1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 NORTHERN DISTRICT OF CALIFORNIA 9 10 MI A LOWE, Case No. 26-cv-00449-NC 11 Plaintiff, ORDER GRANTING MOTION TO 12 v. DISMISS WITHOUT LEAVE TO AMEND 13 MAO IZAKAYA & SUSHI LLC, and others, Re: ECF 48 14 Defendants. 15 16 17 Before the Court is Defendant Hana Escrow Company, Inc.’s (HEC) Motion to 18 Dismiss Plaintiff’s Complaint. HEC argues Plaintiff Lowe cannot state a claim for breach 19 of fiduciary duty because HEC was unaware of Lowe’s potential claim against Defendant 20 Mao Izakaya & Sushi LLC. For the reasons stated below, the Court GRANTS HEC’s 21 Motion to Dismiss without leave to amend. 22 I. BACKGROUND 23 A. Factual Background 24 The complaint alleges as follows. Mao Izakaya operated a restaurant that employed 25 seventy to eighty employees. Id. ¶ 39. Plaintiff alleges, on behalf of a putative class, that 26 Mao Izakaya’s employees were not paid minimum wages, overtime, or for all hours 27 worked. Id. ¶¶ 46–48. Employees were not provided with compliant meal periods or 1 various labor law violations. Id. ¶ 116. In June 2024, after commencing the state court 2 action, Kim, An, the other Mao Izakaya members, and Mao Izakaya (First Group 3 Defendants) transferred the restaurant to Defendant Oh Dublin Inc. and other Defendants 4 (Second Group Defendants). Id. ¶¶ 116, 162. The First Group Defendants transferred the 5 restaurant without public notification, as required by law, to avoid potential creditors and 6 payment to Plaintiff and putative class members. Id. ¶ 116. HEC acted as the escrow 7 company in the transaction and failed to use reasonable care or comply with statutory 8 requirements. Id. ¶¶ 178, 179. In October 2025, the First Group Defendants entered into a 9 settlement agreement with Plaintiff. Id. ¶ 139. 10 The complaint’s eighteenth claim, asserted solely against HEC, is styled as “breach 11 of escrow agent’s duty to third parties.” Id. ¶¶ 174, 175. The complaint alleges that HEC 12 owed Plaintiff a duty under California’s liquor licensing scheme as codified in the 13 Business and Professions Code § 24074 and common law. Id. ¶ 179. HEC allegedly 14 breached this duty when it “aided and conspired with the First and Second Group 15 Defendants in the Fraudulent Transfer.” Id. ¶ 180. 16 B. Procedural Background 17 On January 16, 2026, Plaintiff filed the complaint in this action. ECF 1. 18 HEC moved to dismiss the complaint. ECF 48. Plaintiff opposed. ECF 56. HEC replied. 19 ECF 60. The parties have consented to magistrate judge jurisdiction. ECF 7, 50. 20 II. LEGAL STANDARD 21 A motion to dismiss for failure to state a claim under Rule 12(b)(6) tests the legal 22 sufficiency of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). “To 23 survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as 24 true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 25 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). When 26 reviewing a 12(b)(6) motion, a court “must accept as true all factual allegations in the 27 complaint and draw all reasonable inferences in favor of the non-moving party.” Retail 1 2014). A court, however, need not accept as true “allegations that are merely conclusory, 2 unwarranted deductions of fact, or unreasonable inferences.” In re Gilead Scis. Secs. 3 Litig., 536 F.3d 1049, 1055 (9th Cir. 2008). A claim is facially plausible when it “allows 4 the court to draw the reasonable inference that the defendant is liable for the misconduct 5 alleged.” Id. If a court grants a motion to dismiss, leave to amend should be granted 6 unless the pleading could not possibly be cured by the allegation of other facts. Lopez v. 7 Smith, 203 F.3d 1122, 1127 (9th Cir. 2000). 8 III. DISCUSSION 9 HEC argues that it “was merely the escrow company for the restaurant transaction” 10 so lacked knowledge of Plaintiff’s actual, or threatened, claim and had no duty to withhold 11 funds for Plaintiff’s benefit. ECF 48-1 at 2. Plaintiff argues HEC failed to provide public 12 notice of the restaurant transaction as required when a liquor license, also known as an 13 ABC license, is transferred pursuant to Cal. Bus. & Prof. Code § 24074 and the Bulk Sales 14 statute, Cal. Com. Code § 6105. So, Plaintiff argues, HEC failed to protect the interests of 15 Defendant Mao Izakaya & Sushi LLC’s creditors. ECF 56 at 5–6. 16 To state a claim for breach of fiduciary duty, plaintiff must allege “the existence of 17 a fiduciary relationship, its breach, and damage proximately caused by that breach.” 18 Silverlake Park LLC v. Stewart Title Guar. Co., No. 2:17-cv-03291-CAS(AGRX), 2017 19 WL 9532713, at *6 (C.D. Cal. Oct. 2, 2017) (quoting Pierce v. Lyman, 1 Cal. App. 4th 20 1093, 1101 (1991)). “An escrow holder is an agent and fiduciary of the parties to the 21 escrow.” Id. (quoting Summit Fin. Holdings, Ltd. v. Cont’l Lawyers Title Co., 27 Cal. 4th 22 705, 711 (2002), as modified on denial of reh’g (May 15, 2002)). “[A]n escrow holder 23 owes a duty of care only to actual parties to the escrow, not third parties with an interest in 24 the escrow. Moreover, only parties that actually submit instructions to escrow can 25 rightfully be considered parties to it.” Id. (quoting Jafari v. FDIC, 2 F. Supp. 3d 1125, 26 1133 (S.D. Cal. 2014)). “‘[A]bsent clear evidence of fraud,’ an escrow holder’s 27 obligations are limited to the instructions provided by parties to the escrow.” Id. (quoting 1 Section 24074 requires the parties to a liquor license transfer to establish an escrow 2 and an agreement to pay bona fide creditors of the licensee “who file their claims with the 3 escrow holder” to be distributed in a sequential order. Cal. Bus. & Prof. Code § 24074. 4 Those creditors asserting “payment of claims for wages, salaries, or fringe benefits of 5 employees of the seller or transferor earned or accruing prior to the sale, transfer, or 6 opening of an escrow for the sale thereof” must be paid second. Id. The Bulk Sales statute 7 also mandates notice before a sale is made. Cal. Com. Code § 6105. 8 Section 24074, and its accompanying regulations, does not define a “bona fide 9 creditor.” Under the Bulk Sales statute, a creditor “means a claimant or other person 10 holding a claim.” Cal. Com. Code § 6102(6). A claimant “means a person holding a claim 11 incurred in the seller’s business other than . . . [a]n unsecured and unmatured claim for 12 employment compensation and benefits.” § 6102(5)(i). Black’s Law Dictionary defines a 13 creditor as “a person . . . with a definite claim against another.” Creditor, Black’s Law 14 Dictionary (12th ed. 2024). 15 Under any of the above definitions, the complaint fails to allege a fiduciary 16 relationship because Plaintiff was not a creditor when the restaurant sale occurred. 17 Plaintiff argues that she was a creditor because employment claims for wages or benefits 18 would make her claim second in priority under the ABC licensing scheme. ECF 56 at 12.
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1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 NORTHERN DISTRICT OF CALIFORNIA 9 10 MI A LOWE, Case No. 26-cv-00449-NC 11 Plaintiff, ORDER GRANTING MOTION TO 12 v. DISMISS WITHOUT LEAVE TO AMEND 13 MAO IZAKAYA & SUSHI LLC, and others, Re: ECF 48 14 Defendants. 15 16 17 Before the Court is Defendant Hana Escrow Company, Inc.’s (HEC) Motion to 18 Dismiss Plaintiff’s Complaint. HEC argues Plaintiff Lowe cannot state a claim for breach 19 of fiduciary duty because HEC was unaware of Lowe’s potential claim against Defendant 20 Mao Izakaya & Sushi LLC. For the reasons stated below, the Court GRANTS HEC’s 21 Motion to Dismiss without leave to amend. 22 I. BACKGROUND 23 A. Factual Background 24 The complaint alleges as follows. Mao Izakaya operated a restaurant that employed 25 seventy to eighty employees. Id. ¶ 39. Plaintiff alleges, on behalf of a putative class, that 26 Mao Izakaya’s employees were not paid minimum wages, overtime, or for all hours 27 worked. Id. ¶¶ 46–48. Employees were not provided with compliant meal periods or 1 various labor law violations. Id. ¶ 116. In June 2024, after commencing the state court 2 action, Kim, An, the other Mao Izakaya members, and Mao Izakaya (First Group 3 Defendants) transferred the restaurant to Defendant Oh Dublin Inc. and other Defendants 4 (Second Group Defendants). Id. ¶¶ 116, 162. The First Group Defendants transferred the 5 restaurant without public notification, as required by law, to avoid potential creditors and 6 payment to Plaintiff and putative class members. Id. ¶ 116. HEC acted as the escrow 7 company in the transaction and failed to use reasonable care or comply with statutory 8 requirements. Id. ¶¶ 178, 179. In October 2025, the First Group Defendants entered into a 9 settlement agreement with Plaintiff. Id. ¶ 139. 10 The complaint’s eighteenth claim, asserted solely against HEC, is styled as “breach 11 of escrow agent’s duty to third parties.” Id. ¶¶ 174, 175. The complaint alleges that HEC 12 owed Plaintiff a duty under California’s liquor licensing scheme as codified in the 13 Business and Professions Code § 24074 and common law. Id. ¶ 179. HEC allegedly 14 breached this duty when it “aided and conspired with the First and Second Group 15 Defendants in the Fraudulent Transfer.” Id. ¶ 180. 16 B. Procedural Background 17 On January 16, 2026, Plaintiff filed the complaint in this action. ECF 1. 18 HEC moved to dismiss the complaint. ECF 48. Plaintiff opposed. ECF 56. HEC replied. 19 ECF 60. The parties have consented to magistrate judge jurisdiction. ECF 7, 50. 20 II. LEGAL STANDARD 21 A motion to dismiss for failure to state a claim under Rule 12(b)(6) tests the legal 22 sufficiency of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). “To 23 survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as 24 true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 25 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). When 26 reviewing a 12(b)(6) motion, a court “must accept as true all factual allegations in the 27 complaint and draw all reasonable inferences in favor of the non-moving party.” Retail 1 2014). A court, however, need not accept as true “allegations that are merely conclusory, 2 unwarranted deductions of fact, or unreasonable inferences.” In re Gilead Scis. Secs. 3 Litig., 536 F.3d 1049, 1055 (9th Cir. 2008). A claim is facially plausible when it “allows 4 the court to draw the reasonable inference that the defendant is liable for the misconduct 5 alleged.” Id. If a court grants a motion to dismiss, leave to amend should be granted 6 unless the pleading could not possibly be cured by the allegation of other facts. Lopez v. 7 Smith, 203 F.3d 1122, 1127 (9th Cir. 2000). 8 III. DISCUSSION 9 HEC argues that it “was merely the escrow company for the restaurant transaction” 10 so lacked knowledge of Plaintiff’s actual, or threatened, claim and had no duty to withhold 11 funds for Plaintiff’s benefit. ECF 48-1 at 2. Plaintiff argues HEC failed to provide public 12 notice of the restaurant transaction as required when a liquor license, also known as an 13 ABC license, is transferred pursuant to Cal. Bus. & Prof. Code § 24074 and the Bulk Sales 14 statute, Cal. Com. Code § 6105. So, Plaintiff argues, HEC failed to protect the interests of 15 Defendant Mao Izakaya & Sushi LLC’s creditors. ECF 56 at 5–6. 16 To state a claim for breach of fiduciary duty, plaintiff must allege “the existence of 17 a fiduciary relationship, its breach, and damage proximately caused by that breach.” 18 Silverlake Park LLC v. Stewart Title Guar. Co., No. 2:17-cv-03291-CAS(AGRX), 2017 19 WL 9532713, at *6 (C.D. Cal. Oct. 2, 2017) (quoting Pierce v. Lyman, 1 Cal. App. 4th 20 1093, 1101 (1991)). “An escrow holder is an agent and fiduciary of the parties to the 21 escrow.” Id. (quoting Summit Fin. Holdings, Ltd. v. Cont’l Lawyers Title Co., 27 Cal. 4th 22 705, 711 (2002), as modified on denial of reh’g (May 15, 2002)). “[A]n escrow holder 23 owes a duty of care only to actual parties to the escrow, not third parties with an interest in 24 the escrow. Moreover, only parties that actually submit instructions to escrow can 25 rightfully be considered parties to it.” Id. (quoting Jafari v. FDIC, 2 F. Supp. 3d 1125, 26 1133 (S.D. Cal. 2014)). “‘[A]bsent clear evidence of fraud,’ an escrow holder’s 27 obligations are limited to the instructions provided by parties to the escrow.” Id. (quoting 1 Section 24074 requires the parties to a liquor license transfer to establish an escrow 2 and an agreement to pay bona fide creditors of the licensee “who file their claims with the 3 escrow holder” to be distributed in a sequential order. Cal. Bus. & Prof. Code § 24074. 4 Those creditors asserting “payment of claims for wages, salaries, or fringe benefits of 5 employees of the seller or transferor earned or accruing prior to the sale, transfer, or 6 opening of an escrow for the sale thereof” must be paid second. Id. The Bulk Sales statute 7 also mandates notice before a sale is made. Cal. Com. Code § 6105. 8 Section 24074, and its accompanying regulations, does not define a “bona fide 9 creditor.” Under the Bulk Sales statute, a creditor “means a claimant or other person 10 holding a claim.” Cal. Com. Code § 6102(6). A claimant “means a person holding a claim 11 incurred in the seller’s business other than . . . [a]n unsecured and unmatured claim for 12 employment compensation and benefits.” § 6102(5)(i). Black’s Law Dictionary defines a 13 creditor as “a person . . . with a definite claim against another.” Creditor, Black’s Law 14 Dictionary (12th ed. 2024). 15 Under any of the above definitions, the complaint fails to allege a fiduciary 16 relationship because Plaintiff was not a creditor when the restaurant sale occurred. 17 Plaintiff argues that she was a creditor because employment claims for wages or benefits 18 would make her claim second in priority under the ABC licensing scheme. ECF 56 at 12. 19 However, at the time of transfer, Plaintiff had no judgment entitling her to those wages or 20 other employment benefits, so her claim was not “definite” but an “unsecured and 21 unmatured claim for employment compensation and benefits.” Creditor, Black’s Law 22 Dictionary (12th ed. 2024); Cal. Com. Code § 6102(5)(i). The complaint alleges that HEC 23 aided the restaurant transfer in June 2024, and the settlement agreement was signed in 24 October 2025. Compl. ¶¶ 116, 139. When the restaurant was transferred, sixteen months 25 before the settlement agreement, Plaintiff’s claim as a creditor was speculative at best. As 26 HEC notes, “California law does not impose duties upon an escrow company to unknown, 27 or potential, creditors” or an escrow agent would be subject to “an infinite number of 1 Even if HEC knew about Plaintiff’s state court action, an escrow agent’s “mere knowledge 2 of a third party’s interest in an escrow does not give rise to a duty of care to that third 3 party.” Stereoscope, LLC v. U.S. Bank Nat. Ass’n, No. cv 14-05593 DDP SSX, 2015 WL 4 570099, at *6 (C.D. Cal. Feb. 11, 2015), aff’d sub nom. Stereoscope, LLC v. U.S. Bank 5 Nat’l Ass’n, 675 F. App’x 725 (9th Cir. 2017) (quoting Summit, 27 Cal. 4th at 711). So, 6 HEC owed no duty to Plaintiff because she was not a bona fide creditor to the transfer. 7 Nor is there clear evidence of fraud to support a duty owed to Plaintiff. Though 8 Plaintiff characterizes the transfer as “fraudulent,” the Court is not convinced that 9 transferring the business without the liquor license or without proper notice meets that 10 standard. There could be many innocuous reasons why the liquor license was not 11 transferred with the restaurant. Compl. ¶ 116. For example, the license could be tied to 12 the owner rather than the business, such that it was not transferrable, or it could have 13 expired. There remains a factual dispute regarding whether the liquor license was 14 transferred at all, in which case, no notice would be required. ECF 56 at 8; ECF 60 at 2. 15 Plaintiff has not presented any other allegations that create an inference of fraudulent 16 activity that would give rise to a fiduciary duty. See Silverlake, 2017 WL 9532713, at *7 17 (finding allegations that parties without an interest in the transaction were given several 18 million dollars and that plaintiff received no benefit in return for releasing funds were 19 sufficient to show defendant escrow agent was aware of fraudulent activity). 20 Plaintiff’s cited authority does not alter this analysis. In Cohn v. Gramercy Escrow 21 Co., the court held that “[w]hen one of the main purposes of an agreement is to benefit 22 third persons, they are entitled to recover as third-party beneficiaries in the event of a 23 breach of that agreement.” 65 Cal. App. 3d 884, 893 (Ct. App. 1977). So, “bona fide 24 creditors of the licensed seller are in this category and failure to protect their interests to 25 the fund assets will subject the escrow holder to liability to the creditors for any loss 26 occasioned by its breach of duty.” Id. The Cohn court, however, did not evaluate whether 27 an individual who only filed a lawsuit against the licensee constituted a creditor, as is the 1 || 407 (Ct. App. 1977). The Court is not persuaded that Plaintiff is a bona fide creditor. As 2 || such, HEC owed Plaintiff no fiduciary duty. 3 Further, Plaintiff cannot allege facts to cure this deficiency. Plaintiff had merely 4 || filed a lawsuit alleging labor law violations when the transfer occurred, so had no clear, 5 || demonstrated claim to any of the funds. Since “the pleading could not possibly be cured 6 || by the allegation of other facts,” Plaintiff is not granted leave to amend. Lopez v. Smith, 7 || 203 F.3d at 1127. Accordingly, the Court GRANTS Defendant’s Motion to Dismiss 8 || without leave to amend. 9 || IV. CONCLUSION 10 Accordingly, the Court GRANTS Defendant’s Motion to Dismiss without leave to 11 || amend. 12
= 13 IT IS SO ORDERED.
15 || Dated: June 16, 2026 □□□ ———— NATHANAEL M. COUSINS a 16 United States Magistrate Judge
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