Filed 9/29/26 Matter of Dr. Mohebbi Revocable Trust CA2/7
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
B345304, B346606,
In re the Matter of the Dr. Mohebbi B349070
Revocable Trust
Los Angeles Super. Ct.
SORAYA MOAZAAM, No. 22STPB12611
Petitioner and Appellant,
v.
VREZH HOVHANNISYAN, et al.
Respondents.
APPEALS from orders of the Superior Court of Los Angeles
County, Jonathan L. Rosenbloom, Judge. Affirmed in part,
reversed and remanded in part, and dismissed in part.
Mousavi Law, Amy A. Mousavi; Cochran, Davis Associates,
and Lisa Kralik Hansen for Petitioner and Appellant.
Lurie & Associates, Barak Lurie, Luke Manzo and
Matthew Kiene for Respondents.
_________________________
Soraya Moazaam, the surviving spouse of Dr. Ali Mohebbi,
is trustee of The Mohebbi/Moazaam Family Trust Dated July 12,
2020 (Trust). Mohebbi was a practicing optometrist with his own
business. The Trust held Mohebbi’s interests in two of his
optometry business entities, Faro Optometry, Inc. and Faro
Management, LLC (Faro Management). After Mohebbi died in
2021, respondent Vrezh Hovhannisyan, who had a 50 percent
interest in Faro Management, allegedly converted and
misappropriated assets of the two entities and along with other
respondents started a competing optometry practice across the
street. Moazaam filed a petition in probate court seeking to
recover damages to the trust assets.
The trial court sustained respondents’ demurrer to the
operative fourth amended petition without leave to amend. The
court found that Moazaam did not have standing as trustee to
assert claims on behalf of Faro Optometry, Inc.: Moazaam could
not hold legal title to this corporation’s shares because it was a
professional corporation and Moazaam was not licensed to
practice optometry. The court also found the fourth amended
petition was a sham pleading after respondents argued Moazaam
had tried to shift her allegations to allege injury to Faro
Management instead of Faro Optometry, Inc. in a bid to avoid
dismissal for lack of standing.
The trial court properly sustained the demurrer on the
ground that Moazaam lacked standing as trustee to assert claims
on behalf of Faro Optometry, Inc. In addition, the demurrer was
properly sustained with respect to claims on behalf of Faro
Management because they were not pleaded as derivative
shareholder claims. However, Moazaam should be granted leave
to amend so that she has the opportunity to plead derivative
2
claims on behalf of Faro Optometry, Inc. in her new capacity as
executor of Mohebbi’s will, and to plead derivative claims in her
capacity as trustee on behalf of Faro Management. We further
determine the sham pleading doctrine does not apply.
Accordingly, we reverse the judgment of dismissal and
remand with directions to grant Moazaam leave to amend except
for the third cause of action, because there is no reasonable
possibility Moazaam can remedy the defects identified by
respondents with respect to that cause of action. The
postjudgment order awarding attorney fees is also reversed.
FACTUAL AND PROCEDURAL BACKGROUND1
A. Moazaam’s Series of Amended Petitions
Moazaam has filed an original and four amended petitions
in this matter, culminating in the trial court dismissing her
fourth amended petition without leave to amend. As illustrated
below, the petitions refer in imprecise, ambiguous, and
sometimes shifting terms to the various entities operating as part
of the optometry business.
1. Original petition
In December 2022 Moazaam filed a petition under Probate
Code sections 17000 and 17200 against respondents Vrezh
Hovhannisyan, Leo Gonzalez, Gary Uyeno, Jocelyn Garcia,
1 Moazaam’s motion to augment the record is denied as
unnecessary because the probate notes were included in her
appendix. Moazaam’s request for judicial notice of corporate
records filed with the Secretary of State, including the June 24,
2024 dissolution of Faro Management, is granted. (Pedus
Building Services, Inc. v. Allen (2002) 96 Cal.App.4th 152, 156,
fn. 2.)
3
Magaly Ortiz, Raul Malera, and Alameda Family Optometry, Inc.
(collectively, respondents).2 Moazaam alleged she was the
trustee of the Trust.
Before his death, Mohebbi was an optometrist licensed by
the California State Board of Optometry. In 2015 Mohebbi
formed Faro Optometry, Inc., of which he was the sole owner,
shareholder, officer, and director. In 2016 Mohebbi bought an
optical shop from Hovhannisyan, “open[ing] his optometry
practice in the same space as the optical shop and combin[ing]
the business’s operations.” The petition alleged the optometry
practice and optical shop were “collectively called Faro
Optometry,” which Moazaam referred to as “Business” or “Faro”
in the petition. Mohebbi placed his interest in Faro Optometry in
the Trust.
Mohebbi also formed Faro Management, a limited liability
company, with Hovhannisyan and another person, with each
having a one-third interest and each named as a manager of the
entity. After the third member died, Mohebbi and Hovhannisyan
remained co-managers of the Business. Hovhannisyan oversaw
all financial affairs of the Business, including transactions,
payroll, banking, and insurance billing. Mohebbi maintained
complete control over the “ ‘optometric business,’ ” with neither
Faro Management nor Hovhannisyan having control or discretion
“ ‘over the methods by which Faro Optometry or any optometrist
practices optometry or operates the optometric business.’ ”
After Mohebbi died, Moazaam “inherited [Mohebbi’s]
business interests under the terms of the Trust.” Moazaam
sought her share of the Business’s income, but Hovhannisyan
2 Garcia did not join in the demurrers.
4
claimed that “the business” (not capitalized) had not earned a
profit since Mohebbi’s death. Moazaam reviewed the Business’s
transactions and discovered that Hovhannisyan never deposited
or reported a portion of the earnings to the “business account.”
Hovhannisyan, Gonzalez, and Uyeno resigned and “used the
money they stole from Faro” to open a competing optometry
practice, Alameda Family Optometry, Inc. (Alameda), in January
or February 2022. Two other employees, Ortiz and Malera, also
resigned and refused to return their company keys to Moazaam.
“In addition to stealing cash from Faro, [r]espondents absconded
with confidential documents and information and trade secrets
belonging to Faro,” including patient lists, bank accounts,
inventory, and medical equipment.
Respondents demurred to the original petition based in
part on Moazaam’s lack of standing. According to respondents,
Moazaam could not legally inherit shares of Faro Optometry,
Inc., a professional corporation, because she was not a licensed
optometrist. Moazaam filed a first amended petition in April
2023, which had the effect of mooting the demurrer.
2. First amended petition
In her first amended petition, Moazaam asserted she had
standing as trustee of the Trust. She alleged the Trust assets
included a business operating under the trade name “Faro
Optometry,” abbreviated to “Faro.” Faro was composed of an
optometry practice operated by Faro Optometry and an optical
shop operated by Faro Management. Mohebbi solely owned and
operated the optometry practice through Faro Optometry, Inc.,
which he solely owned. Mohebbi and Hovhannisyan owned Faro
Management, which provided eyeglasses, contact lenses, and
5
fitting services using prescriptions from licensed optometrists.
Hovhannisyan managed Faro Management.
Moazaam demanded her share of Faro’s income, but
Hovhannisyan and Gonzalez had stolen cash from Faro for years.
Respondents used the cash stolen from Faro, as well as Faro’s
patient list, inventory, and equipment, to open and operate the
competing business.
Respondents demurred to the amended petition, again
asserting that Moazaam lacked standing to sue as trustee.
Respondents also argued that the first amended petition was a
sham pleading. The trial court sustained the demurrer without
leave to amend for claims brought on behalf of Faro Optometry,
Inc. but with leave to amend for claims brought on behalf of Faro
Management.
3. Second amended petition
Moazaam filed a second amended petition, again asserting
her status as trustee of the Trust. Moazaam alleged that this
petition “removes arguments and claims based on any ownership
interest by the Trust in Faro Optometry, Inc., pursuant to this
court’s order on demurrer.” “In this Second Amended Complaint,
the causes of action … relate to the Trust’s ownership interest in
Faro Management LLC, because the Trust owns 50% interest in
that entity. [Moazaam] has alleged all along that Faro
Management LLC was also damaged.” “[Moazaam] has never
claimed that Faro Optometry Inc. and Faro Management LLC
became a single entity, nor that all operations occurred under the
Faro Optometry Inc. entity or professional license.” The petition
pointed to an allegation in the original petition distinguishing
Faro Optometry, Inc. and Faro Management. The original
petition had “combined” the two entities “for convenience in
6
preparing the pleading” because the two businesses operated in
the same physical location and “had a symbiotic relationship with
one another.”
The petition alleged Faro Optometry, Inc. operated the
optometry practice and the optical shop, taking products owned
by Faro Management and selling them on a consignment basis.
The petition further alleged Faro Management and Faro
Optometry, Inc. “are not related entities, but they both operate
out of Suite C-12, which is known and publicly advertised as
‘Faro Optometry.’ ”
Hovhannisyan focused on management, billing, and non-
optometric services “for Faro Optometry Inc. on behalf of the
management business, Faro Management.” Respondents,
including optometrist Uyeno, worked for Faro Management.
Moazaam asked for her share of Faro Management’s
income, but Hovhannisyan claimed that Faro Optometry, Inc.
and consequently Faro Management had been unprofitable since
Mohebbi’s death. Moazaam restated the allegation that the
“business’s” income had not changed but newly alleged that
Hovhannisyan failed to make any cash deposit in Faro
Management’s bank account, even though a large portion of the
“business’s” income was in cash.
Moazaam also alleged that respondents were in possession
of Faro Management property that had been loaned to Faro
Optometry, including a prescription testing device, inventory of
frames and lenses, furniture, and software. Respondents never
compensated Moazaam for the property on behalf of the Trust
based on the Trust’s ownership interest in Faro Management.
Respondents also allegedly obtained the client list of Faro
7
Optometry. Respondents used the list to direct Faro Optometry’s
patients to their new competing business.
Respondents demurred to the second amended petition
based on the sham pleading doctrine. Specifically, respondents
argued that Moazaam changed her allegations to focus on the
Faro Management entity to avoid her lack of standing as to Faro
Optometry, Inc.
The demurrer was supported by a declaration from
respondents’ counsel with a table showing purported
inconsistencies between the allegations asserted in the original
petition, first amended petition, and second amended petition.
The demurrer was sustained with leave to amend. The trial
court ordered Moazaam to “distinguish between Faro Optometry
and Faro Management ... in such a way that Respondents can
meaningfully respond to claims she is assessing,” based on the
declaration of respondents’ counsel.
4. Third amended petition
In her third amended petition, Moazaam further described
the relationship between Faro Optometry, Inc. and Faro
Management. Faro Optometry, Inc., wholly owned by Mohebbi,
provided “ ‘optometric and related services along with an optical
eye care retailing business and operations.’ ” Faro Management,
50 percent owned by Hovhannisyan and 50 percent owned by
Mohebbi, provided management services and administrative
support to Faro Optometry, Inc. The support included billing
clients and insurance companies, collecting and depositing
payments, and handling expenses for Faro Optometry, Inc.
Faro Management earned a percentage of Faro Optometry,
Inc.’s net income, which was to be distributed evenly to Faro
Management’s owners and members. Moazaam alleged the two
8
entities “have a symbiotic relationship with one another because
the income of one entity is directly correlated with the income of
the other. However, they are not related entities.”
Respondents demurred, again asserting the sham pleading
doctrine and Moazaam’s lack of standing to seek relief for Faro
Optometry, Inc. Before the demurrer was heard, Moazaam
substituted counsel. New counsel opposed the demurrer on the
merits but also sought leave to amend “to correct some
allegations which appears to be the result of
miscommunication/misunderstanding between [Moazaam] and
her former counsel.” The trial court granted leave to amend
without hearing the demurrer.
5. Operative fourth amended petition
Moazaam filed a fourth amended petition in August 2024.
A month later, Moazaam filed a notice of errata with a corrected
fourth amended petition. The notice of errata stated: “On or
about September 25, 2024, while attempting to obtain the official
records for Faro Optometry, Inc. from Secretary of State of
California, Petitioner’s counsel … discovered for the first time
that Faro Optometry, Inc. was registered as a general stock
corporation. … That discovery required correction of the
allegations contained in the Fourth Amended Petition.” The
corrected fourth amended petition asserted eight causes of action:
(1) orders determining certain personal property in respondents’
possession as belonging to the trust, (2) fraudulent
misrepresentation, (3) intentional interference with economic
relations, (4) misappropriation of trade secrets, (5) conversion,
(6) breach of fiduciary duty, (7) unfair competition, and (8) aiding
and abetting breach of duty.
9
The fourth amended petition alleged Mohebbi operated his
practice under “the entity FARO OPTOMETRY INC. …
(hereafter ‘Faro Optometry’) and did business under the trade
name, ‘Faro Optometry.’ ” The petition alleged that, a year before
his death, Mohebbi placed his 50 percent interest in Faro
Management into the Trust by assignment. The Trust provided
that, upon Mohebbi’s death, his 50 percent interest in Faro
Management shall be distributed to Moazaam. On the same
date, “Mohebbi also transferred his 100% interest in Faro
Optometry to the Trust, and … [Moazaam] is the designated
Trust beneficiary for this 100% interest.”3 The petition also
alleged Moazaam was the “nominated executor” under Mohebbi’s
will.
Prior to September 2024, Moazaam believed that Faro
Optometry was a professional corporation. Accordingly, after
Mohebbi’s death, Moazaam attempted to sell Faro Optometry
within the six months provided by the Board of Optometry for
non-practitioners to sell professional corporations. Moazaam
obtained an extension beyond the six-month period from the
Board. In September 2024, Moazaam learned from her attorney
that Faro Optometry was a general stock corporation, not a
professional corporation.
Moazaam alleged that because Faro Optometry was
incorporated as a general stock corporation, not a professional
corporation, she had standing as trustee to assert claims on its
3 The Trust is attached to the fourth amended petition and
therefore is deemed incorporated by reference. It provides that
upon the death of Mohebbi, his shares and interest in Faro
Optometry, Inc. and Faro Management are to be distributed to
Moazaam.
10
behalf. But even if Faro Optometry was a professional
corporation, she alleged she had standing as the nominated
executor of Mohebbi’s estate who “is opening a probate
administration, and is seeking Letters Testamentary.”
Each time Moazaam demanded the Trust’s monthly share
of the net income, Hovhannisyan told her that Faro Optometry
had not earned a profit since Mohebbi died. Respondents also
intentionally failed to make phone calls, place orders, and
conduct business to make business look slow. Moazaam believed
them because they were in the office every day, and she was not
involved in the business before Mohebbi’s death.
Moazaam later learned that Faro Optometry’s income had
not changed and a significant profit had been earned.
Hovhannisyan had taken $213,000 earned by Faro Optometry
from August to December 2021 instead of depositing it into a
Faro Optometry bank account. “[B]ecause of Hovhannisyan and
the other respondents’ false representations, Hovhannisyan
successfully pocketed all the cash he received.”
Around December 2021, Moazaam asked Uyeno if he
wanted to continue working for Faro Optometry. Uyeno
responded that “he unequivocally did.” Moazaam also asked
Hovhannisyan if he wanted to continue working as manager for
Faro Management. He “represented that he was fully committed
to Faro Management and its arrangement with Faro Optometry,
and he backed up his assertion by claiming that he could not
afford to open another business.” These representations were
false, as Hovhannisyan, Uyeno, and the other respondents had
already decided to open a competing business, Alameda, and
were carrying out their plan. The plan included obtaining Faro
Optometry’s patient list, calling the patients, and telling them
11
that Faro Optometry was moving and changing its name to
Alameda Family Optometry.
On December 17, 2021, Gonzalez took optical frames and
equipment belonging to Faro Management, including a binocular
indirect ophthalmoscope and prescription testing device. On the
same day, Hovhannisyan and Gonzalez resigned. The following
morning, Moazaam called Hovhannisyan, Gonzalez, and Uyeno to
request the keys to the shop, but they ignored her request. Two
days later, after not having shown up for several days, Uyeno
quit, pretending that he had to care for his sick mother in
Arizona. Alameda opened up for business directly across from
Faro Optometry around January or February 2022.
Due to respondents’ scheme, Faro Optometry and Faro
Management lacked doctors and staff to conduct business and
consequently lost income. Moazaam sought damages for
financial loss incurred by both Faro Optometry and Faro
Management.
B. Trial Court Proceedings
Respondents demurred to the fourth amended petition
based on Moazaam’s lack of standing to bring claims on behalf of
Faro Optometry, Inc., the sham pleading doctrine, and
Moazaam’s failure to state sufficient facts for the second through
eighth causes of action.
Moazaam opposed, arguing that prior counsel had made a
mistake by not immediately seeking to have Moazaam confirmed
as executor of Mohebbi’s will to solve the standing issue with
respect to Faro Optometry, Inc. Counsel asserted Moazaam
would soon be confirmed as executor, as demonstrated by the
pleadings submitted to the court.
12
She argued that the sham pleading doctrine did not apply
because miscommunication issues between Moazaam and her
prior counsel had led to discrepancies in the prior petitions. In
addition to difficulties “nail[ing] down the issues” involving the
corporate entities, prior counsel was inexperienced in this subject
matter.
On November 18, 2024, following a hearing, the trial court
orally ruled it would sustain the demurrer without leave to
amend. The court found that Moazaam did not have standing as
a trustee to bring claims on behalf of Faro Optometry, Inc.
because she was not a licensed person under Corporations Code
section 13407. The court determined Faro Optometry, Inc. was a
professional corporation, despite being registered as a general
stock corporation, because Mohebbi practiced optometry through
the corporation. The court noted it had previously sustained the
demurrer to the first amended petition without leave to amend as
to claims on behalf of Faro Optometry Inc., and Moazaam
improperly attempted to reassert those claims in the fourth
amended petition.
The court acknowledged Moazaam was seeking
appointment as administrator of Mohebbi’s estate in
Orange County Superior Court. But the court indicated that
“whether [Moazaam] can bring the claims as an executor” was
not currently before the court.
As to the sham pleading doctrine, the court determined
that “no cause of action solely on behalf of Faro Management can
be stated truthfully.” It found that despite numerous chances
Moazaam “failed to file a petition that properly distinguishes
Faro Management from Faro Optometry and only brings claims
on behalf of Faro Optometry.” Due to “numerous inconsistent
13
allegations” between the petitions, Moazaam “failed to
demonstrate a reasonable probability of curing this defect.”
On January 31, 2025, the Orange County Superior Court
appointed Moazaam executor of Mohebbi’s estate.4 On
February 2, the court issued its written ruling sustaining the
demurrer without leave to amend. On May 6, the court
dismissed the fourth amended petition with prejudice.
The court awarded respondents attorney fees, under Civil
Code section 1717 and the contracts referenced in the petitions,
in the amount of $240,315.50.
C. Appeal
On February 20, 2025, Moazaam filed a notice of appeal
from the February 2, 2025 order sustaining the demurrer without
leave to amend (No. B345304). On May 14, 2025, Moazaam
timely filed a notice of appeal from the May 6, 2025 order of
dismissal (No. B346606). We consolidated these two appeals. On
August 18, 2025, Moazaam timely filed a notice of appeal of the
order granting attorney fees (No. B349070).
DISCUSSION
A. Standard of Review
We review de novo an order dismissing an action after
sustaining a demurrer without leave to amend. (Dawadi v.
4 The trial court took judicial notice of Moazaam’s petition to
be appointed executor. We now grant Moazaam’s request for
judicial notice of the Letters Testamentary appointing Moazaam
as executor of Mohebbi’s will, in Orange County Superior Court
case No. 30-2024-0147583-PR-PW-CMC, entered on January 31,
2025. (Evid. Code, § 452, subd. (d).)
14
Adhikari (2026) 120 Cal.App.5th 558, 562.) We accept as true the
factual allegations in the complaint (Estate of Dito (2011)
198 Cal.App.4th 791, 800) and “ ‘determine whether the
complaint states facts sufficient to constitute a cause of action.’ ”
(Best v. Ocwen Loan Services, LLC (2021) 64 Cal.App.5th 568,
574; accord, City of Dinuba v. County of Tulare (2007) 41 Cal.4th
859, 865.) If the demurrer was properly sustained, we examine
whether there is a reasonable possibility that the defect can be
cured by amendment: if so, the trial court has abused its
discretion, and we reverse. (Cardenas v. Horizon Senior Living,
Inc. (2022) 78 Cal.App.5th 1065, 1069.) The plaintiff may meet
the burden to identify new allegations to cure a defect for the
first time on appeal. (Sierra Palms Homeowners Assn. v. Metro
Gold Line Foothill Extension Construction Authority (2018)
19 Cal.App.5th 1127, 1132.)
B. Causes of Action Relating to Faro Optometry, Inc.
1. Moazaam does not have standing as trustee to plead
claims on behalf of Faro Optometry, Inc.
In the operative fourth amended petition, Moazaam asserts
standing to bring all the claims as trustee of the Trust.5 The
probate court correctly determined Moazaam lacked standing as
trustee to bring claims on behalf of Faro Optometry, Inc. because
she has no legal or equitable title to the shares of that
5 Moazaam also alleged she had standing as a beneficiary of
the Trust but does not argue this basis for standing on appeal.
(See Estate of Bowles (2008) 169 Cal.App.4th 684, 691 [trust
beneficiaries typically do not have standing to sue on behalf of
the trust].)
15
professional corporation by virtue of not being a licensed
optometrist.
“Probate proceedings are statutory in nature, and standing
is determined by the applicable statute.” (Estate of Tarlow (2025)
109 Cal.App.5th 124, 132.) As trustee, Moazaam typically would
have standing to sue to recover the trust assets. (Estate of
Bowles (2008) 169 Cal.App.4th 684, 691, citing Prob. Code,
§§ 16249, 16010, 16011, Code Civ. Proc., § 369.) This is so
because trustees ordinarily hold legal title to property held in the
trust (while the beneficiaries hold equitable title). (Newell v.
Superior Court (2024) 107 Cal.App.5th 728, 736-737;
Boshernitsan v. Bach (2021) 61 Cal.App.5th 883, 891.)
However, a wrinkle exists here because Faro Optometry,
Inc. is a professional corporation. Corporations Code
section 13407, part of the Moscone-Knox Professional
Corporation Act (Act), provides, in relevant part: “Shares in a
professional corporation ... may be transferred only to a licensed
person, ... to a person licensed to practice the same profession in
the jurisdiction or jurisdictions in which the person practices, or
to a professional corporation, and any transfer in violation of this
restriction shall be void.” (See also Cal. Code Regs., tit. 16,
§ 1548, subd. (a); Le v. Pham (2010) 180 Cal.App.4th 1201, 1209
[“the Moscone–Knox Professional Corporation Act ... restricts
transfer of shares in a professional corporation only to licensed
persons”].)6 Because Faro Optometry, Inc. was formed under the
6 The Act defines “professional corporation” to include a
“corporation organized under the General Corporation Law” that
renders “professional services in a single profession.” (Corp.
Code, § 13401, subd. (b).) “Professional services” include “any
type of professional services that may be lawfully rendered only
16
General Corporation Law and renders professional services, it is
subject to Corporations Code section 13407’s prohibition against
transfer of its shares in a professional corporation to unlicensed
persons like Moazaam, and any purported transfer of those
shares to her is void. Moreover, as we now explain, she cannot
hold legal or equitable title to the shares as trustee.
In a formal Legal Opinion, the California Attorney General
addressed “the legal parameters of placing the shares of a
professional corporation into a revocable living trust,” including
the situation where both a licensed spouse and a nonlicensed
spouse are the designated co-trustees. (Cal. Dept. of Consumer
Affairs, Legal Opinion No. 79-5 (Feb. 16, 1979), p. 1; see Gov.
Code, § 12519.) “ ‘Although we are not bound by the Attorney
Generals’ opinions, they are entitled to “considerable weight.” ’ ”
(California Housing Fin. Agency v. Hanover/California Mgmt. &
Acct. Ctr., Inc. (2007) 148 Cal.App.4th 682, 693, fn. 3; accord,
Koire v. Metro Car Wash (1985) 40 Cal.3d 24, 30; Life Care
Centers of America v. CalOptima (2005) 133 Cal.App.4th 1169,
1178.)
The Attorney General determined as follows: “[S]hares of a
professional corporation may be transferred to an inter vivos
trust where the trustee is a licensed person … and the
beneficiaries are also licensed persons. We believe that the
restriction on the transfer of shares set forth in [Corporations
pursuant to a license” authorized by the Business and
Professions Code. The Business and Professions Code requires
optometrists to be licensed. (Bus. & Prof. Code, § 3040, subd. (a).)
Faro Optometry, Inc. renders “professional services in a single
profession,” specifically optometric services. (Corp. Code,
§ 13401, subd. (b).)
17
Code] Section 13407 … applies to both the legal and equitable
title to such shares. Therefore, only a licensed person may be the
beneficiary in such a trust arrangement, however, when spouses
enter a trust agreement and only one spouse is a licensed person,
the nonlicensed spouse may have an equitable title to the
proceeds of such shares which is not greater than the community
property interest he or she already maintains to such shares.”
(Cal. Dept. of Consumer Affairs, Legal Opinion No. 79-5 (Feb. 16,
1979), p. 1, italics added.) To avoid conflicting with Corporations
Code section 13407, the trust agreement should state that “the
trustee/licensed person shall have exclusive control and powers
relating to the shares of the professional corporation,” and the
trust instrument must “specifically state[] that should the
children of the grantors become beneficiaries in the trust their
interest in the shares of any professional corporation is limited to
the proceeds from the sale of those shares after the death of the
grantor/licensed person.” (Id. at pp. 1-2) “If the licensee spouse
pre-deceases the nonlicensed spouse then the shares are sold and
the proceeds are distributed according to the terms of trust.” (Id.
at p. 1.)
Thus, the restriction in Corporations Code section 13407
applies to both legal and equitable title to a professional
corporation’s shares, and the most an unlicensed surviving
spouse may hold is an equitable interest in the proceeds of the
shares, capped at his or her community property interest. (Cal.
Dept. of Consumer Affairs, Legal Opinion No. 79-5 (Feb. 16,
1979.) Because Moazaam is not legally permitted to hold the
legal or equitable title to the shares of Faro Optometry, Inc. given
she is not a licensed optometrist, Moazaam cannot assert
18
standing as a trustee with respect to those shares.7 Accordingly,
the trial court properly determined Moazaam lacked standing to
assert claims on behalf of Faro Optometry, Inc.
2. Moazaam should be granted leave to amend to have
an opportunity to allege standing as an executor
bringing derivative claims on behalf of Faro
Optometry, Inc.
As discussed, when a demurrer is sustained without leave
to amend, we decide whether there is a reasonable possibility
that the defect can be cured by amendment. (Today’s IV, Inc. v.
Los Angeles County Metro. Transportation Auth. (2022)
83 Cal.App.5th 1137, 1165.) A petitioner may make this showing
in the first instance in the appellate court. (Ibid.)
In the fourth amended petition, Moazaam alleged she was
the “nominated executor” of Mohebbi’s will and in that capacity
had a duty to preserve his estate property and standing to sue to
do so. At the hearing on the demurrer, Moazaam stated, and the
7 Moazaam argues that Faro Optometry, Inc. was
incorporated as a general stock corporation, not a professional
corporation, and therefore the restrictions on transfers of shares
to unlicensed persons do not apply. As a general stock
corporation, Faro Optometry, Inc. was incorporated under the
General Corporation Law. Although the articles of incorporation
of Faro Optometry, Inc. did not include “a specific statement that
the corporation is a professional corporation within the meaning
of this part” as required (Corp. Code, § 13404, subd. (b)), the
entity still meets the definition of a “professional corporation,”
i.e., a “corporation[] organized under the General Corporation
Law” that renders “[p]rofessional services in a single profession”
(id., § 13401, subd. (b)). Accordingly, the trial court properly
determined the strict ownership and transfer restrictions for a
professional corporation applied.
19
court acknowledged, she expected to be appointed as executor.
The court noted that because the purported transfer of the
optometry practice to Moazaam as trustee of the trust was void
under Corporations Code section 13407, “[d]ecedent’s interest in
the professional corporation would therefore be held by the
personal representative of his estate taking all allegations as
true.” The court believed it was possible “Moazaam may be able
to recover Faro Optometry assets if she is appointed
administrator of the estate” but determined she was not entitled
to leave to amend because she had not yet been appointed
executor.
Before entry of the orders sustaining the demurrer and
dismissing the fourth amended petition, Moazaam was appointed
executor of Mohebbi’s estate. On appeal Moazaam proposes she
could amend her petition to allege she is the appointed executor
of Mohebbi’s estate and thus has standing to bring claims on
behalf of Faro Optometry, Inc.
Respondents contend that because Moazaam was not
appointed executor until after the demurrer ruling, she lacked
standing in that capacity throughout the action and thus should
not be permitted to maintain the lawsuit. They rely on
Californians for Disability Rights v. Mervyn’s, LLC (2006)
39 Cal.4th 223, 232-233, in which the California Supreme Court
held that “[f]or a lawsuit properly to be allowed to continue,
standing must exist at all times until judgment is entered and
not just on the date the complaint is filed.” The Mervyn’s rule
does not bar leave to amend here.
“ ‘ “A suit is sometimes brought by a plaintiff without the
right or authority to sue, and the amendment seeks to substitute
the real party in interest. Although the original complaint does
20
not state a cause of action in the plaintiff, the amended complaint
by the right party restates the identical cause of action, and
amendment is freely allowed.” ’ ” (River’s Side at Washington
Square Homeowners Assn. v. Superior Court (2023)
88 Cal.App.5th 1209, 1239 (River’s Side).) Code of Civil
Procedure section 473 governs the amendment of pleadings to
add, strike, or modify the parties to a case, and section 473 “has
received a very liberal interpretation by the courts of this state.”
(Klopstock v. Superior Court (1941) 17 Cal.2d 13, 19 (Klopstock);
see Board of Trustees v. Superior Court (2007) 149 Cal.App.4th
1154, 1163; Foundation for Taxpayer & Consumer Rights v.
Nextel Communications, Inc. (2006) 143 Cal.App.4th 131, 135
[“[C]ourts liberally allow amendments for the purpose of
permitting plaintiffs who lack or have lost standing to substitute
as plaintiffs the true real parties in interest.”].) “Amendment
generally is proper where leave is sought to substitute a new
plaintiff based upon a technical defect in the plaintiff’s status,
such as an honest mistake in the naming of a party, but may not
be used to interject a new party into the litigation for the
first time under the guise of a misnomer.” (California Air
Resources Bd. v. Hart (1993) 21 Cal.App.4th 289, 300-301.) “The
important limitation on the rule … is that the plaintiff proposed
to be substituted may not ‘state facts which give rise to a wholly
distinct and different legal obligation against the defendant.’ ”
(Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235,
243.)
Klopstock, supra, 17 Cal.2d 13 is instructive. That case
concerned allegations that two of three brothers who owned stock
in a closely held corporation had wrongfully withdrawn funds
from the corporation. (Id. at p. 15.) The third brother died,
21
naming his wife as executor of his will, but then his wife died as
well. The executor of the wife’s will commenced an action on
behalf of the corporation against the two surviving brothers. The
theory was that the wife was the beneficial owner of the stock,
and her executor had standing to bring the action on behalf of the
corporation. (Ibid.) After a jury rendered a verdict against the
two brothers, the court of appeal reversed on the ground the
wife’s executor was not the proper party to bring the action on
behalf of the corporation. (Id. at p. 16.)
On remand the trial court granted leave to file an amended
complaint in which “the newly appointed administratrix of the
estate” of the deceased brother was named as plaintiff in lieu of
the wife’s executor. (Klopstock, supra, 17 Cal.2d at p. 16.) The
two brothers petitioned for a writ of mandate compelling
dismissal of the action on the theory “the addition or substitution
of the administratrix of the [e]state … as plaintiff was, in effect,
the institution of an entirely new suit on a different cause of
action, which cannot be accomplished by an amendment of the
complaint.” (Id. at p. 16.)
The California Supreme Court held that when the
third brother died, “the legal representative of his estate
obtain[ed] the authority and powers of the stockholder during the
time of administration, including the possession and control of
the property [citations], and may sue in his stead on causes of
action which the deceased stockholder had at the time of his
death.” (Klopstock, supra, 17 Cal.2d at p. 17.) “Thus, in the
original action the suit on behalf of the corporation should have
been brought by the legal representative of the deceased
stockholder.” (Ibid.)
22
The Supreme Court held the trial court did not abuse its
liberal discretion under Code of Civil Procedure section 473 to
permit the amendment of the complaint to substitute the proper
plaintiff in the action, the new administratrix of the estate of the
deceased stockholder. (Klopstock, supra, 17 Cal.2d at pp. 19-22.)
The original plaintiff “sought on behalf of the corporation to
enforce against the defendants exactly the same liability which is
the basis for the relief now sought on behalf of the corporation….
[T]he trial court permitted the amendment which brought [the
new] administratrix of the estate of the deceased stockholder,
into the action as the nominal plaintiff. Since the corporation is
the ultimate beneficiary of such a derivative suit, it is clear that
the particular stockholder who brings the suit is merely a
nominal party plaintiff. [Citation.] The defendants have been
fully apprised since the filing of the original complaint of the
facts which are relied upon to state a right to relief against them
in behalf of the corporation.” (Klopstock, supra, 17 Cal.2d at
p. 21.) “No new facts are alleged as a ground of recovery, the only
change being in the name of the plaintiff and the capacity in
which he sues.” (Id. at p. 22.)
Therefore, “the amendment complained of did not
constitute the statement of a wholly different cause of action
which would prevent amendment of the complaint, but, on the
contrary, was well within the liberal discretion which is granted
to the courts by Code of Civil Procedure, section 473.” (Klopstock,
supra, 17 Cal.2d at p. 21; see also Powers v. Ashton (1975)
45 Cal.App.3d 783, 790-791 [court erred by refusing to permit
substitution of trustees as plaintiffs for trust administrator who
lacked standing].)
23
Similarly here, Faro Optometry, Inc. is the real party in
interest, because the causes of action Moazaam pleaded are
claims for harm done to Faro Optometry, Inc. as an entity:
converted cash, a misappropriated patient list, and stolen
equipment and inventory. (See Schrage v. Schrage (2021)
69 Cal.App.5th 126, 149; Cotton v. Expo Power Systems, Inc.
(2009) 170 Cal.App.4th 1371, 1380.) As the executor, Moazaam
succeeds to Mohebbi’s rights as the 100 percent shareholder to
institute litigation on behalf of the corporation.8 (Code Civ. Proc.,
§§ 369, subd. (a)(1), 377.30; Prob. Code, §§ 58, subd. (a), 9655; see
Klopstock, supra, 17 Cal.2d at p. 17 [in exercising decedent’s
rights as the personal representative of decedent’s estate, an
8 This is true even though Faro Optometry, Inc. is a
professional corporation. Unlike a trustee, who typically (though
not so for a professional corporation) has standing to sue on
behalf of a corporation held in trust because a trustee “holds legal
title to property held in trust” (Boshernitsan v. Bach, supra,
61 Cal.App.5th at p. 892), an executor has standing because the
executor is exercising the decedent’s rights; the appointment as
executor does not vest legal title to the shares in the executor
(Olson v. Toy (1996) 46 Cal.App.4th 818, 825 [“an estate does not
take title to the decedent’s property. When a person dies, title to
his or her property vests in the heirs or devisees, subject to
administration” by the personal representative]). Because no
title to the shares of Faro Optometry, Inc. transferred to
Moazaam when she was appointed as executor, Corporations
Code section 13407 does not come into play as it does with her
status as trustee. (Cf. Corp. Code, § 702, subd. (c) [“[S]hares held
by an … executor … may be voted by such holder … without a
transfer of such shares into the holder’s name … but no trustee
shall be entitled to vote shares held by such trustee without a
transfer of such shares into the trustee’s name.” (Italics added)].)
24
executor may sue in decedent’s stead]; Favila v. Katten Muchin
Rosenman LLP (2010) 188 Cal.App.4th 189, 222 [executor,
standing in shoes of deceased founder of a closely held
corporation, sued on behalf of corporation].)
Permitting amendment of the petition to change the
capacity in which Moazaam sues on behalf of the corporation does
not substantively change the asserted grounds of recovery
against respondents. (See River’s Side, supra, 88 Cal.App.5th at
p. 1241 [“ ‘A plaintiff may amend his complaint to sue in his
representative rather than individual capacity without stating a
new cause of action.’ [Citation]. We see no reason this same rule
would not also allow Plaintiff to amend its complaint to sue as
the assignee of its members rather than as the representative of
its members.”].) Accordingly, such an amendment is permissible
under Code of Civil Procedure section 473.
Therefore, it is reasonably probable Moazaam can fix the
defect in standing with an amendment, and we determine she
should have leave to amend to afford her the opportunity to
allege her appointment as executor. Respondents’ contention is
well-taken that Moazaam must allege the claims on behalf of
Faro Optometry, Inc. as derivative shareholder claims with the
corporation named as an indispensable party. (Corp. Code, § 800,
subd. (b).)
C. Causes of Action Relating to Faro Management
Moazaam asserts that as trustee, she has standing to
assert claims related to Faro Management, which is a limited
liability corporation (LLC). Respondents do not assert Faro
Management is a professional corporation like Faro Optometry,
Inc., and they do not argue the restrictions Corporations Code
section 13407 imposes on shares of a professional corporation
25
apply to an unlicensed trustee’s standing to sue on behalf of Faro
Management.
As respondents assert on appeal, like Moazaam’s
allegations relating to Faro Optometry, Inc., the allegations
relating to Faro Management concern alleged harm to the LLC
itself. (Corp. Code, §§ 17701.04, 17701.05, 17703.04, subd. (b);
Beachcomber Mgmt. Crystal Cove, LLC v. Superior Court (2017)
13 Cal.App.5th 1105, 1118; Curci Investments, LLC v. Baldwin
(2017) 14 Cal.App.5th 214, 220.) As trustee of the Trust holding
50 percent of the shares of this LLC, Moazaam may have
standing to institute a derivative shareholder action on behalf of
the LLC.9 (Prob. Code, § 16234; Corp. Code, § 17709.02; see, e.g.,
Beachcomber Mgmt., at p. 1118; Desaigoudar v. Meyercord (2003)
108 Cal.App.4th 173, 183.) The demurrer was properly sustained
with respect to Moazaam’s allegations in the fourth amended
petition because they were not alleged as derivative claims. (See
Alfaro v. Community Housing Improvement System & Planning
Assn., Inc. (2009) 171 Cal.App.4th 1356, 1396-1397 [“ ‘An
appellate court may ... consider new theories on appeal from the
9 In addition, Moazaam may have standing for limited
purposes in her capacity as executor. “If a member [of an LLC]
dies, the deceased member’s personal representative or other
legal representative may exercise the rights of a transferee
provided in subdivision (c) of Section 17705.02 and, for the
purposes of settling the estate, the rights of a current member
under Section 17704.10.” (Corp. Code, § 17705.04.) Thus, as
executor Moazaam obtains the “rights of a transferee,” referring
to distributions from the LLC, and “for the purposes of settling
the estate, the rights of a current member under Section
17704.10,” referring to informational rights. (Corp. Code,
§ 17705.04.)
26
sustaining of a demurrer to challenge or justify the ruling….
[W]e review the validity of the ruling and not the reasons
given.’ ”]; accord, B & P Development Corp. v. City of Saratoga
(1986) 185 Cal.App.3d 949, 959; see also Ortega v. Topa Ins. Co.
(2012) 206 Cal.App.4th 463, 472 [“[W]e may affirm an order
sustaining a demurrer on grounds presented by the record
whether or not relied on by the trial court [citation], or on
grounds first raised on appeal.”].) Moazaam may attempt to
allege claims on Faro Management’s behalf in this capacity in
amending her petition.10
D. The Sham Pleading Doctrine Does Not Apply
The trial court dismissed Moazaam’s fourth amended
petition, concluding it was a sham pleading, because the
numerous amended petitions had repeatedly shifted the
allegations on where the “rights and responsibilities lie” between
Faro Optometry, Inc. and Faro Management, and the fourth
amended petition resurrected claims relating to Faro Optometry,
Inc. The court rejected Moazaam’s arguments that prior counsel
who drafted the earlier petitions was inexperienced, made
mistakes, and had language barrier issues with Moazaam.
Although we agree the various petitions, up to and including the
fourth amended petition, were unclear with respect to the harm
allegedly inflicted on Faro Optometry, Inc. versus Faro
Management, the fourth amended petition was not a “sham
pleading.” Now that we have determined Moazaam could plead
causes of action derivatively on behalf of both entities, she should
10 The determination Moazaam is entitled to leave to amend
to attempt to allege standing in her capacity as executor does not
foreclose any other viable theories of standing.
27
have a final opportunity to attempt to plead coherent allegations
as to each of them.
“Under the sham pleading doctrine, ‘if a verified complaint
contains allegations fatal to a cause of action, a plaintiff cannot
cure the defect by simply omitting those allegations in an
amended pleading without explanation.’ [Citations.] ‘But
amendment in this manner is allowed where a plaintiff clearly
shows that the earlier pleading is the result of mistake or
inadvertence.’ [Citation.] ‘[T]he sham pleading doctrine “cannot
be mechanically applied.” [Citations.] It “is not intended to
prevent honest complainants from correcting erroneous
allegations or to prevent the correction of ambiguous facts.”
[Citation.] Instead “the rule must be taken together with its
purpose, which is to prevent [an] amended pleading which is only
a sham, when it is apparent that no cause of action can be stated
truthfully.” ’ ” (Dones v. Life Ins. Co. of North America (2020)
55 Cal.App.5th 665, 688; accord, JPMorgan Chase Bank, N.A. v.
Ward (2019) 33 Cal.App.5th 678, 690 (JPMorgan); see Colapinto
v. County of Riverside (1991) 230 Cal.App.3d 147, 151 [“If a party
files an amended complaint and attempts to avoid the defects of
the original complaint by either omitting facts which made the
previous complaint defective or by adding facts inconsistent with
those of previous pleadings, the court may take judicial notice of
prior pleadings and may disregard any inconsistent allegations.”];
Amarel v. Connell (1988) 202 Cal.App.3d 137, 144 [sham pleading
doctrine “is reserved ... for the extreme case, and it may not be
indiscriminately applied”].) The pleader must be allowed to
explain the omission of detrimental allegations. (Deveny v.
Entropin, Inc. (2006) 139 Cal.App.4th 408, 426.) “A plaintiff may
show mistake or inadvertence, or demonstrate a factual basis for
28
the revised allegation, for the first time on appeal.” (JPMorgan,
at p. 690.)
Respondents maintain that only after the trial court
determined that Moazaam could not bring claims for Faro
Optometry, Inc. did Moazaam shift her allegations to allege that
it was Faro Management that was harmed. The original petition
generically alleged respondents stole money, patient lists,
inventory, and equipment belonging to the optometry practice
and optical shop without any focus on the corporate forms. In the
first amended petition, Moazaam attempted to distinguish
between the optometry practice operated by Faro Optometry, Inc.
and an optical shop operated by Faro Management. Beginning
with the second amended petition, Moazaam shifted focus to the
harms to Faro Management, expressly alleging that the second
amended petition “removes arguments and claims based on any
ownership interest by the Trust in Faro Optometry, Inc.” This
was in response to the trial court’s sustaining of the demurrer to
the first amended petition without leave to amend as to claims on
behalf of Faro Optometry, Inc. Moazaam alleged that
respondents did not provide her share of Faro Management’s
income; stole its property, including equipment, inventory,
furniture, and software; and misappropriated the client list
belonging to “Faro Optometry,” defined as the combined space of
Faro Management and Faro Optometry, Inc. Moazaam alleged
Faro Optometry, Inc. operated the practice and the shop; Faro
Management supported Faro Optometry, Inc. with billing and
non-optometric services. The third amended petition alleged the
same. It added that Faro Management earned a percentage of
Faro Optometry, Inc.’s net income. In the fourth amended
petition, Moazaam reintroduced claims for Faro Optometry, Inc.
29
based on her pending probate petition seeking appointment as
executor of Mohebbi’s will.
Since the original petition, Moazaam alleged the existence
of two entities, Faro Optometry, Inc. and Faro Management.
Moazaam also alleged Mohebbi’s interest in both entities. Even
though Moazaam did not specifically delineate harm to Faro
Management in the original and first amended petitions,
Moazaam never alleged that Faro Management was not harmed.
In other words, Moazaam did not foreclose the possibility that
harm to Faro Management could be alleged in future petitions.
When the trial court ruled that Moazaam lacked standing to
assert claims for Faro Optometry, Inc., Moazaam attempted to
support her claims within the limitations set by the court by
shifting focus to Faro Management. We conclude that, although
ambiguities existed and persisted, there was no true
inconsistency in the allegations as they evolved.
Furthermore, even if the fourth amended petition still did
not manage to clearly delineate between the two entities and the
distinct harm each allegedly suffered and made some factual
allegations that conflicted with earlier petitions, the sham
pleading doctrine does not exist “ ‘to bind litigants to inadvertent
untrue statements of facts and forbid them the inherent right to
correct the false by substituting the true facts.’ ” (JPMorgan,
supra, 33 Cal.App.5th at p. 691; accord, Ivanoff v. Bank of
America, N.A. (2017) 9 Cal.App.5th 719, 733, fn. 3 [the sham
pleading doctrine prevents litigants from omitting allegations in
amended pleadings to avoid a demurrer, not from correcting
erroneous or ambiguous facts].) It is obvious that Moazaam was
not intimately familiar with the complex inner workings and
corporate forms associated with her husband’s business prior to
30
his death. Moazaam’s attempt to correct the division of
responsibilities and injuries between the two entities is not the
type of inconsistency that the sham pleading doctrine is intended
to prevent. (See Avalon Painting Co. v. Alert Lumber Co. (1965)
234 Cal.App.2d 178, 184 [seminal case on sham pleading
doctrine, holding that doctrine did not apply where plaintiff
amended pleading to omit allegation of an agency relationship
between parties that was fatal to its cause of action; omitting
reference to the agency relationship in amended pleading was not
the sort of omission that “carries with it the onus of
untruthfulness”].) Moreover, the sham pleading doctrine does
not necessarily apply where, as here, an earlier petition was
drafted by prior counsel, and new counsel immediately attempts
to distance itself from the prior allegations after taking over the
case. (JPMorgan, at p. 692.) Therefore, we conclude the sham
pleading doctrine does not apply, and the court abused its
discretion in dismissing the fourth amended petition on that
basis.
E. Other Asserted Grounds for Demurrer to the Individual
Causes of Action
The trial court did not address respondents’ other grounds
for their demurrers with respect to the second through eighth
causes of action. We conclude that the demurrer was properly
sustained without leave to amend as to the third cause of action
for intentional interference with economic relations. But the
specific challenges to the other causes of action either have no
merit or, if valid, do not support sustaining the demurrer without
leave to amend.
31
1. Second cause of action for fraudulent
misrepresentation
To state a cause of action for fraud, a plaintiff must allege
“ ‘(a) misrepresentation (false representation, concealment, or
nondisclosure); (b) knowledge of falsity (or “scienter”); (c) intent
to defraud, i.e., to induce reliance; (d) justifiable reliance; and
(e) resulting damage.’ ” (Lazar v. Superior Court (1996)
12 Cal.4th 631, 638; see Amiodarone Cases (2022) 84 Cal.App.5th
1091, 1109.) Each element “must be pled specifically; general
and conclusory allegations do not suffice.” (Lazar, at p. 645; see
Amiodarone Cases, at p. 1109.) “ ‘ “This particularity
requirement necessitates pleading facts which ‘show how, when,
where, to whom, and by what means the representations were
tendered.’ ” ’ ” (Robinson Helicopter Co., Inc. v. Dana Corp.
(2004) 34 Cal.4th 979, 993; see Amiodarone Cases, at p. 1109.)
Contrary to respondents’ contention, the fourth amended
petition pleads with particularity fraudulent misrepresentations
by Hovhannisyan and Uyeno. It alleges that from August to
December 2021, each time Moazaam asked Hovhannisyan for the
monthly share of net income from the business, Hovhannisyan
told her that the business was not making a profit and
generating no net income, when in fact he was pocketing the
significant profits earned. Further, the petition alleges
Hovhannisyan falsely represented he was “conducting business
with Faro Management’s best interests in mind.” With respect to
Uyeno, the petition alleges he falsely represented to Moazaam
that he was resigning from Faro Optometry, Inc. because he was
moving to Arizona to care for his sick mother, when in fact he
was preparing to open a new competing optometry business
nearby.
32
On the other hand, the allegations against Gonzalez,
Garcia, Ortiz, and Malera are pleaded in a vague and conclusory
fashion. The petition alleges only that from August to December
2021, these individuals (along with Hovhannisyan and Uyeno)
“collectively and severally, falsely represented to [Moazaam] that
Faro Optometry’s business was allegedly not generating a profit
after Dr. Mohebbi’s death. The respondents did this by telling
[Moazaam] as much, intending for her to rely on their
representations, and by intentionally failing to make phone calls
or place orders or otherwise conduct business while [Moazaam]
was present, in order to further the appearance of business being
slow.” These allegations do not sufficiently plead
misrepresentations by each of these individual respondents, and
thus the demurrer was properly sustained as to the fraud cause
of action against Gonzalez, Ortiz, and Malera.11 Because there is
a reasonable possibility that the defect can be cured by
amendment, Moazaam should have an opportunity to do so.
(Dawadi v. Adhikari, supra, 120 Cal.App.5th at p. 562; accord,
Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)
2. Third cause of action for intentional interference with
economic relations, counts 1 and 2
a. Count 1 does not sufficiently state a claim
Moazaam pleaded two separate counts of intentional
interference with economic relations. The first, count 1, alleged
tortious interference by Hovhannisyan and Alameda with the
relationship between Faro Optometry, Inc. and Faro
Management. Respondents contend that in count 1 Moazaam did
not allege any disruption of any economic relationship with a
11 As discussed, Garcia did not join in the demurrer.
33
third party, as required to state a claim for intentional
interference with prospective economic advantage. (See Crown
Imports, LLC v. Superior Court (2014) 223 Cal.App.4th 1395,
1404; Westside Center Associates v. Safeway Stores 23, Inc. (1996)
42 Cal.App.4th 507, 521-522.) Respondents correctly assert the
petition does not allege any third party was involved; rather, it
alleges respondents interfered with an economic relationship
between Faro Optometry, Inc. and Faro Management, which are
related real parties in interest in this dispute. Moazaam does not
respond to this point or argue she could plead facts that would
state a proper claim. Accordingly, we affirm the ruling
sustaining the demurrer to the third cause of action, count 1,
without leave to amend.
b. The Uniform Trade Secrets Act bars count 2
Respondents argue the California Uniform Trade Secrets
Act (UTSA; Civ. Code, § 3426 et seq.) bars count 2 because that
claim for intentional interference with economic relations is
based on the same nucleus of facts as the fourth cause of action
for misappropriation of trade secrets. (See K.C. Multimedia, Inc.
v. Bank of America Technology & Operations, Inc. (2009)
171 Cal.App.4th 939, 958 [UTSA “preempts common law claims
that are ‘based on the same nucleus of facts as the
misappropriation of trade secrets claim for relief’ ”]; accord,
Silvaco Data Systems v. Intel Corp. (2010) 184 Cal.App.4th 210,
238-240, disapproved of on other grounds by Kwikset Corp. v.
Superior Court (2011) 51 Cal.4th 310.)
In the fourth cause of action for misappropriation of trade
secrets, Moazaam alleges that the list of Faro Optometry Inc.’s
patients is the trade secret that respondents misappropriated.
The third cause of action for intentional interference with
34
economic relations, count 2, is similarly based on respondents’
use of the patient list to start a competing business. The UTSA
thus bars that count. Because there is no reasonable possibility
Moazaam could amend count 2 to remove it from the ambit of the
UTSA, Moazaam is not entitled to leave to amend that count.12
3. Fourth cause of action for misappropriation of trade
secrets
Under the UTSA, “a cause of action for misappropriation of
trade secrets requires a plaintiff to show the plaintiff owned the
trade secret.” (AMN Healthcare, Inc. v. Aya Healthcare Services,
Inc. (2018) 28 Cal.App.5th 923, 942.) Respondents argue that the
fourth cause of action for misappropriation of trade secrets does
not state a claim because it does not allege that Moazaam
personally owned any trade secret that was misappropriated, and
instead alleges the trade secret (i.e., the patient list) belongs to
Faro Optometry, Inc. As discussed, however, the injured parties
in this case are Faro Optometry, Inc. and Faro Management, not
Moazaam. Thus, the petition correctly alleged that Faro
12 Respondents assert the UTSA also bars the fifth cause of
action for conversion, the sixth cause of action for breach of
fiduciary duty, the seventh cause of action for unfair competition,
and the eighth cause of action for aiding and abetting breach of
duty. However, those causes of action are not based entirely on
misappropriation of the patient list but are also based on
misappropriated cash, inventory, and equipment. The “UTSA
does not displace noncontract claims that, although related to a
trade secret misappropriation, are independent and based on
facts distinct from the facts that support the misappropriation
claim.” (Angelica Textile Services, Inc. v. Park (2013)
220 Cal.App.4th 495, 506.) The UTSA does not bar the fifth
through eighth causes of action.
35
Optometry, Inc. owned the trade secret and that its
misappropriation caused Faro Optometry, Inc. to lose patients
and goodwill and thus to lose value. However, the petition
incorrectly alleges that the parties suffering damage were the
Trust, Mohebbi’s estate, and “his beneficiaries.” As discussed,
any further amended petition must recast the claims as
derivative ones on behalf of Faro Optometry, Inc. or Faro
Management. We conclude the demurrer to this cause of action
was properly sustained but Moazaam is entitled to leave to
amend the petition to allege Faro Optometry, Inc. suffered harm.
4. Fifth cause of action for conversion, counts 1 and 2
Respondents make a similar argument that the cause of
action for conversion fails to allege the plaintiff’s ownership of the
property that was converted. But in count 1 of the conversion
cause of action the petition alleges Hovhannisyan “took control of
the cash earned by Faro Optometry” and “kept it for himself.” In
count 2 the petition alleges Hovhannisyan and Gonzalez took
cash, equipment, and other property belonging to Faro
Optometry, Inc. or Faro Management. These allegations
sufficiently state claims for conversion by the proper party; but as
with the other causes of action, the petition improperly pleads
damages suffered by the Trust and Mohebbi’s estate, as opposed
to Faro Optometry, Inc. or Faro Management. Thus, the
demurrer to both counts of this cause of action was properly
sustained, but Moazaam may have leave to amend to allege harm
suffered by the proper parties.
36
5. Sixth cause of action for breach of fiduciary duty and
eighth cause of action for aiding and abetting the
breach of duty
Respondents have not shown the petition failed to
adequately allege a claim for breach of fiduciary duty against
Hovhannisyan. The petition alleges Hovhannisyan owed a duty
of loyalty to Faro Management as a 50 percent owner of the LLC
and a duty of loyalty to Faro Optometry, Inc. as its manager.
(See Corp. Code, § 17704.09, subdivision (a) [member owes duty
of loyalty to a member-managed LLC]; Stokes v. Dole Nut Co.
(1995) 41 Cal.App.4th 285, 295 [“ ‘[D]uring the term of
employment, an employer is entitled to its employees’ “undivided
loyalty.” ’ ”]; Sequoia Vacuum Systems v. Stransky (1964)
229 Cal.App.2d 281, 286 [“a party may not enter into a competing
enterprise which cripples or injures a business or corporation of
which he remains an officer or director”].) The petition further
alleges Hovhannisyan knowingly acted against Faro Optometry,
Inc.’s and Faro Management’s interests “in his conspiracy to take
[their] property, including cash and income, confidential
information, inventory, and equipment.” The allegations pass
muster.
Respondents contend the eighth cause of action, alleging
respondents Gonzalez, Ortiz, and Malera knowingly aided and
abetted Hovhannisyan’s breach of his duty, fails along with the
breach of fiduciary duty cause of action. Because we have
determined the breach of fiduciary duty claim is viable,
respondents’ challenge to the aiding and abetting cause of action
is without merit.
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6. Seventh cause of action for unfair competition
The seventh cause of action is based on the unfair
competition law (UCL) set forth in Business and Professions Code
section 17200 et seq. Besides allegations about the taking of Faro
Optometry, Inc.’s patient list (that, as discussed, are exclusively
cognizable under the UTSA),13 the petition alleges respondents
committed unfair business practices by falsely advertising Faro
Optometry, Inc. and Alameda were the same business, soliciting
Faro Optometry, Inc.’s patients under these false pretenses, and
taking money belonging to Faro Optometry, Inc.
Any person “who has suffered injury in fact and has lost
money or property as a result of such unfair competition” may
prosecute an action under the UCL. (Bus. & Prof. Code, § 17204.)
Parties who “had business dealings with a defendant and had lost
money or property as a result of the defendant’s unfair business
practices” have standing under the UCL. (Clayworth v. Pfizer,
Inc. (2010) 49 Cal.4th 758, 788.) As discussed, Faro Optometry,
Inc. and Faro Management are the injured parties, but the unfair
competition cause of action states it was the Trust and Mohebbi’s
estate that “suffered economic injury.” Accordingly, the demurrer
was properly sustained as to this cause of action, but leave to
amend is granted to allege Faro Optometry, Inc. and Faro
Management suffered the injuries.
F. The Attorney Fee Award Must Be Vacated
“An order awarding attorney fees ‘ “falls with a reversal of
the judgment on which it is based.” ’ ” (Gunther v. Alaska
13 The “UTSA bars UCL claims sounding in misappropriation
of trade secrets.” (Silvaco Data Sys. v. Intel Corp., supra,
184 Cal.App.4th at p. 241.)
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Airlines, Inc. (2021) 72 Cal.App.5th 334, 358.) Because we have
reversed the judgment in favor of respondents, we reverse the
award of attorney fees.
DISPOSITION
The order dismissing the fourth amended petition is
reversed. The matter is remanded for the trial court to vacate
the order sustaining the demurrer to the petition without leave to
amend. The court is directed to enter a new order sustaining the
demurrer to the petition but granting Moazaam leave to amend
to allege standing as an executor bringing derivative claims on
behalf of Faro Optometry, Inc. and as trustee bringing derivative
claims on behalf of Faro Management.
With respect to respondents’ demurrers to the individual
causes of action, the court is directed to enter an order overruling
the demurrers to the second cause of action as to respondents
Hovhannisyan and Uyeno, and to the sixth and eighth causes of
action; sustaining the demurrers (with leave to amend) to the
second cause of action as to respondents Gonzalez, Ortiz, and
Malera, the fourth cause of action, the fifth cause of action
(counts 1 and 2), and the seventh cause of action; and sustaining
the demurrer to the third cause of action (counts 1 and 2) without
leave to amend.
The appeal from the February 2, 2025 order sustaining the
demurrer without leave to amend is dismissed as not appealable.
///
///
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The postjudgment order awarding attorney fees is reversed.
The parties shall bear their own costs on appeal.
STONE, J.
We concur:
MARTINEZ, P. J.
SEGAL, J.
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