Striking alter ego allegations in California

Striking alter ego allegations in California is the topic of this blog post.

In order to request a court order striking allegations of alter ego liability in California you will have to file a motion to strike the alter ego allegations. The motion to strike could be filed in response to any complaint or cross-complaint that contains allegations of alter ego liability, particularly if those allegations are devoid of any factual details and are mostly generic boilerplate allegations as those types of allegations do not state enough facts to support an alter ego claim.

I have worked in California and Federal litigation since 1995. I worked on a case a month or so ago in which the plaintiff had filed an original complaint that did not contain any alter ego allegations against the owner of a corporation and a limited liability company. In fact the original complaint not only did not even name the owner as an individual defendant it did not contain any alter ego allegations against any named defendant.

The plaintiff in that case later discovered that at least one of the fictitious business entities named as a defendant had been suspended from doing business in the State of California and any judgment against that party would have not been worth the paper it was printed on. Once the plaintiff discovered that fact they filed a motion for leave to file a first amended complaint which was granted. I began working on the case after the first amended complaint had been filed and served.

I carefully reviewed and compared both the original complaint and the first amended complaint and quickly realized the obvious fact that the owner was only named as an individual defendant in order to exert financial pressure on them to settle the case. I then performed further research on alter ego liability in California law which uncovered the fact that the law is clear in California that generic boilerplate allegations will not support an alter ego claim. I then prepared a motion to strike the alter ego allegations of the first amended complaint along with several other portions.

Grounds for requesting an order striking alter ego allegations in California.

As I mentioned earlier the law is settled in California that boilerplate allegations alleging that “each defendant was the agent and employee of every other co-defendant” have been described by both the California Supreme Court and California Courts of Appeal in published decisions as an example of generic boilerplate secondary liability allegations.

The reality is that many complaints include alter ego allegations that are merely generic boilerplate allegations that essentially rely on rote and conclusory allegations of agency and alter ego. Arbitrary contentions that defendants are alter egos of each other is not proper pleading practice as it deprives the individual defendants of an opportunity to respond to the allegations against them.

The law in California also states that any imposing of alter ego liability be approached with caution and that the burden is on the plaintiff to overcome the presumption of the separate existence of the corporate entity. For example plaintiffs cannot allege a sufficient alter ego claim merely by including allegations that it may be difficult for them to enforce a judgment or recover losses from the wrongdoers unless alter ego liability is imposed.

Meet and confer requirement effective January 1, 2018.

The new meet and confer requirement for a motion to strike in California just became effective on January 1, 2018.

The new meet and confer requirement for a motion to strike in California is found in Code of Civil Procedure section 435.5 which states in pertinent part that,

“(a) Before filing a motion to strike pursuant to this chapter, the moving party shall meet and confer in person or by telephone with the party who filed the pleading that is subject to the motion to strike for the purpose of determining if an agreement can be reached that resolves the objections to be raised in the motion to strike. If an amended pleading is filed, the responding party shall meet and confer again with the party who filed the amended pleading before filing a motion to strike the amended pleading.

(1) As part of the meet and confer process, the moving party shall identify all of the specific allegations that it believes are subject to being stricken and identify with legal support the basis of the deficiencies. The party who filed the pleading shall provide legal support for its position that the pleading is legally sufficient, or, in the alternative, how the pleading could be amended to cure any legal insufficiency.

(2) The parties shall meet and confer at least five days before the date a motion to strike must be filed. If the parties are unable to meet and confer at least five days before the date the motion to strike must be filed, the moving party shall be granted an automatic 30-day extension of time within which to file a motion to strike, by filing and serving, on or before the date a motion to strike must be filed, a declaration stating under penalty of perjury that a good faith attempt to meet and confer was made and explaining the reasons why the parties could not meet and confer. The 30-day extension shall commence from the date the motion to strike was previously due, and the moving party shall not be subject to default during the period of the extension. Any further extensions shall be obtained by court order upon a showing of good cause.

(3) The moving party shall file and serve with the motion to strike a declaration stating either of the following:

(A) The means by which the moving party met and conferred with the party who filed the pleading subject to the motion to strike, and that the parties did not reach an agreement resolving the objections raised by the motion to strike.

(B) That the party who filed the pleading subject to the motion to strike failed to respond to the meet and confer request of the moving party or otherwise failed to meet and confer in good faith.

(4) A determination by the court that the meet and confer process was insufficient is not grounds to grant or deny the motion to strike.

(b) A party moving to strike a pleading that has been amended after a motion to strike an earlier version of the pleading was granted shall not move to strike any portion of the pleadings on grounds that could have been raised by a motion to strike as to the earlier version of the pleading.

(c) (1) If a court grants a motion to strike and grants leave to amend, the court may order a conference of the parties before an amended pleading, or a motion to strike an amended pleading, may be filed. If the conference is held, the court shall not preclude a party from filing a motion to strike and the time to file a motion to strike shall not begin until after the conference has concluded.

(2) This section does not prohibit the court from ordering a conference on its own motion at any time or prevent a party from requesting that the court order that a conference be held.

(d) This section does not apply to any of the following:

(1) An action in which a party not represented by counsel is incarcerated in a local, state, or federal correctional institution.

(2) A proceeding in forcible entry, forcible detainer, or unlawful detainer.

(3) A special motion brought pursuant to Section 425.16.

(4) A motion brought less than 30 days before trial.

(g) If a motion to strike is denied and the pleading is not further amended, the moving party preserves its right to appeal after final judgment without filing a further motion to strike.

(h) This section shall remain in effect only until January 1, 2021, and as of that date is repealed, unless a later enacted statute that is enacted before January 1, 2021, deletes or extends that date.” (emphasis added).

This code section was enacted by the California legislature in the hopes that it would reduce the number of motions to strike by imposing a requirement to meet and confer before most demurrers can be filed. It will expire on January 1, 2021, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2021, deletes or extends that date.

The advantages of the new meet and confer requirement for a motion to strike in California is  that if you meet and confer as required and the other party or attorney does not respond, or will not meet and confer in good faith you can file and serve a declaration on or before the date that your responsive pleading is due detailing your efforts and that will give you an automatic 30-day extension of time to file a responsive pleading.

Sample motion to request an order striking alter ego allegations in California.

Attorneys or parties in California that would like to view a portion of a 16 page sample motion to strike alter ego allegations containing brief instructions, a memorandum of points and authorities with citations to case law and statutory authority, sample declaration and proof of service by mail sold by the author can use the link shown below.

Sample Motion to Strike Alter Ego Allegations in California by Stan Burman on Scribd

 

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The author of this blog post, Stan Burman, is an entrepreneur and retired litigation paralegal that worked in California and Federal litigation from January 1995 through September 2017 and has created over 300 sample legal documents for sale.

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DISCLAIMER:

Please note that the author of this blog post, Stan Burman is NOT an attorney and as such is unable to provide any specific legal advice. The author is NOT engaged in providing any legal, financial, or other professional services, and any information contained in this blog post is NOT intended to constitute legal advice.

The materials and information contained in this blog post have been prepared by Stan Burman for informational purposes only and are not legal advice. Transmission of the information contained in this blog post is not intended to create, and receipt does not constitute, any business relationship between the author and any readers. Readers should not act upon this information without seeking professional counsel.