Ball Up v. Singer CA2/3 ( 2022 )

Filed 8/26/22 Ball Up v. Singer CA2/3
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on
opinions not certified for publication or ordered published, except as specified by rule
8.1115(b). This opinion has not been certified for publication or ordered published for
purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION THREE
BALL UP, LLC, B311928
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. 20STCV30463)
v.
MICHAEL SINGER,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of Los
Angeles County, Holly J. Fujie, Judge. Reversed with direction.
Hueston Hennigan, Robert N. Klieger, Alexander Botoman
for Plaintiff and Appellant.
Michelman & Robinson, Mona Z. Hanna and Reuben A.
Ginsburg for Defendant and Respondent.
_________________________
In 2016, Ball Up, Inc. (Ball Up) sued Michael Singer in
Texas state court. In 2018, Singer was dismissed from that
action. In 2020, two years after the dismissal, Ball Up filed this
California action against Singer. Singer demurred to the
operative pleading on the ground that the causes of action were
time-barred and that the statute of limitations was not equitably
tolled. Agreeing, the trial court sustained Singer’s demurrer
without leave to amend. Ball Up appeals, contending it alleged
sufficient facts to show that the statute of limitations was
equitably tolled. We agree and reverse the judgment.
BACKGROUND
I. Ball Up sues Singer in Texas.
Streetball is a form of basketball that is typically played on
outdoor courts. Less formal than basketball, its structure allows
players to showcase their individual skills. In 2010, Demetrius
Spencer and Robert Keetch formed Ball Up to create a sports
lifestyle brand “based on the diversity, edginess, and strong sense
of community that have long been the hallmarks of streetball.”
Ball Up thereafter entered into an agreement with Strategic
Partners, a manufacturer and wholesaler of medical apparel, to
develop Ball Up apparel and footwear. Singer was Strategic
Partner’s chairman and chief executive officer.
When the relationship deteriorated, Ball Up sued Strategic
Partners and Singer on January 29, 2016 in Texas state court for
fraud and intentional misrepresentation, civil conspiracy, and
negligent misrepresentation. Ball Up alleged that although its
agreement with Strategic Partners was never finalized in
writing, Strategic Partners promised to fund the brand and
market apparel. However, Strategic Partners and Singer backed
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out of the agreement and stealthily and actively obstructed Ball
Up’s plan to market apparel.
On May 16, 2017, the Texas court dismissed Singer from
the action based on a lack of personal jurisdiction over him. Ball
Up appealed that order, and a Texas court stayed the case,
pending the outcome on appeal. On August 2, 2018, the Texas
appellate court affirmed the order dismissing Singer. That
decision became final on October 16, 2018, and the stay of the
Texas action was lifted shortly thereafter.
Shortly after the stay was lifted, Spencer of Ball Up was
diagnosed with Bell’s Palsy with hemifacial paralysis. Advised to
refrain from cognitive stressors, Spencer was unable to assist
with filing a new case in California against Singer and with the
Texas action, which was again stayed from June 7, 2019 to May
2020 and is now pending trial.
II. Ball Up files this California action.
Meanwhile, Ball Up struggled to find counsel to pursue the
litigation and to finance it. Ball Up retained its current counsel
in June 2020, and he filed this California action on August 11,
2020—two years after Singer had been dismissed from the Texas
action. Singer demurred to the fraud-based complaint on the
grounds that all causes of action were time-barred, and the
doctrine of equitable tolling was inapplicable. Ball Up opposed
the demurrer and argued that the three-year limitations period
applicable to fraud causes of action was tolled from when Ball Up
filed the Texas action in January 2016 to when the Texas
appellate court affirmed the order dismissing Singer in August
2018. The trial court sustained the demurrer with leave to
amend, finding that Ball Up needed to allege facts showing that
the statute of limitations had been equitably tolled.
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Ball Up filed an amended complaint alleging two causes of
action, one for aiding and abetting breach of fiduciary duty and a
second for fraud and deceit. Ball Up alleged that it filed the
action within six weeks of retaining new counsel and could not
have reasonably filed it sooner because of Spencer’s medical
issues and Ball Up’s difficulty raising funds to hire counsel,
which the COVID-19 pandemic exacerbated. Ball Up further
alleged that its claims against Singer in this action and those
raised in the Texas action were substantially similar.
Singer demurred to the amended pleading, again
contending that the causes of action were barred by the three-
years limitations period in Code of Civil Procedure section 338,
subdivision (d). Singer argued that Ball Up unreasonably
delayed commencing the state action, because he was dismissed
from the Texas action in August 2018 but Ball Up did not file the
California action until August 2020. He also argued that
Spencer’s illness, Ball Up’s financial woes, and the pandemic did
not establish a reasonable and good faith reason to invoke
equitable tolling.
Ball Up opposed the demurrer. As relevant here, it argued
that the equitable tolling doctrine applied because the Texas
action was still pending. Further, even if Ball Up was required to
sue Singer after he was dismissed from the Texas action, Ball Up
did not unreasonably delay filing the California action.
The trial court sustained the demurrer without leave to
amend. It found that the three-year-limitations period in Code of
Civil Procedure section 338, subdivision (d), applied and began to
run no later than January 29, 2016, when Ball Up filed the Texas
action. Because the limitations period expired three years later
on January 29, 2019, the state action was untimely unless
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equitable tolling applied. Turning to the elements of equitable
tolling, the trial court found that Ball Up’s financial woes,
Spencer’s medical condition, and the pandemic were irrelevant to
the analysis. Otherwise, the trial court found that the operative
complaint adequately pled timely notice and lack of prejudice to
Singer. However, the trial court found that the two-year delay
between Singer’s dismissal from the Texas action and the filing of
the instant action was objectively unreasonable and not in good
faith. Accordingly, equitable tolling did not apply.
This appeal followed.1
DISCUSSION
I. Standard of review
“In reviewing an order sustaining a demurrer, we assume
well-pleaded factual allegations to be true and examine the
complaint de novo to determine whether it alleges facts sufficient
to state a cause of action on any legal theory.” (Kyablue v.
Watkins (2012) 210 Cal.App.4th 1288, 1292.) “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: if it can be, the trial court has abused its discretion
and we reverse; if not, there has been no abuse of discretion and
we affirm.’ ” (Kan v. Guild Mortgage Co. (2014) 230 Cal.App.4th
736, 740–741.)
1 Ball Up filed its notice of appeal before entry of the
judgment of dismissal. We deem the premature notice of appeal
to have been timely filed from the subsequent judgment. (Cal.
Rules of Court, rule 8.104(d)(1).)
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II. Equitable tolling
The parties agree that the statute of limitations began to
run in January 2016, when Ball Up filed the Texas action. The
three-year statute of limitations applicable to fraud-based causes
of action therefore expired in January 2019, in the absence of
equitable tolling.2 Ball Up now contends that the trial court
erred in finding that the operative complaint did not allege facts
sufficient to show that the statute of limitations was equitably
tolled.
“Equitable tolling is a judicially created doctrine that,
where applicable, will ‘ “suspend or extend a statute of
limitations as necessary to ensure fundamental practicality and
fairness.” ’ (McDonald v. Antelope Valley Community College
Dist. (2008) 45 Cal.4th 88, 99 (McDonald).)” (Long v. Forty
Niners Football Co., LLC (2019) 33 Cal.App.5th 550, 554–555
(Long).) As with other general equitable principles, the doctrine
of equitable tolling “is applied flexibly to ‘ensure fundamental
practicality and fairness.’ ” (J.M. v. Huntington Beach Union
High School Dist. (2017) 2 Cal.5th 648, 658.)
The doctrine of equitable tolling derives from three lines of
cases. (Saint Francis Memorial Hospital v. State Dept.t of Public
Health (2020) 9 Cal.5th 710, 724 (St. Francis).) One line of cases
offers flexibility from a statute of limitations when the plaintiff
2 Ball Up maintained in the trial court that a three-year
limitations period applied, but now asserts on appeal that a four-
year limitations period applies, per Texas law. Because a litigant
may not take inconsistent positions on appeal (see Sole Energy
Co. v. Petrominerals Corp. (2005) 128 Cal.App.4th 212, 235), we
apply the three-year statute of limitations in Code of Civil
Procedure section 338, subdivision (d).
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was already involved in one lawsuit and filed a “subsequent case
that could lessen the damage or harm that would otherwise have
to be remedied through a separate case.” (Ibid.) A second line of
cases tolls limitations periods where a plaintiff was required to
and did pursue an administrative remedy before a civil action.
(Ibid.) The third line of cases tolls limitations periods “ ‘ “to serve
the ends of justice where technical forfeitures would unjustifiably
prevent a trial on the merits.” ’ ” (Ibid.) In sum and “ ‘[b]roadly
speaking, the doctrine applies “ ‘[w]hen an injured person has
several legal remedies and, reasonably and in good faith, pursues
one.’ ” ’ ” (Long, supra, 33 Cal.App.5th at p. 555.)
A plaintiff seeking the benefit of equitable tolling must
show three elements: timely notice, lack of prejudice to the
defendant, and reasonable and good faith conduct on the part of
the plaintiff. (Saint Francis, supra, 9 Cal.5th at p. 724.) The
first element requires the defendant to have received timely
notice of the plaintiff’s intent to file suit. (Id. at p. 727.) The
second element focuses on whether applying equitable tolling
would prevent the defendant from defending a claim on the
merits. (Ibid.) The third element requires a plaintiff’s conduct to
be objectively reasonable and subjectively in good faith. (Id. at
p. 729.) Reasonableness focuses on whether the party’s actions
were fair, proper, and sensible under the circumstances, while
good faith requires determining whether the party’s filing
resulted from honest mistake rather than a dishonest purpose.
(Ibid.) This third element helps prevent the doctrine from
becoming the norm rather than the exception and from being a
cure-all for a common state of affairs, while ensuring it provides
narrow relief “in ‘unusual circumstances’ when justice so
requires.” (Id. at p. 730.)
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Here, the trial court found that Ball Up alleged facts to
show the first two elements of equitable tolling, and Singer does
not contend otherwise. Accordingly, we focus on whether Ball Up
alleged facts to show it acted objectively reasonably and in good
faith.
Ball Up argues it was objectively reasonable for it to delay
filing the California action because Ball Up was seeking recovery
for the same wrongs in the Texas action, and, further, no rule
required it to file the California action within a certain time
frame to avail itself of equitable tolling. As we have said,
equitable tolling has been applied where, as here, a plaintiff was
already involved in one lawsuit that could lessen the damage or
harm that would otherwise have to be remedied through a
separate case, and thereafter filed a subsequent case. (See
generally Addison v. State (1978) 21 Cal.3d 313 (Addison).)
In Addison, supra, 21 Cal.3d 313, the applicable limitations
period required claims against a public entity to be brought
within six months after the entity’s rejection of the claim. The
plaintiffs timely filed a tort action against public entities in
federal court; however, the defendant moved to dismiss the
federal action based on lack of jurisdiction. Anticipating an
adverse ruling, the plaintiffs filed a state action, and a week later
the federal action was indeed dismissed. (Id. at p. 316.) Under
these circumstances, where the second action was filed within a
week of the dismissal of the first action, equitable tolling was
applied. (Id. at p. 319.) The court found that public policy favors
relieving a plaintiff from a bar of a limitations statute when,
“possessing several legal remedies, [the plaintiff] reasonably and
in good faith, pursues one designed to lessen the extent of his
injuries or damage.” (Id. at p. 317.) There is no policy reason to
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require plaintiffs to file simultaneous actions based on the same
facts in federal and state court since such duplicative proceedings
are inefficient, awkward, and laborious. (Id. at p. 319.) The
rationale underlying this “several remedies rule” is the plaintiff
knows there are alternative remedies and makes a conscious,
rational, and reasonable decision to pursue one remedy to
eliminate the need to pursue the other. (Garabedian v. Skochko
(1991) 232 Cal.App.3d 836, 844; accord, McDonald, supra, 45
Cal.4th at p. 99 [doctrine is narrow remedy applied “ ‘ “[w]hen an
injured person has several legal remedies and, reasonably and in
good faith, pursues one,” ’ ” but it later becomes necessary to
pursue another].)
Under this authority, Ball Up reasonably pursued one legal
remedy against Singer via the Texas action before filing the
second action in California, and Singer does not contend
otherwise.
Given that any tolling period extends from January 2016,
when Ball Up filed the Texas action (which is when the parties
agree the statute of limitations began to run), to August 2018,
when Singer was dismissed from that action, what impact does
that tolling period have on the three-years limitations period? As
to that, our California Supreme Court has said, the “effect of
equitable tolling is that the limitations period stops running
during the tolling event, and begins to run again only when the
tolling event has concluded. As a consequence, the tolled
interval, no matter when it took place, is tacked onto the end of
the limitations period, thus extending the deadline for suit.”
(Lantzy v. Centex Homes (2003) 31 Cal.4th 363, 370–371; Pearson
Dental Supplies, Inc. v. Superior Court (2010) 48 Cal.4th 665,
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674.)3 This action was filed within the limitations period,
crediting the tolling period. In other words, crediting the two
years in which the Texas action was pending against Singer, Ball
Up filed this action in August 2020, one year before the three-
year-limitations period ran in August 2021. This weighs in favor
of reasonableness.
Singer, however, argues that the reasonableness of the
delay must be measured from when he was dismissed from the
Texas action in August 2018 to when the California action was
filed in August 2020. He thus points out that courts have
observed that one “possible indicium of reasonableness and good
faith is whether a plaintiff filed the second claim within a
reasonable time after the period of tolling concluded.” (Collier v.
City of Pasadena (1983) 142 Cal.App.3d 917, 931 [second action
filed while statute still tolling] (Collier); see, e.g., Nichols v.
Canoga Industries (1978) 83 Cal.App.3d 956, 963–964
[unreasonable delay in filing second case might bar it in light of
equitable foundation of tolling rule]; see, e.g., Elkins v. Derby
(1974) 12 Cal.3d 410, 413 [second action filed four months after
statute of limitations would have run was timely].) If “a plaintiff
delayed filing the second claim until the statute on that claim
had nearly run, even after crediting the tolled period, his conduct
3 The parties cite cases (e.g., Kolani v. Gluska (1998) 64
Cal.App.4th 402) involving 28 United States Code section
1367(d). That section is a specific tolling statute concerning
when supplemental state claims must be filed upon dismissal by
the district court. Under that statute, the limitations for a state
claim first filed in federal court is “tolled while the claim is
pending and for a period of 30 days after it is dismissed.”
(28 U.S.C. § 1367(d); Artis v. District of Columbia (2018) 138
S.Ct. 594.) That statute has no application here.
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might be considered unreasonable.”4 (Collier, at p. 926, italics
added; see also McDonald, supra, 45 Cal.4th at p. 102, fn. 2.)
But Singer cites no case holding that equitable tolling is
inapplicable as a matter of law where, as here, the limitations
period has not run, crediting the tolling period. Rather, the
general rule is that a tolled period is tacked onto the statute of
limitations. (Collier, supra, 142 Cal.App.3d at p. 926.) Here,
crediting the tolling period, the statute had another year to run
when the California action was filed. We therefore cannot agree
that Ball Up’s conduct in delaying until 2020 to file the California
action was unreasonable as a matter of law.
However, we are not unsympathetic to the fact that Ball Up
waited two years after Singer had been dismissed from the Texas
action to file this one.5 Even so, we cannot, at this stage of the
proceedings and under circumstances where Ball Up
appropriately pursued Singer in the Texas action and filed the
California action within the extended limitations period, find as a
matter of law that equitable tolling does not apply, especially
given the substantial policies the doctrine is designed to further.
That is, it first serves the fundamental purpose of statutes of
limitations by giving defendants timely notice of claims, without
imposing the costs of forfeiture on plaintiffs. (Downs v.
Department of Water & Power (1997) 58 Cal.App.4th 1093, 1100.)
4 The court also said that a plaintiff would have acted
unreasonably or in bad faith also if the plaintiff deliberately
misled the defendant into believing the second claim would not be
filed. (Collier, supra, 142 Cal.App.3d at p. 926.)
5 What makes this case somewhat unusual is that the
parties agree the statute of limitations began to run when the
Texas action was filed. Thus, no time had run on the limitations
period by the time litigation began.
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Second, the doctrine avoids compelling plaintiffs to pursue
duplicative actions simultaneously on the same set of facts.
(Ibid.) Third, it lessens costs to courts because disposing of a case
filed in one forum may render proceedings in the second
unnecessary or easier and less expensive to resolve. (Ibid.) And
courts should liberally apply tolling rules in situations where the
plaintiff has satisfied the notification purpose of a limitations
statute. (McDonald, supra, 45 Cal.4th at p. 102.)
Here, Ball Up’s initial pursuit of Singer in Texas before
filing another action furthered these policies. Singer had timely
notice of the claims against him. Ball Up tried to pursue all
claims in one proceeding instead of filing duplicative actions at
the outset. Finally, all parties agree that the two actions involve
the same issues and facts, and therefore any resolution of the
first action might render the second proceeding easier or cheaper
to resolve. (See, e.g., McDonald, supra, 45 Cal.4th at p. 100.)
In holding that the demurrer should have been overruled,
we find only that at this stage of the proceedings the allegations
were sufficient to show the potential applicability of equitable
tolling. Singer has not, for example, addressed good faith on
appeal, relying instead on its argument that Ball Up acted
unreasonably in delaying filing the California action. We express
no view as to whether equitable tolling ultimately should be
applied.6
6 Given our conclusion, we need not address Ball Up’s
alternative claim that it could have waited until the Texas action
against Strategic Partners concludes before suing Singer.
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DISPOSITION
The judgment is reversed with the direction to the trial
court to enter a new order overruling the demurrer. Ball Up may
recover its costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL
REPORTS
EDMON, P. J.
We concur:
LAVIN, J.
EGERTON, J.
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