Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_15-cv-02025/USCOURTS-casd-3_15-cv-02025-3/pdf.json

Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 28:1332fr Diversity-Fraud

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Case No. 15-cv-2025-WQH-JLB

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

DIRECT LIST, LLC and 

ERAN SALU, 

Plaintiffs,

v.

PHIL KESSLER, 

LAUREN KESSLER, 

DIANA OWENS, and 

ARROW MARKETING

COMPANY L.L.C.,

Defendants.

CASE NO.: 15-cv-2025-WQH-JLB

ORDER 

HAYES, Judge:

I. Background

On September 11, 2015, Plaintiffs Eran Salu and Direct List LLC initiated this 

action by filing a Complaint (ECF No. 1) against a number of Defendants including 

Phil Kessler (“Kessler”). On June 23, 2017, Plaintiffs filed a First Amended 

Complaint (ECF No. 123) (the “FAC”). The FAC includes claims by both Plaintiffs 

against Kessler for fraud and breach of fiduciary duty, as well as five other claims 

brought only by Direct List. FAC at ¶¶ 87 and 97. 

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Case No. 15-cv-2025-WQH-JLB

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On March 28, 2018, the Court ordered the parties to submit Memorandums of 

Fact and Law on: (1) “whether Phil Kessler owed a fiduciary duty to Salu and/or 

Direct List” (and the timing of the Court’s decision on that issue) and (2) whether 

Salu “satisfied the injury requirement for Article III standing.” (ECF No. 158 at 2). 

On May 22, 2018, the Court ordered the parties to submit additional Memorandums 

of Fact and Law “addressing whether Salu meet[s] the prudential requirements of the 

standing doctrine.” ECF No. 196 (alteration in original) (quoting Franchise Tax Bd. 

of California v. Alcan Aluminium Ltd., 493 U.S. 331, 336 (1990)). 

II. Factual Background

Direct List is a limited liability company. Deposition of Eran Salu, ECF No. 

162-2, at 11. The sole owner of Direct List is JAL Equity, a Nevada corporation. Id. 

at 11, 13. Salu is the sole stockholder of JAL Equity. Id. at 13. 

The Complaint alleges that “The Vistage Defendants hold themselves out as 

providing a confidential, trusted forum in which CEOs may safely discuss their most 

sensitive and private business affairs with fellow CEOs, led and overseen by the CEO 

Group Chair.” Id. at ¶ 2. “In reliance on . . . repeated assurances of confidentiality, 

Mr. Salu shared confidential information with Mr. Kessler, his Vistage CEO Group 

Chair, regarding the design and operation of a business that Mr. Salu created called 

Direct List LLC.” Id. at ¶ 7. “In violation of those assurances, . . . Kessler[] used 

Mr. Salu’s confidential information to form a competing business, AVS Leads.” Id.

at ¶ 8. “As a direct result of the Vistage Defendants’ conduct, as described above, 

Mr. Salu and Direct List have suffered damages in the form of substantial loss of 

business and profits to Direct List, which is owned by Mr. Salu, in the estimated 

amount of $5.3 million.” Id. at ¶¶ 95, 100. 

In his deposition, Salu stated that the Defendants’ alleged conduct caused him 

to “los[e] income from Direct List.” Salu Depo. at 15; see also Salu Depo. at 14 

(“I’ve lost the income generated from Direct List . . . . Again, I’ve lost income that 

I would receive from Direct List.”). 

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The Pretrial Order states that Plaintiffs seek $5,950,000 in compensatory 

damages (calculated as of April 1, 2018), as well as punitive damages, attorneys’ 

fees, and costs. ECF No. 155 at 4, 5, 6, 7, 9, 10, 11, 12, 13, and 14. The Pretrial 

Order does not differentiate between the damages sought by Salu and the damages 

sought by Direct List. Id. 

III. Standing

Salu contends that he has standing to bring his claims for fraud and breach of 

fiduciary duty against Kessler. (ECF Nos. 162, 203).1 Kessler contends that Salu 

does not meet the requirements of prudential standing. (ECF Nos. 168, 200, 223). 

“Generally, a shareholder does not have standing to redress an injury to the 

corporation.” Shell Petroleum, N.V. v. Graves, 709 F.2d 593, 595 (9th Cir. 1983)

(collecting cases). Similarly, members of a limited liability company do not have 

standing to bring claims for injuries to the company. See Coto Settlement v. 

Eisenberg, 593 F.3d 1031, 1036–37 (9th Cir. 2010) (citing cases discussing 

shareholder standing when deciding whether a member of a limited liability company 

had standing to assert claims for injuries to the company). “A shareholder does have 

standing, however, when he or she has been ‘injured directly and independently from 

the corporation.’” RK Ventures, Inc. v. City of Seattle, 307 F.3d 1045, 1057 (9th Cir. 

2002) (quoting Shell Petroleum, 709 F.2d at 595). A “personal economic injury 

resulting from a wrong to the corporation” does not qualify as a direct injury that is 

independent from the corporation. Shell Petroleum, 709 F.2d at 595.

 

1 Salu also contends that Kessler waived any objection based on prudential standing by not 

raising the issue in a 12(b)(6) motion. (ECF No. 162 at 6). However, courts “may raise an 

unpreserved prudential-standing question on [their] own.” City of Los Angeles v. Cty. of Kern, 581 

F.3d 841, 846 (9th Cir. 2009) (quoting Rawoof v. Texor Petroleum Co., 521 F.3d 750, 757 (7th Cir. 

2008)).

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Salu’s alleged injuries are “damages in the form of substantial loss of business 

and profits to Direct List, which is owned by Mr. Salu.[2]” FAC at ¶¶ 95, 100; see

also Salu Depo at 14–15 (stating that, as a result of the alleged actions of the 

Defendants, Salu lost income that he would have received from Direct List); ECF 

No. 155 at 4–14 (seeking the same amount of compensatory damages for all claims 

without differentiating between the damages sought by Salu and the damages sought 

by Direct List). Salu’s loss of income from Direct List is a “personal economic injury 

resulting from a wrong to the corporation” and therefore does not qualify as a direct 

injury independent from the injuries allegedly suffered by Direct List. Shell 

Petroleum, 709 F.2d at 595. Consequently, Salu’s claims against Kessler for fraud 

and breach of fiduciary duty do not meet the requirements of the prudential standing

doctrine. 

IV. Fiduciary Duty

“Whether a fiduciary duty exists is generally a question of law.” Marzec v. 

California Pub. Employees Ret. Sys., 187 Cal. Rptr. 3d 452, 470 (Cal. Ct. App. 2015)

(citing David Welch Co. v. Erskine & Tulley, 203 Cal. App. 3d 884, 890 (Cal. Ct. 

App. 1988)). However, it is a question that must be answered by referencing the 

facts concerning the relationship between the parties. In re Daisy Sys. Corp., 97 F.3d 

1171, 1178 (9th Cir. 1996) (citing Kudokas v. Balkus, 103 Cal. Rptr. 318, 321 (Cal. 

Ct. App. 1972)) (“[T]he existence of a fiduciary relation is a question of fact which 

properly should be resolved by looking to the particular facts and circumstances of 

the relationship at issue.”). The Court declines to address whether Kessler owed any 

fiduciary duties to Direct List at this stage of the proceedings.

 

2 Salu is not a member of Direct List; JAL Equity is the sole member of Direct List, and Salu 

is the sole shareholder of JAL Equity. Salu Depo. at 11, 13. 

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V. Conclusion 

Salu’s claims are DISMISSED under the prudential standing doctrine. 

Dated: July 6, 2018

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