Court Opinion

ID: 9893390
Source: CourtListenerOpinion
Date Created: 2023-10-26 20:04:17.11657+00
Date Added: 2024-06-11T09:03:00.836559
License: Public Domain

Filed 10/26/23 Perzow v. Accolade CA2/1
    NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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This opinion has not been certified for publication or ordered published for purposes of rule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 ONE

 MICHAEL PERZOW,                                               B325121

          Plaintiff and Appellant,                             (Los Angeles County
                                                               Super. Ct. No. 22STCV02911)
          v.

 ACCOLADE, INC., et al.,

          Defendants and Respondents.

      APPEAL from a judgment of the Superior Court of
Los Angeles County, Steven J. Kleifield, Judge. Reversed with
directions.
                        _______________

      King & Spalding, K. Luan Tran, Eric S. Pettit, Joseph N.
Akrotirianakis, Jeanne A. Fugate and Samuel C. Cortina for
Plaintiff and Appellant.
      Greenberg Glusker Fields Claman & Machtinger, Ricardo P.
Cestero and Jillian A. Berk for Defendants and Respondents
Accolade, Inc. and MD Insider, Inc.
       Through the instant appeal, plaintiff and appellant Michael
Perzow challenges the trial court’s order sustaining the demurrer
of defendants and respondents Accolade, Inc. (Accolade) and MD
Insider, Inc. (MDI) (collectively, defendants) on the sole basis that
“[t]here [was] another action pending between the same parties on
the same cause of action” (Code Civ. Proc., § 430.10, subd. (c) [basis
for sustaining demurrer])1 and staying the instant lawsuit pending
resolution of that other action.2 (See § 597.)
       We conclude that the instant lawsuit and the other action on
which the court based its ruling do not involve “the same cause[s]
of action,” and thus that the trial court erred in staying the instant
action. We further conclude it is outside the scope of this appeal
to consider, as potential alternative bases for the trial court’s order,
the defendants’ demurrer arguments that the operative complaint
fails to state a viable claim for relief.
       Accordingly, we reverse.

                    FACTUAL BACKGROUND
      A.     Alleged Partnership and Business Venture
      In reviewing a court’s ruling on a demurrer, we accept as true
all well-pleaded factual allegations. (Southern California Gas Leak
Cases (2019) 7 Cal.5th 391, 395.) Therefore, the background in this

      1 All subsequent statutory references are to the Code of Civil
Procedure.
      2 Perzow’s notice of appeal identifies a “[m]inute order
abating and staying the action in its entirety pending the
final determination of another action, appealable under . . .
[section] 597.” Such an order is statutorily deemed an appealable
interlocutory judgment. (See § 597 [appealable interlocutory
judgment “shall be entered” following order sustaining demurrer
under section 430.10, subdivision (c)].)

                                   2
section derives from the allegations in the operative complaint in
the instant litigation:
       In late 2010, Perzow and his business partner, nonparty
Jay Calvert, “agreed to be 50/50 partners in a joint venture [(the
partnership)] to develop and exploit [a] doctor/patient matching
search engine and proprietary rating system,” as well as “all
business lines and businesses stemming from the venture.” In
2011, Perzow and Calvert formed MDI for the sole purpose of
operating the “website/search engine component of their broader
venture” using their search engine and matching/scoring system.
“Perzow and Calvert each had [a] 50 [percent] interest in MDI
shares.” They agreed “MDI would not own the rights to [the
underlying] technology but could rather use it for the specific
purpose of operating MDI’s website/search engine for consumers,”
and that “Calvert and Perzow, and not MDI, each continued to
co-own the rights and interests in the technology . . . and would be
able to control the use of that technology on behalf of their venture,
including MDI’s use of it.” (Capitalization omitted.) The same
was true of all other assets of MDI, including “ ‘all of their
[Calvert and Perzow’s] business plans, projects, technology,
designs, concepts, ideas, codes, software, domain names,
intellectual property or intangible property related to, affiliated
with, pertaining to, or associated with [MDI].’ ”
       In March 2017, Perzow suggested incorporating a
subscription-based, live-person medical concierge concept into
MDI’s business plan, rather than a self-service search website.
He and Calvert agreed, however, “to restrict MDI to the search
website and to pursue the medical concierge idea later outside
of MDI,” meaning the men would “keep [the medical concierge
concept] for themselves—rather than including it in the MDI
entity.”

                                  3
      In 2011, Calvert and Perzow executed a “release agreement”
in which Perzow agreed to “sell, release, and convey to Calvert all
of Perzow’s rights to MDI,” as well as “all claims ‘arising out of or
relating to . . . [MDI] and the technology, and any other agreement
or transaction’ between [Perzow and Calvert].” (Capitalization
omitted.)

      B.    The 2014 Action
       On March 3, 2014, Perzow sued MDI, Jay Calvert and others
(the 2014 action)3 seeking rescission of the 2011 release agreement,
which he alleged would “restor[e] . . . [Perzow’s] [50] percent . . .
ownership interest in [MDI],” as well as declaratory relief regarding
Perzow’s ownership interest in “[MDI] and all related intellectual
property and technology.” The complaint alleged that Calvert
procured Perzow’s assent to the 2011 release agreement by fraud,
and then gave the intellectual property used by MDI to Calvert
Enterprises, Inc.
       Perzow and Calvert settled the 2014 lawsuit on terms
that included (1) rescission of the 2011 release agreement;
(2) transfer of 8 million shares of MDI from Calvert to Perzow;
and (3) a broad mutual general release of known and unknown
claims. The parties placed the settlement agreement on the
record pursuant to section 664.6, and following a successful motion
to enforce it, the court entered a judgment “in favor of . . . Perzow
[and] against . . . Calvert, Calvert Enterprises, Inc. and [MDI]”
that incorporated the settlement terms.

      3 We hereby grant respondents’ request that we take
judicial notice of the records of the 2014 action and the 2018 action
(discussed below). We hereby deny Perzow’s request that we take
judicial notice of an order regarding attorney fees entered on July 5,
2023 in the 2018 action.

                                  4
     C.    The 2018 Action
       In 2018, Perzow and the partnership (through Perzow)
sued MDI, alleging that, without compensating the partnership
or Perzow in any way, MDI was “us[ing] and exploit[ing]” what the
complaint referred to as “the formula and methodology for ‘scoring’
physicians.” The complaint defined this “formula and methodology”
by incorporating by reference the definition of the technology at
issue in the 2011 release agreement—namely, “ ‘all of [Calvert and
Perzow’s] business plans, projects, technology, designs, concepts,
ideas, codes, software, domain names, intellectual property or
intangible property related to, affiliated with, pertaining to, or
associated with [MDI].’ ”
       The complaint alleged MDI filed multiple patent applications
regarding the subject formula and methodology that identified only
Calvert—not Perzow—as a coinventor, and that MDI “licens[ed]
[the formula and technology] to others and/or [sold] access to
physician ratings derived from [the] formula and methodology”
“without compensating [the partnership] or Perzow in any way.”
Based on this alleged conduct, Perzow and the partnership asserted
causes of action for unfair business practices, misappropriation
of trade secrets, unjust enrichment, unfair competition, and
declaratory relief. They sought damages, restitution, injunctive
relief, and a declaratory judgment confirming the partnership’s
exclusive ownership of the formula and methodology and “similar
formulas and methodologies derived therefrom or based thereupon.”
       The court sustained a demurrer to all of Perzow’s claims
asserted in the complaint on the basis that the release from the
2014 action settlement—to which Perzow, but not the partnership,
was a party—barred Perzow from pursuing any of the claims in the
2018 action. The court then granted MDI’s motion for judgment on
the pleadings without leave to amend as to the remaining claims of

                                 5
the partnership on the basis that they were time-barred. The court
entered judgment in favor of MDI and Calvert and against Perzow
and the partnership. The partnership and Perzow appealed.

      D.    The 2022 Action
       While the appeal from the 2018 action was pending, Perzow
filed a third lawsuit (the 2022 action or the instant action), which
gave rise to the instant appeal. The operative complaint therein
alleges that Perzow still partially owns MDI and the related
intellectual property he and Calvert developed. The complaint
alleges that MDI and Accolade violated these ownership rights
when, in 2019, Accolade acquired MDI and related intellectual
property without seeking Perzow’s authorization and without
compensating him. It further alleges that, around July 2020,
Accolade used the data and technology it obtained through this
acquisition “ ‘to launch [a] doctor-picking concierge’ ” without
compensating or seeking authorization from Perzow, despite
Perzow holding 50 percent of “the exclusive right to develop
and co-own the medical concierge/live person concept using the
technology [powering MDI].” (Capitalization omitted.)
       On these bases, the 2022 action alleged causes of action
against Accolade for tortious interference with contractual
relations, tortious interference with prospective economic relations,
unfair competition, unjust enrichment, conversion, breach of
fiduciary duty, and declaratory relief, as well as causes of action
against MDI for breach of contract and breach of fiduciary duty.
Perzow sought damages, injunctive relief, and a declaratory
judgment regarding his ownership interest in the technology at
issue, including the medical concierge business concept.

                                  6
      E.    Demurrer Ruling in the 2022 Action
       Defendants demurred to the operative complaint in the 2022
action, raising six arguments as to why it failed to state a viable
cause of action. The demurrer did not explicitly request abatement
of the lawsuit pursuant to section 430.10, subdivision (c), but did
note that “an interlocutory judgment in favor of defendants abating
[the] 2022 action until the conclusion of the [2018] action,” would be
the “proper remedy” “[b]ecause the [2018] action [was] technically
still pending[,]” and, once final, would have res judicata effect on
the 2022 action. (Capitalization omitted.)
       The court ruled on the demurrer as follows: “The
demurrer . . . is sustained. The present action . . . is abated
pending the appeal in the [(2018 action)] becoming final. The
court hereby stays the case in its entirety.” (Capitalization
omitted.) The court did not rule on any other issues defendants
raised in their demurrer.4 Perzow timely appealed.5

      4 Specifically, the court did not rule on any of the following
arguments defendants raised: (1) the 2014 action bars the instant
action; (2) Perzow’s claims were barred by the release contained in
the 2014 action settlement; (3) Perzow was judicially estopped from
claiming ownership of the technology given contrary allegations
in the 2018 action; (4) the statute of frauds barred Perzow’s claims;
and (5) Perzow’s claims were time-barred.
      5 The judgment from the 2018 action and related appeals
finally concluded while the instant appeal was pending. Based
on this postappeal development, Perzow requested dismissal of
the instant appeal as moot. We denied the motion. As we discuss
below, because the tests for abatement and claim preclusion are
the same, a ruling that the pendency of the 2018 action justified
abatement is also a ruling that, after the stay is lifted, the judgment
in the 2018 action will have claim preclusive effect on the instant
action. (See Lord v. Garland (1946) 27 Cal.2d 840, 851 (Lord) [“[i]f
a judgment upon the merits is rendered in the suit first commenced,

                                   7
                           DISCUSSION
      A.    The Court Erred in Abating the Instant Action
            Based on the Pendency of the 2018 Action
       A defendant “may object, by demurrer or answer” (§ 430.10)
to a complaint filed against it on the grounds that “[t]here is
another action pending between the same parties on the same cause
of action.” (§ 430.10, subd. (c).) This “permit[s] the trial court to
retain jurisdiction over the subsequent action so that when a final
determination is had in the prior pending action the court will be
empowered to determine the issues in the subsequent suit.” (Lord,
supra, 27 Cal.2d at p. 851; see § 597.)
       On appeal, Perzow argues the court erred in sustaining
the demurrer on the basis of a plea in abatement pursuant
to section 430.10, subdivision (c), and that this court should
reverse the resulting order staying the action, which section 597
deems to be an appealable interlocutory judgment. (See § 597
[upon sustaining a demurrer based solely on section 430.10,
subdivision (c), the court “shall” enter an appealable interlocutory

the party asserting the plea in abatement should be granted leave
to amend to plead the res judicata effect of the judgment in bar of
the subsequent action”]; id. at p. 848 [abatement only proper under
section 430.10 when a final judgment in the prior action would
have claim preclusive effect in the current action].) Thus, our
review of the abatement ruling can still grant Perzow effective
relief, even though the stay imposed by the order on appeal is, by
its own terms, no longer in effect now that the 2018 action finally
concluded. We thus review only whether the court properly abated
the action under section 430.10, not whether the court could have
stayed or can in the future stay the action as an exercise of its
general discretion in the interest of judicial efficiency. A stay under
section 430.10 may affect the resolution of the dispute, but a stay
under general jurisdiction does not.

                                   8
judgment in defendant’s favor staying the action].) Our review is
de novo. (See, e.g., Committee for Green Foothills v. Santa Clara
County Bd. of Supervisors (2010) 48 Cal.4th 32, 42.)
       Abating an action under section 430.10, subdivision (c)
is proper only if the judgment in the prior action would create a
res judicata bar to prosecution of the claims in the abated action.
(Lord, supra, 27 Cal.2d at p. 848 [“a plea in abatement may be
maintained only where the claim sued upon in the second action
is such that a final judgment in the first one could be pleaded in
bar as a former adjudication”].) A plea in abatement and claim
preclusion are thus two sides of the same coin, and the same
requirements must be met in order for either to apply. (See
Crowley v. Katleman (1994) 8 Cal.4th 666, 682; Mycogen Corp.
v. Monsanto Co. (2002) 28 Cal.4th 888, 904 (Mycogen).) These
requirements are that “ ‘(1) [a] claim . . . raised in the present
action is identical to a claim . . . litigated in a prior proceeding;
(2) the prior proceeding resulted in a final judgment on the merits;
and (3) the party against whom the doctrine is being asserted was a
party or in privity with a party to the prior proceeding. [Citations.]’
[Citation.]” (People v. Barragan (2004) 32 Cal.4th 236, 253.) We
need not consider whether all of these requirements are satisfied
here, because the second requirement—that the causes of action
in the two proceedings be the same—is dispositive and requires
reversal.
       We assess the sameness of causes of action for the purposes
of res judicata or section 430.10, subdivision (c) based on the
facts alleged in the two complaints at issue. (Bush v. Superior
Court (1992) 10 Cal.App.4th 1374, 1384 (Bush).) In so doing,
we apply “ ‘the primary right theory’ ” under which “ ‘a “cause
of action” is comprised of a “primary right” of the plaintiff, a
corresponding “primary duty” of the defendant, and a wrongful act

                                   9
by the defendant constituting a breach of that duty. [Citation.]’ ”
(Mycogen, supra, 28 Cal.4th at p. 904; Colebrook v. CIT Bank,
N.A. (2021) 64 Cal.App.5th 259, 263.) “ ‘As far as its content is
concerned, the primary right is simply the plaintiff ’s right to
be free from the particular injury suffered’ ” (Mycogen, supra, at
p. 904), and “[a]n injury is defined in part by reference to the set
of facts, or transaction, from which the injury arose.” (Federation
of Hillside & Canyon Assns. v. City of Los Angeles (2004) 126
Cal.App.4th 1180, 1203.)
       Even assuming, without deciding, that the 2018 and 2022
complaints allege the exact same ownership and intellectual
property rights—a subject of disagreement in the parties’ briefing—
the two actions still involve disparate “ ‘wrongful action[s] by the
defendant[s]’ ” violating those rights (Mycogen, supra, 28 Cal.4th
at p. 904), and thus do not assert the same causes of action. (See
Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185,
1199 [“each new breach of such an obligation provides all the
elements of a claim—wrongdoing, harm, and causation [citation]—
each may be treated as an independently actionable wrong”].)
Specifically, in the 2018 action, the wrongful acts alleged are
the filing of patent applications and use of the subject intellectual
property at various points prior to 2018. The wrongful acts alleged
in the 2022 action, by contrast, are the sale of MDI and the subject
intellectual property to Accolade in 2019, as well as Accolade’s
pursuit of the medical concierge business concept in 2020. Thus,
the wrongful actions the 2022 complaint alleges injured Perzow
are distinct from the wrongful, injury-producing actions alleged in
the 2018 action. It is also significant that the wrongful acts alleged
in the 2022 action postdate the 2018 action, because “the rule of
res judicata extends only to the facts and conditions as they existed
at the time the judgment was rendered, or more correctly speaking,

                                 10
at the time the issues in the first action were made. . . . When other
facts or conditions intervene before the second suit, furnishing a
new basis for the claims and defenses of the respective parties,
the issues are no longer the same and the former judgment cannot
be pleaded in bar of the second action.” (Lord, supra, 27 Cal.2d
at p. 849; see Pitts v. City of Sacramento (2006) 138 Cal.App.4th
853, 857 [because the cause of action in the latter case “relie[d]
on acts . . . postdating the ruling in the prior case[,] . . . the trial
court erred . . . in sustaining a demurrer on the basis of a plea in
abatement”].) Thus, the 2018 and 2022 actions do not involve the
same primary rights, the causes of action in the two proceedings
are not the same, and the 2018 action cannot have res judicata
effect on the 2022 action. Accordingly, we conclude the court erred
in abating the 2022 action based on the pendency of the 2018 action
under sections 430.10, subdivision (c) and 597.
       In arguing to the contrary, defendants characterize the
actions as both involving “the allegedly unauthorized use of [the
same] intellectual property.” “Defendants’ contentions suffer from
over-generalization” and “confuse the category of conduct with
the specific . . . wrong [allegedly] done to [Perzow].” (E. & J.
Gallo Winery v. Encana Energy Services, Inc. (E.D.Cal. 2005) 388
F.Supp.2d 1148, 1158 [applying California law].) Assuming (again,
solely for the purposes of argument) that the intellectual property
at issue in the two actions is identical, the fact that one can
generally categorize both actions as based on the unauthorized
use of those rights “substitutes the label for the behavior for
the operative facts that constitute the behavior and implies that
the facts are the same because the labels are the same.” (Ibid.)
That Perzow had sought redress when these rights were allegedly
infringed upon prior to 2018 does not bar him from seeking redress

                                   11
if and when, as the 2022 complaint alleges occurred, different
actions infringed upon those rights again years later.

      B.    We May Not Affirm on the Other Bases Identified
            in Defendants’ Demurrer
       Finally, defendants argue that, even if abatement was not
proper, we can and should affirm the challenged order on the
alternative basis that the operative complaint fails to state a viable
claim for relief for the reasons laid out in defendants’ demurrer. In
so arguing, defendants cite authority for the proposition that “[a]
judgment of dismissal after a demurrer has been sustained without
leave to amend will be affirmed if proper on any grounds stated
in the demurrer, whether or not the court acted on that ground.”
(Carman v. Alvord (1982) 31 Cal.3d 318, 324.) This principle is
inapplicable because the court did not dismiss the action. Nor
are arguments that a complaint fails to state a legally viable
claim bases on which to stay a case. (See Lawyers Title Ins.
Corp. v. Superior Court (1984) 151 Cal.App.3d 455, 459 [“ ‘[a]
plea in abatement is essentially a request—not that an action
be terminated—but that it be continued until such time as there
has been a disposition of the first action’ ”].)
       Accordingly, we reverse the court’s order concluding the 2018
and 2022 actions involve the same cause of action and abating the
instant action. For the sake of clarity, we note that, upon remand,
the court remains free to consider any arguments regarding the
other issues raised in the defendants’ demurrer as to the merits
of the claims, and to consider the issue preclusive effect of prior
judgments, a topic we do not address in the instant opinion.
Any ruling that relies on the 2018 action being res judicata in the
instant action, however, would be inconsistent with this opinion.

                                  12
                         DISPOSITION
      The order on defendants’ demurrer is reversed. The trial
court is instructed to issue a new order consistent with this
opinion, and conduct further proceedings consistent with this
opinion. Perzow is awarded his costs on appeal.
      NOT TO BE PUBLISHED.

                                         ROTHSCHILD, P. J.
We concur:

                 CHANEY, J.

                 BENDIX, J.

                                13