Preview
Electronically
by Supenar Court of California, County of San iateo
ON 2/22/2019
By. ‘sf Mia Marlowe
JAMES L. JACOBS, State Bar No. 158277
Deputy Clerk
ROBERT W. LUCKINBILL, State Bar No. 131977
GCA LAW PARTNERS LLP
2570 W. El Camino Real, Suite 400
Mountain View, CA 94040
Telephone: (650) 428-3900
Facsimile: (650) 428-3901
Attorneys for Defendants
TERRY J. JOHNSTON, and
3COR MEDICAL, INC.
SUPERIOR COURT OF THE STATE OF CALIFORNIA
IN AND FOR THE COUNTY OF SAN MATEO
10
11 FRED H. GEISLER, M.D., Ph.D., an No. 17CIV02888
individual, and NORMAN C. FLEMING, an
12 individual, directly, and derivatively on
behalf of RHAUSLER, INC., a California DECLARATION OF JAMES L.
13 Corporation, JACOBS IN SUPPORT OF
DEFENDANTS TERRY J.
14 Plaintiffs, JOHNSTON’S and 3COR MEDICAL,
INC.’S DEMURRER T:
15 vs. PLAINTIFFS’ FOURTH AMENDED
VERIFIED COMPLAINT
16 TERRY J. JOHNSTON, an individual;
KATIE SIMS, CPA, an individual; ROBERT] Date: April 29, 2019
17 JOHN GLYNN, JR., an individual; 3COR Time: 9:00 a.m.
MEDICAL, INC., a California Corporation; Dept.: 2
18 TEDAN SURGICAL INNOVATIONS, LLC,
a Texas Limited Liability Company, and Hon. Marie S. Weiner
19 DOES 1 to 25,
Complaint Filed: June 28, 2017
20 Defendants, Fourth Amended Complaint Filed:
February 1, 2019
21 and RHAUSLER, INC., a California
Trial Date: None Set
Corporation,
22
Nominal Defendant.
23
24
25 I, James L. Jacobs, hereby declare as follows:
26 1 Tam an attorney at law dully licensed to practice before all of the courts of
27 the State of California and a partner at the law firm of GCA Law Partners LLP, counsel for
DECL. OF JAMES L. JACOBS IN SUPPT OF
JOHNSTON & 3COR DEMURRER -1-
ue Case No. 17CIV02888
defendants TERRY J. JOHNSTON, and 3COR MEDICAL, INC. (hereinafter collectively
“Defendants”). The following is based on my personal knowledge and if called as a
witness, I could and would testify competently thereto.
2, On January 11, 2019, the Court issued Case Management Order #10, a true
and correct copy of which is attached hereto as Exhibit A.
3 I sent a meet and confer letter to Plaintiffs’ counsel regarding Defendants’
planned demurrer and motion to strike on February 18, 2019, via email. The letter outlined
Defendants’ objections to the Fourth Amended Verified Complaint. A true and correct
copy of the letter is attached as Exhibit B. I followed up that letter with a further email
10 (on February 18, 2019) to Plaintiffs’ counsel raising additional objections. A true and
11 correct copy of that email is attached as Exhibit C.
12 4. On February 20, 2019, Plaintiffs’ counsel Jennifer Hagan sent a response
13 letter via email. A true and correct copy of that letter is attached as Exhibit D.
14 5 Although we were able to resolve a few items (which Plaintiffs’ counsel has
15 agreed to memorialize in a proposed stipulation), we were unable, despite our meet and
16 confer efforts, to come to an agreement regarding the majority of the items discussed.
17 I declare under penalty of perjury under the laws of the State of California that the
18 foregoing is true and correct and based upon my personal knowledge.
19 Dated this 22nd day of February 2019 in Mountain View, California.
20
21
22
AMES L. J, S
23
24
25
26
27
DECL. OF JAMES L. JACOBS IN SUPPT OF
JOHNSTON & 3COR DEMURRER -2-
eau se Case No. 17CIV02888
EXHIBIT A
FILED
‘SAN MATEO COUNTY
a ee
Bo —on0ee JAN 11 2019
Case Management Order
1591 Clejerk of % oie
| I ti | | Mt
By.
: - _ cee ans na =——
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SAN MATEO
COMPLEX CIVIL LITIGATION
FRED H. GEISLER M.D., Ph.D, an
individual, NORMAN C. FLEMING, an Case No. 17CIV02888
individual, and GENA ZISCHKE, an DERIVATIVE and INDIVIDUAL
individual, directly and derivatively on ACTION
behalf of RHAUSLER, INC., a
California Corporation, Assigned for all purposes to Dept. 2
Hon. Marie S. Weiner
Plaintiffs,
CASE MANAGEMENT ORDER #10
vs.
TERRY J. JOHNSTON, et al.,
Defendants.
- and—
RHAUSLER, INC.,
Nominal Defendant.
On November 28, 2018, hearing was held on multiple Demurrers and Motions to
Strike as to the Third Amended Complaint in Department 2 of this Court before the’
Honorable Marie 8. Weiner. Jennifer Hagan, Esq. and Misasha Graham, Esq. appeared
on behalf of Plaintiffs; Robert Bodzin of ee Brown appeared on behalf of
1
4. Defendant Fishman’s Demurrer to the Third Amended Complaint is
SUSTAINED WITH LEAVE TO AMEND as to the third, sixth, twelfth, sixteenth,
nineteenth, and twenty-second cause of action, and is MOOT as to the seventh cause of
action (because it is not alleged against Fishman).
5 Defendants Johnston’s and 3COR Medical’s Demurrer to the Third
Amended Complaint is SUSTAINED WITH LEAVE TO AMEND as to the twenty-
second cause of action; is OVERRULED as to nineteenth causes of action; and is
OVERRULED as to the second cause of action (i) on the claims against 3COR and on the
claim by Plaintiff Fleming, but otherwise SUSTAINED WITH LEAVE TO AMEND as
to Johnston on claims by the other Plaintiffs.
6. Defendant Glynn’s Demurrer to the Third Amended Complaint is
OVERRULED as to the fourth, fifth, and sixteenth causes of action; is SUSTAINED
WITH LEAVE TO AMEND as to the first, nineteenth and twenty-second causes of
action; and is SUSTAINED WITHOUT LEAVE TO AMEND as to the twenty-first
cause of action as there is no legal right for shareholders to bring a derivative claim for
attorney malpractice on behalf of a corporation. McDermott vy. Superior Court (James)
(2000) 83 Cal.App.4" 378, 383-386; Favila v. Katten Muchin (2016) 188 Cal.App.4"
189, 217-222.
7 In regards to Defendants Tedan’s and Bass’ Demurrer to the Third
Amended Complaint, the Demurrer of Tedan to the second cause of action is
OVERRULED; Demurrer of Tedan and Bass to the sixth cause of action is SUSTAINED
WITH LEAVE TO AMEND; Demurrer of Tedan and Bass to the twelfth cause of action
is SUSTAINED WITH LEAVE TO AMEND; Demurrer to Tedan to the eighteenth cause
of action is OVERRULED; Demurrer to Tedan and Bass to the nineteenth cause of action
is OVERRULED as to Tedan and is SUSTAINED WITH LEAVE TO AMEND as to
Bass on the grounds that it is vague as to what Bass’ involvement and what he actually
did in regard to misappropriation of trade secrets; Demurrer of Tedan and Bass to the
twenty-second cause of action is SUSTAINED WITH LEAVE TO AMEND.
8 Any and all demurrers to causes ofaction pleaded as claims by “Plaintiffs”
which include new Plaintiff Copernicus Dynamics LP, except the twentieth cause of
action for accounting expressly alleged as to Copernicus are SUSTAINED WITH
LEAVE TO AMEND as to claims of Copernicus because the Third Amended Complaint
utterly fails to allege facts demonstrating that Copernicus has standing to sue under any
of the other causes of action.
9, Plaintiffs’ 13-1/2 page Opposition to Tedan’s Amended Demurter is
STRICKEN as procedurally improper. In a two page document, Tedan withdrew its
demurrer to certain causes of action. In response, Plaintiffs filed a over-sized additional
substantive opposition regarding the remaining demurrer causes of action. The Court
will only be considering the original Opposition.
10. Plaintiffs failed to heed the explicit instruction of this Court at the hearing
on the prior demurrer that the claims for aiding and abetting and for conspiracy are not
separate causes of action, but rather are theories of secondary liability for primary
intentional torts and causes of action, and must be pleaded as allegations within each
cause of action to which they actually apply. These theories of secondary liability do
not necessarily apply to each and every claim by Plaintiffs against each and every
Defendant, and must be specifically linked to a particular cause of action — not a blanket
theory as to all causes of action. Accordingly, the demurrers to twelfth “cause of action”
for aiding and abetting and the twenty-second “cause of action” for conspiracy have been
sustained with leave to amend as to all Defendants who filed a demurrer thereto.
ll. As discussed at the hearing on the demurrers, the Third Amended
Complaint is a jumbled messy pleading as to the second causeof action for “fraud and
deceit”, as Plaintiffs have combined under one alleged “cause of action”, three
completely separate theories/claims, with different elements of proof of liability and
different remedies. Specifically, Plaintiffs allege a contract claim for fraudulent
inducement, a tort claim for fraud and deceit, and a statutory claim for violation of
Corporations Code section 25401. Plaintiffs SHALL break out these three claims into
three separate causes of action in the Fourth Amended Complaint,
so that it can be
intelligently determined which claim is by whom against whom and the specific facts
supporting each of such claims.
12. Plaintiffs shall file and serve their Fourth Amended Complaint on or
before February 1, 2019. Defendants shall file and serve their Answers or other
response to the Fourth Amended Complaint on or before February 22, 2019.
op
DATED: January 11, 2019
HON. S. WEINER
JUDGE OF THE SUPERIOR COURT
Defendant Tedan Surgical Innovations LLC, Daniel Bass and Danny Fishman; James
Jacobs of GCA Law Partners LLP appeared on behalf of Defendants Terry Johnston, and
3COR Medical; Tom Prountzos of Goodman Neuman Hamilton LLP appeared on behalf
of Defendants Katie Sims CPA and Magnolia Group LLP; Whitney Carlson of Murphy
Pearson Bradley & Feeney appeared on behalf of Robert Glynn Jr.; and Daniel Hardy of
Coombs & Dunlap LLP appeared on behalf of Nominal Defendant Rhausler Inc.
Upon due consideration of the pleadings, the briefs presented, and the oral
argument of counsel for the parties, and having taken the matter under submission,
IT IS HEREBY ORDERED as follows:
1 Defendant Glynn’s Motion to Strike portions of the Third Amended
Complaint, and Defendant Johnston’s Joinder therein, as to Paragraphs 163, 205, 237,
329, 414, 444, and the Prayer, alleging fraud and/or malice and seeking punitive damages
is DENIED; and as to the Prayer seeking award of attorneys’ fees is DENIED as to
misappropriation of trade secrets under C.C. §3426.4 but GRANTED as to B&P Code
§17200 and C.C.P. §1021.5.
2. Defendant Tedan Surgical’s and Defendant Bass’ Motion to Strike
portions of the Third Amended Complaint as to the Prayer for punitive damages is
DENIED; and as to the Prayer seeking award of attorneys’ fees is DENIED as to
misappropriation of trade secrets under C.C. §3426.4 but GRANTED as to B&P Code
§17200 and C.C.P. §1021.5.
3 Defendant Fishman’s Motion to Strike portions of the Third Amended
Complaint as to the Prayer for punitive damages is DENIED; and as to the Prayer seeking
award of attorneys’ fees is DENIED as to misappropriation of trade secrets under C.C.
§3426.4 but GRANTED as to B&P Code §17200 and C.C.P. §1021.5.
EXHIBIT B
——
LAW PARTNERS LLP
February 18, 2019
By Email
Jennfier J, Hagan, Esq.
The Hagan Law Firm
535 Middlefield Road, Suite 190
Menlo Park, CA 94025
Re: Fred H, Geisler et al. y. Terry J. Johnston et al,
San Mateo Superior Court (Case No. 17CIV02888)
Dear Ms. Hagan,
This letter serves as an effort to meet and confer on the planned demurrer and
motion to strike of Defendants Terry Johnston (“Johnston”) and 3COR Medical, Inc.
(“3COR”) to Plaintiffs’ Fourth Amended Verified Complaint (* F ’) We hope that
afler reviewing this letter, Plaintiffs will agree to dismiss the cau action and
allegations which cannot be pursued in this case.
Second Cause of Action: Fraud and Deceit — Direct
As an initial matter, Judge Weiner noted and ordered as follows in her Case
Management Order #10 dated January 11,2019 (“CMO #10”).
1, As discussed at the hearing on the demurrers, the Third Amended
Complaint is a jumbled messy pleading as to the second cause of action for “fraud
and deceit”, as Plainti have combined under one alleged “cause of action”,
three completely separate theories/clain with different elements of proof of
liability and different remedies, Spi if lly, Plaintiffs allege a contract claim
for fraudulent inducement, a tort claim for fraud and deceit, and a statutory
claim for violation of Corporations Code section 25401. Plaintiffs SHALL break
out these three claims into three separate causes of action in the Fourth Amended
Complaint, so that it can be intelligently determined which claim is by whom
against whom and the specific facts supporting each of such claims,
CMO # 10 at 411 (emphasis in original).
670 W. HL CAMING RE 400
MOUNTAIN V O40,
900
9101
nw.com
Jennifer Hagan, Esq.
February 18, 2019
Page 2
Plaintiffs have violated this portion of CMO #10 by, once again, combining under
one alleged cause of action completely separately theories/claims, with different elements
of proof of liability and different remedies, On this basis alone, Plaintiffs should agree
to amend this cause of action,
In addition, as separate grounds, please note the other deficiencies as to the
second cause of action:
First, there is no private right of action under Corporations Code Section 25400
(or 25401). See Kamen y. Lindly (2001) 94 Cal.App.4" 197, 202.) Section 24500 defines
proscribed conduct only, and alone cannot give rise to civil liability, Plaintiffs must
plead the statutes upon which they contend they can assert a claim.
Second, even had the FAVC alleged securities fraud pursuant to other provisions
of the Corporations Code that create a private right of action, any cause of action for
alleged securities fraud under the Corporations Code is time barred here, Corporations
Code Section 25506(b) requires that any action to enforce any liability created under the
applicable provisions must be brought “before the expiration of five years after the act or
transaction constituting the violation or the expiration of two years after the discovery by
the plaintiff of the facts constituting the violation, whichever shall first expire.” Here, the
alleged act or transaction constituting the violation of the Corporations Code occurred in
March 2008 (FAVC 4 10), so Mr. Fleming was required to assert this cause of action no
later than 2013, ¢.g, five years after the 2008 investment date or two years after the
anticipated cash return to shareholders (in 2011) failed to take place. Mr. Fleming did
not assert his fraud cause of action until June 2017; thus, his fraud cause of action based
on an alleged violation of the Corporations Code is time barred.
Third, to the extent the alleged private right of action for securities fraud under
the Corporations Code is also based on alleged omissions (see, e.g., FAVC ] 127), the
FAVC fails to allege, as it must, /ow the alleged omissions to state a material fact made
the statements made, in light of the circumstances under which the statements were made,
not misleading. See Corporations Code Section 25401. Not only must the FAVC show
how the alleged omissions made any specific affirmative statement(s) misleading — which
it does not even attempt to do — it must plead this with particularity.
Fourth, the FAVC appears to seek exemplary and punitive damages for the
alleged securities fraud. (See e.g., FAVC§ 136 and Prayer for Relief at ] 20). The
Corporations Code provides statutory damages remedies for securities fraud; punitive
damages are not available to those who choose to proceed under the Corporations Code,
See e.g. Bowden v. Robinson (1977) 67 Cal. App. 3d 706, 714.
Fourth Cause of Action: Breach of Fiduciary Duties — Violation of Corporations
Code § 309(a
Jennifer Hagan, Esq,
February 18, 2019
Page 3
The FAVC fails to allege facts showing that Johnston owed a fiduciary duty to
plaintiff Copernicus Dynamics Group (“Copernicus”). It is axiomatic that Johnston
cannot be held liable for breach of a fiduciary duty in circumstances where he does not
owe a fiduciary duty or to a party to whom he does not owe such a duty,
Further, the Fourth Cause of Action is asserted as a direct — not a derivative claim.
Neither Plaintiffs Zischke nor Fleming have alleged any facts that substantiate that either
has a direct cause of action for breach of fiduciary duty against Johnston, All of the
harms claimed by these Plaintiffs that based on an alleged fiduciary duty violation are
derivative in nature. For example, claims based on alleged self-dealing or failure to
maintain intellectual property and trade secrets as confidential are claims for the benefit
of Rhausler and for which any recovery would go to Rhausler ~ not to Zischke or
Fleming.
Moreover, Fleming cannot allege damages for breach of fiduciary duty based
upon his initial purchase of Rhausler shares and the FAVC does not allege allegations
that Fleming was owed a duty prior to the purchase of his shares,
Seventh Cause of Action: Breach of Contract
Geisler asserts breach of an oral contract against Rhausler and Johnston.
However, the FAVC specifically alleges that Johnson, “acting as CEO of RHAUSLER
and in the course and scope of his duties as CEO of RHAUSLER, entered into an oral
contract with GEISLER.” FAVC § 258). Thus Geisler, himself, admits that the oral
contract that is the subject of this cause of action was between Rhausler and Geisler, and
that Johnston’s involvement was only in his capacity as a representative of Rhausler. As
such, the cause of action against Johnston must fail.
Twelfth Cause of Action: Breach of the Implied Covenant of Good Faith and Faii
Dealing
For its breach of contract claim against 3COR, the FAVC alleges that 3COR
failed to remit profits it allegedly owed Rhausler under the Partners Working Agreement
#2 based on the sale of Rhausler products. In its cause of action for breach of the
implied covenant of good faith and fair dealing based on this contract, the FAVC fails to
allege requisite facts that 3COR somehow unfairly interfered with Rhausler’s right to
receive the benefits of the Partners Working Agreement #2, See CACI 325. That 3COR
purportedly “exploited” Rhausler’s medical devices by commercially selling those
products and then allegedly failed to hand over the profits gleaned called from those sales
is, in essence, alleging nothing more than the underlying contract breach, which is
insufficient.
Jennifer Hagan, Esq.
February 18, 2019
Page 4
Sixteenth and Seventeenth Causes of Action: Unfair Business Practices -- Violation
of Bus. & Prof. Code §17200
For the rea ns and rationales set forth Robert Bodzin’s letter dated February 14,
2019 and Kavin Williams’ letter dated February 15, 2019 (both of which are incorporated
by reference), the causes of action for unfair business practices also fail as to both 3COR
and Johnston.
Moreove: pecific ly, for the Sixteenth Cause of Action, the FAVC does not
identity 3COR as having caused injury to any Plain t The unique injuries suffered by
Gei sler and Fleming are not attributed to 3COR. See FAVC § 329,A and 4 329.B.
Likewise, in the FAVC sections that identify the defendants that ca ed injury to all
Rhausler hareholde -- FAVC $4 331-339 -- the FAVC identifies Rhausler, Johnston,
Ba . Fishman, TSI, [OR, Sims and Magnolia s the defendants who purportedly
committed the acts conduct and practices in question but it does not identify 3COR. As
such, (he cause of action is inadequately pled as to 3COR.
Please respond to this letter at your earliest convenience and, preferably, by
Febr ary 20, [note that the majority of the issues raised in this letter have already been
d by other defendants. most of what is contained in this meet and confer letter has
previously been raised to Pl aintitts.
Johnston and 3COR also specifically r serve their rights to join in the motions to
strike or demurrers filed by any other defendants.
Very truly yours,
GCA LAW PARTNERS LLP eg
Ay ooae de As
Jami ACO
EXHIBIT C
Jimmy Jacobs
From: Jimmy Jacobs
Sent: Monday, February 18, 2019 9:15 PM
To: ‘Ghagan@haganlaw.com)'
Ce: ‘Misasha Suzuki Graham’; ‘ddell@coombslaw.com’; 'dhardy@coombslaw.com’; ‘Aileen
Zurawski’; Bob Luckinbill; Tina Ernst; ‘fneuman@gnhilp.com’; ‘tprountzos@gnhllp.com’;
‘jtrayner@gnhllp.com’; ‘mrosario@gnhllp.com’; ‘Timothy Halloran’; ‘Kavin Williams’;
‘Tyron Jordan’; ‘David Miclean’; ‘Danielle Mihalkanin’; ‘Douglas Collins’; ‘Robert Bodzin’;
‘Katrina Durek’; ‘Emily Wong’; ‘Maria Diazgranados'
Subject: RE: Geisler v. Johnston, et al. - Case No.: 17CIV02888
This email supplements the meet and confer letter of Defendants Johnston and 3COR
Medical, Inc. from earlier today with respect to the allegations of Plaintiffs’ Fourth
Amended Verified Complaint (“FAVC”). The following allegations should also be
dismissed/stricken from the FAVC:
The allegations seeking attorneys’ fees from Johnston in connection with the First
Cause of Action (asserted derivatively on behalf of Rnausler against Johnston for
Breach of Fiduciary Duty by Controlling Shareholder) that appear (A) at FAVC, 47:2-3
(‘In addition, RHAUSLER is entitled to an award of attorney’s fees for having to bring
this action”) and (B) at {| 21 of the Prayer For Relief at FAVC, 114:8-10 (“On the First
Cause of Action for Breach of Fiduciary Duties Owed by a Controlling Shareholder to
the Company, an award of Attorney's fees against JOHNSON in favor of Rhausler’).
This issue appears to have already been disposed of by Judge Weiner in Case
Management Order # 10 at par. 2. There are no additional facts alleged in the First
Cause of Action of the FAVC that would change the conclusion already reached by
Judge Weiner (following the full briefing by the parties) that Plaintiffs have not alleged a
basis to recover attorney's fees from Johnston in connection with either the “substantial
benefit” or “common fund” doctrines. Plaintiffs have likewise not identified (A) a
contractual obligation to recover attorneys’ fees for a fiduciary duty breach or (B) a
statute which entitles Plaintiffs to recover attorneys’ fees for a fiduciary duty breach.
Regards,
Jimmy
James L. Jacobs
GCA Law Partners LLP
2570 W. El Camino Real, Suite 400
Mountain View, CA 94040
Telephone: (650) 428-3900
Facsimile: (650) 428-3901
Internet: jiacobs@gcalaw.com
Website: www.gcalaw.com
This email may contain confidential and privileged material for the sole use of the intended recipient.
Any review or distribution by others is strictly prohibited. If you are not the intended recipient please
contact the sender and delete all copies.
From: Jimmy Jacobs
Sent: Monday, February 18, 2019 5:59 PM
To: '(jhagan@haganlaw.com)'
Cc: 'Misasha Suzuki Graham’; 'ddell@coombslaw.com'; 'dhardy@coombslaw.cot '; ‘Aileen Zurawski'; Bob Luckinbill; Tina
Ernst; 'fneuman@gnhllp.com’, 'tprountzos@gnhllp.com’; ‘jtrayner@gnhllp.co! mrosario@gnhllp.com'; ‘Timothy
Halloran’; 'Kavin Williams’; ‘Tyron Jordan’; ‘David Miclean'; 'Danielle Mihalkanin'; ‘Douglas Collins'; ‘Robert Bodzin’; 'Katrina
Durek'; ‘Emily Wong; 'Maria Diazgranados'
Subject: RE: Geisler v. Johnston, et al. - Case No.: 17CIV02888
Attached please find the meet and confer letter on behalf of Terry Johnston and 3COR
Medical, Inc.
Regards,
Jimmy
James L. Jacobs
GCA Law Partners LLP
2570 W. El Camino Real, Suite 400
Mountain View, CA 94040
Telephone: (650) 428-3900
Facsimile: (650) 428-3901
Internet: jiacobs@gcalaw.com
Website: www.gcalaw.com
This email may contain confidential and privileged material for the sole use of the intended recipient.
Any review or distribution by others is strictly prohibited. If you are not the intended recipient please
contact the sender and delete all copies.
From: Maria Diazgranados [mai MPBF. ]
Sent: Friday, February 15, 2019 3:48 PM
To: (jhagan@haganlaw.com)
Cc: 'Misasha Suzuki Graham’; ddell|@coombslaw.com; dhardy'@coombstaw.com: ‘Aileen Zurawski'; Jimmy Jacobs; Bob
Luckinbill; Tina Ernst;fneuman@anhllp.com; ; Mrosario@gnhllp.com;
Timothy Halloran; Kavin Williams; Maria Diazgranados; Tyron Jordan; ‘David Miclean'; ‘Danielle Mihalkanin'; ‘Douglas
Collins’; ‘Robert Bodzin’; ‘Katrina Durek'; 'Emily Wong'
Subject: Geisler v. Johnston, et al. - Case No.: 17CIV02888
Dear Ms. Hagan,
Please find the attached correspondence in the above mentioned matter on behalf of Kavin Williams. Thank you.
Best Regards
Maria Diazgranados
Maria Diazgranados
Litigation Secretary
ai
MURPHY PEARSON
88 Kearny Street, 10th Floor
San Francisco, CA 94108
Office: 415.788.1900 x2826
BRADLEY & FEENEY Fax: 415.393.8087
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CONFIDENTIALITY - This e-mail message and any attachments thereto are for the sole use of the intended recipient(s) and contains a private, confidential
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EXHIBIT D
e Hagan Law
Hagan Law, 535 Middlefield Road, Ste 190, Menlo Park, CA 94025
(650) 322-8498 www.Haganlaw.com
February 20, 2019
Via Email
JJacobs: GCAlaw.com
James Jacobs, Esq.
GCA Law Partners, LLP
2570 W. El Camino Real, Suite 400
Mt. View, CA 94040
In Re: Geisler et al. v. Robert Glynn, Johnston & Rhausler et al.
San Mateo Superior Court —- Complex Litigation, Case No.: 17CIV02888
Meet and Confer Regarding Johnston’s Letter Re: Demurrer and Motion to Strike
Dear Jimmy,
This letter is written to meet and confer with respect to the two meet and confer letters which
you wrote to me dated February 18, 2019, regarding your intention to file a Demurrer to the Fourth
Amended Verified Complaint)”"4AVC”).
As I informed you yesterday, we are willing to include Johnston in the planned stipulation with
Mr. Glynn concerning the Second Cause of Action (2(b)) asserted against Rhausler, Terry Johnston,
Robert Glynn for Violation of Corporations Code Section 25401 (and its supporting enforcement
provisions of 25501 and 25504), as follows:
1 Fleming shall withdraw his request for punitive damages requested in
Paragraph 136 of the 4AVC. Those are not a remedy afforded to him pursuant
to Sections 25401, 25501 and 25504.
If the Court allows the Plaintiffs leave to amend, we will amend Fleming’s
Cause of Action against Johnston and Glynn under 2(b) to clarify that in 2008,
Glynn and Johnston were two of the three members of Board of Directors of
Rhausler who approved the sale of Rhausler stock and securities to investors,
1 of4
Geisler Meet and Confer Letter to Johnston Re: Demurrer to 4AVC.
February 20, 2019
and in specific, Glynn and Johnston approved and authorized the Company to
issue stock to Norman Fleming in exchange for $100,000 in cash.
With respect to the other issues raised in your letter of February 18, 2019, I respond to them in the
order in which you addressed them:
1. Second Cause of Action — Securities Fraud Against Johnsto!
We disagree with you that the 4AVC fails to allege sufficiently omission of material facts which lead
directly to inducing Fleming to purchase the Rhausler stock. If Fleming had known that Terry Johnston was
continuing to work full time for Tedan Surgical, and that he intended to work full time for Tedan as the Vice
President of Sales and inventing multiple patents that he would then assign to Tedan for no compensation to
Rhausler, he simply would have never invested in Rhausler.
The 4AVC alleges that Terry Johnston was one of the draftsman of the Rhausler PPM, and that he
intentionally, and with knowledge, omitted informing potential investors that he was the current VP of Sales
for Tedan and that in the future, while acting as the CEO of Rhausler, he would continue to be employed by
Tedan and work full time for Tedan in sales and marketing making over 35 trips to China alone.
Fleming relied on the Rhausler PPM in making his investment. The facts that Terry Johnston omitted
to state in the Rhausler PPM are material, and the 4AVC has properly alleged that. The facts alleged in the
4AVC are pleaded with sufficient particularity.
2. Fourth Cause of Action: Breach of Fiduciary Dutie:
Again, we disagree with your position in this matter. The 4AVC adequately alleges facts sufficient to
state a claim by Copernicus against Johnston, acting as an officer and director of Rhausler, that Johnston’s
conduct violated duties owed to Copernicus.
In specific, the 4AVC alleges that Copernicus made a loan to Rhausler to purchase Spinal Integration
based on representations made by Johnston to Geisler. Rhausler then defaulted on that loans and continues
to be in default. Under the Partners Working Agreement, Johnston made a contractual promise to Geisler that
Rhausler would pay the Copernicus loan, and Johnston made this promise, expressly to induce Geisler to
sign the UAB extension of loan paperwork. Rhausler, which was and is controlled by Johnston as its CEO,
then defaulted a second time on this contractual obligation to pay Copernicus.
All of those facts all specifically alleged in the 4AVC. In addition, Mr. Fleming does not make a claim
breaches of fiduciary duties prior to the time he became a shareholder of Rhausler which was in or around
March 15, 2008.
3. Seventh Cause of Action: Breach of Contract
Again, we disagree with your position in this matter. You are attempting to argue the merits of the
claim. A demurrer tests only the sufficiency of the pleading. The 4A VC adequately alleges facts sufficient
to state a claim by Geisler against both Rhausler and Johnston for breach of oral contract because the 4AVC
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February 20, 2019
at Para. 257 incorporates by reference all previous allegations made in the complaint. At Paragraph 112,
the 4AVC also alleges that JOHNSTON made the oral agreement with Geisler that if Geisler transferred
his patents to Rhausler that he would be paid an 8% royalty on sales generated by the patents. Therefore,
the Cause of Action Seven for breach of Oral Agreement is properly pleaded against both Rhausler and
Johnston.
5. Twelfth Cause of Action: Breach of Implied Covenant of Good Faith
I must admit that I am stumped by your objections to the pleadings in this matter. They don’t make
any sense to me. First, Paragraph 297 incorporates by reference all previously made allegations. Second,
to your point, the 4AVC pleads at Paragraph 300 that 3COR acted in bad faith by failing to perform the
Working Partners Agreement #2 between Rhausler and 3COR which agreement required 3COR to remit to
Rhausler 95% of the profits generated from the sale of Rhausler products, and that 3COR just took the
money for itself. We believe those allegations are sufficient to state a claim against 3COR for Breach of
the Implied Covenant of Good Faith and Fair Dealing.
6. 16*" and 17 Cause of Action - Unfair Business Practices
We do not agree with your assessment of the 4AVC that the 16" and 17" cause of action fails to
adequately plead facts demonstrating that JOHNSTON and/or 3COR violated BPC Section 17200. UCL
claims do not stand alone but must borrow violations of statute or law. In this matter, we have alleged that
both JOHNSTON and 3COR has violated case and statutory law. Specifically, JOHNSTON has violated
Corps Code Section 309 and 25401, and Civil Code 1572, 1573 and 1709. All of those statutes independently
support a cause of action for unfair business practices against him.
It appears to me that none of the lawyers who have written us letters regarding their intention to file a
Demurrer have actually researched actions under BPC 17200, or may not understand that there are many
types of actions that can be brought under the umbrella.
The UCL by its terms is extremely far reaching. To state a claim under the UCL, a plaintiff must
allege simply that the defendant engaged in either an unlawful, unfair, or fraudulent business act or practice.
The statute is typically read in the disjunctive subjecting any defendant to liability for activity violating any
of its three prongs: (1) unlawful, (2) unfair, or (3) fraudulent.
The California Supreme Court has explained that “[a] business practice is unlawful ‘if it is
forbidden by any law . ”” Olszewski v. Scripps Health (2003) 30 C4th 798, 135 CR2d 1. California
case law has interpreted the “unlawful” prong of Section 17200 to hold illegal a business practice that
violates any other law, treating it as “unlawful” and making it independently actionable under 17200. Ce/-
Tech Communications & Cel-Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 C4th
163, 180, 83 CR2d 548,
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Geisler Meet and Confer Letter to Johnston Re: Demurrer to 4A VC.
February 20, 2019
JOHNSTON is sued under the 16" and 17" causes of action for his personal unlawful bad acts, as well
as, for unlawful and unfair acts as a Director and Officer of Rhausler . 3COR is sued for unfair business
conduct in that it failed to remit the 95% of profits to Rhausler which it was contractually obligated to do.
Accordingly, Plaintiffs decline to amend, revise or withdraw the 16" or 17" causes of action.
T hope that you find this letter to be clarifying and helpful.
Yours Very Truly,
HAGAN LAW, INC.
Set Yager
By: TT
Jennifer J. Hagan
Jhagan@Haganlaw.com
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Geisler Meet and Confer Letter to Johnston Re: Demurrer to 4AVC
February 20, 2019
Preview
Electronically by Supenar Court of California, County of San iateo ON 2/22/2019 By. ‘sf Mia Marlowe JAMES L. JACOBS, State Bar No. 158277 Deputy Clerk ROBERT W. LUCKINBILL, State Bar No. 131977 GCA LAW PARTNERS LLP 2570 W. El Camino Real, Suite 400 Mountain View, CA 94040 Telephone: (650) 428-3900 Facsimile: (650) 428-3901 Attorneys for Defendants TERRY J. JOHNSTON, and 3COR MEDICAL, INC. SUPERIOR COURT OF THE STATE OF CALIFORNIA IN AND FOR THE COUNTY OF SAN MATEO 10 11 FRED H. GEISLER, M.D., Ph.D., an No. 17CIV02888 individual, and NORMAN C. FLEMING, an 12 individual, directly, and derivatively on behalf of RHAUSLER, INC., a California DECLARATION OF JAMES L. 13 Corporation, JACOBS IN SUPPORT OF DEFENDANTS TERRY J. 14 Plaintiffs, JOHNSTON’S and 3COR MEDICAL, INC.’S DEMURRER T: 15 vs. PLAINTIFFS’ FOURTH AMENDED VERIFIED COMPLAINT 16 TERRY J. JOHNSTON, an individual; KATIE SIMS, CPA, an individual; ROBERT] Date: April 29, 2019 17 JOHN GLYNN, JR., an individual; 3COR Time: 9:00 a.m. MEDICAL, INC., a California Corporation; Dept.: 2 18 TEDAN SURGICAL INNOVATIONS, LLC, a Texas Limited Liability Company, and Hon. Marie S. Weiner 19 DOES 1 to 25, Complaint Filed: June 28, 2017 20 Defendants, Fourth Amended Complaint Filed: February 1, 2019 21 and RHAUSLER, INC., a California Trial Date: None Set Corporation, 22 Nominal Defendant. 23 24 25 I, James L. Jacobs, hereby declare as follows: 26 1 Tam an attorney at law dully licensed to practice before all of the courts of 27 the State of California and a partner at the law firm of GCA Law Partners LLP, counsel for DECL. OF JAMES L. JACOBS IN SUPPT OF JOHNSTON & 3COR DEMURRER -1- ue Case No. 17CIV02888 defendants TERRY J. JOHNSTON, and 3COR MEDICAL, INC. (hereinafter collectively “Defendants”). The following is based on my personal knowledge and if called as a witness, I could and would testify competently thereto. 2, On January 11, 2019, the Court issued Case Management Order #10, a true and correct copy of which is attached hereto as Exhibit A. 3 I sent a meet and confer letter to Plaintiffs’ counsel regarding Defendants’ planned demurrer and motion to strike on February 18, 2019, via email. The letter outlined Defendants’ objections to the Fourth Amended Verified Complaint. A true and correct copy of the letter is attached as Exhibit B. I followed up that letter with a further email 10 (on February 18, 2019) to Plaintiffs’ counsel raising additional objections. A true and 11 correct copy of that email is attached as Exhibit C. 12 4. On February 20, 2019, Plaintiffs’ counsel Jennifer Hagan sent a response 13 letter via email. A true and correct copy of that letter is attached as Exhibit D. 14 5 Although we were able to resolve a few items (which Plaintiffs’ counsel has 15 agreed to memorialize in a proposed stipulation), we were unable, despite our meet and 16 confer efforts, to come to an agreement regarding the majority of the items discussed. 17 I declare under penalty of perjury under the laws of the State of California that the 18 foregoing is true and correct and based upon my personal knowledge. 19 Dated this 22nd day of February 2019 in Mountain View, California. 20 21 22 AMES L. J, S 23 24 25 26 27 DECL. OF JAMES L. JACOBS IN SUPPT OF JOHNSTON & 3COR DEMURRER -2- eau se Case No. 17CIV02888 EXHIBIT A FILED ‘SAN MATEO COUNTY a ee Bo —on0ee JAN 11 2019 Case Management Order 1591 Clejerk of % oie | I ti | | Mt By. : - _ cee ans na =—— SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SAN MATEO COMPLEX CIVIL LITIGATION FRED H. GEISLER M.D., Ph.D, an individual, NORMAN C. FLEMING, an Case No. 17CIV02888 individual, and GENA ZISCHKE, an DERIVATIVE and INDIVIDUAL individual, directly and derivatively on ACTION behalf of RHAUSLER, INC., a California Corporation, Assigned for all purposes to Dept. 2 Hon. Marie S. Weiner Plaintiffs, CASE MANAGEMENT ORDER #10 vs. TERRY J. JOHNSTON, et al., Defendants. - and— RHAUSLER, INC., Nominal Defendant. On November 28, 2018, hearing was held on multiple Demurrers and Motions to Strike as to the Third Amended Complaint in Department 2 of this Court before the’ Honorable Marie 8. Weiner. Jennifer Hagan, Esq. and Misasha Graham, Esq. appeared on behalf of Plaintiffs; Robert Bodzin of ee Brown appeared on behalf of 1 4. Defendant Fishman’s Demurrer to the Third Amended Complaint is SUSTAINED WITH LEAVE TO AMEND as to the third, sixth, twelfth, sixteenth, nineteenth, and twenty-second cause of action, and is MOOT as to the seventh cause of action (because it is not alleged against Fishman). 5 Defendants Johnston’s and 3COR Medical’s Demurrer to the Third Amended Complaint is SUSTAINED WITH LEAVE TO AMEND as to the twenty- second cause of action; is OVERRULED as to nineteenth causes of action; and is OVERRULED as to the second cause of action (i) on the claims against 3COR and on the claim by Plaintiff Fleming, but otherwise SUSTAINED WITH LEAVE TO AMEND as to Johnston on claims by the other Plaintiffs. 6. Defendant Glynn’s Demurrer to the Third Amended Complaint is OVERRULED as to the fourth, fifth, and sixteenth causes of action; is SUSTAINED WITH LEAVE TO AMEND as to the first, nineteenth and twenty-second causes of action; and is SUSTAINED WITHOUT LEAVE TO AMEND as to the twenty-first cause of action as there is no legal right for shareholders to bring a derivative claim for attorney malpractice on behalf of a corporation. McDermott vy. Superior Court (James) (2000) 83 Cal.App.4" 378, 383-386; Favila v. Katten Muchin (2016) 188 Cal.App.4" 189, 217-222. 7 In regards to Defendants Tedan’s and Bass’ Demurrer to the Third Amended Complaint, the Demurrer of Tedan to the second cause of action is OVERRULED; Demurrer of Tedan and Bass to the sixth cause of action is SUSTAINED WITH LEAVE TO AMEND; Demurrer of Tedan and Bass to the twelfth cause of action is SUSTAINED WITH LEAVE TO AMEND; Demurrer to Tedan to the eighteenth cause of action is OVERRULED; Demurrer to Tedan and Bass to the nineteenth cause of action is OVERRULED as to Tedan and is SUSTAINED WITH LEAVE TO AMEND as to Bass on the grounds that it is vague as to what Bass’ involvement and what he actually did in regard to misappropriation of trade secrets; Demurrer of Tedan and Bass to the twenty-second cause of action is SUSTAINED WITH LEAVE TO AMEND. 8 Any and all demurrers to causes ofaction pleaded as claims by “Plaintiffs” which include new Plaintiff Copernicus Dynamics LP, except the twentieth cause of action for accounting expressly alleged as to Copernicus are SUSTAINED WITH LEAVE TO AMEND as to claims of Copernicus because the Third Amended Complaint utterly fails to allege facts demonstrating that Copernicus has standing to sue under any of the other causes of action. 9, Plaintiffs’ 13-1/2 page Opposition to Tedan’s Amended Demurter is STRICKEN as procedurally improper. In a two page document, Tedan withdrew its demurrer to certain causes of action. In response, Plaintiffs filed a over-sized additional substantive opposition regarding the remaining demurrer causes of action. The Court will only be considering the original Opposition. 10. Plaintiffs failed to heed the explicit instruction of this Court at the hearing on the prior demurrer that the claims for aiding and abetting and for conspiracy are not separate causes of action, but rather are theories of secondary liability for primary intentional torts and causes of action, and must be pleaded as allegations within each cause of action to which they actually apply. These theories of secondary liability do not necessarily apply to each and every claim by Plaintiffs against each and every Defendant, and must be specifically linked to a particular cause of action — not a blanket theory as to all causes of action. Accordingly, the demurrers to twelfth “cause of action” for aiding and abetting and the twenty-second “cause of action” for conspiracy have been sustained with leave to amend as to all Defendants who filed a demurrer thereto. ll. As discussed at the hearing on the demurrers, the Third Amended Complaint is a jumbled messy pleading as to the second causeof action for “fraud and deceit”, as Plaintiffs have combined under one alleged “cause of action”, three completely separate theories/claims, with different elements of proof of liability and different remedies. Specifically, Plaintiffs allege a contract claim for fraudulent inducement, a tort claim for fraud and deceit, and a statutory claim for violation of Corporations Code section 25401. Plaintiffs SHALL break out these three claims into three separate causes of action in the Fourth Amended Complaint, so that it can be intelligently determined which claim is by whom against whom and the specific facts supporting each of such claims. 12. Plaintiffs shall file and serve their Fourth Amended Complaint on or before February 1, 2019. Defendants shall file and serve their Answers or other response to the Fourth Amended Complaint on or before February 22, 2019. op DATED: January 11, 2019 HON. S. WEINER JUDGE OF THE SUPERIOR COURT Defendant Tedan Surgical Innovations LLC, Daniel Bass and Danny Fishman; James Jacobs of GCA Law Partners LLP appeared on behalf of Defendants Terry Johnston, and 3COR Medical; Tom Prountzos of Goodman Neuman Hamilton LLP appeared on behalf of Defendants Katie Sims CPA and Magnolia Group LLP; Whitney Carlson of Murphy Pearson Bradley & Feeney appeared on behalf of Robert Glynn Jr.; and Daniel Hardy of Coombs & Dunlap LLP appeared on behalf of Nominal Defendant Rhausler Inc. Upon due consideration of the pleadings, the briefs presented, and the oral argument of counsel for the parties, and having taken the matter under submission, IT IS HEREBY ORDERED as follows: 1 Defendant Glynn’s Motion to Strike portions of the Third Amended Complaint, and Defendant Johnston’s Joinder therein, as to Paragraphs 163, 205, 237, 329, 414, 444, and the Prayer, alleging fraud and/or malice and seeking punitive damages is DENIED; and as to the Prayer seeking award of attorneys’ fees is DENIED as to misappropriation of trade secrets under C.C. §3426.4 but GRANTED as to B&P Code §17200 and C.C.P. §1021.5. 2. Defendant Tedan Surgical’s and Defendant Bass’ Motion to Strike portions of the Third Amended Complaint as to the Prayer for punitive damages is DENIED; and as to the Prayer seeking award of attorneys’ fees is DENIED as to misappropriation of trade secrets under C.C. §3426.4 but GRANTED as to B&P Code §17200 and C.C.P. §1021.5. 3 Defendant Fishman’s Motion to Strike portions of the Third Amended Complaint as to the Prayer for punitive damages is DENIED; and as to the Prayer seeking award of attorneys’ fees is DENIED as to misappropriation of trade secrets under C.C. §3426.4 but GRANTED as to B&P Code §17200 and C.C.P. §1021.5. EXHIBIT B —— LAW PARTNERS LLP February 18, 2019 By Email Jennfier J, Hagan, Esq. The Hagan Law Firm 535 Middlefield Road, Suite 190 Menlo Park, CA 94025 Re: Fred H, Geisler et al. y. Terry J. Johnston et al, San Mateo Superior Court (Case No. 17CIV02888) Dear Ms. Hagan, This letter serves as an effort to meet and confer on the planned demurrer and motion to strike of Defendants Terry Johnston (“Johnston”) and 3COR Medical, Inc. (“3COR”) to Plaintiffs’ Fourth Amended Verified Complaint (* F ’) We hope that afler reviewing this letter, Plaintiffs will agree to dismiss the cau action and allegations which cannot be pursued in this case. Second Cause of Action: Fraud and Deceit — Direct As an initial matter, Judge Weiner noted and ordered as follows in her Case Management Order #10 dated January 11,2019 (“CMO #10”). 1, As discussed at the hearing on the demurrers, the Third Amended Complaint is a jumbled messy pleading as to the second cause of action for “fraud and deceit”, as Plainti have combined under one alleged “cause of action”, three completely separate theories/clain with different elements of proof of liability and different remedies, Spi if lly, Plaintiffs allege a contract claim for fraudulent inducement, a tort claim for fraud and deceit, and a statutory claim for violation of Corporations Code section 25401. Plaintiffs SHALL break out these three claims into three separate causes of action in the Fourth Amended Complaint, so that it can be intelligently determined which claim is by whom against whom and the specific facts supporting each of such claims, CMO # 10 at 411 (emphasis in original). 670 W. HL CAMING RE 400 MOUNTAIN V O40, 900 9101 nw.com Jennifer Hagan, Esq. February 18, 2019 Page 2 Plaintiffs have violated this portion of CMO #10 by, once again, combining under one alleged cause of action completely separately theories/claims, with different elements of proof of liability and different remedies, On this basis alone, Plaintiffs should agree to amend this cause of action, In addition, as separate grounds, please note the other deficiencies as to the second cause of action: First, there is no private right of action under Corporations Code Section 25400 (or 25401). See Kamen y. Lindly (2001) 94 Cal.App.4" 197, 202.) Section 24500 defines proscribed conduct only, and alone cannot give rise to civil liability, Plaintiffs must plead the statutes upon which they contend they can assert a claim. Second, even had the FAVC alleged securities fraud pursuant to other provisions of the Corporations Code that create a private right of action, any cause of action for alleged securities fraud under the Corporations Code is time barred here, Corporations Code Section 25506(b) requires that any action to enforce any liability created under the applicable provisions must be brought “before the expiration of five years after the act or transaction constituting the violation or the expiration of two years after the discovery by the plaintiff of the facts constituting the violation, whichever shall first expire.” Here, the alleged act or transaction constituting the violation of the Corporations Code occurred in March 2008 (FAVC 4 10), so Mr. Fleming was required to assert this cause of action no later than 2013, ¢.g, five years after the 2008 investment date or two years after the anticipated cash return to shareholders (in 2011) failed to take place. Mr. Fleming did not assert his fraud cause of action until June 2017; thus, his fraud cause of action based on an alleged violation of the Corporations Code is time barred. Third, to the extent the alleged private right of action for securities fraud under the Corporations Code is also based on alleged omissions (see, e.g., FAVC ] 127), the FAVC fails to allege, as it must, /ow the alleged omissions to state a material fact made the statements made, in light of the circumstances under which the statements were made, not misleading. See Corporations Code Section 25401. Not only must the FAVC show how the alleged omissions made any specific affirmative statement(s) misleading — which it does not even attempt to do — it must plead this with particularity. Fourth, the FAVC appears to seek exemplary and punitive damages for the alleged securities fraud. (See e.g., FAVC§ 136 and Prayer for Relief at ] 20). The Corporations Code provides statutory damages remedies for securities fraud; punitive damages are not available to those who choose to proceed under the Corporations Code, See e.g. Bowden v. Robinson (1977) 67 Cal. App. 3d 706, 714. Fourth Cause of Action: Breach of Fiduciary Duties — Violation of Corporations Code § 309(a Jennifer Hagan, Esq, February 18, 2019 Page 3 The FAVC fails to allege facts showing that Johnston owed a fiduciary duty to plaintiff Copernicus Dynamics Group (“Copernicus”). It is axiomatic that Johnston cannot be held liable for breach of a fiduciary duty in circumstances where he does not owe a fiduciary duty or to a party to whom he does not owe such a duty, Further, the Fourth Cause of Action is asserted as a direct — not a derivative claim. Neither Plaintiffs Zischke nor Fleming have alleged any facts that substantiate that either has a direct cause of action for breach of fiduciary duty against Johnston, All of the harms claimed by these Plaintiffs that based on an alleged fiduciary duty violation are derivative in nature. For example, claims based on alleged self-dealing or failure to maintain intellectual property and trade secrets as confidential are claims for the benefit of Rhausler and for which any recovery would go to Rhausler ~ not to Zischke or Fleming. Moreover, Fleming cannot allege damages for breach of fiduciary duty based upon his initial purchase of Rhausler shares and the FAVC does not allege allegations that Fleming was owed a duty prior to the purchase of his shares, Seventh Cause of Action: Breach of Contract Geisler asserts breach of an oral contract against Rhausler and Johnston. However, the FAVC specifically alleges that Johnson, “acting as CEO of RHAUSLER and in the course and scope of his duties as CEO of RHAUSLER, entered into an oral contract with GEISLER.” FAVC § 258). Thus Geisler, himself, admits that the oral contract that is the subject of this cause of action was between Rhausler and Geisler, and that Johnston’s involvement was only in his capacity as a representative of Rhausler. As such, the cause of action against Johnston must fail. Twelfth Cause of Action: Breach of the Implied Covenant of Good Faith and Faii Dealing For its breach of contract claim against 3COR, the FAVC alleges that 3COR failed to remit profits it allegedly owed Rhausler under the Partners Working Agreement #2 based on the sale of Rhausler products. In its cause of action for breach of the implied covenant of good faith and fair dealing based on this contract, the FAVC fails to allege requisite facts that 3COR somehow unfairly interfered with Rhausler’s right to receive the benefits of the Partners Working Agreement #2, See CACI 325. That 3COR purportedly “exploited” Rhausler’s medical devices by commercially selling those products and then allegedly failed to hand over the profits gleaned called from those sales is, in essence, alleging nothing more than the underlying contract breach, which is insufficient. Jennifer Hagan, Esq. February 18, 2019 Page 4 Sixteenth and Seventeenth Causes of Action: Unfair Business Practices -- Violation of Bus. & Prof. Code §17200 For the rea ns and rationales set forth Robert Bodzin’s letter dated February 14, 2019 and Kavin Williams’ letter dated February 15, 2019 (both of which are incorporated by reference), the causes of action for unfair business practices also fail as to both 3COR and Johnston. Moreove: pecific ly, for the Sixteenth Cause of Action, the FAVC does not identity 3COR as having caused injury to any Plain t The unique injuries suffered by Gei sler and Fleming are not attributed to 3COR. See FAVC § 329,A and 4 329.B. Likewise, in the FAVC sections that identify the defendants that ca ed injury to all Rhausler hareholde -- FAVC $4 331-339 -- the FAVC identifies Rhausler, Johnston, Ba . Fishman, TSI, [OR, Sims and Magnolia s the defendants who purportedly committed the acts conduct and practices in question but it does not identify 3COR. As such, (he cause of action is inadequately pled as to 3COR. Please respond to this letter at your earliest convenience and, preferably, by Febr ary 20, [note that the majority of the issues raised in this letter have already been d by other defendants. most of what is contained in this meet and confer letter has previously been raised to Pl aintitts. Johnston and 3COR also specifically r serve their rights to join in the motions to strike or demurrers filed by any other defendants. Very truly yours, GCA LAW PARTNERS LLP eg Ay ooae de As Jami ACO EXHIBIT C Jimmy Jacobs From: Jimmy Jacobs Sent: Monday, February 18, 2019 9:15 PM To: ‘Ghagan@haganlaw.com)' Ce: ‘Misasha Suzuki Graham’; ‘ddell@coombslaw.com’; 'dhardy@coombslaw.com’; ‘Aileen Zurawski’; Bob Luckinbill; Tina Ernst; ‘fneuman@gnhilp.com’; ‘tprountzos@gnhllp.com’; ‘jtrayner@gnhllp.com’; ‘mrosario@gnhllp.com’; ‘Timothy Halloran’; ‘Kavin Williams’; ‘Tyron Jordan’; ‘David Miclean’; ‘Danielle Mihalkanin’; ‘Douglas Collins’; ‘Robert Bodzin’; ‘Katrina Durek’; ‘Emily Wong’; ‘Maria Diazgranados' Subject: RE: Geisler v. Johnston, et al. - Case No.: 17CIV02888 This email supplements the meet and confer letter of Defendants Johnston and 3COR Medical, Inc. from earlier today with respect to the allegations of Plaintiffs’ Fourth Amended Verified Complaint (“FAVC”). The following allegations should also be dismissed/stricken from the FAVC: The allegations seeking attorneys’ fees from Johnston in connection with the First Cause of Action (asserted derivatively on behalf of Rnausler against Johnston for Breach of Fiduciary Duty by Controlling Shareholder) that appear (A) at FAVC, 47:2-3 (‘In addition, RHAUSLER is entitled to an award of attorney’s fees for having to bring this action”) and (B) at {| 21 of the Prayer For Relief at FAVC, 114:8-10 (“On the First Cause of Action for Breach of Fiduciary Duties Owed by a Controlling Shareholder to the Company, an award of Attorney's fees against JOHNSON in favor of Rhausler’). This issue appears to have already been disposed of by Judge Weiner in Case Management Order # 10 at par. 2. There are no additional facts alleged in the First Cause of Action of the FAVC that would change the conclusion already reached by Judge Weiner (following the full briefing by the parties) that Plaintiffs have not alleged a basis to recover attorney's fees from Johnston in connection with either the “substantial benefit” or “common fund” doctrines. Plaintiffs have likewise not identified (A) a contractual obligation to recover attorneys’ fees for a fiduciary duty breach or (B) a statute which entitles Plaintiffs to recover attorneys’ fees for a fiduciary duty breach. Regards, Jimmy James L. Jacobs GCA Law Partners LLP 2570 W. El Camino Real, Suite 400 Mountain View, CA 94040 Telephone: (650) 428-3900 Facsimile: (650) 428-3901 Internet: jiacobs@gcalaw.com Website: www.gcalaw.com This email may contain confidential and privileged material for the sole use of the intended recipient. Any review or distribution by others is strictly prohibited. If you are not the intended recipient please contact the sender and delete all copies. From: Jimmy Jacobs Sent: Monday, February 18, 2019 5:59 PM To: '(jhagan@haganlaw.com)' Cc: 'Misasha Suzuki Graham’; 'ddell@coombslaw.com'; 'dhardy@coombslaw.cot '; ‘Aileen Zurawski'; Bob Luckinbill; Tina Ernst; 'fneuman@gnhllp.com’, 'tprountzos@gnhllp.com’; ‘jtrayner@gnhllp.co! mrosario@gnhllp.com'; ‘Timothy Halloran’; 'Kavin Williams’; ‘Tyron Jordan’; ‘David Miclean'; 'Danielle Mihalkanin'; ‘Douglas Collins'; ‘Robert Bodzin’; 'Katrina Durek'; ‘Emily Wong; 'Maria Diazgranados' Subject: RE: Geisler v. Johnston, et al. - Case No.: 17CIV02888 Attached please find the meet and confer letter on behalf of Terry Johnston and 3COR Medical, Inc. Regards, Jimmy James L. Jacobs GCA Law Partners LLP 2570 W. El Camino Real, Suite 400 Mountain View, CA 94040 Telephone: (650) 428-3900 Facsimile: (650) 428-3901 Internet: jiacobs@gcalaw.com Website: www.gcalaw.com This email may contain confidential and privileged material for the sole use of the intended recipient. Any review or distribution by others is strictly prohibited. If you are not the intended recipient please contact the sender and delete all copies. From: Maria Diazgranados [mai MPBF. ] Sent: Friday, February 15, 2019 3:48 PM To: (jhagan@haganlaw.com) Cc: 'Misasha Suzuki Graham’; ddell|@coombslaw.com; dhardy'@coombstaw.com: ‘Aileen Zurawski'; Jimmy Jacobs; Bob Luckinbill; Tina Ernst;fneuman@anhllp.com; ; Mrosario@gnhllp.com; Timothy Halloran; Kavin Williams; Maria Diazgranados; Tyron Jordan; ‘David Miclean'; ‘Danielle Mihalkanin'; ‘Douglas Collins’; ‘Robert Bodzin’; ‘Katrina Durek'; 'Emily Wong' Subject: Geisler v. Johnston, et al. - Case No.: 17CIV02888 Dear Ms. Hagan, Please find the attached correspondence in the above mentioned matter on behalf of Kavin Williams. Thank you. Best Regards Maria Diazgranados Maria Diazgranados Litigation Secretary ai MURPHY PEARSON 88 Kearny Street, 10th Floor San Francisco, CA 94108 Office: 415.788.1900 x2826 BRADLEY & FEENEY Fax: 415.393.8087 website | vCard | map | email @ © @ San Francisco Sacramento Los Angeles Seattle CONFIDENTIALITY - This e-mail message and any attachments thereto are for the sole use of the intended recipient(s) and contains a private, confidential communication protected by the attorney client privilege and the attorney work product doctrine. Any unauthorized review, use, disclosure or distribution of this e mail is strictly prohibited. If you are not the intended recipient, please contact the sender by reply e-mail and destroy all copies of the original message. Thank you. EXHIBIT D e Hagan Law Hagan Law, 535 Middlefield Road, Ste 190, Menlo Park, CA 94025 (650) 322-8498 www.Haganlaw.com February 20, 2019 Via Email JJacobs: GCAlaw.com James Jacobs, Esq. GCA Law Partners, LLP 2570 W. El Camino Real, Suite 400 Mt. View, CA 94040 In Re: Geisler et al. v. Robert Glynn, Johnston & Rhausler et al. San Mateo Superior Court —- Complex Litigation, Case No.: 17CIV02888 Meet and Confer Regarding Johnston’s Letter Re: Demurrer and Motion to Strike Dear Jimmy, This letter is written to meet and confer with respect to the two meet and confer letters which you wrote to me dated February 18, 2019, regarding your intention to file a Demurrer to the Fourth Amended Verified Complaint)”"4AVC”). As I informed you yesterday, we are willing to include Johnston in the planned stipulation with Mr. Glynn concerning the Second Cause of Action (2(b)) asserted against Rhausler, Terry Johnston, Robert Glynn for Violation of Corporations Code Section 25401 (and its supporting enforcement provisions of 25501 and 25504), as follows: 1 Fleming shall withdraw his request for punitive damages requested in Paragraph 136 of the 4AVC. Those are not a remedy afforded to him pursuant to Sections 25401, 25501 and 25504. If the Court allows the Plaintiffs leave to amend, we will amend Fleming’s Cause of Action against Johnston and Glynn under 2(b) to clarify that in 2008, Glynn and Johnston were two of the three members of Board of Directors of Rhausler who approved the sale of Rhausler stock and securities to investors, 1 of4 Geisler Meet and Confer Letter to Johnston Re: Demurrer to 4AVC. February 20, 2019 and in specific, Glynn and Johnston approved and authorized the Company to issue stock to Norman Fleming in exchange for $100,000 in cash. With respect to the other issues raised in your letter of February 18, 2019, I respond to them in the order in which you addressed them: 1. Second Cause of Action — Securities Fraud Against Johnsto! We disagree with you that the 4AVC fails to allege sufficiently omission of material facts which lead directly to inducing Fleming to purchase the Rhausler stock. If Fleming had known that Terry Johnston was continuing to work full time for Tedan Surgical, and that he intended to work full time for Tedan as the Vice President of Sales and inventing multiple patents that he would then assign to Tedan for no compensation to Rhausler, he simply would have never invested in Rhausler. The 4AVC alleges that Terry Johnston was one of the draftsman of the Rhausler PPM, and that he intentionally, and with knowledge, omitted informing potential investors that he was the current VP of Sales for Tedan and that in the future, while acting as the CEO of Rhausler, he would continue to be employed by Tedan and work full time for Tedan in sales and marketing making over 35 trips to China alone. Fleming relied on the Rhausler PPM in making his investment. The facts that Terry Johnston omitted to state in the Rhausler PPM are material, and the 4AVC has properly alleged that. The facts alleged in the 4AVC are pleaded with sufficient particularity. 2. Fourth Cause of Action: Breach of Fiduciary Dutie: Again, we disagree with your position in this matter. The 4AVC adequately alleges facts sufficient to state a claim by Copernicus against Johnston, acting as an officer and director of Rhausler, that Johnston’s conduct violated duties owed to Copernicus. In specific, the 4AVC alleges that Copernicus made a loan to Rhausler to purchase Spinal Integration based on representations made by Johnston to Geisler. Rhausler then defaulted on that loans and continues to be in default. Under the Partners Working Agreement, Johnston made a contractual promise to Geisler that Rhausler would pay the Copernicus loan, and Johnston made this promise, expressly to induce Geisler to sign the UAB extension of loan paperwork. Rhausler, which was and is controlled by Johnston as its CEO, then defaulted a second time on this contractual obligation to pay Copernicus. All of those facts all specifically alleged in the 4AVC. In addition, Mr. Fleming does not make a claim breaches of fiduciary duties prior to the time he became a shareholder of Rhausler which was in or around March 15, 2008. 3. Seventh Cause of Action: Breach of Contract Again, we disagree with your position in this matter. You are attempting to argue the merits of the claim. A demurrer tests only the sufficiency of the pleading. The 4A VC adequately alleges facts sufficient to state a claim by Geisler against both Rhausler and Johnston for breach of oral contract because the 4AVC 2 of4 Geisler Meet and Confer Letter to Johnston Re: Demurrer to 4AVC February 20, 2019 at Para. 257 incorporates by reference all previous allegations made in the complaint. At Paragraph 112, the 4AVC also alleges that JOHNSTON made the oral agreement with Geisler that if Geisler transferred his patents to Rhausler that he would be paid an 8% royalty on sales generated by the patents. Therefore, the Cause of Action Seven for breach of Oral Agreement is properly pleaded against both Rhausler and Johnston. 5. Twelfth Cause of Action: Breach of Implied Covenant of Good Faith I must admit that I am stumped by your objections to the pleadings in this matter. They don’t make any sense to me. First, Paragraph 297 incorporates by reference all previously made allegations. Second, to your point, the 4AVC pleads at Paragraph 300 that 3COR acted in bad faith by failing to perform the Working Partners Agreement #2 between Rhausler and 3COR which agreement required 3COR to remit to Rhausler 95% of the profits generated from the sale of Rhausler products, and that 3COR just took the money for itself. We believe those allegations are sufficient to state a claim against 3COR for Breach of the Implied Covenant of Good Faith and Fair Dealing. 6. 16*" and 17 Cause of Action - Unfair Business Practices We do not agree with your assessment of the 4AVC that the 16" and 17" cause of action fails to adequately plead facts demonstrating that JOHNSTON and/or 3COR violated BPC Section 17200. UCL claims do not stand alone but must borrow violations of statute or law. In this matter, we have alleged that both JOHNSTON and 3COR has violated case and statutory law. Specifically, JOHNSTON has violated Corps Code Section 309 and 25401, and Civil Code 1572, 1573 and 1709. All of those statutes independently support a cause of action for unfair business practices against him. It appears to me that none of the lawyers who have written us letters regarding their intention to file a Demurrer have actually researched actions under BPC 17200, or may not understand that there are many types of actions that can be brought under the umbrella. The UCL by its terms is extremely far reaching. To state a claim under the UCL, a plaintiff must allege simply that the defendant engaged in either an unlawful, unfair, or fraudulent business act or practice. The statute is typically read in the disjunctive subjecting any defendant to liability for activity violating any of its three prongs: (1) unlawful, (2) unfair, or (3) fraudulent. The California Supreme Court has explained that “[a] business practice is unlawful ‘if it is forbidden by any law . ”” Olszewski v. Scripps Health (2003) 30 C4th 798, 135 CR2d 1. California case law has interpreted the “unlawful” prong of Section 17200 to hold illegal a business practice that violates any other law, treating it as “unlawful” and making it independently actionable under 17200. Ce/- Tech Communications & Cel-Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 C4th 163, 180, 83 CR2d 548, 3 of4 Geisler Meet and Confer Letter to Johnston Re: Demurrer to 4A VC. February 20, 2019 JOHNSTON is sued under the 16" and 17" causes of action for his personal unlawful bad acts, as well as, for unlawful and unfair acts as a Director and Officer of Rhausler . 3COR is sued for unfair business conduct in that it failed to remit the 95% of profits to Rhausler which it was contractually obligated to do. Accordingly, Plaintiffs decline to amend, revise or withdraw the 16" or 17" causes of action. T hope that you find this letter to be clarifying and helpful. Yours Very Truly, HAGAN LAW, INC. Set Yager By: TT Jennifer J. Hagan Jhagan@Haganlaw.com 4 of4 Geisler Meet and Confer Letter to Johnston Re: Demurrer to 4AVC February 20, 2019