# Corbrus, LLC v. 8th Bridge Capital, Inc.

> District Court, C.D. California · July 1, 2021

URL: https://www.frixlaw.com/law-library/cases/10634008

## Case

- **Court:** District Court, C.D. California
- **Decided:** July 1, 2021
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10634008

## How later opinions describe it (automated extraction)

- finding that escrow agreement requiring simultaneous performance imposed concurrent conditions

## Opinion text

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES —- GENERAL ‘ SUF § 55. On October 19, 2015, Chang emailed Paz with another
compensation proposal, writing: “Before I talk to Young [Kim], here are my thoughts. I
think if everyone takes a half step back, we can wrap this up. Young wants to market this
as a 5 year term loan, so on paper let’s give him 0.5% penalty for year 6 and 7. He is taking
more equity ($1.2mm vs $800k early at year 2, so he should not take the whole 1% in his
pocket.” SUF § 56. Chang testified that he did not recall speaking to Kim about these
separate conversations with Paz. SUF 4 54.
On October 19, 2015, Chang and Paz agreed that Corbrus would be paid $1.2
million upon disbursement of the loan, and an additional $100,000 per year for seven years
thereafter.° SUF § 7. On October 25, 2015, Chang sent an email to a thread including Paz
and Kim stating: “Per discussions among the project team, Corbrus shall resign from GP
role from the EB-5 LP.” SUF § 8. Paz testified that weeks later, he changed his mind

4 The parties frequently refer to Corbrus and Chang interchangeably in their filings and
testimony. The court assumes, however, that the parties intend to refer to Corbrus when
addressing the general partnership interest, because Corbrus 1s the entity listed as a general
partner by the July 12, 2015 Letter of Intent and Term Sheet. See dkt. 17-5 at 14-15.
> Corbrus’ argument that defendants’ reliance on this email is misplaced does not create a
triable issue as to the existence of this email or its contents. See GDF 4 55.
° Corbrus disputes this fact, but cites to no evidence that is sufficient to raise a triable issue
of fact as to the financial terms of Chang’s agreement with Paz. See GDF 7.

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES —- GENERAL ‘ MSJ Opp’n at 30-32 (citing Bisno v. Douglas Emmett Realty Fund 1988,

13 At the hearing, Corbrus argued for the first time that the Paz defendants lack standing to
assert that they are excused from performance on the grounds that Corbrus breached the
non-circumvention agreement. According to Corbrus, that is because the Paz defendants
contend that Corbrus offered to circumvent the 8th Bridge defendants with the Paz
defendants, rather than that Corbrus attempted to circumvent the Paz defendants. The
Court is unpersuaded by that argument, because the gravamen of the Paz defendants’
position is that Corbrus breached the non-circumvention agreement by attempting to
interfere with the contractual relationship between the 8th Bridge and Paz defendants,
including their compensation arrangements. Such interference potentially causes financial
harm to each party to a non-circumvention agreement because it jeopardizes the negotiating
relationship between all parties. See e.g., Raymat Materials, Inc. v. A & C Catalysts, Inc.,
No. C 13-00567 WHA, 2013 WL 5913778, at *3 (N.D. Cal. Oct. 31, 2013) (finding
allegations that defendant “with full knowledge of the non-circumvention agreement,

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES —- GENERAL ‘<O’
Case No. 2:19-cv-10182-CAS(AFMx) Date July 1, 2021
Title CORBRUS, LLC v. 8TH BRIDGE CAPITAL, INC. ET AL.

174 Cal. App. 4th 1534, 1554 (2009) (section 1439 “applies to conditions precedent to a
contracting party’s obligation to perform.”). Corbrus argues that the non-circumvention
clause is an independent covenant, such that the Paz defendants’ “obligation to comply, 1.¢.
to not circumvent another party, is independent of whether any of the other parties are
complying or not.” Id. at 30-31.
Breach of contract is an “unjustified or unexcused failure to perform a contract.”
Rest.2d, Contracts § 235(2). The elements required to establish a breach of contract are:
“(1) the existence of the contract; (2) plaintiff's performance or excuse for nonperformance;
(3) defendant's breach, and (4) the resulting damages to the plaintiff.” Oasis West Realty,
LLC v. Goldman, 51 Cal.4th 811, 821 (2011). “It is well established that a breach of the
implied covenant of good faith is a breach of the contract, and that breach of a specific
provision of the contract is not a necessary prerequisite to a claim for breach of the implied
covenant of good faith and fair dealing.” Carson v. Mercury Ins. Co., 210 Cal. App. 4th
409, 429, 148 Cal. Rptr. 3d 518, 535 (2012).
Under California law, “the obligations of the parties to a contract are either
dependent or independent.” Colaco v. Cavotec SA, 25 Cal. App. 5th 1172, 1182, 236 Cal.
Rptr. 3d 542, 552 (2018). A dependent obligation exists “when the performance by one
party is a condition precedent to the other party’s performance,” whereas “where the
covenants of a contract are to be performed at different times, they are independent.” Id.
at 1182-83. In the case of a dependent obligation, “one party is excused from its obligation
to perform if the other party fails to perform.” Id. at 1183; see also Brown v. Dillard's, Inc.,
430 F.3d 1004, 1010 (9th Cir. 2005) (a “bedrock principle of California contract law is that
who seeks to enforce a contract must show that he has complied with the conditions
and agreements of the contract on his part to be performed.”’) (emphasis added) (quoting
Pry Corp. of Am. v. Leach, 177 Cal. App. 2d 632, 639 (1960)). However, where the parties
obligations are independent, “the law is settled that |...] the breach by one party of his

engaged in negotiations intended to interfere with the contract that existed” between parties
to a non-circumvention agreement sufficient to allege intentional interference); Goodrich
Cap.. LLC v. Vector Cap. Corp., No. 11 CIV. 9247 JSR, 2012 WL 4123401, at *4
(S.D.N.Y. June 26, 2012) (sustaining each plaintiffs breach of contract claim for violation
of non-circumvention agreement based on allegations suggesting that plaintiff
“restructured its transaction with [a target company] ‘to avoid payment of fees’ [... | despite
relying on [one plaintiffs] insights and strategies.”).

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES —- GENERAL ‘<O’
Case No. 2:19-cv-10182-CAS(AFMx) Date July 1, 2021
Title CORBRUS, LLC v. 8TH BRIDGE CAPITAL, INC. ET AL.

covenant does not excuse the performance by the other party of his covenant or relieve him
of liability for damages for a breach thereof.” Colaco, 24 Cal. App. 5th at 1183 (collecting
cases).
“Whether specific contractual obligations are independent or dependent is a matter
of contract interpretation based on the contract's plain language and the parties’ intent.” Id.
California courts are reluctant “[t]o construe covenants as dependent” because to do so “is
to work a forfeiture as to one party, and no obligation of a contract is to be regarded as a
condition precedent unless made so by express terms or necessary implication.” Verdier v.
Verdier, 133 Cal. App. 2d 325, 334, 284 P.2d 94, 100 (1955). “The rule is that provisions
of a contract will not be construed as conditions precedent in the absence of language
plainly requiring such construction.” Rubin v. Fuchs, 1 Cal. 3d 50, 53, 459 P.2d 925, 928
(1969). “Instead, whenever possible the courts will construe promises in a bilateral
contract as mutually dependent and concurrent.” Id: see also Southland Corp. v. Emerald
Oil Co., 789 F.2d 1441, 1444 (9th Cir. 1986) (same). Where, as here, the parties do not
offer extrinsic evidence as to the interpretation of the contract, the Court looks to its plain
language. See Banning Ranch Conservancy v. Superior Ct., 193 Cal. App. 4th 903, 915,
123 Cal. Rptr. 3d 348, 356 (2011).
The non-circumvention clause contained in the June 12, 2015 Letter of Intent and
Term sheet provides as follows:
8BC, Corbrus, and the Sponsor [the Omnia Group] (including its officers,
directors, agents, associates and any related parties) hereby agree that they
will not, directly or indirectly, contact, deal with or otherwise become
involved with any entity or any other entities or parties introduced, directly or
indirectly, by or through the other party, its officers, agents or associates, for
the purpose of avoiding the payment to each other of profit, fee or otherwise,
without specific written approval of the other party.
SUF 49.
Corbrus argues both that the non-circumvention clause does not impose any
condition precedent, because none of its “language makes any party’s obligation to refrain
from circumventing the other conditional upon the other party refraining from acts
constituting circumvention,” and that it does not create any “mutually dependent”
concurrent condition, or obligations “to be performed at the same time.” MSJ Opp’n at

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES —- GENERAL ‘<O’
Case No. 2:19-cv-10182-CAS(AFMx) Date July 1, 2021
Title CORBRUS, LLC v. 8TH BRIDGE CAPITAL, INC. ET AL.

30-31 (emphasis in original). The Paz defendants do not squarely address Corbrus’
arguments as to whether the non-circumvention clause imposes conditions, except to argue
generally that a “[b|reach by one party to a contract of an important condition excuses the
other party from performance under California law,” and as such that “if the non-
circumvention clause [...] was binding on Paz” Chang’s conduct barred Corbrus from
enforcing the non-circumvention clause against Paz. Reply at 9 (citing James Stewart
Entertainment, LLC v. L&M Racing LLC., 2014 WL 12742612, at *12 (CD Cal., 2014)
and collecting cases).
Here, while the Court agrees with Corbrus that the non-circumvention clause does
not contain any express condition precedent, it appears to the Court that the July 12, 2015
Letter of Intent and Term Sheet 1s a bilateral contract that imposes concurrent conditions
on the parties. See Bleecher v. Conte, 29 Cal. 3d 345, 350, 698 P.2d 1154 (1981) (“A
bilateral contract is one in which there are mutual promises given in consideration of each
other”). Importantly, the July 12, 2015 Letter of Intent and Term Sheet provides, by its
own terms, that only “the obligations contained in the paragraphs entitled ‘Confidentiality’,
‘Non-circumvention’, [..] and ‘Governing Law’”’* are “Binding Obligations” that are
enforceable against the parties, and does not provide for any consideration outside those
three paragraphs. Dkt. 172-5. As such, to the extent enforceable, the agreement must rest
on consideration in the form of the parties’ mutual promises to refrain from circumventing
the others and to keep certain information confidential.’° See id. at 350 (“[w]hen the parties
attempt ... to make a contract where promises are exchanged as the consideration, the
promises must be mutual in obligation. In other words, for the contract to bind either party,
both must have assumed some legal obligations. Without this mutuality of obligation, the
agreement lacks consideration and no enforceable contract has been created.”) (quoting
Mattei v. Hopper, 51 Cal. 2d 119, 122, 330 P.2d 625 (1958)). The promises contained in
the July 15, 2015 Letter of Intent and Term Sheet thus appear “mutually dependent, each
promise given in consideration for the other” and “due at the same time—’” throughout the
effectiveness of the agreement— thereby imposing concurrent obligations on the parties.
See Katemis v. Westerlind, 120 Cal. App. 2d 537, 545, 261 P.2d 553 (1953) (finding that
escrow agreement requiring simultaneous performance imposed concurrent conditions);
4 <Fxclusivity” is also listed as a “Binding Obligation,” but the agreement contains no
“Exclusivity” clause.
Neither party contends that the July 12, 2015 Letter of Intent and Term Sheet is
unenforceable due to a lack of consideration.

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES —- GENERAL ‘<O’
Case No. 2:19-cv-10182-CAS(AFMx) Date July 1, 2021
Title CORBRUS, LLC v. 8TH BRIDGE CAPITAL, INC. ET AL.

see_also Rubin, 1 Cal. 3d at 53. Accordingly, the Court concludes that the non-
circumvention clause imposes concurrent obligations, such that “one party is excused from
its obligation to perform if the other party fails to perform.” See Colaco, 24 Cal. App. 5th
at 1183.
Nonetheless, summary judgment on Corbrus’ contract claims is not warranted,
because there are triable issues of material fact that preclude the Court from finding that
Corbrus may not seek to enforce the non-circumvention clause as a matter of law.
As an initial matter, there is disputed evidence as to whether Corbrus breached the
non-circumvention clause in the fall of 2015. The Paz defendants argue that Corbrus
breached the non-circumvention clause through communications encouraging the Paz
defendants to avoid working with the 8th Bridge defendants and instead pursue cheaper
funding from an alternate EB-5 lender, and by urging Paz to pay the 8th Bridge defendants
less under the parties’ agreements. MSJ at 24-25. As support for their position, the Paz
defendants offer a September 2015 text message in which Chang proposed a buyer for the
54th St. project, and series of October 2015 communications between Chang and Paz,
including text messages in which Chang responded to a comment from Paz that “the terms
are very harsh” by saying “I agree, let me get you out and move to the next loan,” SUF §
52; and emails in which Chang wrote “I can find cheaper money if you like to explore this
option |...] if you decide to switch horse [sic], then you and I have to take over the GP
role;’ SUF 455, and proposed revisions to the parties compensation arrangements. SUF
response, Corbrus offers Chang’s testimony that his overtures to Paz were intended
to further the “three way” negotiation between Corbrus, 8th Bridge, and Paz regarding
Corbrus’ compensation and “give[] Young a little pressure” as part of that negotiation.
Chang Depo. at 261:20-262:9.!° Chang also testified that he never intended to force Young
out of the GP position because “I just want the funds to be raise[d] as quickly as I can” and
that his proposed revisions to the compensation arrangement were intended as a
compromise wherein all three parties would take less to make a deal happen. Chang Depo.
at 282:24-285:13. Corbrus also points to other statements in the communications upon

16 The Paz defendants have objected to the Chang declaration’s discussion of these
documents as in conflict with Chang’s deposition testimony, because the declaration
provides more detail regarding Chang’s negotiation strategy. Because the Court relies only
on Chang’s deposition testimony here, it need not determine whether Chang’s declaration
is sufficient to raise a triable issue of fact.

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES —- GENERAL ‘<O’
Case No. 2:19-cv-10182-CAS(AFMx) Date July 1, 2021
Title CORBRUS, LLC v. 8TH BRIDGE CAPITAL, INC. ET AL.

which the Paz defendants rely, noting that each side-communication between Paz and
Chang includes a statement indicating that Kim’s sign-off would be needed. See GDF □
55-56. As such, genuine disputes of fact preclude the Court from determining that Corbrus
contacted Paz for purpose of avoiding payment to the 8th Bridge defendants or otherwise
breached the parties’ non-circumvention agreement.
Moreover, on the present record, the Court is unable determine as a matter of law
that the Paz defendants did not breach the non-circumvention clause. Corbrus alleges that
the Paz defendants breached the non-circumvention agreement and aided and abetted the
8th Bridge defendants’ breach by participating in a “scheme to deliberately and
fraudulently induce Plaintiff into a false sense of security to not be included as a named
partner on the loan documentation, through false promise of future payments by Omnia
that [d]efendants knew were never going to be made.” TAC 4 115. Corbrus alleges that
defendants intended to and “did circumvent [Corbrus] out of its compensation” in violation
of the non-circumvention clause, via the alleged scheme. Id. Here, although the Paz
defendants contend that “no evidence” demonstrates that Paz or Omnia breached the non-
circumvention agreement and point in their reply to Chang’s testimony that he was not
aware of emails sent between Kim and Paz, see Reply at 14, Corbrus has come forward
with documents and testimony that are sufficient to raise a triable issue of fact as to the Paz
defendants’ conduct. Documents in the record establish that Paz was actively involved in
“three way” negotiations with Kim and Chang in the weeks leading up to Chang’s
resignation from the Manhattan Fund—and Paz’s subsequent decision not to compensate
Corbrus, see e.g dkt. 172-3 at 18-21; GDF § 55. The Paz defendants signed the loan
documentation directing the entire origination fee to the 8th Bridge defendants, despite
later assuring Chang that Corbrus’ interests and compensation were protected. See Dkts.
209-4 (sealed) and 209-5 (sealed). And Chang testified that during a face-to-face
conversation, Paz “encouraged” him that “for the best of the raise, he’d like me to — he
asked me to be a team player essentially, to help” by resigning as a general partner, “and
Young was [also] saying it would help with the raise.” Chang Depo. at 123:2-24. In
addition, Corbrus offers a January 11, 2018, email from Kim to Paz, in which Kim asked:
“Has Max [Chang] not reached out to you at all since? I don’t want Max to be a threat to
you and I again like Northwind and Moses.” Dkt. 209-3 (sealed); GDF § 89. Although
sent well after the alleged breach of the non-circumvention agreement, Paz and Kim’s
discussion of Chang potentially becoming a “threat [...] again” would allow a reasonable
trier of fact to conclude that there were communications between Paz and Kim about taking
actions adverse to Corbrus’ interest in being compensated for the EB-5 loan raise. As such,

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES —- GENERAL ‘<O’
Case No. 2:19-cv-10182-CAS(AFMx) Date July 1, 2021
Title CORBRUS, LLC v. 8TH BRIDGE CAPITAL, INC. ET AL.

the Court concludes that summary judgment is not warranted on the grounds that the Paz
defendants did not breach the agreement.
In light of the foregoing, the Court DENIES the motion for summary judgement as
to Corbrus’ contract claims.
V. CONCLUSION
In accordance with the foregoing, the Paz defendants’ motion for summary
judgment is DENIED.
IT IS SO ORDERED.
00 : 00
Initials of Preparer CMJ

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10634008. Public record. Not legal advice.