Judge: Anne Richardson, Case: 23STCV12977, Date: 2024-02-22 Tentative Ruling

DEPARTMENT 40 - JUDGE ANNE RICHARDSON - LAW AND MOTION RULINGS
The Court issues tentative rulings on certain motions.The tentative ruling will not become the final ruling until the hearing [see CRC 3.1308(a)(2)]. If the parties wish to submit on the tentative ruling and avoid a court appearance, all counsel must agree and choose which counsel will give notice. That counsel must 1) email Dept 40 by 8:30 a.m. on the day of the hearing (smcdept40@lacourt.org) with a copy to the other party(ies) and state that all parties will submit on the tentative ruling, and 2) serve notice of the ruling on all parties. If any party declines to submit on the tentative ruling, then no email is necessary and all parties should appear at the hearing in person or by Court Call. 

Case Number: 23STCV12977    Hearing Date: April 9, 2024    Dept: 40

Superior Court of California

County of Los Angeles

Department 40

I. Background

A. Pleadings

Pursuant to a June 7, 2023 Complaint, Plaintiff Hernandez sues Defendants SRC Holdings, LLC (SRC), SAP Solutions, Inc. (SAP), Kanaplya, LLC (Kanaplya), Pearl Management Group, Inc. (Pearl Management), Pearl Pharma, Inc. (Pearl Pharma), Magic Appliance, Inc. (Magic Appliance), Crystal Air, Inc. (Crystal Air), Covello Investments, LLC (Covello; since dismissed), Chase Medical Assisting and Supplies, Inc. (Chase Medical), Care Evolution, Inc. (Care Evolution), Bluebell Farms, Inc. (Bluebell Farms), Julia Pearlman, Michael, Pearlman, Igor Dekhterman, and Does 1-100.

The Complaint alleges claims of (1) Violation of Labor Code Section 1102.5, (2) Violation of Labor Code Section 98.6, (3) Wrongful Termination in Violation of Public Policy, (4) Violation of Labor Code Section 226, (5) Violation of Labor Code Sections 201, 202, and 218, (6) Violation of Labor Code Section 203, (7) Violation of Labor Code Section 2802, (8) Violations of Labor Code Sections 1182, 1197, and IWC Wage Order 5 § 4, (9) Unfair Business Practices, and (10) Intentional Infliction of Emotional Distress (IIED).

The claims arise from the following allegations.

Defendants SRC, SAP, Kanaplya, Pearl Management, Pearl Pharma, Magic Appliance, Crystal Air, Chase Medical, Care Evolution, and Bluebell Farms (collectively, the Entity Defendants, not including the since-dismissed Covello), and Defendants Julia Perlman, Michael Perlman, and Igor Dekhterman (collectively, the Individual Defendants) operate cannabis growing and distribution companies that taken together are one enterprise, with the Entity Defendants as the alter egos of the Individual Defendants.

From January to July 2020, Plaintiff worked as a consultant for Defendants. In August 2020, Defendant Julia Perlman promised Plaintiff a full-time job as Defendants’ controller for $100,000 per year. Relying on Defendant Perlman’s representation, Plaintiff quit her then-current job and began working for Defendants. Beginning August 2020 through April 2022, Plaintiff worked as Defendants’ Controller. Plaintiff’s salary was $100,000 per year. From August 2020 through April 2022, Plaintiff worked over 40 hours a week and over 8 hours per day each week but was only compensated $36,000.

As part of her job responsibilities, Plaintiff was required to travel from Los Angeles to Santa Rosa for one week per month. Defendants did not reimburse Plaintiff for mileage. Defendants required Plaintiff to live in their house during this week. Plaintiff also utilized her personal phone and internet services for work as she worked from home three weeks of the month. Defendants did not reimburse Plaintiff.

Around April 2022, Plaintiff demanded that she be compensated for her work. Defendants refused. Defendants’ refusal resulted in Plaintiff’s termination.

In addition to the above conduct, Defendants also engaged in other prohibited acts, such as using the Entity Defendants to stop employees from unionizing.

As a result of Defendants’ conduct, Plaintiff has suffered, and continues to suffer humiliation, embarrassment, emotional distress, and mental anguish.

B. Motion Before the Court

On January 23, 2024, the Entity Defendants filed a motion to strike from the Complaint (1) the prayer for punitive damages based on failure to allege (a) oppression, malice, or fraud and (b) approval or ratification by a corporate decisionmaker and (2) references to Penal Code section 484 based on a lack of relevance to the Complaint’s claims—which the Court notes are premised on the Labor Code and IIED.

On March 26, 2024, Plaintiff Hernandez filed an opposition to the Entity Defendants’ motion to strike.

On April 2, 2024, the Entity Defendants filed a reply to Plaintiff’s opposition.

The Entity Defendants’ motion is now before the Court.

II. Motion to Strike

A. Legal Standard

The court may, upon a motion or at any time in its discretion and upon terms it deems proper: (a) strike out any irrelevant, false, or improper matter inserted in any pleading; or (b) strike out all or any part of any pleading not drawn or filed in conformity with the laws of California, a court rule, or an order of the court. (Code Civ. Proc. § 436, subds. (a), (b); Stafford v. Shultz (1954) 42 Cal.2d 767, 782 [“Matter in a pleading which is not essential to the claim is surplusage; probative facts are surplusage and may be stricken out or disregarded”].)

For the purposes of a motion to strike pursuant to Sections 435 to 437 of the Code of Civil Procedure, the term “pleading” generally means a demurrer, answer, complaint, or cross-complaint, (Code Civ. Proc., § 435, subd. (a)), and an immaterial allegation or irrelevant matter in a pleading entails (1) an allegation that is not essential to the statement of a claim or defense, (2) an allegation that is neither pertinent to nor supported by an otherwise sufficient claim or defense, or (3) a demand for judgment requesting relief not supported by the allegations of the complaint or cross-complaint (Code Civ. Proc., § 431.10, subds. (b)(1)-(3), (c)).

B. Analysis

1. Punitive Damages: DENIED.

a. Relevant Law

“In an action for the breach of an obligation not arising from contract, where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice, the plaintiff, in addition to the actual damages, may recover damages for the sake of example and by way of punishing the defendant.” (Civ. Code, § 3294, subd. (a); College Hospital Inc. v. Superior Court (1994) 8 Cal.4th 704, 725 (College Hospital) [explaining amendments requiring “despicable” conduct for malice and oppression].)

When the defendant is a corporation, ‘[a]n award of punitive damages … must rest on the malice of the corporation’s employees’” specifically, “the oppression, fraud, or malice perpetrated, authorized, or knowingly ratified by an officer, director, or managing agent of the corporation,” where a managing agent “include[s] only those corporate employees who exercise substantial independent authority and judgment in their corporate decisionmaking so that their decisions ultimately determine corporate policy.’” (Wilson v. Southern California Edison Co. (2015) 234 Cal.App.4th 123, 164, citations omitted.)

Under the Civil Code, “[a]n employer shall not be liable for damages pursuant to subdivision (a), based upon acts of an employee of the employer, unless the employer had advance knowledge of the unfitness of the employee and employed him or her with a conscious disregard of the rights or safety of others or authorized or ratified the wrongful conduct for which the damages are awarded or was personally guilty of oppression, fraud, or malice.” (Civ. Code, § 3294, subd. (b).) Moreover, “corporate employers[] […] may not be liable for punitive damages unless ‘the advance knowledge and conscious disregard, authorization, ratification or act of oppression, fraud, or malice [is] on the part of an officer, director, or managing agent of the corporation.’ [Citation.]” (White v. Ultramar (1999) 21 Cal.4th 563, 566, fn. 1.) The statute was amended in 1980 to include the limitations in subdivision (b). (Ibid.)

A motion to strike is properly granted when a complaint fails to allege facts to state a prima facie claim for punitive damages under the standards of the statute. (Turman v. Turning Point of Cent. California, Inc. (2010) 191 Cal.App.4th 53, 63.) Alleging an intentional tort alone is not enough to support a claim for punitive damages, nor are conclusory allegations that merely parrot the language of the statute. (Grieves v. Superior Court (1984) 157 Cal.App.3d 159, 166; Blegen v. Superior Court (1981) 125 Cal.App.3d 959, 963.)

b. Parties’ Arguments

In their motion to strike, the Entity Defendants argue that the Complaint insufficiently alleges (1) the oppression, fraud, or malice required for punitive damages and (2) the corporate decisionmaker(s) who made the decisions to ratify or otherwise approve the unlawful conduct at issue in the pleadings. (Mot., pp. 4-6.)

In opposition, Plaintiff Hernandez argues that punitive damages are sufficiently supported by the Complaint’s allegations. Plaintiff refers to the allegations regarding Defendants Perlman, Perlman, and Dekhterman (the Individual Defendants) using the Entity Defendants as their alter egos and using the Entity Defendants to stop employees from unionizing. The opposition then goes to explain other bases for oppression, fraud, or malice and corporate decision-making in the Complaint’s allegations. (Opp’n, pp. 6-8, citing Complaint, ¶¶ 17 & 35, 41, 47, 88, Prayer, ¶ 4 [underlying conduct supporting punitive damages] & ¶¶ 35, 41, 47, 88 [“Defendants” condoned, ratified, or encouraged conduct].)

In reply, the Entity Defendants argue that the gravamen of the case is claims arising in tort, not contract, and that, here, the Complaint does not allege the adequate oppression, malice, or fraud by the Entity Defendants. The Entity Defendants also argue that public records undercut Plaintiff’s position that the Entity Defendants are closed companies for which the Individual Defendants are the only shareholders, citing Secretary of State records attached to the reply in a declaration from counsel to show a lack of relationship between the Individual Defendants and some of the Entity Defendants. The reply does not otherwise address the alter ego argument. (Reply, pp. 3-4.)

c. Court’s Determination

The Court finds in favor of Plaintiff Hernandez.

The Court sufficiently alleges oppression. Oppression is defined as despicable conduct subjecting a person to cruel and unjust hardship in conscious disregard of that person’s rights. (Civ. Code, § 3294, subd. (c)(2).) “Used in its ordinary sense, the adjective ‘despicable’ is a powerful term that refers to circumstances that are ‘base,’ ‘vile,’ or ‘contemptible.’ (4 Oxford English Dict. (2d ed. 1989) p. 529.).” (College Hospital, supra, 8 Cal.4th at p. 725; see Lackner v. North (2005) 135 Cal.App.4th 1188, 1210 [similarly defining despicable conduct].)

Here, the Complaint’s allegations are summarized in Section I.A. Narrowed down for the purpose of this analysis, they allege that:

(1) Defendants operate as a joint enterprise with the Entity Defendants as the alter egos of the Individual Defendants (Complaint, ¶ 17);

(2) Plaintiff Hernandez was hired as Controller for all Defendants (Complaint, ¶¶ 25-26);

(3) Defendants promised Plaintiff Hernandez compensation of $100,000 per year, but during her employment between August 2020 and April 2022, Plaintiff Hernandez was only paid $36,000, i.e., based on the Court’s calculations, over the course of 21 months, Plaintiff was paid by Defendants at a rate of $1,714.29 per month or $20,571.43 per year, rather than the promised $100,000 per year, a 79.34% reduction in salary (Complaint, ¶¶ 25-26);

(4) Plaintiff Hernandez was required to regularly travel from Los Angeles, California to Santa Rosa, California for one-week stays and was forced to utilize her personal phone and internet services for work, with Defendants refusing to reimburse Plaintiff for these expenses (Complaint, ¶¶ 27-28);

(5) When Plaintiff Hernandez demanded reimbursement, Defendants terminated her employment, where the Entity Defendants are alleged as mere alter egos of the Individual Defendants, who controlled the Entity Defendants in this and all the above decisions relating to Plaintiff Hernandez (Complaint, ¶¶ 17, 29); and

(6) Plaintiff Hernandez has suffered damages (Complaint, ¶ 30).

The Court finds, at minimum, oppression in these allegations. They amount to allegations that Defendants enticed Plaintiff, an employed individual, to leave her job for new employment as a Controller for Defendants at a rate of $100,000 per year, only for Defendants to pay Plaintiff an average of $20,571.43 per year over 21 months, a decision that was approved or ratified by the Individual Defendants, who operated and controlled the Entity Defendants as their alter egos at all relevant times.

These allegations potentially amount to oppressive conduct by the Entity Defendants and the Individual Defendants, as necessarily approved (rather than ratified) by the Individual Defendants, subjecting Plaintiff to professional and personal hardship, in conscious disregard of her Labor Code rights and public policy (termination).

The Court also notes that even if the Court were to consider extrinsic evidence attached for the first time to a reply supporting a motion to strike, that evidence does not undercut ownership of the Entity Defendants or whether, for example, the Individual Defendants control the boards or directors of the Entity Defendants.

It is also worth noting that the Entity Defendants’ motion does not challenge the Complaint’s alter ego allegations, nor does their reply respond to the alter ego arguments raised by Plaintiff in her opposition.

The Entity Defendants’ motion is thus DENIED as to striking punitive damages from the Complaint.

2. Motion to Strike, Pen. Code, § 484 Allegation at Complaint, pp. 1-2: DENIED.

a. Relevant Law

Theft may occur when, “by any false or fraudulent representation or pretense, [a person] defraud[s] any other person of money, labor or real or personal property.” (Pen. Code, § 484, subd. (a).)

b. Parties’ Arguments

In their motion to strike, the Entity Defendants argue that the Complaint’s brief mention of Penal Code section 484 on pages one and two is irrelevant to the pleadings where “[t]his Penal Code section is unrelated to any element of any cause of action by Plaintiff[] [and] is not referenced in the Complaint other than in the ‘Introduction.’” (Mot., p. 6.)

In opposition, Plaintiff Hernandez argues that because this is a whistleblower action, reference to Penal Code section 484 is appropriate where she contends that she complained of an action that constitutes a violation of law. (Opp’n, p. 9.)

In reply, the Entity Defendants reiterate their argument that this statutory citation—and a citation to Penal Code section 487 in the same paragraph—is irrelevant where no theft claim is raised in the pleadings, making the cite to this statute irrelevant to the Complaint’s claims. (Reply, p. 2.)

c. Court’s Determination

The Court finds in favor of Plaintiff.

While Plaintiff Hernandez is not alleging a theft claim, she is alleging retaliation for having complained of unlawful conduct, as stated in, at least, the second and third causes of action, as well as unfair business practices as stated in the ninth cause of action. (Stevenson v. Superior Court (1997) 16 Cal.4th 880, 894 [“for a policy to support a wrongful discharge claim, it must be . . . delineated in either constitutional or statutory provisions. . . .”] [Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1359 [“an act of practice is ‘unfair competition’ under the UCL if it is forbidden by law . . . .”].)Whether plaintiff will be able to provide factual evidence sufficient to withstand summary adjudication is not relevant to a determination at the pleadings stage.

The Entity Defendants’ motion to strike is thus DENIED. 

III. Conclusion

Defendants SRC Holdings, LLC, SAP Solutions, Inc., Kanaplya, LLC Pearl Management Group, Inc., Pearl Pharma, Inc., Magic Appliance, Inc., Crystal Air Inc., Chase Medical Assisting and Supplies, Inc., Care Evolution, Inc., and Bluebell Farms, Inc.’s Motion to Strike Portions of Plaintiff’s Complaint is DENIED.