Judge Armen Tamzarian, Case 20STCV33037 2023-03-13 Tentative Ruling

Judge: Armen Tamzarian, Case: 20STCV33037, Date: 2023-03-13 Tentative Ruling

Please notify Department 52 via email at smcdept52@lacourt.org and indicate that the parties are submitting on the tentative ruling. Please provide the attorney's name and represented party. Please notify the opposing side via email if submitting on the Court's tentative ruling.

Case Number: 20STCV33037 Hearing Date: March 13, 2023 Dept: 52

Defendants Madkan Dermatology, PC and Vandana Madkan, M.D.’s Motion for Summary Judgment or, in the Alternative, for Summary Adjudication

Defendants Madkan Dermatology, PC doing business as Mosaic Dermatology (Mosaic) and Vandana Madkan, M.D. move for summary judgment or summary adjudication of each cause of action alleged by plaintiff Olivia McCabe.

Evidentiary Objections

Plaintiff makes 31 objections to defendants’ evidence. Objection Nos. 18, 22, 24, and 26 are sustained. Objection Nos. 1-17, 10-21, 23, 25, and 27-31 are overruled.

Defendants make 30 objections to plaintiff’s declaration. Objection Nos. 12, 13, 24, and 25 are sustained. Objection Nos. 1-11, 14-23, and 26-30 are overruled.

Defendants make 19 objections to the declaration of Samuel Moorhead. All 19 objections are overruled.

Legal Standard

Summary judgment should be granted where no triable issues of fact exist and the moving party is entitled to judgment as a matter of law. (CCP § 437c(c); Villa v. McFerren (1995) 35 Cal.App.4th 733, 741.) Courts use a three-step analysis: “(1) identify the issues framed by the pleadings; (2) determine whether the moving party has negated the opponent’s claims; and (3) determine whether the opposition has demonstrated the existence of a triable, material factual issue.” (Hinesley v. Oakshade Town Center (2005) 135 Cal.App.4th 289, 294.)

I. Alter Ego Liability

Defendant Vandana Madkan, M.D. moves for summary judgment on the grounds that plaintiff cannot show she is liable as Mosaic’s alter ego. Dr. Madkan meets her initial burden of showing she is entitled to judgment as a matter of law on this basis. Plaintiff does not establish a genuine dispute of material fact that would preclude summary judgment. Even accepting all of plaintiff’s evidence as true, the undisputed facts would not suffice to make Dr. Madkan liable as Mosaic’s alter ego.

Under the alter ego doctrine, an individual can be liable for a corporation’s acts when there is: (1) “such a unity of interest and ownership between the corporation and its equitable owner that the separate personalities of the corporation and the shareholder do not in reality exist”; and (2) “an inequitable result if the acts in question are treated as those of the corporation alone.” (Tucker Land Co. v. State of California (2001) 94 Cal.App.4th 1191, 1202.)

“Courts look to the totality of circumstances to determine who actually owns or controls the corporate entity and who is using it as ‘a mere shell or conduit’ for his or her own personal interests. [Citation.] Factors include ‘the commingling of funds and assets ..., identical equitable ownership ..., use of the same offices and employees, disregard of corporate formalities, identical directors and officers,’ etc. [Citation.] They also include who is treating ‘the assets of the corporation as his own.’ ” (Lopez v. Escamilla (2022) 79 Cal.App.5th 646, 650–651 (Lopez).)

It is undisputed that Dr. Madkan was Mosaic’s sole owner, officer, and shareholder. (Opp. Sep. Statement, No. 64.) But “that a person owns all of the corporate stock and makes all of the management decisions is insufficient to cause the court to disregard the corporate entity.” (Leek v. Cooper (2011) 194 Cal.App.4th 399, 415.)

Plaintiff argues, “The most important alter-ego factor appears to be undercapitalization or inadequate capitalization.” (Opp., p. 16.) It is undisputed that, as of February 2023, Mosaic had less than $5,000 in its bank accounts. (Opp. Sep. Statement, No. 69.) But plaintiff’s own evidence also shows that when Dr. “Madkan closed Mosaic down, it had about $125,000 in operating cash in the bank.” (Opp. Sep. Statement, No. 67.)

That Mosaic’s assets have declined since closing is not sufficient to show undercapitalization. The facts in Pearl v. Shore (1971) 17 Cal.App.3d 608 are analogous. There, the court distinguished prior cases finding undercapitalization because “[i]n none of them was the capitalization anything near the $100,000 involved here. Of course if a corporation keeps on purchasing raw land and does virtually nothing with it, yet goes on paying interest on loans, taxes and salaries to its officers and other employees, any amount of capital would soon disappear.” (Id. at p. 617.) The court concluded the entity’s troubles “seem to be attributable to poor management … rather than initial undercapitalization.” (Ibid.)

Similarly, plaintiff does not show Mosaic was initially undercapitalized. When it was operating, it had at least $125,000 in capitalization. Such capitalization undermines any inference that Mosaic was “created to avoid the personal liability of an alter ego.” (Lopez, supra, 79 Cal.App.5th at p. 651.)

The undisputed facts show plaintiff cannot establish the second element: that piercing the corporate veil is necessary to avoid injustice. “Under the alter ego doctrine, then, when the corporate form is used to perpetrate a fraud, circumvent a statute, or accomplish some other wrongful or inequitable purpose, the courts will ignore the corporate entity and deem the corporation’s acts to be those of the persons or organizations actually controlling the corporation, in most instances the equitable owners.” (Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 538 (Sonora).) “Alter ego is an extreme remedy, sparingly used.” (Id. at p. 539.)

Plaintiff’s evidence and argument on this element boil down to simply that she may be unable to collect a judgment from Mosaic. “The alter ego doctrine does not guard every unsatisfied creditor of a corporation but instead affords protection where some conduct amounting to bad faith makes it inequitable for the corporate owner to hide behind the corporate form. Difficulty in enforcing a judgment or collecting a debt does not satisfy this standard.” (Sonora, supra, 83 Cal.App.4th at p. 539.) Rather, typical examples of bad faith are where the corporation diverts its assets to the alter ego for the purpose of avoiding paying a judgment or debt. (See, e.g., Wells Fargo Bank, N.A. v. Weinberg (2014) 227 Cal.App.4th 1, 8 (Wells Fargo); Associated Vendors, Inc. v. Oakland Meat Co. (1962) 210 Cal.App.2d 825, 840.)

Plaintiff provides no evidence of such bad faith. At her deposition, Dr. Madkan testified she never used any money from Mosaic’s bank account to pay her personal debts or debts owed by her business created later in Texas. (Opp. Ex. 17, Madkan Depo., 51:14-52:14.) The only evidence of corporate assets potentially diverted to Dr. Madkan is of Mosaic’s medical equipment. But plaintiff presents no evidence Dr. Madkan has used these goods for her own purposes or diverted them to herself to avoid paying Mosaic’s creditors. Dr. Madkan testified, “They were placed into storage, and that is one of the bills that the Madkan Dermatology credit card pays every month.” (Id., 47:25-48:7.) She explained why she has not sold the most valuable asset, a laser: “We are currently working with Bank of the West to – the laser is one of the items that has a large loan against it. … But we cannot sell that freely without the person who owns the loan giving us the authority to do so.” (Opp. Ex. 17, Madkan Depo, 49:7-16.) Though Dr. Madkan moved the goods to Texas (where she lives now), nothing in the record shows that she—rather than Mosaic—owns or purports to own them.

Plaintiff instead relies on evidence that Dr. Madkan paid Mosaic’s debts. In Sonora, the court rejected that argument in analogous circumstances. “[M]isconduct or injustice was not proved by the many advances made by Diamond for the benefit of Sonora Mining because none were shown to have been made with a fraudulent or deceptive intent.” (Sonora, supra, 83 Cal.App.4th at p. 539.) An equitable owner “is not ‘exposed to liability for the obligations of [the entity] when [the owner] contributes funds to [the entity] for the purpose of assisting [the entity] in meeting its financial obligations and not for the purpose of perpetrating a fraud.’ ” (Ibid.)

Here, the evidence similarly shows that Dr. Madkan made advances to Mosaic to pay its debts—with no evidence of fraudulent or deceptive intent. Plaintiff does not dispute that Mosaic closed in 2021 and has not earned revenue since then. (Opp. Sep. Statement, No. 68 [“the business was permanently shuttered”].) There is nothing fraudulent or deceptive about Dr. Madkan using her own money to pay Mosaic’s debts after the business closed. Instead, that shows efforts to ensure Mosaic pays its debts. That is not fraudulent or deceptive intent that shows an injustice would result. The sort of fraud that supports such a finding would be the opposite: Dr. Madkan closing Mosaic’s business and taking its assets for herself.

Plaintiff further argues, “The timing of the closing of Mosaic, Dr. Madkan’s move to Texas, and a new practice in Texas are further evidence that Dr. Madkan intentionally manipulated the assets, operations, and revenue of Mosaic to insulate it and herself from liability to Ms. McCabe.” (Opp., p. 17.) This argument relies on speculation.

Dr. Madkan explained her decision to close Mosaic. She states, “[M]y personal priorities had changed with the birth of my daughter. My husband and I have no extended family in California. With the birth of our child, we realized the importance of living near family members and strongly desired that our child be raised close to family. Therefore, in early 2021, my husband and I made the decision to move to Texas to be closer to our family. Since I was the only physician at Mosaic and I could not effectively treat California patients while living in Texas, actively operating Mosaic was no longer a viable option. My family and I moved to Texas in April 2021 and closed the [Beverly Hills] Office that same month.” (Madkan Decl., ¶ 22.) Dr. Madkan further states, “My move to Texas was motivated by familial considerations, not as an attempt to avoid corporate liabilities. Since Mosaic is necessarily a local business that requires a physician to operate, there was no feasible choice other than to cease operations once I moved to Texas.” (Id., ¶ 29.)

The contrasting facts in Wells Fargo are instructive. There, the Court of Appeal affirmed an order finding Steven J. Weinberg liable as the alter ego of the firm Steven J. Weinberg, a Professional Law Corporation. “[A]fter dissolving the law corporation in June 2009, Weinberg continued doing business as a sole proprietor under the same name, using the same offices, employees, equipment, Web site, and phone number. The building where the law corporation operated had been owned by Weinberg and his wife since 2003. The corporation paid for Weinberg’s vehicle. [¶.] Additionally, before dissolution, Weinberg disbursed all the corporate assets to family members and himself. Weinberg withdrew $420,981.78 during the corporation’s last 18 months of existence and paid it to himself and family members. … Corporate formalities were completely lacking. Weinberg did not produce corporate minutes, resolutions or authorizations.” (Wells Fargo, supra, 227 Cal.App.4th at p. 8.)

Plaintiff has no such evidence here. Mosaic has not yet been dissolved. There is no evidence that Dr. Madkan has continued doing Mosaic’s business after it closed its offices. There is no evidence of Mosaic paying Dr. Madkan’s individual expenses. There is no evidence Mosaic disbursed its assets to Dr. Madkan. Plaintiff provides no evidence contradicting defendants’ evidence that Mosaic adhered to corporate formalities. Dr. Madkan purchased 10,000 shares of stock in the corporation. (Madkan Decl., ¶ 25, Ex. 7.) Mosaic maintains corporate bylaws. (Id., Ex. 8.) Mosaic held regular meetings and maintained corporate minutes. (Id., Ex. 9.) Aside from Madkan paying Mosaic’s debts—which is not fraudulent or deceptive—there is no evidence of commingling funds.

That plaintiff filed an action against Mosaic did not require Mosaic to continue operating when Dr. Madkan wanted to close the business for legitimate reasons. There are no triable issues of material fact. On this record, Dr. Madkan did not use Mosaic as a corporate shell or conduit and did not employ the corporate form or cease its operations to defraud creditors or otherwise cause injustice.

II. Wrongful Termination (1st through 10th causes of action)

Triable issues of material fact preclude summary adjudication of plaintiff’s causes of action against defendant Mosaic Dermatology regarding wrongful termination. Her first ten causes of action rely on the claim that defendant terminated her for an unlawful reason: discrimination on the basis of disability, retaliation for opposing or reporting unlawful practices, or retaliation for using sick leave.

For employment discrimination and retaliation claims, “California follows the burden shifting analysis of McDonnell Douglas Corp. v. Green (1973) 411 U.S. 792 … to determine whether there are triable issues of fact for resolution by a jury.” (Loggins v. Kaiser Permanente Internat. (2007) 151 Cal.App.4th 1102, 1109.) First, “[i]f the employee successfully establishes [the] elements and thereby shows a prima facie case exists, the burden shifts to the employer to provide evidence that there was a legitimate, nonretaliatory reason for the adverse employment action. If the employer produces evidence showing a legitimate reason for the adverse employment action, the presumption of retaliation drops out of the picture, and the burden shifts back to the employee to provide substantial responsive evidence that the employer’s proffered reasons were untrue or pretextual.” (Ibid., citations and internal quotes omitted.)

“[I]n appropriate circumstances, reasonable accommodation can include providing the employee … additional unpaid leave for treatment.” (Hanson v. Lucky Stores, Inc. (1999) 74 Cal.App.4th 215, 226.) “[A] finite leave can be a reasonable accommodation under FEHA, provided it is likely that at the end of the leave, the employee would be able to perform his or her duties.” (Ibid.) “Under the FEHA, a disabled employee is entitled to a reasonable accommodation—which may include leave of no statutorily fixed duration—provided that such accommodation does not impose an undue hardship on the employer.” (Sanchez v. Swissport, Inc. (2013) 213 Cal.App.4th 1331, 1338; see also Cal. Code Regs, tit. 2, § 11068(c).)

Defendant’s moving papers focus almost exclusively on the second and third steps. (Memo., pp. 11-16; Sep. Statement, Issue No. 1 [“McCabe’s employment was terminated for lawful reasons”], Issue Nos. 3 & 4 [incorporating Issue No. 1].) The court finds that plaintiff meets her initial burden of showing a prima facie case for each cause of action.

Next, defendant produced evidence showing legitimate reasons for terminating plaintiff. Defendant asserts it terminated plaintiff for poor performance. On November 30, 2018, two weeks before terminating plaintiff, defendant issued a counseling record or written warning to her. (Madkan Decl., ¶ 15, Ex. 3.) The document describes numerous problems with plaintiff’s performance. At her deposition, plaintiff testified that she forgot to take photographs before procedures “[p]robably at least seven or eight times.” (Def. Ex. A, McCabe Depo., 150:24-151:3.) She also testified that her supervisors “thought that [she] was taking too long” when rooming patients. (Id., 150:15-23.)

In her declaration, Dr. Madkan also describes plaintiff’s performance problems. (Madkan Decl., ¶¶ 7-17.) After Amber Angel began supervising plaintiff, she resisted her supervision, complained about Angel, and repeatedly went to her former supervisor with questions. (Id., ¶ 9.) Plaintiff once failed to follow office procedures about documenting a patient’s call and told the patient “not to worry” when the patient had described worrisome side effects. (Id., ¶ 12.)

Moreover, on December 2, 2018, Dr. Madkan emailed her human resources consultant (Christa Zimmerman of ADP), describing plaintiff’s resistance to feedback and coaching. (Madkan Decl., ¶ 16, Ex. 4.) Dr. Madkan wrote, “We told her this was her warning and we would start fresh after the meeting and that she had 4-6 weeks to improve her performance. She stayed to work that afternoon for a few hours but gave attitude to her coworkers, was nonverbal, couldn’t do her duties to a basic level and then left, saying she wasn’t feeling well.” (Ibid.) The prior work day, plaintiff “came to work” but “left saying she had heart palpitations.” (Ibid.) Dr. Madkan ended her email by writing, “I have a feeling this will not work out and we’d like to do everything we can to minimize damage.” (Ibid.)

Defendant’s evidence of terminating plaintiff for performance issues suffices to eliminate any presumption of discrimination.

Finally, plaintiff meets her burden of providing substantial evidence supporting an inference of discrimination and retaliation. “The central issue is … whether the evidence as a whole supports a reasoned inference that the challenged action was the product of discriminatory or retaliatory animus. The employer’s mere articulation of a legitimate reason for the action cannot answer this question; it can only dispel the presumption of improper motive that would otherwise entitle the employee to a judgment in his favor. Thus, citing a legitimate reason for the challenged action will entitle the employer to summary judgment only when the employee’s showing, while sufficient to invoke the presumption, is too weak to sustain a reasoned inference in the employee’s favor. That, and not ‘pretext,’ must be the focus of the judicial inquiry.” (Mamou v. Trendwest Resorts, Inc. (2008) 165 Cal.App.4th 686, 715.)

Plaintiff presents substantial evidence undermining defendant’s explanation for terminating her and permitting an inference of discrimination. There is no genuine dispute that plaintiff submitted a doctor’s note dated December 4, 2018, stating she would be unable to work until December 15. (Opp. Sep. Statement; No. 38; Opp. Ex. 2, Madkan Depo, vol. 1, 122:5-21; Opp. Ex. 9.) Defendant purports to dispute this on the basis that it was aware of receiving the note “but was not aware that Plaintiff suffered from a disability.” A trier of fact, however, could find that defendant had sufficient information such that it should have known plaintiff sought a reasonable accommodation for a disability. “An employee is not required to specifically invoke the protections of FEHA or speak any ‘magic words’ in order to effectively request an accommodation under the statute.” (Soria v. Univision Radio Los Angeles, Inc. (2016) 5 Cal.App.5th 570, 598.) “The employer must initiate the interactive process if it becomes aware of the need for accommodation.” (Zamora v. Security Industry Specialists, Inc. (2021) 71 Cal.App.5th 1, 41.)

Moreover, it is undisputed that plaintiff submitted a doctor’s note dated December 12, 2018, stating she would be unable to return to work until January 9, 2019. (Opp. Sep. Statement, No. 46; Madkan Depo., vol. 1., 125:13-126:6; Opp. Ex. 6, p. MADKAN-0173.) It is also undisputed that defendant told plaintiff at the time that she was fired for not returning to work. (Opp. Sep. Statement, Nos. 56.) On December 13, 2018, Dr. Madkan emailed plaintiff, “You have exhausted your PTO and do not qualify for protected leave of absence. You were advised by your supervisor both last week in writing and yesterday via voicemail to return to work, so these are unexcused absences. Your termination is effective today.” (Opp. Ex. 12, p. 1.) The same day, Dr. Madkan sent plaintiff a letter stating, “On December 12, 2018 you were advised to return to work the following day (December 13, 2018) and failed to do so.” (Opp., Ex. 13.)

Other contemporaneous evidence also supports an inference that discrimination or retaliation were substantial motivating factors for terminating plaintiff. At 8:20 a.m. on December 13, 2018, plaintiff’s supervisor Amber Angel emailed Dr. Madkan, stating, “We have been more than accommodating. She is now being held accountable for her absences because she no longer has any vacation or sick time left to use. We need her to report back to work today because without her being here it is causing a burden on other employees. If she does not come back it is considered job abandonment.” (Opp. Ex. 6, p. MADKAN-0173.)

A reasonable factfinder could conclude that discrimination or retaliation were substantial motivating factors for terminating plaintiff. A factfinder could conclude that if plaintiff reported to work on December 13, 2018, she would not have been fired. That is what defendant told her at the time. That defendant gives different reasons now significantly undermines its showing that it terminated plaintiff for the reason it asserts. Triable issues of material fact therefore preclude summary judgment.

III. Sick Leave (8th cause of action)

Defendant argues plaintiff’s eighth cause of action fails because plaintiff was permitted to use and paid for all her accrued sick leave. (Sep. Statement, Issue No. 3, UMF No. 31.) Even if true, that does not show plaintiff cannot establish the elements of this cause of action. Plaintiff does not allege defendant did not permit her to use her accrued sick leave or did not pay her for it. She alleges defendant retaliated against her by terminating her for using her sick leave. (3AC, ¶ 132.) Labor Code section 246.5(c)(1) provides, “An employer shall not deny an employee the right to use accrued sick days, discharge, … or in any manner discriminate against an employee for using accrued sick days.” For the same reasons discussed above, plaintiff shows triable issues of fact on whether defendant terminated her for using her sick days.

IV. Whistleblower Retaliation (10th cause of action)

Triable issues of fact preclude summary adjudication of this cause of action. Labor Code section 1102.5(b) prohibits an employer from retaliating against an employee for reporting information that “the employee has reasonable cause to believe … discloses a violation of state or federal statute, or a violation of or noncompliance with a local, state, or federal rule or regulation.”

First, defendant argues plaintiff never reported these safety concerns to a government agency, to Dr. Madkan, or to her supervisor. Plaintiff, however, testified at deposition that she “had reported some concerns about expired sutures and equipment not being cleaned properly and some concerns I had about Amber with patients.” (McCabe Depo., 83:13-15.) She further testified she raised these concerns with her former direct supervisor, Felicia Moten. (Id., 137:10-19.) This suffices to raise a triable issue.

Second, defendant contends that even assuming she reported these things, none of them were illegal. Defendant argues that the regulations plaintiff cites do not apply to Mosaic Dermatology. Even if so, that does not end the inquiry. “[A]n employee need not prove an actual violation of law; it suffices if the employer fired him for reporting his ‘reasonably based suspicions’ of illegal activity.” (Green v. Ralee Engineering Co. (1998) 19 Cal.4th 66, 87.) “[T]hough it may be unclear whether defendant … legally violated” the relevant regulations, it suffices if the conduct “violated the public policies embodied in the regulations” or “contravened the fundamental well-established policy ‘delineated in’ the” relevant law or regulation. (Ibid.; accord Nejadian v. County of Los Angeles (2019) 40 Cal.App.5th 703, 719.)

Plaintiff raises a triable issue on whether she had reasonable cause to believe the conduct she reported was unlawful. Even if plaintiff now fails to cite a regulation that applies to facilities such as Mosaic Dermatology, and even if there is no such regulation, a reasonable factfinder could conclude she had reasonable cause to believe that a medical provider using expired sutures or dirty equipment violated some law or regulation. One could reasonably find that such conduct violates the fundamental public policies delineated in the regulations governing healthcare facilities and providers.

V. Meal and Rest Periods (11th through 14th causes of action)

Triable issues of fact preclude summary adjudication of these causes of action. “[A]n employer’s obligation is to relieve its employee of all duty, with the employee thereafter at liberty to use the meal [or rest] period for whatever purpose he or she desires, but the employer need not ensure that no work is done.” (Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, 1017.) “The employer satisfies this obligation if it relieves its employees of all duty, relinquishes control over their activities and permits them a reasonable opportunity to take an uninterrupted 30-minute break, and does not impede or discourage them from doing so.” (Id. at p. 1040.) “On the other hand, the employer is not obligated to police meal breaks and ensure no work thereafter is performed.” (Id. at pp. 1040-1041.) “An illusory meal period, where the employer effectively prevents an employee from having an uninterrupted meal period, does not satisfy” the employer’s duties. (Dilts v. Penske Logistics, LLC (S.D. Cal. 2010) 267 F.R.D. 625, 638.)

Defendant presents substantial evidence showing it permitted plaintiff to take required breaks, even if it did not ensure she did so. Plaintiff, however, demonstrates a triable issue of fact on whether defendant impeded or discouraged her from taking breaks. At her deposition, she testified, “[A] couple times a week I wouldn’t take [a break] at least. Q. And that was -- the reason for that is you were -- you felt you were too busy to take a rest break? A. We were just too busy.” (McCabe Depo., 258:3-8.) She further testified that sometimes she “you didn’t take it because you were very busy so you – you just continued to work. That’s just how it was.” (Id., 266:4-6.) A reasonable factfinder could conclude that defendant did not permit plaintiff a reasonable opportunity to take uninterrupted breaks or impeded her from taking breaks because defendant did not have enough employees or a system in place to handle the necessary work during her breaks.

Disposition

The court hereby grants summary judgment in favor of defendant Vandana Madkan, M.D.

The court hereby denies defendant Madkan Dermatology, PC doing business as Mosaic Dermatology’s motion for summary judgment or, in the alternative, summary adjudication.