Judge Armen Tamzarian, Case 22STCV13106 2023-02-24 Tentative Ruling

Judge: Armen Tamzarian, Case: 22STCV13106, Date: 2023-02-24 Tentative Ruling

Case Number: 22STCV13106 Hearing Date: February 24, 2023 Dept: 52

Demurrer

Defendants Farmers Group, Inc., Farmers Insurance Exchange, Truck Insurance Exchange, Fire Insurance Exchange, Mid-Century Insurance Company, and Farmers New World Life Insurance Company demur to the sixth and seventh causes of action alleged in plaintiff Maureen Martinez’s second amended complaint.

6th Cause of Action: Fraud and Misrepresentation

Plaintiff does not allege sufficient facts for fraud. Intentional misrepresentation requires: “(a) misrepresentation; (b) defendant’s knowledge of the statement’s falsity; (c) intent to defraud (i.e., to induce action in reliance on the misrepresentation); (d) justifiable reliance; and (e) resulting damage.” (Hunter v. Up-Right, Inc. (1993) 6 Cal.4th 1174, 1184.)

Fraud must be pleaded specifically. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) “ ‘This particularity requirement necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered.’ ” (Ibid.) “A plaintiff’s burden in asserting a fraud claim against a corporate employer is even greater. In such a case, the plaintiff must ‘allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written.’ ” (Ibid.)

The gravamen of this cause of action is that Farmers allegedly told plaintiff she would have her own business selling insurance, but instead “tightly controlled” her agency and her work in many ways. (SAC, ¶¶ 32-36, 42.) Plaintiff alleges, “Farmers defendants … promis[ed] her and others that they were building their own ‘agency’ with their ‘own clients’ and that plaintiff had the discretion to do sell the agency if she decided to and reap the profits of her lifelong commitment at the time she needed it most, when she was older.” (¶ 302.) Plaintiff alleges that promise was false because Farmers “would block any attempt for plaintiff to sell” her business and “instead put plaintiff on a Performance Plan” as a pretext to terminate her. (Ibid.) She further alleges the Farmers defendants falsely told her agents like her “were ‘agent owners’ building their own business,” when in fact Farmers intended ultimately to “terminate her and take away all of her clients and business.” (¶ 297.) Farmers ultimately “terminated plaintiff, took all of her customers, her office and prevented her from continuing to provide insurance to any customers.” (¶ 78.)

Plaintiff does not specifically allege the details of these misrepresentations as required. She does not allege how, when, where, or by what means the “Farmers defendants” made these promises or representations. She does not allege the names of any individual people who made these representations or their authority to speak on behalf of the six entity defendants. To the contrary, she alleges, “The specific times, dates and names of the people that made those fraudulent statements and misrepresentations is unknown to plaintiff at this time, and uniquely within FARMERS DEFENDANTS’ knowledge custody and control.” (SAC, ¶ 303.)

Plaintiff cannot rely on the rule that “the requirement of specificity is relaxed when the allegations indicate that ‘the defendant must necessarily possess full information concerning the facts of the controversy.’ ” (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 158.) Plaintiff does not allege facts showing that defendants necessarily possess the full information. She alleges the misrepresentations were made to her, so there is no basis to conclude these details “lie more in the knowledge of the opposite party.” (Committee on Children's Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 217.)

Plaintiff also seeks to rely on the rule that less specificity is required for fraud by concealment. The specificity requirement does not fully apply to concealment claims because it is difficult to show “how” and “by what means” something did not happen. (Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1384.)

Plaintiff’s allegations of concealment, however, are tied to the allegations of affirmative misrepresentations. The second amended complaint alleges defendants “are liable for fraudulent concealment since they made representations to plaintiff and others about the ownership of their clients and business … . When they made these representations to plaintiff they did not disclose facts which made their statements misleading, such as FARMERS DEFENDANTS intended to maintain absolute control of plaintiff’s clients, the means and manner that she conducted her work, without telling her that she was entitled to benefits and protections of an employee, instead telling her she was an ‘Agent owner’ and concealed the facts that FARMERS DEFENDANTS had no intention of allowing plaintiff to own any of her business and when she tried to sell it.” (SAC, ¶ 302.) The material facts defendants allegedly concealed were, in substance, that their affirmative representations were false. Such “concealment” is merely the other side of the same coin. Without the alleged affirmative misrepresentations, there would be no fraudulent concealment. Plaintiff therefore must meet the heightened standard of specificity for pleading affirmative misrepresentation.

7th Cause of Action: Gender and Age Discrimination (Civ. Code § 51 et seq.)

Plaintiff does not allege sufficient facts for this cause of action. Civil Code section 51, the Unruh Civil Rights Act, prohibits “business establishments that provide a service to their clients … from discriminating in the provision of that service.” (Alch v. Superior Court (2004) 122 Cal.App.4th 339, 391.) The statute does not apply to claims “involving an employer-employee or equivalent relationship between a plaintiff and defendant.” (Id. at p. 394.) It does not prohibit “discriminations other than those made by a ‘business establishment’ in the course of furnishing goods, services or facilities to its clients, patrons or customers.” (Alcorn v. Anbro Engineering, Inc. (1970) 2 Cal.3d 493, 500.)

Plaintiff does not allege defendants discriminated against her as a client, patron, or customer when providing their services. This case arises from the relationship between plaintiff as either an employee or independent contractor working as an insurance agent affiliated with the Farmers entities. (SAC, ¶¶ 32-37, 39-43.) “Plaintiff dedicated nearly 16 years of her life working for” the entities (¶ 30) “selling [Farmers insurance] policies” (¶ 43). In this cause of action, plaintiff alleges defendants discriminated “against [their] agents, including plaintiff, by favoring younger employees” and “male employees” and included “a pattern and practice of discriminating against older employees” and “against female employees.” (SAC, ¶¶ 348-349.)

Plaintiff further alleges these “entities are reciprocal insurers or mutual companies whose principal businesses are related to the offer or sale of insurance products and the provision of services to [Farmers] policyholders throughout the United States.” (SAC, ¶ 19.) Whether or not the parties had an employment relationship, plaintiff and the Farmers defendants were both on the business side of the business/client relationship. They collaborated in this business to provide a service (insurance coverage) to the public. The insured—not agents like plaintiff—were the clients, patrons, or customers.

Plaintiff’s reliance on Payne v. Anaheim Memorial Medical Center, Inc. (2005) 130 Cal.App.4th 729 (Payne) is misplaced. There, the court held a physician could bring an Unruh Civil Rights Act claim against a hospital. The court reasoned, "Payne does not work for the hospital, and has no obligation to treat his patients there as opposed to any other hospital. Anaheim Memorial does not compensate Payne for his medical services, nor does it exercise any direct control over the manner in which he practices. Instead, the hospital merely provides a facility which a qualified physician may access in connection with providing medical care to his patients.” (Id. at p. 748.)

Here, plaintiff alleges the opposite: that defendants “tightly controlled” her “working relationship with” them. (SAC, ¶ 32.) She alleges they “dictated the hours when Plaintiff could work, when she could take vacation, where her office could be located, and in what region she could work,” they “had the authority to hire, transfer and fire Plaintiff,” and they “ required plaintiff to work exclusively for them and controlled the means and manner that she conducted her work.” (Ibid.) Plaintiff further alleges, “She was paid regularly by EMPLOYER DEFENDANTS, and they controlled the terms of her compensation. … Plaintiff was required to meet performance expectations and if she did not EMPLOYER DEFENDANTS told her she would be terminated. EMPLOYER DEFENDANTS controlled the way in which the work was to be performed, the look of the office, the materials to be used in the office to perform the work and hours of the staff including plaintiff in the office.” (SAC, ¶ 32.)

Rather than Payne, this case is analogous to Johnson v. Riverside Healthcare System, LP (9th Cir. 2008) 534 F.3d 1116, which held a doctor could not bring an Unruh Civil Rights Act claim against a hospital. The Ninth Circuit noted the plaintiff’s “relationship with [the hospital] was materially indistinguishable from that of an employee” and distinguished Payne “because the hospital in that case neither compensated the plaintiff nor controlled the manner of his practice to the degree [the hospital] does here.” (Id. at p. 1126.)

Leave to Amend

After a successful demurrer, where “there is a reasonable possibility that the defects can be cured by amendment, leave to amend must be granted.” (Stevens v. Superior Court (1999) 75 Cal.App.4th 594, 601.) The plaintiff bears the burden of “demonstrat[ing] how the complaint can be amended.” (Smith v. State Farm Mutual Automobile Ins. Co. (2001) 93 Cal.App.4th 700, 711.) “Leave to amend should be denied where the facts are not in dispute and the nature of the claim is clear, but no liability exists under substantive law.” (Lawrence v. Bank of America (1985) 163 Cal.App.3d 431, 436.)

Plaintiff shows a possibility of curing the defect in her sixth cause of action for fraud. In her opposition, she argues she is seeking to depose defendants’ person(s) most qualified on various topics. (Opp., pp. 6-10.) Plaintiff’s efforts could result in discovering the specific information necessary to meet the heightened standard of pleading fraud. Because this discovery may take some time, the court will grant plaintiff extra time to amend her complaint.

Plaintiff, however, shows no reasonable possibility of curing the defect in the seventh cause of action. The facts are not in dispute and the nature of the claim is clear. As a matter of substantive law, the Farmers defendants cannot be liable to plaintiff under the Unruh Civil Rights Act.

Disposition

Defendants Farmers Group, Inc., Farmers Insurance Exchange, Truck Insurance Exchange, Fire Insurance Exchange, Mid-Century Insurance Company, and Farmers New World Life Insurance Company’s demurrer to plaintiff Maureen Martinez’s sixth cause of action is sustained with 60 days’ leave to amend Defendants’ demurrer to plaintiff’s seventh cause of action is sustained without leave to amend.

Motion to Strike

Courts may strike allegations related to punitive damages where the facts alleged “do not rise to the level of malice, oppression or fraud necessary” to recover punitive damages under Civil Code section 3294. (Turman v. Turning Point of Central California, Inc. (2010) 191 Cal.App.4th 53, 64.) Merely stating a cause of action for discrimination or sexual harassment does not suffice to recover punitive damages. (Id. at pp. 63-64.) Conclusory allegations are not enough. (Smith v. Superior Court (1992) 10 Cal.App.4th 1033, 1042.) The complaint must make “factual assertions supporting a conclusion [defendants] acted with oppression, fraud or malice.” (Ibid.) “[W]illfully and consciously retaliat[ing] against” employees for exercising their rights can constitute malicious or oppressive conduct sufficient for punitive damages. (Colucci v. T-Mobile USA, Inc. (2020) 48 Cal.App.5th 442, 455.)

Plaintiff’s second amended complaint alleges sufficient facts for punitive damages. Plaintiff alleges she complained to Farmers about sexual harassment, discrimination, and retaliation. (SAC, ¶¶ 122-123, 127, 134.) She also complained to the Department of Insurance about the harassment and discrimination and about business practices that deceived or harmed customers. (¶¶ 124, 128). Plaintiff further alleges that, because of her complaints, Farmers retaliated against her including by “tak[ing] away her clients and giv[ing] them to other agents” (¶ 130) and “creat[ing] false reasons to terminate her” (¶ 132). Plaintiff alleges Farmers “intentionally made false accusations about plaintiff’s performance and used them as a pretextual basis to terminate her.” (SAC, ¶ 81.) These factual allegations could properly be characterized as malicious conduct intended to injure plaintiff or despicable conduct carried on with a willful and conscious disregard for her rights.

Disposition