Judge Bruce G. Iwasaki, Case Number: 23STCV17404, Date: 2024-02-28 Tentative Ruling

Tentative Ruling: The Demurrer to the Complaint is overruled as to the first, second, fifth, sixth, and ninth causes of action. The demurrer is sustained as to the fourth cause of action and sustained as to Individual Defendants only as to the third and eighth causes of action. The demurrer is otherwise overruled.

On July 25, 2023, Plaintiffs Mi In Fashion, Inc., Hyun S. Lee, and, Young Mi Lee filed this lawsuit alleging the causes of action for (i) failure to pay overtime wage, (ii) failure to pay minimum wage, (iii) failure to pay commission (by Plaintiff Pak only), (iv) fraud (by Plaintiff Pak only), (v) failure to provide all mandated meal periods or to pay additional wages in lieu thereof, (vi) failure to provide all mandated rest periods or to pay additional wages in lieu thereof, (vii) failure to issue timely and accurate itemized wage statements, (viii) failure to timely pay wages due at termination, and (ix) unfair business practice in violation of California Business & Professions Code section 17200 et seq.

On December 20, 2023, Defendants Mi in Fashion, Inc., Hyun S. Lee (aka Tommy Lee), and Young Mi Lee demurred to the Complaint. Plaintiffs filed an opposition to the demurrer. No reply was filed.

A demurrer is an objection to a pleading, the grounds for which are apparent from either the face of the complaint or a matter of which the court may take judicial notice. (Code Civ. Proc. § 430.30, subd. (a); see also Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) The purpose of a demurrer is to challenge the sufficiency of a pleading “by raising questions of law.” (Postley v. Harvey (1984) 153 Cal.App.3d 280, 286.) “In the construction of a pleading, for the purpose of determining its effect, its allegations must be liberally construed, with a view to substantial justice between the parties.” (Code Civ. Proc., § 452.) The court “ ‘ “treat[s] the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law . . . .” ’ ” (Berkley v. Dowds (2007) 152 Cal.App.4th 518, 525.) In applying these standards, the court liberally construes the complaint to determine whether a cause of action has been stated. (Picton v. Anderson Union High School Dist. (1996) 50 Cal.App.4th 726, 733.)

First Cause of Action for Failure to Pay Overtime and Second Causes of Action for Failure to Pay Minimum Wage:

The first cause of action for violation of Labor Code section 510 alleges that Defendants failed to pay Plaintiffs’ respective overtime wages, and the second cause of action for violation of Labor Code section 204 alleges that Defendants failed to pay minimum wages. Both violations entitle Plaintiffs to relief under Labor Code section 1194.

Defendants demur to the first and second causes of action on the grounds that the Complaint fails to allege sufficient facts to state a claim. Specifically, the demurrer argues that “[t]he plaintiffs did not state for what time period they claimed to have not been paid the wages, so that the defendants cannot verify how much minimum wage amount was for a certain time period because the minimum wages changed over the years.” (Dem., 3:11-14.)

However, as noted in the opposition, Defendants cite no authority for their argument that the law requires that these specifics must be pled to state a claim. Thus, the Complaint adequately alleges that Plaintiffs worked for Defendants, worked overtime, and were not paid overtime wages for hours worked in excess of 40 hours per week. (Compl., ¶¶ 11-13.)

These allegations are sufficient for pleading purposes to state a claim for failure to pay overtime wages and failure to pay minimum wages. (Lab. Code, § 1194; CACI 2702.) The demurrer to the first and second causes of action is overruled.

The third cause of action for violation of Labor Code section 2751 alleges Defendants failed to pay commission owed to Plaintiff Pak.

Labor Code section 2751 provides that commission contracts between an “employer” and an “employee” must be in writing and must “set forth the method by which the commissions shall be computed and paid.” (Lab. Code, § 2751, subd. (a).) The employer must give a signed copy of the contract to the employee and obtain a signed receipt. (Lab. Code, § 2751, subd. (b).)

Here, the Complaint alleges Defendants agreed to pay Plaintiff Pak a commission based on 1.5% of the gross sale of Defendant Mi in Fashion, Inc., in addition to her monthly base salary of $5,000.00. (Compl. ¶ 31.) However, Defendants never paid any of Plaintiff Pak’s commission during her employment. (Compl., ¶ 35.)

On demurrer, Defendants argue that this cause of action fails to state whether the alleged agreement to pay commission was verbal or written, fails to state exactly how much was to be paid as commission and on what conditions, or how much Plaintiff Pak claims she was entitled to in commissions.

However, as noted below, to the extent that this claim is based on a Labor Code violation and is sought against all Defendants, this claim is improperly alleged against an individual Defendants. (Lab. Code, § 558.)

The demurrer to the third cause of action is overruled as to Defendant Mi in Fashion, Inc. and sustained as to Defendants Hyun S. Lee and Young Mi Lee (Individual Defendants).

The fourth cause of action alleges a claim for fraud based on Defendants’ promise to pay 1.5% of the gross sale of CES to Plaintiff Pak as a part of wages for her employment. (Compl., ¶ 40.)

The elements of a cause of action for intentional misrepresentation are: (1) a misrepresentation; (2) knowledge of falsity; (3) intent to defraud or induce reliance; (4) actual reliance by the plaintiff; and (5) resulting damage. (Conroy v. Regents of University of California (2009) 45 Cal.4th 1244, 1255; Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 173; Civ. Code, § 1709.) Further, fraud, unlike most claims in tort, requires that each element must be pled with specificity. (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73.) That is, generally, “[i]n California, fraud must be pled specifically; general and conclusory allegations do not suffice.” (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.’ [Citation.]” (Ibid.)

Importantly, fraud requires that each element must be pled with specificity. (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73.) That is, generally, “[i]n California, fraud must be pled specifically; general and conclusory allegations do not suffice.” (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.’ [Citation.]” (Ibid.)

This cause of action is only alleged against Defendant Mi in Fashion, Inc. (Compl., ¶ 39.) None of these allegations contain the level of specificity required for fraud. Thus, the demurrer is sustained as to the fourth cause of action with leave to amend.

Fifth Cause of Action for Failure to Provide Mandated Meal Periods and Sixth Causes of Action regarding Rest Periods:

The fifth and sixth causes of action for violations of Labor Code section 226.7 allege that Defendants failed to provide meal and rest periods.

The demurrer argues “The Complaint failed to state what time period or dates such violations were committed, how such violations occurred, how much of premium wages the plaintiffs claimed to be entitled to, and how much they would acknowledge to have received.” (Dem., 4:1-3.)

Again, no legal authority is cited by Defendants supporting this heightened specificity for these particular causes of action. Thus, these allegations are sufficient to state claim at the pleading stage.

Individual Defendants demur to all the causes of action on the grounds that they are not an “employer” under the Industrial Welfare Commission (IWC) wage order and thus cannot be liable in their individual capacity.

As preliminary matter, this demurrer argument does not apply to the tort cause of action for fraud or the ninth cause of action for the violations for Business and Professions Code section 17200.

Secondly, Individual Defendants fail to acknowledge Labor Code sections 558 and 558.1.

Labor Code section 558.1 specifically permits individual liability on certain Labor Code violations. Under California law, an “employer or other person acting on behalf of any employer, who violates, or causes to be violated, any provision regulating minimum wages or hours and days of work in any order of the Industrial Welfare Commission, or violates, or causes to be violated, Sections 203, 226, 226.7, 1193.6, 1194, or 2802, may be held liable as the employer for such violation.” (Lab. Code, § 558.1, subd. (a).) The law limits the phrase “other person acting on behalf of an employer” to describing a natural person who is an owner, director, officer, or managing agent of the employer.” (Lab. Code, § 558.1, subd. (b).) Thus, only an employer, owner, director, officer, or managing agent may be held liable for violations of the wage orders or the identified provisions of the California Labor Code. (Lab. Code, § 558.1, subd. (b).) The term “managing agent,” includes “only those corporate employees who exercise substantial independent authority and judgment in their corporate decision making so that their decisions ultimately determine corporate policy.” (White v. Ultramar, Inc. (1999) 21 Cal.4th 563, 566-67.)

Here, the Labor Code violations set forth in the first, second, fifth, sixth, and seventh causes of action are expressly enumerated in Labor Code section 558.1. In contrast, Labor Code section 558.1 does not identify the statutory violations at issue in the third and eighth causes of action.[1]

Thus, the demurrer to the third and eighth causes of action are sustained on this ground, and otherwise overruled, as to Individual Defendants.

The demurrer is to the Complaint is overruled as to the first, second, fifth, sixth, and ninth causes of action. The demurrer is sustained as to the fourth cause of action and sustained as to Individual Defendants only as to the third and eighth causes of action. The demurrer is otherwise overruled. Plaintiffs shall have leave to amend. The amended complaint shall be served and filed on or before March 28, 2024.

[1] Plaintiffs, in third cause of action for failure to pay commission, allege that Labor Code section 204 “requires employees to be paid any commissions at least twice a month.” (Compl., ¶ 35.) However, nothing in Labor Code section 204 appears to apply to the payment of commissions under Labor Code section 2751.

Judge Bruce G. Iwasaki

Department 58