Judge: Deborah C. Servino, Case: 30-2022-01248043, Date: 2022-10-07 Tentative Ruling
Defendant Joseph Del Signore’s demurrer to Plaintiff Craig Ziegler’s Complaint is sustained. The demurrer as to the first through fourth and sixth causes of action is sustained with 15 days leave to amend. The demurrer as to the fifth and seventh causes of action is sustained without leave to amend.
Plaintiff’s request for judicial notice of the entity information for Defendant TruClear Global, Inc. from the California Secretary of State’s website, is granted.
A demurrer presents an issue of law regarding the sufficiency of the allegations set forth in the complaint. (Lambert v. Carneghi (2008) 158 Cal.App.4th 1120, 1126.) The challenge is limited to the “four corners” of the pleading (which includes exhibits attached and incorporated therein) or from matters outside the pleading which are judicially noticeable under Evidence Code sections 451 or 452. Although California courts take a liberal view of inartfully drawn complaints, it remains essential that a complaint set forth the actionable facts relied upon with sufficient precision to inform the defendant of what plaintiff is complaining, and what remedies are being sought. (Leek v. Cooper (2011) 194 Cal.App.4th 399, 413.) On demurrer, a complaint must be liberally construed. (Code Civ. Proc., § 452; Stevens v. Superior Court (1999) 75 Cal.App.4th 594, 601.) All material facts properly pleaded, and reasonable inferences, must be accepted as true. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967.)
Failure to Pay Compensation (Lab. Code, §§ 201-203) (First Cause of Action)
Plaintiff alleges that he was not paid his full base salary or his severance pursuant to his Employment Agreement. (Complaint, at pp. 8-9.) Plaintiff’s Employment Agreement was with TruClear Global, Inc. (See Complaint, at Exh. A.) California law does not impose personal liability on corporate officers or directors for wages owed by a corporate employer. The Industrial Welfare Commission’s definition of “employer” does not extend to individual corporate agents acting within the scope of their agency. (Reynolds v. Bement (2005) 36 Cal.4th 1075, 1085 [abrogated on other grounds in Martinez v. Combs (2010) 49 Cal.4th 35, 52–75].) Members of a limited liability company, and shareholders, directors, officers of corporations are typically not legally responsible or subject to the liabilities of the company/corporation. (See Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 538.) As a general rule, only the employer and not the individuals who own or work for the employer, is liable for violations of California’s wage and hour laws. An owner, officer, director, or managing agent of the employer may only be held liable for the employer’s violation, if the owner, officer, director or managing agent “violates or causes to be violated” an IWC wage order or certain wage and hour sections of the Labor Code. (Usher v. White (2021) 64 Cal.App.5th 883.) Here, there are no allegations that Del Signore caused any violations of the Labor Code.
Plaintiff argues that he has properly alleged alter ego liability. (Opp., at pp. 2-5.) Under the alter ego doctrine, “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, supra, 83 Cal.App.4th at p. 538.) There are two conditions precedent to invoking the alter ego doctrine: “First, there must be 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. Second, there must be an inequitable result if the acts in question are treated as those of the corporation alone.” (Ibid.)
While Plaintiff arguably pleads facts to support a unity of interest, he does not plead facts that support the second prong of inequitable result. The court in Sonora Diamond Corp. v. Superior Court, supra, 83 Cal.App.4th at p. 539 explained:
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. (Associated Vendors, Inc. v. Oakland Meat Co., supra, 210 Cal.App.2d at p. 842; Alberto v. Diversified Group, Inc., supra, 55 F.3d at p. 207; Lowell Staats Min. Co. v. Pioneer Uravan, Inc. (10th Cir. 1989) 878 F.2d 1259.)
Similarly, misconduct 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. (Lowell Staats Min. Co. v. Pioneer Uravan, Inc., supra, 878 F.2d at p. 1262.) The parent is not “exposed to liability for the obligations of [the subsidiary] when [the parent] contributes funds to [the subsidiary] for the purpose of assisting [the subsidiary] in meeting its financial obligations and not for the purpose of perpetrating a fraud.” (Id. at p. 1263.)
Here, Plaintiff does not allege a fraudulent, deceptive intent, or some other wrongful or inequitable purpose. The gravamen of the Complaint is that Plaintiff is owed money. Difficulty in collecting a debt is not sufficient to support alter ego liability. According, the demurrer to the first cause of action is sustained with 15 days leave to amend.
Violations of Labor Code, §§ 2802 and 2804 (Second Cause of Action)
The second cause of action is a wage and hour claim. Plaintiff alleges he was not reimbursed for his expenses. (Complaint, at p. 9.) Therefore, like the first cause of action, the demurrer as to the second cause of action is sustained with 15 days leave to amend. (See Reynolds v. Bement (2005) 36 Cal.4th at p. 1075.)
Breach of Contract (Third Cause of Action)
Plaintiff alleges Del Signore breached his Employment Agreement, attached as Exhibit A to the Complaint. (Complaint, at pp. 9-10.) The agreement is between Plaintiff and TrueClear Global, Inc. (See Complaint, at Exh. A.)
Breach of contract generally cannot be alleged against an individual who was not party to the contract, even though that individual may be a corporate officer, which is the case here. (United States Liability Ins. Co. v. Haidinger-Hayes, Inc. (1970) 1 Cal.3d 586, 595 [“Directors and officers are not personally liable on contracts signed by them for and on behalf of the corporation unless they purport to bind themselves individually . . . . [they] do not incur personal liability for torts of the corporation merely by reason of their official position, unless they participate in the wrong or authorize or direct that it be done.”].) Accordingly, the demurrer as to the third cause of action is sustained with 15 days leave to amend.
Breach of Covenant of Good Faith and Fair Dealing (Fourth Cause of Action)
The fourth cause of action is for breach of covenant of good faith and fair dealing. (Complaint, at pp. 10-11.) In order to properly establish breach of the covenant of good faith and fair dealing, Plaintiff must prove the following: (1) the parties entered into a contract; (2) the plaintiff did all that was required under the contract or was excused from such; (3) the conditions required for the defendant’s performance occurred; (4) the defendant unfairly interfered with the plaintiff’s right to receive the benefits of the contract, and (5) the plaintiff was harmed by the defendant’s conduct. (CACI no. 325.) Breach of contract is a necessary prerequisite to bring a claim for breach of the implied covenant of good faith and fair dealing. (See Racine & Laramie, Ltd. v. Department of Parks & Recreation (1992) 11 Cal.App.4th 1026, 1031-1032 [“The implied covenant of good faith and fair dealing rests upon the existence of some specific contractual obligation . . . [T]here is no obligation to deal fairly or in good faith absent an existing contract.”]; Digerati Holdings, LLC v. Young Money Entertainment, LLC (2011) 194 Cal.App.4th 873, 885 [“Although breach of the implied covenant often is pleaded as a separate count, a breach of the implied covenant is necessarily a breach of contract.”].) This cause of action is derivative of the breach of contract claim. Accordingly, the demurrer as to the fourth cause of action is sustained with 15 days leave to amend.
Unjust Enrichment (Fifth Cause of Action)
The fifth cause of action is for unjust enrichment. (Complaint, at p. 11.) Unjust enrichment is a general principle, underlying various legal doctrines and remedies, rather than a remedy itself. It is synonymous with restitution. (Melchior v. New Line Productions, Inc. (2003) 106 Cal.App.4th 779, 793.) The courts have held that “there is no cause of action in California for unjust enrichment.” (Ibid.; see Hill v. Roll Intern. Corp. (2011) 195 Cal.App.4th 1295, 1307.)
Here, the Complaint alleges that Defendants would be unjustly enriched by keeping amounts owed pursuant to his agreements with TruClear Global, Inc. (Complaint, at ¶¶ 51-53.) Considering the causes of action in the Complaint, a claim for unjust enrichment would add nothing. The demurrer to the fifth cause of action is sustained without leave to amend.
Bus. & Prof. Code, § 17200 et seq. (Sixth Cause of Action)
The sixth cause of action is for violation of Business and Professions Code section 17200. (Complaint, at p. 12.) In order to sustain a claim under Business and Professions Code section 17200, Plaintiff must demonstrate that he has lost money or property as a result of the unfair competition practices of Defendants. (Bower v. AT&T Mobility LLC (2011) 196 Cal.App.4th 1545, 1553-1554.) Plaintiff’s 17200 claim is derivative of his other claims. He relies on the success of his claims for wage claims. (Complaint, at ¶¶ 57-58.) Because Plaintiff lacks the predicate statutory violations and injury required for a claim under section 17200, this cause of action also fails. Accordingly, the demurrer as to the sixth cause of action is sustained with 15 days leave to amend.
Conversion (Seventh Cause of Action)
Plaintiff alleges that by failing to adequately pay him adequate compensation, Defendants are liable for conversion. (Complaint, at ¶¶ 62-63.) Recently, in Voris v. Lampert (2019) 7 Cal.5th 1141, 1149, the California Supreme Court held that conversion is not a proper tort remedy for the nonpayment of wages. Plaintiff’s conversion claim is not actionable. Accordingly, the demurrer as to the seventh cause of action is sustained without leave to amend.
Del Signore shall give notice of the ruling.
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