Judge: Deborah C. Servino, Case: 30-2023-01303715, Date: 2023-08-04 Tentative Ruling
Demurrer
Defendants Far West Management Corporation and Richard Silver's demurrer to the first, second, and seventh causes of action of Plaintiff Rory Ferlauto's First Amended Complaint ("FAC"), is overruled.
Breach of Contract (First Cause of Action)
The first cause of action is against Defendant Far West Management Corporation for breach of contract, specifically, the written Employment Protection Agreement. (FAC, at pp. 10-12, Exh. 1.) “Where a complaint is based on a written contract which is set out in full, a general demurrer to the complaint admits not only the contents of the instrument but also any pleaded meaning to which the instrument is reasonably susceptible.” (Aragon-Haas v. Family Security Ins. Services, Inc. (1991) 231 Cal.App.3d 232, 239.)
The Employment Protection Agreement stated in its recitals that it was only “intended to impose obligations on the Company beginning at such time as Richard Silver is no longer serving as Chief Executive Officer of the Company.” (FAC, at Exh. 1, ¶ B.) Additionally, “Richard Silver shall be deemed terminated as Chief Executive Officer (a ‘Termination Event’) in the event of his death, Disability (as hereinafter defined), retirement or resignation as Chief Executive Officer of the Company.” (FAC, at Exh. 1, at ¶ 1.) “For purposes of this Agreement, ‘Disability’ shall mean the person’s inability due to physical or mental incapacity to perform the essential functions of his or her job for One Hundred Eighty (180) days out of any Three Hundred Sixty-five (365)-day period. Any question as to the existence of the employee’s Disability as to which the employee and the Company cannot agree shall be determined in writing by a qualified independent physician . . .” (FAC, at Exh. 1, at ¶ 1.)
Defendants argue that “Plaintiff fails to allege that any of the conditions precedent occurred that would render the agreement operative or enforceable.” (Demurrer, at p. 4.) Defendants assert Plaintiff failed to plead that Silver has been unable to perform the essential functions of CEO for at least 180 days. They contend that “Plaintiff has not alleged that Defendants agree that Silver is disabled or that any alleged disagreement between Defendants has been resolved.” (Demurrer, at p. 7.)
The Complaint alleges, however, that Defendant Silver “has been disabled (as that term is defined in the Agreement) and the protections to Plaintiff’s employment as set forth in the Agreement were in effect on January 5, 2023, the date of Plaintiff’s purported termination.” (FAC, at ¶ 40.) Liberally interpreting the allegations as required by Code of Civil Procedure section 452, the FAC alleges a period of disability of more than 180 days, prior to January 5, 2023.
Additionally, the FAC includes factual allegations, which support this interpretation. Defendant Silver stopped going into the office, stopped attending weekly staff meetings in person, and stopped performing property inspections, as he was unable “to walk or standup independently.” (FAC, at ¶¶ 27, 29.) These are essential functions of the Chief Executive Officer. (FAC, at ¶ 24.) Defendant Silver “has suffered mental deterioration as well,” since 2019. (FAC, at ¶ 29.) “Silver is experiencing an increasing number of incidents of memory loss, which have caused severe disruptions of normal, daily company activities.” (FAC, at ¶ 30.) "As Silver stopped engaging on a regular basis with his executives and department heads, he started making an increasing number of irrational decisions harming the company.” (FAC, at ¶ 31.) The above factual allegations support the allegation that Defendant Silver was disabled, pursuant to the terms of the Agreement.
Finally, Defendants assert that, pursuant to the Employment Protection Agreement, a determination by a physician is necessary to establish disability. However, the language in the agreement expressly requires the involvement of a physician only where there is a disagreement between the employee (Silver) and the Company (Far West). (FAC, Exh. 1, at ¶ 1.) The agreement does not expressly identify or establish a procedure for determining disability in the event of a challenge by the Executive, such as Plaintiff.
Here, Plaintiff’s interpretation of the Agreement – that a determination by a physician is not required to establish disability where a dispute arises between the Executive and the Company – is an interpretation “to which the instrument is reasonably susceptible.” (Aragon-Haas v. Family Security Ins. Services, Inc., supra, 231 Cal.App.3d at p. 239.) Under such an interpretation, all that is required is that Defendant Silver was unable to perform the functions of Chief Executive Officer for 180 days, which was alleged in paragraph 42. The demurrer to this claim is overruled.
Breach of Contract (Second Cause of Action)
The second cause of action is against Defendant Silver for breach of an oral and implied contract. Defendants argue that “Plaintiff fails to plead sufficient facts to support a finding that a contract existed under the statute of frauds.” (Demurrer at p. 7.) Citing Newfield v. Ins. Co. of West (1984) 156 Cal.App.3d 440 and Civil Code section 1624, Defendants assert that Plaintiff’s alleged agreement well exceeded a year. (Demurrer, at pp. 7-8.)
Pursuant to Civil Code section 1624, subdivision (a)(1), “[a]n agreement that by its terms is not to be performed within a year from the making thereof,” is barred by the statute of frauds. However, “this portion of the statute of frauds ‘applies only to those contracts which, by their terms, cannot possibly be performed within one year.” (Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 671.) “[I]f a condition terminating a contract may occur within one year of its making, then the contract is performable within a year and does not fall within the scope of the statute of frauds. This is true even though performance of the contract may extend for longer than one year if the condition does not occur.” (Id. at p. 673.) “To bring a contract within the statute relating to parol agreements, not to be performed within one year, it must appear to be necessarily incapable of performance within that time.” (Id. at p. 674.) The California Supreme Court in Foley expressly disproved of Newfield (cited and relied on by Defendants), to the extent it is inconsistent with the above. (Id. at p. 675, fn. 19.)
Here, the alleged oral agreement provided that “Silver would make [Plaintiff] his ‘successor.’” (FAC, at ¶ 46.) "Successor" was defined to mean “that upon his retirement, death or disability, [Plaintiff] would succeed him as Far West’s Chief Executive Officer.” (FAC, at ¶ 46.) Defendant Silver could have retired, died, or become disabled within a year of September of 2008. Pursuant to Foley, the statute of frauds does not apply.
Referencing the alleged written agreement, Defendants assert: “The Agreement further contains an integration clause.” (Demurrer, at p. 8.) “Plaintiff’s second cause of action for breach of oral contract against Silver fails as a result.” Defendants, however, cite no authority to support this contention. “Every brief should contain a legal argument with citation to authorities on the points made. If none is furnished on a particular point, the court may treat it as waived, and pass it without consideration.” (People v. Stanley (1995) 10 Cal.4th 764, 793.) Similarly, “[i]ssues do not have a life of their own: If they are not raised or supported by argument or citation to authority, [they are] . . . waived.” (Benach v. County of Los Angeles (2007) 149 Cal.App.4th 836, 852.) A court “is not required to examine undeveloped claims, nor to make arguments for parties.” (Paterno v. State of California (1999) 74 Cal.App.4th 68, 106.)
Notably, the written Agreement is alleged to have been executed between Plaintiff and Defendant Far West Management Corporation only. (FAC, at ¶ 38 and Exh. 1.) In contrast, the alleged oral agreements were entered into by Defendant Silver. (FAC, at ¶¶ 46-47.) Defendants offer no explanation, as to how the integration clause executed by Far West Management Corporation prevents Plaintiff’s claims for breach of oral agreement against Defendant Silver.
Breach of Contract (Seventh Cause of Action)
The seventh cause of action is against Defendant Far West Management Corporation for breach of an oral and implied contract wherein it “agreed to not discharge Plaintiff except for good cause and only after notice, counseling, progressive discipline, and a chance to cure.” (FAC, at ¶¶ 87-88.) In demurring to this claim, Defendant Far West Management Corporation asserts that “Plaintiff’s seventh cause of action for breach of implied contract against Far West similarly fails because no such contract existed” and “because there was no operative employment agreement in place protecting Plaintiff’s job.” (Demurrer, at pp. 8-9.) Defendant appears to challenge the truth of Plaintiff’s allegations, however, a demurrer admits all material facts properly pleaded. (Travelers Indemnity Company of Connecticut v. Navigators Specialty Insurance Company (2021) 70 Cal.App.5th 341, 358.)
Additionally, Defendant contends: (1) Labor Code section “12922” prevents the parties from entering into an employment agreement other than at-will; or (2) the integration clause in the alleged written Agreement voids any implied agreement. (Demurrer, at p. 9.) The court disregards any arguments that are unsupported by citation to authority. (People v. Stanley, supra, 10 Cal.4th at p. 793; Benach v. County of Los Angeles, supra, 149 Cal.App.4th at p. 852; Paterno v. State of California, supra, 74 Cal.App.4th at p. 106.)
Additionally, as noted by Plaintiff: “Labor Code section 2922 establishes a statutory presumption of at-will employment. However, an employer and an employee are free to depart from the statutory presumption and specify that the employee will be terminated only for good cause, either by an express, or an implied, contractual agreement.” (Stillwell v. The Salvation Army (2008) 167 Cal.App.4th 360, 380.) “Generally, the existence of an implied-in-fact contract requiring good cause for termination is a question for the trier of fact . . .” (Ibid.) Furthermore, “[i]n the employment context, factors apart from consideration and express terms may be used to ascertain the existence and content of an employment agreement, including ‘the personnel policies or practices of the employer, the employee’s longevity of service, actions or communications by the employer reflecting assurances of continued employment, and the practices of the industry in which the employee is engaged.’” (Foley v. Interactive Data Corp., supra, 47 Cal.3d at p. 680.)
Here, the FAC sufficiently alleges facts to support the existence of an implied agreement. Defendant had a policy and practice of not discharging employees, without notice, counseling and progressive discipline. (FAC, at ¶ 88.) Furthermore, the FAC alleges a breach followed by damages. (FAC, at ¶¶ 89-90.)
Plaintiff argues that the Employment Protection Agreement is only partially integrated and does not bar the alleged implied agreement. The agreement provides: “Unless specifically provided herein, this Agreement contains all of the understandings and representations between the Executive and the Company pertaining to the subject matter hereof and supersedes all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to the subject matter.” (FAC, at Exh. 1, at ¶ 10.) Additionally, “[t]his Agreement is not intended to provide any current employment rights to the Executive but is only intended to impose obligations on the Company beginning at such time as Richard Silver is no longer serving as Chief Executive Officer of the Company.” (FAC, Exh. 1, at ¶ B.) By its own terms, the agreement does not address Plaintiff’s employment rights while Defendant Silver is CEO.
Motion to Strike
Defendants' motion to strike portions of the FAC, is denied.
A court may strike out any irrelevant, false, or improper matter inserted in any pleading or strike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule or an order of the court. (Code Civ. Proc., § 436.) “Irrelevant” matters include: allegations not essential to the claim, allegations neither pertinent to nor supported by an otherwise sufficient claim or a demand for judgment requesting relief not supported by the allegations of the complaint. (Code Civ. Proc., § 431.10, subd. (b).) A motion to strike can also strike legal conclusions. (Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2021) ¶ 7:179.)
Malice is defined as “conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.” (Civ. Code, § 3294, subd. (c)(1).) Oppression is defined as “despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights.” (Civ. Code, § 3294, subd. (c)(2).) Fraud is defined as “an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.” (Civ. Code, § 3294, subd. (c)(3).)
“In order to survive a motion to strike an allegation of punitive damages, the ultimate facts showing an entitlement to such relief must be pled by a plaintiff.” (Clauson v. Superior Court (1998) 67 Cal.App.4th 1253, 1255.) “In determining whether a complaint states facts sufficient to sustain punitive damages, the challenged allegations must be read in context with the other facts alleged in the complaint.” (Monge v. Superior Court (1986) 176 Cal.App.3d 503, 510.)
Here, Defendants challenge Plaintiff’s requests for punitive damages included within the third through sixth and eighth causes of action. The eighth cause of action is not asserted against moving Defendants. They lack standing to challenge the eighth cause of action.
The third cause of action against Defendant Silver is for fraud. Notably, Defendant Silver did not demur to this claim. The FAC alleges that Silver falsely promised, without the intent of so performing, to make Plaintiff his successor. (FAC, at ¶¶ 52-53.) Silver intended to cause Plaintiff injury. (FAC, at ¶ 58.) The promise was apparently made to induce Plaintiff to continuing working for Defendant Far West and to forgo other opportunities. (FAC, at ¶¶ 54-55.)
The fourth through sixth causes of action allege gender discrimination, age discrimination, and wrongful termination. (FAC, at pp. 15-18.) Defendants did not demur to these claims. The FAC alleges that Defendant Silver, while purportedly acting as the CEO of Far West, made the decision to terminate Plaintiff. (FAC, at ¶¶ 62 & 71.) Plaintiff’s gender and age were substantial motivating reasons for the termination. (FAC, ¶¶ 64, 73-74, 82.) In addition to the allegations of discrimination, the FAC alleges: “Over the course of Plaintiff’s employment, Silver made countless comments indicating disdain for people like Plaintiff who were a woman, a wife, and a mother. Male employees were treated differently in that their family commitments were ignored, while any family commitments by a female were seen as a distraction and a sign of weakness.” (FAC, at ¶34.) As a discriminatory termination arguably constitutes an “ultimate fact” which shows “despicable conduct . . . carried on by the defendant with a willful and conscious disregard of the rights . . . of others,” the motion is denied. (Civ. Code, §3294, subd. (c)(1).)
Defendant references the requirements of Civil Code section 3294, subdivision (b). However, the FAC alleges the fraudulent promises and termination were carried out by Defendant Rivers, in his position as Chief Executive Officer. (FAC, at ¶¶ 62 & 71.) As the FAC alleges the fraud and malice were on the part of an officer of Defendant Far West Management Corporation, Plaintiff has sufficiently alleged facts to support punitive damages. (Civ. Code, § 3294, subd. (b).)
Within 15 days, Defendants shall file their answer(s) to the FAC. Defendants shall serve their answer(s) pursuant to the Code of Civil Procedure.
Plaintiff shall give notice of the ruling.
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