Judge: Holly J. Fujie, Case: 19STCV26231, Date: 2023-01-18 Tentative Ruling

Case Number: 19STCV26231    Hearing Date: January 18, 2023    Dept: 56

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES - CENTRAL DISTRICT

AND RELATED CROSS-ACTION

MOVING PARTY: Defendants/Cross-Complainants Estate of Israel Shai Chenzion (“Shai”) and Cucine Italia, Inc. (“Pedini”) (collectively, “Moving Defendants”)[1]

RESPONDING PARTY: Plaintiff

The Court has considered the moving, opposition and reply papers.

BACKGROUND

            This action arises out of an employment relationship.  Plaintiff initiated this action on July 26, 2019.  The currently operative first amended complaint (the “FAC”) alleges: (1) breach of contract; (2) fraud; (3) breach of fiduciary duty; (4) constructive fraud; (5) promissory estoppel; (6) accounting; (7) failure to pay wages; (8) waiting time penalties; (9) violation of Labor Code section 98.6; (10) declaratory relief; (11) quantum meruit; and (12) unfair competition.

            In relevant part, the FAC alleges: in March 2013, in recognition of Plaintiff’s sales performance and to induce him to remain in their employ, Shai promised Plaintiff that he would receive a portion of Pedini’s profits and would eventually become a 50 percent equity owner of Pedini.  (See FAC ¶ 9.)  Shai also informed Plaintiff that this arrangement would remain effective unless Plaintiff resigned or was terminated for cause.  (Id.)  Shai thereafter drafted a proposal for a profit-sharing and partnership agreement (the “PSA”).  (See FAC ¶ 10, Exhibit A.)  Between March 2013 and June 2019, Plaintiff performed under the PSA, but Moving Defendants made partial payments that were based on false or inaccurate accountings.  (FAC ¶ 13.)  On about May 17, 2019, Shai terminated Plaintiff’s employment with Pedini.  (FAC ¶ 15.)  Shai told other Pedini employees that his decision to terminate Plaintiff was “purely personal.”  (Id.) 

On November 4, 2022, Moving Defendants filed a motion for summary judgment and/or adjudication (the “Motion”) to the FAC on the grounds that there are no triable issues of fact as to any of Plaintiff’s claims or entitlement to special or punitive damages. 

As a preliminary matter, the Court observes on February 20, 2020, the Court granted Moving Defendants’ motion to strike the ninth and eleventh causes of action (Labor Code section 98.6 and quantum meruit) and the punitive damages allegations from the FAC.  No amended pleading has since been filed.  Accordingly, the Motion is MOOT as to these issues.

EVIDENTIARY OBJECTIONS

Plaintiff’s objection to the Declaration of Barak Lurie (“Lurie Decl.”) is SUSTAINED.  Plaintiff’s objections to the Declaration of Maya Chenzion (“Maya Decl.”) are OVERRULED in their entirety.

Moving Defendants’ objections to the Declaration of Jeremy Smith (“Smith Decl.”) are OVERRULED in their entirety.  Moving Defendants’ objection to the Declaration of Zane Wells (“Wells Decl.”) number 13 is SUSTAINED.  Moving Defendants’ objections to the Wells Declaration numbers 1-12 and 14 are OVERRULED.  Moving Defendants’ objections to the Declaration of Lira Caldoza (“Caldoza Decl.”) are OVERRULED in their entirety.

DISCUSSION

The function of a motion for summary judgment or adjudication is to allow a determination as to whether an opposing party cannot show evidentiary support for a pleading or claim and to enable an order of summary dismissal without the need for trial.  (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.)  California Code of Civil Procedure (“CCP”) section 437c, subdivision (c) requires the trial judge to grant summary judgment if all the evidence submitted, and all inferences reasonably deducible from the evidence and uncontradicted by other inferences or evidence, show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law.  (Adler v. Manor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119.)

As to each claim as framed by the complaint, the defendant moving for summary judgment must satisfy the initial burden of proof by presenting facts to negate an essential element, or to establish a defense.  (CCP § 437c, subd. (p)(2); Scalf v. D. B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510, 1520.)  Courts liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.  (Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 389.)

Once the defendant has met that burden, the burden shifts to the plaintiff to show that a triable issue of one or more material facts exists as to that cause of action or a defense thereto.  To establish a triable issue of material fact, the party opposing the motion must produce substantial responsive evidence.  (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 166.) 

            Moving Defendants argue that the evidence demonstrates that no contract was ever formed.  Moving Defendants alternatively argue that even if a contract did exist, it would not be enforceable due to: (1) a lack of consideration; (2) the statute of frauds; (3) the statute of limitations; and (4) Plaintiff’s lack of standing.  Moving Defendants contend that because the causes of action alleged in the FAC hinge on the existence of a contract, Moving Defendants argue that all of Plaintiffs claims fail as a matter of law.  

Evidence

Moving Defendants present evidence that Plaintiff, Shai, and Pedini (the “Parties”) never executed a profit-sharing or partnership agreement in writing.  (See Separate Statement of Undisputed Material Facts (“UMF”) 1.)  Shai testified that there was no agreement and that any attempts to put an agreement in writing were initiated by Plaintiff.  (See Lurie Decl., Exhibit 2 178:24-25, 253:2-25.)  Plaintiff was not a shareholder of Pedini and never invested in the business.  (UMF 5.)  In around 2016, Plaintiff began to suspect he was not being paid the proper amount of Pedini’s profits.  (UMF 9.)  Moving Defendants paid Plaintiff through a corporation under Plaintiff’s name called Conradd, Inc. (“Conradd”).  (See UMF 10.) 

Plaintiff provides evidence that Shai hired him to work for Pedini in around 2008 or 2009.  (Additional Material Fact (“AMF”) 1.)  In March 2013, Plaintiff informed Shai that he planned to stop working at Pedini to pursue other professional opportunities.  (AMF 15.)  In March 2013, in exchange for his continued employment with Moving Defendants, Shai orally offered to pay Plaintiff, in addition to his salary, 50 percent of Pedini’s profits on a quarterly basis.  (AMF 16.)  In exchange for Plaintiff’s commitment to remain employed with Moving Defendant’s, Shai also orally represented that Plaintiff would eventually become a 50 percent equity owner of Pedini and participate in Pedini’s significant decisions.  (Id.)  Shai also told Plaintiff that his continued employment could only be terminated for cause, and that the terms of the offer would remain in effect unless Plaintiff voluntarily resigned or was terminated for cause.  (Id.)  While negotiating the terms of this offer, Shai prepared a handwritten document reflecting how Plaintiff’s share of Pedini’s profits would be calculated.  (See id.)  Plaintiff accepted Shai’s offer.  (AMF 18.)  After agreeing to continue his employment with Moving Defendants, Plaintiff did not pursue other employment opportunities.  (See AMF 18.) 

After March 2013, Moving Defendants’ bookkeeper, Caldoza, calculated Pedini’s profits that were owed to Plaintiff in addition to his wages.  (AMF 19.)  Plaintiff formed Conradd in 2017 after being advised by Shai and Pedini’s accountant that doing so would have tax benefits.  (AMF 21-22.)  Plaintiff (via Conradd) received checks from Pedini that feature handwritten notations providing that the payments were for “profit sharing.”  (See AMF 20; Declaration of Zane Wells (“Wells Decl.”) ¶ 13, Exhibit 4.)  These payments were made for Plaintiff’s benefit.  (AMF 22.)  

Moving Defendants did not pay Plaintiff the full amounts of Pedini’s profits that were owed to Plaintiff and missed several quarterly payments that were owed to Plaintiff after July 26, 2017.  (See AMF 23-24.)  In May 2019, Shai terminated Plaintiff’s employment.  (AMF 25.)  Shai told other Pedini employees that he terminated Plaintiff for personal reasons and told Plaintiff that he terminated him because he was upset that Plaintiff continued to request a payment plan for the quarterly profit payments.  (AMF 25.)  Near the time of his May 2019 termination, Plaintiff learned that Shai manipulated Pedini’s accounts to reduce the profits that would be owed to Plaintiff.  (AMF 29.) 

Breach of Contract

The elements of a breach of contract claim are: (1) the contract; (2) plaintiff’s performance or excuse for nonperformance; (3) defendant’s breach; and (4) damage to plaintiff therefrom.  (Wall Street Network, Ltd. v. New York Times Co. (2008) 164 Cal.App.4th 1171, 1178.)  The elements of a breach of oral contract claim are the same as those for a breach of written contract: (1) a contract; (2) its performance or excuse for nonperformance; (3) breach; and (4) damages.  (Stockton Mortgage, Inc. v. Tope (2014) 233 Cal.App.4th 437, 453.) 

A cause of action for breach of implied contract has the same elements as does a cause of action for breach of contract, except that the promise is not expressed in words but is implied from the promisor’s conduct.  (Yari v. Producers Guild of America, Inc. (2008) 161 Cal.App.4th 172, 182.)  Whether an implied contract exists is usually a question of fact for the trial court.  (Unilab Corp. v. Angeles-IPA (244 Cal.App.4th 622, 636.)  Where evidence is conflicting, or where reasonable conflicting inferences may be drawn from evidence which is not in conflict, a question of fact is presented for decision of the trial court.  (Id.)

Under basic contract law, an offer must be sufficiently definite, or must call for such definite terms in the acceptance that the performance promised is reasonably certain.  (Ladas v. California State Auto. Assn. (1993) 19 Cal.App.4th 761, 770.)  To be enforceable, a promise must be definite enough that a court can determine the scope of the duty and the limits of performance must be sufficiently defined to provide a rational basis for the assessment of damages.  (Id.)  Where a contract is so uncertain and indefinite that the intention of the parties in material particulars cannot be ascertained, the contract is void and unenforceable.  (Id.)

The terms of a contract are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy.  (Moncada v. West Coast Quarts Corp. (2013) 221 Cal.App.4th 768, 777.)  In considering expressions of agreement, the court must not hold the parties to some impossible, or ideal or unusual standard.  (Id.)  It must take language as it is and people as they are.  (Id.)  All agreements have some degree of indefiniteness and some degree of uncertainty.  (Id.)  Moreover, the law leans against the destruction of contracts because of uncertainty and favors an interpretation which will carry into effect the reasonable intention of the parties if it can be ascertained.  (Id.)

The FAC alleges that Moving Defendants and Plaintiff entered into an enforceable agreement, the PSA, which was partially written, partially oral, and affirmed by the Parties’ conduct.  As stated in the written portion of the PSA attached to the FAC, Plaintiff would receive his base salary and Pedini’s quarterly profits.  Plaintiff alleges that he also assented to Shai’s oral representation that Plaintiff would eventually become a 50 percent equity owner of Pedini and participate in significant business decisions, that he could only be terminated for cause, and that the PSA would not be terminated unless Plaintiff quit or was terminated for cause.  (See FAC ¶ 10.) 

The Court finds that there are issues of material fact regarding the existence of the PSA alleged in the FAC between Plaintiff and Moving Defendants.  Plaintiff presents evidence that Shai made an oral promise to Plaintiff to share in Pedini’s quarterly profits and to eventually give Plaintiff a 50 percent equity interest in Pedini.  There is also evidence that the Parties performed under the PSA.  The Court finds that at this stage in the proceedings, the terms of Shai’s offer and Plaintiff’s acceptance are sufficiently certain.  (See Moncada v. West Coast Quarts Corp. (2013) 221 Cal.App.4th 768, 777-79.) 

            Further, Moving Defendants have not demonstrated that the agreement was not supported by consideration.  Plaintiff’s continued employment and forbearance of other employment opportunities may constitute adequate consideration for Shai’s promises regarding profit sharing and Plaintiff’s future equity.  (See Asmus v. Pacific Bell (2000) 23 Cal.4th 1, 10-11.)

            Nor have Moving Defendants established that Plaintiff is prohibited from seeking relief by the statute of limitations or statute of frauds.  No evidence establishes that the terms of the agreement for Plaintiff’s continued employment foreclose the possibility of full performance in one year; therefore, the statute of frauds does not bar the enforcement of the oral agreement.  (See White Lightning Co. v. Wolfson (1968) 68 Cal.2d 336, 343.) 

Breach of oral contract claims have a two-year statute of limitations period.  (CCP § 339.)  Moving Defendants argue that Plaintiff’s claims are time-barred because he had reason for suspicion that he was not sufficiently being paid his share of Pedini’s quarterly profits beginning in 2016.  The FAC, however, also alleges that the PSA was breached when Plaintiff was terminated without cause.  (See FAC ¶ 32.)  Furthermore, the PSA provided for quarterly profit payments.  Where performance of contractual obligations is severed into intervals, breaches of the contract’s several parts give rise to separate causes of action, and the statute of limitations will generally begin to run at the time of each breach.  (Armstrong Petroleum Corp. v. Tri-Valley Oil & Gas Co. (2004) 116 Cal.App.4th 1375, 1388-89.)

            In addition, Moving Defendants have not demonstrated that there are no factual disputes regarding whether Plaintiff has standing to seek damages for the PSA.  There is no evidence that Moving Defendant entered into the PSA with Conradd or that the payments were not intended for Plaintiff.  In addition, Plaintiff presents evidence that aside from the payments that were made to Conradd, Moving Defendants failed to make any payments owed to Plaintiff. 

The Court therefore DENIES the Motion to the first cause of action.

Second Cause of Action: Fraud

            Moving Defendants argue that because no contract existed with Plaintiff, Plaintiff cannot establish his fraud claim.  In light of the Court’s ruling on the breach of contract claim, the Court DENIES the Motion to the second cause of action.

Third and Fourth Causes of Action: Breach of Fiduciary Duty and Constructive Fraud

A fiduciary relationship is any relation existing between parties to a transaction wherein one of the parties is in duty bound to act with the utmost good faith for the benefit of the other party.  (Wolf v. Superior Court (2003) 107 Cal.App.4th 25, 29.)  Such a relation ordinarily arises where a confidence is reposed by one person in the integrity of another, and in such a relation the party in whom the confidence is reposed, if he voluntarily accepts or assumes to accept the confidence, can take no advantage from his acts relating to the interest of the other party without the latter's knowledge or consent.  (Id.)  Before a person can be charged with a fiduciary obligation, he must either knowingly undertake to act on behalf and for the benefit of another or must enter into a relationship which imposes that undertaking as a matter of law.  (Hasso v. Hapke (2014) 227 Cal.App.4th 107, 140.)  Fiduciary duties are imposed by law in certain technical, legal relationships such as those between partners or joint venturers, trustees and beneficiaries, principals and agents, and attorneys and clients.  (Id.)  A fiduciary duty under common law may arise when one person enters into a confidential relationship with another.  (Id.)  Every contract to some extent requires each party to repose trust and confidence in the other; one party's right to contingent compensation, standing alone, does not give rise to a fiduciary duty.  (City of Hope National Medical Center v. Genentech, Inc. (2008) 43 Cal.4th 375, 391.)

Constructive fraud is a unique species of fraud applicable only to a fiduciary or confidential relationship.  (Assilzadeh v. California Federal Bank (2000) 82 Cal.App.4th 399, 415.)  Most acts by an agent in breach of his fiduciary duties constitute constructive fraud.  (Id.)  The elements of a constructive fraud cause of action are: (1) a fiduciary or confidential relationship; (2) nondisclosure (breach of fiduciary duty); (3) intent to deceive; and (4) reliance and resulting injury. (Prakashpalan v. Engstrom, Lipscomb & Lack (2014) 223 Cal.App.4th 1105, 1131.) 

While there are factual disputes regarding the PSA, no party contends that a legal partnership was formed and there is no evidence that Plaintiff ever received equity in Pedini.  Plaintiff’s basis for the fiduciary duty claim is Shai’s failure to properly disburse Pedini’s quarterly profits.  Plaintiff argues that Shai’s promise to pay Plaintiff half of Pedini’s quarterly profits is sufficient to impose a fiduciary duty on him but provides no legal authority for the proposition that Moving Defendants owed him a fiduciary duty as his employers.  Without the existence of a fiduciary relationship, there can be no breach of the duty or constructive fraud.  The Court therefore GRANTS the Motion to the third and fourth causes of action.

Fifth Cause of Action: Promissory Estoppel

The elements of a promissory estoppel claim are: (1) a promise clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3) the reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by his reliance.  (US Ecology, Inc. v. State of California (2005) 129 Cal.App.4th 887, 905.)  Although a cause of action for promissory estoppel is inconsistent with a cause of action for breach of contract based on the same facts, when a pleader is in doubt about what actually occurred or what can be established by the evidence, the modern practice allows that party to plead in the alternative and make inconsistent allegations.  (Fleet v. Bank of America N.A. (2014) 229 Cal.App.4th 1403, 1413.)

Because there are factual disputes regarding the PSA and underlying promise Shai made to Plaintiff, there are likewise factual issues over whether Plaintiff may recover on a promissory estoppel theory if the PSA is not enforceable as a contract.  The Court therefore DENIES the Motion to the fifth cause of action.

Sixth Cause of Action: Accounting

A cause of action for accounting requires a showing of a relationship between the plaintiff and the defendant, such as a fiduciary relationship, that requires an accounting or a showing that the accounts are so complicated they cannot be determined through an ordinary action at law.  (Fleet v. Bank of America N.A.¿(2014) 229 Cal.App.4th 1403, 1413.)  An action for accounting is not available where the plaintiff alleges the right to recover a sum certain or a sum that can be made certain by calculation.  (Id.)  The right to an accounting can arise from the possession by the defendant of money or property which, because of the defendant’s relationship with the plaintiff, the defendant is obliged to surrender.  (Teselle¿v. McLoughlin¿(2009) 173 Cal.App.4th 156,¿179-80.)¿¿ 

As Plaintiff has not raised factual disputes over the existence of a fiduciary relationship, the Court GRANTS the Motion to the sixth cause of action.

Seventh, Eighth, Tenth, and Twelfth Causes of Action

            Moving Defendants argue that Plaintiff’s Labor Code claims, unfair competition claim, and declaratory relief claim fail because no contract existed.  Because there are factual disputes over the existence of a contract and Moving Defendants have not raised other arguments regarding these claims, the Court DENIES the Motion to these causes of action.

Special Damages

Unlike general damages, special damages are those losses that do not arise directly and inevitably from any similar breach of any similar agreement.  (Lewis Jorge Construction Management, Inc. v. Pomona Unified School Dist. (2004) 34 Cal.4th 960, 968.)  Instead, they are secondary or derivative losses arising from circumstances that are particular to the contract or to the parties.  (Id. at 968-69.)  Special damages are recoverable if the special or particular circumstances from which they arise were actually communicated to or known by the breaching party (a subjective test) or were matters of which the breaching party should have been aware at the time of contracting (an objective test).  (Id. at 969.)  Special damages will not be presumed from the mere breach but represent loss that occurred by reason of injuries following from the breach.  (Id.)  Special damages are among the losses that are foreseeable and proximately caused by the breach of a contract.  (Id.; see Civ. Code § 3300.)

Moving Defendants argue that Plaintiff may not recover special damages because: (1) there was no contract; and (2) Plaintiff has not alleged unanticipated injuries.  As previously discussed, there are factual issues regarding the PSA.  Moving Defendants have not cited to any authority that supports their argument that Plaintiff was required to allege unanticipated losses flowing from the alleged PSA breach.  The Court therefore DENIES the Motion as to special damages.

            Moving party is ordered to give notice of this ruling.

In consideration of the current COVID-19 pandemic situation, the Court strongly encourages that appearances on all proceedings, including this one, be made by LACourtConnect if the parties do not submit on the tentative.  If you instead intend to make an appearance in person at Court on this matter, you must send an email by 2 p.m. on the last Court day before the scheduled date of the hearing to SMC_DEPT56@lacourt.org stating your intention to appear in person.  The Court will then inform you by close of business that day of the time your hearing will be held. The time set for the hearing may be at any time during that scheduled hearing day, or it may be necessary to schedule the hearing for another date if the Court is unable to accommodate all personal appearances set on that date.  This rule is necessary to ensure that adequate precautions can be taken for proper social distancing.

Parties who intend to submit on this tentative must send an email to the Court at SMC_DEPT56@lacourt.org as directed by the instructions provided on the court website at www.lacourt.org.  If the department does not receive an email and there are no appearances at the hearing, the motion will be placed off calendar.

       Dated this 18th day of January 2023