Judge Holly J. Fujie, Case Number: 23STCV01919, Date: 2023-05-10 Tentative Ruling

This action arises out of an employment relationship. The currently operative first amended complaint (the “FAC”) alleges: (1) common law and statutory fraud and deceit; (2) promissory estoppel; and (3) negligent misrepresentation

In relevant part, the FAC alleges: Moving Defendant’s vice president of construction, Sam Sapp (“Sapp”) began recruiting Plaintiff for a project manager position on or around May 14, 2021. (FAC ¶ 7.) When Plaintiff informed Sapp that he was happy at his current job, Sapp spent the next two weeks making representations to Plaintiff about specific projects he would be assigned to, as well as Moving Defendant’s finances and growth. (See FAC ¶¶ 9-10.) Based on Sapp’s statements, on June 3, 2021, Plaintiff attended a recruitment meeting with Moving Defendant’s head of construction, Spencer Padgett (“Padgett”). During the meeting, Plaintiff restated that he liked his current job and would only consider switching positions for a secure, long-term position that had potential for growth. (FAC ¶ 12.) Padgett reiterated Moving Defendant’s growth and plans for future expansion and informed Plaintiff of the specific role he would play in the company’s growth. (FAC ¶ 13.) Padgett also told Plaintiff that it was a good time to join the company because he would receive stock options before Moving Defendant went public within the next two to three years. (Id.) After the meeting, Sapp again emphasized to Plaintiff that the position would be long-term. (FAC ¶ 14.)

Moving Defendant formally offered Plaintiff the position on or around July 13, 2021. (FAC ¶ 15.) Plaintiff accepted the offer and resigned from his current position based on the representations that his employment with Moving Defendant would be long-term. (FAC ¶ 16.)

When Plaintiff began working on ot around August 2, 2021, he learned that Moving Defendant was undergoing corporate reorganization, a fact which had not been shared with him during the recruitment process. (FAC ¶¶ 17-18.) Sapp and Padgett withheld the information about Moving Defendant’s restructuring as part of the effort to convince Plaintiff that he was accepting “long-term” employment. (See FAC ¶¶ 46, 49.) Despite receiving positive performance reviews, Moving Defendant terminated Plaintiff’s employment on February 23, 2022. (See FAC ¶¶ 19-21.)

Moving Defendant filed a demurrer (the “Demurrer”) to the third cause of action on the ground that the FAC fails to state facts sufficient to constitute a negligent misrepresentation claim.

A demurrer tests the sufficiency of a complaint as a matter of law. (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1358.) The court accepts as true all material factual allegations and affords them a liberal construction, but it does not consider conclusions of fact or law, opinions, speculation, or allegations contrary to law or judicially noticed facts. (Shea Homes Limited Partnership v. County of Alameda (2003) 110 Cal.App.4th 1246, 1254.) With respect to a demurrer, the complaint must be construed liberally by drawing reasonable inferences from the facts pleaded. (Rodas v. Spiegel (2001) 87 Cal.App.4th 513, 517.) A demurrer will be sustained without leave to amend if there exists no reasonable possibility that the defect can be cured by amendment. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)

The elements of negligent misrepresentation are: (1) the misrepresentation of a past or existing material fact; (2) without reasonable ground for believing it to be true; (3) with intent to induce another's reliance on the fact misrepresented; (4) justifiable reliance on the misrepresentation; and (5) resulting damage. (Apollo Capital Fund, LLC v. Roth Capital Partners, LLC (2007) 158 Cal.App.4th 226, 243.) A positive assertion is required; an omission or an implied assertion or representation is not sufficient. (Id.) Generally, parties cannot read something into a neutral statement in order to justify a claim for negligent misrepresentation. (OCM Principal Opportunities Fund, L.P. v. CIBC World Markets Corp. (2007) 157 Cal.App.4th 835, 854.) Although an “implied” assertion or representation is not enough, when the defendant purports to convey the “whole truth” about a subject, “misleading half-truths” about the subject may constitute positive assertions for the purpose of negligent misrepresentation. (Id.)

An actionable misrepresentation must be made about past or existing facts; statements regarding future events are merely deemed opinions. (Neu-Visions Sports, Inc. v. Soren/McAdam/Bartells (2000) 86 Cal.App.4th 303, 309-10.) Under certain circumstances, expressions of professional opinion are treated as representations of fact. (Public Employees' Retirement System v. Moody's Investors Service, Inc. (2014) 226 Cal.App.4th 643, 662.) When a statement, although in the form of an opinion, is not a casual expression of belief but a deliberate affirmation of the matters stated, it may be regarded as a positive assertion of fact. (Id.) Moreover, when a party possesses or holds itself out as possessing superior knowledge or special information or expertise regarding the subject matter and a plaintiff is so situated that it may reasonably rely on such supposed knowledge, information, or expertise, the defendant's representation may be treated as one of material fact. (Id.)

The third cause of action is rooted in: 1) the assurances that Plaintiff would have a long-term position with Moving Defendant; 2) the representations about Moving Defendant’s growth and financial backing; and 3) the simultaneous omission of information regarding Moving Defendant’s ongoing reorganization. (See, e.g., FAC ¶¶ 9, 14, 22-23.) Moving Defendant argues that the claim is based on nonactionable opinions regarding the terms of Plaintiff’s future employment and the non-actionable omission of the reorganization. While the Court agrees with Moving Defendant’s recitation of the law, the Court takes a less compartmentalized approach to its consideration of the sufficiency of Plaintiff’s allegations. Reading the allegations as a whole and drawing inferences in Plaintiff’s favor, the Court finds that the FAC sufficiently alleges that Moving Defendant misrepresented itself as a potential employer by emphasizing its growth and incoming projects while failing to inform Plaintiff of the ongoing reorganization, and the possibility of related personnel changes. In context, these allegations may be reasonably construed as an actionable “half-truth” about the current state of Moving Defendant’s work environment. (See OCM Principal Opportunities Fund, L.P. v. CIBC World Markets Corp. (2007) 157 Cal.App.4th 835, 854.)[1] Furthermore, the affirmative statements about growth combined with the omission of the reorganization may be construed as a misrepresentation of a present fact. The Court therefore OVERRULES the Demurrer. Moving Defendant is ordered to file and serve a responsive pleading within 20 days of the date of this order.

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.

[1] The Court notes that the argument in Plaintiff’s opposition (the “Opposition”) regarding actionable omissions of fact misstate the law, and Plaintiff’s legal authorities only apply to intentional concealment claims. (See Opposition 3:1-4:15.)