Judge: John J. Kralik, Case: 24BBCV00380, Date: 2024-07-19 Tentative Ruling
Case Number: 24BBCV00380 Hearing Date: July 19, 2024 Dept: NCB
North
Central District
|
michael
bank, Plaintiff, v. elita
era llc dba seal skin covers Defendant. |
Case No.:
24BBCV00380 Hearing Date: July 19, 2024 [TENTATIVE] order RE: demurrer |
BACKGROUND
A.
Allegations
Plaintiff Michael Bank (“Plaintiff”) alleges
Defendant Elite Era LLC dba Seal Skin Covers (“Defendant”) is in the business
of manufacturing and selling full body waterproof covers for cars, trucks, and
SUVs. Plaintiff alleges that in 2021, he
began working for Defendant under the job title of Chief Sales Officer. He alleges that the parties orally agreed on
a payment structure as follows: “Plaintiff would earn a $210,000.00 base salary
that included a $60,000.00 draw. The first $60,000.00 in net profits generated
through wholesale and third-party marketplace account sales secured by
Plaintiff would be paid to Defendant to cover the $60,000.00 draw. Once the
draw was repaid, Plaintiff was then entitled to 100% of additional net profits
generated by the wholesale and marketplace accounts he was responsible for
securing up to a total of $90,000.00[], and then an additional 5% of the gross
sales after that. Plaintiff made multiple efforts to have Defendant sign a
written contract memorializing these terms.”
(Compl., ¶8 [footnote omitted].)
Plaintiff alleges that he was employee of Defendant and thereby is
entitled to the protections afforded to employees under the labor code. (Id., ¶9.) Plaintiff alleges that in 2022, he secured a
series of wholesale and third-party marketplace accounts, including Amazon, and
fulfilled the full $60,000 draw repayment while also earning approximately
$21,000 in additional commissions via net profits. Plaintiff alleges that Defendant failed to
pay Plaintiff his earned 2022 commissions, Plaintiff had to pursue payment, and
eventually began receiving payments in April 2023. Plaintiff alleges that Defendant terminated
Plaintiff in 2023 and had failed to issue Plaintiff any commission payments for
2023. Plaintiff alleges that he is owed
in excess of $200,000 in unpaid commissions for 2023.
The complaint, filed February 14, 2024,
alleges causes of action for: (1) breach of contract; and (2) failure to pay
wages in violation of Labor Code, § 201.
B.
Demurrer
on Calendar
On May 6, 2024, Defendant filed a demurrer
to the 1st and 2nd causes of action in the complaint.
On June 24, 2024, Plaintiff filed an
opposition brief.
On July 12, 2024, Defendant filed a reply
brief.
DISCUSSION
Defendant demurs to the
1st and 2nd causes of action in the complaint.
A.
1st
cause of action for breach of contract
The essential elements of a cause of
action for breach of contract are: “(1) the
existence of the contract, (2) plaintiff's performance or excuse for
nonperformance, (3) defendant's breach, and (4) the resulting damages to
plaintiff.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.) “An oral contract may be pleaded
generally as to its effect, because it is rarely possible to allege the exact
words.” (Khoury v. Maly's of California, Inc. (1993) 14 Cal.App.4th 612,
616.)
In the complaint, Plaintiff alleges that
the parties entered into an oral contract with a payment schedule. (Compl., ¶¶8, 15.) He alleges that “Plaintiff made multiple
efforts to have Defendant sign a written contract memorializing these terms.
Despite representing that they would do so, Defendant’s ownership never signed
the agreement.” (Id., ¶8.) Plaintiff alleges that he did all things
required of him under the agreement. (Id.,
¶16.) Plaintiff alleges that Defendant
failed to make contractually agreed upon commission payments to Plaintiff, such
that he was harmed in the form of unpaid commissions and lost wages. (Id., ¶¶17-18.)
Defendant argues that Plaintiff has failed
to attach a copy of the contract or set out the material terms of the contract,
despite alleging the existence of a written contract. In the demurrer and reply papers, Defendant
argues that an unsigned, written contract exists that establishes that
Plaintiff is an independent contractor.
However, these are facts that are extrinsic to the facts alleged in the
complaint. As currently alleged, a
review of the complaint shows that it alleges an oral contract
only. Plaintiff alleges that despite
attempts at trying to obtain a written contract from Defendant, Defendant never
signed the agreement. As such, Plaintiff
acknowledges that no written contract exists, and Plaintiff’s claim is based on
an oral agreement.
Nevertheless, the Court will sustain the
demurrer on the 1st cause of action as the terms of the oral
agreement do not lay out the material terms of the agreement. In paragraph 8 of the complaint (quoted above
in this written order’s “Allegations” section), Plaintiff alleges the amount of
base salary he would earn, the repayment of the $60,000 draw, the 100% of
additional net profits he would generate by accounts up to $90,000, and an
additional 5% of the gross sales after that.
(Compl., ¶8.) However, the terms
of Plaintiff’s obligations, when payments would be made by Defendant, etc.,
have not been provided. Thus, the Court
will sustain the demurrer to the 1st cause of action with leave to
amend so that Plaintiff may allege additional facts regarding the terms of the
oral agreement.
B. 2nd cause of action for failure to
pay wages in violation of Labor Code, § 201
The
California Supreme Court in Dynamex Operations W. v. Superior Court (2018) 4 Cal.5th 903 defined “employment” with 3 alternate definitions: “(a)
to exercise control over the wages, hours or working conditions, (b) to suffer
or permit to work, or (c) to engage, thereby creating a common law employment
relationship.” (Dynamex Operations W. v. Superior Court (2018) 4
Cal.5th 903, 921.) “The ABC test
presumptively considers all workers to be employees, and permits workers to be
classified as independent contractors only if the hiring business demonstrates
that the worker in question satisfies each of three conditions: (a) that
the worker is free from the control and direction of the hirer in connection
with the performance of the work, both under the contract for the performance
of the work and in fact; and (b) that the worker performs work that is
outside the usual course of the hiring entity's business; and (c) that
the worker is customarily engaged in an independently established trade,
occupation, or business of the same nature as that involved in the work
performed.” (Id. at
955-956.) The Supreme Court conclude
that it “is appropriate, and most consistent with the history and purpose of
the suffer or permit to work standard in California's wage orders, to interpret
that standard as: (1) placing the burden on the hiring entity to establish that
the worker is an independent contractor who was not intended to be included
within the wage order's coverage;[] and (2) requiring the hiring entity, in
order to meet this burden, to establish each of the three factors
embodied in the ABC test—namely (A) that the worker is free from the control
and direction of the hiring entity in connection with the performance of the
work, both under the contract for the performance of the work and in fact; and
(B) that the worker performs work that is outside the usual course of the
hiring entity's business; and (C) that the worker is customarily engaged
in an independently established trade, occupation, or business of the same
nature as the work performed.” (Id.
at 956-957 [footnoted omitted].)
The complaint alleges: “Under the laws of the state of California and
specifically the employee test set forth under Dynamex, Plaintiff was an
employee of Defendant. Plaintiff worked under the direction and control of
Defendant’s ownership, attended regular sales meetings and regularly received
direction on all matters concerning corporate strategy and development.
Plaintiff was also primarily engaged in the distribution and sale of
Defendant’s principal product line. Finally, Plaintiff was not engaged in any
independent business or trade outside of his work for Defendant. At all
relevant times herein, Plaintiff was domiciled in the state of California.
Accordingly, Plaintiff is entitled to the protections afforded to California
employees under the California labor code.”
(Compl., ¶9.) In the 2nd
cause of action, Plaintiff alleges that he was an employee of Defendant. (Compl., ¶21.) He alleges that Labor Code, § 200(a) defines
commissions as wages, he earned commissions in 2023, and Defendant failed to pay
him his earned commissions. (Id.,
¶¶22-24.)
Defendant demurs
to the 2nd cause of action, arguing that Plaintiff has not alleged
sufficient facts that he is an employee of Defendant, but is instead an
independent contractor. Defendant argues that the complaint alleges in a conclusory manner that
Plaintiff is an employee of Defendant, but the complaint fails to address the
factors regarding whether an individual qualifies as an employee.
At this time, the Court finds that Plaintiff’s allegations in paragraph 9
of the complaint to be sufficient to allege that he was an employee of
Defendant. At the pleading stage, the
Court accepts the truth of the allegations.
Whether Plaintiff can prove that he is an employee will be determined
upon the consideration of evidence at the summary judgment or trial stage.
The demurrer to the 2nd cause of action is overruled.
CONCLUSION AND ORDER
Defendant Elite
Era LLC dba Seal Skin Covers’ demurrer to the complaint is sustained with 20
days leave to amend as to the 1st cause of action and overruled as
to the 2nd cause of action.
Defendant
shall
provide notice of this order.
DATED: July 19, 2024 ___________________________
John
J. Kralik
Judge
of the Superior Court