Judge: Kevin C. Brazile, Case: 21STCV43407, Date: 2022-09-21 Tentative Ruling

Hearing Date: September 21, 2022

Case Name: Pfau v. Riko Wiemer International, LLC, et al.

Case No.: 21STCV27719

Matter: Demurrer; Motion to Strike

Moving Party: Defendants Riko Weimer International, LLC and Riko Weimer

Responding Party: Plaintiff Jeremy Pfau

Notice: OK

Ruling: The Demurrer is sustained as to the third, fourth, and sixth causes of 

action, but is overruled as to the second and fifth causes of action.  Leave to amend is denied.

The Motion to Strike is granted in part, without leave to amend.

Moving parties to give notice.

If counsel do not submit on the tentative, they are strongly 

encouraged to appear by LACourtConnect rather than in person due to the COVID-19 pandemic. 

1. Background

On July 28, 2021, Plaintiff Jeremy Pfau filed the operative Complaint against Defendants Riko Wiemer International, LLC and Riko Wiemer (actually spelled “Weimer”) for (1) violation of Labor Code §§ 1182.12, 1194, 1197, 1197.1, and 1198 (Unpaid Wages); (2) violation of Labor Code §§ 226.7 and 1198 (Failure to Authorize and Permit Rest Periods); (3) violation of Labor Code § 2802 (Unreimbursed Business Expenses); (4) violation of Labor Code §§ 201-202 (Wages Not Timely Paid Upon Termination); (5) violation of Business & Professions Code §§ 17200, et seq., (6) retaliation in violation of Labor Code § 1102.5; and (7) wrongful termination.  Plaintiff alleges he was a piano instructor for Defendants and that he was not paid for all hours worked, not paid for business expenses, and not given rest breaks.  Plaintiff alleges he was terminated for complaining about these issues.

On June 9, 2022, Riko Weimer International, LLC and Riko Weimer filed a First Amended Cross-Complaint (“FACC”) against Pfau for (1) breach of contract, (2) violation of the UCL, (3) constructive fraud, (4) breach of fiduciary duty, (5) breach of the duty of loyalty, and (6) breach of the implied covenant of good faith and fair dealing.  Among other things, Cross-Complainants allege that Pfau improperly competed with their business; failed to give proper notice of his resignation; and failed to return his master key.

2. Demurrer 

Cross-Defendant Pfau demurs to the second through sixth causes of action for failure to state sufficient facts.

When considering demurrers, courts read the allegations liberally and in context, and “treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.” (Serrano v. Priest (1971) 5 Cal.3d 584, 591.)  “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.”  (Hahn v. Mirda¿(2007) 147 Cal.App.4th 740, 747.)  It is error “to sustain a demurrer without leave to amend if the plaintiff shows there is a reasonable possibility any defect identified by the defendant can be cured by amendment.”  (Aubry v. Tri-City Hospital Dist.¿(1992) 2 Cal.4th 962, 967.)

1. UCL

Pfau argues that Cross-Complainants fail to plead unlawful, fraudulent, or unfair behavior for the purposes of the UCL claim.  Pfau contends, “this cause of action is based on the fact that Mr. Pfau allegedly decided to start a competing business teaching music, and that after leaving RWI’s employment he started to do so at a cheaper rate, and with teaching techniques and piano standard that RWI does not agree with. (See FACC ¶¶ 67-74.) Not only is competing against your former employee legal, but California law explicitly prohibits noncomplete agreements and contracts in restraint of trade. See Bus. & Prof. Code, § 16600. Indeed, California law goes further in that it explicitly allows an employee (and even and an officer of a company) to make preparation to compete before resigning.”

However, Pfau fails to discuss the allegation that he misrepresented his credentials on LinkedIn to the detriment of Cross-Complainants’ business.  (FACC ¶ 72.)  This might constitute fraudulent conduct.  The Demurrer is overruled.

2. Constructive Fraud & Breach of Fiduciary Duty

“The elements of the cause of action for constructive fraud are: (1) fiduciary relationship; (2) nondisclosure (breach of fiduciary duty); (3) intent to deceive, and (4) reliance and resulting injury (causation).”  (Younan v. Equifax Inc. (1980) 111 Cal.App.3d 498, 517.)

“The elements of a cause of action for breach of fiduciary duty are: (1) the existence of a fiduciary duty; (2) the breach of that duty; and (3) damage proximately caused by that breach. [Citation.]” (Mosier v. Southern Cal. Physicians Ins. Exchange (1998) 63 Cal.App.4th 1022, 1044.)

For the purposes of a constructive fraud claim, a confidential relationship—as opposed to a fiduciary duty—may suffice.  (Richelle L. v. Roman Catholic Archbishop (2003) 106 Cal.App.4th 257, 270-273.)  Some courts have stated that the essential elements for a confidential relationship are “1) The vulnerability of one party to the other which 2) results in the empowerment of the stronger party by the weaker which 3) empowerment has been solicited or accepted by the stronger party and 4) prevents the weaker party from effectively protecting itself.”  (Id. at p. 272.)  The “vulnerability” necessary “usually arises from advanced age, youth, lack of education, weakness of mind, grief, sickness, or some other incapacity.”  (Id. at p. 273.)

These causes of action require the existence of a fiduciary duty or confidential relationship, but the FACC fails to plead sufficient facts indicating why Pfau would have such a duty.  The FACC alleges that “Pfau’s duties listed on his performance evaluation included the conduct of staff candidate interviews, supervision of administrative roles, assigning instructors, marketing and communication with the Company accountant regarding fees, taxes, regulations, etc. Performance of these duties entailed participation in the management of the Company and the exercise of discretion to manage its day-to-day activities. CrossDefendant was therefore in a position of fiduciary duty toward the Employer.”  Respectfully, this merely describes a basic supervisory role.  The FACC fails to identify job duties that would make Pfau akin to an officer or director with fiduciary duties.  Indeed, “[e]mployees who are not officers or directors are generally not considered to be fiduciaries and thus owe no fiduciary duty to their employers: ‘There is no confidential or fiduciary relationship in this [employment contract] context.’ [See Calvao v. Sup.Ct. (Klippert) (1988) 201 CA3d 921, 923, 247 CR 470, 471]”.  (Cal. Prac. Guide Employment Litigation Ch. 14-B.)

Thus, the Demurrer is sustained as to the third and fourth causes of action, without leave to amend.

3. Breach of the Duty of Loyalty

“The elements of a cause of action for breach of a duty of loyalty, by analogy to a claim for breach of fiduciary duty, are as follows: (1) the existence of a relationship giving rise to a duty of loyalty; (2) one or more breaches of that duty; and (3) damage proximately caused by that breach.”  (Huong Que, Inc. v. Luu (2007) 150 Cal.App.4th 400, 410.)

“[A]n employer has the right to expect the undivided loyalty of its employees. The duty of loyalty is breached, and may give rise to a cause of action in the employer, when the employee takes action which is inimical to the best interests of the employer.”  (Stokes v. Dole Nut Co. (1995) 41 Cal.App.4th 285, 295.)

Plaintiff merely argues that in Mattel, Inc. v. MGA Entertainment, Inc., 2011 WL 8427611 it was found that there is no separate claim for breach of the duty of loyalty—rather, there is only a claim for breach of fiduciary duty.  However, this seems to be a minority view.  (Cardinal v. Lupo (N.D. Cal. Sept. 17, 2019) 2019 WL 4450859 at *11.)  Further, California law cited above seems to be to the contrary.  

The Demurrer is overruled as to the claim for breach of the duty of loyalty.

4. Breach of the Implied Covenant of Good Faith & Fair Dealing

Pfau argues that there is no tortious breach of the implied covenant of good faith and fair dealing in the employment context.

The Court agrees because an employment relationship is primarily contractual in nature. (Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 692 [“[W]e are not convinced that a ‘special relationship’ analogous to that between insurer and insured should be deemed to exist in the usual employment relationship which would warrant recognition of a tort action for breach of the implied covenant.”; Cal. Prac. Guide Employment Litigation Ch. 4-D.)

The Demurrer is sustained as to the sixth cause of action, without leave to amend.

5. Summary

In sum, the Demurrer is sustained as to the third, fourth, and sixth causes of action, but is otherwise overruled.  Leave to amend is denied.

3. Motion to Strike

Pfau seeks to strike the FACC’s (1) request for damages for the UCL claim and (2) request for punitive damages for breach of the covenant of good faith and fair dealing.

Given the ruling on the Demurrer, the Motion is denied as moot as to punitive damages for breach of the covenant of good faith and fair dealing.

The Motion to Strike is granted as to the UCL claim’s request for (1) damages, (2) punitive damages, and (3) incidental and consequential expenses because the UCL only allows for restitution and injunctive relief.  Leave to amend is denied.

Moving parties to give notice.

If counsel do not submit on the tentative, they are strongly encouraged to appear by LACourtConnect rather than in person due to the COVID-19 pandemic.