Case Number: 23STCV29884    Hearing Date: March 17, 2025    Dept: 20

Tentative Ruling

Judge Kevin C. Brazile

Hearing Date:                         Monday, March 17, 2025

Case Name:                            Teresa Martinez v. Goodwin Procter LLP, et al.

Case No.:                                23STCV29884

Motion:                                  (1) Demurrer to Cross-Complaint

                                                (2) Motion for Sanctions Pursuant to CCP §128.7

Moving Party:                         Defendants Goodwin Procter LLP and D’Juan Parker

Responding Party:                  Plaintiff Teresa Martinez

Notice:                                    OK

Ruling:                                    (1) Defendant Goodwin’s Demurrer to Plaintiff’s Cross-Complaint is SUSTAINED WITHOUT LEAVE TO AMEND

                                                (2)  Defendant Goodwin’s Motion for Sanctions pursuant to CCP §128.7 is GRANTED.  Sanctions are awarded to Defendant and against Plaintiff’s counsel in the amount of $10,890.

Defendant 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.

BACKGROUND

            Plaintiff was employed by Defendant Goodwin Procter, LLP (“Goodwin”) as a legal secretary from October 15, 2021 to January 21, 2023.  Plaintiff alleges Defendant Goodwin’s employee, Defendant D’Juan Parker, sexually harassed her and harassed her based on her race.  Plaintiff alleges Defendant Goodwin failed to adequately investigate or take any corrective action in response to her complaints about Defendant Parker’s conduct.  Plaintiff alleges Defendant Goodwin also refused to provide reasonable accommodations for her disabilities and refused to engage in a timely, good faith interactive process to determine how best to accommodate her. 

            Plaintiff filed this action on December 7, 2023.  Plaintiff filed the operative First Amended Complaint on July 24, 2024 alleging (1) discrimination in violation of FEHA; (2) failure to prevent discrimination (FEHA); (3) failure to engage in a timely good faith interactive process to provide reasonable accommodation; (4) failure to provide reasonable accommodation; (5) retaliation in violation of FEHA; (6) harassment in violation of FEHA; (7) failure to prevent harassment in violation of FEHA; (8) Labor Code §98.6; (9) Labor Code §1102.5; (10) Labor Code §6310; (11) wrongful termination in violation of public policy.

            In response to the FAC, Defendant Goodwin filed a cross-complaint against Plaintiff on August 27, 2024.  Goodwin’s cross-complaint alleges (1) conversion and (2) fraud.

            In response to Defendant Goodwin’s cross-complaint, Plaintiff filed a cross-complaint against Defendant Goodwin on September 30, 2024.  Plaintiff’s cross-complaint alleges (1) Labor Code §2802 and (2) declaratory relief. 

            On November 1, 2024, Defendant Goodwin filed the instant demurrer to Plaintiff’s cross-complaint.  On March 4, 2025, Plaintiff Teresa Martinez filed an opposition to the demurrer.  On March 10, 2025, Defendant Goodwin filed a reply.

            On December 11, 2024, Defendant Goodwin filed the instant Motion for Sanctions Pursuant to CCP §128.7.  On March 4, 2025, Plaintiff filed an opposition.  On March 10, 2025, Defendant filed a reply. 

DISCUSSION

DEFENDANT’S DEMURRER TO PLAINTIFF’S CROSS-COMPLAINT

Applicable Law

            A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirada (2007) 147 Cal.App.4th 740, 747.)  At the pleading stage, a plaintiff need only allege ultimate facts sufficient to apprise the defendant of the factual basis for the claim against him.  (Semole v. Sansoucie (1972) 28 Cal. App. 3d 714, 721.)  On a demurrer, the Court must accept as true all factual allegations in the complaint.  (Nealy v. County of Orange (2020) 54 Cal.App.5th 594, 597.)  “The demurrer tests the pleading alone and not the evidence or other extrinsic matters which do not appear on the face of the pleading or cannot be properly inferred from the factual allegations of the complaint.” (Bach v. McNelis (1989) 207 Cal.App.3d 852, 864; Ion Equip. Corp. v. Nelson (1980) 110 Cal.App.3d 868, 881 (error for court to consider facts asserted in memorandum supporting demurrer).)  A “demurrer does not, however, admit contentions, deductions or conclusions of fact or law alleged in the pleading, or the construction of instruments pleaded, or facts impossible in law.”  (S. Shore Land Co. v. Petersen (1964) 226 Cal.App.2d 725, 732.)  

            “The court may, upon a motion made pursuant to Section 435, or at any time in its discretion, and upon terms it deems proper: (a) Strike out any irrelevant, false, or improper matter inserted in any pleading. (b) 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.” (CCP §436.)

            Pursuant to CCP §436, the Court may strike out “any irrelevant, false, or improper matter inserted in any pleading” and/or “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.” (CCP §436.) In ruling on a motion to strike, the allegations in the complaint are considered in context and presumed to be true: “[J]udges read allegations of a pleading subject to a motion to strike as a whole, all parts in their context, and assume their truth.” (Clauson v. Sup.Ct. (Pedus Services, Inc.) (1998) 67 Cal.App.4th 1253, 1255.)

Application to Facts

            Defendant Goodwin demurs to both causes of action for Labor Code §2802 and declaratory relief in Plaintiff’s cross-complaint.  Defendant Goodwin argues the Labor Code §2802 cause of action fails, because an employer’s obligation to indemnify an employee thereunder does not extend to the employer’s direct lawsuit against the employee.  Defendant Goodwin argues the declaratory relief cause of action fails because there is no actual controversy over Goodwin’s obligation to indemnify Plaintiff.

            In response, Plaintiff argues the case law relied upon by Goodwin was outside this appellate district and wrongly decided.  Plaintiff argues an employee may recover its defense costs from its employer pursuant to Labor Code §2802.

            In reply, Defendant argues Plaintiff improperly interprets and applies Labor Code §2802 and Nicholas Laboratories, LLC.  Defendant argues Plaintiff’s cross-complaint for indemnification is not based on any third party claim against her.  Defendant argues Plaintiff’s cross-complaint for indemnification is based on Defendant’s (employer) against Plaintiff (employee) for fraud and conversion. 

            Plaintiff fails to allege a claim for indemnification under Labor Code §2802

            Labor Code §2802 provides, “An employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer, even though unlawful, unless the employee, at the time of obeying the directions, believed them to be unlawful.” 

            An employer’s obligation to indemnify an employee under Labor Code §2802 does not apply to “first party disputes between employers and employees.”  (Nicholas Laboratories, LLC v. Chen (2011) 199 Cal.App.4^th 1240, 1251.)  “We are not persuaded that the Legislature, in drafting section 2802, intended to depart from the usual meaning of the word “indemnify” to address ‘first party’ disputes between employers and employees. The Legislature could have specifically provided in section 2802 that attorney fees incurred defending an action by the employer were recoverable by a prevailing employee. The fact that the Legislature did not do so suggests disputes between employers and employees are subject to the ordinary rules applying to the recovery of attorney fees in California litigation.”  (Id.)  “Consideration of this more expansive fabric of the law suggests that any interpretation of section 2802 which would allow the statute to become a unilateral attorney fee statute in litigation between employees and employers would be incompatible with that larger body of law.”  (Id.)

            Plaintiff’s claim under Labor Code §2802 seeks indemnification from Defendant Goodwin for Goodwin’s cross-complaint in the instant case. (Goodwin X-Complaint, ¶9.)  Plaintiff is therefore seeking indemnification from Goodwin, her employer, for Goodwin’s “first party” or direct claim against her.  Pursuant to Nicholas Laboratories, LLC, Labor Code §2802 cannot be applied to such “first party claims” by an employer against an employee.

            In response, Plaintiff fails to cite any contrary authority and only argues Nicholas Laboratories, LLC was wrongly decided and from a different appellate district. Despite Plaintiff’s objections, Nicholas Laboratories, LLC is binding precedent. 

            Plaintiff refers to O'Hara v. Teamsters Union Local # 856 (9th Cir.1998) 151 F.3d 1152.  The Court of Appeals in Nicholas Laboratories, LLC distinguished O’Hara.  “[T]he distinction between O’Hara and the instant case is that O’Hara involved an underlying third party claim that was the basis for the monetary dispute between the parties over who was required to indemnify whom…We are not convinced O’Hara answers the question presented in this case.”  (Nicholas Laboratories, LLC, supra, 199 Cal.App.4^th at 1250.)  O’Hara is also a Ninth Circuit case and is not binding on issues of California state law. 

            Defendant’s demurrer to the first cause of action for indemnification under Labor Code §2802 is sustained without leave to amend.  Because section 2802 does not apply to first party disputes between and employer and employee as an issue of law, leave to amend would be futile.

            Plaintiff’s declaratory relief claim moot

            Plaintiff’s declaratory relief claim seeks a judicial determination of the rights and duties of the parties and a declaration as to the obligation of Defendant to indemnify and defend Plaintiff against Defendant’s cross-complaint.  A judicial determination has been made in connection with the demurrer to the first cause of action for indemnification under Labor Code §2802.  The declaratory relief claim is moot and duplicative.

            Defendant’s demurrer to the second cause of action for declaratory relief is sustained without leave to amend. 

DEFENDANT’S MOTION FOR SANCTIONS PURSUANT TO CCP §128.7

Applicable Law

            “By presenting to the court, whether by signing, filing, submitting, or later advocating, a pleading, petition, written notice of motion, or other similar paper, an attorney or unrepresented party is certifying that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances, all of the following conditions are met:  (1) It is not being presented primarily for an improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.  (2) The claims, defenses, and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law.  (3) The allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery.”  (CCP §128.7(b).)

            “Under section 128.7, a court may impose sanctions if it concludes a pleading was filed for an improper purpose or was indisputably without merit, either legally or factually.  [¶]  A claim is factually frivolous if it is ‘not well grounded in fact’ and is legally frivolous if it is ‘not warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law.’  In either case, to obtain sanctions, the moving party must show the party's conduct in asserting the claim was objectively unreasonable.  A claim is objectively unreasonable if any reasonable attorney would agree that it is totally and completely without merit.”  (Bucur v. Ahmad (2016) 244 Cal.App.4th 175, 189 (CCP 128.7 sanctions properly imposed where it was obvious that plaintiffs’ claims were barred by res judicata, judicial admissions and judicial estoppel).) 

            An action that is not legally or factually frivolous cannot be presented for an improper purpose.  “Having concluded that the claims presented in the second amended complaint were nonfrivolous, we must also conclude that they were not presented for an improper purpose.”

(Ponce v. Wells Fargo Bank (2018) 21 Cal.App.5th 253, 265.) 

Application to Facts

            Parties’ Positions

            Defendant Goodwin requests that sanctions be imposed against Plaintiff and Plaintiff’s counsel for filing a frivolous cross-complaint alleging indemnification under Labor Code §2802.  Defendant Goodwin argues the cross-complaint violates all three certifications, because it is legally frivolous, unsupported by evidence and presented for an improper purpose.  Defendant asks for $26,794 in sanctions.

            In response, Plaintiff argues Nicholas Laboratories, LLC was wrongly decided and from a different appellate district.  Plaintiff argues the cross-complaint is not frivolous because O’Hara, which was mentioned in Nicholas Laboratories, LLC, supports her position that Labor Code §2802 applies to “first party disputes” between an employer and employee. 

            In reply, Defendant argues Labor Code §2802 clearly does not apply to Defendant’s cross-complaint against Plaintiff. Defendant argues there is no ambiguity in the statute or the case law.  Defendant argues Nicholas Laboratories, LLC applies and Plaintiff’s contention that it was wrongly decided does not make her Labor Code §2802 meritorious.  Defendant argues the cross-complaint is frivolous, unwarranted by existing law and intended to harass Goodwin and delay this matter.

            Defendant satisfied the 21-day safe harbor requirement

            “A motion for sanctions under this section shall be made separately from other motions or requests and shall describe the specific conduct alleged to violate subdivision (b). Notice of motion shall be served as provided in Section 1010, but shall not be filed with or presented to the court unless, within 21 days after service of the motion, or any other period as the court may prescribe, the challenged paper, claim, defense, contention, allegation, or denial is not withdrawn or appropriately corrected. If warranted, the court may award to the party prevailing on the motion the reasonable expenses and attorney's fees incurred in presenting or opposing the motion. Absent exceptional circumstances, a law firm shall be held jointly responsible for violations committed by its partners, associates, and employees.”  (CCP §128.7(c)(1)(emphasis added).)

            A notice served on the party against whom sanctions is sought must comply with all of the requirements of CCP § 1010, including the time and place of the motion hearing. Otherwise, it does not satisfy the “safe harbor” requirement even if a second notice stating the time and place is served when the motion is filed.  (Galleria Plus, Inc. v. Hanmi Bank (2009) 179 CA4th 535, 538)(document served stating sanctions motion would be filed “on or after” specified date (more than 21 days later) did not provide notice of hearing date and thus did not satisfy “safe harbor” requirement).)  “In order to constitute a proper notice of motion, a document must, inter alia state the nature of the order being sought, specify the time the motion will be heard, and be accompanied by supporting papers.”  (Cromwell v. Cummings (1998) 65 Cal.App.4th Supp. 10, 13.) 

            Moreover, in order to trigger the safe harbor period, the papers served must be identical to those that are ultimately filed with the Court after expiration of the safe-harbor period.  (Hart v. Avetoom (2002) 95 Cal.App.4th 410, 413-415 (for purposes of safe-harbor period, motion served must be same as motion filed).)  “By specifically requiring service of the ‘motion’ and ‘notice of motion,’ the Legislature made clear that the papers to be served on the opposing party are the same papers which are to be filed with the court no less than 30 days later.”  (Cromwell, supra, 65 Cal.App.4th Supp. at 15 (applying deadline under former version of CCP §128.7.)

            Defendant Goodwin served Plaintiff with a copy of the instant motion on November 18, 2024 by email.  (Torossian Dec., ¶13, Ex. G.)  The motion was not filed until December 11, 2024, more than 21 days after.  The motion is therefore timely. 

            Defendant establishes that the cross-complaint was frivolous

            Plaintiff’s cross-complaint alleges a claim for indemnification pursuant to Labor Code §2802.  As discussed in connection with the demurrer, there is no controlling authority applying Labor Code §2802 to a direct claim of liability by an employer against an employee.  The only controlling authority is Nicholas Laboratories, LLC.  Plaintiff’s reliance on O’Hara to justify her position is unpersuasive.  The Court of Appeals in Nicholas Laboratories LLC distinguished O’Hara and rejected any attempt to apply it to the facts before it—an employer’s direct lawsuit against an employee for causes of action that included fraud and conversion, the same claims alleged here by Defendant Goodwin (employer) against Plaintiff (employee).  Nicholas Laboratories LLC’s analysis thoroughly explains why “indemnification” under Labor Code §2802 would not include “first party claims” like Plaintiff’s. 

            In addition, O’Hara is a Ninth Circuit federal case, while Nicholas Laboratories LLC is a California Court of Appeals case.  At best, O’Hara would be persuasive authority.  Nicholas Laboratories LLC is directly on point and binding authority. 

            Given these facts, any reasonable attorney would find Plaintiff’s Labor Code §2802 totally and completely without merit.  Defendant’s request for sanctions is therefore granted pursuant to CCP §128.7(b)(2) for meritless contentions of law.  The Court finds insufficient evidence to deem the cross-complaint frivolous, i.e. “presented primarily for an improper purpose, such as to harass or the cause unnecessary delay or needless increase in the cost of litigation.”  (CCP §128.7(b)(1).)

            Defendant’s requested sanctions amount is excessive.  Defense counsel spent approximately 40 hours reviewing and analyzing Plaintiff’s Cross-Complaint, preparing the instant 128.7 motion, filing the demurrer and meeting and conferring on these motions.   Defense counsel states the lead counsel’s rate is $630/hr and he spent approximately 5 hours on these tasks.  Defense counsel Torossian’s rate is $495/hr and he spent approximately 27.3 hours on these tasks. Defense counsel states the associate on the case spent approximately 6.4 hours on these tasks at $370/hr. 

            The cross-complaint is only four pages long and only two causes of action are alleged.  The legal issue presented is straightforward and Nicholas Laboratories LLC is directly on point.  The facts are similarly straightforward.  It is precisely because of the straightforward nature of these issues that any reasonable attorney would find the cross-complaint totally devoid of merit.  For this reason, sanctions are awarded to Defendant Goodwin and against Plaintiff’s counsel in the amount of $10,890 (22 hours @ $495/hr).  Sanctions are not awarded against Plaintiff, because the violation is based on CCP §128.7(b)(2) for meritless contentions of law.  (CCP §128.7(d)(1); Burkle v. Burkle (2006) 144 Cal.App.4^th 387, 407.)

CONCLUSION

            Defendant Goodwin’s Demurrer to Plaintiff’s Cross-Complaint is SUSTAINED WITHOUT LEAVE TO AMEND.

            Defendant Goodwin’s Motion for Sanctions pursuant to CCP §128.7 is GRANTED.  Sanctions are awarded to Defendant and against Plaintiff’s counsel in the amount of $10,890.

            Defendant Goodwin to give notice.