Judge: Mark A. Young, Case: 21SMCV01408, Date: 2022-09-14 Tentative Ruling
Case Number: 21SMCV01408 Hearing Date: September 14, 2022 Dept: M
CASE NAME: Hoesly v. Solar
Forward Electric, Inc., et al.
CASE NO.: 21SMCV01408
MOTION: Demurrer
and Motion to Strike the Complaint
HEARING DATE: 9/14/2022
BACKGROUND
On August 20, 2021, Plaintiff Andrew Alexander Hoesly
filed this action against Defendants Solar Forward Electric, Inc.
(“Solar Forward”) and Mark Hilton Smith (“Mr. Smith”). The complaint alleges
seven causes of action for: 1) breach of contract; 2) breach of the implied
covenant of good faith and fair dealing; 3) common count; 4) failure to pay
wages; 5) fraud; 6) violation of Business & Professions Code § 17200; and
7) intentional infliction of emotional distress.
The Complaint alleges Plaintiff started
working in sales for Solar Forward in 2011, which is a solar system dealer and
installer. In 2014, he began working as a sales manager. Plaintiff and Smith
agreed on a compensation structure that would govern Plaintiff’s employment. Plaintiff
would earn an annual salary of $70,000.00, but that salary would draw against a
seven percent commission on gross sales. Plaintiff also would not receive
commission payments on sales until the projects had been fully installed.
Plaintiff was entitled to an annual bonus based on Solar Forward’s overall
performance, largely based on Smith’s discretion and subject to negotiations. In
May 2019, Plaintiff accepted a position with another company, and provided
three-to-four weeks’ notice of his departure to Defendants. In response, Smith
began a campaign of retribution against Plaintiff, including sabotaging and
canceling Plaintiff’s pending projects and sales to reduce Plaintiff’s final
sales numbers. By the time Plaintiff left, he had amassed $2,003,946.00 in
gross sales for which no commission had been paid. Based on that gross sales
figure, Plaintiff is entitled to $140,276.22, less any deductions for projects
or sales that ended up falling through and by $30,734.34 in wages Plaintiff had
been paid in 2019. Defendants have also paid $60,000.00, but dispute that they
owe further amounts. Further, Plaintiff alleges that Smith slandered and
otherwise defamed Plaintiff on numerous occasions to Plaintiff’s current
employer, SunPower.
On January 6, 2022, Defendants
demurred to each cause of action and moved to strike allegations pertaining to
punitive damages and alter ego liability. Plaintiff opposes.
Legal
Standard
A
demurrer for sufficiency tests whether the complaint states a cause of action.
(Hahn v. Mirda (2007)
147 Cal.App.4th 740, 747.) When considering demurrers, courts read the
allegations liberally and in context. In a demurrer proceeding, the defects
must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co.
(2004) 116 Cal.App.4th 968, 994.) 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. (CCP §§
430.30, 430.70.) 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.) 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, internal citations omitted.)
A
special demurrer for uncertainty is disfavored and will only be sustained where
the pleading is so bad that defendant cannot reasonably respond—i.e., cannot
reasonably determine what issues must be admitted or denied, or what counts or
claims are directed against him/her. (CCP § 430.10(f); Khoury v. Maly’s
of Calif., Inc. (1993) 14 Cal.App.4th 612, 616.) Moreover, even if
the pleading is somewhat vague, “ambiguities can be clarified under modern
discovery procedures.” (Ibid.)
Any party, within the time allowed
to respond to a pleading may serve and file a notice of motion to strike the
whole or any part thereof. (CCP § 435(b)(1); Cal. Rules of Court, Rule
3.1322(b).) The court may, upon a motion or at any time in its discretion and
upon terms it deems proper: (1) strike out any irrelevant, false, or improper
matter inserted in any pleading; or (2) strike out all or any part of any
pleading not drawn or filed in conformity with the laws of California, a court
rule, or an order of the court. (CCP §§ 436(a)-(b); Stafford v. Shultz (1954) 42 Cal.2d 767, 782 [“Matter in a
pleading which is not essential to the claim is surplusage; probative facts are
surplusage and may be stricken out or disregarded”].)
“Liberality in permitting amendment
is the rule, if a fair opportunity to correct any defect has not been given.” (Angie
M. v. Superior Court (1995) 37 Cal.App.4th 1217, 1227.) It is an abuse of
discretion for the court to deny leave to amend where there is any reasonable
possibility that plaintiff can state a good cause of action. (Goodman v.
Kennedy (1976) 18 Cal.3d 335, 349.) The burden is on plaintiff to
show in what manner plaintiff can amend the complaint,
and how that amendment will change the legal effect of the
pleading. (Id.)
MEET
AND CONFER
Before filing a demurrer or motion to strike, the moving party must meet
and confer in person or by telephone with the party who filed the pleading to
attempt to reach an agreement that would resolve the objections to the
pleading. (CCP §§ 430.41, 435.5.) Counsel’s declaration satisfies this
requirement. (Lewis Decl., ¶ 2.)
Analysis
First Cause of
Action for Breach of Contract
The Court agrees that the Complaint does not clearly state whether the contract
was oral, written, or implied by conduct. Strictly speaking, Defendants failed to notice the demurrer on the
grounds of CCP section 430.10(g). Instead, Defendants improperly rely on
uncertainty. Although the court does not find that the complaint is uncertain, the
Court will sustain the demurrer as to other causes of action with leave to
amend. Plaintiff should take the opportunity to clarify whether the contract
with written, or oral. Accordingly, Defendants’ demurrer is SUSTAINED with
leave to amend.
The cause is otherwise well-stated.
Defendants contend that there is no breach alleged. However, the elements of
breach of contract are pled. Plaintiff alleges the terms of the contract. In
late 2015, Mr. Hoesly and Mr. Smith reached a new agreement with respect to
Hoesly’s compensation at Solar Forward, which remained in place until Mr.
Hoesly’s resignation from Solar Forward in June 2019. (Compl., ¶ 76.) Mr. Smith
agreed to pay Mr. Hoesly 7% commissions on all gross sales that Mr. Hoesly
generated for Solar Forward along with the base salary and bonus terms noted
above. (Compl., ¶¶ 77-80.) Hoesly had generated $2,003,946.00 in gross sales
and, accordingly, entitled to $140,276.22 (7% commission). (Compl., ¶ 81.)
Defendants breached their agreement with Hoesly by failing to pay him in the
total amount due. (Compl., ¶83; see ¶¶ 83-87.) Defendants contend that the
cause of action is uncertain since Plaintiff does not plead with certainty that
the entire amount was due and owing. However, simply because plaintiff might
not be entitled to the fully pled amount does not mean that the pleadings
are insufficient as to breach or damages.
Second Cause of Action for Breach of Implied Covenant
Defendants demur to this cause of
action on the grounds that it is duplicative of the breach of contract claim and
that it appears Plaintiff is complaining about discretionary bonuses. However,
the second cause of action does not only target such bonuses. Defendants were
obligated to perform “the terms and conditions of the agreement fairly and in
good faith and to refrain from doing any act that would deprive Mr. Hoesly of
the benefits of the parties’ agreement.” (Compl., ¶ 90.) Defendants breached
this covenant “by refusing to fully perform and properly pay Mr. Hoesly all
amounts due to him under the parties’ agreement.” (Compl., ¶ 91.) The cause
plainly compensation terms beyond the bonuses. Thus, even if Defendants were
correct that the failure to pay bonuses would not breach the covenant of good
faith and fair dealing, the complaint does not state this as the sole basis for
the cause of action.
Accordingly, Defendants’ demurrer
is OVERRULED.
Third Cause of
Action for Common Counts
Defendants raise the same grounds discussed above. The demurrer is
OVERRULED for the reasons stated as to prior causes of action.
Fourth Cause of
Action for Failure to Pay Wages
Defendants again raise their
demurrer for uncertainty because Plaintiff’s complaint omits the “crucial
allegation” that the projects were completed, thereby giving rise to the basis
for the damages. However, as discussed, Plaintiff properly states damages
sufficient for the pleading stage. This is true for the breach of contract and
the instant Labor Code § 558.1 claim.
Accordingly, Defendants’ demurrer
is OVERRULED.
Fifth Cause of Action for Fraud
Plaintiff
fails to plead this cause of action with the requisite specificity. Allegations of fraud “must be
pled with more detail than other causes of action.” (Apollo Capital Fund,
LLC v. Roth Capital Partners, LLC (2007) 158 Cal.App.4th 226.) “Every
element of the cause of action for fraud must be alleged . . . factually and specifically[,] and the policy of liberal construction of the pleadings
. . . will not ordinarily be invoked to sustain a pleading defective in any
material respect.
[Citations.]” (Committee on Children’s Television, Inc. v. General Foods
Corp. (1983) 35 Cal.3d 197, 216.) Accordingly, a plaintiff pleading fraud
must plead facts showing
“how, when, where, to whom, and by what means” the allegedly fraudulent
representations were tendered. (Lazar v. Superior Court (1996) 12
Cal.4th 631, 645.) “The specificity
requirement means a plaintiff must allege facts showing how, when, where, to
whom, and by what means the representations were made, and, in the case of a corporate defendant,
the plaintiff must allege the names of the persons who made the representations,
their authority to speak on behalf of the corporation, to whom
they spoke, what they said or wrote, and when the representation was made. (West
v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 793.)
The Complaint alleges that Smith
intentionally misrepresented to Plaintiff “on numerous occasions, that he would
pay [Plaintiff] in accordance with the various compensation agreements that the
parties had agreed upon, including the most recent at-issue agreement.”
(Compl., ¶ 106.) Defendants, and Mr. Smith in particular, never had any
intention of fully honoring the compensation terms that the parties struck in
early 2015 and subsequently revised in late 2015. (Compl., ¶ 107.) Plaintiff
would not have continued on with his employment with Defendants and would have
taken a higher paying comparable position elsewhere had he known that
Defendants never had any intention of fully complying with their compensation
agreements with him. (Compl., ¶ 108.) This does not state the misrepresentation
with sufficient specificity. Plaintiffs omit what the representations were, how
this representation was made or when the representations were made.
Accordingly, Defendants’ demurrer
is SUSTAINED with leave to amend.
Sixth Cause of Action for UCL
Plaintiff argues that Defendants
committed an unlawful/fraudulent “business practice” when they failed to pay
him wages due and owing to him. Plaintiff provides uncontroverted authority
that an employer’s failure to comply with California’s statutory wage laws is
an unfair business practice. (See Hodge v. Superior Court (2006)
145 Cal.App.4th 278, 282 [plaintiffs' UCL claim was based on “failure to pay
overtime wages”; finding that defendants had no right to jury trial on section
17200 claim].) As discussed, Plaintiff states a claim for failure to pay wages
under Lab. Code § 558.1. Thus, Plaintiff has alleged an unlawful business
practice.
Defendants’ cited case in reply is inapposite. Regarding the UCL, the
Court discussed: “Van Ness maintains the policy and promotional brochure are
deceptive—and in violation of unfair business practices—because they create the
impression that the plan provides ‘roughly, 70% out-of-plan coverage, with
reasonable freedom of choice coverage.’ Our conclusion that the clear language
of the policy and promotional brochure does not support a reasonable
expectation that Blue Cross would pay anything beyond 70 percent of the limited
fee schedule disposes of this claim.”(Van Ness v. Blue Cross of California (2001)
87 Cal.App.4th 364, 376.) The instant UCL claim does not necessarily involve any
issues regarding representations.
Accordingly, Defendants’ demurrer is OVERRULED as to this cause of
action.
Motion to Strike
The motion to strike is moot regarding punitive damages, as the fraud
cause of action was sustained with leave to amend. As to alter ego, Plaintiff fails to support
the basis for liability with pled facts. In Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223
Cal.App.4th 221, 235-36, the Court of Appeal held the following was sufficient
to allege alter ego liability:
Rutherford alleged that Caswell dominated and
controlled PDR; that a unity of interest and ownership existed between Caswell
and PDR; that PDR was a mere shell and conduit for Caswell's affairs; that PDR
was inadequately capitalized; that PDR failed to abide by the formalities of
corporate existence; that Caswell used PDR assets as her own; and that
recognizing the separate existence of PDR would promote injustice. These
allegations mirror those held to pass muster in First Western Bank &
Trust Co. v. Bookasta (1968) 267 Cal.App.2d 910, 915–916, 73 Cal.Rptr. 657.
As in First Western, “[a]ssuming these facts can be proved, [Caswell]
... may be held liable ... under the alter ego principle.” (Id. at p.
916, 73 Cal.Rptr. 657.)
Defendants argue that Rutherford failed to
allege specific facts to support an alter ego theory, but Rutherford was
required to allege only “ultimate rather than evidentiary facts.” (Doe v.
City of Los Angeles (2007) 42 Cal.4th 531, 550, 67 Cal.Rptr.3d 330, 169
P.3d 559.) Moreover, the “less particularity [of pleading] is required where
the defendant may be assumed to possess knowledge of the facts at least equal,
if not superior, to that possessed by the plaintiff,” which certainly is the
case here. (Burks v. Poppy Construction Co. (1962) 57 Cal.2d 463, 474,
20 Cal.Rptr. 609, 370 P.2d 313.) Therefore, we affirm the trial court's ruling
that Rutherford sufficiently pled an alter ego theory of liability.
Here, Plaintiff has
not made any analogous allegations. Plaintiff only alleges a conclusion
that a unity of ownership and interest existed between the Defendants such that
any individuality and separateness between them ceased. (Compl., ¶ 10.) The
only attempted facts pled are that “Defendants exercised domination and control
over one another” and that respecting the separate corporate existence would
sanction fraud. (Id.) This does not state any of the facts identified as
relevant to establish an alter ego.
Accordingly, the motion to strike is GRANTED with leave to amend.
Plaintiff has ten days to file an amended complaint.