Judge: Mark C. Kim, Case: 22LBCV00021, Date: 2023-03-02 Tentative Ruling
Case Number: 22LBCV00021 Hearing Date: March 2, 2023 Dept: S27
1. Background
Facts
Plaintiffs, Brenda Rivera (“Rivera”)
and Navarro Hospitality Group, Inc. (“NHGI”) (collectively “Plaintiffs”) filed
this action against Defendants, Simon Haxton (“Haxton”) and Portuguese Bend
Distilling, LLC (“PBD”) on January 19, 2022.
According to plaintiffs’ Second
Amended Complaint, in October 2017 Haxton approached Rivera and her business
partner about starting a distillery and restaurant in Long Beach, CA. Through
their corporation, NHGI, Rivera and her partner had already successfully
established several similar operations. Rivera ultimately agreed to invest in
Haxton’s venture, Portuguese Bend Distilling, and participate in its operations
as a co-owner and co-manager.
While the precise timeline of the breakdown
in the parties’ relationship is unclear, Rivera ultimately resigned – or, per the
SAC, was constructively discharged – in November 2021. In January 2022, Rivera and
NHGI sued Haxton, asserting eleven causes of action including breach of
contract, breach of fiduciary duty, fraud, various Labor Code violations, unfair
competition, and involuntary dissolution.
Plaintiffs initially construed their
suit as both a derivative suit on behalf of PBD, against PBD only nominally,
and also a suit directly against PBD as defendant. (See First Amended
Complaint.) Consequently, the Court sustained a demurrer to the First Amended
Complaint on the basis of misjoinder and found plaintiffs had not alleged
standing to bring a derivative suit. (7/26/22 Minute Order; 7/26/22 Ruling
7:6-12..) The Court granted plaintiffs leave to amend their complaint to pursue
only a direct action against PBD. (7/26/22 Ruling 11:12-13.) The Court also
invited plaintiffs to plead a claim against PBD for wrongful discharge in
violation of public policy (a “Tameny” claim). (Id. 9:13.)
The operative Second Amended
Complaint alleges causes of action directly against Haxton and PBD, labeled as
follows:
1. “Breach
of Contract – Tameny Claim”, by Rivera against PBD;
2. Breach
of Contract, by NHGI against PBD;
3. Open
Book Account, by NHGI against PBD;
4. Breach
of Contract, by Rivera against Haxton;
5. Breach
of Fiduciary Duty (and aiding and abetting same), by Rivera against Haxton;
6. Fraud
(and aiding and abetting same), by Rivera against Haxton;
7. Violations
of Labor Code sections 1195 and 558.1, by Rivera against Haxton and PBD;
8. Violations
of Labor Code sections 226 and 558.1, by Rivera against Haxton and PBD;
9. Violations of Labor Code sections
201-203 and 558.1, by Rivera against Haxton and PBD;
10. Unfair Business Practices, by Rivera and
NHGI against Haxton and PBD; and
11. Involuntary Dissolution, by Rivera against
Haxton and PBD.
2. Demurrer
Defendant submits the Declaration
of Ramin Azadegan, which adequately shows counsel attempted to meet and confer
prior to bringing this demurrer.
Defendant Portuguese Bend
Distilling, for itself only, demurs to the SAC in its entirety and to the first
and tenth causes of action specifically. PBD contends, first, that plaintiffs
have fatally confused a tort and contract cause of action in their “Breach of
Contract – Tameny” claim, and second, that plaintiffs have not pled
facts that constitute a cause of action against PBD under the Unfair
Competition Law (UCL), Business & Professions Code § 17200 et seq.
Plaintiffs oppose, contending that
any issue with their first cause of action is “at most[, ] a labeling issue”, (Opp.
3:6), and the defendant’s assertion that plaintiffs failed to state a claim
under the UCL overlooks or misconstrues the facts alleged in the SAC.
A demurrer is a pleading used to
test the legal sufficiency of other pleadings. It raises issues of law, not
fact, regarding the form or content of the opposing party’s pleading. It is not the function of the demurrer to
challenge the truthfulness of the complaint; and for purpose of the ruling on
the demurrer, all facts pleaded in the complaint are assumed to be true,
however improbable they may be.
A demurrer can be used only to
challenge defects that appear on the face of the pleading under attack; or from
matters outside the pleading that are judicially noticeable. (Blank v. Kirwan
(1985) 39 Cal.3d 311.) No other extrinsic evidence can be considered (i.e., no
“speaking demurrers”). A demurrer is brought under Code of Civil Procedure sections
430.10 [grounds], 430.30 [as to any matter on its face or from which judicial
notice may be taken], and 430.50, subdivision (a) [can be taken to the entire
complaint or any cause of action within]. Specifically, a demurrer may be
brought under section 430.10, subdivision (e) if insufficient facts are stated
to support the cause of action asserted. A demurrer for uncertainty will be
sustained only where the complaint is so vague or confused as to be near
incomprehensible, such that the defendant cannot reasonably respond or assert
defenses. (Code Civ. Proc. § 430.10, subd. (f); A.J. Fistes Corp. v. GDL
Best Contractors, Inc. (2019) 38 Cal.App.5th 677, 695.) Irrespective of the
name or label given to a cause of action by the plaintiff, a general demurrer
must be overruled if the facts as pled in the body of the complaint state some
valid claim for relief. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th
962, 967.)
Leave to amend must be allowed
where the court determines there is a reasonable possibility that deficiencies
in the complaint might be successfully cured by amendment. (Goodman v. Kennedy
(1976) 18 Cal.3d 335, 348.) However, the burden is on the complainant to show
the court that a pleading can be amended successfully. (Ibid.)
Finally, Code of Civil Procedure section
430.41 requires that “[b]efore filing a demurrer pursuant to this chapter, the
demurring party shall meet and confer in person or by telephone with the party
who filed the pleading that is subject to demurrer for the purpose of
determining whether an agreement can be reached that would resolve the
objections to be raised in the demurrer.” (Code Civ. Proc. § 430.41, subd. (a).)
The parties are to meet and confer at least five days before the date the
responsive pleading is due. (Id. § 430.41, subd. (a)(2).) Thereafter,
the demurring party shall file and serve a declaration detailing their meet and
confer efforts. (Id. § 430.41, subd. (a)(3).)
As an
initial matter, the Court overrules defendant’s demurrer to the entire SAC on
the basis of uncertainty, misjoinder, and failure to state a claim. (See Dem.
3:2-6.) Defendant mentions these grounds on the third page of its demurrer, but
nowhere else, and makes no argument to support them.
Having
overruled defendant’s gestural demurrer to the entire SAC, the Court turns to
the substance of the papers: defendant’s demurrer to plaintiff’s first and tenth
causes of action only.
e. Analysis re: First Cause of
Action, Wrongful Discharge in Violation of Public Policy
Defendant
demurs to plaintiff’s first cause of action on the basis that it elides a
breach of employment contract claim and a tortious wrongful discharge (“Tameny”)
claim, and in so doing fails to state a cause of action under either theory.
Defendant sums up its argument succinctly in its reply papers: that “a Breach
of Contract / Tameny cause of action is not a possible legal theory, as
it is a mishmash of two distinct types of claims. Thus, no possible legal
theory can be salvaged.” (Reply 2:25-27.)
Defendant
is correct that Breach of Contract and Tameny liability arise under two
different legal theories and cannot be pled as a single cause of action. Defendant
is also correct that plaintiffs’ first cause of action introduces unnecessary
uncertainty by mixing together tort and contract theories. But interweaving two
claims in this manner, although confusing, does not void either or both of them.
In other words, the fact that “a Breach of Contract / Tameny claim is
not a possible legal theory,” though true, does not by itself mean that “no possible
legal theory can be salvaged” from plaintiffs’ SAC. “California decisions …
have long recognized that a wrongful act committed in the course of a
contractual relationship may afford both tort and contract relief, and
in such circumstances the existence of a contractual relationship will not bar
the injured party from pursuing redress in tort.” (Tameny v. Atlantic Richfield
Co. (1980) 27 Cal.3d 167, 174-175, italics added.) “[I]t is error for a …
court to sustain a demurrer when the plaintiff has stated a cause of action
under any possible legal theory.” (Aubry v. Tri-City Hospital Dist., supra,
2 Cal.4th at p. 967.) And demurrers for uncertainty are disfavored except where
“ ’ ”… [a] pleading is so incomprehensible that a defendant cannot reasonably respond.”
’ ” (A.J. Fistes Corp. v. GDL Best Contractors, Inc., supra, 38
Cal.App.5th at p. 695, citations omitted.) Thus, the Court rejects defendant’s
argument to the extent it relies only on assertions of vagueness or uncertainty
because plaintiffs have confused two causes of action.
Plaintiffs
concede in their opposition papers that they intended their first cause of action
to state only a Tameny claim, as the Court instructed in its prior
ruling. (See Opp. 2:18-19.) The Court therefore evaluates the sufficiency of
the first cause of action under that rubric; plaintiffs concede they have not
attempted to state a claim for breach of contract, despite their “labeling
issue”. (Opp. 3:6.)
The term “Tameny claim”,
used by the parties and the Court, describes the tort of wrongful discharge in violation
of public policy, liability for which was affirmed by our Supreme Court in Tameny
v. Atlantic Richfield Co. (1980) 27 Cal.3d 167. A Tameny cause of
action imposes liability for wrongful discharge, notwithstanding an ordinarily at-will
employment relationship, where an employer discharges its employee for reasons that
violate public policy. (Id. at p. 172; see also Green v. Ralee
Engineering Co. (1998) 19 Cal.4th 66, 71.)
To state a successful Tameny
claim, a plaintiff must prove that (1) the defendant employed him, (2) the defendant
discharged him, (3) an alleged violation of public policy was a motivating
reason for the discharge, and (4) the discharge caused him harm. (Hany v.
Aramark Uniform Services, Inc. (2004) 121 Cal.App.4th 623, 641.) The law defines
a “violation of public policy” narrowly in this context: such a policy must be “
‘(1) delineated in either constitutional or statutory provisions; (2) ‘public’
in the sense that it ‘inures to the benefit of the public’ rather than serving
merely the interests of the individual; (3) well established at the time of the
discharge; and (4) substantial and fundamental.’ “ (Phillips v. St. Mary Regional
Medical Center (2002) 96 Cal.App.4th 218, 226.) That said, while the “public
policy” test for Tameny claims is intensive, its application is
straightforward in certain common-sense contexts. (E.g. Petermann v.
International Brotherhood of Teamsters (1959) 174 Cal.App.2d 184 [employee discharged
for refusing to commit perjury]; Stevenson v. Superior Court (1997) 16
Cal.4th 880 [employer motivated by age discrimination]; Rojo v. Kliger
(1990) 52 Cal.3d 65 [employer motivated by sex discrimination].)
Neither party disputes that PBD employed
Rivera. She has pled the first prong of a Tameny claim.
Defendant implies, though it does not
argue clearly, that Rivera failed to allege facts to support the second prong
of her claim. Rivera was not explicitly fired. Instead, she claims she was constructively
discharged, i.e., that her purportedly voluntary resignation was coerced by
intolerable conditions. “ ‘[A]n employee who is forced to resign due to actions
and conditions so intolerable or aggravated … that a reasonable person in the
employee’s position would have resigned … is constructively discharged.’
[Citations.]” (Turner v. Anheuser-Busch, Inc. (1994) 7 Cal.4th 1238,
1245.)
Defendant suggests Rivera’s claim fails
because her alleged “intolerable work environment consist[ed] of mere
nonpayment of wages, which alone cannot support a Tameny claim.” (Dem.
9:3-7.) In this regard, defendants argue “the SAC does not … support [the
contention] that a violation of Labor Code Section 216, alone, constructively
discharges an employee.” (Id. 8:14-15.)
Defendant includes this argument
under a subheading related to violations of public policy – the third Tameny
element. Nonetheless, this argument goes to the second, rather than the third, element
of plaintiffs’ first cause of action. Defendant’s argument as to the second
element fails. Plaintiff alleges twenty-six subparagraphs of poor treatment at
the hands of Haxton that led to her resignation. The Court disagrees that
allegations of – among other things – physical bullying and intimidation (SAC
14:11-12), cursing and name-calling in the workplace (id. 14:17, 22),
inappropriate touching (id. 14:26-27), intentional public condescension and
humiliation (id. 14:17-18 and 15:15-16), and financial mismanagement (id.
15:17-26), together add up only to “being mean”, as the defendant characterizes
it (Dem. 4:18). Accepting these allegations as true, no reasonable person in
Rivera’s position would have remained in her position. She has pled facts
sufficient to satisfy the second prong of her Tameny claim: that she was
discharged, rather than resigned.
Defendant
focuses the bulk of its argument on whether plaintiff has identified a
sufficiently fundamental public policy that motivated her discharge. Specifically,
defendant argues plaintiffs have not identified a specific constitutional or
statutory provision on which the alleged policy violation is based.
Defendant
relies on Gantt v. Sentry Ins. (1992) 1 Cal.4th 1083 and Miklosky v.
Regents of University of California (2008) 44 Cal.4th 876. Neither carries
defendant’s argument. Later courts recognized that the Gantt definition
of “fundamental public policy” is drawn too narrowly. (See Green v. Ralee
Engineering Co. (1998) 19 Cal.4th 66, 76.) The Miklosky ruling is
caught up with a number of rules peculiar to public entities, and therefore
lacks relevance to this dispute between a private employer and employee.
California
has a well-established “public policy in favor of full and prompt payment of an
employee’s earned wages.” (Smith v. Superior Court (2006) 39 Cal.4th 77,
82; see also Voris v. Lampert (2019) 7 Cal.5th 1141, 1156 [reaffirming
the policy interest described in Smith].) Defendant is correct, however,
that Labor Code section 216, by itself, does not quite bridge the gap between a
violation of policy and a Tameny claim. This is not because section 216 fails
to state a fundamental policy for the purposes of a Tameny claim. Case
law is clear that wage and hour violations, even standing alone, amount to a
fundamental public policy that can satisfy a Tameny claim. (See Gould
v. Maryland Sound Industries (1995) 31 Cal.App.4th 1137, 1149.) Plaintiffs
have pled those violations.
But plaintiffs’ complaint lacks
facts showing causation. As a factual matter, plaintiffs must not only plead
and prove that defendant violated the policy in question, but also that Rivera’s
discharge was motivated by those violations in some respect. A Tameny
claim based purely on wage and hour violations rests on sound public policy concerns.
But as with any tort claim, a Tameny plaintiff must also allege
causation. For that reason, while a Tameny claim based on wage and hour
violations is not, strictly speaking, a retaliation claim, it nonetheless implicitly
requires facts showing an employer discharged a plaintiff because she attempted
to assert her rights. (See ibid.)
Here,
plaintiffs fail to state a claim. Plaintiffs allege, in twenty-six sub-paragraphs,
the various ways that the co-founder of PBD made Rivera’s work life miserable, amounting
to constructive discharge. They also allege the company failed to pay Rivera
wages or salary she was owed – a fundamental policy in the state of California.
But they allege only the conclusion that she was discharged because
she complained that she was not being properly paid. The only facts plaintiffs
allege with regard to causation are that she “insisted” and “demand[ed]” she be
fairly paid (SAC ¶¶ 80, 84-85), which was followed by “an increase in the
instances and intensity of” Haxton’s bad behavior” (id. ¶ 85).
These allegations do not suffice to
state a claim that Rivera’s discharge was motivated by a violation of
public policy. Nor do they put defendants on sufficient notice to prepare a defense.
The Court sustains defendant’s demurrer to plaintiffs’ first cause of action.
However, plaintiffs have both requested
and demonstrated a capacity to amend their complaint to state a claim in this regard.
The Court therefore grants leave to amend.
f. Analysis
re; Tenth Cause of Action, Violation of BPC § 17200
Defendant
then argues that plaintiff’s claim under California’s Unfair Competition Law (UCL)
(Bus. & Prof. Code § 17200 et seq.) should fail.
The UCL “bars ‘unfair competition’
and defines the term as a ‘business act or practice’ that is (1) ‘fraudulent,’
(2) ‘unlawful,’ or (3) ‘unfair.’ … Each is its own independent ground for
liability under the [UCL], but their underlying purpose ‘is to protect both
consumers and competitors by promoting fair competition in commercial markets
for goods and services’ … .” (Shaeffer v. Califia Farms, LLC (2020) 44
Cal.App.5th 1125, 1135, citations omitted.) “[T]he UCL is a chameleon. … Depending
on which prong is involved, a UCL claim may most closely resemble, in terms of
the right asserted, an action for misrepresentation …, misappropriation …,
price fixing …, interference with prospective economic advantage …, or any of
countless other common law and statutory claims. ” (Aryeh v. Canon Business
Solutions, Inc. (2013) 55 Cal.4th 1185, 1196.)
Under its unlawful prong,
the UCL “ ‘ “borrows” violations of other laws and treats them as unlawful
practices’ that the unfair competition law makes independently actionable.” (Cel-Tech
Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20
Cal.4th 163, 180.) “The Legislature intended this ‘sweeping language’ to
include ‘ “anything that can properly be called a business practice and that at
the same time is forbidden by law.” ’ ” (Bank of the West v. Superior Court (1992)
2 Cal.4th 1254, 1266.) The practice in question must, however, be unlawful,
in the sense that plaintiffs can point to another specific law that has been
violated and thereby actionable under the UCL. (See De La Torre v. CashCall,
Inc. (2018) 5 Cal.5th 966, 980 [unconscionable loan “independently actionable”
under UCL because it violates the California Financing Law].)
California case law incorporates
the definition of an unfair practice used in federal law: (1) a
substantial consumer injury, (2) not outweighed by any countervailing benefits
to consumers or competition, and (3) that could not reasonable have been
avoided by the consumers. (Camacho v. Automobile Club of Southern California
(2006) 142 Cal.App.4th 1394, 1403; Klein v. Chevron, Inc. (2012) 202
Cal.App.4th 1342, 1376.) A business practice may be unfair within the meaning
of the UCL “if it violates established public policy or if it is immoral,
unethical, oppressive or unscrupulous and causes injury to consumers which
outweighs its benefits.” (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th
1457, 1473.)
Finally, a fraudulent
practice as contemplated by the UCL is “likely to deceive the public.” (Rubenstein
v. The Gap, Inc. (2017) 14 Cal.App.5th 870, 876.) “It may be based on
representations to the public which are untrue, [or possibly] ‘ “ … accurate on
some level, but will nonetheless tend to mislead or deceive. … .” ’ … The
determination as to whether a business practice is deceptive is based on the likely
effect such practice would have on a reasonable consumer.” (McKell v. Washington
Mutual, Inc., supra, 142 Cal.App.4th at p. 1471.)
To establish liability under the UCL, a party must “(1) establish a
loss or deprivation of money or property sufficient to qualify as … economic
injury, and (2) show that economic injury was … caused by[ ] the unfair
business practice … that is the gravamen of the claim.” (Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 322.)
As to Rivera’s claim here, defendant
argues it should fail under each prong of the UCL. First, PBD argues Rivera’s claim
should fail because she points to no “statutory or other law” that PBD violated.
(Dem. 9:25-26.) Next, PBD claims that Rivera alleges no conduct on the part of
PBD whatsoever, and consequently that she alleges no harm caused by PBD’s
conduct; and third, that Rivera does not allege PBD engaged in any fraudulent
activity.
As to “unfair” or “fraudulent”
practices, the Court agrees with defendant to the extent that, while plaintiffs
have alleged harm to Rivera, they have not alleged this harm was caused by
practices that also cause injury to consumers writ large. Thus, plaintiffs must
rely on allegations of unlawful practices in order to state a claim under the
UCL.
In this regard, plaintiffs point to
the specific violations of Labor Code sections 1194, 226, and 201-203 alleged
in the complaint. (Opp. 10:10-13.) Defendant makes what amounts to a semantic
argument, that because PBD is not specifically named in paragraphs 162 through
170 of plaintiffs’ complaint, plaintiffs fail to allege PBD committed any wrongs.
Plaintiffs note they have incorporated all the allegations in the complaint
into each individual cause of action, including the tenth, and refer repeatedly
to “Defendants” collectively in the paragraphs in question.
Defendant’s argument rests on a technicality
that misconstrues the bulk of the complaint, and the Court rejects it.
Defendant’s demurrer to plaintiffs’ tenth cause of action is overruled,
although the Court notes plaintiffs could easily correct this issue by
amendment.
The Court overrules defendant’s demurrer
to the tenth cause of action.
g. Conclusion
Defendant’s
demurrers to the entire SAC and the tenth cause of action specifically are
overruled. Defendant’s demurrer to the
first cause of action is sustained with leave to amend. Plaintiffs are ordered
to file a Third Amended Complaint within twenty days of this ruling.
Moving Defendant is ordered to give
notice.