Judge Michael P. Linfield, Case 21STCV43758 2022-08-12 Tentative Ruling

Judge: Michael P. Linfield, Case: 21STCV43758, Date: 2022-08-12 Tentative Ruling

Case Number: 21STCV43758 Hearing Date: August 12, 2022 Dept: 34

SUBJECT: Demurrer of Defendant Heftel Broadcasting Company to Plaintiff’s Complaint

Moving Party: Defendant Heftel Broadcasting Company, LLC (“HBC”)

Resp. Party: Plaintiff Sean O’Neill (“O’Neill”)

Defendant Heftel Broadcasting Company, LLC’s demurrer as to the Second Cause of Action for Breach of Implied Covenant of Good Faith and Fair Dealing is OVERRULED.

Defendant Heftel Broadcasting Company, LLC’s demurrer as to the Third Cause of Action for Intentional Interference with Contractual Relations is OVERRULED.

Defendant Heftel Broadcasting Company, LLC’s demurrer as to the Fourth Cause of Action for Negligent Interference with Prospective Economic Advantage is OVERRULED.

Defendant Heftel Broadcasting Company, LLC’s demurrer as to the Fifth Cause of Action for Intentional Interference with Prospective Economic Advantage is OVERRULED.

Defendant Heftel Broadcasting Company, LLC’s demurrer as to the Sixth Cause of Action for Breach of Fiduciary Duty is SUSTAINED.

Defendant Heftel Broadcasting Company, LLC’s demurrer as to the Seventh Cause of Action for Unfair Business Practices is OVERRULED.

I. BACKGROUND

On November 30, 2021, Plaintiff Sean O’Neill filed a complaint against Defendants Richard D. Heftel, Heftel Broadcasting Company, LLC, and Lawrence Miller alleging the following causes of action:

1. Breach of Employment Contract

2. Breach of Implied Covenant of Good Faith and Fair Dealing

3. Intentional Interference with Contractual Relations

4. Negligent Interference with Prospective Economic Advantage

5. Intentional Interference with Prospective Economic Advantage

6. Breach of Fiduciary Duty

7. Unfair Business Practices

8. Failure to Reimburse Business Expenses (Cal. Labor Code § 2802)

9. Failure to Provide Accurate, Itemized Wage Statements (Cal. Labor Code § 226)

10. Failure to Pay All Compensation Due Upon Termination (Cal. Labor Code §§ 201-203)

11. Civil Conspiracy

On June 28, 2022, Cross-Complainant and Defendant Heftel Broadcasting Company filed a cross-complaint against Cross Defendant and Plaintiff Sean O’Neill alleging Breach of Fiduciary Duty.

On June 28, 2022, HBC demurred to the Second, Third, Fourth, Fifth, and Sixth Causes of Action of O’Neill’s Complaint.

On July 29, 2022, O’Neill opposed HBC’s demurrer.

On August 5, 2022, HBC replied to O’Neill’s opposition to HBC’s demurrer.

II. ANALYSIS

A. Legal Standard

A demurrer is a pleading used to test the legal sufficiency of other pleadings. (Cty. of Fresno v. Shelton (1998) 66 Cal.App.4th 996, 1008–09; Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) 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. (Unruh-Haxton v. Regents of Univ. of California (2008) 162 Cal.App.4th 343, 365, as modified (May 15, 2008).) For purpose of the ruling on the demurrer, all facts pleaded in the complaint are assumed to be true, however improbable they may be. (CCP §§ 422.10, 589.)

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 § 430.10 (grounds), § 430.30 (as to any matter on its face or from which judicial notice may be taken), and § 430.50(a) (can be taken to the entire complaint or any cause of action within).

A demurrer may be brought under Code of Civil Procedure section 430.10, subdivision (e) if insufficient facts are stated to support the cause of action asserted. A demurrer for uncertainty may be brought pursuant to Code of Civil Procedure section 430.10, subdivision (f). “A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.” (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.) “In general, ‘demurrers for uncertainty are disfavored, and are granted only if the pleading is so incomprehensible that a defendant cannot reasonably respond.’” (Lickiss v. Financial Industry Regulatory Authority (2012) 208 Cal.App.4th 1125, 1135.)

The demurring party must file with the court, and serve on the other party, the: (1) demurrer; (2) notice of hearing; (3) memorandum of points and authorities; and (4) proof of service. (See Cal. Rules of Court, rule 3.1112(a), rule 3.1300(c), rule 3.1320; Code Civ. Proc., § 1005(b).) “A demurrer shall distinctly specify the grounds upon which any of the objections to the complaint . . . are taken. Unless it does so, it may be disregarded.” (CCP § 430.60.)

B. Discussion

1. Second Cause of Action for Breach of Implied Covenant of Good Faith and Fair Dealing

The elements of a breach of the implied covenant of good faith and fair dealing include the existence of a contractual relationship between the parties, an implied duty, breach, and causation of damages. “The covenant of good faith and fair dealing, implied by law in every contract, exists merely to prevent one contracting party from unfairly frustrating the other party's right to receive the benefits of the agreement that was actually made. The covenant thus cannot be endowed with an existence independent of its contractual underpinnings. It cannot impose substantive duties or limits on the contracting parties beyond those incorporated in the specific terms of their agreement.” (Guz v. Bechtel Nat. Inc. (2000) 24 Cal.4th 317, 349–350 [cleaned up].)

O’Neill pleads the existence of a contractual relationship between the parties (Complaint, §§ 57, 59), implied duty on both parties to refrain from actions that would injure the other’s right to receive benefits from the contract (Complaint, §§ 57, 58), Defendants’ breach of this duty (Complaint, §§ 57, 61), and causation of damages (Complaint, §§ 57, 62). The Court finds that O’Neill’s Complaint successfully alleges the elements of a cause of action for Breach of the Implied Covenant of Good Faith and Fair Dealing.

The Court does not find this cause of action duplicative of the Breach of Employment Contract claim. Further, even if it were duplicative, “superfluity does not vitiate.” (Civil Code, § 3537; see also Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC (2008) 162 Cal.App.4th 858, 890.)

2. Third Cause of Action for Intentional Interference with Contractual Relations and Fourth Cause of Action for Negligent Interference with Prospective Economic Advantage

“To state a cause of action for intentional interference with contract, a plaintiff must show: (1) a valid contract between plaintiff and a third party; (2) defendant's knowledge of this contract; (3) defendant's intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage.” (Winchester Mystery House, LLC v. Global Asylum, Inc. (2012) 210 Cal.App.4th 579, 596 [cleaned up].)

O’Neill’s Complaint alleges a valid contract between O’Neill and HBC (Complaint, ¶¶ 63, 65), Defendants Heftel and Miller’s knowledge of the contract (Complaint, ¶¶ 63, 66), Heftel and Miller’s intentional acts designed to induce breach (Complaint, ¶¶ 63, 67), actual breach (Complaint, ¶¶ 63, 68, 69), and resulting damage (Complaint, ¶¶ 63, 70, 71). The Court finds that O’Neill’s Complaint successfully alleges the elements of a cause of action for Intentional Interference with Contractual Relations as to Defendants Heftel and Miller.

The tort of negligent interference with prospective economic advantage is established where a plaintiff demonstrates that (1) an economic relationship existed between the plaintiff and a third party which contained a reasonably probable future economic benefit or advantage to plaintiff; (2) the defendant knew of the existence of the relationship and was aware or should have been aware that if it did not act with due care its actions would interfere with this relationship and cause plaintiff to lose in whole or in part the probable future economic benefit or advantage of the relationship; (3) the defendant was negligent; and (4) such negligence caused damage to plaintiff in that the relationship was actually interfered with or disrupted and plaintiff lost in whole or in part the economic benefits or advantage reasonably expected from the relationship. (Venhaus v. Shultz (2007) 155 Cal.App.4th 1072, 1078.)

O’Neill’s Complaint pleads an economic relationship between O’Neill and HBC (Complaint, ¶¶ 72, 74), Defendants’ knowledge of this relationship and knowledge that the relationship would be undercut should they fail to act with reasonable care (Complaint, ¶¶ 72, 75, 76), Defendants’ negligence (Complaint, ¶¶ 72, 77), and causation of damages (Complaint, ¶¶ 72, 78). The Court finds that O’Neill’s Complaint successfully alleges the elements of a cause of action for Negligent Interference with Prospective Economic Advantage.

Under Woods v. Fox Broadcasting Sub., Inc. (2005) 129 Cal.App.4th 344, 353, persons or entities with an ownership interest in a corporation are not automatically immune from liability for interfering with their corporation's contractual obligations. The Court finds this persuasive. O’Neill’s valid employment contract with HBC was allegedly breached by HBC’s leadership at the highest level. Woods suggests that Heftel and Miller would not escape liability should the trier of fact find these allegations valid. “Equally well established is the general principle that under the doctrine of respondeat superior, an employer is vicariously liable for his employee's torts committed within the scope of the employment.” (John Y. v. Chaparral Treatment Center, Inc. (2002) 101 Cal.App.4th 565, 574 [cleaned up].) Both Plaintiff and Defendants refer to Defendants Heftel and Miller as agents of HBC. (Complaint, ¶¶ 5, 9, 66; Demurrer, MPA, p. 10:9, 25.)

3. Fifth Cause of Action for Intentional Interference with Prospective Economic Advantage

“For intentional interference, the plaintiff must plead and prove: (1) an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff; (2) the defendant's knowledge of the relationship; (3) intentional acts on the part of the defendant designed to disrupt the relationship. With respect to the type of intentional disruptive acts that are actionable, they must be wrongful by some independent legal measure, beyond interference. Next, an intentional interference claim requires setting forth facts of (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the defendant. A proximate cause showing is required for a plaintiff to recover for harm that is closely connected to the defendant's alleged wrongful conduct.” (Golden Eagle Land Investment, L.P. v. Rancho Santa Fe Assn. (2018) 19 Cal.App.5th 399, 429–430 [cleaned up]; see also San Jose Construction, Inc. v. S.B.C.C., Inc. (2007) 155 Cal.App.4th 1528, 1544-1545.)

O’Neill’s Complaint pleads an economic relationship between O’Neill and HBC (Complaint, ¶¶ 79, 81), Defendants knowledge of this relationship (Complaint, ¶¶ 79, 82), Defendants’ intentional acts designed to disrupt the relationship (Complaint, ¶¶ 79, 83), actual disruption (Complaint, ¶¶ 79, 84), and economic harm to O’Neill (Complaint, ¶¶ 79, 85, 86). The Court finds that O’Neill’s Complaint successfully alleges the elements of a cause of action for Intentional Interference with Prospective Economic Advantage.

Though Defendants insist that O’Neill has not sufficiently argued that his employment contract with HBC presents a contract with a third party, the Court addresses those concerns above (see II.B.2). O’Neill notes that the pleadings sufficiently allege facts that Defendants’ conduct “was engaged in with the knowledge that it would undermine and disrupt Plaintiff’s economic prospects (as the Employment Agreement vested Plaintiff with anticipated commission income each time an advertising sale agreement was entered into with prospective customers).” (Opposition p. 6:23-26.)

4. Sixth Cause of Action for Breach of Fiduciary Duty

“A fiduciary relationship is any relation existing between parties to a transaction wherein one of the parties is in duty bound to act with the utmost good faith for the benefit of the other party. Such a relation ordinarily arises where a confidence is reposed by one person in the integrity of another, and in such a relation the party in whom the confidence is reposed, if he voluntarily accepts or assumes to accept the confidence, can take no advantage from his acts relating to the interest of the other party without the latter's knowledge or consent. . . .” (Wolf v. Superior Court (2003) 107 Cal.App.4th 25, 29 [cleaned up], as modified on denial of reh'g (Mar. 20, 2003).)

"Technically, a fiduciary relationship is a recognized legal relationship such as guardian and ward, trustee and beneficiary, principal and agent, or attorney and client, whereas a ‘confidential relationship’ may be founded on a moral, social, domestic, or merely personal relationship as well as on a legal relationship. The essence of a fiduciary or confidential relationship is that the parties do not deal on equal terms, because the person in whom trust and confidence is reposed and who accepts that trust and confidence is in a superior position to exert unique influence over the dependent party." (Richelle L. v. Roman Catholic Archbishop (2003) 106 Cal.App.4th 257, 271 (cleaned up).) The elements of a breach of fiduciary duty are as follows: "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." (Persson v. Smart Inventions, Inc. (2005) 125 Cal.App.4th 1141, 1161 [cleaned up].)

O’Neill’s Complaint pleads that a fiduciary relationship existed between Defendant Heftel, HBC, and Plaintiff O’Neill given the Employment Agreement and Heftel’s conduct (Complaint, ¶¶ 87, 88), promises in the Employment Agreement under which Heftel and HBC agreed to act to benefit O’Neill (Complaint, ¶¶ 87, 90), intentional acts to breach Defendants fiduciary duty to O’Neill (Complaint, ¶¶ 87, 91), and damages (Complaint, ¶¶ 87, 92).

Defendants note that there is no authority for the proposition that a fiduciary duty may arise from an employment relation. (Reply, p. 7:25-26, Opposition, p. 7:18-21.) Further, Defendants charge that while officers, directors and some managers may owe fiduciary duties to business entities, published authority does not establish the reverse. (Reply, p. 7:27—8:11.)

The Court agrees with Defendants. The Court finds that O’Neill’s Complaint does not successfully allege the elements of a cause of action for Breach of Fiduciary Duty because O’Neill does not show authority for the position that a business entity may owe a fiduciary duty to an individual. Simply alleging a possible alter ego liability is not sufficient.

5. Seventh Cause of Action for Unfair Business Practices

By proscribing any unlawful business practice, section 17200 borrows violations of other laws and treats them as unlawful practices that the unfair competition law makes independently actionable. ... The statutory language referring to any unlawful, unfair, or fraudulent practice makes clear that a practice may be deemed unfair even if not specifically proscribed by some other law. Because Business and Professions Code section 17200 is written in the disjunctive, it establishes three varieties of unfair competition—acts or practices which are unlawful, or unfair, or fraudulent. In other words, a practice is prohibited as “unfair” or “deceptive” even if not “unlawful” and vice versa. (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180 [cleaned up].)