Judge: Robert B. Broadbelt, Case: 21STCV10838, Date: 2023-02-06 Tentative Ruling

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Case Number: 21STCV10838    Hearing Date: February 6, 2023    Dept: 53

Superior Court of California

County of Los Angeles – Central District

Department 53

MOVING PARTIES:              Defendants ESP Group, Ltd., and ESP HK, Ltd. (sued as Doe 1)        

RESPONDING PARTY:       Plaintiff William Yue

Motion for Summary Judgment or, in the Alternative, Summary Adjudication

The court considered the moving, opposition, and reply papers filed in connection with this motion.

EVIDENTIARY OBJECTIONS 

The court overrules Defendant’s evidentiary objections, filed on February 1, 2023.

REQUEST FOR JUDICIAL NOTICE

The court grants Plaintiff’s request for judicial notice, filed on January 20, 2023.  (Evid. Code, § 452, subd. (c); Jones v. Goodman (2020) 57 Cal.App.5th 521, 527, fn. 6 [taking judicial notice of articles of incorporation from California Secretary of State’s website].)

LEGAL STANDARD

The purpose of a motion for summary judgment or summary adjudication “is to provide courts with a mechanism to cut through the parties’ pleadings in order to determine whether, despite their allegations, trial is in fact necessary to resolve their dispute.”  (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.)  “Code of Civil Procedure section 437c, subdivision (c), requires the trial judge to grant summary judgment if all the evidence submitted, and ‘all inferences reasonably deducible from the evidence’ and uncontradicted by other inferences or evidence, show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law.”  (Adler v. Manor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119.)

“On a motion for summary judgment, the initial burden is always on the moving party to make a prima facie showing that there are no triable issues of material fact.”  (Scalf v. D.B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510, 1519.)  A defendant or cross-defendant moving for summary judgment or summary adjudication “has met his or her burden of showing that a cause of action has no merit if the party has shown that one or more elements of the cause of action . . . cannot be established, or that there is a complete defense to the cause of action.”  (Code Civ. Proc., § 437c, subd. (p)(2).)  “Once the defendant or cross-defendant has met that burden, the burden shifts to the plaintiff or cross-complainant to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto.”  (Code Civ. Proc., § 437c, subd. (p)(2).)  “If the plaintiff cannot do so, summary judgment should be granted.”  (Avivi v. Centro Medico Urgente Medical Center (2008) 159 Cal.App.4th 463, 467.)  “When deciding whether to grant summary judgment, the court must consider all of the evidence set forth in the papers (except evidence to which the court has sustained an objection), as well as all reasonable inferences that may be drawn from that evidence, in the light most favorable to the party opposing summary judgment.”  (Id. at p. 467; Code Civ. Proc., § 437c, subd. (c).)

DISCUSSION

Defendants ESP Group, Ltd. and ESP HK, Ltd. filed the pending motion for summary judgment or, in the alternative, motion for summary adjudication on November 21, 2022. Plaintiff William Yue (“Plaintiff”) filed a Request for Dismissal as to defendant ESP HK, Ltd. on January 23, 2023.  The clerk entered the dismissal of defendant ESP HK, Ltd. on January 23, 2023.  The court therefore rules on the motion for summary judgment or, in the alternative, motion for summary adjudication as filed by defendant ESP Group, Ltd. (“Defendant”).

1.     First Cause of Action for Wrongful Termination and Retaliation in Violation of Labor Code section 1102.5

“An employer, or any person acting on behalf of the employer, shall not retaliate against an employee for disclosing information . . . to a person with authority over the employee or another employee who has the authority to investigate, discover, or correct the violation or noncompliance . . . if the employee has reasonable cause to believe that the information discloses a violation of state or federal statute . . ..”  (Lab. Code, § 1102.5, subd. (b).)  “[O]nce it has been demonstrated by a preponderance of the evidence that an activity proscribed by Section 1102.5 was a contributing factor in the alleged prohibited action against the employee, the employer shall have the burden of proof to demonstrate by clear and convincing evidence that the alleged action would have occurred for legitimate, independent reasons even if the employee had not engaged in activities protected by Section 1102.5.”  (Lab. Code, § 1102.6; Lawson v. PPG Architectural Finishes, Inc. (2022) 12 Cal.5th 703, 718 [“Section 1102.6 provides the governing framework for the presentation and evaluation of whistleblower retaliation claims brought under section 1102.5”].)

The court finds that Defendant has met its burden of showing that the first cause of action for wrongful termination and retaliation in violation of Labor Code section 1102.5 has no merit because Defendant has shown that an element of the cause of action (that retaliation was a contributing factor in the decision to terminate Plaintiff) cannot be established.

First, Defendant’s Chief Executive Officer states that she (1) alone made the decision to terminate Plaintiff, and (2) denies Plaintiff’s allegations that he complained to her about Defendant’s alleged illegal accounting practices and therefore did not consider, in any manner, his alleged complaints in making the decision to terminate him.  (Yang Decl., ¶ 5.)  Second, Defendant asserts that Plaintiff’s September 2020 termination occurred months after his last alleged complaint, therefore negating an inference of retaliation.  (Undisputed Material Fact No. 9 [Plaintiff was an employee until September 23, 2020]; Yu Decl., Ex. 1, Pl. Supp. Response to special interrogatory number 16, p. 7:7-10, 7:14-15 [“Plaintiff last complained to any of [Defendant’s] agents in or around February 2020”].)  Third, Defendant asserts that Plaintiff received bonuses during the timeframe that he made the alleged complaints, all of which constitute intervening events that break the causal link between Plaintiff’s protected acts and the termination of his employment.  (Yang Decl., Ex. 1 [Payroll Details for Plaintiff stating that he received $20,000 bonuses in 2016 and 2018]; Yu Decl., Ex. 1,  Pl. Supp. Response to special interrogatory numbers 6, 11, pp. 5:23-26, 6:4-7 [Plaintiff complained to Yang Yang (Nancy Yang) between December 2016 through February 28, 2020], 6:16-19, 6:23-25 [Plaintiff complained to Yun Bo Yang in December 2016, December 2017, and February 28, 2020].)

The court finds that Defendant’s evidence establishes that Plaintiff cannot prove that his engaging in protected activity was a contributing factor in his termination, since (1) Defendant’s decisionmaker denied having received Plaintiff’s complaints and states that she did not consider his complaints in making the decision to terminate him, and (2) Defendant has presented evidence showing that it did not treat him unfavorably during the time in which he states he made complaints by awarding him bonuses, and it terminated him seven months after his last complaint.

The court finds that Plaintiff has met his burden to show that a triable issue of material fact exists as to whether retaliation was a contributing factor in the decision to terminate Plaintiff.

First, the court notes that Plaintiff contends that he does not have to establish a causal link.  The court agrees that Plaintiff is not required to satisfy the McDonnell Douglas framework.  However, as noted by Plaintiff, he still carries the burden of showing that retaliation for his protected activity was a contributing factor in his termination.  (Lawson, supra, 12 Cal.5th at p. 667.)

Second, the court finds that Plaintiff has submitted evidence sufficient to show a triable issue of material fact as to whether retaliation for his complaints about Defendant’s alleged fraudulent scheme was a contributing factor in his termination.

As set forth above, Plaintiff need only present evidence showing a triable issue of material fact as to whether retaliation was a “contributing factor” in his termination.  (Lab. Code, § 1102.6.)  “This means plaintiffs may satisfy their burden of proving unlawful retaliation even when other, legitimate factors also contributed to the adverse action.”  (Lawson, supra, 12 Cal.5th at pp. 713-714.)

In opposition, Plaintiff asserts that he (1) learned about Defendant’s fraudulent customs scheme in December of 2016, (2) took immediate steps to voice his opposition to Nancy Yang and Yun Bo Yang, and made frequent complaints between 2017 and 2019, and (3) upon realizing that Nancy Yang and Yun Bo Yang would not take action to correct the illegal conduct, “elevated his concerns to [Defendant’s] principal shareholder Zhao Shaoxiong/Septwolves in July 2019.”  (Mot., p. 8:1-9.)  Plaintiff submits that his (1) refusal to play along with the fraudulent scheme, and (2) subsequent elevation to the majority shareholder in 2020 “marked him for termination,” specifically stating that the timing of his complaints to Septwolves in 2020 was suspiciously close in time to his termination.  (Wong Decl., Ex. C, Yue Dep., pp. 392:23-393:4 [In July 2019, Plaintiff met with people related to Septwolves, including Zhao Shaoxiong], 400:13-23 [Septwolves bought Defendant, and Shaoxiong as director owned 70 percent], 263:20-266: 9 [Plaintiff obtained invoice so that he could “have a conversation with the people at Septwolves over the phone” to explain issues with U.S. Customs, since Plaintiff had been “complaining to Nancy and Yun Bo Yang,” and management, but they did not care and ignored Plaintiff].)

The court notes that Defendant (1) objected to Plaintiff’s deposition testimony wherein he states that he complained to Septwolves about Defendant’s alleged fraudulent scheme, and (2) contends that this evidence directly contradicts the responses provided in discovery.  The court also recognizes that Plaintiff, in response to Defendant’s special interrogatory requesting the identification of all persons with knowledge that fraudulent invoices were issued to Defendant, did not identify Zhao Shaoxiong or Septwolves.  (Yu Decl., Ex. 1, Pl. Supp. Responses to special interrogatory no. 5, p. 5:1-22.)

“After-the-fact attempts to reverse prior admissions are impermissible because a party cannot rely on contradictions in his own testimony to create a triable issue of fact.”  (Thompson v. Williams (1989) 211 Cal.App.3d 566, 574.)  However, while a court may “‘disregard declarations by a party which contradicts his or her own discovery responses (absent a reasonable explanation for the discrepancy), it does not countenance ignoring other credible evidence that contradicts or explains that party’s answers or otherwise demonstrates there are genuine issues of factual disputes.’”  (Ahn v. Kumho Tire U.S.A., Inc. (2014) 223 Cal.App.4th 133, 145.)  The court does not view Plaintiff’s deposition testimony as an after-the-fact attempt to reverse his prior discovery responses and has therefore overruled Defendant’s objections.  The court finds that the evidence of Plaintiff’s complaints to Septwolves and Zhao Shaoxiong in 2020 establish an inference that retaliation was a contributing factor in Plaintiff’s termination months later.

The court therefore finds that Plaintiff has met his burden to establish a triable issue of material fact as to whether Plaintiff’s internal and external complaints about Defendant’s alleged fraudulent scheme “was a contributing factor” in Plaintiff’s termination.  (Lab. Code, § 1102.6; Lawson, supra, 12 Cal.5th at pp. 713-714.)

The court finds that Defendant has met its burden of showing that the first cause of action for wrongful termination and retaliation in violation of Labor Code section 1102.5 has no merit because Defendant has shown that it would have terminated Plaintiff for legitimate, independent reasons, even had Plaintiff not engaged in protected activity.  (Lab. Code, § 1102.6; Lawson, supra, 12 Cal.5th at p. 718.)

Defendant presents evidence establishing that Plaintiff’s termination was the result of Defendant’s termination of nearly its entire workforce, except for two employees who are responsible for winding down Defendant’s affairs.  First, Defendant presents evidence showing that its gross sales declined between 2015 and 2020, which led Defendant to conclude that its “operation in the United States was no longer a viable business.”  (Yang Decl., ¶¶ 7-8; Yang Decl., Ex. 3 [2015, 2019, and 2020 tax returns stating that its gross sales amounted to $27,426,187 in 2015, $21,889,744 in 2019, and $15,034,489 in 2020].)  Second, Defendant presents evidence that, upon reaching this conclusion, Defendant “began the process of winding down its operations in the United States.”  (Undisputed Material Fact No. 24; Yang Decl., ¶ 9.)  To that end, numerous employees were terminated or laid off beginning on August 14, 2020 through November 30, 2020, including Plaintiff.  (Undisputed Material Fact No. 25; Yang Decl., Ex. 2.)  Defendant currently “only employs two individuals—who are responsible for the company’s winding down process, including the resolution of this lawsuit.”  (Undisputed Material Fact No. 26; Yang Decl., ¶ 9.)  Third, Defendant presents evidence showing that Plaintiff (1) was not included in the first round of layoffs, which took place in August of 2020, thereby demonstrating that he was not targeted for any protected activity, and (2) was the only employee to whom Defendant offered a severance package based on his years of service.  (Undisputed Material Fact Nos. 29, 28; Yang Decl., Ex. 2 [showing termination dates, including Plaintiff’s September 2020 date of termination]; Yang Decl., ¶ 4.)

The court finds that Plaintiff has not met his burden to show that a triable issue of material fact exists as to whether his termination would have occurred for legitimate, independent reasons, even if he had not engaged in protected activities. 

Plaintiff argues that there remain legitimate questions as to why Defendant terminated him, based on (1) Defendant’s status as an active corporation registered with the California Secretary of State; (2) Defendant’s payment of salaries and wages to other individuals in 2021; and (3) Plaintiff’s job duties being transferred to other persons.  The court finds that this evidence does not establish a triable issue of material fact as to whether Defendant would have terminated Plaintiff for legitimate, independent reasons, even if Plaintiff had not engaged in protected activity.

First, Plaintiff has presented evidence showing that Defendant is an active corporation registered with the California Secretary of State.  (RJN Ex. B.)  However, this evidence does not establish that Defendant is not winding down its affairs, and Plaintiff does not meaningfully dispute that Defendant began winding down its operations in the United States.  (Undisputed Material Fact No. 24 [it is undisputed that Defendant “began the process of winding down its operations in the United States”].)

Second, Plaintiff argues that Defendant paid $737,970 in salaries and wages in addition to the wages paid to Nancy Yang.  In support of this assertion, Plaintiff references lines 12 through 13 of an exhibit attached to the document entitled “Notice of Lodging of Documents Conditionally Under Seal,” filed by Plaintiff on January 27, 2023.  (Pl. Additional Fact No. 51.)  However, those fields have been redacted.  (Notice of Conditional Lodging, Ex. 2.)  The court therefore cannot verify this assertion.  Even if the court was presented with evidence establishing that Defendant paid wages in this amount or otherwise could have paid its employees (including Plaintiff), it would not establish that Defendant was not winding down its operations, which—as set forth above—remains undisputed by Plaintiff.  (Undisputed Material Fact No. 24.)

Finally, Plaintiff contends that some of his responsibilities were shifted to three individuals: Danny Lo, Nancy Yang, and Almay Tan.  (Pl. Material Fact No. 52; Ex. A, Yang Dep., pp. 54:6-55:15.)  However, Plaintiff’s own evidence reveals that Almay Tan was terminated on September 23, 2020—i.e., around the same time that Plaintiff was terminated.  (Tan Decl., ¶ 23.)  Moreover, as noted by Defendant in reply, Plaintiff has not presented evidence establishing that Danny Lo is still employed by Defendant and has taken completely taken over Plaintiff’s job responsibilities or has otherwise replaced Plaintiff.  Plaintiff also does not meaningfully dispute that, “[c]urrently, [Defendant] only employs two individuals—who are responsible for the company’s winding down process….”  (Undisputed Material Fact No. 26.)  Thus, even if the court were presented with evidence demonstrating that some of these individuals remain employed by Defendant, such evidence would not establish that they are employed as a replacement for Plaintiff to support an inference of retaliation sufficient to show a triable issue of material fact.

The court finds that Plaintiff has not met his burden to show a triable issue of material fact exists as to whether Defendant would have terminated Plaintiff irrespective of his complaints due to Defendant’s winding down of its operations in the United States.  The court therefore finds that Plaintiff has not met his burden to establish a triable issue of material fact as to whether his termination “would have occurred for legitimate, independent reasons even if [Plaintiff] had not engaged in activities protected by Section 1102.5.”  (Lab. Code, § 1102.6; Lawson, supra, 12 Cal.5th at p. 718.)

The court therefore grants Defendant’s motion for summary adjudication as to Plaintiff’s first cause of action for wrongful termination and retaliation in violation of Labor Code section 1102.5.

2.     Second Cause of Action for Wrongful Termination in Violation of Public Policy

“The elements of a claim for wrongful discharge in violation of public policy are (1) an employer-employee relationship, (2) the employer terminated the plaintiff’s employment, (3) the termination was substantially motivated by a violation of public policy, and (4) the discharge caused the plaintiff harm.”  (Yau v. Allen (2014) 229 Cal.App.4th 144, 154.) 

Plaintiff’s second cause of action for wrongful termination (1) is based on the same factual allegations that support Plaintiff’s first cause of action for wrongful termination and retaliation in violation of Labor Code section 1102.5, and (2) does not identify any other constitutional or statutory provision on which this claim is based.  (FAC ¶ 33 [incorporating previous allegations].)  Plaintiff does not, in his opposition, contend that this cause of action is based on any other facts or law.

The court finds that Defendant has met its burden of showing that the second cause of action for wrongful termination in violation of public policy has no merit because Defendant has shown that an element of the cause of action (that Plaintiff’s termination was substantially motivated by a violation of public policy, i.e., Labor Code section 1102.5) cannot be established.  The court has granted Defendant’s motion for summary adjudication on the first cause of action that is based on Defendant’s alleged violation of Labor Code section 1102.5 for the reasons set forth above.  The court therefore finds that Defendant has met its burden of showing that the second cause of action, based on the same facts and violations of law, has no merit. 

The court finds that Plaintiff has not met his burden to show that a triable issue of material fact exists as to whether his termination was substantially motivated by a violation of public policy because, for the reasons set forth above, Plaintiff did not meet his burden to establish a triable issue of material fact exists as to the first cause of action for violation of Labor Code section 1102.5.        

The court therefore grants Defendant’s motion for summary adjudication as to the second cause of action for wrongful termination in violation of public policy.

Because the court has granted summary adjudication on all of the causes of action alleged in Plaintiff’s First Amended Complaint, the court finds that all of the papers submitted show that there is no triable issue as to any material fact and that defendant ESP Group, Ltd. is entitled to judgment as a matter of law on Plaintiff’s First Amended Complaint.  (Code Civ. Proc., § 437c, subd. (c).)  The court therefore grants Defendant’s motion for summary judgment on Plaintiff’s First Amended Complaint. 

ORDER

The court grants defendant ESP Group, Ltd.’s motion for summary judgment on Plaintiff’s First Amended Complaint.   

The court notes that, judgment may not be entered in favor of defendant ESP Group, Ltd. at this time because it still has a cross-complaint pending.  If defendant ESP Group, Ltd. dismisses its cross-complaint, then it shall prepare, serve, and lodge a proposed judgment.   

The court orders defendant ESP Group, Ltd. to give notice of this ruling.

IT IS SO ORDERED.

DATED:  February 6, 2023

_____________________________

Robert B. Broadbelt III

Judge of the Superior Court