Judge: Teresa A. Beaudet, Case: 22STCV28292, Date: 2023-05-01 Tentative Ruling

Case Number: 22STCV28292    Hearing Date: May 1, 2023    Dept: 50

Superior Court of California

County of Los Angeles

Department 50

Background

Plaintiffs Appa Development and Appa Real Estate (jointly, “Plaintiffs”) filed this action on August 30, 2022 against Defendant Oscar Alarcon (“Defendant”). The Complaint asserts causes of action for (1) breach of written contract and (2) fraud and deceit.

Defendant now demurs to each of the causes of action of the Complaint. Plaintiffs oppose.

Demurrer

A.    Legal Standard

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, 318.) “To survive a demurrer, the complaint need only allege facts sufficient to state a cause of action; each evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged.” ((C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.) For the purpose of testing the sufficiency of the cause of action, the demurrer admits the truth of all material facts properly pleaded. ((Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967.) A demurrer “does not admit contentions, deductions or conclusions of fact or law.” ((Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713.)

B.    Allegations of the Complaint

In the Complaint, Plaintiffs allege that on February 7, 2018, Defendant filed a wrongful termination and discrimination action against Plaintiffs, “bearing Los Angeles Superior Case no. BC693219” (referred to herein as the “Underlying Action”). (Compl., ¶ 7.) The Underlying Action was resolved and settled pursuant to a September 21, 2020 “Negotiated Settlement Agreement and Release” (herein, the “Settlement Agreement”) (Compl., ¶ 7.)

Plaintiffs allege that Paragraph 4(b) of the Settlement Agreement provides, inter alia, that “ALARCON hereby represents and agrees that there are no known other complaints, lawsuits, actions, causes of action, administrative charges, claims, controversies, demands, grievances or proceedings against any RELEASEE exist [sic], ALARCON agrees to immediately seek and obtain dismissal with prejudice if any such action, charges or claims exists.” (Compl., ¶ 7, Ex. A, ¶ 4(b).)

            Plaintiffs allege that “[a]pparently, with Defendant enter [sic] into this agreement and signed and notarized the settlement, there was and still is a pending workers compensation action against Plaintiff.” (Compl., ¶ 7.) Plaintiffs allege that “[d]espite Plaintiff’s numerous requests Defendant has failed to dismiss the pending workers compensation action, Case Number ADJ10806054 pending in the Marina Del Rey Division of the State of California Workers’ Compensation Appeals Board.” (Compl., ¶ 8.)

C.    First Cause of Action for Breach of Written Contract

In support of the first cause of action for breach of written contract, Plaintiffs allege that “Defendant by…failing to dismiss the workers compensation matter, is continuing to breach the contract (i.e. the Negotiated Settlement Agreement and Release).” (Compl., ¶ 18.)

In the demurrer, Defendant asserts that the breach of contract cause of action “fails because Defendant cannot waive his statutory right to his workers compensation claims, and the Civil Settlement Agreement states that it does not cover claims that cannot be waived by law.” (Demurrer at p. 7:3-6.)

In support of this assertion, Defendant cites to Steller v. Sears, Roebuck & Co. (2010) 189 Cal.App.4th 175, 180, where the Court of Appeal noted that “Labor Code section 5001 provides in relevant part: ‘No release of liability or compromise agreement is valid unless it is approved by the appeals board or referee.’ Labor Code section 5002 provides: ‘A copy of the release or compromise agreement signed by both parties shall forthwith be filed with the appeals board. Upon filing with and approval by the appeals board, it may, without notice, of its own motion or on the application of either party, enter its award based upon the release or compromise agreement.’…Undoubtedly the Legislature, in enacting this section [(Lab. Code,     § 5001)], was primarily concerned with protecting workmen who might agree to unfortunate compromises [of workers’ compensation liability] because of economic pressure or lack of competent advice…However, the effect of the section, by its clear wording, is to make every compromise invalid until it is approved [by the WCAB]…”

The Steller Court further noted that “[t]hus, there is a significant difference in legal effect between a release of tort liability and a release of workmen’s compensation liability. A tort release is effective upon execution, but a compromise and release of workmen’s compensation liability is invalid until approved by the Workmen’s Compensation Appeals Board…These safeguards against improvident releases place a workmen’s compensation release upon a higher plane than a private contractual release…” ((Steller v. Sears, Roebuck & Co., supra, 189 Cal.App.4th at p. 181 [internal quotations omitted].)

Defendant also notes that Paragraph 4(a) of the Settlement Agreement attached as Exhibit A to the Complaint provides, inter alia, that “[t]his release does not cover claims that cannot be waived by law.” (Compl., ¶ 7, Ex. A.) Defendant asserts that this language demonstrates the parties’ intent not to settle workers compensation claims.

Plaintiffs do not substantively address the foregoing arguments in their opposition. Rather, Plaintiffs solely argue that “Defendant is attempting to bypass the fact-finding process of discovery and trial and is asking the court to resolve all factual disputes based solely on the complaint. This is an inappropriate use of a demurrer.” (Opp’n at p. 5:23-26.) But Defendant’s arguments set forth above are based on the allegations of the Complaint and the Settlement Agreement attached to the Complaint.

Plaintiffs do not address Defendant’s point that “[a] tort release is effective upon execution, but a compromise and release of workmen’s compensation liability is invalid until approved by the Workmen’s Compensation Appeals Board.” ((Steller v. Sears, Roebuck & Co., supra, 189 Cal.App.4th at p. 181).” The Complaint does not allege that any release of workmen’s compensation liability in the Settlement Agreement here was approved by the Workmen’s Compensation Appeals Board.  

Based on the foregoing, the Court sustains Defendant’s demurrer to the first cause of action.

D.    Second Cause of Action for Fraud and Deceit

In support of the second cause of action for fraud and deceit, Plaintiffs allege that “Defendant induce [sic] Plaintiff into enter to the [sic] settlement receiving the settlement funds with no intention on [sic] dismiss the workers compensation action, which was required in the contract. Defendant knew Plaintiff was detrimentally relying on these promises.” (Compl., ¶ 26.)

Defendant asserts that the second cause of action for fraud and deceit must fail for the same reasons that the breach of written contract cause of action fails. Defendant argues that “as California law requires the dismissal of a workers compensation claim to be done only by the WCAB and as the Negotiated Settlement Agreement between Plaintiffs and Defendant provides for claims that cannot be waived by law, Defendant could not have possibly engaged in willful, wanton, malicious and/or oppressive behavior with the intent to defraud Plaintiffs.” (Demurrer at p. 10:6-10.) As set forth above, Plaintiffs do not address these arguments in their opposition.

For the reasons set forth above in connection with the first cause of action, the Court sustains Defendant’s demurrer to the second cause of action.  

Lastly, Defendant asserts that “the instant matter involves purely legal issues pertaining to the jurisdiction of the Workers Compensation System, and therefore the demurrer should be sustained without leave to amend.” (Demurrer at p. 12:3-5.) Defendant notes that “[l]eave to amend should be denied where the facts are not in dispute and the nature of the claim is clear, but no liability exists under substantive law.” ((Lawrence v. Bank of Am. (1985) 163 Cal.App.3d 431, 436.) The Court does not find that the demurrer concerns purely legal issues. As set forth above, the Steller Court provides that “[a] tort release is effective upon execution, but a compromise and release of workmen’s compensation liability is invalid until approved by the Workmen’s Compensation Appeals Board.” ((Steller v. Sears, Roebuck & Co., supra, 189 Cal.App.4th at p. 181.) Thus, the Court is inclined to sustain the demurrer with leave to amend, to allow Plaintiffs an opportunity to amend the Complaint so as to allege facts pertaining to any approval by the Workmen’s Compensation Appeals Board of any release of workmen’s compensation liability here.

Conclusion

Based on the foregoing, Defendant’s demurrer is sustained in its entirety, with leave to amend.

The Court orders Plaintiffs to file and serve an amended complaint, if any, within 20 days of the date of this Order. If no amended complaint is filed within 20 days, the Court orders Defendant to file and serve a proposed judgment of dismissal within 30 days of the date of this order. ((Donald v. Cafe Royale, Inc. (1990) 218 Cal.App.3d 168, 186 [“An order sustaining a demurrer without leave to amend is not a final judgment; a judgment of dismissal follows such an order as a matter of course.”].) 

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Defendant is ordered to give notice of this Order. 

DATED:  May 1, 2023                                   ________________________________

Hon. Teresa A. Beaudet

Judge, Los Angeles Superior Court