Judge: Teresa A. Beaudet, Case: 23STCV03260, Date: 2025-01-03 Tentative Ruling

Case Number: 23STCV03260    Hearing Date: January 3, 2025    Dept: 50

Superior Court of California

County of Los Angeles

Department 50

Background

Plaintiff Mital Tamoro (“Plaintiff”) filed this action on February 14, 2023 against Defendant Quantum Corporation (“Quantum”). The Complaint alleges causes of action for

(1) pregnancy discrimination, (2) disability discrimination, (3) failure to accommodate,

(4) failure to engage in the interactive process, (5) denial of CFRA rights, (6) failure to reimburse expenses, and (7) interference with prospective economic advantage.

On May 7, 2024, Quantum filed a Cross-Complaint against Larkin Benefit Administrators, d/b/a The Larkin Company, alleging causes of action for (1) breach of contract – failure to perform, (2) breach of contract – failure to defend and indemnify,

(3) negligence, (4) comparative indemnity, (5) equitable indemnity, and (6) declaratory relief.

            The Larkin Company (“Larkin”) now moves for an order granting judgment on the pleadings as to each of the causes of action of Quantum’s Cross-Complaint. Quantum opposes.

Request for Judicial Notice

The Court grants Larkin’s request for judicial notice.

Discussion

A.    Legal Standard

A motion for judgment on the pleadings has the same function as a general demurrer but is made after the time for demurrer has expired. Except as provided by ¿Code of Civil Procedure section 438¿, the rules governing demurrers apply. (¿Cloud v. Northrop Grumman Corp. (1998) 67 Cal.App.4th 995, 999¿.) A motion by a defendant can be made on the ground that the complaint (or any cause of action therein) “¿does not state facts sufficient to constitute a cause of action against that defendant.¿” (¿Code Civ. Proc., § 438, subd. (c)(1)(B)(ii)¿.) Pursuant to Code of Civil Procedure section 438, subdivision (d), “[t]he grounds for motion provided for in this section shall appear on the face of the challenged pleading or from any matter of which the court is required to take judicial notice.”

¿“¿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 Cross-Complaint

In the Cross-Complaint, Quantum alleges, inter alia, as follows:

“Plaintiff, Mital Tamoro (‘Plaintiff’ or ‘Tamoro’), brought the underlying action against Quantum alleging various labor code violations premised on her allegation that she was terminated while in a protected employment status following her pregnancy. Quantum denies any liability to Tamoro, but to the extent it is found to be liable, Larkin is the real party at fault. During all relevant times before and after Quantum’s decision to terminate Tamoro, Quantum did not determine protected leave eligibility status for its employees, or administer employee leave programs, because it paid Larkin to fill that role. When Larkin informed Quantum that it would not violate the law by terminating Tamoro (which Quantum asserts it did not) Quantum believed that determination to be correct based on Larkin’s expertise and specialized knowledge. Quantum relied on the accuracy of the advice that Larkin provided with respect to Tamoro’s leave status, and thus, if Quantum is found to have violated the law, Larkin is the party who should answer for such violations and required to satisfy any judgment rendered against Quantum.”

(Cross-Compl., ¶ 1.)

Quantum alleges that it “relied on Larkin’s determination that Tamoro was not under a protected leave status to its detriment should Plaintiff prove her case. If Tamoro proves that she was a protected employee and that her termination was unlawful, then Larkin should pay any monetary relief and other legal fees because it is the direct and proximate cause of any harm.” (Cross-Compl., ¶ 3.) Quantum further alleges that “Larkin was obligated under its agreement with Quantum to administer Quantum’s employee leave programs. If Quantum were to suffer ‘any costs, claims, liabilities, damages, judgments, or expenses (including reasonable attorneys’ fees and costs of litigation)’ as a result of a claim brought by a third party arising from Larkin’s alleged negligence, willful or gross misconduct in the performance of this agreement, then Larkin agreed to ‘defend and indemnify [Quantum] and its affiliates, directors, officers, and employees.’ Therefore, Larkin is also in breach for failing to indemnify Quantum for Tamoro’s claims that arise out of Larkin’s alleged negligence.  (Cross-Compl., ¶ 2.)

C.    Third Cause of Action

First, Larkin asserts that Quantum’s third cause of action for negligence is barred by the economic loss rule. Larkin cites to Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 922, where the California Supreme Court noted that “[w]e begin with a review of the contours of the economic loss rule. The rule itself is deceptively easy to state: In general, there is no recovery in tort for negligently inflicted ‘purely economic losses,’ meaning financial harm unaccompanied by physical or property damage.” The Sheen Court noted that “the rule functions to bar claims in negligence for pure economic losses in deference to a contract between litigating parties,” and that “[t]he Restatement states this form of the economic loss rule thusly: [T]here is no liability in tort for economic loss caused by negligence in the performance or negotiation of a contract between the parties.” ((Id. at pp. 922-923 [internal quotations omitted].)

In the Cross-Complaint, Quantum alleges that “[o]n or about January 1, 2011, Quantum and Larkin entered into The Larkin Company Service Agreement (the “Larkin Agreement”), a copy of which is attached to the Cross-Complaint as Exhibit A. The Larkin Agreement remained in effect at all times relevant to the allegations in the Tamoro Complaint.” (Cross-Compl., ¶ 15.) Larkin asserts that “Quantum’s Third Cause of Action for Negligence contained in its Cross-Complaint arises directly from the Agreement and the contractual relationship of the parties…and it alleges no damages related to physical injury or property damage: it only alleges economic losses.” (Mot. at p. 10:2-6.) Larkin asserts that here, “[u]nder the Economic Loss Rule, Quantum’s negligence claim against Larkin is barred because it seeks to recover in tort for purely economic losses.” (Mot. at p. 10:12-14.)

In the negligence cause of action, Quantum alleges that “[u]nder the Larkin Agreement, Larkin was responsible for, among other things, administering Quantum employee’s leaves in accordance with state and federal law and Quantum’s internal policies, determining Quantum employee’s eligibility for protected leave under state and federal law, and advising Quantum as to the status of employee’s leaves…Larkin had a duty to exercise reasonable and due care in carrying out its obligations under the Larkin Agreement.” (Cross-Compl., ¶¶ 57-58.)

Quantum alleges that “if held liable to Tamoro, Larkin breached and otherwise failed to meet the standard of care by, among other things, wrongly administering Tamoro’s leave in violation of applicable state or federal law, wrongly determining Tamoro’s eligibility for protected leave under state or federal law, wrongly determining the duration and end date of any protected leave under state or federal law, wrongly tracking and applying Tamoro’s eligibility for or accumulation of protected leave under state or federal law, and wrongly advising or counseling Quantum with respect to Tamoro’s protected status and/or the duration of her protected leave.” (Cross-Compl., ¶ 59.) Quantum further alleges that “[i]f Tamoro succeeds in proving liability against Quantum, then it will be as a direct and proximate result of Larkin’s negligence. In such an event, Quantum will have suffered damages in an amount to be determined at trial in the form of costs, liabilities, damages, judgments, or expenses (including attorneys’ fees and costs of litigation) in defending the Tamoro Complaint and in the form of any liability that may arise from the Tamoro Complaint.” (Cross-Compl., ¶ 60.)

In the opposition, Quantum argues, inter alia, that its negligence cause of action falls within an exception to the economic loss rule applicable to contracts for professional services. In Sheen, the California Supreme Court noted that “[i]t is true that we have, in certain contexts, allowed tort actions to proceed even though they arise from, and are not independent of, a contract, despite the economic loss rule. Specifically, we have allowed for tort recovery in some cases involving insurance policies and contracts for professional services.” ((Id. at p. 929.) The Sheen Court further noted that certain “considerations distinguish this case from the recognized exception to the economic loss rule for consumers who contract for certain kinds of professional services. In that context, as in the insurance setting, a cause of action for negligence ensures that the consumer receives the services the professional agreed to provide. In such settings, professionals generally agree to provide careful efforts in rendering contracted-for services, but most clients do not know enough to protect themselves by inspecting the professional’s work or by other independent means. Given this disparity, a claim for professional negligence can serve the important purpose of ensuring that professionals render the careful efforts they have contracted to provide.” ((Id. at p. 933 [internal quotations and citations omitted].)

Quantum notes that the Cross-Complaint alleges that “[w]hen Larkin informed Quantum that it would not violate the law by terminating Tamoro (which Quantum asserts it did not) Quantum believed that determination to be correct based on Larkin’s expertise and specialized knowledge. Quantum relied on the accuracy of the advice that Larkin provided with respect to Tamoro’s leave status…” (Cross-Compl., ¶ 1.) Quantum asserts that it “relied on Larkin’s professional determination that Plaintiff was not under a protected leave status to Quantum’s detriment should Plaintiff prove her case, which resulted in damages in the form of costs, liabilities, damages, and attorneys’ fees and costs in this litigation, among other things…Thus, Quantum has sufficiently pleaded a professional negligence claim to which the economic loss rule does not apply.” (Opp’n at p. 12:17-21.)

Based on the foregoing, the Court finds that Quantum has shown that an exception to the economic loss rule is applicable here, i.e., the exception applicable to contracts for professional services. Thus, the Court denies Larkin’s motion as to the third cause of action for negligence.

D.    Fourth and Fifth Causes of Action

Next, Larkin asserts that Quantum’s fourth cause of action for comparative indemnity and fifth cause of action for equitable indemnity fail. In the comparative indemnity cause of action, Quantum alleges, inter alia, that “[s]hould it be determined that Quantum, by virtue of the allegations in the Tamoro Complaint, is liable to Tamoro, Quantum is entitled to indemnity and contribution from Larkin for the portion of the damages that were determined to be caused by the wrongful acts or omissions of Larkin or any allocation of proportionate fault of Larkin.” (Cross-Compl., ¶ 65.) In the equitable indemnity cause of action, Quantum alleges, inter alia, that “Quantum seeks a determination from the Court as to the respective degrees of liability, if any, on its part and on the part of Larkin, and requests that Larkin be required, to the fullest extent allowable by law, to: a. pay a share of any judgment which may be rendered against Quantum in proportion to Larkin’s fault in causing such alleged damages from which the judgment(s) resulted; and; b. reimburse Quantum for any payments made to defendant and counterclaimant Tamoro or any party in excess of Quantum’ proportional fault.” (Cross-Compl., ¶ 68.)

Larkin cites to Stop Loss Ins. Brokers, Inc. v. Brown & Toland Medical Group (2006) 143 Cal.App.4th 1036, 1040, where the Court of Appeal noted that “[i]t is well settled in California that equitable indemnity is only available among tortfeasors who are jointly and severally liable for the plaintiff’s injury. With limited exception, there must be some basis for tort liability against the proposed indemnitor.” (Internal citations omitted, emphasis in original.) Larkin also cites to Expressions at Rancho Niguel Assn. v. Ahmanson Developments, Inc. (2001) 86 Cal.App.4th 1135, 1139-1140, where the Court of Appeal noted that “[e]quitable indemnity principles govern the allocation of loss or damages among multiple tortfeasors whose liability for the underlying injury is joint and several. Such principles are designed, generally, to do equity among defendants who are legally responsible for an indivisible injury by providing a basis on which liability for damage will be borne by each joint tortfeasor in direct proportion to [its] respective fault. Under comparative indemnity principles, a full range of allocations is possible, from no indemnity to complete indemnity for the amounts paid by the indemnitee.” (Internal quotations and citations omitted.)

Larkin argues that here, “Tamoro’s claims against Quantum are based on Tamoro’s employment relationship with Quantum…Tamoro was not Larkin’s employee…Larkin cannot, therefore, be liable to Tamoro for wrongful termination. Since Larkin has no liability to Tamoro for wrongful termination, which is the gravamen of Tamoro’s complaint, there can be ‘no indemnity without liability,’…” (Mot. at p. 12:5-11.)[1] Larkin also argues that it “cannot be a joint tortfeasor in this case, because Larkin owed no duty to Tamoro to exercise due care to avoid her termination by Quantum…That duty belongs to Quantum, and only Quantum.” (Mot. at p. 12:13-15.)

            In the opposition, Quantum asserts that “this case cannot be boiled down to a ‘no liability’ scenario simply because Larkin did not employ Plaintiff.” (Opp’n at p. 15:13-14.) Quantum notes that in Stop Loss, the Court of Appeal noted that “[a]s plaintiff maintains, joint and several liability in the context of equitable indemnity is fairly expansive. We agree it is not limited to ‘the old common term ‘joint tortfeasor’…It can apply to acts that are concurrent or successive, joint or several, as long as they create a detriment caused by several actors.” (Stop Loss Ins. Brokers, Inc. v. Brown & Toland Medical Group, supra, 143 Cal.App.4th at p. 1050.) The Stop Loss Court noted that “[o]ne factor is necessary, however. With limited exception, there must be some basis for tort liability against the proposed indemnitor…Generally, it is based on a duty owed to the underlying plaintiff.” (Ibid.)

Quantum notes that the Cross-Complaint alleges that “Larkin had a duty to exercise reasonable and due care in carrying out its obligations under the Larkin Agreement.” (Cross-Compl., ¶ 58.) Quantum asserts that such “duty extends to Plaintiff because they were in a ‘special relationship.’” (Opp’n at p. 14:7-8.) Quantum also argues that “because Quantum has demonstrated that Larkin owed Plaintiff a duty arising from their ‘special relationship,’ Quantum has sufficiently pleaded a comparative indemnity claim.” (Opp’n at p. 16:16-17.)

But Quantum does not appear to point to any allegations of the Cross-Complaint stating that Larkin had a duty to Plaintiff to exercise care in carrying out its obligations under the “Larkin Agreement.” The Cross-Complaint does not contain any allegations concerning a purported “special relationship” between Plaintiff and Larkin. As Quantum acknowledges, “Larkin’s MJP challenges the sufficiency of the pleadings…” (Opp’n at p. 16, fn. 8, emphasis omitted.) The Court does not find that Quantum has alleged “a duty owed [by Larkin] to the underlying plaintiff…” (Stop Loss Ins. Brokers, Inc. v. Brown & Toland Medical Group, supra, 143 Cal.App.4th at p. 1040.)

In light of the foregoing, the Court grants Larkin’s motion as to Quantum’s fourth and fifth causes of action, with leave to amend.

E.     First, Second, and Sixth Causes of Action

Lastly, Larkin asserts that “Quantum’s first and second causes of action for breach of contract and sixth cause of action for declaratory relief are barred because Quantum admitted it terminated Plaintiff Tamoro based on her job performance.” (Mot. at p. 13:4-8.)

In the first cause of action for breach of contract – failure to perform, Quantum alleges, inter alia, that “if held liable to Tamoro, the cause will be due to Larkin’s material and substantial breach of the Larkin Agreement, including its failure to accurately and competently advise Quantum as obligated under the Larkin Agreement, and/or by negligently, or though willful or gross misconduct, administering Tamoro’s leave in violation of applicable state or federal law, determining Tamoro’s eligibility for protected leave under applicable state or federal law, and/or advising Quantum as to Tamoro’s eligibility for protected leave and/or duration of protected leave under state or federal law.” (Cross-Compl., ¶ 46.) In the second cause of action for breach of contract – failure to defend or indemnify, Quantum alleges, inter alia, that “Larkin has, and is currently, in material and substantial breach of the Larkin Agreement by its failure or refusal to assume the defense of the Tamoro Complaint and by its failure or refusal to indemnify Quantum against all costs, liabilities, damages, judgments, or expenses, including attorneys’ fees and costs of litigation arising from the Tamoro Complaint. Tamoro’s allegations arise due to Larkin’s alleged negligence in advising Quantum as to her employee leave status. Under the Larkin Agreement, Larkin is obligated to defend and indemnify Quantum for these acts that arise out of Larkin’s alleged negligence. Its refusal to defend and indemnify Quantum is an ongoing breach of the Larkin Agreement.” (Cross-Compl., ¶ 53.)

Larkin argues that “[s]ince Quantum admits that it terminated Tamoro based on her job performance and not because it relied on any information provided by Larkin, Quantum cannot satisfy the fourth element of a breach of contract action that any damages must be ‘as a result of the breach.’…Quantum’s damages, if any, are the result of its decision to terminate Tamoro based on her job performance.” (Mot. at pp. 13:27-14:4.)[2] Exhibit A to Larkin’s Request for Judicial Notice (“RJN”) is a copy of “Defendant Quantum Corporation’s Memorandum of Points and Authorities in Support of Motion for Leave to File Cross-Complaint.” Larkin notes that Quantum’s Memorandum of Points and Authorities provides, inter alia, as follows:

“Plaintiff Mital Tamoro (‘Plaintiff’ or ‘Ms. Tamoro’) filed suit against Defendant Quantum Corporation (‘Quantum’ or the ‘Company’) on February 14, 2023, alleging, among other things, that Quantum unlawfully discriminated against her by terminating her employment because of her pregnancy and disability. (See Complaint, ¶¶ 33-37.) This, of course, is not true, as Quantum actually decided to end its employment relationship with Plaintiff because of certain hardships posed by her job performance, which included her inability to work effectively with her team and her inability to effectively manage her time in a manner that would lead to the completion or management of her tasks or responsibilities in manners required by her position.” (Larkin’s RJN, Ex. A, p. 2:2-9.)

Larkin cites to Mangini v. Aerojet-General Corp. (1996) 12 Cal.4th 1087, 1097-1098, where the Court of Appeal noted that “both at trial and on appeal plaintiffs conceded the lack of evidence of the extent of contamination and what it would take to decontaminate the property. The concessions appear in plaintiffs’ closing argument to the jury and in their appellate brief, both of which may be taken as admissions against the party.”

In the opposition, Quantum asserts that it has “sufficiently pleaded its breach of contract claim (failure to perform).” (Opp’n at p. 17:6.) Quantum asserts that “[a]s pleaded in the Cross-Complaint, Quantum’s reliance on Larkin’s failed performance—e.g., its confirmation that Plaintiff was not a protected employee—led to the decision of when to terminate Plaintiff, even if Quantum decision [sic] that she should be terminated was based on performance. Had Larkin not breached—i.e., had Larkin accurately determined and advised Quantum of Plaintiff’s alleged protected leave status—then Quantum would not have terminated her when it did.” (Opp’n at p. 17:10-15, emphasis omitted.) Quantum argues that “Larkin’s breach gave rise to the decision of when to terminate Plaintiff, and the ‘when’—i.e., while she claims she was ‘job protected’ on leave—is precisely why Plaintiff alleges Quantum is liable for her purported injuries, to the extent any exist in the first instance.” (Opp’n at p. 7:3-6, emphasis omitted.)

But Quantum does not appear to point to any allegations of the Cross-Complaint stating that “Larkin’s breach gave rise to the decision of when to terminate Plaintiff,” or that “had Larkin advised Quantum that Plaintiff was a protected employee, Quantum would not have terminated her, regardless of her performance.” (Opp’n at p. 7:2-4, emphasis omitted.) As discussed, Quantum admitted that it “decided to end its employment relationship with Plaintiff because of certain hardships posed by her job performance, which included her inability to work effectively with her team and her inability to effectively manage her time in a manner that would lead to the completion or management of her tasks or responsibilities in manners required by her position.” (Larkin’s RJN, Ex. A, p. 2:6-9.)

            Quantum also asserts that it “sufficiently alleged facts in support of the essential elements for its claim that Larkin breached the Indemnity Provision of the Larkin Agreement because Larkin has refused to defend and indemnify Quantum for the claims that arose due to Larkin’s alleged negligence in advising Quantum as to Plaintiff’s employee leave status, which caused damages to Quantum in the form of costs, liabilities, damages, and attorneys’ fees and costs of this litigation.” (Opp’n at pp. 17:21-18:2.) But as discussed, Quantum admitted that it “decided to end its employment relationship with Plaintiff because of certain hardships posed by her job performance…” (Larkin’s RJN, Ex. A, p. 2:6-7.) As set forth above, the Cross-Complaint does not appear to allege that “had Larkin advised Quantum that Plaintiff was a protected employee, Quantum would not have terminated her, regardless of her performance.” (Opp’n at p. 7:2-3, emphasis omitted.)

            In light of the foregoing, the Court grants Larkin’s motion as to Quantum’s first and second causes of action, with leave to amend.

As to the declaratory judgment cause of action, Larkin argues that “Quantum’s claim for declaratory relief fails as a matter of law because Larkin did not breach the Agreement and accordingly there is no actual controversy with regard to the Agreement.” (Mot. at p. 14:4-6.)[3]

But the relevant inquiry on Larkin’s motion for judgment on the pleadings is whether the declaratory judgment cause of action states facts sufficient to constitute a cause of action. The Court agrees with Quantum that Larkin’s argument that it “did not breach the Agreement” (Mot. at p. 14:5) is a legal conclusion. The Court does not find that Larkin has shown that the declaratory judgment cause of action fails. Accordingly, the Court denies Larkin’s motion as to the sixth cause of action.

Conclusion

Based on the foregoing, the Court grants Larkin’s motion for judgment on the pleadings as to the first, second, fourth, and fifth causes of action of Quantum’s Cross-Complaint, with leave to amend. The Court denies Larkin’s motion as to the third and sixth causes of action of Quantum’s Cross-Complaint.

The Court orders Quantum to file and serve an amended cross-complaint, if any, within 20 days of the date of this Order.

Larkin is ordered to give notice of this Order.  

DATED:  January 3, 2025                              ________________________________

Hon. Teresa A. Beaudet

Judge, Los Angeles Superior Court