Judge Teresa A. Beaudet, Case Number: 23STCV11375, Date: 2023-11-03 Tentative Ruling

CAROLINE RUDDY,

Plaintiff,

vs.

RQ MEDIA GROUP, INC., et al.,

Defendants.

Case No.:

23STCV11375

Hearing Date:

January 8, 2024

Hearing Time: 2:00 p.m.

[TENTATIVE] ORDER RE:

DEFENDANTS RQ MEDIA GROUP, INC. AND BRIAN SALZMAN’S DEMURRER TO PLAINTIFF’S FIRST AMENDED COMPLAINT;

DEFENDANTS RQ MEDIA GROUP, INC. AND BRIAN SALZMAN’S MOTION TO STRIKE PORTIONS OF PLAINTIFF’S FIRST AMENDED COMPLAINT

On May 19, 2023, Plaintiff Caroline Ruddy (“Plaintiff”) filed the instant action against Defendants RQ Media Group, Inc. (“RQ Media”) and Brian Salzman (“Salzman”) (jointly, “Defendants”).

On September 7, 2023, Plaintiff filed the operative Verified First Amended Complaint (“FAC”). The FAC alleges twelve causes of action, including causes of action for breach of contract and breach of implied covenant of good faith and fair dealing.

Defendants now demur to the first cause of action of the FAC for breach of contract, and the second cause of action of the FAC for breach of implied covenant of good faith and fair dealing. Defendants also move to strike portions of the FAC. Plaintiff opposes both.

A pleading is uncertain if it is ambiguous or unintelligible. (¿Code Civ. Proc., § 430.10, subd. (f)¿.) A demurrer for uncertainty may lie if the failure to label the parties and claims renders the complaint so confusing defendant cannot tell what he or she is supposed to respond to.¿ (Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139, footnote 2¿.) However, “¿[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 the FAC, Plaintiff alleges that in 2015, she and Salzman planned to cofound RQ Media, a marketing agency. (FAC, ¶ 14.) In or about January 2016, Plaintiff and Salzman implemented their plan and opened their new agency under the name RQ Media. (FAC, ¶ 15.) Plaintiff alleges that RQ Media was governed in part by a Shareholders Agreement, dated February 1, 2016. (FAC, ¶ 16.) As set forth therein, Plaintiff and Salzman were the only two shareholders, with Plaintiff owning shares equal to 20% and Salzman owning shares equal to 80%. (FAC, ¶ 16.)

Plaintiff had the title of Chief Operating Officer (“COO”) and Salzman had the titles of President, Chief Executive Officer, and, beginning on or about August 22, 2018, Chief Financial Officer. (FAC, ¶ 17.) In or about the summer of 2022, Plaintiff and Salzman mutually agreed to onboard a new employee to serve as COO, the title Plaintiff had held. (FAC, ¶ 28.) Plaintiff also agreed to modify the scope of her responsibilities and reduce her direct compensation commensurately. (FAC, ¶ 28.)

On December 28, 2022, Salzman informed Plaintiff via email that he wanted to “take her off payroll” and move her to the role of “consultant.” (FAC, ¶ 31.) Plaintiff responded via email on December 29, 2022, and advised Salzman that she did not agree with any changes to her role. (FAC, ¶ 32.) Plaintiff objected to Salzman’s proposal to take her off payroll and instead pay her as a consultant, as Plaintiff did not believe her job duties were those of an independent contractor. (FAC, ¶ 32.) The following day, Salzman, without any action by the Board of Directors, told Plaintiff that she had been terminated. (FAC, ¶ 33.) Plaintiff alleges that “Defendants’ decision to terminate [Plaintiff’s] employment was in breach of her contract and, on information and belief, due in substantial part to [Plaintiff’s] refusal to accede to [Salzman’s] illegal proposal that Defendants misclassify [Plaintiff] as an independent contractor.” (FAC, ¶ 34.)

In the first cause of action for breach of contract, Plaintiff alleges “[Plaintiff] and Defendants are parties to an implied employment contract. Pursuant to the terms of that contract, [Plaintiff] would perform the role and responsibilities discussed in the incorporated allegations unless and until she and [Salzman], her cofounder, agreed to alter that role.” (FAC, ¶ 37.) Plaintiff alleges that “the implied employment contract provided that [Plaintiff], as a coequal cofounder, would be employed indefinitely unless she chose to leave the Company and could be terminated only for good cause.” (FAC, ¶ 37.) Plaintiff also alleges that “[t]he contract further provided that [Plaintiff] would be entitled to be employed by the Company and to serve in a key management role for so long as she owned equity in the Company, lest she be unfairly deprived of the value of her equity and many contributions as a founder in bad faith and/or without good cause.” (FAC, ¶ 37.)

Plaintiff alleges that Defendants breached the contract by, among other things, “terminating [Plaintiff] without good cause while she continued to be a cofounder and 20% shareholder,” and “terminating [Plaintiff], in bad faith, at least in part because [Plaintiff] refused to accede to [Salzman’s] request that she agree to be illegally misclassified as a non-payroll independent contractor.” (FAC, ¶ 40(a)-(b).) Plaintiff further alleges that Defendants breached the contract by “ceasing to pay ‘indirect expense’ payments to [Plaintiff] that had been paid for years while continuing to pay those ‘indirect expense’ payments to [Salzman], despite [Salzman’s] false denial that he would not receive such payments after she was terminated.” (FAC, ¶ 40(c).)

Defendants assert that Plaintiff’s first cause of action is uncertain. More specifically, Defendants argue that “[t]he FAC references a written Shareholders Agreement which allegedly contains a vesting schedule, pricing terms and provisions for Plaintiff’s departure, however the writing itself is not attached, nor is the substance of the vesting schedule, pricing terms or conditions pertaining to Ms. Ruddy’s exit described in detail anywhere in the FAC…In the breach of contract section itself, the FAC references an implied employment contract, but lacks specificity as to the terms thereof.” (Demurrer at p. 10:14-19.) Defendants cite to Otworth v. Southern Pac. Transportation Co. (1985) 166 Cal.App.3d 452, 458-459, where the Court of Appeal noted that “[t]o state a cause of action for breach of contract, Otworth must plead the contract, his performance of the contract or excuse for nonperformance, Southern Pacific’s breach and the resulting damage. Further, the complaint must indicate on its face whether the contract is written, oral, or implied by conduct…If the action is based on an alleged breach of a written contract, the terms must be set out verbatim in the body of the complaint or a copy of the written instrument must be attached and incorporated by reference.” (Internal citations omitted.)

Plaintiff counters that “the first cause of action pleads an implied contract, not a written or oral contract, Defendants’ arguments concerning its adequacy are baseless. In fact, the FAC sets forth in great detail a seven-year course of conduct between [Plaintiff] and Defendants that establishes an implied employment contract and [Plaintiff’s] performance thereunder (FAC ¶¶ 20-39), Defendants’ breach of that contract (Id. at ¶ 40), and damages proximately resulting from Defendants’ breach (Id. at ¶ 41).” (Opp’n at p. 7:10-15.) As noted by Plaintiff and as set forth above, the first cause of action alleges that “[Plaintiff] and Defendants are parties to an implied employment contract,” and that “Defendants breached the contract.” (FAC, ¶¶ 37, 40.) Defendants did not file any reply in support of the demurrer and thus do not respond to these points.

Defendants also assert that “the FAC omits sufficient details of when the contract was allegedly entered into such that Defendants can be apprised of any statute of limitations issues that are in contention in this instant demurrer.” (Demurrer at p. 10:21-23.) In the opposition, Plaintiff argues that “when a contract was formed has no relevance whatsoever to the statute of limitations.” (Opp’n at p. 7, fn. 22.) But Plaintiff does not cite to any legal authority to support this assertion. In addition, although Plaintiff asserts without citing to supporting legal authority that “it is the date of the breach that matters” (Opp’n at p. 2:19), the first cause of action does not appear to allege the date when Defendants allegedly breached the contract. (See, e.g., FAC, ¶ 40.) Plaintiff does not appear to point to any alleged date of breach. The Court thus agrees with Defendants that the first cause of action is uncertain. ((See Code Civ. Proc., § 430.10, subd. (f), “[t]he party against whom a complaint…has been filed may object, by demurrer…to the pleading on any one or more of the following grounds:…(f) The pleading is uncertain. As used in this subdivision, ‘uncertain’ includes ambiguous and unintelligible.”)

In light of the foregoing, the Court sustains the demurrer to the first cause of action, with leave to amend.

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

In the second cause of action for breach of implied covenant of good faith and fair dealing, Plaintiff alleges, inter alia, that “[l]ike any contract in California, [Plaintiff’s] employment contract contained an implied covenant of good faith and fair dealing requiring Defendants to act in good faith toward, and fairly deal with, [Plaintiff] so as not to frustrate [Plaintiff’s] rights to the contract benefits.” (FAC, ¶ 43.) Plaintiff alleges that “[d]espite [Plaintiff’s] performance, Defendants unfairly interfered with [Plaintiff’s] right to receive the benefits of the contract and caused her harm by terminating her employment without cause, withholding her unpaid wages, and ceasing to make payments proportionate to the ‘indirect expense’ payments received by [Salzman].” (FAC, ¶ 45.)

Defendants assert that the second cause of action fails. Defendants cite to Racine & Laramie, Ltd. v. Department of Parks & Recreation (1992) 11 Cal.App.4th 1026, 1031, where the Court of Appeal noted that “[t]he implied covenant of good faith and fair dealing rests upon the existence of some specific contractual obligation. The covenant of good faith is read into contracts in order to protect the express covenants or promises of the contract, not to protect some general public policy interest not directly tied to the contract’s purpose.” (Internal quotations and citations omitted.) “Although breach of the implied covenant often is pleaded as a separate count, a breach of the implied covenant is necessarily a breach of contract.” ((Digerati Holdings, LLC v. Young Money Entertainment, LLC (2011) 194 Cal.App.4th 873, 885.)

Defendants assert that here, “Plaintiff’s allegations as to the breach of contract cause of action are insufficient to plead the existence of a breach of contract claim because the terms are undefined and no writing is attached to the FAC. Plaintiff’s cause of action for breach of the implied covenant of good faith and fair dealing therefore necessarily fails due to the lack of an adequately alleged specific contractual obligation.” (Demurrer at p. 11:19-23.) As discussed, in the first cause of action, Plaintiff alleges that “[Plaintiff] and Defendants are parties to an implied employment contract.” (FAC, ¶ 37.) As set forth above, the Courts sustains Defendants’ demurrer to the first cause of action. Accordingly, the Court also sustains Defendants’ demurrer to the second cause of action, with leave to amend.[1]

A court may strike any “irrelevant, false, or improper matter inserted in any pleading” or all or any part of a pleading “not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court.” ((Code Civ. Proc., § 436.) “The grounds for a motion to strike shall appear on the face of the challenged pleading or from any matter of which the court is required to take judicial notice.” ((Id., § 437.)

In the tenth cause of action for breach of fiduciary duty, Plaintiff alleges, inter alia, that “[i]n performing the acts and omissions set forth below, [Salzman] breached his fiduciary duties to RQ Media and to [Plaintiff], including his duty of care, duty of loyalty, and duty to act in good faith. [Salzman] did so by, among other things:…f. using Company funds for personal purposes, including, among other things, for payment of rent for his New York City apartment, located at 161 W. 15th St., Apt. 3B, NY, NY 10001.” (FAC, ¶ 110(f).) Defendants move to strike the foregoing address.

Defendants assert that “Salzman’s specific address is irrelevant to the issues in dispute. Since its presence serves no purpose other than to place his alleged residence address into the public record, it is an improper inclusion in the pleadings and should be stricken.” (Mot. at p. 3:21-23.) Defendants argue that “[i]nclusion of the street address and apartment number are unnecessary, improper and an undue invasion of privacy…” (Mot. at p. 3:8-9.)

In the opposition, Plaintiff counters that “the FAC never states that the apartment is Defendant Salzman’s residence. The singular mention of this address makes no such allegation.” (Opp’n at p. 3:2-4, citing FAC ¶ 110(f), emphasis omitted.) Plaintiff notes that the FAC alleges that “[Plaintiff] is informed and believes and based thereon alleges that Defendant Salzman is, and at all times relevant was, a resident of Los Angeles County, California.” (FAC, ¶ 4.) Plaintiff argues that “Defendants’ argument is solely predicated on an unsupported factual assertion that is also contrary to the FAC.” (Opp’n at p. 3:10-11.) The Court notes that Defendants did not file any reply in support of the motion to strike and thus do not dispute this point.

Plaintiff also argues that “Defendants fail to explain why the address is ‘irrelevant’ when, as here, the FAC expressly alleges that Salzman has wrongfully appropriated company assets to subsidize this specific apartment…” (Opp’n at p. 3:16-18, emphasis omitted.) As set forth above, Defendants did not file any reply in support of the motion and thus do not dispute this point.

Based on the foregoing, the Court sustains Defendants’ demurrer to first and second causes of action of the FAC, with leave to amend.

The Court orders Plaintiff 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 Defendants to file and serve their answer to the FAC within 30 days of the date of this order.

[1]As noted by Plaintiff, the “Conclusion” section of Defendants’ memorandum of points and authorities in support of the demurrer states, inter alia, that “Defendants respectfully requests [sic] that the Court sustain its [sic] demurrer to the first through sixth causes of action of action [sic] for breach of contract, and breach of implied covenant of good faith and fair dealing.” (Demurrer at p. 12:2-4.) This appears to be a typo, as Defendants’ notice of demurrer only references the first and second causes of action of the FAC, and the memorandum of points and authorities only contain arguments pertaining to the first and second causes of action. (See Demurrer at pp. 10:2-11:23.) Thus, the Court overrules any purported demurrer to any causes of action of the FAC other than the first and second causes of action.

Superior Court of California

County of Los Angeles

Department 50