Judge: Theodore R. Howard, Case: 19-1081908, Date: 2023-06-15 Tentative Ruling
Plaintiff Masimo Corporation’s (“Plaintiff”) Motion for Summary Adjudication (“Motion”) is GRANTED.
“(1) A party may move for summary adjudication as to one or more causes of action within an action, one or more affirmative defenses, one or more claims for damages, or one or more issues of duty, if the party contends that the cause of action has no merit, that there is no affirmative defense to the cause of action, that there is no merit to an affirmative defense as to any cause of action, that there is no merit to a claim for damages, as specified in Section 3294 of the Civil Code, or that one or more defendants either owed or did not owe a duty to the plaintiff or plaintiffs. A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty.
(2) A motion for summary adjudication may be made by itself or as an alternative to a motion for summary judgment and shall proceed in all procedural respects as a motion for summary judgment. . .” (Civ. Proc. Code § 437c(f).)
. . . .
“(p) For purposes of motions for summary judgment and summary adjudication:
(1) A plaintiff . . . has met his or her burden of showing that there is no defense to a cause of action if that party has proved each element of the cause of action entitling the party to judgment on the cause of action. Once the plaintiff . . .has met that burden, the burden shifts to the defendant . . . to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto. The plaintiff . . .shall not rely upon the allegations or denials of its pleadings to show that a triable issue of material fact exists but, instead, shall set forth the specific facts showing that a triable issue of material fact exists as to the cause of action or a defense thereto. (Civ. Proc. Code § 437c(p)(1).)
“The motion for summary judgment shall be granted if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. In determining if the papers show that there is no triable issue as to any material fact, the court shall consider all of the evidence set forth in the papers, except the evidence to which objections have been made and sustained by the court, and all inferences reasonably deducible from the evidence, except summary judgment shall not be granted by the court based on inferences reasonably deducible from the evidence if contradicted by other inferences or evidence that raise a triable issue as to any material fact.” (Civ. Proc. Code § 437c(c).)
At p. 1517 of the ruling in Marshak v. Ballesteros (1999) 72 Cal. App. 4th 1514, The DCA held:
”[T]he function of the affidavits or declarations is to disclose whether there is any triable issue of fact within the issues delimited by the pleadings.“ [Citation omitted.] In this regard, the court construes the moving party's affidavits strictly, construes the opposing affidavits liberally, and resolves any doubt about the propriety of granting the motion in favor of the party opposing it.”
Plaintiff requests summary adjudication as to causes of action (“COA”) Nos. 2 through 4.
1) COA No. 2 – Fraud and Concealment
“[T]he elements of an action for fraud and deceit based on a concealment are: (1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage.” (Roddenberry v. Roddenberry (1996) 44 Cal. App. 4th 634, 665–66.)
Concealment is, “[t]he suppression of a fact, by one who is bound to disclose it, or who gives information of other facts which are likely to mislead for want of communication of that fact.” (Civ. Code § 1710(3).)
“There are “four circumstances in which nondisclosure or concealment may constitute actionable fraud: (1) when the defendant is in a fiduciary relationship with the plaintiff; (2) when the defendant had exclusive knowledge of material facts not known to the plaintiff; (3) when the defendant actively conceals a material fact from the plaintiff; and (4) when the defendant makes partial representations but also suppresses some material facts.” (LiMandri v. Judkins (1997) 52 Cal. App. 4th 326, 336.)
Plaintiff has shown that John Bauche (“Bauche” individually) was the owner, operator, and sole employee of BoundlessRise LLC (“BoundlessRise” individually; “Defendants” with Bauche) but did not notify Plaintiff of those facts. (SSMF Nos. 1-2) Bauche, as an employee of Plaintiff’s was under the duty of loyalty to Plaintiff as his employer to not enter into any agreement that conflicted with Bauche’s duties or obligations to Plaintiff, and to spend his working time and energy for Plaintiff. (Motion, Ex. 8 at p. 73.) Instead of devoting all of his working time and energy to Plaintiff as Plaintiff’s employee, Bauche caused Plaintiff to pay in excess of $900,000 for services Bauche could have performed as part of his everyday job duties as Plaintiff’s employee. (SSMF No. 4.) Plaintiff has shown that Bauche concealed facts regarding ownership/control of BoundlessRise and did not notify Plaintiff of the ownership.
Plaintiff contends it was not aware of the ownership and would not have paid BoundlessRise to perform the work had it known. (SSMF No. 3.) As the result, Plaintiff was harmed in excess of $900,000 paid to Defendants, which Plaintiff would not have otherwise done. (SSMF No. 4.) Plaintiff states that it was reimbursed for the losses from its insurance carrier, however there was a $50,000 deductible Plaintiff had to pay. (SSMF No. 5.) Plaintiff seeks recovery of the $50,000 plus pre-judgment and post-judgment interest. (Id.)
Plaintiff has also demonstrated at least two of the four circumstances wherein concealment might constitute actionable fraud. Plaintiff has shown Bauche had exclusive knowledge of material facts not known to the Plaintiff, and Bauche actively concealed a material fact from the Plaintiff. (SSMF Nos. 1-2.)
Plaintiff has met its initial burden of proving each element of this COA. The burden now transfers to Defendants to show triable issues of material fact remain.
Defendants contend 1) Bauche did not conceal his ownership of BoundlessRise; 2) Bauche had no intention of defrauding Plaintiff; 3) Bauche did not have an affirmative duty to disclose his ownership of BoundlessRise, but rather it was Plaintiff’s duty to make that determination before hiring BoundlessRise; 4) Bauche did not know what Plaintiff would or would not have done had they known he owned BoundlessRise; and 5) Plaintiff did not sustain any damages.
Although the court has already granted issue and evidentiary sanctions on most of the above issues (including that Bauche knowingly and with intent to defraud devised a scheme to obtain money from Plaintiff by the concealment of facts), and that Defendants were not permitted to produce evidence to the contrary, the evidence before the court does not show any issues of material fact remain.
Regarding items 1 through 3, Defendants have produced no evidence showing that Plaintiff had the means to discover Bauche owned BoundlessRise. Although Bauche claims in his deposition testimony that he notified Plaintiff of his ownership of BoundlessRise, there is no other evidence supporting that statement. (Opposition, Ex. I.) None of the invoices had Bauche’s name or address on them. (Motion, Exs. 6-7.) Bauche appears to have recommended BoundlessRise as a preferred company and/or been part of the group vetting SEO companies, but again did not indicate he was the owner. (Motion, Ex. 16). In all of the emails referring to BoundlessRise, Bauche always refers to BoundlessRise as “they,” “them,” “the vendor” and never “my company,” “we,” “I,” etc. (Motion, Exs. 16-19.) It appears Plaintiff and/or Plaintiff’s employees did not know what services an SEO company provides and relied on Bauche’s explanation for the need to hire one. (Motion, Ex. 20.) BoundlessRise was not incorporated until after Bauche began working for Plaintiff, and approximately one-month prior to Bauche submitting invoices for payment, which does not support Bauche’s allegations he notified Plaintiff of ownership of BoundlessRise, nor would it enable Plaintiff to made such a determination. (Motion, Exs. 3, 6.) BoundlessRise’s Wyoming LLC filing does not contain any reference to Bauche or his contact information but was instead filed through a third-party. (Motion, Ex. 3.) Finally, the initial filing date for BoundlessRise with the California Secretary of State, which does include Bauche’s name, was on 05/05/17, well after Bauche was fired from Plaintiff in July 2016. (Opposition, Ex. B.)
The evidence supports Bauche’s concealment of his ownership of BoundlessRise, his intent to defraud Plaintiff, and Plaintiff’s inability to easily determine the owner of BoundlessRise. The fact that Bauche did not know what Plaintiff would or would not do (if true) is not relevant to this COA.
As to Defendants’ argument that Plaintiff did not sustain damages, although Plaintiff was reimbursed for most of the loss, it was still out the $50,000 deductible, which is a loss. (McSwain Decl. ¶ 3.) While Bauche contends that the services paid for were provided to Plaintiff, there is 1) no real evidence of that; 2) there is no declaration of Defendants’ supposed expert (James Baker) regarding actual performed services or the value thereof; and 3) Plaintiff’s had to extra pay for services that their employee was under and employment obligation to perform. There is loss.
Defendants also argue the court’s prior sanctions motion based upon the diversion agreement (“Agreeement”) is improper. Defendants for the first time cite to 18 U.S.C. § 3153(c)(1) for the premise that the Agreement is confidential and cannot be used for any purpose in a civil matter. Defendants did not cite to this code section or make any of these arguments in opposition to the motion for sanctions. (ROA #512.) Defendants in essence are rearguing issues related to the Agreement despite not timely moving for reconsideration of the court’s ruling on the motion, nor appeal the court’s ruling. These are improper arguments. However, even if the court were in theory to rescind the prior ruling, Plaintiff has still proven its initial burden as to this COA without relying on the Agreement, and Defendants have failed to meet the transferred burden of showing triable issues of material fact exist. Defendants have also made almost not legal citations to support their opposition aside from the 18 U.S.C. § 3153 arguments.
Defendants have failed to meet the transferred burden of showing triable issues of material exist that would require the court to deny the Motion.
The Motion is GRANTED as to this COA.
2) COA No. 3 – Conversion
“Conversion is the wrongful exercise of dominion over the property of another. The elements of a conversion claim are: (1) the plaintiff's ownership or right to possession of the property; (2) the defendant's conversion by a wrongful act or disposition of property rights; and (3) damages.” (Lee v. Hanley (2015) 61 Cal. 4th 1225, 1240 (“Lee”).) “But where the money or fund is not identified as a specific thing the action is to be considered as one upon contract or for debt and not for conversion.” (Baxter v. King (1927) 81 Cal. App. 192, 194.)
“Fraud in the contract having been found, what effect, if any, does that fact have upon conversion? “The wrongful taking of possession of personal property, either by force or fraud, generally amounts to a conversion.” [Citation.] “Upon principle, as well as authority and practice, a tortious taking of another's chattel is a conversion. It is the exercise of an act of ownership, an appropriation of another's property, which is synonymous with conversion.” (Elliott v. Federated Fruit & Vegetable Growers (1930) 108 Cal. App. 412, 417.)
Plaintiff has shown a specific sum of $50,000 that it had ownership over. Plaintiff has shown Defendants converted that money by the wrongful act of fraudulently inducing Plaintiff to hire BoundlessRise instead of Bauche performing the services under his employment contract. As Plaintiff could not recover the $50,000 deductible from its insurer, Plaintiff has been damaged in at least that amount. Plaintiff has met its initial burden under this COA.
Defendants did not provide any evidence or legal citations that would support there being a triable issue of material fact.
The Motion is GRANTED as to this COA.
3) COA No. 4 – Breach of Duty of Loyalty to Employer
“The elements of a cause of action for breach of a duty of loyalty, by analogy to a claim for breach of fiduciary duty, are as follows: (1) the existence of a relationship giving rise to a duty of loyalty; (2) one or more breaches of that duty; and (3) damage proximately caused by that breach.” (Huong Que, Inc. v. Luu (2007) 150 Cal. App. 4th 400, 410.) “Thus an employee, while employed, owes undivided loyalty to his employer. [Citation.] (Id., at 414.) “ ‘ “The duty of loyalty is breached, and the breach “may give rise to a cause of action in the employer, when the employee takes action which is inimical to the best interests of the employer.” [Citation.] Indeed, by statute, “[a]n employee who has any business to transact on his own account, similar to that intrusted to him by his employer, shall always give the preference to the business of the employer.” ‘ “ (Id.) “The duty of loyalty embraces several subsidiary obligations, including the duty “to refrain from competing with the principal and from taking action on behalf of or otherwise assisting the principal's competitors” (Rest.3d, Agency, § 8.04), the duty “not to acquire a material benefit from a third party in connection with ... actions taken ... through the agent's use of the agent's position” (id., § 8.02), and the duty “not to use or communicate confidential information of the principal for the agent's own purposes or those of a third party.” (Id., at 416.)
“[A]n employer's right to undivided loyalty is compromised when an employee's outside activities give rise to a possibility of personal influences.” (Stokes v. Dole Nut Co. (1995) 41 Cal. App. 4th 285, 296.)
Plaintiff provided evidence that Bauche was an employee of Plaintiff during the relevant time periods. As Plaintiff’s employee, Bauche had the duty to give his undivided loyalty to Plaintiff. Instead, Bauche used his position as an employee/agent of Plaintiff to convince Plaintiff to hire Bauche’s own company, without notifying Plaintiff of the conflict. This enabled Defendants to obtain a large sum of money work services Bauche apparently could have performed within his job duties as an employee of Plaintiff, all while paying Bauche a regular salary and bonuses. Plaintiff has shown Bauche breached his duty of loyalty to Plaintiff. Plaintiff has shown that it was damaged in at least the amount of the $50,000 deductible. Plaintiff has also shown that it paid Bauche $230,924.38 in wages and bonuses during the applicable time period. (SSMF No. 14.) “An employer is damaged by paying wages to an unfaithful employee.” (Skyline Advanced Tech. Servs. v. Shafer, 2021 WL 5908387, at *9 (N.D. Cal. Dec. 14, 2021).) An employer may seek, as compensatory damages or restitution, the salary, and bonuses for the tortious wrong an employee commits against his employer. (Serv. Emps. Internat. Union, Loc. 250 v. Colcord (2008) 160 Cal. App. 4th 362, 370–71.)
Plaintiff has met its initial burden on this COA.
Again, Defendants have failed to produce any evidence or legal arguments meeting its transferred burden of showing triable issues of material fact remain.
The Motion is GRANTED as to this COA.
4) Plaintiff’s Objections
Sustain as to Nos. A – B (violation of court’s 05/23/23 sanctions ruling; lack of foundation/personal knowledge, hearsay, lack of authentication); Bauche Decl. ¶¶ 3-15 (violation of court’s 05/23/23 sanctions ruling; lack foundation/personal knowledge as to multiple items; improper legal conclusions.)
Not material to disposition of motion (Civ. Proc. Code § 473c(q)) as to Nos. C – F and Bauche Decl. ¶ 15.
Moving party to give notice.