Judge: Thomas D. Long, Case: 21STCP04124, Date: 2023-05-11 Tentative Ruling

Case Number: 21STCP04124    Hearing Date: May 11, 2023    Dept: 48

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES - CENTRAL DISTRICT

On December 17, 2021, Casa Mexico Enterprises, LLC filed this action against Eric Gerardo Leyva-Buccio and Gina Ruccione, and on February 28, 2022, it filed a first amended complaint alleging breach of fiduciary duty, aiding and abetting breach of fiduciary duty, breach of contract, conversion, conspiracy to commit conversion, and unjust enrichment.  Casa Mexico later dismissed Gerardo Leyva-Buccio.

On October 19, 2022, the Court sustained in part a demurrer to Ruccione’s first amended cross-complaint (“FACC”) with leave to amend.  On November 8, 2022, Ruccione filed a second amended cross-complaint (“SACC”), alleging (1) sexual harassment (hostile work environment) in violation of FEHA; (2) quid pro quo sexual harassment in violation of FEHA; (3) sexual battery; (4) gender discrimination in violation of FEHA; (5) retaliation in violation of FEHA; (6) wrongful termination in violation of public policy; (7) negligent infliction of emotional distress; (8) intentional infliction of emotional distress; (9) breach of contract; and (10) fraud.

On January 11, 2023, Casa Mexico Enterprises LLC, Michael A. Gooch, Robert Crossan, and DV Capital Partners LLC (“DVCP”) (collectively, “Cross-Defendants”) filed a demurrer to Ruccione’s SACC.

A demurrer for sufficiency tests whether the complaint states a cause of action.  (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.)  When considering demurrers, courts read the allegations liberally and in context, accepting the alleged facts as true.  (Nolte v. Cedars-Sinai Medical Center (2015) 236 Cal.App.4th 1401, 1406.)

Cross-Defendants argue that the tenth cause of action for fraud lacks allegations about when, where, and how the representation was made.  (Demurrer at pp. 4-6.)  “The essential elements of a count for intentional misrepresentation are (1) a misrepresentation, (2) knowledge of falsity, (3) intent to induce reliance, (4) actual and justifiable reliance, and (5) resulting damage.”  (Chapman v. Skype Inc. (2013) 220 Cal.App.4th 217, 230-231.)  Fraud must be pleaded with specificity.  (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.)  “This particularity requirement necessitates pleading facts which ‘show how, when, where, to whom, and by what means the representations were tendered.’”  (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73.)

Ruccione alleges that “[i]n or around September 2019 and December 2019,” Crossan verbally offered her a 2.5 percent stake in Casa Mexico “during a business trip in Colorado and New York, respectively.”  (SACC ¶ 136.)  This was a false offer of an equity stake made to induce Ruccione to join the company as an employee, with the intent to deceive Ruccione.  (SACC ¶ 145.)  Ruccione relied on the false statement and accepted the employment offer.  (SACC ¶ 146.)  As a result, Ruccione suffered damages due to the financial loss of her equity stake in Casa Mexico.  (SACC ¶ 147.)  This sufficiently alleges who made the representation and where and how the representation was made.  However, “[i]n or around September 2019 and December 2019” does not plead the “when” of the representation with specificity.

Cross-Defendants argue that there are no allegations of fraud by Casa Mexico, Gooch, and DVCP.  (Demurrer at p. 8.)  Crossan and Gooch are alleged to be agents, managing agents, and supervisors of Casa Mexico, and DVCP is a member of the Board of Members of Casa Mexico.  (SACC ¶¶ 13-15.)  The SACC alleges that “Cross-Defendants, acting together and in consultation, through Crossan” made the representation.  (SACC ¶ 136.)  At the pleading stage, this is sufficient to allege that Crossan was acting on behalf of the other Cross-Defendants.

Cross-Defendants argue that the SACC does not adequately allege fraudulent intent.  (Demurrer at p. 6.)  The SACC alleges that the written employment agreement omitted Ruccione’s 2.5-percent equity term, Crossan promised that a separate document would memorialize that provision, Crossan ensured this provision in April 2020, Crossan continued to offer excuses for his delay in preparing a document memorializing the provision, and Ruccione never received a written document memorializing the provision.  (SACC ¶¶ 138-142.)  “Crossan’s and Casa Mexico’s actions demonstrate that they never intended to fulfill their promise to Ms. Ruccione to honor the terms of their initial agreement to give her a 2.5 percent equity stake in the company,” and their offer of the 2.5-percent equity stake was “false and intended to deceive Ms. Ruccione.”  (SACC ¶¶ 144-145.)  “Cross-Defendants knew and intended that Ms. Ruccione would rely on their false statements to induce her to accept their offer to work and continue her employment for Casa Mexico.”  (SACC ¶ 145.)  This sufficiently alleges facts to show fraudulent intent.

Cross-Defendants also argue that the SACC does not allege actionable damages.  (Demurrer at pp. 7-8.)  Ruccione relied on the representations about the 2.5-equity stake, accepted Casa Mexico’s employment offer, and continued to work for Casa Mexico after accepting the offer.  (SACC ¶ 146.)  “[W]here an employer uses misrepresentations to induce a party to change employment when the objective could not have been achieved truthfully, and the party is left in worse circumstances than those in which he would have found himself had he not been lied to, he has a claim for promissory fraud or fraud in the inducement.”  (Magpali v. Farmers Group, Inc. (1996) 48 Cal.App.4th 471, 480.)  Although Ruccione alleges that she was induced to accept and continue employment due to a false promise, she does not allege that she is now left in worse circumstances.  As a result of the misrepresentation, Ruccione “has suffered damages due to the financial loss of her equity stake in Casa Mexico.”  (SACC ¶ 147.)  The only harm is that Ruccione did not receive what she was promised—leaving her in the same position that she would be in without the false promise.

Because the SACC does not plead fraud with specificity and does not allege actual damages caused by the fraud, the demurrer to the tenth cause of action is SUSTAINED.  Ruccione did not show how she can remedy this deficiency, so no further leave to amend is granted.

Cross-Defendants are ordered to file and serve an answer within ten days.  (California Rules of Court, rule 3.1320(j)(3).)

Moving party to give notice.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit.  Parties intending to appear are encouraged to appear remotely and should be prepared to comply with Dept. 48’s new requirement that those attending court in person wear a surgical or N95 or KN95 mask.

      Dated this 11th day of May 2023