Judge Thomas D. Long, Case 22STCV22184 2022-11-10 Tentative Ruling

On July 8, 2022, Plaintiff Donald Vincent Ciota filed this action against Defendants Walgreen Co. and American Protection Group, Inc. (“APG”), alleging (1) breach of duty to indemnify under Labor Code section 2802; (2) breach of duty to indemnify under Corporations Code section 317; and (3) declaratory relief/quantum meruit.

On August 29, 2022, Walgreen Co. (“Defendant”) filed a demurrer and motion to strike.

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.) “Because a demurrer challenges defects on the face of the complaint, it can only refer to matters outside the pleading that are subject to judicial notice.” (Arce ex rel. Arce v. Kaiser Found. Health Plan, Inc. (2010) 181 Cal.App.4th 471, 556.)

“An employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer, even though unlawful, unless the employee, at the time of obeying the directions, believed them to be unlawful.” (Lab. Code, § 2802, subd. (a).) “Because the Labor Code does not expressly define ‘employee’ for purposes of section 2802, the common law test of employment applies.” (Estrada v. FedEx Ground Package System, Inc. (2007) 154 Cal.App.4th 1, 10.)

Defendant argues that Plaintiff was not its employee. (Demurrer at p. 2.) The Complaint alleges that Plaintiff “was hired and trained by APG to offer on-site security services,” and “Walgreens contracted with APG to retain armed security.” (Complaint ¶¶ 8-9, 21.) Plaintiff also alleges that he “was hired by APG and Walgreens to protect both the store and its customers.” (Complaint ¶ 23.) Determining whether Plaintiff was an employee of only APG or also of Defendant under the common law test for employment requires additional facts outside the scope of demurrer.

Defendant also argues that the acts for which Plaintiff seeks indemnification—shooting an individual, resulting in Plaintiff’s arrest and criminal prosecution—are outside the scope of his employment and therefore outside the scope of Labor Code section 2802. (Demurrer at pp. 2-3.) The Complaint alleges that Plaintiff “was equipped with a firearm by APG,” and he “was hired by APG and Walgreens to protect both the store and its customers.” (Complaint ¶¶ 8, 23.) When Plaintiff attempted to escort a suspected shoplifter off the property, “Mr. Hartrefused to leave, physically attacked [Plaintiff], punching him in the face and breaking his eyeglasses and puncturing the skin under Mr. Ciota’s eye. The attack momentarily blinded and disoriented [Plaintiff], leading to the discharge of a single bullet, which struck Mr. Hart.” (Complaint ¶ 11.) Considering these alleged facts, whether Plaintiff’s actions and subsequent losses were “incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer, even though unlawful” (Lab. Code, § 2802, subd. (a)) requires additional facts outside the scope of demurrer.

“A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any proceeding . . . by reason of the fact that the person is or was an agent of the corporation, against expenses, judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with the proceeding if that person acted in good faith and in a manner the person reasonably believed to be in the best interests of the corporation and, in the case of a criminal proceeding, had no reasonable cause to believe the conduct of the person was unlawful.” (Corp. Code, § 317, subd. (b).) An “agent” is “any person who is or was a director, officer, employee or other agent of the corporation.” (Corp. Code, § 317, subd. (a).)

Defendant again argues that Plaintiff cannot be its agent because he was employed by APG. (Demurrer at p. 3.) For the reasons discussed with the first cause of action, the demurrer is overruled on this ground.

Defendant also argues that the indemnification sought is beyond the scope of the statute. (Demurrer at p. 4.) “[T]he stated policy behind section 317 and similar statutes . . . is ‘to provide sufficient flexibility to afford reasonable protection for directors and officers while imposing safeguards which adequately protect the shareholders’ [citation] and ‘to encourage capable individuals to serve’ the corporation [citation]. Such protection should also be afforded to agents who are performing duties on behalf of the corporation in the traditional sense.” (APSB Bancorp v. Thornton Grant (1994) 26 Cal.App.4th 926, 931.) “The first prerequisite to indemnification under section 317, subdivision (b), is that the action against the person is brought ‘by reason of the fact that the person is or was an agent of the corporation.’ Marsh, in his treatise on California corporation law, explains: ‘In other words, the conduct of the agent which gives rise to the claim against him must have been performed in connection with his corporate functions and not with respect to purely personal matters.’ [Citation].” (Plate v. Sun-Diamond Growers (1990) 225 Cal.App.3d 1115, 1123.) This determination is “essentially factual question for the trial court.” (Id. at p. 1125.)

Plaintiff’s actions for which he is being prosecuted occurred during his shift at Defendant’s store when he was working as an armed security guard. (See Complaint ¶¶ 10, 30-32.) Although not typical of many cases brought under section 317, Defendant does not cite, and the Court is not aware of, case law holding that such indemnity is prohibited under the facts alleged here.

Defendant demurs to the third cause of action for uncertainty. (Demurrer at pp. 4-5.) A special demurrer for uncertainty under Code of Civil Procedure section 430.10, subdivision (f) is disfavored and will only be sustained where the pleading is so bad that defendant or plaintiff cannot reasonably respond—i.e., cannot reasonably determine what issues must be admitted or denied, or what counts or claims are directed against him or her. (Khoury v. Maly’s of Calif., Inc. (1993) 14 Cal.App.4th 612, 616.)

Unlike the other causes of action, which are brought “Against all Defendants,” the third cause of action does not specify the defendant. Furthermore, the Complaint alleges that “Geragos & Geragos is entitled to recoup costs for money spent in connection with the Mr.Ciota litigation, as well as the quantum merit of the reasonable value of the house of legal services it provided in connection with the matter,” and “Geragos & Geragos is thus rightfully owed the fair value of its costs and hours of work toward the Mr. Ciota matter at its fair billing rate.” (Complaint ¶¶ 39, 41.) “Geragos & Geragos continues to be harmed by Defendants’ refusal to fairly and justly compensate it for its work,” and “Geragos & Geragos continues to be harmed by Defendants’ refusal to fairly and justly compensate it for its work.” (Complaint ¶¶ 43-44.) This does not allege a harm to Plaintiff or seek a remedy for Plaintiff.

The demurrer to the first and second causes of action is OVERRULED. The demurrer to the third cause of action is SUSTAINED with 20 days’ leave to amend.

The court may, upon a motion or at any time in its discretion: (1) strike out any irrelevant, false, or improper matter inserted in any pleading; or (2) strike out all or any part of any pleading not drawn or filed in conformity with the laws of California, a court rule, or an order of the court. (Code Civ. Proc., § 436, subds. (a)-(b).)

Defendant moves to strike allegations relating to punitive damages and the prayer for punitive damages. A plaintiff can recover punitive damages in tort cases where “the defendant has been guilty of oppression, fraud, or malice.” (Civ. Code § 3294, subd. (a).) Punitive damages thus require more than the mere commission of a tort. (Taylor v. Superior Court (1979) 24 Cal.3d 890, 894-895.) “The mere allegation an intentional tort was committed is not sufficient to warrant an award of punitive damages. [Citation.] Not only must there be circumstances of oppression, fraud or malice, but facts must be alleged in the pleading to support such a claim. [Citation.]” (Grieves v. Superior Court (1984) 157 Cal.App.3d 159, 166, fn. omitted.) A corporate employer can be liable for punitive damages only when an officer, director, or managing agent of the corporation authorized or ratified the wrongful conduct or was personally guilty of oppression, fraud, or malice. (Civ. Code, § 3294, subd. (b).)

Plaintiff’s conclusory allegation that “Defendants acted with malice, fraud, and oppression and/or in conscious disregard of Plaintiff’s rights, and intended to subject Plaintiff to unjust hardship, thereby warranting an assessment of punitive damages in an amount sufficient to punish Defendants and deter others from engaging in similar conduct” (Complaint ¶ 37) does not meet these requirements.

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.

Hon. Thomas D. Long

Judge of the Superior Court