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18-00983799

People vs. Anthony J. Rackauckas

California Department of Justice's Notice of Motion and Motion for Reconsideration Re: Plaintiffs' Motion to Compel ROA 521

Interested party California Department of Justice (“AG”) moves for reconsideration of the Court’s July 22, 2022 order compelling Todd Spitzer, in his official capacity as Orange County District Attorney (“OCDA”), to produce documents.

For the reasons set forth below, the Court finds the motion is properly before it.  However, the Court needs additional information before it can rule on the motion.  To that end, the parties should be prepared to discuss the questions set forth below at the hearing.  Depending on the answers, the Court may decide to invite supplemental briefing.

I.            Propriety of Motion

Plaintiffs argue the AG’s motion is an improper motion for reconsideration, or not even a motion for reconsideration at all, and should be denied on that basis alone.  The Court disagrees.

A.           Untimely or Improper Motion for Reconsideration

CCP § 1008(a) provides: “When an application for an order has been made to a judge, or to a court, and refused in whole or in part, or granted, or granted conditionally, or on terms, any party affected by the order may, within 10 days after service upon the party of written notice of entry of the order and based upon new or different facts, circumstances, or law, make application to the same judge or court that made the order, to reconsider the matter and modify, amend, or revoke the prior order.”

The time for a “party affected by the order” to move for reconsideration is “10 days after service upon the party of written notice of the entry of the order.”  The AG was never served written notice of entry of the 7/22 order.  (Chern Decl. (included in ROA 521), ¶ 3.)  As a result, the 10-day clock never started.  Plaintiffs appear to take the position that because the AG isn’t party to this case, they weren’t required to serve written notice of the order (or the moving papers, etc.).  This may be true, but it’s not responsive to the AG’s argument.  Whether or not the AG is a party to the case, it is a “party affected by the order.”  For the 10-day clock to start, it had to be served with written notice of entry of the order. 

The AG also points to “new or different facts [or] circumstances” that weren’t present earlier.  At the 7/22 hearing, the Court specifically said it would consider the AG’s objections even though the AG hadn’t appeared:

MR. BREIDENBACH:  I think better posed is, I can let [the AG] know what happened today, and if they want to submit an objection, they can, and you can entertain it.

THE COURT:  Okay, all right.  If they have an objection, we’ll look at it.  (Beck Decl., Ex. A, at p. 42.)

The AG’s diligence (or lack thereof) before the hearing notwithstanding, the Court said at the hearing that it would consider objections submitted by the AG.  This is a new fact that justifies a motion for reconsideration.

In addition, while raised by neither party, the Court notes that it retains the “ability, on its own motion to reconsider its prior interim orders so it may correct its own errors.”  (Le Francois v. Goel (2005) 35 Cal.4th 1094.)

B.           Not a Motion for Reconsideration, but Untimely Objections

Plaintiffs argue this motion isn’t a motion for reconsideration at all, but an untimely attempt to raise discovery objections in the first instance.  The Court disagrees that this is grounds to deny the motion.  If the motion is, in some sense, not really one for reconsideration, the Court stated at the hearing that it would consider the AG’s objections.  The Court will not let potential mis-captioning of the papers prevail over its statement that it would consider the AG’s objections. 

Plaintiffs also suggest these objections are untimely because the AG could and should have raised them previously.  Per the briefing on the original motion, and per the declarations in support of this motion, the AG relied on OCDA to raise these objections on its behalf.  The Court therefore does not consider the objections to be untimely or waived on this basis.  In any event, the Court notes that the order rejecting the AG’s attempt to rely on OCDA was never served on the AG, and the AG filed the present motion less than a month after the order.

II.          Further Questions

The parties should be prepared to address the following questions at the hearing.  The Court may order supplemental briefing as well.

Regarding the Official Information Privilege:

1. How many documents are at issue for the official information privilege?  The notice of motion and supporting declarations list numerous documents over which the AG asserts the official information privilege “and/or” the work product privilege, but the supporting memorandum appears to list only four documents to which the official information privilege applies.

2. Assuming only four documents at issue, what specifically about these four documents supports applying the privilege?  Because the AG’s investigation has been closed for over three years, the Court questions whether general references to the integrity of the investigation or the potential for undermining the mission of law enforcement are sufficient for the AG to meet its burden.

3. At page 13 of their opposition memorandum, Plaintiffs write: “Information regarding the AG’s investigation of the OCDA’s use of jailhouse informants is vital to proving Plaintiffs’ case. The AG’s investigation is relevant to [several topics that are important to the case].”  (Emphasis added.)  Do Plaintiffs contend this information is “vital,” or that it is simply “relevant”?  Because the Court must balance interests in analyzing the official information privilege, the potential difference between “vital” and “relevant” may matter.

4.  Separately from arguments about the confidentiality of law enforcement investigation files, the AG notes that as to jail/prison and inmate records, “the state has a valid interest in maintaining the confidentiality of such records to ‘(1) protect individuals, including informants inside and outside of prison, (2) ensure institutional security, and (3) encourage candor and complete disclosure of information concerning inmates from both public officials and private citizens.’”  (People v. Landry (2016) 2 Cal.5th 52, 73.)  Why isn’t the protective order in this case sufficient to address the specific issue of these records, particularly when Plaintiffs represent that they have no interest in knowing the identity of any particular informants, victims, or other witnesses? Would redacting names from documents address the AG’s concerns?

Regarding the Work Product Privilege:

As with the Court’s original ruling on the work product privilege, the Court does not intend to rule on whether any particular document is privileged at this time.  Rather, as with the parties’ requests on the original motion, the Court will rule only on the broad question of whether the AG may assert the work product privilege at all over the documents at issue.

1. The AG states in its reply papers that it conducted a “criminal investigation related to the use of informants at the Orange County Jail.”  (Reply at p. 5.)  Did the AG investigate the Orange County District Attorney’s Office? Over what period of time?

2. Per ¶ 5 of the Ragland Declaration, some portion of the documents at issue are unrelated to the AG’s investigation of the CI program.  Do Plaintiffs seek discovery of these unrelated documents?  If so, what is Plaintiffs’ basis for arguing the work product doctrine is waived as to these documents?  As OCDA pointed out in its papers on the original motion, it often works together with the AG’s office on matters such as criminal appeals.

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21-01203748

Coto Valley Tennis Club, LLC vs. Coto De Caza Community Association

Status Conference

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JCCP 5138

ClubCorp Wage and Hour Cases

Plaintiffs Karlie Brodhagen, Gianni Castillo, Hllister Higgins, Gabriel Jennings, Francisco Vargas, and Angelina Velazquez's Notice of Motion and Motion for Final Approval of Class Action and PAGA Settlement   211

Plaintiffs’ motion for final approval of class action settlement is GRANTED.  The Court approves the following distributions:

1.    Attorney’s fees in the amount of $2,000,000.  The Court finds this amount to be a reasonable result in light of the quality of the result obtained, the work performed by class counsel, a review of the billing records provided, and the estimated lodestar.  In approving these amounts and examining the billing records provided, the Court is not approving any particular hourly billing rates proposed by class counsel.  Per the settlement agreement, these fees are to be paid from the portions of the GSA allocated to the class claims and the LWDA’s share of the PAGA settlement, not the individual share of the PAGA settlement.

2.    Litigation costs in the amount of $41,169.87.  Per the settlement agreement, these costs are to be paid from the portions of the GSA allocated to the class claims and the LWDA’s share of the PAGA settlement, not the individual share of the PAGA settlement.

3.    Administration costs in the amount of $35,950, per the administrator’s declaration.  Per the settlement agreement, these costs are to be paid solely from the portion of the GSA allocated to the class claims.

4.    Enhancements of $5,000 apiece to each Plaintiff, for a total of $30,000.  In making this award, the Court has considered only the factors set forth in Golba v. Dick’s Sporting Goods, Inc. (2015) 238 Cal.App.4th 1251 and Clark v. Am. Residential Servs. LLC (2009) 175 Cal.App.4th 785.  Per the settlement agreement, these enhancements are to be paid solely from the portion of the GSA allocated to the class claims.

5.    Following the foregoing deductions, the remainder of the portion of the GSA allocated to the LWDA’s share of the PAGA settlement is to be paid to the LWDA.

Please submit a revised proposed order that conforms to the foregoing for the Court’s signature and identifies by name the one class member who opted out.

Pursuant to CCP § 384(b), Plaintiff shall submit to the Court a final report on or before May 5, 2023 setting forth the actual amounts paid to class members and other amounts disbursed pursuant to the settlement.  Upon receiving the report, the Court will determine whether further reports and/or a hearing will be necessary.

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JCCP 5214

Akash Wage and Hour Cases

Defendants Akash Management, LLC and OC Burger Boys LLC, ATJ&B, LLC, and Amir Siddiqi's Notice of Motion and Motion To Seal Declaration of Amir Siddiqi ROA 104

Defendants Akash Management, LLC and OC Burger Boys LLC’s motion to seal is GRANTED.  The clerk is ordered to permanently seal the Siddiqi Declaration, which is temporarily lodged under seal at ROA 107.

A court may order a record to be filed under seal only if it expressly finds facts establishing:

1. There exists an overriding interest that overcomes the right of public access to the record;
2. The overriding interest supports sealing the record;
3. A substantial probability exists that the overriding interest will be prejudiced if the record is not sealed;
4. The proposed sealing is narrowly tailored; and
5. No less restrictive means exist to achieve the overriding interest.

(Cal. Rules of Court, rule 2.550(d).)

Defendants move to seal the Siddiqi Declaration.  With the exception of testimony about the harm associated with disclosure, the declaration consists entirely of attached tax returns for Defendants and the related company ATJ&B, LLC from 2019 to 2021.  Siddiqi declares that the tax returns have never been produced or disclosed publicly, and that public disclosure could be used by competitors to assess Defendants’ financial health and determine trends in Defendants’ operations.  (Siddiqi Decl., ¶ 10.)

While the general state of Defendants’ finances is made public in the preliminary approval papers, the specifics are not.  The Court finds the financial statements and tax returns implicate Defendants’ right to privacy in their financial affairs in a manner sufficient to support sealing the record.  Should the record not be sealed, that overriding interest would be prejudiced, as Defendants’ competitors would have access to detailed information about their financial condition, in contrast to the general information already in the record.  The sealing sought is narrowly tailored, limited to the specific details of Defendants’ financial condition.  No means other than sealing will permit this private financial information to remain private.  The motion is therefore granted.

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21-01201041

Moss vs. Sares Regis Operating Company, L.P.

Plaintiff Melissa Moss's Notice of Motion and Motion For Preliminary Approval of Class Action Settlement ROA 63

Plaintiff’s motion for preliminary approval of class action settlement is CONTINUED to November 4, 2022 at 9:00 a.m. in Department CX104 to permit the parties to respond to the following item of concern.  Any supplemental briefing shall be filed on or before October 25, 2022.  If a revised settlement agreement and/or class notice is submitted, a redline showing all changes, deletions and additions must be submitted as well.  In addition, Plaintiffs must provide proof of service of any revised settlement agreement and supporting papers on the LWDA.

Regarding claim valuation, the meal and rest break claim is valued based on 1,136 “instances” of meal and rest break violations.  The theory of the claim is improper calculation of the missed break premium by failing to include nondiscretionary incentive payments in the regular rate.  In supplemental briefing, counsel explains that there are 1,136 workweeks where wage statements show both (1) a nondiscretionary incentive payment and (2) a missed break premium. 

As the Court understands wage statement penalties and PAGA penalties, they are assessed on a workweek or pay period basis.  But isn’t each underpaid break premium a separate violation under § 226.7?  For example, if an employee received five break premiums in a workweek where he or she also received a nondiscretionary incentive, doesn’t that give rise to five separate violations?  Yet it appears counsel’s valuation assumes each workweek only gives rise to one “instance” of penalties.  Shouldn’t the claim be valued based on the actual number of missed break premiums paid to an employee in a workweek where nondiscretionary incentives were paid?  If so, how does this affect valuation of the claim?  Was counsel provided the necessary information to value the claim on this basis?

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20-01133754

Alvidrez vs. Supreme HR Services, LLC, a California limited liability company

Plaintiff Ernesto Alvidrez's Notice of Motion and Motion for Leave to File a Second Amended Class and Representative Action Complaint  ROA 114

Plaintiff Ernesto Alvidrez moves for leave to file a second amended complaint (SAC) against Defendant Supreme HR Services, LLC.  Defendant’s default was taken in July 2020, and it has never appeared in this action.  Plaintiff’s motion, which is unopposed, is GRANTED.  Plaintiff is to file and serve the proposed 2AC by October 7, 2022.

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22-01255939

Hailey vs. Specialty Restaurants Corporation

1. Defendant Specialty Restaurants Corporation's Notice of Motion to Compel Arbitration and Dismiss Plaintiff's Complaint ROA 21

2. Status Conference

Defendant Specialty Restaurants Corporation moves for an order (1) compelling arbitration of the individual portion of Plaintiff Paul Hailey’s PAGA-only complaint, and (2) dismissing the representative portion of Plaintiff’s PAGA claim.  The Court rules as follows:

1. The request to compel arbitration is GRANTED.  Plaintiff is ordered to arbitrate the individual portion of his PAGA claim.

2. The case is STAYED pending completion of arbitration.

3. The request to dismiss the representative portion of Plaintiff’s PAGA claim is DENIED WITHOUT PREJUDICE to being renewed when the stay is lifted.

An arbitration review conference will take place in Department CX-104 on April 17, 2023 at 8:30 a.m.

I.            Factual Background

Plaintiff was employed by Defendant as a bartender from 2019 to 2022.  (Hailey Decl., ¶ 2.)  He admits that as part of his onboarding, he was required to sign an arbitration agreement.  (Id., ¶ 3.)  He claims that he was given ten minutes to review it at the end of his shift, and he was given no opportunity to negotiate its terms.  (Id., ¶¶ 4, 6.)  He adds that he was never told he could opt out.  (Id., ¶ 7.)

Defendant’s regional manager Jake Rossman explains that the arbitration agreement is actually contained in Defendant’s employee manual, and that Plaintiff formed the agreement by signing a “receipt and acknowledgment” for the employee handbook.  (See Rossman Decl., Ex. A [signed receipt], Ex. B [relevant excerpts from handbook].)  Because both sides agree Plaintiff signed a document that required arbitration of disputes, the Court finds Defendant has met its burden to prove the existence of an agreement to arbitrate.

The agreement provides, “Any controversy, dispute or claim between any employee and the Company, or its officers, agents or other employees, subsidiaries, affiliates, parent, or sister corporations, shall be settled by binding arbitration, at the request of either party.”  (Rossman Decl., Ex. B, at p. 18.)  It explains that the FAA governs the agreement.  (Ibid.)  It covers “claims for wages and other compensation” and “claims for violation of any . . . state . . . statute.”  (Ibid.)

The agreement contains a class action/PAGA waiver:

To the maximum extent permitted by law, employee hereby waives any right to bring on behalf of persons other than him/herself, or to otherwise participate with other persons in, any class, collective, or representative action (including but not limited to any representative action under the California Private Attorneys General Act (“PAGA”), or other federal, state or local statute or ordinance of similar effect). Employee understands, however, that to the maximum extent permitted by law employee retains the right to bring claims in arbitration, including PAGA claims, for themselves as an individual (and only for themselves).  (Id., at p. 19.)

The agreement provides for limited modification: “Only the Company President and/or the Chief Operating Officer of Specialty Restaurants may modify this policy in a signed writing and only as is necessary to make this policy enforceable under any federal, state, or local law or other applicable case law effective after this policy's initial dissemination to its workforce.  Otherwise, no employee can modify this policy in any manner or enter into any agreement that is contrary to this policy.”  (Ibid.)  Finally, the agreement contains a severability clause.  (Id., at pp. 19-20.)

Plaintiff filed this PAGA-only action in April 2022.  Shortly after the United States Supreme Court’s decision in Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906, Defendant moved to compel arbitration.

II.          Enforceability

Plaintiff contends the arbitration agreement is unconscionable, and therefore unenforceable. 

“‘The prevailing view is that [procedural and substantive unconscionability] must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability.’  (Citation.)  But they need not be present in the same degree. ‘Essentially a sliding scale is invoked which disregards the regularity of the procedural process of the contract formation, that creates the terms, in proportion to the greater harshness or unreasonableness of the substantive terms themselves.’  (Citation.)”  (Armendariz v. Foundation Health Psychare Services, Inc. (2000) 24 Cal.4th 83, 114.)

A.           Procedural Unconscionability

The Court agrees with Plaintiff that the contract is procedurally unconscionable.  His testimony establishes that it was a contract of adhesion: a take-it-or-leave it condition of employment he had no opportunity to negotiate.  In reply, Defendant argues Plaintiff fails to establish he had no chance to discuss the terms of the agreement.  But discussion isn’t the same as negotiation.  As one of Defendants’ authorities puts it, adhesion turns on whether there is a chance for “arms’ length negotiating on the subject.”  (Steven v. Fidelity & Cas. Co. of New York (1962) 58 Cal.2d 862, 883.)  Whether Plaintiff could ask a supervisor questions about the agreement says nothing about whether he had the ability to negotiate its terms.

B.           Substantive Unconscionability

For the agreement to be unenforceable, it must also be substantively unconscionable.  Plaintiff fails to establish substantive unconscionability.

First, Plaintiff argues the agreement is substantively unconscionable because the modification clause renders it illusory.  (See Asmus v. Pacific Bell (2000) 23 Cal.4th 1, 15 [“when a party to a contract retains the unfettered right to terminate or modify the agreement, the contract is deemed to be illusory”].)  This argument fails because Defendant’s right to modify the contract isn’t unfettered.  Defendant’s president or COO may unilaterally modify the agreement, but “only as is necessary to make this policy enforceable under any federal, state, or local law or other applicable case law effective after this policy’s initial dissemination to its workforce.”  (Rossman Decl., Ex. B, at p. 19.)  The right to unilateral modification is limited to circumstances where the agreement must be changed to comply with subsequent changes to the law.

Second, Plaintiff argues the agreement contains a wholesale waiver of PAGA claims, which remains unenforceable under Viking River Cruises. (See Viking River Cruises, supra, 142 S.Ct. at pp. 1924-1925 [citing Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348].)  Plaintiff misreads the class/PAGA waiver, which applies only “[t]o the maximum extent permitted by law.”  (Rossman Decl., Ex. B, at p. 19.)  Furthermore, the agreement contains a severability clause.  (Id., at pp. 19-20.)  In similar circumstances, Viking River Cruises read a PAGA waiver and a severability clause together to avoid the wholesale PAGA waiver forbidden by Iskanian.

III.       Further Proceedings

Following Viking River Cruises, the individual portion of Plaintiff’s PAGA claim is ordered to arbitration.  Under both the Federal Arbitration Act and the California Arbitration Act, this case must be stayed until the completion of Plaintiff’s arbitration.  (9 U.S.C. § 3; CCP § 1281.4.) 

Defendant also asks the Court to dismiss the representative portion of Plaintiff’s PAGA claim.  This request follows the conclusion of Viking River Cruises, where the majority explained that under its view of California law, plaintiffs ordered to arbitrate their individual PAGA claims lose standing to prosecute representative PAGA claims: “But as we see it, PAGA provides no mechanism to enable a court to adjudicate non-individual PAGA claims once an individual claim has been committed to a separate proceeding.  Under PAGA’s standing requirement, a plaintiff can maintain non-individual PAGA claims in an action only by virtue of also maintaining an individual claim in that action.”  (Viking River Cruises, supra, 142 S.Ct. at p. 1925.)

But “construction of a state statute by a federal court does not preclude a state court from later rejecting the federal court’s conclusion.”  (16 Cal.Jur.3d (2022) Courts, § 324.)  As two concurrences in Viking River Cruises pointed out, the majority may well be incorrect about PAGA standing.  Justice Sotomayor wrote, “Of course, if this Court’s understanding of state law is wrong, California courts, in an appropriate case, will have the last word.”  (Viking River Cruises, supra, 142 S.Ct. at p. 1926 [conc. opn. of Sotomayor, J.].)  And three justices noted the majority’s conclusion “addresses disputed state-law questions” and “is unnecessary to the result.”  (Ibid. [conc. opn. of Barrett, J.].)

In fact, the California Supreme Court recently granted review in Adolph v. Uber Technologies, S274671, to answer this exact question.  Per an order dated August 1, 2022, “The issue to be briefed and argued is limited to the following: Whether an aggrieved employee who has been compelled to arbitrate claims under the Private Attorneys General Act (PAGA) that are ‘premised on Labor Code violations actually sustained by’ the aggrieved employee [citation] maintains statutory standing to pursue ‘PAGA claims arising out of events involving other employees’ [citation] in court or in any other forum the parties agree is suitable.”

In reply, Defendant seeks to avoid state law issues entirely.  It contends dismissal of the representative PAGA claim is required by Part III of the majority opinion in Viking River Cruises, which concerns FAA preemption.  The Court disagrees.  Part III held that FAA preemption requires the splitting of a PAGA claim into individual and representative components, along with the arbitration of the individual component of a PAGA claim.  Part IV addressed “what the lower courts should have done with Moriana’s non-individual claims.”  (Viking River Cruises, supra, 142 S.Ct. at p. 1925.)  The majority’s answer to that question turns on its interpretation of PAGA standing requirements, not the FAA.  (Ibid.) 

Were the Court to dismiss the representative PAGA claims only for Adolph to reach a different conclusion than Viking River Cruises, both judicial economy and the parties’ resources would be taxed by attempts to unwind the dismissal.  Furthermore, the arbitrator may decide that Plaintiff hasn’t suffered any of the Labor Code violations complained of, meaning Plaintiff lacks PAGA standing regardless of what happens in Adolph.  For these reasons, the proper course is to deny the request to dismiss the claims without prejudice to that request being renewed upon conclusion of Plaintiff’s individual arbitration.

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18-01019235

McNair vs. Impac Mortgage Corp.

Plaintiffs Inga McNair and Salvador Batres, Jr.'s Notice of Motion and Motion for Final Approval of Class Action Settlement   ROA 306

Plaintiffs’ motion for final approval of class action settlement is GRANTED.  The Court approves the following distributions:

1.    Attorney’s fees in the amount of $300,000, or 30% of the GSA.  The Court finds this amount to be a reasonable result in light of the quality of the result obtained, the work performed by class counsel, a review of the billing records provided, and the estimated lodestar.  In approving this amount and examining the billing records provided, the Court is not approving any particular hourly billing rates proposed by class counsel. 

2.    Litigation costs in the amount of $17,928.69, representing the full amount sought. 

3.    Administration costs in the amount of $9,750, per the administrator’s declaration.

4.    Enhancements of $5,000 apiece to each Plaintiff, for a total of $10,000.  In making this award, the Court has considered only the factors set forth in Golba v. Dick’s Sporting Goods, Inc. (2015) 238 Cal.App.4th 1251 and Clark v. Am. Residential Servs. LLC (2009) 175 Cal.App.4th 785. 

5.    Payment to the LWDA of $37,500, representing the LWDA’s share of the amount allocated to the PAGA claim.

Please submit a revised proposed order that conforms to the foregoing for the Court’s signature and identifies by name the class members who opted out.

Pursuant to CCP § 384(b), Plaintiffs shall submit to the Court a final report on or before May 5, 2023 setting forth the actual amounts paid to class members and other amounts disbursed pursuant to the settlement.  Upon receiving the report, the Court will determine whether further reports and/or a hearing will be necessary.

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21-01218388

Spotted Shield LLC vs. Electronic Commerce, LLC

1. Defendants Electronic Commerce, LLC and Darnell Ponder's Notice of Demurrer and Demurrer to Plaintiff's First Amended Complaint  ROA 46

2. Defendants Electronic Commerce, LLC and Darnell Ponder's Notice of Motion and Motion to Strike Plaintiff's Complaint  ROA 42

Defendants Electronic Commerce, LLC and Darnell Ponder demurrer to the 4th, 5th and 6th causes of action, and move to strike Plaintiff’s request for punitive damages and attorneys’ fees.

For the reasons below, the Court makes the following rulings:

1.    The Demurrer to the 4th cause of action for fraud is SUSTAINED with leave to amend.

2.    The Demurrer to the 5th cause of action for conversion is OVERRULED.

3.    The Demurrer to the 6th cause of action alleging a violation of Business & Professions Code § 17200 is SUSTAINED with leave to amend.

4.     The Motion to Strike Punitive Damages is GRANTED with leave to amend.

5.    The Motion to Strike Attorneys’ Fees is DENIED.

Any amended complaint must be filed on or before October 17, 2022.

BASIC ALLEGATIONS OF THE COMPLAINT

The First Amended Complaint (FAC) alleges that Defendant Electronic Commerce (EC) is an independent sales organization that processes credit card payments for merchants like Plaintiff Spotted Shield LLC. Ponder is alleged to be the owner and managing member of EC. (FAC ¶ 3) Plaintiff asserts that Defendants have wrongfully withheld funds belonging to Plaintiff but held in reserve pursuant to a Merchant Processing Agreement. The amount wrongfully withheld is in excess of $102,000.

The FAC alleges causes of action against EC for breach of contract, accounting, account stated and violation of Business & Professions Code § 17200. Against Ponder, the FAC alleges a 4th of cause of action for fraud, a 5th cause of action for conversion and the 6th cause of action also for violation of B&P § 17200.

                                            DEMURRER

In evaluating a demurrer, the Court is guided by long-settled rules. The Court “treat[s] the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.” (Serrano v. Priest (1971) 5 Cal.3d 584, 591.) “The complaint must be construed liberally by drawing reasonable inferences from the facts pleaded.” (Rodas v. Spiegel (2001) 87 Cal.App.4th 513, 517.) “Further, [the Court] gives the complaint a reasonable interpretation, reading it as a whole and its parts in their context.” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “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.)

1.    4th COA for Fraud Against Defendant Ponder

The elements of a cause of action for fraud are: (i) misrepresentation; (ii) defendant’s knowledge of the statement’s falsity; (iii) defendant’s intent to defraud; (iv) plaintiff’s justifiable reliance; and (v) resulting damage. (Chapman v. Skype Inc. (2013) 220 Cal.App.4th 217, 230-231; Witkin, Summary of Cal Law, Torts § 676.)

Fraud actions must be pled with specificity. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216, superseded by statute on another ground as stated in California for Disability Rights v. Mervyn’s, LLC (2006) 39 Cal.4th 223, 227.) California’s heightened pleading rule serves two purposes: (1) to put the defendant on notice, to “furnish [it] with certain definite charges which can be intelligently met”; and (2) to weed out nonmeritorious actions. (Id.)

Defendants argue this cause of action is duplicative of the breach of contract claim against EC because it relies upon the same basic contention, i.e., that EC failed to pay back certain monies. Citing Tenzer v. Superscope, Inc. (1985) 39 Cal.3d 18, 30-31, Defendants assert that something more than a mere alleged breach of contract is needed to support a fraud claim. Here, it is alleged that Ponder intentionally and knowingly misled Plaintiff for the purpose of inducing it to enter the Merchant Processing Agreement. (FAC ¶¶ 40-43). At least at the pleading stage, these allegations are sufficient to separate the fraud claim from the breach of contract cause of action. 

EC also argues the FAC fails to allege facts establishing the elements of fraud with the requisite specificity. Namely, that Plaintiff has failed to allege “under what authority Ponder had to make such representations and to whom they were made.” Plaintiff argues that because Ponder’s actions or intentions are exclusively within the knowledge or control of Defendants, the requisite specificity is therefore lower, and the allegations are adequate. At the same time, Plaintiff asserts it can amend the pleading to address the problems identified by EC.

While the FAC adequately alleges most of the basic elements of fraud (¶¶ 39-45), some specificity is missing, including details not exclusively within the control of EC. Thus, Plaintiff must state to whom the alleged misrepresentations were made and when they occurred.

Accordingly, the demurrer on this basis is SUSTAINED WITH LEAVE TO AMEND.

2.    5th COA for Conversion Against Defendant Ponder

The elements of a conversion claim are: (i) the plaintiff’s ownership or right to possession of the property; (ii) the defendant’s conversion by a wrongful act or disposition of property rights; and (iii) damages. (Lee v. Hanley (2015) 61 Cal.4th 1225, 1240.) “ ‘Money cannot be the subject of a cause of conversion unless there is a specific, identifiable sum involved, such as where an agent accepts a sum of money to be paid to another and fails to make the payment.’ [Citation omitted.]” (PCO, Inc. v. Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP (2007) 150 Cal.App.4th 384, 395.) Another court characterized the requirement as “a specific sum capable of identification.” (Voris v. Lampert (2019) 7 Cal.5th 1141, 1151 [citation omitted].)

Defendants argue that the parties’ relationship was contractual and, as the losses were purely economic, the economic loss rule bars the claim. In response Plaintiff asserts the conversion cause of action is not predicated on the breach of contract. Instead, the conversion claim alleges that Ponder wrongfully exercised full dominion and control over a fixed sum-- $102,625.92---for his own use and benefit. (FAC ¶¶ 51-52) This is sufficient at the demurrer stage to set forth a viable claim for conversion.

Accordingly, the demurrer to the conversion claim is OVERRULED.

3.    Sixth COA - Bus. & Prof. Code § 17200 Against EC and Ponder

Business & Professions Code Section 17200 prohibits “any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising.” Under the unlawful prong, a violation of law may be actionable as unfair competition under B&P § 17200. (Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 81.) “An unfair business practice occurs when that practice offends an established public policy or when the practice is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers. . . . An unfair business practice also means the public policy which is a predicate to the action must be tethered to specific constitutional, statutory or regulatory provisions.” (Ibid. [internal citations omitted].) A fraudulent practice “require[s] only a showing that members of the public are likely to be deceived and can be shown even without allegations of actual deception, reasonable reliance and damage.” (Id. [internal citations omitted].)

Defendants argue that the FAC does not allege the requisite underlying violation of a specific statute or law to support a claim under the unlawful prong. Similarly, they argue the FAC does not allege any action taken by Defendants that qualifies as “unfair” under that prong. Further, Defendants contend that Plaintiff does not qualify as a “consumer.”

The Court agrees that Plaintiff fails to cite a law or statute that Defendants allegedly violated. Plaintiff also does not base its claim on a particular public policy. Nor does it respond to Defendants’ contention that it does not qualify as a “consumer.” Indeed, the § 17200 claim is based on the purported wrongful withholding of Plaintiff’s funds, the use of Plaintiff’s funds for a wrongful benefit, and the so-called unjust profiting by Defendants as a result of the unfair business practices. (FAC ¶¶ 53-57.) As currently pleaded, these allegations are not sufficient to support a claim under any of the three § 17200 prongs.

Plaintiff will be given leave to amend to attempt to correct these flaws. Further, to the extent that a valid fraud claim exists, that also may provide a basis for a § 17200 claim.

4.    Naming Ponder as a Defendant

Defendants argue that Ponder is not a proper defendant in this case since there are insufficient allegations of his alter ego status. Alter ego status potentially would come into play if Plaintiff was seeking to hold Ponder personally responsible for EC’s actions. Yet as pleaded, the FAC does not seek to hold Ponder liable for EC’s alleged breach of contract or any other EC conduct. Rather, Plaintiffs seek to hold him liable for actions purportedly taken by him. Defendants fail to cite any authority that precludes an individual owner or manager of a corporation from being sued in this capacity.

                                                MOTION TO STRIKE

A court may strike out any irrelevant, false, or improper matter inserted in any pleading or strike out all or any part of any 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.)  Motions to strike are disfavored.  Pleadings are to be construed liberally with a view to substantial justice.  (Cal. Code Civ. Proc. § 452.)  The allegations of the complaint are presumed true; they are read as a whole and in context.  (Clauson v. Superior Court (1998) 67 Cal. App. 4th 1253, 1255.)  The use of the motion must be “cautious and sparing” and is not intended to be used as a “procedural ‘line item veto’ for the civil defendant.” (PH II, Inc. v. Super. Ct. (1995) 33 Cal.App.4th 1680, 1682-83.)

A. Punitive Damages

To plead a claim to recover punitive damages, a plaintiff must plead and show one of the following bases for imposition of exemplary damages, i.e. malice, oppression, or fraud.  (Civ. Code § 3294(a).) 

At the pleading stage, the complaint may rely on ultimate facts of fraud, oppression or malice. (Spinks v. Equity Residential Briarwood Apartments (2009) 171 Cal.App.4th 1004, 1055.)  Generally, a fraud cause of action adequately pled will support a prayer for punitive damages. (Stevens v. Super. Ct. (1986) 180 Cal.App.3d 605, 610.)

Here, the FAC does not yet plead a valid cause of action for fraud, and there are no other allegations sufficiently alleging malice or oppression. Because the FAC fails to allege facts to support a claim for punitive damages, the motion is GRANTED with leave to amend.

B. Attorney Fees

Defendants fail to address Plaintiff’s contractual-based argument (referring to the terms and conditions of the Merchant Processing Agreement) regarding Defendants’ right to recover attorney fees and the reciprocal rights of Plaintiff pursuant to Civil Code § 1717. Accordingly, the motion to strike the request for attorney fees is DENIED.

12

21-01206298

Miller vs. Stanbridge University

Plaintiff Matthew Miller's Notice of Motion and Motion to Approve Settlement Agreement Pursuant to the Private Attorneys General Act ROA 73

The Court’s prior minute order asked attorney William Marder to provide his hourly rate.  His responsive declaration listed only his hours worked, not his claimed rate.  If this information is provided at the hearing, the Court will GRANT Plaintiff’s motion for approval of the parties’ PAGA settlement with respect to the current version of the settlement agreement.  The Court finds the parties’ settlement is “fair, reasonable, and adequate in view of PAGA’s purposes to remediate present labor law violations, deter future ones, and to maximize enforcement of state labor laws.”  (Moniz v. Adecco USA, Inc. (2021) 72 Cal.App.5th 56, 72.)  The Court also approves the current form of the notice.

The Court approves the following distributions:

1. Attorney’s fees in the amount of $34,710, or 30% of the GSA.  The Court finds this amount to be a reasonable result in light of the quality of the result obtained, the work performed by counsel, a review of the billing records provided, and the estimated lodestar.  In approving this amount and examining the billing records provided, the Court is not approving any particular hourly billing rates proposed by counsel. 

2. Litigation costs in the amount of $9,358.83, out of $10,850.83 sought.  The court will not permit recovery of a filing fee incurred on April 22, 2021 in connection with a separate but related non-PAGA matter, Miller v. Stanbridge University, No. 21-01196748.  The State, as real party in interest here, should not be made to bear the expense of litigation to which it was not a party.

3. Administration costs in the amount of $4,500, per the administrator’s bid.

4. An enhancement to Plaintiff of $5,000.  In making this award, the Court has considered only the factors set forth in Golba v. Dick’s Sporting Goods, Inc. (2015) 238 Cal.App.4th 1251 and Clark v. Am. Residential Servs. LLC (2009) 175 Cal.App.4th 785.

5. Taking the above distributions into account, from the GSA of $115,700, $62,131.17 remains to be distributed as provided under PAGA.  This amount shall be allocated 75% to the LWDA and 25% to the aggrieved employees.

The administrator is to file a declaration no later than May 7, 2023 to confirm that the distribution of funds to aggrieved employees is complete.  Upon receipt of the administrator’s declaration, the Court will determine whether further briefing or a hearing is necessary.

Please submit a revised proposed order that conforms to the foregoing for the Court’s signature.