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Tentative Rulings for May 4, 2017

Departments 402, 403, 501, 502, 503

There are no tentative rulings for the following cases. The hearing will go forward on

these matters. If a person is under a court order to appear, he/she must do so.

Otherwise, parties should appear unless they have notified the court that they will

submit the matter without an appearance. (See California Rules of Court, rule 3.1304(c).)

The court has continued the following cases. The deadlines for opposition and reply

papers will remain the same as for the original hearing date.

16CECG03355 MacKenzie Stevens v. Suncrest Solar, Inc. is continued to

Wednesday, May 24, 2017 at 3:30 p.m. in Department 402.

16CECG00160 Gonzalez v. Lopez is continued to Thursday, May 11, 2017 at 3:30

p.m. in Dept. 503.

09CECG03601 Glaski v. Bank of America is continued to Thursday, May 11, 2017 at

3:30 p.m. in Dept. 403.

14CECG02305 Stevenson v. Community Medical Centers is continued to Thursday,

May 11, 2017, at 3:30 p.m. in Dept. 402.

15CECG03951 Green v. CDCR is continued by separate court order to Thursday,

June 15, 2017, at 3:30 p.m. in Dept. 403; see that order for briefing

schedule.

16CECG02171 Bautista v Parlier Unified School District, et al. is continued to

Thursday, May 11, 2017 at 3:30 pm in Dept. 403.

________________________________________________________________

(Tentative Rulings begin at the next page)

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Tentative Rulings for Department 402

(29)

Tentative Ruling

Re: Isabella Pogosian v. Rite Aid Corporation, et al.

Case No. 16CECG03618

Hearing Date: May 4, 2017 (Dept. 402)

Motion: Modify subpoena

Tentative Ruling:

To grant, and quash the subpoenas issued by Defendant. (Code Civ. Proc.

§1987.1(a).)

If the tentative ruling is not challenged, sanctions in the amount of $4,860 are

granted in favor of Plaintiff. Defendant is ordered to pay the sanctions to the Akopyan

Law Firm within 30 days of service of this order.

Should Defendant choose to have a hearing on the tentative and fail to prevail,

the additional sanctions noticed and requested by Plaintiff for the actual time and

expense incurred to attend the hearing shall be added to the above amount. Based

on Plaintiff’s declaration, those amounts will not exceed 10 hours of attorney time @

$400/hour and $200 maximum of actual travel expense.

Explanation:

“While the filing of the lawsuit by petitioner may be something like issuing a

fishing license for discovery, as with a fishing license, the rules of discovery do not allow

unrestricted access to all species of information. Discovery of constitutionally protected

information is on a par with discovery of privileged information and is more narrowly

proscribed than traditional discovery.” (Tylo v. Superior Court (1997) 55 Cal.App.4th

1379, 1387.) Accordingly, discovery may “be compelled only upon a showing of a

compelling public interest.” (Ibid.; United Farm Workers of America v. Superior Court

(1985) 170 Cal.App.3d 391, 394 [only when disclosure is directly related to party's claim

such that disclosure is essential to fair resolution of case may it be compelled].) The

party seeking the information has the burden of establishing that the information sought

is directly relevant to the claims. (Tylo, supra, 55 Cal.App.4th at p. 1387.) This is so even

where the party who filed the action waived its privacy protections by filing suit: “the

court must construe the concept of ‘waiver’ narrowly[.]” (Barrenda L. v. Superior Court

(1998) 65 Cal.App.4th 794, 801; Britt v. Superior Court (1978) 20 Cal.3d 844, 858-859; In re

Lifschutz (1970) 2 Cal.3d 415, 435.)

Moreover, “[w]hen compelled disclosure intrudes on constitutionally protected

areas, it cannot be justified solely on the ground that it may lead to relevant

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information. [Citation.] … [E]ven…directly relevant [information]…will not be

automatically allowed; there must be a careful balancing of the compelling public

need for discovery against the fundamental right of privacy. [Citations.]” (Board of

Trustees v. Superior Court (1981) 119 Cal.App.3d 516, 525, internal quotation marks

omitted; Davis v. Superior Court (1992) 7 Cal.App.4th 1008, 1017 [“[m]ere speculation as

to the possibility that some portion of the records [sought to be disclosed] might be

relevant to some substantive issue does not suffice.”]; Mendez v. Superior Court (1988)

206 Cal.App.3d 557, 571 [“It would be anomalous for a trial court to accept conjecture

as a basis for discovery when there is no submitted support for the underlying

assumption.”].) These principals have specifically been held to apply to discovery of

medical records (see, e.g., Britt, supra, 20 Cal.3d at p. 864; Lantz v. Superior Court (1994)

28 Cal.App.4th 1839, 1853-1857; Palay v. Superior Court (1993) 18 Cal.App.4th 919, 927-

928) and of personnel records (see, e.g., San Diego Trolley, Inc. v. Superior Court (2001)

87 Cal.App.4th 1083, 1097; Board of Trustees, supra, 119 Cal.App.3d at p. 526.)

In the case at bench, the subpoenas issued by Defendants have no substantive

or temporal limits whatsoever. (See Decl. of M. Akopyan, Exhs. E, F.) Plaintiff seeks to limit

the scope of the employment records to attendance and payroll only, and that of the

medical records to those from July 4, 2012, through present.

Defendant’s subpoena to Plaintiff’s employer seeks production of “all

documents and records, including employment application, work absence records,

medical reports, incidence reports, pre-employment medical examination, employee

progress reports and disciplinary actions pertaining to the employment of [Plaintiff].”

(Decl. of M. Akopyan, Exh. E.) The same is requested of Plaintiff’s previous employer

(Ibid.) Defendant argues such broadly worded subpoenas are needed because there

may be records reflecting Plaintiff’s absence from work that would not be included in

attendance and payroll records, and which may be important in determining Plaintiff’s

wage loss and life expectancy.

The subpoenas sent to Plaintiff’s healthcare providers seek “all documents,

medical records, emergency room records, sign-in sheets, medical tests, radiological

reports, inpatient and outpatient charts and records. All itemized statements of billing

charges, invoices, records of adjustments and/or write-offs, payments and credits,

explanation of benefits, balances due and insurance records pertaining to the care,

treatment or examination of Izabella Pogosian.” (Decl. of M. Akopyan, Exh. F.)

Defendant argues the limitless nature of the subpoenas is necessary here because

neither the copy service nor the health care providers know what is related to the

incident giving rise to the instant action and will thus be unable to properly turn over

what is included in the subpoenas if they are limited as Plaintiff requests. Defendant

states that it “does not know if Plaintiff’s medical records are all relevant either” (opp.,

4:14-15), but that it needs to see them all in order to determine their relevancy.

Defendant appears to be on the proverbial “fishing expedition” here.

Defendant’s justifications for its overbroad subpoenas fail to establish that Defendant’s

interest in obtaining Plaintiff’s protected medical and personnel records outweighs

Plaintiff’s constitutionally protected right of privacy in the documents. Defendant itself

acknowledges that it is unsure whether the medical records sought are in fact relevant

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to Defendant’s defense. Defendant’s position that the health care providers and copy

service will be unable to determine what is included in a more narrowly drawn

subpoena is unsupported and unpersuasive.

This Court does not bear the burden of redrafting subpoenas. (Hallendorf v.

Superior Court (1978) 85 Cal. App. 3d 553, 557; Britt, supra, 20 Cal.3d at pp. 862-863, fn.

7.) The Court is inclined to quash the subpoenas at issue in the instant motion.

Defendant would then be able to issue amended subpoenas with temporal and

substantive scopes that are reasonably related to the claims asserted.

As outlined above, Plaintiff’s request for fees is granted, in the amount of $4,860 if

this tentative is adopted unchallenged.

The Court notes Defendant’s argument that this motion should be denied due to

Plaintiff’s failure to request a pretrial discovery conference, allegedly in violation of

Local Rule 2.1.17. The rule cited, however, is inapplicable to the instant motion, as the

motion is brought pursuant to Code of Civil Procedure section 1987.1, and Plaintiff is not

refusing to produce documents pursuant to a claimed privilege. (See Superior Court of

Fresno County, Local Rules, rule 2.1.17(A), (B).)

Pursuant to California Rules of Court, rule 3.1312, and Code of Civil Procedure

section 1019.5(a), no further written order is necessary. The minute order adopting this

ruling will serve as the order of the court, and service by the clerk of the minute order

will constitute notice of the order.

Tentative Ruling

Issued by: JYH on 05/03/17

(Judge’s initials) (Date)

5

(28) Tentative Ruling

Re: Britz Ag Finance Co., Inc. v. California Department of Transportation

Case No. 15CECG01886

Hearing Date: May 4, 2017 (Dept. 402)

Motion: By Defendant California Department of Transportation for Summary

Judgment.

Tentative Ruling:

To deny the motion.

Explanation:

To obtain summary judgment, “all a defendant needs to do is to show that the

plaintiff cannot establish at least one element of the cause of action.” Aguilar v.

Atlantic Richfield Co. (2001) 25 Cal.4th 826, 853. If a defendant makes this showing, the

burden shifts to the plaintiff to demonstrate that one or more material facts exist as to

the cause of action or as to a defense to a cause of action. (CCP § 437(c),

subdivision(p)(2).)

In a summary judgment motion, the pleadings determine the scope of relevant

issues. (Nieto v. Blue Shield of Calif. Life & Health Ins. Co. (2010) 181 Cal.App.4th 60, 74.)

A defendant need only “negate plaintiff's theories of liability as alleged in the

complaint; that is, a moving party need not refute liability on some theoretical possibility

not included in the pleadings.” (Hutton v. Fidelity Nat’l Title Co. (2013) 213 Cal.App.4th

486, 493 (emphasis in original).)

The court examines affidavits, declarations and deposition testimony as set forth

by the parties, where applicable. (DeSuza v. Andersack (1976) 63 Cal.App.3d 694, 698.)

Any doubts about the propriety of summary judgment are to be resolved in favor of the

opposing party. (Yanowitz v. L’Oreal USA, Inc. (2003) 106 Cal.App.4th 1036, 1050.)

A court will “liberally construe plaintiff's evidentiary submissions and strictly

scrutinize defendant's own evidence, in order to resolve any evidentiary doubts or

ambiguities in plaintiff's favor.” (Johnson v. American Standard, Inc. (2008) 43 Cal.4th 56,

64.)

Furthermore, the moving party must identify for the court the matters it contends

are “undisputed,” and cite the specific evidence showing why it is entitled to judgment

as a matter of law. (United Community Church v. Garcin (1991) 231 Cal.App.3d 327, 337

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(“This is the Golden Rule of Summary Adjudication: if it is not set forth in the separate

statement, it does not exist.” (emphasis in original).)

Defendant has moved for Summary Judgment on two grounds: first that Plaintiff

had notice of the damage to its crops well in advance of October 17, 2014, and

therefore Plaintiff’s claim is untimely; and, second, that Plaintiff cannot prove that the

herbicidal spraying in 2014 caused Defendant damage.

Notice

A plaintiff has reason to discover a cause of action when he or she has reason at

least to suspect a factual basis for its elements. (Fox v. Ethicon Endo-Surgery, Inc. (2005)

35 Cal.4th 797, 807.) Which is to say, that where the Plaintiff has suspicion of

wrongdoing, causation, and harm, the discovery rule will allow for accrual of the

statute of limitations even when the plaintiff does not have reason to suspect the

defendant’s identity. (Id.) A plaintiff is also held to his or her actual knowledge as well as

knowledge that could reasonably be discovered through investigation of sources open

to them. (Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1109.) Essentially, “when the plaintiff

has notice of information of circumstances to put a reasonable person on inquiry, or

has the opportunity to obtain knowledge from sources open to his investigation (such as

public records or corporation books), the statute commences to run.” (McKelvery v.

Boeing North American, Inc. (1999) 74 Cal.App.4th 151, 160, fn.11 (emphasis omitted).)

Thus, in order to succeed on a motion for summary judgment, Defendant would

have to produce evidence to show that Plaintiff was an inquiry notice prior to October

17, 2014.

According to the Separate Statement, Plaintiff does not dispute that an

inspection of the deformed nuts would have revealed the deformity that was the basis

for the damage to Plaintiff’s crops. (UMF Nos. 2-3.) However, nowhere in the Separate

Statement does it indicate that it an investigation was required under the

circumstances, or that “reasonable diligence” would have discovered the issue. (Jolly,

supra, 44 Cal.App.3d at 1112.) So, whether or not opening the almonds would have

demonstrated damage cannot be used as a basis for granting summary judgment or

adjudication because Defendant has not borne its burden to show that Plaintiff was

obligated to inspect the almonds in that way.

The only other fact that Plaintiff cites in favor of its motion on the basis of the

notice period is that “On some date before October 17, 2014, representatives of

plaintiff suspected damage at the RR1 orchard by a chemical application of some

third party.” (UMF 1.)

Plaintiff disputes this fact. It notes that its representative contacted the Madera

County Agricultural Commissioner who informed them that Caltrans had not done any

spraying. (UMF 1.) Plaintiff argues that the first time it had any direct knowledge that

Caltrans had done the spraying was in February of 2015. (UMF 1.)

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Moreover, according to Plaintiff, the only visible sign of problems with the crop,

the yellowing leaves, did not necessarily indicate herbicidal use, but could have had

other sources. (AMF 12-16.) The yellowing of the hulls of the almonds lasted from July to

September and then ceased. (AMF 26.) So, again, there is at least a question of fact as

to whether the damage to Plaintiff’s crops could have been discovered with

reasonable diligence or was actually known to Plaintiff prior to October 17, 2014.

In reply, Defendant argues that there is evidence that (1) two people had a

reasonable suspicion that the spraying caused damage in the summer of 2014 (UMF 1),

and, again, (2) that inspection of the nuts would have revealed the deformity (UMF 2-

3).

Defendant cites to the declarations of Schnoor and the testimony of Miguel

Moran. Although not cited in the separate statement, Schnoor and Moran are affiliated

with Plaintiff. The two appear to have stated that the yellowing leaves made them

suspicious of spraying activity. (UMF 1 and citations within). While this is true, Plaintiff has

also pointed to evidence that a suspicion was raised, that they investigated the

suspicion, and were told by a public agency that there was no spraying. (Response to

UMF 1.)

Defendant relies in large measure on a footnote in McKelvey v. Boeing North

American, Inc. (supra, 74 Cal.App. 4th at 160, fn.11) for the proposition “when the

plaintiff has notice of information of circumstances to put a reasonable person on

inquiry, or has the opportunity to obtain knowledge from sources open to his

investigation (such as public records or corporation books), the statute commences to

run.” (emphasis in original case, quoting 3 Witkin Cal. Procedure (4th Ed. 1996) Actions

§602, p.773.) However, McKelvey dealt with the question of whether widespread news

reports of ground contamination could trigger the commencement of the statute of

limitations. (Id. at p. 155-156.) The McKelvey Court ruled admitting in a complaint that

there was widespread press about the issue undercut Plaintiff’s reliance on the

discovery rule to toll the running of the statute of limitations. (Id. at 160-161.) However,

and not noted by Defendant, McKelvey was superseded on this point by statute.

(Grisham v. Phillip Morris U.S.A., Inc. (2007) 40 Cal.4th 623, 637 fn.8 (“Media reports

regarding ... hazardous material or toxic substance contamination do not, in and of

themselves, constitute sufficient facts to put a reasonable person on inquiry notice that

the injury or death was caused or contributed to by the wrongful act of another.”

quoting Code Civ.Proc. §340.8, subd.(c)(2).)

Furthermore, the language cited by Defendant in the McKelvey case is found in

the latest edition of Witkin at section 659, and refers to when the statute of limitations

begins for a fraud cause of action. (3 Witkin Cal. Proc. (5th Ed. 2008) Actions §659.)

Defendant has not cited to cases applying this statement of law to a negligence claim

such as this.

In any event, Defendant has cited to no cases that hold that, where the Plaintiff

had the opportunity to search the public records, did so, but still did not find the

information that allegedly was there, the statute of limitations still runs. In short, the

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diligence shown by Plaintiff may or may not have been reasonable, but it raises a

question of fact for a jury to determine.

In the reply brief, Defendant points to evidence that various types of inspections

would have revealed the damage in advance of October 17, 2014. While it does

appear undisputed that if Plaintiff had conducted a certain kind of inspection of the

almonds Plaintiff would have discovered the damage in a timely fashion, there is

nothing in the separate statement that such an inspection would have been

reasonable or was required under the circumstances.

Therefore, the motion for summary judgment cannot be granted on this ground.

Causation

Defendant argues that Plaintiff has not shown evidence of causation. Causation

is of course an essential element of a tort action. (Saelzler v. Advanced Group 400

(2001) 25 Cal.4th 763, 772.) To establish causation, a plaintiff must show that

defendant’s conduct was a “substantial factor” in bringing about the harm in question.

(Padilla v. Rodas (2008) 160 Cal.App.4th 742, 752.) The burden on a summary judgment

would be to show that there are no facts that show that Defendant’s conduct was a

“substantial factor” in bringing the harm in question.

In the separate statement, Defendant recounts Plaintiff’s allegations in its

complaint regarding the careless application of chemicals, including Milestone and

Roundup Pro, and how they caused the damage. (UMF 4-5.) Defendant then argues

that the facts are that a symptom of Milestone application is “twisting or cupping of

leaves,” and that a symptom of Roundup Pro application is “stunting of leaves and

stems leading to a condition known as ‘witches’ broom.’” (UMF 7-8.) However, Plaintiff’s

representatives “report seeing no symptoms such as twisting, contorting, or cupping of

leaves, or ‘witches’ broom.’” (UMF 6.) (Defendant does not include in the separate

statement when these reports were from.)

Defendant also notes that Plaintiff failed to perform lab tests of the trees in 2014

for exposure to any of the chemicals. (UMF 9.)

However, Plaintiff disputes the factual components of the allegations, noting

that Defendant also used Landmark XP, Goaltender, Inplace and Activator 90. (UMF 4.)

Plaintiff also notes that exposure to certain quantities of some of these drugs (including

Roundup ProConcentrate) could result in yellowing leaves and not necessarily the

symptoms noted by Defendant. (UMF 8.)

In short, Defendant’s separate statement does not foreclose that Defendant’s

use of certain chemicals caused the injury to Plaintiff, and Plaintiff has, at least, raised a

question of fact about causation.

In the reply brief, Defendant makes the statement that “Caltrans is not required,

as plaintiff suggests, to conclusively rule out all possible causes of causation [sic] in its

moving papers. Caltrans only need make an initial showing it is more probably than not

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chemical it applied [sic] did not cause harm.” (Reply at p.9.) Defendant cites to no

case authority for this proposition. Here, Defendant’s causation argument is based on

the premise that two of the chemicals it used did not cause the harm in question. It is

silent as to the other chemicals it used. It therefore did not carry its burden of showing

that it, as a matter of law, Plaintiff could not establish causation (in this case, that

Defendant’s spraying of chemicals caused Plaintiff’s alleged damages). Therefore,

summary judgment cannot be granted on this ground.

The Court has considered the objections filed by the parties. The objections

interposed went either to the weight of the evidence, or to technical issues that had no

bearing on the outcome of the motion. The objections are all therefore overruled.

Finally, in footnote 4 of its reply brief, Defendant asks for a continuance to

amend its separate statement. Given that a jury trial is due to commence on June 4,

2017, the Court declines to exercise its discretion to do this. Furthermore, the request for

bifurcation is procedurally improper in a footnote in a reply brief, and the Court

expresses no opinion on whether it would grant such a motion if made in a proper

fashion.

Pursuant to California Rules of Court, rule 3.1312, subdivision (a), and Code of

Civil Procedure section 1019.5, subdivision (a), no further written order is necessary. The

minute order adopting this tentative ruling will serve as the order of the court and

service by the clerk will constitute notice of the order.

Tentative Ruling

Issued by: JYH on 05/03/17

(Judge’s initials) (Date)

10

(17) Tentative Ruling

Re: Purnell v. Patio Bar

Court Case No. 17 CECG 00296

Hearing Date: March 4, 2017 (Dept. 402)

Motion: Defendants’ Motion to Transfer Venue to Santa Clara County

Defendants’ Motion to Quash Service of Summons

Tentative Ruling:

To grant the motion to transfer venue to Santa Clara County. Plaintiff is

responsible for paying the costs and fees of transferring the action to Santa Clara

County as determined by the Clerk of the Court, within 30 days after service of notice of

this transfer order. If plaintiff fails to do so within 5 days after service of notice of this

order, any other interested party, whether named in the complaint or not, may pay

such costs and fees in order to expedite the transfer. (If the fees and costs are not paid

within 30 days, the action is subject to dismissal.) (Code Civ. Proc., § 399, subd. (a).)

To deny the motion to quash service of summons.

Explanation:

Motion to Transfer Venue:

Under Code of Civil Procedure section 395, subdivision (a), “[e]xcept as

otherwise provided by law and subject to the power of the court to transfer … the

county where the defendants or some of them reside at the commencement of the

action is the proper court for the trial of the action.” (Code Civ. Proc., § 395, subd. (a);

see Brown v. Superior Court (1984) 37 Cal.3d 477, 483.)

Civil Procedure section 396b, provides that the court must order transfer of a

case “when the court designated in the complaint is not the proper court,” as long as

the motion is filed in a timely fashion. (Code Civ. Proc., §§ 396b, 397(a).) “(I)t is the

moving defendant's burden to demonstrate that the plaintiff's venue selection is not

proper under any of the statutory grounds.” (Fontaine v. Superior Court (2009) 175

Cal.App.4th 830, 836.) Also, if venue is proper in several different counties, the moving

party has the burden of negating the propriety of venue as laid on all possible grounds.

(Karson Insustries, Inc, v. Superior Court (1969) 273 Cal.App.2d 7, 8-9.)

Defendant Patio Bar or, more properly The Patio, appears to be either a

partnership or some other form of unincorporated entity. The Joneses readily admit that

they are the proper defendants in this action. If a partnership or association has not

filed a statement with the Secretary of State designating the county in which it

maintains its principal office (as required by Corporations Code section 18200), then

venue in any action against it is proper in the county in which any partner or member

resides. (Code Civ. Proc., § 295.2; See Juneau Spruce Corp. v. International

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Longshoremen's & Warehousemen's Union (1951) 37 Cal.2d 760, 763-764.) There is no

evidence that The Patio has filed a Corporation’s Code section 18200 statement, but it,

and its owners, the Joneses, all reside in Santa Clara County. Thus, venue for this action

is proper in Santa Clara County.

Motion to Quash:

Code of Civil Procedure section 418.10 authorizes a motion to quash service of

summons within the time allowed for filing a response to the complaint. If the motion is

timely made, “no act” by the party making such motion, “including filing an answer,

demurrer or motion to strike,” shall be deemed a general appearance. (Code Civ.

Proc., § 418.10, subd. (e)(1).) As long as the motion is filed before or concurrently with

an act constituting participation in the litigation on the merits, there is no waiver of

jurisdictional defects: i.e., “a defendant may move to quash coupled with any other

action without being deemed to have submitted to the court's jurisdiction.” (Edmon &

Karnow, California Practice Guide: Civil Procedure Before Trial (The Rutter Group 2016) §

3:165.1, citing Roy v. Superior Court (2005) 127 Cal.App.4th 337, 345.)

Here, defendants filed their motion to transfer venue on March 22, 2017. They

filed their motion to quash service of summons on March 30, 2017. It has long been the

rule in California that “a party waives any objection to the court's exercise of personal

jurisdiction when the party makes a general appearance in the action.” (Roy v.

Superior Court, supra, 127 Cal.App.4th 337, 341; Dial 800 v. Fesbinder (2004) 118

Cal.App.4th 32, 52 [“ ‘ “A general appearance operates as a consent to jurisdiction of

the person....” [Citation.]’ ”) ] Code of Civil Procedure Section 1014 reads in part: “A

defendant appears in an action when the defendant answers, demurs, files a notice of

motion to strike, files a notice of motion to transfer pursuant to Section 396b, moves for

reclassification pursuant to Section 403.040, gives the plaintiff written notice of

appearance, or when an attorney gives notice of appearance for the defendant....”

(Emphasis added.) Accordingly, by the time defendants had filed their motion to

quash service of summons they had already made a general appearance in this

action. Thus, the motion to quash must be denied.

Pursuant to California Rules of Court, rule 3.1312(a) and Code of Civil Procedure

section 1019.5, subdivision (a), no further written order is necessary. The minute order

adopting this tentative ruling will serve as the order of the court and service by the clerk

will constitute notice of the order.

Tentative Ruling

Issued by: JYH on 05/03/17

(Judge’s initials) (Date)

12

(5)

Tentative Ruling

Re: Riyad Saddouq v. Wells Fargo, Inc.

Superior Court Case No. 16 CECG 01575

Hearing Date: May 4, 2017 (Dept. 402)

Motion: Demurrer to the Third Amended Complaint

Tentative Ruling:

To sustain the general demurrers to the first, second, and third causes of action to

the Third Amended Complaint without leave to amend.

The prevailing party to submit to this court, within 7 days of service of the minute

order, a proposed judgment of dismissal.

Explanation:

Background

On June 24, 2014, Wells Fargo filed a limited civil action against Riyad Saddouq

for breach of contract based upon his failure to make payments on a credit card

issued by Wells Fargo. The amount owed was $9,800. The case was filed as 14 CECL

05299. Default was entered on September 22, 2014. A clerk’s judgment was requested

and entered on October 23, 2014 in the amount of $10,095 (including costs.) A writ of

execution was issued on November 19, 2015.

On May 17, 2016, Saddouq filed a Complaint as Case No. 16 CECG 1575 against

Wells Fargo purporting to allege two causes of action for negligence and violation of

Bus. & Prof. Code § 172000 et seq. On June 30, 2016, Defendant filed a general

demurrer to each cause of action. This demurrer was sustained with leave to amend.

A First Amended Complaint was filed on August 29, 2016. On October 3, 2016,

Defendant filed a general demurrer on the grounds that insufficient facts were stated.

The general demurrer was sustained with leave to amend.

On November 21, 2016, Plaintiff filed a Second Amended Complaint. On

December 27, 2016, Defendant filed a general demurrer. The general demurrer was

sustained with leave to amend. The Court emphasized again that the doctrine of res

judicata does not apply. As a matter of law, any plaintiff is entitled to seek equitable

relief against the judgment in the trial court. See Engebretson & Co. v. Harrison (1981)

125 Cal.App.3d 436, 440.

As for the second cause of action, the Court noted that neither actual nor

compensatory damages may be awarded for violation of Bus. & Prof. Code § 172000 et

seq. [Bank of the West v. Sup.Ct. (Industrial Indem. Co.) (1992) 2 Cal.4th 1254, 1266—

“damages are not available under section 17203”; Chern v. Bank of America (1976) 15

13

Cal.3d 866, 875—§§ 17500 and 17535 “do not authorize recovery of damages”]

Likewise, punitive damages are not available under the UCL or the FAL. [People v.

Sup.Ct. (Jayhill Corp.) (1973) 9 Cal.3d 283, 287]

On February 14, 2017, Plaintiff filed a Third Amended Complaint. On March 17,

2017, Defendant filed a general demurrer. In addition, Defendant requests that the

Court strike the first and third causes of action on the grounds that these amendments

exceed the scope of the Court’s order of February 8, 2017. See Notice of Demurrer at

page 2 lines 4-12.

The request to strike will not be addressed. A separate motion to strike was not

filed pursuant to CCP § 436. Defendant did not file a notice of motion [CCP § 1010] nor

a separate Memorandum of Points and Authorities [CRC 3.1112(c), 3.1113].

Merits

The gravamen of the action is Plaintiff’s alleged failure to receive notice that he

was being sued by the Defendant in Case No. 14 CECL 05299. The failure resulted in the

entry of default, default judgment and the issuance of a writ of execution. As a matter

of law, there are only three methods for obtaining relief from entry of default and

default judgment:

1. Discretionary relief pursuant to CCP § 473(b) on grounds of “mistake,

inadvertence, surprise or excusable neglect.” This relief must be sought within 6

months after entry of default or default judgment.

2. After expiration of the 6-month period, defendant may obtain relief by showing

“lack of notice” of the proceedings (CCP § 473.5]. Relief must be pursued

within 2 years of the default judgment or 180 days after service of a written

notice that the default judgment has been entered, whichever is earlier. [CCP

§ 473.5]

3. Notwithstanding the foregoing, a court has inherent, equitable power to set

aside a judgment on the ground of “extrinsic fraud or mistake.” [Olivera v.

Grace (1942) 19 Cal.2d 570, 576; Sporn v. Home Depot USA, Inc. (2005) 126

Cal.App.4th 1294, 1300; Moghaddam v. Bone (2006) 142 Cal.App.4th 283, 290-

291]

The last method requires a showing of:

— a meritorious defense;

— a satisfactory excuse for not presenting a defense to the original action; and

— diligence in seeking to set aside the default once it was discovered.

[Rappleyea v. Campbell (1994) 8 Cal.4th 975, 982—leaving open, however,

whether the same test applies where a default but no judgment has been

entered; Sporn v. Home Depot USA, Inc., supra, 126 Cal.App.4th at 1301]

14

But, relief pursuant to CCP § 473(b) or CCP § 473.5 must be sought in the action which

resulted in a judgment. A new suit is not filed. Id. Only relief sought on grounds of

equity may be filed as a separate suit. [Olivera v. Grace (1942) 19 Cal.2d 570, 575-576,

122 P2d 564, 567-568] Finally, if all other time limits have expired, a defendant may be

able to wait until the judgment is sought to be enforced and then raise the lack of

jurisdiction as a defense to its enforcement. [Donel, Inc. v. Badalian (1978) 87

Cal.App.3d 327, 333-334]

In the instant case, the Plaintiff no longer seeks relief from the default judgment.

Instead, he has alleged causes of action for negligent supervision, negligence and

negligent misrepresentation and seeks damages in the amount of $26,000. See Third

Amended Complaint at ¶ 10 a. and the causes of action attached thereto. But,

regardless of the legal theory, the damages that Plaintiff suffered were due to an

allegedly invalid proof of service that resulted in a default judgment. Further, Plaintiff

cannot be awarded monetary damages because it would render the conditions for

obtaining relief from default judgment meaningless.

The Court has given the Plaintiff a reasonable amount of guidance, three

chances to amend his Complaint and has advised him to seek legal counsel. However,

the Third Amended Complaint is legally incapable of amendment. [Lawrence v. Bank

of America (1985) 163 Cal.App.3d 431, 436; Schonfeldt v. State of Calif. (1998) 61

Cal.App.4th 1462, 1465—if no liability as a matter of law, leave to amend should not be

granted; Jenkins v. JP Morgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 535]

Therefore, the general demurrers to the first, second and third causes of action will be

sustained without leave to amend.

Pursuant to California Rules of Court, Rule 391(a) and Code of Civil Procedure §

1019.5, subd. (a), no further written order is necessary. The minute order adopting this

tentative ruling will serve as the order of the court and service by the clerk will constitute

notice of the order.

Tentative Ruling

Issued by: JYH on 05/03/17

(Judge’s initials) (Date)

15

Tentative Rulings for Department 403

(29)

Tentative Ruling

Re: Basila Construction, Inc. v. Smith, et al.

Superior Court Case No. 13CECG01432

Hearing Date: May 4, 2017 (Dept. 403)

Motion: Defendants' motion to amend

Tentative Ruling:

To grant. (Code Civ. Proc. §187.)

If any oral argument is requested it will be held Thursday, May 11, 2017 at 3:30 p.m. in

Department 403.

Explanation:

Res Judicata

The burden of establishing the defense of res judicata lies with the party asserting

it. (Erlich v. Superior Court of Los Angeles County (1965) 63 Cal.2d 551, 556 - 557.) This

includes stating the facts conferring jurisdiction and the finality of the prior judgment.

(Code Civ. Proc. §456.) Judicial orders of a California or federal court "create a

disputable presumption, according to the matter directly determined, between the

same parties and their representatives and successors in interest by title subsequent to

the commencement of the action or special proceeding, litigating for the same thing

under the same title and in the same capacity." (Code Civ. Proc. §1909.)

In the case at bench, Basila Construction, Inc. ("BCI") alleges that the issue of Jon

Basila ("Jon") and Sam Basila ("Sam") being the alter egos of BCI was already addressed

in arbitration, and is thus res judicata. BCI contends that Greg and Lori Smith ("the

Smiths") moved the arbitrator to add Jon and Sam to the award pursuant to Code of

Civil Procedure section 187 on December 30, 2014, and that the motion was denied.

The Smiths state this contention is false and that what really happened was that on

January 6, 2015, the arbitrator held a telephonic hearing on several issues, including a

request to add Jon and Sam to the award, and found that because Jon and Sam were

not parties to the arbitration agreement, the arbitrator was without jurisdiction to hear

the request to amend.

The arbitrator's findings and amended findings do not address the issue of alter

ego. The email from the arbitrator that BCI provides is inconclusive. There is no evidence

before the Court that the issue of alter ego was formally before the arbitrator; at any

16

rate, no formal ruling on the issue has been provided by either party. The issue therefore

is not res judicata.

Alter Ego

In the interests of justice, the “greatest liberality is to be encouraged” in the

allowance of amendments brought pursuant to Code of Civil Procedure section 187.

(Greenspan v. LADT LLC (2010) 191 Cal.App.4th 486, 508.) A motion to add a party to a

judgment pursuant to section 187 provides a means to satisfy the original judgment,

and may be made at any time so that the judgment designates the real defendants.

(Id. at pp. 516-517.)

Although a corporation is typically regarded as an entity separate and distinct

from its stockholders, “[t]he law of this state is that the separate corporate entity will not

be honored where to do so would be to defeat the rights and equities of third persons.”

(Kohn v. Kohn (1950) 95 Cal.App.2d 708, 720; see also Mesler v. Bragg Management Co.

(1985) 39 Cal.3d 290, 301 ["essence of the alter ego doctrine is that justice be done."];

McLoughlin v. L. Bloom Sons Co., Inc. (1962) 206 Cal.App.2d 848, 854 [proper to bypass

corporate entity to reach alter ego in order to avoid an injustice].) Application of the

alter ego doctrine requires a showing "(1) that there be such unity of interest and

ownership that the separate personalities of the corporation and the individual no

longer exist and (2) that, if the acts are treated as those of the corporation alone, an

inequitable result will follow. [Citation.]" (Automotriz Del Golfo De California S. A. De C.

V. v. Resnick (1957) 47 Cal.2d 792, 796; Minifie v. Rowley (1921) 187 Cal. 481, 487.)

The law regarding whether to pierce the corporate veil is "easy to state but

difficult to apply." (Greenspan, supra, 191 Cal.App.4th at p. 512.) Examples of acts

supporting a finding of alter ego liability include undercapitalization, comingling of

corporate and personal funds, and failure to observe corporate formalities. (Toho–Towa

Co., Ltd. v. Morgan Creek Productions, Inc. (2013) 217 Cal.App.4th 1096, 1107.)

"Because it is founded on equitable principles, application of the alter ego is not made

to depend upon prior decisions involving factual situations which appear to be similar. It

is the general rule that the conditions under which a corporate entity may be

disregarded vary according to the circumstances of each case." (Id. at p. 1108, internal

quotation marks and citations omitted; Associated Vendors, Inc. v. Oakland Meat Co.

(1962) 210 Cal.App.2d 825, 837.) In determining whether to apply the alter ego

doctrine, the court considers factors including:

(1) commingling of funds and other assets, failure to segregate funds of the

separate entities, and the unauthorized diversion of corporate funds or assets to

other than corporate uses;

(2) treatment by an individual of the assets of the corporation as his or her own;

(3) failure to obtain authority to issue shares or to subscribe to or issue shares;

17

(4) holding out by an individual that he or she is personally liable for the debts of

the corporation;

(5) failure to maintain minutes or adequate corporate records, and the

confusion of the records of the separate entities;

(6) identical equitable ownership in two entities; identification of the equitable

owners of two entities with their domination and control; identification of the

directors and officers of two entities in the responsible supervision and

management; sole ownership of all of the shares in a corporation by one

individual or the members of a family;

(7) use of the same office or business location; the employment of the same

employees or attorney;

(8) failure to adequately capitalize a corporation, the total absence of

corporate assets, and undercapitalization;

(9) use of a corporation as a mere shell, instrumentality, or conduit for a single

venture or the business of an individual or another corporation;

(10) concealment and misrepresentation of the identity of the responsible

ownership, management, and financial interest, or concealment of personal

business activities;

(11) disregard of legal formalities and the failure to maintain arm's length

relationships among related entities;

(12) use of the corporate entity to procure labor, services, or merchandise for

another person or entity;

(13) diversion of assets from a corporation by or to a shareholder or other person

or entity, to the detriment of creditors, or the manipulation of assets and liabilities

between entities so as to concentrate the assets in one and the liabilities in

another;

(14) contracting with another with intent to avoid performance by use of a

corporate entity as a shield against personal liability, or the use of a corporation

as a subterfuge of illegal transactions; and

(15) formation and use of a corporation to transfer to it the existing liability of

another person or entity.

(Id. at pp. 838-840; see also Zoran Corp. v. Chen (2010) 185 Cal.App.4th 799, 811–

812.) These factors are not exhaustive, and no single factor is determinative. (Ibid.) It is

insufficient to show only that a creditor will remain unsatisfied if the corporate veil is not

pierced, as the purpose of the doctrine is not to protect every unsatisfied creditor, but

rather to afford protection to a creditor where conduct amounting to bad faith makes

it inequitable under the rule for the equitable owner of a corporation to hide behind its

corporate veil. (Associated Vendors, supra, 210 Cal.App.2d at p. 842; see also Mesler,

supra, 39 Cal.3d at pp. 300-301["issue [is] whether in the particular case presented and

for the purposes of such case justice and equity can best be accomplished and fraud

and unfairness defeated by a disregard of the distinct entity of the corporate form.”].)

The showing of an inequitable result does not require the pleading or proof of fraud.

(Misik v. D'Arco (2011) 197 Cal.App.4th 1065, 1074; First Western Bank & Trust Co. v.

Bookasta (1968) 267 Cal.App.2d 910, 915.)

A party moving, after arbitration, to add parties to a judgment pursuant to the

alter ego theory, must show that the alleged alter egos, in their capacity as such,

18

controlled the arbitration and were virtually represented in the arbitration proceedings.

(Greenspan, supra, 191 Cal.App.4th at p. 509.) Without such a showing, the alleged

alter ego may not be added, as his or her due process right to have the opportunity to

be heard and present defenses, will not have been recognized. (Ibid.; Motores De

Mexicali v. Superior Court (1958) 51 Cal.2d 172, 176.)

Control of the underlying action has been found sufficient to find alter ego

where the nonparty alter ego hired counsel to represent the corporation, was the

person with whom the corporate defendant's counsel primarily dealt, was kept fully

informed of the suit's progress, and was familiar with all of the issues (Alexander v.

Abbey of the Chimes (1980) 104 Cal.App.3d 39, 46; see also Mirabito v. San Francisco

Dairy Co. (1935) 8 Cal.App.2d 54, 59-60); the nonparty's presence during the underlying

action, and contribution of deposition testimony also have been held sufficient (In re

Levander (1999) 180 F.3d 1114, 1123 [applying Calif. law and Code Civ. Proc. §187]).

Providing funds for the corporation's defense, appearing as a witness or cooperating in

defending the corporation do not establish sufficient control to support a finding of alter

ego. (Minton v. Cavaney (1961) 56 Cal.2d 576, 581.) It is insufficient to show only that

individual shareholders of a defendant corporation dominated and controlled the

corporation; if, for example, the individuals were not parties to the contract at issue, did

not guaranty performance of the contract, and are not accused of fraud or other

wrongdoing, and it is not alleged that the corporation is or will become insolvent, alter

ego has not been shown. (Norins Realty Co. v. Consolidated Abstract & Title Guaranty

Co. (1947) 80 Cal.App.2d 879, 883.)

Laches

Laches may be raised as an equitable affirmative defense upon a showing of

both (a) unreasonable delay and (b) either acquiescence in the act about which

plaintiff complains or prejudice to defendant resulting from the delay. (Highland Springs

Conference & Training Ctr. v. City of Banning (2016) 244 Cal.App.4th 267, 282.)

Prejudice is never presumed, it must be affirmatively demonstrated. (Miller v. Eisenhower

Medical Center (1980) 27 Cal.3d 614, 624; see also Highland, supra, 244 Cal.App.4th at

p. 283 ["prejudice simply may not be presumed based solely on an unreasonable delay

in asserting the right."].) The party asserting this affirmative defense must provide

evidence of the alleged acquiescence or prejudice. (Ibid., holding four year delay

insufficient to assert laches.)

Alter ego allegations

In the case at bench, the Smiths seek to add Jon and Sam as alter egos of BCI,

pursuant to section 187. In support of applying the alter ego doctrine here, the Smiths

allege that just prior to BCI filing its bankruptcy petition, Jon convinced a bank to

release a deed of trust securing debts of BCI on property owned individually by Jon, in

exchange for granting the bank a security interest in BCI's accounts receivable, after

which Jon sold the real property to a third party; that Sam used the BCI company credit

card to charge personal income tax payments of $25,000, and that this was not

documented by any type of loan agreement, and BCI took no steps to obtain

repayment; that both Jon and Sam used the BCI company credit card for various

personal charges, and that no promissory note or written agreement was entered into

19

regarding repayment for such personal charges; that one month before BCI filed its

bankruptcy petition, Sam cashed out several years' worth of vacation time, but BCI did

not deduct money owed by Sam from personal charges he made using the company

credit card; that Jon and the Basila Family Trust made loans to BCI, but these were not

documented in any fashion or presented to or discussed with BCI's CPA; that BCI leased

its business space from the Basila Family Trust, but BCI's CPA was never provided a copy

of a written lease agreement, and payments on the lease were only made

sporadically; that, despite BCI policy providing otherwise, when Sam cashed out his

vacation time, he was paid at full value; that Sam only cashed out his vacation pay

after the arbitrator ruled in favor of the Smiths, and that he had not cashed it out on

any previous occasion; that Jon admits he would personally borrow funds from BCI or

take work from BCI and make repayment at a later date, but that this was not

documented; that four months prior to BCI's bankruptcy, Sam was given a 59% raise,

though he was unable to articulate additional duties or other grounds for the raise; that

Jon retained Mr. Whelan as counsel for BCI as well as for himself and Sam; that all BCI

shares were owned by Jon (86%) and Sam (14%); and that Jon paid, out of personal

funds, unsecured BCI creditors. The evidence provided in support of these allegations

(transcripts of 341(a) Meetings of Creditors; bankruptcy examination of BCI's CPA and

bookkeeper; deposition of Sam) is sufficient that the Smiths meet their burden.

Jon and Sam argue that the transaction between Jon and the bank regarding

BCI property arose from a line of credit for which the bank required a guarantor; that

the $25,000 tax payment was a loan, and that Sam informally acknowledged the debt,

which BCI did not formally forgive; that the amount Sam owed BCI could not legally be

deducted from Sam's vacation payout; that Jon and Sam did not use the BCI credit

card for personal expenses, other than Sam's income tax payment; that a formal loan

agreement for the income tax charge was not required, as the intent was to repay the

loan as soon as possible. Jon and Sam fail, however, to provide evidence to establish

their claims. Jon and Sam argue the remaining points made by the Smiths are

irrelevant, and provide no evidence to refute them.

Inequitable result

The Smiths contend that not applying the alter ego doctrine here will have an

inequitable result because Jon personally promised that the barn would be completed

on time, despite knowing that this was not in fact possible, and that he knew the Smiths

needed the barn to be finished by a specific date; that it was Jon's promise to the

Smiths that caused the Smiths to choose BCI over other contractors; that Sam personally

represented that the County required a six foot building pad, costing an additional

$18,000, despite Sam's knowledge this was untrue; that Jon and Sam personally

participated in the construction of the barn, which turned out to be significantly

defective; that the Smiths' communication regarding the problems with the barn was

directed at Jon and Sam, both of whom responded/communicated with the Smiths on

the issue; that, despite BCI instituting the instant action against the Smiths, the arbitrator

ruled in favor of the Smiths, largely due to Jon's and Sam's bad faith in negotiating with

the Smiths and in constructing the barn; and that after judgment was entered against

BCI, Jon and Sam took what they could from BCI, then filed BCI's bankruptcy. The Smiths

state that there are insufficient assets in the bankruptcy estate to satisfy the judgment; if

Jon and Sam are not added as BCI's alter egos, the Smiths will be without recourse and

20

Jon and Sam will be rewarded for engaging in conduct the arbitrator found to be in

bad faith, and the Smiths left with a defective barn. The Smiths have sufficiently shown

an inequitable result if alter ego is not applied.

Jon and Sam counter that because the arbitrator found no tort damages, it has

been conclusively shown that Jon and Sam did not ratify or consent to any alleged tort,

precluding adding Jon and Sam to the judgment as alter egos. This is insufficient to

defeat the Smiths' arguments regarding the inequitable result, however.

Participation in underlying arbitration

The Smiths argue that Sam attended all arbitration proceedings and updated

Jon; that Sam asked after the initial arbitration proceedings if he could borrow one of

the Smiths' exhibits to show to Jon; that Jon chose not to attend the initial phase of the

arbitration as a tactical move, but that he appeared in the second phase of

arbitration; and that Jon hired counsel to represent BCI, and later himself and Sam,

against the Smiths. In support of these allegations, the Smiths submit the transcripts from

the 341 meetings of creditors wherein Jon appeared as BCI's representative; and the

declarations of Mr. Vote and Mr. Smith, stating that Jon appeared at the March 9, 2015,

arbitration hearing on behalf of BCI, and testified extensively; and that this formed the

basis for the arbitrator's amended findings and award. The Smiths state also that Jon

and Sam were represented by the same counsel as BCI at all times, i.e., originally the

Campagne firm, and then Mr. Whelan. Jon and Sam provide no evidence refuting

these allegations. Rather, Jon and Sam argue that the arbitration transcripts from

November 2014, show that Jon did not attend. This fails to address the Smiths' evidence

of Jon's attendance at the second phase of arbitration, however, where Jon testified,

or Jon's involvement in hiring counsel for himself, Sam and BCI. The Smiths have shown

that Jon participated in the underlying arbitration sufficiently to establish control and

virtual representation.

Laches

Jon and Sam contend that the Smiths' having waited more than two years to

bring the instant motion has prejudiced Jon and Sam. In support of this contention, Jon

and Sam state that had the Smiths brought the instant motion nearer the time the

judgment was confirmed, the "Campagne firm would perhaps be available to provide

key pieces of information." (MPA i/s/o Opp., 25:5-7.) That the Campagne firm may have

been available to provide information is an insufficient showing of prejudice; moreover,

it does not establish that such information is currently unavailable. Jon and Sam argue

also that because BCI is no longer in business and has filed bankruptcy, BCI is in a

deteriorated positon to gather responsive records (e.g., receipts). That BCI has filed

bankruptcy does not mean that its business records are unavailable to Jon and Sam.

Last, Jon and Sam argue that because their potential malpractice claims against the

Campagne firm have been settled, Jon and Sam now are prejudiced because their

potential malpractice claims have expired. How this establishes prejudice is unclear.

Jon and Sam fail to provide sufficient evidence that the Smiths' delay in bringing the

instant motion has resulted in prejudice to Jon and Sam. The defense of laches,

therefore, is not available.

21

The Smiths provide sufficient evidence to show a unity of interest between Jon

and Sam, and BCI; that Jon and Sam both were involved in the underlying arbitration;

and that an inequitable result will be had if Jon and Sam are not added to the

judgment as alter egos of BCI. Accordingly, the motion to amend is granted.

Judicial notice is taken as requested by moving parties. The Court declines to

rule on the objections submitted by both sides, as the submissions objected to were not

material to the disposition of the instant motion.

Pursuant to California Rules of Court, rule 3.1312, and Code of Civil Procedure

section 1019.5, subdivision (a), no further written order is necessary. The minute order

adopting this ruling will serve as the order of the court, and service by the clerk of the

minute order will constitute notice of the order.

Tentative Ruling

Issued by: KCK on 05/03/17

(Judge’s initials) (Date)

22

Tentative Rulings for Department 501

(2)

Tentative Ruling

Re: In re Kobe Munvong

Superior Court Case No. 16CECG02353

Hearing Date: May 4, 2017 (Dept. 501)

Motion: Petition to Compromise Minor’s Claim

Tentative Ruling:

To deny without prejudice. Petitioner must file an amended petition, with

appropriate supporting papers and proposed orders, and obtain a new hearing date

for consideration of the amended petition. (Super. Ct. Fresno County, Local Rules, rule

2.8.4.)

Explanation:

The petitioner is required to provide a report of the minor’s current condition. The

most recent medical report provided is dated 8/21/15 and showed need for follow-up.

The petition indicates that there is a Medi-Cal lien yet no demand letter is

provided.

The attorneys’ fees sought are too high. The attorney seeks $10,000 in fees. This

figure represents 25% of the gross settlement. Attorneys’ fees are to be calculated from

the gross settlement minus costs.

The petition indicates at items 11c and 19a(3)(a) that the proceeds will be

deposited into a blocked account. The petitioner has failed to include an attachment

19a(3) stating the name and address of the bank.

The petition indicates at items 19b(3) that the proceeds will be invested in an

annuity. The petitioner has failed to include an attachment 19a(3) stating the terms

and conditions of the annuity. This statement contradicts the statements that the

money will be deposited into a blocked account.

The petition is dated July 21, 2016 and thus the court has no way of knowing if

the information is current.

23

The petitioner has included a proposed order. However, the order is completely

inadequate as pages 2-4 are completely blank.

Pursuant to California Rules of Court, rule 3.1312 and Code of Civil Procedure

section 1019.5(a), no further written order is necessary. The minute order adopting this

tentative ruling will serve as the order of the court and service by the clerk will constitute

notice of the order.

Tentative Ruling

Issued by: MWS on 05/03/17

(Judge’s initials) (Date)

24

(5)

Tentative Ruling

Re: CargoBarn v. Fast Freight Forward et al.

Superior Court Case No. 16 CECG 03544

Hearing Date: May 4, 2017(Dept. 501)

Petitions: Compel Arbitration by Defendant Norman and Fast Freight

Forward

Motion: Demurrer by Defendant Fast Freight Forward to the

Complaint

Tentative Ruling:

To deny both Petitions to compel arbitration.

To sustain the general demurrers to the first, second and fourth causes of action

with leave to amend. The special demurrer for uncertainty as to the fourth cause of

action is rendered moot. An amended complaint is to be filed within 10 days of notice

of the ruling. Any new or different allegations in the amended complaint are to be set

in boldface. The time in which the complaint can be amended will run from service by

the clerk of the minute order plus 5 days for service via mail. [CCP § 1013]

Explanation:

PETITION TO COMPEL ARBITRATION

Nature of Proceeding

A party to an arbitration agreement may seek a court order compelling the

parties to arbitrate a dispute covered by the agreement. See CCP § 1281.2. The

petition must allege specific facts (rather than mere conclusions) demonstrating the

existence of an arbitrable controversy. See Graphic Arts Int'l Union v. Oakland Nat'l

Engraving Co. (1986) 185 Cal.App.3d 775, 781. In addition, the petition must allege

"that the opposing party refuses to arbitrate the controversy." See Spear v. California

State Auto. Ass'n (1992) 2 Cal.4th 1035, 1041.

Submission of Evidence

As in motion proceedings generally, factual issues should be submitted by

affidavits or declarations. Verified pleadings may not suffice. See Strauch v. Eyring

(1994) 30 Cal.App.4th 181, 186--error to deny petition on ground of fraud alleged in

responsive pleadings. The petition to compel must set forth the provisions of the written

agreement and the arbitration clause verbatim, or such provisions must be attached

and incorporated by reference. See CRC Rule 3.1330.

25

Burden of Proof

The moving party must prove by a preponderance of evidence the existence of

the arbitration agreement and that the dispute is covered by the agreement. The

burden then shifts to the resisting party to prove by a preponderance of evidence

ground for denial (e.g., fraud, unconscionability, etc.). See Rosenthal v. Great Western

Fin'l Securities Corp., (1996) 14 Cal.4th 394 at 413-414.

Petition of Defendant Fast Freight Forward, Inc.

Fast Freight submits that pursuant to their business dealings, CargoBarn

presented an agreement to Fast Freight governing shipping, billing and rates. The

Agreement also contained a “no solicitation” clause preventing Fast Freight from

soliciting business from CargoBarn’s customers and a “confidentiality clause” regarding

“all of their financial information and that of their customers...” See Exhibit A attached

to the Declaration of Harris.

Importantly, the Agreement also contained an arbitration clause. It states:

In the event of a dispute arising out of this Agreement, including but not

limited to Federal or State statutory claims, the Party's sole recourse

(except as provided below) shall be to arbitration. Proceedings shall be

conducted under the rules of the (select one):

_x__ Transportation Arbitration and Mediation PLLC (TAM), __American

Arbitration Association (AAA), __Transportation ADR Council, Inc. (ADR), W

DRC (Fruit and Vegetable Dispute Resolution Corp) for fresh produce

related claims, upon mutual agreement of the Parties, or if no agreement,

than at BROKER‘S sole discretion. Arbitration proceedings shall be started

within eighteen (18) months from the date of delivery or scheduled date

of delivery of the freight, whichever is later. Upon agreement of the

Parties, arbitration proceedings may be conducted outside of the

administrative control of the TAM, AAA, ADR or DRC. The decision of the

arbitrators shall be binding and final and the award of the arbitrator may

be entered as judgment in any court of competent jurisdiction. The

rationale and reasoning of the decision of arbitrator(s) shall be fully

explained in a written opinion. The prevailing party shall be entitled to

recovery of costs, expenses and reasonable attorney fees as well as those

incurred in any action for injunctive relief, or in the event further legal

action is taken to enforce the award of arbitrators. Arbitration

proceedings shall be conducted at the office of the AAA, ADR, DRC or

TAM nearest Fresno, CA or such other place as mutually agreed upon in

writing, or by conference call or video conferencing upon agreement of

the Parties, or as directed by the acting arbitration association. Provided,

however, either Party may apply to a court of competent jurisdiction for

injunctive relief. Unless preempted or controlled by federal transportation

law and regulations, the laws of the State of California shall be controlling

notwithstanding applicable conflicts of laws miss. The arbitration provisions

26

of this paragraph shall not apply to enforcement of the award of

arbitration.

The moving party submits that the allegations of the Complaint encompass the

Agreement and hence, the arbitration agreement. This is the only evidence submitted.

See discussion infra.

Merits

Neither side addressed whether the Agreement is governed by the FAA or the

CAA. But, even in cases subject to the Federal Arbitration Act, courts apply ordinary

state law contract principles in deciding whether the parties agreed to arbitrate a

particular dispute (including arbitrability). [First Options of Chicago, Inc. v. Kaplan (1995)

514 US 938, 944, 115 S.Ct. 1920, 1924; Wagner v. Stratton Oakmont, Inc. (9th Cir. 1996) 83

F3d 1046, 1049] Thus, relevant state law usually requires the court to determine whether

the parties objectively intended to submit the issue to arbitration. [First Options of

Chicago, Inc. v. Kaplan, supra, 514 US at 944, 115 S.Ct. at 1924]

The first consideration is the specific words used in the arbitration agreement. The

court must determine (1) whether the clause is broad or narrow; and (2) if the clause is

narrow, whether the dispute involves an agreement collateral to the agreement

containing the arbitration clause. [Prudential Lines, Inc. v. Exxon Corp. (2nd Cir. 1983)

704 F2d 59, 63; Fleet Tire Serv. of North Little Rock v. Oliver Rubber Co. (8th Cir. 1997) 118

F3d 619, 621] “Where a broad arbitration clause is in effect, even the question of

whether the controversy relates to the agreement containing the clause is subject to

arbitration.” [Fleet Tire Serv. of North Little Rock v. Oliver Rubber Co., supra, 118 F3d at

621]

In determining what disputes are subject to arbitration, the contract should be

read as a whole: “However broad the terms of a contract, it extends only to those

things concerning which it appears that the parties intended to contract.” [Civil Code §

1648] Thus, despite broad wording, an arbitration clause does not apply to disputes

unrelated to matters covered in the contract. [Lawrence v. Walzer & Gabrielson (1989)

207 Cal.App.3d 1501, 1506]

Here, the Agreement does contain a provision prohibiting “Back Solicitation.” It

states:

27

It also contains a provision prohibiting disclosure of “confidential information.” It states:

CONFIDENTIALITY:

a. In addition to Confidential lnformation protected by law, statutory or

otherwise, the Parties agree that all of their financial information and that

of their customers, including but not limited to freight and brokerage rates,

amounts received for brokerage services, amounts of freight charges

collected, freight volume requirements, as well as personal customer

information, customer shipping or other logistics requirements shared or

learned between the Parties and their customers, shall be treated as

Confidential, and shall not be disclosed or used for any reason without

prior written consent.

b. In the event of violation of this Confidentiality paragraph, the Parties

agree that the remedy at law, including monetary damages, may be

inadequate and that the Parties shall be entitled in addition to any other

remedy they may have, to an injunction restraining the violating Party

from further violation of this Agreement in which case the prevailing Party

shall be liable for all costs and expenses incurred, including but not limited

to reasonable attorney‘s fees.

Yet, a careful examination of the Complaint reveals that the Fast Freight Forward

appears to be sued on a respondeat superior basis. See ¶¶ 7, 17, 21-25, 35, 42, and 53-

55. More importantly, Plaintiff has not sued Fast Freight Forward for breach of contract.

The terms of the arbitration clause state: “In the event of a dispute arising out of

this Agreement, including but not limited to Federal or State statutory claims...” Cases

differ as to whether the words “arising out of” constitute a “broad form” or a “narrow

form” agreement to arbitrate agreement--Tracer Research Corp. v. National

Environmental Services Co. (9th Cir. 1994) 42 F3d 1292, 1295—arbitration clause omitting

usual words “related to the contract” did not require arbitration of tort claims that did

not involve any breach of the underlying contract or require interpretation thereof;

compare Battaglia v. McKendry (3rd Cir. 2000) 233 F3d 720, 724-727—“any controversy

that arises hereunder” covers claim of fraud in inducement of underlying contract;

Bosinger v. Phillips Plastics Corp. (SD CA 1999) 57 F.Supp.2d 986, 993-994—“arising out of”

broad enough to encompass related tort claims.

More recent state cases such as EFund Capital Partners v. Pless (2007) 150 CA4th

1311, 1314 disapproved of the trial court's reliance on Tracer Research; but see also

Rice v. Downs (2016) 248 CA4th 175, 180, 186-194 which held that the clause providing

for arbitration of any controversy “arising out of, under or in connection with”

agreement was narrow form clause and trial court therefore erred in compelling

arbitration of legal malpractice, breach of fiduciary duty and rescission claims that did

not arise out of the operating agreements (distinguishing EFund and relying on

reasoning in Tracer Research and other Ninth Circuit authority).

Also, the Ninth Circuit has held that a clause in a maritime salvage contract

providing for arbitration of “[a]ny dispute arising under this agreement” was not broad

enough to require arbitration of a related claim for violation of a federal statute (Oil

28

Pollution Act of 1990). The statutory claim was not arbitrable notwithstanding recent

case authority emphasizing the strength of the presumption favoring arbitration. [Cape

Flattery Ltd. v. Titan Maritime, LLC (9th Cir. 2011) 647 F3d 914, 921-924 (applying Tracer

Research reasoning)]

More narrowly worded clauses “cut a fine line” as to the scope of the arbitration

agreement. For example, a clause covering “any dispute arising from this agreement”

may cover only contractual disputes, whereas a clause covering disputes “arising from

or related to” the agreement would also cover misconduct in performance of the

contract (tort claims). [Cobler v. Stanley, Barber, et al. (1990) 217 CA3d 518, 530, 265 CR

868, 875; see also Hall v. Sup.Ct. (Trompas) (1993) 18 CA4th 427, 435, 22 CR2d 376, 381;

Bono v. David, supra, 147 CA4th at 1067, 54 CR3d at 845 (citing text)]

Here, the wording of the arbitration clause will be treated as “narrow.” It covers

“a dispute arising out of the Agreement...” Tracer Research Corp. v. National

Environmental Services Co. (9th Cir. 1994) 42 F3d 1292, 1295 and Cape Flattery Ltd. v.

Titan Maritime, LLC (9th Cir. 2011) 647 F3d 914, 921-924. See also Rice v. Downs (2016)

248 CA4th 175, 180As a result, the Petition should be denied. Plaintiff is not suing “on the

contract” between itself and Fast Freight Forward. Petitioner has not met its burden of

proof. Rosenthal v. Great Western Fin'l Securities Corp., (1996) 14 Cal.4th 394 at 413-414.

Petition of Defendant Norman

To avoid the possibility that the arbitrator's rulings might conflict with the court's

ruling on common issues of law or fact, the court may either:

• refuse arbitration and order intervention or joinder of all parties in the pending

litigation; or

• “order intervention or joinder”—i.e., consolidate the arbitration and litigation—as to

certain issues; or

• stay the pending court action and order arbitration to proceed among the parties

who have agreed to arbitration; or

• stay the arbitration pending the outcome of the pending court action.

See CCP § 1281.2(c) and see Cronus Investments, Inc. v. Concierge Services (2005) 35

Cal.4th 376, 382–383, 394; Abaya v. Spanish Ranch I, L.P. (2010) 189 Cal.App.4th 1490,

1493—court order denying motion to compel arbitration was proper exercise of

discretion to avoid possibility of conflicting rulings on common issues. Accordingly, the

right to arbitration, created by an agreement, is not absolute: “(I)t may have to yield if

there is an issue of law or fact common to the arbitration and a pending action or

proceeding with a third party and there is a possibility of conflicting rulings thereon.”

[Mercury Ins. Group v. Sup.Ct. (Wooster) (1998) 19 C4th 332 at 348]

Here, Fast Freight Forward is not a party to the Agreement. See Exhibit A

attached to the Declaration of Joy. It is a named Defendant in pending litigation with

29

the Plaintiff and Norman. See Complaint filed on November 2, 2016. There are

common issues of law and fact pertaining to both Defendants. Importantly, CCP §

1281.2(c) does not require that an Answer be filed in order for a party to fall within its

provisions. As for the suggestion that the matter be sent to arbitration only on the third

cause of action for breach of loyalty, this would not be feasible. Therefore, the Petition

will be denied.

DEMURRER

Definition of Trade Secret

A “trade secret” has four elements under California's Uniform Trade Secrets Act

(UTSA, Civil Code § 3426 et seq.):

— it must be comprised of “information”;

— it must not be “generally known”;

— it must derive “independent economic value” from the fact that it is a secret;

and

— it must be the subject of “reasonable” efforts to “maintain its secrecy.” [Civ.C.

§ 3426.1(d)]

“Information” includes “a formula, pattern, compilation, program, device, method,

technique, or process.” [Civil Code § 3426.1(d); see Rest.3d Unfair Competition § 39,

comm. d; 13 Witkin, Summary of California Law, Equity § 82]

The list is “inclusive, not exclusive.” [American Paper & Packaging Products, Inc. v.

Kirgan (1986) 183 Cal.App.3d 1318 at 1324]

Notably, the courts apply a case-by-case analysis to determine whether a

customer list is a trade secret. Courts are reluctant to protect customer lists to the extent

they embody information that is “readily ascertainable” through public sources, such as

business directories. [American Paper & Packaging Products, Inc. v. Kirgan, supra at

1318] But when the employer has expended time and effort identifying customers with

particular needs or characteristics, courts will prohibit former employees from using this

information to capture a share of the market. [See Klamath-Orleans Lumber, Inc. v.

Miller (1978) 87 Cal.App.3d 458, 464-465; ABBA Rubber Co. v. Seaquist (1991) 235

Cal.App.3d 1, 19-20; see also Rest.3d Unfair Competition § 42, comm. f & Reporter's

Note to comm. f; 13 Witkin, Summary of California Law, Equity §§ 93 to 95] [See also San

Jose Const., Inc. v. S.B.C.C., Inc. (2007) 155 Cal.App.4th 1528, 1538, (distinguishing

between contact information for subcontractors and “descriptions of the proposed

scope of each project, measurements for each project building, and detailed cost

estimates”); Cellular Accessories for Less, Inc. v. Trinitas LLC (CD CA 2014) 2014 WL

4627090,*4—employee's LinkedIn contacts may be trade secrets to extent such

contacts are not publicly available because LinkedIn users can control what contacts

are publicly viewable]

First Cause of Action--Misappropriation of Trade Secrets

Judicial Council of California Civil Jury Instruction (CACI) No. 4401 states:

30

Misappropriation of Trade Secrets—Essential Factual Elements

[Name of plaintiff] claims that [name of defendant] has misappropriated a trade

secret. To succeed on this claim, [name of plaintiff] must prove all of the following:

1. That [name of plaintiff] [owned/was a licensee of] [the following:][describe each

item claimed to be a trade secret that is subject to the misappropriation claim];

2. That [this/these] [select short term to describe, e.g., information] [was/were] [a] trade

secret[s] at the time of the misappropriation;

3. That [name of defendant] improperly [acquired/used/ [or] disclosed] the trade

secret[s];

4. That [[name of plaintiff] was harmed/ [or] [name of defendant] was unjustly

enriched]; and

5. That [name of defendant]'s [acquisition/use/ [or] disclosure] was a substantial factor

in causing [[name of plaintiff]'s harm/ [or] [name of defendant] to be unjustly enriched].

“A trade secret is misappropriated if a person (1) acquires a trade secret

knowing or having reason to know that the trade secret has been acquired by

‘improper means,’ (2) discloses or uses a trade secret the person has acquired by

‘improper means’ or in violation of a nondisclosure obligation, (3) discloses or uses a

trade secret the person knew or should have known was derived from another who

had acquired it by improper means or who had a nondisclosure obligation or (4)

discloses or uses a trade secret after learning that it is a trade secret but before a

material change of position.” [Ajaxo Inc. v. E*Trade Group Inc. (2005) 135 Cal.App.4th

21, 66]

Civil Code section 3426.1(b)(1) defines “misappropriation” as improper

“[a]cquisition” of a trade secret, and subsection (b)(2) defines it as improper

“[d]isclosure or use” of a trade secret. In some cases, the mere acquisition of a trade

secret, as distinguished from a related disclosure or use, will not result in damages and

will only be relevant to injunctive relief.

“One does not ordinarily ‘acquire’ a thing inadvertently; the term implies

conduct directed to that objective. The choice of that term over ‘receive’

suggests that inadvertently coming into possession of a trade secret will

not constitute acquisition. Thus one who passively receives a trade secret,

but neither discloses nor uses it, would not be guilty of misappropriation.

We need not decide the outer limits of acquisition as contemplated by

CUTSA, however, for there is no suggestion here of acquisition even in the

broadest sense, i.e., that [defendant] ever came into possession of the

source code constituting the claimed trade secrets. Indeed [plaintiff]

does not directly argue that [defendant] acquired the trade secrets at

issue but only that, under the terms of the statute, it could have done so

without itself having ‘knowledge’ of them. We doubt the soundness of this

suggestion, but assuming it is correct, it remains beside the point unless

[defendant] came into possession of the secret. Since there is no basis to

31

find that it did, the mental state required for actionable acquisition

appears to be academic.”

Silvaco Data Systems v. Intel Corp. (2010) 184 Cal.App.4th 210, 223 (internal citations

omitted, disapproved of on other grounds in Kwikset Corp. v. Superior Court (2011) 51

Cal.4th 310.)

In the case at bench, Plaintiff alleges at ¶¶ 21-25 of the Complaint:

CargoBarn is informed and believes and based thereon, alleges that

Norman has used and or communicated CargoBarn’s confidential and

proprietary information for his and FFF’s benefit. CargoBarn is informed

and believes and based thereon, alleges that Norman actively solicited

CargoBarn customers for FFF. CargoBarn is informed and believes and

based thereon, alleges that performance in Norman’s new capacity as

Director of Business Development at FFF necessarily requires use and

disclosure of CargoBarn’s confidential and proprietary information.

CargoBarn is informed and believes and based thereon, alleges that FFF

knowingly benefitted from confidential and proprietary information

misappropriated from CargoBarn.

These allegations are then incorporated by reference into the first cause of

action for misappropriation of trade secret. See ¶ 28. As for the first cause of action, it

states at ¶ 32: “CargoBarn is informed and believes and based thereon, alleges that

Defendants have actually misappropriated and threaten to misappropriate

CargoBarn’s trade secrets to promote a competing business.”

Although the Defendant argues that more specificity is needed vis-à-vis “the

trade secret,” the question at this juncture is not whether customer lists qualify as a

“trade secret.” First, in certain instances, they do. [San Jose Const., Inc. v. S.B.C.C., Inc.

(2007) 155 Cal.App.4th 1528, 1538] Second, it appears that the Plaintiff has adequately

pleaded the nature of the information it believes constitutes a “trade secret.” See ¶¶ 8-

10, 12.

But, the practice is to make such a determination on a case by case basis.

[American Paper & Packaging Products, Inc. v. Kirgan (1986) 183 Cal.App.3d 1318 at

1324] It would not be advisable to make this determination via demurrer. A demurrer

can be used only to challenge defects that appear on the face of the pleading under

attack; or from matters outside the pleading that are judicially noticeable. [Blank v.

Kirwan (1985) 39 Cal.3d 311, 318; Donabedian v. Mercury Ins. Co. (2004) 116

Cal.App.4th 968, 994] It strongly appears that evidence is needed to make such a

determination. There is a difference between pleading a cause of action for

misappropriation of “trade secret” and deciding the merits.

By the same token, the elements supporting Fast Freight’s liability are not clearly

pleaded. The allegations at ¶¶ 21-25 and 32 appear to “dance around” whether Fast

Freight Forward knowingly acquired and/or used the customer list to its benefit. The

hiring of Norman by Fast Freight standing alone is insufficient. Plaintiff must allege more

32

facts regarding the elements of acquisition and use. See Civil Code § 3426.1 and Ajaxo

Inc. v. E*Trade Group Inc. (2005) 135 Cal.App.4th 21, 66. Therefore, the general

demurrer will be sustained with leave to amend.

Second Cause of Action—Violation of Bus. & Prof. Code § 17200 et seq.

A complaint under the Unfair Practices Act (B. & P.C. 17000 et seq.) must state

facts supporting the statutory elements of the alleged violation. See G.H.I.I. v. MTS (1983)

147 Cal.App.3d 256, 271 and Khoury v. Maly's of Calif. (1993) 14 Cal.App.4th 612, 619

[demurrer was properly sustained; complaint identified no particular statutory section

that was violated and failed to describe with reasonable particularity facts

supporting violation].

In the instant case, the allegations are set forth at ¶¶ 39-45 of the Complaint. As

Defendant contends, they are exceedingly broad. In fact, there is no mention of any

actions on the part of the Defendant. This is insufficient. The general demurrer will be

sustained with leave to amend.

Fourth Cause of Action—Interference with Prospective Advantage

“The five elements for intentional interference with prospective economic

advantage are: (1) [a]n economic relationship between the plaintiff and some third

party, with the probability of future economic benefit to the plaintiff; (2) the defendant's

knowledge of the relationship; (3) intentional acts on the part of the defendant

designed to disrupt the relationship; (4) actual disruption of the relationship; and (5)

economic harm to the plaintiff proximately caused by the acts of the defendant.”

[Youst v. Longo (1987) 43 Cal.3d 64, 71, fn. 6]

The interfering conduct must be wrongful by some legal measure other than the

fact of the interference itself. [Della Penna v. Toyota Motor Sales, U.S.A., Inc. (1995) 11

Cal.4th 376, 393] This conduct must fall outside the privilege of fair competition. [PMC,

Inc. v. Saban Entertainment, Inc. (1996) 45 Cal.App.4th 579, 603, disapproved on other

grounds in Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1159 fn.

11] Whether the conduct alleged qualifies as wrongful if proven or falls within the

privilege of fair competition is resolved by the court as a matter of law. I

“The tort of negligent interference with prospective economic advantage is

established where a plaintiff demonstrates that (1) an economic relationship existed

between the plaintiff and a third party which contained a reasonably probable future

economic benefit or advantage to plaintiff; (2) the defendant knew of the existence of

the relationship and was aware or should have been aware that if it did not act with

due care its actions would interfere with this relationship and cause plaintiff to lose in

whole or in part the probable future economic benefit or advantage of the

relationship; (3) the defendant was negligent; and (4) such negligence caused

damage to plaintiff in that the relationship was actually interfered with or disrupted and

plaintiff lost in whole or in part the economic benefits or advantage reasonably

expected from the relationship.” [North American Chemical Co. v. Superior Court

(1997) 59 Cal.App.4th 764, 786]

33

The “wrongful conduct” must fall outside the privilege of fair competition. [PMC,

Inc. v. Saban Entertainment, Inc. (1996) 45 Cal.App.4th 579, 603; Della Penna v. Toyota

Motor Sales, U.S.A., Inc. (1995) 11 Cal.4th 376, 393]

Here, the Plaintiff did not address the issue regarding whether it seeks to plead

intentional or negligent interference. The elements are not identical.

Second, the allegations as set forth at ¶¶ 51-58 are too broad. Defendant is

correct in its assertion that Plaintiff does not name a single customer whose business it

lost. Both causes of action require an economic relationship with a third party. In fact,

both CACI No. 2202 “Intentional Interference with Prospective Economic Relations” and

CACI No. 2204 “Negligent Interference with Prospective Economic Relations” require

the name of the third party. As presently pleaded, the cause of action is based upon

speculation. This is insufficient. The general demurrer will be sustained with leave to

amend. The special demurrer for uncertainty is rendered moot.

Pursuant to California Rules of Court, Rule 3.1312, subd. (a) and Code of Civil

Procedure section 1019.5, subd. (a), no further written order is necessary. The minute

order adopting this tentative ruling will serve as the order of the court and service by

the clerk will constitute notice of the order.

Tentative Ruling

Issued by: MWS on 05/03/17

(Judge’s initials) (Date)

34

Tentative Rulings for Department 502 03

Tentative Ruling

Re: De Flynn v. Sunwest Fruit Co., Inc.

Case No. 14 CE CG 02557

Hearing Date: May 4th, 2017 (Dept. 502)

Motion: Plaintiff’s Unopposed Motion for Approval of Labor Code

Private Attorneys General Act of 2004 Settlement

Tentative Ruling:

To deny the plaintiff’s motion to approve the PAGA settlement, without

prejudice.

Explanation:

1. Introduction

Under Labor Code section 2699, subdivision (a), the Private Attorneys General

Act of 2004 (“PAGA”),

Notwithstanding any other provision of law, any provision of this code that

provides for a civil penalty to be assessed and collected by the Labor and

Workforce Development Agency or any of its departments, divisions,

commissions, boards, agencies, or employees, for a violation of this code, may,

as an alternative, be recovered through a civil action brought by an aggrieved

employee on behalf of himself or herself and other current or former employees

pursuant to the procedures specified in Section 2699.3.

In addition, “The superior court shall review and approve any settlement of any

civil action filed pursuant to this part. The proposed settlement shall be submitted to the

agency at the same time that it is submitted to the court.” (Lab. Code, § 2699, subd.

(i)(2).)

There are very few cases discussing section 2699, and none discuss the standards

under which a Court is to assess a settlement. Nor has the Legislature provided any

structure or standards for making the assessment. Published California case law has not

done so either. However, the common practice when ruling on PAGA settlements

seems to be to follow existing law on class action settlements.

2. Inadequate Notice

Labor Code section 2699(l)(2) states: “The superior court shall review and

approve any settlement of any civil action filed pursuant to this part. The proposed

35

settlement shall be submitted to the agency at the same time that it is submitted to the

court.” The proof of service here fails to show any service on the LWDA.

3. Failure to Show Settlement Fair

“[A court must be] provided with basic information about the nature and

magnitude of the claims in question and the basis for concluding that the consideration

being paid for the release of those claims represents a reasonable compromise.”

(Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal. App. 4th 116, 133.)

“The well-recognized factors that the trial court should consider in evaluating the

reasonableness of a class action settlement agreement include ‘the strength of

plaintiffs' case, the risk, expense, complexity and likely duration of further litigation, the

risk of maintaining class action status through trial, the amount offered in settlement, the

extent of discovery completed and stage of the proceedings, the experience and

views of counsel, the presence of a governmental participant, and the reaction of the

class members to the proposed settlement.’ This list ‘is not exhaustive and should be

tailored to each case.’ Relying on an earlier edition of Newberg on Class Actions, the

court in Dunk asserted that ‘a presumption of fairness exists where: (1) the settlement is

reached through arm's-length bargaining; (2) investigation and discovery are sufficient

to allow counsel and the court to act intelligently; (3) counsel is experienced in similar

litigation; and (4) the percentage of objectors is small.’” (Kullar, supra, at p. 128,

internal citations omitted.)

“More fundamentally, neither Dunk, 7–Eleven, nor any other case suggests that

the court may determine the adequacy of a class action settlement without

independently satisfying itself that the consideration being received for the release of

the class members' claims is reasonable in light of the strengths and weaknesses of the

claims and the risks of the particular litigation.” (Id. at p. 129.)

“[I]n the final analysis it is the court that bears the responsibility to ensure that the

recovery represents a reasonable compromise, given the magnitude and apparent

merit of the claims being released, discounted by the risks and expenses of attempting

to establish and collect on those claims by pursuing the litigation. ‘The court has a

fiduciary responsibility as guardians of the rights of the absentee class members when

deciding whether to approve a settlement agreement.’ ‘The courts are supposed to

be the guardians of the class.’” (Ibid, internal citations omitted.)

“Although ‘[t]here is usually an initial presumption of fairness when a proposed

class settlement ... was negotiated at arm's length by counsel for the class, ... it is clear

that the court should not give rubber-stamp approval. Rather, to protect the interests

of absent class members, the court must independently and objectively analyze the

evidence and circumstances before it in order to determine whether the settlement is

in the best interests of those whose claims will be extinguished.’ ‘To make this

determination, the factual record before the ... court must be sufficiently developed.’

Newberg lists the four factors recognized in Dunk to establish an initial presumption of

fairness, but continues: ‘This initial presumption must then withstand the test of the

plaintiffs' likelihood of success.’ ‘The proposed settlement cannot be judged without

36

reference to the strength of plaintiffs' claims. “The most important factor is the strength

of the case for plaintiffs on the merits, balanced against the amount offered in

settlement.”’ The court ‘must stop short of the detailed and thorough investigation that

it would undertake if it were actually trying the case,’ but nonetheless it ‘must eschew

any rubber stamp approval in favor of an independent evaluation.’” (Id. at p. 130,

internal citations omitted.)

In the present case, the only evidence presented to the court regarding the

strength of plaintiff’s case and the value of the claims is the declaration from Cory Lee,

one of the attorneys for plaintiff. Lee summarizes the number of discovery requests and

documents served and reviewed over the course of the case, which included 196

individual requests for production of documents and 44 special interrogatories, 600

pages of documents and data, including time records, earnings statements, company

policies, and employee handbooks. (Lee decl., ¶ 3.) He claims to have inspected and

analyzed the documents and data and done an in-depth analysis of potential

damages for the aggrieved employees, as well as doing extensive research of the

applicable law with respect to the claims asserted and potential defenses thereto.

(Ibid.)

Lee claims that the $195,000 settlement is fair, reasonable and adequate

considering the discovery and the strengths and weaknesses of the case. (Id. at ¶ 6.)

He claims that plaintiff had a reasonable likelihood of prevailing on his PAGA penalties

claims, and that the top-end penalties for the PAGA claims, if they had been successful

at summary judgment or trial, would have been approximately $264,250, based on

5,285 pay periods times $50 per pay period in penalties. (Ibid.) However, he also states

that plaintiff faced significant obstacles in successfully prosecuting the action, including

Sunwest’s defense that the time spent donning and doffing clothing was de minimus,

and that it would have been difficult to prove that Sunwest was aware of its violations,

thus making only the $50 per violation penalty appropriate. (Id. at ¶ 7.) Thus, plaintiff’s

counsel concludes that the likelihood of success on the remaining claims for meal and

rest breaks was significantly diminished and unlikely to result in additional PAGA

penalties. (Ibid.)

However, plaintiff’s counsel has not provided any support for his brief and vague

statements about the value of plaintiff’s claims, or why they were only worth about

$264,000. He has not presented any expert declarations or evidence, nor has he

explained how he determined the number of pay periods or the number of potential

violations used to calculate potential damages. He does not point to any specific

documents or other evidence obtained in discovery to support his valuation of the

claims. He does not even state how many potential aggrieved employees are involved

here, although elsewhere in the motion the number is alleged to be 245 employees. It

appears that plaintiff’s counsel is simply making a vague estimate based on incomplete

data. Since he is not an expert, his opinion as to the value of the claims is not

admissible.

Kullar cautions against approving a settlement where “there was nothing before

the court to establish the sufficiency of class counsel's investigation other than their

assurance that they had seen what they needed to see.” (Kullar, supra, 168 Cal.App.4th

37

at p. 129.) Likewise, here the court has no real information about the value of plaintiff’s

claims other than counsel’s vague statements that they were only worth about

$264,250. This is not enough to support a showing that the settlement is fair.

4. Resolution of the Class Action Claims

The motion to approve settlement also does not address the class action claims

alleged by plaintiffs. The original complaint contained several non-PAGA class action

claims, all of which were severed from the court action and ordered to arbitration.

Plaintiff has not stated whether the arbitration ever took place, what the result was if it

did, or what happened to the other claims if it did not. They do not appear to have

been dismissed, settled, or otherwise resolved. However, the settlement seems to seek

to resolve the entire action, which would apparently include the class action claims

that were not part of the mediation. It would be improper to approve the settlement

and allow the class action claims to be dismissed without first evaluating them and

determining whether they have merit and should be allowed to proceed.

In Payne v. National Collection Systems, Inc. (2001) 91 Cal. App. 4th 1037, the

court concluded that an action by the Attorney General for penalties under Business

and Professions Code section 17200 et seq. was not res judicata as to a class action by

consumers arising out of the same conduct by the same defendant. Thus, a settlement

of anything other than the claim for PAGA penalties cannot be included in the parties’

agreement absent satisfaction of the usual requirements imposed on class action

cases.

Here, the settlement appears to encompass the entire action, including the class

action claims. “The Parties agree to settle this Action pursuant to the financial terms set

forth below.” (Settlement Agreement, p. 6, ¶ 3.) The agreement defines “Action” to

include “the putative class action and Labor Code Private Attorneys General Act of

2004, California Labor Code section 2699 et seq. (the “PAGA”) entitled De Flynn v.

Sunwest Fruit Co., Inc., pending in the Superior Court of the State of California, County

of Fresno, Case No. 14CECG02557, filed on April 6, 2015.” (Settlement Agreement, p. 1,

¶ 1.1.)

However, the agreement also defines “Released Claims” to mean “those claims

that the Plaintiffs and the Aggrieved Employee release in accordance with the terms of

this Settlement Agreement and as described in Section 6 below.” (Id. at p. 3, ¶ 1.14.)

Section 6.1 states that, “Upon final approval of this Settlement by the Court, the

Plaintiff De Flynn, on her own behalf and as the representative plaintiff, all Aggrieved

Employees, the State of California and all persons purporting to act on their behalf or

purporting to assert a claim under or through them, … hereby forever completely and

irrevocably release and discharge Defendant … from the PAGA claims alleged in

Plaintiffs First Amended Complaint, and all PAGA claims which could have been

alleged, based on the same factual predicate as the PAGA claims alleged in Plaintiff’s

First Amended Complaint for the Relevant Time Period of this agreement. The matters

released as provided above in this paragraph are referred to in this Settlement

Agreement as the ‘Released Claims.’” (Id. at pp. 14-15, ¶ 6.1.)

38

Therefore, it is somewhat unclear whether the settlement would resolve the

plaintiff’s remaining claims or not. Section 6.1 seems to indicate that only the PAGA

claims would be resolved, but the settlement also seems to cover the entire “action”,

which would include the class action claims. If the agreement does include the class

action claims, it is improper because the court needs to separately address whether the

settlement is valid as to the class action. At this point, there is insufficient information to

make such a determination. On the other hand, if the agreement does not cover the

class action claims, then it is unclear what will happen to those claims or how they will

be resolved.

Thus, plaintiff’s counsel needs to provide the court with a clear explanation of

whether the agreement covers the class action claims, and if not, what plaintiff intends

to do about those claims.

5. Attorney’s Fees

Plaintiff’s counsel seeks an order awarding fees of 35% of the gross settlement.

However, while the court has discretion to make a fee award based on a percentage

of the settlement, the court is not required to do so. It can also use the lodestar method

to calculate fees, or it can order plaintiff’s counsel to provide enough information to

double check the reasonableness of a percentage fee award using a lodestar-style

analysis. (Laffitte v. Robert Half Intern. Inc. (2016) 1 Cal.5th 480, 503-504.)

In the present case, plaintiff’s counsel seeks an award of 35% of the gross

settlement, or $68,250. Plaintiff’s counsel also submits some basic information about the

amount of work done and the attorneys’ hourly rates. (Lee decl., ¶ 11; Sasseen decl., ¶

However, counsel does not provide any detail other than a very vague summary of

work performed in the case. (See Exhibit B to decl. of Sasseen; Exhibit C to decl. of Lee.)

This is not enough to make any kind of informed analysis of the amount and nature of

the work done under the lodestar method, if the court chooses to use this approach.

Even if the court were only to do a simplified percentage method, it still needs to have

enough information about the work done to double check the accuracy of the

percentage fees. Therefore, the court intends to require plaintiff’s counsel to provide

more detail as to the work performed and time spent on the case so that it can reach

an informed decision about whether the requested fees are reasonable here. At the

least, plaintiff’s counsel should provide a more detailed summary of the work done and

hours spent on each task.

It is also unclear how the attorneys will divide any fees that the court may award

to them. Plaintiff’s counsel have simply requested $68,250 in fees without specifying

how much each attorney will receive. There are presently two separate firms

representing plaintiff, so some sort of division of fees will be necessary. In order to make

an informed decision, the court needs to have an explanation of how much each law

firm or attorney will receive if the court does approve the request for fees.

39

Pursuant to CRC 3.1312 and CCP §1019.5(a), no further written order is necessary.

The minute order adopting this tentative ruling will serve as the order of the court and

service by the clerk will constitute notice of the order.

Tentative Ruling

Issued by: DSB on 05/03/17

(Judge’s initials) (Date)

40

(24) Tentative Ruling

Re: Gutierrez v. Singh

Court Case No. 16CECG03537

Hearing Date: May 4, 2017 (Dept. 502)

Motion: 1) Defendant Dave Singh’s Demurrer to Complaint

2) Defendant RDX’s Demurrer to Complaint

Tentative Ruling:

To overrule both demurrers in their entirety. Defendants are granted 10 days’

leave to file their answer(s) to the complaint. The time in which the answer(s) can be

filed will run from service by the clerk of the minute order.

Explanation:

Rather than organizing their arguments around each specific cause of action,

defendants instead raise several key points which they argue subject either the entire

complaint or each cause of action to demurrer, although in most cases it was difficult

to determine when they were demurring to the entire complaint and when they were

demurring to a particular cause of action.

The points they raise are as follows:

Argument: Plaintiff fails to state a cause of action against either defendant

because he was an independent contractor, not an employee.

This is a factual issue that cannot be resolved on demurrer.

Argument: Plaintiff cannot state a cause of action against Dave Singh

because he was not an employer, but rather is an officer/director of RDX, Inc.

Only the Fifth cause of action is stated against him, a claim for violation of the

Federal Labor Standards Act (FLSA), and this cause of action expressly alleges his

liability in terms of him being an employer under the FLSA, as defined by 29 United

States Code section 203, subdivision (d). That statute defines “employer” as being “any

person acting directly or indirectly in the interest of an employer in relation to an

employee….” Plaintiff alleges Dave Singh was an owner and officer of RDX, Inc. (¶¶ 3,

34), and that he “was a person acting directly and indirectly in the interest of an

employer in relation to the work of Plaintiff, class members, and collective action

members,” and that he “had the power to hire and fire employees, supervise and

control employee work schedules and conditions of employment, and determine the

rate and method of payment to Plaintiff, class members, and collective action

members. (¶ 34.)

41

In Boucher v. Shaw (9th Cir. 2009) 572 F.3d 1087, the court found that “the

definition of “employer” under the FLSA is not limited by the common law concept of

“employer,” but “ ‘is to be given an expansive interpretation in order to effectuate the

FLSA's broad remedial purposes,” and that the “touchstone is the ‘economic reality’ of

the relationship.” (Id. at p. 1091.) On that basis, the court held that the FLSA claim

against individual managers survived a motion to dismiss (equivalent of demurrer)

where plaintiff alleged they handled labor and employment matters, held ownership

interest and/or served as officers of the company, had responsibility for supervision and

oversight of the company’s cash management, and had control and custody of the

plaintiff class, their employment, and their place of employment. (Id.) Plaintiff’s

allegations as to Mr. Singh’s role in the company are similar, and are sufficient to bring

him under the expansive definition of employer under the FLSA sufficient to survive

demurrer as to the Fifth cause of action.

Argument: All of the proposed class’ overtime claims for drivers are

precluded by “the wage order exemptions.”

While defendants’ heading refer to multiple wage order exemptions applicable

under this argument, the only one specifically mentioned is 8 California Code of

Regulations section 11090, subdivision (3)(L)(1), which provides that the provisions are

not applicable to employees whose hours are regulated by the U.S. Department of

Transportation.

The demurrer must be overruled. The heading of this argument states that all of

the overtime claims for drivers fail. (Singh’s brief, p.3:11-12; RDX’s brief, p. 4:10-11.)

Neither the heading nor defendants’ one-sentence argument specify that this is

directed to any particular cause of action; plaintiff raises overtime claims in the Second

cause of action (a state law claim under Lab. Code § 1194) and the Fifth cause of

action (under the FLSA, specifically 29 U.S.C. § 207). Thus, this must be regarded as a

general demurrer to the entire complaint rather than a demurrer to any one cause of

action.

It is impossible to determine from defendants’ one-sentence argument whether

or not plaintiffs (including putative class plaintiffs) are exempt from California overtime

laws. It is not even clear that this is what defendants were arguing (given the lack of

analysis in the briefs), since in Reply Mr. Singh argued plaintiff was exempt from Federal

overtime laws. Perhaps they were positing that plaintiff was exempt from any overtime

laws, but that was by no means clear, much less explained or analyzed. And even if

plaintiff was exempt from one or the other overtime law, this would not dispense with all

of plaintiffs’ overtime claims: if Federal overtime applied it would not dispense with the

Fifth cause of action; if California overtime applied it would not dispense with the

Second cause of action. A general demurrer to the entire complaint (as this must be

deemed to be) must be overruled where the complaint states any claim entitling

plaintiff to relief. (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 38.)

42

Argument: The Unfair Competition claim (Bus. & Prof. Code § 17200) fails as a

matter of law.

An employer’s “unlawful” acts under California’s labor laws are also actionable

as a violation of Business and Professions Code section 17200 (an Unfair Competition

Law, or UCL claim). (Herr v. Nestle U.S.A., Inc. (2003) 109 Cal.App.4th 779, 789-790—

plaintiff with FEHA claim against employer could also state a UCL claim; Cortez v.

Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 178—“We recognize that any

business act or practice that violates the Labor Code through failure to pay wages is,

by definition (§ 17200), an unfair business practice.”)

Defendants argued in Reply that plaintiff failed to address the exemptions

provided under Wage Orders 4 and 9. However, the fact is that defendants themselves

failed to adequately discuss these supposed provisions; they failed to point to or even

quote the provisions they contend provide them with a safe harbor from a claim under

the UCL. Defendants failed on these demurrers to establish that an exemption applies

to any of the labor codes allegedly violated, so the court cannot find as a matter of

law that the Fourth cause of action is subject to demurrer.

Argument: Complainants claims are boilerplate and therefore uncertain

The only example of boilerplate allegations defendants point to is that plaintiff

has alleged he is an “employee.” This is not a boilerplate allegation, but as noted

above is one of the ultimate facts plaintiff must prove to prevail on his claims. The

demurrer for uncertainty is overruled.

Argument: Demurrer to the Class Action Allegations

Class actions can be attacked by way of demurrer and will be the demurrer will

be sustained without leave to amend where it appears from the face of the complaint

that there is no reasonable possibility plaintiffs could establish a community of interest

among the potential class members and that individual issues predominate over

common questions of law and fact. (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 439.)

However, “[i]f there is a reasonable possibility the plaintiffs can plead a prima facie

community of interest among class members, the preferred course is to defer decision

on the propriety of the class action until an evidentiary hearing has been held on the

appropriateness of class litigation.” (Gutierrez v. California Commerce Club, Inc. (2010)

187 Cal.App.4th 969, 975, citing and quoting Blakemore v. Superior Court (2005) 129

Cal.App.4th 36, 53 (internal quotes omitted); Brown v. Regents of University of California

(1984) 151 Cal.App.3d 982, 988.) In Tarkington v. California Unemployment Ins. Appeals

Bd. (2009) 172 Cal.App.4th 1494, the court recognized the “policy disfavoring the

determination of class suitability issues at the pleading stage.” (Id. at p. 1511.)

Defendants’ arguments largely rely on their prior argument that plaintiff’s status

as an employee is not adequately alleged, which the court has dispensed with above.

Other arguments consisted of conclusions without analysis. It does not appear from the

face of the complaint that there is no reasonable possibility plaintiffs could establish a

community of interest among the potential class members and that individual issues

43

predominate over common questions of law and fact. Therefore the demurrer to the

class action allegations must be overruled.

Pursuant to California Rules of Court, rule 3.1312 and Code of Civil Procedure

section 1019.5(a), no further written order is necessary. The minute order adopting this

ruling will serve as the order of the court, and service by the clerk of the minute order

will constitute notice of the order.

Tentative Ruling

Issued by: DSB on 05/03/17

(Judge’s initials) (Date)

44

Tentative Rulings for Department 503