Case Name:    Carlos Garcia v. Madura, Inc., et al.

Case No.:        1-13-CV-247083

Date:               April 24, 2014

Time:              9:00 a.m.

Dept:               8

In the second amended complaint (“SAC”), plaintiff Carlos Garcia (“Plaintiff”) alleges the following:  Defendants Kalidoss Raju (“Raju”), Gunasekaran Suriyanarayanan, Markkandan Manimaran, and Alex S. Royappa (collectively, “the Owners”) own defendant Madura, Inc., d.b.a. Madura Restaurant (“the Restaurant”).  (SAC, ¶ 5.)  Since the Owners operate the Restaurant “without substantial capital,” the Restaurant is unable “to meet its debts and obligations.”  (Id., ¶ 6.)  The Owners and the Restaurant (collectively, “Defendants”) commingle their assets and disregard corporate formalities such that a unity of interest between them exists and the Restaurant is the alter ego of each of the Owners.  (Id., ¶¶ 6-7.)  “Adherence to the fiction of the separate existence” between them “would permit an abuse of the corporate privilege and would promote injustice.”  (Id., ¶ 8.)  Furthermore, Defendants are each the partners, joint venturers, alter egos, agents, and employees of one another.  (Id., ¶ 10.)

Plaintiff began working for Defendants as kitchen staff on October 23, 2009.  (SAC, ¶¶ 14-16.)  Throughout Plaintiff’s employment, Defendants violated numerous labor laws pertaining to wage and hour requirements and recordkeeping.  (Id., ¶¶ 17-20.)  Defendants have ten other employees who are similarly situated to Plaintiff.  (Id., ¶ 21.)

Plaintiff filed the complaint on May 29, 2013.  On July 8, 2013, Plaintiff filed the first amended complaint (“FAC”), asserting causes of action for asserting claims for (1) nonpayment of wages, (2) failure to produce employment records, (3) “pay stub violation,” (4) “wage penalty,” (5) “record keeping penalty,” and (6) “illegal business practices.”

Raju demurred to the FAC for failure to state a claim, and the court (Hon. Carol Overton) sustained the demurrer with leave to amend.

Plaintiff filed the SAC on February 18, 2014, asserting the same claims as he did in the FAC.

On March 17, 2013, Raju filed a demurrer to the SAC as a whole on the ground of failure to allege sufficient facts to constitute a cause of action.  (See Code Civ. Proc. [“CCP”], § 430.10, subd. (e).)

Plaintiff filed his opposition on April 10, 2014.

On April 18, 2014, Raju filed his reply.

Raju brings this demurrer to the SAC on the ground that the pleading does not allege sufficient facts to support Plaintiff’s alter ego theory of liability.  As noted above, previously, the court (Hon. Carol Overton) sustained Raju’s demurrer to the first amended complaint (“FAC”), with leave to amend, for failure to allege sufficient facts to justify the alter ego theory of liability.  As the court explained, Raju cannot be individually liable as the mere agent or officer of the Restaurant because “[c]orporate agents acting within the scope of their agency are not personally liable for the corporate employer’s failure to pay its employees’ wages and directors or officers of a corporation do not incur personal liability for torts of the corporation merely by reason of their official position.  (Reynolds v. Bement (2005) 36 Cal. 4th 1075, 1087.)”  (Order re: Demurrer to FAC, at p. 3:7-16.)

However, an officer or director of a corporation may be individually liable for the corporation’s actions under the alter ego theory of liability.  The requisite elements of an alter ego claim are (1) a unity of interest between the corporation and its alleged alter ego such that their separate personalities no longer exist; and (2) inequitable results will follow if the corporate separateness is respected.  (Zoran Corp. v. Chen (2010) 185 Cal.App.4th 799, 811, citation omitted.)

In the SAC, Plaintiff still does not allege sufficient facts to support the second requisite element for alter ego liability because the statement that “[a]dherence to the fiction of the separate existence” between Raju and the Restaurant “would permit an abuse of the corporate privilege and would promote injustice” is a mere legal conclusion.  (See SAC, ¶ 8; see also Leek v. Cooper (2011) 194 Cal.App.4th 399, 418 [to plead an inequitable result, plaintiffs must allege conduct amounting to bad faith, and difficulty enforcing a judgment does not suffice].)

Accordingly, Raju’s demurrer to the SAC for failure to allege sufficient facts is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND.  (See Gregory v. Albertson’s, Inc. (2002) 104 Cal.App.4th 845, 850 [it is an abuse of discretion to sustain a demurrer without leave to amend if there is any reasonable possibility that an amendment might cure the defect].)