Case Name: Cassinelli v. Applied Physics Systems, Inc., et al.
Case No.: 1-12-CV-236526

Plaintiff/cross-defendant John Cassinelli (“Cassinelli”) demurs to the first amended cross-complaint (“FACC”) filed by defendant/cross-complainant Applied Physics Systems, Inc. (“APS”).

The instant action arises out of a dispute between Cassinelli and his former employer, APS. On June 28, 2008, APS hired Cassinelli as an hourly employee. (FACC at ¶ 5.) After approximately three months, APS offered Cassinelli health insurance benefits. (Id.) In February 2009, Cassinelli asked APS whether it would provide health insurance benefits for cross-defendant Anna Szabelski (“Szabelski”), whom Cassinelli identified as his domestic partner. (Id. at ¶ 6.) APS answered in the affirmative, and in exchange for Cassinelli and Szabelski signing an Affidavit of Domestic Partnership (the “Affidavit”) under which both parties swore under oath that they were domestic partners and would promptly notify APS of any change in their domestic partnership status, agreed to provide and pay for health insurance benefits for Szabelski. (Id. at ¶ 8 and Exhibit A.) In accordance with both an oral agreement made by Cassinelli and in reliance on the sworn Affidavit, APS provided and paid for health insurance benefits for Szabelski from March 2009 to May 2012. (Id. at ¶ 9.)

On May 3, 2012, APS learned that Cassinelli, identifying himself as “single,” asked a woman out on a date during work hours on APS property. (FACC at ¶ 10.) On May 10, 2012, Cassinelli identified his purported domestic partner Szabeslki as his “roommate” and “landlord,” not as his domestic partner. (Id. at ¶ 11.) APS further inquired about Cassinelli’s purported domestic partner and then decided to terminate his employment, believing that Cassinelli had fraudulently signed the Affidavit in order to obtain health insurance benefits for Szabelski. (Id. at ¶ 12.)

On March 5, 2014, APS filed the FACC asserting the following causes of action: (1) Violation of Penal Code § 502; (2) Breach of Contract; (3) Breach of the Covenant of Good Faith and Fair Dealing; (4) Conversion; (5) Fraud and Deceit; (6) Negligent Misrepresentation; and (7) Promissory Estoppel.

On March 28, 2014, Cassinelli filed the instant demurrer to the second, third, sixth and seventh causes of action on the ground of failure to state facts sufficient to constitute a cause of action. (Code Civ. Proc., § 430.10, subd. (e).)

Cassinelli first contends that APS’s breach of contract claim is deficient for several reasons, including that (1) the Affidavit does not constitute an enforceable contract absent APS’s signature, (2) the Affidavit does not constitute an enforceable agreement due to lack of consideration, (3) APS has failed to state facts supporting a breach and (4) there was no breach of the alleged agreement because the relationship between Cassinelli and Szabelski did not change.

As best as the Court can understand, APS’s first cause of action is predicated on breach of both an oral agreement between the parties for APS to provide health insurance benefits to Szabelski while she and Cassinelli were in a domestic partnership and a written agreement, the Affidavit, providing for the same. Cassinelli asserts that the oral agreement was not by itself sufficient to bind the parties based on the fact that APS required him to sign the Affidavit. It is not clear how the fact that APS required Cassinelli to sign the Affidavit establishes that the oral agreement itself was insufficient; APS has pleaded that there was an oral agreement and a written agreement and that both were breached by Cassinelli. Because a demurrer does not lie to only part of a cause of action (see PH II, Inc. v. Superior Court (1995) 33 Cal.App.4th 1680, 1682) and Cassinelli does not otherwise establish how APS’s allegations regarding the oral agreement are otherwise deficient, his arguments regarding the Affidavit not qualifying as an enforceable contract do not provide a basis upon which to sustain the demurrer to the second cause of action in its entirety.

Cassinelli’s remaining arguments that APS has failed to state facts supporting a breach and that there was no breach are unavailing. First, whether or not Cassinelli ultimately breached the agreement is an issue of fact that is not appropriately resolved on demurrer. Second, APS has sufficiently pleaded the requisite elements of a breach of contract, i.e., the contract, the plaintiff’s performance or excuse for nonperformance, the defendant’s breach and resulting damage (see Acoustics, Inc. v. Trepte Construction Co. (1971) 14 Cal.App.3d 887, 913).

However, Cassinelli’s next assertion that the third cause of action for breach of the implied covenant is duplicative of the breach of contract claim and therefore superfluous is well-taken. “The covenant of good faith and fair dealing, implied by law in every contract, exists merely to prevent one contracting party from unfairly frustrating the other party’s right to receive the benefits of the agreement actually made.” (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 349-350.) The covenant is “implied as a supplement to the express contractual covenants, to prevent a contracting party from engaging in conduct which (while not technically transgressing the express covenants) frustrates the other party’s rights to the benefits of the contract.” (Racine & Laramie, Ltd. v. Department of Parks & Recreation (1992) 11 Cal.App.4th 1026, 1031-1032.) “[W]here breach of an actual term is alleged, a separate implied covenant claim, based on the same breach, is superfluous.” (Guz, supra, 24 Cal.4th at 327.) Here, while APS has added allegations to this cause of action in response to the Court’s order sustaining the demurrer to this claim in the initial cross-complaint, it still merely restates APS’s breach of contract claim in alleging conduct on the part of Cassinelli which amounted to him not being in a domestic partnership with Szabelski while she continued to receive health benefits from APS. Consequently, APS has failed to state a claim for breach of the implied covenant.

Lastly, Cassinelli asserts that APS’s claims for breach of contract, breach of the covenant of good faith and fair dealing, negligent misrepresentation and promissory estoppel are barred by the two-year statute of limitations prescribed by Code of Civil Procedure section 339, subdivision (1), for claims founded upon an oral agreement. Cassinelli insists that despite APS’s contention that it discovered his purported breach of the Affidavit on May 10, 2012, it could have discovered, through the exercise of reasonable diligence, this breach prior to that point, particularly by taking steps to qualify or verify the domestic partnership in the first place.

California courts have often stated the maxim that “[i]n ordinary tort and contract actions, the statute of limitations … begins to run upon the occurrence of the last element essential to the cause of action.” (Neel v. Magana, Olney, Levy, Cathcart & Gelffand (1971) 6 Cal.3d 176, 187.) Here, the acts upon which APS’s claims against Cassinelli are predicated, i.e., his alleged misrepresentation of his relationship status with Szebelski in order to fraudulently obtain health benefits for her, occurred in February 2009, when Cassinelli signed the Affidavit affirming that he and Szabelski were domestic partners and made verbal representations to that effect. Consequently, absent any exceptions to the general rule of accrual, the statute of limitations on APS’s claims, which the parties do not dispute is two years, would have begun to run at that time and concluded prior to the filing of the initial cross-complaint in November 2013. APS insists, however, that the discovery rule operates to delay the accrual of its claims, rendering its causes of action timely.

The discovery rule is an exception to the general rule defining the accrual of a cause of action and postpones said accrual until “the plaintiff discovers, or has reason to discover, the cause of action.” (E-Fab, Inc. v. Accountants, Inc. Services (2007) 153 Cal.App.4th 1308, 1318.) The discovery rule ameliorates the harshness of general accrual principals where “it is manifestly unjust to deprive plaintiffs of a cause of action before they are aware that they have been injured. [Citation.]” (April Enterprises, Inc. v. KTTV (1983) 147 Cal.App.3d 805, 826.)

“A plaintiff whose complaint shows on its face that his claim would be barred without the benefit of the discovery rule must specifically plead facts to show (1) the time and manner of discovery and (2) the inability to have made earlier discovery despite reasonable diligence. The burden is on the plaintiff to show diligence, and conclusory allegations will not withstand demurrer.” (E-Fab, Inc., supra, 153 Cal.App.4th at 1319, emphasis in original.) Here, APS has clearly met the first pleading requirement of the discovery rule in alleging that it became aware of the truth of Cassinelli and Szabelski’s relationship status in May 2012 after learning that Cassinelli had asked another individual out and inquiring about his purported domestic partner. (FACC at ¶¶ 10-12.)

However, APS has not met the second pleading requirement in failing to plead an inability to have made earlier discovery of Cassinelli’s wrongful conduct. Though APS insists in its opposition that it had no reason to know or suspect that Cassinelli and Szabelski were not in an actual domestic partnership because Szabelski did not work for APS, it has not pleaded as much in the FACC. Consequently, APS has not sufficiently alleged delayed discovery and its claims, as currently pleaded, are time-barred.

In accordance with the foregoing analysis, Cassinelli’s demurrer to the third cause of action (breach of implied covenant) on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITHOUT LEAVE TO AMEND and his demurrer to the second (breach of contract), sixth (negligent misrepresentation) and seventh (promissory estoppel) causes of action on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND.