Case Number: BC525141 Hearing Date: June 04, 2014 Dept: 58

JUDGE ROLF M. TREU
DEPARTMENT 58
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Hearing Date: Wednesday, June 4, 2014
Calendar No: 6
Case Name: Extra Express (Cerritos), Inc. v. Employment Development Department
Case No.: BC525141
Motion: Demurrer
Moving Party: Cross-Defendant Extra Express (Cerritos), Inc.
Responding Party: Cross-Complainant Employment Development Department
Notice: OK

Tentative Ruling: Demurrer is sustained with 15 days leave to amend.
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Background –
On 10/18/13, Plaintiff Extra Express (Cerritos), Inc. (“EXE”) filed this action against Defendant Employment Development Department (“EDD”) to recover unemployment insurance contributions, taxes, and penalties assessed and collected by EDD. The Complaint asserted causes of action for (1) recovery of unlawfully collected contributions, interest and penalties; (2) injunctive relief; (3) declaratory relief; and (4) attorneys’ fees and costs.

On 3/10/14, the Court sustained EDD’s demurrer to the 2nd and 3rd COAs without leave to amend. On 3/24/14, EDD filed a cross-complaint against EXE. Trial is set for 10/6/14. Plaintiff has filed a motion for sanctions pursuant to CCP § 128.7 set for hearing on 7/23/14.

Demurrer –
EXE demurs to the Cross-Complaint. The Cross-Complaint alleges that EXE has a tax liability of $434,195.98 for taxes and penalties assessed for 1/1/04 to 10/31/04 for failure to file quarterly returns and/or reports. Cross-Complaint ¶ 3.

1. Requests for Judicial Notice
EXE requests judicial notice of a 7/21/08 notice of assessment issued to Expressshipit.com (“ESC”) in the amount of $434,195.98 for the period of 1/1/04 to 10/31/04 (“Assessment No. 1”) ; Administrative Law Judge Oleh Saciuk’s decision on ESC’s petition for reassessment of Assessment No. 1 (Case No. 2502306(T)); and the California Unemployment Insurance Appeals Board’s (“CUIAB”) 7/23/13 decision affirming ALJ Saciuk’s decision. The RJN is granted.

EDD requests judicial notice of its audit report of EXE and ALJ’s Saciuk’s decisions in Case No. 2502306(T) and Case No. 2502307(T) (concerning Assessment No. 2 as against EXE). The RJN is granted.

2. Insufficient Facts
The Cross-Complaint seeks to hold EXE liable for Assessment No. 1, which was issued against ESC and cancelled (EXE’s RJN Exs. 1-3). EDD fails to allege any facts to support EXE’s liability. In opposition, EDD asserts that EXE and ESC are the same employer because EDD made a determination that there is a unity of enterprise between them (see Opp’n p. 3:18-19 (citing to EDD’s RJN Ex. A [p. 2])). This is not alleged in the Cross-Complaint. Even if alleged, EDD fails to allege facts or cite to law that explains how EXE is liable for Assessment No. 1 based on the unity of enterprise determination where notably separate assessments were issued to EXE and ESC. Cf. Opp’n p. 5 n.3 (asserting that although EDD’s auditor chose to issue multiple assessments stemming from the unity of enterprise determination, the effect of the issuance is the same). The demurrer is sustained on this ground.

3. Statute of Limitations
EXE argues that the Cross-Complaint is time-barred because EDD failed to bring this action within the six-month statute of limitations of Unemployment Ins. Code § 410. Based on the Cross-Complaint’s current allegations, this argument is without merit. Unemployment Ins. Code § 410 provides in pertinent part:
Notwithstanding any other provision of law, the right of the director, or of any other party except as provided by [Unemployment Ins. Code] Sections 1241, 1243, and 5313, to seek judicial review from an appeals board decision shall be exercised not later than six months after the date of the decision of the appeals board or the date on which the decision is designated as a precedent decision, whichever is later.

The Cross-Complaint does not seek judicial review of the CUIAB’s decisions. To the extent EXE interprets Unemployment Ins. Code § 410 as limiting the Cross-Complaint to only a judicial review, this is not supported. By its terms, Unemployment Ins. Code § 410 concerns only judicial review of the CUIAB’s decisions: in response to EXE’s refund action, EDD may generally seek offsets (see Pope Estate Co. v. Johnson (1941) 43 Cal.App.2d 170, 173). Therefore, the statute of limitations in Unemployment Ins. Code § 410 does not apply to the Cross-Complaint.

4. Res Judicata
EXE argues that the Cross-Complaint is barred based on res judicata principles, citing to Pope Estate Co., 43 Cal.App.2d at 175-76. In opposition, EDD argues that the Pope Estate Co. is distinguishable because it concerned the res judicata effect of a judicial action: EDD argues that the CUIAB decision is not subject to res judicata as an administrative agency’s decision, citing to Cal. Employment Stabilization Comm’n v. Lund (1946) 76 Cal.App.2d 567, 571.

However, the linchpin underlying the Lund decision is Empire Star Mines Co. v. Cal. Employment Comm’n (1946) 28 Cal.2d 33, 47-49, which was overruled in People v. Sims (1982) 32 Cal.3d 468, 480 n.8 (superseded by statute on other grounds as stated in Gikas v. Zolin (1993) 6 Cal.4th 841, 851). Indeed, res judicata and collateral estoppel can be applied to administrative decisions generally. See, e.g., Noble v. Draper (2008) 160 Cal.App.4th 1, 11-12; People v. Garcia (2006) 39 Cal.4th 1070, 1077 (citing People v. Sims). Therefore, although the Court does not now determine whether res judicata and collateral estoppel applies to the CUIAB decisions, the Court will sustain the demurrer on this ground.

The Cross-Complaint seeks to impose taxes and penalties assessed for 1/1/04 to 10/31/04 for failure to quarterly returns and/or reports. Cross-Complaint ¶ 3. However, ALJ Saciuk determined that ESC did file quarterly returns and reports for each quarter in question (EXE RJN Ex. B p. 3) which was affirmed by the CUIAB (EXE RJN Ex. C). EDD fails to allege facts as to why EDD’s offset claim arising out of ESC’s failure to file returns for this period (see Opp’n p. 2:26-3:2) is not barred by these administrative decisions.

To the extent EDD is attempting to assert an offset against EXE for a portion of Assessment No. 2 from 11/1/04 to 6/30/05 (Opp’n p. 6:17-20), this is not alleged in the Cross-Complaint. Even if alleged, this portion of Assessment No. 2 was cancelled by ALJ Saciuk (EDD RJN Ex. A [p. 43]) which appears to have been affirmed by the CUIAB (see Complaint ¶¶ 42-44). EDD fails to allege facts as to why this offset claim would not likewise be barred by these administrative decisions.

5. Leave to Amend
EDD has requested leave to amend. Because this is the first challenge to the Cross-Complaint, leave to amend is granted.