Case Name: Ophir Rachman v. Hillview Technologies, Inc., et al.
Case No.: 1-14-CV-265723
Demurrer by Defendants Hillview Technologies, Inc. and Vijay Pullur to the Complaint of Plaintiff Ophir Rachman
With respect to the first cause of action [fraud-intentional misrepresentation], Defendants argue that Plaintiff fails to allege fraud with the required specificity to state a cause of action. Plaintiff’s first cause of action appears to be a fraud claim based on intentional misrepresentation. “The elements of fraud are (1) the defendant made a false representation as to a past or existing material fact; (2) the defendant knew the representation was false at the time it was made; (3) in making the representation, the defendant intended to deceive the plaintiff; (4) the plaintiff justifiably relied on the representation; and (5) the plaintiff suffered resulting damages.” (West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 792 [citation omitted].)
“Fraud must be pleaded with specificity rather than with general and conclusory allegations. The specificity requirement means a plaintiff must allege facts showing how, when, where, to whom, and by what means the representations were made, and, in the case of a corporate defendant, the plaintiff must allege the names of the persons who made the representations, their authority to speak on behalf of the corporation, to whom they spoke, what they said or wrote, and when the representation was made.” (West v. JPMorgan Chase Bank, N.A., supra, 214 Cal.App.4th at p. 793 [citation and quotation marks omitted].)
Courts enforce the specificity requirement in consideration of its two purposes. (West v. JPMorgan Chase Bank, N.A., supra, 214 Cal.App.4th at p. 793.) The first purpose is to give notice to the defendant with sufficiently definite charges that the defendant can meet them. (Ibid.) The second is to permit a court to weed out meritless fraud claims on the basis of the pleadings; thus, the pleading should be sufficient to enable the court to determine whether, on the facts pleaded, there is any foundation, prima facie at least, for the charge of fraud. (Ibid.)
Here, the court finds that Plaintiff has met the specificity requirement. The complaint alleges that, on August 15, 2013, Defendants misrepresented in writing that they were offering Plaintiff the CEO position at Hillview. (See Complaint at ¶ 17.) This representation was false because, among other things, Plaintiff would be denied a seat on the board of directors, denied access to Hillview’s bank accounts, and denied authority to hire an executive team or anyone else. (Id. at ¶ 18.) Plaintiff alleges that Defendants knew the representation was false when it was made, or alternatively, made such statement recklessly and without regard for its truth. (Id. at ¶ 21.) Furthermore, Plaintiff justifiably relied on the misrepresentation by giving up his employment with VMware, Inc. and suffered monetary damages in the form of loss of salary, wages, and bonuses he would have received from VMware had he remained as an employee. (Id. at ¶¶ 24-27.)
With respect to damages, Defendants argue that Plaintiff fails to allege the specific dollar amount to support the fraud claim. However, “the absence of a specific amount from the complaint is not necessarily fatal as long as the pleaded facts entitle the plaintiff to relief.” (Furia v. Helm (2003) 111 Cal.App.4th 945, 957.) Here, Plaintiff has alleged sufficient facts to support his claim for damages and, in the alternative, for rescission to state a fraud cause of action. (See Moncada v. West Coast Quartz Corp. (2013) 221 Cal.App.4th 768, 776 [allegation regarding damages sustained from missed opportunities for other employment sufficient for promissory fraud claim]; see also Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 979 [a defrauded party has the right to rescind a contract, even without a showing of pecuniary damages, on establishing that fraudulent contractual promises inducing reliance have been breached].) In fact, the court notes that Defendants fail to address Plaintiff’s request for rescission with respect to the first cause of action in their moving papers. (See Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1047 [a demurrer cannot rightfully be sustained to part of a cause of action].) As pled, the court finds that Plaintiff has alleged sufficient facts to state a fraud claim which must be accepted as true on a general demurrer. (See Olson v. Toy (1996) 46 Cal.App.4th 818, 823 [for purposes of demurrer, we accept these allegations as true].)
Accordingly, Defendants’ demurrer to the first cause of action on the ground that it fails to state a claim is OVERRULED.
With respect to the second cause of action [declaratory relief], Defendants argue that such a claim is premature as the complaint fails to allege that Hillview has attempted to enforce the provision in the Confidentiality Agreement prohibiting post-employment competition for 12 months. Defendants also assert that declaratory relief is unnecessary since the 12 month period under the post-employment non-compete provision will likely expire before resolution of the claim.
Declaratory relief is codified in Code of Civil Procedure section 1060 which provides in part that “[a]ny person interested under a written instrument…or under a contract…may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an original action or cross-complaint in the superior court for a declaration of his or her rights and duties in the premises, including a determination of any question of construction or validity arising under the instrument contract.”
“A complaint for declaratory relief is legally sufficient if it sets forth facts showing the existence of an actual controversy relating to the legal rights and duties of the parties under a written instrument or with respect to property and requests that the rights and duties of the parties be adjudged by the court. If these requirements are met and no basis for declining declaratory relief appears, the court should declare the rights of the parties whether or not the facts alleged establish that the plaintiff is entitled to a favorable declaration.” (Ludgate Ins. Co. v. Lockheed Martin Corp. (2000) 82 Cal.App.4th 592, 606; see Alameda County Land Use Assn. v. City of Hayward (1995) 38 Cal.App.4th 1716, 1722 [if the pleaded “facts reveal an actual controversy exists between the parties, the complaint is legally sufficient for declaratory relief”].)
Here, Plaintiff alleges that an actual controversy exists between the parties regarding the respective rights under the August 15th Employment Agreement and Confidentiality Agreement. (See Complaint at ¶¶ 35-36.) In particular, Plaintiff contends that the non-compete provision in the Confidentiality Agreement is illegal and void under Business and Professions Code section 16600 while Defendants assert that the provision is legal and enforceable. (Id. at ¶ 37.) Such allegations appear to be sufficient to establish an actual controversy for declaratory relief. Furthermore, in ruling on a demurrer to a complaint for declaratory relief, any doubts regarding the propriety of a declaratory judgment are generally resolved in favor of the plaintiff. (See Widders v. Furchtenicht (2008) 167 Cal.App.4th 769, 776.)
Therefore, Defendants’ demurrer to the second cause of action on the ground that it fails to state a claim is OVERRULED.
With respect to the third cause of action [declaratory relief], Plaintiff alleges that an actual controversy exists between the parties regarding the August 15th Employment Agreement and Confidentiality Agreement. (See Complaint at ¶ 43.) Specifically, Plaintiff contends that the Confidentiality Agreement contains a provision requiring him to waive his right to a jury trial which is void while Defendants assert that the provision is legal and enforceable. (Id. at ¶¶ 44-45.) On demurrer, Defendants argue that this claim is unnecessary because whether Plaintiff is entitled to a jury trial will be decided in the underlying case. (See Cal. Ins. Guar. Ass’n v. Sup. Ct. (1991) 231 Cal.App.3d 1617, 1623 [generally, an action in declaratory relief will not lie to determine an issue which can be determined in the underlying tort action].) However, for purposes of demurrer, Plaintiff has alleged sufficient facts to establish an actual controversy to support declaratory relief with respect to this issue.
Accordingly, Defendants’ demurrer to the third cause of action on the ground that it fails to state a claim is OVERRULED.
With respect to the fourth cause of action [fraud-concealment], Defendants raise the following arguments on demurrer: (1) Plaintiff fails to allege any misrepresentation; (2) Plaintiff fails to allege intent with specificity; and (3) Plaintiff fails to allege causation or damages.
The fourth cause of action appears to be a claim for fraud based on concealment of facts. “Concealment is a species of fraud or deceit. The elements of an action for fraud and deceit based on concealment are: (1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as result of the concealment or suppression of the fact, the plaintiff must have sustained damage.” (Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC (2008) 162 Cal.App.4th 858, 868 [internal citations and quotation marks omitted].)
Since this is a claim for concealment, there is no requirement for Plaintiff to allege any specific misrepresentation. Rather, in support of the claim, Plaintiff alleges that Defendants concealed and/or failed to disclose the following material facts: (1) the Confidentiality Agreement included a post-termination non-competition provision; and (2) the provision was illegal. (See Complaint at ¶ 51.) With respect to the element of intent, the averment that the representation (or concealment of facts) was made with the intent to deceive the plaintiff, or any other general allegation with similar purport, is sufficient. (5 Witkin, California Procedure (5th ed. 2008) Pleading, §728, p. 145.) Plaintiff alleges that Defendants actively concealed and failed to disclose material facts with the intent of deceiving him which is sufficient for pleading purposes. (See Complaint at ¶ 54.) Furthermore, fraudulent intent is generally an issue for the trier of fact to decide. (See Beckwith v. Dahl (2012) 205 Cal.App.4th 1039, 1061.) Finally, as stated above, the claim for damages and rescission with respect to fraud is sufficient and incorporated by reference into Plaintiff’s concealment cause of action. (See Complaint at ¶¶ 27-32 and 48.)
Accordingly, Defendants’ demurrer to the fourth cause of action on the ground that it fails to state a claim is OVERRULED.
With respect to the fifth cause of action [fraud—false promise], Defendants raise the following arguments on demurrer: (1) fraud has not been pled with the required specificity; (2) Plaintiff fails to allege facts showing contemporaneous fraudulent intent; (3) Plaintiff could not have reasonably relied on any alleged pre-employment oral promises of Board membership; and (4) Plaintiff fails to allege causation and damages.
The fifth cause of action appears to be a fraud claim based on a false promise. “Promissory fraud or false promise is a subspecies of [the action for] fraud and deceit. A promise to do something necessarily implies the intention to perform; hence, where a promise is made without such intention, there is an implied misrepresentation of fact that may be actionable fraud.” (Rossberg v. Bank of America, N.A. (2013) 219 Cal.App.4th 1481, 1498.)
The elements of promissory fraud are (1) a promise made regarding a material fact without any intention of performing it; (2) the existence of the intent not to perform at the time the promise was made; (3) intent to deceive or induce the promise to enter into a transaction; (4) reasonable reliance by the promise; (5) nonperformance by the party making the promise; and (6) resulting damage to the promise. (Rossberg v. Bank of America, N.A, supra, 219 Cal.App.4th at p. 1498.) “As with any other form of fraud, each element of a promissory fraud claim must be alleged with particularity.” (Ibid.)
With respect to the specificity argument, Plaintiff alleges that on several occasions prior to entering into the August 15th Employment Agreement, Vijay Pullur, Hillview’s President and Chairman of the Board, orally promised him that he would be made a member of Hillview’s board of directors. (See Complaint at ¶ 60.) To the extent that Defendants want to know the date and time of when such promises were made, they can obtain such information via modern discovery devices. As pled, Plaintiff has alleged sufficient facts to put Defendants on notice of Plaintiff’s fraud claim.
With respect to the element of fraudulent intent, Plaintiff alleges that Defendants did not have any intention of performing of the oral promises. (See Complaint at ¶ 61.) As stated above, the averment that the representation was made with the intent to deceive the plaintiff, or any other general allegation with similar purport, is sufficient. (5 Witkin, California Procedure (5th ed. 2008) Pleading, §728, p. 145.)
Defendants also argue that Plaintiff could not have reasonably relied on any pre-employment oral promises of board membership because of the employment agreement’s integration clause. (See Complaint at Exhibit A.) “An integrated agreement is a writing or writings constituting a final expression of one or more terms of an agreement.” (Alling v. Universal Manufacturing Corp. (1992) 5 Cal.App.4th 1412, 1433.) “The parol evidence rule generally prohibits the introduction of any extrinsic evidence, whether oral or written, to vary, alter or add to the terms of an integrated written instrument.” (Ibid.) “The rule comes into operation when there is a single and final memorial of the understanding of the parties. When that takes place, prior and contemporaneous negotiations, oral or written are excluded.” (Id. at p. 1434.)
However, as the opposition points out, “fraud undermines the essential validity of the parties’ agreement. When fraud is proven, it cannot be maintained that the parties freely entered into an agreement reflecting a meeting of the minds.” (Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Assn. (2013) 55 Cal.4th 1169, 1182.) Therefore, the parol evidence rule should not be used as a shield to prevent proof of fraud. (Ibid.) As this is a claim for false promise, the parol evidence rule is not applicable and thus whether Plaintiff reasonably relied on any pre-employment promise remains a factual issue. (See Qualified Patients Assn. v. City of Anaheim (2010) 187 Cal.App.4th 734, 751 [demurrer is inappropriate where factual issues remain].) Furthermore, for the reasons stated above, the claim for damages and rescission with respect to fraud is sufficient and incorporated by reference into the fifth cause of action. (See Complaint at ¶¶ 27-32 and 58.)
Therefore, Defendants’ demurrer to the fifth cause of action on the ground that it fails to state a claim is OVERRULED.
With respect to the sixth cause of action [wrongful termination in violation of public policy], Defendants argue that there is no causal link between the Confidentiality Agreement and Plaintiff’s subsequent termination to support the wrongful termination claim.
“To establish a claim for wrongful discharge in violation of public policy, a plaintiff must plead and prove (1) a termination or other adverse employment action; (2) the termination or other action was a violation of a fundamental public policy, as expressed in a constitutional, statutory, or regulatory provision; and (3) a nexus between the adverse action and the employee’s protected status or activity.” (Rope v. Auto-Chlor System of Washington, Inc. (2013) 220 Cal.App.4th 635, 660.)
Here, Plaintiff’s wrongful termination claim is based on Business and Professions Code section 16600. (See Parada v. City of Colton (1994) 24 Cal.App.4th 356, 363 [courts in wrongful discharge actions may not declare public policy without a basis in either constitutional or statutory provisions].) Plaintiff alleges that Defendants discriminated and retaliated against him because he protested and questioned the validity of the non-competition provisions in the Confidentiality Agreement. (See Complaint at ¶¶ 72, 74, and 75.) As a result of Plaintiff’s protests, Defendants terminated his employment with the company. (Id. at ¶ 75.) Whether or not these protests were the ultimate motivation for terminating Plaintiff’s employment will be determined on a dispositive motion or at trial. However, for purposes of demurrer, the court finds that Plaintiff has stated a cause of action for wrongful termination in violation of public policy.
Therefore, Defendants’ demurrer to the sixth cause of action on the ground that it fails to state a claim is OVERRULED.
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