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

Case No.:       1-13-CV-247083

 

Plaintiff Carlos Garcia (“Plaintiff”) brings this action for employment law violations against defendant Madura, Inc. (“the Restaurant”) and its owners, defendants Kalidoss Raju (“Raju”), Gunasekaran Suriyanarayanan (“Suriyanarayanan”), Markkandan Manimaran (“Manimaran”), and Alex S. Royappa (collectively, “the Owners”).[1]  The Court (Hon. Carol Overton and Hon. Maureen A. Folan) previously sustained Raju’s demurrers to the first and second amended complaints on the ground that Plaintiff had not alleged sufficient facts to support the conclusion that Raju is liable on an alter ego theory.  On May 5, 2014, Plaintiff filed his third amended complaint (“TAC”), asserting the following claims against each of the defendants: (1) nonpayment of wages; (2) failure to produce employment records for inspection; (3) failure to provide itemized statement of wages and deductions; (4) wage penalty; (5) record keeping penalty; and (6) illegal business practices.

 

Currently before the Court are the separate demurrers of Suriyanarayanan, Manimaran, and the Restaurant (“collectively, the “Restaurant Defendants”) and Raju.

 

Raju’s Demurrer

 

Raju demurs to the entire TAC on the ground that it fails to state a claim (Code Civ. Proc., § 430.10, subd. (e)), arguing that Plaintiff still has not alleged facts adequate to support alter ego liability, while his new theory of direct liability fails.

 

In order to prevail on an alter ego theory, the plaintiff must show that (1) there is such a unity of interest that the separate personalities of the defendants no longer exist and (2) inequitable results will follow if the corporate separateness is respected, in light of a “long list” of non-exhaustive factors.  (Zoran Corp. v. Chen (2010) 185 Cal.App.4th 799, 811.)  In its prior order granting the demurrer to the SAC, the Court (Hon. Maureen A. Folan) held that Plaintiff had failed to allege facts sufficient to support the second prong of alter ego liability.

 

In the TAC, however, Plaintiff alleges that the Owners held themselves out to Plaintiff and others “as owning and operating the restaurant as a general partnership where each of said individual defendants were general partners of the restaurant, a direct employer of its employees, and to be directly and personally responsible for …the wages, hours and working conditions of its employees.”  (TAC, ¶ 5.)  This is adequate to satisfy the second prong of alter ego liability.  (See Leek v. Cooper (2011) 194 Cal.App.4th 399, 418 [in order to show inequitable result, plaintiffs must allege some conduct amounting to bad faith; difficulty in enforcing a judgment does not suffice].)  It would be inequitable to allow Raju to use the Restaurant as a shield from liability where he represented that he would be personally responsible for Plaintiff’s wages and working conditions.  While Raju contends that Plaintiff must allege the specifics of Raju’s alleged representations (Mot., pp. 10-11), alter ego liability is not subject to a heightened pleading requirement.  (See Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 235-236 [allegations of ultimate facts supporting alter ego liability—such as “that a unity of interest and ownership existed between” an individual and a corporation, the corporation “was a mere shell and conduit for” the individual’s affairs, and “recognizing the separate existence of [the corporation] would promote injustice”—adequate to state a claim]; cf. Norins Realty Co. v. Consolidated Abstract & Title Guaranty Co. (1947) 80 Cal.App.2d 879, 883 [“All that is alleged respecting [the individual defendants] is that they are stockholders and residents of Los Angeles County.”].)  With respect to the first element of alter ego liability, as in the SAC, Plaintiff alleges in the TAC that there is a unity of interest between the defendants because the Owners operate the Restaurant “without substantial capital” such that the Restaurant cannot “meet its debts and obligations,” and defendants commingle their assets and disregard corporate formalities.  (TAC, ¶ 7.)  These allegations are adequate to satisfy the first element of alter ego liability.  (See Rutherford Holdings, LLC v. Plaza Del Rey, supra, 223 Cal.App.4th at pp. 235-236.)

 

In light of the above, Raj’s demurrer to the TAC is OVERRULED.  The Court need not address the parties’ arguments concerning Plaintiff’s theory of direct liability.

 

The Restaurant Defendants’ Demurrer

 

The Restaurant Defendants demur to the fourth and fifth causes of action on the ground that they fail to state facts sufficient to constitute a cause of action as to any of the Restaurant Defendants, and they demur to the entire TAC on the grounds that it fails to state a claim against Suriyanarayanan and Manimaran.  (See Code Civ. Proc., § 430.10, subd. (e).)

 

In argument apparently identical to that submitted by Raju in support of his demurrer, the Restaurant Defendants contend that the TAC fails to state a claim against Suriyanarayanan and Manimaran on an alter ego or direct liability theory.  For the reasons already discussed, the Restaurant Defendants’ demurrer to the entire TAC is OVERRULED.

 

The fourth cause of action seeks penalties for wage violations pursuant to Labor Code sections 558 and 2699, while the fifth cause of action seeks penalties for recordkeeping violations pursuant to Labor Code sections 226.3 and 2699.  With respect to the section 2699 penalties, the Restaurant Defendants argue that Plaintiff failed to allege that he gave written notice to the defendants and the Labor and Workforce Development Agency before filing this lawsuit, as required by Labor Code section 2699.3.  However, the TAC alleges that “Plaintiff complied with all applicable notice procedures required by the Labor Code, including as set forth in Labor Code §2699.3.”  (TAC, ¶ 26.)  While this could be construed as a legal conclusion, the Restaurant Defendants do not address this allegation in their demurrer and appear to contend that Plaintiff has not alleged compliance with section 2699.3 at all.  Further, the fourth and fifth causes of action each seek penalties pursuant to another section of the Labor Code in addition to section 2699, and the Restaurant Defendants do not address the issue of whether these sections are also subject to section 2699.3’s notice requirements.  It is improper to sustain a demurrer where a cause of action states a claim on any theory (Gregory v. Albertson’s, Inc. (2002) 104 Cal.App.4th 845, 850), so the Restaurant Defendants’ failure to address this issue is also fatal to their demurrer.

 

The Restaurant Defendants’ demurrer to the fourth and fifth causes of action is consequently OVERRULED.

 

The Restaurant Defendants’ request for judicial notice, which was submitted with their reply brief, is DENIED.  (See Ross v. Creel Printing & Publishing Co., Inc. (2002) 100 Cal.App.4th 736, 744 [appellate court did not take judicial notice of District Attorney’s letter that did not fall into any of the categories for either mandatory or permissive judicial notice under section 451 or 452]; California School Boards Ass’n v. State Bd. of Educ. (2010) 186 Cal.App.4th 1298, 1327, fn.20 [content of correspondence not a proper subject of judicial notice].)

 

 

[1] Plaintiff also named “Madura Restaurant,” Madura Indian Cuisine,” and “Madura Veg Indian Cuisine” as defendants, although he alleges that these are fictitious business names used by the Restaurant and each of the Owners.  (Third Amended Complaint, ¶ 4.)