Case Name: Lai Chen v. ENN, et al.

Case No.: 2015-1-CV-281307

Demurrer to the Second Amended Complaint by defendant ENN Group North America, Inc.

On or about May 8, 2011, plaintiff Lai Chen (“Chen”) and defendant ENN Solar Energy Company, Ltd. (“ENN Solar”) entered into a written employment agreement (“Agreement”). (Second Amended Complaint (“SAC”), ¶8 and Exh. A.) Pursuant to the Agreement, ENN Solar employed plaintiff Chen as its Finance Director for a five year period commencing May 9, 2011 until May 9, 2016. (Id.) Plaintiff Chen commenced work at defendant ENN’s corporate headquarters in Beijing, China. (Id.) At the time of execution of the Agreement, defendant ENN Solar also provided plaintiff Chen with an addendum to the Agreement setting forth the terms of plaintiff Chen’s then current compensation for work performed in China and future compensation for work to be performed for defendant ENN Group North America, Inc. (“ENN Group”) in the United States. (Id.; see also Exh. B.)

In or about August 2011, plaintiff Chen was appointed Interim Chief Financial Officer of defendant ENN Group and commenced a six month assignment at defendant ENN Group’s corporate headquarters in San Jose. (SAC, ¶9.) In this assignment, plaintiff Chen’s responsibilities required him to travel throughout the United States. (Id.)

In February 2012, plaintiff Chen was appointed as the permanent Chief Financial Officer of defendant ENN Group and worked primarily at a solar power project located in East Brunswick, New Jersey. (SAC, ¶10.) On or about March 31, 2012, defendant ENN Group, through its then general manager (De-Ling Zhou; hereafter, “Zhou”), extended a written offer of employment to plaintiff Chen to be their Finance Director at an annual salary of $144,401.75 commencing April 1, 2012. (Id.; see also Exh. C.) Plaintiff Chen, by his signature, accepted the offer. (Id.)

In April/ May 2012, plaintiff Chen expressed concerns about defendants ENN, ENN Energy Holdings, Ltd. (“ENN Energy”), ENN Solar, and ENN Group’s (collectively, “ENN Defendants”) compliance with United States immigration laws to Jianchao Yu (“Yu”), CEO of the ENN Defendants and Bing Liu (“Liu”), the Human Resources Director for the ENN Defendants. (SAC, ¶11.)

In September 2012, plaintiff Chen expressed concern to Zhou, then defendant ENN Group’s CEO, about defendant ENN Group’s violations of United States Tax Code, nonpayment of payroll taxes, and mishandling of corporate tax filings by ENN Group’s accountant. (SAC, ¶14.)

On or about October 9, 2012, Liu informed plaintiff Chen that, effective November 1, 2012, plaintiff Chen would not be paid any further salary and would offer him a severance package in exchange for a waiver of rights to commence a lawsuit against defendant ENN Group. (SAC, ¶17.) Plaintiff Chen understood Liu’s statement as an intent to terminate plaintiff’s employment. (Id.) Plaintiff Chen sought confirmation from Zhou who falsely stated ENN Defendants wanted plaintiff to return to China so plaintiff could be assigned a new position within the ENN Defendants under a new employment agreement. (Id.)

On October 18, 2012, Zhou informed plaintiff Chen that his last day of employment with ENN Group would be October 31, 2012 and provided plaintiff Chen with a proposed termination agreement with an effective date of November 9, 2012. (SAC, ¶18 and Exh. D.)

On October 25, 2012, plaintiff Chen met with Yu at the ENN Defendants’ headquarters in China where Yu informed plaintiff that his employment with the ENN Defendants was summarily terminated effective November 1, 2012. (SAC, ¶19.)

On June 1, 2015, plaintiff Chen filed this action against ENN, ENN Energy, ENN Solar, and ENN Group. On January 6, 2016, defendant ENN Group filed a demurrer to plaintiff Chen’s complaint prompting plaintiff Chen to file a first amended complaint (“FAC”) on February 16, 2016. The FAC asserted causes of action for:

(1) Breach of Contract
(2) Breach of the Implied Covenant of Good Faith and Fair Dealing
(3) Fraud/ Deceit
(4) Misrepresentation
(5) Negligence
(6) Intentional Interference with Contractual Relations
(7) Wrongful Termination in Violation of Public Policy for Breach of Written Contract
(8) Retaliatory Discharge in Violation of Labor Code §1102.5

On March 4, 2016, defendant ENN Group filed a demurrer to the FAC. On April 14, 2016, the court sustained defendant ENN Group’s demurrer to the first, second, sixth, seventh, and eighth causes of action, but otherwise overruled ENN Group’s demurrer.

On April 29, 2016, plaintiff filed a SAC which asserts causes of action for:

(1) Breach of Contract
(2) Breach of the Implied Covenant of Good Faith and Fair Dealing
(3) Fraud/ Deceit
(4) Misrepresentation
(5) Negligence
(6) Intentional Interference with Contractual Relations

On May 16, 2016, defendant ENN Group filed this demurrer. On June 15, 2016, plaintiff Chen filed opposition.

I. Defendant ENN Group’s request for judicial notice is GRANTED.

In support of its demurrer, defendant ENN Group requests judicial notice of various court records from two federal court actions, Chen v. ENN Solar Energy Company Limited, et al., United States District Court for the District of New Jersey, case number 3:13-cv-06579-JAP-LHG and Chen v. ENN Solar Energy Company Limited, et al., United States District Court for the Northern District of California, case number 5-14-cv-05168-RMW-NC. In reply, defendant ENN Group requests judicial notice of this court’s order re demurrer to the FAC.

Evidence Code section 452, subdivision (d) states that the court may take judicial notice of “[r]ecords of any court of record of the United States.” Evidence Code section 452 and 453 permit the trial court to “take judicial notice of the existence of judicial opinions and court documents, along with the truth of the results reached—in the documents such as orders, statements of decision, and judgments—but [the court] cannot take judicial notice of the truth of hearsay statements in decisions or court files, including pleadings, affidavits, testimony, or statements of fact.” (People v. Woodell (1998) 17 Cal.4th 448, 455.)

Accordingly, the request for judicial notice in support of demurrer to second amended complaint and request for judicial notice in support of reply to plaintiff’s opposition to demurrer to second amended complaint by defendant ENN Group North America, Inc. is GRANTED. The court takes judicial notice of the existence of the court records, but not necessarily the truth of any matters asserted therein.

II. Defendant ENN Group’s demurrer to the first cause of action [breach of contract] is SUSTAINED.

In the FAC, plaintiff only alleged the existence of an agreement between himself and defendant ENN Solar. In the SAC, plaintiff also alleges a written employment agreement between himself and defendant ENN Group. At paragraph 10 and Exhibit C to the SAC, plaintiff alleges defendant ENN Group extended a written offer of employment to him in a letter dated March 10, 2012. Plaintiff further alleges he “signed this written employment agreement.”

At paragraph 22, plaintiff Chen alleges, in relevant part, “Additionally, Plaintiff and Defendant [ENN Group] entered into a written Employment Agreement on March 31, 2012.” At paragraph 25, plaintiff Chen alleges, in relevant part, “[ENN Defendants] breached the written Employment Agreements by wrongfully terminating Plaintiff’s employment.”

In demurring, defendant ENN Group argues that even if the March 10, 2012 letter constitutes an employment agreement, plaintiff Chen has not identified the provision of the agreement that has been breached. Defendant ENN Group cites Twaite v. Allstate Ins. Co. (1989) 216 Cal.App.3d 239, 252 where the court wrote, “To state a cause of action for breach of contract, it is absolutely essential to plead the terms of the contract either in haec verba or according to legal effect.”

Plaintiff has plead the terms of the agreement in haec verba by attaching a copy of the letter/ agreement. However, stated within the letter/ agreement is the following: “Please note that your employment with the Company is under an at-will basis. … The Company … may terminate its employment relationship with you at any time, with or without cause.” “If facts appearing in the exhibits contradict those alleged, the facts in the exhibits take precedence.” (Holland v. Morse Diesel International, Inc. (2001) 86 Cal.App.4th 1443, 1447, superseded on other grounds as stated in White v. Cridlebaugh (2009) 178 Cal.App.4th 506, 521.)

Consequently, plaintiff cannot allege breach based upon a wrongful termination where the agreement allows defendant ENN Group to terminate his employment “at any time, with or without cause.”

In opposition, plaintiff notes that the first cause of action is also based upon a breach of the May 8, 2011 Agreement with ENN Solar. As discussed by the court in its order sustaining the demurrer to the FAC, defendant ENN Group is not a party to the May 8, 2011 Agreement.

Accordingly, defendant ENN Group’s demurrer to the first cause of action in plaintiff Chen’s SAC on the ground that the pleading does not state facts sufficient to constitute a cause of action [Code Civ. Proc., §430.10, subd. (e)] for breach of contract is SUSTAINED with 10 days’ leave to amend.

III. Defendant ENN Group’s demurrer to the second cause of action [breach of implied covenant of good faith and fair dealing] is SUSTAINED.

“Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.” (Rest.2d Contracts, §205.) “There is an implied covenant of good faith and fair dealing in every contract that neither party will do anything which will injure the right of the other to receive the benefits of the agreement.” (Comunale v. Traders & General Ins. Co. (1958) 50 Cal.2d 654, 658; see also CACI, No. 325.)

In the second cause of action, plaintiff alleges defendant ENN Group breached the implied covenant of good faith and fair dealing “by wrongfully terminating Plaintiff’s employment.” As noted above, defendant ENN Group cannot be in breach for something the agreement specifically authorizes it to do.

Accordingly, defendant ENN Group’s demurrer to the second cause of action in plaintiff Chen’s SAC on the ground that the pleading does not state facts sufficient to constitute a cause of action [Code Civ. Proc., §430.10, subd. (e)] for breach of implied covenant of good faith and fair dealing is SUSTAINED with 10 days’ leave to amend.

IV. Defendant ENN Group’s demurrer to the fifth cause of action [negligence] is OVERRULED.

The fifth cause of action alleges the ENN Defendants negligently hired and retained Zhou, Yu, and Liu. “An employer may be liable to a third person for the employer’s negligence in hiring or retaining an employee who is incompetent or unfit.” (Roman Catholic Bishop v. Superior Court (1996) 42 Cal.App.4th 1556, 1564 (Roman).) “One who employs another to act for him is not liable merely because the one employed is incompetent, vicious, or careless. If liability results it is because, under the circumstances, the employer has not taken the care which a prudent man would take in selecting the person for the business in hand. Liability results not because of the relation of the parties, but because the employer antecedently had reason to believe that an undue risk of harm would exist because of the employment.” (Roman, supra, 42 Cal.App.4th at p. 1565; internal ellipsis removed; emphasis removed.)

In demurring, defendant ENN Group argues the claim is barred by a two year statute of limitations. Plaintiff opposes defendant ENN Group’s demurrer to this fifth cause of action on the ground that defendant ENN Group previously demurred to this same cause of action as it existed in the FAC, but did not raise this ground in its earlier demurrer. “A party demurring to a pleading that has been amended after a demurrer to an earlier version of the pleading was sustained shall not demur to any portion of the amended complaint, cross-complaint, or answer on grounds that could have been raised by demurrer to the earlier version of the complaint, cross-complaint, or answer.” (Code Civ. Proc., § 430.41, subd. (b).) In reply, defendant ENN Group contends it previously misunderstood the cause of action to assert a claim for general negligence, but now understands it to be a claim for negligent hiring.

However, defendant’s misunderstanding of the theory does not save it from application of the rule enunciated in Code of Civil Procedure section 430.41, subdivision (b). Defendant ENN Group could have raised a statute of limitations argument in demurring to this same cause of action in the FAC. Accordingly, defendant ENN Group’s demurrer to the fifth cause of action in plaintiff Chen’s SAC on the ground that the pleading does not state facts sufficient to constitute a cause of action [Code Civ. Proc., §430.10, subd. (e)] for negligence is OVERRULED.

V. Defendant ENN Group’s demurrer to the sixth cause of action [intentional interference with contractual relations] is SUSTAINED.

The elements which a plaintiff must plead to state the cause of action for intentional interference with contractual relations are (1) a valid contract between plaintiff and a third party; (2) defendant’s knowledge of this contract; (3) defendant’s intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage. (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 55; Tuchscher Development Enterprises, Inc. v. San Diego Unified Port Dist. (2003) 106 Cal.App.4th 1219, 1239; see also CACI, No. 2201.)

Defendant ENN Group demurs to this sixth cause of action by arguing that it is barred by a two year statute of limitations. “Where the dates alleged in the complaint show the action is barred by the statute of limitations, a general demurrer lies.” (Weil & Brown, CAL. PRAC. GUIDE: CIV. PROC. BEFORE TRIAL (The Rutter Group 2015) ¶7:50, p. 7(I)-30 citing Iverson, Yoakum, Papiano & Hatch v. Berwald (1999) 76 Cal.App.4th 990, 995, et al.) A cause of action for intentional interference with contract is governed by a two-year statute of limitations. (Code Civ. Proc., §339, subd. (1); see also Knoell v. Petrovich (1999) 76 Cal.App.4th 164, 168.) Based on the alleged November 2012 date of termination, plaintiff had to file this action by November 2014. The complaint in this action was not filed until June 1, 2015. Plaintiff does not offer any argument in opposition.

Accordingly, defendant ENN Group’s demurrer to the sixth cause of action in plaintiff Chen’s SAC on the ground that the pleading does not state facts sufficient to constitute a cause of action [Code Civ. Proc., §430.10, subd. (e)] for intentional interference with contractual relations is SUSTAINED WITHOUT LEAVE TO AMEND.