Michael Glintzer v. CDNetworks, Inc

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Case Name: Michael Glintzer, et al. v. CDNetworks, Inc., et al.

Case No.: 1-13-CV-246314

Currently before the Court are the demurrer and motion to strike of Defendants CDNetworks, Inc. (“CDNetworks”), Alex Ha (“Ha”), and Jeff Kim (“Kim”) (collectively, “Defendants”) to the second amended complaint (“SAC”) of Plaintiffs Michael Glintzer (“Glintzer”) and Michelle Anne MacDonald (“MacDonald”) (collectively, “Plaintiffs”).

The Court hereby strikes and has not considered the Declaration of Michael Glintzer filed May 29, 2014, and the Declaration of Donald Schwartz filed on June 2, 2014, as not properly before the Court on a demurrer, and as untimely. All opposition to the pending motion and demurrer was due to be filed no later than May 22, 2014. The declarations were not filed until after reply pleadings were filed. The Code does not authorize or permit sur-reply pleadings.

The demurrer is SUSTAINED without leave to amend as to the first cause of action for negligent misrepresentation in its entirety and as to the fourth cause of action for fraudulent misrepresentation with respect to Ha. Defendants correctly contend that the first cause of action does not state a claim because the statements at issue are promises regarding Defendants’ future actions, and there is no cause of action for negligent misrepresentation based upon false promises. (See Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 159 [“we decline to establish a new type of actionable deceit: the negligent false promise”].) Given that the exact same statements are pleaded in support of the fourth cause of action, the first cause of action is merely duplicative even if it is construed as a claim arising from intentional false promises, which does exist.

The demurrer to the fourth cause of action is brought on behalf of Ha only. The fourth cause of action alleges no statement by Ha, and asserts only that a statement by Kim was made “to cover-up the illegal and unethical business practices of defendants CDNetworks, Kim and Ha — all acting in concert through a conspiracy.” (SAC, ¶ 165.) Similarly, in opposition, Plaintiffs contend that Ha “is implicated in the fraudulent scheme to deprive plaintiff Glintzer of his commissions — at a minimum through operation of a conspiracy with defendant Kim.” (Corrected Opp. at p. 8.) To the extent that Plaintiffs contend the fourth cause of action is one for conspiracy as to Ha, they fail to allege that Ha actually agreed with the other Defendants that the fraud alleged by Plaintiffs should be perpetrated. (See People v. Beaumont Inv., Ltd. (2003) 111 Cal.App.4th 102, 137 [“formation of the conspiracy (an agreement to commit wrongful acts)” a required element of a claim for conspiracy].) Consequently, the fourth cause of action fails to state a claim for fraudulent misrepresentation or conspiracy as to Ha.

The demurrer to the second cause of action for violation of Business & Professions Code section 17200, et seq. is OVERRULED. Defendants contend that the second cause of action fails to state a claim because the SAC is devoid of allegations as to how Glintzer was damaged by the actions alleged or how he would be entitled to restitution or an injunction as a result. However, at least with respect to the third count alleged in support of this claim, Glintzer alleges throughout the SAC that he was denied commissions as part of a larger scheme by Defendants, and unlawfully withheld wages are an available remedy under section 17200, et seq. (See Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 178 [“an order that a business pay to an employee wages unlawfully withheld is consistent with the legislative intent underlying the authorization in section 17203 for orders necessary to restore to a person in interest money or property acquired by means of an unfair business practice”].)

The demurrer to the third cause of action for slander per se is SUSTAINED with 10 days’ leave to amend as to Ha and CDNetworks and SUSTAINED without leave to amend as to Kim.

Defendants correctly contend that the statements by Ha fail to state a claim because such a claim is barred by the statute of limitations, which is one year following publication of the statement at issue. (Code Civ. Proc., § 340, subd. (c); Shively v. Bozanich (2003) 31 Cal.4th 1230, 1246-1247 [a cause of action for defamation accrues at the time when the statement at issue is published].) Because the original complaint in this action was filed on May 15, 2013, it appears from the SAC that the April 2012 statements by Ha are barred by the statute of limitations. However, Plaintiffs argue that the statute of limitations was tolled because Ha made the statements at issue in London and Copenhagen, and Code of Civil Procedure section 351 provides that the limitations period is tolled “[i]f, when the cause of action accrues against a person, he is out of the State,” as well as during periods of a defendant’s absence from California. Plaintiffs request leave to amend the SAC to allege the details of Ha’s absence from California, and such leave is granted as to Ha and CDNetworks. (See Campbell v. Campbell (1958) 157 Cal.App.2d 548, 555 [“an affirmative allegation of absence from the State would be required to toll the running of the Statute of Limitations” under section 351].)

As to Kim, Defendants argue that Plaintiffs have failed to plead facts showing that his statement is slanderous and caused Glintzer damages as required to state a claim for slander per quod, and the statement is not slanderous per se. Plaintiffs defend this claim as one for slander per se only. As an initial matter, while Defendants point out that Kim’s statement does not mention Glintzer by name, the SAC alleges facts establishing that Glintzer was known to be involved with the Saxo Bank deal to which the statements pertain (see, e.g., SAC, ¶ 117). Consequently, the SAC does not fail to state a claim for defamation based on Kim’s statement for this reason. (See Stoneking v. Briggs (1967) 254 Cal.App.2d 563, 571 [a defendant may be liable for defamatory statements that are insinuated as well as for those that are stated explicitly].) However, the worst insinuations that could be said to appear from the face of Kim’s statement are that Glintzer was not in fact responsible for securing the Saxo Bank deal and that it was necessary for Ha to “valiantly save” the deal from the competition. “In connection with subdivision 3 of Civil Code section 46, ‘to be actionable per se, a defamatory statement must tend ‘directly’ to injure the person defamed in respect to his office, profession, trade or business ….’ Whether a statement ‘upon its face … clearly conveys a meaning’ within subdivision 3 so as to be slander per se is a question for the court.” (Regalia v. Nethercutt Collection (2009) 172 Cal.App.4th 361, 369, internal citations omitted.)

Here, the statement at issue does not, on its face, clearly impute Glintzer’s incompetence or other disqualification to practice his vocation. Whether or not Glintzer was actually responsible for securing the Saxo Bank deal, the suggestion that he was not could be attributed to any number of variables other than his incompetence (for example, the external “competition” to which the statement itself refers). Consequently, Kim’s statement is not slanderous per se. (See Regalia v. Nethercutt Collection , supra, 172 Cal.App.4th at pp. 369 [“[c]ourts seem to be looking for conduct that might be deemed to reflect character or at least habitual misconduct,” citation omitted], 370 [“[T]he statement that Regalia was fired because other employees would not work for him and would leave if he remained employed does not, on its face, clearly fall within subdivision (3) of Civil Code section 46. That one or more employees do not want to work for someone, without more, again, does not necessarily reflect adversely on the person. The employee or employees might not want to work for a person because of the person’s work ethic or rectitude, or legitimate business policies.”].) Given that Plaintiffs do not indicate they could plead any other statement by Kim in support of this claim, the demurrer to the third cause of action is sustained without leave to amend as to Kim. (See Camsi IV v. Hunter Technology Corp. (1991) 230 Cal.App.3d 1525, 1542 [“absent an effective request for leave to amend in specified ways,” it is appropriate to deny leave to amend unless “a potentially effective amendment [is] both apparent and consistent with the plaintiff’s theory of the case”]; Goodman v. Kennedy (1976) 18 Cal. 3d 335, 349 [“Plaintiff must show in what manner he can amend his complaint and how that amendment will change the legal effect of his pleading”], quoting Cooper v. Leslie Salt Co. (1969) 70 Cal. 2d 627, 636; Hendy v. Losse (1991) 54 Cal. 3d 723, 742 [“the burden is on the plaintiff… to demonstrate the manner in which the complaint might be amended”].)

The demurrer to the fifth cause of action for wrongful termination in violation of public policy is SUSTAINED without leave to amend as to Ha and Kim and with 10 days’ leave to amend as to CDNetworks.

As an initial matter, although the Court previously sustained Defendants’ demurrer to this claim without leave to amend as to Ha and Kim (February 19, 2014 Order (“Order”) at pp. 5-6), the SAC reasserts the claim as to all Defendants. Plaintiffs indicate in their opposition papers that this claim is not meant to be directed at Ha and Kim. (Corrected Opp. at p. 9.) Given these circumstances, Defendants’ demurrer is sustained without leave to amend as to Ha and Kim based on the Court’s prior order.

As to CDNetworks, Plaintiffs’ allegation that Defendants terminated Glintzer to avoid paying his commissions cannot support a claim for wrongful termination in violation of public policy given that Plaintiffs do not allege Glintzer was owed commissions under any constitutional or statutory provision. (See Deschene v. Pinole Point Steel Co. (1999) 76 Cal.App.4th 33, 43 [to state a claim for wrongful termination in violation of public policy, the plaintiff must identify a public policy that is supported by a constitutional or statutory provision].) Nor does the SAC allege any facts in support of the somewhat illogical conclusion that Glintzer was terminated to “cover-up” the various illegal business practices alleged by Plaintiffs, of which Glintzer already knew.

Notably, the SAC does not allege that Glinzter was terminated for refusing to participate in Defendants’ practices or for reporting or suggesting that he would report such practices. Consequently, it fails to allege a nexus between Defendants’ statutory violations and Glintzer’s termination. (See Turner v. Anheuser-Busch, Inc. (1994) 7 Cal.4th 1238, 1257 [even if plaintiff did identify violations of state statutes implicating fundamental public policies, he did not show that he was asked to participate in any illegal activity or was subjected to harassment for performing a statutory obligation or exercising a statutory right or privilege]; see also Stevenson v. Super. Ct. (Huntington Memorial Hospital) (1997) 16 Cal.4th 880, 889 [employee conduct subject to protection under a claim of wrongful discharge in violation of public policy includes (1) refusing to violate a statute, (2) performing a statutory obligation, (3) exercising a statutory right or privilege, and (4) reporting an alleged violation of a statute].) The demurrer to the fifth cause of action is sustained with leave to amend as to CDNetworks to permit Glintzer to attempt to state a cause of action.

The demurrer to the seventh cause of action for accounting and the eighth cause of action for restitution is SUSTAINED without leave to amend as to Ha and Kim. Defendants’ previous demurrer to the claim for accounting was sustained without leave to amend as to these Defendants (Order at p. 8), and Plaintiffs indicate that they do not intend to plead either of these claims against Ha and Kim. Plaintiffs are ordered to insure that any amended pleading does not include claims or allegations where demurrer or motions to strike were sustained without leave to amend.

The demurrer to the ninth cause of action for civil racketeering (RICO) scheme is OVERRULED. Defendants argue in general terms that Plaintiffs’ allegations in support of this claim are not specific enough, do not encompass activity which affects interstate or foreign commerce, and do not indicate a specific intent to defraud using the mail or wires. However, in their first RICO count, Plaintiffs allege that Kim instructed CDNetworks employees to make a number of false representations to customers, on at least one occasion giving this instruction by telephone to Ha, who followed the instruction. (See SAC, ¶¶ 230-238.) Plaintiffs identify the communications at issue, the individuals who participated in them, and the time and manner in which they were conveyed. The communications pertain to CDNetworks’s competitors’ capabilities in the global marketplace. Further, Defendants cite no authority for the proposition that Plaintiffs must allege a specific intent to defraud using the wires and mail as opposed to mere use of the wires in furtherance of a scheme to defraud. (See Schreiber Distributing Co. v. Serv-Well Furniture Co., Inc. (9th Cir. 1986) 806 F.2d 1393,1399-1400.) Defendants’ arguments as to this claim thus lack merit.

The demurrer to the tenth cause of action for negligent infliction of emotional distress is SUSTAINED without leave to amend.

In support of her bystander claim, MacDonald alleges that she witnessed harm caused to Glintzer during his May 16, 2012 termination meeting because he telephoned her after the meeting. (SAC, ¶ 270.) However, as urged by Defendants, these allegations do not state a claim because bystander recovery is limited to cases where the bystander “is present at the scene of the injury-producing event at the time it occurs.” (Burgess v. Super. Ct. (Gupta) (1992) 2 Cal.4th 1064, 1073.) MacDonald also alleges that she listened in on and witnessed a May 23, 2012 telephone conversation between CDNetworks’s Controller Noriko Sekikawa and Glintzer, which, in combination with Defendants’ conduct, caused Glintzer and then MacDonald to go into a state of emotional shock because it placed “the Glintzer-MacDonald household into a state of financial collapse in complete violation of the employment contract with [CDNetworks].” (SAC, ¶ 271.) During this conversation, Ms. Sekikawa informed Glintzer that he was not entitled to any further commission payments in accordance with CDNetworks’s new commission plan. (SAC, ¶¶ 57-58.)

Plaintiffs do not allege that Glintzer was physically injured by this conversation, and Defendants correctly note that fraud and breach of an ordinary commercial contract do not support a claim for emotional distress. (See Erlich v. Menezes (1999) 21 Cal.4th 543, 559 [only “when the express object of the contract is the mental and emotional well-being of one of the contracting parties, [may a] breach of the contract … give rise to damages for mental suffering or emotional distress”]; Kruse v. Bank of America (1988) 202 Cal.App.3d 38, 67 [“Insofar as the claim for emotional distress is based on the same conduct alleged to show fraud, no recovery is permitted. Emotional distress is not recoverable as an element of damages for fraud.”]; see also Smith v. Super. Ct. (Bucher) (1992) 10 Cal.App.4th 1033, 1040 [“mere negligence will not support a recovery for mental suffering where the defendant’s tortious conduct has resulted in only economic injury to the plaintiff”].) While Plaintiffs allege an ultimate physical consequence to Defendants’ actions—MacDonald’s eventual miscarriage—MacDonald cannot recover on a bystander theory where there was no legally cognizable injury to Glintzer. (See Martin v. California Dept. of Veterans Affairs (9th Cir. 2009) 560 F.3d 1042, 1051 [where mother denied admission to a Veterans Home suffered no legally cognizable injury, her daughter could not recover on a bystander theory]; Ra v. Super. Ct. (Presidio International, Inc.) (2007) 154 Cal.App.4th 142, 152 [stating that “permitting bystander recovery when there is no direct victim defies common sense”].)

As to MacDonald’s direct claim, which is based on the same two conversations (SAC, ¶¶ 275-276), Plaintiffs do not plead facts distinguishing their case from Anderson v. Northrop Corp. (1988) 203 Cal.App.3d 772, which was cited in the Court’s prior ruling. While Plaintiffs allege that it was foreseeable or even known to Defendants that Glintzer would inform MacDonald of the events surrounding his termination, there are no allegations that Defendants instructed Glintzer to do so or otherwise directed their termination of Glintzer towards MacDonald. (See Anderson v. Northrop Corp., supra, 203 Cal.App.3d at p. 777 [“Pauline made no assertion that Northrop directed its termination of Roger toward her. Although it may have been foreseeable that he would inform her and that she would be upset at learning of this unfortunate turn of events, Northrop did not expressly or impliedly advise him to do so.”].)

The motion to strike is GRANTED without leave to amend as to the allegations pertaining to loss of consortium. The Court previously granted Defendants’ motion to strike these allegations on the ground that Plaintiffs failed to plead facts showing either of them had been significantly impaired in their ability to participate in the marital relationship. (Order at p. 11.) The SAC again fails to include such allegations, referring only to MacDonald’s alleged miscarriage and Glintzer’s general injury “in his health, strength and activities, … to his nervous system and person, all of which [cause him] great mental, physical and nervous pain and suffering.” (See, e.g. SAC, ¶ 75.) These allegations remain inadequate to state a claim for loss of consortium. (See Anderson v. Northrop Corp. (1988) 203 Cal.App.3d 772, 780 [allegations that husband became “mentally upset, distressed and aggravated” as a result of his termination, but not that he was so incapacitated that he could no longer be a companion and give love, affection, society, comfort and sexual relations, were inadequate to support a claim for loss of consortium].)

The motion to strike is GRANTED with 10 days’ leave to amend as to the allegations pertaining to emotional distress. While emotional distress damages are not generally recoverable in connection with claims for wrongful termination, breach of contract, or other claims where the damages are economic in nature (see Order at pp. 11-12), Glintzer may reassert these allegations in connection with any appropriate claim that he may be able to plead in his third amended complaint, such as his claim for slander.

The motion to strike is DENIED as to the portions of the SAC pertaining to attorneys’ fees and treble damages given that these damages are recoverable on a RICO claim. (See 18 U.S.C., § 1964, subd. (c) [providing for the award of attorneys’ fees and treble damages in RICO actions].)

The motion to strike is DENIED as to the portions of the SAC pertaining to injunctive relief. As discussed above, Defendants’ demurrer to Glintzer’s claim for violation of Business & Professions Code section 17200, et seq. is overruled because the SAC alleges Defendants’ failure to compensate employees including Glintzer in violation of the Cartwright Act. This apparently ongoing practice may support the award of injunctive relief.

Defendants’ motion to strike references to MacDonald’s miscarriage and remaining requests for damages by MacDonald is GRANTED without leave to amend, given that no claims by MacDonald or resulting from Glintzer’s relationship to her remain in this action.

Defendants’ motion to strike claims improperly reasserted against Ha and Kim is deemed MOOT, given that Defendants’ demurrer to these claims has been sustained without leave to amend. The motion to strike is also deemed MOOT as to allegations pled in support of Plaintiffs’ first and third causes of action.

Accordingly, the following language is stricken from the SAC:

-“which tortious conduct catastrophically caused a miscarriage plaintiff Michelle Anne MacDonald.” (SAC, Summary, p. 1, ll.25-26.)

-“proximately triggered serious loss of consortium damages to plaintiff Michelle Anne MacDonald.” (SAC, ¶ 1 at p. 2, ll. 5-6.)

-“having recently become pregnant, plaintiff Michelle MacDonald went into a state of severe emotional and suicidal distress proximately causing the loss of her baby.” (SAC, ¶ 66 at p. 19, ll. 20-22.)

-Paragraphs 121, 136, 138, 148, 150, 154, 156, and 168 in their entireties.

-“and Michelle MacDonald” (SAC, p. 41, l. 20.)

-“and Michelle MacDonald” (SAC, p. 67, l. 9.)

-“mental distress, pain, suffering and other emotional distress” (SAC, Prayer for Relief, ¶ 1 at p.70, l. 25.)

The Court will prepare the order. After Defendants have served notice of entry of the signed order, Defendants shall prepare a judgment of dismissal as to Plaintiff Michelle McDonald.

The parties are reminded of the case management conference on June 5, 2014 at 10:00 A.M.


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