2016-00204270-CU-BC

Patricia Blank vs. Gary Mitchell

Nature of Proceeding: Hearing on Demurrer to Second Amended Complaint

Filed By: Wilkinson, Alison Berry

*** If oral argument is requested, the parties must at the time oral argument is requested notify the clerk and opposing counsel of the causes of action that will be addressed at the hearing. The parties are also reminded that pursuant to local court rules, only limited oral argument is permitted on law and motion matters. ***

Defendants Gary Mitchell and Mitchell & Mitchell Insurance Agency, Inc.’s (collectively “Defendants”) demurrer to Plaintiff Patricia Blank’s second amended complaint (“SAC”) is ruled upon as follows.

Overview

This is an employment/breach of contract action. Plaintiff alleges that in 2011 she was

recruited to join Defendants’ business. In May 2011, Defendants agreed that Plaintiff would become a shareholder and employee of the business if she decided to leave her current employer. Plaintiff and Defendants agreed that in addition to an annual salary of $144,000 (plus car allowance of $6,000), Plaintiff would receive a 5% interest in the business upon joining the firm and Plaintiff could increase her equity stake by meeting various performance “escalators.” Defendants represented that her equity interest was worth approximately $425,000.

Plaintiff alleges that since December 2015, Defendants have refused to recognize Plaintiff’s rights as a shareholder and improperly accounted for revenues and expenses in order to understate her equity. She alleges that the assurances that she was a shareholder continued well into 2016.

Plaintiff filed her original complaint on 12/2/2016.

The SAC asserts causes of action for: (1) Declaratory Relief, (2) Breach of Contract,

(3) Breach of Covenant of Good Faith and Fair Dealing, (4) Promissory Estoppel, (5) Fraud, (6) Breach of Fiduciary Duty, (7) Accounting, (8) Sex and Gender Discrimination, and (9) Age Discrimination.

Defendants demur to all causes of action on the ground that they are barred by the applicable statute of limitations. Defendants demur to the discrimination causes of action on the grounds that Plaintiff failed to exhaust her administrative remedies and failure to state sufficient facts.

Defendants’ and Plaintiff’s requests for judicial notice are granted.

Filing of Answer to First Amended Complaint

Plaintiff contends that Defendants are barred from filing the demurrer because they answered the first amended complaint (“FAC”). The Court disagrees. Plaintiff filed a SAC which superseded the FAC and Defendants may respond the SAC in the same manner as the original complaint, including filing a demurrer. (See Bristol Convalescent Hosp. v. Stone (1968) 258 Cal.App.2d 848, 863 [“One consideration is that under section 586, Code of Civil Procedure, defendant may demur to an amended complaint; should he do so, plaintiff should not be permitted to argue that the demurrer comes too late because defendant’s original answer is a sufficient answer to the amended complaint and defendant may not demur after he has answered”].)

CCP §430.41(b) does not support Plaintiff’s argument. The CCP §430.41(b) provides “[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.” Here, there has been no prior demurrer that was sustained.

CCP §430.41 Meet and Confer Efforts

Plaintiff further contends that Defendants did not sufficiently meet and confer regarding the first seven causes of action prior to filing the demurrer to the SAC. The Court disagrees. The record reflects that Defendants met and conferred with Plaintiff regarding the statute of limitations issues for the first seven causes of action prior to the filing of the demurrer to the FAC. Although Defendants’ meet and confer efforts on the SAC focused on the discrimination causes of action, Defendants sufficiently met and conferred with Plaintiff regarding the first seven causes of action.

Statute of Limitations

Defendants contend that the first seven causes of action are barred by the applicable two year statute of limitations for breach of an oral contract. (CCP §339(1).) Despite the SAC asserting non-contractual causes of action (such as Fraud, Breach of Fiduciary Duty, and Accounting), Defendants only address the statute of limitations for breach of an oral contract. Because different statute of limitations applies to the non-contractual causes of action, Defendants have failed to demonstrate that the non-contractual causes of action are barred by statute of limitations.

The demurrer is OVERRULED as to the Fraud, Breach of Fiduciary Duty, and Accounting causes of action.

With respect to the Declaratory Relief, Breach of Contract, Breach of Covenant of Good Faith and Fair Dealing, and Promissory Estoppel causes of action, Defendants advance that the causes of action accrued on 8/11/2011, when Plaintiff began her employment with Defendants. Plaintiff alleges that Defendants agreed that she would receive the 5% equity interest “upon joining the firm.” (SAC, ¶ 9.) Plaintiff filed her complaint on 12/2/2016.

Plaintiff claims in opposition that the causes of action did not accrue until Fall of 2016 when Defendants breached the contract and refused to give Plaintiff the value of her shares. The Court notes that the SAC alleges that since December 2015, Defendants have refused to recognize Plaintiff’s rights as a shareholder and improperly accounted for revenues and expenses in order to understate her equity. She alleges that the assurances that she was a shareholder continued well into 2016.

Given that Plaintiff specifically alleges that Defendant agreed that she would receive the 5% equity interest “upon joining the firm,” absent allegations to support delayed discovery, the Declaratory Relief, Breach of Contract and Breach of Covenant of Good Faith and Fair Dealing, and Promissory Estoppel causes of action are barred.

The discovery rule “postpones accrual of a cause of action until the plaintiff discovers, or has reason to discover, the cause of action.” (Fox v. Ethicon Endo-Surgery, Inc.

(2005) 35 Cal.4th 797, 807.) “In order to rely on the discovery rule for delayed accrual of a cause of action, ‘[a] plaintiff whose complaint shows on its face that his claim would be barred without the benefit of the discovery rule must specifically plead facts to show (1) the time and manner of discovery and (2) the inability to have made earlier discovery despite reasonable diligence.'” (Fox, 35 Cal.4th at 808; see April Enterprises, Inc. v. KTTV (1983) 147 Cal.App.3d 805, 832 [“plaintiff must plead facts sufficient to convince the trial judge that delayed discovery was justified”].) In assessing the sufficiency of

the allegations of delayed discovery, the court places the burden on the plaintiff to “show diligence”; conclusory allegations will not withstand demurrer. (Fox, 35 Cal.4th at 808.) “The discovery rule only delays accrual until the plaintiff has, or should have, inquiry notice of the cause of action. The discovery rule does not encourage dilatory tactics because plaintiffs are charged with presumptive knowledge of an injury if they have ‘information of circumstances to put [them] on inquiry’ or if they have ‘the opportunity to obtain knowledge from sources open to [their] investigation.’ In other words, plaintiffs are required to conduct a reasonable investigation after becoming aware of an injury, and are charged with knowledge of the information that would have been revealed by such an investigation.” (Id. at 807.)

Here, Plaintiff fails to plead the delayed discovery rule. The demurrer is SUSTAINED with leave to amend.

Discrimination Causes of Action

With respect to her FEHA sex/gender and age discrimination causes of action, Plaintiff alleges that Defendants discriminated against her based on her age, sex/gender by failing to treat her in the same manner as male shareholder/employees and/or younger shareholder/employees of the same rank. Plaintiff filed an administrative complaint with the DFEH and obtained a right to sue letter on January 17, 2018.

In order to bring a FEHA action, a plaintiff must timely file a DFEH complaint within one year from the date on which the alleged violation occurred. (Gov’t. Code § 12960.)

Defendants demur on the ground that the DFEH filing was untimely because she filed her lawsuit on 12/2/2016, but did not file her DFEH complaint until January 2018.

In opposition Plaintiff advances that DFEH complaint was timely because “upon commencing discovery of the instant action Plaintiff found Defendant had engaged in a pattern and practice of awarding considerable compensation to Plaintiff’s male counterparts, one of whom is significantly junior to Plaintiff. This discriminatory conduct occurred each year of Plaintiff’s employment, and continues to occur while Plaintiff is employed with Mitchell & Mitchell. Plaintiff filed an administrative claim within one year of discovering the discrimination.” (Opposition, 13:7-9.) Plaintiff’s argument requires review of facts that are not within the SAC. The Court does not consider such extrinsic facts in ruling on a demurrer.

Plaintiff further argues that a DFEH claim is not required where the discrimination “relates to compensation.” (Opposition, 13:13-14.) Plaintiff relies on Labor Code §1197.5 (known as the Equal Pay Act) which prohibits an employer from paying employees at wage rates less than the rates the opposite sex for substantially similar work. Plaintiff’s causes of action, however, are not for violations of Labor Code §1197.5, but for FEHA employment discrimination.

The demurrer is SUSTAINED with leave to amend.

Where leave to amend is granted, Plaintiff may file and serve a third amended complaint (“TAC”) by no later than June 14, 2018. Response to be filed and served within 30 days thereafter, 35 days if the TAC is served by mail. (Although not required by any statute or rule of court, Plaintiff is requested to attach a copy of the instant minute order to the TAC to facilitate the filing of the pleading.)