Moving Party: Defendants Aaron Brothers Inc. and Ben Summerfield (“defendants”)

Resp. Party: Plaintiff Rocio Ramirez (“plaintiff”)

Defendants’ demurrer is SUSTAINED WITH LEAVE TO AMEND.

The Court takes judicial notice of defendants’ exhibits. (See Evid. Code, § 452(d), (h).)

The Court OVERRULES defendants’ objections Nos. 1-5.

BACKGROUND:

Plaintiff commenced this action on 5/23/13 against defendants for: (1) violations of Labor Code § 1102.5; (2) wrongful termination in violation of public policy; (3) disability discrimination (FEHA); (4) harassment (FEHA); (5) retaliation (FEHA); (6) failure to accommodate (FEHA); (7) failure to engage in interactive process (FEHA); (8) failure to prevent discrimination or harassment; and (9) failure to pay overtime wages.

Plaintiff began working for defendant Aaron Brothers in June 2009 as an assistant store manager. (Compl., ¶ 8.) In July 2010, defendant Summerfield became the manager. (Id., ¶ 10.) In August 2010, plaintiff began suffering from headaches from stress caused by Summerfield’s conduct of verbally abusing employees with profanity and insults. (Id., ¶¶ 11-12.) When she informed Summerfield of the headaches, he screamed at her. (Id., ¶ 12.) Plaintiff was denied a request for a transfer and her headaches continued. (Id., ¶ 13.) In late 2010 and early 2011, plaintiff learned that Summerfield was leaving work several hours early and had altered his hour log on the computer to overstate his hours, and that he altered the employees’ hour logs to understate their time. (Id., ¶¶ 14-15.) Plaintiff complained about this to a human resources representative. (Id., ¶ 17.) Plaintiff alleges she was retaliated against by Summerfield as a result. (Ibid.) In February 2011, plaintiff finally received a temporary transfer to another location. (Id., ¶ 19.) In May 2011, plaintiff was abruptly terminated and was told the termination was the result of plaintiff telling employees at her new location about Summerfield’s conduct and because of a customer complaint. (Id., ¶ 20.)

ANALYSIS:

Defendants demur to the entire complaint and the nine causes of action contained therein. The Court notes that defendants fail to articulate a basis for their demurrer under Code of Civil Procedure section 430.10. Instead, defendants demurrer on the grounds that plaintiff lacks standing pursuant to bankruptcy law and, for the first cause of action, because plaintiff failed to exhaust administrative remedies.

Standing

Defendants primarily argue that plaintiffs claims fail because they are the property of her bankruptcy estate and, thus, she lacks standing to sue.

Actions must be prosecuted in the name of the real party in interest. (See Code Civ. Proc., § 367.) “All causes of action belonging to the bankrupt at the time of filing a Chapter 7 petition (liquidation), or accruing after the filing, become part of the bankruptcy estate. Therefore, the trustee in bankruptcy is the real party in interest as to such causes of action (unless the trustee abandons them).” (Chin, et al., Cal. Prac. Guide: Employment Litigation (The Rutter Group 2013) ¶ 19:303 [citing Cloud v. Northrop Grumman Corp. (1998) 67 CA4th 995; Parker v. Wendy’s Int’l, Inc. (11th Cir. 2004) 365 F3d 1268, 1272].)

Here, there is no dispute that plaintiff filed a petition for Chapter 7 bankruptcy in September 2011. (See RJN, Exh. A.) Plaintiff alleges she was terminated nearly four months earlier, in May 2011. (See Compl., ¶ 20.) Therefore, any employment claims she had against defendants had accrued prior to the filing of the bankruptcy petition. Accordingly, the bankruptcy trustee, and not plaintiff, is the real party in interest.

Plaintiff does not contest this. (See Opp., pp. 7-9.)

Defendants argue that leave to amend should not be granted because plaintiff acted in bad faith. There is no dispute that plaintiff did not list her pending employment discrimination action as an asset in the bankruptcy petition. (See RJN, Exh. A.)

Courts freely allow amendment of complaints to seek to substitute the real party in interest. (Cloud v. Northrop Grumman Corp. (1998) 67 Cal.App.4th 995, 1004-1005.) “The California Supreme Court has held that if the facts of the cause of action against the defendant would not be ‘wholly different’ after amendment, a complaint filed by a party without standing may be amended to substitute in the real party in interest.” (Id. at p. 1005 [citing Klopstock v. Superior Court (1941) 17 Cal.2d 13, 19-22].) Usually, a substitution of a plaintiff does not change the nature of the action, and the relation-back doctrine applies. (See Cloud, 67 Cal.App.4th at pp. 1005-1007.) In Cloud, the trial court, in denying leave to amend to substitute the real party in interest, cited to Coats v. K-Mart Corp. (1989) 215 Cal.App.3d 961, the case upon which defendants here primarily rely. (Id. at p. 1008.) The appellate court noted that Klopstock, and its suggestion that leave to amend should be liberally permitted, was not cited in Coats. (Id. at pp. 1008-1009.) The court differentiated the facts in Coats, where the plaintiff had specifically alleged facts in multiple pleadings which asserted that she did in fact have standing, even though she did not. (Id. at p. 1009.) The court noted that the plaintiff in Coats did not appear to have moved for leave to amend to substitute the real party in interest. (Ibid.) The court found:

Coats did not consider Klopstock, and insofar as the record on appeal reflects, Klopstock was not cited to the trial court in the instant action.[footnote omitted] To the extent the trial court in this case interpreted Coats to hold that amendments substituting in a real party in interest do not “relate back,” such an interpretation would conflict with Klopstock and its progeny. Klopstock is a Supreme Court opinion while Coats is a Court of Appeal opinion. Hence Klopstock and the cases following its liberal rule of amendment control. [Citations.] Coats has apparently never been cited in any other reported opinion. Klopstock has, however, been cited and followed many times in many other reported opinions. Moreover, to the extent that Coats, due to its unique facts and procedural background, might not be considered wholly inconsistent with the Klopstock line of decisions, it is nevertheless not controlling here. Whether due to its probate setting, the plaintiff’s history of knowing misrepresentations to the defendant and to the court, the opinion’s lack of substantive “relation-back” analysis, the lack of a motion by plaintiff to amend in Coats, etc., Coats provides no basis for a refusal to allow amendment in the instant case.

(Id. at pp. 1010-1011.) The court noted: “[A]n amendment to substitute in the real party in interest is entitled to relation-back effect.” (Id. at p. 1011.)

The Court here follows the analysis in Cloud. Though plaintiff may have been aware of defendants’ misconduct at the time she was terminated, this alone does not establish that she acted in bad faith in bringing this action. (See Compl., ¶¶ 12-13, 19, 22.) Unlike in Coats, the complaint does not appear to include knowing misrepresentations, this is not a probate action, and plaintiff is requesting leave to amend to either substitute the bankruptcy trustee or obtain the trustee’s abandonment of the claim. (See Opp., pp. 7-10.) Therefore, the liberal standard for granting leave to amend, as discussed in Cloud and Klopstock, should govern. Any substitution by the bankruptcy trustee would be entitled to relation-back effect.

Accordingly, defendants’ demurrer to the complaint is SUSTAINED, with leave to amend.

Failure to Exhaust Administrative Remedies

In their reply, defendants withdraw this argument because the case on which they had based their argument has been depublished. (Defendants filed their demurrer on Sept. 5, 2013; review was denied and MacDonald v. State of California was ordered not to be officially published on November 26, 2013.)

Plaintiff has 20 days to file an amended complaint.