Case Name: Stephanie Ziesel v. Ballet San Jose Silicon Valley, et al.
Case No.: 2015-1-CV-286768

Demurrer by Defendant Millicent Powers to the Second Amended Complaint of Plaintiff Stephanie Ziesel

Factual and Procedural Background

This is an employment action. Plaintiff Stephanie Ziesel (“Plaintiff”) began working for defendant Ballet San Jose Silicon Valley (“Ballet”) on May 19, 2009, as its Executive Director, pursuant to a written employment contract that set her compensation and other terms of employment. (See Second Amended Complaint [“SAC”] at ¶ 5.) The written contract had a four-year term. (Ibid.) Defendant Millicent Powers (“Powers”) is the Chair of the Ballet’s Board and Plaintiff’s joint employer as she personally controlled Plaintiff’s wages, hours, and/or working conditions. (Id. at ¶ 3.) Plaintiff alleges that the Ballet failed to pay her wages and reimburse her for business expenses. (Id. at ¶¶ 13, 14, and 19.) Powers, accompanied by another Board member, terminated Plaintiff’s employment in May 2014, with defendants still owing her substantial wages and reimbursements. (Id. at ¶ 15.)

On May 1, 2017, Plaintiff filed the operative SAC setting forth causes of action for: (1) breach of written contract; (2) breach of oral contract; (3) failure to pay wages upon termination; (4) waiting time penalties; (5) failure to pay minimum wage; (6) failure to pay business expenses; (7) failure to pay overtime; (8) unfair business practices; and (9) promissory fraud.

Demurrer to the SAC

Currently before the Court is defendant Powers’ demurrer to the ninth cause of action in the SAC on the ground that it fails to state a claim. (Code Civ. Proc., § 430.10, subd. (e).) Powers filed a request for judicial notice in conjunction with the motion. Plaintiff filed written opposition. Powers filed reply papers.

Request for Judicial Notice

The request for judicial notice by defendant Powers of the Court’s Order granting the motion to amend filed on April 27, 2017 is GRANTED. (See Evid. Code, § 452, subd. (d); see also Stepan v. Garcia (1974) 43 Cal.App.3d 497, 500 [the court may take judicial notice of its own file].)

Legal Standard

“In reviewing the sufficiency of a complaint against a general demurer, we are guided by long settled rules. ‘We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. We also consider matters which may be judicially noticed.’” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “A demurrer tests only the legal sufficiency of the pleading. It admits the truth of all material factual allegations in the complaint; the question of plaintiff’s ability to prove these allegations, or the possible difficulty in making such proof does not concern the reviewing court.” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213–214.)

“The reviewing court gives the complaint a reasonable interpretation, and treats the demurrer as admitting all material facts properly pleaded. The court does not, however, assume the truth of contentions, deductions or conclusions of law. … [I]t is error for a trial court to sustain a demurrer when the plaintiff has stated a cause of action under any possible legal theory. And it is an abuse of discretion to sustain a demurrer without leave to amend if the plaintiff shows there is a reasonable possibility any defect identified by the defendant can be cured by amendment.” (Gregory v. Albertson’s, Inc. (2002) 104 Cal.App.4th 845, 850.)

Ninth Cause of Action: Promissory Fraud

The ninth cause of action is a claim for promissory fraud. “ ‘Promissory fraud’ is a subspecies of the action for fraud and deceit. A promise to do something necessarily implies the intention to perform; hence, where a promise is made without such intention, there is an implied misrepresentation of fact that may be actionable fraud.” (Lazar v. Super. Ct. (1996) 12 Cal.4th 631, 638 (Lazar).) “The elements of promissory fraud (i.e., of fraud or deceit based on a promise made without any intention of performing it) are: (1) a promise made regarding a material fact without any intention of performing it; (2) the existence of the intent not to perform at the time the promise was made; (3) intent to deceive or induce the promisee to enter into a transaction; (4) reasonable reliance by the promisee; (5) nonperformance by the party making the promise; and (6) resulting damage to the promise[e].” (Behnke v. State Farm Gen. Ins. Co. (2011) 196 Cal.App.4th 1443, 1453.)

In the ninth cause of action, Plaintiff alleges that defendant Powers repeatedly assured her that she would be paid all moneys owed to her while inducing her to continue providing services and advancing expenses. (See SAC at ¶ 55.) Defendant Powers was uniquely situated to make such assurances given her (1) capacity and propensity to contribute funds to keep the organization operational and (2) ability to direct the use of contributed funds. (Id. at ¶ 56.) Plaintiff reasonably and justifiably relied on Powers’ repeated assurances that she would be paid by continuing to provide services and to advance expenses. (Id. at ¶ 58.) However, Powers failed and refused to contribute sufficient funds to pay Plaintiff the sums owed to her causing Plaintiff to suffer damages. (Id. at ¶¶ 60-61.)

Powers argues that Plaintiff fails to state a claim for promissory fraud because the alleged false promise was not inducement to begin work, but instead, inducement to continue work. In support, Powers relies on Gutkin v. University of Southern California (2002) 101 Cal.App.4th 967 (Gutkin) and Pollock v. University of Southern California (2003) 112 Cal.App.4th 1416 (Pollock). In Gutkin, the University brought dismissal proceedings against Gutkin, a mathematics professor. (Gutkin, supra, 101 Cal.App.4th at p. 970.) Gutkin filed a complaint setting forth causes of action for: (1) fraud and deceit; (2) breach of contract; (3) wrongful termination in violation of public policy; (4) age discrimination; (5) defamation; (6) intentional infliction of emotional distress; and (7) intentional interference with prospective economic advantage. (Id. at p. 971.) The University demurred, requesting dismissal of the first, second, fifth, sixth, and seventh causes of action on the ground that Gutkin’s exclusive judicial remedy as to those claims was administrative mandamus under Pomona College v. Superior Court (1996) 45 Cal.App.4th 1716 (Pomona College). (Id. at p. 972.) That case established that the exclusive remedy to a professor in a private university for any procedural defects which he believed existed in the tenure review or in the grievance process is administrative mandamus under Code of Civil Procedure section 1094.5. (Pomona College, supra, 45 Cal.App.4th at p. 1729.) Absent discrimination, Pomona College stated, “judicial review of tenure decisions in California is limited to evaluating the fairness of the administrative hearing in an administrative mandamus action.” (Id. at p. 1726.) Relying on Pomona College, the Gutkin court affirmed the sustaining of the University’s demurrer without leave to amend “because Gutkin failed to challenge the University’s tenure and grievance procedure by way of administrative mandamus.” (Gutkin, supra, at p. 970.)

Similarly, in Pollock, the plaintiff filed claims for fraud, breach of contract, and other employment-related causes of action against the University arising from her termination from a tenured position. (Pollock, supra, 112 Cal.App.4th at p. 1423.) The trial court sustained the University’s demurrer to the perjury, fraud, and breach of contract claims. (Id. at p. 1424.) Relying on Pomona College and Gutkin, the Second Appellate District affirmed finding that Pollock failed to challenge the University’s tenure and grievance procedure by way of administrative mandamus. (Id. at pp. 1424-1427.)

For purposes of this demurrer, neither Gutkin nor Pollock appears to be persuasive. For example, those decisions do not even address a claim based on promissory fraud. Also, the appellate court in both cases dismissed the fraud claims on procedural grounds for the plaintiff’s failure to seek relief by way of administrative mandamus. In any case, the Court notes that both Gutkin and Pollock briefly address the fraud claims and cite Lazar for the proposition that “[a]n action for promissory fraud may lie where a defendant fraudulently induces the plaintiff to enter into a contract.” (Lazar, supra, 12 Cal.4th at p. 638; see Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 973-974 (Engalla) [same].) Citing Lazar, the appellate court in both Gutkin and Pollock rejected fraud allegations in the respective complaints claiming that the plaintiff was fraudulently induced to remain at the University. (Gutkin, supra, 101 Cal.App.4th at p. 980; Pollock, supra, 112 Cal.App.4th at pp. 1426-1427.)

However, as the opposition points out, there is nothing in Lazar (or Engalla) which suggests that the court intended to limits its decision to false promises inducing the commencement, as opposed to the continuation, of employment. Also, Gutkin and Pollock do not further explain or expand upon the proposition in Lazar with respect to promissory fraud. Conversely, the Sixth Appellate District decision in Moncada v. West Coast Corporation (2013) 221 Cal.App.4th 768 (Moncada), cited by Plaintiff, appears to be instructive. Unlike Gutkin and Pollock, the Moncada court addressed a claim for promissory fraud in the context of a demurrer which alleged the following:

“[P]laintiffs allege that, in order to induce them to continue to work at West Coast until the company sold, defendants intentionally represented to plaintiffs that defendants would pay plaintiffs a bonus at the time of the sale that would be sufficient for plaintiffs to retire. Plaintiffs further allege that defendants’ representations were false, in that defendants intended to pay them a nominal bonus (or no bonus at all) at the time of sale. Plaintiffs allege they justifiably relied on the representations, because defendants repeatedly assured them of the bonus. Plaintiffs further allege they did not seek alternative employment or residential opportunities and remained at West Coast because of the promise of the bonus.”

(Moncada, supra, at pp. 776-777.)

The Sixth District found these allegations were sufficient to state a claim for promissory fraud. (Moncada, supra, 221 Cal.App.4th at p. 777.) Similarly, Plaintiff alleges that Powers repeatedly assured her that she would be paid all moneys owed to her while inducing her to continue providing services and advancing expenses. (See SAC at ¶ 55.) Therefore, given the current state of the law and, more specifically the Sixth District’s decision in Moncada, this Court is persuaded that Plaintiff has stated a cause of action for promissory fraud.

Accordingly, the demurrer to the ninth cause of action on the ground that it fails to state a claim is OVERRULED.