2018-00228686-CU-MC

Tri Modal Distribution Svs., Inc. vs. Patrick W. Henning

Nature of Proceeding: Hearing on Demurrer

Filed By: Rust, Craig D.

The demurrer of Defendants Patrick W. Henning, in his capacity as Director of the Employment Development Department of the State of California (EDD), and EDD (collectively “Defendants”) is OVERRULED.

Plaintiff Tri-Modal Distribution Services, Inc. (Tri-Modal) is suing Defendants “for recovery of unemployment insurance contributions and penalties[.]” (Compl., ¶ 1.) According to Tri-Modal, Defendants incorrectly concluded that drivers Tri-Modal used to haul containers between 2012 and 2015 were employees rather than independent contractors. Tri-Modal alleges that, after initially making an administrative claim for relief, it paid approximately $155,000 in wrongfully assessed employment taxes. It now seeks a refund pursuant to Unemployment Insurance Code § 1241.

Defendants demur to the single refund cause of action in the complaint on grounds of uncertainty and failure to state a cause of action. Tri-Modal opposes.

Defendants’ demurrer for uncertainty is overruled.

The allegations are not so uncertain that Defendants cannot frame a response. Demurrers for uncertainty are disfavored and are only granted where the complaint is so muddled that the defendant cannot reasonably respond. The favored approach is to clarify theories in the complaint through discovery. (See Khoury v. Maly’s of Calif., Inc. (1993) 14 Cal.App.4th 612, 616; 1 Weil & Brown, Civil Procedure Before Trial (Rutter 2018), § 7:85, p. 7(l)-41, -42.)

Defendants’ demurrer for failure to state a cause of action is overruled as well.

Unemployment Insurance Code § 1241 provides in subd. (a) that:

No suit or proceeding shall be maintained in any court for the recovery of any amount of contributions, interest or penalties alleged to have been erroneously or illegally assessed or collected unless a claim for refund or credit has been filed pursuant to this chapter. Within 90 days after the service of the notice of the decision of the appeals board upon an appeal, the claimant may bring an action against the director on the grounds set forth in the claim in a court of competent jurisdiction in the County of Sacramento for the recovery of the whole or any part of the amount with respect to which the claim has been denied. (Emphasis added.)

The statute does not identify specific factual allegations that must be leveled, and Defendants do not cite any case identifying such allegations. Nonetheless, Defendants argue Tri-Modal must allege more because the burden of proof is on it to prove that its drivers are independent contractors. The suggestion appears to be that Tri-Modal must allege the criteria Defendants misapplied to conclude the drivers were employees. The court is not persuaded.

Tri-Modal has alleged that Defendants erroneously assessed taxes, that it challenged the assessment in an administrative proceeding, and that Defendants misclassified its drivers as employees. Nothing more is required.

Disposition

The demurrer is overruled.

Defendants shall file and serve their answer(s) no later than 6/08/18.