Case Number: BC668718 Hearing Date: June 06, 2018 Dept: 39

Zhongrui Zhang v. YMT Global, et al., BC668718

Demurrer to First Amended Complaint by Defendants BYMT Global and Bibo Zeng: OVERRULED

Background

This wage and labor case arises from Defendants YMT Global and Bibo Zeng (“Zeng”)’s alleged failure to pay all monies due to Plaintiff Zhongrui Zhang (“Zhang”) during the course of his employment. Plaintiff filed the Complaint on July 14, 2017, alleging 7 causes of action for: (1) failure to pay overtime compensation; (2) failure to provide meal periods; (3) failure to provide accurate itemized wage statements; (4) waiting time penalties; (5) violations of Business and Professions Code, section 17200 (the Unfair Competition Law, “UCL”); (6) conversion; and (7) joint liability under Labor Code, § 558.1.

Defendants’ demurrer to the Complaint came to hearing on March 5, 2018, at which time the court sustained the demurrer as to the seventh cause of action. The court granted Plaintiff leave to amend to the first, second, third, and fourth cause of action and the Complaint, generally, to allow Plaintiff to plead facts to state Labor Code, section 558.1 as a basis for his other Labor Code claims.

Plaintiff filed the First Amended Complaint on March 20, 2018, alleging 6 causes of action for: (1) failure to pay overtime compensation; (2) failure to provide meal periods; (3) failure to provide accurate itemized wage statements; (4) waiting time penalties; (5) violations of Business and Professions Code, section 17200 (the Unfair Competition Law, “UCL”); and (6) conversion;

Defendants now generally demur to the FAC for failure to state facts sufficient to constitute causes of action and specially demur on the grounds that it is stated ambiguously and unintelligibly.
Meet and Confer

Effective January 1, 2016, a party filing a demurrer “shall meet and confer in person or by telephone with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” (Code Civ. Proc., § 430.41, subd. (a).) “The parties shall meet and confer at least five days before the date the responsive pleading is due. If the parties are not able to meet and confer at least five days prior to the date the responsive pleading is due, the demurring party shall be granted an automatic 30-day extension of time within which to file a responsive pleading, by filing and serving, on or before the date on which a demurrer would be due, a declaration stating under penalty of perjury that a good faith attempt to meet and confer was made and explaining the reasons why the parties could not meet and confer.” (Code Civ. Proc., § 430.41, subd. (a)(2).)

Defendants submit the Declaration of Jonathan Fang (“Fang Decl.”) in support of the demurrer. Fang avers that he met and conferred with Plaintiff’s counsel on April 11, 2018 telephonically to determine whether an agreement could be reached that would resolve the objections raised in the demurrer. (Fang Decl. ¶ 4.) Fang attests that the parties were unable to come to an agreement. (Ibid.) This declaration is sufficient to meet the statutory requirement. (See Code Civ. Proc., § 430.41, subd. (a).)
Demurrer
I. Legal Standard

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda, (2007) 147 Cal.App.4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context. (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal.App.4th 1216, 1228.) The court “treat[s] the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law ….” (Berkley v. Dowds (2007) 152 Cal.App.4th 518, 525 (Berkley).) In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) A demurrer tests the pleadings alone and not the evidence or other extrinsic matters; therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. (Code Civ. Proc., §§ 430.30, 430.70.) The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action. (Hahn, supra, 147 Cal.App.4th at 747.)

The general rule is that the plaintiff need only allege ultimate facts, not evidentiary facts. (Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 550 (Doe).) “All that is required of a plaintiff, as a matter of pleading, even as against a special demurrer, is that his complaint set forth the essential facts of the case with reasonable precision and with sufficient particularity to acquaint the defendant with the nature, source and extent of his cause of action.” (Rannard v. Lockheed Aircraft Corp. (1945) 26 Cal.2d 149, 156-157.) “[D]emurrers for uncertainty are disfavored, and are granted only if the pleading is so incomprehensible that a defendant cannot reasonably respond.” (Mahan v. Charles W. Chan Ins. Agency, Inc. (2017) 14 Cal.App.5th 841, 848, fn. 3, citing Lickiss v. Fin. Indus. Regulatory Auth. (2012) 208 Cal.App.4th 1125, 1135.) In addition, even where a complaint is in some respects uncertain, courts strictly construe a demurrer for uncertainty “because ambiguities can be clarified under modern discovery procedures.” (Ibid, citing Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.)

Demurrers do not lie as to only parts of causes of action, where some valid claim is alleged but “must dispose of an entire cause of action to be sustained.” (Poizner v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119.) “Generally it is an abuse of discretion to sustain a demurrer without leave to amend if there is any reasonable possibility that the defect can be cured by amendment.” (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.)
II. Analysis
A. Special Demurrer for Uncertainty

Defendants contend that the FAC is ambiguous and uncertain because it fails to allege wrongdoing by any “owner, director, officer, or managing agent of Defendant YMT” or any specific employee of YMT. (Dem. 5-7.) Although the FAC now pleads that Zeng “[met] the criteria specified in Labor Code, § 558.1…” (FAC ¶ 11), that same paragraph explains that that required Zeng to be “an owner, director, officer, or managing agent of the employer….” This is substantially identical to the allegation contained in paragraphs 50 and 51 of the Complaint. It is clear that the FAC pleads that the alleged wrongdoing was committed by Zeng, and the court does not find that the allegations of the FAC are “so incomprehensible that a defendant cannot reasonably respond.” (Mahan, supra, 14 Cal.App.5th at p. 848, fn. 3.)

Accordingly, the court OVERRULES the special demurrer for uncertainty.

B. Agency, Alter-Ego, and Defendant Zeng

Defendants demur to the causes of action against Defendant Zeng on the grounds that the Complaint fails to sufficiently allege facts to plead alter ego liability. The alter-ego allegations of the FAC are substantially identical to the allegations of the Complaint. (Compare Compl. ¶¶ 7, 10 with FAC ¶¶ 7, 10-11.) The court therefore overrules the demurrer to the alter ego allegations for the same reasons as previously stated.

Although Defendants assert different legal authority in their renewed arguments concerning Plaintiffs’ alter ego allegations, Defendants’ arguments are, in essence, an untimely motion for reconsideration. (See Code Civ. Proc., § 1008, subd. (a).) Accordingly, the court will not consider Defendants’ additional arguments regarding the adequacy of Plaintiff’s alter ego allegations.

For these reasons, the court OVERRULES the demurrer to the alter ego basis of liability.

Second, Defendants demur to the FAC on the grounds that Defendant Zeng was named for an improper purpose, namely, because there may not be enough resources in YMT to pay any wage and hour judgment against it. This is an argument that Defendants could have raised on demurrer to the Complaint, but did not. Accordingly, Defendants are barred from raising this argument on demurrer to the FAC. (Code Civ. Proc., § 430.41, subd. (b).)

Third, Defendants contend that the demurrer should be granted to Zeng because he was an employee/agent of YMT. Defendants cite Reynolds v. Bement (2005) 36 Cal.4th 1075, 1087 for the proposition that, an employer’s officers, directors and shareholders are not “employers” under the Industrial Welfare Commission’s definition and that such defendants acting within the scope of their agency are not and cannot be held liable for state law wage violations. (Dem. 15.)

A demurrer “must dispose of an entire cause of action to be sustained.” (Poizner, supra, 148 Cal.App.4th at p. 119.) Having overruled the demurrer as to Plaintiff’s alter ego theory of liability, Defendants’ arguments regarding agency are MOOT as they would not dispose of the entire causes of action asserted against Zeng.

C. Labor Code, Section 558.1

Labor Code, section 558.1 provides in relevant part:

(a) Any employer or other person acting on behalf of an employer, who violates, or causes to be violated, any provision regulating minimum wages or hours and days of work in any order of the Industrial Welfare Commission, or violates, or causes to be violated, Sections 203, 226, 226.7, 1193.6, 1194, or 2802, may be held liable as the employer for such violation.

(Lab. Code, § 558.1, subd. (a).)

Labor Code, section 558.1 was newly added to the Labor Code in 2015 and became effective as of January 1, 2016.

Defendants renew their argument that Labor Code, section 558.1 does not authorize a private right of action for an individual to sue for an employer’s wages in state court. The court addressed Defendants’ arguments with respect to the demurrer to the Complaint and disagrees for the same reasons previously stated.

Labor Code, section 558.1, on its face, provides states that an “employer or other person acting on behalf of an employer” may be held liable for violations of “provisions regulating minimum wages or hours and days of work in any order of the Industrial Welfare Commission [‘IWC’]” or in provisions of the Labor Code including sections 203, 226, 226.7, and 1194.) Although Labor Code, section 558.1 does not provide for an enforcement mechanism or independently authorize a civil action under this section, the express language of Labor Code, section 558.1 provides a statutory basis for an employee to assert a claim for violation of the referenced sections (i.e., any order of the Industrial Welfare Commission, or Labor Code, sections 203, 226, 226.7, 1193.6, 1194, or 2802) against an “employer or other person acting on behalf of an employer.” (Lab. Code, § 558.1, subd. (a).) Plaintiff’s first, second, third, and fourth causes plead violations of Labor Code sections to which section 558.1 applies. As such, while Plaintiff is not entitled to allege a separate cause of action for violation of section 558.1, Plaintiff is entitled to assert this section to allege violations of the referenced sections by an employer or other person acting on behalf of an employer. (See Lab. Code, § 558.1.)

Defendants again cite the Legislative Counsel’s Digest of Senate Bill No. 588, Chapter 803 to argue that the bill was intended to “authorize the Labor Commission to provide for a hearing to recover civil penalties against any employer or other person acting on behalf of an employer….” (Sen. Bill No. 588 (2015-2016 Reg. Sess.) Legislative Counsel’s Digest.) As the court previously stated, however, the quoted portion of the Digest, however, appears to be a summary of the amendment to Labor Code, section 98, which authorizes the Labor Commissioner “to provide for a hearing to recover civil penalties due pursuant to Section 558 against any employer or other person acting on behalf of an employer, including, but not limited to, an individual liable pursuant to Section 558.1.” (Id. at § 3; see also Lab. Code, § 98, subd. (a).) Neither the Senate Bill nor the text of section 558.1 itself limits the application of this section to hearings before the Labor Commissioner. (Sen. Bill No. 588 (2015-2016 Reg. Sess.) § 10; see also Lab. Code, § 558.1.)

It should also be noted that Defendants contend that there FAC does not allege that Zeng knew of or caused any provision regulating minimum wage or hours and days of work or any order of the IWC to be violated. The court disagrees. (FAC ¶¶ 13-15.) These allegations of ultimate fact regarding Defendants’ knowledge and conduct are sufficient on demurrer to plead causes of action against Defendant Zeng.

For these reasons, the court OVERRULES the demurrer with regard to Defendants’ arguments on Labor Code, section 558.1.
III. Conclusion

In sum, the court OVERRULES the demurrer in its entirety.