2018-00226402-CU-OE

Gesunda Royal-Shipp vs. Samuel Merritt University

Nature of Proceeding: Hearing on Demurrer to Plaintiffs’ Third Amended Complaint

Filed By: Kitzes, Daniel V.

*** If oral argument is requested, the parties are directed to notify the clerk and opposing counsel at the time of the request which of the issues and causes of action discussed below will be addressed at the hearing. Counsel are also reminded that pursuant to local rules, only limited oral argument is permitted on law and motion matters. ***

*** If oral argument is requested in an attempt to obtain leave to amend, plaintiffs shall be prepared to specifically discuss the new or different facts which may now be alleged in good faith to overcome the deficiencies noted below. ***

Defendants Samuel Merritt University (“SMU”), Sutter Health (“Sutter”) and Isaac Bristow’s (“Bristow”) (collectively “Defendants”) demurrer to the Third Amended Complaint (“3AC”) is ruled on as follows.

The court notes that the caption page for all papers filed in this case should reflect the caption of the original complaint filed on 1/31/2018 regardless of the fact that some defendants may have been dismissed.

Factual Background

This is an employment action is brought by three plaintiffs against the two entities and one individual now demurring to the 3AC, which spans 52 pages and purports to assert 13 separate causes of action (“COA”) consisting primarily of discrimination and harassment based on gender, race and age under the Fair Employment and Housing Act (“FEHA”).

According to Defendants’ demurrer, all but two of the 13 COA are inadequately pled for various reasons discussed below. Plaintiffs oppose but concede they have included three new COA which were not alleged in the Second Amended Complaint (“2AC”).

Analysis

New COA Added to the 3AC. As noted above, the opposition concedes the 3AC now includes three new COA not previously alleged in the 2AC but based on the court’s review of the pleadings, it appears that plaintiffs have actually added four new COA: The final four COA for wrongful termination, assault, age discrimination and negligent retention. As the ruling on the demurrer to the 2AC did not give plaintiffs leave to add any new COA but instead only to amend their existing ones, the court will on its own motion strike from the 3AC the final four COA, thereby obviating the need to address defendants’ demurrer to any of them. Plaintiffs may, if they wish, file a noticed motion to amend to add any COA which was not alleged in the 2AC.

FEHA-based COA Against Sutter. Defendants again demur to each of the FEHA-based COA directed at Sutter (i.e., 1st and 2nd for discrimination, 4th and 6th for harassment, 7th for failure to prevent harassment, and 9th for retaliation) on the grounds that Sutter was not plaintiffs’ employer inasmuch as Paragraphs 16-17 admit that all three plaintiffs “were long-time employees of SMU” and the boilerplate, conclusory allegations in Paragraphs 4-9 in an attempt to establish that Sutter was plaintiffs’ “employers” within the meaning of the FEHA are insufficient to show otherwise. The court notes that these are the same grounds on which Sutter’s previous demurrer to the same COA was sustained but Sutter has added that the new allegations in Paragraph 9 [“…Sutter Health is intimately involved with SMU operations in regard to compliance and compliance reporting procedures;” “SMU employees are required to complete Sutter ‘Compliance Modules’…on a wide array of topics, including ethics, oversight, enforcement and monitoring;” Sutter Health…oversees SMU’s anonymous complaint line and conducts investigation of complaints related to personnel, health and safety and other concerns”] have no bearing on whether Sutter Health can be considered plaintiffs’ employer for purposes of the FEHA-based COA, citing Vernon v. State of California (2004) 116 Cal.App.4th 114 for the factors relevant to determining the existence of an employer-employee relationship (e.g., payment of wages, benefits and taxes; ownership of work equipment; location of work; authority to hire, fire, transfer, promote, etc. and to set work hours). Defendants further contend that the 2AC’s attempt to characterize SMU and Sutter as either alter egos of one another or in a controlling parent-subsidiary relationship is also devoid of facts sufficient to establish plaintiffs have the requisite employment relationship with Sutter.

In opposition, plaintiffs assert that the question of whether SMU and Sutter should be considered a single employer for purposes of the FEHA is determined by the four-part “integrated enterprise” test discussed in Laird v. Capital Cities/ABC, Inc. (1998) 68 Cal.App.4th 727: Interrelation of operations, common management, centralized control of labor relations, and common ownership or financial control. The opposition

admits that under Laird, common ownership or control alone is never enough to establish parent liability and the critical question is, which entity made the final decisions regarding employment matters related to the person claiming discrimination?

Although defendants’ reply concedes the opposition has correctly cited Laird for the standard which must be satisfied to impose liability on a parent corporation, this court finds that the facts currently alleged in the 3AC are insufficient to establish liability against Sutter based on Laird’s four-part “integrated enterprise” test. In short, the allegations found in Paragraphs 4-9 are not only impermissibly conclusory but also fail to establish that Sutter exercised the degree of control over SMU’s operations so as to warrant the imposition of liability against an entity which plaintiffs admit was not their actual employer. The court’s conclusion is reinforced by the following statements by the Third District Court of Appeal in Laird:

An employee who seeks to hold a parent corporation liable for the acts or omissions of its subsidiary on the theory that the two corporate entities constitute a single employer has a heavy burden to meet under both California and federal law. Corporate entities are presumed to have separate existences, and the corporate form will be disregarded only when the ends of justice require this result. In particular, there is a strong presumption that a parent company is not the employer of its subsidiary’s employees.

…

“The critical question is, ‘[w]hat entity made the final decisions regarding employment matters related to the person claiming discrimination?’ [Citation.] A parent’s broad general policy statements regarding employment matters are not enough to satisfy this prong. [Citation.] To satisfy the control prong, a parent must control the day-to-day employment decisions of the subsidiary. [Citations.]”

To make a sufficient showing of “interrelation of operations”…, the plaintiff must do more than merely show that officers of the subsidiary report to the parent corporation or that the parent benefits from the subsidiary’s work. Since these facts exist in every parent-subsidiary situation, such a showing would create a triable issue of material fact in every case. What the plaintiff must show, rather, is that the parent has exercised control “to a degree that exceeds the control normally exercised by a parent corporation.”
(Laird, at 737-738 (underline added for emphasis).)

Moreover, in Laird, the trial court’s grant of summary judgment in favor of the parent company of the plaintiff’s employer was affirmed because the plaintiff had produced no evidence that the parent company exercised day-to-day control over its subsidiary’s employment decisions in general or with respect to her, nor did she produce evidence that the parent exercised an abnormal degree of control over the subsidiary’s operations or any degree of common management. (Laird, at 738-740.) The 3AC in the present case is similarly lacking in facts tending to show the existence of factors which justify a deviation from the general rule precluding liability on the part of the parent of subsidiary to the latter’s employee.

Accordingly, the court will sustain the demurrer to the 1st, 2nd, 4th, 6th, 7th and 9th COA under the FEHA to the extent these COA are directed at Sutter.

COA for Harassment and Discrimination. Defendants also contend that the 3AC’s allegations do not include facts sufficient to establish any actionable harassment or

discrimination against plaintiffs by Sutter or its own employees. Since the court has already found that the 3AC’s attempt to establish Sutter should also be considered plaintiffs’ employer has fallen short, the court need not determine whether the 3AC adequately plead any harassment or discrimination COA against Sutter but the court nevertheless notes that defendants’ arguments could otherwise apply equally to SMU. However, as the moving points & authorities do not by their own terms advance these arguments on behalf SMU, it is unnecessary to consider here whether the 3AC states facts sufficient to constitute a COA against SMU for harassment or discrimination.

Plaintiff Branscum’s FEHA COA. Defendants argue that all of plaintiff Branscum’s FEHA-based COA are time-barred because this suit was not commenced within one year of the last alleged FEHA violation, given that plaintiff Branscum admittedly resigned effective 1/27/2017 and this lawsuit was not commenced until 1/31/2018 (which was prior to plaintiff Branscum’s filing of her administrative complaint with the DFEH on 2/2/2018). The court notes that this is essentially the same contention on which defendants successfully demurrer to the 2AC but they now add that the new allegations in Paragraphs 47-48 (about plaintiff Briscoe believing SMU would investigate her complaints about defendant Bristow after she resigned and believing her employment was not terminated until late February or early March 2017) do not save Briscoe’s FEHA-based COA since she has not alleged she suffered any harassment, discrimination or retaliation in the year before this suit was filed on 1/31/2018 and since the suggestion her employment continued after the effective date of her resignation is inconsistent with her admission she had resigned as of 1/27/2017.

The court agrees and will sustain the demurrer to all FEHA-based COA asserted by plaintiff Branscum. While the opposition suggests this action was timely commenced by virtue of the fact that plaintiff Branscum did not “discover” she had suffered any harassment, discrimination or retaliation until after plaintiff Royal-Shipp was constructively terminated in January 2018, this suggestion is belied by the numerous other allegations of the 3AC which tend to show plaintiff Branscum first knew of the underlying unlawful conduct by defendant Bristow well before she indicated her intent to resign especially since it was Bristow’s which is alleged to be the reason for her resignation. Moreover, a plaintiff seeking to rely on the delayed discovery rule must inter alia plead facts demonstrating reasonable diligence in pursuit of his/her claims (see, e.g., Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797; Holland v. Union Pacific Railroad Co. (2007) 154 Cal.App.4th 940) but the 3AC does not do so.

Conclusion

For the reasons explained above, plaintiffs’ final four COA for wrongful termination, assault, age discrimination and negligent retention are stricken and Defendants’ demurrer to the other COA identified above is sustained.

Since plaintiffs have already had four opportunities to plead their COA and have not otherwise shown a reasonable possibility of curing the defects noted above and since the court concludes they have no reasonable possibility of doing so, leave to amend is denied.

*** If oral argument is requested in an attempt to obtain leave to amend, plaintiffs shall be prepared to specifically discuss the new or different facts which may now be alleged in good faith to overcome the deficiencies noted above. ***

Pursuant to CRC Rule 3.1312, defendants to prepare a judgment of dismissal as to plaintiff Branscum and as to defendant Sutter.

If not already done, the remaining defendants to file and serve their answer(s) to the 3AC no later than 2/1/2019.

This minute order is effective immediately. No formal order or other notice is required. (Code Civ. Proc. §1019.5; CRC Rule 3.1312.)