Case Name: Happy Path, LLC, et al. v. PayPal, Inc., et al.

Case No.: 17CV308519

Defendants PayPal, Inc. and eBay Inc.’s Demurrer to Plaintiffs’ Second Amended Complaint

On or about December 19, 2014, plaintiff Happy Path, LLC (“Happy Path”) and defendants PayPal, Inc. (“PayPal”) and eBay Inc. (“eBay”) entered into a Master Services Agreement (“MSA”) whereby plaintiff Happy Path would provide products and services to PayPal in exchange for payment by PayPal. (Second Amended Complaint (“SAC”), ¶11.) Under the MSA, the particular products and services to be provided to PayPal by Happy Path and the amounts to be paid were set forth in separate documents entitled, “Statements of Work.” (SAC, ¶11.)

The first Statement of Work was established in December 2014 for consulting and marketing services for PayPal’s “NA Merchant Website team,” and products and recommendations relating to “co-branded webpages.” (SAC, ¶14.) Happy Path agreed to provide the products and services and PayPal agreed to pay the sum of $70,000. (SAC, ¶14.)

A second Statement of Work was established in January 2015 which called for Happy Path to provide skilled workers concerning PayPal’s “SMB Merchant Website Marketing team” for the first quarter of 2015. (SAC, ¶15.) PayPal would pay $88,000 for these services to be billed proportionally each month of the quarter. (SAC, ¶15.) In March 2015, Happy Path and PayPal supplemented the second Statement of Work to include an additional on-site contractor providing consulting services. (SAC, ¶17.) This addition increased the amount to be paid to Happy Path from $88,000 to $116,140. (SAC, ¶17.)

The third Statement of Work was established in March 2015 for which Happy Path would provide design services for a “Small Business Week” promotion relating to PayPal’s digital marketing. (SAC, ¶18.) In exchange for the services set forth in the third Statement of Work, PayPal agreed to pay Happy Path the sum of $47,000. (SAC, ¶18.)

A fourth Statement of Work was established in early March 2015 for which Happy Path would provide design services for the “CRO Recommendation and Design” relating to PayPal’s digital marketing. (SAC, ¶19.) Subsequently, the design services were augmented to include design services for the Developer Project. (SAC, ¶19.) In exchange for the services set forth in the fourth Statement of Work, PayPal agreed to pay Happy Path the sum of $100,750. (SAC, ¶19.)

A fifth Statement of Work was submitted in late March 2015 which called for Happy Path to continue providing skilled labor for PayPal’s “SMB Merchant Website Marketing team” for the second quarter of 2015. (SAC, ¶20.)

Happy Path issued six separate invoices to PayPal to obtain payment for the Statements of Work referenced above. (SAC, ¶21.) eBay paid Happy Path’s invoices relating to the first, third, fourth, and original scope of the second ($88,000) Statements of Work. (SAC, ¶¶21 – 24.) However, defendants PayPal and eBay failed and refused to pay for the products and services relating to the augmented second ($28,140) Statement of Work or for the prorated amount of work performed with regard to the fifth Statement of Work ($30,153). (SAC, ¶¶21 and 25.)

Happy Path was formed by and solely owned by plaintiff Catherine Seymour (“Seymour”). (SAC, ¶1.) Seymour’s son, Danny Williams (“Williams”), was an executive employee of PayPal. (SAC, ¶28.) In April 2015, PayPal’s employment relationship with Williams became strained because of a wrongful termination claim made by two employees who blamed Williams for their termination. (SAC, ¶28.) Defendants PayPal and eBay retaliated against Happy Path and Seymour by refusing to pay Happy Path’s outstanding invoices and by intentionally interfering with Happy Path’s relationship with its key employees. (SAC, ¶28.)

On April 13, 2017, plaintiffs Happy Path and Seymour filed a complaint against defendants PayPal and eBay. On June 9, 2017, defendants filed a demurrer to plaintiffs’ complaint.

On June 29, 2017, plaintiffs Happy Path and Seymour filed a First Amended Complaint (“FAC”) which asserted causes of action for:

(1) Breach of Contract
(2) Breach of Covenant of Good Faith and Fair Dealing
(3) Intentional Interference with Prospective Economic Advantage
(4) Negligent Interference with Prospective Economic Advantage
(5) Unfair Competition – Business and Professions Code §17200
(6) Negligent Infliction of Emotional Distress
(7) Intentional Infliction of Emotional Distress
(8) Unfair Competition – Business and Professions Code §17200; Based Upon Discrimination Against Female Owned Business Contrary to Public Policy
(9) Discrimination in Violation of Civil Code section 51.5

On August 1, 2017, defendants PayPal and eBay filed a demurrer to the third through ninth causes of action in plaintiffs’ FAC.

On September 7, 2017, the court sustained, in part, and overruled, in part, defendants’ demurrer to the plaintiffs’ FAC.

On September 21, 2017, plaintiffs Happy Path and Seymour filed the operative SAC which asserts the same nine causes of action.

On October 26, 2017, defendants PayPal and eBay filed the motion now before the court, a demurrer to sixth through eighth causes of action in plaintiffs’ SAC.

On January 4, 2018, plaintiffs filed opposition to defendants’ demurrer.

I. Defendants’ request for judicial notice is GRANTED.

In support of their demurrer, defendants first request judicial notice of the FAC, the court’s September 7, 2017 order, and the SAC. Pursuant to Evidence Code §452, subdivision (d), the court may take judicial notice of “[r]ecords of any court of this state.” This section of the statute has been interpreted to mean that the trial court may take judicial notice of the existence of the court’s own records. Evidence Code section 452 and 453 permit the trial court to “take judicial notice of the existence of judicial opinions and court documents, along with the truth of the results reached—in the documents such as orders, statements of decision, and judgments—but [the court] cannot take judicial notice of the truth of hearsay statements in decisions or court files, including pleadings, affidavits, testimony, or statements of fact.” (People v. Woodell (1998) 17 Cal.4th 448, 455.) Accordingly, defendants PayPal and eBay’s request for judicial notice in support of their demurrer to plaintiffs’ SAC is GRANTED, but only insofar as the court takes judicial notice of their existence, not necessarily the truth of any matters asserted therein.

II. Defendants’ demurrer to plaintiffs’ SAC is SUSTAINED.

A. Defendants’ demurrer to plaintiff Seymour’s sixth and seventh causes of action [negligent infliction of emotional distress/ intentional infliction of emotional distress] is SUSTAINED.

“A claim of negligent infliction of emotional distress is not an independent tort but the tort of negligence to which the traditional elements of duty, breach of duty, causation, and damages apply.” (Wong v. Tai Jing (2010) 189 Cal.App.4th 1354, 1377–78.) “[T]he existence of a duty is a question of law for the court.” (Kentucky Fried Chicken of California, Inc. v. Superior Court (1997) 14 Cal.4th 814, 819.) “The question of whether a duty exists is a question of law and must be decided by the court on a case-by-case basis.” (Dutton v. City of Pacifica (1995) 35 Cal.App.4th 1171, 1175.)

Defendants assert they did not owe plaintiff Seymour any duty under the factual circumstances alleged. The court is called upon to decide whether defendants owed a duty to plaintiff Seymour who is alleged to be the founder, sole shareholder, owner, managing member, and president of Happy Path, the entity who actually contracted with defendants, from emotional injuries suffered after defendants engaged in a “campaign of wrongful conduct lasting several months.” (SAC, ¶68.) “Said conduct included requiring plaintiff Seymour to deal with defendants [sic] accounting department in India at all hours of the night, giving her false excuses as to why her invoices were unpaid and false explanations as to why the company had reversed from Happy Path’s bank account the sum of $98,871.01.” (SAC, ¶¶69 and 71.) “The foregoing was done all the while knowing, or defendants should have known, that the failure to pay Happy Path would put tremendous pressure on Seymour to make payroll for her company as to the very workers that were working at and/or on behalf of PayPal projects.” (SAC, ¶70.)

In the FAC, plaintiff Seymour previously alleged defendants “wrongfully breach[ed] their contractual relationship with Happy Path, refus[ed] to make payments on legitimate invoices, and thereafter intentionally caus[ed] key employees of Happy Path to defect to its direct competitor.” (FAC, ¶¶67 – 68.) In considering the various policy factors to determine the existence and scope of a defendant’s duty in a particular case, the court finds here that defendants did not owe a duty to plaintiff Seymour under these circumstances even under the more detailed factual allegations provided in the SAC.

“The tort of intentional infliction of emotional distress is comprised of three elements: (1) extreme and outrageous conduct by the defendant with the intention of causing, or reckless disregard of the probability of causing, emotional distress; (2) the plaintiff suffered severe or extreme emotional distress; and (3) the plaintiff’s injuries were actually and proximately caused by the defendant’s outrageous conduct.” (Cochran v. Cochran (1998) 65 Cal.App.4th 488, 494 (Cochran); see also Ross v. Creel Printing & Publishing Co., Inc. (2002) 100 Cal.App.4th 736, 744 – 745; see also CACI, Nos. 1600 and 1602.)

“There is no bright line standard for judging outrageous conduct and its generality hazards a case-by-case appraisal of conduct filtered through the prism of the appraiser’s values, sensitivity threshold, and standards of civility. The process evoked by the test appears to be more intuitive than analytical.” (Cochran, supra, 65 Cal.App.4th at p. 494.) “Even so, the appellate courts have affirmed orders which sustained demurrers on the ground that the defendant’s alleged conduct was not sufficiently outrageous.” (Id.) The Cochran court went on to state, “the mere fact that the actor knows that the other will regard the conduct as insulting, or will have his feelings hurt, is not enough.” (Id. at p. 496.) “In evaluating whether the defendant’s conduct was outrageous, it is not enough that the defendant has acted with an intent which is tortious or even criminal.” (Id.)

Among other reasons, defendants demur to the seventh cause of action on the ground that the alleged wrongful conduct does not amount to extreme and outrageous conduct. Plaintiff Seymour’s seventh cause of action for intentional infliction of emotional distress incorporates all the conduct alleged in the sixth cause of action but adding, in conclusory fashion, that said conduct “was intentional and outrageous.” (SAC, ¶73.)

“Conduct, to be ‘outrageous’ must be so extreme as to exceed all bounds of that usually tolerated in a civilized society. While the outrageousness of a defendant’s conduct normally presents an issue of fact to be determined by a trier of fact, the court may determine in the first instance, whether the defendant’s conduct may reasonably be regarded as so extreme and outrageous as to permit recovery.” (Trerice v. Blue Cross of California (1989) 209 Cal.App.3d 878, 883; see also Unterberger v. Red Bull North America, Inc. (2008) 162 Cal.App.4th 414, 423—“[T]he conduct that plaintiffs allege caused them distress, i.e., the termination of a business relationship, is, as [a] matter of law, not the type of ‘outrageous’ conduct that is required to support a cause of action for intentional infliction of emotional distress.”) Here, the court agrees with defendants that the alleged wrongful conduct is not, as a matter of law, sufficiently extreme or outrageous.

Accordingly, defendants’ demurrer to the sixth and seventh causes of action of plaintiff Seymour’s SAC on the ground that the pleading does not state facts sufficient to constitute a cause of action [Code Civ. Proc., §430.10, subd. (e)] is SUSTAINED WITHOUT LEAVE TO AMEND.

B. Defendants’ demurrer to plaintiffs’ eighth cause of action [unfair competition] is SUSTAINED.

The court previously sustained, without leave to amend, defendants’ demurrer to the eighth cause of action for unfair competition insofar as it was being asserted by plaintiff Seymour. Plaintiff Seymour again asserts this same cause of action in the SAC. In her opposition, plaintiff Seymour contends this was done in error and she is not attempting to revive her claim.

Plaintiff Happy Path, however, maintains it intends to pursue the eighth cause of action. To the extent plaintiff Happy Path seeks to maintain this cause of action, defendants demur on the basis that the claim is, verbatim, identical to the eighth cause of action asserted in the FAC to which this court previously sustained defendants’ demurrer. The eighth cause of action continues to allege defendants’ wrongful conduct (“wrongfully breaching their contractual relationship with Happy Path, refusing to make payments on legitimate invoices, and thereafter intentionally causing key employees of Happy Path to defect to its direct competitor”) was done because defendants knew Happy Path was owned by a woman and defendants wanted to “avoid doing business with [plaintiff Seymour] because of her sex.” (SAC, ¶¶81 – 82.) According to the allegations, defendants’ conduct violated the public policy set forth in the California Constitution, Article I, section 8 which states, “A person may not be disqualified from entering or pursuing a business, profession, vocation, or employment because of sex, race, creed, color, or national or ethnic origin.” (SAC, ¶83.)

As explained by the court in ruling on the prior demurrer:

the alleged wrongful conduct does not come within the protection of California Constitution, Article I, section 8 because it applies only where the “conduct which results in the complete exclusion of an individual from employment (i.e., resulting in termination constructive discharge, or the threat of termination).” (Peterson v. State of California Dept. of Corrections and Rehabilitation (E.D. Cal. 2006) 451 F.Supp.2d 1092, 1111; see also Strother v. Southern California Permanente Medical Group (9th Cir. 1996) 79 F.3d 859, 871—“a claim brought directly under Article I, § 8 of the California Constitution may only be brought where a plaintiff has been denied entrance into a profession or particular employment or terminated from the same.”) Even if the court accepts plaintiff’s allegation that defendants ended their contractual relationship with Happy Path and solicited Happy Path’s key employees and did so because plaintiff Seymour was a woman, the allegations do not come within Article I, section 8 of the California Constitution because it does not result in the denial of plaintiff Seymour’s entrance into a profession or particular employment or termination from the same.

This defect applies with even greater force to plaintiff Happy Path who is not a person/ individual. Accordingly, defendants’ demurrer to the eighth cause of action of plaintiffs’ SAC on the ground that the pleading does not state facts sufficient to constitute a cause of action [Code Civ. Proc., §430.10, subd. (e)] is SUSTAINED WITHOUT LEAVE TO AMEND.