Opinion
H046183
03-02-2020
LOUIS CHRISTOPHER ARRIAGA et al., Plaintiffs and Appellants, v. JASON LARA et al., Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Santa Clara County Super. Ct. No. 17CV310003)
Appellants Louis Christopher Arriaga and his business Arriaga & Associates, Inc. sued former employees Jason Lara and Jose Segura and their business Maddison Group, Inc. under various theories of tort and contract liability. Appellants' causes of action generally allege that while Segura and Lara worked for appellants they stole appellants' main customer and solicited other Arriaga & Associates employees to work for their competing business. The trial court granted summary judgment in favor of respondents on all causes of action alleged in the complaint.
Appellants maintain the trial court erred in granting summary adjudication of six causes of action because there were triable issues of material fact. Appellants also claim the trial court improperly disregarded their evidence and abused its discretion under the summary judgment statute in denying their request for a continuance. For the reasons we explain below, we affirm the judgment.
I. FACTS AND PROCEDURAL BACKGROUND
The underlying facts in this case, as developed in the papers filed below in support of and in opposition to defendants' motion for summary judgment, are largely undisputed.
A. Factual Background
Appellant Arriaga was the president and sole shareholder of Arriaga & Associates, Inc. (A&A), a California business that provided security services, principally in the form of armed security guards, to other businesses. A&A employed approximately 170 security guards. Other than the security guards and Arriaga himself, A&A had only one employee, who performed clerical functions.
Dave & Buster's is a national restaurant chain with multiple locations in California and was A&A's principal client. A&A provided services for Dave & Buster's at several of the chain's restaurants in California, including in Milpitas (the Milpitas restaurant).
A&A employed Lara and Segura as hourly, part-time, and at-will employees. Lara and Segura worked as armed security guards at the Milpitas restaurant, mostly in the evenings and early morning hours. Neither Lara nor Segura was a named corporate officer or director of A&A.
The record also reflects they were "on call" employees, but it is not clear what is meant by that designation in this context.
A&A had no employee handbook, written policy, or any other document describing the duties of its employees. The only writing defining the employment relationship between A&A and its employees was an "acknowledgement" that A&A required its employees to sign that acknowledged their " 'part time on call status only.' " Every security guard employed by Arriaga and A&A "was charged with the responsibility to cultivate and maintain the relationship" between A&A and Dave & Buster's, but this duty was not described in writing.
Although both Segura and Lara worked as security guards for A&A, Lara had more responsibility. Lara served consistently as a "lead" security guard at the Milpitas restaurant. Serving as a "lead" involved the performance of additional duties, such as creating the work schedule for the security guards at that restaurant. A "lead" was not a supervisor of the other guards.
During their part-time work for A&A, both Lara and Segura also held full-time positions with the State of California Department of Corrections and Rehabilitation. In addition, beginning in late 2013 or early 2014, Lara and Segura owned their own security guard business, Maddison Group, Inc. (Maddison Group).
In early August 2016, while still employed by A&A as security guards, Lara and Segura learned that Dave & Buster's intended to replace its current security guard service provider (i.e., A&A) and was interested in "exploring" retaining Maddison Group to provide security services. Another Maddison Group employee arranged a meeting between Lara and Segura and a representative of Dave & Buster's that occurred in San Jose on August 15, 2016.
At that August 2016 meeting, a representative for Dave & Buster's invited Segura and Lara to submit a bid to provide armed security guard services for its restaurants. While preparing their bid, Lara and Segura continued to work for A&A. Although it is not clear exactly when Lara and Segura ended their employment with Arriaga and A&A, they were still employed by A&A in April 2017.
That month, Dave & Buster's informed Arriaga that it had chosen another entity to provide security for its restaurants in California. Arriaga conducted an investigation and concluded that Dave & Buster's had replaced A&A because Maddison Group had "undercut" his rates.
Segura and Lara stopped working for A&A, although the record does not clarify either the precise date of this event or whether it occurred by termination or resignation. Segura and Lara did not simultaneously work at Dave and Buster's under both A&A's and Maddison's Group contracts with the restaurant chain.
At some point, on behalf of Maddison Group, Lara and Segura offered jobs to some of A&A's employees, some of whom accepted. The record does not clarify the timing or number of employee departures from A&A to Maddison Group or whether Lara and Segura made the job offers before or after they departed A&A.
B. Lawsuit and Motion for Summary Judgment
In May 2017, shortly after learning that they had lost Dave & Buster's business, Arriaga and A&A (collectively, plaintiffs) filed a lawsuit against Lara, Segura, and Maddison Group (collectively, defendants). Following a demurrer, plaintiffs filed in August 2017 their operative complaint, the first amended complaint. Plaintiffs' complaint alleges seven causes of action: (1) fraud by concealment under Civil Code sections 1701 and 1709; (2) violation of California's unfair competition law (Bus. & Prof. Code, § 17200 et seq.); (3) intentional interference with prospective economic advantage; (4) breach of fiduciary duty; (5) conversion; (6) conspiracy; and (7) breach of implied-in-fact contract. The parties engaged in discovery, including deposing Arriaga.
The complaint also named three other individuals, Edward Giron, Jesus Alacon, and Brad Rothfield, who are not parties in this appeal.
In December 2018, defendants moved for summary judgment, or in the alternative, summary adjudication. In connection with their motion, defendants submitted a separate statement of undisputed material facts, the declaration of Lara, the declaration of Segura, and the declaration of defendants' counsel, which attached certain written discovery responses and excerpts from Arriaga's deposition. We discuss that evidence further below.
Segura and Lara also filed a cross-complaint against Arriaga and A&A, which the parties continued to litigate following entry of judgment on plaintiffs' complaint. Neither party raises any claims related to the cross-complaint. We address the question of appealability of the judgment posed by the pending cross-complaint in Section II.A, post.
Following the filing of the motion and before the scheduled hearing date, the parties filed a stipulation, which the trial court granted, to extend the date for plaintiffs to file their opposition and to allow them to depose Lara and Segura before submitting their opposition. On February 27, 2018, plaintiffs' counsel deposed both Lara and Segura.
Shortly thereafter, on March 5, 2018, plaintiffs filed their opposition to summary judgment, which also sought a continuance to allow for additional discovery. In connection with their opposition, plaintiffs filed a separate statement of disputed and undisputed facts and supporting declarations from Arriaga and from plaintiffs' attorney, Barzin Barry Sabahat, which included excerpts purportedly from the depositions of Segura and Lara. Although the documents that appeared to be excerpts from the Segura and Lara depositions were attached to the Sabahat declaration, they were not certified or marked as exhibits to it.
In reply, defendants filed a brief and a declaration from defendants' counsel that attached additional exhibits, including excerpts from Lara's deposition, excerpts from Segura's deposition, and written discovery propounded by defendants and plaintiffs' responses. Defendants also filed evidentiary objections to Arriaga's declaration and to the attachments to the Sabahat Declaration.
Following a hearing, in March 2018 the trial court by written order granted summary judgment to defendants on all seven causes of action and denied plaintiffs' request for a continuance under Code of Civil Procedure section 437c, subd. (h). In July 2018, the trial court entered judgment on plaintiffs' complaint in favor of defendants.
Unspecified statutory references are to the Code of Civil Procedure.
II. DISCUSSION
Appellants raise evidentiary, substantive, and procedural challenges to the judgment. Appellants contend the trial court erred in its summary judgment ruling by disregarding or improperly weighing appellants' evidence. Appellants also argue the trial court erred by granting summary adjudication of their claims of fraud, unfair competition, intentional interference with prospective economic advantage, breach of fiduciary duty, conspiracy, and breach of implied-in-fact contract because defendants failed to meet their burden as the moving party, and triable issues of material fact exist relating to each of these claims. In the alternative, appellants request leave to amend their complaint. Finally, they argue the trial court abused its discretion in denying their request for a continuance under section 437c, subdivision (h).
Appellants do not challenge the trial court's summary adjudication of their cause of action for conversion, which was based in part on an alleged interference by defendants with A&A's purported trade secrets. Accordingly, we do not address this cause of action.
A. Appealability
Before turning to the merits of appellants' arguments, we address whether the "one final judgment rule" bars our consideration of this appeal with respect to respondents Lara and Segura. "Under California's 'one final judgment' rule, a judgment that fails to dispose of all the causes of action pending between the parties is generally not appealable." (Kurwa v. Kislinger (2013) 57 Cal.4th 1097, 1100; see also § 904.1, subd. (a).)
We have also considered that appellants filed a notice of appeal from a judgment that had not yet been filed. The notice of appeal, filed on May 18, 2018, indicated that appellants were appealing from a judgment entered on March 26, 2018. However, the trial court's judgment was not filed until July 13, 2018. Nevertheless, because a judgment was subsequently filed, we exercise our discretion to construe the premature notice of appeal as pertaining to the July 2018 judgment. (Cal. Rules of Court, rule 8.104(d)(2).)
Although the trial court's judgment fully disposed of Arriaga's and A&A's claims against defendants, the record referenced that Lara and Segura (but not Maddison Group) had previously filed a cross-complaint against Arriaga and A&A. We requested supplemental briefing on whether a cross-complaint remains pending; whether the July 13, 2018 judgment on plaintiffs' complaint is appealable; and, if the judgment is not appealable, whether the appeal should be dismissed. In response, the parties informed this court that Lara and Segura's cross-complaint alleging violations of the Labor Code remains pending and, a few months after the July 2018 judgment, was coordinated with other lawsuits brought by other plaintiffs against Arriaga and A&A.
Lara and Segura's cross-complaint alleges a variety of wage-and-hour claims under the Labor Code. In addition to the cross-complaint, two other wage-and-hour lawsuits were brought against Arriaga and A&A in Santa Clara and Los Angeles counties, apparently brought by other A&A employees. In November 2018, following a request by Arriaga and A&A to coordinate those lawsuits, the complex civil litigation department of Santa Clara County ordered that this action be coordinated with the other wage-and-hour lawsuits brought against Arriaga and A&A and that the coordinated cases be venued in Santa Clara County.
Appellants contend we have jurisdiction over this appeal, notwithstanding the cross-complaint, and, if we lack jurisdiction, request that we treat the appeal as a petition for an extraordinary writ. Respondents assert that we have jurisdiction over the judgment as to Maddison Group, but we do not have jurisdiction over the judgment as it relates to Lara and Segura in light of the pending cross-complaint. Respondents similarly request that we nonetheless treat this appeal as a petition for an extraordinary writ in the interests of judicial economy and avoidance of delay.
Generally, an appeal must be taken from one, final judgment that resolves all the causes of action between the parties. "[A]n appeal cannot be taken from a judgment that fails to complete the disposition of all the causes of action between the parties even if the causes of action disposed of by the judgment have been ordered to be tried separately, or may be characterized as 'separate and independent' from those remaining. . . . A petition for a writ, not an appeal, is the authorized means for obtaining review of judgments and orders that lack the finality required by Code of Civil Procedure section 904.1, subdivision (a)." (Morehart v. County of Santa Barbara (1994) 7 Cal.4th 725, 743-744.) The "one final judgment rule" applies to the situation at issue here, that is where the trial court granted summary judgment on a complaint but where a cross-complaint involving the same parties remained unresolved. "[W]hen a judgment resolves a complaint, but does not dispose of a cross-complaint pending between the same parties, the judgment is not final and thus not appealable. [Citation.] In that event, the appeal must be dismissed [citation], unless the appellate court chooses to treat the improper appeal as a petition for an extraordinary writ." (Angell v. Superior Court (1999) 73 Cal.App.4th 691, 698 (Angell).)
Maddison Group is not a party to the cross-complaint; therefore we have jurisdiction over the appeal as to it. With respect to the claims relating to Lara and Segura, the judgment in their favor on plaintiffs' complaint was not appealable because of the pending, unadjudicated cross-complaint between Lara and Segura and Arriaga and A&A. (Angell, supra, 73 Cal.App.4th at p. 698.) Nevertheless, we agree with the parties that we should exercise our discretion to treat the appeal as a petition for an extraordinary writ. (See ibid.) The parties have fully briefed in this court the claims at issue here relating to Lara, Segura, and Maddison Group's motion for summary judgment on the plaintiffs' complaint. The pending cross-complaint relates to wage-and-hour claims distinct from the claims at issue here and has now been coordinated with other wage-and-hour claims involving other parties. It is not clear when and how those matters will be resolved. Under these unusual circumstances, we conclude that we should reach the merits of the present appeal by treating the appeal involving Lara and Segura as a petition for an extraordinary writ.
Turning now to the merits, we first consider appellants' evidentiary challenges to the trial court's summary judgment ruling.
B. Evidentiary Issues
Appellants contend the trial court erred in its treatment of the declarations they submitted in support of their opposition to the summary judgment motion. Respondents counter that appellants forfeited their challenge of the trial court's evidentiary rulings and, in any event, the trial court did not abuse its discretion in ruling appellants' evidence "inadmissible."
1. Factual Background
The complaint alleges Lara rose in the ranks of A&A's business to the level of an "officer" and that, in his capacity as an officer, Lara breached his fiduciary duty by stealing A&A's most valuable customer, Dave & Buster's. The complaint described Segura as an "employee" who "did not hold a managerial office." Defendants' evidence challenged the claim that Lara was an officer of A&A. The declarations of Segura and Lara detailed their duties for Arriaga and A&A, and Lara asserted he had never been an officer or director of A&A. Defendants also provided excerpts from Arriaga's deposition in which Arriaga stated that he was A&A's only officer and acknowledged Lara and Segura were not officers.
To rebut that evidence and to support their claim Lara had assumed officer-like duties for A&A, plaintiffs offered the declaration of Arriaga (Arriaga Declaration). On appeal, appellants rely principally on paragraph 3 of that declaration. There, Arriaga states that Lara had been an employee with A&A "since its inception, growing in the ranks with the business" and "had gained [Arriaga's] confidence to an extent that [Arriaga] considered Lara as [Arriaga's] right-hand person, trusting him with nearly every aspect of the Business." Arriaga also lists Lara's various duties, such as: "doing the schedule" (for which Lara would receive extra monthly compensation), assisting in training, interviewing and "recommend[ing] hiring of staff," "advis[ing]" Arriaga to give a pay raise to employees at a certain point and "[r]ecommend[ing] start pay for all new employees at the Milpitas store," and auditing time cards.
Regarding Lara's duties with respect to A&A's business relationship with Dave & Buster's, Arriaga states Lara's duties included reporting to Arriaga "if Lara would hear of any problems that may have occurred at any of the other Dave and Busters stores so that they could, or Arriaga would address them and correct the problem." Arriaga asserts, "[a]ny problems that would happen at Dave and Busters and the Dave and Busters Managers needed something addressed they all knew to talk with Lara and he would deal with it, and if he couldn't Lara would contact Arriaga." Arriaga further notes that Lara "was introduced" to all of Dave and Buster's "Regional Managers, General Managers at all stores as well as the Director of Security," and he "was tasked with ensuring the health of the relationship between the Business and Dave & Buster [sic]."
Plaintiffs also submitted a declaration from plaintiffs' counsel Barzin Barry Sabahat (Sabahat Declaration). The Sabahat Declaration describes discovery disputes between the parties and asserts defendants had provided insufficient information during the discovery process, including stating that defendants' counsel had cut short the depositions of Segura and Lara with "objections and instructions not to answer." In addition, the Sabahat Declaration includes two documents that are not referenced in the declaration and are not described as attachments or exhibits to it. These attachments appear to be parts of uncertified transcripts from the deposition testimony of Lara and Segura from February 2018.
2. Procedural Background
Defendants lodged evidentiary objections to the Arriaga Declaration and to the documents submitted with the Sabahat Declaration. Defendants objected to portions of Arriaga's declaration, including the descriptions of Lara's duties, as contradicting Arriaga's own sworn deposition testimony and legally binding admissions.
Plaintiffs filed objections to Lara's and Segura's declarations, largely based on relevance and hearsay grounds. Plaintiffs do not renew their evidentiary objections here, and we therefore do not address them. (See Reid v. Google, Inc. (2010) 50 Cal.4th 512, 534.)
In his deposition, Arriaga stated he was the only officer of A&A and confirmed that Lara was not an officer. When questioned what "leads" were responsible for other than employee schedules, Arriaga responded, "Ensuring that everyone took their breaks. Ensuring that they knew what was expected of them. Ensuring they filled out the proper paperwork for employment. Ensuring that they had the licenses. Overseeing any type of disruption that would happen where my staff was involved in. Ensuring that the reports were done correctly." He also testified, "They acted as my leads and with the instructions I would give them." In his view, the leads did not act as "supervisors."
In appellants' briefing here, they suggest Arriaga was "confused" as what supervisor meant but do not cite any statement from Arriaga's deposition testimony supporting that assertion. Moreover, plaintiffs' separate statement of undisputed material facts did not dispute that leads were not supervisors.
Defendants objected to the attachments to the Sabahat Declaration on foundation and hearsay grounds. The objections stated that, while the documents attached to the Sabahat Declaration appeared to be excerpts from depositions, the Sabahat Declaration did not lay a foundation for them; the documents did not indicate they were certified by a court reporter; and they were not marked as exhibits to the declaration.
In its written order granting summary judgment, the trial court did not issue individual rulings on the parties' evidentiary objections because neither side's submitted objections fully complied with rule 3.1354 of the California Rules of Court. However, the trial court's order did address Arriaga's contradictory statements in his declaration and the lack of authentication of the documents attached to the Sabahat Declaration. After summarizing Arriaga's deposition testimony and verified discovery responses, the trial court noted that the "only admissible evidence submitted by Plaintiff in opposition is a declaration from Louis Arriaga, and only paragraphs 3, 7, and 10 of that declaration are cited in the opposing Separate Statement." The trial court stated that Arriaga's declaration "is disregarded to the (significant) extent that it is inconsistent with or contradictory to Mr. Arriaga's sworn deposition testimony or verified discovery responses." Turning to the documents submitted along with the Sabahat Declaration, the trial court noted that the material was "not described or authenticated" by Sabahat and "[t]herefore it has not been considered."
Paragraph 3 of the Arriaga Declaration, described above, details Lara's duties as an employee of Arriaga's business. Paragraph 7 relates to alleged actions by other defendants in stealing money and misusing Arriaga's credit that are irrelevant to this appeal. Paragraph 10 sets out Arriaga's subjective beliefs about Lara's duties, stating in full, "Based on the duties taken on by Lara and the fact that they [presumably referring to all the defendants] were my employees, I understood that they owed me a duty to inform me of developments that would affect my business and their jobs. I expected such information to be conveyed to me as a part of my employees performing their duties with reasonable skill. I had trusted them to do so." We discuss that paragraph further below in the context of the cause of action for breach of implied-in-fact contract.
3. Standard of Review and Legal Principles
On summary judgment, the evidence relied on by the parties in support of or opposition to the motion must be admissible. (Perry v. Bakewell Hawthorne, LLC (2017) 2 Cal.5th 536, 542.) It is also "well-established that 'a party cannot create an issue of fact by a declaration which contradicts his prior discovery responses.' [Citations.] In determining whether any triable issue of material fact exists, the trial court may give 'great weight' to admissions made in discovery and 'disregard contradictory and self-serving affidavits of the party.' [Citation.] Our Supreme Court has explained that such admissions 'have a very high credibility value,' particularly when they are 'obtained not in the normal course of human activities and affairs but in the context of an established pretrial procedure whose purpose is to elicit facts.' [Citation.] 'Accordingly, when such an admission becomes relevant to the determination, on motion for summary judgment, of whether or not there exist triable issues of fact (as opposed to legal issues) between the parties, it is entitled to and should receive a kind of deference not normally accorded evidentiary allegations in affidavits.' [Citation.] Where a declaration submitted in opposition to a motion for summary judgment motion clearly contradicts the declarant's earlier deposition testimony or discovery responses, the trial court may fairly disregard the declaration and ' "conclude there is no substantial evidence of the existence of a triable issue of fact." ' " (Whitmire v. Ingersoll-Rand Co. (2010) 184 Cal.App.4th 1078, 1087.)
The California Supreme Court has not settled whether a reviewing court examines a trial court's evidentiary rulings on summary judgment de novo or for abuse of discretion. (Reid v. Google, Inc. (2010) 50 Cal.4th 512, 535.) We need not decide the question here, because appellants have not shown the trial court erred under either standard.
4. Analysis
As an initial matter, we disagree with respondents' contention that appellants have abandoned or forfeited any challenge to the trial court's evidentiary rulings because of their "broad, unfocused challenges" to them. Appellants' opening brief and reply include a discernable discussion of this argument, and respondents addressed its merits by arguing that all of appellants' evidence was inadmissible. In the absence of any assertion by respondents that they have been prejudiced by the form of appellants' arguments, we decline to apply the forfeiture doctrine and turn to their merits.
Because it was not properly raised, we do not address appellants' argument made in a footnote that the trial court improperly considered "17 new exhibits" that defendants submitted in their reply. (See Gonzalez v. Mathis (2018) 20 Cal.App.5th 257, 274, fn. 4.) Nevertheless, we have not relied on these documents in our consideration of the merits of this appeal.
a. Sabahat Declaration
Appellants argue the trial court should have considered the documents submitted along with the Sabahat Declaration but cite no authority supporting the admissibility of the unauthenticated and uncertified Lara and Segura deposition excerpts. The Sabahat Declaration does not describe the documents and fails to assert that they are true and correct copies of original transcripts. In addition, the documents do not include a court reporter's signed certification page.
The entire transcripts of the Lara and Segura depositions were not filed with the trial court. At the hearing on the motion for summary judgment, plaintiffs' counsel asserted he brought the "sealed deposition transcripts" and would leave them with the trial court to accept them or not, but the transcripts are not included in the record on appeal. In connection with their reply papers, defendants submitted in the trial court limited excerpts from the Lara and Segura depositions, which were not the same excerpts as those submitted by plaintiffs, in order to rebut plaintiffs' assertions the depositions were cut short by improper objections rather than to support the merits of defendants' motion for summary judgment.
"Authentication of a writing is required before it may be received in evidence." (Evid. Code, § 1401.) "[A] document is authenticated when sufficient evidence has been produced to sustain a finding that the document is what it purports to be." (Jazayeri v. Mao (2009) 174 Cal.App.4th 301, 321.) An unauthenticated document is inadmissible. (McAllister v. George (1977) 73 Cal.App.3d 258, 262.)
The Sabahat Declaration, by failing to provide any evidence—or even mention—the purported deposition excerpts did not fulfill this minimum standard. (Cf. Greenspan v. LADT, LLC (2010) 191 Cal.App.4th 486, 523 [describing alternative methods of authenticating deposition excerpts].) The defendants did not introduce into evidence the portions of the Lara and Segura depositions attached to the Sabahat Declaration and therefore did not authenticate them through their own actions. (Cf. Ambriz v. Kelegian (2007) 146 Cal.App.4th 1519, 1526-1529 [trial court erred in sustaining authentication, foundation, and other objections to deposition excerpts in the plaintiff's evidence where the moving parties relied on the same depositions].) Accordingly, these documents were inadmissible, and the trial court did not err in declining to consider them.
b. Arriaga Declaration
In its written order granting summary judgment, the trial court expressly stated that the Arriaga Declaration was "admissible" and considered portions of it. Appellants therefore incorrectly characterize the trial court's ruling as finding that appellants submitted "no evidence." Appellants also contend the trial court failed to consider key statements in the Arriaga Declaration. Respondents counter that the trial court properly ignored evidence in the Arriaga Declaration not cited in plaintiffs' separate statement of disputed and undisputed material facts and appropriately disregarded evidence that conflicted with Arriaga's prior sworn testimony.
Regarding plaintiffs' separate statement, the trial court's order noted that only paragraphs 3, 7, and 10 of the Arriaga Declaration were cited therein. Despite this observation, it is not clear that the trial court disregarded the other paragraphs of Arriaga's declaration, namely paragraphs 1, 2, 4, 5, 6, 8, 9, and 11. In general, "[t]he separate statement is not designed to pervert the truth, but merely to expedite and clarify the germane facts." (King v. United Parcel Service, Inc. (2007) 152 Cal.App.4th 426, 438.) Although the trial court had discretion to consider all the evidence presented by plaintiffs, even if that evidence did not appear in the separate statement (id. at p. 437), the trial court understandably focused on the provisions of the declaration referenced in the separate statement as the evidence most germane to the summary judgment motion.
These paragraphs largely provide background information. For instance, paragraphs 1 and 2 assert that Arriaga is the CEO and sole shareholder of A&A, paragraph 4 states that Segura was an employee of Arriaga's business, paragraph 5 provides that the business began operating 17 years ago and provided employment to 150 employees "until its main client was stolen by Defendants while they were still my employees." Paragraph 6, which we discuss further below, states Lara was charged with the duty to cultivate customers and this duty was "above and beyond" those of any ordinary employee. Paragraphs 8 and 9 relate to how Arriaga was informed that Dave & Buster's had changed vendors and that the competitor had "undercut my rates." Paragraph 11 states generally that Dave & Buster's was the "financial backbone" of Arriaga's business.
The central issue is whether the trial court improperly disregarded portions of the Arriaga Declaration that it concluded were contradictory to or conflicted with Arriaga's prior admissions or testimony. The trial court's decision does not identify which portions of the Arriaga Declaration it found to be contradictory, and it relied on certain statements contained in the declaration, including that Arriaga trusted Lara " 'with nearly every aspect of the Business.' "
Having reviewed the record and the statements in Arriaga's declaration, we agree that many assertions in it are clearly inconsistent with Arriaga's deposition testimony—most notably on the roles of a "lead," whether Lara was a supervisor, and whether Lara was a de facto officer of A&A. In his deposition testimony, Arriaga stated that leads were not supervisors, and Lara did not oversee any other leads. Arriaga expected every security guard working for A&A to "cultivate" the relationship with Dave & Buster's and to satisfy the general manager of the restaurant. Arriaga's statements did not limit those duties to Lara. Such testimony clearly contradicts the more general assertion in Arriaga's declaration that he entrusted Lara "with nearly every aspect of the Business" or the inference in Arriaga's declaration that only Lara (and not all A&A employees) was "charged with the duty to cultivate and maintain the relationship between [Arriaga] and the customers" and this duty was "above and beyond" that of "any ordinary employee."
Nevertheless, some aspects of the Arriaga Declaration (particularly those in paragraph 3, described above) provide further detail about the specific duties performed by Lara, such as recommending pay and the hiring of employees, which we conclude are admissible. We therefore do not agree with respondents that all of the statements in Arriaga's declaration were "inadmissible." We address this evidence, and particularly the duties delineated in paragraph 3, in our discussion of the merits of appellants' substantive claims.
C. General Principles of Summary Judgment
The purpose of summary judgment is to determine "whether, despite [the parties'] allegations, trial is in fact necessary to resolve their dispute." (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843 (Aguilar).) "A defendant moving for summary judgment has the burden of showing that a cause of action lacks merit because one or more elements of the cause of action cannot be established or there is a complete defense to that cause of action. (Code Civ. Proc., § 437c, subd. (o); Aguilar, [at p. 850].) " (Jones v. Wachovia Bank (2014) 230 Cal.App.4th 935, 945 (Jones).)
" 'Defendants are entitled to summary judgment only if "all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." [Citation.] To determine whether triable issues of fact do exist, we independently review the record that was before the trial court when it ruled on defendants' motion. [Citations.] In so doing, we view the evidence in the light most favorable to plaintiffs as the losing parties, resolving evidentiary doubts and ambiguities in their favor.' " (Elk Hills Power, LLC v. Board of Equalization (2013) 57 Cal.4th 593, 605-606.) We also review de novo the trial court's ruling on a motion for summary adjudication. (Jacks v. City of Santa Barbara (2017) 3 Cal.5th 248, 273.)
In conducting our independent review, we "apply the same three-step analysis as the trial court: first we 'identify the issues framed by the pleadings;' next we 'determine whether the moving party's showing has satisfied his burden of proof and justifies a judgment in movant's favor;' and finally we 'determine whether the opposition demonstrates the existence of a triable issue of material fact.' [Citations.] In doing so, we liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party." (Pipitone v. Williams (2016) 244 Cal.App.4th 1437, 1449 (Pipitone).)
The first step of the summary judgment analysis is both defined and limited by the pleadings, which " 'set the boundaries of the issues to be resolved at summary judgment.' " (Conroy v. Regents of University of California (2009) 45 Cal.4th 1244, 1250.) " 'A moving party seeking summary judgment or adjudication is not required to go beyond the allegations of the pleading, with respect to new theories that could have been pled, but for which no motion to amend or supplement the pleading was brought, prior to the hearing on the dispositive motion.' " (Jacobs v. Coldwell Banker Residential Brokerage Co. (2017) 14 Cal.App.5th 438, 444 (Jacobs).) Because the pleadings define the scope of summary judgment, " '[a] party may not oppose a summary judgment motion based on a claim, theory, or defense that is not alleged in the pleadings,' and '[e]vidence offered on an unpleaded claim, theory, or defense is irrelevant because it is outside the scope of the pleadings.' " (Ibid.)
In the second step of our review, we examine the moving party's evidence to determine whether it has satisfied its burden of production. (Pipitone, supra, 244 Cal.App.4th at p. 1449.) "Typically, to meet this burden, a defendant moving for summary judgment can either negate an element of the cause of action or demonstrate a complete defense to plaintiff's claim. [Citation.] Only if the defendant meets its initial burden does the burden shift to the plaintiff to show a triable issue exists." (Jones v. Awad (2019) 39 Cal.App.5th 1200, 1207.) "A prima facie showing is one that is sufficient to support the position of the party in question." (Aguilar, supra, 25 Cal.4th at p. 851.)
If the moving party has satisfied its prima facie showing, in the third step of the summary judgment analysis we consider whether the opponents of a summary judgment motion have raised a triable issue of material fact. Such an issue "exists 'if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof.' " (Jones, supra, 230 Cal.App.4th at p. 945.) " 'The plaintiff . . . may not rely upon the mere allegations or denials' of his 'pleadings to show that a triable issue of material fact exists but, instead,' must 'set forth the specific facts showing that a triable issue of material fact exists as to that cause of action or a defense thereto.' (Code Civ. Proc., § 437c, subd. (o)(2).)" (Aguilar, supra, 25 Cal.4th at p. 849.)
D. Summary Adjudication of the Causes of Action for Breach of Fiduciary Duty, Breach of Implied-in-Fact Contract, and Fraud by Concealment
Turning to the trial court's ruling on summary judgment, we first address the three causes of action based on a purported duty owed by Lara and Segura to plaintiffs either under tort principles or by contractual agreement—namely, breach of fiduciary duty (the fourth cause of action), fraud by concealment (the first cause of action), and breach of implied-in-fact contract (the seventh cause of action).
1. Breach of Fiduciary Duty (Fourth Cause of Action)
Appellants argue that both Lara and Segura were more than ordinary employees and assert they owed Arriaga and A&A fiduciary duties. They contend that Lara and Segura were akin to "high-level" employees and had "different responsibilities, knew more information and thus had a fiduciary duty to their employer." Respondents counter that Lara was the only defendant named in this cause of action and we should therefore affirm summary adjudication as to Segura and Maddison Group. Respondents further argue Lara and Segura were both at will, part-time employees who did not have any corporate managerial duties and therefore did not owe plaintiffs a fiduciary duty.
In reply, appellants maintain that both Lara and Segura were on a "different level" than regular employees and were fiduciaries both as a matter of law and fact. While appellants couch their arguments in both legal and factual terms, whether the trial court erred in its grant of summary adjudication of this cause of action boils down to a legal issue based on the undisputed facts before it—whether an employee who was not an officer or director and had no substantial independent authority or corporate decision-making power over the business owed a fiduciary duty to his employer.
a. Legal Principles
" 'The elements of a cause of action for breach of fiduciary duty are: (1) the existence of a fiduciary duty; (2) the breach of that duty; and (3) damage proximately caused by that breach. (IIG Wireless, Inc. v. Yi (2018) 22 Cal.App.5th 630, 646.) " ' "Whether a fiduciary duty exists is generally a question of law." ' " (Hodges v. County of Placer (2019) 41 Cal.App.5th 537, 546.)
" '[A] fiduciary relationship is a recognized legal relationship such as guardian and ward, trustee and beneficiary, principal and agent, or attorney and client [citation].' A fiduciary must give 'priority to the best interest of the beneficiary.' " (Oakland Raiders v. National Football League (2005) 131 Cal.App.4th 621, 631.) A fiduciary relationship may either be imposed by law or undertaken by agreement. (Id. at p. 632.)
An employment relationship is not generally a fiduciary relationship. (O'Byrne v. Santa Monica-UCLA Medical Center (2001) 94 Cal.App.4th 797, 811.) "Under prevailing judicial opinion no presumption of a confidential relationship arises from the bare fact that parties to a contract are employer and employee; rather, additional ties must be brought out in order to create the presumption of a confidential relationship between the two." (Odorizzi v. Bloomfield School Dist. (1966) 246 Cal.App.2d 123, 129.)
In contrast to ordinary employees, officers of a corporation may owe a fiduciary duty to the company. (Bancroft-Whitney Co. v. Glen (1966) 64 Cal.2d 327, 346-347.) However, whether an individual holds the title of "officer" of a corporation does not determine whether that individual is a fiduciary. (GAB Business Services, Inc. v. Lindsey & Newsom Claim Services, Inc. (2000) 83 Cal.App.4th 409, 420, disapproved of on other grounds in Reeves v. Hanlon (2004) 33 Cal.4th 1140.) To qualify as a fiduciary, the officer must participate in management functions and exercise discretionary authority. "[A]n officer who participates in management of the corporation, exercising some discretionary authority, is a fiduciary of the corporation as a matter of law." (GAB, at pp. 420-421; Los Angeles Memorial Coliseum Com. v. Insomniac, Inc. (2015) 233 Cal.App.4th 803, 834 [same] (Memorial Coliseum).)
As the pleadings define the issues addressed in a summary judgment proceeding, we first examine the allegations in the complaint.
b. Plaintiffs' Complaint
The complaint generally alleged that Lara was an "officer" of the business, was "entrusted with every aspect of the Business" and was Arriaga's "right-hand person, trusting him with nearly every aspect of the Business." Segura, on the other hand, was "an employee" and "did not hold a managerial office." In the specific allegations related to the cause of action for breach of fiduciary duty, plaintiffs alleged that "Defendants" were "managers and officers of the corporation." It is unclear whether the complaint alleged this cause of action against Lara only, describing it as "AGAINST ALL DEFENDANT JASON LARA ONLY [sic]." The allegations in the cause of action for breach of fiduciary duty stated that "Defendants and the Business were in a fiduciary relationship with one another wherein Defendants owed Plaintiff a duty of utmost care and a duty to deal in good faith and with [honesty] with Plaintiff." The complaint alleged defendants breached their fiduciary duty "when they abused Plaintiff's trust in Defendants and using facilities provided to them by Plaintiffs stole Plaintiff's most valuable customer effectively condemning Plaintiff's business to ruin."
Other than including the broad phrase of "defendants" as encompassing all defendants, the complaint made no specific allegations with respect to Maddison Group in this cause of action, and appellants do not advance any arguments in this court with respect to Maddison Group and breach of fiduciary duty. Therefore, we conclude appellants have abandoned any claim on appeal with respect to the trial court's summary adjudication of this cause of action in favor of Maddison Group. (See The Police Retirement System of St. Louis v. Page (2018) 22 Cal.App.5th 336, 346, fn. 3.)
c. Defendants' Evidence
As the party moving for summary judgment, defendants bore the initial burden of production that plaintiffs could not establish one or more of the elements of the cause of action for breach of fiduciary duty. (Jones, supra, 230 Cal.App.4th at p. 945.) Lara and Segura submitted declarations each denying that they had been entrusted with A&A's confidential information or possessed heightened job responsibilities of an officer-like nature. They each stated they had "no authority to fire employees," "no access to financial records" of Arriaga or A&A, and were not officers or directors of A&A. They stated that A&A had "regional managers," but they were not regional managers. Lara further denied he had the title of "Director of Operations." Arriaga never told them about or showed them the contract between Arriaga and A&A and Dave & Buster's. They did not interact with Dave & Buster's management other than knowing some managers at the restaurant in Milpitas and perhaps meeting with "various management of Dave & Buster's when they infrequently visited the Milpitas' Dave & Buster's restaurant over the many years [Lara and Segura] worked there." Segura did not serve as a " 'lead.' "
Defendants also submitted excerpts from Arriaga's deposition. Arriaga stated he was the only officer of A&A and confirmed that Lara and Segura were not officers. There was a "lead employee" at each restaurant who did the scheduling. When questioned what "leads" were responsible for other than scheduling the workforce, Arriaga responded, "Ensuring that everyone took their breaks. Ensuring that they knew what was expected of them. Ensuring they filled out the proper paperwork for employment. Ensuring that they had the licenses. Overseeing any type of disruption that would happen where my staff was involved in. Ensuring that the reports were done correctly." He also testified "[t]hey acted as my leads and with the instructions I would give them." The leads did not act as "supervisors."
Arriaga had personally negotiated the hourly rate for security guard services with Dave & Buster's for each of the restaurants, and Lara and Segura were not present during these negotiations. Every security guard working for A&A was charged with cultivating and maintaining the relationship with Dave & Buster's. Defendants also submitted Arriaga's responses to Lara's request for admissions, in which Arriaga admitted there were no documents that described Lara as having the role of "Director of Operations."
Based on the above evidence, we determine that defendants provided evidence that tended to show that Lara and Segura were ordinary employees of A&A and were not officers who exercised management authority who would owe a fiduciary duty to their employer. Consequently, they met their initial burden of production that plaintiffs could not establish the duty element of this cause of action. The burden on summary judgment therefore shifted to plaintiffs to make a prima facie showing of the existence of a triable issue of material fact as to fiduciary duty. (Aguilar, supra, 25 Cal.4th at pp. 850-851.)
d. Plaintiffs' Evidence
The sole admissible evidence offered by plaintiffs was the Arriaga Declaration. With respect to Segura, the Arriaga Declaration described him merely as an "employee." In his deposition testimony, Arriaga stated that Segura served as a "lead" when Lara was away. On appeal, appellants characterize Segura as a "high level" employee. However, the complaint alleged Segura "did not hold a managerial office," and appellants' attempt to imbue Segura with "high-level" duties improperly expands the issues or theories beyond those alleged in the complaint. (See Jacobs, supra, 14 Cal.App.5th at p. 444.) "We may not consider a new theory raised by a plaintiff in opposition to summary judgment, or on appeal from the granting of summary judgment, where that theory is not supported by the pleadings." (Schmidt v. Citibank, N.A. (2018) 28 Cal.App.5th 1109, 1125.) Therefore we conclude, in light of plaintiffs' allegations in the complaint and based on the evidence submitted in connection with the summary judgment motion, that there is no triable issue of fact whether Segura had a fiduciary duty to Arriaga and A&A.
Turning to Lara, as discussed above, Arriaga's declaration described additional duties Lara performed for A&A, such as scheduling employees, assisting in training, interviewing and recommending the hiring of staff, advising Arriaga to give a pay raise to employees at a certain point, recommending start pay for all new employees at the Milpitas restaurant, and auditing time cards.
With respect to Lara's duties as to A&A's business relationship with Dave & Buster's, Arriaga stated Lara's duties included reporting to Arriaga "if Lara would hear of any problems that may have occurred at any of the other Dave and Busters stores so that they could, or Arriaga would address them and correct the problem." "Any problems that would happen at Dave and Busters and the Dave and Busters Managers needed something addressed they all knew to talk with Lara and he would deal with it, and if he couldn't Lara would contact Arriaga." Arriaga further noted that Lara "was introduced" to all of Dave and Buster's "Regional Managers, General Managers at all stores as well as the Director of Security." In paragraph 6 of his declaration, Arriaga asserted that Lara would "meet with agents of the customers" and "advise Plaintiff about any potential areas of concern that could potentially cause damage in the relationship." Arriaga's declaration did not refer to Lara as the "Director of Operations" or claim he held this position at A&A.
e. Analysis
We have carefully looked at the admissible statements in Arriaga's declaration and are not persuaded that they raise any triable issue of fact that Lara owed Arriaga or A&A a fiduciary duty based on purported management responsibilities involving the exercise of discretionary authority. While Arriaga stated that he "trusted" Lara, " '[i]t is not every case where parties trust each other that the law recognizes [the relationship] as confidential.' " (Ampuero v. Luce (1945) 68 Cal.App.2d 811, 819.) Furthermore, " 'An issue of fact can only be created by a conflict of evidence. . . . [A]n issue of fact is not raised by "cryptic, broadly phrased, and conclusory assertions" [citation], or mere possibilities.' " (Brown v. Ransweiler (2009) 171 Cal.App.4th 516, 525.)
Beyond the assertion that he "trusted" Lara, Arriaga's declaration does not support a reasonable inference that he imparted any particular trust in Lara over the business's assets or provided him with discretion in managing A&A's business affairs. For example, plaintiffs' opposition confirmed that Arriaga held the "ultimate authority to hire or fire employees," and his declaration only stated that he would rely on Lara for information and recommendations. Arriaga did not state either Lara or Segura had access to the business's pricing information or trade secrets or that Lara had any power to make policy-level decisions for A&A's business.
While appellants' briefing claims that Lara was a "Director of Operations," Lara disputed he held this position, and Arriaga did not make this claim in his declaration. Furthermore, Arriaga admitted in written discovery that no document exists supporting such a description for Lara. We conclude no admissible evidence supports this assertion.
Appellants argue that "[w]hile regular employees who are not officers or directors may not have a fiduciary duty, managers and high-level supervisors do in fact stand in a fiduciary relation to their employers." For that proposition, they cite to language from Sarkes Tarzian, Inc. v. Audio Devices, Inc. (S.D. Cal. 1958) 166 F.Supp. 250, 278, which states "the law frowns upon breaches of trust by those, including employees occupying fiduciary relations." The language in Sarkes Tarzian does not undermine our conclusion here. That case involved a trade secrets dispute, and the court ultimately found no violation of trust by the employee-defendants (whose titles ranged from director and manager, research engineer, technical supervisor, and other roles) who allegedly had access to trade secrets through confidences imposed by their former employer. (Id. at p. 254.) There is no evidence, including in Arriaga's declaration, that Lara was subject to such confidences or had access to confidential A&A information. As noted above, there is no evidence that Lara assumed a high level role at A&A or had access to A&A's pricing information or used confidential A&A information to prepare Maddison Group's bid for Dave and Buster's.
Although Sarkes Tarzian was disapproved of by Droeger v. Welsh Sporting Goods Corp. (9th Cir. 1976) 541 F.2d 790, federal courts still occasionally refer to it in trade secrets cases. (See, e.g., Rent Information Technology, Inc. v. Home Depot U.S.A. (C.D. Cal., Oct. 17, 2008, No. CV05-7198 R (JWJX)) 2008 WL 11334206, at *6 [citing Sarkes Tarzian for the proposition that " 'matters which are generally known in the trade or readily discernible by those in the trade cannot be made secret by being so labelled in an agreement' "].)]
Having reviewed the evidence submitted by both parties on summary judgment, we conclude appellants produced no admissible evidence that raised any triable issue of fact that either Lara or Segura participated in the management of A&A, exercising discretionary authority, such that they could be considered to have fiduciary duties to the corporation as a matter of law. (See Memorial Coliseum, supra, 233 Cal.App.4th at p. 834.) Therefore, the trial court properly granted summary adjudication to defendants of the cause of action for breach of fiduciary duty.
In light of this conclusion, we do not address appellants' arguments about the evidence going to a potential breach of any duty.
2. Breach of Implied-in-Fact Contract
Appellants argue the trial court erred in granting summary adjudication of the seventh cause of action for breach of implied-in-fact contract because "uncontroverted" evidence shows that Lara and Segura agreed impliedly through their conduct to communicate any "issues" Dave & Buster's might have with A&A to Arriaga. They contend the trial court improperly relied on the acknowledgement that they were at-will employees to find that an implied-in-fact contract did not exist. In the alternative, appellants request that we grant them opportunity to amend their complaint. Respondents counter that they negated an essential element of the contractual claim by showing that there was no underlying agreement that Lara and Segura would communicate to Arriaga problems that Dave & Buster's was having with A&A, and plaintiffs failed to raise any admissible evidence to the contrary.
As with the breach of fiduciary duty claim, appellants do not advance any arguments in this court with respect to Maddison Group, and we therefore conclude appellants have abandoned any claim on appeal with respect to the trial court's summary adjudication of this cause of action in favor of Maddison Group. See footnote 14, ante.
a. Legal Principles
As with any contract claim, a key element is the mutual assent of the parties to the contract. " '[T]he vital elements of a cause of action based on contract are mutual assent (usually accomplished through the medium of an offer and acceptance) and consideration. As to the basic elements, there is no difference between an express and implied contract. While an express contract is defined as one, the terms of which are stated in words (Civ. Code, § 1620), an implied contract is an agreement, the existence and terms of which are manifested by conduct (Civ. Code, § 1621). . . . both types of contract are identical in that they require a meeting of minds or an agreement [citation]. Thus, it is evident that both the express contract and contract implied in fact are founded upon an ascertained agreement or, in other words, are consensual in nature, the substantial difference being in the mode of proof by which they are established.' " (Pacific Bay Recovery, Inc. v. California Physicians' Services, Inc. (2017) 12 Cal.App.5th 200, 215.) Where a written contractual term exists, "the law does not recognize implied contract terms that are at variance with the terms of the contract as expressly agreed or as prescribed by statute." (Huong Que, Inc. v. Luu (2007) 150 Cal.App.4th 400, 412, italics omitted (Huong).)
b. Plaintiffs' Complaint
According to the complaint, "[e]ven though Plaintiff and Defendants had not entered into a long-term employment contract and even though Defendants' employment with Plaintiff was an at-will arrangement, Defendants' conduct and performance while employed by Plaintiff was governed by an implied in fact contract." In addition to their duty to cultivate a "healthy business relationship" with Dave & Buster's and A&A, the complaint alleged that Segura and Lara had the "duty [] to communicate any problems [Dave & Buster's] was experiencing with the services they were receiving from Plaintiffs and its employees and to assist Plaintiff in working with [Dave & Buster's] in resolving such problems so as to ensure a healthy business relationship with [Dave & Buster's]." It further alleged that Lara and Segura breached this implied contractual duty by damaging "and eventually stealing the relationship" with Dave & Buster's.
c. Defendants' Evidence
Segura and Lara did not dispute that every security guard employed by Arriaga and A&A "was charged with the responsibility to cultivate and maintain the relationship" between Arriaga and A&A and their main customer, Dave & Buster's. However, they denied that they ever agreed that they would communicate to Arriaga problems Dave & Buster's had with A&A's services or be responsible for resolving them.
Arriaga and A&A did not have any document in the form of a policy, employee handbook, or other writing that delineated the duties of A&A's employees. The only writing defining the employment relationship was an "acknowledgement" that required employees to acknowledge their " 'part time on call status only.' "
Based on the above evidence, we determine that defendants provided evidence that tended to show that Lara and Segura did not through their conduct assume a contractual obligation to communicate problems Dave & Buster's had with A&A's services to plaintiffs. Therefore, defendants met their "initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact." (Aguilar, supra, 25 Cal.4th at p. 850.)
d. Plaintiffs' Evidence
The sole evidence submitted by plaintiffs was Arriaga's declaration. In paragraph 10 Arriaga stated, "Based on the duties taken on by Lara and the fact that they were my employees, I understood that they owed me a duty to inform me of developments that would affect my business and their jobs. I expected such information to be conveyed to me as a part of my employees performing their duties with reasonable skill. I had trusted them to do so."
e. Analysis
Appellants argue that the trial court improperly relied on the acknowledgement that Segura and Lara were part-time employees to find that an implied-in-fact contract did not exist. We generally agree that Segura's and Lara's part-time status is not fatal to this cause of action. It is undisputed that the "acknowledgement," which the parties did not include in the record on appeal, required employees to acknowledge their " 'part time on call status only.' " Based on the evidence in the record summarizing its contents, the acknowledgement does not address one way or the other, and therefore does not foreclose, the implication of additional duties.
However, appellants' claim fails because there is no evidence to support a finding that the parties' conduct created the implied contractual term that, while they had the undisputed duty to "cultivate" the business relationship with Dave & Buster's, Lara and Segura also agreed by their conduct to "communicate any problems encountered with A&A." There is no evidence, nor would a factfinder reasonably infer from the existing evidence, that Lara's contractual duties to Arriaga were expanded to include this promise merely because Arriaga "introduced" Lara to Dave & Buster's management or even because Lara met with the unidentified "agents of the customers," as asserted in Arriaga's declaration.
"[T]he very heart of an enforceable implied in fact contract is the mutual intention of the parties; hence the assumption, intention or expectation of either party alone can give rise to no inference of an implied contract." (Division of Labor Law Enforcement v. Transpacific Transportation Co. (1977) 69 Cal.App.3d 268, 277.) In the absence of any evidence that he communicated these expectations to Lara, Arriaga's statements about his subjective beliefs that Lara would disclose to him "developments" that would affect Arriaga's business fail to create a triable issue of material fact of an implied contract as alleged in the complaint. For these reasons, the trial court did not err in summarily adjudicating the implied-in-fact contract cause of action in favor of defendants.
Alternatively, appellants request that we turn "the motion for summary judgment into a motion for summary judgment on the pleadings and allow the party the opportunity to amend." We understand this request as one to amend the complaint and address this procedural issue below.
3. Fraud by Concealment (First Cause of Action)
Appellants contend their cause of action for fraudulent concealment should have survived summary judgment. They argue the trial court ignored both the existence of defendants' fiduciary duty and the duty of Segura and Lara as employees to be loyal to A&A by disclosing their "negotiations with Dave & Busters" during their employment. Respondents counter that, given the employment relationship at issue, there was no duty flowing either from a fiduciary duty or a general duty of loyalty to disclose the interactions with Dave & Buster's.
As with the preceding claims, appellants do not advance any arguments in this court with respect to Maddison Group and fraudulent concealment, and we conclude appellants have abandoned any claim on appeal with respect to the trial court's summary adjudication of this cause of action in favor of Maddison Group. See footnote 14, ante.
a. Legal Principles
A claim for fraudulent concealment has five elements. The plaintiff must plead that "(1) the defendant . . . concealed or suppressed a material fact, (2) the defendant [was] under a duty to disclose the fact to the plaintiff, (3) the defendant . . . intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff [was] unaware of the fact and would not have acted as he [or she] did if he [or she] had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage." (Marketing West, Inc. v. Sanyo Fisher (USA) Corp. (1992) 6 Cal.App.4th 603, 612-613 (Marketing West).) With respect to the element of duty, "[t]he general rule for liability for nondisclosure is that even if material facts are known to one party and not the other, failure to disclose those facts is not actionable fraud unless there is some fiduciary or confidential relationship giving rise to a duty to disclose." (La Jolla Village Homeowners' Assn. v. Superior Court (1989) 212 Cal.App.3d 1131, 1151 (La Jolla), disapproved of on other grounds by Jimenez v. Superior Court (2002) 29 Cal.4th 473.)
Where there is no fiduciary or other confidential relationship giving rise to a general duty to disclose, there are three circumstances that may nevertheless give rise to such a duty: " '(1) the defendant makes representations but does not disclose facts which materially qualify the facts disclosed, or which render his disclosure likely to mislead; (2) the facts are known or accessible only to defendant, and defendant knows they are not known to or reasonably discoverable by the plaintiff; [or] (3) the defendant actively conceals discovery from the plaintiff.' " (Marketing West, supra, 6 Cal.App.4th at p. 613, quoting Warner Constr. Corp. v. City of Los Angeles (1970) 2 Cal.3d 285, 294, fns. omitted.)
b. Plaintiffs' Complaint
The complaint alleged Lara, Segura, and Maddison Group had a "legal duty to disclose" certain facts, including that Lara and Segura had communicated with Dave & Buster's by telephone in July 2016 regarding replacing A&A as Dave & Buster's security company with Maddison Group and how Maddison Group "could beat Plaintiffs' prices." In addition, it alleged Lara had a legal duty to inform plaintiffs "of these facts on the ground that he was an officer of the Business."
c. Defendants' Evidence
As discussed above, Lara and Segura submitted declarations each denying that they had been entrusted with officer-like duties and asserting that they generally understood that their responsibility was to work as armed security guards at the Milpitas restaurant. They stated they were not "tasked" either by Arriaga or A&A to interact "with Dave & Buster's management." However, they acknowledged meeting with a representative of Dave & Buster's and, following this meeting, they submitted a proposal on behalf of Maddison Group to Dave Buster's. They stated they never made any false statement of fact to Arriaga or A&A about either their relationship with Dave & Buster's or "anything ever communicated to [them] by any employee of Dave & Buster's."
As described above, a failure to disclose facts is not actionable fraud in the absence of a fiduciary or confidential relationship giving rise to a duty to disclose. (La Jolla, supra, 212 Cal.App.3d at p. 1151.) In addition, a non-fiduciary may have a duty to disclose if he or she makes partial and misleading disclosures, possesses facts which the other party cannot learn, or actively conceals information. (Marketing West, supra, 6 Cal.App.4th at p. 613.) Defendants' evidence was sufficient to satisfy their burden of production that plaintiffs could not establish the duty element of the cause of action for fraudulent concealment both because no fiduciary or confidential relationship existed between them and Arriaga and A&A and no facts supported the existence of the three exceptional circumstances. Consequently, the burden shifted to plaintiffs to make a prima facie showing of the existence of any triable issue of material fact on duty. (See Aguilar, supra, 25 Cal.4th at p. 850.)
d. Plaintiffs' Evidence
The sole admissible evidence offered by plaintiff was the Arriaga Declaration, the contents of which we have detailed above.
As we stated in Section II.B.4, ante, the documents submitted with the Sabahat Declaration are inadmissible. Plaintiffs had cited to these documents in their separate statement to show that Dave & Buster's accepted Maddison Group's bid "without any back and forth communication" and "[i]t is highly unlikely that a person with no experience in the area of business would quote a fee on the first attempt that is just right." Therefore we disregard those statements. Moreover, this speculative statement is not itself evidence. (See Aguilar, supra, 25 Cal.4th at p. 864.)
e. Analysis
For the reasons stated in our discussion of breach of fiduciary duty, plaintiffs produced no evidence showing any triable issues of material fact that either Lara or Segura owed a fiduciary duty to A&A or had assumed a confidential role toward them. In addition, we conclude that plaintiffs did not carry their burden of production of showing that any of the exceptions imposing such a duty to disclose in the absence of a fiduciary or confidential relationship applied here. (See Marketing West, supra, 6 Cal.App.4th at p. 613.)
See Section II.D.1, ante.
As respondents point out, Arriaga was in control of Dave & Buster's contractual relationship with A&A and was the sole negotiator with them of A&A's pricing. The status of A&A's contract and business relationship with Dave & Buster's was clearly accessible to Arriaga, who communicated directly with the restaurant chain. For example, in his deposition Arriaga stated he personally negotiated the rates paid for security services with Dave & Buster's director of security. There is also no evidence that Lara and Segura ever made any false statement of fact to Arriaga and A&A about their relationship with Dave & Buster's.
Appellants argue that a "duty to speak/disclose" was triggered by Lara's and Segura's general duty of loyalty as employees to A&A. According to respondents, no duty of loyalty exists because defendants negated the existence of officer, director, or managing agent relationship, and the mere fact that Arriaga had unilaterally " 'trusted' " or placed confidence in Lara did not impose a duty to disclose. Although we discuss the duty of loyalty in further detail below, we are not persuaded that an employee's duty of loyalty required Segura or Lara to tell Arriaga that Dave & Buster's had decided to replace A&A as its security services provider and that Maddison Group was providing a bid for the Dave & Buster's contract. Appellants provide no authority supporting the imposition of this legal duty to speak in the absence of a fiduciary relationship.
Although the parties do not define the term " 'managing agent,' " we note that such employees are subject to statutory liability beyond those of regular employees in certain circumstances. The California Supreme has defined " 'managing agent' " to mean "only those corporate employees who exercise substantial independent authority and judgment in their corporate decisionmaking so that their decisions ultimately determine corporate policy." (White v. Ultramar, Inc. (1999) 21 Cal.4th 563, 566-567, italics added; see also Voris v. Lampert (2019) 7 Cal.5th 1141, 1157 ["The Labor Code also imposes special sanctions on individual directors, officers, or managing agents who are responsible for wage nonpayment."].)
"An employee does not breach his duty of loyalty by preparing to compete with his employer." (Mamou v. Trendwest Resorts, Inc. (2008) 165 Cal.App.4th 686, 719-720 (Mamou).) As the sole officer of A&A and negotiator of the contract with Dave & Buster's, Arriaga had full control of that business relationship. Plaintiffs produced no admissible evidence that either Arriaga or A&A was unable to secure information about the status of the business relationship between plaintiffs and Dave & Buster's. Appellants have cited no authority that suggests that Segura's and Lara's prior knowledge of the decision by Dave & Buster's to replace A&A imposed on them the affirmative obligation as a matter of law to inform Arriaga of that fact in the absence of any fiduciary relationship. That Lara and Segura submitted a bid on behalf of Maddison Group did not impose on them an obligation to "speak" to Arriaga about that bid where there was no evidence or inference from the evidence that A&A was submitting its own counter bid.
For these reasons, the trial court did not err in summarily adjudicating the fraud by concealment cause of action in favor of defendants.
In light of our conclusion that the trial court properly granted summary adjudication to defendants on the issue of a duty to disclose, we do not address appellants' arguments with respect to other elements of this cause of action.
E. Summary Adjudication of the Causes of Action for Tortious Interference, Unfair Competition, and Conspiracy
The remaining three causes of action for intentional interference with prospective economic advantage (the third cause of action), violation of California's unfair competition law (Bus. & Prof. Code, § 17200 et seq.) (UCL) (the second cause of action), and conspiracy (the sixth cause of action) all involve the core legal issue of whether the undisputed actions committed by Segura and Lara while employed with A&A were wrongful.
1. Plaintiffs' Allegations of Wrongful Acts by Segura and Lara
With respect to the factual underpinnings to these causes of action, appellants generally describe the allegedly wrongful actions at issue on appeal as follows: while Lara and Segura worked for A&A, they: (1) ran Maddison Group, a security business in competition with A&A; (2) actively competed with A&A by secretly negotiating with Dave & Buster's and by undercutting A&A's prices to win the contract with Dave & Buster's; and (3) solicited a large number of A&A employees to work for Maddison Group.
As with the preceding claims, appellants do not advance any arguments in this court with respect to Maddison Group and wrongful acts committed by that entity, and we conclude appellants have abandoned any claim on appeal with respect to the trial court's summary adjudication of these causes of action in favor of Maddison Group. See footnote 14, ante.
We distill these acts from the seven acts listed by appellants throughout their briefing: (1) "Lara was running his own competing security group named Maddison Group while concurrently employed by A&A;" (2) "[d]espite their employment, and contrary to their employer's interests, communications between Lara, Segura and A&A's biggest customer, Dave & Busters began sometime in 2016"; (3) "Defendants engaged in negotiations with Dave & Buster while they were still working for A&A" (italics omitted); (4) "[w]hile working for A&A, Defendants put together a proposal to undercut A&A and instead be the ones to provide security services for Dave & Busters"; (5) "This was never expressed to their present employer whose client they were meeting with and working to undermine and take over;" (6) "Defendants (while employed for A&A) began soliciting A&A employees"; and (7) "A&A lost its biggest client Dave & Busters to Madison group [sic]."
While each of these causes of action has distinct legal elements, the parties on appeal agree that whether summary adjudication of these causes of action was proper turns on a single common issue—whether there was a triable issue of material fact that Lara or Segura committed a "wrongful" act.
2. Analysis of the Complaint's Allegations of Wrongdoing
The second, third, and sixth causes of action alleged a variety of legal theories for why these acts were "wrongful" (i.e., illegal), most of which appellants have abandoned on appeal, are irrelevant, or which we have already rejected. For example, under the second cause of action for violation of the unfair competition law, plaintiffs alleged in their complaint that defendants' conduct was an " 'unlawful, unfair, or fraudulent business act or practice" and, in particular, that "[d]efendants used their position of trust with Plaintiff to use the trade secrets belonging to Plaintiff to steal Plaintiff's customer." In addition to the UCL itself, the complaint alleged that defendants violated the following statutes: Civil Code sections 1701 and 1709, Labor Code sections 2854, 2856, 2858, 2859, and Civil Code section 1549.
Civil Code section 1701 is irrelevant. Civil Code section 1709 involves fraud, and we have already affirmed the trial court's summary adjudication of the analogous fraud claim contained in the first cause of action. Appellants have abandoned on appeal any challenge to the summary adjudication of the Labor Code violations alleged in the complaint and do not press their contention that defendants' conduct was "unfair." Civil Code section 1549 merely defines a contract, and we have already affirmed the trial court's summary adjudication of the breach of implied-in-fact contract claim contained in the seventh cause of action. Appellants have similarly abandoned any contention that Lara and Segura misappropriated plaintiffs' trade secrets, which was subsumed in their conversion claim that alleged defendants interfered with trade secrets. The cause of action for tortious interference relied on the same theories of wrongdoing asserted in the UCL claim, and the conspiracy cause of action was essentially derivative of the other causes of action.
Civil Code section 1701 states, "Where a contract is executed in duplicate, an alteration or destruction of one copy, while the other exists, is not within the provisions of the last section." That provision appears to have no application here and appellants on appeal do not contend otherwise.
Civil Code section 1709 states, "[o]ne who willfully deceives another with intent to induce him to alter his position to his injury or risk, is liable for any damage which he thereby suffers."
See Section II.D.3, ante.
Although in their opening brief appellants rely on both the "unlawful" and "unfair" prongs of the UCL, their reply brief discusses only the unlawful prong, and we therefore understand them to have abandoned any argument based on alleged "unfair" acts rather than "unlawful" acts. Moreover, even if we were to address the "unfair" prong, we are not persuaded that there is any evidence that the business competition at issue amounts to "conduct that threatens an incipient violation of an antitrust law, or violates the policy or spirit of one of those laws because its effects are comparable to or the same as a violation of the law, or otherwise significantly threatens or harms competition." (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 187 [describing standard for unfair conduct in action by a competitor alleging anticompetitive practices].)
Civil Code section 1549 states, "A contract is an agreement to do or not to do a certain thing."
See Section II.D.2, ante.
See footnote 6, ante.
In the cause of action of intentional interference with prospective economic advantage (third cause of action), the complaint alleged defendants wrongfully disrupted "the economic relationship" between plaintiff and Dave & Buster's, relying on the same statutory provisions of the Civil Code and Labor Code contained in the cause of action for violation of the unfair competition law. The conspiracy cause of action (sixth cause of action) alleged defendants conspired to "do all of the acts complained of above, including the breach of fiduciary duty, unfair competition and conversion."
Having concluded these potentially wrongful acts by defendants are either unsupported by the evidence, have been abandoned by plaintiffs, or are irrelevant, we are left with appellants' contention that Lara and Segura committed a wrongful act by breaching their duty of loyalty as employees, which would satisfy the requirement of an underlying wrongful act to support liability under the second, third, and sixth causes of action. Although plaintiffs did not plead in the complaint a separate cause of action for breach of loyalty, the parties do not dispute that the complaint adequately alleges this theory of wrongdoing. We now to turn to the elements of this claim and consider the relevant evidence submitted by the parties.
3. Duty of Loyalty: Legal Principles
"The elements of a cause of action for breach of a duty of loyalty, by analogy to a claim for breach of fiduciary duty, are as follows: (1) the existence of a relationship giving rise to a duty of loyalty; (2) one or more breaches of that duty; and (3) damage proximately caused by that breach." (Huong, supra, 150 Cal.App.4th at p. 410.) Appellants generally argue that an employee's duty of loyalty to his or her employer is a sweeping one, and triable issues exist as to whether Segura and Lara breached their respective duties as employees. By contrast, respondents contend that, as with fiduciary duty, the duty of loyalty only exists when there is the "corporate relationship of 'officers,' 'directors,' or 'managing agents.' "
We do not agree with respondents' contention that lower-level employees are exempt from any duty of loyalty. California law generally affords a broad scope to employees' duty of loyalty. "[A]n employee, while employed, owes undivided loyalty to his employer. [Citation.] 'While California law does permit an employee to seek other employment and even to make some "preparations to compete" before resigning [citation], California law does not authorize an employee to transfer his loyalty to a competitor." [Citation.] The duty of loyalty is breached, and the breach 'may give rise to a cause of action in the employer, when the employee takes action which is inimical to the best interests of the employer.' [Citation.] Indeed, by statute, '[a]n employee who has any business to transact on his own account, similar to that intrusted [sic] to him by his employer, shall always give the preference to the business of the employer.' (Lab. Code, § 2863.)" (Huong, supra, 150 Cal.App.4th at p. 414.)
In Huong, this court explained that "[t]he duty of loyalty embraces several subsidiary obligations, including the duty 'to refrain from competing with the principal and from taking action on behalf of or otherwise assisting the principal's competitors' (Rest.3d, Agency, § 8.04), the duty 'not to acquire a material benefit from a third party in connection with . . . actions taken . . . through the agent's use of the agent's position' (id., § 8.02), and the duty 'not to use or communicate confidential information of the principal for the agent's own purposes or those of a third party' (id., § 8.05(2))." (Huong, supra, 150 Cal.App.4th at p. 416.) This court held in Huong that a company's "managing agents" would breach a duty of loyalty by "diverting" customers to their own competing business "while ostensibly remaining plaintiffs' employees or agents." (Id. at p. 417.)
However, California law does generally permit employees to "prepare to compete" with an employer without breaching the duty of loyalty. As noted by the California Supreme Court in the context of an officer in a fiduciary role, "the mere fact that the officer makes preparations to compete before he resigns his office is not sufficient to constitute a breach of duty. It is the nature of his preparations which is significant. No ironclad rules as to the type of conduct which is permissible can be stated, since the spectrum of activities in this regard is as broad as the ingenuity of man itself." (Bancroft-Whitney Co. v. Glen (1966) 64 Cal.2d 327, 346, fn. omitted.)
Although case law does not establish a bright line demarcating an employee's permissible act of preparing to compete from that of wrongfully engaging in actual competition, precedent provides some guidelines. For instance, this court has stated that "an employee's mere formation of a potentially competing corporation does not breach a duty to his employer." (Mamou, supra, 165 Cal.App.4th at p. 719.) However, a current employee may not solicit its employer's customers. (Ibid.) " 'Solicit' is defined as: 'To ask for with earnestness, to make petition to, to endeavor to obtain, to awake or excite to action, to appeal to, or to invite.' " " 'It implies personal petition and importunity addressed to a particular individual to do some particular thing.' " (Aetna Bldg. Maintenance Co. v. West (1952) 39 Cal.2d 198, 203, italics omitted.) Similarly, a current employee may not solicit fellow employees to work for a competing business. (19 Williston on Contracts § 54:27 (4th ed. 2008); Huong, supra, 150 Cal.App.4th at p. 416.)
Regarding the duties of former employees, the California Supreme Court has favored the policy of competition. "[I]t has long been the public policy of our state that '[a] former employee has the right . . . to enter into competition with his former employer, even for the business of . . . his former employer, provided such competition is fairly and legally conducted.' " (Reeves v. Hanlon (2004) 33 Cal.4th 1140, 1149.) Moreover, " 'it is not ordinarily a tort to hire the employees of another for use in the hirer's business.' " (Ibid.) "[T]his general rule is subject to one significant limitation: 'This immunity against liability is not retained . . . if unfair methods are used in interfering in such advantageous relations.' " (Ibid.) " 'Even though the relationship between an employer and his employee is an advantageous one, no actionable wrong is committed by a competitor who solicits his competitor's employees or who hires away one or more of his competitor's employees who are not under contract, so long as the inducement to leave is not accompanied by unlawful action.' " (Id. at p. 1150.)
4. Defendants' Evidence
Defendants' evidence did not dispute that Lara and Segura ran Maddison Group, a security business, while employed by A&A. On or about August 4, 2016, while still employed as security guards by A&A, Lara and Segura learned that Dave & Buster's intended to replace its "current" security guard service (i.e., A&A) and was interested in "exploring" hiring Maddison Group. Another employee of Maddison Group arranged a meeting between Lara and Segura and a representative of Dave & Buster's. Lara and Segura met with that representative in San Jose on August 15, 2016. At that meeting, the representative invited Segura and Lara to submit a bid to provide security services for Dave & Buster's. Using market information they learned from running their own security guard business and not relying on any pricing information from A&A or Arriaga, Lara and Segura prepared a proposal for Dave & Buster's. Lara and Segura eventually got the security contract from Dave & Buster's for their own company, Maddison Group.
Lara and Segura did not approach Dave & Buster's about a potential contract with Maddison Group for security services. In his deposition, Arriaga admitted that he had no information that Lara and Segura had approached Dave & Buster's in the first instance.
Lara and Segura stated that they offered a job to "some, but not all" of the employees of A&A to work for their own company, Maddison Group. Notwithstanding appellants' repeated assertions in their briefing, neither the Lara nor Segura Declaration indicates when they made these employment offers. There was no admissible evidence about the number of employees who left A&A to join Maddison Group.
In their briefing in this court, respondents state (apparently based on the Lara deposition) that Lara and Segura eventually hired "about 60" of A&A's armed security guards to work for Maddison Group. As we have explained above, the purported deposition testimony submitted along with the Sabahat Declaration was inadmissible. See Section II.B.4, ante. Even if we were to consider this evidence, it would not affect our conclusion that there is no material evidence of disputed fact whether Lara and Segura breached a duty of loyalty by hiring these employees in the absence of any information about the timing of the employment offers.
Based on this evidence, defendants made a prima facie showing that they did not commit any wrongful act or breach their duty of loyalty by soliciting A&A's main customer or by soliciting their fellow coworkers to come work for Maddison Group on the Dave & Buster's contract while Lara and Segura were still working for A&A.
5. Plaintiffs' Evidence
In opposition, Arriaga stated that Dave & Buster's had terminated services with A&A because a competitor (i.e., Maddison Group) had "undercut" his prices. He offered no evidence that A&A was still being considered by Dave & Buster's as a suitable provider of security services when Dave & Buster's approached Lara and Segura about the bid or that he had been invited to submit a bid by Dave & Buster's. Arriaga offered no evidence that either Lara or Segura approached Dave & Buster's about the security services contract. Arriaga did not dispute his prices were higher than those offered by Maddison Group. Arriaga's declaration contained no information about any solicitation of A&A employees by Lara and Segura or about the number and timing of the employee departures from A&A to Maddison Group. In the excerpts of his deposition in the record, Arriaga similarly did not address the issue of A&A employees leaving his company to work for Maddison Group.
6. Analysis of the Duty of Loyalty
There is no evidence from which a reasonable trier of fact could conclude that Lara and Segura stole or diverted Dave & Buster's away from A&A. Defendants presented evidence that Dave & Buster's approached them in the first instance, and plaintiffs presented no evidence raising a triable issue of material fact on that point. Plaintiffs presented no evidence that Dave & Buster's was still considering retaining A&A as its security services provider at the time it approached Lara and Segura.
With respect to the solicitation of A&A employees, there is no admissible evidence of how and when Lara and Segura approached security guards working for A&A about working for Maddison Group. Speculation is not evidence. (Aguilar, supra, 25 Cal.4th at p. 864.) There is no evidence that Lara, Segura, or Maddison Group used unlawful means in that effort, such as relying on internal A&A pay information to entice the A&A employees away from A&A. There is a similar absence of evidence that Lara and Segura hired the employees away for an unlawful purpose, such as for the purpose of stealing Dave & Buster's as a customer.
In their briefing in this court, respondents state that Lara and Segura eventually hired "about 60" of A&A's armed security guards to work for Maddison Group. Even assuming there is admissible evidence of this fact, there is no evidence at all about the timing or manner of those departures. Based solely on the number of employees that left A&A to work for Maddison Group, we are not persuaded that a reasonable jury could find there is direct or circumstantial evidence that Lara and Segura solicited A&A's employees while they were employed for A&A or, following their departure, enticed these employees to leave A&A through unlawful means.
See footnote 33, ante.
In the absence of any triable issue of material fact that Lara or Segura breached any duty of loyalty to A&A or Arriaga, and in light of our prior conclusions with respect to the causes of action for breach of fiduciary duty, breach of implied-in-fact contract, and fraud by concealment, we conclude the trial court did not err in granting summary adjudication to defendants on the causes of action for intentional interference with prospective economic advantage, unfair competition, and conspiracy.
F. Procedural Issues
We turn to two procedural issues raised by appellants: first, whether the trial court abused its discretion by denying their request for a continuance, and, second, whether we should grant appellants' request for leave to amend their complaint.
1. Continuance of the Summary Judgment Proceedings
In its order granting summary judgment, the trial court denied plaintiffs' request for a continuance of the summary judgment proceedings based on section 437c, subdivision (h) (hereafter section 437c(h)). The trial court concluded plaintiffs' request for such relief was subject to its discretion, as the Sabahat Declaration did not satisfy the criteria for mandatory relief under the statute.
Appellants do not dispute the trial court's finding that the Sabahat Declaration did not fulfill the requirements for mandatory relief under section 437c(h). They argue the trial court nevertheless should have granted a continuance based on its mandate to "be liberal in granting continuances" and abused its discretion in failing to allow a "continuance, albeit even a conditional one."
We review the trial court's decision on this issue for abuse of discretion. (Chavez v. 24 Hour Fitness USA, Inc. (2015) 238 Cal.App.4th 632, 640.) Section 437c(h) provides that, when "it appears from the affidavits submitted in opposition to a motion for summary judgment or summary adjudication, or both, that facts essential to justify opposition may exist but cannot, for reasons stated, be presented, the court shall deny the motion, order a continuance to permit affidavits to be obtained or discovery to be had, or make any other order as may be just. The application to continue the motion to obtain necessary discovery may also be made by ex parte motion at any time on or before the date the opposition response to the motion is due."
When faced with a request for relief under section 437c(h), the trial court must determine whether the declaration or affidavit meets the substantive standards of the statute in that it demonstrates " '(1) the facts to be obtained are essential to opposing the motion; (2) there is reason to believe such facts may exist; and (3) the reasons why additional time is needed to obtain these facts.' " (Frazee v. Seely (2002) 95 Cal.App.4th 627, 633.) If the party's submission fulfills these requirements, "the court shall deny the [summary judgment] motion, order a continuance to permit affidavits to be obtained or discovery to be had, or make any other order as may be just." (§ 437c(h).) If the party does not fulfill the statutory requirements, the trial court is nevertheless "free to grant a continuance under its broad discretionary power" if a party establishes "good cause" for a continuance. (Johnson v. Alameda County Medical Center (2012) 205 Cal.App.4th 521, 533.) "Good cause has been found where an attorney's 'dire medical condition' or other special circumstances prevented the completion of discovery." (Ibid.)
Applying these principles and having reviewed the Sabahat Declaration, we conclude the trial court did not abuse its discretion in denying plaintiffs' request for relief under section 437c(h). There is no dispute that plaintiffs failed to fulfill the standards set forth under that section. Based on our review of the record, we are also not persuaded that any general policy favoring continuances demanded that the trial court grant plaintiffs' request.
2. Leave to Amend
Appellants' initial brief in this court requests leave to amend the implied-in-fact contract claim, relying on Bostrom v. County of San Bernardino (1995) 35 Cal.App.4th 1654, 1663 (Bostrom). In their reply brief, appellants request leave to amend all of their causes of action.
In Bostrom, the court held that "if summary judgment is granted on the ground that the complaint is legally insufficient, but it appears from the materials submitted in opposition to the motion that the plaintiff could state a cause of action, the trial court should give the plaintiff an opportunity to amend the complaint before entry of judgment." (Bostrom, supra, 35 Cal.App.4th at p. 1663.) That decision does not assist appellants, because the trial court here did not determine the complaint was legally insufficient.
Moreover, plaintiffs did not seek in the trial court leave to amend their complaint before the court ruled on the summary judgment motion. "[A] plaintiff wishing 'to rely upon unpleaded theories to defeat summary judgment' must move to amend the complaint before the hearing." (See Oakland Raiders, supra, 131 Cal.App.4th at p. 648.) It is undisputed plaintiffs made no such request for leave to amend in the trial court either before or during the hearing. Appellants provide no authority supporting their request on appeal that we grant them leave to amend their complaint, and we decline to do so.
III. DISPOSITION
The appeal involving claims against Lara and Segura is treated as a petition for writ of mandate. The judgment is affirmed as to all respondents. Costs on appeal are awarded to respondents.
/s/_________
Danner, J.
WE CONCUR:
/s/_________
Greenwood, P.J.
/s/_________
Grover, J.