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Castaneda v. Denny's Corp.

California Court of Appeals, Second District, Eighth Division
Mar 19, 2008
No. B195879 (Cal. Ct. App. Mar. 19, 2008)

Opinion


FILIBERTO CASTANEDA et al., Plaintiffs and Appellants, v. DENNY'S CORPORATION et al., Defendants and Respondents. B195879 California Court of Appeal, Second District, Eighth Division March 19, 2008

NOT TO BE PUBLISHED

APPEAL from an order of the Superior Court of Los Angeles County No. PC038424, John P. Farrell, Judge.

Henry W. Bockman for Plaintiffs and Appellants.

Reid & Hellyer, Terry Bridges; Diane M. Matsinger for Defendants and Respondents.

COOPER, P.J.

In this action for wrongful termination of employment, plaintiffs appeal from the dismissal of of three corporate defendants – the parent, “grandparent,” and subsidiary of plaintiffs’ employer (collectively respondents) – following the sustaining without leave to amend of their demurrer to plaintiffs’ second amended complaint (SAC). In sustaining the demurrer, the trial court ruled that plaintiffs had not pled facts sufficient to assert liability by respondents, and that plaintiffs’ second cause of action, for violation of Civil Code section 52.1 (section 52.1), subdivision (c), failed to allege such a violation.

We hold that the SAC’s allegation of agency on the part of respondents was sufficient to charge them with responsibility. On the other hand, we agree with the trial court that the second cause of action was legally insufficient. We therefore reverse the order of dismissal, with directions to sustain the demurrer to that cause of action but overrule it as to the wrongful termination cause.

FACTS

The gravamen of plaintiffs’ pleadings, including the SAC, was as follows. Plaintiffs, Filiberto Castenada, Yolanda Salmeron, and Brigitte Dollarhide, were employed as waiter and waitresses at a Denny’s restaurant in Newhall. Apparently their employer was defendant Denny’s, Inc. (not a party to this appeal). On July 3, 2005, plaintiffs walked off the job after discovering that the restaurant’s dishes and utensils were only being rinsed, not washed, and after the restaurant manager refused plaintiffs’ demand to stop the practice, as plaintiffs would not serve food in this manner. Plaintiffs refused to continue serving with unsanitary implements because to so would violate public policies and criminal provisions established by the Health and Safety Code.

Plaintiffs alleged their paychecks came from Denny’s, Inc. Denny’s, Inc. did not demur to plaintiffs’ principal cause of action in the SAC, and in their demurrers respondents cited a response to request for admission in which plaintiffs stated they were employed by Denny’s, Inc.

The next day, plaintiffs were informed that they were suspended for several days, and the end of that period they were terminated. In addition to the suspension and termination, plaintiffs alleged as an adverse employment practice that they were also “red-flagged,” so that other Denny’s restaurants, whether company-owned or franchised, would not hire them. The retaliatory termination also violated Labor Code section 1102.5, subdivision (c), which prohibits an employer from retaliating against an employee for refusing to participate in a violation of state or federal law.

In addition to a claim for wrongful termination, the SAC incorporated all of its allegations into a second cause, for “economic coercion and intimidation,” in violation of section 52.1, subdivisions (a), (b), which make actionable threatened or actual interference, by threats, intimidation, or coercion, with an individual’s rights under the California or United States Constitution or laws.

Plaintiffs’ original complaint named as defendants not only Denny’s, Inc. but also Denny’s Corporation and DFO, Inc. (as well as the nonexistent “Denny’s Restaurant” corporation). The complaint alleged mutual agency among the defendants, and that plaintiffs were employed by all of them.

The agency allegation, included in all versions of the complaint, stated as follows: “At all times herein alleged, the defendants, and each of them were acting as the agents, servants, and employees of their co-defendants herein, and of each other, and were acting at the special instance and direction of their co-defendants herein, and were acting within the purpose and scope and authority of said employment and/or agency.”

In response to a demurrer for uncertainty as to the employment relationship and actionable responsibility of each defendant, plaintiffs filed a first amended complaint (FAC). Plaintiffs asserted this complaint against Denny’s, Inc., Denny’s Corporation, DFO, Inc., and also Denny’s Holdings, Inc. Plaintiffs alleged that Denny’s Corporation owned the stock of Denny’s Holdings, Inc., which in turn owned the stock of Denny’s, Inc. DFO, Inc. was alleged to control the hiring of Denny’s restaurant employees.

The FAC alleged that Denny’s Corporation controlled and managed Denny’s Holdings, Inc. and Denny’s, Inc. “as though they were incorporated departments,” so there was not a real and equitable distinction between the three. Plaintiffs further alleged that the defendants acted in concert, and that plaintiffs were employed by one or more of them. In addition to the wrongful termination cause of action, plaintiffs alleged several other purported causes which incorporated it. One of these was for violation of section 52.1. A claim for conspiracy alleged that the defendants had “acted in concert and conspired among themselves to take adverse employment actions against the plaintiffs . . . .”

Three of the four defendants (Denny’s Holdings had not yet been served) demurred to the FAC. The demurrer postulated that plaintiffs were suing the defendants other than Denny’s, Inc. on a theory of alter ego, and argued that plaintiffs had failed to allege numerous requisite elements of that doctrine. Defendants also challenged the conspiracy claim as not constituting a separate cause of action. The demurrer identified DFO, Inc. as a subsidiary of Denny’s, Inc.

In opposition, plaintiffs asserted they were not relying significantly on alter ego, and that they had alleged liability via agency, conspiracy, and direct responsibility. Citing authorities concerned with personal jurisdiction, plaintiffs argued that their allegation that the subsidiary corporations were akin to “incorporated departments” of Denny’s Corporation rendered them agents of and imposed responsibility on that entity. With respect to their section 52.1 claim, plaintiffs identified the legal right allegedly interfered with as derived from Labor Code section 1102.5.

The trial court sustained the demurrer to all causes of action, and granted leave to amend only those for wrongful termination and violation of section 52.1.

Plaintiffs filed their SAC, again naming Denny’s, Inc. and its three related corporations. The SAC’s wrongful termination claim realleged mutual agency, and restated that Denny’s Corporation. owned Denny’s Holdings, Inc., which in turn owned Denny’s, Inc., while Denny’s, Inc. owned DFO, Inc. Denny’s Corporation and Denny’s Holdings, Inc. were now alleged as “claim[ing]” to be holding companies, whereas the FAC had simply termed them holding companies; Denny’s, Inc. was an operating company. DFO, Inc. again was alleged to manage “the manner of hiring of personnel” at Denny’s restaurants.

The SAC again alleged that Denny’s Corporation controlled and managed Denny’s Holdings Inc. and Denny’s, Inc. as though they were incorporated departments of it, so that there was no real or equitable distinction between Denny’s Corporation and the others. In this respect, the SAC alleged that the three corporations had substantially identical officers and directors and shared corporate offices; that Denny’s Corporation had caused the others to incur debt, and to guarantee debts, for it; and through control of Denny’s, Inc. and Denny’s Holdings, Inc., Denny’s Corporation operated and controlled over 2000 Denny’s restaurants, and also imposed standards of conduct upon and controlled the conduct of the employees of those subsidiaries. Plaintiffs had been employees of Denny’s, Inc., Denny’s Corporation, and Denny’s Holdings, Inc., and all defendants owned and operated the Newhall restaurant.

The SAC then set forth the operative facts of the wrongful termination claim, and alleged that all defendants had suspended, terminated, and “red-flagged” plaintiffs. There followed the Civil Code section 52.1 claim, which incorporated the previous allegations and alleged in essence that the defendants’ actions constituted interference, “by economic intimidation, coercion and retaliation,” with plaintiffs’ rights secured by Labor Code section 1102.5, thus violating section 52.1.

Respondents demurred to both causes of action; Denny’s, Inc. joined in the demurrer to the section 52.1 claim. Respondents argued that the SAC did not allege facts sufficient to charge either an alter ego or a principal-agent relationship between them and Denny’s, Inc. With respect to the second cause, respondents and Denny’s, Inc. argued that plaintiffs had failed to allege threats, intimidation, or coercion involving violence, which is what section 52.1 addressed, and that the section had been enacted to deter hate crimes.

The trial court sustained the demurrers in all respects, without leave to amend, and entered an order of dismissal with respect to respondents. Plaintiffs filed a notice of appeal from the dismissal, and also a petition for writ of mandate in this court, seeking review and reversal of the order sustaining the demurrer to the section 52.1 cause of action as to Denny’s, Inc., which remained a defendant on the wrongful termination cause. We summarily denied that petition.

DISCUSSION

The first issue presented is whether the trial court properly sustained without leave to amend respondents’ demurrer to both causes of action, on grounds plaintiffs had incurably failed to plead facts alleging respondents’ responsibility, whether independently or in relation to Denny’s, Inc.’s conduct. We assess this ruling in light of longstanding rules that a pleading need allege only ultimate facts, and that on a demurrer the court must consider the allegations of the complaint as true, liberally construe them, and not sustain without leave to amend unless there is no reasonable possibility that the plaintiff could state a cause of action. “On appeal the court is not concerned with a plaintiff’s possible difficulty or inability in proving the allegations of the complaint.” (Johnson v. County of Los Angeles (1983) 143 Cal.App.3d 298, 306.)

To assert respondents’ responsibility for plaintiffs’ termination, the SAC, like its predecessors, alleged that respondents and Denny’s, Inc. had acted as each others’ agents. (See ante, fn. 2.) This allegation included the theory that Denny’s, Inc. was the principal actor, but acted as agent of respondents, principally Denny’s Corporation. Although general and perhaps not ultimately provable, the agency allegation was sufficient to state a claim that respondents, as well as Denny’s, Inc., were responsible for plaintiffs’ wrongful termination.

Allegations of this type have long been held sufficient to withstand demurrer. (5 Witkin, Cal. Procedure (4th ed. 1997) Pleading, § 874, p. 331.) For example, Kiseskey v. Carpenters’ Trust for So. California (1983) 144 Cal.App.3d 222, 230, approved an allegation that an individual had acted as the agent of several defendants. The court held in part, “The general allegation of agency is one of ultimate fact, sufficient against a demurrer. [Citations.] We accordingly conclude that plaintiffs’ allegations of agency and that the acts of the agents [were] committed within the scope of agency and employment are sufficient . . . .” Among the authorities the court cited was the Supreme Court’s declaration in Skopp v. Weaver (1976) 16 Cal.3d 432, 437, that general allegations of agency constitute averments of ultimate fact, not conclusions of law, and are sufficient to withstand a demurrer.

Respondents argue that to assert liability of a parent corporation for acts of a subsidiary as agent, “It is settled that a bare allegation of agency” is insufficient. But the cases respondents cite are summary judgment decisions, which do not say anything about the manner of pleading agency. Although these cases define agency as requiring pervasive control by a parent corporation, whether or not those formulations will apply as an evidentiary matter is not the issue here.

Respondents also argue that the SAC failed to overcome the “presumption of corporate separateness,” referred to in Laird v. Capital Cities/ABC, Inc. (1998) 68 Cal.App.4th 727, 737. That case too involved a summary judgment, and did not address pleading requirements. Moreover, the discussion of corporate separateness that respondents cite did not concern an agency theory of liability.

Accordingly, in light of plaintiffs’ allegations of agency on the part of the defendants, the court should not have sustained respondents’ demurrer on grounds plaintiffs had not pled the liability of respondents.

There remains for consideration whether respondents were yet entitled to dismissal of the section 52.1 claim on grounds it did not state a cause of action under that statute. We conclude that this cause of action was deficient as a matter of law.

Section 52.1, subdivision (c) provides a civil remedy for a person whose constitutional or legal rights have been interfered with under subdivision (a). That subdivision penalizes interference or attempted interference with rights by “threats, intimidation, or coercion.” Plaintiffs contend that they properly invoked section 51.2 by alleging that their suspension, termination, and red-flagging interfered with their rights under Labor Code section 1102.5, subdivision (c), “by economic intimidation, coercion and retaliation.”

Section 52.1 does not list retaliation as one of the prohibited means of interference. Presumably its substitution for threats was inadvertent.

We have previously observed that section 52.1 was enacted for the purpose of adding a tool to prevent violent conduct. (Stamps v. Superior Court (2006) 136 Cal.App.4th 1441, 1447.) Whether the statute embraces other kinds of “threats, intimidation, or coercion” has not been resolved. (See City and County of San Francisco v. Ballard (2006) 136 Cal.App.4th 381, 408.) But regardless, the section is clear that the prohibited interference with rights must be done by threats, intimidation, or coercion. Those elements were absent from plaintiffs’ detailed allegation of what they underwent. (Cf. ibid.)

Simply put, plaintiffs alleged that they were suspended, then discharged, and ultimately red-flagged. If committed, as alleged, because of plaintiffs’ refusal to act unlawfully, this behavior would violate Labor Code section 1102.5, subdivision (c), which prohibits any such employer retaliation. But the SAC is devoid of averments that defendants employed threats, intimidation, or coercion to interfere with plaintiffs’ Labor Code section 1102.5 “right” not to be retaliated against.

No such actions accompanied plaintiffs’ termination, which came after they spontaneously walked off the job when their restaurant would not desist from conduct they thought unlawful. Plaintiffs argue that their termination constituted a threat and coercion as against other employees who learned of it, but even assuming that is legally accurate, plaintiffs themselves were not so threatened.

Ultimately plaintiffs’ section 52.1 pleading is redundant of their wrongful termination action. To the extent that plaintiffs allege that their right to be free from retaliation was interfered with by retaliation, the redundancy is patent. And the same appears from plaintiffs’ effort to substantiate “coercion” by reference to the seminal wrongful discharge case of Tameny v. Atlantic Richfield Co. (1980) 27 Cal.3d 167. In announcing the cause of action for wrongful termination in violation of public policy, the court concluded: “We hold that an employer’s authority over its employee does not include the right to demand that the employee commit a criminal act to further its interests, and an employer may not coerce compliance with such unlawful directions by discharging an employee who refuses to follow such an order. An employer engaging in such conduct violates a basic duty imposed by law upon all employers, and thus an employee who has suffered damages as a result of such discharge may maintain a tort action for wrongful discharge against the employer.” (Id. at p. 178.)

The “coercion” referred to in Tameny was an integral part of the wrongful termination itself. Once again, then there is no additional, section 52.1 “coercion” accompanying plaintiffs’ discharge, as they have consistently alleged it. Plaintiffs’ section 52.1 cause of action was factually unfounded and legally redundant, and the court properly sustained respondents’ demurrer to it. (Cf. Tameny, supra 27 Cal.3d at p. 179. fn. 12.)

DISPOSITION

The order of dismissal is reversed, with directions to enter an order sustaining without leave to amend respondents’ demurrer to the second cause of action of the second amended complaint, and overruling the demurrer to the first cause of action. Plaintiffs shall recover costs on appeal.

We concur: RUBIN, J., FLIER, J.


Summaries of

Castaneda v. Denny's Corp.

California Court of Appeals, Second District, Eighth Division
Mar 19, 2008
No. B195879 (Cal. Ct. App. Mar. 19, 2008)
Case details for

Castaneda v. Denny's Corp.

Case Details

Full title:FILIBERTO CASTANEDA et al., Plaintiffs and Appellants, v. DENNY'S…

Court:California Court of Appeals, Second District, Eighth Division

Date published: Mar 19, 2008

Citations

No. B195879 (Cal. Ct. App. Mar. 19, 2008)