Goonewardene v. ADP

Filed 11/29/16 (unmodified opn. attached)
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FOUR
SHARMALEE B267010
GOONEWARDENE, (Los Angeles County
Super. Ct. No. TC026406)
Plaintiff and Appellant,
ORDER MODIFYING
v. OPINION AND DENYING
REHEARING [NO CHANGE
ADP, LLC et al., IN JUDGMENT]
Defendants and
Respondents.
THE COURT:*
It is ordered that the opinion filed herein on November
4, 2016 be modified as follows:
On page 24, line 20, change “1172-1174” to “1772-1774”
On page 25, lines 12 through 17, delete:
Under the principles discussed above, when
a business enters into a contract with a service
provider clearly aimed at aiding the business in
discharging its duty to supply information or
benefits to certain individuals, those individuals
constitute third party creditor beneficiaries of the
contract between the business and service
provider.
And substitute:
Under the principles discussed above, when
an employer enters into a contract with a service
provider by which the provider is to take over the
employer‟s payroll tasks, including the
preparation of the payrolls themselves, the
employees constitute third party creditor
beneficiaries of the contract between the
employer and service provider.
On page 45, line 14, following the sentence ending with the
word “ADP,” insert the following footnote:
In a petition for rehearing, ADP asserts that the
economic loss rule bars the professional negligence
claim. As that contention was not raised prior to the
filing of our opinion, it has been forfeited. (Alameda
County Management Employees, Assn. v. Superior
Court (2011) 195 Cal.App.4th 325, 338, fn. 10.)
Moreover, we would reject the contention
were we to consider it. The economic loss rule
provides that “„“„[w]here a purchaser‟s
expectations in a sale are frustrated because the
product he bought is not working properly, his
remedy is said to be in contract alone, for he has
suffered only “economic” losses.‟” . . . “The
economic loss rule requires a purchaser to recover
in contract for purely economic loss due to
disappointed expectations, unless he can
demonstrate harm above and beyond a broken
contractual promise.” (Robinson Helicopter Co. v.
2
Dana Corp. (2004) 34 Cal.4th 979, 988.) Under
the rule, a plaintiff is permitted to recover purely
economic losses due to negligence in the
performance of a contract if a “„special
relationship‟” exists (Greystone Homes, Inc. v.
Midtec, Inc. (2008) 168 Cal.App.4th 1194, 1215),
which may arise when the plaintiff, though not in
privity to the contract, is a third party beneficiary
of the contract and the Biakanja factors are
appropriately present (J’Aire Corp. v. Gregory
(1979) 24 Cal.3d 799, 803-807; see Ratcliff
Architects v. Vanir Construction Management,
Inc. (2001) 88 Cal.App.4th 595, 605). Under the
allegations in the 6AC, that is the case here.
The petition for rehearing by respondents is denied.
The modification does not change the judgment.
____________________________________________________
*EPSTEIN, P. J., WILLHITE, J. MANELLA, J.,
3
Filed 11/4/16 (unmodified opn.)
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FOUR
SHARMALEE B267010
GOONEWARDENE, (Los Angeles County
Super. Ct. No. TC026406)
Plaintiff and Appellant,
v.
ADP, LLC et al.,
Defendants and
Respondents.
APPEAL from a judgment of the Superior Court of Los
Angeles County, William Barry, Judge. Affirmed in part,
reversed in part and remanded with directions.
Glen Broemer for Plaintiff and Appellants.
Morgan Lewis & Bockius, Robert A. Lewis, Thomas M.
Peterson and Zachary Hill for Defendants and Respondents.
____________________________________
In the underlying action, appellant Sharmalene
Goonewardene‟s fifth amended complaint asserted claims
against respondents ADP, LLC, ADP Payroll Services, Inc.
and AD Processing, LLC for wrongful termination, violations
of the Labor Code, and related causes of action, including
breach of contract, negligent misrepresentation, and
negligence. The trial court sustained respondents‟
demurrers relating to the fifth amended complaint without
leave to amend. Appellant contends the court abused its
discretion in denying her leave to amend, arguing that her
proposed sixth amended complaint states claims against
respondents. We conclude that the proposed complaint
states claims against respondents only for breach of contract,
negligent misrepresentation, and negligence. We therefore
affirm the trial court‟s ruling in part, reverse it in part, and
remand with instructions to permit appellant to file a
complaint against respondents asserting those claims.
RELEVANT FACTUAL AND PROCEDURAL
BACKGROUND
In April 2012, appellant commenced the underlying
action. Her initial complaints named as defendants a
2
California corporation and New York corporation bearing the
same name -- Altour International Inc. -- and Alexandre
Chemla, who was alleged to be the corporations‟ alter ego
(collectively, Altour). The complaints asserted claims for
wrongful termination, breach of contract, violations of the
Labor Code, and related causes of action predicated on
allegations that appellant was employed by Altour, which
failed to compensate her in accordance with the Labor Code
and wrongfully terminated her when she brought that
misconduct to its attention.
In March 2015, appellant filed her fourth amended
complaint (4AC), which, in addition to the claims previously
alleged against Altour, included a single cause of action
against respondent ADP, LLC, namely, a claim for unfair
business practices under the unfair competition law (UCL;
Bus. & Prof. Code, § 17200 et seq.). In connection with that
claim, the complaint alleged that ADP, LLC, failed to
provide appellant with adequate documentation and records
regarding her compensation.
After ADP, LLC, demurred to the 4AC, appellant
informed the trial court that she wished to assert additional
claims against ADP, LLC. The trial court deferred ruling on
the demurrer to permit appellant to submit a motion for
leave to file the fifth amended complaint (5AC), which
contained claims against all three respondents for wrongful
termination, violations of the Labor Code and federal labor
laws, breach of contract, unfair business practices, false
advertising, negligence, and negligent misrepresentation.
3
The 5AC alleged that respondents entered into a contract
with Altour to provide payroll services relating to Altour‟s
employees. Several claims in the 5AC also effectively
asserted or alleged that all respondents acted as appellant‟s
employer.
In ruling on the pending demurrer to the 4AC and the
motion for leave to file the 5AC, the trial court sustained the
demurrer to all claims founded on the assumption that ADP,
LLC was appellant‟s employer, co-employer, or joint
employer. The court denied appellant leave to amend with
respect to those claims, and ordered them dismissed with
prejudice. The court otherwise permitted appellant to file
the 5AC, on the condition that appellant assert only the
remaining claims against respondents.
The 5AC nevertheless contained claims predicated on
the assumption that ADP Payroll Services Processing, Inc.
and AD Processing, LLC were appellant‟s employers.
Respondents demurred to the 5AC, contending the employer-
based claims were defective, and the remaining claims
against respondents were untenable. The trial court
sustained the demurrer without leave to amend, and asked
respondents to prepare the final order reflecting its ruling.
While that order was pending, appellant submitted a
motion for reconsideration and a proposed sixth amended
complaint (6AC), which materially resembles the 5AC, as
originally proposed. The 6AC contains claims similar to
those in the original 5AC -- including the claims relying on
the theory that respondents were appellant‟s employers --
4
with additional factual allegations. The motion for
reconsideration requested leave to file the 6AC. On August
5, 2015, without expressly denying the motion for
reconsideration, the trial court entered a final order
sustaining respondents‟ demurrer to the 5AC without leave
to amend, and a judgment of dismissal in favor of
respondents. This appeal followed.
DISCUSSION
Appellant contends the trial court erred in sustaining
respondents‟ demurrer to the 5AC without leave to amend.
As explained below, we agree with the trial court that the
majority of appellant‟s claims must be dismissed. However,
we conclude the proposed 6AC adequately pleads claims for
breach of contract, negligent misrepresentation, and
negligence based on allegations that respondents performed
payroll services for appellant‟s benefit in an inaccurate and
negligent manner.
A. Standard of Review
“Because a demurrer both tests the legal sufficiency of
the complaint and involves the trial court‟s discretion, an
appellate court employs two separate standards of review on
appeal. [Citation.] . . . Appellate courts first review the
complaint de novo to determine whether or not the
. . . complaint alleges facts sufficient to state a cause of
action under any legal theory, [citation], or in other words, to
determine whether or not the trial court erroneously
5
sustained the demurrer as a matter of law. [Citation.]”
(Cantu v. Resolution Trust Corp. (1992) 4 Cal.App.4th 857,
879, fn. omitted (Cantu).) We do not assess the credibility of
the allegations, as “„it is wholly beyond the scope of the
inquiry to ascertain whether the facts stated are true or
untrue.‟” (Garton v. Title Ins. & Trust Co. (1980) 106
Cal.App.3d 365, 375 quoting Colm v. Francis (1916) 30
Cal.App. 742, 752.)
“Second, if a trial court sustains a demurrer without
leave to amend, appellate courts determine whether or not
the plaintiff could amend the complaint to state a cause of
action. [Citation.]” (Cantu, supra, 4 Cal.App.4th at p. 879,
fn. 9.) To establish an abuse of discretion regarding the
denial of leave to amend, “a plaintiff may propose new facts
or theories to show the complaint can be amended to state a
cause of action . . . .” (Connerly v. State of California (2014)
229 Cal.App.4th 457, 460.)
That showing may be made by way of a motion for
reconsideration. (Mogilefsky v. Superior Court (1993) 20
Cal.App.4th 1409, 1418.) Furthermore, the “showing need
not be made in the trial court so long as it is made to the
reviewing court.” (Careau & Co. v. Security Pacific Business
Credit, Inc. (1990) 222 Cal.App.3d 1371, 1386 (Careau &
Co.).)
B. Scope of Review
At the outset, we examine the scope of our review of
the ruling on the 5AC. The trial court‟s grant of
6
respondents‟ demurrer to the 5AC without leave to amend
effectively barred appellant from filing the 6AC. Thus, our
review examines whether the trial court erred in denying
leave to amend the 5AC.
Although appellant‟s opening brief seeks a reversal of
the trial court‟s rulings “as to every cause of action,” she
does not, in fact, attack the portion of those rulings
sustaining the demurrers to the 5AC. Her brief contains no
argument (supported by legal authority and citations to the
record) aimed at showing any claim in the 5AC is tenable.1
Rather, appellant‟s focus is on whether the trial court erred
in denying leave to amend. In this regard, she argues that
the trial court improperly declined to grant her motion for
reconsideration, urges us to evaluate the allegations in the
6AC, and contends those allegations state causes of action.
Accordingly, appellant has forfeited her challenge to the
rulings on the 5AC, insofar as the court sustained demurrers
to the claims in that complaint. (Rossberg v. Bank of
America, N.A. (2013) 219 Cal.App.4th 1481, 1504; see Badie
v. Bank of America (1998) 67 Cal.App.4th 779, 784.)
The remaining issue is whether appellant may
challenge the denial of leave to amend on appeal, as the
record reflects no oral request for leave to amend at the
1
Appellant‟s sole express citations to the 5AC occur in
her reply brief, in the context of arguments intended to
support the 6AC‟s allegations and to show that certain
purported defects are curable by amendment.
7
hearing on the demurrer to the 5AC, and shows only that
appellant sought to file the 6AC by means of a motion for
reconsideration submitted while the final ruling on the
demurrer to the 5AC was pending. In Careau & Co., the
plaintiffs in two consolidated actions filed first amended
complaints, to which the defendants demurred. (Careau &
Co., supra, 222 Cal.App.3d at p. 1379.) After the trial court
sustained the demurrers without leave to amend, the
plaintiffs filed motions for reconsideration of the denial of
leave to amend, accompanied by proposed second amended
complaints. (Id. at pp. 1379-1380.) The trial court denied
reconsideration, filed orders stating the grounds for the
demurrers, and later entered judgments in favor of the
defendants. (Id. at pp. 1380-1381.) Although the record
reflected no request for leave to amend at the hearing on the
demurrers, the appellate court concluded that in view of the
reconsideration motions, it was appropriate to examine
whether the second amended complaints stated causes of
action. (Id. at pp. 1386-1387.)
We reach the same conclusion here and, accordingly,
examine the 6AC in order to determine whether it states a
claim against respondents (henceforth, collectively, ADP).2
2
ADP suggests that appellant may not challenge the
denial of leave to amend because her motion for
reconsideration was “premature.” In view of the liberal
policy permitting a party to show on appeal that an amended
complaint states a cause of action, that contention fails.
(Scott v. City of Indian Wells (1972) 6 Cal.3d 541, 550
8
C. Facts3
The 6AC alleges the following facts: ADP is a payroll
services provider. Since 2000, ADP‟s advertising and
corporate statements have stated that it provides payroll-
related services to employers and employees. ADP offers to
“„serve as an extension of [an employer‟s] payroll department
and [to] take over all [the employer‟s] payroll tasks.” ADP
holds itself out as possessing specialized knowledge
regarding the calculation of wages under applicable wage
laws and regulations, and states that it “can save
employer[]s[‟] money by calculating their payroll.” ADP‟s
Web site advertises its expertise in tracking employee work
hours, determining wages, and preparing payrolls in
accordance with applicable laws. According to the Web site,
[“[A]buse of discretion in sustaining a demurrer without
leave to amend is reviewable on appeal even in the absence
of a request for leave to amend”].)
3
We observe that the prolix and poorly organized 6AC
ignores the rule that “the complaint must contain a
statement of the facts in ordinary and concise language . . . .”
(M.G. Chamberlain & Co. v. Simpson (1959) 173 Cal.App.2d
263, 267.) In such cases, we “disregard any defects in the
pleading which do not affect the substantial rights of the
parties,” and assess whether “there are averments of
ultimate facts sufficient to constitute a cause of action . . . .”
(Ibid.)
9
ADP provides “„self-service tools‟” allowing employees to view
their attendance, vacation benefits, and time card approvals.
At some point, ADP entered into an unwritten contract
with Altour, which provides travel-related services. Under
that agreement, ADP calculated payrolls, maintained
employee records, offered legal advice, and provided other
wage-related services for the benefit of Altour and its
employees. According to the 6AC, ADP entered into “a
partnership or joint venture with Altour for the purpose of
handling Altour‟s payroll and maintaining records and
confidential information regarding Altour‟s employees.”
(Underscoring omitted.)
Appellant‟s ethnicity is Sinhalese and her nationality
is Sri Lankan. In November 2005, appellant began her
employment with Altour. She answered telephones, made
airline, automobile, and hotel reservations, and issued
electronic tickets and refunds. Because she worked on teams
that provided services “24 hours a day 365 days of the year,”
she accrued overtime hours. Appellant “logged directly into
an ADP system to track her earnings.”
From 2005 to 2012, appellant did not receive the
compensation due her, including overtime compensation,
and she was denied meal and rest breaks required under
Labor Code section 226.7. In addition, she was “treated
differently as a result of her race, nationality[, and]
ethnicity,” as she was offered no promotions despite
favorable work evaluations, and received less pay than a
male counterpart.
10
Under ADP‟s agreement with Altour, the 6AC alleges,
ADP maintained appellant‟s earnings records, added the
hours on her time cards, calculated her earnings, and
provided her with an earnings statement. ADP also was
responsible for determining whether appellant was to
receive, inter alia, overtime or double time (that is, overtime
reflecting a doubled hourly rate of pay), in accordance with
applicable labor laws. ADP alone was responsible for
maintaining appellant‟s records relating to her
compensation, adding the hours shown on her time cards,
and applying the labor laws to determine her wages.
ADP failed to act with “even scant care” in calculating
appellant‟s wages. (Underscoring omitted.) Her earnings
statements provided by ADP never contained a breakdown of
her regular hours, overtime hours or double overtime hours,
and did not reflect data regarding meal and rest breaks.
Although her time cards reflected facts requiring the
payment of double time compensation, she received no such
payment.4 She was paid twice a month on a basis that was
intentionally confusing and did not comply with the wage
orders of the Industrial Welfare Commission (IWC).
4
In connection with appellant‟s reply brief, she filed a
motion to augment the record with certain documents
intended to show that ADP‟s pay calculations failed to reflect
overtime compensation owed her. As we conclude that the
6AC sufficiently alleges that fact (see pts. E., F. & G. of the
Discussion, post), we deny the motion.
11
According to the 6AC, Altour and ADP knew that appellant
was not being paid in accordance with California law.
Appellant reasonably relied on the earnings statements
provided to her. In 2010, she noticed disparities between her
own bookkeeping and her hours worked, as shown on her
paychecks. In January 2012, she was terminated.
According to the 6AC, she was terminated “on a pretext and
in retaliation for [her] efforts to be paid fairly and to receive
those benefits to which she was legally entitled.”
D. Claims Based on Theory That ADP Was Appellant’s
Employer
The 6AC asserts several claims predicated on the
theory that ADP was appellant‟s employer. Specifically,
they allege or suggest (1) that ADP was subject to certain
duties to appellant imposed on employers under California
and federal law, and (2) that ADP was empowered to
terminate appellant‟s employment. The claims assert
violations of the Labor Code and the Fair Labor Standards
Act of 1938 (FLSA) (29 U.S.C. § 201 et seq.), racial
discrimination under the California Fair Employment and
Housing Act (FEHA) (Gov. Code, § 12900 et seq.) and title
VII of the Civil Rights Act of 1964 (title VII) (42 U.S.C.
§ 2000e et seq.), and wrongful termination in violation of
public policy. As explained below, the claims fail for want of
sufficient allegations establishing an employee-employer
relationship between appellant and ADP.
12
1. Labor Code Claims
We begin with appellant‟s claims under the Labor
Code. The 6AC asserts claims against ADP for failure to
make timely wage payments (Lab. Code, §§ 201, 201.3,
201.5, 202, 203, 205.5; second cause of action), failure to pay
overtime compensation (Lab. Code, § 1194; tenth cause of
action), and failure to issue adequate earnings statements
(Lab. Code, § 226; eleventh cause of action).
ADP‟s liability under the claims hinges on whether
ADP employed appellant within the meaning of the term
“employ” in the applicable IWC wage order which the 6AC
alleges to be Wage Order No. 4-2001 or Wage Order No. 9-
2001 (Futrell v. Payday California, Inc. (2010) 190
Cal.App.4th 1419, 1428-1429 (Futrell). Those wage orders
define the term “[e]mploy” as “to engage, suffer, or permit to
work.” (Cal. Code Regs., tit. 8, § 11040(2)(E), 11090(2)(D).)
That definition incorporates “three alternative definitions.
It means: (a) to exercise control over the wages, hours or
working conditions, or (b) to suffer or permit to work, or (c)
to engage, thereby creating a common law employment
relationship.” (Martinez v. Combs (2010) 49 Cal.4th 35, 64
(Martinez).) Generally, “[t]he essence of the common law
test of employment is in the „control of details.‟ A number of
factors may be considered in evaluating this control,
including: (1) whether the worker is engaged in a distinct
occupation or business; (2) whether, considering the kind of
occupation and locality, the work is usually done under the
alleged employer‟s direction or without supervision; (3) the
13
skill required; (4) whether the alleged employer or worker
supplies the instrumentalities, tools, and place of work; (5)
the length of time the services are to be performed; (6) the
method of payment, whether by time or by job; (7) whether
the work is part of the alleged employer‟s regular business;
and (8) whether the parties believe they are creating an
employer-employee relationship. [Citations.]” (Futrell,
supra, 190 Cal.App.4th at p. 1434.)
The application of the IWC‟s definition of “employ” to
Labor Code claims against a payroll services provider was
examined in Futrell. There, the plaintiff initiated a class
action against a television commercial production company
and its hired payroll services provider, asserting claims
under the Labor Code and the applicable IWC wage order for
failure to make timely wage payments, issue adequate pay
statements, and pay overtime compensation (Lab. Code,
§§ 203, 226, 1194), together with claims under the FLSA for
failure to pay overtime compensation (29 U.S.C. §§ 207, 216).
(Futrell, supra, 190 Cal.App.4th at pp. 1424-1425.) When
the payroll services provider sought summary adjudication
on the claims, the evidence established that it collected
timecards from the plaintiff, placed that information in a
computer system to create the plaintiff‟s paychecks, and
maintained records relating to the plaintiff‟s compensation.
(Id. at p. 1427.) The trial court granted summary
adjudication on the claims, concluding that the payroll
services provider was not the plaintiff‟s employer. (Id. at
pp. 1429-1430.)
14
Affirming the ruling, the appellate court held that for
purposes of the Labor Code claims, no employment
relationship existed under the three definitions incorporated
in the IWC‟s definition of the term “employ[].” (Futrell,
supra, 190 Cal.App.4th at pp. 1424-1425.) Regarding the
first definition, the court determined that the payroll service
provider‟s role in generating paychecks established no such
relationship: “[W]e conclude that „control over wages‟ means
that a person or entity has the power or authority to
negotiate and set an employee‟s rate of pay, and not that a
person or entity is physically involved in the preparation of
an employee‟s paycheck. This is the only definition that
makes sense. The task of preparing payroll, whether done
by an internal division or department of an employer, or by
an outside vendor of an employer, does not make [the
preparer] an employer for purposes of liability for wages
under the Labor Code wage statutes. The preparation of
payroll is largely a ministerial task, albeit a complex task in
today‟s marketplace. The employer, however, is the party
who hires the employee and benefits from the employee‟s
work, and thus it is the employer to whom liability should be
affixed for any unpaid wages. The extension of personal
liability to the agents of an employer is not reasonably
derived from the language and purposes of the Labor Code
wage statutes.” (Id. at p. 1432.)
The court further determined that no employment
relationship existed under the remaining definitions.
Regarding the second definition, the court concluded that the
15
payroll service provider did not “suffer or permit” the
plaintiff “to work,” as there was no evidence it “had the
power to either cause him to work or prevent him from
working.” (Futrell, supra, 190 Cal.App.4th at p. 1434.)
Regarding the third definition, the court concluded that the
record reflected no common law employment relationship
because the payroll service provider lacked control over the
circumstances of the plaintiff‟s work. (Id. at pp. 1433-1434.)
We find Futrell persuasive and apply its analysis in
assessing the Labor Code claims in the 6AC. In an apparent
effort to establish that ADP exercised a type of control over
appellant required for an employment relationship, the 6AC
alleges that ADP, by “partnering with or attaching itself to
Altour‟s business and taking over a variety of employer
functions, . . . essentially became [appellant‟s] employer at
least in the area in which it maintain[ed] control . . . .”
Because that allegation represents a legal conclusion, we
disregard it, and examine whether the facts pleaded in 6AC
establish an employment relationship. (B & P Development
Corp. v. City of Saratoga (1986) 185 Cal.App.3d 949, 953.)
As explained below, they do not.
The allegations in the 6AC demonstrate only that ADP
took over the functions ordinarily assigned to an employer‟s
internal payroll department, which is not properly regarded
as an additional employer. (Futrell, supra, 190 Cal.app.4th
at pp. 1424-1434.) Nothing in the 6AC suggests ADP had
“the power or authority to negotiate and set [appellant‟s]
rate of pay.” (Futrell, supra, 190 Cal.app.4th at p. 1432.) On
16
the contrary, the 6AC asserts a claim for breach of contract
solely against Altour (fourth cause of action), alleging that
appellant entered into written and oral agreements with it,
and that from 2005 to 2012, Altour repeatedly breached the
agreements “by failing to pay [her] in accord with the agreed
upon rate in . . . pay.” (Italics added.) Furthermore,
notwithstanding the wrongful termination claim asserted
against ADP, the 6AC contains no factual allegations that
ADP had the power to hire or fire appellant or control the
circumstances of her work. Indeed, in the 6AC and on
appeal, appellant asserts only that ADP exercised a specific
type of control over the payment of her compensation. As
discussed below, that purported control does not render ADP
her employer.
Appellant contends ADP undertook an employment
relationship with her because the 6AC assigns a broader
range of responsibilities to ADP than attributed to the
payroll service provider in Futrell. The 6AC alleges that
under ADP‟s contract with Altour, ADP was exclusively
responsible for determining how appellant‟s salary was to be
calculated under applicable laws. Indeed, according to
appellant‟s opening brief, Altour played no role in the
calculation of her wages, aside from providing her time card
data to ADP. The brief states that Altour “did nothing more
than transmit time card information prepared by [appellant]
to ADP, and by design ADP exercised complete control over
the amount [appellant] was actually paid.” (Italics added.)
Relying on those allegations, appellant maintains that ADP‟s
17
responsibilities in applying the governing laws were not
ministerial, arguing that ADP‟s exercise of judgment
regarding those laws necessarily “„influenced‟ a key term of
[her] employment, [namely], how much she was to receive in
exchange for her labor.”
Appellant‟s contention fails, as ADP‟s influence is not
reasonably regarded as “„control over wages,‟” for purposes of
IWC‟s definition of the term “employ.” That definition refers
to “the power or authority to negotiate and set an employee‟s
rate of pay,” that is, the basic discretionary right to select
the rate of pay from a range of potential values. (Futrell,
supra, 190 Cal.App.4th at p. 1432.) The allegations of the
6AC fail to establish that ADP had such power. Rather,
ADP‟s influence arose solely through Altour‟s duties under
the Labor Code and the applicable wage orders, which
specified how appellant‟s pay was permissibly calculated
once she and Altour agreed upon her rate of pay. Because
those duties identify the appropriate lawful “time and
manner of paying wages” and “mandatory overtime pay”
(Cuadra v. Millan (1998) 17 Cal.4th 855, 858, abrogated on
another ground in Samuels v. Mix (1999) 22 Cal.4th 1, 16,
fn. 4), they are not discretionary, but mandatory (Redwood
Coast Watersheds Alliance v. State Bd. Of Forestry & Fire
Protection (1999) 70 Cal.App.4th 962, 970 [discretionary acts
are those regarding which there is no hard and fast rule as
to the course of conduct that one must or must not take]).
Accordingly, in undertaking to determine appellant‟s
compensation in compliance with those duties, ADP acquired
18
no basic discretionary right to set appellant‟s rate of pay.
Rather, ADP‟s alleged deviations from the lawful
determination of appellant‟s compensation constituted
errors by ADP, not the exercise of a right. ADP‟s conduct
under its agreement is thus properly characterized as
ministerial. (Id. at p. 970 [“A duty is ministerial when it is
the doing of a thing unqualifiedly required”].) In sum, the
6AC fails to allege the employment relationship required for
the Labor Code claims.
2. FLSA Claims
The 6AC asserts two claims against ADP under the
FLSA for failure to pay overtime compensation (sixth and
twelfth causes of action; 29 U.S.C. §§ 207, 216). ADP‟s
liability under those claims hinges on whether there is an
employer-employee relationship under the so-called
“„economic reality test.‟” (Futrell, supra, 190 Cal.App.4th at
p. 1435.) That test, though distinct from the IWC‟s
definition of the term “„employ‟” (Martinez, supra, 49 Cal.4th
at pp. 59-60), ordinarily involves the consideration of similar
factors (Futrell, supra, 190 Cal.App.4th at p. 1435). In
applying the test, courts examine “„the economic reality of a
work relationship,‟” with due attention to “„“whether the
alleged employer (1) had the power to hire and fire the
employees, (2) supervised and controlled employee work
schedules or conditions of employment, (3) determined the
rate and method of payment, and (4) maintained
employment records.”‟” (Guerrero v. Superior Court (2013)
19
213 Cal.App.4th 912, 928-929, quoting Bonnette v. California
Health and Welfare Agency (9th Cir. 1983) 704 F.2d 1465,
1469-1470, disapproved on another ground in Garcia v. San
Antonio Metropolitan Transit Authority (1985) 469 U.S. 528,
539.)
The FLSA claims fail in view of Futrell. In affirming
summary adjudication of the plaintiff‟s FLSA claims relating
to overtime compensation, the court reasoned that under the
economic reality test, the payroll services provider was not
the plaintiff‟s employer, as it merely prepared his paychecks
and maintained certain compensation records. (Futrell,
supra, 190 Cal.App.4th at pp. 1435-1436.) That rationale
applies here. As explained above (see pt. C.1. of the
Discussion, ante), according to the facts alleged in the 6AC,
ADP acted as Altour‟s payroll department; it exercised no
material control over appellant‟s rate of pay, terms of
employment, or circumstances of work. Accordingly, under
the “economic reality” test, the 6AC fails to establish an
employment relationship sufficient to support the FLSA
claims.
3. Discrimination Claims
The 6AC contains claims against ADP for
discrimination under FEHA (eighth cause of action) and title
VII (ninth cause of action). As these claims assert
discrimination relating to appellant‟s employment, ADP is
liable for the alleged discrimination only if it employed her.
(Vernon v. State of California (2004) 116 Cal.App.4th 114,
123 [FEHA prohibits only employers from engaging in
20
discrimination]; Murray v. Principal Financial Group, Inc.
(9th Cir. 2010) 613 F.3d 943, 944 [plaintiffs may assert title
VII discrimination claim against entity only if they are its
employees].) Although courts have applied a variety of
specific tests to determine the existence of an employment
relationship under the two statutory schemes, “[t]he common
and prevailing principle espoused in all of the tests” directs
attention to “the „totality of circumstances‟ that reflect upon
the nature of the work relationship of the parties, with
emphasis upon the extent to which the defendant controls
the plaintiff‟s performance of employment duties.” (Vernon,
supra, 116 Cal.App.4th at p. 124.) As explained above, the
circumstances surrounding appellant‟s work did not
demonstrate an employment relationship between her and
ADP. Accordingly, the 6AC states no discrimination claims
against ADP.
4. Claim for Wrongful Termination in Violation
of Public Policy
The 6AC‟s claim charging ADP with appellant‟s
wrongful termination in violation of public policy (fifth cause
of action) fails for similar reasons. The claim alleges that
when appellant sought the compensation due her, Altour
and ADP discharged her, in contravention of public policy
incorporated in the Labor Code favoring timely payment of
all wages owed. That claim, however, “can only be asserted
against an employer.” (Miklosy v. Regents of University of
California (2008) 44 Cal.4th 876, 900.) In sum, the claims in
21
the 6AC predicated on the theory that ADP employed
appellant are fatally defective, as the allegations establish
no employee-employer relationship between appellant and
ADP.
E. Breach of Contract Claim Predicated on Third
Party Beneficiary Theory
The 6AC contains a breach of contract claim against
ADP predicated on the theory that appellant and other
Altour employees were third party beneficiaries of the
agreement between Altour and ADP (eighteenth cause of
action). For the reasons discussed below, we conclude the
claim is adequately pleaded.
Civil Code section 1559 provides: “A contract, made
expressly for the benefit of a third person, may be enforced
by him [or her] at any time before the parties thereto rescind
it.” Here, “„“„[e]xpressly,‟ . . . means „in an express manner;
in direct or unmistakable terms; explicitly; definitely;
directly.‟” [Citations.] “[A]n intent to make the obligation
inure to the benefit of the third party must have been clearly
manifested by the contracting parties.”‟ [Citation.]”
(Schauer v. Mandarin Gems of Cal. (2005) 125 Cal.App.4th
949, 957-958.) For that reason, the statute “„excludes
enforcement of a contract by persons who are only
incidentally or remotely benefited by it. [Citations.]‟”
(California Emergency Physicians Medical Group v.
PacifiCare of California (2003) 111 Cal.App.4th 1127, 1137
(California Emergency Physicians Medical Group).)
22
A third party may have enforceable rights under a
contract as either a creditor beneficiary or a donee
beneficiary. (Lake Almanor Associates L.P. v. Huffman-
Broadway Group, Inc. (2009) 178 Cal.App.4th 1194, 1199.)
“A person cannot be a creditor beneficiary unless the
promisor‟s performance of the contract will discharge some
form of legal duty owed to the beneficiary by the promisee.”
(Martinez v. Socoma Companies, Inc. (1974) 11 Cal.3d 394,
400.) In contrast, “[a] person is a donee beneficiary only if
the promisee‟s contractual intent is either to make a gift to
him or to confer on him a right against the promisor.” (Id. at
pp. 400-401.)
Because “[t]hird party beneficiary status is a matter of
contract interpretation” (California Emergency Physicians
Medical Group, supra, 111 Cal.App.4th at p. 1138), a party
alleging a claim for breach of contract based on that status
“must plead a contract which was made expressly for his
benefit and one in which it clearly appears that he was a
beneficiary” (Luis v. Orcutt Town Water Co. (1962) 204
Cal.App.2d 433, 441.) The term “„express,‟” as applied here,
is subject to two pertinent qualifications.
First, to be an express third party beneficiary, a person
“„need not be named or identified individually,‟” as it is
sufficient that the contract shows he or she “„is a member of
a class of persons for whose benefit it was made.‟” (Spinks v.
Equity Residential Brairwood Apartments (2009) 171
Cal.App.4th 1004, 1023.) In Soderberg v. McKinney (1996)
44 Cal.App.4th 1760, 1763 (Soderberg), a mortgage broker
23
engaged in the business of arranging investments in
mortgage loans. In order to secure the plaintiff‟s investment
in a specific loan, the broker arranged for an appraiser to
provide the plaintiff with an appraisal of the net value of the
pertinent property. (Ibid.) After the investment failed, the
plaintiff learned that the property‟s true net value was far
less than as appraised, and sued the broker and appraiser
for breach of contract. (Id. at pp. 1763-1764.) When the trial
court ruled that the complaint stated no claim against the
appraiser, the plaintiff sought leave to amend to assert a
third party beneficiary theory based on an alleged contract
between the broker and the appraiser for the preparation of
appraisal reports to be given to potential investors. (Id. at
p. 1772.) The trial court denied that request, concluding
that the alleged contract did not expressly designate the
plaintiff as a third party beneficiary. (Id. at p. 1773.)
Reversing, the appellate court concluded that the proposed
amendment asserted a tenable third party beneficiary
theory, even though the alleged contract did not specifically
identify the plaintiff as a beneficiary. (Id. at pp. 1172-1174.)
Second, the status of a third party beneficiary does not
require a written contract. In Del E. Webb Corp. v.
Structural Materials Co. (1981) 123 Cal.App.3d 593, 606 (Del
E. Webb Corp.), a general contractor asserted a claim for
breach of contract against a construction materials supplier,
contending it was the third party beneficiary of an oral
contract between one of its subcontractors and the supplier.
The general contractor‟s complaint alleged that “„in order to
24
provide [the subcontractor] with the roofing materials and
other materials needed in the performance of the
subcontract, and for the benefit of [the general contractor],
[the supplier] agreed to supply any and all roofing materials
and other materials necessary for the subcontract between
[the general contractor] and [the subcontractor].‟” (Id. at
pp. 606-607.) The appellate court held that a demurrer to
the claim had been improperly sustained, concluding that
the allegation was sufficient to plead the general contractor‟s
status as a third party creditor beneficiary of the oral
contract. (Id. at p. 607.)
Under the principles discussed above, when a business
enters into a contract with a service provider clearly aimed
at aiding the business in discharging its duty to supply
information or benefits to certain individuals, those
individuals constitute third party creditor beneficiaries of
the contract between the business and service provider. (See
Martinez v. Socoma Companies, Inc., supra, 11 Cal.3d at
p. 400; Soderberg, supra, 44 Cal.App.4th at pp. 1771-1774;
Del E. Webb Corp., supra, 123 Cal.App.3d at pp. 606-607.)
The 6AC articulates that theory. The gravamen of its
allegations is that Altour engaged ADP to discharge Altour‟s
wage-related legal duties to its employees, that is, Altour‟s
obligations under the Labor Code and applicable wage orders
to accurately calculate employees‟ wages, fully distribute
those wages in a timely manner, and provide employees with
accurate earnings statements.
25
The 6AC alleges that ADP, in its advertising,
“expressly offers to partner with employers for their mutual
benefit and for the benefit of employees.” The 6AC further
alleges that “Altour and ADP entered into an unwritten
contract whereby ADP provided payroll calculation, records
maintenance, legal advice and a host of related services to
Altour for the benefit of Altour and its employees in the
general area of employee wages and benefits.” In this
regard, the 6AC contains specific allegations that ADP
provided services directly to Altour employees. The 6AC
alleges that under the agreement, ADP added the hours on
appellant‟s time cards, calculated her earnings, and provided
her with earnings statements in connection with her
compensation. Additionally, ADP allegedly was responsible
for determining whether appellant was to receive overtime
or double time in accordance with applicable labor laws. The
6AC thus alleges that Altour employees such as appellant
are, at a minimum, third party creditor beneficiaries of the
unwritten agreement.5
5
In addition to alleging that ADP‟s advertising
“expressly offers to partner with employers for their mutual
benefit and for the benefit of employees,” the 6AC alleges
that ADP provided services to employees not legally
required, for example, a mechanism allowing employees to
access information and track their earnings. Accordingly,
the 6AC arguably also alleges that Altour employees are
donee beneficiaries of the agreement.
26
The 6AC further alleges that that ADP breached its
contractual obligations relating to Altour‟s wage-related
duties to appellant, and that appellant suffered damages as
a result. As elaborated below (see pt. F of the Discussion,
post), the 6AC asserts that appellant was denied full
compensation because ADP repeatedly failed to determine
that she was owed overtime or double time pay, and
otherwise provided inadequate earnings statements.
Regarding these matters, the 6AC expressly attributes some
of that alleged misconduct to ADP‟s own errors and
misapplication of the applicable wage orders, rather than to
mistakes in earnings data transmitted by Altour. Appellant
has thus stated a breach of contract claim against ADP as a
third party creditor beneficiary.6
Relying on Martinez, supra, 49 Cal.4th 35, ADP
contends that as a matter of law, Altour employees cannot be
third party beneficiaries of ADP‟s contract with Altour for
the provision of payroll processing services. In our view,
that broad proposition finds no support in Martinez. There,
a farmer entered into contracts with merchants for the sale
of his produce. (Id. at pp. 42-44.) Under the contracts, the
farmer received advance payments that were to be retired
6
In so concluding, we make no findings regarding the
accuracy of the allegations in the 6AC. As explained above
(see pt. A. of the Discussion, ante), for purposes of our
review, we must accept the factual allegations in the 6AC as
true.
27
from the revenues generated when his produce was delivered
and sold; in addition, the farmer was entitled to a share of
those revenues. (Ibid.) During the harvest season, the
farmer failed to pay his field workers, who asserted Labor
Code claims against the farmer and the merchants,
contending all were their employers. (Id. at p. 48.) After the
merchants secured summary judgment on the claims against
them, our Supreme Court affirmed that ruling, determining
that none of the merchants employed the workers. (Id. at
pp. 68-77.) The court also rejected a contention that the
workers were third party beneficiaries of one of the
contracts, concluding that the terms of the contract
manifestly placed sole responsibility for discharging wage-
related duties on the farmer. (Id. at p. 77.) In contrast,
according to the 6AC, under the unwritten contract between
Altour and ADP, ADP undertook to discharge Altour‟s wage-
related duties -- including the calculation of employees‟
wages and the provision of earnings statements -- to Altour‟s
employees for their benefit. In sum, the 6AC states a breach
of contract claim against ADP predicated on a third party
beneficiary theory.
F. Negligent Misrepresentation Claim
The 6AC contains a negligent misrepresentation claim
predicated on allegations that appellant‟s earnings
statements, as provided by ADP, were inaccurate and
omitted statutorily required information (thirteenth cause of
28
action). As explained below, we conclude that claim is
sufficiently pleaded.
For a claim of negligent misrepresentation, “[a]
plaintiff must prove the following in order to recover[:]
„[M]isrepresentation of a past or existing material fact,
without reasonable ground for believing it to be true, and
with intent to induce another‟s reliance on the fact
misrepresented; ignorance of the truth and justifiable
reliance on the misrepresentation by the party to whom it
was directed; and resulting damage. [Citation.]‟ [Citation.]”
(Shamsian v. Atlantic Richfield Co. (2003) 107 Cal.App.4th
967, 983, quoting Home Budget Loans, Inc. v. Jacoby &
Meyers Law Offices (1989) 207 Cal.App.3d 1277, 1285.)
The tort requires a “„“positive assertion.”‟” (OCM
Principal Opportunities Fund, L.P. v. CIBC World Markets
Corp. (2007) 157 Cal.App.4th 835, 854 (OCM Principal
Opportunities Fund), quoting Diediker v. Peelle Financial
Corp. (1997) 60 Cal.App.4th 288, 297-298.) The tort thus
encompasses “„[t]he assertion, as a fact, of that which is not
true, by one who has no reasonable ground for believing it to
be true‟ [ citation], and „[t]he positive assertion, in a manner
not warranted by the information of the person making it, of
that which is not true, though he believes it to be true‟
[citations].” (Small v. Fritz Companies, Inc. (2003) 30
Cal.4th 167, 174 (Small).) Furthermore, “when the
defendant purports to convey the „whole truth‟ about a
subject, „“misleading half-truths”‟ regarding that subject may
constitute positive assertions for the purpose of negligent
29
misrepresentation.” (OCM Principal Opportunities Fund,
supra, 157 Cal.App.4th at p. 854, quoting Randi W. v. Muroc
Joint Unified School Dist. (1997) 14 Cal.4th 1066, 1081.)
The tort is also subject to a limitation applicable to
claims against professionals such as auditors, attorneys,
architects, engineers, and title insurers, who generally
provide reports or opinions to clients on the basis of
information supplied by the clients. (OCM Principal
Opportunities Fund, supra, 157 Cal.App.4th at p. 856.) In
Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370, 408-415
(Bily), our Supreme Court held that an auditor who plays a
“secondary” role in the preparation of a financial report for a
client -- that is, who relies entirely on information provided
by its client, and is subject to the client‟s “primary control of
the financial reporting process” -- is liable only to a limited
class of third parties for negligent representations contained
in the financial report, viz., the class delimited in section
552, subdivision (2), of the Restatement Second of Torts.7
7
Restatement Second of Torts section 552(2) provides
that the liability of such parties is limited to the “loss
suffered [¶] (a) by the person or one of a limited group of
persons for whose benefit and guidance he intends to supply
the information or knows that the recipient intends to
supply it; and [¶] (b) through reliance upon it in a
transaction that he intends the information to influence or
knows that the recipient so intends or in a substantially
similar transaction.” This limitation extends liability “only
to those persons for whose benefit and guidance it is
30
(Bily, supra, 3 Cal.4th at p. 400.) Under Bily, negligent
misrepresentation claims against such professionals may be
asserted only by “specifically intended beneficiaries of the
report who are substantially likely to receive the
misinformation.” (Murphy v. BDO Seidman (2003) 113
Cal.App.4th 687, 694 (Murphy).)
Here, the 6AC alleges that ADP made positive untrue
assertions regarding appellant‟s wages. Under the
agreement between Altour and ADP, ADP was responsible
for “adding the hours on [appellant‟s] time cards,”
calculating her wages, and preparing her earnings
statements. Nevertheless, according to the 6AC, from 2005
to 2012, appellant did not receive her full compensation.
The 6AC attributes that misconduct directly to ADP,
alleging that “[w]hile [appellant‟s] time cards often contained
facts requiring the payment of double time, [she] did not
receive a single double time payment . . . .” The 6AC further
asserts that the earnings statements ADP prepared failed to
comply with Labor Code section 226, contained no
breakdown of appellant‟s regular hours, overtime hours, or
double time hours, and reflected an accounting method of
her time that was intentionally confusing.8
supplied,” as “distinct from the much larger class who might
reasonably be expected sooner or later to have access to the
information and foreseeably to take some action in reliance
upon it.” (Rest.2d Torts, § 552, com. h, pp. 132-133.)
8
Subdivision (a) of Labor Code section 226 provides in
pertinent part: “Every employer shall, semimonthly or at
31
Under these allegations, the wage statements provided
by ADP, based on data supplied by Altour employees,
contained positive inaccurate assertions that ADP could not
reasonably have believed to be true. According to the 6AC,
ADP miscalculated appellant‟s total wages by omitting
double time payments owed her. In view of those alleged
miscalculations, her earnings statements inaccurately stated
her total wages, or alternatively, constituted misleading
half-truths, as the earnings statements purported to convey
the whole truth regarding her total wages. As ADP allegedly
had the time card data necessary to calculate appellant‟s
overtime, those misrepresentations were not reasonable.
Furthermore, under the allegations in the 6AC, ADP
falls outside the limitation of liability applicable to
the time of each payment of wages, furnish each of his or her
employees . . . an accurate itemized statement in writing
showing (1) gross wages earned, (2) total hours worked by
the employee . . . , (3) the number of piece-rate units earned
and any applicable piece rate if the employee is paid on a
piece-rate basis, (4) all deductions, provided that all
deductions made on written orders of the employee may be
aggregated and shown as one item, (5) net wages earned, (6)
the inclusive dates of the period for which the employee is
paid, (7) the name of the employee . . . , (8) the name and
address of the legal entity that is the employer . . . , and (9)
all applicable hourly rates in effect during the pay period
and the corresponding number of hours worked at each
hourly rate by the employee.”
32
professional providers of financial reports who play only a
“secondary” role in the preparation of the reports. According
to the 6AC, under ADP‟s contract with Altour, ADP was
charged with calculating employee wages in accordance with
applicable laws. The inaccuracies in the earnings
statements are alleged to have arisen from ADP‟s own
conduct, not from errors in the time cards provided to ADP.
Because ADP itself was allegedly responsible for the
inaccuracies, its role regarding them was not merely
“„secondary.‟” (Nutmeg Securities, Ltd. v. McGladrey &
Pullen (2001) 92 Cal.App.4th 1435, 1441-1442 [complaint
stated negligent misrepresentation claim against auditor in
view of allegations that auditor directly participated in
creation of misleading financial statements]; see OCM
Principal Opportunities Fund, supra, 157 Cal.App.4th at
p. 857 [bank was subject to liability for negligent
misrepresentation for offering memorandum prepared for
another party because bank possessed reliable information
establishing the falsity of financial forecasts contained in
offering memorandum].) Furthermore, for the reasons
discussed above (see pt. E. of the Discussion, ante), appellant
was among the “specifically intended beneficiaries” of ADP‟s
earnings statements “substantially likely to receive the
misinformation.” (Murphy, supra, 113 Cal.App.4th at
p. 694.)
In an apparent effort to establish that appellant‟s
earnings statements contained no inaccuracies supporting a
negligent misrepresentation claim, ADP directs our
33
attention to appellant‟s opening brief, which states: “ADP
received only a record of [appellant‟s] hours per day,
generated by [appellant], and used that information to
provide [appellant] with a paycheck and earnings statement
on a semi-monthly basis. ADP had no ability whatsoever to
determine whether [appellant] took or missed a meal or rest
break, and calculated [appellant‟s] pay on the assumption
that [appellant] never missed a break.” However,
immediately following that passage, appellant‟s brief states:
“While [appellant‟s] time cards often showed that she
worked in excess of 12 hours on various workdays and in
excess of eight hours on the seventh consecutive day in a
workweek, ADP never paid [appellant] double time for such
work, in violation of IWC [Wage Order No.] 9-
2001(3)(A)(1)(b) and Labor Code section 510.”9 That portion
9
We observe that under the allegations in the 6AC, ADP
undertook to calculate earnings in accordance with
applicable laws. IWC Wage Order No. 9-2001(3)(A)(1) states
in pertinent part: “Employment beyond eight (8) hours in
any workday or more than six (6) days in any workweek is
permissible provided the employee is compensated for such
overtime at not less than: [¶] . . . [¶] (b) Double the
employee‟s regular rate of pay for all hours worked in excess
of 12 hours in any workday and for all hours worked in
excess of eight (8) hours on the seventh (7th) consecutive day
of work in a workweek.” IWC Wage Order No. 4-2001, upon
which the 6AC also relies, contains an identical provision
(see IWC Wage Order No. 4-2001(3)(A)(1)(b)).
34
of the opening brief sets forth the alleged inaccuracies in
ADP‟s calculation of appellant‟s compensation that resulted
in the underpayment of her wages. As explained above,
because the earnings statements provided to appellant by
ADP purported to -- but allegedly did not -- represent her
accurately calculated compensation due, the 6AC states a
claim for negligent misrepresentation.
ADP also suggests that the 6AC contains no allegations
establishing justifiable reliance. We disagree. Generally, to
plead a claim for negligent misrepresentation, a plaintiff
must allege with sufficient particularity that he or she
actually relied on the misrepresentation, as well as that such
reliance was justifiable. (Daniel v. Select Portfolio Servicing,
Inc. (2016) 246 Cal.App.4th 1150, 1166-1168.) Reliance may
be predicated on a theory of forebearance, that is, “the
decision not to exercise a right or power . . . .” (Small, supra,30 Cal.4th at p. 174.) Under such a theory, the plaintiff
should ordinarily allege “actions, as distinguished from
unspoken and unrecorded thoughts and decisions, that
would indicate that the plaintiff actually relied on the
misrepresentations.” (Id. at p. 184.) Additionally, to allege
Labor Code section 510 states: “Any work in excess of
12 hours in one day shall be compensated at the rate of no
less than twice the regular rate of pay for an employee. In
addition, any work in excess of eight hours on any seventh
day of a workweek shall be compensated at the rate of no
less than twice the regular rate of pay of an employee.”
35
justifiable reliance under any theory, the plaintiff “must set
„forth facts to show that his or her actual reliance on the
representations was justifiable, so that the cause of the
damage was the defendant‟s wrong and not the plaintiff‟s
fault.‟” (Beckwith v. Dahl (2012) 205 Cal.App.4th 1039,
1066, quoting 5 Witkin, Cal. Procedure (5th ed. 2008)
Pleading, § 732, p. 153.) Reliance is justifiable when the
“„circumstances were such to make it reasonable for [the]
plaintiff to accept [the] defendant‟s statements without an
independent inquiry or investigation.‟ [Citation.] The
reasonableness of the plaintiff‟s reliance is judged by
reference to the plaintiff‟s knowledge and experience.
[Citation.]” (OCM Principal Opportunities Fund, supra, 157
Cal.App.4th at p. 864, italics omitted, quoting Wilhelm v.
Pray, Price, Williams & Russell (1986) 186 Cal.App.3d 1324,
1332.)
Aside from alleging in general terms that appellant
reasonably relied on the earnings statements, the 6AC
asserts that after appellant began her employment in 2005,
she was paid twice monthly, and received earnings
statements from ADP. In 2010, she noticed disparities
between her own records and her hours worked as reflected
on her paychecks. She then made her own wage calculations
to verify deficiencies in the paychecks. After she sought
unpaid compensation, she was terminated. Those
allegations adequately plead actual reliance predicated on
forebearance, as they show that appellant decided to claim
additional compensation only after she became aware of
36
inaccuracies in the earnings statements. Until then, the
“„circumstances were such to make it reasonable for
[appellant] to accept [ADP‟s] statements without an
independent inquiry or investigation‟” (OCM Principal
Opportunities Fund, supra, 157 Cal.App.4th at p. 864, italics
omitted). Thus, in view of the relative complexity of the
wage calculation, appellant‟s reliance on ADP‟s earnings
statements until 2010 was justifiable. In sum, the 6AC
states a claim for negligent misrepresentation against ADP.
G. Professional Negligence Claim
The 6AC contains a claim for professional negligence
against ADP (fourteenth cause of action) predicated on
allegations that ADP, as a payroll services provider,
breached a duty of care owed to appellant, resulting in the
underpayment of her compensation. Generally, “there are
four essential elements of a professional negligence claim:
„(1) the duty of the professional to use such skill, prudence,
and diligence as other members of his profession commonly
possess and exercise; (2) a breach of that duty; (3) a
proximate causal connection between the negligent conduct
and the resulting injury; and (4) actual loss or damage
resulting from the professional‟s negligence. [Citations.]”
(Osornio v. Weingarten (2004) 124 Cal.App.4th 304, 319,
quoting Budd v. Nixen (1971) 6 Cal.3d 195, 200.) Here, the
key question regarding appellant‟s claim is whether the 6AC
adequately alleges that ADP owed a duty of care to her.
37
Privity of contract is required for the existence of such
a duty of care, absent special circumstances. (Giacometti v.
Aulla, LLC (2010) 187 Cal.App.4th 1133, 1137 (Giacometti).)
Biakanja v. Irving (1958) 49 Cal.2d 647 is the leading case
regarding those circumstances. There, a notary public
prepared a will for a client, but negligently failed to have it
properly attested. (Id. at p. 648.) Following the client‟s
death, the primary beneficiary under the will asserted a
claim for negligence against the notary. (Ibid.) After the
beneficiary secured a judgment in his favor, our Supreme
Court examined whether the notary owed a duty of care to
the beneficiary, notwithstanding the absence of a contract
between them. (Id. at pp. 648-651.) The court stated: “The
determination whether in a specific case the defendant will
be held liable to a third person not in privity is a matter of
policy and involves the balancing of various factors, among
which are the extent to which the transaction was intended
to affect the plaintiff, the foreseeability of harm to him, the
degree of certainty that the plaintiff suffered injury, the
closeness of the connection between the defendant‟s conduct
and the injury suffered, the moral blame attached to the
defendant‟s conduct, and the policy of preventing future
harm.” (Id. at p. 650.) Under that test, the court concluded
the beneficiary was entitled to recover against the notary,
despite the absence of privity. (Id. at p. 651.)
In Bily, the Supreme Court concluded that under the
multi-factor test set forth in Biajanka, auditors playing a
“secondary” role in preparing financial reports for a client
38
owe no duty of care to third parties not in privity of contract
with the auditors. (Bily, supra, 3 Cal.4th at pp. 402, 396-
407.) As the court explained, auditors acting in that role are
ultimately dependent upon the information supplied by their
client, and have little or no control over to whom the client
distributes their reports. (Id. at pp. 400.) The court
determined that three considerations conclusively weighed
against the imposition of a duty of care: (1) that recognition
of such a duty exposed an auditor to “potential liability far
out of proportion to its fault,” in view of its “secondary
„watchdog‟ role”; (2) that the “generally more sophisticated
class of plaintiffs in auditor liability cases (e.g., business
lenders and investors) permit[ted] the effective use of
contract rather than tort liability to control and adjust the
relevant risks”; and (3) that the imposition of tort liability
was likely to increase the costs and reduce the availability of
auditing. (Id. at p. 398.) Regarding item (3), the court
concluded that the imposition of liability would not yield
greater accuracy “without disadvantage,” in view of the
“labor-intensive nature of auditing,” which creates a report
through “a complex process involving discretion and
judgment on the part of the auditor at every stage.” (Id. at
pp. 400, 404.) In view of that complexity, the court noted,
few audits are immune from criticism. (Id. at p. 400.)
Greater vulnerability to litigation was therefore likely to
reduce the availability of auditing services. (Id. at p. 404.)
The court thus held that “an auditor‟s liability for
general negligence in the conduct of an audit of its client‟s
39
financial statements is confined to the client, i.e., the person
who contracts for or engages the audit services. Other
persons may not recover on a pure negligence theory.” (Bily,
supra, 3 Cal.4th at p. 406.) Nonetheless, in a footnote
accompanying that holding, the court stated: “In theory,
there is an additional class of persons who may be the
practical and legal equivalent of „clients.‟ It is possible the
audit engagement contract might expressly identify a
particular third party or parties so as to make them express
third party beneficiaries of the contract. Third party
beneficiaries may under appropriate circumstances possess
the rights of parties to the contract. [Citations.]” (Id. at
p. 406, fn. 16.) Noting the case presented no third party
beneficiary issue, the court declined to further address the
issue. (Ibid.)
Here, we confront the question not resolved in Bily,
namely, whether a financial services provider may be subject
to a duty of care to a third party beneficiary of the contract
between the provider and its client. In our view, under the
facts alleged in the 6AC, ADP owed a duty of care to
appellant, for purposes of a professional negligence claim.
As explained below, that conclusion relies on three
considerations: (1) that under the 6AC‟s allegations,
appellant is a creditor beneficiary to the contract between
Altour and ADP with respect to wage-related duties that
Altour owed appellant; (2) that the Biajanka factors weigh in
favor of recognizing a duty of care; and (3) that the
40
considerations identified in Bily as precluding the imposition
of such a duty on auditors are not present here.
In view of appellant‟s status as a creditor beneficiary,
she is reasonably regarded as “the practical and legal
equivalent” of a party to the contract between Altour and
ADP. (Bily, supra, 3 Cal.4th at p. 406, fn. 16.) Generally,
creditor beneficiaries may enforce the terms of the contract
made for their benefit to the extent the promissee is
authorized to do so. (Mercury Casualty Co. v. Maloney
(2003) 113 Cal.App.4th 799, 802 [“A person who is not a
party to a contract may nonetheless have certain rights
thereunder, and may sue to enforce those rights, where the
contract is made expressly for her benefit”]; Johnson v.
Holmes Tuttle Lincoln-Merc. (1958) 160 Cal.App.2d 290, 296
[“While the contract remains unrescinded, the relations of
the parties are the same as though the promise had been
made directly to the third party [beneficiary]”].)
Accordingly, to the extent the contract obligated ADP to
discharge Althour‟s pre-existing wage-related duties to
appellant, she is authorized to enforce that contractual
obligation against ADP.
Furthermore, the Biajanka factors weigh in favor of
recognizing a duty of care. The contract between Altour and
ADP was intended to affect all Altour employees, including
appellant, and harm to them was manifestly foreseeable
upon ADP‟s alleged failure to determine their wages in
accordance with applicable laws. For the reasons discussed
above (see pt. E. of the Discussion, ante), appellant‟s injuries
41
were certain and closely connected with ADP‟s alleged
conduct, as ADP was engaged both to calculate her earnings
and to provide earnings statements reflecting the wages due;
her failure to received the compensation owed her was
attributable to ADP‟s own alleged errors. That
underpayment must be regarded as significant, as “„it has
long been recognized that . . . because of the economic
position of the average worker . . . , it is essential to public
welfare that he receive his pay when it is due.” (Kerr’s
Catering Service v. Department of Industrial Relations
(1962) 57 Cal.2d 319, 326, quoting, In re Trombley (1948) 31
Cal.2d 801, 809-810.) Furthermore, recognizing a duty of
care encourages accurate payment of wages. (See Roberts v.
Ball, Hunt, Hart, Brown & Baerwitz (1976) 57 Cal.App.3d
104, 110-112 [law firm engaged by clients to prepare an
opinion letter to be shown to bank in order to secure loan
from bank owed a duty of care to bank].)
The considerations set forth in Bily barring the
imposition of a duty of care on auditors are not present here.
According to the allegations in the 6AC, ADP did not occupy
a “secondary „watchdog‟ role” (Bily, supra, 3 Cal.4th at
p. 398), but was contractually obligated to carry out Altour‟s
wage-related legal duties to its employees; the key
misconduct asserted against ADP stemmed from its own
alleged errors. Furthermore, the imposition of a duty of care
on ADP does not render it vulnerable to potentially open-
ended liability, as the class of potential plaintiffs is limited
to Altour‟s employees. That class also differs markedly from
42
the potential plaintiffs in Bily in terms of financial
sophistication. Finally, payroll preparation, though complex,
“is largely a ministerial task” carried out by an employer‟s
internal payroll department or an outside provider. (Futrell,
supra, 190 Cal.App.4th at p. 1432.) For the reasons
discussed above (see pt. D.1. of the Discussion, ante), the
tasks undertaken by ADP do not involve the complex
exercises of discretion akin to those involved in audits, which
are thus frequently open to criticism. Accordingly, the
rationale in Bily linking the imposition of liability to a
significant reduction in the availability of auditing services
is inapplicable here.
The decisions upon which ADP relies are
distinguishable. In Richard B. LeVine, Inc. v. Higashi (2005)
131 Cal.App.4th 566, 570-571, a partnership retained an
accountant to provide accounting services, including a
calculation of each partner‟s profit allocation in the
partnership. In making that determination, the accountant
employed the method of calculation specified by the
partnership. (Id. at p. 580.) On the basis of that calculation,
the partnership bought out the interest of one of the
partners, who later sued the accountant for professional
negligence. (Id. at pp. 571-572.) Affirming summary
judgment on that claim in favor of the accountant, the
appellate court concluded that the claim failed for want of a
duty of care running from the accountant to the partner. (Id.
at pp. 580-581.) The court determined that no duty arose
under Biajanka because the accountant had merely carried
43
out -- accurately -- the calculation specified by the
partnership. (Id. at pp. 581-583.) In addition, the court
determined that the contract between the partnership and
the accountant established no accountant-client relationship
with the aggrieved partner. (Id. at pp. 582-585.) In
contrast, under the 6AC‟s allegations, appellant was a third
party creditor beneficiary of Altour‟s contract with ADP, and
it was ADP‟s alleged errors that resulted in appellant‟s
insufficient compensation.10
10
Those allegations also distinguish Giacometti, which
ADP does not discuss. There, a restaurant hired an
accounting firm to prepare year-end documents required by
the Internal Revenue Service regarding employee earnings.
(Giacometti, supra, 187 Cal.App.4th at pp. 1135, 1139.) The
firm prepared employee W-2 forms on the basis of
information provided by the restaurant concerning wages
and tips. (Id. at p. 1139.) Several employees asserted a
claim for professional negligence against the firm, alleging
that their W-2 forms overstated their income because the
information provided by the restaurant to the firm included
tips not received by them. (Id. at pp. 1135-1136.) After the
trial court sustained a demurrer to their complaint without
leave to amend, this court affirmed, determining that under
Biajanka and Bily, it alleged no duty of care. (Id. at
pp. 1137-1141.) In so concluding, we observed that the
restaurant‟s intention in hiring the firm was to discharge its
legal obligation to the Internal Revenue Service, not to
benefit the employees, and that the firm had no “primary
role in the harm,” as it had been hired merely to prepare
documents based on the information provided to it by the
44
In Goodman v. Kennedy (1976) 18 Cal.3d 335, 339, an
attorney engaged by a corporation misadvised its officers
regarding the legality of a sale of shares. The shares were
purchased by the plaintiffs, who later learned that the sale
was unlawful, and asserted a claim for professional
negligence against the attorney. (Id. at pp. 340-341.) After a
demurrer to the claim was sustained without leave to
amend, our Supreme Court concluded that the attorney
owed no duty of care to the plaintiffs, as they had no
relationship to the corporation or the attorney other than as
purchasers of the shares. (Id. at pp. 343-345.) That is not
true here, as Altour hired ADP to assist in discharging its
legal duties to employees such as appellant. In sum, the
6AC states a claim for professional negligence against ADP.
H. False Advertising Claim
We turn to the 6AC‟s claim against ADP under the
False Advertising Law (FAL) ( Bus. & Prof. Code, § 17500 et
seq.; seventeenth cause of action). As explained below, that
claim fails for want of allegations establishing her standing
to assert it.
The FAL makes it unlawful for any person or
corporation, acting with the intent to perform a service or
“induce the public to enter into any obligation relating” to
restaurant. (Id. at pp. 1139-1141.) As explained above, the
6AC alleges that Altour relied on ADP to do the appropriate
calculations based on data ultimately supplied to ADP by
employees like appellant.
45
that service, to disseminate a statement by means of
advertising that is “untrue or misleading, and which is
known, or which by the exercise of reasonable care should be
known, to be untrue or misleading . . . .” (Bus. & Prof. Code,
§ 17500.) Claims under the FAL, like claims under the UCL,
are subject to the requirements imposed under Proposition
64, which the voters of California approved in November
2004. (Californians for Disability Rights v. Mervyn’s, LLC
(2006) 39 Cal.4th 223, 227.) Proposition 64 amended the
FAL and the UCL to limit standing to assert claims to any
“„person who has suffered injury in fact and has lost money
or property as a result of‟” a violation of the FAL or the UCL.
(Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 321
(Kwikset).)
“To satisfy these requirements at the pleading stage a
plaintiff must allege facts showing that he or she suffered an
economic injury caused by the alleged violation. [Citation.]
Because „reliance is the causal mechanism of fraud‟ [citation]
this requires pleading facts showing actual reliance, that is,
that the plaintiff suffered economic injury as a result of his
or her reliance on the truth and accuracy of the defendant‟s
representations. [Citation.]” (Chapman v. Skype Inc. (2013)
220 Cal.App.4th 217, 228.)
Here, the 6AC contains no allegations establishing the
requisite reliance. The 6AC alleges that ADP disseminated
many untrue or misleading statements by means of
advertising and the internet. According to the 6AC, those
statements related to ADP‟s provision of payroll tools and
46
services to employers and employees to ensure compliance
with applicable laws, and ADP‟s partnership or joint venture
with the Altour defendants for the purpose of handling its
payroll, maintaining its records, and safeguarding
confidential employee information. The 6AC describes
ADP‟s purportedly misleading statements, but does not
allege that appellant actually saw them. Although the 6AC
asserts that appellant “logged directly into an ADP system to
track her earnings,” it contains no allegations that she was
exposed to the misleading statements through that system
(or in some other way) or that they affected her conduct. In
the absence of such allegations, the 6AC‟s assertion that the
misrepresentations caused injury to appellant are
insufficient to plead reliance.
Appellant contends those allegations are inessential to
her claim. Pointing to Kwikset, she argues that the phrase
“as a result of,” as employed in the FAL and the UCL,
requires a showing of a causal connection or reliance on the
alleged misrepresentation. She asserts that “of these
options, she can show a causal connection, rather than
reliance.”
In our view, appellant‟s contention reflects a
misapprehension of Kwikset. There, in the context of
examining a false advertising claim under the UCL, our
Supreme Court discussed the meaning of the phrase “„as a
result of,‟” for purposes of the FAL and the UCL. (Kwikset,
supra, 51 Cal.4th at pp. 326-327.) After noting that in Hall
v. Time, Inc. (2008) 158 Cal.App.4th 847, 855 (Hall), the
47
appellate court construed that phrase to require “„a showing
of a causal connection or reliance on the alleged
misrepresentation,‟” the court in Kwikset set forth the
“controlling” analysis, which it attributed to its prior
decision in In re Tobacco Cases II Cases (2009) 46 Cal.4th
298 (Tobacco Cases II). (Kwikset, supra, at p. 326.)
The court in Kwikset stated: “Recognizing that
„reliance is the causal mechanism of fraud‟ [citation] we held
that a plaintiff „proceeding on a claim of misrepresentation
as the basis of his or her UCL action must demonstrate
actual reliance on the allegedly deceptive or misleading
statements, in accordance with well-settled principles
regarding the element of reliance in ordinary fraud actions.‟
[citation.]” (Kwikset, supra, 51 Cal.4th at p. 326, quoting
Tobacco Cases II Cases, supra, 46 Cal.4th at pp. 306, 326.)
In a footnote, the court explained: “„Reliance‟ as used in the
ordinary fraud context has always been understood to mean
reliance on a statement for its truth and accuracy.
[Citation.] . . . It follows that a UCL fraud plaintiff must
allege he or she was motivated to act or refrain from action
based on the truth or falsity of a defendant‟s statement, not
merely on the fact it was made. [Citation.] . . .” (Kwikset,
supra, 51 Cal.4th at p. 327, fn. 10.)
The court pointed with approval to Durell v. Sharp
Healthcare (2010) 183 Cal.App.4th 1350, 1363-1364 (Durell),
which involved a UCL class action against a hospital
predicated on a fraudulent business practice. (Kwikset,
supra, 51 Cal.4th at p. 327.) The class plaintiff‟s complaint
48
alleged that the hospital‟s Web site and services agreement
contained misrepresentations regarding the fees charged
uninsured patients for medical services. (Durell, supra, 183
Cal.App.4th at pp. 1361-1362.) Although the complaint
alleged that the plaintiff had suffered damages as a
“„proximate result‟” of the misrepresentations, it contained
no allegation that he ever saw them or relied on them. (Id.
at p. 1363.) After a demurrer to the complaint was
sustained without leave to amend, the appellate court
affirmed. (Id. at pp. 1362-1364.) In so concluding, the court
rejected a contention based on Hall that a simple allegation
of causation sufficed for a UCL claim, stating that Tobacco
Cases II required an allegation of reliance. (Id. at pp. 1363-
1364.)
In view of Kwikset and Durell, the 6AC lacks the
requisite allegations of reliance, and appellant otherwise
acknowledges that she cannot cure that deficiency.
Accordingly, the 6AC states no claim under the FAL.
I. UCL Claims
The 6AC contains two claims under the UCL against
ADP, one of which (fifteenth cause of action) relies on the
misconduct alleged in connection with the claims for
negligent misrepresentation, negligence, and violations of
the FAL, and the other of which (sixteenth cause of action)
relies on the misconduct alleged in connection with the
claims based on the theory that ADP was appellant‟s
employer. Generally, the UCL defines “unfair competition”
49
broadly to include “any unlawful, unfair or fraudulent
business act or practice.” (Bus. & Prof. Code, § 17200.)
Under the UCL, damages cannot be recovered, and plaintiffs
are generally limited to restitution and injunctive relief.
(Clark v. Superior Court (2010) 50 Cal.4th 605, 610.) As
explained below, the allegations in the 6AC fail to
adequately state these claims.
First, we conclude that the 6AC alleges no unlawful or
unfair business practice. Generally, “[b]y proscribing „any
unlawful‟ business practice, „[the UCL] “borrows” violations
of other laws and treats them as unlawful practices‟ that the
unfair competition law makes independently actionable. [¶]
. . . [¶] However, the law does more than just borrow. The
statutory language referring to “any unlawful, unfair or
fraudulent” practice (italics added) makes clear that a
practice may be deemed unfair even if not specifically
proscribed by some other law.” (Cel-Tech Communications,
Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th
163, 180 (Cel-Tech).)
Liability for unlawful and unfair practices is subject to
a restriction traceable to Cel-Tech, which involved UCL
claims relating to the marketing of consumer goods and
services. The court concluded that for purposes of the type of
UCL claim presented to it, the public policy necessary to
establish an unfair practice must be closely tied to a statute.
(Cel-Tech, supra, 20 Cal.4th at p. 187.) Following Cel-Tech,
at least one appellate court has concluded that in any UCL
action, the public policy underlying an alleged unfair
50
practice “must be „tethered‟ to specific constitutional,
statutory, or regulatory provisions.” (Gregory v. Albertson’s,
Inc. (2002) 104 Cal.App.4th 845, 854.)
In Aleksick v. 7-Eleven, Inc. (2012) 205 Cal.App.4th
1176, the appellate court applied that limitation to a UCL
claim arising in circumstances closely resembling those
presented here. There, a franchisor of convenience stores
imposed a contractual obligation on franchisees to obtain
payroll services from the franchisor. (Id. at pp. 1180-1181.)
A franchisee‟s employee asserted a UCL class action against
the franchisor, alleging that its payroll system did not fully
compensate franchisee employees for their work. (Aleksick,
supra, 205 Cal.App.4th at pp. 1180-1181.) When the
franchisor secured summary judgment on the claim, the
appellate court affirmed, concluding that because the
franchisor was not the class members‟ employer, the UCL
claim failed for want of a cognizable unlawful or unfair
practice under the Labor Code, as the franchisor was not
subject to the wage-related duties imposed on employers
under that code. (Aleksick, supra, at pp. 1185-1193.)
Likewise, the 6AC fails to allege an unlawful or unfair
practice. As explained above (see pt. D. of the Discussion,
ante), the labor laws and wage orders identified in the 6AC
are not applicable to ADP. For that reason, the alleged
misconduct by ADP does not violate the public policy
underlying them.
Additionally, we conclude that the 6AC alleges no
fraudulent practice entitling appellant to relief under the
51
UCL. To the extent the UCL claims rely on the alleged false
advertising attributed to ADP in connection with the FAL
claim, the UCL claims fail for the same reason as the FAL
claim, namely, insufficient allegations of reliance.
Furthermore, to the extent the UCL claims rely on the
misrepresentations in appellant‟s earnings statements, as
alleged in connection with the negligent misrepresentation
claim, the claims fail for want of any allegation that ADP
derived a benefit from the misrepresentations supporting a
restitutionary recovery.
In Bradstreet v. Wong (2008) 161 Cal.App.4th 1440,
1444, abrogated on another ground in Martinez, supra, 49
Cal.4th at page 50, footnote 12, three corporations hired an
accountant to perform bookkeeping and payroll work for
them. When the corporations failed to pay wages owed their
employees, litigation ensued in which two employees and
other parties asserted a UCL claim against the corporation‟s
owners and the accountant. (Bradstreet, supra, 161
Cal.App.4th at pp. 1444-1448.) When the accountant
secured a judgment in her favor on the claim, the appellate
court affirmed, concluding there was no basis for a
restitutionary recovery against her because she derived no
benefit from the unpaid wages. (Id. at pp. 1458-1463.) That
rationale applies here, as the 6AC contains no allegation
that ADP derived a benefit from appellant‟s unpaid wages
for which she may seek restitution. In sum, the 6AC states
no UCL claim.
52
J. Aiding and Abetting Claim
Appellant contends she is entitled to assert a claim for
aiding and abetting against ADP. Although her opening
brief discusses that theory of joint liability and the 6AC‟s
caption page refers to an aiding and abetting claim as the
nineteenth (and final) cause of action, the 6AC contains no
such claim. Appellant‟s reply brief states that the omission
was inadvertent, and directs our attention to the aiding and
abetting claim in the 5AC. As explained below, appellant
has failed to show she can state a tenable aiding and
abetting claim.
Generally, “[t]he burden of showing that a reasonable
possibility exists that amendment can cure the defects [in a
complaint] remains with the plaintiff; neither the trial court
nor this court will rewrite a complaint. [Citation.]”
(Rakestraw v. California Physicians’ Service (2000) 81
Cal.App.4th 39, 44.) To carry that burden, appellant “must
clearly and specifically set forth the „applicable substantive
law‟ [citation] and the legal basis for amendment, i.e., the
elements of the cause of action and authority for it. Further,
[she] must set forth factual allegations that sufficiently state
all required elements of that cause of action. [Citations.]
Allegations must be factual and specific, not vague or
conclusionary. [Citation.]” (Id. at p. 43.)
Aiding and abetting, though similar to conspiracy,
involves distinct elements.11 (American Master Lease, supra,
11
“Civil conspiracy is „a legal doctrine that imposes
liability on persons who, although not actually committing a
53
225 Cal.App.4th at p. 1475.) “Liability may . . . be imposed
on one who aids and abets the commission of an intentional
tort if the person (a) knows the other‟s conduct constitutes a
breach of duty and gives substantial assistance or
encouragement to the other to so act or (b) gives substantial
assistance to the other in accomplishing a tortious result and
the person‟s own conduct, separately considered, constitutes
a breach of duty to the third person. [Citations.]” (Saunders
v. Superior Court (1994) 27 Cal.App.4th 832, 846.) Unlike a
conspirator, an aider and abettor need not be capable of the
target tort. (Casey v. U.S. Bank Nat. Assn. (2005) 127
Cal.App.4th 1138, 1144, fn. 2.) To plead aiding and abetting
by a defendant, the plaintiff must allege that the defendant
had actual knowledge of the “specific primary wrong” being
committed, and gave substantial assistance to the wrongful
conduct. (Id. at pp. 1145, 1146-1147; Nasrawi v. Buck
Consultants LLC (2014) 231 Cal.App.4th 328, 343-344
tort themselves, share with the immediate tortfeasors a
common plan or design in its perpetration. [Citation.] . . . .‟
[Citation.] „By its nature, tort liability arising from
conspiracy presupposes that the coconspirator is legally
capable of committing the tort, i.e., that he or she owes a
duty to plaintiff recognized by law and is potentially subject
to liability for breach of that duty.” (American Master Lease
LLC v. Idanta Partners, Ltd. (2014) 225 Cal.App.4th 1451,
1473-1474 (American Master Lease), quoting Applied
Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7
Cal.4th 503, 510-511.)
54
(Nasrawi).)
As alleged in the 5AC, the aiding and abetting claim is
the final cause of action, and incorporates all the previous
factual allegations. The claim‟s material additional
allegations are (1) that Altour and ADP “formed a common
plan to pay Altour employees unfairly,” (2) that they knew
that appellant was not being paid in accordance with
California law, (3) that “ADP knowingly aided and abetted
Altour in committing the wrongful termination,” (4) that
ADP gave substantial assistance or encouragement to
Altour, and (5) that ADP‟s conduct was a substantial factor
in causing harm to appellant.
Appellant has failed to show that she can state an
aiding and abetting claim against ADP with respect to
unpaid wages. Generally, aiding and abetting requires the
commission of an underlying tort. (Nasrawi, supra, 231
Cal.App.4th at p. 344, fn. 7.) Although her briefs refer to two
potential torts -- namely, conversion and “theft” -- the 5AC
and 6AC assert no such claims against Altour, and she offers
no argument (with citation to legal authority) that the
misconduct alleged in them constitutes those torts.
Appellant also has forfeited any contention that she
can state an aiding and abetting claim against ADP with
respect to the alleged wrongful termination, as her briefs
contain no argument in support of that claim. We also point
out that an aider and abettor must “„provide assistance that
was a substantial factor in causing the harm suffered‟”
(American Master Lease, supra, 225 Cal.App.4th at p. 1476,
55
quoting Neilson v. Union Bank of California, N.A. (C.D. Cal.
2003) 290 F.Supp.2d 1101, 1135). Thus, “„causation is an
essential element of an aiding and abetting claim . . . .‟”
(American Master Lease, supra, at p. 1476, quoting Neilson,
supra, at p. 1135.) However, as neither the 5AC nor the 6AC
contains specific allegations describing how ADP assisted in
or encouraged her termination, appellant has failed to plead
the requisite causation. (Schulz v. Neovi Data Corp. (2007)
152 Cal.App.4th 86, 97 [aiding and abetting claim fails for
want of specific factual allegations showing substantial
assistance or encouragement].) In sum, appellant had failed
to demonstrate a tenable aiding and abetting claim.
56
DISPOSITION
The judgment is reversed to the extent the trial court
denied appellant leave to file an amended complaint
asserting claims against respondents limited to breach of
contract, negligent misrepresentation, and negligence, as set
forth in our opinion (see pts. E., F. & G. of the Discussion,
ante). The judgment is affirmed in all other respects. The
parties shall bear their own costs on appeal.
CERTIFIED FOR PUBLICATION
MANELLA, J.
We concur:
EPSTEIN, P. J.
WILLHITE, J.
57