Galeotti v. Internat. Union of Operating Engineers etc.

Filed 5/6/20
CERTIFIED FOR PARTIAL PUBLICATION*
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION FIVE
JOHN GALEOTTI,
Plaintiff and Appellant,
A157785
v.
INTERNATIONAL UNION OF (Alameda County
OPERATING ENGINEERS LOCAL Super. Ct. No. HG18914573)
NO. 3 et al.,
Defendants and Respondents.
John Galeotti appeals from a judgment of dismissal entered after the
court sustained respondents’ demurrer to his second amended complaint
without leave to amend. He contends his second amended complaint stated
causes of action for wrongful termination in violation of public policy and
violations of the Racketeer Influenced and Corrupt Organizations Act (RICO;
18 U.S.C. § 1961 et seq.). He further contends his first amended complaint
stated a cause of action for interference with prospective economic advantage
against the individual respondents. We agree that his second amended
complaint states causes of action and reverse the judgment.
*Pursuant to California Rules of Court, rules 8.1105(b) and 8.1110, this
opinion is certified for publication with the exception of part II sections B and
C.
1
In the published portion of our opinion, we conclude that a threat to
terminate employment can provide a basis for an extortion claim, and, for
this and other reasons, the allegations of the second amended complaint
stated a cause of action for wrongful termination in violation of public policy.
In the unpublished portion of our opinion, we conclude the second amended
complaint stated RICO claims but the first amended complaint did not state
a cause of action for interference with prospective economic advantage.
I. FACTS AND PROCEDURAL HISTORY
In July 2018, Galeotti filed a complaint against respondent
International Union of Operating Engineers Union Local # 3 (Local 3) and
three of its union leaders, respondents Russell Burns, Dan Reding, and Dave
Harrison (individual respondents). In essence, Galeotti alleged that the
individual respondents required union employees to pay them money to keep
their jobs, lied about the reason for collecting the money, and caused Local 3
to terminate Galeotti’s employment when he failed to pay the full amount
demanded. Galeotti purported to allege causes of action for wrongful
discharge in violation of public policy and interference with prospective
economic advantage. After respondents filed a demurrer to the complaint,
Galeotti filed a first amended complaint.
Galeotti’s first amended complaint sought damages again for wrongful
discharge in violation of public policy and interference with prospective
economic advantage, and added claims for a RICO violation and conspiracy to
violate RICO.
Respondents filed a demurrer to the first amended complaint,
contending that all the claims were preempted by the Labor-Management
Reporting and Disclosure Act of 1959 (29 U.S.C. § 401), the claim against
individual respondents for interference with prospective economic advantage
2
was meritless also because the individual respondents were privileged to
cause the discharge, and the RICO and conspiracy claims were not supported
by the allegations of the pleading.
The court overruled the demurrer as to the claim for wrongful
discharge in violation of public policy, sustained it without leave to amend as
to the claim for interference with prospective economic advantage, and
sustained it with leave to amend as to the RICO claims, noting that Galeotti
had not alleged at least two predicate unlawful acts.
Galeotti’s second amended complaint omitted the claim for prospective
economic advantage but again purported to allege causes of action for
termination in violation of public policy, a RICO violation, and conspiracy to
commit a RICO violation. Because the second amended complaint is the
operative pleading for most purposes of this appeal, we set forth its
allegations in greater detail.
According to the second amended complaint, Galeotti was employed by
Local 3 from September 2005 until June 2018, most recently as a non-
managerial “Business Agent” assigned to assist the union by, for example,
helping members obtain the benefit of their collective bargaining agreements.
Burns and Reding were officers, directors or other “leaders” of the union.
In 2006, Burns and Reding formed a political organization called “The
Gold Ticket” to conduct a political campaign to replace the incumbent officers
and directors of Local 3 with their slate of candidates. In 2006, The Gold
Ticket won a three-year term.
In 2009, 2012, 2015, and 2018, Burns and Reding (and also Harrison in
2018) allegedly caused a flyer to be distributed to union employees stating an
amount employees were allegedly required to “donate” to The Gold Ticket, for
the purported purpose of funding the reelection campaign of Burns, Reding,
3
and other members of The Gold Ticket. Galeotti alleges on information and
belief, however, that the true purpose of the collection was to enrich Burns
and Reding. According to Galeotti’s pleading, union employees “understood
that payment of the money to The Gold Ticket election campaign was
required for them to keep their job.”
On information and belief, Galeotti alleged that Burns and Reding ran
unopposed and incurred no campaign expenses in 2009, 2012, and 2015.
None of the money was returned to union employees in 2009, and only half in
2012 and 2015. In 2018, the election was contested.
“For the 2018 election campaign, [Galeotti] was told that the amount he
was required to donate to The Gold Ticket was $1,000 and that refusal to do
so would result in his termination. [Galeotti] is informed and believes that
the $1,000 donation was required for him to retain his job as a Business
Agent.” Galeotti could not pay the full $1,000 but “donated $500.” In June
2018, Local 3 terminated Galeotti’s employment, allegedly because he “did
not contribute the full $1,000 to the political campaign of The Gold Ticket.”
The second amended complaint alleged that “[t]he requirement by [the
individual respondents] and DOES 1 through 100, inclusive, that employees,
including [Galeotti], pay money to enrich [the individual respondents] and
DOES 1 through 100, inclusive, with the threat of losing their jobs, was and
is the taking of employee’s wages in violation of Labor Code §§ 221 and 224,
extortion in violation of Penal Code § 518, and theft by deceit under
California Penal Code § 484.” Therefore, Galeotti asserted, his termination
was in violation of public policy and respondents’ acts violated RICO.
Attached to the second amended complaint was a document entitled
“The 2018 Gold Ticket Election,” which announced that “The Gold Ticket
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Team is requesting your support in re-electing our team of candidates” and
described the donation as “voluntary.”
Respondents filed a demurrer to the second amended complaint on the
ground that (1) the claim for wrongful discharge in violation of public policy
was meritless because Galeotti had not alleged extortion, violation of Labor
Code sections 221 or 224, or violation of Penal Code section 484; (2) the
wrongful discharge claim as to individual respondents was meritless because
officers of an employer cannot be liable for the employer’s wrongful
termination of an employee; and (3) the RICO claims were meritless because
there was no extortion as a matter of law, Galeotti failed to allege theft by
deceit under Penal Code section 484, and a violation of Penal Code section
484 cannot be the basis of a RICO claim.
Galeotti filed an opposition to the demurrer, contending his allegations
stated a cause of action.
The court sustained the demurrer to the second amended complaint
without leave to amend and dismissed the action with prejudice. This appeal
followed.
II. DISCUSSION
In our review of a dismissal entered after the sustaining of a demurrer
without leave to amend, we accept as true the plaintiff’s well-pleaded
allegations and reasonable inferences therefrom, and we determine de novo
whether those facts state a viable cause of action. (Intengan v. BAC Home
Loans Servicing LP (2013) 214 Cal. App. 4th 1047, 1052.)
As mentioned, Galeotti contends the court erred in sustaining the
demurrer to his second amended complaint as to his claims for wrongful
termination in violation of public policy, violation of RICO, and conspiracy to
violate RICO. He further contends the court erred in sustaining the
5
demurrer to his first amended complaint as to his claim against the
individual respondents for interference with prospective advantage. We
examine each contention in turn.
A. Wrongful Termination in Violation of Public Policy
To plead a claim for wrongful termination in violation of public policy, a
plaintiff must identify a fundamental public policy based on a statutory,
constitutional, or regulatory provision. (Green v. Ralee Engineering Co.
(1998) 19 Cal. 4th 66, 78-82 (Green); see Tameny v. Atlantic Richfield Co.
(1980) 27 Cal. 3d 167, 176 (Tameny).) More precisely here, the question is
whether the second amended complaint alleged facts showing that the
termination of Galeotti’s employment was for a reason inconsistent with a
fundamental policy delineated in a statutory protection. (Green, supra, at pp.
71, 79.)
The second amended complaint asserted that Galeotti was fired for
refusing to be a victim of respondents’ purported schemes of extortion (Pen.
Code, §§ 518, 519), theft by deceit (Pen. Code, § 484), and unlawful taking of
wages (Labor Code, §§ 221, 224).
1. Extortion
Penal Code section 518, subdivision (a) defines extortion as “the
obtaining of property or other consideration from another, with his or her
consent, or the obtaining of an official act of a public officer, induced by a
wrongful use of force or fear, or under color of official right.”
Galeotti did not allege that respondents used force or acted under color
of official right, but that they wrongfully used “fear” -- in particular, fear of
losing his job. Under Penal Code section 519, “fear” for purposes of extortion
“may be induced by a threat” to inflict unlawful injury to the person or
property of the individual or a third person, to accuse the individual or family
6
member of a crime, to expose or impute to the individual or a family member
“deformity, disgrace, or crime,” to expose a secret affecting any of them, or to
report their immigration status or suspected immigration status. (Italics
added.) A threat that does not fall within Penal Code section 519 does not
give rise to extortion. (Malin v. Singer (2013) 217 Cal. App. 4th 1283, 1299;
People v. Umana (2006) 138 Cal. App. 4th 625, 639.)
Galeotti argues that he feared for his job because respondents
demanded that he contribute $1,000 to The Gold Ticket campaign and
threatened to fire him (and thereby “inflict unlawful injury to [his] property”
under Penal Code section 519) if he refused. Two issues arise: did Galeotti
adequately allege a threat by respondents, and was the alleged threat to
terminate his employment a threat to injure his “property.”
a. Threat by Respondents
In his wrongful termination count, Galeotti did not unambiguously
allege a threat by a particular respondent to fire him if he refused to pay the
$1,000 contribution. In allegations incorporated into this count, he alleged
that he “was told that the amount he was required to donate to The Gold
Ticket was $1,000 and that refusal to do so would result in his termination,”
but he did not allege who told him. His reference in paragraph 46 to the
“requirement by [the individual respondents] and DOES 1 through100,
inclusive” that Galeotti and others pay money “with the threat of losing their
jobs” is vague as to who made the threat and how, and is unsupported by the
flyer attached to the second amended complaint, which did not demand
payment or threaten termination but merely “request[ed]” support and
described the donation as “voluntary.” And while Galeotti alleged that
respondents “demanded” payment and union employees “understood” they
7
would be fired if they did not pay, there is no specific allegation of anything
respondents did to create that understanding.
We note, however, that in his RICO count Galeotti further alleged that
“[d]efendants violated Penal Code §518 [extortion] each time they . . .
threaten[ed] to take property from [Galeotti] and other Local #3 employees in
the form of their employment if they did not pay Defendants money.” (Italics
added.) Construing Galeotti’s allegations broadly, as we must, it may be
inferred that respondents threatened Galeotti with termination in some
communication apart from what was on the flyer. (See also People v. Bollaert
(2016) 248 Cal. App. 4th 699, 725-726 [threat may be express or implied].)
While it is unknown why Galeotti did not allege who threatened him, when,
and by what means – all matters within his personal knowledge –
respondents do not assert that the elements of extortion must be alleged with
particularity when stating a wrongful termination claim. We conclude that,
for purposes of withstanding a demurrer, the allegations of the second
amended complaint adequately support the inference that it was respondents
who threatened Galeotti to pay or lose his job.
b. Threat to Injure Property
Respondents urge (and the trial court ruled) there was no extortion as a
matter of law because respondents’ threat to get Galeotti fired did not
threaten unlawful injury to his “property” within the meaning of Penal Code
section 519. We disagree.
“Property” is not defined in Penal Code section 519. In Penal Code
section 7, it is defined to include personal property, which in turn “includes”
money, goods, chattels, things in actions, and evidence of debt. (Pen. Code,
§ 7, subd. (10), (12).) By the terms of the statute, the list is not exclusive. To
the contrary, “property” in this context has been broadly construed to include
8
“intangible benefit[s] and prerogative[s] susceptible of possession or
disposition.” (People v. Fisher (2013) 216 Cal. App. 4th 212, 217 (Fisher)
(italics added); see, e.g., People v. Kozlowski (2002) 96 Cal. App. 4th 853, 866
(Kozlowski) [right to PIN code was property that could be the subject of
extortion]; People v. Baker (1978) 88 Cal. App. 3d 115, 119 [under former Pen.
Code, § 520, right to file an administrative protest was property that can be
the subject of extortion]; People v. Cadman (1881) 57 Cal. 562, 564 [right to
appeal was property within the meaning of the extortion statute].)
The foregoing cases mandated a broad interpretation of “property” in
determining what might be the subject of extortion under Penal Code section
518 or its predecessor (i.e., what the extortionist gets from the victim). We
conclude that a broad interpretation should also be given to the types of
property that might be threatened to accomplish the extortion under Penal
Code section 519 (i.e., how the extortionist convinces the victim to hand it
over).
After all, it is fundamental that words in a statute must be construed
in the manner that will best effectuate the statutory purpose. ( Webster v.
Superior Court (1988) 46 Cal. 3d 338, 344.) The aim of Penal Code section
519 is to delineate the type of conduct that is inappropriate in attempting to
convince others to turn things over in a civilized society. A broad
interpretation of “property” under Penal Code section 519 advances this aim
by recognizing there are many real-world vulnerabilities an extortionist
might exploit to induce a victim -- including the victim’s employment.
Indeed, it would make no sense for Penal Code section 519 to mean that a
defendant could go to jail for getting $1,000 from a victim by threatening to
throw a rock through the victim’s window, but not if the defendant got the
$1,000 by threatening to end the victim’s means of livelihood.
9
Respondents nonetheless contend an at-will employee like Galeotti has
no property right to continued employment as a matter of law, so it is okay to
threaten him with the termination of his employment to get him to pay them
money. They argue that an employee who is not employed for a specified
term is presumed to be an at-will employee, and at-will employees may be
terminated without cause. (Lab. Code, § 2922; Gantt v. Sentry Insurance
(1992) 1 Cal. 4th 1083, 1094, overruled on another ground in Green, supra, 19
Cal.4th at p. 80 fn. 6.) Therefore, respondents insist, at-will employees have
no property right in their jobs. (Citing Shapiro v. Wells Fargo Realty Advisors
(1984) 152 Cal. App. 3d 467, 483 (Shapiro), disapproved on another ground in
Foley v. Interactive Data Corp. (1988) 47 Cal. 3d 654, 688, 700 fn. 42; Southern
California Rapid Transit Dist. v. Superior Court (1994) 30 Cal. App. 4th 713,
730 fn.11 (Southern California Rapid Transit).) But neither Shapiro nor
Southern California Rapid Transit said anything about the type of property
that can be the subject of a threat for purposes of extortion.
Respondents focus on Shapiro, which, as relevant here, ruled that an
at-will employee, discharged without cause by his employer, could not
maintain an action for wrongful termination in violation of public policy
because he failed to allege he was terminated in contravention of public policy
(such as retaliation for asserting his statutory rights or refusing to perform
an illegal act) or that the employer violated a statute in dismissing him.
(Shapiro, supra, 152 Cal.App.3d at p. 477.) The court also rejected Shapiro’s
argument that the termination of his employment without cause under Labor
Code section 2922 was an unconstitutional denial of his property interest in
continuing employment, noting that the plaintiff had not “identified any
California statute or rule to support his claim that he is entitled to continued
employment.” (Id. at p. 483, italics added.)
10
Shapiro did not consider whether a threat to fire an employee unless he
paid $1,000 could constitute a threat to injure property under Penal Code
section 519, or whether it could provide the basis for extortion, or whether it
could underpin a claim for wrongful termination in violation of public policy.
Shapiro merely decided that the employee in that case had not identified any
right to continued employment where the employee had not alleged any
substantial public policy violated by his termination. (Shapiro, supra, 152
Cal.App.3d at pp. 477, 483.) Here, Galeotti made such an allegation based on
his claim of a scheme of extortion.1
Of greater relevance to the matter at hand is Fisher, supra, 216
Cal. App. 4th 212. There, the court considered whether a defendant’s threat of
vandalism to induce an employer to hire him constituted a demand for
“property” within the meaning of the extortion statutes. (Id. at p. 216.)
Observing that “property” for purposes of the extortion statute should be
broadly interpreted, the court upheld the conviction, explaining that a threat
to vandalize the employer’s business unless hired was a demand for “part of
the [employer’s] intangible benefit and prerogative of being able to control
whom to employ in one’s business.” (Id. at p. 219.) In reaching this
conclusion, Fisher turned to two New York decisions, including People ex rel.
Short v. Warden of City Prison (N.Y.App.Div. 1911) 145 A.D. 861 (Short),
1 Southern California Rapid Transit is also distinguishable. There, the
court stated in a footnote, without analysis and on a matter not placed at
issue by the parties, that the defendants’ termination of plaintiffs’
employment did not impact a property interest for purposes of a civil rights
claim under 42 U.S.C. § 1983, because at-will employees have no property
right to continued employment. (30 Cal.App.4th at p. 730 fn. 11.) The court
did not consider what might constitute “property” for purposes of extortion
under Penal Code section 519. A case is not authority as to an issue it did not
consider. (Ginns v. Savage (1964) 61 Cal. 2d 520, 524 fn. 2.)
11
which held that a threat to get the plaintiff fired from his job constituted a
threat to injure the plaintiff’s property for purposes of extortion. (Fisher, at
p. 218; see also State v. Smith (1954) 273 S.W.2d 143, 147 [loss of
employment is an injury to a person’s property]; Sekhar v. United States
(2013) 570 U.S. 729, 735 fn. 3 (Sekhar) [acknowledging Short without
disapproval].)
Although respondents (and the trial court) have noted that Fisher cited
Short to support a broad interpretation of property rights with respect to
employers rather than employees, Fisher made no such distinction. Its salient
point is that “property” should be broadly construed to effectuate the
purposes of the extortion statutes -- a principle embraced by California courts
for years. (See, e.g., Kozlowski, supra, 96 Cal.App.4th at pp. 865-866
[“property” as used in California’s extortion statute should be broadly
interpreted].) While Fisher broadly interpreted “property” to determine that
a right to hire could be the subject of an extortion, it relied on a decision
(Short) that broadly construed “property” to conclude that a threat to have
someone fired could be an unlawful means of extortion -- the exact situation
here.
Respondents further argue that the term “property” denotes an
exclusive right to use or possess something or exclusive ownership, so the
employer’s property right to fire an at-will employee precludes an employee
from having any property right that can be the subject of a threat under
Penal Code section 519. The argument is untenable. As Shapiro
acknowledged and Tameny decreed, an employer’s authority to discharge an
at-will employee may be limited by statute or public policy. (Shapiro, supra,
152 Cal.App.3d at p. 475; Tameny, supra, 27 Cal.3d at p. 172.) An employer’s
right as to whom to hire (Fisher) cannot preclude an employee’s right to be
12
free from termination for a purpose inconsistent with substantial public
policies underlying statutory provisions (Tameny).2
Lastly, we note that respondents’ theory misses the mark for another
reason. It is true that a defendant’s threat to do something that the
defendant has a legal right to do is generally not a threat to commit an
unlawful injury, as required for extortion. (People v. Kaufman (2017) 17
Cal. App. 5th 370, 394 [defendant’s threat to go to police and report a theft, if
the money he believed he was owed was not paid, is not extortionate]; People
v. Schmitz (1908) 7 Cal. App. 330, 370 [threatening to go before the board and
protest the issuance of a liquor license if debts were not repaid was not
extortionate, because people may lawfully protest the issuance of a liquor
license]; see CALCRIM No. 1830.) But here, respondents have not
demonstrated that they had a legal right to threaten to fire Galeotti for not
paying them money he did not owe. Quite obviously, threatening an unlawful
termination is a threat of unlawful injury.
2 In a case decided under the “anti-SLAPP” statute (Code. Civ. Proc., §
425.16), the court in Cross v. Cooper (2011) 197 Cal. App. 4th 357 stated that a
threat to remove the plaintiff’s “for sale” sign and tell prospective buyers bad
things about the plaintiff’s real property, to make it impossible to sell, were
not threats to injure property. (Id. at p. 387.) Cross did not cite legal
authority for this proposition; moreover, it did not address the question posed
here: whether “property” under Penal Code section 519 may include
intangible rights, specifically a right not to be unlawfully terminated from
employment. Cross is therefore inapposite. We also note that, while we
conclude that “property” in Penal Code section 519 must be broadly
construed, we leave open the possibility that the meaning of “property” in
Penal Code section 518 may not always be coextensive with the meaning of
“property” in Penal Code section 519; both terms should be interpreted to
effectuate the purpose of their respective statutes. (See Seckhar, supra, 570
U.S. at p. 735 fn. 3 [distinguishing “property” that is the subject of extortion
and injury to “property” as the means of extortion].)
13
Put another way, extortion may be based on threats that are not
unlawful in themselves but become unlawful when coupled with a demand
for money. (Flatley v. Mauro (2006) 39 Cal. 4th 299, 326-327.) Thus, even if,
in isolation, it would have been lawful to threaten Galeotti with the
termination of his at-will employment, it was unlawful for respondents to use
the threat as a hammer to induce him to pay them $1,000.
In sum, Galeotti’s allegations support an inference that respondents
engaged in a scheme to obtain a $1,000 contribution from Galeotti by
threatening to inflict unlawful injury to his property – namely, the
termination of his employment. Because Galeotti further alleged that Local 3
fired him for not succumbing to this extortion attempt, he has adequately
alleged that his employment was terminated in violation of the public policy
underlying the extortion statutes. (Pen. Code, §§ 518, 519; see Pen. Code, §
523 [written attempt to extort punishable even if no property obtained]; § 524
[attempted extortion punishable].)
2. Theft by Deceit
Penal Code section 484, subdivision (a) provides that a person is guilty
of theft if the person “knowingly and designedly” defrauds another person of
money or personal property. (See People v. Hunter (1957) 147 Cal. App. 2d
472, 475 [theft includes “obtaining property under false pretense”].) Theft by
false pretense arises under Penal Code section 484 if the victim justifiably
relied on a misrepresentation by the perpetrator and suffered damage as a
result. (See People v.Wooten (1996) 44 Cal. App. 4th 1834, 1842-1843.)
Here, Galeotti contends the individual respondents misrepresented
that the contributions would be used for their reelection campaigns, when in
reality they intended to get the funds for their personal use.
14
As a preliminary matter, we agree with respondents (and the trial
court) that the second amended complaint did not state an actionable theft by
false pretenses. First, Galeotti failed to allege facts from which it may be
reasonably inferred that he – or any other union employee – relied on
respondents’ purported misrepresentation in giving money to fund their
campaigns. He did not allege that union employees made donations for this
purpose. To the contrary, he alleged that union employees “understood that
payment . . . was required for them to keep their job[s],” suggesting payment
was motivated by a desire to stay employed, not a desire to fund any
campaign.3 Second, Galeotti did not allege that any reliance on respondents’
purported misrepresentation caused him damage. Although he alleged that
respondents did not believe there would be a contested election in 2018 when
they solicited the contribution, he also alleged that the 2018 election turned
out to be contested after all. This gives rise to an inference that the 2018
funds may have been used to cover campaign expenses, and Galeotti nowhere
alleged that they were not.
The question here, however, is not whether respondents could be liable
(or guilty) under Penal Code section 484. The question is whether firing
Galeotti was contrary to the policy underlying Penal Code section 484 –to
protect the public good from persons who would make false statements to
obtain money from others. (Green, supra, 19 Cal.4th at pp. 71, 86-87
[Tameny claim must be “ ‘tethered’ ” to public policy “ ‘delineated’ ” in a
statute, etc., and such a claim was stated where the defendant’s conduct
3 For this reason, Galleoti’s theft-by-deceit theory, as alleged, appears in
conflict with his extortion theory. He attempts to remedy the matter by
representing in his appellate reply brief that he paid the money to keep his
job and to support the reelection campaign. But that is not alleged in the
second amended complaint.
15
allegedly violated the policy evidenced in a federal regulation, whether or not
the defendant could be proven liable for violating the regulation].) As alleged
in the second amended complaint, union leaders attempted to induce Galeotti
to give them money under false pretenses, and Local 3 fired him because he
did not pay the full amount. In so doing, Local 3 terminated his employment
not for refusing to make a contribution to the election campaign, but for
refusing to pay what Local 3 knew was secretly going to enrich the individual
respondents personally. The termination was therefore contrary to the policy
delineated in Penal Code section 484, and on this basis Galeotti stated a
cause of action for wrongful termination of his employment in violation of
public policy.
3. Labor Code Sections 221 and 224
Labor Code section 221 bars employers from obtaining any portion of
the wages paid to an employee. Labor Code section 224 generally requires
written authorization for deductions from employees’ wages. These sections
protect employees against actions taken by their employers – in this case
Local 3.
Galeotti does not allege that Local 3 obtained any of his wages. Nor
does he allege that Local 3 deducted from his salary the $500 he contributed
to The Gold Ticket (or would have deducted the $1,000 if he had paid in full).
To the contrary, Galeotti alleges that he made contributions to the individual
respondents’ campaign funds -- such as by a check “payable to Gold Ticket
2018” -- and those payments enriched individual respondents. While Galeotti
argues that the individual respondents are effectively one and the same as
Local 3, and Local 3 ratified the individual respondents’ decision to fire him,
the point is that the money paid to the campaign fund was not allegedly
received by the union, but by the individual respondents for their personal
16
use. Galeotti thus fails to allege a violation of Labor Code sections 221 or
224.
Moreover, because the 2018 contribution was not designed to be a
payment to Local 3 or a deduction from wages, attempting to induce Galeotti
to make the full contribution did not implicate the public policy underlying
Labor Code sections 221 and 224, so firing him for failing to make the full
contribution was not contrary to the policy delineated in those statutes.
Galeotti failed to state a cause of action under this theory.
4. Conclusion as to the Wrongful Termination Claim
The trial court erred in sustaining respondents’ demurrer; the first
cause of action for wrongful termination in violation of public policy is
reinstated as to Local 3 to the extent it is premised on the public policy
underlying Penal Code sections 518 et seq. and Penal Code section 484.4
B. RICO Claims
The second and third counts in Galeotti’s second amended complaint
alleged that respondents violated RICO by acquiring and maintaining an
interest in, or control of, an enterprise (18 U.S.C. § 1962, subd. (b)) and that
they conspired to violate RICO (18 U.S.C. § 1962, subd. (d)).
Section 1962, subdivision (b) makes it unlawful for a person “to acquire
or maintain, directly or indirectly, any interest in or control of any
enterprise” through a pattern of racketeering activity. To state a cause of
4 A wrongful termination claim cannot be maintained against
individuals. (Miklosy v. Regents of University of California (2008) 44 Cal. 4th
876, 900.) Indeed, Galeotti asserts he is not making a Tameny claim against
the individual respondents . The court therefore did not err in sustaining the
demurrer as to them. The matter may proceed against Local 3, who allegedly
terminated Galeotti due to his refusal to go along fully with the individual
respondents’ scheme, which was allegedly pursued within the course and
scope of their employment and was authorized, consented to, and ratified by
Local 3.
17
action, Galeotti had to allege, among other things, a pattern of racketeering
activity based on the commission of at least two predicate acts. (H.J., Inc. v.
Northwestern Bell Telephone Co. (1989) 492 U.S. 229.)5
Section 1962, subdivision (d) makes it unlawful for persons to conspire
to violate section 1962, subdivisions (a), (b), or (c). To state a cause of action,
Galeotti had to allege that the purported conspirators intended to further a
scheme that, if completed, would satisfy the elements of a civil RICO claim.
(Salinas v. United States (1997) 522 U.S. 52, 65.)
As to both RICO counts, therefore, the question for this appeal is
whether Galeotti alleged two or more predicate acts reflecting a pattern of
racketeering activity. Section 1961, subdivision (1) defines “racketeering
activity” to include enumerated state and federal offenses, including any act
or threat involving extortion chargeable under state law and (as in
California) punishable by imprisonment for more than one year.
In his second amended complaint, Galeotti alleged that the individual
respondents conducted a scheme in 2009, 2012, 2015 and 2018 to extort
money from union employees in violation of Penal Code section 518, and to
5 Other elements of 18 U.S.C. § 1962, subdivision (b) have not been
addressed by the trial court’s order or the parties in this appeal. For
example, section 1962, subdivision (b) precludes the acquisition or
maintenance of control over an enterprise through racketeering activity. The
second cause of action of the second amended complaint alleges that the
individual respondents extorted employees to enrich themselves, but not
specifically to gain an interest in or control of any identified enterprise; what
that “enterprise” is remains unclear. Also unclear is whether Galeotti
suffered injury independent of the predicate acts and, if not, whether he has
standing to pursue a RICO claim under 18 U.S.C. § 1962, subdivision (b).
(E.g., Advocacy Organization for Patients and Providers v. Auto Club Ins.
Association (6th Cir. 1999) 176 F.3d 315, 329.) Since these issues have not
been presented to us, we do not decide them.
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obtain money through deceit under Penal Code section 484 by forcing union
employees to make donations to The Gold Ticket political campaign.
The allegations of theft under Penal Code section 484 are insufficient.
As discussed ante, Galeotti did not state a cause of action for theft by false
pretense. Further, Galeotti has not demonstrated that a violation of Penal
Code section 484 can constitute a predicate act. (United States v. Genao (2d
Cir. 2003) 343 F.3d 578, 584 [theft is not a state law offense that constitutes a
RICO predicate act]; Annulli v. Panikkar (3rd Cir. 1999) 200 F.3d 189, 192
[theft by deception, breach of contract, and intentional interference with
contract are not predicate acts].)
The allegations of extortion in Galeotti’s second amended complaint,
however, are sufficient. Galeotti alleged that in 2018 respondents threatened
that he would be fired unless he made a $1,000 contribution to The Gold
Ticket. Galeotti did not pay $1,000, so to that extent their attempted
extortion failed. But Galeotti did pay $500, so to that extent it succeeded.
Moreover, it can be inferred from the allegations of the second amended
complaint that other employees made campaign donations under threat of
termination. Accordingly, Galeotti alleged two or more predicate acts of
extortion.
Based on the issues presented to us and the trial court, the court erred
in sustaining the demurrer to the second and third causes of action of the
second amended complaint.
C. Interference with Prospective Economic Advantage
Galeotti’s first amended complaint included a claim for interference
with prospective economic advantage against respondents Burns, Reding,
and Harrison, alleging that they initiated efforts to have Local 3 terminate
his employment after he failed to contribute $1,000 to The Gold Ticket, thus
19
interfering with his prospective economic benefits in being employed by Local
3.
As our Supreme Court held long ago, it is “well established that
corporate agents and employees acting for and on behalf of a corporation
cannot be held liable for inducing a breach of the corporation’s contract.”
(Shoemaker v. Myers (1990) 52 Cal. 3d 1, 24 (Shoemaker).) This is because the
acts of the agents and employees, who stand in a confidential relation to the
corporation, are privileged. (Gruenberg v. Aetna Insurance Company (1973) 9
Cal. 3d 566, 570, 576.) On this basis, the trial court sustained respondents’
demurrer to this cause of action without leave to amend.
In his opening brief in this appeal, Galleoti contends the acts of the
individual respondents in causing the termination of his employment with
Local 3 were not privileged, and accordingly they could be liable. For this
proposition, he relies on Olivet v. Frischling (1980) 104 Cal. App. 3d 831
(Olivet).
Olivet explained that a manager or agent would be privileged to counsel
the employer’s breach of contract with a third party if done to protect the
employer’s interest, but the manager or agent would not be privileged to
induce the breach of contract to further their own economic advantage at the
employer’s expense. (Olivet, supra, 104 Cal.App.3d at pp. 840-841.)
Galeotti did not allege facts showing that his situation fell within the
exception described in Olivet. He alleged that the individual respondents
convinced Local 3 to terminate Galeotti’s employment contract because
Galeotti had not provided them with a benefit (the full amount of the $1,000
contribution) – in other words, Galeotti was fired out of retaliation. But
Olivet involved an entirely different scenario, in which board members acted
to induce the breach of contract with a third party so they could thereafter
20
obtain the benefits that the third party had enjoyed. There was no allegation
in Galeotti’s first amended complaint that the individual respondents caused
Local 3 to terminate Galeotti so they would receive the benefits he enjoyed
from his job, or that they acted for their own economic advantage at the
expense of Local 3. Indeed, it is alleged they acted within the course and
scope of their employment and with Local 3’s consent, authorization and
ratification.
In his appellate reply brief, Galeotti insists that, as in Olivet, he alleged
that the individual respondents personally benefited from firing him, because
his termination would convince other employees to make their contributions.
He does not, however, identify where in his first amended complaint he
made this allegation. And even if he had, it would not have given rise to an
inference that they caused Galeotti’s termination so they could obtain a
benefit within the meaning of Olivet, especially in light of the explicit
allegations that they acted with the authority and consent of Local 13. (See
Halvorsen v. Aramark Uniform Services, Inc. (1998) 65 Cal. App. 4th 1383,
1395 [manager’s privilege is absolute as to any lawsuit by a terminated at-
will employee, and the manager’s state of mind is irrelevant]; McCabe v.
General Foods Corp. (9th Cir. 1987) 811 F.2d 1336, 1339 [no cause of action
against managers for inducing discharge of at-will employee, despite
allegation they acted in part by ill will]; cf. Huynh v. Vu (2003) 111
Cal. App. 4th 1183, 1188 [privilege applies where predominant motive is to
benefit principal].)
In any event, Galeotti’s reliance on Olivet is unavailing. Olivet held
that, although parties to a contract cannot be liable for inducing a breach of
their own contract, a hospital board of directors that purported to be the
same legal entity as the hospital (and thus a party to the contract), could be
21
liable for conspiring to interfere with a contract between the hospital and a
leasing company. (Olivet, supra, 104 Cal.App.3d at p. 838.) Here, Galeotti
likewise argues that the individual respondents were one and the same as
Local 3. However, our Supreme Court has disapproved Olivet to the extent it
held that a party to a contract can be held liable based on a conspiracy to
interfere with its own contract. (Applied Equipment Corp. v. Litton Saudi
Arabia Ltd. (1994) 7 Cal. 4th 503, 521 fn. 10.)
Galeotti fails to show that the court erred in sustaining the demurrer to
his first amended complaint.
III. DISPOSITION
The judgment, and the order sustaining the demurrer to the second
amended complaint, are reversed as set forth herein. Appellant shall recover
his costs on appeal from respondents.
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NEEDHAM, J.
We concur.
JONES, P.J.
BURNS, J.
(A157785)
23
Superior Court of Alameda County, No. HG18914573, Michael Markman, Judge.
Law Office of Kevin C. Bedolla and Kevin Bedolla; Law offices of Brian Kreger and
Brian S. Kreger for Plaintiff and Appellant.
Schwartz, Steinsapir, Dohrmann & Sommers, Michael Four and Henry M. Willis for
the Defendants and Respondents.
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