Case Number: KC068671    Hearing Date: December 20, 2016    Dept: J

Re: Blanca Franco, etc., et al. v. H.W. Allstars, Inc., etc., et al. (KC068671)

DEMURRER TO PLAINTIFFS’ FIRST AMENDED COMPLAINT

Moving Parties: Defendants H.W. Allstars, Inc. dba Doubletree by Hilton Claremont and Henry Wu

Respondents: Plaintiffs Blanca Franco and Andres Franco

POS: No proof of service accompanies the moving papers; Opposition served by regular mail contrary to CCP § 1005(c)

[PROCEDURAL NOTE: Plaintiffs bring this action individually, “and on behalf of all others similarly situated.” If counsel for plaintiffs truly seeks class action status, this action was required to be filed in the Central District pursuant to Los Angeles Superior Court Rule 2.3. Counsel for plaintiffs is to clarify this at the time of the hearing.]

Plaintiffs are employed as banquet servers with H.W. All Stars, Inc. dba Doubletree by Hilton Claremont. Plaintiffs claim that they are third party beneficiaries of banquet contracts which entitle them to certain distributions. The complaint was filed on 8/23/16. The First Amended Complaint, filed on 8/31/16, asserts causes of action for:

1. Third Party Beneficiary Breach of Contract
2. Violation of Unfair Competition Law, Section 17200 et seq. of the Business and Professions Code
3. Fraud
4. Declaratory Relief

A Case Management Conference is set for 1/17/17.

Defendant H.W. Allstars, Inc. dba Doubletree by Hilton Claremont (“HWA”) demurs, per CCP § 430.10(e), to the first, second and fourth causes of action, on the basis that they each fail to state facts sufficient to constitute a cause of action. Defendant Harry Wu (“Wu”) demurs to the second cause of action on this basis. HWA also demurs to the third cause of action, per subsection (f), on the basis of uncertainty.

FIRST CAUSE OF ACTION (BREACH OF CONTRACT):

“’A cause of action for damages for breach of contract is comprised of the following elements: (1) the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to plaintiff.’ (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1388).” Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 228. “If the action is based on an alleged breach of a written contract, the terms must be set out verbatim in the body of the complaint or a copy of the written instrument must be attached and incorporated by reference. (Wise v. Southern Pacific Co. (1963) 223 Cal.App.2d 50, 59).” Otworth v. Southern Pac. Transportation Co. (1985) 166 Cal.App.3d 452, 459.

“’Under California law third party beneficiaries of contracts have the right to enforce the terms of the contract under Civil Code section 1559 which provides: “A contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it.”’ (Harper v. Wausau Ins. Co. (1997) 56 Cal.App.4th 1079, 1086). The promise in such a situation is treated as having been made directly to the third party. (Outdoor Services, Inc. v. Pabagold, Inc. (1986) 185 Cal.App.3d 676, 681). The third party need not be identified by name. It is sufficient if the third party belongs to a class of persons for whose benefit the contract was made. (Principal Mutual Life Ins. Co. v. Vars, Pave, McCord & Freedman (1998) 65 Cal.App.4th 1469, 1485). It is not necessary, however, that the contract be exclusively for the benefit of the third party; he need not be the sole or primary beneficiary. (COAC, Inc. v. Kennedy Engineers (1977) 67 Cal.App.3d 916, 920; 1 Witkin, Summary of Cal. Law (9th ed. 1987) Contracts § 665, p. 603.).” Johnson v. Superior Court (2000) 80 Cal.App.4th 1050, 1064.

“’A third party may qualify as a beneficiary under a contract where the contracting parties must have intended to benefit that third party and such intent appears on the terms of the contract [Citation.]…Whether a third party is an intended beneficiary or merely an incidental beneficiary to the contract involves construction of the parties’ intent, gleaned from reading the contract as a whole in light of the circumstances under which it was entered. [Citation.]’ (Jones v. Aetna Casualty & Surety Co. (1994) 26 Cal.App.4th 1717, 1724-1725).” Id.

Plaintiff Blanca Franco has worked as a banquet waitress employed by Defendant H.W. Allstars, Inc. dba Doubletree by Hilton Claremont (“HWA”) for the last eight years. (First Amended Complaint [“FAC”], ¶ 1). Plaintiff Andres Franco worked as a banquet waiter employed by HWA from 10/06-9/14. (Id., ¶ 2). Plaintiffs assert that HWA enters into banquet contracts with its customers to cater weddings, meetings, parties and other events, and attach the form contract purportedly utilized by HWA for said occasions as Exhibit “A.” (Id., ¶¶ 12 & 13).

Paragraph 8 of Exhibit “A,” entitled “GRATUITY & SERVICE CHARGE,” provides that “21% of the food and beverage and event total plus applicable state or local tax will be added to your account as a gratuity/service charge and fully distributed to servers, and where applicable, bussers and/or bartenders assigned to the Event.” (Emphasis added).

Plaintiffs allege that any server, busser, or bartender who works a given event is, by the terms of the above contract, an intended third party beneficiary to the contract. (FAC, ¶ 15). They claim that HWA misappropriated funds paid by the banquet customers pursuant to Paragraph 8 that are designated in the contract for HWA’s servers, bussers and/or bartenders by diverting these monies to management employees and/or retaining these monies, which has caused these individuals damages. (Id., ¶¶ 20-25 and 27).

Exhibit “A,” by its terms, required HWA to confer a benefit on third party servers, bussers and/or bartenders; as such, these individuals cannot be said to be mere incidental beneficiaries. Inasmuch as plaintiffs have sufficiently pled their first cause of action, Defendant HWA’s demurrer to the first cause of action is overruled.

SECOND CAUSE OF ACTION (VIOLATION OF UNFAIR COMPETITION LAW, SECTION 17200 ET SEQ. OF THE BUSINESS AND PROFESSIONS CODE):

Defendants HAW and Harry Wu (“Wu”) contend that plaintiffs’ second cause of action fails, because they are not business competitors. The contention that Section 17200 does not apply to employees, however, is erroneous. A Section 17200 claim may be based on conduct that is unfair, unlawful or fraudulent. The failure to pay wages due is unlawful and thus an unfair business practice. See Cortez v. Purolator Air Filtration Prods. Co. (2000) 23 Cal.4th 163 (i.e., Business & Professions Code § 17203 authorizes an order compelling an employer defendant to pay unlawfully withheld wages as a restitutionary remedy in a UCL action).

Defendants HWA’s and Wu’s demurrer to the second cause of action, then, is overruled.

THIRD CAUSE OF ACTION (FRAUD):

“’”The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.”’ (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638). ‘”Every element of the cause of action for fraud must be alleged in the proper manner (i.e., factually and specifically), and the policy of liberal construction of the pleadings … will not ordinarily be invoked to sustain a pleading defective in any material respect.”’ (Committee On Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216).” Rutherford Holdings, LLC, supra, 223 Cal.App.4th at 234.

“The requirement of specificity in a fraud action against a corporation requires the plaintiff to allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written, authority to speak, to whom they spoke, what they said or wrote, and when it was said or written. (Archuleta v. Grand Lodge etc. of Machinists (1968) 262 Cal.App.2d 202, 208–209; Gautier v. General Telephone Co. (1965) 234 Cal.App.2d 302, 308; Mason v. Drug, Inc. (1939) 31 Cal.App.2d 697, 703; Sanders v. Ford Motor Co. (1979) 96 Cal.App.3d Supp. 43, 46; see Grossman & Van Alstyne, California Practice (2d ed. 1976) § 984, pp. 111–114.).” Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157.

Plaintiffs have not pled this cause of action with the required specificity. Moreover, although not addressed by the parties, this cause of action sounds in promissory fraud (i.e., “HWA…concealed, suppressed, and/or failed to disclose a material fact when it misrepresented its intention to transfer the Banquet Distribution to the Plaintiffs and others similarly situated…” [FAC, ¶ 43]). “To maintain an action for deceit based on a false promise, one must specifically allege and prove, among other things, that the promisor did not intend to perform at the time he or she made the promise and that it was intended to deceive or induce the promisee to do or not do a particular thing. (Hills Trans. Co. v. Southwest Forest Industries, Inc. (1966) 266 Cal.App.2d 702, 708; Regus v. Schartkoff (1957) 156 Cal.App.2d 382, 389).” Tarmann[, supra,] 2 C.A.4th [at] 159. [M]aking a promise with an honest but unreasonable intent to perform is wholly different from making one with no intent to perform and, therefore, does not constitute a false promise.” Id. “’[S]omething more than nonperformance is required to prove the defendant’s intent not to perform his promise.’ (People v. Ashley (1954) 42 Cal.2d 246, 263; see also Jacobson v. Mead (1936) 12 Cal.App.2d 75, 82; Justheim Petroleum Company v. Hammond (10th Cir. 1955) 227 F.2d 629, 637; Rest.2d Torts, § 530, com. d.; Prosser, Torts (5th ed. 1984) § 109, p. 764.).” Tenzer v. Superscope, Inc. (1985) 39 Cal.3d 18, 30. Plaintiffs have not alleged facts reflecting Defendant HWA’s intent not to perform the terms of the contracts.

Defendant HWA’s demurrer to the third cause of action is sustained.

FOURTH CAUSE OF ACTION (DECLARATORY RELIEF):

Defendant HWA claims that the fourth cause of action fails, because it is based on a defectively pled first cause of action. The first cause of action, as noted above, has been sufficiently pled; accordingly, Defendant HWA’s demurrer to the fourth cause of action is overruled.

The court will hear from counsel for plaintiffs as to whether leave to amend the third cause of action is requested, and will require an offer of proof if so.