Maria Azari vs Covenant Living West Inc

Case Number

22CV01556

Case Type

Hearing Date / Time

Fri, 10/25/2024 - 10:00

Nature of Proceedings

Demurrer

Tentative Ruling

(1) For all reasons further discussed herein, the demurrer of defendant to plaintiff’s second amended complaint is overruled.

(2) For all reasons discussed herein, the motion of defendant to strike punitive damages is denied.

(3) On or before November 8, 2024, defendant Covenant Living West shall file and serve its answer to the second amended complaint of plaintiff.

Background:

On April 22, 2022, plaintiff Maria Azari (Azari) filed an original complaint against defendant Covenant Living West, Inc. (Covenant Living) asserting seven causes of action: (1) failure to provide meal and rest periods (Lab. Code, §§ 226.7 & 512; IWC wage orders); (2) failure to pay overtime wages (Lab. Code, § 510 et seq.); (3) failure to pay final wages (Lab. Code, §§ 201, 202, 203); (4) failure to provide accurate itemized wage statements (Lab. Code, §§ 226, 1174); (5) failure to pay wages when due (Lab. Code, § 204); (6) unfair business practices (Bus. & Prof. Code, § 17200 et seq.); and (7) unlawful retaliation (Lab. Code, § 1102.5 et seq.).

On June 6, 2022, Covenant Living filed its answer to Azari’s complaint, generally denying its allegations and asserting twenty-six affirmative defenses.

On January 31, 2024, Covenant Living filed a motion for judgment on the pleadings (the MFJP) asserting that the present action is barred on res judicata grounds as a result of a settlement (the Lopez settlement) reached in a class action entitled Renee Lopez, on behalf of herself and all “aggrieved employees” pursuant to Labor Code § 2698 et seq. v. Covenant Living West, et al., filed with the Superior Court of Stanislaus County Superior as case number CV-21-001160 (the Lopez action). The MFJP was opposed by Azari.

On April 19, 2024, the Court issued its Minute Order (the Minute Order) granting the MFJP with leave to amend as to any claims alleged by Azari under Labor Code section 1102.5 or which arise from any purported retaliation by Covenant Living.

Court records reflect that on April 23, 2024, Azari filed a first amended complaint alleging one cause of action against Covenant Living for retaliation under Labor Code section 1102.5 et seq. On June 24, 2024, with leave of court, Azari filed a second amended complaint (the SAC), also alleging one cause of action against Covenant Living for retaliation under Labor Code section 1102.5 et seq. As alleged in the operative SAC:

Azari was hired by Covenant Living as a Certified Nursing Assistant (CNA) in April 2017. (SAC, ¶ 8.) Covenant Living set the daily tasks, work duties, and rate of pay of Azari who was to be compensated at the rate of $17.12 per hour. (Id. at ¶¶ 9-10.) For six to eight months, Azari, who worked in excess of 8 hours per day and 40 hours per week, was not paid overtime wages and was not permitted to take meal or rest breaks because Covenant Living was understaffed. (Id. at ¶¶ 12-15.) In addition, Covenant Living failed to keep accurate records of Azari’s hours of work and meal breaks, to maintain such records for three years, and to provide accurate, itemized wage statements showing the number of hours worked. (Id. at ¶¶ 17-18.)

On May 16, 2021, Azari and four of her co-workers told the administrator of Covenant Living that it was unfair to assign 120 patients to only five CNAs because it did not enable them to provide the necessary standard of care to the patients without foregoing meal and rest breaks and requiring them to work overtime for which they were not being paid. (SAC, ¶ 16.) The administrator of Covenant Living “brushed them off laughingly telling them they would have a ‘pizza party’ and ordered them to get back to work.” (Ibid.) Azari also informed Covenant Living’s then supervising nurse, Michelle, that due to being short staffed, CNAs and nurses had developed a routine of “splitting” the checking of residents’ vital signs and that disregarding this routine would result in missed meal and rest breaks and unpaid overtime hours. (Id. at ¶¶ 19-20.)

Michelle told Azari that she had to listen to her nurse and brought up a grudge that Michelle evidently held against Azari from a previous conversation during which Azari had tried to persuade Michelle to find nurses to cover for those who called off work when they were short-staffed. (SAC, ¶¶ 20.) After becoming visibly annoyed during the conversation with Azari, Michelle ordered Azari to take a five-minute break, and a couple of minutes later, told Azari to leave, stating that Azari would be called to come into work the next day. (Id. at ¶ 22.)

Azari was not called back into work the next day. (SAC, ¶ 23.) Azari called the Human Resource Director of Covenant Living asking if she could come into work but the Human Resource Director alleged that Azari had abandoned her job without permission or notice and accused Azari of refusing to care for the residents. (Ibid.) Azari explained what happened the day prior. (Id. at ¶ 24.) Though the Human Resource Director said she would call Azari back after an investigation, Azari received a letter 10 days later stating that Azari had been terminated on as of four days prior to the day Michelle demanded that Azari leave the work location. (Id. at ¶ 25.) (Note: Paragraphs 25 and 26 of the SAC appear to include typographical errors with respect to the date Azari was terminated.)

On July 24, 2024, Covenant Living filed a demurrer to the SAC on the grounds that the sole cause of action alleged in the SAC is barred by the res judicata impact of the Lopez settlement and that Azari has failed to allege facts sufficient to state a claim for retaliation under Labor Code section 1102.5. Covenant Living has also filed a motion to strike allegations of punitive damages asserted in the SAC.

Azari opposes the demurrer and motion to strike of Covenant Living.

Analysis:

(1) Demurrer

A general demurrer “attacks only defects disclosed on the face of the pleadings or by matters that can be judicially noticed.” (Cloud v. Northrop Grumman Corp. (1998) 67 Cal.App.4th 995, 999; Code Civ. Proc., § 438, subd. (d).) In ruling on a demurrer, the court determines whether the complaint states a cause of action. (Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125.) The pleading subject to demurrer is given a reasonable interpretation and read as a whole, with all its parts in their context. (Ibid.) A demurrer assumes the truth of properly pleaded material allegations including facts which may be inferred from those expressly alleged, but not of contentions, deductions, or conclusions of fact or law. (Ibid.; McMahon v. Craig (2009) 176 Cal.App.4th 1502, 1509.) “If the complaint states a cause of action under any theory, regardless of the title under which the factual basis for relief is stated, that aspect of the complaint is good against a demurrer.” (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 38.)

Demurrer on ground of failure to state facts sufficient to constitute a cause of action:

Covenant Living contends that Azari is required but has failed to allege facts showing that she reasonably believed or knew that she had disclosed a violation of a rule or law. For this reason, Covenant Living argues, Azari has failed to state facts sufficient to constitute a cause of action for retaliation under Labor Code section 1102.5.

Relevant here, Labor Code section 1102.5 prohibits an employer from retailing against an employee “for disclosing information, or because the employer believes that the employee disclosed or may disclose information, … to a person with authority over the employee or another employee who has the authority to investigate, discover, or correct the violation or noncompliance, … if the employee has reasonable cause to believe that the information discloses a violation of state or federal statute, or a violation of or noncompliance with a local, state, or federal rule or regulation, regardless of whether disclosing the information is part of the employee’s job duties.” (Lab. Code, § 1102.5, subd. (b).)

As further detailed above, Azari expressly alleges that she and her co-workers informed both the administrator and Michelle that there existed issues regarding missed meal and rest breaks and unpaid overtime hours resulting from staffing issues. The allegations of the SAC also show that Azari informed the Human Resources Director of her conversation with Michelle. A reasonable trier of fact could infer from these allegations that Azari had both actual knowledge and reasonable cause to believe that the information Azari disclosed to the administrator, Michelle, and the Human Resources Director reflected a violation of labor statutes governing or applicable to meal and rest breaks and payment of wages. (Vatalaro v. County of Sacramento (2022) 79 Cal.App.5th 367, 381-383 [general discussion].) For these reasons, the Court will overrule the demurrer to the extent Covenant Living contends that Azari has failed to allege facts sufficient to show a reasonable believe or reasonable cause to believe that Azari had disclosed a violation of rule or law.

Demurrer on res judicata grounds:

 

Covenant Living also asserts that the SAC is based on the same cause of action alleged in the Lopez FAC and the same primary right giving rise to the Lopez action, that the parties in this action and the Lopez action are the same, that the Lopez settlement includes a release of all claims that could have been alleged based on the same facts appearing in the Lopez action, and that the Lopez settlement is acts as a final judgment on the merits. For these reasons, Covenant Living argues, the claims alleged in the SAC are barred as a result of the claims encompassed and released in the Lopez settlement.

In support of the demurrer on res judicata grounds, Covenant Living has filed a request for judicial notice of: (1) a first amended complaint (the Lopez FAC) filed on August 27, 2021, by plaintiff Renee Lopez (Lopez) in the Lopez action; (2) an order and judgment filed on July 31, 2023, in the Lopez action granting final approval of the Lopez settlement (the final approval order); and (3) a notice of entry of the final approval order filed by Lopez in the Lopez action on August 1, 2023 (the notice). (RFJN, ¶¶ 1-3 & Exhs. 1-3.) 

Covenant Living also submits in support of the demurrer the declaration of its counsel, Winifred Chan (Chan) who states that the parties to the Lopez settlement reached and approved in the Lopez action released all claims alleged or that could have been alleged in or based on facts set forth in the Lopez FAC, which included various wage and hour violations as well as unfair business practices under Business & Professions Code Section 17200 et seq. (Chan Decl., ¶ 2.) Chan further asserts that, as a result of the Lopez settlement, Azari received a settlement check and released Covenant Living from liability for the claims asserted or that could have been asserted. (Ibid.)

The Court will grant the unopposed request of Covenant Living for judicial notice of the Lopez FAC, the final approval order, and the notice. (Evid. Code, § 452, subd. (d)(1).; Frommhagen v. Board of Supervisors (1987) 197 Cal.App.3d 1292, 1299 (Frommhagen).) Judicial notice does not extend to the truth of any factual assertions or hearsay statements appearing in these court records. (Williams v. Wraxall (1995) 33 Cal.App.4th 120, 130; Arce v. Kaiser Foundation Health Plan, Inc. (2010) 181 Cal.App.4th 471, 483.)

As a preliminary matter, Covenant Living asserts that in the Minute Order, the Court determined that the retaliation claim alleged in the complaint arose from identical facts and conduct at issue in the Lopez settlement, and that the Court “heavily suggested” that the primary right sued upon in this action and in the Lopez action are the same. Covenant Living misconstrues the Court’s ruling reflected in the Minute Order. In that ruling, the Court noted that Azari had effectively conceded that the motion for judgment on the pleadings had merit with respect to certain causes of action alleged in the complaint. For this reason, the Court granted Covenant Living’s motion with leave to amend as to claims arising from any purported retaliation by Covenant Living. The Court did not determine that the retaliation claim alleged by Azari arose from identical facts and conduct alleged in the Lopez action, but did note that Covenant Living had failed to offer any reasoned argument demonstrating which specific issues relating to any retaliation claims were litigated and resolved against it in the Lopez action.

The term “[r]es judicata … is an umbrella term encompassing issue preclusion and claim preclusion, both of which describe the preclusive effect of a final judgment.” (Guerrero v. Department of Corrections & Rehabilitation (2018) 28 Cal.App.5th 1091, 1098.) Claim preclusion, the primary aspect of res judicata, prevents a party from relitigating the same cause of action in a second suit between the same parties while issue preclusion prevents the relitigation of issues actually litigated and resolved in the prior proceeding. (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th 888, 896 (Mycogen); Boeken v. Philip Morris USA, Inc. (2010) 48 Cal.4th 788, 797 (Boeken).) For present purposes, “[i]f all of the facts necessary to show that [this] action is barred by res judicata are within the complaint or subject to judicial notice”, the Court may grant the demurrer. (Frommhagen, supra, 197 Cal.App.3d at p. 1299.)

The parties here do not and cannot dispute that they are each parties to the Lopez action and the Lopez settlement. Covenant Living offers no information to show that Lopez alleged in the Lopez FAC a cause of action for retaliation under Labor Code section 1102.5. Moreover, the Court’s review of the Lopez FAC shows that Lopez did not allege any such cause of action. (RFJN, Exh. 1.) For these reasons, claim preclusion does not prevent litigation of the cause of action for retaliation under Labor Code section 1102.5 alleged in the SAC. (Mycogen, supra, 28 Cal.4th at p. 896.)

Covenant Living also contends that the facts at issue in this action and the Lopez action are identical with respect to the alleged failure by Covenant Living to provide meal and rest breaks and overtime wages, and that the retaliation claim alleged in the SAC arises from Covenant Living’s failure to provide breaks and overtime wages and Azari and Lopez’s right to complain about and seek remedies for these violations. Therefore, Covenant Living argues, the causes of action asserted by Azari here and by Lopez in the Lopez action are the same under the primary rights theory.

“Issue preclusion prohibits the relitigation of issues argued and decided in a previous case, even if the second suit raises different causes of action.” (DKN Holdings LLC v. Faerber (2015) 61 Cal.4th 813, 824, original italics (DKN).) Issue preclusion applies to bar a second suit raising different causes of action “(1) after final adjudication (2) of an identical issue (3) actually litigated and necessarily decided in the first suit and (4) asserted against one who was a party in the first suit or one in privity with that party.” (Id. at p. 825, original italics.)

Covenant Living’s reliance on the facts alleged in each action with respect to the purported failures of Covenant Living to provide meal and rest breaks and overtime wages is inapt. For example, Covenant Living fails to offer any reasoned legal or factual argument demonstrating which, if any, specific issues of retaliation by Covenant Living against employees such as Azari who provided information about the purported wage and hour violations were actually litigated and resolved against it in the Lopez action. (See DKN, supra, 61 Cal.4th at p. 824 [“[u]nder issue preclusion, the prior judgment conclusively resolves an issue actually litigated and determined in the first action”].) Moreover, there are no facts alleged in the Lopez action regarding any purported retaliation by Covenant Living based on any class member’s disclosure of information regarding the violations alleged in the Lopez FAC.

In addition, to the extent Covenant Living contends that, because the present action and the Lopez action involve the same underlying facts with respect to the purported wage and hour violations, the two proceedings involve identical causes of action for purposes of claim preclusion, a cause of action “ ‘is based upon the harm suffered, as opposed to the particular theory asserted by the litigant. [Citation.] Even where there are multiple legal theories upon which recovery might be predicated, one injury gives rise to only one claim for relief. “Hence a judgment for the defendant is a bar to a subsequent action by the plaintiff based on the same injury to the same right, even though he presents a different legal ground for relief.” [Citations.]’ Thus, under the primary rights theory, the determinative factor is the harm suffered. When two actions involving the same parties seek compensation for the same harm, they generally involve the same primary right.” (Boeken, supra, 48 Cal.4th at p. 798, original italics.)

Based on the allegations of the Lopez FAC, the harm suffered by the class in the Lopez action involved purported violations of the Labor Code by Covenant Living based on a purported failure of Covenant Living to pay wages due including at termination, to provide rest periods or compensation for missed rest periods, to provide accurate itemized wage statements, and for penalties under Labor Code section 2698 et seq. (the Private Attorneys General Act of 2004 or PAGA). Covenant Living fails to offer any reasoned factual argument demonstrating which, if any, express or implied allegations in the Lopez FAC relate to any retaliation by Covenant Living against members of the class in the Lopez action.

In addition, based on the Court’s review of the Lopez FAC, wholly absent from the Lopez FAC are any express or implied allegations showing that any member of the class alleged in the Lopez action disclosed to Covenant Living information regarding the violations alleged by Lopez, or that Covenant Living retaliated against the members of the class for disclosing information about the statutory violations alleged in the Lopez FAC in violation of the Labor Code. Accordingly, the primary rights at issue in the Lopez action involved only the rights of the class members alleged in that action not to be deprived of wages, breaks, or proper wage statements in violation of the Labor Code.

In the present action, the harm suffered by Azari does not arise from the failure of Covenant Living to pay wages or provide meal and rest breaks, but from the purportedly wrongful termination of Azari following Azari’s disclosure of information regarding missed meal and rest breaks and the alleged failure by Covenant Living to pay Azari for overtime hours, which Azari contends constitutes unlawful retaliation. Covenant Living fails to explain why Azari seeks to litigate her entitlement to unpaid wages or overtime, nor does the Court find that Azari seeks to litigate such claims. For these reasons, the primary right at issue in this action is Azari’s right to be free from unlawful retaliation for disclosing information regarding unpaid overtime and missed breaks, and not any right to unpaid wages, overtime, or other amounts due for missed meal or rest breaks. For these reasons, the primary rights involved in the Lopez action are different from the primary rights involved in this action.

Because there are no facts alleged in the Lopez FAC demonstrating that any of the claims in the Lopez action arose from any purported unlawful retaliation by Covenant Living, or that Covenant Living unlawfully retaliated against any members of the class in the Lopez action, the Lopez settlement is not conclusive as to the merits of this action as Covenant Living contends.

Covenant Living further asserts that the cause of action for violation of Business and Professions Code section 17200 alleged in the Lopez FAC encompasses the cause of action alleged in the SAC. For this reason, Covenant Living argues, Azari’s claim was released under the Lopez settlement and is accordingly barred.

Business and Professions Code section 17200 et seq. (the Unfair Competition Law or UCL) prohibits unfair competition. “[The term “unfair competition” is broadly defined in the UCL to include “any unlawful, unfair or fraudulent business act or practice.” (Gregory v. Albertson’s, Inc. (2002) 104 Cal.App.4th 845, 850-851.) “A business practice constitutes unfair competition if it is forbidden by any law, ‘be it civil or criminal, federal, state, or municipal, statutory, regulatory, or court-made’ [citation] or if it is unfair, that is, if it ‘ “ ‘offends an established public policy or ... is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.’ ” ’ [Citation.]” (Id. at p. 854.)  A plaintiff alleging unfair business practices under the statute must state with reasonable particularity the facts supporting the statutory elements of the violation. (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 619.)

The same reasoning and analysis applies. Though generally, violations of the Labor Code may constitute an unlawful act for purposes of the UCL (Sullivan v. Oracle Corp. (2011) 51 Cal.4th 1191, 1206), Covenant Living fails to explain why the UCL claim alleged in the Lopez action encompasses any claim for retaliation by Covenant Living under Labor Code section 1102.5 considering the allegations of the Lopez FAC as further described above.

For all reasons further discussed above, Covenant Living has failed to show that Azari has not alleged facts sufficient to constitute a cause of action under Labor Code section 1102.5, or that the cause of action alleged in the SAC is barred under the claim or issue preclusion aspects of res judicata. Therefore, the Court will overrule the demurrer of Covenant Living to the SAC.

(2) Motion To Strike

“Any party, within the time allowed to respond to a pleading may serve and file a notice of motion to strike the whole or any part thereof[.]” (Code Civ. Proc., § 435, subd. (b)(1).) Upon a motion to strike made under Code of Civil Procedure section 435, the court may “strike out any irrelevant, false, or improper matter inserted in any pleading” or “strike  all or part of any pleading not filed in conformity with applicable law, court rules, or an order of the court.” (Code Civ. Proc., §436(a) & (b).) The grounds for a motion to strike must appear on the face of the pleading or from matters which the court may take judicial notice. (Code Civ. Proc., § 437, subd. (a).)

In its motion to strike, Covenant Living contends that Azari has failed to allege facts sufficient to support a claim for punitive damages. The Court notes that the original complaint included a claim for punitive damages. (See Compl., ¶ 86.) The Court questions why Covenant Living did not raise these arguments in the MFJP.

Civil Code section 3294 permits the recovery of punitive damages by a plaintiff “where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice ….” (Civ. Code, § 3294, subd. (a).) (Note: Undesignated code references shall be to the Civil Code unless otherwise indicated.) As used in section 3294, “ ‘[m]alice’ means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.” (Civ. Code, § 3294, subd. (c)(1).) “ ‘Oppression’ means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights.” (Civ. Code, § 3294, subd. (c)(2).) “ ‘Fraud’ means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.” (Civ. Code, § 3294, subd. (c)(3).) “In order to survive a motion to strike an allegation of punitive damages, the ultimate facts showing an entitlement to such relief must be pled by a plaintiff.” (Clauson v. Superior Court (1998) 67 Cal.App.4th 1253, 1255.)

Giving the SAC a reasonable interpretation and accepting the truth of its allegations, if it were proven that Azari was terminated in a relatively short time after disclosing information to her supervisor, an administrator, and the Human Resource Direct about missed meal and rest breaks and unpaid overtime (see Morgan v. Regents of University of Cal. (2000) 88 Cal.App.4th 52, 69), and that Covenant Living unlawfully retaliated against Azari in violation of Labor Code section 1102.5, a reasonable trier of fact could find that the conduct of Covenant Living was despicable. (McNeal v. Whittaker, Clark & Daniels, Inc. (2022) 80 Cal.App.5th 853, 872 [also noting that such conduct has the character of outrage associated with a crime]; Tomaselli v. Transamerica Ins. Co. (1994) 25 Cal.App.4th 1269, 1287 [punitive damages are appropriate if acts are in violation of law or undertaken with a conscious disregard of the plaintiff’s rights].) For these reasons, the Court will deny the motion to strike.