Turman v. Superior Court, No. G0511871 (D4d3 Nov. 19, 2017)
In a case where corporate structure is at issue, it’s mighty confusing when there’s a real live person named “Parent.” Arthur J. Parent, that is. Mr. Parent is the sole stockholder of A.J Parent, Inc. (Which for fun we’ll call the Parent Company.) He also owns a company called Koji’s, which was in the restaurant business, but is now bankrupt.
Plaintiffs brought a wage-and-hour class action against Kojis, where they once worked. Given that Koji’s is judgment proof, they also sued Parent and the Parent Company under joint employer and alter ego theories. The trial court certified a class against Koji’s, but declined to do so against Parent or the Parent Company. It then found in a bench trial that Parent and Parent Company were not, in fact alter egos of Koji’s or joint employers of Plaintiffs. In the course of all this, the trial court also made a procedurally hinky ruling and some sanctions on alter ego discovery, which is bound up in all of this.
But before we get to all that, there’s a motion to dismiss most of the appeal. There’s no final judgment as to the class-certified claim against Koji’s. Similarly, because there’s apparently a yet-to-be-adjudicated federal law claim against Parent, there’s no final judgment against him either. The Court of Appeal tacitly agrees that an appeal hasn’t been perfected except for the alter ego case against Parent Company, because there’s still technically unresolved claims against Parent and Koji’s. But given the insolvency of Koji’s, the court elects to treat the whole thing as a writ, which it has the discretion to do.
On class cert, California has a somewhat unique rule that on appeal, court can only uphold a certification decision based on the trial court’s actual reasoning. If the reasoning isn’t sufficient, you get a reversal and remand. Which here it wasn’t. The only reason the trial court denied class cert on the claims against Parent and Parent Company was that Plaintiffs said that Koji’s was their employer. But that doesn’t mean that the alter ego and joint employer issues weren’t subject to common proof. Indeed, it would seem like the answer to the questions of whether Parent and Parent Company are joint employers with or alter egos of Koji’s is quite likely exactly the same for every member of the class. So that’s reversed.
The discovery thing is interesting, if only because it’s illustrative of what a mess discovery litigation in California state court can be.
Plaintiffs moved to compel, but they didn’t abide by the letter of Rule of Court 3.1345. That rule requires a moving party to file a “separate statement,” which lists each discovery request at issue, the response to that request, and then a summary of the factual and legal reasons why the request should be compelled.
Which seems reasonable. Unless you move to compel on a bunch of different requests that have more or less the same legal or factual basis to compel production. At which time a rule-compliant Separate Statement becomes an extraordinarily voluminous and practically useless filing that says the same thing over and over again. Then that tends to result in the Court complaining about the “x inch stack of paper on this discovery motion” that is mostly comprised of the useless separate statement required by the rules.
So counsel for plaintiffs tried to put their requests into groups, and then provide a single factual and legal basis for each, instead of repeating. But the trial judge apparently didn’t appreciate that effort. She denied the motion, albeit without prejudice to refiling with a proper separate statement. During the hearing, the judge specifically recognized that given 15 letters the parties had sent back and forth on the issue do date, they didn’t need to further “meet and confer” under Code of Civil Procedure § 2016.040 before a renewed motion could be filed. That point, however, didn’t make it into her order.
Plaintiffs renewed their motion with the fixed separate statement on the same day as their prior motion was denied. Given the prior judge’s excusing them from the meet and confer requirement, they didn’t bother. But then the case was transferred to a different judge. The new judge—unawares that the prior judge had excused more meet and confer since it wasn’t in the order—denied the motion because there was no meet and confer and even sanctioned Plaintiffs for their failure to do so. That, obviously, was error, given the record.
Defendants try to salvage the ruling by claiming that the renewed motion was also late under Code of Civil Procedure § 2031.310(c), which says you need to move to compel within 45 days of receiving responses. The Court of Appeal, however, isn’t buying that. Although there isn’t really a great textual answer as to why a renewed motion that cures a procedural defect can be filed outside the 45-day window to move, the court says it’s the same motion and it relates back to the earlier filing for the purposes of the 45 days. Which makes sense.
And since the discovery motion was directed to alter ego issues, the bench trial ruling on alter ego can’t stand. Plaintiffs should get to contest the issue with whatever new evidence is produced. Plus, the trial court applied the wrong standard in its alter ego analysis. To pierce the corporate veil, the plaintiff needs to show a unity of ownership and interest and that respecting the corporate form would lead to an inequitable result. The second prong is often proven by showing that the corporate for was abused to achieve some kind of fraud or inequity. But the trial court raised the bar said that the second element required a corporation to be formed for the purposes of carrying out a fraud. That goes too far. A company that is formed for completely legit reasons can be later used or operated in a way that can cause an inequity.
Finally, the Court also reverses the trial court’s ruling that the state law joint employer doctrine didn’t apply. Similar to its alter ego ruling, the Court holds that the trial court set too high a bar.
So the upshot is that plaintiffs get their discovery, a chance to certify against Parent and Parent Company on alter ego and joint employer, and a chance to retry the case against defendants who aren’t judgment proof.
Writ granted.
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