Opinion
A158348
02-17-2021
ISMAEL MERCADO, Plaintiff and Appellant, v. JECHI, INC. et al., Defendants and Respondents.
ORDER MODIFYING OPINION AND DENYING REHEARING [NO CHANGE IN JUDGMENT] THE COURT:
It is ordered that the opinion filed herein on February 17, 2021, be modified as follows:
1. On page 24, in the first full paragraph, in the second sentence, which begins "We emphasize," we replace "be confined to" with "based on," so the sentence reads:
We emphasize, however, that such PAGA claim must be based on the allegations stated in the current FAC concerning his employment at Bowl'd Albany, the only restaurant in which he was employed by Jeschi.
2. On page 24, at the end of the first full paragraph that begins with "To the extent," add:
Should Mercado establish standing as an "aggrieved employee" under section 2699, subdivision (c), he may assert a representative action under PAGA on behalf of all affected
Jechi employees at the Bowl'd Albany and Korean Spoon Bistro restaurants. (See Huff v Securitas Security Services USA, Inc. (2018) 23 Cal.App.5th 745, 754; Crestwood Behavioral Health, Inc. v. Superior Court (Feb. 17, 2021, A160523) ___ Cal.App.5th ___, ___ [2021 WL 613700 at p. *3].) We express no opinion as to the merits of these potential claims.
The modification does not change the appellate judgment. (Cal. Rules of Court, rule 8.264(c)(2).)
Respondent's petition for rehearing is denied. Dated:
/s/_________
Humes, P.J.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Alameda County Super. Ct. No. RG18899432)
Appellant and proposed class representative Ismael Mercado brought a class action alleging various wage and hour violations on behalf of workers at several restaurants owned or operated by entity respondents Jechi Inc., Kho Corporation, OMC Brands LLC, Eat Bop Corporation, and Kansai Japanese Restaurant, and individual respondents Micha Oh, Jessica Kwon, Chiyoung Moon, and Dongwon Lee. The trial court sustained respondents' demurrer to Mercado's third amended complaint (TAC) without leave to amend, disposing of Mercado's class allegations. On appeal, Mercado contends the trial court abused its discretion in disallowing further amendment to his class claims and dismissing a proposed claim under the Private Attorneys General Act (PAGA) (Lab. Code, § 2698 et seq.) We conclude the trial court properly sustained the demurrer to the TAC's class allegations when it found that Mercado lacked standing to represent the proposed class and there was no reasonable possibility he could satisfy the community of interest requirement for class certification. However, we conclude that Mercado should be permitted to amend his complaint to plead a PAGA claim based on his employment at one of the restaurants, Bowl'd Albany. The order is affirmed in part and reversed in part, and the matter is remanded for further proceedings consistent with this opinion.
All further statutory references are to the Labor Code unless otherwise specified.
I. FACTUAL AND PROCEDURAL BACKGROUND
A. Background Preceding the Operative Complaint
In April 2018, Cesareo Perez filed a complaint against two of the respondents, Jechi, Inc. (Jechi) and Kho Corporation (Kho), asserting five causes of action. Perez alleged that Jechi and Kho jointly operated a restaurant called Charcoal Korean BBQ, where he had worked for seven years as a produce handler. He claimed Jechi and Kho had violated various wage and hour statutes by failing to pay him minimum and overtime wages, denying him rest and meal breaks, failing to provide paystubs, and failing to pay wages due at termination.
In May 2018, Mercado joined Perez as a co-plaintiff in filing an amended complaint restating the wage and hour violations against Jechi and Kho. They alleged that the two companies jointly operated a second restaurant named Bowl'd (also known as Bowl'd Albany), where Mercado had worked for two years. In October, Perez voluntarily dismissed his claims against Jechi and Kho. Mercado sought leave to file a second amended complaint (SAC) to add class allegations, to add co-plaintiff Juan Manuel Luna de Anda, and to name additional defendants. The trial court granted Mercado leave to file the SAC.
In November 2018, Mercado and de Anda filed the SAC against eight defendants, comprised of individual respondents Oh, Kwon, and Moon, and five corporate respondents, Jechi, Kho, OMC Brands LLC (OMC), Eat Bop Corporation (Eat Bop), and Kansai Japanese Restaurant, Inc (Kansai). The SAC alleged that the corporate respondents owned and operated at least 12 restaurants, including three where Mercado had worked—Bowl'd Albany, Kansai, and Ohgane Oakland—and two that had employed de Anda— Bowl'd Albany and Moong Bong Ri. The SAC did not identify any employees who worked in the remaining eight restaurants. Oh, Kwon, and Moon were alleged to have ownership interests in all five companies and exercised personal control over the restaurants' day-to-day operations. The SAC restated the same wage and hour violations that had previously been alleged, and prayed for damages of $5 million.
The SAC defined the putative class to include all individuals who had ever worked at any of the respondents' restaurants in the four years preceding October 23, 2018, and all individuals who had worked for the restaurants since January 1, 2017 who had not been paid a minimum wage. The alleged basis for class treatment was that respondents had collectively implemented the same illegal wage and hour policies in all 12 restaurants. All respondents except for Kansai filed a joint demurrer, contending that the SAC did not adequately plead facts to show that they were the plaintiffs' employers or that they had enforced allegedly uniform wage and hour policies. De Anda subsequently filed a request for dismissal.
On May 24, 2019, the trial court sustained respondents' demurrer to the SAC, denying leave to amend with respect to OMC based on Mercado's admission in his opposition to a related motion to bifurcate that he had never worked for any restaurant owned by OMC. The court otherwise granted leave to amend, while noting that the respondents had "raised legitimate concerns regarding [Mercado's] standing to bring this action against them" and directing that plaintiffs "address [these] concerns to the best of their ability, and dismiss any Defendants against whom Plaintiffs admit they cannot establish standing." Addressing Mercado's expressed intent to add PAGA claims, the trial court stated that its order was "not to be interpreted by Plaintiffs as permission from the Court to add any [PAGA] claims to the complaint" because "this issue is not directly before the Court."
While Mercado asserts in his opening brief that OMC is not a party to this appeal, OMC was named as a defendant in the caption of the operative complaint and is represented by counsel in this appeal.
"Under the [PAGA], an employee may seek civil penalties for Labor Code violations committed against her and other aggrieved employees by bringing—on behalf of the state—a representative action against her employer." (ZB, N.A. v. Superior Court (2019) 8 Cal.5th 175, 181.) All further statutory references are to the Labor Code except as otherwise indicated.
B. The Operative Complaint
In May 2019, Mercado filed the TAC, essentially alleging the same wage and hour claims as before. In addition to the respondents named in the SAC, Mercado added respondent Dongwon Lee. The TAC defined the putative class as "all individuals who had worked at the Restaurants owned by [respondents other than OMC] in the four years preceding October 23, 2018." This time, Mercado alleged that he had worked for four of the eight restaurants in question, though his employment at three of the restaurants lasted for one to two days each. Mercado alleged that he worked at Bowl'd Albany (owned by Jechi) for approximately two years, with his employment ending on December 30, 2017. As to the other four restaurants which had never employed Mercado, he alleged that one was owned by Jechi and was subject to the same unlawful wage and hour scheme. He did not identify which of the respondents owned the other three restaurants.
In June 2019, Mercado filed a motion seeking leave to file a fourth amended complaint (FAC). The proposed FAC augmented the claims in the TAC by adding a cause of action under section 558.1 and a PAGA claim against certain respondents. The proposed class definition remained unchanged.
Section 558.1, subdivision (a) provides: "Any employer or other person acting on behalf of an employer, who violates, or causes to be violated, any provision regulating minimum wages or hours and days of work in any order of the Industrial Welfare Commission, or violates, or causes to be violated, Sections 203, 226, 226.7, 1193.6, 1194, or 2802, may be held liable as the employer for such violation."
Respondents demurred to the TAC on the grounds that Mercado had failed to cure the standing issues previously noted by the trial court and could not satisfy the community of interest requirement for establishing a class action. Respondents argued, in part, that Mercado could not substantiate his conclusory allegations that respondents enforced the same unlawful employment policy over a four year period because he had not worked at all the restaurants named in the TAC and had never worked for some of the respondents. Respondents attached transcripts of Mercado's deposition, which they asked the trial court to judicially notice.
Mercado did not oppose respondents' request for judicial notice and does not challenge said request on appeal. We need not determine whether the deposition excerpts were properly subject to judicial notice in ruling on the demurrer because the excerpts are unnecessary to our resolution of the issues in this appeal.
In his opposition to the demurrer, Mercado conceded that his proposed class definition was "overbroad." Mercado asserted that the only legal theory justifying joint employment claims was under section 1182.12, subdivisions (b)(3)-(4), and those provisions only applied to employees jointly managed or controlled by respondent Oh. He proposed to modify the class definition into five subclasses covering "all workers" who had ever worked at the eight restaurants. The subclasses were largely organized around the restaurants' respective corporate owners. Mercado identified the five proposed subclasses as (1) all workers at the two Jechi restaurants (Bowl'd Albany and Korean Spoon Bistro), (2) all workers at the Kho restaurant Oghane, (3) all workers at Kansai-owned Kansai Japanese restaurant, (4) all workers at Bowl'd Oakland (owned by Kho and Lee), and (5) all workers at Eat Bop restaurants.
Section 1182.12 is a minimum wage statute. Subdivision (b)(3) states in relevant part: "For purposes of this subdivision, 'employer' means any person who directly or indirectly, or through an agent or any other person, employs or exercises control over the wages, hours, or working conditions of any person. ... ." Subdivision (b)(4) provides that "Employees who are treated as employed by a single qualified taxpayer under subdivision (h) of Section 23626 of the Revenue and Taxation Code ... shall be considered employees of that taxpayer for purposes of this subdivision."
On August 7, 2019, the trial court entered an order sustaining the demurrer. The court found Mercado lacked standing to maintain the lawsuit as a class action and that he had failed to state a sufficient basis for class certification. The court granted Mercado leave to amend "solely as to his viable individual claims against [respondents]." Mercado subsequently filed a FAC alleging individual claims only. The following month, the trial court entered an order denying his June 2019 motion for leave to file the proposed FAC as moot given that another version of the FAC had already been filed. This appeal followed.
II. DISCUSSION
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] . . . .' [Citation, fn. omitted.]" (McClain v. Octagon Plaza, LLC (2008) 159 Cal.App.4th 784, 791 (McClain).) To prevail, "the appellant[s] must affirmatively demonstrate error" by showing "the facts pleaded are sufficient to establish every element of a cause of action and [must] overcome all legal grounds on which the trial court sustained the demurrer. [Citation.]" (Intengan v. BAC Home Loans Servicing LP (2013) 214 Cal.App.4th 1047, 1052.)
As part of our de novo review, " '[w]e treat the demurrer as admitting all material facts which were properly pleaded. [Citation.] However, we will not assume the truth of contentions, deductions, or conclusions of fact or law [citation], and we may disregard any allegations that are contrary to the law or to a fact of which judicial notice may be taken. [Citation.]' [Citation.] If a proper ground for sustaining the demurrer exists, 'this court will . . . affirm the demurrers even if the trial court relied on an improper ground, whether or not the defendants asserted the proper ground in the trial court. [Citation.]' [Citation.]" (McClain, supra, 159 Cal.App.4th at p. 792.)
" 'Second, if a trial court sustains a demurrer without leave to amend, appellate courts determine whether or not the [appellants] could amend the complaint to state a cause of action. [Citation.]' [Citation.]" (McClain, supra, 159 Cal.App.4th at pp. 791-792.) Here, "the burden falls upon the [appellants] to show what facts [they] could plead to cure the existing defects in the complaint. [Citation.] 'To meet this burden, [the] [appellants] must submit a proposed amended complaint or, on appeal, enumerate the facts and demonstrate how those facts establish a cause of action.' [Citation.]" (Id. at p. 792.) A ruling denying leave to amend is reviewed for abuse of discretion. (Schermer v. Tatum (2016) 245 Cal.App.4th 912, 930 (Schermer).)
B. Class Certification May Be Decided on Demurrer
Contrary to Mercado's contention on appeal, it is firmly established that trial courts may resolve the issue of class certification on demurrer. (Tucker v. Pacific Bell Mobile Services (2012) 208 Cal.App.4th 201, 212 (Tucker); see Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 440 [noting the issue is "settled" that courts are authorized to "weed[] out" legally meritless class action suits prior to certification by demurrer or pretrial motion].) The authority Mercado relies on for the proposition that "demurrers to class action complaints should never be granted" is a case from the Second District Court of Appeal (Tarkington v. California Unemployment Ins. Appeals Bd. (2009) 172 Cal.App.4th 1494, 1511) that has been criticized by appellate courts in our district as being "overly broad." (Tucker, supra, 208 Cal.App.4th 201 at p. 213.)
A trial court may sustain a demurrer to class action allegations where " 'it concludes as a matter of law that, assuming the truth of the factual allegations in the complaint, there is no reasonable possibility that the requirements for class certification will be satisfied.' " (Tucker, at p. 211; see Canon U.S.A., Inc. v. Superior Court (1998) 68 Cal.App.4th 1, 5 [noting that when the "invalidity of the class allegations is revealed on the face of the complaint, and/or by matters subject to judicial notice, the class issue may be properly disposed of by demurrer or motion to strike," and noting that "[i]n such circumstances, there is no need to incur the expense of an evidentiary hearing or class-related discovery"].)
C. The TAC Does Not Satisfy Class Action Requirements
The trial court sustained the demurrer on the basis that the TAC failed to show Mercado has standing to represent the purported class. The court also found the TAC did not satisfy the community of interest requirement for class actions because common questions of fact and law do not predominate and because Mercado's claims are not typical of the class. The court concluded that Mercado failed to show the class mechanism would be superior to individual actions.
i. Mercado Lacks Standing to Represent the Purported Class
(a) Additional Background
The trial court found that Mercado lacked standing because he "ha[d] not satisfactorily alleged he is a member of the putative class because he did not suffer the same alleged injury as the other putative class members." The TAC also "fail[ed] to allege any factual basis for the purported uniformity of [the respondents'] employment policies." The court observed that Mercado had worked at only four of the eight restaurants named in the TAC, and had only worked at one of these four restaurants for more than one or two days. The court also noted his employment at one restaurant (Bowl'd Albany) had lasted for about two years and Mercado had not stated any grounds for standing to represent a class that spanned four years, as the TAC attempted to do. Further, the TAC was devoid of any allegations to establish that the defendants constituted a "single employer" or a "joint employer."
(b) Applicable Legal Principles
"Absent a named plaintiff with standing, the class action is subject to demurrer and dismissal." (CashCall, Inc. v. Superior Court (2008) 159 Cal.App.4th 273, 285; see also Starbucks Corp. v. Superior Court (2011) 194 Cal.App.4th 820, 830-831.) To have standing, a class representative must allege that he or she is a member of the class, sharing common legal rights and injuries with other class members. (First American Title Insurance Co. v. Superior Court (2007) 146 Cal.App.4th 1564, 1574 (First American).) If the suit involves multiple defendants, the class representative must establish standing with respect to each defendant: "A plaintiff cannot use the procedure of a class action to establish standing to sue a class or group of defendants unless the plaintiff has actually been injured by each of the defendants in the class. Although a plaintiff may represent a group of individuals all of whom have causes of action similar to his own against the same defendant or defendants, he cannot represent a class having causes of action against other defendants as to whom the plaintiff himself has no cause of action. [Citations.]" (Simons v. Horowitz (1984) 151 Cal.App.3d 834, 845; see also Hart v. County of Alameda (1999) 76 Cal.App.4th 766, 775-776 (Hart).)
For example, in Hart, the plaintiff brought a class action against 25 counties, purportedly on behalf of all people who deposited jury fees with the counties and were entitled to a refund of those deposits. (Hart, supra, 76 Cal.App.4th 766 at p. 772.) The plaintiff alleged that he, or his assignors, had deposited jury fees in four of the 25 counties. (Id., 773-773.) The appellate court held that the plaintiff did not have standing to assert claims against the counties in which he or his assignors did not deposit jury fees, and therefore his claim was not typical of the class he purported to represent. As the court explained, "when a class action is brought against multiple defendants, the 'action may only be maintained against defendants as to whom the class representative has a cause of action. Without such a personal cause of action, the prerequisite that the claims of the representative party be typical of the class cannot be met. If the plaintiff class representative only has a personal cause of action against one defendant and never had any claim of any kind against the remaining defendants, his claim is not typical of the class. . . Th[is] . . . requirement is . . . not fulfilled merely because the plaintiffs allege that they suffered injuries similar to those of other parties at the hands of other defendants.' [Citations.]" (Id. at pp. 775-776.)
If a class representative does not have a cause of action against each of the named defendants, he or she must adequately allege common facts linking all the defendants in order to support standing against those with whom the representative has had no direct interaction. For example, a plaintiff may allege the existence of a conspiracy among multiple defendants. (Baltimore Football Club v. Superior Court (1985) 171 Cal.App.3d 352, 359 ["In the absence of a conspiracy between all of the defendants, California has adopted the rule that a class action may only be maintained against defendants as to whom the class representative has a cause of action."].) Alternatively, a plaintiff may allege the defendants constitute a "single employer" under the "integrated enterprise" test (see Laird v. Capital Cities/ABC, Inc., (1998) 68 Cal.App.4th 727, 737, and Maddock v. KB Homes, Inc. (2007) 631 F.Supp.2d 1226, 1237-1238), or that they acted as a "joint employer" (see Vernon v. State of California (2004) 116 Cal.App.4th 114, 124-126, and Zhao v. Bebe Stores, Inc. (2003) 247 F.Supp.2d 1154, 1160).
(c) Analysis
We agree with the trial court that Mercado lacks standing to pursue this lawsuit as a class action. Mercado alleged in the TAC that he worked at only four of the eight restaurants named in the complaint, and only at one of these restaurants (Bowl'd Albany) for any meaningful period of time. Even as to that restaurant, Mercado concedes he was employed there for approximately two years, not the four-year period asserted in his class allegations. Thus, he cannot allege injury with respect to every restaurant and every defendant named in the TAC, nor can he allege that his claims are typical of a class encompassing employees from all eight restaurants covering a four-year span preceding October 23, 2018.
Mercado's attempt to tie these disparate entities and individual defendants together under allegedly uniform wage and hour employment policies is insufficient as a matter of law because he fails to offer nonconclusory factual allegations in doing so. He does not allege the existence of any conspiracy between respondents. Moreover, he concedes on appeal that respondents are not operating as a single or joint employer (with one exception addressed below). In short, Mercado has been unable to establish any common facts sufficient to establish that his claims are typical of the class he seeks to represent. (Hart, supra, at pp. 775-776.)
Glossing over these flaws, Mercado argues that courts routinely certify classes based on restaurants and other businesses that are "owned by the same corporate or individual defendant as the place where the class representative worked if they have the same wage and hour policy." While that may be true, the TAC does not allege that the eight restaurants at issue are "owned by the same corporate or individual defendant." The authorities cited for this proposition are thus inapposite.
Mercado's standing arguments with respect to proposed sub-classes are similarly unavailing. The recurring flaw in these arguments is that the TAC fails to allege in a nonconclusory fashion how respondents' allegedly unlawful wage and hour policies were uniformly applied, or indeed, what respondents' wage and hour policies were. Without any factual basis, Mercado advances allegations such as the following: "Defendants' pay practices towards members of the Classes were uniform as to all 26 class members"; "All class members were paid an amount/salary set by Defendants regardless of the actual hours worked"; "No class member was paid for all hours worked in accordance with California overtime wage laws"; and "Defendants did not permit meal breaks by the end of the fifth hour of work".
Nor does Mercado demonstrate in briefing before this court how he might cure these pleading defects. As to the Jechi subclass, for example, Mercado attempts to tie the two Jechi-owned restaurants together (one of which is Bowl'd Albany) by relying on the same conclusory assertion that "of course as always, he and all class members were subject to the same allegedly illegal wage and hour scheme." As to the three subclasses based on Kansai, Kho, and Bowl'd Oakland (a restaurant also owned by Kho), Mercado does not explain how his experience working one or two days at these restaurants pertains to the experience of other employees at these restaurants over the four-year period alleged in the TAC.
As to the proposed Eat Bop subclass, Mercado concedes that he has never been employed at any of the three restaurants owned by Eat Bop. He contends, however, that he can represent a class of Eat Bop employees under section 1182.12 because respondent Oh (an owner of Eat Bop) was also the "managing agent" of Bowl'd Albany, where he was employed for two years. In other words, because Oh was allegedly the "managing agent" of Bowl'd Albany and was an owner/"single qualified taxpayer" of Kho and Eat Bop under section 1182.12, Oh is a "joint employer" linking Mercado to the Eat Bop subclass employees.
Even if Mercado's theory were correct, section 1182.12 would apply only to state minimum wage violation claims and would not confer on Mercado standing to assert other wage and hour violations alleged in the TAC. Mercado's "joint employer" theory does not hold up, however, because it is based entirely on Oh's status as an owner and purported employer, and not on any factual allegations establishing uniform wage and hour policies or practices implemented by Oh across the different restaurants. Mercado asserts, again in conclusory fashion, that "[t]he same wage and hour practices alleged to be illegal at the restaurants where appellant did work are employed at all Eat Bop restaurants." Because he never worked at any of Eat Bop's three restaurants, this assertion can only be based on speculation. Mercado does not cite to any authorities holding that section 1182.12 gives employees in a class action lawsuit standing to represent the employees of other entities that are owned by a defendant employer, and our independent research has disclosed no such case.
In sum, the trial court properly concluded that the TAC failed to allege that Mercado had standing to bring this lawsuit as a class action. To the extent he argues he should have been given leave to amend the TAC to allege the five proposed subclasses, we address that argument further below.
ii. Community of Interest
(a) Additional Background
In addition to lack of standing to represent the putative class, the trial court found that Mercado could not credibly allege a sufficient basis for class certification because he could not satisfy the community of interest element. Specifically, he had failed to demonstrate that common questions of fact and law predominate because "he ha[d] failed to provide adequate allegations binding the myriad Defendants and restaurants." While Mercado generally alleged that all of the respondents had jointly and uniformly applied illegal policies to all employees at the different restaurants, he had failed "to allege any non-conclusory facts showing what specific uniform practices were allegedly engaged in, or how these policies were allegedly uniformly enforced." The court emphasized that given Mercado's limited experience with the majority of the restaurants and employers named in the TAC, his "ability to ever provide such sufficient factual allegations is highly questionable." As a result, individual questions would predominate among the putative class because each individual class member would need to prove his or her case. We agree.
(b) Applicable Legal Principles
Class actions are permitted "when the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court." (Code Civ. Proc., § 382.) "Drawing on the language of Code of Civil Procedure section 382 and federal precedent, we have articulated clear requirements for the certification of a class. The party advocating class treatment must demonstrate the existence of an ascertainable and sufficiently numerous class, a well-defined community of interest, and substantial benefits from certification that render proceeding as a class superior to the alternatives. [Citations.]" (Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, 1021 (Brinker).) " 'In turn, the "community of interest requirement embodies three factors: (1) predominant common questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class." ' " (Ibid.) Courts may also consider whether the class action procedure is "superior" to litigating claims individually. (Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 332.)
The right to bring a class action is not unlimited. "Class actions will not be permitted, for example, where there are diverse factual issues to be resolved, even though there may be many common questions of law. 'The ultimate question in every case of this type is whether, given an ascertainable class, the issues which may be jointly tried, when compared with those requiring separate adjudication, are so numerous or substantial that the maintenance of a class action would be advantageous to the judicial process and to the litigants.' [Citations.] If the ability of each member of the class to recover clearly depends on a separate set of facts applicable only to him, then all of the policy considerations which justify class actions equally compel the dismissal of such inappropriate actions at the pleading stage." (Brown v. Regents of University of California (1984) 151 Cal.App.3d 982, 988-989.) It is the plaintiff's burden to establish the requisite community of interest and that "questions of law or fact common to the class predominate over the questions affecting the individual members." (Washington Mutual Bank v. Superior Court (2001) 24 Cal.4th 906, 913.)
A demurrer may be sustained where a named plaintiff has failed to demonstrate that he could credibly allege a sufficient basis for class certification. (Schermer, supra, 245 Cal.App.4th at p. 915.) A demurrer to class allegations may only be sustained where, "assuming the truth of the factual allegations in the complaint, there is no reasonable possibility that the requirements for class certification will be satisfied." (Id. at p. 923 (emphasis in original).) When analyzing the sufficiency of a cause of action for purposes of demurrer, it is axiomatic that we consider the truth of all material facts properly pleaded or all ultimate facts alleged, but not contentions, deductions, or factual conclusions. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967 (Aubry).)
Schermer, supra, is instructive. In Schermer, the plaintiffs brought a class action on behalf of residents who lived in 18 different mobilehome parks, alleging they were subjected to uniform unconscionable lease agreements and leasing practices by a collection of related defendants. The mobilehome parks were allegedly owned and/or operated by two defendants and were managed by another defendant. The plaintiffs also named as defendants the 18 "single-purpose" business entities that were each described as the owners of each mobilehome park. (Id. at pp. 915-916.) The operative complaint included 21 subclasses, including one class for each of the 18 mobilehome parks. The complaint was brought by seven class representatives from five of the 18 named mobilehome parks. The seven class representatives were identified as representatives of both the class and of the five distinct park subclasses where they reside or resided. The SAC did not identify representatives for the remaining 13 mobilehome park subclasses. (Id. at p. 918.)
The appellate court upheld the trial court's order sustaining the defendants' demurrer without leave to amend as to the complaint's class allegations, concluding the court had properly determined there was no reasonable possibility the plaintiffs could satisfy the community of interest requirement for class certification because common questions of law and fact did not predominate. (Schermer, supra, 245 Cal.App.4th 912 at p. 915.) In part, the Schermer court found that the plaintiffs' allegations that the defendants had, over a four-year period, implemented a uniform policy in every single lease transaction with plaintiffs and the putative class members in each of the 18 mobilehome parks "[were] not properly admitted for purposes of demurrer because such allegations [were] not ultimate facts but rather merely contentions and/or improper factual conclusions." (Id. at p. 925.) This was so even assuming the written lease agreements for each of the mobilehome parks contained similar clauses. (Ibid.) Further, the defects in the complaint were not curable because the allegations involved conduct at many different mobilehome parks and recovery turned on individualized proof. (Id. at pp. 930-931.)
(c) Analysis
We conclude Mercado's allegations in his TAC that respondents implemented a uniform policy in each and every restaurant employing the putative class members over a four-year period are not properly admitted for purposes of demurrer because such statements are not ultimate facts, but rather are conclusory legal allegations devoid of any factual support. Unlike the complaint at issue in Schermer, here Mercado has not identified any specific policy, written or otherwise, that would apply to all of the putative restaurant employees. Again, conclusory allegations, without specific supporting facts, will not be accepted as true on demurrer. (Aubry, supra, 2 Cal.4th 962, 966-967.)
As the trial court found, Mercado failed to show that common question of fact and law predominate because he had "failed to provide adequate allegations binding the myriad Defendants and restaurants." Specifically, he had failed to allege "any non-conclusory facts showing what specific uniform practices were allegedly engaged in, or how these policies were allegedly uniformly enforced." Further, given his lack of or highly limited experience with nearly all of the restaurants and employers in question, his "ability to ever provide such sufficient factual allegations is highly questionable." As such, individual questions predominate among the putative class "because each individual class member will need to prove his or her case."
As discussed above, the trial court relatedly found that Mercado's claims were not typical of the class because he did not work at four of the eight restaurants at issue. The TAC also invited arguments that would affect Mercado personally in a way that may not affect other class members, such as whether Oh controlled the employment practices at Bowl'd Albany, and whether Eat Bop could be considered his "employer."
On appeal, Mercado claims the trial court erred because, at least as to the restaurants where he had worked, he had alleged the illegal practices "in more factual detail than required." He notes that the TAC alleges he worked 11 hours in a day without receiving overtime, and did not get appropriate meal breaks, was not paid minimum wage, and was given defective wage stubs. The argument misses the mark. The problem is not that he failed to describe the alleged wage and hour violations with particularity. Rather, the fatal flaw in the TAC is that Mercado relies on conclusory language to allege that the respondents had a uniform policy of subjecting their employees to these violations. Mercado's allegations provide no factual basis to support the inference that respondents uniformly maintain the company policies he alleges. In the absence of any such supporting factual assertions, the TAC does not allow this court to infer the existence of a company policy that would be expected to result in a class of similarly situated restaurant employees.
In his reply brief, Mercado cites to Brinker, supra, 53 Cal.4th at page 1033 for the proposition that claims alleging "that a uniform policy consistently applied to a group of employees is in violation of the wage and hour laws are of the sort routinely, and properly, found suitable for class treatment." Brinker is readily distinguishable. In Brinker, there was evidence of a written common, uniform rest break policy. The rest break policy was established at the defendant's corporate headquarters and was equally applicable to all of the defendant's employees. (Brinker, supra, 53 Cal.4th at p. 1033.) This evidence, if true, would constitute an ultimate fact, not a conclusory allegation. In contrast, here Mercado claims each of the subclasses involves "uniform wage practices," however his claim is devoid of any allegations to support the existence of any such uniform policy or practice. Mercado states that each subclass "would be based on facts common to every class member in that class" because "the policy will be the exact same." Again, class allegations regarding the alleged "policy" are wholly conclusory and fail to identify any facts from which such a policy may be inferred. We fail to see how his subclass proposal would cure these defects.
Mercado also contends that he "knows" all four restaurants where he worked "used the same wage and hour scheme . . . because he was paid the same at all of them with the same policies employed." At best, the TAC provides a factual basis for inferring that one employee -- Mercado -- in one restaurant, though possibly also on isolated instances at three other restaurants, was subjected to wage and hour violations. It does not provide a basis to infer that a class of similarly situated employees exists. Requiring a plaintiff to make a modest factual showing that others have suffered the same injury works to prevent class action fishing expeditions. D. Denial of Leave to Amend
In light of our conclusions, we need not address the typicality or superiority factors of the community of interest requirement.
The trial court did not abuse its discretion in denying leave to amend as to the class action allegations. As the trial court noted, Mercado had been given several opportunities to amend his pleading to state his class action claims, and the trial court specifically called attention to pleading defects related to standing and community of interest. Even his proposed FAC did not cure "the fundamental problems with the pleading."
When a demurrer is sustained without leave to amend, as in the present case, " ' " we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm. [Citations.] The burden of proving such reasonable possibility is squarely on the plaintiff." [Citation.] Leave to amend should not be granted where amendment would be futile. [Citation.]' [Citation.]" (Schermer, supra, 245 Cal.App.4th 912 at p. 923.)
Mercado challenges the trial court's finding that his proposal to create five subclasses did not cure the standing issue. As noted above, the proposed five subclasses are generally organized around each of the five corporate respondents, with employees of each of the restaurants owned by each respondent serving as the corresponding subclass.
"When it is determined that a class representative lacks standing to represent the class, the representative may be granted leave to amend to redefine the class or add new individual plaintiffs, or both. [Citation.] This rule is usually applied in situations where the class representative originally had standing, but has since lost it by intervening law or facts. [Citations.] It has also been applied when the class representative had standing when she sent the defendant a demand letter threatening suit, but lacked standing when the suit was filed because the defendant had granted the plaintiff individual relief in response to her demand letter. [Citation.]" (First American, supra, 146 Cal.App.4th 1564 at pp. 1574-1575.) Such facts are not present here.
As discussed above, Mercado cannot allege that he ever had standing to represent the putative class. He did not lose his standing due to intervening law or facts, nor have respondents granted him any individual relief in response to the lawsuit. He never had standing in the first place, and this fundamental flaw infects his class action claims. Rather than curing the standing problem, his attempt to reshuffle respondents and their respective restaurants by creating five subclasses is akin to rearranging the deck chairs on the Titanic. Even as to the Jechi subclass, a subclass that includes the restaurant he worked in for two years, he still cannot legitimately claim he has standing to represent all of Jechi's employees over the four-year period he alleges in the TAC. In sum, we conclude the trial court did not abuse its discretion in denying leave to amend the TAC as to the class allegations. E. PAGA Claim
On appeal, Mercado asks that he be given "leave to find a substitute class representative." However, he does not explain who could be added or how substituting the class representative at this late stage would make any difference.
In its May 24, 2019 order sustaining the demurrer to the SAC, the trial court stated: "Significantly, this order is not to be interpreted by Plaintiffs as permission from the Court to add any [PAGA] claims to the complaint. While the parties have obliquely referred to potential PAGA claims in their papers, this issue is not directly before the Court." Mercado filed the TAC on May 30, 2019 which did not include a PAGA claim.
As noted above, Mercado sought leave to amend his complaint in June 2019 to add a PAGA claim in a proposed FAC. The proposed PAGA claim was asserted "against all defendants except Kansai Japanese Restaurants, Inc., Dongwoon Lee, Eat Bop Corporation and Kho Corporation" and purported to raise a representative action on behalf of all aggrieved employees who are or were employed by respondents during the applicable statutory period, and who were subjected to various violations of the Labor Code. Mercado later explained that the proposed PAGA claim was directed only against respondent Jechi and its owners and managing agents.
On August 7, 2019, the trial court sustained respondents' demurrer to the TAC, dismissing Mercado's class allegations without leave to amend. Mercado was given leave to amend solely as to his individual claims. In compliance with the court's order, Mercado filed a new FAC on August 21, 2019. On September 5, 2019, the court denied his June 2019 motion for leave to file the proposed FAC, concluding the matter was now moot because Mercado had already filed the FAC stating his individual claims.
Mercado contends on appeal that the trial court barred him from alleging a PAGA claim in his August 21, 2019 FAC because the August 7, 2019 order stated: "The next amended complaint [stating Mercado's individual claims] shall not attempt to include any further PAGA claims." At oral argument, Mercado's counsel argued that he should be allowed the opportunity to amend the FAC to state a PAGA claim. In response to questioning, counsel maintained that a PAGA claim could be narrowly asserted to parallel the individual claims raised in the FAC concerning Mercado's employment at Bowl'd Albany.
While it does not appear that Mercado had ever proposed this narrowly defined PAGA claim in the trial court below, Mercado's counsel is correct that a party may advance new legal theories on appeal when a demurrer has been sustained without leave to amend. (Eghtesad v. State Farm General Insurance Co., (2020) 51 Cal.App.5th 406, 414 ["[A]n appellant may rely on statements made for the first time on appeal to show that there is a reasonable possibility that the complaint can be amended to state a cause of action."]; see also Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1038, 1043, [statements made by appellant at oral argument showed reasonable possibility that defects in operative complaint can be cured by amendment].)
To the extent the trial court's ruling prevented Mercado from stating a PAGA claim in his August 21, 2019 FAC, we agree he should be allowed the opportunity to amend. We emphasize, however, that such PAGA claim must be confined to the allegations stated in the current FAC concerning his employment at Bowl'd Albany, the only restaurant in which he was employed by Jechi. (See § 2699, subd. (c) [an aggrieved employee under the PAGA is defined as "any person who was employed by the alleged violator and against whom one or more of the alleged violations was committed."], italics added.)
III. DISPOSITION
The order of dismissal is affirmed in part and reversed in part. The matter is remanded to allow Mercado leave to amend the FAC to allege, if he is able, a PAGA claim limited in scope to the matters addressed in this opinion. The parties shall bear their own costs on appeal.
/s/_________
SANCHEZ, J. We concur. /s/_________
HUMES, P.J. /s/_________
BANKE, J.