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Nollette v. LRIco Servs., LLC

Sep 14, 2017
A143223 (Cal. Ct. App. Sep. 14, 2017)




NICOLE NOLLETTE, Plaintiff and Appellant, v. LRICO SERVICES, LLC et al., Defendants and Respondents.


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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (San Francisco City & County Super. Ct. No. CGC13530213)

Nicole Nollette brought this action against LRICO Services, LLC (LRICO) and its subsidiary Distillery No. 209 Ltd. Napa, California (D209) (collectively, Respondents) after they terminated her employment. Hired as president of D209 in 2010 and fired in 2012, Nollette contends Respondents induced her to leave a higher paying job with false promises of equity in D209 and then fired her in retaliation after she objected. She alleged claims for wrongful termination in violation of public policy, fraud, breach of contract, breach of the implied covenant of good faith and fair dealing, and promissory estoppel. The trial court granted summary judgment for Respondents, and Nollette now appeals. We affirm.


Nollette received an MBA from the Massachusetts Institute of Technology in 2005. She then worked in investment banking, first at Wachovia for 10 months and then at Morgan Stanley from 2006 to 2010, where she advised companies regarding debt and equity markets.

In the spring of 2010, while still employed at Morgan Stanley, Nollette spoke to LRICO's chief financial officer, Darrell Swank, and its founder, Leslie Rudd, about the prospect of her becoming president of D209. Rudd told Nollette he wanted to hire someone who could grow the company profitably and who did not have beverage distribution experience.

The sharpest point of dispute in the evidence is Nollette's claim, denied by Respondents, that Swank and Rudd agreed to make her an equity owner of D209 during these recruitment discussions. Nollette stated in her deposition that "[she] just asked for ownership or equity interest in the company, and [Rudd] said he liked the idea." She recalled that Swank and Rudd "didn't discuss the technicalities" but "said the terms would be . . . outlined in an offer letter."

In May 2010, Swank sent Nollette an offer letter that contained the following language: "In addition, it is anticipated that you will share in a meaningful manner in a liquidity event incentive program that will align you with the owner in building and capturing equity value. Details of this program are being finalized and will be provided to you as soon as possible and no later than your start date." (Italics added.)

In July 2010, after Nollette started her new position, she received a letter dated May 28, 2010 from Rudd that described the liquidity event incentive program. The relevant text of the letter stated:

"I am confirming our recent discussion that you are now a participant in a liquidity event incentive program based on your role and expected contributions at Distillery 209 (D209) . . . . [¶] This program has been designed to align key contributors with ownership and reward participants with a one-time cash bonus, subject to applicable taxes and withholdings, when a company 'liquidity event' occurs (e.g., sale of company, initial public offering, etc.). Although we currently expect such an event will most likely occur many years down the road once we have further grown the business and its profitability, we want you to appropriately participate in the company's financial success if/when that occurs. The amount of the cash bonus paid to you at the time will be based on how much incremental enterprise value is created through improvements to the business that is captured in a liquidity event. [¶] Your Initial Designated Percentage is 5.0%. It is important to note that the 5% will increase at value thresholds (identified below) as additional enterprise value is created. [¶] Individuals must be employed by the company at the time of the liquidity event in order to receive payment of the liquidity event bonus. [¶] . . . [¶] Although the intention of the program design is simple in that it aligns you and other participants with ownership and long-term value creation, I realize the specific details may appear a bit complex. Thus, I encourage you to contact Darrell Swank directly at 316.617.2029 if you have any questions . . . . [¶] . . . I want you to think and act like an owner as you work to grow the business and its profitability. I'm very pleased you will now be financially aligned/rewarded in that manner!" (Italics added.)

Nollette found these terms consistent with "the spirit of [her] negotiation" with Swank and Rudd and believed the letters "encapsulated the ownership." Nollette testified in her deposition that the letters formed the basis for her belief that she owned 5 percent of D209.

Nollette revisited the language of the May 28, 2010 letter in early September 2011, when her friend and colleague from business school, Kathryn Frederick, joined D209 as chief marketing officer. Via email, Nollette told Charlene Haynes, a human resources manager at LRICO, that Frederick wanted "3% equity in the company . . . similar to the equity language in [Nollette's] offer letter." Haynes forwarded the email to Swank, who recognized that Nollette was referring to the May 28, 2010 letter.

In late summer or early fall of 2011, Nollette saw a stock certificate stating that Rudd's daughter owned all of D209. Nollette contacted Haynes in one email and one phone call over the next few months to question why the stock certificate did not reflect her 5 percent equity stake, but Haynes failed to provide a definitive answer.

In March 2012, Nollette raised the issue again by emailing Angie Gregory, a lawyer at LRICO. Gregory forwarded the email to another LRICO lawyer, Matt Myren, who told Nollette she did not have any equity. Although she replied that she would reach out to Rudd directly to discuss the issue, she never did. Nollette intended to wait until she could speak to Rudd in person, but he cancelled two meetings in a row.

In August 2012, Nollette and Frederick spoke with Swank when he became LRICO's chief operating officer. Nollette raised the issue of her ownership interest, and Swank replied that neither she nor Frederick had any equity. Swank also expressed criticisms about D209's financial state.

In September 2012, Swank informed Nollette and Frederick that Respondents were terminating both of them. He told Nollette that Respondents "had decided to go in a different direction" and that "they wanted to find someone . . . who had distribution experience." Respondents provided financial statements as evidence that Nollette failed to grow the company profitably, resulting in her termination.

The statements Swank provided reveal that earnings were in the negative in December 2010, December 2011, and August 2012, and that sales in August 2012 were significantly behind what Nollette had budgeted. In his deposition, Rudd stated that he had asked Swank to "look at" D209 because "we've got a mess down there" and later decided to terminate Nollette based on Swank's recommendation. Rudd never discussed the financial statements with Nollette, but he believed she was aware of his concerns because "she read the same statements."

Nollette filed a complaint against LRICO and D209 in April 2013. Following two rounds of demurrers, Respondents filed their answer to the first amended complaint. After a period of discovery, Respondents moved for summary judgment.

The trial court found no triable issue of material fact regarding any of Nollette's five claims and granted Respondents' motion. First, the court rejected Nollette's claim of wrongful termination in violation of public policy on the ground that Respondents provided a legitimate business reason for terminating her, specifically, poor job performance. Second, the court concluded that any verbal discussions about Nollette's equity were too vague to constitute a misrepresentation in support of the fraud claim. It further explained that Nollette's failure to object promptly to the terms of the liquidity event incentive program precluded a finding of justifiable reliance. Third, as to the breach of contract claim, the court decided that neither the alleged verbal discussions about equity nor the two letters formed an enforceable contract. Fourth, the court held that Respondents did not breach the implied covenant, since they did not try to deprive Nollette of the benefits of their only contract: the May 28, 2010 letter. Fifth, the court found no merit to Nollette's promissory estoppel claim due to a lack of evidence of a clear and unambiguous promise of equity.

Nollette filed this timely appeal from the ensuing judgment.


A. Standard of Review

"The standards for granting summary judgment are well settled and easily delineated. A trial court must grant a motion for summary judgment 'if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.' (Code Civ. Proc., § 437c, subd. (c).) When, as here, defendants move for summary judgment, they can 'meet their burden by demonstrating that 'a cause of action has no merit,' which they can do by showing that '[o]ne or more elements of the cause of action cannot be separately established . . . .' " (In re Automobile Antitrust Cases I & II (2016) 1 Cal.App.5th 127, 150.)

"The purpose of the law of summary judgment is to provide courts with a mechanism to cut through the parties' pleadings in order to determine whether, despite their allegations, trial is in fact necessary to resolve their dispute." (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.) Procedurally, a moving defendant bears "an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact." (Borders Online, LLC v. State Board of Equalization (2005) 129 Cal.App.4th 1179, 1187.) Once the defendant has made a prima facie showing, the plaintiff must then produce sufficient evidence to demonstrate a triable issue of material fact. (Id. at pp. 1187-1188.)

Within this procedural framework, neither party may rely on the allegations or denials in the pleadings, but must set forth specific facts showing whether a triable issue of material fact exists. (Code Civ. Proc., § 437c, subds. (p)(1), (2); see Horn v. Cushman & Wakefield Western, Inc. (1999) 72 Cal.App.4th 798, 805.) A triable issue of material fact is not raised by speculation or mere possibility. (Lyons v. Security Pacific National Bank (1995) 40 Cal.App.4th 1001, 1014.) Supporting and opposing affidavits must be based on personal knowledge, must set forth admissible evidence, and must demonstrate that the affiant is competent to testify to the matters stated in them. (Code Civ. Proc., § 437c, subd. (d).)

"Our review of an order granting summary judgment is de novo, and we must consider all the evidence set forth in the moving and opposing papers except evidence to which objections were made and sustained. [Citation.] Because this case comes before us after the trial court granted a motion for summary judgment, we consider the evidence in the record before the trial court when it ruled on that motion. We liberally construe the evidence in support of the party opposing summary judgment [citation], and assess whether the evidence would, if credited, permit the trier of fact to find in favor of the party opposing summary judgment under applicable legal standards." (Loggins v. Kaiser Permanente International (2007) 151 Cal.App.4th 1102, 1109 (Loggins).)

B. Wrongful Termination in Violation of Public Policy

To establish a claim of wrongful termination in violation of public policy, Nollette must demonstrate that (1) she engaged in activity protected by a public policy; (2) D209 terminated her; and (3) there was a nexus between the termination and the public policy. (See Tameny v. Atlantic Richfield Co. (1980) 27 Cal.3d 167, 172 (Tameny); Turner v. Anheuser-Busch, Inc. (1994) 7 Cal.4th 1238, 1253 (Turner).) Respondents challenge the first and third elements. We do not address Respondents' argument on the first element because we reject the Tameny claim based on the third.

Nollette failed to establish a nexus between her termination and any alleged protected activity. Her evidence cannot withstand the McDonnell Douglas burden shifting analysis, which governs whether there are triable issues of material fact here. (See McDonnell Douglas Corp. v. Green (1973) 411 U.S. 792 (McDonnell Douglas); Arteaga v. Brink's Inc. (2008) 163 Cal.App.4th 327, 334-335, 342-344, 356-357 (Arteaga) [applying McDonnell Douglas to a retaliation claim]; Loggins, supra, 151 Cal.App.4th at pp. 1108-1109 [same].) The burden first rests with the employee to establish a prima facie case, then shifts to the employer to provide evidence of a legitimate business reason for the termination, and finally shifts back to the employee to provide " 'substantial responsive evidence' " of pretext. (See Loggins, at pp. 1108-1109.)

Respondents met their burden to provide evidence of a legitimate business reason for terminating Nollette. D209's financial statements show negative earnings and sluggish sales during her employment. Arguing that her job performance did not warrant termination, Nollette emphasizes that D209's first profitable month took place during her employment, that D209's sales increased after she began working there, and that sales from October to December 2012 could have closed the gap between actual and projected sales in August 2012. But Nollette's assessment of her own job performance does not change that Respondents showed a legitimate business reason to fire her, nor does it stop the burden from shifting back to her under McDonnell Douglas.

Nollette did not produce substantial responsive evidence to prove the proffered reason for firing her was pretextual. Emphasizing that she was terminated one month after asking Swank about equity, she argues that "[s]uch short proximity in time establishes causation." As the trial court noted, however, Loggins and Arteaga illustrate that a retaliatory termination claim supported by nothing more than temporal proximity alone fails as a matter of law. (See Loggins, supra, 151 Cal.App.4th at p. 1113; Arteaga, supra, 163 Cal.App.4th at p. 341.)

Nollette maintains that her evidence of pretext is not only temporal proximity but also "[t]he tone of [Swank's] angry response" at the August 2012 meeting. During her deposition, Nollette at first stated that Swank did not raise his voice at all during the meeting. Conversely, she later said he raised his voice but did not exhibit any other angry behavior. Either way, the evidence she offers does not amount to substantial responsive evidence. Even reading the record generously in Nollette's favor, absent some evidence Swank believed she was entitled to equity at the time, her suggestion that retaliatory intent may be inferred from his tone of voice is based on nothing but conjecture.

Nollette cites Fisher v. San Pedro Peninsula Hospital (1989) 214 Cal.App.3d 590, 615 (Fisher) for the general proposition that circumstantial evidence can support a wrongful termination claim. Fisher is a sexual harassment case involving allegations of a "hostile work environment." (Ibid. ["when an employee seeks to hold an employer responsible for a hostile environment, the employee must show that the employer knew or should have known of the harassment in question; an employer's knowledge can be demonstrated by showing the pervasiveness of the harassment, which gives rise to an inference of knowledge or constructive knowledge"].) Putting to one side the fact that the case was decided on demurrer and thus addressed the legal sufficiency of an alleged retaliation claim in that context at the pleading stage, not an evidentiary showing on summary judgment, the passage from the Fisher opinion on which Nollette relies is inapposite here. There, the court discusses when a plaintiff has made out a prima facie case of retaliation; the court does not address the third step of the McDonnell Douglas analysis, testing pretext, which is the focus of our attention here. --------

C. Fraud

To make a successful fraud claim, a plaintiff must show (1) misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity; (3) intent to induce reliance; (4) justifiable reliance; and (5) resulting damages. (Civ. Code, §§ 1572, 1709-1710; Lazar v. Superior Court (Rykoff-Sexton, Inc.) (1996) 12 Cal.4th 631, 638.) Respondents' argument focuses on the first and fourth elements and briefly disputes the second and third elements. Nollette has failed to produce sufficient evidence supporting any of those elements.

The fraud claim fails on the element of misrepresentation because neither the pre-employment verbal discussions nor the subsequent letters misrepresent her equity in D209. Although Nollette argues that Swank and Rudd falsely represented she would have an ownership interest in D209, she did not provide enough details about the content of their negotiations. She stated in her deposition that Swank and Rudd agreed to make her an owner of D209 and to specify the amount of her equity in a later writing. But she did not recall anything that Swank or Rudd said beyond "lik[ing] the idea of aligning everyone's incentives." Vague statements are not enforceable as promises. (See, e.g., Rochlis v. Walt Disney Co. (1993) 19 Cal.App.4th 201, 213-214 (Rochlis) [finding unenforceable alleged promises to pay the plaintiff " 'appropriate' " bonuses and to provide him with " 'active and meaningful' participation" in creative decisions], disapproved on another ground in Turner, supra, 7 Cal.4th at p. 1251.)

Nollette's offer letter and her May 28, 2010 letter, the documents she says memorialize an agreement giving her ownership rights, do not amount to misrepresentations either. Nollette argues that the May 28, 2010 letter "specifically stated that she had a 5% share of D209" and "that she was being 'aligned with ownership' and that she should 'think and act like an owner,' " leading her to believe she was being offered an equity stake. But this interpretation cannot withstand scrutiny. Both letters speak to her being aligned with ownership, not of her being an owner.

Nollette argues that triable issues of material fact remain as to whether the letters, in the context of her pre-employment negotiations with Swank and Rudd, were deliberately drafted "to lure [her] away from the world of investment banking." We see nothing misleading in them, even considering the surrounding context. Crediting Nollette's claim that she asked for equity, what she received in writing described the liquidity event incentive program, not an ownership interest. If Nollette truly based her understanding of what she was given on these letters, she should have followed up with questions, since in her own version of events there was a gap between what she requested and what she received in writing.

Because we find no evidence of misrepresentation, Nollette cannot establish the additional elements of knowledge of falsity and intent to induce reliance. But even if Respondents did falsely lead her to believe she would receive equity, she did not make an adequate showing for either element.

According to Nollette, the exchange between Haynes and Swank—in which Haynes forwarded an email from Nollette that referred to the May 28, 2010 letter as giving her "equity in the company"—may raise the issue of whether Swank was aware that Nollette believed she had equity but failed to inform her otherwise. She claims his alleged awareness supports the second and third elements of her fraud claim. Respondents counter that Nollette's email defeats her argument because within it she repeats the language of the May 28, 2010 letter—"something like equity is only received if the company sells and [she] is still an employee of the company"—thus demonstrating her understanding of its terms. Given her own inconsistent formulations of her compensation package, Nollette cannot reasonably charge Respondents with knowledge of falsity or intent to induce reliance.

The fraud claim also fails independently on the element of justifiable reliance. The verbal discussions and the letters do not amount to misrepresentations on which Nollette could have justifiably relied, considering her background as a highly educated former investment banker. And in the alternative, even if they did, the evidence precludes a finding of justifiable reliance because she did not object to the terms of the May 28, 2010 letter upon receipt or within a reasonable time thereafter.

As the trial court here noted, the appellate court in Rochlis found that the plaintiff could not show justifiable reliance on alleged misrepresentations because, after he "discovered the 'truth,' " he continued working nine months beyond the expiration of his contract. (See Rochlis, supra, 19 Cal.App.4th at p. 215.) Here, Nollette worked for more than a year after receiving the May 28, 2010 letter, even though it described her as a participant in a liquidity event incentive program, not an owner. Attempting to distinguish herself from the Rochlis plaintiff, Nollette points out that she immediately contacted Haynes after seeing the stock certificate that stated she was not an owner. But after Haynes failed to give her a definitive answer, Nollette did not ask about the issue of ownership for six months. Then, after Myren told Nollette she did not have equity, she continued working for another five months before raising the issue with Swank. These periods of inaction resemble the facts that defeated the fraud claim in Rochlis.

Nollette cites Agosta v. Astor (2004) 120 Cal.App.4th 596 to support the justifiable reliance element, but she misreads the case as holding that reliance on a promise of ownership in a job offer is always justifiable if "made by someone with authority to make it." The holding in Agosta is narrower than that. In Agosta, the defendant reneged on the terms of a compensation package promised to the plaintiff before he changed employment. (See id. at p. 606.) Unlike the facts here, that promise of equity was captured in a written and signed agreement that set forth detailed terms of compensation. (See ibid.) Reversing summary judgment on the fraud claims, the appellate court decided the plaintiff "could justifiably rely on the written promises regarding compensation terms," not because the owner of the company made them, but because there was a clear promise. (See ibid.) That holding does not bear on whether the alleged verbal discussions here constituted a clear promise on which Nollette could have justifiably relied.

D. Breach of Contract

To succeed on a claim for breach of contract, Nollette must establish (1) a contract, (2) her performance or excuse for nonperformance, (3) Respondents' breach, and (4) her resulting damages. (Reichert v. General Insurance Co. (1968) 68 Cal.2d 822, 830; see also Acoustics, Inc. v. Trepte Construction Co. (1971) 14 Cal.App.3d 887, 913.) Challenging the first element, Respondents argue that any alleged oral promises were not reasonably certain enough to create a contract and that the May 28, 2010 letter created a contract only under the terms of the liquidity event incentive program. Nollette does not allege a breach of the program, but she asserts that Respondents breached two contracts to provide her with equity: an oral promise made in pre-employment negotiations, and a written agreement in the May 28, 2010 letter.

The breach of contract claim fails because neither the verbal discussions nor the subsequent letters formed a contract to make Nollette an owner of D209. As discussed above, the letters cannot reasonably be construed to create ownership rights, and Nollette's evidence of the verbal discussions is too uncertain to be enforceable. In Rochlis, the appellate court found no merit to the breach of contract claim because the alleged promises to pay " 'appropriate' " salary increases or bonuses and to provide " 'active and meaningful' " participation in "creative decisions" were too vague to form a contract. (Rochlis, supra, 19 Cal.App.4th at pp. 210-214.) Enforcing those promises—and hence deciding what they meant—would have "impose[d] on the court the burden of making financial and management decisions better left to the parties." (Id. at p. 214.) Distinguishing Rochlis, where the court concluded it could not enforce the terms of the contract without making the terms of the parties' agreement for them, Nollette contends this court could enforce the alleged promises of equity by simply ordering Respondents to provide Nollette with ownership. But enforceability is a problem here for the same reason it was in Rochlis. Rudd's saying that he "liked the idea" of "aligning [ ] incentives" is not specific enough to prove an enforceable promise.

E. Breach of the Implied Covenant of Good Faith and Fair Dealing

Under California law, every contract has an implied covenant of good faith and fair dealing that requires each party to avoid injuring the rights of the other to benefit from the contract. (Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 683-684.) The precise nature and extent of such a requirement depends on the contract language itself. (Ibid.) The implied covenant cause of action, like the breach of contract claim, fails because Nollette did not establish the existence of a contract to make her an owner of D209 for lack of certain and definite terms. At most, the only enforceable promises here are contained in the May 28, 2010 letter, which requires Respondents to award Nollette a one-time bonus if a liquidity event occurs during her employment. There is no evidence Respondents breached that agreement, and Nollette does not contend they did.

F. Promissory Estoppel

The elements of a promissory estoppel claim are (1) a clear and unambiguous promise; (2) reliance by the party to whom the promise is made; (3) the reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by the reliance. (Advanced Choices, Inc. v. Department of Health Services (2010) 182 Cal.App.4th 1661, 1672; see also Toscano v. Greene Music (2004) 124 Cal.App.4th 685, 692.) Respondents challenge the first element. The promissory estoppel claim, similar to the breach of contract claim, cannot withstand summary judgment because Nollette did not present enough evidence of a clear and unambiguous promise made during the pre-employment negotiations.

G. Punitive Damages

Nollette is not entitled to relief, but, even if she were, she did not produce clear and convincing proof of malice, oppression, or fraud to support her claim for punitive damages pursuant to Civil Code section 3294, subdivision (a). (Civ. Code, § 3294, subd. (a).) As Respondents state and Nollette admits, the worst thing that happened to Nollette during her employment was being terminated, and her coworkers never tried to cause her physical or emotional harm.


Affirmed. Respondents shall recover their costs on appeal.


Streeter, J. We concur: /s/_________
Ruvolo, P.J. /s/_________
Rivera, J.

Summaries of

Nollette v. LRIco Servs., LLC

Sep 14, 2017
A143223 (Cal. Ct. App. Sep. 14, 2017)
Case details for

Nollette v. LRIco Servs., LLC

Case Details

Full title:NICOLE NOLLETTE, Plaintiff and Appellant, v. LRICO SERVICES, LLC et al.…


Date published: Sep 14, 2017


A143223 (Cal. Ct. App. Sep. 14, 2017)