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Tentative Ruling
Judge Colleen Sterne
Department 5 SB-Anacapa
1100 Anacapa Street P.O. Box 21107 Santa Barbara, CA 93121-1107

CIVIL LAW & MOTION

Mathew Mercur v. Regents of the University of California, et al.

Case No: 16CV05318
Hearing Date: Mon Mar 12, 2018 9:30

Nature of Proceedings: Demurrer to Fourth Amended Complaint

T

No. 16CV05318 (Judge Sterne)

 

Hearing Date:                      March 12, 2018

 

Motion:                                

Demurrer of Defendant UCSB Triathlon Club to Fourth Amended Complaint

 

Attorneys:                            

For Plaintiff Mathew “Mateo” Mercur: J. Patrick O’Hara, Maureen J. Duris, O’Hara & Duris, PLC

For Defendants Regents of the University of California and Matthew Ison: Jonathan D. Miller, Jennifer M. Miller, Nye, Peabody, Stirling, Hale & Miller, LLP

For Defendant Jennifer Schulman and UCSB Triathlon Club: Steven B. Soltman, Steven S. Nimoy, Soltman, Levitt, Flaherty & Wattles LLP   

 

Tentative Ruling:

 

The demurrer of defendant UCSB Triathlon Club is sustained, without leave to amend, as to the first and second causes of action, and is in all other respects overruled. Defendant UCSB Triathlon Club shall file and serve its answer to the fourth amended complaint, as it remains as to that defendant after this order sustaining the demurrers to the first and second causes of action, on or before March 27, 2018.

  

Background:

 

Plaintiff Mathew “Mateo” Mercur is an accomplished triathlon coach. (Fourth Amended Complaint [4AC], ¶¶ 17-22.) In 2006, Mercur was hired as head coach of the UCSB Triathlon Team and since has been an employee of defendant Regents of the University of California (Regents) through the University of California, Santa Barbara (UCSB) and its Office of Club and Recreational Sports. (4AC, ¶ 23.)

 

Defendant UCSB Triathlon Club (Club) is a student organization separate from the Regents. (4AC, ¶ 4.) Club is funded primarily through team dues, donations, and entry fees paid to the Club from members of the public for the Kendra Payne Triathlon event, which it sponsors. (Ibid.) Club is run by a group of elected officers. (Ibid.) Club shares administrative support and facilities with the Regents, including using the Regents’ facilities and tax identification number. (Ibid.)

 

 

There was a joint employment relationship between Club and Regents and Mercur. (4AC, ¶ 6.) Club, together with Regents, exercised a degree of control over Mercur’s employment, including helping to determine the amount of Mercur’s pay, determining Mercur’s job duties and schedule, evaluating Mercur’s job performance, and termination of Mercur’s employment. (4AC, ¶ 5.) Written and oral contracts of employment were negotiated primarily with elected officers of the Club but were ratified and finalized by administration officials employed by the Regents. (4AC, ¶ 6.) Mercur was terminated based on an evaluation in a referendum vote organized and conducted by the Club but Mercur’s notice of termination was conveyed to Mercur and approved and ratified by Marcus McMullen, an employee and managing agent of Regents. (Ibid.)

 

Throughout his employment, Mercur was a well-regarded employee with no record of discipline or write-ups. (4AC, ¶ 27.)

 

As head coach, Mercur’s duties were predominantly carried out during the school year. (4AC, ¶ 24.) During the summer, Mercur would provide a minimum of one coached session per week. (4AC, ¶ 33.)

 

During the summers of 2013, 2015, and 2016, Mercur pursued professional coaching development outside of Santa Barbara. (4AC, ¶ 33.) Mercur provided “on-deck” coaching before leaving Santa Barbara, when in town, and immediately upon return. (Ibid.) Mercur continued to provide training schedules and consultations with student athletes via email, phone, or Skype, a common practice in keeping with industry standards. (Ibid.) These arrangements were made in agreement with Mercur’s supervisor, director of club sports Taggart Malone, and the UCSB Triathlon Club’s co-presidents. (Ibid.)

 

For the first nine years of his employment, Mercur’s services were secured by a series of one-year contracts which were renewed virtually automatically with little or no discussion. (4AC, ¶ 28.)

 

In the winter of 2014/2015, Mercur met with Malone and the then team co-presidents to address the co-presidents’ concerns about Mercur’s coaching. (4AC, ¶ 31.) Malone determined that the complaints were unfounded and helped to resolve the matter. (Ibid.)

 

In the summer of 2015, incoming team co-presidents Sophia Steffens and Tim Aiken met with Mercur and Malone to finalize his contract for 2015/2016. (4AC, ¶ 36.) Steffens and Aikin indicated an interest in dividing Mercur’s annual payment, as well as the contract, into two separate contracts—one for the academic year and one for the summer—in part to reduce Mercur’s pay. (4AC, ¶ 37.) Mercur was concerned about reducing his pay, and Mercur, Steffens and Aikin agreed that dividing the contract would not reduce Mercur’s annual compensation. (Ibid.) Mercur relied on the representations of Malone, Steffens and Aiken that dividing the contract would not result in a reduction of annual compensation and the issue of his summer contract would be resolved no later than March 31, 2016. (4AC, ¶¶ 38, 39.)

 

In winter 2016, Malone left his position as director of club sports. (4AC, ¶ 30.)

 

On April 28, 2016, Mercur sent an email to Steffens, first mentioning the finalizing of the summer 2016 contract. (4AC, ¶ 41.) On May 15 and 16, 2016, Steffens and Mercur indirectly exchanged emails relating to coaching sessions until Mercur’s departure from Santa Barbara expected to be around June 15. (4AC, ¶¶ 42-44.)

 

On May 16, 2016, Mercur met with the co-presidents and student officers to discuss summer coaching. (4AC, ¶ 45.) The co-presidents made an offer for summer coaching that would have either reduced Mercur’s salary to provide online coaching or maintained Mercur’s salary but required Mercur to be present for on-deck coaching during the summer. (Ibid.)

 

On May 23, 2016, Mercur met with Marcus McMullen, the new director of club sports, to discuss what had become a conflict with team student leadership regarding contract and compensation for summer 2016. (4AC, ¶¶ 42, 47.)

 

On May 31, 2016, Steffens and Aikin, along with incoming co-presidents Rod Farvard and Jennifer “Jenn” Schulman, sent an email to Mercur copied to McMullen proposing summer pay to be $1,500 for online coaching from June through September and to meet with the co-presidents once a month (presumably via telephone or Skype). (4AC, ¶¶ 8, 48.) The proposal amounted to a reduction in Mercur’s annual compensation by about $4,500 and breached the verbal agreement reached with Malone. (4AC, ¶ 48.)

 

Farvard and Mercur exchanged emails and met in person, but did not reach a resolution. (4AC, ¶¶ 49-52.) Farvard indicated that Schulman had expressed a desire to terminate Mercur and to hire a new coach with Matthew Ison as the primary candidate to replace Mercur. (4AC, ¶ 52.)

 

On June 29, 2016, Mercur sent an email to Farvard inquiring about developments and to make arrangements for compensation for the summer. (4AC, ¶ 53.) On June 30, Farvard replied indicating that Schulman was adamant about not paying the full amount for the summer and that Schulman would like to seek out a different coach. (4AC, ¶ 54.)

 

On July 13, 2016, Mercur sent an email to Farvard indicating that all summer coaching had been conducted in good faith and the issue of summer payment should be resolved immediately. (4AC, ¶ 55.) On July 14, Schulman sent an email to Mercur stating that there would be no pay for the summer season. (4AC, ¶ 56.)

 

Mercur continued to provide weekly training until July 17. (4AC, ¶ 61.)

 

In July or August, 2016, McMullen organized an email vote to determine the student-athletes’ preference for Mercur continuing as coach. (4AC, ¶ 62.) Of about 100 team members, 35 voted, of which 18 voted for a new coach and 17 voted to keep Mercur. (Ibid.)

 

On September 21, 2016, McMullen told Mercur that he was terminated as coach of the UCSB Triathlon Team. (4AC, ¶ 64.) Mercur was replaced by Ison, who is 28 years old. (4AC, ¶ 65.) At the time of the events, Mercur was 43 years old. (4AC, ¶ 26.)

 

On November 28, 2016, Mercur filed his original complaint in this action. On February 23, 2017, Mercur filed his first amended complaint. On May 23, 2017, Mercur filed his second amended complaint. Following demurrers by Regents, Ison, and Schulman, Mercur filed his third amended complaint on August 11, 2017. Following further demurrers by Regents, Ison, and Schulman, Mercur filed his 4AC on January 2, 2018. The 4AC asserts 10 causes of action: (1) age discrimination; (2) failure to prevent or investigate discrimination; (3) retaliation; (4) breach of implied-in-fact contract; (5) breach of the covenant of good faith and fair dealing; (6) breach of the implied contract of continued employment; (7) interference with prospective economic advantage; (8) defamation; (9) violation of Labor Code section 226; and (10) violation of Labor Code section 1198.5.

 

On February 6, 2018, defendant Club filed its demurrer to the first, second, fourth, fifth, and sixth causes of action against it.

 

Mercur opposes the demurrer.

 

Analysis:

 

“The rules by which the sufficiency of a complaint is tested against a general demurrer are well settled. We not only treat the demurrer as admitting all material facts properly pleaded, but also ‘give the complaint a reasonable interpretation, reading it as a whole and its parts in their context.’” (Yanting Zhang v. Superior Court (2013) 57 Cal.4th 364, 370, internal quotation marks and citations omitted.)

 

Mercur’s first cause of action is for employment discrimination based on age. Club argues that Mercur has not alleged that Club was an employer subject to the California Fair Employment and Housing Act (FEHA) (Gov. Code, § 12900 et seq.). “ ‘Employer’ includes any person regularly employing five or more persons, or any person acting as an agent of an employer, directly or indirectly, the state or any political or civil subdivision of the state, and cities, except as follows: [¶] ‘Employer’ does not include a religious association or corporation not organized for private profit.” (Gov. Code, § 12926, subd. (d).) Club argues that Mercur fails to allege that that Club is an employer within this statutory definition because Mercur affirmatively alleges that Club does not employ five or more persons. (4AC, ¶ 14.)

 

Mercur argues that Club is alleged as an employer of Mercur because Mercur alleges that Club is alleged as a joint employer and as the agent of Regents in dealings with Mercur. (Opposition, p. 7.) These two arguments need to be analyzed separately.

 

“The possibility of dual employment is well recognized in the case law. ‘Where an employer sends an employee to do work for another person, and both have the right to exercise certain powers of control over the employee, that employee may be held to have two employers his original or “general” employer and a second, the “special” employer.’ [Citation.]” (Kowalski v. Shell Oil Co. (1979) 23 Cal.3d 168, 174, emphasis added.) Mercur alleges, and the court accepts as true for purposes of this demurrer, that Club was an employer of Mercur for general purposes of employment law.

 

Both the general and special employers may each separately be an “employer” for the more limited purposes of a FEHA claim. (Mathieu v. Norrell Corp. (2004) 115 Cal.App.4th 1174, 1183.) But the FEHA statute “predicates potential FEHA liability on the status of the defendant as an ‘employer[]’ ([as defined by] § 12926.)” (Kelly v. Methodist Hospital of Southern Cal. (2000) 22 Cal.4th 1108, 1116.) The definition of “employer” in section 12926 is narrower than the definition of “employer” used generally for purposes of employment law. Thus, although multiple defendants may be employers for purposes of employment law generally, each defendant must be a statutorily defined “employer” to be liable under FEHA. Mercur affirmatively alleges that Club does not employ five or more people. (4AC, ¶ 14.) Club therefore cannot be liable as an employer under the “five or more” employees part of the FEHA definition of “employer.”

 

Because Club does not fall within the “five or more” employees part of the FEHA definition of employer, in order for Club to be liable under FEHA, Club must fall within the remainder of the definition of “employer” of Government Codes section 12926. Mercur alleges that Club is an entity separate from Regents (4AC, ¶ 4) and acts as the agent of Regents (4AC, ¶ 11). Mercur thus argues that Club falls within the “agency” part of the definition of employer in section 12926. However, in sustaining the demurrer to the third amended complaint, the court pointed out that the “agent” language in the FEHA definition of “employer” refers only to the imposition of respondeat superior liability of the employer and does include agents as “employers” under the FEHA definition, citing Janken v. GM Hughes Electronics (1996) 46 Cal.App.4th 55, 70 (Janken).

 

“The Janken court confronted the plaintiffs’ argument that an individual supervisor acts ‘as an agent of an employer’ within the meaning of ‘employer’ in section 12926, subdivision (d), and is therefore personally liable as an employer. It found two possible constructions of the ‘agent’ language. ‘One construction is that argued for by plaintiffs here: that by this language the Legislature intended to define every supervisory employee in California as an “employer,” and hence place each at risk of personal liability whenever he or she makes a personnel decision which could later be considered discriminatory. The other construction is the one widely accepted around the country: that by the inclusion of the “agent” language the Legislature intended only to ensure that employers will be held liable if their supervisory employees take actions later found discriminatory, and that employers cannot avoid liability by arguing that a supervisor failed to follow instructions or deviated from the employer’s policy.’ [Citation.] The court adopted the latter construction for several reasons.” (Reno v. Baird (1998) 18 Cal.4th 640, 647 (Reno).)

 

In analyzing the then-split in authority, the California Supreme Court in Reno identified one feature of the statutory scheme particularly relevant here:

 

“The Janken court also noted that the FEHA exempts small employers from liability for discrimination. ‘Section 12926, subdivision (d) defines “employer” as including “any person regularly employing five or more persons.” A person who regularly employs less than five other persons is not an “employer” for purposes of FEHA prohibitions on discrimination, and hence cannot be sued for discrimination. [Citation.] For purposes of harassment, however, “employer” is specially defined in section 12940, subdivision (h)(3)(A) to include any person regularly employing one or more persons. Section 12940, subdivision (h)(4) and (5) make clear that this special definition of “employer” as someone employing only one other person applies only to harassment claims, and that discrimination claims continue to be covered by the “five or more” definition in section 12926, subdivision (d). The Legislature thus made a clear distinction in California in the treatment of harassment claims versus the treatment of discrimination claims: small employers can be sued for harassment, but they cannot be sued for discrimination.’” (Reno, supra, 18 Cal.4th at p. 650.)

 

The California Supreme Court concluded that “individuals who do not themselves qualify as employers may not be sued under the FEHA for alleged discriminatory acts” (Reno, supra, 18 Cal.4th at p. 663) and approved the holding of Janken (id. at p. 643). Reno thus authoritatively holds that the “agency” language in the statutory definition, while superficially supporting Mercur’s argument here, refers only to respondeat superior liability in discrimination claims and is not a separate basis for finding that a person is an “employer.” The above quoted analysis from Janken (approved by the court in Reno) applies whether the agent is an individual, such as a supervisor, or a second entity employer which does not itself employ five or more employees. Mercur’s argument, either as to dual employment or as to agency, would circumvent the Legislature’s determination that small employers cannot be sued for discrimination. Club is not an “employer” under the FEHA definition by virtue of the “agency” language in that definition.

 

As a result, Mercur cannot plead a cause of action for FEHA discrimination against Club. The demurrer will be sustained to the first cause of action.

 

The same analysis and result applies to the demurrer to the second cause of action.

 

Mercur’s fourth cause of action is for breach of an implied-in-fact contract. Club demurs to this cause of action on the grounds that the 4AC alleges a written contract. In support of this argument, Club cites to Tollefson v. Roman Catholic Bishop (1990) 219 Cal.App.3d 843, disapproved in Scott v. Pacific Gas & Electric Co. (1995) 11 Cal.4th 454, 474. This court twice previously rejected the argument that a claim based upon an implied-in-fact contract may not be alleged because an express contract is also alleged. Repetition of this argument is improper.

 

The court sustained the demurrer to the fourth cause of action in the third amended complaint solely on the grounds of uncertainty. Specifically, the court held that it was unclear whether the implied-in-fact contract which forms the basis of this cause of action was a contractual relationship as between Club and Mercur where Mercur had apparently alleged in the third amended complaint that Club was not an entity separate from the Regents. Mercur has now clarified its pleading and alleged that Club is an entity separate from Regents (4AC, ¶ 6), resolving this aspect of uncertainty. As discussed above in the FEHA context, for purposes of general employment law (but not FEHA), there is nothing inherently wrong with alleging dual employment by two separate entities. Mercur has sufficiently alleged an implied-in-fact contract with Club in the 4AC. Club’s argument is essentially that the weight of the evidence does not support such a contract; the court does not consider whether a plaintiff can prove the allegations in ruling on a demurrer. (Berg & Berg Enterprises, LLC v. Boyle (2009) 178 Cal.App.4th 1020, 1034.)

 

The demurrer to the fourth cause of action will be overruled. The same analysis and result applies to the demurrer to the sixth cause of action.

 

Mercur’s fifth cause of action is for breach of the implied covenant of good faith and fair dealing. As the court twice previously noted, outside the insurance context, “[b]reach of the covenant of good faith and fair dealing is nothing more than a cause of action for breach of contract.” (Habitat Trust for Wildlife, Inc. v. City of Rancho Cucamonga (2009) 175 Cal.App.4th 1306, 1344.) As an action for breach of contract, Mercur is obligated to allege the elements of an action for breach of contract. “A cause of action for breach of contract requires pleading of a contract, plaintiff’s performance or excuse for failure to perform, defendant’s breach and damage to plaintiff resulting therefrom.” (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1489.) Contrary to Club’s arguments that a written contract may only be pleaded verbatim, “[a] written contract may be pleaded either by its terms—set out verbatim in the complaint or a copy of the contract attached to the complaint and incorporated therein by reference—or by its legal effect.” (Ibid.) Moreover, “[a]n oral contract may be pleaded generally as to its effect, because it is rarely possible to allege the exact words.” (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.) Mercur has alleged the legal effect of the terms relevant to this cause of action based in part on writings and in part on oral statements. Mercur has sufficiently alleged a cause of action for contractual breach of the covenant of good faith and fair dealing. The demurrer to this cause of action will be overruled.

 

In summary, the court will sustain Club’s demurrer to the first and second causes of action and overrule the demurrer to the fourth, fifth, and sixth causes of action. In opposition, Mercur requests leave to amend to causes of action where the demurrer is sustained but Mercur does not indicate how he could amend the first and second causes of action. This is a demurrer to the fourth amended complaint. “In response to a demurrer and prior to the case being at issue, a complaint or cross-complaint shall not be amended more than three times, absent an offer to the trial court as to such additional facts to be pleaded that there is a reasonable possibility the defect can be cured to state a cause of action. The three-amendment limit shall not include an amendment made without leave of the court pursuant to Section 472, provided the amendment is made before a demurrer to the original complaint or cross-complaint is filed.” (Code Civ. Proc., § 430.41, subd. (e)(1).) The first amended complaint was filed pursuant to section 472. The second, third, and fourth amended complaints were not filed pursuant to section 472. Moreover, with respect to the first and second causes of action, Mercur has affirmatively alleged facts which make those causes of action in applicable. Further amendment would be ineffective to state a cause of action. Leave to amend will therefore be denied.

 

 

 
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