Tentative Rulings

Case Number: ****7644 Hearing Date: September 21, 2022 Dept: 20

Tentative Ruling

Judge Kevin C. Brazile

Department 20

Hearing Date: September 21, 2022

Case Name: Su, et al. v. Calcrete Construction, Inc., et al.

Case No.: ****7644

Matter: Demurrer

Moving Party: Defendant Vachik Danoukh

Responding Party: Plaintiff Labor Commissioner

Notice: OK

Ruling: The Demurrer is sustained in part, with five days leave to amend.

Moving party to give notice.

If counsel do not submit on the tentative, they are strongly

encouraged to appear by LACourtConnect rather than in person due to the COVID-19 pandemic.

On September 20, 2019, the Labor Commissioner filed the operative Second Amended Complaint (“SAC”) against Calcrete Construction, Inc., Calcrete Inc., and Does 2-10 for (1) failure to pay overtime wages, (2) penalties for failure to pay overtime wages, (3) waiting time penalties, (4) failure to pay sick leave, (5) failure to provide accurate wage statements, and (6) willful misclassification. Calcrete Construction, Inc. and Calcrete Inc. are alleged to be alter egos.

On April 25, 2022, Plaintiff identified Doe 2 as Vachik Danoukh.

The trial date is set for September 26, 2022. This seems to be a “5-year” case.

Vachik Danoukh demurs to the SAC for failure to state sufficient facts. Specifically, Danoukh argues that he is not properly pled as an alter ego of the other Defendants and that this action is time-barred as to him because his existence was known in 2017.

When considering demurrers, courts read the allegations liberally and in context, and “treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.” (Serrano v. Priest (1971) 5 Cal.3d 584, 591.) “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.” (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) It is error “to sustain a demurrer without leave to amend if the plaintiff shows there is a reasonable possibility any defect identified by the defendant can be cured by amendment.” (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967.)

As to liability for Doe 2, the SAC states, “Defendants DOES 2 through 10 were in some manner responsible for the acts and injuries complained of herein, and were at all times mentioned herein employees, agents, partners, and/or representatives of Defendants CALCRETE and CALCRETE INC., and were at all times acting within the course and scope of such agency, service, employment, partnership and/or joint venture.” The SAC asserts all causes of action against Doe 2.

Based on these allegations, Danoukh could be liable for the second cause of action as a person acting on behalf of the employer. (Lab. Code 558.)

On the other hand, it is not apparent how Danoukh can be liable for the other Labor Code violations as an agent, employee, partner, or representative of the remaining Defendants. Further, the SAC does not plead any facts to indicate that Danoukh was operating in a joint venture.

In its Opposition, Plaintiff contends Danoukh is an alter ego of the other Defendants. However, this is not actually alleged in the SAC.

As the basis for liability for Danoukh is currently unclear, the Demurrer is sustained as to the first, third, fourth, fifth, and sixth causes of action, with five days leave to amend.

As to the second cause of action, as mentioned, Defendant argues that the statute of limitations applies.

A plaintiff may file an action against a doe defendant when she is “ignorant of the name of a defendant.” (Code Civ. Proc. 474.) The phrase, “ignorant of the name of a defendant” means either (1) plaintiff was unaware of defendant's identity, (2) plaintiff was unaware of defendant's culpability (facts giving rise to a cause of action against the defendant), or (3) the law did not give plaintiff a right of action until after commencement of the action. (See Marasco v. Wadsworth (1978) 21 Cal.3d 82, 88.) “[Code Civ. Proc.] [s]ection 474 allows a plaintiff in good faith to delay suing particular persons as named defendants until he has knowledge of sufficient facts to cause a reasonable person to believe liability is probable. The distinction between a suspicion that some cause could exist and a factual basis to believe a cause exists is critical in the operation of section 474. The former is one reason attorneys include general charging allegations against fictitiously named defendants; the latter requires substitution of the defendant's true name.” (Dieckmann v. Superior Court (1985) 175 Cal.App.3d 345, 363.)

Code Civ. Proc. 474 “includes an implicit requirement that a plaintiff may not ‘unreasonably delay’ his or her filing of a Doe amendment after learning a defendant's identity.” (A.N. v. Cty. of Los Angeles (2009) 171 Cal.App.4th 1058, 1066–67.)

“When a defendant is properly named under section 474, the amendment relates back to the filing date of the original complaint.” (McClatchy v. Coblentz, Patch, Duffy & Bass, LLP (2016) 247 Cal.App.4th 368, 371.)

Here, it is a factual matter whether Plaintiff was aware of Defendant’s culpability at the time the SAC was filed or whether Plaintiff unreasonably delayed filing a doe amendment.

Regardless, if Plaintiff were to plead an alter ego theory for Danoukh, the statute of limitations would be irrelevant. Indeed, “[i]t is established that an action may be brought against an alter ego defendant after the statute of limitations applicable to the cause of action alleged in the original complaint has expired.” (Hennessey's Tavern, Inc. v. Am. Air Filter Co. (Ct. App. 1988) 204 Cal.App.3d 1351, 1359.)

In sum, the Demurrer is sustained as to the first, third, fourth, fifth, and sixth causes of action, with five days leave to amend. The Demurrer is overruled as to the second cause of action.

The Court discourages any further demurrers as all that is required is the ultimate facts or basic elements of alter ego liability. (Rutherford Holding, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 236.)

Moving party to give notice.

If counsel do not submit on the tentative, they are strongly encouraged to appear by LACourtConnect rather than in person due to the COVID-19 pandemic.

Case Number: ****7644 Hearing Date: April 21, 2022 Dept: 1

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES - CENTRAL DISTRICT

Julie Su, et al. v. Calcrete Construction, Inc., et al. (****7644); Labor Commissioner v. Calcrete Construction, Inc., et al. (21STCV22096)

On September 8, 2021, Calcrete Construction, Inc. filed a Notice of Related Case indicating civil case ****7644 is related to civil case 21STCV22096. On September 17, 2021, Judge Kevin C. Brazile deemed the cases not related. On March 17, 2022, California State Labor Commissioner Lilia Garcia-Brower (“the Commissioner”) filed in Dept. 1 a Motion for Order Relating Cases. (CRC 3.300(h)(1)(D) (authorizing the Supervising Judge of the Civil Division to relate cases upon motion after relation is denied under 3.300(h)(1)(A)-(C).) The Motion is unopposed.

Cases are related when they (1) involve the same parties and are based on the same or similar claims, (2) arise from the same or substantially identical transactions, incidents, or events requiring the determination of the same or substantially identical questions of law or fact, (3) involve claims against, title to, possession of, or damages to the same property, or (4) are likely for other reasons to require substantial duplication of judicial resources if heard by different judges. (CRC 3.300(a).)

In order of filing, the cases sought to be related are:

Julie Su, et al. v. Calcrete Construction, Inc., et al. (****7644) – initiated on July 7, 2017 when Julie Su, as Labor Commissioner of the State of California, filed a Complaint against Calcrete Construction, Inc. and Does 1-10 stating causes of action for various violations of the Labor Code and Industrial Welfare Commission Wage Orders, including failure to pay overtime and sick leave, waiting time penalties, and failure to provide accurate wage statements. The Complaint alleges Calcrete "failed to pay its employees all wages earned" for a period "at least between September 2014 and through August 2016." The Complaint alleges employees "typically worked between 10 and 12 hours Monday through Friday and [8] hours on Saturday" at an "hourly rate between $12 and $18 dollars per hour," albeit "at their regular hourly rate" despite "working between 18 and 28 hours of overtime per week." The Complaint also alleges Calcrete failed to provide accurate information regarding sick leave and failed to provide wage statements.

On September 20, 2019, Lilia Garcia-Brower, as the new Labor Commissioner, filed a Second Amended Complaint against Calcrete Construction, Inc., Calcrete Inc., and Does 2-10 stating causes of action for failure to pay overtime pay and unliquidated sick leave pay, failure to provide accurate itemized wage statements, waiting time penalties, and misclassification of employees as independent contractors between September 2014 and August 2016.

On September 8, 2021, Calcrete Construction filed a Notice of Related Case indicating civil case ****7644 is related to civil case 21STCV22096.

On September 17, 2021, the civil court concluded the cases are not related because civil case 21STCV22096 “involves several new parties” and “does not concern the same or similar claims.” The civil court reasoned that ****7644 related to Calcrete’s Labor Code violations between September 2014 and August 2016, while 21STCV22096 pertained to “transfers and distributions by the individual defendants of Calcrete’s assets to evade responsibility for those Labor Code violations. The civil court also concluded the cases “do not arise from the same events or transactions” because the “earlier-filed case arises out of the treatment of Calcrete employees between September 2014 and August 2016” while the “later-filed case arises out of alleged transfers of Calcrete’s assets to other entities and persons and alleged misrepresentations in the Danoukhs’ bankruptcy proceedings regarding their income from and interest in Calcrete.”

On March 17, 2022, the Commissioner filed a Motion for Reconsideration of the September 17, 2021 Order declining to relate civil cases ****7644 and 21STCV22096.

This case is pending in Department 20 of the Stanley Mosk courthouse with a Final Status Conference set for September 20, 2022.

Labor Commissioner v. Calcrete Construction, Inc., et al. (21STCV22096) – initiated on June 14, 2021 when the Labor Commissioner filed a Complaint against Defendants Calcrete Construction, Inc., Calcrete Inc., Ferrocrete Builders, Inc., Ferrocrete Structures Inc., George Danoukh, Razmik Danoukh, Vachik Danoukh, and Does 1-50 stating causes of action for constructive fraudulent transfer, intentional fraudulent transfer, and improper corporate distributions to directors and shareholders.

The Complaint alleges George and Razmik Danoukh initiated personal bankruptcy proceedings in 2012 and 2013, but intentionally misrepresented to the bankruptcy court that Calcrete Construction had closed, that they had no ownership interest in it, and that they were not receiving income from it. The Complaint alleges their bankruptcy proceedings were discharged in 2016. Between “2014 to at least 2017,” the Complaint alleges Calcrete and Vachik Danoukh used Calcrete assets to make significant “payments to various entities, including escrow companies to purchase real property. Moreover, “from at least September 2014 to the present,” the Danoukhs allegedly “transferred and received substantial amounts of its assets between themselves and DOES 1-50, including, but not limited to equipment, accounts receivables, goodwill, and cash assets” of Calcrete Construction. Further, the Commissioner alleges Calcrete Construction "improperly distributed corporate assets" to shareholders and directors "when in the process of winding up without paying or providing for payment to . . . creditors" such as the State. The Commissioner alleges these transactions left Calcrete Construction incapable of paying its statutory liability for wage violations.

On September 8, 2021, Calcrete Construction filed a Notice of Related Case indicating civil case ****7644 is related to civil case 21STCV22096.

On September 17, 2021, the civil court concluded the cases are not related.

On October 4, 2021, George Danoukh, Vachik Danoukh, Razmik Danoukh, Ferrocrete Structures, Ferrocrete Builders, Calcrete, and Calcrete Construction each filed a separate Answer to the Complaint.

On February 23 and 24, 2022, the Commissioner filed four Doe amendments substituting 11666 Pendleton LLC, 10965 Penrose LLC, Columbus Four, LLC, and Las Flores Corp. for Does 1-4.

This case is pending in Department 62 of the Stanley Mosk courthouse with the next hearing set for May 26, 2022 on an unfiled Motion for Summary Adjudication.

Upon review, the Court DENIES the Motion for Reconsideration as the cases were properly deemed not related. The earlier-filed case seeks relief against Calcrete and Calcrete Construction for mistreatment of employees between September 2014 and August 2016. This case involves various causes of action for violation of the Labor Code and Industrial Welfare Commission Wage Orders. The later-filed case seeks relief for attempts to avoid Calcrete’s potential liability for mistreatment of employees, alleging Calcrete attempted to avoid this liability by improperly and fraudulently distributing and transferring corporate assets between 2014 and 2017. Moreover, the later-filed case alleges Calcrete’s principals misrepresented their interests in Calcrete during personal bankruptcy proceedings between 2012 and 2016. The later-filed case involves causes of action for improper corporate distributions and fraudulent transfers.

The Commissioner argues the cases are related under CRC 3.300(a)(1) because the “Commissioner is the same plaintiff in both actions” and “at least two of the defendants are the same, Calcrete Construction Inc. and Calcrete Inc.” However, as Judge Brazile observed in declining to relate the cases, the parties are largely not the same. The earlier-filed case involves only the Commissioner, Calcrete, and Calcrete Construction. In turn, the later-filed case involves those parties as well as Ferrocrete Structures, Ferrocrete Builders, 11666 Pendleton LLC, 10965 Penrose LLC, Columbus Four, LLC, Las Flores Corp., George, Razmik, and Vachik Danoukh, which are not parties to the earlier-filed case. Moreover, these new parties appear irrelevant to the claims in the earlier-filed case, which pertain exclusively to Calcrete’s treatment of its employees between 2014 and 2016 (as discussed further below).

The claims in both cases are not “the same or similar” under CRC 3.300(a)(1). The earlier-filed case involves claims for statutory penalties for violations of the Labor Code and Industrial Welfare Commission Wage Orders based on allegations that Calcrete misclassified its employees, failed to pay overtime and sick leave pay, and failed to provide accurate wage statements between September 2014 and August 2016. (****7644 SAC, para. 11; 21STCV22096 Complaint, para. 44 ("August 2016 is the end date for the violations alleged in the Unpaid Wages Lawsuit.")) The later-filed case does not involve any cause of action for violation of the Labor Code or IWC Wage Orders—instead, it exclusively focuses on allegedly wrongful distributions of Calcrete assets by its principals and the alleged use of Calcrete assets to purchase real property through the Ferrocrete entities, as the Commissioner contends these transfers were intended to avoid potential liability from the claims in the earlier-filed case.

While the Commissioner claims the later-filed case “subsume[s] Plaintiff’s claims for unpaid wages and other Labor Code violations,” the Commissioner fails to explain this contention. The Complaint in the later-filed case does not seek any relief for Labor Code violations—only for attempts to avoid potential liability for those Labor Code violations. However, such liability is the subject of the earlier-filed case and has not been established yet. The Commissioner’s claims for fraudulent transfer and improper corporate distributions in the later-filed case are merely dependent upon the success of the Labor Code claims in the earlier-filed case; they are not “similar” to those claims. This is further shown by the different evidence required for the claims in each case. In the earlier-filed case, the Commissioner’s claims would be substantiated by evidence of Calcrete’s treatment of its employees between 2014 and 2016. Such evidence would not be relevant to the claims in the later-filed case for improper distributions of corporate assets and fraudulent transfers. Rather, those claims would require evidence regarding management of Calcrete’s assets and use of those assets by other parties (e.g., the Ferrocrete entities). Thus, the Court concludes the cases do not involve the same parties or the same or similar claims.[1]

The Commissioner argues the “claims stem from the same or substantially the same transactions, incidents, or events at issue in both actions” because the “the factual determinations necessary to determine Defendants’ liability in [the earlier-filed case] are necessary for [the later-filed case], including, but not limited to the first element of the fraudulent transfer causes of action, which is the existence of a debt.” Put another way, the Commissioner is arguing the cases arise out of the same events because the “existence of a debt” for Labor Code violations must be established in the earlier-filed case in order to prevail on the fraudulent transfer claims in the later-filed case.

This argument, however, does not show the cases arise from “substantially identical” events. The earlier-filed case arises out of Calcrete’s misclassification and improper payment of employees between September 2014 and August 2016. The later-filed case does not arise out of those events—it arises out of misrepresentations by Calcrete’s principals in their personal bankruptcy proceedings between 2012 and 2016 and transfers of Calcrete assets between 2014 and the present. As discussed earlier, the claims in the later-filed case hinge on the success of Calcrete’s distinct claims in the earlier-filed case. The fact that the later-filed case depends on the earlier-filed case does not at all indicate the claims are similar or arise out of the same events.

Finally, the Commissioner argues it would be “judiciously economical to relate the cases so that they may be consolidated for purposes of trial and limit exposure to COVID-19 for both the parties, witnesses and court staff.” (CRC 3.300(a)(4).) The Commissioner also argues “many of the witnesses will be the same in both actions” as the principals of the Calcrete entities “are named as individual defendants” in the later-filed case. The Commissioner argues the principals and employees of the Calcrete entities will likely offer overlapping testimony in both cases.

However, the Commissioner fails to explain what overlapping testimony would be relevant to both cases. As discussed above, the distinct claims in each case are based on different events and transactions, and thus likely will not be provable by the same evidence. The earlier-filed case will require testimony regarding Calcrete Construction’s treatment of its employees between 2014 and 2016. The later-filed case will require testimony regarding Calcrete Construction’s asset transfers between 2014 and the present, and regarding the Danoukhs’ bankruptcy proceedings, but this testimony would be on its face irrelevant to the Labor Code claims in the earlier-filed case.

The Court was not persuaded that there would be “substantial duplication of judicial resources” if the cases proceed to separate trials. In particular, if the trial in the earlier-filed case resolves adversely to the Commissioner, it is possible that there will be no need for a trial in the later-filed case, as the Commissioner acknowledges the fraudulent transfer claims hinge one establishing an underlying liability for Labor Code violations. To the extent the Commissioner is concerned that the trial in the later-filed case may proceed before the trial in the earlier-filed case, this is a case management issue properly raised in Department 62. Moreover, this sequence of trials is due in part to the Commissioner’s failure to promptly seek reconsideration of Judge Brazile's September 17, 2021 order denying relation, waiting six months to file this Motion on March 17, 2022. In the interim, trial was separately set in both cases. This delayed Motion does not present good reason to now relate the cases, which would disrupt the duly-scheduled trials in both cases.

For the foregoing reasons, the Motion for Reconsideration is DENIED.

Clerk to give notice.

b'

Case Number: ****7644 Hearing Date: September 17, 2021 Dept: 20

Ruling

Judge Kevin C. Brazile

Department 20

Date: Friday, September 17, 2021

Case Name: Julie Su, et al. v. Calcrete Construction Inc., et al.

Case No.: ****7644

Hearing: Non-Appearance Case Review re: Notice of Related Case

Notice: OK

Ruling: Civil case ****7644 is not related to civil case 21STCV22096.

Clerk to give notice.

ANALYSIS

On September 8, 2021, Calcrete Construction, Inc. filed a Notice of Related Case indicating civil case Julie Su, et al. v. Calcrete Construction Inc., et al. (Los Angeles Superior Court case no. ****7644) is related to civil case Labor Commissioner v. Calcrete Construction, Inc., et al. (LASC case no. 21STCV22096) within the meaning of California Rules of Court, Rule 3.300. Cases are related under Rule 3.300 when they (1) involve the same parties and are based on the same or similar claims, (2) arise from the same or substantially identical transactions, incidents, or events requiring the determination of the same or substantially identical questions of law or fact, (3) involve claims against, title to, possession of, or damages to the same property, or (4) are likely for other reasons to require substantial duplication of judicial resources if heard by different judges. The Notice indicates the cases are related on the first two grounds only.

Summary of Identified Cases

On September 20, 2019, Plaintiff Lilia Garcia-Brower, as the Labor Commissioner of the State of California and Chief Executive Officer of the Division of Labor Standards Enforcement of the California Department of Industrial Relations, filed a Second Amended Complaint against Defendants Calcrete Construction, Inc., Calcrete Inc., and Does 2-10 (LASC case ****7644). The Commissioner seeks relief for failure to pay overtime pay and sick leave and provide accurate itemized wage statements, misclassification of employees as independent contractors, and for statutory penalties under the Labor Code. The Commissioner is suing on behalf of Calcrete and Calcrete Construction employees for violations between September 2014 and August 2016.

On June 14, 2021, the Commissioner filed a separate Complaint against Defendants Calcrete Construction, Inc., Calcrete Inc., Ferrocrete Builders, Inc., Ferrocrete Structures Inc., George Danoukh, Razmik Danoukh, Vachik Danoukh, and Does 1-50 stating causes of action for constructive and intentional fraudulent transfers and improper corporate distributions to shareholders and directors (LASC case 21STCV22096). Plaintiff alleges George and Razmik Danoukh made fraudulent representations in their personal Chapter 13 bankruptcy proceedings regarding their personal income and the continued existence of Calcrete Construction. Plaintiff alleges the individual defendants, who were officers and directors of Calcrete Construction, and the other corporate defendants "transferred and received substantial amounts of [Calcrete Construction\'s] assets between themselves and DOES . . . including, but not limited to equipment, accounts receivables, goodwill, and cash assets," which transfers were primarily effected "through the actions of the individual [Danoukh] defendants." Relatedly, Plaintiff alleges Calcrete Construction "improperly distributed corporate assets" to shareholders and directors "when in the process of winding up without paying or providing for payment to . . . creditors" such as Plaintiff. Plaintiff alleges these transfers and distributions rendered Calcrete Construction incapable of paying its debts to the State and its employees under the original lawsuit for wage violations.

Analysis

The cases are not related under CRC 3.300(a)(1). While the cases involve some of the same parties—the Commissioner and Calcrete entities—the later-filed case involves several new parties. Moreover, the later-filed case does not concern the same or similar claims. The earlier-filed case concerned several alleged Labor Code violations by Calcrete between September 2014 and August 2016. The later-filed case concerns alleged transfers and distributions by the individual defendants of Calcrete’s assets to evade responsibility for those Labor Code violations. The claims are not similar. By extension, the cases are not related under CRC 3.300(a)(2) because the cases do not arise from the same events or transactions. The earlier-filed case arises out of the treatment of Calcrete employees between September 2014 and August 2016. The later-filed case arises out of alleged transfers of Calcrete’s assets to other entities and persons and alleged misrepresentations in the Danoukhs’ bankruptcy proceedings regarding their income from and interest in Calcrete. The cases do not present overlapping legal or factual issues. The Notice of Related Cases does not indicate the cases are related under CRC 3.300(a)(3) or (a)(4). The Court therefore declines to deem the cases related.