Filed 5/4/21 Everhart v. Trapac CA2/4

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for 

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publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF 

CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FOUR

JUSTIN EVERHART et al.,

Plaintiffs and Appellants,

v.

TRAPAC, LLC,

Defendant and Respondent.

 B303591

 (Los Angeles County

 Super. Ct. No. 18STCV07650)

APPEAL from a judgment of the Superior Court of Los 

Angeles County, Dennis J. Landin, Judge. Affirmed in part, 

reversed in part, and remanded with directions.

The Arkin Law Firm and Sharon J. Arkin; The Kristy 

Law Firm and James R. Kristy for Plaintiffs and Appellants.
2

Lewis Brisbois Bisgaard & Smith, Connie M. Fickel, 

Ryan D. Harvey and Timothy M. Schowe for Defendant and 

Respondent.

___________________________________________

INTRODUCTION

Appellants Hollis Lewandoski and Justin Everhart are 

former employees of respondent TraPac, LLC. Anna Holt 

ran an insurance/financial services company and was the 

broker for TraPac’s employee health and disability policies. 

Holt and her company, Five Star Financial Services of 

America, promised to invest appellants’ money but instead,

stole it. Appellants filed a complaint against TraPac, Holt, 

and Five Star, alleging that TraPac should be charged for 

the latter two’s torts under both agency and joint venture 

theories of liability.1 Lewandoski also separately alleged a 

negligence claim against TraPac. The trial court sustained 

TraPac’s demurrer to appellants’ second amended complaint 

(SAC) without leave to amend, and appellants appealed from 

the resulting judgment.

On appeal, appellants argue the court erred in 

sustaining the demurrer because: (a) they sufficiently pled 

TraPac’s liability under an agency theory; (b) they 

sufficiently pled TraPac’s liability under a joint venture 

theory; and (c) their new theory of negligence, asserted for 

the first time on appeal, states a cause of action. Appellants 

1 Neither Holt nor Five Star is a party to this appeal.
3

further alleged that although not asserted as a separate 

claim, the facts alleged in the SAC sufficiently stated a cause 

of action for negligent misrepresentation; alternatively, to 

the extent the negligence and/or negligent misrepresentation 

claims were insufficiently pled, appellants assert they can be 

amended.

We conclude the trial court properly determined that 

appellants did not sufficiently allege any of the causes of 

action set forth in the SAC. Specifically, (a) appellants did 

not sufficiently plead liability under an agency theory

because dispensing financial advice to appellants was 

neither in the scope of Holt’s agency, nor a foreseeable risk of 

such an agency; (b) appellants did not sufficiently plead 

liability under a joint venture theory because Holt’s theft 

was not in furtherance of the joint venture; and (c) 

appellants’ newly articulated negligence claim fails for lack

of allegations establishing duty or proximate causation. We 

further conclude, however, that while the SAC failed to 

sufficiently plead a cause of action for negligent 

misrepresentation, there is a reasonable possibility 

appellants could amend to successfully do so. We therefore 

reverse the judgment of dismissal and remand to permit 

appellants to file an amended complaint, in which they may 

attempt to allege only a cause of action for negligent 

misrepresentation.
4

STATEMENT OF RELEVANT FACTS

A. TraPac Successfully Demurs to the First 

Amended Complaint

In December 2018, appellants filed a complaint against 

TraPac and Holt, alleging five causes of action: (1) 

intentional misrepresentation; (2) breach of fiduciary duty; 

(3) conversion; (4) financial abuse; and (5) unfair business 

practices.2 In April 2019, appellants amended the 

complaint, alleging the same causes of action. The gist of 

the complaints was that appellants, while employed or after 

being employed by TraPac, had entrusted their money to 

Holt and Five Star, who had stolen it, and that TraPac was 

liable, both because Holt was its agent, and because TraPac 

and Holt were joint venturers. TraPac demurred, arguing in 

part that appellants failed to state facts sufficient to allege 

liability under joint venture or agency theories. 

In July 2019, the court sustained the demurrer over 

appellants’ opposition, but granted appellants leave to 

amend. The court found that while appellants had 

sufficiently pled a joint venture between TraPac and Holt “to 

form a for-profit joint venture of providing insurance policies 

to TRAPAC’s current and former employees,” they failed to 

allege that Holt’s actions were “conducted ‘in furtherance of 

the venture.’” Similarly, the court found that while 

2 On appeal, appellants have abandoned their unfair 

business practices claim. 
5

appellants had sufficiently pled an agency relationship 

between TraPac and Holt, they failed to allege facts 

establishing that Holt’s actions “f[e]ll within the scope of the 

agency relationship.” Specifically, appellants failed to 

“sufficiently show the scope of TRAPAC’s agency and how 

. . . Holt’s actions were within that scope.” Finally, the court 

found that appellants insufficiently alleged that “Holt’s 

malfeasance was a risk inherent to the provision of 

insurance and investment advice.”

B. Appellants File the Second Amended 

Complaint

In July 2019, appellants filed their SAC, adding a 

cause of action for negligence. The relevant allegations are 

set forth below:

1. TraPac and Holt

“At least as early as September 2014,” TraPac and Holt 

entered into an agreement “for the purpose of forming a 

for-profit joint venture.” As part of this joint venture, Holt 

“would provide skilled counseling to TRAPAC employees, as 

a free benefit of employment, in the following areas: 

(1) health and disability insurance . . . , (2) Medicare

enrollment, and (3) to those employees whom TRAPAC had 

terminated, counseling regarding Social Security and 

unemployment benefits.” Holt “would also function as a 

skilled broker for all employee health and disability 

insurance policies that TRAPAC required.” She additionally 

“would enter into commercial agreements, as she was able, 
6

with both current and terminated TRAPAC employees to 

provide skilled financial planning and investment advice and 

to broker investments, through Five Star, for such 

employees in exchange for financial consideration.” 

Appellants also included two generic allegations that 

“[a]t all relevant times, Defendants . . . were the agents and 

employees of each of the remaining Defendants, and were at 

all times acting within the purpose and scope of said agency 

and employment, and each defendant has ratified and 

approved the acts of each agent” and that “[a]t all relevant 

times, Ms. Holt acted as a joint venturer of the Venture and 

in furtherance of the Venture.” 

2. Holt Provides Services

Between September 2014 and April 2017, TraPac “did 

in fact market Ms. Holt’s services as a financial planner and 

investment broker to TRAPAC’s employees, and endorse 

Ms. Holt as well qualified and trustworthy to act in these 

capacities. In fact, TRAPAC presented the entire spectrum 

of Ms. Holt’s services, including those of financial planning 

and brokering investments, to its employees as benefits of 

employment.” Specifically, “through its Human Resources 

Manager, Elena Salvatore, TRAPAC informed its employees, 

including Plaintiffs, that Ms. Holt was available to counsel 

them, as a free benefit of employment, in the areas of health 

and disability insurance, including but not limited to health 

and disability plans offered by TRAPAC to its employees; 

Medicare enrollment; counseling to employees whom 
7

TRAPAC terminated, including counseling regarding Social 

Security and unemployment benefits; and financial planning 

and investment advice and brokerage services.” TraPac’s 

endorsement of Holt “as competent and trustworthy . . . 

came in the form of emails to employees, including Plaintiffs, 

from TRAPAC’s Human Resources department and in the 

form of announcements at meetings organized by Human 

Resources.” TraPac’s “endorsement was a material 

inducement for Plaintiffs . . . to entrust their retirement and 

other savings to Ms. Holt and Five Star for the purpose of 

investing such funds,” and “as a result of TRAPAC’s 

marketing and endorsement of her, Ms. Holt did in fact enter 

into commercial agreements with current and former 

TRAPAC employees, including Plaintiffs, to provide the 

services of a skilled financial planner and investment 

adviser and broker.” 

3. Holt Swindles Appellants

(a) Lewandoski

Holt met with TraPac employee Lewandoski in 

September 2014, to advise her about health insurance and 

Medicare. “Afterward, Ms. Holt offered financial planning 

services to Ms. Lewandoski, and gave her a business card 

bearing Ms. Holt’s name and a company name of ‘Five Star 

Financial Services of America.’ . . . Ms. Holt offered to 

provide financial planning advice to Ms. Lewandoski.” 

Lewandoski accepted a few days later, and on instructions 

from Holt, liquidated a 401(k) account associated with a 
8

previous employer and transferred the proceeds to Holt. In 

January 2015, TraPac terminated Lewandoski. Lewandoski 

subsequently transferred to Holt amounts of $404,331 

(proceeds from her TraPac 401(k) account), $30,000 (from 

her spouse’s savings account), and $119,000 (from another 

retirement account). She received total payments of $12,000

from Holt, and estimated she lost more than $646,000. 

(b) Everhart

Holt met with Everhart in July 2015, to advise him 

about his health insurance after the company laid him off. 

During the meeting, “Holt confirmed that she was assisting 

TRAPAC’s laid-off employees with health insurance, but 

quickly added that she, through Five Star, was also offering 

financial planning advice and brokering of investment 

vehicles to replace his 401(k) account.” Everhart accepted 

the offer, and in August 2015, liquidated his TraPac 401(k) 

account and transferred the proceeds to Hart. 

In August 2016, Everhart read an article stating that 

Holt’s business partner had been arrested. This “shook [his]

faith” in Holt, and he decided to ask her to return the money 

he had entrusted to her, including all earned interest. 

TraPac agreed to assist him in this endeavor, and in 

September, TraPac presented him with an agreement 

between three parties: TraPac, Five Star, and Everhart. 

Under the agreement, Five Star would return all of 

Everhart’s principal and interest and, in exchange, Everhart 

would not sue TraPac or Five Star. All parties signed, but 
9

Everhart never received his money back. TraPac continued 

trying to contact Holt on Everhart’s behalf before giving up 

in April 2017. Everhart estimated he lost more than 

$125,000. 

In May 2018, Holt and her business partners were

indicted for investment fraud. It was alleged that they took 

their investors’ money and used it for their own ends. 

Based on these allegations, appellants asserted that 

Holt was liable for intentional misrepresentation, breach of 

fiduciary duty, conversion, and (against Lewandoski, who 

was alleged to be at least 65 during these events) elder 

financial abuse. Appellants further pled that TraPac was 

liable because Holt was its joint venturer and, additionally, 

was acting as TraPac’s agent. 

The SAC also added a new cause of action by 

Lewandoski for negligence, alleging that TraPac breached a 

duty of care to warn her when it “became aware that the 

investment-brokerage services of Ms. Holt put 

Ms. Lewandoski at risk of losing her retirement savings.” 

Lewandoski specifically claimed TraPac had a duty to warn 

her “if and when TRAPAC became aware that the 

investment-brokerage services of Ms. Holt put 

Ms. Lewandoski at risk of losing her retirement savings.” 

C. The Court Enters Judgment Against 

Appellants

TraPac demurred to the SAC, arguing that 

Lewandoski’s negligence cause of action failed, both because 
10

appellants had not sought leave to add it, and because it

failed to state a claim. TraPac also argued that the 

remaining causes of action failed for the same reasons

previous articulated by the court. In opposing the demurrer, 

though appellants perfunctorily asked for leave to amend 

should the demurrer be sustained, they failed to explain how 

they could amend the SAC to address any defects. 

In October 2019, the court sustained the demurrer, this 

time without leave to amend, finding the SAC “again devoid 

of facts to show that Holt’s fraud was perpetrated in 

furtherance of the joint venture of providing insurance 

policies to TRAPAC’s current and former employees,” and 

that the “same is true with regard to whether Holt’s criminal 

acts occurred within the scope of TRAPAC’s alleged agency. 

Merely adding conclusory allegations that reiterate the law 

does not suffice.” The court also disagreed with appellants’ 

contention that “an investment broker’s fraud against clients 

is a risk inherent to the alleged venture or agency.” The 

court found the addition of Lewandoski’s negligence claim 

improper because appellants did not seek leave to add it. 

The court additionally held that the claim failed because the 

SAC stated that Lewandoski’s transfers “took place more 

than a year before TRAPAC allegedly became aware of 

Everhart’s accusation against Five Star and Holt . . . 

Plaintiffs cannot establish that TRAPAC’s failure to warn 

Lewandoski caused the alleged harm.”
11

In November 2019, the court entered a separate 

judgment of dismissal as to TraPac.3 Appellants timely 

appealed.

DISCUSSION

“In reviewing the sufficiency of a complaint against a 

general demurrer, we are guided by long-settled rules. ‘We 

treat the demurrer as admitting all material facts properly 

pleaded, but not contentions, deductions or conclusions of 

fact or law. [Citation.] We also consider matters which may 

be judicially noticed.’ [Citations.] Further, we give the 

complaint a reasonable interpretation, reading it as a whole 

and its parts in their context. [Citation.] When a demurrer 

is sustained, we determine whether the complaint states 

facts sufficient to constitute a cause of action. [Citation.] 

And when it is sustained without leave to amend, we decide 

whether there is a reasonable possibility that the defect can 

be cured by amendment: if it can be, . . . we reverse; if not, 

. . . we affirm. [Citations.] The burden of proving such 

reasonable possibility is squarely on the plaintiff.” (Blank v. 

Kirwan (1985) 39 Cal.3d 311, 318.)

A. Appellants Failed to Allege Agency Liability

In sustaining the demurrer to the first amended 

complaint, the trial court found that appellants had 

sufficiently pled an agency relationship between TraPac and 

3 Holt and Five Star remained defendants in the case.
12

Holt, but had failed to “sufficiently show the scope” of that

agency, or how “Holt’s actions were within that scope.” The 

court additionally found appellants had insufficiently alleged 

that Holt’s malfeasance “was a risk inherent to the provision 

of insurance and investment advice.” Because the court 

found that appellants had failed to correct these errors in 

their SAC, it sustained the demurrer to the SAC. 

Both parties agree that a principal is liable for an 

agent’s tort “if the agent commits the tort ‘in the scope of his 

employment and in performing service on behalf of the 

principal’” or “if the principal ratifies its agent’s conduct 

‘after the fact by . . . voluntar[ily] elect[ing] to adopt the 

[agent’s] conduct . . . as its own.’” (Doe v. Roman Catholic 

Archbishop of Los Angeles (2016) 247 Cal.App.4th 953, 969.) 

Appellants argue they adequately alleged both that Holt

committed her theft in the scope of her agency with TraPac, 

and that TraPac ratified Holt’s actions. We address each 

contention below.

1. Holt’s Torts Were Not Within the Scope 

of Her Agency

Appellants argue the SAC alleged facts sufficient to 

support finding that: (a) Holt was TraPac’s actual or 

ostensible agent in providing financial advice to appellants; 

and (b) Holt’s actions were within the scope of providing 

such advice. We disagree.
13

(a) Holt Was Not TraPac’s Agent in 

Providing Financial Advice to 

Appellants

(i) Actual Agency

Noting our Supreme Court’s statement in Skopp v. 

Weaver (1976) 16 Cal.3d 432, 439 that “an allegation of 

agency . . . is a statement of ultimate fact” and that therefore 

“further allegations explaining how this fact of agency 

originated become unnecessary,” appellants argue they have 

adequately pled that Holt provided financial advice to 

appellants as TraPac’s agent because the SAC included a 

general allegation that all defendants “were the agents and 

employees of each of the remaining Defendants.” However, 

cases decided after Skopp have held that a generic allegation 

of agency may be disregarded if specific allegations 

contradict it. (See, e.g., La Jolla Village Homeowners’ Assn. 

v. Superior Court (1989) 212 Cal.App.3d 1131, 1148-1149, 

disapproved on another ground in Jimenez v. Superior Court

(2002) 29 Cal.4th 473, 481, fn. 1 [court may disregard 

general agency allegation when more specific allegation 

undermines it].)4

Here, appellants’ general allegation of agency was 

accompanied by specific allegations as to how and why 

4 Moreover, fourteen years after Skopp, our Supreme Court 

referred to such general allegations of agency as “egregious 

examples of generic boilerplate.” (Moore v. Regents of University 

of California (1990) 51 Cal.3d 120, 134, fn. 12.)
14

TraPac introduced Holt to its employees; read together, 

these allegations contradict the assertion that Holt acted as 

TraPac’s agent in providing financial advice to appellants. 

In setting forth Holt’s apparent duties, the SAC alleged 

she was to do three things: (1) counsel TraPac employees 

regarding insurance, social security, and unemployment; (2) 

broker all the health and disability insurance policies 

TraPac needed; and (3) “enter into commercial agreements, 

as she was able, with both current and terminated TRAPAC 

employees to provide skilled financial planning and 

investment advice and to broker investments, through Five 

Star, for such employees in exchange for financial 

consideration.” (Italics added.) Appellants pled that Holt 

initially met with Lewandoski to counsel her regarding 

health insurance and Medicare; it was only “[a]fterward” 

that Holt provided Lewandoski with “a business card 

bearing Ms. Holt’s name and a company name of ‘Five Star 

Financial Services of America’” and “offered to provide 

financial planning advice.” Similarly, with Everhart, Holt 

first “confirmed that she was assisting TRAPAC’s laid-off 

employees with health insurance, but quickly added that 

she, through Five Star, was also offering financial planning 

advice and brokering of investment vehicles to replace his 

401(k) account.” In other words, Holt’s offer and provision of 

financial services were outside the services she provided for 

TraPac, and were instead provided through her own 

company, Five Star.
15

Though appellants also alleged elsewhere in the SAC 

that “TRAPAC presented the entire spectrum of Ms. Holt’s 

services, including those of financial planning and brokering 

investments, to its employees as benefits of employment” 

and that “[a]t least as early as September 2014, and through 

its Human Resources Manager, Elena Salvatore, TRAPAC 

informed its employees, including Plaintiffs, that Ms. Holt 

was available to counsel them, as a free benefit of 

employment, in the areas of health and disability insurance 

. . . and financial planning and investment advice and 

brokerage services,” the more specific allegations of the SAC 

make clear that Holt’s provision of financial planning advice 

was to be “through Five Star . . . in exchange for financial 

consideration.” Read as a whole, the SAC alleged that 

TraPac engaged Holt to advise its employees regarding 

insurance, social security, and unemployment benefits, and 

that TraPac also informed its employees that Holt provided 

financial counseling services, for which they could separately 

contract with her and her company. If Holt separately 

engaged with employees to provide financial counseling, 

such counseling was not within the scope of her agency with 

TraPac. These specific allegations control over appellants’ 

boilerplate allegation of agency.

(ii) Ostensible Agency

Appellants also argue that they sufficiently alleged 

Holt was TraPac’s ostensible agent. “Before recovery can be 

had against the principal for the acts of an ostensible agent, 
16

three requirements must be met: The person dealing with an 

agent must do so with a reasonable belief in the agent’s 

authority, such belief must be generated by some act or 

neglect by the principal sought to be charged and the person 

relying on the agent’s apparent authority must not be 

negligent in holding that belief.” (J.L. v. Children’s Institute, 

Inc. (2009) 177 Cal.App.4th 388, 403-404.) Here, appellants 

point to the allegations that TraPac informed them that 

Holt’s financial planning advice was free of charge, and that 

it touted her as qualified and trustworthy, as allegations 

sufficient to establish ostensible agency.

As discussed above, taken together, the allegations of 

the SAC assert that Holt’s services as an advisor regarding 

insurance, social security, and unemployment benefits were 

a free employment benefit, but that “Holt would enter into 

commercial agreements, as she was able, with both current 

and terminated TRAPAC employees to provide skilled 

financial planning and investment advice and to broker 

investments, through Five Star, for such employees in 

exchange for financial consideration.” Moreover, when Holt 

offered financial counseling to Lewandoski, she did so after 

their meeting regarding health insurance, and by handing 

Lewandoski a business card of Five Star, not TraPac. 

Similarly, when meeting with Everhart, she confirmed that 

she would be assisting him with health insurance, “but 

quickly added that she, through Five Star, was also offering

financial planning advice.” And both appellants admit they 
17

entered into separate agreements with Holt for financial 

services.

Further, while Lewandoski began “investing” with Holt 

while still employed, only a small portion of her claim 

originated from actions taken during her employment; none 

of Everhart’s claim did.

5 Nothing in the SAC alleged that 

TraPac intended, or ever gave the impression that it 

intended, to provide Holt’s services as a financial advisor to 

former employees -- to the contrary, appellants alleged her 

services were offered as “a free benefit of employment.” On 

this record, we conclude appellants inadequately alleged 

that Holt was TraPac’s ostensible agent in providing them 

with financial advice.

(b) Holt’s Torts Were Not Foreseeable

Moreover, even had appellants sufficiently pled that 

Holt was TraPac’s agent in providing them with financial 

advice, TraPac could be liable only if Holt’s tortious conduct 

was “‘“a generally foreseeable consequence of the 

5 The SAC alleges that while employed by TraPac,

Lewandoski provided Holt with the proceeds of a single 401(k) 

account. While the SAC does not specify the amount, based on 

Lewandoski’s allegations that she lost in excess of $646,000, that 

after the initial transfer she gave Holt amounts of $404,331 

(TraPac 401(k) proceeds), $30,000 (spouse’s savings account), and 

$119,000 (other retirement account proceeds), and that she 

received total payments of $12,000, we deduce that Lewandoski 

transferred approximately $105,000 to Holt while employed by 

TraPac ($646,000 – $404,331 – $30,000 – $119,000 + $12,000). 
18

[employer’s] activity.” In this usage, . . . foreseeability 

“merely means that in the context of the particular 

enterprise an employee’s conduct is not so unusual or 

startling that it would seem unfair to include the loss 

resulting from it among other costs of the employer’s 

business.”’” (PCO, Inc. v. Christensen, Miller, Fink, Jacobs, 

Glaser, Weil & Shapiro, LLP (2007) 150 Cal.App.4th 384, 

391.) Like the trial court, we disagree with appellants’ 

contention that an investment adviser’s outright theft of her 

clients’ money is generally foreseeable, and appellants cite 

no authority to the contrary.

Appellants also argue that TraPac is liable because it 

“placed Holt in a position that enabled her, while apparently 

acting within the authority granted by TraPac to provide 

financial advice and assistance to its employees, to commit 

fraud on plaintiffs.” But our Supreme Court has expressly 

stated that “[t]he nexus required for respondeat superior 

liability--that the tort be engendered by or arise from the 

work--is to be distinguished from ‘but for’ causation. That 

the employment brought tortfeasor and victim together in 

time and place is not enough.” (Lisa M. v. Henry Mayo 

Newhall Memorial Hospital (1995) 12 Cal.4th 291, 295.) 

Therefore, that TraPac introduced Holt to appellants (thus 

providing her with the opportunity to swindle them) is 

insufficient for liability under an agency theory where Holt’s 

tort was not a generally foreseeable consequence.
19

2. TraPac Did Not Ratify Holt’s Torts

As appellants recognize, “‘Ratification is the voluntary 

election by a person to adopt in some manner as his own an 

act which was purportedly done on his behalf by another 

person, the effect of which, as to some or all persons, is to 

treat the act as if originally authorized by him.’” (Dickinson

v. Cosby (2019) 37 Cal.App.5th 1138, 1158.) “‘A purported 

agent’s act may be adopted expressly or . . . by implication 

based on conduct of the purported principal from which an 

intention to consent to or adopt the act may be fairly 

inferred, including conduct which is “inconsistent with any 

reasonable intention on his part, other than that he intended 

approving and adopting it.”’” (Ibid.)

Appellants allege that Everhart decided in August 

2016 to request the return of all the principal he had 

invested with Holt, as well as the interest that he 

purportedly earned, and that TraPac agreed to help him 

with this endeavor. The next month, TraPac informed 

Everhart that Holt had agreed to his request and TraPac 

drafted an agreement providing that Holt would return 

Everhart’s money and Everhart would release any claims 

against Holt or TraPac. Appellants argue that by entering 

into this agreement, and by not disaffirming responsibility 

for Holt’s actions, TraPac ratified Holt’s theft. 

Because neither entering into the agreement nor 

failing to disaffirm responsibility was an express adoption of 

Holt’s actions, we construe appellants’ contention as one

alleging that TraPac’s acts were an implied ratification, viz., 
20

an indication that TraPac adopted Holt’s acts as its own. 

Even so construed, the argument fails.

We discern no logical connection between TraPac’s 

drafting and entering into the agreement and taking 

responsibility for Holt’s theft. At most, TraPac agreed to act 

as an intermediary between Everhart and Holt in exchange 

for Everhart’s agreement not to sue TraPac. Though doing 

so could have inured to the company’s benefit, there is 

simply no basis to construe this act by TraPac as adopting 

Holt’s actions as its own.

As for any responsibility to “disaffirm” Holt’s actions, 

such a requirement could arguably have come into play only 

if appellants had alleged that Holt was TraPac’s agent for 

the purposes of providing financial advice to a former

employee. As discussed above, appellants did not do so.

Thus, even had the SAC unambiguously alleged that 

Holt was TraPac’s agent in providing appellants with 

financial advice during and after their employment with the 

company, TraPac still would not be liable for Holt’s thievery 

both because the torts were not a foreseeable consequence of 

giving financial advice, and because TraPac did not ratify 

Holt’s actions.6

6 In their reply brief, appellants claim that “plaintiffs’ 

allegations of ratification go to TRAPAC’s ratification of the 

existence of the agency, not specifically to ratification of the theft 

that arose out of the agency.” We fail to see how TraPac’s actions 

give rise to a fair inference that it had adopted the position that

Holt was acting as its agent when she acted as appellants’ 

(Fn. is continued on the next page.)
21

B. Appellants Failed to Allege Joint Venture 

Liability

The SAC alleged that “[a]t least as early as September 

2014,” TraPac and Holt entered into an agreement “for the 

purpose of forming a for-profit joint venture.” While it is 

never explicitly stated what the purpose of this joint venture 

was, the trial court had previously found that appellants had 

sufficiently pled that TraPac and Holt agreed “to form a 

for-profit joint venture of providing insurance policies to 

TRAPAC’s current and former employees.” In sustaining the 

demurrer to the SAC, the court again characterized the joint 

venture as one “providing insurance policies to TRAPAC’s 

current and former employees.” However, the court found 

that appellants failed to allege that Holt’s torts were 

committed in furtherance of that joint venture. (See 

Cochrum v. Costa Victoria Healthcare, LLC (2018) 25 

Cal.App.5th 1034, 1053 [“Where a joint venture is 

established, the parties to the venture are vicariously liable 

for the torts of the other in furtherance of the venture”]; 

CACI No. 3712 [“Each of the members of a joint venture, and 

the joint venture itself, are responsible for the wrongful 

conduct of a member acting in furtherance of the venture”].) 

Appellants do not dispute that for TraPac to be vicariously 

financial advisor. Moreover, even if TraPac had ratified Holt’s 

agency through its actions with Everhart, the allegations would 

still be insufficient to hold TraPac liable because, as previously 

discussed, Holt’s theft was not within the scope of any such 

agency.
22

liable, Holt’s acts must have been in furtherance of the joint 

venture; nor do they suggest that Holt’s theft of appellants’ 

money furthered the alleged joint venture of providing 

insurance policies to TraPac’s employees.

Instead, citing Unruh-Haxton v. Regents of the 

University of California (2008) 162 Cal.App.4th 343

(Unruh-Haxton), appellants argue that it was impermissible 

for the court to decide this issue at the demurrer stage. 

Unruh-Haxton is distinguishable. There, plaintiffs accused 

two doctors of stealing human genetic material (their eggs) 

from them. (Id. at 349.) Some of the eggs were sold for 

research, others were fertilized and implanted in different 

women (presumably for a profit). (Id. at 350.) Plaintiffs also 

alleged that the doctors had formed a joint venture with the 

other defendants to share the profits of the fertility clinic

where their eggs were harvested. (Id. at 350.) On appeal, 

the non-doctor defendants argued the trial court had

correctly found plaintiffs’ allegations insufficient to support 

a finding that the defendants were in a joint venture, 

because plaintiffs had failed to allege these defendants had 

control over the enterprise. (Id. at 370.) After first stating 

the general principle that “‘[W]here evidence is in dispute 

the existence or nonexistence of a joint venture is a question 

of fact to be determined by the jury,’” the Court of Appeal 

found control was sufficiently alleged by allegations that the 

parties had entered into a written joint venture agreement, 

and that the joint venture had operated the clinic. (Id. at 

370-371.) The court then added, “Whether the wrongful acts 
23

of one joint venturer were committed in connection with the 

joint venture, or can be imputed to the other joint venturers 

are questions for another day because the scope of review on 

demurrer is limited.” (Id. at 371.) This generic language 

cannot reasonably be construed as a commandment that the 

sufficiency of allegations of liability based on a theory of joint 

venture can never be decided on demurrer -- indeed, such an 

edict would run afoul of the well-established principle that to 

survive demurrer, a complaint must state facts sufficient to 

entitle the plaintiff to relief. (See, e.g., Selby Realty Co. v. 

City of San Buenaventura (1973) 10 Cal.3d 110,123

[recognizing “the well accepted principle that against a 

general demurrer the only requirement is that upon a 

consideration of all the facts stated it must appear plaintiff 

is entitled to some relief” (italics added)].)

Here, the trial court expressly found that appellants 

had failed to allege facts showing Holt’s malfeasance was 

“perpetrated in furtherance of the joint venture.” We agree. 

Holt’s actions in stealing appellants’ money could not 

possibly have been in furtherance of a joint venture to 

provide TraPac’s employees with insurance policies. 

Appellants have pointed to no allegations suggesting how 

Holt’s thievery would advance any joint venture undertaken 

by TraPac and Holt. We discern no error in sustaining a 

demurrer where the complaint lacks an allegation essential 

to recovery.
24

C. Appellants Failed to Allege a Negligence

Cause of Action

Though neither the initial nor first amended complaint 

contained a negligence claim, appellants attempted to add 

such a cause of action to their SAC on behalf of Lewandoski. 

Because appellants did not request leave to do so, the trial 

court found the addition improper, but went on to hold that 

the cause of action failed regardless, because it failed to 

allege causation. 

Appellants argue on appeal that “the negligence cause 

of action is viable in this case, both procedurally and legally.” 

Because we conclude that appellants failed to state a cause 

of action for negligence, we do not address whether they 

were procedurally permitted to add such a cause of action 

without the trial court’s express permission.

Preliminarily, we note that appellants have changed 

their theory of negligence on appeal. In their SAC, 

appellants alleged that TraPac had a “duty of care . . . to 

warn Ms. Lewandoski if and when TRAPAC became aware 

that the investment-brokerage services of Ms. Holt put 

Ms. Lewandoski at risk of losing her retirement savings.” 

But appellants also admitted that Lewandoski’s investments 

with Holt were made between September 2014 and July

2015. It was not until August 2016 that TraPac received 

Everhart’s request for aid in recovering his money from Holt, 

and not until May 2018 that Holt was indicted. As the trial 

court correctly noted, because “the SAC states that 

[Lewandoski’s] transfers took place more than a year before 
25

TRAPAC allegedly became aware of Everhart’s accusation 

against Five Star and Holt . . . Plaintiffs cannot establish 

that TRAPAC’s failure to warn Lewandoski caused the 

alleged harm.” 

Appellants no longer argue the negligence claim pled 

below was sufficient. Rather, they advance a new and 

different theory never articulated in any prior complaint. 

They now allege that because TraPac “retained Holt’s 

services to provide a broad array of insurance and financial 

services to its employees . . . TraPac owed its employees a 

duty to assure that if an employee accessed Holt’s services, 

she would act responsibly in managing their finances and 

not steal their money.” Appellants then allege in conclusory 

fashion that TraPac’s supposed breach of this duty “thereby 

caused injury to plaintiffs.”7 As discussed below, this new 

theory of negligence fares no better than the abandoned one, 

because it fails to allege facts sufficient to support a finding 

of duty or proximate causation.

1. Duty

Appellants’ allegations fail to establish TraPac owed 

them a duty to “assure that if an employee accessed Holt’s 

services, she would act responsibly in managing their 

finances and not steal their money.” Appellants claim such a 

duty existed because: (a) TraPac “created [the] peril” when 

7 Not only is this an entirely new theory, but unlike the 

negligence cause of action asserted in the SAC, it apparently 

would be asserted on behalf of both Lewandoski and Everhart.
26

it retained Holt to provide its employees with financial 

advice; and (b) TraPac had a “special relationship” with its 

employees. We disagree.

As discussed above, Holt’s agency did not include the 

provision of financial advice -- thus TraPac did not “create[] 

the peril.” Moreover, appellants present no authority 

establishing the existence of a special relationship between 

TraPac and appellants that would impose on TraPac a duty 

to ensure the insurance broker it hired would act responsibly 

in managing their money. Their citation to Regents of 

University of California v. Superior Court (2018) 4 Cal.5th 

607 (Regents) is inapposite.

In Regents, our Supreme Court held that “[c]onsidering 

the unique features of the collegiate environment, . . . 

universities have a special relationship with their students 

and a duty to protect them from foreseeable violence during 

curricular activities.” (Regents, supra, 4 Cal.5th at 613.) In 

generally discussing the formation of a special relationship, 

the court listed several examples, including “an employer 

with its employees,” citing section 40, subdivision (b), of the 

Restatement Third of Torts. (Regents, supra, 4 Cal.5th at 

620.) But the issue of when an employer and its employees 

had a special relationship was not considered in Regents. 

“Language used in any opinion is of course to be understood 

in the light of the facts and the issue then before the court, 

and an opinion is not authority for a proposition not therein 

considered.” (Ginns v. Savage (1960) 61 Cal.2d 520, 524, fn. 

2.) Additionally, section 40 of the Restatement Third of 
27

Torts provides that “[a]n actor in a special relationship with 

another owes the other a duty of reasonable care with regard 

to risks that arise within the scope of the relationship” and 

that “[s]pecial relationships giving rise to the duty provided 

in Subsection (a) include: . . . (4) an employer with its 

employees who, while at work, are: [¶] (a) in imminent 

danger; or [¶] (b) injured or ill and thereby rendered 

helpless.” (Rest. 3d Torts, Liability for Physical and 

Emotional Harm (2021) § 40, subds. (a) & (b).) There is no 

allegation that appellants were in imminent danger, or 

helpless.

In any case, as Regents recognized, “[t]he 

determination whether a particular relationship supports a 

duty of care rests on policy and is a question of law.” 

(Regents, supra, 4 Cal.5th at 620.) We conceive of no sound 

public policy requiring imposition on an employer of a duty 

to guarantee that an agent’s actions committed outside the 

scope of the agency would not result in harm to its 

employees.

2. Proximate Causation

Moreover, appellants’ conclusion that TraPac’s alleged 

breach of duty “thereby caused injury to plaintiffs” is 

insufficient. There are limits to the generality with which a 

plaintiff may state a cause of action for negligence. “‘[T]he 

plaintiff must indicate the acts or omissions which are said 

to have been negligently performed. He may not recover 

upon the bare statement that the defendant’s negligence has
28

caused him injury.’” (Berkley v. Dowds (2007) 152 

Cal.App.4th 518, 527, quoting Guilliams v. Hollywood 

Hospital (1941) 18 Cal.2d 97, 101.) “‘A plaintiff “must allege 

a causal connection between the negligence . . . and the 

injury he suffered. Ordinarily that is accomplished by 

implication from the juxtaposition of the allegations of 

wrongful conduct and harm. [Citation.] However, where the 

pleaded facts of negligence and injury do not naturally give 

rise to an inference of causation the plaintiff must plead 

specific facts affording an inference the one caused the 

others.”’” (Berkley v. Dowds, supra, 152 Cal.App.4th at 528, 

quoting Christensen v. Superior Court (1991) 54 Cal.3d 868, 

900-901.)

Here, even assuming TraPac had a duty to “assure that

if an employee accessed Holt’s services, she would act 

responsibly,” appellants did not explain in their opening 

brief what TraPac did or failed to do that breached this

supposed duty. In their reply brief, they contended that 

“TRAPAC failed to adequately and reasonably investigate 

Holt, her partners or her company in order to ascertain her 

qualifications, honesty and trustworthiness, and TRAPAC 

therefore had no reasonable basis for asserting that Holt was 

competent, qualified or trustworthy.” But appellants still 

fail to allege any facts demonstrating how TraPac’s omission 

could have proximately caused appellants’ injuries -- there is 

no allegation, for example, that Holt had a discoverable 

criminal record, or indeed any discoverable history that 

would have indicated she would abuse a position of trust by 
29

stealing appellants’ money outright. In short, appellants did 

not allege a cognizable claim of negligence below or on 

appeal, and have not shown how they could do so.

D. Appellants Failed to Adequately Allege 

Negligent Misrepresentation, But There Is a 

Reasonable Possibility They Could Do So

Appellants’ SAC did not purport to include a cause of 

action for negligent misrepresentation. Nonetheless, on 

appeal, they assert the allegations were sufficient to state 

such a claim; alternatively, they suggest that any deficiency 

can be cured. 

“The elements of a negligent misrepresentation are ‘(1) 

the misrepresentation of a past or existing material fact, (2) 

without reasonable ground for believing it to be true, (3) 

with intent to induce another’s reliance on the fact 

misrepresented, (4) justifiable reliance on the 

misrepresentation, and (5) resulting damage.’” (Tindell v. 

Murphy (2018) 22 Cal.App.5th 1239, 1252.) Appellants 

argue that their SAC “also alleged facts sufficient to state a 

cause of action for negligent misrepresentation.”

8

8 While no negligent misrepresentation cause of action was 

alleged below, nor is there any evidence such a cause of action 

was suggested to the trial court as viable, on an appeal from a 

demurrer, we “make a de novo determination of whether the 

complaint alleges ‘facts sufficient to state a cause of action under 

any possible legal theory,’” including “a legal theory presented for 

the first time in an opening appellant’s brief.” (Gutierrez v. 

Carmax Auto Superstores California (2018) 19 Cal.App.5th 1234, 

(Fn. is continued on the next page.)
30

Specifically, they allege that TraPac represented to 

appellants that “Holt was a skilled, trustworthy financial 

advisor” but “she was certainly not trustworthy” and that 

even if TraPac believed she was, “it had no reasonable 

grounds for believing that.” On appeal, appellants 

additionally allege that TraPac made this representation 

intending that appellants rely on it, and that appellants’ 

reliance was both reasonable and a substantial factor in 

their subsequent injury. 

TraPac counters that any representation of Holt’s 

trustworthiness was an opinion that does “not misrepresent 

any past or existing material fact,” and therefore cannot be 

the basis of a negligent misrepresentation claim. 

Specifically, TraPac contends that because it “owns a 

shipping container terminal and operates a stevedore 

service,” “is not a stock brokerage or financial services firm, 

and there is no allegation it held itself out as having any 

special expertise or unique knowledge in these areas,” and it 

“did not hold itself out as an expert in vetting investment 

advisers,” “[w]hen it represented Holt was qualified and 

trustworthy there were no grounds for anyone to treat this 

as a positive affirmation of fact.” 

1244; 20th Century Ins. Co. v. Quackenbush (1998) 64 

Cal.App.4th 135, 139, fn. 3 [“When a demurrer is sustained 

without leave to amend the petitioner may advance on appeal a 

new legal theory why the allegations of the petition state a cause 

of action”].)
31

We think TraPac too narrowly limits the potential 

bases for its liability. One need not be an expert in 

determining trustworthiness to be liable for proclaiming that 

another possesses this quality, if the proclamation is stated 

as a fact, or in a manner leading the listener to believe it is 

based on facts. (See Cohen v. S & S Constr. Co. (1983) 151 

Cal.App.3d 941, 946 [negligent misrepresentation cause of 

action may lie “where a party states his opinion as an 

existing fact or as implying facts which justify a belief in the 

truth of the opinion”]; Strutzel v. Williams (1952) 109 

Cal.App.2d 512, 514 [representation that “Mr. Brunson was 

honest and honorable” could constitute false and fraudulent 

misrepresentation].) Even a non-expert in human morality

can describe a person as honest in a way that implies 

knowledge of facts justifying a belief in such an opinion.

Here, the SAC alleged that “TRAPAC’s endorsement of 

Ms. Holt and Five Star as competent and trustworthy 

financial planners and investment brokers came in the form 

of emails to employees, including Plaintiffs, from TRAPAC’s 

Human Resources department and in the form of 

announcements at meetings organized by Human 

Resources.” Conceivably, the contents of any such e-mails or 

announcements could lead to a reasonable conclusion that 

TraPac stated facts to justify its belief in Holt’s 

trustworthiness. If TraPac promoted Holt’s trustworthiness 

as a financial planner, having no reasonable basis for such 

representation, it could be liable for negligent 

misrepresentation.
32

However, because “[c]auses of action for intentional 

and negligent misrepresentation sound in fraud . . . each 

element must be pleaded with specificity. [Citation] ‘The 

specificity requirement means a plaintiff must allege facts 

showing how, when, where, to whom, and by what means the 

representations were made, and, in the case of a corporate 

defendant, the plaintiff must allege the names of the persons 

who made the representations, their authority to speak on 

behalf of the corporation, to whom they spoke, what they 

said or wrote, and when the representation was made.’” 

(Daniels v. Select Portfolio Servicing, Inc. (2016) 246 

Cal.App.4th 1150, 1166-1167.) The allegations appellants 

stated in their opening brief fail to meet this level of 

specificity, and thus fail to state a cause of action for 

negligent misrepresentation. But “[i]f there is any 

reasonable possibility that the plaintiff can state a good 

cause of action, it is error to sustain a demurrer without 

leave to amend.” (Youngman v. Nevada Irrigation Dist.

(1969) 70 Cal.2d 240, 245.) Based on the allegations that 

TraPac’s emails and announcements to its employees 

“endorse[d] . . . Ms. Holt and Five Star as competent and 

trustworthy financial planners,” and appellants’ 

representations that they relied on such endorsement to 

entrust their funds to her, we conclude there is a reasonable 

possibility appellants could -- with additional allegations 

satisfying the specificity requirements -- amend their 

complaint to state a cause of action for negligent 

misrepresentation. In doing so, we express no opinion as to 
33

any particular infirmity TraPac may choose to raise 

regarding any such amendment -- that is a matter for the 

trial court to consider in the first instance.

9

9 We further emphasize that we find no fault in the trial 

court’s failure to consider the viability of a cause of action 

articulated for the first time on appeal.
34

DISPOSITION

The judgment is reversed. Because the trial court 

correctly sustained TraPac’s demurrer to appellants’ other 

causes of action, on remand, appellants are granted leave to 

file an amended complaint to allege only a cause of action for 

negligent misrepresentation. TraPac may challenge any 

such amended complaint in any manner permitted by law. 

In the interests of justice, the parties shall bear their own 

costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

 MANELLA, P. J.

We concur:

WILLHITE, J.

COLLINS, J.