Court Opinion

ID: 1057552
Source: CourtListenerOpinion
Date Created: 2013-10-09 18:18:09.001539+00
Date Added: 2024-06-11T13:01:27.990190
License: Public Domain

Filed 10/7/13 Alsheikh v. Superior Court CA2/5
                  NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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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              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                     SECOND APPELLATE DISTRICT

                                                  DIVISION FIVE

EDDIE ALSHEIKH et al.,                                               No. B249822

         Petitioners,                                                (Super. Ct. No. BC360109)
                                                                     (Jane L. Johnson, Judge)
         v.

THE SUPERIOR COURT OF LOS
ANGELES COUNTY,

         Respondent;

SARA LEE FRESH, INC. et al,

         Real Parties in Interest.

         Original proceeding; petition for writ of mandate. Jane L. Johnson, Judge.
Granted and remanded with instructions.
         Arias, Ozzello & Gignac, Mike Arias; Law Offices of George Kaufman, George
A. Kaufman; Kreindler & Kreindler, Gretchen M. Nelson; Law offices of Jonathan Weiss
and Jonathan Weiss for Petitioners and Plaintiffs.
         No appearance for Respondent.
         Paul Hastings, Donna Melby, Elizabeth Brown, Holly House, and Sean Unger for
Defendants and Real Parties In Interest.
                                     INTRODUCTION
       Petitioner and plaintiff Sylvia Ingoglia (plaintiff) is one of the four plaintiffs who
filed a class action against real parties in interest and defendants Sara Lee Fresh, Inc.,
Sara Lee Corporation, Grupo Bimbo S.A.B. De C.V, Bimbo Bakeries USA Inc. and
Earthgrains Distribution, LLC (collectively defendants). Out of three petitioners, two of
the plaintiffs settled their case with defendants shortly before the oral argument in this
matter, leaving just plaintiff Sylvia Ingoglia as the remaining petitioner.
       Plaintiff alleged she was an employee denied wage and hour benefits under the
Labor Code. Plaintiff also alleged that if she were an independent contractor, defendants
violated state antitrust laws by setting the price at which plaintiff was required to sell
baked goods to those stores and by imposing territorial restrictions. Plaintiff alleged in
her 12th and 13th causes of action violations of Business and Professions Code section
16720, California’s antitrust law (Cartwright Act), and in her 15th cause of action
violation of Business and Professions Code section 17200 (Unfair Competition Law).
       Defendants demurred to plaintiff’s 12th, 13th and 15th causes of action, in which
she alleged an antitrust violation and unfair competition based on the facts of vertical
price fixing and horizontal territorial divisions. Defendants asserted that plaintiff had
failed to allege an antitrust violation. Defendants also contended that even if plaintiff had
alleged an antitrust violation based on such acts, such acts are no longer per se illegal
under the Cartwright Act. Defendants argued that the California Supreme Court case of
Mailand v. Burckle (1978) 20 Cal.3d 367, in which the court held that the per se rule
applied to vertical price fixing under the Cartwright Act, was no longer good law because
the court relied upon federal law that subsequently had been abandoned by the United
States Supreme Court in Leegin Creative Leather Products, Inc. v. PSKS, Inc. (2007)
551 U.S. 887.
       We hold that plaintiff’s allegations in the operative complaint do not show vertical
price fixing in violation of the Cartwright Act. Although granting the petition for a writ
of mandate, we remand the matter to the trial court with instructions to sustain the

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demurrer as to the 12th and 15th causes of action with leave to amend. For guidance of
the trial court we note that the holding in Mailand v. Burckle, supra, 20 Cal.3d 367 that
vertical price fixing is a per se violation of the Cartwright Act is the governing law of
California.

                                        BACKGROUND
       In her fourth amended complaint, plaintiff alleged that she has agreements with
defendant Sara Lee Corporation to distribute the latter’s baked goods in California.
Defendant Sara Lee Fresh, Inc. is the alter ego of defendant Sara Lee Corporation. (The
two entities are referred to collectively as Sara Lee.) Defendant Earthgrains Distribution
LLC operates the Sara Lee Corporation distribution system. Defendant Grupo Bimbo
S.A.B. De C.V., operating through defendant Bimbo Bakeries USA Inc., ultimately
assumed all the outstanding rights and obligations of Sara Lee in the distribution
agreements.
       Plaintiff alleged that defendants entered into agreements with various chain stores,
such as Vons, Safeway, Ralphs, Costco, Smart & Final, Sam’s Club, Walmart, Target,
Food 4 Less and other similar stores, by which agreements defendants committed to
deliver baked goods to the chain stores, and the chain stores agreed to provide shelf space
and displays for those products. Defendants entered into distribution agreements with
plaintiffs, who bought the baked goods from defendants and resold them to retail stores,
including the chain stores. Virtually all of the retail sales to consumers of defendants’
products take place through the chain stores. The distribution agreement between
plaintiffs and defendants is attached to the complaint.
       These distribution agreements assigned plaintiff a specific geographic area, and
she was not permitted to sell goods outside that area. Plaintiff purchased the goods from
defendants and took title to those goods. Defendants claimed that plaintiff was an
independent contractor. The distribution agreement provided as follows: “§3.3.
TERMS: Products will be sold to DISTRIBUTOR on terms and prices established by
SARA LEE FRESH from time to time. [¶] §5.2 SALES TO CHAINS: In order to

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enable DISTRIBUTOR to pursue business opportunities with Chains, which may require
standard terms for all DISTRIBUTORS, DISTRIBUTOR hereby designates SARA LEE
FRESH and SARA LEE FRESH hereby agrees to act, as DISTRIBUTOR’S agent.
SARA LEE FRESH shall use commercially reasonable efforts to obtain from Chains
authorization to sell Products in the Chains and information regarding the prices and
terms at which the Chains would be willing to purchase Products for their Outlets, and
SARA LEE FRESH will communicate the information concerning such authorizations,
prices and terms to DISTRIBUTOR. This appointment of SASRA LEE FRESH as
DISTRIBUTOR’S agent shall not prevent DISTRIBUTOR from having the right to
negotiate prices and terms directly with a Chain and selling Products to the Chain at
whatever prices and terms DISTRIBUTOR can negotiate. In addition, DISTRIBUTOR
shall have the option to revoke the designation of SARA LEE FRESH as
DISTRIBUTOR’S agent at any time on thirty (30) days notice. Nothing herein shall
require SARA LEE FRESH to pay slotting allowances or other similar fee charges
imposed by the Chains.”
          Defendants negotiated agreements with the chain stores concerning the prices of
defendants’ product sold to the chain stores by plaintiff. Plaintiff alleged that the
agreement required plaintiff to comply with the terms of the agreement reached between
defendants and the chain stores. This was at odds with the actual term of the distribution
agreement allowing plaintiff to negotiate the price. “For purposes of a demurrer, we
accept as true both facts alleged in the text of the complaint and facts appearing in
exhibits attached to it. If the facts appearing in the attached exhibit contradict those
expressly pleaded, those in the exhibit are given precedence.” (Mead v. Sanwa Bank
California (1998) 61 Cal.App.4th 561, 567-568.) Plaintiff also alleged, in effect, she was
required to comply with defendants’ price because she was provided computerized
devices that were preprogrammed with the prices fixed between defendants and the chain
stores.
          Plaintiff alleged in her 12th cause of action that defendants had violated the
Cartwright Act by fixing the price at which plaintiff sells defendants baked goods to the

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chain stores and by imposing territorial and customer restrictions on plaintiff. In her 15th
cause of action plaintiff alleged that defendants’ actions constitute an unfair business
practice in violation of the Unfair Competition Law. Plaintiff also alleged wage and
hour claims based on the theory she was an employee, but the trial court declined to
certify the employment-related claims for class treatment. The trial court sustained
without leave to amend demurrers to the 12th and 13th causes of action and granted the
motion to strike the 15th cause of action.
       Upon a petition for writ of mandate by three plaintiffs, this court issued an
alternative writ of mandate compelling the respondent trial court to vacate that portion of
its order sustaining defendants’ demurrer as to the 12th cause of action and granting the
defendants’ motion to strike the 15th cause of action or show cause why a peremptory
writ ordering it to do so should not issue. The trial court, after conferring with the parties
elected not to vacate its orders.1 Shortly before oral argument before this court, two of
the plaintiffs notified the court that they settled their case with defendants. Thus, we deal
only with plaintiff Sylvia Ingoglia’s claim.

                                       DISCUSSION

       A.     Standard of Review
       On an appeal from a court order sustaining a demurrer to a complaint, “[w]e give
the complaint a reasonable interpretation, reading it as a whole and its parts in their
context. [Citation.] Further, we treat the demurrer as admitting all material facts,
including those that may reasonably be implied or inferred, properly pleaded, but do not
assume the truth of contentions, deductions or conclusions of law. [Citations.] When a
demurrer is sustained, we determine whether the complaint states facts sufficient to
constitute a cause of action. [Citation.]” (City of Dinuba v. County of Tulare (2007) 41

1
       We deny defendants’ motion to supplement the record on appeal with material
arising after the order being reviewed.

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Cal.4th 859, 865.) If any one of multiple grounds supports the demurrer or the order
sustaining the demurrer is correct, even if on a ground not relied upon by the trial court,
we would uphold the trial court’s determination. (Aubry v. Tri-City Hospital Dist., supra,
2 Cal.4th at pp. 966-967; Saks v. Damon Raike & Co. (1992) 7 Cal.App.4th 419, 426.)
We review a ruling on a demurrer de novo. (Czajkowski v. Haskell & White, LLP (2012)
208 Cal.App.4th 166, 173.)

       B.     Price Fixing Not Alleged
       The distribution agreement with the remaining plaintiff expressly gives her the
right “to negotiate prices and terms directly with a Chain and selling Products to the
Chain at whatever prices and terms DISTRIBUTOR can negotiate.” This contradicts
plaintiff’s allegation that defendants control the prices that plaintiff charges chain stores
“by including provisions in the Distribution Agreements which require plaintiff and the
class members to comply with the terms of the agreements reached between defendants
and the Chain Stores.” Plaintiff further alleged, “and by using hand-held devices and
computer systems that are pre-programmed with the prices fixed between Defendants and
the Chain Stores.” But there is no allegation that those devices must be used, or how they
are used, or that the prices in them cannot be altered.
       Although the allegations may be applicable to other class members, they are not
applicable to the remaining plaintiff in this case. Thus, plaintiff has not alleged facts as
to her sufficient to state a cause of action for vertical price fixing in violation of the
Cartwright Act. Had the distribution agreements contained the provision alleged or there
were allegations that the agreements operated in such a way as to “limit[] the distributor’s
freedom to sell the supplier’s product at a price independently selected by the
distributor . . .” (Kunert v. Mission Financial Services Corp. (2003) 110 Cal.App.4th 242,
263), then a Cartwright Act violation might be stated. We also note that if there were
vertical price fixing, that would, under Mailand v. Burckle, supra, 20 Cal.3d 367, be a per
se violation under the Cartwright Act, notwithstanding a change of law under the
Sherman Antitrust Act, 15 U.S.C. section 1 et seq. (see Leegin Creative Leather

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Products, Inc. v. PSKS, Inc., supra, 551 U.S. 887). We are bound to follow the law set
forth by our Supreme Court applying state law. (Auto Equity Sales, Inc. v. Superior
Court (1962) 57 Cal.2d 450, 455.)
       Although granting the petition for writ of mandate, we remand the matter to the
trial court only to allow plaintiff the opportunity to amend or add a new class
representative to her fourth amended complaint. (See Cloud v. Northrop Grumman Corp.
(1998) 67 Cal.App.4th 995, 1004-1005.)

                                     DISPOSITION

       The petition for writ of mandate is granted and remanded with instructions to
sustain the demurrer as to the 12th and 15th causes of action with leave to amend. Costs
are not awarded.

                                                 MOSK, Acting P. J.

       We concur:

                     KRIEGLER, J.

                     KUMAR, J.

        Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to
article VI, section 6 of the California Constitution.

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