Court Opinion

ID: 4683937
Source: CourtListenerOpinion
Date Created: 2021-05-04 21:04:14.62499+00
Date Added: 2024-06-11T09:02:22.908886
License: Public Domain

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   NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115.

          IN THE COURT OF APPEAL OF THE STATE OF
                        CALIFORNIA

                          SECOND APPELLATE DISTRICT

                                            DIVISION FOUR

JUSTIN EVERHART et al.,                                                        B303591

           Plaintiffs and Appellants,                                          (Los Angeles County
                                                                               Super. Ct. No. 18STCV07650)
           v.

TRAPAC, LLC,

           Defendant and Respondent.

     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.
     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.

                                2
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.

                               3
          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.

                               4
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,

                               5
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

                              6
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

                              7
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

                              8
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

                              9
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.”

                             10
     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.

                              11
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.

                              12
                  (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.)

                               13
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.

                              14
        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,

                              15
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

                               16
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).

                               17
[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.

                              18
            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.,

                              19
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.)

                                       20
      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.

                                21
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

                              22
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.

                               23
     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

                               24
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.

                               25
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

                              26
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

                             27
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

                             28
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.)

                                       29
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”].)

                                30
      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.

                              31
      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

                             32
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.

                                33
                        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.

                             34