Court Opinion

ID: 4704916
Source: CourtListenerOpinion
Date Created: 2021-07-20 18:03:39.563098+00
Date Added: 2024-06-11T08:05:55.507677
License: Public Domain

Filed 7/20/21 Keeling v. Howroyd-Wright Employment Agency 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   NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                         SECOND APPELLATE DISTRICT

                                       DIVISION FOUR

 KAREN KEELING,                                                            B301851

           Plaintiff and Appellant,                                        (Los Angeles County
                                                                           Super. Ct. No. BC723763)
           v.

 HOWROYD-WRIGHT EMPLOYMENT
 AGENCY, INC.,

           Defendant and Respondent.

      APPEAL from a judgment of the Superior Court of
Los Angeles County, Randolph M. Hammock, Judge. Affirmed.
      The Community Law Group, Mark S. Smith for Plaintiff
and Appellant.
      K.P. Roberts & Associates, Kenneth P. Roberts, Ryan P.
Tish and Kevin Y. Kanooni for Defendant and Respondent.
                         INTRODUCTION
       During discovery for a prior employment discrimination
lawsuit, plaintiff Karen Keeling learned of “sham” documents
purportedly showing compensation owed to her but never paid.
She sued her employer, defendant Howroyd-Wright Employment
Agency, Inc., for fraud, failure to provide accurate wage
statements, and unfair business practices under California’s
unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et
seq.).1 The trial court sustained a series of demurrers filed by
Howroyd, ultimately dismissing all of Keeling’s claims without
leave to amend. On appeal, Keeling argues that she properly
pled a claim for violations of the UCL or, alternatively, any
deficiencies in the claim could be cured by amendment. We find
no error and therefore affirm.
           FACTUAL AND PROCEDURAL HISTORY
I.     Keeling’s Pleadings
       Keeling filed her complaint against Howroyd in October
2018, alleging nonpayment of wages. Howroyd demurred, the
court sustained the demurrer with leave to amend, and Keeling
filed a first amended complaint (FAC), alleging claims for fraud,
negligent misrepresentation, negligence, and failure to provide
an accurate wage statement. Howroyd demurred again, and the
court sustained the demurrer without leave to amend her claims,
but granted Keeling leave to amend to allege a new cause of
action under the UCL.
       Keeling filed the second amended complaint (SAC)—the
pleading at issue here—on June 26, 2019. She alleged a cause of
action for unfair and deceptive business practices under the UCL,

     1All further statutory references are to the Business and
Professions Code unless otherwise indicated.

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and realleged claims for fraud and failure to provide accurate
wage statements. The following facts are taken from the
allegations of the SAC.
       Keeling was hired by Howroyd as an office coordinator in
May 1999. After three years, she was “given the duties of an
Account Executive, and ultimately promoted to Senior Account
Executive.” She remained an active employee until she took
disability leave in May 2014 for “stress and carpal tunnel
syndrome.” Keeling’s initial salary was $2,080 per month; as of
May 2014, “her salary had increased to $3,700 per month.”
       Keeling filed her first lawsuit against Howroyd in
December 2015, alleging workplace discrimination, harassment,
and retaliation. During her 2017 deposition for that lawsuit, she
“was asked whether she acknowledged receiving certain raises to
her salary and commission based on performance or promotions.”
During this questioning, Keeling was shown a series of
documents for the first time called Performance Standard
Change Forms (PSCs). These PSCs “reflected raises that
Plaintiff was unaware of.” Specifically, Keeling alleged the
existence of four PSCs, dated between 2004 and 2012, reflecting
raises to Keeling’s salary and an “increased commission structure
for recruiting permanent employees.” The ending salary reflected
on the latest newly-discovered PSC was $3,333.33.
       According to Keeling, “[p]rior to receiving any raise, a PSC
must be presented to both the employee and his or her immediate
supervisor for review, signing, and dating.” The PSCs at issue,
however, contained signatures by Howroyd managers, but no
signatures by Keeling or her supervisor. Keeling further alleged
that she “never received the money that she earned according to
the PSCs,” including commissions she purportedly earned. She

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first learned of the existence of these PSCs at her 2017
deposition.
       Keeling retained a financial expert who “conducted a
forensic examination of Plaintiff and Defendants’ employment
compensation records and the PSCs.” Based on these records,
which included Keeling’s W-2s, check stubs, and reported Social
Security wage records, the expert determined that Keeling “was
shorted at least $58,000.00 in unpaid employment
compensation.” In addition, Keeling’s investigation determined
that Howroyd was “creating these fake PSCs to generate more
funds in their coffers to pay supervisors and managers
performance and tenure bonuses. This process was given the
internal name of ‘Transaction 27.’”
       In her UCL claim, Keeling alleged that Howroyd engaged
in “unlawful, unfair, fraudulent, misleading, untrue or deceptive
business acts or practices designed to induce Plaintiff to continue
as an employee of Defendant, while depriving her of her
proportionate share of salary and commissions as documented on
the PSCs, while Plaintiff’s salary and commissions were being
redirected to pay supervisors and managers performance and
tenure bonuses under the internal name of ‘Transaction 27.’” She
claimed that she suffered damages of $58,000 as a result of
Howroyd’s “unfair and deceptive business practices.”
II.    Demurrer to the SAC
       Howroyd demurred to the SAC. It argued that Keeling
failed to state facts to support any cause of action. (See Code Civ.
Proc. § 430.10, subd. (e).) Specifically, Howroyd contended that
Keeling could not bring a UCL cause of action based on a claim
for unpaid compensation, because she “admitted she was not
entitled” to any unpaid wages when she alleged that the PSCs

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were a sham. Howroyd also noted that the court previously
sustained the demurrer to the second and third causes of action
without leave to amend, and argued that Keeling could not
predicate her UCL claim on these invalid causes of action.
Howroyd also urged the court to deny further leave to amend,
arguing that Keeling had repeatedly amended her complaint by
alleging the same facts, despite the trial court’s finding that she
had failed to show she was entitled to any unpaid compensation.
       Keeling opposed the demurrer, arguing that she had
adequately alleged unfair and fraudulent practices under the
UCL and that her claim was sufficient “even if no one was
actually deceived, relied upon the fraudulent practice, or
sustained any damage.” She also stated that she had realleged
the other two claims because the UCL “requires a legal basis for
its usage.” She requested leave to amend if the court sustained
the demurrer, but did not state how she would amend the
complaint to cure any defects.
       In her accompanying declaration, Keeling stated that
Howroyd used these PSCs “four times to siphon money that
should have been given to me had I seen the PSC’s and signed
them. These PSC’s were instead used to compensate and
provide[ ] bonuses to managers of [Howroyd]. While all the while
attributed to me in the Defendant’s books although I never
received it!” She also acknowledged that she testified in her
deposition for the prior lawsuit that “I didn’t get the money
indicated on the fraudulent PSCs and that I was not entitled to
it, however, this was before I discovered Defendant’s unfair
business practices.” She stated that if she had she “known then
what I subsequently found out [from her expert’s audit], my
response would have been totally different.” Keeling attached

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excerpts from her deposition transcript and several PSCs as
exhibits.2
III. Hearing and Ruling on Demurrer
       At the demurrer hearing on September 18, 2019, the court
indicated it was tentatively inclined to sustain the demurrer as to
the remaining UCL claim, because Keeling was “bootstrapping”
her claim to her other causes of action, but “the analysis is going
to be the same,” and Keeling had “no viable theory at this point
for 17200.” The court observed to Keeling’s counsel that “if you
could allege that [Howroyd] did not give her money to which she
is entitled or they stole it from her and paid themselves healthier
bonuses, if you could allege that and/or prove it, you could also
have a cause of action for 17200.” But the court found that
Keeling’s allegations failed to support any right to the money
listed on the PSCs.
       In its written ruling, the court sustained the demurrer as to
all causes of action without leave to amend. First, the court
addressed the two non-UCL causes of action Keeling had
realleged. The court noted that it had previously sustained the
demurrer to the FAC without leave to amend as to both the fraud
and wage statement claims, only granting plaintiff leave to allege
a new cause of action under the UCL. The court reaffirmed its
dismissal of the fraud and wage statements claims, citing
Keeling’s continued allegations that the PSCs were invalid
because they were never presented to her or signed. Thus,
because Keeling “has not alleged the existence of any valid PSC

      2Neither party requested judicial notice of these exhibits
and the trial court expressly declined to consider them in ruling
on the demurrer. We likewise decline to consider Keeling’s
declaration or attached exhibits for the purposes of this appeal.

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showing that she was entitled to additional compensation,” she
“cannot allege damages flowing from concealing invalid PSCs
from her.”
       Turning to the UCL cause of action, the court found that
Keeling was “attempting to ‘borrow’ the law governing fraud and
failure to provide accurate wage statements as the basis for her §
17200 claim. . . . Where a plaintiff cannot state a claim under the
‘borrowed’ law, however, she cannot state a UCL claim either.”
Thus, because Keeling “has not shown that she can successfully
allege a violation of law” by Howroyd, “she cannot successfully
allege a violation of § 17200.” The court denied leave to amend,
finding that the SAC “does not contain allegations that suggest
Plaintiff would be able to successfully amend this cause of
action.”
       The court entered judgment in favor of Howroyd on October
21, 2019. Keeling timely appealed.
                           DISCUSSION
       On appeal, Keeling challenges only the court’s dismissal of
her UCL claim, contending that she adequately alleged a claim
for relief under the UCL. She further argues that even if the
claim was deficient, the trial court erred in denying her leave to
amend to cure those deficiencies. We find no error in either
respect.
I.     Legal Standards
       A demurrer tests the legal sufficiency of factual allegations
in a complaint. (Title Ins. Co. v. Comerica Bank–California
(1994) 27 Cal.App.4th 800, 807; Code Civ. Proc. § 430.10, subd.
(e).) We review de novo the dismissal of a civil action after a
demurrer is sustained without leave to amend. (Cantu v.
Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 879 (Cantu).)

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In doing so, “we determine whether the complaint states facts
sufficient to constitute a cause of action.” (Blank v. Kirwan
(1985) 39 Cal.3d 311, 318.) “‘We treat the demurrer as admitting
all material facts properly pleaded, but not contentions,
deductions or conclusions of fact or law.’” (Ibid.) “Further, we
give the complaint a reasonable interpretation, reading it as a
whole and its parts in their context.” (Ibid.)
       On appeal, a plaintiff bears the burden of demonstrating
that the trial court erroneously sustained the demurrer as a
matter of law. (Rakestraw v. California Physicians’ Service
(2000) 81 Cal.App.4th 39, 43.) To establish that a cause of action
has been adequately pled, a plaintiff must demonstrate he or she
has alleged “facts sufficient to establish every element of that
cause of action. [Citation.]” (Cantu, supra, 4 Cal.App.4th at pp.
879–880.) If the complaint fails to plead any essential element of
a cause of action, this court should affirm the sustaining of a
demurrer. (Ibid.)
       We review an order denying leave to amend for an abuse of
discretion. It is an abuse of discretion to sustain a demurrer
without leave to amend if there is “a reasonable possibility that
the defect can be cured by amendment.” (Blank v. Kirwan, supra,
39 Cal.3d at p. 318.) “However, the burden is on the plaintiff to
demonstrate that the trial court abused its discretion. Plaintiff
must show in what manner he [or she] can amend [the] complaint
and how that amendment will change the legal effect of [the]
pleading.’” (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349; see
also Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-
967.)
II.    Sufficiency of the UCL Claim
       Keeling contends that she adequately alleged a claim for

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relief under the UCL, based on Howroyd’s “unlawful, fraudulent,
and/or deceptive business practices.” Howroyd responds that
Keeling lacks standing to bring a UCL claim because she did not
allege any injury or damages she suffered as a result of
Howroyd’s alleged misconduct. We agree that Keeling has not
adequately alleged standing under the UCL.
        The UCL prohibits “unfair competition,” including “any
unlawful, unfair or fraudulent business act or practice and
unfair, deceptive, untrue or misleading advertising.” (§ 17200.)
“The UCL’s purpose is to protect both consumers and competitors
by promoting fair competition in commercial markets for goods
and services.” (Kasky v. Nike, Inc. (2002) 27 Cal.4th 939, 949; see
also Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 320
(Kwikset).)
        The UCL previously authorized “any person acting for the
interests of . . . the general public” to sue for relief for unfair
competition, notwithstanding lack of injury or damages. (Former
§ 17204; see also Californians for Disability Rights v. Mervyn’s,
LLC (2006) 39 Cal.4th 223, 227 (Mervyn’s).) Proposition 64,
approved by the voters in 2004, amended section 17204 and
“changed the standing requirements for a UCL claim to create a
two-pronged test: A private person now has standing to assert a
UCL claim only if he or she (1) ‘has suffered injury in fact,’ and
(2) ‘has lost money or property as a result of such unfair
competition.’” (Hall v. Time Inc. (2008) 158 Cal.App.4th 847, 852,
citing § 17204; see also Mervyn’s, supra, 39 Cal.4th at p. 227-228.)
Thus, “[t]o satisfy the narrower standing requirements imposed
by Proposition 64, a party must now (1) establish a loss or
deprivation of money or property sufficient to qualify as injury in
fact, i.e., economic injury, and (2) show that that economic injury

                                9
was the result of, i.e., caused by, the unfair business practice or
false advertising that is the gravamen of the claim.” (Kwikset,
supra, 51 Cal.4th at p. 322 (emphasis in original).)
       In her opening brief, Keeling ignored the narrowed
standing requirements following the passage of Proposition 64,
arguing that she had a right to relief under the UCL “without
individualized proof of deception, reliance, and injury.” Tellingly,
she cited cases pre-dating the amendment to the statute to
support this contention. (See, e.g., Bank of the West v. Superior
Court (1992) 2 Cal.4th 1254, 1266-1267; State Farm Fire &
Casualty Co. v. Superior Court (1996) 45 Cal.App.4th 1093,
1105.) In her reply, she concedes that under the amended
statute, a plaintiff alleging a UCL claim “must satisfy its burden
of demonstrating standing by alleging facts showing that she
suffered an economic injury in fact as a result of the alleged
violation,” citing Kwikset, supra, 51 Cal.4th at pp. 322, 326. She
argues, however, that she “suffered economic loss in unpaid
compensation in the amount of at least $58,000, which she
rightfully earned as commissions and/or bonuses.”
       We are not persuaded. In order to suffer an injury in fact, a
plaintiff may: “(1) surrender in a transaction more, or acquire in
a transaction less, than he or she otherwise would have; (2) have
a present or future property interest diminished; (3) be deprived
of money or property to which he or she has a cognizable claim; or
(4) be required to enter into a transaction, costing money or
property, that would otherwise have been unnecessary.”
(Kwikset, supra, 51 Cal.4th at p. 323, citing Hall v. Time Inc.,
supra, 158 Cal.App.4th at pp. 853–854 [injury in fact may not be
“conjectural” or “hypothetical”; injury occurs when the plaintiff
expends money, loses money or property, or is denied money to

                                10
which it has cognizable claim]; see also Drum v. San Fernando
Valley Bar Assn. (2010) 182 Cal.App.4th 247, 252.) Here, the
facts Keeling alleged in the SAC do not support her claim that
she was entitled to compensation that was not paid. As alleged
in the SAC, her claim to unpaid compensation is based entirely
on the PSCs. However, the PSCs do not establish a right to such
compensation, because Keeling alleged that the documents were
a “sham,” fabricated as part of some greater scheme by Howroyd
to hide compensation given to supervisors and managers. She
further alleged that the PSCs were invalid because they were
missing the requisite signatures. Therefore, Keeling has not
alleged any facts supporting a claim that these invalid PSCs
establish that she had a legitimate right to compensation.
       Moreover, because Keeling claims that she was not aware
of the existence of these PSCs until her 2017 deposition, she
cannot allege that she relied on them or was misled.
Consequently, she cannot establish that the PSCs caused injury
to her. Keeling has therefore failed to allege standing to bring a
claim under the UCL.3
III. Leave to Amend
       Keeling also contends that the trial court erred in denying
leave to amend her UCL claim because “any perceived defects in

      3I n light of Keeling’s failure to allege facts to support
standing, we need not reach her argument that she could allege a
UCL claim based on any unfair conduct, and thus that the trial
court erred by finding she was merely “borrowing” the law from
her other dismissed claims. (See, e.g., Cel-Tech Communications,
Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163,
180 [“a practice may be deemed unfair even if not specifically
proscribed by some other law”].)

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the second amended complaint can be cured by amendment.”
However, Keeling fails to identify any facts she would allege that
could give rise to a viable UCL claim. In her reply brief, Keeling
suggests she could “offer additional facts into Howroyd’s
fraudulent business practices.” But as with the current
allegations of the SAC, such purported facts would not establish
that Keeling had a right to any unpaid compensation by Howroyd
or acted in reliance on any such fraudulent practices; thus, these
facts would not aid Keeling in showing that she was injured as a
result of Howroyd’s alleged practices.
      Keeling has not met her burden to show that the trial court
abused its discretion in denying leave to amend the complaint, as
she has failed to demonstrate a reasonable possibility that she
could cure the deficiencies in her UCL claim by amendment. (See
Blank v. Kirwan, supra, 39 Cal.3d at p. 318.)
                           DISPOSITION
      The judgment is affirmed. Respondent is awarded its costs
on appeal.
  NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

                          COLLINS, J.

We concur:

WILLHITE, ACTING P.J.

CURREY, J.

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