Lazar v. Superior Court, RYKOFF-SEXTO

CourtUnited States State Supreme Court (California)
Writing for the CourtWERDEGAR; LUCAS; MOSK; KENNARD
Citation909 P.2d 981,12 Cal.4th 631,49 Cal.Rptr.2d 377
Parties, 909 P.2d 981, 64 USLW 2544, 131 Lab.Cas. P 58,085, 61 Cal. Comp. Cases 34, 11 IER Cases 545 Andrew LAZAR, Petitioner, v. The SUPERIOR COURT of Los Angeles County, Respondent;, Real Party in Interest.
Decision Date29 January 1996
Docket NumberRYKOFF-SEXTO,INC,No. S044234

Page 377

49 Cal.Rptr.2d 377
12 Cal.4th 631, 909 P.2d 981, 64 USLW 2544,
131 Lab.Cas. P 58,085, 61 Cal. Comp. Cases 34,
11 IER Cases 545
Andrew LAZAR, Petitioner,
v.
The SUPERIOR COURT of Los Angeles County, Respondent;
RYKOFF-SEXTON, INC., Real Party in Interest.
No. S044234.
Supreme Court of California.
Jan. 29, 1996.

Page 378

[12 Cal.4th 634] [909 P.2d 982] Ross & Morrison, Gary B. Ross, Andrew D. Morrison, Schulman & Miller, Barry A. Schulman and Jerry Miller, Beverly Hills, for petitioner.

William G. Hoerger, San Francisco, Luis Jaramillo, Salinas, Joseph Posner, Encino, Quackenbush & Quackenbush and William C. Quackenbush, San Mateo, as amici curiae on behalf of petitioner.

No appearance for respondent.

Gibson, Dunn & Crutcher, Martin C. Washton and Jeffrey F. Webb, Los Angeles, for real party in interest.

Musick, Peeler & Garrett, Richard J. Simmons, Michael G. Morgan, Los Angeles, Morrison & Foerster, Kirby Wilcox and James E. Boddy, Jr., San Francisco, as amici curiae on behalf of real party in interest.

WERDEGAR, Justice.

We granted review in this matter to clarify, following our decisions in Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 254 [12 Cal.4th 635] Cal.Rptr. 211, 765 P.2d 373 (Foley ) and Hunter v. Up-Right, Inc. (1993) 6 Cal.4th 1174, 26 Cal.Rptr.2d 8, 864 P.2d 88 (Hunter ), whether or under what circumstances a

Page 379

plaintiff may state a cause of action for [909 P.2d 983] fraudulent inducement of employment contract. The Court of Appeal concluded the allegations of the plaintiff in this case are adequate to state such a cause of action. For the reasons that follow, we agree. Accordingly, we affirm the judgment of the Court of Appeal.

I. Background

Because this matter comes to us after the trial court sustained the defendant's demurrer, "we must, under established principles, assume the truth of all properly pleaded material allegations of the complaint in evaluating the validity" of the decision below. (Tameny v. Atlantic Richfield Co. (1980) 27 Cal.3d 167, 170, 164 Cal.Rptr. 839, 610 P.2d 1330; see also Alcorn v. Anbro Engineering, Inc. (1970) 2 Cal.3d 493, 496, 86 Cal.Rptr. 88, 468 P.2d 216.)

Andrew Lazar alleged as follows:

Lazar was born in New York in 1950. He lived and worked in Long Island, New York until 1990. From 1972 to 1990, he was employed with a family-owned restaurant equipment company. As of 1990, he was president of the company, earning $120,000 annually and living in New York with his wife of 21 years and his two children, ages 17 and 15.

In September 1989, a vice-president of real party in interest Rykoff-Sexton, Inc. (Rykoff or defendant) contacted Lazar and tried to persuade him to come to work in Los Angeles as Rykoff's West Coast general manager for contract design. Rykoff, through its vice-president and, later, through its president and its chief executive officer, intensively recruited Lazar through February 1990. For recruitment purposes, Rykoff brought Lazar and his wife to Los Angeles to visit Rykoff's offices, to visit realtors and to see the city.

During this recruitment process, Lazar told Rykoff he was concerned about relocating to Los Angeles, as the move would entail relinquishing a secure job as president of the family company where he had worked all his adult life, separating his children from their friends at an important time of their lives and leaving his home of 40 years. As a condition of agreeing to relocate, Lazar required Rykoff's assurance that his job would be secure and would involve significant pay increases.

In response to Lazar's concerns, Rykoff made representations to Lazar that led him to believe he would continue to be employed by Rykoff so long [12 Cal.4th 636] as he performed his job and achieved goals. Rykoff represented that Lazar would enjoy continued advancement within the organization, would be welcomed as part of the Rykoff "family" and, as a Rykoff employee, would enjoy security and a strong future. Rykoff represented that Lazar would have a long-term relationship with the company. Additionally, Rykoff implied the current head of the department in which Lazar would work had plans to retire and Lazar would be groomed to assume that position.

Rykoff further represented that the company was very strong financially and anticipated solid growth and a stable, profitable future. In particular, Rykoff represented that the department in which Lazar would work was a growth division within the company and that Rykoff had plans to expand it. Rykoff also stated Rykoff would pay Lazar $130,000 annually to start and, if Lazar performed his job, his yearly income would quickly rise to $150,000. Rykoff told Lazar he would receive annual reviews and raises accordingly.

Lazar asked for a written employment contract, but was refused. Rykoff stated a written contract was unnecessary because "our word is our bond." In or about February 1990, Lazar accepted Rykoff's offer of employment on terms including the foregoing.

Rykoff's representations to Lazar regarding the terms on which he would be retained, Rykoff's financial health and Lazar's potential compensation were false and, when making them, Rykoff's agents knew they were false. Rykoff had in the immediately preceding period experienced its worst economic performance in recent history, and the company's financial outlook was pessimistic. In fact, Rykoff was planning an operational merger that would eliminate Lazar's position. Rykoff had no intention of retaining Lazar so long as he performed adequately. Instead, Rykoff secretly intended to treat Lazar as if

Page 380

[909 P.2d 984] he were an "at will" employee, subject to termination without cause. Rykoff knew the promised compensation increases would not be given, as company policy limited annual increases to 2 to 3 percent.

Based on Rykoff's representations, Lazar resigned his New York position and, in May 1990, commenced employment at Rykoff. The following month, Lazar bought a home in California and moved his family there.

Lazar performed his job at Rykoff in an exemplary manner. He obtained sales increases in his assigned region, and soon after he commenced employment his West Coast region achieved its sales budget for the first time. Lazar accomplished continued improvement in sales and lowered overall operating costs within his department.

In April 1992, Rykoff failed to pay Lazar certain bonus compensation to which he had become entitled under a company incentive program. Subsequently, in July, Lazar was terminated. Rykoff told Lazar his job was being [12 Cal.4th 637] eliminated owing to management reorganization. A Rykoff vice-president told Lazar his termination was not performance related and was for cause.

The Rykoff vice-president further stated Lazar could leave the company with dignity by tendering a letter of resignation and by keeping his regular status (and all the appearances of job stability) for three months so that he could better search for a new job. In fact, Lazar was given a desk in Rykoff's warehouse, where noise from forklifts made use of the telephone an absurdity. The fact Lazar was leaving Rykoff was not maintained as a secret and became common knowledge. Lazar has been unable to find comparable employment.

As a consequence of Rykoff's conduct and Lazar's reliance on Rykoff's representations, Lazar lost past and future income and employment benefits. He lost contact with the New York employment market so that reemployment there is difficult or impossible. Lazar is burdened with payments on Southern California real estate he can no longer afford. Lazar and his family have experienced emotional distress, with both psychological and physical manifestations.

Lazar further alleged Rykoff acted with oppression, fraud, or malice within the meaning of Civil Code section 3294.

Based on these allegations, Lazar set forth causes of action for: (1) violation of Labor Code section 970 (false representations to induce relocation), (2) wrongful termination in violation of public policy, (3) fraud and deceit, (4) negligent misrepresentation, (5) breach of contract, (6) promissory estoppel, (7) intentional infliction of emotional distress, and (8) negligent infliction of emotional distress.

Rykoff demurred to all causes of action except the Labor Code and breach of contract claims. The trial court sustained Rykoff's demurrer in its entirety without leave to amend, leaving Lazar with only the Labor Code section 970 and breach of contract causes of action. Lazar unsuccessfully sought reconsideration, then a writ of mandate. (Lazar did not seek review of the trial court's sustaining of Rykoff's demurrer to his cause of action for promissory estoppel.)

The Court of Appeal issued a writ of mandate directing the superior court to vacate its order, insofar as it sustained Rykoff's demurrers to Lazar's causes of action for wrongful termination in violation of public policy, fraud and deceit, negligent misrepresentation, and intentional infliction of emotional distress, and to enter a new order overruling the demurrers to those causes of action.

[12 Cal.4th 638] We granted Rykoff's petition for review. Subsequently, we specified that the issues to be argued would be limited to whether, or under what circumstances, a plaintiff may state a cause of action for fraudulent inducement of employment contract. (Cal.Rules of Court, rule 29.2(b).)

II. Discussion

A. Promissory fraud

"The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or 'scienter'); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage." (5 Witkin, Summary of Cal.Law (9th ed. 1988) Torts,[909 P.2d 985]

Page 381

§ 676, p. 778; see also Civ.Code, § 1709; Hunter, supra, 6 Cal.4th 1174, 1184, 26 Cal.Rptr.2d 8, 864 P.2d 88; Molko v. Holy Spirit Assn. (1988) 46...

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  • Grant v. Aurora Loan Serv., Inc., Case No. CV 09-08174 MM(CTx)
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Central District of California
    • September 10, 2010
    ...is made without such intention, there is an implied misrepresentation of fact that may be actionable fraud." Lazar v. Superior Court, 12 Cal.4th 631, 638, 49 Cal.Rptr.2d 377, 909 P.2d 981 (1996). To plead promissory fraud, a plaintiff must plead the same elements as he would if asserting a ......
  • Survine v. Cottle, CASE NO. CV F 12-1453 LJO JLT
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Eastern District of California
    • January 8, 2013
    ...(3) intent to defraud, i.e.,Page 18to induce reliance; (4) justifiable reliance; and (5) resulting damage. Lazar v. Superior Court, 12 Cal.4th 631, 638, 49 Cal.Rptr.2d 377 (1996). The same elements comprise a cause of action for negligent misrepresentation, except there is no requirement of......
  • Ayon v. JPMorgan Chase Bank, N.A., CASE NO. CV F 12-0355 LJO SKO
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Eastern District of California
    • April 9, 2012
    ...(3) intent to defraud, i.e., to induce reliance; (4) justifiable reliance; and (5) resulting damage. Lazar v. Superior Court, 12 Cal.4th 631, 638, 49 Cal.Rptr.2d 377 (1996). The same elements comprise a cause of action for negligent misrepresentation, except there is no requirement of inten......
  • Yamauchi v. Cotterman, No. C–14–1378 EMC
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Northern District of California
    • March 24, 2015
    ...for a claim of fraud are the same. In re Estate of Young, 160 Cal.App.4th 62, 79, 72 Cal.Rptr.3d 520 (2008) (quoting Lazar v.Super. Ct., 12 Cal.4th 631, 638, 49 Cal.Rptr.2d 377, 909 P.2d 981 (1996) ). Under Rule 9(b), “[i]n alleging fraud or mistake, a party must state with particularity th......
  • Request a trial to view additional results
1433 cases
  • Grant v. Aurora Loan Serv., Inc., Case No. CV 09-08174 MM(CTx)
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Central District of California
    • September 10, 2010
    ...is made without such intention, there is an implied misrepresentation of fact that may be actionable fraud." Lazar v. Superior Court, 12 Cal.4th 631, 638, 49 Cal.Rptr.2d 377, 909 P.2d 981 (1996). To plead promissory fraud, a plaintiff must plead the same elements as he would if asserting a ......
  • Survine v. Cottle, CASE NO. CV F 12-1453 LJO JLT
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Eastern District of California
    • January 8, 2013
    ...(3) intent to defraud, i.e.,Page 18to induce reliance; (4) justifiable reliance; and (5) resulting damage. Lazar v. Superior Court, 12 Cal.4th 631, 638, 49 Cal.Rptr.2d 377 (1996). The same elements comprise a cause of action for negligent misrepresentation, except there is no requirement of......
  • Ayon v. JPMorgan Chase Bank, N.A., CASE NO. CV F 12-0355 LJO SKO
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Eastern District of California
    • April 9, 2012
    ...(3) intent to defraud, i.e., to induce reliance; (4) justifiable reliance; and (5) resulting damage. Lazar v. Superior Court, 12 Cal.4th 631, 638, 49 Cal.Rptr.2d 377 (1996). The same elements comprise a cause of action for negligent misrepresentation, except there is no requirement of inten......
  • Yamauchi v. Cotterman, No. C–14–1378 EMC
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Northern District of California
    • March 24, 2015
    ...for a claim of fraud are the same. In re Estate of Young, 160 Cal.App.4th 62, 79, 72 Cal.Rptr.3d 520 (2008) (quoting Lazar v.Super. Ct., 12 Cal.4th 631, 638, 49 Cal.Rptr.2d 377, 909 P.2d 981 (1996) ). Under Rule 9(b), “[i]n alleging fraud or mistake, a party must state with particularity th......
  • Request a trial to view additional results

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