Service by Medallion, Inc. v. Clorox Co.

• Decision Date: 06 May 1996
• Docket Number: No. H013857,H013857
• Citation: 44 Cal.App.4th 1807,52 Cal.Rptr.2d 650
• Parties: , 152 L.R.R.M. (BNA) 2500, 96 Daily Journal D.A.R. 5260 SERVICE BY MEDALLION, INC., Plaintiff and Appellant, v. CLOROX COMPANY, Defendant and Respondent.
• Court: California Court of Appeals Court of Appeals

Page 650

52 Cal.Rptr.2d 650

44 Cal.App.4th 1807, 152 L.R.R.M. (BNA) 2500,

96 Daily Journal D.A.R. 5260

SERVICE BY MEDALLION, INC., Plaintiff and Appellant, v. CLOROX COMPANY, Defendant and Respondent.

No. H013857.

Court of Appeal, Sixth District, California.

May 6, 1996.

Rehearing Denied June 3, 1996.

Review Denied July 17, 1996.

Thierman Law Firm, Mark R. Thierman and Robert Fried, San Francisco, for Appellant.

Fitzgerald, Abbott & Beardsley, Beth E. Aspedon, Philip E. Drysdale, and Michael S. Ward, Oakland, for Respondent.

ELIA, Associate Justice.

Service By Medallion, Inc. ("Medallion") appeals from a judgment dismissing its complaint without leave to amend, following an order sustaining the demurrer of defendant Clorox Company. Medallion contends (1) the trial court erred in ruling that the action was preempted by the National Labor Relations Act ("NLRA"), 29 United States Code sections 157 and 158, and (2) the third amended complaint adequately stated a cause of action for fraudulent inducement of a contractual relationship. We agree with Medallion's first contention, but hold nonetheless that the complaint was fatally defective. Accordingly, we will affirm the judgment of dismissal.

Scope of Review

A general demurrer presents the same question to the appellate court as to the trial court--namely, whether the plaintiff has alleged sufficient facts in the complaint to justify relief on any legal theory. (B & P Development Corp. v. City of Saratoga (1986) 185 Cal.App.3d 949, 953, 230 Cal.Rptr. 192.) The reviewing court "gives the complaint a reasonable interpretation, and treats the demurrer as admitting all material facts properly pleaded. [Citations.] The court does not, however, assume the truth of contentions, deductions or conclusions of law. [Citation.] The judgment must be affirmed 'if any one of the several grounds of demurrer is well taken. [Citations.]' [Citation.] However, it is error for a trial court to sustain a demurrer when the plaintiff has stated a cause of action under any possible legal theory. [Citation.] And it is an abuse of discretion to sustain a demurrer without leave to amend if the plaintiff shows there is a reasonable possibility any defect identified by the defendant can be cured by amendment. [Citation.]" (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967, 9 Cal.Rptr.2d 92, 831 P.2d 317.) In addition, whether an action is preempted by federal law is a question the appellate court reviews de novo. (Hillhaven Oakland Nursing etc. Center v. Health Care Workers Union (1996) 41 Cal.App.4th 846, 853, 49 Cal.Rptr.2d 11.)

In light of these principles, we recite the material allegations of the third amended complaint, treating them as true for the purpose of determining whether they are sufficient to withstand demurrer. Medallion alleged that prior to April 1992 Clorox had used the janitorial services of a company that was bound by a collective bargaining agreement with the Service Employees International Union. In April 1992, Clorox made certain representations to Medallion, summarized in paragraph 6 of the complaint: "CLOROX represented to [Medallion] that it wanted to terminate its union contractor and replace them [sic ] with a non-union contractor with the goal of having all future janitorial services at the Clorox Pleasanton facility performed by non-union personnel. CLOROX represented that the union would not be permitted at any time to dictate or influence which company CLOROX chose to perform janitorial services at its Pleasanton facility and whether it was union or non-union. CLOROX further represented that CLOROX was committed to all steps necessary to ensure that janitorial services could be performed and provided on an ongoing basis by a non-union contractor at the Pleasanton facility without regard to union pressure. CLOROX specifically represented that this commitment included setting up and support of a 'dual gate' system and any other measures authorized and available to employers under the National Labor Relations Act and in the state and federal courts, to permit work by a non-union contractor under picketing and leafleting conditions, or other tactics of a union campaign. CLOROX specifically represented that the foregoing representations were a condition of contract negotiations with the non-union contractors, including [Medallion], bidding to perform cleaning services at the Clorox Pleasanton facility."

The complaint further alleged that Clorox made these representations to induce Medallion to submit a bid and enter into a contract. Medallion relied on Clorox's representations by submitting a bid and thereafter entering into a two-year contract. Clorox, however, knew its statements were false or had no reasonable ground to believe they were true, and it did not intend to perform its promises.

The third amended complaint asserted a single cause of action, for fraudulent inducement to enter into a contract. Clorox had successfully demurred to three earlier versions of the complaint, which had attempted to state claims based on the parties' contract in addition to tort claims for fraud. On these previous occasions the trial court had granted leave to amend.

In response to the third amended complaint, Clorox again demurred, contending (1) the action was preempted by the NLRA, 29 United States Code sections 157 and 158, and (2) the complaint failed to state facts sufficient to constitute a cause of action for fraudulent inducement to enter into a contract. (Code Civ. Proc., § 430.10, subd. (e).) The trial court sustained the demurrer without leave to amend on the ground that "[the] NLRA preempts this matter." This appeal followed.

Discussion

1. NLRA Preemption

Medallion first challenges the trial court's determination that its action against Clorox was preempted by the NLRA, 29 United States Code sections 157 and 158. Medallion contends that the issue before the court, whether Medallion was fraudulently induced to enter into the contract with Clorox, was not preempted because it could be independently resolved without interfering with the administration of national labor policy. We agree.

In addressing a claim of preemption the court must determine whether the conduct at issue was arguably protected or arguably prohibited by section 7 or section 8 of the NLRA. (San Diego Union v. Garmon (1959) 359 U.S. 236, 245, 79 S.Ct. 773, 779-780, 3 L.Ed.2d 775.) If so, then the state court ordinarily has no power to adjudicate it and must defer to the exclusive jurisdiction of the National Labor Relations Board (NLRB). On the other hand, when the challenged activity is a "merely peripheral concern" of the NLRA, it will not be inferred that Congress intended to deprive states of the power to act. (Id. at p. 243, 79 S.Ct. at pp. 778-779.) Likewise, states may regulate conduct that "touches on interests so deeply rooted in local feeling and responsibility that, in the absence of compelling congressional direction, it could not be inferred that Congress intended to deprive the State of the power to act." (Operating Engineers v. Jones (1983) 460 U.S. 669, 676, 103 S.Ct. 1453, 1459, 75 L.Ed.2d 368; San Diego Union v. Garmon, supra, 359 U.S. at p. 244, 79 S.Ct. at p. 779.)

The United States Supreme Court has refused to apply the doctrine of Garmon preemption in a mechanical, inflexible fashion, particularly where the state has a "substantial interest in regulation of the conduct at issue and the State's interest is one that does not threaten undue interference with the federal regulatory scheme." (Farmer v. Carpenters (1977) 430 U.S. 290, 302, 97 S.Ct. 1056, 1064, 51 L.Ed.2d 338; Sears, Roebuck & Co. v. Carpenters (1978) 436 U.S. 180, 188, 98 S.Ct. 1745, 1752-1753, 56 L.Ed.2d 209.) "The precondition for pre-emption, that the conduct be 'arguably' protected or prohibited, is not without substance. It is not satisfied by a conclusory assertion of pre-emption.... If the word 'arguably' is to mean anything, it must mean that the party claiming pre-emption is required to demonstrate that his case is one that the [National Labor Relations] Board could legally decide in his favor." (Longshoremen v. Davis (1986) 476 U.S. 380, 394-395, 106 S.Ct. 1904, 1914, 90 L.Ed.2d 389.) In considering the "arguably prohibited" facet of the preemption doctrine, the focus of the inquiry is "not whether the State is enforcing a law relating specifically to labor relations or one of general application but whether the controversy presented to the state court is identical to ... or different from ... that which could have been but was not, presented to the Labor Board. For it is only in the former situation that a state court's exercise of jurisdiction necessarily involves a risk of interference with the unfair labor practice jurisdiction of the Board which the arguably prohibited branch of the Garmon doctrine was designed to avoid." (Sears, Roebuck & Co. v. Carpenters, supra, 436 U.S. at p. 197, 98 S.Ct. at p. 1757, emphasis added.)

In Sears, the United States Supreme Court considered whether a union's peaceful picketing on the private property of an employer was subject to NLRA preemption under Garmon. The Court assumed that the picketing was both arguably prohibited and arguably protected under the NLRA. Nevertheless, it found that the controversy the employer might have presented to the NLRB was not the same as the controversy presented to the state court. The issue presented by the employer was simply whether trespass had occurred, not whether the objectives of the picketing violated federal law. Sears' challenge was addressed solely to the location of the picketing, which was "completely unrelated" to questions the Labor Board would have been called upon to determine. (Id. at p. 198, 98 S.Ct. at p. 1758.) "Accordingly, permitting the state court to adjudicate Sears' trespass claim would create no realistic risk of interference with the Labor Board's primary jurisdiction to...