Chang v. Cashman

Background

Stacy Chang sued Carlos Cashman, Arrowside Capital, LLC, Arrowside Fund GP, LLC, Arrowside Ventures, LLC, Cashman Family Investments II LLC, and Perseverus LLC over an alleged failed joint investment venture. Her amended complaint asserted nine causes of action: fraudulent inducement; negligent misrepresentation; misrepresentations under California Labor Code section 970; breach of contract; promissory estoppel; unjust enrichment; failure to pay wages upon separation under California Labor Code sections 201, 202, and 2926; violations of California’s Unfair Competition Law; and failure to reimburse expenses and losses under Labor Code section 2802. She also sought related statutory and Private Attorneys General Act penalties.

Defendants moved for summary judgment on all claims. Alternatively, they sought partial summary judgment on whether Chang could recover Labor Code sections 203 and 210 penalties if she prevailed on her wage claim, and whether she could recover attorney’s fees under the Unfair Competition Law.

Evidentiary objections

Chang objected to portions of defendants’ reply evidence and requested permission to file a sur-reply. The court overruled her objections, concluding that defendants’ reply arguments were responsive rather than new. The court also stated that unsupported factual assertions could not be relied on at summary judgment and treated Chang’s evidentiary citations as moot for that reason. The court noted that her request for a sur-reply was procedurally improper because she had not filed the required administrative motion.

Claims that survived summary judgment

The court denied summary judgment on fraudulent inducement. Chang submitted evidence that Thomas Copeman promised her a partnership position, that the promise was reiterated at a September 2021 meeting attended by Cashman, that she was to receive salary and carried interest, and that Cashman assured her the fund would be raised and promised anchor funding. Evidence including a December 16, 2021 email and communications holding Chang out as a partner created factual disputes about misrepresentation, intent to defraud, and the reasonableness of Chang’s reliance. The court left damages, if any, for the jury.

The court also denied summary judgment on negligent misrepresentation. It concluded that a reasonable jury could find that defendants made misrepresentations without reasonable grounds for believing them to be true, even if the evidence did not establish the intent required for fraudulent inducement.

The court denied summary judgment on breach of contract. Chang presented evidence that she was promised and accepted a partnership position and testified that Cashman approved a $225,000 salary, 25% carried interest, and the fund’s structure. The court stated that the conflicting evidence could not be weighed at summary judgment and that the jury must decide which account to believe.

The court denied summary judgment on promissory estoppel. Chang presented evidence that she was promised a partnership position, gave notice to her prior employer, ended that position, and would not have done so except to obtain a partnership at a venture capital fund. The court held that a jury must decide whether the promise existed, how concrete it was, and whether Chang’s reliance was reasonable.

The court denied summary judgment on unjust enrichment. Chang declared that she spent more than 400 hours working for Arrowside, evaluated investments, and prepared economic models at Cashman’s request. The court held that a reasonable jury could find that this work benefited defendants and that defendants unjustly retained that benefit without compensating her.

The court denied summary judgment on Chang’s wage claim under Labor Code sections 201, 202, and 2926. Defendants argued that Chang was not their employee because there was no written employment agreement, no final agreement about salary or carried interest, and no completed fund. The court applied California’s “ABC test,” which generally treats a person providing labor or services for remuneration as an employee unless the hiring entity establishes all three statutory conditions for independent-contractor status. The court held that defendants’ arguments did not satisfy their burden on the employee-status issue.

The court also denied summary judgment on Chang’s Labor Code section 2802 claim for reimbursement of expenses and losses because defendants relied on the same employee-status argument that the court had rejected for the wage claim.

Claims and issues resolved for defendants

The court granted summary judgment on Chang’s Labor Code section 970 claim. Chang offered evidence of temporary business travel but no evidence that she temporarily or permanently relocated her residence. The court held that section 970 requires a relocation of residence, not merely a change in the place where an employee works or temporary business travel.

The court ruled on the UCL claim in parts. It denied summary judgment on the portion based on alleged violations of Labor Code sections 201 and 202 because the underlying unpaid-wage claim survived. It granted summary judgment to defendants to the extent the UCL claim relied on an alleged Labor Code section 970 violation. It also granted summary judgment on Chang’s UCL claim under the statute’s unfair prong because Chang did not respond to defendants’ argument that the alleged violations could not legally serve as predicate acts under that prong; the court treated that theory as abandoned.

Alternative partial-summary-judgment motion

The court denied defendants’ alternative motion for partial summary judgment concerning potential waiting-time penalties under Labor Code section 203. Although defendants argued that their dispute over whether Chang was an employee and whether wages were owed was a good-faith dispute, the court concluded that the evidence—including Cashman’s statement that defendants had made a commitment to Chang, his approval of a proposal involving three months of backpay, and his statement that Chang would be part of deals in which she had participated—could allow a jury to find no good-faith dispute.

The court granted defendants’ alternative motion for partial summary judgment concerning Chang’s potential Labor Code section 210 penalties. The court held that Chang had not pleaded a claim under Labor Code section 204, the provision she invoked in opposing the motion, and would not be allowed to expand her claims at the summary-judgment stage. The court also stated that defendants were not independently moving for summary judgment on civil penalties sought under the Private Attorneys General Act.

The court denied defendants’ alternative motion concerning attorney’s fees if Chang prevailed on her UCL claim. It declined to decide that issue at summary judgment because defendants cited no authority resolving the apparently premature question in that procedural posture.

Disposition

The court granted in part and denied in part defendants’ motion for summary judgment. It also granted in part and denied in part defendants’ alternative motion for partial summary judgment. The opinion therefore left the fraudulent-inducement, negligent-misrepresentation, contract, promissory-estoppel, unjust-enrichment, wage, and expense-reimbursement claims unresolved at this stage; resolved the Labor Code section 970 claim for defendants; resolved specified portions of the UCL claim for defendants while allowing another portion to continue; denied the request to foreclose Labor Code section 203 penalties; granted the request concerning section 210 penalties; and declined to foreclose UCL attorney’s fees.