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Nicholas Laboratories, LLC v. Christopher Chen

October 12, 2011

NICHOLAS LABORATORIES, LLC, PLAINTIFF, CROSS-DEFENDANT AND RESPONDENT,
v.
CHRISTOPHER CHEN, DEFENDANT, CROSS-COMPLAINANT AND APPELLANT.



Appeal from a judgment of the Superior Court of Orange County, Sheila Fell, Judge. (Super. Ct. No. 07CC07218)

The opinion of the court was delivered by: Ikola, J.

CERTIFIED FOR PUBLICATION

OPINION

Affirmed.

The question presented is whether plaintiff, Nicholas Laboratories, LLC (Nicholas Labs), is required to "indemnify" its ex-employee, defendant Christopher Chen, for attorney fees incurred by Chen during his successful defense of an action brought by Nicholas Labs. The trial court rejected Chen's assertion that various statutory (Lab. Code, § 2802, subd. (a); Corp. Code, § 317, subd. (d)) and/or contractual indemnity provisions obligated Nicholas Labs to reimburse Chen.

We hold that Labor Code section 2802 does not require an employer to reimburse its employee for attorney fees incurred in the employee's successful defense of the employer's action against the employee.*fn1 We further conclude Corporations Code section 317 has no application to limited liability companies, and that substantial evidence supports the court's denial of Chen's attorney fees based upon the alleged contract. Accordingly, we affirm the judgment.

FACTS

Pleadings

Nicholas Labs filed a complaint against Chen, listing seven theories of liability (breach of contract, breach of the implied covenant of good faith and fair dealing, conversion, negligence, money had and received, unjust enrichment, and constructive trust). The alleged factual basis for Nicholas Labs' complaint was the following: Chen was hired by Nicholas Labs as its director of information technology; Chen agreed to work full time and exclusively on behalf of Nicholas Labs; Chen instead engaged "in a business that made him a competitor of Nicholas Labs"; Chen diverted business opportunities away from Nicholas Labs; Chen stole certain personal property from Nicholas Labs (e.g., computers, printers); Chen misused the company credit card; and Chen, "in contravention of [Nicholas Labs'] specific directive," "involve[d] himself in a renovation project of the residence of [Nicholas Labs'] principal" and thereby "cause[d] third parties to enter into contracts to provide labor and equipment in the millions of dollars, purportedly binding [Nicholas Labs]." Nicholas Labs sought compensatory damages, punitive damages, reasonable attorney fees, and other relief in excess of $2 million.

Chen responded with a cross-complaint, claiming he "has incurred and will continue to incur expenses and attorneys fees to defend himself against claims which relate to his service as employee or agent of plaintiff. [Chen] is entitled to indemnity for all such claims and expenses under the provisions of the California Labor Code, the provisions of the California Corporations Code and the provisions of the operating agreement and articles of [Nicholas Labs]." Chen sought compensatory damages and indemnity, as well as attorney fees.

Motions in Limine and Pre-trial Stipulation

Citing various alleged abuses of the discovery process by Nicholas Labs, Chen filed several motions in limine seeking either terminating sanctions or evidence sanctions against Nicholas Labs. (See Code Civ. Proc., § 2023.030, subds. (c), (d).) Nicholas Labs opposed these motions in writing.

But on the eve of trial, the parties filed a stipulation premised on the following facts: "WHEREAS, Nicholas Lab[s] has decided to dismiss its Complaint without prejudice, if Chen decides to submit his Cross-Complaint for disposition pursuant to written submission to and decision by the Court; [¶] WHEREAS, Chen has decided to submit his Cross-Complaint for disposition pursuant to written submission to and decision by the Court, exclusive of a jury and without the presentation of live testimony." The parties stipulated: (1) Nicholas Labs "will dismiss its Complaint without prejudice pursuant to the Request for Dismissal attached hereto"; (2) "Chen will submit his Cross-Complaint" for a bench trial based on written submissions; and (3) "This stipulation is not a resolution of a disputed claim. [Nicholas Labs] has determined to dismiss the action for its own reasons, and [Chen] has determined to submit the cross-complaint in writing to the court for [his] own reasons."

The stipulation was accompanied by a request for dismissal of Nicholas Labs' ...


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