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Yau v. Allen

California Court of Appeals, Fourth District, Third Division

August 26, 2014

EDDIE YAU, Plaintiff and Appellant,
GINA ALLEN, Defendants and Respondents. EDDIE YAU, Plaintiff and Appellant,
SANTA MARGARITA FORD, INC., et al., Defendants and Respondents.

Appeals from judgments of the Superior Court of Orange County, No. 30-2011-00448900 Andrew P. Banks, Judge.

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Skanadore Reisdorph Law Office and Deborah S. Reisdorph for Plaintiff and Appellant.

Gordon & Rees, Roger M. Mansukhani, Gina H. Lindell, Matthew G. Kleiner, and Craig D. Nickerson for Defendants and Respondents.



Eddie Yau filed a complaint against his former employer, Santa Margarita Ford, Inc., alleging a cause of action for wrongful termination in violation of public policy. Yau alleged he was terminated after complaining to Santa Margarita Ford’s management about fraudulent warranty repair claims being submitted to Ford Motor Company (Ford). Yau also alleged an intentional infliction of emotional distress cause of action against individual defendants who were his coworkers and supervisors, and the owner of Santa Margarita Ford.

The trial court sustained demurrers without leave to amend and dismissed the action, entering separate judgments for Santa Margarita Ford and the individual defendants. We conclude Yau adequately pleaded his wrongful termination cause of action and therefore the judgment in favor of Santa Margarita Ford must be reversed and the matter remanded as to that cause of

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action. We conclude the trial court correctly dismissed the intentional infliction of emotional distress cause of action, and the judgment in favor of the individual defendants is affirmed.


First Amended Complaint

Yau’s original complaint was amended before the trial court ruled on a pending demurrer. Accordingly, we begin with the allegations of his first amended complaint.

In 1992, Yau was hired as a mechanic by Santa Margarita Ford. By September 2007, he had been promoted to the position of service manager. Yau alleged he was terminated in February 2009 after complaining to Santa Margarita Ford’s general manager, Mike Mamic, and later to Santa Margarita Ford’s owner, James Graham, that fraudulent warranty repair claims were being submitted to Ford. Yau alleged Santa Margarita Ford’s service director, Robert Selff, to whom Yau reported, was the instigator/mastermind of the warranty fraud. He alleged Santa Margarita Ford’s parts director, Robert Cira, and its customer relations manager, Gina Allen, were involved as well. Mamic, Graham, Selff, Cira, and Allen were named defendants in Yau’s action (and are hereafter referred to collectively as the Individual Defendants).

Yau’s first amended complaint described the fictitious warranty repair scheme as follows. Pablo Prudencio was an outside vendor who had previously worked for Santa Margarita Ford to whom Yau, at Selff’s direction, referred fictitious warranty repairs. Prudencio would contact Pablo Pastrano in Santa Margarita Ford’s parts department and order parts for fictitious warranty repairs. Pastrano would charge Ford for the parts but would not give Prudencio any of the parts because the vehicle did not need them. Selff would have the technician/shop team leader documenting the repair order use the correct “warranty labor operations” and “draft[] a corresponding story to reflect the labor operations that were performed.” Once the parts were charged out and everything documented, Selff would meet with Cira (parts director), to discuss how much money Santa Margarita Ford was generating in parts from fictitious warranty claims. Anytime the service department or Selff “needed parts for any reason, Selff would tap into the parts ‘credit’. . . .” Selff told Yau “every year Santa Margarita Ford would hire an outside company to take inventory of the parts department” and it would always have $25, 000 to $50, 000 worth of excess parts that were unexplainable.

Yau alleged that in 2007, Mamic bought a used Ford truck that was out of warranty from Santa Margarita Ford for his son. The engine was replaced

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with one from a truck still under warranty that had been returned to Santa Margarita Ford after the lease expired. Yau refused Mamic’s order to warrant the new engine, believing it would be unlawful to do so. Selff later authorized the warranty of the new engine, telling Mamic “it was not a big deal” to do so.

Yau alleged that beginning in December 2007, Selff ordered him to sign Selff’s name to warranty repair orders. Yau did so with the understanding “the warranty clerk” would make sure the claims were proper. From April 2008 to June 2008, Yau repeatedly complained to Mamic about “issues” with fictitious repairs with warranty claims involving Prudencio, Pastrano, Selff, and another person, and Yau did not want to get blamed for them. In July 2008, Mamic told Yau he had spoken with Selff and they agreed Yau should sign warranty repair orders himself. Mamic told Yau that Selff said he was happy to let Yau sign warranty repair orders so if there was a warranty audit, “[Yau] would be the fall guy.”

In September and October 2008, Yau told Mamic several times there had been an increase in the warranty numbers related to Prudencio, Pastrano, and Selff, and some claims were questionable. Yau was signing the warranty repair orders, and Yau wanted to make sure he was not blamed for questionable orders if Ford performed a warranty audit.

In October 2008, Selff told Yau to call Prudencio and give him the “green light on fictitious repairs in order to generate as much revenue as possible by the end of the month in order to bring Santa Margarita [Ford’s] numbers up.” Selff told Yau to “offer... Prudencio a high percentage of the total monies generated to compensate him for his participation.” Yau “decided to bring the matter to Mamic’s attention once again.” Mamic again told Yau he would speak to Selff.

By November 2008, “Prudencio had written more warranty claims than Selff had expected which raised a red flag with Santa Margarita [Ford’s] warranty numbers.” Selff indicated to Yau that he did not want to pay Prudencio what they had agreed, and told Yau to discuss it with Prudencio, but “Prudencio would not hear any of it.” Selff later told Yau that he and Prudencio had “‘worked it out.’”

In December 2008, Selff told Yau to again contact Prudencio and have him “generate more fictitious warranty repair orders. [Yau] reluctantly did what he was told to do out of fear of his continued employment with Santa Margarita [Ford].” But the amount of warranty claims Prudencio generated was so high that Selff decided to only submit half of them to Ford in December 2008 and

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the other half in January 2009. Yau again complained to Mamic and said he did not want to sign warranty repair orders. Mamic again said he would talk to Selff.

On January 20, 2009, Selff told Yau to have each service adviser generate five fictitious warranty repair orders each containing three concerns and to give those repair orders to certain technicians “to perform the fictitious repairs.” After doing so, Yau gave the repair orders to Selff for review. Selff then reduced the number of warranty concerns on each repair order and had everyone change the repair orders accordingly. Selff ordered Yau to have Allen, Santa Margarita Ford’s customer relations manager, change customer contact information on the fictitious repair orders in Ford’s data banks so the customer would not get a survey from Ford about the claimed warranty service and verify the vehicles had not had warranty concerns during the past ...

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