Samuel Hale 2, LLC vs. SS Personnel LLC

15 Keller vs. Etheridge Motion for Summary Adjudication

OFF-CALENDAR. The matter was CONTINUED to 9/18/26, per Stipulation. (See 9/10/26 Minute Order.)

16 Samuel Hale 2, LLC Motion for Summary Judgment and/or Adjudication vs. SS Personnel LLC The court GRANTS Plaintiff SAMUEL HALE 2, LLC dba SHE3’s unopposed motion for summary judgment on the Complaint filed against Defendants SS PERSONNEL LLC, ROBERT MORINAGA, KENJI SEIJI T. MORINAGA, SIGNATURE SELECT PERSONNEL, LLC, and ESSENTIAL STAFF, LLC.

Plaintiff’s alternative motion for summary adjudication of issues is DENIED as MOOT.

The Complaint asserts the following causes of action:

1. Breach of contract 2. Fraud in the inducement 3. Rescission 4. Unjust enrichment

Except for the third cause of action, each cause of action is asserted against each defendant. The third cause of action (for rescission) is asserted against Defendant SS PERSONNEL LLC only.

RJN: Plaintiff’s request for judicial notice is GRANTED. (Evid. Code § 452(b) and (d).)

On 11/12/25, the court entered an order pursuant to the parties’ stipulation that Essential Staff, LLC is deemed to be the successor entity to SS Personnel, LLC and/or doing business as Essential Staff. The Complaint is deemed amended to substitute and/or add Essential Staff, LLC as a Defendant in place of, or in addition to, SS Personnel, LLC, and Essential Staff, LLC shall assume all liabilities alleged against SS Personnel, LLC in the existing Complaint. (ROA 175.)

According to Plaintiff’s proffered evidence:

Plaintiff is a professional employer organization engaged in obtaining workers’ compensation coverage for their client’s employees. (Plaintiff’s Material Fact (“PMF”) 1.) Defendant Robert Morinaga (“Robert”) is the 100% owner and operative of the staffing agency, SS Personnel, LLC dba Essential Staff. (PMF 2-4.) Defendant Kenji Morinaga (“Kenji”) is Robert’s father. (PMF 5.) Kenji owns and operates Defendant Signature Select Personnel, LLC. (PMF 6.)

In 2022, after being terminated by its prior insurer, SS Personnel contacted Plaintiff for its workers’ compensation coverage. (PMF 7.) Plaintiff required SS Personnel to submit specific information and documents to apply for coverage, and Plaintiff informed Robert that it would not enter into the CSA if Kenji or Signature Select were involved in SS Personnel’s business operations or had any affiliation with SS Personnel. (PMF 8-9.) Robert represented that SS Personnel was a completely separate business operation from Signature Select, and that Kenji was not involved with SS Personnel. (PMF 10.) Robert’s application listed Robert as the 100% CEO. (PMF 11-12.)

After this action was commenced, Plaintiff discovered that Signature Select and SS Personnel entered into a written agreement in which Signature Select agreed to provide its assets, personnel, its offices, and support to SS Personnel for a monetary amount. (PMF 13.) Kenji made lease payments for offices that Signature Select and SS Personnel shared. (PMF 14.) Robert used employees that were paid by Signature Select and/or Kenji to perform SS Personnel’s business operations. (PMF 16-17, 20-25.) Robert did not separate his business from Kenji until 2023. (PMF 19.) Signature Select did not maintain workers’ compensation insurance coverage. (PMF 26.)

Robert’s resume that was received by Plaintiff in the application process contained false information regarding Robert’s education and work history. (PMF 27-30.)

Plaintiff requested a complete list of SS Personnel’s active client worksites. (PMF 8.) Plaintiff received SS Personnel’s active client list, which did not include National Retail Transportation (“NRT”), one of SS Personnel’s highest-risk client worksites. (PMF 31-33.) Thus, Plaintiff did not provide insurance coverage for NRT.

Based on the documents it received Plaintiff and SS Personnel entered into a Client Service Agreement (“CSA”) on 2/10/22 in which Plaintiff agreed to obtain workers’ compensation insurance for “Covered Employees” of SS Personnel. (PMF 34-38.) “Covered Employees” were defined as SS Personnel temporary employees whose “PACT Form and Form I-9” have been submitted to Samuel Hale, and thereafter approved by Samuel Hale, prior to the temporary employee commencing employment. (PMF Nos. 38.) Plaintiff would not be considered a co-employer required to procure workers’ compensation coverage for any individual that does not have those aforementioned documents submitted. (Ibid.)

Plaintiff performed under the CSA by providing workers’ compensation coverage for temporary employees. (PMF 48.) However, SS Personnel submitted workers’ compensation claims for employees that were not “Covered Employees,” including individuals who were injured while working at NRT. (PMF 43.)

On or around 4/6/23, Plaintiff terminated the CSA and cancelled the policy provided to SS Personnel because SS Personnel breached the CSA by making misrepresentations to Plaintiff and submitting fraudulent workers’ compensation claims. (PMF 47.)

1st C/A (breach of contract)

“[T]he elements of a cause of action for breach of contract are (1) the existence of the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to the plaintiff.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.)

The Complaint alleges that Defendants breached the CSA “by fraudulently submitting workers’ compensation claims for injured workers that were not employees of Defendants.” (Compl., ¶ 24.) Section 5.6 of the CSA states, “Any misrepresentation made by CLIENT or its agents to SHE, its agents, brokers, insurance carriers, third party administrators, assigns and the like shall be considered a material breach of this Agreement and shall void this Agreement, and SHE shall be entitled to restitution for monies or fees/charges for services accrued under this Agreement.” (PMF 40; see also PMF 37-39.)

The court finds that Plaintiff has established the existence of a contract (the CSA) and Plaintiff’s performance under the CSA. (PMF 35-38, 48.) Plaintiff has also established Defendants’ breach of the CSA. (PMF 7-33, 43-45.)

As the moving party, Plaintiff must also establish the amount of damages it incurred. (Paramount Petroleum Corp. v. Superior Court (2014) 227 Cal.App.4th 226, 241- 242 [“As damages are an element of a breach of contract cause of action [], a plaintiff cannot obtain judgment on a breach of contract cause of action in an amount of damages to be determined later.”]; Pajaro Valley Water Mgt. Agency v. McGrath (2005) 128 Cal.App.4th 1093, 1106 [to prevail on a motion for summary judgment where damages are an element of the plaintiff's action, the plaintiff must meet its initial burden of production with respect to both the fact of damages and the amount of damages]; Dept. of Indus. Relations v. UI Video Stores, Inc. (1997) 55 Cal.App.4th 1084, 1097 [summary judgment inappropriate where issues concerning the calculation of damages remain to be determined].)

The court finds that Plaintiff shows it has been damaged in the amount of $657,661.95, including expenses spent providing workers’ compensation coverage for all claims submitted under the policy pursuant to the CSA. (PMF 39- 48.)

Plaintiff has also established that the parties expressly agreed that SS Personnel would bear litigation expenses and attorney’s fees arising from disputes connected to SS Personnel’s contractual performance and conduct. (PMF 39-40.) Thus, Plaintiff is entitled to also recover its reasonable attorney’s fees and litigation expenses of $231,357.06 incurred in prosecuting the breach of contract claim. (PMF 49.)

2nd C/A (fraud in the inducement)

To state a cause of action for fraud, Plaintiff must allege the following with specificity: (1) a misrepresentation, (2) knowledge of its falsity, (3) intent to defraud, 4) justifiable reliance, and (5) damages. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645 [specific pleading requirement for fraud necessitates pleading facts that show the how, where, when, and who of the fraudulent conduct].) “Fraud in the inducement is a subset of the tort of fraud. It occurs when the promisor knows what he is signing but his consent is induced by fraud, mutual assent is present and a contract is formed, which, by reason of the fraud, is voidable.” (Hinesley v. Oakshade Town Center (2005) 135 Cal.App.4th 289, 294–295, internal quotation marks omitted.)

Plaintiff shows that SS Personnel and Robert made multiple misrepresentations and omissions to Plaintiff during the application period, despite being under a duty to disclose those material facts during the application process and the contract period. (PMF 27-46.) Plaintiff also proffers evidence showing that Defendants intended to induce Plaintiff to rely on their misrepresentations and concealment to provide workers’ compensation coverage for SS Personnel, and that Plaintiff relied on the misrepresentations and omissions in providing that coverage. (Id.) Plaintiff also shows it suffered out of pocket damages due to Defendants’ misrepresentations and concealment in the amount of $657,661.95, including expenses spent providing workers’ compensation coverage for all claims submitted under the policy pursuant to the CSA. (PMF 39-48.)

3rd C/A (rescission)

If the consent of a contracting party was obtained through fraud, that party can rescind the contract. (Civ. Code, § 1689.) Rescission requires each party to the contract to restore to the other everything of value received under the contract: “[T]o effect a rescission a party to the contract must, promptly upon discovering the facts which entitle him to rescind if he is free from duress, menace, undue influence or disability and is aware of his right to rescind: [¶] (a) Give notice of rescission to the party as to whom he rescinds; and [¶] (b) Restore to the other party everything of value which he has received from him under the contract or offer to restore the same upon condition that the other party do likewise, unless the latter is unable or positively refuses to do so.” (Civ.

Code, § 1691. See also, Viterbi v. Wasserman (2011) 191 Cal.App.4th 927, 935.) “When notice of rescission has not otherwise been given or an offer to restore the benefits received under the contract has not otherwise been made, the service of a pleading in an action or proceeding that seeks relief based on rescission shall be deemed to be such notice or offer or both.” (Civ. Code, § 1691.) In a claim for rescission, the “aggrieved party shall be awarded complete relief, including restitution of benefits, if any, conferred by him as a result of the transaction and any consequential damages to which he is entitled; but such relief shall not include duplicate or inconsistent items of recovery.” (Civ.

Code, § 1692.)

The court finds that Plaintiff met its initial burden of establishing that Defendants induced Plaintiff to enter into the CSA through misrepresentations and concealment and that Plaintiff relied upon these representations and omissions in deciding to enter into the CSA. (PMF 8-46.) Thus, Plaintiff is entitled to rescind the CSA. Plaintiff has also shown that it incurred damages in the amount of $657,661.95. (PMF 39-48.)

4th C/A (unjust enrichment)

The Court of Appeal for the First District, Second Division, has held that “[u]njust enrichment is not a cause of action, however, or even a remedy, but rather a general principle, underlying various legal doctrines and remedies. It is synonymous with restitution.... Unjust enrichment has also been characterized as describing the result of a failure to make restitution....” (McBride v. Boughton (2004) 123 Cal.App.4th 379, 387.) In Peterson v. Cellco Partnership (2008) 164 Cal.App.4th 1583, 1593, the Fourth District, Third Division Court of Appeal set forth the elements for unjust enrichment: the receipt of a benefit and the unjust retention of the benefit at the expense of another. Although unjust enrichment is not a cause of action, the Court may choose to treat this claim as one for restitution. (Ibid; Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 231.)

Under the law of restitution, “an individual is required to make restitution if he or she is unjustly enriched at the expense of another. A person is enriched if the person receives a benefit at another’s expense. Benefit means any type of advantage.... The person receiving the benefit is required to make restitution only if the circumstances are such that, as between the two individuals First Nationwide Savings v. Perry, it is unjust for the person to retain it.” ((1992) 11 Cal.App.4th 1657, 1662-1663.)

Plaintiffs show that Defendants retained a benefit of Plaintiff handling and providing workers’ compensation coverage for claims that SS Personnel submitted on behalf of employees that were not “Covered Employees.” (PMF 45-48.) Plaintiff also shows that it incurred damages in the amount of $657,661.95. (PMF 39-48.)

In sum, Plaintiff has met its burden on summary judgment. Defendants, who failed to file any opposing papers, have failed to show any triable issue of material fact. As such, Plaintiff’s motion for summary judgment is GRANTED.

The court VACATES the scheduled 5/3/27 trial.

Plaintiff to give notice and prepare a proposed Judgment.

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