Motion to Amend Judgment in LAUREN SMITH ET AL VS. LUSH, INC. ET AL| Trellis.Law

On April 10, 2020 a Motion-Secondary was filed involving a dispute between Jefferson, E'Lesha, Smith, Lauren, and Does 1 Through 50, Inclusive, Lush, Inc., Lush, Inc., Dba Farmstead, for OTHER NON EXEMPT COMPLAINTS (CLASS ACTION COMPLAINT) in the District Court of San Francisco County.

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1 Cristina Molteni (Bar No. 244715)
cmolteni@moltenilaw.com
2 MOLTENI EMPLOYMENT LAW
100 Pine Street, Suite 1250 ELECTRONICALLY
3 San Francisco, California 94111 FILED
Telephone: (415) 762-0270 Superior Court of California,
4 Facsimile: (415) 762-0271 County of San Francisco

David Ratner (Bar No.316267) 03/26/2024
5 Clerk of the Court
Shelley Molineaux (Bar No. 277884) BY: VERA MU
RATNER MOLINEAUX LLP Deputy Clerk
6 1990 N. California Boulevard, Suite 20
Walnut Creek, California 94596
7 Telephone: (925) 393-7511
Facsimile: (925) 891-3818
8

9 Attorneys for Plaintiffs and the Class
10

11 IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA
12
COUNTY OF SAN FRANCISCO
13
LAUREN SMITH and E’LESHA JEFFERSON, Case No. CGC-20-584125
14 individually, and on behalf of all others similarly
situated, PLAINTIFFS’ MOTION FOR ORDER TO
15 AMEND THE JUDGMENT; DECLARATION
Plaintiffs,
16 OF SHELLEY A. MOLINEAUX; AND
v.
[PROPOSED] ORDER
17 LUSH, INC., WHICH WILL DO BUSINESS IN
CALIFORNIA AS LUSH FOODS, INC. DBA [Concurrently filed with Notice of Motion;
18 FARMSTEAD and DOES 1 through 50, inclusive, Declaration of Shelley A. Molineaux; and
[Proposed] Order]
19
Defendants.
Date: April 19, 2024
20
Time: 9:00 a.m.
21 Department 304
Judge: Hon. Ethan P. Schulman
22
The date and time have been approved by
23 Department 304.
24

1
PLAINTIFFS’ MOTION FOR ORDER TO AMEND THE JUDGMENT;
DECLARATION OF SHELLEY A. MOLINEAUX; AND [PROPOSED] ORDER
1 TABLE OF CONTENTS
2 I. INTRODUCTION……………………………………………………………………………..5
3 II. PROCEDURAL HISTORY……………………………………………………………………5
4 III. FACTURAL BACKGROUND………………………………………………………………..6
5 A. Defendant Lush's Debtor Examination…………………………………………………….8
6 B. Elankumaran Participated in the Activities That Lead to the Wage
7 and Hour Violations…………………………………………………………………………..9
8 IV. ARGUMENT…………………………………………………………………………………10
9 A. The Court Has The Authority To Amend The Judgment Pursuant To Code Of Civil
10 Procedure Section 187……………………………………………………………………10
11 B. Legal Standard Under Labor Code Section 558.1………………………………………..10
12 1. This Case Was Brought For Wage and Hour Violations Identified in Labor Code
13 Section 5558.1(a)……………………………………………………………………..10
14 2. Elankumaran Is An Officer and Therefore May be Individually Liable for Wage and
15 Hour Violations……………………………………………………………………….11
16 3. Elankumaran Violated or Caused to Be Violated Labor Code and Wage Order
17 Provisions Pursuant to Labor Code 558.1…………………………………………….11
18 4. Since Elankumaran Is In The Class of Persons Identified in Section 558.1 The Court
19 Shall Hold Elankumaran Liable as the Employer for The Wage and
20 Hour Violations……………………………………………………………………….12
21 C. Legal Standard Under Alter Ego Theory…………………………………………………13
22 1. Elankumaran Controlled the Litigation……………………………………………….14
23 2. There is Sufficient Unity of Interest Between Elankumaran and Lush………………14
24 3. The Default on the Class Settlement Payment Caused an Inequitable Result………..16
25 V. CONCLUSION……………………………………………………………………………….16
26

2
PLAINTIFFS’ MOTION FOR ORDER TO AMEND THE JUDGMENT;
DECLARATION OF SHELLEY A. MOLINEAUX; AND [PROPOSED] ORDER
1 TABLE OF AUTHORITIES

2 CASES

3 Alexander v. Abbey of the Chimes (1980) 140 Cal.App.3d 39, 45……………………………………10,14

4 Dow Jones Co. v. Avenel (1984) 151 Cal.App.3d 144, 149…………………………………………..….10

5 Greenspan v. LADT LLC (2010) 191 Cal.App.4th 486, 508………………………….…………..10,14,16

6 Highland Springs Conference & Training Center v. City of Banning

7 (2016) 244 Cal.App.4th 267, 287……………………………………….……………..…………10

8 McClellan v. Northridge Park Townhome Owners Assoc. (2001) 89 Cal.App.4th 508, 746, 752…...…...13

9 Mirabito v. San Francisco Dairy Co. (1935) 8 Cal.App.2d 54 ,57………………………………………10
10 NEC Electronics, Inc. v. Hurt (1989) 208 Cal.App.3d 772, 778…………………………………………10
11 Relentless Air Racing LLC v. Airborne Turbine Ltd. Partnership
12 (2013) 222 Cal.App.4th 811, 813, 815-816………………………………………………...…13,16
13 Seviour-Iloff v. LaPaille (2022) 80 Cal.App.5th 427, 444………………………………………………..12
14 Talbot v. Fresno-Pacific Corp. (1960) 181 Cal.App.2d 425, 431……………………………………..…15

15 Temple v. Bodega Bay Fisheries, Inc. (1960) 180 Cal.App.2d 279, 283……………………………..…..15

16 Troyk v. Farmers Group, Inc. (2009) 171 Cal.App.4th 1305, 1341…………………………………..….13

17 Usher v. White (2021) 64 Cal.App.5th 883, 896-897…………………………………………………….11

18 Wells Fargo Bank, N.A. v. Weinberg (2014) 227 Cal.App.4th 1, 7…………………………………..….10

19 Zoran Corp. v. Chen (2010) 185 Cal.App.4th 799, 811-812……………………………………………15
20

3
PLAINTIFFS’ MOTION FOR ORDER TO AMEND THE JUDGMENT;
DECLARATION OF SHELLEY A. MOLINEAUX; AND [PROPOSED] ORDER
1 STATUTES

2 Civil Procedure Code § 187………………………………………………………………….………..10,16

3 Labor Code § 1193.6………………………………………………………………………………….…..10

4 Labor Code § 1194………………………………………………………………………………………..10

5 Labor Code § 203……………………………………………………………………………………...10,11

6 Labor Code § 226……………………………………………………………………………………..…..11

7 Labor Code § 226.7……………………………………………………………………………………10,11

8 Labor Code § 2802…………………………………………………………………………….………10,11

9 Labor Code § 558.1………………………………………………………………...……5,6,10,11,12,13,16
10

11 OTHER AUTHORITY

12 Sen. Rules Com., Off. of Sen. Floor Analyses,
Rep. on Sen. Bill 588, as amended Sept. 4, 2015, p. 8…………………………………………….5
13

19
20

4
PLAINTIFFS’ MOTION FOR ORDER TO AMEND THE JUDGMENT;
DECLARATION OF SHELLEY A. MOLINEAUX; AND [PROPOSED] ORDER
1 I. INTRODUCTION

2 California has a robust and comprehensive statutory scheme designed to protect California’s

3 workers. This is especially true as it relates to vindicating unpaid wages. There is no doubt that

4 California’s wage and hours laws are skewed to provide the utmost protection to California’s working

5 class. As part of this comprehensive scheme, California’s legislature holds not just employers responsible

6 for failure to follow wage and hour laws but also individuals who are “acting on behalf of an employer.”

7 (Lab. Code §558.1.) The legislature enacted various provisions in response to employers “rolling up their

8 operations and walking away from their debts to workers…” The provisions were designed “to hold
individual business owners accountable for their debts to workers.” (Sen. Rules Com., Off. of Sen. Floor
9
Analyses, Rep. on Sen. Bill 588, as amended Sept. 4, 2015, p. 8.) This motion is necessitated by exactly
10
the concerns that the legislature identified in 2015 to enact provisions holding individuals, and not just
11
employers, liable for wage and hour theft.
12
II. PROCEDURAL HISTORY
13
On April 10, 2020, Plaintiffs filed this class action on behalf of 324 Warehouse Employee Class
14
Members and 416 Independent Contractor Driver Class Members. Following extensive discovery and
15
investigation, on January 27, 2022, the parties negotiated a $1.8 million non-revisionary settlement at a
16
voluntary mediation. On December 30, 2022, this court approved the $1.8 million settlement and entered
17
judgment. [Molineaux Decl., ¶ 3, Ex. 1 (Final Approval and Judgment)]
18
The settlement and judgment provided for two $900,000 payments 30 and 60 days after final
19
approval. [Molineaux Decl., ¶ 4, Ex. 2 (Joint Stipulation of Class Settlement and Amendments p. 18, ¶
20
30).] The first installment was due January 30, 2023. The second installment was due February 28, 2023.
21
Defendant has never paid a dime.
22
After Defendant Lush, Inc. dba Farmstead (“Defendant”) failed to make any payments, Plaintiffs
23
obtained an order requiring Lush to appear at a Debtor’s Examination. The Examination was set for April
24
28, 2023. Id., ¶ 5. At Defendant’s request, the Examination was continued multiple times. (See court docket
25
entry 2023-4-28, 2023-5-3, 2023-5-5, 2023-5-16, and 2023-5-24).
26

5
PLAINTIFFS’ MOTION FOR ORDER TO AMEND THE JUDGMENT;
DECLARATION OF SHELLEY A. MOLINEAUX; AND [PROPOSED] ORDER
1 On May 4, 2023, Defendant filed for Chapter 7 protection. Defendant did not list the judgment in

2 Defendant’s bankruptcy schedules. The Bankruptcy Court dismissed Defendant’s Chapter 7 bankruptcy

3 on May 31, 2023. Id., ¶ 7.

4 Plaintiff conducted a debtor’s examination on June 28, 2023. Pradeep Elankumaran

5 (“Elankumaran”), Defendant’s CEO and principal shareholder appeared at the examination Id., ¶ 8.

6 Elankumaran is one of, if not the only, individual responsible for Defendant’s violation of California’s

7 wage and hour laws. As a result of the testimony given, Plaintiffs request the Court grant leave to amend

8 the settlement and judgment to name Pradeep Elankumaran as judgment debtor, pursuant to individual

9 liability under Labor Code § 558.1 or, in the alternative, under the alter ego theory.
10 III. FACTUAL BACKGROUND

11 Since at least May 2016, 1 Farmstead operated an online grocery business with its own warehouses,
12 inventory, employees, and drivers. Farmstead has employed approximately 324 Warehouse Employees

13 and 416 Independent Contractor Drivers in the San Francisco Bay Area. [Molineaux Decl., ¶ 4, Ex. 2 (Joint

14 Stipulation of Settlement Agreement and Amendments (redacted class lists)].

15 On April 10, 2020, Plaintiffs filed this class action on behalf of themselves and others who worked

16 in California for Farmstead at any time since April 10, 2016. The Complaint alleged the following Causes

17 of Action: (1) Failure to Pay for All Hours Worked; (2) Failure to Pay Overtime; (3) Failure to Provide

18 Meal Periods (4) Failure to Provide Rest Periods; (5) Failure to Pay Earned Wages Upon Discharge; (6)

19 Failure to Provide Accurate Wage Statements; (7) Failure to Reimburse for Business Expenses; (8)

20 Unlawful Misclassification; (9) Private Attorneys General Act (“PAGA”) Penalties; (10) Unlawful and/or

21 Unfair Business Practices; and (9) Declaratory and Injunctive Relief. [Molineaux Decl., ¶ 9, Ex. 3 (Class

22 Action Complaint, ¶¶ 9-25.)]

23 After significant discovery and investigation, the parties participated in a mediation session on

24 January 27, 2022, which ended without settlement but with the expectation of a mediator’s proposal. Prior

25 to, and in anticipation of the mediator’s proposal, the parties negotiated and reached a Memorandum of

26 Understanding (“MOU”). On February 1, 2022, the mediator issued her recommendation proposing a $1.8

28 1
Although the class period starts on April 10, 2016, Farmstead started operations and hiring in May 2016.
6
PLAINTIFFS’ MOTION FOR ORDER TO AMEND THE JUDGMENT;
DECLARATION OF SHELLEY A. MOLINEAUX; AND [PROPOSED] ORDER
1 million settlement. On February 2, 2022, Elankumaran moved $2 million into Lush’s checking account

2 marking $1.8 million as “reserved.” [Molineaux Decl., ¶ 25, Ex. 15 (Defendant Lush, Inc.’s February 2022

3 Bank Statement)]. On February 8, 2022, the mediator notified both sides that the proposal was accepted.

4 The settlement was incorporated in the written agreement. [Molineaux Decl., ¶ 10, Ex. 4 (Memorandum

5 of Understanding Re Class Settlement)]

6 Plaintiffs moved for preliminary approval of the settlement in July 2022 and for final approval in

7 December 2022. Id., ¶ 11. The Court entered final approval and judgment on December 30, 2022. Id., ¶

8 12. The judgment called for two $900,000 payments 30 and 60 days from the date of the judgment.

9 [Molineaux Decl., ¶ 3, Ex. 1 (Final Approval and Judgment)]. Defendant did not make either payment.

10 On February 2, 2022, at the time of the mediator’s proposal, Defendant had over $7.5 million in its bank

11 accounts, including the $1.8 million it had “reserved” to pay Plaintiffs their stolen wages. By the time this

12 Court signed the final judgment on December 30, 2022, Defendant had drained its five bank accounts to

13 less than $2,200 and ceased operations. [Molineaux Decl., ¶ 17, Ex. 7 (Debtor’s Exam 15:14-16)].

14 Throughout 2022 Pradeep Elankumaran continued to collect a bi-weekly paycheck to the tune of $150,072.

15 Elankumaran’s business partner and Defendant’s co-founder, Kevin Li, collected bi-weekly paychecks

16 totaling $134,887 for 2022. [Molineaux Decl., ¶ 18, Ex. 8 (Officer Payroll)]. The numerous bank accounts

17 and the large sums of money being transferred in and out of the various accounts were part of a scheme by

18 Elankumaran to prevent tracing the $14 million Lush, Inc. allegedly burned through in less than a year.

19 Additionally, as further proof that Lush, Inc.’s stated financials cannot be given credence, the $1.8 million

20 settlement agreed to in February 2022, is notated on the Profit and Loss statement for December 2021-

21 almost two months before the mediator’s proposal was accepted. [Molineaux Decl., ¶26, Ex. 16 (Lush

22 Profit and Loss Statement].

23 After Defendant’s default, Plaintiffs requested an order for examination of the judgment debtor,

24 which was postponed at Elankumaran’s request. [Molineaux Decl., ¶ 13, Ex. 13 (Application and Order

25 for Appearance and Examination)]. On May 4, 2023, Lush filed for bankruptcy protection. Less than a

26 month later, the bankruptcy case was summarily closed without discharging Plaintiffs’ judgment.

27 [Molineaux Decl., ¶ 14 and ¶ 15, Ex. 5 (Elankumaran’s Declaration Under Penalty of Perjury)].

7
PLAINTIFFS’ MOTION FOR ORDER TO AMEND THE JUDGMENT;
DECLARATION OF SHELLEY A. MOLINEAUX; AND [PROPOSED] ORDER
1 Since December 2022, Defendant has not paid one cent of the judgment, ceased doing business,

2 drained its bank accounts, disposed of its hard assets, and has rendered itself judgment proof. Pradeep

3 Elankumaran (“Elankumaran”), Defendant’s President and co-founder is the individual responsible for

4 Defendant’s violation of California’s wage and hour laws. This motion seeks to hold him accountable for

5 the violations by adding him to the action as a defendant and judgment debtor. Id., ¶ 2.

6 A. Defendant Lush’s Debtor Examination

7 On June 28, 2023, and after several continuances, Plaintiffs conducted the debtor’s examination.

8 Elankumaran attended on behalf of Defendant. During the examination, Elankumaran confirmed that he

9 is one of two founders and sole CEO of Defendant. [Molineaux Decl., ¶ 17, Ex. 7 (Debtor’s Exam 7:21-

10 22)], and he was “responsible for raising money, adding people, and making sure that operations were

11 going well.” Id., at 11:24-25;12:1. In fact, he admitted that he built the software for Lush that misclassified

12 drivers. Id., at 14:20-21 and 20:19-20. (“I developed [the software system] by thinking about it and writing

13 the software”). The business software was owned by Defendant; and, although it was never copyrighted,

14 Elankumaran tried to sell it. Id. at 15:2-7, 56:19-24.

15 Elankumaran admitted that he had the ultimate authority in the day-to-day operations of Defendant.

16 Id. at 17:7-12. (“I was the CEO. The buck stopped with me.”). Elankumaran was the face of

17 Farmstead: he gave press releases, he was the CEO, he verified discovery, he participated in the mediation,

18 and he was the sole decision maker about the handling of the lawsuit. Id. at 46:4-47:6.

19 Elankumaran stated that Defendant had five accounts in two banks: Silicon Valley Bank and First

20 Republic Bank. Id. at 27:15-17. The Silicon Valley Bank account was the primary account and they

21 received capital through the First Republic Bank account. Id., 28-2-5. Elankumaran further conceded that

22 they moved money between the accounts. Id., 28:6-7 Bank records produced by Elankumaran confirm that

23 money in $100,000 dollar increments and more was routinely moved in and out of accounts without a clear

24 purpose. After the parties scheduled the mediation, Defendant continued raising money (“We definitely

25 raised a little bit of money after [10-21-21] […] The Circle K investment happened, I believe, that

26 December or January or something.”). Id., 56:16-23. In 2021, Defendant raised just shy of $24 million in

27 capital. [Molineaux Decl., ¶ 24, Ex. 14 (Statement of Cash Flows)]. Ten million dollars of the raised capital

28 was from a SAFE in prior years leaving almost $14 million in cash on hand in the last quarter of 2021. Id.;

8
PLAINTIFFS’ MOTION FOR ORDER TO AMEND THE JUDGMENT;
DECLARATION OF SHELLEY A. MOLINEAUX; AND [PROPOSED] ORDER
1 Molineaux Decl., ¶ 17, Ex. 7 (Debtor’s Exam 54:19-55:23)].

2 The mediation was held on January 27, 2022. [Molineaux Decl., ¶ 19.] Defendant’s board,

3 comprised of Elankumaran, co-founder Kevin Li and venture capitalists Michael Hirshland and Tim

4 Reynders, approved the settlement. Notably, this was the only time in Defendant’s history of operation that

5 the board met. Lush had sufficient funds to pay for the settlement. [Molineaux Decl., ¶ 17, Ex. 7 (Debtor’s

6 Exam 48:23-49:2 and 49:22-25)]. The money was “earmarked” in Defendant’s bank account. Id., at 50:1-

7 6, 50:15-20.

8
B. Elankumaran Participated in the Activities That Lead to the Wage and Hour
9 Violations.
10 Elankumaran is one of two co-founders of Lush. Id., 14:1-3. He was also the CEO. Id., at 7:21-
11 22. Elankumaran described his duties as “responsible for raising money, adding people and making sure
12 operations were going well.” Id., at 11:24-25; 12:1. There was a warehouse in Burlingame that handled
13 the Bay Area deliveries; this is where the wage and hour violations occurred. Elankumaran testified that
14 Sara Custer managed the warehouse. Id., at 12:22-13:1. Specifically, Custer handled the day-to-day
15 operations, including customer support. Id., at 16:14-20; 17:3-4. Custer’s official title was “Head of
16 Operations.” [Molineaux Decl., ¶ 20, Ex. 9 (Defendant Lush, Inc.’s Responses to Plaintiff Lauren Smith’s
17 First Set of Special Interrogatories, No. 21)]. Custer reported directly to Elankumaran. [Molineaux Decl.,
18 ¶ 17, Ex. 7 (Debtor’s Exam 17:5-6)]. Elankumaran admitted that he had the ultimate authority in the day-
19 to-day operations of Lush. Id., at 17:7-12. Custer was one of the people identified as being tasked with
20 assigning shifts and hours to warehouse employees. [Molineaux Decl., ¶ 20, Ex. 9 (Defendant Lush, Inc.’s
21 Responses to Plaintiff Lauren Smith’s First Set of Special Interrogatories, No. 17)]. As Custer’s direct
22 supervisor. Elankumaran oversaw all tasks done by Custer, including assigning shifts and hours.
23 Elankumaran was the person listed on all payroll forms, such as the “Independent Contractor
24 Reporting Form” and “Report of New Employee” in which Elankumaran was the contact person listed on
25 behalf of Lush. [Molineaux Decl., ¶ 21, Ex. 10 (Defendant Lush, Inc.’s Document Production, Bates
26 Stamped LUSH000068) and ¶ 22, Ex. 11 (Defendant Lush, Inc.’s Document Production, Bates Stamped
27 LUSH000297)] Elankumaran testified that Silicon Valley Bank (“SVB”) was Defendant’s primary
28

9
PLAINTIFFS’ MOTION FOR ORDER TO AMEND THE JUDGMENT;
DECLARATION OF SHELLEY A. MOLINEAUX; AND [PROPOSED] ORDER
1 account. [Molineaux Decl., ¶ 17, Ex. 7 (Debtor’s Exam (27:2-7)]. Elankumaran signed dozens of

2 handwritten checks drafted from SVB and noted as being for “final paycheck.” (October 2021, November

3 2021, December 2021, January 2022, February 2022, March 2022, April 2022, May 2022.) [Molineaux

4 Decl., ¶ 23, Ex. 12 (Defendant Lush, Inc.’s Bank Statements)]. There is no evidence that anyone else was

5 a signatory on Defendant’s primary account.

6 IV. ARGUMENT

7 A. The Court Has The Authority To Amend The Judgment Pursuant To Code of Civil
Procedure Section 187.
8
Code of Civil Procedure section 187 confers broad powers on the courts, including the “authority
9
to amend the judgment to add a judgment debtor.” See NEC Electronics, Inc. v. Hurt (1989) 208 Cal.
10
App.3d 772, 778. Courts have long held that “a court may amend its judgment at any time so that the
11
judgment will properly designate the real defendants.” See Dow Jones Co. v. Avenel (1984) 151 Cal.
12
App.3d 144, 149; Alexander v. Abbey of the Chimes (1980) 104 Cal.App.3d 39, 45; Mirabito v. San
13
Francisco Dairy Co. (1935) 8 Cal. App.2d 54, 57. “No statute of limitations applies to a section 187 motion
14
to amend a judgment to add a judgment debtor.” (Highland Springs Conference & Training Center v. City
15
of Banning (2016) 244 Cal.App.4th 267, 287.) The motion may be made “at any time so that the judgment
16
will properly designate the real defendants.’”’ [Citation.]” (Wells Fargo Bank, N.A. v. Weinberg (2014)
17
227 Cal.App.4th 1, 7.) “Simply put, section 187 recognizes ‘the inherent authority of a court to make its
18
records speak the truth.’ [Citation.]” (Greenspan v. LADT LLC (2010) 191 Cal.App.4th 486, 509, quoting
19
Mirabito v. San Francisco Dairy Co. (1935) 8 Cal.App.2d 54, 57.)
20
B. Legal Standard Under Labor Code Section 558.1
21
Section 558.1 of the Labor Code provides: “(a) Any employer or other person acting on behalf of
22
an employer, who violates, or causes to be violated, any provision regulating minimum wages or hours and
23
days of work in any of the Industrial Welfare Commission, or violates, or causes to be violated, sections
24
203, , 226.7, 1193.6, 1194, or 2802 may be held liable as the employer for such violation.” (Lab. Code §
25
558.1(a).) Subsection b defines “other person acting on behalf of an employer” as a “natural person who
26
is an owner, director, officer, or managing agent of the employer…” (Lab. Code § 558.1(b).)
27
1. This Case Was Brought For Wage and Hour Violations Identified in Labor
28

10
PLAINTIFFS’ MOTION FOR ORDER TO AMEND THE JUDGMENT;
DECLARATION OF SHELLEY A. MOLINEAUX; AND [PROPOSED] ORDER
1 Code Section 558.1(a)

2 As explained above, this case was brought for wage and hour violations against warehouse

3 employees and drivers, including causes of action under Labor Code § 203, 226, 226.7 and 2802.

4 [Molineaux Decl., ¶ 9, Ex. 3 (Class Action Complaint).] The Complaint named only the employer, Lush,

5 Inc. Id.

6 2. Elankumaran Is An Officer and Therefore May be Individually Liable for
Wage and Hour Violations.
7
Elankumaran is, and at all relevant times, was the CEO and co-founder of Lush, Inc. Elankumaran
8
falls within the types of persons who may be individually liable for a Defendant employer’s wage and hour
9
violation. (Lab. Code § 558.1(b).)
10
3. Elankumaran Violated or Caused to Be Violated Labor Code and Wage
11 Order Provisions Pursuant to Labor Code § 558.1
12 To be held liable under section 558.1, an “owner” must either have been personally involved in the

13 purported violation of one or more of the enumerated provisions; or absent such personal involvement, had

14 sufficient participation in the activities of the employer, or oversight over company operations and those

15 responsible for the violations. See Usher v. White (2021) 64 Cal.App.5th 883, 896-897. Determining

16 whether an individual can be held liable pursuant to Labor Code section 558.1 is not a bright line rule but

17 must be examined on an individual basis in light of the violations. Id. at 897.

18 Here it is undisputed that Elankumaran oversaw Defendant’s operations. Elankumaran testified that

19 Sara Custer managed the warehouse where the violations alleged in this lawsuit occurred, as the Operations
20 Manager and was responsible for assigning shifts and hours. [Molineaux Decl., ¶ 17, Ex. 7 (Debtor’s Exam

21 12:22-13:1)]. Custer reported it to Elankumaran. Id., at 17:3-10. As Custer’s direct supervisor,

22 Elankumaran had oversight over those responsible for the wage and hour violations.

23 Additionally, Elankumaran participated in the day-to-day operations, and he was a decision maker

24 in terms of operational/managerial decisions. Id., at 11:24-25; 12:1-3; 17:7-12; 18:18-23. In Elankumaran’s

25 own words, “the buck stopped” with him.

26 Elankumaran was identified as the contact person on paperwork reporting Plaintiff Jefferson as an

27 independent contractor. [Molineaux Decl., ¶ 21, Ex. 10 (Defendant Lush, Inc.’s Document Production,

28 Bates Stamped LUSH000068)] This is a wage and hour violation which Elankumaran caused.

11
PLAINTIFFS’ MOTION FOR ORDER TO AMEND THE JUDGMENT;
DECLARATION OF SHELLEY A. MOLINEAUX; AND [PROPOSED] ORDER
1 Elankumaran personally signed dozens of handwritten checks for “final paycheck” indicating he was

2 intimately involved in the payroll process. [Molineaux Decl., ¶ 23, Ex. 12 (Bank Statements)]

3 4. Since Elankumaran Is In The Class of Persons Identified in Section 558.1 The
Court Shall Hold Elankumaran Liable as the Employer for The Wage and
4 Hour Violations

5 “State wage and hour laws ‘reflect the strong public policy favoring protection of workers’ general

6 welfare and society's interest in a stable job market. For this reason, ‘the statutory provisions are to be

7 liberally construed with an eye to promoting such protection.’” Seviour-Iloff, supra, at 442. (citations

8 omitted).

9 The court in Seviour-Iloff v. LaPaille considered whether the use of “may” in Section 558.1 granted
10 the court discretion to hold the employer liable, as the defendant argued, or whether “may” conveyed a
11 right to the plaintiff to hold an individual liable as the employer should plaintiff choose. Seviour-Iloff v.
12 LaPaille (2022) 80 Cal.App.5th 427, 444. The court agreed with the plaintiff that the term “may” was not
13 directed to the trial court but to the remededy a plaintiff may choose. Id.
14 As noted in Seviour-Iloff v. LaPaille, “[i]n the event an employer attempts to avoid a judgment
15 arising for a wage violation, the employee […] is entitled to enforce such liability against those individuals
16 who ‘violates or causes to be violated’ the minimum wages laws.” Seviour-Iloff v. LaPaille (2022) 80
17 Cal.App.5th 427, 444. The court found that its interpretation was supported by the legislative history of
18 Labor Code § 558.1 by targeting “individual officers who are involved in the failure to pay wages and
19 sought to discourage such individuals from rolling up their operations and walking away from their debts
20 to workers.” Id. The Legislature’s use of the term “may” reflects the understanding that a party prosecuting
21 a wage violation may not need to pursue such liability in the event the employer satisfies any outstanding
22 judgment. Seviour-Iloff, supra, at 445. The court further opined that giving courts discretion to “excuse
23 individual liability would undermine the purpose…to facilitate an employee’s ability to recover unpaid
24 wages.” Id. at 444
25 This is exactly what happened here. Lush, Inc. allegedly wound down operations, even though it
26 received millions of dollars in funding, which it allegedly burned through in less than a year. Elankumaran
27 admits to raising very little capital in 2022, post the January 27, 2022, mediation, compared to previous
28 years. [Molineaux Decl., ¶ 17, Ex. 7 (Debtor’s Exam 18:7-10)]. Elankumaran admits that he “had to pull

12
PLAINTIFFS’ MOTION FOR ORDER TO AMEND THE JUDGMENT;
DECLARATION OF SHELLEY A. MOLINEAUX; AND [PROPOSED] ORDER
1 those markets down” referring to constricting business in certain areas even after an investment round

2 occurred in April or May of 2022. Id., at 52:20-25;53:1-3.

3 In 2023, after draining Defendant’s bank accounts to the tune of millions of dollars, Elankumaran

4 requested bankruptcy protection in an attempt to avoid a debtor’s exam. 2 [Molineaux Decl., ¶ 16, Ex. 6
5 (Notice of Stay).] Elankumaran did not seek to discharge Plaintiffs’ judgment in the bankruptcy court to

6 avoid having to pay the judgment. The Legislature designed Labor Code § 558.1 to protect workers from

7 the exact scenario Elankumaran orchestrated. Elankumaran violated the minimum wages laws on behalf

8 of Defendant and therefore is liable for the judgment against Defendant. Plaintiffs respectfully request the

9 Court to amend the judgment to include Pradeep Elankumaran.
10 C. Legal Standard under Alter Ego Theory

11 “A corporate identity may be disregarded—the "corporate veil" pierced—where an abuse of the

12 corporate privilege justifies holding the equitable ownership of a corporation liable for the actions of the

13 corporation. Under the alter ego doctrine, then, when the corporate form is used to perpetuate a fraud,

14 circumvent a statute, or accomplish some other wrongful or inequitable purpose, the courts will ignore the

15 corporate entity and deem the corporation's acts to be those of the persons or organizations actually

16 controlling the corporation, in most instances the equitable owners.’ " Troyk v. Farmers Group, Inc. (2009)

17 171 Cal.App.4th 1305, 1341.

18 To prevail on the motion, the judgment creditor must show, by preponderance of the evidence,

19 that “(1) the parties to be added as judgment debtors had control of the underlying litigation and were
20 virtually represented in that proceeding; (2) there is such an unity of interest and ownership that the

21 separate personalities of the entity and the owners no longer exist; and (3) an inequitable result will follow

22 if the acts are treated as those of the entity alone.” Relentless Air Racing, LLC v. Airborne Turbine Ltd.

23 Partnership (2013) 222 Cal.App.4th 811, 815-816. Amending a judgment to add an alter ego of an original

24 judgment debtor “is in equitable procedure based on the theory that the court is not amending the judgment

25 to add a new defendant but is merely inserting the correct name of the real defendant.” McClellan v.

26 Northridge Park Townhome Owners Assoc. (2001) 89 Cal.App.4th 746, 752.

28 2
Please see in particular the date and time that Elankumaran filed pro per for bankruptcy protection on behalf of Lush.
13
PLAINTIFFS’ MOTION FOR ORDER TO AMEND THE JUDGMENT;
DECLARATION OF SHELLEY A. MOLINEAUX; AND [PROPOSED] ORDER
1 1. Elankumaran Controlled the Litigation

2 Amending a judgment to add judgment debtors is an appropriate and complete method by which

3 to bind new defendants where it can be demonstrated that in their capacity as alter ego of the corporation

4 they in fact had control of the previous litigation, and thus were virtually represented in the lawsuit.

5 Alexander v. Abbey of Chimes (1980) 104 Cal.App.3d 39, 45; Greenspan v. LADT LLC (2010) 191 Cal.

6 App. 4th 486, 508.

7 Here, Elankumaran had control of the litigation and defense. He received the summons, he verified

8 discovery, he entered the class action settlement agreement, and he participated in the debtor’s

9 examination. He also met on several occasions with counsel to discuss the payment of the debt.
10 Elankumaran personally communicated with Plaintiffs’ counsel regarding Plaintiffs’ efforts to take the
11 debtor’s exam. Elankumaran participated in the litigation from its inception, and he has been virtually
12 represented in this lawsuit. There is no evidence that anyone other than Elankumaran participated in the
13 litigation on behalf of Lush or that he had to report back to anyone about the status of the litigation.
14 Plaintiff issued the Debtor’s Exam Subpoena to Lush, Inc, not to Elankumaran personally.
15 [Molineaux Decl., ¶ 13, Ex. 13 (Application and Order for Appearance and Examination)]. Unsurprisingly,
16 as it was clear throughout the litigation that Elankumaran is and always was the sole puppet master,
17 Elankumaran appeared to testify on behalf of Lush, Inc. On April 28, 2023, Elankumaran showed up to
18 the debtor’s examination on his own without a lawyer to represent Lush, Inc. The examination was
19 continued by the Clerk. On May 3, 2023, Elankumaran again appeared in court to represent Lush, Inc,
20 without a lawyer present. The Court ordered Elankumaran to call Lush’s counsel of record and have him
21 appear via video conference. (See Docket minutes.) Elankumaran alone controlled and participated in the
22 Litigation on behalf of Lush, Inc.
23 2. There is Sufficient Unity of Interest Between Elankumaran and Lush
24 "The general rule is thus stated as follows: Before a corporation's acts and obligations can be legally

25 recognized as those of a particular person, and vice versa, it must be made to appear that the corporation

26 is not only influenced and governed by that person, but that there is such a unity of interest and ownership

27 that the individuality, or separateness, of such person and corporation has ceased, and that the facts are

28 such that an adherence to the fiction of the separate existence of the corporation would, under the particular

14
PLAINTIFFS’ MOTION FOR ORDER TO AMEND THE JUDGMENT;
DECLARATION OF SHELLEY A. MOLINEAUX; AND [PROPOSED] ORDER
1 circumstances, sanction a fraud or promote injustice.'" Talbot v. Fresno-Pacific Corp. (1960) 181

2 Cal.App.2d 425, 431; Temple v. Bodega Bay Fisheries, Inc. (1960) 180 Cal.App.2d 279, 283.

3 Elankumaran admitted that Defendant disregarded corporate formalities. Lush, Inc. held a single

4 Board of Directors’ meeting in its entirety corporate existence to approve this class action settlement. The

5 company did not keep any record or minutes because they never met. Even for the one time they did meet,

6 no records or minutes exist. [Molineaux Decl., ¶ 17, Ex. 7 (Debtor’s Exam 49:6-10)]. Elankumaran used

7 the corporate structure as a mere shell, instrumentality or conduit for his own business, conducting business

8 as though he was a sole proprietor rather than the director of a corporation. Id., at 11:24-25; 12:1-3; 18:18-

9 23. Elankumaran admitted that the “buck stops with him” which is only true under a sole proprietor or
10 partnership structure. Id., 17:5-12. In a corporation, the “buck stops” with the Board. This statement
11 reflects Elankumaran’s belief that Lush, Inc was his company and he viewed himself as the sole owner of
12 Defendant; he should be treated as such.
13 Elankumaran has conceded that Lush received different rounds of funding, including one right
14 before entering into the settlement agreement. Yet, the company was undercapitalized allegedly for fast
15 expansion to secure new funding, instead of paying the wages due and owed to the members of the class.
16 [Molineaux Decl., ¶ 17, Ex. 7 (Debtor’s Exam 18:7-10; 52:17-25; 53:1-3)]. Elankumaran used the funds
17 he marked as “reserved” to pay for this settlement to instead fund his own self-interest in growing the
18 company and to maintain his own lifestyle. Because the company was undercapitalized for this growth,
19 Elankumaran instead used the Plaintiffs’ money to fund his growth. See e.g. Zoran Corp. v. Chen (2010)
20 185 Cal.App.4th 799, 811-812. “No single factor is determinative, and instead a court must examine all
21 the circumstances to determine whether to apply the doctrine.” Id. at 812.
22 In addition, it appears that Elankumaran created post-hoc financials for Defendant in order to try
23 and “prove” that Defendant burned through $14 million in less than 9 months. For example, the financials
24 indicate that Elankumaran included the $1.8 million settlement on December 2021- almost two months
25 before the mediator’s proposal was accepted. [Molineaux Decl., ¶26, Ex. 16 (Lush Profit and Loss
26 Statement]. This is the sort of unity of interest that should allow the Court to disregard the corporate
27 structure and instead hold Elankumaran responsible.
28

15
PLAINTIFFS’ MOTION FOR ORDER TO AMEND THE JUDGMENT;
DECLARATION OF SHELLEY A. MOLINEAUX; AND [PROPOSED] ORDER
1 3. The Default on the Class Settlement Payment Caused an Inequitable Result

2 Plaintiffs and the class cannot collect their judgment because Lush is insolvent. Under the

3 circumstances here, this is an inequitable result as a matter of law. Greenspan v. LADT LLC, supra, 191

4 Cal.App.4th at 508. Indeed, an inequitable result does not require a wrongful intent. Relentless Air Racing,

5 LLC v. Airborne Turbine Ltd. Partnership (2013) 222 Cal.App.4th 811, 813. In Relentless, the plaintiff

6 has been unable to collect its judgment from defendant and moved to amend the judgment to add the

7 individual officers as judgment debtors. The Court of Appeal held that the law does not require a plaintiff

8 to prove that the debtor acted with wrongful intent. The plaintiff was required to prove that the acts of the

9 alter egos caused an “inequitable result”. Relentless, supra, at 816. Nothing else. Like in Relentless,
10 Plaintiffs and the class here have been deprived of their settlement awards because Lush is insolvent. There
11 is only one reasonable inference here—there is an inequitable result if Elankumaran is not added as a
12 judgment debtor.
13 Elankumaran should not be permitted to hide behind the corporate veil when doing so will permit
14 him to dodge the very settlement that he entered into on behalf of Defendant. Elankumaran should not be
15 permitted to hide behind the corporate structure when it is convenient for him but disregard the corporate
16 structure in controlling the corporate business. Elankumaran drained the corporate bank accounts.
17 Elankumaran continued to draw a paycheck using funds that were stolen from the Plaintiffs. Elankumaran
18 bankrolled an expansion of the business using Plaintiffs’ stolen wages. Elankumaran closed up shop and
19 has attempted to roll out of town, leaving Plaintiffs holding the bag.
20 In short, the goal of amendments under Section 187 is to preclude debtors from taking actions that
21 would unfairly prevent judgment creditors from recovering on their judgments and the Court does not need
22 to inquire whether a wrongful intent existed. Great liberality is encouraged in the allowance of amendments
23 brought pursuant to Section 187. Greenspan v. LADT, LLC (2010) 191 Cal.App.4th 486, 508.
24 V. CONCLUSION

25 Plaintiffs and the Class respectfully request that the Court grant their Motion and leave to amend

26 the judgment and add judgment debtor Pradeep Elankumaran based on his individual liability pursuant to

27 Labor Code § 558.1 or, in the alternative, as an alter ego of Lush, Inc.

16
PLAINTIFFS’ MOTION FOR ORDER TO AMEND THE JUDGMENT;
DECLARATION OF SHELLEY A. MOLINEAUX; AND [PROPOSED] ORDER
1 Respectfully Submitted,

2 Dated: March 26, 2024. RATNER MOLINEAUX LLP
3

4 By:_ __________________________________
David Ratner
5 Shelley Molineaux
RATNER MOLINEAUX, LLP
6
Cristina Molteni
7 MOLTENI EMPLOYMENT LAW
8
Attorney for Plaintiffs and the Class
9
10

19
20

17
PLAINTIFFS’ MOTION FOR ORDER TO AMEND THE JUDGMENT;
DECLARATION OF SHELLEY A. MOLINEAUX; AND [PROPOSED] ORDER

Case Info

Judge

Ethan P. Schulman Track Judge’s New Case

Case No.

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Document Filed Date

March 26, 2024

Case Filing Date

April 10, 2020

County

Parties

DOES 1 THROUGH 50, INCLUSIVE Defendant
JEFFERSON, E'LESHA Plaintiff
LUSH, INC. Defendant
LUSH, INC., DBA FARMSTEAD Defendant
MOLTENI, MARIA CRISTINA Attorney for the Plaintiff
RATNER, DAVID S Attorney for the Plaintiff
SMITH, LAUREN Plaintiff
VALDEZ, TROY A Attorney for the Defendant
Shelley Molineaux Attorneys for Plaintiffs
Jill Sperber Attorney
Tom Lin Attorneys for Plaintiffs
Hannah Jones Attorneys for Defendants
Donovan Bonner Attorneys for Plaintiffs
Paula Weber Attorney

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Motion-Secondary: LAUREN SMITH ET AL VS. LUSH, INC. ET AL

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