Forsythe vs. ACW Escape LLC

Watermeier primarily disputes Cross-Complainants’ interpretation of the terms of the parties’ March 1, 2024 Partnership Agreement, but that agreement is outside of the scope of the pleadings. “A demurrer only tests the sufficiency of the pleading; it does not address evidence or other extrinsic matters except those subject to judicial notice.” (Jessica H. v. Allstate Ins. Co. (1984) 155 Cal. App. 3d 590, 592–93.) “Because a demurrer challenges defects on the face of the complaint, it can only refer to matters outside the pleading that are subject to judicial notice.” (Arce v. Kaiser Found. Health Plan, Inc. (2010) 181 Cal. App. 4th 471, 482.) Watermeier has not requested and has provided no basis for judicial notice of the agreement. Watermeier refers to the partnership agreement as Exhibit A and contends it is “attached to and incorporated” in the FAXC, but there are no exhibits to the FAXC. Thus, it is outside the scope of the pleadings and cannot be the basis for a demurrer.

Further, the court must accept as true Cross-Complainants’ interpretation of the partnership agreement to the extent any terms may be ambiguous. “So long as the pleading does not place a clearly erroneous construction upon the provisions of [an ambiguous] contract, in passing upon the sufficiency of the complaint, [the court] must accept as correct plaintiff's allegations as to the meaning of the agreement.” (Aragon-Haas v. Fam. Sec. Ins. Servs., Inc. (1991) 231 Cal. App. 3d 232, 239.) In addition, as the court does not have a copy of the complete agreement, the court cannot determine the nature of the agreement.

Watermeier’s demurrer also arises from his disputes of fact as to his role in payroll and supervision of alleged employees of the parties’ partnership venture. However, for purposes of the demurrer, the court must assume the facts pled in the FAXC are true. “As a general rule in testing a pleading against a demurrer the facts alleged in the pleading are deemed to be true, however improbable they may be,” unless the “complaint contains allegations of fact inconsistent with attached documents, or allegations contrary to facts which are judicially noticed.” (Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal. App. 3d 593, 604.)

Contrary to Watermeier’s contention that Cross-Complainants were charged with operation of the business and management of employees, Cross-Complainants have alleged in the FAXC the following (which the court must assume to be true for purposes of the demurrer): • “Cross-Defendant Escape Room Era was used by Cross-Defendant [Watermeier] as a payroll conduit, alter ego, and employer of record for certain individuals who rendered services for Escapade Games, including the underlying Plaintiffs Sage Forsythe and Niko Protacio.” (FAXC ¶ 22.) • “Upon information and belief, W-2 forms issued to these employees and others during the relevant period were generated under the name of Cross-Defendant “Escape Room Era, LLC”, rather than ACW Escape Rooms or Escapade Games, thereby concealing the true employing entity and creating confusion regarding the lawful employer of record.” (Id.) • Watermeier “intentionally used Cross-Defendant Escape Room Era as his alter ego and instrumentality to divert revenue, misappropriate payroll functions, and compete directly with Escapade Games, all while acting in concert and for his own personal gain.” (Id.) • Cross-Defendants “directly or jointly participated in the hiring, supervision, and payment of wages to said employees and thereby bears responsibility, in whole or in part, for any wage-and-hour violations alleged in the underlying complaint.” (FAXC ¶ 25.) • “To the extent that any alleged Labor Code violations asserted by Plaintiff SAGE FORSYTHE and Plaintiff NIKO PROTACIO occurred, Cross-Complainants are informed and believe, and thereon allege, that such violations were proximately caused by the negligent acts, omissions, and willful misconduct of Cross- Defendant David Watermeier in the performance of his duties as owner, controller, administrative officer, and de facto employer of Escapade Games.” (FAXC ¶ 38.)

Accordingly, Watermeier’s argument that he cannot be liable for indemnity or contribution because Cross-Complainants were at least partially responsible for the conduct at issue in Plaintiffs’ Complaint is a dispute of fact.

Furthermore, Watermeier’s arguments as to the law concerning equitable indemnity and contribution is not based on any legal authority and is a misstatement of law. (Mot. at pp. 11-12.) Equitable indemnity “is premised on a joint legal obligation to another for damages,” and is “subject to allocation of fault principles and comparative equitable apportionment of loss.” (C.W. Howe Partners Inc. v. Mooradian (2019) 43 Cal. App. 5th 688, 700.) “The elements of a cause of action for [equitable] indemnity are (1) a showing of fault on the part of the indemnitor and (2) resulting damages to the indemnitee for which the indemnitor is . . . equitably responsible.” (Id.) There is no requirement that a claimant be “without fault.”

Watermeier also alleges that Cross-Complainants made judicial admissions “in a recorded confrontation” that negate some of the allegations in the FAXC. However, Watermeier fails to explain how the alleged admissions constitute judicial admissions that the court may consider at the demurrer stage. “Judicial admissions are admissions of fact that ‘may be made in a pleading, by stipulation during trial, or by response to request for admission.’” (BMC Promise Way, LLC v. Cnty. of San Benito (2021) 72 Cal. App. 5th 279, 285–86.) These alleged admissions did not arise from any of these sources.

Watermeier also challenges the allegation that he encouraged Plaintiffs to file suit (FAXC ¶ 33), which he contends is based on an inadmissible illegal recording. This is a dispute of fact as to the admissibility of evidence, not a challenge to the pleadings. Further, Watermeier fails to explain how that allegation is an essential part of any of the claims asserted against him such that its omission constitutes a failure to state a claim.

As Watermeier has failed to demonstrate any defect in the pleadings in the FAXC, his demurrer is overruled.

Cross-Defendants are ordered to give notice of this ruling.

10 30-2025-01520418 Defendants Laguna Cookie Company Inc. (“LCC”) and D.F. Lorenzo vs. Chartwell Stauffer Biscuit Company Co. Inc.’s (“D.F. Stauffer”) Staffing Services, Inc. (collectively, “LCC Defendants”) Demurrer to Plaintiff Joaquina Lorenzo’s (“Plaintiff”) Complaint, joined by Defendant Partners Personnel – Management Services, LLC’s (“Partners”), is SUSTAINED WITH LEAVE TO AMEND as to the Eighteenth Cause of Action and OVERRULED as to