Superior Court, State of California
DATE: DECEMBER 1, 2022 TIME: 1:30 P.M.
PREVAILING PARTY SHALL PREPARE THE ORDER
UNLESS OTHERWISE STATED (SEE RULE OF COURT 3.1312)
|LINE # |CASE # |CASE TITLE |RULING |
|LINE 1 |19CV347966 |Vehawn v. Surefox North America Corp., et al. |See tentative ruling. The Court will |
| | |[Consolidated With 20CV366749] |prepare the final order. |
|LINE 2 |21CV386080 |Munoz v. Sierra Circuits, Inc. |See tentative ruling. The Court will |
| | | |prepare the final order. |
|LINE 3 |20CV364121 |Jasper, et al. v. Chubb National Insurance Company,|See tentative ruling. The Court will |
| | |et al. |prepare the final order. |
|LINE 4 |20CV364121 |Jasper, et al. v. Chubb National Insurance Company,|See line 3. |
| | |et al. | |
|LINE 5 |21CV386663 |Zulu v. Front Porch Communities and Services (PAGA)|VACATED, as per the 11/9 stipulation/order. |
|LINE 6 |22CV395980 |Longoria v. Albeco, Inc. |See tentative ruling. The Court will |
| | | |prepare the final order. |
|LINE 7 |21CV375173 |Jimenez v. M.D.E. Electric Company, Inc., et al. |See tentative ruling. The Court will |
| | | |prepare the final order. |
|LINE 8 |19CV345534 |Palomino v. Northrop Grumman Systems Corporation |See tentative ruling. The Court will |
| | | |prepare the final order. |
|LINE 9 |18CV336725 |Roberts v. Larson et al. |See tentative ruling. The Court will |
| |[NON-COMPLEX] | |prepare the final order. |
|LINE 10 | | | |
|LINE 11 | | | |
|LINE 12 | | | |
|LINE 13 | | | |
Calendar Line 1
Case Name: Jason Vehawn, et al. v. Surefox North America Corp., et al.
Case No.: 19CV347966
This is a consolidated putative class and Private Attorneys General Act (“PAGA”) action. Plaintiffs allege that Defendants Surefox North America and Surefox Consulting LLC (collectively “Surefox”) failed to provide timely off-duty meal and rest breaks, failed to pay wages on time and reimburse business expenses, and required employees to sign invalid non-compete agreements, among other wage and hour violations.
The parties reached a settlement, which the Court preliminarily approved in an order filed on April 22, 2022. The factual and procedural background of the action and the Court’s analysis of the settlement and settlement class are set forth in that order.
Before the Court is Plaintiffs’ motion for final approval of the settlement and for approval of their attorney fees, costs, and service awards. The motion is unopposed. As discussed below, the Court GRANTS final approval.
I. LEGAL STANDARDS FOR SETTLEMENT APPROVAL
A. Class Action
Generally, “questions whether a [class action] settlement was fair and reasonable, whether notice to the class was adequate, whether certification of the class was proper, and whether the attorney fee award was proper are matters addressed to the trial court’s broad discretion.” (Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 234–235 (Wershba), disapproved of on other grounds by Hernandez v. Restoration Hardware, Inc. (2018) 4 Cal.5th 260.)
In determining whether a class settlement is fair, adequate and reasonable, the trial court should consider relevant factors, such as the strength of plaintiffs’ case, the risk, expense, complexity and likely duration of further litigation, the risk of maintaining class action status through trial, the amount offered in settlement, the extent of discovery completed and the stage of the proceedings, the experience and views of counsel, the presence of a governmental participant, and the reaction of the class members to the proposed settlement.
(Wershba, supra, 91 Cal.App.4th at pp. 244–245, internal citations and quotations omitted.)
In general, the most important factor is the strength of the plaintiffs’ case on the merits, balanced against the amount offered in settlement. (See Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 130 (Kullar).) But the trial court is free to engage in a balancing and weighing of relevant factors, depending on the circumstances of each case. (Wershba, supra, 91 Cal.App.4th at p. 245.) The trial court must examine the “proposed settlement agreement to the extent necessary to reach a reasoned judgment that the agreement is not the product of fraud or overreaching by, or collusion between, the negotiating parties, and that the settlement, taken as a whole, is fair, reasonable and adequate to all concerned.” (Ibid., citation and internal quotation marks omitted.) The trial court also must independently confirm that “the consideration being received for the release of the class members’ claims is reasonable in light of the strengths and weaknesses of the claims and the risks of the particular litigation.” (Kullar, supra, 168 Cal.App.4th at p. 129.) Of course, before performing its analysis the trial court must be “provided with basic information about the nature and magnitude of the claims in question and the basis for concluding that the consideration being paid for the release of those claims represents a reasonable compromise.” (Id. at pp. 130, 133.)
B. PAGA
Labor Code section 2699, subdivision (l)(2) provides that “[t]he superior court shall review and approve any settlement of any civil action filed pursuant to” PAGA. The court’s review “ensur[es] that any negotiated resolution is fair to those affected.” (Williams v. Superior Court (2017) 3 Cal.5th 531, 549.) Seventy-five percent of any penalties recovered under PAGA go to the Labor and Workforce Development Agency (LWDA), leaving the remaining twenty-five percent for the aggrieved employees. (Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 380, overruled on other grounds by Viking River Cruises, Inc. v. Moriana (2022) ___U.S.___, 2022 U.S. LEXIS 2940.)
Similar to its review of class action settlements, the Court must “determine independently whether a PAGA settlement is fair and reasonable,” to protect “the interests of the public and the LWDA in the enforcement of state labor laws.” (Moniz v. Adecco USA, Inc. (2021) 72 Cal.App.5th 56, 76–77.) It must make this assessment “in view of PAGA’s purposes to remediate present labor law violations, deter future ones, and to maximize enforcement of state labor laws.” (Id. at p. 77; see also Haralson v. U.S. Aviation Servs. Corp. (N.D. Cal. 2019) 383 F. Supp. 3d 959, 971 [“when a PAGA claim is settled, the relief provided for under the PAGA [should] be genuine and meaningful, consistent with the underlying purpose of the statute to benefit the public ….”], quoting LWDA guidance discussed in O’Connor v. Uber Technologies, Inc. (N.D. Cal. 2016) 201 F.Supp.3d 1110 (O’Connor).)
The settlement must be reasonable in light of the potential verdict value. (See O’Connor, supra, 201 F.Supp.3d at p. 1135 [rejecting settlement of less than one percent of the potential verdict].) But a permissible settlement may be substantially discounted, given that courts often exercise their discretion to award PAGA penalties below the statutory maximum even where a claim succeeds at trial. (See Viceral v. Mistras Group, Inc. (N.D. Cal., Oct. 11, 2016, No. 15-CV-02198-EMC) 2016 WL 5907869, at *8–9.)
II. TERMS AND ADMINISTRATION OF SETTLEMENT
The gross settlement amount is $835,000. Attorney fees of up to $400,000 (almost half of the gross monetary settlement) were originally requested, but counsel has reduced their request to the standard one-third of the gross settlement, or $278,333.33.[1] These fees, along with litigation costs not to exceed $15,000 and administration costs of up to $18,000, will be paid from the gross settlement. $140,000 will be allocated to PAGA penalties, 75 percent of which will be paid to the LWDA. The named plaintiffs will seek incentive awards of $7,500 each.
The net settlement will be allocated to settlement class members proportionally based on their eligible workweeks. Class members will not be required to submit a claim to receive their payments. For tax purposes, settlement payments will be allocated 20 percent to wages and 80 percent to interest and penalties. The employer’s share of taxes will be paid separately from the gross settlement.
In addition to the monetary portion of the settlement, Surefox has agreed to non-monetary remedial measures: (1) it will provide written notice of its clock-in/clock-out policies to the specific effect that all time spent performing work duties will be compensated and compensable work time begins when employees arrive at the worksite at their scheduled time and begin working, and (2) it will provide written notice to California guards that they may work for any other entity that is disclosed to Surefox and has been deemed not to create a conflict of interest with their Surefox employment.
With regard to uncashed checks, the settlement agreement states: “The Parties agree that Code of Civil Procedure section 384 does not apply to the settlement. To the extent that Individual Settlement Payment checks are uncashed 120 days after the date listed on the check, the Settlement Administrator will deem the checks to be void and return the amount of uncashed checks to Surefox.”[2]
Per the amended settlement agreement filed on May 9, 2022, the parties agreed to modify the release of claims to encompass “any and all actual or potential claims arising from the factual allegations pled in the Third Amended Complaint in the Consolidated Action, during the Class Period,” including specified wage and hour claims.
The notice process has now been completed. There were no objections to the settlement and 10 requests for exclusion from the class. Of the 734 notices mailed by the administrator, 74 were re-mailed to updated addresses and 5 were ultimately undeliverable. Plaintiffs estimate that the average payment to class members will be $606.12, with a high payment of over $1,300.
At preliminary approval, the Court found that the settlement is a fair a reasonable compromise of the class claims and that the PAGA allocation is genuine, meaningful, and reasonable in light of the statute’s purposes. It finds no reason to deviate from these findings now, especially considering that there are no objections. The Court thus finds that the settlement is fair and reasonable for purposes of final approval.
III. ATTORNEY FEES, COSTS, AND INCENTIVE AWARD
Plaintiffs seek a fee award of $278,333, one-third of the gross settlement, which is not an uncommon contingency fee allocation in a wage and hour class action. This award is facially reasonable under the “common fund” doctrine, which allows a party recovering a fund for the benefit of others to recover attorney fees from the fund itself. Plaintiffs also provide a lodestar figure of $296,750, based on 522.9 hours spent on the case by counsel billing at $450–725 per hour. Plaintiffs’ request results in a negative multiplier. The lodestar cross-check supports the percentage fee requested, particularly given the lack of objections to the attorney fee request. (See Laffitte v. Robert Half Intern. Inc. (Cal. 2016) 1 Cal.5th 480, 488, 503–504 [trial court did not abuse its discretion in approving fee award of 1/3 of the common fund, cross-checked against a lodestar resulting in a multiplier of 2.03 to 2.13].)[3]
Plaintiffs’ counsel also request $15,000 in litigation costs. However, the Declaration of James Treglio filed in support of their motion indicates that counsel has incurred only $5,292 in costs, including “anticipated costs” associated with finalizing the settlement. The Court will award only $5,292 in documented costs to counsel. The $11,000 in administrative costs actually incurred are also approved.
Finally, the named plaintiffs seek incentive awards of $7,500 each. To support their requests, they submit declarations describing their efforts on the case. The Court finds that the class representatives are entitled to enhancement awards and the amounts requested are reasonable. It therefore approves a total of $22,500 in incentive awards.
IV. ORDER AND JUDGMENT
In accordance with the above, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED THAT:
The motion for final approval is GRANTED. The following class is certified for settlement purposes:[4]
All individuals who who were hired by Surefox North America and/or Surefox Consulting LLC between May 1, 2018 and August 1, 2021 and employed in California as non-exempt employees providing security-related services for one or more pay periods at any time from May 1, 2018 through April 22, 2022 (“PAGA Settlement Class” or “PAGA Class Members”); and
All individuals who were hired by Surefox North America and/or Surefox Consulting LLC between January 1, 2018 and August 1, 2021 and employed in California as non-exempt employees providing security-related services for one or more pay periods at any time from January 1, 2018 through April 22, 2022 (collectively, the “Settlement Class” or “Class Members”).
Excluded from the class are the 10 individuals who submitted timely requests for exclusion.
The Court approves the deduction of the following fees and costs from the gross settlement: $278,333 in attorney fees, $5,292 in litigation costs, $11,000 in administrative costs, and $22,500 in incentive awards.
Judgment shall be entered through the filing of this order and judgment. (Code Civ. Proc., § 668.5.) Plaintiffs and the members of the class shall take from their complaint only the relief set forth in the settlement agreement and this order and judgment. Pursuant to Rule 3.769(h) of the California Rules of Court, the Court retains jurisdiction over the parties to enforce the terms of the settlement agreement and the final order and judgment.
The Court sets a compliance hearing for June 1, 2023 at 2:30 P.M. in Department 1. At least ten court days before the hearing, class counsel and the settlement administrator shall submit a summary accounting of the net settlement fund identifying distributions made as ordered herein; the number and value of any uncashed checks; amounts remitted back to Surefox; the status of any unresolved issues; and any other matters appropriate to bring to the Court’s attention. Counsel shall also submit an amended judgment similar to the one described in Code of Civil Procedure section 384, subdivision (b). Counsel may appear at the compliance hearing remotely.
The Court will prepare the order and judgment.
****
LAW AND MOTION HEARING PROCEDURES
Remote hearings are required. If a party wants to appear in person, please contact Rowena Walker (rwalker@) to make that request.
Effective August 15, 2022, Department 1 will be using Microsoft Teams for all remote hearings, unless otherwise ordered by the court. The Teams link for Department 1 can be found at .
State and local rules prohibit recording of court proceedings without a court order. These rules apply while in court and also while participating in a hearing remotely or listening in on a public access line. No court order has been issued which would allow recording of any portion of this motion calendar.
The Court does not provide court reporters for proceedings in the complex civil litigation departments. Any party wishing to retain a court reporter to report a hearing may do so in compliance with this Court’s October 13, 2020 Policy Regarding Privately Retained Court Reporters. The court reporter must participate remotely and cannot be present in the courtroom.
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Calendar Line 2
Case Name: Alejandro Munoz v. Sierra Circuits, Inc., et al.
Case No.: 21CV386080
This is a putative class and Private Attorneys General Act (“PAGA”) action. Plaintiff alleges that Defendant Sierra Circuits, Inc. committed meal and rest break violations, failed to pay minimum and overtime wages, and committed other wage and hour violations.
The parties reached a settlement, which the Court preliminarily approved in an order filed on July 25, 2022. The factual and procedural background of the action and the Court’s analysis of the settlement and settlement class are set forth in that order.
Before the Court is Plaintiff’s motion for final approval of the settlement and for approval of his attorney fees, costs, and service award. The motion is unopposed. As discussed below, the Court GRANTS final approval.
I. LEGAL STANDARDS FOR SETTLEMENT APPROVAL
A. Class Action
Generally, “questions whether a [class action] settlement was fair and reasonable, whether notice to the class was adequate, whether certification of the class was proper, and whether the attorney fee award was proper are matters addressed to the trial court’s broad discretion.” (Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 234–235 (Wershba), disapproved of on other grounds by Hernandez v. Restoration Hardware, Inc. (2018) 4 Cal.5th 260.)
In determining whether a class settlement is fair, adequate and reasonable, the trial court should consider relevant factors, such as the strength of plaintiffs’ case, the risk, expense, complexity and likely duration of further litigation, the risk of maintaining class action status through trial, the amount offered in settlement, the extent of discovery completed and the stage of the proceedings, the experience and views of counsel, the presence of a governmental participant, and the reaction of the class members to the proposed settlement.
(Wershba, supra, 91 Cal.App.4th at pp. 244–245, internal citations and quotations omitted.)
In general, the most important factor is the strength of the plaintiffs’ case on the merits, balanced against the amount offered in settlement. (See Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 130 (Kullar).) But the trial court is free to engage in a balancing and weighing of relevant factors, depending on the circumstances of each case. (Wershba, supra, 91 Cal.App.4th at p. 245.) The trial court must examine the “proposed settlement agreement to the extent necessary to reach a reasoned judgment that the agreement is not the product of fraud or overreaching by, or collusion between, the negotiating parties, and that the settlement, taken as a whole, is fair, reasonable and adequate to all concerned.” (Ibid., citation and internal quotation marks omitted.) The trial court also must independently confirm that “the consideration being received for the release of the class members’ claims is reasonable in light of the strengths and weaknesses of the claims and the risks of the particular litigation.” (Kullar, supra, 168 Cal.App.4th at p. 129.) Of course, before performing its analysis the trial court must be “provided with basic information about the nature and magnitude of the claims in question and the basis for concluding that the consideration being paid for the release of those claims represents a reasonable compromise.” (Id. at pp. 130, 133.)
B. PAGA
Labor Code section 2699, subdivision (l)(2) provides that “[t]he superior court shall review and approve any settlement of any civil action filed pursuant to” PAGA. The court’s review “ensur[es] that any negotiated resolution is fair to those affected.” (Williams v. Superior Court (2017) 3 Cal.5th 531, 549.) Seventy-five percent of any penalties recovered under PAGA go to the Labor and Workforce Development Agency (LWDA), leaving the remaining twenty-five percent for the aggrieved employees. (Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 380, overruled on other grounds by Viking River Cruises, Inc. v. Moriana (2022) ___U.S.___, 2022 U.S. LEXIS 2940.)
Similar to its review of class action settlements, the Court must “determine independently whether a PAGA settlement is fair and reasonable,” to protect “the interests of the public and the LWDA in the enforcement of state labor laws.” (Moniz v. Adecco USA, Inc. (2021) 72 Cal.App.5th 56, 76–77.) It must make this assessment “in view of PAGA’s purposes to remediate present labor law violations, deter future ones, and to maximize enforcement of state labor laws.” (Id. at p. 77; see also Haralson v. U.S. Aviation Servs. Corp. (N.D. Cal. 2019) 383 F. Supp. 3d 959, 971 [“when a PAGA claim is settled, the relief provided for under the PAGA [should] be genuine and meaningful, consistent with the underlying purpose of the statute to benefit the public ….”], quoting LWDA guidance discussed in O’Connor v. Uber Technologies, Inc. (N.D. Cal. 2016) 201 F.Supp.3d 1110 (O’Connor).)
The settlement must be reasonable in light of the potential verdict value. (See O’Connor, supra, 201 F.Supp.3d at p. 1135 [rejecting settlement of less than one percent of the potential verdict].) But a permissible settlement may be substantially discounted, given that courts often exercise their discretion to award PAGA penalties below the statutory maximum even where a claim succeeds at trial. (See Viceral v. Mistras Group, Inc. (N.D. Cal., Oct. 11, 2016, No. 15-CV-02198-EMC) 2016 WL 5907869, at *8–9.)
II. TERMS AND ADMINISTRATION OF SETTLEMENT
The non-reversionary gross settlement amount is $2,000,000. Attorney fees of up to $700,000 (thirty-five percent of the gross settlement),[5] litigation costs not to exceed $25,000, and administration costs of up to $15,000 will be paid from the gross settlement. $100,000 will be allocated to PAGA penalties, 75 percent of which will be paid to the LWDA. The named plaintiff will seek an incentive award of $10,000.
The net settlement will be allocated to settlement class members proportionally based on their weeks/pay periods worked during the class and PAGA periods. Class members will not be required to submit a claim to receive their payments. For tax purposes, settlement payments will be allocated 20 percent to wages and 80 percent to penalties and interest (and PAGA payments all to non-wages). The employer’s share of taxes will be paid separately from the settlement. Funds associated with checks uncashed after 180 days will be paid to the “California State Controller Unpaid Wages Fund.”[6]
In exchange for the settlement, class members who do not opt out will release “all claims alleged or that could have been alleged based on the facts alleged in the Complaint which occurred during the Class Period.” The PAGA release encompasses such released claims under PAGA, as well as “all PAGA claims alleged in the Complaint and Plaintiff’s PAGA notice to the LWDA which occurred during the PAGA Period….” Consistent with the statute, aggrieved employees will not be able to opt out of the PAGA portion of the settlement.
The notice process has now been completed. There were no objections to the settlement and 6 requests for exclusion from the class. One class member’s workweeks were corrected upon receipt and review of a dispute. Of the 823 notices mailed by the administrator, 16 were re-mailed to updated addresses and 5 were ultimately undeliverable. The administrator estimates that the average payment to class members will be $1,457.25, with a high payment of $4,035.12.
At preliminary approval, the Court found that the settlement is a fair a reasonable compromise of the class claims and that the PAGA allocation is genuine, meaningful, and reasonable in light of the statute’s purposes. It finds no reason to deviate from these findings now, especially considering that there are no objections. The Court thus finds that the settlement is fair and reasonable for purposes of final approval.
III. ATTORNEY FEES, COSTS, AND INCENTIVE AWARD
Plaintiff seeks a fee award of $666,666.67, one-third of the gross settlement, which is not an uncommon contingency fee allocation in a wage and hour class action. This award is facially reasonable under the “common fund” doctrine, which allows a party recovering a fund for the benefit of others to recover attorney fees from the fund itself. Plaintiff also provides a lodestar figure of $653,460, based on 872 hours spent on the case by counsel billing at $650–850 per hour. Plaintiff’s request results in a modest multiplier of 1.02. The lodestar cross-check supports the percentage fee requested, particularly given the lack of objections to the attorney fee request. (See Laffitte v. Robert Half Intern. Inc. (2016) 1 Cal.5th 480, 488, 503–504 [trial court did not abuse its discretion in approving fee award of 1/3 of the common fund, cross-checked against a lodestar resulting in a multiplier of 2.03 to 2.13].)
Plaintiff’s counsel also request $18,412.98 in litigation costs, below the amount estimated at preliminary approval. Plaintiff’s costs appear reasonable based on the summary provided and are approved. The $14,350 in administrative costs are also approved.
Finally, the named plaintiff seeks an incentive award of $10,000. To support his request, he submits a declaration describing his efforts on the case. The Court finds that the class representative is entitled to an enhancement award and the amount requested is reasonable.
IV. ORDER AND JUDGMENT
In accordance with the above, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED THAT:
The motion for final approval is GRANTED. The following class is certified for settlement purposes:
All current and former hourly paid or non-exempt persons employed by Defendant in California at any time beginning February 21, 2017, through and including April 29, 2022.
Excluded from the class are the 6 individuals who submitted timely requests for exclusion.
Judgment shall be entered through the filing of this order and judgment. (Code Civ. Proc., § 668.5.) Plaintiff and the members of the class shall take from their complaint only the relief set forth in the settlement agreement and this order and judgment. Pursuant to Rule 3.769(h) of the California Rules of Court, the Court retains jurisdiction over the parties to enforce the terms of the settlement agreement and the final order and judgment.
The Court sets a compliance hearing for July 13, 2023 at 2:30 P.M. in Department 1. At least ten court days before the hearing, class counsel and the settlement administrator shall submit a summary accounting of the net settlement fund identifying distributions made as ordered herein; the number and value of any uncashed checks; amounts remitted to the Controller’s Officer; the status of any unresolved issues; and any other matters appropriate to bring to the Court’s attention. Counsel shall also submit an amended judgment as described in Code of Civil Procedure section 384, subdivision (b). Counsel may appear at the compliance hearing remotely.
The Court will prepare the order and judgment.
****
LAW AND MOTION HEARING PROCEDURES
Remote hearings are required. If a party wants to appear in person, please contact Rowena Walker (rwalker@) to make that request.
Effective August 15, 2022, Department 1 will be using Microsoft Teams for all remote hearings, unless otherwise ordered by the court. The Teams link for Department 1 can be found at .
State and local rules prohibit recording of court proceedings without a court order. These rules apply while in court and also while participating in a hearing remotely or listening in on a public access line. No court order has been issued which would allow recording of any portion of this motion calendar.
The Court does not provide court reporters for proceedings in the complex civil litigation departments. Any party wishing to retain a court reporter to report a hearing may do so in compliance with this Court’s October 13, 2020 Policy Regarding Privately Retained Court Reporters. The court reporter must participate remotely and cannot be present in the courtroom.
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Calendar Line 3
Case Name: Carl Jasper, et al. v. Chubb National Insurance Company, et al.
Case No.: 20CV364121
Plaintiff Carl Jasper alleges he is due coverage under an policy issued by Defendants Chubb National Insurance Company and Federal Insurance Company (“Excess Policy” or “Federal Policy”), for claims by his former employer, Plaintiff Maxim Integrated Products Inc., to recover defense and settlement costs in underlying litigation involving the backdating of stock options at Maxim.
Before the Court are: (1) Defendants’ motion for summary judgment, or in the alternative, summary adjudication and (2) Plaintiffs’ motion for summary adjudication of issues. As discussed below, the Court GRANTS Defendants’ motion and DENIES Plaintiffs’.
I. BACKGROUND
As alleged in the complaint, Mr. Jasper was the Chief Financial Officer (“CFO”) and Vice President of Maxim from 1998 to 2007. (Complaint, ¶ 18.) On January 31, 2007, Mr. Jasper terminated his employment and executed a Severance Agreement with Maxim after an investigation discovered that Maxim’s stock options had been improperly backdated over a number of years. (Id., ¶ 19.) Although Mr. Jasper never backdated any stock options himself, he was responsible as CFO since he had submitted annual and quarterly reports containing false information to the Securities and Exchange Commission (“SEC”) and to Maxim’s board of directors pertaining to the backdated stock options. (Ibid.) Upon learning of potential liability for the backdated stock options, Maxim timely reported the circumstances to its insurers. (Ibid.)
A. Litigation Concerning Backdating at Maxim
A number of lawsuits were filed against Maxim and various officers and directors, including a shareholder derivative filed in Delaware Chancery Court (Ryan v. Gifford (Del.Ch., Civil Action No 2213-CC), the “Derivative Action”), as well as actions brought by shareholders in the United States District Court for the Northern District of California and actions in the Superior Court of California, County of Santa Clara (collectively, the “California Actions,” including In re Maxim Integrated Products, Inc. Securities Litigation (N.D.Cal., Case No. C-08-00832-JW) (the “Class Action”)). (Complaint, ¶ 20.) All of these lawsuits were settled. (Ibid.)
On December 4, 2007, the Securities and Exchange Commission (“SEC”) filed its own enforcement action against Maxim, Mr. Jasper, and Maxim’s former Chief Executive Officer for violations of the Securities and Exchange Act arising from the backdated stock options and the SEC filings made on Maxim’s behalf (Securities and Exchange Commission v. Jasper (N.D.Cal., Case No. CV 07-cv-6122-JW), the “SEC Action”).[7] (Complaint, ¶ 21.) The SEC Action proceeded to jury trial, and on November 5, 2010, Mr. Jasper was found in violation of 8 of 11 counts stemming from the backdated stock options and misrepresentations made in SEC filings. (Id., ¶ 22.) Specifically, the jury found that Mr. Jasper engaged in fraudulent conduct in connection with Maxim’s issuance of stock options from 2000 to 2005. (Ibid.) He was found liable for securities fraud and for making knowingly false statements and certifications. (Ibid.) Mr. Jasper was ordered to pay a civil penalty in the amount of $360,000, and was disgorged an additional $1.8 million as a forfeiture of bonuses and profits. (Ibid.)[8]
Maxim and Mr. Jasper were subject to an Indemnification Agreement, which provided that Maxim would advance payment for Mr. Jasper’s fees to the fullest extent permitted by law for certain claims arising out of his employment. (Complaint, ¶ 24.) The Indemnification Agreement further provided for Maxim’s ability to recover any and all amounts advanced to Mr. Jasper should it be determined that he was not entitled to indemnification. (Id., ¶ 25.) Throughout the Derivative Action, California Actions, and the SEC Action and its subsequent appeals, Maxim continued to provide for Mr. Jasper’s defense with the counsel of his choosing pursuant to the Indemnification Agreement, and it funded the settlement of claims raised against him. (Id., ¶ 26.) In total, Maxim spent over $187 million on Mr. Jasper’s behalf, including $533,000 to fund his defense in the civil lawsuits, $173 million to fund the civil settlements, and $13,683,025.36 to fund his defense against the SEC Action and his unsuccessful appeals. (Id., ¶ 28.)
Arch Insurance Company and Defendants accepted coverage when this underlying litigation settled, and $15 million was paid from the Primary Policy issued by Arch, exhausting that policy. (Complaint, ¶ 34.) An additional $6 million was paid from the Excess Policy issued by Defendants, leaving $9 million in coverage available. (Ibid.)
B. Litigation Between Maxim and Mr. Jasper
On December 10, 2014, Mr. Jasper sued Maxim in the Superior Court of California, County of Santa Clara, asserting claims for breach of contract, breach of the covenant of good faith and fair dealing, failure to pay wages, conversion, fraud, unfair business practices, and unjust enrichment (Jasper v. Maxim Integrated Products, Inc. (Super. Ct. Santa Clara County, 2019, No. 1-14-cv-274265)).[9] (Complaint, ¶ 29.) Mr. Jasper alleged that Maxim breached the Severance Agreement by refusing to allow him to exercise and cash out his vested stock options and vested restricted stock units worth millions of dollars. (Id., ¶ 30.) Maxim filed counterclaims for declaratory relief, breach of duty of loyalty, breach of fiduciary duty, and breach of contract, seeking to recover the amounts spent to fund Mr. Jasper’s defense in the SEC Action and civil lawsuits, as well as to fund the settlements on his behalf. (Id., ¶ 32.) Despite their previous acceptance of coverage under the Excess Policy, Defendants now refused to indemnify Mr. Jasper or pay his defense costs against Maxim’s counterclaim. (Id., ¶ 35.)
1. Defendants Deny Coverage to Mr. Jasper
On March 28, 2018, more than 10 months after the claim had been tendered to them, Defendants issued a coverage letter that denied Mr. Jasper coverage for the claims alleged in Maxim’s counterclaim. (Complaint, ¶ 40.) But to reach this conclusion, Defendants analyzed coverage not under the Excess Policy to which the claim had been tendered, but under a completely different policy. (Ibid.) Defendants thus erroneously concluded that Maxim’s counterclaims were not brought within the effective policy period, were not reported in a timely manner, and were excluded under a “Personal Conduct Exclusion” in this inapplicable policy. (Ibid.)
Maxim’s counsel wrote back to challenge this supposedly-erroneous analysis, and on June 5, 2018, Defendants issued a second coverage letter, this time under the correct Excess Policy. (Complaint, ¶¶ 41–42.) The letter repeated the same conclusion as before—that no coverage exists—but based on entirely different grounds: now, Defendants reasoned that the settlement of the Derivative Action and California Actions in 2008 extinguished and fully released Mr. Jasper and Defendants from further liability to Maxim for the damages incurred as a result of the Derivative Action, California Actions, or SEC Action. (Id., ¶ 42.) Alternatively, Defendants concluded that Maxim’s claims against Jasper were excluded under “Insured versus Insured” and “Fraudulent Act” exclusions in the Primary Policy. (Ibid.)
The grounds for denying coverage stated in Defendants’ June 5, 2018 letter were again incorrect, according to Plaintiffs. (Complaint, ¶ 43.) Defendants omitted from their analysis that the settlement agreement to the Derivative Action, which it cited as a reason for disclaiming coverage, specifically excluded from the settlement a number of “Reserved Claims” for the settling parties, including “all of their respective claims or rights that may exist for indemnification and/or advancement and/or for reimbursement to Maxim of fees and costs arising under and pursuant to any Defendant’s respective Indemnification Agreement with Maxim.” (Ibid., emphasis original.) Moreover, the exclusions cited by Defendants provided an exception for the recovery of defense costs that were claimed as damages in Maxim’s counterclaim. (Ibid.) These issues were explained in a letter to Defendants by Maxim’s coverage counsel dated July 6, 2018. (Ibid.) Defendants responded with a supplemental letter continuing to disclaim coverage. (Id., ¶ 44.)
2. Defendants Fail to Settle Maxim’s Claims within the Policy Limits
On April 16, 2018, Maxim served Mr. Jasper with a statutory offer to compromise pursuant to Code of Civil Procedure section 998, in the amount of $8,999,999. (Complaint, ¶ 45.) A copy was provided to Defendants for consideration: at the time, $9 million in coverage remained available under the Excess Policy and Defendants had all the information they needed to evaluate the settlement. (Id., ¶¶ 46–47.) Defendants refused to settle and did not request any further information to assess Mr. Jasper’s potential liability or assist in forming a response to the statutory offer to compromise. (Id., ¶¶ 48–49.)
3. Maxim and Mr. Jasper Reach a Settlement and Submit Maxim’s Counterclaim to a Referee
Mr. Jasper settled in an attempt to protect his interests. (Complaint, ¶ 50.) Under the terms of the settlement, he was required to dismiss his complaint against Maxim, forfeiting claims that could be worth over $7 million dollars. (Ibid.) Mr. Jasper also agreed to assign and transfer his assignable rights against Defendants to Maxim, and to jointly prosecute an action for insurance bad faith against them. (Ibid.) In exchange, Maxim agreed not to execute any judgment it may obtain against Mr. Jasper on its counterclaim. (Ibid.)
The parties agreed to refer Maxim’s counterclaim to the Honorable James C. Emerson (Ret.) pursuant to Code of Civil Procedure section 638. (Complaint, ¶ 51.) On October 18, 2019, Judge Emerson issued his decision, ruling that Mr. Jasper could not be indemnified under Maxim’s Indemnification Agreement, the prior settlement agreements did not extinguish Maxim’s claims for recovery of defense costs against Mr. Jasper, and Mr. Jasper breached his contractual and fiduciary duties to Maxim and was liable for damages arising from his conduct. (Ibid.) Judge Emerson ruled that Mr. Jasper was liable for $13,683.025.36 in defense costs advanced by Maxim for defense of the SEC Action and appeals and $533,126.80 for defense costs in the Derivative and California Actions, for a total of $14,236,152.16. (Id., ¶ 53.) He also held that Maxim was entitled to prejudgment interest for the advanced defense costs, which totaled $5,997,612.90 as of October 2, 2019 (and which continued to accrue at a rate of $2,925.24 per day). (Id., ¶ 54.) The Referee’s decision was reduced to a judgment filed in the Superior Court of California, County of Santa Clara on November 15, 2019 (the “Stipulated Judgment”). (Id., ¶ 55.)
C. The Present Lawsuit
Plaintiffs filed the instant action on February 20, 2020. They assert claims for (1) breach of the implied covenant of good faith and fair dealing and (2) breach of contract. The matter was designated as complex pursuant to a joint motion by the parties.
The parties have proceeded with discovery, and agreed that coverage issues should be resolved through motions for summary judgment or summary adjudication to effectively manage the case. These motions were accordingly submitted to the Court.
II. LEGAL STANDARDS
“A defendant seeking summary judgment must show that at least one element of the plaintiff’s cause of action cannot be established, or that there is a complete defense to the cause of action. … The burden then shifts to the plaintiff to show there is a triable issue of material fact on that issue.” (Alex R. Thomas & Co. v. Mutual Service Casualty Ins. Co. (2002) 98 Cal.App.4th 66, 72; see also Code Civ. Proc., § 437c, subd. (p)(2).)[10]
A plaintiff or cross-complainant has met its burden on summary judgment or adjudication if it “has proved each element of the cause of action entitling [it] to judgment on that cause of action. Once the plaintiff or cross-complainant has met that burden, the burden shifts to the defendant or cross-defendant to show that a triable issue of one or more material facts exists as to that cause of action or a defense thereto.” (Code Civ. Proc., § 437c, subd. (p)(1).)
These standards provide for a shifting burden of production; that is, the burden to make a prima facie showing of evidence sufficient to support the position of the party in question. (See Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850–851.) The burden of persuasion remains with the moving party and is shaped by the ultimate burden of proof at trial. (Ibid.) “There is a triable issue of material fact if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof.” (Ibid.) The opposing party must produce substantial responsive evidence that would support such a finding; evidence that gives rise to no more than speculation is insufficient. (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 162–163.)
On summary judgment, “the moving party’s declarations must be strictly construed and the opposing party’s declaration liberally construed.” (Hepp v. Lockheed-California Co. (1978) 86 Cal.App.3d 714, 717 (Hepp); see also Johnson v. American Standard, Inc. (2008) 43 Cal.4th 56, 64 [the evidence is viewed in the light most favorable to the opposing plaintiff; the court must “liberally construe plaintiff’s evidentiary submissions and strictly scrutinize defendant’s own evidence, in order to resolve any evidentiary doubts or ambiguities in plaintiff’s favor”].) Summary judgment may not be granted by the court based on inferences reasonably deducible from the papers submitted, if such inferences are contradicted by others which raise a triable issue of fact. (Hepp, supra, 86 Cal.App.3d at pp. 717–718.)
Even if there are some triable issues in the case, the court has the power to summarily adjudicate that one or more causes of action has no merit, there is no affirmative defense to one or more causes of action, there is no merit to a claim for punitive damages (Civil Code section 3294), or one or more defendants either owed or did not owe a duty to the plaintiff or plaintiffs. (Code Civ. Proc., § 437c, subd. (f)(1).) Absent a stipulation approved by the court, “[a] motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty.” (Ibid.)
III. DEFENDANTS’ MOTION
Defendants move for summary judgment on the grounds that there is no coverage for the claims submitted to the Excess Policy and Chubb National is not a party to that policy. In the alternative, they move for summary adjudication that there is no coverage for the Stipulated Judgment.
It is undisputed that the Excess Policy follows form to the Primary Policy issued by Arch. (Joint Statement of Stipulated Facts, no. 5.) Defendants contend that “Loss” under that policy is defined not to include any amount that represents or is substantially equivalent to disgorgement or restitutionary or recessionary damages and “matters uninsurable under the applicable law.” Defendants urge that Maxim’s counterclaims sought uninsurable restitution, and the Stipulated Judgment is therefore not covered. Coverage is also precluded under Insurance Code section 533 (“Section 533”), which prohibits coverage for loss caused by the willful (including fraudulent) act of the insured. Defendants further contend that coverage is precluded under three exclusions in the Primary Policy.
Plaintiffs respond that Defendants’ broad interpretation of “restitution” conflicts with authority from the California Supreme Court. They urge that they seek coverage for defense costs that Maxim advanced on Mr. Jasper’s behalf, which are expressly exempted from the exclusions Defendants rely on, rather than damages caused by Mr. Jasper’s fraudulent conduct.[11]
A. Material Facts
The material facts are undisputed, and are set forth in detail in the parties’ Joint Statement of Stipulated Facts as well as Defendants’ Separate Statement filed in support of their motion.[12] Here, the Court will focus on the key policy language, which is not in dispute.
The insuring clause of the Primary Policy provides that Arch will “pay on behalf of the Insured Persons a Non-Indemnifiable Loss for which the Insured Persons shall become legally obligated to pay as a result of a Claim first made during the Policy Period or Discovery Period, if applicable, against the Insured Persons for a Wrongful Act which takes place during or prior to the Policy Period.” (Defs.’ Sep. Statement (DSS) & Pls.’ Resp., no. 4.) Maxim and its officers and directors—including Mr. Jasper—are Insured Persons. (See id., no. 5.)
“Non-Indemnifiable Loss” means:
Loss incurred by Insured Persons for which the Corporation, and with respect to service in a Non-Profit Outside Position, the Non-Profit Outside Entity:
1) refuses to indemnify or advance, or
(2) fails or refuses to indemnify or advance by reason of the Corporation’s or Non-Profit Outside Entity’s Financial Impairment.
For purposes of this Policy, the Corporation hereby agrees to indemnify the Insured Persons for such Loss and to advance Defense Costs to the fullest extent permitted or required by law, including the making in good faith of any required application for court approval. If the Corporation fails or refuses to provide such indemnification or advancement for the Insured Persons, then any coverage under this Policy for such Insured Persons shall be subject to their compliance with Section XII, Subrogation.
(DSS & Pls.’ Resp., no. 9.)[13]
“Loss” is defined as “damages, judgments (including pre/post-judgment interest on a covered judgment), settlements, and Defense Costs for which the Insured Persons are legally obligated to pay; however, Loss shall not include … (iv) any amount that represents or is substantially equivalent to disgorgement or restitutionary or rescissionary damages, or forfeiture of any profits or remuneration … or (vi) matters which may be deemed uninsurable under the law pursuant to which this Policy shall be construed.” (DSS & Pls.’ Resp., no. 11.) “Defense Costs” means “that portion of Non-Indemnifiable Loss constituting reasonable and necessary fees, costs and expenses consented to by the Insurer (including premiums for any appeal bond, attachment bond or similar bond, but without any obligation to apply for or furnish any such bond) resulting solely from the defense and appeal of a Claim against the Insured Persons, but shall not include salaries, wages, overhead or benefit expenses associated with the Insured Persons or employees of the Corporation.” (Id., no. 12.)
The Primary Policy also contains three relevant exclusions. (DSS & Pls.’ Resp., nos. 15–16.) The first exclusion is for “Non-Indemnifiable Loss” resulting from a claim “which is brought or maintained by, or on behalf, or in the right of the Corporation ….” (Id., no. 15, the “Insured v. Insured Exclusion.”) The others are for “Non-Indemnifiable Loss” resulting from a claim “arising out of, based upon or attributable to the gaining of any profit, remuneration or financial advantage to which such Insured Person was not legally entitled…” or “arising out of, based upon or attributable to the committing of any deliberate criminal or deliberate fraudulent act by such Insured Person…,” as evidenced by a judgment. (Id., no. 16.) But all of these exclusions “shall not apply to Defense Costs.” (Id., nos. 15–16.)
B. Interpreting Insurance Policy Language
“In general, interpretation of an insurance policy is a question of law that is decided under settled rules of contract interpretation.” (State of California v. Continental Ins. Co. (2012) 55 Cal.4th 186, 194 (Continental).)[14] If policy language is clear and explicit, it governs. (Ibid.) But a policy provision will be considered ambiguous “ ‘when it is capable of two or more constructions, both of which are reasonable.’ ” (Id., quoting Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 18 (Waller).)
A term is not ambiguous merely because the policies do not define it. Nor is it ambiguous because of “[d]isagreement concerning the meaning of a phrase,” or “ ‘the fact that a word or phrase isolated from its context is susceptible of more than one meaning.’ ” “ ‘[L]anguage in a contract must be construed in the context of that instrument as a whole, and in the circumstances of that case, and cannot be found to be ambiguous in the abstract.’ ”
(Continental, supra, 55 Cal.4th at p. 195, internal citations omitted.) “If an asserted ambiguity is not eliminated by the language and context of the policy, courts then invoke the principle that ambiguities are generally construed against the party who caused the uncertainty to exist (i.e., the insurer) in order to protect the insured’s reasonable expectation of coverage.” (Ibid.) But that principle does not apply where the policy was negotiated and jointly drafted by parties with relatively equal bargaining power. (See Garcia v. Truck Ins. Exchange (1984) 36 Cal.3d 426, 438.) And “if a term in an insurance policy has been judicially construed, it is not ambiguous and the judicial construction of the term should be read into the policy unless the parties express a contrary intent.” (CDM Investors v. Travelers Casualty & Surety Co. (2006) 139 Cal.App.4th 1251, 1257, internal quotation marks and citation omitted.)
Ultimately, the burden is on an insured to establish that the occurrence forming the basis of its claim is within the basic scope of insurance coverage. (Aydin Corp. v. First State Ins. Co. (1998) 18 Cal.4th 1183, 1188.) Even with that in mind, coverage provisions are construed broadly in favor of the insured. (Id. at p. 1192.) This broad construction “aid[s] the insured in meeting its burden of proof, thereby ensuring that the end result (coverage or noncoverage) conforms to the insured’s objectively reasonable expectations.” (Ibid.) Where basic coverage is established, the burden is on the insurer to prove the claim is specifically excluded. (Ibid.)
C. Coverage
Here, it appears to the Court that—while it advanced these sums—Maxim is refusing to indemnify Mr. Jasper for his underlying liability and costs of defense as reflected in the Stipulated Judgment. (See DSS & Pls.’ Resp. no. 78 [the Stipulated Judgment provides that Mr. Jasper is liable to Maxim for his defense costs in the SEC Action and the Class Action, for a portion of the underlying liability in the Class Action settlement, and for pre-judgment interest].)[15] So the key issue with regard to coverage is whether the damages set forth in the Stipulated Judgment constitute “Loss,” or are instead carved out of that definition as “disgorgement or restitutionary or rescissionary damages” or their substantial equivalent, or as a matter “uninsurable under the law.”
1. Restitution or Its Substantial Equivalent
With regard to restitution, Defendants argue that the Stipulated Judgment implicates “monies—defense fees, costs and settlement payments in the SEC Action and Class Action—which Maxim claimed Jasper wrongfully acquired.” “The fact that the recovery sought by Maxim was restitutionary is further evidenced by the” ruling in the Stipulated Judgement “that the only damages which were sought and obtained by Maxim were repayment of defense fees and costs and settlement amounts which Maxim had previously paid on behalf of Jasper in the SEC Action and the Class Action.”
Plaintiffs respond that this argument conflates “restitution” with “reimbursement.” They emphasize that Mr. Jasper was entitled to have his defense costs advanced prior to a final adjudication of the underlying claims. The defense costs were paid to Mr. Jasper’s attorneys pursuant to the Indemnification Agreement, and Mr. Jasper is now contractually required to reimburse Maxim. According to Plaintiffs, these costs are merely contractual damages, not restitution.
a. AIU
To support their argument that reimbursement does not equal restitution, Plaintiffs rely primarily on AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807 (AIU). AIU held that the comprehensive general liability insurance policies at issue in that case covered, as “damages,” the costs of reimbursing government agencies and complying with injunctions that ordered cleanup under environmental statutes. Rejecting the insurer’s argument that such costs constituted restitution and thus could not be “damages,” the opinion affirmed that the California courts “have recognized a distinction between restitution and compensatory damages” in some contexts. (Id., p. 835.) And reimbursement could be restitution: “[r]eimbursement can reasonably be labelled a restitutive remedy, either because it awards a plaintiff ‘the very thing to which he was entitled’ [citation], or because it attempts to compensate a plaintiff for the cost of performing the duty of another (see Rest., Restitution, § 115 [providing that a person who performs the duty of another is entitled to ‘restitution’]).” (Ibid.)
But this potential distinction did not matter under the AIU policies, because those policies did not distinguish between restitutionary and other “damages”:
This label does not, however, preclude characterization of the amounts in question here as ‘damages’ awarded to compensate a plaintiff for out-of-pocket expenditures. Indeed, restitution, to which the insurers analogize the reimbursement at issue here, is frequently denominated as one type of ‘damages’ for descriptive purposes. [Citations.] Whatever technical distinctions we and other courts have drawn between restitution and compensatory damages in other contexts, in ordinary terms both concepts are within the definition of ‘damages.’ ”
(AIU, supra, 51 Cal.3d at pp. 835–836.)
Here, the policies at issue do distinguish between “disgorgement or restitutionary or rescissionary damages” or their substantial equivalent and covered “Loss.” So the Court needs to decide whether the Stipulated Judgment is restitutionary or not based on the policy language.
b. other key authorities
Other key authorities predating AIU address the concept of restitution in the insurance context. Like AIU, these cases focus on the policy language—i.e., the meaning of the term “damages”—as well as public policy considerations.
Jaffe v. Cranford Ins. Co. (1985) 168 Cal.App.3d 930 (Jaffe) held that there was no duty to defend an insured accused of Medi-Cal fraud and theft, or to reimburse him for his defense costs when he was ultimately found innocent. Addressing the insured’s argument that the Attorney General could have sought repayment of overpaid funds in a civil action, the opinion reasoned that such liability would not be covered either, because this would be restitution and not “damages” within the meaning of the policy. The opinion explained:
“Damages” describes a payment made to compensate a party for injuries suffered. The remedy provided for in sections 14170 et seq. is more properly characterized as restitutionary rather than compensatory in nature. The defendant is asked to return something he wrongfully received; he is not asked to compensate the plaintiff for injury suffered as a result of his conduct. At least absent demonstrably unusual circumstances, we have doubts whether an insurance policy which purported to insure a party against payments of a restitutionary nature would comport with public policy. Although the concept of “restitution” may have a broader meaning in other contexts, we limit our reference to it here to situations in which the defendant is required to restore to the plaintiff that which was wrongfully acquired. In any event, Jaffe’s policy is limited to coverage for “damages” awarded against him. We have no trouble concluding that payments of a restitutionary nature, if sought by the state pursuant to sections 14170 et seq., are not “damages” within the meaning of Jaffe’s policy.
(Jaffe, supra, 168 Cal.App.3d at p. 935; see also AIU, supra, 51 Cal.3d at pp. 836–837 [“[r]eimbursement of response costs … is not restitutive in the narrow sense identified by Jaffe as inappropriate for insurance coverage”].)
Later, Bank of the West v. Superior Court (1992) 2 Cal.4th 1254 (Bank of the West) held that a policy covering damages for advertising injury did not include disgorgement under California’s Unfair Competition Law, Business & Professions Code section 17200 et seq. (“UCL”). Like Jaffe, it did so based on the policy language as well as public policy:
In summary, the Unfair Business Practices Act does not authorize an award of damages, and a definition of “unfair competition” that cannot support a claim for damages cannot reflect the objectively reasonable expectations of the insured. Accordingly, we hold that the policy term “unfair competition” does not refer to conduct that violates the [UCL]. Because the context elucidates the meaning, there is no need to resort to the rule that ambiguities are resolved against the insurer. (See AIU, supra, 51 Cal.3d at p. 822.)
(Bank of the West, supra, 2 Cal.4th at p. 1272.) Citing Jaffe and AIU, the opinion explained that “[i]t is well established that one may not insure against the risk of being ordered to return money or property that has been wrongfully acquired. Such orders do not award ‘damages’ as that term is used in insurance policies.” (Id. at p. 1266.) It emphasized that “AIU did not overrule Jaffe or hold that any award capable of bearing the ‘restitution’ label is insurable as ‘damages.’ ” (Id. at p. 1270.)
c. discussion
Jaffe, AIU, and Bank of the West provide important context, but the policy language here is somewhat different. The policies define “Loss” broadly to include not only “damages” but “judgments (including pre/post-judgment interest on a covered judgment), settlements, and Defense Costs for which the Insured Persons are legally obligated to pay.” But “any amount that represents or is substantially equivalent to disgorgement or restitutionary or rescissionary damages…” is not included. It is not clear that this carve-out is coextensive with the limited public policy exclusion for restitutionary relief first articulated in Jaffe or if it means something broader, but—interpreting coverage broadly in Plaintiffs’ favor—the Court will assume the former.
Plaintiffs urge that, applying the definition of restitution from Jaffe and its progeny, there was nothing “wrongful” about Mr. Jasper’s allowing Maxim to advance his defense costs pursuant to their Indemnity Agreement. This may be true, but wrongfully refusing to repay these sums also counts.[16] “Restitution is not limited to money wrongfully acquired…. Money can be lawfully acquired yet restitution can be owed, because of unjust enrichment and unjust impoverishment. Whenever someone accidentally pays a $100 creditor $1,000 by mistake, the $900 is owed under restitution theory, although the creditor did nothing wrong to obtain it.” (Republic W. Ins. Co. v. Spierer, Woodward, Willens, Denis & Furstman (9th Cir. 1995) 68 F.3d 347, 352, citing Jaffe and Bank of the West.) California authorities thus characterize as “restitution” or “unjust enrichment” defense costs that insurers prophylactically advance for claims that are ultimately not subject to the duty to defend. (See Scottsdale Ins. Co. v. MV Transportation (2005) 36 Cal.4th 643, 659; Blue Ridge Ins. Co. v. Jacobsen (2001) 25 Cal.4th 489, 501; Buss v. Superior Court (1997) 16 Cal.4th 35, 51.)
That is essentially what Maxim did here. Under the Indemnification Agreement, any expenses advanced by Maxim were expressly deemed an undertaking that Mr. Jasper agreed to repay if it was determined that he was not entitled to be indemnified by Maxim. (DSS & Pls.’ Resp., nos. 29, 45.) The Stipulated Judgment held that Mr. Jasper was not entitled to indemnification and must repay those amounts. And those same amounts are what Plaintiffs claim are covered “Loss” in this case. These amounts constitute restitution or its substantial equivalent. While they may also be contractual damages as Plaintiffs urge, there is still no coverage for the Stipulated Judgement when viewed in this light, because contractual damages are not covered “Loss” caused by a “Wrongful Act.” (See August Entertainment, Inc. v. Philadelphia Indemnity Ins. Co. (2007) 146 Cal.App.4th 565, 576 [“D&O policies typically exclude coverage for breach of contract”].)[17]
d. conclusion
For the reasons discussed above, the Stipulated Judgment constitutes restitution or its substantial equivalent. So it is not covered “Loss” under the policies at issue.
2. Uninsurable Under the Law/Insurance Code Section 533
Also carved out of the definition of “Loss” are “matters which may be deemed uninsurable under the law pursuant to which this Policy shall be construed.” Much of Defendants’ discussion of this carve-out addresses the public exclusion for restitutionary relief, which applies here for the reasons already discussed.
Defendants also cite Section 533, which provides that “[a]n insurer is not liable for a loss caused by the wilful [sic] act of the insured….”
Insurance Code section 533 embodies a public policy to discourage willful wrongdoing. Liability arising from intentional and inherently or predictably harmful conduct cannot be covered by liability insurance. But, there may be coverage for negligence, gross negligence and recklessness.
(California Amplifier, Inc. v. RLI Ins. Co. (2001) 94 Cal.App.4th 102, 116.) Section 533 precludes coverage for securities liability based on a knowingly false statement. (Ibid.)
Here, it is undisputed that Mr. Jasper’s conduct giving rise to the underlying actions was knowing and fraudulent. (DSS & Pls.’ Resp., nos. 30–33.) Plaintiffs contend that such conduct must nevertheless be covered, because Maxim would have covered liability arising from non-willful conduct, making the Excess Policy useless to Mr. Jasper under Defendants’ interpretation. But this argument assumes that someone must cover Mr. Jasper’s liability arising from his willful misconduct, and ignores that Section 533 overrides contrary policy terms. (See J. C. Penney Casualty Ins. Co. v. M. K. (1991) 52 Cal.3d 1009, 1019 [“Section 533 is an implied exclusionary clause which by statute is to be read into all insurance policies”], internal citation and quotation marks omitted.)
Plaintiffs go on to argue that they “are not seeking coverage for Jasper’s fraudulent conduct; they are seeking coverage for defense costs.” They urge that reading the policy as a whole, since “Defense Costs” are carved out of its various exclusions, they must be covered.[18] It is true that Section 533 “precludes only indemnification of wilful conduct and not the defense of an action in which such conduct is alleged. … [E]ven though public policy or section 533 precludes an insurer from indemnifying an insured in an underlying action the duty to defend still exists so long as the insured reasonably expect[s] the policy to cover the types of acts involved in the underlying suit[.]” (Marie Y. v. General Star Indemnity Co. (2003) 110 Cal.App.4th 928, 95, italics original, internal citations, quotation marks, and other notations omitted.) But Plaintiffs do not contend that Defendants had a duty to defend Mr. Jasper in the underlying litigation. Instead, Maxim did, and it defended him until he was adjudged to have committed willful misconduct. That triggered Mr. Jasper’s obligation to pay Maxim back, per their contract. All of this liability to Maxim was caused by Mr. Jasper’s willful actions.[19]
Combs v. State Farm Fire & Casualty Co. (2006) 143 Cal.App.4th 1338 (Combs) is illustrative. There, it was held that Section 533 prohibited coverage for attorney fees taxed against the insured as costs after he was found liable for intentional discrimination. The opinion explained:
[S]ection 533 prohibits coverage for any “loss” caused by the willful misconduct of the insured. Liability for the adversary’s costs and attorney fees in this case is a loss caused by and incurred as a result of the insured’s intentional racial discrimination. … While providing a legal defense pursuant to the terms of an insurance policy does not constitute indemnification for a loss, providing a defense is hardly the same as indemnifying the insured for the other party’s costs and attorney fees that the insured becomes obligated to pay only as the result of being found liable for the underlying misconduct. As the court observed in Gray, providing an insured with a defense “does not offend the statute [section 533, and Civil Code section 1668]; a contract to defend an assured upon mere accusation of a wilful tort does not encourage such wilful conduct.” But supplementary coverage for the costs incurred by the prevailing party is not a necessary component of providing the insured with a defense, the obligation to provide which “is discharged when the action is concluded.” Like the duty to indemnify, the obligation to pay costs taxed to the insured “arises only after liability is established.” The attorney fees of the opposing party become payable only if and when the insured has been found liable, in this case as a statutory consequence of its liability. Permitting the wrongdoer to insure against this consequence would, no less than permitting the wrongdoer to be indemnified for the damages he or she must pay as a result of willful misconduct, undercut the public policy behind section 533 and permit the offender to avoid what may be a significant consequence of the wrongdoing.
(Combs, supra, 143 Cal.App.4th at pp. 1345–1346, internal citations omitted.) Similarly, here, Mr. Jasper was provided with a defense, and any obligation in this regard was extinguished when the underlying matters were concluded. At that point, Mr. Jasper became obligated to repay the costs of his defense to Maxim, an obligation that arose when the nature of his liability was established. As with opposing party attorney fees, permitting Mr. Jasper to insure against this obligation would undercut the public policy embodied by Section 533.
Thus, the Stipulated Judgment—including the part that constitutes the costs of defending the underlying actions—is “uninsurable under the law,” namely, Section 533. This is another reason that the Stipulated Judgement is not a covered “Loss” under the policies at issue.
3. Conclusion
The Stipulated Judgment constitutes restitution or its substantial equivalent, and is “uninsurable under the law,” namely, Section 533. So it is not covered “Loss” under the policies at issue. Defendants are entitled to summary judgment, without the need to address their alternative arguments based on the three exclusions mentioned above.
D. Conclusion
Defendants’ motion for summary judgment is GRANTED.
IV. PLAINTIFFS’ MOTION
Plaintiffs’ motion seeks summary adjudication of the following issues: (1) “[a]s to the issue of coverage under Federal’s policy, Jasper’s claim falls within the insuring agreement of the policy” and (2) “[a]s to the issue of coverage under Federal’s policy, Jasper’s claim is not barred by any exclusions in the policy.” The facts Plaintiffs rely on to support their motion are again undisputed,[20] and are in essence the same as those discussed above. For the reasons already discussed, Mr. Jasper’s claim does not pertain to a covered “Loss.” Summary adjudication of the first issue must be denied, mooting the second issue.
Plaintiffs’ motion for summary adjudication is accordingly DENIED.
The Court will prepare the order.
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Case Name: Olga Longoria v. Albeco, Inc., et al.
Case No.: 22CV395980
This is a putative class and Private Attorneys General Act (“PAGA”) action. Plaintiff alleges that Defendant Albeco, Inc. required employees to work off-the-clock, failed to provide meal and rest breaks, and committed other wage and hour violations.
Before the Court is Defendant’s petition to compel arbitration of Plaintiff’s underlying Labor Code claims and to dismiss the putative class claims. Defendant also moves to compel arbitration of the PAGA claim, based on the United States Supreme Court’s recent decision in Viking River Cruises, Inc. v. Moriana (2022) ___U.S.___ [142 S. Ct. 1906, 2022 U.S. LEXIS 2940] (Viking River). Plaintiff opposes the motion on several grounds.
As discussed below, the Court GRANTS Defendant’s motion in part and DENIES it in part.
I. BACKGROUND
As alleged in the operative complaint, Defendant does business in California as Mollie Stone’s Markets. (First Amended Class and Representative Action Complaint (“FAC”), ¶ 10.) Plaintiff worked for Defendant in Santa Clara County as a non-exempt bakery manager from January 2004 to August 2021. (Id., ¶¶ 8, 14.) Defendant required Plaintiff and other employees to work off-the-clock while (1) waiting to undergo a COVID screening before clocking in to work each day, (2) assisting customers before clocking in or after clocking out, (3) receiving text messages and telephones calls outside of business hours, and (4) working through meal periods. (Id., ¶ 16.) In addition, Defendant shaved time from employees’ hours worked, including through the use of “Exception Reports.” (Ibid.)
Plaintiff further alleges that Defendant failed to provide compliant meal and rest periods or pay associated premiums (FAC, ¶¶ 17–18), and failed to reimburse employees for business expenses such as those associated with their use of personal cellular telephones and vehicles, their purchase of masks, and their use of personal equipment when required to work from home (id., ¶ 19). As a result of these other violations, Defendant failed to pay employees all minimum and overtime wages and all meal and rest period premiums owed at the conclusion of their employment, and to provide them with accurate wage statements. (Id., ¶¶ 20–21.) Defendant’s wage statements also failed to show its address as required by California law. (Id., ¶ 21.)
Based on these allegations, Plaintiff asserts putative class claims for (1) failure to pay minimum wages for all hours worked, (2) failure to pay overtime wages, (3) failure to provide meal periods, (4) failure to authorize and permit rest periods, (5) failure to indemnify necessary business expenses, (6) failure to pay wages of discharged employees – waiting time penalties, (7) failure to provide and maintain accurate and compliant wage records, and (8) violation of Business & Professions Code section 17200, et seq. (the “UCL”). Plaintiff also brings (9) a claim for PAGA penalties.
II. MOTION TO COMPEL ARBITRATION
Defendant moves to compel arbitration based on the terms of Plaintiff’s collective bargaining agreement (“CBA”) and successor agreements, which are attached to the Declaration of Erika Deschodt as Exhibits A–D: specifically, Section 18 of the original CBA (Ex. A), as modified by a successor agreement executed in 2020 (Ex. D). Plaintiff opposes the motion, urging that the CBA has expired and does not involve interstate commerce, and the waiver of statutory claims and PAGA waiver are not enforceable. And even if the Court were to order arbitration of the individual component of her PAGA claim, Plaintiff contends that the representative component of that claim should not be dismissed.[21]
A. Legal Standards
“The FAA [Federal Arbitration Act], which includes both procedural and substantive provisions, governs [arbitration] agreements involving interstate commerce.” (Avila v. Southern California Specialty Care, Inc. (2018) 20 Cal.App.5th 835, 840.) However, “[t]he procedural aspects of the FAA do not apply in state court absent an express provision in the arbitration agreement.” (Ibid.) Here, Defendant introduces evidence that the CBA involves interstate commerce.[22] But since the CBA does not expressly state that the FAA’s procedural aspects govern, California arbitration law controls procedure.
Under such California arbitration law, a court must grant a petition to compel arbitration “if it determines that an agreement to arbitrate … exists, unless it determines that: (a) The right to compel arbitration has been waived by the petitioner; or (b) Grounds exist for the revocation of the agreement,” among other exceptions. (Code Civ. Proc., § 1281.2.) The moving party must prove by a preponderance of evidence the existence of the arbitration agreement and that the dispute is covered by the agreement. (See Cruise v. Kroger Co. (2015) 233 Cal.App.4th 390, 396 [under both federal and state law, “the threshold question presented by a petition to compel arbitration is whether there is an agreement to arbitrate”]; Rosenthal v. Great Western Fin’l Securities Corp. (1996) 14 Cal.4th 394, 413 (Rosenthal) [moving party’s burden is a preponderance of evidence].) The burden then shifts to the resisting party to prove a ground for denial. (Rosenthal, supra, 14 Cal.4th at p. 413.)
“In determining the rights of parties to enforce an arbitration agreement within the FAA’s scope, courts apply state contract law while giving due regard to the federal policy favoring arbitration.” (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236.)
But the FAA’s policy favoring arbitration … is merely an acknowledgment of the FAA’s commitment to overrule the judiciary’s longstanding refusal to enforce agreements to arbitrate and to place such agreements upon the same footing as other contracts. Or in another formulation: The policy is to make arbitration agreements as enforceable as other contracts, but not more so. Accordingly, a court must hold a party to its arbitration contract just as the court would to any other kind.
(Morgan v. Sundance, Inc. (2022) ___U.S.___ [142 S.Ct. 1708, 1713], internal citations and quotation marks omitted.)
B. Existence and Scope of Agreement to Arbitrate
Ms. Deschodt declares that Plaintiff was a union employee covered by the CBA—which Plaintiff does not dispute. (See Oswald v. Murray Plumbing & Heating Corp. (2022) 82 Cal.App.5th 938, 942 (Oswald) [“[a]rbitration provisions in a CBA are enforceable with respect to claims made by a union member”].) Rather, Plaintiff argues that the CBA and successor agreements are not properly authenticated and, in any event, have expired. Plaintiff further contends that her claims are not within the scope of the CBA’s arbitration provision, applying case law that requires a “clear and unmistakable” waiver of statutory claims for a CBA’s arbitration provision to apply to such claims.
1. Foundation for the CBA and Successor Agreements
As one Court of Appeal recently summarized,
the moving party bears the burden of producing “prima facie evidence of a written agreement to arbitrate the controversy.” (Rosenthal, supra, 14 Cal.4th at p. 413.) The moving party “can meet its initial burden by attaching to the [motion or] petition a copy of the arbitration agreement purporting to bear the [opposing party’s] signature.” (Bannister v. Marinidence Opco, LLC (2021) 64 Cal.App.5th 541, 543–544 [279 Cal. Rptr. 3d 112] (Bannister).) Alternatively, the moving party can meet its burden by setting forth the agreement’s provisions in the motion. (Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 219 [105 Cal. Rptr. 2d 597] (Condee); see also Cal. Rules of Court, rule 3.1330 [“The provisions must be stated verbatim or a copy must be physically or electronically attached to the petition and incorporated by reference.”].) For this step, “it is not necessary to follow the normal procedures of document authentication.” (Condee, at p. 218.) If the moving party meets its initial prima facie burden and the opposing party does not dispute the existence of the arbitration agreement, then nothing more is required for the moving party to meet its burden of persuasion.
If the moving party meets its initial prima facie burden and the opposing party disputes the agreement, then in the second step, the opposing party bears the burden of producing evidence to challenge the authenticity of the agreement. (See Condee, supra, 88 Cal.App.4th at p. 219.) The opposing party can do this in several ways. For example, the opposing party may testify under oath or declare under penalty of perjury that the party never saw or does not remember seeing the agreement, or that the party never signed or does not remember signing the agreement. [Citations.]
If the opposing party meets its burden of producing evidence, then in the third step, the moving party must establish with admissible evidence a valid arbitration agreement between the parties. The burden of proving the agreement by a preponderance of the evidence remains with the moving party. (Rosenthal, supra, 14 Cal.4th at p. 413.)
(Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165–166.)
Here, Plaintiff does not dispute the existence of the CBA and the successor agreements or that they were binding on her and applied to her employment. So Defendant meets its burden on these issues.
2. Expiration of the CBA
Plaintiff further contends that, because the 2020 successor agreement expired on October 9, 2021, the CBA’s arbitration provisions are no longer in effect. She cites Pittsburgh Mailers Union Local 22 v. PG Publ’g Co. (3d Cir. 2022) 30 F.4th 184 (Pittsburgh Mailers Union), which explains that a court “must apply ordinary contract principles in determining whether a contractual provision in a CBA survives the expiration of the CBA. According to these principles, if a specific provision does not have its own durational clause, the general durational clause of the CBA applies.” (Id. at p. 188.)
Here, there is no dispute that the general durational clause of the CBA applies. But the CBA has not expired: on reply, Defendant introduces the most recent successor agreement, which extends the term of the CBA through April 12, 2025.
In any event, the dispute in Pittsburgh Mailers Union involved facts and occurrences that arose after the CBA in that case had expired. (See Pittsburgh Mailers Union, supra, 30 F.4th at p. 186.) Here, even assuming that the CBA expired in October 2021, Plaintiff’s claims arose during her employment ending in August 2021. So there is no dispute the CBA was in place when the facts at issue arose. As long as Plaintiff’s claims are within the scope of the CBA’s arbitration provision in the first place, they are “subject to arbitration even in the postcontract period.” (Litton Fin. Printing Div. v. NLRB (1991) 501 U.S. 190, 205 (Litton), citing Nolde Bros. v. Bakery & Confectionery Workers Union (1977) 430 U.S. 243 (Nolde Bros.).)
3. Scope of Section 18/“Clear and Unmistakable” Waiver
a. Section 18 of the original CBA
Section 18.1 of the original CBA provides that “[a]ll grievances as defined [by the CBA] are to be processed in accordance with the terms of th[is] section.” The same provision provides the following definition of a grievance:
For the purpose of this Agreement, a grievance is a dispute, difference of opinion, between the parties, and grievances of employees involving or arising out of the meaning, interpretation, application or alleged violation of this Agreement, including all such matters that are arbitrable.
(Sic.) Sections 18.2 and 18.3 establish different arbitration procedures for “DISCIPLINARY GRIEVANCES” in which an employee “feels he has been unjustly discharged or suspended” and “INTERPRETATION OR APPLICATION DISPUTES,” meaning “[d]isputes as to the interpretation or application of the [CBA].”
The first paragraph of Section 18.9 establishes an optional procedure for “CLAIMS”:
In the case of a direct wage claim or a claim for contributions to employee benefit plans which does not involve an interpretation of any of the provisions of this Agreement, either party may submit such claim for settlement to either the grievance procedure provided for herein or to any other tribunal or agency which is authorized and empowered to effect such a settlement.
Reading these provisions together, while grievances between Defendant and the union itself may be more broadly defined, “grievance of employees” subject to mandatory arbitration are limited to disciplinary grievances and those “involving or arising out of the meaning, interpretation, application or alleged violation of [the CBA].”
Defendant does not argue for a broader interpretation: rather, it contends that because the CBA establishes employees’ working conditions and incorporates the Labor Code, the claims in this action are covered as grievances “involving or arising out of the meaning, interpretation, application or alleged violation” of the CBA. Plaintiff responds that her complaint seeks to enforce statutory rights and not to interpret or enforce the CBA.
b. clear and unmistakable waiver and successor CBA
As the United States Supreme Court explained in [Wright v. Universal Mar. Serv. Corp. (1998) 525 U.S. 70 (“Wright”)], cases involving statutory claims “ultimately concern[] not the application or interpretation of any CBA, but the meaning of a … statute” and rights “distinct from any right conferred by the collective-bargaining agreement.” (Wright, 525 U.S. at pp. 78–79.) In other words, a plaintiff … asserts rights conferred to her and all workers under California law, regardless of whether the employment occurred under the terms of a CBA. Therefore, when a plaintiff has alleged statutory violations, the “ultimate question” is “not what the parties have agreed to, but what [applicable] law requires; and that is not a question which should be presumed to be included within the arbitration requirement.” (Id. at p. 79.)
“Not only is [a plaintiff’s] statutory claim not subject to a presumption of arbitrability … any CBA requirement to arbitrate it must be particularly clear.” (Wright, supra, 525 U.S. at p. 79.) This is required because the “right to a … judicial forum is of sufficient importance to be protected against less-than-explicit union waiver in a CBA.” (Id. at p. 80.) In order for a waiver to be valid, therefore, a CBA must “contain a clear and unmistakable waiver of the covered employees’ rights to a judicial forum” relating to the statutory claims alleged in the complaint. (Id. at p. 82.)
(Vasserman v. Henry Mayo Newhall Memorial Hospital (2017) 8 Cal.App.5th 236, 245 (Vasserman).)
Clearly, Section 18 of the original CBA does not contain a clear and unmistakable waiver of the right to bring statutory claims in court. But as reflected in Exhibit D to Ms. Deschodt’s declaration, the 2020 successor agreement eliminated the first paragraph in Section 18.9 making arbitration of “wage claim[s]” optional, and replaced it with the following provision:[23]
This Agreement hereby incorporates all provisions of the California Labor Code which are subject to redress under the Labor Code Private Attorneys General Act of 2004 (“PAGA”). Any violations of such provisions will be subject to redress solely through the Arbitration and Grievance procedure set forth in this article 18. The arbitrator may award any and all remedies otherwise available under the California Labor Code, except penalties payable to the Labor and Workforce Development Agency.
Plaintiff contends that this provision “does not list Labor Code Sections covered under the CBA, and the language of the CBA explicitly covers only claims under [PAGA] while the complaint in this action includes various Labor Code Section violations.” Moreover, “the CBA excludes award of any remedies to the State of California and does not even cover claims under the ninth cause of action [under PAGA].”
c. discussion
“[I]n determining whether there has been a sufficiently explicit waiver, courts look to the generality of the arbitration clause, explicit incorporation of statutory requirements, and the inclusion of specific contractual provisions.” (Vasserman, supra, 8 Cal.App.5th at p. 246.) “ ‘The test is whether a collective bargaining agreement makes compliance with the statute a contractual commitment subject to the arbitration clause.’ ” (Id., quoting Vasquez v. Superior Court (2000) 80 Cal.App.4th 430, 434.) “At a minimum, the agreement must specify the statutes for which claims of violation will be subject to arbitration.” (Mendez v. Mid-Wilshire Health Care Center (2013) 220 Cal.App.4th 534, 546 (Mendez).)
The 2020 successor agreement does exactly that. Mendez cites Safrit v. Cone Mills Corp. (4th Cir. 2001) 248 F.3d 306 (Safrit) as an example of a case where a clear and unmistakable waiver was found. In Safrit, as here, the same provision both expressly incorporated the statutory provisions at issue (there, “Title VII of the Civil Rights Act of 1964”) and stated that “[u]nresolved grievances arising under this Section are the proper subjects for arbitration.” (Safrit, supra, 248 F.3d at pp. 307–308.) This is in contrast to Vasserman, where the CBA included its own discussion of wage and hour requirements also addressed by the Labor Code, and an immaterial reference to Labor Code penalties, but did not “couple[]” language addressing arbitration “with an explicit incorporation of statutory requirements.” (Vasserman, supra, 8 Cal.App.5th at p. 250; see also Wright, supra, 525 U.S. at p. 81 [general statements of intent not to violate “Federal or State Law” did not incorporate specific antidiscrimination provisions].) Here, the incorporation of specific Labor Code provisions and the requirement that violations of those provisions be arbitrated are coupled.
Plaintiff also cites Cortez v. Doty Bros. Equipment Co. (2017) 15 Cal.App.5th 1 (Cortez), but this case only further undermines her position. Cortez found that an agreement to arbitrate claims arising under a particular wage order was a clear and unmistakable waiver of associated Labor Code claims, even where the relevant Labor Code provisions and indeed the Labor Code itself went unmentioned. It reasoned: “the agreement to arbitrate claims ‘arising under’ Wage Order 16 is clear and unmistakable. Although the Labor Code is not specifically mentioned, we cannot disregard the reality that an employee may enforce the protections of the wage order in court only by bringing a claim under the Labor Code.” (Cortez, supra, 15 Cal.App.5th at p. 14.) Similarly, here, the incorporation of Labor Code provisions subject to PAGA—as a group—is effective, if somewhat indirect.
In sum, the 2020 successor agreement—but not the original CBA—includes a clear and unmistakable waiver of the right to bring certain Labor Code claims in court. So the Court must address how the 2020 successor agreement, specifically, applies to Plaintiff’s claims.
d. temporal scope of the 2020 successor agreement
Plaintiff urges that, per the express terms of the 2020 successor agreement, “[n]othing in this agreement shall be retroactive unless expressly agreed to in a specific provision contained herein.” The modifications to Section 18.9 implementing the PAGA waiver do not state that they are retroactive.
In response, Defendant cites Oswald for the proposition that a union “may agree to an arbitration clause that applies retroactively…, affecting claims that arose while the plaintiff worked for the defendant but before the arbitration clause was signed, if the clause explicitly applies to all claims relating to the employment.” (Oswald, supra, 82 Cal.App.5th at p. 944, italics added.) Here, though, the successor agreement to the CBA expressly provides that none of its provisions are retroactive unless expressly agreed in that provision. That was not the case in Oswald or the authorities it cites, Franco v. Graystone Ridge Condominium (2019) 39 Cal.App.5th 221 and Salgado v. Carrows Restaurants, Inc. (2019) 33 Cal.App.5th 356.
The statement that the successor agreement’s provisions are not retroactive does not directly answer the question of whether the Section 18.9 modifications are not retroactive vis-à-vis claims that had already been filed when the successor agreement was executed, or rather as to claims that had accrued by that time. But viewed in context, the second option must be correct. As already discussed, the 2020 successor agreement was what modified the CBA—which had not previously incorporated any Labor Code provisions or clearly waived employees’ statutory claims—to incorporate the provisions of the Labor Code subject to PAGA. Any violations of the Labor Code that accrued before the successor agreement was executed did not violate the CBA, and so did not qualify as an employee grievance “involving or arising out of the meaning, interpretation, application or alleged violation” of the CBA. So Section 18.9 modifications are not retroactive in that sense.
Thus, Plaintiff is correct that the modified Section 18.9 only applies to claims that accrued after the successor agreement was executed on August 20, 2020.
e. conclusion
In sum, the 2020 successor agreement to the CBA includes a clear and unmistakable waiver of Plaintiff’s underlying Labor Code claims (all of which are enforceable under PAGA, as outlined in Plaintiff’s PAGA notice letter attached to the FAC). These claims (and the derivative claim under the UCL) are subject to arbitration, insofar as they accrued after the successor agreement was executed on August 20, 2020. But claims that accrued before that date are not subject to arbitration.
The PAGA claim itself warrants further discussion.
C. PAGA Claim
For the reasons already discussed, Plaintiff’s PAGA claim is encompassed by the 2020 successor agreement to the CBA as an initial matter, since it arises from events after the successor agreement was executed. But Plaintiff urges that the PAGA waiver is not enforceable under Viking River, and the PAGA claim must proceed in court. Plaintiff further contends that, even if a valid PAGA waiver could be achieved now, this one should not be enforced because it was unenforceable when executed.
The Court’s first task is to apply Viking River to the specific language of the parties’ agreement here.
1. Viking River
The United States Supreme Court granted certiorari in Viking River “to decide whether the [FAA] preempts a rule of California law that invalidates contractual waivers of the right to assert representative claims under [PAGA].” (Viking River, supra, 142 S.Ct. at p. 1913.) That rule of California law was established by Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348 (Iskanian).
In answering that question, the Supreme Court distinguished between two aspects of Iskanian’s holding:
Iskanian’s principal rule prohibits waivers of “representative” PAGA claims in the … sense [that they are brought by employees acting as agents or proxies of the State]. That is, it prevents parties from waiving representative standing to bring PAGA claims in a judicial or arbitral forum. But Iskanian also adopted a secondary rule that invalidates agreements to separately arbitrate or litigate “individual PAGA claims for Labor Code violations that an employee suffered,” on the theory that resolving victim-specific claims in separate arbitrations does not serve the deterrent purpose of PAGA. [Citations.]
(Viking River, supra, 142 S.Ct. at pp. 1916–1917, italics original.) Viking River left the first, “principal” holding of Iskanian intact.[24] But it held that “the FAA preempts the rule of Iskanian insofar as it precludes division of PAGA actions into individual and non-individual claims through an agreement to arbitrate.” (Id. at p. 1925.) Critical to the outcome here, Viking River applied the severability provision in the agreement before it to hold that the valid portion of the waiver must be “enforced in arbitration”:
The agreement between Viking and Moriana purported to waive “representative” PAGA claims. Under Iskanian, this provision was invalid if construed as a wholesale waiver of PAGA claims. And under our holding, that aspect of Iskanian is not preempted by the FAA, so the agreement remains invalid insofar as it is interpreted in that manner. But the severability clause in the agreement provides that if the waiver provision is invalid in some respect, any “portion” of the waiver that remains valid must still be “enforced in arbitration.” Based on this clause, Viking was entitled to enforce the agreement insofar as it mandated arbitration of Moriana’s individual PAGA claim. The lower courts refused to do so based on the rule that PAGA actions cannot be divided into individual and non-individual claims. Under our holding, that rule is preempted, so Viking is entitled to compel arbitration of Moriana’s individual claim.
(Viking River, supra, 142 S.Ct. at pp. 1924–1925, italics added.)
2. Discussion
Viking River held that Iskanian is not preempted by the FAA to the extent that Iskanian held that waivers of representative PAGA claims are invalid. Here, we have such a waiver of representative actions in the successor agreement to the CBA. Again, the relevant provision states:
This Agreement hereby incorporates all provisions of the California Labor Code which are subject to redress under the Labor Code Private Attorneys General Act of 2004 (“PAGA”). Any violations of such provisions will be subject to redress solely through the Arbitration and Grievance procedure set forth in this article 18. The arbitrator may award any and all remedies otherwise available under the California Labor Code, except penalties payable to the Labor and Workforce Development Agency.
Here, by prohibiting the award of PAGA penalties, the provision effects a waiver of the right to bring a representative PAGA action. That waiver must fall under Iskanian. Importantly, both the individual and representative components of a PAGA claim are brought on behalf of the state as the real party in interest (see Oswald, supra, 82 Cal.App.5th at p. 943), and a portion of any penalties awarded in connection with either component of a PAGA claim must go to the state. Viking River has not changed California law in this regard. (See ibid.) Sending any portion of a PAGA claim to an arbitration in which no penalties may be awarded to the state is effectively a waiver of “Iskanian’s principal rule” prohibiting waivers of “representative standing to bring PAGA claims in a judicial or arbitral forum.” (Viking River, supra, 142 S.Ct. at pp. 1916–1917, italics original.)
So then what happens? The CBA has a severability provision, but it does not appear to apply to Plaintiff’s employment.[25] And unlike the agreement in Viking River, the agreement here does not provide for partial enforcement of the representative action waiver, and makes no distinction between an “individual” and a “representative” PAGA claim in this regard. The PAGA waiver is unenforceable, even in part.
Because the successor agreement’s representative action waiver remains unenforceable under Iskanian and Viking River, Plaintiff’s PAGA claim must proceed in court.
III. CONCLUSION
Defendant’s petition to compel arbitration is GRANTED IN PART as to non-PAGA claims that accrued after August 20, 2020. The petition is DENIED as to earlier-accrued Labor Code and UCL claims, and as to the PAGA claim.
Defendant’s request to dismiss Plaintiff’s putative class claims is DENIED.
The Court will prepare the order.
***
LAW AND MOTION HEARING PROCEDURES
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Case Name: Alberto Conchas Jiminez v. M.D.E. Electric Company, Inc., et al.
Case No.: 21CV375173
This is a putative class action alleging wage and hour violations by Defendants M.D.E. Electric Company, Inc. and The Castine Group. Before the Court is a motion for summary judgment by M.D.E. Electric on the ground that it did not employ Plaintiff. Alternatively, M.D.E. moves for summary adjudication of each cause of action asserted by Plaintiff on the same ground. Plaintiff opposes M.D.E. Electric’s motion.
As discussed below, the Court DENIES M.D.E.’s motion in its entirety.
I. BACKGROUND
A. Factual
According to the complaint, Plaintiff worked for Defendants in Santa Clara County as an hourly-paid, non-exempt employee from August 2019 to July 2020. (Class Action Complaint, ¶ 7.) Plaintiff alleges that Defendants were each his employers and are liable for the conduct of one another on one of several theories. (Id., ¶ 12.)
Plaintiff alleges that Defendants failed to pay employees for all hours worked, including minimum wages, straight time wages, and overtime wages, and thus failed to maintain accurate records of the hours employees worked. (Class Action Complaint, ¶ 14.) They regularly required employees to work through their first meal periods and rest periods, and never provided a second meal period when Plaintiff worked over 10 hours in a day. (Id., ¶¶ 15–16.) Defendants failed to timely pay final wages at termination of employment, and failed to pay certain wages owed at termination at all. (Id., ¶ 17.) Finally, Defendants failed to provide accurate itemized wage statements showing all applicable hourly rates and all wages earned. (Id., ¶ 18.)
Based on these allegations, Plaintiff asserts putative class claims for (1) failure to pay minimum and straight time wages for all hours worked, (2) failure to pay overtime wages, (3) failure to provide meal periods, (4) failure to authorize and permit rest periods, (5) failure to pay wages of discharged employees – waiting time penalties, (6) failure to provide and maintain accurate and compliant wage records, and (7) violation of Business & Professions Code section 17200 et seq.
B. Procedural
On January 6, 2022, the Court lifted the discovery stay with respect to all class certification issues for Defendant Castine Group and lifted it for M.D.E. Electric with respect to standing issues only. On September 1, M.D.E. Electric moved for summary judgment, with the hearing originally scheduled for October 27. Per the parties’ stipulation, the hearing was continued to December 1 and the briefing schedule was amended to allow Plaintiff to complete discovery needed to oppose the motion. M.D.E. Electric’s motion has now been fully briefed for hearing by the Court.
II. LEGAL STANDARD
“A defendant seeking summary judgment must show that at least one element of the plaintiff’s cause of action cannot be established, or that there is a complete defense to the cause of action. … The burden then shifts to the plaintiff to show there is a triable issue of material fact on that issue.” (Alex R. Thomas & Co. v. Mutual Service Casualty Ins. Co. (2002) 98 Cal.App.4th 66, 72; see also Code Civ. Proc., § 437c, subd. (p)(2).)
This standard provides for a shifting burden of production; that is, the burden to make a prima facie showing of evidence sufficient to support the position of the party in question. (See Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850–851 (Atlantic Richfield).) The burden of persuasion remains with the moving party and is shaped by the ultimate burden of proof at trial. (Ibid.) “There is a triable issue of material fact if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof.” (Ibid.) The opposing party must produce substantial responsive evidence that would support such a finding; evidence that gives rise to no more than speculation is insufficient. (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 162–163.)
The traditional method for a defendant to meet its burden on summary judgment is by “negat[ing] a necessary element of the plaintiff’s case” or establishing a defense with its own evidence. (Guz v. Bechtel Nat’l, Inc. (2000) 24 Cal.4th 317, 334.) The defendant may also demonstrate that an essential element of plaintiff’s claim cannot be established by “present[ing] evidence that the plaintiff does not possess, and cannot reasonably obtain, needed evidence-as through admissions by the plaintiff following extensive discovery to the effect that he has discovered nothing.” (Atlantic Richfield, supra, 25 Cal.4th at p. 855.)
On summary judgment, “the moving party’s declarations must be strictly construed and the opposing party’s declaration liberally construed.” (Hepp v. Lockheed-California Co. (1978) 86 Cal.App.3d 714, 717 (Hepp); see also Johnson v. American Standard, Inc. (2008) 43 Cal.4th 56, 64 [the evidence is viewed in the light most favorable to the opposing plaintiff; the court must “liberally construe plaintiff’s evidentiary submissions and strictly scrutinize defendant’s own evidence, in order to resolve any evidentiary doubts or ambiguities in plaintiff’s favor”].) Summary judgment may not be granted by the court based on inferences reasonably deducible from the papers submitted, if such inferences are contradicted by others which raise a triable issue of fact. (Hepp, supra, 86 Cal.App.3d at pp. 717–718.)
III. UNDISPUTED MATERIAL FACTS
The following background is undisputed. On August 9, 2019, Plaintiff applied to an open position through a craigslist advertisement. (Sep. Statement of Undisputed Facts (“SS”) and Pl.’s Resp., no. 9.) After Plaintiff submitted his resume, Elodia Criado called him and asked if he was interested in working in the warehouse as a warehouse associate driver, and if Plaintiff had a driver’s license and a clean driving record. (Id., no. 10.) Plaintiff attended an in-person interview conducted by Mike Edens and Ms. Criado. (Id., no. 12.) They offered Plaintiff the position during the interview, which he accepted. (Id., no. 13.)
Following his interview, Plaintiff asked Ms. Criado for a higher hourly rate of pay. (SS and Pl.’s Resp., no. 17.) Ms. Criado advised Plaintiff that she needed to talk with Mr. Edens, but Mr. Edens did not approve the increase. (Id., no. 18.) Plaintiff accepted the job offer and began work. (Id., no. 19.)
One of the individuals who supervised Plaintiff was Andrew Padilla. (SS and Pl.’s Resp., no. 24 [disputed only to the extent that Plaintiff contends others also supervised him].) If Plaintiff ever needed to call in to work late, he would tell Mr. Padilla. (SS and Pl.’s Resp., no. 25.) Meanwhile, Rick Celemin trained Plaintiff on operating forklifts and ensured that Plaintiff obtained the necessary certifications. (Id., no. 28.) If Plaintiff ever had a concern about safety, he would report his concerns to Mr. Celemin or Ms. Criado. (Id., no. 29.)
On July 8, 2020, Plaintiff received a final written warning issued by Ms. Criado concerning unreliable attendance. (SS and Pl.’s Resp., no. 37 [disputed only to the extent that Plaintiff contends he provided reasoning for needing time away from work].) Plaintiff’s employment was terminated on July 13, 2020. (Id., no. 38 [disputed only to the extent that Plaintiff contends M.D.E. Electric’s directors had the power to fire him].)
IV. DISCUSSION
M.D.E. Electric moves for summary judgment on the grounds that it neither employed Plaintiff nor is part of an integrated enterprise with the entity that did, Defendant the Castine Group. On opposition, Plaintiff contends that there are triable issues of material fact with regard to both of these theories.
A. M.D.E. Electric’s Evidence
To support its motion, M.D.E. Electric relies largely on a declaration by its President, Mark Jones.[26] Mr. Jones declares that M.D.E. is an electrical contractor that only employs union electricians. M.D.E. is a separate entity from the Castine Group, and (1) does not exercise control over the day-to-day activities of Castine’s employees, (2) does not hire, employ, compensate or otherwise direct or control any Castine employee, and (3) has no authority to make hiring or termination decisions at Castine. With respect to Plaintiff,
M.D.E. Electric has never exercised any control over the terms or conditions of Mr. Jimenez’s employment at the Castine Group, and never had the right to do so. M.D.E. Electric was not asked to advise and did not advise the Castine Group regarding any terms or conditions of Mr. Jimenez’s employment at the Castine Group. … M.D.E. Electric had no control over and was not asked to advise the Castine Group, and did not advise this entity regarding: (a) Mr. Jimenez’s compensation; (b) Mr. Jimenez’s schedule or working hours; (c) Mr. Jimenez’s job performance; (d) any review of Mr. Jimenez’s job performance; (e) the decision to hire Mr. Jimenez; or (f) the decision to terminate Mr. Jimenez’s employment.
Mr. Jones declares that M.D.E. Electric did not exercise the rights and responsibilities of Plaintiff’s employer, nor did it maintain Plaintiffs personnel file. M.D.E. Electric did not provide any benefits to Plaintiff, and Plaintiff did not sign an employment agreement or contract for employment with M.D.E. Electric. Finally, Mr. Jones declares that M.D.E. has at no time employed Ms. Criado, Mr. Edens, Mr. Padilla, or Mr. Celemin.
M.D.E. Electric also submits several documents indicating that the Castine Group was Plaintiff’s employer: his new hire letter, his wage statements, an employee counseling report, and his termination letter.
B. Joint Employment
The parties agree that the standard stated in Martinez v. Combs (2010) 49 Cal.4th 35 (Martinez) governs the issue of joint employment.[27] Under that standard, there are three alternative definitions of an employer: (a) one who “exercise[s] control over the wages, hours or working conditions” of employees, or (b) one who “suffer[s] or permit[s] [employees] to work,” or (c) one who “engage[s] [employees], thereby creating a common law employment relationship.” (Id. at p. 64.)
1. M.D.E. Electric’s Initial Burden
Under any of these definitions, M.D.E. Electric’s evidence tends to show that it did not exercise control over Plaintiff’s employment, suffer or permit him to work, or engage him in an employment relationship. M.D.E. Electric introduces evidence that it did not recruit or hire Plaintiff, direct or evaluate his work, or terminate his employment. (See Taylor v. Financial Casualty & Surety, Inc. (2021) 67 Cal.App.5th 966, 991–993 (Taylor) [similar evidence by alleged joint employer satisfied its initial burden on summary judgment].) Although it is not very detailed, this evidence satisfies M.D.E.’s initial burden to show it did not directly or indirectly control Plaintiff’s employment or otherwise act as his employer.
2. Plaintiff’s Burden on Opposition
Since M.D.E. meets its initial burden, the Court must decide whether Plaintiff raises a triable issue of fact concerning joint employment.
The question of whether an employment relationship exists is generally a question reserved for the trier of fact. This remains true where the evidence, though not in conflict, permits conflicting inferences. However, if neither the evidence nor inferences are in conflict, then the question of whether an employment relationship exists becomes a question of law.
(Taylor, supra, 67 Cal.App.5th 966, 993–994, internal citations and punctuation omitted.)
Martinez held that an employer includes “ ‘any person … who directly or indirectly, or through an agent or any other person, employs or exercises control over the wages, hours, or working conditions of any person.’ ” (Martinez, supra, 49 Cal.4th at p. 71, italics original.) It observed that employment is defined in terms of control “to reach situations in which multiple entities control different aspects of the employment relationship,” as, “for example, when one entity (such as a temporary employment agency) hires and pays a worker, and another entity supervises the work.” (Id. at p. 76.) But Martinez rejected the plaintiffs’ argument that a business partner of their employer exercised indirect control over their wages, hours, or working conditions simply because the two entities had a close business relationship. (Id. at p. 71–74.) In doing so, it focused on the actual terms of the two entities’ relationship and on the actual exercise of control over the employees.
Here, Plaintiff introduces documents suggesting M.D.E. was his employer: in particular, an offer email from Ms. Criado identifying her as the Human Resources Manages for “MDE Electric Companies” and nowhere identifying the Castine Group as the employer; direct deposit documents identifying “MDE Electric Company” as the employer and authorizing that entity to deposit Plaintiff’s paychecks; a form authorizing “MDE Electric Company, Inc.” to obtain Plaintiff’s driving record; a payroll acknowledgement form suggesting that Plaintiff is subject to “MDE Electric’s rest and meal period policies”; Plaintiff’s training certifications bearing only the logo for “MDE Electric Company”; a job posting for Plaintiff’s “Warehouse Associate/Driver” position identifying the employer as “a major electrical contractor”; and a notice of disability benefits denial identifying “M.D.E. Electric Company Inc.” as Plaintiff’s employer.[28]
Consistent with this evidence, Plaintiff testified at his deposition that he understood Ms. Criado’s offer of employment was made on behalf of M.D.E. Electric, because her email displayed M.D.E.’s logo and came from an M.D.E. email address. Plaintiff testified that he received uniforms indicating that he “was driving M.D.E. trucks,” he received “training from M.D.E. Electric,” and he worked on “job sites that say M.D.E.” No one ever explained to him that he was going to work for the Castine Group. Plaintiff’s duties included working “on the warehouse receiving materials, tools, … marking the tools, putting the M.D.E. signs on the tools [used by electricians and others], deliver materials to the job sites, … and pick up the trash … from the job sites and going to … the dump and dump the garbage.” Plaintiff also submits a declaration consistent with this testimony. Plaintiff declares that, while working at M.D.E. job sites, he “received directions from M.D.E. foreman and also was counseled by the M.D.E. foreman on occasion.” He received requests from foremen to participate in jobsite clean-ups, which would impact his schedule.[29]
Plaintiff also introduces deposition testimony by Mr. Jones. Mr. Jones described the Castine Group as “the parent company of M.D.E. Electric,”[30] and confirmed that the two entities share a business address, Chief Executive Officer, and Chief Financial Officer, and that Mr. Jones serves as a director for both entities. Mr. Jones testified that he determined the rate of compensation for Castine Group employees. Mr. Jones testified that Castine Group employees, but not M.D.E. Electric Company employees, worked at the business address for both entities, while M.D.E. employees worked at various job sites. But M.D.E. Electric’s general manager, Omar Omeragic, is employed by the Castine Group. Mr. Jones testified that Castine employees delivered tools or supplies to M.D.E. job sites virtually every day, based on “what’s needed at those job sites.” M.D.E. Electric employees on the job sides would “not typically communicate with the warehouse workers,” but would communicate with the “warehouse leader” or “purchasing agents,” including Mr. Edens. This would then impact the warehouse workers’ daily assignments. The warehouse workers who drove to the job sites required access to those sites to fulfill their duties. And Mr. Jones testified that M.D.E. Electric foremen could be directing or “counsel[ing]” Castine Group employees while those employees are on job sites. He testified that Castine Group employees or warehouse workers have assisted with job site cleanups at M.D.E. Electric job sites, and he had no evidence to refute that they were directed by M.D.E. Electric foremen and managers while doing so.
Mr. Jones further testified that Mr. Celemin is responsible for safety not only for Castine Group, but also for M.D.E. Electric. He did not know if there were any differences between the meal and rest period policies for M.D.E. Electric and for the Castine Group, and testified that it “appear[ed]” they were the same. M.D.E. Electric and Castine Group employees used the same direct deposit system. Mr. Jones affirmed that an e-mail address would state M.D.E. Electric for M.D.E. Electric Company employees, and was unaware of any differences between Castine employees’ e-mail addresses and M.D.E. employees’ email addresses. M.D.E. Electric and Castine Group used the same workers’ compensation policy, and Ms. Criado would be responsible for reaching out to any M.D.E. Electric foremen or managers if any workers’ compensation concerns arose on a job site.
Plaintiff also introduces deposition testimony by Mr. Eden, who explains that he was hired by M.D.E. Electric in 2005, but then “transitioned” at some point to working for the Castine Group. Mr. Jones hired Mr. Eden and is his “direct boss.” Mr. Eden testified he was “indirect[ly]” involved in hiring warehouse employees, in that he would sit in on the interview and give a recommendation. But he “do[es] not make the ultimate choice,” is not responsible for determining these employees’ rates of compensation, and did not have the power to fire anyone from the Castine Group. He explained that M.D.E. Electric does not have its own accounting group, payroll group, or warehouse, but uses Castine Group’s. Mr. Eden testified that Castine Group employees had identification that allowed them to go on to job sites, which indicated that they were affiliated with M.D.E. Electric Company. The vehicles they drive to job sites indicate the same affiliation: these employees “wouldn’t be allowed on the job site” if their vehicles were identified as Castine Group vehicles. And he testified that these employees would directly call individuals at the job sites to check in about their deliveries, including the foreman.
Plaintiff submits deposition testimony by Ms. Criado, who confirmed that Castine Group provides the administrative services for M.D.E., specifically “payroll services, accounts receivables, accounts payable, and – and some HR support,” including for hiring and terminating union employees. Ms. Criado later testified that there is no HR manager for M.D.E., because the Castine Group provides those services to M.D.E. She confirmed that Castine Group and M.D.E. Electric employees receive the same code of safety practices during orientation, which is drafted by Mr. Celemin and Mr. Jones. Ms. Criado is involved with enforcing labor and employment policies and practices, as well as coaching or disciplining, for both Castine and M.D.E. employees. She administers workers’ compensation claims by M.D.E. employees. Her immediate supervisor is Jennifer Starbird. Mr. Jones and Ms. Starbird determine the rate of compensation for hourly paid employees at the Castine Group, and make hiring and firing decisions. Ms. Criado testified that Mr. Jones determines the operating hours for the Castine Group’s facilities and Mr. Celemin trains its hourly employees. Mr. Celemin also trains M.D.E. Electric employees. M.D.E. and Castine employees are insured by the same company to drive company vehicles, and Ms. Criado’s department maintains the personnel files for both sets of employees.
Plaintiff submits deposition testimony by Mr. Padilla, who affirmed that warehouse associates’ tasks depended on what the M.D.E. Electric job sites needed. M.D.E. foremen would directly request materials or tools from Mr. Padilla as well as Mr. Eden, on a daily basis. Warehouse associates also directly communicated with M.D.E. foremen when delivering supplies or tools to the job sites. Mr. Padilla would alter driver schedules for the next day based on M.D.E. foremen’s requests. Mr. Padilla did not support any other electrical contractors besides M.D.E. Electric during his time with the Castine Group.
Finally, Plaintiff introduces Mr. Celemin’s deposition testimony. Mr. Celemin affirmed that he is responsible for safety for both M.D.E. Electric and Castine Group job sites and that the same safety manual applies to employees of both entities. And he provided additional testimony consistent with the other deponents.
3. Discussion
While M.D.E. Electric meets its initial burden to show it did not employ Plaintiff, Plaintiff introduces ample conflicting evidence on opposition, which would permit a factfinder to conclude that M.D.E. directly or indirectly controlled Plaintiff’s wages, hours, and/or working conditions under Martinez. (See Medina v. Equilon Enters. (2021) 68 Cal.App.5th 868, 879 [“[i]f the putative joint employer … exercises enough control over [an] intermediary entity to indirectly dictate the wages, hours, or working conditions of the employee, that is a sufficient showing of joint employment”].)
Notably, M.D.E. Electric does not attempt to explain what the Castine Group does other than support M.D.E., or provide any details about the relationship between the two entities as in Taylor, Henderson v. Equilon Enterprises, LLC (2019) 40 Cal.App.5th 1111, and Curry v. Equilon Enterprises, LLC (2018) 23 Cal.App.5th 289. While it ultimately may be the case that Castine merely provides services to M.D.E. and retains control over its own employees’ wages, hours, and working conditions as M.D.E. contends, M.D.E.’s evidence about this relationship is limited and very general.
And rather than relying on stray references to M.D.E. on work-related documents or on the branding of his uniforms as M.D.E. suggests, Plaintiff presents evidence that his job was essentially to support M.D.E. job sites, the needs of which dictated his hours and working conditions. His evidence would allow a reasonable factfinder to infer that M.D.E. foremen were controlling his day-to-day duties and performance, whether directly or indirectly through his supervisors, and that Mr. Jones, M.D.E.’s President, had the ultimate power to hire and fire him and to set his wages and hours. Plaintiff also presents evidence that policies and employees common to both M.D.E. and Castine governed his employment. While M.D.E. insists that those in control were acting for the Castine Group, a reasonable factfinder could infer that they were acting for M.D.E., whether directly or indirectly.
Plaintiff thus raises triable issues of material fact on a control theory of joint employment. Summary judgment must be denied, without the need to address Plaintiff’s theory that M.D.E. “suffered or permitted” Plaintiff to work, or his theory that M.D.E. and Castine Group are an integrated enterprise.
V. CONCLUSION
The Court DENIES M.D.E. Electric’s motion for summary judgment/adjudication.[31]
The Court will prepare the order.
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LAW AND MOTION HEARING PROCEDURES
Remote hearings are required. If a party wants to appear in person, please contact Rowena Walker (rwalker@) to make that request.
Effective August 15, 2022, Department 1 will be using Microsoft Teams for all remote hearings, unless otherwise ordered by the court. The Teams link for Department 1 can be found at .
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Case Name: Esteban Palomino v. Northrop Grumman Systems Corp., et al.
Case No.: 19CV345534
This is a class and Private Attorneys General Act (“PAGA”) action alleging wage statement violations against Defendant Northrop Grumman Systems Corporation. In an order filed on February 22, 2022 (“February Order”), the Court granted Plaintiff’s motion to certify the class, “but only as to union employees, who—like Plaintiff—are not subject to arbitration agreements.”
The February Order also addressed a request by Defendant that the Court strike Plaintiff’s PAGA claim as unmanageable:
Finally, Northr[o]p Grumman urges that, for the same reasons it argues against certification, the Court should “exercise its inherent authority to strike [Plaintiff’s] PAGA claims—which are significantly broader than the proposed class—due to a lack of manageability.” While the Court has the authority to strike unmanageable PAGA claims, it declines to do so in response to a request raised in opposition papers. In any event, striking Plaintiff’s PAGA claim in its entirety is inappropriate here since a large portion of the claim, at a minimum, is manageable. The Court accordingly DENIES Northr[o]p Grumman’s request to strike Plaintiff’s PAGA claim as unmanageable.
Defendant now brings a formal motion to strike the PAGA claim as unmanageable specifically as to non-union employees, or otherwise to exclude non-union employees from this claim. Plaintiff opposes Defendant’s motion in its entirety.
In an order filed on October 17, 2022, the Court continued Northrop Grumman’s motion to permit Plaintiff to provide a trial plan and for the parties to meet and confer about it and, if necessary, file supplemental briefs. Plaintiff filed his trial plan on November 4. On November 17, the parties filed a stipulation concerning key facts related to the arbitration agreements at issue, agreeing that “early resolution of the primary legal issue raised in the Motion to Strike —whether the arbitration agreements signed by non-union employees require the dismissal of the PAGA claims brought on their behalf—should be the focus of the hearing set to take place on December 1, 2022.”
Having read and considered Plaintiff’s trial plan and the parties’ supplemental briefing, the Court DENIES Defendant’s motion to strike.
I. DISCUSSION
As an initial matter, the parties dispute whether the Court has the authority to strike unmanageable PAGA claims or portions of PAGA claims. The Court assumes without deciding that it does. (See Wesson v. Staples the Office Superstore, LLC (2021) 68 Cal.App.5th 746, 775.) In any event, as urged by Defendant, the Court has other tools to address an unmanageable PAGA claim short of striking it. (See Estrada v. Royalty Carpet Mills, Inc. (2022) 76 Cal.App.5th 685, 697 [courts may “limit the amount of evidence PAGA plaintiffs may introduce at trial to prove alleged violations to other unrepresented employees. If plaintiffs are unable to show widespread violations in an efficient and reasonable manner, that will just reduce the amount of penalties awarded rather than lead to dismissal”].)
A. Manageability
Defendant fails to show that Plaintiff’s PAGA claim is unmanageable. Northrop Grumman’s motion is based entirely on its argument that non-union employees are subject to agreements to arbitrate their employment claims, while union employees are not. Defendant claims that in certifying a class limited to union employees, the Court held that including both union and non-union employees in one class raised “manageability concerns.” (Mot. at p. 9.) But that is not what the Court held. To the contrary, the February Order observed that unique issues raised by the arbitration agreements “could probably be addressed through the creation of subclasses, since there are a few identical agreements at issue and their enforceability likely turns on the resolution of common issues.” (February Order at p. 6.) However, the Court held that adequacy and typicality were not satisfied as to individuals who signed arbitration agreements where the class representative did not execute such an agreement. (Id., pp. 8–9.)
Adequacy and typicality of the representative plaintiff are not required in PAGA actions. So the February Order does not suggest that the PAGA claim should not proceed as to non-union employees. As for manageability, the Court remains of the view that any issues raised by the arbitration agreements can be addressed by resolving common issues as to a few sets of identical agreements. Northrop Grumman provides no evidence or argument to refute this view, and Plaintiff’s trial plan provides a workable, specific proposal to manage the case. And as discussed below, the parties have now agreed to resolve these issues on stipulated facts. So the arbitration agreements do not present any insurmountable manageability issues.
B. Impact of Viking River
In arguing that non-union employees’ arbitration agreements will fundamentally complicate the resolution of Plaintiff’s PAGA claim, Defendant relies on the United States Supreme Court’s recent decision in Viking River Cruises, Inc. v. Moriana (2022) ___U.S.___ [142 S. Ct. 1906, 2022 U.S. LEXIS 2940] (Viking River). Defendant cites Viking River—and only Viking River—for the proposition that any PAGA claim asserted on behalf of non-union employees is subject to individual arbitration by each of those employees. To allow the Court to resolve this issue in the context of the pending motion to strike, the parties have stipulated to the following:
• Plaintiff is not a party to any arbitration agreement with Defendant.
• Defendant has already submitted evidence of its Arbitration Agreement Program in this action as part of its Opposition to Plaintiff’s Motion for Class Certification, and resubmitted as part of its Motion to Strike. See Sessions Declaration in Support of Motion to Strike, Exhibit 6 (Declaration of Bart Barré in Support of Defendant’s Opposition to Plaintiff’s Motion for Class Certification and accompanying exhibits). For the limited purpose of ruling on Defendant’s Motion to Strike, the agreements attached to the Barré declaration are the only arbitration agreements that Defendant contends cover the representative PAGA claims of the non-union aggrieved employees.
• For the limited purpose of ruling on the Motion to Strike, Plaintiff does not challenge the authenticity of the Arbitration Agreements or that all non-union employees agreed to and assented to them.
Per the parties’ stipulation, and under the Court’s added powers in this complex case,[32] the Court will address the merits of Defendant’s argument based on these stipulated facts.
1. Viking River
The United States Supreme Court granted certiorari in Viking River “to decide whether the [FAA] preempts a rule of California law that invalidates contractual waivers of the right to assert representative claims under [PAGA].” (Viking River, supra, 142 S.Ct. at p. 1913.) That rule of California law was established by Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348 (Iskanian).
In answering that question, the Supreme Court distinguished between two aspects of Iskanian’s holding:
Iskanian’s principal rule prohibits waivers of “representative” PAGA claims in the … sense [that they are brought by employees acting as agents or proxies of the state]. That is, it prevents parties from waiving representative standing to bring PAGA claims in a judicial or arbitral forum. But Iskanian also adopted a secondary rule that invalidates agreements to separately arbitrate or litigate “individual PAGA claims for Labor Code violations that an employee suffered,” on the theory that resolving victim-specific claims in separate arbitrations does not serve the deterrent purpose of PAGA. [Citations.]
(Viking River, supra, 142 S.Ct. at pp. 1916–1917, italics original.) Viking River left the first, “principal” holding of Iskanian intact.[33] But it held that “the FAA preempts the rule of Iskanian insofar as it precludes division of PAGA actions into individual and non-individual claims through an agreement to arbitrate.” (Id. at p. 1925.) Viking River then applied the severability provision in the agreement before it to hold that the valid portion of the waiver must be “enforced in arbitration”:
The agreement between Viking and Moriana purported to waive “representative” PAGA claims. Under Iskanian, this provision was invalid if construed as a wholesale waiver of PAGA claims. And under our holding, that aspect of Iskanian is not preempted by the FAA, so the agreement remains invalid insofar as it is interpreted in that manner. But the severability clause in the agreement provides that if the waiver provision is invalid in some respect, any “portion” of the waiver that remains valid must still be “enforced in arbitration.” Based on this clause, Viking was entitled to enforce the agreement insofar as it mandated arbitration of Moriana’s individual PAGA claim. The lower courts refused to do so based on the rule that PAGA actions cannot be divided into individual and non-individual claims. Under our holding, that rule is preempted, so Viking is entitled to compel arbitration of Moriana’s individual claim.
(Viking River, supra, 142 S.Ct. at pp. 1924–1925.)
2. Discussion
Viking River held that Iskanian is not preempted by the FAA to the extent that Iskanian held that waivers of representative PAGA claims are invalid. Here, the representative plaintiff did not sign any waiver of his right to bring a representative PAGA claim—or any arbitration agreement at all—in the first place. Still, Defendant contends that it is entitled to enforce arbitration agreements signed by other aggrieved employees against this representative plaintiff under Viking River.
Importantly, both the individual and representative components of a PAGA claim are brought on behalf of the state as the real party in interest (see Oswald v. Murray Plumbing & Heating Corp. (2022) 82 Cal.App.5th 938, 943), and a portion of any penalties awarded in connection with either component of a PAGA claim must go to the state. Viking River has not changed California law in this regard. (See ibid.) And Viking River has not narrowed a representative plaintiff’s standing to bring a representative PAGA claim that addresses wage and hour violations committed against other aggrieved employees.
As Viking River itself explained,
PAGA actions … permit the adjudication of multiple claims in a single suit, but their structure is entirely different [from that of a class action]. A class-action plaintiff can raise a multitude of claims because he or she represents a multitude of absent individuals; a PAGA plaintiff, by contrast, represents a single principal, the [Labor and Workforce Development Agency (“LWDA”)], that has a multitude of claims. As a result of this structural difference, PAGA suits exhibit virtually none of the procedural characteristics of class actions. The plaintiff does not represent a class of injured individuals, so there is no need for certification. PAGA judgments are binding only with respect to the State’s claims, and are not binding on nonparty employees as to any individually held claims. [Citation.] This obviates the need to consider adequacy of representation, numerosity, commonality, or typicality. And although the statute gives other affected employees a future interest in the penalties awarded in an action, that interest does not make those employees “parties” in any of the senses in which absent class members are, see Devlin v. Scardelletti, 536 U. S. 1, 122 S. Ct. 2005, 153 L. Ed. 2d 27 (2002), or give those employees anything more than an inchoate interest in litigation proceeds. See Vermont Agency of Natural Resources v. United States ex rel. Stevens, 529 U. S. 765, 773, 120 S. Ct. 1858, 146 L. Ed. 2d 836 (2000) (The “‘right’” to a share of the proceeds of a qui tam action “does not even fully materialize until the litigation is completed and the relator prevails”).
(Viking River, supra, 142 S.Ct. at pp. 1920–1921, italics added.)
Because the aggrieved employees who signed arbitration agreements are in no sense parties to this case, Defendant’s argument that plaintiff “does not have the right to dictate how disputes should be resolved under [those employees’ arbitration agreements]” falls flat. So does its argument that addressing violations against non-union aggrieved employees in this action will allow those employees to “do indirectly that which they cannot do directly” by finding someone else to bring their own claims in court on their behalf. Again, PAGA actions simply “do not adjudicate the individual claims of multiple absent [aggrieved employees]….” (Viking River, supra, 142 S.Ct. at p. 1921.) They instead join the claims of “a single principal, the LWDA, that has a multitude of claims.” (Id. at p. 1920.) Here, neither the representative plaintiff nor the state has agreed to arbitrate these claims. So Viking River has no bearing here.
II. CONCLUSION
For all the reasons discussed above, Defendant’s motion to strike is DENIED.
The Court will prepare the order.
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LAW AND MOTION HEARING PROCEDURES
The Court rescinded, effective June 21, 2021, all prior general orders restricting courthouse access. Remote appearances for complex civil matters are still permitted, but are no longer mandatory. (See General Order Rescinding Portion of May 6, 2020 General Order Concerning Complex Civil Actions, available at
RescindingPortionof050621GeneralOrderConcerningComplexCivilActions.pdf.) If a party gives notice that a tentative ruling will be contested, any party seeking to participate in the hearing remotely should contact CourtCall.
Public access to hearings is available on a listen-only line by calling 888-808-6929 (access code 2752612).
State and local rules prohibit recording of court proceedings without a court order. These rules apply while in court and also while participating in a hearing remotely or listening in on a public access line. No court order has been issued which would allow recording of any portion of this motion calendar.
The Court does not provide court reporters for proceedings in the complex civil litigation departments. Any party wishing to retain a court reporter to report a hearing may do so in compliance with this Court’s October 13, 2020 Policy Regarding Privately Retained Court Reporters. The court reporter must participate remotely and cannot be present in the courtroom.
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Case Name: Roberts v. Larson et al.
Case No.: 18CV336725
After reviewing the Court of Appeal order, the Court agrees with Defendants that Plaintiff’s partial success on her anti-SLAPP motion had no practical benefit, as Defendants retained the same key defenses they had before. Thus, the Court does not find her to be a prevailing party and does not award her attorney fees. (See Mann v. Quality Old Time Service, Inc. (2006) 139 Cal.App.4th 329, 340 (Mann).)
Moreover, the evidence Plaintiff in support of her fee request makes no attempt to allocate the work on the successful claim versus the unsuccessful claims. And the spreadsheet attached to her motion is not authenticated or admissible evidence of fees. It therefore is extremely difficult, if not impossible, for the Court to “first determine the lodestar amount for the successful claims, and, if the work on the successful and unsuccessful causes of action was overlapping, the court should then consider the defendant’s relative success on the motion in achieving his or her objective, and reduce the amount if appropriate.” (Mann, supra, 139 Cal.App.4th at p. 344.)
The Court therefore DENIES Plaintiff’s motion for attorney fees.
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[1] The settlement provides that any portion of the requested attorney fees and costs that is not approved by the Court will be added to the net settlement fund to be paid to class members.
[2] While the Court generally disapproves of reversionary settlements, here, class members are not required to submit a claim to receive their settlement payments, which will revert to Defendants only in the event that a class member fails to cash his or her settlement check within 120 days. Under these circumstances, the Court expects that the reversion will involve only a small portion of the settlement funds, which would be unlikely to reach nonresponsive class members in any event. The Court considers this reversion as part of its analysis of the settlement’s overall fairness. (See In re Microsoft I-V Cases (2006) 135 Cal.App.4th 706, 718–722 [a court-approved settlement may properly include a reversion of unpaid funds to the defendant notwithstanding Code of Civil Procedure section 384].)
[3] Plaintiffs report that Law Office of Sam Karimzadeh and Potter Handy LLP have agreed to share equally their respective portion of any attorney fee award.
[4] On May 9, 2022, the Court entered a stipulated order amending the definitions of the settlement class and PAGA aggrieved employees to include only those employees hired through August 1, 2021.
[5] Counsel ultimately reduced their request to the standard one-third of the gross settlement.
[6] The Court assumes this is a reference to the Unclaimed Property Division of the State Controller’s Office, and has not heard otherwise.
[7] The Court GRANTS Defendants’ request for judicial notice of filings in this action (Exs. 1, 4, & 5 to Defs.’ Req.). (Evid. Code, § 452, subd. (d).)
[8] Mr. Jasper unsuccessfully appealed the District Court’s judgment to the Ninth Circuit. (SEC v. Jasper (2012) 678 F.3d 1116.) He also appealed the Ninth Circuit’s decision to the United States Supreme Court, but certiorari was denied. (Jasper v. SEC (2013) 568 U.S. 1212.)
[9] The Court GRANTS Defendants’ request for judicial notice of filings in this action (Exs. 2, 3, & 6–8 to Defs.’ Req.). (Evid. Code, § 452, subd. (d).)
[10] The traditional method for a defendant to meet its burden on summary judgment is by “negat[ing] a necessary element of the plaintiff’s case” or establishing a defense with its own evidence. (Guz v. Bechtel Nat’l, Inc. (2000) 24 Cal.4th 317, 334.) The defendant may also demonstrate that an essential element of plaintiff’s claim cannot be established by “present[ing] evidence that the plaintiff does not possess, and cannot reasonably obtain, needed evidence-as through admissions by the plaintiff following extensive discovery to the effect that he has discovered nothing.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 855.)
[11] It is not entirely clear whether Plaintiffs seek to recover the entire value of the Stipulated Judgment, or just the component that relates to defense costs. The parties stipulate that “[t]he claim for which Maxim and Carl Jasper are seeking coverage in this action is the Maxim Counterclaims” (Joint Statement of Stipulated Facts, no. 30), which sought (and achieved) recovery for both defense costs and a portion of the Class Action settlement (see id., no. 40). But Plaintiffs’ argument on opposition is entirely focused on “defense costs.” (See, e.g., Opp., p. 20 “[P]laintiffs are not seeking coverage for Jasper’s fraudulent conduct; they are seeking coverage for defense costs.”].) So is their argument in their own motion for summary adjudication. The Court will accordingly focus on defense costs, and deem abandoned for purposes of these motions any argument that Mr. Jasper’s portion of the Class Action settlement is covered. (See Robinson v. Hewlett-Packard Corp. (1986) 183 Cal.App.3d 1108, 1127 [theory not addressed in opposition to motion for summary judgment deemed abandoned]; Depew v. Crocodile Enters. (1998) 63 Cal.App.4th 480, 492, fn. 12 [same].)
[12] As reflected in their response to Defendants’ separate statement, Plaintiffs dispute only one fact, in part, concerning the Excess Policy’s references to Chubb National. (See Defs.’ Sep. Statement & Pls.’ Resp., No. 53.)
[13] “D&O policies generally do not contain a duty to defend, but the insurer is usually obligated to pay defense costs as part of the ‘loss.’ ” (August Entertainment, Inc. v. Philadelphia Indemnity Ins. Co. (2007) 146 Cal.App.4th 565, 574.) The parties agree that the policies at issue do not contain a duty to defend as to the insurers.
[14] Here, the parties have stipulated that the Excess Policy is governed by California law. (Joint Statement of Stipulated Facts, no. 47.)
[15] Defendants dispute this point (see Defs.’ Opp. to Pls.’ Mot., pp. 18–21), but it is unnecessary for the Court to definitively resolve this issue given that Defendants’ primary, dispositive argument is addressed to the policies’ definition of “Loss.” (See id. at p. 15 [“Plaintiffs focus on the “non-indemnifiable” component while ignoring the more fundamental requirement that there must have been a ‘Loss,’ which in this case there is not.”].)
[16] Even the statutes discussed in Jaffe do not appear to require any finding of wrongdoing in the initial receipt of funds to support the restitution of overpaid funds. (See Welf. & Inst. Code, § 14170 et seq.)
[17] Under the policies at issue, “Wrongful Act” means “any actual or alleged breach of duty, neglect, error, misstatement, misleading statement, omission or act by the Insured Persons in their respective capacities as such or in a Non-Profit Outside Position, or any matter claimed against them solely by reason of their status as Insured Persons or by reason of their service in a Non-Profit Outside Position.”
[18] This argument would be better addressed to the interpretation of the policy language, rather than a statutory exclusion that overrides the policy language. But in any event, “an exception to a policy exclusion does not create coverage not otherwise available under the coverage clause.” (Hurley Construction Co. v. State Farm Fire & Casualty Co. (1992) 10 Cal.App.4th 533, 540.)
[19] While the lack of insurance coverage for Mr. Jasper’s liability to Maxim may seem unfair to Maxim, “the public policy embodied in section 533 requires that the burden of paying [fees owed due to intentional misconduct] be borne by the intentional wrongdoer and not by the wrongdoer’s insurance carrier,” even though “denying insurance coverage may in some instances limit the ability of victims of intentional misconduct to collect attorney fees they are awarded.” (Combs v. State Farm Fire & Casualty Co. (2006) 143 Cal.App.4th 1338, 1347.)
[20] Defendants only partially dispute a few of the material facts stated in support of Plaintiffs’ motion, and not in substance.
[21] Plaintiff urges that, if it is inclined to grant Defendant’s motion as to the PAGA claim, the Court should deny Defendant’s request to dismiss the representative component of the PAGA claim without prejudice, pending anticipated guidance from the Supreme Court of California. (See Adolph v. Uber Technologies, Inc. (June 16, 2022, No. S274671) ___Cal.5th___ [2022 Cal. LEXIS 4262] (Adolph) [authorizing supplemental briefing in light of Viking River].) The Court GRANTS Plaintiff’s request for judicial notice of the scope of the supplemental briefing in Adolph.
[22] Ms. Deschodt, Mollie Stone’s Vice President of Human Resources, declares that Mollie Stone’s purchases products, equipment, and machines that are integral to its business operations from outside of California and, in some cases, internationally. It also enters into vendor and distribution agreements with various businesses who are outside of California and those businesses cross state lines to deliver various products to Mollie Stone’s. This is adequate to show that the agreement involves interstate commerce. (See Giuliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1286–1287 [discussing Allied-Bruce Terminix Cos. v. Dobson (1995) 513 U.S. 265, which held that an arbitration clause in a residential pest control contract between an Alabama customer and a local Allied-Bruce Terminix franchise involved interstate commerce because of “the multistate nature of Terminix and Allied-Bruce” and the use of house-repairing materials that “came from outside Alabama”].)
Plaintiff appears to argue that Ms. Deschodt’s declaration cannot stand on its own without some type of additional supporting evidence. This argument lacks merit. Ms. Deschodt establishes her personal knowledge of Mollie Stone’s operations, and Plaintiff does not object to her declaration on this or any other specific ground.
[23] The 2022 successor agreement submitted by Defendant on reply reflects further updates to this provision, but Defendants do not seek to enforce that 2022 provision. So the Court will not address it.
[24] See Viking River, supra, 142 S.Ct. at pp. 1921–1922 (disagreeing “that Iskanian’s prohibition on PAGA waivers is inconsistent with the FAA because PAGA creates an intrinsically representational form of action”; the FAA “do[es] not mandate the enforcement of waivers of representative capacity as a categorical rule”), p. 1925 (“Under our holding in this case, [non-individual PAGA] claims may not be dismissed simply because they are ‘representative.’ Iskanian’s rule remains valid to that extent.”).
[25] Plaintiff was employed as a baker, while the provision in question (Section 19 of the original CBA) appears to apply only to “MEAT” employees.
[26] Plaintiff’s objections to Mr. Jones’s declaration are OVERRULED. (See Taylor v. Financial Casualty & Surety, Inc. (2021) 67 Cal.App.5th 966, 983 [“Shields made his statements as FCS’s president [and] as a member of its board of directors … [who] stated he had personal knowledge of the facts stated in his declaration”; similarly, “McGuire’s status as a McGuire Bros. and DMCG officer and director gave him sufficient personal knowledge to establish a foundation for his assertions”].)
[27] “[I]n Labor Code wage and hour violation cases, the wage order definition of the employment relationship and the Martinez test control.” (Taylor v. Financial Casualty & Surety, Inc. (2021) 67 Cal.App.5th 966, 996.) The parties appear to agree that the applicable wage order is consistent with the standard stated in Martinez.
[28] M.D.E.’s objections to this evidence are OVERRULED. (See Hooked Media Group, Inc. v. Apple Inc. (2020) 55 Cal.App.5th 323, 338 [“Apple’s documents were authenticated both by the attorney’s statement that they had been produced in discovery and by their form, which indicates authenticity.”].)
Plaintiff also submits public filings providing information for M.D.E. Electric and the Castine Group, of which the Court GRANTS judicial notice. (Evid. Code, § 452, subds. (c) & (h).)
[29] The Court SUSTAINS M.D.E’s objections to legal conclusions asserted in Plaintiff’s declaration (objection nos. 1 & 2), but otherwise OVERRULES M.D.E.’s objections to the declaration.
[30] A public filing with the California Secretary of State describes the Castine Group as a holding company.
[31] The Court need not rule on M.D.E’s remaining objections to evidence, as they are immaterial to its disposition of this motion. (See Code Civ. Proc., § 437c, subd. (q) [“In granting or denying a motion for summary judgment or summary adjudication, the court need rule only on those objections to evidence that it deems material to its disposition of the motion. Objections to evidence that are not ruled on for purposes of the motion shall be preserved for appellate review.”].)
[32] “The trial court has broad discretion to fashion suitable methods of practice to manage complex litigation.” (Hernandez v. Superior Court (2003) 112 Cal.App.4th 285, 296; accord Cottle v. Superior Court (1992) 3 Cal.App.4th 1367, 1377.) Therefore, the Court believes it has the power to resolve, in a somewhat-standalone fashion, the legal issue the parties want the Court to decide.
[33] See Viking River, supra, 142 S.Ct. at pp. 1921–1922 (disagreeing “that Iskanian’s prohibition on PAGA waivers is inconsistent with the FAA because PAGA creates an intrinsically representational form of action”; the FAA “do[es] not mandate the enforcement of waivers of representative capacity as a categorical rule”), p. 1925 (“Under our holding in this case, [non-individual PAGA] claims may not be dismissed simply because they are ‘representative.’ Iskanian’s rule remains valid to that extent.”).
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