-MDD Brecher et al v. Citigroup Global Markets, Inc. et al, No. 3:2009cv01344 - Document 62 (S.D. Cal. 2011)
Court Description: ORDER granting in part and denying in part 52 Motion to Dismiss the Second Amended Complaint and denying as moot 52 Motion to Strike. Plaintiffs first and third causes of action are dismissed for failure to state a claim upon which relief can be granted. Defendants Motion to Strike is denied as moot. Plaintiff may file an amended complaint within thirty (30) calendar days from the date of this Order. Signed by Judge Anthony J. Battaglia on 08/05/11. (All non-registered users served via U.S. Mail Service)(cge) (jrl).
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-MDD Brecher et al v. Citigroup Global Markets, Inc. et al Doc. 62 1 2 3 4 5 6 7 8 9 10 UNITED STATES DISTRICT COURT 11 SOUTHERN DISTRICT OF CALIFORNIA 12 13 14 15 16 17 18 DANIEL BRECHER, et al., ) ) ) Plaintiffs, ) v. ) ) CITIGROUP GLOBAL MARKETS, INC., ) et al. ) ) Defendants. ) ) Case No.: 3:09-cv-1344 AJB (MDD) ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS THE SECOND AMENDED COMPLAINT AND DENYING MOTION TO STRIKE AS MOOT [Doc. No. 52] 19 On April 28, 2010, Plaintiffs filed the Second Amended Complaint (“SAC”) [Doc. No. 46] in 20 this action in accordance with the Order Granting in Part Motion to Dismiss filed on March 29, 2010 21 (“March 29 Order”) [Doc. No. 44]. This putative class action asserts claims under California law on 22 behalf of two classes of Defendants’ past or current employees who either did not receive pro rata 23 vesting of company shares, or who were not reimbursed for payments made to support staff. (SAC 6-7.) 24 On July 12, 2010, Defendants filed the instant Motion to Dismiss or, in the Alternative, Motion to Strike 25 Second Amended Complaint [Doc. No. 52]. The Court has considered the SAC, the March 29 Order, 26 and the Motion, along with Plaintiffs’ Opposition [Doc. No. 54], and Defendants’ Reply [Doc. No. 55]. 27 For the following reasons, Defendants’ Motion to Dismiss is GRANTED IN PART and DENIED IN 28 PART as set forth below. The Defendants Motion to Strike is DENIED AS MOOT. 1 3:09-cv-1344 AJB (MDD) Dockets.Justia.com 1 2 BACKGROUND A. Factual Background 3 In August 2005, Smith Barney, a wealth management company and Citigroup subsidiary, hired 4 Plaintiffs Brecher and Short as financial advisors in San Diego, California, and hired Plaintiff Murphy 5 as a financial advisor in Walnut Creek, California. (SAC 3.) In August 2007, Smith Barney hired 6 Plaintiff Taylor as a financial advisor in San Diego. (Id.) As incentive to join the company, Smith 7 Barney awarded Brecher, Short, and Taylor unvested Citigroup shares under the Citigroup Stock Award 8 Program (“CSAP”). (Id. at 3-4.) The CSAP prospectus (“Prospectus”) set forth the terms, and each 9 Plaintiff’s New Hire Agreement outlined the individual award amounts and vesting schedule. (Id at 3.) 10 Brecher was awarded 7,107 shares on a seven-year vesting schedule, with 25% of the total shares 11 vesting in years four, five, six and seven, ending in August, 2012. (Id. at 4.) Short received 11,296 12 shares subject to the same vesting schedule as Brecher’s. (Id.) Taylor received 6,142 shares on a nine- 13 year vesting schedule, with the first 20% of the shares vesting in August, 2012 and 20% of the total 14 shares vesting each year thereafter through August, 2017. (Id.) According to the Prospectus, the award 15 of shares was subject to a cancellation provision which stated that the “award will be cancelled if . . . 16 employment is terminated for any reason before the end of the applicable vesting period” (“Cancella- 17 tion Provision”). (SAC Ex. 1.) 18 During Plaintiffs’ employment at Smith Barney the company instituted a policy whereby 19 Plaintiffs were expected to pay a portion of their commissions to their sales assistants to supplement 20 their sales assistants’ wages. (Id. at 5.) Between January 1, 2007 and June 1, 2009, Brecher and Short 21 paid approximately $20,000 per year to their sales assistant, Taylor paid approximately $3,500 per year 22 to his sales assistant, and Murphy paid approximately $5,000 per year to her sales assistant. (Id.) These 23 payments to the sales assistants were not reimbursed by Smith Barney. (Id.) 24 On or about January 13, 2009, Morgan Stanley and Citigroup entered into a joint venture in 25 which they each contributed portions of their brokerage businesses to create a new entity known as 26 Morgan Stanley Smith Barney (“MSSB”). (Mot. Dismiss Mem. P. & A. 3.) On April 24, 2009, Brecher 27 and Short executed a Financial Advisor/Investment Representative Retention Agreement (“Retention 28 Agreement”). (SAC 6.) This agreement provided that the employee signing the agreement would 2 3:09-cv-1344 AJB (MDD) 1 release Smith Barney and Citigroup from all claims against them, except for claims that arise after the 2 date of the execution of the Retention Agreement or those already filed and pending at the time of the 3 execution of the Retention Agreement. (Id.) Taylor and Murphy did not execute the Retention 4 Agreement. 5 On June 1, 2009, Defendant Citigroup completed the transaction with Morgan Stanley to create 6 MSSB, and Brecher, Short, and Taylor’s employment with Smith Barney was involuntarily terminated 7 without cause as a result of the transaction. (Id. at 3.) Pursuant to the Prospectus, Brecher, Short, and 8 Taylor’s CSAP awards were cancelled. (Id. at 4.) MSSB subsequently hired Brecher, Short, and 9 Taylor, and replaced their cancelled CSAP awards with unvested Morgan Stanley shares with the same 10 vesting schedule. (Id.) Brecher, Short, and Taylor are currently employed by MSSB. (Id.) Murphy 11 voluntarily terminated her employment with Smith Barney in April, 2009, and is not employed by 12 MSSB. (Id.) 13 B. 14 Procedural Background On May 20, 2009, Plaintiffs filed the First Amended Complaint (“FAC”) in the Superior Court 15 of the State of California, County of San Diego. (Not. Removal 2, Doc. No. 1.) Defendants removed 16 the action to the United States District Court, Southern District of California on June 22, 2009, pursuant 17 to 28 U.S.C. § 1332(d)(2) (2006). (Id.) On July 15, 2009, Defendants filed a motion to dismiss the 18 FAC, which was granted in part and denied in part by the March 29 Order. (Doc. Nos. 14, 44.) The 19 March 29 Order dismissed without prejudice the three causes of action that remain in the SAC. (March 20 29 Order at 12.) In granting leave to amend the breach of implied covenant of good faith and fair 21 dealing claim, the Court noted that Plaintiffs “might . . . be able to plead facts showing Defendants did 22 something that violated the covenant of good faith . . . .” (Id. at 10.) Similarly, the Court explained that 23 the “Forfeiture Provisions might . . . be actionable under the UCL if they violate some other law or are 24 unfair for some other reason . . . .” (Id. at 6.) Lastly, the Court dismissed Plaintiffs California Labor 25 Code section 2802 claim because the complaint did not provide enough details to place Defendants on 26 notice of the claims against them. (See id. at 10-11.) 27 28 3 3:09-cv-1344 AJB (MDD) 1 On April 28, 2010, Plaintiffs filed the SAC to address the deficiencies noted in the March 29 2 Order. On May 26, 2010, Defendants filed the Motion to Dismiss or, in the Alternative, Motion to 3 Strike Second Amended Complaint. 4 5 LEGAL STANDARDS A Rule 12(b)(6) motion to dismiss tests the sufficiency of the complaint. Navarro v. Block, 250 6 F.3d 729, 732 (9th Cir. 2001). When determining whether a complaint states a claim, the Court accepts 7 all allegations of material fact in the complaint as true and construes them in the light most favorable to 8 the non-moving party. Cedars-Sinai Med. Ctr. v. Nat’l League of Postmasters of U.S., 497 F.3d 972, 9 975 (9th Cir. 2007) (citation omitted). However, the Court is "not required to accept as true conclusory 10 allegations which are contradicted by documents referred to in the complaint," and does "not . . . 11 necessarily assume the truth of legal conclusions merely because they are cast in the form of factual 12 allegations." Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir. 2003) (citations and 13 quotation marks omitted). 14 Generally, the scope of review on a motion to dismiss for failure to state a claim is limited to the 15 contents of the complaint. See Warren, 328 F.3d at 1141 n.5. Under Rule 12(b)(6), extrinsic evidence 16 can generally only be considered if the motion is converted to a Rule 56 motion for summary judgment. 17 However, “documents whose contents are alleged in a complaint and whose authenticity no party 18 questions, but which are not physically attached to the pleading, may be considered in ruling on a Rule 19 12(b)(6) motion to dismiss.” Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994) overruled on other 20 grounds by Galbraith v. Cnty. of Santa Clara, 307 F.3d 1119 (9th Cir. 2002). The court may treat such a 21 document as "part of the complaint, and thus may assume that its contents are true for purposes of a 22 motion to dismiss under Rule 12(b)(6)." United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003). 23 24 25 Additionally, because the Court is sitting in diversity, it must apply the substantive law of California under the doctrine of Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). DISCUSSION 26 In the SAC, Plaintiffs assert three causes of action against Defendants on behalf of two stock 27 classes. The first cause of action is for breach of the implied covenant of good faith and fair dealing. 28 4 3:09-cv-1344 AJB (MDD) 1 The second is for violation of the Unfair Competition Law section 17200, and the third is for violation 2 of California Labor Code section 2802. 3 The “Stock Award Class” is defined as: 4 All individuals who: (1) were employed by Smith Barney in the State of California; (2) were terminated by Smith Barney as a result of the transaction between Citigroup and Morgan Stanley on or about June 1, 2009; and (3) did not receive immediate vesting of a pro rata portion of their unvested CSAP shares upon their termination from Smith Barney. (SAC 6.) The “Business Expense Class” is defined as: 5 6 7 8 9 All individuals who: (1) were employed by Smith Barney in the State of California on or after January 1, 2008; (2) paid a portion of their commissions to their support staff to supplement their wages; and (3) were not reimbursed for those payments by Smith Barney.(Id. at 7.) 10 A. Breach of Implied Covenant of Good Faith and Fair Dealing 11 In the first cause of action by the Stock Award Class, Plaintiffs claim that the Prospectus and 12 New Hire Agreements contained an implied covenant of good faith and fair dealing that prevented 13 Smith Barney and Citigroup from interfering with Brecher, Short, and Taylor’s rights to receive the 14 benefits under those agreements. (Id. at 8.) Plaintiffs maintain that by terminating Plaintiffs and failing 15 to vest and distribute a pro rata portion of Plaintiffs’ and Stock Award Class members’ unvested CSAP 16 shares, Defendants breached the implied covenant of good faith and fair dealing. (Id.) 17 In the Motion to Dismiss, Defendants assert that Plaintiffs’ claim for breach of covenant of good 18 faith and fair dealing should fail as a matter of law. (Mot. Dismiss Mem. P. & A. 7-10.) The implied 19 covenant, they argue, exists only to protect the agreement actually made. (Id. at 8) (citing Guz v. 20 Bechtel Nat’l, Inc., 24 Cal. 4th 317, 349 (2000)). Because the express terms of the agreements 21 specifically allow the cancellation of unvested awards at the termination of employment, the implied 22 covenant may not “be read to prohibit a party from doing that which is expressly permitted by an 23 agreement.” (Id.) (quoting Carma Developers, Inc. v. Marathon Develop. Cal. Inc., 2 Cal. 4th 342, 374 24 (1992)). 25 In the Opposition, Plaintiffs argue that “[a] specific bonus plan normally becomes binding as a 26 unilateral contract when the employee begins performance, in the sense that the plan then cannot be 27 revoked by the employer.” (Opp’n 6) (quoting Neisendorf v. Levi Strauss & Co., 143 Cal. App. 4th 509, 28 523 (2006)). The termination without cause was “in effect, an attempt by Defendants to revoke 5 3:09-cv-1344 AJB (MDD) 1 Plaintiffs’ rights under the CSAP. Defendants’ actions alone prevented Plaintiffs from receiving the 2 benefit of their agreement.” (Opp’n 6.) 3 Plaintiffs also rely heavily on the fact that Plaintiffs Brecher, Short, and Taylor were terminated 4 involuntarily without cause to support their breach of implied covenant claim. They claim that 5 “involuntary termination does not impede an employee’s right to receive a bonus where no other action 6 is required on the part of the employee to earn the bonus.” Id. at 7, quoting Willson v. Turner Resilient 7 Floors, 89 Cal. App. 2d 589 (1949). Because it was solely Defendants’ actions, not Plaintiffs’, that 8 caused Brecher, Short, and Taylor to lose the unvested shares, Plaintiffs are entitled to a portion of the 9 shares “because they performed all the conditions necessary to do so.” (Opp’n 7.) 10 Additionally, Plaintiffs assert that in a recent case decided “under nearly identical facts,” the 11 California Supreme Court recently explained that “common law contract principles prohibit an employer 12 from terminating an employee without cause unless the employer distributes a pro rata portion of 13 unvested stock.” Id. citing Schachter v. Citigroup, Inc., 47 Cal. 4th 610, 622 (2009). In Schachter, the 14 Plaintiff employee voluntarily participated in the company’s capital accumulation plan. Schachter, 47 15 Cal. 4th at 614. Under the plan, eligible employees could elect to receive awards of restricted company 16 stock “in lieu of cash payment of a percentage of the employee’s annual compensation.” Id. The 17 California Supreme Court noted, in dicta, that if employee’s employment had been terminated without 18 cause, the plan’s stated terms required him to forfeit his shares of restricted stock in exchange for “a 19 cash payment equal to the portion of this or her annual compensation that had been paid in the form of 20 such forfeited [r]estricted [s]tock.” Id. at 622. That provision, the court opined, is consistent with 21 contract law principles prohibiting efforts by one party to a contract to prevent completion by the other 22 party. Id. 23 Here, Plaintiffs claim that they received unvested stock as incentive to join Smith Barney. (SAC 24 3-4.) The vestment schedule no doubt served as an incentive to remain with the company for an 25 extended period of time. Unlike in Schachter, Plaintiffs have not plead that the unvested stock award 26 was in lieu of annual compensation. Schachter was eligible to receive a pro rated cash equivalent of the 27 stock in case of involuntary termination without cause because he had already earned the amount as 28 annual compensation. In other words, Schachter could “gather the fruit” of his labor. Schachter, 47 6 3:09-cv-1344 AJB (MDD) 1 Cal. 4th at 622. Plaintiffs argue that they “are entitled to ‘gather the fruit’ of their labor because they 2 performed all conditions necessary to do so.” (Opp’n 7.) Plaintiffs’ unvested stock awards, however, 3 are directly related to the amount of time they were employed by Smith Barney under the express terms 4 of the agreements. Plaintiffs did not perform all conditions necessary to “gather the fruit” because they 5 did not remain employed throughout the vesting schedule. In fact, remaining with the company was the 6 only condition necessary to receive the bonus. 7 But for purposes of this Motion, the issue is whether or not Plaintiffs have adequately plead a 8 cause of action for breach of implied covenant of good faith and fair dealing. Defendants argue, and the 9 Court agrees, that Plaintiffs have not. (Reply 2.) In dismissing the same claim in the First Amended 10 Complaint, the Court noted that Plaintiffs did not allege any factual allegations to explain what 11 Defendants did to breach the implied covenant. (March 29 Order 10.) In response, Plaintiffs plead two 12 acts by Defendants in the SAC that allegedly breached the implied covenant of good faith and fair 13 dealing: (1) “terminating plaintiffs’ and the Stock Award Class member’s employment . . . ;” and (2) 14 “failing to vest and distribute a pro rata portion of [Plaintiffs’ and Stock Award Class members’] 15 unvested CSAP shares . . . .” (SAC 8.) 16 As to the first act, while the implied covenant of good faith and fair dealing “exists . . . to prevent 17 one contracting party from unfairly frustrating the other party's right to receive the benefits of the 18 agreement actually made,” Guz, 24 Cal. 4th at 349, the California Supreme Court has made clear that an 19 employer’s termination decision, absent a contractual provision otherwise, is not a breach of the implied 20 covenant of good faith and fair dealing. See id. at 350. In Guz v. Bechtel Nat’l, Inc., the California 21 Supreme Court explained: 22 24 Precisely because employment at will allows the employer freedom to terminate the relationship as it chooses, the employer does not frustrate the employee's contractual rights merely by doing so. In such a case, “the employee cannot complain about a deprivation of the benefits of continued employment, for the agreement never provided for a continuation of its benefits in the first instance.” 25 Id. (quoting Hejmadi v. AMFAC, Inc., 202 Cal.App.3d 525, 547(1988)). California Labor Code section 26 2922 establishes the presumption that an employer may terminate its employees at will, for any or no 27 reason. Plaintiffs have not plead that Defendants violated any contractual provision restricting the 28 employer’s right to terminate employees at will. Moreover, Plaintiffs have not alleged that Defendants 23 7 3:09-cv-1344 AJB (MDD) 1 exercised their discretion to terminate Plaintiffs’ employment in bad faith. See McCollum v. xCare.Net, 2 Inc., 212 F.Supp.2d 1142, 1153 (N.D. Cal. 2002). Thus, Defendants’ act of terminating Plaintiffs and 3 Stock Award Class members’ employment is not a breach of the implied covenant of good faith and fair 4 dealing. 5 The second act alleged, failure to vest and distribute a pro rata portion of award shares, similarly 6 does not breach the implied covenant of good faith and fair dealing. The covenant “cannot impose 7 substantive duties or limits on the contracting parties beyond those incorporated in the specific terms of 8 their agreement.” Guz, 24 Cal. 4th at 349-50. Defendants cannot have violated the implied covenant of 9 good faith and fair dealing by failing to vest and distribute a pro rata portion of the unvested CSAP 10 shares because the specific terms of the agreements very clearly allowed vesting of the CSAP award 11 shares only if the employee remained employed throughout the vesting period. (See SAC, Ex. 1, at p. 5 12 (“Unless your Award Agreement provides otherwise, your award will be cancelled if your employment 13 is terminated for any reason before the end of the applicable vesting period.”)). The Court cannot imply 14 terms to the contract calling for pro rata distribution because the implied covenant cannot “be endowed 15 with an existence independent of its contractual underpinnings.” Guz, 24 Cal. 4th at 349 (citation 16 omitted). 17 The Plaintiffs have not identified facts sufficient to support a claim for breach of the implied 18 covenant of good faith and fair dealing. Based upon the foregoing, the Defendants’ Motion to Dismiss 19 Plaintiffs’ first cause of action is GRANTED. Accordingly, the claim for breach of implied covenant of 20 good faith and fair dealing is DISMISSED. In light of the fact that Plaintiffs have amended their 21 pleadings twice, the Court concludes that no other factual allegations can cure the defects of this cause 22 of action and accordingly DISMISS the claim WITH PREJUDICE. See DCD Programs, Ltd. v. 23 Leighton, 833 F.2d 183, 186 n. 3 (9th Cir. 1987); Doe v. United States, 58 F.3d 494, 497 (9th Cir.1995). 24 B. Violation of the Unfair Competition Law 25 The second cause of action by the Stock Award Class alleges that the Cancellation Provision is 26 both procedurally and substantively unconscionable, and that the Defendants’ enforcement of the 27 unconscionable provision constituted an unfair, unlawful, or fraudulent business act or practice in 28 violation of the California Unfair Competition Law, Bus. & Prof. Code section 17200 et seq. (“UCL”). 8 3:09-cv-1344 AJB (MDD) 1 (Id. at 10.) According to Plaintiffs, the Cancellation Provision is procedurally unconscionable because 2 Defendants drafted it, Defendants had superior bargaining power, and the provision was imposed on a 3 “take-it-or-leave-it” basis, without opportunity for negotiation. (Id.) Plaintiffs’ contend that the 4 provision is substantively unconscionable because it resulted in the Stock Award Class members 5 forfeiting their entire CSAP awards when they were terminated through no fault of their own. (Id.) 6 In the Motion to Dismiss, Defendants argue that a claim that a contract term is unconscionable 7 does not constitute an unlawful, unfair, or fraudulent business practice. (Mot. Dismiss Mem. P. & A. 8 11.) They assert that a contract based claim alone cannot serve as the basis of a UCL claim, but instead 9 a contract based claim must be independently unlawful, unfair, or fraudulent to be actionable under the 10 UCL. (Id.) According to Defendants, the Plaintiffs’ claim is nothing more than a garden-variety 11 contract claim, which does not implicate the UCL. (Id. at 12.) 12 Defendants also argue that Plaintiffs’ UCL claim fails because they are not entitled to restitution. 13 (Mot. Dismiss Mem. P. & A. 12.) The California Supreme Court has clarified its position on restitution 14 since the parties briefed this issue. In Kwikset Corp. v. Superior Court, 51 Cal.4th 310 (2011), the court 15 held that ineligibility for restitution is not a basis for denying standing under the UCL. “That a party 16 may ultimately be unable to prove a right to damages . . . does not demonstrate that it lacks standing to 17 argue for its entitlement to them.” Clayworth v. Pfizer, Inc., 49 Cal. 4th 758, 789 (2010). 18 To have standing to bring a section 17200 cause of action, a plaintiff must “(1) establish a loss or 19 deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury, and (2) 20 show that the economic injury was the result of, i.e., caused by, the unfair business practice or false 21 advertising that is the gravamen of the claim.” Kwikset, 51 Cal. 4th at 322. Plaintiffs have adequately 22 alleged an economic injury by pleading a diminishment of a property interest. See id. at 323 (stating 23 that either present or future diminished property interest constitutes economic injury). Therefore, to 24 have standing, Plaintiffs must show that this economic injury was caused by an unfair business practice. 25 The layoff undeniably caused Plaintiffs’ property interest in the restricted stock to be diminished, 26 so the question is whether or not Plaintiffs have adequately plead an “unfair” business practice within 27 the meaning of the UCL. Defendants argue that unconscionability is nothing more than an ordinary 28 common law breach of contract claim, which cannot violate the UCL. (Reply at 6) (citing Shroyer v. 9 3:09-cv-1344 AJB (MDD) 1 New Cingular Wireless Servs., 606 F.3d 658, 666, amended and superceded by, 622 F.3d 1035 (9th Cir. 2 2010)). That standard, however, applies to “unlawful” acts, not “unfair” acts. See Shroyer, 622 F.3d at 3 1044. Plaintiffs plead “unfair” acts, (SAC at 9), and “[u]nfair simply means any practice whose harm to 4 the victim outweighs its benefits.” Shroyer, 622 F.3d at 1044. Plaintiffs allege that the practice of 5 terminating employees without cause with the effect of cancelling employees’ future interest in 6 company shares is unconscionable. (SAC 9.) An unconscionable provision is certainly “unfair.” While 7 some cancellation provisions have been found to be lawful, see Nein v. HostPro, Inc., 174 Cal.App.4th 8 833 (2009), others have been held unlawful where they are unconscionable. See Ellis v. McKinnon 9 Broad. Co., 18 Cal.App.4th 1796 (1993). Because the cancellation provision could be unconscionable, 10 it could be unfair under the UCL, and therefore Plaintiffs have sufficiently stated a claim under the 11 UCL. See Zanze v. Snelling Servs., LLC, 412 Fed.Appx. 994, 996-97 (9th Cir. 2011). Accordingly, 12 Defendants’ Motion to Dismiss Plaintiffs’ UCL claim is DENIED. 13 C. Violation of California Labor Code Section 2802 14 In the third cause of action, the Business Expense Class maintains that Defendants violated Cal. 15 Lab. Code section 2802(a) because they failed to reimburse the Business Expense Class members for 16 payments made to support staff, despite the fact that the payments were “necessary expenditures.” (Id. 17 at 9-10.) 18 In dismissing the First Amended Complaint the Court noted that there were insufficient facts to 19 put Defendants on notice of the section 2802 claim. (March 29 Order 10-11.) For example, the Court 20 informed Plaintiffs that “it is impossible to say, looking at the face of the FAC, whether [the expenses] 21 were incurred in consequence of the discharge of Plaintiffs’ duties.” (Id. at 10.) The SAC has failed to 22 cure these defects. The pleading names a “policy” by which Plaintiffs were “expected” to supplement 23 their support staffs’ wages. (SAC 10.) The complaint does not elaborate what the policy was, what 24 “expected” means, or how the payments were “necessary expenditures.” (See id.) Without more, the 25 statement that “necessary expenditures” were made without reimbursement is precisely the type of bare 26 assertion and conclusory statement that the Supreme Court has held insufficient to survive a motion to 27 dismiss. See Ashcroft v. Iqbal, ––– U.S. ––––, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). As such, 28 Defendants’ Motion to Dismiss Plaintiff’s third cause of action for violation of section 2802, as well as 10 3:09-cv-1344 AJB (MDD) 1 the section 203 claim, is GRANTED. The Court cannot conclude that amendment of this claim would 2 be futile. Thus, Plaintiffs’ section 2802 claim is DISMISSED WITHOUT PREJUDICE. Should 3 Plaintiffs chose to amend, they are advised to provide enough factual detail explaining the “policy” and 4 why the expenditures were “necessary” to avoid dismissal with prejudice. 5 D. Class Definitions 6 Additionally, Plaintiffs have ignored instructions from the March 29 Order regarding class 7 definitions. Plaintiffs were instructed to more narrowly define the classes in terms of time periods 8 employed and in terms of any releases signed, which they have not. 9 10 CONCLUSION For the foregoing reasons, Defendants’ Motion to Dismiss or in the Alternative Strike Second 11 Amended Complaint is GRANTED IN PART AND DENIED IN PART. Plaintiffs’ first and third 12 causes of action are DISMISSED for failure to state a claim upon which relief can be granted. 13 Defendants Motion to Strike is DENIED AS MOOT. Plaintiff may file an amended complaint within 14 thirty (30) calendar days from the date of this Order. Should Plaintiff fail to amend his complaint within 15 the time permitted, his claims will be dismissed WITH PREJUDICE. 16 17 DATED: August 5, 2011 18 19 Hon. Anthony J. Battaglia U.S. District Judge 20 21 22 23 24 25 26 27 28 11 3:09-cv-1344 AJB (MDD)
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