Lopez v. Smiths Detection, Inc. et al, No. 3:2020cv01453 - Document 8 (S.D. Cal. 2021)
Court Description: ORDER Denying 4 Defendant's Motion to Dismiss Plaintiff's Complaint. Signed by Judge Janis L. Sammartino on 1/25/2021. (tcf)
Download PDF
<![CDATA[
Lopez v. Smiths Detection, Inc. et al Doc. 8 Case 3:20-cv-01453-JLS-WVG Document 8 Filed 01/26/21 PageID.108 Page 1 of 20 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 ALBERTO LOPEZ, an individual, Plaintiff, 12 13 v. 14 SMITHS DETECTION, INC., a Delaware corporation; and DOES 1 through 50, inclusive, 15 Case No.: 20-CV-1453 JLS (WVG) 16 ORDER DENYING DEFENDANT’S MOTION TO DISMISS PLAINTIFF’S COMPLAINT (ECF No. 4) Defendants. 17 18 Presently before the Court is Defendant Smiths Detection, Inc.’s Motion to Dismiss 19 Plaintiff’s Complaint (“Mot.,” ECF No. 4), as well as Plaintiff Alberto Lopez’s Opposition 20 thereto (“Opp’n,” ECF No. 5) and Defendant’s Reply in support thereof (“Reply,” ECF 21 No. 6). The Court took the matter under submission without oral argument pursuant to 22 Civil Local Rule 7.1(d)(1). See ECF No. 7. Having carefully reviewed Plaintiff’s 23 Complaint (“Compl.,” ECF No. 1-2), the Parties’ arguments, and the law, the Court 24 DENIES the Motion. 25 /// 26 /// 27 /// 28 /// 1 20-CV-1453 JLS (WVG) Dockets.Justia.com Case 3:20-cv-01453-JLS-WVG Document 8 Filed 01/26/21 PageID.109 Page 2 of 20 BACKGROUND 1 1 2 “[Defendant] manufactures, manages, and sells detection and screening technology 3 for use in airports, ports and borders, urban security, and defense end use markets.” Compl. 4 ¶ 19. Defendant hired Plaintiff in 2012 as a Senior Sales Business Development Manager 5 for Latin America. See id. ¶ 14. While employed by Defendant, Plaintiff received a base 6 salary as well as “the opportunity to earn sales commissions.” Id. Annually, Plaintiff and 7 Defendant entered commission agreements that contained substantially similar terms year 8 after year. See id. ¶ 15. On or around January 21, 2020, Plaintiff and Defendant entered 9 into such an agreement covering the sales period from August 1, 2019, through July 31, 10 2020 (the “Commission Contract”). See id. ¶ 13; see also generally Compl. Ex. A. 11 As relevant to the present Motion, the Commission Contract provides that “Sales 12 Commission Credits accrue to Employee upon a customer’s order for Products having been 13 Booked by [Defendant] during the Sales Period.” Compl. Ex. A § 3.1. 2 Similarly, “Sales 14 Commission Credits for a given Product order do not accrue to Employee unless and until 15 the customer’s order is Booked”; accordingly, if an order is not booked until “after the date 16 of Employee’s separation from [Defendant],” “no Sales Commission Credits will accrue 17 to Employee and no Net Sales Commissions will be earned.” Id. § 3.1.2. 18 /// 19 20 21 22 1 The facts alleged in Plaintiff’s Complaint are accepted as true for purposes of the present Motion. See Vasquez v. Los Angeles Cty., 487 F.3d 1246, 1249 (9th Cir. 2007) (holding that, in ruling on a motion to dismiss, the Court must “accept all material allegations of fact as true”). 2 23 24 25 26 27 28 As a general rule, a district court cannot rely on evidence outside the pleadings in ruling on a Rule 12(b)(6) motion without converting the motion into a Rule 56 motion for summary judgment. See United States v. Ritchie, 342 F.3d 903, 907 (9th Cir. 2003) (citing Fed. R. Civ. P. 12(b); Parrino v. FHP, Inc., 146 F.3d 699, 706 n.4 (9th Cir. 1998)). “A court may, however, consider certain materials—documents attached to the complaint, documents incorporated by reference in the complaint, or matters of judicial notice—without converting the motion to dismiss into a motion for summary judgment.” Id. at 908 (citing Van Buskirk v. CNN, 284 F.3d 977, 980 (9th Cir. 2002); Barron v. Reich, 13 F.3d 1370, 1377 (9th Cir. 1994); 2 James Wm. Moore et al., Moore’s Federal Practice § 12.34[2] (3d ed.1999)). As the Commission Contract was attached as an exhibit to the Complaint and both parties relied to a significant extent on the Commission Contract’s terms in their briefing on the Motion, the Court will consider the Commission Contract in ruling on the present Motion. 2 20-CV-1453 JLS (WVG) Case 3:20-cv-01453-JLS-WVG Document 8 Filed 01/26/21 PageID.110 Page 3 of 20 1 2 3 4 5 6 7 “Booked” is defined as: [T]he sales event that takes place when [Defendant] notifies the customer that [Defendant] has accepted the customer’s order for Products and has entered the customer’s order into [Defendant’s] order entry system. For purposes of calculating Sales Commission Credits for Professional Services, “Booked” means the date on which [Defendant] accepts and enters the order for those Professional Services that have actually been rendered and accepted by the customer or third party. 8 Id. § 1.1. “Product” or “Products” is defined as “those SMITHS hardware and software 9 products, Maintenance Services, Professional Services, and other services for which 10 Employee is eligible to earn Sales Commissions Credits,” and “Professional Services” is 11 defined as “those services rendered by [Defendant’s] internal professional services 12 organization.” Id. 13 Plaintiff’s Commission Rates are set forth in the “FY 20 Employee Commission 14 Target Schedule” (the “Target Schedule”), which provides that his Commission Rate is 15 1.0% for a booking of less than $6,000,000, his Commission Rate is 2.0% for bookings 16 between $6,000,001 and $15,000,000, and his Commission Rate is 2.5% for bookings 17 exceeding $15,000,000. Id. at Target Schedule. The Commission Contract indicates that, 18 “if [Defendant] wishes to reduce any Commission Rate under this Plan, such Commission 19 Rate reduction will be communicated in writing to the applicable Employee within seven 20 (7) business days of acceptance by [Defendant] of the relevant customer purchase order.” 21 Id. § 3.4.4. “Additionally, [Defendant] shall not reduce any Commission Rate on any sale 22 of Products where the gross margins on the sale exceed 35%.” Id. 23 Moreover, “[Defendant] reserves the right to allocate, increase or decrease Gross 24 Sales Commission Credits, as it deems appropriate in its sole discretion, under Special 25 Circumstances.” Id. § 3.7. The Commission Contract defines “Special Circumstances” to 26 include “[o]ther circumstances as may reasonably be determined by [Defendant].” Id. 27 § 3.7.5. “Where Special Circumstances exist, [Defendant] will inform Employee of the 28 presence of such Special Circumstances and will inform Employee of the amount of Gross 3 20-CV-1453 JLS (WVG) Case 3:20-cv-01453-JLS-WVG Document 8 Filed 01/26/21 PageID.111 Page 4 of 20 1 Sales Commission Credits that Employee is eligible to receive at or prior to the date the 2 customer’s order is Booked.” Id. § 3.7. “Gross Sales Commission Credits” is defined as 3 “the total amount of Sales Commission Credits attributed to Employee for a specified 4 period, prior to any adjustments being made and, thus, prior to being Earned by Employee.” 5 Id. § 1.1. “Sales Commission Credits” is defined as “the amount of commission credits 6 attributed to Employee for each Booked Product order, calculated by multiplying the Net 7 Sales Price of the Product Order by the designated Commission Rate for the applicable 8 credit accumulation period . . . .” Id. 9 “Gross Sales Commission Credits that have accumulated are subject to cancellation 10 and reversal by [Defendant] and / or offset against future Gross Sales Commission Credits” 11 in a number of delineated circumstances, including if “the Product order or contract for 12 which the Sales Commission Credits accumulated has been cancelled, reversed, reserved, 13 or de-Booked based on returned Products, recalled Products, unpaid receivables, or 14 contract breaches.” Id. § 3.6.1. 15 Upon separation of employment, the Commission Contract “shall automatically 16 terminate.” 17 Commission Credits or receive any Net Sales Commissions on Product orders that have 18 not been Booked as of the date of separation of employment.” Id. “Subject to any off-set 19 rights [Defendant] may have under this Plan, [Defendant] may, in its sole discretion, 20 accelerate the calculation of any Gross Sales Commission Credits accumulated up to and 21 including the date of separation of employment and the payment of Net Sales 22 Commissions.” Id. Id. § 3.11. “Employee will not be entitled to accumulate any Sales 23 The Commission Contract “is subject to cancellation or modification at any time in 24 the sole discretion of [Defendant]. No cancellation or modification shall be effective unless 25 it is in writing and signed by [Defendant]. Notification of changes to the Plan shall be 26 provided in writing to Employee.” Id. § 3.12. 27 Beginning in or around March 2019, Plaintiff began “pursuing several high value 28 sales opportunities that would result in hundreds of thousands of dollars in sales 4 20-CV-1453 JLS (WVG) Case 3:20-cv-01453-JLS-WVG Document 8 Filed 01/26/21 PageID.112 Page 5 of 20 1 commissions” with Grupo Aeroportuario del Pacifico (“GAP”). 2 Plaintiff was Defendant’s main point of contact with GAP, communicating extensively 3 with GAP, traveling to Mexico for meetings and to evaluate GAP’s needs, and preparing 4 cost and sales proposals. See id. ¶ 22. Compl. ¶¶ 21–22. 5 On or around September 17, 2019, about six months into pursuing the GAP 6 opportunity, Plaintiff received a letter from Stephen Esposito, Vice President of Sales & 7 Business Development at Defendant. See id. ¶ 23. The letter indicated Defendant had 8 determined a “special circumstance” applied to the GAP opportunity, and accordingly 9 “[Plaintiff] would only be entitled to a 0.5% commission on particular projects within the 10 GAP sales opportunity.” Id. Several days after Plaintiff received this letter, Mr. Esposito 11 telephoned Plaintiff to inform him “that a further, undisclosed reduction of commission 12 would also be implemented,” and that Defendant “could reduce and/or change a 13 salesperson’s commission ‘at the company’s discretion.’” Id. ¶ 24. Plaintiff subsequently 14 contacted Mr. Esposito and informed him “that he felt the reduction in his commission 15 percentage, and the policy that commissions could be reduced and/or changed at the 16 company’s discretion, was in breach of his Commission Contract.” Id. ¶ 25. 17 In or around January 2020, Plaintiff informed Defendant that GAP was to award two 18 airport contracts to Defendant. See id. ¶ 26. Plaintiff’s commission potential on these 19 contracts was “close to $450,000.” Id. Shortly thereafter, “[Plaintiff] and [Defendant] 20 revised the pricing and cost proposal provided to GAP to reflect the awarded bids,” 21 resulting in Defendant’s gross margins on the contracts exceeding 35%. Id. ¶ 27. 22 In or around January or February 2020, Plaintiff spoke with his direct supervisor, 23 Javier Rivera, “again object[ing] to the reduction in his commission rate” and conveying 24 his view “that the Commission Contract precluded a reduction in commission when 25 [Defendant’s] gross margins exceeded 35%.” Id. ¶ 28. Mr. Rivera assured Plaintiff 26 Defendant would pay Plaintiff his full commission and abide by the Commission Contract. 27 See id. 28 /// 5 20-CV-1453 JLS (WVG) Case 3:20-cv-01453-JLS-WVG Document 8 Filed 01/26/21 PageID.113 Page 6 of 20 1 Over the next several months, GAP and Defendant engaged in contract negotiations, 2 with Plaintiff continuing to serve as the main point of contact. See id. ¶ 29. Defendant 3 provided approval of the final contracts on or around March 31, 2020, executing them and 4 sending them back to GAP. See id. ¶ 31. That same day, “the GAP order was ‘booked’ 5 into [Defendant’s] order entry system.” 6 “[c]orrespondence from [Defendant] . . . confirmed that the GAP contracts were accepted 7 as booked into [Defendant’s] order entry system.” Id. Id. ¶ 32. On or around April 3, 2020, 8 Plaintiff alleges on information and belief that GAP never canceled, modified, or 9 otherwise indicated any intention to not proceed with the contracts. See id. ¶ 34. On or 10 around April 9, 2020, however, Defendant informed Plaintiff “that, due to an error, the 11 GAP contract was being placed in a ‘holding pattern.’” Id. ¶ 35. Plaintiff alleges on 12 information and belief that “[Defendant’s] custom and practice dictate that a contract in a 13 ‘holding pattern’ does not preclude payout of commissions to a sales person, nor does it 14 mean that a sale is no longer ‘booked.’” Id. 15 On or around April 10, 2020, Mr. Esposito requested that Defendant’s human 16 resources department “‘immediate[ly] terminat[e]’” Plaintiff “for ‘consistently poor 17 performance as a regional sales manager for the Latin America [] business.” Id. ¶ 36. On 18 or around April 15, 2020, Defendant’s human resources department informed Plaintiff by 19 telephone “that he was terminated effective immediately for ‘not meeting performance 20 expectations.’” Id. ¶ 37. However, “[a]t no point prior to [Plaintiff]’s termination was 21 [Plaintiff] ever counseled, warned, written up, or provided with a performance 22 improvement plan for his allegedly ‘consistently poor performance.’” Id. ¶ 38. “In fact, 23 [Plaintiff]’s performance reviews from [Defendant] for the duration of his employment 24 were consistently positive.” Id. 25 Immediately after his termination, Plaintiff asked Defendant’s human resources 26 department when he would receive his commission payout on the GAP contracts. See id. 27 ¶ 39. Defendant indicated Plaintiff would not receive any commissions on the GAP 28 contracts “because the GAP contract was in a holding pattern, and allegedly no longer 6 20-CV-1453 JLS (WVG) Case 3:20-cv-01453-JLS-WVG Document 8 Filed 01/26/21 PageID.114 Page 7 of 20 1 ‘booked.’” Id. Plaintiff alleges that Defendant terminated Plaintiff in order to avoid paying 2 him the GAP commissions, and not due to poor performance. See id. ¶ 40–42. 3 Plaintiff filed this action in the Superior Court of California, County of San Diego, 4 on June 24, 2020. See ECF No. 1 (“Not. of Removal”) at 1. Plaintiff’s Complaint alleges 5 six claims: (1) wrongful termination in violation of public policy; (2) retaliation; (3) breach 6 of employment contract; (4) breach of the implied covenant of good faith and fair dealing; 7 (5) failure to pay wages upon termination; and (6) unlawful, unfair, and/or fraudulent 8 business practices. See generally Compl. On July 28, 2020, Defendant removed to this 9 District, based on diversity jurisdiction. See generally Not. of Removal. Defendant filed 10 the instant Motion on August 4, 2020. See ECF No. 4. 11 LEGAL STANDARD 12 Federal Rule of Civil Procedure 12(b)(6) permits a party to raise by motion the 13 defense that the complaint “fail[s] to state a claim upon which relief can be granted,” 14 generally referred to as a motion to dismiss. The Court evaluates whether a complaint 15 states a cognizable legal theory and sufficient facts in light of Federal Rule of Civil 16 Procedure 8(a), which requires a “short and plain statement of the claim showing that the 17 pleader is entitled to relief.” 18 allegations,” . . . it [does] demand more than an unadorned, the-defendant-unlawfully- 19 harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. 20 Corp. v. Twombly, 550 U.S. 544, 555 (2007)). In other words, “a plaintiff’s obligation to 21 provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and 22 conclusions, and a formulaic recitation of the elements of a cause of action will not do.” 23 Twombly, 550 U.S. at 555 (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). A 24 complaint will not suffice “if it tenders ‘naked assertion[s]’ devoid of ‘further factual 25 enhancement.’” Iqbal, 556 U.S. at 677 (citing Twombly, 550 U.S. at 557). Although Rule 8 “does not require ‘detailed factual 26 To survive a motion to dismiss, “a complaint must contain sufficient factual matter, 27 accepted as true, to ‘state a claim to relief that is plausible on its face.’” Id. (quoting 28 Twombly, 550 U.S. at 570); see also Fed. R. Civ. P. 12(b)(6). A claim is facially plausible 7 20-CV-1453 JLS (WVG) Case 3:20-cv-01453-JLS-WVG Document 8 Filed 01/26/21 PageID.115 Page 8 of 20 1 when the facts pled “allow the court to draw the reasonable inference that the defendant is 2 liable for the misconduct alleged.” Iqbal, 556 U.S. at 677 (citing Twombly, 550 U.S. at 3 556). That is not to say that the claim must be probable, but there must be “more than a 4 sheer possibility that a defendant has acted unlawfully.” Id. Facts “‘merely consistent 5 with’ a defendant’s liability” fall short of a plausible entitlement to relief. Id. (quoting 6 Twombly, 550 U.S. at 557). This review requires context-specific analysis involving the 7 Court’s “judicial experience and common sense.” Id. at 675 (citation omitted). “[W]here 8 the well-pleaded facts do not permit the court to infer more than the mere possibility of 9 misconduct, the complaint has alleged—but it has not ‘show[n]’—‘that the pleader is 10 entitled to relief.’” Id. 11 Where a complaint does not survive 12(b)(6) analysis, the Court will grant leave to 12 amend unless it determines that no modified contention “consistent with the challenged 13 pleading . . . [will] cure the deficiency.” DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 14 658 (9th Cir. 1992) (quoting Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 15 1393, 1401 (9th Cir. 1986)). 16 ANALYSIS 17 Defendant argues that Plaintiff has failed to state a claim as to each of his six asserted 18 claims. See generally Mot. Accordingly, the Court will address each claim in turn. 19 I. Wrongful Termination in Violation of Public Policy 20 “Wrongful termination in violation of public policy is a California common law 21 cause of action providing that ‘when an employer’s discharge of an employee violates 22 fundamental principles of public policy, the discharged employee may maintain a tort 23 action and recover damages traditionally available in such actions.’” Ferretti v. Pfizer Inc., 24 855 F. Supp. 2d 1017, 1024 (N.D. Cal. 2012) (citing Tameny v. Atl. Richfield Co., 27 Cal. 25 3d 167 (1980); Freund v. Nycomed Amersham, 347 F.3d 752, 758 (9th Cir. 2003)). “The 26 elements of a claim for wrongful discharge in violation of public policy are (1) an 27 employer-employee relationship, (2) the employer terminated the plaintiff’s employment, 28 (3) the termination was substantially motivated by a violation of public policy, and (4) the 8 20-CV-1453 JLS (WVG) Case 3:20-cv-01453-JLS-WVG Document 8 Filed 01/26/21 PageID.116 Page 9 of 20 1 discharge caused the plaintiff harm.” Yau v. Santa Margarita Ford, Inc., 229 Cal. App. 2 4th 144, 154 (2014) (citing Haney v. Aramark Uniform Servs., Inc., 121 Cal. App. 4th 623, 3 641 (2004)). “The public policy implicated must be (1) delineated in either constitutional 4 or statutory provisions; (2) public in the sense that it inures to the benefit of the public 5 rather than serving merely the interests of the individual; (3) well established at the time of 6 discharge; and (4) substantial and fundamental.” Ferretti, 855 F. Supp. 2d at 1024 (quoting 7 Freund, 347 F.3d at 758) (internal quotation marks omitted). 8 Plaintiff pleads an employer-employee relationship, see Compl. ¶¶ 14, 46, and the 9 termination of his employment, see id. ¶¶ 37, 47. Plaintiff alleges that one “substantial 10 motivating reason” for his termination was “[Defendant’s] desire to avoid the full and 11 prompt payment of [Plaintiff’s] wages,” despite it being “a violation of California public 12 policy to discharge an employee to avoid paying that employee earned commissions and/or 13 other wages.” Id. ¶¶ 44–48. Plaintiff further alleges that another “substantial motivating 14 reason” for his termination was his pre-termination complaints about his belief that 15 Defendant was unlawfully withholding his wages, violating the “broad public policy 16 interest in encouraging workplace whistleblowers to report unlawful acts without fearing 17 retaliation” set out in California Labor Code § 1102.5. Id. ¶¶ 49–52. Finally, Plaintiff 18 alleges that his termination caused his harm. Id. ¶ 53. 19 However, Defendant asserts that, because Plaintiff’s retaliation, failure to pay wages 20 upon termination, and breach of contract claims allegedly fail, so too does his wrongful 21 termination claim. Mot. at 6 (citing Jennings v. Marralle, 8 Cal. 4th 121, 135–36 (1994); 22 Sanders v. Arneson Prods., Inc., 91 F.3d 1351 (9th Cir. 1996)). Defendant claims it 23 violated no public policy because the GAP commissions were not “earned,” and Plaintiff 24 only voiced his grievances after he was terminated. Id. at 7. Defendant further claims that 25 “Plaintiff has alleged no facts falling into any of the[] four categories [of public policy 26 violations in wrongful termination cases that] the Supreme Court identified” in Gantt v. 27 /// 28 /// 9 20-CV-1453 JLS (WVG) Case 3:20-cv-01453-JLS-WVG Document 8 Filed 01/26/21 PageID.117 Page 10 of 20 1 Sentry Ins. Co., 1 Cal. 4th 1083, 1090–91 (1998), overruled on other grounds by Green v. 2 Ralee Engineering Co., 19 Cal. 4th 66 (1998). Mot. at 7. 3 3 Plaintiff argues that each of the two factual bases for his claim is adequately pleaded. 4 First, Plaintiff argues that his claim is substantively similar to that at issue in Gould v. 5 Maryland Sound Industries, Incorporated, 31 Cal. App. 4th 1137, as modified (Feb. 9, 6 1995), where the Court of Appeal held that a claim that an employer fired the plaintiff to 7 avoid paying commissions earned adequately pleaded a wrongful termination claim, and 8 that wrongful termination claims are “not strictly limited” to the situations identified by 9 Defendant. Id. at 13–14 (citing Gould, 31 Cal. App. 4th at 1147) (emphasis omitted). 10 Second, because Plaintiff adequately pleads his retaliation claim and that he was terminated 11 in violation of § 1102.5, Plaintiff’s wrongful termination claim is also sound. Id. at 16. 12 The Court agrees with Plaintiff. For the reasons provided infra at 14–15, the Court 13 has found that Plaintiff has pleaded adequately that his commissions were “booked” and 14 therefore earned, and accordingly the Court has determined that Plaintiff satisfactorily has 15 alleged claims for retaliation and failure to pay wages, see infra at 12–14, 18. Accordingly, 16 Plaintiff has alleged a potential violation of public policy sufficient to ground his claim. 4 17 18 3 19 20 21 22 23 24 25 26 27 28 On reply, Defendant argues that Plaintiff’s claim is further defective because the Complaint alleges Plaintiff “was terminated for ‘consistently poor performance,’” and therefore his termination was not wrongful as it was not premised on an illegitimate factor. Reply at 7–8 (citing Compl. ¶ 36; Greta v. Surfun Enter., No. 09-CV-2793 JLS (NLS), 2013 WL 12204908, at *3 (S.D. Cal. May 17, 2013)). However, “‘[a]rguments raised for the first time in a reply brief are waived.’” Autotel v. Nev. Bell Tel. Co., 697 F.3d 846, 852 n.3 (9th Cir. 2012) (quoting Turtle Island Restoration Network v. U.S. Dep’t of Commerce, 672 F.3d 1160, 1166 n.8 (9th Cir. 2012)). Nonetheless, even overlooking this issue, Plaintiff clearly alleges that he had never previously had a poor performance review, Compl. ¶ 38, and that “poor performance” was a pretext so that Defendant could avoid paying his commission, id. ¶¶ 41–42, 47–48. Thus, taking these allegations as true, as the Court must on Defendant’s Motion, Plaintiff has pleaded wrongful termination premised on an illegitimate factor. 4 Even had the Court found the allegations supporting these claims defective, however, that does not mean that the wrongful termination in violation of public policy claim would necessarily fail. See, e.g., Freund v. Nycomed Amersham, 347 F.3d 752, 759 (9th Cir. 2003) (“As long as the employee makes the health or safety complaint in good faith, it does not matter for purposes of a wrongful termination action whether the complaint identifies an actual violation of other workplace safety statutes or regulations. Nycomed’s 10 20-CV-1453 JLS (WVG) Case 3:20-cv-01453-JLS-WVG Document 8 Filed 01/26/21 PageID.118 Page 11 of 20 1 Specifically, courts have routinely determined that the timely payment of wages is a 2 fundamental public policy of the State of California, and that a plaintiff alleging he or she 3 was fired to avoid payment of commissions, vacation time, or other wages states a claim 4 for wrongful termination in violation of public policy. See, e.g., Gould, 31 Cal. App. 4th 5 at 1147–48 (“[W]e conclude if MSI discharged Gould in order to avoid paying him the 6 commissions, vacation pay, and other amounts he had earned, it violated a fundamental 7 public policy of this state.”); McCullough v. Lennar Corp., No. 09CV1808-WQH-NLS, 8 2009 WL 3805305, at *4–5 (S.D. Cal. Nov. 10, 2009) (denying motion to dismiss wrongful 9 termination in violation of public policy claim where plaintiff alleged he was terminated in 10 part to avoid paying a performance incentive); Sinclair v. Servicemaster Co., No. CIV 07- 11 0611 FCD/DAD, 2007 WL 2254448, at *4 (E.D. Cal. Aug. 3, 2007) (rejecting argument 12 “that plaintiff’s allegations are insufficient to state a claim for wrongful termination in 13 violation of public policy because a private contractual dispute between an employer and 14 employee does not rise to the level of a fundamental public policy” and concluding, “to the 15 extent plaintiff alleges his termination was intended to avoid payment of his accrued 16 vacation time, his claim for wrongful termination in violation of public policy is valid”). 17 Likewise, courts have found repeatedly that California has a fundamental public 18 policy supporting the reporting of unlawful conduct to employers, and accordingly courts 19 have determined time and again that a plaintiff states a claim for wrongful termination 20 when he or she alleges that she was discharged in retaliation for such reports. See, e.g., 21 Gould, 31 Cal. App. 4th at 1150 (“[W]e conclude if MSI discharged Gould in retaliation 22 for his reporting violations of the overtime wage law to MSI management, it violated a 23 fundamental public policy of this state.”); Phillips v. Gemini Moving Specialists, 63 Cal. 24 App. 4th 563, 571 (1998), as modified (Apr. 24, 1998) (“[I]s there a fundamental public 25 26 27 28 argument would add a requirement that California law simply does not support.”) (citation omitted); Banko v. Apple, Inc., No. 13-02977 RS, 2013 WL 6623913, at *4 (N.D. Cal. Dec. 16, 2013) (concluding “that Banko’s failure to state a claim under a particular statute (e.g., Dodd–Frank) does not preclude him from relying on that statute’s policies for purposes of his wrongful termination claim”). 11 20-CV-1453 JLS (WVG) Case 3:20-cv-01453-JLS-WVG Document 8 Filed 01/26/21 PageID.119 Page 12 of 20 1 policy against an employer’s retaliation for its employee having asserted a right to be free 2 from the employer’s withholding of pay, as alleged to have occurred in this case? We 3 conclude there is such a fundamental public policy.”); Wood v. Igate Techs., Inc., No. 3:15- 4 CV-00799 JSW, 2015 WL 13345325, at *5 (N.D. Cal. Aug. 11, 2015) (“California cases 5 have recognized that wrongful termination in contravention of public policy occurs when 6 the employee is terminated for reporting to the employer about existing unlawful 7 conduct.”). 8 Accordingly, the Court concludes Plaintiff has adequately alleged a claim for 9 wrongful termination in violation of public policy and DENIES the Motion as to this claim. 10 II. 11 Retaliation (Cal. Lab. Code § 1102.5) California’s “whistleblower” retaliation statute provides, in relevant part: 12 An employer, or any person acting on behalf of the employer, shall not retaliate against an employee for disclosing information . . . to a person with authority over the employee or another employee who has the authority to investigate, discover, or correct the violation or noncompliance, . . . if the employee has reasonable cause to believe that the information discloses a violation of state or federal statute, or a violation of or noncompliance with a local, state, or federal rule or regulation .... 13 14 15 16 17 18 19 Cal. Lab. Code § 1102.5(b). 20 “In order to plead a prima facie case of retaliation, a plaintiff must show that she 21 engaged in a protected activity, her employer subjected her to an adverse employment 22 action, and there is a causal link between the protected action and the adverse action.” Tam 23 v. Qualcomm, Inc., 300 F. Supp. 3d 1130, 1148 (S.D. Cal. 2018) (citing Patten v. Grant 24 Joint Union High Sch. Dist., 134 Cal. App. 4th 1378, 1384 (2005)). Furthermore, “[t]he 25 employee must have an actual belief that the employer’s actions were unlawful and the 26 employee’s belief, even if mistaken, must be reasonable.” Id. (citing Carter v. Escondido 27 Union High Sch. Dist., 148 Cal. App. 4th 922, 933–34 (2007)). 28 /// 12 20-CV-1453 JLS (WVG) Case 3:20-cv-01453-JLS-WVG Document 8 Filed 01/26/21 PageID.120 Page 13 of 20 1 Defendant claims that Plaintiff’s retaliation claim fails because Plaintiff (1) does not, 2 and cannot, allege that he engaged in any protected activity and (2) does not allege that he 3 exhausted his administrative remedies by filing a claim with the California Labor 4 Commissioner. Mot. at 5–6. Plaintiff counters that the Complaint does allege that he 5 engaged in protected activity—namely, “opposing [Defendant’s] unilateral reduction of his 6 commission rate after he had worked for more than six months toward securing the GAP 7 contract, in violation of the Commission Contract.” Opp’n at 9. Plaintiff alleges that he 8 engaged in this protected activity by complaining to both Mr. Esposito and Mr. Rivera 9 about the reduction prior to his termination. Id. at 10 (citing Compl. ¶¶ 25, 28). Plaintiff 10 argues that, given that California law requires commission rates to be set by contract before 11 work is performed, he plausibly could have believed that Defendant’s unilateral reduction 12 of his commission rate six months into his work on the GAP account was illegal. Id. at 11 13 (citing Cal. Labor Code § 2751). Further, Plaintiff argues that there is no exhaustion 14 requirement. Id. at 12 (citing Cal. Labor Code §§ 244, 1102.5). On reply, Defendant 15 argues that “[a] modification provision in a commission plan, such as the one at issue, is 16 not restricted by Labor Code § 2751(a), other statutes, or case law.” 17 Furthermore, Plaintiff signed onto commission contracts containing substantially similar 18 terms each of his eight years working for Defendant, thereby “ratif[ying]” it. Id. (citing 19 Compl. ¶ 15). Reply at 6. 20 As an initial matter, Plaintiff is correct that, per the plain terms of the California 21 Labor Code, no exhaustion requirement applies to § 1102.5 claims, as several notable 22 treatises concisely state. See, e.g., The Rutter Group, Cal. Prac. Guide Civ. Pro. Trial 23 Claims and Def. Ch. 13(V)-A § 13:928 (“Pursuant to Lab.C. § 244(a), ‘[a]n individual is 24 not required to exhaust administrative remedies or procedures in order to bring a civil 25 action’ under the Labor Code, ‘unless that section under which the action is brought 26 expressly requires exhaustion of an administrative remedy.’ Section 1102.5 contains no 27 such express requirement.”). 28 /// 13 20-CV-1453 JLS (WVG) Case 3:20-cv-01453-JLS-WVG Document 8 Filed 01/26/21 PageID.121 Page 14 of 20 1 Having found Plaintiff’s claim does not fail for failure to plead exhaustion, the Court 2 finds that Plaintiff adequately pleads a claim for whistleblower retaliation. Plaintiff pleads 3 that he opposed Defendant’s alleged wage theft, a violation of California law, by 4 complaining to both Mr. Esposito and Mr. Rivera prior to his termination. See Compl. 5 ¶¶ 25, 28, 57. Defendant may renew its objections to whether or not the complained of 6 activity was, in fact, illegal later in these proceedings; however, at this stage in the 7 proceedings, the argument is premature. Further, Plaintiff alleges he was subject to adverse 8 employment action by having his wages withheld and being wrongfully terminated. See 9 id. ¶ 58. Finally, Plaintiff alleges that his complaints to Mr. Esposito and Mr. Rivera 10 “w[ere] a contributing factor” in his wrongful termination, thereby establishing a nexus 11 between the protected activity and the adverse employment action. Id. ¶ 59. Accordingly, 12 Plaintiff has alleged satisfactorily the basic elements of his claim, and the Court DENIES 13 the Motion as to this claim. 14 III. Breach of Employment Contract 15 “[T]he elements of a cause of action for breach of contract are (1) the existence of 16 the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s 17 breach, and (4) the resulting damages to the plaintiff.” Oasis W. Realty, LLC v. Goldman, 18 51 Cal. 4th 811, 821 (2011) (citing Reichert v. General Ins. Co., 68 Cal.2d 822, 830 19 (1968)). Plaintiff adequately alleges the existence of the contract, see Compl. ¶ 67, and 20 performance, see id. ¶ 68. Based on their competing interpretations of the term “booked,” 21 however, the Parties dispute whether the Complaint alleges a breach. 22 Defendant argues that Plaintiff fails to plead a claim for breach of contract “because 23 the express terms of the Commission [Contract] contradicts the allegations in the 24 Complaint.” Mot. at 7. Specifically, Defendant argues that the definition of “booked” 25 requires that the customer be notified both (1) that its order was accepted and (2) that the 26 order was placed into Defendant’s order entry system. Id. at 8. Because GAP was not 27 notified that its order was placed in the order entry system, GAP’s order was not “booked,” 28 Plaintiff did not earn any commissions, and accordingly Plaintiff cannot assert a breach of 14 20-CV-1453 JLS (WVG) Case 3:20-cv-01453-JLS-WVG Document 8 Filed 01/26/21 PageID.122 Page 15 of 20 1 contract. See id. Plaintiff, on the other hand, argues that the definition of “booked” requires 2 the Defendant to (1) notify the customer that Defendant has accepted the order and (2) 3 enter the order into its order entry system. Opp’n at 14. Because the Complaint alleges 4 that the order was entered in Defendant’s system and that GAP was notified that Defendant 5 had accepted its order, Plaintiff argues his allegations are adequate to state a claim. Id. at 6 15. 7 Plaintiff’s interpretation of the term “booked” is both plausible and reasonable. At 8 best, Defendant introduces an ambiguity in raising a competing interpretation. Thus, given 9 the posture of this case, the Court finds Plaintiff has adequately pleaded that the GAP 10 contract was “booked” and that he accordingly was entitled to his commission; thus, 11 Plaintiff adequately alleges that, in not paying the commission and by reducing his 12 commission, Defendant breached the Commission Contract. See Compl. ¶¶ 69–70; see, 13 e.g., Aragon-Haas v. Family Sec. Ins. Servs., Inc., 231 Cal. App. 3d 232, 239 (1991) (“So 14 long as the pleading does not place a clearly erroneous construction upon the provisions of 15 the contract, in passing upon the sufficiency of the complaint, we must accept as correct 16 plaintiff’s allegations as to the meaning of the agreement.”) (citing Marina Tenants Ass’n 17 v. Deauville Marina Development Co., 181 Cal. App. 3d 122, 128 (1986)). 18 On reply, Defendant argues that Plaintiff further fails to state a claim because he was 19 not damaged. Reply at 4. Essentially, Defendant claims that Plaintiff would have had to 20 pay back his commission when the GAP contract was placed “on hold,” and accordingly, 21 Plaintiff has not been injured. See id. (citing Compl. Ex. A §§ 3.5, 3.6). But again, taking 22 as true the allegations in Plaintiff’s Complaint, Defendant’s custom and practice was that 23 a contract in a “holding pattern” did not preclude the payout of commissions and did not 24 render a contract “no longer ‘booked.’” Compl. ¶ 35. Thus, the Court cannot conclude as 25 a matter of law that Plaintiff would have had to pay back his commission on the GAP 26 contract. Accordingly, the Complaint adequately alleges resultant damage, see id. ¶ 71, 27 and therefore Plaintiff states a claim for breach of contract. Thus, the Court DENIES the 28 Motion as to this claim. 15 20-CV-1453 JLS (WVG) Case 3:20-cv-01453-JLS-WVG Document 8 Filed 01/26/21 PageID.123 Page 16 of 20 1 IV. Breach of the Implied Covenant of Good Faith and Fair Dealing 2 “Under California law, . . . all contracts contain an implied covenant of good faith 3 and fair dealing. This covenant ‘requires each contracting party to refrain from doing 4 anything to injure the right of the other to receive the benefits of the agreement.’” San Jose 5 Prod. Credit Ass’n v. Old Republic Life Ins. Co., 723 F.2d 700, 703 (9th Cir. 1984) 6 (citations omitted). 7 Defendant argues that, because Plaintiff’s claim for breach of the implied covenant 8 of good faith and fair dealing “is based on the alleged breach of the Commission 9 [Contract],” Mot. at 9, it is “superfluous” and should be “disregarded,” id. at 8 (citations 10 omitted). Further, because Plaintiff’s breach of contract claim allegedly fails to state a 11 claim, Defendant asserts that this claim fails as a matter of law. Id. at 9. In response, as 12 an initial matter, Plaintiff again argues that his breach of contract claim is adequately 13 pleaded, “and therefore so too is the corresponding breach of the implied covenant claim.” 14 Opp’n at 16. Moreover, Plaintiff argues that, in order to avoid paying Plaintiff the 15 commissions he had fairly earned, “[Defendant] sought to interject into the Commission 16 Contract a provision that a ‘holding pattern’ means no commissions are paid” and then 17 “fired [Plaintiff] so as to rely on the contractual provision that no commissions can be 18 earned if not booked before termination,” clearly frustrating Plaintiff’s right to receive the 19 benefits of his agreement. Id. at 17–18 (citation omitted). Separately, Plaintiff contends 20 that Defendant acted in bad faith by unilaterally exercising its discretionary power and 21 declaring that a “special circumstance,” never explained to Plaintiff, warranted reducing 22 the commission rate to 0.5%. Id. at 18 (citing Compl. ¶ 23). 23 Having found that Plaintiff adequately pleads a claim for breach of contract, see 24 supra at 14–15, the Court rejects Defendant’s argument that this claim must fail with the 25 breach of contract claim. 5 As Plaintiff alleges that “[Defendant] unfairly interfered with 26 27 28 5 At any rate, this argument appears contrary to prevailing law. See, e.g., Fed. Ins. Co. v. Dencity, Inc., No. SACV071458DOCRNBX, 2008 WL 11342969, at *3 (C.D. Cal. June 5, 2008) (“[Although] the covenant is limited to assuring compliance with the express terms of the contract and cannot be used to 16 20-CV-1453 JLS (WVG) Case 3:20-cv-01453-JLS-WVG Document 8 Filed 01/26/21 PageID.124 Page 17 of 20 1 [Plaintiff]’s right to receive the benefits of the contract by, inter alia, refusing to pay 2 [Plaintiff]’s commissions earned, unilaterally reducing [Plaintiff]’s commission rate in 3 breach of the Commission Contract, and wrongfully terminating [Plaintiff] to avoid paying 4 [Plaintiff] commissions owed under the Commission Contract,” Compl. ¶ 76, and that 5 Plaintiff was harmed as a direct result, see id. ¶ 77; Fed. Ins. Co., 2008 WL 11342969, at 6 *4 (denying motion to dismiss claim for breach of covenant of good faith and fair dealing 7 where the alleged damages “can be found to be within the contemplation of the parties at 8 the time of performance”), Plaintiff has pleaded sufficiently his claim. Accord Wood v. 9 Igate Techs., Inc., No. 3:15-CV-00799 JSW, 2015 WL 13345325, at *4 (N.D. Cal. Aug. 10 11, 2015) (denying motion to dismiss where “Plaintiff sufficiently alleges that Defendant 11 breached the covenant of good faith and fair dealing by terminating her employment to 12 cheat her out of receiving her earned commissions that she was promised and entitled to 13 receive.”). Nor, as pleaded, is the claim superfluous. 6 See Celador Int’l Ltd. v. Walt Disney 14 Co., 347 F. Supp. 2d 846, 853 (C.D. Cal. 2004) (“Plaintiffs allege that Defendants’ actions 15 breached the contract. If not, the actions, allegedly taken in bad faith, frustrated the actual 16 benefits of the contract. The breach of the covenant of good faith and fair dealing claim, 17 therefore, is not superfluous.”) (citation omitted). Accordingly, the Court DENIES the 18 Motion as to this claim. 19 /// 20 21 22 23 24 25 26 27 28 create additional obligations not contemplated in the contract, . . . it is not necessary that an express term be breached before the covenant is implicated. Where one party is given discretion under the terms of a contract and does not act in an objectively reasonable manner, the covenant of good faith and fair dealing can be implicated.”) (citing Badie v. Bank of Am., 67 Cal. App. 4th 779, 796 (1998)). 6 Even assuming the claim were duplicative of the breach of contract claim, the Court would not dismiss the claim on that basis at this stage in the litigation. See, e.g., Lett v. Paymentech, Inc., 81 F. Supp. 2d 992, 1002 (N.D. Cal. 1999) (denying motion to dismiss allegedly duplicative claim for breach of the covenant of good faith and fair dealing, reasoning: “The Court agrees with Lett that within the ambit of Rule 12 it is premature to foreclose avenues of relief, even where the relief sought might ultimately prove duplicative. For the Court to intervene and foreclose potential avenues of relief is not within the purview of Rule 12, which focuses the Court’s efforts on the plaintiff’s ability to state a legally viable claim, not its ultimate viability relative to a plaintiff’s other claims.”). 17 20-CV-1453 JLS (WVG) Case 3:20-cv-01453-JLS-WVG Document 8 Filed 01/26/21 PageID.125 Page 18 of 20 1 V. Failure to Pay Wages Upon Termination (Cal. Lab. Code §§ 201–03) 2 “If an employer discharges an employee, the wages earned and unpaid at the time of 3 discharge are due and payable immediately.” Cal. Lab. Code § 201(a). “If an employer 4 willfully fails to pay . . . any wages of an employee who is discharged . . . , the wages of 5 the employee shall continue as a penalty from the due date thereof at the same rate until 6 paid or until an action therefor is commenced; but the wages shall not continue for more 7 than 30 days.” Id. § 203(a). “‘Wages’ includes all amounts for labor performed by 8 employees of every description, whether the amount is fixed or ascertained by the standard 9 of time, task, piece, commission basis, or other method of calculation.” Id. § 200(a). 10 Defendant argues that because Plaintiff’s breach of contract claim is allegedly 11 defective, Defendant had no duty to pay Plaintiff the commissions in question, and 12 therefore this claim must be dismissed. Mot. at 9. Plaintiff counters that, because he has 13 established that the GAP contract was “booked,” and therefore his commissions were 14 earned, before his termination, he has adequately pleaded this claim. Opp’n at 16. 15 Plaintiff alleges he was due wages—i.e., his commission payment—on the date he 16 was terminated, see Compl. ¶¶ 41–42, 82, and that “[Defendant] failed to pay, and 17 continues to fail to pay,” those wages, id. ¶ 83. For the reasons provided supra at 14–15, 18 the Court has found that the Complaint adequately pleads a claim for breach of contract, 19 and thus wages allegedly due. Accordingly, the Court finds Plaintiff has pleaded a claim 20 for failure to pay wages and DENIES the Motion as to this claim. 21 VI. 22 Unlawful, Unfair, and/or Fraudulent Business Practices (Cal. Bus. & Prof. Code § 17200 et seq.) 23 Finally, Plaintiff brings a claim under § 17200 of the California Business & 24 Professions Code (the “UCL”) for unlawful, unfair, and/or fraudulent business practices. 25 Defendant claims that, because the breach of contract and retaliation claims allegedly are 26 inadequately pleaded, this derivative claim, which “adds nothing new” and “simply makes 27 a conclusory allegation sans particularity,” is also defective and must be dismissed. Mot. 28 at 9. Plaintiff counters that Defendant’s argument is premised on its erroneous 18 20-CV-1453 JLS (WVG) Case 3:20-cv-01453-JLS-WVG Document 8 Filed 01/26/21 PageID.126 Page 19 of 20 1 interpretation of the term “booked,” and because Plaintiff has adequately pleaded his other 2 claims, this claim is likewise sound. Opp’n at 16. 3 “As to the ‘unlawful’ prong, the UCL prohibits ‘unlawful’ practices ‘forbidden by 4 law, be it civil or criminal, federal, state, or municipal, statutory, regulatory, or court- 5 made.’ The UCL ‘thus creates an independent action when a business practice violates 6 some 7 CV1600443BRORAOX, 2016 WL 8929249, at *14–15 (C.D. Cal. May 5, 2016) (quoting 8 Saunders v. Super. Ct., 27 Cal. App. 4th 832, 838 (1994); Walker v. Countrywide Home 9 Loans, Inc., 98 Cal. App. 4th 1158, 1169 (2002)). The Court has found, as explained supra, 10 that Plaintiff has adequately pleaded claims for various violations of state law. Thus, 11 because Plaintiff satisfactorily has pleaded that Defendant violated the law, Plaintiff 12 adequately states a claim under the “unlawful” prong. See, e.g., Lopez v. Stages of Beauty, 13 LLC, 307 F. Supp. 3d 1058, 1073 (S.D. Cal. 2018) (“Based on the foregoing, Plaintiff 14 plausibly alleges that Defendant’s conduct or practices violates the [California Automatic 15 Renewal Law, Cal. Bus. & Prof. Code §§ 17600 et seq.], and therefore, Plaintiff plausibly 16 alleges a UCL claim.”). other law.’” Johnson v. Sunrise Senior Living Mgmt., Inc., No. 17 As to the “unfair” prong, “[a]lthough ‘[t]he standard for determining what business 18 acts are “unfair” in consumer actions under the UCL is currently unsettled,’ the alleged 19 ‘unfair’ conduct must be ‘tethered to a violation of a constitutional, statutory or regulatory 20 provision.” Johnson v. Sunrise Senior Living Mgmt., Inc., No. CV1600443BRORAOX, 21 2016 WL 8929249, at *14–15 (C.D. Cal. May 5, 2016) (quoting Zhang v. Superior Court, 22 57 Cal. 4th 364, 380 n.9 (2013); Graham v. Bank of Am., N.A., 226 Cal. App. 4th 594, 613 23 (2014)). “‘Unfair’ means any practice whose harm to the victim outweighs its benefits.” 24 McCullough v. Lennar Corp., No. 09CV1808-AJB(NLS), 2011 WL 1585017, at *20 (S.D. 25 Cal. Apr. 26, 2011) (citing Olsen v. Breeze, Inc., 48 Cal. App. 4th 608, 618 (1996)). Given 26 that the Court has determined, as set forth supra, that Plaintiff has alleged various 27 violations of California statutes, including California Labor Code §§ 201–03 and 1102.5, 28 and Plaintiff alleges that “[t]he harm to [Plaintiff] resulting from Defendant’s violations of 19 20-CV-1453 JLS (WVG) Case 3:20-cv-01453-JLS-WVG Document 8 Filed 01/26/21 PageID.127 Page 20 of 20 1 California law as identified herein far outweighs whatever benefits, if any, such business 2 practices have for Defendant,” Compl. ¶ 91, Plaintiff adequately states a claim under the 3 “unfair” prong. 4 Given that Defendant raises no arguments specific to the “fraudulent” prong and 5 Plaintiff has pleaded adequately a UCL claim for at least unlawful and unfair business 6 practices, the Court DENIES the Motion as to this claim. 7 CONCLUSION 8 In light of the foregoing, the Court DENIES the Motion. 9 IT IS SO ORDERED. 10 Dated: January 25, 2021 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 20 20-CV-1453 JLS (WVG)
]]>
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You
should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google
Privacy Policy and
Terms of Service apply.
