Summary
warning that production of telephone numbers presents a greater risk of improper solicitation
Summary of this case from Lucas v. TransOpinion
Case No. SA CV 02-507-GLT(MLGx)
July 29, 2002
ORDER REGARDING DEFENDANT'S MOTION TO DISMISS AND STRIKE, PLAINTIFFS' MOTION FOR CLASS CERTIFICATION
Defendant's Motion to Dismiss and Motion to Strike is DENIED. Plaintiffs' Motion for Class Certification is GRANTED in part and DENIED in part.
I. BACKGROUND
Defendant Eastwood Insurance Services, Inc. is an insurance broker specializing in automobile policies. Defendant has offices in eleven different states and employs Solicitors (sales agents) in each office. Plaintiffs' Complaint alleges Defendant Eastwood failed to pay overtime to Plaintiffs and to a putative class of similarly situated Solicitors employed by Eastwood in its offices nationwide. Plaintiffs allege this denial of overtime compensation is in violation of the Fair Labor and Standards Act (FLSA), 28 U.S.C. § 207, and California's Unfair Business Practices Act or unfair competition law (UCL), Cal. Business Professions Code §§ 17200, et seq.
Eastwood moves to dismiss Plaintiff's claim under the UCL, arguing such a claim cannot be maintained by non-California residents where the alleged misconduct did not occur in California. Eastwood further moves to strike Plaintiffs' reference to Eastwood's "boiler-room" offices.See Complaint at ¶ 9. By separate motion, Plaintiffs seek an order certifying this case as a collective class action, authorizing the mailing of a Proposed Notice to all similarly situated Solicitors with viable claims under the FLSA and UCL, and requiring Eastwood to produce the names, addresses, and telephone numbers of all potential opt-in plaintiffs.
II. DISCUSSION
A. Defendant's Motion to Dismiss/Motion to Strike
1. Motion to Dismiss
The function of a Rule 12(b)(6) motion is to test the legal sufficiency of the claims stated in the complaint. The Court construes the complaint in the light most favorable to the plaintiff and accepts all well-pleaded factual allegations as true. See Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). A Rule 12(b)(6) dismissal is proper only where there is either a "lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory."Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1990). Thus, the issue is whether the facts alleged, if true, would entitle the plaintiff to any form of relief. See Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Parks Sch. of Business, Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995).
Defendant argues Plaintiffs' cause of action under the UCL should be dismissed for failure to state a claim upon which relief can be granted. Defendants contend the UCL does not support claims by non-Californians for wrongdoing committed outside of California. Defendants assert any failure to pay overtime compensation committed by Defendant's offices outside of California against Solicitors located in those offices and residing in those states cannot form the basis of a UCL claim.
The district court in Churchill Village, L.L.C. v. General Electric Co., 169 F. Supp.2d 1119 (N.D. Cal. 2000), a case relied upon by Defendant, found "[w]ith respect to the UCL specifically, § 17200 does not support claims by non-Californians where none of the alleged misconduct or injuries occurred in California." 169 F. Supp.2d at 1126. The court went on to point out the defendant in Churchill Village was a New York corporation with its principal place of business in Connecticut and none of the alleged wrongdoing occurred in California.
The facts alleged by Plaintiffs present a different factual situation than in Churchill Village. Defendant Eastwood maintains its corporate headquarters in California. While Eastwood has 40 offices nationwide, 23 of those offices are located in California. Plaintiff alleges Eastwood has a policy of requiring their Solicitors to work in excess of forty hours per week without paying overtime compensation as a result of mis-classifying these Solicitors as "exempt" under the FLSA. Plaintiff alleges "Defendant's founders and executive officers directed, authorized, ratified, and or/participated in the conduct that gives rise to the claims . . . ." See Complaint at ¶ 6. These allegations sufficiently depict a factual scenario in which Eastwood, from its headquarters in California and at the direction of the directors and officers located in the California headquarters, has instituted a policy of depriving overtime pay to all Solicitors nationwide. This alleged wrongdoing, while injuring non-Californian and Californian Solicitors alike, occurred in California and is actionable under the UCL. See Churchill Village, 169 F. Supp.2d at 1126.
In support of its Opposition to Plaintiffs' Motion for Class Certification, Defendant submits numerous "Remuneration Agreements" from non-California offices. While these Agreements show differing commission scales for each office, they do not rebut Plaintiffs' allegations of a company-wide policy to not pay overtime to Solicitors. In any event, this evidence is outside the pleadings and could not be considered in a motion to dismiss. See Arpin v. Santa Clara Valley Trans. Agency, 261 F.3d 912. 925 (9th Cir. 2001; Beliveau v. Caras, 873 F. Supp. 1393, 1395 (C.D. Cal. 1995).
Defendant Eastwood's Motion to Dismiss is DENIED.
2. Motion to Strike
Under Federal Rule of Civil Procedure 12(f) any portion of the pleading may be stricken if it is "redundant, immaterial, impertinent or scandalous." F.R.Civ.P. 12(f). Motions to strike are regarded with disfavor because of the limited importance of pleadings in federal practice. See Stanbury Law Firm v. I.R.S., 221 F.3d 1059, 1063 (8th Cir. 2000); Bureerong v. Uvawas, 922 F. Supp. 1450, 1478 (C.D. Cal. 1996). Where there is any doubt as to the relevance of the challenged allegations, courts frequently permit the allegations to stand, particularly where the moving party shows no resulting prejudice. See Dah Chong Hong, Ltd. v. Silk Greenhouse Flowers, Inc., 719 F. Supp. 1072, 1073 (M.D. Fla. 1989).
Eastwood seeks to strike the phrase "boiler-room" from Plaintiffs' Complaint. The term "boiler-room" is only used once in the Complaint and refers to the manner of business conducted in Eastwood's 40 nation-wide offices. See Complaint at ¶ 9. Defendant argues this term is immaterial, impertinent, and scandalous under F.R.Civ.P. 12(f). The term "boiler-room" has become a term of art and is a recognized reference to a practice of offering customers a service or product by means of an intensive selling campaign through numerous salespersons by telephone or direct mail. See e.g., S.E.C. v. R.J. Allen Associates, Inc., 386 F. Supp. 866, 874 (S.D. Fla. 1974) (defining and using the term "boiler-room" in its opinion). This definition fits the Eastwood operations alleged in Plaintiffs' Complaint and is not immaterial, impertinent, or scandalous. Defendants have also not demonstrated any prejudice arising from the singular use of this term in Plaintiffs' Complaint.
Defendant Eastwood's Motion to Strike is DENIED.
B. Plaintiffs' Motion
1. Class Certification
District courts are authorized to certify a collective action and facilitate notice to potential plaintiffs under 29 U.S.C. § 216(b).Hoffman-LaRoche, Inc. v. Srerling, 493 U.S. 165, 169 (1989). For an opt-in class to be created under § 216(b), an employee must show he is suing his employer on behalf of himself and other "similarly situated" employees. Grayson v. K-Mart Corporation, 79 F.3d 1086, 1096 (11th Cir. 1996). Some courts hold a plaintiff can demonstrate potential class members are "situated," for purposes of receiving notice, based solely upon allegations in a complaint of class-wide illegal practices. See, e.g., Allen v. Marshall Field Co., 93 F.R.D. 438, 442-45 (N.D. Ill. 1982). Other courts hold a plaintiff meets this burden by demonstrating some factual support for the allegations before issuance of notice. See, e.g., Jackson v. New York Telephone Co., 163 F.R.D. 429, 431 (S.D. N.Y. 1995). Under either standard, Plaintiffs have met their burden. The allegations contained in Plaintiffs' Complaint detail a policy of denying all Solicitors, nation-wide, overtime compensation for all hours worked in excess of 40 hours per week. See Complaint ¶ 2-6. The Complaint also alleges Solicitors, in all Eastwood offices, regularly work 60 or more hours per week. See Complaint at ¶ 16. Plaintiffs have further offered the declarations of several Solicitors supporting these allegations. While these Solicitors worked only in Eastwood's California offices, two declarants worked at Eastwood's corporate headquarters and attest to a nationwide policy of "exempting" Solicitors from overtime compensation.
The Court is not holding all members of the potential class who will be sent notices are, in fact, similarly situated to Plaintiffs. Discovery may show Plaintiffs and the potential opt-ins are not similarly situated after all, in which case Defendant Eastwood may move for "decertification." See Mooney v. Aramco Services Co., 54 F.3d 1207, 1214 (5th Cir. 1995); Church v. Consolidated Freiqhtways, Inc., 137 F.R.D. 297, 303 (N.D. Cal. 1991) ("nothing would appear to prevent a court from modifying or reversing a decision on 'similar situations' at a later time in an action, as new facts emerge."). Later discovery proving the original Plaintiffs and opt-ins are not similarly situated does not work against the original decision to facilitate notice. Schwed v. General Elec. Co., 159 F.R.D. 373, 375 (N.D. N.Y. 1995) (finding even where later discovery proves putative class members to be dis-similarly situated, notice before discovery is appropriate as it furthers the remedial purposes of the FLSA).
Plaintiffs' Motion for Class Certification is GRANTED.
2. The Proposed Notice
The "Proposed Notice" submitted by Plaintiffs requires the following changes for the following reasons:
a. In the "To" line, change the date of prospective class member employment to read "within the past four (4) years" instead of "from May 24, 1998." Because the Court has found Plaintiffs' UCL claim is proper, the applicable statute of limitations is four years, not the three years proposed by Defendant Eastwood. Cortez v. Purcolator Air Filtration Products, 23 Cal.4th 163, 178-79 (2000). While Plaintiff's Proposed Notice is directed to all employees working as a Eastwood Solicitor or sales agent "from May 24, 1998 to the present," four years before the date the Complaint was filed, this too is incorrect. The statute of limitations is tolled from the time the person seeking to opt into the lawsuit files a consent to join with the court, not from the time the named Plaintiffs filed the Complaint. See Grayson, 79 F.3d at 1107 ("a putative plaintiff must file his written consent to opt into the class action prior to the expiration of the statute of limitations . . . ."). The eligible opt-ins must have worked as a Solicitor and sales agent "within the past four (4) years."
Technically, the phrase should read "four (4) years before the filing date of the attached 'Consent to Join.'" This phrasing, while accurately reflecting the statute of limitations, would confuse potential opt-in plaintiffs. In the rare event a potential opt-in plaintiff has worked as a Solicitor "within the last four (4) years," but files his or her written consent outside the statute of limitations, Defendant may move to remove this party from the class. See supra Order at 6:7-21.
b. In the "COMPOSITION OF THE CLASS" section, at the end of the section, add the following language:
Specifically, the named Plaintiffs seek to sue on behalf of any employees who are or have been, at any time within the past four (4) years: (a) Employed at Eastwood Insurance Services on a commission basis as a Solicitor or sales agent; and (b) Did not receive overtime as a result of practices described in section 2 above.
This specification of those "similarly situated" is modeled after the notice found in Belcher v. Shoney's, Inc., 927 F. Supp. 249, 252-55 (M.D. Tenn. 1996), a case relied upon by both parties. This additional language spells out the opt-in requirements for those "similarly situated" Solicitors. Without this language, Plaintiff's Proposed Notice is too vague and may unduly cause attempts to opt-in by persons who feel they have not been properly compensated but are not "similarly situated."
c. In the "EFFECT OF JOINING THIS SUIT" section, paragraph 1, after the first sentence, add the following:
While this suit is pending, you may be required to respond to written questions, sit for depositions, and/or testify in court.
This language is also found in the Belcher notice and accurately describes the potential obligations of opt-in plaintiffs. While Plaintiffs argue a defendant in a class action lawsuit brought under the FLSA is not entitled to individualized discovery, the cases cited by Plaintiffs in support of this contention do not stand for this overly generalized principle or do not apply to the facts of this case.
d. In the "NO RETALIATION PERMITTED" section, change "any person (including management at Eastwood)" to "Eastwood." Plaintiffs' emphasized language is unnecessary.
e. A section entitled "COUNSEL FOR EASTWOOD," specifying the name and address of Eastwood's counsel, should be inserted directly following the section entitled "YOUR LEGAL REPRESENTATION IF YOU JOIN." Potential plaintiffs are entitled to accurate notice concerning the pendency of the collection action, "so that they can make informed decisions about whether to participate." Hoffman-La Rouche, 493 U.S. at 170. Notice as to the identity of Eastwood's counsel is proper and necessary to ensure potential opt-ins can make informed decisions as to their participation.See Belcher, 927 F. Supp. at 255 (including defense counsel's identification in notice). The lack of Eastwood's counsel's phone/fax numbers and e-mail address, in addition to the direction to contact only Plaintiffs' counsel for additional information contained in the "FURTHER INFORMATION" section, sufficiently guards against potential opt-in plaintiffs improperly contacting Eastwood's counsel.
All following sections should be accordingly renumbered.
Plaintiff's motion to approve and authorize the mailing of the Proposed Notice is DENIED. Plaintiffs shall submit an "Amended Proposed Notice" incorporating these changes on or before August 16, 2002. Once the Amended Proposed Order is filed and reviewed, the Court may authorize its mailing.
3. Discovery Order
Plaintiff also requests an Order requiring Eastwood to produce a computer-readable data file containing the names, addresses, and telephone numbers of all potential opt-in plaintiffs. While the names and last known addresses of potential opt-in plaintiffs are necessary to facilitate mailing notices, the production of telephone numbers for all putative class members is unwarranted and presents a greater risk of improper solicitation. See Hoffman-La Rouche, 493 U.S. at 171 (finding the potential misuse of the "class device" through misleading communications should be countered by court-authorized notice).
Defendant Eastwood is hereby ORDERED to produce a computer-readable data file containing the names and last known addresses of all potential opt-in plaintiffs.
Defendant Eastwood does not object to the computer data file format of the discovery request.