Opinion
Case No.: 17cv1880-WQH-JLB
07-06-2018
JENNIFER M. SANSONE, and BALDEMAR ORDUNO, Jr., Individually and on Behalf of Other Members of the Public Similarly Situated, Plaintiffs, v. CHARTER COMMUNICATIONS, INC.; TWC ADMINISTRATION LLC; CHARTER COMMUNICATIONS, LLC; and DOES 1-25, inclusive, Defendants.
ORDER
:
The matter before the Court is the Motion to Dismiss Counts I-III filed by Defendants. (ECF No. 22).
I. PROCEDURAL BACKGROUND
On December 6, 2017, Plaintiffs Jennifer M. Sansone and Baldemar Orduno, Jr., individually and on behalf of members of the public similarly situated, filed the First Amended Complaint ("FAC"), the operative complaint in this action. (ECF No. 19). Plaintiffs allege the following causes of action: (1) violation of California Labor Code section 227.3 (failure to pay at termination); (2) violation of California Labor Code section 227.3 (valuation); (3) failure to timely pay wages due in violation of California Labor Code sections 201 and 203; (4) breach of contract (base compensation); (5) breach of contract (commissions); and (6) unfair competition. Id. Plaintiffs bring these causes of action on behalf of themselves and as representatives of three proposed classes, the "Vacation Pay Class", the "TWC Legacy Employee Breach of Contract Class", and the "Commission Breach of Contract Class." Id. at 4-8.
On February 5, 2018, Defendants Charter Communications, Inc. ("Charter Inc."), Charter Communications, LLC ("Charter LLC"), and TWC Administration LLC ("TWC"), filed a motion to dismiss the first three counts in the FAC. (ECF No. 22).
On March 7, 2018, Plaintiffs filed a response in opposition. (ECF No. 23).
On March 21, 2018, Defendants filed a reply. (ECF No. 24).
II. ALLEGATIONS OF FACT
Plaintiff Sansone and Plaintiff Orduno were employees of TWC until on or about May 18, 2016 and employees of "Charter" from on or about May 18, 2016 to the present. (ECF No. 19 at ¶¶ 3-4). TWC was a wholly-owned subsidiary of Time Warner. Id. ¶ 20. "On or about May 18, 2016, Charter, Inc. acquired Time Warner and all of Time Warner's subsidiaries, including, but not limited to, TWC." Id. ¶22. "Charter LLC is a wholly owned subsidiary of Charter Inc." Id. ¶ 23.
In the FAC, Plaintiff state "Charter LLC and Charter Inc. are collectively referred to as Charter." (ECF No. 19 at 2).
Plaintiffs' employment with TWC "was terminated on or about the date Charter Inc. acquired Time Warner." Id. ¶ 24. At the time Plaintiffs' employment with TWC was terminated, Plaintiffs had accrued unused vacation wages with TWC. Plaintiffs were not paid for the accrued but unused vacation wages when their employment with TWC was terminated. "TWC and Charter appear to have 'carried over' Plaintiffs' . . . vacation accrual from TWC to Charter LLC in an attempt to avoid paying Plaintiffs . . . for their accrued vacation pay at the time of their termination from TWC." Id. ¶ 26. Defendants failed to obtain Plaintiffs' express written consent to carry over accrued vacation wages and failed to provide Plaintiffs the option of being paid out for their accrued vacation wages at the time of their employment termination. Id. Plaintiffs' "ability to accrue vacation wages from Charter LLC [was limited] because they began their employment at Charter LLC with a vacation accrual balance putting them closer to or at any applicable vacation accrual caps." Id. ¶ 27. "Further, Charter LLC's policies for calculating vacation pay results in Plaintiffs . . . being paid less by Charter LLC when they use the vacation time accrued at TWC." Id. TWC paid Plaintiffs vacation hours "based on both their base wages and incentive pay." Id. Charter LLC "reduced the value of vacation pay earned at and illegally 'transferred' from TWC by paying vacation wages solely at the base pay rate." Id. "[M]any Vacation Pay Class Members (including Plaintiff Orduno) had their base wages reduced, which further reduces the value they receive for the vacation pay they accrued at TWC and which should have been paid at the termination of their employment from TWC." Id.
III. LEGAL STANDARD
Federal Rule of Civil Procedure 12(b)(6) permits dismissal for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). Federal Rule of Civil Procedure 8(a) provides that "[a] pleading that states a claim for relief must contain . . . a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). "All factual allegations set forth in the complaint are 'taken as true and construed in the light most favorable to plaintiffs.'" Lee v. City of Los Angeles, 250 F.3d 668, 679 (9th Cir. 2001) (quoting Epstein v. Wash. Energy Co., 83 F.3d 1136, 1140 (9th Cir. 1996)). "A district court's dismissal for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6) is proper if there is a 'lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.'" Conservation Force v. Salazar, 646 F.3d 1240, 1242 (9th Cir. 2011) (quoting Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1988)).
"[A] plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Fed. R. Civ. P. 8(a)). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citation omitted). "[T]he tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. (citation omitted). "In sum, for a complaint to survive a motion to dismiss, the non-conclusory factual content, and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief." Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) (quotation omitted).
IV. REQUESTS FOR JUDICIAL NOTICE
Defendants request judicial notice of a number of documents, including filings with the Securities and Exchange Commission ("SEC") and records of administrative entities, pursuant to Federal Rule of Evidence 201(b). (ECF No. 22-2). Plaintiffs request judicial notice of a number of documents, including SEC filings and filings with the California Secretary of State, pursuant to Federal Rule of Evidence 201(b). (ECF No. 23-1).
Defendants state that they provide only the relevant portions of the documents so as not to burden the Court and state that a portion of Exhibit C has been redacted because it contains "confidential and highly-sensitive information." (ECF No. 22-2 at 2 n.1, n.2). Defendants assert that they will provide the Court with the complete documents and an unredacted version of Exhibit C under seal if the Court so requests. Id. The Court does not require these documents at this stage in the proceedings.
"As a general rule, a district court may not consider any material beyond the pleadings in ruling on a Rule 12(b)(6) motion." Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001). However, there are "exceptions to the requirement that consideration of extrinsic evidence converts a 12(b)(6) motion to a summary judgment motion." Id. Federal Rule of Evidence 201 provides that "[t]he court may judicially notice a fact that is not subject to reasonable dispute because it . . . is generally known within the trial court's territorial jurisdiction; or . . . can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Fed R. Evid. 201(b). "[U]nder Fed. R. Evid. 201, a court may take judicial notice of 'matters of public record.'" Lee, 250 F.3d at 689 (quoting Mack v. South Bay Beer Distrib., 798 F.2d 1279, 1282 (9th Cir.1986)).
Both parties seek judicial notice in order to rely on the truth of the contents of the documents as support for the substance of their claims. The Court cannot properly take judicial notice of the contents of the documents for this purpose. See, e.g., Gerritsen v. Warner Bros. Entm't Inc., 112 F. Supp. 3d 1011, 1033 (C.D. Cal. 2015) ("S]he relies on the truth of the contents of the SEC filings to prove the substance of her claims. It is inappropriate for the court to take judicial notice of the contents of the documents for this purpose."); Hennessy v. Penril Datacomm Networks, Inc., 69 F.3d 1344, 1355 (7th Cir. 1995) (affirming the denial of judicial notice because "we believe that the fact in question here was not capable of accurate and ready determination by resort to the 10-K"); Patel v. Parnes, 253 F.R.D. 531, 546 (C.D. Cal. 2008) ("It is appropriate for the court to take judicial notice of the content of the SEC Forms 4 and the fact that they were filed with the agency. The truth of the content, and the inferences properly drawn from them, however, is not a proper subject of judicial notice under Rule 201."). Defendants' request for judicial notice and Plaintiffs' request for judicial notice are denied. (ECF Nos. 22-2, 23-1).
V. CONTENTIONS
Defendants contend that the first three causes of action, two violations of California Labor Code section 227.3 and failure to timely pay wages due under California Labor Code sections 201 and 203, fail as a matter of law because Plaintiffs fail to plead facts demonstrating an actual termination of employment. Defendants contend that a termination of employment is a required element of each of these causes of action. Further, Defendants contend that Plaintiffs cannot plead any termination of employment because the stock transaction between the Defendants did not impact Plaintiffs' employment status. Defendants contend that the factual allegations of the FAC demonstrate that Plaintiffs continued in their same jobs and were not terminated. Defendants contend that "no court has held that such transactions between two corporations constitute[] a termination of employ[ment] for purposes of Section 227.3 with respect to employees who continued on in their jobs following the transactions." (ECF No. 22-1 at 10). Defendants contend that even if the transaction constituted a termination, "such would not trigger a requirement to pay out accrued vacation because the vacation obligations were assumed by the surviving employer." (ECF No. 24 at 5-6). Defendants contend that there are no equitable or policy reasons for the Court to "recognize a termination sufficient to trigger § 227.3 here." Id. at 14. Defendants contend that the third cause of action for failure to timely pay wages under California Labor Code sections 201 and 203 additionally fails as derivative of the section 227.3 claims.
Plaintiffs contend that California provides substantial protections to employees' accrued vacation wages and that, "beyond applying principles of equity and fairness, courts . . . must liberally construe the Labor Code to reflect its protective and remedial nature." (ECF No. 23 at 12-13). Plaintiffs contend that the FAC contains sufficient factual allegations to establish that their employment was terminated and that TWC's control over Plaintiffs' employment was extinguished. Plaintiffs contend that "termination paperwork" or an "unequivocal statement of discharge" is not required to establish a termination of employment. Id. at 16-17. Plaintiffs assert that "the 2016 Charter Inc.-TWCI transaction extinguished TWCI." Id. at 17. Plaintiffs assert that upon this transaction, "Plaintiffs' and putative class members' employment with [TWC] was terminated, Charter LLC became their new employer, and [TWC] ultimately ceased to transact any form of business in California." Id. Plaintiffs contend that "it is well established in California that the sale/acquisition of a business equates to the termination of the selling company's employees and triggers that employer's obligation to pay out accrued but unused vacation wages." Id. at 23.
Plaintiffs refer to Time Warner Cable, Inc. as "TWCI" and collectively refer to Time Warner Cable, Inc and Time Warner Cable Administration, LLC as "Time Warner." Time Warner Cable, Inc. is not a named defendant. Plaintiffs assert that Time Warner Cable Administration, LLC is a subsidiary of Time Warner Cable, Inc. (ECF No. 23 at 5).
VI. DISCUSSION
Plaintiffs bring the first cause of action under California Labor Code section 227.3 against TWC and Charter Inc. for TWC's "failure to pay Plaintiffs and Vacation Pay Class Members their vested vacation pay at the time of their termination from TWC." (ECF No. 19 at ¶ 44). Plaintiffs allege that Charter Inc. "assumed any of TWC's liability" for this claim as the "Successor in Interest" to TWC. Id. ¶ 45. Plaintiffs bring their second claim under section 227.3 against Charter LLC for its alleged "devaluing" of Plaintiffs' and the Vacation Pay Class Members' earned and accrued vacation wages. Id. ¶¶ 48-55.
Section 227.3 of the California Labor Code provides:
Unless otherwise provided by a collective-bargaining agreement, whenever a contract of employment or employer policy provides for paid vacations, and an employee is terminated without having taken off his vested vacation time, all vested vacation shall be paid to him as wages at his final rate in accordance with such contract of employment or employer policy respecting eligibility or time served; provided, however, that an employment contract or employer policy shall not provide for forfeiture of vested vacation time upon termination. . . . .Cal. Lab. Code § 227.3. To state a claim under section 227.3, Plaintiffs must adequately plead that their employment was terminated. See, e.g., Church v. Jamison, 50 Cal. Rptr. 3d 166, 171 (Ct. App. 2006) ("Thus, termination of employment is the event that converts the employer's obligation to allow an employee to take vacation from work into the monetary obligation to pay that employee for unused vested vacation time."); Suastez v. Plastic Dress-Up Co., 647 P.2d 122, 128 (Cal. 1982) ("On termination of employment, therefore, the statute requires that an employee be paid in wages for a pro rata share of his vacation pay.").
Plaintiffs' third cause of action under California Labor Code sections 201 and 203 alleges that TWC "willfully and illegally failed to pay Plaintiffs and Vacation Pay Class Members their accrued vacation wages at the time of their termination from TWC, and continue to willfully fail and refuse, to pay Plaintiffs and Vacation Pay Class Members their accrued vacation wages." (ECF No. 19 at ¶ 58). Plaintiffs allege that Charter Inc. "assumed any of TWC's liability" for this claim as the "Successor in Interest" to TWC. Id. ¶ 60.
California Labor Code section 201 provides, "If an employer discharges an employee, the wages earned and unpaid at the time of discharge are due and payable immediately." Cal. Lab. Code § 201(a). California Labor Code section 203 provides, in part:
If an employer willfully fails to pay, without abatement or reduction, in accordance with Sections 201, 201.3, 201.5, 201.9, 202, and 205.5, any wages of an employee who is discharged or who quits, the wages of the employee shall continue as a penalty from the due date thereof at the same rate until paid or until an action therefor is commenced; but the wages shall not continue for more than 30 days.Cal. Lab. Code § 203(a). Plaintiffs must adequately plead that a termination of employment has occurred to state this claim under California Labor Code sections 201 and 203. See id.
At this stage in the proceedings, and because the Court has denied the parties' requests for judicial notice, the Court is limited to the factual allegations of the FAC in ruling on this motion. See Lee, 250 F.3d at 688. In the FAC, Plaintiffs allege that Plaintiffs were employed by TWC until on or about May 18, 2016 and employed by Charter from on or about May 18, 2016 through the present. (ECF No. 19 ¶¶ 3-4). Plaintiffs allege that "Plaintiffs' and Vacation Pay Class Members' employment with TWC was terminated on or about the date Charter Inc. acquired Time Warner." Id. ¶ 24. Plaintiffs allege that on May 26, 2015, "Time Warner's Executive Vice President, Chief Product, People & Strategy Officer sent an email to TWC's Employees Below Directors Job Level . . . encouraging them to (i) stay focused while the transaction was finalized and (ii) work at Charter after the transaction closed." Id. ¶ 28. Plaintiffs contend that this communication included "specific, material promises" intended to induce Plaintiffs to "work for Charter subsequent to the acquisition." Id. ¶ 29. Plaintiffs allege that TWC and Charter failed to pay Plaintiffs for their accrued but unused vacation wages when their employment with TWC was terminated and instead carried over the vacation wages without obtaining consent and without providing the option of being paid out. Id. at ¶¶ 25-26. Plaintiffs allege that Charter LLC's policies for calculating and valuing vacation time differed from the policies of TWC. Id. ¶ 27. Viewed in the light most favorable to Plaintiffs, the Court concludes that Plaintiffs have alleged sufficient facts to support a reasonable inference that Plaintiffs suffered a termination of their employment.
VII. CONCLUSION
IT IS HEREBY ORDERED that the Motion to Dismiss Counts I-III of the First Amended Complaint is DENIED. (ECF No. 22). Dated: July 6, 2018
/s/_________
Hon. William Q. Hayes
United States District Court