Thomas Atencio et al v. Tunecore, Inc. et al

REPLY for Relief 206 PLAINTIFFS REPLY TO DEFENDANTS UNTIMELY OPPOSITION TO PLAINTIFFS MOTION FOR POST TRIAL RELIEF

C.D. Cal.February 8, 2019

1 REPLY TO TUNECORE’S UNTIMELY OPPOSITION 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Jason A. Archinaco (State Bar No. 284396) THE ARCHINACO FIRM, LLC 1100 Liberty Ave, Suite C-6 Pittsburgh, PA 15222 (412) 434-0555 -- FAX (888) 563-7549 Email: jarchinaco@archlawgroup.com ATTORNEYS FOR PLAINTIFFS UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA THOMAS ATENCIO, an adult individual, and GIAN CATERINE a/k/a JOHN CATE, an adult individual, Plaintiffs, vs. TUNECORE, INC., a corporation, Defendant. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) CASE NO. 2:16-cv-01925-DMG-MRW [Assigned to the Hon. Dolly M. Gee, Courtroom 8C] PLAINTIFFS’ REPLY TO DEFENDANTS’ UNTIMELY OPPOSITION TO PLAINTIFFS’ MOTION FOR POST TRIAL RELIEF Date: February 22, 2019 Time: 9:30am Location: Courtroom 8C Case 2:16-cv-01925-DMG-MRW Document 213 Filed 02/08/19 Page 1 of 13 Page ID #:8778 2 REPLY TO TUNECORE’S UNTIMELY OPPOSITION 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF CONTENTS I. TUNECORE’S OPPOSITION IS UNTIMELY AND SHOULD BE STRICKEN. .................................................................................................................. 4 II. ATENCIO WAS AN EMPLOYEE FOR PURPOSES OF THE CALIFORNIA LABOR CODE. ............................................................................................................ 5 III. UPON THE LIQUIDITY EVENT, ATENCIO AND CATERINE WERE OWED A DEFINITIVE AND SPECIFIC AMOUNTS AS ALL CONDITION PRECEDENTS HAD BEEN MET AND THE ‘OPTION EGG’ HAD HATCHED INTO WAGES. ........................................................................................................... 10 IV. CONCLUSION ................................................................................................... 13 Case 2:16-cv-01925-DMG-MRW Document 213 Filed 02/08/19 Page 2 of 13 Page ID #:8779 3 REPLY TO TUNECORE’S UNTIMELY OPPOSITION 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHORITIES Cases Baptista v. Abbey Healthcare Group, Inc., 1996 WL 33340740 (D. Mass. Apr. 10, 1996) ........................................................................................................................ 11 IBM v. Bajorek, 191 F.3d 1033 (9th Cir. 1999) ........................................................... 11 Narayan v. EGL, Inc., 616 F.3d 895 (9th Cir. 2010) ..................................................... 6 Roche v. Morgan Collection, Inc., 882 F.Supp.2d 257 (D. Mass 2012) ..................... 11 Ruiz v. Affinity Logistics Corp., 667 F.3d 1318 (9th Cir. 2012) ................................ 5, 6 S. G. Borello & Sons, Inc. v Dept. of Industrial Relations, 48 Cal.3d 341 (1989) .. 6, 7, 8 Tieberg v. Unemployment Ins. App. Bd., 2 Cal. 3d 943 (1970) .................................... 7 Toyota Motor Sales v. Superior Court, 220 Cal.App.3d 864 (1990) ............................ 8 Yellow Cab Cooperative v. Workers Compensation Appeals Board, 226 Cal.App.3d 1288 (1991) ............................................................................................................... 8 Case 2:16-cv-01925-DMG-MRW Document 213 Filed 02/08/19 Page 3 of 13 Page ID #:8780 4 REPLY TO TUNECORE’S UNTIMELY OPPOSITION 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA THOMAS ATENCIO, an adult individual, and GIAN CATERINE a/k/a JOHN CATE, an adult individual, Plaintiffs, vs. TUNECORE, INC., a corporation, Defendant. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) CASE NO. 2:16-cv-01925-DMG-MRW [Assigned to the Hon. Dolly M. Gee, Courtroom 8C] PLAINTIFFS’ REPLY TO DEFENDANTS’ UNTIMELY OPPOSITION TO PLAINTIFFS’ MOTION FOR POST TRIAL RELIEF PLAINTIFFS’ REPLY TO DEFENDANTS’ UNTIMELY OPPOSITION TO PLAINTIFFS’ MOTION FOR POST TRIAL RELIEF And now come Plaintiffs, by and through their counsel The Archinaco Firm LLC, and files the within Reply to TuneCore’s Untimely Opposition to Motion for Post Trial Relief, averring in support as follows I. TUNECORE’S OPPOSITION IS UNTIMELY AND SHOULD BE STRICKEN. TuneCore’s opposition is untimely under L.R. 7.9 that provides in relevant part: “[e]ach opposing party shall, not later than ten (10) days after service of the motion in the instance of a new trial motion . . . .” Here, TuneCore did not file its opposition within ten days, despite the fact that Plaintiffs filed their opposition to Case 2:16-cv-01925-DMG-MRW Document 213 Filed 02/08/19 Page 4 of 13 Page ID #:8781 5 REPLY TO TUNECORE’S UNTIMELY OPPOSITION 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TuneCore’s motion for a new trial within the prescribed period. As such, TuneCore’s motion is untimely, and as such, should be stricken. To the extent that TuneCore attempts to argue that Plaintiff’s request for “reconsideration” extended the time period, it did not as Plaintiff has requested a new trial on damages only. The rule is clear and TuneCore violated it. TuneCore’s opposition should be stricken. Plaintiffs are also prejudiced for several reasons. First, they are prejudiced because they have to respond to the late filed brief at a time period inconvenient to their counsel given his other obligations. Plaintiffs’ counsel appeared in federal court twice this past week for scheduled arguments involving complicated discovery issues as well as a Daubert motion hearing. Second, TuneCore “lobbed” its late brief over to Plaintiff and the court as a “research grenade.” Indeed, although sadly at this point it is not shocking any longer, TuneCore completely misstated the law – despite citing to a case that includes the proper standard for determining whether a person is an employee for purposes of California law. This is just improper on top of the brief being filed late, and has caused Plaintiffs’ counsel to have to do TuneCore’s work for them. That’s the purpose of what they did – to abuse the rules yet again. Third, Plaintiffs were prejudiced by having to read TuneCore’s late filed brief, one that contains incorrect legal arguments and more repetitive propaganda. II. ATENCIO WAS AN EMPLOYEE FOR PURPOSES OF THE CALIFORNIA LABOR CODE. TuneCore’s motion should be stricken, not only because it does not comply with the local rules, but also because it seeks to place the burden on Plaintiffs’ counsel and the court to correct TuneCore’s counsel’s intentionally obtuse analysis of the law. TuneCore’s brief is blatantly disingenuous. For example, and most importantly, TuneCore cites the case of Ruiz v. Affinity Logistics Corp., 667 F.3d 1318, 1323 (9th Cir. 2012). And even though within that case, the Ruiz court Case 2:16-cv-01925-DMG-MRW Document 213 Filed 02/08/19 Page 5 of 13 Page ID #:8782 6 REPLY TO TUNECORE’S UNTIMELY OPPOSITION 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 identified the test employed to determine whether a person is an employee or an independent contractor under California law, TuneCore performed no analysis at all and ignored the test as it was not there – similar to ignoring Local Rule 7.9 – as if it was not there.1 So, naturally, Plaintiff and the court must do the work for TuneCore. The question should be asked of TuneCore’s counsel how it could be that they cite a case, but claim not to know its contents. As for the substance of the argument, although TuneCore argues the opposite without any valid legal substantiation, for purposes of the California Labor Code Atencio was an employee. California Labor Code 200 provides that “’wages’ includes all amounts for labor performed by employees of every description . . . .” “Under California law, once a plaintiff comes forward with evidence that he has provided services for an employer, the employee has established a prima facie case that the relationship was one of employer/employee.” Ruiz v. Affinity Logistics Corp., 667 F.3d 1318, 1323 (9th Cir. 2012)(quoting Narayan v. EGL, Inc., 616 F.3d 895, 900 (9th Cir. 2010)). “Once the employee establishes a prima facie case, the burden shifts to the employer, which may prove, if it can, that the presumed employee was an independent contractor.” Id. In most labor matters in California, the multi-factor “economic realities” test adopted by the California Supreme Court in the case of S. G. Borello & Sons, Inc. v Dept. of Industrial Relations, 48 Cal.3d 341 (1989) is employed. “The California Supreme Court recognized that this test “must be applied with deference to the purposes of the protective legislation” that the worker seeks to enforce.” Ruiz, 1325 (quoting S.G. Borello & Sons, 48 Cal.3d at 353). In applying the economic realities test, the most significant factor to be considered is whether the employer has the right to “control the manner and means of 1 Plaintiffs’ counsel’s paralegal, Jessica Dietz, who worked on a weekend to timely file a motion to TuneCore’s ex parte motion (filed after hours on a weekend), identified the Local Rule that required responses to be filed within ten (10) days of a motion for a new trial being filed. Case 2:16-cv-01925-DMG-MRW Document 213 Filed 02/08/19 Page 6 of 13 Page ID #:8783 7 REPLY TO TUNECORE’S UNTIMELY OPPOSITION 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 accomplishing the result desired . . . .” S.G. Borello & Sons, 48 Cal.3d at 350. The test also calls for an analysis of “secondary” indicia. Id. “Strong evidence in support of an employment relationship is the right to discharge at will, without cause.” S.G. Borello & Sons, 48 Cal.3d at 350 (quoting Tieberg v. Unemployment Ins. App. Bd., 2 Cal. 3d 943, 949 (1970)). Additional factors that may be considered depending on the issue involved are: 1. Whether the person performing services is engaged in an occupation or business distinct from that of the principal; 2. Whether or not the work is a part of the regular business of the principal or alleged employer; 3. Whether the principal or the worker supplies the instrumentalities, tools, and the place for the person doing the work; 4. The alleged employee's investment in the equipment or materials required by his or her task or his or her employment of helpers; 5. Whether the service rendered requires a special skill; 6. The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision; 7. The alleged employee's opportunity for profit or loss depending on his or her managerial skill; 8. The length of time for which the services are to be performed; 9. The degree of permanence of the working relationship; 10. The method of payment, whether by time or by the job; and 11. Whether or not the parties believe they are creating an employer-employee relationship may have some bearing on the question, but is not determinative Case 2:16-cv-01925-DMG-MRW Document 213 Filed 02/08/19 Page 7 of 13 Page ID #:8784 8 REPLY TO TUNECORE’S UNTIMELY OPPOSITION 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 since this is a question of law based on objective tests.2 Even where there is an absence of control over work details, an employer- employee relationship will be found if (1) the principal retains pervasive control over the operation as a whole, (2) the worker's duties are an integral part of the operation, and (3) the nature of the work makes detailed control unnecessary. Yellow Cab Cooperative v. Workers Compensation Appeals Board, 226 Cal.App.3d 1288 (1991). The existence of a written agreement purporting to establish an independent contractor relationship is not determinative. S. G. Borello & Sons, 48 Cal.3d at 349. Additionally, the fact that a worker is issued a 1099 form rather than a W-2 form is also not determinative with respect to independent contractor status. Toyota Motor Sales v. Superior Court, 220 Cal.App.3d 864, 877 (1990). First, before even reaching an analysis of the S. G. Borello & Sons factors, it should be noted that TuneCore has done nothing to rebut the presumption that Atencio was an employee under California law other than claiming that Atencio’s legal interpretation about whether he was an employee or not (as he understands that term) is binding and conclusive. However, TuneCore’s analysis was specifically rejected in S. G. Borello & Sons as the court acknowledged that titles, while evidence, are not conclusive. That’s the whole purpose of the test. Indeed, if titles were determinative, then Jeff Price’s testimony referring to Atencio as an employee during his deposition would be binding. Price, 42:22-43:02; 46:13-47:03 “(I cannot recall anyone, Gian Caterine, Tom Atencio, or any other employee at any time . . . .”)(emphasis added). A further analysis of the S.G. Borello & Sons factors leads to the inevitable conclusion that Atencio was an employee for purposes of California Labor Code 200, not just that TuneCore failed to rebut the presumption by performing no analysis. 2 See also, State of California Employment Development Department, Employment Determination Guide, Exhibit 1. The guide provides a checklist of the factors, including those that are identified as possessing the most significant weight. Case 2:16-cv-01925-DMG-MRW Document 213 Filed 02/08/19 Page 8 of 13 Page ID #:8785 9 REPLY TO TUNECORE’S UNTIMELY OPPOSITION 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TuneCore so thoroughly failed to rebut the presumption, that it did not even refer to it. Yet, can Plaintiffs leave this issue to chance and not brief it? Of course not, so Plaintiff’s counsel must do TuneCore’s work for them. With regard to the factors, the two most import weight in favor of Atencio being considered an employee for purposes of California Labor Code 200. First, whether TuneCore ever did (or only did so from time-to-time), it had the right to control and direct Atencio’s work. Indeed, Price testified to asking actually directing Atencio to perform specific tasks. Price: 49:24-52:11; 69:23-70:09. Price testified that others at TuneCore also asked Atencio to perform tasks. Price: 52:12-53:6. This testimony was unrebutted and is further corroborated by Atencio’s testimony. Although TuneCore might attempt to claim that it never actually exercised control, that is irrelevant – as the right to control governs. This factor strongly weighs in Atencio’s favor. The second of the two factors also strongly weigh in favor of Atencio being considered an employee for purposes of California Labor Code 200. TuneCore had the right to terminate Atencio at will, whenever it wanted and for no reason at all. Indeed, TuneCore’s counsel even asserted in closing argument that nothing in the option agreement provided any right to the option holder to be retained by the company. Day 5, p. 97:7-9 (Mr. Kohler: “And importantly, nothing in this agreement gives the option holder the right to be retained by the company.”). Yet, was Atencio ever terminated? Not really, other than Scott Ackerman noting him as terminated in the cap tables, an act that caused him to be paid more money. Did they ever -- and have they ever to this day – terminated Atencio? Of course not, but they still could have whenever they wanted to. Thus, the second of the two most important factors weigh in favor of Atencio being considered an employee for the purposes of California Labor Code 200. As to the remaining factors, they too weigh in favor of Atencio being Case 2:16-cv-01925-DMG-MRW Document 213 Filed 02/08/19 Page 9 of 13 Page ID #:8786 10 REPLY TO TUNECORE’S UNTIMELY OPPOSITION 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 considered an employee for the purposes of California Labor Code 200. Going through each of the eleven listed factors, factors: 2 (regular business of the principal); 5 (special skills); 7 (opportunity for profit); 8 (length of time); and 9 (degree of permanence of the relationship weigh in favor of a conclusion of employment for purposes of the law. Further factors found in the California Employment Development Department, Employment Determination Guide, also support the conclusion that Atencio should be considered an employee for purposes of California Labor Code 200.3 And if the court had any doubt, TuneCore would have provided an analysis and not ignored the test in its own case Ruiz if it really thought otherwise. Either TuneCore intentionally tried to mislead the court, or it knew that an analysis of the S. G. Borello & Sons would prove their downfall, so they just decided not to provide any analysis, and hope that Plaintiff’s counsel and the court missed it. III. UPON THE LIQUIDITY EVENT, ATENCIO AND CATERINE WERE OWED A DEFINITIVE AND SPECIFIC AMOUNTS AS ALL CONDITION PRECEDENTS HAD BEEN MET AND THE ‘OPTION EGG’ HAD HATCHED INTO WAGES. TuneCore challenges Plaintiffs’ request for a new trial and/or reconsideration pertaining to the court’s prior wage rulings. First, as set forth previously, the court can look behind the words used in agreements to determine that what really was occurring was that TuneCore was deferring income due to cash flow concerns, and therefore, the “options” label was improper. Second, TuneCore misses a very important point. There has been a very significant factual change that would warrant 3The first three questions weigh strongly in favor of Atencio being considered an employee, those considered the most important. Questionnaire answers supported by the evidence in the case: (1) no; (2) yes; (3) yes. [“Questions 1-3 are significant questions. If the answer to any of them is “Yes,” if it is a strong indication that the worker is an employee.”]. Further: (4) yes; (5) yes; (6) yes; (7) no; (8) no; (9) no; (10) no; (11) no; (12) no; (13) no. Although the factors after the first three are mixed, they too weigh in favor of the conclusion that Atencio is an employee for purposes of the Labor Code. And, using the interpretation rules, there is either a strong indication of employment, or a likely employment relationship. Case 2:16-cv-01925-DMG-MRW Document 213 Filed 02/08/19 Page 10 of 13 Page ID #:8787 11 REPLY TO TUNECORE’S UNTIMELY OPPOSITION 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 reconsideration pursuant to Rule 7-18. TuneCore has consistently argued that options are not wages under California, Massachusetts or New York law. First, the court ruled in favor of TuneCore as to Atencio’s claims, relying upon IBM v. Bajorek, 191 F.3d 1033 (9th Cir. 1999). TuneCore argued then, as it does now, that options are not an amount – and therefore, not included in the wage act. See, [Docket 42, Page ID# 760]. Second, the court ruled in favor of TuneCore as to Caterine’s claims, relying on Roche v. Morgan Collection, Inc., 882 F.Supp.2d 257 (D. Mass 2012) and Baptista v. Abbey Healthcare Group, Inc., 1996 WL 33340740 (D. Mass. Apr. 10, 1996) for the proposition that compensation triggered by contingencies does not amount to a wage. See, [Docket 63, Page ID# 1082]. Indeed, prior to proving that Atencio and Caterine had complied with all condition precedents contained in their options agreements, TuneCore insisted repeatedly that neither had complied and litigated that point for several years, holding onto the proposition that no “amounts” were due, as the contingencies, like in Bajorek, had never been met. As such, TuneCore argued for years until they lost, that no amount was ever due, because all Plaintiffs received were contingent options that never matured into a right to receive a U.S. currency payment. However, post-verdict, the facts are different – as determined by the jury itself, as Atencio and Caterine were entitled to an amount - a definitive and specific cash payment. For example, comparing the facts in Bajorek, Bajorek failed to prove that he had complied with all condition precedents such that he earned the entitlement to his options – let alone any cash payment / value associated with them. Instead, Bajorek acted dishonestly, and never actually earned the options by violating a sit out clause. Had he simply complied, he would have been entitled to an amount, i.e., the cash value of the options (easily computed given the liquid nature of IBM stock at the time). Thus, Bajorek’s inchoate right to an “amount,” never actually ripened into Case 2:16-cv-01925-DMG-MRW Document 213 Filed 02/08/19 Page 11 of 13 Page ID #:8788 12 REPLY TO TUNECORE’S UNTIMELY OPPOSITION 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 one. Unlike in Bajorek, despite TuneCore’s best efforts at tossing the kitchen sink at Plaintiffs and their counsel, the kitchen sink flew over Plaintiffs’ heads – and simply landed with a thud before the jury, as the Jury unanimously concluded that Atencio and Caterine had complied with their agreements, and thus all condition precedents entitling them to an amount - a definitive and specific cash payment from TuneCore in April 2015 – ironically as TuneCore repeatedly argues now that it owed them. So assuming arguendo that options are not amounts when given, but instead unhatched financial “eggs” as in Bajorek, once all condition precedents have been proven to be met (vesting, sit out, continuous association, etc.), the options then belong to the option holder, even if there is no cash payment entitlement when earned. However, as in the instant case, when a liquidity even occurred, even if the “option egg” was previously only viewed as an inchoate right, upon the liquidity event the “option egg” hatched, and there was no longer any option for Atencio, Caterine or TuneCore, but instead an entitlement to an definitive and specific amount that TuneCore then failed and refused to pay the amount on now proven false pretenses. Indeed, according to TuneCore, it knew precisely the amount owed in April 2015, but decided not to pay it and litigate over it for two years. Indeed, even if the options were not considered wages, the definitive and specific cash amount owed to each was. U.S. currency is an amount. However, those wages were improperly withheld. Doing so violated both California and Massachusetts’s law. See, California Labor Code 200; [Docket 63, Page ID# 1092 (“Court . . . in connection with stock options, responded to counsel, ‘Usually, wages are of a sum certain.’”). Here, reconsideration is proper given the factual change as determined by the jury as a sum certain amount was due in April 2015, not options. Under California Case 2:16-cv-01925-DMG-MRW Document 213 Filed 02/08/19 Page 12 of 13 Page ID #:8789 13 REPLY TO TUNECORE’S UNTIMELY OPPOSITION 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 law, all amounts for labor to employees of any kind are wages – which is consistent with Massachusetts’s law as well.4 Plaintiffs’ citations to other cases not previously cited also supports this proposition. Plaintiffs’ motion should be granted under either Rules 59, 60 and/or pursuant to its request for reconsideration. The amounts due to them in April 2015 were wages under the law. IV. CONCLUSION For the reasons set forth above and herein, Plaintiffs request that the court either provide a new trial, or determine that Plaintiffs’ wages were not paid under pertinent law. THE ARCHINACO FIRM LLC DATED: February 8, 2019 By: /s/ Jason A. Archinaco Jason A. Archinaco Michael A. O’Leary THE ARCHINACO FIRM, LLC Attorneys for Plaintiffs, Thomas Atencio and Gian Caterine aka John Cate 4 Plaintiffs’ counsel notes that under this analysis, a person who obtains options could not sue for wages unless and until the option converted into a right for a definitive and specific cash payment. However, once the option is no longer an option, but an amount, withholding those wages is a violation of the wage laws. Case 2:16-cv-01925-DMG-MRW Document 213 Filed 02/08/19 Page 13 of 13 Page ID #:8790