Stephen Eldard vs. Hewlett-Packard Company

Reply to Motion

Cal. Super. - 4th Dist.January 17, 2012

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 LITTLER MENDELSON, P.C. 2049 Century Park East 5th Floor Los Angeles, CA 90067.3107 310.553.0308 MELINDA S. RIECHERT, Bar No. 065504 MORGAN, LEWIS & BOCKIUS LLP 1400 Page Mill Road Palo Alto, CA 94304 Tel: 650.843.4000 Fax: 650.843.4001 mriechert@morganlewis.com BRADLEY E. SCHWAN, Bar No. 246457 MORGAN, LEWIS & BOCKIUS LLP 600 Anton Blvd., Suite 1800 Costa Mesa, CA 92626 Tel: 714.830.0600 Fax: 714.830.0700 bschwan@morganlewis.com J. KEVIN LILLY, Bar No. 119981 KEITH A. JACOBY, Bar No. 150233 LITTLER MENDELSON, P.C. 2049 Century Park East 5th Floor Los Angeles, CA 90067.3107 Telephone: 310.553.0308 Fax No.: 310.553.5583 klilly@]littler.com kjacoby@littler.com Attorneys for Defendants HP INC. and HEWLETT PACKARD ENTERPRISE COMPANY SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF ORANGE JEFFREY WALL, on behalf of himself and others similarly situated, Plaintiff, Vv. HP, INC., formerly known as HEWLETT- PACKARD COMPANY, a Delaware Corporation; HEWLETT PACKARD ENTERPRISE COMPANY; and DOES 1 - 100, inclusive, Defendant. Case No. 30-2012-00537897-CU-BT-CXC DEFENDANTS’ REPLY IN SUPPORT OF MOTION TO BIFURCATE ASSIGNED FOR ALL PURPOSES TO JUDGE HON. THIERRY P. COLAW, DEPT. CX-105 PTC Date: Time: April 21 2017 1:30 pm Dept: CX105 Trial Date: May 22,2017 Complaint Filed: 1/17/2012 DEFENDANTS’ REPLY ISO MOTION TO BIFURCATE 1 I. INTRODUCTION 2 Plaintiff’s Opposition to Defendants’ Motion to Bifurcate demonstrates a startling 3 unwillingness to try the simple case Plaintiff told this Court was deserving of class certification. 4 Indeed, not so long ago, Plaintiff’s Motion for Class Certification proffered a tantalizingly simple, 5 common legal question which allegedly predominated over all others: its sales representatives? That legal question, plaintiff assured the Court, was common to all members of the proposed class, and thus a 8 common question of law predominates over all other issues.” (Motion for Class Certification, p. 15:3-7, emphasis added). 6 “In what time frame was HP legally obligated to pay commissions to 7 10 The Court agreed, finding in its Order granting Class Certification that, indeed, a manageable 11 class-wide question could rise above the din and be answered: 12 “[D]ifferent geographical areas, different percentage commission rates, and different product lines, (in different sales plans and sales letters) 13 do not impact the coreproblem alleged — that the employer-controlled 14 commission crediting system is not comprehensively defined or explained, and uniformly includes a wide variety of barriers to timely 15 commission payments, either under a statutory framework, or reasonableness standard.” (Court Order on Class Certification, p. 2, 16 Section 2(f)). 17 Now, on the eve oftrial, Plaintiff is trying to break his promise to the Courtto try this simple 18 liability question. Instead, Plaintiff uses ongoing discovery skirmishes as a smoke screen to avoid 19 trying the case on the very terms that got Plaintiff’s class an admission ticket to this Courtroom in 20 the first place. This is both disingenuous and disappointing, if not outright dishonest. 21 In the face of Defendants’ simple trial plan, Plaintiff has no trial plan at all. Nothing 22 demonstrates this better than the stark difference in his representations made to this Court at the time 23 of class certification in 2015, and those made now in opposing Defendants’ request to bifurcate the 24 ||trial:25 o Plaintiff alleged in his class certification briefing that this case is “not as complicated26 as HP makes it out to be.” (Reply iso Class Certification, p. 3). Now he claims that the27 Court’s determination as to whether Defendants’ policies establish the legal criteria for28 when incentive compensation is earned prior to other issues in the case will not save the LITTLER MENDELSON, P.C. 1 . 2049 Century Park East 5th Floor Los Angeles, CA 90067.3107 310.862.0908 DEFENDANTS’ REPLY ISO MOTION TO BIFURCATE 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 LITTLER MENDELSON, P.C. 2049 Century Park East 5th Floor Los Angeles, CA 90067.3107 310.553.0308 Court from a “complex” trial. (Opposition, pp. 4-5). Plaintiff’s opposition papers set forth a multi-pronged analysis which he asserts requires seemingly endless discovery and individualized fact finding, concerning when each and every particular sale occurred, when associated incentive pay calculations were made, and the time that elapsed thereafter before various amounts were paid for individual employees. (Opposition, p. 2). eo Similarly, Plaintiff stated in class certification briefing that auditing each sale transaction would be wholly unnecessary. “HP relies solely on its contract defense, which is simply the flipside of Plaintiff’s legal argument. It has not claimed that any other defense might apply to different sales representatives. HP has not specified any separate issues that class members would be required to litigate individually, other than individual damages.” (Reply iso Class Certification, p. 6). Now, Plaintiff advocates introducing individualized auditing into the core question of liability. Indeed, Plaintiff laments that, even once the Court determines the proper criteria for when incentive compensation is earned, the Court will still be required to individually determine, “(a) when the criteria for “earning” the commission was satisfied; and (b) how long did it take Defendants to pay the commission after it was “earned” as a matter of policy and practice.”! (Opposition, p. 2, Ins. 16-20). Plaintiff certainly has shifted positions. Notwithstanding Plaintiff's new embrace of complexity and issues of individualized proof, the reasons for bifurcation remain obvious, compelling, and wholly consistent with what was contemplated by this Court at class certification. If Defendants are correct, their sales employees earned advances on incentive wages monthly, as calculated under the terms of their sales letters and were paid timely under sections 203 and 204. Even if Plaintiff is correct, and the contractual terms offend Sections 203 and 204’s requirements, bifurcation would still benefit the Court and both sides, as a Court ruling on the issues raised by ' This newfound embrace of complexity also contradicts Plaintiff’s prior claim that, “if a payroll system is broken, it will affect all employees uniformly. If, for example, the time clock does not record hours accurately, all employees will be affected in the same way. Their damages will differ because the employees work different hours and make different hourly rates. But that only affects the question of damages, not liability.” (Reply iso Class Certification, p.4). 2. DEFENDANTS’ REPLY ISO MOTION TO BIFURCATE 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 LITTLER MENDELSON, P.C. 2049 Century Park East 5th Floor Los Angeles, CA 90067.3107 310.553.0308 Defendants in their moving papers would allow the parties to move forward to liability and penalty questions only if necessary, and without arguing two completely different theories. II. ARGUMENT A. Bifurcation Serves Judicial Economy on Plaintiffs PAGA (Labor Code 204) Claim. Plaintiffs Opposition outlines five separate factual/legal components which he believes are necessary to resolve in a single proceeding to decide his PAGA claim based on Labor Code section 204. In so doing, he fails to substantively address why these issues cannot be addressed in the bifurcated structure requested by Defendants. Indeed, Plaintiff’s ‘subpart (i)’ (Oppo. p. 5, Ins. 10- 11) merely restates the first issue identified in Defendants’ moving papers requesting bifurcation: Do Defendants’ policies, as incorporated into their agreements with sales representatives, determine when compensation was earned under LC203/204? This question presents a straightforward question of contractual interpretation. Johnson v. Hewlett-Packard Co., 809 F.Supp.2d 1114, 1136 (2011) (upholding HP incentive compensation plan); see also Nordstrom Commission Cases, 186 Cal. App. 4th 576, 548 (2010) (providing that for purposes of enforcing the provisions of the Labor Code, [t]he right of a salesperson or any other person to a commission depends on the terms of the contract for compensation.”’); Nein v. HostPro, Inc., 174 Cal. App. 4th 833, 853 (2009) (“[t]he right of a salesperson...to a commission depends on the terms of the contract for compensation”); Steinhebel v. Los Angeles Times Commun.; 126 Cal. App. 4th 696, 705 (2005); Peabody v. Time Warner Cable, Inc., 59 Cal. 4th 662, 668 (2014) (“[S]ection 204 establishes semimonthly pay periods, but there is no obligation to pay unearned commission wages in any pay period). To avoid the conundrum that the very issue Defendants seek to bifurcate is the issue Plaintiff also believes should be tried first, Plaintiff does something very troubling and entirely improper — he suggests the case is really about something different altogether. Plaintiff claims that even if subpart (i) were to be bifurcated and decided first as Defendants suggest, the additional claim challenging whether “Defendants [are] paying their commissions on a semi-monthly basis thereafter” would remain to be litigated. (Oppo., p. 6). There is no such allegation in this matter and that was not a certified issue. This certified case challenges the legality of the structure ofDefendants’ pay plans, not whether theyfollow the pay plans’ mandates. Nowhere in the operative complaint does Plaintiff 3. DEFENDANTS’ REPLY ISO MOTION TO BIFURCATE 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 LITTLER MENDELSON, P.C. 2049 Century Park East 5th Floor Los Angeles, CA 90067.3107 310.553.0308 allege that Defendants systematically do not follow the terms of the sales letters and policies in effect, resulting in late payments. To the contrary, any such analysis would consist of nothing more than anecdotal and individualized testimony which cannot be tried on a class-wide basis and presents an entirely different case than the present matter.” Plaintiffs cannot introduce new issues altogether to configure the trial in a manner they see fit. They must live with their common question and cannotlitigate different, uncertified issues. Further, subparts (ii) and (iii) identified by Plaintiff are directly dictated by the results of Defendants’ proposed Phase One oftrial. In fact, subpart (ii) identified by Plaintiff, “Applying the applicable legal criteria found by the Court, did Defendants' timely pay their employees commissions” (Oppo., p. 5, Ins. 12-13), becomes entirely unnecessary should Defendants prevail with regard to the question posed in subpart (i). Similarly, subpart (iii) identified by Plaintiff, “If Defendants did not timely pay their employees commissions, what are the “baseline” PAGA penalties (i.e. penalties calculated as $100 for each violation per Labor Code section 210)?” (Oppo., p. 5, Ins. 14-16) could be determined, or at the very least streamlined, based upon stipulated facts following Phase One, without the need to unnecessarily consume additional judicial resources. Those are simple damage calculations, properly reserved for Phase Two. Plaintiff’s subpart (iv), “[i]f Defendants did not timely pay their employees commissions, were any of the violations ‘subsequent’ or ‘willful’ violations” (Oppo, p. 5, Ins. 17-20), is again encompassed in in Defendants’ proposed Phase One. In fact, the very case law cited by Plaintiff in his opposition, supports bifurcation ofthis issue. Cohn v. Bugas, 42 Cal. App. 3d 381 (1974) (noting “it has long been held that special defenses which abate or bar the claim of the plaintiff may be tried before other issues, for a decision in the defendant’s favor may render unnecessary the efforts and expense of complete trial”). As discussed in further detail in Section II.B., infra, a good faith defense completely bars Plaintiff’s claims under both 203 and 204, and thus makes the issue ripe for bifurcation. Amaral v. Cintas Corp., 163 Cal. App. 4th 1157 (2008) (employer presented good faith * Plaintiff’s citation to Nguyen v. Wells Fargo Bank, 2016 U.S. Dist. LEXIS 131710 (N.D. Cal. 2016), presents no evidence in support of how this matter may proceed to trial, and the circumstances under which bifurcation is appropriate. Indeed, the decision merely addresses the evidence presented at summary judgment, and not how that evidence may be presented or considered at trial. 4. DEFENDANTS’ REPLY ISO MOTION TO BIFURCATE 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 LITTLER MENDELSON, P.C. 2049 Century Park East 5th Floor Los Angeles, CA 90067.3107 310.553.0308 defense to claims for violations of living wage ordinance, thereby negating finding of willfulness). Finally, Plaintiff’s subpart (v), “Should the Court exercise its discretion to reduce the PAGA penalties” (PL. Oppo., p. 5, In. 21), is already functionally bifurcated. This Court is empowered to exercise its discretion to award a lesser amount than the maximum civil penalty if, “based on the facts and circumstances ofthe particular case, to do otherwise would result in an award thatis unjust arbitrary and oppressive, or confiscatory.” Cal. Lab. Code § 2699(e)(2); Home Depot U.S.A., Inc. v. Superior Court, 191 Cal. App. 4th 210. 225 (2010) (recognizing that a court may award a lesser amount than the maximum civil penalty amount specified by this part if, based on the facts and circumstances of the particular case, to do otherwise would result in an award that is unjust, arbitrary and oppressive, or confiscatory); Stuart v. RadioShack Corp., 2010 U.S. Dist. LEXIS 92067, at *10 (N.D. Cal. Aug. 9, 2010) ( “a court may award a lesser amount than the maximum civil penalty [under PAGA] ... based on the facts and circumstances of the particular case”). The Court’s discretion to do so is akin to a Court’s discretion to reduce or eliminate a punitive damages award where the evidence does not support the award, and necessarily cannot be decided by the Court until after the close ofevidence. Cardenas v. McLane Foodservice, Inc., 2011 U.S. Dist. LEXIS 13126, at *10-11 (C.D. Cal. Jan. 30, 2011) (noting plaintiffs’ recovery of civil penalties is limited by the requirements of proving their case); Fleming v. Covidien, Inc., 2011 U.S. Dist. LEXIS 154590 (C.D. Cal. August 12, 2011) (awarding reduction ofPAGA penalties following close of trial). Plaintiff’s opposition thus fails to rebut the clear and compelling reasons for bifurcation. B. Plaintiff’s 203 Claim Should Be Bifurcated And Decided As Part of Phase One. Plaintiff’s Section 203 claim will require three simple things to resolve — (1) a law library, (2) a trial that illustrates whether, irrespective ofits ultimate legality, Defendants had a good faith legal basis for making incentive payments when they did, and, (3) in the event waiting time penalties are to be awarded, whether any class members would be due less than 30 days’ pay, because they in fact received all pay (including incentive compensation) owed in less than 30 days after termination or 33 daysafter resignation. The last question is a penalty calculation (which Plaintiff has incorrectly referred to as “damages”) that can clearly be reserved for Phase Two. Phase One requires a very limited record to resolve. 5. DEFENDANTS’ REPLY ISO MOTION TO BIFURCATE 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 LITTLER MENDELSON, P.C. 2049 Century Park East 5th Floor Los Angeles, CA 90067.3107 310.553.0308 The second question will be answered in Phase One as Defendants contemplate it. Of course, if Defendants prevail on the first question (i.e., the Court concludes that Defendants’ pay plans as set out in their policies and sales letters do not violate Section 204), we never reach the issue of quantifying any Section 203 penalties. More importantly, even a finding that Defendants’ pay plans are not legalis not sufficient to establish liability under Section 203. As Amaral v. Cintas Corp. No 2, 163 Cal. App. 4th 1157 (2011) explains, the existence of a good faith dispute that any additional wages were due at the time of termination, even one arising in litigation, precludes an award of Section 203 penalties. A “good faith dispute” is defined as: (a) Good Faith Dispute. A “good faith dispute” that any wages are due occurs when an employer presents a defense, based in law or fact which, if successful, would preclude any recovery on the part of the employee. The fact that a defense is ultimately unsuccessful will not preclude a finding that a good faith dispute did exist. Defenses presented which, under all the circumstances, are unsupported by any evidence, are unreasonable, or are presented in bad faith, will preclude a finding of a “good faith dispute.” Cal. Code Regs., tit. 8 § 13520(a). Amaral states that while a court may require limited fact finding to reach a conclusion, the issue “is primarily legal in nature.” 163 Cal. App. 4th at 1203. This constructis logical and fair because Section 203 penalties can be severe indeed, up to 30 days’ pay for even a small deficit in the final wage payment. Such a severe outcome is not appropriate if it is the result of an honest factual mistake or an honest legal mistake. That is the balance 203 strikes; if you hold back pay on purpose and with no justification that can be set out even after you are sued, then you pay the severe penalty. If you are mistaken or simply wrong legally (and most of the time in litigation, one side is wrong), you do not. In Phase One, then, Defendants will put on evidence of their contract-based method of paying class members. What Defendants did is what matters for purposes of Section 203, not what Plaintiff suggests they should have done instead. Defendants could have done many things instead that would have avoided this lawsuit, like having no incentive pay at all, or paying a straight hourly wage. They did not do that, and what they did not do is not the test for awarding Section 203 penalties. For that reason, the factual record upon which this Court can award or decline to award 6. DEFENDANTS’ REPLY ISO MOTION TO BIFURCATE 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 LITTLER MENDELSON, P.C. 2049 Century Park East 5th Floor Los Angeles, CA 90067.3107 310.553.0308 Section 203 penalties is necessarily narrow. Consider this simple example. A restaurant paysits employees $7.00 an hour and is sued for a minimum wage violation. It argues in court it paid that amount because it could afford no more. Is that a good faith legal dispute, based in law or in fact? No good faith dispute exists on that factual record, and the court can award 203 penalties. Now suppose the same defendant argues it believes the tips the employees earned placed their earnings well above the minimum wage. Is that a good faith legal defense? The Court can consider whatit did, look at the cases on tip credits, and decide — is that a colorable legal defense, or is it nonsense? What the waiting time penalties would be is factually complex, but meaningless to the 203 test — is counting tips a good faith legal dispute to a minimum wage violation? That is the narrow 203 question. This Court, like the Court in Nguyen v. Wells Fargo Bank, N.A., 2016 Lexis 131710 (2016), denied summary judgmentso it can hear foritself with live witnesses how the incentive pay plans at issue functioned and were communicated. Defendants will present this direct testimony in Phase One, and a legallibrary is all that is needed for the Court to then decide the Section 203 claim. If the pay plans are permissible, no 203 penalties can be awarded. If the Court finds the plans are not legal, it can then decide whether Defendants had a good faith argument that they were legal, even though they were wrong. The Court will be fully equipped after Phase One, and with trial briefs in hand, to reach its own Section 203 determination, without the need for further evidence taking. 111. CONCLUSION For all the foregoing reasons, Defendants respectfully request that the Court grant their Motion and issue an order bifurcating the issues framed above into Phase One, leaving remaining issues for subsequent proceedings. Dated: April 14,2017 /s/ J. Kevin Lilly J. KEVIN LILLY LITTLER MENDELSON,P.C. Attorneys for Defendants HP INC. and HEWLETT PACKARD ENTERPRISE COMPANY 7. DEFENDANTS’ REPLY ISO MOTION TO BIFURCATE 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 LITTLER MENDELSON, P.C. 2049 Century Park East 5th Floor Los Angeles, CA 90067.3107 310.553.0308 PROOF OF SERVICE I am employed in the County of Los Angeles, State of California, over the age of eighteen years, and not a party of the within action. My business address is: 2049 Century Park East, Suite 500, Los Angeles, CA 90067. On April 14, 2017, I served the foregoing document(s) described as DEFENDANTS’ REPLY IN SUPPORT OF MOTION TO BIFURCATE on the interested parties in this as follows: Steven R. Young, Esq. LAW OFFICES OF STEVEN R. YOUNG Civil Justice Attorneys 600 Anton Blvd., Suite 650 Costa Mesa, CA 92626 Tel: 714.673.6500 Fax: 714.545.0355 Email: bestlawyer@aol.com VIA EMAIL & PERSONAL SERVICE Attorneysfor Plaintiffs STEVENELDARD andJEFFREY WALL Franklin D. Azar, Esq. Keith Scranton, Esq. Jonathan Parrott, Esq. FRANKLIN D. AZAR & ASSOCIATES, P.C. 14426 East Evans Avenue Aurora, CO 80014 Tel: 303.757.3300 Fax: 303.759.5203 azarf(@fdazar.com parrottj@fdazar.com scrantonk@fdazar.com VIA EMAIL SERVICE Attorneysfor Plaintiffs STEVENELDARD andJEFFREY WALL Patrick McNicholas Philip Shakhnis McNICHOLAS & McNICHOLAS LLP 10866 Wilshire Blvd., Suite 1400 Los Angeles, CA 90024 Tel: 866.664.3055 Fax: 310.475.7871 ps@mcnicholaslaw.com VIA EMAIL SERVICE Attorneysfor Plaintiffs STEVENELDARD andJEFFREY WALL James O’CallahanColleen TeemanGIRARDI & KEESE1126 Wilshire Blvd.Los Angeles, CA 90017 VIA EMAIL SERVICEAttorneysfor Plaintiffs STEVENELDARD 8. DEFENDANTS’ REPLY ISO MOTION TO BIFURCATE Tel: 213.997.0211 andJEFFREY WALL Fax: 213.481.1554 jgocallahan(@girardikeese.com cteeman@girardikeese.com Jason M. Frank VIA EMAIL SERVICE Scott H. Sims FRANK SIMS & STOLPHER LLP An Jor Plaintiffs STEVENELDARDi orneys for Plaintiffs19800 MacArthur Boulevard, Suite 855 andJEFFREY WALL Tel: 949.201.2400 Fax: 949.201.2401 jfrank@lawfss.com ssims@lawfss.com 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 LITTLER MENDELSON, P.C. 2049 Century Park East 5th Floor Los Angeles, CA 90067.3107 310.553.0308 V1 BY ELECTRONIC MAIL WHERE INDICATED: Pursuant to C.R.C. 2060, I served the foregoing document described by emailing to it each of the aforementioned electronic mail addresses and the transmission was reported as complete and without error. My email address is mgerard@littler.com. declare under penalty of perjury under the laws of the State of California that the above is true and correct. I declare that I am employed in the office of a member of the bar ofthis court at whose direction the service was made. Executed on April 14, 2017 at Los Angeles, California. Sheila Shaw /s/ Sheila Shaw [Signature] Firmwide:146996234.10 066902.1126 9. DEFENDANTS’ REPLY ISO MOTION TO BIFURCATE