James R Glidewell Dental Ceramics Inc v. Philadelphia Indemnity Insurance Company

NOTICE OF MOTION AND MOTION for Partial Summary Judgment as to Duty to Defend

C.D. Cal.October 14, 2016

186576.1-10753-003-10/14/2016 4:47 PM NOTICE OF MOTION AND MOTION FOR PARTIAL SUMMARY JUDGMENT 1 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 GAUNTLETT & ASSOCIATES David A. Gauntlett (SBN 96399) James A. Lowe (SBN 214383) 18400 Von Karman, Suite 300 Irvine, California 92612 Telephone: (949) 553-1010 Facsimile: (949) 553-2050 info@gauntlettlaw.com jal@gauntlettlaw.com Attorneys for Plaintiff JAMES R. GLIDEWELL DENTAL CERAMICS, INC. UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA SOUTHERN DIVISION JAMES R. GLIDEWELL DENTAL CERAMICS, INC., a California corporation, Plaintiff, vs. PHILADELPHIA INDEMNITY INSURANCE COMPANY, a Pennsylvania corporation, Defendant. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Case No.:8:16-cv-01155 JLS (Ex) Hon. Josephine L. Staton PLAINTIFF JAMES R. GLIDEWELL DENTAL CERAMICS INC.’S NOTICE OF MOTION AND MOTION FOR PARTIAL SUMMARY JUDGEMENT Date: December 9, 2016 Time: 2:30 PM Ctrm: 10A [Filed concurrently with Memorandum of Points & Authorities; Statement of Uncontroverted Facts and Conclusions of Law; Declaration of Gary M. Pritchard; and [Proposed] Order] Complaint Filed: June 22, 2016 Trial Date: November 14, 2017 TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD: PLEASE TAKE NOTICE that pursuant to Fed. R. Civ. P. 56, Plaintiff James R. Glidewell Dental Ceramics, Inc. (“Glidewell”) will appear in the United States Case 8:16-cv-01155-JLS-E Document 27 Filed 10/14/16 Page 1 of 3 Page ID #:1143 186576.1-10753-003-10/14/2016 4:47 PM NOTICE OF MOTION AND MOTION FOR PARTIAL SUMMARY JUDGMENT 2 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 District Court for the Central District of California, Southern Division, located at 411 West Fourth Street, Santa Ana, California 92701-4516 and will and hereby does move on December 9, 2016 at 2:30 p.m. or as soon thereafter as counsel may be heard for a partial summary judgment that Defendant Philadelphia Indemnity Insurance Company (“Philadelphia”) owed a duty to defend Glidewell in the Estonilo Class Action,1 and that Philadelphia breached its duty to defend the Estonilo Class Action. This motion is made following the conferences of counsel pursuant to L.R. 7-3, which took place on September 30, 2016 and the Stipulation submitted to the Court on October 5, 2016. (Dkt. No. 24). This motion is based on this Notice of Motion and Motion, the concurrently filed Memorandum of Points and Authorities, Statement of Uncontroverted Facts and Conclusions of Law, and the Declaration of Gary M. Pritchard and all the referenced exhibits thereof, as well as all pleadings and paper on file in this action, and upon such matters as may be presented to the Court at the time of hearing. Dated: October 14, 2016 GAUNTLETT & ASSOCIATES By: /s/ David A. Gauntlett David A. Gauntlett James A. Lowe Attorneys for Plaintiff JAMES R. GLIDEWELL DENTAL CERAMICS, INC. 1 The case, styled as Allan R. Estonilo et al. v. James R. Glidewell Dental Ceramics, Inc., Case No. 30-2010-00382163-CU-OE-CXC (“Estonilo Class Action”), was filed in California Superior Court, Orange County, on June 17, 2010. Case 8:16-cv-01155-JLS-E Document 27 Filed 10/14/16 Page 2 of 3 Page ID #:1144 186576.1-10753-003-10/14/2016 4:47 PM CERTIFICATE OF SERVICE 1 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 CERTIFICATE OF SERVICE I hereby certify that on October 14, 2016, I electronically filed the foregoing PLAINTIFF JAMES R. GLIDEWELL DENTAL CERAMICS INC.’S NOTICE OF MOTION AND MOTION FOR PARTIAL SUMMARY JUDGMENT with the Clerk of the Court using the CM/ECF system which will send notification of such filing via electronic mail to all counsel of record. /s/David A. Gauntlett David A. Gauntlett Case 8:16-cv-01155-JLS-E Document 27 Filed 10/14/16 Page 3 of 3 Page ID #:1145 186359.11-10753-003-10/14/2016 4:57 PM MEMORANDUM OF P&As ISO MPSJ Case No. 8:16-cv-01155 JLS (Ex) 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 GAUNTLETT & ASSOCIATES David A. Gauntlett (SBN 96399) James A. Lowe (SBN 214383) 18400 Von Karman, Suite 300 Irvine, California 92612 Telephone: (949) 553-1010 Facsimile: (949) 553-2050 info@gauntlettlaw.com jal@gauntlettlaw.com Attorneys for Plaintiff JAMES R. GLIDEWELL DENTAL CERAMICS, INC., a California Corporation UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA SOUTHERN DIVISION JAMES R. GLIDEWELL DENTAL CERAMICS, INC., a California corporation, Plaintiff, vs. PHILADELPHIA INDEMNITY INSURANCE COMPANY, a Pennsylvania company, Defendant. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Case No.: 8:16-cv-01155 JLS (Ex) Hon. Josephine L. Staton PLAINTIFF JAMES R. GLIDEWELL DENTAL CERAMICS, INC.’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF ITS MOTION FOR PARTIAL SUMMARY JUDGMENT REGARDING DUTY TO DEFEND Date: December 9, 2016 Time: 2:30 PM Ctrm: 10A [Filed concurrently with Notice of Motion and Motion for Summary Judgment; Statement of Uncontroverted Facts; Declaration of Gary M. Pritchard; and [Proposed] Order] Complaint Filed: June 22, 2016 Trial Date: November 14, 2017 Case 8:16-cv-01155-JLS-E Document 27-1 Filed 10/14/16 Page 1 of 34 Page ID #:1146 186359.11-10753-003-10/14/2016 4:57 PM MEMORANDUM OF P&As ISO MPSJ Case No. 8:16-cv-01155 JLS (Ex) i 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 Page I. THIS RENEWED MOTION FOR PARTIAL SUMMARY JUDGMENT ON THE DUTY TO DEFEND FOLLOWS A SUBSTANTIVE MEET AND CONFER CONFERENCE ............................1 II. STATEMENT OF FACTS ................................................................................1 A. The Pertinent Underlying Actions..........................................................1 1. The Huynh Class Action................................................................1 2. The Estonilo Wage and Hour Claims ..........................................2 a. The Estonilo DLSE Claim...................................................2 b. The Estonilo Class Action (Wage and Hour Action)...................................................................................2 B. The Consolidated Class Action ...............................................................3 C. The Policy Provisions...............................................................................4 1. The Policy’s Coverage ...................................................................4 2. The Insurance Policy .....................................................................4 a. The Insuring Agreement.....................................................4 b. The “Interrelated Wrongful Acts” Provision ...................5 3. The Earned Wage Exclusion.........................................................6 D. The Court’s Order in the RLI Action ....................................................6 III. POTENTIAL COVERAGE ARISES UNDER GLIDEWELL’S POLICY PROVISIONS.....................................................................................7 A. The Policy’s Requirement of a “Claim” for a “Wrongful Employment Act” Is Met.........................................................................7 1. A “Wrongful Employment Act” Is Asserted Against Glidewell .........................................................................................7 2. The Estonilo Class Action Is a “Claim” Against the Insured ............................................................................................7 3. The Estonilo Class Action Is a Claim for a “Wrongful Employment Act”...........................................................................7 B. Philadelphia Failed to Consider if the Estonilo Class Action and the Huynh Class Action Were Related Claims for Purposes of the Policy’s Notice Provision ..............................................8 Case 8:16-cv-01155-JLS-E Document 27-1 Filed 10/14/16 Page 2 of 34 Page ID #:1147 186359.11-10753-003-10/14/2016 4:57 PM MEMORANDUM OF P&As ISO MPSJ Case No. 8:16-cv-01155 JLS (Ex) ii 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 C. The Huynh Class Action and Estonilo Class Action are Claims for “Interrelated Wrongful Acts”...........................................................9 1. The Policy Defines “Interrelated Wrongful Acts” as “Any Series of the Same, Similar, or Related Wrongful Acts” ................................................................................................9 2. The Allegations in the Huynh Class Action and Estonilo Class Action Are the Same or Substantially Similar..................9 3. There Is Significant Overlap Between the Class Employees in Both Class Actions .................................................9 4. Courts Have Previously Held that Two Class Actions Stemming from Allegations of an Insured’s Business Practices Are Related ..................................................................10 5. The Relatedness of the Huynh Class Action and Estonilo Class Action Is Further Evidenced by the Consolidation of the Cases ...................................................................................11 D. Philadelphia Breached Its Duty to Defend by Again Denying Coverage After It Knew of the Consolidation of the Cases ...............12 E. Philadelphia Was Obligated to Defend Glidewell In Light of the Potentiality of Coverage Doctrine Applicable Where, As Here, It Requested a Defense ................................................................13 1. Philadelphia, a Denying Insurer, Cannot Second-Guess What Coverage Benefits Glidewell Would Have Sought.........13 2. Glidewell Never Asked The Underwriter to Manage The Defense and Cannot Be Presumed To Have Done So...............14 3. After Philadelphia’s Repeated Denials, Glidewell Had No Choice Except To Defend The Claims Without Its Insurer...........................................................................................14 IV. THERE ARE NO POLICY EXCLUSIONS THAT OPERATE TO BAR COVERAGE FOR THE ESTONILO CLASS ACTION....................15 A. The Earned Wage Exclusion Does Not Exclude Coverage for All Allegations in the Estonilo Class Action ........................................15 1. The Earned Wage Exclusion Does Not Bar Philadelphia’s Duty to Defend Gildewell...................................15 2. “Arising Out Of” Language in the “Earned Wages” Exclusion Must be Narrowly Interpreted Against Philadelphia ..................................................................................16 3. CLC § 226 Does Not Authorize an Award of Unpaid Wages for Failure to Provide Itemized Wage Statements .......17 4. Violations of CLC § 221 for Illegal Wage Deductions Is Case 8:16-cv-01155-JLS-E Document 27-1 Filed 10/14/16 Page 3 of 34 Page ID #:1148 186359.11-10753-003-10/14/2016 4:57 PM MEMORANDUM OF P&As ISO MPSJ Case No. 8:16-cv-01155 JLS (Ex) iii 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 Concerned with Improper Piece Rate Calculations .................18 5. Philadelphia Only Superficially Raised the Earned Wage Exclusion While the Estonilo Class Action Was Pending and Should Be Estopped from Raising It Now .........................19 B. The FLSA Exclusion Does Not Operate to Bar Coverage for Violations of CLC §§ 221 and 226 ........................................................20 C. Other Bases for Limitations in Philadelphia’s Denial Letter ............20 D. The “Earned Wages” Exclusion Fails To Give The Insured The Required Understanding Of Reduced Coverage ................................21 E. The “Related To” Provision Does Not Require an Expansive Construction ...........................................................................................23 V. CONCLUSION .................................................................................................25 Case 8:16-cv-01155-JLS-E Document 27-1 Filed 10/14/16 Page 4 of 34 Page ID #:1149 186359.11-10753-003-10/14/2016 4:57 PM MEMORANDUM OF P&As ISO MPSJ Case No. 8:16-cv-01155 JLS (Ex) iv 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 Page(s) FEDERAL CASES Admiral Ins. Co. v. Kay Auto. Distribs., 82 F. Supp. 3d (C.D. Cal. 2015) .........................................................................24 Allstate Ins. Co. v. Fibus, 855 F.2d 660 (9th Cir. 1988) ........................................................................21, 22 Burns v. Int’l Ins. Co., 929 F.2d 1422 (9th Cir. 1991) ..............................................................................8 Cal. Dairies, Inc. v. RSUI Indem. Co., 617 F. Supp. 2d 1023 (E.D. Cal. 2009) ........................................................19, 20 HS Servs. v. Nationwide Mut. Ins. Co., 109 F.3d 642 (9th Cir. 1997) ..............................................................................16 Jeff Tracy, Inc v. United States Specialty Ins. Co., 636 F. Supp. 2d 995 (C.D. Cal. 2009) ................................................................23 WFS Fin., Inc. v. Progressive Cas. Ins. Co., 232 F. App’x 624 (9th Cir.) ................................................................................10 STATE CASES Atl. Mut. Ins. Co. v. J. Lamb, Inc., 100 Cal. App. 4th 1017 (2002) ...........................................................................15 Buss v. Sup. Ct., 16 Cal. 4th 35 (1997) ..........................................................................................21 California v. Pacific Indemnity Co., 63 Cal. App. 4th 1535 (1998) .............................................................................15 CNA Cas. of Cal. v. Seaboard Sur. Co., 176 Cal.App.3d 598 (1986) ................................................................................14 Davis v. United Servs. Auto. Ass’n, 223 Cal. App. 3d 1322 (1990) ............................................................................22 Case 8:16-cv-01155-JLS-E Document 27-1 Filed 10/14/16 Page 5 of 34 Page ID #:1150 186359.11-10753-003-10/14/2016 4:57 PM MEMORANDUM OF P&As ISO MPSJ Case No. 8:16-cv-01155 JLS (Ex) v 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 Fireman’s Fund Ins. Co. v. Atlantic Richfield Co., 94 Cal. App. 4th 842 (2001) .........................................................................20, 24 Gonzalez v. Fire Ins. Exch., 234 Cal. App. 4th 1220 (2015) ...........................................................................16 Hamilton v. Asbestos Corp., 22 Cal. 4th 1127 (2000) ......................................................................................11 Hartford Cas. Ins. Co. v. Swift Distrib., Inc., 59 Cal. 4th 277 (2014) ........................................................................................13 KPFF, Inc. v. Cal. Union Ins. Co., 56 Cal. App. 4th 963 (1997) .........................................................................13, 14 MacKinnon v. Truck Ins. Exch., 31 Cal. 4th 635 (2003) ........................................................................................15 McClure v. Donovan, 33 Cal. 2d 717 (1949) .........................................................................................12 Montrose Chem. Corp. v. Superior Court, 6 Cal. 4th 287 (1993) ..........................................................................................14 Morris v. Paul Revere Life Ins. Co., 109 Cal. App. 4th 966 (2003) .............................................................................23 North Counties Eng’g, Inc. v. State Farm Gen. Ins. Co., 224 Cal. App. 4th 902 (2014) .............................................................................16 Price v. Starbucks Corp., 192 Cal. App. 4th 1136 (2011) ...........................................................................17 Safeco Ins. Co. of Am. v. Robert S., 26 Cal. 4th 758 (2001) ........................................................................................17 Sanchez v. Sup. Ct., 203 Cal. App. 3d 1391 (1988) ............................................................................11 State Farm Mut. Auto. Ins. Co. v. Partridge, 10 Cal. 3d 94 (1973) .....................................................................................15, 16 Stubblefield Constr. Co. v. City of San Bernardino, 32 Cal. App. 4th 687 (1995) .......................................................................3, 4, 11 Case 8:16-cv-01155-JLS-E Document 27-1 Filed 10/14/16 Page 6 of 34 Page ID #:1151 186359.11-10753-003-10/14/2016 4:57 PM MEMORANDUM OF P&As ISO MPSJ Case No. 8:16-cv-01155 JLS (Ex) vi 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 DOCKETED CASES Cal. Dairies, Inc. v. RSUI Indem. Co., No. 1:08-CV-00790 OWW DLB, 2010 U.S. Dist. LEXIS 37712 (E.D. Cal. Apr. 16, 2010).....................................................................................................19 Classic Distrib. & Beverage Grp., Inc. v. Travelers Cas. & Sur. Co. of Am., No. CV 11-07075 GAF RZX, 2012 WL 3860597 (C.D. Cal. Aug. 29, 2012) vacated by settlement, No. CV 11-07075 GAF RZX, 2012 WL 5834570 (C.D. Cal. Nov. 6, 2012).....................................................................................22 Crisp Enters. v. Golden Eagle Ins. Co., No. SACV 15-02011 JVS...................................................................................13 Holak v. K Mart Corp., No. 1:12-cv-00304-AWI-MJS, 2015 U.S. Dist. LEXIS 105441 (E.D. Cal. Aug. 11, 2015) (noting that “[t]he 2013 Amendment seems to indicate that Price was wrong in determining the injury requirement[.]”) .............................18 Impac Mortg. Holdings, Inc. v. Hous. Cas. Co., No. SACV 11-1845-JST.....................................................................................21 James R. Glidewell Dental Ceramics, Inc. v. RLI Ins. Co., No. CV 15-7049 AG (C.D. Cal. Jan. 25, 2016) ...................................................6 Liberty Ins. Underwriters, Inc. v. Davies Lemmis Raphaely Law Corp., No. CV 15-859 DMG .........................................................................................10 Millennium Labs., Inc. v. Darwin Select Ins. Co., No. 12-cv-2742 BAS (KSC), 2014 U.S. Dist. LEXIS 89746 (S.D. Cal. July 1, 2014) .................................................................................................................8 N.H. Ball Bearings, Inc. v. Nat'l Union Fire Ins. Co., No. CV 13-06114 DDP.................................................................................21, 24 Petersen v. Col. Cas. Co., No. SACV-12-00183-JVS(ANx), 2012 WL 5316352 (C.D. Cal. Aug. 21, 2012) ...................................................................................................................23 PHP Ins. Serv. v. Greenwich Ins. Co., No. 15-cv-00435-BLF, 2015 U.S. Dist. LEXIS 106274 (N.D. Cal. (San Jose Div.) Aug. 12, 2015)...............................................................................23, 24, 25 Case 8:16-cv-01155-JLS-E Document 27-1 Filed 10/14/16 Page 7 of 34 Page ID #:1152 186359.11-10753-003-10/14/2016 4:57 PM MEMORANDUM OF P&As ISO MPSJ Case No. 8:16-cv-01155 JLS (Ex) vii 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 Tower Ins. Co. v. Capurro Enters. Inc., No. C 11-03806 SI, 2012 U.S. Dist. LEXIS 46443 (N.D. Cal. Apr. 2, 2012) ...16 XL Specialty Ins. Co. v. Perry, No. CV 11-02078-RGK......................................................................................10 STATE RULES AND STATUTES 10 Cal. Code.............................................................................................................19 Cal. Code Civ. Proc. § 1048 ......................................................................................4 Cal. Ins. Code § 790.03(h)(13) ................................................................................19 Property Law 2010...................................................................................................22 OTHER AUTHORITIES California Business and Professions Code (“CBPC”)...............................................3 “Earned Wages” (the “Earned Wage Exclusion”).....................................................2 Estonilo Class Action (the “RLI Action”) ..................................................................6 FLSA Exclusion Does Not Operate to Bar Coverage for Violations of CLC §§ 221 and 226.........................................................................................................20 Policy Defines “Interrelated Wrongful Acts”..........................................9, 10, 11, 17 Case 8:16-cv-01155-JLS-E Document 27-1 Filed 10/14/16 Page 8 of 34 Page ID #:1153 186359.11-10753-003-10/14/2016 4:57 PM MEMORANDUM OF P&As ISO MPSJ Case No. 8:16-cv-01155 JLS (Ex) 1 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 I. THIS RENEWED MOTION FOR PARTIAL SUMMARY JUDGMENT ON THE DUTY TO DEFEND FOLLOWS A SUBSTANTIVE MEET AND CONFER CONFERENCE Philadelphia’s primary reason for denying coverage for the Estonilo Class Action was that the claim was not timely pursuant under its “claims-made” policy. [SUF ¶25] (stating that “Philadelphia believes that the claims-made issue is dispositive of coverage for the [Estonilo Class Action]”). Philadelphia breached its duty to defend Glidewell because, upon tender, it failed to consider whether the Estonilo Class Action was related to the earlier Huynh Class Action, noticed under the Policy. Philadelphia again breached its duty following Glidewell’s re-tendered defense of the Consolidated Class Action complaint to Philadelphia. Following a fully briefed Motion for Partial Summary Judgment on the duty to defend, the parties met and conferred on the date while Philadelphia has argued it requires discovery. None of the discovery identifies or has sought to pursue its germane to the duty to defend. [Dkt. 18, p. 3:4-10]. II. STATEMENT OF FACTS A. The Pertinent Underlying Actions 1. The Huynh Class Action On March 26, 2009, Tan Huynh filed a class-action against James R. Glidewell Dental Ceramics, Inc. (“Plaintiff” or “Glidewell”) in Orange County Superior Court, entitled Tan Huynh et. al. v. James R. Glidewell Dental Ceramics, Inc. (Case No. 00180107) (the “Huynh Class Action”). [SUF ¶7] Glidewell gave notice of the Huynh Class Action to its insurer, Philadelphia Indemnity Insurance Company (“Defendant” or “Philadelphia”). Philadelphia had previously issued Private Company Protection Plus Policy No. PHSD332929 to Glidewell, effective June 1, 2008 to June 1, 2009 (the “Policy”). [SUF ¶2] On May 14, 2009, Philadelphia denied coverage for the Huynh Class Action. [SUF ¶¶9, 10] The Huynh Class Action was timely under Philadelphia’s claims-made policy, which had a policy period from June 1, 2008 to Case 8:16-cv-01155-JLS-E Document 27-1 Filed 10/14/16 Page 9 of 34 Page ID #:1154 186359.11-10753-003-10/14/2016 4:57 PM MEMORANDUM OF P&As ISO MPSJ Case No. 8:16-cv-01155 JLS (Ex) 2 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 June 1, 2009. [SUF ¶¶2, 9] The claim was first made on March 26, 2009 and was reported to Philadelphia well before its May 14, 2009 coverage denial. [SUF ¶9] 2. The Estonilo Wage and Hour Claims a. The Estonilo DLSE Claim On September 24, 2009, Allan R. Estonilo filed a claim with the California Department of Industrial Relations, Division of Labor Standards Endorsement (“DLSE”) (the “Estonilo DLSE Claim”). [SUF ¶12] The Estonilo DLSE Claim alleged that Estonilo was entitled to overtime wages for hours worked in excess of eight hours per day for the period from November 4, 2006 to January 4, 2008. [SUF ¶13] The total amount claimed was $38,105.33. [SUF ¶13] Glidewell provided notice to Philadelphia on October 5, 2009. [SUF ¶14] Philadelphia issued a denial of coverage on October 26, 2010. [SUF ¶20] According to Philadelphia, its denial was based on: (1) the claim not being made during the policy period; (2) Part II, Section III, Paragraph B of the Policy, which precludes coverage for an insured’s refusal, failure, or inability to pay “Earned Wages” (the “Earned Wage Exclusion”); and (3) its belief that the DLSE complaint and the DFEH claim were two separate, unrelated claims, and do not arise out of “Interrelated Wrongful Acts.” [SUF ¶¶21-25] b. The Estonilo Class Action (Wage and Hour Action) On June 17, 2010, Estonilo and Carlos Galdamez filed a class action lawsuit against Glidewell in Orange County Superior Court, entitled Allan R. Estonilo et al. v. James R. Glidewell Ceramics, Inc. (Case No. 30-2010-00382163-CU-OE-CXC) (the “Wage and Hour Action”). [SUF ¶16] Estonilo and Galdamez filed the complaint on behalf of themselves and all others similarly situated. (The Huynh Class Action contained similar, but not identical, claims to the Wage and Hour Action.) The complaint generally alleged that, from at least June 17, 2006 and continuing to the date of filing, Glidewell violated the California Labor Code Case 8:16-cv-01155-JLS-E Document 27-1 Filed 10/14/16 Page 10 of 34 Page ID #:1155 186359.11-10753-003-10/14/2016 4:57 PM MEMORANDUM OF P&As ISO MPSJ Case No. 8:16-cv-01155 JLS (Ex) 3 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 (“CLC”), the California Business and Professions Code (“CBPC”), and various Industrial Welfare Commission (“IWC”) Wage Orders. Based on these allegations, the complaint asserted six causes of action, including the fifth claim for “Knowing and Intentional Failure to Comply With Itemized Employee Wage Statement Provisions (CLC § 226).” Glidewell provided notice of the Estonilo Class Action to Philadelphia on August 3, 2010. [SUF ¶19] Philadelphia denied coverage for the Estonilo Class Action pursuant to its October 26, 2010 letter.1 [SUF ¶20] The letter acknowledged that the Estonilo Class Action constituted a claim, but denied coverage principally because on the basis that the claim was not made during the policy period and did not relate back to a claim first made in the policy period. [SUF ¶21] Although Philadelphia determined that the Estonilo Class Action did not relate back to earlier Estonilo discrimination claims for which Philadelphia provided coverage, [SUF ¶24] it failed to analyze whether the Estonilo Class Action related back to the Huynh Class Action, for which it received timely notice within Philadelphia’s policy period. B. The Consolidated Class Action On October 19, 2011, plaintiffs in the Estonilo Class Action and Huynh Class Action, along with Glidewell, signed and filed a Joint Stipulation for Consolidation of Cases, [SUF ¶30] followed on April 22, 2013 with a First Amended Complaint in the Estonilo Class Action2 that superseded all prior pleading. [SUF ¶35] As consolidated 1Philadelphia also listed the following grounds for denying coverage: “potentially relevant exclusions, amendatory endorsements and definitions which may otherwise operate to preclude or limit coverage,” including (1) BPC §17200 claim; penalties; and employment-related benefits; and (2) exclusions for CLC allegations set forth in the first through third causes of action asserted claims under “similar provisions” to those found in the FSLA in Part 2 of §III of the Policy; Personal Profits; and Dishonest Acts. [SUF ¶25] 2Stubblefield Constr. Co. v. City of San Bernardino, 32 Cal. App. 4th 687, 701 (1995) (Where two or more cases are consolidated for all purposes, the “‘allegations of the various complaints may be taken together and treated as one pleading’ and ‘for the purposes of all further proceedings, the cases will be treated as if the causes had been Case 8:16-cv-01155-JLS-E Document 27-1 Filed 10/14/16 Page 11 of 34 Page ID #:1156 186359.11-10753-003-10/14/2016 4:57 PM MEMORANDUM OF P&As ISO MPSJ Case No. 8:16-cv-01155 JLS (Ex) 4 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 in the Consolidated Class Action, the cases proceeded through class certification and settlement under a consolidated class action complaint. [SUF ¶35] The Estonilo Class Action ceased to exist as a separate or distinct legal proceeding, by operation of law, when it was consolidated into the Huynh Class Action on October 24, 2011.3 [SUF ¶31] The Huynh Class Action, Estonilo Class Action, and Consolidated Class Action sought class action treatment on behalf of all Glidewell non-exempt employees for certain alleged common business practices of Glidewell, including alleged CLC violations that are not similar to FSLA violations.4 Glidewell re-tendered the claim on April 4, 2014 when it transmitted a copy of the Consolidated Class Action complaint to Philadelphia along with a letter requesting a defense in the Huynh Class Action. [SUF ¶38] Philadelphia again denied coverage on April 21, 2014 principally relying on the “Earned Wages” exclusion. [SUF ¶39] C. The Policy Provisions 1. The Policy’s Coverage The Policy provides for Employment Practices Liability coverage with a limit of liability of $2,000,000 per policy period, including defense fees paid by the insurer outside the limit of coverage. [SUF ¶¶3-4] 2. The Insurance Policy a. The Insuring Agreement [Philadelphia] shall pay on behalf of the Insured, Loss from Claims made against the Insured during the Policy Period . . . , and reported to [Philadelphia] pursuant to the terms of this Policy, for an Employment Practice Act. united originally.’”) (quoting McClure v. Donovan, 33 Cal. 2d 717 (1949)). 3Cal. Code Civ. Proc. § 1048; Stubblefield, 32 Cal. App. 4th at 701. 4Failure to keep and provide accurate itemized wage statements; and meal and rest break violations. [SUF ¶36] Case 8:16-cv-01155-JLS-E Document 27-1 Filed 10/14/16 Page 12 of 34 Page ID #:1157 186359.11-10753-003-10/14/2016 4:57 PM MEMORANDUM OF P&As ISO MPSJ Case No. 8:16-cv-01155 JLS (Ex) 5 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 It broadly defines an “Employment Practice Act” as: any actual or alleged: . . . 2. breach of a written or oral employment contract; 3. employment related misrepresentation; [or] . . . 17. violation of any federal, state or local civil rights laws[.] B. Claim means: 1. a written demand for monetary relief; 2. a judicial or civil proceeding commenced by the service of a complaint or similar pleading; [or] … D. Defense Costs means: 1. any reasonable and necessary legal fees and expenses incurred in the defense of a Claim, whether by the Insured with [Philadelphia]’s consent or directly by [Philadelphia], in the investigation, adjustment, defense and appeal of a Claim…. … J. Loss means: 1. Damages 2. Defense Costs [SUF ¶5] b. The “Interrelated Wrongful Acts” Provision All Loss arising out of the same Wrongful Act and all Interrelated Wrongful Acts shall be deemed one Loss on account of a one Claim. Such Claim shall be deemed to be first made when the earliest of such Claims was first made…. I. Interrelated Wrongful Act means any causally connected Wrongful Act or any series of the same, similar or related Wrongful Acts. Case 8:16-cv-01155-JLS-E Document 27-1 Filed 10/14/16 Page 13 of 34 Page ID #:1158 186359.11-10753-003-10/14/2016 4:57 PM MEMORANDUM OF P&As ISO MPSJ Case No. 8:16-cv-01155 JLS (Ex) 6 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 … T. Wrongful Act means: … 2. with respect to Part 2, any Employment Practice Act[.] 3. The Earned Wage Exclusion Any Claim related to, arising out of, based upon, or attributable to the refusal, failure, or inability of any Insured(s) to pay Earned Wages (as opposed to tort-based back pay or front pay damages) or for improper payroll deductions taken by any Insured(s) from any Employee(s) or purported Employee(s), including but not limited to, (i) any unfair business practices claim alleged because of failure to pay Earned Wages; or (ii) any Claim seeking Earned Wages because any Employee(s) or purported Employee(s) were improperly classified or mislabeled as “exempt.” Earned Wages means wages or overtime pay for services rendered. [SUF ¶5] D. The Court’s Order in the RLI Action On July 10, 2015, Glidewell filed an insurance coverage action against its secondary provider, RLI Insurance Co. (“RLI”) for its failure to cover the Estonilo Class Action (the “RLI Action”). [SUF ¶41]5 The RLI policy period was from June 1, 2009 through June 1, 2010. [SUF ¶43] RLI filed a Motion to Dismiss on the basis that the Estonilo Class Action and the Huynh Class Action were not sufficiently “related” under its policy. [SUF ¶44] In denying the Motion, Judge Guilford acknowledged the stipulation holding that RLI’s position was potentially viable because “the policy’s 5The action was filed in the Central District of Illinois and thereafter transferred by stipulation to the Central District of California. James R. Glidewell Dental Ceramics, Inc. v. RLI Ins. Co., No. CV 15-7049 AG (ASx) (C.D. Cal. Jan. 25, 2016). [SUF ¶¶41-42] Case 8:16-cv-01155-JLS-E Document 27-1 Filed 10/14/16 Page 14 of 34 Page ID #:1159 186359.11-10753-003-10/14/2016 4:57 PM MEMORANDUM OF P&As ISO MPSJ Case No. 8:16-cv-01155 JLS (Ex) 7 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 broad definition of ‘Related’ appears to be a high hurdle for Glidewell to clear.” [SUF ¶46] III. POTENTIAL COVERAGE ARISES UNDER GLIDEWELL’S POLICY PROVISIONS A. The Policy’s Requirement of a “Claim” for a “Wrongful Employment Act” Is Met 1. A “Wrongful Employment Act” Is Asserted Against Glidewell Under the Policy, Philadelphia is liable for defense costs if there is: (1) a Claim (2) against an Insured (3) for a Wrongful Employment Act (4) made during the Policy Period. [SUF ¶5] The Policy provides that “[u]pon written notice [of a Claim] … [Philadelphia] shall undertake and manage the defense of such Claim, even if such Claim is groundless, false or fraudulent. . . . [Philadelphia] shall pay on behalf of [Glidewell], Loss from Claims made against the Insured during the Policy Period … and reported to [Philadelphia] pursuant to the terms of [the] Policy[.]” 2. The Estonilo Class Action Is a “Claim” Against the Insured The first two requirements are easily satisfied. Philadelphia acknowledges that the Estonilo Class Action qualifies as a Claim. In its October 26, 2010 denial letter, Philadelphia stated that the Estonilo Wage and Hour Action is “a civil proceeding commenced by the service of a complaint, [and] constitutes a Claim” under the Policy. [SUF ¶24] The Claim is also made against Glidewell, an Insured under the Policy. 3. The Estonilo Class Action Is a Claim for a “Wrongful Employment Act” The third requirement is also satisfied, since the Estonilo Class Action falls under several different categories of “Wrongful Employment Act” as defined by the Policy to encompass a breach of an implied employment contract as well as statutory violations of California employment laws including CLC §§ 221 and 226. [SUF ¶17] Case 8:16-cv-01155-JLS-E Document 27-1 Filed 10/14/16 Page 15 of 34 Page ID #:1160 186359.11-10753-003-10/14/2016 4:57 PM MEMORANDUM OF P&As ISO MPSJ Case No. 8:16-cv-01155 JLS (Ex) 8 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 B. Philadelphia Failed to Consider if the Estonilo Class Action and the Huynh Class Action Were Related Claims for Purposes of the Policy’s Notice Provision The Policy is a “claims-made and reported” policy, which means that it provides coverage for claims that are first made against the insured and reported to the insurer during the policy period.6 [SUF ¶5] Philadelphia denied Glidewell’s claim because it was not made during the policy period. [SUF ¶¶22, 24] Since the Estonilo Class Action was filed in June 2010, and served on Glidewell in July 2010, “approximately 13 months after the expiration of the Policy,” Philadelphia noted that coverage was “precluded unless it relates back to a claim first made in the policy period.” [SUF ¶¶22, 24] Analyzing whether the Estonilo Class Action related back to an earlier-filed Estonilo discrimination claim for which Philadelphia previously provided coverage, it concluded that the two actions were two separate, unrelated Claims, which fell outside coverage under the Policy. [SUF ¶24] Philadelphia, however, improperly failed to analyze whether the Estonilo Class Action related back to the earlier Huynh Class Action.7 First, There are no specific requests for information from Philadelphia to Glidewell that Glidewell failed to honor. Second, Glidewell never expressly withdrew its request for coverage. Indeed, the reverse is true as the last request for coverage came while the Consolidated Action was pending [SUF¶ 38] Third, Philadelphia cannot reverse delegate its duty to investigate to Glidewell, and Philadelphia acknowledges that it considered and evaluated the pending Motion for Class Certification which Glidewell provided. [SUF ¶51] The Huynh Class Action was filed on March 26, 2009, and reported to Philadelphia shortly thereafter during the Policy Period. [SUF ¶9] Philadelphia 6See Burns v. Int’l Ins. Co., 929 F.2d 1422, 1424 (9th Cir. 1991). 7Millennium Labs., Inc. v. Darwin Select Ins. Co., No. 12-cv-2742 BAS (KSC), 2014 U.S. Dist. LEXIS 89746, at *7 (S.D. Cal. July 1, 2014) (“It is illogical to permit an insurer to hide its head in the sand and deny its duties because of its own failure to investigate. ‘Hear no evil, see no evil, speak no evil’ is no defense for shirking a Case 8:16-cv-01155-JLS-E Document 27-1 Filed 10/14/16 Page 16 of 34 Page ID #:1161 186359.11-10753-003-10/14/2016 4:57 PM MEMORANDUM OF P&As ISO MPSJ Case No. 8:16-cv-01155 JLS (Ex) 9 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 declined coverage on May 14, 2009. [SUF ¶10] There is no question that the Huynh Class Action was a Claim “first made and reported” during the Policy Period— effective through June 1, 2009. [SUF ¶2] C. The Huynh Class Action and Estonilo Class Action are Claims for “Interrelated Wrongful Acts” 1. The Policy Defines “Interrelated Wrongful Acts” as “Any Series of the Same, Similar, or Related Wrongful Acts” Had Philadelphia considered the relatedness of the Huynh Class Action and Estonilo Class Action, it would have determined the two arise out of Interrelated Wrongful Acts, such that the Estonilo Class Action Claim would be first made at the time the Huynh Class Action Claim was made, even prior to their formal consolidation. A comparison of the pleadings and class members in both cases shows that the allegations and causes of action in both are “substantially similar” as Judge Guilford concluded in the companion coverage action against the subsequent insurer on risk, RLI. [SUF ¶46] Accordingly, Philadelphia had a duty to defend Glidewell, which it breached. 2. The Allegations in the Huynh Class Action and Estonilo Class Action Are the Same or Substantially Similar Both actions8 are brought by employees or former employees of Glidewell and allege violation of the same or similar provisions of the CLC and CBPC, alleging, as pertinent to the coverage issues here, claims which fall outside of the “Earned Wages” exclusion. 3. There Is Significant Overlap Between the Class Employees in Both Class Actions There is significant overlap between the subset of employees who were part of both the Huynh Class Action and the Estonilo Class Action. Huynh and Estonilo were cognizable duty.”). 81) failure to provide rest and meal breaks in violation of CLC §§ 226.7 and 512; and 2) failure to provide itemized wage statements in violation of CLC § 226” [Compare Case 8:16-cv-01155-JLS-E Document 27-1 Filed 10/14/16 Page 17 of 34 Page ID #:1162 186359.11-10753-003-10/14/2016 4:57 PM MEMORANDUM OF P&As ISO MPSJ Case No. 8:16-cv-01155 JLS (Ex) 10 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 members of each other’s classes [Compare SUF ¶8 with SUF ¶17], and ultimately ended up as representatives for a common class of employees. [SUF ¶31]9 4. Courts Have Previously Held that Two Class Actions Stemming from Allegations of an Insured’s Business Practices Are Related The Ninth Circuit has held that two class action suits “filed by two different sets of plaintiffs in two different fora under two different legal theories” nevertheless were interrelated because the common basis for the suits was defendant’s consistent business practice of permitting its agents to inflate loan prices.10 The court explained that “[t]he harms alleged in the two class action suits are causally related and do not present such an ‘attenuated or unusual’ relationship that a reasonable insured would not have expected the claims to be treated as a single claim under the policy.” Id. (citation omitted). Similarly, this district concluded that underlying actions from multiple plaintiffs were related where they alleged an insured’s consistent policy of recklessly issuing high-risk mortgages.11 In another decision from this district,12 the court held that seven separate underlying actions brought by different plaintiffs were related13 because: “they all [arose] from a single course of conduct, a unified policy of making alleged SUF ¶8 with SUF ¶17] 9The Estonilo Class Action states that Glidewell’s alleged violations giving rise to the action took place “from at least June 17, 2006 and continu[ed]” until at least August 22, 2011, the date the Estonilo First Amended Complaint was filed. [SUF ¶28] The Huynh Class Action asserts class certification from 2005 through 2009. [SUF ¶8] 10WFS Fin., Inc. v. Progressive Cas. Ins. Co., 232 F. App’x 624, 625 (9th Cir.) 2007). 11XL Specialty Ins. Co. v. Perry, No. CV 11-02078-RGK (JCGx), 2012 U.S. Dist. LEXIS 109341, at *20-21 (C.D. Cal. June 27, 2012). 12Liberty Ins. Underwriters, Inc. v. Davies Lemmis Raphaely Law Corp., No. CV 15- 859 DMG (JCx), 2016 U.S. Dist. LEXIS 25395, at *27-28 (C.D. Cal. Feb. 23, 2016). 13Id. at *27-28 (“The fact that these acts resulted in a number of different harms to different persons, who may have different types of causes of action … does not render the ‘wrongful acts’ themselves to be ‘unrelated’ for the purposes of the insurance contract [where they] comprised a single course of conduct designed to promote Case 8:16-cv-01155-JLS-E Document 27-1 Filed 10/14/16 Page 18 of 34 Page ID #:1163 186359.11-10753-003-10/14/2016 4:57 PM MEMORANDUM OF P&As ISO MPSJ Case No. 8:16-cv-01155 JLS (Ex) 11 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 affirmative misrepresentations to investors in order to induce them to invest in commercial real estate acquisitions facilitated by AMC.” Id. at 27. As in those cases, the Huynh Class Action and the Estonilo Class Action arose from common alleged improper wage and hour practices. [SUF ¶32] When those factors are considered in conjunction with the commonality of the class employees, it is evident that Philadelphia breached its duty to defend the Estonilo Class Action as untimely due to its failure to investigate the relatedness of the Estonilo Class Action and the Huynh Class Action. 5. The Relatedness of the Huynh Class Action and Estonilo Class Action Is Further Evidenced by the Consolidation of the Cases The substantial overlap and interrelatedness of the Estonilo Class Action and Huynh Class Action are further evidenced by the plaintiffs’ decision, as well as the court’s approval, to have the cases consolidated for all purposes in October 2011. [SUF ¶¶30-31]14 The consolidation did not just relate the cases, it transformed them into a single, combined case, requiring “the allegations of the various complaints may be taken together and treated as one pleading and for the purposes of all further proceedings, the cases are to be treated as if the causes had been united originally.”15 [SUF ¶32] Under California law, when two actions are consolidated “for all purposes,” “the two actions are merged into a single proceeding under one case number and result in only one verdict or set of findings and one judgment.”16 investment in [the firm].”). 14The Joint Stipulation for Consolidation of Cases stated that: “As this Court has previously determined, the Huynh and Estonilo cases are related because they (i) involve the same parties and are based on the same or similar claims; (ii) they arise from the same or substantially identical transactions, incidents, or events requiring the determination of the same or substantially identical questions of law or fact, and/or (iii) are likely for other reasons to require substantial duplication of judicial resources if heard by different judges.” 15Stubblefield, 32 Cal. App. 4th at 701 (internal quotations and citations omitted). 16Hamilton v. Asbestos Corp., 22 Cal. 4th 1127, 1147 (2000); Sanchez v. Sup. Ct., 203 Cal. App. 3d 1391, 1396 (1988) (“[T]he pleadings are regarded as merged, one set of Case 8:16-cv-01155-JLS-E Document 27-1 Filed 10/14/16 Page 19 of 34 Page ID #:1164 186359.11-10753-003-10/14/2016 4:57 PM MEMORANDUM OF P&As ISO MPSJ Case No. 8:16-cv-01155 JLS (Ex) 12 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 In its recent briefing, Philadelphia ignored the obvious reasons for the consolidation of the suits. The broader Estonilo class necessarily included the members of the Huynh class, as the Estonillo class extended to “all persons employed by Glidewell as production employees or in any similar position[.]”17 Philadelphia does not and cannot contest that the smaller class was necessarily subsumed in the greater Estonilo class. The significant overlap in the class periods requiring their consolidation and joint defense,18 is additional evidence that the Consolidated Actions are “interrelated.”19 The same wrongful acts that are asserted to Section II.A.17, “violation of [labor] laws,” however, have a broad meaning in this context. It certainly includes the same statutory violations for parties in the assumed Estonilo class for overlapping periods of times, which comprises the vast majority of time at issue in the two class action suits. Notably, Philadelphia does not seek to parse its policy language because it knows it cannot show that “Interrelated Wrongful Acts” did not occur. D. Philadelphia Breached Its Duty to Defend by Again Denying Coverage After It Knew of the Consolidation of the Cases On April 4, 2014, Glidewell notified Philadelphia that the Estonilo Class Action and the Huynh Class Action had been consolidated and transmitted a copy of the Consolidated Class Action complaint for coverage analysis in the Huynh Class Action. [SUF ¶38] By transmitting the Consolidated Class Action complaint, Glidewell re- tendered the claim and triggered Philadelphia’s duty to investigate it for coverage. findings is made, and one judgment is rendered.”). McClure v. Donovan, 33 Cal. 2d 717, 722, 205 P.2d 17, 20 (1949) (“[T]he cases are to be treated as if the causes had been united originally.”) (citations omitted) 17[SUF ¶¶16, 51], while the Huynh class was limited to dental ceramics and prosthesis manufacturer technicians [SUF ¶52] 18[SUF ¶7, Huynh Complaint, ¶¶2, 13] Class Period 3/26/05-3/26/09; [SUF ¶7 Estonillo Complaint, ¶1-5, 29] Class Period 6/17/06-6/17/10. 19“i. Interrelated wrongful act means any casually connected wrongful act or any series of the same, similar or related wrongful acts.” [SUF ¶5] Case 8:16-cv-01155-JLS-E Document 27-1 Filed 10/14/16 Page 20 of 34 Page ID #:1165 186359.11-10753-003-10/14/2016 4:57 PM MEMORANDUM OF P&As ISO MPSJ Case No. 8:16-cv-01155 JLS (Ex) 13 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 The duty to defend is determined from information available to the insurer, including a third party complaint, when the defense is tendered.20 After an insurer has denied a claim, the transmittal of additional information which may give rise to the duty to defend is a re-tender of the claim.21 This re-tender triggered Philadelphia’s duty to investigate. Upon tender or re-tender, an insurer has a duty to investigate the claim and is charged with constructive notice of all facts it might have learned pursuant to the investigation.22 After Philadelphia received the Consolidated Class Action complaint, it only considered whether there was any change in coverage for the Huynh Class Action. Philadelphia should have known that there were coverage issues related to the Estonilo Class Action and investigated whether the Consolidated Class Action changed that coverage analysis. Since Philadelphia’s main reason for denying coverage under the Estonilo Class Action was timeliness, an investigation into its relatedness to the Huyhn Class Action would have disposed of the timeliness issue and required Philadelphia to provide a defense. E. Philadelphia Was Obligated to Defend Glidewell In Light of the Potentiality of Coverage Doctrine Applicable Where, As Here, It Requested a Defense 1. Philadelphia, a Denying Insurer, Cannot Second-Guess What Coverage Benefits Glidewell Would Have Sought Philadelphia dodges the undisputed fact that a “potential for coverage” existed which required it to defend its insured by arguing that an entirely different and higher “actual coverage” standard applies in this case such that the duty to defend case law does not apply. This argument [Dkt. 16, 17:12-18:15] falsely presumes that Glidewell 20Hartford Cas. Ins. Co. v. Swift Distrib., Inc., 59 Cal. 4th 277, 287 (2014). 21Crisp Enters. v. Golden Eagle Ins. Co., No. SACV 15-02011 JVS (KESx), 2016 U.S. Dist. LEXIS 28154, at *4 (C.D. Cal. Feb. 26, 2016) (“[insured] re-tendered its defense under the Policy on the basis of three pieces of extrinsic evidence obtained during discovery in the underlying action.”) Case 8:16-cv-01155-JLS-E Document 27-1 Filed 10/14/16 Page 21 of 34 Page ID #:1166 186359.11-10753-003-10/14/2016 4:57 PM MEMORANDUM OF P&As ISO MPSJ Case No. 8:16-cv-01155 JLS (Ex) 14 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 elected to be “reimbursed” for a “loss” rather than requesting a defense. Philadelphia meritlessly asserts that Glidewell “did not tender the defense” as if the failure to use the magic word “tender” in repeated defense requests eliminated the insurer’s “duty to defend” under California law which mandates that a liability insurer like Philadelphia owes a broad duty to defend its insured against claims that create a potential for indemnity. “[I]mposition of an immediate duty to defend is necessary to afford the insured what it is entitled to: the full protection of a defense on its behalf.”23 2. Glidewell Never Asked The Underwriter to Manage The Defense and Cannot Be Presumed To Have Done So The policy language cannot be so interpreted. Instead the policy permits the insured to manage the defense or else expressly turn over defense management to the Underwriter [SUF¶ 5, 8:12-24]. Defense Costs owed by Philadelphia are the same (and are not characterized as a “loss” [SUF¶ 5, at 4:2-3] when “incurred in the defense of a Claim, whether by the Insured with the Underwriter’s consent or directly by the Underwriter…” [SUF¶ 5, 6:1-4]. Glidewell provided notice of all the underlying actions including the Huynh Class Action which Philadelphia denied [SUF¶ 10], the Estonilo DLSE Claim which Philadelphia denied [SUF¶ 15], and the Estonilo Class Action which Philadelphia denied [SUF¶ 20]. Philadelphia had a duty to investigate properly submitted claims. It is charged with constructive notice of facts that it might have learned if it had pursued the requisite investigation.24 A Philadelphia defense denial subjected it to liability for the insured’s full attorney's fees and costs incurred thereafter.25 3. After Philadelphia’s Repeated Denials, Glidewell Had No Choice Except To Defend The Claims Without Its Insurer 22KPFF, Inc. v. Cal. Union Ins. Co., 56 Cal. App. 4th 963, 974 (1997). 23Montrose Chem. Corp. v. Superior Court, 6 Cal. 4th 287, 295 (1993). 24KPFF, 56 Cal. App. 4th at 973. 25CNA Cas. of Cal. v. Seaboard Sur. Co., 176 Cal.App.3d 598, 610 (1986). Case 8:16-cv-01155-JLS-E Document 27-1 Filed 10/14/16 Page 22 of 34 Page ID #:1167 186359.11-10753-003-10/14/2016 4:57 PM MEMORANDUM OF P&As ISO MPSJ Case No. 8:16-cv-01155 JLS (Ex) 15 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 After repeatedly refusing to defend any claims submitted by Glidewell, Philadelphia cannot avoid liability here based on rights it might have had if it had not denied all policy benefits to Glidewell. A denying insurer cannot argue how it might have defended or second-guess the defense strategy. Glidewell’s use of defense counsel previously approved by Philadelphia (as a means of reducing transactional and defense costs) is not evidence that Glidewell had elected indemnity based on proof of “actual coverage” instead of defense benefits based on the “potential for coverage.” An insurer that has “materially breached its duty to defend [has] forfeited its right to participate in or control the . . . defense. . . .”26 IV. THERE ARE NO POLICY EXCLUSIONS THAT OPERATE TO BAR COVERAGE FOR THE ESTONILO CLASS ACTION A. The Earned Wage Exclusion Does Not Exclude Coverage for All Allegations in the Estonilo Class Action 1. The Earned Wage Exclusion Does Not Bar Philadelphia’s Duty to Defend Gildewell “Interpretation of an insurance policy is a question of law and follows the general rules of contract interpretation.”27 “The ‘clear and explicit’ meaning of [policy] provisions, interpreted in their ‘ordinary and popular sense’” controls, unless the terms are “‘used by the parties in a technical sense or a special meaning is given to them by usage.’”28 It is well established that “exclusionary clauses are interpreted narrowly against the insurer.”29 The Policy’s Earned Wage exclusion only eliminates coverage for claims 26California v. Pacific Indemnity Co., 63 Cal. App. 4th 1535, 1544 (1998). 27MacKinnon v. Truck Ins. Exch., 31 Cal. 4th 635, 647 (2003). 28Id. at 647-48 (citing Waller v. Truck Ins. Exch., Inc., 11 Cal. 4th 1, 18 (1995)). 29State Farm Mut. Auto. Ins. Co. v. Partridge, 10 Cal. 3d 94, 102 (1973); Atl. Mut. Ins. Co. v. J. Lamb, Inc., 100 Cal. App. 4th 1017, 1038-39 (2002) (“[A]n insurer may only defeat an existing potential for coverage by undisputed facts that conclusively negate such coverage…. [A]n insurer that wishes to rely on an exclusion has the burden of proving, through conclusive evidence, that the exclusion applies in all possible Case 8:16-cv-01155-JLS-E Document 27-1 Filed 10/14/16 Page 23 of 34 Page ID #:1168 186359.11-10753-003-10/14/2016 4:57 PM MEMORANDUM OF P&As ISO MPSJ Case No. 8:16-cv-01155 JLS (Ex) 16 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 “related to, arising out of, based upon, or attributable to [Glidewell’s] refusal, failure, or inability … to pay Earned Wages[.]” [CLC § 226] [SUF ¶5] Allegations related to Estonilo Class Action’s Fifth Cause of Action (“Knowing and Intentional Failure to Comply with Itemized Employee Wage Statement Provisions”) and Eighth Cause of Action [CLC § 221] (“Illegal Wage Deductions”) do not come within the scope of the Earned Wage Exclusion. 2. “Arising Out Of” Language in the “Earned Wages” Exclusion Must be Narrowly Interpreted Against Philadelphia Neither the claim for “failure to provide itemized wage statements” nor “illegal wage deductions” “aris[e] out of” Glidewell’s failure to pay Earned Wages. While “arising out of” language in insurance coverage provisions is to be interpreted broadly, “arising out of” language in the context of exclusionary clauses should be interpreted narrowly.30 As California courts have held, “to ‘arise out of’” means “directly and proximately result[] from.”31 Under a strict interpretation of the Earned Wage Exclusion, the claims are excluded only if they arise out of Glidewell’s failure to pay Earned Wages. The exclusion thus requires that the claim “directly and proximately result from” Glidewell’s failure to pay Earned Wages. Here, the claim for “illegal wage deductions” does not “arise out of” or “directly and proximately result from” Glidewell’s failure to pay Earned Wages. worlds.”) (italics in original) (emphasis added). 30Gonzalez v. Fire Ins. Exch., 234 Cal. App. 4th 1220, 1237 (2015); North Counties Eng’g, Inc. v. State Farm Gen. Ins. Co., 224 Cal. App. 4th 902, 933 (2014) (“The more inclusive use of the phrase ‘arise out of,’ urged by [the insurer], has been to provide coverage, not limit it[.]”) (quoting S.T. Hudson Engineers, Inc. v. Pa. Nat’l Mut. Cas. Co., 388 N.J. Super. 592, 604 (2006)) (emphasis added); Tower Ins. Co. v. Capurro Enters. Inc., No. C 11-03806 SI, 2012 U.S. Dist. LEXIS 46443, at *27-28 (N.D. Cal. Apr. 2, 2012) (“The broad coverage–narrow exclusion principle is well illustrated with respect to the phrase ‘arising out of’ in [Partridge, 10 Cal. 3d at 101- 02].”). 31HS Servs. v. Nationwide Mut. Ins. Co., 109 F.3d 642, 647 (9th Cir. 1997). Case 8:16-cv-01155-JLS-E Document 27-1 Filed 10/14/16 Page 24 of 34 Page ID #:1169 186359.11-10753-003-10/14/2016 4:57 PM MEMORANDUM OF P&As ISO MPSJ Case No. 8:16-cv-01155 JLS (Ex) 17 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 Rather, the allegations specifically state that “[a]s a proximate result of [Glidewell’s] violations of [CLC] § 221, the [plaintiffs] have been damaged[.]” [SUF ¶29; ¶92] The exclusion does not provide for the opposite causal connection—that Glidewell’s failure to pay Earned Wages “directly and proximately results from” the claim. If Philadelphia intended to exclude claims for Glidewell’s failure to pay Earned Wages “arising out of” Glidewell’s “illegal wage deductions,” it should have worded the exclusion to effectuate that intention.32 3. CLC § 226 Does Not Authorize an Award of Unpaid Wages for Failure to Provide Itemized Wage Statements The Fifth Cause of Action alleges that Glidewell failed to provide proper itemized wage statements and failed to maintain records in violation of CLC § 226. This section authorizes an award of damages, not wages. The claim under that section is not a claim for “wages or overtime pay for services rendered.” Rather, these allegations relate solely to Glidewell’s recordkeeping and administrative requirements. Indeed, the complaint correctly identifies these allegations as “record- keeping” violations and seeks damages up to the maximum statutory penalty of $4,000 dollars per violation. [SUF ¶29] Glidewell may be liable under CLC § 226 absent any allegation or finding of improper payment of Earned Wages. CLC § 226(e) has an injury requirement. [SUF ¶49] Historically, an employee was not permitted to recover for violations of CLC § 226(a) “unless he or she demonstrates an injury arising from the missing information.”33 Deprivation of information was not a cognizable injury. Id. 32Safeco Ins. Co. of Am. v. Robert S., 26 Cal. 4th 758, 764 (2001) (“[W]e cannot read into the policy what Safeco has omitted. To do so would violate the fundamental principle that in interpreting contracts, including insurance contracts, courts are not to insert what has been omitted.”) 33Price v. Starbucks Corp., 192 Cal. App. 4th 1136, 1142-43 (2011) (emphasis in original). Case 8:16-cv-01155-JLS-E Document 27-1 Filed 10/14/16 Page 25 of 34 Page ID #:1170 186359.11-10753-003-10/14/2016 4:57 PM MEMORANDUM OF P&As ISO MPSJ Case No. 8:16-cv-01155 JLS (Ex) 18 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 Effective January 2013,34 the California legislature amended CLC § 226 to clarify the injury requirement under section 226(e).35 Additionally, the 2013 amendment does not present any issues regarding retroactive application since it merely “clarified existing law and did not substantially change the legal consequences of past actions[.]”36 Under the amended statute, the plaintiffs in the Estonilo Class Action can recover absent injury for unpaid wages. [SUF ¶29] The Estonilo Class Action complaint alleges: “27. [Glidewell] has made it difficult to determine the applicable piece rates and deductions due to be paid Glidewell non-exempt employees … because they did not implement and preserve a lawful record-keeping method … as required for non-exempt employees by … [CLC] section 226….” The injury alleged due to Glidewell’s violation of section 226 is not unpaid wages. Rather, plaintiffs allege that the violation made it difficult to determine the deductions made from gross wages. [SUF ¶29] This injury is sufficient to trigger recovery under the amended section 226(e) and is in no way “related to, arising out of, based upon, or attributable to the refusal, failure or inability of [Glidewell] to pay Earned Wages.” The injury alleged is separate and distinct from Glidewell’s failure to pay earned wages. Plaintiffs can therefore allege, prove, and recover for the Fifth Cause of Action absent any such “refusal, failure or inability.” 4. Violations of CLC § 221 for Illegal Wage Deductions Is Concerned with Improper Piece Rate Calculations 34Holak v. K Mart Corp., No. 1:12-cv-00304-AWI-MJS, 2015 U.S. Dist. LEXIS 105441, at *24 n.6 (E.D. Cal. Aug. 11, 2015) (noting that “[t]he 2013 Amendment seems to indicate that Price was wrong in determining the injury requirement[.]”). 35CLC § 226(e)(2)(B) (“An employee is deemed to suffer injury for purposes of this subdivision if the employer fails to provide accurate and complete information as required by any one or more of items (1) to (9), inclusive, of subdivision (a) and the employee cannot promptly and easily determine from the wage statement alone one or more of the following: … (ii) Which deductions the employer made from gross wages to determine the net wages paid to the employee during the pay period.”), 36Brewer v. Gen. Nutr. Corp., No.: 11-CV-3587 YGR, 2015 U.S. Dist. LEXIS 114860, at *27-28 (N.D. Cal. Aug. 27, 2015). Case 8:16-cv-01155-JLS-E Document 27-1 Filed 10/14/16 Page 26 of 34 Page ID #:1171 186359.11-10753-003-10/14/2016 4:57 PM MEMORANDUM OF P&As ISO MPSJ Case No. 8:16-cv-01155 JLS (Ex) 19 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 The Eighth Cause of Action alleges that Glidewell made wrongful “deductions for damaged products” in violation of CLC § 221. This section authorizes an award of damages, not wages. A claim under that section is not a claim for “wages or overtime pay for services rendered.” Rather, it relates solely to Glidewell’s business practice of improperly classifying products as damaged for purposes of piece rate calculation. 5. Philadelphia Only Superficially Raised the Earned Wage Exclusion While the Estonilo Class Action Was Pending and Should Be Estopped from Raising It Now Glidewell settled the Estonilo Class Action based, in part, on the shortcomings of Philadelphia’s grounds for denial of a defense.37 While this mandate applies to a “first party claimant,” the California Fair Claims Practices Regulations define that term as “any person asserting a right under an insurance policy as a named insured[.]”38 As Cal. Dairies39 concluded, “by requesting coverage under the Policy, [the insured] is a ‘first party claimant,’ entitling it to a denial that explicitly explains which exclusions apply under [§ 2695.7(b)(1)].” This conclusion was thoroughly reviewed and subsequently upheld.40 By not “explicitly explain[ing]” how the Earned Wage Exclusion applied under the facts in its denial [SUF ¶24], Philadelphia breached its duty to disclose under the regulations.41 And, by continuing to resist recognizing coverage in this lawsuit, it 37Cal. Ins. Code § 790.03(h)(13) (“[Under California law, an insurer must] provide promptly a reasonable explanation of the basis relied on in the insurance policy, in relation to the facts or applicable law, for the denial of a claim….”); 10 Cal. Code Reg. § 2695.7(b)(1) (“[Where denial of a claim is based on a policy exclusion,] the written denial shall include reference thereto and provide an explanation of the application of the … exclusion to the claim.”) (emphasis added). 3810 Cal. Code Reg. § 2695.2(f). 39Cal. Dairies, Inc. v. RSUI Indem. Co., 617 F. Supp. 2d 1023, 1048 (E.D. Cal. 2009). 40Cal. Dairies, Inc. v. RSUI Indem. Co., No. 1:08-CV-00790 OWW DLB, 2010 U.S. Dist. LEXIS 37712, at *41-45 (E.D. Cal. Apr. 16, 2010). 41Cal. Dairies, 617 F. Supp. 2d at 1048 (“Failure to comply with the minimum standards set forth in the regulations provides a basis for finding that an insurer failed Case 8:16-cv-01155-JLS-E Document 27-1 Filed 10/14/16 Page 27 of 34 Page ID #:1172 186359.11-10753-003-10/14/2016 4:57 PM MEMORANDUM OF P&As ISO MPSJ Case No. 8:16-cv-01155 JLS (Ex) 20 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 revealed its intent to have this court rewrite its policy under the guise of construction.42 While Philadelphia breached its duty to disclose, to establish estoppel, the insured “must also demonstrate that it reasonably relied [on the insurer’s assertions] to its detriment.” Id. Glidewell reasonably relied on Philadelphia’s assertion that the Earned Wage Exclusion would prevent coverage when it settled the Estonilo Class Action. Glidewell faced significant exposure in the case and accounted for Philadelphia’s denial under that specific exclusion—and its attendant risk—in settling the case for a substantial amount, which it did to its detriment. As a result, Philadelphia should be estopped from asserting that this exclusion bars coverage. B. The FLSA Exclusion Does Not Operate to Bar Coverage for Violations of CLC §§ 221 and 226 Philadelphia listed both the Personal Profits Exclusion and the Dishonest Acts Exclusion as possible limitations to coverage. [SUF ¶25] These exclusions are inapplicable, however, because they “only apply if a final and non-appealable judgment or adjudication establishes the Insured committed such an act or omission.” [SUF ¶5] C. Other Bases for Limitations in Philadelphia’s Denial Letter Philadelphia listed an additional four “potentially relevant exclusions, amendatory endorsements and definitions which may otherwise operate to preclude or limit coverage.” [SUF ¶25] None of the four limitations asserted by Philadelphia operate to bar coverage to all of the allegations in the Estonilo Class Action. It is well- established that in a “mixed” action, in which some of the claims against the insured are at least potentially covered and others are not, the insurer is legally obligated to to abide by its duty to disclose for purposes of the estoppel doctrine.”) (citations omitted). 42Fireman’s Fund Ins. Co. v. Atlantic Richfield Co., 94 Cal. App. 4th 842, 852 (2001) (“[A]n insurance company’s failure to use available language to exclude certain types of liability gives rise to the inference that the parties intended not to so limit Case 8:16-cv-01155-JLS-E Document 27-1 Filed 10/14/16 Page 28 of 34 Page ID #:1173 186359.11-10753-003-10/14/2016 4:57 PM MEMORANDUM OF P&As ISO MPSJ Case No. 8:16-cv-01155 JLS (Ex) 21 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 defend the entire action prophylactically.43 D. The “Earned Wages” Exclusion Fails To Give The Insured The Required Understanding Of Reduced Coverage The Earned Wages Exclusion does not describe circumstances where one Wrongful Employment Act is subject to coverage but, due to this exclusion, does not provide defense benefits. It leaves an insured in quandary as to the scope of the exclusion at the time of its policy acquisition. “Coverage may be limited by exclusionary clauses only to the extent that those clauses are ‘conspicuous, plain and clear.’ ”44 Exclusions which reference virtually every wage and hour claim, such as in NH Ball Bearings,45 more clearly identify Wrongful Employment Conduct, so that an insured can ascertain whether the activity is within or outside the scope of coverage. The Earned Wages provides: “Part 2 of the Policy excludes coverage for any Claim: related to, arising out of, based upon, or attributable to the refusal, failure, or inability of any Insured(s) to pay Earned Wages (as opposed to tort-based back pay or front pay damages) or for improper payroll deductions taken by any Insured(s) from any Employee(s) or purported Employee(s), . . . . Earned Wages means wages or overtime pay for services rendered.” Precisely these concerns guided the Ninth Circuit in Fibus.46 That court held that a paragraph printed on the first page of an eight-page “Amendatory Endorsement” coverage.”). 43Buss v. Sup. Ct., 16 Cal. 4th 35, 48-49 (1997). 44Impac Mortg. Holdings, Inc. v. Hous. Cas. Co., No. SACV 11-1845-JST (JCGx), 2013 U.S. Dist. LEXIS 27190, at *24 (C.D. Cal. Feb. 26, 2013). 45N.H. Ball Bearings, Inc. v. Nat'l Union Fire Ins. Co., No. CV 13-06114 DDP (AGRx), 2014 U.S. Dist. LEXIS 31448, at *2-3 (C.D. Cal. Mar. 10, 2014) (The policy extended coverage to thirteen enumerated Wrongful Employment Acts and then excluded three broad classes of wage and hour violations, including “the failure to pay . . . wages.”). 46Allstate Ins. Co. v. Fibus, 855 F.2d 660, 663 (9th Cir. 1988). Case 8:16-cv-01155-JLS-E Document 27-1 Filed 10/14/16 Page 29 of 34 Page ID #:1174 186359.11-10753-003-10/14/2016 4:57 PM MEMORANDUM OF P&As ISO MPSJ Case No. 8:16-cv-01155 JLS (Ex) 22 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 was insufficiently conspicuous to provide the requisite notice to the policyholder. So too, in Classic Distrib.,47 vacated by settlement,48 invalidating insufficient endorsements. This language, like Classic and Fibus, fails to notify the insured that coverage was being further and extremely limited through this endorsement. The Endorsement changes the Policy Coverage language (“Part 2 – Employment Practices Liability Insurance”) exclusion from “compensation earned by the claimant in the course of employment but not paid by the Insured” [SUF ¶5, at 3:26- 4:1], to anything tangentially related to a FLSA claim such that it was “similar,” or any other rule, regulation or law for any failure to pay, however styled. [SUF ¶5, at 12:1-13:3] The “conspicuous, plain and clear” notice must describe “the specific reduction in coverage. . . . The law, however, requires notice of the specific reduction in coverage.”49 Less notice was provided by this endorsement than the held-insufficient paragraph printed on the first page in Fibus. There, the limits of liability were referenced on a declaration. The court concluded that “Allstate’s Amendatory Endorsement itself did not conspicuously notify Fibus of a reduction in coverage . . . .”50 This reference was to limits of liability on the declarations page. The policy does not contain an “explicit disclaimer of any duty to defend.” 47Classic Distrib. & Beverage Grp., Inc. v. Travelers Cas. & Sur. Co. of Am., No. CV 11-07075 GAF RZX, 2012 WL 3860597, at *7 (C.D. Cal. Aug. 29, 2012) vacated by settlement, No. CV 11-07075 GAF RZX, 2012 WL 5834570 (C.D. Cal. Nov. 6, 2012) (Held an endorsement neither “conspicuous, plain or clear,” thus did not give the policy holder the requisite knowledge of reductions to coverage.). 48The vacation of an opinion to facilitate settlement, as in Classic, does not lessen its legal authority. See DAVID A. GAUNTLETT, IP ATTORNEY’S HANDBOOK FOR INSURANCE COVERAGE IN INTELLECTUAL PROPERTY DISPUTES (“IP HANDBOOK”), Ch. 10, C.(2) p. 183 (ABA Section of Intellectual Property Law 2010). 49Davis v. United Servs. Auto. Ass’n, 223 Cal. App. 3d 1322, 1332 (1990). 50Fibus, 855 F.2d at 663. Case 8:16-cv-01155-JLS-E Document 27-1 Filed 10/14/16 Page 30 of 34 Page ID #:1175 186359.11-10753-003-10/14/2016 4:57 PM MEMORANDUM OF P&As ISO MPSJ Case No. 8:16-cv-01155 JLS (Ex) 23 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 This is in stark contrast to Petersen51 and Jeff Tracy Inc.,52 where, as “[h]ere, the D&O Policy clearly and conspicuously disclaims the duty to defend.” Rather, the Policy allows Glidewell to elect that Philadelphia provide a defense.53 Glidewell properly provided notice of the Estonilo Action but due to Glidewell’s improper denial of coverage, Glidewell never had the opportunity to make an election regarding coverage. Indeed, Philadelphia’s denial letter articulated that it was denying coverage, which refers to the duty to defend under the Policy.54 Philadelphia cannot escape the consequences of its denial of policy benefits by hypothesizing in hindsight that Glidewell was electing indemnification and claiming that Glidewell did not elect to tender a defense. E. The “Related To” Provision Does Not Require an Expansive Construction A subsequent decision, PHP,55concluded that CLC § 226 claims fell within the scope of coverage and outside the scope of both the FLSA exclusion and the operative additional exclusionary language in that case. PHP also recognized that where similar 51Petersen v. Col. Cas. Co., No. SACV-12-00183-JVS(ANx), 2012 WL 5316352 at *10 (C.D. Cal. Aug. 21, 2012) (Combined with the explicit disclaimer of any duty to defend, the Court finds the Policy here is “not consistent with the broader duty to defend.”). 52Jeff Tracy, Inc v. United States Specialty Ins. Co., 636 F. Supp. 2d 995 (C.D. Cal. 2009). 53“However, the Insured shall have the right, as soon as practicable after a Claim is first made to tender the defense of such Claim to the Underwriter. Upon written notice the Underwriter of such election by the Insured and subject to all of the provisions of this Section III. DEFENSE AND SETTLEMENT, the Underwriter shall undertake and manage the defense of such Claim, even if such Claim is groundless, false or fraudulent.” [SUF ¶5, 8:15-24] 54Morris v. Paul Revere Life Ins. Co., 109 Cal. App. 4th 966, 977 (2003) (The denial of policy benefits under and insurance contract is serious gives rise to breach of contract and potential bad faith claims.) 55PHP Ins. Serv. v. Greenwich Ins. Co., No. 15-cv-00435-BLF, 2015 U.S. Dist. LEXIS 106274 (N.D. Cal. (San Jose Div.) Aug. 12, 2015), citing Cal. Dairies, 617 F. Supp. 2d at1029. Case 8:16-cv-01155-JLS-E Document 27-1 Filed 10/14/16 Page 31 of 34 Page ID #:1176 186359.11-10753-003-10/14/2016 4:57 PM MEMORANDUM OF P&As ISO MPSJ Case No. 8:16-cv-01155 JLS (Ex) 24 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 provisions language in the FSLA exclusion is implicated, it should be done so in plain language.56 PHP also distinguished N.H. Ball Bearings because it “considered an exclusionary provision enumerating specific misconduct (and causes of action relating to that misconduct) that would be excluded from coverage, thereby rendering the reasoning in that case inapposite to the issue at hand.”57 Nonetheless, the exclusionary language in PHP was far broader than here. Statutory violations were not covered, nor could they be deemed covered by virtue of the asserted breach of contract claim. Nonetheless, the court, even under the improper coverage, found the FLSA exclusion no bar.58 The Kay59 Opinion, cited in PHP, provides a logical pathway which is readily distinguishable because of the “wage and hour law” exclusion. It construed, as in N.H. Ball Bearings, a far broader exclusion than the Earned Wages exclusion here. The Kay exclusion extended to violations of “any federal, state, local or foreign wage and hours laws[.]”60 Nor does the exclusion define Earned Wages to include any form of compensatory damages which are linked to, or in any way, obfuscate the relation between and render tenuously or otherwise damages tied to earned wages.61 Distinct claims for inaccurate wage statements in the Underlying Action arise from 56 Id. at *23. 57Id. at *24 (citing N.H. Ball Bearings, 2014 U.S. Dist. LEXIS 31448, at *15 n.1.) 58Id. at *20-21 (“Greenwich would have the Court construct a silo around those claims and conclude that no duty to defend could ever be triggered in such an action, regardless of the facts alleged in the complaint or the language of the Policy. Such a rigid application of the duty to defend is ultimately not persuasive and not mandated by the case law[.]”) (emphasis added). 59Admiral Ins. Co. v. Kay Auto. Distribs., 82 F. Supp. 3d 1175, 1178 (C.D. Cal. 2015). 60PHP, 2015 U.S. Dist. LEXIS 106274, at *23. 61Fireman’s Fund, 94 Cal. App. 4th at 852 (“[A]n insurance company’s failure to use available language to exclude certain types of liability gives rise to the inference that the parties intended not to so limit coverage.”). Case 8:16-cv-01155-JLS-E Document 27-1 Filed 10/14/16 Page 32 of 34 Page ID #:1177 186359.11-10753-003-10/14/2016 4:57 PM MEMORANDUM OF P&As ISO MPSJ Case No. 8:16-cv-01155 JLS (Ex) 25 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 Glidewell’s failure to “accurately maintain records of wages earned, or deductions made” creates a damage remedy. Failure to maintain records rather than the failure to pay wages. The same failure to maintain records is reiterated in Paragraphs 57-60 of the Consolidated Complaint. Philadelphia’s argument rests on the notion that “related to” language is broader than “arising out of language.” This is not true.62 It doesn’t matter that the allegations were omitted from the altered Consolidated Complaint, “it only matters whether the facts alleged or otherwise known by the insurer suggest potential liability or whether they do not.”63 V. CONCLUSION An Order finding that a duty to defend arose should issue with an award of reasonable defense fees and prejudgment interest from the date of invoice. A motion for assessment of all fees and costs, including monies paid in settlement that are implicated by potential coverage at the time of its assessment and any prejudgment interest due, should be filed by Plaintiff within 30 days of the Order’s issuance. Dated: October 14, 2016 GAUNTLETT & ASSOCIATES By: /s/ David A. Gauntlett David A. Gauntlett James A. Lowe Attorneys for Plaintiff JAMES R. GLIDEWELL DENTAL CERAMICS, INC. 62C.O.D. Gas & Oil Co. v. Ace Am. Ins. Co., 2004 Cal. App. Unpub. LEXIS 5419, at *13, (Cal. App. 4th Dist. June 8, 2004) (“[B]ecause ‘related’ means ‘connected,’ the ‘related to’ language requires at least a minimal causal connection, the same showing required for the ‘arising out of’ language.”) (emphasis added). 63PHP, 2015 U.S. Dist. LEXIS 106274, at *20 (quoting Hudson Ins. Co. v. Colony Ins. Co., 624 F.3d 1264, 1269 (9th Cir. 2010).) Case 8:16-cv-01155-JLS-E Document 27-1 Filed 10/14/16 Page 33 of 34 Page ID #:1178 186359.11-10753-003-10/14/2016 4:57 PM MEMORANDUM OF P&As ISO MPSJ Case No. 8:16-cv-01155 JLS (Ex) 26 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 CERTIFICATE OF SERVICE I hereby certify that on October 14, 2016, I electronically filed the foregoing MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF ITS MOTION FOR PARTIAL SUMMARY JUDGMENT REGARDING DUTY TO DEFEND with the Clerk of the Court using the CM/ECF system which will send notification of such filing via electronic mail to all counsel of record. /s/David A. Gauntlett David A. Gauntlett Case 8:16-cv-01155-JLS-E Document 27-1 Filed 10/14/16 Page 34 of 34 Page ID #:1179 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 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 GAUNTLETT & ASSOCIATES David A. Gauntlett (SBN 96399) James A. Lowe (SBN 214383) 18400 Von Karman, Suite 300 Irvine, California 92612 Telephone: (949) 553-1010 Facsimile: (949) 553-2050 info@gauntlettlaw.com jal@gauntlettlaw.com Attorneys for Plaintiff JAMES R. GLIDEWELL DENTAL CERAMICS, INC., a California Corporation UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA SOUTHERN DIVISION JAMES R. GLIDEWELL DENTAL CERAMICS, INC., a California corporation, Plaintiff, vs. PHILADELPHIA INDEMNITY INSURANCE COMPANY, a Pennsylvania corporation, Defendant. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Case No.: 8:16-cv-01155 JLS (Ex) Hon. Josephine L. Staton PLAINTIFF JAMES R. GLIDEWELL DENTAL CERAMICS, INC.’S STATEMENT OF UNCONTROVERTED FACTS AND CONCLUSIONS OF LAW IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT REGARDING DUTY TO DEFEND Date: December 9, 2016 Time: 2:30 PM Ctrm: 10A [Filed concurrently with Notice of Motion and Motion for Summary Judgment; Memorandum of Points & Authorities; Declaration of Gary M. Pritchard; and [Proposed] Order] Complaint Filed: June 22, 2016 Trial Date: November 14, 2017 Pursuant to Local Rule 56-1, Plaintiff JAMES R. GLIDEWELL DENTAL CERAMICS, INC., by one of its attorneys, DAVID A. GAUNTLETT, submits the Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 1 of 41 Page ID #:1180 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS ii 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 following Statement of Uncontroverted Facts in support of its Motion for Partial Summary Judgment. Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 2 of 41 Page ID #:1181 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 1 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 STATEMENT OF UNCONTROVERTED FACTS 1. James R. Glidewell Dental Ceramics, Inc. is a California corporation with its principal place of business at 4141 MacArthur Boulevard, Newport Beach, California. The corporation operates and does business as other entities including Glidewell Dental Laboratory, a California business with its principal place of business at the same address as the corporation. These businesses are collectively defined herein as “Glidewell” or “Plaintiff.” Declaration of Gary M. Pritchard (“Pritchard Decl.”) ¶2. 2. Philadelphia Indemnity Insurance Company (“Philadelphia”) issued an Employment Practices Liability Insurance Policy, No. PHSD332929, to Glidewell as the named insured, effective June 1, 2008 through June 1, 2009 (“the Policy”). Pritchard Decl. ¶3, Exh. 1. 3. The Policy has a limit of $2,000,000.00 for each Employment Practice Act. Pritchard Decl. ¶4, Exh. 1. 4. The Policy provides for retention of $50,000.00 for each Employment Practices Claim. Pritchard Decl. ¶5, Exh. 1. 5. The Policy provides, in pertinent part, the following coverage and definitions: PRIVATE COMPANY PROTECTION PLUS … In consideration of the premium paid and in reliance upon all statements made and information furnished to the Underwriter, including all statements made in the Pritchard Decl. ¶6, Exh. 1. Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 3 of 41 Page ID #:1182 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 2 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 Application, the Underwriter agrees to provide coverage as shown in the Declarations and described as follows: … PART 2—EMPLOYMENT PRACTICES LIABILITY INSURANCE I. INSURING AGREEMENT 1. The Underwriter shall pay on behalf of the Insured, Loss from Claims made against the Insured during the Policy Period (or, if applicable, the Extended Reporting Period), and reported to the Underwriter pursuant to the terms of this Policy, for an Employment Practice Act. II. DEFINITIONS A. Employment Practice Act means any actual or alleged: … 2. breach of a written or oral employment contract or implied employment contract; 3. employment related misrepresentation; … 5. violation of workplace discrimination laws (including harassment); … 7. employment related wrongful discipline; Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 4 of 41 Page ID #:1183 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 3 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 … 13. employment related Retaliation; … 17. violation of any federal, state or local civil rights laws; and committed or attempted by an Individual Insured in his/her capacity as an Individual Insured or by the Private Company. … B. Retaliation means retaliatory treatment against an Individual Insured on account of such Individual: 1. exercising his or her rights under law, including but not limited to rights under any workers compensation laws, the Family and Medical Leave Act, or the Americans with Disabilities Act; …. … III. EXCLUSIONS The Underwriter shall not be liable under this Part 2 to make any payment for Loss in connection with any Claim made against the Insured: … B. for compensation earned by the claimant in the course of employment but not paid by Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 5 of 41 Page ID #:1184 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 4 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 the Insured; however, this Exclusion shall not apply to Defense Expenses, any back pay or front pay, or any additional compensation allegedly due as a result of Discrimination. … D. arising out of, based upon or attributable to obligations or payments owed under (i) an express (written or verbal) contract of employment…; however, this exclusion does not apply to any of the following: 1. liability of the Private Company which would have attached even in the absence of such contract or agreement; or 2. Defense Costs. E. to the extent such Loss, other than Defense Costs, constitutes employment-related benefits, stock options, perquisites, deferred compensation, payment of insurance, or any other type of compensation earned by the claimant in the course of employment or the equivalent value thereof; however, this exclusion shall not apply to front pay or back pay; … PART 4—COMMON POLICY DEFINITIONS … Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 6 of 41 Page ID #:1185 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 5 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 B. Claim means: 1. a written demand for monetary or non- monetary relief; 2. a judicial or civil proceeding commenced by the service of a complaint or similar pleading; … 4. a formal administrative or regulatory proceeding commenced by the filing of a notice of charges, formal investigation order or similar document, including, but not limited to, proceedings before the Equal Employment Opportunity or any similar governmental agency; … C. Damages means any monetary judgment (including any pre- and post-judgment Interest thereon) or monetary settlement, including punitive, exemplary or multiple portion of any judgment (to the extent such damage is insurable under law of any jurisdiction which has a substantial relationship to the Insured or to the Claim seeking such damage and which is most favorable to the insurability of such damage). D. Defense Costs means: 1. any reasonable and necessary fees and Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 7 of 41 Page ID #:1186 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 6 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 expenses incurred in the defense of a Claim, whether by the Insured with the Underwriter’s consent or directly by the Underwriter, in the investigation, adjustment, defense and appeal of a Claim, except that Defense Costs shall not include: … b. salaries, wages, overhead or benefit expenses associated with any Insured except as specified in subparagraph 2 below; …. … I. Interrelated Wrongful Act means any causally connected Wrongful Act or any series of the same, similar or related Wrongful Acts. J. Loss means: 1. Damages; 2. Defense Costs; but Loss does not include: 1. criminal or civil fines or penalties imposed by law …[;] … 3. matters deemed uninsurable under the law to which this Policy shall be construed; or Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 8 of 41 Page ID #:1187 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 7 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 4. any amounts other than Defense Costs, which an Insured is obligated to pay as a result of a Claim seeking relief or redress in any form other than monetary damages; …. … T. Wrongful Act means: … 2. with respect to Part 2, any Employment Practice Act[.] … PART 5—COMMON POLICY EXCLUSIONS The Underwriter shall not be liable to make any payment for Loss in connection with any Claim made against the Insured: A. arising out of, based upon or attributable to such Insured gaining any profit, remuneration or advantage to which they were not legally entitled; however, this exclusion shall only apply if a final and non-appealable judgment or adjudication establishes the Insured committed such act or omission; B. arising out of, based upon or attributable to any dishonest or fraudulent act or omission or any criminal act or omission by such Insured; however, this exclusion shall only apply if a Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 9 of 41 Page ID #:1188 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 8 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 final and non-appealable judgment or adjudication establishes the Insured committed such act or omission; No Wrongful Act of any Insured shall be imputed to any other Individual Insured for purpose of determining the applicability of Exclusions A and B above. … PART 6—COMMON POLICY CONDITIONS … III. DEFENSE AND SETTLEMENT. A. The Insured and not the Underwriter shall have the responsibility to defend any Claim. However, the Insured shall have the right, as soon as practicable after a Claim is first made to tender the defense of such Claim to the Underwriter. Upon written notice the Underwriter of such election by the Insured and subject to all of the provisions of this Section III. DEFENSE AND SETTLEMENT, the Underwriter shall undertake and manage the defense of such Claim, even if such Claim is groundless, false or fraudulent. … IV. NOTICE/CLAIM REPORTING PROVISIONS Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 10 of 41 Page ID #:1189 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 9 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 … C. All Loss arising out of the same Wrongful Act and all Interrelated Wrongful Acts shall be deemed one Loss on account of a one Claim. Such Claim shall be deemed to be first made when the earliest of such Claims was first made…. … RETENTION WAIVER NO LIABILITY ENDORSEMENT … This Policy is amended as follows: With respect to coverage under Part(s) 1, 2, 3, Part 6, Common Policy Conditions, II. RETENTION CLAUSE is deleted in its entirety and replaced by the following: II. RETENTION CLAUSE A. The Retention amount stated in Item 4. of the Declarations shall not be applied to Defense Cost in the following instances: 1. a final judgment of no liability obtained prior to trial, in favor of all Insureds, by reason of a motion to dismiss or a motion for summary judgment, after the exhaustion of all appeals; or 2. a final judgment of no liability obtained after trial, in favor of all Insureds, after Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 11 of 41 Page ID #:1190 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 10 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 the exhaustion of all appeals. In no event shall the term “no liability” apply to a Claim for which a settlement has occurred. … PUNITIVE, EXEMPLARY, MULTIPLE DAMAGE EXCLUSION … This Policy is amended as follows: … J. Loss means: 1. Damages; 2. Defense Costs; but Loss does not include: 1. criminal or civil fines or penalties imposed by law …; or … 3. matters deemed uninsurable under the law to which this Policy shall be construed; or 4. any amounts other than Defense Costs, which an Insured is obligated to pay as a result of a Claim seeking relief or redress in any form other than monetary damages[.] … BUSINESS ADVANTAGE PRO-PAK Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 12 of 41 Page ID #:1191 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 11 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 ELITE COVERAGE ENDORSEMENT … In consideration of the premium paid, the policy is amended as follows: … 10. CLAIM EXPENSES COVERED IN ADDITION TO LIMITS OF LIABILITY Part 6 (COMMON POLICY CONDITIONS), section I (LIMITS OF LIABILITY) is replaced by: … D. Defense Costs paid by the Underwriter are in addition to and not a part of the Limit of Liability specified in Item 3. of the Declarations. Payment by the Underwriter of Defense Costs incurred on account of any Claim will not reduce the Limit of Liability stated in Item 3. of the Declarations. The most the Underwriter will pay for Defense Costs is equal to the applicable Limit of Liability stated in Item 3. of the Declarations. The Underwriter is not obligated to pay Defense Costs nor Damages after the applicable Limit of Liability has been exhausted. … AMENDMENT OF EXCLUSIONS ENDORSEMENT Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 13 of 41 Page ID #:1192 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 12 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 … Part 2 (EMPLOYMENT PRACTICES LIABILITY INSURANCE), section III (EXCLUSIONS), Item B. is replaced by: B. for any actual or alleged violation(s) of any of the responsibilities, obligations or duties imposed by … the Fair Labor Standards Act (except the Equal Pay Act), … [and] any rules or regulations of the foregoing promulgated thereunder, and amendments thereto or any similar federal, state, local or foreign statutory law or common law; provided, further, however, there is no coverage provided under this policy for any Claim related to, arising out of, based upon, or attributable to the refusal, failure or inability of any Insured(s) to pay Earned Wages (as opposed to tort- based back pay or front pay damages) or for improper payroll deductions taken by any Insured(s) from any Employee(s), including but not limited to, (i) any unfair business practice claim alleged because of the failure to pay Earned Wages, or (ii) any Claim seeking Earned Wages because any Employee(s) or purported Employee(s) were improperly classified or mislabeled as “exempt.” Part 4 (COMMON POLICY DEFINITIONS), Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 14 of 41 Page ID #:1193 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 13 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 is supplemented by: Earned Wages means wages or overtime pay for services rendered. 6. Tan Huynh and Allan R. Estonilo were, at all times relevant to the current matter, employees of Glidewell. Pritchard Decl. ¶7. 7. On March 26, 2009, a class action complaint was filed against Glidewell in California Superior Court for the County of Orange. The action is styled as Tan Huynh et al. v. James R. Glidewell Dental Ceramics, Inc., Case No. 30-2009-00180107-CU-OE-CJC (the “Huynh Class Action”). Pritchard Decl. ¶8; Dkt. 1-2 (“Huynh Complaint”) 8. The Huynh Class Action alleged that Glidewell had failed to pay employees properly in accord with various provisions of the California Labor Code (“CLC”) and thus owed wages, overtime wages, and statutory damages under California labor laws. Namely, the complaint asserted the following causes of action: 1. Failure to Pay Minimum Wage; 2. Failure to Pay Overtime; 3. Failure to Timely Pay Wages Due Upon Termination; 4. Failure to Provide Meal Periods; 5. Failure to Provide Rest Periods; 6. Failure to Provide Itemized Statements of Wages; and 7. Unfair Competition. The Huynh Class Action also provided that: Pritchard Decl. ¶9. Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 15 of 41 Page ID #:1194 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 14 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 ¶13. The proposed class includes the following: All persons employed by JAMES R. GLIDEWELL, DENTAL CERAMICS, INC. as Technicians at any time within the four years prior to filing of this Complaint. 9. Between March 26, 2009 and May 14, 2009, Glidewell provided timely notice of the Huynh Class Action to Philadelphia after the issuance of the Policy. Pritchard Decl. ¶10. 10. Philadelphia sent a letter to Glidewell denying coverage for the Huynh Class Action claims on May 14, 2009. Pritchard Decl. ¶11. 11. A First Amended Complaint was filed in the Huynh Class Action on July 30, 2009 (“Huynh FAC”). Pritchard Decl. ¶12, Exh. 2. 12. On September 24, 2009, Allan R. Estonilo filed a claim with the California Department of Industrial Relations, Division of Labor Standards Endorsement (“DLSE”), seeking overtime premium wages from Glidewell, styled as Allan R. Estonilo v. Glidewell Dental Laboratory, Case. No. 18-78086 KV (the “Estonilo DLSE Claim”). Pritchard Decl. ¶13. 13. The Estonilo DLSE Claim sought overtime premium wages for hours worked in excess of eight hours per day over the period from September 5, 2006 to January 4, 2008, totaling $38,105.33. Pritchard Decl. ¶14. 14. On October 5, 2009, Glidewell provided notice of the Estonilo DLSE Claim to Philadelphia. Pritchard Decl. ¶15. 15. On October 30, 2009, Philadelphia sent a letter to Glidewell denying coverage for the claim. Pritchard Decl. ¶16. Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 16 of 41 Page ID #:1195 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 15 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 16. On June 17, 2010, a class action complaint was filed against Glidewell in California Superior Court for the County of Orange. The action is styled as Allan R. Estonilo et al. v. James R. Glidewell Dental Ceramics, Inc., Case No. 30-2010-00382163-CU-OE-CXC (the “Estonilo Class Action”). Pritchard Decl. ¶17; Dkt. 1-4 (“Estonillo Complaint”) 17. The Estonilo Class Action complaint asserted six causes of action: 1. Failure to Pay Hourly Wages and Overtime Wages; 2. Failure to Pay Minimum Wages; 3. Failure to Provide Rest Periods and Meal Periods or Compensation in Lieu Thereof; 4. Failure to Timely Pay Wages; 5. Knowing and Intentional Failure to Comply with Itemized Employee Wage Statement Provisions; and 6. Violations of the Unfair Competition Law. The Estonilo Class Action also provided that: ¶2. During the liability period, as defined as the applicable statute of limitations for each and every cause of action contained herein, i.e. Plaintiffs’ claims under the Unfair Competition Law is four (4) years; Plaintiffs’ claims for either unpaid wages or actual Pritchard Decl. ¶18. Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 17 of 41 Page ID #:1196 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 16 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 damages is three (3) years; and Plaintiffs’ claims for statutory penalties is one (1) year from the filing of this action and through to the present (hereinafter “the liability period”), Defendant consistently maintained and enforced against Glidewell Non-Exempt Employees the following unlawful practices and policies, among others, in violation of California state wage and hour laws, failing to accurately pay all employees earned wages for hours worked including the required overtime and minimum wage for all hours worked and failing to provide meal and/or rest periods. 18. The Estonilo Class Action alleged that Glidewell had failed to pay “piece rate” employees properly in accord with various provisions of the CLC and thus owed overtime wages and statutory damages under California labor laws. Pritchard Decl. ¶19. 19. On August 3, 2010, Glidewell provided timely notice of the Estonilo Class Action to Philadelphia after the issuance of the Policy. Pritchard Decl. ¶20, Exh. 5. 20. On October 26, 2010, Philadelphia, through its outside coverage counsel Sedgwick, Detert, Moran & Arnold LLP (“Sedgwick”), denied coverage for the Estonilo Class Action. Pritchard Decl. ¶21, Exh. 6. 21. In its denial letter, Philadelphia stated: Pritchard Decl. Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 18 of 41 Page ID #:1197 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 17 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 (1) Philadelphia acknowledges the potential for coverage exists for the claims asserted in the Discrimination Action [Claim No. 363659]. Philadelphia’s acknowledgement of the potential for coverage for the Discrimination Action is made under a full and complete reservation of all rights under the policy and law; (2) Philadelphia has determined that coverage is not available for the claims asserted in the Wage and Hour Action [Claim No. 424291]. ¶22, Exh. 6, p. 1. 22. In analyzing coverage for the Discrimination Action, Philadelphia stated: The Discrimination Action, a civil proceeding commenced by the service of a complaint, constitutes a Claim as that term is defined by the Policy. … The Discrimination Action was filed in June 2010 and was served in July 2010, approximately 13 months after the expiration of the Policy. Therefore, coverage for the Discrimination Action is precluded unless it relates back to a claim first made in the policy period. … The Discrimination Action and DFEH claim Pritchard Decl. ¶23, Exh. 6, pp. 5-6. Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 19 of 41 Page ID #:1198 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 18 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 both contain allegations of discrimination and failure to accommodate Estonilo’s alleged disability. Therefore, coverage exists for the Discrimination Action, , [sic] filed over a year after the expiration of the 2008/2009 policy, as it arises out of the same Wrongful Acts or Interrelated Wrongful Acts as those alleged in the DFEH claim, first made during the 2008/2009 policy period. 23. Its denial letter further listed the following “potentially relevant exclusions, amendatory endorsements and definitions which may otherwise operate to preclude or limit coverage” for the Discrimination Action: 1. No Coverage for Punitive, Exemplary or Multiple Damages; 2. No Coverage for Earned Wages or Employment-Related Benefits; 3. Coverage Limitations for Intentional Acts; and 4. Other Insurance. Pritchard Decl. ¶24, Exh. 6, pp. 6-7. 24. In analyzing coverage for the Wage and Hour Action, Philadelphia stated: The Wage and Hour Action, a civil proceeding commenced by the service of a complaint, constitutes a Claim as that term is defined by the Policy. … Pritchard Decl. ¶25, Exh. 6, pp. 8-9. Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 20 of 41 Page ID #:1199 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 19 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 The Wage and Hour Action was filed in June 2010 and was served in July 2010, approximately 13 months after the expiration of the Policy. Therefore, coverage for the Wage and Hour Action is precluded unless it relates back to a claim first made in the policy period. … There are no allegations of discrimination or failure to accommodate in the Wage and Hour Action. Further, there are no allegations in the DFEH claim of wage and hour violations including, but not limited to, failure to pay overtime wages, failure to provide meal and rest periods, failure to pay wages upon termination or failure to provide itemized wage statements. Thus, the DFEH claim and the Wage and Hour Action are two separate, unrelated Claims. … In addition to being precluded from coverage based on the “Earned Wages” exclusion, coverage for the DLSE complaint is precluded as the Claim was not made during the 2008/2009 policy period. The DLSE complaint was filed in September 2009, approximately three months after the Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 21 of 41 Page ID #:1200 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 20 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 expiration of the policy. … The DLSE complaint and the DFEH claim do not arise out of Interrelated Wrongful Acts. There are no allegations of discrimination or failure to accommodate in the DLSE complaint. Further, there are no allegations in the DFEH claim of failure to pay overtime wages. Thus, the DLSE complaint and DFEH claim are two separate, unrelated Claims. 25. Its denial letter further stated that, “[w]hile Philadelphia believes that the claims-made issue is dispositive of coverage for the Wage and Hour Action, below are other potentially relevant exclusions, amendatory endorsements and definitions which may otherwise operate to preclude or limit coverage” for the Wage and Hour Action: 1. FLSA Exclusion; … Pursuant to the FLSA Exclusion, as amended by the Amendment of Exclusion Endorsement, there is no coverage for causes of action one (failure to pay hourly wages and overtime), two (failure to pay minimum wage) and three (failure to provide meal and rest periods or compensation in lieu thereof) in the Wage and Hour Action since they allege violations of, or are based upon, Pritchard Decl. ¶26, Exh. 6, pp. 9-12. Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 22 of 41 Page ID #:1201 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 21 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 various sections of the California Labor Code for which similar provisions are found in the FLSA. 2. No Coverage for Section 17200 Claims; The Sixth Cause of Action in the Wage and Hour Action asserts that Glidewell’s violations of the California Labor Code and IWC Wage Orders constitute unfair and unlawful business practices in violation of Section 17200. The FLSA Exclusion, as amended by endorsement, expressly precludes coverage for unfair business practices involving Earned Wages. Further, the Policy’s definition of Loss excludes from coverage “matters deemed uninsurable under the law to which this Policy shall be construed.” The only non- punitive monetary relief available under Section 17200 is restitution – which is uninsurable under California law. [Citation.] As such, there is no coverage for any relief awarded under Section 17200. 3. No Coverage for Penalties; 4. No Coverage for Employment-Related Benefits; 5. Personal Profits Exclusion; and 6. Dishonest Acts Exclusion. Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 23 of 41 Page ID #:1202 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 22 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 26. A First Amended Complaint was filed in the Estonilo Class Action on August 22, 2011 (“Estonilo FAC”). Pritchard Decl. ¶27, Exh. 4. 27. The Estonilo FAC included Count (6), which alleged that Glidewell failed to provide itemized statements of wages in violation of CLC § 226. It also asserted two additional claims for relief: 7. Representative Action: Private Attorneys General Action of 2004 Labor Code §2698, et seq.; and 8. Unlawful Deductions. Pritchard Decl. ¶28, Exh. 4, ¶¶69-95. 28. The Estonilo FAC also asserted that the alleged wrongful conduct occurred “[f]rom at least June 17, 2006 and continuing to [August 22, 2011.]” Pritchard Decl. ¶29, Exh. 4, ¶¶3-5. 29. The Estonilo FAC alleges, in pertinent part: … ¶27. Defendants have made it difficult to determine applicable piece rates and account with precision for the unlawfully withheld wages and deductions due to be paid to Glidewell non-exempt employees, including Plaintiffs, during the liability period because they did not implement and preserve a lawful record-keeping method to record all non- provided rest and meal periods owed to employees as required for non-exempt employees by 29 U.S.C. section 211(c), Pritchard Decl. ¶30, Exh. 4. Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 24 of 41 Page ID #:1203 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 23 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 California Labor Code section 226, and applicable California Wage Orders. Plaintiffs and Class Members are therefore entitled to penalties not to exceed $4,000 for each employee pursuant to Labor Code section 226(e). … Sixth Cause of Action Violation of Unfair Competition Law Cal. Bus. & Prof. Code §§ 17200, et. seq. (Against All Defendants) … ¶70. Defendants have engaged in unlawful activity prohibited by Business and Professions Code section 17200 et. seq. for actions including, but not limited to, the following: i. requiring work “off the clock,” for example by not paying employees for their time worked; ii. requiring work in excess of eight (8) hours in a workday and/or forty (40) hours in a workweek without paying compensation at the rate of time and one- half (1 1/2) of an employee’s regular rate of pay or failing to accurately calculate overtime rates; Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 25 of 41 Page ID #:1204 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 24 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 iii. requiring employees to work without being provided a minimum ten-minute rest period for every four hours or major fraction thereof worked and not being compensated one (1) hour of pay at an employee’s regular rate of compensation for each workday the employee was not provided a rest period; iv. requiring employees to work in excess of five hours and/or ten hours per day without being provided a meal period and/or a second meal period and/or requiring employees to remain on Defendants premises during their meal period and not being compensated one (1) hour of pay at the regular rate (or minimum wage) of compensation for each workday that a meal period was not provided, all in violation of California labor laws, regulations, and Industrial Welfare Commission Wage Orders; v, failing to pay non-exempt employees the required minimum wages due and owed for each hour worked; vi. failing to pay overtime premiums; vii. unlawfully deducting wages; and viii. failing to properly describe the piece Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 26 of 41 Page ID #:1205 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 25 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 rate calculation used to calculate wages paid to non-exempt employees in a given pay period. ¶71. The actions of Defendants, as alleged within this Complaint, constitute false, unlawful, unfair, fraudulent and deceptive business practices within the meaning of Business and Professions Code section 17200, et. seq. ¶72. As a result of their unlawful acts, Defendants have reaped and continue to reap unfair benefits at the expense of Plaintiffs and the Class they seek to represent. Defendant should be enjoined from such activity and made to restore to Plaintiffs and the members of the Plaintiffs’ Class their wrongfully withheld wages pursuant to Business and Professions Code section 17203. Plaintiffs are informed and believe, and thereon allege, that Defendants have been unjustly enriched by requiring employees to assume Defendants’ expenditures and losses, by failing to pay legal wages and/or other compensation for working through meal periods, and by failing to pay compensation for non-provided rest periods to Plaintiffs and members of the Plaintiffs’ Class. Plaintiffs and members of the Plaintiffs’ Class Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 27 of 41 Page ID #:1206 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 26 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 are prejudiced by Defendants’ unfair trade practices. ¶73. As a direct and proximate result of the unfair business practices of Defendants, and each of them, Plaintiffs, individually and on behalf of all Class Members similarly situated, are entitled to restitution of all wages which have been unlawfully withheld from Plaintiffs and members of the Plaintiffs’ Class as a result of Defendants’ business acts and practices described herein. Seventh Cause of Action Private Attorneys General Act of 2004 Labor Code §2698, et seq. Labor Code § 2698, et. seq. (Representative Action Against All Defendants) ... ¶77. Labor Code §2699.3(a) states in pertinent part: “A civil action by an aggrieved employee pursuant to subdivision (a) or (f) of Section 2699 alleging a violation of any provision listed in Section 2699.5 shall commence only after the following requirements have been met: (1) The aggrieved employee or representative shall give written notice by certified mail to the Labor and Workforce Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 28 of 41 Page ID #:1207 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 27 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 Development Agency and the employer of the specific provisions of this code alleged to have been violated, including the facts and theories to support the alleged violation.” ¶78. Here, Plaintiffs’ civil action alleges violations of provisions listed in Labor Code §2699.5. ¶79. On May 26, 2011, Plaintiffs complied with Labor Code §2699.3(a) in that Plaintiffs gave written notice by certified mail to the Labor and Workforce Development Agency (“LWDA”) and Defendants of the specific provisions of the Labor Code alleged to have been violated, including the facts and theories to support the alleged violation by attaching and incorporating by reference the operative complaint and the proposed first amended complaint to Plaintiffs’ LWDA letter. Attached hereto as Exhibit “1” is Plaintiffs’ LWDA letter. ¶80. Labor Code §2699.3(a) further states in pertinent part: “(2)(A) The agency shall notify the employer and the aggrieved employee or representative by certified mail that it does not intend to investigate the alleged violation within 30 calendar days of the postmark date of the notice received pursuant to paragraph Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 29 of 41 Page ID #:1208 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 28 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 (1). Upon receipt of that notice or if no notice is provided within 33 calendar days of the postmark date of the notice given pursuant to paragraph (1), the aggrieved employee may commence a civil action pursuant to Section 2699.” ¶81. Labor Code § 2699.3 (2) (B) 2 further states: “If the agency intends to investigate the alleged violation, it shall notify the employer and the aggrieved employee or representative by certified mail of its decision within 33 calendar days of the postmark date of the notice received pursuant to paragraph (1). Within 120 calendar days of that decision, the agency may investigate the alleged violation and issue any appropriate citation. If the agency determines that no citation will be issued, it shall notify the employer and aggrieved employee of that decision within five business days thereof by certified mail. Upon receipt of that notice or if no citation is issued by the agency within the 158-day period prescribed by subparagraph (A) and this subparagraph or if the agency fails to provide timely or any notification, the aggrieved employee may commence a civil action pursuant to Section 2699.” Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 30 of 41 Page ID #:1209 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 29 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 ¶82. On or about June 22, 2011, Plaintiffs received via certified letter from the LWDA, a notification that “the LWDA does not intend to investigate the allegations.” Attached hereto as Exhibit “2” is the LWDA letter. ¶83. As such, Plaintiffs have complied with Labor Code §2699.3(a) and have been given authorization therefrom to commence a civil action which includes a cause of action pursuant to Labor Code §2699. ¶84. On information and belief and based thereon, by their policy of: i. requiring employees to work without being provided a minimum ten-minute rest period for every four hours or major fraction thereof worked and not being compensated one (1) hour of pay at his regular rate of compensation for each workday that a rest period was not provided; and, ii. requiring employees to work in excess of five hours per day without being provided a first meal period and in excess of ten hours per day not being provided a second meal period, and not being compensated one (1) hour of pay at the regular rate (or minimum wage) of Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 31 of 41 Page ID #:1210 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 30 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 compensation for each workday that a meal period was not provided, all in violation of California labor laws; and iii. in failing to pay all wages owed; iv. failing to accurately pay overtime wages; v. failing to pay minimum wages; vi. failing to timely pay wages upon separation; and vii. failing to comply with accurate itemized wage statements. Defendants engaged in unlawful activity prohibited by inter alia, Labor Code section 2698 et. seq., 201, 202, 203, 218.6, 221, 222, 223, 224, 225.5, 226, 226.7, 510, 512, 1194, and Cal. Code Regs., Title 8, §11010 which violation constitutes a violation of fundamental public policy. … Eighth Cause of Action Illegal Wage deductions Labor Code §22l-224,300 (Against All Defendants) ... ¶88. Labor Code §221 states “It shall be unlawful for any employer to collect or receive from an employee any part of wages Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 32 of 41 Page ID #:1211 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 31 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 theretofore paid by said employer to said employee and without written authorization.” ¶89. In violation of Labor Code §221-224 and 300, during the appropriate time period, Defendants willfully and intentionally made deductions from the wages of the members of the Deductions Class, including but not limited to deductions for damaged products. ¶90. Further, Defendant's unlawfully deducted these wages without written authorization. ¶91. Defendants’ pattern, practice and uniform administration of corporate policy regarding said illegal wage deductions is unlawful and creates an entitlement pursuant to Labor Code §221. ¶92. As a proximate result of Defendants’ violations of Labor Code §221, the member of the Deductions Class have been damaged in an amount according to proof at the time of trial. ¶93. The members of the Deductions Class seek reimbursement of such illegal wage deductions. … ¶95. The members of the Deductions Class are entitled to recover from Defendants the full amount of all illegal wage deductions, plus … interest, reasonable attorneys’ fees and costs of Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 33 of 41 Page ID #:1212 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 32 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 suit. VI. Prayer WHEREFORE, Plaintiffs prays for judgment as follows: … 2. For compensatory damages …; 3. For economic and/or special damages …; … 8. For attorneys’ fees, interest, and costs of suit …; and 9. For such other and further relief as the Court deems just and proper. 30. On October 19, 2011, plaintiffs in the Estonilo Class Action and the Huynh Class Action, along with Glidewell, signed and filed a Joint Stipulation for Consolidation of Cases. Pritchard Decl. ¶31, Exh. 7. 31. The Estonilo Wage and Hour Action ceased to exist as a distinct legal proceeding, by operation of law, when it was consolidated into the Consolidated Class Action on October 24, 2011. Estonilo and Huynh were designated as class representatives in the Consolidated Class Action. Pritchard Decl. ¶32. 32. In that Stipulation for Order (which the court adopted), the parties agreed: As this Court has previously determined, the Huynh and Estonilo cases are related because they (i) involve the same parties and are based Pritchard Decl. ¶33, Exh. 7. Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 34 of 41 Page ID #:1213 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 33 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 on the same or similar claims; (ii) arise form the same or substantially identical transactions, incidents or events requiring the determination of the same or substantially identical questions of law or fact, and/or (iii) are likely for other reasons to require substantial duplication of judicial resources if heard by different judges. 33. On October 19, 2011, Glidewell again requested coverage for the Huynh Class Action. Pritchard Decl. ¶34. 34. On December 13, 2011, Philadelphia reiterated its denial of coverage for the Huynh Class Action. Pritchard Decl. ¶35, Exh. 3. 35. On April 22, 2013 the class action plaintiffs filed a master, consolidated class action complaint (the “Consolidated Class Action”). The Consolidated Class Action then proceeded through class certification and settlement under a consolidated class action complaint. Pritchard Decl. ¶36, Exh. 8. 36. The Consolidated Class Action complaint, filed on April 22, 2013, asserted nine causes of action: 1. Failure to Pay Minimum Wages; 2. Failure to Pay Hourly Wages and Overtime Wages; 3. Failure to Timely Pay Wages Due Upon Termination; 4. Failure to Provide Meal Periods; 5. Failure to Provide Rest Periods; Pritchard Decl. ¶37, Exh. 8. Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 35 of 41 Page ID #:1214 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 34 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 6. Knowing and Intentional Failure to Comply with Itemized Employee Wage Statement Provisions; 7. Violations of the Unfair Competition Law; 8. Representative Action: Private Attorneys General Act of 2004 Labor Code § 2698, et. seq.; and 9. Unlawful Deductions. 37. Subsequently, a Joint Stipulation of Class Action Settlement (the “Settlement Agreement”) was filed in the Consolidated Class Action. The Settlement Agreement states, in relevant part: ¶41. Nothing contained herein, nor the consummation of this Settlement, is to be construed or deemed an admission of liability, culpability, negligence, or wrongdoing on the part of Defendant. Defendant denies all the claims and contentions alleged by the Plaintiff in this case. The Defendant has entered into this Settlement solely with the intention to avoid further disputes and litigation with the attendant inconvenience and expenses. Pritchard Decl. ¶38. 38. On April 4, 2014, Glidewell sent an email to Sedgwick. In the email, Glidewell provided Philadelphia with information and filings regarding the Huynh Class Action and again requested a defense and indemnity, both in the Pritchard Decl. ¶39, Exh. 9, Exh. 10. Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 36 of 41 Page ID #:1215 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 35 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 email and in an attached demand letter. 39. On April 21, 2014, Philadelphia declined again to provide coverage on the Huynh Class Action. Pritchard Decl. ¶40, Exh. 11. 40. On October 22, 2015, the Settlement Agreement was granted final approval by the court. Pritchard Decl. ¶41. 41. On July 10, 2015, Glidewell filed suit against another of its insurers, RLI Insurance Company (“RLI”), seeking coverage related to the Estonilo Class Action and the Huynh Class Action. The case was styled as James R. Glidewell Dental Ceramics, Inc. v. RLI Ins. Co., Case No. 1:15-cv-01283-JES-JEH (C.D. Ill. 2015). Pritchard Decl. ¶42, Exh. 12. 42. The Illinois case was subsequently transferred to the Central District of California, and is presently styled as James R. Glidewell Dental Ceramics, Inc. v. RLI Ins. Co., Case No. 2:15-cv-07049-AG (ASx) (C.D. Cal. 2015) (the “RLI Coverage Action”). A First Amended Complaint was filed on October 19, 2015. Pritchard Decl. ¶43, Exh. 13. 43. The relevant RLI insurance policy period was from June 1, 2009 to June 1, 2010. Pritchard Decl. ¶44. 44. In the RLI Coverage Action, RLI brought a motion to dismiss, asserting that the Estonilo Class Action claims and the Huynh Class Action claims were not sufficiently “related” under the terms of the RLI policy at issue. Pritchard Decl. ¶45. 45. The court issued its ruling on RLI’s motion to dismiss on January 25, 2016. Pritchard Decl. ¶46, Exh. 14. Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 37 of 41 Page ID #:1216 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 36 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 46. The Order worded the relevant issue in its analysis: Both parties appear to agree on the issue now before the Court: are the Huynh and Estonilo cases related such that RLI was relieved of its duty to defend Glidewell in Estonilo? Pritchard Decl. ¶47, Exh. 14, p. 4. 47. The Order further stated: Generally speaking, both parties making [sic] compelling points. On one hand, the policy’s broad definition of “Related” appears to be a high hurdle for Glidewell to clear. On the other hand, RLI may be too quickly glossing over the disjunctive language of the stipulation or overstating the stipulation’s importance. But the Court isn’t charged with deciding the strength or weakness of Glidewell’s claims at the pleading stage. Because Glidewell “alleges facts to support a theory that is not facially implausible, [any] skepticism [the Court may have] is best reserved for later stages of the proceedings when the plaintiff’s case can be rejected on evidentiary grounds.” [Citations.] For now, this case should move forward. Pritchard Decl. ¶48, Exh. 14, p. 5. 48. Based on his analysis, Judge Andrew J. Guilford denied RLI’s motion to dismiss. Pritchard Decl. ¶49, Exh. 14, p. 6. 49. Cal. Labor Code § 226(e)(1) reads as follows: An employee suffering injury as a result of a Pritchard Decl. ¶50. Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 38 of 41 Page ID #:1217 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 37 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 knowing and intentional failure by an employer to comply with subdivision (a) is entitled to recover the greater of all actual damages or fifty dollars ($50) for the initial pay period in which a violation occurs and one hundred dollars ($100) per employee for each violation in a subsequent pay period, not to exceed an aggregate penalty of four thousand dollars ($4,000), and is entitled to an award of costs and reasonable attorney’s fees. 50. On April 21, 2014, Philadelphia, via its coverage counsel, wrote to Plaintiff to supplement and reaffirm its denial of coverage for the Huynh Action (taking the Consolidated Complaint and class certification motion into account) because coverage was excluded by the Endorsement and unpaid wages and penalties were uninsurable losses. Dkt. 16-1 Declaration of Susan Shue (“Shue Decl.”) ¶15 & Dkt. 16-3 Ex. 10 at Bates number PIIC 224-228 51. The class in the Estonillo Action extended to “all persons employed by Glidewell as production employees or in any similar position[.]” Dkt. 1-4, ¶29 52. In an August 10, 2010 email responding to Philadelphia’s August 3, 2010 email, Goddard sent Philadelphia a copy of the Estonilo class action complaint. Dkt. 16-1 Shue Decl. ¶20 & Dkt. 16-3 Ex. 13 at p. 1- 2 53. The class in the Huynh Class Action was limited to dental Dkt. 1-2, ¶¶2, 13 Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 39 of 41 Page ID #:1218 186495.1-10753-003-10/14/2016 4:48 PM STATEMENT OF UNCONTROVERTED FACTS 38 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 ceramics and prosthesis manufacturer technicians Dated: October 14, 2016 GAUNTLETT & ASSOCIATES By: /s/ David A. Gauntlett David A. Gauntlett James A. Lowe Attorneys for Plaintiff JAMES R. GLIDEWELL DENTAL CERAMICS, INC. Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 40 of 41 Page ID #:1219 186495.1-10753-003-10/14/2016 4:48 PM CERTIFICATE OF SERVICE 1 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 CERTIFICATE OF SERVICE I hereby certify that on October 14, 2016, I electronically filed the foregoing PLAINTIFF JAMES R. GLIDEWELL DENTAL CERAMICS, INC.’S STATEMENT OF UNCONTROVERTED FACTS AND CONCLUSIONS OF LAW IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT with the Clerk of the Court using the CM/ECF system which will send notification of such filing via electronic mail to all counsel of record. /s/ David A. Gauntlett David A. Gauntlett Case 8:16-cv-01155-JLS-E Document 27-2 Filed 10/14/16 Page 41 of 41 Page ID #:1220 185486.4-10753-003-10/14/2016 4:42 PM DECLARATION OF PRITCHARD 1 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 GAUNTLETT & ASSOCIATES David A. Gauntlett (SBN 96399) James A. Lowe (SBN 214383) 18400 Von Karman, Suite 300 Irvine, California 92612 Telephone: (949) 553-1010 Facsimile: (949) 553-2050 info@gauntlettlaw.com jal@gauntlettlaw.com Attorneys for Plaintiff JAMES R. GLIDEWELL DENTAL CERAMICS, INC., a California Corporation UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA SOUTHERN DIVISION JAMES R. GLIDEWELL DENTAL CERAMICS, INC., a California corporation, Plaintiff, vs. PHILADELPHIA INDEMNITY INSURANCE COMPANY, a Pennsylvania corporation, Defendant. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Case No.: 8:16-cv-01155 JLS (Ex) Hon. Josephine L. Staton DECLARATION OF GARY M. PRITCHARD IN SUPPORT OF PLAINTIFF’S MOTION FOR PARTIAL SUMMARY JUDGMENT Date: December 9, 2016 Time: 2:30 p.m. Ctrm: 10A [Filed concurrently with Notice of Motion and Motion for Summary Judgment; Memorandum of Points & Authorities; Statement of Uncontroverted Facts and Conclusions of Law; and [Proposed] Order] Complaint Filed: June 22, 2016 Trial Date: November 14, 2017 DECLARATION OF GARY M. PRITCHARD I, GARY M. PRITCHARD, declare: 1. I am an attorney at law duly licensed to practice in all the state courts in Case 8:16-cv-01155-JLS-E Document 27-3 Filed 10/14/16 Page 1 of 30 Page ID #:1221 185486.4-10753-003-10/14/2016 4:42 PM DECLARATION OF PRITCHARD 2 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 the State of California. I am Labor Counsel for Plaintiff James R. Glidewell Dental Ceramics, Inc. as well as businesses it owns or does business as. I have personal knowledge of the following facts, and I could and would competently testify thereto if called upon to do so. 2. James R. Glidewell Dental Ceramics, Inc. is a California corporation with its principal place of business at 4141 MacArthur Boulevard, Newport Beach, California. The corporation operates and does business as other entities including Glidewell Dental Laboratory, a California business with its principal place of business at the same address as the corporation. These businesses are collectively defined herein as “Glidewell” or “Plaintiff.” 3. Defendant Philadelphia Indemnity Insurance Company (“Philadelphia”) issued an Employment Practices Liability Insurance Policy, No. PHSD332929, to Glidewell as the named insured, effective June 1, 2008 through June 1, 2009 (“the Policy”). A copy of the Policy is attached to the Complaint in this action as Exhibit “1.” [Dkt. 1-1] 4. The Policy has a limit of $2,000,000.00 for each Employment Practice Act. 5. The Policy provides for retention of $50,000.00 for each Employment Practices Claim. 6. The Policy provides, in pertinent part, the following coverage and definitions: PRIVATE COMPANY PROTECTION PLUS … In consideration of the premium paid and in reliance upon all statements made and information furnished to the Underwriter, including all statements made in the Application, the Underwriter agrees to provide coverage as shown in the Declarations and described as follows: Case 8:16-cv-01155-JLS-E Document 27-3 Filed 10/14/16 Page 2 of 30 Page ID #:1222 185486.4-10753-003-10/14/2016 4:42 PM DECLARATION OF PRITCHARD 3 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 … PART 2—EMPLOYMENT PRACTICES LIABILITY INSURANCE I. INSURING AGREEMENT 1. The Underwriter shall pay on behalf of the Insured, Loss from Claims made against the Insured during the Policy Period (or, if applicable, the Extended Reporting Period), and reported to the Underwriter pursuant to the terms of this Policy, for an Employment Practice Act. II. DEFINITIONS A. Employment Practice Act means any actual or alleged: … 2. breach of a written or oral employment contract or implied employment contract; 3. employment related misrepresentation; … 5. violation of workplace discrimination laws (including harassment); … 7. employment related wrongful discipline; … 13. employment related Retaliation; … 17. violation of any federal, state or local civil rights laws; and committed or attempted by an Individual Insured in his/her capacity as an Individual Insured or by the Private Company. … Case 8:16-cv-01155-JLS-E Document 27-3 Filed 10/14/16 Page 3 of 30 Page ID #:1223 185486.4-10753-003-10/14/2016 4:42 PM DECLARATION OF PRITCHARD 4 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 B. Retaliation means retaliatory treatment against an Individual Insured on account of such Individual: 1. exercising his or her rights under law, including but not limited to rights under any workers compensation laws, the Family and Medical Leave Act, or the Americans with Disabilities Act; …. … III. EXCLUSIONS The Underwriter shall not be liable under this Part 2 to make any payment for Loss in connection with any Claim made against the Insured: … B. for compensation earned by the claimant in the course of employment but not paid by the Insured; however, this Exclusion shall not apply to Defense Expenses, any back pay or front pay, or any additional compensation allegedly due as a result of Discrimination. … D. arising out of, based upon or attributable to obligations or payments owed under (i) an express (written or verbal) contract of employment…; however, this exclusion does not apply to any of the following: 1. liability of the Private Company which would have attached even in the absence of such contract or agreement; or 2. Defense Costs. E. to the extent such Loss, other than Defense Costs, constitutes employment-related benefits, stock options, Case 8:16-cv-01155-JLS-E Document 27-3 Filed 10/14/16 Page 4 of 30 Page ID #:1224 185486.4-10753-003-10/14/2016 4:42 PM DECLARATION OF PRITCHARD 5 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 perquisites, deferred compensation, payment of insurance, or any other type of compensation earned by the claimant in the course of employment or the equivalent value thereof; however, this exclusion shall not apply to front pay or back pay; … PART 4—COMMON POLICY DEFINITIONS … B. Claim means: 1. a written demand for monetary or non-monetary relief; 2. a judicial or civil proceeding commenced by the service of a complaint or similar pleading; … 4. a formal administrative or regulatory proceeding commenced by the filing of a notice of charges, formal investigation order or similar document, including, but not limited to, proceedings before the Equal Employment Opportunity or any similar governmental agency; … C. Damages means any monetary judgment (including any pre- and post-judgment Interest thereon) or monetary settlement, including punitive, exemplary or multiple portion of any judgment (to the extent such damage is insurable under law of any jurisdiction which has a substantial relationship to the Insured or to the Claim seeking such damage and which is most favorable to the insurability of such damage). D. Defense Costs means: 1. any reasonable and necessary fees and expenses incurred in the defense of a Claim, whether by the Insured with the Case 8:16-cv-01155-JLS-E Document 27-3 Filed 10/14/16 Page 5 of 30 Page ID #:1225 185486.4-10753-003-10/14/2016 4:42 PM DECLARATION OF PRITCHARD 6 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 Underwriter’s consent or directly by the Underwriter, in the investigation, adjustment, defense and appeal of a Claim, except that Defense Costs shall not include: … b. salaries, wages, overhead or benefit expenses associated with any Insured except as specified in subparagraph 2 below; …. … I. Interrelated Wrongful Act means any causally connected Wrongful Act or any series of the same, similar or related Wrongful Acts. J. Loss means: 1. Damages; 2. Defense Costs; but Loss does not include: 1. criminal or civil fines or penalties imposed by law …[;] … 3. matters deemed uninsurable under the law to which this Policy shall be construed; or 4. any amounts other than Defense Costs, which an Insured is obligated to pay as a result of a Claim seeking relief or redress in any form other than monetary damages; …. … T. Wrongful Act means: … 2. with respect to Part 2, any Employment Practice Act[.] … PART 5—COMMON POLICY EXCLUSIONS Case 8:16-cv-01155-JLS-E Document 27-3 Filed 10/14/16 Page 6 of 30 Page ID #:1226 185486.4-10753-003-10/14/2016 4:42 PM DECLARATION OF PRITCHARD 7 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 The Underwriter shall not be liable to make any payment for Loss in connection with any Claim made against the Insured: A. arising out of, based upon or attributable to such Insured gaining any profit, remuneration or advantage to which they were not legally entitled; however, this exclusion shall only apply if a final and non-appealable judgment or adjudication establishes the Insured committed such act or omission; B. arising out of, based upon or attributable to any dishonest or fraudulent act or omission or any criminal act or omission by such Insured; however, this exclusion shall only apply if a final and non-appealable judgment or adjudication establishes the Insured committed such act or omission; No Wrongful Act of any Insured shall be imputed to any other Individual Insured for purpose of determining the applicability of Exclusions A and B above. … PART 6—COMMON POLICY CONDITIONS … III. DEFENSE AND SETTLEMENT. A. The Insured and not the Underwriter shall have the responsibility to defend any Claim. However, the Insured shall have the right, as soon as practicable after a Claim is first made to tender the defense of such Claim to the Underwriter. Upon written notice the Underwriter of such election by the Insured and subject to all of the provisions of this Section III. DEFENSE AND SETTLEMENT, the Underwriter shall undertake and manage the defense of such Claim, even if such Claim is groundless, false or fraudulent. Case 8:16-cv-01155-JLS-E Document 27-3 Filed 10/14/16 Page 7 of 30 Page ID #:1227 185486.4-10753-003-10/14/2016 4:42 PM DECLARATION OF PRITCHARD 8 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 … IV. NOTICE/CLAIM REPORTING PROVISIONS … C. All Loss arising out of the same Wrongful Act and all Interrelated Wrongful Acts shall be deemed one Loss on account of a one Claim. Such Claim shall be deemed to be first made when the earliest of such Claims was first made…. … RETENTION WAIVER NO LIABILITY ENDORSEMENT … This Policy is amended as follows: With respect to coverage under Part(s) 1, 2, 3, Part 6, Common Policy Conditions, II. RETENTION CLAUSE is deleted in its entirety and replaced by the following: II. RETENTION CLAUSE A. The Retention amount stated in Item 4. of the Declarations shall not be applied to Defense Cost in the following instances: 1. a final judgment of no liability obtained prior to trial, in favor of all Insureds, by reason of a motion to dismiss or a motion for summary judgment, after the exhaustion of all appeals; or 2. a final judgment of no liability obtained after trial, in favor of all Insureds, after the exhaustion of all appeals. In no event shall the term “no liability” apply to a Claim for which a settlement has occurred. … PUNITIVE, EXEMPLARY, MULTIPLE DAMAGE Case 8:16-cv-01155-JLS-E Document 27-3 Filed 10/14/16 Page 8 of 30 Page ID #:1228 185486.4-10753-003-10/14/2016 4:42 PM DECLARATION OF PRITCHARD 9 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 EXCLUSION … This Policy is amended as follows: … J. Loss means: 1. Damages; 2. Defense Costs; but Loss does not include: 1. criminal or civil fines or penalties imposed by law …; or … 3. matters deemed uninsurable under the law to which this Policy shall be construed; or 4. any amounts other than Defense Costs, which an Insured is obligated to pay as a result of a Claim seeking relief or redress in any form other than monetary damages[.] … BUSINESS ADVANTAGE PRO-PAK ELITE COVERAGE ENDORSEMENT … In consideration of the premium paid, the policy is amended as follows: … 10. CLAIM EXPENSES COVERED IN ADDITION TO LIMITS OF LIABILITY Part 6 (COMMON POLICY CONDITIONS), section I (LIMITS OF LIABILITY) is replaced by: … D. Defense Costs paid by the Underwriter are in addition to Case 8:16-cv-01155-JLS-E Document 27-3 Filed 10/14/16 Page 9 of 30 Page ID #:1229 185486.4-10753-003-10/14/2016 4:42 PM DECLARATION OF PRITCHARD 10 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 and not a part of the Limit of Liability specified in Item 3. of the Declarations. Payment by the Underwriter of Defense Costs incurred on account of any Claim will not reduce the Limit of Liability stated in Item 3. of the Declarations. The most the Underwriter will pay for Defense Costs is equal to the applicable Limit of Liability stated in Item 3. of the Declarations. The Underwriter is not obligated to pay Defense Costs nor Damages after the applicable Limit of Liability has been exhausted. … AMENDMENT OF EXCLUSIONS ENDORSEMENT … Part 2 (EMPLOYMENT PRACTICES LIABILITY INSURANCE), section III (EXCLUSIONS), Item B. is replaced by: B. for any actual or alleged violation(s) of any of the responsibilities, obligations or duties imposed by … the Fair Labor Standards Act (except the Equal Pay Act), … [and] any rules or regulations of the foregoing promulgated thereunder, and amendments thereto or any similar federal, state, local or foreign statutory law or common law; provided, further, however, there is no coverage provided under this policy for any Claim related to, arising out of, based upon, or attributable to the refusal, failure or inability of any Insured(s) to pay Earned Wages (as opposed to tort-based back pay or front pay damages) or for improper payroll deductions taken by any Insured(s) from any Employee(s), including but not limited to, (i) any unfair business practice claim alleged because of the Case 8:16-cv-01155-JLS-E Document 27-3 Filed 10/14/16 Page 10 of 30 Page ID #:1230 185486.4-10753-003-10/14/2016 4:42 PM DECLARATION OF PRITCHARD 11 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 failure to pay Earned Wages, or (ii) any Claim seeking Earned Wages because any Employee(s) or purported Employee(s) were improperly classified or mislabeled as “exempt.” Part 4 (COMMON POLICY DEFINITIONS), is supplemented by: Earned Wages means wages or overtime pay for services rendered. 7. Tan Huynh and Allan R. Estonilo were, at all times relevant to the current matter, employees of Glidewell. 8. On March 26, 2009, a class action complaint was filed against Glidewell in California Superior Court for the County of Orange. The action is styled as Tan Huynh et al. v. James R. Glidewell Dental Ceramics, Inc., Case No. 30-2009- 00180107-CU-OE-CJC (the “Huynh Class Action”). 9. The Huynh Class Action alleged that Glidewell had failed to pay employees properly in accord with various provisions of the California Labor Code (“CLC”) and thus owed wages, overtime wages, and statutory damages under California labor laws. Namely, the complaint asserted the following causes of action: 1. Failure to Pay Minimum Wage; 2. Failure to Pay Overtime; 3. Failure to Timely Pay Wages Due Upon Termination; 4. Failure to Provide Meal Periods; 5. Failure to Provide Rest Periods; 6. Failure to Provide Itemized Statements of Wages; and 7. Unfair Competition. 10. Between March 26, 2009 and May 14, 2009, Glidewell provided timely notice of the Huynh Class Action to Philadelphia after the issuance of the Policy. 11. Philadelphia sent a letter to Glidewell denying coverage for the Huynh Class Action claims on May 14, 2009. Case 8:16-cv-01155-JLS-E Document 27-3 Filed 10/14/16 Page 11 of 30 Page ID #:1231 185486.4-10753-003-10/14/2016 4:42 PM DECLARATION OF PRITCHARD 12 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 12. A First Amended Complaint was filed in the Huynh Class Action on July 30, 2009 (“Huynh FAC”). The Huynh FAC also provided that: ¶13. The proposed class includes the following: All persons employed by JAMES R. GLIDEWELL, DENTAL CERAMICS, INC. as Technicians at any time within the four years prior to filing of this Complaint. A copy of the Huynh FAC is attached to the Complaint in this action as Exhibit “2.” [Dkt. 1-2] 13. On September 24, 2009, Allan R. Estonilo filed a claim with the California Department of Industrial Relations, Division of Labor Standards Endorsement (“DLSE”), seeking overtime premium wages from Glidewell, styled as Allan R. Estonilo v. Glidewell Dental Laboratory, Case. No. 18-78086 KV (the “Estonilo DLSE Claim”). 14. The Estonilo DLSE Claim sought overtime premium wages for hours worked in excess of eight hours per day over the period from September 5, 2006 to January 4, 2008, totaling $38,105.33. 15. On October 5, 2009, Glidewell provided notice of the Estonilo DLSE Claim to Philadelphia. 16. On October 30, 2009, Philadelphia sent a letter to Glidewell denying coverage for the claim. 17. On June 17, 2010, a class action complaint was filed against Glidewell in California Superior Court for the County of Orange. The action is styled as Allan R. Estonilo et al. v. James R. Glidewell Dental Ceramics, Inc., Case No. 30-2010- 00382163-CU-OE-CXC (the “Estonilo Class Action”). 18. The Estonilo Class Action complaint asserted six causes of action: 1. Failure to Pay Hourly Wages and Overtime Wages; 2. Failure to Pay Minimum Wages; Case 8:16-cv-01155-JLS-E Document 27-3 Filed 10/14/16 Page 12 of 30 Page ID #:1232 185486.4-10753-003-10/14/2016 4:42 PM DECLARATION OF PRITCHARD 13 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 3. Failure to Provide Rest Periods and Meal Periods or Compensation in Lieu Thereof; 4. Failure to Timely Pay Wages; 5. Knowing and Intentional Failure to Comply with Itemized Employee Wage Statement Provisions; and 6. Violations of the Unfair Competition Law. The complaint also provided that: ¶2. During the liability period, as defined as the applicable statute of limitations for each and every cause of action contained herein, i.e. Plaintiffs’ claims under the Unfair Competition Law is four (4) years; Plaintiffs’ claims for either unpaid wages or actual damages is three (3) years; and Plaintiffs’ claims for statutory penalties is one (1) year from the filing of this action and through to the present (hereinafter “the liability period”), Defendant consistently maintained and enforced against Glidewell Non-Exempt Employees the following unlawful practices and policies, among others, in violation of California state wage and hour laws, failing to accurately pay all employees earned wages for hours worked including the required overtime and minimum wage for all hours worked and failing to provide meal and/or rest periods. 19. The Estonilo Class Action alleged that Glidewell had failed to pay “piece work” employees properly in accord with various provisions of the CLC and thus owed overtime wages and statutory damages under California labor laws. 20. On August 3, 2010, Glidewell provided timely notice of the Estonilo Class Action to Philadelphia after the issuance of the Policy. A copy of this letter is attached to the Complaint in this action as Exhibit “5.” [Dkt. 1-5] Case 8:16-cv-01155-JLS-E Document 27-3 Filed 10/14/16 Page 13 of 30 Page ID #:1233 185486.4-10753-003-10/14/2016 4:42 PM DECLARATION OF PRITCHARD 14 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 21. On October 26, 2010, Philadelphia, through its outside coverage counsel Sedgwick, Detert, Moran & Arnold LLP (“Sedgwick”), denied coverage for the Estonilo Class Action. A copy of this letter is attached to the Complaint in this action as Exhibit “6.” [Dkt. 1-6] 22. In its denial letter, Philadelphia stated: (1) Philadelphia acknowledges the potential for coverage exists for the claims asserted in the Discrimination Action [Claim No. 363659]. Philadelphia’s acknowledgement of the potential for coverage for the Discrimination Action is made under a full and complete reservation of all rights under the policy and law; (2) Philadelphia has determined that coverage is not available for the claims asserted in the Wage and Hour Action [Claim No. 424291]. 23. In analyzing coverage for the Discrimination Action, Philadelphia stated: The Discrimination Action, a civil proceeding commenced by the service of a complaint, constitutes a Claim as that term is defined by the Policy. … The Discrimination Action was filed in June 2010 and was served in July 2010, approximately 13 months after the expiration of the Policy. Therefore, coverage for the Discrimination Action is precluded unless it relates back to a claim first made in the policy period. … The Discrimination Action and DFEH claim both contain allegations of discrimination and failure to accommodate Estonilo’s alleged disability. Therefore, coverage exists for Case 8:16-cv-01155-JLS-E Document 27-3 Filed 10/14/16 Page 14 of 30 Page ID #:1234 185486.4-10753-003-10/14/2016 4:42 PM DECLARATION OF PRITCHARD 15 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 the Discrimination Action, , [sic] filed over a year after the expiration of the 2008/2009 policy, as it arises out of the same Wrongful Acts or Interrelated Wrongful Acts as those alleged in the DFEH claim, first made during the 2008/2009 policy period. 24. Philadelphia’s denial letter further listed the following “potentially relevant exclusions, amendatory endorsements and definitions which may otherwise operate to preclude or limit coverage” for the Discrimination Action: 1. No Coverage for Punitive, Exemplary or Multiple Damages; 2. No Coverage for Earned Wages or Employment- Related Benefits; 3. Coverage Limitations for Intentional Acts; and 4. Other Insurance. 25. In analyzing coverage for the Wage and Hour Action, Philadelphia stated: The Wage and Hour Action, a civil proceeding commenced by the service of a complaint, constitutes a Claim as that term is defined by the Policy. … The Wage and Hour Action was filed in June 2010 and was served in July 2010, approximately 13 months after the expiration of the Policy. Therefore, coverage for the Wage and Hour Action is precluded unless it relates back to a claim first made in the policy period. … There are no allegations of discrimination or failure to accommodate in the Wage and Hour Action. Further, there are no allegations in the DFEH claim of wage and hour Case 8:16-cv-01155-JLS-E Document 27-3 Filed 10/14/16 Page 15 of 30 Page ID #:1235 185486.4-10753-003-10/14/2016 4:42 PM DECLARATION OF PRITCHARD 16 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 violations including, but not limited to, failure to pay overtime wages, failure to provide meal and rest periods, failure to pay wages upon termination or failure to provide itemized wage statements. Thus, the DFEH claim and the Wage and Hour Action are two separate, unrelated Claims. … In addition to being precluded from coverage based on the “Earned Wages” exclusion, coverage for the DLSE complaint is precluded as the Claim was not made during the 2008/2009 policy period. The DLSE complaint was filed in September 2009, approximately three months after the expiration of the policy. … The DLSE complaint and the DFEH claim do not arise out of Interrelated Wrongful Acts. There are no allegations of discrimination or failure to accommodate in the DLSE complaint. Further, there are no allegations in the DFEH claim of failure to pay overtime wages. Thus, the DLSE complaint and DFEH claim are two separate, unrelated Claims. 26. Its denial letter further listed the following “other potentially relevant exclusions, amendatory endorsements and definitions which may otherwise operate to preclude or limit coverage” for the Wage and Hour Action: 1. FLSA Exclusion; … Pursuant to the FLSA Exclusion, as amended by the Amendment of Exclusion Endorsement, there is no coverage for causes of action one (failure to pay hourly wages and overtime), two Case 8:16-cv-01155-JLS-E Document 27-3 Filed 10/14/16 Page 16 of 30 Page ID #:1236 185486.4-10753-003-10/14/2016 4:42 PM DECLARATION OF PRITCHARD 17 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 (failure to pay minimum wage) and three (failure to provide meal and rest periods or compensation in lieu thereof) in the Wage and Hour Action since they allege violations of, or are based upon, various sections of the California Labor Code for which similar provisions are found in the FLSA. 2. No Coverage for Section 17200 Claims; The Sixth Cause of Action in the Wage and Hour Action asserts that Glidewell’s violations of the California Labor Code and IWC Wage Orders constitute unfair and unlawful business practices in violation of Section 17200. The FLSA Exclusion, as amended by endorsement, expressly precludes coverage for unfair business practices involving Earned Wages. Further, the Policy’s definition of Loss excludes from coverage “matters deemed uninsurable under the law to which this Policy shall be construed.” The only non-punitive monetary relief available under Section 17200 is restitution – which is uninsurable under California law. [Citation.] As such, there is no coverage for any relief awarded under Section 17200. 3. No Coverage for Penalties; 4. No Coverage for Employment-Related Benefits; 5. Personal Profits Exclusion; and 6. Dishonest Acts Exclusion. 27. A First Amended Complaint was filed in the Estonilo Class Action on August 22, 2011 (“Estonilo FAC”). A copy of the Estonilo FAC is attached to the Complaint in this action as Exhibit “4.” [Dkt. 1-4] 28. The Estonilo FAC included Count (6), which alleged that Glidewell failed to provide itemized statements of wages in violation of CLC § 226. It also asserted two additional claims for relief: Case 8:16-cv-01155-JLS-E Document 27-3 Filed 10/14/16 Page 17 of 30 Page ID #:1237 185486.4-10753-003-10/14/2016 4:42 PM DECLARATION OF PRITCHARD 18 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 7. Representative Action: Private Attorneys General Action of 2004 Labor Code §2698, et seq.; and 8. Unlawful Deductions. 29. The Estonilo FAC also asserted that the alleged wrongful conduct occurred “[f]rom at least June 17, 2006 and continuing to [August 22, 2011.]” 30. The Estonilo FAC alleges, in pertinent part: … ¶27. Defendants have made it difficult to determine applicable piece rates and account with precision for the unlawfully withheld wages and deductions due to be paid to Glidewell non-exempt employees, including Plaintiffs, during the liability period because they did not implement and preserve a lawful record-keeping method to record all non-provided rest and meal periods owed to employees as required for non-exempt employees by 29 U.S.C. section 211(c), California Labor Code section 226, and applicable California Wage Orders. Plaintiffs and Class Members are therefore entitled to penalties not to exceed $4,000 for each employee pursuant to Labor Code section 226(e). … Sixth Cause of Action Violation of Unfair Competition Law Cal. Bus. & Prof. Code §§ 17200, et. seq. (Against All Defendants) … ¶70. Defendants have engaged in unlawful activity prohibited by Business and Professions Code section 17200 et. seq. for actions including, but not limited to, the Case 8:16-cv-01155-JLS-E Document 27-3 Filed 10/14/16 Page 18 of 30 Page ID #:1238 185486.4-10753-003-10/14/2016 4:42 PM DECLARATION OF PRITCHARD 19 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 following: i. requiring work “off the clock,” for example by not paying employees for their time worked; ii. requiring work in excess of eight (8) hours in a workday and/or forty (40) hours in a workweek without paying compensation at the rate of time and one-half (1 1/2) of an employee’s regular rate of pay or failing to accurately calculate overtime rates; iii. requiring employees to work without being provided a minimum ten-minute rest period for every four hours or major fraction thereof worked and not being compensated one (1) hour of pay at an employee’s regular rate of compensation for each workday the employee was not provided a rest period; iv. requiring employees to work in excess of five hours and/or ten hours per day without being provided a meal period and/or a second meal period and/or requiring employees to remain on Defendants premises during their meal period and not being compensated one (1) hour of pay at the regular rate (or minimum wage) of compensation for each workday that a meal period was not provided, all in violation of California labor laws, regulations, and Industrial Welfare Commission Wage Orders; v, failing to pay non-exempt employees the required minimum wages due and owed for each hour worked; vi. failing to pay overtime premiums; vii. unlawfully deducting wages; and Case 8:16-cv-01155-JLS-E Document 27-3 Filed 10/14/16 Page 19 of 30 Page ID #:1239 185486.4-10753-003-10/14/2016 4:42 PM DECLARATION OF PRITCHARD 20 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 viii. failing to properly describe the piece rate calculation used to calculate wages paid to non-exempt employees in a given pay period. ¶71. The actions of Defendants, as alleged within this Complaint, constitute false, unlawful, unfair, fraudulent and deceptive business practices within the meaning of Business and Professions Code section 17200, et. seq. ¶72. As a result of their unlawful acts, Defendants have reaped and continue to reap unfair benefits at the expense of Plaintiffs and the Class they seek to represent. Defendant should be enjoined from such activity and made to restore to Plaintiffs and the members of the Plaintiffs’ Class their wrongfully withheld wages pursuant to Business and Professions Code section 17203. Plaintiffs are informed and believe, and thereon allege, that Defendants have been unjustly enriched by requiring employees to assume Defendants’ expenditures and losses, by failing to pay legal wages and/or other compensation for working through meal periods, and by failing to pay compensation for non- provided rest periods to Plaintiffs and members of the Plaintiffs’ Class. Plaintiffs and members of the Plaintiffs’ Class are prejudiced by Defendants’ unfair trade practices. ¶73. As a direct and proximate result of the unfair business practices of Defendants, and each of them, Plaintiffs, individually and on behalf of all Class Members similarly situated, are entitled to restitution of all wages which have been unlawfully withheld from Plaintiffs and members of the Plaintiffs’ Class as a result of Defendants’ business acts Case 8:16-cv-01155-JLS-E Document 27-3 Filed 10/14/16 Page 20 of 30 Page ID #:1240 185486.4-10753-003-10/14/2016 4:42 PM DECLARATION OF PRITCHARD 21 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 and practices described herein. Seventh Cause of Action Private Attorneys General Act of 2004 Labor Code §2698, et seq. Labor Code § 2698, et. seq. (Representative Action Against All Defendants) ... ¶77. Labor Code §2699.3(a) states in pertinent part: “A civil action by an aggrieved employee pursuant to subdivision (a) or (f) of Section 2699 alleging a violation of any provision listed in Section 2699.5 shall commence only after the following requirements have been met: (1) The aggrieved employee or representative shall give written notice by certified mail to the Labor and Workforce Development Agency and the employer of the specific provisions of this code alleged to have been violated, including the facts and theories to support the alleged violation.” ¶78. Here, Plaintiffs’ civil action alleges violations of provisions listed in Labor Code §2699.5. ¶79. On May 26, 2011, Plaintiffs complied with Labor Code §2699.3(a) in that Plaintiffs gave written notice by certified mail to the Labor and Workforce Development Agency (“LWDA”) and Defendants of the specific provisions of the Labor Code alleged to have been violated, including the facts and theories to support the alleged violation by attaching and incorporating by reference the operative complaint and the proposed first amended complaint to Plaintiffs’ LWDA letter. Attached hereto as Exhibit “1” is Case 8:16-cv-01155-JLS-E Document 27-3 Filed 10/14/16 Page 21 of 30 Page ID #:1241 185486.4-10753-003-10/14/2016 4:42 PM DECLARATION OF PRITCHARD 22 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 Plaintiffs’ LWDA letter. ¶80. Labor Code §2699.3(a) further states in pertinent part: “(2)(A) The agency shall notify the employer and the aggrieved employee or representative by certified mail that it does not intend to investigate the alleged violation within 30 calendar days of the postmark date of the notice received pursuant to paragraph (1). Upon receipt of that notice or if no notice is provided within 33 calendar days of the postmark date of the notice given pursuant to paragraph (1), the aggrieved employee may commence a civil action pursuant to Section 2699.” ¶81. Labor Code § 2699.3 (2) (B) 2 further states: “If the agency intends to investigate the alleged violation, it shall notify the employer and the aggrieved employee or representative by certified mail of its decision within 33 calendar days of the postmark date of the notice received pursuant to paragraph (1). Within 120 calendar days of that decision, the agency may investigate the alleged violation and issue any appropriate citation. If the agency determines that no citation will be issued, it shall notify the employer and aggrieved employee of that decision within five business days thereof by certified mail. Upon receipt of that notice or if no citation is issued by the agency within the 158-day period prescribed by subparagraph (A) and this subparagraph or if the agency fails to provide timely or any notification, the aggrieved employee may commence a civil action pursuant to Section 2699.” ¶82. On or about June 22, 2011, Plaintiffs received via Case 8:16-cv-01155-JLS-E Document 27-3 Filed 10/14/16 Page 22 of 30 Page ID #:1242 185486.4-10753-003-10/14/2016 4:42 PM DECLARATION OF PRITCHARD 23 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 certified letter from the LWDA, a notification that “the LWDA does not intend to investigate the allegations.” Attached hereto as Exhibit “2” is the LWDA letter. ¶83. As such, Plaintiffs have complied with Labor Code §2699.3(a) and have been given authorization therefrom to commence a civil action which includes a cause of action pursuant to Labor Code §2699. ¶84. On information and belief and based thereon, by their policy of: i. requiring employees to work without being provided a minimum ten-minute rest period for every four hours or major fraction thereof worked and not being compensated one (1) hour of pay at his regular rate of compensation for each workday that a rest period was not provided; and, ii. requiring employees to work in excess of five hours per day without being provided a first meal period and in excess of ten hours per day not being provided a second meal period, and not being compensated one (1) hour of pay at the regular rate (or minimum wage) of compensation for each workday that a meal period was not provided, all in violation of California labor laws; and iii. in failing to pay all wages owed; iv. failing to accurately pay overtime wages; v. failing to pay minimum wages; vi. failing to timely pay wages upon separation; and vii. failing to comply with accurate itemized wage Case 8:16-cv-01155-JLS-E Document 27-3 Filed 10/14/16 Page 23 of 30 Page ID #:1243 185486.4-10753-003-10/14/2016 4:42 PM DECLARATION OF PRITCHARD 24 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 statements. Defendants engaged in unlawful activity prohibited by inter alia, Labor Code section 2698 et. seq., 201, 202, 203, 218.6, 221, 222, 223, 224, 225.5, 226, 226.7, 510, 512, 1194, and Cal. Code Regs., Title 8, §11010 which violation constitutes a violation of fundamental public policy. … Eighth Cause of Action Illegal Wage deductions Labor Code §22l-224,300 (Against All Defendants) ... ¶88. Labor Code §221 states “It shall be unlawful for any employer to collect or receive from an employee any part of wages theretofore paid by said employer to said employee and without written authorization.” ¶89. In violation of Labor Code §221-224 and 300, during the appropriate time period, Defendants willfully and intentionally made deductions from the wages of the members of the Deductions Class, including but not limited to deductions for damaged products. ¶90. Further, Defendant's unlawfully deducted these wages without written authorization. ¶91. Defendants’ pattern, practice and uniform administration of corporate policy regarding said illegal wage deductions is unlawful and creates an entitlement pursuant to Labor Code §221. ¶92. As a proximate result of Defendants’ violations of Case 8:16-cv-01155-JLS-E Document 27-3 Filed 10/14/16 Page 24 of 30 Page ID #:1244 185486.4-10753-003-10/14/2016 4:42 PM DECLARATION OF PRITCHARD 25 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 Labor Code §221, the member of the Deductions Class have been damaged in an amount according to proof at the time of trial. ¶93. The members of the Deductions Class seek reimbursement of such illegal wage deductions. … ¶95. The members of the Deductions Class are entitled to recover from Defendants the full amount of all illegal wage deductions, plus … interest, reasonable attorneys’ fees and costs of suit. VI. Prayer WHEREFORE, Plaintiffs prays for judgment as follows: … 2. For compensatory damages …; 3. For economic and/or special damages …; … 8. For attorneys’ fees, interest, and costs of suit …; and 9. For such other and further relief as the Court deems just and proper. 31. On October 19, 2011, plaintiffs in the Estonilo Class Action and the Huynh Class Action, along with Glidewell, signed and filed a Joint Stipulation for Consolidation of Cases. A copy of the consolidated class action stipulation is attached to the Complaint in this action as Exhibit “7.” [Dkt. 1-7] 32. The Estonilo Wage and Hour Action ceased to exist as a distinct legal proceeding, by operation of law, when it was consolidated into the Consolidated Class Action on October 24, 2011. Estonilo and Huynh were designated as class representatives in the Consolidated Class Action. Case 8:16-cv-01155-JLS-E Document 27-3 Filed 10/14/16 Page 25 of 30 Page ID #:1245 185486.4-10753-003-10/14/2016 4:42 PM DECLARATION OF PRITCHARD 26 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 33. In that Stipulation for Order (which the court adopted), the parties agreed: As this Court has previously determined, the Huynh and Estonilo cases are related because they (i) involve the same parties and are based on the same or similar claims; (ii) arise form the same or substantially identical transactions, incidents or events requiring the determination of the same or substantially identical questions of law or fact, and/or (iii) are likely for other reasons to require substantial duplication of judicial resources if heard by different judges. 34. On October 19, 2011, Glidewell again requested coverage for the Huynh Class Action. 35. On December 13, 2011, Philadelphia reiterated its denial of coverage for the Huynh Class Action. A copy of the denial letter is attached to the Complaint in this action as Exhibit “3.” [Dkt. 1-3] 36. On April 22, 2013 the class action plaintiffs filed a master, consolidated class action complaint (the “Consolidated Class Action”). The Consolidated Class Action then proceeded through class certification and settlement under a consolidated class action complaint. A copy of the Consolidation Class Action complaint is attached to the Complaint in this action as Exhibit “8.” [Dkt. 1-8] 37. The Consolidated Class Action complaint, filed on April 22, 2013, asserted nine causes of action: 1. Failure to Pay Minimum Wages; 2. Failure to Pay Hourly Wages and Overtime Wages; 3. Failure to Timely Pay Wages Due Upon Termination; 4. Failure to Provide Meal Periods; 5. Failure to Provide Rest Periods; 6. Knowing and Intentional Failure to Comply with Itemized Employee Wage Statement Provisions; Case 8:16-cv-01155-JLS-E Document 27-3 Filed 10/14/16 Page 26 of 30 Page ID #:1246 185486.4-10753-003-10/14/2016 4:42 PM DECLARATION OF PRITCHARD 27 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 7. Violations of the Unfair Competition Law; 8. Representative Action: Private Attorneys General Act of 2004 Labor Code § 2698, et. seq.; and 9. Unlawful Deductions. 38. Subsequently, a Joint Stipulation of Class Action Settlement (the “Settlement Agreement”) was filed in the Consolidated Class Action. The Settlement Agreement states, in relevant part: ¶41. Nothing contained herein, nor the consummation of this Settlement, is to be construed or deemed an admission of liability, culpability, negligence, or wrongdoing on the part of Defendant. Defendant denies all the claims and contentions alleged by the Plaintiff in this case. The Defendant has entered into this Settlement solely with the intention to avoid further disputes and litigation with the attendant inconvenience and expenses. 39. On April 4, 2014, Glidewell sent an email to Sedgwick. In the email, Glidewell provided Philadelphia with information and filings regarding the Huynh Class Action and again requested a defense and indemnity, both in the email and in an attached demand letter. Copies of the email and demand letter are attached to the Complaint in this action as Exhibit “9” and Exhibit “10,” respectively. [Dkt. 1-9, 1- 10] 40. On April 21, 2014, Philadelphia declined again to provide coverage on the Huynh Class Action. A copy of the denial letter is attached to the Complaint in this action as Exhibit “11.” [Dkt. 1-11] 41. On October 22, 2015, the Settlement Agreement was granted final approval by the court. 42. On July 10, 2015, Glidewell filed suit against another of its insurers, RLI Insurance Company (“RLI”), seeking coverage related to the Estonilo Class Action Case 8:16-cv-01155-JLS-E Document 27-3 Filed 10/14/16 Page 27 of 30 Page ID #:1247 185486.4-10753-003-10/14/2016 4:42 PM DECLARATION OF PRITCHARD 28 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 and the Huynh Class Action. The case was styled as James R. Glidewell Dental Ceramics, Inc. v. RLI Ins. Co., Case No. 1:15-cv-01283-JES-JEH (C.D. Ill. 2015). A copy of the complaint is attached to the Complaint in this action as Exhibit “12.” [Dkt. 1-12] 43. The Illinois case was subsequently transferred to the Central District of California, and is presently styled as James R. Glidewell Dental Ceramics, Inc. v. RLI Ins. Co., Case No. 2:15-cv-07049-AG (ASx) (C.D. Cal. 2015) (the “RLI Coverage Action”). A First Amended Complaint was filed on October 19, 2015. A copy of the First Amended Complaint is attached to the Complaint in this action as Exhibit “13.” [Dkt. 1-13] 44. The relevant RLI insurance policy period was from June 1, 2009 to June 1, 2010. 45. In the RLI Coverage Action, RLI brought a motion to dismiss, asserting that the Estonilo Class Action claims and the Huynh Class Action claims were not sufficiently “related” under the terms of the RLI policy at issue. 46. The court issued its ruling on RLI’s motion to dismiss on January 25, 2016. A copy of the Court’s Order is attached to the Complaint in this action as Exhibit “14.” [Dkt. 1-14] 47. The Order worded the relevant issue in its analysis: Both parties appear to agree on the issue now before the Court: are the Huynh and Estonilo cases related such that RLI was relieved of its duty to defend Glidewell in Estonilo? 48. The Order further stated: Generally speaking, both parties making [sic] compelling points. On one hand, the policy’s broad definition of “Related” appears to be a high hurdle for Glidewell to clear. On the other hand, RLI may be too quickly glossing over the Case 8:16-cv-01155-JLS-E Document 27-3 Filed 10/14/16 Page 28 of 30 Page ID #:1248 185486.4-10753-003-10/14/2016 4:42 PM DECLARATION OF PRITCHARD 29 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 disjunctive language of the stipulation or overstating the stipulation’s importance. But the Court isn’t charged with deciding the strength or weakness of Glidewell’s claims at the pleading stage. Because Glidewell “alleges facts to support a theory that is not facially implausible, [any] skepticism [the Court may have] is best reserved for later stages of the proceedings when the plaintiff’s case can be rejected on evidentiary grounds.” [Citations.] For now, this case should move forward. 49. Based on his analysis, Judge Andrew J. Guilford denied RLI’s motion to dismiss. 50. Cal. Labor Code § 226(e)(1) reads as follows: An employee suffering injury as a result of a knowing and intentional failure by an employer to comply with subdivision (a) is entitled to recover the greater of all actual damages or fifty dollars ($50) for the initial pay period in which a violation occurs and one hundred dollars ($100) per employee for each violation in a subsequent pay period, not to exceed an aggregate penalty of four thousand dollars ($4,000), and is entitled to an award of costs and reasonable attorney’s fees. I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. Executed this 3rd day of August, 2016 at Newport Beach, California. _________/s/ Gary M. Pritchard______ Gary M. Pritchard Case 8:16-cv-01155-JLS-E Document 27-3 Filed 10/14/16 Page 29 of 30 Page ID #:1249 185486.4-10753-003-10/14/2016 4:42 PM CERTIFICATE OF SERVICE 1 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 CERTIFICATE OF SERVICE I hereby certify that on October 14, 2016, I electronically filed the foregoing DECLARATION OF GARY M. PRITCHARD IN SUPPORT OF PLAINTIFF JAMES R. GLIDEWELL DENTAL CERAMICS, INC.’S MOTION FOR SUMMARY JUDGMENT with the Clerk of the Court using the CM/ECF system which will send notification of such filing via electronic mail to all counsel of record. /s/ David A. Gauntlett David A. Gauntlett Case 8:16-cv-01155-JLS-E Document 27-3 Filed 10/14/16 Page 30 of 30 Page ID #:1250 185488.2-10753-003-8/3/2016 4:06 PM [PROPOSED] ORDER GRANTING MPSJ 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 SOUTHERN DIVISION JAMES R. GLIDEWELL DENTAL CERAMICS, INC., a California corporation, Plaintiff, vs. PHILADELPHIA INDEMNITY INSURANCE COMPANY, a Philadelphia corporation, Defendant. ) ) ) ) ) ) ) ) ) ) ) ) ) ) Case No.: 8:16-cv-01155 JLS (Ex) Hon. Josephine L. Staton [PROPOSED] ORDER GRANTING PLAINTIFF’S MOTION FOR PARTIAL SUMMARY JUDGMENT The Court has considered the papers filed in support of and in opposition to Plaintiff JAMES R. GLIDEWELL DENTAL CERAMICS, INC.’s (“Glidewell”) Motion for Partial Summary Judgment. Having also considered the arguments of counsel thereon, and good cause appearing, Glidewell’s Motion for Partial Summary Judgment is hereby GRANTED. IT IS THEREFORE ORDERED THAT: 1. There is no genuine issue of material fact and, as a matter of law, Defendant Philadelphia Indemnity Insurance Company (“Philadelphia”) owed Glidewell a Case 8:16-cv-01155-JLS-E Document 27-4 Filed 10/14/16 Page 1 of 2 Page ID #:1251 185488.2-10753-003-8/3/2016 4:06 PM [PROPOSED] ORDER GRANTING MPSJ ii 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 defense in the underlying lawsuit styled as Allan R. Estonilo et al. v. James R. Glidewell Dental Ceramics, Inc., Case No. 30-2010-00382163-CU-OE-CXC, Superior Court of California, Orange County (“Estonilo Class Action”) under Philadelphia’s Policy No. PHSD332929, for the period of June 1, 2008 to June 1, 2009, issued to Glidewell. 2. Philadelphia shall pay to Glidewell all of its outstanding post-tender attorneys’ fees incurred in the Estonilo Class Action with prejudgment interest at the applicable statutory rate of 10% from the date of each invoice. Glidewell shall file a motion for assessment of fees and costs to be filed within 30 days of this order. Dated: _______________________ _________________________________ Hon. Josephine L. Staton UNITED STATES DISTRICT JUDGE Case 8:16-cv-01155-JLS-E Document 27-4 Filed 10/14/16 Page 2 of 2 Page ID #:1252