United States District Court, N.D. California
September 6, 2005.
ALLIED NORTH AMERICA INSURANCE BROKERAGE CORP. OF CALIFORNIA, Plaintiff,
WOODRUFF-SAWYER, et al., Defendants.
The opinion of the court was delivered by: MARTIN JENKINS, District Judge
ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION TO
DISMISS DEFENDANTS' COUNTERCLAIM
Before the Court is Plaintiff Allied North America Insurance
Brokerage Corporation's ("Plaintiff") Motion to Dismiss the
Third, Fourth, Fifth, and Seventh Causes of Action in Defendants
Woodruff-Sawyer and Dermond Houweling's ("Defendants")
First Amended Counterclaim.
Plaintiff employed Defendant Houweling, a successful and highly
regarded executive in the insurance and surety brokerage
industry, from June 15, 1998 through June 15, 2004. Houweling and
Plaintiff executed a "Producer Agreement" ("the Agreement") which
governed the terms and conditions of his employment with
Plaintiff. The Agreement allegedly prevented Houweling from
engaging in conduct that posed a conflict of interest with his
employment with Plaintiff and attempted to restrict him from
engaging in similar activities after his employment with
Plaintiff ended. On June 15, 2004, Houweling resigned from
Plaintiff and accepted employment with Defendant Woodruff-Sawyer.
Plaintiff filed this suit against Defendants on June 24, 2004.
On July 1, 2004, the Court issued a temporary restraining order
against Defendants. The Court later modified the order following
Defendants' motion for reconsideration on July 24, 2004.
Houweling filed a counterclaim and subsequently passed away on
November 20, 2004. On January 3, 2004, Houweling's counsel
notified Plaintiff of Houweling's death and the appointment of
Mary Houweling as the Special Administrator to Houweling's
estate. On March 30, 2005, the Estate was substituted in as
counterclaimant. The First Amended Counterclaim was filed on June
15, 2005. On June 21, 2005 Plaintiff filed a First Amended
Complaint. The Estate moved to strike the complaint, prompting
Plaintiff to seek leave of the Court to file its First Amended
A Rule 12(b)(6) motion to dismiss tests the legal sufficiency
of the claims asserted in the complaint. See Cahill v. Liberty
Mut. Ins. Co., 80 F.3d 336, 337 (9th Cir. 1996). Dismissal of an
action pursuant to Rule 12(b)(6) is appropriate only where it
"appears beyond doubt that the plaintiff can prove no set of
facts in support of his claim which would entitle him to relief."
Levine v. Diamanthuset, Inc., 950 F.2d 1478, 1482 (9th Cir.
1991) (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). In
reviewing such a motion, the Court must assume all factual
allegations to be true and must construe them in the light most
favorable to the nonmoving party. See N. Star v. Ariz. Corp.
Comm., 720 F.2d 578, 580 (9th Cir. 1983). In the context of a
motion to dismiss, review is limited to the contents of the
complaint. Allarcom Pay Television, Ltd. v. Gen. Instrument
Corp., 69 F.3d 381, 385 (9th Cir. 1995). However, matters
properly presented to a court, such as those attached to the
complaint and incorporated within its allegations, may be
considered as part of the motion to dismiss. See Hal Roach
Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n. 19
(9th Cir. 1989).
Motions to dismiss for failure to state a claim "are generally
viewed with disfavor." Ramos v. Cal. Comm. of Bar Exam'rs of the
State Bar of Cal., 857 F. Supp. 702, 704 (N.D. Cal. 1994). "Each
averment of a pleading shall be simple, concise, and direct."
FED. R. CIV. P. 8(e)(1). Courts must assume that all general
allegations "embrace whatever specific facts might be necessary
to support them." Peloza v. Capistrano Unified Sch. Dist.,
37 F.3d 517, 521 (9th Cir. 1994). If the complaint does not meet the
liberal pleading standard, a court must grant leave to amend
unless "it is absolutely clear that the deficiencies of the
complaint [cannot] be cured by amendment." Noll v. Carlson,
809 F.2d 1446, 1448 (9th Cir. 1987).
Plaintiff moves to dismiss Defendants' Third, Fourth, Fifth and
Seventh Causes of Action for failure to state a claim under Rule
12(b) of the Federal Rules of Civil Procedure. Since Plaintiff
has voluntarily dismissed the Third and Fourth Causes of Action,
the Court does not address the merits of these actions.
A. The Fifth Cause of Action Declaratory Relief
Defendants' Fifth Cause of Action seeks declaratory relief
based on Plaintiff's actions in restricting Houweling from
conducting business with his long-standing clients. This cause of
action also seeks attorney's fees and costs based on section
18.10 of the Agreement. Plaintiff argues that Defendants' request
for declaratory relief is mooted by Houweling's death. Defendants
counter that even though Houweling has died, an actual
controversy still exists surrounding the validity and
enforceablity of the Agreement's non-interference provision.
Declaratory relief is appropriate only when there exists an
"actual controversy." 28 U.S.C. § 2201. An actual controversy
exists when there is a "substantial controversy, between parties,
having adverse legal interests, of sufficient immediacy and
reality to warrant the issuance of declaratory judgment."
Maryland Gas Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273
(1941). Additionally, if the claim for declaratory relief becomes
moot, no actual controversy will exist. U.S. Const., Art. III;
see also McQuillon v. Schwarzennegger, 369 F.3d 1091, 1095 (9th
Here, the Court finds that Defendants' declaratory relief claim
is appropriate because of the necessity to determine the rights
of the Estate under the provisions of the Agreement and to
address questions regarding the validity and enforceability of
the non-interference provisions. Additionally, the Court is not
persuaded that the Estate's right to recover attorney fees is
adversely affected by Houweling's death. Therefore, the Court
DENIES Plaintiff's motion to dismiss Defendants' Fifth Cause of
Action. B. The Seventh Cause of Action Waiting Time Penalties
Defendants' Seventh Cause of Action alleges a violation of
California Labor Code Section 203 which provides for penalties
beyond those provided by contract law. California Labor Code
Section 203 states that, "[i]f an employer willfully fails to
pay, without abatement or reduction, in accordance with Sections
201, 201.5, 202, and 205.5, any wages of an employee who is
discharged or who quits" then the employee shall receive wages
"as a penalty from the due date thereof at the same rate until
paid or until an action therefor is commenced."
Defendants argue that the phrase "in accordance with Sections
201, 201.5, 202, and 205.5" modifies the phrase "without
abatement or reduction." See CAL. LABOR CODE § 203. Defendants
further assert that the statute is designed to protect the rights
of every employee who quits, resigns, or is laid off based on the
phrase "who is discharged or who quits." See id. Plaintiff, on
the other hand, argues that penalties can only be provided for
violations of the specifically enumerated sections. Since
Houweling's employment relationship is not one of those listed in
201 (applicable to employees who are discharged or laid off;
Houweling resigned), 201.5 (applicable to employees in the motion
picture industry; Houweling worked in the insurance industry),
202 (applicable to employees without a written contract for a
definite period; Houweling's contract was for five years), or
205.5 (applicable to agricultural employees which Houweling was
not), Plaintiff contends that Defendants fail to state a claim
based on Section 203.
When engaging in statutory construction, courts should give
significance, if possible, to every word of an act, and a
construction that renders a word surplusage should be avoided.
Delaney v. Superior Court, 50 Cal. 3d 785 (1990) (citing City
and County of San Francisco v. Farrell, 32 Cal. 3d 47, 54
(1982); Cal. Mfrs. Assn. v. Pub. Utils. Com., 24 Cal. 3d 836,
844 (1979)). The Court finds that Defendants' interpretation of
Section 203 is incorrect. First, Defendants' contention that "in
accordance with Sections 201, 201.5, 202 and 205.5" modifies the
phrase "without abatement or reduction" is illogical given that
Sections 201.5 and 205.5 do not discuss abatement or reduction at
all. CAL. LABOR CODE § 203; see also CAL. LABOR CODE §§ 201.5,
Second, each of the enumerated sections govern whether and when
wages are due and none of them apply to employees who have a
written contract for a definite term. Here, Defendants' counterclaim alleges that the purpose of the Agreement was "[t]o
secure [Houweling's] services for a number of years[.]"
(Counterclaim at ¶ 3.) Furthermore, an examination of the
Agreement itself reveals that it explicitly contemplated a
five-year employment term.
Third, the only cases in California to return awards based on
Section 203 involve violations of the other sections listed. See
Road Sprinklers Fitness Local Union No. 669 v. G&G Fire
Sprinklers, 102 Cal. App. 4th 765, 781 (2002) ("This Section 203
requires the payment of an additional penalty if the employer
willfully fails to comply with Section 202"); Barnhill v. Robert
Saunders & Co., 125 Cal. App. 3d 1, 4 (1981) (violation of
Section 201 alleged in order to recover penalties based on
Section 203); Oppenheimer v. Sunkist Growers, Inc.,
153 Cal. App. 2d Supp. 897, 898 (1957) (Section 201 and 202 allow for
Section 203 penalties); Oppenheimer v. Robinson,
150 Cal. App. 2d 420, 422 (1957) (the plaintiff sought penalties under Section
203 when his employment situation was based on Section 201);
Sayre v. Western Bowl, 76 Cal. App. 2d 793, 799 (1946) (stating
"section 203 may be invoked by plaintiff only upon proof that
defendant employers wilfully failed to pay wages due to him in
accordance with section 201"). Davis v. Morris,
37 Cal. App. 2d 269, 274 (1940) (violation of Section 201 allows for penalties
pursuant to Section 203).
Because Defendants do not, and cannot allege, that Houweling
was employed pursuant to Section 201, 201.5, 202, or 205.5, the
Court DISMISSES Defendants' Seventh Cause of Action with
For the foregoing reasons, the Court GRANTS IN PART and
DENIES IN PART Plaintiff's Motion to Dismiss. IT IS SO ORDERED.
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