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AMALGAMATED TRANSIT UNION v. LAIDLAW TRANSIT SERVICES

United States District Court, S.D. California


November 18, 2005.

AMALGAMATED TRANSIT UNION, LOCAL 1209, AFL-CIO, et. al., Plaintiffs,
v.
LAIDLAW TRANSIT SERVICES, INC, et. al., Defendants.

The opinion of the court was delivered by: IRMA GONZALEZ, District Judge

ORDER GRANTING IN PART AND DENYING IN PART FIRST TRANSIT'S MOTION TO STRIKE
Presently before the Court is First Transit, Inc.'s ("defendant") motion to strike pursuant to Fed.R.Civ.P. 12(f) portions of Amalgamated Transit Local 1309, AFL-CIO, Selma Shackelford, Gregory Passmore, Ronald G. Duncan, Timothy Thurmann, Samuel J. Frank, Alexander Bradley, Michele L. Boswell, John A. Taylor, Terrence Sandidge, Kuniyuki Kashiuagi, Gwenaida Cole, Lela Shipman, Sharon K. Harris, Fabis Horton III and Philip Bingman's ("plaintiffs") complaint.*fn1 For the reasons discussed below, the Court denies defendant's motion to strike plaintiffs' Labor Code § 226.7 claims for money damages stemming from defendant's alleged failure to provide meal and rest periods prior to April 12, 2004. Court also denies defendant's motion to strike plaintiffs' claims brought under Business and Professions Code Sections 17200 et seq. The Court grants defendant's motion to strike allegations under sections 1194 and 1194.2 and defendant's motion to strike claims for attorney's fees brought under the Private Attorneys General Act of 2004.

BACKGROUND

  A. Factual

  Defendant had a contract with the San Diego Metropolitan Transit Systems (SDMTS) to provide transportation services in the San Diego and El Cajon areas that terminated on September 30, 2001. (Memo. ISO Motion, 2.) In their complaint, plaintiffs allege that defendant failed to provide meal and/or rest break periods to its employees.

  B. Procedural

  Plaintiffs filed the present action in state court on April 12, 2005. On June 9, 2005, defendant filed for removal to this Court pursuant to 28 U.S.C. 1441 and the Class Action Fairness Act of 2005. Plaintiffs seek recovery for "one hour of pay" for each day that defendant did not provide a meal period and "one hour of pay" for each day that defendant did not provide a rest period under Labor Code § 226.7. (Compl. ¶ 25.) Plaintiffs seek restitution for unpaid "wages," attorney's fees and costs of suit under Labor Code § 1194 and 1194.2 and make parallel claims under Labor Code § 218.5 and 218.6 "in the event" that sections 1194 and 1194.2 are found inapplicable. (Id. ¶ 26, 28.) Under Labor Code § 558, plaintiffs claim additional civil penalties in the amount of $50 for each initial violation of the meal and rest period requirements and $100 for each subsequent violation. (Id. ¶ 31.) Plaintiffs' second cause of action restates the foregoing claims under California's Unfair Competition Law, Business & Professions Code § 17200, et seq. (Id. ¶ 34-36.) Finally, plaintiffs seek reasonable attorney's fees under the Private Attorneys General Act of 2004 (PAGA). (Id. ¶ 32.)

  Defendant moves to strike much of this complaint. Defendant first argues that the recovery mandated by section 226.7 is a "penalty" subject to California Code of Civil Procedure § 340's one year statute of limitation and moves to strike plaintiffs' untimely claims for damages. (Notice of Motion.) Next, defendant argues that section 17200 is unavailable because plaintiffs lack standing. (Id.) Defendant moves to strike references to sections 1194, 1194.2 as inapplicable to the facts plead by plaintiffs. (Notice of Motion.) Finally, defendant seeks to strike plaintiffs' request for attorney's fees under section 2699 because PAGA was not effective until after defendant's contract with SDMTS had expired. (Memo. ISO Motion, 6.)

  DISCUSSION

  A. Legal Standard

  Rule 12(f) provides that a court "may order stricken from any pleading . . . any redundant, immaterial, impertinent, or scandalous matter." Fed.R.Civ.P. 12(f). The Ninth Circuit has stated that "[t]he function of a 12(f) motion to strike is to avoid the expenditure of time and money that must arise from litigating spurious issues by dispensing with those issues prior to trial." Fantasy Inc. v. Fogerty, 984 F.2d 1524, 1527, rev'd on other grounds, 510 U.S. 517 (1994). For example, "immaterial" matter is that which "has no essential or important relationship to the claim for relief or the defenses being pleaded." Id. (citing 5 Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 1382, at 706-07 (1990)). Additionally, "impertinent" matter includes "statements that do not pertain, and are not necessary, to the issues in question." Id. "Motions to strike are generally viewed with disfavor and are not frequently granted . . . unless it is clear that the matter to be stricken could have no possible bearing on the subject matter of the litigation." Bassiri v. Xerox Corp., 292 F.Supp.2d 1212, 1219-20 (C.D. Cal. 2003) (internal quotations and citations omitted).

  B. Section 226.7 Provides for the Recovery of Wages, not "Penalties"

  California Labor Code § 226.7 provides:

(a) No employer shall require any employee to work during any meal or rest period mandated by an applicable order of the Industrial Welfare Commission.
(b) If an employer fails to provide an employee a meal period or rest period in accordance with an applicable order of the Industrial Welfare Commission, the employer shall pay the employee on additional hour of pay at the employee's regular rate of compensation for each work day that the meal or rest period is not provided.
  Plaintiffs complain that defendant has violated Wage Order 9 of the Industrial Welfare Commission and seek to recover the corresponding "additional hour of pay" for each day that defendant allegedly violated the Wage Order. (Compl. ¶ 25.) Pointing to text, case law, legislative history*fn2 and a recent proposed regulation by the Division of Labor Standards Enforcement, defendant argues that section 226.7 provides for recovery of a penalty rather than a wage and, therefore, is subject to California Code of Civil Procedure § 340's one-year statute of limitations. Plaintiffs contest each of defendant's points, arguing that section 226.7 provides for the recovery of a legislatively determined wage for employees' break or meal period akin to overtime. For the following reasons, the Court finds that section 226.7 provides for the recovery of a wage.

  In California, a "penalty" includes any law compelling a defendant to pay a plaintiff other than what is necessary to compensate him for a legal damage done him by the former. Miller v. Municipal Court of City of Los Angeles, 22 Cal.2d 818, 837 (Cal. 1943); People ex rel. Dept. of Conservation v. Triplett, 48 Cal. App.4th 233, 252 (Cal.Ct.App. 1996).

  Defendant argues that section 226.7 meets the definition for a penalty because it forces employers who do not provide meal or rest periods to pay an hour of pay in addition to the wage paid employees for time worked. (Memo. ISO Motion, 4.) For example, an employee who works through a thirty minute meal period would receive the normal wage for thirty minutes of work and an extra hour of pay.

  Plaintiffs counter that section 226.7 is a legislatively determined wage, like overtime, that California requires employers to pay employees who work through their rest or meal periods, a "premium wage to be paid to the employee on account of the business decision of the employer to work the employee during mandated meal and rest periods." (Opp. 10.) The recovery available under section 226.7 is not "additional" to actual harm, it is the measure of the compensation due workers. (Id. at 11.)

  There is little directly applicable case law, but our sister court in the Central District of California has ruled that section 226.7 provides for recovery of wages. Tomlinson v. Indymac Bank, F.S.B., 359 F.Supp.2d 891 (C.D.Ca., 2005). The Court follows much of the Tomlinson Court's persuasive reasoning in finding that section 226.7 provides for recovery of wages. Payments under section 226.7 are akin to overtime payments: both are legislatively mandated increased wages that an employer may make a business decision to pay. Defendant is correct that, unlike with overtime, section 226.7 payments do not perfectly correlate to the incurred hardship. However, section 226.7 payments relate closely to the range of harms, deprivation of a thirty minute meal period or a ten minute rest period, envisioned by the statute. The variability between harm and recovery is much smaller than with some statutes deemed "penalties." For example, waiting penalties can impose the same penalty whether a payment is delayed a day or a year. Id. at 896. As the Tomlinson Court noted, "the minor potential variability in relation to time worked does not undermine the basic concept of paying workers a premium for time worked without a meal break or rest breaks." Indeed, legislators could have decided that the administrative efficiency of section 226.7's bright line compensation rule outweighed any harm caused by a certain inexactness of compensation.

  The interposition of a proposed regulation from California's Division of Labor Standards Enforcement (DLSE) finding that section 226.7 imposes a "penalty" does not change the Court's opinion. The California Supreme Court has held that state agencies' interpretations of statutes are only valuable to the extent the agency has "expertise" that it can bring to bear and that even expert interpretations are only "legal opinion[s]." Yamaha Corp. of America v. State Board of Equalization, 19 Cal.4th 1, 12 (Cal. 1998). In determining how much "weight" to accord agency interpretations, a court must consider an agency's comparative interpretative advantage and the probability that the agency's interpretation is correct. Id. Here important factors militate against deference: (1) section 226.7 is a statute instead of an agency's own regulation, (2) the DLSE does not have expertise in deciding whether a statute imposes a "penalty," (3) the DLSE has vacillated in its opinion (Decla. ISO Motion, Exhibit 6) and (4) the DLSE's interpretation was not contemporaneous with legislative enactment. Id. at 12-13. These factors raise serious doubts as to the accuracy of DLSE's interpretation and as the Yamaha Court noted, "the ultimate resolution of . . . legal questions rests with the courts." Id.

  Since section 226.7 does not provide for a penalty, plaintiffs' claims are not subject to the one-year statute of limitations imposed on penalties. C. Plaintiffs Can Seek Monies from Laidlaw Under California's Unfair Competition Laws, California Business & Professions Code § 17200, et seq.

  Defendant moves to strike plaintiffs' claims under California Business & Professions Code § 17200, et seq for lack of standing. Section 17203 provides that "[t]he court may make such order or judgments as may be necessary to restore to any person in interest any money or property, real or personal, which may have been acquired by means of such unfair competition." Interpreting this language, the California Supreme Court has held that "restitution is the only monetary remedy expressly authorized by section 17203." Kraus v. Trinity Management Services, Inc., 23 Cal.4th 116 (2000).

  Defendant argues that plaintiffs lack standing for two reasons. First, Proposition 64 amended section 17204, which governs standing, eliminating standing for parties suing in the public interest. (Memo. ISO Motion, 9.) Section 17204 now gives standing to (1) the Attorney General or authorized local government prosecutor "upon their complaint or upon the complaint of any board, officer, person, corporation or association," or (2) "by an person who has suffered injury in fact and has lost money or property as a result of such unfair competition." Bus. & Prof. Code § 17204. Defendant argues that neither the Union nor individual employees qualify under the second prong of the amended section because defendant paid its employees for time worked and, therefore, no injury occurred. (Id. at 10.)

  Plaintiffs respond that Proposition 64's effect on section 17204 is unclear and may allow standing for public interest suits. Alternately, plaintiffs argue that defendant's employees suffered an injury in fact when defendant deprived them of their meal and/or rest periods without paying the statutorily mandated wage premium required by section 226.7. Consequently, these employees have standing under the second prong of section 17204 and the union, as the assignee of employees' rights, has standing as well. (Opp., 5.)

  The Court need not address whether Proposition 64 eliminated standing for persons suing in the public interest because the Court finds that plaintiffs-employees have standing under prong two of section 17204 and that plaintiff-union has standing because it is the assignee of workers who have suffered an injury in fact. The Court has already found that section 226.7 is a wage setting statute. Since section 226.7 imposes a wage, an employee earns the additional hour of pay when he is not given a meal break or rest period. Therefore, an award under section 226.7 is restitutionary and defendant's employees have a right to seek recovery under the statute. Tomlinson, 359 F.Supp.2d at 896-7. Employees can assign their statutory rights to the union and confer standing. In Road Sprinkler Fitters Local Union No. 669 v. G&G Fire Sprinklers, Inc., a California appellate court held that where workers have private statutory remedies against their employer, the assignment of their "statutory rights" sufficed to give the Union standing to sue for recovery. 102 Cal.App. 4th 765, 780 (Cal.Ct.App. 2002). In this case, the Union has received assignments of statutory rights from fifteen employees, and this is sufficient to confer standing. (De Nardo Declaration, ¶ 3 and Exhibit A.)

  D. The Court Strikes References to California Labor Code Sections 1194 and 1194.2

  Defendant moves to strike plaintiffs' claims under sections 1194 and 1194.2 of the California Labor Code, arguing that these sections are inapplicable to the pleaded facts because these provisions only allow for recovery when an employer fails to pay the minimum wage mandated by the Industrial Wage Commission in Wage Orders 3 and 4. (Memo ISO Motion, 11.) Plaintiffs counter that sections 1194 and 1194.2 are remedial statutes to be construed liberally and that California courts have interpreted the term "minimum wage" functionally. (Opp. 14) In plaintiffs' view, 1194 and 1194.2 are appropriate because Labor Code 226.7 has effectively set a minimum wage. Id.

  The Court finds that sections 1194 and 1194.2 are not appropriate to the facts pleaded in this case. The relevant text of section 1194 states that "employee[s] receiving less than the legal minimum wage or the legal overtime compensation" may recover. The total absence of the crucial terms "legal minimum wage" and "legal overtime compensation" from section 226.7 is decisive. Simply put, the extra hour of pay available under section 226.7 is not a legal minimum wage or legal overtime compensation. The Court sees no reason to move beyond the plain meaning of the text of these sections. The case cited by plaintiffs, Road Sprinkler Fitter Local Union No. 669 v. G & G Fire Sprinklers, Inc., 102 Cal.4th 765, 779 (2002) does not support the contention that California has a functional definition of the term "legal minimum wage." In making available section 1194 to plaintiffs suing under a prevailing wage law, the Road Sprinkler Court noted that it was "well-established" that California's prevailing wage law is a "minimum wage." Here, that proposition is not established at all.

  E. The Court Strikes Claims for Attorney's Fees Under the Private Attorneys General Act § 2699

  Defendant moves to strike references to PAGA § 2699, arguing that plaintiffs do not have standing and that defendant's conduct giving rise to this cause of action ended before the enactment of PAGA. Plaintiffs respond that section 2699 applies retroactively because it is merely a procedural, rather than substantive, change to the law. In plaintiffs' view, employers have always been liable for violations of the Labor Code and section 2699 merely expands the ambit of parties who can sue to enforce from state officials to aggrieved employees. (Opp., 17.)

  The Court finds defendant's retroactivity argument compelling. As defendant notes, courts generally presume that statutes do not apply retroactively because elementary considerations of fairness dictate that individuals should have opportunity to know what the law is and to conform their conduct accordingly. Landgraf v. USI Film Products, 511 U.S. 244, 265 (1994). On the other hand, a statute does not operate "retrospectively" merely because it is applied in a case arising from conduct antedating the statute's enactment, rather, the court must ask whether the new provision attaches new legal consequences to events completed before its enactment. Id. at 270. Changes in procedural rules may apply in suits arising before their enactment without raising concerns about retroactivity. Id. at 275.

  In California, a statute is procedural "when it neither creates a new cause of action nor deprives defendant of any defense on the merits." Kuykendall v. State Board of Equalization, 22 Cal. App. 4th 1194, 1211 (Cal.App. 1994.) Even a procedural statute which may validly be given a retroactive operation will ordinarily, for reasons of fairness, be construed as prospective. See Krause v. Rarity, 210 Cal. 644 (1930). This policy is particularly strong where the statute, though partly procedural in form, is mainly substantive in nature or effect. Aetna Cas. & Sur. Co. v. Industrial Acc. Commission, 30 Cal.2d 388, 394 (1947).

  Here PAGA § 2699 is more substantive than procedural. Section 2699(a) creates a new private cause of action for "aggrieved employees" to recover against their employers for violation of the labor code. Moreover, section 2699 changes the legal consequences that attach to a labor code violation by increasing a potential violator's liability. This fits squarely into the substantive category delineated by the Kuykendall Court. 22 Cal. App. 4th at 1211. For these reasons, the Court strikes plaintiffs' claims against defendant brought under PAGA.

  CONCLUSION

  For the foregoing reasons, the Court DENIES defendant's motion to strike allegations relating to section 226.7 and DENIES defendant's motion to strike allegations brought under Business & Professions Code § 17200, et seq. The Court GRANTS defendant's motion to strike allegations brought under sections 1194 and 1194.2. The Court GRANTS defendant's motion to strike allegations brought under the Private Attorney General Act § 2699.

  Accordingly the Court strikes the following sections of plaintiffs' complaint against defendant:

[1] General Allegations, Paragraphs 26-28 in their entirety.
[2] General Allegations, Paragraph 30, lines 10-13
[3] General Allegations, Paragraph 31-32 in their entirety
[4] Prayer for Relief, Paragraph 2, line 12 reference to section 1194.
[5] Prayer for Relief, Paragraph 3 in its entirety
[6] Prayer for Relief, Paragraph 4 in its entirety
[7] Prayer for Relief, Paragraph 5 in its entirety
IT IS SO ORDERED.
20051118

© 1992-2005 VersusLaw Inc.



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