UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA
May 8, 2008
CONCEPCION JIMENEZ, ON BEHALF OF HERSELF AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFF,
JP MORGAN CHASE & CO., ET. AL., DEFENDANTS.
The opinion of the court was delivered by: Hon. Thomas J. Whelan United States District Judge
ORDER GRANTING-IN-PART AND DENYING-IN-PART DEFENDANTS' MOTION TO DISMISS PLAINTIFF'S COMPLAINT PURSUANT TO RULE 12(b)(6) AND RULE 12(b)(1) (Doc. Nos. 11, 12)
On January 24, 2008 Plaintiff Concepcion Jimenez ("Plaintiff"), on behalf of herself and all others similarly situated, commenced this class action against Defendants JP Morgan Chase & Co. et. al. ("JP Morgan" or "Defendants") alleging various violations of federal and state labor laws. (Doc. No. 1.) Pending before the Court is Defendants' motion to dismiss Plaintiff's Complaint for failure to state a claim and lack of standing. (Doc. Nos. 11, 12.) The Court takes the matter under submission and without oral argument. See S.D. Cal. Civ. R. 7.1(d)(1). For the following reasons, the Court GRANTS-IN-PART and DENIES-IN-PART Defendants' motion.
Plaintiff Concepcion Jimenez, a California resident, worked as a Loan Officer for Defendants JP Morgan Chase & Co, et. al. (Compl. ¶ 33.) Defendants are a collection of affiliated banks which provide loan products and financial services across the country. (Id. ¶¶ 34--38.)
In summer 2007, Plaintiff's employment with Defendant was terminated. (Mills Decl. Ex. 3 at 10 [hereinafter "Release Agreement"].) In exchange for severance pay and benefits, Plaintiff signed a "Release Agreement" ("Release") that, subject to certain exceptions, released Defendants from any and all claims and waiver protections under federal, state, local and common law. (Id. at 8.) One exception, however, preserved Plaintiff's right to bring a federal Fair Labor Standards Act ("FLSA") claim for Defendants' failure to pay minimum wages or overtime. (Id.)
Under the Release Agreement's terms, Plaintiff agreed not to file a lawsuit on any released claims and promised not to participate in a class or collective action against JP Morgan. (Id. at 8--9.) Furthermore, Plaintiff represented that Defendants had paid all compensation owed to her, including overtime, as of the Release date. (Id.)
Before signing, Defendants allowed Plaintiff forty-five days to consider the Release Agreement, and Plaintiff was offered an additional seven days to revoke acceptance after signing. (Id. at 10.) Plaintiff attested that she signed the Release knowingly and voluntarily, and acknowledged that Defendants advised her to discuss the Release with her own attorney. (Id.)
On January 24, 2008 Plaintiff, on behalf of herself and all others similarly situated, commenced this class action against Defendants JP Morgan Chase & Co. et. al. alleging various violations of federal and state labor laws. (Doc. No. 1.) Plaintiff alleges that while she worked at JP Morgan, Defendants had a policy and practice of: (1) refusing to pay overtime compensation to Loan Officers who worked in excess of eight hours per day and/or forty hours per week, (2) failing to provide Loan Officers with all required meal and rest breaks, (3) failing to reimburse work-related expenses, (4) failing to maintain accurate records of hours worked and wages paid, and (5) failing to pay all wages upon cessation of employment. (Id. ¶ 9.) Plaintiff seeks damages on her behalf, and also seeks to certify a Federal Rule of Civil Procedure*fn1 23 "opt-out" class action and a FLSA "opt-in" collective action for other "similarly situated" plaintiffs. (Id. Prayer for Relief.)
On April 3, 2008 Defendants moved to dismiss Plaintiff's Complaint under Rules 12(b)(1) and 12(b)(6), arguing that Plaintiff's Complaint failed to state a claim, that Plaintiff lacked standing, and that the Court lacked jurisdiction to provide Plaintiff with redress. (Doc. No. 12.) On April 22, 2008, per an extension, Plaintiff filed her Opposition brief. (Doc. No. 13.) On May 1, 2008 Defendants filed their Reply. (Doc. No. 17.)
II. LEGAL STANDARD
Rule 12(b)(6) permits the court to dismiss a complaint, or a count therein, for failure to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). A motion to dismiss under this rule tests the complaint's sufficiency. See N. Star Int'l v. Ariz. Corp. Comm'n, 720 F.2d 578, 581 (9th Cir. 1983). Dismissal of a claim according to this rule is proper only in "extraordinary" cases. United States v. Redwood City, 640 F.2d 963, 966 (9th Cir. 1981).
A complaint may be dismissed as a matter of law for two reasons: (1) lack of a cognizable legal theory, or (2) insufficient facts under a cognizable theory. Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir. 1984). As the Supreme Court recently explained, "[w]hile a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the 'grounds' of his 'entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 127 S.Ct. 1955, 1964 (2007). Rather, the allegations in the complaint "must be enough to raise a right to relief above the speculative level." Id. at 1964--65. All material allegations in the complaint, "even if doubtful in fact," are assumed to be true, id., and the court must "construe them in the light most favorable to the nonmoving party," Gompper v. VISX, Inc., 298 F.3d 893, 895 (9th Cir. 2002). In other words, the court construes the complaint and all reasonable inferences in the plaintiff's favor. Walleri v. Fed. Home Loan Bank of Seattle, 83 F.3d 1575, 1580 (9th Cir. 1996).
Rule 12(b)(1) provides that a court may dismiss a claim for "lack of jurisdiction over the subject matter[.]" Fed. R. Civ. P. 12(b)(1). Although the defendant is the moving party in a motion to dismiss, the plaintiff is the party invoking the court's jurisdiction. Therefore, the plaintiff bears the burden of proof on the necessary jurisdictional facts. McCauley v. Ford Motor Co., 264 F.3d 952, 957 (9th Cir. 2001).
"Unlike a Rule 12(b)(6) motion, a Rule 12(b)(1) motion can attack the substance of a complaint's jurisdictional allegations despite their formal sufficiency, and in so doing rely on affidavits or any other evidence properly before the court." St. Clair v. City of Chico, 880 F.2d 199, 201 (9th Cir. 1989) (citing Thornhill Publishing Co. v. General Tel. & Elec. Corp., 594 F.2d 730, 733 (9th Cir. 1979)); see also Marriot Intern., Inc. v. Mitsui Trust & Banking Co., Ltd., 13 F. Supp. 2d 1059, 1061 (9th. Cir. 1998).
A. Plaintiff's State Law Wage and Hour Claims Are Barred By the Release Agreement
Defendants argue that because Plaintiff voluntarily signed the Release Agreement in exchange for severance pay, she cannot now bring claims against JP Morgan that were previously released. (Defs.' Mot. 6--8.) Moreover, Defendants argue, Plaintiff covenanted not to file a lawsuit. (Id.)
Plaintiff, in response, contends that the Release Agreement is illegal and unenforceable as a matter of law and public policy. (Pl.'s Opp'n 5--11.) Specifically, Plaintiff argues that the Release Agreement was "confusing" and that Plaintiff had "little choice" but to sign it in order to receive her severance package.*fn2 (Id. 6--7.) Furthermore, Plaintiff argues, California Labor Code section 206.5 prohibits an employee from releasing wage and hour claims unless the employer first pays those claims. (Id. 8--11.)
California law strongly favors the settlement of disputes and the enforcement of releases. See In re Marriage of Hasso, 280 Cal. Rptr. 919, 925 (Cal. Ct. App. 1991); Stambaugh v. Superior Court, 132 Cal. Rptr. 843, 846 (Cal. Ct. App. 1976). However, California Labor Code section 206.5 states:
No Employer shall require the execution of any release of any claim or right on account of wages due, or to become due, or made as an advance on wages to be earned, unless payment of such wages has been made. Any release required or executed in violation of the provisions of this section shall be null and void as between the employer and the employee and the violation of the provisions of this section shall be a misdemeanor.
Courts construing section 206.5 have concluded that, upon termination of an employee's services, the employer is bound to pay the employee all wages conceded to be due, and can require no condition in connection with this payment. Sullivan v. Del Conte Masonry Co., 48 Cal. Rptr. 160, 163 (Cal. Ct. App. 1965). However, the statute only bars conditions (like releases) where an employer concedes that wages are due; that is, nothing prevents the release of wage and hour claims where a bona fide dispute exists over whether wages are in fact due. Reynov v. ADP Claims Serv. Group, Inc., No. C 06-2056 CW, 2007 U.S. Dist. LEXIS 31631 (N.D.Cal. April 30, 2007) (analyzing legislative history and Sullivan, 48 Cal. Rptr. at 163) (emphasis added).
As a threshold issue, the Court finds that the Release Agreement is not confusing and clearly distinguishes what rights and obligations Plaintiff released, and what rights and obligations Plaintiff retained. Additionally, this appears to be a typical situation where Plaintiff agreed to release certain claims in exchange for severance benefits not otherwise earned. See, e.g., Fox v. Rodel, Inc., 1999 U.S. Dist. LEXIS 12246, at *21--22 (D.Del. July 14, 1999) (approving of litigation carve-out provision in employee release agreement). At any rate, Plaintiff has not made any legally cognizable arguments that Defendants procured the Release Agreement by fraud or by procedurally or substantively unconscionable means. Therefore, because the Release is otherwise valid, the Court next turns to whether section 206.5 prevents its enforcement.
California Labor Code section 206.5 does not bar enforcement of Plaintiff's Release. This is because nowhere does Plaintiff allege that Defendants concede that wages were due, but that Defendants forced Plaintiff to release her wage claims in exchange for some other benefit. By contrast, Plaintiff's Release admits "I agree that [Defendants have] paid me all compensation (including without limitation all salary, bonus, incentive and overtime payments) that I have earned on or before the date I sign below...." (Defs.' Mot. 7.) Even if, at the time Plaintiff executed the Release in exchange for severance benefits, Plaintiff and Defendants disagreed over whether Plaintiff was owed additional overtime, nothing prevents an employer and employee from compromising a bona fide dispute over wages. See Reynov, 2007 U.S. Dist. LEXIS 31631, at *9 (holding that where a bona fide dispute exists, overtime pay cannot be considered "concededly due").
Although Plaintiff cites much California law emphasizing the sanctity of wages and overtime compensation, (Pl.'s Opp'n 8--9), nowhere does Plaintiff allege section 206.5's threshold requirement-that Defendants conceded that they owed outstanding wages. Plaintiff generally argues that "by Defendants [sic] own admission, Plaintiff was entitled to overtime wages." However, Defendants only admit to classifying Plaintiff as non-exempt and, in some prior instances, paying her overtime; this does not concede a failure to pay additional overtime wages due. If anything, Plaintiff has already conceded that Defendants have paid her all wages due. (Release Agreement 9 ("I agree that [Defendants have] paid me all compensation...).) At the very least, the parties have a bona fide dispute over whether Defendants accurately compensated Plaintiff for each hour of her employment at JP Morgan.*fn3 This disagreement renders California Labor Code section 206.5 irrelevant. See, e.g., Reid v. Overland Machine Products, 359 P.2d 251, 253 (Cal. 1961) ("An employer and employee may of course compromise a bona fide dispute over wages...").*fn4
Because Plaintiff does not allege that she was forced to release her state wage and hour claims as a condition for Defendants paying some portion of wages concededly owed to her, California Labor Code section 206.5 does not bar enforcement of the clause releasing "any claims under any federal, state or local law..." (Release Agreement 8.) Thus, the Release Agreement prevents Plaintiff from bringing any state wage and hour claims. Accordingly, the Court DISMISSES WITHOUT PREJUDICE Plaintiff's second (overtime), third (meal breaks), fourth (rest breaks), fifth (civil penalty), sixth (record keeping), seventh (business expense) and eighth (unfair competition) claims. See Reynov, 2007 U.S. Dist. LEXIS 31631, at *11 ("Because the release [plaintiff] signed is legally enforceable, [plaintiff's] claims for compensation for overtime, waiting time, meal and rest periods and civil penalties must fail. Likewise, his... cause of action alleging that [defendant] engaged in unfair business practices must be dismissed."); see also Simel v. JP Morgan Chase, 2007 U.S. Dist. LEXIS 18693, at *12 (S.D.N.Y. Mar. 19, 2007) (discussing courts' reluctance in extending the FLSA's expressed limitation of waiver to other statutory rights).
B. Plaintiff's Federal FLSA Claim
Defendants argue that Plaintiff, by signing the Release Agreement, waived her ability to proceed with a FLSA collective action. (Defs.' Mot. 8--9.) Plaintiff, in response, contends that FLSA rights are unwaivable and cannot be abridged by contract. (Pl.'s Opp'n 11--12.) Both parties are correct.
For the purposes of this Rule 12(b)(6) motion, it suffices to say that while individual FLSA rights cannot be waived, Barrentine v. Arkansas-Best Freight Sys., 450 U.S. 728, 740 (1981), it is clear that a party may waive the right to bring a collective FLSA action. See Horenstein v. Mortgage Market, Inc., 9 Fed. Appx. 618, 619 (9th Cir. 2001) (holding that plaintiffs who knowingly signed an arbitration agreement abandoned their right to enforce their FLSA claims as part of a class action). From the information before the Court, it appears that Plaintiff has probably waived her right to bring a class or collective action under Rule 23 and/or the FLSA. However, the Court need not decide that issue today-this question is best answered at the class certification stage.
Under Rule 12(b)(6), the Court must decide whether the facts, as alleged, support any valid claim entitling plaintiff to relief-even if that claim is not necessarily the one intended by plaintiff. Haddock v. Board of Dental Examiners of Calif., 777 F.2d 462, 464 (9th Cir. 1985). Here, the Release Agreement specifically carves out the right to bring an individual FLSA claim for failure to pay overtime, and by construing Plaintiff's Complaint in the most favorable light the Court concludes that Plaintiff has stated an individual claim for overtime wages under the FLSA. (See Compl. ¶¶ 51--57.) Under Rule 12(b)(6)'s lenient standard, the fact that Plaintiff also alleges the (potentially waived) right to proceed collectively is not fatal to her individual claim. Whether or not Plaintiff can proceed collectively or represent a class will be decided at a later stage of this litigation.
Defendants argue that Plaintiff lacks standing to pursue her claims because she was eligible for and received overtime compensation. (Defs.' Mot. 10--13.) Plaintiff contends, in response, that regardless of her classification she did not receive wages, including overtime wages, for all hours worked in excess of forty per workweek and/or eight per day. (Pl.'s Opp'n 14.)
Because standing is a jurisdictional issue, federal courts treat motions to dismiss for lack of standing under Rule 12(b)(1). See Alliance for Environmental Renewal, Inc. v. Pyramid Crossgates, Co., 436 F.3d 82, 88 n.6 (2d Cir. 2006). In resolving a Rule 12(b)(1) motion, the Court is not limited to the Complaint's allegations, but may consider extrinsic evidence in determining whether Plaintiff lacks standing. Roberts v. Corrothers, 812 F.2d 1173, 177 (9th Cir. 1997).
A plaintiff must satisfy three elements in order to have standing to bring a claim:
(1) she must have suffered an injury in fact that is (a) concrete and particularized and (b) actual or imminent; (2) there must be a causal connection between the injury and the conduct complained of; and (3) it must be likely that the injury will be redressed by a favorable decision. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). The burden of proof rests with Plaintiff. Stock West, Inc. v. Confederate Tribes of Colville Reservation, 873 F.2d 1221, 1225 (9th Cir. 1989).
The standing issue is a messy one for Plaintiff, Defendants and the Court because it appears that Plaintiff's boilerplate collective/class action complaint fails to competently reflect Plaintiff's particular, individual grievances. For instance, the bulk of Plaintiff's Complaint implies that Plaintiff, and other similarly situated Loan Officers, were mis-classified as "exempt" employees and denied any overtime and FLSA-provided benefits. (See Compl. ¶¶ 11, 13, 18--22, 24, 33, 54, 60.) However, the parties' moving papers and declarations agree that Plaintiff was actually a non-exempt employee who in fact received, at times, some overtime compensation. (Defs.' Mot. 13; Mills Decl. Ex. 2; Pl.'s Opp'n 14; Jimenez Decl. ¶¶ 5, 7, 14.) Indeed, Plaintiff's Opposition re-frames her argument under the theory that Defendants failed to compensate her for all time worked over forty hours, rather than any time. (Pl.'s Opp'n 14.)*fn5
Considering Plaintiff's Complaint and declarations, the Court concludes that Plaintiff has met her burden in proving that she has standing to press an individual FLSA claim. Although her Complaint spends much time alleging away any applicable exemptions on behalf of Plaintiff and the putative class, the Court gives Plaintiff every benefit of the doubt and finds these allegations merely irrelevant, rather than inconsistent. (See Compl. ¶¶ 11-25.) Regardless, Plaintiff presents allegations that she was not fully compensated for all hours worked in excess of forty per week and eight per day-this is enough to state an individual FLSA claim. Contrary to Defendants' assertions, evidence that Plaintiff received some overtime pay does not mean she received all overtime pay due to her; at any rate, analyzing pay stubs and overtime records is not appropriate at this stage of the litigation.
Because Plaintiff generally alleges that she suffered injury when Defendant failed to pay her overtime, the Court would potentially be able to provide redress under the FLSA if Plaintiff presented evidence proving her allegations. Thus, Plaintiff has technically met the standing requirements for bringing an individual FLSA claim.*fn6 Accordingly, the Court DENIES Defendants' motion to dismiss Plaintiff's first cause of action.
Because Plaintiff voluntarily signed a Release Agreement in exchange for severance benefits, Plaintiff has waived her right to bring almost all state or federal claims against Defendants JP Morgan Chase & Co. et. al. California Labor Code section 206.5 does not bar enforcement of the Release Agreement because Defendants never conceded that Plaintiff was due any more compensation over what was previously paid.
However inelegantly drafted, Plaintiff has alleged sufficient facts to plead an individual FLSA claim for overtime wages. Although Plaintiff's prospects of bringing a collective/class action on behalf of "similarly situated" individuals appear dim, the Court declines to decide these issues under the instant Rule 12(b)(6) motion. For the above reasons, the Court GRANTS-IN-PART and DENIES-IN-PART Defendants' motion to dismiss under Rule 12(b)(6) and Rule 12(b)(1). Plaintiff's second through eighth claims are DISMISSED WITHOUT PREJUDICE.
IT IS SO ORDERED.