UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA
May 15, 2010
MICHAEL GONG-CHUN, INDIVIDUALLY, AND ON BEHALF OF OTHER MEMBERS OF THE GENERAL PUBLIC SIMILARLY SITUATED, PLAINTIFF,
AETNA, INC., A PENNSYLVANIA CORPORATION, AETNA LIFE INSURANCE COMPANY, A CONNECTICUT CORPORATION, AND DOES 1 THROUGH 10 INCLUSIVE, DEFENDANTS.
The opinion of the court was delivered by: Sheila K. Oberto United States Magistrate Judge
ORDER GRANTING DEFENDANT AETNA LIFE INSURANCE COMPANY'S MOTION FOR A STAY OF ALL PROCEEDINGS
On September 17, 2009, Plaintiff Michael Gong-Chun filed a class action complaint in Fresno County Superior Court. The complaint sets forth four causes of action: (1) violations of California Labor Code §§ 226.7 and 512 for unpaid meal break premiums; (2) violations of California Labor Code §§ 201 and 202 for failure to pay wages upon termination of employment; (3) violations of California Labor Code § 204 for failure to pay wages timely during employment; and (4) violations of the California Business & Professional Code §§ 17200 et seq.
On November 12, 2009, Defendants filed a Notice of Removal to this Court.*fn1 The parties' initial scheduling conference was calendared for January 14, 2010; the parties agreed to continue the scheduling conference to April 15, 2010, in order to proceed with mediation. Some informal discovery was provided to Plaintiff for the purpose of mediation, but no formal discovery has been received by Plaintiff. See Plaintiff's Opposition (Opp.) Brief (Br.) at 3.8; Defendant's Motion (Mot.) at 9:3-11; Defendant's Reply at 11:4-12.*fn2 On April 2, 2010, Defendant Aetna Life Insurance Company*fn3 filed a Motion to Stay all further proceedings in this matter pending the outcome of the California Supreme Court's review of Brinker Restaurant Corp. v. Superior Court, 80 Cal. Rptr. 3d 781 (Cal. Ct. App. 2008), petition for review granted, 85 Cal. Rptr. 3d 688, 196 P.3d 216. Docket No. 102. In light of Defendant's pending motion to stay, the Court vacated the initial scheduling conference set for April 15, 2010.
According to the complaint, Plaintiff is a former employee of Defendant who asserts that he was not allowed to take his meal breaks and was not reimbursed for his missed meal periods as required by Cal. Labor Code § 226.7. One of the fundamental issues that could significantly affect the course of the litigation in this case is whether Defendant, as an employer, is required under Cal. Labor Code §§ 226.7 and 512 and the related regulatory provisions to ensure its employees take their meal rest breaks, or whether it merely needs to offer breaks to its employees. Two California Court of Appeals decisions have established seemingly competing standards for compliance with the Labor Code's requirements in this respect. Compare Brinker Restaurant Corp. v. Superior Court, 80 Cal. Rptr. 3d at 802 ("employers need only make meal breaks available, not 'ensure' they are taken"), with Cicairos v. Summit Logistics, Inc., 133 Cal. App. 4th 949, 962-63 (2005) ("the defendant's obligation to provide the plaintiffs with an adequate meal period is not satisfied by assuming that the meal periods were taken, because employers have 'an affirmative obligation to ensure that workers are actually relieved of all duty.'") (internal citation omitted).*fn4 The California Supreme Court has granted review in Brinker and is expected to address this issue. Defendant asserts that Brinker will establish the standard of liability for employers in meal break claims and will have a dispositive effect on this case.
II. LEGAL STANDARD
A district court has the "power to stay proceedings" as part of its inherent power to "control the disposition of the cases on its docket with economy of time and effort for itself, for counsel, and for litigants." Landis v. N. Am. Co., 299 U.S. 248, 254, 57 S.Ct. 163, 81 L.Ed. 153 (1936). In determining whether to stay an action, courts must weigh competing interests that will be affected by the granting or refusal to grant a stay. CMAX, Inc. v. Hall, 300 F.2d 265, 268 (9th Cir. 1962). Among these competing interests are (1) the possible damage which may result from the granting of a stay; (2) the hardship or inequity which a party may suffer in being required to go forward; and (3) the orderly course of justice measured in terms of simplifying or complicating of issues, proof, and questions of law which could be expected to result from a stay. Id. (citing Landis, 299 U.S. at 254-55).
"The proponent of a stay bears the burden of establishing its need." Clinton v. Jones, 520 U.S. 681, 708, 117 S.Ct. 1636, 137 L.Ed.2d 945 (1997) (citing Landis, 299 U.S. at 255). "If there is even a fair possibility that the stay... will work damage to some one else," the party seeking the stay "must make out a clear case of hardship or inequity." Landis, 299 U.S. at 255.
Pursuant to these standards, "[a] trial court may, with propriety, find it is more efficient for its own docket and the fairest course for the parties to enter a stay of an action before it, pending resolution of independent proceedings which bear upon the case." Levya v. Certified Grocers of California, Ltd., 593 F.2d 857, 863 (9th Cir. 1979). "This rule applies whether the separate proceedings are judicial, administrative, or arbitral in character, and does not require that the issues in such proceedings are necessarily controlling of the action before the court." Id. at 863-64. A district court's decision to grant or deny a Landis stay is a matter of discretion. Dependable Highway Express, Inc. v. Navigators Ins. Co., 498 F.3d 1059, 1066 (9th Cir. 2007). Considering all of the foregoing, the Court weighs the relevant Landis factors as related to this case.
After careful and considerable review of the parties' arguments, both written and oral, related to Defendant's Motion to Stay all Further Proceedings, and weighing the relevant Landis factors, the Court concludes that a stay in this matter is appropriate for the following reasons.
A. Possible Damage to Plaintiff Resulting From a Stay
Plaintiff asserts that a stay would result in indefinite delay and would likely deplete the number of witnesses Plaintiff's counsel could interview, and over time, the witnesses would be more likely to move and discard potentially relevant documents. Plaintiff's Opp. Br. at 7-8.
A stay, particularly a lengthy one, creates a danger that witnesses' memories will fade and evidence will be lost. See Pagtalunan v. Galaza, 291 F.3d 639, 642-43 (9th Cir. 2002) (recognizing that unnecessary delay inherently increases the risk that "witnesses' memories will fade and evidence will become stale"). This danger is inherent in any stay and is a factor that the Court must consider.
In this case, several factors mitigate the risk that evidence will be lost. First, staying this case until the California Supreme Court issues its decision in Brinker would not be tantamount to an "indefinite" stay. Briefing before the California Supreme Court in Brinker is complete. The California Supreme Court has not scheduled oral argument, but it is highly likely that argument will be heard in the next several months. Further, according to its own internal operating practices and procedures, the California Supreme Court issues its decisions within ninety (90) days following oral argument. See The Supreme Court of California, Part IV at 23 (ed. 2007), also available at http://www.courtinfo.ca.gov/courts/supreme. Accordingly, a stay in this case will not be indefinite and may be relatively brief.
Second, Plaintiff has the names and contact information of putative class members who did not opt out of communication and Plaintiff can elect to conduct interviews with those potential class members or collect any documents those class potential members might have. Moreover, Plaintiff has not asserted that formal discovery would, or possibly could, be propounded on potential members of the class even if the litigation were to go forward.*fn5
Third, Plaintiff has already been provided informal discovery that includes relevant portions of Defendant's policy and procedures, a sample of class member timekeeping and payroll data, and contact information of all putative class members who did not expressly refuse such communications. See Plaintiff's Opp. Br. at 3.8; Defendant's Mot. at 9:3-11; Defendant's Reply at 11:4-12. At the hearing on this issue, Plaintiff's counsel acknowledged that they had received this information, but dispute that it is comprehensive. Plaintiff, therefore, has some discovery relevant to his claims. Further, as a party to this litigation, Defendant has a clear duty to preserve any other evidence in its possession. See Wm. T. Thompson Co. v. General Nutrition Corp., Inc., 593 F.Supp. 1443, 1445 (C.D. Cal. 1984) (litigant under duty to keep or retain evidence in his or her possession).
Plaintiff's asserted hardship is significantly mitigated by the fact that a stay of this case is expected to be relatively brief, some informal discovery has been produced to Plaintiff, and the potential class members' contact information is known to Plaintiff, thereby allowing him to elect to collect evidence from those members, even while a stay is in place. Given these factors, the Court finds that risk of potential harm to Plaintiff due to the risk of lost evidence does not weigh heavily in favor of a stay.
B. Potential Hardship to Defendant Resulting From Going Forward
Defendant asserts that it will suffer hardship if forced to proceed to discovery without the benefit of the California Supreme Court's decision in Brinker. Defendant contends that discovery will be inefficient for both parties and will unnecessarily drive up the cost of litigation. With the standard of liability in question, Plaintiff cannot tailor its discovery requests and the parties will be left to guess as to what should be sought and provided. The parties could be conducting and responding to discovery that is completely moot. See Minor v. FedEx, No. C 09-1375 TEH, 2009 WL 1955816, at *1 (N.D. Cal. Jul. 6, 1009)(granting stay in light of Brinker and determining that "[t]o the extent that both Plaintiffs and Defendants will be able to tailor discovery and avoid duplicative or unnecessary tasks, this causes a benefit, rather than damage, to accrue to both parties."); see also Gabriella v. Wells Fargo Fin., Inc., No. 06-4347, 2009 WL 188856, at *1 (N.D. Cal. Jan 26, 2009) ("regardless of the outcome in Brinker, it is true that the parties will seek, and be willing to provide, different discovery depending on the Supreme Court's guidance in Brinker.").
Plaintiff suggests that discovery might be tailored and that Defendant can object to any request it found potentially irrelevant due to the pendency of Brinker. The Plaintiff asserts that if the parties are unable to reach an agreement with regard to the relevancy of any request, the parties can then present their discovery disputes to the Court. Plaintiff's Opp. Br. at 10:18-22. Plaintiff's offered compromise would unnecessarily create a greater need for judicial oversight, would drive up the cost of litigation for the parties, and would burden judicial resources.*fn6 See Leyva, 593 F.2d at 864 ("A trial court may, with propriety, find it is efficient for its own docket and the fairest course for the parties to enter a stay of an action....").
Plaintiff also contends that, regardless of whether a stay is issued as to his meal break claim, litigation should proceed with respect to Plaintiff's claim that Defendant failed to pay Plaintiff's wages timely upon termination of his employment, i.e., a late-pay claim. Defendant asserts that even if this claim is not directly derivative of Plaintiff's meal break claim, it too should be stayed to avoid duplicative discovery and additional hardship on Defendant. Defendant further asserts that its "person most knowledgeable" about Plaintiff's meal break claim, located in Connecticut, would generally also be most knowledgeable about the claim related to the failure to pay wages timely, and contends it would be unnecessarily costly and inefficient to depose this person on two separate occasions. Defendant's Reply Br. at 8-9. Defendant's arguments are well taken in this regard -- piecemeal discovery related to the late-pay claim that potentially overlaps with the meal break claim would be highly inefficient. Although going forward with discovery does not create or impose inequity, Defendant has made out a clear case of hardship as to conducting what could be inefficient or pointless discovery. See CMAX, Inc., 300 F.2d at 268 (quoting Landis, 299 U.S. at 255); see also Minor 2009 WL 1955816, at *1.
C. The "Orderly Course of Justice" Favors a Stay
The third Landis factor is a consideration of "the orderly course of justice measured in terms of simplifying or complicating of issues, proof, and questions of law which could be expected to result from a stay." CMAX, Inc. 300 F.2d at 268 (citing Landis, 299 U.S. at 254-55). Plaintiff argues that Brinker will not be dispositive of his case and is not even certain to be relevant; i.e., the evidence procured through discovery may show that Defendant had systematic policies that prevent meal breaks from being "available." Plaintiff's Opp. Br. at 10-13. Defendant asserts that Brinker will definitively decide what type of discovery is relevant and whether Plaintiff will be able to achieve class certification. Defendant's Reply Br. at 9:8-14.
It is likely that the California Supreme Court's decision in Brinker will define the scope of the employer's duty as to providing meal breaks under the California Labor Code. In this respect, a decision in Brinker may provide guidelines for discovery in this matter and dictate issues related to class certification. In the absence of precedent of the California Supreme Court, this Court must apply the interpretation it believes that the court would adopt. See Wyler Summit P'ship v. Turner Broad. Sys., Inc., 135 F.3d 658, 663 (9th Cir. 1998). However, as Brinker is presently before the California Supreme Court and will likely be decided this year, "[s]uch speculation [as to the proper standard] is unnecessary...." Lew v. Countrywide Fin. Corp., No. 08-1993, 2009 WL 1384975, at *2 (N.D. Cal. Feb. 24, 2009) (finding stay warranted in light of pendency of Brinker before the California Supreme Court). Moreover, once Brinker is decided, this Court will be bound by it. See Ariz. Elec. Power Coop., Inc. v. Berkeley, 59 F.3d 988, 991 (9th Cir. 1995).
On balance, the Landis factors weigh in favor of granting a stay. While the risk of lost evidence is inherent in every stay, Plaintiff's risk in this case is considerably mitigated by the fact that he has already received some informal discovery. Defendant, as a party, has an affirmative duty to preserve any additional evidence that it possesses, and Plaintiff has the contact information of those putative class members who did not opt out of communication and may contact those individuals regarding any evidence they may have. Defendant has stated a clear case of hardship related to inefficient and costly discovery without the benefit of the California Supreme Court's decision in Brinker. Finally, a decision in Brinker will clarify an employer's duty to provide meal breaks pursuant to the California Labor Code and will likely impact not only the course of discovery in this matter, but also issues related to class certification.
IV. SCHEDULING CONFERENCE
The initial scheduling conference in this matter calendared for April 15, 2010, was vacated in light of Defendant's Motion to Stay. On April 21, 2010, while Defendant's Motion to Stay was pending, Plaintiff propounded six (6) sets of Requests for Production of Documents upon Defendant. At the May 7, 2010, hearing on this matter, the parties disputed whether they have met and conferred with regard to this scheduling conference. Plaintiff asserts that the parties conducted considerable discussion regarding the course of litigation and has thus properly propounded discovery upon Defendant. Defendant disputes that discussions between the parties related to the Rule 26(f) meet and confer requirement.
The Court notes that on November 13, 2009, it issued an "Order Setting Mandatory Scheduling Conference Requiring the Parties to Confer Pursuant to Fed. R. Civ. P. 26(f)." In its order, the Court noted the requirement of Rule 26(f) that the parties must: confer to consider the nature and basis of their claims and defenses and the possibilities for a prompt settlement or resolution of the case, to make or arrange for the disclosures required by Rule 26(a)(1), and to develop a proposed discovery plan.
Given that the parties have already participated in mediation and have conferred regarding the Motion to Stay, they have presumably conferred to consider the nature of the claims and the possibilities of settlement. However, in light of Defendant's Motion to Stay, it is unlikely that the parties have fully discussed their mandatory disclosures required by Rule 26(a)(1) or have developed a proposed discovery plan. Moreover, following Brinker, additional conversations regarding the course and timing of discovery will likely be necessary between the parties in order to prepare their joint scheduling report that must be submitted to the Court seven (7) days prior to the scheduling conference.
As such, when the California Supreme Court issues its decision in Brinker, the Court will lift the stay and order a mandatory scheduling conference. Following such an order, the parties will have the opportunity to complete any remaining discussions regarding a proposed discovery plan pursuant to Rule 26(f). The response time for discovery already propounded by Plaintiff will begin to run on the first calendar day following the Rule 26(f) meet and confer conference between the parties, absent any further order of the Court. See Fed. R. Civ. P. 26(d) (unless authorized by order or agreement of the parties, no party may seek discovery from any source before the parties have conferred as required by Rule 26(f)). Until that time, the proceedings are stayed and formal discovery is prohibited.
The parties are reminded that they are under a duty to preserve what they know, or reasonably should know, is relevant to this action; is reasonably calculated to lead to the discovery of admissible evidence; and/or is reasonably likely to be requested during discovery. See Wm. T. Thompson Co., 593 F.Supp. at 1455. Further, during the pendency of the stay, each party will provide the Court with status reports every ninety (90) days. The parties are also encouraged to file a status report with the Court, regardless of timing, when Brinker is decided.
V. CONCLUSION AND ORDER
For the foregoing reasons, the Court HEREBY ORDERS THAT:
1. Defendant's Motion to Stay all Proceedings is GRANTED;
2. Defendant's Request for a Protective Order Prohibiting Discovery Until the Stay is Lifted is GRANTED;
3. The parties are each ordered to provide status updates to the Court as to the pendency of Brinker every ninety (90) days from the date of this Order.
IT IS SO ORDERED.