ORDER ON DEFENDANT'S MOTION TO DISMISS (Doc. No. 6)
This case is arises from the termination of an employment relationship between Plaintiffs Donald Reinhardt ("Reinhardt") and Jon Armstrong ("Armstrong") (collectively "Plaintiffs"), and their former employer Defendant Gemini Motor Transport ("Gemini"). Plaintiffs allege ten California state law causes of action under the Labor Code, the Business & Professions Code, the Government Code, contract related claims, and state law wrongful termination in violation of public policy. Gemini now moves to dismiss eight of the ten causes of action (Gemini does not challenge Armstrong's age-related termination claims), and also moves to strike Plaintiffs' request for disgorgement of profits. For the reasons that follow, Gemini's motion will be granted in part and denied in part.
From the Complaint, Reinhardt was employed by Gemini as a gasoline/diesel fuel delivery truck driver from August 2006 to January 29, 2010. Reinhardt was stationed at a Love's Gas Station*fn2 in Ripon, California. Reinhardt worked 12 hour shifts. Reinhardt's duties as a Gemini driver included: (1) driving an empty truck from Ripon to Stockton, California, loading the truck with fuel at a "tank farm" in Stockton, and then driving back to Ripon to unload the fuel; (2) driving an empty truck from Ripon to Fresno, California, filling the truck at a "tank farm" in Fresno, and then driving back to Ripon to unload the fuel; (3) delivering fuel from Ripon to a Love's station in Lost Hills, California; and (4) delivering fuel from Ripon to a Love's station in Tulare, California.*fn3 Reinhardt was paid a flat rate fee for these deliveries. Specifically, Reinhardt was paid $63.14 for the 48-mile round trip to Stockton, $135 for the 240-mile round trip to Fresno, $258 for the 460-mile round trip to Lost Hills, and approximately $135 for the delivery to Tulare.
Armstrong was employed by Gemini as a gasoline/diesel fuel delivery truck driver from May 11, 2006, to March 21, 2011. Armstrong was assigned to the Love's station in Lost Hills. Armstrong resided in Bakersfield, California, and began each day by going to the facility in Bakersfield where the Gemini delivery truck was located. Armstrong then would drive his empty truck to a "tank farm" in either Bakersfield or Fresno, fill up there, drive to Lost Hills and unload, and then drive the empty truck back to Bakersfield. Armstrong was paid a flat-rate fee of $132.20 for trips involving fuel loads from Fresno, and $81.00 or $94.55 for trips involving fuel loads from Bakersfield.*fn4 For the first 3 years of employment, Armstrong's shifts were less than 12 hours, but after deliveries to Fresno were added, his shifts were more than 12 hours.
On a daily basis during their employment with Gemini, and pursuant to a company practice and policy, Gemini knowingly failed to provide Plaintiffs (and other drivers) with timely, off-duty, 30-minute meal periods or timely, off-duty 10-minute rest periods at any time. Instead, Gemini actively and forcefully discouraged and prevented drives from having any off-duty meal periods or rest periods in the course of the drivers' 12 hour work days. Gemini failed to implement or disseminate policys that would be consistent with the drivers' rights to a 30-minute meal period and 10-minute rest periods.
On a daily basis and throughout Plaintiffs' employment with Gemini, various managers and dispatch personnel (who were located at corporate headquarters in Oklahoma City, Oklahoma) imposed time pressures on drivers by continually calling drivers on communication devices. Gemini personnel would explicitly and repeatedly instruct drivers to "go straight there and come straight back," ask for ETA's back to the station, tell drivers to "run and get the load done," reminding drivers of the written policy that drivers are not allowed to leave the area while loading or unloading is in progress because of the fuel's hazardous nature, and warning drivers that they are not to pull off the road or stop at all, especially while carrying a load. Drivers do all the loading and unloading work themselves. While at the "tank farms" loading gasoline/diesel fuel, waiting to load may take considerable time (because of the presence of other trucks), and the drivers are not permitted to leave their trucks while they are in the queue for fuel. Further, Gemini trucks are equipped with an on-board computer GPS and monitoring system. The computer system automatically and continuously sends a stream of information to corporate headquarters in Oklahoma City. This permits Gemini personnel to see a truck's exact location, speed, direction, and engine RPM's on a second-by-second basis. The on-board computer system allows managers to virtually ride with every driver at all times. Finally, Gemini drivers are required to immediately input into the on-board computer system every change of status in the course of a day, including the exact timing and nature of every stop. Plaintiffs are unaware of any way to identify periods for meal and rest breaks on the computer system.
Per Gemini policy, drivers are compensated for standard duties according to a uniform piece-rate system, which is different from an hourly-wage method in that drivers are paid primarily on the basis of miles driven rather than hours worked. Per Gemini policy, drivers are required to perform significant amounts of non-driving duties on either a daily or weekly basis.
These non-driving duties are not recognized under any pay rubric, and the drivers receive no separate compensation. The mandatory duties include: (1) daily pre-trip and post-trip vehicle inspections; (2) daily truck refueling; (3) weekly truck wash for Lead Drivers;*fn5 (4) detention or waiting time at the "tank farms"; and (5) time spent driving an empty vehicle.*fn6
When Armstrong was hired, the regional manager told Armstrong that drivers would receive a minimum of $200 per day. Between 2008 and 2009, Gemini's National Manager sent drivers a letter stating that minimum daily pay was being reduced to $165. However, drivers often did not receive the minimum pay, even after complaining about it.
When Reinhardt applied for his job in 2006, Gemini assured him that the company provided pay for detention or waiting time at the "tank farms" of $24 per hour. Gemini did this for the first month of employment, but then simply dropped this category of pay. Similarly, when Reinhardt began his employment, Gemini paid $15 for truck wash time, and later increased that amount to $25. However, after the first year, Gemini stopped paying anything for this activity.
Under Federal Rule of Civil Procedure 12(b)(6), a claim may be dismissed because of the plaintiff's "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). A dismissal under Rule 12(b)(6) may be based on the lack of a cognizable legal theory or on the absence of sufficient facts alleged under a cognizable legal theory. Johnson v. Riverside Healthcare Sys., 534 F.3d 1116, 1121 (9th Cir. 2008); Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). In reviewing a complaint under Rule 12(b)(6), all allegations of material fact are taken as true and construed in the light most favorable to the non-moving party. Marceau v. Blackfeet Hous. Auth., 540 F.3d 916, 919 (9th Cir. 2008); Vignolo v. Miller, 120 F.3d 1075, 1077 (9th Cir. 1999). However, the Court is not required "to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1056-57 (9th Cir. 2008); Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). To avoid a Rule 12(b)(6) dismissal, "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009); see Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1949. The Ninth Circuit has distilled the following principles from Iqbal and Twombly:
First, to be entitled to the presumption of truth, allegations in a complaint or counterclaim may not simply recite the elements of a cause of action, but must contain sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively. Second, the factual allegations that are taken as true must plausibly suggest an entitlement to relief, such that it is not unfair to require the opposing party to be subjected to the expense of discovery and continued litigation.
Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011). If a Rule 12(b)(6) motion is granted, "[the] district court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts." Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en banc). That is, leave to amend need not be granted where amendment would be futile. Gompper v. VISX, Inc., 298 F.3d 893, 898 (9th Cir. 2002).
1. California Labor Code § 226.7 and § 512 (First & Second Causes of Action)
Gemini argues that dismissal is proper because these claims are preempted by 49 U.S.C. § 14501, the Federal Aviation Administration Authorization Act ("FAAAA"). Gemini contends that the rationale and analysis of Dilts v. Penske Logistics LLC, 2011 U.S. Dist. LEXIS 122421 (S.D. Cal. Oct. 19, 2011), shows that the meal and rest periods significantly affect the frequency and scheduling of routes, the number of routes each driver may go per day, the types of roads that the driver takes, and the amount of time it takes to reach the destination. Accordingly, Gemini argues that FAAAA preemption applies. Also, the allegations in support of these claims are largely legal conclusions, and there are insufficient factual allegations to show plausibility.
Plaintiffs argue that these causes of action are not preempted by the FAAAA. Dilts is an outlier case that is contrary to a host of decisions by lower federal and California courts. Further, the facts in this case show that in-house drivers like Plaintiffs functioned like drones in that they drove a fixed number of times from point A to point B to point C to point A. Requiring meal and rest breaks would not significantly affect price, route or service, and thus, would not implicate the FAAAA. Also, the complaint contains many detailed, factual allegations that are sufficient to state plausible claims.
Legal Standard "Congress enacted the [FAAAA] in 1994 to prevent States from undermining federal deregulation of interstate trucking." American Trucking Ass'ns v. City of Los Angeles, 660 F.3d 384, 396 (9th Cir. 2011) (hereinafter "ATA"). In pertinent part, the FAAAA provides that a State "may not enact or enforce a law . . . related to a price, route, or service of any motor carrier . . . with respect to the transportation of property." 49 U.S.C. § 1501(c)(1); Rowe v. New Hampshire Transp. Ass'n, 552 U.S. 364, 368 (2008). "The terms 'rates, routes, and services' were used by Congress in the public utility sense; that is, service refers to such things as the frequency and scheduling of transportation, and to the selection of markets to or from which transportation is provided. . . . . Rates indicates price; routes refers to courses of travel." ATA, 660 F.3d at 396; Air Transport Ass'n of Am. v. City & Cnty of San Francisco, 266 F.3d 1064, 1071 (9th Cir. 2001). In determining whether § 14501(c)(1) of the FAAAA preempts State action, three questions are asked:
First, we must consider whether the provision "relate[s] to a price, route, or service of a motor carrier." If the answer is no, the provision does not fall within the preemptive scope of § 14501(c)(1). If the answer is yes, we must consider whether the provision "has the force and effect of law" -- that is, whether the provision was enacted pursuant to the State's regulation of the market, rather than the State's participation in the market in a proprietary capacity. If the provision does not fall within the market participant doctrine and relates to rates, routes, or services, we turn to the third inquiry and consider whether any of the FAAAA Act's express exemptions save the regulation from preemption. As relevant here, the FAAAA Act does not restrict the safety regulatory authority of a State with respect to motor vehicles.
ATA, 660 F.3d at 395-96. State laws "having a connection with, or reference to, carrier rates, routes, and services are preempted." Rowe, 552 U.S. at 370-71; ATA, 660 F.3d at 396. "Preemption resulting from 'reference to' price, route, or service occurs where a State's law acts immediately and exclusively upon price, route or service, or where the existence of a price, route or service is essential to the law's operation." Air Transport, 266 F.3d at 1071. In determining whether a state law has a "connection to" rates, routes, or services, courts examine the actual or likely effect of a State's action. ATA, 660 F.3d at 396. Preemption may occur even if the state law's effect is only indirect. See Rowe, 552 U.S. 370; ATA, 660 F.3d at 396. However, the state law's effect on rates, routes, or services must be more than tenuous, remote, or peripheral.
Rowe, 552 U.S. at 370; ATA, 660 F.3d 396-97. In "borderline cases, the proper inquiry is whether the provision, directly or indirectly, binds the [motor] carrier to a particular price, route, or service and thereby interferes with competitive market forces within the . . . industry." ATA, 660 F.3d at 397; Air Transport, 266 F.3d at 1072.
The Ninth Circuit has yet to address the question of whether the FAAAA preempts the Labor Code's meal and rest period requirements. Four cases dealing with FAAAA preemption of the meal and rest period laws have been presented to the Court -- Esquivel v. Vistar Corp., 2012 U.S. Dist. LEXIS 26686 (C.D. Cal. 2012), Dilts v. Penske Logistics, LLC, 2011 U.S. Dist. LEXIS 122421 (S.D. Cal. Oct. 19, 2011), Cardenas v. McLane Food Services, Inc., 796 F.Supp.2d 1246 (C.D. Cal. 2011), and Dunbar Armored, Inc. v. Rea, 3:04-cv-602 WQH WMC (S.D. Cal. July 9, 2004). Of these cases, only Esquivel did not have the benefit of having evidence presented to it.
The evidence presented in Dunbar Armored convinced that District Court inter alia that the meal and lunch period laws did not have a sufficient effect on that defendant's prices, routes, or services; thus, FAAAA preemption was not found.*fn8 See PRJN Ex. B at 8-10. The evidence presented in Dilts convinced that District Court that the meal and lunch period laws would have more than a tenuous effect on that defendant's prices, routes, and services; thus FAAAA preemption was found. See Dilts, 2011 U.S. Dist. LEXIS 122421 at *35. In Cardenas, that District Court found that case law suggested that the FAAAA did not preempt the meal and rest break laws. See Cardenas, 796 F.Supp.2d at 1255. The Cardenas court also characterized that defendant's evidence as "shaky" and "speculative." Id. at 1255-56. Despite this, the District Court held that the plaintiff did not rebut the "shaky" evidence, "the question of whether compliance with California rest and meal break laws impacts [the defendant's] price, service, and routes is a genuine issue of material fact," and that the trier of fact would determine the impact of the meal and rest period laws on that defendant's prices, routes, and services. Id. at 1256.
The differing results of these cases illustrate the potential importance of evidence beyond the allegations of a complaint in determining FAAAA preemption. The Court does not believe that it can determine whether FAAAA preemption applies at this stage in the proceedings. The Court finds it significant that the Complaint describes essentially "in-house carriers" who function "like drones" and make very specific and limited deliveries. This fact pattern does not appear to be part of any of the cases cited by the parties, and the Court is not satisfied with the parties' discussion of this fact pattern to date. The Court finds that additional arguments, and most likely additional evidence, is necessary in order to determine whether the effects of the meal and rest break laws are more than tenuous on Gemini's prices, routes, and services.
Plaintiffs rely heavily on Cardenas. Cardenas was indeed close to endorsing Plaintiffs' position that the meal and break laws are not preempted by the FAAAA. Yet, as noted above, Cardenas acknowledged that the defendant's evidence could support a finding of preemption. See id. It was on the basis of this evidence, and the absence of any rebuttal of that evidence, that caused the District Court to decline to rule that FAAAA preemption was inapplicable. See id.*fn9
Gemini relies heavily on Dilts and Esquivel. Contrary to Plaintiffs' arguments, the Court is not inclined to dismiss Dilts out of hand as a "mere outlier" case. However, Dilts had the benefit of an evidentiary record that demonstrated the disruption that the meal and rest period laws would have on prices, routes, or services. Equivel, on the other hand, did not have additional evidence like Dilts. However, there is nothing in the Esquivel case to indicate that the nature of the deliveries made in that case is similar to those in the case at bar, i.e. the alleged fixed, drone like routes of essentially an "in house" carrier. Given Esquivel's adoption of the reasoning of Dilts, it appears that the nature of the deliveries made in Esquivel were not materially different from the deliveries in Dilts.*fn10
In sum, the Court is not rejecting either parties' respective positions at this point. The Court believes that additional arguments and evidence is needed before it can resolve the issue of FAAAA preemption. In the context of a Rule 12(b)(6) motion, and given the allegations in the Complaint, the Court cannot determine whether FAAAA preemption applies to Plaintiffs' meal and rest period claims. Accordingly, dismissal of the first two causes of action will be denied.*fn11
2. California Labor Code § 1194 (Third Cause of Action)*fn12
Gemini argues that this claim should be dismissed because Plaintiffs were paid pursuant to a valid piece rate system that was based on each delivery made. Employees who are paid on a piece rate system are no treated in the same manner as hourly employees. Plaintiffs' reliance on the Armenta case is misplaced because that case did not involve a piece rate system. Also, the allegations in support of this claim are largely legal conclusions, and there are insufficient factual allegations to support a plausible claim.
Plaintiffs argue that the third cause of action properly states a claim. The complaint alleges that Plaintiffs performed significant duties that were not covered by any pay rubric. Under Armenta, the employer must pay compensation for those tasks. While Armenta did not involve a piece rate system, other cases that did involve a piece rate systems have relied upon and extended Armenta. Also, the ...