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Michael E. Taylor; Kenneth B. Young v. Waddell & Reed

August 20, 2012

MICHAEL E. TAYLOR; KENNETH B. YOUNG; INDIVIDUALS, ON BEHALF OF THEMSELVES INDIVIDUALLY AND ON BEHALF OF OTHERS SIMILARLY SITUATED, PLAINTIFFS,
v.
WADDELL & REED, INC., A DELAWARE CORPORATION,
DEFENDANT.



The opinion of the court was delivered by: Hon. Anthony J. Battaglia U.S. District Judge

ORDER (1) GRANTING IN PART AND DENYING IN PART PLAINTIFFS' MOTION FOR LEAVE TO FILE SECOND AMENDED COMPLAINT AND (2) GRANTING DEFENDANT'S MOTIONS FOR SUMMARY JUDGMENT [Docs. 142, 149, 150]

Presently before the Court are Plaintiffs' motion for leave to file a Second Amended Complaint (Doc. 142), Defendant's motion for summary judgment as to Plaintiff Kenneth Young (Doc. 149), and Defendant's motion for summary judgment as to Plaintiff Michael Taylor (Doc. 150). The Court held a hearing on the three motions on August 3, 2012. For the reasons set forth below, the Court (1) GRANTS in part and DENIES in part Plaintiffs' motion for leave to amend and (2) GRANTS Defendant's two motions for summary judgment.

I.

BACKGROUND

This matter is a proposed wage and hour collective action brought by former Waddell & Reed ("W&R") financial advisors ("Advisors"). (FAC ¶ 1.) Named Plaintiffs Kenneth B. Young and Michael E. Taylor seek to represent a class of Advisors who allege they were classified as independent contractors, when, in fact, they were employees. (Id. at ¶¶ 3, 5.)

W&R is in the business of selling financial products, which are distributed through a sales force of Advisors. (Id. at ¶ 2.) When Advisors begin working for W&R, they are required to sign a "Professional Career Agreement" ("PCA"). (Id. at ¶ 37.) This agreement provides the basic terms governing the association with W&R Inc. and Waddell & Reed Affiliates ("W&R Affiliates"). (Id.) Advisors were classified as independent contractors and were paid on a commission only basis. (Id. at ¶ 34, 114.) Advisors did not receive a salary or hourly wage and were not paid overtime. (Id. at ¶¶ 114, 117-118.) With regard to the independent contractor relationship, the PCA specifically states, "Subject to the responsibilities and limitations stated in this Agreement, you shall be free to use W&R office facilities and to exercise your own judgment as to the persons whom you solicit and the time, place, and manner of solicitation." (See Agreement at 2 & ¶ 7 (emphasis added).)

Plaintiffs filed suit on December 28, 2009, alleging nine claims for violations of the Fair Labor Standards Act ("FLSA"), 29 U.S.C. §§ 206-207, the California Labor Code, and California's Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code § 17200, et. seq. On April 28, 2010, Plaintiffs filed the FAC. Plaintiffs filed the instant motion to amend on March 12, 2012, and Defendant filed the instant motions for summary judgment on June 21, 2012.

Defendant previously filed motions for partial summary judgment as to the FLSA claims only. On January 3, 2012, the Court granted those motions, finding that the FLSA claims failed because Plaintiffs fell under the FLSA's "outside salesperson" exemption. The Court simultaneously denied as moot Plaintiffs' motion for conditional class certification (since it involved only the FLSA claims). (Doc. 137.) Defendant now moves for summary judgment on the remaining California claims.

II. PLAINTIFFS' MOTION TO AMEND

Plaintiffs seek to amend their Complaint. Their proposed Second Amended Complaint ("SAC") would add (1) an additional named plaintiff, Brian Jaeger, who was formerly a W&R "Advisor" until September 2011, and (2) a claim by Jaeger, in a representative capacity, under Lab. Code §§ 2698, et . (the Private Attorney General Act, "PAGA") for "civil penalties" set forth in that and certain other Labor Code sections.

Absent undue prejudice, or a "strong showing" of bad faith or futility, there is "a presumption under Rule 15(a) in favor of granting leave to amend." Eminence Capital, 316 F.3d 1048, 1052 (9th Cir. 2003). However, the Court's discretion to deny leave to amend is broader where, as here, the Plaintiffs have previously amended the Complaint. Allen v. City of Beverly Hills, 911 F.2d 367, 373 (9th Cir. 1990). Here, Defendant argues that Plaintiffs' proposed amendment would be futile for two reasons, each of which is discussed below.

Section 226.8

Defendant argues that Plaintiffs' proposed amendment is futile because Jaeger lacks standing to assert a PAGA claim to recover penalties based on violations of Cal. Lab. Code ยง 226.8, which applies larger penalties than other penalties recoverable under PAGA. However, that particular section did not become effective until after Jaeger was no longer affiliated with W&R. Section 226.8 was codified on January 1, 2012, and Jaeger was no longer associated with W&R on that date. His association ended four months earlier, in September 2011. There is no indication ...


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