United States District Court, N.D. California, San Jose Division
ORDER GRANTING MOTION TO AMEND, AND DENYING MOTION TO DISMISS Re: Dkt. Nos. 19, 25
LUCY H. KOH, District Judge.
Plaintiffs Michelle Naranjo and Mathan Jayme (collectively, "Plaintiffs") bring this lawsuit against Defendant Bank of America National Association ("Defendant") alleging violations of the California Labor Code for failure to provide legally compliant itemized pay statements, failure to pay overtime, providing improper forms of payment, failure to timely pay wages, and failure to provide legally-required rest periods. ECF No. 1 ("Compl.") ¶¶ 1-30. Before the Court are two motions. The first is Defendant's motion to strike or to dismiss Plaintiffs' representative claim under California Labor Code § 2698 et seq., the Private Attorneys General Act of 2004 ("PAGA"). ECF No. 19 ("Motion to Dismiss"). The second is Plaintiffs' motion for leave to file a first amended complaint. ECF No. 25 ("Motion to Amend" or "Mot."). Having considered the parties' submissions, the relevant law, and the record in this case, the Court GRANTS Plaintiffs' Motion to Amend and DENIES Defendant's Motion to Dismiss without prejudice, for the reasons stated below.
A. Factual Background
Plaintiffs are former employees of Defendant, and were employed in San Jose, California. Compl. ¶ 2. Michelle Naranjo ("Naranjo") was terminated by Defendant on December 30, 2013. Id. ¶ 6. Mathan Jayme ("Jayme") was terminated by Defendant on March 10, 2014. Id. ¶ 7. Plaintiffs allege that upon their termination, Defendant paid Plaintiffs with cashier's checks, but failed to provide Plaintiffs with pay statements as required by California law. Id. ¶¶ 6-7. Plaintiffs also allege that Defendant failed to pay Plaintiffs for time worked during Plaintiffs' final pay periods. Id. ¶¶ 11-12. Naranjo individually alleges that Defendant failed to pay her for one hour and 22 minutes of overtime during Naranjo's final pay period, and that Defendant systematically failed to allow Naranjo to take legally-mandated rest periods during her employment. Id. ¶¶ 14-26.
B. Procedural Background
On May 14, 2015, Plaintiffs filed the operative Complaint in California Superior Court for the County of Santa Clara. Plaintiffs allege that Defendant's failure to provide them with pay statements upon termination, and failure to pay them for time worked during their final pay periods, violated California Labor Code §§ 201, 203, and 226. Compl. ¶¶ 1-12. Naranjo individually alleges that Defendant's failure to pay Naranjo for overtime work, and systematic failure to permit Naranjo to take her legally-mandated rest periods, violated Labor Code §§ 510 and 226.7. Compl. ¶¶ 13-26. Of particular relevance to the instant Motion to Amend and Motion to Dismiss, Plaintiffs seek damages under PAGA "on behalf of themselves and other current and former employees of Defendant affected by the labor law violations alleged in this complaint." Id. ¶ 29.
On June 13, 2014, Defendant removed this lawsuit to U.S. District Court on the basis of diversity jurisdiction. ECF No. 1, at 4, 13. On November 5, 2014, this Court held an initial case management conference, at which the Court set a deadline to amend pleadings or add parties of January 1, 2015. ECF No. 17, at 1.
On November 19, 2014, Defendant filed the instant Motion to Dismiss. ECF No. 19. Defendant moved to dismiss and strike Plaintiffs' PAGA claim, on the grounds that Plaintiffs improperly sought to represent absent "aggrieved" current and former employees of Defendant. Id. at 1. Defendant argued that, unless Plaintiffs alleged that they could meet the requirements of class certification pursuant to Federal Rule of Civil Procedure 23 with respect to Plaintiffs' representative PAGA claim, Plaintiffs could not seek PAGA penalties on behalf of other aggrieved employees. Id. Defendant further contended that absent bringing a PAGA claim as a class action, Plaintiffs lack standing under Article III of the U.S. Constitution to pursue relief on behalf of other absent parties. Id. In addition, Defendant argued that, because Plaintiffs did not bring their representative PAGA claim pursuant to a putative class action under Rule 23, Plaintiffs' PAGA claim was unmanageable. Id. at 11-14. Plaintiffs filed an opposition to the Motion to Dismiss on December 3, 2014. ECF No. 23. Defendant filed a reply on December 19, 2014. ECF No. 27.
On December 5, 2014 - approximately two weeks after Defendant filed the Motion to Dismiss, and approximately one month before the deadline to amend pleadings or add parties - Plaintiffs filed the instant Motion to Amend. ECF No. 25. The Motion to Amend sought leave of the Court to file a First Amended Complaint ("FAC"). ECF No. 25-3. The First Amended Complaint made three substantive changes to Plaintiffs' allegations which are relevant here. First, the First Amended Complaint converted Plaintiffs' allegation that Defendant failed to provide wage statements to terminated employees in violation of Labor Code § 226 from an individual claim to a class claim. FAC ¶ 30. Second, Plaintiffs sought, pursuant to Rule 23, to represent the following class with respect to Plaintiffs' § 226 claim:
All current and former non-exempt California employees whose employment was terminated (voluntarily or involuntarily) at any time from May 15, 2013, through the present, who received their final pay in the form of cashier's check, and who did not opt-in to the Fair Labor Standards Act (the "FLSA") settlement in the case entitled, Bank of America Wage and Hour Employment Practices Litigation, Case No. 10-md-2138, pending in the United States District Court of Kansas.
FAC ¶ 17. Third, the First Amended Complaint amended Plaintiffs' PAGA claim such that Plaintiffs now would seek PAGA penalties on behalf of other "Aggrieved Employees" only with respect to Plaintiffs' putative class claim under § 226. Id. ¶ 53. Concurrent with Plaintiffs' Motion to Amend, Plaintiffs also filed three supporting declarations. ECF Nos. 25-1, 25-2 & 25-3.
On December 19, 2014, Defendant filed an opposition to Plaintiffs' Motion to Amend. ECF No. 26 ("Opp'n"). On December 24, 2014, Plaintiffs filed a reply in support of the Motion to Amend, with one supporting declaration. ECF Nos. 29 ("Reply") & 29-1.
II. LEGAL STANDARD
A. Motion to Amend Under Rule 15(a)
Under Federal Rule of Civil Procedure 15(a), a party may amend its pleading once as a matter of course within 21 days of service of the pleading. Fed.R.Civ.P. 15(a)(1). After that period, amendment is permitted only with the opposing party's written consent or leave of the court. Id. at 15(a)(2). Rule 15 instructs that "[t]he court should freely give leave when justice so requires." Id. This rule is applied with "extreme liberality." Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir. 2003). Courts commonly consider four factors when determining whether to grant leave to amend: (1) bad faith on the part of the movant; (2) undue delay; (3) prejudice to the opposing party; and (4) futility of the proposed amendment. Foman v. Davis, 371 U.S. 178, 182 (1962); Lockheed Martin Corp. v. Network Solutions, Inc., 194 F.3d 980, 986 (9th Cir.1999). "[I]t is the consideration of prejudice to the opposing party that carries the greatest weight." Eminence Capital, 316 F.3d at 1052. "Absent prejudice, or a strong showing of any of the ...