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Roberts v. Daymon Worldwide Inc.

United States District Court, N.D. California

July 22, 2016

DAYMON WORLDWIDE INC., et al., Defendants.


          WILLIAM H. ORRICK United States District Judge


         Defendants Daymon Worldwide Inc. and Omni Global Sourcing Solutions, Inc. terminated plaintiff Brett Roberts for ordering the destruction of certain export-related documents, which they claim violated multiple provisions of his employment agreement and warranted termination “for cause.” Roberts contends that defendants fired him to avoid paying transition and earn-out payments to which he was entitled upon termination other than for “cause, ” and that the proffered justifications are simply pretextual. In addition, Roberts alleges that defendants have intentionally interfered with his right to possess company tax records and receipts and misrepresented his ability to participate in certain Daymon benefit plans.

         There are no material facts in dispute. Roberts did violate his employment contract by committing a “material violation of the law” and has not met his burden to establish that defendants’ justification for his termination was pretextual, defendants are entitled to judgment on Roberts’s wrongful termination, breach of contract, breach of the covenant of good faith and fair dealing, unpaid wages, and waiting time penalties claims. Nor has Roberts demonstrated personal ownership of the records in Daymon’s possession; his conversion claim has no merit. Finally, the contracts Roberts signed with Daymon are fully integrated and preclude his misrepresentation claims. Accordingly, I GRANT defendants’ motion for summary judgment on all causes of action.


         Roberts founded Omni Pacific, a business importing and exporting food and beverages, in 1989. Roberts Depo. at 25:3-4, 65:9-11 [Dkt. Nos. 73-2; 75-2]. He was the President, CEO, Secretary, and Treasurer of Omni Pacific as well as owner. He considered his job to be “everything from janitor to parking lot attendant to salesperson to chief risk officer, chief financial officer, you name it.” Id. at 32:17-19.

         Omni Pacific employed sales employees, known as “traders, ” who were responsible for buying and selling food and beverage products. Id. at 51:18-25. Omni Pacific’s policies provided that each sale should be reflected in a file containing a signed purchase order from the customer on the customer’s letterhead and a signed sales contract from Omni Pacific, each reflecting the same terms and agreements. Id. at 77:7-78:1, 81:21-82:2. In addition, depending on the requirements of the sale, Certificates of Origin (“COOs”) were added to the file. A COO certifies the origin of the good. Id. at 88:18. The importance of COOs varied depending on the customer, but it could affect whether the product could be imported or aid in determining the applicable duty or tariff. Id. at 88:20-89:3. For example, as relevant to this case, under the United States/Korean Free Trade Agreement (“KORUS”), having a COO showing that the goods originated in the United States could have an impact on whether the Korean customer has to pay a duty or tariff for the importation of the goods. Id. at 92:4-22.

         In mid-2009, Roberts hired a third party to help him sell Omni Pacific. Id. at 111:5-112:7. Roberts commenced discussion with Daymon in summer 2010, but the discussions were temporarily put on hold due to changes in Daymon’s management. Id. at 113:18-21, 115:15-117:4. The parties ultimately signed a Letter of Intent on January 5, 2012 and the acquisition closed approximately eight months later on August 15, 2012. Id. at 126:4-7. The acquisition consisted of several different agreements including: (i) a Goodwill Purchase Agreement in which Daymon agreed to pay Roberts $200, 000 in cash and up to $700, 00 in earn-out payments over six years; (ii) an Asset Purchase Agreement in which both Roberts and Omni Pacific agreed to sell certain assets, properties, and rights to Daymon in exchange for the purchase price; (iii) an Employment Agreement between Daymon and Roberts in which Daymon agreed to hire Roberts as a Senior Vice President at a base compensation of $175, 000 with up to another 40% in bonuses, full benefits, car allowance, and twelve months of base salary in possible transition payments.

         The agreements also provided that Roberts would not be entitled to either the transition payments or further earn-out payments if he was terminated for “cause” as defined by his Employment Agreement. Id. at 196:11-15; see also section 2(a)(ii)(C) of Goodwill Purchase Agreement. The Employment Agreement, which Roberts signed, defines “cause” to mean: (i) “an act of fraud, embezzlement, theft, or any other material violation of law that occurs during or in the course of [plaintiff’s] employment with company;” (ii) “intentional damages to companies [sic] assets;” (iii) “intentional breach of any of company’s policies;” (iv) “willful conduct by you that is demonstrably and materially injurious to company, monetarily or otherwise.” Roberts Depo., Exh. 21. “Cause also includes any of the above grounds for dismissal regardless of whether the company learns of it before or after terminating [plaintiff’s] employment.” Id.

         In January 2014, Daymon commenced an outside compliance audit of its trading department, which included Omni Pacific’s former import/export business. Over two days, the auditors interviewed Daymon employees and reviewed records. Roberts Depo. at 230:16-240:11. During a meeting on the third day, the auditors informed Roberts they had identified three “mistakes.” Id. at 239:13-15. The third mistake involved COOs that Jim Duffy, a Daymon employee who previously worked for Omni Pacific, had signed. Id. at 240:7-11. The COOs were on the letterhead of a customer, ConAgra; Duffy signed them immediately above a line that stated “ConAgra Grocery Products Company.” Id. at 243:5-9. Duffy testified that in some cases he signed the COOs on behalf of ConAgra for the sake of expediency. Duffy Depo. at 66:2-12. He admitted that Omni Pacific had to abide by certain quotas for sales in Korea and that if he had requested too many COOs from ConAgra, ConAgra’s Korean agent would have been alerted that “too much” was coming in from Omni. Id. at 93:18-94:5.

         Roberts testified that the audit team lawyers, and the other people present at the meeting, did not give him any recommendation or advice on how to handle the mistake. Roberts Depo. at 248:4-5. Roberts told them that he would “take care” of all three issues the following day. Id. at 248:16-20.

         The next day, Roberts met with Duffy and told him:

I want you to go through every one of those contract files back there, both before and after the sale. I want you to pull them out. I want you to take out the [COO] in there, and I want you to shred it, and I want you to delete it out of your personal computer at the same time.

Id. at 258:11-17. Despite his specific instruction to destroy the electronic PDF copies of the COOs, Roberts believed that copies could be retrieved from the company’s servers and “backup drives.” Roberts Decl. ¶ 58. Roberts told Duffy to accomplish this task on a Saturday afternoon as a form of “punishment.” Roberts Depo. at 259:8-15.

         Duffy did as directed and informed Roberts on the following Monday that he had followed Roberts’s instructions. The same day, Roberts told Larry Becker and Cindy Cheng, both Daymon employees, that he had instructed Duffy to delete and shred the COOs. Id. at 264:18-265:12. They were “silent” and said they would check with the audit team regarding Roberts’s conduct. Id. at 265:18- 166:10.

         Approximately three months later, on March 10, 2014 Daymon terminated Roberts. Roberts was told that he was being terminated for “violating [the] company[’s] document-retention policy.” Id. at 349:19-23.

         Roberts filed this lawsuit on February 19, 2015. The operative complaint encompasses eight claims: (1) wrongful termination in violation of public policy; (2) breach of contract; (3) breach of the covenant of good faith and fair dealing; (4) unpaid wages; (5) waiting time penalties; (6) conversion; (7) intentional misrepresentation; and (8) negligent misrepresentation. Second Amended Complaint (“SAC”) [Dkt. No. 57]. Roberts alleges that Daymon breached the Employment Agreement by terminating him without “cause” and failing to pay him the transition and earn-out payments he was owed upon termination other than for “cause.” Id. ¶¶ 73-79. He asserts that the pretextual for “cause” termination was intended to “cheat [him] out of his employment contract and the salary, benefits and other items they owed him.” Id. ¶ 57. According to Roberts, this conduct not only violated the terms of the Employment Agreement, but also constituted wrongful termination and a breach of the covenant of good faith and fair dealing. Id. ¶¶ 68-70, 83. Roberts also alleges that defendants have intentionally and substantially interfered with his right to possess “personal company tax records and receipts.” Id. ¶ 95. Lastly, he claims that defendants misrepresented his eligibility to participate in the 401(k) Profit Sharing Plan and the Employee Stock Ownership Plan. Id. ¶¶ 100-114.

         Defendants filed a motion for summary judgment on all eight claims. I held a hearing on June 22, 2016.


         A party is entitled to summary judgment where it “shows that there is no genuine dispute as to any material fact and [it] is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A dispute is genuine if it could reasonably be resolved in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A fact is material where it could affect the outcome of the case. Id.

         The moving party has the initial burden of informing the court of the basis for its motion and identifying those portions of the record that demonstrate the absence of a genuine dispute of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986). Once the movant has made this showing, the burden shifts to the nonmoving party to identify specific evidence showing that a material factual issue remains for trial. Id. The nonmoving party may not rest on mere allegations or denials from its pleadings, but must “cit[e] to particular parts of materials in the record” demonstrating the presence of a material factual dispute. Fed.R.Civ.P. 56(c)(1)(A). The nonmoving party need not show that the issue will be conclusively resolved in its favor. See Anderson, 477 U.S. at 248-49. All that is required is the identification of sufficient evidence to create a genuine dispute of material fact, thereby “requir[ing] a jury or judge to resolve the parties’ differing versions of the truth at trial.” Id. (internal quotation marks omitted). If the nonmoving party cannot produce such evidence, the movant “is entitled to...judgment as a matter of law because the nonmoving party has failed to make a sufficient showing on an essential element of her case.” Celotex, 477 U.S. at 323.

         On summary judgment, the court draws all reasonable factual inferences in favor of the nonmoving party. Anderson, 477 U.S. at 255. “Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge.” Id. However, conclusory and speculative testimony does not raise a genuine dispute and is insufficient to defeat summary judgment. See Thornhill Publ’g Co., Inc. v. GTE Corp., 594 F.2d 730, 738-39 (9th Cir. 1979).


         Defendants’ motion for summary judgment involves four primary questions: (1) Was Roberts terminated for cause? (2) If so, was the “for cause” termination simply pretext to avoid paying him earn-out and other transition benefits? (3) Does Roberts have ownership over the “tax receipts and records” at issue in his conversion claim? and (4) Are the alleged negligent and intentional ...

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