Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_04-cv-00142/USCOURTS-caed-2_04-cv-00142-2/pdf.json

Nature of Suit Code: 790
Nature of Suit: Other Labor Litigation
Cause of Action: 28:1441 Petition for Removal

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28 1 Because oral argument will not be of material

assistance, the court orders the matter submitted on the briefs. 

E.D. Cal. L.R. 78-320(h). 

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

KENNETH DRAKE,

NO. CIV. S-04-0142 FCD JFM

Plaintiff,

v. MEMORANDUM AND ORDER

LOWE’S COMPANIES, INC.,

Defendant.

_________________________/

----oo0oo----

This matter is before the court on motion by defendant,

Lowe’s Companies, Inc. (“defendant”), for attorney’s fees

pursuant to Federal Rule of Civil Procedure 54.1

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2 The background facts are taken from the court’s order

awarding summary judgment to defendant, filed July 22, 2005.

2

BACKGROUND2

 On August 22, 1994, defendant hired Kenneth Drake

(“plaintiff”) to work at one of its retail stores in Indiana. 

After the hiring, the parties entered into an employment contract

which was signed and executed in Indiana. Plaintiff transferred

to work at defendant’s store in Temecula, California in October

1999. Plaintiff then received a promotion to work at defendant’s

store in Vacaville, California in March 2001, where plaintiff

managed the store for two years.

Desiring to return home to Indiana, plaintiff applied for

and defendant approved a transfer to work as a store manager for

one of defendant’s stores in Indiana. Plaintiff’s last day at

the Vacaville store was January 31, 2003. On February 1, 2003,

plaintiff requested one of his former subordinates pay him

$1,502.00 to redeem some of his accrued vacation time. His

subordinate complied by paying him $1,502.00 in cash from the

store safe. 

On February 5, 2003, plaintiff’s supervisor at the Indiana

store questioned plaintiff regarding the cash withdrawal. 

Plaintiff admitted that he withdrew the cash from the Vacaville

store safe. Plaintiff’s supervisor consulted with defendant’s

human resources department and determined that plaintiff should

be terminated for withdrawing the cash without approval. 

Plaintiff was terminated on February 7, 2003. 

Plaintiff filed the instant complaint in Solano County

Superior Court, seeking damages for 1) breach of implied-in-fact

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contract, 2) breach of the covenant of good faith and fair

dealing, 3) tortious discharge in violation of public policy, 4)

unfair competition under California Business and Professions Code

section 17200, and 5) waiting time penalties under California

Labor Code section 203. (First Amended Complaint (“FAC”), Exh. A

to Def.’s Notice of Removal, filed January 22, 2004.) Defendant

removed the action to this court on January 22, 2004 and

subsequently filed a motion to dismiss, which this court denied. 

(Mem.& Order Mot. Dismiss, filed May 21, 2004.) 

Defendant moved for summary judgment on June 7, 2005. The

court granted defendant’s motion in its entirety. (Mem. & Order,

filed July 22, 2005.) After applying a conflict of law analysis

for plaintiff’s tort and statutory claims (claims three through

five), the court determined that Indiana law applied and

dismissed these claims on the basis of Indiana law. (Id. at 13-

18.) As to plaintiff’s contract-based claims (claims one and

two), the court alternatively applied both California and Indiana

law. As to these claims, the court did not engage in a conflict

of law analysis because the application of either state’s laws

resulted in dismissal of the claims. (Id. at 7-11.)

Defendant subsequently filed the instant motion seeking, as

the prevailing party on the summary judgment motion, reasonable

attorney’s fees pursuant to California Labor Code section 218.5. 

(Def.’s Mot. Att’y Fees, filed August 22, 2005.) 

ANALYSIS

Defendant brings this motion under Federal Rule of Civil

Procedure 54. Rule 54 establishes the procedure to obtain

attorney’s fees, and a party seeking attorney’s fees must provide

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3 Rule 54(d) allows its requirement of filing 14 days

from judgment to be modified if a statute provides otherwise or

by order of the court. “Local Rules are standing court orders

for purposes of Rule 54(d).” Eastwood v. National Enquirer, 123

F.3d 1249, 1257 (9th Cir. 1997); see also Port of Stockton v.

Western Bulk Carrier KS, 371 F.3d 1119, 1122 (9th Cir. 2004)

(modifying Rule 54(d) to incorporate a 30-day time limit from

Eastern District Local Rule 54-293). Here, defendant filed its

motion for fees on August 22, 2005, within the requisite 30-day

filing period. 

4 As stated above, the Labor Code is raised by plaintiff

only with regard to a claim for waiting time penalties.

4

another source for the award of fees such as a rule, statute, or

contract.3 Fed. R. Civ. P. 54(d)(2); MRO Commc’ns, Inc. v. AT&T

Co., 197 F.3d 1276, 1282 (9th Cir. 1999). Here defendant brings

this Rule 54 motion alleging that it is entitled to attorney’s

fees under California Labor Code section 218.5.

I. Application of California Labor Code section 218.5

Setting aside any choice of law issues, the parties first

dispute whether California Labor Code section 218.5 applies to

the instant case, which does not raise the statute directly and

which largely involves non-Labor Code claims.4 Section 218.5

provides:

In any action brought for the nonpayment of wages,

fringe benefits, or health and welfare or pension

fund contributions, the court shall award reasonable

attorney’s fees and costs to the prevailing party if 

any party to the action requests attorney’s fees and 

costs upon the initiation of the action. 

Cal. Lab. Code § 218.5. Courts have applied Section 218.5 to

claims that arise outside of the Labor Code. Leighton v. Old

Heidelberg, Ltd., 219 Cal. App. 3d 1062, 1078 (1990) (awarding

plaintiff attorney’s fees under Section 218.5 for claims of

wrongful termination and breach of the covenant of good faith and

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fair dealing); Mandelaris v. McGraw-Hill Broad. Co., 1 Wage &

Hour Cas. 2d (BNA) 64, 1992 U.S. Dist. LEXIS 17818 (D. Cal. 1992)

(applying Section 218.5 to a breach of contract claim). Thus,

the court finds that Section 218.5 is not limited to claims

brought under the statute specifically or under the Labor Code

generally.

Nevertheless, to be applicable, Section 218.5 requires that

plaintiff seek recovery for the “nonpayment of wages.” Plaintiff

maintains he did not seek “unpaid wages” in his pleadings. (Id.) 

The court rejects plaintiff’s argument as he expressly sought

such wages in paragraphs 19, 24, and 32 of the first amended

complaint:

In addition, Defendant terminated Plaintiff for the 

purpose of depriving Plaintiff of vacation pay and 

other compensation to which Plaintiff was legally

entitled under the California Labor Code, as identified

herein, and applicable wage and hour laws. (1st Am.

Compl. ¶ 19.)

As a proximate and legal result of Defendant’s 

violation of said implied covenant of good faith and 

fair dealing, Plaintiff has suffered contract economic

damages and has incurred substantial losses in wages,

earnings, bonuses, deferred compensation, and other

employee benefits and costs incurred in seeking 

substitute employment, all to his damage in an amount

according to proof. (1st Am. Compl. ¶ 24.)

As a proximate and legal result of the Plaintiff’s

termination from employment in violation of public 

policy, Plaintiff has suffered and continues to suffer

substantial losses in the form of past and future wages,

earnings, bonuses, deferred compensation, other 

employment benefits and consequential damages which 

damages Plaintiff would not have incurred had Defendant

not tortiously discharged Plaintiff, plus expenses 

incurred in obtaining substitute employment, all to

Plaintiff’s damage in an amount according to the proof.

(1st Am. Compl. ¶ 32.) 

As such, if California law applies (which is discussed below),

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5 The court additionally rejects plaintiff’s argument

that fees are not permitted under Section 218.5 because defendant

failed to specifically request such fees under Section 218.5. 

Section 218.5 requires a party to request attorney’s fees upon

the initiation of the action. Here, defendant requested,

generally, in its answer attorney’s fees. (Def.’s Answer, filed

June 17, 2004, at 9). A plain reading of the statute does not

require a specific request for fees under the Section (“if any

party to the action requests attorney’s fees and costs upon the

initiation of the action”).

6

Section 218.5 could be a source of fees in this case.5

II. Application of California Labor Code section 218.5 to

Claims Decided Under Indiana Law

The parties next dispute whether Section 218.5 may serve as

a basis for an award of fees in this case where the underlying

claims were, in large part, resolved on the basis of Indiana law.

In MRO, the Ninth Circuit held that “[i]n an action involving

state law claims, we apply the law of the forum state to

determine whether a party is entitled to attorneys' fees, unless

it conflicts with a valid federal statute or procedural rule.” 

197 F.3d at 1282. Defendant argues that MRO thus compels this

court to apply Section 218.5 because California is the forum

state. (Def.’s Suppl. Br., filed September 23, 2005, at 2). The

award of attorney’s fees here, however, is not susceptible to

such a conclusory analysis.

As plaintiff correctly points out, MRO did not address the

instant issue of applying the forum state’s attorney’s fees

provision when the substantive claims were governed, or governed,

at least, alternatively, by the laws of a foreign state. Rather,

at issue in MRO was whether Federal Rule of Civil Procedure 68

(regarding offers of judgment), as opposed to Nevada state law,

should apply to an award of attorney’s fees to the defendant who

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6 While it was not clear whether the district court

applied Nevada law or New Jersey law to the state law claims, the

Ninth Circuit did not need to make such a determination because

the law of both states compelled the same result--an award of

attorney’s fees to the prevailing party. MRO at 1281-1282.

7

prevailed on the plaintiff’s Nevada state laws claims. MRO at

1283.6 To the contrary, the question here is whether the forum

state’s law pertaining to attorney’s fees applies where the

underlying claims were resolved primarily on a foreign state’s

law and where the foreign state’s law conflicts with the forum

state’s law on attorney’s fees. 

When a foreign state’s substantive law applies, rather than

the law of the forum state, federal courts will apply the foreign

state’s law in awarding attorney’s fees. Cutler v. Bank of Am.

Nat'l Trust & Sav. Ass’n, 441 F. Supp. 863, 864-865 (D. Cal.

1977). At issue in Cutler was whether English law or California

law applied to an award of attorney’s fees. Id. at 864. The

plaintiff, Cutler, sued the defendant Bank of America for the

loss of property which resulted from a robbery at a bank branch

in England. Id. The court found that English law governed the

plaintiff's substantive claims for punitive damages, intentional

infliction of emotional distress, and conversion. Id. Applying

California choice of law principles, the court found that English

law should also apply in awarding attorney’s fees. Id. at 867. 

The court noted, “a California court would look to the governing

substantive law to determine the appropriateness of an award of

attorneys' fees under the circumstances.” Id. at 865 (emphasis

added). In that case, the court had determined that the

governing substantive law was English law. Other federal courts

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have similarly applied a foreign state’s laws in awarding fees. 

DeRoburt v. Gannett Co., 558 F. Supp. 1223, 1226 (D. Haw. 1983); 

McMahan v. Toto, 256 F.3d 1120, 1135 (11th Cir. 2001)(rescinded

on other grounds); Atchison Casting Corp. v. Dofasco, Inc., 1995

U.S. Dist. LEXIS 17367 (D. Kan. 1995).

Applying these principles here, the court clearly applied

Indiana law to plaintiff’s tort and statutory claims. (Mem. &

Order at 16.) On this point, defendant must concede California

law is not applicable. As such, the California Labor Code cannot

serve as a basis for an award of fees on these claims as it is

not the “governing substantive law.” 

With respect to plaintiff’s contract-based claims, however, 

the court applied, alternatively, both California and Indiana law

in dismissing the claims. (Id. at 8.) Defendant thus argues

that because California law was applied, an award of fees is

appropriate based on Section 218.5, at least in part, based on

plaintiff’s first and second claims for relief. In ruling on the

summary judgment motion, the court did not determine which

state’s law ultimately applied to the contract claims under a

conflict of law analysis because it was not necessary in that

application of either state’s law resulted in dismissal of

plaintiff’s claims. (Id.) 

The court must therefore determine whether Section 218.5

should apply to the contract claims when both state’s laws were

applied and no express finding was made regarding the choice of

law question. To resolve this question, the court finds Anderson

v. Savin Corp., 206 Cal. App. 3d 356 (1988) instructive. The

court in Anderson found that when there is no conflict between

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the law of two jurisdictions because the result is the same under

either the forum or foreign state’s law, a court may apply the

law of the foreign state in conformance with the “reasonable

expectations of the parties.” Anderson, 206 Cal. App. 3d at 366; 

seealso DeRoburt, 558 F. Supp. at 1227 (considering the

“reasonable expectations of the parties” in awarding attorney’s

fees). The plaintiff, in Anderson, was hired by the defendant

Savin Corporation as a photocopier salesperson under an

employment contract which contained a choice of law provision

requiring application of New York law. Id. at 360. Anderson was

subsequently terminated for making racially and sexually

derogatory comments to a defendant trainee. Id. Anderson filed

suit alleging wrongful discharge along with six other claims for

relief related to his termination. Id. at 360-361. At issue

before the court was whether New York law determined Anderson's

employment rights and precluded an at-will employee from

maintaining a cause of action for wrongful discharge. Id. at

361. The court found no conflict existed between California and

New York law with regard to wrongful discharge as applied to the

facts of the case. Id. at 366. The court found that in such a

situation, when two states’ laws may apply but no conflict

exists, it may nevertheless be appropriate to apply the law of

the non-forum state to adjudicate substantive claims. Id.

“Under such circumstances, California will apply the law of the

foreign jurisdiction in conformance with the reasonable

expectations of the parties.” Id.

Applying Anderson to the instant case, although the contract

here did not contain a choice of law provision, it is reasonable

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to conclude that the parties expected the employment contract to

be governed by Indiana law. Specifically, plaintiff was hired by

defendant to work at one of its retail stores in Indiana, entered

into his employment contract in Indiana, and ultimately requested

transfer back to Indiana where he was terminated. (Mem. & Order

at 2-5.) In addition, defendant applied its Indiana policy and

Indiana law in distributing plaintiff’s final pay. (Id. at 5.) 

Thus, the court finds that even with respect to plaintiff’s

contract based claims, Indiana law should apply in determining

whether attorney’s fees are appropriate. 

On the issue of Indiana law, defendant has not cited, and

the court is not aware, of any applicable Indiana authority

allowing an award of attorney’s fees on the facts of this case. 

Therefore, defendant’s motion for attorney’s fees is DENIED in

its entirety.

CONCLUSION

For the foregoing reasons, defendant’s motion for attorney’s

fees is DENIED.

IT IS SO ORDERED.

DATED: October 11, 2005

/s/ Frank C. Damrell Jr. 

FRANK C. DAMRELL, Jr.

UNITED STATES DISTRICT JUDGE

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