Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_14-cv-00846/USCOURTS-cand-3_14-cv-00846-1/pdf.json

Nature of Suit Code: 442
Nature of Suit: Civil Rights Employment
Cause of Action: 28:1332 Diversity-Employment Discrimination

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

San Francisco Division

JOSEPH A SMITH,

Plaintiff,

v.

EQUINOX HOLDINGS, INC., et al.,

Defendants.

Case No. 14-cv-00846-LB 

ORDER ON SUMMARY JUDGMENT

[Re: ECF No. 49]

INTRODUCTION

Plaintiff Joseph Smith sued his former employer Equinox for unpaid wages under California 

law based on Equinox‘s allegedly mistaken classification of him as an exempt employee. (Compl., 

ECF No. 1-1.)1 He also sued for (1) retaliatory termination, (2) defamation based on an Equinox 

manager‘s allegedly telling other employees that Equinox fired him for ―integrity‖ reasons, and (3) 

breach of contract. (Id.) Equinox counters that Smith was an exempt employee and thus is not 

entitled to additional wages and that it fired him for violation company policy. (Motion, ECF No. 

49.) It moves for summary judgment on all claims. (Id.)

Because genuine issues of material fact preclude summary judgment, the court denies 

Equinox‘s summary-judgment motion.

 

1 Record citations are to material in the Electronic Case File (―ECF‖); pinpoint citations are to the 

ECF-generated page numbers at the tops of the documents.

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STATEMENT

This case is about a retail manager who performed well for years, but who was eventually fired 

when his employer discovered that he had (allegedly) breached company policy in certain 

transactions. Many facts are undisputed. The court recounts them here from the parties‘ joint 

statement of undisputed material facts (ECF No. 49-1). The Analysis below contains a more 

detailed discussion of additional facts relevant to specific issues.

I. SMITH’S EMPLOYMENT HISTORY WITH EQUINOX

From 2008 to December 2013, Plaintiff Joseph A. Smith worked as a manager for several

Equinox retail clothing and workout-gear shops located in Equinox Fitness facilities in California. 

(ECF No. 49-1, ¶ 1.) Mr. Smith started working for Equinox in the summer of 2008 as a Regional 

Shop Manager. (Id. ¶ 2.) His offer letter states that his employment would be at will. (Id. ¶ 3.) A 

year or two later, Mr. Smith‘s title was changed to District Shop Manager. (Id. ¶ 4.) He later 

became the National Shop Training Manager. (Id. ¶ 5.) During his career, Mr. Smith was 

responsible for three Equinox shops in California. (Id. ¶ 6.)

A. Plaintiff’s Job: Duties and Characteristics

Mr. Smith was responsible for training and developing both sales associates and Managers on 

Duty. (Id. ¶¶ 6, 17.) His salary when he was fired was roughly $61,000 per year. (Id. ¶ 7.)

(Equinox sales associates made around $10 per hour. (Id. ¶ 8.)) He participated in the hiring of 

approximately 15 associates. (Id. ¶ 9.) He claims that ―on a daily basis‖ he researched the previous 

day‘s sales to decide how to place items on the floor. (Id. ¶ 28.) He was responsible for ensuring 

that all three shops had systems that mirrored one another according to corporate directives. (Id. ¶ 

29.) Mr. Smith could choose (and submit for upper-management approval) which stores he would 

visit on which days. (Id. ¶ 30.) He made hiring recommendations that were followed ―more often 

than not‖ and promoted one sales associate to Manager on Duty. (Id. ¶ 30.) His 2009 performance 

review reflects that he oversaw ―trunk shows‖ and special events at the shops, and was responsible 

for ensuring that club events were ―cleanly‖ executed. (Id.) It is undisputed that, as District Shop 

Manager, Mr. Smith engaged in and was responsible for:

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 Talent management — Helping with and ensuring the proper coaching, training, and 

development of sales associates and Managers on Duty; identifying ―top trainers.‖

 Operational excellence — Understanding and upholding loss-prevention and inventorymanagement policy, including ensuring that the team followed the policies; ensuring that 

he and his team understood all communication and training materials and accurately 

completed assigned operational tasks; helping with scheduling and shift coverage; 

administering and completing ―Shop Visit Audits.‖

 Product and presentation — Ensuring that the shop and staff reflected brand standards 

(proper execution of merchandising, ―marketing direction,‖ and dress code); enforcing and 

maintaining organizational standards on sales floor, at ―cash wraps,‖ and in stockrooms; 

ensuring that shops within his territory were visually enticing.

 Professional dimensions — Building effective relationships with employees, colleagues, 

supervisors, and clients; maintaining working knowledge of happenings and general 

standards and practices outside the shop; complying with and enforcing company policy 

and procedure; resolving personnel concerns fairly and in a timely manner.

(Id. ¶ 32.)

Mr. Smith was deployed to train and develop talent in the company; he focused on finding the 

best possible staff and on ―bringing them to a level that would make his shops operate flawlessly.‖ 

(Id. ¶¶ 10-16.) In his 2012 review, he highlighted the fact that he had promoted a sales associate to 

Manager on Duty in Palo Alto and had also cultivated new talent for a new Manager on Duty at 

the Pine Street store. (Id. ¶ 12.) As manager, Mr. Smith was responsible for ensuring that sales 

associates did their jobs and correcting them to improve performance. (Id. ¶¶ 19-20.) He 

completed performance reviews for his associates. (Id. ¶ 18.)

Mr. Smith was further expected to understand, train other employees on, and enforce company 

policy. (Id. ¶¶ 22-23, 32.) This included the meal-break policy. (Id.) When Mr. Smith was in the 

shops himself, he enforced those policies; he gave permission for breaks and reminded people to 

take breaks when they were due. (Id. ¶¶ 22-23.)

Mr. Smith also performed work that Equinox characterizes as being ―much above the District 

Shop Manager title.‖ (See ECF No. 49 at 11.) However characterized, it is undisputed that Mr. 

Smith helped open new stores in Southern California, in the course of which he trained new 

associates and managers. (ECF No. 49-1, ¶ 24.) He trained three new district managers in 2011 

and led the ―LA 2 District‖ in Los Angeles. (Id. ¶¶ 25.) The previous year, Equinox had sent Mr. 

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Smith to Florida to help turn around the region, which had been performing poorly, by training a 

new manager and identifying opportunities for that manager to produce better results for Equinox. 

(Id. ¶ 26.) In 2013, Equinox flew him to New York to work with the Senior Manager of Retail 

Operations, Becca Briggs, to revise training documents in advance of a national meeting. (Id. ¶ 

33.)

Mr. Smith‘s employment agreement with Equinox established certain sales goals for the shops 

that he managed. Sometime in Spring or Summer 2013, Equinox raised those goals. (Id. ¶ 35.) Mr. 

Smith knows of no policy forbidding the company from raising his sales goals (Id. ¶ 36.) He does 

not know the criteria that Equinox uses when deciding whether to raise goals. (Id.) His regional 

manager, Brooke English, told him that his sales goals had been raised because he was doing 

―fabulous‖ work and the company believed that he could meet the more ambitious targets. (Id.

¶ 37.)

B. Mr. Smith Complains to Equinox

Early in 2013, Mr. Smith allegedly raised concerns to senior Equinox personnel that nonexempt shop employees were not able to take their breaks on time and that the company was not 

complying with its meal- and rest-break policy. (Id. ¶ 41.) Mr. Smith does not recall anyone at 

Equinox telling him that he should not complain about these things. (Id. ¶¶ 43-44.) He further 

alleges that shortly before June or July 2013 he complained to several Equinox officers that he 

himself was misclassified as exempt. (Id. ¶ 47.) He was aware that a wage-and-hour class action 

had been filed against Equinox. (Id. ¶ 40; Smith Dep. – ECF No. 49-3 at 74.)

C. Underperformance, Investigation, Termination

In November 2013, Equinox noticed low profit margins in its Northern California stores. (ECF 

No. 49-1, ¶ 48.) The ensuing investigation revealed low margins in Mr. Smith‘s shops and 

associated these low margins with sales prices being applied after sales had ended. (Id. ¶ 49.) 

Equinox then started to investigate Mr. Smith. (Id. ¶ 50.) On November 7, 2013, Equinox 

personnel met with Mr. Smith and other shop employees. (Id. ¶ 51.) Equinox told Mr. Smith that 

he could prepare a written response to the issues raised at the meeting and that this ―would be 

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passed along to people who better understand shop business.‖ (Id. ¶ 52.) Mr. Smith felt 

uncomfortable with this approach; he declined to submit a written response and instead asked ―to 

speak with someone else at Equinox regarding the matter.‖ (Id.)

Equinox concluded that Mr. Smith had rung his own sale and given himself a discount on 

items that should not have been discounted. (Id. ¶ 56.) It is undisputed that Equinox‘s lossprevention provided that anyone found applying unauthorized discounts to transactions could be 

subject to discipline up to and including termination. (Id. ¶¶ 53, 55.) Mr. Smith understood this. 

(Id.) His position as a regional and district manager obligated him not only to follow lossprevention policies himself but to ensure that shop associates followed them as well. (Id. ¶ 54.) 

Tracey Gaven-Bridgmann, the Equinox manager who fired Mr. Smith, participated in the firing of 

an employee who ―she believes to have been a Manager on Duty‖ in one of the company‘s New 

York stores ―for abusing the employee discount and ringing her own sales.‖ (Id. ¶¶ 56-57.) The 

New York employee was actually fired for misusing a customer‘s gift card. (Briggs Dep. – ECF 

No. 51-3 at 175.)

In December 2013, Equinox fired Mr. Smith for ringing up his own sales and giving 

unauthorized discounts. (Id. ¶¶ 56, 60, 61.) The Equinox officer who fired Mr. Smith testified that, 

when she made that decision, he had not given any explanation for his challenged actions. (Id. ¶ 

54.) Mr. Smith has testified that two other Equinox store managers told him that ―they heard he 

was terminated for  ̳integrity reasons.‘‖ (Id. ¶ 64.) One of these managers also told him that she 

had been told this by regional manager Brooke English. (Id. ¶ 65.) Mr. Smith did not know of 

anything suggesting that information about his firing had been otherwise ―made public.‖ (Id. ¶ 67.)

II. DISPUTED FACTS

Both parties go beyond the undisputed facts to offer additional details about the composition 

of Mr. Smith‘s work. These details will affect the pivotal question of whether Mr. Smith was 

―primarily engaged‖ in exempt managerial work. Mr. Smith argues that, whatever his managerial 

duties, he spent most of his time doing non-exempt work. Equinox denies this.

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For its part, to the undisputed facts recounted above, Equinox adds a single item: It contends 

that Mr. Smith‘s ―register history‖ at Equinox shows that, during his whole tenure, he rang up 

―approximately 3% of the sales in his shops.‖ (ECF No. 49 at 12; Briggs Decl. – ECF No. 49-5 at 

1, ¶ 2.) This proves (in Equinox‘s view) that Mr. Smith ―rarely acted as a [non-exempt] sales 

associate.‖ (ECF No. 49 at 12.) It explains: ―[T]he percentage to total sales contribution of any 

associate working in any of Equinox‘[s] shops is almost exactly the percentage of the total 

operating hours that they work.‖ (Id. (citing Briggs Decl. – ECF No. 49-5 at 2, ¶ 3).) A sales 

associate who works 60% of the hours in a given shop will ring up 60% of sales; one who works 

10% of the hours will account for that fraction of sales.

The plaintiff goes further in filling out the record. His basic assertion is that he ―performed 

non-managerial duties for more than 50% of his work time.‖ (ECF No. 51 at 10.) He claims that 

he ―spent most of his work time receiving shipments, stocking shelves, folding merchandise, and 

selling clothing.‖ (Id. (citing Smith Dep. – ECF No. 51-2 at 16).) ―These were the same job duties 

performed by non-exempt Shop employees.‖ (ECF No. 51 at 10 (citing Smith Dep. – ECF No. 51-

2 at 22-23, Smith Decl. – ECF No. 51-5 at 2, ¶ 5).) ―During an average work week,‖ Mr. Smith 

continues, he ―spent approximately 30-40% of his work time receiving deliveries of merchandise, 

unpacking this merchandise, processing the merchandise in preparation for putting it on Shop 

shelves, logging this merchandise in the Equinox database system, tagging this merchandise, and 

disposing of the boxes and packing materials‖ in which it arrived. (ECF No. 51 at 10 (citing Smith 

Decl. – ECF No. 51-5 at 2, ¶ 6 and Gaven-Bridgmann Dep. – ECF No. 49-3 at 112-13 ).) Another 

―40-50% of his work time‖ Mr. Smith describes as occupied by ―greeting customers . . . [,] 

informing them of promotions . . . , organizing the . . . Shop floor,‖ folding and displaying 

merchandise, ―creating sales tags, dressing mannequins, and cleaning the Shop floor.‖ (ECF No. 

51 at 10-11; Smith Decl. – ECF No. 51-5 at 2, ¶ 6.) He also rang up customer sales. (Id.) Finally in 

this vein, Mr. Smith asserts that he spent ―approximately 5-10% of his work time checking 

inventory in the backroom, organizing the backroom, and cleaning the backroom.‖ (Id.)

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On a related point, Mr. Smith claims that, ―[a]lthough he was a District Manager,‖ he ―had 

minimal authority and discretion over his work because his supervisors and Equinox‘s corporate 

office had to approve most of his decisions.‖ (ECF No. 51 at 11.) According to Mr. Smith, the 

corporate office instructed him on ―how to manage the Shops, select merchandise, manage 

inventory, ensure loss prevention, and carry out company brand standards.‖ (Id.) ―Equinox‘s 

corporate office controlled the operation of the Shops,‖ he continues, ―including developing key 

business metrics, selling tactics, and how to clean and maintain the Shop.‖ (Id.) He ―had no input 

into the budget‖ for the shops that he managed, and ―did not have authority to determine the labor 

hours that were allocated‖ to his shops. (Id.)

* * *

Having set out these additional facts, this may be the best place to address the parties‘ crossing 

objections about this material. The plaintiff objects to parts of Ms. Briggs‘s testimony —

especially her assertion that Equinox ―register history‖ for Mr. Smith shows that he accounted for 

roughly 3% of sales in his shops.2

Then there is the defendant‘s objection. Equinox complains that Mr. Smith‘s opposition 

invokes a ―raft of facts‖ without having conferred with Equinox‘s counsel about whether any of 

them would have been ―appropriate for a joint statement of facts.‖ (ECF No. 52 at 6.) This 

―violate[s] the spirit‖ of the court‘s standing order, which contemplates that a party opposing 

summary judgment ―may propose additional undisputed facts to the moving party . . . and ask for 

a response . . . .‖ (Id. (quoting standing order)). Equinox argues that ―all‖ such evidence should be 

struck or — what amounts to the same thing — ―should be given no weight whatsoever.‖ (Id.)

The court disagrees. The plaintiff is simply pointing to additional facts that it deems material 

to the summary-judgment analysis. If those facts are disputed, the plaintiff must think that he can 

 

2 Mr. Smith challenges this evidence, arguing that the basis for this figure was not supported by 

the actual register history. (ECF No. 51 at 16.) Equinox then submitted a supplemental declaration 

with its reply brief with more evidentiary support. (ECF No. 52.) Mr. Smith responded that the 

court should not consider this further evidence, in part because it was untimely. (ECF No. 53.) The 

court need not resolve this issue because, even considering the supplemental evidence, and as 

discussed below, genuine issues of material fact about Mr. Smith‘s work duties preclude summary 

judgment.

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prove them to a trier of fact, and that they will consequentially (read: materially) impact the Rule 

56 inquiry. Nothing in Rule 56 confines a summary-judgment opponent to arguing from only 

undisputed facts. Nothing in Rule 56 obligates a party to concede that the only material facts in a 

case are those on which the parties agree. Summary judgment poses exactly the question: Are 

there disputed material facts? If there are not, then, in most conceivable cases, one party should be 

entitled to summary judgment. But summary judgment may be inappropriate precisely because 

there are disputed facts that impact the analysis and help delimit the permissible conclusions.

Perhaps the better practice would have been to meet and confer over — and, if possible, agree 

on — additional undisputed facts. That is what the court‘s standing order contemplates. (And, of 

course, the court expects parties to follow its standing order.) But that same standing order also 

provides: ―Joint statements of undisputed facts are not required but are helpful.‖ (Standing Order 

at 4, ¶ 8 (emphasis added).) This reflects a practical reality that obtains here: Even if the parties 

had conferred, that could not have guaranteed that they would agree to further undisputed facts. 

And, again, nothing in summary-judgment law prevents the plaintiff from propounding other facts 

as disputed and material.

ANALYSIS

I. MISCLASSIFICATION

Most of the plaintiff‘s claims stem from his charge that Equinox wrongly classified him as an 

exempt employee under California labor laws, and so denied him the various benefits (such as 

overtime pay and paid meal periods) that he would have been entitled to had he been classified as 

non-exempt. Mr. Smith‘s first six claims depend directly on this root allegation that he was 

misclassified; his seventh claim, under California‘s UCL, likewise depends on the contention that 

Equinox wrongly treated him as an exempt employee.

Equinox argues that Mr. Smith was indeed exempt and, on this ground, seeks summary 

judgment against Claims 1-7. Specifically, Equinox claims that Mr. Smith fell under the 

―executive exemption.‖ (E.g., ECF No. 49 at 16.) ―[T]he assertion of an exemption . . . is 

considered to be an affirmative defense, and therefore the employer bears the burden of proving 

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the employee‘s exemption.‖ Sav-On Drug Stores, Inc. v. Superior Court, 34 Cal.4th 319, 338 

(2004) (quoting Ramirez v. Yosemite Water Co., 20 Cal.4th 785, 794-95 (1999)). Proving the 

exemption is a complete defense to, and warrants summary judgment against, claims of 

misclassification. In re United Parcel Serv. Wage and Hour Cases, 190 Cal. App. 4th 1001, 

(2010) (―UPS‖) (citing authorities) (―A moving defendant may properly meet its burden on 

summary judgment by conclusively establishing a defense to the [misclassification] claim.‖); see 

Hill v. R+L Carriers, Inc., 690 F. Supp. 2d 1001, 1005 (N.D. Cal. 2010).

A. Governing Law

To show that Smith was exempt, Equinox is ―required to demonstrate the following: (1) his 

duties and responsibilities involve management of the enterprise or a  ̳customarily recognized 

department or subdivision thereof‘; (2) he customarily and regularly directs the work of two or 

more employees; (3) he has the authority to hire or terminate employees, or his suggestions as to 

hiring, firing, promotion or other changes in status are given  ̳particular weight‘; (4) he 

customarily and regularly exercises discretion and independent judgment; (5) he is primarily 

engaged in duties that meet the test of the exemption; and (6) his monthly salary is equivalent to 

no less than two times the state minimum wage for full-time employment.‖ UPS, 190 Cal. App. 

4th at 1014 (citing Cal. Code Regs., tit. 8, § 11090, subd. 1(A)(1)). ―Because the exemption uses 

conjunctive language,‖ Equinox is ―required to establish all of the elements.‖ UPS, 190 Cal. App. 

4th at 1014 (emphasis in original) (citing, inter alia, Eicher v. Advanced Bus. Integrators, Inc.,

151 Cal. App. 4th 1363, 1372 (2007)).

―Determining whether or not all of the elements of the exemption have been established is a 

fact-intensive inquiry.‖ UPS, 190 Cal. App. 4th at 1014. ―The appropriateness of any employee‘s 

classification as exempt must be based on a review of the actual job duties performed by that 

employee.‖ Id. at 1015. ―The work actually performed by the employee during the course of the 

workweek must, first and foremost, be examined and the amount of time the employee spends on 

such work, together with the employer‘s realistic expectations and the realistic requirements of the 

job, shall be considered . . . .‖ Id. (emphasis in UPS) (citing Cal. Code Regs., tit. 8, § 11090, subd. 

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1(A)(1)(e) and Ramirez, 20 Cal.4th at 802). The court must, in other words,

inquir[e] into the realistic requirements of the job. In so doing, the 

court should consider, first and foremost, how the employee actually 

spends his or her time. But the trial court should also consider 

whether the employee‘s practice diverges from the employer‘s 

realistic expectations, whether there was any concrete expression of 

employer displeasure over an employee‘s substandard performance, 

and whether these expressions were themselves realistic given the 

actual overall requirements of the job.

Ramirez, 20 Cal.4th at 802 (emphasis in original).

This has all been broadly viewed as involving a ―two-step inquiry.‖ Vinole v. Countrywide 

Home Loans, Inc., 571 F.3d 935, 945 (9th Cir. 2009); see also, e.g., Campbell v. 

PricewaterhouseCoopers, LLP, 253 F.R.D. 586, 600 (E.D. Cal. 2008). First, the court examines in 

an individualized fashion the work by the employee to determine how much of that work is 

exempt. Vinole, 571 F.3d at 945. Second, the court determines whether the employee‘s work was 

consistent with the employer‘s expectation and whether those expectations were realistic. Id

(footnote omitted); accord Sepulveda v. Wal–Mart Stores, Inc., 237 F.R.D. 229, 246 (C.D. Cal.

2006), aff'd in relevant part, 275 Fed. Appx. 672 (9th Cir. 2008).

B. Application: Fact Issues Preclude Summary Judgment

The court finds that there is no material dispute on four of the six executive-exemption 

elements described in UPS, supra. Specifically — and following the UPS numbering scheme for 

these elements — Equinox has shown that Mr. Smith: 1) managed a ―customarily recognized 

department or subdivision‖ of Equinox; 2) customarily and regularly directed the work of two or 

more employees; 3) had authority to hire or fire employees, or that his suggestions on such matters 

were given ―particular weight‖; and 6) made more than twice California‘s minimum wage (a point 

that is effectively undisputed (see ECF No. 49-1, ¶¶ 7-8) and so is not discussed further here).

Material factual disputes exist, however, on whether Mr. Smith: 4) customarily and regularly 

exercises discretion and independent judgment; and 5) was ―primarily engaged‖ in exempt work.

Because Equinox has the burden to prove all the UPS elements, the material factual disputes on 

these items preclude summary judgment against the six claims directly rooted in alleged 

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misclassification, and the seventh, derivative claim under the UCL. Furthermore, the court finds 

that a material factual dispute exists over whether it was realistic for Equinox to expect that Mr. 

Smith would spend most of his time in exempt activities.

1. Customarily Recognized Department Or Subdivision

―There is a dearth of case law interpreting the rather simple phrase  ̳customarily recognized 

department or subdivision thereof.‘‖ UPS, 190 Cal. App. 4th at 1016. ―The federal regulation 

expressly incorporated into [California‘s] Wage Order 9 defines the phrase  ̳customarily 

recognized department or subdivision‘ as distinguishing  ̳between a mere collection of men 

assigned from time to time to a specific job or series of jobs and a unit with permanent status and 

function.‘‖ UPS, 190 Cal. App. 4th at 1016 (citing 29 C.F.R. § 541.104(a) (emphasis in UPS)).

The plaintiff offers no legal argument to support his contention that material facts remain in 

dispute on this point. He argues that Equinox‘s centralized control was so ―stringent‖ as to render 

each Equinox retail shop a ―mere cog‖ and thus ―unrecognizable‖ as a department or subdivision 

of Equinox. But, again, he offers no legal authority to support this conclusion. And, as both parties 

describe the rudimentary facts of this case, the court finds untenable the contention that brick-andmortar retail shops, with fixed personnel daily carrying out routinized duties, does not constitute a 

―customarily recognized department or subdivision‖ of Equinox. The court holds that the Equinox 

shops, as they have been described in this case, are ―customarily recognized department[s] or 

subdivision[s]‖ of Equinox.

2. Managing two or more employees

The court finds it equally untenable for Mr. Smith to contend that he did not customarily direct 

the work of two or more employees. The undisputed facts, and the additional facts that Mr. Smith 

himself has asserted, show that he had various managerial duties for three Equinox shops. As 

Equinox rightly points out, Mr. Smith has himself said that there was typically one sales associate 

or Manager on Duty working at any given time in each shop. This means that Mr. Smith was 

regularly managing at least three employees.

Mr. Smith does not dispute this. He instead argues — again conflating this element with the 

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question of independent discretion — that Equinox‘s corporate offices so controlled the retail 

shops that he effectively ―shared [management] duty‖ with the corporate office, or with Equinox 

officers Tracey Gaven-Bridgmann and Brooke English. (ECF No. 51 at 18.) He argues that 

―shared responsibility‖ for management ―does not satisfy this prong‖ of the executive exemption. 

(Id. (citing 29 C.F.R. § 541.104(d)).

There are at least two flaws to this reasoning. First, the regulation that Mr. Smith cites 

addresses situations where employees are managed by one or more people; the hours of the 

managed employee cannot count in whole toward calculating the executive exemption for both 

managers. (The regulation gives an illustration: ―Hours worked by an employee cannot be credited 

more than once for different executives. . . . However, a full-time employee who works four hours 

for one supervisor and four hours for a different supervisor, for example, can be credited as a halftime employee for both supervisors.‖ 29 C.F.R. § 541.104(d).) Nothing in the regulation indicates 

that corporate policies can so control a business as to diminish the credit (so to speak) that a 

putatively exempt worker gets for managing multiple employees under this prong of the 

exemption. Nor does Mr. Smith point to any authority for so anthropomorphizing the ―level of 

[corporate] control‖ for purposes of this element. Again, he seems mainly to be borrowing notions 

from the ―independent discretion‖ element and hoping that these will also carry water under the 

―managing multiple employees‖ factor.

Second, as Equinox argues, the actual people that Mr. Smith identifies as ―sharing 

responsibility‖ for managing the employees in his three shops — Tracey Gaven-Bridgmann and 

Brooke English — ―were rarely in [Mr. Smith‘s] stores.‖ (See ECF No. 52 at 10.) Ms. GavenBridgmann was based in New York and visited Mr. Smith‘s stores once per quarter. (See ECF No. 

52 at 10.) Ms. English was based on Los Angeles and testified that she visited Mr. Smith‘s stores 

on only a few occasions. (Id.) As for the ―Managers on Duty‖ and ―assistant managers‖ that Mr. 

Smith generically identifies as possibly (―and/or‖) sharing managerial responsibility (ECF No. 51 

at 18), these are exactly the people that Mr. Smith was managing. He points to no facts suggesting 

that, instead of being under his direction, these unnamed inferior managers so shared 

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responsibility for directing other employees that they must affect the ―managing multiple 

employees‖ head in the way that Mr. Smith proposes.

3. Hiring, firing, and promoting employees

There is no genuine dispute that Mr. Smith had authority regarding hiring and firing

employees — at least to the extent that his recommendations on such matters were given 

―particular weight.‖ The parties‘ undisputed facts recount that Mr. Smith ―made hiring 

recommendations which were followed more than not.‖ (ECF 49-1, ¶ 30.) He ―participated in the 

hiring of approximately 15 associates.‖ (Id. ¶ 9.) He ―promoted one sales associate to‖ Manager 

on Duty. (Id.) And he was involved in the development of various employees. (Id. ¶¶ 10, 12, 15, 

32.)

―In order to satisfy this element of the executive exemption, the managerial or supervisory 

employee need not have final authority to hire or fire. It is sufficient if his or her  ̳suggestions and 

recommendations as to hiring or firing and as to advancement and promotion or any other change 

of status of the employee who[m] he supervises will be given particular weight.‘‖ UPS at 1021-22 

(quoting in part 29 C.F.R. § 541.106 and Cal. Code Regs., tit. 8, § 11090, subd. 1(A)(1)(c) 

(emphasis in UPS)). There was no triable issue on this head in UPS where the employee was ―part 

of the process of promoting and discharging employees,‖ where he had in fact fired employees, 

and where part of his work was to ―manage and develop‖ employees, including completing 

―regular performance appraisals‖ and ―assisting in achieving career development goals.‖ UPS, 190 

Cal. App. 4th at 1022. There is likewise no triable issue on this point in this case.

4. Discretion and independent judgment

Two major UPS elements do involve material factual disputes, however, and these prevent 

summary judgment against Mr. Smith‘s misclassification-based and UCL claims. The first such 

issue involves whether Mr. Smith customarily and regularly exercised discretion and independent 

judgment. This indeed presents a nearly prototypical jury question. The court may accept the 

relevant facts as both parties depict them and yet be unable to dispose of the question as a matter 

of law.

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Guidance again comes from the decision in UPS. The California Court of Appeal there wrote: 

[T]he phrase ―exercise of discretion and independent judgment‖ is 

defined as generally involving ―the comparison and the evaluation 

of possible courses of conduct and acting or making a decision after 

the various possibilities have been considered. The term . . . implies 

that the person has the authority or power to make an independent 

choice, free from immediate direction or supervision and with 

respect to matters of significance.‖

UPS at 1024 (quoting 29 C.F.R. § 541.207(a)). ―The requirement that discretion be exercised with 

respect to  ̳matters of significance‘ means the decision being made must be relevant to something 

consequential and not merely trivial.‖ UPS at 1024 (quoting 29 C.F.R. § 541.207(d)).

Mr. Smith argues that, ―[g]iven the level of control and supervision exercised by Equinox‘s 

corporate office,‖ it remains an issue of fact whether he exercised such discretion and independent 

judgment. (ECF No. 51 at 17-18.) He has testified that Equinox ―had to approve most of his 

decisions,‖ and, perhaps more important, directed him on ―how to manage the Shops, select 

merchandise, manage inventory, ensure loss prevention‖ and even ―how to clean and maintain the 

Shop.‖ (Id. at 11.) As might be expected, Equinox ―develop[ed] key business metrics‖; Mr. Smith 

explains that he ―had no input into the budget‖ for his shops, and ―did not have the authority to 

determine the labor hours that were allocated‖ to his shops. (Id.)

This calls to mind further, and the court thinks determinative, observations from UPS:

Perhaps the most frequent cause of misapplication of the term 

 ̳discretion and independent judgment‘ is the failure to distinguish it 

from the use of skill in various respects. An employee who merely 

applies his knowledge in following prescribed procedures or 

determining which procedure to follow, or who determines whether 

specified standards are met or whether an object falls into one or 

another of a number of definite grades, classes, or other categories, . 

. . is not exercising discretion and independent judgment . . . . This is 

true even if there is some leeway in reaching a conclusion, as when 

an acceptable standard includes a range or a tolerance above or 

below a specific standard.

UPS at 1026 (quoting 29 C.F.R. § 541.207(c)(1)). That said, a regulated workplace does not rule 

out independent judgment; and, under California law, does not itself debar a finding on summary 

judgment that an employee did exercise independent judgment. Again, UPS: ―We conclude that 

where . . . employer policies and procedures simply channel the exercise of discretion and 

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judgment, as opposed to eliminating it entirely or otherwise constraining it to a degree where any 

discretion is largely inconsequential, the executive exemption may still apply. . . . Our charge to 

construe exemptions narrowly is not a directive to render them nonexistent.‖ UPS at 1026.

Given this law, and the facts as currently developed, the court cannot say as a matter of law 

that Mr. Smith did or did not regularly exercise discretion and independent judgment within the 

meaning of the executive exemption. That is a question for the trier of fact and it prevents 

summary judgment.

5. “Primarily engaged” in exempt activity

A genuine issue of material fact exists, as well, on the question whether Mr. Smith was 

―primarily engaged‖ in exempt work, or whether, whatever his managerial duties, he spent most of 

his time ―actually performing‖ non-exempt work. This is the issue that looms largest in the 

parties‘ discussions. The court finds it insusceptible to summary resolution.

―Under California law, the phrase  ̳primarily engaged‘ means  ̳more than one-half of the 

employee‘s worktime‘ is spent performing duties that qualify as exempt.‖ UPS, 190 Cal. App. 4th

at 1018. As discussed above, Mr. Smith asserts that, whatever his managerial (exempt) duties, in 

practice he spent most of his time (―more than 50%‖) doing the same work that non-exempt sales 

associates did: ―stocking shelves,‖ for example, ―folding merchandise,‖ and ringing up customer 

sales. (See ECF No. 51 at 10.) Mr. Smith estimates that his managerial work ultimately absorbed 

―approximately 10% of his work time.‖ (Id.)

Equinox has made a countervailing factual assertion: namely, that Mr. Smith‘s ―register 

history‖ shows him accounting for only 3% of sales in his shops, and that this implies he cannot 

have been ―primarily engaged‖ in non-exempt work. If it proves true, that would indeed be a

striking fact. With or without it, though, Mr. Smith‘s own testimony raises a factual issue on this 

point that the court cannot decide as a matter of law. This is especially true given that the burden 

to prove each element of the exemption rests on Equinox. On this issue, too, the court cannot grant 

the requested summary judgment.

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6. Realistic expectations

Finally in this area, Equinox argues (in sum) that, if Mr. Smith engaged in as much nonexempt work as he claims, he has departed from the expectations of the job he was hired and paid 

for, and cannot thereby shunt himself into non-exempt status. (See ECF No. 49 at 19-20.) Equinox 

raises a valid point. The California Supreme Court has indicated the role that an employer‘s 

expectations play in this respect:

the trial court should also consider whether the employee‘s practice 

diverges from the employer‘s realistic expectations, whether there 

was any concrete expression of employer displeasure over an 

employee‘s substandard performance, and whether these expressions 

were themselves realistic given the actual overall requirements of 

the job.

Ramirez, 20 Cal.4th at 802. The court finds a material factual dispute to exist on this question. Mr. 

Smith has testified that the Equinox facilities were physically small and lightly staffed. (See Smith 

Dep. – ECF No. 51-2 at 16; Briggs Dep. – ECF No. 51-3 at 5-6; English Dep. – ECF No. 51-3 at 

47-48.) By his description, these simple facts made it unavoidable that a manager in Mr. Smith‘s 

position would be among the inventory and customers, and by force of circumstance would end up 

discharging many of the same tasks as non-exempt employees. It is further relevant in this vein 

that Mr. Smith describes spending, not just most, but the vast majority of his time in non-exempt 

work. The California Supreme Court in Ramirez wrote that, in determining ―the realistic 

requirements of [a] job,‖ the court ―should consider, first and foremost, how the employee actually 

spends his or her time.‖ Id. (emphasis in original).

For these reasons, the court cannot summarily decide the realistic-expectations element of the 

exemption test. That issue too must await the trier of fact.

* * *

The court consequently denies Equinox‘s motion for summary judgment against Claims 1-6.

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II. THE DERIVATIVE UCL CLAIM

The preceding analysis equally dictates that the court deny Equinox‘s motion with respect to 

Claim 7, under California‘s UCL.

The UCL claim is wholly derivative of the misclassification claims. As Judge Chen recently 

explained:

The UCL substantively prohibits business acts or practices that 

are ―unlawful.‖ See Cal. Bus. and Prof. Code § 17200. As the 

California Supreme Court has explained, ―section 17200  ̳borrows' 

violations of other laws and treats them as unlawful practices 

independently actionable‖ under the UCL. Saunders v. Superior 

Court, 27 Cal. App. 4th 832, 839, 33 Cal. Rptr. 2d 438 (1994) 

(quoting Farmers Ins. Exchange v. Superior Court, 2 Cal.4th 377, 

383, 6 Cal. Rptr. 2d 487, 826 P.2d 730 (1992)). Thus, as one leading 

treatise author has noted, ―if a  ̳business practice‘ violates any law 

— literally — it also violates § 17200 and may be redressed under 

that section.‖ William L. Stern, Business and Professions Code 

§ 17200 Practice, 3:56 (Rutter Group 2014 ed.) (quoting Cal. Bus. 

and Prof. Code § 17200).

Newton v. Am. Debt Servs., Inc., 2014 WL 7183930, at *5 (N.D. Cal. Dec. 16, 2014). Equinox has 

not identified a reason for dismissing the UCL claim that is somehow independent of the fate of 

the misclassification claims. Because summary judgment is not warranted on the underlying 

misclassification claims, it must also be denied on the UCL claim. Cf., e.g., Glenn K. Jackson, Inc. 

v. Roe, 273 F.3d 1192, 1203 (9th Cir. 2001) (affirming summary judgment against UCL claim 

where underlying claims had substantively failed).

III.WHISTLEBLOWER RETALIATION — WRONGFUL TERMINATION IN 

VIOLATION OF PUBLIC POLICY

A. General Analysis

Mr. Smith alleges that he was wrongfully terminated in retaliation for complaining internally 

that he and other Equinox employees were misclassified as exempt, and about Equinox‘s alleged 

failure to provide meal and rest breaks, and that this retaliatory discharge violated California 

public policy, particularly as reflected in California Labor Code Section 1102.5. (Compl. – ECF 

No. 1-1 at 6, ¶ 7.) He specifically names 1102.5(b) and (c) in his wrongful-termination claim (id. 

at 20, ¶¶ 82-83), and the latter section (along with other code sections) are said to constitute 

California ―fundamental public policy.‖ (Id. at 20-22, ¶¶ 81-94.)

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The California Court of Appeal has explained the framework that governs such claims:

When a plaintiff alleges . . . wrongful employment termination 

in violation of public policy, and the defendant seeks summary 

judgment, California follows the burden shifting analysis of 

McDonnell Douglas Corp. v. Green[, 411 U.S. 792 (1973)] to 

determine whether there are triable issues of fact for resolution by a 

jury. 

Loggins v. Kaiser Permanente Int’l, 151 Cal. App. 4th 1102, 1108-09 (2007). The familiar 

McDonnell-Douglas approach runs as follows:

In the first stage, the ―plaintiff must show (1) he or she engaged in a 

 ̳protected activity,‘ (2) the employer subjected the employee to an 

adverse employment action, and (3) a causal link existed between 

the protected activity and the employer‘s action.‖ (Yanowitz v. 

L’Oreal USA, Inc. (2005) 36 Cal.4th 1028, 1042, 32 Cal. Rptr. 3d 

436, 116 P.3d 1123.) If the employee successfully establishes these 

elements and thereby shows a prima facie case exists, the burden 

shifts to the employer to provide evidence that there was a 

legitimate, nonretaliatory reason for the adverse employment action. 

(Morgan v. Regents of University of California (2000) 88 Cal. App.

4th 52, 68, 105 Cal. Rptr. 2d 652.) If the employer produces 

evidence showing a legitimate reason for the adverse employment 

action, ―the presumption of retaliation  ̳ ―  ̳drops out of the picture,‘ 

‖ ‘ ‖ (Yanowitz, supra), and the burden shifts back to the employee 

to provide ―substantial responsive evidence‖ that the employer‘s 

proffered reasons were untrue or pretextual. (Martin v. Lockheed 

Missiles & Space Co. (1994) 29 Cal. App. 4th 1718, 1735, 35 Cal.

Rptr. 2d 181.)

Loggins, 151 Cal. App. 4th at 1109.

There is no doubt that Mr. Smith engaged in ―protected activity‖: he complained that Equinox 

was not observing its policy on mandatory meal and rest breaks; and he suggested that Equinox 

might have misclassified him as an exempt employee. There is obviously no doubt that Mr. Smith 

was later fired. Equinox has moreover articulated, and provided evidence to support, a ―legitimate, 

nonretaliatory reason‖ for firing Mr. Smith: the company contends that it fired Mr. Smith ―for 

ringing his own sales, [and] giving improper discounts.‖ (See, e.g., ECF No. 49-1, ¶¶ 56, 61.) 

(More exactly, Equinox contends, and its proof suggests, that Mr. Smith ―gave himself a discount 

on items that he should never have discounted (specifically[,] black Lululemon gear).‖ (Id. ¶ 56.))

It is undisputed that Equinox had recently fired an employee in New York ―for abusing the 

employee discount and ringing her own sales.‖ (ECF No. 49-1, ¶ 57.)

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The retaliation inquiry thus comes down to whether Mr. Smith has raised a material issue of 

fact that Equinox‘s stated explanation was pretextual. Having parsed the parties‘ proof and 

arguments, the court concludes that there is at least some evidence that Equinox‘s stated reasons 

may have been pretextual. For example, in firing Mr. Smith, Equinox pointed to three transactions 

in which he rang his own sales. Equinox‘s own witness (Becca Briggs) testified, however, that 

Equinox‘s corporate offices instructed Mr. Smith to conduct the first of these transactions as a 

rough-and-ready way to correct an inventory-tracking error associated with a consignment sale. 

(Briggs Dep. – ECF No. 51-3 at 14-22.) Mr. Smith has testified that the second transaction 

―reflects the same type of cash[-]register activity,‖ which raises the plausible (if not ―inescapable‖) 

conclusion that ―this was also an inventory correction.‖ (See ECF No. 51 at 28.)

The court has trod as alertly as possible through the brush of facts constituting the proof and 

arguments on pretext. It has tried to do so with a clear understanding that it is often easy to 

―muddy the waters‖ to deflect an otherwise proper summary judgment. The court concludes that a 

trier of fact must be allowed to pass on the issue of pretext; the evidence does not permit the court 

to decide the question on summary judgment.

B. Disclosure of Known Information

Equinox argues that Mr. Smith cannot establish a prima facie wrongful-termination claim —

or, perhaps more precisely, whistleblower-retaliation claim — in part because, in complaining 

about the inability of Equinox employees to take their compulsory breaks, he was ―disclosing‖ 

information that was already known. It is undisputed that, when Mr. Smith made his complaint, 

Equinox was already the defendant in a wage-and-hour case; it is also undisputed that Mr. Smith 

knew this. (ECF No. 49-1, ¶¶ 39-40.) The whistle, says Equinox, had already been blown. And 

calling attention to public information cannot constitute a ―disclosure‖ under California Labor 

Code § 1102.5 — the statute that provides the ―policy‖ anchor for Mr. Smith‘s claim of wrongful 

termination in violation of public policy.

The court is not convinced that Mr. Smith‘s complaints do not constitute ―disclosure‖ under 

§ 1102.5. What Mr. Smith complained of was not merely the basic fact that Equinox had problems 

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with employees missing their requisite breaks — which is what knowledge of the pending lawsuit 

would have generally provided. Rather, and somewhat more precisely, Mr. Smith was telling 

Equinox that there were persisting problems in this area in the shops that he managed. That is at 

least notionally different from the fact that Equinox had previously had problems with break 

compliance. And, as Equinox recognizes, ―[Section] 1102.5 does not only apply to  ̳first 

reporters.‘‖ (ECF No. 49 at 25 n. 9 (citing Hager v. County of Los Angeles, 228 Cal. App. 4th 

1538 (2009)). To his complaint about breaks, moreover, Mr. Smith added his suggestion that he 

himself might be misclassified under the labor laws.

In any event, the court need not decide whether Mr. Smith‘s mandatory-break complaint was a 

―disclosure‖ under § 1102.5. Mr. Smith‘s wrongful-termination (or whistleblower-retaliation) 

claim is not a claim directly under § 1102.5; instead, § 1102.5 supplies the ―policy‖ backing for 

his claim for ―wrongful termination in violation of public policy.‖ This is a distinction that 

precedent recognizes and upholds. A plaintiff can invoke § 1102.5 to support a claim for 

termination in violation of public policy without bringing a § 1102.5 claim, properly so called, and 

thus without having to establish the prima facie elements of a true § 1102.5 claim. See, e.g., Banko 

v. Apple, Inc., 2013 WL 6623913 at *3-4 (N.D. Cal. Dec. 16, 2013). This has various doctrinal 

consequences, the most relevant being that a termination-in-violation-of-public-policy claim does 

not fail just because the facts of a case would not support a prima facie claim directly under 

§ 1102.5. The present ramification being that, even if Mr. Smith‘s mandatory-break grievance was 

not a ―disclosure‖ under § 1102.5, it can yet constitute the ―protected activity‖ that launches the 

plaintiff‘s retaliation claim under the Loggins–McDonnell-Douglas analysis. If Mr. Smith 

complained about what was already known, in other words, that does not summarily defeat his 

retaliation claim. See Banko, 2013 WL 6623913 at *3-4 (denying motion to dismiss termination 

claim where plaintiff was not ―whistleblower‖ under relevant statutes); Weingand v. Harland Fin. 

Solutions, Inc., 2012 WL 3537035 (N.D. Cal.) (denying motion to dismiss termination claim even 

while dismissing direct § 1102.5 claim); Stoval. v. Bain Street Props., 2013 WL 6002758 (N.D. 

Cal.) (denying summary judgment against termination claim even though plaintiff was likely 

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precluded from bringing a direct § 1102.5 claim).

IV.DEFAMATION

The plaintiff‘s claim for defamation likewise cannot be dismissed on summary judgment. Mr. 

Smith claims that two other Equinox store managers told him that ―they heard he was terminated 

for  ̳integrity reasons.‘‖ (ECF No. 49-1, ¶ 64.) One of these managers further told him that she had 

been told this by regional manager Brooke English. (Id. ¶ 65.) Mr. Smith does not know of 

anything suggesting that information about his firing had been otherwise ―made public.‖ (Id. ¶ 67.)

The court is aware of the law that requires allegations of defamation to describe the challenged 

statements with heightened particularity. See, e.g., Jones v. ThyssenKrupp Elevator Corp., 2006 

U.S. Dist. LEXIS 13978 (N.D. Cal. 2006). In this case, however, in the context of Mr. Smith‘s 

having been fired, the statement that he was terminated for ―integrity reasons‖ is specific enough 

to be defamatory. Or, more precisely, it is specific enough that a jury should be allowed to pass on 

whether it was defamatory.

This brings us to the question of privilege. Equinox argues that the statement by Ms. English 

cannot be actionably defamatory because it comes under the qualified privilege set out in Cal. Civ. 

Code § 47(c). (ECF No. 49 at 28-29.) Because the challenged communication was made between 

Equinox managers, and concerned a matter in which they had a common interest, the privilege 

nearly applies as a matter of law. It is a statutory requisite of the privilege, however, that the 

putatively protected communication be made ―without malice.‖ Cal. Civ. Code § 47(c). Here, Mr. 

Smith points to two things that he argues raise a triable question on malice. First, he asserts that he 

and Ms. English shared a ―history of hostility.‖ (ECF No. 49 at 32.) Second, he claims that another 

Equinox officer ―told [Smith] during his termination meeting that if he did not sign a severance 

agreement, Equinox would make it public that he had stolen from the company.‖ (ECF No. 51 at 

32; Smith Dep. – ECF No. 51-2 at 55.) This is not overwhelming proof that Ms. English‘s 

statement was made maliciously, but it is enough to overcome the defendant‘s motion for 

summary judgment.

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V. BREACH OF CONTRACT

The plaintiff‘s final claim is for breach of contract. (ECF No. 1-1 at 23, ¶¶ 99-101.) Neither 

party has given the court a very detailed analysis on the plaintiff‘s contract claim. The contract in 

question consists of a 2008 offer letter from Equinox to Mr. Smith to which was appended a 

―Compensation Plan.‖ The latter set out a defined plan for monthly bonuses if Mr. Smith‘s shops 

met certain sales goals, stated in specific dollar figures. (See ECF No. 51-6 at 2-5.) 

The parties agree that Equinox changed the monthly sales goals as it set successive annual 

budgets. Mr. Smith does not appear to be complaining about that. His grievance, his claim of 

breach, is that sometime in 2013 Equinox raised his sales goals beyond those called for in the 

annual budget. (See Smith Dep. – ECF No. 141-48; Compl. – ECF No. 1-1 at 23, ¶ 100 (―Plaintiff 

was required to meet higher sales goals than [had been] set annually for his stores‖).) That 

Equinox did this is undisputed. (ECF No. 49-1, ¶¶ 35-37.) Mr. Smith complains that this 

effectively — and wrongfully — ―reduced‖ or ―denied‖ his bonus compensation. (ECF No.1-1 at 

23, ¶ 100.)

The undisputed facts do not raise a triable claim for breach of contract. Equinox correctly 

argues that nothing in the offer letter prevents the company from raising its monthly sales targets 

in this manner. (See ECF No. 51-6, passim.) To the contrary, the letter expressly says: ―Given the 

at-will nature [of the employment agreement,] the Company may from time-to-time [sic] add to, 

modify, or discontinue its compensation policies . . . or other aspects of your employment.‖ (Id. at 

3 (emphases added).) This express grant of authority scotches Mr. Smith‘s contract claim. The 

court would additionally note: The contract claim alleges that Equinox breached the employment 

contract in ―bad faith.‖ The court has seen absolutely no evidence that Equinox raised Mr. Smith‘s 

sales targets out of malice or anything else that could be deemed ―bad faith.‖ The undisputed facts 

establish, to the contrary, that Equinox raised his targets because he was doing a ―fabulous‖ job, 

and the company believed he could achieve the more ambitious goals. (ECF No. 49-1, ¶ 37.)

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13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

CONCLUSION

The court denies Equinox‘s motion for summary judgment on the First through Eighth Causes 

of Action. The court grants summary judgment in favor of Equinox on the Ninth Cause of Action 

for breach of contract; that claim is dismissed with prejudice.

This disposes of ECF No. 49.

IT IS SO ORDERED.

Dated: April 10, 2015

______________________________________

LAUREL BEELER

United States Magistrate Judge

Case 3:14-cv-00846-LB Document 55 Filed 04/10/15 Page 23 of 23