Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_04-cv-00438/USCOURTS-caed-2_04-cv-00438-4/pdf.json

Nature of Suit Code: 790
Nature of Suit: Other Labor Litigation
Cause of Action: 28:1332 Diversity-Employment Discrimination

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

VICKI WEST and WENDY FEGUNDES,

individually and on behalf of

all others similarly situated,

NO. CIV. S-04-0438 WBS GGH

Plaintiffs,

v.

ORDER RE: PARTIAL SUMMARY

JUDGMENT

CIRCLE K STORES, INC., a

foreign corporation,

Defendant.

----oo0oo----

Plaintiffs Vicki West and Wendy Fegundes seek to bring

a class action suit against defendant Circle K Stores, Inc. for

alleged violations of the California Labor Code, Cal. Lab. Code

§§ 226.7, 227.3, and the California Business and Professions

Code, Cal. Bus. & Prof. Code §§ 17200-17210. Presently before

the court is defendant’s motion for partial summary judgment.

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I. Factual and Procedural Background

On March 3, 2004, plaintiffs filed a class action

complaint claiming that defendant failed to pay (1) overtime

wages, (2) administrative leave wages, and (3) accrued but unused

vacation wages, all in violation of state law. (Compl. ¶ 17.) 

On May 6, 2005, a related state court action in the Superior

Court of California in and for the County of Orange approved a

settlement between defendant and management (non-hourly)

employees. (Jones Decl. in Supp. of Mot. to Amend ¶ 6; id. Ex. B

(state court order granting final approval); id. Ex. C

(stipulation and release).) Consequently, plaintiffs sought

leave to amend their complaint, which was granted in part. (July

15, 2005 Order at 2-3.) 

The amendments approved by the court dropped some of

the claims of one proposed subclass (managers) because these

claims were resolved by the state court action. (Id. at 3-4.) 

In addition, the amended complaint added Wendy Fegundes as a

named plaintiff representing an additional subclass of employees

claiming that defendant failed to pay meal and break wages. (Id.

at 4.) In light of these amendments, the court reopened precertification discovery regarding the new subclass only. (Id. at

8.) The court also extended the deadline for plaintiffs’ motion

for certification until March 20, 2006. (Id.)

Hoping to “streamline the certification hearing,”

defendant now moves for partial summary judgment on three

supposedly “straight-forward legal issues.” (Def.’s Mem. of P. &

A. in Supp. of Mot. for Partial Summ. J. 1-2.) First, defendant

asks the court to determine, as a matter of law, the appropriate

Case 2:04-cv-00438-WBS-GGH Document 62 Filed 02/14/06 Page 2 of 9
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 Pre-certification summary judgment is often 1

inappropriate because “the relative merits of the underlying

dispute are to have no impact upon the determination of the

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statute of limitations for a claim under Cal. Lab. Code § 226.7

(describing the consequences for employers who fail to provide

legally mandated meal and rest breaks for hourly employees). 

Second, defendant argues that plaintiffs do not have a cause of

action under California’s Unfair Competition Law (“UCL”), Cal.

Bus. & Prof. Code § 17203, for failure to provide required meal

and rest breaks (claim three). Finally, defendant seeks a

judicial determination that it is not liable for the practices at

up to 104 Circle K stores that, as of sometime in 2003, are

allegedly no longer under defendant’s control.

II. Discussion

Summary judgment is proper “if the pleadings,

depositions, answers to interrogatories, and admissions on file,

together with the affidavits, if any, show that there is no

genuine issue as to any material fact and that the moving party

is entitled to judgment as a matter of law.” Fed. R. Civ. P.

56(c). However, in a Rule 23 class action such as this, where

the district court must rule on the issue of class certification

“[a]s soon as practicable after the commencement of [the]

action,” the court must not prematurely grant such a motion. 

Fed. R. Civ. P. 23. Significantly, the Ninth Circuit has limited

early resolution of a motion for summary judgment in a potential

Rule 23 class action to cases where granting the motion “seems

likely to protect both the parties and the court from needless

and costly further litigation.” Wright v. Schock, 742 F.2d 541, 1

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propriety of the class action.” Thompson v. County of Medina, 29

F.3d 238, 241 (6th Cir. 1994) (quoting Marx v. Centran Corp.,

747 F.2d 1536, 1552 (6th Cir. 1984)). Additionally, “it is

preferable to review a motion for class certification first

[because] a quick disposition on the merits is often not

possible.” Chavez v. Ill. State Police, 251 F.3d 612, 630 (7th

Cir. 2001). 

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544 (9th Cir. 1984). “Under the proper circumstances--where it

is more practicable to do so and where the parties will not

suffer significant prejudice--the district court has discretion

to rule on a motion for summary judgment before it decides the

certification issue.” Id. at 543-44.

A. Statute of Limitations Under Cal. Lab. Code § 226.7 and

Cal. Bus. & Prof. Code § 17203

Defendant seeks partial summary judgment to establish

the statute of limitations under California Labor Code § 226.7,

which requires employers to pay employees “one additional hour of

pay at the employee’s regular rate of compensation for each work

day that [a] meal or rest period[, as required by subsection a,]

is not provided.” Cal. Lab. Code § 226.7(b). Resolution of this

issue turns on whether the “additional hour of pay” constitutes a

penalty or a wage. If the language of § 226.7 is interpreted as

imposing a penalty against employers for failure to provide

legally mandated breaks, the applicable statute is only one year. 

See Cal. Civ. Proc. Code § 340(a); Murphy v. Kenneth Cole Prods.,

Inc., 134 Cal. App. 4th 728, 751 (2005). In contrast, if the

statute provides a wage payment to the wronged employee, a three

year statute of limitations applies. See Nat’l Steel &

Shipbuilding Co. v. Superior Court, No. D046692, 2006 WL 147520,

at *7 (Cal. App. Jan. 20, 2006) (applying the three year statute

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Additionally, the Amicus Brief submitted by the 2

California Teamster Public Affairs Counsel and the California

Conference Board of the Amalgamated Transit Union in National

Steel identified several cases being actively litigated in the

state trial courts that have all raised the same question:

whether the monetary award under § 226.7 is a restitutionary wage

or a penalty. (See Jones Decl. Ex. B at 1-2.).

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of limitations for “[a]n action upon a liability created by

statute, other than a penalty or forfeiture,” Cal. Civ. Proc.

Code § 338(a)). 

Relatedly, defendant also argues that plaintiffs’ claim

under the UCL for restitution with respect to wrongfully denied

break times likewise hinges on whether the provisions in § 226.7

award a wage or a penalty. Cal. Bus. & Prof. Code § 17203. The

UCL offers a substantial, four year statute of limitations. Cal.

Bus. & Prof. Code § 17208; Cortez v. Purolator Air Filtration

Prods. Co., 23 Cal.4th 163, 173 (2000). However, plaintiffs can

recover only restitution, not damages, under that statute, a bar

that they concede forecloses an award of penalties. Korea Supply

Co. v. Lockheed Martin Corp., 29 Cal. 4th 1134, 1144 (2003); see

also Tomlinson v. Indymac Bank, F.S.B., 359 F. Supp. 2d 891, 895-

96 (C.D. Cal. 2005). Consequently, resolution of the

penalty/wage issue in defendant’s favor could eliminate

plaintiffs’ UCL claim based on denied break times, and thereby

also restrict the relevant time period for plaintiffs’ claims.

Section 226.7 has very recently been interpreted

differently by several California appellate courts, with some

courts classifying the payment owed as a penalty and others

disagreeing with this characterization. Compare Nat’l Steel, 2

2006 WL 147520, at *7 (Fourth District) (applying the three year

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Defendant contended at oral argument that if the court 3

holds that the award under § 226.7 is a wage rather than a

penalty, the size of the potential class will triple or

quadruple. Defendant’s argument assumes, without support, that

its payroll turns over completely on an annual basis. Although a

longer statute of limitations in this case may increase

plaintiffs’ damages, the scope of the class requiring

notification will not necessarily grow at the same rate.

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statute of limitations from Cal. Civ. Proc. Code § 338 because

“the payment of section 226.7 is an obligation created by

statute, other than a penalty”), with Murphy, 134 Cal. App. 4th

at 751 (First District) (applying the one year statute of

limitations from Cal. Civ. Proc. Code § 340(a) because “a statute

like section 226.7 that imposes a payment without regard to the

actual loss suffered, is in the nature of a penalty”) and Mills

v. Superior Court, No. B184760, 2006 WL 198588, at *6 (Cal. App.

Jan. 27, 2006) (Second District) (“[W]e read section 226.7 as

imposing a penalty on employers who fail to ensure mandated break

periods are provided to their employees.”). A petition for

review of the Murphy decision, filed on January 11, 2006, is

currently pending before the California Supreme Court. Defendant

thus asks the court to add to a growing and divergent set of

opinions involving a complicated interpretation of state law. 

Applying Wright, the court is convinced that

defendant’s motion for summary judgment is premature. Ruling on

this motion now would not save the court or the parties from the

costs of further litigation. See Wright, 742 F.2d 544. Rather,

it would simply potentially limit the size of the class that 3

will receive notice if the court grants plaintiffs’ upcoming

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Significantly, defendant denies that it “failed to 4

provide and/or pay for meal and break periods.” (See First Am.

Compl. ¶ 9; Answer to First Am. Compl ¶ 6.) Consequently, 

deciding this issue now, assuming defendant is even found liable,

will at best only impact defendant’s damages; it will not resolve

liability issues and it will not narrow the issues presented by

the case. See Trull v. Lason Sys., Inc., 982 F. Supp. 600, 603

(N.D. Ill. 1997) (implying that the rule allowing courts to

decide summary judgment motions first is limited to situations

where the motion argues that “the plaintiffs’ claims are without

merit”).

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motion for class certification. As plaintiff noted at oral 4

argument, if it should turn out that this court is wrong in

limiting the relevant time period to one year, expanding the

class after Rule 23 litigation is already underway would be both

time consuming and expensive in terms of delay and disruption. 

In contrast, trimming an overly broad class in the event that the

California Supreme Court determines that § 226.7 awards a penalty

and not a wage would be a relatively simple task. Consequently,

granting defendant’s motion might result in significant and

costly delay if the court wrongly anticipates the California

Supreme Court’s take on this matter. See Sims Snowboards, Inc.

v. Kelly, 863 F.2d 643, 647 (9th Cir. 1988) (holding that, when

jurisdiction is based on diversity, a federal court is “in

effect, only another court of the State [and] it cannot afford

recovery if the right to recover is made unavailable by the

State”). Because the relevant state law is in flux, this is not

a situation where judicial economy can be served by deciding

defendant’s summary judgment motion before the certification

issue. 

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If defendant hopes to distance itself from the 104 5

stores allegedly transferred to ConocoPhillips “in 2003, prior to

[December 17, 2003]”, it would do well to provide more than a

declaration from “a Circle K employee for most of the past 13

years” who has “worked closely with Circle K’s legal personnel

and human resources personnel” and “become familiar with Circle

K’s corporate structure and corporate affiliations.” 

(Westerfield Decl. ¶¶ 1, 2, 4, 5.) This declaration lacks

sufficient detail explaining how, and more importantly when, some

employees at Circle K stores became employees of ConocoPhillips.

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B. Number of Liable Circle K Stores

Defendant also accuses plaintiffs of being “ambiguous”

about which Circle K stores are the subject of their lawsuit and

seeks a determination that it is not liable for any violations in

104 stores that were allegedly transferred to ConocoPhillips in

“late 2003.” (Def.’s Mem. of P. & A. in Supp. of Mot. for Partial

Summ. J. 9.) Again though, through its motion for summary

judgment on this third issue, defendant prematurely seeks to

limit the size the relevant class. 

Plaintiffs have only sued defendant for failing to

provide its employees with required meal and rest breaks. 

Significantly, the suit is already limited “to claims brought by

current or former Circle K employees that arose during their

employment with Circle K.” (Def.’s Reply 13.) Defendant can

seek to further define the limitations on this class, assuming

they exist, when the court hears plaintiffs’ motion for class

certification. This is not the proper subject matter for a pre- 5

certification motion for summary judgment. 

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III. Conclusion

Defendant’s motion for partial summary judgment is

premature and seeks the court’s opinion on matters related only

to the scope of its damages. Such motions should not be heard

before plaintiffs’ motion for class certification.

IT IS THEREFORE ORDERED that defendant’s motion for

partial summary judgment be, and the same hereby is, DENIED.

DATED: February 14, 2006

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