Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_09-cv-02909/USCOURTS-casd-3_09-cv-02909-3/pdf.json

Nature of Suit Code: 710
Nature of Suit: Fair Labor Standards Act
Cause of Action: 29:206 Collect Unpaid Wages

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1 09cv2909

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

MICHAEL E. TAYLOR; KENNETH B.

YOUNG; individuals, on behalf of

themselves individually and on behalf of

others similarly situated,

Plaintiffs,

v.

WADDELL & REED, INC., a Delaware

Corporation,

Defendant. 

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Case No.: 09cv2909 AJB (WVG)

ORDER GRANTING DEFENDANT’S

MOTIONS FOR PARTIAL SUMMARY

JUDGMENT AND DENYING AS

MOOT PLAINTIFFS’ MOTION FOR

CONDITIONAL CLASS

CERTIFICATION

[Docs. 91, 92, 97]

Presently before the Court are the following three motions: 

1. Defendant’s Motion for Partial Summary Judgment as to Plaintiff Michael Taylor (Doc. 91), 

2. Defendant’s Motion for Partial Summary Judgment as to Plaintiff Kenneth Young (Doc. 92), and

3. Plaintiffs’ Motion for Conditional Collective Action Certification, Hoffmann-La Roche Notice,

and Equitable Tolling (Doc. 97). 

For the reasons set forth below, the Court GRANTS both of Defendant’s motions for partial summary

judgment and consequently DENIES AS MOOT Plaintiffs’ motion for conditional class certification.

I.

BACKGROUND

This matter is a proposed wage and hour collective action brought by former Waddell & Reed

(“W&R”) financial advisors (“Advisors”). (FAC ¶ 1.) Named Plaintiffs Kenneth B. Young and Michael

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1

 In their oppositions to the motions for partial summary judgment, Plaintiffs request that the

Court take judicial notice of a number of filed documents pertaining to Lint v. Northwestern Mutual

Life Insurance Company, Case No. 09-C-1373 DMS (RBB) (S.D. Cal. 2010). (Docs. 120, 126.)

The Court finds that these documents are judicially noticeable under Fed. R. Evid. 201(b) and grants

2 09cv2909

E. Taylor seek to represent a class of Advisors who allege they were classified as independent

contractors, when, in fact, they were employees. (Id. at ¶¶ 3, 5.)

W&R is in the business of selling financial products, which are distributed through a sales force

of Advisors. (Id. at ¶ 2.) When Advisors begin working for W&R, they are required to sign a “Professional Career Agreement” (“PCA”). (Id. at ¶ 37.) This agreement provides the basic terms governing the

association with W&R Inc. and Waddell & Reed Affiliates (“W&R Affiliates”). (Id.) Advisors were

classified as independent contractors and were paid on a commission only basis. (Id. at ¶ 34, 114.)

Advisors did not receive a salary or hourly wage and were not paid overtime. (Id. at ¶¶ 114, 117-118.)

With regard to the independent contractor relationship, the PCA specifically states, “Subject to the

responsibilities and limitations stated in this Agreement, you shall be free to use W&R office facilities

and to exercise your own judgment as to the persons whom you solicit and the time, place, and

manner of solicitation.” (See John T. Mullan Decl., Exhibit 5 (emphasis added).)

According to Plaintiffs, Advisors should have been classified as employees because, among

other things, Advisors could sell only under the name of W&R and could only sell securities authorized

by W&R. (Id. at ¶¶ 40-41.) Advisors were assigned clients by W&R and had to surrender all client files,

client lists and client data to W&R upon termination of the working relationship. (Id. at ¶ 49.) Advisors

were required to work a specified number of hours and generally adhere to a schedule proposed by

W&R. (Id. at ¶ 57.) Advisors were encouraged to work at W&R’s offices and had to explain any

activities conducted outside the office. (Id. at ¶¶ 60-61.) Advisors were required to attend meetings or

face disciplinary action, and were subject to periodic performance reviews by Defendants. (Id. at ¶¶ 68-

69.)

Plaintiffs filed suit on December 28, 2009, alleging nine claims for violations of the Fair Labor

Standards Act (“FLSA”), 29 U.S.C. §§ 206-207; the California Labor Code; and California’s Unfair

Competition Law (“UCL”), Cal. Bus. & Prof. Code § 17200, et. seq. On April 28, 2010, Plaintiffs filed

the FAC. Defendant filed the instant motions for partial summary judgment on April 22, 2011.1

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Plaintiffs’ request.

3 09cv2909

Plaintiffs filed the instant motion for conditional class certification on April 27, 2011. The Court held a

hearing on the motions on December 15, 2011.

II.

LEGAL STANDARD

“The court shall grant summary judgment if the movant shows that there is no genuine dispute as

to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A

genuine issue of material fact exists if there is sufficient evidence for a reasonable jury to return a

verdict for the non-moving party. Miller v. Glenn Miller Prod., Inc., 454 F.3d 975, 987 (9th Cir. 2006).

In order to prevail, a party moving for summary judgment must show the absence of a genuine

issue of material fact with respect to an essential element of the nonmoving party’s claim, or to a

defense on which the nonmoving party will bear the burden of persuasion at trial. Nissan Fire &

Marine Ins. Co. v. Fritz Cos. Inc., 210 F.3d 1099, 1102 (9th Cir. 2000). When the nonmoving party

would bear the burden of proof at trial, the moving party may satisfy its burden on summary judgment

by simply pointing out to the Court an absence of evidence from the nonmoving party. Miller, 454 F.3d

at 987. “The moving party need not disprove the other party’s case.” Id.

Once the movant has made that showing, the burden shifts to the opposing party to produce

“evidence that is significantly probative or more than ‘merely colorable’ that a genuine issue of material

fact exists for trial.” LVRC Holdings LLC v. Brekka, 581 F.3d 1127, 1137 (9th Cir. 2009) (citing FTC v.

Gill, 265 F.3d 944, 954 (9th Cir. 2001)); see also Miller, 454 F.3d at 988 (“[T]he nonmoving party must

come forward with more than ‘the mere existence of a scintilla of evidence.’”) (quoting Anderson v.

Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)).

The Court must review the record as a whole and draw all reasonable inferences in favor of the

nonmoving party. Hernandez v. Spacelabs Med. Inc., 343 F.3d 736, 738 (9th Cir. 2000). However,

unsupported conjecture or conclusory statements are insufficient to defeat summary judgment. Id.;

Surrell v. Cal. Water Serv. Co., 518 F.3d 1097, 1103 (9th Cir. 2008). “Thus, ‘[w]here the record taken

as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine

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2

 Plaintiffs contend that Defendant should be equitably estopped from asserting inconsistent

positions—i.e., maintaining that Taylor and Young are independent contractors, yet assuming for

purposes of this motion that they are employees. However, Defendant is careful to frame its argument as

a hypothetical. Moreover, under the Federal Rules of Civil Procedure, a party moving for summary

judgment may accept the non-movant’s allegations as true for the limited purpose of summary

judgment. See FRCP 56(g); see also FRCP 8(d)(2) (“A party may set out 2 or more statements of a

claim or defense alternatively or hypothetically.”), 8(d)(3) (“A party may state as many separate claims

or defenses as it has, regardless of consistency.”) (emphasis added). Here, Defendant merely argues that

even accepting as true Plaintiffs’ allegations that they are employees, their FLSA claims still fail. Such

an argument is permissible.

4 09cv2909

issue for trial.’” Miller, 454 F.3d at 988 (quoting Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio

Corp., 475 U.S. 574, 587 (1986)).

III.

DISCUSSION

Defendant’s motions for partial summary judgment address only the FLSA causes of action

alleged by Plaintiffs Taylor and Young. Although Defendant submitted separate motions for Plaintiff

Taylor and for Plaintiff Young, the Court addresses the two motions together due to their factual and

legal similarities. 

A. Defendant’s Motions for Partial Summary Judgment

Defendant’s position is that as independent contractors (not employees), Taylor and Young do

not fall within the FLSA’s scope. However, Defendant argues for purposes of these partial summary

judgment motions that even if Taylor and Young could show they were misclassified as independent

contractors, their FLSA claims nonetheless fail because they fall under the FLSA’s “outside salesperson” exemption. In other words, their FLSA claims will fail regardless of whether Taylor and Young are

considered independent contractors or employees.2

The FLSA specifically exempts an outside salesperson from the statute’s minimum wage and

overtime requirements. See 29 U.S.C. § 213(a)(1) (exempting “any employee employed . . . in the

capacity of outside salesman . . . .”). The Department of Labor (“DOL”) regulations

promulgated under the FLSA define “outside salesman” as any employee:

(1) Whose primary duty is: (i) making sales within the meaning of section

3(k) of the [FLSA], or (ii) obtaining orders or contracts for services or for

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5 09cv2909

the use of facilities for which a consideration will be paid by the client or

customer; and

(2) Who is customarily and regularly engaged away from the employer’s

place or places of business in performing such primary duty. 29 C.F.R. §

541.500(a).

Importantly, the FLSA exemption includes not only the sales work itself, but also any “work

performed incidental to and in conjunction with the employee’s own outside sales or solicitations.” 29

C.F.R. ¶ 541.500(b). The case law supports this broad interpretation of “sales.” See, e.g., Wong v. HSBC

Mortg. Corp. (USA), 749 F. Supp. 2d 1009, 1013 (N.D. Cal. 2010) (finding that making a sale “is not an

activity that necessarily occurs at one time and/or in one location, but, rather, may comprise a number of

component activities”); Christopher v. Smithkline Beecham Corp., DBA GlaxoSmithKline, 635 F.3d 383,

398, 400-01 (9th Cir. 2011) (holding that pharmaceutical sales representatives are exempt as outside

salespersons, even though they did not make direct sales, take orders, or negotiate contracts—rather,

their activities were “preliminary steps toward the end goal” of sales and thus constituted sales activities

within the meaning of the exemption).

Here, Defendant points to substantial evidence in the record (mostly from Plaintiffs’ own

depositions and pleadings) demonstrating that both Taylor and Young fall under the “outside salesperson” exemption. 

1. “Primary Duty”

With regard to the first prong of the exemption, Taylor and Young admitted that their primary

duty as a Financial Advisor was making sales. Even in the Complaint, they pled that their job was

primarily as a salesperson. See, e.g., Compl. ¶¶ 2, 45, 47, 48. Making sales was obviously paramount to

their success, since their earnings were based entirely on sales commissions. Moreover, under the broad

definition of “sales” discussed above, all of Taylor’s and Young’s incidental activities and solicitations

are construed as sales under the FLSA. Therefore, Taylor’s and Young’s primary activities were clearly

sales and sales-related. The Court finds that they have satisfied the exemption’s first prong. 

//

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6 09cv2909

2. “Customarily and Regularly” 

With regard to the second prong, the phrase “customarily and regularly” is not a “majority of the

time” test. See, e.g., Lint v. Northwestern Mutual Life Insurance Company, 2010 WL 4809604 at *3

(S.D. Cal. Nov. 19, 2010) (finding that spending 10-20 percent of the time outside of the office engaged

in sales activity is sufficient for the exemption). The DOL likewise confirmed that selling or sales

related activity outside the office “one or two hours a day, one or two times a week” satisfied the test

for the exemption. See FLSA2007-2, DOL Opinion Letter from Paul DeCamp, Administrator at 3-4

(Jan. 25, 2007) (emphasis added).

Here, Defendant shows that Taylor and Young customarily and regularly engaged in sales

activity away from the W&R office. For example, Defendant points to evidence demonstrating that

Taylor frequently met with existing and prospective clients away from the office—wherever it was

convenient for the customer—in order to generate business and consummate sales. She testified that she

was consistently outside of the office engaged in sales activity, and the available records confirm as

much—showing that in some weeks, she was absent at least three or four days, and that she was

frequently absent from company meetings. (See, e.g., Taylor Depo. Tr. 167:6-25, 168:17-19, 219:9-25,

227:22-228:13; Bertrand Decl., ¶ 5, Exhibit C.) Taylor’s accounts of her constantly being out of the

office on sales meetings are confirmed by Young, who testified that Taylor was out of the office

“perhaps 40, 50 percent” of the time. (Young Depo. Tr. 184:7-13, 186:7-10.) Taylor’s outside sales

activity therefore meets the “customarily and regularly” threshold. Finally, the Court notes that Taylor

failed to preserve her calendars, which would have provided relevant evidence relating to the extent of

her outside sales activity. 

Similarly, Young frequently sought to develop customers to generate sales by holding seminars,

meeting with business professionals, and hosting gatherings. Most of these efforts took place outside of

the office—at the gym, restaurants, sporting events, community events, car dealerships, etc. (See, e.g.,

Young Depo. Tr. 199:8-17, 201:13-18, 202:1-6, 203:3-17, 204:23-205:2, 205:24-206:9, 206:23-207:18,

209:19-22.) Young testified in his deposition that he spent “easily 30 or 40 percent” of his time in any

given week on sales activity outside the office, which far surpasses the “customarily and regularly”

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7 09cv2909

threshold under the FLSA exemption. (Young Depo. Tr. 215:10-15, 223:10-15.) Consequently, the

Court agrees that both Taylor and Young have satisfied the second prong of the exemption. 

3. Plaintiffs’ Arguments

In response, Plaintiffs claim the outside sales exemption does not apply because the sales were

technically consummated inside the office (when they were approved by management). Even assuming

that fact to be true, Plaintiffs misconstrue the FLSA definition of sales. As noted above, the exemption

includes not only the sales work itself, but also any “work performed incidental to and in conjunction

with the employee’s own outside sales or solicitations.” 29 C.F.R. ¶ 541.500(b) (emphasis added).

Because Taylor and Young conducted substantial incidental work and solicitations outside of the office,

it does not matter that the actual moment of sale occurred inside the office. Plaintiffs emphasize the use

of “outside sales” in Section 541.500(b) and contend that there is a question of fact regarding whether

W&R intended the Advisors to conduct “outside sales” versus “inside sales.” However, the Court

simply does not see how W&R’s intent—whatever it may have been—factors into the two-pronged

analysis for the FLSA exemption. Even if it did, the PCA’s language quoted above indicates that W&R

intended for Advisors have free rein to conduct their sales work in the manner and place of their

choosing. 

Plaintiffs next contend that there are genuine disputes of fact as to the extent of Taylor’s and

Young’s outside sales. They point to Taylor’s June 2, 2011 declaration in support. (Doc. 117.) However,

the Court finds that this declaration contradicts Taylor’s earlier deposition, in which she testified at

length about her extensive outside sales activity. Unlike her deposition, her subsequent declaration

indicates that nearly all of her activities were conducted inside the office, concluding that she spent only

about 5 percent of her time outside the office engaged in sales activities within the meaning of the

FLSA. Likewise, Plaintiffs point to Young’s June 2, 2011 declaration (Doc. 123) as creating a question

of fact, but for the same reasons, the Court finds that this declaration contradicts his earlier deposition.

Because these subsequent declarations appear to be self-serving, they cannot create a genuine question

of material fact to defeat summary judgment. Nelson v. City of Davis, 571 F.3d 924, 927 (9th Cir. 2009)

(“The general rule in the Ninth Circuit is that a party cannot create an issue of fact by an affidavit

contradicting his prior deposition testimony.”).

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K:\COMMON\BATTAGLI\DJ CASES\2 Orders to be filed\9cv2909 Summary Judgment Order.wpd 8 09cv2909

Finally, Plaintiffs assert that because Taylor and Young never performed outside sales activity

during their months-long training at W&R, the FLSA exemption does not apply to that period of time.

However, this argument fails because Taylor and Young did not properly plead an FLSA claim for their

training phases. For example, Taylor alleges in her FAC that she began working for W&R on November

1, 2005. She cannot now expand the scope of her FLSA claim by identifying her start of “employment”

as June 13, 2005, so as to include the training period. Young’s argument likewise fails. By failing to so

allege in FAC, they waived their right to claim compensation under the FLSA for that period of time.

Regardless, such a claim would be time-barred. Under the FLSA, an action for overtime pay must be

commenced within two years, or three years if the claim arises out of “a willful violation.” 29 U.S.C. §

255(a). Here, even if Taylor and Young could show a willful violation of the FLSA, they did not file the

Complaint until December 2009, more than three years after their respective 2005 training periods.

Having found Plaintiffs’ arguments unconvincing, the Court concludes that Taylor and Young

satisfy both prongs of the outside salesperson exemption and that there is no genuine dispute of material

fact as to their exempt status. Because they are exempt, Plaintiffs’ FLSA claims fail as a matter of law,

regardless of whether Taylor and Young are considered employees or independent contractors. The

Court therefore grants Defendant’s motions for partial summary judgment as to both Taylor and Young. 

B. Plaintiffs’ Motion for Conditional Class Certification

The FLSA expressly authorizes class (or “collective”) actions where the employees are

“similarly situated.” 29 U.S.C. §§ 207, 216(b). Like Defendant’s motions for partial summary judgment,

this motion involves only the FLSA causes of action. Because the Court grants the motions for partial

summary judgment above, no FLSA claims survive, and the Court therefore denies as moot Plaintiffs’

motion for conditional class certification.

IV.

CONCLUSION

For the reasons set forth above, the Court GRANTS Defendant’s Motion for Partial Summary

Judgment as to Plaintiff Michael Taylor, GRANTS Defendant’s Motion for Partial Summary Judgment

//

//

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 as to Plaintiff Kenneth Young, and DENIES AS MOOT Plaintiffs’ Motion for Conditional Class

Certification. 

IT IS SO ORDERED.

DATED: January 3, 2012

Hon. Anthony J. Battaglia

U.S. District Judge

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