Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_07-cv-00227/USCOURTS-caed-1_07-cv-00227-0/pdf.json

Nature of Suit Code: 710
Nature of Suit: Fair Labor Standards Act
Cause of Action: 15:2(a) Fair Labor Standards Act

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

1

IN THE UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF CALIFORNIA

ENRIQUE VASQUEZ and JUAN )

ANDRES RUIZ on behalf of a )

class of similarly situated )

employees, )

)

)

)

Plaintiffs, )

)

vs. )

)

)

COAST VALLEY ROOFING INC. dba )

COAST ROOFING, )

)

)

Defendant. )

)

)

No. CV-F-07-227 OWW/DLB

ORDER GRANTING DEFENDANT'S

MOTION TO DISMISS

PLAINTIFFS' TWELFTH CAUSE OF

ACTION WITH LEAVE TO AMEND

(Doc. 11)

Plaintiffs’ Complaint is brought as a class action on behalf

of Plaintiffs and former non-exempt employees of Defendant. 

Paragraph 22 of the Complaint alleges that Defendant has

maintained and enforced against its non-exempt employees, the

following unlawful practices and polices in violation of

California and federal wage and hour laws:

a. failing to pay premium overtime wages for

hours worked in excess of 8 hours in one day,

40 hours in a workweek, and on the seventh

Case 1:07-cv-00227-OWW -GSA Document 17 Filed 06/06/07 Page 1 of 21
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

2

day of a workweek without overtime pay;

b. failing to pay minimum wages for all hours

worked;

c. failing to pay accrued vacation wages 

d. failing to permit rest periods of at least

(10) minutes per four (4) hours worked or

major fraction thereof and failing to pay

such employees one (1) hour of pay at the

employee’s regular rate of compensation for

each workday that the rest period was not

provided;

e. failing to provide, to work at least five

(5) hours without a meal period and failing

to pay such employee one (1) hour of pay at

the employee’s regular rate of compensation

for each workday that the meal period was not

provided;

f. failing to provide accurate itemized wage

statements;

g. failing to maintain accurate time-keeping

records;

h. failing to reimburse employees for

expenses reasonably incurred;

i. failing to pay wage deductions to the

proper state and federal authorities;

j. failing to compensate for all hours worked

at hourly wage rates above the minimum wage

rate;

k. requiring employees to report to work but

not putting employees to work or furnishing

less than half their usual or scheduled day’s

work, and while paying less than half the

usual or scheduled day’s work at their

regular rate of pay;

l. failing to pay all earned wages and/or

premium wages due and owing at the time that

any Class member's employment with DEFENDANT

terminated;

m. refusing to pay all wages when due;

Case 1:07-cv-00227-OWW -GSA Document 17 Filed 06/06/07 Page 2 of 21
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

3

n. charging employees to rent equipment

needed to complete tasks for the benefit of

the employer; and

o. failing to timely permit inspection and/or

copying of employment records requested by

employees. 

The Twelfth Cause of Action is for Conversion. After

incorporating all preceding allegations, the Twelfth Cause of

Action alleges:

117. PLAINTIFFS and the Class labored for

and was subject to the control of DEFENDANT

and was permitted and/or required to suffer

work, all for the benefit of DEFENDANT, and

earned wages lawfully belonging to PLAINTIFFS

and the Class. PLAINTIFFS also made

reasonable expenditures - including the

provision of vehicles and equipment, and even

the renting of equipment from DEFENDANT - on

the DEFENDANT’S behalf and have not been

reimbursed. DEFENDANT converted to it’s own

use the lawful wages and monies of PLAINTIFFS

and the class by unlawfully requiring them to

work at hourly and/or piece rates below the

minimum wage and converting minimum wages due

to DEFENDANT’S own use, failing to pay

overtime premium and converting overtime

wages due to DEFENDANT’S own use; failing to

provide rest and meal periods without

compensating non-exempt employees one hour’s

pay for each instance such periods were not

provided, failing to reimburse employees for

expenditures taken on the employer’s behalf

and the other violations described in this

complaint and converted said monies and labor

DEFENDANT’S [sic] own use. 

118. As a result of the unlawful acts of

DEFENDANT, PLAINTIFFS and the Class have been

deprived of wages in amounts to be determined

at trial, and are entitled to recovery of

such amounts, punitive damages, and other

equitable relief. 

Defendant moves to dismiss the Twelfth Cause of Action

pursuant to Rule 12(b)(6), Federal Rules of Civil Procedure,

Case 1:07-cv-00227-OWW -GSA Document 17 Filed 06/06/07 Page 3 of 21
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

4

contending that the cause of action does not state a cognizable

legal theory.

A. Governing Standards.

A motion to dismiss under Rule 12(b)(6) tests the

sufficiency of the complaint. Novarro v. Black, 250 F.3d 729,

732 (9 Cir.2001). Dismissal of a claim under Rule 12(b)(6) is th

appropriate only where “it appears beyond doubt that the

plaintiff can prove no set of facts in support of his claim which

would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45-

46 (1957). Dismissal is warranted under Rule 12(b)(6) where the

complaint lacks a cognizable legal theory or where the complaint

presents a cognizable legal theory yet fails to plead essential

facts under that theory. Robertson v. Dean Witter Reynolds,

Inc., 749 F.2d 530, 534 (9 Cir.1984). In reviewing a motion to th

dismiss under Rule 12(b)(6), the court must assume the truth of

all factual allegations and must construe all inferences from

them in the light most favorable to the nonmoving party. 

Thompson v. Davis, 295 F.3d 890, 895 (9 Cir.2002). However, th

legal conclusions need not be taken as true merely because they

are cast in the form of factual allegations. Ileto v. Glock,

Inc., 349 F.3d 1191, 1200 (9 Cir.2003). Immunities and other th

affirmative defenses may be upheld on a motion to dismiss only

when they are established on the face of the complaint. See

Morley v. Walker, 175 F.3d 756, 759 (9 Cir.1999); Jablon v. th

Dean Witter & Co., 614 F.2d 677, 682 (9 Cir. 1980) When ruling th

on a motion to dismiss, the court may consider the facts alleged

Case 1:07-cv-00227-OWW -GSA Document 17 Filed 06/06/07 Page 4 of 21
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

5

in the complaint, documents attached to the complaint, documents

relied upon but not attached to the complaint when authenticity

is not contested, and matters of which the court takes judicial

notice. Parrino v. FHP, Inc., 146 F.3d 699, 705-706 (9th

Cir.1988).

B. Merits of Motion.

Defendant contends that the Twelfth Cause of Action for

conversion is simply an effort to recast statutory wage and hour

claims as a tort in order to recover tort damages. 

As explained in Farmers Inc. Exchange v. Zerin, 53

Cal.App.4th 445, 451 (1997):

‘Conversion is the wrongful exercise of

dominion over the property of another. The

elements of a conversion are the plaintiff’s

ownership or right to possession of the

property at the time of the conversion; the

defendant’s conversion by a wrongful act or

disposition of property rights; and damages. 

It is not necessary that there be a manual

taking of the property; it is only necessary

to show an assumption of control or ownership

over the property, or that the alleged

converter has applied to property to his own

use ....’ ... Money can be the subject of an

action for conversion if a specific sum

capable of identification is involved .... 

Neither legal title nor absolute ownership of

the property is necessary ... A party need

only allege it is ‘entitled to immediate

possession at the time of conversion ...’ ...

However, a mere contractual right of payment,

without more, will not suffice.

Defendant argues that Plaintiffs have not stated a

cognizable claim for conversion because generalized claims for

unspecified sums of money or indebtedness are not cognizable as

Case 1:07-cv-00227-OWW -GSA Document 17 Filed 06/06/07 Page 5 of 21
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

6

conversion. Defendant relies on Farmers Ins. Exchange v. Zerin,

supra, and Vu v. California Commerce Club, 58 Cal.App.4th 229

(1997).

In Farmers Ins. Exchange, the insurance company issued

separate policies of automobile insurance to Joseph Stewart and

Linda Kendrick, which provided for the payment of medical

benefits in the event of an accident in which the insured or

another covered person is injured. Both insureds were involved

in automobile accidents in which the insureds and other were

injured. Claims for medical benefits were submitted and the

insurance company paid the claims. The policies issued to the

insureds contained the provision: “When a person has been paid

damages by us under this policy and also recovers from another,

the amount recovered from the other shall be held by that person

in trust for us and reimbursed to us to the extent of our payment

....” The insureds hired attorney Zerin to represent them in

their claims against third party tortfeasors responsible for

their injuries. The insurance company notified Zerin of the

policy provisions requiring reimbursement upon recovery from

third parties. Zerin thereafter received payments from the third

party tortfeasors on behalf of the insureds but failed to pay any

portion of the recovery to Farmers, disbursing the funds instead

to himself and others. 53 Cal.App.4th at 450. On appeal,

Farmers argued that it had a sufficient property interest in the

third party recoveries by virtue of the policies’ provisions

which created an actual or equitable lien on the funds, citing

Case 1:07-cv-00227-OWW -GSA Document 17 Filed 06/06/07 Page 6 of 21
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

7

cases holding that “[o]ne who wrongfully withholds personal

property from another who is entitled to it under a security

agreement may be liable for conversion.” Id. at 452. The Court

of Appeals then discussed cases involving equitable liens, noting

that “[a] promise to pay a debt out of a particular fund, without

more, will not create an equitable lien on that fund” and

discussing other issues relevant to the creation of equitable

liens, Id. at 453-456, and concluded that “[o]n the bare

allegations of the complaint, this matter appears to be nothing

more than an attempt by Farmers to avoid the necessity of seeking

repayment from the parties primarily responsible by simply giving

notice to their personal representative”. The Court of Appeal

thus upheld the demurrer to the insurance company’s claim for

conversion. 

In Vu v. California Commerce Club, Inc., two card players

brought an action against a card club to recover moneys lost

while playing card games at the club, the plaintiffs alleging

that their losses were the result of other players’ cheating and

a breach of the card club’s implied contractual obligations to

them. The Court of Appeal held that the trial court properly

granted summary judgment for the card club on the cause of action

for conversion and conspiracy to commit conversion:

The subject of these causes of action, and

the damages alleged in them, once again were

the funds plaintiffs lost. But neither by

pleading nor responsive proof did plaintiffs

identify any specific, identifiable sums that

the club took from them. That rendered the

generalized claim for money not actionable as

Case 1:07-cv-00227-OWW -GSA Document 17 Filed 06/06/07 Page 7 of 21
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

8

conversion ... Indeed, the gist of

plaintiffs’ case was that much of the money

they lost was taken by persons other than the

club or its employees. Any amounts the club

may have taken (e.g., Pan-Nine bets

confiscated upon discovery of cheating) also

were not identified.

58 Cal.App.4th at 235.

Relying on these two cases, Defendants argue that

Plaintiffs’ conversion cause of action does not relate to a

“specified fund”:

Plaintiffs have simply alleged that Defendant

owes them what they contend amount to wages

and/or unreimbursed expenses under Labor Code

section 203 (and other Code sections) because

of violations of the specified Labor Code

sections. These allegations may establish a

statutory or property right to payment, but

is not the specified fund essential to plead

a claim for conversion of money.

Defendants further contend that the California Labor Code

provides statutory remedies for employees to seek unpaid wages

and that common law remedies are not generally available in

actions to recover wages.

Defendants cite Oppenheimer v. Robinson, 150 Cal.App.2d 420,

422-423 (1957). However, there is no such holding in this case

or any discussion that common law remedies are not generally

available in actions to recover wages. Therefore, Defendants’

contention is not supported by authority.

Plaintiffs cite Department of Industrial Relations v. UI

Video Stores, Inc., 55 Cal.App.4th 1084 (1997) as authority that

a claim for conversion can be stated as well as statutory claims

for unpaid wages. There, the Department of Industrial Relations

Case 1:07-cv-00227-OWW -GSA Document 17 Filed 06/06/07 Page 8 of 21
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

9

(DLSE) brought an action against an employer seeking

reimbursement for the cost of uniforms the employer had required

its employees to furnish in violation of law. The DLSE and the

employer entered into a settlement agreement whereby the employer

agreed to deliver to the DLSE checks made payable to each

affected employee. Rather than comply with the settlement

agreement, the employer mailed the checks directly to the

employees. A number of the checks were returned as

undeliverable. The employer eventually turned over the

undelivered checks to the DLSE, but instructed its bank not to

honor them, asserting that it had complied with the settlement

agreement and intended to keep the funds equal to the

undeliverable checks. The DLSE filed a complaint against the

employer for breach of the settlement agreement and conversion of

the checks. The trial court granted summary judgment for the

employer and the Court of Appeals reversed. With regard to

DLSE’s claim for conversion, the Court of Appeal held:

The DLSE’s second cause of action alleged

that the DLSE had the right to immediate

possession of the checks and that Blockbuster

unlawfully converted the checks to its own

use ... Blockbuster argues that the DLSE has

no right to exercise dominion and control of

the checks, that Blockbuster is willing to

issue a new check if the missing employee is

located, and that appellant suffered no

damages because it has no right to deposit

the checks.

The issues of DLSE’s authority and

Blockbuster’s theory of lack of damages have

been resolved by our discussion of the DLSE’s

statutory and contractual authority to

collect wages on behalf of the employees

Case 1:07-cv-00227-OWW -GSA Document 17 Filed 06/06/07 Page 9 of 21
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

10

absent an actual assignment. Furthermore,

the DLSE need not possess legal title to the

property at issue to support a cause of

action for conversion. A person without

legal title to property may recover from a

converter if the plaintiff is responsible to

the true owner, such as in the case of a

bailee or pledgee of the property ... The

DLSE, which is empowered by section 96.7 to

collect and deposit unpaid benefits, has such

an interest. It was error to grant summary

judgment on this cause of action. 

55 Cal.App.4th at 1096. 

Plaintiffs acknowledge that UI Video Stores, Inc. is not on

point authority supporting their claim for conversion, but

contend that the decision demonstrates that a conversion cause of

action may be brought for recovery of unpaid wages, including

reimbursement of employee expenses. Although the viability of

the conversion claims was not at issue in either case, Plaintiffs

also cite Singh v. Superior Court, 140 Cal.App.4th 387 (2006) and

Smith v. Superior Court, 39 Cal.4th 77 (2006) to suggest the

“common practice” under California labor law is to bring

conversion claims as well as California Labor Code wage and hour

claims.

Defendants rejoin that UI Video, Inc. is not authority that

the Plaintiffs can state a cause of action for conversion for

unpaid wages, because that conversion claim was based on the

employer’s retention of undeliverable checks that DLSE had an

interest in, in violation of the settlement agreement with the

DLSE. Defendants further argue that the Plaintiffs’ cases cited

to demonstrate the alleged “common practice” of asserting 

Case 1:07-cv-00227-OWW -GSA Document 17 Filed 06/06/07 Page 10 of 21
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

11

conversion as well as statutes as a basis for recovery of unpaid

wages, do no such thing:

[U]nless this alleged ‘common practice’ has

been recognized judicially as legitimate,

then this assertion may amount to nothing

more that the assertion that plaintiffs

attorneys [sic] have made a ‘common practice’

of throwing in an appropriate (if not indeed

frivolous) conversion claim with their wage

and hour pleadings.

At the hearing, Plaintiffs argued that because Blockbuster

had ordered its bank not to honor the undeliverable checks and

intended to maintain sufficient funds to cover those amounts, UI

Video, Inc. involved a general fund as opposed to a specified

fund. 

Plaintiffs’ contention is meritless. The specified fund was

the amount set forth in the Settlement Agreement. Checks were to

be drawn against that specified fund and delivered to the DLSE

for transmittal to the employees. The conversion occurred

because Blockbuster failed to turn over to the DLSE the

undeliverable checks as required by the Settlement Agreement,

instead using those funds for Blockbuster’s own use. 

Plaintiffs argue that Paragraph 117 of the Complaint pleads

their ownership or right to possession of personal property

because personal vehicles, equipment and earned wages are all

property rights of the Plaintiffs. Plaintiffs rely on Moreno v.

Greenwood Auto Center, 91 Cal.App.4th 201, 210 (2001)(individual

sued a car dealer for conversion of an older truck and recovered

damages based on her belief she was trading in her old truck and

Case 1:07-cv-00227-OWW -GSA Document 17 Filed 06/06/07 Page 11 of 21
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

12

buying a newer truck, when in fact she executed a lease agreement

for the newer truck); O’Flaherty v. Belgum, 115 Cal.App.4th 1044,

1079 (2004)(dissenting opinion)(“The withdrawing partners did not

reimburse OB for the reasonable value of the offices, equipment,

supplies, and employees paid for by OB and used by the

withdrawing partners from October 12, 1997, to December 31, 1997,

to set up and promote the business of OCMOH. This use

constituted conversion of OB’s property.”).

Defendant replies that Moreno and O’Flaherty do not support

Plaintiffs’ claim for conversion based on the allegations in

Paragraph 117 that “Plaintiffs also made reasonable expenditures

- including the provision of vehicles and equipment, and even the

renting of equipment from DEFENDANT - on the DEFENDANT’S behalf

and have not been reimbursed.” 

Moreno involved a deprivation of the use of her older truck

after the plaintiff was duped into signing a lease for a new

truck instead of buying a new truck and the removal of

accessories from the older truck by the car dealer. Defendant

argues that Moreno does not support Plaintiffs here because there

is no allegation that Defendant confiscated Plaintiffs’ personal

vehicles and prevented them from using it or any allegation that

Defendant removed accessories from Plaintiffs’ vehicles. 

Defendant contends:

Plaintiffs have instead alleged an issue

regarding reimbursement they now seek for the

alleged use of their personal vehicles. This

is not a claim for the common law tort of

conversion. Plaintiffs offer the Court the

Case 1:07-cv-00227-OWW -GSA Document 17 Filed 06/06/07 Page 12 of 21
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

13

opportunity to accept an absurd

misinterpretation of Moreno in order to apply

conversion in a way it has never been applied

before. The Court should decline that

opportunity.

O’Flaherty entailed a wrongful withdrawal from a medical

partnership and the retention by the withdrawing partners of the

exclusive use and possession of the partnership’s furniture,

supplies and equipment. Defendant argues: “Such exclusive,

wrongful possession and use of supplies and equipment constituted

conversion. But the facts of O’Flaherty are obviously and easily

distinguishable from the alleged facts in this litigation[,]” for

the reason that the taking of tangible personal property was in

dispute.

Plaintiffs cite Cortez v. Purolator, 23 Cal.4th 163 (2000)

as authority that earned wages are the property of the employee

who has performed labor for compensation. In Cortez, a former

employee brought an action against her former employer for

failure to pay overtime wages. Plaintiff sought overtime pay

that had accrued as a result of the failure of defendant’s

predecessor company to comply with certain regulations when it

changed its workers’ weekly schedules from five 8-hour days to

four 10-hour or longer days. In addition to her individual cause

of action, plaintiff prosecuted an Unfair Competition Law (UCL)

claim for unfair business practice seeking restitution of the

overtime wages withheld from her and other employees. In

pertinent part, the California Supreme Court ruled:

We conclude that orders for payment of wages

Case 1:07-cv-00227-OWW -GSA Document 17 Filed 06/06/07 Page 13 of 21
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

14

unlawfully withheld from an employee are also

a restitutionary remedy authorized by

[Business and Professions Code] section

17203. The employer has acquired the money

to be paid by means of an unlawful practice

that constitutes unfair competition as

defined by section 17200. The employee is,

quite obviously, a ‘person in interest’ (§

17203) to whom that money may be restored. 

The concept of restoration or restitution, as

used in the UCL, is not limited to the return

of money or property that was once in the

possession of that person. The commonly

understood meaning of ‘restore’ includes a

return of property to a person from whom it

was acquired ..., but earned wages that are

due and payable pursuant to section 200 et

seq. of the Labor Code are as much the

property of the employee who has given his or

her labor to the employer in exchange for

that property as is property a person

surrenders through an unfair business

practice. An order that earned wages be paid

is therefore a restitutionary remedy

authorized by the UCL. The order is not one

for payment of damages. The Court of Appeal

concluded that a claim for wages owed is not

a damage claim in holding that claims for

wages earned but not paid are not damage

claims subject to the claim filing

requirement of Government Code section 905 in

Loehr v. Ventura County Community College

Dist. (1983) 147 Cal.App.3d 1071, 1080 ...

(‘Earned but unpaid salary or wages are

vested property rights, claims for which may

not be properly characterized as actions for

monetary damages.’). Because equity regards

that which ought to have been done as done

(Civ. Code § 3529), and thus recognizes

equitable conversion (Parr-Richmond

Industrial Corp. v. Boyd (1954) 43 Cal.2d

157, 165-166 ..., we also conclude that

unlawfully withheld wages are property of the

employee within the contemplation of the UCL. 

Our conclusion that these wages may be the

subject of a restitutionary order under

section 17203 is consistent with our

recognition in Walnut Creek Manor v. Fair

Employment & Housing Com. (1991) 54 Cal.3d

245, 263 ..., that restitutionary awards

encompass quantifiable sums one person owes

Case 1:07-cv-00227-OWW -GSA Document 17 Filed 06/06/07 Page 14 of 21
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

15

to another, and with that of the United

States Supreme Court in Curtis v. Loether

(1974) 415 U.S. 189, 197 ..., that backpay

may be a form of restitution.

We are satisfied therefore, that an order

that a business pay to an employee wages

unlawfully withheld is consistent with the

legislative intent underlying the

authorization in section 17203 for orders

necessary to restore to a person in interest

money or property acquired by means of an

unfair business practice.

23 Cal.4th at 177-178. 

Defendant argues that Cortez cannot be read as approval for

a claim of conversion by employees for unpaid wages. Defendants

correctly contend that there is no discussion in Cortez of the

common law tort of conversion and only a single reference to

“equitable conversion”. Neither Cortez nor the cases cited in

Cortez involve the common law tort of conversion.

Defendant moves to dismiss the Twelfth Cause of Action on

the ground that it does not state a cognizable theory of relief

as a matter of law. However, Defendant does not identify a

California case that holds a cause of action for conversion

cannot be stated by employees against their employer for failure

to pay wages as required by law.

Defendant provides authority from other jurisdictions. 

Temmen v. Kent-Brown Chevrolet Co., 227 Kan. 45, 605 P.2d 95

(1980), involved a claim by an employee against the employer for

withholding money from the employee’s wages without

authorization. In holding that the employer’s action did not

constitute the tort of conversion, the Court ruled:

Case 1:07-cv-00227-OWW -GSA Document 17 Filed 06/06/07 Page 15 of 21
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

16

It has been uniformly held that conversion is

an unauthorized assumption and exercise of

the right of ownership over goods or personal

chattels belonging to another ... We note

also that:

‘An action will not lie for

conversion of a mere debt or chose

in action. Hence, where there is

no obligation to return identical

money, but only a relationship of

debtor and creditor, an action for

conversion of the funds

representing the indebtedness will

not lie against the debtor.’ ....

605 P.2d at 99. In Erlich v. Howe, 848 F.Supp. 482

(S.D.N.Y.1994), a former partner brought an action against his

law firm, alleging that his discharge violated ERISA and COBRA,

and, inter alia, alleged a claim for conversion of his deferred

compensation. In dismissing the conversion claim, the District

Court held in pertinent part:

This claim is one for conversion of monies

owed to Ehrlich under the [Partnership]

Agreement. An action for conversion of money

is insufficient as a matter of law unless it

is alleged that the money converted was in

specific tangible funds of which the claimant

was the owner and entitled to immediate

possession. An action of conversion does not

lie to enforce a mere obligation to pay

money.

848 F.Supp. at 492. In Huff v. Biomet, Inc., 654 N.E.2d 830

(1995), an executrix of an employee’s estate brought an action

against the employer for violating the Indiana Wage Payment

Statute and for conversion. In affirming the trial court’s

dismissal of the conversion claim, the Indiana Court held in

pertinent part:

Case 1:07-cv-00227-OWW -GSA Document 17 Filed 06/06/07 Page 16 of 21
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

17

To constitute the tort of conversion there

must be an appropriation of the personal

property of another ... Money may be the

subject of an action for conversion, so long

as it is capable of being identified as a

special chattel ... The money must be a

determinate sum with which the defendant was

entrusted to apply to a certain purpose ...

The refusal to pay a debt will generally not

support a conversion action ....

...

Here, Huff [the executrix] seeks payment of

money which was allegedly withheld from

Carrell’s [the employee] commissions. Huff

alleges no facts which would indicate that

Carrell entrusted money to Biomet for a

particular purpose. Moreover ..., Huff has

not shown that Biomet retained specific funds

which could be directly attributed to

Carrell. The facts alleged in Huff’s

complaint do not support a claim for

conversion.

654 N.E.2d at 836.

Plaintiffs argue that these cases are not dispositive

because Plaintiffs have alleged they have earned a specific

amount, or have expended a specific amount for which

reimbursement is due, and for which they are entitled to under

California labor laws, and that these “specific tangible amounts,

wages that are the property of Plaintiffs and reimbursement of

expenses were converted by Defendants for its own use.” 

As to Defendant’s claim Plaintiffs must prove that Defendant

is obligated to return a specific sum capable of identification,

i.e., a specified fund, Plaintiffs argue Defendant is equitably

estopped to make such an assertion at the pleading stage. 

Plaintiffs assert that Defendant controls this information and

Case 1:07-cv-00227-OWW -GSA Document 17 Filed 06/06/07 Page 17 of 21
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

18

has denied Plaintiffs’ access to the documents after Plaintiffs

made a request for them pursuant to California Labor Code § 226. 

California Labor Code § 226(a) requires an employer to

provide itemized written statements semimonthly or at the time of

payment of wages showing, inter alia, gross wages earned; total

hours worked (unless salaried and exempt from overtime); the

number of piece-rate units earned and applicable piece-rate if

employee paid on a piece-rate basis; all deductions; net wages

earned; the inclusive dates of the period for which the employee

is paid; and all applicable hourly rates in effect during the pay

period and the corresponding number of hours worked at each

hourly rate by the employee. Section 226(b) requires the

employer to keep the information described in Section 226(a) and

to afford current and former employees the right to inspect and

copy the records upon reasonable request to the employer. 

Section 226(c) provides that an employer who receives an oral or

written request to inspect or copy the records shall comply as

soon as practicable, but no later than 21 calendar days from the

date of the request. 

Plaintiffs refer to the following allegations of Paragraph

22 of the Complaint, incorporated by reference into the Twelfth

Cause of Action:

a. failing to pay premium overtime wages for

hours worked in excess of 8 hours in one day,

40 hours in a workweek, and on the seventh

day of a workweek without overtime pay;

b. failing to pay minimum wages for all hours

worked;

Case 1:07-cv-00227-OWW -GSA Document 17 Filed 06/06/07 Page 18 of 21
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

19

c. failing to pay accrued vacation wages 

...

l. failing to pay all earned wages and/or

premium wages due and owing at the time that

any Class member's employment with DEFENDANT

terminated ....

Plaintiffs state that further discovery will reveal the specific

sum amount of wages that were converted by Defendant’s actions. 

Because such documents are in the exclusive possession of

Defendant, such sums are “capable of identification”.

Defendant responds that “allegedly unpaid wages are a

category of damages which are categorically unavailable through a

tort action for conversion.” Therefore, Defendant contends:

The important legal point for the Court not

to lose sight of is that it is the

categorical nature of the allegedly unpaid

wages - not their alleged or unalleged amount

- that prevents them from constituting the

‘specific fund’ required to state a tort for

conversion. Unpaid wages are not a specific

fund.

Plaintiffs’ erroneous arguments based on

allegations of non-access to documents also

help to point out some of the hidden dangers

in accepting their unprecedented theory of

conversion ... [T]he Court may notice that

the Opposition tends to obscure one of the

major categories of unspecified allegedly

unpaid wages that Plaintiffs seek to recover

- allegedly unpaid wages predicated on

allegations of missed meal and rest periods. 

Quantification of any allegedly missed meal

and rest periods over an extended time period

is a matter that may turn on the vagaries of

testimony, the problems of human memory, the

willingness of some persons to offer selfserving but inaccurate testimony, and other

related problems. Does the potential for

such discovery now mean that a conversion

claim alleging meal and rest period

Case 1:07-cv-00227-OWW -GSA Document 17 Filed 06/06/07 Page 19 of 21
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

20

violations can never be dismissed? It cannot

be so, under existing law. Plaintiffs’

theory of the common law tort of conversion

would stretch the tort far beyond any past

conception of it by seeking to include

recovery of alleged meal and rest period

violations. This example helps to further

underscore the new kinds of unanticipated

problems that this Court could be opening up,

if it were to seriously entertain any notion

of now extending the common law tort of

conversion in the unprecedented manner

Plaintiffs’ request.

Plaintiffs here seek to extend the California law of

conversion into the wage and hour field in a context unrecognized

by existing state law. Well-reasoned cases from other

jurisdictions explain why unliquidated and unpaid employment

compensation does not constitute the requisite personal property

or chattels, capable of conversion. When the law of a state is

silent, the District Court is to endeavor to predict what the

Supreme Court of the state will decide. See Vernon v. City of

Los Angeles, 27 F.3d 1385, 1391 (9 Cir.), cert. denied, 513 th

U.S. 1000 (1994)(“Where the state supreme court has not spoken on

an issue presented to a federal court, the federal court must

determine what result the state supreme court would reach based

on state appellate court opinions, statutes, and treatises.”).

Based on the absence of any California authority, the 

reasoning of the out-of-state cases, and the comprehensive

remedial scheme protecting employees under California and federal

law, the conversion theory proffered by Plaintiffs is an idea

whose time has not come. There is no reason to extend tort law

into a field comprehensively regulated by federal and state wage

Case 1:07-cv-00227-OWW -GSA Document 17 Filed 06/06/07 Page 20 of 21
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

21

and hour laws. 

Plaintiff requests leave to amend, subject to the

requirements of Rule 11, Federal Rules of Civil Procedure. Given

Plaintiffs’ representation that the Twelfth Cause of Action can

be amended to state a claim in compliance with Rule 11, leave to

amend is GRANTED.

CONCLUSION 

For all the reasons stated above, Defendants’ motion to

dismiss the Twelfth Cause of Action is GRANTED WITH LEAVE TO

AMEND. Plaintiffs shall file a First Amended Complaint in

accordance with this Order within 14 days of the filing date of

this Order.

IT IS SO ORDERED.

Dated: May 31, 2007 /s/ Oliver W. Wanger 

668554 UNITED STATES DISTRICT JUDGE

Case 1:07-cv-00227-OWW -GSA Document 17 Filed 06/06/07 Page 21 of 21