Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_04-cv-06473/USCOURTS-caed-1_04-cv-06473-2/pdf.json

Nature of Suit Code: 710
Nature of Suit: Fair Labor Standards Act
Cause of Action: 29:201 Denial of Overtime Compensation

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IN THE UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF CALIFORNIA

STEVE AULDRIDGE, BILL BATES, )

GARY CHAMBERLAIN, DAVID )

COUFAL, GLEN DONHAM, WILLIAM )

DURFFEL, GEORGE HANSEN, )

CHARLES KIMBALL, PEGGY )

MARTIN, LAWRENCE REGO, KARL )

SHAFFER, ROBERT SWEENEY, )

)

Plaintiffs, )

)

v. )

)

MODESTO IRRIGATION DISTRICT, )

)

)

Defendant. )

____________________________________)

CV-F-04-6473 AWI DLB

MEMORANDUM OPINION

AND ORDER GRANTING

PLAINTIFFS' MOTION FOR

SUMMARY ADJUDICATION 

This case comes before the Court on Plaintiffs’ motion for summary adjudication. 

Plaintiffs Steve Auldridge, Bill Bates, Gary Chamberlain, David Coufal, Glen Donham, William

Durffel, George Hansen, Charles Kimball, Peggy Martin, Lawrence Rego, Karl Shaffer, and

Robert Sweeney (collectively, “Plaintiffs”), are or were employed by Defendant Modesto

Irrigation District (“Defendant”). Plaintiffs brought the present motion for summary adjudication

on the issue of the proper temporal allocation of settlement payments paid by Defendant under a

settlement agreement reached by the parties. This Court grants Plaintiffs’ motion for summary

adjudication.

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Although Defendant filed objections to some of Plaintiffs’ evidence on relevance 1

grounds and for purported failure to conform to the local rules, the underlying facts are

undisputed. 

2

PROCEDURAL AND FACTUAL HISTORY

Plaintiffs are or were dispatchers employed by Defendant who filed the instant action in

2004 under the Federal Labor Standards Act to recover overtime wages and liquidated damages.1

The parties settled their dispute in April 2006, but specifically reserved the issue of how to

allocate that portion of the settlement payment to each plaintiff that constituted overtime wages

for purposes of calculating retirement benefits. The overtime wages, pursuant to the parties’

settlement agreement, were reported as taxable wages on each plaintiff’s IRS Form W-2 for

2006. Defendant administers two retirement plans for the benefit of its employees, the Basic

Plan, which is a defined benefit pension plan, and the Supplemental Plan, which is a defined

contribution pension plan. The overtime wages, again pursuant to the parties’ agreement, were

characterized as 2006 compensation under the Supplemental Plan. The issue before this Court is

whether under the Basic Plan the overtime wages should be allocated to 2006, as Plaintiffs

contend, or among the years 2000-2005, as Defendant contends. 

LEGAL STANDARD

Summary adjudication is proper when a court does not enter judgment upon the whole

case. See Fed. R. Civ. P. 56(d). The moving party “bears the initial responsibility of informing

the district court of the basis for its motion, and identifying those portions of ‘the pleadings,

depositions, answers to interrogatories, and admissions on file, together with the affidavits, if

any,’ which it believes demonstrate the absence of a genuine issue of material fact.” Celotex

Corp. v. Catrett, 477 U.S. 317, 323 (1986). After the moving party meets this initial burden, the

nonmoving party “must set forth specific facts showing that there is a genuine issue for trial.” 

Fed. R. Civ. P. 56(e). A dispute as to a material fact is “genuine” if the evidence is such that “a

reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc.,

477 U.S. 242, 248 (1986). All reasonable inferences drawn from the underlying facts must be

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Section 1.12 provides, in relevant part:

2

“Compensation” shall mean an Employee’s Taxable Compensation, plus:

(a) The amount of his “regular contributions” to the Supplemental

Retirement Plan for Employees of the District;

(b) The amount of any compensation deferred by the Employee under

the District’s Deferred Compensation Plan or any other eligible

3

viewed in the light most favorable to the non-movant. See Matsushita Elec. Indus. Co., Ltd. v.

Zenith Radio Corp., 475 U.S. 574, 587-588 (1986). 

DISCUSSION

Plaintiffs argue that the terms of the Basic Plan require that the overtime wages should be

characterized as 2006 compensation because such payments are deemed “Taxable

Compensation,” a defined term under the Basic Plan. Defendant concedes that the wage

payments constitute Taxable Compensation, but argues the Basic Plan is silent or ambiguous

regarding how to treat settlement payments that represent overtime wages. The real issue, in

Defendant’s view, is how the overtime wage payments should be allocated for purposes of

determining “Average Monthly Compensation,” also a defined term, under the Basic Plan. The

Court understands the parties’ dispute to be whether the overtime wage payments should be

allocated to 2006 when they were actually paid or among the years 2000-2005 when they should

have been paid.

Language of the Basic Plan

This Court’s inquiry begins with the language of the Basic Plan. A participant’s

retirement benefits are calculated as a certain percentage of his or her “Average Monthly

Compensation.” See Exhibit B to Saltzman Declaration, Basic Retirement Plan (“Basic Plan”), §

6.01. “Average Monthly Compensation” is defined as “the monthly average of the Participant’s

Compensation over the 36 consecutive months of Credited Service out of his last 120 months of

Credited Service during which such average is the greatest.” See id., § 1.05. “Compensation” is

defined as an employee’s “Taxable Compensation,” plus various amounts not relevant here. See 2

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state deferred compensation arrangement (as defined in section 457

of the Code); and

(c) The amount of any contributions by the District to a “cafeteria

plan” governed by section 125 of the Code, or a plan governed by

section 401(k) or 132(f)(4) of the Code, that are made at the

Employee’s election.... 

Section 1.42 provides, in relevant part:

3

“Taxable Compensation” shall mean, with respect to any Employee, the

Employee’s wages, salaries, fees for professional services, and other amounts received for

personal services actually rendered in the course of employment by the District, but excluding the

following:

(a) Contributions to this Plan and other plan of deferred compensation,

to the extent deductible or not includable in gross income by the

Employee...;

(b) Distributions from any plan of deferred compensation, other than

an unfunded plan that is not qualified under section 401 of the

Code;

(c) Amounts realized from the exercise of a stock option or the

disposition of stock acquired on exercise of a stock option;

(d) Amounts realized on the vesting of restricted property;

(e) All other amounts that receive special tax benefits under the Code;

and

(f) Amounts or payments received for cash out or voluntary sale of

accrued benefits, including vacation, compensatory time, and sick

leave....

4

id., § 1.12. “Taxable Compensation” is in turn defined as an employee’s “wages, salaries, fees

for professional services, and other amounts received for personal services actually rendered in

the course of employment by the District,” and excludes various amounts not relevant here. See 3

id. at § 1.42. Plaintiffs argue that the terms of the Basic Plan require that overtime wage

payments be recognized as 2006 Taxable Compensation. Defendant does not dispute that

overtime wage payments constitute “Taxable Compensation,” but argues that the Basic Plan is

silent, or at best ambiguous, as to how settlement payments, including reparations for unpaid

overtime, should be allocated and, thus, that summary judgment is precluded. According to

Defendant, the Basic Plan is reasonably susceptible to its interpretation that such payments are to

be allocated to 2000-2005.

Whether a contract provision is ambiguous is a question of law. Maffei v. Northern Ins.

Co. of New York,12 F.3d 892, 898 (9th Cir. 1993) (applying California law). A contract is

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ambiguous when it is capable of two or more constructions, both of which are reasonable. See

Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 18. Courts will not strain to create an

ambiguity where none exists. Id. at 19. If a contract is ambiguous ordinarily summary judgment

is improper because differing views of the intent of parties will raise genuine issues of material

fact. See Maffei, 12 F.3d at 898. In the absence of a factual dispute, resolution of ambiguity is a

question of law for the court and summary judgment is proper. JBC Lockwood v. Wolf

Corporation, 629 F.2d 603, 610 (9th Cir. 1980); see also Levi Strauss & Co. v. Aetna Casualty

and Surety Co. (1986) 184 Cal. App. 3d 1479 (same).

This Court’s review of the Basic Plan indicates that it is silent, rather than ambiguous,

regarding how to allocate the overtime wage payments. Although courts cannot add a term to a

contract about which the contract is silent, a contract’s silence does not preclude a court from

construing the contract where the only dispute is the interpretation of the contract terms. See

Levi Strauss, 184 Cal. App. 3d at 1486 (construing contract on summary judgment where

contract was silent on relevant term and party opposing motion argued the contract was

ambiguous with respect to relevant term); see also Continental Ins. Co. v. Metro Goldwyn

Mayer, 107 F.3d 1344, 1346 (9th Cir. 1997) (applying California law) (“No factual disputes exist

in this case. The parties agree as to the content of the ... agreement; they differ only as to its

interpretation.”). In construing a silent contract, the court’s function is to ascertain and declare

what, in terms and substance, is contained in that contract, and not to insert what has been

omitted. Id., citing Jensen v. Traders & General Ins. Co. (1959) 52 Cal. 2d 786, 790-791. Intent

is not at issue here and the parties’ only disagreement is with respect to interpretation of the

Basic Plan. To survive summary judgment, Defendant must set forth evidence that the Basic

Plan is reasonably susceptible to more than one interpretation. 

Plaintiffs’ interpretation of the Basic Plan is persuasive. The Basic Plan defines Taxable

Compensation, a constituent component of Compensation and Average Monthly Compensation,

with respect to receipt of payment, not entitlement to payment or retroactive payment. “Taxable

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Given that both parties agree that the settlement payments constitute Taxable 4

Compensation, this Court assumes without deciding that the payments represent “amounts

received for personal services actually rendered in the course of employment.” 

6

compensation” is explicitly defined as an employee’s “wages, salaries, fees for professional

services, and other amounts received for personal services actually rendered in the course of

employment.” See Basic Plan, § 1.42. (emphasis added). The Basic Plan does not define the

term “receive,” but “[t]he words of a contract are to be understood in their ordinary and popular

sense” in the absence of a specific definition given to a word by the parties or a technical use of

the word. See Cal. Civ. C. § 1644. To receive means “to come into possession of.” MERRIAM

WEBSTER’S NEW COLLEGIATE DICTIONARY 956 (1973). Thus, the Basic Plan’s use of the term

“receive” means that the overtime payments are to be allocated according to when such payments

“came into the possession of” Plaintiffs. Clearly under the contract Taxable Compensation is

defined according to receipt of payment rather than entitlement to payment. The payments came

into the possession of Plaintiffs in 2006, and should thus be allocated to 2006. 

Both parties agree and there is no dispute that the overtime wage payments constitute

Taxable Compensation. Although Defendant argues that the Basic Plan is silent as to the 4

characterization of settlement payments constituting retroactive overtime wages, Defendant

agrees that the payments constitute Taxable Compensation, and the Basic Plan clearly defines

Taxable Compensation according to receipt of payment. Contrary to Defendant’s argument, the

Basic Plan cannot reasonably be interpreted to define Taxable Compensation according to when

the right to overtime payment arose, that is according to entitlement. There is no ambiguity in

the Basic Plan on this point. See Levi Strauss, 184 Cal. App. 3d at 1486 (“Nor is the contract

ambiguous on this point. Instead it is silent.”). There is no term in the Basic Plan providing

different treatment to overtime wage payments, even if they are in reparation for past overtime

wages. 

Defendant argues that although the definition of Taxable Compensation incorporates the

term “received,” the Basic Plan establishes no policy regarding temporal recognition of the

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It is unclear what standing Defendant has to argue that equity or public policy is violated 5

given that Plaintiffs are the ones advocating the position which is allegedly to their detriment. 

The Court notes that Defendant presents evidence that administration of the Basic Plan is

administered by its board of directors and the retirement committee, but Defendant provides no

evidence that it is opposing this motion in its capacity as trustee, nor has it provided evidence

that the board of directors or retirement committee have considered these issues.

7

overtime wage payments. Defendant is correct that the Basic Plan is silent on this point, but is

incorrect as to the effect of that silence. In Defendant’s view, this silence or purported ambiguity

means that its interpretation allocating the payments to 2000-2005 is plausible. The text of the

Basic Plan does not support Defendant’s argument nor does Defendant provide any evidence that

supports its view. For example, Defendant does not argue, let alone present any evidence, that

the Basic Plan’s silence on this point is intentional. 

Defendant also argues that interpretation of the Basic Plan is vested in Defendant’s board

of directors and administered by a retirement committee which has the discretion to interpret the

Basic Plan. Under the Basic Plan, decisions by the retirement committee are “conclusive and

binding on all interested parties, except as otherwise provided by law.” Basic Plan, § § 10.01-

10.03. Defendant argues that as the fiduciary its interpretation is binding, especially where

Plaintiffs have not shown its interpretation is contrary to law. Defendant’s argument, however, is

unsupported by evidence that its board of directors or retirement committee have considered this

matter or adopted the interpretation of the Basic Plan advocated by Defendant. Thus, Defendant

fails to raise any material issue of fact precluding summary adjudication.

Equity and Public Policy Considerations

Defendant further argues that for reasons of equity and public policy, the Basic Plan

should not be interpreted as advocated by Plaintiffs. According to Defendant, retirement 5

benefits are calculated according to Average Monthly Compensation earned during the time

period marked by the beginning of employment and ending when an employee “quits, retires, is

discharged or dies,” or is absent from work for more than a year. See Basic Plan, §§ 1.05, 1.13,

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 Defendant argues that Plaintiffs’ interpretation “counters the purposes of the Basic Plan, 6

which is drafted in a way that rewards eligible participants for consistent service to Defendant

over a longer period of time,” and cites to the definition of Average Monthly Compensation in

support. The evidence cited by Defendant defines Average Monthly Compensation over a period

of 10 years, but expresses no policy of rewarding consistent service, and is not a statute. 

8

1.14, 1.36. Defendant argues that compensation received outside this time period would not be

used to calculate Average Monthly Compensation, and provides evidence in the form of

declarations that for five Plaintiffs this would mean that their retirement benefits would be

unaffected by the overtime payments because they were no longer employed by Defendant in

2006 when the payments were made. See Declarations of Kenneth Winstead and Irma Perrone in

Opposition to Plaintiffs’ Motion for Summary Adjudication. In a similar vein, Defendant

maintains that the remaining seven Plaintiffs would receive a windfall payment that would

artificially inflate their Average Monthly Compensation, but presents no evidence of what effect

such purported windfall would have on Plaintiffs. More fundamentally, defendant cites no law in

support of its position nor does it identify the equity or public policy concerns implicated. 

“Public policy, in the context of a court’s refusal to enforce a contract term, may be based on the

policy expressed in a statute ... or may be implied from the language of such statute....” Cariveau

v. Halferty (2000) 83 Cal. App. 4th 126, 132. Defendant cites no statutes which are purportedly

violated, whether by letter or in spirit, by Plaintiff’s interpretation. “[U]nless it is entirely plain 6

that a contract is violative of sound public policy, the court will never so declare.” Bovard v.

American Horse Enterprises, Inc. (1988) 201 Cal. App. 3d 832, citing Stephens v. Southern

Pacific Co. (1895) 109 Cal. 86, 89-90. 

Prior Settlements Involving Retroactive Overtime Wage Payments by Defendant

The parties dispute the admissibility of Defendant’s treatment of prior settlements

involving retroactive overtime wages, which in those settlements were purportedly allocated to

the time period in which they were paid. Defendant argues that such evidence is inadmissible to

establish liability for the instant claim under Fed. R. Evid. 408. Defendant also maintains that

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Rule 408 also prohibits evidence of a compromise “to impeach through a prior 7

inconsistent statement or contradiction.” This prohibition appears to apply to testimonial

evidence, and Defendant does not argue that Plaintiffs offer evidence of prior settlements as

impeachment evidence.

Defendant’s objections to the Declarations of Harvey Frantz and of Peter Saltzman on 8

similar grounds are also overruled. Defendant’s objections to Saltzman’s declaration for failure

to conform to Local Rule 56-260 are also overruled.

Plaintiffs also argue that the terms of the Basic Plan reflect IRS regulations that require 9

such characterization. The Court need not address this argument given the disposition of the

case. 

9

evidence that the parties agreed to allocate the overtime wage payments to 2006 under the

Supplemental Plan is also inadmissible under the same rationale. Rule 408 provides that

evidence of a compromise, such as a settlement, is not admissible “when offered to prove

liability for, invalidity of, or [the] amount of a claim.” Plaintiffs do not offer this evidence to

prove Defendant’s liability, or to establish the invalidity or the amount of any claim, and thus

Rule 408 is inapplicable and evidence of characterization under prior settlements may be

considered. Plaintiffs, however, overstate the probative value of the prior settlements because, 7

contrary to Plaintiffs’ argument, such settlements are not controlling here. The prior settlements

evidence Defendant’s past treatment of settlement payments characterized as overtime payments,

but, in the instant case, it is the language of the Basic Plan that is controlling. This Court has 8

already found that such language requires recognition of the overtime payments in 2006 when

they were received by Plaintiffs.

9

In summary, Defendant has raised no material issue of fact that the Basic Plan means

anything other than what Plaintiffs advocate, that is Defendant failed to offered evidence that

would allow a reasonable factfinder to interpret the Basic Plan as it does. To withstand a motion

for summary adjudication, the nonmoving party must show that there are “genuine factual issues

that properly can be resolved only by a finder of fact because they may reasonably be resolved in

favor of either party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). Summary

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adjudication is proper when a party fails to provide evidentiary support for its interpretation of a

contract. See National Union Fire Ins. Co. of Pittsburgh v. Argonaut Insurance Company, 701

F.2d 95, 97 (9th Cir. 1983) (“National cannot rely on the mere possibility of a factual dispute as

to intent to avert summary judgment. Nor can it expect the district court to draw inferences

favorable to it when they are wholly unsupported.”); see also Levi Strauss, 184 Cal. App. 3d at

1486. On this record, the only reasonable interpretation of the Basic Plan is that retroactive

overtime payments are to be allocated according to when the payments were received by

Plaintiffs. On summary adjudication, the issue for this Court is to determine whether it is

possible for a reasonable factfinder to interpret the Basic Plan as advocated by Defendant. This

Court has concluded that it is not. 

CONCLUSION AND ORDER

For the reasons stated in the above Memorandum Opinion, IT IS HEREBY

ORDERED that Plaintiffs’ motion for summary adjudication is GRANTED.

IT IS SO ORDERED.

Dated: August 29, 2007 /s/ Anthony W. Ishii 

0m8i78 UNITED STATES DISTRICT JUDGE

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