Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_07-cv-01766/USCOURTS-casd-3_07-cv-01766-0/pdf.json

Nature of Suit Code: 790
Nature of Suit: Other Labor Litigation
Cause of Action: 28:1331 Fed. Question: Fair Labor Standards

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1 07CV1766

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

JORDANA BEEBE ,

Plaintiff,

CASE NO. 07CV1766 BTM (NLS)

ORDER GRANTING MOTION TO

DISMISS; GRANTING MOTION FOR

SUMMARY JUDGMENT; GRANTING

IN PART AND DENYING IN PART

MOTION TO STRIKE 

vs.

MOBILITY, INC., D/B/A FLEXCAR AND

DOES 1 TO 50,

Defendant.

Plaintiff Jordana Beebe is a former employee of Defendant Mobility, Inc. d/b/a Flexcar.

Plaintiff has filed a complaint alleging various violations of the California Labor Code such

as failure to pay overtime, failure to provide meal and rest periods, failure to provide semimonthly wages, failure to provide itemized wage statements, and failure to pay full wages

upon termination. Plaintiff also alleges that Defendant required employees to sign a

restrictive covenant in violation of Labor Code § 432.5, breached its employment contract

with Plaintiff and engaged in unfair business practices. In her complaint, Plaintiff alleges that

she brings this action on behalf of herself, as well as other former and present Flexcar

employees, and seeks civil penalties pursuant to the California Private Attorney General Act

(PAGA), Labor Code § 2698, et seq.

California law authorizes the Commissioner of the Labor and Workforce Development

Agency (LWDA) to assess and collect civil penalties for specified violations of the Labor

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2 07CV1766

Code committed by an employer. (See e.g., Lab. Code, §§ 210, 558 and 1197.1). For the

purpose of improving enforcement of existing Labor Code obligations, the Legislature

enacted the PAGA to permit an aggrieved employee in a private action to collect civil

penalties for Labor Code violations (suffered by the plaintiff and other employees) which

previously could only be collected by state agencies in enforcement actions. Labor Code §

2699. The penalties collected in these private civil actions are to be distributed 75 percent

to the State and 25 percent to the aggrieved employee. Labor Code § 2699(I). See Caliber

Bodyworks, Inc. v. Superior Court, 134 Cal App. 4th 365, 374-75 (2005) for a more detailed

background and explanation of PAGA. 

Defendant Flexcar has filed the following three motions challenging various aspects

of Plaintiff’s Complaint : (1) motion to dismiss Plaintiff’s sixth cause of action for violation of

Labor Code § 432.5; (2) motion for summary judgment on Plaintiff’s fourth cause of action

for failure to provide bi-monthly wages; and (3) motion to strike. The Court examines each

of these motions in turn. 

1. Motions to Dismiss and Strike the Sixth Claim

A motion to dismiss for failure to state a claim will be denied unless it appears that “no

relief could be granted under any set of facts that could be proved consistent with the

allegations.” Hishon v. King & Spalding, 467 U.S. 69, 73 (1984); Fidelity Financial Corp. v.

Federal Home Loan Bank of San Francisco, 792 F.2d 1432, 1435 (9th Cir. 1986). 

In her sixth cause of action, Plaintiff alleges that Defendant required its employees to

sign a restrictive covenant in violation of Business and Professions Code § 16600 which

provides that “every contract by which anyone is restrained from engaging in a lawful

profession, trade or business of any kind is to that extent void.” Plaintiff argues that this in

turn violates Labor Code § 432.5 which prohibits employers from requiring employees to

“agree, in writing, to any term of condition which is known by such employer . . . to be

prohibited by law.” In this cause of action, Plaintiff seeks penalties under the PAGA for the

alleged violation of § 432.5. Defendant argues that this cause of action should be dismissed

on the ground that the restrictive covenant at issue is lawful on its face.

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3 07CV1766

Defendant’s employment agreement contained the following restrictive covenant:

Unless Employee receives the prior express written permission of Employer,

Employee shall not, during the term of Employee's employment and the two (2)

years after termination of his employment, solicit or attempt to solicit, directly or

indirectly or by assisting others, any work, services, goods, or other business from

any of (sic) Business Contacts of Employer with whom Employee had material

contact in the two (2) years prior to his termination of employment. For purposes

of this Agreement, "material contact" shall mean interaction between Employee

and the Business Contact which takes place in an effort to continue and/or expand

the relationship and/or service between Employer and the Business Contact, and

which involves the use of Employer's confidential information. (Exhibit A)

The term Business Contact is defined as “ non-public lists of actual or prospective clients,

customers, suppliers, vendors, or investors provided to Employee by Employer or developed

or learned by Employee while employed by Employer.” (Id.)

California courts have held that covenants prohibiting employees from soliciting the

clients of their former employer are void under §16600 except where the restriction is

necessary for the protection of trade secrets. Thompson v. Impaxx, Inc., 113 Cal. App. 4th

1425, 1427 (2003); American Credit Indemnity Co. v. Sacks, 213 Cal. App. 3d 622, 634

(1989) (“In the absence of a protectable trade secret, the right to compete fairly outweighs

the employer’s right to protect clients against competition from former employees.”) Whether

information constitutes a trade secret is a question of fact. Thompson, 113 Cal. App. 4th at

1430-31. “Labeling information as trade secret or as confidential information does not

conclusively establish that the information fits this description.” Id. 

Defendant contends that the restrictive covenant at issue is valid as a matter of law

because it only prohibits solicitation of certain business contacts and does not “limit Plaintiff

from engaging in an entire profession, trade, or business.” (Defendant’s Memorandum of

Points and Authorities pps. 3- 4). The Court disagrees. As set forth above, California courts

have clearly voided anti-solicitation clauses as unfair restraints of trade unless their purpose

is the protection of trade secrets. See, e.g., Thompson, 113 Cal. App. 4th at 1429. Whether

Defendant’s covenant restricting solicitation of “Business Contacts” actually protects trade

secrets or other confidential, proprietary material would be an issue of fact. On its face, the

restrictive covenant prohibits employees from contacting Defendant’s actual and prospective

clients that are on a non-public list obtained through employment with the Defendant, if the

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4 07CV1766

employees had contact with the client involving the Employers’ confidential information. In

order to determine whether these restrictions are necessary for protection of the Defendant’s

trade secrets, the Court would need to resolve questions such as (1) whether these “nonpublic” customer lists contain information generally available through public sources or

contain information requiring the expenditure of time, effort and/or prior business dealings;

and (2) whether the secrecy of this “non-public” list provides Defendant with a “substantial

business advantage.” Morlife v. Perry, 56 Cal. App. 4th 1514, 1521-22 (1997). Because

these are factual determinations which the Court does not engage in at this procedural stage,

the Court concludes that Plaintiff’s sixth cause of action should not be dismissed on this

ground. 

Nevertheless, the Court concludes that Plaintiff’s sixth cause of action should be

dismissed on the ground set forth in Defendant’s motion to strike. The Court agrees with

Defendant’s argument that Plaintiff is not entitled to relief under Labor Code § 432.5 which

proscribes only agreements that are “prohibited by law” rather than those that are void. 

Plaintiff likens the instant case to Baker Pacific Corporation v. Shuttles, 220 Cal. App.

3d 1148, 1153 (1990) and urges the Court to be persuaded by its logic. In Baker, the

defendant required its employees to sign a release for fraud and intentional acts as a

condition of employment despite the fact that such releases are proscribed by Civil Code

section 1668 as follows: “All contracts which have for their object . . . to exempt anyone from

responsibility for his own fraud, or wilful injury . . . are against the policy of law.” Id.

at 1154. The Baker court rejected as circular and unintelligible defendant’s argument that

because such a release would be “of no force or effect,” it could not be contrary to law. Id.

The Court finds that the Baker case is distinguishable from the instant case in one

important aspect. Unlike Civil Code §1668 which pronounces proscribed releases “against

the policy of the law,” §16600 specifically states that covenants in restraint of trade will be

void. Nothing in the statute precludes employers or employees from entering into restrictive

covenants. § 16000 makes those agreements in restraint of trade unenforceable. Defendant

therefore has a valid argument that §16600 voids restrictive covenants rather than prohibits

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1 In reaching this conclusion, the Court is persuaded by similar logic set forth in

Edwards v. Arthur Andersen, 142 Cal. App. 4th 603, 631 n.10 (2006) review granted by 52

Cal. Rptr. 3d 86 (2006) The Court is aware that review has been granted in this case. If this

portion of the opinion is reversed upon review, the parties may ask the Court to reconsider

its ruling in this matter. 

2 The Court agrees that Plaintiff failed to plead that Defendant knew it was

requiring an agreement that was prohibited by law. The Court would normally grant leave to

amend to address this deficiency. In this instance, however, any amendment regarding

Plaintiff’s request for PAGA damages would be futile for the reasons just set forth. 

5 07CV1766

them. A comparison to Civil Code § 1668 strengthens, rather than weakens, Defendant’s

position. The plain language of Labor Code § 432.5 appears to apply only to contracts that

are specifically declared unlawful such as those declared by Civil Code §1668 to be “against

the policy of the law.” Because §16600 only voids restrictive covenants in restraint of trade,

the Court holds that Labor Code § 432.5 does not apply.1 

Here, Plaintiff does not seek a declaratory judgment or any other relief under §16600.

Plaintiff only seeks penalties for a violation Labor Code § 432.5. Because the Court finds that

no violation of § 432.5 occurred, the Court therefore GRANTS Defendant’s motions to dismiss

and strike the sixth cause of action.2

 

2. Motion for Summary Judgment

Rule 56 of the Federal Rules of Civil Procedure provides that summary judgment is

proper when "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).

In considering a motion for summary judgment, the Court must examine all of the evidence

in the light most favorable to the non-moving party. United States v. Diebold. Inc., 369 U.S.

654, 655 (1962). 

Plaintiff’s fourth cause of action alleges that Defendant paid its employees only once

per month and, therefore, violated Labor Code § 204 which provides as follows: 

All wages . . . earned by any person in any employment are due and payable twice

during each calendar month, on days designated in advance by the employer as the

regular paydays. Labor performed between the 1st and 15th days, inclusive, of any

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6 07CV1766

calendar month shall be paid for between the 16th and 26th day of the month during

which the labor was performed, and labor performed between the 16th and the last day,

inclusive, of any calendar month, shall be paid for between the 1st and 10th day of the

following month. . . . The requirements of this section shall be deemed satisfied by the

payment of wages . . . if the wages are paid not more than seven calendar days

following the close of the payroll period. 

Plaintiff seeks penalties for Defendant’s failure to make semi-monthly wage payments to her

and other employees pursuant to the PAGA and Labor Code § 210, which specifies civil

penalties for the violation of Labor Code § 204. 

Defendant moves for summary judgment of this claim on the ground that the statute

of limitations bars Plaintiff’s claim for penalties. Because Plaintiff seeks a civil penalty under

the Labor Code, the applicable statute of limitations is one year. Cal. Code Civ. Proc. §

340(a); McCoy v. Superior Court, 157 Cal. App. 4th 225 (2007). In support of this motion,

Defendant has provided undisputed evidence that it started paying its employees on a semimonthly basis staring in the month of July 2006, i.e. Defendant paid its employees their salary

on June 30, 2006 and thereafter on July 14, 2006, July 31, 2006, etc. (Millard Decl. 3-4) It

is also undisputed that Plaintiff wrote a letter to the California Labor and Workforce

Development Agency (“LWDA”) on June 29, 2007 complaining of this employment practice

among others. 

Defendant contends that by June 29, 2007 when Plaintiff filed her complaint with the

LWDA, the one year statute of limitations had already expired. On the other hand, Plaintiff

contends that the statute did not commence running until July 31, 2006 because that is the

first date upon which Defendant paid its employees for the second time in one month. 

Contrary to the Plaintiff’s position, the statute of limitations does not start running when

a wrong is remedied. Rather, the statute of limitations starts running when a cause of action

accrues i.e. when a plaintiff has the right to sue on a cause of action. Hogar Dulce Hogar v.

Community Development Com’n of City of Escondido, 110 Cal. App. 4th 1288, 1295 (2003).

“When an obligation or liability arises on a recurring basis, a cause of action accrues each

time a wrongful act occurs, triggering a new limitations period.” Id. The continuing accrual rule

has been applied in a variety of actions involving the obligation to make periodic payments

under California statutes or regulations. Id. citing Jones v. Tracy School Dist., 27 Cal.3d 99,

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105-107 (1980). “[T]he wrong that triggers the running of the statute of limitations is the

violation of the statute.” Church v. Jamison, 143 Cal. App. 4th 1568, 1583 n. 25 (2006). 

Where the alleged wrong is violation of Labor Code § 204, an employer commits a

wrongful act or violation of statute each time it (1) fails to pay wages by the 26th day of the

month for wages earned from the 1st to the 15th day of that month and (2) fails to pay wages

by the 10th day of the month for wages earned from the 16th to the last day of the preceding

month. Here, Defendant paid its employees on June 30, 2006 for the wages earned in the

month of June and commenced paying its employees the requisite semi-monthly wages in

July of 2006. The last time that Defendant violated Labor Code 204 was therefore on June

26, 2006 when it failed to pay its employees for the wages they earned from June 1, 2006 to

June 15, 2006. By paying its employees wages for the month on June 30, 2006, Defendant

satisfied its requirement of paying wages from June 15 to June 30 before the seven days after

the close of the payroll period. Plaintiff’s cause of action for violation of § 204 therefore last

accrued on June 27, 2006 and the one year statute of limitations ran one year later on June

27, 2007. Because Plaintiff did not file her complaint with the LWDA until June 29, 2007, her

claims regarding the violations of Labor Code § 204 are barred by the statute of limitations.

Plaintiff’s reliance on tolling under Labor Code § 2699.3(d) is unavailing as the statute of

limitations had expired before Plaintiff filed a complaint with the LWDA. For the above

reasons, the Court GRANTS Defendant’s motion for summary judgment on Plaintiff’s fourth

cause of action and dismisses that claim with prejudice. 

3. Motion to Strike

Federal Rule of Civil Procedure 12(f) provides that a court “may order stricken from any

pleading ... any redundant, immaterial, impertinent, or scandalous matter.” “[T]he function of

a 12(f) motion to strike is to avoid the expenditure of time and money that must arise from

litigating spurious issues by dispensing with those issues prior to trial....” Sidney-Vinstein v.

A.H. Robins Co., 697 F.2d 880, 885 (9th Cir.1983). 

Defendant moves to strike portions of Plaintiff complaint on three additional grounds

as set forth below. First, Defendant moves to strike the portions of Plaintiff’s complaint

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3 Defendant attached as Exhibit A to its motion to strike a copy of an unsigned

arbitration agreement. This alleged arbitration agreement was unsupported by a declaration

identifying it and attesting to its authenticity. Defendant provided no further evidence

regarding which employees, if any, signed this agreement. After Plaintiff pointed out these

infirmities in its Opposition, Defendant attached to its reply brief copies of arbitration

agreements signed by some of its employees. (Millard Decl.at 3.) Defendant has therefore

provided no evidence that all of its current employees have signed arbitration agreements

which cover wage and hour disputes. 

4 Even assuming all current employees have signed arbitration agreements, it

is doubtful whether these arbitration agreements would bar Plaintiff’s PAGA claims against

Defendant. As explained above, the nature of a PAGA action is to collect penalties that

would otherwise have been collected by the LWDA, not damages or unpaid wages that

would be collected by the individual employees. The Court however declines to reach this

issue at this time and will address this question if and when properly raised by the parties.

8 07CV1766

seeking penalties on behalf of current employees claiming that all current employees have

signed arbitration agreements that cover wage and hour claims and other disputes raised in

the Complaint. The Defendant however has provided no evidence showing that all current

employees have signed the alleged arbitration agreement.3 The Court declines to strike

portions of Plaintiff’s complaint based on Defendant’s unsupported allegations that all current

employees have signed arbitration agreements.4 

 The Court next considers Defendant’s motion to strike portions of Plaintiff’s complaint

which request unpaid wages on behalf of other employees pursuant to the PAGA and Labor

Code § 558. 

Labor Code § 558 provides:

“Any employer or other person acting on behalf of an employer who violates, or causes

to be violated, a section of this chapter or any provision regulating hours and days of

work in any order of the Industrial Welfare Commission shall be subject to a civil

penalty as follows: (1) For any initial violation, fifty dollars ($ 50) for each underpaid

employee for each pay period for which the employee was underpaid in addition to an

amount sufficient to recover underpaid wages. (2) For each subsequent violation, one hundred dollars ($100) for each underpaid employee for each pay period for which the

employee was underpaid in addition to an amount sufficient to recover underpaid

wages. (3) Wages recovered pursuant to this section shall be paid to the affected

employee. (Emphasis added.)

Both parties agree that the PAGA permits a Plaintiff to collect only penalties and not wages

on behalf of other employees. Labor Code § 2699. The parties dispute, however, whether

the “amount sufficient to recover underpaid wages” specified in Labor Code § 558 constitutes

wages or a penalty calculated based on unpaid wages. 

The Court agrees with Defendant that Plaintiff’s claims for amounts in addition to the

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5 The Court finds the analogy to Labor Code section 203 similarly unconvincing.

The penalty provided in that section is not a civil penalty to be collected by the Labor

Commissioner (and thus by plaintiffs under PAGA) but rather a penalty that the underpaid

employee is entitled to collect. 

9 07CV1766

flat sums specified in Labor Code § 558 should be stricken because they represent wages

rather than a penalty. The plain language of Labor Code § 558 allows the Labor

Commissioner to perform two separate functions: (1) to collect penalties in the $50 and $100

amounts specified on its own behalf; and (2) to recover “an amount sufficient to recover

underpaid wages” and pay the “wages recovered” to affected or underpaid employees.

(Emphasis added.) Contrary to the Plaintiff’s position, the “amounts sufficient to recover

underpaid wages” is not included in the penalty to be collected by the Labor Commissioner

but rather constitutes wages which the Commissioner collects on behalf of previously

underpaid employees. 

 Plaintiff argues that the additional amounts specified in Labor Code § 558 are not

wages but rather a penalty that is calculated in terms of unpaid wages. In support of this

argument, Plaintiff analogizes to Labor Code § 210 which sets a penalty of $50 dollars for

initial violations and $100 plus “25 percent of the amount unlawfully withheld” for subsequent

violations. Unlike § 558, however, § 210 does not refer to the additional 25 percent amount

as wages nor mandate that they be returned to the employees who were underpaid.5

Plaintiff’s argument that Labor Code § 558 similarly provides a penalty which is measured by

the amount of unpaid wages would be convincing if the statute itself did not refer to these

amounts as “wages” and require that they be paid to the employees who earned them, rather

than collected by the Labor Commissioner as a penalty. As is, the plain language of Labor

Code §558 clearly indicates that the additional amounts are underpaid wages rather than a

penalty which can be recovered by Plaintiff in lieu of the Labor Commissioner. The Court

therefore GRANTS Defendant’s motion to strike the portions of the Plaintiff’s complaint which

request sums in the amount of underpaid wages pursuant to Labor Code § 558 on behalf of

other employees. 

Finally, Defendant moves to strike portions of the complaint seeking relief on behalf of

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employees other than Plaintiff on the ground that Plaintiff failed to allege detailed facts and

legal theories, including the identities of the employees “by name or job title” for whom Plaintiff

seeks penalties. This level of detail is not required by the liberal pleading standards contained

in Federal Rule of Civil Procedure 8 which only requires a “short and plain statement of the

claim showing that the pleader is entitled to relief.” The Court therefore holds that the lack of

detail concerning the other alleged employees suffering similar wage and hour violations does

not justify striking these claims as “redundant, immaterial, impertinent, or scandalous”

pursuant to Rule 12(f). The Court therefore DENIES Defendant’s motion to strike the

portions of Plaintiff’s complaint seeking relief on behalf of other employees. 

CONCLUSION

For the reasons set forth above, Defendant’s Motion to Dismiss [Doc. No. 2] is

GRANTED; Defendant’s Motion for Summary Judgment [Doc. No. 7] is GRANTED; and

Defendant’s Motion to Strike [Doc. No. 3] is DENIED IN PART AND GRANTED IN PART.

IT IS SO ORDERED. 

DATED: February 20, 2008

Honorable Barry Ted Moskowitz

United States District Judge

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