Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_04-cv-00227/USCOURTS-caed-2_04-cv-00227-1/pdf.json

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

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 On September 21, 2004, the court held that the arbitration 1

agreement between defendants Auburn Honda, Jay Cooper, and Jimmy

Ray Mullins and plaintiffs was enforceable. (9/21/2004 Order at

16.) 

1

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

RICHARD HUSE and JEFF DUNCAN,

Plaintiffs, CIV. S-04-0227 DFL/JFM

v. MEMORANDUM OF OPINION 

AND ORDER

AUBURN HONDA, JAY COOPER, JIMMY

RAY MULLINS, AMERICAN HONDA MOTOR

CO., and DOES 1-30,

Defendants.

_________________________________/ 

Plaintiffs Richard Huse and Jeff Duncan, former car salesmen

at Auburn Honda, bring this action against defendants for sexual

harassment and retaliation. Defendant American Honda Motor 1

Company, Inc. (“American Honda”) now moves for summary judgment.

For the reasons that follow, American Honda’s motion is GRANTED.

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I.

The underlying dispute in this case involves allegations of

sexual harassment by Huse against defendant Jimmy Ray Mullins, a

manager at Auburn Honda. Auburn Honda, a car dealership located

in Auburn, California, hired Huse in March 2001. (9/21/2004

Order at 2.) Huse alleges that while working at Auburn Honda, he

was the victim of sexual harassment by Mullins. (Id. at 3.) 

Huse further contends that no remedial action was taken by the

dealership after he complained to another supervisor about this

behavior. (Id.) In September 2002, Huse filed a complaint for

sexual battery with the Placer County Sheriff’s Department and

took approved medical leave. (Id. at 4.) When he returned from

leave in February 2003, defendant Jay Cooper, the president and

owner of Auburn Honda, allegedly informed Huse that Auburn Honda

was under no obligation to return him to his former sales

position. (Id.) According to Huse, Cooper then offered him a

janitor or file clerk position, which Huse refused, thereby

ending his employment at Auburn Honda. (Id.) 

Duncan claims that after Huse left Auburn Honda, he was

called into Cooper’s office with Mullins present. (Id.) Cooper

questioned Duncan about whether Huse intended to sue the

dealership. (Id.) Duncan alleges that he told Cooper that

Mullins had been acting inappropriately for years. (Id.) Duncan

later spoke with the Placer County Sheriff’s Department. (Id.) 

He alleges that co-workers and management began treating him

differently, allegedly in retaliation. (Id.) According to

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Duncan, in March 2003, Cooper screamed obscenities at him and

accused him of working with Huse to sue the dealership. (Id.) 

Shortly thereafter, Duncan’s doctor recommended that he not

return to work because of the severe mental and physical stress

associated with the Huse incident. (Id. at 5.) Duncan took his

doctor’s advice. 

Plaintiffs’ claims against American Honda are based on their

contention that American Honda was their employer at the time of

the events described above. 

American Honda and Auburn Honda are two distinct entities. 

Auburn Honda is a local dealership owned and operated by

defendant Cooper; American Honda is a separate California

corporation and is the exclusive distributor of Honda vehicles

within the United States. (SUF ¶¶ 1, 9.) No member of American

Honda’s board of directors serves on the Auburn Honda board of

directors. (Geffon Decl. ¶ 24.) There is no evidence that the

two companies are subsidiaries of one another or that they are

jointly owned. 

However, the two companies were in contact during the time

period of plaintiffs’ allegations. For instance, it is not

disputed that American Honda and Auburn Honda entered into a

Dealer Sales and Service Agreement. (Mot. at 3; SUF ¶ 12.) An

American Honda representative, one Mr. Butts, also visited Auburn

Honda at least once a month during plaintiffs’ employment,

although plaintiffs themselves seldom had contact with Butts,

other than to be introduced and to say hello on occasion. 

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(Yeager Decl. ¶ 3; Huse. Dep. at 102-06; Duncan Dep. at 183-84.) 

American Honda also had a hand in certain aspects of Auburn

Honda’s operations. For example, American Honda provided

training programs for salespeople. (SUF ¶ 22.) Plaintiffs

allege that they were required to attend these training sessions. 

(Opp’n at 5; Duncan Decl. ¶ 5; Huse Decl. ¶ 8.) However, the

evidence does not indicate which of the two companies required

their attendance. In connection with these training programs,

plaintiffs received monthly statements from American Honda,

telling them which quizzes and training programs they had

completed, and which were outstanding. (Huse Decl. ¶ 12.) 

Plaintiffs also received monthly performance statements from

American Honda. (Id.) These statements were compiled from

customer surveys American Honda supplied to Auburn Honda and its

other dealers. (SUF ¶¶ 14-15.) Each month, American Honda

reviewed customer feedback and ranked salespeople in each of the

dealerships relative to one another. (Geffon Decl. ¶¶ 14-15.) 

In connection with this performance rating, a cash award or

“spiff” of anywhere from $50 to $1,500 was given to certain

salespeople who met milestones set by American Honda. (Id. ¶

23; Huse Decl. ¶ 18.) Plaintiffs received awards from American

Honda on at least one or two occasions. (Huse Decl. Ex. 4;

Duncan Decl. Ex. 1.) Plaintiffs received form 1099s, not W-2s,

for tax purposes. (SUF ¶¶ 102-05.) According to American Honda,

it was legally required to issue a Form 1099 when it paid nonemployees for services performed. (Id. ¶ 105.) 

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In addition to cash awards, plaintiffs received various

certifications and letters of congratulations from American Honda

for completing training programs and quizzes. (Opp’n at 7-8;

Huse Decl. ¶ 28.) Huse emphasizes a letter he received from

David Heath, manager of product and sales information at American

Honda, which states, “[b]y passing on all of the product

knowledge certification quizzes you have demonstrated a desire to

become one of our top salespeople.” (Opp’n at 8.) 

 However, outside of issuing Form 1099s and training

certifications to plaintiffs, American Honda did little else to

track or keep records of Auburn Honda and its salespeople. It

did not keep Auburn Honda’s books, issue its paychecks, maintain

its payroll records, pay its federal and state employment taxes,

issue its W-2s, or pay its bills. (SUF ¶ 29.) American Honda

did not set the salary or commission structure for Auburn Honda

employees, nor did it control Auburn Honda’s personnel files. 

(Id. ¶ 34-35.) Specifically, when American Honda checked its

computerized employee records, which date back to 1998, it found

no record of plaintiffs. (Id. ¶ 35.) 

Plaintiffs also concede that they were interviewed,

disciplined, hired, and fired by Auburn Honda personnel. (Id. ¶¶

40-41, 49, 52, 67-69, 71-76, 109, 114.) Defendant Cooper

confirms that only Auburn Honda, and not American Honda,

maintained personnel and payroll records, set salary and

commissions, and hired, fired, disciplined, and promoted Auburn

Honda employees. (Cooper Decl. ¶¶ 13-16.) Finally, plaintiffs

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26 In their opposition brief, plaintiffs concede their third 2

claim against American Honda under California Government Code §

12653. (Opp’n at 11.) 

6

completed benefits paperwork, employment verification forms, and

insurance forms for Auburn Honda only. (SUF ¶¶ 53-55.) 

Nonetheless, Larry Gonzales, a former salesman at Auburn

Honda, states that defendants Cooper and Mullins informed him

that if his sales performance was judged low by American Honda,

he would be fired. (Gonzales Decl. ¶ 4.) Further, he asserts

that Butts confirmed that dealerships, especially President’s

Award winning dealerships like Auburn Honda, were encouraged to

fire employees who did not meet or follow American Honda

standards. (Id.) In contrast, Cooper states that American Honda

had no control over, nor did it direct, Auburn Honda personnel

decisions. (Cooper Decl. ¶¶ 18-19.) Finally, Gonzales alleges

that he saw e-mails from Butts stating that if Auburn Honda

failed to perform to American Honda’s standards, it would suffer

adverse consequences such as diminishment of its car allotments. 

(Gonzales Decl. ¶ 10.) 

II. 

Plaintiffs make two claims against American Honda. The 2

first claim asserts a violation of California Labor Code §

1102.5, which prohibits retaliation by an employer against an

employee for disclosing information to a government or law

enforcement agency. The second claim is for wrongful

termination. Both claims require a finding that American Honda

employed Huse and Duncan. Cal. Labor Code § 1102.5(b); Holmes v.

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 When deciding whether entities are a single employer or an 3

integrated enterprise, the following four factors are considered: 

(1) interrelation of operations; (2) common management; (3)

centralized control of labor relations; and (4) common ownership

or financial control. Laird, 68 Cal.App.4th at 737. All four of

these factors should be considered together, but centralized

control of labor is often considered the most relevant of the

factors. Id. at 738.

 Whether two companies are joint employers depends on the 4

following factors: (1) the nature and degree of control over

employees; (2) the day-to-day supervision of employees, including

discipline; (3) the authority to hire and fire employees and set

conditions of employment; (4) the power to set pay rates or

payment methods; and (5) control of employee records, including

payroll. Jones v. County of Los Angeles, 99 Cal.App.4th 1039,

1045-46, 121 Cal.Rptr.2d 621 (2002); Wynn, 234 F.Supp.2d at 1093.

7

Gen. Dynamics Corp., 17 Cal.4th 1418, 1426, 22 Cal.Rptr.2d 172

(1993)(plaintiff must demonstrate an employer/employee

relationship in order to show wrongful termination). 

“Employer” is not defined in Cal. Lab. Code § 1102.5. Nor

is there a definition unique to wrongful termination. American

Honda suggests borrowing the definition of employer from Title

VII and the California Fair Employment and Housing Act (“FEHA”)

case law. (Mot. at 11.) Plaintiffs do not take issue with this

approach. 

In cases defining employer under Title VII and FEHA, there

is a presumption that separate corporate entities such as

American Honda and Auburn Honda are not co-employers. This

presumption may be overcome if: (1) the entities can be

considered a “single employer” or “integrated enterprise,” (2) 3

the entities can be considered “joint employers,” or (3) one 4

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 As to agency, the Dealer Sales and Service Agreement 5

between the two entities specifically states that their

relationship is “independent” and does not create any kind of

agency relationship. (SUF ¶¶ 12-13.) Unless the parties acted

in a manner inconsistent with this agreement, Auburn Honda is not

American Honda’s agent. See Laird, 68 Cal.App.4th at 741

(holding that where parent company did not control any of the

employment actions of the subsidiary, the subsidiary did not

function as the parent’s agent). 

8

entity is the agent of another entity. See Morgan v. Safeway 5

Stores, Inc., 884 F.2d 1211, 1213 (9th Cir. 1989); Wynn v. Nat’l

Broad. Co., Inc., 234 F.Supp.2d 1067, 1093 (C.D.Cal. 2002); Laird

v. Capital Cities/ABC, Inc., 68 Calliope.4th 727, 737-41, 80

Cal.Rptr.2d 454 (1998).

The factors relevant to these various tests suggest the

signal importance of day-to-day supervision of employees to the

employer designation. On the undisputed facts here, such day-today supervision was absent from American Honda’s relationship to

Huse and Duncan. Nonetheless, plaintiffs argue that American

Honda effectively acted as their employer because it exerted so

much overall control over Auburn Honda. (Opp’n at 12-13.) They

point to the following: (1) plaintiffs received certificates of

achievement and letters from American Honda; (2) American Honda

paid cash awards to plaintiffs; (3) American Honda, while not

handling day-to-day matters, had ultimate control over how Auburn

Honda operated; (4) Butts confirmed to Gonzales that American

Honda encouraged dealerships to terminate underperforming

employees; and (5) American Honda provided training programs to

plaintiffs and required participation in those programs. (Id. at

3, 5-8, 13-14, 19.) For the reasons discussed below, however,

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these facts are not adequate to overcome the presumption. 

The first three facts are off the point. As to the

certificates of achievement and congratulatory letters,

plaintiffs’ receipt and public display of American Honda

certificates and letters does not show that American Honda

employed plaintiffs or dictated the terms of their employment any

more than the display of an Oscar demonstrates that the Academy

of Motion Picture Arts and Sciences is the employer of all

actors. Similarly, plaintiffs’ receipt of cash awards from

American Honda is not sufficient to show an employment

relationship. Incentive awards are not uncommon between parties

and entities who have an economic, but not an employment,

relationship. Plaintiffs were compensated for their day-to-day

labor by Auburn Honda. (SUF ¶¶ 29, 34-35.) Cash awards were not

treated as employer/employee income by either plaintiffs or

American Honda. 

Plaintiffs’ evidence of American Honda’s general control

over Auburn Honda also fails to establish an employment

relationship between plaintiffs and American Honda. The

pertinent inquiry is whether American Honda exercised day-to-day

control over Auburn Honda’s employment relations, not whether it

could influence Auburn Honda in other respects. Therefore,

whether American Honda could limit the number of cars it

distributed to Auburn Honda or whether American Honda could

conduct quality inspections of the dealership and inquire into

customer satisfaction is irrelevant. These types of activities

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do not create an employment relationship. See Adcock v. Chrysler

Corp., 166 F.3d 1290, 1293 (9th Cir. 1999) (dealership agreement

and similar “control” of dealership by Chrysler did not create

employment relationship between the dealership’s owner and

Chrysler); Evans v. McDonald’s Corp., 936 F.2d 1087, 1090 (10th

Cir. 1991) (even where a franchisor provided training materials

and conducted frequent inspections, it did not have control over

franchisee’s labor relations); Alberter v. McDonald’s Corp., 70

F.Supp.2d 1138, 1145 (D.Nev. 1999) (franchiser’s ability to

terminate the franchise agreement, without more, did not

“establish the requisite degree of control to demonstrate that an

agency relationship existed”). 

Finally, plaintiffs’ last two facts do not help plaintiff’s

position. Butts’s statement that American Honda encouraged

Auburn Honda to terminate underperforming employees is not

relevant. There is no evidence that either of the plaintiffs

were underperforming or that they were terminated for this

reason. In fact, Huse alleges that he was one of Auburn Honda’s

top performers. (9/21/2004 Order at 3.) In addition, whether or

not American Honda might encourage a dealership to terminate

underperforming salesmen as a general proposition is not evidence

that American Honda actually ever directed Auburn Honda to

terminate plaintiffs or any other particular salesman. 

Similarly, the allegation that American Honda required

training as a condition of continued employment at Auburn Honda

is not supported by the evidence provided. In fact, Huse states

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26 Plaintiffs also have not submitted evidence showing that 6

American Honda knew plaintiffs reported the alleged sexual

harassment to law enforcement officials.

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that he was informed by Auburn Honda -- not American Honda --

that he had to comply with the American Honda sales procedures. 

(Huse Decl. ¶ 8.) Plaintiffs allege that American Honda dictated

these requirements, but they provide no probative evidence to

support that contention.

Plaintiffs have failed to show that American Honda acted as

their employer; therefore, they cannot recover against American

Honda under § 1102.5(b) or for wrongful termination in violation 6

of public policy. American Honda’s motion for summary judgment

on these claims is GRANTED. 

III. 

For the reasons discussed above, defendant American Honda’s

motion for summary judgment is GRANTED.

 

IT IS SO ORDERED.

Dated: _June 10, 2005

DAVID F. LEVI

United States District Judge

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