Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_06-cv-02376/USCOURTS-caed-2_06-cv-02376-1/pdf.json

Parties Involved:
Jason Campbell
Plaintiff
PriceWaterhouse Coopers, LLP
Defendant
Sarah Sobek
Plaintiff

Document Text:

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1

UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

JASON CAMPBELL and

SARAH SOBEK, individually,

and on behalf of all other

similarly situated current

and former employees of 

PricewaterhouseCoopers, LLP,,

NO. CIV. S-06-2376 LKK/GGH

Plaintiffs,

v.

PRICEWATERHOUSE COOPERS, LLP, O R D E R

a Limited Liability Partnership;,

and DOES 1-100, inclusive,

Defendant.

 /

Plaintiffs Jason Campbell and Sarah Sobek bring this action

against defendant, PricewaterhouseCoopers LLP, on behalf of

themselves and a class of similarly situated non-licensed

accountants employed by the defendant. Pending before the court

are defendant’s motion to dismiss and its motion to strike certain

portions of the second amended complaint. First, defendant moves

to dismiss on the grounds that collateral estoppel bars class

certification. Second, defendant moves to dismiss plaintiffs’

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 Notably, Ruiz was brought prior to the passage of 1

Proposition 64, which requires that all representative actions

proceed as class action under California law.

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claims under California Labor Code Section 226.7 on the grounds

that no private right of action exists for these claims. Third,

defendant moves to strike any reference to punitive damages because

plaintiff is not entitled to them as a matter of law. For the

reasons set forth below, the court denies the motions.

I. Background

The present action stems from the allegation that the

defendant misclassified plaintiffs as exempt employees. 

Specifically, plaintiffs maintain that defendant erroneously

classified non-licensed associate accountants as exempt

employees and thereby denied them the various statutory rights

afforded to non-exempt employees, including, for example, the

right to overtime pay. 

The court takes judicial notice of the Los Angeles Superior

Court’s December 8, 2003 Order in Ruiz v. PricewaterhouseCoopers

LLP, Case No. BC 287920, in which that court sustained

defendant’s demurrer without leave to amend. Def.’s Request for

Judicial Notice, Ex. 5. In that case, Anthony Ruiz brought a

representative action under California’s Unfair Competition Law,

Cal. Bus. Prof. Code § 17200 (“UCL”), alleging that non-licensed

accountants were wrongly classified as exempt and should have

been eligible for overtime pay. Id. at 2. The court dismissed 1

Ruiz’s claims with prejudice, finding that Ruiz was not a

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competent representative and that the suit was inappropriate for

a representative action. Id.

II. Standard

A. Motion to Dismiss for Failure to State a Claim

On a motion to dismiss, the allegations of the complaint

must be accepted as true. See Cruz v. Beto, 405 U.S. 319, 322

(1972). The court is bound to give the plaintiff the benefit of

every reasonable inference to be drawn from the "well-pleaded"

allegations of the complaint. See Retail Clerks Intern. Ass'n,

Local 1625, AFL-CIO v. Schermerhorn, 373 U.S. 746, 753 n.6

(1963). Thus, the plaintiff need not necessarily plead a

particular fact if that fact is a reasonable inference from

facts properly alleged. See id.; see also Wheeldin v. Wheeler,

373 U.S. 647, 648 (1963) (inferring fact from allegations of

complaint).

In general, the complaint is construed favorably to the

pleader. See Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). So

construed, the court may not dismiss the complaint for failure

to state a claim unless it appears beyond doubt that the

plaintiff can prove no set of facts in support of the claim

which would entitle him or her to relief. See Hishon v. King &

Spalding, 467 U.S. 69, 73 (1984) (citing Conley v. Gibson, 355

U.S. 41, 45-46 (1957)). In spite of the deference the court is

bound to pay to the plaintiff's allegations, however, it is not

proper for the court to assume that "the [plaintiff] can prove

facts which [he or she] has not alleged, or that the defendants

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have violated the . . . laws in ways that have not been

alleged." Associated General Contractors of California, Inc. v.

California State Council of Carpenters, 459 U.S. 519, 526

(1983).

B. Motion to Strike

Rule 12(f) authorizes the court to order stricken from any

pleading "any redundant, immaterial, impertinent, or scandalous

matter." A party may bring on a motion to strike within 20 days

after the filing of the pleading under attack. The court,

however, may make appropriate orders to strike under the rule at

any time on its own initiative. Thus, the court may consider

and grant an untimely motion to strike where it seems proper to

do so. See 5A Wright and Miller, Federal Practice and

Procedure: Civil 2d § 1380.

Motions to strike are generally viewed with disfavor, and

will usually be denied unless the allegations in the pleading

have no possible relation to the controversy, and may cause

prejudice to one of the parties. See 5A C. Wright & A. Miller,

Federal Practice and Procedure: Civil 2d § 1380; See also Hanna

v. Lane, 610 F. Supp. 32, 34 (N.D. Ill. 1985). If the court is

in doubt as to whether the challenged matter may raise an issue

of fact or law, the motion to strike should be denied, leaving

an assessment of the sufficiency of the allegations for

adjudication on the merits. See 5A Wright & Miller, supra, at §

1380.

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III. Analysis

Defendant’s motion to dismiss is premised on two claims:

(1) that the doctrine of collateral estoppel bars plaintiffs

from certifying as a class under Rule 23 of the Federal Rules of

Civil Procedure, and (2) that California Labor Code Section

226.7 does not provide for a private right of action. 

Defendant’s motion to strike is premised on the grounds that

plaintiffs are barred from seeking punitive damages. For the

reasons set forth below, the motion to dismiss and motion to

strike are denied.

A. Collateral Estoppel

Defendant argues that collateral estoppel bars the present

action because the issue of class certification was previously

decided in Ruiz. The doctrine of collateral estoppel applies if

(1) the present issue is identical to the issue decided in a

prior proceeding; (2) the issue was actually litigated; (3) the

issue was necessarily decided; (4) the decision was final and on

the merits; and (5) preclusion is sought against a party in the

prior proceeding or a person in privity with a party to the

prior proceeding. Alvarez v. May Dept. Stores, 143 Cal. App.

4th 1223, 1223 (2006). As explained below, the court finds that

the first requirement (identity of issues) and the last

requirement (privity) are lacking.

1. Identity of Issues

The language of the first prong of the collateral estoppel

analysis could not be clearer: the issues must be identical --

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 Defendant’s attempt to characterize the Ruiz action as one 2

brought on behalf of a narrow class of individuals relies upon out

of context quotations from the complaint. Furthermore, as the

caption makes clear, Ruiz brought the action “on behalf of the

general public.” Ruiz Compl. at 1.

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not merely similar, or even substantially similar. See Pacific

Lumber Co. v. State Water Resources Control Bd., 37 Cal. 4th

921, 943 (2006) (“[T]he issue sought to be precluded from

relitigation must be identical to that decided in a former

proceeding.”). Requiring identity of issues, as opposed to mere

similarity, serves the important purpose of ensuring that the

rights of those estopped are not unnecessarily circumscribed.

Here, the issues between Ruiz and the present action may be

similar, but they are not identical. Defendant notes that Ruiz,

like the plaintiffs here, brought a claim under the UCL, on the

same underlying dispute regarding misclassification, and sought

the same recovery, but none of this overcomes the fact that Ruiz

commenced suit as a private attorney general, whereas the

plaintiffs here have brought a class action. With the former, 2

a plaintiff purports to act as a representative of the general

public, whereas with the latter, a plaintiff seeks relief on

behalf of a defined (and certified) group of individuals. 

Accordingly, in Ruiz, the parties never litigated, and the court

never decided, the issue of class certification.

It is true that there are similarities between the

requirements for proceeding as a private attorney general under

the UCL and those for class certification. For example, courts

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examining whether a case should be permitted to proceed as a

private attorney general under the UCL (i.e., on a non-class,

representative basis) have analyzed the competence of the

plaintiff, Kraus v. Trinity Mgmt. Servs., Inc., 23 Cal. 4th 116,

138 (2000), and the factual similarities between those the

plaintiff seeks to represent, Lazar v. Trans Union LLC, 195

F.R.D. 665, 672-73 (C.D. Cal. 2000). Similarly, to certify a

class under Rule 23, the plaintiff must prove common questions

of law or fact to the class and that the representation will

adequately represent the interests of the class.

Relying on these similarities, defendant argues that the

reason why Ruiz was not permitted to proceed in a representative

capacity is equally applicable to why plaintiffs should not be

permitted to proceed in their class action. When Ruiz was

decided, a representative action required the plaintiff to show

that his “individual claim should be afforded private attorney

general status.” Id. (citing South Bay Chevrolet v. General

Motors Acceptance Corp., 72 Cal. App. 4th 861, 891 (1999)). In

making its determination regarding the appropriateness of

representative status, the Ruiz court considered whether the

case would accommodate the “‘streamlined’ procedure envisioned

by the [California] Legislature.” Id. at 6. It held that,

rather than accommodating a streamlined procedure, the case

would require “numerous mini-trials,” and as such, was

inappropriate for a representative action. Id.

This is not the identical issue that is posed by whether

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plaintiffs’ class should be certified in the present action. 

Presumably, defendant equates the “streamlined procedure”

consideration under the UCL with the “common question of law or

fact” requirement under Rule 23. But it is not at all clear

that the two are coterminous with one another. Even if the

reasoning that would lead the Ruiz court to find that a

representative action would not facilitate a “streamlined

procedure” would also lead it to conclude that there are no

common questions of law or fact, this would be mere speculation. 

Certainly, a hypothesized holding -- even one that should

logically follow from an earlier ruling -- does not satisfy the

stringent requirement that the issue in earlier suit be

“identical” to that in the present suit.

Defendant responds that plaintiffs have placed form over

substance. In support, it relies heavily on Alvarez, in which

the court stated that the “[a]lthough the causes of action are

not identical, the principle of collateral estoppel does not

depend on the legal theory used but the primary rights

asserted.” 143 Cal. App. 4th at 1237. This quote is taken out

of context, as the next sentence reads: “The primary right

asserted in each case was the right to litigate claims in a

class action lawsuit.” Id. Because the plaintiffs in Ruiz did

not assert “the right to litigate claims in a class action

lawsuit,” the plaintiffs in this case are not estopped from

doing so.

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2. Privity 

Under the fifth prong of the collateral estoppel analysis, 

the plaintiff must be in privity with the party in the prior

proceeding. Alvarez, 143 Cal. App. 4th at 1223. Defendant

argues that Ruiz was a “virtual representative” of all nonlicensed accountants, which is the same group of individuals as 

those whom plaintiffs seek to certify as a class. See Citizens

for Open Access to Sand and Tide, Inc. v. Seadrift Ass’n, 60

Cal. App. 4th 1053, 1070 (1998) (“A party is adequately

represented for purposes of the privity rule if his or her

interests are so similar to a party's interest that the latter

was the former's virtual representative in the earlier action.”)

(internal quotation marks omitted). 

The argument is unavailing for the same reasons addressed

above: Ruiz was purporting to act on behalf of the general

public, not the narrow class of non-licensed accountants. 

Furthermore, it could hardly be said that Ruiz had the same

interests as those of the plaintiffs here, when Ruiz was found

to have had a conflict of interest. See Ruiz, 3-4 (noting that

employees could seek more extensive remedies than a plaintiff

proceeding in a UCL action). As defendant successfully argued

in the earlier proceeding, Ruiz was a professional plaintiff,

was not an employee of defendant, had no relationship with

defendant, and had suffered no injury.

Defendant relies In re Bridgestone/Firestone, Inc., Tires

Product Liability Litigation for the proposition that putative

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class members to a second class action motion are the same

parties to the first denial of class certification. 333 F.3d

763, 768 (7th Cir. 2003) (“[A]s they receive the fruits of

victory, so an adverse decision is conclusive against them.”). 

Here, however, there was no initial denial of class

certification in Ruiz; there was only a denial of private

attorney general status. As In re Bridgestone/Firestone made

clear, “outside the domain of class actions, precedent rather

than preclusion is the way one case influences another.” Id. at

769. Accordingly, the court finds that collateral estoppel is

also inapplicable for the independent reason that the element of

privity is lacking.

B. California Labor Code Section 226.7

Defendant next argues that Labor Code Section 226.7 does

not provide for a private right of action and that the

legislative history confirms that no private right of action was

intended. The court disagrees. When interpreting a statute,

the court’s task is to discern the legislative intent. Wells v.

One2One Learning Foundation, 39 Cal. 4th 1164, 1190 (2006). If

the words are not ambiguous, the statute’s plain meaning

prevails. Id. However, “if the language allows more than one

reasonable construction, [the court] may look to such aids as

the legislative history.” Id. Here, the court finds the law is

unambiguous and that it need not resort to legislative history. 

Section 226.7 requires that employers pay “one additional

hour of pay” for each day an employee is not provided with a

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meal or rest period. The law provides that: 

(1) No employer shall require any employee to work

during any meal or rest period mandated by an

applicable order of the Industrial Welfare commission.

(2) If an employer fails to provide an employee a

meal period or rest period in accordance with an

applicable order of the Industrial Welfare Commission,

the employer shall pay one additional hour of pay at

the employee's regular rate of compensation for each

work day that the meal or rest period is not provided.

Cal. Lab. Code § 226.7. 

By itself, Section 226.7 does not contain language

creating a private cause of action. But it need not do so

where the same language is provided elsewhere. As plaintiffs

correctly point out, California Labor Code Section 218

provides in relevant part that “[n]othing in this article

shall limit the right of any wage claimant to sue directly or

through an assignee for any wages or penalty due him under

this article.” Cal. Lab. Code § 218. Because Section 226.7

falls within the same article (i.e., Sections 200-243) as

Section 218, the legislature has provided in unmistakably

clear language that a private right of action exists under

Section 226.7. 

Defendant urges that Section 218 does not constitute an

affirmative right to sue but merely states that nothing in the

article limits an otherwise existing right to sue. This

flatly contradicts well-settled case law. See Smith v. RaeVenter Law Group, 29 Cal. 4th 345, 350 (2002) (holding that

employee may file civil action under Section 218); Reynolds v.

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Bement, 36 Cal. 4th 1075, 1084 (2005) (same); Sampson v.

Parking Serv. 2000 Com, Inc., 117 Cal. App. 212, 220 (2004)

(“Section 218 authorizes an employee . . . to ‘sue directly’

for any unpaid wages or penalty owed under the Labor Code.”).

Defendant also points out that other provisions of the

Labor Code expressly provide for a right to sue, suggesting

that the absence of similar provisions elsewhere is

intentional. Furthermore, defendant argues that to read

Section 218 as providing a blanket private right of action

would render these provisions superfluous. But this ignores

the fact that these provisions do more than simply reiterate

an employee’s right to sue. For example, the provisions cited

by defendant also specify when suit may be brought, Cal. Lab.

Code § 203, whether attorney’s fees and costs of suit are

recoverable, Cal. Lab. Code § 1194, and whether intent is

relevant for liability, Cal. Lab. Code § 203.1. More

importantly, though, to infer from the silence of Section

226.7 an intention not to create a private right of action

would import that which Section 218 expressly prohibited: a

limitation on the right to sue.

C. Punitive Damages

Last, defendant argues that because each statute giving

rise to plaintiff’s claims provides for specific remedies and

penalties, plaintiff cannot recover punitive damages. The

court disagrees.

When a statute imposes a penalty, that imposition

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 Plaintiffs may be required to elect a remedy where there is 3

a statutory penalty for conduct that also violates common law, but

the election is not made at the pleading stage. Trumbull &

Trumbull, 219 Cal. App 3d at 826.

The complaint merely asks for punitive damages generally, 4

SAC Prayer for Relief ¶ 8, and while defendant argues that punitive

damages may not be recovered under certain provisions of the Labor

Code, see, e.g., Czechowski v. Tandy Corp., 731 F. Supp. 406, 410

(N.D. Cal. 1990) (holding that punitive damages are not recoverable

under Labor Code § 203), this does not meet its burden of showing

that such relief is unavailable under any of plaintiffs’ claims.

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generally does not foreclose recovery of punitive damages.3

Trumbull & Trumbull v. ARA Transportation, Inc., 219 Cal. App.

3d 811, 826 (1983). If, however, a new right that did not

exist at common law is created by statute and a remedy for the

violation of that right is provided, “such remedy is exclusive

of all others unless the statutory remedy is inadequate.” Id.

(citing Orloff v. Los Angeles Turf Club, 30 Cal. 2d 110,

112-113 (1947); Strauss v. A.L. Randall Co., 144 Cal. App. 3d

514 (1983)).

Although some of the statutes under which plaintiffs have

brought suit do provide for a penalty, defendant has failed to

meet its burden of demonstrating why such a penalty forecloses

the recovery of punitive damages with respect to any of

plaintiffs’ claims. Defendant merely asserts that the wages 4

and penalties that plaintiffs seek were not recoverable at

common law. Because recovery of punitive damages is not

generally foreclosed by the mere provision a statutory

penalty, the court denies defendant’s motion to strike.

IV. Conclusion

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The motion to dismiss is hereby DENIED. 

The motion to strike is hereby DENIED.

IT IS SO ORDERED.

DATED: March 19, 2007.

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