Case Name: Carlos Galvez, Jr. v. A2Z Development Center, Inc., et al.
Case No.: 2016-CV-291029

Factual and Procedural Background

This is an employment action. Plaintiff Carlos Galvez, Jr. (“Plaintiff”) worked for defendant A2Z Development Center, Inc. dba Amazon Lab 126 (“Amazon Lab 126”) in its Sunnyvale office from January 2013 through August 2015 as the senior manager of global safety and security. (See Complaint at ¶ 8.) Defendants Amazon Lab 126 and Amazon.com, Inc. (“Amazon”) (collectively, “Defendants”) were joint employers of Plaintiff. (Id. at ¶ 14.) Plaintiff reported to Steven DiNoto (“DiNoto”), the senior manager for security, safety, and enterprise business continuity at Amazon in Seattle, Washington. (Id. at ¶ 10.) In his capacity as senior manager, DiNoto owed a statutory duty of loyalty and had a statutory fiduciary duty to Defendants pursuant to Labor Code sections 2860 and 2863. (Ibid.)

As part of his job duties, Plaintiff and members of his team were responsible for participating in the competitive bid process for awarding multi-million dollar contracts to third party vendors. (See Complaint at ¶ 16.) The bid process involved screening numerous vendors, with Plaintiff and members of his team voting on which vendor to support. (Ibid.) In 2015, Plaintiff led the corporate security team’s response to the bid process for a contract entitled North American Corporate Security Request for Proposal (“NACS Contract”), a multi-million dollar contract where 13 vendors submitted proposals. (Id. at ¶ 17.) In Spring 2015, Plaintiff became concerned that DiNoto was favoring a particular vendor (“Vendor A”) in its bid for the NACS Contract. (Id. at ¶ 18.) For example, DiNoto instructed Plaintiff to provide Vendor A with advance notice of a request for proposal, without providing the same notice to the other 12 vendors who were also bidding for the contract. (Ibid.) Plaintiff informed DiNoto that he felt uncomfortable reaching out to Vendor A during the quiet bidding process since Amazon was to cease communication with any vendor regarding a bid. (Ibid.) Plaintiff’s other team members also expressed concern that DiNoto improperly favored Vendor A in the bidding process. (Ibid.)

In late May or early June 2015, Plaintiff contacted Kathryn Sheehan (“Sheehan”), an associate general counsel with Amazon, and reported that DiNoto was improperly attempting to award the NACS Contract to Vendor A. (See Complaint at ¶ 20.) Sheehan told Plaintiff that she was going to conduct an investigation into the matter under Amazon’s Code of Business Conduct and Ethics. (Ibid.) After Plaintiff contacted Sheehan, DiNoto began communicating less frequently with Plaintiff. (Id. at ¶ 23.) For example, Plaintiff’s phone calls to DiNoto often went unanswered and DiNoto now sent text messages to him instead of phone calls when responding to voicemails. (Ibid.)

On July 20, 2015, Plaintiff returned to work following his medical leave and learned that many of his job responsibilities had been reassigned to other employees, including his work in the bid process for awarding contracts. (See Complaint at ¶ 26.) As a result, Plaintiff was left with little to no work to perform. (Ibid.) Plaintiff addressed this issue with DiNoto but he gave no indication that Plaintiff would receive his job duties back. (Id. at ¶ 27.) Since DiNoto had reassigned most of Plaintiff’s job responsibilities and because he had observed DiNoto discharge or attempt to discharge other employees who disagreed with DiNoto, Plaintiff believed that DiNoto had effectively ruined his career with Defendants and that he intended to fire him. (Id. at ¶¶ 28-30.) Thus, Plaintiff resigned from his employment on August 21, 2015. (Id. at ¶ 31.)

On February 2, 2016, Plaintiff filed a Complaint asserting causes of action for: (1) violation of California Labor Code Section 1102.5; (2) violation of California Family Rights Act – California Government Code Section 12945.2; (3) retaliation in violation of California Family Rights Act – California Government Code Section 12945.2, Subdivision (l); (4) wrongful demotion in violation of public policy; and (5) constructive discharge in violation of public policy.

Currently before the Court are Defendants’ demurrer and motion to strike to the Complaint. Defendants satisfied their obligation to meet and confer before filing the demurrer pursuant to Code of Civil Procedure section 430.41, subdivision (a). Plaintiff filed written opposition. Defendants filed reply papers.

Demurrer to the Complaint

Defendants argue that the first and fifth causes of action are subject to demurrer on the ground that they fail to state a claim. (Code Civ. Proc., § 430.10, subd. (e).)

Legal Standard

“In reviewing the sufficiency of a complaint against a general demurer, we are guided by long settled rules. ‘We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. We also consider matters which may be judicially noticed.’” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “A demurrer tests only the legal sufficiency of the pleading. It admits the truth of all material factual allegations in the complaint; the question of plaintiff’s ability to prove these allegations, or the possible difficulty in making such proof does not concern the reviewing court.” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213–214.)

“The reviewing court gives the complaint a reasonable interpretation, and treats the demurrer as admitting all material facts properly pleaded. The court does not, however, assume the truth of contentions, deductions or conclusions of law. … [I]t is error for a trial court to sustain a demurrer when the plaintiff has stated a cause of action under any possible legal theory. And it is an abuse of discretion to sustain a demurrer without leave to amend if the plaintiff shows there is a reasonable possibility any defect identified by the defendant can be cured by amendment.” (Gregory v. Albertson’s, Inc. (2002) 104 Cal.App.4th 845, 850.)
First Cause of Action: Violation of Labor Code Section 1102.5

Labor Code section 1102.5 prohibits an employer from retaliating against an employee who discloses information to a government or law enforcement agency, “where the employee has reasonable cause to believe that the information discloses a violation of state or federal statute, or a violation or noncompliance with a state or federal rule or regulation.” (Lab. Code., § 1102.5, subd. (a).) To establish a prima facie case under section 1102.5, a plaintiff must show (1) he engaged in a protected activity, (2) his employer subjected him to an adverse employment action, and (3) there is a causal link between the two. (Patten v. Grant Joint Union High School Dist. (2005) 134 Cal.App.4th 1378, 1384.)

A plaintiff engages in protected activity under section 1102.5 “where the employee has reasonable cause to believe that the information discloses a violation of state or federal statute, or a violation or noncompliance with a state or federal rule or regulation.” (Lab. Code., § 1102.5, subd. (a).) Plaintiff alleges that he had a good faith belief that DiNoto had committed a violation of the Cartwright Act, California Business and Professions Code sections 16720 and 16726, and/or the Sherman Antitrust Act, 15 U.S.C., section 1. (See Complaint at ¶ 34.) Plaintiff disclosed his good faith belief to an employee with authority to investigate, discover, or correct legal violations or noncompliance. (Id. at ¶ 35.) Finally, Plaintiff alleges that his disclosure was a contributing factor in Defendants’ decision to demote and/or constructively discharge him. (Id. at ¶ 37.)

Here, Defendants argue that Plaintiff fails to allege facts to support any antitrust violation. This is because antitrust violations require a contract or conspiracy between two or more people. (See G.H.I.I. v. MTS, Inc. (1983) 147 Cal.App.3d 256, 266 [“Both the Cartwright and Sherman Acts require a showing or allegation of a conspiracy or combination to restrain trade.”]; Cal. Bus. & Prof. Code, § 16720 [requires an act by two or more persons].) Plaintiff fails to allege facts showing that DiNoto conspired with Vendor A regarding the bid process. Thus, Defendants claim that the mere fact that DiNoto showed favoritism or bias toward one vendor does not constitute an antitrust violation. Similarly, Defendants argue that Plaintiff could not reasonably believe an antitrust violation occurred because Plaintiff simply reported an internal company dispute over preferred vendors. (See Patten v. Grant Joint Union High School Dist., supra, 134 Cal.App.4th at pp. 1384-1385 [appellate court determined there was no violation of section 1102.5 where disclosures encompassed only the context of internal personnel matters involving a supervisor and her employee, rather than the disclosure of a legal violation].)

Defendants’ arguments are not well-taken. As the opposition points out, the statute does not require the person reporting the suspected violation to be correct. (See Devlyn v. Lassen Municipal Utility District (2010) 737 F.Supp.2d 1116, 1124.) Instead, “reasonable cause” is the relevant standard and Plaintiff has alleged that he reasonably believed that the antitrust statutes had been violated. (Ibid.) Furthermore, even if Plaintiff had failed to disclose the exact law that Defendants violated, it is enough that he has alleged reasonable cause to believe there is a violation of state or federal law. (See Dowell v. Contra Costa County (2013) 928 F.Supp.2d 1137, 1155.) The legal authorities cited by Defendants are not persuasive as they involve a motion for summary judgment and a verdict following jury trial based on evidence which is beyond the scope of demurrer. At least for pleading purposes, the Court finds that sufficient allegations have been pled to state a claim under section 1102.5.

Accordingly, the demurrer to the first cause of action on the ground that it fails to state a claim is OVERRULED.

Fifth Cause of Action: Constructive Discharge

An employer may, in an attempt to avoid liability for a wrongful termination, “refrain from actually firing an employee, preferring instead to engage in conduct causing him or her to quit.” (Turner v. Anheuser-Busch, Inc. (1994) 7 Cal.4th 1238, 1251 [overruled in part on another ground in Romano v. Rockwell Internat., Inc. (1996) 14 Cal.4th 479].) If the employer’s conduct “effectively forces an employee to resign,” this is a constructive discharge, and is “legally regarded as a firing rather than a resignation.” (Id. at pp. 1244-1245.) “[T]o establish a constructive discharge, an employee must plead and prove…that the employer either intentionally created or knowingly permitted working conditions that were so intolerable or aggravated at the time of the employee’s resignation that a reasonable employer would realize that a person in the employee’s position would be compelled to resign.” (Id. at p. 1251.)

An employee may not simply “ ‘quit and sue,’ ” claiming to have been constructively discharged. (Turner v. Anheuser-Busch, Inc., supra, 7 Cal.4th at p. 1246.) The facts must support a finding that the resignation was “coerced,” rather than “simply one rational option for the employee.” (Ibid.) “The conditions giving rise to the resignation must be sufficiently extraordinary and egregious to overcome the normal motivation of a competent, diligent, and reasonable employee to remain on the job to earn a livelihood and to serve his or her employer.” (Ibid.) Moreover, “the cases are in agreement that the standard by which a constructive discharge is determined is an objective one—the question is ‘whether a reasonable person faced with the allegedly intolerable employer actions or conditions of employment would have no reasonable alternative except to quit.’ [Citation.]” (Id. at p. 1248, quoting Rochlis v. Walt Disney Co. (1993) 19 Cal.App.4th 201, 212.) In other words, the applicable standard is whether “ ‘the adverse working conditions [are] so intolerable’ “ or “unusually adverse” that “ ‘any reasonable employee would resign rather than endure [them].’ ” (Turner, supra, at p. 1247, quoting Slack v. Kanawha County Housing (1992) 188 W. Va. 144.)

Plaintiff’s constructive discharge claim is based on the following: (1) Plaintiff had very little work to do; (2) DiNoto failed to return Plaintiff’s phone calls; and (3) Plaintiff observed DiNoto discharge or attempt to discharge other employees who disagreed with DiNoto. (See Complaint at ¶¶ 26, 28, 29, and 30.) However, such facts fall short of establishing a claim for constructive discharge as a matter of law. (See King v. AC & R Advertising (9th Cir. 1995) 65 F.3d 764, 768 [applying California law, a demotion in job level, even when accompanied by reduction in pay, does not constitute a constructive discharge].) Furthermore, as Defendants point out, it is difficult to see a continuous pattern of misconduct when Plaintiff resigned only one month after returning from medical leave. (See Addy v. Bliss & Glennon (1996) 44 Cal.App.4th 205, 219 [in general, single, trivial, or isolated acts of misconduct are insufficient to support a constructive discharge claim].) As pled, these facts do not support a finding that Plaintiff’s working conditions were so intolerable or unusually adverse that he would be forced to resign from his employment. While it appears from the reply papers that Plaintiff has served written opposition to the demurrer, no such opposition has been filed with the Court.

Therefore, the demurrer to the fifth cause of action is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND for failure to state a claim.

Motion to Strike Portions of the Complaint

Defendants move to strike portions of the fourth and fifth causes of action on the grounds that the allegations are irrelevant, false, and improper. (Code Civ. Proc., §§ 435-436.)

Legal Standard

A court may strike out any irrelevant, false, or improper matter asserted in a pleading. (Code Civ. Proc., § 436, subd. (a).) A court may also strike out all or any part of a pleading not filed in conformity with the laws of the State of California. (Code Civ. Proc., § 436, subd. (b).) The grounds for a motion to strike shall appear on the face of the challenged pleading or from any matter of which the court is required to take judicial notice. (Code Civ. Proc., § 437, subd. (a).)

Fourth Cause of Action: Wrongful Demotion in Violation of Public Policy

With respect to the fourth cause of action, Defendants move to strike “California Labor Code sections 1102.5, 2860, and 2863, California Business and Professions Code sections 16720 and 16726,” and “15 U.S.C., section 1” from paragraph 57 of the Complaint and “Plaintiff’s good faith complaint regarding DiNoto’s conduct” from paragraph 58 of the Complaint. Defendants reiterate the same arguments from their demurrer to the first cause of action to support their motion to strike these allegations. Having overruled the demurrer to the first cause of action, the Court finds that these allegations are sufficiently relevant to support Plaintiff’s fourth cause of action.

Accordingly, the motion to strike portions of the fourth cause of action is DENIED.
Fifth Cause of Action: Constructive Discharge

As stated above, the Court sustained the demurrer to the fifth cause of action. Therefore, the motion to strike portions of the fifth cause of action is MOOT.