SUPERIOR COURT OF CALIFORNIA

COUNTY OF SANTA CLARA

WADE SHUMWAY, an individual, on behalf of himself, and on behalf of others similarly situated,

Plaintiff,

vs.

INTUIT, INC., a Delaware corporation, and DOES 1-100, inclusive,

Defendants.

Case No. 2018-1-CV-330368

TENTATIVE RULING RE: DEMURRER TO FIRST AMENDED COMPLAINT; MOTION TO STRIKE

The above-entitled action comes on for hearing before the Honorable Thomas E. Kuhnle on March 8, 2019, at 9:00 a.m. in Department 5. The Court now issues its tentative ruling as follows:

I. INTRODUCTION
II.
This is a putative class action arising out of various alleged Labor Code violations. According to the allegations of the First Amended Class Action Complaint (“FAC”), filed on January 29, 2019, defendant Intuit, Inc. (“Defendant”) has a program of unlawfully rounding employee time to the nearest five minutes, resulting in underpayment of all wages owed. (FAC, ¶ 14.) Intuit also has a program in which it sets aside a percentage of base payroll totaling millions of dollars to fund its “Spotlight Program.” (Id. at ¶ 17.) The Spotlight Program is an employee recognition program pursuant to which certain employees receive bonuses. (Id. at ¶¶ 17-18.) Defendant does not include these bonuses in the regular rate of pay.

The FAC sets forth the following causes of action: (1) Failure to Pay all Minimum and Overtime Wages; (2) Failure to Pay all Overtime Wages Due to Miscalculation of the Regular Rate of Pay; (3) Failure to Provide Accurate Itemized Wage Statements; (4) Failure to Pay all Wages When Due; (5) Violation of California’s UCL; and (6) PAGA. Defendant now demurs to the third and sixth causes of action and moves to strike portions of the FAC.

III. DEMURRER TO FIRST AMENDED COMPLAINT
IV.
A. Requests for Judicial Notice
B.
1. Defendant’s Requests for Judicial Notice
2.
In connection with the moving papers, Defendant requests judicial notice of the following:

a. The June 12, 2017, letter signed by Shaun Markley of Nicholas & Tomasevic, LLP, submitted to the California Labor & Workforce Development Agency (“LWDA”) on behalf of Darci Myers;
b.
c. Class Action Complaint filed by Darci Myers on June 16, 2017, in the United States District Court, Southern District of California, Case No. 17cv1228-WQH-BLM, against Intuit Inc.;
d.
e. Amended Collective and Class Action Complaint filed by Darci Myers on October 17, 2017, in the United States District Court, Southern District of California, Case No. 17cv1228-WQH-BLM, against Intuit Inc.;
f.
g. The February 6, 2018, letter signed by Shaun Markley of Nicholas & Tomasevic, LLP, submitted to the LWDA;
h.
i. Email correspondence from the California Department of Industrial Relations on August 16, 2018, with a subject line of “RE: Public Records Request – Wade Shumway” and showing two PDF attachments, entitled “PAGA NoticeDarci-Myers.pdf” and “Amended Notice Submitted on 02-6-2018-Darci-Myers.pdf”;
j.
k. Order dated May 18, 2018, by the Honorable William Q. Hayes in the United States District Court, Southern District of California, Case No. 17cv1228-WQH-BLM; and
l.
m. Judgment in a Civil Case, issued on May 18, 2018, in the United States District Court, Southern District of California, Case No. 17cv1228-WQH-BLM.
n.
The Court can take judicial notice of the LWDA records as official acts of an administrative agency. (Evid. Code, § 452, subd. (c); see also Fowler v. Howell (1996) 42 Cal.App.4th 1746, 1750 [a trial court can take “judicial notice of the records and files of a state administrative board”].) The Court can take judicial notice of the complaints, the order, and the judgment as court records. (Evid. Code, § 452, subd. (d).) The request for judicial notice is GRANTED.

In connection with the reply papers, Defendant requests judicial notice of the following:

(1) Declaration of Noam Glick in Support of Motion for Leave to File Amended Complaint, and Ex. B thereto, filed on February 14, 2018, in Myers v. Intuit, Inc., United States District Court, Southern District of California, Case No. 17cv1228-WQH-BLM; and
(2)
(3) Declaration of Joshua D. Levine in Support of Defendant Intuit, Inc.’s Opposition to Plaintiff’s Motion to Vacate Class Certification Hearing Date and Briefing Schedule, and Exs. B-D thereto, filed on January 22, 2018, in Myers v. Intuit, Inc., United States District Court, Southern District of California, Case No. 17cv1228-WQH-BLM.
(4)
The reply request for judicial notice is GRANTED. (Evid. Code, § 452, subd. (d).)

3. Plaintiff’s Request for Judicial Notice
4.
Plaintiff requests judicial notice of the following:

a. Plaintiff Darci Myer’s Memorandum of Points and Authorities in Support of Motion for Leave to Amend Complaint, filed in Darci Myers v. Intuit, Inc., case no. 3:17-cv-01228-WQH-BLM, filed in the United States District Court, Southern District of California; and
b.
c. Defendant Intuit, Inc.’s Memorandum of Points and Authorities in Support of Motion for Summary Judgment, filed in Darci Myers v. Intuit, Inc., case no. 3:17-cv-01228-WQH-BLM, filed in the United States District Court, Southern District of California.
d.
The request for judicial notice is GRANTED. (Evid. Code, § 452, subd. (d).)

C. Discussion
D.
1. Third Cause of Action
2.
The third cause of action is for failure to provide accurate itemized wage statements pursuant to Labor Code section 226. Defendant argues this cause of action is time-barred because it is a claim for penalties and therefore is subject to a one year statute of limitations. Defendant states plaintiff Wade Shumway (“Plaintiff”) last worked for Defendant in April 2017 (see FAC, ¶ 10), but did not file this action until June 20, 2018, more than a year later.

Defendant is correct that a claim for wage statement penalties under Section 226 is subject to a one-year statute of limitations. (See Singer v. Becton, Dickinson and Co. (S.D. Cal., 2008) 2008 WL 2899825, at *5.) Plaintiff argues, however, that the claim is timely because of: (1) “American Pipe” tolling; and (2) equitable tolling.

a. American Pipe Tolling
b.
Plaintiff asserts that in June 2017, Darci Myers, another former Intuit employee filed a class action in the U.S. District Court for the Southern District of California based on the same failure to properly pay overtime theory. After filing the Myers action, Myers declared bankruptcy. After this came to light, Myers’s counsel (who also represent Plaintiff here) proposed amending the Myers action to add Plaintiff as a class representative in that case. Myers’s counsel and counsel for Defendant (who also represented Defendant in the Myers action) did not reach an agreement. Therefore, Myers sought leave to amend from the court. Around the same time, Defendant filed a motion for summary judgment in the Myers case. The court granted summary judgment on the ground Myers lacked standing and also denied the motion for leave to amend, finding it was not timely made. (See Request for Judicial Notice in Support of Defendant Intuit Inc.’s Demurrer to Plaintiff’s First Amended Class Action Complaint, Ex. F.) The Court stated, however, that “Shumway maintains the right to assert his individual, class/collective, and representative claims in a new action.” (Id. at p. 14:13-14.)

In American Pipe, the United States Supreme Court held “the commencement of a class action suspends the applicable statute of limitations as to all asserted members of the class who would have been parties had the suit been permitted to continue as a class action.” (American Pipe & Const. Co. v. Utah (1974) 414 U.S. 538, 554.) Plaintiff argues his case was tolled during the pendency of the Myers action based on the rule set forth in American Pipe. Defendant counters that American Pipe tolling only applies where the plaintiff in the original action (i.e. Myers) had standing to assert the claim.

It is clear that Myers did not have standing in the original action. Therefore, American Pipe tolling is not available to Plaintiff. (F.D.I.C. v. Countrywide Financial Corp. (C.D. Cal. 2012) 2012 WL 5900973, at *9 [“Tolling under American Pipe is only appropriate when the named plaintiff had standing to assert the claim. If a class action plaintiff lacked standing to sue on certain claims, then jurisdiction could never attach for those claims.”]; See also Becerra v. General Motors LLC (S.D. Cal. 2017) 241 F.Supp.3d 1094, 1116 [“[C]ourts in this Circuit have interpreted American Pipe to toll only the claims that the plaintiffs named in the first complaint filed in the case had standing to pursue.”].)

The Court notes Defendant makes the additional meritorious argument that, even if American Pipe tolling applied, it would only toll Plaintiff’s individual claims, not the class action claims. (China Agritech, Inc. v. Resh (2018) 138 S.Ct. 1800, 1806-1807.)

c. Equitable Tolling
d.
Plaintiff argues equitable tolling applies to make the third cause of action timely. “Equitable tolling under California law is a judicially created doctrine that operates to suspend or extend a statute of limitations in order to ensure that a limitations period is not used to bar a claim unfairly.” (Hatfield v. Halifax PLC (9th Cir. 2009) 564 F.3d 1177, 1185.) “Three factors are taken into consideration when deciding whether to apply equitable tolling under California law: (1) timely notice to the defendant in the filing of the first claim; (2) lack of prejudice to the defendant in gathering evidence to defend against the second claim; and (3) good faith and reasonable conduct by the plaintiff in filing the second claim.” (Ibid.)

Defendant contends equitable tolling does not apply because Myers lacked standing in the earlier action. For this argument, however, Defendant relies on the cases discussed previously concerning American Pipe. Those cases have no bearing on equitable tolling.

Defendant also argues equitable tolling applies only when the plaintiff in the earlier action is the same plaintiff in the later action. This argument has merit. (See Reid v. City of San Diego (2018) 24 Cal.App.5th 343, 361 [“Plaintiffs cite no authority, and we are aware of none, that would allow a plaintiff in one case to equitably toll the limitation period based on the filing of a stranger’s lawsuit.”].)

Additionally, “[w]hen a plaintiff relies on a theory of . . . equitable tolling . . . to save a cause of action that otherwise appears on its face to be time-barred, he or she must specifically plead facts which, if proved, would support the theory.” (Mills v. Forestex Co. (2003) 108 Cal.App.4th 625, 641.) Plaintiff has alleged no facts in the FAC that would support equitable tolling.

In sum, the third cause of action is time-barred. Defendant’s demurrer to the third cause of action is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND.

3. Sixth Cause of Action
4.
The sixth cause of action is one to enforce PAGA. Defendant argues this claim is time-barred. Defendant also argues the spotlight theory in the sixth cause of action is barred by the previous ruling in the Myers case and the time rounding theory is barred by a failure to exhaust administrative remedies.

a. Statute of Limitations
b.
Because a PAGA claim is one to recover a statutory civil penalty (see Lab. Code, § 2699, subdivision (a)), it is subject to a one year statute of limitations period. (Code Civ. Proc, § 340, subd. (a); Thomas v. Home Depot USA Inc. (N.D. Cal. 2007) 527 F.Supp.2d 1003, 1007-1008.) As stated previously, Plaintiff filed this case more than one year after leaving employment with Defendant. Plaintiff contends the claim is timely because of: (1) statutory PAGA tolling; (2) “American Pipe” tolling; and (3) equitable tolling. For the reasons discussed in connection with the demurrer to the third cause of action, American Pipe tolling and equitable tolling are inapplicable. Therefore, Plaintiff must establish the claim is timely because of statutory PAGA tolling.

Plaintiff argues PAGA contains a 65-day statutory tolling period following notice to the defendant and the LWDA, which makes the sixth cause of action timely. The PAGA statute requires an aggrieved employee to provide written notice to the LWDA of “the specific provisions of this code alleged to have been violated, including the facts and theories to support the alleged violation.” (Lab. Code, § 2699.3, subd. (a)(1)(A).) “If the agency intends to investigate the alleged violation, it shall notify the employer and the aggrieved employee or representative by certified mail of its decision within 65 calendar days of the postmark date of the notice. . . .” (Lab. Code, § 2699.3, subd. (a)(2)(B).) Upon receipt of notice from the LWDA “or if the agency fails to provide timely or any notification, the aggrieved employee may commence a civil action pursuant to Section 2699.” (Ibid.) “The periods specified in this section are not counted as part of the time limited for the commencement of the civil action to recover penalties. . . .” (Lab. Code, § 2699.3, subd. (d).)

Plaintiff alleges his counsel submitted notice to the LWDA on February 6, 2018, and received no response. (FAC, ¶ 90.) Therefore, based on the language of the statute, Plaintiff contends he had one year and 65 days to file the PAGA claim. Defendant argues the 65-day period ended on April 12, 2018, before the one-year statute of limitations would have run, so there would be no reason to toll the statute of limitations. Defendant asserts Plaintiff has cited no cases indicating that when the 65-day exhaustion period runs concurrently with, and within, the one-year limitations period, the statute of limitations is nonetheless extended by 65 days.

Section 2699.3 sets forth no exception to its tolling language in subdivision (d). Consequently, the statute of limitations is “tolled for up to 65 days to account for the period between when LWDA receives a PAGA complaint letter and when it provides notice (or fails to provide such notice) to the aggrieved employee as to whether it grants permission for the aggrieved employee to initiate a civil action.” (Robles v. Schneider National Carriers, Inc. (C.D. Cal. 2017) 2017 WL 8231246, at *8.) In this case, it is alleged no notice was received from the LWDA, so the statute of limitations was tolled for the full 65 days, making the filing of the PAGA action timely.

c. Spotlight Theory
d.
Defendant argues Plaintiff cannot pursue a PAGA claim based on the same spotlight theory (i.e. allegations regarding the Spotlight Program bonuses) that was alleged in the Myers case because duplicative PAGA actions are barred by the California Supreme Court’s decision in Arias v. Superior Court (2009) 46 Cal.4th 969. In Arias, the Court stated that “[b]ecause an aggrieved employee’s action under the Labor Code Private Attorneys General Act of 2004 functions as a substitute for an action brought by the government itself, a judgment in that action binds all those, including nonparty aggrieved employees, who would be bound by a judgment in an action brought by the government.” (Id. at p. 986.) In other words, collateral estoppel can be asserted not only against the named plaintiff in a prior PAGA action, but also against the unnamed aggrieved employees. (See id. at p. 985.)

However, “[c]ollateral estoppel precludes relitigation of issues that were necessarily decided in prior litigation.” (Arias v. Superior Court, supra, 46 Cal.4th at p. 985.) Defendant makes no showing regarding the collateral estoppel effect of the Myers action, simply arguing there was a binding judgment in that case. Defendant does not establish any PAGA issue was necessarily decided in the Myers action, in which summary judgment was granted based on a lack of standing. The Myers’s court’s statement that “Shumway maintains the right to assert his individual, class/collective, and representative claims in a new action” suggests otherwise. (Request for Judicial Notice in Support of Defendant Intuit Inc.’s Demurrer to Plaintiff’s First Amended Class Action Complaint, Ex. F, p. 14:13-14.) Therefore, the Court finds Arias does not bar Plaintiff from pursuing the spotlight theory in the PAGA claim in this case.

A demurrer cannot be sustained to part of a cause of action. (Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1047.) Because the PAGA cause of action can be maintained based on the spotlight theory, the demurrer to the sixth cause of action cannot be sustained even if the Court were to find Plaintiff failed to exhaust administrative remedies as to the time rounding theory. Accordingly, the Court does not reach that argument. Defendant’s demurrer to the sixth cause of action is OVERRULED.

V. MOTION TO STRIKE
VI.
A. Plaintiff’s Request for Judicial Notice
B.
Plaintiff requests judicial notice of the following:

a. Plaintiff Darci Myer’s Memorandum of Points and Authorities in Support of Motion for Leave to Amend Complaint, filed in Darci Myers v. Intuit, Inc., case no. 3:17-cv-01228-WQH-BLM, filed in the United States District Court, Southern District of California; and
b.
c. Defendant Intuit, Inc.’s Memorandum of Points and Authorities in Support of Motion for Summary Judgment, filed in Darci Myers v. Intuit, Inc., case no. 3:17-cv-01228-WQH-BLM, filed in the United States District Court, Southern District of California.
d.
The request for judicial notice is GRANTED. (Evid. Code, § 452, subd. (d).)

C. Discussion
D.
Defendant moves to strike the following allegations from the FAC: (1) certain language in the class definition; (2) Labor Code section 558 allegations in the second cause of action; (3) allegations seeking penalties in the UCL cause of action; and (4) requests for injunctive relief.

1. Class Definition
2.
Two classes are alleged in this case – a rounding class and a bonus class. Defendant seeks to strike a portion of the rounding class definition. The rounding class is defined as follows: “All persons in California who were, are, or will be employed by Defendant as non-exempt employees and who were subject to time-rounding by Defendant to their detriment.” (FAC, ¶ 34.)

Defendant argues the language “to their detriment” makes the class contingent upon a determination of liability and therefore the class is an improper “fail-safe” class. A “fail-safe” class is one that precludes membership in the class unless liability of the defendant is first established. (Pepka v. Kohl’s Department Stores, Inc. (C.D. Cal. 2016) 2016 WL 8919460, at *2.) Fail-safe classes are generally impermissible. (Id. at *3.)

Plaintiff contends it is premature to look at class certification issues at the pleading stage and that the proposed definition is ascertainable. With regard to the first argument, as explained by one case:

Class certification is generally not decided at the pleading stage of a lawsuit. The preferred course is to defer decision on the propriety of the class action until an evidentiary hearing has been held on the appropriateness of class litigation. However, if the defects in the class action allegations appear on the face of the complaint or by matters subject to judicial notice, the putative class action may be defeated by a demurrer or motion to strike.

(In re BCBG Overtime Cases (2008) 163 Cal.App.4th 1293, 1298-1299, quotation marks, brackets, and citations omitted.)

Here, the Court is not deciding class certification. Where there is a clear defect in the class definition, however, there is no reason to wait until the certification stage to remedy the problem. Plaintiff contends the class definition is ascertainable, but a determination of whether any alleged time-rounding caused detriment to each class member requires an examination of the merits and is not properly included in the class definition. Therefore, the language “to their detriment” is struck from the class definition.

3. Labor Code Section 558 Allegations in the Second Cause of Action
4.
Plaintiff’s second cause of action seeks penalties under Labor Code section 558. Defendant first argues the section 558 allegations are time-barred and second that Plaintiff cannot seek section 558 penalties because that statute is not privately enforceable by an individual employee. The second argument is dispositive.

A claim for civil penalties pursuant to Labor Code section 558 cannot be maintained because “the statute is not privately enforceable by an individual employee.” (Morales v. Compass Group, PLC (C.D. Cal. 2014) 2014 WL 5304913, at *8.) Plaintiff contends he can recover these penalties by pursuing a representative claim under PAGA. The second cause of action is not a PAGA claim; it seeks penalties directly. Plaintiff has alleged a separate PAGA claim in the sixth cause of action. Therefore, the allegations in the second cause of action relying on a claim for penalties under Labor Code section 558 are struck.

5. Penalties Allegations in the UCL Cause of Action
6.
Defendant states Plaintiff seeks restitution in the fifth cause of action for alleged unfair business practices, in part, based on claims for penalties for separation pay and wage statement violations. Defendant argues this is improper because the UCL only allows for restitution and penalties cannot be recovered as restitution under the UCL. Plaintiff responds that he does not oppose Defendant’s request to strike these allegations. Therefore, the Court will strike the allegations based on penalties for separation pay and wage statement violations.

7. Injunctive Relief
8.
Plaintiff alleges in the FAC that he is entitled to injunctive relief. Defendant argues Plaintiff cannot seek injunctive relief as a former employee because he cannot show a likelihood he will be harmed in the future if the injunction is not granted.

Defendant is correct that Plaintiff does not have standing to seek injunctive relief under these circumstances. (See Delodder v. Aerotek, Inc. (C.D. Cal. 2009) 2009 WL 3770670, at *3 [“[P]laintiffs lack standing to seek prospective relief under the UCL because plaintiffs do not dispute that they are no longer employees of defendant, and thus, they cannot demonstrate ‘a real or immediate threat of irreparable injury’ by defendant’s employment practices.”]; see also Heffelfinger v. Electronic Data Systems Corp. (C.D. Cal. 2008) 2008 WL 8128621, at *17 [“Because plaintiffs are no longer employed by EDS, they lack standing to seek prospective injunctive relief under the UCL.”].)

Plaintiff cites to McGill v. Citibank, N.A. (2017) 2 Cal.5th 945 for the proposition that he can seek “public” injunctive relief. In McGill, the Court explained the distinction between “private injunctive relief – i.e., relief that primarily resolves a private dispute between the parties and rectifies individual wrongs, and that benefits the public, if at all, only incidentally – and public injunctive relief – i.e., relief that by and large benefits the general public and that benefits the plaintiff, if at all, only incidentally and/or as a member of the general public.” (Id. at p. 955, quotation marks, brackets, and citations omitted.) The McGill court held an arbitration provision that purports to waive a statutory right to seek public injunctive relief is invalid and unenforceable. (Id. at p. 961.)

Defendant correctly argues Plaintiff is not seeking public injunctive relief because Plaintiff is only seeking relief on behalf of himself and his fellow employees. (FAC, ¶ 5; McGill v. Citibank, N.A. (2017) 2 Cal.5th at p. 955 “[Relief that has the primary purpose or effect of redressing or preventing injury to an individual plaintiff – or to a group of individuals similarly situated to the plaintiff – does not constitute public injunctive relief.”].) The Court will strike the injunctive relief allegations.

E. Conclusion
F.
Defendant’s motion to strike is GRANTED WITH 10 DAYS’ LEAVE TO AMEND.

The Court will prepare the final order if this tentative ruling is not contested.