Case Name: Guang Tian, et al. vs. Ma Laboratories, Inc., et al.
Case No.: 1-11-CV-195373

This is a putative wage and hour class action on behalf of all present and former employees of defendant Ma Labs, Inc. (“Ma Labs”), a computer component distributor doing business in California. The operative Second Complaint (“SAC”) is brought by plaintiffs Guang Tian (“Tian”), Yan Nie (“Nie”), Jing Jian Wu (“J. Wu”), Zhen Sheng Yin (“Yin”), Tie Quan Ma (“T. Ma”), Mie Fang Tie (“Tie”), Yu Hong Chang (“Chang”), Yi Wu (“Wu”), Bao Jie Zhang (“Zhang”), Chao Hui Liu (“Liu”), and Christopher Cavaliere (“Cavaliere”) (collectively “Plaintiffs”) against Ma Labs, its founder and Chairman Abraham C. Ma, and its Chief Executive Officer Christine Rao (collectively “Defendants”). The Class is defined as “All persons employed by Defendant in California during the Class Period in an hourly position.” In addition, Cavaliere seeks penalties under the Private Attorney General Act (“PAGA”), California Labor Code section 2698 et seq. on behalf of himself and current and former hourly employees who worked for Ma Labs in California in the period of March 18, 2012 through the date of judgment (the “PAGA Subclass”).

The SAC asserts twelve causes of action for:

1. Unlawful failure to pay required overtime (by Plaintiffs and the Class against Defendants);
2. Unlawful failure to pay minimum wage (by Tian on behalf of himself and all similarly-situated members of the Class against Defendants);
3. Unlawful failure to provide off-duty meal periods and meal period compensation (by Plaintiffs and the Class against Defendants)
4. Unlawful failure to provide off-duty rest periods (by Plaintiffs and the Class against Defendants);
5. Unlawful failure to timely pay wages upon separation from employment (by Plaintiffs and the Class against Defendants);
6. Unlawful failure to furnish and keep accurate wage statements (by Plaintiffs and the Class against Defendants);
7. Wrongful termination in violation of public policy, retaliation (by Tian, Nie, J. Wu, T. Ma, and Tie);
8. Unfair competition – unlawful acts (by Plaintiffs and the Class against Defendants);
9. Unfair competition – unfair acts (by Plaintiffs and the Class against Defendants);
10. Unfair competition – fraudulent acts (by Plaintiffs and the Class against Defendants);
11. Unfair competition – for preliminary and permanent injunction (by Plaintiffs and the Class against Defendants); and
12. Violation of PAGA (by Cavaliere and the PAGA Subclass against Defendants).

Plaintiffs now move for leave to file a Third Amended Complaint (“TAC”) in order to (1) add putative class member Steven Lee (“Lee”) as a named Plaintiff and add his individual claims to the case; (2) add Lee as a representative plaintiff to the existing PAGA cause of action; (3) change the named class representatives among the existing Plaintiffs; (4) dismiss entirely the SAC’s second cause of action for failure to pay minimum wage; and (5) make clarifying “stylistic” changes.

The motion is supported by the declaration of Xinying Valerian attaching redlined and clean versions of the proposed TAC. Under the proposed TAC, Tian, Nie, J. Wu, Yin, and T. Ma will no longer be class representatives, but they will still assert individual claims for wage and hour violations. The class representatives are listed in paragraph 1 of the proposed TAC as Tie, Chang, Y. Wu, Zhang, Liu, Cavaliere and Lee. Additionally, Tian, Nie, J. Wu, T. Ma, Tie, and Lee bring individual claims for wrongful termination and retaliation.

Notice of Errata and Request to Strike

On May 29, 2014, Plaintiffs filed a Notice of Errata and Correction to Supporting Documents Filed with Plaintiffs’ Motion for Leave to File Third Amended Complaint. The Notice of Errata attaches corrected redlined and clean versions of the Proposed TAC, and a list of 16 proposed changes. Among the corrections, the titles of Counts 1-12 now reflect the changes in the composition of the class representatives and add individual wage claims.

On May 30, 2014, Defendants filed request to strike the Notice of Errata on the grounds that it is in essence a new motion that asks for new and different relief. In their reply, Plaintiffs argue the Notice of Errata merely seeks to correct typographical errors in the proposed TAC.

Defendants are correct to point out inconsistencies in the original moving papers. The proposed TAC attached to the supporting Valerian declaration lists Lee among the class representatives in paragraph 1, and Counts 9-12 in the original proposed TACs were brought “by All Plaintiffs on Behalf of Themselves and the Class”, suggesting that all of the named Plaintiffs, including Lee, are representing the putative class on these claims. However, other portions of the original moving papers state that “Lee is not a proposed Class Representative for the class claims” and “[h]is addition as a named plaintiff does not impact the upcoming class certification.”

Rather than seeking new and different relief than the original papers, however, the Notice of Errata corrects the inconsistencies in the moving papers and makes clear that Lee is not intended to be a class representative. This clarification is relevant to understanding the scope of the proposed amendment. Thus, Defendants’ request to strike the Notice of Errata is DENIED.

The proposed TAC attached to the Notice of Errata asserts 13 causes of action for:

1. Unlawful failure to pay required overtime (by Tie, Chang, Wu, Zhang, Liu and Cavaliere on behalf of themselves and the Class against Defendants, and by Tian, Nie, J. Wu, Yin, T. Ma, and Lee on behalf of themselves);
2. Unlawful failure to provide off-duty meal periods and meal period compensation (by Tie, Chang, Wu, Zhang, Liu and Cavaliere on behalf of themselves and the Class against Defendants, and by Tian, Nie, J. Wu, Yin, T. Ma, and Lee on behalf of themselves);
3. Unlawful failure to provide off-duty rest periods (by Tie, Chang, Wu, Zhang, Liu and Cavaliere on behalf of themselves and the Class against Defendants, and by Tian, Nie, J. Wu, Yin, T. Ma, and Lee on behalf of themselves);
4. Unlawful failure to timely pay wages upon separation from employment (by Tie, Chang, Wu, Zhang, Liu and Cavaliere on behalf of themselves and the Class against Defendants, and by Tian, Nie, J. Wu, Yin, T. Ma, and Lee on behalf of themselves);
5. Unlawful failure to furnish and keep accurate wage statements (by Tie, Chang, Wu, Zhang, Liu and Cavaliere on behalf of themselves and the Class against Defendants, and by Tian, Nie, J. Wu, Yin, T. Ma, and Lee on behalf of themselves);
6. Wrongful termination in violation of public policy, retaliation (by Tian, Nie, J. Wu, Ma, and Tie on behalf of themselves against Defendants);
7. Wrongful termination in violation of public policy, retaliation (by Lee against Defendants);
8. Retaliation for protected activity (by Lee against Defendants);
9. Unfair competition – unlawful acts (by Tie, Chang, Wu, Zhang, Liu and Cavaliere on behalf of themselves and the Class against Defendants, and by Tian, Nie, J. Wu, Yin, T. Ma, and Lee on behalf of themselves);
10. Unfair competition – unfair acts (by Tie, Chang, Wu, Zhang, Liu and Cavaliere on behalf of themselves and the Class against Defendants, and by Tian, Nie, J. Wu, Yin, T. Ma, and Lee on behalf of themselves);
11. Unfair competition – fraudulent acts (by Tie, Chang, Wu, Zhang, Liu and Cavaliere on behalf of themselves and the Class against Defendants, and by Tian, Nie, J. Wu, Yin, T. Ma, and Lee on behalf of themselves);
12. Unfair competition – for preliminary and permanent injunction (by Tie, Chang, Wu, Zhang, Liu and Cavaliere on behalf of themselves and the Class against Defendants, and by Tian, Nie, J. Wu, Yin, T. Ma, and Lee on behalf of themselves);
13. Violation of PAGA (by Cavaliere and Lee on behalf of themselves and the PAGA Class).

Parties’ Arguments

Plaintiffs argue that the addition of Lee in this action will not prejudice Defendants because Defendant and the Court were notified in November of 2013 that Lee had retained Plaintiffs’ counsel to represent him. Plaintiffs further submit that on February 7, 2014, they sent a letter to the Labor Workforce Development Agency (“LWDA”) on Lee’s behalf to give the agency notice of Labor Code violations pursuant to PAGA. On February 24, 2014, Defendants wrote to the LWDA and asserted that Lee’s claims would be “best resolved in the pending action.” On March 6, 2014, the LWDA declined to investigate Lee’s claims and ordered Plaintiffs to advise the LWDA of the results of the litigation. On March 7, 2014, Ma Labs fired Lee. On March 13, 2014, Lee notified the LWDA of his termination following his assertion of his Labor Code rights. On March 19, 2014, Plaintiffs filed a motion for protective order regarding defense communications with the putative class. On April 9, 2014, Defendants served a notice of deposition and propounded written discovery on Lee on a variety of topics, including his wage and hour, retaliation and wrongful termination claims. On April 28, 2014, Lee produced documents and continues to do so. On April 29, 2014, Defendants took Lee’s deposition for a full day, and Lee agreed to continue his deposition on another day.

Plaintiffs contend that Lee has always been a putative class member in this action since he worked full-time for Ma Labs since October 2002 as a front lobby guard/receptionist. Plaintiffs argue Defendants will not be prejudiced by the addition of Lee and his claims because in their declarations in opposition to Plaintiffs’ motion for protective order, Defendants’ witnesses demonstrate that they have been investigating Lee’s claims since the latter half of 2013. Plaintiffs argue that Defendants have been on notice of Lee’s claims by virtue of his status as a putative class member, and Defendants have already treated Lee as a named plaintiff by serving discovery on him and deposing him. Plaintiffs argue that Lee’s claims relate back to the filing of the original Complaint because they are based on Ma Labs’ employment policies and practices regarding rest breaks and overtime for hourly employees.

Defendants argue that Lee should not be added at this late stage of the proceeding because it will require enlargement of discovery, retaking of discovery, and retaking of Lee’s deposition, with less than 30 days before Defendants’ opposition to the motion for class certification must be filed. Defendants argue that Lee’s wage and hour claim is unique in that he was only the front lobby guard/receptionist, and unlike the other putative class members or named Plaintiffs, he had a unique time card system, set up solely for his position. Defendants argue that they have a right to conduct discovery on whether Lee’s claims or defenses are typical of the putative class, whether he is an adequate representative, and whether he has UCL standing, none of which can be completed by the July 7, 2014 deadline for Defendants’ opposition to the class certification motion. Defendants argue that they already have evidence that Lee would not be a proper class representative for Counts 9 to 12 because he lied on his employment application. Defendants contend Lee’s claims are not typical because he was employed at different time periods than other named Plaintiffs, and was a front lobby security guard and receptionist, with a different meal and rest break schedule than other employees, and he was terminated for taking excessive meal breaks.

Defendants further argue that because the trial date has been set for February 2, 2015, adding Lee’s individual and PAGA claims to the lawsuit will give Defendants little time to investigate, conduct discovery and prepare for trial. According to Defendants, Lee knew he had a potential claim in 2009 when the Department of Labor Standards Enforcement (“DLSE”) conducted a surprise wage and hour audit at Ma Labs, at which time Lee was given a business card by one of the DLSE auditors and a brochure outlining his wage and hour rights. Defendants argue that that had Lee brought his wage and hour claims earlier, Ma Labs would have been able to review the findings of the DLSE from 2009, but at this time, the entire audit file has been destroyed. Defendants argue that Lee’s claims should be barred by laches.

Defendants further contend that adding Lee and his individual claims to the existing action of individual and class claims will create a conflict among the Plaintiffs because if the entire case settles, Plaintiffs’ counsel will have opportunities to manipulate the allocation of settlement dollars. Defendants argue that bifurcating Lee’s individual claims would further complicate the case, and delaying the class certification motion is inappropriate because the case has been pending for years and the timing of the class certification motion has been in place for months.

Discussion

Judicial policy favors resolution of all disputed matters between the parties in the same lawsuit, and thus, the court’s discretion on allowing leave to amend will usually be exercised liberally to permit amendment of pleadings. (See Nestle v. Santa Monica (1972) 6 Cal.3d 920, 939.) “If the motion to amend is timely made and the granting of the motion will not prejudice the opposing party, it is error to refuse permission to amend and where the refusal also results in a party being deprived of the right to assert a meritorious cause of action or a meritorious defense, it is not only error but an abuse of discretion.” (Morgan v. Superior Court (1959) 172 Cal.App.2d 527, 530.) “Although courts are bound to apply a policy of great liberality in permitting amendments to the complaint at any stage of the proceedings, up to and including trial, this policy should be applied only ‘[w]here no prejudice is shown to the adverse party. …’ [Citations.]” (Atkinson v. Elk Corp. (2003) 109 Cal.App.4th 739, 761.)

Most of Defendants’ arguments regarding prejudice are based on the assumption that Lee is being added as a class representative shortly before Defendants’ opposition to the class certification motion is due. As discussed above, Plaintiffs have clarified that Lee is not being added as a class representative, and therefore, his addition in the case will not affect the class certification proceedings. As for Lee’s PAGA claim, because the class action requirements need not be met when an employee’s representative action against an employer is seeking civil penalties under PAGA (see Arias v. Superior Court (2009) 46 Cal.4th 969, 975), the addition of Lee’s PAGA claim should not affect the class certification proceedings either.

Regarding the proposed addition of Lee’s individual claims, Defendants’ prejudice arguments are not very persuasive. There is sufficient time between now and the February 2015 trial date for Defendants to obtain discovery on Lee’s individual claims, especially since Defendants have already begun investigating Lee’s claims through interviews, written discovery, and deposition.

Although Defendants refer to a possible demurrer to Lee’s individual claims, Defendants do not raise any potential grounds for a demurrer appearing on the face of the proposed TAC to demonstrate that the addition of Lee’s claims is futile. Defendants argue that Lee’s claims are barred by laches because Lee knew about his wage claims in 2009, as evidenced by the fact that he took photos of the Ma Labs Time Card Computer System in January 2009 and he received a DLSE brochure and business card during a 2009 DLSE audit of Ma Labs. Defendants argue they have been prejudiced by this delay because the DLSE’s audit file has now been destroyed. However, “[l]aches may properly be raised by a general demurrer where the facts showing laches appear on the face of the complaint.” (Stafford v. Ballinger (1962) 199 Cal.App.2d 289, 296.) Here, Defendants’ claims of unreasonable delay by Lee and resulting prejudice to Defendants do not appear on the face of the proposed TAC.

Defendants’ argument that there may be a conflict among the named Plaintiffs due to the possible manipulation of settlement dollars by Plaintiffs’ counsel is speculative and does not demonstrate any prejudice to Defendants.

Finally, Defendants do not contend that they will be prejudiced by the other proposed amendments that would change the class representatives, dismiss the SAC’s second cause of action for failure to pay minimum wage, and make other formatting or stylistic changes.

For all of these reasons, Plaintiffs’ motion for leave to file a TAC is GRANTED.