Danny Flores et al v. City of San Gabriel et al

Filing 71

ORDER DENYING PLAINTIFFS MOTION FOR SUMMARY JUDGMENT AND SUA SPONTE GRANTING DEFENDANT SUMMARY JUDGMENT AS TO LIQUIDATED DAMAGES by Judge Jesus G. Bernal, re Objection/Opposition (Motion related), 39 , and Supplement(Motion related), 38 . (See document for specifics) (mrgo)

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UNITED STATES DISTRICT COURT

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CENTRAL DISTRICT OF CALIFORNIA

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DANNY FLORES, ROBERT
BARADA, KEVIN WATSON, VY
VAN, RAY LARA, DANE
WOOLWINE, RIKIMARU
NAKAMURA, CHRISTOPHER
WENZEL, CRUZ HERNANDEZ,
SHANNON CASILLAS, JAMES
JUST, RENE LOPEZ, GILBERT
LEE, STEVE RODRIGUES, and
ENRIQUE DEANDA,
Plaintiffs,
v.
CITY OF SAN GABRIEL, and
DOES 1 THROUGH 10,
inclusive,
Defendants.

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Case No.
CV 12-04884-JGB (JCGx)
ORDER DENYING PLAINTIFFS’
MOTION FOR SUMMARY
JUDGMENT AND SUA SPONTE
GRANTING DEFENDANT
SUMMARY JUDGMENT AS TO
LIQUIDATED DAMAGES

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I.

BACKGROUND

On August 29, 2013, the Court issued an order
granting Defendant’s motion for partial summary
judgment and granting in part Plaintiffs’ motion for
partial summary judgment (hereinafter “Summary Judgment
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Order”).1

(Summ. J. Order (Doc. No. 37).)

In that

Order, the Court directed the parties to submit further
briefing addressing the issue of liquidated damages.
Before the Court is Plaintiffs’ supplemental brief on
the issue of liquidated damages filed on September 13,
2013 in support of Plaintiffs’ motion for partial
summary judgment.

(Doc. No. 38.)

opposition on September 25, 2013.

Defendant filed an
(Doc. No. 39.)

The Court incorporates by reference the procedural
and factual background and the uncontroverted facts as
set forth in the Court’s Summary Judgment Order.
(Summ. J. Order at 1-23.)

For the reasons set forth

below, the Court denies Plaintiffs’ Motion for Partial
Summary Judgment on the issue of liquidated damages.
The Court sua sponte enters summary judgment in favor
of Defendant and holds that Plaintiffs are not entitled
to liquidated damages.

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Specifically, the Court found the following: (1)
Defendant’s payments to Plaintiffs made in lieu of
benefits are not excludable from the regular rate
calculation under section 207(e)(2); (2) the payments
made in lieu of benefits are also not excludable under
section 207(e)(4); (3) to the extent that Defendant
makes contributions under the Plan to third parties,
these contributions are excludable under 29 U.S.C. §
207(e)(4); (4) Plaintiffs’ claims are governed by a
two-year statute of limitations under 29 U.S.C. §
255(a); and (5) Defendant is liable to Plaintiffs for
FLSA overtime only to the extent that Plaintiffs worked
in excess of 86 hours in a 14-day work period since
Defendant implemented a partial overtime exemption
pursuant to section 207(k).
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II. LEGAL STANDARD2
Federal Rule of Civil Procedure 56 empowers the

Court to enter summary judgment on factually

unsupported claims or defenses, and thereby “secure the
just, speedy and inexpensive determination of every
action.”

(1986).

Celotex Corp. v. Catrett, 477 U.S. 317, 325

Summary judgment is appropriate if the

“pleadings, depositions, answers to interrogatories,

and admissions on file, together with the affidavits,
if any, show that there is no genuine issue as to any

material fact and that the moving party is entitled to
judgment as a matter of law.”

Fed. R. Civ. P. 56(c).

A fact is material when it affects the outcome of the
case.

Anderson v. Liberty Lobby, Inc., 477 U.S. 242,

248 (1986); Freeman v. Arpaio, 125 F.3d 732, 735 (9th
Cir. 1997).
The party moving for summary judgment bears the

initial burden of establishing an absence of a genuine
issue of material fact.

Celotex, 477 U.S. at 323.

This burden may be satisfied by either (1) presenting
evidence to negate an essential element of the non-

moving party's case; or (2) showing that the non-moving
party has failed to sufficiently establish an essential
element to the non-moving party's case.
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Id. at 322-23.

Unless otherwise noted, all references to “Rule”
refer to the Federal Rules of Civil Procedure.
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Where the party moving for summary judgment does not

bear the burden of proof at trial, it may show that no
genuine issue of material fact exists by demonstrating
that “there is an absence of evidence to support the
non-moving party's case.”

Id. at 325.

party is not required to produce evidence showing the
absence of a genuine issue of material fact, nor is it
required to offer evidence negating the non-moving
party's claim.

Lujan v. National Wildlife Fed'n, 497

U.S. 871, 885 (1990); United Steelworkers v. Phelps
Dodge Corp., 865 F.2d 1539, 1542 (9th Cir. 1989).

However, where the moving party bears the burden of

proof at trial, the moving party must present

compelling evidence in order to obtain summary judgment
in its favor.

United States v. One Residential

Property at 8110 E. Mohave, 229 F. Supp. 2d 1046, 1047
(S.D. Cal. 2002) (citing Torres Vargas v. Santiago

Cummings, 149 F.3d 29, 35 (1st Cir. 1998) (“The party
who has the burden of proof on a dispositive issue

cannot attain summary judgment unless the evidence that
he provides on that issue is conclusive.”)).

Failure

to meet this burden results in denial of the motion and
the Court need not consider the non-moving party's
evidence.

One Residential Property at 8110 E. Mohave,

229 F. Supp. 2d at 1048.

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The moving

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Once the moving party meets the requirements of

Rule 56, the burden shifts to the party resisting the
motion, who “must set forth specific facts showing that
there is a genuine issue for trial.”
U.S. at 256.

The non-moving party does not meet this

burden by showing “some metaphysical doubt as to the
material facts.”

Matsushita Elec. Indus. Co., Ltd. v.

Zenith Radio Corp., 475 U.S. 574, 586 (1986).

The

United States Supreme Court has held that “[t]he mere

existence of a scintilla of evidence in support of the
non-moving party's position is not sufficient.”
Anderson, 477 U.S. at 252.

Genuine factual issues must

exist that “can be resolved only by a finder of fact
because they may reasonably be resolved in favor of
either party.”

Id. at 250.

When ruling on a summary

judgment motion, the Court must examine all the

evidence in the light most favorable to the non-moving
party.

Celotex, 477 U.S. at 325.

The Court cannot

engage in credibility determinations, weighing of

evidence, or drawing of legitimate inferences from the
facts; these functions are for the jury.
U.S. at 255.

Anderson, 477

Without specific facts to support the

conclusion, a bald assertion of the “ultimate fact” is
insufficient.

See Schneider v. TRW, Inc., 938 F.2d

986, 990-91 (9th Cir. 1991).

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Anderson, 477

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III. DISCUSSION
Plaintiffs argue that they are entitled to an award
of liquidated damages pursuant to 29 U.S.C. § 216(b)
because Defendant failed to meet its burden of

establishing that it acted with subjective good faith
and had objectively reasonable grounds for believing
that its conduct complied with the FLSA.

Defendant

responds that it has always made a good faith effort to
comply with its obligations under the FLSA.

In

addition, Defendant contends that its determination
that the compensation was excludable under section

207(e)(2) was objectively reasonable based on the plain
language of that section.
Under section 216(b), an employer who violates

section 206 or section 207 of the FLSA is “liable to
the employee or employees affected in the amount of

their unpaid minimum wages, or their unpaid overtime
compensation . . . and in an additional equal amount as
liquidated damages.”

29 U.S.C. § 216(b).

“These

liquidated damages represent compensation, and not a
penalty.”

Local 246 Util. Workers Union of Am. v. S.

Cal. Edison Co., 83 F.3d 292, 297 (9th Cir. 1996)

(citing Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697, 707
(1945)).

“While section 216(b) is mandatory, it is

modified by section 260.”

EEOC v. First Citizens Bank

of Billings, 758 F.2d 397, 403 (9th Cir. 1985).
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Under 29 U.S.C. § 260, liquidated damages are
mandatory unless “the employer shows . . . that the act
or omission giving rise to [the violation] was in good
faith and that he had reasonable grounds for believing
that his act or omission was not in violation of the
[FLSA].”
297-298.

29 U.S.C. § 260; see Local 246, 83 F.3d at

“This test has both objective and subjective

components, asking how a reasonably prudent person
would have acted under the same or similar

circumstances and requiring that the employer have

honesty of intention and no knowledge of circumstances
which ought to put him upon inquiry.”

Alvarez v. IBP,

Inc., 339 F.3d 894, 907 (9th Cir. 2003) (internal
citations and quotations omitted).

“The employer bears

the burden of proof to establish this exception.”

Id.

at 907.
First, the Court finds that Defendant has met its

burden of establishing that it acted in subjective good
faith.

Defendant provided evidence that the payroll

department works with the human resources personnel to
determine whether a particular pay qualifies as premium
pay, includable in the regular rate, or a benefit that
is excluded from the regular rate calculation.
Tang Dep. 43:13-46:12, May 1, 2013 (Exh. A to
Declaration of Alex Y. Wong).)

(Linda

If the human resources

department notices or hears of any new ruling, they
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notify the payroll department.
10.)

(Linda Tang Dep. 46:8-

When the payments made in lieu of benefits were

first implemented, Defendant determined that it was a

benefit, classified it as a benefit in its system, and
did not include it in calculating overtime.
Tang Dep. 43:17-44:12.)

(Linda

Therefore, Defendant’s

evidence shows that it implemented steps to ensure it
accurately classified payments to be included in the
calculation of the regular rate based on the
information available to it at the time of
implementation.

Thus, the Court finds that Defendant

was not “blindly operat[ing] without making an

investigation as to its responsibilities under the
law.”

Dalheim v. KDFW-TV, 712 F. Supp. 533, 539 (N.D.

Tex. 1989).

Given the absence of legal authority

addressing whether cash payments made in lieu of

benefits must be included in the calculation of regular
rate of pay, Defendant had no reason to alter its
initial determination.
Plaintiffs cite the Ninth Circuit decision in Chao

v. A-One Med. Services, Inc., 346 F.3d 908 (9th Cir.

2003) to argue that Defendant failed to present facts

that it was acting based on some objective authority or
that it, at the very least, sought advice on the

legality of excluding substantial direct cash-in-lieu
of benefits from the regular rate of pay.

However, as

Defendant argues, these two methods constitute mere
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examples rather than an exhaustive list of acceptable
methods for demonstrating good faith.

Additionally, in

Chao, the court found that the employer’s violation of
the FLSA was willful.

Chao, 346 F.3d at 920.

The

court in Chao noted that “a finding of good faith is
plainly inconsistent with a finding of willfulness.”
Id.

Accordingly, the court’s finding of willfulness

precluded a finding of that the employer acted in good
faith.

This case is distinguishable from Chao since

the Court here previously found that Defendant’s
violation was not willful.

(Summ. J. Order at 46-47.)

Accordingly, the Court finds that Defendant acted with
subjective good faith in deciding to exclude the

payments made in lieu of benefits from the regular rate
calculation.
Second, the Court finds that Defendant had

objectively reasonable grounds for believing that its
conduct complied with the FLSA.

Plaintiffs argue that

Defendant’s determination was not objectively

reasonable since courts have clearly established that
payments to employees are not excludable from the

regular rate under section 207(e)(2) if they constitute
“compensation for work . . . if makes no difference

whether the . . . payments are tied to a regular weekly
wage or regular hourly wage.”
Local 246, 83 F.3d at 296).

(Mot. at 7) (quoting

As noted in the Court’s

Summary Judgment Order, the Ninth Circuit has not
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addressed whether payments made to employees out of
flexible benefit plans constitute “compensation for
work” that must be included in an employee’s regular
rate for purposes of the FLSA.
25.)

(Summ. J. Order at 24-

In addition, while district courts have addressed

whether other payments and benefits are excludable from
the regular rate calculation, none has addressed the

application of section 207(e)(2) to payments made under
flexible benefit plans.

Therefore, Defendant did not

have knowledge of circumstances which put him upon
inquiry that his conduct violated the FLSA.

Based on the uncontroverted facts, the amount an

employee may receive as cash in lieu of benefits is not
contingent upon the number of hours worked or the
employee’s productivity.
¶¶ 29-30.)

(Def. SUF, ¶¶ 29-30; Pl. SGD,

With little guidance on the issue, it was

reasonable for Defendant to classify its payments under
the Flexible Benefit Plan as “payments . . . which are
not made as compensation for . . . hours of employment
. . .”

29 U.S.C. § 207(e)(2).

Accordingly, the Court

finds that Defendant had reasonable grounds for

believing that its conduct complied with the FLSA.
Since the Court finds that Defendant acted with

subjective good faith and had objectively reasonable
grounds for believing that its exclusion of payments
made in lieu of benefits under the plan was not a
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violation of the FLSA, the Court finds that Plaintiffs
are not entitled to liquidated damages under 29 U.S.C.
§ 216(b).

See Portsmouth Square Inc. v. Shareholders

Protective Comm., 770 F.2d 866, 869 (9th Cir. 1985)

(citation omitted) (“[S]ua sponte summary judgment is

appropriate where one party moves for summary judgment
and, after the hearing, it appears from all the

evidence presented that there is no genuine issue of
material fact and the non-moving party is entitled to
judgment as a matter of law.”).

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IV. CONCLUSION
For the reasons set forth above, the Court denies
Plaintiffs’ Motion for Partial Summary Judgment on the
issue of liquidated damages.

The Court sua sponte

enters summary judgment in favor of Defendant and holds
that Plaintiffs are not entitled to liquidated damages.

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Dated:

10/29/13

____________________________
Jesus G. Bernal
United States District Judge

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