Hector Navarro et al v. Mercedes Benz of Encino

Filing 25

MINUTES: (IN CHAMBERS) Order Re: Defendant's Motion to Dismiss 9 The Court GRANTS Defendant's Motion to Dismiss as to Plaintiffs' First, Third, Fifth, and Seventh claims. The Court sua sponte DISMISSES the remaining state law causes of action. As such, Plaintiffs' Complaint is dismissed in its entirety IT IS SO ORDERED by Judge R. Gary Klausner. ( MD JS-6. Case Terminated ) (ir)

Case 2:12-cv-08051-RGK-MRW Document 25 Filed 01/25/13 Page 1 of 5 Page ID #:740
JS-6
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV 12-08051-RGK (MRWx)

Title

NAVARRO, et al v. MERCEDES BENZ OF ENCINO

Present: The
Honorable

Date

January 25, 2013

R. GARY KLAUSNER, UNITED STATES DISTRICT JUDGE

Sharon L. Williams (Not Present)

Not Reported

N/A

Deputy Clerk

Court Reporter / Recorder

Tape No.

Attorneys Present for Plaintiffs:

Attorneys Present for Defendants:

Not Present

Not Present

Proceedings:

I.

(IN CHAMBERS) Order Re: Defendant’s Motion to Dismiss (DE 9)

INTRODUCTION

On September 18, 2012, Hector Navarro, Mike Shirinian, Anthony Pinkins, Kevin
Malone, and Reuben Castro (collectively “Plaintiffs”) filed this complaint alleging nine claims
against Mercedes Benz of Encino (“Defendant”) for various violations of the Fair Labor
Standards Act (“FLSA”) and the California Labor Code.
On November 16, 2012, Defendant filed this Motion to Dismiss. The Court reviews
Defendant’s Motion to Dismiss as to four of the nine claims: (1) First Claim: violation of FLSA
29 U.S.C. § 207 for failure to pay overtime wages,1 (2) Third Claim: violation of FLSA 29
U.S.C. § 206 for failure to pay minimum wage, (3) Fifth Claim: violation of FLSA 29 U.S.C. §
207 for failure to provide extra compensation for work completed during mandatory meal and
rest periods, and (4) Seventh Claim: violation of FLSA 29 U.S.C. § 211 for failure to provide a
written, itemized statement detailing hours worked and compensation received.
For the reasons stated below, the Court GRANTS Defendant’s Motion to Dismiss.
Additionally, the remaining claims are state claims over which the Court will not exercise
supplemental jurisdiction. Therefore, the Court dismisses those claims for lack of subject
matter jurisdiction.

1

The Court notes that Plaintiffs’ Complaint alleges a violation of 29 U.S.C. § 201; however, the proper statutory basis
for the allegations asserted in the first claim is 29 U.S.C. § 207.
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II.

FACTUAL BACKGROUND

With the exception of Plaintiff Reuben Castro, Plaintiffs are all current employees of
Defendant. Plaintiff Reuben Castro is a former employee. Defendant owns and operates a
Mercedes Benz automobile dealership in Encino, California. This business sells and services
both new and used Mercedes Benz automobiles. Plaintiffs work (or have worked) at the
dealership as Service Advisors.
As Service Advisors, the Plaintiffs must: (1) meet and greet Mercedes Benz owners as
they enter the service area and evaluate their service and repair needs; (2) solicit service to be
conducted on the vehicle; (3) solicit supplemental service to be performed on the vehicle; and
(4) inform the vehicle owner about the status of the vehicle while Defendant’s mechanics repair
and service the vehicle. For every additional service or repair provided, the commission
increases. Defendant pays Service Advisors, such as Plaintiffs, solely on this commission.
On September 18, 2012, Plaintiffs filed a complaint against Defendant alleging
violations of both federal and state laws for failure to pay overtime, failure to pay minimum
wage, failure to provide extra compensation for Plaintiffs’ work during mandatory meal and rest
periods, and failure to provide itemized wage statements to Plaintiffs. Additionally, Plaintiffs
allege that because of these practices, Defendant has engaged in unfair competition in
violation of California Business & Professions Code §17200.
III.

JUDICIAL STANDARD

To comply with Federal Rules of Civil Procedure 8, a complaint must allege “enough
facts to state a claim for relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570 (2007). Under Rule 12(b)(6), a party may move to dismiss a claim for failure to allege
enough facts to comply with Rule 8.
In deciding a Rule 12(b)(6) motion, a court must assume allegations in the challenged
complaint are true, and must construe the complaint in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F. 3d 336, 337-38 (9th Cir. 1996). However, a
court need not accept as true unreasonable inferences, unwarranted deductions of fact, or
conclusory legal allegations cast in the form of factual allegations. See W. Mining Council v.
Watt, 643 F.2d 618, 624 (9th Cir. 1981). The complaint need not contain detailed factual
allegations, but must provide more than a “formulaic recitation of the elements of a claim.”
Twombly, 550 U.S. at 555.
IV.

DISCUSSION

Defendant argues Plaintiffs’ claims should be dismissed for the following reasons: (1)
Plaintiffs’ First, Third, and Fifth Claims fail because Plaintiffs are exempt from the FLSA’s
maximum hour and minimum wage requirements; (2) alternatively, Plaintiffs’ Third Claim fails
because the Complaint pleads insufficient facts; (3) alternatively, Plaintiffs’ Fifth Claim fails
because § 207 does not require meal and rest periods; and (4) Plaintiffs’ Seventh Claim fails
because a violation of § 211 does not create a private right of action. The Court agrees.
A.

First, Third, Fifth Claims Fail Based on Exemptions

Section 206 states, in pertinent part, that every employer shall pay to each of his
employees not less than $7.25 an hour. 29 U.S.C. § 206(a)(1)(C). Section 207 states no
employer shall employ any employee for a workweek longer than forty hours unless the
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employee receives additional compensation specified at a rate not less than one-half the
regular rate at which the employer generally pays the employee. 29 U.S.C. §207(a).
Section 213 creates an exemption to the above provision for “any salesman, partsman,
or mechanic primarily engaged in selling or servicing automobiles … if he is employed by a
nonmanufacturing establishment primarily engaged in the business of selling such vehicles or
implements to ultimate purchasers.” Courts have applied this exemption to Service Advisors.
See Brennan v. Deel Motors, 475 F.2d 1095, 1097 (5th Cir. 1973) (“... a common sense
interpretation and application of this exemption mandates inclusion of service salesmen within
its scope.”); Walton v. Greenbrier Ford, 370 F.3d 446, 453 (4th Cir. 2004).
The Department of Labor (“DOL”), however, has expressly rejected this interpretation.
The DOL defines a salesman as an employee “primarily engaged in making sales or obtaining
orders or contracts for sale of automobiles.” 29 C.F.R. § 779.372(c)(1). A mechanic is an
employee “primarily engaged in doing mechanical work in the servicing of an automobile.” 29
C.F.R. § 779.372(c)(3). In a “final rule,” the Wage and Hour Division of the DOL explained that
“[t]he Department notes that current § 779.372(c)(1) … limit[s] the exemption to salesmen who
sell vehicles and partsmen and mechanics who service vehicles.” Updating Regulations Issued
Under the Fair Labor Standards Act, 76 Fed. Reg. 18832-01 (April 5, 2011). Thus, under the
DOL’s enforcement of § 213(b)(10)(A), Service Advisors are not exempt from the hour/wage
requirements set forth in §§ 206 and 207.
Given the conflicting interpretations, the Court must first look to the statutory language.
Where the statutory language is clear, the Court is bound by such language as a clear
expression of legislative intent. Chevron, U.S.A., Inc. v. Natural Resources Defense Council,
467 U.S. 837, 842-43 (1984). Where the statutory language is ambiguous, however, the Court
accords deference to the DOL action based on the nature of that action. “Legislative
regulations” are given a high level of judicial deference, and will stand unless arbitrary or
capricious. Id. at 844. Mere “interpretations,” however, are accorded lower deference, and will
stand only so long as they are reasonable. Id.
1.

The Statutory Language is Ambiguous as Applied to Service Advisors

Here, the statutory language of § 213(b)(10)(A) does not expressly exempt Service
Advisors. However, the job description of a Service Advisor encompasses those of both a
salesman and a mechanic, and falls squarely within the category of positions exempted by the
provision. The legislative history demonstrates an intent to “narrow significantly the reach of
the automobile dealership employee exemption.” Gieg v. Howarth, 244 F.3d 775, 776 (9th Cir.
2001). Nonetheless, it is not clear that Congress intended Service Advisors to be excluded,
particularly when their job duties are simply a hybrid of two jobs expressly listed within the
exemption. For this reason, the Court finds § 213(b)(10)(A) ambiguous as applied to Service
Advisors. See Brennan v. Deel Motors, Inc., 475 F.2d 1095, 1098 (5th Cir. 1973) (“The
intended scope of [the exemption] is not entirely clear. Indeed, the Secretary’s own
interpretation of the coverage of that section is not altogether consistent.”).
2.

The DOL’s Interpretation is not Reasonable

In light of the finding above, the Court’s role is to “determine whether the agency’s
interpretation is based on a permissible construction of the statute.” Chevron, 467 U.S. at 843.
As previously stated, the permissiveness of the agency’s construction depends upon the
nature of the agency action, as allowed by Congress. When Congress has “explicitly left a gap
for the agency to fill, there is an express delegation of authority to the agency.” Id. at 844. In
such a case, agency decisions are “legislative regulations” that are given “controlling weight
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unless they are arbitrary, capricious, or manifestly contrary to the statute.” Id. When Congress
has not left such an explicit gap, agency actions are mere interpretations that are upheld only if
reasonable. Id.
Within the § 213 arena, the U.S. Supreme Court has found agency action to constitute
“legislative regulation.” See Auer v. Robbins, 519 U.S. 452 (1997); Long Island Care at Home,
Ltd. v. Coke, 551 U.S. 158 (2007). However, in those cases, the specific provisions being
reviewed expressly grant the Secretary of Labor the power to “defin[e] and delimi[t]” the terms
in the section. Id. As such, the Court found that the statute creates an explicit gap for the
agency to fill. Id. at 172. This case is distinguishable. Here, the applicable section, §
213(10)(b)(A), does not contain any such language. It is clear that where Congress intended to
grant the agency power to create legislative regulation, it included language to that effect. In
the absence of similar language, this Court will not read into the statute the grant of such
power. Therefore, the Court finds that the agency action is not a legislative regulation, but
rather, a mere interpretation, which is accorded lower deference.
Having established that the DOL’s action is an interpretation, the Court is bound to the
DOL interpretation only if the interpretation is reasonable. Chevron, 467 U.S. at 844. The Court
agrees with both the Fourth and Fifth Circuits, and holds that the DOL interpretation of §
213(b)(10)(A) is unreasonable. When faced with facts nearly identical to those of the present
case, the Fourth Circuit concluded that the “Secretary’s interpretation of ... [salesman] is
unreasonable, as it is an impermissibly restrictive construction of the statute.” Walton, 370 F.3d
at 452. Similarly, the Fifth Circuit explained that “[i]n the absence of clear intent to the contrary,
we cannot assume that Congress intended to treat employees with functionally similar
positions differently.” Brennan ,475 F.2d at 1097-98. Service Advisors, such as Plaintiffs, are
functionally equivalent to salesmen and mechanics and are similarly responsible for the “selling
and servicing” of automobiles. Accordingly, the Court finds the DOL’s interpretation
unreasonable. As such, the Court finds that Service Advisors fall within the exemption of §
213(b)(10)(A).
The Court dismisses Plaintiffs’ first, third, and fifth claims, which all allege violations of
§§ 206 and 207.
B.

Third Claim Fails to Allege Sufficient Facts

As discussed above, the minimum wage requirements established in § 206 do not apply
to Plaintiffs because Service Advisors are exempt under § 213(b)(10)(A). Even if they did
apply, however, Plaintiff’s Third Claim fails to plead sufficient facts to survive a Rule 12(b)(6)
Motion.
Legal conclusions alone, without some factual allegations, do not provide fair notice of
the nature of the claim nor the grounds on which the claim rests. Bell Atlantic Corp. v.
Twombly, 550 U.S. at 556. Here, Plaintiffs allege only that Defendant (1) failed to provide an
hourly wage, (2) paid Plaintiffs on a pure commission basis, (3) required Plaintiffs to work for
wages less than the legal minimum, and (4) refused to pay minimum wages. A salary based
solely on commission can still satisfy the minimum wage requirement. See 29 C.F.R. §
778.117. No facts demonstrate that the commissions Plaintiffs earned do not satisfy the
minimum wage requirements. Even if a Motion to Dismiss is not designed to correct inartistic
pleading, as Plaintiff argues, these legal conclusions alone are insufficient to survive a Rule
12(b)(6) Motion.

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C.

Fifth Claim Fails to State a Claim

To the extent Plaintiffs’ Fifth Claim alleges that Defendant failed to provide Plaintiffs with
overtime compensation in violation of § 207, this Section does not apply to Service Advisors.
As discussed above, Plaintiffs are exempt under § 213(b)(10)(A).
To the extent Plaintiffs’ Fifth Claim alleges that Defendant failed to provide Plaintiffs with
meal or rest periods, neither § 207 nor the cited DOL regulations mandate rest and meal
periods. Section 785.18 simply states that: “Rest periods of short duration, running from 5
minutes to about 20 minutes… must be counted as hours worked.” 29 C.F.R.§ 785.18.
Section 785.19 states that “[b]ona fide meal periods are not worktime … The employee must
be completely relieved from duty for the purposes of eating regular meals … The employee is
not relieved if he is required to perform any duties, whether active or inactive, while eating.” 29
C.F.R. § 785.19. These statutes simply determine when employees must be compensated for
working during these periods, but do not require an employer to provide their employees with
meal or rest periods. On this ground, the Court dismisses Plaintiff’s Fifth Claim.
D.

Seventh Claim Fails Because § 211 Does Not Create a Private Right of
Action

Section 29 U.S.C. § 211 states: “Every employer subject to any provision of this chapter
… shall make, keep, and preserve such records of the persons employed by him and of the
wages, hours, and other conditions and practices of employment maintained by him, and shall
preserve such records…” Section 217 authorizes only the Secretary to initiate injunction
proceedings involving an employer’s failure to comply with the record keeping requirements.
29 U.S.C. § 217. Put simply, § 211(c) does not create a private action against an employer for
failure to comply with the record-keeping provisions. Elwell v. University Hospitals Home Care
Services, 276 F. 3d 832, 843 (6th Cir. 2002). Therefore, the Court dismisses Plaintiff’s Seventh
Claim.
E.

The Remaining State Law Causes of Action

Having dismissed all federal claims alleged, the Court exercises its discretion under 28
U.S.C. § 1367(c) to dismiss the remaining state law causes of action for lack of subject matter
jurisdiction.
V.

CONCLUSION

The Court GRANTS Defendant’s Motion to Dismiss as to Plaintiffs’ First, Third, Fifth,
and Seventh claims. The Court sua sponte DISMISSES the remaining state law causes of
action. As such, Plaintiffs’ Complaint is dismissed in its entirety.
IT IS SO ORDERED.
:
Initials of
Preparer

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