Jared Andresen et al v. International Paper Company et al

Filing 56

MINUTES (IN CHAMBERS) by Judge Christina A. Snyder: The Court hereby DENIES Plaintiff Yeghia Bekarian's motion to dismiss defendant International Paper Company, d/b/a Container the Americas' counterclaims 44 . Court Reporter: Not Present. (gk)

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:13-cv-02079-CAS(AJWx)

Title

JARED ANDRESEN, ET AL. V. INTERNATIONAL PAPER
COMPANY, ET AL.

Present: The Honorable

Date

June 3, 2014

CHRISTINA A. SNYDER

Catherine Jeang
Deputy Clerk

Not Present
Court Reporter / Recorder

N/A
Tape No.

Attorneys Present for Plaintiffs:

Attorneys Present for Defendants:

Not Present

Not Present

Proceedings:

(In Chambers:) PLAINTIFFS’ MOTION TO DISMISS
DEFENDANT’S COUNTERCLAIMS (Dkt. #44, filed May 7,
2014)

The Court finds this motion appropriate for decision without oral argument. Fed.
R. Civ. P. 78; Local Rule 7-15. Accordingly, the hearing date of June 9, 2014, is vacated,
and the matter is hereby taken under submission.
I.

INTRODUCTION

On February 13, 2013, plaintiffs Jared Andresen, Yeghia Bekiarian, and John
Duffy filed suit against defendants International Paper Company, d/b/a Container the
Americas (“IP”) and Does 1-50 in the Los Angeles County Superior Court. IP removed
the action to this Court on March 22, 2013. Dkt. #1. The operative second amended
complaint (“SAC”) asserts claims for failure to pay vested vacation wages upon
termination, in violation of Labor Code § 227.31, failure to pay wages, waiting time
penalties pursuant to Labor Code §§ 202-03, violation of the Unfair Competition Law
(“UCL”), Cal. Bus. & Prof. Code §§ 17200, et seq., violation of the record-keeping
provisions set forth in Labor Code § 226, breach of contract, and promissory estoppel.
Dkt. #21. IP filed an amended answer on April 23, 2014, in which it asserts assert
counterclaims against Bekiarian for breach of the duty of loyalty, breach of fiduciary
duty, gross negligence, and intentional misrepresentation. Dkt. #43.
On May 7, 2014, Bekarian filed a motion to dismiss IP’s counterclaims. IP filed an
opposition on May 19, 2014, dkt. #50, and Bekarian replied on May 26, 2014, dkt. #51.
After considering the parties’ arguments, the Court finds and concludes as follows.
1

References to “Labor Code” are to the California Labor Code.

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:13-cv-02079-CAS(AJWx)

Title

JARED ANDRESEN, ET AL. V. INTERNATIONAL PAPER
COMPANY, ET AL.

II.

Date

June 3, 2014

BACKGROUND

Plaintiffs are former employees of defendant who allege that defendant has
deprived them of severance pay, vested vacation wages, and commissions that they
accrued during their employment. See generally SAC. The crux of IP’s counterclaims is
that, to the extent that IP is liable to plaintiffs for accrued vacation pay, Bekiarian is
partially responsible for creating this liability. In this regard, IP alleges that Bekiarian
was first hired by Crockett Containers in 1972. Countercl. ¶ 5. IP alleges that, at that
time, Bekiarian oversaw all Crockett facilities in California. Id. In 1990, Crockett was
acquired by Temple-Inland, and IP acquired Temple-Inland in or around February 2012.
Id. ¶¶ 5-15. After Temple-Inland acquired Crockett, Bekiarian became vice president and
general manager of Temple-Inland’s Crockett Division, and remained in that position
after IP acquired Temple-Inland. Id. ¶¶ 8-16.
IP asserts that Bekiarian “created and subjected Crockett, [Temple-Inland, and IP]
to material contingent paid vacation accrual liability” as to certain sales representatives,
including plaintiffs Andresen and Duffy, while at the same time instructing human
resources and accounting employees under his control not to provide paid vacation for
IP’s sales representatives, and not to account for accruing vacation pay liability. Id. ¶¶
5-20. In particular, IP alleges that Bekiarian instructed Gale Leach, formerly a human
resources manager at Crockett, that commissioned sales representatives were not entitled
to paid vacation, and further instructed her not to account for accruals of paid vacation as
to those representatives. Id. ¶ 7. IP alleges that Bekiarian gave similar instructions to
Edith Rocha, the Controller of the Crockett Division of Temple-Inland. Id. ¶¶ 11-12.
Additionally, according to IP, when IP acquired Temple-Inland, Bekarian did not disclose
the possibility that this alleged liability existed. Id. ¶¶ 5-20.
III.

LEGAL STANDARD
A.

Fed. R. Civ. P. 12(b)(6)

A Rule 12(b)(6) motion tests the legal sufficiency of the claims asserted in a
complaint or counterclaim. “While a [pleading] attacked by a Rule 12(b)(6) motion to
dismiss does not need detailed factual allegations, a plaintiff’s obligation to provide the
‘grounds’ of his ‘entitlement to relief’ requires more than labels and conclusions, and a
formulaic recitation of the elements of a cause of action will not do.” Bell Atlantic Corp.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:13-cv-02079-CAS(AJWx)

Date

June 3, 2014

Title

JARED ANDRESEN, ET AL. V. INTERNATIONAL PAPER
COMPANY, ET AL.

v. Twombly, 550 U.S. 544, 555 (2007). “[F]actual allegations must be enough to raise a
right to relief above the speculative level.” Id.
In considering a motion pursuant to Rule 12(b)(6), a court must accept as true all
material allegations in the counterclaim, as well as all reasonable inferences to be drawn
from them. Pareto v. F.D.I.C., 139 F.3d 696, 699 (9th Cir. 1998). The counterclaim must
be read in the light most favorable to the nonmoving party. Sprewell v. Golden State
Warriors, 266 F.3d 979, 988 (9th Cir. 2001); Parks Sch. of Bus., Inc. v. Symington, 51
F.3d 1480, 1484 (9th Cir. 1995). However, “[i]n keeping with these principles a court
considering a motion to dismiss can choose to begin by identifying pleadings that,
because they are no more than conclusions, are not entitled to the assumption of truth.
While legal conclusions can provide the framework of a counterclaim, they must be
supported by factual allegations.” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1950
(2009); Moss v. United States Secret Service, 572 F.3d 962, 969 (9th Cir. 2009) (“[F]or a
complaint to survive a motion to dismiss, the non-conclusory ‘factual content,’ and
reasonable inferences from that content, must be plausibly suggestive of a claim entitling
the plaintiff to relief.”) (citing Twombly and Iqbal); Sprewell, 266 F.3d at 988; W.
Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981). Ultimately, “[d]etermining
whether a complaint [or counterclaim] states a plausible claim for relief will . . . be a
context-specific task that requires the reviewing court to draw on its judicial experience
and common sense.” Iqbal, 129 S.Ct. at 1950.
Furthermore, unless a court converts a Rule 12(b)(6) motion into a motion for
summary judgment, a court cannot consider material outside of the complaint or
counterclaim (e.g., facts presented in briefs, affidavits, or discovery materials). In re
American Cont’l Corp./Lincoln Sav. & Loan Sec. Litig., 102 F.3d 1524, 1537 (9th Cir.
1996), rev’d on other grounds sub nom Lexecon, Inc. v. Milberg Weiss Bershad Hynes &
Lerach, 523 U.S. 26 (1998). A court may, however, consider exhibits submitted with or
alleged in the counterclaim and matters that may be judicially noticed pursuant to Federal
Rule of Evidence 201. In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 986 (9th Cir.
1999); Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001).
For all of these reasons, it is only under extraordinary circumstances that dismissal
is proper under Rule 12(b)(6). United States v. City of Redwood City, 640 F.2d 963, 966
(9th Cir. 1981).

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:13-cv-02079-CAS(AJWx)

Date

June 3, 2014

Title

JARED ANDRESEN, ET AL. V. INTERNATIONAL PAPER
COMPANY, ET AL.

As a general rule, leave to amend a complaint or counterclaim which has been
dismissed should be freely granted. Fed. R. Civ. P. 15(a). However, leave to amend may
be denied when “the court determines that the allegation of other facts consistent with the
challenged pleading could not possibly cure the deficiency.” Schreiber Distrib. Co. v.
Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986); see Lopez v. Smith, 203
F.3d 1122, 1127 (9th Cir. 2000).
B.

Fed. R. Civ. P. 9(b)

Federal Rule of Civil Procedure 9(b) requires that the circumstances constituting a
claim for fraud be pled with particularity. Federal Rule of Civil Procedure 9(b) applies
not just where a complaint specifically alleges fraud as an essential element of a claim,
but also where the claim is “grounded in fraud” or “[sounds] in fraud.” Vess v. CibaGeigy Corp. U.S.A., 317 F.3d 1097, 1103–04 (9th Cir. 2003). A claim is said to be
“grounded in fraud” or “‘sounds in fraud’” where a plaintiff alleges that defendant
engaged in fraudulent conduct and relies on solely on that conduct to prove a claim. Id.
“In that event, . . . the pleading of that claim as a whole must satisfy the particularity
requirement of [Fed. R. Civ. P.] 9(b).” Id. However, where a plaintiff alleges claims
grounded in fraudulent and non fraudulent conduct, only the allegations of fraud are
subject to heightened pleading requirements. Id. at 1104.
A pleading is sufficient under Fed. R. Civ. P. 9(b) if it “[identifies] the
circumstances constituting fraud so that the defendant can prepare an adequate answer
from the allegations.” Walling v. Beverly Enters., 476 F.2d 393, 397 (9th Cir. 1973).
This requires that a false statement must be alleged, and that “circumstances indicating
falseness” must be set forth. In re GlenFed Sec. Litig., 42 F.3d 1541, 1548 (9th Cir.
1994). Thus, Rule 9(b) requires a plaintiff to “identify the ‘who, what, when, where and
how of the misconduct charged,’ as well as ‘what is false or misleading about [the
purportedly fraudulent conduct], and why it is false.” Cafasso, ex rel. United States v.
Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1055 (9th Cir. 2011) (quoting Ebeid ex rel.
United States v. Lungwitz, 616 F.3d 993, 998 (9th Cir. 2010)).
IV.

DISCUSSION

The Court first addresses Bekiarian’s arguments that are applicable to IP’s claims
as a group, and then considers those that are directed at individual claims.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:13-cv-02079-CAS(AJWx)

Title

JARED ANDRESEN, ET AL. V. INTERNATIONAL PAPER
COMPANY, ET AL.
A.

Date

June 3, 2014

Bekiarian’s Arguments Applicable to all of IP’s Claims

Bekiarian first argues that all of IP’s claims should be dismissed because IP does
not allege that any liability for paid vacation has actually accrued. According to
Bekiarian, IP cannot assert claims based on accrued liability for vacation pay without first
alleging that such liability exists. This argument fails. In its answer, IP denies that any
paid vacation liability has accrued as to plaintiffs. Answer ¶ 19. The crux of IP’s claims
is that, to the extent that any liability for vacation pay has accrued, Bekiarian is
responsible for that accrual. Rule 8 of the Federal Rules of Civil Procedure expressly
permits pleading in the alternative in this fashion. See Fed. R. Civ. P. 8(d)(3) (“A party
may state as many separate claims or defenses as it has, regardless of consistency.”); cf.
Standfacts Credit Servs. v. Experian Information Solutions, Inc., 405 F. Supp. 2d 1141,
1150 (C.D. Cal. 2005) (“[A] pleading should not be construed as an admission against
another alternative or inconsistent pleading in the same case.”).2
Next, Bekiarian argues that IP lacks standing under Article III of the United States
Constitution to sue for injuries allegedly incurred as a result of Bekiarian’s conduct prior
to IP’s acquisition of Temple-Inland. In this regard, Bekiarian contends that IP has
denied in its answer that it is a successor employer of Crockett or Temple-Inland, and is
therefore estopped from asserting it has suffered an injury in fact based on conduct that
occurred while Bekiarian was employed by those entities. This argument lacks merit for
two reasons. First, a “credible threat of harm” is sufficient to satisfy the injury-in-fact
requirement for Article III standing. Krottner v. Starbucks Corp., 628 F.3d 1139, 1143
(9th Cir. 2010). Here, it is plain that IP is now facing a lawsuit by plaintiffs, alleging that
IP is liable for accrued vacation pay, including pay that accrued prior to IP’s acquisition
of Temple-Inland. See SAC ¶¶ 39-62. Thus, IP is facing a threat of economic harm
stemming from the possibility that plaintiffs will prevail on their claims for accrued paid
vacation. See Krottner, 628 F.3d at 1143. Second, as stated above, IP’s claims are
properly construed as pleading in the alternative, by alleging that, to the extent that IP is
found liable as a successor to Crockett or Temple-Inland for accrued vacation pay,
Bekiarian is responsible for that liability. IP need not admit that it is a successor to
Crockett or Temple-Inland in order to assert claims based on the possibility that it could

2

Bekiarian also argues that IP’s claims are implausible based on its denial that it as
any obligation to provide plaintiffs with paid vacation. This argument fails for the same
reason stated above, namely, that Rule 8 permits IP to plead in the alternative.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:13-cv-02079-CAS(AJWx)

Date

June 3, 2014

Title

JARED ANDRESEN, ET AL. V. INTERNATIONAL PAPER
COMPANY, ET AL.

be deemed a successor at some point in this litigation. See Standfacts Credit Servs., 405
F. Supp. 2d at 1150.
Bekiarian also argues that IP’s claims should be dismissed because, under
California law, there is no personal liability for failure to pay wages. This argument fails.
California law recognizes that an employer may assert claims against an employee “when
the employee takes action which is inimical to the best interests of the employer.” See
Stokes v. Dole Nut Co., 41 Cal. App. 4th 285, 295 (1995).3 Here, IP’s claims do not seek
to hold Bekiarian liable for failure to pay wages. Rather, they seek indemnity for
Bekiarian’s own alleged tortious conduct, done to the detriment of IP—exposing IP to
liability for vacation pay, and then concealing that liability from IP. This theory of
liability is available under California law. See id.
Bekiarian next argues that IP’s claims “impermissibly seek[] to thrust an
employer’s cost of doing business upon an employee,” in violation of California law.
Specifically, Bekiarian argues that IP’s claims violate California Labor Code section 221,
which provides that “[i]t shall be unlawful for any employer to collect or receive from an
employee any part of wages theretofore paid by said employer to said employee.” Cal.
Labor Code § 221. This argument fails for substantially the same reason set forth in the
previous paragraph; California law recognizes that an employer may seek to hold an
employee liable for his or her own tortious conduct. That is what IP’s claims seek to do
in the present case.
Finally, Bekiarian argues that IP is barred from seeking damages against him
because, pursuant to California Labor Code section 2802, IP would be required to
indemnify him for any damages awarded against him. The Court disagrees. Labor Code
section 2802 provides, in relevant part, that an employer “shall indemnify his or her
employee for all necessary expenditures or losses incurred by the employee in direct
consequence of the discharge of his or her duties.” Cal. Labor Code § 2802. This section
does not require an employer to indemnify an employee for that employee’s tortious

3

The rule cited by plaintiff is inapplicable here, but rather applies to situations in
which an employee brings an action against an employer for unpaid wages, and seeks to
hold an agent of the employer personally liable for the unpaid wages. See, e.g., Reynolds
v. Bement, 36 Cal. 4th 1075, 1087 (2005), abrogated on other grounds by Martinez v.
Combs, 49 Cal. 4th 35 (2010).
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:13-cv-02079-CAS(AJWx)

Date

June 3, 2014

Title

JARED ANDRESEN, ET AL. V. INTERNATIONAL PAPER
COMPANY, ET AL.

conduct toward the employer. See Exec. Sec. Mgmt. v. Dahl, 830 F. Supp. 2d 870, 882
(C.D. Cal. 2011) (explaining that claims involving “alleged conduct outside the scope of
[an employee’s] duties, such as breach of fiduciary duty” do not come within the scope of
section 2802). Here, as set forth above, IP seeks to hold Bekiarian liable for alleged
tortious conduct committed toward IP. Labor Code section 2802 is inapplicable to such
claims. See Dahl, 830 F. Supp. 2d at 882.
B.

Bekiarian’s Claim-Specific Arguments
1.

IP’s claim for intentional misrepresentation

To maintain a claim for intentional misrepresentation, a plaintiff must allege: (1) a
false representation as to a material fact; (2) knowledge of its falsity; (3) intent to
defraud; (4) actual and justifiable reliance; and (5) resulting damages. E.g., Do Sung
Uhm v. Humana, Inc., 620 F.3d 1134, 1157 (9th Cir. 2010); Glen Holly Entm’t, Inc. v.
Tektronix, Inc., 100 F. Supp. 2d 1086, 1093 (C.D. Cal. 1999). In support of this claim, IP
alleges that Bekiarian knowingly made false statements to Crockett, Temple-Inland, and
IP that no paid vacation accrual liability existed as to any sales representatives or himself.
Countercl. ¶ 37. IP further alleges that it relied on these representations, and as a result,
has been damaged because it was deprived of the opportunity to “manage or account” for
any of this alleged accrued liability. Id. ¶¶ 37-38. This claim also incorporates by
reference IP’s allegations that Bekiarian (1) instructed various human resources personnel
not to record any paid vacation for sales representatives, and (2) never disclosed this
alleged accrual liability at the time that IP acquired Temple-Inland. See id. ¶¶ 5-20.
Bekiarian contends that this claim is not pled with the particularity required by
Rule 9(b) because it does not specify the “who, what, when, where, and how of the
misconduct charged.” Mot. Dismiss at 8. The Court finds this argument unpersuasive.
As discussed above, a pleading is sufficient under Fed. R. Civ. P. 9(b) if it “[identifies]
the circumstances constituting fraud so that the defendant can prepare an adequate answer
from the allegations.” Walling, 476 F.2d at 397. Moreover, although the “who, what,
when, where, and how” standard evokes the level of detail required by Rule 9(b), it does
not articulate a rigid checklist. See U.S. ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 190
(5th Cir. 2009) (“[T]he ‘time, place, contents, and identity’ standard is not a straitjacket
for Rule 9(b). Rather, the rule is context specific and flexible . . . .”). Because the
allegations summarized above identify the substance of the misstatements that form the
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

2:13-cv-02079-CAS(AJWx)

Date

June 3, 2014

Title

JARED ANDRESEN, ET AL. V. INTERNATIONAL PAPER
COMPANY, ET AL.

basis for plaintiff’s fraud claim, the Court concludes that the claim is pled with sufficient
particularity.
2.

Manager’s privilege

Bekiarian argues that IP’s claims for gross negligence and intentional
misrepresentation are barred by the rule that “managers . . . cannot be held liable for
actions taken in their managerial capacity.” Mot. Dismiss at 9-10. According to
Bekiarian, he cannot be held liable for these torts because all of the “alleged misconduct
is based on [his] conduct as a manager.” Id. Under California law, the manager’s
privilege acts primarily as a shield to protect a manager from individual liability to third
parties for certain torts. For example, it operates as a shield against individual liability
arising from personnel decisions, e.g., Hernandez v. Ignite Restaurant Group, 917 F.
Supp. 2d 1086, 1090 (E.D. Cal. 2013), or from liability for intentional interference with
contractual relations resulting from a corporation’s breach of a contract on the advice of
the manager, e.g., Halvorsen v. Aramark Uniform Servs., 65 Cal. App. 4th 1383, 1392
(1998). No authority supports Bekiarian’s argument that the manager’s privilege shields
a manager from liability as to the manager’s own principal. Thus, the Court finds that the
manager’s privilege does not bar IP’s claims for gross negligence or intentional
misrepresentation.
V.

CONCLUSION

In accordance with the foregoing, the Court hereby DENIES Bekiarian’s motion to
dismiss.
IT IS SO ORDERED.
00
Initials of Preparer

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CMJ

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