Jared Andresen et al v. International Paper Company et al

Filing 65

MINUTES OF Motion Hearing held before Judge Christina A. Snyder: Defendants International Paper Company, d/b/a Container the Americas' ("IP") Motion to Dismiss Yeghia Bekiarian's Reply Counterclaim 61 is GRANTED IN PART and DEN IED IN PART. Specifically, IP's motion is GRANTED insofar as it is grounded on California Labor Code Section 2802 and IP's corporate bylaws. IP's motion is DENIED insofar as it is grounded on California Corporations Code Section 317. Bekiarian shall have leave to file an amended reply counterclaim no later than 9/18/2014 that corrects the deficiencies identified herein. Court Reporter: Laura Elias. (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

‘O’

August 11, 2014

CHRISTINA A. SNYDER

Catherine Jeang
Deputy Clerk

Laura Elias
Court Reporter / Recorder

N/A
Tape No.

Attorneys Present for Plaintiffs:

Attorneys Present for Defendants:

Douglas Silverstein

Amy Gillinger
Marcus Torrano

Proceedings:

I.

DEFENDANT’S MOTION TO DISMISS PLAINTIFF YEGHIA
BEKIARIAN’S COUNTERCLAIM IN REPLY (Dkt. #61, filed
July 14, 2014)

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 § 227.3,1 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 June 24, 2014,
in response to IP’s counterclaims, Bekiarian filed an answer and counterclaim in reply.
Dkt. #61. The reply counterclaim asserts a single claim for indemnification based on
Labor Code § 2802, California Corporations Code § 317, and IP’s corporate bylaws.
Reply Countercl. ¶¶ 112-18.

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
Date

‘O’

Case No.

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

August 11, 2014

Title

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

On July 14, 2014, IP filed a motion to dismiss the reply counterclaim pursuant to
Federal Rule of Civil Procedure 12(b)(6). Dkt. #61. Bekiarian filed an opposition on
July 21, 2014, dkt. #63, and IP replied on May 26, 2014, dkt. #64. The Court held a
hearing on August 11, 2014. After considering the parties’ arguments, the Court finds
and concludes as follows.
II.

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. Specifically, IP alleges 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. Countercl. ¶¶ 5-20.
In the reply counterclaim, Bekiarian alleges that, to the extent that IP has incurred
any liability as a result of Bekiarian’s actions, this liability was incurred as a result of
Bekiarian carrying out his duties as an employee of IP. Reply Countercl. ¶¶ 114-15.
III.

LEGAL STANDARD

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.
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 pleading, as well as all reasonable inferences to be drawn from
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Date

‘O’

Case No.

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

August 11, 2014

Title

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

them. Pareto v. F.D.I.C., 139 F.3d 696, 699 (9th Cir. 1998). The pleading 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 [pleading], 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 [pleading] 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
[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 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).
As a general rule, leave to amend 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
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Date

‘O’

Case No.

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

August 11, 2014

Title

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

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).
IV.

DISCUSSION

As stated above, Bekiarian alleges that, to the extent that IP has incurred any
liability to plaintiffs as a result of his actions, this liability was incurred as a result of
Bekiarian carrying out his duties as an employee of IP. Bekiarian’s claim for relief is
grounded on Labor Code § 2802, California Corporations Code § 317, and IP’s corporate
bylaws. The Court addresses each ground in turn.
A.

Indemnification Under Labor Code § 2802

Bekiarian first seeks indemnification pursuant to Labor Code § 2802, which
provides, in relevant part:
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, or of his or her obedience to the directions of the employer, even
though unlawful, unless the employee, at the time of obeying the directions,
believed them to be unlawful.
Cal. Labor Code § 2802. To the extent that the reply counterclaim is grounded on
Section 2802, it fails to state a claim. In this regard, the California Court of Appeal held
in Nicholas Laboratories, LLC v. Chen, 199 Cal. App. 4th 1240, 1251 (2011), that the
California Legislature did not “intend[] to depart from the usual meaning of the word
‘indemnify’ to address ‘first party’ disputes between employers and employees.”; see also
Warner v. Sims Metal Mgmt., 2013 WL 4777314, at *2 (N.D. Cal. Sept. 6, 2013) (“An
employee, however, cannot seek indemnification for the costs of defending himself
against a lawsuit by his employer under Section 2802”). Thus, Section 2802 is
inapplicable to the present case because Bekiarian is engaged in litigation against his
employer, and not a third party. The Court accordingly concludes that the reply
counterclaim fails to state a claim based on Section 2802.

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Date

‘O’

Case No.

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

August 11, 2014

Title

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

At oral argument, Bekiarian noted that Chen and Warner addressed the employer’s
duty to reimburse an employee for expenses incurred in defending against an action by
his employer, and not to indemnification for other liability, such as the amount of the
judgment itself. This argument fails. Bekiarian is correct that Chen focused on the
applicability of Section 2802 to attorney’s fees and expenses. However, the court’s
conclusion, namely, that Section 2802 does not apply to attorney’s fees incurred by an
employee while defending against a suit by his employer, was grounded on an analysis of
the statutory language of Section 2802 and fundamental principles of California law. The
result of that analysis was that the California Legislature did not “intend[] to depart from
the usual meaning of the word ‘indemnify’ to address ‘first party’ disputes between
employers and employees.” Chen, 199 Cal. App. 4th at 1251. Thus, the holding of Chen,
as well as Warner, is fully applicable to the present case, where the question presented is
whether Section 2802 applies in the context of litigation between an employer and an
employee.
B.

Indemnification Under California Corporations Code § 317

Bekiarian’s claim for indemnity is also grounded on California Corporations Code
§ 317, which provides, in relevant part:
A corporation shall have power to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending, or completed
action by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that the person is or was an agent of the corporation, against
expenses actually and reasonably incurred by that person in connection with the
defense or settlement of the action if the person acted in good faith, in a manner
the person believed to be in the best interests of the corporation and its
shareholders.
To the extent that an agent of a corporation has been successful on the merits
in defense of any proceeding referred to in [the previous paragraph] or in
defense of any claim, issue, or matter therein, the agent shall be indemnified
against expenses actually and reasonably incurred by the agent in connection
therewith.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Date

‘O’

Case No.

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

August 11, 2014

Title

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

Cal. Corp. Code § 317(c)-(d). IP argues that the reply counterclaim fails to state a claim
under Corporations Code § 317 because this section “prohibits indemnification in cases
of bad faith or intentional wrongdoing.” Mot. Dismiss at 3 (quoting Plate v. SunDiamond Growers, 225 Cal. App. 3d 1115, 1124 (1990)). The Court finds this argument
unpersuasive. First, Section 317 is not “limited in application to third party lawsuits.”
Wilshire-Doheny Assocs. Ltd. v. Shapiro, 83 Cal. App. 4th 1380, 1390 (2000). Thus,
unlike in the context of Labor Code § 2802, the fact that Bekiarian was “sued by the
corporation [as opposed to a third party] is not a bar to recovery.” See id. Next, IP is
correct that, to the extent that it is able to prove that Bekiarian engaged in intentional,
tortious misconduct towards IP, he is not subject to indemnification. See Plate, 225 Cal.
App. 3d at 1124. However, if Bekiarian is “successful on the merits” in this action, then
he may be entitled to indemnification “against expenses actually and reasonably incurred
by [him] in connection therewith.” See Cal. Corp. Code § 317(d); see also WilshireDoheny Assocs. Ltd. v. Shapiro, 83 Cal. App. 4th 1380, 1390-91 (2000). Accordingly,
the Court finds that the reply counterclaim states a claim under Corporations Code § 317.
C.

Indemnification Under IP’s Corporate Bylaws

Bekiarian also seeks indemnification under IP’s corporate bylaws. IP argues that
the reply counterclaim fails to state a claim for indemnification based on the bylaws
because the reply counterclaim does not identify what provisions of the bylaws give rise
to his claimed right to indemnification. The Court agrees. The reply counterclaim
provides no information about the terms of the bylaws, and the bylaws are not appended
to the reply counterclaim. Without additional allegations regarding the terms of the
bylaws, the reply counterclaim’s reference to the bylaws amounts to mere “labels and
conclusions,” which are not sufficient to give rise to a plausible claim for relief. See
Twombly, 550 U.S. at 555. Accordingly, the Court concludes that the reply counterclaim
fails to state a claim for indemnification based on IP’s corporate bylaws.
V.

CONCLUSION

In accordance with the foregoing, IP’s motion to dismiss is GRANTED IN PART
and DENIED IN PART. Specifically, IP’s motion is GRANTED insofar as it is
grounded on California Labor Code § 2802 and IP’s corporate bylaws. IP’s motion is
DENIED insofar as it is grounded on California Corporations Code § 317. Bekiarian
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Date

‘O’

Case No.

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

August 11, 2014

Title

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

shall have leave to file an amended reply counterclaim no later than September 8, 2014,
that corrects the deficiencies identified herein.
IT IS SO ORDERED.
00
Initials of Preparer

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06

CMJ

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