Terry et al v. Register Tapes Unlimited, Inc. et al

Filing 156

ORDER signed by Senior Judge William B. Shubb on 3/3/2020 GRANTING IN PART AND DENYING IN PART defendant's 114 Motion for Summary Judgment. (Zignago, K.)

1
2
3
4
5
6
7
8

UNITED STATES DISTRICT COURT

9

EASTERN DISTRICT OF CALIFORNIA

10

----oo0oo----

11
12
13

ROBERT TERRY; CREST CORPORATION;
and CREST IRREVOCABLE BUSINESS
TRUST DBA FREEDOM MEDIA,
Plaintiffs,

14
15
16
17
18

No. 2:16-CV-00806 WBS AC

MEMORANDUM AND ORDER RE:
DEFENDANTS’ MOTION FOR
SUMMARY JUDGMENT

v.
REGISTER TAPES UNLIMITED, INC.;
REGISTER TAPES UNLIMITED, L.P.;
EDWARD DOUGLAS ENDSLEY, and DOES
1 through 50, inclusive,
Defendants.

19
20
21
22
23
24
25
26
27

----oo0oo---Plaintiffs Robert Terry, Crest Corporation, and Crest
Irrevocable Business Trust DBA Freedom Media brought this breach
of contract and disability discrimination, retaliation, and
harassment case against defendants Register Tapes Unlimited, Inc.
and Register Tapes Unlimited, L.P., and Edward Endsley, president
of Register Tapes Unlimited (collectively “RTUI”).
court is defendants’ motion for summary judgment.

28
1

Before the
(Docket No.

1

114.)

2

I. Factual and Procedural Background

3

This case concerns RTUI’s register tape advertising

4

business.

Register tape advertising involves selling advertising

5

space on the back of receipt tapes at grocery stores.

6

Statement of Undisputed Facts (“SUF”) ¶ 6 (Docket No. 117-3.))

7

RTUI enters into agreements with grocery store chains to provide

8

register tape with color advertising on the reverse side and then

9

enters into agreements with local businesses to advertise on the

(Pls.’

10

grocery receipt tape at a specific grocery store or stores.

(Id.

11

¶ 6.)

12

businesses who are interested in advertising on the register tape

13

and to sell advertising contracts to those businesses.

14

7.)

RTUI uses sales representatives to identify local

15

Plaintiff Terry was such a salesperson.

(Id. ¶

(Id. ¶ 9.)

16

Terry was also the owner of Freedom Media (“Freedom”).

17

9.)

18

tape advertising in the area.

19

register tape advertising to local businesses for Freedom.

20

¶¶ 10-11.)

21

Corporation.

22

and sales commissions for Freedom’s contracts were thereafter

23

paid to Crest.

24
25

(Id. ¶

Freedom contracted with companies like RTUI to sell register
(Id. ¶ 9-10.)

Terry then sold
(Id.

At the end of 2000, Terry incorporated Crest
(Id. ¶ 25.)

Crest took over Freedom’s business,

(Id.)

A. Safeway Agreements
In October 1999, Freedom and RTUI entered into an

26

agreement (“1999 Freedom-RTUI Agreement”) that provided that if,

27

with Freedom’s assistance, RTUI secured a register tape contract

28

with Safeway, Freedom would receive a portion of the gross
2

1

profits as that term was defined and calculated in the agreement.

2

(Id. ¶ 18.)

3

in obtaining an agreement with Safeway to provide it with

4

register tape.

5

entitled to a ten-percent share of the “gross profits” realized.

6

(Id.)

7

Under this contract, Freedom agreed to assist RTUI

In exchange for this assistance, Freedom would be

In May 2000, RTUI signed a regional agreement with

8

Safeway (“the 2000 Safeway-RTUI Agreement”) pursuant to which

9

RTUI would provide register tape to Safeway stores in the Seattle

10

area, as well as the Baltimore/Washington, D.C./Northern Virginia

11

metroplex.

12

would manage register advertising sales in the Seattle area.

13

(Id. ¶ 23.)

14

office space for Freedom in the area.

15

RTUI Contract expired in 2003 and subsequent negotiations for a

16

new agreement were unsuccessful.

17

(Id. ¶ 22.)

RTUI and Freedom agreed that Freedom

Terry subsequently moved to Seattle and acquired
(Id.)

The 2000 Safeway-

(Id. ¶ 31, 32.)

From December 1, 2003 to September 2009, RTUI had no

18

contractual right to place ads on Safeway register tape and did

19

not provide any printed or blank register tape to Safeway.

20

¶ 33.)

21

make any sales on behalf of RTUI or perform any work for RTUI

22

until RTUI entered into a contract with Kroger around April 2004.

23

(Id. ¶ 34.)

24

(Id.

After RTUI lost the Safeway business, plaintiffs did not

In 2009, Safeway advised RTUI that Safeway had

25

cancelled its agreement with RTUI’s competitor.

26

September 14, 2009, RTUI and Safeway entered into a nationwide

27

agreement (the “2009 Safeway-RTUI Agreement”) to provide register

28

tape to Safeway stores and print third-party advertising on the
3

(Id. ¶ 47.)

On

1

tape.

2

2009 agreement and there were no discussions with Safeway about

3

the plaintiffs during negotiations.

4

the 2009 Safeway-RTUI Agreement was signed, RTUI notified all of

5

its sales agents, including plaintiffs, of the pending agreement

6

and advised that they could begin to solicit advertising for

7

placement on Safeway register tape.

8

Safeway signed the agreement, plaintiffs were assigned 45 Safeway

9

stores in the Sacramento area, to which Terry specifically

10

(Id. ¶ 48.)

Plaintiffs played no role in negotiating the

requested to be assigned.

11

(Id. ¶ 49.)

(Id. ¶ 50.)

Shortly before

After RTUI and

(Id. ¶ 51.)

In January 2011, Terry inquired for the first time into

12

whether he was entitled to a share of gross profits earned by

13

RTUI under the 2009 Safeway-RTUI Agreement, pursuant to the 1999

14

Freedom-RTUI Agreement.

15

(Id. ¶ 93.)

B. Terry’s Accident

16

In October 2010, Terry was involved in an automobile

17

accident in Alaska.

18

email to RTUI to provide notice of the accident.

19

Terry did not request any accommodation in his email and did not

20

file a workers’ compensation claim.

21

sales meeting in February 2011, Terry told Endsley that the

22

accident had affected his short-term memory and speech but that

23

it had “started getting better.”

24

(Id. ¶ 95.)

In February 2011, Terry sent an

(Id. ¶ 66.)

(Id. ¶ 65.)

At an annual

(Id. ¶ 67.)

In early 2011, RTUI contracted with Frank Mirahmadi, a

25

register tape salesperson, who would be reporting to Terry in the

26

Sacramento area.

27

Mirahmadi got in a disagreement about a specific account.

28

72.)

(Id. ¶ 71.)

In the summer of 2013, Terry and

Mirahmadi accused Terry of poaching the client.
4

(Id. ¶

(Id. ¶

1

72.)

2

divided the Sacramento area between Terry and Mirahmadi.

3

In September 2013, Endsley decided to separate them and
(Id.)

On September 24, 2013, after Endsley had carved a

4

separate area for Mirahmadi, RTUI received an email from Terry

5

attaching a letter from his physician stating that Terry was “in

6

need of accommodation for his work.”

7

stating that “the control and method of [Terry’s] work, including

8

the hours worked and how [he] work[s], is dependent on [Terry].

9

Any accommodations or adjustments in how [Terry] perform[s] the

(Id. ¶ 73.)

10

work must be made by [Terry].”

11

characterized RTUI’s answer as “denying accommodation.”

12

75.)

13

accommodations must be made by Terry because he controls the way

14

he performs the job.

15

structure with decreased responsibilities.”

16

continued to make sales for Crest.

17
18

(Id. ¶ 74.)

RTUI responded

Terry responded and
(Id. ¶

RTUI once again responded and reiterated that all

RTUI then offered “the same compensation
(Id. ¶ 76.)

Terry

(Id. at 77.)

C. Plaintiffs’ Suit
Plaintiff filed suit on January 16, 2016 and alleged

19

the following ten causes of action: (1) breach of the 1999

20

Freedom-RTUI Agreement; (2) breach of implied covenant of good

21

faith and fair dealing; (3) disability discrimination in

22

violation of California’s Fair Employment and Housing Act

23

(“FEHA”), Cal. Gov. Code § 12926; (4) failure to engage in the

24

interactive process in violation of FEHA; (5) failure to

25

accommodate in violation of FEHA; (6) retaliation in violation of

26

FEHA; (7) hostile work environment and harassment in violation of

27

FEHA; (8) failure to prevent discrimination in violation of FEHA;

28

(9) wrongful adverse action in violation of public policy; and
5

1

(10) failure to pay wages pursuant to the Labor Code.1

Count

2

Seven of the Second Amended Complaint (“SAC”) was dismissed

3

pursuant to the parties’ stipulation on June 21, 2017. (Docket

4

No. 43.)

5

remaining claims.

6

II. Legal Standard

Defendants now move for summary judgment on the

7

(Docket No. 114.)

Summary judgment is proper “if the movant shows that

8

there is no genuine dispute as to any material fact and the

9

movant is entitled to judgment as a matter of law.”

Fed. R. Civ.

10

P. 56(a).

A material fact is one that could affect the outcome

11

of the suit, and a genuine issue is one that could permit a

12

reasonable jury to enter a verdict in the non-moving party’s

13

favor.

14

(1986).

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248

15

The party moving for summary judgment bears the initial

16

burden of establishing the absence of a genuine issue of material

17

fact and can satisfy this burden by presenting evidence that

18

negates an essential element of the non-moving party’s case.

19

Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986).

20

Alternatively, the movant can demonstrate that the non-moving

21

party cannot provide evidence to support an essential element

22

upon which it will bear the burden of proof at trial. Id.

23

inferences drawn from the underlying facts must, however, be

24

viewed in the light most favorable to the party opposing the

25

motion.

26
27
28

Any

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475

Plaintiffs do not cite what section of the Labor Code
defendants allegedly violated, either in the Second Amended
Complaint or in their opposition to defendants’ motion for
summary judgment.
6
1

1

U.S. 574, 587 (1986).

2

III. Breach of Contract (Count One)

3

1.

Terry’s Claim for Breach of Contract

4

Defendant contends that Terry’s claim pursuant to the

5

1999 Safeway Agreement should be dismissed because he was not a

6

party to the agreement.

7

breach of contract requires plaintiff to show that a contract

8

between the parties existed.

9

Cal. App. 4th 1226, 1239 (2008).

The court agrees.

A cause of action for

CDF Firefighters v. Maldonado, 158
Terry signed the 1999 Safeway

10

Agreement as a “Trustee, for and on behalf of Freedom Media,” and

11

not in his individual capacity.

12

Agreement.”)

13

defendants cannot be liable to Terry for breach of this

14

agreement.

15

1174 (C.D. Cal. 2010).

16

summary judgment as to Terry’s claim.

(SAC Ex. E “1999 Safeway

Because Terry was not a party to the contract,

See Conder v. Home Sav. of Am., 680 F. Supp. 2d 1168,
Accordingly, the court will grant partial

17

2. Freedom’s Claim for Breach of Contract

18

“A cause of action for breach of contract requires

19

proof of the following elements: (1) existence of the contract;

20

(2) plaintiff's performance or excuse for nonperformance; (3)

21

defendant's breach; and (4) damages to plaintiff as a result of

22

the breach.”

23

Defendants contest only the breach and damages elements of this

24

claim.

CDF Firefighters, 158 Cal. App. 4th at 1239.

25

Defendants argue that the 1999 Freedom-RTUI Agreement

26

applied only to the 2000 RTUI-Safeway Agreement that expired in

27

2003.

28

profits under the 2009 Safeway Agreement and defendants therefore

If so, plaintiffs were not entitled to compensation for

7

1

did not breach the agreement.

2

Freedom “has initiated negotiations with Safeway . . . to enter

3

into a contract whereby R.T.U.I. will provide register tape to

4

Safeway in exchange for the rights for R.T.U.I. to sell third-

5

party advertising to be printed on the back of the register

6

receipt tapes.”

7

Freedom-RTUI Agreement thus refers to a specific agreement

8

already contemplated at the time of the drafting of the 1999

9

Freedom-RTUI Agreement -- and not all future contracts -- because

10

the 1999 Freedom-RTUI agreement goes on to state that “Freedom is

11

assisting R.T.U.I. in negotiations to obtain the aforementioned

12

agreement between Safeway and R.T.U.I.,” that “R.T.U.I. desires

13

to obtain the agreement,” and that “Freedom hereby agrees to

14

assist R.T.U.I. in obtaining the aforementioned agreement with

15

Safeway.”

16

Agreement entitled plaintiffs to compensation only under the 2000

17

RTUI-Safeway Agreement.

18

(SAC Ex. F.)

(Id.)

The agreement describes how

Defendants argue that the 1999

Under defendants’ view, the 1999 Freedom-RTUI

Plaintiffs in turn argue that the language in the

19

contract is ambiguous and therefore summary judgment is

20

inappropriate.

21

Freedom-RTUI Agreement committed RTUI to compensate Freedom for

22

any and all business RTUI did with Safeway thereafter.

23

Plaintiffs rely on the clause that states that RTUI “will pay

24

Freedom ten percent (10%) of gross profit for as long as R.T.U.I

25

or its successors conduct business with Safeway.”

26

Under plaintiffs’ view, the phrase “conduct business” does not

27

limit defendants’ contractual obligations to any particular

28

contract.

Specifically, Plaintiffs contend that the 1999

(SAC Ex. F.)

Instead, because defendants were in talks with Safeway
8

1

for an indeterminate time between the two Safeway contracts,

2

defendants have been conducting business with Safeway since the

3

2000 RTUI-Safeway Agreement.

4

interpretation, defendants’ failure to compensate plaintiff for

5

profits made under the 2009 Safeway Agreement breached the 1999

6

Freedom-RTUI Agreement.

7

Accordingly, under that

Under California law, “[a] contract must be so

8

interpreted as to give effect to the mutual intention of the

9

parties as it existed at the time of contracting, so far as the

10

same is ascertainable and lawful.”

11

language of a contract is to govern its interpretation, if the

12

language is clear and explicit, and does not involve an

13

absurdity.”

14

to be ascertained from the writing alone, if possible.”

15

1639.

16

give effect to every part, if reasonably practicable, each clause

17

helping to interpret the other.”

18

Id. at § 1638.

Cal. Civ. Code § 1636.

“The

“[T]he intention of the parties is
Id. at §

“The whole of a contract is to be taken together, so as to

Id. at § 1641.

“The Court's determination of whether an ambiguity

19

exists is a question of law.”

Centigram Argentina, S.A. v.

20

Centigram Inc., 60 F. Supp. 2d 1003, 1007 (N.D. Cal. 1999)

21

(citing WYDA Assocs. v. Merner, 42 Cal. App. 4th 1702, 1710

22

(1996).

23

language of a contract may be made parole evidence is admissible

24

to aid in interpreting the agreement.”

25

App. 4th at 1710; see also Meridian Project Sys., Inc. v. Hardin

26

Const. Co., LLC, 426 F. Supp. 2d 1101, 1109 (E.D. Cal. 2006).

27

“If there is no material conflict over extrinsic evidence, the

28

court may interpret an ambiguous term as a matter of law.”

“[W]hen two equally plausible interpretations of the

9

WYDA Assocs., 42 Cal.

Best

1

Buy Stores, L.P. v. Manteca Lifestyle Ctr., LLC, 859 F. Supp. 2d

2

1138, 1147 (E.D. Cal. 2012) (citing Lonely Maiden Prods., LLC v.

3

GoldenTree Asset Mgmt., LP, 201 Cal. App. 4th 368, 377 (2d Dist.

4

2011)).

5

The court finds the language in the 1999 Freedom-RTUI

6

Agreement to be unambiguous.

First, the circumstances that the

7

1999 Freedom-RTUI Agreement clearly describes refer only to a

8

previously contemplated contract with Safeway, and not any future

9

contracts.

The 1999 Freedom-RTUI Agreement describes how

10

“Freedom has initiated negotiations with Safeway” specifically to

11

obtain “a contract whereby R.T.U.I. will provide register tape.”

12

(SAC Ex. F.)

13

purpose of the 1999 Freedom-RTUI Agreement: “R.T.U.I. desires to

14

obtain the agreement [with Safeway] and have Freedom assist in

15

the negotiating an agreement [with Safeway] on behalf of

16

R.T.U.I.”

17

Agreement, Freedom “agree[d] to assist R.T.U.I. in obtaining the

18

aforementioned agreement [with Safeway].”

19

information memorialized in the agreement, and Freedom’s

20

obligations under the agreement, refer only to a previously

21

contemplated contract for register tape.

22

The 1999 Freedom-RTUI Agreement describes the

(Id.)

As a result, under the 1999 Freedom-RTUI

(Id.)

The background

Second, because Freedom’s only obligation under this

23

agreement is to negotiate a previously contemplated contract, it

24

is unreasonable to interpret the commissions clause to entitle

25

Freedom to payment in perpetuity.

26

if it is “reasonably susceptible” to multiple reasonable

27

interpretations.

28

F.2d 866, 871 (9th Cir. 1979).

A contract is ambiguous only

Brobeck, Phleger & Harrison v. Telex Corp., 602
Plaintiffs’ request for the
10

1

court to read the contract to entitle Freedom to indefinite

2

payments regardless of the value, length, or content of the

3

contract negotiated in 1999 by Freedom, or despite Freedom’s lack

4

of participation in future Safeway contracts, is not reasonable.

5

Indeed, plaintiffs’ interpretation would grant plaintiff profits

6

that were clearly not contemplated by the parties in the 1999

7

Freedom-RTUI contract.

8

Freedom to assisting RTUI in obtaining a contract for “register

9

tape” only (SAC Ex. F), but plaintiffs seek “10% gross profit for

The 1999 Freedom-RTUI Agreement binds

10

register tape, Customer Information Center displays (‘CIC’),

11

shopping cart advertisements, and bench seating advertising at

12

Safeway stores” from other RTUI-Safeway contracts.

13

17(a).)

14

profit” to mean “profit after cost of tape and total paid

15

commissions,” and thus clearly contemplated profits for only

16

register tape and an agreement involving only register tape. (See

17

SAC Ex. F (emphasis added).)

18

(SAC ¶

The 1999 Freedom-RTUI Agreement, however, defined “gross

Finally, the phrase “as long as R.T.U.I. or its

19

successors conduct business” does not create ambiguity.

The

20

phrase is not part of a general clause.

21

modifies the previous paragraph wherein the parties again mention

22

a specific and previously contemplated contract with Safeway:

Instead, the phrase

23
24
25
26
27
28

Freedom hereby agrees to assist R.T.U.I. in
obtaining the aforementioned agreement with
Safeway. R.T.U.I. agrees to compensate Freedom
upon consummation of an agreement with Safeway in
exchange for the following covenants and fees:
R.T.U.I. or its successors will pay Freedom ten
percent (10%) of gross profit for as long as
R.T.U.I. or its successors conduct business with
Safeway, its subsidiaries, or any successor
11

1

company of Safeway for sales made by R.T.U.I . .
. .

2
3

(Id.)

Further, the 1999 Freedom-RTUI Agreement explicitly

4

conditions compensation on “consummation of an agreement with

5

Safeway” and, contrary to plaintiffs’ contention, does not

6

entitle Freedom to compensation for R.T.U.I.’s “communications

7

with Safeway” in the time between the two contracts.

8

Pls.’ Opp. Mot. Summ. J. at 23.)

(SAC Ex. F;

Plaintiffs’ only evidence suggesting that the 1999

9
10

Freedom-RTUI Agreement was to apply to all business with Safeway

11

thereafter is the lack of contact between RTUI and Safeway prior

12

to the 2000 RTUI-Safeway Agreement.

13

sole and important purpose of the Safeway Agreement was to

14

introduce Defendants to Safeway.”

15

23.)

16

to which the language is ‘reasonably susceptible,’ not to flatly

17

contradict the express terms of the agreement.”

18

4 Cal. App. 4th 1159, 1167 (1992).

19

Agreement does not compensate Freedom for introducing RTUI to

20

Safeway.

21

declares that the “covenants and fees” will be for the

22

“consummation of an agreement” after “Freedom . . . assist[s]

23

R.T.U.I. in obtaining” an agreement with Safeway for register

24

tape, for which Freedom “ha[d] [already] initiated negotiations”

25

at the time of the 1999 Freedom-RTUI Agreement.

26

Plaintiffs contend that “the

(Pls.’ Opp. Mot. Summ. J. at

But “parol evidence is admissible only to prove a meaning

Winet v. Price,

The 1999 Freedom-RTUI

Instead, the 1999 Freedom-RTUI Agreement explicitly

(SAC Ex. F.)

Indeed, plaintiffs’ conduct after the 1999 Freedom-RTUI

27

Agreement confirms that the agreement applied only to the

28

specific contract negotiated by Freedom on behalf of RTUI.
12

RTUI

1

notified all sales agents, including plaintiffs, of the pending

2

agreement with Safeway shortly before 2009 and advised that they

3

could solicit advertising for placement on Safeway register tape.

4

(Pls.’ SUF ¶ 50.)

5

plaintiff Crest was assigned about 45 Safeway stores in the

6

Sacramento area.

7

Crest be assigned to those stores.

8

not ask about gross profits until 2011 despite being fully aware

9

that defendants were selling register tape to Safeway since 2009.

After the 2009 Safeway Agreement was signed,

(Pls.’ SUF ¶ 51.)

Terry specifically requested
(Pls.’ SUF ¶ 51.)

Terry did

10

(Pls.’ SUF ¶ 93.)

The language of the contract, the

11

circumstances surrounding the creation of the contract, and

12

plaintiffs’ behavior after the parties entered into the contract

13

all support the conclusion that the 1999 Freedom-RTUI Agreement

14

applied only to the 2000 RTUI-Safeway Agreement, and not all

15

future business with Safeway.

16

to pay plaintiffs a share of profit under the 2009 Safeway

17

Agreement does not violate the 1999 Freedom-RTUI Agreement and

18

this claim fails as a matter of law.

19

grant summary judgment as to Count One.

Accordingly, defendants’ failure

The court will therefore

20
21
22

IV.

Breach of the Implied Duty of Good Faith and Fair Dealing
(Count Two)
“The covenant of good faith and fair dealing, implied

23

by law in every contract, exists merely to prevent one

24

contracting party from unfairly frustrating the other party's

25

right to receive the benefits of the agreement actually made.”

26

Guz v. Bechtel Nat’l, Inc., 24 Cal. 4th 317, 349 (2000).

27

the plaintiff's allegations of breach of the covenant of good

28

faith ‘do not go beyond the statement of a mere contract breach
13

“[I]f

1

and, relying on the same alleged acts, simply seek the same

2

damages or other relief already claimed in a companion contract

3

cause of action, they may be disregarded as superfluous as no

4

additional claim is actually stated.’”

5

Agrigenix, LLC, 345 F. Supp. 3d 1207, 1240 (E.D. Cal. 2018)

6

(citing Bionghi v. Metro. Water Dist., 70 Cal. App. 4th 1358,

7

1370 (2d Dist. 1999); Careau & Co., 222 Cal. App. 3d 1371, 1395

8

(2d Dist. 1990).

9

Deerpoint Grp., Inc. v.

Here, plaintiffs’ claim for breach of the implied duty

10

of good faith and fair dealing is superfluous.

11

alleged acts under each claim are the same.

12

of contract claim relies on defendants allegedly “failing to

13

provide Plaintiff with correct payment per the terms of the

14

contracts and by failing to provide Plaintiff with the necessary

15

documentation for him to ascertain the exact amount of . . .

16

underpayments.”

17

good faith and fair dealing similarly relies on defendant

18

“fail[ing] to provide Plaintiff with the necessary documentation

19

for him to ascertain the exact amount of . . . underpayments.”

20

(SAC ¶ 46.)

21

claims.

22

business with Safeway in the amount of $5,000,000.

23

43, 46, 48.)

24

duty of good faith and fair dealing, “do not go beyond the

25

statement of a mere contract breach.”

26

Supp. 3d at 1240.

27

judgment as to Count Two.

(SAC ¶ 41.)

First, the

Plaintiffs’ breach

The claim for breach of the duty of

Second, plaintiffs seek the same damages under both

Both claims allege loss of “percentages of profits” from
(SAC ¶¶ 41,

Plaintiffs’ allegations for breach of the implied

See Deerpoint, 345 F.

Accordingly, the court will grant summary

28
14

1

V. FEHA Claims (Counts Three, Four, Five, Six, and Eight)2

2

Plaintiff asserts six claims under California’s Fair

3

Employment and Housing Act (FEHA).

4

judgment on all claims and argue plaintiff Terry is not an

5

employee under the meaning of the statute.

6

Defendants move for summary

FEHA does not protect independent contractors.

S.G.

7

Borello & Sons, Inc. v. Dep’t. of Indus. Relations, 48 Cal. 3d

8

341, 359 (1989).

9

individual under the direction and control of an employer under

For the purposes of FEHA, an employee is “any

10

any appointment or contract of hire or apprenticeship, express or

11

implied, oral or written . . . .

12

independent contractor as defined in Labor Code Section 3353.”

13

Cal. Code Regs. tit. 2, §§ 7286.5(b) & 7286.5(b)(1); see also

14

Strother v. S. Cal. Permanente Med. Grp., 79 F.3d 859, 866 (9th

15

Cir. 1996).

16

independent contractor as “any person who renders service for a

17

specified recompense or a specified result, under the control of

18

his principal as to the result of his work only and not as to the

19

means by which such result is accomplished.”

20

3353.

21

Employee does not include an

Section 3353 of the Labor Code defines an

Cal. Labor Code §

In evaluating an employment relationship, “traditional

22

common law principles of agency and respondeat superior supply

23

the proper analytical framework under FEHA.”

24

Domino’s Pizza, LLC, 60 Cal. 4th 474, 499 (2014).

25

“courts consider the totality of the circumstances bearing on the

26
27
28

Patterson v.
In FEHA cases,

Terry is not claiming any violation of FEHA on behalf
of Plaintiffs Freedom and Crest. Because Freedom and Crest are
not parties to any remaining claim, the court will dismiss
Freedom and Crest from this action.
15
2

1

nature of the work relationship of the parties, with an emphasis

2

on the extent to which the defendant controls the plaintiff's

3

performance of employment duties.”

4

F. Supp. 2d 997, 1003 (E.D. Cal. 2013) (citing Hall v. Apartment

5

Inv. & Mgmt. Co., Civ. No. 08–03447, 2011 WL 940185, at *5 (N.D.

6

Cal. Feb. 18, 2011); Vernon v. State, 116 Cal. App. 4th 114, 124

7

(1st Dist. 2004)).

Rhodes v. Sutter Health, 949

8

Other factors to be taken into account include “payment

9

of salary or other employment benefits and Social Security taxes,

10

the ownership of the equipment necessary to performance of the

11

job, the location where the work is performed, the obligation of

12

the defendant to train the employee, the authority of the

13

defendant to hire, transfer, promote, discipline or discharge the

14

employee, the authority to establish work schedules and

15

assignments, the defendant’s discretion to determine the amount

16

of compensation earned by the employee, the skill required of the

17

work performed and the extent to which it is done under the

18

direction of a supervisor, whether the work is part of the

19

defendant’s regular business operations, the skill required in

20

the particular occupation, the duration of the relationship of

21

the parties, and the duration of the plaintiff's employment.”

22

Id. (quoting Vernon, 116 Cal. App. 4th at 125).

23

“Of these factors, the extent of the defendant’s right

24

to control the means and manner of the workers’ performance is

25

the most important.”

26

finding of the right to control employment requires . . . a

27

comprehensive and immediate level of “day-to-day” authority over

28

employment decisions.’”

Vernon, 116 Cal. App. 4th at 126.

“‘A

Doe I v. Wal–Mart Stores, Inc., 572 F.3d
16

1

677, 682 (9th Cir.2009) (quoting Vernon, 116 Cal. App. 4th at

2

127–28).

3

The court finds that there is an issue of material fact

4

as to whether or not Terry was RTUI’s employee.

Although Terry

5

was free to determine his schedule, breaks, and hours, and was

6

not subject to sale quotas (Pls.’ SUF ¶ 62), RTUI controlled the

7

product Terry could sell, the price that Terry could charge, for

8

whom Terry could sell ads, and where Terry could sell ads.

9

Although Terry was “authorized to sell any[]” kind of

10

advertisement, Terry sold only “what Doug [Endlsey] t[old] [him]

11

he want[ed] [him] to.”

12

determined the price salespeople could charge because salespeople

13

were required to follow RTUI’s national rate cards.

14

at 79:23-25.)

15

Court, 220 Cal. App. 3d 864, 876 (2d Dist. 1990) (finding that

16

plaintiff was an employee where “[defendant] determined what

17

would be delivered, when and to whom and what price would be

18

charged.”).

19

had the “authority to discharge” him.

20

4th at 125.

21

[Endsley] would fire them.”

22

RTUI determined where Terry could and could not sell ads.

23

the dispute with Mirahmadi, RTUI created a district for Mirahmadi

24

where Terry could no longer work.

25

RTUI’s control over Terry’s work suffices to establish an

26

employer-employee relationship is thus a question of fact.

27
28

(Terry Dep. at 41: 14-21.)

RTUI

(Krocak Dep.

Cf. Toyota Motor Sales U.S.A., Inc. v. Superior

RTUI also limited for whom Terry could sell ads and
See Vernon, 116 Cal. App.

“If somebody went to work for the competitor, Doug
(Terry Dep. at 111:9-11.)

(Pls.’ SUF ¶ 72.)

Further,
After

Whether

Moreover, although defendants emphasize that RTUI never
withheld taxes for Terry, never provided insurance, and never
17

1

reimbursed Terry for employment expenses (Pls.’ SUF ¶¶ 57-61),

2

those facts are insufficient for the court to grant summary

3

judgment.

4

to one of independent contractor by illegally requiring him to

5

assume burdens which the law imposes directly on the employer.”

6

Toyota, 220 Cal. App. 3d at 877.

7

legal consequences of an independent contractor status not a

8

means of proving it.”

9

[Terry] was an independent contractor in the first place who was

“An employer cannot change the status of an employee

Id.

These facts are “merely the

Instead, “[t]he issue here is whether

10

legally obligated to pay his own taxes.”

11

Ins. Sols., Inc., 38 F. Supp. 3d 1083, 1106 (N.D. Cal. 2014); cf.

12

Toyota, 220 Cal. App. 3d at 876 (finding that plaintiff providing

13

“his own car, expenses and insurance” is “at most” a “‘a

14

secondary element,’ and, without more, worthy of little weight”).

15

Hennighan v. Insphere

Finally, defendants emphasize that RTUI never paid

16

Terry directly, which “while not controlling, is at least strong

17

evidence that an employment relationship did not exist.”

18

116 Cal. App. 4th at 126.

19

defendants contend that RTUI “made all commission payments” to

20

Crest, plaintiffs argue that two to three years ago RTUI changed

21

the payee from Crest to Terry.

22

67:6-25.)

23

that an employer-employee relationship did not exist.

24

A.

But the record is inconclusive.

(Pls.’ SUF

Vernon,
While

¶ 53; Terry Dep. at

Accordingly, the court cannot at this stage determine

FEHA Disability Discrimination (Count Three)

25

“To establish a prima facie case of disability

26

discrimination, a plaintiff must show that: (1) she suffered from

27

a disability; (2) could perform the essential duties of the job

28

with or without reasonable accommodations, i.e., she was a
18

1

‘qualified individual’; and (3) was subjected to an adverse

2

employment action because of the disability.

3

Reynolds Tobacco Co., 819 F. Supp. 2d 923, 934 (E.D. Cal. 2011)

4

(quoting Brundage v. Hahn, 57 Cal. App. 4th 228, 236 (2d

5

Dist.1997)).

6

discrimination as a matter of law because Terry could not perform

7

the essential duties of the job.

8
9

McCarthy v. R.J.

Defendants argue that plaintiff cannot recover for

The court finds an issue of material fact as to Terry’s
ability to perform the essential duties of the job.

On the one

10

hand, by Terry’s own allegaations he suffers from impaired memory

11

and “processing speed,” “migraines,” “low energy,” “fatigue,” and

12

a “reduced ability to work for an extended period” of time.

13

¶ 28.)

14

for accommodation and after that accommodation was denied, Terry

15

“continued to make new sales and renewal sales in Alaska and to a

16

limited extent the Sacramento area stores that he retained.

17

also made sales and renewals for register tape advertising . . .

18

for placement on stores in Washington, Oregon and Idaho and

19

elsewhere.”

20

levels were declining (Pls.’ SUF ¶ 79), Terry was not subject to

21

any sales quotas, so the number of sales was not an essential

22

component of the job he was hired to perform.

23

court cannot conclude that plaintiff could not perform his job

24

“with or without accommodation” as a matter of law.

25

McCarthy, 819 F. Supp. 2d at 934.

26

defendants’ motion as to Count Three.

27
28

B.

(SAC

On the other, defendants concede that after Terry asked

(Pls.’ SUF ¶ 77.)

He

Further, although Terry’s sales

Accordingly, the

See

The court will therefore deny

Failure to Engage in Interactive Process (Count Four)
Under FEHA, “[o]nce an employer becomes aware of the
19

1

need for accommodation, that employer has a mandatory obligation

2

. . . to engage in an interactive process with the employee to

3

identify and implement appropriate reasonable accommodations.”

4

Ravel v. Hewlett-Packard Enter., Inc., 228 F. Supp. 3d 1086, 1097

5

(E.D. Cal. 2017) (quoting Humphrey v. Mem’l Hosps. Ass’n, 239

6

F.3d 1128, 1137 (9th Cir. 2001)).

7

requires communication and good-faith exploration of possible

8

accommodations between employers and individual employees, and

9

neither side can delay or obstruct the process.”

“The interactive process

Id.

10

“Employers, who fail to engage in the interactive process in good

11

faith, face liability for the remedies imposed by the statute if

12

a reasonable accommodation would have been possible.”

13

1137–38.

14

engaged in the interactive process with Terry.

15

Id. at

Defendants argue that, as a matter of law, defendants

The court disagrees and finds an issue of material

16

fact.

After Terry first requested accommodation, RTUI told Terry

17

that “[a]ny accommodations or adjustments in how [Terry]

18

perform[s] the work must be made by [Terry].”

19

After Terry took RTUI’s response as a denial of accommodation,

20

RTUI again responded stating that “any accommodation must come

21

from [Terry] because as an Independent contractor [Terry]

22

control[s]” how he performs his job.

23

also offered “the same compensation structure with decreased

24

responsibilities.”

25

to meet with Terry to discuss his situation.

26

RTUI’s offer to meet with Terry to further discuss the issue,

27

after clearly telling Terry that all accommodations must be made

28

by him, suffices as engagement is a question for the trier of

(Id.)

(Pls.’ SUF ¶ 74.)

(Pls.’ SUF ¶ 76.)

RTUI

In this second response, RTUI offered

20

(Id.)

Whether

1

fact.

Accordingly, the court will deny defendants’ motion as to

2

Count Four.

3

C.

4

Failure to Accommodate (Count Five)
“A reasonable accommodation is ‘a modification or

5

adjustment to the workplace that enables the employee to perform

6

the essential functions of the job held or desired.’”

7

819 F. Supp. 2d at 935.

8

reasonable accommodation available and that defendants did

9

accommodate Terry by “relieving Terry of some work volume” and by

McCarthy,

Defendants argue that there was no

10

hiring Mirahmadi to alleviate some of Terry’s workload.

11

Summ. J. at 45, 47.)

12

(Mot.

“An ‘employer cannot prevail on summary judgment on a

13

claim of failure to reasonably accommodate unless it establishes

14

through undisputed facts’ that ‘reasonable accommodation was

15

offered and refused,’ that ‘there simply was no vacant position

16

within the employer's organization for which the disabled

17

employee was qualified and which the disabled employee was

18

capable of performing with or without accommodation,’ or that

19

‘the employer did everything in its power to find a reasonable

20

accommodation, but the informal interactive process broke down

21

because the employee failed to engage in discussions in good

22

faith.’”

23

Inc., 642 F.3d 728, 743–44 (9th Cir. 2011) (quoting Jensen v.

24

Wells Fargo Bank, 85 Cal. App. 4th 245 (2000)).

25

Dep’t of Fair Employment & Hous. v. Lucent Techs.,

Defendants have not carried their burden.

First, the

26

hiring of Mirahmadi was never “offered” as an accommodation to

27

Terry.

28

Mirahmadi reached out to Finkelstein and because he had a good

By defendants’ admission, Mirahmadi was hired because

21

1

reputation as a salesperson.

(Pls.’ SUF ¶ 71.)

Defendants offer

2

no evidence suggesting that RTUI hired Mirahmadi in order to

3

accommodate Terry.

4

Further, defendants have not established how the lower-

5

volume accommodation was reasonable given Terry’s doctor’s report

6

of Terry’s “[m]ild orientation loss,” “sustained attention

7

impairments,” and “[m]oderate impairments in cognitive

8

proficiency.”

9

not offer a different position within the company.

(Boucher Decl. Ex. H at 2.)

Defendants also did
Finally,

10

defendants have failed to show that they did “everything in

11

[their] power to find a reasonable accommodation,” because they

12

have not offered any evidence to suggest that they considered

13

Terry’s proposed accommodation of hiring a personal assistant for

14

him.

15

as a matter of law, that, given Terry’s condition, RTUI’s

16

suggestions and actions constituted reasonable accommodations.

17

The court will therefore deny defendants’ motion as to Count

18

Five.

19

(See id. at 6.)

D.

20

Accordingly, the court cannot determine,

Retaliation (Count Six)
“Retaliation occurs when a plaintiff engages in

21

protected activity and suffers an adverse employment action as a

22

result.”

23

2d 1079, 1091 (N.D. Cal. 2008) (citing Cornwell v. Electra

24

Central Credit Union, 439 F.3d 1018, 1034–35 (9th Cir. 2006)).

25

California Government Code § 12940(h) makes it unlawful for “any

26

employer . . . to discharge, expel, or otherwise discriminate

27

against any person because the person has opposed any practices

28

forbidden under [FEHA].”

Lelaind v. City & Cty. of San Francisco, 576 F. Supp.

The phrase “otherwise discriminate”
22

1

encompasses “the same forms of adverse employment activity that

2

is actionable under section 12940(a)”, namely “‘ultimate

3

employment actions’ such as termination or demotion, but also the

4

entire spectrum of employment actions that are reasonably likely

5

to adversely and materially affect an employee's job performance

6

or opportunity for advancement in his or her career.”

7

v. L'Oreal USA, Inc., 36 Cal. 4th 1028, 1050-51, 1054 (2005).

8
9

Yanowitz

Here, plaintiffs offer evidence that suggests that RTUI
did retaliate against Terry.

William Krocak, RTUI’s Director of

10

Human Resources, stated that he may have had discussions with

11

RTUI about getting rid of Terry.

12

Krocak also agreed that RTUI’s suggestion for Terry to work less

13

constituted a demotion from Regional Sales Manager to Independent

14

Marketing Consultant.

15

divided Sacramento between Mirahmadi and Terry before Terry asked

16

for accommodations, since that division, Terry has been unable to

17

generate new business, has had his territory further diminished,

18

and has allegedly not been provided with an adequate sales force.

19

(Terry Decl. ¶¶ 13-16.)

20

fact as to whether defendants retaliated against plaintiff.

21

Accordingly, the court will deny defendants’ motion as to Count

22

Six.

23
24

E.

(Krocak Dep. at 194:14-20.)

(Id. at 179.)

Further, although RTUI

These facts create an issue of material

Failure to Prevent Discrimination and Retaliation
(Count Eight)
It goes without saying that anytime a defendant

25

discriminates it also by definition fails to prevent

26

discrimination.

27

claim for failure to prevent discrimination depends on the court

28

granting summary judgment as to plaintiffs’ claim for

Defendants’ only argument against plaintiffs’

23

1

discrimination (Count Three).

Because the court will not grant

2

summary judgment as to the discrimination claim, it will also

3

deny summary judgment as to Count Eight.

4

VI. Wrongful Action in Violation of Public Policy (Count Nine)

5

Defendants argue that Terry’s disability was not a

6

substantial factor in any alleged adverse employment action.

7

the reasons discussed under the retaliation claim, the court

8

finds an issue of material fact as to whether Terry’s disability

9

was a factor in RTUI’s subsequent adverse treatment of Terry.

10

Accordingly, the court will deny summary judgment as to Count

11

Nine.

12

V. Failure to Pay Wages (Count Ten)

13

For

Defendants argue only that Terry is not an employee and

14

is therefore not entitled to wage protections under the

15

California Labor Code.

16

test of an employment relationship is whether the person to whom

17

service is rendered has the right to control the manner and means

18

of accomplishing the result desired.”

19

v. Dep't of Indus. Relations, 48 Cal. 3d 341, 350 (1989).

20

also consider “(a) whether the one performing services is engaged

21

in a distinct occupation or business; (b) the kind of occupation,

22

with reference to whether, in the locality, the work is usually

23

done under the direction of the principal or by a specialist

24

without supervision; (c) the skill required in the particular

25

occupation; (d) whether the principal or the worker supplies the

26

instrumentalities, tools, and the place of work for the person

27

doing the work; (e) the length of time for which the services are

28

to be performed; (f) the method of payment, whether by the time

Like under FEHA claims, “[t]he principal

24

S. G. Borello & Sons, Inc.
Courts

1

or by the job; (g) whether or not the work is a part of the

2

regular business of the principal; and (h) whether or not the

3

parties believe they are creating the relationship of employer-

4

employee.”

5

2010) (citing Borello, 48 Cal. 3d 341, 351 (1989)).

6

Narayan v. EGL, Inc., 616 F.3d 895, 900 (9th Cir.

As discussed above, RTUI controlled the product Terry

7

could sell, the price that Terry could charge, for whom Terry

8

could work, and where Terry could sell ads.

9

factors, Terry was one of many salespersons, was subject to

As to the secondary

10

Endsley’s instructions, and had been working for defendant for

11

over 20 years.

12

as to whether Terry was an employee.

13

deny summary judgment as to Count Ten.

The evidence thus creates a triable issue of fact
Accordingly, the court will

14

IT IS THEREFORE ORDERED that defendants’ Motion for

15

Summary Judgment (Docket No. 114) be, and the same hereby is,

16

GRANTED as to Claims One and Two of the Second Amended Complaint.

17

IT IS FURTHER ORDERED that defendants’ Motion for

18

Summary Judgment be, and the same hereby is, DENIED as to Claims

19

Three, Four, Five, Six, Eight, Nine, and Ten of the Second

20

Amended Complaint.

21

Dated:

March 3, 2020

22
23
24
25
26
27
28
25