Mostajo et al v. Nationwide Mutual Insurance Company

Filing 56

ORDER signed by District Judge John A. Mendez on 3/21/2019 GRANTED IN PART and DENYING IN PART defendant's 49 Motion for Reconsideration and CERTIFIES its 11/14/2018 48 Order for interlocutory appeal. Plaintiffs' counsel ORDERED to pay sanctions in the amount of $400 to the Clerk of the Court within five days of the date of this Order. (Zignago, K.)

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1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 EASTERN DISTRICT OF CALIFORNIA 9 10 11 12 ANTHONY MARC MOSTAJO, and ELAINE QUEDENS, on behalf of themselves and all others similarly situated, Plaintiffs, 13 14 15 16 17 18 v. NATIONWIDE MUTUAL INSURANCE COMPANY, and Does 1 through 50, inclusive, No. 2:17-cv-00350-JAM-AC ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION FOR RECONSIDERATION AND CERTIFYING NOVEMBER 14, 2018 ORDER FOR INTERLOCUTORY APPEAL Defendants. Anthony Marc Mostajo and Elaine Quedens (“Plaintiffs”) bring 19 class claims against Nationwide Mutual Insurance Company 20 (“Defendant” or “Nationwide”), their former employer, for 21 Nationwide’s alleged failure to pay overtime and unused but 22 accrued vacation time to claims adjusters in California. 23 Second Am. Compl., ECF No. 23. 24 for partial summary judgment on a single question to determine 25 the validity of Nationwide’s twenty-first affirmative defense: 26 whether Nationwide’s “Your Time Program,” through which 27 Nationwide provides a paid a time-off benefit to its employees, 28 is regulated by ERISA. The parties filed cross-motions ECF No. 29; ECF No. 39. 1 1 In an Order entered November 14, 2018, this Court denied 2 Nationwide’s motion and granted Plaintiffs’ motion, holding that 3 the Your Time Program is an ERISA-exempt “payroll practice.” 4 Order, ECF No. 48. 5 and vacate the Order, or, in the alternative, certify the Order 6 for interlocutory appeal. 7 the motion. 8 9 10 Nationwide now moves this Court to reconsider Mot., ECF No. 49-1. Plaintiffs oppose Opp’n, ECF No. 51. For the reasons set forth below, the Court GRANTS IN PART and DENIES IN PART Defendant’s motion and CERTIFIES the Order for interlocutory appeal.1 11 12 I. 13 A. 14 OPINION Motion for Reconsideration 1. Standard of Review 15 This Court “possesses the inherent procedural power to 16 reconsider, rescind, or modify an interlocutory order. . .” 17 City of Los Angeles, Harbor Div. v. Santa Monica Baykeeper, 18 254 F.3d 882, 885 (9th Cir. 2001) (internal quotation marks, 19 citation, and emphasis omitted); see also Fed. R. Civ. P. 54(b) 20 (authorizing a district court to revise a non-final order “at any 21 time before entry of a judgment adjudicating all the claims.”). 22 23 24 25 26 27 28 This motion was determined to be suitable for decision without oral argument. E.D. Cal. L.R. 230(g). The hearing was scheduled for February 19, 2019. Additionally, Plaintiffs request this Court take judicial notice of FASB Accounting Standards Codification 710-10-25. ECF No. 51-1. While judicial notice is not necessary to resolve this motion, Plaintiffs’ request is granted because it is unopposed and FASB standards are proper subjects for judicial notice. See Zulfer v. Playboy Enterprises, Inc., Case No. 2:12-cv-08263-BRO-SH, 2013 WL 12132075, at *2 (C.D. Cal. Apr. 24, 2013) (collecting cases). 2 1 1 A motion for reconsideration “should not be granted, absent 2 highly unusual circumstances, unless the district court is 3 presented with newly discovered evidence, committed clear error, 4 or if there is an intervening change in the controlling law.” 5 Marlyn Nutraceuticals, Inc. v. Mucos Pharma GmbH & Co., 571 F.3d 6 873, 880 (9th Cir. 2009) (quotation omitted). 7 of California Local Rule 230(j) also requires a motion for 8 reconsideration to identify, among other things, “what new or 9 different facts or circumstances are claimed to exist which did Eastern District 10 not exist or were not shown upon prior motion, or what other 11 grounds exist for the motion.” 12 E.D. Cal. L.R. 230(j). Nationwide does not present any new or different facts, 13 circumstances, or evidence in its Motion for Reconsideration. 14 Nor does Nationwide argue an intervening change in controlling 15 law. 16 error, both in its evaluation of the facts and application—or 17 disregard—of governing law. 18 reviewing court on the entire record is left with the definite 19 and firm conviction that a mistake has been committed.” 20 States v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948). 21 22 Instead, Nationwide argues this Court committed clear 2. Clear error exists when “the United Factual Errors Resolution on summary judgment is inappropriate “where the 23 district court has made a factual determination” or “where 24 evidence is genuinely disputed on a particular issue.” 25 Zetwick v. Cty. of Yolo, 850 F.3d 436, 441 (9th Cir. 2017) 26 (citations and quotations omitted). 27 Court committed clear error in making factual findings that were 28 contrary to the undisputed facts, treating disputed facts as 3 Nationwide insists this 1 undisputed, and by drawing inferences favoring Plaintiffs when 2 competing inferences were equally likely. 3 Nationwide argues this Court’s conclusion that the 4 “undisputed facts demonstrate Nationwide pays the [Your Time 5 Program vacation] benefit from its general assets” (Order at 13) 6 was a factual determination inappropriately made in the face of 7 conflicting evidence. 8 originate from the Main Funding Account, are, for a time, 9 deposited in and held in the Trust before moving back into the Mot. at 1. The benefit funds, which 10 Main Funding Account and then to the employees. 11 Nationwide contends that an inference or factual conclusion is 12 equally likely that the vacation benefits are actually paid from 13 the Trust. 14 undisputed fact that the vacation benefits funds do not move 15 directly from the Trust to the employees, but rather from the 16 Main Funding Account to the employees. 17 ECF No. 45-4, ¶¶ 17–18. 18 undisputed fact, and no divergent inference is possible: 19 Nationwide pays the vacation benefits from its general assets. 20 Mot. at 5. Accordingly, But that conclusion would contradict the ECF No. 39-5, ¶¶ 23–24; This Court cannot disregard that Nor is this Court convinced that it committed clear error in 21 concluding, on summary judgment, “the substance of Nationwide’s 22 vacation benefits payment procedure bears more similarity to an 23 unfunded benefit program with the true source of payments being 24 Nationwide’s general assets.” 25 made a similar finding in Alaska Airlines, affirming a grant of 26 summary judgment on the grounds the airline’s payment of benefits 27 was an ERISA-exempt “payroll practice.” 28 v. Oregon Bureau of Labor, 122 F.3d 812, 814 (9th Cir. 1997). Order at 12. 4 The Ninth Circuit Alaska Airlines, Inc., 1 2 3 4 5 6 This Court is not persuaded it committed clear error in its evaluation of the facts. 3. Legal Errors Nationwide further argues this Court committed clear error by improperly applying and ignoring controlling legal precedent. First, Nationwide contends the Department of Labor’s four- 7 factor test is controlling in this case, and this Court’s failure 8 to apply the test is clear error. 9 Opn. No. 2004-10A, 2004 WL 3244869 (Dec. 30, 2004) (“May Company Mot. at 7 (citing DOL Advisory 10 Opinion”)). But that test is used to determine whether a program 11 in which benefits are paid directly from a trust qualifies as an 12 “employee welfare benefit plan” subject to ERISA. 13 Advisory Opn. No. 2004-08A 2004 WL 2074325 (July 2, 2004) 14 (“Denny’s Opinion”). 15 from Nationwide’s general assets. 16 the ERISA statute itself, not the regulation upon which this 17 Court’s ruling rests. 18 Pep Boys Manny Moe & Jack of Cal., 551 F. Supp. 2d 982, 990 19 (C.D. Cal. 2008) (analyzing, and discussing judicial deference 20 due to, May Company Opinion and Denny’s Opinion). 21 respect to Nationwide’s argument as to the binding nature of the 22 DOL advisory opinions, this Court notes that whether Auer v. 23 Robbins, 519 U.S. 452 (1997) should be overturned is a question 24 currently pending before for the Supreme Court. 25 No. 18-15 (argument scheduled for March 27, 2019). 26 Order is therefore consistent with the controlling legal 27 authority of 29 C.F.R. § 2510.3–1(b); Massachusetts v. Morash, 28 490 U.S. 107, 109 (1989); and Alaska Airlines. See DOL Here, conversely, the benefits are paid Moreover, the test interprets Order at 12-13; see also Villegas v. The 5 And with Kisor v. Wilkie, This Court’s 1 Second, Nationwide argues this Court committed clear error 2 in focusing its inquiry on the vacation benefits of the Your Time 3 Program alone, rather than on the Plan as a whole (the Your Time 4 Program together with the short-term and long-term disability 5 benefits). 6 specific benefit is an ERISA-exempt payroll practice under 7 Department of Labor regulation 29 C.F.R. § 2510.3–1(b), which 8 focuses on narrow practices, the proper inquiry is on the 9 individual benefit at issue. Mot. at 10-12. But when determining whether a Order at 10. Neither Shaw v. Delta 10 Air Lines, 463 U.S. 85 (1983) nor Peterson v. Am. Life & Health 11 Ins. Co., 48 F.3d 404 (9th Cir. 1995) discussed or analyzed the 12 payroll practices exemption. 13 Third, Nationwide contends this Court committed clear error 14 in finding the Consent Decree in McGoldrick v. Angela 15 Bradstreet, No. 2:08-cv-0001-JLG-MRA (S.D. Ohio Sept. 26, 2008) 16 did not trigger claim preclusion and thereby bar Plaintiffs’ 17 pursuit of certain PAGA claims. 18 Labor Commissioner of the State of California entered into a 19 Consent Decree with Nationwide’s Benefits Administrative 20 Committee agreeing that the Your Time Plan is governed by ERISA 21 and so “California’s vacation benefit laws are preempted as they 22 relate to the Your Time Plan.” 23 employee plaintiff suing . . . under [PAGA], does so as the 24 proxy or agent of the state's labor law enforcement agencies.” 25 Arias v. Superior Court, 46 Cal. 4th 969, 986 (Cal. 2009). 26 Because the Labor and Workforce Development Agency is bound by 27 the Consent Decree—a final judgment—and could not bring 28 California-law based claims with respect to the vacation Mot. at 12-13. In 2008, the ECF No. 39-8 at 6-7. 6 “An 1 benefits, Plaintiffs likewise cannot do so acting as the 2 Agency’s proxy or agent under PAGA. 3 This Court therefore amends its previous opinion and finds 4 that Plaintiffs’ PAGA claims for violations of California law 5 specific to vacation benefits are precluded as res judicata and 6 are hereby DISMISSED. 7 B. 8 To certify its November 14, 2018 Order for interlocutory 9 Certification for Interlocutory Appeal appeal, this Court must find the Order: “involves a controlling 10 question of law as to which there is substantial ground for 11 difference of opinion and that an immediate appeal from the order 12 may materially advance the ultimate termination of the 13 litigation. . .” 14 Litig. (MDL No. 296), 673 F.2d 1020, 1026 (9th Cir. 1981). 28 U.S.C. § 1292(b); In re Cement Antitrust 15 This Court concludes the issue of whether the Your Time 16 Program is an ERISA-exempt payroll practice could materially 17 affect the outcome of the litigation because if the Ninth Circuit 18 finds ERISA governs, Plaintiffs’ California-law claims related to 19 vacation benefits are preempted and would be dismissed. 20 Nutrishare, Inc. v. Connecticut Gen. Life Ins. Co., No. 2:13-CV- 21 02378-JAM-AC, 2014 WL 2624981, at *3 (E.D. Cal. June 12, 2014). 22 Moreover, such a finding would materially advance the ultimate 23 resolution of the litigation, as it could eliminate those claims 24 and obviate any need for this Court to address them. See Id. 25 See This Court further finds there is substantial ground for a 26 difference of opinion on several issues relating to the question 27 of ERISA-preemption for the vacation benefits claim. 28 example, there is substantial ground for a difference of opinion 7 For 1 as to whether the holdings of Shaw and Peterson apply to reviews 2 of benefits plans under the payroll practice exemption. 3 463 U.S. at 107 (holding ERISA’s coverage may only “exclude[] 4 ‘plans,’ not portions of plans”); Peterson, 48 F.3d at 407 5 (finding program “taken as a whole, constitutes an ERISA plan.”); 6 Mot. at fn. 8 (citing cases). 7 Department of Labor four-factor test to cases in which an 8 employee-benefits trust operates as it does here, and the level 9 of deference due to DOL advisory opinions, are additional issues Shaw, Moreover, the applicability of the 10 as to which opinions could differ. See Denny’s Opinion; 11 May Company Opinion; Bassiri v. Xerox Corp., 463 F.3d 927, 931 12 (9th Cir. 2006); Kisor, No. 18-15 (argued Mar. 27, 2019); 13 Villegas, 551 F. Supp. 2d at 990. 14 Accordingly, this Court CERTIFIES its November 14, 2018 15 Order (ECF No. 48), as modified by this Order, for interlocutory 16 appeal pursuant to 28 U.S.C. § 1292(b). 17 18 19 II. SANCTIONS This Court issued its Order re Filing Requirements (“Filing 20 Order”) on February 17, 2017. ECF No. 2-2. The Filing Order 21 limits memoranda in support of and in opposition to motions for 22 reconsideration to fifteen pages. 23 that an attorney who exceeds the page limits must pay monetary 24 sanctions of $50 per page. 25 exceeds the page limit by eight pages. 26 therefore ORDERS Plaintiffs’ counsel to pay $400 to the Clerk of 27 the Court within five days of the date of this Order. The Filing Order also states Plaintiffs’ opposition memorandum 28 8 See Opp’n. This Court 1 2 III. ORDER For the reasons set forth above, this Court GRANTS IN PART 3 and DENIES IN PART Defendant’s Motion for Reconsideration (ECF 4 No. 49) and CERTIFIES its November 14, 2018 Order (ECF No. 48) 5 for interlocutory appeal pursuant to 28 U.S.C. § 1292(b). 6 7 IT IS SO ORDERED. Dated: March 21, 2019 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 9

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