Tyehimba et al., v. Crunch, LLC et al

Filing 39

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO STAY AND DEFENDANTS' MOTION TO DISMISS AND STRIKE 17 18 (Illston, Susan) (Filed on 5/3/2013)

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1 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE NORTHERN DISTRICT OF CALIFORNIA 8 9 United States District Court For the Northern District of California 10 11 OSABEMI-YE ADEDAPOIDLE-TYEHIMBA, individually and on behalf of all others similarly situated, Plaintiffs, 12 ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO STAY AND DEFENDANTS’ MOTION TO DISMISS AND STRIKE v. 13 14 No. C 13-225 SI CRUNCH LLC., et al., Defendants. 15 / 16 Defendants’ motions to dismiss and for a stay are scheduled for a hearing on May 10, 2013. 17 Pursuant to Civil Local Rule 7-1(b), the Court determines that these matters are appropriate for 18 resolution without oral argument and VACATES the hearing. The case management conference 19 scheduled for May 10, 2013 at 2:30 p.m. will remain on calendar. For the reasons set forth below, 20 defendants’ motion to stay is GRANTED IN PART and DENIED IN PART and defendants’ motion to 21 dismiss and strike is GRANTED IN PART and DENIED IN PART. Plaintiff shall file an amended 22 complaint by May 10, 2013. 23 24 BACKGROUND 25 I. The instant action 26 Plaintiff Osabemi-Ye Adedapoidle-Tyehimba filed the original complaint in this Court on 27 January 16, 2013, and a first amended complaint (“FAC”) on February 7, 2013. The FAC alleges that 28 defendants Crunch LLC, New Evolution Ventures LLC, and New Evolution Fitness Company LLC 2 operate numerous fitness clubs throughout the United States, and that plaintiff worked as a non-exempt 3 personal trainer in one of defendants’ fitness clubs located in the Northern California. Plaintiff alleges 4 a variety of claims stemming from defendants’ alleged failure to abide by the wage and hour provisions 5 of California and federal law by, inter alia, requiring personal trainers to work “off the clock,” failing 6 to reimburse for necessary business expenses, and failing to provide meal and rest breaks. The FAC 7 alleges the following claims: (1) failure to pay wages and overtime wages as required by the Fair Labor 8 Standards Act (“FLSA”), 29 U.S.C. §§ 206, 207; (2) failure to pay wages and overtime wages as 9 required by the California Labor Code §§ 226, 226.6, 1174, 1194, 1197, and 1199; (3) failure to provide 10 United States District Court For the Northern District of California 1 meal periods as required by California Labor Code §§ 226, 512, 516; (4) failure to provide rest periods 11 as required by California Labor Code §§ 226.7; (5) failure to reimburse for necessary work-related 12 expenses as required by California Labor Code §2802(c); (6) failure to provide and maintain accurate 13 wage statements in violation of California Labor Code §§ 226, 226.3, 1174 and 1174.5; (7) failure to 14 pay all wages due on termination in violation of California Labor Code §§ 201 and 202; and (8) 15 violations of California Business and Professions Code §§ 17200, et seq. 16 17 Plaintiff seeks relief on behalf of a nationwide collective class pursuant to the FLSA, and a California class for claims under California law pursuant to Federal Rule of Civil Procedure 23. 18 19 II. The Rothberg action 20 On April 4, 2012, a class action lawsuit was filed against defendant Crunch LLC in San 21 Francisco Superior Court, Rothberg v. Crunch LLC (Case No. CGC-12-519740). The original complaint 22 alleged all of the same California wage and hour claims as are alleged in the FAC, with the addition of 23 a claim under the Private Attorney General Act, Cal. Lab. Code § 2699. See Defs’ Request for Judicial 24 Notice, Ex. C. The Rothberg complaint was brought as a statewide class action on behalf of personal 25 trainers, and alleged, inter alia, that Crunch requires personal trainers to work “off the clock,” failed to 26 reimburse necessary business expenses, and failed to provide meal and rest breaks. 27 The defendants removed that case to federal court, and after the federal court remanded the 28 action, the defendants filed a demurrer and a motion to strike. Pls’ Request for Judicial Notice, Ex. 1. 2 1 On July 13, 2012, the state court issued an order sustaining a demurrer with leave to amend as to the 2 meal and rest break claims and the waiting time penalty claims. Id. On July 27, 2012, the Rothberg 3 plaintiffs filed a first amended complaint dropping the meal and rest break claims and the waiting time 4 penalty claims. Id. After further motion practice, the parties stipulated to the filing of a second 5 amended complaint; that complaint also omitted the meal and rest break claims. According to defendants (and not disputed by plaintiffs), on February 13, 2013, the Rothberg 7 parties attended a mediation during which they reached a settlement agreement. The settlement 8 agreement, which is awaiting preliminary approval of the state court, releases all California and federal 9 wage and hour claims on behalf of the putative class members, including unpled claims under the FLSA 10 United States District Court For the Northern District of California 6 and the dismissed California meal and rest break claims. Kemple Decl. Ex. 2. The Rothberg settlement 11 class is defined as all current and former personal trainer, group fitness instructor and Pilates instructor 12 employees who were employed in California from April 4, 2008 to the present. Id. The Rothberg 13 settlement releases all FLSA and state claims unless a class member opts out of the settlement. 14 15 III. The Aghili action 16 On October 9, 2012, a collective and class action lawsuit was filed in the United States District 17 Court for the Southern District of New York entitled Aghili v. Crunch LLC, Case No. 12 CIV 7536-PAC 18 (S.D.N.Y.). Defs’ Request for Judicial Notice, Ex. B. The complaint alleges a claim under the FLSA 19 for failure to pay overtime and also alleges wage and hour claims under New York law. Id. The Aghili 20 complaint alleges that the named plaintiff worked for Crunch as a non-exempt Corporate Sales Assistant 21 from 2004 to 2006, and that in 2006 she was promoted to Corporate Sales Administrator. The complaint 22 alleges that Crunch classified the Corporate Sales Administrator position as exempt and therefore not 23 eligible for overtime pay. The complaint alleges that the named plaintiff’s work duties did not include 24 managerial responsibilities and that her primary job function did not require the exercise of independent 25 judgment. The FLSA claim is brought as a collective action on behalf of “all persons who are or were 26 formerly employed by Crunch during the Statutory Period and who were nonexempt employees within 27 the meaning of the FLSA and who were not paid overtime premium pay, in violation of the FLSA.” Id. 28 ¶ 44. 3 1 2 DISCUSSION I. Defendants’ motion to stay A. 4 Defendants move to stay the FLSA claim pursuant to the first-to-file rule based on the Aghili 5 action pending in New York. The first-to-file rule was developed to “serve the purpose of promoting 6 efficiency well and should not be disregarded lightly.” Alltrade, Inc. v. Uniweld Prods, Inc., 946 F.2d 7 622, 625 (9th Cir.1991), quoting Church of Scientology v. United States Dep’t of the Army, 611 F.2d 8 738, 750 (9th Cir.1979). Under the first-to-file rule, a district court may transfer, stay or dismiss an 9 action when a similar action has been filed in another federal district court. See Alltrade, 946 F.2d at 10 United States District Court For the Northern District of California 3 625-26. When deciding whether to apply the first-to-file rule, the court must look at three factors: (1) 11 the chronology of the two actions; (2) the similarity of the parties; and (3) the similarity of issues. Id. 12 The Court finds that the first-to-file rule does not apply here because the factual allegations of 13 the Aghili complaint indicate that the Aghili FLSA collective action challenges misclassification of 14 employees as exempt from overtime pay, while the FLSA claim in this case is based on allegations of 15 “off the clock” work by personal trainers. Defendants argue that the two cases involve identical FLSA 16 claims because both cases allege the denial of overtime wages in violation of the FLSA, and both 17 complaints are brought on behalf of the same classes: “all current and former non-exempt hourly 18 employees who worked for Crunch” in this case, and “all persons who are or were formerly employed 19 by Crunch during the Statutory Period who were non-exempt employees” in Aghili. While it is true that 20 the broad class allegations of the Aghili complaint, read in isolation, appear identical to the collective 21 class allegations in this case, when the Aghili class allegations are read in the context of the complaint 22 as a whole, it becomes clear that the nature of the FLSA claims alleged in the two cases is different. First-to-file 23 Accordingly, the Court DENIES defendants’ motion to stay the FLSA claims based on the first- 24 to-file rule. Defendants may renew their motion if developments in the Aghili case show that the FLSA 25 collective class claim in that case is in fact similar to the FLSA claim alleged in this case. 26 27 B. 28 Defendants move to stay the California wage and hour claims pursuant to several abstention Abstention 4 1 doctrines, including the Colorado River doctrine. The Colorado River doctrine represents an exception 2 to the “virtually unflagging obligation of the federal courts to exercise the jurisdiction given them.” 3 Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 818 (1976). Generally, 4 considerations of “wise judicial administration, giving regard to conservation of judicial resources and 5 comprehensive disposition of litigation” may counsel granting a stay when there are concurrent state 6 proceedings involving the same matter as in the federal district court. Id. at 817-18. A court must consider and weigh several factors when determining the propriety of a stay in 8 favor of state proceedings. These include: (1) whether either court has asserted jurisdiction over a res 9 or property; (2) the relative inconvenience of the forum; (3) the avoidance of piecemeal litigation; (4) 10 United States District Court For the Northern District of California 7 the order in which jurisdiction was obtained and the progress of such proceedings; (5) whether state or 11 federal law controls; and (6) whether the state proceeding is adequate to protect the rights of the parties. 12 See Moses H. Cone Memorial Hosp. v. Mercury Construction Corp., 460 U.S. 1, 21-22 (1983); 13 Colorado River, 424 U.S. at 817-19; Nakash v. Marciano, 882 F.2d 1411, 1415 (9th Cir. 1989). The 14 court’s determination rests on a “careful balancing of the important factors as they apply” to the facts 15 of the specific case before the court. Cone, 460 U.S. at 16. Therefore, “[t]he weight to be given any 16 one factor may vary greatly from case to case.” Id. However, the balance is “heavily weighted in favor 17 of the exercise of jurisdiction.” Id. 18 Defendants contend the Colorado River factors weigh in favor of a stay because Rothberg was 19 filed before this case, involves the same state law claims, and has resulted in a classwide settlement that 20 is awaiting approval by the state court judge. Defendants argue that “each of the Plaintiff’s California 21 causes of action will be subsumed by the preceding State Action once settlement is approved, such that 22 adjudication of Plaintiff’s claims will constitute duplicative litigation, and will waste judicial resources.” 23 Motion at 7:14-16. 24 Plaintiff opposes a stay of the state claims on several grounds. First, plaintiff contends, 25 confusingly, that the Rothberg settlement’s release of unpled FLSA claims by state law opt-out 26 procedures (as opposed to FLSA opt-in procedures) violates federal law, and that because the proposed 27 Rothberg settlement cannot dispose of the FLSA claims in this case, abstention is inappropriate. As an 28 initial matter, this argument does not address the propriety of staying plaintiff’s state law claims, and 5 1 defendants’ Colorado River abstention arguments are directed at the state claims, not the FLSA claim. 2 In any event, the Court has determined that at this stage of the litigation, plaintiff’s FLSA claim may 3 proceed, and the validity of the release of FLSA claims in Rothberg is a question to be resolved by the 4 state court judge in the first instance.1 Plaintiff also argues that the Rothberg settlement covers a smaller group of employees (personal 6 trainers, group fitness instructors, and Pilates instructors) than this case because plaintiff seeks to 7 represent a class of all hourly paid employees who worked in Crunch fitness clubs in California. 8 However, as defendants note, the single named plaintiff in this case worked as a personal trainer, and 9 plaintiff’s opposition does not identify the other types of hourly employees beyond personal trainers (or 10 United States District Court For the Northern District of California 5 group fitness instructors and Pilates instructors) who he seeks to represent. Regardless, at a minimum 11 there is significant (if not identical) overlap between the employees in the California class in Rothberg 12 and the California class alleged in this case. 13 The Court concludes that the Colorado River factors favor staying the state law claims. The 14 Court notes that several of the factors are of little, if any relevance, to this dispute. As to the first factor, 15 despite defendants’ contention, the proposed settlement does not constitute “res or property” over which 16 the state court has asserted jurisdiction. The second factor – the relative inconvenience of the forum – 17 is also neutral because both cases are pending in San Francisco. However, the remaining factors weigh 18 heavily in favor of a stay, at least pending the state court’s approval or rejection of the settlement. On 19 the third factor, the California wage and hour claims covered by the Rothberg settlement include the 20 same California wage and hour claims alleged in the FAC, and thus a stay will avoid duplicative 21 litigation. The fourth factor – the order in which jurisdiction was obtained and the progress of such 22 proceedings – favors a stay as the state action was filed over eight months before this case and has 23 reached a settlement which is pending court approval. Finally, state law controls the claims at issue, 24 and there is no reason to believe that the state proceeding is not adequate to protect the rights of the 25 putative class members, as they will have the opportunity to object to the settlement and to opt-out. 26 27 28 1 The Court notes that even if the FLSA release by the California class members is determined to be valid, this case seeks to represent a nationwide FLSA collective class, while the Rothberg case is limited to California. 6 1 Accordingly, the Court GRANTS defendants’ motion to stay the state claims pending further 2 developments in Rothberg. The Court will address case management issues with the parties at the May 3 10, 2013 case management conference. 4 5 II. Defendants’ motion to dismiss and to strike Rule 23 class allegations Defendants also move to dismiss the complaint for failure to state a claim. With regard to all 7 claims, defendants argue that the complaint fails to allege which of the three defendants was plaintiff’s 8 employer, and instead lumps all three entities together as “Crunch.” Defendants argue that the 9 complaint contains conclusory allegations that the defendants are a “joint employer,” and that they are 10 United States District Court For the Northern District of California 6 each other’s “agents” and “alter egos,” but that the FAC does not contain any factual allegations in 11 support. 12 In response, plaintiff argues that “it is neither necessary nor appropriate to speculate on 13 defendants’ contentions who is or is not the proper ‘employer’ at the pleading stage as that will require 14 a fact-based inquiry into the merits.” Opposition at 9 :13-15. Plaintiff argues that the complaint meets 15 the pleading requirements under the federal rules. Plaintiff’s opposition also mentions unpled facts, 16 such as information regarding defendant New Evolution Ventures found on www.crunch.com, or from 17 the Rothberg settlement. 18 The Court concludes that the FAC’s allegations regarding each defendant are too imprecise and 19 conclusory. The FAC alleges that each defendant “owns and operates a chain of health and fitness 20 facilities in this district and throughout the United States,” FAC ¶¶ 19-21, but there are no allegations 21 that any defendant owned and operated the facility where plaintiff worked (indeed, the FAC does not 22 state which Northern California facility plaintiff worked at). The FAC does not contain any facts in 23 support of the allegations that defendants are “joint employers,” “agents” or “alter egos.” While 24 plaintiff need not plead detailed allegations regarding the relationship between the defendants, 25 presumably plaintiff has some factual basis for seeking to hold each of the defendants liable. 26 Accordingly, the Court GRANTS this aspect of defendants’ motion and GRANTS plaintiff leave to 27 amend to clarify and amplify the allegations regarding the three defendants. 28 Defendants also argue that the FLSA claim is insufficiently pled because there are no factual 7 1 allegations in support of the claims that plaintiff and the FLSA class members worked “off the clock” 2 and that defendants failed to include all required remuneration when calculating the regular rate of pay 3 for purposes of paying overtime.2 Defendants’ characterization of the FAC is incorrect. While the FAC does not contain detailed 5 factual allegations, the FAC does allege that “Plaintiff and other Class Members were required to 6 perform work ‘off-premise’ attending certification/continuing education exams for which they were not 7 being compensated,” and that “ Plaintiff and other Class Members are also required to perform work 8 ‘off the clock’ before and after their actual training sessions, which includes but is not limited to, time 9 spent ‘programming’ (i.e. creating a member-specific program tailored to meet the member’s health and 10 United States District Court For the Northern District of California 4 fitness needs) for Defendants’ club members for which they were not paid.” FAC ¶ 7. The FAC also 11 alleges that “Defendants regularly payed Plaintiff and Class Members only for the length of the time 12 of the actual training sessions they conducted rather than their actual hours worked, which included 13 additional hours associated with the training. Additionally, Plaintiff and Class Members were required 14 to attend company meetings and were not paid for the travel time to and from those meetings.” Id. With 15 regard to the calculation of the regular rate of pay, the FAC alleges that “Defendants paid Plaintiff and 16 other Class Members an hourly wage and other compensation, including but not limited to commission 17 pay, session pay and non-discretionary bonus pay but failed to properly include such other compensation 18 when calculating the regular rate of pay, a predicate calculation to determine overtime wages owed 19 under both Federal and California law.” Id. ¶ 8. The Court concludes that the FAC sufficiently alleges 20 a factual basis for the FLSA claim and thus DENIES this aspect of the motion. 21 Defendants move to strike the Rule 23 class allegations on the ground that a Rule 23 class is 22 inherently irreconcilable with plaintiff’s FLSA collective action. The Ninth Circuit recently rejected 23 this contention in Busk v. Integrity Staffing Solutions, Inc., ___ F.3d ___, 2013 WL 1490577 (9th Cir. 24 Apr. 12, 2013), and accordingly the Court DENIES this aspect of defendants’ motion. Defendants also 25 contend that the Rule 23 class allegations are defective because, inter alia, the class is overbroad, 26 plaintiff is not alleged to be typical of the class, and plaintiff has not alleged commonality as required 27 2 28 Defendants also contend that plaintiff’s state law claims are insufficiently pled. In light of the stay of the state claims, the Court does not reach these arguments at this time. 8 1 by Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011). In light of the stay of plaintiff’s state law 2 claims, this aspect of defendants’ motion is DENIED WITHOUT PREJUDICE to renewal if the stay 3 is lifted. 4 5 6 7 CONCLUSION For the foregoing reasons, defendants’ motions are GRANTED IN PART and DENIED IN PART. Docket Nos. 17 & 18. Plaintiff shall file an amended complaint by May 10, 2013. 8 9 IT IS SO ORDERED. United States District Court For the Northern District of California 10 11 Dated: May 3, 2013 SUSAN ILLSTON United States District Judge 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 9

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