Swamy v. Title Source, Incorporated

Filing 69

ORDER DENYING MOTION TO DISMISS AND MOTION TO STRIKE by Judge William Alsup [denying 53 Motion to Dismiss]. (whasec, COURT STAFF) (Filed on 7/17/2017)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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For the Northern District of California

United States District Court

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SOM SWAMY, on behalf of himself and
on behalf of all others similarly situated,
No. C 17-01175 WHA
Plaintiff,

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v.
ORDER DENYING
MOTION TO DISMISS
AND MOTION TO STRIKE

TITLE SOURCE, INC.,
Defendant.
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INTRODUCTION

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In this action for unpaid wages, defendant moves to dismiss plaintiff’s FLSA and

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California state law claims pursuant to FRCP 12(b)(6) and 12(b)(1). In the alternative, defendant

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moves to strike a portion of plaintiff’s factual allegations. For the reasons set forth herein,

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defendant’s motion is DENIED.
STATEMENT

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Defendant Title Source, Inc., is a national real estate valuation company that works with

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lenders to evaluate properties and refinance loans. To complete property valuations, defendant

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hires appraisers who work remotely and choose properties to inspect in their geographic region

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through an online portal (Dkt. No. 29 ¶¶ 26–27). Appraisers work remotely, driving to assigned

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properties in their own vehicles and using their personal computers to communicate with their

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Title Source managers.

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From May 2013 to May 2017, plaintiff Som Swamy worked as a Title Source appraiser,

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driving to various locations in the San Francisco Bay Area in his personal vehicle to conduct

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physical inspections of his assigned properties and write reports on them, which he forwarded to

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his manager electronically. Plaintiff worked at least eight hours each day from Monday through

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Friday and worked approximately five to ten hours each weekend to keep up with the workload.

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Thus, the amended complaint alleges, plaintiff worked approximately fifty hours a week on

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average during his employment with defendant, except during weeks when he was not working

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due to sick leave or vacation. Defendant paid plaintiff, and other former appraisers, no overtime

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wages and kept no records of their work hours. Moreover, defendant did not reimburse
appraisers for any costs — namely travel and computer expenses — they incurred in completing

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For the Northern District of California

United States District Court

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their reports (id. ¶¶ 28–33).

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The amended complaint alleges that defendant misclassifies appraisers as exempt from

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overtime and therefore its failure to pay plaintiff, as well as putative class and collective

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members, overtime wages for work done in excess of forty hours a week violates (1) the FLSA,

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and (2) the California Labor Code. In addition to the state and federal overtime claims, the

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complaint alleges that defendant violates California labor laws and the California Business and

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Professions Code by (3) failing to reimburse plaintiff, and putative class members, for necessary

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job-related expenditures; (4) failing to provide statements accurately reflecting appraisers’ work

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hours and wages; (5) reaping profits at the expense of appraisers, and, therefore, engaging in

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unfair business practices (Dkt. No. ¶¶ 75–110).

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Defendant brought a motion to transfer this action to the Eastern District of Michigan,

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which the undersigned judge denied after full briefing, venue discovery, and oral argument

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(Dkt. No. 61). Defendant also brought a motion to dismiss, to which plaintiff responded with

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an amended complaint, specifying that he worked approximately fifty hours a week on average

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and alleging that he is owed reimbursements for business expenses under the FLSA as well as

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California law (Dkt. No. 29 ¶¶ 32, 82). Defendant now brings a new motion to dismiss.

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This order follows full briefing and oral argument.

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ANALYSIS

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First, defendant moves to dismiss plaintiff’s claims for overtime wages and unfair

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competition pursuant to FRCP 12(b)(6). Second, defendant argues in the alternative that

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plaintiff’s factual allegations regarding unreimbursed business expenses should be stricken

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from the FLSA claim. Third, defendant contends that plaintiff’s state law claim for accurate

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wage statements and unpaid business expenses should be dismissed for lack of supplemental

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jurisdiction. This order addresses these arguments in turn.

A complaint must plead “enough facts to state a claim to relief that is plausible on its

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face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim has facial plausibility

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For the Northern District of California

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United States District Court

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when its factual allegations, rather than mere conclusory statements, create the reasonable

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inference that defendant is liable for the misconduct alleged. Ashcroft v. Iqbal, 556 U.S. 662,

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678 (2009).

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MOTION TO DISMISS.

A.

State and Federal Overtime Claims.

Defendant moves to dismiss plaintiff’s state and federal claims for unpaid overtime,

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contending that plaintiff’s allegations fall short of pleading a plausible claim for overtime under

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Landers v. Quality Communications, Inc., 771 F.3d 638 (9th Cir. 2014). Landers held that an

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employee need not allege the overtime compensation owed with mathematical precision, but

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must provide “sufficient detail about the length and frequency of [his] unpaid work to support a

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reasonable inference that [he] worked more than forty hours in a given week.” 771 F.3d at 646.

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Thus, the plaintiff’s general allegations that he worked more than forty hours a week and was not

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paid overtime or minimum wage as required by the FLSA failed to show “that there was a given

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week in which he was entitled to but denied minimum wages or overtime wages.” Ibid.

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Defendant contends that plaintiff’s FLSA claim should be dismissed because he “fails to

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identify even one specific week that he worked overtime” (Dkt. No. 53 at 18). But the amended

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complaint alleges that plaintiff worked for defendant “from approximately May 2013 to the

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present” and worked an average of approximately fifty hours per work week without receiving

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overtime compensation (Dkt. No. 29 ¶ 32). These factual allegations not only support the
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inference that plaintiff worked in excess of forty hours in one specific week but that he did so

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each work week from May 2013 through May 2017 and defendant failed to pay him overtime in

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each of those weeks. See Daugherty v. SolarCity Corp., No. 05155 WHA, 2017 WL 386253,

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at *5 (N.D. Cal. Jan. 26, 2017).

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Moreover, in Landers the plaintiff failed to provide sufficient detail about the length and

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frequency of his unpaid work. But, here, plaintiff specifies that he worked at least eight hours

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on weekdays and approximately five to ten hours on weekends to keep up with the work (Dkt.

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No. 29 ¶ 32). Thus, ours is not a situation where plaintiff has failed to provide any details about

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the overtime hours he works.
Defendant further contends that plaintiff fails to state how he could plausibly know about

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overtime work performed by putative collective members around the country (Dkt. No. 53).

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But this is not a motion for certification and, since plaintiff’s factual allegations support an

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inference as to his own overtime claim, defendant’s motion to dismiss plaintiff’s first claim for

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relief is DENIED.

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Reciting the same arguments as above, defendant also moves to dismiss plaintiff’s claim

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for overtime under the California Labor Code. Defendant’s motion acknowledges that the FLSA

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and California overtime claims parallel each other closely and raises no new arguments as to

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why the state law claims are inadequately pled (Dkt. No. 53 at 18–19). Accordingly, defendant’s

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motion to dismiss plaintiff’s second claim for relief is also DENIED.

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B.

Unfair Business Practice Claim.

Defendant also moves to dismiss plaintiff’s claim under Section 17200 of the California

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Business and Professions Code to the extent it is based on penalties rather than wages.

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Specifically, defendant argues that the amended complaint incorporates all preceding paragraphs,

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including the wage statement provision of the California Labor Code, which imposes penalties if

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violated. A Section 17200 claim, defendant argues, must be based on wages rather than

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penalties (Dkt. No. 53 at 20). Plaintiff’s opposition does not disagree and notes that the

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complaint specifically seeks restitution of all wrongfully held wages (Dkt. No. 58 at 20).

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This order therefore clarifies that plaintiff’s Section 17200 claim incorporates preceding

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paragraphs only insofar as they support a claim based on wages and DENIES defendant’s motion

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to dismiss.

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2.

MOTION TO STRIKE.

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In the alternative to dismissal, defendant moves to strike plaintiff’s factual allegations

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regarding unreimbursed business expenses from paragraphs 82 and 86 of the amended

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complaint, contending they are immaterial or impertinent to the FLSA claim (Dkt. No. 53 at 20).

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Pursuant to a motion under FRCP 12(f), the district court may strike “any insufficient defense or

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any redundant, immaterial, impertinent, or scandalous matter.” The purpose of a motion under
FRCP 12(f) is to “avoid the expenditure of time and energy that must arise from litigating

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spurious issues by dispensing those issues prior to trial.” Fantasy, Inc., v. Fogerty, 984 F.2d

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1524, 1527 (9th Cir. 1993). A matter is impertinent if it “consists of statements that do not

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pertain, and are not necessary to the issues in question” and it is immaterial if it has “no essential

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or important relationship to the claim for relief.” Ibid.

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Here, defendant contends plaintiff’s allegations regarding unreimbursed business

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expenses “have no bearing on the FLSA overtime claim” because “the FLSA provides no

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requirement to reimburse employee business expenses” (Dkt. No. 53 at 21). But, in Rivera v.

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Peri & Sons Farms, Inc., our court of appeals held that the FLSA required an employer to

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reimburse the out-of-pocket travel and immigration expenses incurred by the migrant farm

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workers it had hired because the expenses were “primarily for the benefit or convenience of the

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employer.” 735 F.3d 892, 897 (9th Cir. 2013) (citing 29 C.F.R. 531.3(d)). Though that action

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involved reimbursement of expenses that caused plaintiffs’ wages to fall below the required

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minimum wage, the Department of Labor regulations that formed the basis of plaintiffs’ claim in

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that action apply to minimum and overtime wages. See id. (the district court erred in holding

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that 29 C.F.R. 531.35, which states minimum and overtime wages must be paid “free and clear,”

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did not provide for reimbursement of immigration and travel expenses).

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Plaintiff relies on the same FLSA regulations as the plaintiffs in Rivera, specifically

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Section 531.35, for the proposition that he may recover business expenses under the FLSA.
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Without contemplating Rivera, defendant argues the FLSA regulations cited by plaintiff only

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provide for recovery of business expenses that are born by the employer and deducted from

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employee wages (Dkt. No. 62 at 8–10). Moreover, defendant argues that even if the FLSA

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regulations are applicable here, plaintiff’s expenses were not “primarily for the benefit or

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convenience of the employer” and therefore not reimbursable.

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While defendant may ultimately prevail on this issue, the factual allegations it seeks

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to strike from the amended complaint are related to plaintiff’s FLSA claim and, therefore, not

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immaterial or impertinent. Defendant’s motion to strike is therefore DENIED.

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SUPPLEMENTAL JURISDICTION.

Where, as here, a substantial federal claim exists, district courts have supplemental

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jurisdiction over state law claims that form part of the same case or controversy under Article III.

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28 U.S.C. 1367(a). State and federal claims form part of the same constitutional “case” when

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they “derive from a common nucleus of operative fact” and are such that “considered without

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regard to their federal or state character . . . [plaintiff] would ordinarily be expected to try them

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all in one judicial proceeding.” United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 725 (1966).

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Where the district court has power to hear state law claims, it may invoke its discretion to

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decline supplemental jurisdiction only if the action falls into one of the categories enumerated in

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Section 1367(c), which provides in pertinent part “The district courts may decline to exercise

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supplemental jurisdiction over a claim . . . [if it] substantially predominates over the claim or

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claims over which the district court has original jurisdiction.” See Acri v. Varian Assocs., Inc.,

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114 F.3d 999, 1001 (9th Cir. 1997).

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Here, defendant contends the relevant supplemental jurisdiction inquiry is “whether the

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state and federal claims are alternate theories of recovery for the same acts” and, therefore, no

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supplemental jurisdiction exists over plaintiff’s non-overtime California claims because the

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FLSA does not provide for recovery of employees’ business expenses or cover the contents of

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wage statements (Dkt. No. 53 at 12) (citing McBain v. Behr Paint Corp., 2017 WL 1208074, at

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*6 (N.D. Cal Apr. 3, 2017) (Magistrate Judge Maria-Elena James)). But our court of appeals has

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not endorsed such a narrow definition of common nucleus of facts.
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In Mpoyo v. Litton Electronic Optical Systems, a decision cited by neither side, our court

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of appeals held that an employee’s Title VII claims, alleging racial discrimination by his former

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employer, and his FLSA claim, seeking unpaid overtime from the same employer, shared a

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common nucleus of facts because “both sets of [plaintiff’s] claims ar[ose] from [employer’s]

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conduct while [plaintiff] was an employee” and because the Title VII and FLSA claims

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“form[ed] a convenient trial unit that disclose[d] a cohesive narrative.” 430 F.3d 985, 987

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(9th Cir. 2005). Though Mpoyo concerned res judicata, that decision is applicable in the present

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action because, there, the relevant common nucleus inquiry was whether the claims arose from

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the same transaction and “the common nucleus concept [in the supplemental jurisdiction context]
encompasses claims that arise from the ‘same transaction or occurrence’ as the

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jurisdiction-invoking claim.” Charles Alan Wright and Arthur R. Miller, Federal Practice &

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Procedure 3567.1 (3d ed. 1998) (emphasis added).

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Here, as in Mpoyo, the wage statement, reimbursement and FLSA claims all arise out of

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a cohesive narrative: defendant’s conduct towards plaintiff in his capacity as an employee and,

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specifically, defendant’s allegedly inadequate compensation of plaintiff for his work as an

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appraiser. Additionally, these claims would ordinarily be tried in the same proceeding because

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they disclose a cohesive narrative, requiring overlapping testimony and administrative records

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regarding appraisers’ job description, including their day-to-day duties and the guidelines they

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must follow (Dkt. No. 58 at 15–16). Therefore, supplemental jurisdiction exists over plaintiff’s

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wage statement and reimbursement claims.

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Defendant further urges that even if power to hear the California wage statement and

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reimbursement claims exists, the Court should decline supplemental jurisdiction pursuant to

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Section 1367(c)(2). Specifically, at oral argument, counsel for defendant emphasized this

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action’s similarity to McBain, a decision from this district that held plaintiff’s wage statement,

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rest period, and reimbursement claims would substantially predominate over the FLSA overtime

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claim and therefore declined supplemental jurisdiction over those claims pursuant to

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Section 1367(c)(2). 2017 WL 1208074, at *7–8. But, as defendant’s counsel duly

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acknowledged, that decision is not binding authority. Moreover, McBain did not contemplate
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the efficiency consideration that the undersigned judge raised at oral argument, namely that if

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the California claims proceed separately in a parallel state court action, the federal and state

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proceedings may call for duplicative testimony and discovery, therefore frustrating the goals of

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economy and convenience promoted by supplemental jurisdiction.

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Ultimately, this order finds it premature to assert, at this early stage of litigation and

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without the benefit of discovery, that plaintiff’s California claims will predominate over the

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FLSA claim. Defendant’s motion to dismiss for lack of supplemental jurisdiction is therefore

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DENIED and the parties will proceed with disclosures and discovery as per the scheduling order.

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If discovery indicates that the wage statement claim and reimbursement claims require resolution
of unique issues that will substantially predominate over the FLSA claim, the efficiency

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considerations may advise against retaining non-overtime California claims in this action.

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This order is therefore without prejudice to defendant’s renewal of this motion if new facts urge

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a different result.

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CONCLUSION
For the foregoing reasons, defendant’s motion to dismiss plaintiff’s FLSA and California
law claims or to strike a portion of the FLSA claim in the alternative is DENIED.

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IT IS SO ORDERED.

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Dated: July 17, 2017.

WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE

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