Scharber v. Cutter Holding Co.

Filing 44

ORDER denying 28 Defendant's Motion for Summary Judgment. Signed by Judge Janis L. Sammartino on 9/13/2018. (jpp)

1
2
3
4
5
6
7
8

UNITED STATES DISTRICT COURT

9

SOUTHERN DISTRICT OF CALIFORNIA

10
11

PHILLIP SCHARBER,

Case No.: 16-CV-3045-JLS (WVG)
Plaintiff,

12
13
14

ORDER DENYING DEFENDANT’S
MOTION FOR SUMMARY
JUDGMENT

v.
CUTTER HOLDING CO., d/b/a HondaJet
Southwest, Cutter Aviation, Tower
Industries, L.L.C., Cutter Southwest
Aircraft Sales L.L.C., and Cutter Flight
Management,

15
16
17

(ECF No. 28)

Defendants.

18
19

Presently before the Court is Defendant Cutter Holding Co.’s Motion for Summary

20

Judgment, or in the Alternative, Summary Adjudication (“MSJ,” ECF No. 28). Also before

21

the Court are Plaintiff Phillip Scharber’s Response in Opposition to the MSJ (“Opp’n,”

22

ECF No. 30) and Defendant’s Reply in Support of Its MSJ (“Reply,” ECF No. 31.) The

23

Court heard oral argument on September 4, 2018.

24

arguments, the evidence, and the law, the Court DENIES Defendant’s MSJ.

25
26

After considering the Parties’

BACKGROUND
I.

Plaintiff’s Employment With Defendant

27

Defendant sells new and pre-owned aircraft, as well as other aviation services and

28

products. ECF No. 22-1 (“FAC”) ¶ 3. Plaintiff began working for Defendant in January
1
16-CV-3045-JLS (WVG)

1

2006 selling new and used aircraft. Id. ¶ 4. In October 2006, Honda announced it was

2

entering the aircraft market and would be manufacturing a jet called the HondaJet. MSJ at

3

6. 1 Plaintiff was tasked with selling HondaJets and smaller-engine planes. Id. Plaintiff

4

states he “sold” thirty-four HondaJets, but Defendant claims Plaintiff only took preorders

5

for these jets and only eleven of the preorders remained tentatively viable in 2016. Id. at

6

6–7. In 2015, Plaintiff was asked to sell only the HondaJet and the Parties entered into an

7

Employment Agreement (the “Agreement”), effective January 5, 2015. 2 FAC ¶ 6; see ECF

8

No. 28-9 (“Agreement”) at 44.

9

II.

The Agreement

10

By entering into the Agreement, Plaintiff became the Regional Sales Manager for

11

the HondaJet in the territories of Southern California, Las Vegas, Nevada, and Hawaii.

12

Agreement ¶ 1. Plaintiff’s employment was at-will and could be terminated by Defendant

13

at any time, with or without cause, for any or no reason. Id. ¶ 3.

14

Per the Agreement, Plaintiff would be paid 20% of the top half and 10% of the

15

bottom half of the gross profit of the sale of each new HondaJet he sold. Id. ¶ 8; Def.’s

16

Facts ¶ 4. The Parties agree that:

17

The gross profit would be calculated by subtracting the cost of
the new aircraft from the suggested selling price (SSP). The cost
of the new aircraft would be calculated based on the
manufacturer’s net cost, plus a 1% reserve (the difference
between the SSP and the cost of the plane from Honda
constituted the margin, from which the salesperson would be
paid). The Agreement also affirmed that the cost may include
processing and promotional fees paid or credited to Cutter.

18
19
20
21
22
23
24
25
26
27
28

1

Pin citations refer to the CM/ECF page numbers electronically stamped at the top of each page.

2

The agreement is between Plaintiff and HondaJet Southwest (“HJSW”), one of Defendant’s trade names.
Defendant states that Plaintiff took multiple preorders for the HondaJet in 2006, but failed to secure a
single HondaJet sale, which did not subsequently cancel, in the next ten years following this. MSJ at 7.
In 2015, however, Defendant made Plaintiff its Regional Sales Manager for HondaJets in a designated
sales territory. It is unclear why Defendant would enter into this agreement and give Plaintiff this
responsibility if Plaintiff had failed to secure a single HondaJet sale since 2006, as Defendant alleges. Id.
2
16-CV-3045-JLS (WVG)

1

Def.’s Facts ¶ 4. For example, if Plaintiff sold a HondaJet, with no sales discount, for

2

$4,500,000, the company would make a profit of $500,000, meaning that Plaintiff would

3

receive 10% of $250,000 (or $25,000) and 20% of $250,000 (or $50,000) for a total of

4

$75,000. Agreement ¶ 8.

5

Under the terms of the Agreement, Plaintiff was eligible to be paid commissions if:

6

(1) Defendant “is in receipt of full and complete payment on the aircraft”; (2) for a new

7

aircraft, “management has determined that the aircraft is delivered into [its] area of

8

responsibility, and that any holdback due from the manufacturer will be paid in full”; and

9

(3) Plaintiff “is a full-time employee of HJSW, and is in good standing with the company

10

at the time of the final delivery of the aircraft.” Id. ¶ 16. Good standing was defined “as

11

an employee that is not undergoing a Disciplinary Procedure as delineated in the Employee

12

Policy and Procedures Manual which is provided to every employee.” Id. If Plaintiff were

13

to leave the company prior to the final delivery of the aircraft, he would “be due a partial

14

commission based solely at the management’s discretion.” Id. If he were terminated for

15

cause, he would “forfeit any right to payment for any commission or other compensation

16

for any and all pending sales for which delivery has not occurred prior to the date of

17

termination.” Id.

18
19

Finally, the Agreement required the National Sales Manager to “discuss”
performance issues with the Employee prior to termination:

20

[I]f Employee’s drive and motivation deteriorates to an
unacceptable level, and/or if Employee demonstrates a drop in
performance/profit and/or an unreasonable increase in expenses,
the National Sales manager will discuss these deficiencies with
the Employee. If immediate improvement is not noted,
Employee may be subject to discharge.

21
22
23
24
25

Id. ¶ 3.

26

///

27

///

28

///
3
16-CV-3045-JLS (WVG)

1

III.

Plaintiff’s HondaJet Sales

2

Although Honda had projected delivery of the pre-ordered HondaJets in 2010,

3

Honda repeatedly delayed delivery. ECF No. 30-1 (“Pl.’s Facts”) ¶¶ 23–25.3 As an interim

4

measure to bridge the gap until the HondaJets were delivered and commissions for their

5

sale were paid, Plaintiff was entitled to a “draw” against future commissions. Def.’s Facts

6

¶¶ 7–8, 49–50. Plaintiff and Mr. Cutter disagreed as to the interpretation of the contractual

7

provision concerning the draw. Pl.’s Facts ¶¶ 36–39. Over Plaintiff’s objection, Mr. Cutter

8

cut off the draw in July 2016. See id.

9

Because of Honda’s delays in delivering the HondaJets, Plaintiff had to “spend most

10

of his time and effort preserving existing sales and impeded new sales” and many

11

purchasers cancelled their orders. FAC ¶ 6. Plaintiff does not seem to dispute that he did

12

not make any HondaJet sales in the years 2006 to 2016, but states that no other salesman

13

made any sales of the HondaJet in 2015 or 2016. Pl.’s Facts ¶ 2. He also states that out of

14

all of Defendant’s salespeople, he obtained the most customer contracts to purchase

15

HondaJets by far. Id.

16

Honda delivered the first jet on June 10, 2016, id. ¶ 34, and Plaintiff received his

17

first full commission in nearly ten years of selling HondaJets soon thereafter. Id. ¶ 35.

18

Plaintiff did not dispute the calculation of his first commission. Def.’s Facts ¶ 19.

19

Around this same time, Jerry Buesing, to whom Plaintiff had sold HondaJet Serial

20

No. 28 in 2006, became frustrated by a delivery delay. Id. ¶ 62. Mr. Cutter therefore

21

offered to sell Mr. Buesing Serial No. 15, which was Defendant’s demonstrator HondaJet.

22

Id. ¶ 63. Serial No. 15 included additional options, but Mr. Buesing paid the same price

23

for Serial No. 15 as he had contracted to pay for Serial No. 28. Id. ¶ 64. Plaintiff’s

24

commission of $53,366.00 was calculated based on the suggested selling price of Serial

25
26
27
28

3

Defendant has submitted its Separate Statement of Facts, to which Plaintiff has filed a Response. The
Court’s citation to “Facts” herein is to ECF No. 30-1, which is a chart containing Defendant’s Facts and
Evidence, as well as Plaintiff’s Response, Facts, and Evidence. Citations to “Defendant’s Facts” shall
refer to “Defendant’s Facts and Evidence,” see id. at 2–234, while citations to “Plaintiff’s Facts” shall
refer to “Plaintiff’s Additional Facts.” See id. at 234–51.
4
16-CV-3045-JLS (WVG)

1

No. 28. Id. ¶ 65.

2

IV.

Plaintiff’s Complaints

3

On September 6, 2016, Plaintiff emailed Mr. Cutter about the commission on the

4

sale of the Buesing jet, indicating his belief that the commission could have been based on

5

the suggested selling price of Serial No. 15. Id. ¶ 66. In the email, Plaintiff noted that it

6

was “[n]ice for the company and for [him] to finally begin to see some of [their] efforts

7

over these last few years begin to pay off. Albeit 6 years later tha[n they] originally planned

8

for.” ECF No. 28-9 at 80. Mr. Cutter responded that he was “very disappointed as well.

9

To not have any new sales in 10 years is beyond aggravati[ng].” Id.

10

Plaintiff also raised concerns that certain of his business expenses were not being

11

paid. Def.’s Facts ¶¶ 68–69. On October 26, 2016, for example, Mr. Cutter told Plaintiff

12

“[t]ough deal” and refused to reimburse certain of Plaintiff’s expenses for a HondaJet

13

delivery that fell through due to a component recall. See ECF No. 30-8 at 104. Not until

14

after this litigation was filed did Mr. Cutter reimburse Plaintiff for all previously disputed,

15

unpaid business expenses. Def.’s Facts ¶ 70.

16

V.

Plaintiff’s Termination and Replacement

17

In late summer 2016, Michelle Hoover contacted Mr. Cutter regarding a potential

18

sales position. Id. ¶ 73. Ms. Hoover corresponded with Mr. Cutter, and they met up at the

19

Palm Springs Airshow between October 21 and 23, 2016. Id. ¶ 74. Mr. Cutter expressed

20

to Ms. Hoover that he was frustrated with Plaintiff’s sales performance.

21

Mr. Cutter also believed that Plaintiff spent little time working at the Palm Springs

22

Airshow, see id. ¶ 76, although Plaintiff claims he “worked as much or more than anyone,

23

but few potential customers attended the air show.” Declaration of Phillip Scharber

24

(“Scharber Decl.”), ECF No. 30-3 ¶ 50.

Id. ¶ 75.

25

Following the Palm Springs Airshow, Mr. Cutter spoke with Defendant’s Chief

26

Financial Officer, Steve Priser, and Human Resources manager, Heather Wahl, about the

27

possibility of terminating Plaintiff. Def.’s Facts ¶ 78. Ms. Wahl cautioned Mr. Cutter that

28

Plaintiff’s employment contract explicitly required discussion of any perceived sales
5
16-CV-3045-JLS (WVG)

1

deficiencies prior to termination. Pl.’s Facts ¶ 69.

2

During this time, Mr. Cutter also continued to correspond with Ms. Hoover, meeting

3

with her in Arizona on October 27, 2016. Def.’s Facts ¶¶ 79–80. At their October 27,

4

2016 meeting, Mr. Cutter informed Ms. Hoover that he was considering bringing her on

5

and letting Plaintiff go at the end of the year. Id. ¶ 80.

6

Nonetheless, because of a large industry tradeshow scheduled in Florida a few days

7

later, Mr. Cutter, in consultation with Defendant’s leadership team, terminated Plaintiff by

8

telephone on October 28, 2016. FAC ¶ 7; Def.’s Facts ¶ 81. Ms. Hoover was hired to fill

9

Plaintiff’s position that same day. Def.’s Facts ¶ 81.

10

Plaintiff claims that he was never given any warning that his job was in jeopardy

11

prior to termination. Pl.’s Facts ¶ 63. Mr. Cutter, on the other hand, asserts that he orally

12

counseled Plaintiff about his lack of sales, but admits that he never put anything in writing.

13

Id. ¶ 64. Plaintiff believes that any comments expressing frustration about the lack of sales

14

focused on all HondaJet salespeople, not him personally. Id. ¶ 67.

15

VI.

The Severance Agreement and Ensuing Litigation

16

As of October 28, 2016, Plaintiff “had nine deposit holders for the future delivery of

17

a HondaJet.” MSJ at 15. Upon termination, Defendant states Plaintiff was “offered a

18

comprehensive severance package” that included “two months of salary” and a promise to

19

pay Plaintiff commissions for all nine HondaJets that were expected to be delivered. Def.’s

20

Facts ¶ 40. Plaintiff does not dispute that this offer was made, but objects to it for various

21

reasons—including an allegedly illegal non-compete provision—and states it was not

22

reasonable. Id. Needless to say, Plaintiff did not accept the severance offer. Id. ¶ 41.

23

Plaintiff estimates that he would have made approximately $500,000 in commissions

24

once the HondaJet deliveries were finally made. Pl.’s Facts ¶ 35. Because Mr. Cutter no

25

longer needs to pay these commissions to Plaintiff, he has been able to pocket that money.

26

Id. ¶ 73.

27

On November 17, 2016, Plaintiff filed a complaint in the Superior Court of

28

California, County of San Diego. See ECF No. 1-2. Defendant removed to this Court on
6
16-CV-3045-JLS (WVG)

1

December 16, 2016. See ECF No. 1. The Parties stipulated to Plaintiff filings a first

2

amended complaint on May 24, 2017, see ECF No. 22, which alleges wrongful termination,

3

violation of various sections of the California Labor Code, breach of contract, and breach

4

of implied covenant of good faith and fair dealing. See generally FAC.

5

LEGAL STANDARD

6

Under Federal Rule of Civil Procedure 56(a), a party may move for summary

7

judgment as to a claim or defense or part of a claim or defense. Summary judgment is

8

appropriate where the Court is satisfied that there is “no genuine dispute as to any material

9

fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a);

10

Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Material facts are those that may affect

11

the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A

12

genuine dispute of material fact exists only if “the evidence is such that a reasonable jury

13

could return a verdict for the nonmoving party.” Id. When the Court considers the

14

evidence presented by the parties, “[t]he evidence of the non-movant is to be believed, and

15

all justifiable inferences are to be drawn in his favor.” Id. at 255.

16

The initial burden of establishing the absence of a genuine issue of material fact falls

17

on the moving party. Celotex, 477 U.S. at 323. The moving party may meet this burden

18

by identifying the “portions of ‘the pleadings, depositions, answers to interrogatories, and

19

admissions on file, together with the affidavits, if any,’” that show an absence of dispute

20

regarding a material fact. Id. When a plaintiff seeks summary judgment as to an element

21

for which it bears the burden of proof, “it must come forward with evidence which would

22

entitle it to a directed verdict if the evidence went uncontroverted at trial.” C.A.R. Transp.

23

Brokerage Co. v. Darden Rests., Inc., 213 F.3d 474, 480 (9th Cir. 2000) (quoting Houghton

24

v. South, 965 F.2d 1532, 1536 (9th Cir. 1992)).

25

Once the moving party satisfies this initial burden, the nonmoving party must

26

identify specific facts showing that there is a genuine dispute for trial. Celotex, 477 U.S.

27

at 324. This requires “more than simply show[ing] that there is some metaphysical doubt

28

as to the material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,
7
16-CV-3045-JLS (WVG)

1

586 (1986). Rather, to survive summary judgment, the nonmoving party must “by her own

2

affidavits, or by the ‘depositions, answers to interrogatories, and admissions on file,’

3

designate ‘specific facts’” that would allow a reasonable fact finder to return a verdict for

4

the non-moving party. Celotex, 477 U.S. at 324; Anderson, 477 U.S. at 248. The non-

5

moving party cannot oppose a properly supported summary judgment motion by “rest[ing]

6

on mere allegations or denials of his pleadings.” Anderson, 477 U.S. at 256.

7
8

ANALYSIS
I.

Evidentiary Objections

9

As an initial matter, both Parties have filed evidentiary objections. See generally

10

ECF Nos. 30-4, 31-4. The Court first addresses Plaintiff’s objection to Defendant’s

11

severance package offer. See ECF No. 30-4 at 2–3. As noted above, Defendant claims

12

that when Plaintiff was terminated, he was offered his commissions in full per a severance

13

agreement, but Plaintiff refused to accept the package. MSJ at 21. Plaintiff argues that

14

this proposal included a requirement that Plaintiff release all legal rights and this offer is

15

therefore inadmissible under Federal Rule of Evidence 408. Opp’n at 23; ECF No. 30-4 at

16

2–3.

17

Under Federal Rule of Evidence 408, evidence of offers “to compromise a claim

18

which was disputed as to either validity or amount, is not admissible to prove liability for

19

or invalidity of the claim or its amount.” Fed. R. Evid. 408. Both Parties cite to Cassino

20

v. Reichhold Chemicals, Inc., 817 F.2d 1338 (9th Cir. 1987), to support their argument.

21

Compare ECF No. 30-4 at 3 n.2, with ECF No. 31-1 at 3. In Cassino, the Ninth Circuit

22

analyzed a situation where, as here, “an employment relationship [wa]s terminated and the

23

employer offer[ed] a contemporaneous severance pay package in exchange for a release of

24

all potential claims, including claims for discriminatory acts that may have occurred at or

25

before the termination.” 817 F.2d at 1343. The court noted that “[s]uch termination

26

agreements are generally made a part of the record in the case and are considered relevant

27

to the circumstances surrounding the alleged discriminatory discharge itself” and that

28

“termination agreements . . . are probative on the issue of discrimination.” Id. In this
8
16-CV-3045-JLS (WVG)

1

situation, “the policy behind Rule 408 does not come into play.” Id.

2

Such is the situation here. Defendant offered to pay Plaintiff severance in exchange

3

for him giving up certain claims. Opp’n at 23. At the time, however, Plaintiff had not yet

4

filed a claim against Defendant. Consequently, Rule 408 does not bar admissibility of the

5

offer and the Court DENIES Plaintiff’s objection to its admission. 4

6

As to the remainder of the Parties’ objections, see ECF Nos. 30-4, 31-4, the Court

7

notes that “objections to evidence on the ground that it is irrelevant, speculative, and/or

8

argumentative, or that it constitutes an improper legal conclusion are all duplicative of the

9

summary judgment standard itself” and are therefore “superfluous” in the summary

10

judgment context, as a “court can award summary judgment only when there is no genuine

11

dispute of material fact.” Burch v. Regents of Univ. of Cal., 433 F. Supp. 2d 1110, 1119

12

(E.D. Cal. 2006); see also Fonseca v. Sysco Food Servs. of Ariz., Inc., 374 F.3d 840, 846

13

(9th Cir. 2004) (“Even the declarations that do contain hearsay are admissible for summary

14

judgment purposes because they ‘could be presented in an admissible form at trial.’”)

15

(quoting Fraser v. Goodale, 342 F.3d 1032, 1037 (9th Cir. 2003)); Hal Roach Studios, Inc.

16

v. Richard Feiner and Co., Inc., 896 F.2d 1542, 1551 (9th Cir. 1990) (holding trial court’s

17

consideration of unauthenticated document on summary judgment was harmless error

18

where a “competent witness with personal knowledge could authenticate the document”);

19

Burch, 433 F. Supp. 2d at 1120–21 (noting even if a document is not properly

20

authenticated, it is improper to raise an objection on that ground “if the party nevertheless

21

knows that the document is authentic”) (quoting Fenje v. Feld, 301 F. Supp. 2d 781, 789

22

(N.D. Ill. 2003)). As to the objections that are directed towards the weight of the evidence,

23

this is an improper consideration on summary judgment. See Strong v. Valdez Fine Foods,

24

724 F.3d 1042, 1046 (9th Cir. 2013) (“[T]he weight of the evidence is an issue for trial, not

25

summary judgment.”).

26
27
28

4

Plaintiff also argues this proposal included a non-compete provision which is illegal in California. Opp’n
at 23. Plaintiff does not explain how this “illegal” provision renders the offer inadmissible.
9
16-CV-3045-JLS (WVG)

1

The Court therefore DENIES WITHOUT PREJUDICE all evidentiary objections

2

not specifically addressed in this Order, and the Parties are granted leave to reassert their

3

objections at a later stage in the proceedings. See Madrigal v. Allstate Indem. Co., No. CV

4

14-4242 SS, 2015 WL 12747906, at *8 (C.D. Cal. Sept. 30, 2015).

5

II.

Wrongful Termination in Violation of Public Policy

6

Plaintiff’s first cause of action is for wrongful termination in violation of a public

7

policy requiring payment of wages. See FAC ¶¶ 3–11. Plaintiff states that “Cutter fired

8

Plaintiff to avoid paying him wages for earned commissions,” id. ¶ 9, and that Plaintiff was

9

fired “just before he had large commissions coming due.” Opp’n at 17.

10

It is undisputed that Plaintiff’s employment was at-will.

Nonetheless, an

11

“employer’s right to discharge an at-will employee is subject to limits that fundamental

12

public policy imposes.” Green v. Ralee Eng’g Co., 19 Cal. 4th 66, 71 (1998). To prevail,

13

a plaintiff must show the policy at issue is fundamental, beneficial to the public, and

14

embodied in a statute or constitutional provision. Turner v. Anheuser-Busch, Inc., 7 Cal.

15

4th 1238, 1256 (1994). There must also be a nexus between the protected activity taken

16

by a plaintiff and the allegedly adverse treatment by his employer. Id. at 1258.

17

California law requires that, “[i]f an employer discharges an employee, the wages

18

earned and unpaid at the time of discharge are due and payable immediately.” 5 Cal. Lab.

19

Code § 201. Indeed, if an employer discharges an employee “to avoid paying him the

20

commissions, vacation pay, and other amounts he had earned, it violate[s] a fundamental

21

public policy of this state.” Gould v. Md. Sound Indus., Inc., 31 Cal. App. 4th 1137, 1147

22

(1995).

23

Here, it is clear that Plaintiff repeatedly disputed his pay and reimbursement of

24

expenses with Defendant. For example, Plaintiff disputed Mr. Cutter’s decision not to pay

25
26
5

27
28

Plaintiff also alleges a violation of California Labor Code sections 200 and 202. FAC ¶ 13. Section 200
is only definitional and provides that “wages” includes any amount earned on a commission basis. Cal.
Lab. Code § 200(a). Section 202 only applies if the employee quits, which indisputably did not happen
here. Cal. Lab. Code § 202(a).
10
16-CV-3045-JLS (WVG)

1

further “draws” against future commissions in July 2016. See, e.g., Pl.’s Facts ¶¶ 37–39.

2

Plaintiff also disputed the amount of the commission he was paid on the sale of the jet to

3

Mr. Buesing in September 2016, see, e.g., id. ¶¶ 41–49, and expected additional

4

commissions to be paid in the coming months following delivery of additional HondaJets.

5

See, e.g., id. ¶¶ 35, 73. Finally, Plaintiff also disputed Mr. Cutter’s decision not to

6

reimburse certain business expenses, see, e.g., id. ¶¶ 50–56, with the latest complaint being

7

only two days before Plaintiff’s termination. See, e.g., id. ¶¶ 56–57.

8

On these facts, the Court finds that there is a dispute of material fact as to whether

9

Mr. Cutter fired Plaintiff “to avoid paying him . . . amounts he had earned,” in violation of

10

“a fundamental public policy of this state.” See Gould, 31 Cal. App. 4th at 1147. The

11

Court therefore DENIES Defendants’ MSJ as to Plaintiffs’ claim for wrongful termination

12

in violation of a public policy.

13

III.

Violation of California Labor Code Section 98.6

14

The Court next addresses Plaintiff’s claim for retaliation, which is asserted under

15

California Labor Code section 98.6. Under Section 98.6, employers may not discharge or

16

discriminate against an employee because the employee has “made a written or oral

17

complaint that he or she is owed unpaid wages” or exercised “any rights afforded him or

18

her.” See Cal. Lab. Code § 98.6(a). “Summary judgment is not appropriate if a reasonable

19

jury viewing the summary judgment record could find by a preponderance of the evidence

20

that the plaintiff is entitled to a verdict in his favor.” Davis v. Team Elec. Co., 520 F.3d

21

1080, 1089 (9th Cir. 2008).

22

“To establish a prima facie case of retaliation, a plaintiff must prove (1) she engaged

23

in a protected activity; (2) she suffered an adverse employment action; and (3) there was a

24

causal connection between the two.” Surrell v. Cal. Water Serv. Co., 518 F.3d 1097, 1108

25

(9th Cir. 2008); Davis, 520 F.3d at 1093–94. The Court finds that these elements are easily

26

met here. As to protected activity, Plaintiff states he repeatedly and consistently disputed

27

unpaid wages, including the guaranteed draw, commissions, and business expenses, see

28

Opp’n at 24; consequently, Plaintiff has demonstrated he “made” a complaint under
11
16-CV-3045-JLS (WVG)

1

Section 98.6 and was participating in a protected activity. 6 Further, Plaintiff’s termination

2

qualifies as an adverse action. See Lewis v. United Parcel Serv., Inc., No. 05-cv-02820

3

WHA, 2005 WL 2596448, at *2 (N.D. Cal. Oct. 13, 2005) (“Under California law, an

4

adverse employment action may be an ultimate employment action such as termination or

5

demotion.”), aff’d, 252 Fed. App’x 806 (9th Cir. 2007). Finally, regarding causation,

6

Plaintiff must present evidence “sufficient to raise the inference that protected activity was

7

the likely reason for the termination.” Davis, 520 F.3d at 1094. “[C]ausation can be

8

inferred from timing alone where an adverse employment action follows on the heels of

9

protected activity.” Villiarimo v. Aloha Island Air, Inc., 281 F.3d 1054, 1065 (9th Cir.

10

2002). Here, Plaintiff has demonstrated that he was fired two days after his most recent of

11

numerous complaints about unpaid wages. Opp’n at 21. He states he was fired as a result

12

of his complaints. Id. at 15. Plaintiff therefore establishes a prima facie case of retaliation.

13

Because Plaintiff has established a prima facie case, the burden shifts to Defendant

14

“to articulate a nonretaliatory reason for terminating” Plaintiff. Davis, 520 F.3d at 1094.

15

To meet this burden, the employer must explain why it selected the plaintiff in particular

16

for the layoff. Id. Here, Defendant states that Plaintiff was “terminated for good faith,

17

legitimate, non-retaliatory reasons rooted in his prolonged and continued failure to correct

18

his languishing sales and performance related issues.” MSJ at 18. Defendant states that

19

Plaintiff procured minimal sales of HondaJets in a decade, procured dismal sales of pre-

20

owned and brokered planes in 2015–2016, and that Mr. Cutter was frustrated with

21

Plaintiff’s lack of energy and drive. Id. Defendant claims that Plaintiff failed to develop

22

new leads and attract buyers. Id. Defendant also points to the October 2016 Palm Springs

23

Airshow, during which Mr. Cutter claims to have observed Plaintiff sitting under a tent

24

rather than working to attract customers. Id. at 19. In contrast, Mr. Cutter says that he met

25
26
6

27
28

The language in California Labor Code section 98.6 regarding making “a written or complaint that he or
she is owed unpaid wages” was added to the statute in 2014. The Court finds the purpose of the statute,
i.e., protecting employees who make complaints about wages, is evidence that making an oral or written
complaint is a protected activity.
12
16-CV-3045-JLS (WVG)

1

Ms. Hoover in the summer of 2016, and that he believed she could make sales to high net

2

worth individuals. Id. at 13, 19. On the same day that Mr. Cutter terminated Plaintiff, he

3

hired Ms. Hoover to serve as Plaintiff’s replacement. Id. at 19.

4

The Court finds that Defendant has met its burden of showing a legitimate reason

5

for its challenged actions. Defendant has alleged that Plaintiff had poor job performance

6

and was not driven to make new sales. Defendant claims that Mr. Cutter had found a

7

replacement for Plaintiff whom Mr. Cutter claims he believed would be a better and more

8

successful salesperson. See Pinder v. Emp’t Dev. Dep’t, 227 F. Supp. 3d 1123, 1148 (E.D.

9

Cal. 2017) (“Poor job performance constitutes a legitimate, non-retaliatory reason for

10

taking an adverse employment action.”) (citing Aragon v. Republic Silver State Disposal

11

Inc., 292 F.3d 654, 661 (9th Cir. 2002)).

12

The burden therefore shifts back to Plaintiff “to raise a genuine factual question

13

whether, viewing the evidence in the light most favorable to [him], [Defendant]’s reasons

14

are pretextual.” Chuang v. Univ. of Cal. Davis, Bd. of Trs., 225 F.3d 1115, 1126 (9th Cir.

15

2000); see also Davis, 520 F.3d at 1089. Pretext may be proven “indirectly, by showing

16

that the employer’s proffered explanation is ‘unworthy of credence’ because it is internally

17

inconsistent or otherwise not believable.” Chuang, 225 F.3d at 1127. “As a general matter,

18

the plaintiff in an employment discrimination action need produce very little evidence in

19

order to overcome an employer’s motion for summary judgment. This is because ‘the

20

ultimate question is one that can only be resolved through a searching inquiry—one that is

21

most appropriately conducted by a factfinder, upon a full record.’” Id. at 1124 (quoting

22

Schnidrig v. Columbia Mach., Inc., 80 F.3d 1406, 1410 (9th Cir. 1996)).

23

Here, the Court finds that Plaintiff has raised a genuine issue of material fact as to

24

whether Defendant’s claimed reasons for terminating Plaintiff are pretextual. Although

25

Mr. Cutter testified that Plaintiff’s job performance was poor, Plaintiff has introduced

26

competing evidence that he had a reputation for being an enthusiastic, hardworking

27

employee who obtained the most customer contracts to purchase a HondaJet and retained

28

the commitment of the most customers for such sales. See Pl.’s Facts ¶¶ 9–20. Further,
13
16-CV-3045-JLS (WVG)

1

although Mr. Cutter claims that he repeatedly counseled Plaintiff as to his inadequate sales

2

performance, Mr. Cutter never put any sort of complaint regarding Plaintiff’s performance

3

in writing. Id. ¶ 64. Plaintiff also contests that any criticism was directed personally at

4

Plaintiff rather than toward the sales team as a whole. Id. ¶¶ 65, 67. Mr. Cutter also claims

5

that he told Ms. Hoover that he was considering letting Plaintiff go at the end of 2016, but

6

instead he decided to terminate Plaintiff within the week, days after Plaintiff complained

7

of unpaid wages and just as Defendant was on the verge of having to pay Plaintiff hundreds

8

of thousands of dollars of commissions for which Plaintiff had been working for nearly a

9

decade. See id. ¶¶ 35, 51–57, 62, 70. Plaintiff claims that his termination has allowed

10

Mr. Cutter to pocket the substantial commissions that would otherwise have been payable

11

to Plaintiff. Id. ¶ 73.

12

“Given this evidence, a factfinder could well decide to disbelieve [Mr. Cutter]’s

13

explanation.” See Chuang, 225 F.3d at 1127. The Court therefore DENIES Defendant’s

14

Motion for Summary Judgment on Plaintiff’s claim for retaliation under California Labor

15

Code section 98.6.

16

IV.

Plaintiff’s Breach of Contract Claim

17

Plaintiff’s FAC states that Defendant breached various parts of the Agreement,

18

including requirements that Defendant: (1) provide Plaintiff with a “‘protected’ sales

19

territory in Southern California, Clark County Nevada, Hawaii, and for certain specific

20

sales in Arizona;” (2) “discuss unacceptable deficiencies in job performance prior to any

21

discharge of employment;” (3) “pay Plaintiff a guaranteed amount of $100,000 as a draw

22

against commissions until after the first 24 sales” of HondaJets;” (4) “pay commission

23

according to a specific formula at the rate of 15% on sales of new aircraft, 20% on sales of

24

pre-owned aircraft, and 20% on support fees paid by a manufacturer for a sale;” and

25

(5) “promptly reimburse business expenses.” FAC ¶ 16. Because Plaintiff no longer

26

pursues theories 1, 3, or 5, see Opp’n at 28, the Court analyzes Plaintiff’s claim based only

27

on the alleged failure to warn of unacceptable job performance prior to termination and the

28

alleged failure to pay commissions.
14
16-CV-3045-JLS (WVG)

1

As to job performance, the Agreement states that, “if Employee’s drive and

2

motivation deteriorates to an unacceptable level, and/or if Employee demonstrates a drop

3

in performance/profit and/or an unreasonable increase in expenses, the National Sales

4

manager will discuss these deficiencies with the Employee. If immediate improvement is

5

not noted, Employee may be subject to discharge.” Agreement ¶ 3. As noted above, the

6

Parties disagree as to whether Plaintiff was ever provided with negative feedback regarding

7

his performance. See supra Section III. Because this creates a genuine issue of material

8

fact, the Court DENIES Defendant’s Motion for Summary Judgment as to Plaintiff’s

9

breach of contract claim on this theory.

10

Regarding the payment of commissions, Plaintiff also argues that:

11

Cutter failed to pay commission as required following delivery
to Plaintiff’s customer of a demonstrator HondaJet, known as
#15, in lieu of the new jet previously ordered by the customer but
delayed as to delivery; also, Plaintiff anticipates Cutter will not
act in good faith to reasonably exercise discretion in paying him
commission on ten other sales awaiting delivery following his
termination as required by section 16 of the employment
contract.

12
13
14
15
16
17

FAC ¶ 8(d).

18

These issues have been addressed above, see supra Section II, and the Court has

19

concluded there is an issue of material fact as to whether Plaintiff was paid the full

20

commission owed under the contract for Mr. Beusing’s jet. Consequently, the Court

21

DENIES Defendant’s Motion as to Plaintiff’s cause of action for breach of contract.

22

V.

23

Plaintiff’s Claim for Breach of the Implied Covenant of Good Faith and Fair
Dealing

24

Defendant argues that Plaintiff’s cause of action for breach of the implied covenant

25

of good faith and fair dealing is duplicative of his cause of action for breach of contract.

26

See MSJ at 28. Plaintiff agrees as it relates to two of his theories, but states he “alleges for

27

the first time that Cutter: (a) unreasonably exercised discretion to refuse payment of future

28

commissions at the time of his termination, and (b) unreasonably insisted that he sign a
15
16-CV-3045-JLS (WVG)

1

release giving up his rights and agreeing to an illegal non-compete provision in return for

2

severance pay.” Opp’n at 28 (citing FAC ¶ 22).

3

Every contract contains an implied covenant of good faith and fair dealing. Cates

4

Constr., Inc. v. Talbot Partners, 21 Cal. 4th 28, 43 (1999). Performance in good faith

5

requires the parties to be “faithful[] to an agreed common purpose” and to perform

6

“consistent[ly] with the justified expectations of the other party.” Neal v. Farmers Ins.

7

Exch., 21 Cal. 3d 910, 921 n.5 (1978). The covenant requires “that neither party do

8

anything that will injure the right of the other to receive the benefits of the contract.”

9

Habitat Trust for Wildlife, Inc. v. City of Rancho Cucamonga, 175 Cal. App. 4th 1306,

10

1332 (2009). California courts determine what conduct meets those criteria on a “case by

11

case basis” depending on the “contractual purposes and reasonably justified expectations

12

of the parties.” Careau & Co. v. Sec. Pac. Bus. Credit, Inc., 222 Cal. App. 3d 1371, 1395

13

(1990).

14

Here, Plaintiff argues that Mr. Cutter exercised “sole[] . . . discretion” to pay the

15

commissions and, “[b]y law, Cutter had an obligation to exercise its discretion in good

16

faith.” Opp’n at 29. Plaintiff further claims that “Cutter exercised this discretion in bad

17

faith by conditioning payment on [Plaintiff] acquiescing to both a release of all his legal

18

rights and a non-compete provision,” requests that “violated California law based on Labor

19

Code section 206.5(a) and California Business & Professions Code section 16600.”7 Id.

20

At oral argument, Plaintiff indicated his belief that the severance offer was a sham that

21

Mr. Cutter knew Plaintiff would be forced to reject. Defendant countered that Plaintiff did

22

not attempt to renegotiate the severance offer or provisions Plaintiff found objectionable.

23

Although the Court was originally inclined to find that Plaintiff’s cause of action for

24

breach of the implied covenant of good faith and fair dealing is satisfactorily encompassed

25
26
27
28

7

California Labor Code section 206.5(a) provides that “[a]n employer shall not require the execution
of a release of a claim or right on account of wages due, or to become due, or made as an advance on
wages to be earned, unless payment of those wages has been made.” California Business and Professions
Code section 16600 provides that, “[e]xcept as provided in this chapter, every contract by which anyone
is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.”
16
16-CV-3045-JLS (WVG)

1

by his breach of contract claim, the Court finds Plaintiff’s arguments compelling. Plaintiff

2

clarified at oral argument that his breach of contract cause of action does not encompass

3

the failure to pay commissions on jets not paid for or delivered at the time of Plaintiff’s

4

termination, and that his breach of the implied covenant cause of action is predicated on

5

Defendant’s failure to exercise his sole discretion in good faith with regarding to payment

6

of those commissions by, among other things, conditioning their payment on acceptance

7

of provisions contrary to California law. Consequently, Plaintiff’s cause of action for

8

breach of the implied covenant of good faith and fair dealing is not duplicative of his cause

9

of action for breach of contract. See, e.g., Longest v. Green Tree Servicing LLC, 74 F.

10

Supp. 3d 1289, 1301 (C.D. Cal. 2015); Stewart v. Screen Gems-EMI Music, Inc., 81 F.

11

Supp. 3d 938, 966 (N.D. Cal. 2015).

12

Further, the Court concludes that Plaintiff has raised a genuine issue of material fact,

13

thereby allowing his cause of action for breach of the implied covenant of good faith and

14

fair dealing to proceed to trial. Mr. Cutter testified at his deposition that he wanted to pay

15

Plaintiff the commissions that were not yet due “[b]ecause there had been ten years of

16

efforts on [Plaintiff’s] part” and he “felt that was what Cutter Aviation in our culture . . .

17

would do.” ECF No. 28-7, Ex. 2 at 24:23–25:10. Plaintiff, on the other hand, testified that

18

he “found [the severance agreement] insulting” . . . and “way too confining” because he

19

“was signing away pretty much all [his] rights.” ECF No. 30-6, Ex. 12 at 196:10–15. By

20

signing the agreement, Plaintiff testified, he “couldn’t . . . work in this industry . . . [or]

21

bring suit,” and he “was dependent upon getting commissions only as airplanes were

22

delivered, and then [he did]n’t know what the commission would be.” Id. at 196:15–19.

23

In short, Plaintiff “simply did not trust that they would live up to what they were

24

promising.” Id. at 196:20–21.

25

On this record, the Court must conclude that a genuine issue of material fact exists

26

as to whether the severance agreement was offered in good faith. Accordingly, the Court

27

DENIES Defendant’s Motion as to Plaintiff’s cause of action for breach of the covenant

28

of good faith and fair dealing.
17
16-CV-3045-JLS (WVG)

1

VI.

Plaintiff’s Claim for Punitive Damages

2

Defendant also moves for summary adjudication of Plaintiff’s prayer for punitive

3

damages. See MSJ at 29. Under California law, a plaintiff is entitled to punitive damages

4

if he can show by “clear and convincing evidence[] that the defendant has been guilty of

5

oppression, fraud, or malice.” Cal. Civ. Code § 3294. If the defendant is a corporation,

6

the evidence must demonstrate that an officer, director or managing agent of the defendant

7

committed, authorized or ratified an act of malice, oppression or fraud. 8 Id.; see also White

8

v. Ultramar, Inc., 21 Cal. 4th 563, 572 (1999). Summary judgment on the issue of punitive

9

damages is proper only “when no reasonable jury could find the plaintiff’s evidence to be

10

clear and convincing proof of malice, fraud, or oppression.” Hoch v. Allied-Signal, Inc.,

11

24 Cal. App. 4th 48, 60–61 (1994).

12

Plaintiff states that Defendant “acted toward Plaintiff with a conscious disregard of

13

his rights and safety and with malice, fraud, or oppression so as to justify an award of

14

exemplary and punitive damages under California Civil Code section 3294.” FAC ¶ 11.

15

Plaintiff argues there is substantial evidence to support an award of punitive damages here

16

because Mr. Cutter “disregarded the legal rights of Plaintiff by firing him without notice,

17

without any severance pay, because he dared to complain about how Cutter owed him

18

guaranteed draw, commission, and reimbursement of business expenses” and fired Plaintiff

19

“just as the commission payments came due with delivery of” the HondaJet. Opp’n at 30–

20

31.9

21

///

22
23
8

26

Malice is defined as “conduct which is intended by the defendant to cause injury to the plaintiff or
despicable conduct which is carried on by the defendant with a willful and conscious disregard of the
rights or safety of others.” Cal. Civ. Code § 3294(c)(1). “‘Oppression’ means despicable conduct that
subjects a person to cruel and unjust hardship in conscious disregard of that person's rights.” Cal. Civ.
Code § 3294(c)(2).

27

9

24
25

28

For the first time, Plaintiff makes arguments that Defendant wrongly fired him knowing he “had a history
of cancer” and “in conscious disregard of Plaintiff’s health . . . rights.” Opp’n at 31. There is no mention
of Plaintiff’s health in his Complaint, and the Court therefore declines to consider this argument here.
18
16-CV-3045-JLS (WVG)

1

As indicated above, see supra Section III, the motivation “in deciding to terminate

2

[the plaintiff] is an inherently fact-intensive inquiry to be resolved by a jury.” McCullough

3

v. Xerox Corp., No. 13-cv-4596, 2015 WL 5769620, at *11 (N.D. Cal. Oct. 2, 2015).

4

Because the Court finds in this order that Defendant is not entitled to summary adjudication

5

of any of Plaintiff’s claims, the Court finds summary adjudication is likewise inappropriate

6

as to Plaintiff’s prayer for punitive damages. Accordingly, the Court DENIES Defendant’s

7

Motion for Summary Judgment as to Plaintiff’s prayer for punitive damages.

8

CONCLUSION

9

For the foregoing reasons, the Court DENIES Defendant’s Motion for Summary

10

Judgment (ECF No. 28). The Parties SHALL confer and submit a proposed schedule of

11

pretrial dates and deadlines within ten (10) days of the electronic docketing of this Order.

12

IT IS SO ORDERED.

13
14

Dated: September 13, 2018

15
16
17
18
19
20
21
22
23
24
25
26
27
28
19
16-CV-3045-JLS (WVG)