McCormack v. Medcor, Inc

Filing 34

MEMORANDUM Opinion and Order. Medcor's motion to dismiss Counts II, IV, and V 26 is granted. Count II is dismissed with prejudice, and Counts IV and V are dismissed without prejudice to allow McCormack to replead under Illinois law. McCormack may file an amended complaint, consistent with this opinion, no later than December 1, 2014. Motion hearing date of 11/6/14 is stricken. It is so ordered. Signed by the Honorable Marvin E. Aspen on 11/4/2014. Notice mailed by judge's staff (ntf, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
CINDI MCCORMACK,

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Plaintiff,
v.
MEDCOR, INC.,
Defendant.

No. 14 CV 3551
Hon. Marvin E. Aspen

MEMORANDUM OPINION AND ORDER
MARVIN E. ASPEN, District Judge:
Presently before us is Defendant’s motion to dismiss Counts II, IV, and V of Plaintiff’s
complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). For the reasons stated below,
we grant Defendant’s motion in its entirety.
BACKGROUND
Plaintiff Cindi McCormack (“McCormack”) filed a complaint against Defendant Medcor,
Inc. (“Medcor”), alleging that her former employer retaliated against her for taking protected
medical leave pursuant to the Family Medical Leave Act (“FMLA”) (Count 1); discriminated
against her on the basis of her disability and wrongfully terminated her in violation of public
policy (Count 2); breached its duties under the employment contract (Count 3); breached an
implied covenant of good faith and fair dealing in the employment contract (Count 4); and
violated the California Labor Code (Count 5).
Medcor, a corporation headquartered in Illinois, maintains offices and does business in
multiple states. (Compl. ¶ 2.) It provides services to clients on-site at large client locations and
through telephone calls at smaller locations. (Id.) When Medcor first hired McCormack in
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April 2003, she resided in Washington state. (Id. ¶ 7; Mem. at 2.) She moved to California in
May 2011 for personal reasons. (Resp. at 2.) McCormack worked from home and also traveled
to Medcor’s clinics in Washington, Colorado, Wyoming, New Mexico, and Texas. (Id.) While
Medcor maintains offices in California, McCormack’s work was not related to its business in
that state. (Compl. ¶ 2; Mem. at 2.)
In December 2011, McCormack suffered a “nervous breakdown” and went on medical
leave at her doctor’s recommendation. (Compl. ¶ 10.) Medcor granted McCormack’s request
for leave pursuant to the FMLA, with a return date of January 31, 2012. (Id.) When
McCormack requested a leave extension until February 19, 2012, based on her doctor’s
recommendation, Medcor informed her that if she did not return to work by February 1, 2012,
the company would begin looking for her replacement. (Id. ¶¶ 11–12.) McCormack
communicated with her supervisors and the human resources department located in Illinois
regarding her separation. (Id. ¶¶ 12–20.) She was in California at the time her employment
ended. (Resp. at 2.)
McCormack originally filed this action in the Superior Court of California, County of San
Joaquin, on August 20, 2013. (See Compl.) Medcor removed the case to the United States
District Court for the Eastern District of California on September 26, 2013. (Resp. at 2.)
Medcor then moved to transfer venue to this court pursuant to 28 U.S.C. § 1404(a), which the
California district court granted on May 14, 2014. (Id.)
STANDARD OF REVIEW
A motion to dismiss under Rule 12(b)(6) is meant to test the sufficiency of the complaint,
not to decide the merits of the case. Gibson v. City of Chi., 910 F.2d 1510, 1520 (7th Cir. 1990).
To survive a motion to dismiss, the complaint must contain a “short and plain statement of the

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claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). Specifically,
“a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief
that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 1949 (2009)
(citing Bell Atl. Corp. v. Twombly, 540 U.S. 544, 555, 127 S. Ct. 1955, 1964–65 (2007)). The
plausibility standard “is not akin to a ‘probability requirement,’ but it asks for more than a sheer
possibility that a defendant has acted unlawfully.” Id. Thus, while a complaint need not give
“detailed factual allegations,” it must provide more than “labels and conclusions, and a formulaic
recitation of the elements of a cause of action.” Twombly, 540 U.S. at 545, 127 S. Ct. at 1964–
65; Killingsworth v. HSBC Bank Nevada, N.A., 507 F.3d 614, 618–19 (7th Cir. 2007). The
statement must be sufficient to provide the defendant with “fair notice” of the claim and its basis.
Twombly, 540 U.S. at 545, 127 S. Ct. at 1964 (quoting Conley v. Gibson, 355 U.S. 41, 47, 78
S. Ct. 99, 102 (1957)); Tamayo v. Blagojevich, 526 F.3d 1074, 1083 (7th Cir. 2008). In
evaluating a motion to dismiss, we must accept all well-pleaded allegations in the complaint as
true and draw all reasonable inferences in the plaintiff’s favor. Thompson v. Ill. Dep’t of Prof’l
Reg., 300 F.3d 750, 753 (7th Cir. 2002).
DISCUSSION
McCormack, a California resident, brings this action against Medcor, the Illinoisheadquartered employer that discharged her. (Compl. ¶ 1; Mem. at 2.) McCormack argues that
California law applies to the merits of this case, while Medcor argues that Illinois law applies.
Relying on Illinois law, Medcor also asserts that Counts II, IV, and V should be dismissed for
failure to state a claim. We will first resolve which state law applies, and then evaluate the
sufficiency of McCormack’s complaint.

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I.

CHOICE-OF-LAW
Before we evaluate whether McCormack adequately pleads a cause of action, we must

first determine whether Illinois or California law governs the claims at issue. When a defendant
transfers venue under 28 U.S.C. § 1404(a), the transferee court must generally apply the law of
the state where the action originated to the plaintiff’s claims. Van Dusen v. Barrack, 376 U.S.
612, 639, 84 S. Ct. 805, 821 (1964); Anderson v. Aon Corp., 614 F.3d 361, 365 (7th Cir. 2010).
This principle also requires use of the originating state’s choice-of-law rules. Downing v.
Abercrombie & Fitch, 265 F.3d 994, 1005 (9th Cir. 2001); Smidt v. Drobny, 96 C 8360, 1997
WL 797669, at *3 (N.D. Ill. Dec. 24, 1997) (citing Piper Aircraft Co. v. Reyno, 454 U.S. 235,
244, 102 S. Ct. 252, 260 (1981)). This action was transferred from California, thus we will look
to the choice-of-law rules applied in that state.
California uses a three-part governmental interest test to resolve choice-of-law issues.
Sullivan v. Oracle Corp., 51 Cal. 4th 1191, 1202, 254 P.3d 237, 245 (Cal. 2011); Kearney v.
Salomon Smith Barney, Inc., 39 Cal. 4th 95, 107–08, 137 P.3d 914, 922 (Cal. 2006). Using the
governmental interest approach, the court must determine: (1) whether the foreign law materially
differs from California law; (2) the nature and extent of each state’s interest in the application of
its own law; and (3) which state’s interest would be more impaired if its laws were not applied.
Sullivan, 51 Cal. 4th at 1202, 254 P.3d at 245; Kearney, 39 Cal. 4th at 107–08, 137 P.3d at 922.
Absent a governing contractual choice-of-law stipulation, California courts examine the relative
contacts with each state to determine each jurisdiction’s interest. Edwards v. U.S. Fid. & Guar.
Co., 848 F. Supp. 1460, 1465 (N.D. Cal. 1994); Expansion Pointe Props. Ltd. P’ship v.
Procopio, Cory, Hargreaves & Savitch, LLP, 152 Cal. App. 4th 42, 59, 61 Cal. Rptr. 3d 166, 179
(Cal. Ct. App. 2007). This inquiry includes where the contract was negotiated, executed, and

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performed, the location of the subject matter of the contract, and the parties’ residence and place
of business. Edwards, 848 F. Supp. at 1465 (quoting Restatement (Second) of Conflict of Laws
§ 188(2)); Expansion Pointe, 152 Cal. App. 4th at 59, 61 Cal. Rptr. 3d at 179.
A. California and Illinois law Materially Differ
We will first assess whether Illinois and California law materially differ with regard to
Counts II, IV, and V. For the reasons stated below, we find that they do.
i. Count II: Wrongful Termination
Count II of McCormack’s complaint alleges that Medcor discriminated against her on the
basis of her disability, and wrongfully terminated her in violation of public policy. McCormick
brings this count as a common law claim under the disability discrimination provisions of the
California Fair Employment and Housing Act (“FEHA”). See Cal. Gov. Code § 12940.
California and Illinois both recognize a common law cause of action for wrongful termination in
violation of public policy, but Illinois’s law is far narrower, as discussed below.
The FMLA and the Americans with Disabilities Act (“ADA”) both provide statutory
remedies for wrongful termination. 29 U.S.C. § 2615; 42 U.S.C. § 12112. Medcor concedes that
in addition to those remedies, California law permits distinct common law claims for wrongful
termination. (Mem. at 6.) Hernandez v. MidPen Hous. Corp., 13 C 5983, 2014 WL 2040144,
at *5 (N.D. Cal. May 16, 2014); Violan v. On Lok Senior Health Serv., 12 C 5739, 2013 WL
6907153, at *5 (N.D. Cal. Dec. 31, 2013); see Stevenson v. Superior Court, 16 Cal. 4th 880, 889,
941 P.2d 1157, 1161 (Cal. 1997); Tameny v. Atl. Richfield Co., 27 Cal. 3d 167, 170, 610 P.2d
1330, 1331 (Cal. 1980). Illinois courts, however, do not usually allow common law claims
where a statutory anti-retaliation provision provides an alternative remedy. O’Connell v. Cont’l
Elec. Constr. Co., 11 C 2291, 2011 WL 4916464, at *10 (N.D. Ill. Oct. 17, 2011); Stebbings v.

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Univ. of Chi., 312 Ill. App. 3d 360, 366, 726 N.E.2d 1136, 1141 (1st Dist. 2000). Indeed,
McCormack concedes that she could not file her common law tort claim for discriminatory
discharge in Illinois. (Resp. at 4.) Therefore, California and Illinois law conflict with regard to
Count II.
ii. Count IV: Breach of Implied Covenant of Good Faith and Fair Dealing
In Count IV, McCormack alleges that Medcor breached an implied covenant of good
faith and fair dealing in the employment contract. Specifically, she claims that Medcor breached
the implied covenant by terminating her in interference with the performance of the contract and
by refusing to pay her bonus. (Compl. ¶¶ 21, 45–46.)
California law implies a covenant of good faith and fair dealing in every contract. Kelly
v. Skytel Commc’ns, Inc., 32 F. App’x 283, 285 (9th Cir. 2002); Carma Developers (Cal.), Inc. v.
Marathon Dev. Cal., Inc., 2 Cal. 4th 342, 371, 826 P.2d 710, 726 (Cal. 1992); see Restatement
(Second) of Contracts § 205 (1981). For example, the California Supreme Court has noted that
“the covenant might be violated if termination of an at-will employee was a mere pretext to cheat
the worker out of another contract benefit to which the employee was clearly entitled, such as
compensation already earned.” Guz v. Bechtel Nat. Inc., 24 Cal. 4th 317, 353 n.18, 8 P.3d 1089,
1112 (Cal. 2000). Illinois law, on the other hand, does not recognize an independent cause of
action for breach of an implied duty of good faith and fair dealing between an employer and an
employee. Marron v. Eby-Brown Co., LLC, 11 C 2584, 2012 WL 182234, at *3 (N.D. Ill.
Jan. 23, 2012); Harrison v. Sears, Roebuck & Co., 189 Ill. App. 3d 980, 993, 546 N.E.2d 248,
256 (4th Dist. 1989). Therefore, California and Illinois law conflict with regard to Count IV.

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iii. Count V: Failure to Pay Wages Upon Termination
In Count V, McCormack alleges that Medcor violated the California Labor Code by
failing to pay her a bonus that she earned before her termination. (Compl. ¶¶ 21, 51.)
McCormack argues that California and Illinois law do not substantively differ on this issue
because both states require employers to pay wages earned at or around the time of separation.
(Resp. at 7–8.) Medcor, on the other hand, contends that the states’ laws do differ because
Illinois law would not consider McCormack’s bonus to be an “earned wage.” (Reply at 8–9.)
The California Labor Code provides that “[i]f an employer discharges an employee, the
wages earned and unpaid at the time of discharge are due and payable immediately.” Cal. Labor
Code § 201(a). The Illinois Wage Payment and Collection Act (“IWPCA”) provides that
“[e]very employer shall pay the final compensation of separated employees in full, at the time of
separation, if possible, but in no case later than the next regularly scheduled payday for such
employee.” 820 ILCS 115/5. Both states impose penalties if wages are not timely paid upon
termination. Cal. Labor Code § 203; 830 ILCS 115/14(a).
Nonetheless, Medcor argues that there is a conflict between Illinois and California law
over the type of bonus that an employee is entitled to receive upon separation. In California,
incentive-based bonuses fit under the California Labor Code’s definition of “wages,” which are
owed at the time of discharge. Kempf v. Barret Bus. Servs., Inc., 6 C 3161, 2007 WL 4167016,
at *2 (N.D. Cal. Nov. 20, 2007); Neisendorf v. Levi Strauss & Co., 143 Cal. App. 4th 509, 521–
22, 49 Cal. Rptr. 3d 216, 224–25 (Cal. Ct. App. 2006). Alternatively, Illinois courts have held
that conditional or discretionary bonuses are not “earned” income recoverable under the IWPCA.
Hess v. Kanoski & Assocs., 9 C 3334, 2014 WL 1282572, at *7 (C.D. Ill. Mar. 28, 2014);
McLaughlin v. Sternberg Lanterns, Inc., 395 Ill. App. 3d 536, 544, 917 N.E.2d 1065, 1071 (2nd

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Dist. 2009). Illinois’s exclusion of conditional bonuses from the meaning of “earned wages”
means that the two states’ laws materially differ with regard to Count V.
Because California and Illinois law materially differ with regard to Counts II, IV, and V,
we will examine and then compare each state’s interest.
B. Illinois’s and California’s Interests
Having found that California and Illinois law materially differ, we turn to the second step
in California’s governmental interest test and consider each state’s interest in applying its law.
McCormack argues that California law should apply because she is a California resident, the
injury (her termination) occurred in California, and California has the greater interest in
protecting its residents in the employment context. (Resp. at 2, 5.) California plainly has a
strong interest in providing its residents with employment protection. California courts have
held that the state’s FEHA is a substantial, fundamental, and well-established public policy of the
state. City of Moorpark v. Superior Court, 18 Cal. 4th 1143, 1160–61, 959 P.2d 752 (Cal. 1998);
Stevenson v. Superior Court, 16 Cal. 4th 880, 895, 941 P.2d 1157, 1165 (Cal. 1997). State law
even extends to nonresidents when they perform work in the state. Sullivan, 51 Cal. 4th at 1206,
254 P.3d at 246–47. “[A] company that conducts business in numerous states ordinarily is
required to make itself aware of and comply with the law of a state in which it chooses to do
business.” Id. at 1205, 254 P.3d at 246.
While California has an interest in protecting its residents and workers, Illinois also has
an interest in having its law applied in this matter. As mentioned earlier, Medcor is
headquartered in Illinois. (Mem. at 2.) Medcor sent McCormack her original offer of
employment from Illinois to Washington, where she resided at the time. (Id.) The decisions
about McCormack’s medical leave were made by the company’s employees in Illinois, and her

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personnel file is located at company headquarters in that state. (Id.) Although Medcor does
business in California, McCormack’s work was not related to its business there. (Compl. ¶ 2;
Mem. at 2.) McCormack spent approximately forty-percent of her time working from home in
California and the remainder traveling to Medcor clinics in other Western states. (Resp. at 2.)
Based on these allegations, California and Illinois both have an interest in applying their state’s
law.
C. Illinois’s Interests Would be More Impaired
When application of the governmental interest approach finds a “true conflict” between
two states’ interest in having their own laws apply, the court must conduct a “comparative
impairment analysis.” Engel v. CBS Inc., 981 F.2d 1076, 1081 (9th Cir. 1992); Paulo v. Bepex
Corp., 792 F.2d 894, 895 (9th Cir.1986). Here, both California and Illinois have an interest in
protecting their citizens’ employment rights, but each state’s laws governing those rights
materially differ. For the reasons stated below, Illinois’ interests would be more impaired if its
law was not applied.
California courts analyze the relevant contacts with each state to determine the strength
of governmental interests. Edwards, 848 F. Supp. at 1465; Expansion Pointe, 152 Cal. App. 4th
at 59, 61 Cal. Rptr. 3d at 179. Relevant contacts include: “(1) the place of contract formation;
(2) the place of negotiation; (3) the place of performance; (4) the location of the subject matter of
the contract; and (5) the residence or place of incorporation and place of business of the parties.”
Edwards, 848 F. Supp. at 1465 (quoting Restatement (Second) of Conflict of Laws, § 188(2));
Savitch, 152 Cal. App. 4th at 59, 61 Cal. Rptr. 3d at 179. Here, the most relevant factors favor
Illinois’s interests above California’s. The contract negotiation and execution occurred between
Medcor in Illinois and McCormack in Washington. (Mem. at 2.) Although McCormack now

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resides in California, her work did not relate to Medcor’s California business. (Compl. ¶ 2;
Mem. at 2.) McCormack performed her duties under the contract from her home in California
and from several Western states, but not usually from Illinois, where she spent only six days in
2011. (Resp. at 2.) On the other hand, she did report to supervisors in Illinois. (Mem. at 2.)
Finally, the decisions regarding her medical leave and termination were made by Medcor
employees in Illinois. (Id.)
Medcor argues that this case is similar to Shorter v. Peaches Uniform, Inc, 10 C 2232,
2012 WL 3882322 (E.D. Cal. Sept. 6, 2012). In Shorter, an employee who worked out of her
home in California for a Texas employer filed a wrongful termination lawsuit in California. The
court held that Texas’s interest in applying its laws outweighed California’s interest because
“virtually every relevant contact” was with Texas and the only connection to California was the
employee’s residence. Id. at *5. The employer was based in Texas, the employment agreement
was formed in Texas, the employee’s work was submitted to supervisors in Texas, and the
employee’s work, performed remotely from California, was unrelated to the employer’s business
in California. Id.
Here, as in Shorter, only McCormack’s residence weighs in favor of applying California
law. The dispute is unrelated to her California residence. Instead, it turns on an employment
agreement with an Illinois employer that was formed when McCormack was not even a
California resident. (Mem. at 2.) Medcor performed the majority of her work outside of
California, (Resp. at 2), and the work she did perform from her home in California was unrelated
to Medcor’s business in the state, (Mem. at 2). Moreover, McCormack makes no attempt to

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distinguish Shorter from the facts of this case.1 Accordingly, we find that Illinois has more
relevant contacts to the present case than California, and thus Illinois’s interests would be more
impaired if we did not apply its law.
In sum, using California’s governmental interest choice-of-law test, we conclude that
Illinois law applies to the present case.
II.

FAILURE TO STATE A CLAIM
Having determined that Illinois law applies, we now turn to the substance of Medcor’s

motion to dismiss. First, Count II alleges discriminatory discharge under common law.
McCormack concedes that this claim cannot stand under Illinois law. (Resp. at 4.) See
O’Connell, 2011 WL 4916464 at *10; Stebbings, 312 Ill. App. 3d at 366, 726 N.E.2d at 1141.
Therefore, we dismiss Count II with prejudice.
Next, Count IV of McCormack’s complaint alleges that Medcor breached an implied
covenant of good faith and fair dealing in the employment agreement by terminating her. As
discussed above, Illinois does not recognize an independent cause of action against an employer
for such a duty. Marron, 2012 WL 182234 at *3. Accordingly, Count IV is dismissed without
prejudice. McCormack may amend her complaint, if she can do so consistent with Illinois state
law.
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The parties did not identify many cases that address choice-of-law questions where an
employee in California worked remotely for an out-of-state employer. Our research likewise
found a limited number of applicable cases, but one that we will distinguish here is Gelber v.
Leonard Wood Mem’l For Eradication of Leprosy, 7 C 1785, 2007 WL 1795746 (N.D. Cal. June
21, 2007). In Gelber, a plaintiff who worked from home in California filed a Title VII claim in
California courts against his out-of-state employer. Id. at *1. The plaintiff, a California resident,
worked from home and traveled domestically and internationally on behalf of the employer,
which was based out-of-state. Id. at *1. The court denied the employer’s motion to transfer
venue, largely because the plaintiff resided in California and performed a significant portion of
his employment there, but also because his Title VII claim afforded his choice of forum “even
stronger deference.” Id. at *3. In part because this is not a Title VII case, we find that the
court’s analysis in Shorter is more persuasive than Gelber.
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Finally, in Count V, McCormack alleges that Medcor violated the California Labor Code
by failing to pay wages upon her termination. Because McCormack brought this claim under
specific provisions of California statute, but Illinois law applies to this action, we dismiss
Count V without prejudice. McCormack may replead this count under Illinois law, to the extent
possible.
CONCLUSION
For the reasons set forth above, Medcor’s motion to dismiss Counts II, IV, and V is
granted. Count II is dismissed with prejudice, and Counts IV and V are dismissed without
prejudice to allow McCormack to replead under Illinois law. McCormack may file an amended
complaint, consistent with this opinion, no later than December 1, 2014. It is so ordered.

____________________________________
Marvin E. Aspen
United States District Judge

Dated: November 3, 2014
Chicago, Illinois

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