Columbia Sportswear settled a trade-secrets lawsuit against Crocs. The suit stemmed from Crocs’s hiring a Columbia employee as an independent contractor. Columbia alleged claims of misappropriation of trade secrets, intentional interference with contract, and aiding and abetting the employee’s breach of his duty of loyalty to Columbia. Read a report from the Denver Post here.
Judge Vaughn R. Walker of the Northern District of California today lifted a stay on his decision where he ruled that Proposition 8 was unconstitutional. Judge Walker, however, delayed implementation of the order to lift his stay until August 18.
Defendant-intervenors Dennis Hollingsworth, Gail Knight, Martin Gutierrez, Mark Jansson and ProtectMarriage.com brought a motion to stay the court’s judgment last week to ensure that Proposition 8 remains in effect as they pursue their appeal in the Ninth Circuit. In the alternative, proponents sought a brief stay to allow the court of appeals to consider the matter.
San Francisco asked the court to deny the stay and order the injunction against Proposition 8 to take effect immediately. California’s Governor and Attorney General also opposed any stay.
The Court held that “[b]ecause proponents fail to satisfy any of the factors necessary to warrant a stay, the court denies a stay except for a limited time solely in order to permit the court of appeals to consider the issue in an orderly manner.”
Federal courts look to four factors in deciding whether a stay is appropriate:
(1) whether proponents have made a strong showing that they are likely to succeed on the merits;
(2) whether proponents will be irreparably injured absent a stay;
(3) whether the stay will substantially injure other interested parties; and
(4) whether the stay is in the public interest.
See Nken v. Holder, 556 U.S. —-, 129, S. Ct. 1749, 1761 (2009) (noting overlap with Winter v. Natural Resources Defense Council, Inc., 555 U.S. —-, 129 S. Ct. 365, 374 (2008)). The first two factors “are the most critical.” Nken, 129 S. Ct. at 1757.
The order reads:
None of the factors the court weighs in considering a motion to stay favors granting a stay. Accordingly, proponents’ motion for a stay is DENIED. Doc #705. The clerk is DIRECTED to enter judgment forthwith. That judgment shall be STAYED until August 18, 2010 at 5 PM PDT at which time defendants and all persons under their control or supervision shall cease to apply or enforce Proposition 8.
As reported by Robert Pear of the New York Times yesterday, the Department of Labor has bulked up its staffing of wage and hour investigators by one-third, or 250 investigators. Mr. Pear reports that the Obama administration is paying particular attention to the pay practices in the healthcare industry “after finding that many hospitals and nursing homes do not pay proper overtime to nurses and other employees who work more than 40 hours a week.”
In Aqua-Lung America, Inc. v. American Underwater Products, Inc., 2010 WL 2991512 (N.D. Cal. July 28, 2010) (slip op.), plaintiff moved for reconisderation of an order denying summary judgment on trade secret misappropriation claim for trade secret misappropriation. Judge Richard Seeborg of the Northern District of California held that relying on evidence from an economic expert, joined with evidence that plaintiff was in possession of the alleged trade secrets and that it was able to bring its devices to market in advance of defendants, allows sufficient inferences to support the existence of triable issues of fact as to the trade secrets claim. The court denied reconsideration.
Hon. Howard R. Lloyd today issued an unpublished opinion today confirming that a one year statute of limitations pursuant to Cal. Code Civ. Proc. § 340(a) applies to a plaintiff’s claim for waiting time penalties. Pinheiro v. ACXIOM Information Security Services, Inc., 2010 WL 3058081 (N.D. Cal. August 03, 2010) (Slip Op.)
Plaintiff argued that a three year statute of limiations applied, citing Cortez v. Purolator Air Filtration Products Co., 23 Cal.4th 163, 999 P.2d 706, 96 Cal.Rptr.2d 518 (2000), in which the plaintiff sought both unpaid wages and waiting time penalties. The court rejected this argument and granted defendant’s motion to dismiss this claim without leave to amend.
Plaintiff Carla Pinheiro was an employee of defendant Aerotek, Inc. (Aerotek), an employment agency. She alleges that she was assigned to work as a temporary customer service representative for defendant Quest Diagnostics Clinical Laboratories, Inc. (Quest). The gravamen of Pinheiro’s complaint as to Aerotek is that Aerotek wrongfully terminated her employment (Sixth Claim for Relief) and failed to timely pay her final wages in violation of California Labor Code sections 201-203 (Seventh Claim for Relief). Plaintiff also asserts a claim against Aerotek under California Bus. & Prof.Code section 17200 (Eighth Claim for Relief) based upon the alleged failure to timely pay her final wages.
Aerotek moved to dismiss Pinheiro’s seventh and eighth claims for relief concerning the alleged failure to timely pay her final wages.
The Court found that, based upon the law as it currently stands, plaintiff’s seventh and eighth claims for relief as to Aerotek should be dismissed.
Cal. Labor Code §§ 201-203 COA
At issue was whether Pinheiro’s claim for waiting time penalties is subject to a one-year statute of limitations (Aerotek’s view) or to a three-year limitations period (Pinheiro’s position). The court held that the one-year statute of limitations under Cal.Code Civ. Proc. § 340(a) applies, and plaintiff’s seventh claim for relief therefore is time-barred. See McCoy v.Super. Ct., 157 Cal.App.4th 225, 68 Cal.Rptr.3d 483 (2008) (holding that in action seeking only waiting time penalties, and not wages, the one-year statute of limitations under Cal.Code Civ. Proc. § 340(a) applies). Cf. Ross v. U.S. Bank Nat’l Ass’n, Case No. C07-02951 SI, 2008 WL 4447713 *4 (N.D. Cal., Sept. 30, 2008) (concluding that the three-year statute of limitations period under Cal. Labor Code § 203 applied where plaintiff sought unpaid wages, as well as waiting time penalties). Plaintiff’s cited authority, Cortez v. Purolator Air Filtration Products Co., 23 Cal.4th 163, 999 P.2d 706, 96 Cal.Rptr.2d 518 (2000), in which the plaintiff sought both unpaid wages and waiting time penalties, but the Court held that this “does not compel a contrary conclusion.”
Cal. Bus. & Prof.Code § 17200 COA
The court held that remedies under California Labor Code § 203 are penalties, and not restitution, and therefore cannot be recovered under the UCL. In re Wal-Mart Stores, Inc. Wage & Hour Litig., 505 F.Supp.2d 609, 619 (N.D. Cal.2007); Tomlinson v. Indymac Bank, F.S.B., 359 F.Supp.2d 891, 895 (C.D. Cal.2005). The court dismissed the 17200 claim as to Aerotek without leave to amend.
Alison Marie Miceli, Michael James Grace, and Graham Stephen Paul Hollis for Plaintiff.
Jonathan Morris Brenner, Caroline McIntyre, and Alison P. Danaceau for Defendants
The California Supreme Court today issued its opinion in Lu v. Hawaiian Gardens Casino, Inc., an eagerly anticpiated decision where the issue was whether Labor Code section 351 provides a private cause of action for employees to recover any misappropriated tips from employers. The Court concluded that “section 351 does not contain a private right to sue.”
Labor Code section 351 prohibits employers from taking any gratuity patrons leave for their employees, and declares that such gratuity is “the sole property of the employee or employees to whom it was paid, given, or left for.” Several appellate opinions have held that this prohibition, at least in the restaurant context, does not extend to employer-mandated tip pooling, whereby employees must pool and share their tips with other employees. (See Leighton v. Old Heidelberg, Ltd. (1990) 219 Cal. App. 3d 1062, 1067 (Leighton); see also Etheridge v. Reins Internat. California, Inc. (2009) 172 Cal. App. 4th 908, 921-922; Budrow v. Dave & Buster’s of California, Inc. (2009) 171 Cal.App.4th 875, 878-884; Jameson v. Five Feet Restaurant, Inc. (2003) 107 Cal.App.4th 138, 143.)
Plaintiff Louie Hung Kwei Lu (plaintiff) was employed as a card dealer at defendant Hawaiian Gardens Casino, Inc. (the Casino), from 1997 to 2003. The Casino had a written tip pooling policy. Plaintiff brought a class action against the Casino and its general manager. His complaint alleged that the Casino‟s tip pooling policy amounted to a conversion of his tips, and violated the employee protections under sections 221 (prohibiting wage kickbacks by employer), 351 (prohibiting employer from taking, collecting, or receiving employees‟ gratuities), 450 (prohibiting employer from compelling employees to patronize employer), 1197 (prohibiting payment of less than minimum wage), and 2802 (indemnifying employee for necessary expenditures). The complaint also alleged that the Casino‟s conduct giving rise to each statutory violation constituted an unfair business practice under the unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et seq.).
The trial court granted the Casino‟s motion for judgment on the pleadings on the causes of action based on sections 351 and 450. It agreed with the Casino that neither section contained a private right to sue. The court also granted the Casino‟s successive motions for summary adjudication on the remaining causes of action. Plaintiff appealed.
The Court of Appeal held, “pursuant to the analysis in Leighton, that tip pooling in the casino industry is not prohibited by Labor Code section 351.” However, it reversed the trial court‟s order granting summary adjudication of the UCL cause of action based on section 351. While section 351 itself contains no private right to sue, the Court of Appeal concluded this provision may nonetheless serve as a predicate for a UCL claim because plaintiff presented triable issues of fact as to whether section 351 prohibited certain employees who participated in the tip pool from doing so because they were “agents” of the Casino.
Less than two months later, another Court of Appeal expressly disagreed with the holding on section 351 of the appellate court below. (See Grodensky v. Artichoke Joe’s Casino (2009) 171 Cal.App.4th 1399, review granted June 24, 2009, S172237.) The Supreme Court granted review to resolve the conflict on this narrow issue.
The Court concluded that the statutory language does not “unmistakabl[y]” reveal a legislative intent to provide wronged employees a private right to sue. Based on a review of section 351‟s legislative history, the Court also concluded that there is no clear indication that the legislative history showed an intent to create a private cause of action under the statute.
Justice Chin wrote the opinion for the California Supreme Court, with all other Jusitices concurring. Judge David L. Minning of the Los Angeles Superior Court was the trial judge.
The attorneys for appellant were Spiro Moss, Dennis F. Moss, and Andrew Kopel.
David Arbogast submitted an amicus curiae brief for the Consumer Attorneys of California.
Respondents were represented by Tracey A. Kennedy and Michael St. Denis
Anna Segobia Masters and Jennifer Rappoport submitted an amicus curiae brief for the California Gaming Association on behalf of Defendants and Respondents.
Dennis F. Moss and Tracey A. Kennedy argued in front of the Court.
While this next case doesn’t deal directly with trade secrets, it addresses a common fact pattern in the employee mobility arena. The Second District Court of Appeal in Silguero v. Creteguard, Inc., — Cal. Rptr. 3d —-, 2010 WL 2978222, *1 (Cal. Ct. App. 2d Dist. July 30, 2010) decided the issue of whether a terminated employee working in the area of sales has a viable claim for wrongful termination in violation of public policy under Tameny v. Atlantic Richfield Co., 27 Cal. 3d 167 (1980), against her subsequent employer when the employee’s former employer contacts the employee’s subsequent employer and informs it that the employee had signed an agreement with the former employer which prohibited the employee “from all sales activities for 18 months following either departure or termination,” and the subsequent employer terminated the employee’s employment out of “respect and understanding with colleagues in the same industry,” notwithstanding its belief that “non-compete clauses are not legally enforceable here in California .” Silguero, 2010 WL 2978222, *1.
The Court reasoned that this alleged understanding is “tantamount to a no-hire agreement.” Silguero, 2010 WL 2978222, *6. The Court concluded that such an “understanding” between the new and old employer “would be void and unenforceable under section 16600 because it ‘unfairly limit[s] the mobility of an employee’ and because [the old employer] ‘should not be ‘allowed to accomplish by indirection that which it cannot accomplish directly.’” Silguero, 2010 WL 2978222, *1 (citing VL Systems, Inc. v. Unisen, Inc., 152 Cal. App. 4th 708, 716-17 (2007).
[P]ermitting a Tameny claim against Creteguard under the circumstances of this case furthers the interest of employees in their own mobility and betterment, “‘deemed paramount to the competitive business interests of the employers, where neither the employee nor his new employer has committed any illegal act accompanying the employment change.’” (Dowell v. Biosense Webster, Inc. (2009) 179 Cal.App.4th 564, 575, quoting Diodes, Inc. v. Franzen, supra, 260 Cal.App.2d at p. 255 [in Dowell, both employees and their current employers sued a former employer to invalidate a noncompetition agreement].) For all of the foregoing reasons, we conclude that Silguero has pleaded a viable Tameny claim against Creteguard predicated on the public policy in section 16600.
Id. *6.
The Court created a new avenue of liability for employers, who must now carefully decide how to respond to cease and desist letters from old employers. Creteguard would almost certainly have fared better had it avoided the unnecessary editorializing in its termination letter.
In a 3-0 opinion, the Second District held that while California state courts do not apply the FAA vactur provisions, because of the choice of law provision in the arbitration agreement, the trial judge was required to utilize the vacatur provisions of the FAA in passing on the amended petition to vacate the partial arbitration awards.
In Countrywide Financial Corp. v. Bundy, — Cal.Rptr.3d —-, 2010 WL 3064481 (Cal. Ct. App. 2d Dist. August 06, 2010), Defendants, Thomas Bundy, Misty Sanchez, Kevin Prevost and David Godina, appealed from an order vacating partial arbitration awards against plaintiffs, Countrywide Financial Corporation and Full Spectrum Lending, Inc.
The underlying case involved two arbitrations that were ultimately consolidated. The Bundy-Sanchez-Prevost arbitration demand sought classwide arbitration of claims for unpaid wages including incentive compensation, waiting penalties, costs and attorney fees pursuant to Labor Code section 200 et seq., Business and Professions Code section 17200 et seq., and common law principles. The Godina arbitration demand alleged many of the same matters in terms of plaintiffs’ operations.
The arbitrator issued partial arbitration awards in favor of defendant. Judge Elizabeth A. White vacated the partial arbitration awards on the ground the arbitrator committed a number of legal errors. The Second District concluded that because of the unambiguous choice of law language in the agreements to arbitrate, “we must apply the vacatur provisions applicable before a United States District Court in a case subject to the Federal Arbitration Act. (9 U.S.C. § 1 et seq.)” Applying the vacatur provisions of the Federal Arbitration Act, the Court of Appeal reversed, finding “no grounds permitted the partial awards to be vacated.”
The Court expressed doubt regarding whether the “manifest disregard of the law standard” survives Hall Street Associates L.L.C., but it chose to evaluate the interim awards under both title 9 United States Code section 10(a)(4) and the manifest disregard of the law test. ; the course chosen by the Supreme Court in Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., supra, 559 U.S. at page —- [130 S.Ct. at page 1768].” The Court described the manifest disregard standard as follows:
The first element is the arbitrator must know the governing rule of law and refuse to apply it or ignore it. The second element is that the law ignored by the arbitrator is well-defined, explicit, and clearly applicable to the case.
Presiding Justice Paul A. Turner wrote the opinion. Hon. Sandy R. Kriegler and Hon. Richard M. Mosk concurred.
Defendants and appellants were represented by Caryl L. Boies, Sigrid S. McCawley and Lauren E. Fleischer of Boies, Schiller & Flexner.
Plaintiffs and Respondents were represented by Andrew M. Paley, Gregg A. Fisch and Jennifer Sloane Abramowitz of Seyfarth Shaw.
Significantly, the Ninth Circuit Court of Appeals yesterday amended its opinion in Narayan v. EGL, Inc., — F.3d —-, 2010 WL 3035487 (9th Cir. July 13, 2010). The Court had written that “The fact that the Drivers here had contracts ‘expressly acknowledging that they were independent contractors‘ is simply not significant under California’s test of employment.”
The Court replaced this holding with “That the Drivers here had contracts ‘expressly acknowledging that they were independent contractors’ is simply not dispositive under California’s test of employment.”
In this next case, Judge James Lorenz of the Southern District of California runs through a federal question analysis and concludes that Plaintiff’s mere reference to the fact his intellectual property is patented does not convert a state law UTSA claim into a federal question that can impart original jurisdiction in the federal courts. Markey v. Verimatrix, Inc., 2010 WL 2976164 (S.D. Cal. July 22, 2010) (slip op.).
A careful review of plaintiff’s misappropriation of trace secret claim as found in the complaint does not suggest a basis for federal jurisdiction. The issue presented for decision is not whether plaintiff’s patents are valid or invalid or are or are not being infringed but whether his intellectual property was misappropriated. Mere reference to the fact that plaintiff’s intellectual property was patented does not turn on a substantial question of federal law. Plaintiff is not seeking to prove his trade secrets are protected under federal patent law and that defendant infringed on the patent. And the Court is not called to determine in any manner the scope and meaning of plaintiff’s patent in order to consider the alleged trade secret misappropriation. The misappropriation of trade secret claim does not ‘turn on substantial questions of federal law,’ and does not ‘really and substantially involv[e] a dispute or controversy respecting the validity, construction or effect of [federal] law.’ “ Williston Basin, 524 F.3d at 1102. Instead, the sole remaining claim in the complaint is based solely on California law. As a result, the Court does not have original jurisdiction over plaintiff’s claim.
California Employment Lawyer 