LU v. AT&T Serv. Inc.

• Decision Date: 21 June 2011
• Docket Number: Case No: C 10-05954 SBA
• Court: U.S. District Court — Northern District of California
• Parties: HERMAN LU, an individual, on behalf of himself and all others similarly situated, Plaintiff, v. AT&T SERVICES, INC.; AT&T MANAGEMENT SERVICES LP; AT&T MOBILITY SERVICES LLC; SOUTHWESTERN BELL; YELLOW PAGES INC.; AT&T OPERATIONS, INC.; YELLOWPAGES.COM LLC; and DOES 1 through 10, inclusive, Defendants.

HERMAN LU, an individual, on behalf of himself and all others similarly situated, Plaintiff, v. AT&T SERVICES, INC.; AT&T MANAGEMENT SERVICES LP; AT&T MOBILITY SERVICES LLC; SOUTHWESTERN BELL; YELLOW PAGES INC.; AT&T OPERATIONS, INC. YELLOWPAGES.COM LLC; and DOES 1 through 10, inclusive, Defendants.

Case No: C 10-05954 SBA

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA OAKLAND DIVISION

Dated: June 21, 2011

ORDER GRANTING DEFENDANTS' MOTION TO DISMISS CERTAIN CLAIMS

Docket 7

Plaintiff Herman Lu brings the instant action on behalf of himself, as a collective action under the federal Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 216(b), and as a class action with respect to Defendants' alleged violations of California labor law. The parties are presently before the Court on Defendants' Motion to Dismiss, which is brought pursuant to Federal Rule of Civil Procedure 12(b)(6). Dkt. 7. The gravamen of the motion is that Plaintiff is barred from pursuing any FLSA claims on a collective action basis, as well as any individual or class claims based on California wage and hour law, under the terms of a General Release and Waiver ("Release") contained in a severance agreement that he previously executed. Having read and considered the papers filed in connection with this matter and being fully informed, the Court hereby GRANTS Defendants' motion. The Court, in its discretion, finds this matter suitable for resolution without oral argument. See Fed.R.Civ.P. 78(b); N.D. Cal. Civ. L.R. 7-1(b).

I. BACKGROUND¹

A. FACTUAL SUMMARY

Plaintiff was previously employed by AT&T Services, Inc., where he worked as an On-Call Worker. Compl. ¶ 13; Dkt. 1. On or about December 18, 2009, Plaintiff signed a severance agreement in connection with the termination of his employment. Moore Decl. Ex. A at 1, Dkt. 8. Under the terms of the agreement, Plaintiff received $21,700 in severance pay, plus medical and other insurance coverage for an additional 12 months. Id. at 1, 3. In consideration for receiving such benefits, Plaintiff agreed to waive any claims he may have against Defendants. Id. at 7. The Release states, in pertinent part:

IV. GENERAL RELEASE AND WAIVER OF CLAIMS

....

In exchange for the Plan benefits described under Section III of this General Release and Waiver, I hereby release the Plan, AT&T Inc., and the Participating Company and their current and former parents, subsidiaries, affiliates, successors and assigns ("the Companies") . . . from any claims, liabilities, demands or causes of action, whether from discrimination, breach of contract, or any other claim,.... that I may have or claim to have as of or prior to the date of this General Release and Waiver....

Id. § IV at 7 (emphasis added). In addition, Plaintiff agreed that he had been paid all wages and overtime owed to him, and specifically waived his right to participate in or initiate any class or collective action against Defendants. Id.

B. PROCEDURAL HISTORY

Plaintiff filed the Complaint in this Court on December 29, 2010, which alleges five claims, as follows: (1) unpaid wages, Cal. Labor Code §§ 216, 510 and 1194 and FLSA, 29 U.S.C. § 216(b); (2) failure to pay overtime, Cal. Labor Code §§ 510 and 1194, FLSA 216(b); (3) inaccurate wage and hour statements, Cal. Labor Code § 226; (4) waiting timepenalties, Cal. Labor Code §§ 201-203; (5) Conversion, Cal. Civ. Code §§ 3294 and 3336; (6) unfair competition, Cal. Bus. & Prof. Code § 17200; and (7) Private Attorney General Act, Cal. Labor Code § 2698, et seq. Plaintiff seeks to have the action certified as a collective action under the FLSA and class action under Rule 23 as to the remaining claims.

Defendant AT&T Services, Inc., AT&T Mobility Services, LLC, Southwestern Bell, Yellow Pages, Inc., and Yellowpages.com, joined by AT&T Management Services (collectively "Defendants"), contend in their motion to dismiss that the Release bars: (1) Plaintiff's individual wage and hour claims under California law (contained in the first through seventh claims for relief); (2) Plaintiff's class action law wage and hour claims under California law (contained in the first through seventh claims for relief); and (3) Plaintiff's collective action claims under the FLSA (contained in the first and second claims for relief).² Plaintiff does not address Defendants' arguments with respect to the viability of his state law claims, but instead, asserts that the waiver of his FLSA collective action claims violates public policy and is otherwise unconscionable.

II. LEGAL STANDARD

A complaint may be dismissed under Rule 12(b)(6) for failure to state a claim if the plaintiff fails to state a cognizable legal theory, or has not alleged sufficient facts to support a cognizable legal theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). The Court accepts as true all well-pleaded allegations of material fact, and construes them in the light most favorable to the non-moving party. Erickson v. Pardus, 551 U.S. 89, 93-94 (2007); Daniels-Hall v. National Educ. Ass'n, 629 F.3d 992, 998 (9th Cir. 2010). In adjudicating a Rule 12(b)(6) motion, the Court may consider the allegations of the complaint and matters that are properly the subject of judicial notice under Federal Rule of Evidence 201. Barron v. Reich, 13 F.3d 1370, 1377 (9th Cir. 1994). Where a complaint or claim is dismissed, leave to amend generally is granted, unless further amendment would be futile. Chaset v. Fleer/Skybox Int'l, 300 F.3d 1083, 1087-88 (9th Cir. 2002).

III. DISCUSSION

Under California law, the interpretation of a release is governed by the same principles applicable to any other contract. See Cohen v. Five Brooks Stable, 159 Cal.App.4th 1476, 1483 (2008). Contracts are to be interpreted to give effect to the mutual intention of the parties at the time of contracting. Cal. Civ. Code § 1638; Waller v. Truck Ins. Exch., 11 Cal.4th 1, 18 (1995). "[S]uch intent is to be inferred, if possible, solely from the written provisions of the contract," read in their ordinary and popular sense, unless it appears the parties used the terms in some special sense. AIU Ins. Co. v. FMC Corp., 51 Cal.3d 807, 822 (1995) (citing Cal. Civ. Code § 1639). "If the contract language is clear and explicit, it governs." Foster-Gardner, Inc. v. National Union Fire Ins. Co., 18 Cal.4th 857, 868 (1998) (internal quotations and citation omitted). A contract is "to be construed as a whole, effecting harmony among and giving meaning to all the parts thereof." Hi-Desert County Water Dist. v. Blue Skies Country Club, Inc., 23 Cal.App.4th 1723, 1734 (1994) (internal quotation marks omitted). The "interpretation of a contract generally presents a question of law for this court to determine[.]" DVD Copy Control Ass'n, Inc. v. Kaleidescape, Inc., 176 Cal.App.4th 697, 713 (2009).

A. FLSA CLAIMS

1. Enforceability of the Collective Action Waiver

Plaintiff seeks to pursue his first and second claims on an individual basis and as a collective action under § 216(b) of the FLSA.³ In their motion, Defendants argue that such claims are foreclosed under the terms of the Release, wherein Plaintiff expressly agreed that he "will not bring or participate in any class action or collective action against the Company which asserts, in whole or in part, any claim(s) which arose to the date [he]signed this Agreement, whether or not such claims are covered by the Release." Moore Decl. Ex. A at 7 (emphasis added). Plaintiff counters that the waiver is unenforceable because it requires him to forego rights under the FLSA that are unwaivable. Pl.'s Opp'n at 3.

Generally, an individual employee's rights under the FLSA "cannot be abridged by contract or otherwise waived." Barrentine v. Arkansas-Best Freight Sys., Inc., 450 U.S. 728, 740 (1981); Parth v. Pomona Valley Hosp. Medical Ctr., 630 F.3d 794, 802 n.2 (9th Cir. 2010). However, this restriction applies only to employee's substantive rights under the FLSA, not his procedural rights. The right to bring a collective action under the FLSA is a procedural—not a substantive one. See Carter v. Countrywide Credit Indus., Inc., 362 F.3d 294, 298 (5th Cir. 2004) (rejecting "Appellants' claim that their inability to proceed collectively deprives them of substantive rights available under the FLSA."); Veliz v. Cintas Corp., No. 03-01180 SBA, 2005 WL 1048699, at *3 (N.D. Cal. May 4, 2005) ("[p]recedent establishes that even an inability to proceed on a class or collective basis in arbitration has no impact on a plaintiff's ability to vindicate his or her substantive statutory rights.") (discussing Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 32 (1991)) (Armstrong, J.). Because the right to proceed on a collective basis implicates an employee's procedural, as opposed to substantive rights, a collective action waiver contained in severance agreement is enforceable. See Kelly v. City & County of San Francisco, No. C 05-1287 SI, 2008 WL 2662017, at *4 (N.D. Cal. June 30, 2008) (finding that employees' settlement agreement "not to sue or otherwise institute or in any way actively participate in or voluntarily assist in the prosecution of any legal or administrative proceeding against the city" barred their ability to bring a collective FLSA action). Thus, the Court rejects Plaintiff's contention that Plaintiff's waiver of his right to bring a collective action is unenforceable.

2. Unconscionability of the Release

As an alternative matter, Plaintiff asserts that the entire Release itself is unenforceable on the ground that it is procedurally and substantively unconscionable underCalifornia law. "Under California law, a contract provision is unenforceable due to unconscionability only if it is both procedurally and substantively unconscionable." Shroyer v. New Cingular Wireless Servs., Inc., 498 F.3d 976, 981-82 (9th Cir. 2007). The procedural element focuses on oppression and surprise due to unequal bargaining power, while the substantive...