Drumm v. Morningstar, Inc.

• Court: U.S. District Court — Northern District of California
• Writing for the Court: THELTON E. HENDERSON
• Citation: Drumm v. Morningstar, Inc., 695 F. Supp.2d 1014 (N.D. Cal. 2010)
• Decision Date: 26 February 2010
• Docket Number: No. C08-03362 TEH.,C08-03362 TEH.
• Parties: Michael DRUMM, Plaintiff, v. MORNINGSTAR, INC., Defendant.

695 F. Supp.2d 1014

Michael DRUMM, Plaintiff, v. MORNINGSTAR, INC., Defendant.

No. C08-03362 TEH.

United States District Court, N.D. California.

February 26, 2010.

William Gaus, Angelito Remo Sevilla, Barbara Lynne Harris Chiang, Dillingham & Murphy LLP, San Francisco, CA, for Plaintiff.

Michael Eugene Wilbur, Cook Roos Wilbur LLP, San Francisco, CA, Lisa A. McGarrity, Franczek Radelet & Rose P.C., Chicago, IL, Staci Ketay Rotman, Franczek Radelet P.C., Chicago, IL, for Defendant.

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S RULE 59(e) MOTION; GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR ATTORNEY'S FEES; AND DENYING DEFENDANT'S MOTION FOR ATTORNEY'S FEES.

THELTON E. HENDERSON, District Judge.

This matter came before the court on February 1, 2010 on three motions. Plaintiff Michael Drumm ("Drumm") moves pursuant to Federal Rule of Civil Procedure 59(e) to alter or amend the judgment entered on November 13, 2009, and moves for an award of attorney's fees and costs. Defendant Morningstar, Inc. ("Morningstar") likewise moves for attorney's fees. For the reasons set forth below, Drumm's Rule 59(e) motion is GRANTED IN PART and DENIED IN PART. Drumm's motion for attorney's fees and costs is GRANTED IN PART and DENIED IN PART, and Morningstar's motion is DENIED.

BACKGROUND

Drumm filed this lawsuit after he was terminated from his position as a sales director at Morningstar. Drumm alleged that he was improperly terminated on the basis of sexual orientation in violation of California's Fair Employment and Housing Act ("FEHA"), Cal. Gov.Code § 12940. His complaint asserted three causes of action premised on his allegedly discriminatory firing: discrimination, failure to take reasonable steps to prevent discrimination, and termination in violation of public policy. Drumm also brought a fourth claim for failure to pay wages earned upon discharge, based on unpaid commissions and vested but unused vacation time under Morningstar's "time off" policy and its "sabbatical" policy.

The Court dismissed the three discrimination claims, as well as the part of the fourth claim based on Morningstar's time off policy, on summary judgment. On Morningstar's motion for reconsideration of that ruling, the Court also dismissed Drumm's claim for unpaid commissions. All that remained to be tried was the last portion of Drumm's fourth cause of action, for Morningstar's failure to pay out vested vacation time for a six-week "sabbatical" that he never took, and waiting time penalties based on those unpaid wages.

After a three-day trial held from October 20 to 22, 2009, the jury returned a verdict for Drumm, awarding him $9,692.31 in unpaid wages for 30 days of accrued but unused vacation time under Morningstar's sabbatical policy, and an additional $9,692.31 in waiting time penalties. The Court denied motions for directed verdict from both parties. In its Judgment entered on November 13, 2009, the Court imposed pre-judgment interest on the unpaid wages but not the waiting time penalties. Drumm subsequently moved to alter or amend the judgment, and both parties moved for an award of attorney's fees.

LEGAL STANDARD

Federal Rule of Civil Procedure 59(e) allows a motion to alter or amend a judgment to be made "no later than 28 days after the entry of the judgment." Although the rule prescribes no standards for such a motion, the Ninth Circuit has annunciated four grounds upon which a Rule 59(e) motion may be granted: "1) the motion is necessary to correct manifest errors of law or fact upon which the judgment is based; 2) the moving party presents newly discovered or previously unavailable evidence; 3) the motion is necessary to prevent manifest injustice; or 4) there is an intervening change in controlling law." Turner v. Burlington Northern Santa Fe R.R., 338 F.3d 1058, 1063 (9th Cir.2003) (internal citations and quotation marks omitted). "A district court has considerable discretion when considering" such a motion. Id. "Although Rule 59(e) permits a district court to reconsider and amend a previous order, the rule offers an extraordinary remedy, to be used sparingly in the interests of finality and conservation of judicial resources." Kona Enters. v. Estate of Bishop, 229 F.3d 877, 890 (9th Cir.2000) (internal citation and quotation marks omitted).

To determine "whether a party is entitled to attorneys' fees" in "an action involving state law claims," the law of the forum state is applied "unless it conflicts with a valid federal statute or procedural rule." MRO Commc'ns, Inc. v. AT & T Co., 197 F.3d 1276, 1282 (9th Cir.1999); see also Kona Enters., Inc. v. Estate of Bishop, 229 F.3d 877, 883 (9th Cir.2000) ("A federal court sitting in diversity applies the law of the forum state regarding an award of attorneys" fees.). California law therefore governs the motions for attorney's fees of both Drumm (for his state law sabbatical claim) and Morningstar (for Drumm's discrimination claims).

The awarding of attorney's fees is "mandatory" in unpaid wage claims. Earley v. Superior Court, 79 Cal.App.4th 1420, 1427, 95 Cal.Rptr.2d 57 (2000). "In any action brought for the nonpayment of wages, . . . the court shall award reasonable attorney's fees and costs to the prevailing party if any party to the action requests attorney's fees and costs upon the initiation of the action." Cal. Lab.Code § 218.5 (emphasis added). Drumm's motion for attorney's fees, based on the favorable jury verdict on his unpaid wage claim, is governed by this standard.

Morningstar bases its motion for attorney's fees on having prevailed in the discrimination claims. In a FEHA action, "the court, in its discretion, may award to the prevailing party reasonable attorney's fees and costs." Cal. Gov.Code § 12965(b). A prevailing defendant "should be awarded attorney fees `not routinely, not simply because he succeeds, but only where the action brought is found to be unreasonable, frivolous, meritless or vexatious.'" Bond v. Pulsar Video Prods., 50 Cal.App.4th 918, 921-22, 57 Cal.Rptr.2d 917 (1996) (quoting Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 421, 98 S.Ct. 694, 54 L.Ed.2d 648 (1978)). That "the plaintiff ultimately lost" is not reason enough; the claim would have to be "groundless or without foundation," although the defendant need not show any "subjective bad faith" to be entitled to attorney's fees. Id. at 922, 57 Cal.Rptr.2d 917.

DISCUSSION

I. Drumm's Motion to Alter or Amend Judgment¹

Only one of the four grounds for granting a Rule 59(e) motion is at issue here: to "correct manifest errors of law or fact upon which the judgment is based." Turner, 338 F.3d at 1063. Drumm raises two alleged errors in the Court's judgment. First, he disputes the jury's calculation of waiting time penalties, arguing that the award should have been based on Drumm's overall year 2007 compensation of $410,589, rather than his base salary alone. Second, Drumm contends that prejudgment interest should have been awarded on the waiting time penalties.

A. Calculation of Waiting Time Penalties

Where an employer "willfully fails to pay.. . any wages of an employee who is discharged or who quits, the wages of the employee shall continue as a penalty from the due date thereof at the same rate until paid or until an action therefor is commenced; but the wages shall not continue for more than 30 days." Cal. Lab.Code § 203(a). The so-called "waiting time penalty" is "equivalent to the employee's daily wages for each day he or she remained unpaid up to a total of 30 days." Mamika v. Barca, 68 Cal.App.4th 487, 493, 80 Cal.Rptr.2d 175 (1998). The "critical computation" is "the calculation of a daily wage rate, which can then be multiplied by the number of days of nonpayment, up to 30 days." Id. "Wages" include "all amounts for labor performed by employees of every description, whether the amount is fixed or ascertained by the standard of time, task, piece, commission basis, or other method of calculation." Cal. Lab.Code § 200(a).

Although the waiting time penalty was triggered by Morningstar's failure to pay Drumm for his unused vacation, the waiting time penalty and vacation pay are distinct calculations. Section 203(a) requires that the "wages of the employee" continue when an employer willfully fails to pay wages owed. As the California Division of Labor Standards Enforcement ("DLSE") explained in an opinion letter, the "wages of the employee" should "include all of the wages—the base rate, the piece rate, the commission and any bonus." DLSE 1/28/03 Opinion Letter, at 2 (citing Cal. Lab.Code § 200). "To eliminate any of the wages would not serve the public policy which the Mamika court concluded underlies the penalty, i.e., the imposition of the `larger penalty which acts as a disincentive to employers who are reluctant to pay wages in a timely manner.'" Id. (quoting Mamika, 68 Cal.App.4th at 493, 80 Cal.Rptr.2d 175).

Vested vacation time, on the other hand, is paid out "as wages at the employee's final rate in accordance with such contract of employment or employer policy respecting eligibility or time served." Cal. Lab. Code § 227.3. An employer must, in other words, pay out vested vacation time at the rate at which the employee would have been paid during a vacation, had he taken one. "The law directs the Labor Commissioner to enforce the `contract of employment or employer policy' with respect to vacation pay," which is typically "based on the wage paid to the worker on a regular basis." DLSE 1/28/03 Opinion Letter, at 2. Such was the case at Morningstar: Melia Kimura, a vice president of human resources at the company, testified that Drumm would have received six weeks of base salary during his six weeks of sabbatical, had he taken it. 10/21/09 Tr. at 89.

The jury heard separate instructions on calculating "wages due for vested vacation time" and the waiting time penalty. For vested vacation time, the "amount of wages" owed to Drumm was to be ...