Hamilton v. Juul Labs

• Docket Number: 20-cv-03710-EMC
• Decision Date: 16 November 2021
• Parties: MARCIE HAMILTON, Plaintiff, v. JUUL LABS, INC., Defendant.
• Court: U.S. District Court — Northern District of California

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MARCIE HAMILTON, Plaintiff,
v.
JUUL LABS, INC., Defendant.

No. 20-cv-03710-EMC

United States District Court, N.D. California

November 16, 2021

ORDER GRANTING PLAINTIFF'S MOTIONS FOR PAGA SETTLEMENT APPROVAL AND ATTORNEYS' FEES DOCKET NOS. 80-81

Edward M. Chen, United States District Judge.

I. INTRODUCTION

Plaintiff Marcie Hamilton and Private Attorneys General Act (“PAGA”) Representative Jim Isaacson (“Plaintiff” for simplicity) filed this lawsuit against Hamilton's former employer, Defendant Juul Labs, Inc. (“Juul”), seeking civil penalties and injunctive relief related to alleged policies, separation agreements and suppression of the whistleblowing and political activities of its employees in violation of California law. Docket No. 32 (“FAC”).

The parties indicate that they have agreed to resolve Plaintiff's PAGA claims through monetary penalties and programmatic relief. Docket No. 80. Now pending are Plaintiff's unopposed motions for approval of the PAGA settlement, Docket No. 80 (“Settlement Motion”), and for attorneys' fees, Docket No. 81 (“Fees Motion”).

For the following reasons, the Court GRANTS Plaintiff's motion to approve settlement, and Plaintiff's motion for fees and awards, subject to the modifications explained below.

II. BACKGROUND

A. Legal Basis for Plaintiff's PAGA Claims

Several provisions of California law, taken together, “establish as a minimum employment

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standard an employee anti-gag rule.” Doe v. Google Inc., 54 Cal.App.5th 948, 961 (2020).

For example, California law protects whistleblowers. Labor Code § 1102.5(a) makes it unlawful for an employer to adopt or enforce a policy or rule that prevents employees from disclosing information about reasonably suspected violations of the law to persons with the power to address the problem, e.g., government agencies or another employee who has the authority to investigate, discover, or correct the legal violation. Doe, 54 Cal.App.5th at 958. Government Code § 12964.5(a) prohibits employers from requiring employees to sign certain non-disparagement agreements or other documents that purport to deny them the right to disclose information to anyone, including the press, about any “unlawful or potentially unlawful conduct.”

California law also protects a broad array of employee speech and activity unrelated to whistleblowing. Labor Code § 96(k) prohibits employer retaliation for “'lawful conduct occurring during nonworking hours away from the employer's premises,' so employers do not seek to control the non-work aspects of their employees' lives.” Doe, 54 Cal.App.5th at 958 (citations omitted). Labor Code §§ 232, 232.5, and 1197.5(k) generally outlaw employer prohibitions on the disclosure or discussion of wages and working conditions.

As the Court previously stated in this litigation, “Labor Code §§ 1101 and 1102 are ‘designed to protect the fundamental right of employees in general to engage in political activity without interference by their employers.'” Docket No. 42 at 21). And California Business & Professions Code § 16600 outlaws contracts in restraint of trade, rendering overbroad or oppressive non-disclosure agreements illegal. Brown v. TGS Management Co., LLC, 57 Cal.App.5th 303, 318-319 (2020).

California's anti-gag rule for employees is not absolute. Labor Code § 232.5(d) states that the rule prohibiting employers from requiring employees to refrain from disclosing information about their working conditions “is not intended to permit an employee to disclose proprietary information, trade secret information, or information that is otherwise subject to a legal privilege without the consent of his or her employer.”

B. Plaintiff's PAGA Claims

Plaintiff alleges that certain of Juul's policies and practices restrict speech, protected

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activity, and the disclosure of information beyond the limited categories of information protected by law, and, therefore, violate California's anti-gag rule. Plaintiff brought five PAGA claims (four of which survived Juul's motions to dismiss, see Docket No. 42) on behalf of Juul employees and former employees challenging the following aspects of Juul's policies and practices:

1. Non-Disclosure and Non-Disparagement Agreements

As an express condition of their employment at Juul, Ms. Hamilton and Mr. Isaacson were required to sign the “Proprietary Information and Invention Assignment Agreement” (“NDA”). FAC ¶ 28. Their offer letters stated the following: “this offer, and employment pursuant to this offer, is conditioned upon . . . [y]our signed agreement to, and ongoing compliance with, the terms of the enclosed [NDA], ” and included a disclaimer that the offer letter is governed by California law. Id. Plaintiff alleges that Juul has a policy of requiring all of its employees to sign this offer letter (or one that is substantially similar). Id. The NDA specifically states that its employees “shall at all times during the term of [their] employment with the Company and thereafter, hold in strictest confidence, and not use . . . or disclose to any person, firm, or corporation, without written authorization from the Company's Board of Directors (the ‘Board'), any Confidential Information of the Company.” FAC ¶ 29 (citing NDA, Docket No. 32, Ex. A, § 4.1 (“Company Information”)). Plaintiffs alleges that “Confidential Information” is defined by the NDA to mean essentially everything related to Juul (e.g., information about Juul's customers, products, and markets, as well as catch-all terms such as “other business information of the Company” and “information disclosed by the Company to Employee and information developed or learned by Employee during the course of employment with Company”). Id. (citing NDA, Docket No. 32, Ex. A, § 4.1 (“Company Information”)).

The NDA also contains a non-disparagement provision, which prohibits employees from disclosing “all information of which the unauthorized disclosure could be detrimental to the interests of the Company, whether or not such information is identified as Confidential Information.” FAC ¶ 30 (emphasis in original). Further, the NDA creates a presumption of confidentiality, stating “Employee agrees that Employee bears the burden of proving that given information or materials are not confidential.” FAC ¶ 31 (emphasis in original).

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The NDA contains a direct nexus to the Termination Certificate discussed below because it states that “[i]n the event of the termination of the Employee's employment, Employee hereby covenants and agrees to sign and deliver the ‘Termination Certificate' attached hereto as Exhibit C.” FAC ¶ 32. Plaintiff alleges it has no temporal or geographic limitation (i.e., it lasts forever and applies whether an employee is on or off Juul's premises), and it contains a provision subjecting it to California law. FAC ¶¶ 34, 35.

2. Termination Certificate

On March 15, 2019, Ms. Hamilton was informed that her employment at Juul had been terminated, and Juul required her to sign the “Termination Certificate” that all employees must sign as a condition of employment. FAC ¶ 38. The Certificate requires employees to verify that they have complied with the terms of the NDA, and further states:

[i]n compliance with the [NDA], I will preserve as confidential all trade secrets, confidential knowledge, data or other proprietary information, relating to products processes, know-how, designs, formula, developmental or experimental work, computer programs, data bases, other original works of authorship, customer lists, business plans financial information or other subject matter pertaining to any business of the Company or any of its employees, clients consultants, or licensees.

FAC ¶ 38 (emphasis in original). Ms. Hamilton signed the Termination Certificate in compliance with her contractual obligations, and she alleges that other Juul employees have also been required to sign a standard Termination Certificate when leaving employment at Juul. FAC ¶ 39.

3. Severance Agreement

The third document at issue is the Severance Agreement (referred to in the FAC as the “Standard Release Agreement”). When Ms. Hamilton's employment was terminated on March 15, 2019, Juul informed her that it would continue to employ her and pay her wages through April 2, 2019 (as well as pay her a bonus), if she signed a Juul Severance Agreement. FAC ¶ 69. This date (April 2, 2019) was significant because it would allow Ms. Hamilton's first tranche of equity to vest. Id. Similarly, when Mr. Isaacson was notified of Juul's intent to terminate his employment in September and early October 2019, Juul offered him continued employment through November 1, 2019 if he signed a release agreement. FAC ¶ 70. Plaintiff alleges that Juul

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requires its employees to sign Severance Agreements that are the same (or similar to) those offered to Ms. Hamilton and Mr. Isaacson (i.e., conditioning continued employment and the payment of wages, bonuses, or other employment benefits on signing the Agreement). FAC ¶ 72.

Juul's Severance Agreements include a general release of claims (including those arising under the Fair Employment & Housing Act, or “FEHA”), and contain another non-disparagement clause, which applies to Juul and “its current and former parents, subsidiaries, related entities and affiliates, and their respective employee benefit plans or funds, officers, directors, shareholders [including Altria, its largest shareholder], partners, employees, agents, trustees, administrators, predecessors, successors, and assigns.” FAC ¶ 74. Juul's Severance Agreement also requires that employees keep its existence and terms confidential. FAC ¶ 75.

4. Employment Practices

Plaintiff further alleges that, in all-hands meetings and other company-wide communications, Juul's senior executives and lawyers instructed employees both to not speak to the press and to not put anything in writing that could be...