Khan v. K2 Pure Solutions, L.P.
| Decision Date | 04 December 2013 |
| Docket Number | Case No. 12-cv-05526-WHO |
| Parties | IMTIAZ KHAN, et al., Plaintiffs, v. K2 PURE SOLUTIONS, L.P., et al., Defendants. |
| Court | U.S. District Court — Northern District of California |
Re: Dkt. No. 73
Plaintiffs Imtiaz Khan, Tim Morris, Rick Seisinger, and Neelesh Shah are suing defendants K2 Pure Solutions, L.P., K2 Pure Solutions NoCal, L.P., and K2 Pure Solutions Pittsburg, L.P. (collectively "K2"), claiming violations of the California Labor Code, violations of the California Business and Professions Code, unjust enrichment, and conversion, and seeking equitable relief related to non-compete agreements allegedly used by the defendants. K2 moves to dismiss with prejudice from the plaintiffs' Third Amended Complaint ("TAC") the Third Cause of Action alleging failure to pay overtime wages, the Fifth Cause of Action alleging failure to furnish accurate itemized wage statements, the Sixth Cause of Action alleging failure to provide meal and rest periods, the Seventh Cause of Action alleging conversion, and the Eighth Cause of Action alleging unjust enrichment. K2 also moves to strike portions of the TAC.1
For the reasons below, the motion to dismiss and motion to strike are GRANTED IN PART and DENIED IN PART.
For purposes of this Motion to Dismiss, the Court accepts as true the factual allegations in the TAC. 2
K2 is a manufacturer of solutions used for water purification and disinfection. TAC ¶ 16. The plaintiffs are all former employees of K2. TAC ¶ 17. K2 hired Khan as a Plant Manager around December 2007, Morris as a Site General Manager around October 2008, Seisinger as a Production Manager around September 2010, and Shah as an Instrumentation and DCS Controls Engineer around June 2008. TAC ¶ 17. As a condition of their at-will employment, they were required to sign non-compete and confidentiality agreements with K2. TAC ¶ 18. The agreements state that for one year following the end of the plaintiffs' employment with K2, the plaintiffs will not be employed by "any person or entity which (A) competes with [K2] in the manufacture, processing or distribution of bleach and related chemical products to commercial customers and (B) is located or has operations within 300 miles of any existing plant operated by [K2] or any location [K2] has specifically identified for a future plant." TAC ¶ 33. Further, the agreements require the plaintiffs not to "[s]olicit, hire, recruit, or otherwise engage the services of any person who then currently is, or who at any time during [their] employment with [K2] was, an employee or independent contractor of [K2], or otherwise encourage or induce any such person to discontinue his or her relationship with [K2]." TAC ¶ 34.
K2's Employee Handbook has a vacation policy that applies only to employees protected by the California Labor Code (or "non-exempt" employees), which provides that TAC ¶ 19. In letters to the plaintiff's counsel, K2 asserted that Khan, Morris, and Seisinger are subject to the policy and demanded that they reimburse K2 for payments that they allegedly received for vacation hours exceeding their limit. TAC ¶ 19. The plaintiffs argue that these letters are admissions that Khan, Morris, and Seisinger are non-exemptemployees.
K2 classified Morris as an exempt employee "within four years prior to the filing of this lawsuit," but he "was a 'manager' in title only . . . particularly during the last several years of his employment" because he "did not regularly perform exempt duties, or exercise the requisite independent judgment and discretion in the performance of his job duties." TAC ¶ 20. "Morris initially worked for K2 as a Site General Manager" and "was responsible for working directly with the Delta Diablo Sanitary District and Dow Chemical to develop and obtain approval for a plan to utilize Dow's wastewater allotment for K2's use." TAC ¶ 21. He worked with municipal agencies to "develop a plan and obtain the necessary permits" to properly dispose of waste and "to prepare, submit and obtain approval for K2's CEQA Mitigated Negative Declaration for the plant." TAC ¶ 21. "Morris was also responsible for the recruitment and hiring of a team to design and operate K2's Pittsburg, California[,] plant, including the Production Manager (Seisinger), Maintenance Manager, Laboratory Manager, and all operations, maintenance and lab personnel." TAC ¶ 21. He "was vested with and exercised independent judgment and discretion with respect to matters of importance. " TAC ¶ 21.
Around February 2011, however, K2's chief executive officer, Howard Brodie, and K2's executive chairman, David Cynamon, "specifically demoted Morris [to Environmental Health & Safety Manager] and stripped him of authority and discretion following his refusal to follow their direction to terminate an employee for asking questions concerning his wages." TAC ¶¶ 20, 22. Morris refused to fire the employee because he felt that doing so was illegal, and also refused to fire several other employees "for the purpose of providing cover," which he was also asked to do. TAC ¶ 22. After that, he was no longer allowed to perform the duties he previously had as Site General Manager and was stripped of supervisorial responsibility. TAC ¶ 22. "Cynamon and Brodie relegated Morris to performing busy work that merely involved executing their decisions without accepting any of his input or suggestions."3 TAC ¶ 22. Morris "spent a great deal of histime serving as a messenger between outside consultants and Cynamon and Brodie." TAC ¶ 22. They "completely removed any ability or authority of Morris to exercise independent judgment or discretion" and "refused and would not allow Morris to even offer his opinion or input regarding any issue that he was couriering information about." TAC ¶ 22. He "was stripped of all responsibility and authority for managing employees or other plant operations," and could not provide any managerial guidance." TAC ¶ 22. "Morris, therefore, was not primarily engaged in exempt duties to qualify for exempt status." TAC ¶ 20.
Morris was constantly at the "beck and call" of Cynamon and Brodie, including nights and weekends. TAC ¶ 23. He thus often worked more than eight hours a day and more than forty hours a week. TAC ¶ 23. "On average," he worked between nine and ten hours a day and fifty or more hours a week without overtime compensation. TAC ¶ 23. "K2, including specifically, Brodie and Cynamon were aware of the hours that Morris was working, as they were the individuals often requiring that he be responsive to their requests." TAC ¶ 57. K2 "did not have a policy providing exempt employees with meal or rest breaks," and Morris often had to work during his meal period and breaks. TAC ¶ 74. "K2 knowingly and willfully failed to pay overtime wages earned and due to Morris." TAC ¶ 58.
When the plaintiffs heard rumors that K2 was planning to lay them off, they resigned from K2—Morris in June 2012, Khan in September 2012, and Shah in October 2012. TAC ¶¶ 26-28. None were paid the wages owed to them, including "unused, accrued vacation." TAC ¶¶ 26-28. They were each then "independently recruited to work for Molycorp [at its Mountain Pass, California, facility] by Molycorp or its agents." TAC ¶¶ 25, 30. Molycorp is a rare earth mining, engineering, and processing company. TAC ¶ 30. The plaintiffs did not recruit or solicit any K2 employee, including one another, to leave K2 to join Molycorp. TAC ¶ 38.
"Shortly after" Khan, Morris, and Seisinger began working at Molycorp, K2 "began threatening to interfere" with their employment there. TAC ¶ 31. K2 sent them letters onSeptember 20, 2012, claiming that they were in violation of the Noncompetition Agreements and demanding that they abide by its provisions. TAC ¶¶ 32, 35. On October 10, 2012, David Cynamon, K2's Executive Chairman, called Khan to urge him to leave Molycorp to return to K2, "implying that there may be consequences if Khan did not return." TAC ¶ 36.
The plaintiffs believe that K2 intends to prevent Molycorp from employing them or to seek damages or other relief from them for violating the non-compete agreements due to their employment at Molycorp and alleged recruitment of one another. TAC ¶ 37. The plaintiffs argue that the agreements are unenforceable under California law and that "K2's threats to enforce" them violate California law and public policy, and are an unlawful business practice and illegal restraint of trade. TAC ¶ 38. They also argue that by requiring current and former employees to sign the agreements as a condition of employment, K2 is violating the California Labor Code and other statutes. TAC ¶ 39.
The plaintiffs bring nine causes of action for (1) a declaration that the agreements are invalid and unenforceable under California Business and Professions Code Section 16600 and an injunction against K2's "interfering" with the plaintiffs' employment with Molycorp; (2) a declaration that the agreements are overbroad and unenforceable, and an injunction against K2's "interfering" with the plaintiffs' employment with Molycorp; (3) failure to pay overtime in violation of California Labor Code Sections 510, 558, and 1194 and Wage Order No. 4-2001; (4) failure to pay all wages upon resignation in violation of California Labor Code Section 202 and Wage Order No. 4-2001; (5) failure to furnish accurate itemized wage statements in violation of California Labor Code Section 226 and Wage Order No. 4-2001; (6) failure to provide meal periods and rest breaks in violation of California Labor Code Sections 226.7 and 512 and Wage Order No. 4-2001; (7) conversion; (8) unjust enrichment; and (9) violation...
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