Zavala v. Kruse-Western, Inc.
| Decision Date | 13 December 2021 |
| Docket Number | 1:19-cv-00239-DAD-SKO |
| Parties | Armando ZAVALA, Plaintiff, v. KRUSE-WESTERN, INC., et al., Defendants. |
| Court | U.S. District Court — Eastern District of California |
Laura E. Older, PHV, Pro Hac Vice, Mary J. Bortscheller, PHV, Pro Hac Vice, Michelle C. Yau, PHV, Pro Hac Vice, Cohen Milstein Sellers & Toll PLLC, Washington, DC, Nina R. Wasow, Andrea M. Obando, Daniel Mark Feinberg, Feinberg, Jackson, Worthman and Wasow LLP, Berkeley, CA, for Plaintiff.
Chelsea Ashbrook McCarthy, PHV, Pro Hac Vice, Rachel C. Agius, Holland & Knight LLP, Chicago, IL, David G. Litman, Ian Blade Wieland, Howard A. Sagaser, Sagaser, Watkins & Wieland, PC, Fresno, CA, Lynn E. Calkins, Holland & Knight, Washington, DC, for Defendants.
ORDER DENYING DEFENDANTS’ MOTION FOR JUDGMENT ON THE PLEADINGS, OR ALTERNATIVELY, MOTION FOR SUMMARY JUDGMENT
This matter is before the court on the motion for judgment on the pleadings filed on behalf of defendant Kevin Kruse and defendants the Kruse-Western, Inc. Board of Directors and Administration Committee (collectively, "defendants") on December 6, 2019. (Doc. No. 54.) Plaintiff Armando Zavala filed his opposition brief and defendants filed their reply thereto. (Doc. Nos. 58, 61.) Pursuant to Local Rule 230(g) and the undersigned's standing order addressing the ongoing judicial emergency in the Eastern District of California, the court took this matter under submission on February 18, 2020 to be decided on the papers, without holding a hearing. For the reasons set forth below, the court will deny defendants’ motion for judgment on the pleadings.1
The following facts are taken from defendants’ statement of undisputed facts, plaintiff's response to defendants’ statement of undisputed facts, and defendants’ reply thereto. (Doc. Nos. 54-2, 59, 61-1.) On November 4, 2015, the Western Milling Employee Stock Ownership Plan (the "ESOP" or "Plan") was formed and purchased all of the outstanding shares of Kruse Western, Inc. stock. (Doc. No. 54-2 at ¶ 1.) The ESOP was designed to be and is invested primarily in shareholder stock of Kruse Western, Inc. (Id. at ¶ 2.) Section 1.3 of the ESOP Plan Document ("Plan Document") provides for a trust and trustee to manage the ESOP's assets:
Amounts contributed under the Plan are held and invested, until distributed, by the trustee (the "Trustee ") appointed by the Company acting by its Board of Directors. The Trustee acts in accordance with the terms of a trust agreement between the Company and the Trustee, which trust agreement is known as the Western Milling Employee Stock Ownership Trust (the "Trust "). The Trust implements and forms a part of the Plan. The provisions of and benefits under the Plan are subject to the terms and provisions of the Trust. In the event of any conflict between the Plan and the trust agreement, the terms of the trust agreement shall control.
(Doc. Nos. 59 at ¶ 3; 61-1 at ¶ 3.) All stock purchased by the ESOP is held in its Trust, including all the outstanding shares of Kruse Western, Inc. stock it purchased when the ESOP was formed. (Doc. No. 54-2 at ¶¶ 4–5.) GreatBanc Trust is the trustee of the ESOP Trust. (Id. at ¶ 6.)
A Trust Agreement details the terms by which the ESOP Trust is overseen and administered. For instance, under the Trust Agreement, the Trust Fund includes "all property of every kind held by the Trustee from time to time pursuant to this Trust Agreement." (Doc. Nos. 59 at ¶ 6; 61-1 at ¶ 6.) The Trust Agreement also describes the identity of the Plan Administrator, the distribution of the responsibilities of the Plan Administrator and the Trustee, and states that (Doc. Nos. 59 at ¶ 6; 61-1 at ¶ 6.)
Defendant Administration Committee is the Plan Administrator of the ESOP (Doc. No. 54-2 at ¶ 11), and defendant Kevin Kruse is a director of Kruse Western, Inc. (Id. at ¶ 10.) Kruse Western, Inc. operates four entities: Western Milling, LLC, OHK Transport LLC, OHK Logistics, LLC, and Winema Elevators, LLC. (Doc. No. 54-2 at ¶ 8.) The ESOP provides that, except for unionized employees, "Leased Employee[s]," and nonresident alien employees, all employees over the age of 21 will become a participant in the ESOP on the next January 1st or July 1st after completing a year of employment. (Id. at ¶ 14; Doc. Nos. 59 at ¶ 14; 61-1 at ¶ 14.)
Plaintiff was hired by the Western Milling family of companies, which includes Western Milling, LLC and OHK Logistics, LLC (collectively, "Western Milling") on December 8, 2015 and resigned on or about May 18, 2018. (Doc. No. 54-2 at ¶¶ 13, 16.) Upon resignation from his position as a Truck Loading and Transfer 1, plaintiff was offered a severance payment of $2,500 and a severance agreement that provided in exchange for execution of the agreement, Western Milling would not contest unemployment benefits and would provide a neutral reference. (Doc. No. 59 at ¶¶ 17, 22.) Plaintiff signed the offered severance agreement on May 18, 2018 and received $2,500 as a severance payment. (Id. at ¶¶ 21, 23; Doc. No. 59 at ¶ 23.)
Section 2 of the severance agreement is a general release clause that provides:
(Doc. No. 54-2 at ¶¶ 26, 27.)
In addition, paragraph 19 of the severance agreement provides:
19. Voluntary Execution of Agreement. Employee understands and agrees that he executed this Agreement voluntarily, without any duress or undue influence on the part or behalf of Employer or any third party, with the full intent of releasing all of his claims against Employer and any of the other Releasees. Employee acknowledges that: (a) he has read this Severance Agreement; (b) he has been represented in the preparation, negotiation, and execution of this Severance Agreement by legal counsel of his own choice or has voluntarily elected not to retain legal counsel; (c) he understands the terms and consequences of this Severance Agreement and of the releases it contains; and (d) he is fully aware of the legal and binding effect of this Severance Agreement.
Defendants also allege the following facts that plaintiff asserts he cannot admit or deny without conducting discovery in this action: (1) Kruse Western, Inc. is the sole manager of Western Milling, LLC, and Western Milling, LLC is the sole manager of OHK Transport, LLC, OHK Logistics, LLC, and Winema Elevators, LLC (Doc. No. 54-2 at ¶ 9); (2) defendant Administration Committee administers the ESOP according to the terms of the Plan Document, which states that "[t]he Plan is administered by an Administrator appointed by the Company, which shall consist of one or more individuals (who may but need not be Employees of the Employers) to conduct Plan Administrative functions" (Doc. Nos. 59 at ¶ 12; 61-1 at ¶ 12); (3) plaintiff became a participant in the ESOP on January 1, 2017 (Doc. No. 59 at ¶ 15); and (4) the $2500 severance payment offered to plaintiff equaled approximately four weeks of plaintiff's salary with Western Milling (Id. at ¶ 18).
Defendants allege that the severance agreement was presented to and discussed with plaintiff during his exit interview on May 18, 2018, and that plaintiff was not told he had to sign the severance agreement on that same day. (Doc. No. 54-2 at ¶¶ 19, 20.) Plaintiff disputes that the severance agreement was discussed "in any detail with him during the exit interview." (Doc. No. 59 at ¶ 19.) Plaintiff contends that a human resources representative attended his exit interview with a stack of documents she described as "standard" and directed him to sign the documents in several places. (Id. ) Plaintiff contends he understood he would not receive the offered severance payment if he did not sign the documents, but was not otherwise told what he was signing. (Id. ) Plaintiff contends that when he signed the paperwork presented to him at the exit interview, including the severance agreement, he believed that his signing was a necessary part of the exit interview process and he was not informed he could take the documents home or otherwise review them before signing. (Id. at ¶ 20.) Plaintiff also contends that he was not aware he could apply for unemployment benefits and did not apply for such benefits. (Id. at ¶ 23.)
On February 19, 2019, plaintiff filed this action against defendants Kruse-Western, Inc., Kevin Kruse, GreatBanc Trust Company, and Does 1 through 30, inclusive. (Doc. No. 1.) On July 26, 2019, following briefing and oral argument by the parties, this court issued an order granting in...
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