Wellons v. PNS Stores, Inc.

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 S. WELLONS, et al., Case No.: 18-cv-02913-TWR-DEB 12 Plaintiffs, ORDER DENYING DEFENDANTS’ 13 v. MOTION FOR ATTORNEYS’ FEES 14 PNS STORES, INC. et al., [DKT. NO. 139] 15 Defendants. 16 17 I. INTRODUCTION 18 Before the Court is Defendants’ Motion for Attorneys’ Fees Under Rules 37(c)(2) 19 and 26(g)(3). Dkt. No. 139. Defendants seek fees resulting from Plaintiffs’ initial denial of 20 Defendants’ Request for Admission (“RFA”) No. 4. Dkt. No. 139. Plaintiffs oppose, 21 contending their initial denial was justified. Dkt. No. 227. Defendants filed a Reply. Dkt. 22 No. 236. 23 Having reviewed the parties’ pleadings and supporting evidence, and for the reasons 24 set forth below, the Court DENIES Defendants’ Motion. 25 / / 26 / / 27 / / 28 / / 1 II. RELEVANT BACKGROUND 2 Defendants’ RFA No. 4 states, “[a]dmit that you customarily and regularly exercised 3 discretion and independent judgment while you were employed by PNS Stores, Inc.” Dkt. 4 Nos. 139-2; 227 at 7–8, 28–29.1 5 On September 16, 2019, Plaintiffs responded as follows: 6 This Request is susceptible of two meanings. The first is the 7 colloquial meaning, and the second is a legal term of art which correlates to the element for the executive exemption found at 8 Section 1(A)(1)(d) of Wage Order No. 7. 9 Colloquial meaning: ADMITTED. “In one sense almost every 10 employee is required to use some discretion and independent judgment.” (Former 12 C.F.R. § 541.207(d), incorporated into 11 California law as of the date of adoption of the Wage Orders.) 12 Legal Term of Art meaning: DENIED. See, In re United Parcel 13 Service Wage and Hour Cases (2010) 190 Cal.App.4th 1001, 14 1024, and n.11, applying the former 29 C.F.R. § 541.207 to California’s executive exemption. It is a disputed question of law 15 whether the matters over which Plaintiffs exercised discretion 16 and independent judgment qualified as “matters of significance” at all times, or during any particular workweek. California courts 17 have repeatedly held that exempt / non-exempt status may vary 18 from workweek to workweek. See, Dunbar v. Albertson’s, Inc. (2006) 141 Cal.App.4th 1422, 1426-1427 (executive exemption 19 case). See also, Batze v. Safeway, Inc. (2017) 10 Cal.App.5th 20 440, 478-479 (executive exemption case). (“[T]he significant period for determining exempt status is the workweek . . .”) See 21 also, Peabody v. Time Warner Cable, Inc. (2014) 59 Cal.4th 662, 22 670. (“Compliance with the requirements of the exemption is determined on a workweek basis.” [Commissioned employee 23 exemption case.]) Cf.: Marlo v. United Parcel Service, Inc., 639 24 F.3d 942, 948 (9th Cir. 2011). 25 Id. 26 27 1 When referencing page numbers for documents filed with the Court, the Court’s 28 1 On August 25, 2020, Plaintiffs amended their response to RFA No. 4: 2 “ADMITTED.” Dkt. No. 139-7 at 2. 3 On September 30, 2020, Defendants filed the instant Motion seeking an award of 4 $30,753 in attorneys’ fees associated with unnecessarily having to prove Plaintiffs were 5 “customarily and regularly exercised discretion and independent judgment while . . . 6 employed by PNS Stores, Inc.” Dkt. No. 139 at 10, 16. 7 III. LEGAL STANDARD 8 Federal Rule of Civil Procedure 37(c)(2) states: 9 If a party fails to admit what is requested under Rule 36 and if 10 the requesting party later proves . . . the matter true, the requesting party may move that the party who failed to admit pay 11 the reasonable expenses, including attorney’s fees, incurred in 12 making that proof. The court must so order unless: 13 (A) the request was held objectionable under Rule 36(a); 14 (B) the admission sought was of no substantial 15 importance; 16 (C) the party failing to admit had a reasonable ground to believe that it might prevail on the matter; or 17 18 (D) there was other good reason for the failure to admit. 19 Moreover, every discovery response must be signed by an attorney “certify[ing] that 20 to the best of the person’s knowledge, information, and belief formed after a reasonable 21 inquiry” the response is consistent with federal rules, “not interposed for any improper 22 purpose,” and “neither unreasonable nor unduly burdensome or expensive.” Fed. R. Civ. 23 P. 26(g)(1). “If a certification violates this rule without substantial justification” the court 24 must impose an appropriate sanction, which may include “an order to pay the reasonable 25 expenses, including attorney’s fees, caused by the violation.” Fed. R. Civ. P. 26(g)(3); see 26 also Or. RSA No. 6 v. Castle Rock Cellular of Or. Ltd. P’ship, 76 F.3d 1003, 1007 (9th Cir. 27 1996) (“Under Federal Rule of Civil Procedure 26(g), the district court may sanction either 28 the parties or their attorneys at its discretion. We use an objective standard to determine 1 whether a party or attorney has responded or objected to a discovery request for an 2 improper purpose.”) (internal citations omitted). 3 IV. DISCUSSION 4 Defendants argue they are entitled to attorneys’ fees because “Plaintiffs, without 5 justification,” denied RFA No. 4 when they were “on notice that their responses were 6 incorrect.” Dkt. No. 139 at 6, 8. 7 In opposition, Plaintiffs contend: (1) “Defendants didn’t prove anything”; 8 (2) “Plaintiffs had a reasonable ground to believe they might prevail on the matter”; and 9 (3) “there was other good reason for the failure to admit.” Dkt. No. 227 at 5. Specifically, 10 Plaintiffs’ counsel declares, “[t]he decision in the Merrill Appeal is the entire basis for the 11 timing of the amended responses to requests for admissions.” Dkt. No. 227-1 ¶ 5.2 12 Based on Plaintiffs’ counsel’s sworn declaration and the Merrill Appeal decision, 13 which coincides with the timing of Plaintiffs’ amended response, the Court finds Plaintiffs 14 had a reasonable basis for their initial denial. See First Nat. Mortg. Co. v. Fed. Realty Inv. 15 Tr., No. 03-cv-2013-RMW, 2009 WL 2915145, at *1 (N.D. Cal. Sept. 8, 2009) (finding 16 defendant “had a reasonable basis” for denying requests where defendant was contesting 17 the issue on appeal), aff’d 631 F.3d 1058 (9th Cir. 2011); accord Securiforce Int’l Am., 18 LLC v. United States, 127 Fed. Cl. 386, 407 (2016) (“Although a party seeking 19 sanctions [under Rule 37(c)(2)] may not always be required to show bad faith by the other 20 21 2 On November 19, 2018, after receiving an unfavorable jury verdict in, Merrill, et al. 22 v. Party City Corporation, No. CGC-14-538972 (Super. Ct. of Cal. Cty. of San Francisco), 23 Plaintiffs’ counsel filed an appeal brief (No. A152838, Ct. App. Of Cal. 1st App. Dist. Div. 3). Dkt. No. 227 at 33 (“Merrill Appeal”). On appeal, counsel argued “Nordquist 24 requires that the discretion and independent judgment must have, ‘. . . a substantial effect 25 on the whole business.’” Id. at 41. Plaintiffs’ counsel contends he “reasonably believed it likely that the Merrill Panel would issue a published decision” reinterpreting the executive 26 exemption requirement for employers. Id. at 12. On August 25, 2020, the California Court 27 of Appeal rejected that argument and found “no basis to conclude that managerial responsibilities must have a substantial effect on an entire business.” Id. at 46. 28 1 || party, sanctions are punitive in nature and intended to reprove a party for engaging in bad 2 || behavior during discovery”), aff'd, 879 F.3d 1354 (Fed. Cir. 2018). The Court, therefore, 3 || finds no basis to impose sanctions under Rule 37(c)(2). 4 For these same reasons, and crediting Plaintiffs’ counsel’s representation that the 5 || “initial responses were not interposed for any improper purpose, such to harass, cause 6 ||unnecessary delay, or needlessly increase the cost of litigation,’ Dkt. No. 227-1, § 6, the 7 || Court finds no violation of Rule 26(g)(3). 8 Vv. CONCLUSION 9 Based on the foregoing, Defendants’ Motion for Attorneys’ Fees is DENIED. 10 IT IS SO ORDERED. 11 ||Dated: November 1, 2021 — 12 wudGedinfdlnn. B Honorable Daniel E. Butcher United States Magistrate Judge 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28