1 2 3 4 5 UNITED STATES DISTRICT COURT 6 NORTHERN DISTRICT OF CALIFORNIA 7 SAN JOSE DIVISION 8 PETER ALBERS, 9 Case No. 5:19-cv-05896-EJD Plaintiff, 10 ORDER GRANTING IN PART AND Vv. DENYING IN PART DEFENDANTS’ 1] MOTION TO DISMISS YARBROUGH WORLD SOLUTIONS, g 222 LLC, et al., Re: Dkt. No. 12
13 Defendants.
14 Plaintiff Peter Albers brings suit against Defendants Yarbrough World Solutions, LLC © 3 15 || (°YWS”) and Dally E. Yarbrough alleging violations of the Racketeer Influenced and Corrupt 4 16 || Organizations Act (“RICO”) and of California labor laws. Defendants contend that this Court
17 || must dismiss Plaintiff's Complaint for failure to state a claim upon which relief can be granted.
18 Having considered the Parties’ papers, the Court GRANTS in part and DENIES in part 19 || Defendants’ motion to dismiss.' 20 I. BACKGROUND 21 A. Factual Background 22 Plaintiff is a construction worker in California—he is not personally licensed by the 23 California Contractors State License Board to perform construction services in the state of 24 || California. Complaint § 21 (“Compl.”), Dkt. 1. Defendants operate a “staffing solutions” 25 26 ; . . . Pursuant to N.D. Cal. Civ. L.R. 7-1(b), this Court found this motion suitable for consideration 27 || without oral argument. See Dkt. 23. Case No.: 5:19-cv-05896-EJD 28 || ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS
1 company, which helps contractors find construction workers for large-scale commercial and 2 || government projects in California and across the United States. /d. Jf 13, 14. Defendants provide 3 contractors with a site representative and handle the compensation, benefits, and taxes for the 4 construction workers “without the [contractor] having the additional overhead.” Id. J 14; see also 5 || id. § 15. Plaintiff worked for Defendants from approximately 2006 until August 6, 2019. Jd. § 21. 6 Plaintiff alleges that Defendant YWS controlled and directed his construction work. □□□□ 7 || 16. Defendant YWS “negotiates all compensation” with its contractor clients on behalf of its 8 || construction workers. /d. Defendant YWS requires construction workers to report their hours to 9 || YWS through YWS’s contractor clients, and Defendant YWS maintains the right to terminate its 10 || construction workers if a contractor client determines that a construction worker has failed to 11 perform as promised. /d. Defendant YWS makes profit by retaining a portion of the 12 || compensation generated by construction workers. /d. § 17. The construction workers are not 13 customarily engaged in an independently established trade, occupation, or business and are not 14 || required to have any professional licenses or specified experience in the construction industry. Jd. 3 15 || §.18. Defendant YWS represented to its contractor-clients that construction workers are YWS a 16 || employees whose tax withholding and conferment of benefits are handled by YWS. Jd. 4 19. 3 17 In fact, Defendant YWS allegedly forced its construction workers to sign “independent 18 || contractor/exclusion” waivers for the right to benefits, workers compensation, and employee 19 || status. Jd. 19. Moreover, Defendant YWS did not provide its employees with any benefits or 20 || insurance, did not pay YWS’s employer’s share of state or federal taxes, and did not withhold any 21 state or federal taxes from YWS employees. /d. § 20. Defendants withheld these facts from their 22 || contractor clients. Id. 23 As a condition of his employment, Defendants required Plaintiff to sign an “Independent 24 || Contractor/Exclusion Letter” (“Exclusion Letter”) prepared by YWS. /d. § 22. This letter stated: 25 (1) Plaintiff “operates as an independent contractor/consultant;” (2) Plaintiff “wishes to be 26 || excluded from workers’ compensation and client liability;” (3) Defendant YWS “and its clients a Case No.: 5:19-cv-05896-EJD 28 Oa NTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO
1 are not liable for any benefits or damages to [Plaintiff] should an injury occur;” and (4) by signing 2 || the letter, Plaintiff “elected to be excluded from any workers’ compensation policy.” /d. Asa 3 condition of employment, Plaintiff was required by Defendant YWS to execute a “List and Refer 4 || Agreement” (“Employment Agreement”), which designated Plaintiff as a subcontractor who 5 || performed services through his own “independently established business and independently of 6 || YWS/Y.E.S.” Id. § 22. This Employment Agreement set forth (1) the terms of Plaintiff’ □ 7 || compensation, (2) Plaintiffs performance of services, (3) Plaintiff’s non-entitlement to supplies or 8 || reimbursement of expenses, (4) Plaintiff’s acknowledgment of his performance of services as an 9 || independent contractor, (5) Plaintiff's agreement to indemnify YWS against “any form of 10 || financial detriment, including attorney’s fees, whether alleged or actually incurred” in connection 11 with Plaintiff's performance of services, (6) the operative term of the agreement, and (7) 12 || Plaintiff's agreement to keep confidential information about YWS’s contractor clients, as well as 13 || the nature of Plaintiffs’ employment. Jd. | 24. 14 Specifically, Plaintiff alleges that, throughout his employment with Defendant YWS, he: 3 15 e Consistently worked forty hours per week on construction projects throughout the State a 16 of California and the United States under YWS’s direction and control; 3 17 e Was compensated by YWS to provide construction related services; 18 e Was terminable at YWS’s will; 19 e Was prevented by YWS from engaging in “other obligations [which] interfere with the 20 timely performance” of YWS work; 21 e Was required to “provide all of his own insurance for general liability, errors and 22 omissions, casualty, etc., as he deems necessary and appropriate;” 23 e Was not entitled to any benefits, such as, premium overtime pay, worker’s 24 compensation, health plans, retirement plans, disability insurance, vacation pay, sick 25 leave and the like;” and 26 e Was solely responsible for paying his own social security and income taxes per federal a Case No.: 5:19-cv-05896-EJD 28 Oa NTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO
1 and state law. 2 || Id. 425. In addition, Plaintiff had a non-compete clause in his Employment Agreement. See id. 3 {| □ 28. 4 On March 15, 2017, Plaintiff was assigned by Defendant YWS to an Army Corps of 5 || Engineers construction project at the United States Army Garrison Facility, Presidio of Monterey 6 || in Monterey, California (“the Monterey Presidio Project”). Jd. § 29. CTE Cal, Inc., the 7 || subcontractor on the project, used YWS’s services to find Plaintiff. /d. Pursuant to his 8 compensation agreement, Plaintiff was to be compensated $50.00 per hour for providing services 9 || to CTE Cal on the Presidio Project. /d. § 30. Under CTE Cal’s contract, however, Plaintiff was to 10 || be compensated $68 per hour. /d. § 34. On October 21, 2017, CTE Cal left the Presidio Project 1] following a nonpayment by the general contractor—this terminated CTE’s Service Agreement 12 || with Defendant YWS. /d. 438. CTE Cal still paid Defendant YWS for services under the CTE 13 Service Agreement and Plaintiff was compensated pursuant to his Employment Agreement. /d. 14 On April 20, 2017, federal litigation ensued regarding various alleged construction defects 3 15 and nonpayment claims arising from the Monterey Presidio Project. /d. § 39. The litigation was a 16 || between Halbert Construction Company, Inc. (the general contractor on the project), CTE Cal. and 3 17 |} McCullough Plumbing, Inc. (another subcontractor). /d. McCullough sued Halbert and Halbert 18 filed a third-party complaint against CTE Cal for breach of contract related to alleged construction 19 || deficiencies. CTE Cal counterclaimed for nonpayment. /d. § 40. 20 CTE Cal identified Plaintiff as a possible witness. Jd. § 41. In March 2019, Plaintiff sat 21 for a deposition and as the case neared trial, Plaintiff was advised that CTE Cal intended to 22 || subpoena him to testify at trial. Jd. On May 16, 2019, Plaintiff prepared and executed a 23 declaration, which CTE Cal used for pre-trial motions, that set forth details concerning the nature 24 || of Plaintiff's employment at YWS. /d. § 42. Plaintiff was subpoenaed by CTE Cal to testify at 25 || trial; CTE Cal arranged and paid for Plaintiff’s travel accommodations to San Diego. □□□ § 43. 26 || Before the trial, on or around July 12, 2019, Defendant Yarbrough contacted Plaintiff by telephone a Case No.: 5:19-cv-05896-EJD 28 Oa NTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO
1 and advised him that he was prohibited from testifying at the trial and that if he testified, his 2 || employment with YWS would be terminated. /d. 4 44. Plaintiff still flew to San Diego to testify, 3 || but ultimately was not called to testify. /d. 7 45. 4 On or around August 6, 2019, Defendant Yarbrough demanded reimbursement from 5 || Plaintiff for any fees Plaintiff had received from CTE Cal for testifying in the litigation. /d. □ 46. 6 || Plaintifftold Defendant Yarbrough that he had not received any fees or compensation. /d. 7 || Defendant Yarbrough then informed Plaintiff by telephone that he was terminated from his 8 employment with YWS. /d. At the time, Plaintiff was assigned to a construction project at a 9 || naval base in Monterey, California. /d. Following his termination, he was no longer allowed to 10 || access the project. Jd. 11 B. Procedural History 12 On September 20, 2019, Plaintiff filed his Complaint alleging that Defendants violated 13 RICO, 18 U.S.C. § 1962(c) and committed (1) unlawful business practices in violation of 14 || California Business & Professions Code 17200, (2) unfair business practices in violation of 3 15 California Business & Professions Code 17200, (3) wrongful termination in violation of public a 16 || policy, and (4) wrongful termination in breach of the covenant of good faith and fair dealing. See 3 17 || generally Compl. On January 21, 2020, Defendants filed a motion to dismiss Plaintiff's 18 Complaint pursuant to Rule 12(b)(6). Defendants’ Motion to Dismiss Pursuant to Rule 12(b)(6) 19 |} (‘Mot’), Dkt. 12. In this same motion, Defendants filed a request for judicial notice. Defendants’ 20 || Request for Judicial Notice in Support of Defendants’ Motion to Dismiss (“RJN”), Dkt.12-1. On 21 February 4, 2020, Plaintiff filed an opposition. Memorandum of Points and Authorities in 22 || Opposition to Defendants’ Motion to Dismiss (“Opp.”), Dkt. 18. Defendants filed their reply on 23 February 11, 2020. Defendants’ Reply Brief in Support of Defendants’ Motion to Dismiss 24 || (“Reply”), Dkt. 20. Along with their reply brief, Defendants filed a second request for judicial 25 || notice. Defendants’ Second Request for Judicial Notice in Support of Defendants’ Motion to 26 || Dismiss (“RJN 2”), Dkt. 19. a Case No.: 5:19-cv-05896-EJD 28 Oa NTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO
1 Il. LEGAL STANDARD 2 To survive a Rule 12(b)(6) motion to dismiss, a complaint must contain sufficient factual 3 matter, accepted as true, to “state a claim for relief that is plausible on its face.” Ashcroft v. Iqbal, 4 || 556 US. 662, 678 (2009) (discussing Federal Rule of Civil Procedure 8(a)(2)). A claim has facial 5 || plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable 6 || inference that the defendant is liable for the misconduct alleged. Jd. The requirement that the 7 || court “accept as true” all allegations in the complaint is “inapplicable to legal conclusions.” Jd. It 8 is improper for the court to assume “the [plaintiff] can prove facts that it has not alleged” or that 9 || the defendant has violated laws “in ways that have not been alleged.” Associated Gen. 10 Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983). 11 If there are two alternative explanations, one advanced by the defendant and the other 12 || advanced by the plaintiff, both of which are plausible, the “plaintiff's complaint survives a motion 13 || to dismiss under Rule 12(b)(6).” Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011). Dismissal 14 || can be based on “the lack of a cognizable legal theory or the absence of sufficient facts alleged 3 15 || under a cognizable legal theory.” Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. a 16 1990). Hence, when a claim or portion of a claim is precluded as a matter of law, that claim may 3 17 || be dismissed pursuant to Rule 12(b). See Whittlestone, Inc. v. Handi-Craft Co., 618 F.3d 970, 975 18 (9th Cir. 2010) (discussing Rule 12(f) and noting that 12(b)(6), unlike Rule 12(f), provides 19 || defendants a mechanism to challenge the legal sufficiency of complaints). However, a complaint 20 || should not be dismissed unless it appears beyond doubt that the plaintiff can prove no set of facts 21 in support of the claim that would entitle the plaintiff to relief. No. 84 Emplover-Teamster Joint 22 Council v. Am. W. Holding Corp., 320 F.3d 920, 931 (9th Cir. 2003). 23 24 25 26 a Case No.: 5:19-cv-05896-EJD 28 Oa NTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO
1 II. DISCUSSION? 2 Defendants first argue that Plaintiff’s RICO claim fails to adequately allege fraud and a 3 || pattern of racketeering activity. See Mot. at 3-5. Defendants next argue that Plaintiff's state law 4 || claims are barred under the federal enclave doctrine. /d. at 8. The Court addresses each in turn. 5 A. RICO Claim 6 RICO prohibits “any person employed by or associated with any enterprise engaged in, or 7 || the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or 8 indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity or 9 || the collection of unlawful debt.” 18 U.S.C. § 1962(c). A violation of § 1962(c), the section on 10 || which Plaintiff relies, requires (1) conduct (2) of an enterprise (3) through a pattern (4) of 11 racketeering activity. Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496 (1985). s “To support the mail and wire fraud allegations, the plaintiffs must plausibly allege “the . . 13 existence of a scheme or artifice to defraud or obtain money or property by false pretenses,
14 || representations or promises,’ and that [defendants] communicated, or caused communications to © 3 15 || occur, through the U.S. mail or interstate wires to execute that fraudulent scheme.” George v. 16 Urban Settlement Servs., 883 F.3d 1242, 1254 (10th Cir. 2016) (citation omitted). Because
17 || Federal Rule of Civil Procedure 9(b) requires a plaintiff to plead mail and wire fraud with
Zz 18 particularity, the plaintiff must set forth, with detail, the time, place, and contents of the alleged 19 || false representation. /d. Defendants argue that Plaintiff has failed to adequately plead the 20 || predicate acts of mail and wire fraud. Mot. at 3. Plaintiff alleges that Defendants engaged in the 21 22 || 5 4. ao Defendants request for the Court to take judicial notice of several exhibits. First, Defendants 23 || request for the Court to take judicial notice of the history of the Presidio of Monterey. See RJN, Ex. A. Second, Defendants request for the Court to take judicial notice of various public court 24 || documents. See RJN 2, Exs. A, 1, B,C. Federal Rule of Evidence 201(b) permits a court to take judicial notice of an adjudicative fact “not subject to reasonable dispute,” that is “generally 25 || known” or “can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.” Specifically, a court may take judicial notice of matters of public 26 || record. Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 999 (9th Cir. 2018). Because the exhibits sought to be noticed are “matters of public record,” Defendants’ request for judicial notice 27 ‘|| is GRANTED. Case No.: 5:19-cv-05896-EJD 28 || ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS
1 predicate acts of mail fraud (18 U.S.C. § 1341) and wire fraud (18 U.S.C. § 1343). Compl. 4§ 69- 2 || 70. Defendants argue that the Complaint fails to allege the predicate acts with sufficient 3 || particularity. Mot. at 3-4. Defendants also argue that because Plaintiffs’ fraud claim rest on 4 || misrepresentation of law, it does not amount to actionable fraud. J/d. at 4 (citing Miller v. 5 Yokohama Tire Corp., 358 F.3d 616 (9th Cir. 2004)). 6 In Miller, the Ninth Circuit held that an employer’s misrepresentation of law to its 7 || employees does not constitute actionable fraud. 358 F.3d at 621. There, Christopher Miller sued 8 || his former employer, Yokohama Tire Corporation, for RICO violations. /d. at 618-19. Miller 9 || worked for Yokohama from 1990 until 2001. 7d. at 618. Miller alleged that throughout his eleven 10 || years of employment, he was ordered to work many overtime hours for which he was never paid 11 additional compensation. /d. He claimed that various Yokohama managers falsely represented to 12 || him and other employees that they were not entitled to overtime pay because they were salaried. 13 || Id. Because Yokohama mailed him and other employees their paychecks or pay stubs twice 14 || monthly and their W-2s annually (or sent these items via wire transfers), Miller contended that the 3 15 scheme to deny overtime pay was furthered through these paycheck-related mailings and wire a 16 || transfers. Jd. at 619. Hence, Miller argued that every time the Yokohama managers’ sent him or 3 17 || other employees a paycheck or W-2, they committed a predicate act of mail or wire fraud and 18 || violated RICO (18 U.S.C. § 1962(c)). Jd. at 619, 620. Miller’s theory of fraud, however, was not 19 || actionable because the misrepresentation—.e., that he and his coworkers were not entitled to 20 || overtime pay—was a misrepresentation of law. Such misrepresentations are not actionable. □□□ at 21 622. 22 Plaintiff’s theory of fraud is that Defendants mischaracterized YWS construction workers’ 23 || status to clients. In Plaintiff's view, Defendants misled their contractor-clients into believing that 24 2 || 3 Miller brought this same claim against Yokohama. The Ninth Circuit determined that Miller’s 26 || RICO claim against Yokohama failed because Miller premised Yokohama’s liability on a respondeat superior theory. Miller, 458 F.3d at 619-20. That reasoning, however, is irrelevant to 27 || this Order and so this Court does not address that portion of the Miller order. Case No.: 5:19-cv-05896-EJD 28 Oa NTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO
1 YWS construction workers were employees when, in fact, the workers were independent 2 || contractors. Opp. at 6. Plaintiff argues that this misrepresentation differs from the 3 misrepresentation analyzed in Miller because Defendants did not make the misrepresentations to 4 || YWS employees. /d. at 5. This is a distinction without a difference. In determining whether or 5 || not a misrepresentation is legal or factual, the question is not to whom the misrepresentation was 6 || made, but rather what the contents of the misrepresentation are. See Miller, 358 F.3d at 621 7 || (‘Statements about domestic law are normally regarded as expressions of opinion which are not 8 || actionable in fraud even if they are false.”). Hence, the relevant inquiry is—does Plaintiff allege 9 || that Defendants made a misrepresentation of fact or of law? 10 Plaintiff alleges that Defendants defrauded contract-clients by misrepresenting the status of 11 || YWS construction workers. This is a misrepresentation of law—the allegation focuses on the || construction workers’ employment status. Indeed, a “statement that an individual is a contractor, . 13 vendor, or an employee of a contractor, is a statement of law.” Bernal v. FedEx Ground Package
14 || Sys. Inc., 2015 WL 4273034, at *3 (C.D. Cal. July 14, 2015) (citing Harris v. Vector Mktg. Corp., 3 15 656 F. Supp. 2d 1128, 1136 (N.D. Cal. 2009)). As noted, misrepresentations of law cannot form A 16 || the basis of a fraud claim.’ /d. at 621.
17 Tronsgard v. FBL Financial Group, Inc. is instructive. 312 F. Supp. 3d 982 (D. Kan.
18 2018). There, the court held that the plaintiffs’ complaint failed to allege facts supporting a RICO 19 || predicate act because the alleged fraudulent statements did not involve a misrepresentation of fact. 20 || Id. at 991 (citing Miller, 358 F.3d at 620-21). As in Miller, the plaintiffs premised their RICO 21 claims on purported acts of mail and wire fraud involving their employers’ alleged 22 || misrepresentations about their employment classification. /d. The plaintiff argued that factual 23 24 | 4 oo. There are four exceptions to this rule. A misrepresentation of law is actionable where the party 25 || making the misrepresentation: (1) purports to have special knowledge; (2) stands in a fiduciary or similar relation of trust and confidence to the recipient; (3) has successfully endeavored to secure 26 || the confidence of the recipient; or (4) has some other special reason to expect that the recipient will rely on his opinion. Miller, 358 F.3d at 621. None of these exceptions appear to be present 27 || here and Plaintiff does not argue that one is present. See generally Opp. Case No.: 5:19-cv-05896-EJD 28 || ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS
1 issues existed as to whether or not the defendants properly classified the plaintiffs as independent 2 || contractors. /d. at 994. In the context of alleging mail or wire fraud, however, the court merely 3 considers the alleged misrepresentations that the defendant made. /d. Hence, after assessing the 4 || alleged misrepresentation—.e., that the plaintiffs were independent contractors—the court 5 determined that the plaintiffs alleged a legal misrepresentation and not a misrepresentation of fact. 6 || Jd. 7 Likewise, here, Plaintiffs allegation that Defendants misrepresented his and other YWS 8 construction workers’ employment status is a misrepresentation of law. The alleged 9 || misrepresentation is nearly identical to that of Miller and Tronsgard—as in those cases, the 10 || alleged misrepresentation focuses on misstatements about Plaintiff's employment status. See Opp. 11 at 6 (“[Defendants| knowingly carried out a material scheme to defraud its contractor clients by 12 || misrepresenting to them the status of YWS employees.” (emphasis added)). The Complaint 13 || alleges that Defendants lied to contractor-clients by stating that YWS construction workers were 14 || employees when, in fact, they were independent contractors. As established, this is a legal 3 15 || representation. See e.g., Tronsgard, 312 F. Supp. 3d at 994. It appears that, like the plaintiff in a 16 || Miller, Plaintiff is attempting to “transform a California state law wage and hour claim into a 3 17 || federal RICO claim under 18 U.S.C. § 1962(c).” 358 F.3d at 618. 18 Contrary to Plaintiffs position, Bridge v. Phoenix Bond & Indemnity Co., 553 U.S. 639 19 || (2009) does not change this analysis. Bridge does not disrupt the requirement that a plaintiff must 20 || plead a fraudulent misrepresentation of fact to support the predicate act requirement. Rather, 21 Bridge only held that a plaintiff need not show reliance. 553 U.S. at 649; see also Tronsgard, 312 22 || F. Supp. 3d at 994 (“Bridge merely held that a plaintiff need not show reliance; it never held that a 23 federal mail fraud claim does not require the other elements of a common law fraud claim—such 24 || as the existence of a material misrepresentation of fact.”). 25 Because Plaintiff's predicate act allegations rest on a misrepresentation of law, the Court 26 || GRANTS Defendants’ motion to dismiss Plaintiff's RICO claim. When dismissing a complaint a Case No.: 5:19-cv-05896-EJD 28 Oa NTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO
1 for failure to state a claim, a court should grant leave to amend “unless it determines that the 2 || pleading could not possibly be cured by the allegation of other facts.” Lopez v. Smith, 203 F.3d 3 1122, 1127 (9th Cir. 2000). It may be possible that Plaintiff could plead facts showing that 4 || Defendants misrepresented facts about YWS construction workers’ employment status. 5 || Accordingly, Plaintiff may file an amended complaint as to his RICO claim no later than June 26, 6 || 2020.° 7 B. State Law Claims® 8 Defendants next argue that Plaintiffs second through fifth causes of action must be 9 || dismissed because they are barred under the federal enclave doctrine. Mot. at 8. While Plaintiff 10 || concedes that the Monterey Presidio is a federal enclave, he argues that because the federal 11 government has enacted legislation stating that State wage-and-hour law applies to federal 12 || enclaves, his state law causes of action are not barred. See Opp. at 13. In the alternative, Plaintiff 13 || argues that even if the federal enclave doctrine bars these causes of action, he has plead sufficient 14 || facts to show that Defendants did not perpetrate their tortious acts exclusively on federal enclaves. 3 15 Under the U.S. Constitution, the United States has the power to acquire land from the a 16 || states for certain unspecified uses and to exercise exclusive jurisdiction over such lands. These 3 17 || lands are known as “federal enclaves.” Swords to Plowshares v. Kemp, 423 F. Supp. 2d 1031, 18 1034 (N.D. Cal. 2005). Article 1, Section 8, Clause 17 grants Congress the power to “exercise 19 || exclusive legislation in all cases whatsoever” over all places purchased with the consent of a state 20 “for the erection of forts, magazines, arsenals, dock-yards, and other needful buildings.” Jd. The 21 power to exercise “exclusive legislation” holds the same meaning as “exclusive jurisdiction.” Jd. 22 || (quoting Surplus Trading Co. v. Cook, 281 U.S.647, 652 (1930)). Exclusive jurisdiction “assumes 23 || the absence of any interference with the exercise of the functions of the Federal Government 24 || and... debar[s] the State from exercising any legislative authority, including its taxing and police 25 26 . Because it is unnecessary, this Court does not address Defendants’ other RICO arguments. While the Court held that Plaintiffs federal RICO claim must be dismissed, the Court retains 27 || diversity jurisdiction over Plaintiffs state law claims. See Compl. § 9. Case No.: 5:19-cv-05896-EJD 28 Oa NTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO
1 power, in relation to the property and activities of individuals and corporations within the 2 || territory.” Silas Mason Co. v. Tax Comm’n of Wash., 302 U.S. 186, 197 (1937); see also S.R.A., 3 || Inc. v. Minnesota, 327 U.S. 558 (1946) (noting that exclusive legislative power is “in essence 4 || complete sovereignty” because the federal property is immune from state taxation and from “state 5 laws, not adopted directly or impliedly by the United States”). 6 On federal enclaves, in the absence of federal legislation displacing state law, those state 7 || laws that existed at the time that the enclave was ceded to the federal government remain in force. 8 || Paul v. United States, 371 U.S. 245, 268 (1963). Three exceptions exist to this rule: (1) where 9 || Congress has, by statute, provided a different rule; (2) where the state explicitly retained the right 10 || to legislate over specific matters at the time of cession; and (3) where minor regulatory changes 11 modify laws existing at the time of cession. United States v. Sharpnack, 355 U.S. 286, 294-95 12 || (1958). Federal enclaves are thus typically under the exclusive jurisdiction of the United States, 13 meaning the property and activities of individuals and corporations within that territory are also 14 || under federal jurisdiction. See Swords to Plowshares, 423 F. Supp. 2d at 1034. 3 15 The California Legislature ceded the Monterey Presidio to the United States Government a 16 || in 1897. Mot at 8; see also RJN, Ex. A. It is not contested by the Parties and the case law 3 17 || supports that, when California ceded the Presidio to the United States, exclusive jurisdiction over 18 || that area was conferred upon the United States. Standard Oil Co. v. People of State of Cal., 291 19 || US. 242, 244 (1934). Because the state laws on which Plaintiff relies were enacted after the 20 || federal government acquired the Monterey Presidio, Plaintiff argues that California law applies on 21 federal enclaves. 22 Plaintiff cites to 40 U.S.C. § 3172 and 26 U.S.C. § 3305(d) to support his argument that 23 California law applies to the Presidio. Opp. at 13. Neither of these statutes, however, support 24 || Plaintiff's argument. These statutes vest California with authority to enforce its labor laws on 25 federal enclaves—neither statute provides for a private right of action. 40 U.S.C. § 3172(a) states 26 || that “[t|he state authority charged with enforcing and requiring compliance with the state workers’ a Case No.: 5:19-cv-05896-EJD 28 Oa NTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO
1 compensation laws . .. may apply the laws to all land and premises in the State which the Federal 2 || Government owns or holds.” (emphasis added). This waiver of jurisdiction however is limited to 3 “the state authority.” See 40 U.S.C. § 3172(b) (“Limitation on relinquishing jurisdiction. The 4 || Government under this section does not relinquish its jurisdiction for any other purpose.” 5 (emphasis added)). Likewise, 26 U.S.C. § 3305(d) states that while unemployment compensation 6 || law cannot be evaded on federal enclaves, only the “State shall have full jurisdiction and power to 7 || enforce the provisions of such law . . . as though such place were not owned, held, or possessed by 8 || the United States.” Thus, neither statute provides for a private cause of action. The statutes only 9 || allow for California or its agencies to enforce compliance with worker’s compensation laws. See 10 || Alexander v. Sandoval, 532 U.S. 275, 286-87 (2001) (“[P]rivate rights of action to enforce federal 11 law must be created by Congress.”). Plaintiff's use of S. G. Borello & Sons Inc. v. Department of 12 || Industrial Relations, 769 P.3d 399 (Cal. 1989) is thus unpersuasive; that case involved the 13 || California Department of Industrial Relations, which is a state authority. Accordingly, Section 14 || 3172 and Section 3305(d) are unhelpful to Plaintiff. 3 15 In the alternative, Plaintiff argues that even if the federal enclave doctrine applies, it is a 16 || irrelevant to Plaintiff's Complaint since many of the alleged tortious acts occurred outside of 3 17 || federal enclaves. Opp. at 11. Pursuant to the above analysis, Plaintiffs state-law wage and hour 18 claims that stem from the Monterey Presidio project are barred by the federal enclave doctrine. 19 || Likewise, any claims stemming from projects on federal lands are barred. The issue thus becomes 20 || whether or not Plaintiff has plead sufficient facts about non-federal enclave projects to support his 21 wage-and-hour and wrongful termination claims. The Court finds that Plaintiff has. 22 Plaintiff first contends that the point of the allegations pertaining to the Monterey Presidio 23 Project were to provide context about the severity and scope of Defendants’ scheme so as to 24 || support the RICO claim. Opp. at 12. Plaintiff maintains that the California Labor Code violations 25 || are unrelated to Plaintiff's services at the Presidio of Monterey. The Court agrees. The Complaint 26 || alleges that Defendants required him to enter into an illegal agreement accepting his a Case No.: 5:19-cv-05896-EJD 28 Oa NTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO
1 misclassification as an independent contractor and that this violated California Business and 2 || Professions Code. See Compl. 80—95 (Counts II & HI); see also supra 1.A. (recounting the 3 alleged labor violations). This is an actionable. See Dynamex Operations W y. Superior Court, 4 || 416 P.3d 1 (Cal. 2018); see also Tan v. GrubHub, Inc., 171 F. Supp. 3d 998, 1004 (N.D. Cal. 5 || 2016). The “illicit agreement” exists outside of the federal enclave. Indeed, Plaintiff had to enter 6 || this agreement regardless of where he performed construction services—the agreement was 7 || applied to a// contracted services (private, state, or federal). Plaintiff has pled sufficient facts to 8 show that the agreement applied equally to his non-federal projects. These projects can support 9 || Plaintiffs’ unfair/unlawful business practices claims.’ 10 Plaintiff next argues that the alleged witness tampering, which support his wrongful 11 termination claims (counts four and five), is not barred by the federal enclave doctrine. In 12 || Plaintiff's view, because the facts giving rise to these claims occurred outside of the federal 13 enclave and a year after Plaintiff stopped working on the Monterey Presidio project, the federal 14 || enclave doctrine does not apply to these claims. Defendants argue that these claims are still barred 3 15 || because the federal enclave doctrine applies even in circumstances where the alleged wrongful a 16 || conduct occurs off the enclave. Reply at 9. The Court disagrees with Defendants. 3 17 Powell v. Tessada & Associates, Inc. is instructive. There, the court held that the federal 18 || enclave doctrine still barred the plaintiffs’ state law claims even though the decision to fire the 19 || plaintiffs was made off the federal enclave. 2005 WL 578103, at *1 (N.D. Cal. 2005). Notably, in 20 || Powell, the plaintiffs worked only on the federal enclave and the decision to fire the plaintiffs was 21 a decision about employment practices on the federal enclave. /d. at *2. Here, in contrast, 22 || Defendants’ decision to fire Plaintiff had nothing to do with his work on a federal enclave. To the 23 || contrary, Plaintiff alleges that Defendants terminated him to stop him from talking. Hence, the 24 || termination decision had nothing to do with “employment practices on the federal enclave.” 25 26 || ’ As noted, Plaintiff's work on the Monterey Presidio Project or on other federal enclaves cannot form the basis of Plaintiffs unfair/unlawful business practices claims. A contrary ruling would 27 || permit plaintiffs to circumvent the federal enclave doctrine. Case No.: 5:19-cv-05896-EJD 28 Oa NTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO
1 Moreover, unlike the Powell plaintiffs, Plaintiff did not work exclusively on a federal enclave. 2 || Rather, Plaintiff worked on both commercial and government projects. In other words, he worked 3 generally for Defendant YWS; his work was not exclusively on federal enclaves. Indeed, the 4 || decision to terminate Plaintiff prevented Plaintiff from working on a// YWS projects, regardless of 5 || whether such projects were on federal land. Accordingly, Plaintiff's unfair business practice and 6 || wrongful termination claims are not barred by the federal enclave doctrine. 7 IV. CONCLUSION 8 For the foregoing reasons, Defendants’ motion to dismiss is GRANTED in part and 9 || DENIED in part. Plaintiff may file an amended complaint as to his RICO claim by June 26, 10 || 2020. See supra. Plaintiff may not add new claims or parties without leave of the Court or 11 stipulation by the Parties pursuant to Federal Rule of Civil Procedure 15. a 2 IT IS SO ORDERED.
13 Dated: May 7, 2020
EDWARD J. DAVILA 15 United States District Judge 16
(«17
Z 18 19 20 21 22 23 24 25 26 27 Case No.: 5:19-cv-05896-EJD 28 || ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS