Graves v. DJO, LLC

• Court: District Court, S.D. California
• Decided: March 12, 2021
• Docket: 3:20-cv-01103
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 9 10 UNITED STATES DISTRICT COURT 11 SOUTHERN DISTRICT OF CALIFORNIA 12 13 MARIE GRAVES, Case No.: 20-CV-1103 W (KSC)

14 Plaintiff, ORDER GRANTING REQEUSTS 15 v. FOR JUDICIAL NOTICE [DOC.S 8- 1, 9-1] AND DENYING MOTION TO 16 DJO, LLC, DISMISS OR STAY [DOC. 4] 17 Defendant. 18 19 Pending before the Court is Defendant DJO, LLC’s motion to dismiss or, in the 20 alternative, stay this case pending resolution of a Texas state-court litigation. Along with 21 DJO’s reply, it has filed an unopposed request for judicial notice. Plaintiff Marie Graves 22 opposes the motion and has also filed an unopposed request for judicial notice. 23 The Court decides the matter on the papers submitted and without oral argument. 24 See Civ. L.R. 7.1(d)(1). For the reasons stated below, the Court GRANTS the requests 25 for judicial notice [Docs. 8-1, 9-1] and DENIES the motion to dismiss or stay this matter 26 [Doc. 4]. 27 28 1 I. BACKGROUND 2 A. Graves’ Employment with DJO. 3 According to the Complaint, Plaintiff Marie Graves worked for Defendant DJO, 4 LLC from April 30, 2018 until June 1, 2019 as a Global Medical Device Auditor in its 5 Vista, California headquarters. (Compl. [Doc. 1] ¶ 17.) On July 11, 2018, DJO claimed 6 that it would be relocating its headquarters to Dallas, Texas. (Id. ¶ 18.) 7 On October 2, 2018, Graves received a letter from DJO confirming that her 8 position in Vista would be terminated on June 1, 2019. (Compl. ¶¶ 20, 21.) The letter 9 stated that Graves would be offered a separation package that would include “severance, 10 health insurance, outplacement assistance, and a completion bonus of $33,000, ‘which 11 will be paid, less applicable withholdings, on your last day of employment along with 12 your final pay check’. The completion bonus was contingent on Ms. Graves ‘remain[ing] 13 in good standing and perform[ing] your duties in a satisfactory manner through the 14 Separation date.’” (Id. ¶ 21.) The letter did not state that as a condition for payment, 15 Graves would also have to agree to a general release of all claims. (Id.) 16 In January 2019, Graves informed DJO that she was pregnant and requested 17 paperwork for FMLA coverage. (Compl. ¶ 28.) Before notifying DJO about her 18 pregnancy, she had been in discussions with the company’s Vice President of Regulatory 19 Affairs, Ehab Esmail, about the possibility of continuing to work for the company from 20 Vista, California as a Manger/Lead of Regulatory Affairs. (Id. ¶¶ 22–25.) Just prior to 21 announcing her pregnancy, Graves was asked by Esmail to formalize their discussions 22 about the position. (Id.) 23 On March 13, 2019, Esmail held a meeting and explained there was an opening in 24 Carlsbad for the “lead” in Regulatory Affairs, which was posted online. (Compl. ¶ 30.) 25 Graves immediately emailed DJO’s in-house recruiter and Esmail about the position 26 because Esmail previously implied the position would be hers. (Id.) “Esmail called Ms. 27 Graves and stated that the position is actually temporary, that he was not going to hire or 28 1 even consider Ms. Graves for the position, and that he would be giving the job to Usman 2 Khan, M[r]. Esmail’s friend.” (Id.) 3 On March 26, 2019, Graves checked the website and discovered the position was 4 still open. (Compl. ¶ 31.) She then emailed Esmail and Colleen Farrell of Human 5 Resources to verify if the position remained open. (Id.) A few weeks later, Graves 6 received an updated organizational chart indicating the Manager of Regulatory Affairs 7 position was still open and it was still listed on the website. (Id. ¶ 32.) Graves again sent 8 Esmail an email about the position. (Id.) He stated the person who was going to fill the 9 role was out of the country caring for his sick wife, was expected to start later that week 10 but that if he did not, Esmail would explore other options. (Id.) 11 On April 19, 2019, Graves sent an extensive email to Esmail, Farrell, and DJO’s 12 new Director of RA, Pete Gonzalez, requesting an explanation as to why her application 13 was not considered for the position given that it had now been posted for over 45 days. 14 (Compl. ¶ 33.) Graves did not receive a response. (Id.) 15 On April 26, 2019, Graves learned that all full-time employees and contractors in 16 the RA department, except Graves, were granted an extension of their positions up to 17 June 29, 2019. (Compl. ¶ 34.) When Graves asked Esmail for an explanation, she 18 received an incoherent response that contractors were not extended. (Id.) Graves was a 19 full-time employee, not a contractor. (Id.) At some point, “[a]ll contractors and 20 employees in Ms. Graves’ department had their last date of employment extended until 21 February 2020.” (Id.) Graves’ employment was still terminated on June 1, 2019. (Id. ¶ 22 1.) 23 On May 8, 2019, Graves began maternity leave, but DJO still required her to 24 continue to work from home. (Compl. ¶ 35.) She believed the following provision in the 25 October 2, 2018 letter regarding her separation severance agreement would be voided if 26 she did not continue to work while on maternity leave: 27 if you . . . fail to continue to report to work . . . and/or satisfactorily perform the duties of your employment, you will be deemed to have resigned your 28 1 peloisgiitbioilnit ya.n d forfeited continued employment, pay, benefits and severance 2

3 (Id.) Therefore, from May 8, 2019 until May 16, 2019, Graves worked about 36 hours 4 assisting another employee, Jim Pomeroy, despite being on FMLA leave and without 5 being compensated by DJO. (Id. ¶ 36.) 6 On May 16, 2019, Pomeroy informed Graves that Esmail was no longer with the 7 company. (Compl. ¶ 37.) He also told Graves that although he was not sure what 8 opportunities would be available with the company in the future, he told her to “reach out 9 to him when ‘you’re done with having a baby.’” (Id.) 10 On May 31, 2019, the day before her employment was to terminate, Graves 11 received an agreement titled, Confidential Separation Agreement and General Release of 12 all Claims (the “Release”). (Compl. ¶ 39.) “On June 10, 2019, Ms. Graves received a 13 call telling her that the agreement would lapse if not signed by June 10, 2019.” (Id.) 14 Graves, therefore, signed the agreement so that she could receive her $33,000 bonus as 15 promised in the October 2, 2018 letter. (Id.) 16 “On June 11, 2019, Graves learned that her medical coverage was going to 17 terminate on June 30, 2019, which was contrary to what she had been told would happen 18 regarding the severance.” (Compl. ¶ 40.) DJO also failed to pay the first severance 19 installment on June 21, 2019. (Id. ¶ 41.) Despite DJO’s promise to “fix the confusion 20 with the medical insurance,” on July 8, 2019 she received notice that her insurance 21 terminated on June 30, 2019. (Id. ¶ 42.) 22 23 B. DJO Files Suit in Texas After Receiving a Draft Complaint from 24 Graves’ Attorney. 25 On March 24, 2020, Graves’ attorney sent a letter and draft copy of the Complaint 26 to DJO’s attorney indicating she intended to file a lawsuit. (Dolghih Decl. [Doc. 5-1] ¶ 27 3.) On May 1, 2020, DJO filed a complaint for declaratory relief against Graves in 28 1 Denton County, Texas. (Id. ¶ 4. ) On February 23, 2021, the lawsuit was dismissed for 2 lack of personal jurisdiction over Graves. (Jt. Status Rpt. [Doc. 11] 2:8–12.) DJO plans 3 to appeal the decision. (Id. 2:27–28.) 4 Meanwhile, on June 17, 2010, Graves filed this lawsuit. (See Compl.) The 5 Complaint asserts 13 causes of action for violation of a number of provisions of the 6 California Labor Code and California Government Code, violation of 29 USC 2601 et 7 seq. (the “FMLA”), intentional infliction of emotional distress, wrongful termination in 8 violation of public policy, and unfair competition under California Business and 9 Professions Code §§ 17200 et seq. 10 DJO now seeks to dismiss the lawsuit arguing that it is barred by the Release 11 Graves signed in June 2019. Alternatively, DJO requests a stay of this matter pending 12 final resolution of the Texas litigation. 13 14 II. LEGAL STANDARD 15 The court must dismiss a cause of action for failure to state a claim upon which 16 relief can be granted. Fed. R. Civ. P. 12(b)(6). A motion to dismiss under Rule 12(b)(6) 17 tests the legal sufficiency of the complaint. See Parks Sch. of Bus., Inc. v. Symington, 51 18 F.3d 1480, 1484 (9th Cir. 1995). A complaint may be dismissed as a matter of law either 19 for lack of a cognizable legal theory or for insufficient facts under a cognizable theory. 20 Balisteri v. Pacifica Police Dep’t., 901 F.2d 696, 699 (9th Cir. 1990). In ruling on the 21 motion, a court must “accept all material allegations of fact as true and construe the 22 complaint in a light most favorable to the non-moving party.” Vasquez v. L.A. Cnty., 487 23 F.3d 1246, 1249 (9th Cir. 2007). But a court is not required to accept legal conclusions 24 couched as facts, unwarranted deductions, or unreasonable inferences. Papasan v. Allain, 25 26 27 1 According to Elisaveta Dolghih’s declaration, a copy of the complaint filed in Texas state court is 28 attached to her declaration as Exhibit A. (Amend. Dolghih Decl. ¶ 4.) However, Exhibit A is the 1 478 U.S. 265, 286 (1986); Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2 2001). 3 Complaints must contain “a short plain statement of the claim showing that the 4 pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). The Supreme Court has interpreted 5 this rule to mean that “[f]actual allegations must be enough to rise above the speculative 6 level.” Bell Atl. Corp. v. Twombly, 550 U.S. 554, 555 (2007). The allegations in the 7 complaint must “contain sufficient factual matter, accepted as true, to state a claim to 8 relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing 9 Twombly, 550 U.S. at 570). 10 11 III. DISCUSSION 12 DJO argues that Graves’ lawsuit is barred by the Release. (Amend. P&A [Doc. 5- 13 1] 5:15–16, 13:6–14:21.) Alternatively, DJO argues the case should be stayed pending 14 the outcome of the Texas state-court action. (Id. 5:18–21, 14:22–18:6.) Graves does not 15 appear to dispute that the terms of the Release would bar this lawsuit. Instead, she argues 16 the Release is unconscionable and unenforceable. (Opp’n [Doc. 8] 4:27–5:4.) She also 17 opposes the stay, pointing out that the Texas case has been dismissed. (Id. 9:18–22.) 18 For the reasons that follow, the Court finds the Complaint’s allegations suggest the 19 Release is unconscionable and therefore unenforceable. Additionally, given the trial 20 court’s dismissal of the Texas action, a stay is not warranted. 21 22 C. The Complaint adequately pleads facts suggesting the Release is 23 unconscionable and thus unenforceable. 24 California Civil Code § 1670.5(a) provides that “[i]f the court as a matter of law 25 finds the contract or any clause of the contract to have been unconscionable at the time it 26 was made the court may refuse to enforce the contract, or it may enforce the remainder of 27 the contract without the unconscionable clause, or it may so limit the application of any 28 unconscionable clause as to avoid any unconscionable result.” Unconscionability has a 1 “procedural” and “substantive” element. A&M Produce Co. v. FMC Corp., 135 2 Cal.App.3d 473, 486 (1982). The procedural element focuses on “oppression” and 3 “surprise.” Id. “‘Oppression’ arises from an inequality of bargaining power which 4 results in no real negotiation and ‘an absence of meaningful choice.’ [Citation omitted.] 5 ‘Surprise’ involves the extent to which the supposedly agreed-upon terms of the bargain 6 are hidden in a prolix printed form drafted by the party seeking to enforce the disputed 7 terms. [Citation omitted.]” Id. 8 The substantive element looks at “the effects of the contractual terms and whether 9 they are unreasonable. Because a contract is largely an allocation of risks, a contractual 10 provision is ‘substantively suspect if it reallocates the risks ... in an objectively 11 unreasonable or unexpected manner.’ [Citation omitted.]” Marin Storage & Trucking, 12 Inc. v. Bencoj Contracting and Eng’g, Inc., 89 Cal.App.4th 1042, 1052–53 (2001). Thus, 13 for example, a one-sided arbitration agreement requiring one contracting party, but not 14 the other, to arbitrate all claims would be considered overly harsh. Tiri v. Lucky 15 Chances, Inc., 226 Cal.App.4th 231, 246–47 (2014); Little v. Auto Striegler, Inc., 29 16 Cal.4t 1064, 1071 (2003) (“Substantively unconscionable terms may take various forms, 17 but may generally be described as unfairly one-sided.”) 18 In order to find a contract unenforceable because it is unconscionable, both 19 procedural and substantive elements must be present. Armendariz v. Foundation health 20 Psychcare Services, Inc., 24 Cal.4th 83, 114 (2000). “But they need not be present in the 21 same degree. ‘Essentially a sliding scale is invoked which disregards the regularity of the 22 procedural process of the contract formation, that creates the terms, in proportion to the 23 greater harshness or unreasonableness of the substantive terms themselves.’ [Citations 24 omitted.] In other words, the more substantively oppressive the contract term, the less 25 evidence of procedural unconscionability is required to come to the conclusion that the 26 term is unenforceable, and vice versa.” Id. 27 Here, Graves alleges that based on the terms of October 2, 2018 letter, her 28 severance package—which included health insurance and a $33,000 completion bonus— 1 was to be paid if Graves “remain[ed] in good standing and perform[ed] your duties in a 2 satisfactory manner through the Separation date.’” (Compl. ¶ 21.) Seven months later, 3 while Graves was on maternity leave and literally on the eve of being unemployed 4 because of DJO’s alleged relocation, she received the agreement containing the Release 5 from DJO. (Id. ¶¶ 21, 35, 39.) Although her employment terminated the next day, DJO 6 did not pay her the $33,000 completion bonus promised in October 2018 letter. Then on 7 June 10, she received a phone call stating that if she did not sign the agreement by that 8 day, it would lapse. (Id. ¶ 39.) Graves, therefore, signed the agreement to ensure she 9 received the previously promised $33,000 bonus. (Id.) 10 Graves’ factual allegations support the inference of a fairly significant level of 11 procedural unconscionability. When read in favor of Graves, as is required in evaluating 12 a motion to dismiss, it is reasonable to infer from the factual allegations that DJO 13 unilaterally changed the terms of the separation severance agreement on the eve of 14 Graves’ termination, after she had arguably already satisfied the terms included in the 15 October 2018 letter, by requiring her to execute the Release in order to received the 16 $33,000 bonus and continued medical insurance. 17 DJO nevertheless asserts that Graves was not “ambushed” by the agreement 18 because she knew about DJO’s relocation to Texas as early as July 2018. (Reply [Doc. 9] 19 6:24–27.) But DJO confuses the issue, which is not when Graves learned about DJO’s 20 relocation or even when she requested the severance package. Rather, the issue is when 21 did DJO notify Graves that her severance package was contingent on executing the 22 Release. Based on the facts alleged in the Complaint, it is reasonable to infer that the 23 Release was a last-minute condition, unilaterally imposed by DJO eight months after it 24 first proposed the severance package and on the eve of Graves’ last day of employment, 25 while still at home on maternity leave with a newborn baby. In short, the facts support a 26 finding of both the “oppression” and “surprise” elements of procedural unconscionability. 27 The allegations also support a finding that the Release was substantively 28 unconscionable because it solely applied to Graves’ claims against DJO: 1 Iinn tchoins sAidgerreaetmioenn ot f… an Ed minp rloetyueren …fo rd tohees p hreormebisye sre alenads ceo, vabensoalnvtes uanndd ertaken 2 discharge the Company and each of the Company’s parents, subsidiaries, 3 related companies and business concerns, past and present, and each of them, as well as each of their partners, trustees, directors, officers, agents, 4 attorneys, servants and employees, past and present, and each of them 5 (collectively referred to as “Releasees”) from any and all claims, demands, … and liabilities of whatever kind or nature in state or federal law, equity or 6 otherwise, whether known or unknown to Employee (collectively, the 7 “Claims”), which Employee now owns or holds or has at any time owned or held as against Releasees…. 8

9 (Amended P&A 6:14–7:6, citing Dolghih Decl. Ex. A.2) In fact, DJO’s motion does not 10 even attempt to assert the Release was mutual and instead focuses on the consideration 11 Graves received for the Release. (See Amend. P&A 8:23–8:16.) Because the factual 12 allegations strongly suggest DJO changed the terms of the bargain at the last minute by 13 imposing a unilateral release of all claims, DJO’s arguments are unpersuasive at this 14 stage in the litigation. 15

16 D. A stay is not warranted at this time. 17 DJO requests a stay pending resolution of the Texas litigation. However, as 18 acknowledged by the parties’ joint status report, the trial court has dismissed the case 19 based on a lack of personal jurisdiction over Graves. (Jt. Status Rpt. 2:8–12.) The 20 finding seems well supported by the fact that Graves is a California resident, who was 21 employed by DJO in California and the Release was executed in California. Regardless, 22 DJO’s assertion that it plans to appeal indicates that as of the filing of the status report, 23 there was no pending litigation. (Id. 2:27–28.) For these reasons, a stay is not warranted 24 at this time. 25 26 27 2 The Amended P&A references Exhibit A of the Dolghih Decl. for the Release. However, as stated 28 above, Exhibit A is Graves’ Complaint in this case. The Release is attached to DJO’s Request for 1 CONCLUSION & ORDER 2 For the foregoing reasons, the Court GRANTS the requests for judicial notice 3 || [Docs. 8-1, 9-1] and DENIES DJO’s motion to dismiss [Doc. 4] and the request to stay 4 || without prejudice. 5 IT ISSO ORDERED. 6 |/Dated: March 12, 2021 por 8 Hn. 7 omas J. Whelan 9 United States District Judge 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28