Mcafee v. LifeStance Health Group Incorporated

• Court: District Court, D. Arizona
• Decided: March 13, 2024
• Docket: 2:23-cv-01144
• Status: Unknown

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA

9 Jessica Mcafee, et al., No. CV-23-01144-PHX-DJH

10 Plaintiffs, ORDER

11 v.

12 LifeStance Health Group Incorporated,

13 Defendant. 14 15 This matter arises out of the Fair Labor Standards Act, 29 U.S.C. § 201 et seq. 16 (“FLSA”) and the Declaratory Judgment Act, 28 U.S.C. §2201(a) (“DJA”). Plaintiffs 17 Jessica McAfee, Lisa Miller, Hanna Naude, Angela Charlton, Cheryl Mitchell, H.L. Smith, 18 Denise Trent, Lydia Potoma, and Jacqueline Silva (collectively “Plaintiffs”) filed a 19 Collective and Class Action Complaint (Doc. 1) (“Complaint”) bringing three Counts 20 against Defendant LifeStance Health Group Incorporated (“LifeStance”). Pending before 21 the Court is LifeStance’s Motion to Dismiss (Doc. 19). The Court must decide whether 22 Plaintiffs have adequately stated a claim under Federal Rule of Civil Procedure 12(b)(6). 23 They have. Therefore, LifeStance’s Motion to Dismiss will be denied. 24 I. Background1 25 LifeStance is a mental healthcare company focused on providing evidence-based, 26 medically driven treatment services for children, adolescents, and adults suffering from 27 1 Unless otherwise noted, these facts are taken from Plaintiffs’ Complaint (Doc. 1). The 28 Court will assume the Complaint’s factual allegations are true, as it must in evaluating a motion to dismiss. See Lee v. City of L.A., 250 F.3d 668, 679 (9th Cir. 2001). 1 mental health issues. (Doc. 1 at ¶¶ 7, 10). Plaintiffs are current or former clinicians who 2 worked at LifeStance as W-2 employees providing mental health clinical treatment and 3 therapy to patients. (Id. at ¶ 8). As used by Plaintiffs, the term “clinician” means 4 “nonexempt psychiatric and mental health nurse practitioners and other nonphysician 5 employees of LifeStance.” (Id. at ¶ 59). 6 A. Plaintiffs’ Allegations 7 LifeStance’s website represents that clinicians would receive a salary ranging 8 between $185,000–$245,000. (Id. at ¶ 24). LifeStance further represented that their 9 clinicians are employed as W-2 employees rather than independent contractors. 10 (Id. at ¶ 26). Plaintiffs summarized LifeStance’s compensation structure as follows: 11 LifeStance was to compensate clinicians between fifty and sixty percent of the gross 12 amounts billed to insurance providers related to the clinician’s treatment and service to 13 patients (id. at ¶ 35 n.4); LifeStance treated all wages paid to clinicians during their first 14 six to twelve months of employment as an “advance” that LifeStance expects clinicians to 15 repay if they fail to satisfy LifeStance’s performance metrics (id. at ¶ 28–29); and a 16 clinician’s obligation to repay LifeStance’s advance follows the clinician if the person 17 leaves the company before LifeStance can recover the amount of the advance, plus interest 18 (id.) 19 Plaintiffs alleged they routinely worked forty and more hours per week several times 20 a month while receiving less than $450 per week “for at least one week and as much as 21 twelve weeks[.]” (Id. at ¶ 61–62). The majority of the Plaintiffs claimed they experienced 22 pay periods where they did not receive any compensation for an entire month. (Id. at ¶ 62). 23 Plaintiffs represented that LifeStance’s advances on wages functioned as “loans” that 24 clinicians were expected to repay without exception, and so the clinicians did not actually 25 receive any wages during their first six to twelve months of employment. (Id. at ¶ 64). 26 Plaintiffs also stated that LifeStance did not disclose the metrics or data used to calculate 27 their gross compensation or corresponding deductions from its advances each pay period. 28 (Id. at ¶¶ 35–37, 123). 1 B. Procedural History 2 In June 2023, Plaintiffs filed a Complaint bringing the following three claims 3 against LifeStance on behalf of themselves and those similarly situated: 4 Count One for unpaid minimum and overtime wages under the FLSA, 5 29 U.S.C. §§ 206, 207, 215, 216 (id. at ¶¶ 101–118); 6 Count Two for unlawful wage “kickbacks” under the FLSA, 29 C.F.R § 531.35 (id. at ¶¶ 119–128); and 7 8 Count Three for declaratory relief under the DJA, 28 U.S.C. §2201(a) (id. at ¶¶ 129–142). 9 10 Plaintiffs sought to bring all claims as a class action under Rule 23(b)(3).2 (Id. at ¶ 94). 11 LifeStance moved to dismiss all Counts under Rule 12(b)(6) in August 2023. (Doc. 19). 12 In February 2024, Plaintiffs filed a “Request for the Court to take Judicial Notice of 13 Adjudicative Fact” (Doc. 35) with respect to a Florida class action lawsuit filed by 14 Plaintiffs’ counsel while representing a similar class of plaintiffs comprised of current or 15 former LifeStance employees. See Complaint, Armand v. LifeStance Health Group, Inc., 16 No. 6:23-cv-00103-PGB-EJK, (M.D. Fla. Jan. 20, 2023) (the “Florida Class Action”). 17 Plaintiffs noticed this Court that the Florida district court had denied the motion to dismiss 18 that LifeStance filed in that matter. (Doc. 35 at 1–4). See Report and Recommendation, 19 Armand v. LifeStance Health Group, Inc, No. 6:23-cv-00103-PGB-EJK, (M.D. Fla. Oct. 20 27, 2023), ECF No. 34 (Magistrate Judge Embry J. Kidd); see also Order Adopting Report 21 and Recommendation, Armand v. LifeStance Health Group, Inc., No. 6:23-cv-00103-PGB- 22 EJK, (M.D. Fla. Feb. 1, 2024), ECF No. 47 (District Judge Paul G. Byron). 23 II. Legal Standard 24 A motion to dismiss under Rule 12(b)(6) challenges the legal sufficiency of a 25 complaint. Ileto v. Glock, Inc., 349 F.3d 1191, 1199–1200 (9th Cir. 2003). A complaint 26 need not contain detailed factual allegations to avoid a Rule 12(b)(6) dismissal; it simply 27 must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl.

28 2 Unless where otherwise noted, all Rule references are to the Federal Rules of Civil Procedure. 1 Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A complaint has facial plausibility when 2 the plaintiff pleads factual content that allows the court to draw the reasonable inference 3 that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 4 678 (2009) (citing Twombly, 550 U.S. at 556). “The plausibility standard is not akin to a 5 ‘probability requirement,’ but it asks for more than a sheer possibility that defendant has 6 acted unlawfully.” Iqbal, 556 U.S. at 678 (citation omitted). “Where a complaint pleads 7 facts that are ‘merely consistent with’ a defendant’s liability, it ‘stops short of the line 8 between possibility and plausibility of entitlement to relief.’” Id. (citation omitted). 9 When ruling on a motion to dismiss, the court accepts all factual allegations in the 10 complaint as true and views the pleadings in light most favorable to the nonmoving party. 11 See Knievel v. ESPN, 393 F.3d 1068, 1072 (9th Cir. 2005). That rule does not apply, 12 however, to legal conclusions. Iqbal, 556 U.S. at 678. A complaint that provides “labels 13 and conclusions” or “a formulaic recitation of the elements of a cause of action will not 14 do.” Twombly, 550 U.S. at 555. Nor will a complaint suffice if it presents nothing more 15 than “naked assertions” without “further factual enhancement.” Id. at 557. 16 III. Discussion 17 LifeStance argues Plaintiffs have not adequately pled claims under the FLSA and 18 the DJA. (Doc. 19 at 12–19). LifeStance further contends this matter cannot be brought 19 as a class action because Plaintiffs have failed to establish how the putative class members 20 are similarly situated. (Id. at 14, 15). The Court will address each of Plaintiffs’ claims 21 before turning to LifeStance’s challenge to the putative class. 22 A. Count One: Unpaid Wages Under the FLSA 23 Plaintiffs’ Count One is a claim for unpaid minimum and overtime wages under the 24 FLSA. (Doc. 1 at ¶¶ 101–118). The FLSA requires employers to pay their employees a 25 minimum wage for any time spent working during the workweek as well as additional 26 compensation for any time spent in excess of a forty hour workweek. See 29 U.S.C. §§ 27 206(a), 207(a). LifeStance argues Plaintiffs’ allegations are too generalized to establish a 28 1 prima facie showing of FLSA violations.3 (Doc. 19 at 12–14). LifeStance contends 2 Plaintiffs needed to identify particular workweeks where they were not paid federal 3 minimum or overtime wages and specifically allege the amount and extent of their work. 4 (Id. at 13). In LifeStance’s opinion, Plaintiffs have simply recited the elements required 5 for FLSA violations in a conclusory fashion, which is insufficient under Rule 12(b)(6). 6 (Doc. 28 at 7). The Court disagrees. 7 The Ninth Circuit clarified the level of specificity required to establish FLSA claims 8 in Landers v. Quality Commc’ns, Inc., 771 F.3d 638 (9th Cir. 2014) (applying Twombly 9 and Iqbal to claims brought under the FLSA). To bring an FLSA claim for unpaid 10 minimum wages, a plaintiff must “allege facts showing that there was a given week in 11 which he was entitled to but denied minimum wages[.]” Id. at 645. To bring an FLSA 12 claim for unpaid overtime wages, a plaintiff must allege at least one workweek in which 13 she worked in excess of forty hours and was not paid overtime wages. Id. at 646. A 14 plaintiff can establish a plausible claim “by estimating the length of her average workweek 15 during the applicable period and the average rate at which she was paid, the amount of 16 overtime wages she believes she is owed, or any other facts that will permit the court to 17 find plausibility.” Id. at 645 (citing Pruell v. Caritas Christi, 678 F.3d 10, 14 (1st 18 Cir.2012)). However, a plaintiff need not go so far as to make an approximation of 19 overtime hours because such “detailed information concerning a plaintiff-employee’s 20 compensation and schedule is in the control of the defendants.” Id. 21 Plaintiffs argue the following allegations demonstrate they have pled FLSA wage 22 violations with the requisite specificity: 23 A. [LifeStance] refused to pay Plaintiffs minimum wages, overtime 24 wages, and wages in general (i.e., no payment was made at all) for one or more workweeks during the applicable Collective Period [from 25 26 3 LifeStance also contends that Plaintiffs are highly educated, licensed professionals who 27 are exempt from FLSA’s overtime and minimum wage provisions. (Doc. 19 at 12). However, in their Reply, LifeStance clarified that it “did not move to dismiss based on this 28 affirmative defense.” (Doc. 28 at 6). Therefore, the Court will not address LifeStance’s exemption argument for the purposes of this Order. 1 January 2020 to present]. 2 B. Plaintiffs routinely worked 40 and more hours per week several times 3 a month while employed by [LifeStance] and many of the Plaintiffs went through periods in which they did not receive any compensation 4 for an entire month. 5 C. [LifeStance] deprived all the collective action members (which 6 includes Plaintiffs) of earning at least the federal minimum wage for all hours worked, and/or failed to pay them overtime wages when 7 appropriate. 8 D. Since the advances were a loan and not wages (according to 9 [LifeStance]), then the Plaintiffs did not actually receive any wages 10 during their first six to twelve months of employment. 11 (Doc. 27 at 6) (internal citations and quotations omitted). LifeStance is correct that 12 Plaintiffs allegations contain some general phrasing. Nonetheless, when accepted as true, 13 Plaintiffs’ allegations set forth examples of unpaid time that occurred from January 2020 14 to the present through LifeStance’s practice of treating all wages paid to clinicians during 15 their first six to twelve months of employment as loans that the clinicians were expected to 16 repay. (See Doc. 1 at ¶¶ 28–29, 64). LifeStance’s supporting authorities are 17 distinguishable because those cases dealt with complaints that lacked any such examples.4 18 The Court finds Plaintiffs allegations establish sufficient plausibility under Landers. 19 Therefore, the Court will deny LifeStance’s request to dismiss Count One. 20 B. Count Two: Kickbacks Under the FLSA 21 Plaintiffs’ Count Two claims that LifeStance’s “advance on compensation 22 arrangement”5 functioned as loans that clinicians were expected to repay through paycheck 23

24 4 (See Doc. 19 at 13–14 citing Salazar v. Driver Provider Phoenix LLC, 2020 WL 5748129, *5 (D. Ariz. Sept. 24, 2020); Richardson v. Mountain Range Restaurants LLC, 2015 WL 25 1279237, at *5 (D. Ariz. Mar. 20, 2015); Kirchgessner v. CHLN, Inc., 174 F. Supp. 3d 1121, 1126 (D. Ariz. 2016)). 26 5 LifeStance included copies of each Plaintiff’s “Provider Employment Agreement” in their 27 supplemental exhibits to its Motion to Dismiss. (See Docs. 20-2; 20-3; 20-4; 20-5; 20-6; 20-7; 20-8; 20-9). Indeed, most of the Provider Employment Agreement expressly 28 providing for similar advance on compensation arrangements. (See Docs. 20-2 at 6–7; 20- 3 at 7; 20-4 at 7; 20-5; 20-6 at 7; 20-7; 20-8 at 7; 20-9 at 7). 1 deductions, thus resulting in unlawful “kickbacks” under the FLSA (Id. at ¶¶ 119–128). 2 The FLSA’s anti-kickback regulation provides the following: 3 Whether in cash or in facilities, “wages” cannot be considered to have been 4 paid by the employer and received by the employee unless they are paid finally and unconditionally or “free and clear.” The wage requirements of the 5 Act will not be met where the employee “kicks-back” directly or indirectly 6 to the employer or to another person for the employer’s benefit the whole or part of the wage delivered to the employee. 7 8 29 C.F.R. § 531.35 (the “Anti-kickback Regulation”). Under the Anti-kickback 9 Regulation, an employer has not satisfied the minimum wage requirement under the FLSA 10 “in any workweek when the cost of [the kickbacks] cuts into the minimum or overtime 11 wages required to be paid [the employee] under the Act.” Id.; see also Rivera v. Peri & 12 Sons Farms, Inc., 735 F.3d 892, 897 (9th Cir. 2013) (to the extent that kickbacks “lower 13 an employee’s wages below the minimum wage, they are unlawful”). So, to state a claim 14 for unlawful kickbacks, “a plaintiff must allege an underlying minimum or overtime wage 15 violation caused by the kickback.” Walsh v. SL One Glob., Inc., 2022 WL 17722964, *3 16 (E.D. Cal. Dec. 15, 2022) (citing Rivera, 735 F.3d at 897). 17 Here, Plaintiffs represented that LifeStance “treat[ed] all wages paid during the first 18 six to twelve months of the Clinician’s employment as a loan disguised as an advance that 19 LifeStance expected the Clinician to repay if the person failed to satisfy LifeStance’s 20 circuitous performance metrics[.]” (Doc. 1 at ¶ 28). Plaintiffs further claimed that 21 LifeStance routinely made deductions to the clinician’s pay “without reason or description” 22 and without “details explaining [how] the deductions were related to the “advance.” 23 (Id. at ¶¶ 123, 37). As a result, Plaintiffs alleged they were forced to kick-back their earned 24 wages to LifeStance and essentially repay their salary. (Id. at ¶¶ 28–29, 124–125). 25 LifeStance argues Plaintiffs’ claim fails because its advance on compensation 26 arrangement is a lawful employment practice endorsed by the United States Department of 27 Labor (“DOL”), to which Plaintiffs agreed to in writing. (Doc. 19 at 14–15). LifeStance 28 1 cites to various DOL opinion letters6 for the proposition that “an employer can advance 2 compensation to an employee and then recoup the advance through paycheck deductions 3 without violating the FLSA . . . even if such deduction cuts into the minimum wage or 4 overtime pay due to the employee under the FLSA.” (Id. at 15 (citing DOL, Wage and 5 Hour Division Opinion Letter of March 20, 1998 and October 8, 2004)). However, the 6 Court notes the opinion letters that LifeStance relies on delt with circumstances where an 7 employer administered deductions from an employee’s earned wages to recoup a specific 8 amount of overpaid wages.7 (Docs. 20-10 at 2 (an employer had inadvertently overpaid 9 one of its pilots and wanted to recoup the money by deducting it from his paycheck)); 20- 10 11 at 2 (an employer had inadvertently paid an employee for 75 hours of vacation one pay 11 period when the employee in fact had only 32 hours available)). Plaintiffs, by contrast, are 12 concerned with the deductions LifeStance made from their earned wages that prevented 13 clinicians from receiving any wages during their first six to twelve months of employment 14 because clinicians were required to pay those advances back. (Doc. 1 at ¶¶ 63–64). Indeed, 15 Plaintiffs stated that LifeStance’s deductions were “arbitrary,” “were not commensurate 16 with the work performed by the employee,” and functioned so that employee “would not 17 ‘earn’ the funds advanced even if they worked full time for the entire month.” 18 (Doc. 27 at 9–10). 19 The Court finds Plaintiffs’ allegations sufficiently state a claim for unlawful 20 kickbacks under the FLSA. First, Plaintiffs claimed that LifeStance made deductions from 21 their earned wages, which constitutes a direct kick-back for LifeStance’s benefit under the 22 FLSA’s Anti-kickback Regulation. See 29 C.F.R. § 531.35. Second, Plaintiffs alleged 23 these deductions “caused [c]linicians to earn $0 for work conducted or, less than $450.00 24 in a given week” from January 2020 to the present. (Doc. 1 at ¶ 27). When accepting these 25 allegations as true, Plaintiffs sufficiently articulated how the alleged kickbacks resulted in

26 6 LifeStance included copies of each DOL opinion letter in their supplemental exhibits to its Motion to Dismiss. (See Docs. 20-10; 20-11). 27 7 Furthermore, LifeStance’s argument asks the Court to evaluated whether the “advance on 28 compensation arrangement” is lawful. (See Doc. 28 at 9–11). Such a determination would be premature at this stage of the proceedings. 1 underlying minimum and/or overtime wage violations. See Walsh, 2022 WL 17722964, 2 *3 (citing Rivera, 735 F.3d at 897). 3 Therefore, the Court will deny LifeStance’s request to dismiss Count Two. 4 C. Count Three: Declaratory Relief 5 Plaintiffs’ Count Three seeks a declaration under the DJA stating the following: 6 (a) The advance that LifeStance uses to create indentured servitude is a 7 violation of the 13th Amendment to the United States Constitution, thereby making it an illegal and unenforceable obligation. 8 (b) LifeStance cannot take any further action to seek to collect on its 9 indenture as such action is unconstitutional and thus unenforceable. 10 (c) LifeStance must repay all Clinicians whatever portion of the indenture 11 it has collected from them as of the date of the entry of final judgment 12 in this action. 13 (Doc. 1 at ¶ 130). Life Stance argues Plaintiffs’ DJA should be dismissed because it fails 14 to state a claim for relief and is duplicative of an identical request for declaratory judgment 15 filed in the Florida Class Action by Plaintiffs’ counsel. The Court will address each 16 argument in turn. 17 1. Requirements for Claims Under the Declaratory Judgment Act 18 The Court will first determine whether Plaintiffs have stated a claim for relief under 19 the DJA. LifeStance argues Count Three fails because Plaintiffs’ allegations foreclose any 20 possible claim that LifeStance’s advance on compensation arrangement violates the 21 Thirteenth Amendment. (Doc. 19 at 15–17). In so doing, LifeStance proposes Plaintiffs 22 should be held to the requirements for bringing a cause of action under the Thirteenth 23 Amendment. (Id. at 16 (“Unless a plaintiff alleges that he does not have the option of 24 leaving his job, his claim under the Thirteenth Amendment must be dismissed.”) (quoting 25 Rogers v. American Airlines, Inc., 527 F.Supp. 229, 231 (S.D.N.Y.1981)). However, those 26 standards are not relevant when considering Count Three under Rule 12(b)(6) because 27 Plaintiffs seek to bring a DJA claim—Plaintiffs have not pled an independent cause of 28 action under the Thirteenth Amendment. The Court will thus proceed to review Count 1 Three under the requirements for DJA claims. 2 The DJA provides that “[i]n a case of actual controversy within its 3 jurisdiction . . . any court of the United States . . . may declare the rights and other legal 4 relations of any interested party seeking such declaration, whether or not further relief is 5 or could be sought.” 28 U.S.C. § 2201(a). Therefore, a district court must first inquire 6 whether there is an actual case or controversy within its jurisdiction.8 The ripeness of a 7 DJA claim depends upon “whether the facts alleged, under all the circumstances, show that 8 there is a substantial controversy, between parties having adverse legal interests, of 9 sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” 10 Maryland Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941); see also Principal 11 Life Ins. Co. v. Robinson, 394 F.3d 665, 671 (9th Cir. 2005). 12 Count three seeks a declaration that LifeStance’s advances violate the Thirteenth 13 Amendment as well as associated injunctive relief.9 The Thirteenth Amendment states that 14 “[n]either slavery nor involuntary servitude, except as a punishment for crime whereof the 15 party shall have been duly convicted, shall exist within the United States, or any place 16 subject to their jurisdiction.” U.S. Const. Amend. XIII. Relevant here, Plaintiffs stated 17 that LifeStance used their advance on compensation arrangement to create “employer 18 generated debt”, which LifeStance used as “leverage to hold the employee hostage until 19 LifeStance can replace the employee once the Clinician gives LifeStance notice of the 20 person’s decision to terminate her/his employment.” (Id. at ¶ 43–45). Plaintiffs claimed 21 that prospective clinicians “accept[] employment with LifeStance under the delusion of 22 earning a competitive salary when in fact the employee is signing up to become an 23 8 The DJA creates a federal remedy but is not itself a basis for federal 24 jurisdiction. See Fiedler v. Clark, 714 F.2d 77, 79 (9th Cir.1983). Because Plaintiffs’ DJA claim rests in part to Plaintiffs’ alleged FLSA violations, the Court may properly consider 25 Plaintiffs’ Count Three under its federal question jurisdiction.

26 9 In their Response, Plaintiffs represent that “[their]claim for declaratory relief does not hinge on whether LHG’s compensation policies and employment agreement violate the 27 Thirteenth Amendment.” (Doc. 27 at 13) (emphasis added). But Plaintiffs position contradicts the plain language of their Count Three. The Court will hold Plaintiffs to their 28 allegations in the Complaint. To the extent Plaintiffs’ wish to modify their allegations, they must make the appropriate motion. 1 indentured servant.” (Id. at ¶ 30). 2 When accepting these allegation as true, as the Court must, Plaintiffs’ Complaint 3 demonstrates a bona fide ongoing controversy between the parties regarding whether 4 LifeStance’s advance on compensation arrangement violates the Thirteenth Amendment. 5 (Doc. 27 at 13–14).10 LifeStance opposes that Plaintiffs’ DJA claim must fail because 6 “the ironic reality is that plaintiffs actually were overpaid because they never provided the 7 services to recover the large advances they accepted and have never repaid those amounts 8 they never earned” (Doc. 28 at 11). But by doing so, LifeStance essentially asks this Court 9 to resolve disputes of fact, which is premature at this juncture. See Knievel, 393 F.3d at 10 1072 (district courts must accept all factual allegations in the complaint as true). When 11 viewing the Complaint in the light most favorable to Plaintiffs, the Court finds Plaintiffs 12 have pled enough facts under Count Three to state a DJA Claim that is plausible on its face. 13 Twombly, 550 U.S. at 570. 14 2. Whether Plaintiffs’ Claim under the Declaratory Judgment Act 15 Would Promote Duplicative Litigation 16 Despite having concluded that Plaintiffs have plausibly stated a claim under the 17 DJA, the DJA further requires district courts to balance “concerns of judicial 18 administration, comity, and fairness to the litigants” when deciding whether or not to 19 exercise jurisdiction. Principal Life, 394 F.3d at 672 (citing Brillhart v. Excess Ins. Co., 20 316 U.S. 491 (1942)). This is because “[t]he Declaratory Judgment Act gives the Court 21 the authority to declare the rights and legal relations of interested parties, but not a duty to 22 do so.” Stickrath v. Globalstar, Inc., 2008 WL 2050990 (N.D. Cal. May 13, 2008) 23

24 10 Plaintiffs also maintain their DJA claim should survive because the parties dispute whether LifeStance’s contractual arrangement is unconscionable. (Doc. 27 at 12–14). 25 However, Plaintiffs do not allege any state law theory of unconscionability in their claim for declaratory relief. Plaintiffs’ seek a declaration that “[t]he advance that LifeStance uses 26 to create indentured servitude is a violation of the 13th Amendment to the United States Constitution, thereby making it an illegal and unenforceable obligation.” (Doc. 1 at ¶ 130). 27 And, the Court’s evaluation of a motion to dismiss is limited to the four corners of the complaint. Lee, 250 F.3d at 688 (A court’s review of motion to dismiss under a Rule 28 12(b)(6) is typically “limited to review” of only the complaint itself). Therefore, the Court will not consider Plaintiffs’ unconscionability argument at this juncture. 1 (emphasis in original) (citing Leadsinger, Inc. v. BMG Music Pub., 512 F.3d 522, 533 (9th 2 Cir. 2008)). “[T]herefore, it is within a district court’s discretion to dismiss an action for 3 declaratory judgment.” Leadsinger, 512 F.3d at 533 (citing Wilton v. Seven Falls Co., 515 4 U.S. 277, 288 (1995)). The relevant factors a district court should consider when deciding 5 whether to hear a DJA claim are “the discouragement of the use of declaratory actions as 6 a means of forum shopping, the avoidance of duplicative litigation, the extent to which the 7 declaratory action will resolve the controversy, the convenience of the parties, and the 8 availability and convenience of other remedies.” Astra Veda Corp. v. Disruptive Res. LLC, 9 2022 WL 3921117, *1 (D. Ariz. Aug. 31, 2022) (citing Principal Life, 394 F.3d at 672). 10 LifeStance argues Count Three should be dismissed because it is duplicative of the 11 identical request for declaratory judgment in the Florida Class Action. LifeStance further 12 argues that Plaintiffs’ present action constitutes forum shopping. (Doc. 19 at 17–19). The 13 Florida Class Action concerns claims for unpaid wages under the FLSA, unlawful 14 kickbacks under the FLSA, and a claim for declaratory judgment. See Amended 15 Complaint, Armand v. LifeStance Health Group, Inc., No. 6:23-cv-00103-PGB-EJK, 16 (M.D. Fla. June 1, 2023), ECF No. 24 at ¶¶ 100–105. Specifically, the Florida Class Action 17 seeks the following declaration: 18 (a) The advance that LifeStance uses to create indentured servitude is a 19 violation of the 13th Amendment to the United States Constitution, thereby making it an illegal and unenforceable obligation. 20 (b) LifeStance cannot take any further action to seek to collect on its 21 indenture as such action is unconstitutional and thus unenforceable. 22 (c) LifeStance must repay all Clinicians whatever portion of the indenture 23 it has collected from them as of the date of the entry of final judgment 24 in this action. 25 Id. at ¶ 129. 26 Plaintiffs argue the Florida Class Action is not duplicative of the present matter 27 because the parties, class definitions, and lead plaintiffs are different. (Doc. 27 at 15). 28 Plaintiffs also point out the putative class in the Florida Class Action is limited to 1 LifeStance clinicians who provided services to patients within Florida, and Plaintiffs have 2 not served any Florida patients. (Id.) In Plaintiffs’ view, a declaratory ruling regarding the 3 enforceability of their employment agreements would not be duplicative of a ruling on the 4 enforceability of the employment agreements in the Florida Class Action because, 5 “according to [LifeStance,] the terms of employment vary between employees[.]” (Id. at 6 16). The Court agrees with Plaintiffs. 7 Although Plaintiffs’ DJA claim is phrased identically to the claim in the Florida 8 Class Action, compare Amended Complaint, Armand v. LifeStance Health Group, Inc., 9 No. 6:23-cv-00103-PGB-EJK, (M.D. Fla. June 1, 2023), ECF No. 24 at ¶ 129 with (Doc. 10 1 at ¶ 130), it is not certain that both matters concern identical circumstances. So, the 11 specific issues raised in either matter may differ. Moreover, “when other claims are joined 12 with an action for declaratory relief (e.g. . . . claims for other monetary relief), the district 13 court should not, as a general rule, [] decline to entertain the claim for declaratory relief.” 14 Snodgrass v. Provident Life & Accident Ins. Co., 147 F.3d 1163,1167 (9th Cir. 1998) 15 (quoting Gov’t Emples. Ins. Co. v. Dizol, 133 F.3d 1220, 1225 (9th Cir. 1998)) (examining 16 a declaratory relief claim that was accompanied by claims for breach of contract, 17 negligence, intentional infliction of emotional distress, and punitive damages). This is 18 because claims that exist independent of the request for a declaration are not subject to 19 DJA’s discretionary jurisdictional rule, and to dismiss only the declaratory component of 20 such an action would result in “piecemeal litigation.” Id. (citations omitted). Because (a) 21 Plaintiffs have alleged viable claims for FLSA violations and (b) it is not clear that 22 Plaintiffs DJA claim would result in duplicative litigation, the Court will exercise its 23 discretion to hear Plaintiffs’ DJA claim. 24 In sum, the Court will deny LifeStance’s request to dismiss Count Three. 25 D. The Putative Class 26 Last, LifeStance contends this matter cannot be brought as a class action because 27 Plaintiffs have failed to establish how the putative class members are similarly situated. 28 (Doc. 19 at 14, 15). Plaintiffs proposed the following putative class: 1 [N]onexempt psychiatric and mental health nurse practitioners and other nonphysician employees of LifeStance (called “Clinicians” . . . ) who 2 provided mental health clinical services to LifeStance patients within the 3 United States at any time from January 2020 to the entry of judgment in this case (the “Collective Period”) and who: (a) Did not receive any 4 compensation from LifeStance, during the individual’s employment, for a 5 minimum of at least one week, with many not receiving compensation for as much as twelve weeks; (b) Did not receive all compensation due them, to the 6 extent the individual was paid, consistent with LifeStance’s obligation to 7 compensate them a percentage of all services billed to patients, insurance companies and others; (c) Paid some portion or all the specious debt 8 obligation conceived solely by LifeStance for its own benefit as a condition 9 of the employee’s employment; [and] (d) [] had deductions from their wages for a debt and other obligations that were never disclosed or explained to 10 them. 11 (Doc. 1 at ¶ 59). Plaintiffs further represented that, based on preliminary investigation, the 12 putative class can be categorized as licensed therapists or psychologist, licensed psychiatric 13 nurse practitioners, and licensed clinical social workers. (Id. at ¶ 70). 14 LifeStance argues that neither Count One, Two, nor Three can be pled as a class 15 action because the Complaint does not contain any allegations showing how licensed 16 therapists or psychologist, licensed psychiatric nurse practitioners, or licensed clinical 17 social workers have similar job duties. (Doc. 19 at 14, 15). LifeStance also contends 18 Plaintiffs have potentially different employment contracts and have not set forth allegations 19 regarding how they were subject to similar compensation practices. (Id. at 15).11 20 District courts enjoy broad discretion to control the class certification process and 21 whether or not to permit discovery beforehand. See Vinole v. Countrywide Home Loans, 22

23 11 LifeStance also argues Plaintiffs’ DJA claim cannot be brought as class action because whether the advance-on-compensation arrangement is unconscionable is a question of state 24 law, and Plaintiffs’ employment contracts contain different choice of law provisions. (Doc. 28 at 12). However, as mentioned supra Section III.C(1) at n.10, Plaintiffs do not 25 allege any such theory of unconscionability in their claim for declaratory relief. Plaintiffs seek a declaration that “[t]he advance that LifeStance uses to create indentured servitude 26 is a violation of the 13th Amendment to the United States Constitution, thereby making it an illegal and unenforceable obligation.” (Doc. 1 at ¶ 130). Because the Court’s evaluation 27 of LifeStance’s Motion to Dismiss is “limited to review” of only the allegations in the Complaint itself, the Court will not consider the parties’ state law unconscionability 28 arguments at this juncture. Lee, 250 F.3d at 688. In any event, a contract provision that violates the United States Constitution would be unlawful and unenforceable in any state. 1 Inc., 571 F.3d 935, 942 (9th Cir. 2009). “A preemptive motion to deny class certification— 2 for example, in a motion to dismiss []—is permissible, as ‘nothing in the plain language of 3 Rule 23 either vests plaintiffs with the exclusive right to put the class certification issue 4 before the district court or prohibits a defendant from seeking early resolution of the class 5 certification question.’” Sousa v. 7-Eleven, Inc., 2020 WL 6399595, *4 (S.D. Cal. Nov. 2, 6 2020) (quoting Vinole, 571 F.3d 935, 940–41 (9th Cir. 2009)). Nonetheless, it is rare to 7 dismiss a class definition while still in the early stages of case proceedings. See e.g., In re 8 Wal-Mart Stores, Inc. Wage & Hour Litig., 505 F. Supp. 2d 609, 615 (N.D. Cal. 2007) 9 (“[T]he granting of motions to dismiss class allegations before discovery has commenced 10 is rare.”). “The propriety of a class action cannot be determined in some cases without 11 discovery, as, for example, where discovery is necessary to determine the existence of a 12 class or set of subclasses.” Kamm v. Cal. City Dev. Co., 509 F.2d 205, 210 (9th Cir. 1975). 13 In those instances, to deny discovery would be an abuse of discretion. Id. The better 14 practice is to provide the litigants with an opportunity to present evidence regarding 15 whether a class certification is maintainable. Vinole, 571 F.3d at 942 (citing Doninger v. 16 Pac. Nw. Bell, Inc., 564 F.2d 1304, 1313 (9th Cir. 1977)) 17 Here, LifeStance has not filed an answer nor is there a motion for certification before 18 the Court. LifeStance filed its present Motion to Dismiss on August 25 2023, which was 19 weeks before the parties’ deadline for initial disclosures (Doc. 16) and ten months before 20 the parties’ fact discovery deadline (Doc. 26 at 2). Although LifeStance points out 21 potential issues with Plaintiffs’ proposed class and subclass definitions, the Court finds that 22 Plaintiffs should be given the opportunity to make a later motion in which their case for 23 class certification can be fully evaluated by the Court. See e.g. Sousa, 2020 WL 6399595, 24 *4–5; see also Cole v. Asurion Corp., 2008 WL 5423859, at *14 (C.D. Cal. Dec. 30, 2008). 25 The Court agrees with Plaintiffs that “a motion for class certification is a more appropriate 26 time to consider the class allegations in [the] complaint.” Silcox v. State Farm Mut. Auto. 27 Ins. Co., 2014 WL 7335741, at *9 (S.D. Cal. Dec. 22, 2014). The Court will therefore 28 allow Plaintiffs’ class action allegations to proceed. IV. Conclusion 2 To summarize, LifeStance’s Motion to Dismiss will be denied in its entirety. || Plaintiffs’ Count One sufficiently pled that there was a given week between January 2020 4|| to the present where they were denied minimum wages under the FLSA, and worked in 5 || excess of forty hours yet were denied overtime wages under the FLSA. Plaintiffs’ Count 6|| Two plausibly alleged that LifeStance carried out a scheme constituting unlawful 7\| kickbacks under the FLSA. Moreover, Plaintiffs demonstrated a bona fide ongoing 8 || controversy between the parties on whether LifeStance’s advance on compensation 9|| arrangement is unconstitutional under the Thirteenth Amendment. And, because (a) it is || not clear that the Florida Class Action poses a risk of duplicative litigation and (b) Plaintiffs 11 || have stated sufficient FLSA violations that are independent of their DJA claim, the Court will exercise its discretion to hear Plaintiffs’ Count Three. The Court will also defer its 13 || decision regarding the propriety of Plaintiffs’ class action allegations to allow Plaintiffs an || adequate opportunity to conduct formal discovery in support of certification. 15 Accordingly, 16 IT IS ORDERED that Defendant LifeStance Health Group Incorporated’s Motion || to Dismiss (Doc. 19) is DENIED. 18 IT IS FURTHER ORDERED that within fourteen (14) days, Defendant LifeStance Health Group Incorporated shall answer Plaintiffs’ Complaint (Doc. 1) 20 || pursuant to Federal Rule of Civil Procedure 12(a)(4)(A). 21 Dated this 13th day of March, 2024. 22 23 5 fe □□ 24 norable' Diang/4. Hunfetewa 5 United States District Judge 26 27 28

-16-