Civil Minutes, Motion to Dismiss, Motion to Remand — Scott v. Gate Gourmet, Doc. 29 (February 22, 2021)

Summary

These civil minutes, dated February 22, 2021, rule on motions in Charles Scott et al. v. Gate Gourmet, Inc. et al.: the plaintiffs' motion to remand to Los Angeles Superior Court, and the defendant's motions to dismiss under FRCP 12(b)(6) and to strike under FRCP 12(f). The plaintiffs allege they were laid off on or after March 28, 2020, contrary to the terms of CARES Act payroll support that the defendant allegedly received in the amount of $171,424,598. The Court denies the motion to remand, grants the motion to dismiss the UCL, wrongful termination in violation of public policy, and breach of fiduciary duty claims, each with leave to amend, and denies the motion to strike. The plaintiffs have twenty-one (21) days to file an amended complaint.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Full text

Text recognized from a scanned document; may contain errors.

Case 2:20-cv-11033-CAS-JPR Document 29 Filed 02/22/21 Page1of20 Page ID #:325

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES — GENERAL ‘OQ’
Case No. = 2:20-cv-11033-CAS-JPRx Date February 22, 2021
Title CHARLES SCOTT ET. AL. V. GATE GOURMET, INC. ET. AL.

Present: The Honorable CHRISTINA A. SNYDER

Catherine Jeang Not Present N/A
Deputy Clerk Court Reporter / Recorder Tape No.
Attorneys Present for Plaintiffs: Attorneys Present for Defendants:
Heather Cox Jill Porcaro

Proceedings: DEFENDANT’S MOTION TO STRIKE PURSUANT TO FRCP
12(f) (Dkt. 12, filed December 28, 2020)

DEFENDANT’S MOTION TO DISMISS COMPLAINT
PURSUANT TO FRCP 12(b)(6) (Dkt. 13, filed December 28, 2020)

PLAINTIFFS’ MOTION TO REMAND CASE TO LOS ANGELES
SUPERIOR COURT (Dkt. 14, filed December 28, 2020)

I. INTRODUCTION & BACKGROUND

On October 27, 2020, plaintiffs Charles Scott, Brenda McCoy, and Dominque
Ferdinand filed this class action against defendant Gate Gourmet, Inc. and Does 1-100 in
Los Angeles Superior Court, alleging claims for (1) wrongful termination in violation of
public policy; (2) violation of the California Unfair Competition Law, Cal. Bus. & Prof.
Code §§ 17200, et seq. (“UCL”); and (3) breach of fiduciary duty. Dkt. 1-1 (“Compl.”).
The gravamen of plaintiffs’ complaint is that they and members of the class were laid off
by defendant on or after March 28, 2020, in violation of the terms and conditions of the
payroll support that defendant was awarded by the federal government pursuant to the
CARES Act, 15 U.S.C. § 9001, et seg. Defendant removed this action to this Court on
December 4, 2020. Dkt. 1 (“NTC of Removal’).

On December 28, 2020, plaintiff filed a motion to remand. Dkt. 14 (“Remand
MTN”). Defendant opposed the motion to remand on January 4, 2021. Dkt. 20 (“Remand
Opp’n.”). Plaintiff filed a reply in support of the motion to remand on January 11, 2021.
Dkt. 23 (“Remand Reply”). On January 14, 2021, the Court requested supplemental
briefing. Dkt. 25. The parties each submitted supplemental briefs on February 5, 2021.
Dkts. 26 (“Plts. Remand Supp.”), 27 (“Def. Remand Supp.”).

CV-549 (01/18) CIVIL MINUTES - GENERAL Page 1 of 20
Case 2:20-cv-11033-CAS-JPR Document 29 Filed 02/22/21 Page 2of20 Page ID #:326

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES — GENERAL ‘OQ’
Case No. = 2:20-cv-11033-CAS-JPRx Date February 22, 2021
Title CHARLES SCOTT ET. AL. V. GATE GOURMET, INC. ET. AL.

On December 28, 2020, defendant filed a motion to dismiss the complaint pursuant
to FRCP 12(b)(6), dkt. 13 (“MTD”), and a motion to strike pursuant to FRCP 12(f). Dkt.
12 (“MTS”). Plaintiffs opposed the motion to dismiss and motion to strike on January 4,
2021. Dkts. 18 (“MTS Opp’n”), 19 (“MTD Opp’n”). Defendant filed replies in support
of the motion to dismiss and motion to strike on January 11, 2021. Dkts. 21 (“MTS
Reply”), 22 (“MTD Reply”).

Having carefully considered the parties’ arguments, the Court finds and concludes
as follows.

Il. BACKGROUND

Plaintiffs allege the following facts.
a. The Parties

Plaintiff Charles Scott (“Scott”) is a resident of Long Beach, California. Compl. § 5.
Scott began working for defendant as a chef in approximately 2017. Id. § 13. Plaintiff
Brenda McCoy (“McCoy”) is a resident of Los Angeles, California. Id. § 6. McCoy began
working in food assembly for defendant in or about “early 2019.” Id. § 14. Plaintiff
Dominique Ferdinand (“Ferdinand”) is a resident of Los Angeles, California. Id. § 7.
Ferdinand began working for defendant as an equipment handler on or about February 11,
2019. Id. ¥ 15.

Defendant Gate Gourmet is a Delaware Corporation with its principal place of
business in Reston, Virginia. NTC of Removal at 5. Defendant is a provider of airline

catering and provisioning services for airlines, with operations in Los Angeles County.
Compl. 4 8, 19.

b. Federal Payroll Support for Aviation Industry

Plaintiffs allege that the Coronavirus Aid, Relief, and Economic Security Act, 15
U.S.C. § 9001, et seg. (the “CARES ACT”) was signed into law in March 2020, with the
“stated purpose and public policy” of addressing “the profound economic disruption arising
from the unprecedented COVID-19 global pandemic.” Id. §{ 16, 17. Plaintiffs allege that
Congress’s intent in passing the CARES Act was to “reduce the amount of unemployment
that would otherwise flow from the impact of COVID-19 on the economy, and to protect
vulnerable workers.” Id. | 17. The CARES Act allegedly provided “significant” federal

CV-549 (01/18) CIVIL MINUTES - GENERAL Page 2 of 20
Case 2:20-cv-11033-CAS-JPR Document 29 Filed 02/22/21 Page 3of20 Page ID #:327

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES — GENERAL ‘OQ’
Case No. = 2:20-cv-11033-CAS-JPRx Date February 22, 2021
Title CHARLES SCOTT ET. AL. V. GATE GOURMET, INC. ET. AL.

funding to support several industries impacted by COVID-19, including the airline
industry. Id. { 16.

Specifically, plaintiffs allege that Section 4112 of the CARES Act has been
described by the United States Department of Treasury website as intended to provide
“payroll support to passenger air carriers, cargo air carriers, and certain contractors for the
continuation of employee wages, salaries and benefits,” as part of a “$2 trillion relief

package” aimed at “protecting the American people from the public health and economic
impacts of COVID-19.” Id. ¥ 18.

Plaintiffs allege that defendant was eligible to receive federal funds pursuant to
Section 4111 of the Cares Act because it is a provider of “airline catering services”. Id.
19: see also 15 U.S.C. § 9071. Plaintiffs further alleged that in order to establish eligibility
to receive funding through the CARES ACT, defendant was required to make assurances
pursuant to Sections 4113(b)(1)(A) and 4114 of the Act that defendant “would use such
payments exclusively for the continuation of employee wages, salaries and benefits; and
refrain from conducting involuntary layoffs or furloughs until September 30, 2020. Compl.
] 20; see also 15 U.S.C. §§ 9073, 9074. Defendant allegedly received federal funding
pursuant to the CARES Acct in the amount of $171,424,598. Compl. § 19.

c. Layoffs

Plaintiffs allege that on March 28, 2020—after the CARES Act was signed into
law—defendant began laying off or furloughing hundreds of employees, including
plaintiffs. Id. ]21. Plaintiffs allege that at the time of those employment actions, defendant
was aware that federal funds would be made available to defendant “with the purpose of
protecting workers and helping to retain employees.” Id. Plaintiffs further allege that the
layoffs and furloughs are “in direct contravention to the purpose behind the financial bail-
out [defendant] applied for and received under the CARES Act.” Id.

Il, LEGAL STANDARDS

a. Motion to Remand

Removal is proper where the federal courts would have had original jurisdiction over
an action filed in state court. See 28 U.S.C. § 1441(a). In general, a federal district court
has subject matter jurisdiction where a case presents a claim arising under federal law

CV-549 (01/18) CIVIL MINUTES - GENERAL Page 3 of 20
Case 2:20-cv-11033-CAS-JPR Document 29 Filed 02/22/21 Page4of20 Page ID #:328

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES — GENERAL ‘OQ’
Case No. = 2:20-cv-11033-CAS-JPRx Date February 22, 2021
Title CHARLES SCOTT ET. AL. V. GATE GOURMET, INC. ET. AL.

(“federal question jurisdiction’), or where the plaintiffs and defendants are residents of
different states and the amount in controversy exceeds $75,000 (“diversity jurisdiction”).
See Deutsche Bank Nat'l Trust Co. v. Galindo, No. CV 10-01893, 2011 WL 662324, *1
(C.D. Cal. Feb. 11, 2011) (explaining the two types of jurisdiction). The Ninth Circuit
“strictly construe[s] the removal statute against removal jurisdiction.” Gaus v. Miles, Inc..,
980 F.2d 564, 566 (9th Cir. 1992) (citations omitted). Thus, “[f]ederal jurisdiction must
be rejected if there is any doubt as to the right of removal in the first instance.” Id. (citation
omitted). “The strong presumption against removal jurisdiction means that the defendant
always has the burden of establishing that removal is proper.” Id. (quotation omitted).

CAFA gives federal courts jurisdiction over certain class actions if (1) “the class has
more than 100 members”; (2) “the parties are minimally diverse”; and (3) “the amount in
controversy exceeds $5 million.” Dart Cherokee Basin Operating Co.. LLC v. Owens, 574
US. 81, 84-85, 135 S.Ct. 547, 552 (2014). There is no presumption against removal
jurisdiction in CAFA cases; however, the defendant still bears the burden of establishing
removal jurisdiction. Id. at 554. CAFA’s “minimal diversity” requirement means that “a
federal court may exercise jurisdiction over a class action if ‘any member of a class of
plaintiffs is a citizen of a State different from any defendant.’ ” Mississippi ex rel. Hood
v. AU Optronics Corp., 571 U.S. 161, 165, 134 S.Ct. 736, 740, (2014) (quoting 28 U.S.C.
§ 1332(d)(2)(A)). Where, as here, the amount in controversy is contested, and the plaintiff
does not plead a specific amount in controversy, the defendant’s evidentiary burden in
opposing a motion to remand depends on whether plaintiff has mounted a facial or factual
attack on defendants jurisdictional allegations. Salter v. Quality Carriers, Inc., 974 F.3d
959, 964 (9th Cir. 2020). A facial attack “accepts the truth of the plaintiffs allegations but
asserts that they are insufficient on their face to invoke federal jurisdiction,” thus calling
for the Court to “determine[] whether the allegations are sufficient as a legal matter to
invoke the court’s jurisdiction.” Id. (quoting Leite v. Crane Co., 749 F.3d 1117, 1121 (9th
Cir. 2014)). In contrast, a factual attack “contests the truth of plaintiff's factual allegations,
usually by introducing evidence outside the pleadings.” Id. “When a plaintiff mounts a
factual attack, the burden is on the defendant to show, by a preponderance of the evidence,
that the amount in controversy exceeds the $5 million jurisdictional threshold.” Harris v.
KM Indus., Inc., 980 F.3d 694, 699 (9th Cir. 2020). Although a plaintiff may present
evidence in support of a factual attack, they “need only challenge the truth of defendant’s

CV-549 (01/18) CIVIL MINUTES - GENERAL Page 4 of 20
Case 2:20-cv-11033-CAS-JPR Document 29 Filed 02/22/21 Page5of20 Page ID #:329

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES — GENERAL ‘OQ’
Case No. = 2:20-cv-11033-CAS-JPRx Date February 22, 2021
Title CHARLES SCOTT ET. AL. V. GATE GOURMET, INC. ET. AL.

jurisdictional allegations by making a reasoned argument as to why any assumptions on
which they are based are not supported by the evidence.” Id. at 700.

Under the preponderance of the evidence standard, the removing party must
“provide evidence establishing that it is more likely than not that the amount in controversy
exceeds [the jurisdictional amount].” Sanchez v. Monumental Life Ins. Co., 102 F.3d 398,
404 (9th Cir. 1996) (internal quotation omitted). In determining whether the removing
party has satisfied this burden, the district court may consider facts in the removal petition
and “‘summary-judgment-type evidence relevant to the amount in controversy at the time
of removal.’ ” Singer v. State Farm Mut. Auto. Ins. Co.,116 F.3d 373, 377 (9th Cir.1997)
(quoting Allen v. R & H Oil & Gas Co., 63 F.3d 1326, 1335-36 (Sth Cir.1995)).

b. Motion to Dismiss Pursuant to Rule 12(b)(6)

A motion pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the legal
sufficiency of the claims asserted in a complaint. Under this Rule, a district court properly
dismisses a claim if “there is a ‘lack of a cognizable legal theory or the absence of sufficient
facts alleged under a cognizable legal theory.’” Conservation Force v. Salazar, 646 F.3d
1240, 1242 (9th Cir. 2011) (quoting Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699
(9th Cir. 1988)). “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does
not need detailed factual allegations, a plaintiffs obligation to provide the ‘grounds’ of his
‘entitlement to relief’ requires more than labels and conclusions, and a formulaic recitation
of the elements of a cause of action will not do.” Bell Atlantic Corp. v. Twombly, 550
U.S. 544, 555 (2007) (internal citations omitted). “Factual allegations must be enough to
raise a right to relief above the speculative level.” Id. (internal citations omitted).

In considering a motion pursuant to Rule 12(b)(6), a court must accept as true all
material allegations in the complaint, as well as all reasonable inferences to be drawn from
them. Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir. 1998). The complaint must be read in
the light most favorable to the nonmoving party. Sprewell v. Golden State Warriors, 266
F.3d 979, 988 (9th Cir. 2001). However, “a court considering a motion to dismiss can
choose to begin by identifying pleadings that, because they are no more than conclusions,
are not entitled to the assumption of truth. While legal conclusions can provide the
framework of a complaint, they must be supported by factual allegations.” Ashcroft v.
Iqbal, 556 U.S. 662, 679 (2009): see Moss v. United States Secret Service, 572 F.3d 962,
969 (9th Cir. 2009) (“[F]or a complaint to survive a motion to dismiss, the non-conclusory

CV-549 (01/18) CIVIL MINUTES - GENERAL Page 5 of 20
Case 2:20-cv-11033-CAS-JPR Document 29 Filed 02/22/21 Page6of20 Page ID #:330

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES — GENERAL ‘OQ’
Case No. = 2:20-cv-11033-CAS-JPRx Date February 22, 2021
Title CHARLES SCOTT ET. AL. V. GATE GOURMET, INC. ET. AL.

‘factual content,’ and reasonable inferences from that content, must be plausibly suggestive
of a claim entitling the plaintiff to relief.”). Ultimately, “[d]etermining whether a
complaint states a plausible claim for relief will . . . be a context-specific task that requires
the reviewing court to draw on its judicial experience and common sense.” Iqbal, 556 U.S.
at 679.

Unless a court converts a Rule 12(b)(6) motion into a motion for summary judgment,
a court cannot consider material outside of the complaint (e.g., facts presented in briefs,
affidavits, or discovery materials). In re American Cont’! Corp./Lincoln Sav. & Loan Sec.
Litig., 102 F.3d 1524, 1537 (9th Cir. 1996), rev’d on other grounds sub nom Lexecon, Inc.
v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26 (1998). A court may, however,
consider exhibits submitted with or alleged in the complaint and matters that may be
judicially noticed pursuant to Federal Rule of Evidence 201. In re Silicon Graphics Inc.
Sec. Litig., 183 F.3d 970, 986 (9th Cir. 1999); Lee v. City of Los Angeles, 250 F.3d 668,
689 (9th Cir. 2001).

As a general rule, leave to amend a complaint which has been dismissed should be
freely granted. Fed. R. Civ. P. 15(a). However, leave to amend may be denied when “the
court determines that the allegation of other facts consistent with the challenged pleading
could not possibly cure the deficiency.” Schreiber Distrib. Co. v. Serv-Well Furniture Co..,
806 F.2d 1393, 1401 (9th Cir. 1986); see Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir.
2000).

c. Motion to Strike Pursuant to Rule 12(f)

Pursuant to Rule 12(f) of the Federal Rules of Civil Procedure, the Court “may strike
from a pleading an insufficient defense or any redundant, immaterial, impertinent, or
scandalous matter.” Fed. R. Civ. P. 12(f). “The key to determining the sufficiency of
pleading an affirmative defense is whether it gives plaintiff fair notice of the defense.”
Wyshak v. City National Bank, 607 F.2d 824, 827 (9th Cir. 1979). To meet this lenient
“fair notice” standard, a defendant need only state “the nature and grounds for the
affirmative defense.” See, e.g., Vogel v. Linden Optometry APC, No. 2:13-cv-00295-
GAF-SH, 2013 WL 1831686, at *3 (C.D. Cal. Apr. 30, 2013); Kohler v. Islands
Restaurants, LP, 280 F.R.D. 560, 564 (S.D. Cal. 2012). A matter is “immaterial” within
the meaning of Rule 12(f) if it “has no essential or important relationship to the claim for
relief or the defenses being plead,” and “impertinent” matters are “statements that do not

CV-549 (01/18) CIVIL MINUTES - GENERAL Page 6 of 20
Case 2:20-cv-11033-CAS-JPR Document 29 Filed 02/22/21 Page 7 of 20 Page ID #:331

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES — GENERAL ‘OQ’
Case No. = 2:20-cv-11033-CAS-JPRx Date February 22, 2021
Title CHARLES SCOTT ET. AL. V. GATE GOURMET, INC. ET. AL.

pertain, and are not necessary, to the issues in question.” Whittlestone, Inc. v. Handi-Craft
Co., 618 F.3d 970, 974 (9th Cir. 2010) (internal citations omitted). The essential function
of a Rule 12(f) motion is to “avoid the expenditure of time and money that must arise from
litigating spurious issues by dispensing with those issues prior to trial.” Sidney-Vinstein
v. A.H. Robins Co., 697 F.2d 880, 885 (9th Cir. 1983). “However, motions to strike are
typically viewed with disfavor because they are often used for purposes of delay, and
because of the strong judicial policy favoring resolution on the merits.” Harbor Breeze
Com. v. Newport Landing Sportfishing, Inc., No. 8:17-cv-01613-CJC-DFM, 2018 WL
4944224. at *1 (C.D. Cal. Mar. 9, 2018). “Ultimately, whether to grant a motion to strike
lies within the sound discretion of the district court.” California Dep't of Toxic Substances
Control v. Alco Pac.. Inc., 217 F. Supp. 2d 1028, 1033 (C.D. Cal. 2002).

IV. DISCUSSION
a. Motion to Remand
i. Diversity Jurisdiction Pursuant to CAFA

Defendant asserts that this Court has jurisdiction over this action pursuant to CAFA.
As stated above, CAFA gives federal courts jurisdiction over certain class actions if (1)
“the class has more than 100 members”; (2) “the parties are minimally diverse”; and (3)
“the amount in controversy exceeds $5 million.” Dart Cherokee, 135 S.Ct. at 552. Here,
plaintiffs appear to concede that the parties are minimally diverse and that the proposed
class contains more than 100 members. See generally Remand MTN. Accordingly, the
Court addresses only whether defendant has adequately established that “the amount in
controversy exceeds $5 million.”

Plaintiffs argue that defendant has failed to establish by a preponderance of the
evidence that the amount in controversy exceeds $5 million. “In measuring the amount in
controversy, a court must ‘assum[e] that the allegations of the complaint are true and
assum[e that] a jury [will] return[ | a verdict for the plaintiff on all claims made in the
complaint.’ ” Kenneth Rothschild Trust v. Morgan Stanley Dean Witter, 199 F. Supp. 2d
993, 1001 (C.D. Cal. 2002) (quoting Jackson v. American Bankers Ins. Co. of Florida, 976
F. Supp. 1450, 1454 (S.D. Ala. 1997)): see also Coleman v. Estes Express Lines, Inc., 730
F. Supp. 2d 1141, 1148 (C.D. Cal. Jul. 19, 2010) (“In deciding the amount in controversy,
the Court looks to what the plaintiff has alleged, not what the defendants will owe’).
“[W Jhen the defendant’s assertion of the amount in controversy is challenged by plaintiffs
in a motion to remand, the Supreme Court has said that both sides submit proof and the

CV-549 (01/18) CIVIL MINUTES - GENERAL Page 7 of 20
Case 2:20-cv-11033-CAS-JPR Document 29 Filed 02/22/21 Page 8of 20 Page ID #:332

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES — GENERAL ‘OQ’
Case No. = 2:20-cv-11033-CAS-JPRx Date February 22, 2021
Title CHARLES SCOTT ET. AL. V. GATE GOURMET, INC. ET. AL.

court then decides where the preponderance lies.” Ibarra v. Manheim Investments, Inc.,
775 F.3d 1193, 1198 (9th Cir. 2015). Under this system, the removing party bears the
burden of demonstrating that the CAFA amount in controversy requirement is met, but
may “rely on reasonable assumptions to prove that it has met the statutory threshold.”
Harris, 980 F.3d at 701 (citing Ibarra, 775 F.3d at 1197; Arias v. Residence Inn by Marriott,
936 F.3d 920, 922 (9th Cir. 2019)).

Defendant asserted in its notice of removal that the amount placed in controversy by
plaintiffs’ claims for back pay for the period from May 21, 2020 through September 30,
2020 was “in excess of $5,616,000.00” calculated as follows: “(600 [employees] x $13
[per hour] x 40 [hours per week] x 18 [weeks] = $5,616,000.00).” NTC of Removal at 8.
In support of removal, defendant submitted a declaration from its Regional Human
Resources Director, William McGowan, stating that defendant’s employment records
reflected that on May 20, 2020, defendant laid off “more than 600 full-time” employees,
each of whom was earning at least $13.00 at the time of the layoffs. Dkt. 3 (McGowan
Decl.”) § 10. In opposition to plaintiffs’ motion to remand, defendant explained that its
initial estimate of the amount in controversy was “conservatively calculated” and submitted
a second declaration from McGowan, attaching data generated from its employee records
database for the employees laid off on May 20, 2020. Remand Opp’n at 6; Dkt. 20-1
(“Supp. McGowan Decl.”) 4 5. Relying on that data, McGowan attests that on May 20,
2020, Gate Gourmet laid off 1,500 full-time hourly employees, earning an average of
$17.92 per hour, such that “[a]ssuming these employees continued to be employed by Gate
Gourmet on a full-time basis through September 30, 2020 (19 weeks, and their pay rates
did not change, they would have earned $19,876,429.60.”. Supp. McGowan Decl. §] 6.
Defendant’s supplemental brief explains, in response to a question from the Court
regarding the disparity between its two calculations of the amount in controversy, that the
$19,876,429.60 reflected in McGowan’s second declaration represents the “maximum
amount that Plaintiffs could potentially recover in wage losses” based on the actual number
of employees laid off and their pay rates. Def. Remand Supp. at 4 -5.

In opposing removal, plaintiffs argue that defendant has not met its burden to
demonstrate that the amount in controversy is met by a preponderance of the evidence,
arguing that the McGowan declarations are “inherently unreliable” evidence because
defendants’ two calculations of the amount in controversy are “orders of magnitude
different from each other” and therefore contradictory. Remand Reply at 3-4. Plaintiffs
also contend that defendant’s estimate of the amount in controversy relies on an

CV-549 (01/18) CIVIL MINUTES - GENERAL Page 8 of 20
Case 2:20-cv-11033-CAS-JPR Document 29 Filed 02/22/21 Page9of 20 Page ID #:333

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES — GENERAL ‘OQ’
Case No. = 2:20-cv-11033-CAS-JPRx Date February 22, 2021
Title CHARLES SCOTT ET. AL. V. GATE GOURMET, INC. ET. AL.

unreasonable assumption that each employee would be owed back wages for the entire
“arbitrary” period between May 21, 2020 and September 30, 2020. Id. at 4. In addition,
in response to the Court’s question as to why Plaintiffs contend that the total amount in
controversy is less than $5 million, Plaintiffs argue for the first time in their supplemental
briefing that the amount in controversy should be discounted by the amount of plaintiffs’
mitigation of damages, including their receipt of unemployment benefits. Plts. Remand
Supp. at 2. As such, plaintiffs calculate that the total amount in controversy is
$2,566,429.60, assuming that each laid off employee received $260.00 per week in state
unemployment benefits and received $600.00 in CARES Act unemployment benefits each
week until that additional support expired on August 1, 2020. Id. at 3.

The Court finds that defendant has submitted sufficient evidence to establish by a
preponderance of the evidence that the amount in controversy exceeds $5 million. A
declaration from a company employee is “credible evidence to establish CAFA removal”
jurisdiction with respect to the amount in controversy where that employee’s testimony
cites to “statistics gleaned from defendant’s records, such as the number of class members”
and explains “where she obtained her figures and how her estimates and averages were
calculated.” Alvarez v. Office Depot, Inc., No. CV 17-7220 PSG (AFMx), 2017 WL
5952181, at *2 (C.D. Cal. Nov. 30, 2017) (collecting cases); see also Andrade v. Beacon
Sales Acquisition, Inc., No. CV1906963CJCRAOX, 2019 WL 4855997, at *3 (C.D. Cal.
Oct. 1, 2019) (declaration estimating that defendants “employed approximately 939 non-
exempt employees” who worked “50,720 weeks” at an “average hourly rate [of] $17.98”
sufficient to demonstrate amount in controversy). Here, defendant has submitted
declaration evidence from McGowan, attaching and relying on data generated from
defendant’s employment records, that calculates the total back wages in controversy are
$19,876,429.60 taking into account the actual number of full-time employees who were
laid off (1,500) and their actual average rate of pay ($17.92). See McGowan Supp. Decl.
§] 6. Defendant’s application of a 19 week period between May 21, 2020 and September
30, 2020 is not arbitrary or unreasonable assumption; May 21, 2020 is the first day after
defendant conducted layoffs, and September 30, 2020 is the date until which the complaint
alleges defendant was required to assure the Secretary of the Treasury that it would “refrain
from conducting involuntary layoffs or furloughs.” See McGowan Supp. Decl. 5; Compl.
§] 20. Likewise, the Court find defendant’s assumption that each employee would have
worked full-time during the period at issue reasonable, especially given that no reasonable
assumption regarding employee leave or vacation time would reduce the amount of wages
owed to the class by $14 million.

CV-549 (01/18) CIVIL MINUTES - GENERAL Page 9 of 20
Case 2:20-cv-11033-CAS-JPR Document 29 Filed 02/22/21 Page 10 of 20 Page ID #:334

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES — GENERAL ‘OQ’
Case No. = 2:20-cv-11033-CAS-JPRx Date February 22, 2021
Title CHARLES SCOTT ET. AL. V. GATE GOURMET, INC. ET. AL.

Plaintiffs’ argument that the class has mitigated its damages by recovering state and
federal unemployment benefits does not defeat defendants’ showing regarding the amount
in controversy. As an initial matter, the extent to which unemployment benefits mitigate
the total back wages that are recoverable by the class presents a question of law that must
be resolved at a later stage of the proceedings. Moreover, plaintiffs appear to assume—
without evidence—that every member of the class was entitled to government
unemployment benefits and in fact mitigated their lost wages by applying for and receiving
those benefits. As such, the Court concludes that a finding that plaintiffs’ damages have
been mitigated such that only $2,566,429.60 is truly at issue would be premature and
speculative at this stage.

Accordingly, the Court finds that defendant has demonstrated by a preponderance
of the evidence that more than $5 million is in controversy. The Court therefore concludes
that it has diversity jurisdiction over this action pursuant to CAFA.

ii. Federal Question Jurisdiction

For purposes of 28 U.S.C. § 1331, the question of whether a claim arises under
federal law is determined by reference to the complaint. Franchise Tax Bd. v. Constr.
Laborers Trust, 463 U.S. 1, 9-10, 103 S.Ct. 2841, 77 L-Ed.2d 420 (1983). Invoking a
federal issue or provision is not “a password opening federal courts to any state action
embracing a point of federal law.” Grable & Sons Metal Prods., Inc. v. Darue Eng'g &
Mfg., 545 U.S. 308, 314, 125 S.Ct. 2363, 162 L.Ed.2d 257 (2005). Instead, a claim “arises
under” the laws of the United States only if “a well-pleaded complaint establishes either
that (1) federal law creates the cause of action or that (2) the plaintiff's right to relief
necessarily depends on resolution of a substantial question of federal law.” Franchise Tax
Bd., 463 U.S. at 27-28.

Here, as the parties agree, the CARES Act provides no private right of action. See
MTN to Remand at 9 (Citing American Video Duplicating, Inc. v. City National Bank, et
al., 2020 WL 6882735 at *5 (C.D. Cal. Nov. 20, 2020)); MTD at 7-8 (collecting cases).
As such, federal jurisdiction is not appropriate on the grounds that federal law “creates the
cause of action.” Moreover, the absence of a private cause of action means that the doctrine
of complete preemption cannot provide an exception to the well-pleaded complaint rule.
Hansen v. Grp. Health Coop., 902 F.3d 1051, 1057 (9th Cir. 2018) (complete preemption
occurs only where federal law (a) “preempts a state-law cause of action,” and (b)
“substitutes an exclusive federal cause of action in its place.”’)

CV-549 (01/18) CIVIL MINUTES - GENERAL Page 10 of 20
Case 2:20-cv-11033-CAS-JPR Document 29 Filed 02/22/21 Page 11of20 Page ID #:335

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES — GENERAL ‘OQ’
Case No. = 2:20-cv-11033-CAS-JPRx Date February 22, 2021
Title CHARLES SCOTT ET. AL. V. GATE GOURMET, INC. ET. AL.

Defendant asserts that federal question jurisdiction is nonetheless proper here
because “the complaint raises a disputed federal issue as to whether [defendant] violated
the CARES Act” and “a trier of fact must therefore interpret the CARES Act to determine
if these alleged layoffs and furloughs violated public policy [], constitute an unlawful,
unfair, and/or fraudulent business act or practice, [] or breached a fiduciary duty allegedly
owed by [defendant] to its employees as a result of its receipt of funds under the CARES
Act.” Remand Opp’n at 12. In moving to remand, plaintiffs argue that the complaint does
not require an interpretation of the CARES Act because they “are not claiming that
Defendant received the money improperly, only that Defendant received money from the
federal government under the CARES act” and acted in violation of California state law
and public policy. MTN to Remand at 9.

The Ninth Circuit has explained that “the Supreme Court has recognized a ‘special
and small’ category of state-law claims that arise under federal law for purposes of § 1331
“because federal law is a necessary element of the ... claim for relief,” including certain
state-law quiet title actions. City of Oakland v. BP PLC, 969 F.3d 895, 904 (9th Cir. 2020)
(quoting Empire Healthchoice Assur., Inc. v. McVeigh, 547 U.S. 677, 699, 126 S.Ct. 2121,
165 L.Ed.2d 131 (2006)). In most “other cases where parties have sought to invoke federal
jurisdiction for state-law claims, the Court has concluded that jurisdiction was lacking,
even when the claims were premised on violations of federal law.” Id.

Federal jurisdiction over a state-law claim is proper only if a federal issue is “(1)
necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in
federal court without disrupting the federal-state balance approved by Congress.” Gunn v.
Minton, 568 U.S. 251, 258, 133 S.Ct. 1059, 185 L.Ed.2d 72 (2013) (citing Grable & Sons
Metal Products, Inc. v. Darue Eng'g & Mfg., 545 U.S. 308, 314 (2005)). A case turns on
a “substantial question of federal law” for purposes of this test if it “raises substantial
questions about the interpretation or validity of a federal statute.” City of Oakland, 969
F.3d at 905. “By contrast, a federal issue is not substantial if it is “fact-bound and situation-
specific,” or raises only a hypothetical question unlikely to affect interpretations of federal
law in the future.” Id. (collecting cases). Moreover, “it is not enough that the federal issue
be significant to the particular parties in the immediate suit; that will always be true when
the state claim ‘necessarily raise[s|’ a disputed federal issue, as Grable separately requires.
The substantiality inquiry under Grable looks instead to the importance of the issue to the
federal system as a_ whole.” Lyons v. Cucumber Holdings, LLC, No.
CV2010571JFWJPRX, 2021 WL 364640, at *6 (C.D. Cal. Feb. 3, 2021). In addition,

CV-549 (01/18) CIVIL MINUTES - GENERAL Page 11 of 20
Case 2:20-cv-11033-CAS-JPR Document 29 Filed 02/22/21 Page 12 of 20 Page ID #:336

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES — GENERAL ‘OQ’
Case No. = 2:20-cv-11033-CAS-JPRx Date February 22, 2021
Title CHARLES SCOTT ET. AL. V. GATE GOURMET, INC. ET. AL.

“Jurisdiction under § 1331 is unavailable where the federal claim is patently without merit.”
Yokeno v. Mafnas, 973 F.2d 803, 808 (9th Cir. 1992).

Here, defendant argues that this standard is met because plaintiffs’ reliance on the
CARES Act raises a substantial federal question that is disputed—‘‘whether Gate Gourmet
violated the CARES Act by allegedly laying off and furloughing its employees.” Opp’n at
12. However, although plaintiffs’ state law claims are indisputably made with reference
the CARES Act, plaintiffs’ claims do not arise from the disbursement of the federal funds
or appear to require an interpretation of the legality of the government’s disbursement of
funds pursuant to the CARES Act that would raise an important “issue to the federal system
as a whole.” Rather, plaintiffs’ claims here are “fact-bound and situation-specific,” See
Empire Healthchoice Assur., Inc, 547 U.S. at 701, and appear to rest not on interpretation
of what the CARES Act requires, but on the circumstances under which its requirements
entered public policy within the meaning of California law and on fact and case-specific
questions such as the timing of the adverse employment actions as compared to defendant’s
application for and receipt of the federal funds. As such, the Court finds that plaintiffs
complaint raises federal issues that are too fact-specific and insubstantial to fit within the
narrow category of state law claims that support federal subject matter jurisdiction.

Accordingly, the Court concludes that it does not possess subject matter jurisdiction
on the basis of a federal question.

Nonetheless, because there is diversity jurisdiction pursuant to CAFA, the Court
DENIES the motion to remand.

b. Motion to Dismiss Pursuant to Rule 12(b)(6)

Defendant moves to dismiss plaintiffs’ complaint in its entirety, arguing both that
plaintiffs’ common law claims fail because the CARES Act does not provide a private right
of action, and that each of plaintiffs’ state law claims fails to state a claim upon which relief
can be granted. MTD at 1. The Court addresses each of defendant’s contentions as follows.

i. UCL Claim

The UCL prohibits “any unlawful, unfair or fraudulent business practice.” Cal. Bus.
& Prof Code § 17200. “Because Business & Professions Code § 17200 is written in the
disjunctive, it establishes three varieties of unfair competition—acts or practices which are
unlawful, or unfair, or fraudulent.” Hodsdon v. Mars, Inc., 891 F.3d 857, 865 (9th Cir.

CV-549 (01/18) CIVIL MINUTES - GENERAL Page 12 of 20
Case 2:20-cv-11033-CAS-JPR Document 29 Filed 02/22/21 Page 13 of 20 Page ID #:337

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES — GENERAL ‘OQ’
Case No. = 2:20-cv-11033-CAS-JPRx Date February 22, 2021
Title CHARLES SCOTT ET. AL. V. GATE GOURMET, INC. ET. AL.

2018) (citing Cel-Tech Comme'ns, Inc. v. L.A. Cellular Tel. Co., 20 Cal.4th 163, 181
(1999)). Here, plaintiffs assert that defendant has violated the UCL by engaging in “an
unlawful, unfair, and fraudulent business practice.” See Compl. § 33. In opposing
defendant’s motion to dismiss, however, plaintiffs appear to disclaim any claim for
violation of the UCL’s “fraudulent” prong, instead arguing only that they have stated a
claim under the UCL’s “unlawful” and “unfair” prongs. See MTD Opp’n at 10-12.

As a threshold matter, plaintiffs must establish standing to obtain one of the remedies
available under the statute. “[R]emedies for individuals under the UCL are restricted to
injunctive relief and restitution.” Walker v. Geico Gen. Ins. Co., 558 F.3d 1025, 1027 (9th
Cir. 2009) (quoting Buckland v. Threshold Enters. Ltd., 155 Cal. App. 4th 798, 817
(2007)): see also. Cel-Tech Comme'ns, Inc., 20 Cal. 4th at 179. Injunctive relief is only
available if the assertedly wrongful conduct is ongoing or likely to recur. Nelson v. Pearson
Ford Co., 186 Cal. App. 4th 983, 1015 (2010). Otherwise, to establish an entitlement to
restitution, “a plaintiff must demonstrate that the defendant is in possession of money or
property taken from [him or] her” or in which plaintiff otherwise has an ownership interest.
Asghari v. Volkswagen Grp. of Am., Inc., 42 F. Supp. 3d 1306, 1324 (C.D. Cal. 2013); see
also Zeppeiro v. Green Tree Servicing, LLC, No. 14-CV-01336-MMM-JCX, 2015 WL
12660398, at *11 (C D. Cal. Apr. 15, 2015), aff'd, 679 Fed. Appx. 592 (9th Cir. 2017)
(affirming same). The failure to establish an entitlement to injunctive relief or restitution
requires dismissal of, or judgment against, a UCL claim. See Walker, 558 F.3d at 1027:
see also Kwikset, 51 Cal. 4th at 337 (holding that UCL standing is proper where plaintiff
is eligible for injunctive relief or restitution).

Here, the Court finds plaintiffs have not adequately alleged that they are entitled to
injunctive relief or to recover restitution in connection with defendant’s allegedly unfair
and fraudulent conduct. First, with respect to entitlement to injunctive relief, plaintiffs
have pled no facts demonstrating that their alleged harms are ongoing or likely to recur. To
the contrary, plaintiffs each allege that they are not currently employed by defendant,
having been laid off or furloughed. See Compl. § 21. As such, plaintiffs lack standing to
seek an injunction because they are not personally threatened by defendant’s ongoing
unfair or unlawful employment conduct, to the extent that such ongoing conduct is alleged.
See e.g. Richards v. Emst & Young LLP, No. C08-4988 JF(HRL), 2010 WL 682314, at
*2 (N.D. Cal. Feb. 24, 2010) (former employee lacked standing to pursue injunctive relief
regarding alleged labor code violations on behalf of class made up of current and former
employees).

CV-549 (01/18) CIVIL MINUTES - GENERAL Page 13 of 20
Case 2:20-cv-11033-CAS-JPR Document 29 Filed 02/22/21 Page 14 of 20 Page ID #:338

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES — GENERAL ‘OQ’
Case No. = 2:20-cv-11033-CAS-JPRx Date February 22, 2021
Title CHARLES SCOTT ET. AL. V. GATE GOURMET, INC. ET. AL.

Second, plaintiffs have not alleged the type of injuries that are compensable by
restitution. To the extent that plaintiffs seek to recover “profits and gains resulting from”
defendant’s decision to lay off employees despite receiving federal payroll support through
the CARES Acct, plaintiffs have not pled facts demonstrating a vested ownership interest
in those funds that would establish a right to restitution. Without more, plaintiffs’
allegation that defendant received payroll support funding from the federal government is
not sufficient to establish that defendant has “taken” money or property or is otherwise “in
possession of funds rightfully belonging” to plaintiffs. See Asghari v, 42 F. Supp. 3d at
1324. Moreover, “nonrestitutionary disgorgement” of funds unlawfully or unfairly
obtained from a third party—such as the Department of the Treasury—“is not an available
remedy in an individual action under the UCL.” Korea Supply Co. v. Lockheed Martin
Corp., 29 Cal. 4th 1134, 1149, 63 P.3d 937 (2003). Likewise, although California courts
have sustained claims for restitution under the UCL where plaintiffs seek to recover earned
wages, such as unpaid overtime, see Cortez v. Purolator Air Filtration Prod. Co., 23 Cal.
4th 163, 178, 999 P.2d 706 (2000), a claim for compensation for loss of future, as yet
unearned, wages is a claim for “monetary damages” that is not recoverable under the UCL.
See Voris v. Lampert, 7 Cal. Sth 1141, 1154 n. 9, 446 P.3d 284, 293 (2019), reh'g denied
(Oct. 23, 2019) (“claims for compensation for work already performed qualify as claims
for “salaries [or] wages,” whereas claims for wnearned compensation fall under the
category of claims for “monetary damages.”) (emphasis in original). :

Because plaintiffs have not adequately alleged a real or immediate threat that
plaintiffs will be subject to illegal conduct by defendant in the future or that plaintiffs have
suffered injuries that are compensable by restitution, plaintiffs lack standing to pursue their
UCL claim. Accordingly, the Court GRANTS defendant’s motion to dismiss the claim
for violation of the UCL, with leave to amend. In light of plaintiffs’ failure to allege facts
that support standing, the Court declines to reach defendant’s remaining arguments
regarding plaintiffs’ UCL claim.

i. Common Law Claims

As a threshold matter, Defendant contends that plaintiffs cannot assert common law
claims for wrongful termination in violation of public policy and breach of fiduciary duty
because those claims “are predicated on [p]laintiffs’ contentions that [defendant] violated
the CARES Act” and the CARES Act does not provide a private right of action. MTD at
9. As discussed with respect to the motion to remand, plaintiffs and defendant agree that

CV-549 (01/18) CIVIL MINUTES - GENERAL Page 14 of 20
Case 2:20-cv-11033-CAS-JPR Document 29 Filed 02/22/21 Page 15 of 20 Page ID #:339

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES — GENERAL ‘OQ’
Case No. = 2:20-cv-11033-CAS-JPRx Date February 22, 2021
Title CHARLES SCOTT ET. AL. V. GATE GOURMET, INC. ET. AL.

the CARES Act does not provide a private right of action.! See MTN to Remand at 9

(Citing American Video Duplicating, Inc. v. City National Bank, et al., 2020 WL 6882735
at *5 (C.D. Cal. Nov. 20, 2020)); MTD at 7-8 (collecting cases).

In arguing that the absence of a private right of action precludes plaintiffs from
bringing common law claims that incorporate obligations imposed by the CARES Act,
defendant relies principally on the Second Circuit’s reasoning in Grochowski v. Phoenix
Construction, 318 F.3d 80 (2d Cir. 2003).2_ The Grochowski court considered state law
breach of contract and quantum meruit claims brought by third party beneficiaries of
employment contracts governed by the Davis-Bacon Act (“DBA”). Id. at 85. The Second
Circuit held that plaintiffs’ claims as third-party beneficiaries were aimed at enforcing the
wage schedules contained in the DBA, which does not provide a private right of action,
and thus constituted an “impermissible ‘end run’ around” the statutory scheme established
by Congress. Id. 86.

However, a number of courts have rejected Grochowski’s approach and found that
the absence of a federal private right of action does not preclude state law claims that refer
to or incorporate federal statutes. For example, in Wigod v. Wells Fargo Bank, N.A., the
Seventh Circuit declined to adopt the Grochowski “end-run theory” with respect to state
law claims referencing the federal Home Affordable Mortgage Program (“HAMP’”),
instead holding that the “absence of a private right of action from a federal statute provides
no reason to dismiss a claim under a state law just because it refers to or incorporates some
element of the federal law.” 673 F.3d 547, 581 (7th Cir. 2012). In so holding, the Seventh
Circuit noted that the Supreme Court has on many occasions “confronted issues of subject

1 Although plaintiffs’ opposition does not specifically address defendant’s argument that
the absence of a private night of action defeats their state common law claims, plaintiffs
argue that each claim states a claim upon which relief can be granted. See generally Opp’n.
Accordingly, the Court declines to find that plaintiffs have waived or abandoned their
common law claims pursuant to Local Rule 7-9.

* Defendant’s remaining case law citations are inapposite because each addresses the
question of whether the Court may infer a private right of action in a federal statute, not
whether state common law claims are preempted by federal law. See Profiles, Inc. v. Bank
of Am. Corp., 453 F. Supp. 3d 742, 748 (D. Md. 2020) (finding no implied private right of
action in the CARES Act); Hoopes v. Equifax, Inc., 611 F.2d 134 (6th Cir. 1979).

CV-549 (01/18) CIVIL MINUTES - GENERAL Page 15 of 20
Case 2:20-cv-11033-CAS-JPR Document 29 Filed 02/22/21 Page 16 of 20 Page ID #:340

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES — GENERAL ‘OQ’
Case No. = 2:20-cv-11033-CAS-JPRx Date February 22, 2021
Title CHARLES SCOTT ET. AL. V. GATE GOURMET, INC. ET. AL.

matter jurisdiction presented by state common-law claims that incorporate federal
standards of conduct, without so much as a peep about whether state law may do so without
being preempted.” Id.

The Ninth Circuit has not squarely addressed this particular issue, but several
California district courts have followed the Seventh Circuit. For example, a California
district court recently followed Wigod, finding that “lack of a private federal right of action
does not automatically preclude state-law claims that refer to or incorporate” the
requirements of a federal statute, and noted specifically that Wigod is consistent with the
approach followed by California appellate courts. Hernandez v. Wells Fargo & Co., No.
C 18-07354 WHA, 2019 WL 2359198, at *3 (N.D. Cal. June 3, 2019) (“Since the appellate
court's decision in Wigod, our court of appeals and California appellate courts have
similarly allowed state-law claims based on HAMP-required loan modifications to proceed
past the pleading stage.”’) (collecting cases); see also Smith v. Bank of Am., N.A., No.
CV 146668DSFPLAX, 2018 WL 6071048, at *3 (C.D. Cal. July 2, 2018) (following Wigod
and explaining that the “end-run theory [...] is an attempt at preemption without having to
follow established preemption doctrines.”’).

On balance, the Court finds the reasoning of Wigod persuasive. As such, the Court
similarly finds that the absence of a private nght of action from the CARES Act, which
does not expressly prohibit state law claims, does not require dismissal of plaintiffs’
common law claims for wrongful termination in violation of public policy and breach of
fiduciary duty. Accordingly, the Court addresses the substance of each claim in turn.

1. Wrongful Termination in Violation of Public Policy

Plaintiffs allege that they and other members of the class were laid off by defendant
in violation of a public policy established by the CARES Act. Id. § 31. More specifically,
plaintiffs allege that that airline industry employers receiving payroll support through the
CARES Act are required to provide assurances to the Secretary of the Treasury that they
will “use such payments exclusively for the continuation of employee wages, salaries, and
benefits; and refrain from conducting involuntary layoffs or furloughs until September 30,
2020,” and contend that requirement establishes a public policy directed at reducing air
industry unemployment due to COVID-19. Compl. §§ 17-20, 31. Defendant argues that
the claim for wrongful termination in violation of public policy should be dismissed, both
because plaintiffs have not alleged that they were discharged for engaging in a protected

CV-549 (01/18) CIVIL MINUTES - GENERAL Page 16 of 20
Case 2:20-cv-11033-CAS-JPR Document 29 Filed 02/22/21 Page17 of 20 Page ID #:341

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES — GENERAL ‘OQ’
Case No. = 2:20-cv-11033-CAS-JPRx Date February 22, 2021
Title CHARLES SCOTT ET. AL. V. GATE GOURMET, INC. ET. AL.

activity, and because plaintiffs’ allegations are insufficient to establish the existence of a
public policy. Mot. at 1.

A claim for wrongful termination in violation of public policy “requires only a
termination in retaliation for engaging in an activity protected by public policy.” Hobson
v. Raychem Corp., 73 Cal. App. 4th 614, 632 (1999) (internal quotation marks and citation
omitted) (abrogated on other grounds). The protected “activity must be based on a statutory
or constitutional night.” Id. The California Supreme Court has explained that protected
activities generally “fall into one of four categories: the employee (1) refused to violate a
statute; (2) performed a statutory obligation; (3) exercised a constitutional or statutory right
or privilege; or (4) reported a statutory violation for the public’s benefit.” Green v. Ralee
Eng'g Co., 19 Cal. 4th 66, 76, 960 P.2d 1046 (1998). In addition, there must be a causal
connection between the protected activity and the adverse employment action. See Turner
v. Anheuser-Busch, Inc., 7 Cal.4th 1238, 1258-1259 (1994) (rejecting claim for wrongful
discharge in violation of public policy in part because plaintiff failed to show “the required
nexus between his reporting of alleged statutory violation and his allegedly adverse”
discharge.).

Here, the Court finds that plaintiffs have not sufficiently alleged that they were
terminated for engaging in a protected activity. As defendant notes, plaintiffs’ complaint
does not contain any allegation that plaintiffs were discharged because they exercised a
protected right or because they refused to engage in illegal conduct. Instead, plaintiffs
allege only that they were each employed by defendant when the CARES Act was signed
into law on March 27, 2020, at which time defendant “was aware and put on notice that
federal fund[s] would be made available to them with the purpose of protecting workers
and helping retain employees.” Compl. 21. Plaintiffs also allege that on approximately
March 28, 2020, defendant “began to layoff and/or furlough hundreds of employees
including [p]laintiffs after the CARES Act had been signed into law.” Id. Those
allegations, without more, are insufficient to support a claim on the grounds that plaintiffs
engaged in a protected activity or were discharged because of that protected activity. As
such, plaintiffs have not stated a claim for wrongful discharge in violation of public policy.

Accordingly, defendant’s motion to dismiss as to the claim for wrongful termination
in violation of public policy is GRANTED, with leave to amend. In light of plaintiffs’
failure to allege facts sufficient to establish that they were discharged for participating in a
protected activity, the Court declines to reach defendant’s remaining arguments that the

CV-549 (01/18) CIVIL MINUTES - GENERAL Page 17 of 20
Case 2:20-cv-11033-CAS-JPR Document 29 Filed 02/22/21 Page 18 of 20 Page ID #:342

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES — GENERAL ‘OQ’
Case No. = 2:20-cv-11033-CAS-JPRx Date February 22, 2021
Title CHARLES SCOTT ET. AL. V. GATE GOURMET, INC. ET. AL.

complaint fails to sufficiently allege that the CARES Act establishes a “fundamental public
policy” that is implicated by plaintiffs’ terminations.

2. Breach of Fiduciary Duty

Defendant argues that plaintiffs’ claim for breach of fiduciary duty must be
dismissed because plaintiffs fail to allege a legally cognizable fiduciary relationship. MTD
at 20. To state a claim for breach of fiduciary duty, a plaintiff must show: (1) the existence
of a fiduciary relationship; (2) the breach of that relationship; and (3) damage proximately
caused by the breach. Roberts v. Lomanto, 112 Cal. App. 4th 1553, 1562 (2003). Under
California law, a fiduciary relationship exists only where established by agreement or as a
matter of law. See City of Hope Nat'l Med. Ctr. v. Genentech, Inc., 43 Cal. 4th 375, 386,
181 P.3d 142, 150 (2008) (“[B]efore a person can be charged with a fiduciary obligation,
he must either knowingly undertake to act on behalf and for the benefit of another, or must
enter into a relationship which imposes that undertaking as a matter of law.”).

Here, the complaint fails to present any non-conclusory allegations sufficient to
establish the existence of a fiduciary relationship between the parties. Plaintiffs allege that
the CARES Act establishes a fiduciary duty because it provides “federal money [to]
Defendants for the sole purpose of the continuation of payment of employee wages,
salaries, and benefits.” Compl. ] 44, 46. However, plaintiffs fail to point to any specific
provision of the CARES Act that gives rise to a fiduciary relationship, including based on
defendant’s receipt of federal funds. Likewise, plaintiffs do not allege the existence of any
agreement or representation through which defendant undertook to act as a fiduciary for its
employees. See Foley v. Interactive Data Corp., 47 Cal. 3d 654, 690-693 (1988)
(ordinarily, no “special relationship” establishes fiduciary obligations between employer
and employee in the wrongful discharge context). Accordingly, the Court finds that
plaintiffs’ allegations are insufficient to state a claim for breach of fiduciary duty.

Defendant’s motion to dismiss the claim for breach of fiduciary duty is GRANTED,
with leave to amend.

c. Motion to Strike Pursuant to Rule 12(f)

Defendant moves to strike from the prayer for relief all references to attorneys fees,
the prayer for restitution in connection with plaintiffs’ UCL claim, and all references to
injunctive relief. MTS at 1-2. Defendant argues that each form of relief is unavailable to

CV-549 (01/18) CIVIL MINUTES - GENERAL Page 18 of 20
Case 2:20-cv-11033-CAS-JPR Document 29 Filed 02/22/21 Page 19 of 20 Page ID #:343

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES — GENERAL ‘OQ’
Case No. = 2:20-cv-11033-CAS-JPRx Date February 22, 2021
Title CHARLES SCOTT ET. AL. V. GATE GOURMET, INC. ET. AL.

plaintiffs as a matter of law. Id. Specifically, defendant contends: (1) that attorneys fees
are not recoverable in connection with any of plaintiffs claims because plaintiffs have not
established that their suit will benefit a “large class of persons” pursuant to Cal. Code Civ.
P. § 1021.5 and the UCL does not provide for attorneys fees; (2) injunctive relief is not
available because plaintiffs have an adequate remedy at law and are not in imminent danger
of future irreparable harm; and (3) “[p]laintiffs’ Prayer for restitution is incompatible with
[p|laintiffs’ COA for relief under the UCL,” both because plaintiffs lack standing to seek
disgorgement of funds defendant obtained from the U.S. Treasury and because unearned
backpay may not be recovered as restitution as a matter of California law. See MTS at 3-
9. In reply, defendant argues for the first time that these requests for relief “are immaterial
and impertinent to [p]laintiffs’ claims because the relief sought is unavailable.” MTS
Reply at 5.

In opposition, plaintiffs contend that defendant’s motion must be denied because the
Ninth Circuit has held that “Rule 12(f) does not authorize courts to strike claims for
damages on the ground that such claims are precluded as a matter of law.” MTS Opp’n at
4 (quoting Whittlestone, Inc. v. Handi-Craft Company, 618 F.3d 970, 974 (9th Cir. 2010)).

In Whittlestone, the Ninth Circuit explained that a Rule 12(f) motion to strike may
be granted only if the material the movant seeks to strike is “(1) an insufficient defense; (2)
redundant; (3) immaterial; (4) impertinent; or (5) scandalous.” 618 F. 3d at 973-74. A
matter is “immaterial” within the meaning of Rule 12(f) if it “has no essential or important
relationship to the claim for relief or the defenses being plead,” and “impertinent” matters
are “statements that do not pertain, and are not necessary, to the issues in question.”
Whittlestone, Inc. v. Handi-Craft Co., 618 F.3d 970, 974 (9th Cir. 2010) (internal citations
omitted).

“A claim for relief, regardless of form, is not immaterial to a plaintiffs complaint”
or “impertinent because whether these damages are recoverable pertains directly to the
harm being alleged.” Thomas-Byass_v. Michael Kors Stores (California), Inc., No.
EDCV15369JGBKKX, 2015 WL 13756100, at *3 (C.D. Cal. Sept. 16, 2015). In addition,
courts in this circuit have applied Whittlestone to requests for relief other than damages,
including injunctive relief and attorneys fees. See e.g. In re Toyota Motor Corp.
Unintended Acceleration Mktg., Sales Practices, & Prod. Liab. Litig., 754 F. Supp. 2d
1145, 1195 (C.D. Cal. 2010) (injunctive relief); Powell v. Wells Fargo Home Mortg., No.
14-CV-04248-MEJ, 2017 WL 2720182, at *7 (N.D. Cal. June 23, 2017) (attorney’s fees).

CV-549 (01/18) CIVIL MINUTES - GENERAL Page 19 of 20
Case 2:20-cv-11033-CAS-JPR Document 29 Filed 02/22/21 Page 20 of 20 Page ID #:344

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

CIVIL MINUTES — GENERAL ‘OQ’
Case No. = 2:20-cv-11033-CAS-JPRx Date February 22, 2021
Title CHARLES SCOTT ET. AL. V. GATE GOURMET, INC. ET. AL.

Here, it appears to the Court that defendant’s motion to strike does not target truly
inappropriate or unnecessary material, but is instead “really an attempt to have certain
portions of the complaint dismissed or to obtain summary judgment.” Thomas-Byass,
2015 WL 13756100, at *3 (quoting Whittlestone). As discussed supra, the Court
concludes that plaintiffs have not adequately alleged standing to obtain injunctive relief or
restitution pursuant to the UCL and dismisses plaintiffs’ UCL claim on that basis.
However, because plaintiffs’ requests for attorney’s fees, injunctive relief, and restitution
pursuant to the UCL do not appear to be redundant, immaterial, impertinent, or scandalous
within the meaning of Rule 12(f), the Court declines to strike plaintiffs’ requests. To the
extent that defendant believes the relief plaintiffs seek is unsupported by facts or
unavailable as a matter of law, defendant’s arguments are better resolved on a Rule 12(b)(6)
motion or a motion for summary judgment.

Accordingly, the Court DENIES defendant’s motion to strike portions of plaintiffs’
prayer for relief.

V. CONCLUSION
In accordance with the foregoing, the Court orders as follows:
1. The Court DENIES plaintiffs’ motion to remand.

2. The Court GRANTS defendant’s motion to dismiss plaintiffs’ UCL claim,
with leave to amend

3. The Court GRANTS defendant’s motion to dismiss plaintiffs’ claim for
wrongful termination in violation of public policy, with leave to amend.

4. The Court GRANTS defendant’s motion to dismiss plaintiff's claim for
breach of fiduciary duty, with leave to amend.

5. The Court DENIES defendant’s motion to strike.
Plaintiffs shall have twenty-one (21) days to file an amended complaint

IT IS SO ORDERED.

00 : 03
Initials of Preparer CMJ

CV-549 (01/18) CIVIL MINUTES - GENERAL Page 20 of 20


File and source

File

29-remand-case-to-state-court-and-dismiss-and-strike.pdf

Size

4,716,746 bytes

SHA-256

9b7ce70fcda0fba869e9fec3bced9a3c0fb7ca500ac1d8ab856ab015efea52b0

Our copy

29-remand-case-to-state-court-and-dismiss-and-strike.pdf

Original

storage.courtlistener.com