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Billings v. Ryze Claim Solutions, LLC

United States District Court, S.D. Indiana

June 7, 2018

LESLIE BILLINGS, Plaintiff
v.
RYZE CLAIM SOLUTIONS, LLC f/k/a Eagle Adjusting Services, Inc., an Indiana Limited Liability Company, and DOES 1-10 inclusive Defendants

          ORDER ON DEFENDANT'S MOTION TO TRANSFER VENUE (DOC. NO. 7)

         This case was removed from the Kern County Superior Court and is an employment dispute between Plaintiff Leslie Billings (“Billings”) and his former employer, Ryze Claim Solutions, Inc. (“Ryze”). In the operative complaint, which is the First Amended Complaint (“FAC”), Billings alleges claims under the California Labor Code (relating to minimum wages, premium wages, meal periods, rest periods, separation pay, reimbursement, and unlawful wage deductions), California Business & Professions Code § 17200, and violation of the federal Fair Labor Standards Act. Billings attempts to bring collective and class actions claims on behalf of a California class and a nationwide class. Currently before the Court is Ryze's motion to transfer venue from the Eastern District of California - Fresno Division (“EDC”) to the Southern District of Indiana - Indianapolis Division (“SDI”). For the reasons that follow, Ryze's motion will be granted and this case will be transferred to the SDI.

         GENERAL BACKGROUND

         From the FAC, Ryze is a comprehensive claims services company that provides residential and commercial property adjusting services throughout the United States. Billings worked for Ryze as a traveling claims adjuster from approximately 2009 to July 2016, and worked out of his home in Bakersfield, California. As a traveling adjuster, Billings traveled extensively to customer locations, gathered measurements and recorded statements, took photographs, gathered prior loss reports, transmitted findings/information to underwriting, and communicated with customers. Billings was required to drive in territories of up to 150 miles to 300 to 400 miles without compensation. Billings was permitted or required to work in excess of 8 hours per day and in excess of 40 hours per week without receiving overtime and double time pay, and worked seven consecutive days without receiving premium pay. Ryze failed to pay minimum wages for all hours worked, and failed to provide mandated meal and break periods. Ryze improperly required Billings to pay for business expenses, including automobile expenses, digital camera expenses, and mileage reimbursement. Ryze also made unauthorized deductions from Billings's wages and failed to timely pay Billings all wages due upon termination of employment. The FAC alleges that Ryze's practices were directed not only at Billings, but also to a Collective Class and a California Class.

         DEFENDANT'S MOTION

         Defendant's Argument

         Ryze argues that there are employment agreements (“the Agreement”) between it and Billings that contains a forum selection clause.[1] The forum selection clause provides that, for any claim of any type that Billings may try and pursue, such claims must be pursued in Hamilton County or Marion County, Indiana state court or the SDI. The forum selection clause is broad and has no limiting language. Therefore, all claims alleged in the FAC fall under the forum selection clause. Further, the forum selection clause is valid and enforceable because it was not the product of fraud or overreaching, no public policy of California would be contravened by enforcing it, and Billings would not be deprived of his rights simply by having another federal court decide the merits of his claims. Thus, the forum selection clause should be enforced and this case should be transferred to the SDI.

         Plaintiff's Opposition

         Billings argues that there is no enforceable contract. First, Ryze's employee handbook states that no one but an owner of Ryze has the authority to enter into any agreement for employment for a specified period of time unless the agreement is in writing and signed by an owner. The Agreement was signed by a member of Ryze's human resources who is not an owner. Second, Labor Code § 2802 (“2802”) requires employers to indemnify their employees for all necessary expenditures or losses in direct consequence of discharging their duties. However, the Agreement violates § 2802 because it required Billings to pay for his own digital camera and all other equipment needed to perform his duties. Pursuant to Labor Code § 2804 (“§ 2804”), contracts that violate § 2802 are null and void. Third, the Agreement is unconscionable because: signing the Agreement without negotiation was a condition of employment, the forum selection clause is one-sided because Ryze can pursue any claim in any court that can exercise personal jurisdiction over an employee but Ryze can only be sued in Indiana, the Agreement violates the employee handbook because it was not signed by an owner, the Agreement attempts to waive rights under § 2802, and the Agreement has a de facto waiver of non-waivable statutory rights under the California Labor Code through operation of the forum selection clause and choice of law clause. Severance of the Agreement's offending provisions is not in the interests of justice because Ryze will not be deterred from continuing to attempt to violate California law and policy.

         Alternatively, Billings argues that enforcing the forum selection clause is unreasonable. First, enforcement of that clause would contravene California's strong public policy against waiving statutory employment rights (prompt payment of wages, meal periods, rest periods, overtime and premium wages). The Agreement designates Indiana law as the governing law, and Indiana law does not have the same protections as California law. If the case was transferred to the SDI, Indiana's choice of law provisions would mean applying Indiana law to this case and losing the protections of California labor law. Second, for the same reasons that the Agreement is unconscionable, the forum selection clause is the product of “overreaching.” Billings also argues that considerations under 28 U.S.C. § 1404(a) (“§ 1404(a)”) warrant denial of a transfer. Because the forum selection clause is unenforceable, Atlantic Marine does not apply, and Ryze has not made a strong showing of inconvenience. In any event, the relevant private and public interest factors that are considered in deciding a § 1404(a) motion favor venue in the EDC.

         Finally, even if Atlantic Marine does apply, transfer is not appropriate. The public interest factors support keeping the case in the EDC. There is greater localized interest in this case in the EDC, the EDC is more familiar with the governing law, and California's public policy against waiving particular employment rights far outweigh enforcement of the forum selection clause.

         Relevant Contractual Terms

         In pertinent part, the Agreement under § 3 (entitled “Duties and Responsibilities”) reads:

Employee agrees that s/he shall be responsible for providing a digital camera with which s/he can electronically send photographs of claim sites to Eagle for submission to Eagle's clients serviced by Employee. Employee additionally agrees that's/he shall be responsible for providing all other equipment, not specially set forth herein as provided by Eagle, needed to complete his/her duties and responsibilities as a Property Claims Adjuster for Eagle.

         In pertinent part, the Agreement under § 7 (“Injunctive Relief and Other Remedies”) reads:

7. Injunctive Relief and Other Remedies. Employee agrees that any breach or threatened breach of the provisions of this Agreement shall cause immediate and irreparable injury to [Eagle/Ryze] for which there exists no adequate remedy at law, thus entitling [Eagle/Ryze] to immediate injunctive relief to restrain or enjoin such breach or threatened breach, without prejudice to any other rights or remedies afforded [Eagle/Ryze] hereunder or by law. In the event it becomes necessary for [Eagle/Ryze] to institute legal proceedings to enforce any of the terms of this Agreement against Employee, Employee shall be liable to Eagle for all costs of such legal proceedings, including reasonable attorneys' fees.

         In pertinent part, the Agreement under § 8 (“Miscellaneous Provisions”) provides:

(a) Severability. The provisions of this Agreement are severable, and the validity of any one or more provisions shall not affect or limit the enforceability of the remaining provisions. . . .
(b) Applicable Law. This Agreement shall be construed in accordance with and governed by the law of the State of Indiana, regardless of the place of execution or performance.
(c) Applicable Jurisdiction. Ryze is based in Indiana, and Employee understands and acknowledges Ryze's desire and need to defend any litigation against it in Indiana. Accordingly, the parties agree that any claim of any type brought by Employee against Ryze or any of its employees or agents must be maintained only in a court sitting in Marion County, Indiana, or Hamilton County, Indiana, or, if a federal court, the Southern District of Indiana, Indianapolis Division.
Employee further understands and acknowledges that in the event Ryze initiates litigation against Employee, Ryze may need to prosecute such litigation in the Employee's forum state, in the State of Indiana, or in such other state where Employee is subject to personal jurisdiction. Accordingly, the parties agree that Ryze can pursue any claim against Employee in any forum in which Employee is subject to personal jurisdiction. Employee specifically consents to personal jurisdiction in the State of Indiana, as well as any state in which resides a customer assigned to Employee.

         Discussion

         I. Validity of the Agreement

         Billings argues that the Agreement is invalid and unenforceable because: (1) it was not signed by an owner of Ryze despite the requirements of the Employee Handbook, (2) it violates Labor Code § 2802 and § 2804, and (3) it is unconscionable.

         1. Insufficient Signature

         The Ryze Employee Handbook reads in relevant part: “I understand that no one except an Owner of Eagle has the authority to enter into any agreement for employment for a specified period of time and that any such agreement must be in writing and signed by an Owner.”[2] Billings Dec. Ex. D at § 3.10. The quoted section is from the “Acknowledgement and Receipt” portion of the handbook. For several reasons, the Court cannot find that this portion of the employee handbook invalidates the Agreement.

         First, Paragraph 8(e) is entitled “Entire Agreement” and reads: “This Agreement constitutes the entire agreement by and between the parties. No. representations, modifications, alterations, or agreements shall affect this Agreement unless in writing, signed by Eagle and Employee, and executed in the same manner as this Agreement.” Devoe Dec. Exs. A & B at ¶ 8(e). The Agreement contains no language that limits or defines who may sign it on behalf of Ryze. See Devoe Dec. Exs. A, B. Rather, the Agreement merely identifies Ryze and Billings as the relevant parties and contains signature blocks for Ryze and “Employee.” The handbook is a separate document from the Agreement. While the handbook contains a place for an employee's signature as part of the “Acknowledgement of Receipt, ” there is no place for Ryze to sign. Thus, the handbook cannot be “executed in the same manner as the Agreement, ” as required by ¶ 8(e). Billings has not shown how the handbook can affect the Agreement consistent with ¶ 8(e).

         Second, the handbook on the first page states that it “is not intended and should not be understood to create an employment contract, ” and that the “policies and practices described in this handbook are subject to change without notice by Eagle.” Id. at § 1.1. This is consistent witch the Acknowledgement and Receipt, which states that the handbook “does not create an employment contract, ” it “sets out general information as to current personnel policies and practices, ” and Ryze/Eagle “reserves full discretion to unilaterally add, modify, delete or otherwise change any provisions [or related policies and procedures] at any time without . . . .” Id. at § 3.10. Since the handbook states that it is not a contract for employment, it is unknown how it could modify or affect the Agreement, which is a contract for employment. Further, Billings points to nothing in the handbook that purports to limit Ryze's ability to have an agent of its choosing sign a contract for employment. As the name suggests, an employee handbook is meant to guide and inform an employee. It makes no sense for Ryze to include a provision in the handbook that could invalidate a pre-existing employment contract. Moreover, because Ryze can change or eliminate any provision or associated policy of the handbook unilaterally, there would be nothing to stop Ryze from accepting an employment contract that violates § 3.10 of the handbook. That is, the ability to unilaterally change any provision of the handbook amounts to a very small (if any) limitation on the part of Ryze. Assuming that § 3.10 was a limitation that affected Billings's Agreement, the fact that both Billings and Ryze performed under the contract for about 8 years indicates a unilateral change by Ryze with respect to Billings's Agreement.

         Third, receipt of an employee handbook generally presupposes employment. Since an employee handbook is meant for employees, it would make no sense for Ryze to provide Billings with the handbook if it did not consider Billings to already be a legitimate employee.

         Finally, Billings's argument is novel, especially given the general nature of an employee handbook. Billings cites no cases that have applied similar language in an employee handbook to invalidate employment contracts that were otherwise in effect for years.

         In sum, Billings has failed to show that § 3.10 invalidates the Agreement.

         2. Labor Code § 2802 and § 2804

         In pertinent part, § 2802 reads: “An employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or though his or her obedience to the directions of the employer . . . .” Cal. Lab. Code § 2802(a). Section 2802 is “designed to prevent employers from passing their operating expenses on to their employees.” Gattuso v. Harte-Hanks Shoppers, Inc., 42 Cal.4th 554, 562 (2007) (citation omitted). Pursuant to Labor Code § 2804, the rights afforded under § 2802 cannot be waived. Edwards v. Arthur Andersen LLP, 44 Cal.4th 937, 951 (2008); Gattuso, 42 Cal.4th at 562. Labor Code § 2804 (“§ 2804”) provides in part: “Any contract or agreement, express or implied, made by any employee to waive the benefits of this article or any part thereof, is null and void . . . .” Cal. Lab. Code § 2804.

         A clause in § 3 of the Agreement states that Billings is responsible for providing a digital camera and any other equipment needed to complete his job duties. The Agreement shows that part of Billings's employment duties with Ryze is to take photographs of claim sites. See Agreement §§ 3, 4(b). While there is no other equipment specifically identified, if the equipment is needed to complete job duties, then the expenditure for that equipment is in direct discharge of one's duties as a claims adjuster. Although the expense must be “reasonable” in order to qualify for indemnification, see Cal. Labor Code § 2802(c), both the digital camera and “other equipment” (whatever that may be) are expenses to which Billings is entitled to indemnification or reimbursement under § 2802(a). See Division of Lab. Stds. Enforcement - Enforcement Policies & Interpretations Manual, pp. 29-2 to 29-3 (December 2017) (“When tools or equipment are required by the employer or are necessary to the performance of a job, such tools and equipment shall be provided and maintained by the employer . . . .”); Division of Lab. Stds. Enforcement - Enforcement Policies & Interpretations Manual, pp. 45-12 to 45-13 (June 2002) (same).

         Ryze relies heavily on the California Supreme Court's decision in Edwards v. Arthur Andersen LLP to argue that there is no waiver of indemnification rights for a camera or other equipment. The Edwards court was faced with a release that purported to release “any and all claims” by an employee. See Edwards, 44 Cal.4th at 950. While the Court of Appeal found that “any and all claims” necessarily included claims covered by § 2802, the California Supreme Court disagreed. The Edwards court explained that indemnity rights under § 2802 were not expressly waived in the release and then declined to read such a waiver into the release. See id. at 953-54. Instead, the court relied on the rule of contract interpretation that, where reasonable, a contract should be interpreted in such a way as to avoid illegality. See id. at 953-54. One reasonable interpretation of the release, and the interpretation adopted by the California Supreme Court, was that the term “any and all” did not encompass non-waivable statutory protections. See id. at 954.

         In this case, whether § 3 of the Agreement actually waives indemnification for digital cameras and “other equipment” is not clear. On the one hand, the clause states that Billings is responsible for providing a camera and equipment, and a common understanding of the term “responsible” is that Billings is expected to pay for the equipment himself - period. Further, there is no express provision that permits an employee to seek indemnification for these costs. Significantly, the contract has a section that is entitled “Reimbursed Expenses.” See Agreement at § 4(d). Several types of expenses and equipment/supplies are identified, but conspicuously absent from this list is any mention of a digital camera or “other equipment.” The absence of these expenses from the list suggests that no compensation or reimbursement is authorized.

         On the other hand, § 2802 is not mentioned or identified in the Agreement. While Billings is certainly responsible for obtaining the digital camera and other equipment (whatever equipment that may be), the contract does not expressly prohibit Billings from obtaining or attempting to obtain indemnification or reimbursement, nor does the contract expressly state that Ryze will not reimburse an employee for these expenses. Further, Billings brings a claim for violation of § 2802 based in part on this clause and alleges that he was not compensated for a digital camera. As Ryze correctly points out, there is no evidence or allegations concerning attempts to obtain reimbursement by Billings, and there have been no findings that any reasonable expenses were actually submitted by Billings to Ryze but not reimbursed.[3] Finally, although Billings submitted a declaration and evidence in support of other arguments, he submitted no evidence relating § 3 of the Agreement.[4]

         The state of the briefing is such that the Court cannot definitively hold either that § 3 of the Agreement violates § 2802 or that Ryze utilizes § 3 in such a way as to violate § 2802. In the absence of additional evidence from Billings regarding his experiences with § 3, or statements or materials by Ryze relating to § 3's interpretation or application, the Court cannot hold at this time that § 3 violates § 2802 as a matter of law. Cf. Edwards, 44 Cal.4th at 950-54 (holding that if a reasonable and legal interpretation is possible, a contract should be interpreted in a way as to make the contract lawful). Therefore, Billings has not shown that § 3 violates § 2802 and § 2804.

         However, even if the Court were to assume that § 3 violates § 2802, Billings has not shown that § 2804 would invalidate the entire agreement. In Gattuso, the California Supreme Court explained that § 2804 makes an agreement “null and void insofar as it waives the employee's rights to full expense reimbursement under § 2802.” Gattuso, 42 Cal.4th at 569-70 (emphasis added). Similarly, in Edwards, the California Supreme Court stated that “any contract that does purport to waive an employee's indemnity right [under § 2802] would be contrary to the law and therefore unlawful to that extent.” Edwards, 44 Cal.4th at 951-52 (emphasis added). The terms “insofar as” and “to that extent” create boundaries or limitations on the reach of § 2804. Per Gattuso and Edwards, the Agreement in this case is not null and void in the entirety, rather, the Agreement would be null and void under § 2804 only insofar as, or only to the extent that, it waives the right of Billings to seek reimbursement for the reasonable cost of a digital camera. That is, the entire Agreement would not be void, rather the relevant portion of § 3 would be void. Without more from Billings, the Court cannot hold that the Agreement is void pursuant to § 2804.

         3. Unconscionability

         Under California law, a contract as a whole or any part thereof may be unenforceable because it was “unconscionable at the time it was made.” Cal. Civ. Code § 1670.5(a); Tompkins v. 23andMe, Inc., 840 F.3d 1016, 1023 (9th Cir. 2016). The party asserting that a contractual provision is unconscionable bears the burden of proof. See Poublon v. C.H. Robinson Co., 846 F.3d 1251, 1260 (9th Cir. 2017); Tompkins, 840 F.3d at 1023; Sanchez v. Valencia Holding Co., LLC, 61 Cal.4th 899, 911 (2015). Unconscionability has “both a procedural and a substantive element, the former focusing on oppression or surprise due to unequal bargaining power, the latter on overly harsh or one-sided results.” Sanchez, 61 Cal.4th at 910; see Poublon, 846 F.3d at 1260. However, procedural and substantive unconscionability need not be present in the same degree, rather, “the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.” Armendariz v. Foundations Health Psychare Servs., Inc., 24 Cal.4th 83, 114 (2000); see Poublon, 846 F.3d at 1260. Procedural unconscionability focuses on “oppression or surprise due to unequal bargaining power, ” and generally arises from “an inequality of bargaining power that results in no real negotiation and absence of meaningful choice.” Poublon, 846 F.3d at 1260. While California courts have described substantive unconscionability in numerous ways, each of the formulations point to the central idea that unconscionability “is concerned not with ‘a simple old-fashioned bad bargain' but with terms that are ‘unreasonably favorable to the more powerful party.'” Baltazar v. Forever 21, Inc., 62 Cal.4th 1237, 1244 (2016); see Poublon, 845 F.3d at 1261. “A contract term is not substantively unconscionable when it merely gives one ...


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