Ward v. CareFusion Solutions, LLC

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
STEVE WARD and FRANCIS
TRESSA, individually and on behalf of
all other similarly situated persons,
Plaintiffs, C.A. No. Nl 7C- l O- 199 l\/ll\/IJ
V.
CAREFUSION SOLUTIONS, LLC,
Defendant.
Subrnitted: February 8, 2018
Decided: March 13, 2018
OPINION
Daniel C. Herr, Esq. (Argued), lack D. Mclnnes, Esq., Attorneys for Plaintiffs and
the Putative Class
Elizabeth S. Fenton, Esq., Danielle N. Petaja, Esq., Saul EWing Arnstein & Lehr
LLP, Matthevv J. Hank, Esq. (Argued), Helga P. Spencer, Esq., Littler Mendelson
P.C., Attorneys for Defendant CareFusion Solutions, LLC
JOHNSTON, J.
FACTUAL AND PROCEDURAL CONTEXT
This is a class action suit brought to recover allegedly unpaid Wages and Work
expenses Defendant CareFusion Solutions, LLC (“CareFusion”) licenses, sells, and
leases assorted medical devices. CareFusion hired Steve Ward, Francis Tressa, and
the putative class (collectively, “Plaintiffs”), to service CareFusion’s products
pursuant to a Maintenance and Service Agreernent. Plaintiffs allege that they should
be classified as CareFusion’s employees, not independent contractors. Plaintiffs
further allege that, as employees, Sections 510, 1194, 1198, and 2802 of the
California Labor Code entitle them to recover for CareFusion’s failure to reimburse
Plaintiffs for Work-related expenses and CareFusion’s failure to pay Plaintiffs
overtime Wages.
In response, CareFusion has filed this Motion to Dismiss, arguing that the
California laws on Which Plaintiffs rely do not apply to Work performed outside of
California. Plaintiffs counter by arguing that California law controls, because the
Maintenance and Service Agreements designate California as the choice of laW.
Should the Court find that California law does not apply, the Plaintiffs seek leave to
amend their complaint to add facts establishing Plaintiffs’ presence Within California
and to include violations of DelaWare and Pennsylvania law.
MOTION TO DISMISS STANDARD
In a Rule l2(b)(6) motion to dismiss, the Court must determine Whether the
claimant “may recover under any reasonably conceivable set of circumstances
susceptible of proof.”l The Court must accept as true all Well-pleaded allegations2
Every reasonable factual inference Will be drawn in the non-moving party’s favor.3
1 Spence v. Funk, 396 A.2d 967, 968 (Del.1978).
2 Ia’.
3 Wilmington Sav. Fund. Soc ’v, F.S.B. v. Ana'erson, 2009 WL 597268, at *2 (Del. Super.) (citing
Doe v. Cahz'll, 884 A.2d 451, 458 (Del. 2005)).
If the claimant may recover under that standard of review, the Court must deny the
motion to dismiss.4
ANALYSIS
Generally, a court may not rely on materials extrinsic to the pleadings when
ruling on a Rule 12(b)(6) motion.5 An exception to this rule exists when “an
extrinsic document is integral to a plaintiffs claim and is incorporated into the
complaint by reference.”6 Plaintiffs’ Complaint states that Plaintiffs brings their
claims under California law “[p]ursuant to the choice of law clause contained in their
Maintenance and Service Agreements” with CareFusion.7 The Court therefore may
consider the Maintenance and Service Agreements when ruling on this motion.
There are two Agreements, both Signed by representatives of CareFusion.
One is signed by Ward as owner of Computers RX Ltd., and the other is signed by
Tressa as owner/operator of Raymond Electronic Services. Two clauses that appear
in both Agreements are relevant to the resolution of this motion.
Section 23 of both Agreements is titled “Compliance with Laws” and states:
“The Parties shall comply with all laws and regulations applicable to their respective
performance of this Agreement.” Section 44 of both Agreements is titled
4 Spence, 396 A.2d at 968.
5 See Furman v. DelaWare Dept. ofTransp., 30 A.3d 771, 774 (Del. 2011).
6 Id.
7 Compl. 11 4.
“Governing Law” and states: “This Agreement shall be governed by and construed
in accordance with the laws of the State of California, without regard to that state’s
conflicts of law principles.”
Plaintiffs do not allege that they performed any work in California. Plaintiffs
instead rely entirely on the Agreements’ choice-of-law provision for the inclusion of
California causes of action in the Complaint Whether the two clauses of the
Agreements enable Plaintiffs to allege a valid claim under the California Labor Code
requires an examination of the California courts’ interpretation of the Code’s
extraterritorial application.
California courts presume that the state’s statutes do not apply to occurrences
outside of California.8 This presumption against extraterritoriality can be rebutted
when the “language . . . purpose, subject matter or history” of the statute in question
clearly expresses or allows for a reasonable inference that the legislature intended
for the statute to apply beyond the state’s borders.9
Plaintiffs argue that the presence of a choice-of-law agreement creates the
opposite presumption; that is, a law will apply extraterritorially unless it states
otherwise. The basis of their argument is Gravquick A/S v. Trimble Navigation
International Limited.lo The Gravquick court held that “[i]f a state law does not
8 Sullivan v. Oracle Corp., 254 P.3d 237, 238 (Cal. 2011).
9 Ia'.
1° 323 F.3d 1219 (9th Cir. 2003).
have limitations on its geographical scope, courts will apply it to a contract governed
by that state’s law, even if parts of the contract are performed outside of the state.”11
However, later cases analyzing vaquz``ck clarified that when a choice-of-law clause
imports California law, it necessarily brings California’s presumption against
extraterritorial application along with it.12 This means that California’s presumption
against extraterritoriality is the sort of limitation on geographical scope
contemplated by Gravquick.l3
The proper question, therefore, is whether the language or legislative history
of the subsections of the Labor Code on which Plaintiffs rely_Sections 510, 1194,
1198, and 2802_establish the legislative intent for the act to apply outside of
California. In answering this question, Gravquz'ck is not dispositive That court
analyzed the California Equipment Dealers Act, a subsection of the California
Business & Professions Code, not the California Labor Code.14 Other cases more
directly address the subsections of the California Labor Code on which Plaintiffs
rely.
In O ’Connor v. Uber Technologz``es, lnc., the court concluded that Labor Code
Section 2802 did not apply extraterritorially because it found no legislative intent to
ll Ia’. at 1223.
12 O’Connor v. Uber Technologies, Inc., 58 F. Supp. 3d 989, 1006 CN.D. Cal. 2014).
13 Id. at 1005 (“While Gravquick makes clear one such circumstance is where the legislation
contains an explicit limitation, there is no logical reason to reach a different result where that
limitation is implicit . . . .”).
14 Gravquick, 323 F.3d at 1223.
the contrary.15 The O ’Connor court reasoned, in part, that “[w]here it so desired, the
California legislature provided for extraterritorial applications; the California
legislature did not so provide with respect to Section . . . 2802.”'6
lt appears that there is no common law specifically analyzing California Labor
Code Sections 510, 1194, and 1198, which define and create a civil cause of action
on the basis of a failure to pay overtime or minimum wage. The language of these
statutes does not Suggest that these sections should apply outside of California. This
finding is in accord with Cotter v. Lyft, Irzc.17 In Cotter, the court reached the
conclusion that “California wage and hour law” in general does not apply outside of
California and that “[p]arties cannot, by contract, extend its reach.”18
When considering related statutes, California courts have demonstrated an
intent to narrowly apply its wage laws, limiting who qualifies as “a wage earner of
California” to a person who “resides in California, receives pay in California, and
works exclusively, or principally, in Califomia.”19 No part of the Labor Code and
no case interpreting the Labor Code suggests that the law should apply
15 O’Connor, 58 F. Supp. 3d at 1006.
16 la'. at 1006.
17 60 F. Supp. 3d 1059 (N.D. Cal. 2014).
18 Id. at 1065.
19 Tidewater Marl``ne Western, Inc. v. Bradshaw, 927 P.2d 296, 309 (Cal. 1996). In Tl``a'ewater, the
California Supreme Court “intended to caution against overly broad conclusions about the
extraterritorial application of employment laws.” Sullivcm v. Oracle Corp., 254 P.2d 237, 242
(Cal. 2011) (internal citations omitted).
extraterritorially on the sole basis of a choice-of-law clause.20
Therefore, the Motion to Dismiss must be granted, because “[a]n employee
cannot create by contract a cause of action that California law does not provide.”21
The choice-of-law clauses would govern claims “that arise from the agreement
itself;” they cannot create “claims that exist independent of the contract.”22
However, the Court is granting the Motion to Dismiss without prejudice and
granting Plaintiffs leave to amend the complaint. Though the contract is insufficient
to create a cause of action under California law, it would not be futile for the
Plaintiffs to amend the complaint to assert contract claims23 or claims based on labor
laws in states in which Plaintiffs performed services. Additionally, under Superior
Court Civil Rule 15(a), “[a] party may amend the party’s pleading once as a matter
of course at any time before a responsive pleading is served . . . .”24 CareFusion has
filed a Motion to Dismiss, but not an answer or any other responsive pleading. “[A]
motion to dismiss is not a responsive pleading that would require [Plaintiffs] to seek
20 See Sarviss v. General Dynamics Informatl``on Technology, Inc., 663 F. Supp. 2d 883, 900 (C.D.
Cal. 2009) (“Although the cases discussing the extraterritorial application of California’s wage
and hour law are sparse, those decisions that do discuss it have tended to find that California wage
and hour provisions do not apply to non-resident Californians who work primarily outside of
California.”).
21 Cotter, 60 F. Supp. 3d at 1064.
22 Id
23 CareFusion hints at an argument that the Plaintiffs are not parties to the contract The Court
declines to rule on a standing issue at this time.
24 Super. Ct. Civ. R. 15(a).
leave of the Court to file an amended Complaint.”25 Plaintiffs therefore are entitled
to amend their Complaint as a matter of course.
Finally, the Court will not address CareFusion’s Commerce Clause
Argument. CareFusion waived this argument by raising it for the first time in its
reply brief.26
CONCLUSION
Plaintiffs allege causes of action based on provisions of the California Labor
Code. A choice-of-law clause alone is insufficient to permit Plaintiffs a cause of
action under the California Labor code. Plaintiffs’ Complaint is hereby
DISMISSED WITHOUT PREJUDICE.
Plaintiffs may amend their Complaint without filrther order of the Court.
IT IS SO ORDERED.
The%)fioraM\/laly M. Johnston
25 Stoppel v. Henry, 2011 WL 55911, at *3 (Del. Super.).
26 Zutrau v. Jansing, 2013 WL 1092817, at *6 (Del. Ch.) (“‘The failure to raise a legal issue in an
opening brief generally constitutes a waiver of the ability to raise that issue in connection with a
matter under submission to the court. ”’) (quoting Thor Merritl‘ Square, LLC v. Bayview Malls LLC,
2010 WL 972776, at *5 (Del. Ch.)).