Opinion
22-cv-264-MMA (DDL)
07-23-2024
KYLE WALKER, Plaintiff, v. HOWMEDICA OSTEONICS CORP., et al., Defendants.
ORDER AFFIRMING TENTATIVE RULINGS AND DENYING DEFENDANTS' MOTION FOR SANCTIONS [Doc. No. 97]
HON. MICHAEL M. ANELLO UNITED STATES DISTRICT JUDGE
On June 24, 2024, Plaintiff Kyle Walker and Defendants Howmedica Osteonics Corp. (“Howmedica”) and Stryker Employment Company, LLC (“Stryker” and collectively with Howmedica, “Defendants”) appeared before the Court for a hearing on Defendants' motion for sanctions. In anticipation of the hearing, the Court issued tentative rulings on Defendants' motion. Doc. No. 126. For the reasons set forth in the tentative rulings, based upon the arguments of counsel at the hearing, and for the reasons set forth below, the Court AFFIRMS its tentative rulings and DENIES Defendants' motion for sanctions.
Unless otherwise noted, these are the undisputed facts derived from the Court's Summary Judgment Order. See Doc. No. 72. As this section is intended to provide background information only, additional relevant facts will be discussed below.
“This is a breach of contract case.” Doc. No. 136 (“June Tr.”) at 14:16. More specifically, this employment case involves the parties' dispute over whether Plaintiff was properly paid commissions. A detailed recitation of the facts can be found in the Court's Summary Judgment Order, Doc. No. 72, which the Court incorporates by reference here. For the purpose of providing background information, only the following summary is necessary.
Unless otherwise noted, all citations to electronically filed materials refer to the pagination assigned by the CM/ECF system.
On March 3, 2014, Plaintiff began working for Howmedica as a Sales Associate. Howmedica “later became Stryker.” On October 1, 2015, Plaintiff was promoted to Sales Representative, selling implants to surgeons and hospitals in the Palms Springs area.
At all times during his employment, Plaintiff was an at-will employee. Upon hire, Plaintiff acknowledged receipt of the Stryker Orthopaedics Employee Handbook (the “Handbook”). Pursuant to the Handbook, Defendants reserved the right to alter, modify, change, or terminate the terms and conditions of employment at its sole discretion, with or without notice to employees.
From January 1, 2017 through December 31, 2017, Plaintiff received an annual base salary and monthly sales commissions based on his individual sales of implants. In early 2017, Jerimiah Wurzbacher became Plaintiff's manager.
On January 1, 2018, Defendants began redistributing the commissions of Plaintiff and other sales representatives under a “team-based” approach (the “Allocation Sales Plan”). Under the Allocation Sales Plan, Plaintiff did not receive commissions as a percentage of his individual net sales, but as a percentage of the team sales in his territory. These percentages were allocated to him by his manager, Wurzbacher. Undisputedly, Plaintiff was paid a percentage of the net sales for his team beginning in 2018 under the Allocation Sales Plan.
The Court adopts Defendants' shorthand reference to the 2018 modification and therefore refers to the team-based commissions plan that took effect on January 1, 2018 as the “Allocation Sales Plan.” For ease of reference, the Court refers to the pre-2018 commissions plan, which was based individual sales, as the “Individual Sales Plan.”
Plaintiff sent his notice of resignation on May 24, 2021. Plaintiff's last day of work was June 4, 2021.
II. PROCEDURAL BACKGROUND
On January 25, 2022, Plaintiff filed a complaint against Stryker and Stryker Corporation in the Superior Court for the State of California, County of San Diego. See Cal. St. Case No. 37-2022-00003066-CU-OE-CTL. Doc. No. 1-2. In his state court complaint, Plaintiff alleged (5) five state law claims, including breach of contract, unfair business practices, and violations of various California Labor Code statutes. Id. On February 25, 2022, Stryker and Stryker Corporation removed the action to federal court based upon the Court's diversity jurisdiction, 28 U.S.C. § 1332. Doc. No. 1. On that same date, Stryker and Stryker Corporation filed an Answer. Doc. No. 4.
On April 28, 2022, the parties filed a joint motion seeking leave for Plaintiff to amend his complaint. Doc. No. 21. According to the joint motion, the parties agreed that Howmedica should be added as a defendant and that Stryker Corporation should be removed. Id. The Court granted the joint motion, see Doc. No. 22, and on May 4, 2022, Plaintiff filed the First Amended Complaint, see Doc. No. 23 (“FAC”).
By way of the First Amended Complaint, which is the operative pleading, Plaintiff asserts the following: (1) failure to pay commission wages in violation of California Labor Code § 200 et seq.; (2) breach of contract; (3) failure to pay wages at time of termination in violation of California Labor Code § 201 et seq.; (4) failure to provide accurate wage statements in violation of California Labor Code § 226 et seq.; and (5) unfair business practices in violation of California Business & Professions Code § 17200. See id. He brings all five of these claims against both Defendants. Id. On June 3, 2022, Defendants filed an Answer. Doc. No. 26.
On December 15, 2022, Defendants filed a motion for summary judgment, seeking judgment in their favor on all of Plaintiff's claims. Doc. No. 59. The Court largely denied Defendants' motion in June 2023. Doc. No. 72 (the “Summary Judgment Order”). Thereafter, the Court issued a trial scheduling order, setting a final pretrial conference for February 12, 2024, and for trial to begin on March 12, 2024. Doc. No. 76.
The parties appeared before Magistrate Judge David D. Leshner for a mandatory settlement conference on October 13, 2023 (the “MSC”). Doc. No. 79. The parties did not settle at the MSC, and on December 14, 2024, Judge Leshner held a status conference. Doc. No. 83.
The following day, on December 15, 2023, the parties filed a joint motion to amend the Court's trial scheduling order. Doc. No. 84. According to the joint motion, the parties “fundamental[ly] disagree[d] on the nature of Plaintiff's theory of the case” following the Court's Summary Judgment Order. Id. at 3. The parties further indicated that they “agree that motion practice could help resolve this disagreement.” Id. The Court granted the joint motion and vacated the trial scheduling order. Doc. No. 85. Judge Leshner further set the case for another status conference on January 17, 2024. Id.; Doc. No. 88.
According to the parties' joint status report filed in advance of that conference:
[T]he Parties have a fundamental disagreement on the nature of Plaintiff's theory of the case. Defendants maintain that Judge Anello's summary judgment ruling and/or the allegations pled in the operative Complaint foreclose Plaintiff from pursuing a claim at trial based on the theory that Stryker breached or otherwise violated his terms of employment when it failed to assign him a team sales allocation that did not align with his territory sales. Plaintiff disagrees. The Parties do agree that motion practice will help resolve this disagreement and significantly clarify the theories and claims at issue before the Parties incur substantial costs in conducting additional discovery and preparing for trial.
3. The Parties agree that discovery is premature at this time and should remain stayed pending the outcome of law and motion practice. After a ruling on Defendants' motion, the Parties propose further meeting and conferring
within two weeks of the ruling to determine the discovery that is needed and the proposed timeline therefor. The Parties propose that they thereafter file a Joint Status Report setting forth pretrial dates.Doc. No. 86 at 2.
On January 26, 2024, Judge Leshner issued an amended scheduling order, permitting additional limited discovery and resetting the trial date and related deadlines. Doc. No. 89. Namely, the reopened discovery was set to close with an additional expert deposition deadline of May 10, 2024, and trial was reset to begin on August 6, 2024. Id.
On March 26, 2024, the parties filed a joint motion seeking to extend the discovery deadlines by thirty (30) days, representing that the extensions “would have no effect on the current Trial and Trial Readiness deadlines.” Doc. No. 91 at 2. Judge Leshner granted the motion and extended the discovery deadlines accordingly. Doc. No. 94. Per that amended scheduling order, discovery was reset to close with expert depositions by May 27, 2024. Id.
On April 2, 2024, Defendants filed a motion to compel Plaintiff to sit for three (3) more hours of deposition. Doc. No. 95. Plaintiff opposed that motion. Doc. No. 96.
On April 12, 2024, Defendants filed the instant motion for sanctions, seeking, among other things, dismissal of or judgment on Plaintiff's claims. Doc. No. 97. Three days later, the parties filed a joint motion seeking to extend the discovery deadlines and continue the trial dates and deadlines by sixty (60) days. Doc. No. 98.
Based upon the motion for case-ending sanctions, and the representation that the parties were not on track to finish the additional discovery in a timely manner, the Court vacated the trial schedule. Doc. No. 99. Judge Leshner also denied the parties' request for an extension of the discovery deadlines. Id.
Since then, the parties have requested numerous extensions and raised various discovery disputes, both by way of and outside of motion practice. See Doc. Nos. 10002, 105-10, 114, 118, 121-25, 127, 130-31. As of the June 24 hearing, discovery was still incomplete. Based on the current schedule, discovery was set to be complete on July 17, 2024, see Doc. No. 125, and there is at least one discovery motion still pending, see Doc. No. 123.
Further, at the June 24 hearing, Defendants represented that they wished to file another summary judgment motion, June Tr. at 50:23-51:8, and they have since obtained a September 10, 2024 deadline to do so, Doc. No. 131. Plaintiff also represented at the June 24 hearing that “there could be” more discovery motions. June Tr. at 43:14-21.
Therefore, as of the date of this Order, this case is still in discovery and not scheduled for trial, more than one year after summary judgment.
III. LEGAL STANDARDS
A. Rule 11 Sanctions
Federal Rule of Civil Procedure 11 sets forth the responsibilities and duties imposed on filers when “presenting to the court a pleading, written motion, or other paper,” Fed.R.Civ.P. 11(b), and the procedure for imposing sanctions when those duties are not met, Fed.R.Civ.P. 11(c). “The central purpose of Rule 11 is to deter baseless filings.” Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 393 (1990), partially superseded on other grounds by 1993 amendment to Fed.R.Civ.P. 11. Purposes of Rule 11 “sanctions include to deter dilatory or abusive pretrial tactics, to avoid delay and unnecessary expense, and to streamline litigation.” Altmann v. Homestead Mortg. Income Fund, 887 F.Supp.2d 939, 955 (E.D. Cal. 2012) (citing Golden Eagle Distributing Corp. v. Burroughs Corp., 801 F.2d 1531, 1536 (9th Cir. 1986)). “[S]anctions must be imposed on the signer of a paper if either (a) the paper is filed for an improper purpose, or (b) the paper is ‘frivolous.'” Townsend v. Holman Consulting Corp., 929 F.2d 1358, 1362 (9th Cir. 1990). In the context of Rule 11, “[f]rivolous” means “a filing that is both baseless and made without a reasonable and competent inquiry.” Id. at 1358.
Unless otherwise noted, all “Rule” references are to the Federal Rules of Civil Procedure.
Rule 11 “impose[s] on any party who signs a pleading, motion, or other paper . . . an affirmative duty to conduct a reasonable inquiry into the facts and the law before filing, and that the applicable standard is one of reasonableness under the circumstances.” Business Guides, Inc. v. Chromatic Communications Enterprises, Inc., 498 U.S. 533, 551 (1991). Rule 11 thus “creates an objective standard of reasonableness under the circumstances.” Golden Eagle, 801 F.2d at 1536. The Ninth Circuit has articulated the objective reasonableness standard: “As we have observed, the subjective intent of the pleader or movant to file a meritorious document is of no moment. The standard is reasonableness. The ‘reasonable man' against which conduct is tested is a competent attorney admitted to practice before the district.” Zaldivar v. City of Los Angeles, 780 F.2d 823, 830 (9th Cir. 1986), abrogated on other grounds by Cooter, 496 U.S. at 399400. “If, judged by an objective standard, a reasonable basis for the position exists in both law and fact at the time that the position is adopted, then sanctions should not be imposed.” Golden Eagle, 801 F.2d at 1538.
The Ninth Circuit has further explained:
Sanctions should be imposed if (1) after reasonable inquiry, a competent attorney could not form a reasonable belief that the pleading is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification or reversal of existing law or if (2) a pleading has been interposed for any improper purpose.Golden Eagle, 801 F.2d at 1537 (internal quotations omitted).
Imposing sanctions under Rule 11 “is an extraordinary remedy, one to be exercised with extreme caution.” Operating Eng'rs Pension Tr. v. A-C-Co., 859 F.2d 1336, 1345 (9th Cir. 1988). The party seeking sanctions has the burden of demonstrating that sanctions are justified. Tom Growney Equip., Inc. v. Shelley Irrigation Dev., Inc., 834 F.2d 833, 837 (9th Cir. 1987). Courts have “significant discretion to determine what sanctions, if any, should be imposed, subject to the principle that sanctions should not be more severe than reasonably necessary to deter repetition of the conduct.” See Advisory Committees Notes to the 1993 Amendment to Fed.R.Civ.P. 11; see also Miller v. Cardinale (In re DeVille), 361 F.3d 539, 553 (9th Cir. 2004) (quoting Fed.R.Civ.P. 11).
B. Inherent Authority Sanctions
In addition to Rule 11, district courts have the inherent authority to impose sanctions “when a party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons, delaying or disrupting litigation, or has taken actions in the litigation for an improper purpose.” Fink v. Gomez, 239 F.3d 989, 992 (9th Cir. 2001) (citing Chambers v. NASCO, Inc., 501 U.S. 32, 45-46 (1991)); see also Am. Unites for Kids v. Rousseau, 985 F.3d 1075, 1090 (9th Cir. 2021). Under the Court's inherent authority, “[s]anctions are available for a variety of types of willful actions, including recklessness when combined with an additional factor such as frivolousness, harassment, or an improper purpose.” Id. at 994. The decision of a district court to impose inherent authority sanctions is discretionary. See Air Separation Inc. v.Underwriters at Lloyd's of London, 45 F.3d 288, 291 (9th Cir. 1995).
IV. EVIDENTIARY OBJECTIONS
As a preliminary matter, both parties have filed objections to the other's evidence. Doc. Nos. 103-6, 111-3. Many courts have observed that the Federal Rules of Evidence do not apply to motions for sanctions; the evidence relied upon need only “bear indicia of reliability.” Sentis Grp., Inc. v. Shell Oil Co., 559 F.3d 888, 901 (8th Cir. 2009) (holding that, “[w]hile the Federal Rules of Evidence do not necessarily apply in the context of a motion for sanctions, evidence relied upon must, at a minimum, bear indicia of reliability”); Jensen v. Phillips Screw Co., 546 F.3d 59, 66 n.5 (1st Cir. 2008) (“We do not suggest that the rules of evidence necessarily apply to factfinding in the context of sanctions. That is not the case.”); see also Deerpoint Grp., Inc. v. Agrigenix, Ltd. Liab. Co., No. 1:18-cv-00536-AWI-BAM, 2022 U.S. Dist. LEXIS 197646, at *31 (E.D. Cal. Oct. 31, 2022); Juul Labs, Inc. v. Chou, No. 2:21-cv-03056-DSF-PDx, 2022 U.S. Dist. LEXIS 109075, at *15 (C.D. Cal. May 6, 2022); AtPac, Inc. v. Aptitude Sols., Inc., 2011 U.S. Dist. LEXIS 40043, at *1 (E.D. Cal. Apr. 12, 2011). Although these cases are not binding, the Court finds them highly persuasive, especially on the present facts and in the absence of Ninth Circuit authority on this issue. Here, the challenged evidence is two attorneys' declarations and three exhibits to their declarations. Neither party argues these sources are unreliable but rather the parties primarily argue the import, credibility, and relevance of the evidence. Evidentiary objections are not the appropriate vehicle to argue the facts, especially where, as here, there is no trial, no evidentiary hearing, and the evidence is before the Court on a motion for sanctions. Further, the Court finds that this evidence bears sufficient indicia of reliability to be considered, where relevant, for the purpose of resolving the present motion. Accordingly, the Court OVERRULES the parties' objections.
V. DISCUSSION
Turning now to the merits of Defendants' motion. At its core, this motion concerns Plaintiff's theory of his case, and the timing of his knowledge of the Allocation Sales Plan.
According to Defendants, Plaintiff's opposition papers to Defendants' motion for summary judgment (“MSJ”), including Plaintiff's declaration, contain false factual averments and were filed for an improper purpose. Doc. No. 97 at 14-16. On this basis, Defendants seek sanctions for violation of Rule 11(b)(1) and (b)(3). Id. at 20-22. Additionally, Defendants ask the Court to issue inherent authority sanctions, contending that Plaintiff's opposition papers were filed in bad faith and that Plaintiff's pursuit of an unpleaded and dismissed theory since summary judgment is tantamount to bad faith. Id. at 23-25.
Defendants seek case-ending sanctions. See id. Namely, Defendants ask for an order striking the assertedly false information in Plaintiff's MSJ opposition papers, entering summary judgment for Defendants, and dismissing all of Plaintiff's claims. Id. at 2-3. In the alternative, Defendants seek evidentiary sanctions and jury instructions to wit that Plaintiff received timely notice of the Allocation Sales Plan and submitted a false declaration at summary judgment and that Defendants' commissions allocations were not arbitrary or unfair. Id. Defendants also seek $174,925.20 in attorneys' fees incurred since they filed their reply in support of their MSJ. Id. at 3.
This case presents a close call, but ultimately, for the reasons stated in the tentative rulings, at the June 24 hearing, and as set forth below, the Court finds that the record is insufficient to warrant the discretionary exercise of sanctions under either Rule 11 or the Court's inherent authority.
A. Rule 11 Sanctions
As an initial matter, Defendants' request for Rule 11 sanctions is properly before the Court. Rule 11 provides a safe harbor, such that any motion for sanctions must be served on the offending party at least 21 days before the motion is filed with the court. Fed.R.Civ.P. 11(c)(2). The safe harbor provision further dictates that the motion may not be filed if the offending party timely “withdraw[s] or appropriately correct[s]” the challenged contention during the safe harbor period. Id.; Islamic Shura Council of S. Cal. v. FBI, 757 F.3d 870, 872-73 (9th Cir. 2014).
Here, Defendants' attorney, Ms. Michele Beilke, served Plaintiff's counsel, Mr. Noam Glick and Ms. Vanessa Ruggles, with the motion on March 21, 2024. Doc. No. 97-1 (“Beilke Decl.”) ¶ 12. Plaintiff's summary judgment opposition was not withdrawn or otherwise amended. Defendants filed their motion twenty-two (22) days later, on April 12, 2024. Doc. No. 97. Accordingly, the Court has the authority to consider the merits of Defendants' motion.
Rule 11 places various duties and obligations on attorneys who, relevant here, file papers with the Court. Fed.R.Civ.P. 11(a). Plaintiff is represented by Mr. Glick and Ms. Ruggles. Defendants' Rule 11 motion challenges Plaintiff's MSJ opposition papers, which were signed and filed by Ms. Ruggles. Doc. No. 62 at 31. And Ms. Ruggles submitted a declaration in support of the MSJ opposition, laying the foundation for much of Plaintiff's opposition evidence. Doc. No. 62-2. And yet, Ms. Ruggles did not personally respond to the Rule 11 motion. She did not sign or file the response, Mr. Glick did. See Doc. No. 103. She did not submit a declaration in opposition to Defendants' motion, asserting that she violated Rule 11, Mr. Glick did. Doc. No. 103-1. And she did not appear at the June 24 hearing, Mr. Glick did. Doc. No. 128.
Nevertheless, the Court moves on to the merits, and it is necessary to begin with a brief overview of the allegations in the pleadings and the evidence and arguments raised at summary judgment.
Plaintiff pleaded that his written commissions plan, the Individual Sales Plan, entitled him to 6/14 commissions on his individual sales. FAC ¶¶ 4, 5, 13, 14, 16, 17, 22, 24, 28, 29, 30, 31. He alleged that in January 2018, Wurzbacher began arbitrarily and unilaterally shorting his commissions to the tune of $1.2 million in breach of the Individual Sales Plan. See, e.g., id. ¶¶ 5, 17-18. All five (5) of Plaintiff's claims, at least in part, rely on these core allegations. See, e.g., id. ¶¶ 25, 31, 37, 43, 51.
At summary judgment, Defendants came forward with evidence of the Allocation Sales Plan; effective January 1, 2018, Stryker modified the commissions plan applicable to employees such as Plaintiff to a team-based approach, Doc. No. 59-5 at 179-184.
Faced with this evidence, Plaintiff argued, among other things, that there is a triable issue of fact as to when he received notice of the Allocation Sales Plan Plaintiff contended he was not given notice of the change in his commission structure. See, e.g., Doc. No. 62 at 10-11, 21-23. This argument was successful because, as the Court explained at summary judgment, under California law an employer may change the terms of an at-will employee's contract provided the employee receives “reasonable notice of the change” and accepts the new terms by, for example, continued employment. Asmus v. Pac. Bell, 999 P.2d 71, 76 (Cal. 2000). Accordingly, as the case stood after summary judgment there was, as relevant here, one triable factual issue remaining: whether Plaintiff received “reasonable notice” of the Allocation Sales Plan.
There are also outstanding issues regarding Claim 3 to the extent it is based on Plaintiff's COVID pay and Claim 5 to the extent it is based on an asserted violation of California Labor Code § 2751. Doc. No. 72 at 20, 23. But these issues are not relevant to the pending motion and arguments.
Sometime in or around (but at least by) October 2023, Plaintiff identified his theory for trial and discord ensued. In November 2023, Plaintiff served supplemental disclosures identifying fourteen (14) new witnesses relevant to his theory. Beilke Decl. Ex. 8; see also Beilke Decl. ¶ 8; June Tr. at 9:20-23. In early January 2024, parties agreed to reopen discovery related to this theory, despite never pursuing the promised motion practice they represented was necessary to resolve their “fundamental disagreement” over its viability. Doc. No. 84 at 3. And since then, the parties have filed at least four requests to extend the discovery deadlines, Doc. Nos. 91, 98, 102, 104, not to mention the extensions requested by email, see Doc. Nos. 101, 104, and have spent some seven (7) months pursuing additional discovery, including motion practice expand the scope of the previously agreed-upon limited discovery, Doc. Nos. 95, 123.
In the midst of this chaos, Defendants filed the instant motion for sanctions. According to Defendants, Plaintiff and counsel have now admitted Plaintiff received timely notice of the Allocation Sales Plan.
1. Challenged Filings
Defendants challenge Ms. Ruggles' filing of the MSJ opposition papers, and specifically identify arguments contained in the opposition brief and statements in Plaintiff's declaration as violative of Rule 11:
Defendants also challenge Plaintiff's deposition testimony. Doc. No. 97 at 21. But Ms. Ruggles did not submit the challenged portion of the deposition in support of Plaintiff's MSJ opposition papers. So it is not within the scope of the present Rule 11 motion.
Defendants identify the statements at “Dkt. #62 at 3-5,” which the Court finds reasonably translates to Plaintiff's MSJ opposition brief at CM/ECF pages 9-11. See also Doc. No. 97 at 15.
• “Wurzbacher did not communicate to Mr. Walker that he would no longer be paid the commissions to which he had previously agreed or seek his agreement to this change in his compensation.” Doc. No. 62 at 10.
• “Mr. Walker did not agree to any revised compensation plan. In fact, Mr. Walker never knew when his compensation plan had been changed until after the fact.” Id. at 11 (internal citation omitted).
Plaintiff's Declaration
• “When Wurzbacher changed my compensation plan in 2018, he gave me no notice. I did not agree to the revised compensation plan. In fact, I did not know my compensation plan had been changed.” Doc. No. 62-3 (“Pl. MSJ Decl.”) ¶ 3.
• “Defendant never notified me or obtained my assent to a change in my compensation plan from 2018 until I approved the slight change in June of 2020. . . . .” Id. ¶ 4.
2. Defendants' Motion for Sanctions Evidence
As noted, the impetus for Defendants' motion is their position that Plaintiff and counsel have now admitted Plaintiff received timely notice of the Allocation Sales Plan. In support, Defendants put forth two pieces of evidence: an email exchange and Ms. Beilke's declaration.
On November 13, 2023, Ms. Beilke emailed Mr. Glick stating, among other things: “I am confused. Are you back to Walker never knew about the change?” Beilke Decl. at Ex. 7. Mr. Glick responded on November 14:
I don't know what to say about your confusion about our case. It's laid out in our last MSC statement. But I'll reiterate it here for your benefit.
Mr. Walker knew things had shifted to a percentage approach, but understood (based on what he was told) that the percentages were to be based on actual sales not some gestalt list of arbitrary factors that Jeremiah used to reward his friends at the expense of high performers including Kyle.
I have personally spoken to multiple former employees who will testify consistently with this understanding. And the purported agreement that Mr. Walker never signed was sent to him and others (including Mr. Smith) in 2020 -consistent with Mr. Walker's testimony that you wrongly claimed was perjurious. Id.
Ms. Beilke also states the following in her declaration:
On December 5, 2023, I engaged in a telephonic meet and confer with Mr. Glick, regarding the relevance of the supplemental disclosures. During the meet and confer, I specifically asked Mr. Glick if Plaintiff now was admitting that he received timely notice of the Allocation Sales Plan effective January 1, 2018, and Mr. Glick responded in the affirmative, confirming that Plaintiff had indeed received timely notice of the Allocation Sales Plan. Mr. Glick also advised me that the newly identified witnesses would testify regarding their understanding of the Allocation Sales Plan and communications with Mr. Wurzbacher (and others) on how the percentage allocations would be determined. Specifically, Mr. Glick stated that the new witnesses would testify that Plaintiff had discussed his conversations with Mr. Wurzbacher regarding percentage allocations being based on actual individual sales. For example, Mr. Glick explained that Mike Shultz, a peer manager of Mr. Wurzbacher, would testify that the percentage allocations under the Allocation Sales Plan were to be based exclusively on actual sales. Mr. Glick also explained that newly identified Sales Reps similarly would testify regarding communications with Mr. Wurzbacher and others that the allocation percentages would be based entirely on individual actual sales.Beilke Decl. ¶ 9.
3. Opposition Evidence
Generally speaking, Mr. Glick argues in response that he and Plaintiff have not admitted timely notice. Doc. No. 103 at 11. In terms of relevant evidence, Mr. Glick states in his declaration:
Defendants' motion principally relies on an alleged conversation that defense counsel had with me during settlement negotiations. Defendants' counsel alleges that, in this conversation, I represented that “Plaintiff had indeed received timely notice of the Allocation Sales Plan.” I did not state this. I explained that Plaintiff understood his manager, Jeremiah Wurzbacher, had adopted a percentage method whereby each team member's commissions went into the team “pot” and then were reallocated back to each team member based on their respective percentage of the “pot.” I further explained that Plaintiff understood (because Wurzbacher told him) that his percentage allocation was based on actual sales (the only relevant metric for a sales job).
As such, Plaintiff would still receive the same amount (6 percent on year-over-year sales, and 14 percent on new growth). I explained that nobody at Stryker ever informed Plaintiff that Wurzbacher had unfettered discretion to reallocate his commissions to other team members as he saw fit. I further explained that Plaintiff would never have remained employed at Stryker had he known Wurzbacher (with whom he had a difficult relationship) had such discretion.Doc. No. 103-1 (“Glick Decl.”) ¶ 3 (emphasis in original).
4. Analysis
It is significant to the Court that the challenged filings here are MSJ opposition papers. The Ninth Circuit has spoken persuasively on the issue of Rule 11 sanctions in this context. In Stitt v. Williams, the Ninth Circuit expressly considered application of Rule 11 to the filing of pleadings as opposed to summary judgment opposition papers. 919 F.2d 516 (9th Cir. 1990). Reversing the district court's award of Rule 11 sanctions, the Ninth Circuit explained:
There is, however, a more important reason to reverse the sanctions in this case. In considering counsel's conduct, we must bear in mind that, at the summary judgment stage of the proceedings, counsel may have legitimate cause for concern that he will be subject to sanctions or discipline if he fails or refuses to oppose a summary judgment motion. In the particular case before us, from the clients' standpoint a great deal was at stake in this litigation -financially and otherwise. The clients had spent much time and considerable resources in their effort to vindicate their position. They had the right to expect their counsel to assert their position vigorously and not simply to surrender their claims by consenting to judgment in favor of their opponents. Here, as the court acknowledged, the filing of the [ ] claims was not unreasonable. Given that fact, a lawyer should not be sanctioned for failing to abandon his client's case at the drop of a summary judgment motion, unless there is no colorable defense to the motion that can be advocated and no possible merit to any argument that can be advanced.Id. at 528.
The Ninth Circuit went on to explain that for Rule 11 sanctions motions, “it is appropriate to evaluate such opposition papers under a different standard than we use for papers filed at the outset of the litigation.” Id. at 529.
We conclude that when a lawyer is justified in filing an opposition to a summary judgment motion, his contemporaneous failure to drop a portion of his claim does not warrant the imposition of Rule 11 sanctions. We hold that, in evaluating the opposition to a motion for summary judgment for purposes of Rule 11, the district court must consider the filing as a whole. Sanctions are not appropriate where, as here, counsel opposes a summary judgment motion and: (1) there is a non-frivolous basis for opposing the motion, and (2) the non-frivolous basis constitutes more than an incidental part of the opposition. Under these circumstances, the opposition as a whole is not frivolous.Id.
Here, the Court cannot say that the initial filing of Plaintiff's claims was unreasonable, and therefore Ms. Ruggles should not be sanctioned unless there was no colorable defense at summary judgment. Id. at 528. Looking at Plaintiff's summary judgment opposition papers as a whole, there appears to have been a non-frivolous basis to oppose the motion at the time: the argument that Plaintiff did not receive timely notice of the modification. Regardless of what is known or admitted now, as will be discussed below, there is no evidence in the record that Plaintiff was admitting timely notice by January 2023. And this non-frivolous position was not just an incidental part of the MSJ opposition, but rather it resulted in the denial of Defendants' MSJ at least in part as to all of Plaintiff's claims. Therefore, following the Ninth Circuit's discussion in Stitt, it does not appear to be appropriate to sanction Ms. Ruggles for filing the MSJ opposition papers. However, even turning to the specific Rule 11 provisions Defendants argue counsel violated, the Court is not convinced that the record supports sanctions.
a. False Factual Averments in Violation of Rule 11(b)(3)
First, Defendants argue that Plaintiff's opposition brief and declaration contain false factual averments in violation of Rule 11(b)(3). Doc. No. 97 at 20-21. Rule 11(b)(3) provides that an attorney, by presenting to the court in a pleading, written motion, or other paper, certifies to the best of his knowledge and belief formed after an inquiry reasonable under the circumstances, that “the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery.” Fed.R.Civ.P. 11(b)(3).
Defendants argue that the “no notice” factual contentions laid out above are false and have no evidentiary support. The Court agrees that Plaintiff's and counsel's position on Plaintiff's knowledge of the Allocation Sales Plan has been a moving target at best. But the record is not clear that an objectively reasonable inquiry in January 2023 would have uncovered what Defendants now contend is the truth.
Objectively speaking, the reasonable attorney would have inquired into his client's knowledge of the modification prior to opposing summary judgment, given that the primary basis for Defendants' MSJ was that Plaintiff received notice prior to the Allocation Sales Plan's effective date. But there is no evidence in the record that Plaintiff was admitting, or remembered he had received, timely notice by January 2023 such that the Court can say a reasonable inquiry into the matter would have uncovered that the “no notice” assertions were false. Rather, Defendants offer two pieces of evidence suggesting, at best, that Mr. Glick has since admitted Plaintiff received timely notice. It is an equally reasonable interpretation of events here that Plaintiff's position on his own notice has changed since summary judgment. Meaning that an objectively reasonable inquiry at summary judgment would have produced the same result.
In fact, it appears that this post-summary judgment change in strategy is truly what Defendants take issue with. But this conduct does not, on these facts and evidence, fall within the reach of Rule 11(b)(3). Rule 11 charges attorneys with undertaking an objectively reasonable pre-filing inquiry. Even accepting that Plaintiff and counsel are now admitting Plaintiff received prospective notice, there is no evidence or argument that Ms. Ruggles should have known in January 2023 that Plaintiff had received prospective notice of Allocation Sales Plan. Absent some evidence or argument tending to show that an objectively reasonable inquiry would have uncovered that these assertions were false prior to January 2023, the record does not support a finding that Ms. Ruggles violated Rule 11(b)(3) when she filed the MSJ opposition papers. Accordingly, to the extent Defendants seek sanctions under Rule 11(b)(3), the Court DENIES their motion.
b. Improper Purpose in Violation of Rule 11(b)(1)
Defendants next argue that Plaintiff's declaration was “patently false” and offered for the improper purpose of avoiding summary judgment. Doc. No. 997 at 21-22. Rule 11(b)(1) prohibits attorneys from presenting papers “for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation.” Fed.R.Civ.P. 11(b)(1).
For the reasons identified in Stitt, the Court finds as a general matter that filing opposition papers to avoid summary judgment can hardly be deemed an improper purpose and that the mere failure to abandon causes of action, without more, is not sanctionable. 919 F.2d at 528.
But more importantly, unless the Court can say that an objectively reasonable investigation would have revealed that Plaintiff was lying in his declaration, Ms. Ruggles' presentation of the declaration in opposition to summary judgment is not sanctionable. On this point, Defendants refer back to the Court's ruling at summary judgment that a portion of Plaintiff's declaration was a sham.
With respect to the Stryker Orthopaedics Oerview of Compensation Summary of Terms (the “Overview”) a written document that Defendants offered as setting forth the commissions methodology under the Allocation Sales Plan Plaintiff submitted a declaration in support of his MSJ opposition, stating: “I do not remember when exactly I received it, but I estimate that it was sometime during 2020.” Pl. MSJ Decl. ¶ 8. The Court sustained Defendants' objection to this statement pursuant to the sham affidavit rule. Doc. No. 72 at 10. Under Ninth Circuit precedent, “a district court may find a declaration to be a sham when it contains facts that the affiant previously testified he could not remember.” Yeager v. Bowlin, 693 F.3d 1076, 1080 (9th Cir. 2012). Although a harsh result, as the Court explained, Plaintiff did not explain the basis for his ability to estimate when he received the Overview. Id. at 9. And this was not a minor inconsistency but in clear contradiction to his previous testimony that he could not recall when he received it and that he was aware of no document that would refresh his recollection. Id. at 7-10. In light of the fact that when, if ever, Plaintiff received notice was the central issue that all of Plaintiff's claims, at least in part, hinged on, and with a failure by Plaintiff to offer any explanation for his newfound memory, the Court agreed this was a sham. Id.
However, as discussed above, Rule 11 calls for an objective examination of the reasonableness of the inquiry prior to filing. And here, there is simply no evidence that an objectively reasonable inquiry would have uncovered that this statement was a sham prior to its submission. For these reasons, the Court DENIES Defendants' motion to the extent they seek sanctions under Rule 11(b)(3).
c. Rule 11 Conclusion
In sum, Rule 11 requires that attorneys certify, at the time of signing, filing, or submitting, that the papers are, “to the best of the[ir] knowledge, information, and belief, formed after an inquiry reasonable under the circumstances.” Fed.R.Civ.P. 11(b). A change in position or strategy later in litigation does not automatically equate to a failure to make a reasonable inquiry at the time a paper is filed. And it is Plaintiff's apparent post-MSJ change in position that Defendants take exception to here.
Absent any evidence or argument bearing on what the reasonable inquiry would have produced in January 2023, the Court cannot say that Ms. Ruggles' inquiry into the truth of the contentions identified above was objectively unreasonable or that she filed the challenged papers for an improper purpose. Accordingly, the Court DENIES Defendants' motion for Rule 11 sanctions.
Relatedly, Plaintiff argues in opposition that Ms. Beilke should be sanctioned under Rule 11 for filing this motion for sanctions. An opposition brief is not the appropriate place to request Rule 11 sanctions because, at a minimum, the Ninth Circuit requires strict adherence to Rule 11's safe harbor provision. Radcliffe v. Rainbow Constr. Co., 254 F.3d 772, 789 (9th Cir. 2001). Plaintiff filed his opposition requesting Rule 11 sanctions less than twenty-one (21) days after Ms. Beilke filed Defendants' motion for sanctions the allegedly violative filing. So clearly Plaintiff did not serve Ms. Beilke with his request and wait the requisite twenty-one (21) days. Therefore, to the extent Plaintiff asks the Court to sanction Ms. Beilke for filing this motion for sanctions, the Court DENIES his request.
B. Inherent Authority Sanctions
Defendants also ask the Court to sanction Plaintiff and counsel under its inherent authority. Doc. No. 97 at 23. According to Defendants, Plaintiff's summary judgment opposition was filed in bad faith and Plaintiff's pursuit of an unpleaded and dismissed theory is tantamount to bad faith. Id. at 23-25.
Beginning with the former, for the same reasons above, the Court does not have a sufficient record to make a finding of bad faith during the summary judgment phase of this case. Instead, Defendants' evidence bears on Plaintiff's and counsel's post-summary judgment conduct. For this reason, the Court DENIES Defendants' motion for inherent authority sanctions based on Plaintiff's MSJ opposition.
As to the latter, Mr. Glick now proffers that the theory of Plaintiff's case is that he never agreed to a compensation plan whereby Wurzbacher had unfettered discretion to allocate the percentages. Doc. No. 103 at 19. At the June 24 hearing, Mr. Glick elaborated that because Plaintiff “never assented to unfettered discretion,” the Allocation Sales Plan “did not legally exist.” June Tr. at 19:16-17.
The Court is inclined to agree that Plaintiff's and counsel's post-summary judgment conduct has been problematic. And for the reasons discussed below, the Court agrees that Plaintiff's pursuit of this unpleaded and untenable theory after summary judgment has derailed this case. But bad faith is a “high threshold,” that requires a finding of willfulness or recklessness combined with something more. Primus Auto. Fin. Servs. v. Batarse, 115 F.3d 644, 649 (9th Cir. 1997); Fink, 239 F.3d at 994. And here, the Court finds that the record does not clearly support a finding of bad faith.
1. The Scope of the Pleadings
First, this theory is beyond the scope of this case on these pleadings. Plaintiff filed his First Amended Complaint on May 4, 2022. See FAC. Plaintiff did not submit a redlined version of his First Amended Complaint as is required under the Civil Local Rules. See CivLR 15.1.b. Nevertheless, a comparison of the original complaint and First Amended Complaint reveals that only one change was made, and it pertains to the identity of the Defendants: Howemedica was swapped in for Stryker Corp. Compare Doc. No. 1-2 with FAC. Thus, the factual allegations, theories of liability, and claims have remained the same since the inception of this case in January 2022.
According to Plaintiff's pleading of his case, he was entitled to a 6/14 commission structure based on his individual sales (the Individual Sales Plan). See, e.g., FAC ¶¶ 4, 5, 13, 14, 16, 17, 22, 24, 28, 29, 30, 31. But then, in January 2017, Plaintiff was assigned a new manager, Wurzbacher. Id. ¶ 14. Wurzbacher “refused to follow the established, written 6/14 commission structure” and instead “arbitrarily and unilaterally reallocated earned commissions across the team.” Id. Under “Wurzbacher's redistribution scheme,” Id. ¶ 15, salespersons were allocated a percentage of sales that Wurzbacher “unilaterally determined,” Id. ¶ 14. According to Plaintiff, he was underpaid over $1.2 million from 2018-2020. Id. ¶ 16.
It is true that Plaintiff gripes about Wurzbacher's arbitrary allocations and the allocation of commissions “across the team.” See id. ¶ 14. But the basis for Defendants' asserted liability as set forth in the pleadings is that these commissions and percentages did not comply with, and therefore breached, the Individual Sales Plan, which Plaintiff alleged was in place still to this day. Id. ¶ 13.
Plaintiff now wishes to recenter this case around what he was told about the Allocation Sales Plan including, for example, that he did not agree to its terms because he was not told about Wurzbacher's discretion. Doc. No. 103 at 19. And Plaintiff takes the position that this theory has always been part of this case and was adequately pleaded. Id. (“Plaintiff continues to assert, just as he did in the operative complaint, ....”); see also id. at 14-16. Then at the June 24 hearing, counsel argued in the alternative and for the first time, that Plaintiff need not plead any facts supporting this theory because it is Defendants' affirmative defense. June Tr. at 15:1-7; Id. at 16:24-17:3.
This is, by counsel's own admission, a breach of contract case. June Tr. at 14:16. The contract that was allegedly breached was the Individual Sales Plan, specifically, the provision calling for 6/14 commissions based on his individual sales. See, e.g., FAC ¶¶ 4, 5, 13, 14, 16, 17, 22, 24, 28, 29, 30, 31. Plaintiff's pleadings are devoid of any reference to the Overview or Allocation Sales Plan and in fact set forth that the Individual Sales Plan remains in effect to this day. Logically speaking, the Court agrees with Defendants that, absent amendment, Plaintiff cannot take issue with terms, which here would include Wurzbacher's “unfettered discretion,” of a commissions plan that is nonexistent in his pleadings in support of his commissions claims.
And the Court rejects the contention that this theory was always part of this case. Fact discovery closed in November 2022. After bringing his allegedly preexisting theory to light in October 2023, Plaintiff served supplemental disclosures a year later, in November 2023, identifying fourteen (14) new witnesses relevant to this theory. Beilke Decl. ¶ 8; see also June Tr. at 9:22-25. Further, Plaintiff then agreed to reopen discovery relevant to this theory. And this reopened discovery was not quick or incidental but has lasted nearly seven (7) months. These facts alone should end any debate.
Undeterred, at the June 24 hearing, counsel argued instead that Plaintiff need not plead any facts surrounding the Allocation Sales Plan because Defendants bear the burden of proving, as an affirmative defense, that the contract was amended. June Tr. 15:3-10. The case counsel cited in support, Barrett v. Bank of America, 183 Cal.App.3d 1362 (Cal.Ct.App. 1986), does not stand for the proposition argued. June Tr. at 15:1-7 (arguing that Barrett “states that it is the party seeking to amend the contract burden to prove that the amendment actually was operative”). And United States v. McGee, 993 F.2d 184 (9th Cir. 1993), merely stands for the general rule that a plaintiff need not plead around an anticipated affirmative defense.
In support of his breach of contract and derivative claims, it is Plaintiff's burden to plead and ultimately prove, among other things, that there was a valid contract. Plaintiff pleads the terms of the Individual Sales Plan. And as pleaded, his theory is that he was contractually entitled to 6/14 commissions on his individual sales under the Individual Sales Plan, not that he was told something different about the terms of the Allocation Sales Plan.
Based on Plaintiff's pleading, then, it is irrelevant to Defendants' alleged liability what Plaintiff received in commissions (i.e., the specific percentages) and how these commissions were determined (i.e., Wurzbacher's discretion). This is because if Plaintiff was entitled to 6/14 commissions, then any deviation would amount to a breach, regardless of what that deviation was and why.
Additionally, for Plaintiff to take issue with his notice of the terms of the Allocation Sales Plan, including, for example, what Wurzbacher told him about it, Plaintiff would at the very least need to plead its existence. For these reasons, the Court agrees with Defendants that Plaintiff's current theory is beyond the scope of the factual allegations and pleadings.
2. The Summary Judgment Order
Second, Plaintiff's theory appears incompatible with the arguments, evidence, and the Court's rulings at summary judgment.
Defendants moved for summary judgment on all of Plaintiff's claims. Denying summary judgment, the Court expressly stated the triable factual issues as follows:
Drawing all reasonable inferences in favor of Plaintiff as the nonmoving party as the Court must do the Court concludes there is a genuine issue of material fact as to whether Plaintiff received reasonable, prospective notice of the change to his compensation method. See Stegall, 350 F.3d at 1065. Additionally, whether Plaintiff's continued performance constituted assent to the change in his compensation methodology turns on when Plaintiff received notice of the change, if at all.Doc. No. 72 at 16 (Claim 2).
This precise ruling resulted in the denial of summary judgment, at least in part, on all of Plaintiff's claims. Id. at 18-19 (denying summary judgment as to Claim 1 “because the Court finds there are triable issues of fact bearing on whether Plaintiff is bound by this allocation change”); Id. at 19 (denying summary judgment as to Claim 3 “because the Court has denied summary judgment for Defendants on Plaintiff's unpaid commissions claim (Claim 1) and breach of contract claim (Claim 2)”); Id. at 21 (denying summary judgment as to Claim 4 “[t]o the extent Plaintiff's claim for failure to provide accurate wage statements is derivative of Claims 1, 2, and 3”); Id. at 22 (denying summary judgment on Claim 5 “[t]o the extent Plaintiff's UCL claim is based on Plaintiff's claims for failure to pay commission wages (Claim 1), Plaintiffs' failure to pay wages at time of termination claim (Claim 3), and violation of California Labor Code § 226 (Claim 4) . . . because the Court has denied summary judgment for Defendants on those claims”).
Thus, for counsel to say now that whether Plaintiff received the Overview is “neither here nor there,” June Tr. 26:22-25, is a gross misunderstanding of the issues identified for trial in the Summary Judgment Order. It is also wholly inconsistent with the argument, which the Court agreed warranted denying summary judgment, that “there are disputes of fact regarding whether and when Mr. Walker received the Overview on which Defendant relies.” Doc. No. 62 at 26.
Nevertheless, counsel argues that the legal validity of the Allocation Sales Plan does not turn on when Plaintiff received notice but what he was told about it. See, e.g., Doc. No. 103 at 5-6, 7-8. This is unsurprising, given that Defendants have seemingly located a copy of the Overview signed by Plaintiff in December 2017. June Tr. 31:1112; Id. at 44:22-23, 47:5-9; see also Doc. No. 135. But Plaintiff did not raise a triable issue of fact regarding the terms of the Allocation Sales Plan, either as stated in the Overview or what he was told, at summary judgment.
In moving for summary judgment on Plaintiff's breach of contract and derivative claims, Defendants came forward with evidence of Plaintiff's at-will employment status, timely notice of the Allocation Sales Plan by way of his receipt of the Overview, and continued employment. According to Defendants, the Allocation Sales Plan was therefore binding on Plaintiff. It was then Plaintiff's burden to identify a triable issue to overcome summary judgment. He argued: (1) that he received no notice of the Allocation Sales Plan; (2) that the Overview is not a contract; and (3) that his claims should survive based on the alternate theory that Wurzbacher's arbitrary setting of percentages was in breach of the duty of good faith and fair dealing. Doc. No. 62 at 2129. The Court addresses its rulings on these arguments in turn.
First, the Court found that Plaintiff raised a triable issue at summary judgment by offering evidence that he received no notice of the Allocation Sales Plan. At summary judgment, the Court found that based upon Plaintiff's at-will employment status, the terms of Plaintiff's Handbook, and under California law, Plaintiff was bound by the Allocation Sales Plan if and when he received “reasonable notice” of it. Doc. No. 72 at 13-16. Earlier in the Summary Judgment Order, the Court stated that whether Defendants provided Plaintiff with “reasonable notice” of the modification turns on the “timing and content of the purported notice” and “whether Plaintiff consented” by remaining employed with Defendants. Doc. No. 72 at 14. But Plaintiff offered no evidence raising a triable issue as to the content of the notice. For example, Plaintiff did not offer evidence or argument bearing on whether the Overview sufficiently set forth the terms of the Allocation Sales Plan. He also did not offer evidence tending to show he did not assent to the modification because he was not told about Wurzbacher's discretion or that Wurzbacher told him something different than what was in the Overview.
Rather, the only evidence and argument offered by Plaintiff in opposition was his position on when he received the Overview. Doc. No. 72 at 15-16. Viewing the record in Plaintiff's favor, the Court found that there was a triable issue of fact.
To summarize: Defendants' evidence was an unsigned copy of the Overview, Wurzbacher's declaration and deposition testimony wherein he stated that he gave Plaintiff the Overview in December 2017, and a January 2018 email exchange stating that Plaintiff, among others, received the Overview “last month” but had not returned a signed copy. Doc. No. 72 at 15 (citing Defendants' evidence). In opposition, Plaintiff offered his declaration stating he was not given notice prior to the 2018 modification. Doc. No. 72 at 15 (citing Pl. MSJ Decl. ¶ 3).
Given that the only evidence Plaintiff offered in opposition weighed on the timing of his notice, it is a reasonable reading of the Summary Judgment Order that only the timing, not the content, of the notice remains a triable issue. And because Defendants challenged all of Plaintiff's claims and the Court identified the remaining issues for trial, the fact that Plaintiff's current theory is not within the parameters of the Summary Judgment Order would seem to foreclose the viability of Plaintiff's new theory at this stage of the litigation absent some type of relief.
Moreover, to the extent Plaintiff's theory relies on what Wurzbacher or anyone else told him about the terms of the Allocation Sales Plan, this is inconsistent with his position at summary judgment that Wurzbacher never told him about it. See, e.g., Doc. No. 62 at 10 (“Wurzbacher did not communicate to Mr. Walker that he would no longer be paid the commissions to which he had previously agreed or seek his agreement to this change in his compensation.”).
Second, whether the Overview disclaims being a contract is not dispositive on the issue of whether Plaintiff became bound by the Allocation Sales Plan. Counsel continues to argue that the Overview is not a contract, seemingly to make the point that Plaintiff is not bound by it, and refers back to the Summary Judgment Order. See, e.g., Doc. No. 103 at 5, 7. In the Summary Judgment Order, addressing the Overview, that Court stated: “The Court agrees with Plaintiff that, by its own terms, the Stryker Orthopaedics Overview is not itself a contract.” Doc. No. 72 at 14.
Counsel has taken this statement out of context and places undue meaning on these words. Although the Court facially agreed with Plaintiff on this point, the Court immediately proceeded to analyze whether the Allocation Sales Plan, as set forth in the Overview, was nevertheless legally binding on Plaintiff. Reading the Summary Judgment Order as a whole, it is clear that when the Court stated that the Overview, “by its own terms,” “is not itself a contract,” the Court simply meant that it is not a contract independent of Plaintiff's employment contract. The Court never stated that this document does not or cannot set forth the terms of a modification of Plaintiff's at-will employment. In fact, the Court's subsequent reasonable notice analysis demonstrates that the Court expressly considered the Overview to be a document memorializing the modification.
Counsel also did not dispute at the June 24 hearing that the Individual Sales Plan was set forth in a document bearing language similar to that in the Overview. June Tr. at 30:5-7.
Third, the Court tangentially reached this theory at summary judgment. In opposing summary judgment, Plaintiff also contended that his claims should nevertheless survive because Wurzbacher's distribution under the Allocation Sales Plan was in breach of the duty of good faith and fair dealing. Doc. No. 62 at 26-29. This was, to be sure, the first time this duty and asserted breach had ever been mentioned in this litigation. It was also the first time Plaintiff raised an issue with the terms of the Allocation Sales Plan. The Court “assume[d] without deciding” that Plaintiff could raise an asserted breach of the duty of good faith and fair dealing as a theory in support of his breach of contract claim and for the first time in opposition to summary judgment and addressed the merits of this theory. Doc. No. 72 at 17; Id. at 17 fn.9-10. The Court agreed with Defendants that in light of the undisputed evidence, “Plaintiff cannot point to any promise in the Stryker Orthopaedics Overview or elsewhere that Defendants did not have maximum discretion over allocations ....” Id. at 17. The Court granted summary judgment for Defendants to the extent Plaintiff sought to pursue a breach of the duty of good faith and fair dealing claim, or as a theory underlying his breach of contract claim. Id.
Thus, Plaintiff failed in his attempt to identify a triable issue with respect to Wurzbacher's discretion at summary judgment. And although Plaintiff raised this argument in the context of a breach of the good faith and fair dealing theory, the Court nevertheless found that Defendants retained maximum discretion over the allocations. Plaintiff's current theory, challenging whether he was given notice that Wurzbacher would have discretion to allocate the percentages, does not seem logically or legally consistent with these rulings.
In short, as the case stands after summary judgment, the triable factual issues remaining are whether Plaintiff received reasonable notice of the Allocation Sales Plan and whether his continued employment constituted assent to that modification. Both of these issues turn on when Plaintiff received reasonable notice of the Allocation Sales Plan. Doc. No. 72 at 16. Plaintiff's new theory is not within the scope of these issues identified for trial, at least in part because Plaintiff did not offer any evidence or argument at summary judgment raising a triable issue compatible with what he now advances as his theory for trial. For these reasons, the Court agrees that on this record, Plaintiff's theory is inconsistent with the Court's rulings at summary judgment.
As noted above, supra fn.5, there are also outstanding issues regarding Plaintiff's COVID pay and the asserted violation of California Labor Code § 2751. Doc. No. 72 at 20, 23.
3. Inherent Authority Analysis
For the reasons discussed above, the Court finds that the theory of Plaintiff's case that counsel now offers is not set forth in the First Amended Complaint. Nor is it compatible with the Court's rulings at summary judgment or consistent with the remaining triable issues as identified in the Court's Summary Judgment Order. The Court is not “narrowing” the scope of this case, June Tr. 48:8-12, but merely reminding Plaintiff of the factual allegations in his pleadings and restating the issues it previously identified for trial, which were based on Plaintiff's evidence, arguments, and legal strategy through summary judgment. If at any point Plaintiff and counsel wished to deviate from this path or alter their theories, there were procedures available to do so.
Plaintiff has not utilized these procedures. But for the Spring 2022 amendment, which was nonsubstantive and purely technical in nature, Plaintiff has never duly sought amendment. The deadline to file a motion to amend the pleadings was May 11, 2022. Doc. No. 15 at 2. He did not seek to extend the May 11 deadline to pursue further amendment, despite seeking extensions of other deadlines in the Rule 16 scheduling order, see Doc. Nos. 29, 35, 39. He also did not ask for belated amendment based upon the evidence put forth at summary judgment. And he has not filed a motion for leave to amend since or otherwise sought clarification or reconsideration of the Court's Summary Judgment Order. Instead, counsel appeared at the pretrial MSC claiming that this theory has always been part of the case. And even after Defendants raised this issue, and Plaintiff himself served supplemental disclosures and agreed to reopen discovery, Plaintiff continues to maintain that amendment is not necessary because his theory has not changed. The record says otherwise.
Despite not asking for amendment, the Court nevertheless “assumed without deciding” that Plaintiff could amend his pleadings to raise a breach of the duty of good faith and fair dealing theory, or claim, for the first time at summary judgment. Doc. No. 72 at 17; see also id. at fn.9-10.
If it were true that this theory was substantiated with factual allegations in the pleadings, then there would not have been the need for these belated supplemental disclosures and the reopening of discovery. And had Plaintiff duly disclosed the relevant evidence and witnesses, and had discovery been timely undertaken, this theory would have been tested at summary judgment and, accepting Plaintiff's position, identified as a triable issue.
Instead, this case proceeded through summary judgment within the confines Plaintiff himself set through his own pleadings and disclosures and his own arguments and evidence at summary judgment. And then, on the eve of trial, Plaintiff changed his strategy, prompting the need for additional discovery, which is now nearing seven (7) months, and taking this case off calendar for trial.
That is not to say that a litigant may never alter his litigation strategy. And even a change in litigation strategy on the eve of trial may not by itself be sanctionable under the Court's inherent authority. But what is problematic here is both the last-minute shift in theory for trial and the position taken that no such change occurred.
Fortunately for Plaintiff and counsel, what is missing from the record here is why there has been this change in strategy. As the Ninth Circuit has explained, “bad faith, including conduct done vexatiously, wantonly, or for oppressive reasons, requires proof of bad intent or improper purpose.” Am. Unites, 985 F.3d at 1090 (first citing Evon v. Law Offices of Sidney Mickell, 688 F.3d 1015, 1035 (9th Cir. 2012); and then citing Fink, 239 F.3d at 993-94). The record is silent as to when Plaintiff remembered he received timely notice of the Overview and when he told counsel, if ever. There is also no evidence tending to show malintent or improper purpose behind the strategy shift. As a result, the Court cannot say that Plaintiff and counsel have been litigating in bad faith as opposed to, for example, pivoting around the bad facts as they become known. Although frustrating, the Court finds that without more, this conduct does not warrant the imposition of sanctions under the Court's inherent authority. Accordingly, the Court DENIES Defendants' motion for inherent authority sanctions.
VI. CONCLUSION
For the reasons set forth in the Court's tentative rulings, as stated on the record at the June 24 hearing, and based upon the foregoing, the Court DENIES Defendants' motion for sanctions pursuant to Rule 11 and the Court's inherent authority.
IT IS SO ORDERED.