LUCY H. KOH, District Judge.
Plaintiff Tanner Trosper ("Trosper") filed this putative class action against his former employers, Stryker Corporation ("Stryker") and Howmedica Osteonics Corporation ("Howmedica"), alleging that he had not been indemnified for employment-related expenses in violation of California Labor Code § 2802 and California's Unfair Competition Law (Bus. and Prof. Code § 17200 et seq.) ("UCL"). Before the Court is Defendant Stryker's Motion for Summary Judgment. See ECF No. 34. Pursuant to Civil Local Rule 7-1(b), the Court finds this matter appropriate for resolution without oral argument and hereby VACATES the hearing on this Motion set for May 1, 2014, at 1:30 p.m. The Case Management Conference scheduled for May 1, 2014, at 1:30 p.m. remains as set. The Court, having considered the record in this case, applicable law, and parties' briefs, DENIES Stryker Corporation's Motion for Summary Judgment.
Trosper was employed by Howmedica as a Sales Representative from approximately November 2008
Trosper alleges that during the Class Period
Trosper contends that Defendants' policy prohibiting expense reimbursement violated California Labor Code § 2802, which provides that "[a]n 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." Id. ¶¶ 23, 39-40. Moreover, Trosper alleges that Defendants' policy constituted an "unfair" and "unlawful" business practice in violation of the UCL. Id. ¶¶ 45-48.
Trosper filed his Complaint against Howmedica and Stryker on February 12, 2013. ECF No. 1. Defendants answered on March 29, 2013, ECF No. 16. On October 28, 2013, the parties filed a joint statement indicating that they disagreed as to whether Stryker was a properly named defendant and that Defendants planned on filing a motion for summary judgment seeking to dismiss Stryker from the case. ECF No. 31. Stryker filed the instant motion on January 23, 2014, ECF No. 34 ("Mot."), and Trosper filed his opposition on February 6, 2014. ECF No. 35 ("Opp'n"). On February 13, 2014, Stryker filed a reply. ECF No. 36 ("Reply"). The parties also filed various declarations in support of their arguments. In support of its motion for summary judgment and its reply, Stryker filed the Michelle Shinevare Declaration, ECF No. 34-1 ("Shinevare Decl."), and the Soo Cho Declaration, ECF No. 36-1 ("Soo Cho Decl."). In support of Plaintiff's opposition, Plaintiff filed the Trosper Declaration, ECF No. 35-3 ("Trosper Decl."), and the Hanna Raanan Declaration, ECF No. 35-1 ("Raanan Decl.").
Summary judgment is appropriate if, viewing the evidence and drawing all reasonable inferences in the light most favorable to the nonmoving party, there are no genuine disputed issues of material fact, and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A fact is "material" if it "might affect the outcome of the suit under the governing law," and a dispute as to a material fact is "genuine" if there is sufficient evidence for a reasonable trier of fact to decide in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). "If the evidence is merely colorable, or is not significantly probative," the court may grant summary judgment. Id. at 249-50 (citation omitted). At the summary judgment stage, the Court "does not assess credibility or weigh the evidence, but simply determines whether there is a genuine factual issue for trial." House v. Bell, 547 U.S. 518, 559-60 (2006).
The moving party has the burden of demonstrating the absence of a genuine issue of fact for trial. Celotex, 477 U.S. at 323. To meet its burden, "the moving party must either produce evidence negating an essential element of the nonmoving party's claim or defense or show that the nonmoving party does not have enough evidence of an essential element to carry its ultimate burden of persuasion at trial." Nissan Fire & Marine Ins. Co. v. Fritz Companies, Inc., 210 F.3d 1099, 1102 (9th Cir. 2000) (citation omitted). Once the moving party has satisfied its initial burden of production, the burden shifts to the nonmoving party to show that there is a genuine issue of material fact. Id. at 1103.
In its Reply in support of the instant Motion, Stryker raises various evidentiary objections to exhibits introduced by Trosper in support of his opposition. See generally Reply. The Court addresses each of Stryker's objections throughout the analysis below.
Stryker moves for summary judgment on all of Trosper's claims on the basis that Trosper has failed to produce evidence demonstrating the existence of an employment relationship between Trosper and Stryker. Mot. at 1-2. Stryker argues that if no employment relationship existed between Stryker and Trosper, Stryker cannot be held liable. Id. Construing all the evidence in favor of Trosper, the non-moving party, as this Court must do at the summary judgment stage, the Court concludes that Trosper's evidence presents a genuine issue of material fact regarding the existence of an employment relationship between Trosper and Stryker. The Court rejects Stryker's argument that Stryker is, as a matter of law, not Trosper's employer and thus not liable for Howmedica's acts because Trosper has produced evidence sufficient to support a finding by a reasonable jury that Stryker was in fact Trosper's employer. Accordingly, the Court DENIES Stryker's Motion for Summary Judgment.
Trosper alleges that Stryker and Howmedica, collectively as his employers, violated California Labor Code § 2802, which provides that that "[a]n 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." Cal. Labor Code ¶ 2802; Compl. ¶¶ 39-40. California courts have held that inherent in raising such a claim is the requirement that a plaintiff sue his or her actual employer. See, e.g., Estrada v. FedEx Ground Package Sys., Inc., 154 Cal.App.4th 1, 10 (2007) (determining whether employment relationship existed between plaintiff and defendant prior to adjudicating a § 2802 claim).
Trosper argues that Stryker is liable as his employer under the "integrated enterprise" test as set forth in Laird v. Capital Cities/ABC, Inc., 68 Cal.App.4th 727 (1998), overruled on other grounds by Reid v. Google, 50 Cal.4th 512 (2010). Opp'n at 6. Under the "integrated enterprise" test, two corporations, here Stryker and its subsidiary Howmedica, may be treated as a single employer for purposes of liability. Laird, 68 Cal. App. 4th at 737. While "this test is most often applied in the context of claims arising under Title VII and the California Fair Employment and Housing Act," and while California law is unsettled as to what precise test regarding the existence of an employer-employee relationship applies to claims under California Labor Code § 2802, California courts as well as federal courts in the Ninth Circuit have applied the "integrated enterprise" test to claims arising from alleged violations of the California Labor Code. See, e.g., Kenny v. Regis Corp., No. 06-07521, 2008 WL 686710, at *3 (N.D. Cal. Mar. 10, 2008); Huse v. Auburn Honda, No. 04-0227, 2005 WL 1398521, at *3 (E.D. Cal. June 10, 2005) (employing the integrated enterprise test to determine whether a defendant was an employer within the meaning of the California Labor Code); Serrano v. 180 Connect, Inc., No. 06-1363, 2006 WL 2348888, at *2 (N.D. Cal. Aug. 11, 2006) (employing the integrated enterprise test in an action arising from alleged California Labor Code violations), rev'd on other grounds 478 F.3d 1018 (9th Cir. 2007). Courts have also applied the integrated enterprise test in the context of addressing UCL claims predicated upon California Labor Code violations. See Maddock v. KB Homes, Inc., 631 F.Supp.2d 1226, 1238 (C.D. Cal. 2007).
Under Laird, in determining whether two entities are liable as a single employer or an "integrated enterprise," courts consider four factors: (1) centralized control of labor relations; (2) interrelation of operations; (3) common management; and (4) common ownership or financial control. Laird, 68 Cal. App. 4th at 737. "Under this test, common ownership or control alone is never enough to establish parent liability." Id. at 738. Because corporate entities are presumed to exist separately, "the corporate existence form will be disregarded only when the ends of justice require this result." Id. at 737. As a result, "an employee who seeks to hold a parent corporation liable for the acts or omissions of its subsidiary on the theory that the two corporate entities constitute a single employer has a heavy burden to meet[.]" Id.
Below, the Court analyzes each of the Laird factors, and concludes that Trosper has presented sufficient evidence for a reasonable trier of fact to conclude that Stryker and Howmedica are "integrated enterprises" and thus that Stryker was Trosper's employer.
The Court first considers the "centralized control of labor relations" factor. "Although courts consider the four factors together, [and no one factor is dispositive], they often deem centralized control of labor relations to be most important." Id. at 738. "The critical question is, [w]hat entity made the final decisions regarding employment matters related to the [clamaint]? . . . To satisfy the control prong, a parent must control the day-to-day employment decisions of the subsidiary." Id. (internal quotation marks and citations omitted). In Laird, the court held that this factor weighed greatly in favor of the defendant parent company, given that the subsidiary's control over its own employment decisions was "essentially undisputed." Id. at 739. The court noted that all of the plaintiff's employment paperwork designated her employer to be the subsidiary, not the parent. Id. The employee handbooks the plaintiff received explicitly stated she was a subsidiary employee. Id. Furthermore, the subsidiary provided all of her W-2 forms. Id. Finally, the plaintiff admitted in her deposition that the supervisors who fired her were employees of the subsidiary, not the parent company. Id. Below, the Court considers the evidence relevant to this factor and concludes Trosper has presented evidence that raises a genuine issue of material fact as to whether this first factor weighs in favor of a finding that Stryker is Trosper's employer.
In its motion for summary judgment, Stryker argues it did not participate in any of the day-to-day employment decisions affecting Trosper or any putative class members, and that Stryker "does not employ any Sales Representatives in California." Mot. at 2; id. at 3 ("Stryker does not currently, and has not ever during the putative liability period, employed any Sales Representatives in California."); Shinevare Decl. ¶¶ 8-10, 12.
Stryker's arguments notwithstanding, the Court finds Trosper's evidence presents a genuine issue of material fact as to whether the "centralized control of labor relations" factor supports a finding that Stryker was Trosper's employer. First and foremost, Trosper has cited to a Western District of Michigan case filed by Stryker and Howmedica as joint plaintiffs against former Stryker CMF employees.
In addition to the Michigan Complaint, the Court finds that other evidence also raises a genuine issue of material fact as to whether Stryker controlled the day-to-day employment decisions at Howmedica and specifically its Stryker CMF subdivision. Laird, 68 Cal. App. 4th at 738. The Court acknowledges that Michelle Shinevare, the Senior Manager of Human Resources and Payroll Shared Services for Stryker, testified in her declaration that "Howmedica and its various divisions maintain their own employee handbooks, trainings, and internal employment policies," Shinevare Decl. ¶ 10. The Court also notes the existence in the record of the "Stryker Orthopaedics Employee Handbook," which is a Howmedica policy.
Stryker minimizes the impact of these policies, first arguing they "are actually Howmedica policies," and second that the policies do not reveal that Stryker management had any control over Howmedica's day-to-day employment decisions. Reply at 6, 9. The Court disagrees with Stryker's characterization of the evidence. First, it is not at all clear, as Stryker argues, that the policies are "Howmedica" policies because as noted above, many of the policies prominently feature either a Stryker logo or the words "Stryker Corporation" throughout the policy. See, e.g., Trosper Decl. Ex. A (Stryker Employee Confidentiality and Intellectual Property Agreement); id. Ex. B (Stryker Corporation Code of Conduct); id. Ex. C (Stryker Corporation Notice to All Employees); Raanan Decl. Ex. G (Stryker Corporate Accounting Policy #12). Second, the Court is not convinced by Stryker's implicit suggestion that only decisions involving hiring, firing, and compensation — and not decisions regarding expense reimbursement policies, confidentiality agreements, or "codes of conduct" — are the types of decisions that are relevant to the "centralized control of labor relations" factor. Mot. at 10; Reply at 6-7. Stryker has not cited any binding authority mandating such a "narrow" view regarding what kinds of specific employment decisions are relevant to a court's evaluation of the first factor.
In light of the representations made by Stryker in the Michigan Complaint and Trosper's evidence regarding policies promulgated by Stryker specifically, the Court concludes Trosper has raised a genuine issue of material fact as to whether the "centralized control of labor relations" factor weighs in favor of finding Stryker is Trosper's employer. A reasonable jury could conclude this factor weighs in favor of finding that Stryker and Howmedica are integrated enterprises such that Stryker can be held liable as Trosper's employer.
The Court now addresses the second factor — i.e., interrelation of operations. To make a sufficient showing of "interrelation of operations" on a defendant's summary judgment motion, the plaintiff must show that the parent company has exercised control over the subsidiary "to a degree that exceeds the control normally exercised by a parent corporation." Laird, 68 Cal. App. 4th at 738 (quoting Frank v. U.S. West, Inc., 3 F.3d 1357, 1362 (10th Cir. 1993)). Plaintiff must do more than demonstrate that the parent "benefits from the subsidiary's work" because "such a showing would create a triable issue of material fact in every case." Id. at 739. In Laird, the court found Laird had failed to introduce evidence to satisfy this prong, and provided examples of evidence that would help to show that the operations of the parent and subsidiary were interrelated: "She did not show, for instance, that the [the parent corporation] kept [the subsidiary's] books, issued its paychecks, or paid its bills," or that "the two operations share employees, . . . headquarters, or office space." Id. Below, the Court concludes Trosper has presented evidence that raises a genuine issue of material fact as to whether this factor weighs in favor of finding that Stryker is Trosper's employer.
First, with respect to evidence of keeping the subsidiary's "books," Stryker concedes that it provides human resources support such as payroll processing services and administrative data entry for Stryker CMF. Mot. at 4; Shinevare Decl. ¶ 13. Stryker's additional concession that it is not compensated for performing these duties, Reply at 5 n.5, further supports a finding of interrelatedness of operations between Stryker and Howmedica. C.f. Kenny, 2008 WL 686710, *4 (noting, in support of its conclusion that Plaintiff had shown no evidence of "interrelation of operations" between the subsidiary and parent, that "[subsidiary] is charged for all services provided by [the parent corporation's] employees."). Although the Court agrees with Strkyer that this evidence is not dispositive of the Court's "integrated enterprise" inquiry in light of the uncontroverted evidence that Stryker and Howmedica otherwise maintain separate finances, see Reply at 5; Shinevare Decl. ¶¶ 6-7, the Court nonetheless considers the existence of this payroll processing relationship to be at least evidence probative of an "interrelation of operations" between Stryker and Howmedica.
Second, there is some evidence that Stryker and Stryker CMF may share "employees, headquarters, or office space." Laird, 68 Cal. App. 4th at 739. Notably, the evidence raises at least a plausible inference that the two companies share two managing-level employees. First, it appears that Mike VanVleet may be a shared employee of Stryker CMF and Stryker. Notably, Trosper's termination letter — specifically referencing his termination from Stryker CMF — is signed by Mike VanVleet in his capacity as "Director, Human Resources and Kalamazoo Operations" with a return address in Portage, Michigan.
The Court thus finds that Trosper has presented evidence that raises a genuine issue of material fact as to whether this factor weighs in favor of finding that Stryker is Trosper's employer.
The Court now addresses the third factor under the integrated enterprise test — common management. The Laird court held that Laird had failed to show the parent and subsidiary had any degree of common management, as she had "offered no evidence that anyone served as a manager of both corporations." Laird, 68 Cal. App. 4th at 740. The court also reasoned Laird should have introduced evidence that at least one manager of the parent corporation made or influenced a "day-to-day managerial decision" of the subsidiary, and further noted, "[n]or did [Laird] show that any manager from either corporation was ever transferred to the other." Id. Below, the Court considers the evidence relevant to this factor and concludes Trosper has presented sufficient evidence that raises a genuine issue of material fact as to whether this factor weighs in favor of finding that Stryker is Trosper's employer.
Trosper has introduced evidence similar to what the Laird court envisioned as satisfying this prong of the "integrated enterprise" test. See Laird, 68 Cal. App. 4th at 740. First, Trosper has offered evidence that at least two people served as a manager of both Howmedica and Stryker. In her deposition, Senior Manager of Human Resources and Payroll Shared Services for Stryker, Michelle Shinevare, identifies David Furgason and Jeanne Blondia as officers of Howmedica. Raanan Decl. Ex. J, 26:24-28:6 (identifying Ferguson as Vice President of Tax at Howmedica and identifying Blondia as an "officer"). Yet Furgason is also listed on the "Stryker Management" page for Stryker's website, www.stryker.com, as "Vice President, Tax", and Blondia is also listed as "Vice President and Treasurer." Id. Ex. L; Raanan Decl. ¶ 7.
In light of the foregoing, the Court finds Trosper has presented sufficient evidence for a reasonable jury to conclude that this factor weighs in favor of finding that Stryker is Trosper's employer under the "integrated enterprise" test.
Finally, the Court addresses the fourth and final factor — common ownership or financial control. The mere fact of common ownership or financial control, without more, is insufficient to raise a triable issue of fact under the integrated enterprise test and thus hold that a parent corporation must be liable for the illegal acts of its subsidiary on the theory that the two corporate entities constitute a single employer. Laird, 68 Cal App. 4th at 739-40. Courts have recognized this factor as being the least important of the four. See, e.g., Pearson v. Component Tech Corp., 247 F.3d 471, 494 (3rd Cir. 2001) (noting that common ownership is "typically referred to as the `least important' of the factors"); Serrano, 2006 WL 2348888, *5. Further, because this factor is not dispositive of the existence of an integrated enterprise, courts have even refrained from addressing this factor entirely. See, e.g., Ruiz, 2011 WL 3300098, at *3-4.
Here, as in Laird where the existence of common ownership was not denied by the parent corporation, Stryker does not deny that Howmedica is a wholly-owned subsidiary of Stryker, and thus does not deny that Stryker and Howmedica are commonly owned. However, Stryker does provide persuasive evidence that Stryker does not exercise any financial control over Howmedica. Stryker HR Director Michelle Shinevare testifies that the two corporations have separate accounting departments, maintain separate financial records, maintain separate payroll records, issue separate W-2 forms, and have separate federal tax identification numbers. See Shinevare Decl. ¶¶ 6-7; see also Mot. at 3. Howmedica employees are paid from Howmedica funds, not Stryker funds. Id. at 7. Trosper does not appear to contest whether Stryker exercises any financial control over Howmedica. Opp'n at 8. The Court concludes the record supports a finding of common ownership, but does not support a finding of common financial control. However, because this Court, like other courts, concludes that this factor is minimally probative of whether Stryker and Howmedica are "integrated enterprises," Stryker's evidence demonstrating no common financial control between Howmedica and Stryker does not convince the Court to conclude as a matter of law that Stryker is not Trosper's employer under the "integrated enterprise" test. Rather, the Court simply finds that Stryker's concession of common ownership provides at least some support for the Court's conclusion that a reasonable jury could find Stryker was in fact Trosper's employer. The jury will be entitled to consider Stryker's evidence of no common financial control at trial when deciding whether this fourth factor weighs in favor of finding an employment relationship between Trosper and Stryker.
The Court finds that Trosper has introduced evidence sufficient to create a genuine issue of material fact as to the existence of an employment relationship between Trosper and Stryker. In support of the first and most important prong of the integrated enterprise test — centralized control of labor relations — Trosper has introduced not only a judicial admission by Stryker that it is a direct employer of Howmedica employees in the same sales position as Trosper, but also points to multiple policies, promulgated by Stryker, that bind employees like Trosper. This included the Code of Conduct which required Trosper to sign and acknowledge that he "underst[ood] that compliance with the Code of Conduct is a condition of [his] continued employment with Stryker Corporation and [he] will abide by and support the policies set forth in [Stryker's] Code of Conduct." Trosper Decl. Ex. B at 4 (emphasis added). Trosper also introduced evidence sufficient to satisfy the second prong of the integrated enterprise test — interrelation of operations — by pointing out common officers and payroll functions. A reasonable jury could also find that the third factor of the integrated enterprise test, common management, weighs in Trosper's favor, as it appears that Howmedica and Stryker not only shared common executives, but also potentially shared managers in charge of employment and termination decisions. Finally, Howmedica and Stryker are commonly owned. A reasonable jury could find an employer-employee relationship between Stryker and Trosper based on these four factors of the integrated enterprise test.
For the foregoing reasons, the Court DENIES Stryker Corporation's Motion for Summary Judgment.
