Judge: Glenda Sanders, Case: 2018-01021149, Date: 2022-12-09 Tentative Ruling

1. Motions for Summary Adjudication x2

2. Status Conference

This is a continued hearing on these motions. The initial hearing took place on 5/17/22. After the hearing the court required further oral argument on both motions, but ordered that that no further briefing was allowed. (ROA 436).

MOTION 1: CPS’s MSA ON ITS AFFIRMATIVE DEFENSES

Defendant CPS seeks summary adjudication of its affirmative defenses to the 1st through Fifth and Seventh Causes of Action in the FAC which, in summary, allege that Plaintiff was properly classified as an “outside salesman under the FLSA and under the California Labor Code, and was therefore exempt from the minimum wage and maximum hour requirements of the FLSA, from California’s overtime, meal and rest period requirements and the derivative wage statement requirements. (“Outside Sales Exemption Affirmative Defenses”.)

Defendant Consumer Portfolio Services, Inc.’s (“CPS”) Motion for Summary Adjudication of its above described affirmative defenses is denied.

The party moving for summary judgment bears the burden of persuasion that there is no triable issue of material fact and that he is entitled to judgment as a matter of law. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 849-850).

In determining a motion for summary judgment, the court is “required to view the evidence and the reasonable inferences therefrom in the light most favorable to the party opposing the summary judgment motion; doubts as to whether there are any triable issues must be resolved in favor of the opposing party; and equally conflicting evidence or inferences require denial of a summary judgment motion.” (Essex Ins. Co. v. Heck (2010) 186 Cal.App.4th 1513, 1522).

Here, even assuming, without deciding, that CPS has met its initial burden on this motion, there are several triable issues of fact as more fully described below.

As cautioned by the leading treatise on California civil procedure before trial, “[i]nclude only those facts which are truly material to the claims or defenses involved because the separate statement effectively concedes the materiality of whatever facts are included. Thus, if a triable issue is raised as to any of the facts in your separate statement, the motion may be denied.” (Weil & Brown, Cal. Prac. Guide Civ. Pro. Before Trial §10:95.1 (citing Nazir v. United Airlines, Inc. (2009) 178 Cal.App.4th 243, 252,; Insalaco v. Hope Lutheran Church of West Contra Costa County (2020) 49 Cal.App.5th 506, 521)).

For its “undisputed material fact” (“UMF”) number 5 (incorporated by reference regarding all issues raised in the motion), CPS states that Dealers pay fees to CPS for the benefit of using CPS’ financial products for their customers. Plaintiff disputes this fact by introducing statements from the CPS’ 10-K filings that indicate that CPS’ purchases automobile contracts from dealers “at a price generally computed as to the total amount financed under the automobile contracts, adjusted for an acquisition fee, which may either increase or decrease the automobile contract purchase price we pay.”

The statements in CPS’ 10-K statements are admissible admissions of a party pursuant to Evidence Code §1220. (See also Jazayeri v. Mao (2009) 174 Cal.App.4th 301, 325 (“Express admissions may be oral or written.... Written admissions are found in many types of informal and formal documents, and the fact that a writing is made pursuant to statute, e.g., an income tax return, does not preclude its use.”)

While the trier of fact might ultimately find the statement in the 10K is not an accurate description of the transaction, the fact that CPS describes the transaction as a “purchase” rather than a “sale” is a material fact, the accuracy of which is disputed. Plaintiff has, therefore, created a triable issue of fact as to whether the Plaintiff’s work actually involved sales. (See also disputed Defendant’s UMF 15 (“If CPS has been chosen to fund the deal, it will then send a net settlement check to the dealer consisting of the amount financed by the customer plus any dealer participation, minus the agreed-upon fees that the dealer owes to CPS.”). There is a triable issue of fact as to whether CPS receives any profits directly from its transactions with the dealers, or whether the “agreed upon fees” purportedly owed by the dealers are merely a matter of semantics which reduce the dealer participation fees paid by CPS. There is also a triable issue of fact as to whether “agreed-upon fees” owed by the dealer are even present in every transaction.

Under 29 C.F.R. 541.501, to be an outside salesperson, one must engage in making sales or obtaining orders. It appears that one hallmark of this definition is that the “sales” or “orders” must result in a payment to the company by the “buyer.” (See also 29 C.F.R. § 541.500(a): An outside salesman is an employee (1) whose primary duty is “making sales” or “obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer,” and (2) who is customarily and regularly engaged away from the employer’s place or places of business in performing such primary duty.”)

Here, there are disputed facts as to whether the dealerships actually pay CPS for the loans. While CPS claims that it collects an acquisition fee from the dealer, it also pays dealer participation. There is a triable issue of fact as to whether this results in a net payment to CPS or to the dealer. Further, it is also questionable whether the dealers’ clients (the borrowers) even make payments to CPS, as CPS apparently makes money on this category of loans by pooling and securitizing them and then selling them to investors. (Pltf.’s AUMF 3; see also disputed UMF 16).

IWC Wage Order No. 7–80, 2(I) defines the term “outside salesperson” as used in California Labor Code §1171 as follows: “[A]ny person, 18 years of age or over, who customarily and regularly works more than half the working time away from the employer's place of business selling tangible or intangible items or obtaining orders or contracts for products, services or use of facilities.”

As the California Supreme Court noted in Ramirez v. Yosemite Water Co., Inc., “[b]y choosing not to track the language of the federal exemption and instead adopting its own distinct definition of ‘outside salespersons,’ the IWC evidently intended to depart from federal law and to provide, at least in some cases, greater protection for employees.” (Ramirez (1999) 20 Cal.4th 785, 797). Further, under California law, “[e]xemptions are narrowly construed against the employer and their application is limited to those employees plainly and unmistakably within their terms.” (Nordquist v. McGraw-Hill Broad. Co. (1995) 32 Cal.App.4th 555, 562; see also Ramirez at 794).

As stated above, there are triable issues of fact as to whether Plaintiff was engaged in “sales” at all within the meaning of either the FLSA or California law.

The court grants Plaintiff’s request for judicial notice of CPS’s 10-K filing (Exh. 1 to RJN) pursuant to Evidence Code §452(h).

The court overrules Plaintiff’s objections Nos. 2, 4, 7, 8, 10, 32, 49, and 80 in connection with UMFs 5 and 16. Each of these objections is made on the ground that the evidence objected to was not produced in discovery by Defendant on the basis it is irrelevant. Plaintiff’s objections to this evidence are improper objections to otherwise admissible evidence that plaintiff could have sought to compel but apparently did not.

The court does not rule on Plaintiff’s other objections because they are not material to the disposition of this motion.

MOTION 2: Plaintiff’s MSA that Defendant Cannot Establish its Outside Sales Exemption Affirmative Defenses

This action alleges that CPS failed to pay plaintiff and aggrieved employees’ overtime. CPS argues that it did not have to pay overtime based on its alleged Outside Sales Exemption Affirmative Defenses under federal and California law.

Plaintiff seeks summary adjudication that CPS cannot establish at least one element of its Outside Sales Exemption Affirmative Defenses. Based on an adjudication of this issue in his favor, Plaintiff seeks an order dismissing: (1) CPS’ outside sales exemption affirmative defense under federal law with respect to Plaintiff James Lawson, and (2) CPS’ outside sales exemption affirmative defense under California law with respect to Plaintiff and the Aggrieved Employees under the PAGA claim.

Plaintiff’s Motion for Summary Adjudication is denied.

The applicable standard where a plaintiff moves for summary adjudication of an affirmative defense has been articulated as follows:

“The plaintiff bears the initial burden to show there is no triable issue of material fact as to the defense and that he or she is entitled to judgment on the defense as a matter of law. In so doing, the plaintiff must negate an essential element of the defense, or establish the defendant does not possess and cannot reasonably obtain evidence needed to support the defense. [citations]

If the plaintiff does not make this showing, “ ‘it is unnecessary to examine the [defendant's] opposing evidence and the motion must be denied.’ ” [citations] “‘However, if the moving papers establish a prima facie showing that justifies a [ruling] in the [plaintiff's] favor, the burden then shifts to the [defendant] to make a prima facie showing of the existence of a triable material factual issue.’ ” [citations]

(See's Candy Shops, Inc. v. Superior Ct. (2012) 210 Cal.App.4th 889, 899–900).

The moving party's declarations and evidence will be strictly construed in determining whether they negate (disprove) an essential element of plaintiff's [or opposing party’s] claim “in order to resolve any evidentiary doubts or ambiguities in plaintiff's [opposing party's] favor.” (Weil & Brown, Cal. Prac. Guide Civ. Pro. Before Trial §10:241.20 (citing Johnson v. American Standard, Inc. (2008) 43 Cal.4th 56, 64)).

Plaintiff’s motion relies on Exhibit 5 to the declaration of Jacqueline Thompson. CPS objects to the admission of Exhibit 5 on the basis that Ms. Thompson’s declaration lacks foundation and the document has not been properly authenticated. The court disagrees and overrules CPS’ objection to this exhibit.

Plaintiff, in his reply brief, appropriately responded to Defendant’s objection by relying on statements made by Defendant’s counsel at a deposition that reasonably caused Plaintiff to believe Defendant did not object to the authenticity of Exhibit 5. Plaintiff submitted deposition excerpts which Plaintiff contends demonstrate that CPS’ counsel stipulated to the authenticity of Exhibit 5, or at a minimum, give rise to a reasonable inference that Defendant stipulated to the authenticity of the document.

But the admission of Exhibit 5 does not save Plaintiff’s motion because, as the court has found in connection with CPS’ summary motion (see above), there are triable issues of material fact as to the nature of the transactions between Defendant and automobile dealers and thus, as to whether Plaintiff was actually an outside buyer rather than an outside seller.

As the court has found in connection with Defendant’s Motion for Summary Adjudication, there is a triable issue of fact as to whether CPS receives profits directly from its transactions with the dealers, or whether the “agreed upon fees” purportedly owed by the dealers merely reduce the dealer participation fees paid by CPS. There is also a triable issue of fact as to whether “agreed-upon fees” owed by the dealer are present in every transaction.

As Plaintiff pointed out at the May 17, 2022 hearing on this motion, the inquiry does not end here. This is because Plaintiff may still be able to prevail on his motion by negating a different element of CPS’s affirmative defenses.

To that end, Plaintiff contends that, even if the court were to find that CPS is selling loans to dealers (as opposed to buying loans from dealers), CPS will not be able to prevail on its affirmative defenses because it cannot demonstrate that Plaintiff was engaged in “making sales or obtaining orders,” which Plaintiff contends is required under both the FLSA and California law. (ROA 189 at 10:12-15).

Plaintiff contends that he only obtained nonbinding commitments from dealers (UF 36, 89), and there is no constraint in the industry that would have precluded him from completing the sale. Reps have no authority to approve or commit to the purchase of a Contract, make promises to Dealers, negotiate terms of CPS’ purchase of Contracts, or determine what documents CPS requires before CPS will determine whether to buy a Contract. (UF 22-24, 75-77). Rather, there are CPS employees who are not Reps who can make exceptions to the initial determination by the automated system, negotiate the buying of Contracts and otherwise finalize the purchases of Contracts from Dealers. (UF 28, 81).

CPS contends that the above facts are incomplete. CPS contends that Reps are often involved in “working the deal,” communicating with dealers and CPS to determine what CPS can do to capture the deal, and have the ability to affect the dealers’ decision to use CPS to fund contracts over its competitors. (CPS’ AUF 30-37).

This is sufficient to raise a triable issue of fact. Contrary to Plaintiff’s contentions, the Supreme Court in Christopher v. SmithKline Beecham Corp. (2012) 567 U.S. 142 did not establish a requirement that, where the individual in question only obtains a non-binding commitment, the defendant must show that there is some type of constraint on the industry that makes a non-binding commitment the most they can get. Rather, the high court emphasized that an employee who functions in all relevant respects as an outside salesman should not be excluded from that category based on technicalities. (Christopher at fn. 23).

In applying these principles, the Second Circuit in Flood v. Just Energy Marketing Corp. (2d Cir. 2018) 904 F.3d 219 emphasized that, even where the company retained discretion to reject agreements obtained by plaintiff, since he was the last person in the chain of sale, he was considered an outside salesperson. To decide otherwise would involve the use of technicalities to defeat the application of the outside salesman exemption, which Christopher expressly cautioned against.

These cases demonstrate that when nonbinding commitments are involved, the trier of fact should consider whether plaintiff is functionally the last person in the chain of sale. Here, CPS has raised triable issues of fact as to whether Plaintiff is functionally the last person “making the sale.”

Finally, Plaintiff contends that, under California law, CPS will not be able to meet its burden because California takes a quantitative approach to the outside salesperson exemption, requiring a showing that the employee spent more than 50% of their time on activities directly related to sales (i.e., selling or obtaining orders or contracts). Ramirez v. Yosemite Water Co., Inc., (1999) 20 Cal.4th 785, 797-98).

Plaintiff contends that CPS fails to meet its burden because it has never quantified the percentage of time Plaintiff spent directly on sales activity versus other incidental activities. In support of this, Plaintiff cites to UF 107, which provides CPS’s response to Special Interrogatory No. 17 requesting all facts supporting CPS’s contention that the outside salesman exemption applies. Plaintiff contends that, because CPS did not quantify the time spent on various tasks, it will not be able to prove its affirmative defense under California law.

This is not sufficient to meet Plaintiff’s burden as to this issue. As CPS points out in the Separate Statement, the interrogatory did not request an estimate of time, nor did it specify whether it was referring to the outside salesperson exemption under the FLSA or California law.

Further, even if Plaintiff had met its initial burden, CPS has submitted additional facts which are sufficient to create a triable issue of fact. CPS’s AUFs 39 through 44 describe the tasks performed by representatives including Plaintiff. AUF 44 (which is disputed by Plaintiff—further demonstrating that there are triable issues) concludes that “Reps (including Plaintiff) spend nearly all of their time (well over 50% and typically closer to 100%) on activities relating to increasing the number of contracts CPS funds for dealers within their particular territories.”

The motion is denied.

The court overrules CPS’ objections 1 and 2 to Paragraph 5 and Exhibit 5 of the Thompson Declaration.

The court overrules Plaintiff’s objections to the evidence underlying CPS’s AUFs 39 through 44.