Question

On February 6, 2013, Danial Farris filed a claim against International Paper Company (IP), alleging that IP failed to to pay vested vacation wages upon termination.

On May 30, 2014, IP field a third-party claim against Yeghia Bekiarian, a former managerial employee. IP argued that Bekiarian was responsible for the liability for vacation wages by not only promising Farris that he would be entitled to paid vacation, but then instructing human resources employees not to provide paid vacation for IP’s sales representatives, of which Farris was a member.

Bekiarian field an answer asserting that since the claim against IP arose from Bekiarian’s actions as an employee of IP, IP was required to reimburse and indemnify him.

[Daniel Farris v. International Paper Company, et ai., 2014 U.S. Dist. LEXIS 143607.]

Do you think Bekiarian should be indemnified for his actions which led to Farris’s claims? Keep in mind that Farris did not include Bekiarian in his action against IP. How did the court decide on the third-party claim between IP and Bekiarian? What was the court’s reasoning?

Answer 1

On February 6, 2013, Daniel Farris ("Farris") filed an action against International Paper Company, Inc. ("IP" or "defendant") and Does 1-100 in San Bernardino County Superior Court. The operative second amended complaint ("SAC") asserts claims for failure to pay vested vacation wages upon termination, in violation of Labor Code § 227.3,1 failure to pay wages and waiting time penalties pursuant to Labor Code §§ 202-03, violation of the Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code §§ 17200, et seq., and violation of the record-keeping provisions set forth in Labor Code § 226. Farris ECF No. 21.

On February 13, 2013, plaintiffs Jared Andresen ("Andresen"), Yeghia Bekiarian ("Bekiarian"), and John Duffy ("Duffy") (collectively "Andresen plaintiffs") filed a lawsuit against IP and Does 1-50 in Los Angeles County Superior Court. See Andresen ECF No. 1. The operative Second Amended Complaint ("SAC") asserts claims on behalf of all three plaintiffs for (1) failure to pay vested vacation wages upon termination, in violation of Cal. Labor Code § 227.3; (2) waiting period penalties in violation of Labor Code §§ 202, 203; (3) violations of California's Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code §§ 17200 et seq.; and (4) violations of record-keeping provisions in Cal. Labor Code § 226. Andresen ECF No. 21. The SAC also asserts claims on behalf of Andresen and Duffy for failure to pay wages, including commissions, and on behalf of Andresen only for (1) breach of contract and (2) promissory estoppel. Id.

On October 1, 2014, the Court consolidated the two aforementioned cases. See ECF No. 169. Phase I of the consolidated trial is set to begin on December 2, 2014. Id. On November 17, 2014, the Court held a hearing on numerous motions in limine. After considering the parties' arguments, the Court finds and concludes as follows.

A. Legal Standard

A motion in limine is "a procedural device to obtain an early and preliminary ruling on the admissibility of evidence." Goodman v. Las Vegas Metro. Police Dep't, 963 F.Supp.2d 1036, 1046 (D. Nev. 2013). Trial courts have broad discretion when ruling on such motions. See Jenkins v. Chrysler Motor Corp., 316 F.3d 664, 664 (7th Cir. 2002). Moreover, such rulings are provisional and "not binding on the trial judge" on the court. Ohler v. United States, 529 U.S. 753, 758 n.3 (2000). "Denial of a motion in limine does not necessarily mean that all evidence contemplated by the motion will be admitted at trial. Denial merely means that without the context of trial, the court is unable to determine whether the evidence in question should be excluded.

B. Plaintiff Farris's Motions in Limine

1. To Preclude Evidence of Farris's Business "My Three Sons" (Farris ECF No. 185)

Farris moves to preclude evidence or argument concerning his current, business, My Three Sons Container Corporation ("My Three Sons"), which sells boxes and corrugated packaging. He argues that this business is irrelevant to this case because it does not affect whether he was entitled to vacation, and if so how much and at what rate of pay. Farris argues that IP has produced "no evidence to support an argument that [Farris] took anytime [sic] away from his work at IP and [a predecessor] to engage in activities with My Three Sons." Farris ECF No. 185 at 4. He also argues that mention of My Three Sons could unfairly prejudice Farris by painting him "as a two-timing employee who engaged in a competing business while still employed by his employer, only to resign, and steal his employer's customers for his own benefit." Id. at 1.

In opposition, defendant contends that evidence of Farris's work for My Three Sons is relevant to the amount of vacation days Farris took and, accordingly, to his potential damages. Defendant reasons that any time Farris took off from IP to set up My Three Sons should be counted as vacation time, and suggests that a significant drop in Farris's sales in the last month before his resignation could be attributed to his diverting IP's clients to My Three Sons. Defendant also argues that, because Farris's credibility is crucial to his claims that he was entitled to paid vacation and did not take all of his vacation time over a multi-decade period, Farris's setting up of a competing business is relevant evidence. Defendant contends that Farris incorporated My Three Sons in his wife's name to avoid company policy against competing businesses, making it more likely that his vacation claims are incredible and contrived.

On the record before it, the Court does not see any showing that evidence of My Three Sons is relevant to plaintiffs' vacation claims or damages. The Court finds defendant's invitation to speculate that Farris's sales must have dropped because he was taking unreported time off from IP too speculative to justify introducing evidence that could confuse the jury or otherwise unfairly prejudice Farris. Defendant has not cited—and the Court has been unable to find—any legal provision that would bolster the relevance of My Three Sons evidence. Nor, on the present showing, does the Court find evidence of My Three Sons relevant to the issue of Farris's credibility.

2. To Preclude Evidence of Farris's Previously Claimed Damages

Farris seeks to preclude defendant from introducing evidence pertaining to or mentioning his initially claimed damages of over eight million dollars. Farris argues that this evidence is irrelevant given his superseding disclosure claiming a reduced amount of damages, and would unfairly prejudice him by impugning his credibility or characterizing him as an employee seeking to "strong arm his employer for millions of dollars." Farris ECF No. 186 at 5. At oral argument, Farris's counsel explained that the earlier damages figure was a pre-discovery estimate. Farris also argues that this evidence could confuse the jury as to the amount at stake.

In opposition, defendant argues that the initial claimed damages figure, as stated in an initial disclosure and Farris's deposition testimony, is relevant to Farris's credibility, and is admissible as a prior inconsistent statement. Defendant contends that any unfair prejudice can be minimized with an instruction that "in hearing any evidence of prior inconsistent statements or testimony about Plaintiff's claimed vacation pay owed, the jury is not to consider the evidence as proof or disproof of a fact, but can consider the evidence in assessing Farris' claim that he was entitled to paid vacation at all, and regarding the reliability (or lack thereof) of his damages' [sic] calculations." Farris ECF No. 264, Memo. at 5.

Given that the evidence Farris now seeks to preclude comes from his own discovery disclosure, the Court does not find that its introduction would lead to significant unfair prejudice. The Court therefore DENIES Farris's Motion in Limine No. 2 without prejudice to a request for a limiting instruction if the evidence is offered at trial.

3. To Exclude or Limit Expert Testimony of Robert Crandall

Farris seeks to exclude the expert testimony of Robert Crandall ("Crandall") in its entirety or, in the alternative, limit any testimony he gives to the opinions set forth in his existing expert report and deposition. Crandall is an economist who opines that Farris was not entitled to paid vacation, and that even if he was, he has overstated both the number of days to which he is entitled and the correct rate at which those vacation days should be compensated. In doing so, Crandall relies on general economic theory and market observations, his experience with other companies' employment policies, employment handbooks and memoranda from IP and its predecessors, and other documentary evidence. Crandall relies on one opinion letter by the Labor Commissioner for the proposition that "[i]n most instances, when a salesperson is on a draw plus commission, that person receives the draw during the vacation period and any commissions for the period prior to the vacation and pay this amount during the vacation period." See Crandall Decl. at 10.

Farris argues that these opinions "encompass the ultimate legal issues that the Court and jury will ultimately decide," and therefore are not a proper subject for expert testimony. Farris ECF No. 191, Memo. at 3-4. Farris also argues that Crandall's expert opinions are inadmissible because he is not qualified and cannot present "reliable" testimony within the meaning of Federal Rule of Evidence 702. Farris contends that because Crandall is not a lawyer, let alone a labor lawyer, he has no "specialized" knowledge that would qualify him to opine on Farris's entitlement to vacation. Farris also argues that Crandall misstates California law. Finally, Farris asserts that Crandall's opinions concerning "industry standards" for vacation policy are irrelevant and could mislead the jury, mandating their exclusion.

Following are the Court Reasoning -

1. References to "Labor Code" are to the California Labor Code.

2. Based on the purported hearsay nature of the witness's conversations with Bekiarian, Farris also argues that testimony from Leach or Rocha would be improper lay opinion. Under Federal Rule of Evidence 701, a lay witness may only offer opinions "rationally based on the witness's perception." Fed. R. Evid. 701. Moreover, a lay witness is not "`allowed . . . to testify based on hearsay information, and to couch [her] observations as generalized opinions rather than as firsthand knowledge.'" United States v. Freeman, 498 F.3d 893, 904 (9th Cir. 2007) (further internal quotation marks omitted) (quoting Jinrno Am. Inc. v. Secure Invest., Inc., 266 F.3d 993, 1004 (9th Cir. 2001)). Farris contends that the only foundation Leach or Rocha have for their alleged knowledge about IP's vacation policies comes from "conversations with other people at IP, including Lee Bekiarian," which "constitute inadmissible hearsay" for the reasons discussed above. Farris ECF No. 190, Memo. at 5.

3. The Court notes that Rule 608(b) does not allow the admission of "extrinsic evidence . . . to prove specific instances of a witness's conduct in order to attack or support the witness's character for truthfulness."

4. Defendant submits signed "Standards of Business Conduct" forms signed on July 26, 2011 (Duffy) and July 27, 2011 (Andresen), in which both plaintiffs certified that they did not have "additional employment that needs to be disclosed" and did not have any "financial or ownership interest" in any "customers or competitors of Temple-Inland." See Andresen ECF No. 146-9, 146-10.

5. "In California, the unclean hands doctrine applies not only to equitable claims, but also to legal ones." Adler v. Fed. Rep. Of Nigeria, 219 F.3d 869, 877 (9th Cir. 2000), as amended on denial of reh'g and reh'g en banc (Aug. 17, 2000) (citing Jacobs v. Universal Dev. Corp., 53 Cal.App.4th 692, 699 (1997)). California courts determining whether the defense applies consider "the analogous case law, the nature of the misconduct, and the relationship of the misconduct to the claimed injuries." Blain v. Doctor's Co., 222 Cal.App.3d 1048, 1060 (1990).

6. Andresen testified that most of his customers at IP, and about forty percent of his sales volume, followed Andresen when he left IP. See Andresen Depo., Vol I, at 104:4-105:7. Duffy testified that sixty-five or seventy percent of his customers followed him when he left IP. See Duffy Depo., Vol. I, at 88:21-89: 1.

7. This Acceptable Use Policy, attached to Derrick Bates's declaration in support of defendant's opposition to this motion in limine, applied "to all International Paper Company employees." See Andresen ECF No. 148-8. The policy stated that IP was the "sole and exclusive owner of its IT Resources and Information Assets, including User files, e-mails, instant messages, and any electronically stored information composed, sent, received or stored using company-provided systems and devices." Id. It stated that users "have no expectation or right to provacy of any kind related to their use of the company's IT Resources or its Information Assets," and warned that "the company retains the right, with or without cause or any additional notice to the User, to access and monitor its IT Resources. . . . including those marked `private,' `personal,' or `confidential.'" Id. The policy further provided that "[u]sers expressly consent to the access, monitoring, and recording of their use of the company's IT Resources, and waive any right of privacy or similar right in their use of the IT Resources or any Information Assets." Id.

8. According to defendant, the photographs were recovered from an IP hard drive used by Bekarian. See Andresen ECF No. 149, Memo. at 1.

9. The specific employees whose testimony defendant seeks to exclude are James Campbell, Mike Cwieka, Chris Farris, Donald Fry, Robert Jones, Larry Leavitt, Eric Radtke, Donald Skrede, and Donald Zenser.

10. This provision provides in part: "If an employer willfully fails to pay, without abatement or reduction, in accordance with Sections 201, 201.3, 201.5, 202, and 205.5, any wages of an employee who is discharged or who quits, the wages of the employee shall continue as a penalty from the due date thereof at the same rate until paid or until an action therefor is commenced; but the wages shall not continue for more than 30 days." Cal. Labor Code § 203(a). An employer acts "willfully" when it "`intentionally fail[s] or refuse[s] to perform an act which was required to be done.'" Choate v. Celite Corp., 215 Cal.App.4th 1460, 1468 (2013) (quoting Barnhill v. Robert Saunders & Co., 125 Cal.App.3d 1, 7 (1981))

.11. At oral argument, counsel for plaintiffs clarified that no plaintiff intends to call Renaud as a witness, though plaintiffs do intend to offer documentary evidence related to Renaud. Counsel for plaintiffs intends to show video deposition testimony of Kocis, over whom the Court does not have subpoena power.

12. The Andresen plaintiffs have submitted a separate opposition that appears to be substantially identical to the one filed by Farris. See Farris ECF No. 258.

13. Defendant also avers that Cornet is biased because he has only served as an expert for employees, not employers. But "[g]enerally, evidence of bias goes toward the credibility of a witness, not his competence to testify, and credibility is an issue for the jury." United States v. Abonce-Barrera, 257 F.3d 959, 965 (9th Cir. 2001).