WILLIAMSON v GENERAL DYNAMIC
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| FindLaw: Laws: Cases and Codes: 9TH CIRCUIT COURT Opinions | |
PHILIP WILLIAMSON; ITZIK RIEF; RONDA KIRLIN; THOMAS PAINTER, No. 98-55783 Plaintiffs-Appellants, D.C. No. v. CV-97-01466-E GENERAL DYNAMICS CORPORATION, OPINION Defendant-Appellee.
Appeal from the United States District Court
for the Southern District of California
William B. Enright, District Judge, Presiding
Argued and Submitted
December 9, 1999--Pasadena, California
Filed April 12, 2000
Before: Dorothy W. Nelson, Robert Boochever, and
Thomas G. Nelson, Circuit Judges.
Opinion by Judge D.W. Nelson
_________________________________________________________________
COUNSEL
Michael A. Conger, Monaghan and Conger, San Diego, Cali-
fornia; Richard H. Benes, San Diego, California, for the
plaintiffs-appellants.
Richard T. Franch, Jenner & Block, Chicago, Illinois, counsel
for the defendant-appellee.
_________________________________________________________________
OPINION
D.W. NELSON, Circuit Judge:
Phillip Williamson and three former General Dynamics
("GD") employees appeal the district court's order dismissing
their lawsuit with prejudice. They claim that the district court
erred because: (1) the Fair Labor Standards Act ("FLSA")
does not preempt their common law fraud and misrepresenta-
tion claims; (2) they deserved an opportunity to amend their
state claims in light of the preemption concerns; (3) Califor-
nia's three-year statute of limitations has not run; and (4) they
have stated a valid claim for fraud under California law. We
have jurisdiction under 28 U.S.C. S 1291, and we reverse and
remand for further proceedings.
I. FACTUAL AND PROCEDURAL BACKGROUND
The appellants are former long-term employees of GD who
were improperly classified as "salaried exempt " from Califor-
nia and federal overtime laws. On September 28, 1993, the
appellants were entitled to join the settlement of a FLSA-
based, class-action lawsuit concerning GD's failure to pay
overtime wages, Sena v. General Dynamics Corp. In order to
participate in the Sena settlement under the FLSA, the appel-
lants were required to sign and return an opt-in form by
November 15, 1993.
The appellants failed to join the Sena settlement because
GD allegedly threatened to harm their jobs if they joined.
Management told the employees that by joining the lawsuit
they would be committing "career suicide," "cutting their
balls off," and other similar statements. GD made representa-
tions that it would act in a "law abiding" way with regard to
wages and that the appellants had "viable careers" with the
company. As early as 1991, however, GD allegedly knew that
it would have to sell or close the Convair Division where the
appellants worked. Yet as late as April 1994, the GD execu-
tive in charge of the division wrote: "Let me once again make
it clear that we have not been sold, [and] there has been no
decision to shut down this plant. . . ." On July 1, 1994, GD
announced it was closing the Convair Division.
The appellants' lawyers have filed the following lawsuits
on behalf of other parties:
Argo
In April 1995, 101 GD employees who had not opted into
Sena filed a state court lawsuit, Argo v. General Dynamics &
Arthur Veitch, alleging state civil rights violations, tortious
interference, and fraud. GD was unable to remove the case to
federal court because the plaintiffs also had named GD's
managers as co-defendants. On May 1, 1997, a jury awarded
97 employees compensatory damages of $1.77 million and
punitive damages of $99 million. The state trial court denied
GD's motion for a new trial and affirmed the jury's damages
award. The case is on appeal. The appellants are not parties
to that lawsuit.
Harman
In November 1995, GD employees filed a FLSA lawsuit in
federal court attempting to recover unpaid overtime. Over 135
employees opted-into this lawsuit, Harman v. General
Dynamics, including the four named appellants in this case.
Harman sought back wages from 1992 to 1996 under FLSA,
but not under a fraud theory. A proposed settlement in Har-
man was before the district court.
Adams
In March 1997, the Argo plaintiffs filed another lawsuit in
state court, Adams v. General Dynamics. They alleged claims
of wage and career fraud, but did not name GD managers as
co-defendants. GD removed Adams to federal court on diver-
sity grounds. The case was assigned to Judge Enright (the dis-
trict judge in this case), who on June 26, 1997, stayed the case
until Argo becomes final. The Adams plaintiffs abandoned
their appeal to this court.
Williamson
On June 27, 1997 (the day after Judge Enright stayed
Adams), GD employees filed a lawsuit in state court alleging
fraud and misrepresentation (the "wage fraud" and "career
fraud" claims) under California law. On August 7, 1997, GD
removed the case to federal court on diversity grounds. Judge
Enright, sua sponte, issued an order staying this case until
Argo becomes final because of res judicata concerns. Both
sides, however, objected to the stay because the plaintiffs in
Williamson and Adams are not the same. On September 10,
1997, the district court lifted the stay.
On November 26, 1997, after briefing and hearings on the
issue, the district court ordered the Williamson plaintiffs to
plead their fraud claims with more particularity under Fed. R.
Civ. P. 9(b). On December 24, 1997, the appellants filed their
first amended complaint. The amended complaint makes two
basic claims:
(1) Wage fraud -- GD pledged to be "honest, trustwor-
thy, and law abiding" with regard to paying correct overtime
(because of a government contracts scandal), yet stopped pay-
ing overtime. The district court termed this claim, "wage
fraud."
(2) Career fraud -- GD represented that this was a "ca-
reer job," that there would be business "all the way into the
year 2000," and that as of April 1994 "we have not been sold,
[and] there has been no decision to shut down this plant." Yet
the appellants claim that documents introduced in Argo
proved those statements to be false, that GD knew it was
going to close the plant when it told its employees not to jeop-
ardize their careers with GD by opting into the Sena lawsuit.
The documents in Argo, however, are under a protective
order, and GD refuses to release them for this case. Finally,
the appellants argue that they did not discover the falsity of
these statements until GD announced that it was closing the
plant on July 1, 1994. The district court labeled this claim,
"career fraud."
After the appellants amended their complaint, GD filed a
motion to dismiss under Fed. R. Civ. P. 12(b)(6). On April 3,
1998, the district court granted the motion, finding that the
fraud claims were: (1) too vague; (2) barred by California's
three-year statute of limitations; and (3) preempted by the Fair
Labor Standards Act ("FLSA"). The appellants timely
appealed.
II. STANDARD OF REVIEW
We review the district court's decision regarding preemp-
tion de novo. See Niehaus v. Greyhound Lines, Inc., 173 F.3d
1207, 1211 (9th Cir. 1999).
We review a dismissal based on statutes of limitations de
novo. See Ellis v. City of San Diego, 176 F.3d 1183, 1188 (9th
Cir. 1999).
We review a dismissal for failure to state a claim pursuant
to Federal Rule of Civil Procedure 12(b)(6) de novo. See
TwoRivers v. Lewis, 174 F.3d 987, 991 (9th Cir. 1999). A
complaint should not be dismissed unless it appears beyond
doubt that the plaintiff can prove no set of facts in support of
the claim that would entitle it to relief. See Morley v. Walker,
175 F.3d 756, 759 (9th Cir. 1999). If support exists in the
record, a dismissal may be affirmed on any proper ground,
even if the district court did not reach the issue or relied on
different grounds or reasoning. See Steckman v. Hart Brew-
ing, Inc., 143 F.3d 1293, 1295 (9th Cir. 1998).
III. DISCUSSION
This case presents an issue of first impression in this Cir-
cuit -- whether the FLSA preempts a common-law fraud
claim. Given the lack of discussion of the wage fraud claims
in the appellants' briefs or at oral argument, we find that the
appellants have abandoned their wage fraud claims. See Col-
lins v. City of San Diego, 841 F.2d 337, 339 (9th Cir. 1988)
("It is well established in this Circuit that claims which are
not addressed in the appellant's brief are deemed aban-
doned."). Therefore, the remainder of this opinion only will
address the appellants' career fraud claims. We believe that
the appellants' career fraud claims are not preempted because
the appellants were never subject to FLSA's anti-retaliation
provision. We also find that the appellants' career fraud
claims are not barred by the statute of limitations and are not
too vague to state a claim. In light of our ruling on preemp-
tion, we will not address whether the district court erred in not
allowing the appellants leave to amend their complaint.
A. Preemption
Article VI of the Constitution provides that the laws of the
United States "shall be the supreme Law of the Land; . . . any
Thing in the Constitution or laws of any state to the Contrary
notwithstanding." U.S. Const. art. VI, cl.2. "Consideration of
the issues arising under the Supremacy Clause `start[s] with
the assumption that the historic police powers of the states
[are] not to be superseded by . . . Federal Act unless that [is]
the clear and manifest purpose of Congress.' " Cipollone v.
Liggett Group, Inc., 505 U.S. 504, 516 (1992) (plurality)
(quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230
(1947)).
[1] The Ninth Circuit has based its preemption analysis on
the Supreme Court's three categories: (1) express preemption
-- "where Congress explicitly defines the extent to which its
enactments preempt state law"; (2) field preemption --
"where state law attempts to regulate conduct in a field that
Congress intended the federal law exclusively to occupy"; and
(3) conflict preemption -- "where it is impossible to comply
with both state and federal requirements, or where state law
stands as an obstacle to the accomplishment and execution of
the full purposes and objectives of Congress." Industrial
Truck Ass'n, Inc. v. Henry, 125 F.3d 1305, 1309 (9th Cir.
1997) (citing English v. General Elec. Co., 496 U.S. 72, 78-
80 (1990)).
Although we adhered to this categorical framework in
Industrial Truck, we recognized that the categories are not
" `rigidly distinct.' " Industrial Truck, 125 F.3d at 1309 (quot-
ing English, 496 U.S. at 79 n.5). In Cipollone, a plurality of
the Court said, "[t]he purpose of Congress is the ultimate
touchstone of pre-emption analysis." Cipollone, 505 U.S. at
516 (citations and quotations omitted). Cipollone said that
Congress's intent may be express or it may be implied
through the structure and purpose of a statute. See id. The
Ninth Circuit has echoed the Court's focus on Congress's pur-
pose: "Congressional intent to preempt state law must be clear
and manifest." Industrial Truck, 125 F.3d at 1309 (citing Law
v. General Motors Corp., 114 F.3d 908, 909-10 (9th Cir.
1997) (citations omitted)).
1. FLSA
a. Purpose
[2] The Fair Labor Standards Act of 1938 contains the fol-
lowing finding:
The Congress finds that the existence, in industries
engaged in commerce or in the production of goods
for commerce, of labor conditions detrimental to the
maintenance of the minimum standard of living nec-
essary for health, efficiency, and general well-being
of workers (1) causes commerce and the channels
and instrumentalities of commerce to be used to
spread and perpetuate such labor conditions among
the workers of the several States; . . . .
29 U.S.C. S 202(a) (1994). Many authorities have recognized
that the principal purpose of the FLSA is " `to protect all cov-
ered workers from substandard wages and oppressive working
hours.' " Adair v. City of Kirkland, 185 F.3d 1055, 1059 (9th
Cir. 1999) (quoting Barrentine v. Arkansas-Best Freight Sys.,
Inc., 450 U.S. 728, 739 (1981)). Furthermore, we have recog-
nized that "[t]he FLSA's minimum wage and overtime provi-
sions are central among the protections the Act affords to
workers." Adair, 185 F.3d at 1059. In Barrentine, the
Supreme Court distinguished the FLSA from other federal
statutes designed to strike a balance between employees and
employers:
In contrast to the Labor Management Relations Act,
which was designed to minimize industrial strife and
to improve working conditions by encouraging
employees to promote their interests collectively, the
FLSA was designed to give specific minimum pro-
tections to individual workers and to ensure that each
employee covered by the Act would receive " `[a]
fair day's pay for a fair day's work' " and would be
protected from "the evil of `overwork' as well as
`underpay.' "
Barrentine, 450 U.S. at 739 (quoting Overnight Motor
Transp. Co. v. Missel, 316 U.S. 572, 578 (1942) (quoting 81
Cong. Rec. 4983 (1937) (message of President Roosevelt))).
b. Savings Clause
[3] In addition to protecting workers by establishing a mini-
mum wage and maximum hours, the FLSA contains a "sav-
ings clause" that enables states and municipalities to enact
more favorable wage, hour, and child labor legislation. See 29
U.S.C. S 218(a).1
c. Anti-Retaliation Provision
[4] Finally, the FLSA contains an "anti-retaliation provi-
sion" that prohibits employers from retaliating against
employees for filing complaints about violations of the Act.
It states that it is unlawful:
[T]o discharge or in any other manner discriminate
against any employee because such employee has
filed any complaint or instituted or caused to be
instituted any proceeding under or related to this
chapter, or has testified or is about to testify in any
such proceeding, or has served or is about to serve
on an industry committee.
29 U.S.C. S 215(a)(3).
[5] We recently held that the FLSA's anti-retaliation provi-
sion protects not only employees who have filed complaints
in court or with an agency such as the Department of Labor
but also employees who have complained to their employers.
See Lambert v. Ackerley, 180 F.3d 997, 1004 (9th Cir. 1999)
(en banc), cert. denied, 120 S. Ct. 936 (2000). Lambert said
that the FLSA "is a remedial statute . . . [that] must be inter-
preted broadly." Lambert, 180 F.3d at 1003 (citing Tennessee
Coal, Iron & R. Co. v. Mucoda Local No. 123, 321 U.S. 590,
597 (1944)). Furthermore, Lambert stated that the purposes of
the anti-retaliation provision are: (1) "to provide an incentive
for employees to report wage and hour violations by their
employers"; id.; (2) " `to prevent fear of economic retaliation
by an employer against an employee who chose to voice such
a grievance' "; id. at 1004 (quoting EEOC v. White & Son
Enters., 881 F.2d 1006, 1011 (11th Cir. 1989)); and "to
ensure that employees are not compelled to risk their jobs in
order to assert their wage and hour rights under the Act." Id.
2. District Court's Decision
As a threshold matter, the district court failed to analyze
this case under the Supreme Court's categorical framework.
The district court conceded that the "authorities are not uni-
form on this issue," yet it found that the FLSA preempted the
appellants' fraud claims. The district court asserted four rea-
sons: (1) The FLSA is a comprehensive statute, except for
allowing states to provide more generous wage and hour laws;
(2) "The FLSA is the exclusive remedy for claims that dupli-
cate or are the equivalent of rights protected by the FLSA"
(citing Lerwill v. Inflight Motion Pictures, 343 F. Supp. 1027
(N.D. Cal. 1972)); (3) The appellants' fraud claims "reduce to
claims that [the appellants] would lose their jobs if they par-
ticipated in the Sena FLSA action," and the FLSA's anti-
retaliation provision is broad enough to protect their rights;
and (4) The wage fraud claims duplicate a claim that they
were not paid overtime under FLSA. The district court con-
cluded that the FLSA "does not allow employees to circum-
vent the statutory remedy by re-labeling their claims as
common law torts."
3. Preemption Analysis
a. Express and Field Preemption
[6] GD does not argue that the FLSA expressly preempts
a common law fraud claim. No statutory language expressly
preempts the appellants' claims. GD also does not argue that
FLSA preempts the entire field of law. The statute contains a
"savings clause" that allows states and municipalities to enact
stricter wage and hour laws. See 29 U.S.C.S 218(a). Although
this lawsuit does not invoke California's wage and hour laws,
the FLSA's "savings clause" is evidence that Congress did
not intend to preempt the entire field. Under field preemption,
it does not matter whether the common law claim conflicts
with the statute. See Industrial Truck, 125 F.3d at 1309. The
common law claim is preempted because the statute provides
exclusive remedies. While the FLSA may be a comprehensive
remedy, as the district court argues, the "savings clause" indi-
cates that it does not provide an exclusive remedy.
b. Conflict Preemption
There are two types of conflict preemption: (1)"where it is
impossible to comply with both state and federal require-
ments"; and (2) "where state law stands as an obstacle to the
accomplishment and execution of the full purposes and objec-
tives of Congress." Industrial Truck, 125 F.3d at 1309. GD
argues that the appellants' fraud claims present an obstacle to
the FLSA's purposes and enforcement, citing the statute's
"language, structure, and underlying goals." GD, however,
does not cite any Ninth Circuit case that supports its conten-
tion that fraud claims are preempted by the FLSA.
GD's best argument, given the Ninth Circuit's broad read-
ing of the statute in Lambert, is that the FLSA's anti-
retaliation provision covers the fraud claims. If the district
court is correct in arguing that (1) the anti-retaliation provi-
sion covers these claims and (2) the FLSA is the exclusive
remedy for claims duplicated by or equivalent of rights cov-
ered by the FLSA, then the fraud claims would be an obstacle
to the enforcement of the FLSA. The district court's assump-
tions, however, are incorrect.
[7] Even under Lambert's broad reading of the FLSA's
anti-retaliation provision, the appellants' career fraud claims
are not covered. Lambert interpreted the anti-retaliation provi-
sion to include employees, not only who have filed com-
plaints with the courts or the appropriate agency, but also who
have complained to their employers. See Lambert , 180 F.3d
at 1004. The FLSA refers to employees who have "filed any
complaint or instituted or caused to be instituted any proceed-
ing under this chapter, or ha[ve] testified or[are] about to tes-
tify in any such proceeding." 29 U.S.C. S 215(a)(3).
Basically, Lambert expanded the definition of "filing" to
include a complaint to a supervisor.
The facts of Lambert are much different from this case. The
Lambert employees called the Department of Labor for
advice, complained to their supervisors orally, hired an attor-
ney, and notified their employer in writing of an FLSA viola-
tion. See Lambert, 180 F.3d at 1007. After these complaints,
the employees were fired and replaced. See id. at 1001-02. In
Lambert we held that "so long as an employee communicates
the substance of his allegations to the employer " the anti-
retaliation provision applies, though we declined to articulate
a rule for the degree of specificity necessary to constitute fil-
ing a complaint within the meaning of the statute. Id. at 1008.
[8] In this case, the appellants never filed a complaint with
an agency or the courts. They never complained to their
supervisors of a FLSA violation or notified the Department of
Labor. They never instituted or caused to be instituted any
proceedings because they were not parties to the class-action
litigation in Sena. They were invited to opt-into that lawsuit,
but relied on GD's allegedly fraudulent assertions that they
held career jobs and that the Convair Division would remain
open. The appellants argue the fraud occurred after the failure
to pay overtime and after Sena settled the FLSA claims. Thus,
even under Lambert, GD's allegedly fraudulently conduct
would not be actionable under the anti-retaliation provision.
At oral argument, GD contended that two recent cases from
other circuits, Valerio v. Putnam Assocs. Inc. , 173 F.3d 35
(1st Cir. 1999) and Kendall v. City of Chesapeake, Virginia,
174 F.3d 437 (4th Cir. 1999), suggest that the FLSA governs
the appellants' claims. As with Lambert, we find both cases
distinguishable.
In Valerio, the First Circuit found that the plaintiff's written
complaint to her supervisor constituted a complaint under the
FLSA's anti-retaliation provision. See Valerio , 173 F.3d at 45.
The court did not subject the plaintiff's state law claims of
retaliation to a preemption analysis because it did not consider
whether the state retaliation claims survived once it had rein-
stated the federal retaliation claim. See id. at 46 n.7. The
appellants in this case never complained to their supervisor,
and their state fraud claims do not merely duplicate possible
federal retaliation claims. Valerio is like Lambert and there-
fore not factually analogous to this case.
In Kendall, the Fourth Circuit found that the plaintiffs
could not use a S 1983 claim to enforce their rights to over-
time compensation under the FLSA. See Kendall , 174 F.3d at
443. The plaintiffs in Kendall signed a release of their rights
under the FLSA, so they attempted to enforce their rights
under S 1983. The court conducted a S 1983 analysis, con-
cluding that the FLSA's "unusually elaborate" remedial
scheme prevented a S 1983 claim. See id. Kendall is not a
case about federal preemption of state law; rather, it is about
whether another federal statute (Section 1983) can support a
claim that clearly falls under the FLSA. Furthermore, Kendall
never reached the merits of the issue in this case -- whether
a state fraud claim is preempted by the FLSA. In Kendall, the
district court dismissed the plaintiffs' state law claim on juris-
dictional grounds but without prejudice. See id. at 443-44.
Neither the district court nor the appellate court addressed
whether the FLSA preempted the state fraud claims.
In this case, the district court relied on an even weaker pre-
cedent, Lerwill v. Inflight Motion Pictures, 343 F. Supp. 1027
(N.D. Cal. 1972), in order to conclude that the appellants'
fraud claims are preempted because the "FLSA is the exclu-
sive remedy for claims that duplicate or are equivalent of
rights protected by the FLSA." Lerwill is a dubious authority.
It is a 1972 district court case that is not even about preemp-
tion. Lerwill never mentions the word "preemption," and it
does not rely on a preemption framework. It was about the
plaintiff's effort to get a more favorable remedy. The plaintiff
sued for breach of contract of a collective bargaining agree-
ment because of unpaid overtime. See id. at 1028. This theory
directly implicated the FLSA's statutory provisions.
In this case, however, GD's allegedly fraudulent conduct
was not covered by a FLSA provision. Nor are the appellants
in this case avoiding the FLSA in order to seek a more favor-
able remedy. The FLSA's anti-retaliation provision actually
offers broader remedies than state fraud claims because the
anti-retaliation provision allows the recovery of attorneys'
fees. The other remedies are the same. In 1977, Congress
amended section 216(b) to allow plaintiffs who prove retalia-
tion under section 215(a)(3) to obtain "legal and equitable
relief" under state law.2 At least one other circuit has inter-
preted this relief to include compensatory, punitive, and emo-
tional distress damages. See, e.g., Moskowitz v. Trustees of
Purdue Univ., 5 F.3d 279, 284 (7th Cir. 1993); Travis v. Gary
Community Mental Health Ctr., Inc., 921 F.2d 108, 111 (7th
Cir. 1991). The only advantage of a state fraud claim over a
FLSA claim is a longer statute of limitations (three years
compared to two years). Compare Cal. Civ. Proc. Code
S 338(d) with 29 U.S.C. S 255(a).
[9] The district court's preemption analysis does not hold
up under the categorical preemption framework. There is defi-
nitely no express or field preemption. And there is no conflict
preemption because the anti-retaliation provision does not
apply even under Lambert's broad definition. Under a cate-
gorical preemption analysis, the career fraud claims are not
preempted.
c. The Purpose of the FLSA
Mindful that we should not adhere only to a categorical
preemption analysis, we also find that the career fraud claims
are not contrary to the purpose of the FLSA. GD argues that
the purpose of the FLSA was to protect employers as well as
employees, and therefore the appellants' fraud claims would
upset the careful balance established by the statute. Indeed,
Congress amended the FLSA in 1947 in order to mitigate the
impact of the statute on American industry by limiting retro-
active relief and including a statute of limitations. See 29
U.S.C. SS 251-261. Despite these amendments, the Supreme
Court and the Ninth Circuit have consistently found that the
central purpose of the FLSA is to enact minimum wage and
maximum hour provisions designed to protect employees. See
Barrentine, 450 U.S. at 739; Adair, 185 F.3d at 1059.
[10] The appellants' career fraud claims do not conflict
with purpose of the FLSA of protecting employees. Nor do
they upset by any balance created by amendments to the stat-
ute. Fraud claims by employees do not conflict with the FLSA
any more than claims for wrongful death, assault, or murder.
Claims that are directly covered by the FLSA (such as over-
time and retaliation disputes) must be brought under the
FLSA. That is not the case here. Thus, neither the district
court nor GD has presented a convincing case that the career
fraud claims conflict with the purposes of the FLSA.
d. Other Analogies
GD also argues that the Sena settlement was under the
exclusive jurisdiction of Judge Brewster. If GD allegedly
committed fraud in inducing the appellants not to join the set-
tlement, GD contends that the appellants should have gone to
Judge Brewster and asked him to reopen the settlement agree-
ment. GD supports this argument with a securities case in
which California plaintiffs who were part of a class action
lawsuit were barred from filing a lawsuit in California court
for fraud and misrepresentation based on the allegation that
the defendant encouraged them not to opt-out of the class
action. See In re VMS Sec. Litig., 103 F.3d 1317, 1320 (7th
Cir. 1996). The Seventh Circuit held that the exclusive rem-
edy in that case was for the California plaintiffs to return to
the district court. See id. at 1323.
As a procedural matter, GD makes this exclusive jurisdic-
tion argument for the first time on appeal. Even if the argu-
ment is not waived, it is substantively flawed. In securities
cases such as the one cited by GD, the plaintiffs had the
opportunity to opt-out of the class and were therefore subject
to the court's jurisdiction. The appellants in this case, how-
ever, were never under the exclusive jurisdiction of Judge
Brewster. They were never parties to the Sena settlement.
They only had the opportunity to opt-in to the settlement. Fur-
thermore, the appellants (along with 136 GD employees)
asked GD to reopen the Sena settlement just three weeks after
learning the Convair Division was closing. GD's attorneys
denied their requests, testifying to this fact during the Argo
litigation. We therefore deny GD's request to take judicial
notice of documents from Sena and reject GD's argument that
Judge Brewster had exclusive jurisdiction over the appellants'
claims.
Better analogies appear in the preemption cases involving
the field of nuclear energy regulation. In a 1990 preemption
case, the Supreme Court held that the anti-retaliation provi-
sion of the Energy Reorganization Act ("ERA") did not pre-
empt a state law claim for intentional infliction of emotional
distress. See English, 496 U.S. at 90. English said: "[W]e
think the District Court failed to follow this Court's teaching
that `[o]rdinarily, state causes of action are not pre-empted
solely because they impose liability over and above that
authorized by federal law.' " Id. at 89 (quoting California v.
ARC Am. Corp., 490 U.S. 93, 105 (1989)). Furthermore,
English said:
[W]e find no `clear and manifest' intent on the part
of Congress . . . to pre-empt all state tort laws that
traditionally have been available to those persons
who, like petitioner, allege outrageous conduct at the
hands of an employer . . . . [That] would require us
to conclude that Congress has displaced not only
state tort law, which is at issue in this case, but also
state criminal law, to the extent that such criminal
law is applied to retaliatory conduct at the site of a
nuclear employer.
Id. at 83. English is instructive not only because it is a recent
Supreme Court precedent on preemption but also because
Lambert used the ERA's anti-retaliation provision as an ana-
log for interpreting the scope of the FLSA's anti-retaliation
provision. See Lambert, 180 F.3d at 1005 n.3 (citing Mac-
Kowiak v. University Nuclear Sys., Inc., 735 F.2d 1159 (9th
Cir. 1984) and its interpretation of the ERA's anti-retaliation
provision).
[11] Finally, there is a simpler way to look at the preemp-
tion issues in this case. The appellants' career fraud claims are
nothing more than fraud claims about a plant closing. We
have typically allowed state fraud claims when companies
allegedly lie or misrepresent the status of a plant closing. See
Milne Employees Ass'n v. Sun Carriers, Inc., 960 F.2d 1401,
1418 (9th Cir. 1992) (finding that the employees' claims of
fraud, misrepresentation of facts, and intentional infliction of
emotional distress were not preempted by the Labor Manage-
ment Relations Act). This case is about whether GD is guilty
of fraud and misrepresentation because of its statements about
the appellants' "career jobs" and about not closing the Con-
vair Division. The Sena settlement of the FLSA claims was
merely an impetus for this alleged fraud and may factor into
the amount of damages to which the appellants are due.
The preemption issues in this case have important federal-
ism concerns, and we are reluctant to allow a plaintiff to cir-
cumvent the FLSA's comprehensive statutory remedies.
Preemption issues, however, must be decided on a case-by-
case basis. In this case, the appellants' career fraud claims are
not categorically preempted because the appellants never
complained or instituted any proceedings under the anti-
retaliation provision; the career fraud claims also are not con-
trary to the FLSA's purpose of protecting employees. Thus,
after conducting a thorough preemption analysis and consult-
ing analogous legal precedents, we reverse the district court's
finding of federal preemption as to the career fraud claims.
B. Statute of Limitations
The district court also argued that the appellants failed to
file their fraud claims within the three-year statute of limita-
tions under Cal. Civ. Proc. Code S 338(d). The district court
argued that the appellants, who filed their complaint on June
27, 1997, "were on notice of the purported fraud in September
1993" when they could have opted-in to the Sena settlement.
The district court found that at the time of the Sena settlement
the appellants "had the necessary information upon which to
conclude that the company had not properly compensated
them for all hours worked."
[12] California Civil Procedure CodeS 338(d) provides that
a cause of action for fraud "is not to be deemed to have
accrued until the discovery, by the aggrieved party, of the
facts constituting the fraud or mistake." Accrual may also be
defined as when the "the plaintiff discovers, or has reason to
discover the cause of action." Norgart v. Upjohn Co., 87 Cal.
Rptr. 2d 453, 457 (1999). Once the statute of limitations is
tolled, S 338(d) "does not in any way limit a plaintiff's ability
to recover for events that occurred more than three years prior
to accrual or filing." County of Marin Ass'n of Firefighters v.
Marin County Employees Retirement Ass'n, 30 Cal. Rptr. 2d
736, 744 (Ct. App. 1994).
[13] In this case, the appellants did not have reason to dis-
cover GD's alleged fraud and misrepresentations until the
company announced that the plant was closing on July 1,
1994. The Sena settlement is irrelevant to the appellants'
knowledge of GD's alleged fraud. They had no reason to
doubt GD's statements about their jobs or the status of the
Convair Division until the announcement of the plant closing.
The only thing the appellants were on notice of in September
1993 was that GD may not have paid them enough overtime.
They learned nothing at that time about their job security or
the plant closing. The district court's holding about the statute
of limitations misstates the appellants' case, conflating the
fraud claims with a garden-variety FLSA claim. The appel-
lants could not have discovered the alleged fraud until July 1,
1994. Therefore, given that the appellants filed their claim on
June 27, 1997, they were within the three-year statute of limi-
tations.
C. Failure to State a Claim
The district court found that the appellants' allegations
were too vague to support their fraud claims, relying on the
following dicta: " `Promises too vague to be enforced will not
support a fraud claim any more than they will one in con-
tract.' " (quoting Rochlis v. Walt Disney Co., 23 Cal. Rptr. 2d
793, 800 (Ct. App. 1993), disapproved on other grounds, Tur-
ner v. Anheuser Busch, Inc., 876 P.2d 1022 (Cal. 1994)).
Under our de novo review of the district court's dismissal, we
reverse in light of the admonition that a complaint should not
be dismissed unless it appears beyond doubt that the plaintiff
can prove no set of facts in support of the claim that would
entitle the plaintiff to relief. See Morley, 175 F.3d at 759.
[14] The appellants alleged two basic fraud claims: fraudu-
lent misrepresentation and fraudulent concealment. 3 There are
two principal reasons why the district court erred in granting
GD's 12(b)(6) motion. First, Rochlis is distinguishable. In that
case, the court found that promises of "appropriate" financial
rewards and "active and meaningful" participation in creative
decisions were too vague. See Rochlis, 23 Cal. Rptr. 2d at
800. In this case, however, the appellants presented numerous
statements by GD that they had "career jobs" and the Convair
Division would remain open through the year 2000. Vague
promises about financial rewards and creative control are far
different from specific promises of job security.
[15] Second, the outcome of Argo plays a pivotal role in
proving that GD knowingly misrepresented facts and con-
cealed information about the plant closing with an intent to
prevent the appellants in this case from joining the Sena set-
tlement. In Argo, the trial judge denied GD's motion for a
new trial because "there was substantial evidence before the
jury that [GD] misled its employees and clear and convincing
evidence that there was fraud involved." Although the appel-
lants in this case concede that Argo "was tried on narrower
fraud claims than alleged by the Williamson plaintiffs," they
allege that "Williamson includes the same type of fraud
claims which were tried to verdict favoring the plaintiffs in
Argo." The evidence in Argo about GD's allegedly knowing
misrepresentations, however, is under seal, and GD refuses to
release it for this lawsuit. We assume from GD's refusal that
the evidence in Argo is probative of the alleged fraud in this
case.
[16] In this case, the district court's instincts were correct.
The district court issued a sua sponte order staying this case
pending the outcome in Argo because of res judicata con-
cerns, but it lifted the stay when both parties objected because
the parties are different. See Trulis v. Barton, 107 F.3d 685,
691 (9th Cir. 1997) (noting that res judicata only applies if the
parties are the same). If Argo becomes a final judgment, how-
ever, the appellants may be able to preclude GD from reliti-
gating some of the fraud issues in this case by invoking
offensive non-mutual collateral estoppel.4 Argo is still on
appeal in the California courts. Since the decision in Argo is
not final and documents in Argo are critical to proving fraud
in this case, we recommend that on remand the district court
issue a stay in this case pending the outcome in Argo. Once
Argo has become final, the parties can litigate the collateral
estoppel issues and agree to some sort of sealed discovery of
the Argo documents. Given the importance of Argo to this
case, however, the district court's 12(b)(6) order on vagueness
grounds was premature.
IV. CONCLUSION
For the forgoing reasons, we reverse the district court's
12(b)(6) order finding that the FLSA had preempted the
appellants' career fraud claims, that the California statute of
limitations had run, and that the appellants' claims were too
vague. We remand this case for further proceedings.
REVERSED and REMANDED.
_______________________________________________________________
FOOTNOTES
1 The statute says:
No provision of this chapter or of any order thereunder shall
excuse noncompliance with any Federal or State law or munici-
pal ordinance establishing a minimum wage higher than the mini-
mum wage established under this chapter or a maximum
workweek established under this chapter, and no provision of this
chapter relating to the employment of child labor shall justify
noncompliance with any Federal or State law or municipal ordi-
nance establishing a higher standard than the standard established
under this chapter.
29 U.S.C. 218(a).
2 Section 216(b) says: "Any employer who violates the provisions of
section 215(a)(3) of this title shall be liable for such legal and equitablerelief as may be appropriate to effectuate the purposes of section 215(a)(3)
of this title, including without limitation employment, reinstatement, pro-
motion, and the payment of wages lost and an additional equal amount as
liquidated damages." 29 U.S.C. S 216(b).
3 Misrepresentation, under California law, requires that: (1) the defen-
dant must have made a representation as to a past or existing material fact;
(2) the representation must have been false; (3) the defendant must have
known the representation was false when made; (4) the defendant must
have made the representation with an intent to defraud the plaintiff -- with
the purpose of inducing the plaintiff to rely on it; (5) the plaintiff must
have been unaware of the falsity of the representation and acted on the
truth of the representation; and (6) as a result of relying on the representa-
tion, the plaintiff must have sustained damages. See Witkin, Summary of
Cal. Law (9th ed. 1998) Torts, SS 676-677, at 778-79. Concealment
requires that: (1) the defendant concealed a material fact; (2) the defendant
was under a duty to disclose the fact to the plaintiff; (3) the defendant con-
cealed or suppressed the fact with an intent to defraud; (4) the plaintiff
was unaware of the fact and would have acted if he or she had known
about it; and (5) the concealment caused the plaintiff to sustain damage.
See id. at Torts S 697, at 799-800; Cal. Civ. Code SS 1572(3), 1710(3).
4 "Under California law, `[a] party is collaterally estopped from relitigat-
ing an issue previously adjudicated if: (1) the issue necessarily decided in
the previous lawsuit is identical to the issue sought to be relitigated; (2)
there was a final judgment on the merits of the previous suit; and (3) the
party against whom the estoppel is asserted was a party, or in privity with
a party, to the previous suit.' " In re Russell, 76 F.3d 242, 244-45 (9th Cir.
1996) (quoting In re Joshua J., 46 Cal. Rptr. 2d 491, 497 (Ct. App. 1995)).
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