Preview
TIMOTHY J. LONG (STATE BAR NO. 137591) FlLED/ENDORSi•D
tjlong@orrick.coin
2 NICHOLAS J. HORTON (STATE BAR NO. 289417)
nhorton@orrick.com JAN 3 0 2019
3 AVALON JOHNSON FITZGERALD (STATE BAR > )
afitzgerald@orrick.com By; J, Carrisosa
4 ORRICK, HERRINGTON & SUTCLIFFE LLP-
400 Capitol-Mall, Suite 3000 - •- • — -—- •
5 Sacramento, CA 95814-4497
Telephone: +1916 447 9200
6 Facsimile: +1916 329 4900
7 Attorneys for Defendant
HEALTH NET OF CALIFORNIA, INC.
8
9 SUPERIOR COURT OF THE STATE OF CALIFORNIA
10 COUNTY OF SACRAMENTO
11
ANDREA SPEARS, an individual, on behalf Consolidated Case No. 34-2017-00210560-
12 of herself and on behalf of all persons similarly CU-OE-GDS
situated,
13 Plaintiff, REPLY MEMORANDUM OF POINTS
AND AUTHORITIES IN SUPPORT OF
14 V. DEFENDANT HEALTH NET OF
CALIFORNIA, INC.'S RENEWED
15 HEALTH NET OF CALIF0RNIA,-INC., a MOTION FOR SUMMARY
California Corporation; and Does 1 through 50, ADJUDICATION
16 inclusive,
Date: February 4, 2019
17 Defendants. Time: 9:00 a.m.
Dept.: 54
18
Reservation No.: 2380178
19
Complaint Filed: April 5, 2017
20 FAC Filed: June 29, 2017
Consolidated Complaint Filed: Dec. 21, 2017
21
TOMAS R. ARANA, on behalf of himself, all Complaint Filed: August 1,2017
22
others similarly situated.
23
Plaintiff,
24
V.
25
HEALTH NET OF CALIFORNIA, INC., a
26 California corporation; and DOES 1-50,
inclusive.
27
Defendant.
28
DEFENDANT'S REPLY IN SUPPORT OF RENEWED MOTION FOR SUMMARY ADJUDICATION
4123-7092-9178
1 I. INTRODUCTION
2 Plaintiff Andrea Spears' opposition to HNCA's Renewed Motion for Summary
3 Adjudication ("Renewed MSA") suffers from several critical flaws. Spears reads both the
4 relevant-Statutes and the law far too narrowly. She would.have this Court believe that her own
5 unartful pleading—which groups together several separate and distinct allegedly wrongful acts
6 into her third cause of action for regular rate violations—precludes HNCA from seeking summary
7 adjudication on her claim arising from just one of those wrongful acts. The law is not so
8 nonsensical. Spears would further have this Court believe that because HNCA's Renewed MSA
9 does not present newly discovered facts, HNCA is barred from bringing the Renewed MSA.
10 Again, the law rejects this constrained reading of the statute. Because HNCA presents numerous
11 facts in support of this motion that were not presented to the Court in its original motion,
12 HNCA's Renewed MSA is proper.
13 Spears does not even bother to oppose HNCA's Renewed MSA as to the payment of
14 SPOT bonuses. Wellness Incentive Payments, or ACA Incentive Plan Payments. Nor can she, as
15 she admits.that she never-received these payments. Because Spears is not the real party in-interest
16 for claims arising from these payments, HNCA is entitled to summary adjudication on them.'
17 Finally, Spears' opposition to ITNCA's motion on the payment she did receive—the cash
18 benefit received through the Flex Dollars program under the Health Net, Inc. Associates Benefit
19 Program (the "Plan")—suffers from critical misunderstandings. First, Spears incorrectly believes
20 that employees who opted to receive cash instead of medical benefits under the Plan were not
21 participants in the Plan ("Plan Participants"). Not so. Second, Spears misconstrues the basic
22 holding of Flores v. City of San Gabriel and argues that the analysis set forth by 29 C.F.R.
23 § 778.215 applies only to payments made for benefits and can never apply to cash payments made
24 to employees pursuant to a benefits plan. Again, this is incorrect. Third, Spears disingenuously
25 asserts that employees received cash payments directly from HNCA, rather than from third-party
26 Health Net, Inc. ("HNI") because employees received these cash payments in their paychecks.
27
28 ' Although Plaintiff Tomas Arana did receive these payments, he does not oppose HNCA's motion. Because HNCA
has met its burden to establish that it properly included or excluded these payments from the regular rate, as the case
may be, HNCA is entitled to summary adjudication on Arana's regular rate claim as well.
DEFENDANT'S REPLY IN SUPPORT OF RENEWED MOTION FOR SUMMARY ADJUDICATION
4123-7092-9178
Yet Spears' own direct deposit authorization slip demonstrates this is false. Fourth, and relatedly,
2 Spears contends that detailed evidence of LFNl's accounting processes is necessary to establish
3 that HNCA's contributions to the Plan were irrevocable. Again, not so. HNCA has met its
4 burden to provide uncontro.verted evidence that HNCA transferred the money to fund all benefits
5 under the Plan—including the cash benefits at issue here and payments made to healthcare
6 providers—to HNI, and fLNCA had no ability to recapture those funds. Nothing more is required.
7 Fifth, Spears twists the language of the regulations and contends that because HNCA might
somehow abstractly "benefit" from providing its employees with Flex Dollars, HNCA can divert
9 these funds for its own benefit. The uncontroverted evidence proves otherwise. In short. Spears'
10 basic misunderstanding of the law and the facts cannot and does not change the reality that the
Plan is bona fide under 29 U.S.C. § 207(e) because it satisfies the requirements of 29 C.F.R.
12 § 778.215. The cash benefits paid to Spears pursuant to that Plan were therefore properly
13 excluded from her regular rate of pay.
14 II. ARGUMENT
15: A. HNCA's Renewed MSA Is Proper Because It Ghaliieniges-Separate and
Distinct Allegedly Wrongful Acts.
16 —
17 Spears contends that HNCA's Renewed MSA is improper under Code of Civil Procedure
18 section 437c(f) because it does not dispose of the entirety of Plaintiffs' third cause of action for
19 failure to pay hourly and overtime wages, sixth cause of action for unfair competition, or seventh
20 cause of action for PAGA penalties. This argument relies on a simplistic and inaccurate
21 understanding of section 437c(f). While the Legislature amended this section in 1990 to prohibit
22 the adjudication of separate "issues," California courts have long recognized that where a
23 plaintiffs complaint lumps together "separate and distinct wrongful acts . . . in the same cause of
24 action," summary adjudication on one or more of those "separate and distinct wrongful acts" is
25 proper. Lilienthal & Fowler v. Superior Court, 12 Cal. App. 4th 1848, 1854 (1993); see also
26 EdwardFineman Co. v. Superior Court, 66 Cal. App. 4th 1110, 1118 (1998). Lilienthal and its
27 progeny recognize that while a plaintiff might include multiple wrongful acts as a basis for a
28
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single "cause of action," allegations regarding two unrelated transactions "involve two separate
2_ and distinct causes of action regardle.ss of how pled in the complaint.'' 12 Cal. App. 4th at 1854.
3 FFNCA's motion's is therefore entirely proper. While Plaintiffs' cause of action for failure
.4 to pay hourly and. overtijne wages and their derivative claims rely upon nimierous alleged ;-
5 wrongs—i.e., the failure to provide compliant meal periods, the failure to provide compliant rest
6 periods, the failure to include "non-discretionary bonuses" when calculating the regular rate of
7 pay—these alleged wrongs are each a separate and distinct wrongful act. Compl. 87, 89, 91-
8 93. That Plaintiffs combined these wrongful acts into the same cause of action does not prevent
9 HNCA from seeking summary adjudication on any one of them. Any holding to the contrary
10 "would defeat the time and cost saving purposes of the amendment and allow a cause of action in
11 its entirety to proceed to trial even where, as here, a separate and distinct alleged . . . claim may
12 be defeated by summary adjudication." Edward Fineman Co., 66 Cal. App. 4th at 1118.
13 B. Because HNCA's Renewed MSA Presents New Facts to the Court, section
437c(f)(2) Is Not a Procedural Bar.
14
15 Spears next contends that because HNCA does notmeet the-requirements for bringing a'
16 renewed motion under section 437c(f)(2), the Court must deny FFNCA's Renewed MSA on
17 procedural grounds. Once again. Spears' rigid reading of the statute has no basis in the law. In
18 Bagleyv. TRW, Inc., 73 Cal. App. 4th 1092 (1999), the court found the defendant's renewed
19 motion for summary judgment did not present "new" evidence, as the statute required, because
20 the only evidence offered "was already presented before [to the court], in support of [the] original
21 motion." Id. at 1097. Specifically, the court "compared the evidence submitted with [the
22 defendant's] first motion to the evidence submitted with its second motion," and compared the
23 material facts "in [the] second separate statement of undisputed facts" with the material facts
24 "included in [the] first separate statement of undisputed facts." Id. The court's analysis turned on
25 whether the moving party presented new facts to the court, not whether the evidence was newly
26 discovered. Id. The Supreme Court's decision in Le Francois v. Goel, 35 Cal. 4th 1094 (2005),
27 is not to the contrary. There, the Court merely observed that "a repeated motion or motion for
28
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reconsideration must be based on new facts or law," and that section 437c(f)(2) "limit[s] the
2 parties' ability to file repetitive motions."- Id. at 1099, 1 104.
3 Here, FFNCA in no way attempts to "bring the same motion over and over." Le Francois,
.4 35 Cal._4th at 1104 (quotation omitted).- While this motion, like-HNCA's original motion for
5 summary adjudication, addresses Plaintiffs' regular rate claims arising from FFNCA's alleged
6 payment of certain so-called "bonuses," this motion does not merely repeat the original. Instead,
7 HNCA sets forth new material facts demonstrating that it "'contributed' the 'cash in lieu of
8 benefits' to third party HNI, and . . . that HNI, not [HNCA], actually paid out those amounts to
9 employees." Decl. of Nicholas J. Horton ISO Renewed MSA, Nov. 19, 2018,.Ex. D at 5.
10 Likewise, HNCA now provides evidence to define what it considers to be a "bonus," identifies all
11 forms of earnings received by Plaintiffs as non-exempt employees, specifically identifies which
12 of these earnings HNCA considered a bonus, and identifies whether those earnings were included
13 in the regular rate. HNCA's Reply Separate Statement of Undisputed Material Facts
14 ("RUF")^ 52-67, 79-81, 86-88, 101 -02. Because these facts were not included in the prior motion
15 for summary adjudication, HNCA's-rhotibn does not violate section 427c(f)(2).
'6 C. Spears Concedes the Merits of HNCA's Renewed MSA as to the Wellness
Incentive, SPOT Bonus, and ACA Incentive Plan Payments.
18 Spears opposes only HNCA's motion regarding the payment of cash benefits under the
19 Plan."* Spears does not offer any argument or legal authority whatsoever to oppose FFNCA's
20 Renewed MSA on her regular rate claim arising from Wellness Incentive Payments, SPOT
21 Awards, or ACA Incentive Plan Payments. By failing to address HNCA's motion on these
22
23 2 While Spears characterizes this statement as the Court's "holding," Opp. 16:1, it is only dicta. The Court of Appeal
found the defendant's renewed motion for summary judgment barred because it "was based on the same law and
24 evidence as the first motion," but the Court "did not grant review on [that] question . . . 35 Cal. 4th at 1099.
25 ^ HNCA provides the Court vvith its RUF not only to assist the Court's review of Spears' lengthy, convoluted, and
oflen misleading responses to HNCA's Separate Statement filed with its moving papers, but to respond to the new
26 "facts" raised by Spears in her responses to HNCA's undisputed facts.
27 HNCA has provided competent, undisputed evidence of all compensation Plaintiffs received through payroll.
RUF 57, 63, HNCA has also provided competent, undisputed evidence of what payments it considered to be a
28 "bonus." RUF 52. Spears' opposition makes clear that the only payment she received that she contends HNCA
incorrectly excluded from her regular rate is the cash benefit she received pursuant to the Flex Dollars program.
Opp. 5:12-15, 19:11-13.
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1 claims. Spears has waived any opposition. See, e.g.. People v. Blankenship, 213 Cal. App. 3d
2 992, 995-96 (1989). Of course, it is unsurprising that Spears does not oppose HNCA's Renewed
3 MSA regarding Wellness Incentive Payments, SPOT Awards, or ACA Incentive Plan Payments,
4 given that Spears does not dispute that she never received them. See R.UF 81,88, 102. Because
5 Spears did not receive these payments, she cannot have been "personally damaged" by HNCA's
6 alleged failure to include these payments in the regular rate. Bluinhorst v. Jewish Family Sen>s. of
1 L.A., 126 Cal. App. 4th 993, 1000 (2005). Spears thus lacks standing to pursue regular-rate
8 claims based on these payments. Id. at 1000-01; Cal. Civ. Proc. Code § 367.
9 Likewise, Arana undisputedly did not receive cash benefits under the Flex Dollars
10 program, RUF 51, and thus lacks standing to pursue regular-rate claims based on these payments.
11 Blumhorst, 126 Cal. App. 4th at 1000. And while Arana received Wellness Incentive, SPOT
12 Bonus, and ACA Incentive Plan Payments, and thus has standing to pursue claims arising from
13 these payments, Arana does not oppose FFNCA's Renewed MSA. Because FFNCA has met its
14 burden to prove that it did not need to include Arana's SPOT Bonuses or Wellness Incentive
15 Payments in his regular-rate of pay, and-that ACA Incentive Plan payments were properly - ~-~
16 included in calculating Arana's regular rate, RUF 52-55, 62-80, 83-87, 90-101, HNCA is entitled
17 to summary adjudication on Arana's claims arising from these payments.
18 D. HNCA Is Entitled to Summary Adjudication on Claims Arising from Spears'
Receipt of Cash Benefits Under the Plan.
19
20 In opposing HNCA's Renewed MSA on Spears' regular rate claim arising from her
21 receipt of Flex Dollars as cash benefits under the Plan, Spears reveals her own lack of
22 understanding of the facts and the law. Her arguments distract from the sole dispositive question
23 before this Court: whether the money Spears received for waiving her medical benefits are
24 "contributions irrevocably made by [HNCA] to a trustee or third person pursuant to a bona fide
25 plan for providing old-age, retirement, life, accident, or health insurance or similar benefits to
26 employees." 29 U.S.C. § 207(e)(4). Five criteria must be satisfied for a plan to qualify as "bona
27 fide." 29 C.F.R. § 778.215(a)(l)-(5). To be clear: whether the money Spears received for
28 waiving her medical benefits under the Plan must be included in the regular rate depends solely
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DEFENDANT'S REPLY IN SUPPORT OF RENEWED MOTION FOR SUMMARY ADJUDICATION
4123-7092-9178
upon whether the Plan satisfies these five criteria. HNCA has put forward competent, undisputed
2 evidence that these criteria are satisfied, and Spears fails to offer any evidence creating a triable
3 factual dispute. HNCA is therefore entitled to summary adjudication on this claim.
4 1. Employees Who Received Cash-Benefits Under the Flex Dollars
^ Program Were Plan Participants.
6 Spears argues that because she exercised her option under the Plan to receive Flex Dollars
7 as a cash benefit, she was not a "Plan Participant." In other words. Spears claims, only
8 employees who received medical benefits under the Plan were "Plan Participants." And, her
9 logic goes, because Spears was not a "Plan Participant," it is impossible that the Flex Dollar
10 payments she received could qualify for the exemption set forth at § 207(e). Neither the evidence
11 nor basic logic supports this strained analysis.
12 Spears received cash benefits pursuant to the Flex Dollars program. RUF 18,61. The
13 Plan itself makes clear that Flex Dollars are "amounts made available . . . under the Plan on
14 behalf of a Participant "^ Decl. of Debbie Colia ISO Renewed MSA ("Colia Decl."), Nov.
15 -19,-201-8,-Ex. A at-3 (emphasis added). The"Plan"- is defined as "the plan herein set forth-v. . ."
16 Id. at 4. A "Participant" is defined as an "Eligible Associate who has elected to participate in the
17 Plan for a Plan Year. . . ." Id. at 3. The Summary Plan Description further provides:
1S To help you pay for the cost of your benefits under the Health Net, Inc. Associate
Benefits Program, your Employer provides you with "Flex Dollars" that you can
19 use to pay for the cost of your optional benefits. . . . If you waive coverage or you
have Flex Dollars left over after you pay the cost of all of the optional benefits you
20 elect, you'll receive a portion of your Flex Dollars as cash in your paycheck and
you'll be taxed on this amount.
21
22 Colia Decl. \ 7, Ex. J at 6; Ex. K at 11. In other words, regardless of whether Flex Dollars were
23 used to pay for the employee's optional benefits or were received as a cash benefit. Flex Dollars
24 were received by employees "under the Plan," and employees who received Flex Dollars—as a
25 cash benefit or as a contribution towards benefits—were necessarily Plan Participants.
26 Spears' insistence that Debbie Colia and Diane Rodes testified to the contrary will not
27
28 ' The Plan was in fact required to provide "cash" as a "benefit" under section 125 ofthe Internal Revenue Code,
which Plaintiffs agree governs the Plan. RUF 6. That statute provides that "cash" is a "benefit" that must be
included as an option to employees participating in a "cafeteria plan." 26 U.S.C. § 125(d)(1)(B).
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1 make it so. Ms. Colia testified unequivocally that "an employee who meets the eligibility
2 requirements as set forth in the [Plan] [who] elects to not receive any optional benefit is . . .-slill a
3 plan participant. . . ." Decl. of Nicholas J. Horton ISO Reply to Renewed MSA ("Horton
4 Decl.") ^.3, Ex, B at 92:25-93:5; .fee oZyf?/£/. 118:12-16. Employees who waived medical and-
5 dental coverage under the Plan would receive "medical flex waive payments and dental flex
6 waive payments."^ Id. 96:2-8. This is precisely the situation presented here, where Spears
7 elected not to receive optional medical benefits under the Plan and thus received medical flex
8 waive payments. As Ms. Colia's testimony makes clear, Spears was "still a plan participant."
9 Id. 93:3-4. Ms. Rodes similarly testified that Spears received her "Med Flex Waive" payments
10 "as part of the plan through Health Net Inc." Horton Decl. T] 2, Ex. A at 56:2-3. When
11 questioned whether Spears was a "plan participant" with respect to medical coverage, given that
12 she waived medical coverage, Ms. Rodes clarified: plan participant is in the cafeteria plan.
13 That's what the plan means—the cafeteria style benefit plan." Id. 79:3-5 (emphasis added).
14 Thus, while an employee might elect some coverage and waive other coverage under the Plan, a
.1-5 Plan Participant is anyone who received any benefit^—including cash payments through the Flex
16 Dollars program—under the cafeteria-style benefits Plan.
'7 2. Flores Does Not Categorically Prohibit Applying 29 C.F.R. $ 778.215
^^ to an Employer's Cash Payments Under a Cafeteria Benefits Plan.
19 Central to Spears' argument is her distorted view of Flores v. Cily of San Gabriel,
20 824 F.3d 890 (9th Cir. 2016). Spears claims Flores held that all cash payments made to
21 employees in lieu of benefits are categorically included in the regular rate because that money is
22 "ultimately paid" to the employee rather than a medical provider, and thus the analysis set forth at
23 29 C.F.R. § 778.215 is simply inapplicable. Flores held no such thing. There, like HNCA, the
24 City "furnishe[d] a designated monetary amount to each employee for the purchase of medical,
25 vision, and dental benefits" pursuant to a "Flexible Benefits Plan." 824 F.3d at 896. An
26 employee could "receive the unused portion of her benefits allotment as a cash payment added to
27
^ The cash benefits represented less than 2% of HNCA's contributions under the Plan and were available to Plan
28 Participants only if they otherwise had medical or dental coverage. RUF 43, 48. Accordingly, the cash benefits
provided to Plan Participants were consistent with the Plan's purpose to provide health and welfare benefits to
HNCA employees. RUF 24-38: Dep't of Labor Op. Letter, 2003 WL 23374600, *l-2 (July 2, 2003).
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1 her regular paycheck." Id. These payments were not included in the regular rate of pay. Id.
2 But unlike HNCA, "the City [paid] the unused benefits directly to its employees and not
3 'to a trustee or third person . . . ."' 824 F.3d at 901. Indeed, the City did not dispute that it did
4 _not make these benefits.payments to a third party—nor could it, given that the-City administered
5 its own flexible benefits plan. Id. Instead, the City argued that it "generally" met the
6 requirements of § 207(e)(4). The Ninth Circuit concluded that "generally" meeting the statutory
7 requirements was insufficient and held that the City's administration of its own benefits plan
8 precluded its reliance on § 207(e)(4). Id. at 902. Nowhere does Flores hold, much less suggest,
9 that cash benefits payments did not qualify for the exception set forth in § 207(e)(4) because the
10 payments were ultimately received hy employees rather than third parties such as healthcare
11 providers. See id. Nor does Flores hold that section 778.215 does not apply to cash payments
12 made to employees who waive benefits under a cafeteria benefits plan.^ Spears'
13 mischaracterization of the court's decision cannot change this reality.
14 3. Spears and Other Employees Received Cash Benefits From HNI. a
Third Party. Not from HNCA.
15
16 FFNCA made employer contributions to a "third person" because it deposited the total
17 amount necessary to cover all benefits the Plan paid out to Plan Participants—including the cash
18 benefits paid to Spears under the Flex Dollars program—into an account maintained and
19 controlled by FFNI as the Plan's sponsor and administrator. RUF 13, 19, 21. Spears contends that
20 FFNI and FFNCA were not actually "third parties" because these entities shared human resources
21 and payroll and were headquartered at the same location, but provides no authority establishing
22 that such circumstances legally render FFNI and FTNCA the same entity for purposes of
23 § 207(e)(4). Opp. 19:17-21:12. Indeed, Spears does not even attempt to explain how these
24 "facts" create a triable issue as to whether HNCA and HNI were third parties for purposes of
25 administering the Plan.
26 That FTNCA is a subsidiary of FfNI does not alter this result. See, e.g., Horton Decl. ^ 3,
27
28 ' In fact, the Department of Labor has explicitly stated that "[a] bona fide plan may allow incidental cash payments to
employees," and applied the analysis set forth at section 778.215 to cash benefits received under a cafeteria plan.
2003 WL 23374600 at*l-3.
DEFENDANT'S REPLY IN SUPPORT OF RENEWED MOTION FOR SUMMARY ADJUDICATION
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1 Ex. B at 56:24-25. FFNCA, HNI, was Spears'employer. HNI, «o/FFNCA, administered the
2 Plan and paid the Flex Dollars to Spears. Ms. Colia clearly testified to this fact:
3 Q. Did Health Net of California, Inc. provide money to Health Net, Inc. to fund the
benefits ofthe plan participants who are employees of Health Net of California,
4 . -Inc.? - .
5 A. Yes.
6 Id. 33:5-9. Ms. Colia fijrther explained that "[tjhrough the Finance and Accounting Department
7 the funds would move from accounts between the legal entities." Id. 34:10-12. The money was
8 then separately maintained by FFNl's Compensation and Benefits Committee. Id. 36:9-14, 65:18-
9 21; UF 4, 8. FfNI's Compensation and Benefits Committee served as the plan sponsor and
10 "ensure[d] the accurate administration of the Plan. Horton Decl. \ 3, Ex. B at 147:10-148:16; id.
11 149:5-22. The Plan was in fact separate even from HNI, such that the Compensation and Benefits
12 Committee separately administered the Plan and HNI had no authority to access the Plan's
13 accounts or to direct the Compensation and Benefits Committee to take any actions with respect
14 to the Plan. I d 149:14-150:8, 150:24-151:16; 5ee a/^o z^/. 152:1-3.
15 That Spears and other'employees received Flex Dollars from FFNF in their paycheck along
16 with their pay from HNCA is unremarkable, given Ms. Colia's testimony that the various Health
17 Net entities "had a payroll department that issued paychecks and processed payroll. There were
18 not separate payroll departments for the separate legal entities." Horton Decl. 3, Ex. B at 52:9-
19 12. Thus, the money for Flex Dollars transferred to HNI from HNCA did not revert back to
20 FFNCA prior to FTNCA issuing Spears' paycheck; FFNI paid Flex Dollars to Spears at the same
21 time FFNCA paid Spears'wages. M ; 5ee a/50 iJ. 52:18-53:12. Nor is the fact that the money was
22 directly deposited into Spears' account significant in any way. As Ms. Colia clearly explained:
23 different components listed on this [pay] stub come from different accounts. And
so the waive credit, the medical flex waive credit, the dental flex benefit, once again
24 as the plan sponsor and plan administrator Health Net, Inc. was responsible for
those benefits. Whereas I would assume /or base rate compensation Ms. Spears'
25 employer Health Net of California . . . is responsible for those payments.
26 I d 62:10-18 (emphasis added); 5eea/jo/W. 62:23-63:5,64:23-65:9,66:11-67:4,68:6-18.
27 Ms. Colia also specifically testified that the "Health Net Inc. plan accounf' deposited the
28 "medical flex waive payment of $20" into Spears' account. Id. l\:9-\ 1; see also id. 71:21-72:20.
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1 Spears' own direct deposit authorization form confirms that FFNI, not HNCA, was authorized to
2 deposit money into Spears' bank account.^.Rodes Decl. ISO Reply to Renewed MSA, ^ 2, Ex. A.
3 Spears' attempts to twist the language of the Plan and to make hay out of ultimately irrelevant
4 facts do not create a genuine dispute as,to whether Spears received her Flex Dollar payments
-'»- " --• - ' —r
5 from FFNI, which is a third party to HNCA for purposes of administering the Plan. RUF 13.
6 4. HNCA's Payments to HNI Were Irrevocable and HNCA Could Not
Divert the Funds for Its Own Benefit.
7
8 Nor does Spears create a genuine dispute as to whether FFNCA's payments of Flex Dollars
9 were irrevocable. Under the regulation, contributions are "irrevocable" if "the trust or fund [is]
10 set up in such a way that in no event will the employer be able to recapture any of the
11 contributions paid in nor in any way divert the funds to his own use or benefit." 29 C.F.R.
12 § 778.215(a)(4). Spears contends the payments were not irrevocable because FFNCA has not
13 provided detailed evidence regarding the accounting process through which Flex Dollars were
14 transferred from HNCA to HNI and then from FFNI to Spears. But such evidence is not required.
15 FFNCA has submitted'competenty-uhdisputed evidence that HNCA deposited its contributions:
16 under the Plan—including the Flex Dollars provided to employees who waived medical coverage
17 under the Plan—into an account maintained and controlled by HNI, via its Compensation and
18 Benefits Committee. RUF 4, 8, 18, 19. Once HNCA made these contributions, HNCA could not
19 recapture or divert the funds for its own benefit. UF 20. Instead, HNI controlled this money, and
20 used it to pay for benefits provided by the Plan. UF 22, 39. Spears offers nothing to refute this
21 evidence, or to even suggest that HNCA had the ability to control, recapture, or divert these funds
22 once they were transferred to HNI. See Opp. 19:17-21:12. Nor could she, as Ms. Colia's
23 testimony confirms that the Compensation and Benefits Committee operated independently of
24 both HNI and HNCA.^ Horton Decl. U 3, Ex. B at 151:2-16, 152:1-3.
25 HI. CONCLUSION
26 For the reasons set forth above, HNCA is entitled to summary adjudication.
27
^ Spears' suggestion that HNCA benefitted on some level by providing Flex Dollars lo employees is the same as
28 having the ability to divert funds for its own use or benefit is similarly nonsensical. The (question is not whether the
payments in some way benefit HNCA; the question is whether HNCA had the ability to "recapture any ofthe
contributions paid" or "in any way divert the funds to [its] own use or benefit." 29 C.F.R. § 778.215(a)(4).
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1 Dated: January 30, 2019 ORRICK, HERRINGTON & SUTCLIFFE LLP
2
3 By: (
TIMOTHY J. LONG
4 Attorneys for Defendant
HEALTH-NET OF CALIFORNIA, INC.
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DEFENDANT'S REPLY tN SUPPORT OF RENEWED MOTION FOR SUMMARY ADJUDICATION
4123-7092-9178
2019 JAN 30 ?n ^'2S
r- :,: :V.'.!'k.'^'.*f
Preview
TIMOTHY J. LONG (STATE BAR NO. 137591) FlLED/ENDORSi•D tjlong@orrick.coin 2 NICHOLAS J. HORTON (STATE BAR NO. 289417) nhorton@orrick.com JAN 3 0 2019 3 AVALON JOHNSON FITZGERALD (STATE BAR > ) afitzgerald@orrick.com By; J, Carrisosa 4 ORRICK, HERRINGTON & SUTCLIFFE LLP- 400 Capitol-Mall, Suite 3000 - •- • — -—- • 5 Sacramento, CA 95814-4497 Telephone: +1916 447 9200 6 Facsimile: +1916 329 4900 7 Attorneys for Defendant HEALTH NET OF CALIFORNIA, INC. 8 9 SUPERIOR COURT OF THE STATE OF CALIFORNIA 10 COUNTY OF SACRAMENTO 11 ANDREA SPEARS, an individual, on behalf Consolidated Case No. 34-2017-00210560- 12 of herself and on behalf of all persons similarly CU-OE-GDS situated, 13 Plaintiff, REPLY MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF 14 V. DEFENDANT HEALTH NET OF CALIFORNIA, INC.'S RENEWED 15 HEALTH NET OF CALIF0RNIA,-INC., a MOTION FOR SUMMARY California Corporation; and Does 1 through 50, ADJUDICATION 16 inclusive, Date: February 4, 2019 17 Defendants. Time: 9:00 a.m. Dept.: 54 18 Reservation No.: 2380178 19 Complaint Filed: April 5, 2017 20 FAC Filed: June 29, 2017 Consolidated Complaint Filed: Dec. 21, 2017 21 TOMAS R. ARANA, on behalf of himself, all Complaint Filed: August 1,2017 22 others similarly situated. 23 Plaintiff, 24 V. 25 HEALTH NET OF CALIFORNIA, INC., a 26 California corporation; and DOES 1-50, inclusive. 27 Defendant. 28 DEFENDANT'S REPLY IN SUPPORT OF RENEWED MOTION FOR SUMMARY ADJUDICATION 4123-7092-9178 1 I. INTRODUCTION 2 Plaintiff Andrea Spears' opposition to HNCA's Renewed Motion for Summary 3 Adjudication ("Renewed MSA") suffers from several critical flaws. Spears reads both the 4 relevant-Statutes and the law far too narrowly. She would.have this Court believe that her own 5 unartful pleading—which groups together several separate and distinct allegedly wrongful acts 6 into her third cause of action for regular rate violations—precludes HNCA from seeking summary 7 adjudication on her claim arising from just one of those wrongful acts. The law is not so 8 nonsensical. Spears would further have this Court believe that because HNCA's Renewed MSA 9 does not present newly discovered facts, HNCA is barred from bringing the Renewed MSA. 10 Again, the law rejects this constrained reading of the statute. Because HNCA presents numerous 11 facts in support of this motion that were not presented to the Court in its original motion, 12 HNCA's Renewed MSA is proper. 13 Spears does not even bother to oppose HNCA's Renewed MSA as to the payment of 14 SPOT bonuses. Wellness Incentive Payments, or ACA Incentive Plan Payments. Nor can she, as 15 she admits.that she never-received these payments. Because Spears is not the real party in-interest 16 for claims arising from these payments, HNCA is entitled to summary adjudication on them.' 17 Finally, Spears' opposition to ITNCA's motion on the payment she did receive—the cash 18 benefit received through the Flex Dollars program under the Health Net, Inc. Associates Benefit 19 Program (the "Plan")—suffers from critical misunderstandings. First, Spears incorrectly believes 20 that employees who opted to receive cash instead of medical benefits under the Plan were not 21 participants in the Plan ("Plan Participants"). Not so. Second, Spears misconstrues the basic 22 holding of Flores v. City of San Gabriel and argues that the analysis set forth by 29 C.F.R. 23 § 778.215 applies only to payments made for benefits and can never apply to cash payments made 24 to employees pursuant to a benefits plan. Again, this is incorrect. Third, Spears disingenuously 25 asserts that employees received cash payments directly from HNCA, rather than from third-party 26 Health Net, Inc. ("HNI") because employees received these cash payments in their paychecks. 27 28 ' Although Plaintiff Tomas Arana did receive these payments, he does not oppose HNCA's motion. Because HNCA has met its burden to establish that it properly included or excluded these payments from the regular rate, as the case may be, HNCA is entitled to summary adjudication on Arana's regular rate claim as well. DEFENDANT'S REPLY IN SUPPORT OF RENEWED MOTION FOR SUMMARY ADJUDICATION 4123-7092-9178 Yet Spears' own direct deposit authorization slip demonstrates this is false. Fourth, and relatedly, 2 Spears contends that detailed evidence of LFNl's accounting processes is necessary to establish 3 that HNCA's contributions to the Plan were irrevocable. Again, not so. HNCA has met its 4 burden to provide uncontro.verted evidence that HNCA transferred the money to fund all benefits 5 under the Plan—including the cash benefits at issue here and payments made to healthcare 6 providers—to HNI, and fLNCA had no ability to recapture those funds. Nothing more is required. 7 Fifth, Spears twists the language of the regulations and contends that because HNCA might somehow abstractly "benefit" from providing its employees with Flex Dollars, HNCA can divert 9 these funds for its own benefit. The uncontroverted evidence proves otherwise. In short. Spears' 10 basic misunderstanding of the law and the facts cannot and does not change the reality that the Plan is bona fide under 29 U.S.C. § 207(e) because it satisfies the requirements of 29 C.F.R. 12 § 778.215. The cash benefits paid to Spears pursuant to that Plan were therefore properly 13 excluded from her regular rate of pay. 14 II. ARGUMENT 15: A. HNCA's Renewed MSA Is Proper Because It Ghaliieniges-Separate and Distinct Allegedly Wrongful Acts. 16 — 17 Spears contends that HNCA's Renewed MSA is improper under Code of Civil Procedure 18 section 437c(f) because it does not dispose of the entirety of Plaintiffs' third cause of action for 19 failure to pay hourly and overtime wages, sixth cause of action for unfair competition, or seventh 20 cause of action for PAGA penalties. This argument relies on a simplistic and inaccurate 21 understanding of section 437c(f). While the Legislature amended this section in 1990 to prohibit 22 the adjudication of separate "issues," California courts have long recognized that where a 23 plaintiffs complaint lumps together "separate and distinct wrongful acts . . . in the same cause of 24 action," summary adjudication on one or more of those "separate and distinct wrongful acts" is 25 proper. Lilienthal & Fowler v. Superior Court, 12 Cal. App. 4th 1848, 1854 (1993); see also 26 EdwardFineman Co. v. Superior Court, 66 Cal. App. 4th 1110, 1118 (1998). Lilienthal and its 27 progeny recognize that while a plaintiff might include multiple wrongful acts as a basis for a 28 -2- DEFENDANT'S REPLY IN SUPPORT OF RENEWED MOTION FOR SUMMARY ADJUDICATION 4123-7092-9178 single "cause of action," allegations regarding two unrelated transactions "involve two separate 2_ and distinct causes of action regardle.ss of how pled in the complaint.'' 12 Cal. App. 4th at 1854. 3 FFNCA's motion's is therefore entirely proper. While Plaintiffs' cause of action for failure .4 to pay hourly and. overtijne wages and their derivative claims rely upon nimierous alleged ;- 5 wrongs—i.e., the failure to provide compliant meal periods, the failure to provide compliant rest 6 periods, the failure to include "non-discretionary bonuses" when calculating the regular rate of 7 pay—these alleged wrongs are each a separate and distinct wrongful act. Compl. 87, 89, 91- 8 93. That Plaintiffs combined these wrongful acts into the same cause of action does not prevent 9 HNCA from seeking summary adjudication on any one of them. Any holding to the contrary 10 "would defeat the time and cost saving purposes of the amendment and allow a cause of action in 11 its entirety to proceed to trial even where, as here, a separate and distinct alleged . . . claim may 12 be defeated by summary adjudication." Edward Fineman Co., 66 Cal. App. 4th at 1118. 13 B. Because HNCA's Renewed MSA Presents New Facts to the Court, section 437c(f)(2) Is Not a Procedural Bar. 14 15 Spears next contends that because HNCA does notmeet the-requirements for bringing a' 16 renewed motion under section 437c(f)(2), the Court must deny FFNCA's Renewed MSA on 17 procedural grounds. Once again. Spears' rigid reading of the statute has no basis in the law. In 18 Bagleyv. TRW, Inc., 73 Cal. App. 4th 1092 (1999), the court found the defendant's renewed 19 motion for summary judgment did not present "new" evidence, as the statute required, because 20 the only evidence offered "was already presented before [to the court], in support of [the] original 21 motion." Id. at 1097. Specifically, the court "compared the evidence submitted with [the 22 defendant's] first motion to the evidence submitted with its second motion," and compared the 23 material facts "in [the] second separate statement of undisputed facts" with the material facts 24 "included in [the] first separate statement of undisputed facts." Id. The court's analysis turned on 25 whether the moving party presented new facts to the court, not whether the evidence was newly 26 discovered. Id. The Supreme Court's decision in Le Francois v. Goel, 35 Cal. 4th 1094 (2005), 27 is not to the contrary. There, the Court merely observed that "a repeated motion or motion for 28 -3- DEFENDANT'S REPLY IN SUPPORT OF RENEWED MOTION FOR SUMMARY ADJUDICATION 4123-7092-9178 reconsideration must be based on new facts or law," and that section 437c(f)(2) "limit[s] the 2 parties' ability to file repetitive motions."- Id. at 1099, 1 104. 3 Here, FFNCA in no way attempts to "bring the same motion over and over." Le Francois, .4 35 Cal._4th at 1104 (quotation omitted).- While this motion, like-HNCA's original motion for 5 summary adjudication, addresses Plaintiffs' regular rate claims arising from FFNCA's alleged 6 payment of certain so-called "bonuses," this motion does not merely repeat the original. Instead, 7 HNCA sets forth new material facts demonstrating that it "'contributed' the 'cash in lieu of 8 benefits' to third party HNI, and . . . that HNI, not [HNCA], actually paid out those amounts to 9 employees." Decl. of Nicholas J. Horton ISO Renewed MSA, Nov. 19, 2018,.Ex. D at 5. 10 Likewise, HNCA now provides evidence to define what it considers to be a "bonus," identifies all 11 forms of earnings received by Plaintiffs as non-exempt employees, specifically identifies which 12 of these earnings HNCA considered a bonus, and identifies whether those earnings were included 13 in the regular rate. HNCA's Reply Separate Statement of Undisputed Material Facts 14 ("RUF")^ 52-67, 79-81, 86-88, 101 -02. Because these facts were not included in the prior motion 15 for summary adjudication, HNCA's-rhotibn does not violate section 427c(f)(2). '6 C. Spears Concedes the Merits of HNCA's Renewed MSA as to the Wellness Incentive, SPOT Bonus, and ACA Incentive Plan Payments. 18 Spears opposes only HNCA's motion regarding the payment of cash benefits under the 19 Plan."* Spears does not offer any argument or legal authority whatsoever to oppose FFNCA's 20 Renewed MSA on her regular rate claim arising from Wellness Incentive Payments, SPOT 21 Awards, or ACA Incentive Plan Payments. By failing to address HNCA's motion on these 22 23 2 While Spears characterizes this statement as the Court's "holding," Opp. 16:1, it is only dicta. The Court of Appeal found the defendant's renewed motion for summary judgment barred because it "was based on the same law and 24 evidence as the first motion," but the Court "did not grant review on [that] question . . . 35 Cal. 4th at 1099. 25 ^ HNCA provides the Court vvith its RUF not only to assist the Court's review of Spears' lengthy, convoluted, and oflen misleading responses to HNCA's Separate Statement filed with its moving papers, but to respond to the new 26 "facts" raised by Spears in her responses to HNCA's undisputed facts. 27 HNCA has provided competent, undisputed evidence of all compensation Plaintiffs received through payroll. RUF 57, 63, HNCA has also provided competent, undisputed evidence of what payments it considered to be a 28 "bonus." RUF 52. Spears' opposition makes clear that the only payment she received that she contends HNCA incorrectly excluded from her regular rate is the cash benefit she received pursuant to the Flex Dollars program. Opp. 5:12-15, 19:11-13. -4- DEFENDANT'S REPLY IN SUPPORT OF RENEWED MOTION FOR SUMMARY ADJUDICATION 4123-7092-9178 1 claims. Spears has waived any opposition. See, e.g.. People v. Blankenship, 213 Cal. App. 3d 2 992, 995-96 (1989). Of course, it is unsurprising that Spears does not oppose HNCA's Renewed 3 MSA regarding Wellness Incentive Payments, SPOT Awards, or ACA Incentive Plan Payments, 4 given that Spears does not dispute that she never received them. See R.UF 81,88, 102. Because 5 Spears did not receive these payments, she cannot have been "personally damaged" by HNCA's 6 alleged failure to include these payments in the regular rate. Bluinhorst v. Jewish Family Sen>s. of 1 L.A., 126 Cal. App. 4th 993, 1000 (2005). Spears thus lacks standing to pursue regular-rate 8 claims based on these payments. Id. at 1000-01; Cal. Civ. Proc. Code § 367. 9 Likewise, Arana undisputedly did not receive cash benefits under the Flex Dollars 10 program, RUF 51, and thus lacks standing to pursue regular-rate claims based on these payments. 11 Blumhorst, 126 Cal. App. 4th at 1000. And while Arana received Wellness Incentive, SPOT 12 Bonus, and ACA Incentive Plan Payments, and thus has standing to pursue claims arising from 13 these payments, Arana does not oppose FFNCA's Renewed MSA. Because FFNCA has met its 14 burden to prove that it did not need to include Arana's SPOT Bonuses or Wellness Incentive 15 Payments in his regular-rate of pay, and-that ACA Incentive Plan payments were properly - ~-~ 16 included in calculating Arana's regular rate, RUF 52-55, 62-80, 83-87, 90-101, HNCA is entitled 17 to summary adjudication on Arana's claims arising from these payments. 18 D. HNCA Is Entitled to Summary Adjudication on Claims Arising from Spears' Receipt of Cash Benefits Under the Plan. 19 20 In opposing HNCA's Renewed MSA on Spears' regular rate claim arising from her 21 receipt of Flex Dollars as cash benefits under the Plan, Spears reveals her own lack of 22 understanding of the facts and the law. Her arguments distract from the sole dispositive question 23 before this Court: whether the money Spears received for waiving her medical benefits are 24 "contributions irrevocably made by [HNCA] to a trustee or third person pursuant to a bona fide 25 plan for providing old-age, retirement, life, accident, or health insurance or similar benefits to 26 employees." 29 U.S.C. § 207(e)(4). Five criteria must be satisfied for a plan to qualify as "bona 27 fide." 29 C.F.R. § 778.215(a)(l)-(5). To be clear: whether the money Spears received for 28 waiving her medical benefits under the Plan must be included in the regular rate depends solely -5- DEFENDANT'S REPLY IN SUPPORT OF RENEWED MOTION FOR SUMMARY ADJUDICATION 4123-7092-9178 upon whether the Plan satisfies these five criteria. HNCA has put forward competent, undisputed 2 evidence that these criteria are satisfied, and Spears fails to offer any evidence creating a triable 3 factual dispute. HNCA is therefore entitled to summary adjudication on this claim. 4 1. Employees Who Received Cash-Benefits Under the Flex Dollars ^ Program Were Plan Participants. 6 Spears argues that because she exercised her option under the Plan to receive Flex Dollars 7 as a cash benefit, she was not a "Plan Participant." In other words. Spears claims, only 8 employees who received medical benefits under the Plan were "Plan Participants." And, her 9 logic goes, because Spears was not a "Plan Participant," it is impossible that the Flex Dollar 10 payments she received could qualify for the exemption set forth at § 207(e). Neither the evidence 11 nor basic logic supports this strained analysis. 12 Spears received cash benefits pursuant to the Flex Dollars program. RUF 18,61. The 13 Plan itself makes clear that Flex Dollars are "amounts made available . . . under the Plan on 14 behalf of a Participant "^ Decl. of Debbie Colia ISO Renewed MSA ("Colia Decl."), Nov. 15 -19,-201-8,-Ex. A at-3 (emphasis added). The"Plan"- is defined as "the plan herein set forth-v. . ." 16 Id. at 4. A "Participant" is defined as an "Eligible Associate who has elected to participate in the 17 Plan for a Plan Year. . . ." Id. at 3. The Summary Plan Description further provides: 1S To help you pay for the cost of your benefits under the Health Net, Inc. Associate Benefits Program, your Employer provides you with "Flex Dollars" that you can 19 use to pay for the cost of your optional benefits. . . . If you waive coverage or you have Flex Dollars left over after you pay the cost of all of the optional benefits you 20 elect, you'll receive a portion of your Flex Dollars as cash in your paycheck and you'll be taxed on this amount. 21 22 Colia Decl. \ 7, Ex. J at 6; Ex. K at 11. In other words, regardless of whether Flex Dollars were 23 used to pay for the employee's optional benefits or were received as a cash benefit. Flex Dollars 24 were received by employees "under the Plan," and employees who received Flex Dollars—as a 25 cash benefit or as a contribution towards benefits—were necessarily Plan Participants. 26 Spears' insistence that Debbie Colia and Diane Rodes testified to the contrary will not 27 28 ' The Plan was in fact required to provide "cash" as a "benefit" under section 125 ofthe Internal Revenue Code, which Plaintiffs agree governs the Plan. RUF 6. That statute provides that "cash" is a "benefit" that must be included as an option to employees participating in a "cafeteria plan." 26 U.S.C. § 125(d)(1)(B). -6- DEFENDANT'S REPLY IN SUPPORT OF RENEWED MOTION FOR SUMMARY ADJUDICATION 4123-7092-9178 1 make it so. Ms. Colia testified unequivocally that "an employee who meets the eligibility 2 requirements as set forth in the [Plan] [who] elects to not receive any optional benefit is . . .-slill a 3 plan participant. . . ." Decl. of Nicholas J. Horton ISO Reply to Renewed MSA ("Horton 4 Decl.") ^.3, Ex, B at 92:25-93:5; .fee oZyf?/£/. 118:12-16. Employees who waived medical and- 5 dental coverage under the Plan would receive "medical flex waive payments and dental flex 6 waive payments."^ Id. 96:2-8. This is precisely the situation presented here, where Spears 7 elected not to receive optional medical benefits under the Plan and thus received medical flex 8 waive payments. As Ms. Colia's testimony makes clear, Spears was "still a plan participant." 9 Id. 93:3-4. Ms. Rodes similarly testified that Spears received her "Med Flex Waive" payments 10 "as part of the plan through Health Net Inc." Horton Decl. T] 2, Ex. A at 56:2-3. When 11 questioned whether Spears was a "plan participant" with respect to medical coverage, given that 12 she waived medical coverage, Ms. Rodes clarified: plan participant is in the cafeteria plan. 13 That's what the plan means—the cafeteria style benefit plan." Id. 79:3-5 (emphasis added). 14 Thus, while an employee might elect some coverage and waive other coverage under the Plan, a .1-5 Plan Participant is anyone who received any benefit^—including cash payments through the Flex 16 Dollars program—under the cafeteria-style benefits Plan. '7 2. Flores Does Not Categorically Prohibit Applying 29 C.F.R. $ 778.215 ^^ to an Employer's Cash Payments Under a Cafeteria Benefits Plan. 19 Central to Spears' argument is her distorted view of Flores v. Cily of San Gabriel, 20 824 F.3d 890 (9th Cir. 2016). Spears claims Flores held that all cash payments made to 21 employees in lieu of benefits are categorically included in the regular rate because that money is 22 "ultimately paid" to the employee rather than a medical provider, and thus the analysis set forth at 23 29 C.F.R. § 778.215 is simply inapplicable. Flores held no such thing. There, like HNCA, the 24 City "furnishe[d] a designated monetary amount to each employee for the purchase of medical, 25 vision, and dental benefits" pursuant to a "Flexible Benefits Plan." 824 F.3d at 896. An 26 employee could "receive the unused portion of her benefits allotment as a cash payment added to 27 ^ The cash benefits represented less than 2% of HNCA's contributions under the Plan and were available to Plan 28 Participants only if they otherwise had medical or dental coverage. RUF 43, 48. Accordingly, the cash benefits provided to Plan Participants were consistent with the Plan's purpose to provide health and welfare benefits to HNCA employees. RUF 24-38: Dep't of Labor Op. Letter, 2003 WL 23374600, *l-2 (July 2, 2003). -7- DEFENDANT'S REPLY IN SUPPORT OF RENEWED MOTION FOR SUMMARY ADJUDICATION 4123-7092-9178 1 her regular paycheck." Id. These payments were not included in the regular rate of pay. Id. 2 But unlike HNCA, "the City [paid] the unused benefits directly to its employees and not 3 'to a trustee or third person . . . ."' 824 F.3d at 901. Indeed, the City did not dispute that it did 4 _not make these benefits.payments to a third party—nor could it, given that the-City administered 5 its own flexible benefits plan. Id. Instead, the City argued that it "generally" met the 6 requirements of § 207(e)(4). The Ninth Circuit concluded that "generally" meeting the statutory 7 requirements was insufficient and held that the City's administration of its own benefits plan 8 precluded its reliance on § 207(e)(4). Id. at 902. Nowhere does Flores hold, much less suggest, 9 that cash benefits payments did not qualify for the exception set forth in § 207(e)(4) because the 10 payments were ultimately received hy employees rather than third parties such as healthcare 11 providers. See id. Nor does Flores hold that section 778.215 does not apply to cash payments 12 made to employees who waive benefits under a cafeteria benefits plan.^ Spears' 13 mischaracterization of the court's decision cannot change this reality. 14 3. Spears and Other Employees Received Cash Benefits From HNI. a Third Party. Not from HNCA. 15 16 FFNCA made employer contributions to a "third person" because it deposited the total 17 amount necessary to cover all benefits the Plan paid out to Plan Participants—including the cash 18 benefits paid to Spears under the Flex Dollars program—into an account maintained and 19 controlled by FFNI as the Plan's sponsor and administrator. RUF 13, 19, 21. Spears contends that 20 FFNI and FFNCA were not actually "third parties" because these entities shared human resources 21 and payroll and were headquartered at the same location, but provides no authority establishing 22 that such circumstances legally render FFNI and FTNCA the same entity for purposes of 23 § 207(e)(4). Opp. 19:17-21:12. Indeed, Spears does not even attempt to explain how these 24 "facts" create a triable issue as to whether HNCA and HNI were third parties for purposes of 25 administering the Plan. 26 That FTNCA is a subsidiary of FfNI does not alter this result. See, e.g., Horton Decl. ^ 3, 27 28 ' In fact, the Department of Labor has explicitly stated that "[a] bona fide plan may allow incidental cash payments to employees," and applied the analysis set forth at section 778.215 to cash benefits received under a cafeteria plan. 2003 WL 23374600 at*l-3. DEFENDANT'S REPLY IN SUPPORT OF RENEWED MOTION FOR SUMMARY ADJUDICATION 4123-7092-9178 1 Ex. B at 56:24-25. FFNCA, HNI, was Spears'employer. HNI, «o/FFNCA, administered the 2 Plan and paid the Flex Dollars to Spears. Ms. Colia clearly testified to this fact: 3 Q. Did Health Net of California, Inc. provide money to Health Net, Inc. to fund the benefits ofthe plan participants who are employees of Health Net of California, 4 . -Inc.? - . 5 A. Yes. 6 Id. 33:5-9. Ms. Colia fijrther explained that "[tjhrough the Finance and Accounting Department 7 the funds would move from accounts between the legal entities." Id. 34:10-12. The money was 8 then separately maintained by FFNl's Compensation and Benefits Committee. Id. 36:9-14, 65:18- 9 21; UF 4, 8. FfNI's Compensation and Benefits Committee served as the plan sponsor and 10 "ensure[d] the accurate administration of the Plan. Horton Decl. \ 3, Ex. B at 147:10-148:16; id. 11 149:5-22. The Plan was in fact separate even from HNI, such that the Compensation and Benefits 12 Committee separately administered the Plan and HNI had no authority to access the Plan's 13 accounts or to direct the Compensation and Benefits Committee to take any actions with respect 14 to the Plan. I d 149:14-150:8, 150:24-151:16; 5ee a/^o z^/. 152:1-3. 15 That Spears and other'employees received Flex Dollars from FFNF in their paycheck along 16 with their pay from HNCA is unremarkable, given Ms. Colia's testimony that the various Health 17 Net entities "had a payroll department that issued paychecks and processed payroll. There were 18 not separate payroll departments for the separate legal entities." Horton Decl. 3, Ex. B at 52:9- 19 12. Thus, the money for Flex Dollars transferred to HNI from HNCA did not revert back to 20 FFNCA prior to FTNCA issuing Spears' paycheck; FFNI paid Flex Dollars to Spears at the same 21 time FFNCA paid Spears'wages. M ; 5ee a/50 iJ. 52:18-53:12. Nor is the fact that the money was 22 directly deposited into Spears' account significant in any way. As Ms. Colia clearly explained: 23 different components listed on this [pay] stub come from different accounts. And so the waive credit, the medical flex waive credit, the dental flex benefit, once again 24 as the plan sponsor and plan administrator Health Net, Inc. was responsible for those benefits. Whereas I would assume /or base rate compensation Ms. Spears' 25 employer Health Net of California . . . is responsible for those payments. 26 I d 62:10-18 (emphasis added); 5eea/jo/W. 62:23-63:5,64:23-65:9,66:11-67:4,68:6-18. 27 Ms. Colia also specifically testified that the "Health Net Inc. plan accounf' deposited the 28 "medical flex waive payment of $20" into Spears' account. Id. l\:9-\ 1; see also id. 71:21-72:20. -9- DEFENDANT'S REPLY IN SUPPORT OF RENEWED MOTION FOR SUMMARY ADJUDICATION 4123-7092-9178 1 Spears' own direct deposit authorization form confirms that FFNI, not HNCA, was authorized to 2 deposit money into Spears' bank account.^.Rodes Decl. ISO Reply to Renewed MSA, ^ 2, Ex. A. 3 Spears' attempts to twist the language of the Plan and to make hay out of ultimately irrelevant 4 facts do not create a genuine dispute as,to whether Spears received her Flex Dollar payments -'»- " --• - ' —r 5 from FFNI, which is a third party to HNCA for purposes of administering the Plan. RUF 13. 6 4. HNCA's Payments to HNI Were Irrevocable and HNCA Could Not Divert the Funds for Its Own Benefit. 7 8 Nor does Spears create a genuine dispute as to whether FFNCA's payments of Flex Dollars 9 were irrevocable. Under the regulation, contributions are "irrevocable" if "the trust or fund [is] 10 set up in such a way that in no event will the employer be able to recapture any of the 11 contributions paid in nor in any way divert the funds to his own use or benefit." 29 C.F.R. 12 § 778.215(a)(4). Spears contends the payments were not irrevocable because FFNCA has not 13 provided detailed evidence regarding the accounting process through which Flex Dollars were 14 transferred from HNCA to HNI and then from FFNI to Spears. But such evidence is not required. 15 FFNCA has submitted'competenty-uhdisputed evidence that HNCA deposited its contributions: 16 under the Plan—including the Flex Dollars provided to employees who waived medical coverage 17 under the Plan—into an account maintained and controlled by HNI, via its Compensation and 18 Benefits Committee. RUF 4, 8, 18, 19. Once HNCA made these contributions, HNCA could not 19 recapture or divert the funds for its own benefit. UF 20. Instead, HNI controlled this money, and 20 used it to pay for benefits provided by the Plan. UF 22, 39. Spears offers nothing to refute this 21 evidence, or to even suggest that HNCA had the ability to control, recapture, or divert these funds 22 once they were transferred to HNI. See Opp. 19:17-21:12. Nor could she, as Ms. Colia's 23 testimony confirms that the Compensation and Benefits Committee operated independently of 24 both HNI and HNCA.^ Horton Decl. U 3, Ex. B at 151:2-16, 152:1-3. 25 HI. CONCLUSION 26 For the reasons set forth above, HNCA is entitled to summary adjudication. 27 ^ Spears' suggestion that HNCA benefitted on some level by providing Flex Dollars lo employees is the same as 28 having the ability to divert funds for its own use or benefit is similarly nonsensical. The (question is not whether the payments in some way benefit HNCA; the question is whether HNCA had the ability to "recapture any ofthe contributions paid" or "in any way divert the funds to [its] own use or benefit." 29 C.F.R. § 778.215(a)(4). -10- DEFENDANT'S REPLY IN SUPPORT OF RENEWED MOTION FOR SUMMARY ADJUDICATION 4123-7092-9178 1 Dated: January 30, 2019 ORRICK, HERRINGTON & SUTCLIFFE LLP 2 3 By: ( TIMOTHY J. LONG 4 Attorneys for Defendant HEALTH-NET OF CALIFORNIA, INC. 5 6 7 8 9 10 11 12 13 14 15- 16 17 18 19 20 21 22 23 24 25 26 27 28 DEFENDANT'S REPLY tN SUPPORT OF RENEWED MOTION FOR SUMMARY ADJUDICATION 4123-7092-9178 2019 JAN 30 ?n ^'2S r- :,: :V.'.!'k.'^'.*f