Peak v. Tigergraph, Inc.

[3] 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA [6] 7 BRENDON PEAK, Case No. 21-cv-02603-PJH 8 Plaintiff, 9 v. ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS 10 TIGERGRAPH, INC., et al., Re: Dkt. No. 51 11 Defendants. [13] 14 Defendants’ motion to dismiss came on for hearing before this court on December 15 9, 2021. Plaintiff appeared through his counsel, Sol J. Cohen. Defendants appeared 16 through their counsel, Adron W. Beene. Having read the papers filed by the parties and 17 carefully considered their arguments and the relevant legal authority, and good cause 18 appearing, the court hereby rules as follows. 19 BACKGROUND 20 Plaintiff Brendon Peak is a sales professional who resides in Hingham, 21 Massachusetts. FAC ¶ 5. Defendants TigerGraph, Inc., and GraphSQL, Inc., both d/b/a 22 TigerGraph (hereinafter together to as “TigerGraph”), are foreign corporations, with their 23 principal place of business in Redwood City, California. FAC ¶ 6. TigerGraph is an 24 Information Technology company that customizes its novel graphing and reporting 25 technology and applications for its clients. FAC ¶ 10. Defendant Dr. Yu Xu is 26 TigerGraph’s Chief Executive Officer, and defendant Todd Blaschka is TigerGraph’s 27 Chief Operating Officer. Dkt. 51-1 ¶ 2. 1 the company, offering a base salary plus commission compensation plan. FAC ¶¶ 9, 11. 2 In early 2018, TigerGraph and Mr. Peak entered into a written compensation agreement 3 (“agreement”) consistent with the parties’ verbal agreements made during the recruiting 4 process. FAC ¶ 16. 5 Relevant terms of the agreement include: (1) Peak was hired, full-time, as a 6 Regional Sales Director; (2) his compensation consisted of a base-salary plus “variable 7 compensation” in the form of a commission based upon “attainment of annual sales 8 targets”; (3) his employment was “at will” and could be terminated at any time for any 9 reason, with or without cause; (4) disputes regarding Peak’s employment would be 10 governed by California law and California courts have exclusive personal jurisdiction in 11 connection with such disputes. FAC ¶¶ 16, 17. 12 When Peak started at TigerGraph, his commissions were based on total contract 13 value, with escalators for commissions beginning at 11.5% of total contract value and 14 maximized at 20% of total contract value. FAC ¶ 17. In August 2018, Peak began to 15 build a relationship with a potentially lucrative new client. FAC ¶ 20. In December 2018, 16 Peak informed Blaschka of the client’s plans to begin a three-year Statement of Work 17 (“SOW”) with TigerGraph worth $3,000,000. FAC ¶ 37. 18 In 2019 and 2020, Peak and TigerGraph executed new compensation plans, 19 which superseded the prior ones. Dkt. 51-1 at 21, 27. According to all the plans, 20 “Commissions are considered ‘Earned’ when the Company receives payment in full from 21 the customer.” Blaschka Dec., Ex. 2, p. 2 “Commissions”; Ex. 3, p. 2-3, “Commissions”; 22 Ex. 4, p. 3 “Commissions” (Dkt. 51-1 at 12, 18, 25). The 2019 and 2020 compensation 23 plans changed the provisions for quota attainment and capped multi-year commissions, 24 changes that Peak estimates reduced the commissions payable to him by approximately 25 $1 million. FAC ¶¶ 43, 47, 50, 51. 26 Peak expressed dissatisfaction with the change from the 2018 to the 2019 27 compensation plan. FAC ¶ 52. Peak was compensated in April 2019 for the first SOW 1 Peak complained about this compensation to his direct supervisor, Jay Samonsky, based 2 on his belief that he should have been compensated at the greater rates considered 3 under the 2018 compensation plan. FAC ¶ 59. 4 Peak expressed further dissatisfaction when, after delivering four more executed 5 SOWs by December 2019, he was compensated under the 2019 compensation plan 6 because he believed he should have received commissions calculated under the 2018 7 compensation plan. FAC ¶¶ 67, 69. In spring 2020, Peak received from the client a 8 “graph portfolio” document that outlined 20 anticipated projects with TigerGraph along 9 with percentages representing the likelihood that each project would be consummated. 10 FAC ¶¶ 77, 80, 81. On May 13, 2020, Peak relayed an executed SOW from the client to 11 Blaschka. FAC ¶ 88. Rather than responding to the executed SOW, on May 14, 2020, 12 TigerGraph informed Peak that he was being laid off due to the financial impact of Covid13 19. FAC ¶ 90. Peak alleges he did not receive pay “for wages or commissions earned 14 and due.” FAC ¶ 95. 15 Procedural History 16 On July 6, 2020, after Peak threatened litigation, TigerGraph filed a declaratory 17 judgment action in the Superior Court of California, County of San Francisco, seeking a 18 determination that no future commissions were owed to Peak. TigerGraph, Inc. v. Peak, 19 Case no. 4:20-cv-5489-PJH (N.D. Cal. filed Aug. 7, 2020). Peak removed the case to 20 this court on August 6, 2020, and then filed a motion to dismiss the complaint for lack of 21 personal jurisdiction, improper venue, and forum non conveniens, or, in the alternative, 22 motion to transfer the case to the district court for the District of Massachusetts. 23 TigerGraph, Case no. 4:20-cv-5489-PJH, Dkt. 9. The court denied that motion on 24 October 21, 2020. TigerGraph, Case no. 4:20-cv-5489-PJH, Dkt. 16. 25 On August 8, 2020, Peak filed this lawsuit in the U.S. District Court for the District 26 of Massachusetts, claiming breach of contract, breach of the covenant of good faith and 27 fair dealing, and violations of the Massachusetts Wage Act against TigerGraph, Inc., and 1 and civil conspiracy against all Defendants. Dkt. 1 ¶ 1. Defendants then filed a motion to 2 transfer venue, which sought to bring the case to this court based on the forum-selection 3 clause in Peak’s employment agreement. Dkt. 14. The District Court for the District of 4 Massachusetts, Judge I. Talwani presiding, granted defendants’ motion on April 9, 2021. 5 Dkt. 28. Following transfer and a case management conference in 4:20-cv-5489-PJH, 6 this court related the two cases on June 28, 2021. Dkt. 41. 7 Following briefing, this court granted defendants’ motion to dismiss the complaint 8 with leave to amend. Dkt. 46. The court’s decision was substantially based on plaintiff’s 9 failure to establish that he had earned the commissions he now seeks—the sales 10 underlying such commissions were not complete as they had not been paid by the client 11 and thus, under the terms of all three compensation plans, they had not yet been earned. 12 Peak’s amended complaint abandons the previous contract-based claims and 13 alleges only: 14 1. Count I – Wrongful termination in violation of the Massachusetts Wage Act, 15 General Law Chapter 149, § 148A (retaliation) (Peak v. TigerGraph); 16 2. Count II – Wrongful termination in violation of the Massachusetts Wage Act, 17 General Law Chapter 149, § 148A (retaliation) (Peak v. Blaschka & Xu); and 18 3. Count III – Violation of the Massachusetts Wage Act in violation of General 19 Law Chapter 149, §§ 148, 150, failure to pay wages (Peak v. all defendants). 20 Defendants now move to dismiss the entirety of Peak’s amended complaint. Dkt. 21 51. 22 INCORPORATION BY REFERENCE 23 In support of its motion to dismiss, TigerGraph includes a declaration from 24 Blaschka. Dkt. 51-1. The Blaschka declaration includes copies of the following 25 documents as exhibits: (1) the January 9, 2018, letter Employment Agreement between 26 TigerGraph and Brendon Peak (“Employment Agreement”); (2) TigerGraph 2017-2018 27 Sales Compensation Plan between TigerGraph and Brendon Peak; (3) TigerGraph 2019 1 2020 Sales Compensation Plan between TigerGraph and Brendon Peak. Dkt. 51-1. The 2 first argument in defendants’ motion is that all of these agreements should be considered 3 as part of the test of the complaint because the complaint relies upon their contents. 4 Plaintiff does not genuinely oppose the consideration of these documents. 5 A. Legal Standard 6 “Courts regularly decline to consider declarations and exhibits submitted in support 7 of or opposition to a motion to dismiss . . . if they constitute evidence not referenced in 8 the complaint or not a proper subject of judicial notice.” Gerritsen v. Warner Bros. Entm’t 9 Inc., 112 F. Supp. 3d 1011, 1021 (C.D. Cal. 2015) (citing City of Royal Oak Retirement 10 Sys. v. Juniper Networks, Inc., 880 F. Supp. 2d 1045, 1060 (N.D. Cal. 2012)); see also 11 Schneider v. Cal. Dep’t of Corr., 151 F.3d 1194 , 1197 n.1 (9th Cir. 1998) (“In determining 12 the propriety of a Rule 12(b)(6) dismissal, a court may not look beyond the complaint to a 13 plaintiff's moving papers, such as a memorandum in opposition to a defendant's motion 14 to dismiss.”). “The court must, however, consider each exhibit to the declaration in turn 15 to determine whether it is a proper subject of judicial notice or can be taken into account 16 under the incorporation by reference doctrine in deciding [defendant’s] motion to 17 dismiss.” Gerritsen, 112 F. Supp. 3d at 1021-22 . 18 The incorporation by reference doctrine is judicially created and is normally 19 applicable when a defendant seeks to incorporate a document into the complaint “if the 20 plaintiff refers extensively to the document or the document forms the basis of the 21 plaintiff's claim.” Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 1002 (9th Cir. 22 2018) (quoting United States v. Ritchie, 342 F.3d 903, 907 (9th Cir. 2003)). “We have 23 extended the doctrine of incorporation by reference to consider documents in situations 24 where the complaint necessarily relies upon a document or the contents of the document 25 are alleged in a complaint, the document’s authenticity is not in question and there are no 26 disputed issues as to the document’s relevance.” Coto Settlement v. Eisenberg, 593 27 F.3d 1031, 1038 (9th Cir. 2010). 1 B. Analysis 2 Here, the incorporation by reference doctrine applies to all of the documents 3 appended to the Blaschka Declaration. The complaint refers to each the (1) the January 4 9, 2018, letter Employment Agreement between TigerGraph and Brendon Peak 5 (“Employment Agreement”); (2) TigerGraph 2017-2018 Sales Compensation Plan 6 between TigerGraph and Brendon Peak; (3) TigerGraph 2019 Sales Compensation Plan 7 between TigerGraph and Brendon Peak; and (4) TigerGraph 2020 Sales Compensation 8 Plan between TigerGraph and Brendon Peak. Dkt. 51-1. Even though plaintiff does not 9 include these documents along with his complaint, they are properly considered by the 10 court because they serve as the basis for his claims. The gravamen of the lawsuit is that 11 TigerGraph failed to compensate Peak under the terms of their agreements, so it is 12 appropriate for the court to consider the agreements in assessing whether the complaint 13 states a claim. Therefore, the court considers the documents appended to the Blaschka 14 declaration incorporated by reference. 15 DISCUSSION 16 A. Legal Standard 17 A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests for the 18 legal sufficiency of the claims alleged in the complaint. Ileto v. Glock, 349 F.3d 1191 , 19 1199-1200 (9th Cir. 2003). Under Federal Rule of Civil Procedure 8, which requires that 20 a complaint include a “short and plain statement of the claim showing that the pleader is 21 entitled to relief,” Fed. R. Civ. P. 8(a)(2), a complaint may be dismissed under Rule 22 12(b)(6) if the plaintiff fails to state a cognizable legal theory, or has not alleged sufficient 23 facts to support a cognizable legal theory. Somers v. Apple, Inc., 729 F.3d 953, 959 (9th 24 Cir. 2013). 25 While the court is to accept as true all the factual allegations in the complaint, 26 legally conclusory statements, not supported by actual factual allegations, need not be 27 accepted. Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009). The complaint must proffer 1 Twombly, 550 U.S. 544, 555, 558-59 (2007) (citations and quotations omitted). 2 “A claim has facial plausibility when the plaintiff pleads factual content that allows 3 the court to draw the reasonable inference that the defendant is liable for the misconduct 4 alleged.” Iqbal, 556 U.S. at 678 (citation omitted). “[W]here the well-pleaded facts do not 5 permit the court to infer more than the mere possibility of misconduct, the complaint has 6 alleged—but it has not ‘show[n]’—that the pleader is entitled to relief.” Id. at 679 . Where 7 dismissal is warranted, it is generally without prejudice, unless it is clear the complaint 8 cannot be saved by any amendment. Sparling v. Daou, 411 F.3d 1006, 1013 (9th Cir. 9 2005). 10 “Although generally the scope of review on a motion to dismiss for failure to state a 11 claim is limited to the Complaint, a court may consider evidence on which the complaint 12 necessarily relies if: (1) the complaint refers to the document; (2) the document is central 13 to the plaintiffs’ claim; and (3) no party questions the authenticity of the copy attached to 14 the 12(b)(6) motion.” Daniels-Hall v. Nat’l Educ. Ass’n, 629 F.3d 992, 998 (9th Cir. 2010) 15 (internal quotation marks and citations omitted); see also Knievel v. ESPN, 393 F.3d 16 1068, 1076 (9th Cir. 2005). The court may “treat such a document as ‘part of the 17 complaint, and thus may assume that its contents are true for purposes of a motion to 18 dismiss under Rule 12(b)(6).’” Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006) 19 (quoting United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003)). Moreover, the court 20 “need not accept as true allegations contradicting documents that are referenced in the 21 complaint.” Lazy Y Ranch Ltd. v. Behrens, 546 F.3d 580, 588 (9th Cir. 2008). 22 B. Analysis 23 1. Retaliatory Termination 24 Section 148A of the Massachusetts Wage Act (“Wage Act”) provides the following 25 anti-retaliation protection: “No employee shall be penalized by an employer in any way as 26 a result of any action on the part of an employee to seek his or her rights under the 27 wages and hours provisions of this chapter.” Termination is the quintessential example 1 Inc., 905 F. Supp. 2d 405, 412 (D. Mass. 2012). To prevail on a retaliation claim, plaintiff 2 must show: (1) he engaged in protected conduct, 2) he was thereafter subjected to an 3 adverse employment action, and 3) a causal connection existed between the protected 4 conduct and the adverse action. Travers v. Flight Servs. & Sys., Inc., 808 F.3d 525 , 531 5 (1st Cir. 2015) (analogizing retaliation claim under the Wage Act to retaliation under the 6 Federal Labor Standards Act). 7 In general, “a complaint made to an employer (or a manager of the employer) by 8 an employee who reasonably believes that the wages he or she has been paid violate 9 such laws readily qualifies as such an ‘action.’” Smith v. Winter Place LLC, 447 Mass. 10 363, 367 (2006). Two recent Massachusetts appellate opinions considering allegations 11 of retaliatory termination are relevant for consideration of whether an employee’s 12 complaint about pay constituted protected activity under the retaliation assessment’s first 13 prong. The Supreme Judicial Court affirmed a jury determination that a salesperson’s 14 complaint to management that she believed she had been shortchanged on a 15 commission payment constituted protected activity. Parker v. EnerNOC, Inc., 484 Mass. 16 128, 135-36 (2020). In contrast, an intermediate appellate court determined that an 17 employee’s “abstract grumblings” about long hours and low pay were insufficient to 18 constitute protected activity—they did not announce a violation of the Wage Act such as 19 misclassification or unpaid overtime with any level of specificity. Tam v. Fed. Mgmt. Co., [20] 99 Mass. App. Ct. 41 , 51, review denied, 487 Mass. 1102 , (2021). 21 In addition to showing protected activity, the Wage Act requires the plaintiff to 22 show “but-for” causation to establish retaliation. Travers, 808 F.3d at 531 . “On a claim of 23 retaliatory discharge, unless the termination is very closely connected in time to the 24 protected activity, the plaintiff must rely on additional evidence beyond temporal proximity 25 to establish causation.” Mole v. Univ. of Mass., 442 Mass. 582, 594 (2004) (cleaned up) 26 (emphasis in original). A lack of temporal proximity may be overcome if the plaintiff 27 draws a connection of intervening conduct demonstrating that an eventual termination [1] 342 F.3d 31, 38 (1st Cir. 2003) (despite passage of eleven months between filing of claim 2 and demotion of plaintiff, “[e]vidence of discriminatory or disparate treatment in the time 3 period between the protected activity and the adverse employment action can be 4 sufficient to show a causal connection”). 5 Here, on the first prong, the facts resemble those in Parker v. EnerNOC. Though 6 the defendants emphasize that the commission structure at issue in that case involved 7 the complication of a multi-year deal, a complication not at issue here, such complication 8 is relevant to the total amount of commission earned, not retaliation. As in Parker, Peak 9 engaged in protected activity where he complained to his supervisor about the calculation 10 and payment of his commissions. As pleaded, Peak reasonably believed that he should 11 have received commissions as calculated under the agreement originally executed at the 12 beginning of his tenure with TigerGraph. His complaint about improper pay was more 13 specific than “abstract grumblings,” and such complaint falls within the statutory scope of 14 an employee’s protected action. 15 On the third prong, plaintiff argues that causation is demonstrated by the 16 pretextual nature of defendants’ justification for terminating Peak, but this argument 17 stretches the rationale of Travers beyond recognition and places the cart before the 18 horse. Plaintiff’s argument more properly fits a few steps down the burden-shifting 19 chain—he must first establish the prima facie claim of retaliation (including the element of 20 causation), then, after defendants name their non-retaliatory rationale for the layoff, 21 plaintiff may argue that the rationale was pretextual. Mogilevsky v. Wellbridge Club 22 Mgmt., Inc., 905 F. Supp. 2d 405, 411 (D. Mass. 2012) (applying McDonnell Douglas 23 Corp. v. Green, 411 U.S. 792, 802-803 (1973), burden-shifting analysis to analogous 24 FLSA retaliation claim). Peak alleges that he told his manager in December 2019 about 25 his desire to receive commissions under the older 2018 Agreement. FAC ¶ 69. Peak 26 was laid off in May 2020 (FAC ¶ 90), well after such complaints regarding pay and after 27 his March 2020 execution of the new compensation plan acknowledging the 2018 and 1 to the complaints to support an inference of causation, and further, Peak fails to establish 2 any conduct in the intervening months between his commission complaints and his 3 eventual termination that support such an inference. 4 Peak’s good-faith complaints about his commissions constituted protected 5 conduct, and defendants concede that he suffered an adverse employment action in the 6 form of termination from employment, but Peak fails to plead a plausible claim for 7 retaliation where he does not establish a causal connection between the two. They are 8 simply too attenuated based on the separations of time and Peak’s own conduct. 9 Therefore, Peak’s two claims for retaliation are dismissed. Because plaintiff advanced at 10 the hearing that further amendment of the pleading would remedy this attenuation, the 11 two claims for retaliation are dismissed without prejudice. 12 2. Violation of the Massachusetts Wage Act 13 The Wage Act requires that commissions are to be paid when two conditions are 14 met: (1) the amount of the commission “has been definitely determined”; and (2) the 15 commission “has become due and payable.” MASS. GEN. LAWS ch. 149, § 148. Efforts to 16 develop business or curry future sales do not support a Wage Act claim for unpaid 17 commission where the commission is based on paid sales. King v. Mannesmann Tally 18 Corp., 847 F.2d 907 (1st Cir. 1988); Gerald Rosen Co. v. Int’l Tel. & Tel. Co., 16 Mass. 19 App. Ct. 929 (1983). 20 Peak seeks to analogize this case to Parker, 484 Mass. 128 , where another 21 plaintiff sought to recover unpaid commissions following termination. However, despite 22 the similarities between the Parker case and the facts here related to the retaliation claim 23 discussed above, there is one glaring distinction between that case and the facts here 24 related to the Wage Act claim: unlike the unpaid commission on a multi-year deal at issue 25 in Parker, Peak did not yet earn the commissions he claims are owed. The controlling 26 language from the 2018, 2019, and 2020 compensation plans provides that 27 “Commissions are considered ‘Earned’ when the Company receives payment in full from 1 “Commissions”; Ex. 4, p. 3 “Commissions” (Dkt. 51-1 at 12, 18, 25). The FAC describes 2 at length Peak’s pre-sale efforts to bring in a multi-million-dollar line of business for 3 TigerGraph, but the commissions on that line of business were not yet “earned” at the 4 time he was terminated. Peak does not plead that TigerGraph was paid based on the 5 sales he completed, and “defendants were not required to retain [Peak], an at-will 6 employee, indefinitely and on his terms,” while they waited for completion of a sale. 7 Biewald v. Seven Ten Storage Software, Inc., 94 Mass. App. Ct. 376 , 383 (2018). The 8 unpaid commissions that serve as the basis for Peak’s claim for violation of the Wage Act 9 had not “become due and payable,” and Peak thus cannot plead a plausible violation of 10 the Wage Act. This claim is thus also dismissed. Because plaintiff has failed to allege 11 any new factual matter relating to this claim which he has already been given leave to 12 amend, it is clear that further amendment would be futile. Thus, the dismissal is with 13 prejudice. 14 CONCLUSION 15 For the reasons stated above, defendants’ motion to dismiss plaintiff’s FAC is 16 GRANTED. The two claims for retaliation are DISSMISSED with leave to amend, and 17 the claim for violation of the Wage Act is DISMISSED WITH PREJUDICE. Plaintiff shall 18 have 28 days from the date of this order to file a second amended complaint to cure the 19 deficiencies noted herein. No new claims or parties may be added without leave of court 20 or the agreement of all parties. Upon the filing of any amended complaint, plaintiff must 21 also file a redline clearly demarcating its changes from the FAC. 22 IT IS SO ORDERED. 23 Dated: December 10, 2021 24 /s/ Phyllis J. Hamilton PHYLLIS J. HAMILTON 25 United States District Judge