McClure v. Panzura, LLC

Background

Larry McClure sued Panzura, LLC after Panzura terminated his employment as chief financial officer. According to the complaint, McClure reported concerns that Panzura’s chief revenue officer, Dan Waldschmidt, had misused company funds, engaged in an improper sexual relationship with a junior female employee, and sought preferential compensation for that employee. McClure alleged that he was terminated in retaliation for those reports. Panzura removed the case from Santa Clara County Superior Court to federal court.

McClure asserted claims under California Labor Code section 1102.5, the California Fair Employment and Housing Act, Title VII of the Civil Rights Act of 1964, the implied covenant of good faith and fair dealing, wrongful termination in violation of public policy, and California’s Unfair Competition Law. The opinion’s initial list of claims appears to omit a separately numbered Count 3, although the later analysis identifies Count 3 as a claim for failure to prevent retaliation.

Motion to Transfer

Panzura asked the court to transfer the case to the Eastern District of Texas under 28 U.S.C. § 1404(a), which allows transfer when convenience and the interests of justice favor another federal district. The parties agreed that the case could have been brought in the Eastern District of Texas; the dispute concerned whether transfer would be more convenient and just.

The court denied the motion to transfer. It gave some weight to McClure’s choice of the Northern District of California because several important alleged events occurred in San Jose, including reports of the alleged misconduct, discussions about the junior employee’s compensation, and the alleged decision to retaliate. The court also found that McClure identified more important nonparty witnesses who would be more inconvenienced by transfer, particularly former chief executive officer Jill Stelfox. Other factors were neutral or did not overcome these considerations, including the Eastern District of Texas’s lower congestion and Panzura’s stronger contacts with Texas.

Motion to Dismiss

Panzura moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint alleges enough facts to state a legally plausible claim. The court denied dismissal of Counts 1, 2, and 4, the retaliation claims under California Labor Code section 1102.5, the Fair Employment and Housing Act, and Title VII. The court concluded that McClure plausibly alleged protected activity, including reporting conduct he reasonably believed could violate laws concerning equal pay, sexual harassment, and misuse of company funds. The court also found that he plausibly alleged causation under a theory that Waldschmidt influenced the decisionmakers who terminated him.

The court denied dismissal of Count 3, the claim that Panzura failed to take reasonable steps to prevent retaliation. It found that McClure plausibly alleged that Panzura failed to investigate the reported conduct. The court also denied dismissal of Count 6, the wrongful-termination claim, because that claim was based on the retaliation allegations and McClure plausibly alleged violations of public policies reflected in Title VII and the Fair Employment and Housing Act.

The court granted dismissal of Count 5, the claim for breach of the implied covenant of good faith and fair dealing, and dismissed that claim with prejudice. McClure’s employment agreement described his employment as at will, and he did not identify a contractual provision that prohibited Panzura from terminating him. McClure also conceded at the hearing that this claim could be dismissed with prejudice because it duplicated his other claims.

The court severed Count 7, McClure’s Unfair Competition Law claim, and remanded it to Santa Clara County Superior Court. The court found that McClure plausibly alleged a UCL claim, but he lacked Article III standing in federal court to seek injunctive relief, which the court identified as his only available UCL remedy. The court explained that the lack of federal standing did not prevent a California state court from considering requests for public injunctions.

Disposition

The court denied Panzura’s motion to transfer. It granted Panzura’s motion to dismiss as to Count 5, which was dismissed with prejudice, and denied the motion as to Counts 1, 2, 3, 4, and 6. Count 7 was severed and remanded to Santa Clara County Superior Court. The court ordered McClure to file an amended complaint within 21 days and Panzura to answer within 21 days after that filing. Judge Eumi K. Lee also extended the deadline for the parties’ initial alternative-dispute-resolution session to May 23, 2025, with a status report due May 30, 2025.