Marcie Hamilton v. JUUL Labs, Inc.

Background

Marcie Hamilton sued her former employer, JUUL Labs, Inc. She alleged that JUUL’s Proprietary Information and Invention Assignment Agreement, termination certification, severance agreement, and other policies unlawfully restricted whistleblowing, discussions of wages and working conditions, lawful conduct outside work, and other protected activity. Her first five claims were brought under California’s Private Attorneys General Act (PAGA), which allows an eligible employee to seek civil penalties for certain Labor Code violations on behalf of the state. Her sixth claim was under California’s Unfair Competition Law (UCL).

Hamilton worked for JUUL as a Director of Program Management from April 2018 to March 2019. When JUUL terminated her on March 15, 2019, it required her to sign a termination certification and offered a severance agreement. The proposed agreement offered continued employment, wages, and a bonus until April 2, 2019, when Hamilton’s equity would vest, but also included a broad release of claims, including claims under California’s Fair Employment and Housing Act. Hamilton did not sign the severance agreement.

Motion to Dismiss Claims 1 Through 4

JUUL moved to dismiss the first four claims for failure to state a claim. Those claims concerned alleged restrictions on whistleblowing, lawful conduct outside working hours, wage disclosures, and disclosures about working conditions.

The court applied the California Supreme Court’s decision in Edwards v. Arthur Andersen LLP. That decision requires courts, when a contract provision is uncertain, to interpret the agreement in a way that makes it lawful and workable when such an interpretation is reasonable. The court held that, at least at the pleading stage, it was not unreasonable to interpret JUUL’s agreements as protecting proprietary or confidential information without prohibiting legally protected disclosures. The severance agreement also expressly preserved protected activity, including communications with government agencies and activity protected by federal labor law.

The court separately found Hamilton’s allegations about JUUL’s unspecified “other policies and practices” too vague and conclusory to meet federal pleading standards. It therefore granted JUUL’s motion to dismiss Claims 1 through 4 without prejudice and allowed Hamilton to amend if she could plead facts showing that the agreements were applied to prohibit protected conduct or could provide specific facts about non-contractual policies.

Claim 5: California Labor Code Section 432.5

Claim 5 alleged that JUUL violated California Labor Code section 432.5 by requiring Hamilton to enter into an agreement containing a term or condition JUUL knew was unlawful.

The court rejected or found insufficient several proposed bases for this claim. It concluded that Hamilton had not adequately alleged that the NDA’s employee non-solicitation provision unlawfully restrained her profession or that JUUL knew the provision was unlawful when she signed it. The court also held that the Defend Trade Secrets Act’s notice requirement did not make the entire confidentiality agreement unlawful; failure to provide the required notice could instead prevent an employer from obtaining exemplary damages or attorney’s fees. The court noted that the severance agreement included exceptions for disclosures to the Securities and Exchange Commission and other regulators.

The court reached a different result concerning California Government Code section 12964.5. That provision prohibits an employer from requiring an employee to release certain Fair Employment and Housing Act claims in exchange for a raise or bonus or as a condition of employment or continued employment. Because Hamilton alleged that JUUL offered continued employment, wages, and a bonus in exchange for signing an agreement containing a broad, prospective release, and because the parties agreed she had no existing claim against JUUL when the agreement was offered, the court held that she sufficiently pleaded a section 432.5 claim based on section 12964.5. The court denied JUUL’s motion to dismiss Claim 5.

Claim 6 and Injunctive Relief

The discussion states that the court denied JUUL’s motion to dismiss Claim 6 under the UCL because Hamilton had stated a viable Labor Code claim. However, the motion-to-strike discussion states that Hamilton lacked standing to seek a public injunction based on the NDA and termination certification, and did not allege how she had standing to seek an injunction based on the one-time severance offer. The conclusion then states that the UCL motion was granted for lack of standing. The opinion therefore contains an apparent inconsistency about the disposition of the UCL claim or the requested UCL relief.

Motion to Strike

Hamilton waived her request for a jury trial and withdrew her request for interest on PAGA penalties. The court granted JUUL’s motion to strike part of Paragraph 22, removing the references to Theranos, Harvey Weinstein, and Jeffrey Wigand while leaving the paragraph’s first sentence. The court denied the motion to strike Paragraphs 1 and 2, finding those allegations relevant enough to remain in the complaint.

The court also granted JUUL’s request for judicial notice of the termination certification and a California Senate Judiciary Committee bill analysis. The opinion states that judicial notice of the unsigned severance agreement offered by JUUL was improper because Hamilton disputed whether it was the agreement JUUL actually presented.

Disposition and Classification

The order granted in part and denied in part JUUL’s motion to dismiss and strike. Claims 1 through 4 were dismissed without prejudice; the motion to dismiss Claim 5 was denied; the discussion says the motion to dismiss Claim 6 was denied, while the conclusion says the UCL motion was granted for lack of standing; the motion to strike part of Paragraph 22 was granted; and the motion to strike Paragraphs 1 and 2 was denied. Because the order primarily applied the failure-to-state-a-claim standard under Federal Rule of Civil Procedure 12(b)(6), it is classified as a procedural order rather than a decision on the ultimate merits.