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Ly v. Paragon Technology & Development Inc.

United States District Court, D. Arizona

September 13, 2019

Cathy Ly, Plaintiff,
Paragon Technology & Development Incorporated, et al., Defendants.


          Dominic W. Lanza United States District Judge.

         Pending before the Court are (1) a Rule 12(b)(6) motion for partial dismissal (Doc. 39) filed by Defendants Gatsby Enterprises Incorporated, Jude C. Hudson, Rosalie Hudson, Aaron Lee, and Paragon Technology & Development Incorporated (collectively “Defendants”), (2) Plaintiff Cathy Ly's motion for leave to amend her complaint (Doc. 50), and (3) Ly's motion to enforce the parties' purported settlement agreement (Doc. 55). For the following reasons, Defendants' motion to dismiss will be granted in part and denied in part, Ly's motion for leave to amend will be granted, and Ly's motion to enforce will be denied.


         I. Factual Allegations

         Ly brings this suit against Defendants, her former employers, related to her employment between March 2016 and February 2018. Among other things, Ly alleges that Defendants discriminated against her (1) based on her sex by treating her less favorably than similarly-situated males, and (2) based on her disability by demoting her immediately after discovering her pregnancy and pregnancy-related disability.[1] The factual allegations related to these claims, taken as true for the purpose of Defendants' motion to dismiss, are as follows.

         Defendants “employ[] roughly 20-25 employees and operate[] out of a commercial office suite in Scottsdale, Arizona.” (Doc. 31 ¶ 10.) Ly began working for Defendants as an unpaid Graphics Designer intern in March 2016. (Id. ¶ 43.) During her four-month internship, Defendants paid a full-time male employee to perform the same or similar kind of work Ly performed. (Id. ¶¶ 47, 63.)[2] Ly was the only employee ever required to begin employment as an unpaid intern. (Id. ¶ 50.)

         In July 2016, Defendants offered Ly full-time employment in the position of Marketing and Communications Director at an annual base salary of $60, 000, which was far below industry standards for comparable positions in the region. (Id. ¶ 51.) Defendants also agreed to increase Ly's annual salary to $72, 000 on her one-year anniversary in July 2017. (Id. ¶ 52.)

         In July 2017, Defendants only raised Ly's salary to $66, 000. (Id. ¶ 66.) Defendants didn't raise Ly's salary to $72, 000 until approximately October 2017. (Id. ¶ 67.) Even with the raise, Ly was paid “significantly lower annual compensation than similarly-situated male employees.” (Id. ¶ 64.)

         In December 2017, Defendants denied Ly a significant bonus they had paid unconditionally to all other similarly-situated male employees. (Id. ¶ 69.) They also revoked Ly's “modified work schedule privileges” but didn't revoke the modified schedules of other similarly-situated male employees. (Id. ¶ 70.)

         On January 5, 2018, Defendants granted Ly “a disability accommodation to work from home that related to a serious pregnancy complication and resulting medical condition.” (Id. ¶ 72.) The accommodation was recommended by Ly's medical provider. (Id.)

         On an unspecified date in January 2018, Defendants demoted Ly to the role of Marketing Coordinator and immediately hired a less-senior and less-experienced male employee to fill her former position. (Id. ¶ 71.) This occurred “immediately after [Defendants] received actual notice of her pregnancy and pregnancy-related disability.” (Id. ¶ 134.)

         At all relevant times, Ly was the only female employed by Defendants. (Id. ¶ 63.)

         II. Procedural Background

         On April 6, 2018, Ly filed this action in state court. (Doc. 1-1 at 3.)

         On July 3, 2018, Ly amended her complaint. (Id. at 27-51.)

         On August 3, 2018, Defendants removed the case to this Court. (Doc. 1.)

         On December 17, 2018, Ly filed her Second Amended Complaint (“SAC”). (Doc. 31.)

         On January 11, 2019, Defendants filed a motion for partial dismissal under Rule 12(b)(6). (Doc. 39.) The parties later filed a stipulation to extend certain deadlines so they could pursue mediation. (Doc. 46.) This caused the Court to delay consideration of the motion to dismiss. (Doc. 47.)

         On June 25, 2019, the parties informed the Court their mediation had been “unsuccessful.” (Doc. 49.)

         On July 1, 2019, Ly filed a motion for leave to amend her SAC. (Doc. 50.)

         On July 23, 2019, Ly filed a motion entitled “Motion to Enforce Settlement and Stay Discovery Deadlines.” (Doc. 55.) In a nutshell, it argues that the parties continued engaging in settlement negotiations after the unsuccessful mediation, that these discussions culminated in the execution of a written settlement agreement on July 9, 2019, and that Defendants later reneged on that agreement. (Id.)

         On September 4, 2019, the Court informed the parties that it wished to hear argument on the pending motions on September 12, 2019, and further noted that, although the parties hadn't requested an evidentiary hearing on the motion to enforce, the Court would be willing to hold such a hearing at either party's request. (Doc. 63.)

         On September 5, 2019, the Court issued a tentative order addressing the three pending motions. (Doc. 64.)

         On September 6, 2019, Ly informed the Court that she wanted an evidentiary hearing. (Doc. 65.)

         On September 12, 2019, the Court conducted an evidentiary hearing, during which four witnesses testified, and then heard argument on the pending motions.


         I. Motion To Dismiss

         A. Legal Standard

         “[T]o survive a motion to dismiss, a party must allege ‘sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'” In re Fitness Holdings Int'l, Inc., 714 F.3d 1141, 1144 (9th Cir. 2013) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (quoting Iqbal, 556 U.S. at 678). “[A]ll well-pleaded allegations of material fact in the complaint are accepted as true and are construed in the light most favorable to the non-moving party.” Id. at 1144-45 (citation omitted). However, the court need not accept legal conclusions couched as factual allegations. Iqbal, 556 U.S. at 679-80. The court also may dismiss due to “a lack of a cognizable legal theory.” Mollett v. Netflix, Inc., 795 F.3d 1062, 1065 (9th Cir. 2015) (citation omitted).

         B. Analysis

         1. Sex Discrimination

         In Count Five of the SAC, Ly asserts a claim for “Sex/Retaliation Discrimination” in violation of Title VII of the Civil Rights Act. (Doc. 31 ¶¶ 121-131.) Similarly, in Count Seven, Ly asserts a claim for “Sex/Retaliation Discrimination” in violation of the Arizona Civil Rights Act (“ACRA”). (Id. ¶¶ 143-153.) In their motion, Defendants seek dismissal of these claims[3] because Ly hasn't sufficiently pleaded that “similarly situated individuals outside of her protected class were treated more favorably.” (Doc. 39 at 3-7.) According to Defendants, Ly must allege she was similar to her proposed comparators “in all material respects, ” which typically requires allegations that proposed comparators “[had] the same supervisor, [were] subject to the same standards, and . . . engaged in the same conduct.” (Id. at 3-4.) Defendants contend Ly hasn't pleaded facts related to these categories, only vague and conclusory allegations. (Id.)

         In response, Ly argues she doesn't need to plead a prima facie case of sex discrimination because “the prima facie standard set forth under McDonnell Douglas, [4] is an evidentiary standard, not a pleading requirement.” (Doc. 42 at 2-3.) Ly also contends that, in any event, she has alleged a prima facie case because the SAC specifically alleges she was demoted and replaced as Marketing and Communications Director “with a less senior and less experienced male employee.” (Id. at 4, citing Doc. 31 ¶¶ 124, 156.) This, she argues, “is sufficient to properly plead the existence of similarly situated male counterparts who received more favorable treatment.” (Id. at 4.) In addition, Ly argues the SAC alleges “she is the only female employed by Defendants, and the only employee being subjected to the negative treatment that she identifies.” (Id. at 5.) Finally, she identifies “roughly thirty (30) paragraphs of allegations in support of showing the disparate treatment she experienced when compared to her male counterparts.” (Id.)

         As an initial matter, Ly is correct that her complaint doesn't need to track the McDonnell Douglas framework in order to survive a motion to dismiss. In McDonnell Douglas, the Supreme Court established “the order and allocation of proof” in a Title VII case. 411 U.S. at 800. That framework “is a tool to assist plaintiffs at the summaryjudgment stage so that they may reach trial.” Austin v. Univ. of Oregon, 925 F.3d 1133, 1136 (9th Cir. 2019) (citation omitted) (emphasis added). As the Supreme Court reiterated in Swierkiewicz v. Sorema N. A., 534 U.S. 506 (2002), “[t]he prima facie case under McDonnell Douglas . . . is an evidentiary standard, not a pleading ...

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