Mathiason v. Shutterfly, Inc.

1

Rita Mathiason, Plaintiff, v. Shutterfly, Inc., Defendant.

No. 22-cv-1203 (DSD/DJF)

United States District Court, D. Minnesota

May 16, 2023

ORDER

DULCE J. FOSTER, UNITED STATES MAGISTRATE JUDGE.

This matter is before the Court on remand from the District Judge's Order (ECF No. 42) declining to adopt the Report and Recommendation (ECF No. 40) on Plaintiff Rita Mathiason's Motion for Leave to Amend Complaint (“Motion”) (ECF No. 30). Mathiason alleges Defendant Shutterfly, Inc. (“Shutterfly”)^[1]acted with deliberate disregard for her rights when it violated the Minnesota Whistleblower Act Minn. Stat. 181.932 (“MWA”) by firing her in response to a protected report, and that the Court should grant leave to further amend her Amended Complaint (ECF No 11) to add a claim for punitive damages (ECF Nos. 32, 45). In its Report and Recommendation, the Court initially denied Mathison's motion on grounds of futility because she had neither pled in her proposed amendment (ECF No. 34-1 at 75-89) (“Second Amended Complaint”), nor identified in any briefing or other communication to the Court, any federal or state law implicated by her report that would bring it within the scope of the MWA's protections. In her appeal to the District Court (ECF No. 45), Mathiason argued for the first time that her report implicates certain notice provisions of the Minnesota wage theft prevention law Minn. Stat. § 181.032 (the “Notice Statute”). Because the Court finds the allegations in the proposed Second Amended Complaint are sufficient to plead Shutterfly acted with deliberate disregard for Mathiason's rights, and because Mathiason now identifies a potential violation of state law implicated by her report, such that she plausibly alleges Shutterfly violated her rights under the MWA, the Court grants her motion to amend.^[2]

I. Background

a. Factual Background

The Report and Recommendation reviewed the factual background of Mathiason's Motion in detail (ECF No. 40 at 1-4). The Court will not reiterate all of that detail but incorporates and refers to the facts as relevant to its analysis here.^[3]

In brief, Mathiason's claims stem from Shutterfly's decision to categorize and recategorize her role at the company as a full-time employee, a temporary employee, or an independent contractor. Shutterfly allegedly made these changes without prior notice to Mathiason and in some instances retroactively changed her start date, such that she was either deprived of accrued holiday and paid time off (“PTO”) benefits owed to employees or deprived of the higher wage owed to independent contractors. Mathiason alleges she sought clarification of her employment status on multiple occasions through various communications with her supervisors and human resources employees. (See generally ECF No. 11.)

Having received no satisfactory response, she sent an email on August 31, 2021 to a Senior Director and a Senior Director of Human Resources complaining about the frequent changes to her position, demanding a new job description defining her as a full-time permanent employee, and demanding that her alleged accrued holiday and paid time off benefits be restored. (ECF No. 34-1 at 37-42.) This email is the alleged report upon which her MWA claim is based (“Report”). (See ECF No. 45 at 6.)

Mathiason's new argument that her Report implicated the Notice Statute is based, in relevant part, on the following language:

How is [Shutterfly] going to resolve the changes made to my employment status and start dates, and the manual removal of earned, accrued, entitled employee benefits? What is the plan for compensation of lost benefits?

***

The changes made to my employee profile need to be resolved, not just from a status standpoint but also the monetary loss of benefits that were manually removed and justified by changing the status and start dates ... Please note that Shutterfly had deemed me a full-time employee entitled to benefits. All holiday and PTO benefits were present in the Shutterfly payroll time tracking system prior to the status change dated 12/15/2019. A Lifetouch HR representative manually removed them when changing my employment status to contractor. No notification of status change was received.

(ECF No. 34-1 at 37, 40, emphasis added.)

Two days after she sent the Report, Mathiason received a termination notice from Shutterfly stating that her “employment as a Temporary Employee” would be terminated as of that day, September 2, 2021. (Id. at 44, 82 ¶ 30.) On September 16, 2021, she received a letter from Shutterfly stating its position that she had been a “temporary employee” from May 30, 2018 to September 2, 2021. (Id. at 49-50, 82 ¶ 31.) Shutterfly further asserted it had compensated her correctly and terminated her employment pursuant to a reduction in force announced June 29, 2021. (Id.)

b. Procedural Background

In the Memorandum supporting her Motion, Mathiason argued she stated a claim for punitive damages because Shutterfly acted with deliberate disregard for her rights under the MWA by terminating her in response to the Report. (ECF No. 32 at 18-19.) Mathiason acknowledged that a report is protected under the MWA only if it describes “an actual, suspected, or planned violation of statute, regulation, or common law, whether committed by an employer or a third party.” Minn. Stat. § 181.931, subd. 6. But though Mathiason asserted the Report was “protected” under this standard, she failed to identify any state, federal or common law violation allegedly described in her Report. (See ECF No. 32 at 19, vaguely referring to “wage, hour and classification laws” without reference to any statute, regulation or case law establishing a claim.)

Upon reviewing not only Mathiason's Amended Complaint and proposed Second Amended Complaint, but also the parties' arguments at the hearing and the entire record in the case, the Court identified only two laws Mathiason had ever argued were implicated by her Report: 29 U.S.C. § 215(a)(3) and Minn. Stat. § 177.23. (See ECF No. 34-1 at 86 ¶ 49.) Concluding Mathiason's Report did not implicate either 29 U.S.C. § 215(a)(3) or Minn. Stat. § 177.23, such that she failed to state a claim for relief under the MWA, the Court recommended her Motion to add a claim for punitive damages based on the MWA claim be denied as futile. (Id. at 7-9.)

Mathiason objected to the Report and Recommendation and asserted for the first time in her argument to the District Judge that her Report described a violation of subdivisions (d) and (f) of the Notice Statute. (ECF No. 41 at 5-8.) Based on this newly-alleged violation, Mathiason argued she adequately pled an MWA claim and sought a remand to this Court. (Id.)

The District Judge granted Mathiason's objection and remanded this matter after concluding the Report and Recommendation incorrectly examined the futility of Mathiason's proposed punitive damages claim (ECF No. 42). The District Judge held that, instead of first determining whether Mathiason adequately pled an underlying substantive right for Shutterfly to have deliberately disregarded, “the ‘first question' [in the Rule 15 futility analysis] is whether Mathiason has pleaded sufficient facts to support her theory that Shutterfly acted with deliberate disregard for her rights.” (Id. at 3) (citing Ramirez v. AMPS Staffing, Inc., 17-cv-5107, 2018 WL 1990031, at *7 (D. Minn. April 27, 2018)). The District Judge further stated he was unsure whether a finding, on remand, that the laws Plaintiff claimed her report implicated did not apply would be sufficient to bar her punitive damages claim at this stage in the proceedings. (Id. at 3 n.1.) This Court is bound by the directives of the District Judge and accordingly applies them here.

II. Standard of Review

Under Fed.R.Civ.P. 15(a)(2), the Court must “freely grant leave [to amend] when justice so requires.” Although this is a liberal standard, it does not give parties an absolute right to amend their pleadings. Sherman v. Winco Fireworks, Inc., 532 F.3d 709, 715 (8th Cir. 2008). “A decision whether to allow a party to amend her complaint is left to the sound discretion of the district court.” Popaolii v. Correctional Medical Srvs., 512 F.3d 488, 497 (8th Cir. 2008). A district court appropriately denies the movant leave to amend if, after having reviewed the proposed amended complaint, “there are compelling reasons such as undue delay, bad faith, or dilatory motive, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the non-moving party, or futility of the amendment.” Id. (quoting Moses.com Sec., Inc. v. Comprehensive Software Sys., Inc., 406 F.3d 1052, 1065 (8th Cir. 2005)).

A proposed amendment is futile if “the district court has reached the legal conclusion that that the amended complaint could not withstand a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure.” Zutz v Nelson, 601 F.3d 842, 850 (8th Cir. 2010) (quoting Cornelia I. Crowell GST Trust v. Possis Med., Inc., 519 F.3d 778, 782 (8th Cir. 2008)). To survive a Rule 12(b)(6) “motion to dismiss for failure to state a complaint, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Carlsen v. GameStop, Inc., 833 F.3d 903, 910 (8th Cir. 2016) (citations and quotations omitted). “A claim has facial plausibility when the plaintiff [pled] factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citations and quotations omitted). In considering the facial plausibility of a claim, “[c]ourts must accept as true all of the factual allegations in the complaint and draw all reasonable inferences in the plaintiff's...