Naser v. Metro. Life Ins. Co.

LOAY S. NASER, Plaintiff,

v. METROPOLITAN LIFE INSURANCE COMPANY, METLIFE ENTERPRISEGENERAL INSURANCE AGENCY, INC., AND METLIFE SECURITIES, Defendants.

Case No.: 5:10-CV-04475 EJD

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION

Dated: July 31, 2013

ORDER GRANTING-IN-PART AND

DENYING-IN-PART DEFENDANTS'

MOTION FOR SUMMARY

JUDGMENT; DENYING

PLAINTIFF'S MOTION FOR

SUMMARY JUDGMENT;

GRANTING DEFENDANTS'

MOTION TO STRIKE

[Re: Docket Nos. 71, 89, 94]

The above-captioned lawsuit is an employment-related action brought by Plaintiff Loay Naser ("Naser" or "Plaintiff") against Defendants Metropolitan Life Insurance Company, MetLife Enterprise General Insurance Agency, Inc., and MetLife Securities, Inc. (collectively "MetLife" or "Defendant"). Presently before the Court are three motions. MetLife has moved for summary judgment as to all eight causes of action brought forth by Naser. See Docket Item No. 89. MetLife has also moved to strike evidence submitted by Naser. See Docket Item No. 71. Naser has moved for partial summary judgment as to one of his claims for unpaid wages. See Docket Item No. 90.

The Court found this matter suitable for decision without oral argument pursuant to Civil Local Rule 7-1(b) and previously vacated the hearing. Having fully reviewed the parties' briefings, and for the following reasons, the Court GRANTS MetLife's Motion to Strike, DENIES Naser'sMotion for Partial Summary Judgment, and GRANTS-IN-PART and DENIES-IN-PART MetLife's Motion for Summary Judgment.

I. Background

A. Factual Background

1. MetLife Insurance Company and Its Incentive Programs

MetLife is a Delaware corporation with its principal place of business in New York. Def.'s Answer to Pl.'s Second Amended Consolidated Complaint ("SACC"), ¶ 5. MetLife deals in insurance and annuities and offers these services through agencies distributed throughout the country. Def.'s Ex. 1, Declaration of Kim Wargaki ("Wargaki Decl.") ¶ 3, Docket Item No. 78. MetLife operates one such agency in San Jose, CA ("E-38"), with satellite offices in Cupertino, CA and Walnut Creek, CA. Def.'s Ex. 25, Deposition of Loay S. Naser, Nov. 16, 2012 ("Naser Dep. 11/16") at 162:23-163:2, Docket Item No. 76. Each agency offers its services through Financial Services Representatives ("FSRs"), who earn commission on the sale of insurance and other financial products. Wargaki Decl. ¶ 19. FSRs work under the direction of a local management team headed by a Managing Director. Id. ¶ 3. The management team earns its pay from Performance Based Credits ("PBC")—effectively a type of override on the premiums clients pay. Id. ¶¶ 7, 9.

PBC serves both as the source of management pay and as an investment fund from which local management may pay out expenses intended to generate revenue. Id. ¶ 8. PBC does not, however, act as a payment source for the agency's necessary and direct expenses, such as rent, utilities, and insurance, which are paid by MetLife through an independent operating budget. Id. ¶ 11. As compensation, management may take a percentage draw from PBC. Id. ¶¶ 12-15. MetLife considers a percentage draw over 50% inappropriate and reflective of insufficient investment in the agency. Id. ¶ 23. MetLife recalibrates PBC at regular intervals based on projected growth and a location's percentage achievement of its goal. Id. ¶ 16. MetLife pays its draws based on 85% of projected PBC, leading to an under- or overstatement of payments. Id. ¶ 21. There is therefore anecessary delay between the payment of draws and the final assessment of actual PBC. In order to rationalize the difference between the 85% payout of PBC and the actual draw due, MetLife undertakes an annual process called a "true-up." Id. ¶ 18. During a "true-up," amounts due from understated payments are paid out, and any overpayment must be paid back to MetLife. Id.

MetLife awards additional PBC through incentive programs. Id. ¶ 9. One of these is the "super starter" program, which rewards new FSRs for strong performance. Id. ¶ 20. It also motivates management to push the performance of new FSRs by awarding PBC to agency locations for each FSR who achieves super starter status. Def.'s Ex. 1, 2007 Management Compensation Plan Description ("Comp. Plan") at 9, Docket Item No. 78; Def.'s Ex. 5, Deposition of Thomas Ross, May 15, 2012 ("Ross Dep. 5/15") at 50:16-22, Docket Item No. 73; Def.'s Ex. 6, Deposition of Thomas Ross, May 17, 2012 ("Ross Dep. 5/17") at 207:22-208:9, Docket Item No. 74; Def.'s Ex. 7, Deposition of Michael Vietri, July 26, 2012 ("Vietri Dep. 7/26") at 34:19-25:25, Docket Item No. 75.

In addition to the super starter program, MetLife supports new FSRs by assigning existing client accounts to them. Def.'s Ex. 2, Declaration of Michael Vietri ("Vietri Decl.") ¶ 7; Naser Dep. 11/16 at 12:11-18. These are clients whose accounts are "orphaned"—that is, no longer assigned to another FSR because of that FSR's separation from MetLife. Id. Managing Directors typically assign these client accounts evenly across all FSRs in a location, including new FSRs. Vietri Decl. ¶ 8; Naser Dep. 11/16 at 12:11-18.

2. Loay Naser's Employment with MetLife

Loay Naser is a Kuwaiti-born resident of California. SACC ¶¶ 6, 7; Declaration of Loay Naser in Opp'n to Defs.' Mot. for Summ. J. ("Naser Decl. Opp'n") ¶ 2. He describes himself as a Christian of Palestinian/Arab ancestry. Id. ¶ 11. In 1991, he joined MetLife at its Cupertino office as an FSR. Def.'s Ex. 20, Deposition of Loay S. Naser, September 28, 2012 ("Naser Dep. 9/28") at 48:10-11, Docket Item No. 74. At the time of his hire, Naser signed a memorandumacknowledging that his employment was "at-will." Naser Dep. 9/28 at 20-21, 25; see also Def.'s Ex. 23, MetLife Disciplinary Action Policy, Docket Item No. 76; Def.'s Ex. 22, Guide to Policies and Procedures at 4, Docket Item No. 76. In 2000, MetLife promoted him and Mike Shami to co-Managing Directors of E-38. Def.'s Ex. 4, Deposition of Loay S. Naser, May 11, 2012 ("Naser Dep. 5/11") at 17:18-22, 63:12-64:10, 166:13-18. In 2007, pursuant to MetLife's perception that Shami was doing too little work to justify allowing him to retain the title of co-Managing Director, the pair was given a set of options: (1) allow Naser to take over as Managing Director, with Shami accepting a demotion to FSR, or (2) separate from MetLife. Id. Naser and Shami chose the first option. Id. Accordingly, MetLife promoted Naser to sole Managing Director of the agency in San Jose ("E-38"). Id.

3. MetLife's Special Investigations Unit Investigates Naser's Management of E-38

The series of events underlying the present action commenced in the autumn of 2008. That September, Naser flew to Jordan to attend his father's funeral. SACC ¶ 13. He states that upon his return, he was subjected to derogatory comments about Jordan and his travels there. SACC ¶ 13. Around the same time, Peter Chang, a subordinate FSR in Naser's agency complained to MetLife's Human Resources department ("HR") alleging that Naser forced FSRs to split 25% of their commissions resulting from certain leads with management ("the Chang complaint"). Def.'s Ex. 9, Internal Investigation Report ("Ross Report") at 3, Docket Item No. 75. HR referred the matter to MetLife's Special Investigations Unit ("SIU"). Ross Dep. 5/15 at 15:23-16:19; Def.'s Ex. 3, Declaration of Thomas Ross ("Ross Decl.") Ex. 1, Docket Item No. 73.

In October, 2008, the SIU began its investigation of the Chang complaint. Id. Thomas Ross, then Senior Fraud Investigator, led this investigation (the "Ross investigation"). Id. The Ross investigation lasted through June of 2009, and Ross noted that he had never known an SIU investigation that had lasted so long. Ross Report, Docket Item No. 75. Upon the conclusion of the Ross investigation, Ross issued a final report (the "Ross Report") to the committee overseeing theinvestigation. Id. This committee consisted of several members included on a high-level communications distribution list, including Michael Vietri, Executive Vice-President for Individual Distribution, and Nam Patel from MetLife Human Resources, among others. See Docket Item No. 75, Ex. 9 (distribution list). The Ross Report not only confirmed the accuracy of the Chang complaint, but revealed many additional violations of MetLife procedures, practices, and policies. Ross Report, Docket Item No. 75. These included (1) that Naser required FSRs to leave commission assignment lines on new applications blank so that he could assign 25% of commissions to management; (2) that Naser had exchanged the assignment of 30,000 orphaned accounts with an FSR in southern California in return for that FSR's payment of a $70,000 salary for Naser's secretary; (3) that Naser would require experienced FSRs to assign accounts to new FSRs in order to help new FSRs achieve super starter status, and that this arrangement required the new FSRs to repay these commissions to the experienced FSRs in either cash or commission assignments; (4) that Naser would switch paperwork in order to ensure that new applicants would pass competency exams; and (5) that Naser had hired a marketing director for the agency, and, as part of the deal, agreed to personally pay her housing costs—an arrangement never reported to HR and for which no IRS forms 1099 were ever issued. See Ross Report, Docket Item No. 75. MetLife management considered this conduct improper, especially because it artificially increased PBC at E-38. Id.

John Schrieffer and Steve Day, Naser's direct managers, received the Ross Report and, upon review recommended that Naser and his management team be placed under enhanced supervision and that Naser and his management team receive no discretionary bonus for 2009; no recommendation of termination was included. Def.'s Ex. 17, Deposition of John Schrieffer, September 20, 2012 ("Schrieffer Dep. 9/20") at 252:9-253:15, Docket Item No. 105. Vietri, the MetLife executive responsible for disciplinary action in this...