Smith v. HashiCorp, Inc.

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RYAN SMITH, Plaintiff and Appellant, v. HASHICORP, INC., Defendant and Respondent.

A165389

California Court of Appeals, First District, Fourth Division

April 12, 2023

NOT TO BE PUBLISHED

(City &County of San Francisco Super. Ct. No. CGC-20-587383)

WHITMAN, J. ^[*]

Plaintiff Ryan Smith appeals a summary judgment entered on his complaint against his former employer, defendant HashiCorp Inc. (HashiCorp), alleging, among other things, three causes of action for wrongful termination and retaliation.^[1] He contends the trial court erred in concluding that there could be no causation as a matter of law because the decision to terminate his employment was made before he engaged in the "protected activity" alleged in the complaint. He argues: (1) to reach this conclusion, the court construed the amended complaint's allegations concerning "protected activity" too narrowly; (2) the court erroneously declined to consider undisputed facts submitted in opposition to the motion that show he engaged in other unpled protected activity before the decision to terminate was made (such that those causes of actions were not temporally barred); and (3) the court erred by refusing to grant his request for leave to amend his complaint to add the unpled theories of liability.

We find no error in the court's summary adjudication of Smith's first two causes of action, which as pleaded were plainly limited to protected activity that occurred after the decision to terminate his employment was made. Nor did the court err in refusing to consider evidence going only to unpled theories of liability. We agree with Smith, however that his third cause of action alleges retaliation based on his assertion of a bona fide right to be paid and that triable issues of fact preclude summary adjudication of this cause of action. Accordingly, we reverse the judgment and remand with instructions to deny the motion with respect to the third cause of action. On remand, the court retains discretion to rule on a renewed motion by Smith for leave to amend the complaint.

Background

Smith's first amended complaint alleges that he began working for HashiCorp in March 2019. His direct supervisor was the regional vicepresident of sales, Jason Flashberg. Between March and August 2019, Smith was working to secure substantial purchase agreements with three of his assigned clients: Venmo/PayPal,^[2] Oracle Corporation, and VMware, Inc. In August 2019, as these agreements were approaching completion Flashberg advised Smith that he would need to give one of the above accounts to a coworker. On August 16, Smith "reluctantly" surrendered the Venmo/PayPal account to his coworker. Smith was told he could split the commission on the Venmo purchase agreement 50/50 with his coworker if he saw the purchase agreement through to completion. As to the PayPal account, Smith would not receive any share of the commission.

On August 19, Smith was informed that the Oracle sale would not proceed and, on November 6, Smith learned that the VMware sale would not close, either. In the meantime, Smith completed the Venmo sale and his coworker completed the PayPal sale.

On November 7, 2019, Smith requested a meeting with Flashberg and Flashberg's supervisor, the vice-president of North America sales, "to discuss what had occurred and the fact that he had received almost no commission from the three accounts and purchase agreements he had been working on prior to being forced to surrender the Venmo/PayPal accounts to [his coworker]. Smith also wanted to discuss the possibility of retaining both the Venmo and PayPal accounts as his Oracle and VMware deals fell through."

At that meeting, which took place on November 11, Smith learned that the decision to surrender an account to his coworker had been made by Flashberg, not Flashberg's supervisor as Smith had been told. Smith did not know why he had been required to surrender one of his accounts but, based on information and belief, suspected it was because the coworker to whom he transferred the account, who was under-performing, had a "close personal relationship" with Flashberg.

On November 20, Smith received a letter from defendant's human resources department notifying him that he was being placed on a performance improvement plan. Smith was "blindsided" by the letter because he had closed the last business quarter "at 425% of his quota attainment, had earned 159% of his total yearly quota, and was No. 1 in sales for the western region."

On January 15, 2020, Smith requested a meeting with the human resources department to discuss his concerns about the decision to place him on a performance improvement plan. At the meeting on January 17, Smith "expressed his frustrations and concerns with respect to how he had been and was being treated, as detailed above."

Smith received a letter that afternoon terminating his employment.

Smith's first cause of action asserts his employment was terminated in violation of Labor Code section 98.6 for making a bona fide complaint for unpaid wages. He alleges that defendant "abruptly terminated [him] on January 17, 2020 after [Smith] complained to the human resources department about how he had and was being treated by his superiors at HashiCorp, including the fact that he lost significant commissions because he had been improperly forced to surrender his Venmo and PayPal accounts to [his coworker]. [Smith] additionally complained that HashiCorp was retaliating against him by putting him on a 'Performance Plan' .... [Smith] further complained to Human Resources that his direct superior, Mr. Flashberg, had lied to him about why he was being forced to surrender these accounts, falsely representing that the directive had been issued by [the vice-president of North America sales]."

Smith's second cause of action alleges his employment was terminated in violation of Labor Code section 1102.5, which prohibits an employer from retaliating against and/or terminating an employee for disclosing information about a superior which the employee reasonably believes constitutes a violation of company policy. Smith alleges that he was terminated after he complained to the human resources department as set forth above.

Finally, the third cause of action alleges HashiCorp violated the California public policy, incorporated into Labor Code sections 200-300, prohibiting retaliation against an employee who asserts a right to be paid by "forcing him to surrender his valuable accounts, for which Mr. Smith would have been owed commissions, ignoring [Smith's] requests about these commissions and to reinstate the Venmo and PayPal accounts, placing Smith on a bogus 'Performance Plan', and the actions in terminating Mr. Smith in retaliation for him asserting his legal rights."^[3]

HashiCorp moved for summary judgment or, alternatively, summary adjudication of the individual causes of action. As to the three retaliation causes of action, HashiCorp asserted, inter alia, that the decision to terminate Smith's employment was made before his meeting with the human resources department on January 17. Because the "decision to terminate Smith's employment cannot be retaliation for a complaint that Smith had not yet made" and the complaint does not allege that he engaged "in any protected conduct before HashiCorp made the decision to terminate him," there was no triable issue as to causation.

In support of its motion, HashiCorp submitted the following undisputed evidence that the decision to terminate Smith was made on January 7: On October 2, 2019, Flashberg sent Smith an email expressing his concern that "[a]fter 5 months on the job," Smith had "limited . . . knowledge" of HashiCorp's basic products. Flashberg also indicated that he was "surprised at how unprepared" Smith was for meetings and suggested they work "on a plan to improve [his] product knowledge." On November 11, Flashberg sent another email to Smith regarding his "activity, his outbound pipeline generation, his understanding of the company's products, and his relationship with leadership." On November 20, Smith was placed on a performance improvement plan that included benchmarks for three of the four categories marked for improvement in the November 11 email (activity, pipeline generation, product knowledge) and well as the added category of business reporting. On December 19, Flashberg wrote to human resources stating: "I continue to not be impressed with [Smith's] skills, attention to detail, etc. as a sales person. Culturally he's not a perfect fit.... I am not sure I see him here for the long-term." On January 6, 2020, Flashberg sent an email to Smith expressing concerns about the manner in which Smith had handled an account and noting his insubordination. The email states: "This is not the first time you've sent content/documents out w/o approval and certainly not the first time you've embarrassed/challenged me in front of the team. We will need to discuss in greater detail during our 1:1." Also on January 6, Flashberg emailed the vice-president of North America sales and the human resources department recommending that Smith's employment be terminated by the end of the month. The email asserts, "As of now, [Smith] is not meeting the expectations of his performance plan . . . and there are already grounds for termination." The decision was made the next day to terminate Smith's employment.

In opposition, Smith asserted that he engaged in protected activity on at least four separate occasions before HashiCorp decided to terminate his employment: (1) when he made a "bona fide objection, beginning in late July 2019, to Mr. Flashberg's unjustified and patently improper demand that he give one of his valuable accounts to [his coworker] and that she receive...