A former chief financial officer’s retaliation lawsuit against software company Panzura will remain in California after a federal court declined the company’s motion to transfer the case to Texas, and partially denied its bid to dismiss the complaint.
The court found that L.M., who served as CFO from March 2022 until his termination in January 2024, had plausibly alleged multiple claims under California and federal employment laws. He asserts he was fired in retaliation for reporting alleged misconduct by the company’s then-chief revenue officer, including financial improprieties and an inappropriate sexual relationship with a subordinate.
“The Court concludes that Panzura has not met its burden to show that these factors clearly favor transfer of this case to the Eastern District of Texas,” the ruling stated.
The court denied Panzura’s request to transfer the matter under 28 U.S.C. § 1404(a), finding that California’s Northern District had a meaningful connection to the events at issue and was more convenient for key witnesses, including former executives. It also rejected the company’s bid to dismiss five of the seven claims brought by L.M., but did dismiss one claim with prejudice and severed another for lack of standing in federal court.
Claims tied to reporting of potential legal violations
L.M. alleges that he was terminated shortly after raising concerns about D.W., Panzura’s chief revenue officer and later CEO, who allegedly used company funds to finance personal travel with a junior female employee and influenced decisions to prevent her layoff and increase her compensation.
He reported suspicions that the relationship was sexual and potentially coercive, given the power imbalance. According to the complaint, L.M. raised these concerns with then-CEO J.S., also warning that it posed legal risks, including possible violations of pay equity and sexual harassment laws.
After allegedly refusing demands to approve preferential compensation for the junior employee, L.M. was fired days after confronting D.W. with CEO J.S. at a company meeting. Both executives were dismissed during a subsequent trip to meet board members, as were two of J.S.’s family members who also worked for the company. Days later, D.W. was named CEO and promoted the junior employee.
The court held that these allegations were sufficiently detailed to support retaliation claims under California Labor Code § 1102.5, the Fair Employment and Housing Act (FEHA), and Title VII of the Civil Rights Act.
“Whether [L.M.] had an objectively reasonable belief that this conduct violated the law is a question that this Court cannot resolve against [him] at this early stage,” the court found.
Transfer motion fails despite corporate presence in Texas
Panzura, which is majority-owned by venture capital firm Profile Capital Management, argued the case should be heard in Texas, where it claimed its main operations had moved. However, the court found California’s Northern District retained sufficient ties to the dispute.
While L.M. resides in Alabama and spent time in Panzura’s Texas office, he also worked from its San Jose office and alleged that key events—including the confrontation with D.W.—took place there. Former CEO J.S., the former HR director, and other witnesses are located in or near California, further supporting the decision to retain the case in the current forum.
“The convenience of witnesses is often the most important factor in deciding whether to transfer an action,” the court noted, adding that Panzura failed to show that Texas was clearly more convenient.
Although the company submitted evidence that it planned to close its California office and relocate operations, the court found that it maintained sufficient connections to California to weigh against transfer.
Dismissal granted in part
The court dismissed L.M.’s claim for breach of the implied covenant of good faith and fair dealing (Count 5) with prejudice. As an at-will employee, the court found L.M. could not establish a contractual obligation barring termination, and that the claim duplicated other statutory claims.
The court also severed and remanded L.M.’s claim under California’s Unfair Competition Law (UCL) to state court (Count 7), holding that he lacked Article III standing to pursue injunctive relief in federal court as a former employee.
The remaining claims—including retaliatory discharge under California and federal laws, failure to prevent retaliation, and wrongful termination in violation of public policy—survived the motion to dismiss.
Panzura must respond to an amended complaint to be filed within 21 days of the ruling. The court also ordered the parties to complete an initial alternative dispute resolution session by May 23, 2025.
For more information, see McClure v. Panzura, LLC, No. 5:2024cv02966 – Document 50 (N.D. Cal. 2025).
