Opinion
D070107
10-31-2017
MARTHA L. MONCADA et al., Plaintiffs and Appellants, v. WAVE CREST HOTELS AND RESORTS LLC, Defendant and Respondent.
Williams Iagmin and Jon R. Williams; Cadena Churchill and Raul Cadena for Plaintiffs and Appellants. Higgs Fletcher & Mack, John Morris, Alexis S. Gutierrez and Rachel E. Moffitt for Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 37-2013-00072691-CU-OE-CTL) APPEAL from an order of the Superior Court of San Diego County, Joan M. Lewis, Judge. Affirmed in part, reversed in part, and remanded with directions. Williams Iagmin and Jon R. Williams; Cadena Churchill and Raul Cadena for Plaintiffs and Appellants. Higgs Fletcher & Mack, John Morris, Alexis S. Gutierrez and Rachel E. Moffitt for Defendant and Respondent.
In this wage and hour class action lawsuit, the trial court denied the plaintiffs' motion to certify a class and a number of subclasses with respect to the defendant's meal break, rest break, grace period, and overtime calculation practices. With the exception of one of the plaintiffs' overtime claims, we find no abuse of discretion in the trial court's order. In particular, we reject the plaintiffs' contention on appeal that the trial court inappropriately determined the merits of their meal break, rest break, grace period, and meal overtime claims. Rather, the record supports the trial court's principle determination that given the nature of those claims and the evidence presented with respect to defendant's practices, proof of defendant's liability on those claims would require individual determinations which are not suitable for resolution on any discernible classwide basis.
We do agree with the plaintiffs with respect to one of their overtime claims. They argued that, although front desk employees at the hotels the defendant managed were paid "upsell" bonuses, in calculating the front desk employees' overtime pay, the defendant failed to include the bonuses in the employees' base pay. Contrary to the trial court's determination, the fact the representative plaintiffs were not front desk employees did not require denial of class certification; rather the trial court should have granted the plaintiffs' leave to identify a representative of that subclass and amend their complaint accordingly.
FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff Martha L. Moncada works for defendant Wave Crest Hotels and Resorts, LLC (Wave Crest) as a housekeeping employee at one of two hotels Wave Crest manages in Carlsbad, California; plaintiff Julio Torres worked as an engineering supervisor at both Wave Crest hotels in Carlsbad.
Wave Crest manages the Hilton Garden Inn Carlsbad Beach and the Hilton Carlsbad Oceanfront Resort and Spa.
In October 2013, Moncada filed a class action complaint against Wave Crest and added Torres as a plaintiff in October 2014. Thereafter, in March 2015, Moncada and Torres filed a first amended complaint, which Wave Crest answered, and which is the operative pleading herein. In particular, the plaintiffs alleged Wave Crest did not provide its employees with timely meal breaks, rest breaks for employees who work between six and eight hours, and payment for five-minute periods before and after the ends of scheduled shifts; the plaintiffs further alleged that Wave Crest failed to properly calculate its employees base pay for purposes of paying overtime.
Plaintiffs presented three additional theories of liability for class certification: (1) an alleged policy of discouraging meal and rest breaks; (2) an alleged unlawful uniform policy; and (3) a policy of requiring its employees to work "off the clock." On appeal, plaintiffs do not challenge the trial court's rejection of these theories.
On February 29, 2016, the trial court heard the plaintiffs' motion to certify subclasses with respect to the labor law violations the plaintiffs had alleged. As we indicated at the outset, the trial court found that with respect to the bulk of the plaintiffs' claims, Wave Crest's liability could not be determined on a classwide basis, and hence class certification was not appropriate. With respect to plaintiffs' claim to payment of overtime to front desk employees, the trial court found that neither plaintiff was a suitable representative because neither had worked at the front desk and earned the upsell bonuses, which were the predicate to plaintiffs' front desk claim.
Plaintiffs filed a timely notice of appeal.
DISCUSSION
I
Where, as here, an order denying class certification effectively rings "the death knell" for the class claims, we treat the order in essence as a final judgment on those claims and it is therefore appealable immediately. (Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 699; see also Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 435; Richmond v. Dart Industries, Inc. (1981) 29 Cal.3d 462, 470.)
In Hale v. Sharp Healthcare (2014) 232 Cal.App.4th 50, 57-58 (Hale), we set forth the familiar principles which govern our review of a trial court's ruling on class certification: "A party seeking class certification has the burden of establishing the prerequisites to certification and ' "more than 'a reasonable possibility' that class action treatment is appropriate.' " [Citation.] ' "Because trial courts are ideally situated to evaluate the efficiencies and practicalities of permitting group action, they are afforded great discretion in granting or denying certification." ' [Citation.]
"[¶] . . . [¶]
"As a result, we will reverse a trial court certification ruling 'only if a " 'manifest abuse of discretion' " is present. [Citation.] " 'A certification order generally will not be disturbed unless (1) it is unsupported by substantial evidence, (2) it rests on improper criteria, or (3) it rests on erroneous legal assumptions. [Citations.]' [Citations.]" [Citation.] [¶] "We must '[p]resum[e] in favor of the certification order . . . the existence of every fact the trial court could reasonably deduce from the record. . . .' " ' [Citations.]
" 'We review the trial court's actual reasons for granting or denying certification; if they are erroneous, we must reverse, whether or not other reasons not relied upon might have supported the ruling.' [Citation.] However, '[a]ny valid, pertinent reason will be sufficient to uphold the trial court's order.' [Citation.]"
II
" 'The party advocating class treatment must demonstrate the existence of an ascertainable and sufficiently numerous class, a well-defined community of interest, and substantial benefits from certification that render proceeding as a class superior to the alternatives. [Citations.] "In turn, the 'community of interest requirement embodies three factors: (1) predominant common questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class.' " ' " (Ayala v. Antelope Valley Newspapers, Inc. (2014) 59 Cal.4th 522, 529-530.)
Here, the trial court denied class certification with respect to most of plaintiffs' claims because it found individual issues predominate regarding the entitlement to or the fact of damages. As we explain, we find no abuse of discretion in that determination. We do, however, disagree with the trial court's disposition of the plaintiffs' proposed front desk class on the grounds there is no suitable representative.
III
A trial court's determination of whether individual or common issues predominate regarding entitlement to or the fact of damages is governed in important respects by the Supreme Court's opinions in Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004 (Brinker), and this court's opinion in Hale.
Like the plaintiffs here, in Brinker, the plaintiff alleged the defendant violated meal break and rest break regulations. Without resolution on the merits of a number of defenses which the defendant raised, the trial court in Brinker certified the plaintiff's proposed subclasses. The defendant, by way of a petition for extraordinary relief, challenged the certification and the Court of Appeal vacated the trial court's order; the Court of Appeal found that, with respect to the subclasses, the trial court was required to determine the merits of the proffered defenses. The Supreme Court reversed and found that in general, at the certification stage, the question of predominance does not require resolution of the merits of the plaintiff's claims, but rather only consideration of the merits insofar as such consideration helps the trial court determine whether there are common questions of law or fact which predominate over individual questions. "[W]hether common or individual questions predominate will often depend upon resolution of issues closely tied to the merits. [Citations.] To assess predominance, a court 'must examine the issues framed by the pleadings and the law applicable to the causes of action alleged.' [Citation.] It must determine whether the elements necessary to establish liability are susceptible of common proof or, if not, whether there are ways to manage effectively proof of any elements that may require individualized evidence. [Citation.] In turn, whether an element may be established collectively or only individually, plaintiff by plaintiff, can turn on the precise nature of the element and require resolution of disputed legal or factual issues affecting the merits. For example, whether reliance or a breach of duty can be demonstrated collectively or poses insuperable problems of individualized proof may be determinable only after closer inspection of the nature of the reliance required or duty owed and, in some instances, resolution of legal or factual disputes going directly to the merits. [Citations.]" (Brinker, supra, 53 Cal.4th at p. 1024.) Thus, with respect to the trial court's determination that the plaintiffs' rest period claim was amenable to treatment as a class action, the Supreme Court found no abuse of discretion. The court noted the defendants' express written policy did not require, as does the applicable regulation, a rest break after six hours of work; given that circumstance, the trial court could find the claim was subject to common proof of a uniform policy that deprived workers of the mandated second break after six hours of work. "Claims alleging that a uniform policy consistently applied to a group of employees is in violation of the wage and hour laws are of the sort routinely, and properly, found suitable for class treatment." (Brinker, at p. 1033.) The fact that the rest period might be waived by individuals did not prevent the trial court from determining that the underlying question of liability was subject to common proof. (Ibid.)
However, with respect to two other claims, the Supreme Court found that the underlying merits of the plaintiff's claims in fact controlled the certification issue. With respect to the defendant's obligation to provide meal breaks for its employees, the Supreme Court agreed with the plaintiff that a meal break was required after five hours of work. However, the court did not agree with plaintiff's contention that after a first meal, an employee may be required to work only five hours without another meal break. (Brinker, supra, 53 Cal.4th at pp. 1041-1048.) Because the trial court's class certification of the meal break claim included both employees who had been deprived of any meal break and those who had worked five hours after a first meal break, the court remanded the issue to the trial court for reconsideration of certification in light of the court's narrower interpretation of an employer's meal break obligation. (Brinker, at pp. 1050-1051.)
Significantly, the Supreme Court found that the trial court had erred in certifying a class of employees who had been required to work while on meal breaks. The court noted that the defendant had an express policy which prohibited such "off-the-clock" work and that in the trial court the plaintiffs had not presented any evidence of a systematic company policy to pressure or require employees to work off the clock. "[T]hat employees are clocked out creates a presumption they are doing no work, a presumption [plaintiff has] . . . the burden to rebut. As all parties agree, liability is contingent on proof [defendant] knew or should have known off-the-clock work was occurring. [Citations.] Nothing before the trial court demonstrated how this could be shown through common proof, in the absence of evidence of a uniform policy or practice. Instead, the trial court was presented with anecdotal evidence of a handful of individual instances in which employees worked off-the-clock, with or without knowledge or awareness by Brinker supervisors. On a record such as this, where no substantial evidence points to a uniform, companywide policy, proof of off-the-clock liability would have had to continue in an employee-by-employee fashion, demonstrating who worked off the clock, how long they worked, and whether [defendant] knew or should have known of their work. Accordingly, the Court of Appeal properly vacated certification of this subclass." (Brinker, supra, 53 Cal.4th at pp. 1051-1052.)
In sum, although Brinker makes it clear that determination of the merits of a claim is in no sense a prerequisite to class certification, in particular instances consideration of the substantive nature of a plaintiffs' claim may determine whether the claim is amenable to resolution as a class action. (Brinker, supra, 53 Cal.4th at pp. 1024-1025.)
In Hale, we affirmed an order decertifying a class with respect to the plaintiff's claim a hospital charged uninsured patients more for emergency services than the hospital accepted as payment from private insurers or government plans. In decertifying the class the trial court had found that as a practical matter, there was no way of determining on a classwide basis that the hospital charged uninsured patients at higher rates than the hospital accepted from third party payers. (Hale, supra, 232 Cal.App.4th at p. 63.) We stated: " ' " '[A]s a general rule if the defendant's liability can be determined by facts common to all members of the class, a class will be certified even if the members must individually prove their damages.' " ' [Citation.] However . . . 'class treatment is not appropriate "if every member of the alleged class would be required to litigate numerous and substantial questions determining his individual right to recover following the 'class judgment' " on common issues.' [Citation.] ' "Only in an extraordinary situation would a class action be justified where, subsequent to the class judgment, the members would be required to individually prove not only damages but also liability." ' [Citation.]" (Id. at pp. 63-64.)
We found support for this principle not only in the Supreme Court's opinion in Duran v. U.S. Bank National Assn. (2014) 59 Cal.4th 1, 28-30 (Duran), but in a number of Court of Appeal opinions. "In Thompson [v. Automobile Club of Southern California (2013)] 217 Cal.App.4th 719, Division Three of the Fourth Appellate District affirmed an order denying class certification in a case alleging the defendant's auto club renewal policies resulted in late-renewing members receiving less than a full year of services. The court determined common issues did not predominate because individualized issues existed regarding whether damage recovery was possible, not merely the measure of damages. These individual issues included what benefits, if any, were received during the delinquency period, whether the renewal practices rather than paying a new member fee saved class members money and whether the member was aware of the renewal policy. (Id. at pp. 731-732.) The court noted these issues were essentially the same issues identified as to why the class was not ascertainable, but they were equally important for a predominance analysis. (Id. at p. 731.)
"In Morgan v. Wet Seal, Inc. (2012) 210 Cal.App.4th 1341, the court denied class certification in a case alleging the company required employees to purchase company clothing to wear to work but failed to reimburse such purchases. Because there were no clear companywide policies requiring employees to purchase company clothing as a condition of employment or describing what an employee was required to wear, the trial court determined there was no common method to prove the fact of liability on a classwide basis. Rather, individualized inquiries would need to be made regarding what employees were told by store managers about wardrobe, how employees interpreted any such discussion, whether attire required by the company constituted a uniform, where employees purchased wardrobe items and the particular items purchased. [Citation.] The Court of Appeal affirmed, concluding the plaintiffs did not meet their burden to present an effective plan to manage the individual issues necessary to determine the fact of liability, i.e., the right to recover, on a classwide basis. (Id. at pp. 1368-1369; see Wilens v. TD Waterhouse Group, Inc. (2003) 120 Cal.App.4th 746, 756, [individual issues went beyond calculation of damages and involved 'each class member's entitlement to damages. Each class member would be required to litigate "substantial and numerous factually unique questions to determine his or her individual right to recover," thus making a class action inappropriate']; City of San Jose v. Superior Court (1974) 12 Cal.3d 447, 459, ['a class action cannot be maintained where each member's right to recover depends on facts peculiar to his case . . . '].)" (Hale, supra, 232 Cal.App.4th at p. 64, fn. omitted.)
With these principles in mind we turn to the trial court's disposition of plaintiffs' claims.
IV
The record here fully supports the trial court's determination the plaintiffs' meal time, rest time and grace period claims are not amenable to class treatment because liability cannot be determined on a classwide basis.
A. Meal Time Breaks
The parties agree an employer is required to provide a first meal break no later than the end of an employee's fifth hour of work, and a second meal break no later than the end of an employee's 10th hour of work. (See Lab. Code, § 512, subd. (a); Industrial Welfare Commission (IWC) Wage Order No. 5-2001; Cal. Code of Regs. tit. 8, § 11050; Brinker, supra, 53 Cal.4th at p. 1049.)
Although Wave Crest's Employee Handbook does not specify that first meal breaks are to be provided during an employee's first five hours of work or that second meal breaks are to be provided before an employee works 10 hours, Wave Crest's Standard Operating Procedure (SOP) and its Break Assignment Sheet, both set forth a policy for meal breaks which completely complies with the requirements of the law. Notwithstanding the articulated policies which comply with the law, plaintiffs attempted by way of employee declarations and evidence from an expert to show that there was a uniform policy which prevented employees from taking breaks. The trial court found that the employee declarations to the effect that they missed meal breaks were insufficient to show a common policy, because among other reasons they were contradicted by 224 employee declarations submitted by Wave Crest to the effect that those employees took their meal breaks in a timely manner. The trial court found that the expert's statistical analysis was unpersuasive because it was based on a relatively small sample and because at most that only 13 percent of the sampled records showed a failure to take timely meal breaks.
The SOP provides: "The meal period must be taken so that the associate does not work more than five hours without a 30 minute meal period." The Break Sheets state that "Lunch [breaks] must occur between 3 and 5 hours [from the] start of shift."
Given this record, in which the defendant's express policy complied with the law, and only conflicting anecdotal evidence and unpersuasive statistical evidence supported plaintiffs' claims, the trial court could reasonably conclude, as it did, that liability could only be shown by way of individual proof, which in turn made class treatment impractical. (See Hale, supra, 232 Cal.App.4th at pp. 63-64.) It bears emphasis here that as we interpret the trial court's ruling, it did not resolve the merits of the plaintiffs' claim, but rather only determined that resolution of the merits could not be accomplished on a classwide basis.
We note that in Duran, supra, 59 Cal.4th at pages 39-40, the court discussed at length the difficulties and limitations in using sampling and statistical projections as means of proving liability in class action cases.
B. Rest Breaks
For much the same reason, the trial court properly denied class certification of the plaintiffs' rest break claims.
As interpreted in Brinker, a rest break is required after four hours of work and then again if an employee works two or more additional hours. (Brinker, supra, 53 Cal.4th at pp. 1032-1033; IWC Wage Order No. 5-2001.) Consistent with requirements of the law, on one hand, Wave Crest's Employee Handbook provides that "Associates are authorized and permitted to take one 10-minute rest break for every four hours worked, or major fraction thereof." On the other hand, Wave Crest's SOP does not contain the phrase "or major fraction thereof" and plaintiffs argued that under the SOP it was possible that employees working more than six, but less than eight hours, might have been deprived of their second rest break. However, in attempting to prove there was a common policy of depriving such workers of a second break the plaintiffs only offered statistical proof that 47 percent of employees' shifts were more than six, but less than eight hours and conflicting employee statements about whether they were permitted to take a second break when they worked shifts that long.
The fact many employees worked between six and eight hours plainly does not show they were denied a second break. The conflicting evidence from employees also fails to show any common policy. Thus, the trial court could again properly conclude class treatment was not appropriate because liability would require individual proof. (See Hale, supra, 232 Cal.App.4th at pp. 63-64.)
C. Grace Period
Wave Crest permitted employees to clock in five minutes before a shift commenced and five minutes after a shift was completed; under this policy, the employee was only paid for the time of the scheduled shift and not for any time worked before the shift ended or after it was completed. Plaintiffs argued that by effectively rounding down employee shifts, Wave Crest was unfairly depriving employees of earned wages. However, as in Brinker, in order to prove such an "off-the-clock" claim, plaintiffs would have to rebut the presumption they only began working when their scheduled shifts commenced and ended; as in Brinker, they could not do so without individual proof of such work during the five-minute grace periods before and after shifts and hence, as in Brinker, the "off-the-clock" claims asserted here were not subject to class litigation. (See Brinker, supra, 53 Cal.4th at pp. 1051-1052.)
V
The plaintiffs also made two related bonus time claims. They argued that in calculating employees overtime pay, Wave Crest failed to include in calculation of their base pay compensation they received in the form of meals Wave Crest provided to employees who worked more than five hours. They also argued that because front desk employees received agreed "upsell" bonuses, the bonuses should have been used in calculating their overtime pay.
A. Meals
The evidence produced in the trial court showed that Wave Crest made meals available at no charge to employees who worked in excess of five hours. However, the record also suggests employees only intermittently ate the meals provided by Wave Crest, and, in fact Torres stated that he very seldom ate the meals, perhaps once a week. For its part, Wave Crest did not keep records of the employees who ate the meals available in the employees' break room, or the value of the food any particular employee ate. Under these circumstances, the fact that employees' overtime pay did not account for food consumed by employees could not be determined on a classwide basis. To establish any liability the plaintiffs would have to show that employees actually ate food provided by Wave Crest, the value of the food, and proof that in the same pay period the employee worked overtime. Because there are no records with respect to what particular employees consumed, proof of this claim would necessarily depend on evidence provided by individual employees. Thus, the trial court could reasonably determine that the claim was not suitable for resolution as a class claim.
We do not accept the plaintiffs' contention this claim could be litigated by determining the cost of the food Wave Crest provided all employees over the period covered by their allegations and spreading that cost over all employees, whether they took the meals or, like Torres, usually declined them. Unless an employee in fact took a meal offered by his or her employer, we are unwilling to find that the meal was part of the employee's compensation.
B. Front Desk
The record shows Wave Crest regularly paid its front desk employees an "upsell bonus" and that these bonuses were not used in determining the front desk employee's base pay for purposes of calculating their overtime pay. In denying certification of this claim, the trial court stated: "The only issue raised by Defendant is one of standing: this sub-class would be for front desk employees but neither Plaintiff worked at the front desk, neither ever earned 'upsell bonuses' and the request is not supported by evidence from any front desk employee, or evidence that a front desk employee earned a 'bonus' during the same time period. Plaintiffs argue that the remedy here would be to substitute a new member of the class. However, as currently constituted, the representatives of this class do not have claims to support certifying it. It appears to be a different class entirely: front desk employees."
As plaintiffs point out, in reviewing an order denying class certification, we are limited to the reasons stated by the trial court. (See Hale, supra, 232 Cal.App.4th at p. 58.) When a trial court determines that a class representative is not suitable representative of the class "it should at least afford plaintiffs the opportunity to amend their complaint, to redefine the class, or to add new individual plaintiffs, or both, in order to establish a suitable representative. [Citations.] If, after the trial court has thus extended an opportunity to amend, the class still lacks a suitable representative, the court may conclude that it must dismiss the action." (La Sala v. American Sav. & Loan Assn. (1971) 5 Cal.3d 864, 872; accord Kagan v. Gibraltar Sav. & Loan Assn. (1984) 35 Cal.3d 582, 594; see also Best Buy Stores, L.P. v. Superior Court (2006) 137 Cal.App.4th 772, 778-779 [permitting discovery to locate new potential class representative where prior representative disqualified due to interim change of law].) Here, in failing to give the plaintiffs' an opportunity to locate a new potential class representative, the trial court abused its discretion. The cases make it clear that until a trial court has given class representatives an opportunity to locate a suitable representative, it cannot find that such a representative is unavailable. (See La Sala v. American Sav. & Loan Assn., at p. 872.)
Accordingly, as to the plaintiffs' front desk employees claim, we must reverse and remand with instructions that the plaintiffs be permitted to locate a suitable representative and amend their complaint accordingly.
DISPOSITION
The order denying class certification is reversed only insofar as it denied certification of the front desk employees' overtime claims; those claims are remanded with instructions to permit plaintiffs to locate a suitable representative of that class. In all other respects the trial court's order is affirmed. Each party to bear their own costs of appeal.
BENKE, J. WE CONCUR: McCONNELL, P. J. O'ROURKE, J.