Opinion
Case No. 5:19-cv-02275-FLA (SPx)
2022-10-17
Randy SALINAS, Plaintiff, v. The CORNWELL QUALITY TOOLS COMPANY, Defendant.
Craig M. Nicholas, Shaun Andrew Markley, Nicholas and Tomasevic LLP, San Diego, CA, Ethan Thomas Litney, Wilson Turner Kosmo LLP, San Diego, CA, for Plaintiff. Adam Yuda Siegel, Jackson Lewis PC, Los Angeles, CA, Allyson Suzanne Ascher, Jared L. Bryan, Eric Angel, Jackson Lewis PC, Irvine, CA, Robert M. Gippin, Pro Hac Vice, Roderick Linton Belfance LLP, Akron, OH, Jessica Ewert, Lewis Brisbois Bisgaard and Smith LLP, Costa Mesa, CA, Kyle Richard Bevan, Theodora Oringher PC, Costa Mesa, CA, for Defendant.
Craig M. Nicholas, Shaun Andrew Markley, Nicholas and Tomasevic LLP, San Diego, CA, Ethan Thomas Litney, Wilson Turner Kosmo LLP, San Diego, CA, for Plaintiff. Adam Yuda Siegel, Jackson Lewis PC, Los Angeles, CA, Allyson Suzanne Ascher, Jared L. Bryan, Eric Angel, Jackson Lewis PC, Irvine, CA, Robert M. Gippin, Pro Hac Vice, Roderick Linton Belfance LLP, Akron, OH, Jessica Ewert, Lewis Brisbois Bisgaard and Smith LLP, Costa Mesa, CA, Kyle Richard Bevan, Theodora Oringher PC, Costa Mesa, CA, for Defendant.
ORDER GRANTING PLAINTIFF'S MOTION FOR CLASS CERTIFICATION [DKT. 97]
FERNANDO L. AENLLE-ROCHA, United States District Judge
RULING
Before the court is Plaintiff Randy Salinas' ("Plaintiff") Motion for Class Certification ("Motion"). Dkt. 97 ("Mot."). Defendant The Cornwell Quality Tools Company ("Defendant") opposes the Motion. Dkt. 103 ("Opp'n"). On November 11, 2021, the court took the Motion under submission, finding it appropriate for decision without oral argument. Dkt. 121; see Fed. R. Civ. P. 78(b); Local Rule 7-15.
The court cites documents by the page numbers added by the court's CM/ECF system, rather than any page numbers that appear natively within the documents.
For the reasons set forth below, the court GRANTS the Motion in its entirety.
BACKGROUND
The facts of the parties' dispute are set forth in the court's Order on Plaintiff's Motion for Partial Summary Judgment ("MSJ"), Dkt. 161.
On October 10, 2019, Plaintiff filed the Class Action Complaint ("Complaint") in Riverside County Superior Court. Dkt. 1-3 ("Compl."). Defendant removed the action to federal court on November 27, 2019. Dkt. 1.
On May 29, 2020, Plaintiff filed the operative First Amended Class Action Complaint ("FAC"), asserting nine causes of action against Defendant for: (1) failure to reimburse expenses in violation of Cal. Labor Code § 2802 and the California Industrial Welfare Commission ("IWC") Wage Order No. 1, §§ 8-9; (2) unlawful deductions from wages in violation of Cal. Labor Code §§ 221-23 and IWC Wage Order No. 1, §§ 8-9; (3) failure to provide accurate wage statements in violation of Cal. Labor Code §§ 226 and 226.3 and IWC Wage Order No. 1, § 7; (4) failure to provide overtime pay in violation of Cal. Labor Code § 510 and IWC Wage Order No. 1, § 3; (5) failure to provide meal periods in violation of Cal. Labor Code § 226.7 and IWC Wage Order No. 1, § 11; (6) failure to provide rest breaks in violation of Cal. Labor Code § 226.7 and IWC Wage Order No. 1, § 12; (7) failure to pay wages in violation of Cal. Labor Code §§ 1194 & 1197 and IWC Wage Order No. 1; (8) unfair business practices in violation of Cal. Bus. & Prof. Code § 17200 et seq. (the Unfair Competition Law, "UCL"); and (9) violation of the California Private Attorneys General Act of 2004 ("PAGA"). Dkt. 26 ("FAC").
All subsequent statutory references will be to the California Labor Code unless otherwise specified. All discussion of "employees" in connection with IWC Wage Orders shall refer to non-exempt employees, unless otherwise specified.
Plaintiff contends Defendant improperly classifies its "Dealers" as independent contractors instead of employees, despite Cornwell's control over its Dealers and their central role in Cornwell's tools sales business. Id. ¶ 2. Plaintiff asserts the first through eighth causes of action on behalf of a proposed class of himself and similarly situated Dealers in California and the ninth cause of action as a representative action on behalf of the same. Id. ¶ 4.
Plaintiff filed the operative version of the Motion on August 13, 2021, requesting the court certify the first through eighth causes of action for class action. Mot. 1. Defendant filed the operative version of its Opposition on August 20, 2021. Opp'n. These versions of the parties' documents replace and supersede the parties' earlier filings in connection with the Motion. See Dkt. 92.
Although the Motion states Plaintiff "seeks to have certified for resolution each of the causes of action pled in his operative First Amended Class Action Complaint," Mot. 1, the Motion does not request certification of the ninth cause of action for violation of PAGA, and neither party discusses the PAGA claim in their respective briefs. The court, therefore, excludes consideration of the ninth cause of action from its analysis, as it is clear Plaintiff did not intend to seek class certification of this representative claim.
Plaintiff and Defendant each object to certain evidence submitted by the opposing party. Dkts. 103-2, 105-14. Except as specifically addressed below, the parties' evidentiary objections are OVERRULED as moot.
DISCUSSION
Plaintiff moves the court for an order certifying the following class: "[a]ll persons who signed Dealer Agreements in California and personally operated a mobile store at any time within four years preceding the filing of this action," with respect to the first through eighth causes of action. Mot. 1. Plaintiff also requests the court appoint Nicholas & Tomasevic, LLP as Class Counsel under Fed. R. Civ. P. 23(g) ("Rule 23(g)"). Id. I. Legal Standard
"[T]he class action is an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only." James v. Uber Techs. Inc., 338 F.R.D. 123, 128-29 (N.D. Cal. 2021) (citing Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 348, 131 S.Ct. 2541, 180 L.Ed.2d 374 (2011)) (internal quotation marks omitted). To justify departure from that rule, a class representative must be part of the class and possess the same interest and suffer the same injury as fellow class members. Id. at 129 (citing E. Tex. Motor Freight Sys., Inc. v. Rodriguez, 431 U.S. 395, 403, 97 S.Ct. 1891, 52 L.Ed.2d 453 (1977)). "Accordingly, before certifying a class, the Court must conduct a rigorous analysis to determine whether the party seeking certification has met the prerequisites of Rule 23." Id. (citing Mazza v. Am. Honda Motor Co., Inc., 666 F.3d 581, 588 (9th Cir. 2012), overruled in part on other grounds by Olean Wholesale Grocery Coop., Inc. v. Bumble Bee Foods LLC, 31 F.4th 651, 682 n. 31 (9th Cir. 2022)) (internal quotation marks omitted). "The Supreme Court has made it clear that Rule 23 does not set forth a mere pleading standard." Id. (citing Comcast Corp. v. Behrend, 569 U.S. 27, 33, 133 S.Ct. 1426, 185 L.Ed.2d 515 (2013)) (internal quotation marks omitted). Rather, the party seeking certification must affirmatively demonstrate compliance with the requirements of both Rule 23(a) and (b). Id. (citing Wal-Mart, 564 U.S. at 349, 131 S.Ct. 2541).
Rule 23(a) permits a plaintiff to sue as a representative of a class only if: (1) "the class is so numerous that joinder of all members is impracticable" ("numerosity" requirement); (2) "there are questions of law or fact common to the class" ("commonality" requirement); (3) "the claims or defenses of the representative parties are typical of the claims or defenses of the class" ("typicality" requirement); and (4) "the representative parties will fairly and adequately protect the interests of the class" ("adequacy" requirement). Fed. R. Civ. P. 23(a). "The purpose of Rule 23(a)'s requirements is largely to ensure that the named plaintiffs are appropriate representatives of the class whose claims they wish to litigate, and to effectively limit the class claims to those fairly encompassed by the named plaintiff's claims." James, 338 F.R.D. at 129 (citing Wal-Mart, 564 U.S. at 349, 131 S.Ct. 2541) (internal quotation marks and brackets omitted).
"If each of the Rule 23(a) requirements are satisfied, the purported class must also satisfy one of the three prongs of Rule 23(b)." Id. Here Plaintiff seeks certification under Rule 23(b)(3), which requires the court to find that "questions of law or fact common to class members predominate over any questions affecting only individual members" ("predominance" requirement), and "that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy" ("superiority" requirement). Dkt. 97-1 ("Mot. Br.") at 1.
"[A] court's class certification analysis must be rigorous and may entail some overlap with the merits of the plaintiff's underlying claim." Amgen Inc. v. Conn. Ret. Plans & Tr. Funds, 568 U.S. 455, 465-66, 133 S.Ct. 1184, 185 L.Ed.2d 308 (2013) (citing Wal-Mart, 564 U.S. at 351, 131 S.Ct. 2541) (internal quotation marks omitted). However, "Rule 23 grants courts no license to engage in free-ranging merits inquiries at the certification stage." Id. at 466, 133 S.Ct. 1184. "Merits questions may be considered to the extent—but only to the extent—that they are relevant to determining whether Rule 23 prerequisites for class certification are satisfied." Id. Ultimately, the question of whether a class should be certified is within the discretion of the court. Leyva v. Medline Indus. Inc., 716 F.3d 510, 513 (9th Cir. 2013).
II. Analysis
A. Ascertainability
"As a threshold matter, the party seeking class certification must demonstrate that an identifiable and ascertainable class exists." Daniel F. v. Blue Shield of Cal., 305 F.R.D. 115, 121 (N.D. Cal. 2014). To be ascertainable, the definition of the class must be 'definite enough so that it is administratively feasible for the court to ascertain whether an individual is a member' before trial, and by reference to 'objective criteria.' " James, 338 F.R.D. at 130.
Plaintiff seeks to certify a class comprising: "[a]ll persons who signed Dealer Agreements in California and personally operated a mobile store at any time within four years preceding the filing of this action." Mot. 1. Defendant does not challenge the ascertainability of the proposed class. See Opp'n. Accordingly, the court finds that the proposed class is identifiable and ascertainable. See James, 338 F.R.D. at 130.
B. Commonality and Predominance
The "commonality" requirement of Rule 23(a)(2) is minimal and "only requires a single significant question of law or fact" common to putative class members. Mazza, 666 F.3d at 589; Fleming v. Matco Tools Corp., Case No. 3:19-cv-00463-WHO, 2021 WL 673445 at *3, 2021 U.S. Dist. LEXIS 33513 at *8 (N.D. Cal. Feb. 21, 2021). Commonality requires the plaintiff to demonstrate the class members' claims depend upon a common contention that is "of such a nature that it is capable of classwide resolution—which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke." Wal-Mart, 564 U.S. at 350, 131 S.Ct. 2541. "What matters to class certification . . . is not the raising of common 'questions' . . . but, rather, the capacity of a classwide proceeding to generate common answers apt to drive the resolution of the litigation." Id. (emphasis in original).
The predominance requirement of Rule 23(b)(3), meanwhile, is "far more demanding" than the commonality requirement of Rule 23(a)(2). Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 624, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997). Because predominance "supersedes" commonality and involves a similar analysis, the court will address both requirements together. See, e.g., Karl v. Zimmer Biomet Holdings, Inc., Case No. 3:18-cv-04176-WHA, 2020 WL 4340172, *1-2, *4, *9-10, 2020 U.S. Dist. LEXIS 134483, at *4-5, 26 (N.D. Cal. July 28, 2020) (considering commonality and predominance simultaneously and finding commonality satisfied where predominance is satisfied).
"The Rule 23(b)(3) predominance inquiry tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation." Amchem, 521 U.S. at 623, 117 S.Ct. 2231. "Common issues predominate over individual issues when the common issues 'represent a significant aspect of the case and they can be resolved for all members of the class in a single adjudication.' " Edwards v. First Am. Corp., 798 F.3d 1172, 1182 (9th Cir. 2015).
As Plaintiff's claims are based on the Dealers' alleged misclassification as independent contractors, the court must consider two separate questions regarding predominance. See Norris-Wilson v. Delta-T Group, Inc., 270 F.R.D. 596, 607 (S.D. Cal. 2010). The first is the threshold question of whether common issues of fact and law predominate with respect to the issue of misclassification. See id. If the answer to the first question is yes, the court must consider the second question of whether Plaintiff's individual claims also satisfy the predominance test. See id.
1. Predominance and Misclassification
a. The Borello and Dynamex Tests and California Law
California law recognizes two tests for determining whether workers are independent contractors or employees. Under the common law, "[t]he principal test of an employment relationship is whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired." S. G. Borello & Sons, Inc. v. Dep't of Indus. Rels., 48 Cal. 3d 341, 350, 256 Cal.Rptr. 543, 769 P.2d 399 (1989). Under this test, the right to control work details is the "most important" or "most significant" consideration; however, several "secondary" considerations bear in the analysis. Id. In particular, the California Supreme Court noted "the right to discharge at will, without cause," serves as "[strong] evidence in support of an employment relationship . . . ." Id. at 350-51, 256 Cal.Rptr. 543, 769 P.2d 399. Additional considerations include:
a) whether the one performing services is engaged in a distinct occupation or business;Id. at 351, 256 Cal.Rptr. 543, 769 P.2d 399. "Generally, . . . the individual factors cannot be applied mechanically as separate tests; they are intertwined and their weight depends often on particular combinations." Id. (internal citations omitted).
b) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;
c) the skill required in the particular occupation;
d) whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work;
e) the length of time for which the services are to be performed;
f) the method of payment, whether by the time or by the job;
g) whether or not the work is a part of the regular business of the principal; and
h) whether or not the parties believe they are creating the relationship of employer-employee.
On April 30, 2018, the California Supreme Court decided Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903, 956-57, 232 Cal.Rptr.3d 1, 416 P.3d 1 (2018), which established a different test for distinguishing between employees and independent contractors in connection with IWC Wage Orders (the "ABC test").
The ABC test presumptively considers all workers to be employees, and permits workers to be classified as independent contractors only if the hiring business demonstrates that the worker in question satisfies each of three conditions: (a) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of the work and in fact; and (b) that the worker performs work that is outside the usual course of the hiring entity's business; and (c) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.Id. at 955-56, 232 Cal.Rptr.3d 1, 416 P.3d 1 (emphasis in original). Since a worker is an employee unless the employer proves all three conditions, each individual factor may be dispositive in a plaintiff's favor on the merits. Id. at 966, 232 Cal.Rptr.3d 1, 416 P.3d 1. Thus, the predominance of common issues on a single prong of the ABC test will support class certification. Id.
Defendant contends Plaintiff must establish all three prongs of the ABC test to prevail on the subject Motion. Opp'n 25. Defendant, however, does not cite any supporting legal authority for this proposition, and its argument, thus, fails.
The California Supreme Court and Ninth Circuit have held that the Dynamex ABC test applies retroactively to claims that predate the decision. Vazquez v. Jan-Pro Franchising Int'l, Inc., 986 F.3d 1106, 1117 (9th Cir. 2021) (citing the California Supreme Court's decision on the certified question at id., 10 Cal. 5th 944, 273 Cal.Rptr.3d 741, 478 P.3d 1207 (2021)).
b. Whether Dynamex or Borello Apply
In 2020, the California Legislature adopted the ABC test for all claims that arise under the California Labor and Unemployment Insurance Codes, unless a statutory or IWC Wage Order exception applies. Cal. Lab. Code § 2775(b)(1), (2); e.g., Parada v. E. Coast Transp. Inc., 62 Cal. App. 5th 692, 699 n. 2, 277 Cal.Rptr.3d 89 (2021). This extension of the ABC test "was prospective, with an effective date of January 1, 2020." Lawson v. Grubhub, Inc., 13 F.4th 908, 912 (9th Cir. 2021) (citing Cal. Lab. Code § 2785(c)). If a court rules the ABC test cannot be applied to a particular context based on grounds other than an express exception to employment status under Section 2775(b)(2), the Borello test applies. Cal. Lab. Code § 2775(b)(3).
Plaintiff's first through seventh causes of action arise under the California Labor Code and IWC Wage Order No. 1, and his eighth cause of action for violation of the UCL is dependent on the underlying Labor Code and Wage Order claims. Accordingly, the Dynamex ABC test governs as to Plaintiff's first through eighth causes of action unless an exception applies.
Defendant contends Dynamex is inapplicable because Plaintiff and the putative class members fall within the scope of the "direct salesperson exemption" set forth in California Unemployment Insurance Code § 650 ("Unemployment Insurance Code § 650"). Opp'n 24-25. This section states in relevant part:
Section 2775 and Dynamex do not apply to a "direct sales salesperson," as described in California Unemployment Insurance Code § 650, "so long as the conditions for exclusion from employment under that section are met." Cal. Lab. Code § 2783(e).
"Employment" does not include services performed . . . as a . . . direct sales salesperson, . . . by an individual if all of the following conditions are met:
(a) The individual is licensed under the provisions of Chapter 19 (commencing with Section 9600) of Division 3 of, or Part 1 (commencing with Section 10000) of Division 4 of, the Business and Professions Code, Article 2 (commencing with Section 700) of Chapter 5 of Division 3 of the Harbors and Navigation Code, or is engaged in the trade or business of primarily in person demonstration and sales presentation of consumer products, including services or other intangibles, in the home or sales to any buyer on a buy-sell basis, a deposit-commission basis, or any similar basis, for resale by the buyer or any other person in the home or otherwise than from a retail or wholesale establishment.
(b) Substantially all of the remuneration (whether or not paid in cash) for the services performed by that individual is directly related to sales or other output (including the performance of services) rather than to the number
Cal. Unemp. Ins. Code § 650.of hours worked by that individual.
(c) The services performed by the individual are performed pursuant to a written contract between that individual and the person for whom the services are performed and the contract provides that the individual will not be treated as an employee with respect to those services for state tax purposes.
Defendant argues its Dealers qualify as direct salespeople under this section because they: "(1) engage in direct, in person sales of end-user products, (2) are solely paid based on the profits they receive from their sales[ ], and (3) operate under a [Dealer Franchise Agreement ('DFA')] which states they are independent contractors." Opp'n 24-25.
Unemployment Insurance Code § 650, however, does not apply to all individuals who engage in "direct, in person sales of end-user products," as Defendant suggests. This exception applies only to individuals who are "engaged in the trade or business of primarily in person demonstration and sales presentation of consumer products, including services or other intangibles, in the home or sales to any buyer on a buy-sell basis, a deposit-commission basis, or any similar basis, for resale by the buyer or any other person in the home or otherwise than from a retail or wholesale establishment." Cal. Unemp. Ins. Code § 650(a) (emphasis added).
Defendant does not present any evidence to suggest that its Dealers primarily engage in direct, in person sales of consumer products in the home or for resale. To the contrary, Cornwell's Director of National Sales, Dave Columbus ("Columbus"), testified that Dealers are "restricted from selling to wholesale distributors or middlemen" and that their "typical customers" are auto repair dealer shops, body shops, motorcycle shops, and truck shops, who use the tools professionally. Dkt. 97-3 (Markley Decl. Ex. A) at 38-39.
In sum, the court finds that Unemployment Insurance Code § 650 and the "direct salesperson exception" do not apply here, and that the Dynamex ABC test governs. Accordingly, the court need not address the parties' arguments regarding Borello.
c. Commonality and Predominance under the ABC Test
Under Prong A of the ABC test, a worker is an employee unless the hiring entity establishes "that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of the work and in fact." Dynamex, 4 Cal. 5th at 955, 232 Cal.Rptr.3d, 416 P.3d. "[D]epending on the nature of the work and overall arrangement between the parties, a business need not control the precise manner or details of the work in order to be found to have maintained the necessary control that an employer ordinarily possesses over its employees, but does not possess over a genuine independent contractor." Id. (citing Borello, 48 Cal. 3d at 353-54, 356-57, 256 Cal.Rptr. 543, 769 P.2d 399). What matters here "is not how much control a hirer exercises, but how much control the hirer retains the right to exercise." Ayala v. Antelope Valley Newspapers, Inc., 59 Cal. 4th 522, 533, 173 Cal.Rptr.3d 332, 327 P.3d 165 (2014) (emphasis in original).
Dynamex, 4 Cal. 5th at 939 & 958, 232 Cal.Rptr.3d, 416 P.3d, recognized that because the IWC Wage Orders' definition of "employ" was intended to be broader and more inclusive than the common law test, a worker who would be considered an employee under the common law test would also properly be treated as an employee for purposes of Prong A of the ABC test. Thus, Borello and its progeny's discussion of a putative employer's right to control a worker inform and are relevant to the court's analysis of this issue.
In Ayala, id. at 533-34, 173 Cal.Rptr.3d 332, 327 P.3d 165, the California Supreme Court discussed how this issue should be addressed in connection with a predominance analysis, stating:
A court evaluating predominance must determine whether the elements necessary to establish liability (here, employee status) are susceptible of common proof or, if not, whether there are ways to manage effectively proof of any elements that may require individualized evidence. Consequently, at the certification stage, the relevant inquiry is not what degree of control [Defendant] retained over the manner and means of its [workers' conduct]. It is, instead, a question one step further removed: Is [Defendant's] right of control over its [workers], whether great or small, sufficiently uniform to permit classwide assessment? That is, is there a common way to show [Defendant] possessed essentially the same legal right of control with respect to each of its [workers]? Alternatively, did its rights vary substantially, such that it might subject some [workers] to extensive control as to how they [performed their work], subject to firing at will, while as to others it had few rights and could not have directed their manner of [performance] even had it wanted, with no common proof able to capture these differences?(internal brackets and citations omitted); see also Karl, 2020 WL 4340172, at *4, 2020 U.S. Dist. LEXIS 134483, at *10 (applying Ayala to class certification under Fed. R. Civ. P. 23).
As stated, "[c]ommon issues predominate over individual issues when the common issues 'represent a significant aspect of the case and they can be resolved for all members of the class in a single adjudication.' " Edwards, 798 F.3d at 1182. Cornwell's right to control its Dealers' performance is a significant aspect of this action because control is the "principal test of an employment relationship," Ayala, 59 Cal. 4th at 531, 173 Cal.Rptr.3d 332, 327 P.3d 165, and the alleged misclassification forms the basis of Plaintiff's claims. See generally FAC. Defendant does not challenge the significance of this issue and argues only that the issue of Cornwell's control and direction over its Dealers is not subject to common proof. See Opp'n 25-28. Accordingly, the court will focus its analysis on the "common proof" portion of the analysis.
Plaintiff argues common issues predominate here because the Dealers' duties are defined by materially identical Dealer Franchise Agreements ("DFAs") and a common Operations Manual. Mot. Br. 25-26. Defendant does not dispute the DFAs are materially identical, but argues that the mere existence of uniform contract terms is not dispositive. Opp'n 25.
Defendant appears to object to the consideration of the DFAs (erroneously described as "Dealer termination letters"), on the grounds that they are dated outside the relevant time period. Dkt. 103-2 (Def. Evid. Obj.) ¶ 3. Defendant's objection is OVERRULED, as these DFAs appear to be for the relevant time period for members of the proposed class. See FAC ¶ 33.
The court agrees with Plaintiff that the question of Defendant's right of control over the Dealers is sufficiently uniform and subject to common proof to satisfy the commonality and predominance requirements for class certification. Under the DFAs, Dealers must agree to participate personally full-time in the direct operation of the dealership and to use their best, full-time efforts to serve the assigned territory fully with the sale of Cornwell products. E.g., Dkt. 97-13 (Markley Decl. Ex. H) at 5, 13, 21, 97, 99, 101, 107, 109, 111, 117, 119, 122. The "best, full-time efforts" requirement is reiterated in Cornwell's Franchise Disclosure Document, which states that its Dealers "must agree to use best, full-time efforts to serve [the] assigned territory fully by the sale of Cornwell products." Dkt. 103-4 (Def. Evid. Ex. K) at 64. Columbus, Cornwell's Director of National Sales and designated person most knowledgeable regarding the corporation, testified at deposition that using "best efforts" includes abiding by the DFAs. See Dkt. 97-3 (Markley Decl. Ex. A) at 40.
Plaintiff contends Dealers are also subject to the provisions set forth in a common Operations Manual. Mot. Br. 13, 25-26. Defendant contends Dealers are not required to comply with the provisions of the Operations Manual. Opp'n 25 n. 98 (citing Dkt. 97-3 (Markley Decl. Ex. A) at 41. On the subject Motion, the court need not determine whether the Operations Manual establishes policies with which Dealers must comply.
According to Columbus, Dealers are expected to be "out in the field selling" during normal business hours of 9:00 a.m. to 5:00 p.m. and have additional non-customer-based work including placing orders, receiving orders, cleaning the truck, and computer work, which could require Dealers to work 60 or more hours per week. Id. at 44-47. "[Dealers] are not permitted to hire employees or independent contractors in lieu of the obligation of an Owner personally to provide full-time, best efforts as the Operator of the Dealership." Dkt. 103-4 (Def. Evid. Ex. K) at 64. Cornwell may terminate a Dealer's franchise for failure to comply with any provision in the DFAs, including failure "to use best full-time efforts to serve the Territory fully[.]" E.g., Dkt. 97-13 (Markley Decl. Ex. H) at 122, ¶ 13.
The DFAs impose additional common limitations on the Dealers' performance of their work. For example, the DFAs require Dealers to operate one truck only, directly or indirectly, unless Cornwell expressly waives this requirement. E.g., id. at 119. During the relevant class period, all 110 Dealers in California have personally operated only one Cornwell mobile tool truck. Dkt. 97-3 (Markley Decl. Ex. A) at 27-28. The DFAs further require Dealers to: (1) participate in mandatory initial classroom training that must be completed before Dealers may operate the dealership; (2) acquire and/or use a display truck or van which has been approved by Cornwell; (3) buy and wear Cornwell approved clothing; (4) display Cornwell trademarks in the location, style, and manner specified by Cornwell and refrain from displaying any other trademarks on or in connection with Cornwell products except as specified in writing by Cornwell; (5) license and use Cornwell's proprietary software; and (6) maintain average weekly purchases from Cornwell equal to at least 90% of the national average of Cornwell franchise dealers' weekly purchases during the current calendar year. E.g., id. at 5-6, 118-19.
The 2006 DFA required participation in at least 28 hours of initial training; the 2020 DFA requires at least 40 hours. Dkt. 97-13 (Markley Decl. Ex. H) at 5, 119.
The 2006 through 2012 DFAs required use of Cornwell's "MM1Plus" Software; the 2013 through 2020 DFAs required use of Cornwell's "Ironman Business Network (IBN)" software. Dkt. 97-13 (Markley Decl. Ex. H) at 5, 118.
Furthermore, the DFAs include substantially identical provisions regarding termination. The 2020 DFA provides:
13. In the event of default caused by the following (and except as required under applicable laws): (1) breach of promises contained in this Agreement and any other agreement between Dealer and Cornwell, including but not limited to (a) Dealer's failure to pay as agreed for merchandise delivered by Cornwell or (b) to maintain the inventory purchase levels required in Paragraph 7 or (c) to
display Cornwell's Marks and to refrain from their misuse or (d) to supply weekly data required in Paragraph 5.e or (e) to maintain full collateralization of any promissory note and security agreement or (f) to use best full-time efforts to serve the Territory fully; (2) Dealer is convicted of a felony; (3) a voluntary or involuntary proceeding is instituted against Dealer in bankruptcy or other similar laws; . . . this Agreement may be declared terminated by Cornwell by notice in writing effective immediately upon receipt.Dkt. 97-13 (Markley Decl. Ex. H) at 122, ¶ 13. The prior years' versions of the DFAs contain substantively identical language. E.g., id. at 91, 101.
The 2011 through 2020 versions of the DFAs specify that failure to use Cornwell's proprietary software or to supply business data (including weekly written report summaries of a Dealer's sales, existing total inventory, and all accounts) constitutes a material breach of the DFAs and may result in the termination of a Dealer's franchise. E.g., Dkt. 97-13 (Markley Decl. Ex. H) at 29, ¶ 5.d-f; id. at 118, ¶ 5.d, e. All versions of the DFAs require Dealers to submit data generated by Cornwell's software and provide for termination for failure to maintain average weekly purchase amounts. See, e.g., id. at 5, ¶¶ 5, 7. Cornwell may agree to waive any default in its sole discretion and upon such terms as Cornwell determines, and no action or inaction by Cornwell is to operate as a waiver unless expressly stated in writing. Id. ¶ 15.
Based on these DFA provisions and the other evidence in the record, the court finds that the issue of the degree of control and direction Cornwell retained over its Dealers is sufficiently uniform and subject to common proof to permit class-wide assessment. See Ayala, 59 Cal. 4th at 533-34, 173 Cal.Rptr.3d 332, 327 P.3d 165. While questions concerning Cornwell's application of its policies may require individualized inquiries for each Dealer, the amount of control Cornwell retained the right to exercise is subject to common proof. See Ayala, 59 Cal. 4th at 533, 173 Cal.Rptr.3d 332, 327 P.3d 165; see also Olean, 31 F.4th at 668-69 ("a district court is not precluded from certifying a class even if plaintiffs may have to prove individualized damages at trial" as "[c]lass-wide proof is not required for all issues"); cf. Bowerman v. Field Asset Servs., Inc., 39 F.4th 652, 662 (9th Cir. 2022) (holding class certification improper where all parties agreed there were significant variations between putative class members and that plaintiffs could not prove, through common evidence, that class members worked overtime hours or claimed reimbursable expenses, and where defendant company's "liability to any class member . . . would implicate highly individualized inquiries on whether that particular class member ever worked overtime or ever incurred any 'necessary' business expenses" (emphasis in original)).
Cornwell argues the "best efforts" provisions of the DFAs do not delineate specific conduct that Dealers must follow to carry out their duties, and necessarily leads to "a host of individualized inquiries" as to what "best efforts" means for each Dealer. Opp'n 27. The court disagrees.
Defendant cites cases, including Maxim Integrated Products v. Analog Devices, No. 94-16744, 1996 WL 117425, at *3, 1996 U.S. App. LEXIS 5785 at *9 (9th Cir. Mar. 15, 1996), to argue that "best efforts" provisions are widely used in entirely non-employment commercial contexts and cannot be used here as an indication of an employment-type control." Opp'n 27. Defendant's cited cases do not establish that "best efforts" provisions cannot constitute enforceable provisions in employment contexts or serve as proof of an employment relationship, as Defendant suggests, and establish only that "best efforts" provisions of agreements have been held to be enforceable under contract law, in general. See id. Defendant's argument, thus, fails.
The language in question does not merely require Dealers to engage in "best efforts" generally, but to "use best, full-time efforts to serve [the] assigned territory fully by the sale of Cornwell products." E.g., Dkt. 97-13 (Markley Decl. Ex. H) at 117, 119; Dkt. 103-4 (Def. Evid. Ex. K at 64). The evidence in the record, including other provisions of the DFAs, Cornwell's Franchise Disclosure Document, and Columbus' testimony, demonstrate that this provision requires Dealers to devote personally full-time efforts to their franchise and imposes additional restrictions on the performance of their work, including by prohibiting Dealers from hiring employees or contractors to perform the work without Cornwell's express authorization. See Dkt. 103-4 (Def. Evid. Ex. K) at 64. Furthermore, the DFAs expressly state that a Dealer's failure "to use best, full-time efforts to serve the Territory fully" constitutes grounds for termination. E.g., Dkt. 97-13 (Markley Decl. Ex. H) at 122, ¶ 13. The court, therefore, finds that this provision is not as vague, open-ended, and individualized as Defendant suggests.
In sum, the court finds that the amount of control Cornwell retained over its Dealers' hours and/or working conditions under Prong A of the ABC Test is a significant issue of fact or law that is subject to common proof, and which predominates over individualized issues. The court, therefore, finds Plaintiff has satisfied the commonality and predominance requirements of Rule 23(a)(2) and (b)(3) with respect to the question of misclassification. Having found predominance and commonality on this basis, the court need not examine the parties' remaining arguments on this issue, including the parties' arguments regarding Prong B of the ABC test.
2. Predominance and Plaintiff's Individual Claims
Having found that common questions predominate the threshold question of employee classification, the court turns to the second question of whether Plaintiff's individual claims also satisfy the predominance requirement. See Norris-Wilson, 270 F.R.D. at 607.
a. The Outside Salesperson and Commissioned Salesperson Exemptions
As an initial matter, Defendant argues the outside salesperson and commissioned salesperson exemptions preclude certification of certain claims. Opp'n 29-30. Plaintiff contends Defendant's argument fails because these defenses were not properly pleaded at the pleading stage. Dkt. 105 ("Reply") at 16. As stated in the court's Order denying Defendant's Motion for Leave to File an Amended Answer, Dkt. 159, Defendant pleaded these defenses sufficiently in its thirty-ninth affirmative defense, and the court will not preclude Defendant from asserting these defenses here.
The outside salesperson exemption states "[t]he provisions of [IWC Wage Order No. 1] shall not apply to outside salespersons." Cal. Code Regs. tit. 8, § 11010(1)(C); see also Cal. Lab. Code § 1171 (stating the provisions of that chapter "shall not include any individual employed as an outside salesman . . . ."). California Code of Regulations, title 8, § 11010(2)(J) defines the term "outside salesperson" to mean "any person, 18 years of age or over, who customarily and regularly works more than half the working time away from the employer's place of business selling tangible or intangible items or obtaining orders or contracts for products, services or use of facilities."
Defendant's Opposition cites the outside sales exemption as Cal. Code Regs. tit. 8, § 11040(1)(C) and (2)(M). Opp'n 30. Plaintiff contends Defendant's argument fails because section 11040 relates to IWC Wage Order No. 4, while Plaintiff's claims arise under Wage Order No. 1. Reply 16. Although Plaintiff is correct that Defendant cited an incorrect Wage Order, Wage Order No. 1 also contains an outside salesperson exemption with identical language. Compare Cal. Code Regs. tit. 8, § 11010(1)(C), (2)(J) with Cal. Code Regs. tit. 8, § 11040(1)(C) and (2)(M). The court will not disregard Defendant's argument on this basis.
Defendant contends the outside salesperson exemption requires an individualized examination of whether the person spends more than half of the workday engaged in sales activities outside the office. Opp'n 30 (citing Duran v. U.S. Bank Nat'l Ass'n, 59 Cal. 4th 1, 26, 172 Cal.Rptr.3d 371, 325 P.3d 916 (2014) ("California's wage order definition 'takes a purely quantitative approach' and focuses exclusively on whether the employee spends more than half of the workday engaged in sales activities outside the office.")). According to Defendant, individual issues predominate here because the court will be required to conduct an individualized analysis of each Dealer's sales operations and working hours to determine whether he or she qualifies for the exemption. Id. Plaintiff responds that the outside sales exemption does not defeat predominance where an employer maintained " 'centralized rules . . . suggest[ing] a uniformity among employees that is susceptible to common proof.' " Reply 16 (citing Ambrosia v. Cogent Commc'ns, Inc., 312 F.R.D. 544, 553 (N.D. Cal. 2016)).
The court agrees with Plaintiff that the outside sales exemption does not bar class certification here. The Ninth Circuit has recognized that an employer's centralized policy regarding the outside salesperson exemption can establish predominance for employees performing similar duties. See In re Wells Fargo Home Mortg. Overtime Pay Litig., 571 F.3d 953, 959 (9th Cir. 2009) ("A centralized policy requiring employees to be at their desks for 80% of their workday would change this individual issue [of the outside salesperson exemption] into a common one."). Pursuant to the DFAs, Dealers are required to sell Cornwell products from Cornwell-approved display trucks or vans. E.g., Dkt. 97-13 (Markley Decl. Ex. H) at 5, ¶ 5; id. at 118, ¶ 5.a. Columbus testified that Dealers are expected to be "out in the field selling" during normal business hours of 9:00 a.m. to 5:00 p.m. Dkt. 97-3 (Markley Decl. Ex. A) at 44-45. The evidence in the record is sufficient to demonstrate common issues predominate with regards to the applicability of this exemption.
Next, Defendant argues individualized inquiries need to be made as to whether Dealers qualify for the "commissioned salesperson exemption" under California Code of Regulations title 8, § 11040(3)(D). Opp'n 31. Unlike the outside salesperson exemption, however, the commissioned salesperson exemption does not have a comparable analogue under IWC Wage Order No. 1. Compare Cal. Code Regs. tit. 8, § 11040(3)(D) (stating certain provisions "shall not apply to any employee whose earnings exceed one and one-half (1 1/2) times the minimum wage if more than half of that employee's compensation represents commissions") with id. § 11010(3) (which does not contain such provision). Defendant's argument, thus, fails.
Accordingly, the court will not deny class certification on these bases.
b. Plaintiff's First Cause of Action for Failure to Reimburse Expenses and Second Cause of Action for Unlawful Deduction from Wages
Pursuant to Labor Code § 2802(a), "[a]n employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties . . . ." Labor Code § 221 makes it unlawful "for any employer to collect or receive from an employee any part of wages theretofore paid by said employer to said employee."
The first cause of action alleges Defendant failed to reimburse its Dealers for reasonably incurred business expenses, including fuel, maintenance, registration, computers, printers, software, internet service, cell phones, uniforms, insurance, and the cost of unsold or returned tools. FAC ¶¶ 44-45; Mot. Br. 29. The second cause of action alleges Defendant made wrongful deductions from the wages of its Dealers, including for franchise fees, software licensing fees, and lost, stolen, and returned equipment. FAC ¶¶ 50-51; Mot. Br. 29.
Defendant contends Plaintiff cannot prove the first and second causes of action through common proof because Cornwell does not track its Dealers' expenses on a uniform basis and the amount Dealers may spend on various expenses may vary significantly between Dealers. Opp'n 32. The court disagrees. As stated, the Ninth Circuit has recognized that "a district court is not precluded from certifying a class even if plaintiffs may have to prove individualized damages at trial." Olean, 31 F.4th at 668-69.
Having reviewed the evidence in the record, the court finds common issues of fact and law predominate with respect to these claims. The DFAs set forth uniform practices regarding the expenses Dealers are required to pay, including for a display truck or van which has been approved by Cornwell, a computer that meets specifications set by Cornwell, and Cornwell's proprietary software. E.g., Dkt. 97-13 (Markley Decl. Ex. H) at 5, ¶ 5. The DFAs also require Dealers to deposit funds as a reserve with Cornwell, make payments to Cornwell for inventory, and obtain general commercial liability insurance that includes Cornwell as "loss payee" and "additional insured." E.g., id. at 4, ¶ 4; id. at 5, ¶¶ 6-7. These provisions demonstrate Cornwell has a "uniform policy as [to] what is reimbursed and what is not," which predominate over individual issues for Plaintiff's reimbursement and unlawful deduction claims. See Villalpando v. Exel Direct Inc., 303 F.R.D. 588, 609-10 (N.D. Cal. 2014) (certifying class of drivers who provided delivery services despite the existence of some individualized issues regarding damages, based on defendant's uniform policy regarding reimbursement).
Defendant additionally argues Plaintiff's wage deduction claim cannot be certified because Plaintiff presents no evidence Cornwell paid wages to its Dealers or unlawfully deducted wages. Opp'n 32. Plaintiff's second cause of action is premised on Plaintiff's allegations that Dealers were miscategorized as independent contractors instead of employees. FAC ¶ 29. Plaintiff contends Dealers' earnings mirror those of commissioned or piece rate employees. Mot. Br. 17. If Plaintiff is found to be correct, then class members will not need to demonstrate that Cornwell paid wages, as Cornwell's fees may constitute improper deductions from Dealers' commissions as employees. See Lindell v. Synthes USA, 155 F. Supp. 3d 1068, 1086 (E.D. Cal. 2016) (holding employer's deduction exceeding employee's maximum commission for a particular sale violated Cal. Lab. Code § 221).
Accordingly, the court finds Plaintiff has satisfied the commonality and predominance requirements for class certification for these claims.
c. Fourth Cause of Action for Failure to Pay Overtime, Fifth Cause of Action for Failure to Provide Meal Breaks, Sixth Cause of Action for Failure to Provide Rest Breaks, and Seventh Cause of Action for Failure to Pay Wages
Under California law, employers must provide non-exempt employees meal and rest breaks. IWC Wage Order No. 1 provides: "[n]o employer shall employ any person for a work period of more than five (5) hours without a meal period of not less than 30 minutes, except that when a work period of not more than six (6) hours will complete the day's work the meal period may be waived by mutual consent of the employer and employee." Cal. Code Regs. tit. 8, § 11010(11); see also Cal. Lab. Code §§ 226.7, 512. Failure to retain accurate time records creates a rebuttable presumption that no meal period was provided. Donohue v. AMN Servs., LLC, 11 Cal. 5th 58, 76, 275 Cal.Rptr.3d 422, 481 P.3d 661 (2021); see also Cal. Code Regs. tit. 8, § 11010(7)(A)(3). An employer must also permit employees to take rest periods "based on the total hours worked daily at the rate of ten (10) minutes net rest time per four (4) hours or major fraction thereof." Cal. Code Regs. tit. 8, § 11010(12); see also Cal. Lab. Code §§ 226.7, 512.
California law also mandates overtime and minimum wages for non-exempt employees. Labor Code § 510(a) provides, "[a]ny work in excess of eight hours in one workday and any work in excess of 40 hours in any one workweek . . . shall be compensated at the rate of no less than one and one-half times the regular rate of pay for an employee. Any work in excess of 12 hours in one day shall be compensated at the rate of no less than twice the regular rate of pay for an employee." See also Cal. Code Regs. tit. 8, § 11010(3). Furthermore, an employer must "pay to each employee, on the established payday for the period involved, not less than the applicable minimum wage for all hours worked in the payroll period, whether the remuneration is measured by time, piece, commission, or otherwise." Cal. Code Regs. tit. 8, § 11010(4)(B); see also Cal. Lab. Code §§ 1194, 1197.
With respect to Plaintiff's fourth through seventh causes of action, Defendant argues principally that individual damages calculations preclude predominance. Opp'n 31-32. As stated, however, "the presence of individualized damages issues does not preclude a court from certifying a class because class-wide proof is not required for all issues." Olean, 31 F.4th at 651 (citations and brackets omitted); see also Negrete v. Allianz Life Ins. Co. of N. Am., 238 F.R.D. 482, 494 (C.D. Cal. 2006) (collecting authority).
Defendant also argues that Plaintiff did not address the seventh cause of action in his Motion. Opp'n 31. The court disagrees. Plaintiff's seventh cause of action is for failure to compensate Dealers for each hour worked pursuant to Labor Code §§ 1194, 1197, 1198, and Wage Order 1. Plaintiff's claim centers on Defendant's alleged failure to pay minimum wage for all hours worked. See Cal. Code Regs. tit. 8, § 11010(4)(B) (requiring employers to pay to each employee "not less than the applicable minimum wage for all hours worked in the payroll period"). Plaintiff argues that predominance exists over this claim in his Motion, pursuant to Labor Code § 1194 and Wage Order 1. Mot. Br. at 30. Accordingly, the court finds Plaintiff did not fail to address class certification of this claim.
Having reviewed the parties' arguments and submitted evidence, the court finds Plaintiff's meal and rest break, overtime, and minimum wage claims are subject to common proof under the DFAs and Cornwell's policies. For example, Columbus testified that Cornwell never promulgated a meal or rest break policy and did not pay Dealers overtime when they worked over eight hours in one day or over 40 hours in a week. See Dkt. 97-3 (Markley Decl. Ex. A) at 106-08. Also, Columbus testified that he could "easily see" a Dealer working over 60 hours per week "in the beginning," and that Cornwell did not have a goal as to how many hours it wanted Dealers to work. Id. at 44-47. The evidence in the record demonstrates Dealers were subject to uniform practices and policies by Cornwell, which predominate over individualized issues regarding damages.
The court, therefore, finds Plaintiff has satisfied the commonality and predominance requirements for class certification for these claims.
d. Third Cause of Action for Failure to Provide Accurate Wage Statements
An employer must provide employees with accurate, itemized written wage statements. Cal. Lab. Code § 226(a); Cal. Code Regs. tit. 8, § 11010(7)(B). Columbus testified that Cornwell does not issue wage statements to its Dealers. Dkt. 97-3 (Markley Decl. Ex. A) at 114. The evidence in the record shows that this claim is subject to common proof which predominates over individual issues.
Defendant contends class certification should be denied as to the third cause of action because Plaintiff's wage statement claim is dependent upon a finding of misclassification. Opp'n 33. Having found that common issues predominate over individual issues for the question of misclassification, the court will not deny the Motion on this basis. The court, therefore, finds Plaintiff has satisfied the commonality and predominance requirements for this claim.
e. Seventh Cause of Action for Violation of the UCL
The parties agree that Plaintiff's UCL claim is dependent upon and arises from the same alleged violations as the first through sixth causes of action. Mot. Br. 30-31; Opp'n 33. Having found that common issues predominate over individual issues with respect to the underlying causes of action, the court finds Plaintiff has satisfied the commonality and predominance requirements for class certification for this claim.
3. Conclusion
In sum, the court finds that common issues predominate over individual issues with respect to the question of misclassification and Plaintiff's individual claims. The court, therefore, finds Plaintiff has satisfied the predominance and commonality requirements of Rule 23(a)(2) and (b)(3).
C. Numerosity
Pursuant to Rule 23(a)(1), a party seeking class certification must demonstrate "the class is so numerous that joinder of all members is impracticable[.]" Fed. R. Civ. P. 23(a)(1). "The numerosity requirement requires examination of the specific facts of each case and imposes no absolute limitations." Gen. Tel. Co. v. EEOC, 446 U.S. 318, 330, 100 S.Ct. 1698, 64 L.Ed.2d 319 (1980). Courts, however, have recognized that the numerosity requirement is generally satisfied where the proposed class contains over one hundred members. E.g., Jordan v. County of Los Angeles, 669 F.2d 1311, 1319 & n. 10 (finding class of 110 persons sufficiently numerous and collecting cases certifying classes of 7 to 75 members), vacated on other grounds by County of Los Angeles v. Jordan, 459 U.S. 810, 103 S.Ct. 35, 74 L.Ed.2d 48 (1982).
Plaintiff states that at least 110 individuals fall within the proposed class. Mot. Br. 20. Defendant does not oppose class certification on this basis. See Opp'n. Accordingly, the court finds Plaintiff has satisfied the numerosity requirement.
D. Typicality and Adequacy
Rule 23(a)(3) requires "the claims or defenses of the representative parties [to be] typical of the claims or defenses of the class[.]" Fed. R. Civ. P. 23(a)(3). "The test of typicality is whether other members have the same or similar injury, whether the action is based on conduct which is not unique to the named plaintiffs, and whether other class members have been injured by the same course of conduct." Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992) (quotation marks omitted). "Under the rule's permissive standards, representative claims are 'typical' if they are reasonably co-extensive with those of absent class members; they need not be substantially identical." Castillo v. Bank of Am., NA, 980 F.3d 723, 729 (9th Cir. 2020) (quotation marks omitted). [C]lass certification is inappropriate where a putative class representative is subject to unique defenses which threaten to become the focus of the litigation." Hanon, 976 F.2d at 508 ("[A] named plaintiff's motion for class certification should not be granted if 'there is a danger that absent class members will suffer if their representative is preoccupied with defenses unique to it.").
Rule 23(a)(4) requires class representatives to "fairly and adequately protect the interests of the class." Fed. R. Civ. P. 23(a)(4). A named plaintiff satisfies the adequacy test if he or she has no conflicts of interest with other class members and if the named plaintiff will prosecute the action vigorously on behalf of the class. Ellis v. Costco Wholesale Corp., 657 F.3d 970, 985 (9th Cir. 2011). " '[T]he typicality and adequacy inquiries tend to significantly overlap' and are often resolved together." Fleming, 2021 WL 673445, at *4, 2021 U.S. Dist. LEXIS 33513, at *10 (citing James, 338 F.R.D. at 133).
Plaintiff argues his claims are typical of the class because he alleges the same wrongs as other class members, namely: misclassification as independent contractors and corresponding violations of California employment laws. Mot. Br. 21. Plaintiff also argues he is an adequate class representative because he does not have any conflicts of interest with other putative class members, shares common injuries with the class, and seeks relief that will benefit the class. Mot. Br. 21-22.
Defendant contends Plaintiff is not a typical or adequate representative because he is a former franchisee and, therefore, cannot adequately represent current franchisees, many of whom may not want to be classified as employees and may want to continue operating their businesses as independent franchisees. Opp'n 21, 23. According to Defendant, Plaintiff's only stake in the outcome of the litigation is a potential economic recovery, whereas current Dealers may lose the investments they have made in their franchises and earn significantly less income if they are deemed to be employees instead of independent contractors. Id. Defendant cites cases from outside this Circuit to argue that former franchisees cannot adequately represent a class containing current franchisees. Id. Plaintiff responds that courts in this Circuit routinely reject Defendant's argument that a former franchisee cannot serve as an adequate representative. Reply 10 (citing Fleming, 2021 WL 673445, at *4, 2021 U.S. Dist. LEXIS 33513, at *11).
In Fleming, 2021 WL 673445, at *4, 2021 U.S. Dist. LEXIS 33513, at *11, the court explained that "[w]hile some courts have held that former franchisees are not adequate to represent current franchisees, . . . more recent decisions have tended to reject this framing and have adopted a more nuanced view." As Fleming, id. at *4, 2021 U.S. Dist. LEXIS 33513 at *11-12, explained, the relevant question is not whether a plaintiff is a current or former franchisee, but whether his or her claims "are reasonably co-extensive with those of the other class members." See also Castillo, 980 F.3d at 730. This court agrees with and adopts the Fleming court's reasoning.
Defendant argues Plaintiff's claims are not typical because "there is wide variation in how Dealers operate their franchises, and varying levels of Cornwell interaction and involvement on the same with the individual Dealerships." Opp'n 23. According to Defendant, "Dealers have different numbers of customers, have dissimilar levels of interaction with management, incur varying expenses, sell on differing prices and terms[,] and have different daily routines impacting hours, sales operations, administrative tasks, and breaks." Id. Defendant further argues that "some Dealers operate their dealerships with their spouses, who are also parties to the DFA, and are therefore also franchisee Dealers of Cornwell." Id. The court disagrees.
That there may have been some variation in individual Dealers' personal interactions with Cornwell and how they operated their franchises is alone insufficient to demonstrate that Plaintiff's claims are not reasonably co-extensive with those of other Dealers. As stated, Plaintiff was subject to the same requirements and practices under the DFAs. Plaintiff presents evidence that Cornwell reserved the right to exercise the same degree of control over Plaintiff as other Dealers, including the requirement to personally "use best, full-time efforts to serve [the] assigned territory fully," the restriction against hiring employees or independent contractors to serve the assigned territory, and the provisions regarding termination. See, e.g., Dkt. 97-13 (Markley Decl. Ex. H) at 119, 122; Dkt. 103-4 (Def. Evid. Ex. K) at 64. Based on the evidence in the record, the court finds Plaintiff's claims are reasonably co-extensive with those other class members who, like Plaintiff, may recover unpaid wages, reimbursements, and penalties if they are deemed non-exempt employees under California law. Dkt. 105 (Pl. Reply) at 10.
Cornwell also presents several declarations from Dealers who state they have never considered themselves employees and that "no one from Cornwell ever supervised, directed or controlled the manner and performance of [their] work." Dkt. 103-4 (Def. Exs. X-AD) at 439-492. Courts, however, have found that such "happy camper" declarations are generally not sufficient to defeat a finding of adequacy or typicality. E.g., Fleming, 2021 WL 673445, at *4, 2021 U.S. Dist. LEXIS 33513, at *12 (collecting cases); Guifu Li v. A Perfect Day Franchise, Inc., Case No. 5:10-cv-01189-LHK, 2011 WL 4635198, at *9, 2011 U.S. Dist. LEXIS 114821, at *27 (N.D. Cal. Oct. 5, 2011) ("The fact that . . . some potential class members may prefer their current employment situation, is not sufficient to defeat adequacy."). Furthermore, the generally duplicative nature of the declarations and their description of these Dealers' working conditions to the allegations of the FAC suggests that Plaintiff's claims are typical of the proposed class. Compare Dkt. 103-4 (Def. Exs. X-AD) at 439-492 with FAC. The court will not deny the Motion on this basis.
In sum, the court finds Plaintiff has demonstrated his claims are typical of the claims of the class members and that he is an adequate class representative.
E. Superiority
In addition to satisfying all four requirements of Rule 23(a) and the predominance requirement of Rule 23(b)(3), a party seeking class certification must also demonstrate "a class action is superior to other available methods for fairly and efficiently adjudicating the controversy." Fed. R. Civ. P. 23(b)(3). The matters pertinent to this analysis include:
(A) the class members' interests in individually controlling the prosecution or defense of separate actions;Id.
(B) the extent and nature of any litigation concerning the controversy already begun by or against class members;
(C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and
(D) the likely difficulties in managing a class action.
First, regarding the class members' interests in individually controlling prosecution or defense of separate actions, Plaintiff argues that class members have little interest in individual control of separate actions while Defendant argues the reverse. Mot. Br. 31; Opp'n 33. Having considered the parties' arguments, the court is satisfied that class certification with the availability of an opt-out procedure after notification will provide a superior mechanism for adjudicating the parties' dispute than individual actions, as this would strike the appropriate balance between efficiency and protecting the rights of potential objectors to pursue individual actions.
Second, regarding the extent and nature of other litigation involving the same controversy, Plaintiff represents and Defendant does not dispute that there is currently no other ongoing litigation between the California Dealers and Defendant. Mot. Br. 31. Accordingly, the court finds a class action would not lead to inconsistent results or waste of judicial resources.
Third, regarding the desirability of this forum, Plaintiff argues this is an appropriate forum because Plaintiff and many other class members' claims arose in connection with work performed in this district and this court is familiar with California law. Defendant does not dispute the appropriateness of this forum. See Opp'n. The court, therefore, finds this factor favors certification.
Fourth, regarding the likely difficulties in managing a class action, the court finds that a class action is superior to individual actions as issues related to Defendant's liability, including Dealers' classification as independent contractors instead of employees and certain affirmative defenses, such as the outside salesperson exemption to IWC Wage Order No. 1, are subject to common proof. Defendant argues individual issues exist regarding the class members' damages. Opp'n 33. The court, however, finds the existence of individualized issues regarding damages are alone insufficient to bar class certification, as such issues can be addressed in a separate damages phase, if necessary, as Plaintiff has proposed. See Mot. Br. 32; see also Fleming, 2021 WL 673445, at *12, 2021 U.S. Dist. LEXIS 33513, at *48-49.
Accordingly, the court finds that a class action is superior to other available methods for fairly and efficiently adjudicating the parties' controversy.
F. Class Counsel
"Unless a statute provides otherwise, a court that certifies a class must appoint class counsel." Fed. R. Civ. P. 23(g)(1). In appointing class counsel, the court must consider: "(i) the work counsel has done in identifying or investigating potential claims in the action; (ii) counsel's experience in handling class actions, other complex litigation, and the types of claims asserted in the action; (iii) counsel's knowledge of the applicable law; and (iv) the resources that counsel will commit to representing the class." Fed. R. Civ. P. 23(g)(1)(A). The court may also consider "any other matter pertinent to counsel's ability to fairly and adequately represent the interests of the class[.]" Fed. R. Civ. P. 23(g)(1)(B). Questions regarding the competency of class counsel also implicate the adequacy-of-representation requirement of Rule 23(a)(4). Wal-Mart, 564 U.S. at 349 n. 5, 131 S.Ct. 2541.
Counsel Shaun Markley ("Markley") attests he is familiar with this action, as he and his law firm have been involved in the action since its inception, and that he and his law firm's personnel have spent hundreds of hours engaging in discovery and investigating Plaintiff and the putative class' claims. Dkt. 97-2 (Markley Decl.) ¶¶ 4-5. Counsel Craig Nicholas ("Nicholas") attests that this type of litigation comprises more than half of the legal services his law firm performs as well as the majority of the services he has performed for more than the past ten years. Dkt. 97-16 (Nicholas Decl.) ¶¶ 2-4. This testimony is sufficient to demonstrate counsel is familiar with this action and employment class action litigation in general, as well as counsel's experience in handling such actions.
Nicholas further attests his law firm is committed to litigating the action vigorously and seeing the action through to trial and recovery, as has been demonstrated repeatedly in the past. Id. ¶ 17. No conflicts of interest are apparent in the record. These declarations are sufficient to satisfy the requirements of Rule 23(g)(1)(A). Based on the declarations by Plaintiff's counsel, Dkt. 97-2, the court finds that counsel satisfies the requirements of Rule 23(g)(1).
Defendant argues Plaintiff's counsel is inadequate because it engaged in unlawful self-help. Opp'n 22 (citing Reliable Money Order, Inc. v. McKnight Sales Co., 704 F.3d 489, 495 (7th Cir. 2013)). In Reliable Money Order, 704 F.3d at 498, the court recognized that in the Seventh Circuit, "misconduct by class counsel that creates serious doubt that counsel will represent the class loyally requires denial of class certification." The court further noted that while "misconduct that prejudices the class or creates a direct conflict between counsel and the class" requires denial under the "serious doubt" standard, not all ethical breaches "justif[y] the grave option of denying class certification." Reliable Money Order, id. at 499, ultimately concluded that "unethical conduct, not necessarily prejudicial to the class, nevertheless raises a 'serious doubt' about the adequacy of class counsel when the misconduct jeopardizes the court's ability to reach a just and proper outcome in the case."
The Ninth Circuit has not addressed whether the same standard applies in this circuit. Courts in this district that have considered Reliable Money Order have noted that "[c]ase law preceding this standard suggests that the degree of unethical conduct justifying a finding of inadequacy is high, and often turns on counsel's integrity and candor." E.g., White v. Experian Info Solns., 993 F.Supp.2d 1154, 1171 (C.D. Cal. 2014).
Assuming arguendo that the Seventh Circuit's standard were to apply here, the court finds Plaintiff's counsel has not engaged in misconduct that requires denial of class certification. Magistrate Judge Sheri Pym has already ruled that Plaintiff's counsel's conduct did not rise to the level of bad faith and does not warrant sanctions under the court's inherent powers. Dkt. 144 at 15. While this court has not yet issued a ruling on Defendant's second Motion for Reconsideration of Magistrate Judge Pym's ruling (Dkt. 150), the court finds that Defendant has not met its burden to demonstrate that Plaintiff's counsel's conduct creates serious doubt that counsel will represent the class loyally or otherwise jeopardizes the court's ability to reach a just and proper outcome in the case. See Reliable Money Order, 704 F.3d at 498-99. The court, therefore, will not deny class certification on this basis.
In sum, the court finds Plaintiff's counsel has satisfied the requirements of Rule 23(g)(1) and demonstrated its ability to represent fairly and adequately the interests of the class. The court, therefore, APPOINTS Nicholas & Tomasevic, LLP to serve as class counsel for the class certified herein.
CONCLUSION
For the foregoing reasons, the court GRANTS Plaintiff's Motion for Class Certification and CERTIFIES the following class: "All persons who signed Dealer Agreements in California and personally operated a mobile store at any time within four years preceding the filing of this action." The court APPOINTS Nicholas & Tomasevic, LLP to serve as class counsel for the certified class.
The parties are ORDERED to meet and confer within 14 days of this Order, regarding: (1) the contents and logistics of class notice and (2) the status of the action. The parties are further ORDERED to submit a joint status report within 28 days of this Order, regarding the same.
IT IS SO ORDERED.