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Samuel Brandon Kress, et al v. Price Waterhouse Coopers

June 4, 2012

SAMUEL BRANDON KRESS, ET AL., PLAINTIFFS,
v.
PRICE WATERHOUSE COOPERS,
DEFENDANT.



The opinion of the court was delivered by: Gregory G. Hollows United States Magistrate Judge

ORDER

Introduction and Summary

Previously pending on this court's law and motion calendar for May 23, 2012, was defendant's motion for protective order to quash Rule 45 subpoenas issued to seven non-party audit clients of PwC.*fn1

To the uninitiated in the PriceWaterhouse Coopers (PwC) associate "overtime" disputes, which includes this undersigned magistrate judge who has had only sporadic involvement with the disputes, this Kress action, with four discrete classes, or subclasses, along with the related Campbell action, is reminiscent of the Abbott and Costello routine of Who's on first, What's on second, and I-Don't-Know-Who's on third. At least it seems that way when trying to identify class members and potential class members in the Fed. R. Civ. P 23 classes and the FSLA "opt-in" classes, identification which PwC insists is the sine qua non for permitting the third party discovery at issue. After extensive review of the background of these litigations, and because the parties have not pointed the undersigned to any limitations or birfurcations of discovery presently applicable, only a very limited protective order is issued.

Background

The Kress action is a class action concerning overtime compensation and other wages. Plaintiffs claim that they were misclassified and do not meet the tests for exemption under law, while PwC asserts that these class members were properly classified as exempt under the Professional Exemption or the Administrative Exemption. There are four classes in the action: (1) Senior Audit Associates asserting claims under California Labor Law, (2) Tax Associates and Senior Tax Associates asserting claims under California Labor Law, (3) nationwide Attest Associates (Assurance Line of Service) asserting FLSA claims, and (4) a class consisting of Threat and Vulnerability Management Associates; Disputes, Analysis and Investigations Associates (Advisory Line of Service); and Tax Projects Delivery Group Associates (Tax Line of Service), asserting FLSA claims.

Of the four classes covered by this action, class certification is in flux. The Senior Audit Associates are part of a putative Rule 23 class asserting claims under California law. Their class certification motion is currently under submission with Judge Karlton. The Tax Associates and Senior Tax Associates are also part of the putative Rule 23 class asserting claims under California law. Briefing on plaintiffs' class certification motion for this group will begin later this year. The third group consists of Attest Associates in the Assurance Line of Service which is already conditionally certified as an FLSA nationwide action. Defendant indicates that it will move to de-certify this class in the future. The fourth group consists of the Threat & Vulnerability Management Associates in the Advisory Line of Service; Disputes, Analysis and Investigations Associates in the Advisory Line of Service; and Tax Projects Delivery Group Associates in the Tax Line of Service. This group has been conditionally certified as an FLSA Nationwide class. Defendant plans to move to decertify this group also.

The district judge defined the Attest Associates for purposes of FLSA claims in its November 25, 2009 conditional certification order as Associates in the Attest Division of the Assurance line anywhere in the United States at any time from December 11, 2005 to the present and who were not licensed. (Dkt. no. 92 at 17.)

In conditionally certifying the Associates in the Assurance, Advisory and Tax divisions (groups (3) and (4) listed above), the district court noted that unlike the Rule 23 certification in Campbell, the FLSA claims in this case involved different standards for exemption, and class certification should be considered in light of the claims involved. Furthermore, Rule 23 and FLSA section 16(b) involved different standards for certification. (Id. at 4.) With these distinctions in mind, the district court considered certification of the FLSA group by means of a two stage process. At the first tier or notice stage, the pertinent inquiry is whether the individuals are sufficiently similarly situated such that notice should be sent to prospective plaintiffs. (Id. at 7.) Recognizing that the FLSA does not define "similarly situated," the district court cited Gerlach v. Wells Fargo & Co., No. 05-0585, 2006 U.S. Dist. LEXIS 24823, *6-7 (N.D. Cal. Mar. 28, 2006), which requires plaintiffs to provide "substantial allegations, supported by declarations or discovery, that 'the putative class members were together victims of a single decision, policy, or plan.'" (Id. at 7.) At this first stage, the standard is fairly lenient, and the court is not required to consider defendant's evidence, probably because the certification at this stage is conditional. It is at the second stage, typically after discovery has been completed, and through a motion to decertify, that a stricter definition of "similarly situated" is applied.

The district judge's basis for finding conditional class certification at the first stage was that the prospective class members' job duties were similar in pertinent regards. In support, plaintiffs had presented evidence of PwC's training, audit methodology, and applicable professional standards. For example, training was uniformly provided through PwC's "Go Audit" program. The audit methodology was uniform, by way of an internet based Audit Guide adhered to by employees. There was also evidence that PwC's procedures were uniform across multiple offices. (Id. at 15.) All prospective class members were subject to a level of supervision. Because plaintiffs had provided some evidence of similarity, conditional class certification was found to be appropriate. (Id. at 16.)

PwC's defense is based on either the professional and/or administrative exemption. In Campbell v. PwC, 642 F.3d 820, 832 (9th Cir. 2011), the Ninth Circuit defined the administrative exemption as requiring an inquiry into what "associates actually do (and what PwC reasonably expects them to do) during audit engagements." The elements of this exemption related to the discovery at issue here are:

1. The employee performs work "directly related to management policies or general business operations" of either the employer or the employer's clients;

2. The employee "customarily and regularly exercises discretion and independent judgment;"

3. The employee works "under only general supervision" while either: (1) performing work along specialized or technical lines requiring special training, experience, or knowledge, or (2) executing special assignments and tasks;

4. The employee is "primarily engaged" in exempt work meeting the above requirements....

Campbell, 642 F.3d at 831, quoting Cal. Code Regs. tit. 8, § 11040(1)(A)(2) (California Industrial Welfare Commission Wage Order No. 4-2001). The Campbell Court explained some of the terms in these elements. The first element requires that the associates' work be of "'substantial importance' to management or business operations," but more importantly questions whether it is of "'substantial importance' to the management or operations of the clients' businesses." Id. at 832, citing 29 C.F.R. § 541.205(a).

The court had trouble defining the term "general supervision" in the third element because there was little precedent or legal guidance on its meaning. Id. at 831-32. Such a determination would have to await the trial stage. Id. at 832.

The Campbell court also explained that the professional exemption concerns "the employee's actual job duties and responsibilities." Id. at 830. The court has reviewed the ...


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