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Villalpando v. Exel Direct Inc.

United States District Court, N.D. California

November 20, 2014

DANIEL VILLALPANDO, et al., Plaintiffs,
v.
EXEL DIRECT INC., et al., Defendants

For Daniel Villalpando, individually and on behalf of all others similarly situated, Plaintiff: Guy Burton Wallace, Todd Michael Schneider, LEAD ATTORNEYS, Joshua Geoffrey Konecky, Schneider Wallace Cottrell Konecky LLP, San Francisco, CA.

For Tafiti Shekur, Plaintiff: Jennifer Lynn Connor, Cohelan Khoury & Singer, San Diego, CA; Denise Lissette Diaz, Robert Ira Spiro, Spiro Law Corp., Los Angeles, CA; Jeffery Durham Holmes, Attorney at Law, Los Angeles, CA; Joshua Geoffrey Konecky,, Schneider Wallace Cottrell Konecky LLP, San Francisco, CA.

For Exel Direct Inc., Defendant: Angela S. Cash, LEAD ATTORNEY, Scopelitis Garvin Light Hanson & Feary, Indianapolis, IN; Christopher Chad McNatt, Jr., LEAD ATTORNEY, Scopelitis Garvin Light Hanson & Feary, LLP, Pasadena, CA; Andrew J Butcher, Scopelitis, Gavin, Light, Hanson & Feary, Washington, DC; James H. Hanson, Scopelitis, Garvin, Light & Hanson, Indianapolis, IN; Ryan Wayne Wright, Scopelitis, Garvin, et al., Indianapolis, IN.

For DHL Express (USA), Inc., Defendant: Christopher Chad McNatt, Jr., LEAD ATTORNEY, Scopelitis Garvin Light Hanson & Feary, LLP, Pasadena, CA; James H. Hanson, Scopelitis, Garvin, Light & Hanson, Indianapolis, IN; Ryan Wayne Wright, Scopelitis, Garvin, et al., Indianapolis, IN.

For DPWN Holdings (USA), Inc, Deutsche Post Beteiligungen Holding GmbH, Defendants: Angela S. Cash, LEAD ATTORNEY, Scopelitis Garvin Light Hanson & Feary, Indianapolis, IN; Christopher Chad McNatt, Jr., LEAD ATTORNEY, Scopelitis Garvin Light Hanson & Feary, LLP, Pasadena, CA; James H. Hanson, Scopelitis, Garvin, Light & Hanson, Indianapolis, IN; Ryan Wayne Wright, Scopelitis, Garvin, et al., Indianapolis, IN.

ORDER GRANTING MOTION FOR CLASS CERTIFICATION

JOSEPH C. SPERO, United States Magistrate Judge.

Re: Dkt. No. 141

I. INTRODUCTION

Plaintiffs in this putative class action are drivers who have provided delivery services for Defendants Exel Direct Inc., DPWN Holdings (USA), Inc. and Deutsche Post Beteiligungen Holding GmbH (collectively " Exel") in California. Plaintiffs assert wage and hour claims under California law based on the allegation that Exel has misclassified its drivers as independent contractors. Presently before the Court is Plaintiffs' Motion for Class Certification (" Motion"), in which Plaintiffs ask the Court to certify a class under Rule 23(a) and (b)(3) of the Federal Rules of Civil Procedure. The parties have consented to the jurisdiction of the undersigned magistrate judge pursuant to 28 U.S.C. § 636(c). A hearing on the Motion was held on Friday, November 14, 2014 at 9:30 a.m. For the reasons stated below, the Motion is GRANTED.

II. BACKGROUND

A. Factual Background

1. Exel's Business

Exel is a federally authorized interstate motor carrier that provides transportation services to a variety of customers, including retailers. See Declaration of James H. Hanson in Support of Defendants' Opposition to Plaintiffs' Motion for Class Certification (" Hanson Decl."), Ex. 3 (Declaration of Renee Albarano (" Albarano Decl.") P 2; Declaration of Joshua Konecky in Support of Plaintiffs' Motion for Class Certification (" Konecky Motion Decl."), Ex. 2 (Dep. of Renee Albarano (" Albarano Dep.")) at 28-53 (describing types of services offered to retail customers); Ex. 5 (webpages describing services of MXD Group, Inc.).[1] These services include the delivery of furniture and other oversized items. Hanson Decl., Ex. 13 (Albarano Decl.) P 2.

Exel drivers work out of either a " network hub" or a " dedicated business." Konecky Motion Decl., Ex. 2 (Albarano Dep.) at 28-29. From its network hubs, housed in buildings that Exel leases, Exel provides services to multiple retail customers. Id. Exel drivers operating out of a network hub " comingle freight on the delivery trucks" and make deliveries for multiple retail customers along their route. Id. Thus, for example, the driver " could deliver a Pottery Barn sofa to stop one, then an Office Depot pallet of paper to stop two, and then perhaps a Restoration Hardware crib to stop three." Id. In California, there are two network hubs: one in Oakland serving the San Francisco Bay area, and one in Ontario serving the Los Angeles area. Id. at 30. Exel provides delivery services for Crate & Barrel, Office Depot, JC Penney, Williams-Sonoma, Ikea (Oakland only) and Restoration Hardware (Ontario only) out of these two hubs. Konecky Motion Decl., Ex. 8 (Response to Special Interrogatories, Set Three), No. 22. A driver working out of one of these hubs is likely to have delivered products for each of the Exel customers serviced at the hub. Id.

An Exel " dedicated business" operates off the back of a customer's facility rather than out of a leased building and provides services only for that retail customer. Konecky Motion Decl., Ex. 2 (Albarano Dep.) at 29. Consequently, a driver working out of a dedicated business typically delivers products from only one particular Exel customer on any given route. Id. One of Exel's " dedicated businesses" is its Sears account. Konecky Motion Decl., Ex. 2 (Albarano Dep.) at 35.

Exel's policies and procedures are largely the same whether a driver works out of a network hub or a dedicated business. Konecky Motion Decl., Ex. 2 (Albarano Decl.) at 44, 52-53. The only differences regarding Exel's " policies and procedures applicable to the drivers, in terms of the way they make the deliveries and perform their work for Exel" are: 1) those who work on Exel's account with Sears deliver and install appliances, while drivers on other retail customer accounts deliver furniture and other products; and 2) the way drivers confirm deliveries or report problems with a delivery (whether by inputting information in a handheld device or calling a hotline) varies depending on the particular retail customer for whom the delivery is made. Id.

Exel has identified 373 individuals who were drivers for Exel in California between June 14, 2008 (the start of the liability period in this action) and March 11, 2014 (the date of Exel's interrogatory responses providing this information). See Konecky Motion Decl., Ex. 7 (Interrogatory Response, No. 14).

2. Hiring of Exel Drivers

Prospective drivers " [m]ust be personally interviewed by an Exel representative to determine the driver qualifications, attitude and motivation." Konecky Motion Decl., Ex. 10 (Transportation Safety & Regulatory Compliance Manual for: Contractors, Qualified Second Drivers and Helpers (" Compliance Manual")) at 4. Other requirements for Exel drivers include " Exel review of [an applicant's] Motor Vehicle Record" and a background investigation " conducted by Exel's Safety & Compliance Department using an independent third-party service engaged by Exel." Id. at 5-6. Other than a driver's license, drivers are not required to have any special licenses or experience to be eligible for hire. Id.

When they are hired, Exel drivers are required to complete paperwork, including an " Independent Truckman's Agreement, " which is identical for all drivers. Konecky Motion Decl., Decl., Ex. 2 (Albarano Dep.) at 83; Ex. 11 (Independent Truckman's Agreement (" ITA")). The ITA is presented to the drivers in English only. Konecky Motion Decl., Ex. 2 (Albarano Dep.) at 101. Many of the drivers state in their declarations that English is not their first language, that they did not understand the agreements, and that Exel did not explain the terms of the agreements to them before asking them to sign them. See, e.g., Villalpando Decl., ¶ 5; Aguilera Decl., ¶ 5; Montes Decl., ¶ 5; Padilla Decl., ¶ 5; Sarabia Decl., ¶ 5; Alancastro Decl., ¶ 5; Delafuente Decl., ¶ 5; Lopez Decl., ¶ 5; Miranda Decl., ¶ 5; Navarro Decl., ¶ 5; Raymundo Decl., ¶ 5; Yako Decl., ¶ 5.

3. Independent Truckman's Agreement

The ITA is between Exel and the " CONTRACTOR." Konecky Motion Decl., Ex. 11 (ITA). Section 1 provides that the " CONTRACTOR's General Duties" are to " deliver consumer items for [Exel's] customers and perform such other transportation and related services as may be necessary to serve [Exel's] customers." Id., Section 1. Section 2 provides that the term of the agreement is one year, with subsequent year-to-year renewal to occur automatically unless the agreement is expressly terminated pursuant to the termination clause, in Section 3. The termination clause permits termination of the agreement " at any time" as follows: " a) by mutual consent; b) by the insolvency of CONTRACTOR . . .; c) without cause upon either party giving the other sixty (60) days written notice of termination; or d) with cause upon the breach of [the ITA] by either of the parties." Id., Section 3 (emphasis in original).

Under the " Payment" term, the ITA provides that the " CONTRACTOR" will be paid based on " hauling revenue." Id., Sections 4 & Exhibit A.[2] Exhibit A to the ITA provides that the contractor " will receive a minimum of sixty percent (60%) of hauling revenue." Id., Ex. A. The term " hauling revenue" is defined " in accordance with [Exel's] established accounting practices and past practices" and does not include " compensation for services above and beyond basic delivery services." Id., Ex. A. " For example, compensation for routing and supervision, overhead, customer relations, order fulfillment, prenotification, cross-dock operations, transportation management, intercompany transfer and warehouse operations, among other things, are not considered elements of hauling revenue." Id.

The ITA provides that the " CONTRACTOR shall provide its own vehicle and shall pay all costs attendant to its operation and maintenance." Id., Section 5. Drivers also must carry insurance on their vehicles. Id., Section 6. In particular, the ITA provides that " CONTRACTOR will carry at its own expense public liability and property damage insurance upon any vehicles or other equipment used by it in carrying out its duties" under the agreement. Id. The ITA specifies that " [t]he insurance shall be in an amount consistent with minimum Exel requirements." Id.

Section 7 of the ITA is entitled " Labor and Hold Harmless" and provides that the " CONTRACTOR shall, at its own expense . . . furnish whatever labor is necessary to provide delivery services to [Exel's] customers. " Id., Section 7. It further provides that the " CONTRACTOR" is " responsible for the payment of wages and social security and withholding taxes for any of its employees." Id.

Under the term entitled " Control and Exclusive Use, " the ITA provides as follows:

In performing services under this Agreement, CONTRACTOR will direct the operation of any equipment in all respects and will determine the means of performance including but not limited to such matters as choice of any routes, points of service of equipment, rest stops, and timing and scheduling of customer deliveries. The parties intend to create an independent contractor relationship and not an employer-employee relationship.

Id., Section 9.

4. Equipment Lease Agreement

All Exel drivers also are required to sign an Equipment Lease Agreement (" ELA") as a condition of the job. See Konecky Motion Decl., Ex. 12. The ELA mirrors the ITA in many respects, and expands upon certain provisions of the ITA. The ELA, like the ITA, is between Exel and " CONTRACTOR." Id. It sets forth requirements regarding " LEASED EQUIPMENT, " which is to be described in Exhibit A to the ELA. The form to be completed as " Exhibit A" to the ELA contains columns for " YEAR, " " MAKE" and " SERIAL NUMBER, " suggesting that the ELA is used for drivers' vehicles rather than other equipment. Id., Ex. A.[3] The ELA provides that " CONTRACTOR shall pay all costs attendant to the operation and maintenance of the LEASED EQUIPMENT, including, but not limited to, the costs of fuel, fuel taxes, empty mileage, permits of all types, tolls, ferries, detention and accessorial services, base plates and licenses and any unused portions of such items." Id., Section 5.

Section 4 of the ELA sets forth payment terms, which are to be in accordance with Exhibit B to the ELA. Id., Section 4. Exhibit B, in turn, provides for a " delivery stop charge" to be paid for " network solution customer deliveries, " with compensation for all other deliveries to be paid based on " hauling revenue." Id., Ex. B. As under the ITA, the term " hauling revenue" " does not include compensation for " services above and beyond basic delivery services." Id. Thus, " compensation for routing and supervision, overhead, customer relations, order fulfillment, pre-notification, cross-dock operations, transportation management, intercompany transfer and warehouse operations, among other things, are not considered elements of hauling revenue." Id.

Section 9 of the ELA provides that " CONTRACTOR will be liable for loss or damage to items intended for transport which are in CONTRACTOR'S possession or under CONTRACTOR'S dominion and control." Id., Section 9. In addition, Section 10 of the ELA, entitled " Chargeback Items, " provides that expenses listed in Exhibit D will be " set-offs to CONTRACTOR'S compensation." Id., Exhibit D. Exhibit D lists numerous types of " Chargeback Items, " including deductibles for drivers who are insured under Exel's insurance programs, charges for failure to report any liability/collision claim within 24 hours and for failure to comply with Exel policies and/or state or federal requirements if the driver is involved in an accident, losses covered in Section 9 and expenses associated with the " cost of operation paid on [the driver's] behalf." Id. Specific expenses listed as cost of operation chargebacks include insurance costs (for those drivers who are insured under Exel's programs), " [t]ruck rentals/leases and repairs, " " [f]ines [and] citations, " " drug, alcohol, background and criminal checks, " " [s]ervice apparel and cleaning, " " [v]ehicle washes, " " [i]n-home damage to customer's property, " " [t]elephone, " " [f]uel, " " [t]ires, " " [m]erchandise claims, " " [p]hysical examinations, " " [t]owing, " " [d]elivery supplies, " " [p]ostage, " " [s]ettlement adjustments" and " [d]ebit memos, purchase orders, or promissory notes with interest relative to operating or start-up costs." Id.The insurance provision of the ELA provides that Exel will cover insurance for " protection of the public pursuant to U.S. Department of Transportation regulation under Title 49 U.S.C. § 13906, " while the " CONTRACTOR will carry at its own expense" the following insurance:

(i) commercial general liability and property damage insurance in the amount of $5, 000, 000 per occurrence; (ii) auto liability insurance upon the LEASED EQUIPMENT used in the amount of $5, 000, 000 per occurrence; and (iii) cargo insurance in the amount of $100, 000 per occurrence.

Id., Section 7. Section 7 further requires that Exel must be named as " additional insured" on the " CONTRACTOR's" insurance policy. Id. If a " CONTRACTOR requests to be insured by [Exel's] insurer in lieu of providing its own coverage, CONTRACTOR shall be assessed charges" as set forth in Exhibit C to the ELA. Id. Exhibit C sets forth the requirements for Exel's " Company Sponsored Insurance Coverages." Id., Ex. C.

The ELA also includes a " Labor and Hold Harmless" provision. Id., Section 8. This provision requires that " CONTRACTOR shall, at its own expense. . . furnish whatever labor is necessary to operate the LEASED EQUIPMENT." Id., Sections 8. This provision also requires that the " Contractor" " shall provide workers' compensation insurance coverage for all labor furnished or utilized by CONTRACTOR." Id.

The ELA contains a " Control and Exclusive Use" provision that is almost identical to the one in the ITA except that it is subject to the additional proviso that Exel " shall have such possession, control and use of the LEASED EQUIPMENT and its operation as required by Title 49 C.F.R. § 376.12(c)(1)." [4] Id., Section 11.

Addendum No. 1 to the ELA, which took effect on August 1, 2011, adds terms to the ELA relating to " compensation, safety and compliance with laws." Konecky Motion Decl., Ex. 19 (Addendum No. 1). In particular, Addendum No. 1 states that Exel and " CONTRACTOR" recognize that Exel's " Safety Measurement System ('SMS') evaluation published by the Federal Motor Carrier Safety Administration ('FMCSA') has economic value" and establishes a Driver Safety Accountability Program (" DSA") and a Safety Incentive Program whereby " CONTRACTORS" are charged liquidated damages (payable to Exel) for certain types of violations and are paid additional compensation when there are no such violations reported over a specific period of time. Id.

5. Training and Procedures

Exel requires all drivers to regularly participate in its " stand-up morning meetings." Konecky Motion Decl., Ex. 2 (Albarano Dep.) at 158-160. These generally happen " every day" and cover subjects such as new product lines, installation techniques, and customer service. Id. at 158-159. According to the putative class members, Exel uses these regular meetings to train the drivers as to its policies and procedures; teach drivers about customer service; provide feedback on the performance of individual drivers; discipline or threaten discipline for drivers not performing up to company expectations, and hand out routes for the day. See Compendium of Class Member Decls. at ¶¶ 7-9. Certain agenda items come from corporate headquarters, which sends via email daily agendas for the stand-up meetings. Konecky Motion Decl., Ex. 2 (Albarano Dep.) at 165. The meetings are led by Exel management. Id. at 162.

In addition to the training provided at the mandatory stand-up meetings, Exel trains its drivers through its " development" programs, implemented by " Program Development Coordinators, " who work with new Exel drivers and also provide " ongoing development." Konecky Motion Decl., Ex. 2 (Albarano Dep.) at 34. Through the development programs, drivers are taught Exel's " guidelines and standards." Id. at 57. These guidelines and standards are generally applicable to all Exel drivers. Id. The only differences as to the training provided to individual drivers under the development programs relate to the type of product a driver is delivering; thus, a driver who works out of a Sears dedicated location, for example, will be trained to install appliances whereas a driver who works out of a network hub might learn how to install a crib. Id. at 35-36.

Exel also provides to its drivers " training modules" and objectives, which include both paper documents and instructional videos. Id. at 131-132; see also Konecky Motion Decl., Ex. 14 (instructional videos offering training on " The Safer Way of Protecting Floors" and " The Safer Way of Preventing Water Damage"). One of Exel's standardized training modules is entitled " Exel Direct Driver Training: U.S. DOT Regulations." (" Exel's Driver Training"). Id., Ex. 15. This document summarizes Exel's training of drivers on issues such as safety, driver qualifications, hours of service, and what to do at the scene of an accident. Id. at EDV001540-001598. In addition, Exel's Driver Training states that " [e]very driver must complete the Safer Way of Defensive Driving Program, " which is an Exel program facilitated by " the Exel Direct site manager." Id. at EDV001561; see also Konecky Motion Decl., Ex. 18 (documentation for " Exel Safer Way of Driving" program). Exel's Driver Training also provides that Exel drivers must submit to " post-trip" inspections and have a " Mechanic or Exel Direct Manager" verify that all necessary truck repairs are made. Konecky Motion Decl., Ex. 15 (Exel's Driver Training) at EDV001584.

Many of Exel's policies and procedures are set forth in its Compliance Manual, which is provided to drivers to give them a " thorough understanding of what is expected of [them] as . . . independent contractor[s]" for Exel. Konecky Motion Decl., Ex. 10 (Compliance Manual) at EDV000302. The Compliance Manual sets forth Exel's safety policy and lists the qualifications for drivers. Id. at EDV000305. It makes clear that " [e]ach Contractor, Second Driver and helper must be qualified through the Exel Delivery Specialist qualification process" and that " [a] Contractor or second driver number and helper approval must be issued before a Contractor, driver or helper commences service on behalf of Exel." Id. at EDV000307-08. The Compliance Manual describes the procedures that should be followed by Exel drivers in case of an accident, instructing them, inter alia, that they should " never accept or place blame on any person" and that they should " not sign anything." Id. at EDV000320; see also Konecky Motion Decl., Ex. 15 (Exel's Driver Training) at EDV001593 (instructing drivers that if they are asked for a comment by news media, they should respond by saying " I am not allowed to comment until the company's representative gets here and has investigated what has happened"). Exel's Compliance Manual also sets forth requirements as to how to maintain the appearance of the trucks and the equipment carried on the trucks, conditions for cell phone usage " while performing services on behalf of Exel, " how to fill out ...


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