United States District Court, N.D. California
ORDER RE MOTION FOR CLASS CERTIFICATION
JAMES
DONATO UNITED STATES DISTRICT JUDGE
In this
action alleging violations of California state employment
laws, named plaintiffs Stephanie Ochoa, Ernestina Sandoval,
Yadira Rodriguez, and Jasmine Hedgepeth move for class
certification. Dkt. Nos. 70, 157. The motion is granted in
part and denied in part.
BACKGROUND
The
Court's summary judgment order provides the background on
the case. Dkt. No. 289. In a nutshell, plaintiffs allege a
variety of labor violations by defendant the Edward J. Smith
and Valerie S. Smith Family Limited Partnership ("the
Smiths"), which owns and operates five restaurants in
California under a franchise agreement with McDonald's.
Dkt. No. 40 ¶ 17. Plaintiffs also sued McDonald's USA,
LLC and McDonald's Corporation (collectively,
"McDonald's") on direct and vicarious liability
grounds. Dkt. No. 40 ¶¶ 1, 154-243.[1] McDonald's moved for
summary judgment and the Court granted it on plaintiffs'
direct liability theories but denied it on the issue of
whether McDonald's may be liable on an ostensible agency
basis. Dkt. No. 289. Plaintiffs have settled with the Smiths,
and the McDonald's entities are the last standing
defendants. Dkt. No. 305.
Plaintiffs
seek to certify a class of all current and former employees
at the Smiths' restaurants who worked as crew, crew
trainers, or maintenance workers (collectively, "crew
members") and were paid on an hourly basis from four
years before the complaint to final judgment or settlement
("Class"). Dkt. No. 157 at i. Plaintiffs move for
certification of that single Class to pursue claims for: (1)
miscalculated wages; (2) overtime; (3) meals and rest breaks;
(4) maintenance of uniforms; (5) wage statements; and (6)
related derivative claims. Id. at 13-22.
The
certification motion preceded entry of the summary judgment
order. Because that order left open the possibility that
McDonald's could be held liable through ostensible
agency, the Court took supplemental briefing from the parties
on how ostensible agency might affect the certification
question. Dkt. Nos. 290, 294. The certification filings also
preceded the settlement with the Smiths. McDonald's
joined in all the arguments the Smiths made against class
certification. Dkt. No. 170 at 1. Consequently, the Court has
considered the arguments in both briefs as part of
McDonald's opposition to certification and also each
side's arguments in the supplemental briefs.
DISCUSSION
I.
Legal Standards
Federal
Rule of Civil Procedure 23 governs plaintiffs' motion for
class certification. Under that rule, a party seeking class
certification bears the burden of showing that each of the
four requirements of Rule 23(a) -- "sufficiently
numerous parties, common questions of law or fact, typicality
of claims or defenses, and adequacy of representation"
-- and at least one of the provisions of Rule 23(b) are met.
Comcast Corp. v. Behrend, 133 S.Ct. 1426, 1432
(2013). Plaintiffs focus on a (b)(3) class, which is
appropriate when "questions of law or fact common to
class members predominate over any questions affecting only
individual members, " and a class action is
"superior to other available methods for fairly and
efficiently adjudicating the controversy." Fed.R.Civ.P.
23(b)(3).
The
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. Connecticut Ret. Plans &
Trust Funds, 133 S.Ct. 1184, 1194 (2013) (citing
Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350-51
(2011)). This principle applies to the Rule 23(a) and 23(b)
requirements. Wal-Mart, 564 U.S. at 350-51 (Rule
23(a)); Comcast, 133 S.Ct. at 1432 (Rule 23(b)). But
"Rule 23 grants courts no license to engage in
free-ranging merits inquiries at the certification stage,
" and "[m]erits questions may be considered to the
extent -- but only to the extent -- that they are relevant to
determining whether the Rule 23 prerequisites for class
certification are satisfied." Amgen, 133 S.Ct.
at 1194-95. The class certification procedure is decidedly
not an alternative form of summary judgment or an occasion to
hold a mini-trial on the merits. Alcantar v. Hobart
Service, 800 F.3d 1047, 1053 (9th Cir. 2015) (internal
citation omitted).
The
issue to be decided in a certification motion is whether the
case should be "conducted by and on behalf of the
individual named parties only" or as a class.
Wal-Mart, 564 U.S. at 348. The purpose is
"‘to select the metho[d] best suited to
adjudication of the controversy fairly and
efficiently.'" Alcantar, 800 F.3d at 1053
(quoting Amgen, 133 S.Ct. at 1191, alteration in
original). Under Rule 23(a)(2), what matters "is not the
raising of common ‘questions' but rather ‘the
capacity of a classwide proceeding to generate common
answers.'" Wal-Mart, 564 U.S. at
350 (emphasis in original). And in the Rule 23(b)(3) context,
which the parties focus on here, plaintiffs must also show
that the proposed class is "‘sufficiently cohesive
to warrant adjudication by representation'" because
common issues predominate over questions affecting only
individual class members. Amgen, 133 S.Ct. at
1196-97 (quoting Amchem Products, Inc. v. Windsor,
521 U.S. 591, 623 (1997)). Each element of a claim need not
be susceptible to classwide proof; what Rule 23(b)(3)
requires is that common issues
"‘predominate over any questions
affecting only individual [class] members.'"
Id. at 1196 (emphasis in original). Class treatment
is appropriate when the proposed class "will prevail or
fail in unison." Id. at 1191.
II.
Class Certification and Ostensible Agency
In the
summary judgment order, the Court found that McDonald's
is not directly liable as a joint employer with the Smiths
but that fact disputes precluded summary judgment on the
issue of whether McDonald's might be liable because the
Smiths were its ostensible agents. Dkt. No. 289 at 14-15.
Ostensible agency exists where (1) the person dealing with
the agent does so with reasonable belief in the agent's
authority; (2) that belief is "generated by some act or
neglect of the principal sought to be charged, " and (3)
the relying party is not negligent. Kaplan v. Coldwell
Banker Residential Affiliates, Inc., 59 Cal.App.4th 741,
747 (1997).
In
response to the Court's call for supplemental briefing,
McDonald's made the categorical objection that
"allegations of ostensible agency are incapable of being
resolved on a classwide basis." Dkt. No. 290-1 at 1. The
essence of the objection is that, separate and apart from the
Rule 23 analysis of the substantive claims, ostensible agency
necessarily forestalls class adjudication because it involves
individualized questions of personal belief and reasonable
reliance on an agency relationship. Id. at 2. In
effect, it echoes Amgen, without actually citing it,
to argue that "the asserted problem" of ostensible
agency inherently "exhibits some fatal dissimilarity
among class members that would make use of the class-action
device inefficient or unfair." Amgen, 133 S.Ct.
at 1197 (internal citation omitted).
McDonald's
effort to stake out a general bar on certification in cases
involving ostensible agency is not well taken. Nothing in
ostensible agency marks it as forbidden territory under Rule
23. To the contrary, courts have permitted classes in a
variety of cases involving ostensible agency issues.
See, e.g., The Siding & Insulation Co.
v. Combined Ins. Grp., Ltd., Inc., No. 1:11CV1062, 2014
WL 1577465 (N.D. Ohio Apr. 17, 2014) (class action with
ostensible agency issue under the Telephone Consumer
Protection Act); Guardian Angel Credit Union v.
MetaBank, No. 08-cv-261-PB, 2010 WL 1794713, at *10
(D.N.H. May 5, 2010) (certifying class with ostensible agency
issues in state law fraud and contract case). The class
certification analysis for a case involving ostensible agency
is not innately different from that for every other proposed
class. In each case, the Court looks to the facts in the
record and weighs "the balance between individual and
common issues" and "tests whether proposed classes
are sufficiently cohesive to warrant adjudication by
representation." Wang v. Chinese Daily News,
Inc., 737 F.3d 538, 545-46 (9th Cir. 2013). Ostensible
agency does not demand unique or alternative treatment, and
certainly does not stand entirely outside Rule 23 as
impossible to adjudicate on a classwide basis.
McDonald's
case citations do not point to a different conclusion. It
relies on Guardian Angel Credit Union v. MetaBank,
No. 08-cv-261-PB, 2009 WL 2489325 (D.N.H. Aug. 12, 2009), but
appears to have overlooked the fact that the court granted
certification in a subsequent order on plaintiffs'
renewed motion after they showed that the principal likely
acted in substantially similar ways with respect to the
class. See Guardian Angel, 2010 WL 1794713, at *10
(granting class certification where defendant "has
offered nothing beyond conclusory assertions to suggest that
the evidence that bears on Guardian Angel's apparent
authority claim will differ substantially from plaintiff to
plaintiff"). In the other cases McDonald's cites,
courts denied certification in the ostensible agency context
not because class adjudication was inherently impractical or
unfair but because the record did not support it.
See, e.g., Cannon v. GunnAllen Fin.,
Inc., No. 3:06-0804, 2008 WL 4279858, at *10 (M.D. Tenn.
Sept. 15, 2008) (the "set of facts" did not warrant
class certification); Schmidt v. Bassett Furniture
Indus., No. 08-C-1035, 2011 WL 67255, at *5 (E.D. Wis.
Jan. 10, 2011) (certification denied because record showed
varied facts not susceptible to common proof).
Since
there is no a priori bar to class certification in
cases involving ostensible agency, the question is whether
the particular facts in this case allow for classwide
adjudication against McDonald's. They do. Plaintiffs have
tendered substantial and largely undisputed evidence that the
putative class was exposed to conduct in common that would
make proof of ostensible agency practical and fair on a class
basis. For example, plaintiffs have submitted declarations
showing that they were required to wear McDonald's
uniforms, packaged food in McDonald's boxes, received
paystubs, orientation materials, shift schedules and time
punch reports all marked with McDonald's name and logo,
and in most cases applied for a job through a McDonald's
website. See Dkt. No. 289 at 15; see also
Dkt. No. 294 at 4-5; Dkt. No. 184 (Sandoval Decl.) ¶ 2,
Dkt. No. 185 (Hedgepeth Decl.) ¶ 2. The fact that each
employee spent every work day in a restaurant heavily branded
with McDonald's trademarks and name is also informative.
These facts are shared in common across the proposed class
and make classwide adjudication of ostensible agency against
McDonald's a suitable and appropriate procedure.
That
the ostensible agency inquiry will implicate issues of
"reasonable belief" or reliance does not bar
certification. In Kaplan, the California court of
appeals held that whether or not ostensible agency exists
"may be implied from circumstances." 59 Cal.App.4th
at 748. As shown here, plaintiffs have already identified a
common course of conduct on the part of McDonald's which
makes possible the implication that class members reasonably
believed that the Smiths were McDonald's ostensible
agents. On top of that, as the Court found in the summary
judgment order, the named plaintiffs have submitted
declarations stating that they in fact held the personal
belief that McDonald's was their employer. See
Dkt. No. 289 at 15. Significantly, on the other side of the
ledger, McDonald's has submitted no evidence at all
indicating that any named plaintiff or putative class member
did not believe that McDonald's was their employer or
that they were unjustified or unreasonable in relying on that
belief.
On this
record, the Court finds that plaintiffs have done enough to
show that the ostensible agency issue can be litigated on a
classwide basis. Whether plaintiffs will ultimately prevail
or fail in their proof of agency is for the trier of fact to
decide and not for the Court to resolve in determining
certification. It may well be that the proposed class has the
"fatal similarity" of a failure of proof on
ostensible agency. What is important for present purposes is
that the mere fact that the ostensible agency inquiry will
need to be made and resolved to determine McDonald's
liability in this case does not by itself stand as a bar to
class certification.
III.
Rule ...