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Ochoa v. McDonald's Corp.

United States District Court, N.D. California

July 7, 2016

STEPHANIE OCHOA, et al., Plaintiffs,
MCDONALD'S CORP., et al.. Defendants.



         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.


         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.


         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 ...

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