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Bowerman v. Field Asset Services, Inc.

United States District Court, N.D. California

March 17, 2017

FRED BOWERMAN, et al., Plaintiffs,
v.
FIELD ASSET SERVICES, INC., et al., Defendants.

          ORDER DENYING DEFENDANT'S MOTION TO DECERTIFY THE CLASS; GRANTING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT; GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT AS TO MAGDALENO AND DENYING AS TO COHICK AND ACKEL RE: DKT. NOS. 152, 154, 155

          William H. Orrick United States District Judge.

         INTRODUCTION

         This is a classwide misclassification case involving vendors who perform property preservation services in California for Field Asset Services, Inc. I previously granted plaintiffs' renewed motion for class certification after they “limit[ed] the class to a group of vendors over which FAS has a uniform right of control.” Certification Order at 2 (Dkt. No. 85). FAS now moves to decertify the class, and for summary judgment as to one of the named plaintiffs and two absent class members. Plaintiffs move for partial summary judgment as to their status as employees under the law, and their resulting entitlement to expenses and overtime pay.

         While FAS again highlights manageability concerns that complicate class treatment, as it has throughout this litigation, those concerns are not substantial enough to justify decertifying the class. The class meets the requirements of Rule 23 and discovery has not revealed otherwise. The overwhelming weight of the evidence supports a finding that FAS retained and, more often than not, actually exercised a right to control the manner and means of the vendors' work. While some of the secondary factors for evaluating proper classification fall in FAS's favor, they cannot overcome the powerful evidence of control that establishes that the vendors are employees as a matter of law. A reasonable jury could not return a verdict for FAS on that issue. Accordingly, plaintiffs' motion for partial summary judgment is GRANTED as to FAS's affirmative defense that the vendors are independent contractors and as to its liability for failing to pay overtime and business expenses. FAS's motion for summary judgment is GRANTED as to purported class member Julia Magdaleno, but DENIED as to Matthew Cohick and Eric Ackel.

         BACKGROUND

         I. FACTUAL BACKGROUND[1]

         A. FAS's Business Model

         FAS is a property preservation, maintenance, and repair services company for foreclosed and real-estate-owned properties.[2] Hunter Decl. ¶¶ 2, 8 (Cubre Decl. ¶ 46, Ex. 45, Dkt. No. 189-6, 50-2). It maintains a network of “vendors”[3] to perform work at the properties for the clients. Hunter Decl. ¶ 5; Hunter Dep. at 354:5-10 (FAS's “Person Most Knowledgeable”)(Duckworth Decl. Ex. 2, Dkt. No. 155-3). Vendors may range in size from sole proprietors to large corporations. Cubre Decl. ¶ 4 (Dkt. No. 156).

         FAS owns the contracts with its property-owner clients and serves as the intermediary between clients and vendors-forbidding clients from contacting Vendors and hiring them directly. Hunter Decl. ¶ 6; Hunter Dep. at 66:3-5 (“Generally the point of contact for the vendor would be FAS, as FAS is facilitating the vendor relationship on behalf of the client.”); Pl.'s Mot. for Partial Summary J. at 3 (“MPSJ”)(Dkt. No. 155). A “company”[4] applies to become a vendor by submitting a complete Vendor Qualification Packet (“VQP”), which sets out the terms of the relationship between the parties.[5] Hunter Decl. ¶¶ 8-10; 2009 VQP with attachments (Duckworth Decl. ¶ 20, Ex. 17, Dkt. No. 155-18); 2009-2013 VQPs (Duckworth Decl.¶ 38, Exs. 34-38, Dkt. Nos. 155-35-155-39); 2013 VQP (Duckworth Decl. ¶ 9, Ex. 6, Dkt. No. 155-7).[6] In addition to the main agreement, the VQP includes a Release Authorization; a Vendor Checklist, on which vendors indicate which type of services they offer[7]; Insurance Requirements sheet; Errors and Omissions Insurance Acknowledgement; Vendor Packet Checklist; Vendor Checklist for Photos Needed; Lock Change/Securing Service Requirements and Cost Schedule; Plywood Boarding Panel Detail; Request for Taxpayer Identification Number; a Letter detailing the importance of quality control[8]; Approved Vendor Quality Policy; and Personal Property Policy and Acknowledgment. 2009 VQP (Dkt. No. 155-18); 2013 VQP (Dkt. No. 155-7).

         The Vendor Qualification Packets contain instructions for the standard services performed by vendors, [9] including re-keys, board-ups, debris removal, hazardous material removal, yard services, janitorial/maid services, roof tarps, pool service, snow removal, mold/water damage, and winterization/de-winterization. Duckworth Decl.¶ ¶ 9, 38, Exs. 6, 34-38. The VQPs also dictate insurance requirements, photo documentation specifications, pricing and invoicing procedures, timelines for completing services, and penalties for failing to comply with FAS's terms. Id. By signing, vendors attest that they will carry General Liability and Errors and Omissions (E & O) Insurance, and will list FAS as an additional insured. E.g., 2013 VQP (Dkt. No. 155-7 at 5); 2009 VQPs (Dkt. Nos. 155-35 at 5; 155-36 at 5; 155-37 at 5); see also Insurance Requirements attached to 2009 VQP (setting specific coverage requirements)(Dkt. No. 155-18 at 16-17). The 2011 version expands these requirements, “FAS requires and you agree that you will carry general liability, errors & omissions, workers compensation, and auto insurance.” 2011 VQP (Dkt. No. 155-38 at 6); see also 2013 VQP (Dkt. No. 155-7 at 5). It offers a Master E & O policy to all approved vendors. Hunter Dep. at 43:22-44:5. FAS instructs that “[v]endors are the eyes and ears at a property; therefore it is necessary that vendors report any damages, hazardous, or unsafe conditions at a property… . Failure to do so will result in the vendor's liability to correct the issues at no cost to FAS.” 2013 VQP (Dkt. No. 155-39 at 5). Through the VQPs, FAS also retains the “Right to Set-Off” and vendors must agree to indemnify FAS. 2009-2013 VQPs (Dkt. Nos. 155-35 at 10; 155-36 at 10; 155-37 at 10; 155-39 at 5-6).

         Later versions of the VQP explicitly designate vendors as “independent contractors, ” and include additional provisions. E.g., 2011 VQP (Dkt. No. 155-38 at 7). A Lien Provision precludes vendors from filing liens on “FAS maintained propert[ies].” Id. (Dkt. No. 155-38 at 6). A Termination Provision states, “[t]he relationship between you or your company and FAS may be terminated by either you or FAS at any time and for any reason, with or without notice.” Id. (Dkt. No. 155-38 at 8). The Master Services Agreement, which FAS began using in 2014, provides an agreement term of one year, which automatically renews for one year periods, “unless either party provides thirty (30) days prior written notice of its intent to terminate the Agreement.” 2014 Master Services Agreement § 11.1 (Duckworth Decl. ¶ 38.f, Ex. 39, Dkt. No. 155-40 at 8). It also includes a mutual right to terminate the agreement, with a notice provision. Id. § 11.2.

         After FAS receives a complete VQP and the terms are finalized, it performs a background check[10] and insurance verification. Hunter Dep. at 84:10-13. Plaintiffs cite to vendor testimony to support their claim that FAS requires them to obtain a business license and an Employer Identification Number or EIN. E.g., Bowerman Dep. at 13:7-11; 40:24-41:5 (Duckworth Decl. Ex. 3, Dkt. No. 155-4); Lopez Decl. ¶ 4 (Duckworth Decl. Ex. 68, Dkt. No. 155-69); Hart Dep. at 65:21-22 (Dkt. No. 196-31). FAS disputes that it required any vendors to obtain an EIN prior to contracting with it, and points to the fact that the VQPs do not request it. Id. at 13 n. 32; see Hunter Dep. at 30:10-14. But see 2013 VQP (“Please ensure the name on Line 1 (Taxpayer) and the corresponding EIN matches exactly your information on file with the IRS.”)(Dkt. No. 155-7 at 6). Once a vendor is approved, FAS issues a username and password for vendors to interface with its proprietary software, FAStrack. Hunter Dep. at 84: 17-19; see also 2013 VQP (Dkt. No. 155-7 at 3). It requires Vendors to be trained on the software (FAStrack, My FAStrack, and FAStrack Mobile) before they can accept work orders and begin working. Hunter Dep. at 87:2-15; see also 2013 VQP (“Completion of training is required prior to receiving work orders.”)(emphasis in original)(Dkt. No. 155-7 at 3); FAStrack Mobile Training Guide (Duckworth Decl. ¶ 6, Ex. 13, Dkt. No. 155-14); 1/17/12 Prentiss Email and Authenticating Dep. (“Our vendors are NOT utilizing the mandatory FAStrack Mobile program.”)(emphasis in original)(Miller Decl. ¶ 5, Ex. 2, Dkt. No. 196-3) . FAS creates a “Vendor Profile, ” which includes vendor contact information, zip codes for service areas, list of services, agreed upon price sheet, and a signed VQP. Hunter Dep. at 99:6-22; 2013 VQP (Dkt. No. 155-7 at 3).

         Vendors purchase their own tools and equipment[11] and choose which services they will provide. Hunter Dep. at 27:25-28:1. They are not required to have prior experience and frequently did not have any. E.g., McLain Dep. at 149:11-16 (Dkt. No. 196-25); Pyzer Dep. at 30:3-13 (Dkt. No. 196-26); Bowerman Dep. at 50:1-3 (Dkt. No. 196-27); Montes Dep. at 22:9-21 (Dkt. No. 196-28). FAS then assigns work to vendors through work orders on FAStrack which vendors must accept or reject within 24 hours. Hunter Dep. at 126:20-22; 174:15-20; see also 2011 (Dkt. No. 155-38 at 2). FAS reserves the right to reassign work orders if vendors fail to respond within 24 hours. E.g., 2013 VQP (“We expect acceptance or decline responses within a few hours, but will reassign a work order to another vendor, with or without notification, if a response has not been received within 24 hours.”). Work orders include the name of the vendor, the amount the vendor will be paid, the address of the property, the FAS contacts for the property, and a set of “work instructions, ” which include detailed tasks to complete per client specifications. Hunter Dep. at 37:10-13; see e.g., FAS Work Order (Duckworth Decl. ¶ 10, Ex. 7, Dkt. No. 155- 8). Once a vendor accepts a work order, the work must be completed within three days. Hunter Dep. at 175:22-24; see also VQPs “Vendor Service Schedule” (Dkt. Nos. 155-35 at 13; 155-36 at 13; 155-37 at 13). Vendors performing certain services are required to post a notice, provided by FAS through a work order, that the property is maintained by FAS. Id. at 115:9-23; see also Vinson Dep. at 40:11-18 (Dkt. No. 196-21).

         Once the work is completed, the invoice and required photo documentation must be uploaded to the FAS system within 24 hours. FAS Work Order (Dkt. No. 155-8 at 3); see also 2013 VQP (Dkt. No. 155-39 at 3). “Failure to do so will result in loss of payment[, ] but if a vendor is providing more than one service, “[l]ate invoices will result in a 10% penalty assessed to the full invoice amount.” 2013 VQP (Dkt. No. 155-39 at 3). Payment is approved only after FAS has reviewed all before, during, and after photos. FAS Work Order (Dkt. No. 155-8 at 3). Work orders inform vendors that if work is “not completed in accordance with the instructions provided and conditions set forth in the work order, no fee will be paid[.]” FAS Work Order (Duckworth Decl. ¶ 10, Ex. 7, Dkt. No. 155-8 at 2).

         Vendors set a cap on the number of work orders they can handle, but FAS can lower it. Hunter Dep. at 164-165; see also Pilisko Email and Authenticating Dep. (Miller Decl. ¶ 4, Ex. 1, Dkt. No. 196-2)). Plaintiffs contend that vendors “[i]n theory” can decline a work order, but FAS will penalize them by, “among other things, providing less work in the future.”[12] MPSJ at 6; see, e.g., FAS Email Exchange and Authenticating Dep. (“[H]e [the vendor] is continuing to decline many work orders on or past day 3 and not communicating with FAS on a daily basis. … he has been placed on hold and been removed from preferred vendor status.”)(Miller Decl. ¶ 10, Ex. 7, Dkt. No. 196-8 at 2); Bowerman Dep. at 39:9-22; 152:20-153:10 (Duckworth Decl. ¶ 6, Ex. 3, Dkt. No. 155-4); Purkett Vendor Profile Notes (Duckworth Decl. ¶ 37, Ex. 33, Dkt. No. 155-34 at 3)(“The declining of jobs that are listed in your coverage area can result in the lowering of your status as a top tier vendor.”); Kleisner Vendor Profile Notes (Duckworth Decl. ¶ 44, Ex. 45, Dkt. No. 155-46 at 4)(“When I [FAS vendor administrator] send out emails like the ones I did today [warning against ‘cherry-picking' work orders] to CA vendors, usually they'll respond that they can accept the order, once they realize the ramifications they started by declining.”). FAS asserts that vendors are permitted to select amongst the work orders. Hunter Dep. at 168:14-25. FAS's PMK maintains that FAS does not track how often vendors decline work, “however, it is captured as one of the factors on the scorecard.” Id. at 187:13-21.

         FAS uses “vendor blasts … to communicate information that could apply to a large group of vendors.” Hunter Dep. at 295:5-7; see also Valentino Dep. at 71:16-23 (Miller Decl., Ex. 10, Dkt. No. 196-11). Examples of “vendor blasts” include a pricing guideline for submitting invoices for lawn service, Valentine Email (Miller Decl. ¶ 13, Ex. 10, Dkt. No. 196-11), and a Letter regarding changes to Vendor Scorecards. Duckworth Decl., Ex. 16 (Dkt. No. 155-17). The “metrics” captured in the scorecards includes: on time completion percentage, inspections scores, broker signoff score, work order response time, vendor work order acceptance, QC approval percentage, and photo request percentage. Id. FAS's PMK frames the scorecards as “primarily a tool for the vendor to use and being able to manage their businesses and to see how certain areas they were doing.” Hunter Dep. at 225:16-18. But the vendor blast notifying vendors of changes to the scorecard system discloses that FAS is “increasing the number of metrics we will look at to assess your performance.” Ex. 16 (Dkt. No. 155-17). While FAS maintains that it stopped using the scorecard system sometime in 2013, Hunter Dep. at 226:8-10, plaintiffs point to evidence that the system was used as late as December 2016. Olivier Decl. ¶ 82, Ex. 70, Dkt. No. 191-71[placeholder]; Dkt. No. 190-4 [unredacted version filed under seal].

         FAS also supervises vendors' work through frequent updates, [13] photo documentation requirements, [14] and quality control site inspections. MPSJ at 8-11. Clients are not part of the quality process. Hunter Dep. at 238:3-4. FAS's “quality control program [] ensures all service work is performed according to specifications and done in a timely, competent manner.” See, e.g., 2009 VQP (Dkt. No. 155-35 at 12). The program includes “frequent random inspections” inspections, after which FAS's “QC department will contact [a vendor] immediately if [the vendor's] invoice is insufficient and will give 24 hours for a resolution.” Id.; 2013 VQP (Dkt. No.155-39 at 4). Vendors are required to correct “unacceptable or incomplete work” at no cost. Id. If vendors fail to respond to quality control representatives, FAS reserves the right to use another vendor to remedy the problem at the expense of the original vendor. Id.; see also Hunter Dep. at 195:4-11. This section of the VQP also dictates, “Your score and standing with FAS will, in no small part, depend on the reviews completed by our Field QC team.” Id.

         The Approved Vendor Quality Policy attached to the 2009 VQP provides,

Vendor Status Recommendations and Reporting: Through the findings and results of FieldQC Inspections, each Field QC Team member is responsible for providing recommendation(s) to Vendor Management pertaining to promotions, adjustments, or denial of Vendor use and/or Vendor status. Furthermore, Field QC Team members are charges with the task of recommending whether or not a non compliant offense is significant repetition or magnitude to be considered for stages of progressive discipline, as defined and outlined below.

Approved Vendor Quality Policy (Dkt. No. 155-18 at 28). The policy details the progressive discipline scale, which includes: stage one (10 percent or $100 penalty, verbal warning, and requirement to submit written description of in house quality control program), stage two (15 percent or $150 penalty, reduction in work order capacity, and written warning placed in vendor's permanent FAS vendor profile), stage three (25 percent or $250 penalty, loss of preferred vendor status, revocation of payment, reduction in work order capacity, immediate 30 day probationary period and mandatory field meeting with FAS representatives), stage four (50 percent or $500 penalty, immediate 90 day suspension of approved status, mandatory inspection of all work orders, chargeback for correction costs, reduction in work order capacity, and follow up conference at end of suspension), and stage five (immediate termination without recourse and no eligibility for rehire). Id. (Dkt. No. 155-18 at 29-30); e.g., Rangel (FAS Operations Supervisor) Recommendation to Proceed with Stage 3 Discipline for a particular vendor (Miller Decl. ¶ 11, Ex. 8, Dkt. No. 196-9); see generally Hunter Dep. at 211-238 (describing general quality control program).

         “In approximately 2010, ” FAS reduced the Five Stage program to Three Stages, “in order to be more effective in recommending action due to quality deficiencies.” Hunter Dep. at 218:21- 22; FAS Vendor Blast and Authenticated Dep. (Miller Decl. ¶ 7, Ex. 4, Dkt. No. 196-5). The new stages are no longer numbered, but labeled initial notification of non compliance, final notification of non compliance, and non compliance termination. Id. When an invoice is declined for quality control reasons, it is automatically captured in a vendor's “scorecard.” Id. at 211:3-8.

         Plaintiffs point to “mandatory training” provided by FAS-pertaining to FAS proprietary software and also to the specific tasks performed by vendors. 2013 VQP (“Completion of training is required prior to receiving work orders.”)(emphasis in original)(Dkt. No. 155-7 at 3); see also FASTrack Mobile Training (Duckworth Decl. Ex. 13, Dkt. No. 155-14); Winterization Training (Duckworth Decl. Ex. 14, Dkt. No. 155-15); Email Exchange Re: Mandatory Training Follow Up and Authenticating Dep. (Dkt. No. 196-34); Mezin Dep. at 91:1-22. FAS counters with vendor testimony that they were never offered any training. Opp'n to MSPJ at 9 n.18. However, FAS's own marketing material indicates that it provides “initial and ongoing training.” Our National Vendor Network (Duckworth Decl. ¶ 7, Ex. 4, Dkt. No. 155-5).[15] Its PMK states that “FAS offers certain informational sessions to the vendors which we call REO Training Wagons.” Hunter Dep. at 282:7-9 (Dkt. No. 198-4). These training wagons are offered “approximately a dozen [times] per year per region.” Id. at 282:12-13. Although FAS insists that these trainings were not mandatory, they are labeled as “MANDATORY.” Id. at 282:17-25; see Personal Invitation to the REO Training Wagon and Authenticating Dep. (Dkt. No. 196-35). It also hosts a vendor convention in Texas, but the parties dispute whether attendance was mandatory. Compare Mezin Dep. at 69:12-70:2, 92:8-18 (Dkt. No. 155-26), with Ackel Dep. at 78:24-80:5.

         B. Particular Class Members

         1. Julia Magdaleno (f.k.a. Bowerman)[16]

         In 2008, Julia Magdaleno married plaintiff Fred Bowerman, owner of “sole proprietorship” BB Home Services (“BBHS”), a company that contracted with FAS beginning in 2007. See BBHS 2012 W-9 (Perez Decl. ¶ 2, Ex. 2, Dkt. No. 152-2 at 7); Magdaleno Dep. at 12:23-25 (Dkt. No. 152-4 at 57). Prior to that, Magdaleno was an employee of BBHS. Magdaleno Responses to FAS RFA (Perez Decl. ¶ 6, Ex. 5 (Dkt. No. 152-2 at 17). After the marriage, Magdaleno ceased collecting paychecks from BBHS, and considered herself a “manager” but not an “owner” of BBHS. Magdaleno Dep. at 28:11-16. Subsequent testimony states that she considered herself an owner of BBHS when she married Bowerman. Id. at 174:13-16. She became a co-signor on BBHS's bank account, entered into contracts on BBHS's behalf, and received work orders from FAS with her name. Magdaleno Dep. at 186:1-9; 193:22-24.

         2. Matthew Cohick

         In 2003, Cohick started Monster Mowers as a sole proprietorship dedicated to a range of landscaping services, “from installation to maintenance.” Cohick Dep. at 21, 22:11-23:12 (Dkt. No. 152-4 at 98). Cohick worked for homeowners and operated the company with a single truck, a lawnmower, a weed whacker, a leaf blower, and a chainsaw. Cohick Dep. at 29:12-14; 78:13- 79:2. He started servicing properties for FAS in 2006, and soon grew into “a full-service vendor … from trash outs to initials to winterizations to landscape to other repairs… .” Id. at 23:6-12. He reportedly ran one advertisement during the time frame from 2003 to present, “but nothing to do with property preservation work.” Id. at 51:22-25. He later clarified that the advertisement had to do with landscaping services, targeted at homeowners. Id. at 52:1-14. He operated a home office and reportedly “bought office equipment for Field Asset Services.” Id. at 46:11-13. FAS required him to “have a cell phone, download their program, their software, cameras, cell phones, computers, fax and printer… .” Id. at 47:3-16.

         Between 2006 and 2014, Monster Mowers employed between 15 and 30 people, and sometimes used 15 to 30 subcontractors.[17] Id. at 60:14-61:3, 64:8-65:8. He testified that he had to secure workers to help him meet FAS's work orders. Id. at 70:20-21; 77:14-78:4. According to Cohick, “Field Assets trained [his] employees.” Id. at 70:15-16.

         In 2010, Monster Mowers incorporated and elected Cohick as a director. Articles of Incorporation (Perez Decl., Ex. 6, Dkt. No. 152-2 at 29). It received its California State contractor's license in 2011. Cohick initially declared that he “worked exclusively for FAS from 2006 until late 2012, ” but later stated he worked 99.9 percent of the time for FAS.[18] Cohick Decl. ¶ 2; Cohick Dep. at 31:9-31:23. He recalled a specific period between August 2012 and May 2013 in which he worked for Asset Management Specialists, another property preservation company. Id. at 33:10-15. Between 2006 and 2008, he worked for FAS seven days a week for 12 to 19 hours a day. Id. at 138:16-139:11 (Dkt. No. 188-4). A “[c]ouple of times a year or more” FAS inspectors would inspect the way work was done, how it was done, the quality of the work, and to make sure it was done to completion. Id. at 110:24-111:18. FAS terminated Cohick around May 2013. Monster Mowers Profile Notes (Perez Decl. ¶ 17, Ex. 21, Dkt. No. 152-4 at 1).

         3. Eric Ackel

         Ackel's company Kurb Appeal, Inc., began doing work for FAS around 2008 or 2009, and continued for about two to three years. Ackel Dep. at 44:13-15; 53:9-11 (Perez Decl. Ex. 29, Dkt. No. 152-4 at 169). Before that, Ackel operated several other corporations. Id. at 15:21-17:1. When Kurb Appeal entered the property preservation business, it only provided services for FAS. Id. at 26:9-18. Kurb Apeal had its own office space where it stored its equipment. Id. at 32:17- 35:1. It did not advertise, but may have had business cards. Id. at 35:2-12. Kurb Appeal hired twenty different people to help with property preservation work, but Ackel only met four of them in person. Id. at 37:25-38:12; 73:15-17. He would post an advertisement for work on craigslist and explain the work over the phone. Id. at 72:3-4. FAS did not tell Ackel to hire people, nor did they ask him if he had. Id. at 63:8-15.

         Ackel personally performed property preservation work on average 14 to 16 hours a day, seven days a week. Id. at 62:6:9; 64:21 (Dkt. No. 188-5). He recalls about 30 occasions when FAS came to properties unannounced to inspect the work. Id. at 66:12-16; 74:6-11. FAS representatives might spend anywhere from 20 minutes to three hours on a property. Id. at 67:1-3. FAS profile notes indicate that it ended its relationship with Kurb Appeal due to “lack of communication.” Id. at 84:24-85:2. Ackel reports that he decided not to do FAS work anymore “[b]ecause of the money.” Id. at 85:5-9.

         II. PROCEDURAL BACKGROUND

         Plaintiffs filed this class action complaint against FAS on January 7, 2013 (Dkt. No. 1), and filed an amended complaint on February 15, 2013. First Amended Compl. (“FAC”)(Dkt. No. 4). The first amended complaint brings causes of action for: (1) breach of contract; (2) breach of the covenant of good faith and fair dealing; (3) willful misclassification of independent contractor status, Cal. Labor Code §§ 226.8, 2753; (4) failure to pay overtime compensation, Cal. Labor Code §§ 510, 1194, 1198; (5) failure to pay wages due and owing, Cal. Labor Code § 200 et seq.; (6) failure to indemnify employees for business expenses, Cal. Labor Code § 2802; (7) violations of the Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code § 17200 et seq.; and (8) failure to comply with Labor Code provisions in violation of the Private Attorney General Act (“PAGA”), Cal. Labor Code § 2699 et seq. FAC ¶¶ 36-83.

         On September 17, 2014, I denied plaintiffs' motion for class certification, but left open the possibility “that a better defined, narrower class would be certifiable.” Order on Mot. for Class Certification (“Prior Order”)(Dkt. No. 61). Within 60 days, plaintiffs filed a renewed motion to certify a class under Federal Rule of Civil Procedure 23(b)(3), which proposed narrowing the class definition. Pls.' Renewed Mot. (Dkt. No. 65). On January 26, 2015, I supplied a summary order granting plaintiffs' renewed motion, Summary Order (Dkt. No. 78), and on March 24, 2015, I issued a reasoned decision “explain[ing] that the modifications plaintiffs made to the proposed class definition allow for common questions of law and fact to predominate over questions affecting only individual class members[.]” Order Granting Renewed Mot. for Class Certification at 1 (“Certification Order”)(Dkt. No. 85). The certified class is defined as:

All persons who at any time from January 7, 2009 up to and through the time of judgment (the “Class Period”) (1) were designated by FAS as independent contractors; (2) personally performed property preservation work in California pursuant to FAS work orders; and (3) while working for FAS during the Class Period, did not work for any other entity more than 30 percent of the time. The class excludes persons who primarily performed rehabilitation or remodel work for FAS.

Pl.'s Renewed Mot. at 1: 7-10.

         On May 25, 2015, [19] the class administrator mailed notice to 628 individuals at 729 addresses, based on a list of 680 vendors identified by FAS as having provided services in California during the class period.[20] Cubre Decl. ¶ 14; Olivier Decl. ¶ 4 (Dkt. No. 191-1). To aid in discovery, [21] I identified a group of “Discovery Vendors” as “(1) vendor declarants in this case; (2) vendor deponents in this case; and (3) an additional ten percent of vendors to whom the class notice was sent.” Further Order on Discovery Disputes at 1:24-25 (Dkt. No. 118). The parties agreed upon a list of 107[22] Discovery Vendors (Discovery Vendor Group or “DVG”). Mot. to Decertify at 6; Cubre Decl. ISO Mot. to Decertify ¶ 15; Cubre Decl. ISO Defs.' Opp'n to Pls.' MPSJ ¶ 2 (Dkt. No. 189-2). Plaintiffs assert that 47 have self-identified as class members, 40 have self-identified as non-class members, while the remaining 21 had either confidentially settled claims with FAS, or were unreachable. Opp'n at 4; Olivier Decl. ¶ 6.

         On June 2, 2016, class administrator mailed a copy of the “Class Member Questionnaire” to the 107 discovery vendors; verified responses were received from just thirteen vendors.[23] Mot. to Decertify at 6; Cubre Decl. ¶ 2; Olivier Decl. ¶ 9. According to FAS, only 27 of the 65 noticed depositions of Discovery Vendors took place.[24] Mot. to Decertify at 6. Plaintiffs contend that 45 individuals in the DVG were deposed, and 39 submitted declarations (with some overlap between deponents and declarants). Olivier Decl. ¶ 8. Eighteen Discovery Vendors produced responsive documents, but none of them provided information on the number of hours or percentage of time they contracted with FAS. Mot. to Decertify at 6. Fact discovery closed on December 5, 2016.[25]Id. at 8.

         On January 4, 2017, FAS moved for class decertification, Mot. to Decertify (Dkt. No. 154), and summary judgment as to potential class members Julia Magdaleno (f/k/a Bowerman), Matthew Cohick, and Eric Ackel, Mot. for Summary J. (“FAS MSJ”)(Dkt. No. 152[redacted], Dkt. No. 151-4[under seal]). The same day, plaintiffs moved for summary judgment on (1) “FAS's affirmative defense that Plaintiffs and Class Members are independent contractors”; (2) “FAS's liability under California law for failing to pay the Class overtime”; and (3) “FAS's liability under California law for failing to reimburse the Class for reasonable and necessary business expenses.” Pls.' Mot. for Partial Summary J. (“Pls.' MPSJ”)(Dkt. No. 155).

         I heard argument from the parties on February 22, 2017, during which I asked the parties to submit a joint table of identified class members, listing FAS's objections and plaintiffs' response. Dkt. No. 199. The parties submitted that table, listing 126 class members, on March 2, 2017. Dkt. No. 201.

         LEGAL STANDARD

         I. FEDERAL RULE OF CIVIL PROCEDURE 23

         Federal Rule of Civil Procedure 23 governs class actions. “Before certifying a class, the trial court must conduct a rigorous analysis to determine whether the party seeking certification has met the prerequisites of Rule 23.” Mazza v. Am. Honda Motor Co., Inc., 666 F.3d 581, 588 (9th Cir. 2012) (internal quotation marks omitted). The burden is on the party seeking certification to show, by a preponderance of the evidence, that the prerequisites have been met. See Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541, 2551 (2011); Conn. Ret. Plans & Trust Funds v. Amgen Inc., 660 F.3d 1170, 1175 (9th Cir. 2011).

         Certification under Rule 23 is a two-step process. The party seeking certification must first satisfy the four threshold requirements of Rule 23(a), numerosity, commonality, typicality, and adequacy. Specifically, Rule 23(a) requires a showing that:

(1) the class is so numerous that joinder of all members is impracticable;
(2) there are questions of law or fact common to the class;
(3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and
(4) the representative parties will fairly and adequately protect the interests of the class.

Fed. R. Civ. P. 23(a).

         The party seeking certification must then establish that one of the three grounds for certification applies. See Fed. R. Civ. P. 23(b). Plaintiffs invoke Rule 23(b)(3), which provides that a class action may be maintained where the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy. The matters pertinent to these findings include:

(A) the class members' interests in individually controlling the prosecution or defense of separate actions;
(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.

Fed. R. Civ. P. 23(b)(3).

         An order certifying a class “may be altered or amended before final judgment.” Fed.R.Civ.P. 23(c)(1). “In considering the appropriateness of decertification, the standard of review is the same as a motion for class certification: whether the Rule 23 requirements are met.” Ridgeway v. Wal-Mart Stores, Inc., 2016 WL 4529430, at *12 (N.D. Cal. Aug. 30, 2016). The burden of proof remains on the plaintiff. Marlo v. UPS, 639 F.3d 942, 947 (9th Cir. 2011). Parties should be able to rely on a certification order and “in the normal course of events it will not be altered except for good cause, ” such as “discovery of new facts or changes in the parties or in the substantive or procedural law.” O'Connor v. Boeing N. Am., Inc., 197 F.R.D. 404, 409-10 (C.D. Cal. 2000).

         II. SUMMARY JUDGMENT

         Summary judgment on a claim or defense is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). In order to prevail, a party moving for summary judgment must show the absence of a genuine issue of material fact with respect to an essential element of the non-moving party's claim, or to a defense on which the non-moving party will bear the burden of persuasion at trial. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the movant has made this showing, the burden then shifts to the party opposing summary judgment to identify “specific facts showing there is a genuine issue for trial.” Id. The party opposing summary judgment must then present affirmative evidence from which a jury could return a verdict in that party's favor. Anderson v. Liberty Lobby, 477 U.S. 242, 257 (1986).

         On summary judgment, the Court draws all reasonable factual inferences in favor of the non-movant. Id. at 255. In deciding a motion for summary judgment, “[c]redibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge.” Id. However, conclusory and speculative testimony does not raise genuine issues of fact and is insufficient to defeat summary judgment. See Thornhill Publ'g Co., Inc. v. GTE Corp., 594 F.2d 730, 738 (9th Cir. 1979).

         III. CALIFORNIA LAW GOVERNING CLASSIFICATION OF WORKERS AS EMPLOYEES OR INDEPENDENT CONTRACTORS

         “Employers have varying responsibilities with respect to persons performing services on their behalf. These responsibilities depend, in part, on whether those persons are classified as employees or independent contractors under the Labor Code.” Cristler v. Express Messenger Sys., Inc., 171 Cal.App.4th 72, 76 (2009). “Whether a worker is classified as an employee or an independent contractor has great consequences. California law gives many benefits and protections to employees; independent contractors get virtually none.” Cotter v. Lyft, Inc., No. 13-cv-04065-VC, 2015 WL 1062407, at *5 (N.D. Cal. Mar. 11, 2015). Of particular relevance here, employees are generally entitled to overtime compensation, Cal. Labor Code §§ 510, 1194, and indemnification for business expenses, Cal. Labor Code § 2802. Independent contractors are not.

         “[U]nder California law, once a plaintiff comes forward with evidence that he provided services for an employer, the employee has established a prima facie case that the relationship was one of employer/employee.” Narayan v. EGL, Inc., 616 F.3d 895, 900 (9th Cir. 2010). “[T]he rule is that the fact that one is performing work [ ] for another is prima facie evidence of employment and such person is presumed to be a servant in the absence of evidence to the contrary.” Id. (internal quotation marks and modifications omitted). “Once the employee establishes a prima facie case, the burden shifts to the employer, which may prove, if it can, that the presumed employee was an independent contractor.” Id.

         Because the California Labor Code does not define “employee, ” courts generally apply the common law test to distinguish between employees and independent contractors. See Estrada v. FedEx Ground Package Sys., Inc., 154 Cal.App.4th 1, 10 (2007). Under this test, the defendant's right to control the manner and means by which the plaintiff's work is accomplished, rather than the amount of control actually exercised, is the principal factor in assessing whether a plaintiff is an employee or an independent contractor. See Ayala v. Antelope Valley Newspapers, Inc., 59 Cal.4th 522, 533-34 (2014)(“What matters under the common law is not how much control a hirer exercises, but how much control the hirer retains the right to exercise.”)(emphasis in original). Courts have consistently emphasized the significance of this factor. See, e.g., S.G. Borello & Sons, Inc. v. Dep't of Indus. Relations, 48 Cal.3d 341, 350 (1989)(“The 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.”)(internal quotation marks and modifications omitted); Estrada, 154 Cal.App.4th at 10 (“The essence of the test is the ‘control of details' - that is, whether the principal has the right to control the manner and means by which the worker accomplishes the work.”); see also Ruiz v. Affinity Logistics Corp., 754 F.3d 1093, 1100 (9th Cir. 2014) (“[T]he right to control work details is the most important or most significant consideration.”) (emphasis omitted).

         The defendant's right to control need not extend to every possible aspect of the plaintiff's work for this factor to indicate the existence of an employee/employer relationship. The relevant question is whether the defendant retains “all necessary control” over the plaintiff's performance of his job duties. Borello, 48 Cal.3d at 357. In other words, “the fact that a certain amount of freedom is allowed or is inherent in the nature of the work involved does not change the character of the relationship, particularly where the employer has general supervision and control.” Air Couriers Int'l v. Employment Dev. Dep't, 150 Cal.App.4th 923, 934 (2007) (internal quotation marks omitted); see also Toyota Motor Sales U.S.A., Inc. v. Superior Court, 220 Cal.App.3d 864, 875 (1990). The right to terminate at will, without cause, provides “strong evidence” of a right to control and an employment relationship. Borello, 48 Cal.3d at 350 (internal quotation marks omitted); see also Ayala, 59 Cal.4th at 533 (“Whether a right of control exists may be measured by asking whether or not, if instructions were given, they would have to be obeyed on pain of at will discharge for disobedience.”) (internal quotation marks and modifications omitted).

         Because the right to control factor “is often of little use in evaluating the infinite variety of service arrangements, ” Borello, 48 Cal.3d at 350, courts applying the common law test may also consider the following “secondary” factors:

(1) whether the worker is engaged in a distinct occupation or business, (2) whether, considering the kind of occupation and locality, the work is usually done under the principal's direction or by a specialist without supervision, (3) the skill required, (4) whether the principal or worker supplies the instrumentalities, tools, and place of work, (5) the length of time for which the services are to be performed, (6) the method of payment, whether by time or by job, (7) whether the work is part of the principal's regular business, and (8) whether the parties believe they are creating an employer-employee relationship.

Estrada, 154 Cal.App.4th at 10. “Regarding the final secondary factor, the California Court of Appeal has noted that the label that parties place on their employment relationship ‘is not dispositive and will be ignored if their actual conduct establishes a different relationship.'” Ruiz, 754 F.3d at 1101 (quoting Estrada, 154 Cal.App.4th at 10-11).

         The Borello court listed additional factors developed by other jurisdictions considering the issue “in light of the remedial purposes of the legislation”:

(1) the alleged employee's opportunity for profit or loss depending on his managerial skill; (2) the alleged employee's investment in equipment or materials required for his task, or his employment of helpers; (3) whether the service rendered requires a special skill; (4) the degree of permanence of the working relationship; and (5) whether the service rendered is an integral part of the alleged employer's business.

Borello, 48 Cal.3d at 355.

         The secondary factors “cannot be applied mechanically as separate tests; they are intertwined and their weight depends often on particular combinations.” Germann v. Workers' Comp. Appeals Bd., 123 Cal.App.3d 776, 783 (1981). “[T]o determine whether a worker is an employee or independent contractor, a court should evaluate each service arrangement on its facts, and the dispositive ...


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