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Karl v. Zimmer Biomet Holdings, Inc.

United States District Court, N.D. California

July 2, 2019

JAMES KARL, individually and on behalf of all others similarly situated, Plaintiff,
v.
ZIMMER BIOMET HOLDINGS, INC., a Delaware corporation; ZIMMER US, INC., a Delaware corporation; BIOMET U.S. RECONSTRUCTION, LLC, an Indiana limited liability company; BIOMET BIOLOGICS, LLC, an Indiana limited liability company; and BIOMET, INC., an Indiana corporation, Defendants.

          ORDER RE MOTION TO CONDITIONALLY CERTIFY COLLECTIVE ACTION AND MOTION TO FILE UNDER SEAL

          William Alsup, United States District Judge.

         INTRODUCTION

         In this putative employment class action, plaintiff moves for conditional certification of an FLSA collective action and to file under seal. To the extent stated below, the motions are Granted.

         STATEMENT

         In August 2015, plaintiff James Karl signed a sales associate agreement with defendants Zimmer US, Inc. (“Zimmer US”); Biomet U.S. Reconstruction, LLC (“Biomet Reconstruction”); and Biomet Biologicals, LLC (“Biomet Biologics”). He thereafter began working for those three entities as a sales representative in California. Pursuant to the agreement, plaintiff sold medical devices in the surgical field - particularly, orthopedics - such as replacement hips and surgical tools. The agreement also classified plaintiff as an independent contractor. Sales representatives such as plaintiff were primarily paid on commission (Dkt. No. 53-1, Exhs. 1 at 164:15-165:22; 13 ¶ 1; 21 ¶ 1).

         Defendant Zimmer Biomet Holdings, Inc. (“Zimmer Biomet Holdings”) was formed in June 2015 as a result of a merger between two previous competitors, Zimmer Holdings, Inc. and Biomet, Inc. Zimmer Biomet Holdings is a holding company and the parent corporation of various subsidiaries, including the three subsidiary entities plaintiff contracted with. It did not have any employees or directly contract with independent contractor sales representatives who sell orthopedic products (Dkt. Nos. 53-1, Exh. 1 at 110:19-111:7; 57-14 ¶ 3).

         The subsidiaries of Zimmer Biomet Holdings were responsible for selling and distributing various product lines (with each subsidiary selling different products). These products included orthopedic reconstructive products, sports medicine, biologics, extremities, and trauma products, office-based technologies, spine, craniomaxillofacial and thoracic products, dental implants, and related surgical products. The primary customers were surgeons, other specialists, hospitals, and other health care dealers (Dkt. No. 53-1, Exh. 1 at 22:4-21, 110:17-24).

         As to the three subsidiary entities plaintiff directly contracted with, Zimmer U.S. engaged Biomet Reconstruction and Biomet Biologics in designing, manufacturing, and marketing medical devices and biologics related to knees, hips, sports medicine, foot and ankle, extremities, and trauma. These three entities (and Zimmer Biomet Holdings' subsidiaries generally) used two different sales models relevant to this action: (1) direct, and (2) distributor (Dkt. No. 57-14 ¶¶ 4, 6, 14).

         Under the direct territory sales model, the Zimmer Biomet Holdings subsidiaries contracted directly with independent contractor sales representatives who sold primarily their products. Under the distributor sales model, the subsidiary entities contracted with a third-party distributor - who owned and operated its independent business - who was in turn responsible for all sales within a geographic territory, including hiring sales representatives (id. ¶¶ 6, 14).

         Plaintiff filed the instant action in July 2018, alleging that defendants misclassified him and others similarly situated as independent contractors. Relevant to this motion, plaintiff seeks to represent other sales representatives who were classified as independent contractors and allegedly subsequently denied overtime pay under the FLSA. Plaintiff now moves under Section 216(b) of the FLSA to conditionally certify a collective action and to disseminate notice. Plaintiff's proposed FLSA class is defined as follows (Dkt. No. 53 at 3):

Any person who signed a contract, from three years prior to the date on which notice is issued to the date on which notice is issued, with Zimmer Biomet, or any of its subsidiaries, that engages the person as an independent contractor for the solicitation of sales of Zimmer Biomet products and/or services in the market segments or product lines: Orthopedics, S.E.T., Biologics, Reconstructive, Spine, CMF, Thoracic, Knee, Hip, Foot & Ankle, Sports Medicine, Extremities, Surgical, Microfixation, Bone Healing, Cement, Trauma.

         Defendants oppose. They contend that (1) those individuals who have not contracted with the same entities as plaintiff (i.e., Zimmer US, Biomet Reconstruction, and Biomet Biologicals) should be excluded from the collective; (2) those individuals who contracted with third-party distributors should be excluded from the collective; (3) the forum-selection clause narrows the scope of the collective; and (4) fact-intensive inquiries bar conditional certification. This order follows full briefing and oral argument, followed by supplemental briefing.

         ANALYSIS

         The FLSA provides employees with a private right of action to enforce the minimum wage and overtime provisions of the Act. See 29 U.S.C. § 216(b). “[W]orkers may litigate jointly if they (1) claim a violation of the FLSA, (2) are ‘similarly situated,' and (3) affirmatively opt in to the joint litigation, in writing.” Campbell v. City of Los Angeles, 903 F.3d 1090, 1100 (9th Cir. 2018). “Similarly situated” means “plaintiffs must be alike with regard to some material aspect of their litigation.” Id. at 1114. “[W]hat matters is not just any similarity between party plaintiffs, but a legal or factual similarity material to the resolution of the party plaintiffs' claims, in the sense of having the potential to advance these claims, collectively, to some resolution.” Id. at 1115. In other words, “[p]arty plaintiffs are similarly situated, and may proceed in a collective, to the extent they share a similar issue of law or fact material to the disposition of their FLSA claims.” Id. at 1117.

         A majority of district courts in our circuit employ a two-step approach to collective actions. See Leuthold v. Destination Am., Inc., 224 F.R.D. 462, 466-67 (N.D. Cal. Aug. 16, 2004) (Judge Vaughn Walker); Campbell, 903 F.3d at 1109-10 (noting the two-step approach favorably). In the first step of this approach, plaintiffs move for preliminary certification and show that the members of the defined collective are “similarly situated” for purposes of providing notice of the action. At this early stage, the standard is “lenient” and district courts simply evaluate whether there is “some factual basis beyond the mere averments in their complaint for the class allegations.” Adams v. Inter-Con Sec. Sys., Inc., 242 F.R.D. 530, 536 (N.D. Cal. Apr. 11, 2007) (Judge Marilyn Patel); see also Campbell, 903 F.3d at 1109. The second stage occurs when discovery is complete and the case is ready to be tried. The party opposing collective certification may then move for decertification. Leuthold, 224 F.R.D. 466-67.

         Here, plaintiff alleges that each member of the putative collective signed an independent contractor agreement, subjecting them to a uniform company policy of treating them as exempt workers under FLSA. Plaintiff thus argues that “all of Zimmer Biomet's Sales Representatives are similarly situated to himself because they are victims of a common policy that misclassified them as independent contractors when they are in fact employees” (Dkt. No. 53 at 21). This order agrees (in accepting plaintiff's broad allegation as true) that there is sufficient material similarity between plaintiff and the putative collective members with respect to the disposition of their FLSA claim. This order also agrees with defendants, however, that the proposed FLSA class should be narrowed in scope, as discussed below.

         1. Sales Representatives Who Sold Products for Non-Party Entities.

         In addressing the scope of the proposed FLSA class, defendants argue that plaintiff failed to show that he is “similarly situated” to putative members who sold products for non-party entities (i.e., other subsidiaries of Zimmer Biomet Holdings) with which he did not contract (Dkt. No. 56 at 11).

         Plaintiff's proposed FLSA class includes sales representatives who contracted to sell spine, CMF, thoracic, microfixation, and surgical products, which are sold by non-party entities Zimmer Biomet Spine, Inc. (“ZB Spine”), Zimmer Biomet CMF and Thoracic, LLC (“CMF&T”), MedTech Surgical, Inc. (“MedTech”), and Zimmer Biomet Surgical, Inc. (“ZB Surgical”) (Dkt. No. 56 at 1, 11). Defendants thus contend that, even assuming that plaintiff was an employee of the entities he contracted with, he failed to offer evidence that parent company Zimmer Biomet Holdings or the non-parties entities was a “joint employer” of the entities with which he contracted with and, as such, plaintiff is not similarly situated to the individuals selling products manufactured by these non-party entities (Dkt. No. 56 at 11-12). This order agrees.

         Two or more employers may be considered “joint employers” for purposes of the FLSA. Bonnette v. Cal. Health & Welfare Agency, 704 F.2d 1465, 1469-70 (9th Cir. 1983), abrogated on other grounds by Garcia v. San Antonio Metro. Transit Auth., 469 U.S. 528 (1985). “All joint employers are individually responsible for compliance with the FLSA.” Ibid.; see 29 C.F.R. ยง 791.2(a). Whether an entity is a ...


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