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McCleery v. Allstate Insurance Co.

California Court of Appeals, Second District, First Division

July 15, 2019

TIMOTHY McCLEERY et al., Plaintiffs and Appellants,
ALLSTATE INSURANCE COMPANY et al., Defendants and Respondents.

          APPEAL from an order of the Superior Court of Los Angeles County No. BC410865, Teresa Sanchez-Gordon, Judge. Affirmed.

          Shenoi Koes, Allan A. Shenoi, Daniel J. Koes, Nneka Egbujiobi; The Law Offices of Stephen M. Benardo, Stephen M. Benardo; Appell Shapiro, Barry Appell and Scott E. Shapiro for Plaintiffs and Appellants.

          Seyfarth Shaw, Andrew M. Paley, James M. Harris, Sheryl L. Skibbe, Joshua A. Rodine and Kiran Aftab Seldon for Defendant and Respondent Allstate Insurance Company.

          Bononi Law Group, Michael J. Bononi and Christy W. Granieri for Defendant and Respondent Capital Personnel Services, Inc.

          Nelson Mullins Riley & Scarborough and Cory E. Manning for Defendant and Respondent Advanced Field Services, Inc.

          Epstein Becker & Green, Michael S. Kun and Kevin D. Sullivan for Defendant and Respondent Farmers Group, Inc.

          Robie & Matthai and Kyle Kveton for Defendants and Respondents CIS Group LLC and North American Compass Insurance Services Group LLC.

          CHANEY, ACTING P. J.

         In this putative class action, property inspectors allege they were engaged by three “service” companies to perform inspections for two major insurers. The inspectors allege they were in fact employees of the insurers and service companies jointly, and were entitled to but deprived of minimum wages, overtime, meal and rest breaks, reimbursement of expenses, and accurate wage statements.

         The inspectors moved for class certification, supported by their expert's declaration that liability could be determined and damages calculated classwide by way of statistical analyses of results obtained from an anonymous, double-blind survey of a sampling of class members.

         The trial court summarily rejected the expert's plan and denied certification on the ground that the inspectors had failed to show that their status as employees (as opposed to independent contractors) could be established on predominately common proof.

         We reversed the order and remanded the matter with a direction, as pertinent here, to evaluate plaintiffs' proposed sampling plan. (McCleery v. Allstate Ins. Co. (Feb. 5, 2016, B256374) [nonpub. opn.].) On remand, plaintiffs offered a trial plan describing their proposal to establish liability and damages by way of an anonymous survey of all class members. The trial court found common issues existed as to the class members' employment status. It further found that plaintiffs' survey method, although flawed in some respects, was carefully crafted for accuracy. However, the court found plaintiffs' trial plan to be unworkable because it failed to address individualized issues and deprived defendants of the ability to assert defenses. The court therefore again denied certification.

         Plaintiffs appeal, contending the trial court applied improper criteria and made incorrect legal assumptions.

         We conclude that under the analytic framework promulgated by Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004 (Brinker) and Duran v. U.S. Bank National Assn. (2014) 59 Cal.4th 1 (Duran), the trial court acted within its discretion in denying certification.


         A. Procedural Posture Up To the First Appeal

         We take the facts and much of the procedural posture from our prior opinion.

         Property inspectors Timothy McCleery, Yvonne Beckner, Terry Quimby and April Boyles Jackson filed this action on behalf of themselves and similarly situated persons, alleging defendants Allstate Insurance Company and Farmers Group, insurers for whom the plaintiffs provided property inspection services, and CIS Group LLC/North American Compass Insurance Services Group (CIS), Advanced Field Services, Inc. (AFS), and Capital Personnel Services, Inc. (PMG), service companies contracting to provide inspection services, concocted a scheme to insulate themselves from labor laws by nominally employing plaintiffs as independent contractors while retaining control over all aspects of their work. Plaintiffs purport to represent a putative class of approximately 1, 550 property inspectors in California.

         Plaintiffs allege the insurers and service companies were in fact their joint employers, and all defendants failed to pay minimum wages and overtime (Lab. Code, § 1194), furnish timely or accurate wage statements (Lab. Code, § 226, subd. (e)), establish a policy for meal or rest breaks, or reimburse them for employment expenses (Lab. Code, § 2802), and in so doing violated the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.; UCL).

         In 2013, plaintiffs filed five class certification motions, one for each employer, designating one subclass per employer and a sixth subclass for CIS employees who had suffered retaliation for cooperating with plaintiffs in this litigation. Plaintiffs contended defendants' liability or lack thereof could be determined on common proof regarding defendants' status as joint employers and their uniform employment policies, or lack thereof.

         Defendants opposed the motions, arguing, as pertinent here, that few if any inspectors provided services for only the defendant insurers, but in fact freelanced for any insurer that would hire them; and wide variation existed in their work practices, as some worked part-time and some full-time, some long hours on any given day and some short, and some with the assistance of subcontractors.

         The trial court tentatively concluded that plaintiffs had demonstrated the requisite ascertainability and numerosity for class certification (at least with respect to some subclasses), as well as the suitability of class counsel and diligence and typicality of the class representatives. The court also tentatively concluded that liability issues could be divided into, as pertinent here, two phases, the first to determine whether the defendants were plaintiffs' joint employers and the second to determine whether plaintiffs had been deprived of legally mandated wage and hour benefits. But the court requested further briefing on the commonality of proof of deprivation of wage and hour benefits.

         In response, plaintiffs submitted the supplemental declaration of Dr. John Krosnick, their survey expert, setting forth his plan to use established survey methods and statistical analyses to accurately determine and measure the extent of variations in the inspectors' work. Dr. Krosnick acknowledged that variations in the inspectors' work practices might not be amenable to classwide proof-for example, as to overtime, minimum wages, and expenses-but represented that his methodology for the design and implementation of a survey of representative samples of the plaintiffs' class would result in reliable evidence on issues for which common proof was unavailable, such as wage-statement violations, amounts owed to compensate inspectors for earned and unpaid overtime, differences between earned wages and the minimum wage, compensation for mileage and other earned and unpaid work expenses, and compensation for retaliation. Dr. Krosnick declared that his methodology would account for variations in work practices and would be manageable, scientifically based, and fair, using “well-established methodology of random sampling... designed expressly to gauge the amount of variation in an attribute within a population, and well-established statistical procedures for analyzing randomly sampled data, ” thereby accurately measuring the degree to which variations in the inspectors' work affects the plaintiffs' entitlement to the various employee benefits, “no matter how much variation there is within the population.”

         The trial court summarily rejected Dr. Krosnick's plan, and concluded that defendants' employment practices as to each class member would necessitate individualized determinations.

         We reversed the order denying certification and directed the trial court to evaluate the extent to which Dr. Krosnick's proposed sampling and statistical methods might render proof of some or all of the liability issues manageable.

         B. Post-Appeal Proceedings

         On remand, Dr. Krosnick elaborated on his plan. He explained he was in the midst of conducting survey research of all people who performed inspections for Allstate, Farmers, CIS, AFS, and PMG to gather evidence for both liability and damages determinations as to unpaid overtime, missed meal and/or rest breaks, unpaid minimum wage, unreimbursed miles driven, and other business expenses. After gathering this evidence he intended to compute penalties and pre-judgment interest.

         Dr. Krosnick explained his research involved “(1) drawing a sample of respondents to represent a population, (2) collecting data from those respondents, and (3) analyzing the data generated to answer the questions of interest.” He and his team of researchers had obtained from plaintiffs' attorneys “the constructs to be measured in the survey, ” which he described as “(1) the amount of overtime worked, (2) the numbers of meal and rest breaks to which inspectors were entitled to take under California law but did not take (assuming that law applied to these individuals), (3) the amount of time inspectors spent performing specific tasks of relevance to the claimed minimum wage violations, (4) the number of miles that inspectors drove to do their work, [and] (5) the amount of money that inspectors spent for other business expenses incurred in connection with their work.”

         The researchers designed questions to “gauge the target constructs.” Dr. Krosnick explained that “[t]he questions were drafted according to the principles of optimal questionnaire measurement identified in the published peer reviewed academic literature on survey methodology and related fields, drawing on [his] expertise and years of experience in the field.” Each interview would take approximately 45 minutes, and respondents would be told their answers and participation were confidential.

         After ethics approval by IntegReview, an Institutional Review Board providing ethical review services to scientists conducting human subjects research, and some pretesting, Dr. Krosnick retained SSRS, a telephone survey research firm, to conduct the actual interviews. He sent letters to all potential class members explaining the survey, inviting them to participate, and informing them they would be contacted by phone. Each letter contained a “small financial pre-incentive to thank each respondent for reading it, ” as well as the offer of $100 for their participation and an added $10 if they initiated telephone contact with the research team.

         C. The Interview

         Each interview was conducted by telephone by an SSRS employee who read questions from a computer monitor and entered responses by computer into a flowchart program designed by Dr. Krosnick. The flowchart updated both itself and the interviewer's script according to answers received. For example, if a respondent stated he or she had worked as an inspector for AFS from 2005 to 2008, the program calculated the maximum number of months the respondent could have worked and inserted that number, those years, and the vendor's name into later questions, obtaining, for example, the following question: “The maximum number of months you could have worked with AFS between 2005 and 2008 is 42 months. For how many of those months did you work with AFS?”

         Aside from some initial monitoring, neither Dr. Krosnick nor his research team participated in the interviews.

         Respondents were asked preliminary questions to establish whether they had worked for CIS, AFS, PMG, or Allstate, and when and for how long. A respondent giving an answer outside known parameters was coached to give an in-range response. For example, it was known that AFS performed inspections from 2005 to 2008. If a respondent stated he or she had worked for AFS after 2008, the interviewer was instructed to say, “I think I might have misheard you. Let me read the question again.” If the respondent repeated the out-of-range year, the interviewer was instructed to say, “I've been told AFS stopped doing inspections in 2008. Let me read this question again.” If the ...

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