Villalpando v. Exel Direct Inc. et al

Filing 261

ORDER by Judge Joseph C. Spero denying 237 Plaintiffs' Daubert Motion ; and denying 238 Defendants' Daubert Motion and Motion to Decertify. (jcslc1S, COURT STAFF) (Filed on 4/21/2016)

1
2
3
4

UNITED STATES DISTRICT COURT

5

NORTHERN DISTRICT OF CALIFORNIA

6
7

DANIEL VILLALPANDO, et al.,
Plaintiffs,

8
v.
9
10

EXEL DIRECT INC., et al.,
Defendants.

United States District Court
Northern District of California

11

Consolidated Cases
Case No. 12-cv-04137-JCS
Case No. 13-3091-JCS
ORDER RE DAUBERT MOTIONS AND
DEFENDANTS' MOTION TO
DECERTIFY
Re: Dkt. Nos. 237, 238

12
13

I.

INTRODUCTION

14

These consolidated cases are scheduled to go to trial on May 31, 2016. While neither side

15

has offered experts on the issue of liability, the parties have presented three experts on the issue of

16

damages. In particular, Plaintiffs have presented Wesley Curtis and David Breshears as experts on

17

damages, while Defendants have offered Jonathan Walker as a rebuttal expert. Presently before

18

the Court are two motions (collectively, ―the Motions‖): 1) Plaintiffs‘ Daubert Motion to Exclude

19

Speculative, Unsubstantiated and Legal Opinion Testimony of Jonathan Walker (―Plaintiffs‘

20

Motion‖); and 2) Defendants‘ Combined Daubert Motion and Motion to Decertify the Class

21

Action (―Defendants‘ Combined Motion‖ or ―Combined Motion‖). In the Motions, both parties

22

bring Daubert challenges to the qualifications and testimony of the other side‘s expert(s).

23

Defendants argue further in their Combined Motion that the class should be decertified because

24

neither liability nor damages can be addressed on a class-wide basis. In addition, at the request of

25

the Court, the parties have suggested mechanisms that might address Defendants‘ concerns and/or

26

make adjudication of Plaintiffs‘ claims more manageable, including the creation of possible

27

subclasses and/or partial decertification. A hearing on the Motions was held on April 20, 2016.

28

1

The Court‘s rulings are set forth below.1

2

II.

3

BACKGROUND
A.

Procedural Background
Plaintiffs are delivery drivers for Defendant Exel Direct Inc. (―Exel‖) who were classified

4
5

as independent contractors. They brought a putative Rule 23 class action asserting 15 state law

6

wage and hour claims, contending they had been misclassified and were, in fact, employees.

7

Three of Plaintiffs‘ claims were dismissed before class certification, on March 28, 2014. See

8

Docket No. 122 (dismissing claims for Cost of Physical Examinations, Coerced Purchases and

9

Willful Misclassification).
On November 20, 2014, the Court granted Plaintiffs‘ motion for class certification,

10

United States District Court
Northern District of California

11

certifying the following class:

12

All individuals who have personally provided delivery services for
Defendant Exel Direct in California while being classified by Exel
Direct as independent contractors, at any time beginning June 14,
2008 until resolution of this action. Any individual who has signed
the Independent Truckman‘s Agreement with Exel Direct but has
provided delivery services exclusively through the use of hired
second drivers and who has never personally made deliveries for
Exel is excluded from the Class.

13
14
15
16
17

Docket No. 150 (―Class Certification Order‖) at 34-35. The Court recognized in the Class

18

Certification Order that Plaintiffs‘ claims would require resolution of some individual issues,

19

―primarily relating to damages,‖ but concluded that issues that are amenable to class treatment

20

predominated. Id. at 33-34.

21

Class Notices were sent out in January 2015. See Defendants‘ Combined Motion at 18.

22

On September 3, 2015, the Court granted Plaintiffs‘ summary judgment motion,

23

concluding, as a matter of law, that Plaintiffs were employees of Exel rather than independent

24

contractors. See Docket No. 210 (―Summary Judgment Order‖). In the same Order, the Court

25

granted in part and denied in part Defendants‘ summary judgment motion, dismissing Plaintiffs‘

26

claims for Failure to Keep Accurate Payroll Records, Failure to Furnish Accurate Wage

27
1

28

The parties have consented to the jurisdiction of the undersigned magistrate judge pursuant to 28
U.S.C. § 636(c).
2

1

Statements, and Waiting Time Penalties. Id. The Court also dismissed Plaintiffs‘ claim for

2

Reimbursement of Expenses to the extent Plaintiffs sought reimbursement for rental or lease

3

expenses. Id.

4

The claims that remain in the case are as follows: 1) Minimum Wage (Claim One); 2)

5

Overtime (Claim Two); 3) Pay for All Hours Worked (Claim Three); 4) Meal Periods (Claim

6

Four); 5) Rest Periods (Claim Five); 6) Deductions from Wages (Claim Six); 7) Reimbursement of

7

Expenses (except lease or rental expenses) (Claim Nine); 8) UCL (Claim Fourteen); and 9) Private

8

Attorneys General Act (―PAGA‖) (Claim Fifteen). The parties have agreed that the UCL claim

9

can be tried to the Court following a jury trial. January 15, 2016 Case Management Statement at
3. They also appear to agree that the PAGA claims are based on the alleged violations of the

11
United States District Court
Northern District of California

10

California Labor Code and that any additional issues raised by that claim can be decided by the

12

Court following the jury trial. Id. at 32.

13
14
15

B.

The Expert Reports
1. The Curtis Reports
Curtis is a former California Highway Patrolman who has operated a trucking consulting

16

business for the last 10 years. Declaration of Nathan Piller in Support of Plaintiffs‘ Motion

17

(―Piller Motion Decl‖), Ex. A (August 28, 2015 Expert Report of Wesley Curtis) (―Curtis Report‖)

18

at 1. His work includes inspecting commercial motor vehicles, conducting mock DOT audits and

19

examining vehicle maintenance programs for regulatory compliance. Id. In addition, Curtis has

20

conducted ―cost per mile‖ analyses for company vehicles he operated in connection with his own

21

past businesses – a video arcade and a swimming pool business. Id.

22

In his initial expert report, dated August 28, 2015, Curtis calculated the ―cost per mile‖ of

23

driving a truck with the specifications required for Exel drivers. Id. at 3. Curtis used a 2012

24

International 4300, 2-axle truck as an exemplar on the basis that it was ―typical of the type and

25

size of box truck used by the Class members in this case.‖ Id. at 4. In calculating the cost-per-

26

mile of operating such a truck, Curtis drew on deposition testimony of Class Member witnesses

27

and Exel managers, as well as documents produced by Exel, including ―Exel‘s own cost-benefit

28

analyses generated to assess the financial implications of transitioning to an independent
3

1

contractor Driver model‖ and ―documents generated by Exel showing estimated annual driver

2

operating expenses.‖ Id. at 3.

3

Curtis divided the expenses associated with operating a truck into categories and came up

4

with cost-per-mile estimates for each category, performing three calculations for each category:

5

one based on the assumption that Exel drivers drive an average of 150 miles per day (36,000 miles

6

a year); a second based on the assumption that they drive 164 miles per day (39,360 miles a year)

7

and a third based on the assumption that they drive 175 miles per day (42,000 miles a year). Id. at

8

6. The categories of costs Curtis estimated were: 1) Fuel; 2) Truck Payment; 3) Truck Insurance;

9

4) Cargo Insurance; 5) Medical Insurance; 6) Workers Compensation Insurance Premium; 7)
License/Registration/Commercial Vehicle Registration; 8) Permits/ Truck Inspection/ UCRA; 9)

11
United States District Court
Northern District of California

10

Meals; 10) Cell Phone; 11) Toll Roads/Bridges; 12) Tires; 13) Preventative Maintenance; 14)

12

Major Repairs; 15) Laborer Wages (for helpers and second drivers); 16) Payroll Taxes for helpers

13

and second drivers; 17) Miscellaneous Expenses; and 18) Depreciation. Id. at 8-15.

14

On October 30, 2015, Curtis submitted an Amended Expert Report in which he addressed

15

evidence the Court ordered Exel to produce after he completed the original report, namely, twenty

16

documents entitled ―Delivery Specialist Annual Operating Expenses‖ containing estimated annual

17

driver operating expenses at twenty Exel locations in California. Piller Motion Decl., Ex. C

18

(October 30, 2015 Amended Expert Report of Wesley Curtis) (―Curtis Amended Expert Report‖)

19

at 2. According to the deposition testimony of Exel‘s Vice President of Operations, Kenneth

20

Mangen, these estimates were submitted to potential Exel clients in California in connection with

21

requests for proposals (―RFPs‖). Id. at 5. Curtis does not recalculate the estimated costs from his

22

earlier report but rather, simply compares the figures in the new Exel documents and concludes

23

that they corroborate his own estimates. Id. He notes that the average cost per mile in Exel‘s

24

estimates is $2.09 whereas his own estimate for a 36,000 mile year was $2.12. Id. at 2.

25
26

2. The Breshears Reports
David Breshears is a Certified Public Accountant who is licensed in Financial Forensics.

27

Piller Motion Decl., Ex. C (August 28, 2015 Expert Report of David Breshears) (―Breshears

28

Expert Report‖) at 1. He has served as a consultant and expert witness in numerous wage and
4

1

hour cases, including misclassification cases such as this one. Breshears Expert Report at 2 & Ex.

2

A thereto. In his report, Breshears calculated Plaintiffs‘ potential damages, including penalties

3

and interest, for the 387 Plaintiffs he had identified in the data provided as of the date of the

4

report. Id. at 2. Breshears‘ damages calculation included those resulting from: 1) failure to

5

compensate Plaintiffs for all hours worked (including minimum wage violations); 2) failure to

6

compensate Plaintiffs for all overtime hours worked; 3) failure to reimburse for employment-

7

related expenses and improper deductions from wages to cover certain costs; 4) failure to provide

8

meal periods; and 5) failure to provide rest periods. Id. at 1. He also reviewed Exel‘s ―Synergy

9

Calculations‖ addressing the cost of paying drivers as independent contractors as compared to
employees. Id. at 10. According to Breshears, these calculations showed a savings of $22,962 per

11
United States District Court
Northern District of California

10

driver per year that would result from converting employees to independent contractors and this

12

estimate was likely conservative because Exel may not have taken into account certain additional

13

savings. Id.

14

In his report, Breshears relied on documents produced by Exel, deposition testimony and

15

the Curtis Expert Report. Breshears Report at 2-5. The deposition testimony consists of: 1)

16

deposition excerpts from 10 deposition transcripts obtained through a search using search terms

17

―meet‖ and ―met,‖ of which 6 included testimony about the length of morning meetings; and 2)

18

excerpts from 24 deposition transcripts regarding meal and rest periods, which included 11

19

depositions in which class members stated a quantifiable frequency of missed meal and/or rest

20

breaks; and 3) deposition excerpts of Exel management addressing meal and rest break policies.

21

Id. at 4. The Exel documents included: 1) a Settlement Data Summary report, which includes

22

information about actual payments and deductions for certain types of expenses for 383

23

contractors from their start date through their termination date; 2) a Weeks Worked report

24

including start and termination dates, and corresponding weeks worked, by 387 independent

25

contractors; 3) an iDirect Report containing information about deliveries for the period June 2,

26

2008 through March 31, 2015, related to 135 contractors; 4) a Sears report covering the period

27

September 25, 2011 through June 22, 2015 for 39 contractors; 5) Driver Daily Logs and ―various

28

time sheets‖; 6) 379 Dispatch Recap Reports; 7) a Network Driver Pay presentation related to
5

1
2

driver pay restructuring; and 8) the Synergy Calculation discussed above. Id. at 4-5.
In a supplemental report dated October 30, 2015, Breshears reviewed paper records
produced by Exel, namely, Drivers Daily Records and Time Sheets, to assess the frequency with

4

which class members missed meal and breaks. See Piller Motion Decl., Ex. C (Supplemental

5

Expert Report of David Breshears) (―Breshears Supplemental Report‖). Whereas Breshears

6

assumes a 100% violation rate for all class members for whom there was no specific deposition

7

testimony in his original report, in his supplemental report he came up with a 90.2% meal break

8

violation rate for these class members based on his review of: 1) Driver‘s Daily Logs ranging

9

from January 7, 2010 to May 22, 2015 and covering 2,572 driver days with a non-sleeper vehicle;

10

and 2) daily Time Sheets with blank fields for break start and end times ranging from July 2013 to

11
United States District Court
Northern District of California

3

September 2013 and covering 1,271 drivers days. Breshears Supp. Report at 1. At oral

12

argument, Plaintiffs‘ counsel explained that the violation rate based on sampling of the paper

13

records was not offered to replace the estimate of damages in the original Breshears Report but

14

rather, simply to rebut Defendants‘ assertions that class members often were afforded compliant

15

meal and rest breaks.

16

In the supplemental report, Breshears described the paper records on which he relied. He

17

states that it was his understanding that Defendants produced ―a large volume of bankers boxes

18

which contained a variety of Defendants‘ business records‖ and that Plaintiffs‘ ―search protocol

19

allowed counsel to identify the vast majority, if not all, of the Driver‘s Daily Logs‖ that

20

Defendants produced. Id. The Time Sheets, on the other hand, were produced in a manner that

21

made them difficult to collect: ―dispersed within these bankers boxes [ ] were some large caches of

22

daily Time Sheets, which were copied in their entirety. However, other daily time sheets were

23

attached to driver manifests and other related documents, which were not copied as it would have

24

been cost prohibitive to separate and isolate the daily Time Sheets.‖ As a result, Breshears stated,

25

his ―analysis may not reflect all available daily Time Sheets in the Defendants‘ possession.‖ Id.

26
27
28

3. The Walker Report
Defendants‘ rebuttal expert, Jonathon Walker, is a labor economist who ―consults about
labor and employment related issues in the context of litigation and regulation.‖ Piller Motion
6

1

Decl., Ex. G (F.R.C.P. Rule 26(a)(2)(B) Report of Jonathan Walker) (―Walker Expert Report‖) at

2

2. In his report, Walker opines that the calculations of costs by Curtis and damages by Breshears

3

are unreliable, pointing to what he contends are a number of shortcomings in the analysis of Curtis

4

and Breshears. Id. at 3-6, 15-34. In a section of the report entitled ―Partial Corrections to Mr.

5

Breshears‘ Analysis,‖ Walker recalculates the potential damages, excluding certain categories of

6

employee costs and recalculating other categories of damages. Id. at 34-38. Walker also contends

7

Breshears‘ opinions relating to the ―Synergy Calculations‖ are irrelevant. Id. at 3-4. He devotes a

8

section of his report to showing that the Class Members are better off being paid as independent

9

contractors than they would have been if they had been paid as employees. Id. at 7-14.

10

C.

Defendants’ Combined Motion

United States District Court
Northern District of California

11

Exel asserts the Plaintiff Class must be decertified, either in its entirety or in part, because

12

Plaintiffs have failed to come forward with data that will allow the Court to adjudicate Plaintiffs‘

13

claims on a class-wide basis. According to Exel, Plaintiffs have drawn on small samples and

14

unrepresentative evidence relating to various subsets of the Plaintiff class and then impermissibly

15

extrapolated the experiences of those class members to the entire class. Exel also argues that the

16

class must be decertified because of the fact that some class members used second drivers and

17

Plaintiffs do not have class-wide data reflecting which routes were driven by the class member and

18

which were driven by second drivers. In addition, Defendants contend, some Class members

19

provided services for other companies, giving rise to the need for individualized inquiries relating

20

to the allocation of certain expenses Plaintiffs seek to recover. Individual inquiries are also

21

required in connection with Exel‘s overtime exemption defense, according to Exel.
Even if the Court declines to decertify the class, Exel argues, Curtis is not qualified to

22
23

offer expert testimony and both Curtis and Breshears offer testimony that does not meet the

24

requirements of Rule 702 of the Federal Rules of Evidence and Daubert v. Merrell Dow

25

Pharmaceuticals, Inc., 509 U.S. 579 (1993).

26
27
28

D.

Plaintiffs’ Motion
Plaintiffs contend many of Walker‘s opinions should be excluded under Rule 702 and

Daubert on the basis that they are unreliable. In particular, Plaintiffs contend Walker‘s opinions
7

1

are speculative to the extent that he has extrapolated from the experiences of a few class members

2

who are outliers. Plaintiffs also argue that Walker‘s opinions about Plaintiffs‘ mileage

3

reimbursement rates should be excluded because Walker has no knowledge or training in this area.

4

Plaintiffs further assert Walkers opinions should be excluded to the extent they are based on

5

impermissible or incorrect legal assumptions. Plaintiffs contend, for example, that many of

6

Walker‘s opinions are premised on the incorrect assumption that when employers fail to keep

7

adequate records to permit an exact computation of damages, the employees can be denied

8

compensation on that basis.

9

III.

10

United States District Court
Northern District of California

11

ANALYSIS
A.

Legal Standards
1. Rule 23 and Decertification

12

Rule 23 of the Federal Rules of Civil Procedure gives district courts the discretion to

13

certify a class where they find that all of the requirements of Rule 23(a) are met and that the

14

lawsuit qualifies for class action status under one of the three criteria found in Rule 23(b). See

15

Molski v. Gleich, 318 F.3d 937, 946 (9th Cir. 2003). In this case, the Court certified a Rule 23

16

class under Rule 23(b)(3). Rule 23(a) requires that the plaintiff demonstrate (1) numerosity, (2)

17

commonality, (3) typicality, and (4) fair and adequate representation of the class interest.

18

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

19

that the questions of law or fact common to class members predominate over any questions

20

affecting only individual members, and that a class action is superior to other available methods

21

for fairly and efficiently adjudicating the controversy.‖ Fed. R. Civ. P. 23(b)(3). ―An individual

22

question is one where ‗members of a proposed class will need to present evidence that varies from

23

member to member,‘ while a common question is one where ‗the same evidence will suffice for

24

each member to make a prima facie showing [or] the issue is susceptible to generalized, class-wide

25

proof.‘‖ Tyson Foods, Inc. v. Bouaphakeo, — U.S. —, 136 S. Ct. 1036, 1045 (2016) (quoting 2

26

W. Rubenstein, Newberg on Class Actions § 4:50, pp. 196-197 (5th ed. 2012) (internal quotation

27

marks omitted)).

28

Rule 23(b)(3) allows a class action to be maintained where ―the court finds

In determining whether the predominance requirement is met, courts tend to be more
8

1

―comfortable‖ certifying a class where individualized inquires will be necessary to determine

2

damages than they are when such inquiries are necessary to determine liability. See Kurihara v.

3

Best Buy Co., No. C 06-01884 MHP, 2007 WL 2501698, at *9 (N.D. Cal. Aug. 30, 2007); Melgar

4

v. CSk Auto, Inc., No. 13-CV-03769-EMC, 2015 WL 9303977, at *11 (N.D. Cal. Dec. 22, 2015)

5

(―courts are often more forgiving with respect to individualized inquiries as to damages‖); Brinker

6

Rest. Corp. v. Superior Court, 53 Cal. 4th 1004, 1022 (2012)(―‗As a general rule if the defendant‘s

7

liability can be determined by facts common to all members of the class, a class will be certified

8

even if the members must individually prove their damages‘‖) (quoting Hicks v. Kaufman &

9

Broad Home Corp., 89 Cal.App.4th 908, 916 (2001)). Thus, ―[a]s articulated by the California
Supreme Court in assessing predominance, trial courts must ‗determine whether the elements

11
United States District Court
Northern District of California

10

necessary to establish liability are susceptible of common proof or, if not, whether there are ways

12

to manage effectively proof of any elements that may require individualized evidence.‘‖ Dalton v.

13

Lee Publications, Inc., No. 08CV1072-GPC-NLS, 2013 WL 2181219, at *7 (S.D. Cal. May 20,

14

2013) (quoting Brinker Rest. Corp. v. Superior Court, 53 Cal.4th 1004, 1024 (2012)); see also

15

Jimenez v. Domino’s Pizza, Inc., 238 F.R.D. 241, 251 (C.D. Cal. 2006) (―To determine whether

16

common issues predominate, this Court must first examine the substantive issues raised by

17

Plaintiffs and second inquire into the proof relevant to each issue‖).

18

A district court‘s order granting class certification is subject to later modification,

19

including class decertification. See Fed.R.Civ.P. 23(c)(1)(C) (―An order that grants or denies

20

class certification may be altered or amended before final judgment‖). ―In considering the

21

appropriateness of decertification, the standard of review is the same as a motion for class

22

certification: whether the Rule 23 requirements are met.‖ Cruz v. Dollar Tree Stores, Inc., No. 07-

23

2050 SC, 2011 WL 2682967, at *3 (N.D. Cal. July 8, 2011) (citing O’Connor v. Boeing N. Am.,

24

Inc., 197 F.R.D. 404, 410 (C.D. Cal. 2000)). ―Although certification decisions are not to focus on

25

the merits of a plaintiff‘s claim, a district court reevaluating the basis for certification may

26

consider its previous substantive rulings in the context of the history of the case, and may consider

27

the nature and range of proof necessary to establish the class-wide allegations.‖ Marlo v. United

28

Parcel Serv., Inc., 251 F.R.D. 476, 479 (N.D. Cal. 2008). In addition, decertification may be
9

1

appropriate where the plaintiff has failed to offer a realistic plan for conducting a class trial. See

2

Valentino v. Carter-Wallace, Inc., 97 F.3d 1227, 1234 (9th Cir. 1996) (holding that district court

3

abused its discretion in certifying Rule 23 class based, in part, on the fact that the plaintiffs had

4

made ―no showing . . . of how the class trial could be conducted‖).

5
6

2. The Use of Representative Evidence in Class Actions
The question of whether a particular claim is amenable to class-wide treatment may

7

depend upon whether it is permissible to rely on ―statistical evidence, or so-called representative

8

evidence.‖ Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. at 1046. This question was addressed in

9

the seminal case of Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680 (1946), a collective action
involving donning and doffing claims asserted under the Fair Labor Standards Act. In that case,

11
United States District Court
Northern District of California

10

the Court held that where ―the employer‘s records are inaccurate or inadequate and the employee

12

cannot offer convincing substitutes . . . an employee has carried out his burden if he proves that he

13

has in fact performed work for which he was improperly compensated and if he produces

14

sufficient evidence to show the amount and extent of that work as a matter of just and reasonable

15

inference.‖ 328 U.S. at 687-88. The Court reasoned that under these circumstances, the employee

16

should not be penalized ―by denying him any recovery on the ground that he is unable to prove the

17

precise extent of uncompensated work‖ as this would ―place a premium on an employer‘s failure

18

to keep proper records in conformity with his statutory duty‖ and ―would allow the employer to

19

keep the benefits of an employee‘s labors without paying due compensation as contemplated by

20

the Fair Labor Standards Act.‖ Id. Under Mt. Clemens, once the employee‘s work is

21

demonstrated by ―just and reasonable inference,‖ ―[t]he burden then shifts to the employer to

22

come forward with evidence of the precise amount of work performed or with evidence to

23

negative the reasonableness of the inference to be drawn from the employee‘s evidence.‖ Id. ―If

24

the employer fails to produce such evidence, the court may then award damages to the employee,

25

even though the result be only approximate.‖ Id.

26

The Mt. Clemens rule is not limited to FLSA cases. It has also been invoked in cases

27

involving state law wage and hour claims based on the same reasoning that was applied to FLSA

28

claims in Mt. Clemens, namely, that it would unfairly penalize employees to deny recovery
10

1

because of the employer‘s failure to keep proper records. See, e.g., Melgar v. CSk Auto, Inc., No.

2

13-CV-03769-EMC, 2015 WL 9303977, at *9 (N.D. Cal. Dec. 22, 2015) (holding that Rule 23

3

class asserting claim under California Labor Code section 2802, requiring that employees must be

4

reimbursed for business expenses, met predominance requirements under Mt. Clemens); Garcia

5

v. Bana, No. C 11-02047 LB, 2013 WL 621793, at *9 (N.D. Cal. Feb. 19, 2013), aff'd, 597 F.

6

App‘x 415 (9th Cir. 2015) (applying Mt. Clemens rule in wage and hour case asserting overtime

7

claims under both FLSA and California state law); Kamar v. Radio Shack Corp., 254 F.R.D. 387,

8

403 (C.D. Cal. 2008), aff‘d sub nom. Kamar v. RadioShack Corp., 375 F. App'x 734 (9th Cir.

9

2010) (holding that Rule 23 predominance requirement was met in case asserting wage and hour
claims under state law based, in part, on Mt. Clemens rule); Hernandez v. Mendoza, 199 Cal.

11
United States District Court
Northern District of California

10

App. 3d 721, 725 (1988) (holding that where employer ―failed to keep records required by statute‖

12

a plaintiff seeking overtime pay under California state law could rely on ―imprecise evidence‖ and

13

citing Mt. Clemens).

14

In Tyson Foods, Inc. v. Bouaphakeo, the Supreme Court reiterated the principle of Mt.

15

Clemens that ―when employers violate their statutory duty to keep proper records, and employees

16

thereby have no way to establish the time spent doing uncompensated work, the ‗remedial nature

17

of [the FLSA] and the great public policy which it embodies . . . militate against making‘ the

18

burden of proving uncompensated work ‗an impossible hurdle for the employee.‘‖ 136 S. Ct. at

19

1047 (quoting Mt. Clemens, 382 U.S. at 687). In that case, the Court held that it was permissible

20

for the plaintiffs to ―introduce a representative sample to fill an evidentiary gap created by the

21

employer‘s failure to keep adequate records‖ in order to prove their overtime claim. Id. In

22

particular, Plaintiffs relied on the opinions of an industrial relations expert who conducted 744

23

videotaped observations to determine the average time class members had spent donning and

24

doffing required protective equipment in different departments. Id. at 1043. The employer had not

25

kept records of its employees‘ donning and doffing time but had records of the class members‘

26

time at their work stations, which another expert used, in combination with the estimated donning

27

and doffing times, to determine how many class members had worked overtime without receiving

28

overtime compensation and how much overtime compensation was owed to the class. Id.
11

1

The Court in Tyson Foods began its analysis by recognizing that ―[i]n many cases, a

2

representative sample is the ‗only practicable means to collect and present relevant data‘

3

establishing a defendant‘s liability.‖ Id. at 1046 (quoting Manual of Complex Litigation § 11.493,

4

p. 102 (4th ed. 2004)). It further reasoned that the use of sampling was permissible under the facts

5

of that case because ―the study here could have been sufficient to sustain a jury finding as to hours

6

worked if it were introduced in each employee‘s individual action.‖ Id. at 1048. The Court

7

explained, ―[i]n a case where representative evidence is relevant in proving a plaintiff‘s individual

8

claim, that evidence cannot be deemed improper merely because the claim is brought on behalf of

9

a class.‖ Id. at 1046. The Court acknowledged that ―[r]easonable minds may differ as to whether
the average time [the plaintiffs‘ expert] calculated is probative as to the time actually worked by

11
United States District Court
Northern District of California

10

each employee‖ but found that resolving this question ―is the near-exclusive province of the jury.‖

12

Id. at 1049. The Court also made clear that not ―all inferences drawn from representative evidence

13

in an FLSA case are ‗just and reasonable,‘‖ explaining:

14

Representative evidence that is statistically inadequate or based on
implausible assumptions could not lead to a fair or accurate estimate
of the uncompensated hours an employee has worked. Petitioner,
however, did not raise a challenge to respondents‘ experts‘
methodology under Daubert; and, as a result, there is no basis in the
record to conclude it was legal error to admit that evidence.

15
16
17
18
19

Id. at 1048.
In Tyson Foods, the Court distinguished its earlier decision in Wal-Mart Stores, Inc. v.

20

Dukes, 564 U.S. 338 (2011), in which it held that a class of more than a million and a half female

21

employees asserting discrimination claims under Title VII was not properly certified because the

22

plaintiffs failed to establish even that there were common questions of fact or law under Rule

23

23(a). Id. at 1048. In Wal-Mart, the Court explained, ―[t]he only corporate policy that the

24

plaintiffs‘ evidence convincingly establishe[d was] Wal-Mart‘s ‗policy‘ of allowing discretion by

25

local supervisors over employment matters‘; and even then, the plaintiffs could not identify ‗a

26

common mode of exercising discretion that pervade[d] the entire company.‘‖ Id. (quoting 564

27

U.S. at 355-56). Thus, the plaintiffs proposed the use of representative evidence to ―overcome[e]

28

this absence of common policy.‖ Id. This ―Trial by Formula‖ was impermissible, the Tyson
12

1

Foods Court explained, because it enlarged the substantive rights of the class members and

2

deprived the defendant of its right to litigate individual statutory defenses. Id. Notably, the Tyson

3

Foods Court found, in Wal-Mart, the sample at issue could not have been used ―to establish

4

liability in an individual action‖ because the Court held that the employees were not similarly

5

situated. Id.

6

3. Legal Standards Governing Rule 702 of the Federal Rules of Evidence

7

Rule 702 of the Federal Rules of Evidence permits a party to offer the testimony of a

8

―witness who is qualified as an expert by knowledge, skill, experience, training, or education.‖

9

Fed. R. Evid. 702. This Rule embodies a ―relaxation of the usual requirement of firsthand
knowledge,‖ Daubert, 509 U.S. at 592, and requires that certain criteria be met before expert

11
United States District Court
Northern District of California

10

testimony is admissible. The Rule sets forth four elements, allowing such testimony only if:

13

(a) the expert‘s scientific, technical, or other specialized knowledge
will help the trier of fact to understand the evidence or determine a
fact in issue;

14

(b) the testimony is based on sufficient facts or data;

15

(c) the testimony is the product of reliable principles and methods;
and

12

16
17

(d) the expert has reliably applied the principles and methods to the
facts of the case.

18

Fed. R. Evid. 702. These criteria can be distilled to two overarching considerations: ―reliability

19

and relevance.‖ Ellis v. Costco Wholesale Corp., 657 F.3d 970, 982 (9th Cir. 2011). The inquiry

20

does not, however, ―require a court to admit or exclude evidence based on its persuasiveness.‖ Id.

21

The reliability prong requires the court to ―act as a ‗gatekeeper‘ to exclude junk science,‖

22

and grants the court ―broad latitude not only in determining whether an expert‘s testimony is

23

reliable, but also in deciding how to determine the testimony‘s reliability.‖ Id. (citing Kumho Tire

24

Co. v. Carmichael, 526 U.S. 137, 145, 147–49, 152 (1999)). Evidence should be excluded as

25

unreliable if it ―suffer[s] from serious methodological flaws.‖ Obrey v. Johnson, 400 F.3d 691,

26

696 (9th Cir. 2005).

27
28

The relevance prong looks to whether the evidence ―fits‖ the issues to be decided:
―scientific validity for one purpose is not necessarily scientific validity for other, unrelated
13

1

purposes,‖ and ―[e]xpert testimony which does not relate to any issue in the case is not relevant.‖

2

Daubert, 509 U.S. at 591.

3

Although the Court has found scant authority addressing the relationship between the Mt.

4

Clemens rule and Daubert, the Supreme Court in Tyson Foods implied that the standard under

5

Daubert is the same regardless of whether or not the Mt. Clemens rule applies. See Tyson Foods,

6

Inc. v. Bouaphakeo, 136 S. Ct. at 1048 (quoted above); see also Chavez v. IBP, Inc., No. CV-01-

7

5093-RHW, 2004 WL 5520002, at *2 (E.D. Wash. Dec. 8, 2004) (rejecting plaintiffs‘ assertion

8

that in wage and hour cases the burden of proof is lower under Mt. Clemens and therefore the

9

court should apply a ―relaxed Daubert standard,‖ finding instead that ―[t]he burden of proof for

10

United States District Court
Northern District of California

11
12

damages at trial . . . does nothing to alter Daubert‘s requirement of reliability‖).
B.

Whether the Class Should be Decertified in its Entirety or in Part
1. Exel’s Request for Clarification re Scope of Class

13

Exel asserts that the following three limitations should be placed on the class definition: 1)

14

to ensure due process, the class should include only individuals who received the class notices that

15

issued in January 2015, because only those individuals had the opportunity to opt out of the class;

16

2) the class period should end as of January 6, 2015 because Plaintiffs‘ experts examined data only

17

up to that date; and 3) the class should include only those individuals who provided delivery

18

services pursuant to the Independent Truckman‘s Agreement. Plaintiffs stipulated at oral

19

argument that they do not object to these limitations. Therefore, the Court accepts Exel‘s

20

proposed limitations.

21

2. Whether Plaintiffs have Offered a Sufficient Trial Plan

22

Plaintiffs have set forth their plans for proving liability and damages on the remaining

23

claims, on a claim-by-claim basis, in the Joint Case Management Conference Statement filed

24

January 15, 2016 and in the briefing on the pending motions. See Docket No. 225; see also

25

Docket No. 242 (Plaintiffs‘ Memorandum of Points and Authorities in Opposition to Defendants‘

26

Combined Daubert Motion and Motion to Decertify the Rule 23 Class (―Plaintiffs‘ Opposition‖))

27

at 6-16. Therefore, the Court declines Exel‘s invitation to decertify the class on the basis that

28

Plaintiffs have not offered a detailed trial plan. To the extent Exel challenges specific aspects of
14

1

Plaintiffs‘ plan, the Court will address these issues below in the context of its consideration of

2

Exel‘s decertification and Daubert challenges.

3

3. Whether Mt. Clemens Applies to Plaintiffs’ Claims

4

Exel contends Plaintiffs are not entitled to rely on the Mt. Clemens rule as to any of their

5

claims because it has produced to Plaintiffs over 4 million paper documents that included paper

6

manifests and timesheets, and that it was Plaintiffs‘ obligation to review all of these documents to

7

determine the actual damages of the class members. The Court disagrees.

8

Under Mt. Clemens, it is the employer that bears the burden of maintaining adequate

9

records. See Grimes v. Kinney Shoe Corp., 902 F. Supp. 1070, 1074 (D. Alaska 1995) (Mt.
Clemens ―presupposes that the employer will be in the best position to keep accurate records of an

11
United States District Court
Northern District of California

10

employee‘s work and should bear the risk that records will be inadequate‖) (citing McLaughlin v.

12

Ho Fat Seto, 850 F.2d 586 (9th Cir.1988)). Aside from the difficulty of reviewing millions of

13

paper documents, Plaintiffs‘ expert has identified numerous inadequacies as to the records

14

produced by Exel: The paper manifests and times sheets were not organized in any particular

15

manner, were mixed up with other, irrelevant documents, and are sometimes illegible; the paper

16

manifests also do not provide accurate timekeeping records to the extent they consist only of lists

17

of delivery windows and appear to omit time spent loading and unloading merchandise at the

18

warehouse; and most troubling, there is no way to know whether these paper records are complete

19

and Exel does not even attempt to establish that they are. See Breshears Dep. at 74-75, 150-151;

20

Piller Opposition Decl., Ex. 47 (sample manifest). In short, Exel has not demonstrated that it

21

maintained adequate records and therefore Plaintiffs are entitled to prove their claims by

22

reasonable inference under Mt. Clemens. See, e.g., Arias v. U.S. Serv. Indus., Inc., 80 F.3d 509,

23

512 (D.C. Cir. 1996) (―In light of the evidentiary difficulties appellants faced as a result of [the

24

employer‘s] failure to maintain accurate time and payment records by workweek, and to

25

denominate clearly the number of hours being compensated by some payments, [the estimates of

26

the employee‘s expert are] sufficient to establish an amount and extent of work and wages as a

27

matter of just and reasonable inference as contemplated by Mt. Clemens‖). Exel is, of course,

28

entitled to attempt to rebut those inference by using the paper records to demonstrate the precise
15

1

amount of work performed by the class members. It is the Court‘s understanding, however, that

2

Exel recognizes that review of the 4 million paper records is not realistic (and perhaps of little

3

probative value as well) and that it will not be pursuing that option.

4

The Court also rejects Exel‘s assertion that Mt. Clemens does not apply to employee

5

reimbursement under California Labor Code section 2802. See Defendants‘ Combined Motion at

6

34 (―Mt. Clemens does not apply here, where Exel had no duty to track class members‘ employee

7

business expenses. Indeed, the legal duty to maintain records here fell to the contractors

8

themselves, who must be able to substantiate Schedule C business deductions‖). This same

9

argument was rejected in Melger v. CSK Auto, Inc., No. 13-cv-3769 EMC, 2015 WL 9303977, at
*9 (N.D. Cal. Dec. 22, 2015), in which the court held that even if there is no explicit statutory duty

11
United States District Court
Northern District of California

10

requiring employers to maintain records of employee expenses, to the extent section 2802 imposes

12

an ―affirmative duty on employers to reimburse such expenses when it has knowledge thereof‖ it

13

is ―obvious[] [that] some recordkeeping [on the part of the employer] is required.‖ Id. Therefore,

14

the court concluded, the burden of the employer‘s failure to maintain records of business expenses

15

falls on the employer rather than the employee under Mt. Clemens and Hernandez. Id. The

16

undersigned agrees with the reasoning of Melger on this question.

17

The Court rejects Exel‘s reliance on the fact that class members must document their

18

business expenses in a Schedule C to obtain a tax deduction for them. Any duty class members

19

may have on that score is an entirely separate issue and does not negate Exel‘s obligations under

20

California‘s wage and hour laws. The Court also notes that the question of whether Exel had a

21

good faith belief that its drivers were properly classified as independent contractors and therefore

22

was not required to reimburse its drivers for business expenses or maintain records of such

23

expenses does not have any bearing on whether Mt. Clemens applies. See Mt. Clemens, 328 U.S.

24

at 688 (―And even where the lack of accurate records grows out of a bona fide mistake as to

25

whether certain activities or non-activities constitute work, the employer, having received the

26

benefits of such work, cannot object to the payment for the work on the most accurate basis

27

possible under the circumstances‖).

28

For these reasons, the Court concludes that Plaintiffs may prove their claims based on
16

1

reasonable inferences as to the time worked (e.g., how many days a week drivers worked, how

2

many hours a day, how long meetings lasted) and the amount of employee expenses for which

3

Plaintiffs seek reimbursement.

4

4. Specific Issues Related to Class Members who Employ Second Drivers

5

One of Exel‘s recurring challenges to proceeding on a class basis is the problems it

6

contends arise in connection with class members who used second drivers. See Defendants‘ Notice

7

of Motion at 3 (―Plaintiffs‘ fundamental problem of proof, going to both liability and damages, is

8

that they lack class-wide data to identify, for each day of delivery service, who (the contractor or

9

someone else) drove the route‖); Defendants‘ Combined Motion at 1 (asserting that absence of
class-wide data showing whether routes were driven by class members or second drivers is a

11
United States District Court
Northern District of California

10

fundamental flaw in trial on a class-wide basis because class members can ―pursue Labor Code

12

claims only for those days they personally performed services; as to other days there were no

13

wages to earn, no meal or rest breaks to take, no employee business expenses to incur‖); id. at 21

14

(arguing that ―many class members acted as entrepreneurs, not employees, when they utilized

15

second drivers‖ and therefore, that Plaintiffs ―erred in assuming where records are absent, that

16

[the] class member performed labor every day a truck was under contract‖); 22 (arguing that

17

Plaintiffs erred in ―assum[ing] that weekly settlement statements record employee expenses, even

18

though settlement expenses . . .include class members acting as entrepreneurs as well as class

19

members acting as employees‖); 24 (―Class members who drove infrequently (e.g., rarely or just a

20

couple of days per week, while second drivers drove on remaining days) . . . would have no

21

overtime claim at all‖); 29 (arguing that meal break claim is unmanageable because iDirect data

22

and Dispatch data do not cover all class members or the entire class period and ―it is undisputed

23

that substitute or second drivers handled many routes‖); 30 (asserting that same problems with

24

addressing meal violations on a class-wide basis ―apply with even greater force as to the claim for

25

rest pay‖); at 31 (arguing with reference to unlawful deduction claim that ―settlement payments,

26

by definition, are not class-member wages when paid for a week when the class member

27

exclusively used the labor of second drivers‖ and that individualized inquiries will be necessary

28

because the ―settlement data do not identify whether the contractor or a second driver operated a
17

1

truck in performing deliveries‖ and because ―there is no way to determine whether a deducted

2

amount was ultimately charged to the helper or the second driver); 32 (Plaintiffs trial plan ―would

3

systematically overstate liability by including . . . entrepreneurial expenses as well as employee

4

expenses‖); 37-38 (same).

5

It is not clear how many class members used second drivers. Plaintiffs note that Exel‘s

6

expert refers to only nine specific class members (out of 386) who at any point used a second

7

driver. See Plaintiffs‘ Opposition at 5 (citing Walker Report ¶¶ 23, 27, 57). According to Plaintiff,

8

Exel‘s exhibits reveal only six more class members who employed second drivers. Id. at 5-6

9

(citing Perez Decl. ¶¶ 14, 15, 16, 18; King Decl. ¶ 5; Sheridan Decl. ¶ 4; Marshall Decl. ¶ 5). Exel,
on the other hand, points to evidence suggesting the number is higher, though it does not state an

11
United States District Court
Northern District of California

10

exact number. See Defendants‘ Reply at 8 (citing King Decl. ¶ 8 (stating that at the Ontario hub,

12

the delivery trucks ―generally have not been driven by the contractors themselves, but rather by

13

‗second drivers‘‖); Molina Dep. at 49 (testifying that he personally drove his truck for the first two

14

months he worked for Exel and then he ―handed it over to a second driver‖); Supp. Crossman

15

Decl., Ex. A (reflecting that as of December 2014 there were 153 ―active second drivers‖ in

16

California). Whether this group contains only 16 class members or is somewhat larger, however,

17

the Court concludes the claims against them raise some legal and factual questions as to both

18

liability and damages that do not apply to the class as a whole.

19

One of the primary issues that may give rise to individualized inquiries is how much of the

20

time these class members spent personally driving a truck, which has implications for the

21

minimum wage claim (how often did these class members actually attend the meetings given that

22

they may not have driven five days a week), the overtime claim (how many hours a week did these

23

class members drive and was it enough to entitle them to overtime pay), and the meal and rest

24

break claims (on what days were these contractors working as employees such that they were

25

entitled to meal and rest breaks). Exel has offered at least anecdotal evidence indicating that the

26

assumptions of Plaintiffs‘ experts as to driving time for these class members may be less

27

reasonable than they are for the class as a whole.

28

Another closely related issue is whether class members who employed second drivers can
18

1

recover employee expenses – or improper deductions ˗ where the expenditures or deductions are

2

associated with second drivers rather than class members. This is not only a fact question; it also

3

requires the Court to address legal disputes as to whether so-called ―entrepreneurial expenses‖ are

4

subject to the provisions of the California Labor code upon which Plaintiffs‘ wrongful deduction

5

and employee reimbursement claims are based.
At oral argument, Plaintiffs‘ counsel also asserted that under the California Labor Code,

6
7

the term ―employee‖ includes not just individuals but also entities and therefore, any class

8

members who have used second drivers can assert some or all of the claims in this case on behalf

9

of themselves and their second driver(s) on the theory that the class member and the second
driver(s) constitute a single ―employee.‖ Plaintiffs further asserted these ―entity employees‖ can

11
United States District Court
Northern District of California

10

recover the expenses of both the first and the second drivers. These are legal issues that are

12

common to all class members who have used second drivers.2

13

The Court concludes that the legal and factual issues that relate to class members who have

14

used second drivers do not require decertification of the class but instead, can be managed through

15

the creation of a subclass of class members who used a second driver during the class period. The

16

Court notes that the majority of the issues relating to these class members are associated with the

17

determination of damages and that there are ways to handle the variations among these class

18

members as to the time worked, including using a claims procedure. The Court declines to

19

designate the subclass as a damages only subclass, however, because there is at least one claim

20

(the overtime claim) where there may be an issue as to liability. Accordingly, the subclass will be

21

used both for the determination of liability and for damages.3

22
2

23
24
25
26
27
28

To the extent Exel seeks to challenge Plaintiffs‘ legal theory as to the ―entity employees‖ it
should make that challenge in a motion in limine. If the Court decides that a class member with
second drivers cannot assert the claims in this action collectively on behalf of himself and the
second driver(s) as a unitary ―employee,‖ it may reconsider the question of whether the Class
should be decertified as to the individuals who used second drivers because it does not appear the
Plaintiffs have offered sufficient evidence to show liability or damages for these class members if
their second drivers are not included.
3
Exel also challenges class treatment of certain claims based on evidence that some class
members performed deliveries for other companies while they worked for Exel. This issue does
not pose significant problems as to manageability, however, as only two class members have been
identified who worked for another delivery company while also working for Exel. Therefore, the
Court concludes that it is not necessary to create a subclass for these individuals; nor do any
19

1
2
3
4
5

With the additional subclass for class members with second drivers in mind, the Court
addresses below the manageability issues associated with each of Plaintiffs‘ claims.
5. Claim One (Minimum Wage)
a. Background
In the January 15, 2016 Joint Case Management Statement, Plaintiffs stated that they were
pursuing two theories on their minimum wage claim: 1) that Exel ―does not compensate drivers

7

for the administrative work and non-productive time required for the job, such as attending

8

morning stand-up meetings and filling out paperwork‖; and 2) that drivers within the class ended

9

up making less than minimum wage during one or more work weeks when subtracting the

10

chargebacks and out-of-pocket expenses from their piece rate compensation for the week.‖

11
United States District Court
Northern District of California

6

Docket No. 225 at 11-12. At oral argument, Plaintiffs stipulated that the minimum wage claim is

12

now based solely on the morning meeting time theory.

13

Exel contends Plaintiffs‘ claim for unpaid time for morning meetings cannot be tried on a

14

class-wide basis because there is no common proof showing when morning meetings occurred or

15

how long they lasted and moreover, Exel had no duty to separately record morning meeting time

16

except insofar as drivers recorded their on-duty, pre-driving time on daily logs. Defendants‘

17

Combined Motion at 23. Consequently, Exel contends, this claim will require individualized

18

inquiries to determine the time class members spent in morning meetings. Id. This is not merely a

19

question of damages, according to Exel, because there may be class members who never attended

20

a morning meeting. Id. Exel emphasizes the possibility that class members who hired second

21

drivers would have sent the second driver to the meeting instead of personally attending morning

22

meetings. Defendants‘ Combined Motion at 23. Exel also cites evidence that at some locations,

23

morning meetings were not held every day. Id. Finally, it contends the conclusion of Plaintiffs‘

24

expert that morning meetings lasted on average 23.75 minutes is an ―arbitrary concoction‖ that

25

amounts to ―Trial by Formula‖ and is impermissible under Dukes.

26
b. Discussion
27
28

individualized issues raised in connection with these class members warrant decertification.
20

1

A claim for unpaid wages under California Labor Code § 1194 requires a plaintiff to

2

prove: ―1) Plaintiff performed work for defendant; 2) plaintiff was paid less than the minimum

3

wage for some or all hours worked; and 3) the amount of wages owed.‖ Dalton v. Lee

4

Publications, Inc., No. 08-cv-1072-GPC-NLS, 2013 WL 2181219, at *9 (S.D. Cal. May 20,

5

2013). While the amount of wages owed is a damages question, whether a class member is owed

6

any amount in unpaid minimum wage is a question of liability. See id. at *10.

7

Plaintiffs propose to prove liability on this claim based on the Independent Truckman‘s

8

Agreement, which states that independent contractors are not compensated for ―services above and

9

beyond basic delivery services,‖ such as ―warehouse operations‖ and ―transportation
management.‖ See January 15, 2016 Joint Case Management Statement at 11. Plaintiffs also plan

11
United States District Court
Northern District of California

10

to rely on admissions by Exel witnesses that morning meetings occur regularly and to present

12

emails, agendas and morning meeting packets documenting the morning meetings. This is the

13

sort of common proof that is typically found to warrant class treatment. See Brinker Restaurant

14

Corp. v. Superior Court, 53 Cal. 4th 1004, 1033 (2012) (―Claims alleging that a uniform policy

15

consistently applied to a group of employees is in violation of the wage and hour laws are of the

16

sort routinely, and properly, found suitable for class treatment‖). The Court finds that this

17

common evidence is sufficient to try class-wide liability on this claim – especially as Exel has not

18

offered any evidence that there is a single class member who never attended a morning meeting.

19

The Court also finds that damages can be handled through use of common proof. In

20

particular, in addition to the meeting agendas and Exel testimony discussed above, Plaintiffs offer

21

the testimony of their expert as to the length of the meetings to establish the time spent in

22

meetings by reasonable inference. As discussed above, in light of Exel‘s failure to maintain

23

adequate records, Plaintiffs are entitled to establish that time based on reasonable inference from a

24

representative sample. The Court rejects Exel‘s suggestion that Plaintiffs‘ could (and therefore

25

should be required to) prove the time spent in morning meetings with precision based on the driver

26

daily logs, see Defendants‘ Combined Motion at 23. In addition to the problems with the paper

27

records discussed above, Plaintiffs‘ expert has testified that the time spent in morning meetings

28

cannot be discerned from the driver daily logs because they include tasks other than the morning
21

1

meetings in their pre-driving time, resulting in a ―comingling of time‖ that makes it impossible to

2

determine from these logs how long drivers spent in meetings. See Breshears Dep. at 79, 81.
Even a sample that constitutes a relatively small percentage of the class may allow for a

3
4

reasonable inference, see, e.g., Reich v. S. New England Telecommunications Corp., 121 F.3d 58,

5

67 (2d Cir. 1997) (―there is no bright line formulation that mandates reversal when the sample is

6

below a percentage threshold. It is axiomatic that the weight to be accorded evidence is a function

7

not of quantity but of quality‖). However, to the extent Exel intends to challenge the conclusions

8

of Plaintiffs‘ expert on the basis that they are ―unrepresentative or inadequate,‖ this defense is

9

itself ―common to the claims made by all class members.‖ See Tyson Foods, 136 S. Ct. 1036
(2016) (noting that ―[s]ince there were no alternative means for the employees to establish their

11
United States District Court
Northern District of California

10

hours worked, petitioner‘s primary defense was to show that [Plaintiffs‘ expert‘s] study was

12

unrepresentative or inaccurate and holding that ―[t]hat defense is itself common to the claims

13

made by all class members‖).

14

Finally, to the extent Exel points to the issues related to class members who employed

15

second drivers, these issues can be addressed through the creation of a sub-class, as discussed

16

above.

17
18
19

6. Claim Two (Overtime Pay)
a. Background
Plaintiffs intend to prove liability on their overtime claim with deposition testimony by

20

Exel managers that class members typically work more than 40 hours a week as well as an Exel

21

Recruiting document (Realistic Preview of Business Opportunity) discussing the typical schedule

22

of a driver; they intend to show that class members were not paid overtime based on the ITA and

23

the Equipment Lease Agreements, which describe Exel‘s compensation scheme and do not

24

provide for the payment of overtime. Plaintiffs‘ Opposition at 15. They will rely on the opinions

25

of their expert to establish damages.

26

Exel argues that this claim will require individualized inquiries as to its interstate

27

commerce exemption defense (as to which the Court found on summary judgment there were fact

28

questions that precluded summary judgment) and challenges Plaintiffs‘ ability to establish on a
22

1

class-wide basis hours worked and the proper pay rate to be used for determining overtime pay.

2

Defendants‘ Motion at 24-26; Reply at 13. Exel asserts that class members who used second

3

drivers pose a particularly difficult problem for handling this claim on a class-wide basis. Reply at

4

13. Exel also argues that Plaintiffs cannot rely on Mt. Clemens to prove the amount of overtime

5

by reasonable inference because Exel produced paper records that would have allowed them to

6

prove their overtime damages with precision. Defendants‘ Combined Motion at 26.

7
8

b. Discussion
Plaintiffs assert their claim for overtime wages under California Labor Code sections 510,
515.5, 1194 and 1198 and IWC Wage Order No. 9-2001. These provisions require generally that

10

employees be paid one and a half times their regular rate of pay for hours worked in excess of 40

11
United States District Court
Northern District of California

9

hours per week and eight hours per day. Plaintiffs‘ theory of liability is based on Exel‘s uniform

12

contracts and general policies and practices and therefore can be addressed on a class-wide basis.

13

As discussed above, the Court rejects Exel‘s reliance on the production of paper records to avoid

14

the Mt. Clemens rule. It is Exel‘s burden to demonstrate that these documents would have been

15

sufficient to establish the actual amount of overtime to which Plaintiffs may be entitled and it has

16

not done so. The Court also finds that damages can be addressed through common proof, namely,

17

the opinions of Plaintiffs‘ expert as to hours driven by class members and the applicable rate.

18

Finally, although Exel asserts that its overtime exemption defense will require

19

individualized inquiries, that assertion is not persuasive given that the main issue relating to the

20

applicability of that is exemption is the intent of the shippers, not that of the drivers themselves.

21

See S. Pac. Transp. Co. v. I.C.C., 565 F.2d 615, 617 (9th Cir. 1977). (―Whether transportation is

22

interstate or intrastate is determined by the essential character of the commerce, manifested by

23

shipper‘s fixed and persisting transportation intent at the time of the shipment, and is ascertained

24

from all of the facts and circumstances surrounding the transportation‖). Exel has not pointed to

25

any specific evidence it intends to introduce on this issue or explained why individualized

26

inquiries will be necessary. Therefore, the Court concludes that this claim is manageable and need

27

not be decertified at this time.

28
23

1

7. Claim Three (Pay for All Hours Worked)

2

According to the January 15, 2016 Joint Case Management Statement, this claim is

3

essentially the same as the minimum wage claim except that if Plaintiffs prevail on liability on this

4

claim, they are entitled to damages based on their regular rate of pay instead of minimum wage.

5

See January 15, 2016 Joint Case Management Statement at 18. At oral argument, Plaintiffs

6

conceded that they cannot recover damages on both Claim One and Claim as this would be

7

duplicative. Thus, if Plaintiffs prevail on Claim Three, they will dismiss Claim One. Claim Three

8

raises no separate issues as to manageability.

9
10

8. Claims Four and Five (Meal and Rest Breaks )
a. Background

United States District Court
Northern District of California

11

Plaintiffs intend to prove liability on their meal and rest break claims based on evidence

12

showing that Exel‘s policies as to providing breaks for drivers are not compliant with California

13

law. January 15, 2016 Case Management Statement at 19. Plaintiffs plan to present evidence that

14

Exel affirmatively instructs drivers that breaks need not be taken until after eight hours of work,

15

that it requires drivers to remain on duty during breaks to protect the products in the delivery

16

vehicle, that it does not pay drivers for missed meal periods or breaks, and that it does not keep

17

records as to employee meal periods. Plaintiffs‘ Opposition at 11.

18

With respect to damages, Plaintiffs plan to ―provide testimony from [Exel] managers that

19

the drivers typically work more than 5 hours in a day, as well as Exel‘s compensation and dispatch

20

data showing the number of days worked by the class.‖ Id. at 20. Plaintiffs then will multiply the

21

number of days worked by the class by the regular rates of pay from Exel‘s settlement data.

22

Plaintiffs contend that once they have established a non-compliant policy the burden shifts to Exel

23

to demonstrate that compliant breaks were provided or that it paid the required hour of pay for

24

missed meal or rest breaks. January 15, 2016 Case Management Statement at 20 (citing Safeway,

25

Inc. v. Superior Court, 238 Cal. App. 4th 1138, 1153-61 (2015); Bradley v. Networkers Int’l, LLC,

26

211 Cal. App. 4th 1129, 1144 (2012); Brinker, 53 Cal. 4th at 1053-54).

27
28

Exel counters that it does not have a policy of prohibiting drivers from taking breaks.
Defendants‘ Reply at 11. It also argues that the requirement that drivers protect the contents of
24

1

their trucks does not make breaks noncompliant with California law. Id. Even if the policy were

2

unlawful, Exel contends, Plaintiffs cannot rely only on the policy to demonstrate liability – they

3

must also demonstrate that it was implemented. Id. (citing Campbell v. Vitran Express Inc., No.

4

CV1105029RGKSSX, 2016 WL 873009, at *3 (C.D. Cal. Mar. 2, 2016)). In addition, Exel

5

argues that individualized inquiries will be necessary to determine whether the class members

6

were actually denied breaks or if, instead, they simply chose not to take them. Id. Exel points out

7

that under Brinker, the employer‘s obligation is simply to make rest breaks available; an employer

8

is not liable if it makes a break available but the employee chooses not to take it. Id. at 12.

9
10

b. Discussion
California law requires: 1) an off-duty meal period by the fifth hour of the shift and another

United States District Court
Northern District of California

11

meal period by the 10th hour of the shift; 2) that the employee be relieved of ―all duty‖ during the

12

meal period; and 3) that the employer keep accurate information for each employee reflecting

13

meal periods. Wage Order 9-2001; Brinker Rest. Corp. v. Superior Court, 53 Cal. 4th 1004,

14

1040-41 (2012). Employees are also entitled to 10 minutes for each four hours of work ―or major

15

fraction thereof.‖ Brinker, 53 Cal. 4th at 1028 (citing Wage Order 5, Subdivision 12(A)). Like

16

meal breaks, an employer is required to ―authorize and permit the [rest] break or pay the

17

employee one hour of pay at the employee‘s regular rate for each workday the rest break is not

18

provided.‖ Faulkinbury v. Boyd & Associates, Inc., 216 Cal. App. 4th 220, 236 (2013) (citing

19

Brinker, 53 Cal.4th at pp. 1029–1031; Cal.Code Regs., tit. 8, § 11040, subd. 12.)

20

In Brinker, the California Supreme Court held that an employer satisfies its obligations as

21

to meal breaks so long as it ―relieves its employees of all duty, relinquishes control over their

22

activities and permits them a reasonable opportunity to take an uninterrupted 30-minute break, and

23

does not impede or discourage them from doing so.‖ 53 Cal. 4th at 1040. The employer is not

24

―obligated to police meal breaks and ensure no work thereafter is performed.‖ Id. at 1040-41. The

25

court recognized, however, that a ―common scheduling policy that made taking breaks extremely

26

difficult would show a violation‖ of California‘s meal break laws. Id. at 1041 (citing Jaimez v.

27

DAIOHS USA, Inc., 181 Cal. App. 4th 1286, 1303 (2010)).

28

In Brinker, the court remanded to the trial court to allow it to reconsider the class definition
25

1

as to the meal break claim in that case in light of the court‘s clarification of the law. Id. at 1050-

2

51. In a concurring opinion Justice Wederger, who also authored the majority opinion, wrote to

3

―emphasize what our opinion does not say.‖ Id. at 1052. She states:

4
5
6
7

the opinion of the court does not endorse Brinker‘s argument,
accepted by the Court of Appeal, that the question why a meal
period was missed renders meal period claims categorically
uncertifiable. Nor could it, for such a per se bar would be
inconsistent with the law governing reporting obligations and our
historic endorsement of a variety of methods that render collective
actions judicially manageable.

8

Id. at 1052. She explained, ―If an employer‘s records show no meal period for a given shift over

9

five hours, a rebuttable presumption arises that the employee was not relieved of duty and no meal
period was provided.‖ Id. at 1053. Thus, ―[a]n employer‘s assertion that it did relieve the

11
United States District Court
Northern District of California

10

employee of duty, but the employee waived the opportunity to have a work-free break, is not an

12

element that a plaintiff must disprove as part of the plaintiff‘s case-in-chief‖ but instead, ―is an

13

affirmative defense, and thus the burden is on the employer, as the party asserting waiver, to plead

14

and prove it.‖ Id.

15

Justice Werdeger further explained that while ―individual issues arising from an

16

affirmative defense can in some cases support denial of certification, they pose no per se bar.‖ Id.

17

She recognized that while such defenses pose issues of manageability, it is ―rarely if ever‖

18

appropriate to deny certification based merely on the need to conduct individual damages

19

inquiries going only to the amount of damages rather than the underlying question of liability. Id.

20

Courts have justified this approach on the basis that ―individual claims . . . might otherwise go

21

unpursued‖ giving a ―windfalls to defendants that harm many in small amounts rather than a few

22

in large amounts.‖ Id. (citing Sav–On Drug Stores, Inc. v. Superior Court, 34 Cal.4th 319, 339–

23

340 (2004); Daar v. Yellow Cab Co., 67 Cal.2d 695, 714–715 (1967)). She continued,

24

―[r]epresentative testimony, surveys, and statistical analysis all are available as tools to render

25

manageable determinations of the extent of liability.‖ Id.

26

In Safeway, Inc. v. Superior Court, the California Court of Appeal applied these principles

27

in a case involving a meal break claim based on the theory that the employer had a ―systemwide

28

practice‖ of failing to pay meal break premiums when required. 238 Cal. App. 4th 1138, 1144
26

1

(2015). On appeal, the employer challenged the trial court‘s certification of the meal break claim,

2

presenting evidence that it did, in fact, provide breaks and that many employees took those breaks.

3

Id. at 1050-51. In particular, it pointed to the opinion of its expert, based on time-punch data, that

4

there was significant variability as to whether employees took their breaks and that there was no

5

evidence of a companywide policy or practice of depriving employees of breaks. Id. Under these

6

circumstances, the employer argued, there were individualized issues as to liability that

7

predominated and the class should not have been certified. Id. The Court of Appeal rejected the

8

employer‘s argument, however, reasoning that it failed to address the employees‘ theory of

9

liability. Id. at 1156. The court found that the plaintiffs‘ ―evidence supports the reasonable
inference that in the context of a class action, they could establish that [the employer] engaged in

11
United States District Court
Northern District of California

10

the alleged practice, that is, they never paid meal break premium wages, even though a significant

12

number of employees accrued them.‖ Id. at 1159; see also Alberts v. Aurora Behavioral Health

13

Care, 241 Cal. App. 4th 388, 411 (2015)(noting that ―California courts routinely consider ‗pattern

14

and practice evidence, statistical evidence, sampling evidence, expert testimony, and other

15

indicators of a defendant's centralized practices in order to evaluate whether common behavior

16

towards similarly situated plaintiffs makes class certification appropriate‘ and holding that the trial

17

court had applied a ―flawed rationale‖ in refusing to certify a class on the basis that some

18

employees had ‗voluntarily‘ skipped breaks‖ because it had ―disregard[ed] plaintiffs‘ theory of

19

recovery, i.e., that there was no real choice to be made ‗voluntarily.‘‖).
In light of the case law discussed above, the Court concludes that Plaintiffs‘ are entitled to

20
21

proceed on their meal and rest break claims on a class-wide basis. Like the cases discussed above,

22

their theory of liability is based on common policies that make it difficult or impossible for class

23

members to take breaks. This theory can be addressed on a classwide basis.4 Exel‘s defense that

24
4

25
26
27
28

Exel seeks to distinguish Safeway on the basis that the evidence in that case included testimony
that managers often ―pressured‖ employees to skip breaks and that time-punch data reflected
―millions‖ of omitted, shortened, or delayed meal breaks. Exel states, ―Here, in contrast, there are
no time-punch data and no evidence of a systematic practice of pressuring employees to skip meal
breaks.‖ Reply at 11 n. 12. Exel misses the point. Safeway does not hold that any specific type of
evidence, such as time-punch cards, is required to establish a policy or practice. In that case, the
employees relied on this evidence to show a system-wide practice of failing to pay meal break
premiums. Here, Plaintiffs plans to rely on written break policies and training materials to show a
27

1

it does not have such policies is merely the flip side of this inquiry and turns on common questions

2

as well. To the extent Plaintiffs establish that Exel‘s policies and practices are non-compliant,

3

Exel will bears the burden of showing that it provided compliant meal and rest breaks. This is a

4

damages issue, however, and Exel has not shown that it cannot be addressed through the use of the

5

various tools that are routinely used to determine damages, including sampling and expert

6

testimony. Further, the fact that it may not be possible to come up with the exact number of breaks

7

the class members actually missed does not warrant decertification, as the cases discussed above

8

make clear.

9
10

United States District Court
Northern District of California

11

9. Claim Six (Deductions from Wages)
a. Background
This claim is based on the allegation that Exel automatically deducts from drivers‘ pay

12

certain categories of expenses, in violation of California Labor Code § 221. Plaintiffs intend to

13

present testimony by Exel witnesses confirming this practice, as well as the standard contracts

14

with class members that identify the specific items that are deducted as ―charge backs.‖

15

Plaintiffs‘ Opposition at 7. Further, according to Plaintiffs, damages ―can be easily calculated by

16

adding up the amounts that [Exel] itself has recorded for the deductions in its compensation and

17

settlement data.‖ January 15, 2016 Joint Case Management Statement at 25.

18

Exel contends this claim presents too many individualized issues to address on a class-

19

wide basis. Defendants‘ Combined Motion at 31. First, as to class members who hired second

20

drivers, Exel argues that settlement payments to the class member for the work of a second driver

21

are not wages, and therefore there can be no claim for deductions from ―wages‖ in that scenario;

22

further, Exel contends, there is no way to identify whether routes were driven by the class member

23

or the second driver for the class members who employed second drivers without individualized

24

inquiries. Id. Second, Exel asserts, the settlement payments may be inflated, in which case the

25

deductions would not ―invade the class members‘ wages‖; here again, Exel asserts, individualized

26
27
28

non-compliant policy, along with testimony of Exel witnesses about its policies. Nothing in
Safeway suggests that Plaintiffs‘ approach here, which relies on common proof, is any less
suitable for class-wide treatment than the approach of the plaintiffs in Safeway.
28

1

inquiries would be necessary. Id. Other individualized questions that Exel contends make this

2

claim unmanageable are: 1) did class members who employed helpers or second drivers charge

3

any of the deductions to those helpers or second drivers; 2) where deductions were based on

4

damage claims, was the damage the result of the independent contractor‘s willful conduct (in

5

which case Exel would not have an obligation to cover the claim); and 3) were the deductions

6

―secret‖ as Exel contends is required under section 221, citing Koehl v. Verio, Inc., 142 Cal. App.

7

4th 1313, 1337 (2006). Id. at 31-32.

8
9

b. Discussion
California Labor Code section 221 provides that ―[i]t shall be unlawful for any employer to
collect or receive from an employee any part of wages theretofore paid by said employer to said

11
United States District Court
Northern District of California

10

employee.‖ The Court finds that common issues predominate and that this claim can be addressed

12

on a class-wide basis.

13

Plaintiffs plan to rely on class-wide proof to establish liability, namely, testimony of Exel

14

representatives and standard contracts signed by all class members. Although Exel contends the

15

settlement payments are inflated to cover these expenses, it has not explained why this issue is not

16

also a question of Exel‘s general policies and procedures; nor has it pointed to evidence suggesting

17

that it will be necessary to conduct a separate inquiry on this question for each class member.

18

Further, to the extent Plaintiffs challenge the legality of Exel‘s argument that it is not liable

19

because it ―inflated‖ settlement payments, that is an issue that also can be addressed on a class-

20

wide basis. See January 15, 2016 Joint Case Management Statement at 25. Similarly, Exel‘s

21

defense that the deductions were not secret appears to be premised on common practices. See

22

Defendants‘ Combine Motion at 32 (―the deductions were transparent [and] mutually agreed-

23

upon‖).

24

The Court also is not persuaded that the possibility that a claim for which a deduction was

25

taken was based on damages that were caused by willful conduct will make adjudication of this

26

claim on a classwide basis unmanageable. Exel has not pointed to any evidence that any

27

deductions from any class members‘ settlement payments were associated with damage that were

28

the result of willfully conduct. Assuming that there is such evidence, Exel has not demonstrated
29

1

that introducing it at trial will create problems of manageability. 5
The remainder of Exel‘s challenges focus on the individualized inquiries it contends will

2
3

be necessary as to class members who employ second drivers. As discussed above, the Court

4

concludes that these issues can be addressed through the creation of a subclass of the class

5

members who have employed second drivers.

6

10. Claim Nine (Reimbursement for Employee Expenses)

7

a. Background
Plaintiffs intend to prove this claim based on language in the standard contracts requiring

9

that drivers must pay the expenses associated with operating and maintaining their trucks. They

10

will use settlement data, where available, to establish the expenses of class members, and where

11
United States District Court
Northern District of California

8

no such information is available they will rely on the opinions of their experts as to the estimated

12

amounts of these expenses for class members. January 15, 2016 Case Management Statement at

13

27-28.
Exel argues that this claim is unmanageable and should be decertified for several reasons.

14
15

First, it contends the settlement payments provided ―enhanced compensation‖ to cover some of the

16

expenses Plaintiffs have claimed as unreimbursed expenses. Motion at 33. According to Exel,

17

―only individualized inquiries would determine which class members were not fully reimbursed

18

for expenses and by how much.‖ Id. Second, Exel contends class members are required to prove

19

their actual expenses and may not rely on estimates because the lack of expense records is

20

―Plaintiffs‘ problem, not Exel‘s.‖ Id. at 34. Third, for the class members who have employed

21

second drivers, Exel contends expenses associated with those second drivers are ―entrepreneurial‖

22

and therefore not recoverable. Id. at 37. Fourth, Exel contends that for class members who work

23

for other delivery companies, some of the expenses may not be attributable to the class member‘s

24

employment with Exel. Id. at 38.
Exel suggests that these issues could be addressed by ―limiting the class to those

25
26
27
28

5

Plaintiffs do not appear to dispute that as a legal matter, Exel is entitled to deduct from wages
claims for damage that was caused by willful conduct and therefore, that these deductions are not
subject to reimbursement.
30

1

contractors who, during the periods covered by iDirect and Dispatch data, were the only people to

2

drive their trucks in service of Exel.‖ Id. at 38.

3

b. Discussion

4

California Labor Code section 2802 requires that an employer ―indemnify his or her

5

employee for all necessary expenditures or losses incurred by the employee in direct consequence

6

of the discharge of his or her duties.‖ As discussed above, the Court concludes that to the extent

7

this section imposes an obligation on the employer to reimburse employees for work-related

8

expenses, it also imposes an obligation to keep records of those expenses adequate to show that

9

the employer is fulfilling this obligation. To the extent the employer fails to satisfy that
requirement, Mt. Clemens applies. With this in mind, the Court concludes that common questions

11
United States District Court
Northern District of California

10

predominate on this claim.

12

With respect to liability, Plaintiffs will rely on the standard contracts to show that it is

13

Exel‘s policy not to reimburse class members for many work-related expenses. The main dispute

14

as to liability appears to be whether Exel will be able to prevail on its argument that it ―inflated‖

15

the settlement payments to cover these expenses. This argument turns on a common question of

16

law, namely, whether such an approach is permissible or rather, whether employers are required to

17

separately apportion any employee reimbursements from wages under section 2802, as Plaintiffs

18

contend. See Plaintiffs‘ Opposition at 9 (citing Gattuso, 42 Cal. 4th at 573). Further, as discussed

19

above in connection with the unlawful deduction claim, Exel has not explained how individualized

20

inquiries would be conducted to show this alleged ―inflation‖ or even why this practice could not

21

be addressed based on Exel‘s general policies and practices.

22

As to damages, many of Exel‘s challenges are based on Plaintiffs‘ reliance on estimates

23

rather than actual evidence. As discussed above, however, the absence of complete and accurate

24

information is a result, at least in part, of Exel‘s failure to maintain records of these expenses and

25

therefore Plaintiffs may prove these expenses as a matter of reasonable inference. To the extent

26

Exel challenges certain individual expenses on the basis of their availability as a legal matter (e.g.

27

certain costs associated with furnishing a truck that Exel contends are not considered ―employee

28

expenses‖), these challenges can be resolved on a class-wide basis. Similarly, challenges to the
31

1

assumptions of Plaintiffs‘ experts in coming up with the amounts of the cost estimates raise

2

common questions. Finally, the issues associated with expenses of class members who employed

3

second drivers can be handled by creating a separate subclass for these class members.
C.

4
5

The Parties’ Daubert Challenges
1. Curtis Testimony
Exel argues that Curtis does not have the experience necessary to qualify him as an expert

6
7

on the subject of cost-per-mile of operating a delivery truck and therefore, that he should not be

8

permitted to offer expert testimony under Rule 702. Defendants‘ Combined Motion at 9-10. In

9

addition, Exel argues that Curtis‘s estimates are unreliable because they are based on speculation
and not actual evidence of the class members‘ expenses. Id. at 12. In connection with this

11
United States District Court
Northern District of California

10

challenge, Exel criticizes the inclusion of or assumptions upon which Curtis based his estimates as

12

to the following costs: 1) tires, towing and repairs; 2) medical insurance; 3) cell phone expenses;

13

4) parking and traffic tickets; 5) payroll taxes; 6) tolls; 7) meals; and 8) payroll taxes for helpers.

14

Id. at 4, 13. Finally, Exel argues that to the extent Curtis offers opinions about the costs of truck

15

ownership (including yearly truck payments, liability insurance, license and registration, permits,

16

fuel, tires, preventative maintenance, and repairs), this testimony is irrelevant and should be

17

stricken under Rule 702 because California Labor Code section 2802 does not permit recovery of

18

the cost of furnishing a truck. Id. at 16-17 (citing Docket No. 210 (September 3, 2015 Order Re

19

Cross Motions for Summary Judgment) at 67-68).6 The Court is not persuaded by Exel‘s

20

challenges to the Curtis testimony.

21

First, the Court rejects Exel‘s contention that Curtis is not qualified to offer opinions about

22

the costs incurred in operating a delivery truck. Rule 702 permits a witness to testify as an expert

23

if he or she is qualified ―by knowledge, skill, experience, training, or education.‖ Fed. R. Evid.

24

702. The Ninth Circuit has emphasized that Rule 702 ―contemplates a broad conception of expert

25

qualifications.‖ Hangarter v. Provident Life & Acc. Ins. Co., 373 F.3d 998, 1015 (9th Cir. 2004)

26
27
28

6

In its Order re Cross Motions for Summary Judgment, the undersigned found that the cost of
lease payments on an employee‘s truck is not subject to reimbursement under California Labor
Code section 2802. Docket No. 210 at 67-68.
32

1

(emphasis in original).

2

business, Curtis has ―perform[ed] cost analyses for clients . . ., examin[ed] vehicle maintenance

3

programs, and conduct[ed] mock DOT audits and truck inspections.‖ Curtis Report at 1; see also

4

Declaration of Nathan Piller in Support of Plaintiffs‘ Opposition to Defendants‘ Combined

5

Daubert Motion and Motion to Decertify Rule 23 Class (―Piller Opposition Decl.‖), Ex. 48 (Curtis

6

Dep.) at 7, 42-44, 55-56. In addition, he has conducted several comprehensive analyses of vehicle

7

operating costs for his own businesses. See Piller Opposition Decl., Ex. 48 at 44-45. The Court

8

finds that Curtis‘s knowledge and experience are sufficient to qualify him as an expert as to the

9

cost of operating delivery trucks and that Exel‘s suggestions that Curtis must have training as a

10

United States District Court
Northern District of California

11

In his capacity as a consultant in the commercial truck consulting

statistician or have operated his own delivery truck are misplaced.
Second, the Court does not agree with Exel‘s assertion that Curtis‘s cost estimates are

12

unreliable simply because they are not based on investigation of the class members‘ actual costs

13

through, for example, a review of their receipts. The California Supreme Court has held that

14

employers may use a ―mileage reimbursement method‖ to determine the amount employees

15

should be reimbursed under California Labor Code section 2802, even though it is ―inherently less

16

accurate than the actual expense method‖ because of the ―onerous burdens that the actual expense

17

method imposes on both employer and employee.‖ Gattuso v. Harte-Hanks Shoppers, Inc., 42

18

Cal. 4th 554, 569 (2007). When this approach is used, the ―employee must be permitted to

19

challenge the resulting reimbursement payment‖ by demonstrating that his or her actual expenses

20

were greater than the approximate amount paid under the mileage reimbursement method. Id.

21

Similarly, the undersigned concludes that the methodology used by Curtis is sufficiently reliable

22

to meet the requirements of Rule 702 so long as Exel has the opportunity to challenge Curtis‘s

23

estimates. These challenges go to the weight of the evidence rather than admissibility, however.

24

See Clicks Billiards, Inc. v. Sixshooters, Inc., 251 F.3d 1252, 1263 (9th Cir. 2001).

25

The approach taken in Estrada v. FedEx Ground Package System, Inc., 154 Cal. App. 4th

26

1 (2007), cited by Exel, does not require a contrary result. In that case, the Court of Appeal

27

upheld the trial court‘s refusal to permit a class of delivery drivers to establish expenses on a class-

28

wide basis using expert testimony in which expenses were estimated, requiring instead that the
33

1

drivers prove their expenses through receipts and records. 154 Cal. App. 4th 1, 19-20 (2007). In

2

particular, the drivers were to provide a package to the referee containing, for each driver, receipts,

3

certain personal records and records from the defendant relating to their expenses. Id. The trial

4

court‘s ruling was based on its conclusion that the drivers‘ expenses would be ―too disparate

5

because of the economic differences in the California geographic area.‖ Id. The Court of Appeal

6

upheld the ruling, rejecting the plaintiff‘s assertion that they should have been allowed to offer

7

class-wide estimates of expenses on the basis that the record in that case showed that the drivers‘

8

claim was ―susceptible of exact proof.‖ Id. Although the Court of Appeal did not cite Mt.

9

Clemens, it implied that if the claim had not been susceptible to exact proof, the plaintiffs might

10

United States District Court
Northern District of California

11

have been entitled to prove their expenses based on the estimates of their experts. Id.
Here, in contrast to Estrada, the Court has made no finding that the expense claim is

12

susceptible of exact proof; nor has Exel pointed to evidence that would permit exact

13

determinations of expenses for each of the class members. Further, this absence of evidence is

14

likely at least partially attributable to the fact that Exel has treated Plaintiffs as independent

15

contractors rather than employees and has no system in place for reimbursing drivers for work-

16

related expenses. Under these circumstances, it is appropriate to permit Plaintiffs to rely on

17

estimates that may permit a ―fair and reasonable inference‖ as to their expenses, as discussed

18

above. The Court also notes that while Exel may present evidence at trial showing that there are

19

significant regional variations in class members‘ expenses, it is has not established at this stage of

20

the proceedings that such variations are sufficient to justify precluding Curtis‘s estimates. Finally,

21

there is nothing in Estrada suggesting that the trial court in that case excluded the experts‘

22

estimates as part of its gatekeeping role of excluding evidence that is unreliable or irrelevant.

23

Thus, Estrada does not support Exel‘s challenge to the Curtis testimony under Daubert.

24

Third, the Court finds that many of Exel‘s challenges to the inclusion of certain specific

25

types of costs in Curtis‘s cost-per-mile estimates (e.g., medical insurance, license and registration

26

fees, parking and traffic tickets) raise legal questions as to the availability of certain types of

27

damages that are more appropriately addressed on motions in limine or in the Court‘s instructions

28

to the jury. Further, Exel‘s challenges to the assumptions Curtis used in estimating certain costs
34

1

(e.g., tolls, towing and repairs) go to the weight of Curtis‘s opinions, not their admissibility as

2

Exel has not demonstrated that Curtis‘s methodology as to his estimates is unreliable or lacking

3

any factual basis.
Finally, the Court declines to strike as irrelevant Curtis‘s estimates as to the costs

5

associated with owning a truck that Exel contends are not available under California Labor Code

6

section 2802. The Court previously held that truck lease payments cannot be recovered under

7

section 2802 but it has not addressed whether other costs such as yearly payments on trucks

8

purchased by class members (rather than leased), liability insurance, licenses and registration,

9

permits, fuel, tires, preventative maintenance, and repairs are also excluded. While Exel may

10

bring a motion in limine on this question, the Court declines to exclude this testimony under

11
United States District Court
Northern District of California

4

Daubert.

12

2. Breshears Testimony

13

Exel‘s primary challenge to the testimony of Breshears is that his opinions are speculative

14

because he extrapolated from incomplete and non-representative data, and that his conclusions are

15

unfounded to the extent he relied on the Curtis estimates. Defendants‘ Combined Motion at 2-3.

16

Exel contends Breshears‘ testimony is speculative on the following grounds: 1) where he did not

17

have records showing who drove contractors‘ trucks, he assumed it was the class member rather

18

than a second driver, leading to an overestimate of employee expenses; 2) he did not account for

19

different rates of pay in different parts of California; 3) he assumed that ―all class members

20

worked 12 hours per day and five days per week, based on a fanciful interpretation of one Exel

21

document‖ even though the contractors with second drivers may have driven less and data for

22

Sears drivers indicated those drivers only drove 4.33 days per week on average; 4) he relied on

23

deposition testimony of a small number of class members to estimate the time of morning

24

meetings; 5) he extrapolated the Dispatch data (which covers 109 of 386 contractors for the period

25

beginning July 2013) and iDirect data (which covers 122 contractors for two hub locations for the

26

entire class period) to come up with estimates for the entire class for the entire class period; 6) he

27

reviewed timesheets and logs for less than 2% of all routes driven to come up with estimates for

28

break violations, assuming that when no break was shown it was not provided and that no driver
35

1

freely waived the break. Id. at 13-15. Exel also argues that Breshears‘ opinions regarding the

2

money Exel allegedly saved by converting its drivers from employees to independent contractors,

3

and about the costs of furnishing a delivery truck, is irrelevant and should be stricken under

4

Daubert. The Court rejects Exels challenges.

5

Several of Exel‘s challenges (numbers 1, 3 and 5 in the list above) relate to the

6

methodology Breshears used to determine the number of weeks, days and hours each class

7

member drove for the purposes of calculating the various forms of damages. Breshears describes

8

the basis for his opinions as follows:

9
10

United States District Court
Northern District of California

11
12
13
14
15
16

23. With respect to the potential number of work weeks each
Plaintiff worked with Defendants, I have used the number of weeks
between the start and termination dates (or January 6, 2015 if no
termination date) per the Weeks Worked report.
24. With respect to the potential number of days worked per week, I
have used for each Plaintiff, when available, his average number of
dates worked in a week per the iDirect Report and/or the Sears
report. If there was no iDirect Report and/or Sears report
information for a Plaintiff, I have used for each Plaintiff, when
available, his average number of dates worked in a week per the
Dispatch Recap Reports. If there were no Dispatch Recap Reports
for a Plaintiff, I have assumed that, for each potential work week,
each Plaintiff worked five days per work week.

19

25. With respect to the potential number and type of hours worked
per week, I have used for each Plaintiff, when available, his average
number of regular, overtime, and/or double time hours worked in a
week as determined per the Dispatch Recap Reports. If there were
no Dispatch Recap Reports for a Plaintiff, I have assumed that each
Plaintiff worked 12 hours per work day.

20

Breshears Report ¶¶ 23-25. Breshears goes on to explain that the assumption that contractors as to

21

whom there was no Dispatch or iDirect data drove five days a week, 12 hours a day, is based on an

22

Exel recruiting document stating that the typical work schedule is five to six days per week and

23

usually 10-12 hours a day including loading, as well as testimony by Exel executives. Id. ¶ 26.

17
18

24

To the extent Exel challenges as speculative the assumptions Breshears made to fill in gaps

25

in the iDirect and Dispatch data, the Court disagrees. First, Exel‘s position ignores the teaching

26

of Mt. Clemens and Tyson Foods that representative data may be used where an employer does not

27

keep adequate records of employee work time. As discussed above, that rule applies here. Given

28

that Plaintiffs are entitled to prove their time worked based on reasonable inference, the Court
36

1

finds that the assumptions Breshears has used to fill in the gaps are supported by sufficient

2

evidence to render them non-speculative and potentially helpful to the jury, which is all that

3

Daubert requires.

4

In assuming that drivers for whom there was no actual data drove five days a week, 12

5

hours a day, Breshears relied on guidelines used by Exel recruiters stating as much, as well as

6

deposition testimony of Exel Support Manager Greg Smigelsky and Exel Recruiter Cristina de la

7

Rosa regarding the schedule typically expected of Exel drivers. See Breshears Report at 5;

8

Breshears Dep. at 100. While Exel is entitled to cross-examine Breshears and present testimony

9

of its own to show that this assumption does not accurately reflect class members‘ daily and/or
weekly schedule, Breshears‘ testimony is based on sufficient evidence to take it out of the realm of

11
United States District Court
Northern District of California

10

speculation.7 Similarly, Exel has not pointed to any evidence showing that it was unreasonable to

12

use the actual data that was provided for some of the class members to estimate the schedules for

13

those class members for the portion of the class period that was not covered by that data.
The Court also rejects Exel‘s challenge based on Breshears‘ failure to apply different rates

14
15

of pay for different geographical regions in estimating unpaid overtime for the class (number 2,

16

above). In his expert report, Breshears performed two calculations based on two assumed wage

17

rates:

18

37. For purposes of this report, I have assumed a regular rate of
$30.00 per hour, which was calculated as (c) the piece rate of $24
per stop multiplied by an average of 15 stops per day (i.e., $360 per
day) divided by (d) 12 estimated hours worked per day. . . .

19
20

38. For purposes of this report, I have also prepared an alternative
calculation, which assumes a regular rate of $18.29 per hour, which
was based on the General Freight Trucking hourly mean wage for
53-3033 Light Truck or Delivery Services Drivers per the May 2014
Occupational Employment and Wages . . .

21

22
23
24

Breshears Report ¶¶ 37-38. Breshears conceded at his deposition that he did not attempt to

25

calculate overtime using different rates for different regions. Breshears Dep. at 193. He also

26
7

27
28

To the extent Breshears concedes he did not factor into his calculation data for the 20 to 39 class
members who worked for Sears, see Bresehears Dep. at 51, Exel may present that evidence at
trial. The Court does not find, however, that this omission is significant enough to render
Breshears testimony unreliable for the purposes of Daubert.
37

1

explained the basis for his conclusion that the statewide averages he used would provide a good

2

measure of damages for the class. Id. at 95-96. Exel has not pointed to any case suggesting that

3

this methodology is impermissible under Daubert; nor has it offered any evidence that the ultimate

4

damages figure would have been different regional rates had been used to calculate overtime rates

5

The Court concludes this is an issue more appropriately addressed at trial through cross-

6

examination and rebuttal evidence.

7

Exel also contends Breshears‘ estimate of morning meeting time, which is offered in

8

support of Plaintiffs‘ claim for unpaid wages, should be stricken as speculative. Again, the Court

9

disagrees. As discussed above, Breshears explained in his deposition that he relied on deposition
testimony of the only six class members who testified as to the precise length of the morning

11
United States District Court
Northern District of California

10

meetings and then took an average of those times. Breshears Dep. at 81. He also explained that

12

there was no information available as to the actual start and end times of daily meetings and that

13

the drivers‘ daily logs also would not have allowed for such a determination because they included

14

tasks other than the morning meeting in their pre-driving time, resulting in a ―comingling of time.‖

15

Id. at 79, 81. Under these circumstances, Mt. Clemens and Tyson Foods permit reasonable

16

inferences to be drawn from samples. It was Exel‘s duty to maintain records of employee work

17

time. As Exel failed to do so, Plaintiffs may use sampling to attempt to establish the amount of

18

time that class members spent in morning meetings. Exel, in turn, may attempt to establish at trial

19

that Breshears‘ estimate is inflated. It has not, however, shown that this testimony falls below the

20

standards of Daubert.

21

The Court also rejects Exel‘s assertion that Breshears‘ meal and rest break estimates do not

22

satisfy Daubert (number 6). Exel complains that Breshears sampled timesheets and logs for less

23

than 2% of all routes driven to come up with estimates for break violations. It also challenges

24

Breshears‘ assumption that when the timesheets did not reflect that a break was taken, the driver

25

was not provided with an opportunity to take a break (as opposed to having voluntarily waived the

26

break). As Plaintiffs‘ made clear at the hearing, their theory of damages on these claims (and

27

Breshears‘ damages estimates) assumes a 100% violation rate and thus, the claim does not depend

28

upon Breshears‘ analysis in his supplemental report, where he reviewed paper records to obtain a
38

1

violation rate based on the sample captured by those records. In any event, the Court concludes

2

that the sampling used by Breshears in his supplemental report was adequate to satisfy Daubert.

3

Further, to the extent Exel argues that many class members did, in fact, either take breaks or

4

voluntarily waive them, it will be Exel‘s burden to prove that class members received compliant

5

break periods (assuming Plaintiffs can establish liability by establishing that Exel‘s policy as to

6

breaks does not comply with California law).

7

Finally, the Court declines to strike Breshears‘ testimony about the costs of furnishing a

8

truck and the alleged savings to Exel resulting from treating drivers as independent contractors

9

rather than employees on the basis of relevance. As discussed above, the Court has not yet ruled
on the legal question of whether the specific expenses Plaintiffs seek to recover are available

11
United States District Court
Northern District of California

10

under section 2802 and therefore it is premature to hold that this testimony is irrelevant under

12

Daubert. Similarly, the relevance of Breshears‘ testimony relating to the alleged savings Exel

13

enjoyed from treating drivers as independent contractors is more appropriately addressed closer to

14

trial or during trial, when the Court can evaluate the relevance of this testimony in the context of

15

the actual evidence and legal theories put forward by the parties.

16

For the reasons stated above, the Court concludes the Breshears testimony satisfies the

17

requirements of Daubert.

18

3. Walker

19

Plaintiffs object to the testimony of Exel‘s rebuttal expert, Jonathan Walker, on the

20

grounds that he is not qualified to opine as to Curtis‘s mileage reimbursement rates. They object

21

to Walker‘s critique of the Breshears‘ reports on the basis that Walker simply chose ―a few

22

outliers to speculate about how the class as a whole might have different damages from those

23

presented by Mr. Breshears.‖ Plaintiffs‘ Motion at 3. In doing so, Plaintiffs contend, Walker

24

ignored the Exel testimony and documents upon which Breshears relied in support of his

25

calculations. Id. Plaintiffs contend Walker‘s report is ―littered with inadmissible speculation and

26

conjecture,‖ that he ―relies on inadmissible legal presumptions about which expenses are

27

recoverable and which are not recoverable under Labor Code § 2802,‖ that he ―fundamentally

28

misunderstands Plaintiffs‘ theory of recovery on the meal and rest period claims,‖ and that he is
39

1

unqualified to opine as to Breshears‘ use of Curtis‘s cost-per-mile figures because he himself has

2

no expertise or experience in calculating driving related expenses using a cost-per-mile formula.

3

Id. Plaintiffs also assert that Walker‘s testimony that drivers were better off as independent

4

contractors than as employees is speculative, irrelevant, and tainted as to the methodology he used

5

for determining the comparable market rate for employee wages. Id. Finally, Plaintiffs argue that

6

all of Walker‘s opinions are premised on the incorrect assumption that Plaintiffs are required to

7

prove their damages with precision even though it was Exel‘s failure to maintain proper records

8

that prevents them from doing so.

9

The Court finds that Walker‘s opinions addressing purported flaws in Breshears‘ damages
calculations due to possible variations among class members are sufficient to satisfy Daubert.

11
United States District Court
Northern District of California

10

This includes Walker‘s opinion that Breshears‘ damages estimates may be inflated because he did

12

not take into account class members who employed second drivers, see Walker Report ¶¶ 56-57,

13

and his challenge to Breshears‘ calculation of meal and rest break penalties based in part on

14

testimony of class members who testified that they did not record their breaks on daily logs and

15

time sheets, id. ¶ 48-50. While Walker does not attempt to evaluate the magnitude of the impact

16

these variations may have on Breshears‘ damages estimates, he does offer some anecdotal

17

evidence to show that Breshears‘ estimates may be flawed. The Court concludes this is sufficient

18

to satisfy Daubert. Plaintiffs will be able to challenge Walker‘s reliance on what Plaintiffs

19

contend are outliers in support of his opinions at trial. Similarly, Plaintiffs will have an

20

opportunity to introduce evidence as to Exel‘s policies and practices to show, if they can, that

21

Walker‘s opinions are unfounded.

22

Further, to the extent Plaintiffs challenge Walker‘s opinions as being based on incorrect

23

legal assumptions relating to what expenses are recoverable under Labor Code section 2802, the

24

Court concludes that these are issues that should be addressed in motions in limine, as discussed

25

above, rather than on a Daubert motion. As to Walker‘s critiques of Breshears‘ calculation of

26

damages on meal and rest breaks, which challenge Breshears‘ sampling to determine the meal

27

break violation rate as well as Breshears‘ assumption that where employees did not record a break

28

on their timesheets they were denied a break, see Walker Report ¶¶ 48-50, the Court does not find
40

1

these opinions so misleading as to require their exclusion. With proper instruction about the

2

allocation of burdens of proof on the meal and rest break claims, the jury may find this testimony

3

helpful and is unlikely to be confused.
The Court also declines to strike Walker‘s testimony opining that drivers were better off as

4
5

contractors on the grounds that this testimony is not relevant. While Plaintiffs may renew their

6

relevance challenge at trial under Rule 403, the Court concludes that such a determination is

7

premature at this point. To the extent that Plaintiffs challenge the wage rate used to calculate the

8

alleged benefits of working as independent contractors, this issue can be adequately addressed

9

through cross-examination at trial.
With respect to the section of Walker‘s Report entitled ―Partial Corrections to Mr.

10

United States District Court
Northern District of California

11

Breshears‘ Analysis,‖ the Court concludes that the opinions expressed by Walker are not so

12

misleading as to require exclusion under Daubert. Although Walker purports to come up with

13

what appears to be his own cost-per-mile estimate – an area in which he admits he has no expertise

14

or experience – the methodology he uses to come up with that estimate is straightforward and does

15

not require specific expertise in calculating cost-per-mile rates; so long as he is clear in his

16

testimony as to his reasons for excluding certain items from the overall damages figure, and is

17

careful not to invade the province of the court in setting forth the law (particularly as to the level

18

of certainty that is required to prove Plaintiffs‘ damages), or the jury in resolving issues relating to

19

the sufficiency of the evidence, Walker‘s opinions may be helpful to the jury

20

IV.

21

22
23
24
25
26
27
28

CONCLUSION
Defendants‘ Combined Motion and Plaintiffs‘ Motion are DENIED. The Court modifies

the Class definition, which is as follows:
All individuals who have: 1) signed the Independent Truckman‘s
Agreement with Exel Direct; 2) personally provided delivery
services for Defendant Exel Direct in California while being
classified by Exel Direct as independent contractors under the
Independent Truckman‘s Agreement at any time between June 14,
2008 and January 6, 2015; and 3) received the official notice of this
action that was approved by the Court and sent to potential class
members in January 2015. Any individual who has signed the
Independent Truckman‘s Agreement with Exel Direct but has
provided delivery services exclusively through the use of hired
second drivers and who has never personally made deliveries for
41

1
2
3

Exel is excluded from the Class.
In addition, the following Subclass will be added:

4

All individuals who are members of the Class and who at any time
during the class period employed second drivers to perform
deliveries for Exel.

5

Finally, the Court has not decided whether it makes sense to conduct the jury trial in

6

phases, with the first phase addressing liability and the second phase addressing damages. The

7

parties should be prepared to address this question at the Pre-Trial Conference.

8

IT IS SO ORDERED.

9
10

Dated: April 21, 2016

United States District Court
Northern District of California

11
12
13

______________________________________
JOSEPH C. SPERO
Chief Magistrate Judge

14
15
16
17
18
19
20
21

22
23
24
25
26
27
28
42