Woods et al v. Vector Marketing Corporation

Filing 228

ORDER by Judge Edward M. Chen Granting in Part and Denying in Part 178 Plaintiffs' Motion for Class Certification; and Denying 192 Defendant's Motion to Partially Decertify FLSA Collective Action. (emcsec, COURT STAFF) (Filed on 9/4/2015)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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WILLIAM WOODS, et al.,

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Plaintiffs,
v.

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For the Northern District of California

United States District Court

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No. C-14-0264 EMC

VECTOR MARKETING CORPORATION,

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Defendant.
___________________________________/

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ORDER (1) GRANTING IN PART AND
DENYING IN PART PLAINTIFFS’
MOTION FOR CLASS
CERTIFICATION; AND (2) DENYING
DEFENDANT’S MOTION TO
PARTIALLY DECERTIFY FLSA
COLLECTIVE ACTION
(Docket Nos. 178, 192)

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I.

INTRODUCTION

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The Plaintiffs in this action participated in Defendant Vector Marketing Corporation’s sales

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training program.1 It is undisputed that the Plaintiffs were not paid for any of the time they spent in

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training. Vector argues this was entirely appropriate, as the Plaintiffs were its trainees not entitled to

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any wages. Plaintiffs argue otherwise, and contend that Vector’s recruits are actually employees

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who are entitled to various employment benefits, such as receipt of minimum or overtime wages.

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See Docket No. 1 (Complaint). Currently pending before the Court is Plaintiffs’ motion for final

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certification of a collective action under the FLSA, as well as certification of five state law wage-

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and-hour class actions under Federal Rule of Civil Procedure 23 (Rule 23). Docket No. 178 (Class

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Cert. Mot.). Vector has also moved for partial decertification of Plaintiffs’ FLSA collective action.

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Docket No. 192 (Decertification Mot.).

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Plaintiffs are William Woods (California), Dominic Seale (Florida), Wesley Varughese
(Illinois), Eric Essler (Michigan) and Samuel Barone-Crowell (New York).

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On March 16, 2015, this Court conditionally certified a collective action under the Fair

1198593 (N.D. Cal. Mar. 16, 2015). It was not the first time this Court has conditionally certified an

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FLSA collective action brought on behalf of Vector trainees. See Harris v. Vector Mktg. Corp.

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(Harris I), 716 F. Supp. 2d 835 (N.D. Cal. 2010). In fact, this Court has previously granted final

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certification of an FLSA collective action involving Vector trainees, and has further granted class

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certification under Federal Rule of Civil Procedure 23 (Rule 23) of California wage-and-hour claims

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brought against Vector by its recruits. See Harris v. Vector Mktg. Corp. (Harris II), 753 F. Supp. 2d

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996 (N.D. Cal. 2010). As will be discussed in this Order, a substantially similar result is required

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here. Indeed, the large majority of Vector’s arguments currently before the Court were previously

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For the Northern District of California

Labor Standards Act (FLSA). Woods v. Vector Mktg. Corp., No. 14-cv-264-EMC, 2015 WL

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United States District Court

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raised and rejected by this Court in Harris.

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For the reasons explained below, and further for the reasons articulated at the hearing on this

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matter, the Court finds that final certification of an FLSA collective action is appropriate here

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because the Plaintiffs and the FLSA opt-ins are “similarly situated” such that adjudication of their

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legal claims in one collective proceeding would be both fair and efficient. See Harris II, 753 F.

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Supp. 2d at 1005. The Court similarly finds that the requirements of Rule 23 are met with respect to

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Plaintiffs’ proposed class actions under the wage and hour laws of California, Florida, Illinois,

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Michigan, and New York. Notably, Vector concedes that many of the Rule 23 requirements,

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including commonality and predominance, are satisfied here. And with the exception of one

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argument regarding California recruits who agreed to arbitrate their claims against Vector, the Court

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finds Vector’s remaining Rule 23 arguments to be without merit.

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II.
A.

BACKGROUND2

Factual Background
Vector sells CUTCO-brand kitchen cutlery, kitchen accessories, and sporting knives through

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a “direct marketing” sales model which involves, among other things, in-home sales appointments

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conducted by Vector’s Sales Representatives. Docket No. 193 (Matheson Decl.) at ¶ 2. The

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majority of Vector’s Sales Representatives are college-aged, and many have no prior sales

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experience. Id. at ¶ 3.

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Before an individual can “launch” as a Sales Representative, they typically must receive
some form of training from Vector. Matheson Decl. at ¶¶ 3-5; see also Docket No. 194 (Humphrey
Decl.), Ex. C (Matheson 8/5/14 Depo. Tr.) at 61:7-62:24 (Vector’s Legal Affairs Coordinator

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For the Northern District of California

United States District Court

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testified that at least 90% of Sales Representatives complete Vector training, and further testified

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that “it’s necessary to participate in [Vector’s] initial training . . . to become a successful sales

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representative”). An individual interested in becoming a Vector Sales Representative can choose to

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receive training either online or via a “three-day classroom seminar.” Matheson Decl. at ¶¶ 3-4.

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Because only recruits who attended in-person training are members of the putative collective and

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class actions at issue here, the Court will focus its attention on Vector’s in-person training practices.

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See Docket No. 195 at 1 n.1 (acknowledging that the parties have stipulated to exclude from any

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class all individuals who completed their training online).

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There is little factual dispute about how Vector’s in-person training program is conducted.

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Training typically occurs over the course of 3 days, and lasts five hours per day excluding any take

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home assignments. See Humphrey Decl., Ex. D. at 126:25-127:6. Nor is there dispute over the

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content of the training: Training is conducted using standardized manuals, the substance of which

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the parties agree has remained largely identical over time and in all geographic regions where Vector

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Given the long history of this litigation, the Court assumes some familiarity with the
factual and procedural history of this case. See generally, Harris II, 753 F. Supp. 2d 996 (N.D. Cal.
2010) (granting Rule 23 class certification and final collective action certification in similar
litigation); Woods, 2015 WL 1198593 (N.D. Cal. Mar. 16, 2015) (conditionally certifying FLSA
collective action in this case); Woods v. Vector Mktg. Corp., No. 14-cv-264-EMC, 2015 WL
2453202 (N.D. Cal. May 22, 2015) (granting in part and denying in part Vector’s motion for partial
summary judgment in this case).

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operates. See, e.g., Docket No. 179 (Saltzman Decl.), Exs. 1A and 1B (summary charts detailing

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overwhelming similarities between Vector training manuals); id., at Exs. 2-36 (Training Manuals).

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While Vector claims it prohibits its recruits from actually selling any knives during the training

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period, at some point during the three-day seminar trainees are asked to create lists of potential

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customers (“customer lists”) who might want to purchase Vector’s products and schedule

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appointments with these individuals for sales demonstrations after training has ended. See, e.g.,

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Saltzman Decl., Ex. 7 at 16-17 (training manual with phone script for trainee to use to set up sales

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appointments); Id., Ex. 9 (“The reason I am calling is I just started a new job. And as part of my

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training, I’m required to put on some initial appointments.”). There is similarly no dispute that as
part of something Vector calls the “Personal Recommendation Program,” trainees are asked to

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For the Northern District of California

United States District Court

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provide Vector with a list of friends and other potential recruits (“recruit lists”) who might want to

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train to become Vector Sales Representatives. See, e.g., Saltzman Decl., Ex. 36C (Vector Training

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Transcript) at 175:21-187:16; id. at 182:14-19 (training instructor telling trainees to “put a star next

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to the ones you want [Vector] to focus on, the ones that you’re like ‘Oh, definitely call this person. I

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know they’re looking for work or I know they’d be really good.’ But everybody else, you never

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know . . . so just put them down anyways”); id. at 178:13-25 (promising the first three trainees who

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provided Vector 75 recruit names a “free peeler” and promising any trainee who provided more than

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100 names a “supreme burrito”); see also Docket No. 188 (Barone-Crowell Decl.) at ¶ 14 (averring

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that Vector trainees were asked to provide “recruit lists,” and that he printed a list containing

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hundreds of his Facebook friends that he then supplied to Vector).

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Not every recruit completes all three days of training. See Matheson Decl. at ¶ 5. Those that

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do, however, become eligible to serve as Vector Sales Representatives. See Matheson 8/5/14 Depo.

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Tr. at 86:13-17. There is no dispute that Vector does not pay its recruits for any time they spend in

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training.

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In the training courses attended by the named Plaintiffs, 97% of the trainees who completed

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all three days of training ultimately signed Sales Representative Agreements (SRAs) in order to sell

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cutlery for Vector. See Humphrey Decl., Ex. E. At least some of Vector’s SRAs contain an

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arbitration clause that purports to require the Sales Representative to arbitrate any disputes “related

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to . . . the Sales Rep’s initial training” at either JAMS or before the AAA. See Woods v. Vector

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Mktg. Corp., No. 14-cv-264-EMC, 2014 WL 4348285, at *1 (N.D. Cal. Aug. 28, 2014) (compelling

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arbitration of certain named Plaintiffs’ claims). The Court has previously found that the arbitration

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provision in the SRAs is enforceable. Id. at *5.

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B.

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Procedural Background
As indicated above, this is not the first time Vector has faced claims that it improperly denies

spend in training to become Sales Representatives. In the Harris litigation, this Court certified an

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FLSA collective action on behalf of “all individuals who worked for Vector in the state of California

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as Sales Representatives from April 15, 2006, through May 12, 2010.” Harris II, 753 F. Supp. 2d at

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For the Northern District of California

its recruits minimum wages and other statutorily required employment benefits for the time they

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United States District Court

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1023. The Court had previously determined that the proper legal standard for determining whether a

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trainee is “employed” within the meaning of the FLSA (and under California law, as well) is the

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Department of Labor/Portland Terminal test.3 See Harris I, 716 F. Supp. 2d at 840. Under the

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Portland Terminal test, the fact-finder considers whether:

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(1) the “training, even though it includes actual operation of the
facilities of the employer, is similar to that which would be given in a
vocational school”; (2) the “training is for the benefit of the trainee”;
(3) the “trainees do not displace regular employees, but work under
close observation”; (4) the “employer that provides the training
derives no immediate advantage from the activities of the trainees and
on occasion his operations may actually be impeded”; (5) the “trainees
are not necessarily entitled to a job at the completion of the training
period”; and (6) the “employer and the trainees understand that the
trainees are not entitled to wages for the time spent in training.”

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Harris II, 753 F. Supp. 2d 1006 (citation omitted). In Harris, the Court found that final certification

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of the FLSA claims for minimum wages was appropriate because the “Portland Terminal factors are

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largely susceptible to collective treatment” in light of the fact that they could be analyzed using

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proof common to nearly all collective action members. Id. at 1010.

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The Court also found that the Harris plaintiffs had met their burden to certify a class action
under Rule 23 to pursue claims under California law alleging that Vector (1) failed to pay minimum

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The DOL/Portland Terminal test is derived from factors identified by the United States
Supreme Court in Walling v. Portland Terminal Co., 330 U.S. 148 (1947).

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wages; (2) coerced trainees into purchasing a sample knife kit; and (3) failed to reimburse trainees

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for necessary expenses of training, including the sample knife set. Harris, 753 F. Supp. 2d at 1012.

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The Court ultimately certified a Rule 23(b)(3) class “defined as all individuals who worked for

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Vector in the state of California as ‘Sales Representatives’ from October 15, 2004 through the date

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of the class notice.” Id. at 1023. Class notice was mailed around September 2011, and the Harris

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case eventually settled in February 2012. See Harris, No. 08-cv-5198, Docket Nos. 450 at 18;

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Docket No. 516 (Order Granting Final Approval).

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This case was filed on January 16, 2014, by the same attorneys who represented the plaintiffs
in Harris. Once again, Plaintiffs contend that Vector has unlawfully refused to pay its recruits for
the time they spend in training. See Complaint. More specifically, Plaintiffs still believe that

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For the Northern District of California

United States District Court

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Vector’s recruits are the firm’s employees under the Portland Terminal test. They argue that the

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Portland Terminal analysis will reveal that Vector’s trainees are its employees as a matter of law

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under not just the FLSA, but under California, Florida, Illinois, Michigan, and New York law as

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well. The Court will discuss the procedural history of the FLSA claim first, before discussing the

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state law claims.

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1.

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As in Harris, the current complaint alleges an FLSA claim for failure to pay minimum

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wages. The FLSA claim is brought on behalf of all Vector trainees nationwide that attended training

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during the relevant collective action period. The Court previously granted Plaintiffs’ motion for

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conditional certification of an FLSA collective action. Woods, 2015 WL 1198593. Notice was

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subsequently provided to members of the conditionally certified FLSA class, which is defined as

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follows:

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FLSA Claims

All individuals who attended all three days of Vector’s initial training,
or attended some portion of Vector’s initial training and provided
personal recruit names during training, and who did not complete their
entire training online, and who did not enter into a sales representative
agreement containing an arbitration clause, at any time on or after
September 22, 2011.

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Docket No. 146 at 2; Docket No. 152. The conditionally certified FLSA collective action in this

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case is significantly broader than that which was ultimately certified in Harris. See Woods, 2015

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WL 1198593, at *4. This is largely due to the fact that the Harris collective action only included

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trainees who trained with Vector in California, while the proposed FLSA collective action proposed

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here is nationwide. Ultimately, notice was sent to roughly 145,000 potential collective action

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members. See Docket No. 201 (Noguera Decl.) at ¶ 14. Exactly 4,500 individuals filed timely and

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valid opt-in forms to join the collective action. Id.

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Vector has now filed a motion for partial decertification of the FLSA collective action.

should be excluded from this FLSA collective action because they are not “similarly situated” with

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the other collective action members or named Plaintiffs. See Decertification Mot. at 8. Vector also

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argues that a two-year limitations period should apply to any collective FLSA claims, rather than the

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For the Northern District of California

Specifically, Vector argues that any individuals who did not provide recruit lists during training

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United States District Court

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three-year limitations period that could apply if Plaintiffs proved “willful” violations of the FLSA.

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Id. at 11-13.

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2.

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Plaintiffs’ complaint also asserts various state law wage-and-hour claims against Vector.

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State Law Claims

Specifically, Plaintiffs currently seek class certification of the following claims:
Claims Asserted

California

Failure to Pay Minimum or Overtime Wages
(Cal. Lab. Code §§ 1194, 1197); Unfair
Competition and Unlawful Business Practices
(Cal. Bus. and Prof. Code § 17200).

Florida

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State

Failure to Pay Minimum and/or Overtime
Wages (Fla. Stat. § 48.110 and Fla.
Constitution Article X, § 24).

Illinois

Failure to Pay Minimum and/or Overtime
Wages (820 Ill. Comp. Stat. §§ 105, et seq.)

Michigan

Failure to Pay Minimum and/or Overtime
Wages (Mich. Comp. Laws §§ 408.382,
408.384, 408.393, 408.394)

New York

Failure to Pay Minimum and/or Overtime
Wages (12 N.Y. Comp. Codes R. & Regs. Part
142-2, et seq. and N.Y. Lab. Law §§ 2 and 650,
et seq.) Failure to Pay Wages Upon
Termination (N.Y. Lab. Law §§ 191, 198)

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While the precise state law claims vary, each concern Vector’s undisputed policy of not

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paying trainees any wages. Crucially, it is undisputed that resolution of Vector’s liability for each

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state law claim asserted turns on a common threshold legal issue – whether Vector trainees are the

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company’s employees under the Portland Terminal test. See Docket No. 198 (Class Cert.

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Opposition Brief) at 16 (conceding that “the Portland Terminal test for determining whether trainees

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are employees for purposes of the FLSA applies equally to all of [Plaintiffs’] state and federal law

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claims”). That is, the parties are in agreement that application of the Portland Terminal analysis

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will resolve not just Vector’s liability under the FLSA, but its liability (or lack thereof) with respect

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to all of the Plaintiffs’ state law claims as well.

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For the Northern District of California

United States District Court

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Plaintiffs have now moved to certify their state law claims pursuant to Rule 23(b)(3).
Specifically, the Plaintiffs seeks to certify the following five classes, and one subclass:

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State

Plaintiffs’ Proposed Class Definition

California

All individuals in California, who, since
January 16, 2010, through the date a final
judgment is rendered, either (a) attended all
three days of Vector’s initial training program,
or (b) attended some portion of Vector’s
training program and provided a list of
individuals they thought might be interested in
becoming sales representatives for Vector.

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Excluded from the California class are those
individuals who completed their initial training
entirely online or who did not opt out of the
case captioned: Harris v. Vector Marketing
Corp., Civil Action Number 08-5198, before
the United States District Court for the
Northern District of California

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State

Plaintiffs’ Proposed Class Definition

Florida

All individuals in Florida, who, since January
16, 2012, through the date a final judgment is
rendered, either (a) attended all three days of
Vector’s initial training program, or (b)
attended some portion of Vector’s training
program and provided a list of individuals they
thought might be interested in becoming sales
representatives for Vector.

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Excluded from the Florida class are those
individuals who completed their entire initial
training online or who signed a sales
representative agreement with an arbitration
clause.

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Illinois

All individuals in Illinois, who, since January
16, 2011, through the date a final judgment is
rendered, either (a) attended all three days of
Vector’s initial training program, or (b)
attended some portion of Vector’s training
program and provided a list of individuals they
thought might be interested in becoming sales
representatives for Vector.

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For the Northern District of California

United States District Court

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Excluded from the Illinois class are those
individuals who completed their entire initial
training online or who signed a sales
representative agreement with an arbitration
clause.

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Michigan

All individuals in Michigan, who, since
January 16, 2011, through the date a final
judgment is rendered, either (a) attended all
three days of Vector’s initial training program,
or (b) attended some portion of Vector’s
training program and provided a list of
individuals they thought might be interested in
becoming sales representatives for Vector.

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Excluded from the Michigan class are those
individuals who completed their entire initial
training online or who signed a sales
representative agreement with an arbitration
clause.

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State

Plaintiffs’ Proposed Class Definition

New York

All individuals in New York, who, since
January 16, 2008, through the date a final
judgment is rendered, either (a) attended all
three days of Vector’s initial training program,
or (b) attended some portion of Vector’s
training program and provided a list of
individuals they thought might be interested in
becoming sales representatives for Vector.

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Excluded from the New York class are those
individuals who completed their entire initial
training online or who signed a sales
representative agreement with an arbitration
clause.

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New York Subclass: All members of the New
York Class whose employment with
Defendants terminated during the New York
Class Period.

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For the Northern District of California

United States District Court

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See Class Cert. Mot. at 5-6.
As should be apparent from the above chart, the class definitions are largely identical except

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with respect to the selection of the appropriate class period.4 For the purposes of this motion,

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however, there is one very material difference between the proposed class definitions.5 Whereas

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Plaintiffs have “excluded” those individuals “who signed a sales representative agreement with an

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arbitration clause” from the Florida, Illinois, Michigan, and New York classes, the proposed

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California class definition includes individuals who have signed an arbitration agreement with

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Vector. As will discussed below, however, the ultimate California class as certified must (like the

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other four proposed state law classes) exclude individuals who signed an arbitration agreement with

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Vector.

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The Court presumes that the class periods differ because the limitations periods under state
law vary from two years in Florida to four years in California and six in New York.
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Vector does not argue that the proposed New York subclass cannot be certified if the New
York class is certified. Rather, Vector’s only arguments in opposition to the New York subclass are
those that also fully apply to the New York class as a whole. Hence, the Court will not specifically
discuss the proposed New York subclass or perform a separate Rule 23(b)(3) analysis for that class.
If the New York class can be certified, the New York subclass can similarly be certified for the exact
same reasons.

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III.

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FLSA COLLECTIVE ACTION

In this section of the order, the Court considers whether Plaintiffs’ FLSA claims can continue

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as a collective action, and specifically considers Vector’s arguments that certain collective action

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members’ class must be decertified. The Court will first discuss the applicable legal standard before

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applying that standard in the following sections.

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A.

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Legal Standard
Plaintiffs seeking to certify and maintain an FLSA collective action must demonstrate that

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the collective action members are “similarly situated.” 29 U.S.C. § 216(b). As this Court has noted

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on prior occasions, “[n]either the statute nor the Ninth Circuit has defined when employees are
‘similarly situated.’” Richie v. Blue Shield of Cal., No. 13-cv-2693-EMC, 2014 WL 6982943, at *6

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For the Northern District of California

United States District Court

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(N.D. Cal. Dec. 9, 2014). That said, a “majority of district courts (and a number of circuit courts)”

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have “adopted a two-step approach for determining whether putative FLSA class members are

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‘similarly situated.’” Id. (citations omitted). The undersigned followed the two-step approach both

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in Harris and, more recently, in Richie. See Harris II, 753 F. Supp. 2d at 1003; Richie, 2014 WL

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6982943, at *6. Neither of the parties suggest that the Court deviate from this approach now, and so

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the Court will once more apply the two-step FLSA framework.

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Under the first step, the court determines whether the proposed class should be conditionally

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certified for the sole purpose of sending out notice of the proposed action to the potential class

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members. See Lillehagen v. Alorica, Inc., No. SACV 13-0092-DOC, 2014 WL 2009031, at *3 (C.D.

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Cal. May 15, 2014); see also Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013) (“The

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sole consequence of conditional certification is the sending of court-approved written notice to

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employee . . . .”). At this preliminary notice stage, “courts require little more than substantial

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allegations, supported by declarations or discovery, that ‘the putative class members were together

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the victims of a single decision, policy, or plan.’” Benedict v. Hewlett-Packard Co., No. C13-0119-

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LHK, 2014 WL 587135, at *5 (N.D. Cal. Feb. 13, 2014). What this requires is the plaintiff to show

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that some “identifiable factual or legal nexus binds together the various claims of the class members

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in a way that hearing the claims together promotes judicial efficiency and comports with the broad

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remedial policies underlying the FLSA.” Richie, 2014 WL 6982943 at *6. “In making this

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determination, courts usually rely only on the pleadings and any affidavits that have been

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submitted.” Id. (internal quotation marks and citations omitted); see also Leuthold v. Destination

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America, Inc., 224 F.R.D. 462, 468 (N.D. Cal. 2004)). This Court has already determined that

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Plaintiffs have made an adequate showing at step one, and therefore notices went out to the putative

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collective action members.6 See Woods, 2015 WL 1198593, at *7.

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At the “second step of the two-step inquiry, ‘the party opposing the certification may move

Adams, 242 F.R.D. at 536). Thus, this step occurs after the conditional class has received notice and

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discovery has been completed. Leuthold, 224 F.R.D. at 467. In addressing the defendant’s motion

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to decertify, the court must make a “factual determination about whether the plaintiffs are similarly

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For the Northern District of California

to decertify the class once discovery is complete.’” Benedict, 2014 WL 587135, at *6 (quoting

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United States District Court

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situated by weighing such factors as:

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(1) the disparate factual and employment settings of the individual
plaintiffs; (2) the various defenses available to the defendants with
respect to the individual plaintiffs; and (3) fairness and procedural
considerations.”

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Harris II, 753 F. Supp. 2d at 1003.
The court applies a stricter standard at step-two “because there is much more information

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available, ‘which makes a factual determination possible.’” Harris I, 716 F. Supp. 2d at 837-38

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(quoting Vasquez v. Coast Valley Roofing, Inc., 670 F. Supp. 2d 1114, 1123 (E.D. Cal. 2009)). Even

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with this stricter standard, however, courts have noted that the second step analysis under the FLSA

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is still different from, and easier to satisfy than, the Rule 23 class certification requirements. See

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Lewis v. Wells Fargo & Co., 669 F. Supp. 2d 1124, 1127 (N.D. Cal. 2009). Finally, it is important

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to remember that what the Court is ultimately being called on to decide at step two “is whether there

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is enough similarity between” the claims of the named Plaintiffs “and other putative collective

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action members such that the case should proceed as a collective action.” Harris II, 753 F. Supp. 2d

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at 1005 (emphasis added). Exact similarity is not required.

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As noted above, exactly 4,500 individuals have filed opt-in notices, and seek to participate
in this putative collective action. Noguera Decl. at ¶ 14.

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B.

The Collective Action Members Are Similarly Situated

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In order to adjudicate whether Vector recruits are bona fide trainees rather than employees,

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the fact-finder must apply the Portland Terminal test. As noted above, the question at this stage is

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not the merits question (i.e., the proper classification of Vector’s recruits under the FLSA), but

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simply whether “the factors making up the [Portland Terminal] test can be evaluated on a collective

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basis – i.e., there is sufficient uniformity.” Harris II, 753 F. Supp. 2d at 1005.

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Vector agrees that five out of the six Portland Terminal factors can be adjudicated on a

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classwide basis using uniform proof. Indeed, in its opposition to Plaintiffs’ class certification

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motion – discussed in more detail below – Vector concedes that both the Rule 23 commonality and
predominance tests are met. That is, Vector essentially concedes that the Portland Terminal test can

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For the Northern District of California

United States District Court

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be uniformly applied to all of its trainees without significant individual variation, as this Court

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previously held in Harris II. See 753 F. Supp. 2d at 1005-10.7 Nevertheless, Vector argues that a

13

portion of the conditionally certified FLSA class must be decertified because there is a potential for

14

variation on the fourth Portland Terminal factor – whether the alleged employer derives immediate

15

advantage from the trainees’ activities. See Docket No. 192 at 8-11.

16

Specifically, Vector argues that recruits that attended all three days of Vector’s training, but

17

who did not provide any recruit names to Vector during the Personal Recommendation Program are

18

not “similarly situated” to those other Vector recruits who did provide recruit lists. Vector argues

19

that the Court should decertify the FLSA collective action to the extent it includes individuals who

20

did not provide recruit names to Vector. The Court disagrees.

21

First, Vector’s argument fails to recognize the importance of its concession that five of the

22

other six Portland Terminal factors can be uniformly adjudicated using common proof on a

23

classwide basis. As this Court has previously held, the working environment for all Vector trainees

24

is the same nationwide, and Vector has an undisputed policy of not compensating recruits for time

25
7

26
27
28

Vector does not argue that this Court’s analysis of the various Portland Terminal factors in
Harris II was wrong, nor has Vector presented any evidence that would cause this Court to rethink
its earlier determination that the Portland Terminal test can be adjudicated on a classwide basis; the
training Vector recruits receive is highly standardized and Vector has not argued that the training
has materially changed since this Court decided Harris II. Thus, the Court adopts by reference its
discussion of the Portland Terminal factors from its earlier Harris II decision.

13

1

spent in training. Thus, even if Vector were correct that there is some variance among collective

2

action members on the fourth Portland Terminal factor, the Court finds any such variance is not

3

sufficient to defeat final FLSA certification here, where all of the other Portland Terminal factors

4

can be efficiently adjudicated with common proof.

5

Second, Vector has not shown that any claimed variation with respect to whether an

6

individual trainee provided Vector with a recruit list is in fact material to the ultimate outcome of the

7

Portland Terminal analysis. See, e.g., Reich v. Parker Fire Protection Dist., 992 F.2d 1023, 1026-

8

27 (10th Cir. 1993) (explaining that the six factors of the Portland Terminal test are meant to be

9

assessed in light of the “totality of the circumstances”); Harris II, 753 F. Supp. 2d at 1006
(following Reich and similar cases, and concluding that the Portland Terminal factors cannot be

11
For the Northern District of California

United States District Court

10

analyzed in isolation). While it can be argued, as Plaintiffs do, that providing a recruit list

12

“immediately advantages” Vector, recruits arguably provide an “immediate advantage” to Vector in

13

other ways. For instance, Vector does not dispute that all trainees who complete three days of

14

training are asked to create customer lists and set up appointments with potential customers that are

15

to take place soon after training is over. See, e.g., Saltzman Decl., Exs. 9 (“The reason I am calling

16

is I just started a new job. And as part of my training, I’m required to put on some initial

17

appointments.”). The Court has yet to adjudicate whether that may be characterized as a

18

commencement of the sales process, such that it might be deemed to provide an “immediate”

19

advantage to Vector.

20

Third, it may be argued that the fourth Portland Terminal factor should be evaluated not on

21

an individual recruit by recruit basis, but in the aggregate – i.e., did Vector receive an “immediate

22

advantage” from the recruit lists produced by trainers on the whole. The Court notes the fourth

23

factor references “the acivities of the trainees – the plural not singular form. Whatever the merits of

24

these arguments, recruits share a common interest in pursuing these issues and hence in that regard

25

are similarly situated.

26

Finally, perhaps the most important point is that any variance with respect to recruit lists can

27

be easily managed (and adjudicated) at either trial or summary judgment because any variance as to

28

this issue is simple and binary. Either a collective action member provided a recruit list or not.

14

1

There is no grey area, and within each group (i.e., those who provided lists and those who did not), it

2

is clear that all trainees are “similarly situated.” Thus, Vector is free to argue in a summary

3

judgment motion that it receives no “immediate advantage” from trainees who did not provide

4

recruit lists. Or the jury could decide, via special interrogatory, that trainees who provided recruit

5

lists are Vector’s employees, while those who did not are bona fide trainees.

6

Thus, the Court finds that the collective action members provisionally certified here have

7

sufficiently similar legal claims (particularly in light of the case management tools available) to

8

warrant final certification of a collective action under the FLSA.

9

C.

FLSA claims are typically governed by a two year statute of limitations, but Congress

11
For the Northern District of California

United States District Court

10

The Court Will Not Resolve Statute of Limitations Questions at This Stage of Proceedings

provided for a three-year limitations period if a Plaintiff can prove willful FLSA violations. See 29

12

U.S.C. § 255(a). Vector asks this Court to hold, as a matter of law, that Plaintiffs cannot prove

13

“willful” violations of the FLSA, determine that the standard two-year limitations period under the

14

FLSA consequently applies, and then decertify the claims of those collective action members whose

15

lawsuits would be untimely under the FLSA’s normal two-year statute of limitations period.8 The

16

Court declines to do so at this juncture.

17

The only question currently before the Court is whether it should certify an FLSA collective

18

action, or, more specifically, whether the claims and defenses of the parties are sufficiently similar to

19

warrant collective treatment. As noted above, the merits of this dispute are not currently at issue.

20

Vector does not argue that Plaintiffs could prove willful violations as to some collective action

21

members, but not as to others. Rather, Vector acknowledges that whatever limitations period is

22
8

23
24
25
26
27
28

Vector notes that the Court previously granted partial summary judgment in its favor,
finding that Plaintiffs could not prove “willful” violations of either California Labor Code sections
203 and 226. See Docket No. 164 at 3-8. Under those Labor Code provisions, a failure to pay
wages is only “willful” where the Defendant has no “good faith” argument that wages were not
owed (i.e., a violation is only willful where the Defendant cannot raise any defense to payment in
good faith). Plaintiffs correctly note that the standard of willfulness under the FLSA is different,
and thus this Court’s prior holding is not conclusive of Vector’s current argument regarding
“willful” violations of the FLSA. See McLaughlin v. Richland Shoe Co., 486 U.S. 128, 130 (1988)
(explaining that a plaintiff alleging a willful FLSA violation must show the defendant “knew or
showed reckless disregard for the matter of whether its conduct was prohibited by the FLSA”)
(emphasis omitted). Thus, it is theoretically possible for an employer to act in subjective good faith
and yet display reckless disregard, although the line is thin.

15

1

ultimately determined to apply here will apply uniformly across the class. Thus, Vector’s statute of

2

limitations argument is not relevant to the issues currently before the Court, and is essentially

3

premature.

4

Admittedly, Vector has cited three out-of-Circuit district court cases that suggest that a court

5

could determine the appropriate statute of limitations at the final certification stage. See, e.g., Stuven

6

v. Texas de Brazil (Tampa) Corp., No. 12-cv-1283, 2013 WL 610651, at *6 (M.D. Fla. Feb. 19,

7

2013) (“[Defendant] may renew its objection to a three-year limitations period in a motion for

8

decertification of the class, or a motion for summary judgment.”). While the Court does not

9

conclusively hold that a limitations argument could never be successfully raised at the final
certification stage, the Court believes such arguments are better addressed via summary judgment,

11
For the Northern District of California

United States District Court

10

where a fuller factual record may be developed. Alvarez v. IBP, Inc., 339 F.3d 894, 908 (9th Cir.

12

2003); see also O’Connor v. Uber Techs., Inc., -- F. Supp. 3d – , 2015 WL 1069092, at *10-12 (N.D.

13

Cal. 2015). Thus, the Court finds that it is far more appropriate to determine the “willfulness” issue

14

at an adjudicating stage rather than at the certification stage, where the Court’s task is far more

15

circumscribed, and limited to determining simply whether an FLSA action should proceed on a

16

collective basis. See Harris II, 753 F. Supp. 2d at 1005 (rejecting Vector’s merits arguments at the

17

certification stage because “[w]hat the Court is being called upon to evaluate at this juncture is

18

whether there is enough similarity between [Plaintiffs] and other putative collective action members

19

such that the case should proceed as a collective action”).

20

IV.

STATE LAW CLASS ACTIONS

21

Plaintiffs also seek class certification under Rule 23 of the five state-law class actions (and

22

one New York subclass) defined above. Plaintiffs’ certification bid is aided by the fact that Vector

23

largely agrees that the majority of the Rule 23 requirements are met. For instance, Vector does not

24

contest that all of the Rule 23(a) requirements are satisfied with respect to Plaintiffs’ Florida,

25

Michigan, and New York proposed classes. And Vector similarly concedes that Rule 23(a)’s

26

commonality requirement is satisfied for all of Plaintiffs’ proposed classes, as is Rule 23(b)(3)’s

27

predominance test.

28

16

1

That said, Vector does not agree that Plaintiffs’ proposed classes should be certified here.

2

Rather, Vector argues that: (1) Plaintiffs Woods (California) and Varughese (Illinois) are not typical

3

or adequate class representatives under Rule 23(a) because they did not provide Vector with recruit

4

lists during their training with Vector; (2) the proposed state law class actions are not a superior

5

method for adjudicating this controversy under Rule 23(b)(3) because aggrieved putative class

6

members can (and should) pursue their rights through the FLSA collective action this Court has

7

certified, rather than through Rule 23 class actions; and (3) Plaintiffs’ counsel are inadequate to

8

represent the interests of the class under Rule 23(g) because they filed certain of Plaintiffs’ private

9

information on this Court’s public docket without proper redactions, thereby creating a conflict
between Plaintiffs and their proposed class counsel. The Court disagrees, and rejects all of Vector’s

11
For the Northern District of California

United States District Court

10

Rule 23 arguments.

12

However, the Court does agree with Vector on two points regarding the Plaintiffs’ proposed

13

class definitions. First, the Court agrees with Vector that the classes, as currently defined, are

14

“improper, as they appear to include within their scope anyone who currently lives in any of the five

15

states at issue, even if they participated in an initial training seminar in a different state that is not at

16

issue.” Docket No. 198 at 18 n.21. The classes must be redefined slightly to require that the actual

17

Vector training occurred in the state at issue; the fact that the trainee currently resides in one of the

18

five states is not sufficient.9 And the Court also agrees with Vector that the California class must

19

exclude those recruits who signed an arbitration agreement with Vector. With those changes made,

20

however, the Court finds that Rule 23 certification of the Plaintiffs’ proposed class actions is

21

appropriate.

22

A.

Legal Standard (Class Certification)

23

Although class actions have long been an integral part of the legal landscape and are

24

sanctioned by Rule 23, the “class action is an exception to the usual rule that litigation is conducted

25
26
27
28

9

As currently defined the classes would include, for example, “[a]ll individuals in
California, who, since January 16, 2010, through the date a final judgment is rendered, either (a)
attended all three days of Vector’s initial training program, or (b) attended some portion of Vector’s
training program and provided a list of individuals they thought might be interested in becoming
sales representatives for Vector.” (emphasis added).

17

1

by and on behalf of the individual named parties only.” Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct.

2

2541, 2550 (2011). “In order to justify departure from that rule, a class representative must be part

3

of the class and possess the same interest and suffer the same injury as [her fellow] class members.”

4

Id. (internal quotation marks omitted).

5

Accordingly, before certifying a class, this Court “must conduct a ‘rigorous analysis’ to

Am. Honda Motor Co., Inc., 666 F.3d 581, 588 (9th Cir. 2012) (citation omitted). The Supreme

8

Court has made it clear that Rule 23 “does not set forth a mere pleading standard.” Comcast Corp.

9

v. Behrend, 133 S. Ct. 1426, 1432 (2013). Rather, the party seeking certification must “affirmatively

10

demonstrate” her compliance with the requirements of both Rule 23(a) and 23(b). See Dukes, 131 S.

11
For the Northern District of California

determine whether the party seeking certification has met the prerequisites of Rule 23.” Mazza v.

7

United States District Court

6

Ct. at 2551.

12
13

Rule 23(a) of the Federal Rules of Civil Procedure permits Plaintiffs to sue as representatives
of a class only if:

14

(1) the class is so numerous that joinder of all members is
impracticable;

15
(2) there are questions of law or fact common to the class;
16
(3) the claims or defenses of the representative parties are typical of
the claims or defenses of the class; and

17
18

(4) the representative parties will fairly and adequately protect the
interests of the class.

19
20

Fed. R. Civ. P. 23(a)(1)-(4). The purpose of these Rule 23(a) requirements is largely to “ensure[]

21

that the named plaintiffs are appropriate representatives of the class whose claims they wish to

22

litigate,” and to “effectively limit the class claims to those fairly encompassed by the named

23

plaintiff’s claims.” Dukes, 131 S. Ct. at 2550 (internal quotation marks and citations omitted).

24

If each of the Rule 23(a) requirements are satisfied, the purported class must also satisfy one

25

of the three prongs of Rule 23(b). Here Plaintiffs seek certification under Rule 23(b)(3) which

26

provides:

27

(3) the court finds that the questions of law or fact common to class
members predominate over any questions affecting only individual

28

18

1

members, and that a class action is superior to other available methods
for fairly and efficiently adjudicating the controversy.

2
3

The underlying merits of the case, while admittedly relevant at the class certification stage,

4

should not overly cloud the Court’s certification analysis – the only question presently before the

5

Court is whether the requirements of Rule 23 are met. See Comcast Corp., 133 S. Ct. at 1432. The

6

fact that certain elements of proof may favor Vector on the merits does not negate class certification;

7

the issue is whether the proof is amenable to class treatment. Moreover, “[n]either the possibility

8

that a plaintiff will be unable to prove his allegations, nor the possibility that the later course of the

9

suit might unforeseeably prove the original decision to certify the class wrong, is a basis for
declining to certify a class which apparently satisfies the Rule.” Blackie v. Barrack, 524 F.2d 891,

11
For the Northern District of California

United States District Court

10

901 (9th Cir. 1975). Indeed, even “after a certification order is entered, the judge remains free to

12

modify it in the light of subsequent developments in the litigation.” Gen. Tel. Co. of Sw. v. Falcon,

13

457 U.S. 147, 160 (1982). Ultimately, whether or not to certify a class is within the discretion of the

14

Court. Levya v. Medline Indus. Inc., 716 F.3d 510, 513 (9th Cir. 2013).

15

B.

Rule 23(a) Requirements Are Satisfied

16

As noted above, Vector does not dispute that all of the Rule 23(a) requirements are met with

17

respect to Plaintiffs’ proposed Florida, Michigan, and New York classes. And Vector further agrees

18

that the numerosity and commonality requirements are satisfied for each of Plaintiffs’ proposed

19

classes. Because the parties are in agreement on these issues, the Court will not belabor its analysis

20

of these points. Rather, the Court will focus its attention on the typicality and adequacy arguments

21

raised by Vector regarding the California and Illinois proposed classes.

22

1.

23

A plaintiff satisfies the numerosity requirement if “the class is so large that joinder of all

Numerosity

24

members is impracticable.” Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019 (9th Cir. 1998) (citation

25

omitted). While no court has set the precise number of class members that are needed to satisfy the

26

numerosity requirement, there is general recognition that Rule 23(a)(1) is at least satisfied when the

27

proposed class contains one hundred or more members. See, e.g., Wang v. Chinese Daily News, 231

28

F.R.D. 602, 607 (C.D. Cal. 2005) (recognizing there is a presumption of numerosity where the

19

1

proposed class contains one hundred or more members), reversed on other grounds by 737 F.3d 538

2

(9th Cir. 2013); Ikonen v. Hartz Mountain Corp., 122 F.R.D. 258, 262 (S.D. Cal. 1998) (finding a

3

proposed class of forty members sufficient to satisfy numerosity).

4

Vector has indicated in its papers that there are at least 23,000 putative class members in

5

California, 8,000 in Florida, 4,000 in Illinois, 3,000 in Michigan, and nearly 8,000 in New York.

6

Docket No. 198 at 10. The numerosity requirement is plainly satisfied.

7

2.

8

In order to satisfy Rule 23(a)(2)’s commonality requirement, a plaintiff must “affirmatively

9

Commonality

demonstrate” that their claims depend upon at least one common contention the truth or falsity of
which “will resolve an issue that is central to the validity” of each one of the class members’ “claims

11
For the Northern District of California

United States District Court

10

in one stroke.” Dukes, 131 S. Ct. at 2551. That is, the lawsuit must call upon the court or jury to

12

decide at least one factual or legal question that will generate a common answer “apt to drive the

13

resolution of the litigation.” Id.; see also id. at 2556 (holding that “even a single common question”

14

will suffice to satisfy Rule 23(a)) (citation and internal modifications omitted).

15

The parties agree that the commonality requirement is satisfied here. There is no dispute that

16

Portland Terminal is the applicable test as to whether Vector’s recruits are (or are not) its employees

17

under the laws of each of the five states at issue. There is similarly no dispute that Vector’s liability

18

will be conclusively resolved as to each class member by the application of Portland Terminal:

19

Vector acknowledges it never paid any wages to its trainees, and thus if those trainees are

20

determined to be Vector’s employees under Portland Terminal, Vector’s liability for minimum wage

21

violations will be established. As noted above, it is also undisputed that five of the Portland

22

Terminal factors are susceptible to common proof.

23

Even with respect to the fourth Portland Terminal factor, where there arguably could be

24

some variance between class members who did or did not provide recruit lists, the Court finds there

25

are a number of questions common to all class members. What constitutes an “immediate”

26

advantage to the employer is a common issue for all class members. For instance, the issue of

27

whether providing or making customer lists provides an “immediate advantage” to Vector is a

28

question common to all. So is the question whether the fourth Portland Terminal factor should be

20

1

measured in the aggregate or on an individual basis. That individual class members may present

2

different facts as to whether they provided a recruit list, if anything, goes primarily to predominance,

3

and less so to commonality. Thus, the commonality requirement is satisfied. See Harris II, 753 F.

4

Supp. 2d at 1016-17 (finding commonality established under nearly identical facts).

5

3.

6

Rule 23(a)(3) requires that “the [legal] claims or defenses of the representative parties [be]

7

typical of the claims or defenses of the class.” Fed. R. Civ. P. 23(a)(3). Representative claims are

8

“typical” if they are “reasonably co-extensive with those of absent class members; they need not be

9

substantially identical.” Hanlon, 150 F.3d at 1020. Thus, the “test of typicality is whether other

Typicality And Adequacy

members have the same or similar injury, whether the action is based on conduct which is not unique

11
For the Northern District of California

United States District Court

10

to the named plaintiffs, and whether other class members have been injured by the same course of

12

conduct.” Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992). Moreover, courts may

13

evaluate whether a named plaintiff is typical by determining whether she is “subject to unique

14

defenses which threaten to become the focus of the litigation.” Id. (citation omitted). “Class

15

certification should not be granted if there is a danger that absent class members will suffer if their

16

representative is preoccupied with defenses unique to [her].” Id. (internal modification and citation

17

omitted).

18

Rule 23(a)(4) imposes a closely related requirement to typicality – namely that the putative

19

class representative must “fairly and adequately protect the interests of the class.” Fed. R. Civ. P.

20

23(a)(4). A named plaintiff satisfies the adequacy test if the individual has no conflicts of interest

21

with other class members and if the named plaintiff will prosecute the action vigorously on behalf of

22

the class. See Ellis v. Costco Wholesale Corp., 657 F.3d 970, 985 (9th Cir. 2011). As other courts

23

and commentators have noted, the typicality and adequacy inquiries tend to significantly overlap.

24

See, e.g., Newberg on Class Actions § 3:32 (5th ed. 2015) (“Due to the related nature of the two

25

requirements and the frequency with which they are challenged on the same grounds, many courts

26

address the typicality and adequacy requirements in a single inquiry.”). Because Vector’s typicality

27

and adequacy arguments are overlapping here (Vector argues that Woods and Varughese are not

28

21

1

typical because they did not provide recruit lists, and argue that they are not adequate because their

2

failure to provide recruit lists opens them up to unique defenses) the Court treats them together.

3

Before analyzing the typicality and adequacy of the proposed class representatives for the

4

California and Illinois classes, the Court notes that Vector concedes that the typicality and adequacy

5

requirements are met for the Florida, Michigan and New York classes. These proposed classes

6

satisfy all of the Rule 23(a) requirements. Despite Vector’s arguments to the contrary, all of the

7

Rule 23(a) requirements are satisfied for the California and Illinois classes, including typicality and

8

adequacy.

9

Vector claims that neither Woods (California) or Varughese (Illinois) are typical class
representatives because neither individual provided Vector with a recruit list during training. As

11
For the Northern District of California

United States District Court

10

discussed above, Vector argues that this undermines typicality and adequacy under the fourth

12

Portland Terminal factor, which asks whether the alleged employer derives immediate advantage

13

from its trainees’ activities. For largely the same reasons outlined above, the Court disagrees.

14

As the Ninth Circuit has repeatedly made clear, Rule 23(a) does not require that the claims of

15

the class representatives and the putative class members be “substantially identical.” Hanlon, 150

16

F.3d at 1020. Rather, the typicality and adequacy requirements simply require the representatives

17

and putative class members to have suffered the same injury caused by “conduct which is not unique

18

to the named plaintiffs.” Hanon, 976 F.2d at 508. Notably, the Ninth Circuit has also consistently

19

held that Rule 23(a)’s typicality and adequacy requirements present relatively “permissive

20

standards” that do not pose a particularly high bar to class certification. See Parsons v. Ryan, 754

21

F.3d 657, 685 (9th Cir. 2014); see also In re NJOY, Inc. Consumer Class Action Litig., -- F. Supp.

22

3d. --, 2015 WL 4881091, at *27 (C.D. Cal. 2015) (acknowledging that the typicality requirement

23

presents a “permissive standard”). That “permissive” test is satisfied here.

24

Vector cannot dispute that each named Plaintiff and putative class member suffered the exact

25

same injury – each was denied wages for the time they spent in training. And Vector similarly

26

cannot dispute that each named Plaintiff and every putative class member were subject to the same

27

uniform policies and practices during training. Each underwent substantially similar training, and

28

each were asked to provide Vector with the names of potential recruits. The fact that Woods and

22

1

Varughese did not ultimately provide Vector with any recruit names does not make their claims so

2

dissimilar from those of their fellow class members to defeat typicality or adequacy. Indeed, as

3

noted above, Vector acknowledges that five of the six Portland Terminal will be subject to the same

4

analysis for all class members – a concession that is essentially dispositive of the Rule 23(a)

5

requirements. And even with respect to the fourth Portland Terminal factor, Plaintiffs persuasively

6

argue that trainees’ provision of recruit lists to Vector is only one possible mechanism by which

7

Plaintiffs will contend that Vector received an “immediate advantage” from its trainees so as to

8

satisfy Portland Terminal. In addition to recruit lists, Vector does not dispute that trainees were

9

uniformly asked to create customer lists and to schedule sales appointments with potential
customers.10 Put simply, Woods’ and Varguhese’s claims are largely identical to those of their

11
For the Northern District of California

United States District Court

10

fellow class members, and the one possible difference is not so obviously material to the Portland

12

Terminal six-factor test to defeat typicality or adequacy. The named class representatives have an

13

incentive to litigate on behalf of all recruits regardless of whether any particular individual provided

14

a recruit list; there is no conflict of interest. Furthermore, any variance is easily managed and

15

adjudicated at later stages of this case. For instance, a fact-finder could take into account any

16

variance (and could determine the materiality of any such variance) vis-a-vis recruit lists using a

17

special verdict form. That is, the fact finder could take into account the variation among recruits as

18

to the fourth Portland Terminal factor and reach conclusions particular to each group. Thus, the

19

Court finds that the Rule 23(a) factors are satisfied for all of Plaintiffs’ proposed classes.

20

C.

21

The Rule 23(b)(3) Requirements Are Satisfied
Because Plaintiffs’ proposed class claims satisfy the requirements of Rule 23(a), this Court

22

must next consider whether the claims satisfy one of the three prongs of Rule 23(b). Here, Plaintiffs

23

have moved for class certification pursuant to Rule 23(b)(3), which provides that the Court must find

24
10

25
26
27
28

Vector does not dispute that its recruits received training regarding Vector’s specific
products, which training could theoretically advantage Vector by providing the firm with recruits
that can quickly sell larger quantities of Vector products. Vector does dispute that its training
program was, in the words of the Plaintiffs, “Cutco-centric,” and further disputes that it received an
“immediate advantage” from this aspect of its training. This is a merits argument, however, that the
Court does not currently reach. Nor, contrary to Vector’s papers, is it one that the Court previously
ruled on at summary judgment. See Docket No. 115 at 40:11-43:7. What is important here is that
this argument can be resolved on a classwide basis using common proof.

23

1

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

2

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

3

fairly and efficiently adjudicating the controversy.” Fed. R. Civ. P. 23(b)(3). That is, the Court

4

must find that common questions predominate over individualized issues, and that proceeding as a

5

class action is superior to other forms of adjudication.

6

As noted above, Vector concedes that the predominance requirement is satisfied here. Each

7

state law class action will be resolved by applying the Portland Terminal test, and there is no dispute

8

that the Portland Terminal test can for the most part be adjudicated on a uniform basis using

9

classwide (and common) proof. Variation as the fourth factor can be handled via case and trial

11
For the Northern District of California

United States District Court

10

management. Thus, this element of the Rule 23(b)(3) test is satisfied.
Vector argues, however, that the test for superiority is not met here because an FLSA

12

collective action is a vastly superior method for Vector’s trainees to prosecute their wage and hour

13

claims. The Court previously rejected many of Vector’s similar superiority arguments in Harris II,

14

and it rejects them once again here.

15
16

With respect to the Court’s “superiority” analysis, the Federal Rules suggest that the Court
should consider:

17

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

18
(B) the extent and nature of any litigation concerning the controversy
already begun by or against class members;

19
20

(C) the desirability or undesirability of concentrating the litigation of
the claims in the particular forum; and

21
(D) the likely difficulties in managing a class action.
22
23

Fed R. Civ. P. 23(b)(3)(A)-(D). Despite Vector’s arguments to the contrary, each of these factors

24

weighs heavily in favor of class certification here.

25
26
27
28

1.

Class Members’ Interests in Individually Controlling the Prosecution or Defense of
Separate Actions

Vector argues that Plaintiffs here have “individual interests in controlling the prosecution of
any claims they may have against Vector,” but Vector is mistaken. As the Supreme Court and

24

1

numerous panels of the Ninth Circuit have recognized, the first superiority factor largely turns on the

2

amount of damages at stake in any individual lawsuit. As Justice Ginsburg explained, an

3

individual’s interest in individually controlling the prosecution of a lawsuit is likely “no more than

4

theoretic where the individual stake is so small as to make a separate action impracticable.”

5

Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 616 (1997) (citation omitted); see also Zinser v.

6

Accufix Research Institute, Inc., 253 F.3d 1180, 1190 (9th Cir. 2001) (“Where damages suffered by

7

each putative class member are not large, this factor weighs in favor of certifying a class action.”)

8

(citation omitted). Thus, the first superiority factor only weighs against class certification where

9

individual damages “run high” such that individual class members have a strong interest “in making
individual decisions on whether and when to settle.” Amchem Prods., 521 U.S. at 616-17. Vector

11
For the Northern District of California

United States District Court

10

has not, and cannot, argue that the individual damages in this case run sufficiently high to tilt this

12

superiority factor in favor of the prosecution of thousands of individual lawsuits for recovery of

13

minimum wages. Vector acknowledges that its trainees spend roughly 15 hours in training over the

14

course of three days. See, e.g., Humphrey Decl., Ex. D. at 126:25-127:6. Thus class members’

15

claims for minimum wages are individually worth a few hundred dollars at best. “[T]he amounts at

16

stake for individuals” here are “so small that separate suits would be impracticable.” Amchem

17

Prods., 521 U.S. at 616. Thus the first superiority factor is satisfied.

18

Vector argues otherwise, and suggests that the Court should infer that the large majority of

19

putative class members have an individual interest in prosecuting their own lawsuits against Vector

20

because nearly 96% of putative class members failed to opt-in to the FLSA collective action. The

21

Court rejects this argument because it is predicated on a fundamentally flawed premise – that a

22

putative class member’s failure to specifically opt-in to an FLSA collective action shows that the

23

class member has a significant interest in controlling his or her own individual lawsuit against

24

Vector. As this Court held previously in Harris II, “a Sales Representative’s decision not to opt-in

25

to the FLSA claim is not necessarily an indication that he or she does not want to participate in a

26

lawsuit involving different substantive claims,” 753 F. Supp. 2d at 1018, nor does it indicate that the

27

reason the individual failed to opt-in is because he or she would rather hire their own attorney, file

28

their own complaint, engage in discovery, motions practice, and possibly trial, in order to obtain a

25

1

few hundred dollars in damages from Vector. Vector has presented no evidence that any class

2

members would prefer to control and litigate an individual action for such a small potential damages

3

award. Thus, the first superiority factor reveals that class treatment is superior.

4

2.

5
6

The Extent and Nature of Any Litigation Concerning the Controversy Already Begun
by or Against Class Members

Vector argues that the second superiority factor is not met here because the FLSA action

7

being prosecuted collectively on behalf of certain class members is the far superior method of

8

adjudicating these claims. The Court roundly rejected this exact same argument in Harris II, and it

9

is no more persuasive here.
According to Vector, this Court should find that “an opt-in procedure under the FLSA [is]

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For the Northern District of California

United States District Court

10

superior to an opt-out Rule 23 class action where putative class members demonstrate[] hostility

12

towards [the Rule 23 action] and a lack of interest in pursuing the litigation.” Docket No. 198 at 14

13

(citing Leuthold v. Destination Am., Inc., 224 F.R.D. 462 (N.D. Cal. 2004) and McDonald v.

14

Ricardo’s on the Beach, Inc., No. 11-cv-9366, 2013 WL 228334 (C.D. Cal. Jan 22, 2013)). Vector’s

15

argument is flawed in a number of respects. First, Vector has not shown that putative class members

16

here have “demonstrated hostility” towards the proposed class actions. Vector has submitted just

17

seventeen declarations from putative class members indicating that they do not want to participate in

18

any class action against Vector. See Docket No. 198 at 13 n.16. The views of these 17 individuals

19

have no probative value, however, where Vector admits11 that the five putative classes here may well

20

have over 45,000 members. See Harris II, 753 F. Supp. 2d at 1018 (rejecting argument that Vector

21

had shown “significant hostility with respect to the class on the whole, which numbers over 40,000

22

people,” where Vector submitted only “fifty plus declarations” from putative class members who

23

opposed the action); see also O’Connor v. Uber Techs., Inc., No. 13-cv-3826-EMC, 2015 WL

24

5138097, at *12 (N.D. Cal. Sept. 1, 2015) (holding that 400 declarations submitted by Defendant

25

that arguably showed hostility to the lawsuit had “little probative value to the question” of class

26

certification where the proposed class included 160,000 members).

27
28

11

See Docket No. 198 at 10.

26

1

Nor is the Court convinced that because “only 4,500 individuals” affirmatively chose to join

2

the FLSA collective action against Vector, the Court can conclude that the remaining individuals

3

who did not opt-in have somehow manifested their hostility to the Plaintiffs’ lawsuit. As this Court

4

has previously recognized, “‘there may be a number of reasons the employees failed to opt-in to the

5

action’” that have nothing to do with a belief that the lawsuit is a bad idea or a “‘belief they were not

6

actually aggrieved.’” Harris II, 753 F. Supp. 2d at 1018 (quoting Cortez v. Nebraska Beef, Ltd., 266

7

F.R.D. 275, 294 (D. Neb. 2010)). Indeed, the most likely reason the FLSA opt-in rate was relatively

8

low – around 4% here – was “inadvertence, as opposed to a conscious decision not to participate,”

9

especially where any potential individual damages award obtained through the FLSA action will be
fairly small, as here. See Harris II, 753 F. Supp. 2d at 1018; see also Samuel Issacharoff and

11
For the Northern District of California

United States District Court

10

Geoffrey P. Miller, Will Aggregate Litigation Come to Europe?, 62 Vand. L. Rev. 179, 202-08

12

(2009) (discussing variables that negatively impact opt-in participation rates, such as when “the size

13

of per capita recovery” is relatively low). Put simply, neither Leuthold or McDonald apply here, as

14

Vector suggests, because there is no evidenced hostility to the Rule 23 actions.

15

Moreover, this Court has previously “decline[d] to follow Leuthold” and similar decisions

16

(like McDonald) that found superiority defeated by the presence of a parallel FLSA collective

17

action, because the Court determined that such decisions are not persuasively reasoned. See Harris

18

II, 753 F. Supp. 2d at 1018-19.12 Leuthold and its progeny would essentially prohibit the

19

simultaneous pursuit of plaintiffs’ rights under both the FLSA and state wage and hour laws, despite

20

the fact that there is no dispute that the FLSA does not preempt state employment laws, and there is

21

similarly no dispute that a plaintiff is entitled to recover under both the FLSA and state law if she

22

can successfully prove her claims under the relevant statutes. As this Court previously explained:

23

[I]f the Court were to require this case to be prosecuted solely under
the FLSA, it would in practical terms have a preemptive effect on the
state law claims . . . . To the extent Vector disputes this effect on the
ground that the state law claims are still substantively preserved, only

24
25
26
27
28

12

This Court is not alone in declining to follow Leuthold. See, e.g., Thorpe v. Abbott Labs.,
Inc., 534 F> Supp. 2d 1120, 1123-24 (N.D. Cal. 2008); Murillo v. Pac. Gas & Electric. Co., 266
F.R.D. 468, 472 (E.D. Cal. 2010); Lindsay v. Government Employees Ins. Co., 251 F.R.D. 51, 57
(D.D.C. 2008) (refusing to follow Leuthold and indicating that the decision is “contrary to the
weight of authority”).

27

1

procedurally altered, it ignores the fact that the procedural difference
between the FLSA and Rule 23 is significant. Given the likely
difference in class sizes between an opt-in FLSA class and an opt-out
Rule 23 class, the rights of the class as a whole to prosecute the state
claims would be substantially diminished were Rule 23 class
certification denied as a result of FLSA certification. The likely
practical effect of denial of Rule 23 certification is that the state wage
claims . . . will be dropped.

2
3
4
5
6

Harris II, 753 F. Supp. 2d at 1018 (citation omitted).

7

This Court’s Harris II decision advanced additional reasons why an FLSA collective action

8

is not necessarily superior to a Rule 23 class action, and certainly not so superior as to effectively

9

prohibit (or preempt) parallel state wage actions:
[W]ere FLSA certification to bar Rule 23 certification of state claims,
claimants with rights under both the FLSA and state law would be
faced with a trilemma. They must either: (1) forego their FLSA
claims altogether in contravention of the remedial purposes of the
FLSA; (2) forego their state wage claims in violation of the spirit of
the savings claims of the FLSA, see 29 U.S.C. § 218(a) (permitting
states and municipalities to enact stricter wage and hour laws); or (3)
split their claims and prosecute their state claims via class action in
state courts while maintaining their FLSA claims in federal court,
resulting in a multiplicity of actions. It is highly doubtful that
Congress in establishing the FLSA certification procedure would have
intended such perverse consequences.

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For the Northern District of California

United States District Court

10

12
13
14
15
16
17

Id. Finally, the Court rejected Vector’s superiority argument vis-a-vis FLSA collective actions

18

because:

19

[A] paradoxical result would obtain if the Court were to deny Rule 23
certification simply because of the existing FLSA claim. Plaintiffs
bringing only state claims under Rule 23 would be afforded greater
rights than those who bring both state claims and FLSA claims. That
paradox cannot be fully rationalized by the contention that those
employees who fail to opt-in under FLSA have indicated their
conscious refusal to participate in a Rule 23 class action.

20
21
22
23

Id.

24

Vector has made no arguments here that would convince the undersigned to reverse course,

25

and find that Rule 23 certification of state law wage claims should be denied merely because some

26

putative class members can pursue entirely different wage claims by way of an FLSA collective

27

action. The second superiority factor weighs in favor of class certification here.

28

28

1

3.

2
3

The Desirability or Undesirability of Concentrating Litigation of the Claims in the
Particular Forum

Vector argues that the third superiority test is not met because of the pending FLSA

4

collective action. For the reasons explained above, Vector’s arguments are without merit.

5

Moreover, it is clearly desirable to litigate Plaintiffs’ state law causes of action via Rule 23 class

6

actions in this forum. It is far more efficient for the judiciary as a whole, as well as both Plaintiffs

7

and Vector, to litigate Plaintiffs’ wage and hour claims in one action, as opposed to in several

8

thousand individual actions filed across the country. Moreover, this Court’s extensive knowledge of

9

this case and the parties – gained not just through overseeing this litigation, but through overseeing
Harris – counsels in favor of class certification here.

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For the Northern District of California

United States District Court

10

4.

12

Vector argues that the proposed Rule 23 class actions will not be manageable because

The Likely Difficulties in Managing a Class Action

13

putative class members will be confused by receiving both opt-in (FLSA) and opt-out (Rule 23)

14

notices. Vector raised this precise argument in Harris, and it remains unpersuasive. While

15

manageability could potentially be a “concern where there is both an opt-in and an opt-out procedure

16

and an attendant risk that class notices might be perceived as contradictory, the confusion can be

17

dealt with by a carefully worded Rule 23 class notice. The fact that the FLSA class notice has

18

already issued in the instant case will substantially lessen the confusion.” Harris II, 753 F. Supp. 2d

19

at 1019.

20

The Court foresees no other manageability problems here. As noted above, Vector’s

21

substantive liability will turn on the application of the Portland Terminal test, which can be

22

adjudicated using common proof for all class members. Further, to extent that some class members

23

did not provide recruit lists to Vector during training, the Court can manage any such variation in

24

proof through the use of a special verdict form or other standard trial management techniques, as

25

indicated above. Consequently, the Court concludes that fourth and final superiority factor is

26

satisfied.

27
28

29

1

Because all of the superiority factors are met, the predominance requirement is met, and all

2

of the Rule 23(a) factors are met, the Court concludes that certification of Plaintiffs’ proposed

3

classes appropriate here.

4

D.

5

Plaintiffs’ Proposed Class Definitions Need to Be Modified
Above, the Court determined that class certification is appropriate under Rule 23. However,

6

the Court agrees with Vector that the definitions of the precise classes to be certified need to be

7

modified slightly. First, the definitions need to be modified to accurately reflect that only

8

individuals who received training in the state at issue can be members of the class. As currently

9

drafted, an individual who attended training in Nevada, but later moved to California, could possibly
be a member of the California class. See, e.g., Class Cert. Mot. at 5 (defining California class to

11
For the Northern District of California

United States District Court

10

include: “All individuals in California” who otherwise qualify to be class members) (emphasis

12

added). However, a trainee who attended training in another state would be protected by the labor

13

laws in the state where training occurred, not the laws of the state where they later happen to reside.

14

See Sullivan v. Oracle Corp., 51 Cal. 4th 1191, 1207 (2014) (holding that a presumption exists

15

against the extraterritorial application of state law); see also O’Connor v. Uber Techs., Inc., 58 F.

16

Supp. 3d 989, 1003-07 (N.D. Cal. 2014). Thus, Plaintiffs shall file revised class definitions to the

17

Court within five (5) days of the date of this Order which clearly indicate that only individuals who

18

received training in a relevant state will be class members under that state’s laws.

19

The Court is also convinced that the California class definition must exclude those trainees

20

who signed an arbitration agreement. Plaintiffs acknowledge as much with respect to their proposed

21

Florida, Illinois, Michigan, and New York classes – each of these proposed class definitions

22

expressly exclude those individuals “who signed a sales representative agreement with an arbitration

23

clause.” See Class Cert. Mot. at 5-6. Plaintiffs argue a different result is required in California,

24

however, because the Vector arbitration agreement provides that it does not apply to “claims which

25

are excluded from arbitration by applicable state or federal law,” and California Labor Code section

26

229 provides that Plaintiffs’ wage and hour claims asserted here “may be maintained without regard

27

to the existence of any private agreement to arbitrate.” Cal. Lab. Code § 229 (“Actions to enforce

28

the provisions of this article for the collection of due and unpaid wages claimed by an individual

30

1

may be maintained without regard to the existence of any private agreement to arbitrate.”).

2

Plaintiffs’ argument fails because the United States Supreme Court held in 1987 that California

3

Labor Code section 229 is expressly preempted by the Federal Arbitration Act. See Perry v.

4

Thomas, 482 U.S. 483, 492 (1987) (holding that “§ 2 of the Federal Arbitration Act preempts § 229

5

of the California Labor Code”). A code nullified by the Supreme Court is not, in normal parlance,

6

“applicable.”

7

As a number of courts have previously recognized, a state law is not generally thought

8

“applicable” where it has been preempted. See Flagg v. Yonkers Savings and Loan Ass’n, FA, 396

9

F.3d 178, 186 (2d Cir. 2005); Sovereign Bank v. Sturgis, 863 F. Supp. 2d 75, 99 (D. Mass. 2012);
McAnaney v. Astoria Fin. Corp., 665 F. Supp. 2d 132, 160 (E.D.N.Y. 2009). As the Court in

11
For the Northern District of California

United States District Court

10

McAnaney correctly explained, where a contract incorporates all “applicable” laws, the contract

12

“only require[s] compliance to the extent that such laws are applicable.” McAnaney, 665 F. Supp.

13

2d at 160. “State laws that are subject to preemption . . . are manifestly not applicable . . . and not

14

specifically incorporated into defendants’ agreements.” Id. (emphasis in original). Plaintiffs have

15

cited no case to the contrary, and thus Plaintiffs argument is rejected. That is not to say that parties

16

could not contract in such a way that pre-empted laws could apply to their disputes. But the terms of

17

Vector’s arbitration agreement – which provides an exception to arbitration only where required

18

under “applicable” law – does not clearly mandate such a result. Cf. Roling v. E*Trade Securities

19

LLC, 860 F. Supp. 2d 1035, 1041-42 (N.D. Cal. 2012) (explaining that terms can be incorporated by

20

reference into an agreement under California law, but only where the incorporation is “clear and

21

unequivocal”). Rather, the plain and ordinary meaning of Vector’s contract excludes preempted (or

22

otherwise invalidated laws, such as those that have been repealed or deemed unconstitutional) from

23

the scope of the agreement. Plaintiffs’ arguments to the contrary are unpersuasive.

24

E.

25

Plaintiffs Counsel Are Appointed Class Counsel
Federal Rule of Civil Procedure 23(g) mandates that if this Court certifies a class it “must

26

appoint class counsel.” Fed. R. Civ. P. 23(g)(1). In making this appointment, the Court must

27

principally evaluate the adequacy of class counsel to fairly represent the interests of the class, see

28

Fed. R. Civ. P. 23(g)(4), which requires the Court to consider such factors as the work counsel has

31

1

done to-date in the action, her experience handling class actions and other complex litigation, her

2

knowledge of the applicable law, and the resources counsel will bring to bear in prosecuting the

3

action. See Fed. R. Civ. P. 23(g)(1)(A)(i)-(iv).

4

Here, the Court is convinced that Plaintiffs’ current attorneys are more than adequate to

5

fairly and vigorously represent the interests of the class. Indeed, the Court previously appointed

6

these same attorneys as class counsel in the Harris matter, which they successfully prosecuted to

7

completion, obtaining an excellent class settlement. See Harris II, 753 F. Supp. 2d at 1016

8

(discussing putative class counsel’s extensive experience prosecuting employment-related class

9

actions). The Court is very familiar with the work of the Plaintiffs’ attorneys here, and has no doubt

11
For the Northern District of California

United States District Court

10

they will adequately serve the interests of the absent class members here.
Vector argues otherwise, and claims that there is a conflict between the Plaintiffs’ attorneys

12

and their clients here because certain named Plaintiffs have “potential legal claim[s] against their

13

counsel for improperly filing their private information in the public record.” Docket No. 198 at 21.

14

Specifically, Vector contends that the Plaintiffs’ attorneys here mistakenly “published their clients’

15

Social Security Numbers and birth dates in publicly-filed Court documents, in violation of the

16

fiduciary duty of care they owed their clients, in flagrant13 disregard of the Federal Rules of Civil

17

Procedure (Rule 5.2(a)), and in defiance of the ECF redaction rules” that attorneys of this Court

18

must comply with. In their reply brief, Plaintiffs’ attorneys candidly admit that they mistakenly filed

19

some private information on the public docket, but note that the mistake has now been rectified and

20

that they have “implemented additional protocols as a direct result of this case” to make sure such

21

mistakes are not repeated. The Court does not believe that such mistakes rise to the level of a

22

“conflict” between Plaintiffs and their attorneys, nor does the Court believe that counsel’s honest

23

mistakes are so grave that they would be inadequate to serve the interests of the class here. Vector’s

24

arguments to the contrary are rejected.

25
26
27
28

13

The Court observes that both sides papers’ employ a heavy dose of over-the-top rhetoric
and, frankly, name calling. Such language is not helpful to the Court, and reflects poorly on the
individual lawyers who use it, as well as the profession as a whole.

32

1
2

V.

CONCLUSION

The Court concludes that Plaintiffs are similarly situated to the opt-in class members such

3

that final certification of an FLSA collective action is appropriate. The Court also concludes that the

4

Plaintiffs’ proposed state class actions meet the requirements of Rule 23(a) and (b). However, the

5

Plaintiffs’ class definitions must be revised as indicated above. Plaintiffs shall submit revised

6

definitions consistent with this order within five (5) days.

7

This order disposes of Docket Nos. 178 and 192.

8
9

IT IS SO ORDERED.

11
For the Northern District of California

United States District Court

10
Dated: September 4, 2015

12

_________________________
EDWARD M. CHEN
United States District Judge

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24
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26
27
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