Nguyen v. Wells Fargo Bank, National Association

Filing 61

ORDER by Judge Joseph C. Spero granting 46 Motion to Certify Class. A Further Case Management Conference is set for November 3, 2017. The parties are instructed to meet and confer and submit a joint Case Management Conference Statement that includes a proposed schedule for the remainder of the case by October 27, 2017. (jcslc1S, COURT STAFF) (Filed on 9/22/2017)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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HUY NGUYEN,

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Case No. 15-cv-05239-JCS

Plaintiff,
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v.

ORDER GRANTING MOTION FOR
CLASS CERTIFICATION

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WELLS FARGO BANK, NATIONAL
ASSOCIATION,

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United States District Court
Northern District of California

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Defendant.

Re: Dkt. No. 46

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I.

INTRODUCTION
Plaintiff Huy Nguyen asserts claims on behalf of a putative class of Home Mortgage

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Consultants (“HMCs”)1 who are or were employed by Defendant Wells Fargo Bank, National

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Association (“Wells Fargo”). Following summary judgment, the claims that remain in this case

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are based on two alleged substantive violations of the California Labor Code. First, Plaintiff

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claims that Wells Fargo’s policy of not reimbursing HMCs for certain marketing programs,

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namely, the use of Wells Fargo’s HMC websites and FASTMail program, violates California

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Labor Code section 2802. Second, Plaintiff contends Wells Fargo does not timely pay

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commissions to HMCs based on when the commissions are earned under California law, in

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violation of California Labor Code section 204. Presently before the Court is Plaintiff’s Motion

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for Class Certification (“Motion”).2 A hearing on the Motion was held on September 8, 2017 at

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In the Stipulated Facts of the Parties for Use in Briefing Class Certification Issues (“Stipulated
Facts”), Dkt. No. 46-5, the parties have stipulated that for the purposes of the instant motion, the
term HMC is used to refer to “Wells Fargo employees working in the position of Home Mortgage
Consultant, Private Mortgage Banker, Home Mortgage Consultant Jr., and Private Mortgage
Banker, Jr.[,] [all of which] are all treated equivalently.” Stipulated Facts, No. 2.
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Defendant also filed a motion styled as a Motion to Deny Class Certification (“Motion to
Deny”). See Dkt. No. 47. The Court did not authorize such a motion. Although the parties raised
the possibility that Wells Fargo might wish to file such a motion in their Joint Case Management

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9:30 a.m. For the reasons stated below, the Motion is GRANTED.3

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II.

BACKGROUND
A.

Factual Background

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1. Plaintiff’s Employment as an HMC, Duties of HMCs, and the Compensation
Plans

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Nguyen was employed by Wells Fargo in various HMC positions between October 1, 2011
and August 17, 2015. Stipulated Facts, No. 5. The HMCs share as their primary job duty the

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origination of home loan products. Stipulated Facts, No. 3. This involves sales activities such as

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meeting with referral partners and finding leads, as well as receiving loan applications, assembling

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loan packages for submission to underwriting, and pushing the loan application forward in order to

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Northern District of California

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originate mortgage loans for Wells Fargo. Defendant’s Appendix of Evidence, Ex. F (Nguyen

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Dep.) at 169-170.

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When Nguyen began working for Wells Fargo in any HMC position, he received an offer

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letter that referenced a Compensation Plan for Home Mortgage Consultants (“HMC Comp Plan”)

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setting forth Wells Fargo’s compensation plan for HMCs. Stipulated Facts, Nos. 6-7. The HMC

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Comp Plan is updated every year, superseding the previous plan as to mortgage loans funded after

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a certain date. Stipulated Facts, No. 8.

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Conference Statement, see Dkt. No. 38, the Court did not adopt that proposal in its Case
Management Order. See Dkt. No. 40 (“The class certification motion shall be filed and served on
or before February 21, 2017. The parties shall meet and confer and submit a stipulation and
proposed order on the briefing schedule for the class certification motion with the reply brief to be
due four (4) weeks before the scheduled hearing date.”). While Defendant’s proposed motion was
vaguely referenced in a subsequent scheduling stipulation (which referred generally to “class
certification related motions”), see Dkt. No. 44, the Court authorized only one such motion.
Moreover, in contrast to summary judgment motions, where cross-motions are warranted because
a denial of one party’s request for summary judgment does not necessarily result in summary
judgment for the other side, there is no such justification here for filing cross-motions. There are
only two possible outcomes: the Court will either certify a class or it will not. There is no need
for a cross-motion to deny class certification, which simply gives Wells Fargo a “second bite at
the apple” as to opposing class certification. (Here, Wells Fargo filed its “Motion to Deny” one
week after Plaintiff filed his Class Certification Motion and its Opposition brief a week after that).
Finally, as a practical matter, the Motion to Deny raises essentially the same arguments that are
made in Wells Fargo’s opposition brief. Therefore, the Court STRIKES Wells Fargo’s Motion to
Deny under Rule 12(f) of the Federal Rules of Civil Procedure on the basis that it is redundant and
was not authorized by the Court.
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The parties have consented to the jurisdiction of the undersigned magistrate judge pursuant to 28
U.S.C. § 636(c).
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Under the HMC Comp Plan, there are three components of HMC compensation: 1) hourly

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pay; 2) commissions, bonuses, incentives; and 3) premium pay for overtime hours worked. See

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Stipulated Facts, Ex. B (2013 HMC Comp Plan) at 2; Ex. C (2014 HMC Comp Plan) at 2; Ex. D

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(2015 HMC Comp Plan) at 2.
The HMC Comp Plans4 provide that “commission credit will be granted on the last day

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[of]5 the month in which the loan actually funds (i.e. disbursement of funds to the closing/

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settlement agent).” Stipulated Facts, Ex. B (2013 HMC Comp Plan) at 2; Ex. C (2014 HMC

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Comp Plan) at 2; Ex. D (2015 HMC Comp Plan) at 2. In order for commissions to be credited,

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however, the HMC must be “actively employed by Wells Fargo through the date commission
credit is granted.” Stipulated Facts, Ex. B (2013 HMC Comp Plan) at 9; Ex. C (2014 HMC Comp

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Northern District of California

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Plan) at 8; Ex. D (2015 HMC Comp Plan) at 8.6 The “Standard Commission Schedule” contained

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in the HMC Comp Plans states that commission rates are determined based on “monthly funded”

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loans. Id. Gross commissions are “calculated according to the commission credit schedule and

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the loans funded in the month.” Stipulated Facts, Ex. B (2013 HMC Comp Plan) at 8; Ex. C (2014

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HMC Comp Plan) at 7; Ex. D (2015 HMC Comp Plan) at 7.

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The Court refers generally to the HMC Comp Plans for 2013, 2014 and 2015 as “The HMC
Comp Plans.” The 2016 HMC Comp Plan was not provided to the Court until after the September
8, 2017 motion hearing, see Dkt. No. 60 (Notice of Lodging), and the parties did not address the
terms of the 2016 HMC Comp Plan in their briefs.
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While the 2015 Comp Plan uses the word “of” here, the 2013 and 2014 Comp Plans read,
“commission credit will be granted on the last day off for the month in which the loan actually
funds.” The parties stipulated at oral argument that the use of “off for” instead of the word “of”
was a clerical error and does not reflect any difference in the meaning of this language in these
three versions of the HMC Comp Plan.
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The language of this section of the HMC Comp Plans varies slightly in the three relevant years.
In the 2013 and 2014 HMC Comp Plans, this provision is entitled “When Incentive Payments are
Credited.” In the 2015 HMC Comp Plan, the provision is entitled “When Incentive Payments are
Earned.” See Stipulated Facts, Ex. B at 9, Ex. C at 8, Ex. D at 8. Further, the 2013 HMC Comp
Plan uses the word “earn” in the body of the provision whereas the 2014 and 2015 HMC Comp
Plans do not. Stipulated Facts, Ex. B (2013 HMC Comp Plan) at 9 (“To earn commissions,
bonuses, or other incentives under this Plan, the Employee must be actively employed by Wells
Fargo . . . .”); Ex. C (2014 HMC Comp Plan) (“Crediting of commissions, bonuses, or other
incentives under this Plan: the Employee must be actively employed by Wells Fargo through the
date commission credit is granted . . . .”); Ex. D (2015 HMC Comp Plan) (“The employee must
be actively employed by Wells Fargo through the date commission credit is granted under the
terms of this Plan . . . .”). In other words, while both the 2013 and 2015 HMC Comp Plans use the
word “earn” in connection with when the commission is credited – either in the title of the
provision or in the body of the provision – the 2014 HMC Comp Provision does not use the word
“earn” in either.
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Wells Fargo pays HMCs’ hourly pay in bi-weekly paychecks. Stipulated Facts, Nos. 12-

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13. Hourly pay is fully vested when paid and cannot be recaptured by Wells Fargo, but is

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considered as an “advance on commissions” under the HMC Comp Plans. Wynne Decl., Ex. 3

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(Faktor Dep.) at 18-19; Stipulated Facts, Ex. B-D at 2. Wells Fargo pays the HMCs incentive pay7

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once a month, based on loan fundings, on the last pay day of the month following the month in

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which the loans funded. Stipulated Facts, No. 14. Wells Fargo’s monthly pay cycle for incentive

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pay has applied to all HMCs equally since at least 2012. Wynne Decl., Ex. 3 (Faktor Dep.) at 58-

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59.
The Wells Fargo payroll department calculates the amount of commissions owed based on

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three types of information: 1) time cards that come in weekly; 2) partner referrals that come in

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Northern District of California

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approximately 8-10 business days after the end of the month; and, 3) refinances (referred to as

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“Wells to Wells Refinances”), which come in 8-15 days after the end of the month. Wynne Decl.,

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Ex. 3 (Faktor Dep.) at 12-17; see also Wynne Decl., Ex. 4 (April 5, 2016 email with the subject

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heading “Timing for Commission Processing – California Terms”). According to Wells Fargo,

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the commission is paid in the last pay period of the month following the month in which it was

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funded because the “verification process” used to calculate commissions takes on average 15 days.

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Wynne Decl., Ex. 3 (Faktor Dep.) at 37-38. Wells Fargo’s Rule 30(b)(6) witness, Mark Faktor,

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testified at his deposition that he considers the commissions to be “earned” at the point when the

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calculation of the amount is complete. Wynne Decl., Ex. 3 (Faktor Dep.) at 52.

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2. Marketing Programs Used by HMCs
The two Wells Fargo marketing programs that are the subject of Plaintiff’s claims in this

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action are the individual HMC website program and FASTMail.
According to Jennifer Clark, who has been designated as Wells Fargo’s “person most

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knowledgeable” as to these marketing programs, the HMC website program was created to “allow

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HMCs to have an individual website that would be mostly standardized content that Wells Fargo

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The parties agree that for the purposes of this action there is no meaningful legal distinction
between commissions and incentive pay. Therefore, the Court, like the parties, uses these terms
interchangeably.
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would ensure remained current with the governing regulations.” Defendant’s Appendix of

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Evidence, Clark Decl. (Dkt. No. 51-1, hereinafter, “Clark Class Cert. Decl.”) ¶3. HMCs could

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then customize a portion of the website with their contact information and “include other

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functionality to enable the HMC to gather some preliminary information from potential

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borrowers.” Id. One of the advantages for an HMC of having an individual website was that “[t]o

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the extent leads came in through the HMC’s website, the leads were directed to the particular

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HMC.” Id. ¶ 5. On the other hand, “if leads came in through the branch website or the central

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home mortgage website, Wells Fargo decided who got the lead.” Id. Until January 2016, Wells

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Fargo charged HMCs a $95 set-up fee and a $40 monthly subscription fee for their individual

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Northern District of California

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websites. Id. ¶¶ 4, 14.
FASTMail “allows HMCs to stay in contact with people in their ‘book of business,’ which

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includes both former customers and potential new customers.” Id. ¶ 7. Clark describes the

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advantages of using FASTMail as follows:

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Similar to the websites, there is extensive regulation over mailing
communications with potential customers (including no contact lists
that preclude sending unsolicited mailers). Accordingly, while
HMCs can set up their own mailers to their book of business, they
need to be evaluated by Wells Fargo to ensure they comply with
regulations, and their book of business needs to be “scrubbed” to
eliminate anyone from the mailing on a “do not call list.” To
simplify things for HMCs, they can subscribe to FASTMail, which
will cause a number of pieces of customized mailing to be sent to
anyone they want within their personal book of business. The
mailings have their name on them (in addition to Wells Fargo’s),
which allows the direct recipients to contact the HMC specifically.

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Id. HMCs are charged a monthly fee for FASTMail, which is set at a “tiered level” based on the

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number of mailings the HMC sends out, ranging from $40 to $340, exclusive of postage. Id. ¶ 8.

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Wells Fargo encourages HMCs to subscribe to these marketing programs, touting the

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advantages they offer HMCs in performing their jobs. The central portal for signing up for an

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HMC website, for example, states in bold that “[a] WFHM HMC Website is a vital tool for

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your business.” Wynne Decl., Ex. 6 (HMC Online Advertising Toolkit – Branch/HMC

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Websites); see also Wynne Decl., Ex. 5 (Clark Dep.) at 60-61 (describing webpage as the

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“document that resides on the sales central portal that shows HMCs how to use and sign up for the
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website”). The benefits of an HMC website are addressed in some detail on this page, which

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explains:

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The WFHM Branch/HMC Websites Program provides standard,
compliant individual Websites for members of the Wells Fargo
Home Mortgage Distributed Retail sales force. The websites offer a
means to start the application process online, numerous lead
generation tools, e-mail subscriptions and a wealth of Information
that provide your customers the ability to begin their mortgage
research from the comfort of their own homes.

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In addition to the comprehensive Information a site provides, it is a
valuable business tool. HMCs can direct customers to their website
to begin the application process online. This provides greater
business efficiency, significantly reducing data entry for an HMC.

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Your website can also be a valuable referral tool. You can list your
referral sources directly on your Website – potentially sending
customers to them. And, your referral sources can link back to you
from their Websites.

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Northern District of California

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Wynne Decl., Ex. 6.
Similarly, a Wells Fargo brochure entitled “FASTMail Works, FASTMail Works for

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You,” states that the program FASTMail was created to “drive retention of existing customers and

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build referrals through continual personalized contact from the HMC,” “leverage the HMC’s

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prospecting and database efforts,” “provide compliant, professional, branded materials

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personalized to the individual HMC,” and “drive lead generation efforts back to the HMC through

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the Business Reply Cards (BRC) that are included in their mail pieces.” Wynne Decl., Ex. 8

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(brochure); see also Wynne Decl., Ex. 5 (Clark Dep.) at 93-94 (testifying that this document from

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2009 has been updated since that time and continues to be used). The brochure goes on to

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describe results of a survey of HMCs, stating that “[a]lmost 90% of those surveyed rated

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FASTMail as a valuable/very valuable/extremely valuable program.” Wynne Decl., Ex. 8

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(brochure). It then provides “Success Stories Received From FASTMail Subscribers.” Id. One

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states:

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FASTMail keeps my customers in touch with me. I don’t have the
time to contact all of them and the mailers help remind them to call
me, and they do!
I have been a loan originator for over twenty years now and never
had a system in place like FASTMail to consistently and
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professionally stay in contact with my past customers. The key to
marketing is those two components.

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I would not be as successful as I am without this marketing
campaign, which is simple and easy to use. Great sales tool!

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Id.
Notwithstanding the significant benefits Wells Fargo tells its HMCs these marketing tools

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offer them in conducting their business, however, use of these programs is officially optional.

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Defendant’s Appendix of Evidence, Clark Class Cert. Decl. ¶ 10. The 2014 HMC Comp Plan was

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amended to include express language to this effect, stating that “Employee acknowledges and

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agrees that Employee’s decision to participate in any or all of these programs is purely voluntary

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and that Employee is not obligated or otherwise required to participate in any of these programs.”

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Stipulated Facts, Ex. C (2014 HMC Comp Plan) at 4. Thus, a small but not negligible minority of

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HMCs has chosen not to use one or both of these programs. In particular, Clark states in her

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declaration that between 2011 and 2015, 65 to 75% of HMCs had individual websites, and even

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when the charges were dropped for individual websites, in 2016, 15% of HMCs chose not to have

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one. Appendix of Evidence, Clark Class Cert. Decl. ¶ 6. Likewise, not all HMCs use FASTMail.

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Id. ¶ 10. In particular, between 50 and 55% of HMCs used FASTmail between 2011 and 2015

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and in May 2016, the rate was about 60%. Id.8

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B.

Procedural Background

The operative complaint in this action is the First Amended Complaint (“FAC”), which

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was filed in San Francisco Superior Court on September 28, 2015. Wells Fargo removed the

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action to this Court on November 16, 2015. Plaintiff asserted eight claims in his FAC, a number

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of which were dismissed on summary judgment. See Docket No. 37. The claims that remain in

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the case are as follows: 1) Claim Four for reimbursement of business expenses (Cal. Lab. Code §

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2802); 2) Claim Five for failure to pay all wages at termination (Cal. Lab. Code §§ 201-03); 3)

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Claim Six for failure to provide lawful wage statements (Cal. Lab. Code § 226); 4) Claim Seven

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In its Opposition brief, Wells Fargo states that “[a]t present, only a bit more than half of eligible
HMCs are enrolled in FASTMail.” Opposition at 6 (citing Defendant’s Appendix of Evidence,
Clark Class Cert. Decl. ¶ 10). The Clark Declaration does not provide any statistics reflecting the
current rate of enrollment, however.
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for violations of California’s Unfair Competition Law (Cal. Bus. & Prof. Code §§ 17200 et seq.),

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including failure to reimburse business expenses and to pay timely commissions (Cal. Lab. Code §

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204.2); and 5) Claim Eight for penalties under the California Labor Code Private Attorney General

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Act (“PAGA”) (Cal. Lab. Code § 2699).
Plaintiff asks the Court to certify the following class and subclasses as to Claims Four

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through Seven:
Class
All persons who are or have been employed, at any time from August 25,
2011 through December 31, 2016, by Wells Fargo Bank, National
Association in California under the job titles Home Mortgage Consultant,
Home Mortgage Consultant Jr. and Private Mortgage Banker (collectively
“HMCs”)

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Expense Reimbursement Sub-Class
All persons who are or have been employed as HMCs, at any time from
August 25, 2011 through December 31, 2015, by Wells Fargo Bank,
National Association in California and who participated in either Wells
Fargo’s individual HMC website program or FASTMail program.

United States District Court
Northern District of California

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Commission Pay Sub-Class
All persons who are or have been employed as HMCs, at any time from August 25, 2011
through December 31, 2016, by Wells Fargo Bank, National Association in California.

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Waiting Time Penalties Sub-Class
All persons who have been employed as HMCs and separated from employment (either by
involuntary termination or resignation), at any time from August 25, 2011 through
December 31, 2016, by Wells Fargo Bank, National Association in California and who did
not timely receive all of their wages at time of separation.

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Reply at 2-3.9

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In the Motion, Plaintiff proposed: 1) a Class of California HMCs employed by Wells Fargo from
August 25, 2011 to the date of class certification; and 2) a waiting-time penalties sub-class of
former HMCs who were employed by Wells Fargo during this period. Motion at 1. Plaintiff
modified the proposed class definition in his Reply brief, however, to include a general class cutoff date of December 31, 2016 (instead of the date of the Court’s class certification order). Reply
at 2. In addition, Plaintiff proposed two sub-classes: 1) an Expense Reimbursement Sub-class;
and 2) a Commission Pay Sub-class. Id. at 2-3. As to these sub-classes, Plaintiff proposes cut-off
dates of December 31, 2015 and December 31, 2016, respectively. Id. Plaintiff changed the cutoff dates in recognition of the fact that “Wells Fargo has amended both its expense reimbursement
program and commission compensation plan in ways that address issues raised in the subject
lawsuit” and “Plaintiff has not worked under these new policies.” Id. at 2; see also Opposition at
24 (“Effective January 1, 2017 . . . Wells Fargo thoroughly revamped it HMC compensation plan
to better clarify that no incentive pay is earned until the 16th day of the month following the loan
activity); Appendix of Evidence, Clark Class Cert. Decl. ¶ 14 (stating that in 2016 Wells Fargo
“rolled out a marketing initiative that includes as a ‘free’ item for HMCs an individual website.”).
Because of these modifications to the proposed class definition, the Court need not address Wells
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III.

ANALYIS

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A.

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A class action may be maintained under Rule 23 of the Federal Rules of Civil Procedure if

Legal Standard

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all of the requirements of Rule 23(a) are satisfied and the plaintiff demonstrates that one of the

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requirements of Rule 23(b) is met as well. Here, Plaintiff asks the Court to certify the proposed

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class under Rule 23(b)(3).

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Rule 23(a) requires that a plaintiff seeking to assert claims on behalf of a class
demonstrate: 1) numerosity; 2) commonality; 3) typicality; and 4) fair and adequate

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representation of the interests of the class. Fed. R. Civ. P. 23(a). Rule 23(b)(3) allows a class

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action to be maintained where “the court finds that the questions of law or fact common to class

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Northern District of California

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members predominate over any questions affecting only individual members, and that a class

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action is superior to other available methods for fairly and efficiently adjudicating the

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controversy.” Fed. R. Civ. P. 23(b)(3). “An individual question is one where ‘members of a

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proposed class will need to present evidence that varies from member to member,’ while a

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common question is one where ‘the same evidence will suffice for each member to make a prima

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facie showing [or] the issue is susceptible to generalized, classwide proof.’” Tyson Foods, Inc. v.

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Bouaphakeo, — U.S. —, 136 S. Ct. 1036, 1045 (2016) (quoting 2 W. Rubenstein, Newberg on

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Class Actions § 4:50, pp. 196-197 (5th ed. 2012) (internal quotation marks omitted)).

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“At class certification, a court does not accept at face value a plaintiff’s theory of the case;

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the court must engage in a ‘rigorous analysis . . . [into whether] . . . the prerequisites of Rule 23(a)

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have been satisfied,’ and ‘frequently that “rigorous analysis” will entail some overlap with the

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merits of the plaintiff’s underlying claim.’” Rodman v. Safeway, Inc., No. 11-cv-03003-JST, 2014

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WL 988992, at *6 (N.D. Cal. Mar. 10, 2014) (quoting Wal-Mart Stores, Inc. v. Dukes, 564 U.S.

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338, 351 (2011) (quoting Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 161 (1982))). “While the

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trial court has broad discretion to certify a class, its discretion must be exercised within the

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framework of Rule 23.” Zinser v. Accufix Research Inst., Inc., 253 F.3d 1180, 1186 (9th Cir.),

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Fargo’s argument that the proposed class cannot be certified after December 31, 2016 because of
changes to the HMC Comp Plan that went into effect in 2017. See Opposition at 24.
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opinion amended on denial of reh’g, 273 F.3d 1266 (9th Cir. 2001) (citing Doninger v. Pac. Nw.

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Bell, Inc., 564 F.2d 1304, 1309 (9th Cir. 1977)).

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B.

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Rule 23(a)(1) requires that the size of the proposed class be “so numerous that joinder of

Numerosity

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all the class members is impracticable.” Wells Fargo stated in its Notice of Removal that there are

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“2,015 putative class members who experienced some adjustment to their commissions as a result

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of participating in the marketing programs at issue” in this case. Notice of Removal ¶ 9.

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Therefore, the numerosity requirement is satisfied.

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C.

Commonality and Predominance

The commonality requirement of Rule 23(a)(2) is met where “the class members’ claims

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Northern District of California

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‘depend upon a common contention’ such that ‘determination of its truth or falsity will resolve an

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issue that is central to the validity of each [claim] with one stroke.’” Mazza v. Am. Honda Motor

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Co., 666 F.3d 581, 588 (9th Cir. 2012) (internal citation omitted) (quoting Wal-Mart Stores, Inc. v.

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Dukes, 564 U.S. 338, 350 (2011)). Thus, plaintiffs seeking to certify a class must “demonstrate

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‘the capacity of classwide proceedings to generate common answers’ to common questions of law

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or fact that are ‘apt to drive the resolution of the litigation.’” Id. (quoting Wal-Mart, 564 U.S. at

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350). “[C]ommonality only requires a single significant question of law or fact.” Id. at 589

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(citing Wal-Mart, 564 U.S. at 359).

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“The commonality preconditions of Rule 23(a)(2) are less rigorous than the companion

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requirements of Rule 23(b)(3),” requiring that common questions predominate over individual

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issues. Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019 (9th Cir. 1998). In Hanlon, the Ninth

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Circuit explained that in contrast to the commonality requirement of Rule 23(a)(2), the

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predominance inquiry under Rule 23(b)(3) “focuses on the relationship between the common and

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individual issues.” Id. at 1022. “‘When common questions present a significant aspect of the case

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and they can be resolved for all members of the class in a single adjudication, there is clear

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justification for handling the dispute on a representative rather than on an individual basis.’” Id.

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(quoting 7A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice &

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Procedure § 1778 (2d ed.1986)); see also Amchem Prod., Inc. v. Windsor, 521 U.S. 591, 623
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(1997) (“The Rule 23(b)(3) predominance inquiry tests whether proposed classes are sufficiently

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cohesive to warrant adjudication by representation.”).

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To determine whether the commonality and predominance requirements are satisfied as to

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the classes Plaintiff seeks to certify, the Court looks to the legal requirements of Plaintiff’s claims,

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the theories Plaintiff advances in support of his claims, and the factual record that has been

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developed thus far in this case. As set forth below, the Court concludes that the commonality and

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predominance requirements are satisfied as to both of Plaintiff’s substantive claims.

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1. Late Payment of Commissions Claim
Plaintiff’s claim for late payment of commissions is based on California Labor Code
section 204(a), which provides that “[a]ll wages . . . earned by any person in any employment are

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Northern District of California

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due and payable twice during each calendar month. . . .” Wages include “all amounts for labor

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performed by employees of every description, whether the amount is fixed or ascertained by the

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standard of time, task, piece, commission basis, or other method of calculation.” Cal. Labor Code

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§ 200(a). “In other words, all earned wages, including commissions, must be paid no less

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frequently than semimonthly.” Peabody v. Time Warner Cable, Inc., 59 Cal. 4th 662, 668 (2014).

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The California Supreme Court recognized in Peabody, however, that “(1) commissions are not

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earned or owed until agreed-upon conditions have been satisfied, and (2) such satisfaction often

18

may occur on a monthly or less frequent basis.” Id.

19

As the Court explained on summary judgment, the question of when a commission is

20

earned is typically a matter of contract. See Koehl v. Verio, Inc., 142 Cal. App. 4th 1313, 1335

21

(2006). In this case, Plaintiff seeks to establish on behalf of the class that under Section V(C) of

22

the HMC Comp Plans, HMC commissions are “earned” no later than the end of the month, which

23

is when the loans fund and the commissions are credited. Under this theory, Wells Fargo would

24

have to make commission payments by the 10th day of the following month. See Opposition at 23

25

(citing California Labor Code section 204(a) for the proposition that “wages earned between the

26

16th and 31st of the month may be paid as late as the 10th day of the following month”). It is

27

undisputed, though, that HMCs are not paid commissions until after that date. Given that

28

Plaintiff’s claim turns on contractual language that applies to all HMCs and a common practice as
11

1

to when commissions are paid, the Court concludes that common issues predominate as to the

2

proposed class.

3

The Court rejects Wells Fargo’s assertion that there are individualized issues relating to the

4

calculation of commissions that defeat commonality and predominance as to the late payment of

5

commission claim. On summary judgment, the Court stated that if it “later determines that

6

commissions for certain loans are earned at the end of the month in which they are funded, then

7

the DLSE manual requires that they be paid when ‘reasonably calculable.’” Nguyen v. Wells

8

Fargo Bank, No. 15-CV-05239-JCS, 2016 WL 5390245, at *12 (N.D. Cal. Sept. 26, 2016)

9

(quoting DLSE Manual § 5.2.5). As to the question of when commissions are “reasonably
calculable,” the Court found that there were factual disputes that precluded summary judgment.

11
United States District Court
Northern District of California

10

Id. Wells Fargo contends “individualized factors can delay when pay was calculable,” pointing to

12

variations such as “[w]hether an HMC identified any errors in the commission report that Wells

13

Fargo had to investigate and correct,” “[h]ow long an HMC waited after the end of the month to

14

input his work hours for the latter part of the month,” and “[w]hether the HMC generated loans

15

that required Wells Fargo to access information from other databases to calculate the commission

16

rate.” Opposition at 23.

17

Wells Fargo’s argument is based on the premise that the lawfulness of its policy as to when

18

payment of commissions occurs varies from month to month and from HMC to HMC. The Court

19

finds no authority to support such an approach, however, and finds that it is inconsistent with the

20

standard articulated in the DLSE Manual. The DLSE Manual looks to when a commission is

21

“reasonably calculable” (as opposed to when a commission was actually calculated). DLSE §

22

5.2.5. Section 5.2.5 addresses situations where “commission wages are not ascertainable at the

23

time of a sale or transaction and must be calculated based on later developments (i.e., receipt of

24

payment, shipping, etc.).” Most of the variations that Wells Fargo has identified, however, do not

25

result from the sort of “later developments” described in this section but are simply the result of

26

practices that Wells Fargo and/or some HMCs may have followed for reasons unrelated to such

27

developments. In other words, these variations appear to have little or no relevance to the question

28

of when commissions reasonably could be calculated. Therefore, the Court concludes that any
12

1

individualized inquiries that might arise as to when HMC commissions were reasonably calculable

2

do not defeat commonality and predominance. 10

3

2. Failure to Reimburse Claim
California law requires that “[a]n employer shall indemnify his or her employee for all

4

necessary expenditures or losses incurred by the employee in direct consequence of the discharge

6

of his or her duties, or of his or her obedience to the directions of the employer, even though

7

unlawful, unless the employee, at the time of obeying the directions, believed them to be

8

unlawful.” Cal. Labor Code § 2802(a). Section 2802(c) provides that “[f]or purposes of this

9

section, the term ‘necessary expenditures or losses’ shall include all reasonable costs, including,

10

but not limited to, attorney’s fees incurred by the employee enforcing the rights granted by this

11
United States District Court
Northern District of California

5

section.” As the Court recognized in its summary judgment order, under California law an

12

expenditure need not be required by the employer to be “necessary” under section 2802. Dkt. No.

13

37 at 14-15. Rather, an expenditure may be necessary either because it was “‘incurred by the

14

employee’” or because it was incurred in direct consequence of the employee’s “‘obedience to the

15

directions of the employer.’” Buchanan, 2013 WL 1788579, at *3 (quoting Morgan v. Wet Seal,

16

Inc., 210 Cal. App. 4th at 1355).

17

In the Motion, Plaintiff took a dual approach, arguing both that the marketing program

18

expenses were incurred “in direct consequence of the discharge of” the HMCs’ duties and that

19

HMCS were often coerced into subscribing to these marketing programs. At oral argument,

20

however, Plaintiff stipulated that he no longer seeks to assert a section 2802 claim based on the

21

latter theory, leaving only the claim that these expenses were reasonably necessary to the

22
23
24
25
26
27
28

10

At oral argument, Wells Fargo cited for the first time to DLSE Opinion Letter No. 12.09.02
(December 9, 2002) in support of its position. Wells Fargo offered no explanation for failing to
cite to this opinion letter in its brief. Even assuming Wells Fargo did not waive its right to rely on
this opinion letter by failing to cite it in its opposition brief, Wells Fargo’s reliance on it is
misplaced. In the opinion letter, the DLSE found that monthly payment of commissions to “sales
employees engaged in origination of home mortgage loans” was not in violation of Labor Code
section 204 “[s]o long as the agreement is clear and unambiguous” that commissions are “not
‘earned’ within the meaning of Section 204, until the agreed calculation becomes ascertainable.”
DLSE Opinion Letter No. 12.09.02 (December 9, 2002), p. 2. (emphasis in original). As the Court
discussed on summary judgment, the HMC Comp Plans are not clear and unambiguous on this
question.
13

1

discharge of the HMCs’ duties. With this limitation, the Court finds that the commonality and

2

predominance requirements are met as to this claim.

3

Wells Fargo relies heavily upon Buchanan v. HomeServices Lending, LLC, 2013 WL

4

1788579 (C.D. Cal. Apr. 25, 2013) and Morgan v. Wet Seal, 210 Cal. App. 4th 1341 (2012) in

5

support of its assertion that the expense reimbursement claim should not be certified. In

6

Buchanan, the plaintiffs were HMCs employed by a joint venture between Wells Fargo and Home

7

Services of America. Like the plaintiff in this case, they asserted a section 2802 claim based on

8

the employer’s failure to reimburse them for the costs of websites, e-business cards, and mailer

9

forms. 2013 WL 1788579, at *1, 4. The plaintiffs acknowledged that the company handbook and
written policies did not expressly require these expenditures, but asserted that management used

11
United States District Court
Northern District of California

10

“strong arm tactics” to impose the expenses on all class members. Id. The plaintiffs offered in-

12

person and email communications between employees and managers to establish that the

13

expenditures were required, but the employer countered with “evidence showing that other HMCs

14

interpreted the marketing programs to be merely optional including declarations of several HMCs .

15

. . and evidence that many HMCs did not enroll” in the programs at issue. Id. at *5. The court

16

concluded that the plaintiffs had not met the commonality requirement of Rule 23(a) because the

17

“[d]efendants’ liability will rest on individualized inquiries into matters such as what each

18

manager instructed, how each employee interpreted the instruction, and whether the employee

19

then relied on the instructions and enrolled in the programs.” Id. In other words, the theory of the

20

plaintiffs’ expense reimbursement claim under section 2802 in Buchanan was the one that Plaintiff

21

here has now abandoned, namely, that HMCs were forced to use these marketing tools by their

22

managers. Because Plaintiff plans to rely on the common duties and requirements of HMCs that

23

make these expenditures necessary and not on coercion of managers, Buchanan is distinguishable

24

on the question of whether the commonality and predominance requirements are satisfied.

25

Morgan is distinguishable for the same reason. In that case, the plaintiffs alleged that their

26

former employer, Wet Seal, violated California Labor Code section 2802 by requiring them to

27

purchase Wet Seal clothing and merchandise as a condition of employment. Morgan v. Wet Seal,

28

Inc., 210 Cal. App. 4th 1341, 1344 (2012). The official policy of the employer, as stated in the
14

1

employee handbook, was that employees were expected to “dress in a manner that is both

2

respectful of our Customers and consistent with the current fashion attire that is reflected in the

3

stores” but that they were “not required to wear the Company’s clothing.” Id. at 1347. The

4

plaintiffs, however, offered evidence that in fact their managers required them to wear all Wet

5

Seal clothing and accessories and that they were not reimbursed for these expenses. Id. at 1350.

6

The court found that a class could not be certified as to this claim because of the individualized

7

issues that would have to be addressed under these circumstances, including “(1) what, if

8

anything, the employee was told by his or her store manager regarding purchasing Wet Seal

9

clothing or wearing Wet Seal clothing to work; (2) if such a discussion occurred, when and with
whom the employee had that discussion; (3) how the employee interpreted that discussion; (4)

11
United States District Court
Northern District of California

10

whether the employee's interpretation was reasonable; and (5) whether the employee then

12

purchased Wet Seal clothing to wear to work pursuant to that discussion.” Id. at 1356. Again,

13

Plaintiff in this case no longer asserts the expense reimbursement claim on the basis that HMCs

14

are forced by their managers to use the marketing tools that are the subject of this claim.

15

Consequently, the individualized issues that precluded certification in Morgan will not arise in this

16

case.11

17
18
19
20
21
22
23
24
25
26
27
28

11

In its Opposition brief, Wells Fargo also argues that the expense reimbursement claim will raise
individualized issues because the expense associated with purchasing FASTMail and individual
HMC websites may have been offset by the revenue generated by use of these programs and that
amount is likely to vary widely between HMCs. Opposition at 21-22. The only authority it cites
for this argument is a footnote in Howard v. Gap, Inc., No. C 06-06773 WHA, 2009 WL 3571984,
at *1 (N.D. Cal. Oct. 29, 2009). In that case, the plaintiff asserted a claim under New York law
for unlawful deductions from wages by the retailer Gap, Inc. based on the allegation that her
manager told her at orientation that she was required to purchase and wear Gap clothing at work.
Because Gap’s official policy encouraged but did require employees to purchase and wear its
clothing, the court declined to certify a class as to this claim because there was no common
method of proof. Id. at *4-5. The court noted that there was no common script used by managers
to train employees and that even the declarations offered by plaintiff’s declarants varied as to what
they remembered being told by their managers during training. In the footnote cited by Wells
Fargo, the Court noted that another reason for denying class certification on this claim was that
some employees may have purchased Gap clothing to give to family members or wear outside of
work. As these purchases would fall outside the ambit of the claim, the Court concluded that it
would be “very difficult, if not impossible to determine, on class-wide proof, whether all
employees were harmed by some Gap manager’s instructions.” Aside from the fact that this
statement is dicta, it does not stand for the proposition that a reasonably necessary expense need
not be reimbursed under section 2802 if the expense is outweighed by some benefit that allegedly
results from the expense. Nor has the Court found any authority that supports such a conclusion.
15

Instead, Plaintiff’s expense reimbursement claim turns on whether the marketing expenses

1
2

at issue were reasonably necessary to the discharge of the HMCs’ duties. Wells Fargo has

3

stipulated that all HMCs perform the same primary duty (the origination of loans) and Wells

4

Fargo’s witnesses and promotional materials tout benefits of the marketing programs that

5

apparently apply equally to all HMCs. Further, all HMCs are subject to the same policy with

6

respect to reimbursement of these expenses. Conversely, Wells Fargo has pointed to no

7

significant individualized issues regarding the ways in which HMCs use these programs or the

8

types of benefits they obtain from them. Thus, the Court concludes that it will not need to engage

9

in significant individualized inquiries to adjudicate this claim and that the commonality and

10

predominance requirements are met.12

United States District Court
Northern District of California

11

D.

12

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

Typicality

13

typical of the claims or defenses of the class.” Fed. R. Civ. P. 23(a)(3). “Under the rule’s

14

permissive standards, representative claims are ‘typical’ if they are reasonably co-extensive with

15

those of absent class members; they need not be substantially identical.” Hanlon v. Chrysler

16

Corp., 150 F.3d 1011, 1020 (9th Cir. 1998). Here, Nguyen worked as an HMC and shared with

17

the putative class members the primary obligation of originating loans on behalf of Wells Fargo.

18

He also was subject to the same policies with respect to payment of commission and

19

reimbursement of marketing expenses as the putative class members. Therefore, the Court finds

20

that the typicality requirement is satisfied.13

21

E.

22

Rule 23(a)(4) requires that the class representatives “fairly and adequately protect the

Adequacy

23

interests of the class.” “Determining whether the representative parties adequately represent a

24

class involves two inquiries: (1) whether the named plaintiff and his or her counsel have any

25
12

26
27
28

The Court also finds that because Plaintiff has limited the scope of his reimbursement claim,
his failure to present a trial plan showing how the individualized issues can be managed does not
present an obstacle to class certification. See Opposition at 24-25 (arguing that the Court should
deny class certification because Plaintiff did not present a trial plan
13
The Court’s conclusion is based, in part, on the limitation in the scope of Plaintiff’s section
2802 claim discussed above.
16

1

conflicts of interest with other class members and (2) whether the named plaintiff and his or her

2

counsel will act vigorously on behalf of the class.” Calvert v. Red Robin Int’l, Inc., No. C 11-

3

03026 WHA, 2012 WL 1668980, at *2 (N.D. Cal. May 11, 2012) (citing Lerwill v. Inflight Motion

4

Pictures, Inc., 582 F.2d 507, 512 (9th Cir. 1978)). There is no evidence of a conflict of interest

5

on the part of Nguyen or his counsel. Further, Nguyen has actively served the class, including

6

responding to discovery and sitting for his deposition. Wynne Decl. ¶ 11. Likewise, Nguyen’s

7

counsel has litigated many wage and hour class actions and is prosecuting this case vigorously.

8

Wynne Decl. ¶ 5-8, Kaufmann Decl. ¶¶ 5, 15. Wells Fargo does not contend that either the

9

plaintiff or his counsel will not adequately represent the putative class.

10

The Court finds this

requirement is satisfied.

United States District Court
Northern District of California

11

F.

12

The Court also finds that a “class action is superior to other available methods for fairly

Superiority of Class Mechanism

13

and efficiently adjudicating the controversy.” Fed. R. Civ. P. 23(b)(3). The factors considered in

14

making this determination include “(A) the class members’ interests in individually controlling the

15

prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning

16

the controversy already begun by or against class members; (C) the desirability or undesirability

17

of concentrating the litigation of the claims in the particular forum; and (D) the likely difficulties

18

in managing a class action.” Fed. R. Civ. P. 23(b)(3)(A) – (D). In addition, the Ninth Circuit has

19

explained that “[w]here recovery on an individual basis would be dwarfed by the cost of litigating

20

on an individual basis, this factor weighs in favor of class certification.” Wolin v. Jaguar Land

21

Rover N. Am., LLC, 617 F.3d 1168, 1175 (9th Cir. 2010) (citation omitted). An overriding

22

concern of the “superiority” inquiry is judicial economy which, in turn, is related to the question

23

of commonality. Id.

24

Here, the Court finds that adjudication of Plaintiff’s claims on a classwide basis is in the

25

interest of judicial efficiency because the claims (as limited by Plaintiff) are relatively

26

straightforward and do not appear to present any serious management problems. Moreover, the

27

cost of litigating these claims will likely “dwarf” the relatively small amount of damages that

28

might be recovered by each class member. Therefore, the Court concludes the class mechanism
17

1

me the superiority requirement.
eets

2
IV.

CONCLUSION

3
For the reasons stat above, th Motion is GRANTED The Cour certifies th following
ted
he
D.
rt
he
4
cla and subcl
ass
lasses:
5
6
7
8
9
10

United States District Court
Northern District of California

11
12
13
14
15
16
17
18
19
20
21
22

Class
All per
rsons who ar or have been employ
re
b
yed, at any t
time from A
August 25,
2011 through December 31, 2016, by Wells Fa
t
,
y
argo Bank, National
Associa
ation in California unde the job tit
er
tles Home M
Mortgage Consultant,
Home Mortgage Consultant Jr and Privat Mortgage Banker (co
M
C
r.
te
e
ollectively
“HMCs
s”)
Expens Reimburse
se
ement Sub-C
Class
All per
rsons who are or have been employ as HMC at any t
a
b
yed
Cs,
time from
August 25, 2011 through De
ecember 31 , 2015, by Wells Fargo Bank,
Nationa Association in Califo
al
fornia and w
who particip
pated in eith Wells
her
Fargo’s individual HMC websi program o FASTMa program.
s
H
ite
or
ail
Commi
ission Pay Su
ub-Class
All pers
sons who are or have been employed as HMCs, at any time from Augus 25, 2011
e
d
st
through December 31, 2016, by Wells Farg Bank, Nat
h
y
go
tional Assoc
ciation in Ca
alifornia.
Waiting Time Pena
g
alties Sub-Cl
lass
All pers
sons who ha been emp
ave
ployed as HM and sep
MCs
parated from employmen (either by
m
nt
y
involun
ntary termina
ation or resig
gnation), at a time from August 25 2011 through
any
5,
Decemb 31, 2016 by Wells Fargo Bank, National As
ber
6,
F
ssociation in California a who did
n
and
d
not timely receive all of their wages at time of separatio
a
w
e
on.
A Furth Case Ma
her
anagement Conference is set for Nov
C
s
vember 3, 20 at 2:00 p.m. The
017
par
rties are instr
ructed to me and confe and submi a joint Cas Managem Confere
eet
er
it
se
ment
ence
Sta
atement that includes a proposed sch
p
hedule for the remainder of the case b October 27, 2017.
e
by
IT IS SO ORDER
S
RED.
Da
ated: Septem
mber 22, 2017

23
24
25
26

___
__________
___________
__________
________
JO
OSEPH C. SP
PERO
Ch Magistra Judge
hief
ate

27
28
18
8