Soto v. Diakon Logistics (Delaware), Inc. et al

Filing 156

ORDER denying without prejudice 118 Plaintiff's Motion for class certification and Denying as moot 153 Defendant's ex parte application for supplemental briefing. Signed by Judge M. James Lorenz on 8/10/2011. (mtb) (jrl).

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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JOSUE SOTO et al.,
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Plaintiffs,
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v.
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DIAKON LOGISTICS (DELAWARE),
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Defendant.
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Civil No. 08cv33-L(WMC)
ORDER (1) DENYING PLAINTIFFS’
MOTION FOR CLASS
CERTIFICATION; AND (2)
DENYING DEFENDANT’S EX
PARTE APPLICATION FOR
SUPPLEMENTAL BRIEFING

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This putative class action claiming violation of California wages and hours laws was

18 brought by three truck drivers working for Defendant. Plaintiffs filed a motion for class
19 certification pursuant to Federal Rule of Civil Procedure 23. Defendant filed an opposition and
20 Plaintiffs replied. In addition, Defendant filed an ex parte application for supplemental briefing.
21 For the reasons which follow, Plaintiffs’ motion for class certification is DENIED WITHOUT
22 PREJUDICE. Defendant’s ex parte application for supplemental briefing is DENIED as moot.
23 The parties are REFERRED to the Magistrate Judge to resolve their discovery issues and set
24 case management dates consistent with this order.
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Defendant Diakon Logistics (Delaware), Inc. provides home delivery services to various

26 furniture and appliance retailers. Plaintiffs Josue Soto, Ghazi Rashid and Mohamed Abdelfattah
27 are truck drivers who worked for Defendant in California. They claim they were classified by
28 Defendant as independent contractors when they were in fact non-exempt employees.
08cv33

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Mr. Soto filed a putative class action complaint in state court seeking recovery from

2 Defendant for failure to pay minimum wages, provide proper meal and rest periods, reimburse
3 for reasonable business expenses, issue itemized wage statements and for other alleged
4 violations of the California Labor Code provisions. He also alleged that Defendant violated
5 California Business and Professions Code Sections 17200 et seq. He requested damages and
6 injunctive relief. Defendant removed the action to this court pursuant to 28 U.S.C. § 1441 based
7 on diversity jurisdiction under 28 U.S.C. Section 1332(a)(1) and (d)(2). Subsequently, the
8 complaint was amended to add the remaining two Plaintiffs.
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Plaintiffs’ initial motion for class certification was denied without prejudice. (See Order

10 (1) Denying Plaintiffs’ Motion for Class Certification Without Prejudice; and (2) Denying
11 Defendant’s Ex Parte Application for Supplemental Briefing, filed August 30, 2010 (“Order”).)
12 Subsequently, the parties conducted discovery and Plaintiffs renewed their motion.
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“The class action is an exception to the usual rule that litigation is conducted by and on

14 behalf of the individual named parties only. In order to justify a departure from that rule, a class
15 representative must be part of the class and possess the same interest and suffer the same injury
16 as the class members.” Wal-Mart Stores, Inc. v. Dukes, __ U.S. __, 131 S.Ct. 2541, 2550 (2011)
17 (“Dukes”) (internal quotation marks and citations omitted). In this regard, Rule 23 contains two
18 sets of class certification requirements set forth in Rule 23(a) and (b). United Steel, Paper &
19 Forestry, Rubber, Mfg. Energy, Allied Indus. & Serv. Workers Int’l Union v. ConocoPhillips
20 Co., 593 F.3d 802, 806 (9th Cir. 2010) (“United Steel”). “The party seeking class certification
21 bears the burden of demonstrating that the[se] requirements . . . are met.” Id. at 807.
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“Rule 23(a) ensures that the named plaintiffs are appropriate representatives of the class

23 whose claims they wish to litigate. The Rule’s four requirements – numerosity, commonality,
24 typicality, and adequate representation – effectively limit the class claims to those fairly
25 encompassed by the named plaintiff’s claims.” Dukes, 131 S.Ct. at 2550-51 (internal quotation
26 marks and citations omitted). As noted in the Order, Plaintiffs met the numerosity, commonality
27 and typicality requirements of Rule 23(a), but were given leave to make a proper showing that
28 they also meet the adequate representation requirement. (Order at 3-4.)
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08cv33

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“Where a putative class satisfies all four requirements of Rule 23(a), it must still meet at

2 least one of the three additional requirements outlined in Rule 23(b) in order to be eligible for
3 certification.” United Steel, 593 F.3d at 806. Plaintiffs seek certification under Rule 23(b)(3)
4 (See Pls’ Mot at 7), which provides:
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A class action may be maintained if Rule 23(a) is satisfied and if:

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...

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(3) the court finds that the questions of law or fact common to class members
predominate over any questions affecting only individual members, and that a
class action is superior to other available methods for fairly and efficiently
adjudicating the controversy. The matters pertinent to these findings include:

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

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

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

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

15 Defendant argued in opposition to Plaintiffs’ initial motion, as it does now, that a class cannot be
16 certified under Rule 23(b)(3) because the questions of law or fact common to class members do
17 not predominate over the questions affecting individual members. “The predominance inquiry
18 focuses on the relationship between the common and individual issues and tests whether the
19 proposed class [is] sufficiently cohesive to warrant adjudication by representation.” Vinole v.
20 Countrywide Home Loans, Inc., 571 F.3d 935, 944 (9th Cir. 2009) (internal quotation marks,
21 footnote and citation omitted).
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Rule 23(b)(3)'s predominance and superiority requirements were added to cover
cases in which a class action would achieve economies of time, effort, and
expense, and promote uniformity of decision as to persons similarly situated,
without sacrificing procedural fairness or bringing about other undesirable results.
Accordingly, a central concern of the Rule 23(b)(3) predominance test is whether
adjudication of common issues will help achieve judicial economy.

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26 Id. (ellipsis, internal quotation marks and citations omitted). Plaintiffs’ initial motion was denied
27 in large part because they failed to sufficiently address and make a proper showing under Rule
28 23(b)(3). (Order at 8-10.)
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08cv33

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Plaintiffs sought to certify a class defined as

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All persons presently and formerly employed by Defendant in the State of
California between December 5, 2003 and the present as delivery personnel during
the Class Period who were subject to the “Service Agreement” (or similar
document), which categorized them as independent contractors and not employees.

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5 Plaintiffs’ action is premised on the claim that they and the putative class members were
6 misclassified by Defendant as independent contractors, when they should have been classified as
7 non-exempt employees. If Plaintiffs are correct that they were erroneously treated as
8 independent contractors, then the case can proceed to determine whether their rights under
9 California wages and hours laws were violated. The Service Agreement, which each Plaintiff
10 and putative class member signed in substantially the same form, provided that the contracting
11 party was Defendant’s independent contractor.1 California Labor Code does not define the terms
12 “employee” and “independent contractor” for purposes of the claims asserted by Plaintiffs. See
13 Estrada v. FedEx Ground Package Sys., Inc., 154 Cal. App. 4th 1, 10 (2007). The relevant
14 determination is made based on a fact intensive analysis:
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The essence of the test is the “control of details” – that is, whether the principal
has the right to control the manner and means by which the worker accomplishes
the work – but there are a number of additional factors in the modern equation,
including (1) whether the worker is engaged in a distinct occupation or business,
(2) whether, considering the kind of occupation and locality, the work is usually
done under the principal's direction or by a specialist without supervision, (3) the
skill required, (4) whether the principal or worker supplies the instrumentalities,
tools, and place of work, (5) the length of time for which the services are to be
performed, (6) the method of payment, whether by time or by job, (7) whether the
work is part of the principal's regular business, and (8) whether the parties believe
they are creating an employer-employee relationship.

21 Id., citing S.G. Borello & Sons, Inc. v. Dep’t of Indus. Relations, 48 Cal.3d 341, 350-51 (1989),
22 among others. A contract such as the Service Agreement, which designates a party as an
23 independent contractor, does not necessarily negate a finding of an employment relationship.
24 See Estrada, 154 Cal. App. 4th at 10; see also Borello, 48 Cal.3d at 349 (1989) (“label placed by
25 the parties on their relationship is not dispositive”).
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It is undisputed that although the Service Agreements were revised by Defendant
during the proposed class period, they were substantially the same in the matters pertinent to
28 class certification.
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08cv33

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Defendant argued in opposition to Plaintiffs’ initial motion, as it does now, that a class

2 cannot be certified because the factors relevant to the employment analysis cannot be established
3 on a class-wide basis. Plaintiffs’ initial motion was denied largely because Defendant presented
4 evidence that the drivers were free to, and in some instances did, operate multiple trucks with
5 multiple delivery teams, and in some instances did not personally perform any deliveries at all.
6 (Order at 8.) Because the evidence was relevant to the employment analysis, the extent of this
7 practice was relevant in deciding whether “adjudication of common issues will help achieve
8 judicial economy.” (Id., quoting Vinole, 571 F.3d at 944.) Defendant also presented other
9 evidence that suggested that the putative class was fragmented in other respects. (See id. at 9.)
10 Based on the record before the court, it was unclear whether the employment factors could be
11 considered on a class-wide basis so as to meet predominance and superiority requirements of
12 Rule 23(b)(3). (Id.; see also id. at 8.)
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Although Plaintiffs’ motion was denied, Plaintiffs were given an opportunity to renew the

14 motion with appropriate evidentiary support. They were admonished that if they chose to “file
15 another motion for class certification, they must address the issue of the prevalence among the
16 putative class members of drivers operating multiple trucks and not personally performing
17 delivery services, and to what extent such individuals should be included in the proposed
18 definition of the class.” (Order at 8-9.) The parties were further instructed to “focus their
19 evidence on the factors relevant to the employment analysis and address the issues (1) whether
20 and to what extent the factors can be addressed on a class-wide basis; (2) whether dividing the
21 putative class into subclasses would remedy any shortcomings; and (3) whether any groups of
22 individuals should be excluded from the proposed class definition.” (Id. at 9.) In addition, the
23 court admonished Plaintiffs that they had to address Rule 23(b)(3)(B) though (D). (Id. at 9-10.)
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In their new motion, Plaintiffs did not adequately address the issues highlighted in the

25 Order. With respect to the main issue, that the putative class appeared to be fragmented because
26 some class members operated more than one truck with multiple delivery teams and that some
27 did not personally perform delivery services at all, Plaintiffs amended the proposed class
28 definition to read:
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08cv33

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All persons who performed work for Diakon Logistics (Delaware) Inc. as an
owner/operator in the State of California between December 5, 2003 and the
present subject to the “Service Agreement” characterizing them as an independent
contractor, with the exception of any such person who operated more than one
delivery vehicle for Defendant during this period.

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In addition to not addressing the issues identified by the court, Plaintiffs did not make any

6 showing or argument why the new class definition should be considered. Furthermore, it raises
7 new issues of its own. For example, Plaintiffs do not contend that the showing on Rule 23(a)
8 factors they made with respect to the old definition automatically applies to the new definition.
9 Another issue raised by the new definition is that it does not appear to be limited to Defendant’s
10 employees. For these reasons alone, the new class definition cannot be considered.
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More importantly, Plaintiffs did not discuss the change in the definition or argued how it

12 addresses the issues raised by the court. Instead, they attempted to make their Rule 23(b)(3)
13 showing by arguing that the employment factors can be addressed on a class-wide basis because
14 all persons who signed the Service Agreement were treated the same. Based on the Service
15 Agreement, Defendant’s advertising (Pls’ Exh. A & R), the deposition testimony of Defendant’s
16 President (id. Exh. B) and his affidavit (Decl. of Charles H. Johnson), Plaintiffs may well be able
17 to show that all who signed the Service Agreement were treated by Defendant in the same way.
18 However, this does not address the fragmented nature of the putative class. Defendant’s
19 evidence shows that the putative class breaks down along many different categories. (See Def.’s
20 Exh. B.) Plaintiffs’ new evidence, legal argument and class definition have not negated this and
21 Plaintiffs have not suggested any ways in which the court should address the various groups of
22 putative class members. The fragmentation of the putative class undoubtedly will present case
23 management issues, if a class were to be certified. See Fed. R. Civ. Proc. 23(b)(3)(D). Again,
24 Plaintiffs were required to address this issue, but did not. Based on the foregoing, Plaintiffs have
25 failed to meet their burden under Rule 23(b)(3) to show that class certification is appropriate in
26 their case. Accordingly, their motion is DENIED.
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However, Plaintiffs indicated that in some respects they were not able to make a proper

28 showing because Defendant failed to comply with their discovery requests and then sand-bagged
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08cv33

1 them with new evidence presented in the opposition papers. (See Pls’ Objection to the Decl. of
2 Charles Johnson Filed in Opp’n to Mot. for Class Certification.) Because it appears that
3 Plaintiffs were not provided all the requested and necessary information to evaluate their case
4 prior to class certification, Plaintiffs’ motion is denied WITHOUT PREJUDICE to renewing it
5 after they have had an opportunity to obtain and review complete responses to their discovery.
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The parties’ discovery disputes in this regard are REFERRED to the Magistrate Judge

7 pursuant to Federal Rule of Civil Procedure 72(a) and Civil Local Rule 72.1(b). In addition, the
8 parties shall schedule a case management conference with the Magistrate Judge to establish an
9 appropriate date when Plaintiffs should file any further motion for class certification.
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Based on the foregoing, Plaintiffs’ motion for class certification is DENIED WITHOUT

11 PREJUDICE. The court therefore need not consider at this time Plaintiffs’ showing on the
12 other deficiencies in their initial class certification motion which were noted in the Order.
13 Defendant’s ex parte application for supplemental briefing is DENIED as moot.
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IT IS SO ORDERED.

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16 DATED: August 10, 2011
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M. James Lorenz
United States District Court Judge

19 COPY TO:
20 HON. WILLIAM McCURINE, Jr.
UNITED STATES MAGISTRATE JUDGE
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ALL PARTIES/COUNSEL
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08cv33