KANDIS A. WESTMORE, United States Magistrate Judge.
Plaintiffs Shikwana Jennings and Lisa Drake filed the instant suit against Defendants
The Court held a hearing on the motions on March 30, 2017. Having considered the papers filed by the parties, the relevant legal authority, and the arguments advanced by counsel at the hearing, the Court rules as follows: (1) Plaintiff's motion to expand the scope of the certified collective action is GRANTED IN PART AND DENIED IN PART; (2) 20/20's motion to deny class certification is GRANTED IN PART and DENIED IN PART, and (3) 20/20's motion for judgment on the pleadings is DENIED.
Plaintiffs Jennings and Drake previously worked for Defendants "to promote free cell phones and wireless service plans for low-income individuals who meet the plans' requirements." (TAC ¶ 1.) Plaintiffs allege that they were misclassified as independent contractors, resulting in Defendants failing to pay them minimum wage, overtime, and expenses, as well as providing itemized wage statements. (TAC ¶ 2.)
In June 2013, 20/20 first began providing marketing services for providers of wireless service plans and cellular phones. (Burks Decl. ¶ 2, Dkt. No. 143-7.) Until October 2014, 20/20 contracted directly with individuals to promote wireless service plans and cellular phones as "Sales Representatives." (TAC ¶ 16; Burks Decl. ¶ 2.) Since June 2013, to become a "Sales Representative," individuals were required to submit an application through 20/20's online application portal. (Warren Decl. ¶ 2, Dkt. No. 143-3.) As part of the onboarding process, individuals were presented with the Mutual Arbitration Agreement ("20/20 MAA"). (Warren Decl. ¶ 4.) All newly-retained Sales Representatives were required to execute the 20/20 MAA; 20/20 asserts that it was not possible for an individual to advance to the next step of the onboarding process without executing the 20/20 MAA, as the individual would then receive an error message. (Warren Decl. ¶ 4, Exh. B.) The 20/20 MAA requires the parties to resolve all disputes and claims between the parties through final and binding arbitration unless the individual opts out of the 20/20 MAA by delivering a completed and signed opt-out form to 20/20's Vice President of Human Resources. (Warren Decl., Exh. C ("20/20 MAA") ¶¶ 1, 10.) 20/20 alleges that 186 individuals in California and 204 individuals in Nevada contracted with 20/20 "on or after September 24, 2013." (Warren Decl. ¶ 10.) No individuals in California or Nevada submitted opt-out forms. (Warren Decl. ¶ 9.)
Plaintiffs allege that from September 2012 to October 2014, 20/20 and the individual Defendants controlled the manner in which workers "performed their marketing work," including retaining the right to terminate, setting and monitoring performance goals, setting hours and work locations, requiring workers to send supervisors a photo of themselves at work to prove their attendance at the required time, requiring the use of a script, requiring
In October 2014, 20/20 and the individual Defendants allegedly "jointly created [Open Door] as a `spin off' company from 20/20." (TAC ¶ 18.) Sales Representatives would contract directly with Open Door rather than 20/20. As part of the onboarding process, Open Door required Sales Representatives "to execute an independent contractor agreement...." (Clark Decl. ¶ 5, Dkt. No. 143-5.) Since January 1, 2016, Open Door has used a version of the independent contractor agreement ("Open Door ICA") that includes a mandatory arbitration provision. (Clark Decl. ¶ 6, Exh. A ("Open Door ICA") ¶ 13.) The arbitration provision requires that "[a]ny controversy between the parties to this Agreement involving the construction or application of any of the terms, provisions, or conditions of this Agreement" shall be submitted to mediation and binding arbitration. (Open Door ICA ¶ 13.) There does not appear to be an opt-out provision. Of the 526 individuals who contracted with Open Door in California, 48 were engaged after January 1, 2016; of the 187 individuals who contracted with Open Door in Nevada, 4 were engaged after January 1, 2016. (Clark Decl. ¶ 8.)
As with 20/20, Plaintiffs allege that Open Door and the individual Defendants controlled the manner in which workers "performed their marketing work," including retaining the right to hire and terminate, setting and monitoring performance goals, setting hours and work locations, requiring workers to send supervisors a photo of themselves at work to prove their attendance at the required time, requiring the use of a script, requiring regular attendance of meetings, requiring attendance of pre-employment training, requiring use of a uniform while working, setting disciplinary standards, requiring the use of company-provided tablets, and requiring workers to report to their supervisors how many customers they signed up each day. (TAC ¶ 19(a).) Plaintiffs also allege that during this time, 20/20 acted as a joint employer of these individuals because workers "acted in the interest of 20/20," and 20/20 maintained the right to hire, fire, and otherwise modify the employment condition of workers. (TAC ¶¶ 20(a)-(b).) 20/20 also "retained the right to supervise and control... work schedules," and supervisors were required to participate in weekly meetings with 20/20, "during which they discussed the weekly number of sign-ups achieved ..., the locations where [workers] should work, the standard operating procedures for [workers], and new [Open Door] agent hires." (TAC ¶ 20(c).) 20/20 also retained the right to determine the rate of pay. (TAC ¶ 20(e).) There was also "no change in the work responsibilities or payment methods of those [individuals] who transitioned from working for 20/20 directly to [Open Door] directly." (TAC ¶ 20(f).) 20/20 also continued to provide workers with the tablets necessary to perform their work, as well as technology support. (TAC ¶ 20(g).)
Plaintiffs filed the instant action on September 8, 2015. (Compl., Dkt. No. 1.) Plaintiffs filed the operative complaint on May 12, 2016, asserting claims for: (1) failure to pay minimum wage in violation of the FLSA; (2) failure to pay overtime in violation of the FLSA; (3) failure to pay minimum wage and overtime in violation of the California Labor Code; (4) failure to provide workers with itemized wage statements
Following the commencement of this action, the parties filed a series of motions. On October 23, 2015, Plaintiffs filed a motion for notice to be issued to similarly situated employees pursuant to 29 U.S.C. § 216(b). (Dkt. No. 21.) On December 7, 2015, Open Door filed a motion to compel arbitration and dismiss, or alternatively, stay claims; a motion to dismiss based on forum non conveniens and Rule 12(b)(3); and a motion to dismiss pursuant to Rule 12(b)(6), or alternatively, for a more definite statement pursuant to Rule 12(e). (Dkt. Nos. 49, 50 51.) 20/20 also filed a motion to dismiss Plaintiffs' complaint, or alternatively, for a more definite statement, as well as a motion to compel arbitration and dismiss, or alternatively, stay claims. (Dkt. Nos. 53, 54.)
On April 12, 2016, the Court issued an order on the parties' motions. (Ord., Dkt. No. 92.) First, the Court denied the motion to dismiss based on forum non conveniens, finding that the forum selection clause did not apply to the claims asserted in the action. (Id. at 6.) Second, the Court granted 20/20's unopposed motion to compel arbitration of former Plaintiff Carlos Conde. (Id. at 7.) Third, the Court granted 20/20's motion to dismiss on the ground that Plaintiffs failed to "identify the particular conduct attributable for each defendant," as Plaintiffs instead used the term "Defendants" throughout the complaint, which "failed to give each defendant fair notice of the claims asserted against them and the grounds upon which those claims rest." (Id. at 9-10.) Fourth, the Court granted Open Door's motion to dismiss as to claims asserted against Open Door prior to September 2014, and as to claims asserted against Defendants Farris and Clark specifically due to the lack of "any allegations describing what conduct Farris and Clark engaged in that would expose them to liability for the wage and hour violations Plaintiffs allege." (Id. at 10-11.) Finally, the Court held in abeyance Plaintiffs' motion for notice to be issued to similarly situated employees pending the filing of the third amended complaint and the parties' meet and confer on the scope of the class. (Id. at 15.)
After Plaintiffs filed their operative third amended complaint, the parties stipulated to the issuance of notice to all individuals who worked for Open Door "as independent contractors marketing free cell phones and wireless service plans to potential consumers face-to-face in Nevada and California from October 2014 to the present" who have not entered into an arbitration agreement with either Open Door or 20/20. (Dkt. No. 104 at 2.) Plaintiffs' counsel would then issue notice to these individuals, after which class members would have 60 days to opt into the collective action. (Id. at 2-3.) The parties would then participate in a full-day private mediation. (Id. at 3.) In the interim, the case would be stayed in its entirety, and Plaintiffs' motion for notice would remain held in abeyance. (Id.) On June 28, 2016, the Court granted the stipulation and stayed the case. (Dkt. No. 107.)
On November 29, 2016, Attorney David Sohn, counsel for Defendants Open Door, Larry Clark and Jerrimy Farris, moved to withdraw as attorney. (Dkt. No. 124.) Through this motion, the Court was notified for the first time that the mediation had taken place on November 10, 2016, but was unsuccessful, and that the parties had agreed to lift the stay on November 17, 2016. (Dkt. No. 124-1 ¶¶ 3-4.) The Court ordered the parties to submit a joint status report to explain the status of the case and any pending motions before the Court. After the parties filed their joint status report, the Court lifted the stay and set a case management conference. (Dkt. No. 127.) On January 10, 2017, the Court granted Attorney Sohn's motion to withdraw. (Dkt. No. 128.) Defendants Open Door, Larry Clark, and Jerrimy Farris are presently unrepresented.
On February 21, 2017, the Court held a case management conference with the parties. (Dkt. No. 137.) Defendants Open Door, Larry Clark, and Jerrimy Farris did not appear. The Court specially set a hearing on March 30, 2017, to hear Plaintiffs' motion to expand the scope of the collective action, as well as 20/20's motion to deny class certification and motion for judgment on the pleadings. (Id. at 1-2.) The parties were directed to stipulate to a shortened briefing schedule accordingly. (Id. at 2.) On February 22, 2017, the Court issued an order to show cause, directed at Defendants Open Door, Larry Clark, and Jerrimy Farris, ordering them to explain why they should not pay monetary sanctions in the amount of $500 for their failure to appear at the case management conference. (Dkt. No. 138.) Defendants' response was due by March 10, 2017; as of the date of this order, no response has been filed. On April 6, 2017, the Court issued a second order to show cause as to Defendants Open Door, Larry Clark, and Jerrimy Farris. (Dkt. No. 168.)
On February 22, 2017, Plaintiffs filed their motion to expand the scope of the collective action. (Plfs.' Mot. to Expand, Dkt. No. 139.) On March 10, 2017, 20/20 filed its opposition to Plaintiffs' motion to expand the scope of the collective action. (20/20 Opp'n to Mot. to Expand, Dkt. No. 152.) No reply was filed.
On March 1, 2017, 20/20 filed its motion to deny class certification and motion for judgment on the pleadings as to Plaintiffs' PAGA claim. (20/20 Mot. to Deny Cert, Dkt. No. 143; 20/20 Mot. for Judgment on the Pleadings, Dkt. No. 144.) On March 10, 2017, Plaintiffs filed their oppositions to 20/20's motions. (Plfs.' Opp'n to Mot. to Deny Cert, Dkt. No. 151; Plf.'s Opp'n to Mot. for Judgment on the Pleadings, Dkt. No. 150.) On March 16, 2017, 20/20 filed its replies. (20/20 Reply re Mot. to Deny Cert, Dkt. No. 155; 20/20 Reply re Mot. for Judgment on the Pleadings, Dkt. No. 154.) The Court held a hearing on the motions
Federal Rule of Civil Procedure 23(c)(1)(A) "addresses the timing of a district court's class certification determination, and states: `Time to Issue: At an early practicable time after a person sues or is sued as a class representative, the court must determine by order whether to certify the action as a class action.'" Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935, 939 (9th Cir. 2009) (quoting Fed. R. Civ. P. 23(c)(1)(A)). The Ninth Circuit has concluded that "[n]othing in the plain language of Rule 23(c)(1)(A) either vests plaintiffs with the exclusive right to put the class certification issue before the district court or prohibits a defendant from seeking early resolution of the class certification question." Id. at 939-40. Accordingly, "Rule 23 does not preclude a defendant from bringing a `preemptive' motion to deny certification." Id. at 939.
To obtain class certification, a proposed class must satisfy the prerequisites of Rule 23(a), which are:
Fed. R. Civ. P. 23(a). The purpose of these requirements is to "ensure[ ] that the named plaintiffs are appropriate representatives of the class whose claims they wish to litigate," and to "effectively limit the class claims to those fairly encompassed by the named plaintiff's claims." Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 349, 131 S.Ct. 2541, 180 L.Ed.2d 374 (2011). The plaintiff must also satisfy the requirements for certification of "one of the types of class actions identified in Rule 23(b)." Pulaski & Middleman, LLC v. Google, Inc., 802 F.3d 979, 985 (9th Cir. 2015).
In the instant case, Plaintiffs ultimately seek to certify a Rule 23 class made up of "workers who have worked for 20/20 from September 2012 through the present and who have worked for Open Door from October 2014 to the present in California...." (TAC ¶ 3.) 20/20 contends that Plaintiffs cannot satisfy the prerequisites of Rule 23 because Plaintiffs did not sign arbitration agreements with Defendants, whereas approximately 234 putative class members signed arbitration agreements with either 20/20 or Open Door.
As an initial matter, Plaintiffs argue that 20/20's motion is premature because "discovery has not yet taken place." (Plfs.' Opp'n to Mot. to Deny Cert. at 1.) Plaintiffs argue that they "have had no opportunity to learn the circumstances surrounding the signing of these arbitration agreements, which might lead to procedural unconscionability defenses of which Plaintiffs are not currently aware." (Id. at 2.)
The Court finds that the discovery sought by Plaintiffs does not prevent the Court from ruling on the instant motion. Plaintiffs seek to challenge the enforceability of the arbitration agreements; Defendants' motion, however, is premised on the fact that Plaintiffs did not sign arbitration agreements, but intend to certify a class that includes individuals who did sign the arbitration agreements. Because of this distinction, Defendants argue that Plaintiffs cannot demonstrate typicality, commonality, and superiority, as required by Rule 23(a). Plaintiffs do not dispute that they did not sign an arbitration agreement, while other individuals did. Thus, the Court concludes that additional discovery is not required to decide the merits of Defendants' motion.
First, 20/20 argues that Plaintiff cannot satisfy the prerequisites of Rule 23(a) because "Plaintiffs are atypical and inadequate representatives." (20/20 Mot. to Deny Cert. at 11 (capitalization omitted).) Typicality requires the Court to look at "whether the claims of the class representatives are typical of those of the class, and is satisfied when each class member's claim arises from the same course of events, and each class member makes similar legal arguments to prove the defendant's liability." Stearns v. Ticketmaster Corp., 655 F.3d 1013, 1019 (9th Cir. 2011). Typicality is generally a "permissive standard[ ]," such that "representative claims are `typical' if they are reasonably co-extensive with those of absent class members; they need not be substantially identical." Hanlon v. Chrysler Corp., 150 F.3d 1011, 1020 (9th Cir. 1998). Adequacy, in turn, considers whether the representative will "fairly and adequately protect the interests of the class." Fed. R. Civ. P. 23(a)(4). "A named plaintiff satisfies the adequacy test if the individual has no conflicts of interest with other class members and if the named plaintiff will prosecute the action vigorously on behalf of the class." Circle Click Media LLC v. Regus Mgmt. Grp. LLC, Case No. 12-cv-4000-EMC, 2016 WL 1048046, at *9 (N.D. Cal. Mar. 11, 2016) (citing Ellis v. Costco Wholesale Corp., 657 F.3d 970, 985 (9th Cir. 2011)).
In Avilez v. Pinkerton Government Services, Inc., the Ninth Circuit in an unpublished decision vacated the district court's class certification order. 596 Fed.Appx. 579, 579 (9th Cir. 2015). There, the district court had certified classes and subclasses that included employees who signed class action waivers. Id. The named plaintiff, however, had signed an arbitration agreement that did not contain a class waiver, and the parties "did not dispute that those who signed such waivers have potential defenses that [the named plaintiff] would be unable to argue on their behalf." Id. Thus, "[t]o the extent the classes and subclasses include individuals who signed class action waivers, [the named plaintiff] is not an adequate representative, and her claim lacks typicality." Id. (internal citations omitted).
Citing to Avilez, the district court in Tan v. GrubHub, Inc. similarly found that a named plaintiff who had opted out of an
Plaintiffs counter that Avilez is not binding and was "wrongly decided," and that the Court should instead follow the lead of Nitsch v. Dreamworks Animation SKG Inc., 315 F.R.D. 270 (N.D. Cal. 2016).
The Court ultimately finds that the analysis in Avilez and Tan is more persuasive, as Nitsch did not appear to consider whether a plaintiff who is not bound by an arbitration agreement is able to challenge the enforceability of that arbitration agreement. See Tan, 2016 WL 4721439, at *6 (concluding that the named plaintiff "has no standing to challenge the applicability or enforceability of the arbitration and class action waiver provisions ... because, in light of his decision to opt out, they do not apply to him"). At this juncture, Plaintiffs are not personally affected by the arbitration agreements at issue because they have not signed agreements that contain similar terms; 20/20 cannot require Plaintiffs to arbitrate because Plaintiffs are not bound by any such agreement. Plaintiffs therefore have no interest in the enforceability of the arbitration agreement itself, and lack the ability to challenge the agreements on behalf of individuals who did sign such agreements. Thus, the defenses the named Plaintiffs are subject to are not typical of the class as proposed.
In addition to their citation to Nitsch, Plaintiffs raise a number of arguments for why the Court should deny 20/20's motion. First, Plaintiffs dedicate the bulk of their opposition to arguing that the arbitration agreements at issue are unenforceable. (Plfs.' Opp'n to Mot. to Deny Cert. at 7-16.) This requires, however, that the Court determine whether Plaintiffs are able to challenge the enforceability of the arbitration agreements in the first place, given that Plaintiffs did not sign arbitration agreements. In a footnote, Plaintiffs contend that the Court should consider enforceability because otherwise, a defendant could prevent "similarly situated individuals from joining together in a class action merely by treating them differently with respect to their employment agreements, but nothing else. For example, a company which amends and updates its employment agreement regularly ... would be able to preemptively defeat class certification solely because representative plaintiffs did not sign every potential version of its agreement." (Id. at 4 n.5.) Plaintiffs overstate the issue; the issue here is not merely that the employment agreements are different, but that the differences themselves raise unique defenses as to some putative class members, but not others, including Plaintiffs. If multiple versions of an employment agreement exist, but such versions have only superficial differences, the fact that a named plaintiff signed one version but not the others would not affect typicality or adequacy if those differences do not affect a named plaintiff's claims vis-à-vis
Plaintiffs' citation to Milbourne v. JRK Residential America, LLC does not inspire a contrary conclusion; there, the district court concluded that the named plaintiff had standing to contest the defendant's motion to compel the absent class members to arbitration, even though the named plaintiffs had not signed the arbitration agreement. Civil Case No. 3:12cv861, 2016 WL 1071564, at *7 (E.D. Va. Mar. 15, 2016). This Eastern District of Virginia decision, however, was made after the class had already been certified, as the defendants had failed to raise the issue in opposition to the motion for class certification; thus, the individuals who had signed arbitration agreements were parties before the court. Id. Notably, the court agreed that "[t]he fact that none of the three Named Plaintiffs signed an arbitration agreement to which some class members may be subject admittedly affects the typicality of the Named Plaintiffs' claims and their ability to adequately and fairly represent the class as a whole." Id.; see also id. at *6 ("where the named plaintiff has shown that there is an actual, justiciable controversy between himself and the defendant, differences between the claims and defenses available to the named plaintiff and to the class bear on the questions of typicality and adequacy of representation under Fed. R. Civ. P. 23, rather than standing"). In other words, the district court was rejecting the defendant's attempt to belatedly challenge typicality and adequacy in the context of standing, when the defendant should have argued that issue during class certification. Here, however, a class has not yet been certified, and the putative class members are not parties to the suit. Thus, their claims — and the defenses 20/20 has against such individuals, including the enforceability of the arbitration agreement — are not yet properly before the Court. In light of this procedural posture, the Court does not consider Plaintiffs' arguments regarding the viability of the arbitration agreement.
Second, Plaintiffs argue that "[t]he fact that some putative class members signed arbitration agreements is ... irrelevant, because, unlike [Plaintiff] Jennings, unnamed class members are `not part of the lawsuit.'" (Plfs.' Opp'n to Mot. to Deny Cert. at 20.) Instead, Plaintiffs suggest that such absent class members have only a "passive role" and are "mere spectators of a representative action brought on their behalves," thus "render[ing] their arbitration provisions irrelevant and no bar to class certification." (Id. at 20-21.) In other words, "unnamed class members simply do not have active disputes or claims ... in a Rule 23 representative action brought by an individual who is not bound to arbitrate." (Id. at 21 n.15.)
The Court disagrees with this proposition, which would essentially permit courts to ignore arbitration agreements signed by every absent class member, so long as there is one named plaintiff who is not bound by the arbitration agreement. While an absent class member may be "passive," they are still parties to a suit, whose claims are actively being litigated by class counsel. Thus, a judgment in a class action "`will bind not only the presentative parties, but also all nonparticipating members of the class certified by the court.'" Ross v. Trex Co., Inc., No. C 09-670-JSW, 2013 WL 791229, at *1 (N.D. Cal. Mar. 4, 2013) (quoting Roussel v. Wells Fargo Bank, No. C 12-4057 CRB, 2012 WL 5301909, at *3 (N.D. Cal. Oct. 25, 2012)); see also Cooper v. Fed. Reserve Bank of Richmond, 467 U.S. 867, 874, 104 S.Ct. 2794,
2016 WL 4721439, at *5.
Finally, Plaintiffs argue that 20/20's motion should be denied to the extent it seeks to deny certification of putative class members who signed arbitration agreements with Open Door. (Plfs.' Opp'n to Mot. to Deny Cert. at 22.) As an initial matter, Plaintiffs point out that "20/20 is not a signatory to these agreements, and therefore cannot seek to benefit from them." (Id.) 20/20 contends that "[a]lthough not a party to the [Open Door] agreement, 20[/]20 may be able to assert it as a defense to absent class members' claims as a third-party beneficiary, and/or on a theory of equitable estoppel." (20/20 Reply re Mot. to Deny Cert at 2 n.1.) 20/20, however, fails to point to any legal authority or factual evidence in support of this proposition.
At this point, the Court agrees that just as the named Plaintiffs have no interest in the arbitration agreements to challenge their enforceability, 20/20 lacks an interest in the Open Door arbitration agreements to use it to deny certification of the putative class members who signed arbitration agreements.
Accordingly, the Court finds that Plaintiffs cannot satisfy Rule 23's typicality prerequisite as to a class that includes individuals who signed the 20/20 MAA and are therefore possibly bound by an arbitration agreement. The Court therefore GRANTS 20/20's motion to deny class certification as to these individuals, and DENIES 20/20's motion to deny class certification with respect to individuals who signed the Open Door ICA because 20/20 lacks an interest to enforce or rely on the Open Door ICA. Because the Court has granted the motion on typicality grounds, the Court does not rule on 20/20's arguments that Plaintiffs also cannot satisfy adequacy, commonality, predominance, and superiority.
Plaintiffs move to expand the scope of the certified collective action, such that notice will be issued to:
(Plfs.' Mot. to Expand at 1.) The proposed collective action expands on the stipulated collective action, which included individuals "marketing free cell phones and wireless service plans to potential consumers face-to-face in Nevada and California from October 2014 to the present" who did not sign an arbitration agreement with either Open Door or 20/20. (Dkt. No. 104 at 2.) In other words, Plaintiffs seek to expand the scope of the collective action to include individuals in California and Nevada who entered into arbitration agreements with Defendants.
The FLSA requires employers to pay their employees a minimum wage. 29 U.S.C. § 206(a). If an employer fails to comply with the FLSA, § 216(b) allows an aggrieved employee to bring a collective action on behalf of herself and "similarly situated" employees. A collective action permits plaintiffs to lower the cost of vindicating their rights and promotes the efficient use of judicial resources. See Hoffmann-La Roche Inc. v. Sperling, 493 U.S. 165, 170, 110 S.Ct. 482, 107 L.Ed.2d 480 (1989).
"[T]he majority of district courts in this Circuit use a two-step approach for determining whether employees are similarly situated under Section 216(b)." Woods v. Vector Mktg. Corp., No. C-14-264-EMC, 2015 WL 1198593, at *2 (N.D. Cal. Mar. 16, 2015). At the first step, "the court determines whether the proposed class should be conditionally certified for the sole purpose of sending out notice of the proposed action to the potential class members." Feaver v. Kaiser Found. Health Plan, Inc., Case No. 15-cv-890-EMC, 2016 WL 324176, at *3 (N.D. Cal. Jan. 27, 2016). "The standard for the first step is a lenient one that typically results in certification." Woods, 2015 WL 1198593, at *3 (internal quotations and citations omitted). To satisfy this lenient standard, the plaintiff must simply establish that an "identifiable factual or legal nexus binds together the various claims of the class members in a way that hearing the claims together promotes judicial efficiency and comports with the broad remedial policies underlying the FLSA." Russell v. Wells Fargo Co., No. C07-3993 CW, 2008 WL 4104212, at *5 (N.D. Cal. Sept. 3, 2008) (internal quotation omitted). At this stage, "courts usually rely only on the pleadings and any affidavits that have been submitted." Benedict v. Hewlett-Packard Co., No. 13-cv-119-LHK, 2014 WL 587135, at *5
At the second step, "the party opposing certification may move to decertify the class once discovery is complete." Feaver, 2016 WL 324176, at *4. In deciding whether decertification is appropriate, the court makes factual determinations regarding the "propriety and scope" of the class. Id. The Court "considers three factors: (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." Id. (citing Leuthold v. Destination Am., Inc., 224 F.R.D. 462, 467 (N.D. Cal. 2004)). In contrast to the lenient first step, the second step applies a stricter standard. Id.; see also Harris v. Vector Mktg. Corp., 716 F.Supp.2d 835, 837-38 (N.D. Cal. 2010).
As an initial matter, 20/20 argues that because neither Plaintiff worked directly for 20/20 as an independent contractor, Plaintiffs "do not have standing to claim, on behalf of [20/20's contractors], that 20/20 was their "employer" and violated the FLSA by misclassifying them as independent contractors. (20/20 Opp'n to Mot. to Expand at 8.)
Although Plaintiffs were not directly employed by 20/20, Plaintiffs have alleged that 20/20 is still liable as a joint employer. (TAC ¶ 20.) Thus, regardless of whether they were directly employed by 20/20 or Open Door, Plaintiffs allege that their injury is traceable to 20/20, due to 20/20 acting as a joint employer.
20/20 does not point to any authority that a plaintiff must be directly employed by a defendant. Such an argument would be contrary to federal guidance on the FLSA, which explains that "[a] single individual may stand in the relation of an employee to two or more employers at the same time under the [FLSA], since there is nothing in the act which prevents an individual employed by one employer from also entering into an employment relationship with a different employer." 29 C.F.R. § 791.2. Thus:
29 C.F.R. § 791.2(b). The courts have likewise recognized that "[s]eparate persons or entities that share control over an individual may be deemed joint employers under the FLSA." Schultz v. Capital Int'l Sec., Inc., 466 F.3d 298, 305 (4th Cir. 2006). In determining whether there is joint employment, the Ninth Circuit "has recognized that the concept of joint employment should be defined expansively under the FLSA...." Torres-Lopez v. May, 111 F.3d 633, 639 (9th Cir. 1997).
In contrast, 20/20 cites to cases where there were no allegations of joint employment or inadequate allegations that the defendants were related. In Henry v. Circus Casinos, Inc., the plaintiffs were current or former security guards for Mandalay Corporation, a subsidiary of Mandalay Resort Group. 223 F.R.D. 541, 542 (D. Nev. 2004). The plaintiffs brought a collective action on behalf of all Mandalay Resort Group security guards. Id. The plaintiffs did not allege joint employment; instead, they did not dispute that they only had standing to pursue claims against Mandalay Corporation. Id. at 544. Similarly, in Perez v. Wells Fargo & Co., the plaintiffs brought claims against five separate corporate entities, but "allege[d] no facts showing how the five defendants are related, if at all, and allege no facts showing which of those defendants was the employer of each of the named plaintiffs in this case." No. C 14-989 PJH, 2015 WL 1887354, at *5 (N.D. Cal. Apr. 24, 2015).
Here, however, Plaintiffs have alleged that 20/20 is a joint employer, along with Open Door and the individual Defendants. (TAC ¶ 20.) In support of the joint employer theory, Plaintiffs allege that class members acted in the interest of 20/20, and that 20/20 maintained "the right to hire, fire, and otherwise modify the employment conditions of" workers.
Plaintiffs also previously submitted declarations which support a finding of a joint employment relationship. For example, Paris Howard stated in her declaration that when working as an outreach agent, she was supervised by Derrick Lopez. (Howard Decl. ¶ 4, Dkt. No. 59-2.) Ms. Howard later was promoted to assistant manager, during which she received weekly e-mails from a 20/20 employee, providing the preliminary numbers of sign-ups for outreach agents. (Howard Decl. ¶ 25.) 20/20 also provided the equipment used by workers, including electronic tablets and tents. (Howard Decl. ¶ 26.) During one of her weekly meetings with Mr. Lopez, Mr. Lopez allegedly explained to her "that we were `working through' 20/20 Companies, and drew a triangle diagram with 20/20 at the top, and other companies, including Open Door Marketing, at the bottom." (Howard Decl. ¶ 27.) Mr. Lopez also explained that he had been an employee of 20/20, and then had started up Open Door, "and that the two companies had a part-nership whereby 20/20 backed Open Door Marketing." (Howard Decl. ¶ 28.) Mr. Lopez also allegedly stated that he was paid by 20/20. (Id.) Similarly, Kiyana Merchant stated in her declaration that while working for Open Door between March and July 2015, during her orientation and in subsequent meetings, Mr. Lopez explained that "20/20 provided the funding and equipment for the Oakland office." (Merchant Decl. ¶ 21, Dkt. No. 59-3.) When Ms. Merchant once inquired about getting permits, she was referred to 20/20. (Merchant Decl. ¶ 23, Exh. A.)
Such allegations suggest that there was a joint employer relationship. Notably, Defendants do not appear to challenge the allegations that 20/20 is a joint employer, instead arguing only that there is no allegation that 20/20 directly engaged or employed Plaintiffs. (20/20 Opp'n to Mot. to Expand at 8-9.) This is a distinction without a difference; whether 20/20 is a joint employer or direct employer, 20/20 is alleged to be the class members' employer, who is liable for misclassification. As discussed above, a worker has standing, and an alleged employer can be held liable under a joint employment theory. At this stage, the Court finds Plaintiffs' allegations of joint employment adequate, such that Plaintiffs have standing to represent individuals who contracted with 20/20 because Plaintiffs themselves have claims against 20/20 as their joint employer.
Next, the parties dispute whether Plaintiffs are similarly situated to workers who contracted with 20/20. In its prior order, the Court determined that "Defendants' alleged uniform practice of not paying minimum wage and overtime compensation constitutes an `identifiable factual or legal nexus' that likely connects the various claims of potential class members." (Ord. at 15.) Thus, "[t]his policy may be sufficiently uniform to make the Plaintiffs `similarly situated' to a proposed class," although not necessarily the class proposed by Plaintiffs at that time, which included all individuals who had promoted cell phones and wireless service plans for 20/20 and Open Door anywhere in the United States. (Id.)
Here, Plaintiffs again allege that there is an identifiable nexus, namely that "[r]egardless of whether these individuals worked directly for 20/20 or Open Door, they were misclassified as independent contractors, and were not paid minimum
The Court again finds that there is an identifiable factual or legal nexus, namely that Plaintiffs allege that regardless of whether they were employed by 20/20 or Open Door, they were misclassified as independent contractors and therefore not paid minimum wage and overtime, as required by the FLSA. The dissimilarities relied upon by 20/20 do not affect this alleged uniform policy or practice; the types of training, number or nature of meetings, and amount of pay do not necessarily affect the challenged practice, which is the misclassification of workers. 20/20 also fails to adequately explain how these dissimilarities show that the level of control retained by 20/20 and Open Door was so different as to affect whether or not workers were misclassified. To the extent that these differences do impact the factual or legal nexus binding the claims of the proposed collective action together, "such issues are more appropriately addressed at step two, rather than the more lenient step one." Feaver, 2016 WL 324176, at *5 (acknowledging that there were significant questions about whether individual inquiries were necessary, as well as questions going to the merits of the case, but ultimately granting the motion for conditional certification).
In the alternative, 20/20 argues that the collective action should not be expanded to include individuals who signed arbitration agreements because they are not similarly situated. (20/20 Opp'n to Mot. to Expand at 13.) In its prior order, the Court rejected this argument, explaining:
(Ord. at 15.) 20/20 contends that the facts have changed as "the Court no longer has before it `only 20/20's assertion' that putative class members signed arbitration agreements. Rather, the record is now clear and uncontroverted that all those who contracted with 20/20, and all those who contracted with [Open Door] after January 1, 2016, did, in fact, sign arbitration agreements and that none of them chose to opt out of those agreements." (20/20 Opp'n to Mot. to Expand at 14.) Plaintiffs, in turn, argue that the Court already decided this issue in favor of Plaintiffs. (Plfs.' Mot. to Expand at 9.)
In FLSA cases, the courts have disagreed on whether a collective action may be conditionally certified when the named Plaintiffs are not subject to an arbitration agreement, but some putative collective action members are. In Adami v. Cardo
Notably, in this district, several courts have rejected the argument that the signing of arbitration agreements by some members of the proposed collective action bars conditional certification. In Deatrick v. Securitas Security Services USA, Inc., the named plaintiff had opted out of the arbitration agreement. Case No. 13-cv-5016-JST, 2014 WL 5358723, at *3 (N.D. Cal. Oct. 20, 2014). Although the defendant argued that this meant that the named plaintiff was not similarly situated to those who had signed arbitration agreements, the district court found that conditional certification was "appropriate under the lenient standard applicable at this first stage...." Id. at *4. As to the arbitration agreement, such agreements had "little to no bearing at this point in the litigation because they relate to whether `disparate factual and employment settings' exist with respect to the putative class members and to `the various defenses available to the defendant with respect to each plaintiff.' [Citation.] These inquiries are reserved for the second stage of the certification process," and would be considered "if and when Defendant moves to decertify." Id. In Saravia v. Dynamex, the district court had found that the arbitration agreement against the named plaintiff was unenforceable, based on facts "that may have been unique" to the named plaintiff. 310 F.R.D. 412, 424 (N.D. Cal. 2015). Despite these potentially unusual circumstances, the district court found that "[n]o district court in our circuit has denied conditional certification on the basis that some members of the proposed collective may be subject to valid and enforceable clauses. The decisions that have addressed that issue have all found that the issue of enforceability of arbitration clauses related to the merits of the case and therefore should be dealt with in phase two." Id. Further, "it would be premature to assume that the issue of arbitration will be unmanageable at this phase, rather than reserving it for a motion for decertification, as other courts have done." Id. at 425. The district court did, however, limit the collective to California drivers only, in order to "ensure that the arbitration clauses are subject to only one state's laws, which will facilitate collective-wide treatment." Id.
Like other courts in this district, the Court concludes that the arbitration agreements do not preclude conditional certification at this point, especially given the lenient standard at step one. This lenient standard distinguishes conditional certification from class certification, which imposes certain prerequisites before class certification is permitted, such as typicality. In contrast, the focus of the step one inquiry is only on whether there is a common policy that binds together the claims of the collective; the fact that there is an arbitration agreement goes to Defendants' defenses, not the common policy. Thus, the enforceability of the arbitration agreements is better reserved for the step two determination, not step one.
Accordingly, the Court GRANTS IN PART AND DENIES IN PART Plaintiffs' motion to expand the collective action to include individuals who signed the arbitration agreement from September 2013 on, but like Saravia, will limit the expansion to individuals in California in order to ensure the manageability of this case. The Court, however, agrees with Defendants that "the notice to individuals who entered into arbitration agreements `reflect the possibility that an opt-in plaintiff will be compelled to arbitrate his or her claims.'" (Defs.' Supp. Brief at 3 n.2 (quoting Saravia,
Finally, 20/20 moves for judgment on the pleadings as to Plaintiff Jennings's PAGA claim, on the ground that Plaintiff Jennings failed to adequately exhaust her administrative remedies under PAGA. (20/20 Mot. for Judgment on the Pleadings at 1.) Specifically, 20/20 argues that Plaintiff Jennings did not provide adequate written notice to the California Labor & Workforce Development Agency ("LWDA"), instead stating legal conclusions. (Id.)
Federal Rule of Civil Procedure 12(c) allows a party to move for judgment on the pleadings after the pleadings are closed but early enough not to delay trial. Judgment on the pleadings is proper "when there is no issue of material fact in dispute, and the moving party is entitled to judgment as a matter of law." Fleming v. Pickard, 581 F.3d 922, 925 (9th Cir. 2009). "A motion for judgment on the pleadings faces the same test as a motion under Rule 12(b)(6)." McGlinchy v. Shell Chem. Co., 845 F.2d 802, 810 (9th Cir. 1988). In determining whether a moving party has satisfied this standard, the court treats the opposing party's allegations as true, and construes them in the light most favorable to that party. Gen. Conference Corp. of Seventh-Day Adventists v. Seventh-Day Adventists Congregational Church, 887 F.2d 228, 230 (9th Cir. 1989) (internal citation omitted). Nonetheless, "[c]onclusory allegations of law and unwarranted inferences are insufficient to avoid" dismissal. Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). In ruling on the motion, the court may consider facts which may be judicially noticeable.
In passing PAGA:
Arias v. Superior Court, 46 Cal.4th 969, 980, 95 Cal.Rptr.3d 588, 209 P.3d 923 (2009). Prior to bringing a civil action for statutory penalties, an employee must comply with California Labor Code § 2699.3, which "requires the employee to give written notice of the alleged labor Code violation to both the employer and
At issue here is what information must be in the letter before an employee may bring suit. In Alcantar v. Hobart Service, the Ninth Circuit reviewed the following letter:
800 F.3d 1047, 1057 (9th Cir. 2015). The Ninth Circuit found that this letter was merely "a string of legal conclusions with no factual allegations or theories of liability to support them," making it "insufficient to allow the [LWDA] to intelligently assess the seriousness of the alleged violations." Id. Instead, "[t]he only facts or theories that could be read into this letter are those implied by the claimed violations of specific sections of the California Labor Code — that [the defendant] failed to pay wages for time worked, failed to pay overtime wages for overtime worked, failed to include the extra compensation required by § 1194 in the regular rate of pay when computing overtime compensation, and so on." Id. Such allegations were "insufficient." Id.
Here, the parties have jointly stipulated to the authenticity of the letter submitted by Plaintiff Jennings to the LWDA. (Dkt. No. 147-1, PAGA Letter.) The letter states in relevant part:
(PAGA Letter at 1.) The letter goes on to state that the letter was a PAGA notice, and listed the statutes that were allegedly violated by Defendants.
The Court finds that the PAGA letter is adequate. In Alcantar, the letter simply stated that the plaintiff was a former employee, without identifying what position the plaintiff worked in and during what
Plaintiff's letter is comparable to that in Stevens v. Datascan Field Services LLC, which the district court found sufficient to satisfy PAGA's notice requirements. No. 2:15-cv-839-TLN-AC, 2016 WL 627362 (E.D. Cal. Feb. 17, 2016). There, the defendant had argued that the plaintiff provided inadequate notice. Id. at *4. The plaintiff, in turn, pointed to her allegations that "she was employed by Defendant `as an associate field specialist at various third party customer locations since 2008 performing field vehicle audit and inspection related activities," and that the defendant had engaged in a scheme to require the plaintiff and other class members to work overtime and go without meal and rest periods "under the false pretense of being classified as exempt employees." Id. The scheme also included altering time records to reflect a lower number of hours worked. Id. Applying Alcantar, the district court found that the letter provided sufficient notice, as it "contains the specific statutes Defendant allegedly violated; facts about the position Plaintiff held; and a statement about Defendant's policies or practices of misclassifying her as an exempt employee and incorrectly rounding her work hours." Id. Like the Stevens letter, Plaintiff Jennings has identified the statutes allegedly violated, facts about the position she held, and a statement about the underlying theory of liability, specifically that she was misclassified as an independent contractor rather than an employee.
The cases cited by 20/20 involved PAGA letters that contained comparable levels of detail (or lack thereof) to that in Alcantar, and are thus distinguishable. For example, in Amey v. Cinemark USA Inc., the letter simply stated that the defendant employed the plaintiff "as a non-exempt employee from March 2012 to September 2012 at [the defendant's] San Francisco, California, theatre location," and that the defendant did not provide the plaintiff "with properly itemized wage statements." Case No. 13-cv-5669-WHO, 2015 WL 2251504, at *13 (N.D. Cal. May 13, 2015). While the letter stated that the plaintiff was employed as a non-exempt employee, the plaintiff's claim was based not on the non-exempt status, but on the "`core' theory that [the] wage statements did not properly list overtime rates." Id. Thus, the theory underlying the claim — that the wage statements did not list overtime rates — was not stated in the letter. Similarly, in Raphael v. Tesoro Refining and Marketing Co., the district court found insufficient a letter
Accordingly, the Court DENIES 20/20's motion for judgment on the pleadings.
For the reasons stated above, the Court GRANTS IN PART AND DENIES IN PART 20/20's motion to deny certification. To the extent Plaintiffs seek class certification of a class that includes individuals who signed 20/20's arbitration agreement, class certification is denied. The Court GRANTS IN PART AND DENIES IN PART Plaintiff's motion to expand the collective and send notice, limited only to individuals in California; the parties are directed to meet and confer on the language of the notice, to state that individuals who signed an arbitration agreement may be required to go to arbitration. The Court DENIES 20/20's motion for judgment on the pleadings.
IT IS SO ORDERED.
