Posts belonging to Category Certification Rulings



Exotic Dancers’ Misclassification Claim Certified in Salazar v. VIP Showgirls

On August 5, 2015, after nearly five years of litigation and following a remand from the California Court of Appeal, a class of exotic dancers was finally certified in Salazar v. VIP Showgirls, aka Victory Entertainment, No. BC445154 (Los Angeles Super. Ct., filed Sept. 10, 2010).  In 2010, Salazar, an exotic dancer, sued VIP Showgirls aka Victory Entertainment, Inc. (“VIP”), an adult entertainment club, alleging wage-and-hour violations arising from the club’s misclassification of dancers who performed at the club.  VIP required its dancers to sign a standard agreement identifying them as independent contractors, and the agreement provided that either party could terminate the relationship at will.

Salazar moved to certify a class of “[a]ll persons who are employed or have been employed and who have worked one or more shifts as a ‘dancer’ for [VIP] in the State of California.” In its initial determination of whether the class certification requirements had been met, the trial court applied the common law test for whether an employee relationship existed between Salazar and VIP.  See S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal. 3d 341 (1989).  Defendant-employers frequently succeed in arguing that that the multi-factor Borello test, often called the “economic realities” test,[1] creates individual issues of fact which predominate over common questions, hindering class certification.  The Salazar trial court thus denied certification because it found that the dancers’ relationships with VIP under the Borello test would require individual inquiries at trial.  Salazar then appealed, and, in 2014, the Court of Appeal reversed the order denying certification in an unpublished decision and remanded to the superior court.  Salazar v. Victory Entertainment, Inc., No. B249888 (2nd Dist. Div. 7 Dec. 15, 2014) (slip op. available here). 

In reversing the trial court, the Court of Appeal cited its opinion in Dynamex Operations West, Inc. v. Superior Court, 230 Cal. App. 4th 718 (2014), which had been decided after the Salazar trial court denied certification.  In Dynamex, the Court of Appeal held the Industrial Welfare Commission (“IWC”) definition of an employment relationship applied to claims falling within the scope of an IWC wage order.  Dynamex at 734; see also Martinez v. Combs, 49 Cal. 4th 35, 64 (2010).  For claims falling outside the scope of a relevant wage order, the common law test for an employment relationship applies.  Dynamex at 734; see Ayala v. Antelope Valley Newspapers, Inc., 59 Cal. 4th 522, 531-532 (2014).  The Salazar Court of Appeal concluded that both Wage Orders 5 and 10 appeared to apply to the exotic dancers and both define the word “employ” as “to engage, suffer, or permit to work” and define an “employer” as any person “who directly or indirectly, or through an agent or any other person, employs or exercises control over the wages, hours, or working conditions of any person.”  Interpreting this same language, the California Supreme Court in Martinez previously concluded that “[t]o employ, then, under the IWC’s definition, has three alternative definitions[]: (a) to exercise control over the wages, hours or working conditions, or (b) to suffer or permit to work, or (c) to engage, thereby creating a common law employment relationship.”  Martinez, supra, 49 Cal. 4th at 64.  The Martinez test of employment is far simpler than the Borello test and is easier to prove with common evidence.  The Salazar appellate court concluded that because the trial court had applied only the common law test, reversal was required in order to determine whether the dancers’ claims fell within the IWC Wage Orders and were thereby governed by the IWC employment test.  The Salazar appellate court instructed the trial court to determine on remand whether the IWC definitions applied, and if so, whether common issues predominated.

Applying the standards for determining employment articulated by the appellate court, the Salazar trial court held that the dancers’ claims fell within the Wage Orders and that common issues predominated, and on that basis reversed its March 2013 decision and certified the class.  This case highlights the significance of the simplified employment test announced in Martinez, which eases the burden of obtaining class certification.  This ruling is also a victory for a group of long-suffering workers who often endure difficult workplace conditions and deserve the rights and protections afforded employees under the California Labor Code. 

Authored By:
Robert Drexler, Senior Counsel
CAPSTONE LAW APC

Editors’ note: the Order in Salazar is not yet publicly available and will be posted as soon as is practicable.


[1] In applying the economic realities test, factors that may be considered include: (1) whether the employer or principal has the right to control the worker (both as to the work done and the manner and means in which it is performed); (2) whether the person performing services is engaged in an occupation or business distinct from that of the principal; (3) whether or not the work is a part of the regular business of the principal or alleged employer; (4) whether the principal or the worker supplies the instrumentalities, tools, and place for the person doing the work; (5) whether the service rendered requires a special skill; among others.  See http://www.dir.ca.gov/dlse/faq_independentcontractor.htm

California District Court Delivers Cert Win to Class of FedEx Drivers

On July 24, 2015, United States District Judge Lawrence O’Neil issued an order granting certification to a class of FedEx line-haul drivers alleging rest break and wage violations under California law.  See Taylor v. FedEx Freight, Inc., No. 13-01137 (E.D. Cal. July 24, 2015) (slip opinion available here).  In doing so, Judge O’Neil adopted in full Magistrate Judge Barbara McAuliffe’s 27-page Findings and Recommendations (available here), rejecting each of FedEx’s arguments to the contrary.  

Plaintiff Roy Taylor, a former line-haul driver for FedEx, brought suit in 2013 alleging that FedEx underpaid him and fellow drivers by utilizing a policy that failed to separately compensate them for non-driving activities, such as vehicle inspections, rest breaks, trip-related paperwork, and wait time.  FedEx countered that non-driving work was already built into its mileage pay program.  The plaintiff then moved for class certification under Rule 23. 

Conceding numerosity and typicality, FedEx’s main arguments against class certification related to the U.S. Supreme Court’s heightened standards for commonality in Wal-Mart Stores Inc. v. Dukes, 131 S. Ct. 2541 (2011), and the requirements for a manageable trial plan in Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013).  Ultimately, the District Court held that the question of whether FedEx’s compensation policy was lawful was well-suited for classwide determination.

With respect to commonality and predominance, FedEx argued that Dukes precludes certification because the dissimilarities among the class members prevent a common answer to the liability question of whether FedEx’s compensation policy failed to account for all non-driving work.  Distinguishing Dukes, the court held that FedEx’s mileage policy was uniformly applied without discretion, and thus resolution of the liability question did not hinge on differences among the drivers.

With respect to manageability, FedEx contended that damages for the rest break claims could not be determined by reviewing employee time cards, because, although breaks were recorded, (1) the records did not distinguish between meal periods and rest breaks, and (2) the time cards were rounded in fifteen-minute increments.  The court rejected this argument, however, finding that because the plaintiff’s theory of liability centers on FedEx’s non-payment for recorded rest breaks, liability would attach whenever the records demonstrated that a rest break was taken, regardless of the length.  With respect to the wage claims, the plaintiff persuasively argued that statistical sampling and surveys, along with FedEx’s admissions and employee testimony, would effectively manage any differences in damages.

It is also noteworthy that the plaintiff successfully moved to certify a class period which continues “through the date of trial.”  While FedEx argued that this definition subjects the company to one-way intervention and raises due process issues (because individuals hired after the mailing of the class notice would fall into the class definition, but would not have an opportunity to opt in or out), the court adopted the plaintiff’s proposed solution of providing a second class notice to such individuals just prior to trial. 

Authored by: 
Matthew Theriault, Partner
CAPSTONE LAW APC

In Re Yahoo Mail Litig.: Court Rejects Defendant’s Catch-22 Argument re Article III Standing

On May 26, 2015, Judge Lucy H. Koh of the Northern District of California certified both nationwide and California state classes of individual non-Yahoo mail users in a putative class action against Yahoo for its non-consensual collection, or mining, of data from non-user emails to Yahoo Mail subscribers. See In Re Yahoo Mail Litig., No. 13-4980 (N.D. Cal. May 26, 2015) (Order Granting in Part and Denying in Part Motion for Class Certification, available here).

In In re Yahoo Mail Litig., the class claims were limited to injunctive and declaratory relief, and the plaintiffs strategically did not seek statutory damages. Judge Koh certified a nationwide class under the Stored Communications Act (“SCA”) and a California-only class under the California Invasion of Privacy Act (“CIPA”). The certification of the two classes involved the intersection of three current, hot-button issues: (1) electronic online data mining; (2) Article III standing; and (3) ascertainability. In particular, Judge Koh’s straightforward, commonsense analysis of Article III standing is instructive for its clarity and reasoning.

Whether a plaintiff has Article III standing to pursue injunctive relief after gaining knowledge of a defendant’s wrongdoing was a pivotal question in this case. Yahoo argued that the plaintiffs’ continued email interaction with Yahoo subscribers after they learned of Yahoo’s data collection practices forecloses their standing to pursue injunctive relief, since these continued interactions constituted consent to Yahoo’s policies. As a result, the class members would be unable to show a likelihood of being injured in the future. See Order at 10. However, the court simply rejected this argument. Id.

According to Yahoo, the plaintiffs would be required to cease emailing Yahoo users in order to preserve their claims and to avoid consenting to Yahoo’s data mining, yet they would need to continue communicating with Yahoo users’ accounts in order to demonstrate a threat of future injury. Judge Koh found that, because a showing of a likelihood of future injury is required to pursue injunctive relief, Yahoo’s rationale “would put Plaintiffs in a catch-22 that would essentially preclude injunctive relief altogether.” Id. at 14.

While other courts have landed on the less-desirable end of the issue, Judge Koh’s ruling signals that Yahoo’s interpretation of Article III standing should be rejected for being overly narrow in the consumer protection context, which is welcome news for California consumers. See id. at 12.

Authored by: 
Tarek Zohdy, Associate
CAPSTONE LAW APC

Ascertaining Ascertainability in the Third Circuit

A recent opinion issued by the Third Circuit Court of Appeals is a must-read for any class action practitioner who has been flummoxed by the Court’s approach to ascertainability under Rule 23. Byrd, et al. v. Aaron’s Inc., et al., No. 14-3050 (3d Cir. April 16, 2015) (slip op. available here). The Third Circuit sought to “dispel any confusion” regarding the ascertainability requirement. Slip op. at 20. This confusion was self-inflicted by a quartet of Third Circuit opinions that courts interpreted to mean that retail records and class member affidavits are not sufficient to establish that a class is ascertainable. As one court noted, in commenting on a key Third Circuit case, “[i]t appears that pursuant to [Carrera v. Bayer Corp., 727 F.3d 300, 306 (3d Cir. 2013)] in any case where the consumer does not have a verifiable record of its purchase, such as a receipt, and the manufacturer or seller does not keep a record of buyers, Carerra [sic] prohibits certification of the class.” McCrary v. Elations Co., LLC, No. 13-cv-242, 2014 U.S. Dist. LEXIS 8443, at * 24 (C.D. Cal. Jan. 13, 2014).

In Byrd, the Third Circuit attempted to clarify the ascertainability standard, which the court acknowledged had been invoked by defendants in class actions “with increasing frequency in order to defeat class certification.” Slip op. at 20. The court stated that ascertainability “only requires the plaintiff to show that class members can be identified. Accordingly, there is no records requirement.” Id. at 25. However, a plaintiff still has to propose a method of ascertaining a class that has some evidentiary support that the method will be successful. Id. The court cautioned against conflating ascertainability with other class action requirements, such as numerosity and predominance, stressing that certain inquiries regarding certification are more properly analyzed under those specific Rule 23 requirements and not under the ascertainability inquiry.

The refreshingly candid concurring opinion by Judge Rendell calls out the Third Circuit for further muddling the issue and is much more interesting from a plaintiff/consumer perspective. Judge Rendell begins by noting that “[the Third Circuit’s] heightened ascertainability requirement defies clarification,” and “the lengths to which the majority goes in its attempt to clarify what our requirement of ascertainability means, and to explain how this implicit requirement fits in the class certification calculus, indicate that the time has come to do away with this newly created aspect of Rule 23 in the Third Circuit.” Slip op., Rendell concurring op. at 1.

In Judge Rendell’s view, the Third Circuit still has “precluded class certification unless there can be objective proof—beyond mere affidavits—that someone is actually a class member.” Id. at 4. That approach is wrong, according to Judge Rendell, and for compelling reasons:

In most low-value consumer class actions, prospective class members are unlikely to have documentary proof of purchase, because very few people keep receipts from drug stores or grocery stores. This should not be the reason to deny certification of a class. . . . We have effectively thwarted small-value consumer class actions by defining ascertainability in such a way that consumers will necessarily fail to satisfy for lack of adequate substantiation. Consumers now need to keep a receipt or can, bottle, tube, or wrapper of the offending consumer items in order to succeed in bringing a class action.

Id. at 5-7.  He notes that in other Circuits, such as the Seventh and Ninth Circuits, some courts have certified small-value consumer cases and have not imposed the Third Circuit’s heightened proof requirement for ascertainability. Id.

The concurrence also rejects the notion that defendants’ due process rights will be abrogated by a standard that seeks to compensate at least some of the injured class members, stating that the odds that someone would sign a false affidavit, under penalty of perjury, that he or she purchased aspirin for the sake of receiving a “windfall” of $1.59 are “far-fetched at best.” Id. at 10. Further, Judge Rendell opines that the Third Circuit emphasized the wrong policy goal with this “clarified” standard, noting that “by focusing on making absolutely certain that compensation is distributed only to those individuals who were actually harmed, [the ascertainability doctrine] has ignored an equally important policy objective of class actions: deterring and punishing corporate wrongdoing. . . . In small-claims class actions like Carrera, the real choice for courts is between compensating a few of the injured, on the one hand, versus compensating none while allowing corporate malfeasance to go unchecked, on the other.” Id. at 10-12. Judge Rendell is adamant that rigorously applying the ascertainability requirement “translates into impunity for corporate defendants who have harmed large numbers of consumers in relatively modest increments. Without the class action mechanism, corporations selling small-value items for which it is unlikely that consumers would keep receipts are free to engage in false advertising, overcharging, and a variety of other wrongs without consequence.” Id. at 10-11.

He concludes that the Third Circuit’s approach to ascertainability “disserves the public,” writing,“[w]hile a rigorous insistence on a proof-of-purchase requirement . . . keeps damages from the uninjured, it does an equally effective job of keeping damages from the truly injured as well, and ‘it does so with brutal efficiency.’. . . [I]t is time to retreat from our heightened ascertainability requirement . . . .” Id. at 12-13. Judge Rendell’s conclusion is worth contemplating and should inform every court that is inclined to invoke ascertainability in order to deny class certification.

Authored by: 
Jordan Lurie, Of Counsel
CAPSTONE LAW APC