ORDER GRANTING MOTION TO DECERTIFY CLASS AND SETTING STATUS CONFERENCE
JEFFREY S. WHITE, District Judge.
This matter comes before the Court upon consideration of the motion to decertify class, filed by Defendant U.S. Bank National Association ("U.S. Bank"). The Court has considered the parties' papers, relevant legal authority, and the record in this case, and it HEREBY GRANTS U.S. Bank's motion.
Plaintiff, Jerry Trahan ("Trahan") originally filed this case in Alameda County Superior Court ("Superior Court") in 2009, as a continuation of Duran v. U.S. Bank National Association. In the Duran case, the plaintiffs, a group of Business Banking Officers ("BBO"), alleged that U.S. Bank mis-classified them as exempt employees under California Labor Code section 1171 ("the outside salesperson exemption"). (First Amended Complaint ¶ 12.)
In this case, Trahan alleges that, notwithstanding the judgment in Duran, now vacated, U.S. Bank continues to mis-classify the BBO position as a non-exempt position. Trahan further alleges that he and the class members "were regularly scheduled as a matter of uniform company policy to work and in fact worked as salaried bank employees in excess of eight hours per workday and/or in excess of forty hours per workweek without receiving straight time or overtime compensation for such overtime hours." (FAC ¶¶ 13-14.)
The Court shall address additional facts, as necessary, in its analysis.
A. The Parties' Objections to Evidence.
The parties object to almost all the evidence submitted in connection with this motion. Although the Superior Court considered and ruled on many of the same objections, the parties have resubmitted the evidence to this Court for consideration. Accordingly, the Court rules on the objections anew.
Trahan explicitly objects to much of U.S. Bank's evidence on the basis that it is not relevant, and U.S. Bank, implicitly, raises the same objections to Trahan's evidence. The Court's analysis "will entail some overlap with the merits of [Trahan's] underlying" claims. Wal-Mart Stores, Inc. v. Dukes, ___ U.S. ___, 131 S.Ct. 2541, 2551 (2011). However, the Court "is required to examine the merits of the underlying claim[s] . . ., only inasmuch as it must determine whether common questions exist; not to determine whether class members could actually prevail on the merits of their claims." Ellis v. Costco Wholesale Corp., 657 F.3d 970, 983 n.8 (9th Cir. 2011) (citing Wal-Mart, 131 S. Ct. at 2552 n.6). "To hold otherwise would turn class certification into a mini-trial." Ellis, 657 at 983 n.8; cf. Amgen Inc. v. Connecticut Ret. Plans & Trust Funds, ___ U.S. ___, 133 S.Ct. 1184, 1185 (2013) ("Merits questions may be considered to the extent — but only to the extent — that they are relevant to determining whether the" prerequisites of Federal Rule of Civil Procedure 23 are satisfied.).
The Court concludes that the parties' relevance objections are more properly characterized as disputes over the weight of the evidence.
The Court rules on Trahan's objections as follows:
The Court OVERRULES the objections to portions of the declarations submitted by Brent Biggs, Ted Biggs, Birnbryer, Brandt, Catton, Carreon, Corral, Dampier, Dias, Doughty, Gediman, Hwang, Jeske, Jimenez, John, Kaur, Klingman, Lim, Lufti, Maier, Moulton, Pai, Pizarroso, Racusin, Pokuta-Ramirez, Reed, Summers, Tamblyn, Tobes, Vanderford, Weimer, Wheaton (11/8/2010), and Wheaton (3/30/2012), except as set forth in the remainder of this section. To the extent any of the declarations contain statements that qualify as improper legal conclusions, e.g., "I was exempt," or "I exercised discretion and independent judgment," the Court has not considered such statements, and it SUSTAINS Trahan's objections to those statements. (See, e.g., Jeske Decl., ¶ 4; Jimenez Decl., ¶¶ 4, 21.)
The Court SUSTAINS the objection to the portion of the Dampier Declaration in which he states that "[f]our of the five BBOs on my team ... understand the job expectations, including the expectation that they spend a majority of their time outside of the office." (Dampier Decl., ¶ 7.) The Court SUSTAINS the objection to the portion of the Gediman Declaration in which he states that "[s]uch unambiguous language makes the Bank's expectation regarding outside time crystal clear." (Gediman Decl., ¶ 8.) The Court SUSTAINS the objection to that portion of the Jimenez declaration regarding Mr. Wynne's conduct, as irrelevant to the issues presented by this motion. (Jimenez Decl., ¶ 21.)
The Court OVERRULES Trahan's objections to the entirety of the declarations submitted as US Bank's exhibits 27-63, 67-68, 71-73, and it OVERRULES the objections to U.S. Bank's exhibit 77 as moot.
The Court rules on U.S. Bank's objections as follows:
U.S. Bank objects to the declarations submitted by Anita Jimenez and James Klingman, on the basis that they have submitted declarations that contain statements that contradict their earlier declarations. The Court OVERRULES these objections on the basis that they do not go to the admissibility of the evidence.
U.S. Bank objects to, and moves to strike Trahan's separate statement of facts, submitted with his compendium of evidence, on the basis that it violates this Court's Order setting page limitations on the parties' briefs. The Court finds this objection well taken. Because Trahan was able to refer the Court to the separate factual statement, instead of the citing to the record in his opposition brief, he was able to comply with the Court's page limitations. In the interest of resolving the motion to decertify on the merits, the Court DENIES U.S. Bank's motion to strike. However, the Court places all parties on notice that, going forward, it shall not accept separate factual statements, and it shall strike such statements without further notice to either parties. All citations to the record must be cited in the parties' briefs.
B. The Nature of Trahan's Claims and U.S. Bank's Primary Affirmative Defense.
Trahan's theory of the case is that U.S. Bank improperly classifies the BBO position as "exempt" from California's overtime laws, and he asserts claims against U.S. Bank for violations of California Labor Code sections 203 and 1194 and for violations of California's Unfair Competition Law, Business and Professions Code sections 17200, et seq.
U.S. Bank's primary affirmative defense is that BBOs are subject to California's outside sales exemption. The outside sales exemption applies to any person "who customarily and regularly works more than half the working time away from the employer's place of business selling tangible or intangible items or obtaining orders or contracts for products, services, or use of facilities." California Industrial Welfare Commission, Wage Order 4-2001 (Jan. 1, 2001), § 1(C), 2(M), codified at Cal. Code Regs., tit. 8, § 11040; see also Cal. Labor Code § 1171. In order to determine whether this exemption applies, California law "`takes a purely quantitative approach.'" Duran, 59 Cal. 4th at 26 (quoting Ramirez v. Yosemite Water Co., 20 Cal.4th 785, 797 (1999)).
In Ramirez, the Supreme Court noted that the quantitative approach had created confusion about how the number hours worked was to be determined: whether it should be determined by way of an employer's job description; or whether it should be determined by calculating the average hours an employee worked on sales activity. Ramirez, 20 Cal. 4th at 802. The Ramirez court noted that neither alternative was wholly satisfactory and created two potential pitfalls. First, an employer could escape liability by "fashioning an idealized job description that had little basis in reality." Id. Second, an employee who fell below the 50 percent threshold because of substandard performance could evade a valid exemption. Id. Therefore, under California law, the focus remains "exclusively on whether the employee spends more than half of the workday engaged in sales activities outside the office," and "requires scrutiny of both the job description and an employee's own work habits." Duran, 59 Cal. 4th at 26. However, a fact-finder
Duran, 59 Cal. 4th at 26 (citing Ramirez, 20 Cal. 4th at 802 (internal quotations omitted, emphasis in original); see also Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935, 945 (9th Cir. 2009) (court "must conduct an individualized analysis of the way each employee actually spends his or her time, and not simply review the employer's job description").
C. The Class Certification Order.
On August 28, 2012, the Superior Court, applying California law, granted Trahan's motion for class certification and certified the following class: all current and former California-based employees of [U.S. Bank], who were employed as a BBO at any time from September 27, 2005 through June 30, 2009. (Order Granting Plaintiff's Motion for Class Certification at 31:22-23 (hereinafter "Class Certification Order").)
The Superior Court also evaluated whether U.S. Bank's affirmative defenses presented common questions and whether such questions predominated over potentially individualized issues. It concluded they did. (Id. at 30:7-10.) For example, the Superior Court noted that the applicability of the outside sales exemption is based on a "purely quantitative approach," and that "the primary consideration is how employees actually spend their time." (Id. at 8:17-19, 9:4, citing inter alia, Ramirez, 20 Cal. 4th at 797, 802.) The Superior Court found that the common questions regarding this affirmative defense included: the proportion of time BBOs spent outside of U.S. Bank's branches; the nature of U.S. Bank's expectations regarding where and how BBOs spent their work time; and whether U.S. Bank's expectations were realistic.
After reviewing the evidentiary record, the Superior Court found there were "no material variances across the putative [class] with respect to the factual questions that pertain to the outside sales exemption." Thus, common questions predominated over individualized issues. (Id. at 18:15-16; see also id. at 19:11-12 (finding U.S. Bank had not effectively rebutted "overwhelming testimony" of BBOs that they spent more time working on bank property than working elsewhere).) The Superior Court also concluded that "it may not be unfair to extrapolate from representative witness testimony and/or rely on survey evidence to determine liability for the [class] as a whole." (Id. at 19:22-20:1 (emphasis added).) Based on its view that "few if any individualized issues exist," the Superior Court concluded that those issues could be managed using "one or more of the `innovative tools' that have been approved by California Courts," and it required Trahan to submit a trial plan that would confirm that a class trial "will be manageable." (Id. at 31:16-18, 31:13-14.) Before the Superior Court could rule on the parties' proposed trial plans and Trahan's motion to approve a survey instrument, U.S. Bank filed its notice of removal.
D. Legal Standard on Motion to Decertify.
Federal Rule of Civil Procedure 23(c)(1)(C), provides that an order certifying a class "may be altered or amended before final judgment." In considering a motion to decertify, "a court must reevaluate whether the class continues to meet the requirements of Rule 23." Bruno v. Eckhart Corp., 280 F.R.D. 540, 544 (C.D. Cal. 2012). The Court also may consider "subsequent developments in the litigation." General Telephone Co. of the Southwest v. Falcon, 457 U.S. 147, 160 (1982). It is undisputed that U.S. Bank will bear the burden to establish its affirmative defenses at trial. However, Trahan continues to bear the burden to show that this case may be tried on a classwide basis. See, e.g., Marlo v. United Parcel Service, Inc., 639 F.3d 942, 947 (9th Cir. 2011); cf. Duran 59 Cal. 4th at 26.
U.S. Bank argues Trahan cannot meet his burden on the issues of commonality, predominance, and manageability, because its affirmative defenses cannot be resolved in one stroke. Rather, it contends that the Court would be required to conduct mini-trials that address each class member's work performance.
Rule 23 requires that there be "questions of fact and law which are common to the class." Fed. R. Civ. P. 23(a)(2). The class claims "must depend on a common contention," which "must be of such a nature that it is capable of classwide resolution — which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke." Wal-Mart, 131 S. Ct. at 2551. The commonality requirement is construed permissively and is "less rigorous than the companion requirements of Rule 23(b)(3)." Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019 (9th Cir. 1998).
In light of the fact that commonality requirement is subject to a "less rigorous" standard and can be satisfied by even a single question, the Court concludes that Trahan has met his burden to show that there are common factual legal issues, including those identified by the Superior Court and, for example, the issue of whether "tacking" is permitted to establish an employee is exempt.
In order to maintain class certification, Trahan also must establish that "questions of law or fact common to class members predominate over any questions affecting only individual members." Fed. R. Civ. P. 23(b)(3). "The Rule 23(b)(3) predominance inquiry tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation" and requires a "much more rigorous" analysis than the issue of commonality. Amchem Products, Inc. v. Windsor, 521 U.S. 591, 623-24 (1997). Predominance focuses "on the relationship between the common and individual issues. When common questions present a significant aspect of the case and they can be resolved for all members of the class in a single adjudication, there is clear justification for handling the dispute on a representative rather than on an individual basis." Hanlon, 150 F.3d at 1022. "[I]f the adjudication of a defense for which the defendant has the burden of proof would necessitate individual inquires, and those inquiries would predominate over inquiries into common questions, certification should be denied." In re Wells Fargo Home Mortgage Overtime Pay Litigation, 268 F.R.D. 604, 612 (N.D. Cal. 2010) ("In re Wells Fargo II").
Trahan argues that the common questions still predominate, because the primary focus will be on whether U.S. Bank's expectations about the requirements of the BBO position, including where it is performed, are realistic. U.S. Bank argues that Trahan has not met his burden to show that there is common evidence that will answer these questions. Thus, according to U.S. Bank, he has not met his burden to show by common evidence that "misclassification is the rule rather than the exception." See Sav-On, 34 Cal. 4th at 330. In resolving this issue, the Court finds guidance in Vinole, 571 F.3d 935, In re Wells Fargo Home Mortgage Overtime Pay Litigation, 571 F.3d 953 (9th Cir. 2009) ("In re Wells Fargo I"), and In re Wells Fargo II.
In Vinole, the defendant categorized its External Home Loan Consultants ("HLCs") as exempt employees based on the outside sales exemption. Vinole, 571 F.3d at 938. The district court granted the defendant's motion to deny class certification. The Ninth Circuit affirmed, noting that "a court evaluating the applicability of the outside sales exemption must conduct an individualized analysis of the way each employee actually spends his or her time, and not simply review the employer's job description." Id. at 945.
The court also noted that there was no evidence that the defendant had a company-wide policy that governed how employees spent their time or that the HLCs' duties and experiences were uniform, which could have "diminish[ed] the need for individualized inquiry." Id. at 947 (citation omitted). Finally, although the plaintiffs argued that any individualized issues could be mitigated by using tools such as questionnaires or surveys, the court found those arguments unpersuasive, and it questioned whether such tools would have assisted the court. Id.
In In re Wells Fargo I, the court discussed the relevance of uniform corporate policies to the predominance inquiry. In that case, the district court found a number of individualized inquiries would be required to determine the application of several exemptions, including the outside sales exemption. However, because the defendant uniformly categorized the employees as exempt, it concluded that those issues did not predominate. The Ninth Circuit reversed and found that the district court abused its discretion by relying on the defendant's decision to uniformly categorize the position as exempt, "to the near exclusion of other factors relevant to the predominance inquiry." In re Wells Fargo I, 571 F.3d at 959. The court reasoned that the "blanket exemption policy does nothing to facilitate common proof on the otherwise individualized issues." Id. The court noted, however, that "[a] centralized policy requiring employees to be at their desks for 80% of their workday would change this individual issue into a common one." Id.
On remand, the district court denied the motion for class certification, finding that the plaintiffs had not shown that common issues predominated over the individualized issues. In re Wells Fargo II, 268 F.R.D. at 613. In addition to relying on In re Wells Fargo I, the court also relied on Vinole, which "appear[ed] to foreclose any viable path for certifying this action as a class action," Id. at 610. The court noted that, as in the Vinole case, the defendants uniformly categorized the position at issue as exempt, claimed to have no control over how employees performed their job, and did not monitor the manner in which employees performed their duties. The record also showed variations in the amount of time each employee spent inside or outside of the office. Id. The court noted that although "class members had uniform job descriptions, uniform training, the same primary goal . . ., uniform job expectations, similar compensation plans, and standardized employee evaluation standards," it also had previously held that "analysis of five of the seven exemptions asserted by [the defendant] would require fact-intensive inquiries into how individual [employees] performed their job." Id. at 611.
The plaintiff argued that those individualized issues could be addressed by way of random sampling, which the court could use to extrapolate across the class to determine liability. The court rejected this argument. It reasoned that if the plaintiff's sampling proposal could be used to show that some members of the class were exempt, the plaintiff had not demonstrated that the fact finder could accurately separate exempt employees from non-exempt employees. Id. at 612. The court also noted that it had been "unable to locate any case in which a court permitted a plaintiff to establish the non-exempt status of class members, especially with respect to the outside sales exemption, through statistical evidence or representative testimony." Id. Further, even if the plaintiff were able to "establish the prima facie case using some form of common proof," the court noted that fact would not end the inquiry.
"[I]f the adjudication of a defense for which the defendant has the burden of proof would necessitate individual inquiries, and those inquiries would predominate over inquiries into common questions, certification should be denied." Id. Finally, the court rejected the plaintiff's argument that the case presented the single common question of the nature of the position's primary duty, because "not all of [the] claimed exemptions hinge[d] on the ... job function." Id. at 613. The court again focused on the outside sales exemption, which it stated "has nothing to do with what an employee does; it focuses solely on where an employee completes his or her work." Id. Because the plaintiff did not come forth with any common proof, such as a corporate policy that dictated how and where class members spent their day, the court concluded that plaintiff had not met her burden on the predominance prong of Rule 23. Id. at 610-613.
In this case, as in Vinole and In re Wells Fargo II, it is undisputed that U.S. Bank uniformly characterizes BBOs as exempt employees, however that fact is not dispositive of the issue. In addition, as in the In re Wells Fargo II, case, the record shows that BBOs went through the same basic training and had the same primary goals, i.e. to sell U.S. Bank's financial products, including loans and lines of credit to their clients. (Docket No. 161, Plaintiff's Compendium of Evidence ("PCE"), Ex. 36 (Deposition of Matthew Gediman ("Gediman Depo.") at 185:14-186:8.) The record also shows that U.S. Bank had a uniform job description for the BBO position, during the class period. (Gediman Depo. at 161:2-5.) That Job Description states that the "essential functions" of the position required BBOs to engage in outside sales activities, and that "[m]ore than 80% if the time" was expected to be spent on such activities. (Docket No. 146, Declaration of Teresa W. Ghali ("Ghali Decl."), ¶ 15, Ex. M (2005 Job Description).) Thus, unlike in Vinole and the In re Wells Fargo cases, U.S. Bank did have a uniform policy that governed the BBOs' duties, i.e. what BBOs were expected to do throughout their day.
The 2005 Job Description includes statements that at least some of these activities should take place at a prospective client's place of business, on "joint outside sales calls," or at civic and community functions. (Id.) However, until July 1, 2009, the BBO Job Description did not contain an explicit requirement about how much time a BBO must spend outside of the office. In addition, at least until 2010, U.S. Bank did not have a formal, uniform policy in place to monitor where BBOs conducted their business.
Therefore, although there are a number of common issues, the Court finds that in order "to determine if each [BBO] qualified for the outside sales exemption the [Court] would need to conduct `inquiries into how much time each individual [BBO] spent in or out of the office and how the [BBO] performed his or her job; all of this where the [BBO] was granted almost unfettered autonomy to do his or her job.' Those inquiries would inevitably consume the majority of a trial, and overwhelm the adjudication of common issues." In re Wells Fargo II, 268 F.R.D. at 611 (quoting Vinole, 571 F.3d at 947).
Moreover, even if the Court were to conclude, as the Superior Court did, that common issues still predominate, the Court would deny the motion for the reasons set forth in the following section.
Trahan must establish that class resolution is "`superior to other available methods for the fair and efficient adjudication of the controversy.'" Hanlon, 150 F.3d at 1022 (quoting Fed. R. Civ. P. 23(b)(3)). The superiority requirement includes an examination of whether the case can be managed effectively. Before U.S. Bank removed the case to this Court, Trahan proposed to use representative testimony to establish liability. However, in light of this Court's ruling on his motion to conduct a survey, Trahan has abandoned reliance on representative testimony or statistical evidence to establish liability. Rather, he proposes a bifurcated trial. According to Trahan, the first phase will address the issue of liability based on an assessment of whether U.S. Bank's expectations about the BBO position are realistic.
Trahan's approach appears to be similar to the position that the plaintiffs advocated in Duran, i.e. that the case can be tried along the model of a disparate treatment case. See Duran, 59 Cal. 4th at 35-37. In addition, as in Duran, Trahan's proposal to bifurcate the trial appears to conflate the issue of whether U.S. Bank is liable to a specific class member for failure to pay overtime with the damages any given class member may be owed. Id. at 37 (noting that "plaintiff's vision of a wage and hour class action trial conflates liability and damages"). The Court finds that Trahan's proposal suffers from the same flaws identified by the court in In re Wells Fargo II, albeit in the context of the predominance analysis. 268 F.R.D. at 612-13. Trahan has neither offered a persuasive explanation as to how any testimony presented could be extrapolated across class members to establish liability nor identified a means by which U.S. Bank could "show that its liability is reduced because some plaintiffs were properly classified as exempt." Duran, 59 Cal. 4th at 38.
Because Trahan has not met his burden to show that the predominance and superiority prongs of Rule 23 are satisfied, the Court GRANTS U.S. Bank's motion, and it DECERTIFIES the class. In light of this ruling, the Court HEREBY ORDERS the parties to appear for a status conference on February 20, 2015 at 11:00 a.m. The parties shall file a joint status conference statement by February 13, 2015.