Ludlow v. Flowers Foods, Inc. et al, No. 3:2018cv01190 - Document 312 (S.D. Cal. 2022)
Court Description: ORDER Granting Plaintiffs' Motion for Class Certification 213 . Signed by Judge Jinsook Ohta on 7/5/2022. (axc)
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Ludlow v. Flowers Foods, Inc. et al Doc. 312 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 12 13 DANIEL LUDLOW, individually and on behalf of others similarly situated; and WILLIAM LANCASTER, individually and on behalf of others similarly situated, 15 v. 16 FLOWERS FOODS, INC., a Georgia corporation; FLOWERS BAKERIES, LLC, a Georgia limited liability company; and FLOWERS FINANCE, LLC, a limited liability company, 18 19 20 ORDER GRANTING PLAINTIFFS’ MOTION FOR CLASS CERTIFICATION Plaintiffs, 14 17 Case No.: 18cv1190-JO-JLB Defendants. 21 22 Plaintiffs are current and former delivery drivers alleging they were misclassified by 23 Defendants as independent contractors instead of employees. Plaintiffs bring a wage and 24 hour action arising from the alleged misclassification, asserting claims under the California 25 Labor Code and related wage orders for failure to pay overtime, unlawful deductions from 26 wages, failure to indemnify for necessary expenditures, and failure to provide proper wage 27 28 1 Dockets.Justia.com 1 statements. Dkt. 56 (FAC).1 Plaintiffs have filed a motion for class certification of these 2 claims. Dkt. 213. The Court held oral argument on March 30, 2022. For the reasons 3 discussed below, Plaintiffs’ motion is GRANTED. 4 5 I. A. BACKGROUND Defendants’ Business 6 Defendant Flowers Foods, Inc. (“Flowers Foods”) is a national bakery company 7 behind popular brands such as Wonder Bread, Nature’s Own, and Dave’s Killer Bread. 8 FAC ¶ 21. Flowers Foods operates as the sole parent company of Defendant Flowers 9 Bakeries, LLC (“Flowers Bakeries”), 2 which in turn operates as the sole parent company 10 of multiple operating subsidiaries located throughout California and the United States. Id. 11 ¶¶ 17, 18. According to Flowers Foods’ investor materials, Flowers Foods is “America’s 12 premier baker” that “produces and markets bakery products” in the “retail and food 13 service” market. Dkt. 213-5 (Declaration of Alex Tomasevic in support of Plaintiffs’ 14 Motion for Class Certification, “Tomasevic Decl.”), Ex. 1. Flowers Foods claims in its 15 SEC filings that it is the “second largest producer and marketer of packaged bakery foods 16 in the US” and “operate[s] in the highly competitive fresh bakery market.” Id., Ex. 2 at 11. 17 Flowers Foods’ customers are retail and foodservice locations such as Walmart and Costco. 18 FAC ¶ 29. With sales of $3.9 billion in 2017, Flowers Foods generates revenue from sales 19 of the bakery products to its retail and foodservice customers. Tomasevic Decl., Ex. 1 at 20 4; Ex. 2 at 5–6. 21 According to Flowers Foods, its key business functions include distribution and 22 delivery of these packaged bakery goods to its customers. Tomasevic Decl., Ex. 1. Flowers 23 24 25 26 27 28 1 This Court also presides over two other misclassification lawsuits filed against Defendants and its subsidiaries: (1) Goro et al v. Flowers Foods, Inc. et al, 3:17-cv-2580-JO-JLB, which is a related case brought by individual plaintiffs; and (2) Maciel et al. v. Flowers Foods, Inc. et al, 3:20-cv-02059-JO-JLB, a class action that was transferred from the Northern District of California and consolidated with this action. 2 Flowers Bakeries, jointly referred to with Flowers Foods as “Flowers” in the parties’ briefing, is in charge of “sales related activities,” such as negotiations with the customers on price, shelf space, and distributor service requirements that are then communicated to the operating subsidiaries. FAC ¶ 17. 2 1 Foods’ business model relies on a system of delivery drivers such as Plaintiffs to deliver 2 the bakery products to the retail and foodservice locations. Tomasevic Decl., Ex. 19. 3 Flowers Foods refers to these delivery drivers as “distributors.” Each distributor enters 4 into a standard and substantially identical distributor agreement with a local operating 5 subsidiary of Flowers Foods and Flowers Bakeries that governs the distributor relationship. 6 Id., Ex. 6. 7 B. Plaintiffs’ Role and Responsibilities 8 The Distributor Agreement (“DA”) signed by the delivery drivers sets forth the 9 working relationship between the distributor and Defendants. Tomasevic Decl., Ex. 6. The 10 DA labels the delivery drivers as “independent contractors.” Id. at § 16.1. As a prospective 11 distributor, the delivery driver purchases the “right” to deliver Flowers Foods’ bakery 12 products in a specific geographic territory.3 Id. at § 2.4. The territory dictates which 13 specific bakery products are delivered to the customer locations in the given territory. Id. 14 at §§ 2.2–2.3. The distributor can purchase and own more than one territory or resell his 15 or her territory to another person for a profit. Id. § 15.1. Distributors may hire helpers to 16 service their territory while they hold other full-time jobs (so-called “absentee” 17 distributors). Id. § 16.2. 18 The DA also describes how the distributor purportedly earns money with these 19 territory rights. Under the DA, the distributor “purchases” bakery products from Flowers 20 Foods and then “re-sells” those products to the retail and foodservice customers within 21 their given territory. Tomasevic Decl., Ex. 6 at §§ 4.1, 8.6. The distributor earns money 22 based on the standard margin—that is, the difference between the purchase price and the 23 sale price—which is set by Flowers Foods based on its negotiations with the customers on 24 the product price. The DA prohibits the distributor from selling stale products to the 25 customers, and so Flowers Foods will “repurchase” a percentage of the distributor’s stale 26 products. Id. at §§ 12.2, 12.3. Flowers Foods “repurchases” the stale products by charging 27 28 3 Financing for this purchase is offered to distributors by Defendant Flowers Finance, LLC, another subsidiary of Flowers Foods. FAC ¶ 19. 3 1 the distributors a fee. FAC ¶ 102. Flowers Foods also provides the distributors with 2 advertising and branded material to increase sales. Tomasevic Decl., Ex. 6 at §§ 13.1, 13.2. 3 Some distributors use the marketing materials and displays to promote their sales, while 4 others do not. Dkt. 237-1 (Declaration of Frank L. Tobin in support of Defendants’ 5 Opposition to Plaintiffs’ Motion for Class Certification, “Tobin Decl.”), Ex. 21. 6 The DA further describes the quality standards that distributors must meet as part of 7 their job requirements. For example, the DA requires the distributor to perform his or her 8 services in accordance with “the standards that have developed and are generally accepted 9 and followed in the baking industry,” including maintaining an adequate and fresh supply 10 of products in the stores, actively soliciting stores not being serviced, properly rotating the 11 products, promptly removing stale products, maintaining proper service per the store’s 12 requirements, and maintaining equipment in sanitary and safe conditions. Tomasevic 13 Decl., Ex. 6 at § 2.6. The DA also requires the distributor to obtain his or her own delivery 14 vehicle and insurance, and to keep the delivery vehicle clean, professional, and safe. Id. at 15 § 9.1. 16 administrative services” to collect sales data or prepare sales tickets. Id. at § 10.1. Flowers 17 Foods charges the distributor a fee unilaterally established by Flowers Foods to use these 18 services. Id. at § 10.2. The DA does not require a standard outfit or uniform, but some 19 distributors wear a polo shirt or branded shirt based on the recommendation of Defendants. 20 Tobin Decl., Ex. 23. The DA further requires the distributor to use Flowers Foods’ “proprietary 21 As set forth in the DA, the relationship between the distributor and Defendants is 22 one of indefinite duration. Under the DA’s terms, the distributor relationship continues 23 unless the distributor sells the territory, Flowers Foods ceases to use distributors in a 24 territory for “business reasons,” or Flowers Foods terminates as a result of the distributor 25 engaging in certain enumerated activities deemed non-curable or repeated curable 26 breaches. Tomasevic Decl., Ex. 6 at §§ 3.1, 17.1. 27 /// 28 /// 4 1 II. CLASS CERTIFICATION STANDARDS 2 Class certification is governed by Federal Rule of Civil Procedure 23 (“Rule 23”). 3 To obtain certification, a plaintiff bears the burden of proving that the class meets all four 4 requirements of Rule 23(a) and at least one of the requirements of Rule 23(b). Wal-Mart 5 Stores, Inc. v. Dukes, 564 U.S. 338, 350–51 (2011); Zinser v. Accufix Research Inst., Inc., 6 253 F.3d 1180, 1186 (9th Cir. 2001). Rule 23(a) sets out four prerequisites: (1) numerosity, 7 (2) commonality, (3) typicality, and (4) adequacy. Ellis v. Costco Wholesale Corp., 657 8 F.3d 970, 979–80 (9th Cir. 2011). If these four prerequisites are met under Rule 23(a), the 9 court must then decide whether the class action is maintainable under Rule 23(b). Under 10 Rule 23(b)(3), a class may be certified if the court finds that “the questions of law or fact 11 common to class members predominate over any questions affecting only individual 12 members, and that a class action is superior to other available methods for fairly and 13 efficiently adjudicating the controversy.” Vinole v. Countrywide Home Loans, Inc., 571 14 F.3d 935, 944 (9th Cir. 2009) (quoting Fed. R. Civ. P. 23(b)(3)). 15 At the class certification stage, the court must take the substantive allegations of the 16 complaint as true, but it “also is required to consider the nature and range of proof necessary 17 to establish those allegations.” In re Coordinated Pretrial Proceedings in Petroleum 18 Prods. Antitrust Litig., 691 F.2d 1335, 1342 (9th Cir. 1982). The court must engage in a 19 “rigorous analysis” of each Rule 23(a) factor, which often “will entail some overlap with 20 the merits of the plaintiff’s underlying claim.” Dukes, 564 U.S. at 351. If the court 21 concludes that the moving party has carried its burden, then the court is afforded “broad 22 discretion” to certify the class. Zinser, 253 F.3d at 1186. 23 III. STANDARDS FOR MISCLASSIFICATION CLAIMS 24 Prior to considering whether Plaintiffs’ claims satisfy Rule 23, the Court first 25 addresses Defendants’ argument regarding the applicable legal framework to evaluate the 26 putative class members’ central claim that they were misclassified as independent 27 contractors instead of employees. Plaintiffs argue that the ABC Test articulated in 28 5 1 Dynamex Operations W. v. Superior Court, 4 Cal. 5th 903 (2018),4 governs this inquiry. 2 The ABC Test provides that a hiring entity is an employer if any one of the following three 3 prongs is not met: 4 (A) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; and (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed. Dynamex, 4 Cal. 5th at 957 (emphasis in original). 5 6 7 8 9 10 Because the ABC Test requires all three prongs to be met before a worker can be 11 deemed an independent contractor, a class need only establish that a hiring entity failed 12 one prong in order to prove its misclassification claim. Id. at 963–64. Defendants argue 13 that before the ABC Test can be applied to Plaintiffs’ claims, the Court must first conduct 14 individualized determinations of whether Flowers Foods and Flowers Bakeries, as parent 15 companies of the subsidiaries that directly contract with Plaintiffs, constitute “hiring 16 entities.” The Court disagrees with Defendants. 17 Contrary to Defendants’ argument, the law does not require any threshold “hiring 18 entity” analysis before the Dynamex ABC Test is applied to determine whether a worker 19 is an employee or independent contractor. Mejia et al. v. Roussos Construction, Inc., 76 20 Cal. App. 5th 811, 819 (2022) (finding that a threshold hiring entity test was not intended 21 by Dynamex court and would “run counter to the intent of California wage and hour laws”); 22 People v. Uber Technologies, Inc., 56 Cal. App. 5th 266, 288 (2020) (concluding that 23 Dynamex did not intend for additional threshold step in the ABC Test and rejecting hiring 24 entity test). The California Supreme Court in Dynamex affirmed that any entity that 25 “suffer[s] or permit[s]” an individual “to work” for the entity’s benefit is an employer if 26 the ABC Test is met. See Martinez v. Combs, 49 Cal. 4th 35, 65 (2010). The “to suffer or 27 28 4 The ABC Test in Dynamex was subsequently codified by Cal. Lab. Code § 2775(b)(1). 6 1 permit to work” standard looks to whether the putative employer had “knowledge of and 2 failure to prevent the work from occurring.” Id. at 70. The Ninth Circuit has made clear 3 that this standard applies to entities even when they do not directly contract with the worker 4 or directly receive the services of the worker: so long as “the putative employee was 5 providing a service to the hiring entity even indirectly, the hiring entity can fail the ABC 6 test and be treated as an employer.” Vazquez v. Jan-Pro Franchising Int’l, Inc., 986 F.3d 7 1106, 1124 (9th Cir. 2021) (emphasis in original) (finding that defendant “could be 8 Plaintiffs’ employer under the ABC Test even though it is not a party to any contract with 9 Plaintiffs”). 10 Here, like the plaintiffs in Vazquez, the distributors provided delivery services that 11 benefited Flowers Foods and Flowers Bakeries, with the full knowledge of those entities. 12 Specifically, distributors were tasked with delivering the parent companies’ bakery 13 products to their customers located within delivery routes, which were owned, financed, 14 and sold by Flowers Foods. Tomasevic Decl., Ex. 2 at 5–6; FAC ¶ 19. Flowers Foods, the 15 ultimate parent company, generated revenue from the sales of the bakery products 16 delivered by distributors. Flowers Bakeries, an intermediate parent company, negotiated 17 with the customers on the pricing of the delivered bakery products and the specific 18 customer service requirements and quality standards for the delivery drivers to follow. 19 FAC ¶ 17. Even though Flowers Foods and Flowers Bakeries did not directly contract with 20 the delivery drivers through the DAs, Plaintiffs provided both entities a delivery service 21 that they both knew about and permitted. Vazquez, 986 F.3d at 1124. Therefore, Flowers 22 Foods and Flowers Bakeries are subject to the ABC Test without the need for a threshold 23 “hiring entity” test. 24 IV. CLASS CERTIFICATION 25 Having determined that the ABC Test is the applicable legal framework for 26 Plaintiffs’ misclassification claims, the Court now turns to the class certification analysis. 27 Plaintiffs seek to certify the Misclassification Class, which they define as “All persons who 28 worked in California pursuant to a ‘Distributor Agreement’ or similar arrangement with 7 1 Flowers Food, Inc., or one of its subsidiaries, that were classified as ‘independent 2 contractors’ during the period commencing four years prior to the commencement of this 3 action through judgment. ‘Absentee’ distributors are not part of this class definition.” Dkt. 4 213 at 18. The two named Plaintiffs are proposed class representatives. 5 The Court first examines whether the four prerequisites of Rule 23(a) are satisfied 6 with regard to the proposed class, then turns to whether common questions of law or fact 7 predominate, and finally to whether a class action is the superior method for resolving the 8 controversy. 9 A. Plaintiffs Have Satisfied Rule 23(a) 10 1. The Class is Sufficiently Numerous 11 First, the Court finds that the proposed class of distributors is sufficiently numerous. 12 To establish numerosity, a plaintiff must show that the represented class is “so numerous 13 that joinder of all members is impracticable.” Fed. R. Civ. P. 23(a)(1). Although the 14 numerosity requirement is not tied to a strict numerical threshold, trial courts have 15 generally found classes of at least 40 members to satisfy the requirement. Rannis v. 16 Recchia, 380 Fed. Appx. 646, 651 (9th Cir. 2010). Here, Plaintiffs allege that there are at 17 least 172 distributors contracting with Flowers Modesto and 258 distributors contracting 18 with Flowers Henderson. A class consisting of at least 430 members renders joinder 19 impracticable and far exceeds the threshold of 40 class members that other trial courts have 20 identified as sufficiently numerous. Plaintiffs have therefore satisfied the numerosity 21 requirement. 22 2. The Named Plaintiffs are Typical 23 Second, the Court finds that the named plaintiffs are typical of the class. The Court’s 24 typicality inquiry looks to whether “the claims or defenses of the representative parties are 25 typical of the claims or defenses of the class.” Fed. R. Civ. P. 23(a)(3). This inquiry, which 26 focuses on the relationship between the class and its representatives, considers “whether 27 other members have the same or similar injury, whether the action is based on conduct 28 which is not unique to the named plaintiffs, and whether other class members have been 8 1 injured by the same course of conduct.” Evon v. Law Offices of Sidney Mickell, 688 F.3d 2 1015, 1030 (9th Cir. 2012). Courts examine the nature of the claim, rather than the specific 3 facts of each violation, in conducting this inquiry. Hanon v. Dataprods. Corp., 976 F.2d 4 497, 508 (9th Cir. 1992). Here, Defendants classified the named plaintiffs and the class 5 members as independent contractors instead of employees. This course of conduct—that 6 is, the alleged misclassification—affected the named plaintiffs and the other class members 7 in the same manner and gives rise to identical claims for violations of the California Labor 8 Code and related wage orders. Although the amount of damages allegedly owed to each 9 class member and the named plaintiffs may vary, the claims and injury of the named 10 plaintiffs are the same as those of the other distributors in the class. 11 Defendants argue that the typicality requirement is not satisfied because the named 12 plaintiffs do not have arbitration agreements, whereas some members of the putative class 13 do. This concern is moot because the Court has since found that the arbitration agreements 14 of distributors in this action are not enforceable. See Dkt. 307 (order denying Defendants’ 15 motion to compel arbitration on waiver grounds). 16 agreements were binding on members of the putative class, that factor alone does not 17 necessarily result in atypicality. Courts have noted atypicality concerns when the named 18 plaintiff, as opposed to one of the class members, “is subject to unique defenses which 19 threaten to become the focus of the litigation,” Hanon, 976 F.2d at 508, but that concern is 20 not present here. Accordingly, the Court finds that the typicality requirement is satisfied. 21 3. Even if enforceable arbitration The Named Plaintiffs are Adequate 22 Third, the Court finds that the named Plaintiffs and class counsel are adequate. 23 Defendants argue that class counsel are inadequate due to conflicts of interest arising from 24 their representation of other class and individual plaintiffs in similar lawsuits against the 25 same defendants. The Court is not persuaded. 26 In determining adequacy of class counsel, courts consider whether “the 27 representative parties will fairly and adequately protect the interests of the class.” Fed. R. 28 Civ. P. 23(a)(4). The Court’s inquiry focuses on two questions: (1) whether “the 9 1 representative plaintiffs and their counsel have any conflicts with other class members,” 2 and (2) whether “the representative plaintiffs and their counsel prosecute the action 3 vigorously on behalf of the class.” Staton v. Boeing Co., 327 F.3d 938, 957 (9th Cir. 2003). 4 Courts have found counsel to be inadequate where they represent multiple groups of 5 plaintiffs with inherently conflicting claims, such as those with present or future claims in 6 a global settlement fund, against the same defendant. Ortiz v. Fibreboard Corp., 527 U.S. 7 815, 856 (1999). However, trial courts have not found class counsel inadequate “merely 8 for representing another class against the same defendants when, for instance, the purported 9 conflicts are illusory and speculative…and there are procedural safeguards protecting the 10 class’s interests, such as requiring disclosure of the potential conflict to class members and 11 requiring court approval for settlements.” Sandoval v. M1 Auto Collisions Centers, 309 12 F.R.D. 549, 569 (N.D. Cal. 2015). 13 Here, the Court finds no factors suggesting that class counsel will provide inadequate 14 representation due to their concurrent representation of other plaintiffs in similar lawsuits 15 against the same defendants. Plaintiffs’ counsel is also counsel for other Flowers Foods 16 distributor plaintiffs in individual and class action lawsuits asserting similar 17 misclassification claims and resulting wage violations against Defendants and their 18 subsidiaries. See Goro et al v. Flowers Foods, Inc. et al, 3:17-cv-2580-JO-JLB; Maciel et 19 al. v. Flowers Foods, Inc. et al, 3:20-cv-02059-JO-JLB. Defendants have not identified 20 any inherent or potential conflicts of interest that would arise from the representation of 21 similarly situated individuals and class members with similar claims. 22 Unlike in Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999), to which Defendants point 23 in arguing inadequacy, this case presents no inherent conflict of interest. In Ortiz, class 24 counsel represented plaintiffs with both existing and future injuries in a global asbestos 25 settlement against the same defendant. 527 U.S. at 856. The court concluded that separate 26 counsel was required to eliminate inherent conflicts of interest where the currently injured 27 plaintiffs were interested in large immediate payments whereas the not-yet-injured 28 plaintiffs were interested in inflation-protected funds for the future. Id. Here, unlike in 10 1 Ortiz, class counsel’s representation of both the class in this action and individual and class 2 plaintiffs in similar actions does not present an inherent conflict of interest because no 3 substantive law or limited settlement fund restricts the potential recovery for the plaintiffs. 4 On this record, the Court concludes that any concern about conflicts of interest or adequate 5 representation is speculative. Moreover, the Court notes that its oversight of potential class 6 settlements provides a procedural safeguard that further protects the interests of the class. 7 Sandoval, 309 F.R.D. at 569. 8 4. There are Questions of Law and Fact Common to the Class 9 Finally, the Court finds that the commonality requirement for class certification is 10 satisfied. Commonality requires a plaintiff to show that “there are questions of law or fact 11 common to the class.” Fed. R. Civ. P. 23(a)(2). A question of law or fact is common to 12 the class if “the determination of its truth or falsity will resolve an issue that is central to 13 the validity of each one of the claims in one stroke.” Dukes, 564 U.S. at 350. Thus, what 14 matters is not the “raising of common ‘questions’ . . . but rather, the capacity of a class- 15 wide proceeding to generate common answers apt to drive the resolution of the litigation.” 16 Id. at 350 (emphasis in original). To demonstrate that class claims would produce a 17 common answer, the party seeking certification must present “significant proof” that an 18 employer operated under a “general policy” or practice. Wang v. Chinese Daily News, Inc., 19 737 F.3d 538, 543 (9th Cir. 2013) (citing Dukes, 564 U.S. 338 at 351–53). If there is no 20 evidence that the entire class was subject to the same allegedly unlawful policy or practice, 21 then there is no question common to the class. Kilbourne v. Coca-Cola Co., 2015 WL 22 5117080, at *8 (S.D. Cal. July 29, 2015) (citing Ellis, 657 F.3d at 983). 23 Here, the Court faces a common question at the heart of the action—whether 24 Defendants misclassified its distributors as independent contractors instead of employees. 25 And this common question can largely be determined by common evidence of Defendants’ 26 overarching business structure and business practices regarding their distributors. In 27 arguing that commonality exists, Plaintiffs focus on Prong B of the ABC Test set forth 28 above, which looks to whether the worker “performs work that is outside the usual course 11 1 of the hiring entity’s business.” Dynamex, 4 Cal. 5th at 957. As one of the three prongs of 2 the ABC Test, Prong B comprises a significant portion of the misclassification analysis 3 and, because the ABC Test is conjunctive, proof that Defendants failed this prong alone 4 will be sufficient to establish Plaintiffs’ misclassification claim. Id. at 963–64. Here, 5 whether the distributors’ delivery services is central to Defendants’ course of business will 6 be determined in large part by common evidence across the class. 7 Defendants’ corporate filings regarding their business operations and financial 8 performance will provide evidence of the nature of their business and what their usual 9 course of business entails. See, e.g., Tomasevic Decl., Ex. 1; Ex. 2 at 11. Corporate 10 representative testimony that describes the operational realities of the business also serves 11 as common evidence of class-wide practices to prove the nature of Defendants’ course of 12 business and the distributors’ role in that business. See, e.g., Tomasevic Decl., Ex. 14; Ex. 13 23. Moreover, the standard DA signed by every distributor details the workers’ specific 14 job requirements and responsibilities. These class-wide work requirements and practices 15 can be used to determine whether the distributor is “necessary” or “merely incidental” to 16 Defendants’ usual course of business. Vazquez, 986 F.3d at 1125–26. Because the above 17 evidence about the distributors’ role in Defendants’ overall business structure will provide 18 common, class-wide answers regarding the centrality of the distributors’ work to 19 Defendants’ business, the Court thus concludes that Plaintiffs have satisfied the 20 commonality requirement. For example, 21 Moreover, the Court also notes that the common evidence discussed above— 22 namely, Defendants’ corporate practices and policies with regard to its distributors and the 23 DA describing the nature of distributors’ responsibilities and working relationship with the 24 company—also serves to provide common proof of whether Defendants satisfy Prong A 25 of the ABC Test, which focuses on a putative employer’s control over the worker. 26 Dynamex, 4 Cal. 5th at 957. 27 /// 28 /// 12 1 B. Plaintiffs Have Satisfied Rule 23(b) 2 Having concluded that Plaintiffs have met Rule 23(a) requirements, the Court now 3 examines whether common questions will predominate over individual ones in deciding 4 the threshold misclassification issue, and then, if necessary, the substantive Labor Code 5 claims of the class members. The Rule 23(b)(3) inquiry looks to whether the putative class 6 is “sufficiently cohesive to warrant adjudication by representation.” Fed. R. Civ. P. 7 23(b)(3); Amchem Products, Inc. v. Windsor, 521 U.S. 591, 623 (1997). The court 8 considers whether “members of a proposed class will need to present evidence that varies 9 from member to member” or if “the same evidence will suffice for each member to make 10 a prima facie showing or the issue is susceptible to generalized, class-wide proof.” Tyson 11 Foods, Inc. v. Bouaphakeo, 577 U.S. 422, 453 (2016). When “one or more of the central 12 issues in the action are common to the class and can be said to predominate, the action may 13 be considered proper under Rule 23(b)(3) even though other important matters will have 14 to be tried separately, such as damages or some affirmative defenses peculiar to some 15 individual class members.” Id. (citing C. Wright, A. Miller, & M. Kane, Federal Practice 16 and Procedure § 1778, pp. 123–124 (3d ed. 2005)). 17 Here, as discussed above, the misclassification claim central to this proposed class 18 will be susceptible to common, class-wide proof regarding the distributors’ role in 19 Defendants’ overall business structure and Defendants’ level of control over the 20 distributors. If Plaintiffs prove their threshold misclassification claim, the factfinder will 21 then need to determine substantive wage claims for failure to pay overtime, unlawful 22 deductions from wages, failure to indemnify for necessary expenditures, and failure to 23 provide proper wage statements. The Court therefore examines the extent to which 24 common questions are presented in Plaintiffs’ substantive wage claims. 25 1. Failure to Pay Overtime 26 First, Plaintiffs bring a claim for failure to pay overtime under Cal. Lab. Code § 510 27 and the related wage orders, which require the payment of overtime compensation to non- 28 exempt employees for over eight hours worked in a day, over forty hours worked in a week, 13 1 and the first eight hours worked on the seventh consecutive day of the work week. See 2 Cal. Lab. Code § 510. Plaintiffs allege that the distributors in the putative class “regularly 3 worked and continue to work” overtime hours without overtime pay “in accord with 4 [Flowers Foods’] mandated schedule.” FAC ¶ 96. Defendants had a general practice of 5 not paying distributors overtime regardless of the number of hours worked: the standard 6 DA set out their policy on not providing these benefits to their distributors. Tomasevic 7 Decl., Ex. 6 at § 16.1. Although the number of overtime hours worked by each class 8 member is an individual question, the legality of Defendants’ class-wide policy of not 9 paying overtime to all distributors, regardless of hours worked, is an issue subject to 10 common proof. 11 2. Unlawful Deductions from Wages 12 Second, Plaintiffs bring a claim for unlawful deductions from wages under Cal. Lab. 13 Code § 221 and the related wage orders, which prohibit employers from taking back wages 14 that have been earned. See Cal. Lab. Code § 221. Plaintiffs allege that Flowers Foods 15 withholds payments for certain administrative expenses and “charges [distributors] for 16 stale product returned from retail locations that exceeds a certain percentage of sales.” 17 FAC ¶ 102. As set forth in the standard DA, Defendants had a general practice requiring 18 distributors to pay a fee to use Flowers Foods’ administrative services. The DA also 19 provided that Flowers Foods would only “repurchase” a percentage of the distributor’s 20 stale products, thus leaving the distributors to bear the cost of the remainder of the stale 21 products. While the specific amount of deductions from each class member will require 22 individualized determinations, whether class-wide practices of charging distributors for 23 certain costs constituted unlawful deductions in violation of state labor laws is a common 24 question. 25 3. Failure to Indemnify for Necessary Expenditures 26 Third, Plaintiffs bring a claim for failure to indemnify for necessary expenditures 27 under Cal. Lab. Code § 2802 and the related wage orders, which require an employer to 28 “indemnify his or her employee for all necessary expenditures or losses incurred by the 14 1 employee in direct consequence of the discharge of his or her duties.” See Cal. Lab. Code 2 § 2802. Plaintiffs argue that Flowers Foods has a policy of not reimbursing distributors 3 “for reasonable and necessary expenditures, including their vehicles, tools, cellular 4 telephones, transportation expenses, insurance, uniform and laundry of the same, loss of 5 product (such as stolen baked goods), among other expenses.” FAC ¶ 107. Flowers Foods 6 has a general policy that requires distributors to obtain their own vehicle and insurance, as 7 set forth in the standard DA signed by all distributors. Tomasevic Decl., Ex. 6 at § 9.1. 8 While the amount of expenses incurred by each class member is an individual question, 9 the legality of this common practice can be determined on a class-wide basis with common 10 11 proof. 4. Failure to Provide Proper Wage Statements 12 Finally, Plaintiffs bring a claim for failure to provide proper wage statements under 13 Cal. Lab. Code § 226(a) and the related wage orders, which require that an employer must 14 provide its employees with an “accurate itemized statement in writing” containing certain 15 required information at the time of each payment of wages or at least twice a month. See 16 Cal. Lab. Code § 226(a). Plaintiffs argue, and the Court agrees, that this claim is subject 17 to common proof because it is based on Defendants’ class-wide policy of not providing 18 wage statements to distributors. Defendants’ uniform practice affected all members of the 19 putative class and can thus be adjudicated on a class-wide basis. 20 For the reasons set forth above, the Court concludes that common issues 21 predominate over individual questions such that Rule 23(b) is satisfied. In sum, the 22 threshold and central question of misclassification as well as liability for the substantive 23 wage claims are common questions susceptible to common proof. Once liability and 24 misclassification are established, the Court will indeed need to make individualized 25 determinations to determine damages—for example, with regard to the overtime claim, 26 whether and to what extent each class member is entitled to overtime pay based on the 27 number of hours worked. However, the Court concludes that the central and common 28 questions of misclassification and liability under the Labor Code predominate over these 15 1 individualized issues of damages. Tyson Foods, 577 U.S. at 453 (finding class certification 2 is proper if central issues predominate over individualized issues of damages and 3 affirmative defenses). 4 C. A Class Action is Superior 5 Having determined that the questions of law or fact common to class members 6 predominate, the Court also finds that a class action is the superior method of resolving 7 this controversy. Under Rule 23(b)(3), a class action may be superior if “classwide 8 litigation of common issues will reduce litigation costs and promote greater efficiency.” 9 Valentino v. Carter-Wallace, Inc., 97 F.3d 1227, 1234 (9th Cir. 1996). In evaluating 10 superiority, courts examine (a) the class members’ interests in individually controlling 11 separate actions; (b) the extent and nature of any preexisting related litigation; (c) the 12 desirability of concentrating the litigation of the claims in the forum; and (d) manageability. 13 Fed. R. Civ. P. 23(b)(3). “A consideration of these factors requires the court to focus on 14 the efficiency and economy elements of the class action so that cases allowed under 15 subdivision (b)(3) are those that can be adjudicated most profitably on a representative 16 basis.” Zinser, 253 F.3d at 1190. 17 Here, the putative class action involves approximately 430 distributors who were 18 subject to identical DAs that classified them as independent contractors. These 430 19 distributors assert the same misclassification claims, and also the same substantive wage 20 claims stemming from the alleged misclassification. 21 misclassification and liability for the substantive wage claims are common class-wide 22 questions susceptible to common proof, the Court concludes that trying these issues 23 together in a class action would be more efficient and cost-effective. Because the issues of both 24 For the same reason, the Court declines to conclude that this class would not be 25 manageable due to the need for individualized determinations. Defendants argue that 26 individual actions are more appropriate because damages could be significant and exceed 27 $150,000 for each class member. The Court is not convinced that each distributor is 28 necessarily entitled to such an amount, and even if that were the case, the class action would 16 1 still be more efficient for the judicial system given the presence of significant common 2 questions on misclassification and liability.5 Accordingly, the Court finds that a class 3 action is the superior method of resolving the controversy. 4 5 6 7 IV. CONCLUSION For the reasons set forth above, Plaintiffs’ motion for class certification is GRANTED. IT IS SO ORDERED. 8 9 Dated: July 5, 2022 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 5 Moreover, as expressed in the Court’s May 13, 2022 order in the related Goro case, see Goro et al v. Flowers Foods, Inc. et al, 3:17-cv-2580-JO-JLB at Dkt. 247, this Court intends to use its broad discretion to bifurcate trial on Prong B and to order additional bifurcation as necessary to enhance the manageability of this action. For example, a finding that Defendants failed to meet Prong B of the ABC Test will resolve the misclassification question and obviate the need for trial on Prong C, which may require more individualized determinations. 17
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