Kawaski Corley v. FedEx Ground Package System, Inc. et al, No. 5:2019cv00429 - Document 91 (C.D. Cal. 2022)

Court Description: ORDER DENYING PLAINTIFF'S MOTION FOR CLASS CERTIFICATION WITH PREJUDICE 69 by Judge Otis D. Wright, II. (lc)

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Kawaski Corley v. FedEx Ground Package System, Inc. et al Doc. 91 O 1 2 3 4 5 6 7 United States District Court Central District of California 8 9 10 11 12 KAWASKI CORLEY, individually and on Case 5:19-cv-00429-ODW (SHKx) behalf of all others similarly situated, 14 15 16 17 ORDER DENYING PLAINTIFF’S MOTION FOR CLASS CERTIFICATION [69] Plaintiff, 13 v. FEDEX GROUND PACKAGE SYSTEM INC., Defendant. 18 19 I. INTRODUCTION 20 Plaintiff Kawaski Corley was a linehaul driver for Defendant FedEx Ground 21 Package System, Inc. (“FedEx”). He brings suit against FedEx asserting that he and 22 other linehaul drivers were employees under California law and that FedEx failed to 23 hire them as such. Corley now moves for class certification. (Mot. Class Certification 24 (“Motion” or “Mot.”), ECF No. 69.) After carefully considering the papers filed in 25 connection with the Motion, the Court deemed the matter appropriate for decision 26 without oral argument. Fed. R. Civ. P. 78(b); L.R. 7-15. For the following reasons, 27 the Court DENIES Corley’s Motion. 28 Dockets.Justia.com II. 1 BACKGROUND 2 FedEx is a licensed motor carrier that provides package transportation and 3 delivery services throughout the United States. (Decl. Brian Tangi (“Tangi Decl.”) 4 ¶ 3, ECF No. 70-7.) FedEx maintains approximately eight hubs and fifty stations 5 within California, and during the relevant time period it contracted with around 6 340 California-based linehaul Transportation Service Providers (“Service Providers” 7 or “Providers”) to move goods between these hubs and stations prior to the goods 8 reaching their end destination. (Mot. 1; Opp’n 2, ECF No. 70.) 9 From approximately 2008 to 2017, Corley, and then his company, were 10 Transportation Service Providers for FedEx. (Decl. Jessica Scott (“Scott Decl.”) Ex. 8 11 (Dep. Kawaski Corley (“Corley Dep.”)) 138:10-12, 165:5-9, 170:24–172:11, ECF 12 No. 70-8.) The relationship between Corley and FedEx was governed by a Linehaul 13 Contractor Operating Agreement (“Operating Agreement”). (Tangi Decl. ¶¶ 21–22.) 14 On May 3, 2011, the Parties entered into an amended Operating Agreement under 15 which K Corley Trucking Inc. (“K Corley”) was substituted in as the contracting 16 entity. 17 eventually grew to four employees. (Corley Dep. 26:19-25, 178:13-15, 226:21-25.) 18 For most of the class period, Corley’s main role with K Corley was to manage and 19 oversee its employee-drivers, and Corley himself would drive only if a K Corley 20 employee did not arrive for their shift. (Id. at 120:22–121:9, 182:11-15, 297:4-25, 21 315:24–316:15, 388:20–389:5.) (Id.) At first, Corley was K Corley’s sole employee, but the business 22 FedEx establishes relationships with only those Service Providers that have 23 incorporated, including when the Service Provider corporation would consist of just a 24 single owner-manager-driver. (See Decl. Cody R. Kennedy (“Kennedy Decl.”) Exs. 25 5–9 (“Operating Agreements”), ECF Nos. 54-3 to 54-7.) Each Service Provider owns 26 or leases its own tractors, and many Service Providers contract simultaneously with 27 other firms, such as Amazon, to provide transportation services. (Scott Decl. Ex. 9 28 (Dep. Brian Tangi (“Tangi Dep.”)) 35:1-6, ECF No. 70-8; Tangi Decl. ¶¶ 4–6, 19–20.) 2 1 The typical Service Provider has between ten and fifteen employees and seven trucks. 2 (Tangi Dep. 122:13-20) The smallest Service Providers consist of a single owner- 3 operator, and the largest have a couple hundred employees and millions of dollars in 4 annual revenue. (Id. at 122:13–123:5.) Service Providers hire their own employees 5 and decide their pay. (Corley Dep. 189:3-11; Scott Decl. Ex. 1 (“Decl. Michael 6 Cahill”) ¶ 9, ECF No. 70-8; Scott Decl. Ex. 12 (“Dep. Kristen Mikan”) 9:16–12:2, 7 ECF No. 70-8.) Service Providers manage their own employees, and the Service 8 Provider, not FedEx, is responsible for ensuring compliance with federal, state, and 9 local labor laws. (Tangi Decl. Ex. B (“TSPA”) § 6.2.) 10 FedEx pays Service Providers “settlement” for services, and from that revenue, 11 Service Providers pay their expenses and employees and generate profits for their 12 owners. (Id. at Schedule C; Corley Dep. 178:13–179:6; Scott Decl. Ex. 11 (“Dep. 13 Michael W. Grodi”) 105:6–108:18, ECF No. 70-8.) Service Providers can and do sell 14 their assets and contracts to other companies. For example, during the class period, 15 Corley’s company sold two unassigned transportation runs for $110,000. (Corley 16 Dep. 341:10-342:8.) 17 FedEx subjects its Transportation Service Providers to various rules and 18 requirements as part of their contractual relationship. (See Mot. 3–5.) One such rule 19 is that the Provider designate an “Authorized Officer” and a “Business Contact” to be 20 the primary points of contact between the Provider and FedEx. (See, e.g., Kennedy 21 Decl. Ex. 5 at 71.) Corley likens the role Authorized Officers and Business Contacts 22 serve to that of a FedEx middle manager. (Mot. 5.) Authorized Officers usually own 23 the Service Provider and might drive a truck themselves, direct operations, hire 24 additional drivers, and delegate management. (See Kennedy Decl. Ex. 4 (“Pl. Tangi 25 Dep.”) 9:17-50:20, 98:13-99:8, ECF No. 54-2; Opp’n 3.) 26 expectations and requirements for its Service Providers include expectations and 27 requirements regarding the behavior and work habits of the entire corporation, 28 including the Service Provider’s employees. (See Mot. 2–6.) 3 FedEx’s contractual 1 2 Since 2017, Corley and K Corley have had no relationship with FedEx Ground. (Corley Dep. 138:10-12, 340:24–343:16.) 3 On January 9, 2019, Corley brought suit in the Superior Court of California, 4 County of San Bernardino, asserting claims for: (1) declaratory relief; (2) failure to 5 pay minimum wages; (3) failure to pay overtime wages; (4) failure to provide meal 6 breaks; (5) failure to provide rest breaks; (6) failure to reimburse for necessary 7 business expenses; (7) failure to provide adequate wage statements; (8) unlawful 8 deductions from wages; (9) unfair competition; and (10) quantum meruit/unjust 9 enrichment. (Notice of Removal (“NOR”) Ex. A (“Compl.”), ECF No. 1-1.) On 10 March 8, 2019, FedEx removed the case to this Court based on diversity jurisdiction, 11 28 U.S.C. § 1332(a), and on jurisdiction pursuant to the Class Action Fairness Act, 12 28 U.S.C. § 1332(d). (NOR ¶¶ 8–34.) 13 FedEx moved for and obtained partial summary judgment in the form of a 14 series of rulings on the applicable limitations period for each of Corley’s claims. 15 (Order 8.) Following the Court’s ruling on FedEx’s motion for summary judgment, 16 Corley filed the operative First Amended Class Action Complaint. (First Am. Compl. 17 (“FAC”), ECF No. 39.) 18 19 20 21 22 23 24 Corley now moves for class certification. He seeks certification of the “Class,” which he now defines as: All persons who at any time during the Class Period, and within the State of California: (1) directly performed, or were designated as an authorized officer/business contact responsible for the performance of, the “linehaul” transportation of goods for Defendant pursuant to a Linehaul Transportation Service Provider Agreement (“TSPA”), or similarly titled agreement; and (2) were not designated by Defendant as its employees. 25 (Mot. ii.) He also seeks certification of “Subclass A,” which he defines as “All 26 persons falling within the Class Definition who were designated as ‘Authorized 27 Officers’ pursuant to a TSPA . . . during the Class Period.” (Id.) Corley indicates that 28 4 1 these definitions are intended to supersede the class definitions in the First Amended 2 Class Action Complaint. (Id.) 3 Corley seeks class certification on four claims in particular: (1) his declaratory 4 relief claim for misclassification, on behalf of the entire Class; (2) his claim for 5 reimbursement of business expenses/unlawful deduction of wages, on behalf of 6 Subclass A; (3) his claim for failure to provide accurate itemized wage statements, on 7 behalf of the Class; and (4) his claim for unfair business practices, on behalf of the 8 Class. Corley does not seek class certification for any of the other claims in his First 9 Amended Class Action Complaint. (Mot. iii.) Thus, based on the Court’s rulings in 10 its Order on FedEx’s Motion for Summary Judgment, the applicable limitations period 11 for the first three claims at issue began January 9, 2016, and ended January 9, 2019. 12 (Order 8; NOR ¶ 1.) The limitations period for the fourth claim at issue began 13 January 9, 2015, and ended January 9, 2019. (Order 8; NOR ¶ 1.) 14 The parties briefed the Motion, and on November 30, 2021, the Court took the 15 matter under submission. (Opp’n; Reply, ECF No. 72.) More recently, the Court 16 ordered supplemental briefing on the retroactivity of the ABC Test for employment 17 classification, and the parties filed briefs and responses in accordance with the Court’s 18 order. (Mins., ECF No. 81; Def. Suppl. Br., ECF No. 82; Pl. Suppl. Br., ECF No. 84; 19 Pl. Suppl. Resp., ECF No. 85; Def. Suppl. Resp., ECF No. 87.) 20 III. LEGAL STANDARD 21 Class certification is appropriate only if the parties demonstrate each of the four 22 requirements of Rule 23(a) and at least one of the requirements of Rule 23(b). 23 Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 613–14, 621 (1997). 24 Rule 23(a), a class action is certifiable only if (1) the class is so numerous that joinder 25 of all members is impracticable; (2) there are questions of law or fact common to the 26 class; (3) the claims or defenses of the representative parties are typical of the claims 27 or defenses of the class; and (4) the representative parties will fairly and adequately 28 protect the interests of the class. Fed. R. Civ. P. 23(a). 5 Under 1 As for Rule 23(b), Corley relies solely on Rule 23(b)(3), which states that a 2 class may be maintained where “questions of law or fact common to class members 3 predominate over any questions affecting only individual members,” and a class 4 action would be “superior to other available methods for fairly and efficiently 5 adjudicating the controversy.” Fed. R. Civ. P. 23(b)(3). 6 “Rule 23 does not set forth a mere pleading standard.” Wal-Mart Stores, Inc. v. 7 Dukes, 564 U.S. 338, 350 (2011). Rather, “[a] party seeking class certification must 8 affirmatively demonstrate . . . compliance with the Rule,” id., by a preponderance of 9 the evidence, Olean Wholesale Grocery Coop., Inc. v. Bumble Bee Foods LLC, 10 31 F.4th 651, 665 (9th Cir. 2022). If faced with conflicting or insufficient evidence on 11 the issue of class certification, the Court must “judge the persuasiveness and not 12 merely the admissibility of evidence bearing on class certification.” Henson v. Fid. 13 Nat. Fin. Inc., 300 F.R.D. 413, 417 (C.D. Cal. 2014) (citing Ellis v. Costco Wholesale 14 Corp., 657 F.3d 970, 982 (9th Cir. 2011)). This “may ‘entail some overlap with the 15 merits of the plaintiff’s underlying claim.’” Amgen Inc. v. Conn. Ret. Plans & Tr. 16 Funds, 568 U.S. 455, 465–66 (2013) (quoting Dukes, 564 U.S. at 351). 17 “[A] court’s class-certification analysis must be ‘rigorous’ . . . .” Id. at 465. 18 This is true of analysis under Rules 23(a) and 23(b) alike. Comcast Corp. v. Behrend, 19 569 U.S. 27, 33 (2013). If the court concludes that the moving party has met its 20 burden of proof, then the court has broad discretion to certify the class within the 21 framework of Rule 23. 22 (9th Cir. 2001). 23 Zinser v. Accufix Rsch. Inst., Inc., 253 F.3d 1180, 1186 IV. DISCUSSION 24 The Court declines to certify a class for purposes of declaratory relief because 25 Corley no longer has a business relationship with FedEx and therefore lacks standing 26 to pursue prospective relief on behalf of a putative employee class. 27 declines to certify Subclass A for purposes of the business expense reimbursement 28 because even if one of the applicable employment classification tests can be applied 6 The Court 1 classwide, individualized inquiries would nevertheless predominate damages 2 calculations across Subclass A; moreover, typicality is not satisfied. Next, the Court 3 declines to certify the class for the purpose of the wage statement claim because the 4 test that applies to the strong majority of class members is not capable of classwide 5 application. Finally, the unfair competition claim is derivative and is therefore also 6 uncertifiable. 7 A. DECLARATORY RELIEF; STANDING 8 Corley seeks to certify a class for the purposes of his first claim for declaratory 9 relief. According to the Notice of Motion, Corley’s claim for declaratory relief is 10 brought under California law and specifically under California Code of Civil 11 Procedure section 1060. Corley seeks a declaration that (1) “Defendant’s conduct 12 violated and violates California law;” (2) “Plaintiff and the class members are 13 Defendants’ employees and entitled to the protections of the Labor Code and 14 applicable Wage Order;” and (3) Defendant must pay “restitution and disgorgement of 15 all sums improperly retained by Defendant[] as a result of [its] misclassification of 16 Plaintiff and class members.” (FAC Prayer for Relief ¶ 4.) 17 The “California law” Corley alleges FedEx violated includes Wage Order 9 of 18 the California Industrial Welfare Commission (“IWC”)1 and California Labor Code 19 section 3357, which provides that “[a]ny person rendering service for another, other 20 than as an independent contractor, or unless expressly excluded herein, is presumed to 21 22 23 24 25 26 27 28 1 The IWC was created pursuant to a California constitutional amendment granting legislative, executive, and judicial powers to an independent body whose initial purpose was to regulate wages and conditions of employment for women and children in the workforce. Martinez v. Combs, 49 Cal. 4th 35, 53–54 n.20 (2010). To effectuate this purpose, the IWC issued Wage Orders setting minimum wages and work conditions in a variety of industries. Id. at 54. Thus, “[i]n California, wage orders are constitutionally-authorized, quasi-legislative regulations that have the force of law.” Dynamex Operations W. v. Superior Court, 4 Cal. 5th 903, 914 n.3 (2018). The IWC was defunded in 2004, but seventeen of its wage orders remain in effect and apply to all California employees. Id. at 936 n.14. The standards and requirements in a Wage Order apply whenever someone “employs” another in the relevant field, with the word “employ” expressly defined in each Wage Order. See Martinez, 49 Cal. 4th at 57–60. 7 1 be an employee.” The statutory presumption section 3357 provides is limited to the 2 context of workers’ compensation claims, but it embodies the general presumption of 3 employment that arises under California law when a person performs work or labor 4 for another, Dynamex Operations W. v. Superior Court, 4 Cal. 5th 903, 955–56 5 (2018). 6 “[D]eclaratory relief ‘operates prospectively to declare future rights, rather than 7 to redress past wrongs.’” Pub. Serv. Mut. Ins. Co. v. Liberty Surplus Ins. Corp., 51 F. 8 Supp. 3d 937, 950 (E.D. Cal. 2014) (quoting Canova v. Trs. of Imperial Irrigation 9 Dist. Emp. Pension Plan, 150 Cal. App. 4th 1487, 1497 (2007)); see Travers v. 10 Louden, 254 Cal. App. 2d 926, 931 (1967) (explaining that purpose of declaratory 11 relief action is “to set controversies at rest before they lead to repudiation of 12 obligations, invasions of rights, or commissions of wrongs”). Thus, “declaratory 13 relief will not be provided where only past alleged wrongs are at issue.” Osseous 14 Techs. of Am., Inc. v. DiscoveryOrtho Partners LLC, 191 Cal. App. 4th 357, 375 n.6 15 (2010). Accordingly, Corley’s first claim places at issue only whether he and the class 16 are entitled to a declaration that, in the present and moving forward, FedEx’s 17 relationships with its Service Providers, if unchanged, violate California employment 18 law. 19 FedEx argues that Corley lacks standing to pursue this declaratory relief, and 20 FedEx’s argument is well taken. The “‘irreducible constitutional minimum’ of 21 Article III standing consists of three elements.” Spokeo, Inc. v. Robins, 578 U.S. 330, 22 338 (2016) (quoting Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992)). “The 23 plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the 24 challenged conduct of the defendant, and (3) that is likely to be redressed by a 25 favorable judicial decision.” Id. at 560–61; Ctr. for Biological Diversity v. Mattis, 26 868 F.3d 803, 816 (9th Cir. 2017). 27 Examining the standing requirement in this case, Corley’s “allegations of past 28 injury alone are not sufficient to confer standing” to pursue a declaratory judgment. 8 1 Leu v. Int’l Boundary Comm’n, 605 F.3d 693, 694 (9th Cir. 2010) (citing Fieger v. 2 Mich. Supreme Court, 553 F.3d 955, 962 (6th Cir. 2009); see also Bayer, 861 F.3d 3 at 861–62, 868 (confirming no standing to pursue declaratory relief when “parties 4 have no relationship beyond this litigation” and plaintiff “produced no evidence to 5 show the conduct complained of in this action presently affects him or can reasonably 6 be expected to affect him in the future”). A declaration that FedEx’s current and 7 future conduct violates California law would not have any effect on Corley, as Corley 8 no longer works for FedEx and does not express any intent to do so in the future. In 9 short, Corley cannot show that putative class members’ classification “continues to 10 affect [his] present interest,’” Bayer, 861 F.3d at 868 (quoting Super Tire Eng’g Co. v. 11 McCorkle, 416 U.S. 115, 125–26 (1974)), so he lacks standing for declaratory 12 judgment. 13 A plaintiff must have standing to assert class claims, and district courts may 14 properly deny class certification when a named plaintiff lacks standing. Simon v. E. 15 Ky. Welfare Rts. Org., 426 U.S. 26, 40 n.20 (1976) (“[N]amed plaintiffs who represent 16 a class ‘must allege and show that they personally have been injured, not that injury 17 has been suffered by other, unidentified members of the class to which they belong 18 and which they purport to represent.’” (quoting Warth v. Seldin, 422 U.S. 490, 502 19 (1975))); see, e.g., Jang v. Asset Campus Hous., Inc., No. CV 15-01927-BRO (PJWx), 20 2016 WL 11755105, at *4 (C.D. Cal. May 4, 2016) (refusing to reconsider denial of 21 class certification based on named plaintiff’s lack of standing to pursue injunctive or 22 declaratory relief); see also Dukes, 564 U.S. at 364–65; cf. Cholakyan v. Mercedes- 23 Benz, USA, LLC, 281 F.R.D. 534, 559 (C.D. Cal. 2012) (noting that putative class 24 members who were former owners of class vehicles would gain “no tangible benefit” 25 from declaratory relief). 26 Here, as discussed, Corley lacks standing to pursue the declaratory relief he 27 seeks, and he is the only named Plaintiff in the action. Certification of the declaratory 28 relief claim is denied on this basis. Corley’s Motion is DENIED to this extent. 9 1 B. REIMBURSEMENT OF BUSINESS EXPENSES 2 Corley next presents for certification his claim for failure to reimburse business 3 expenses. Corley brings this claim pursuant to California Labor Code section 2802, 4 which requires employers to indemnify their employees “for all necessary 5 expenditures or losses incurred by the employee in direct consequence of the 6 discharge of his or her duties.” Cal. Lab. Code § 2802(a). The purpose of the statute 7 is “‘to prevent employers from passing their operating expenses on to their 8 employees.’” Cochran v. Schwan’s Home Serv., Inc., 228 Cal. App. 4th 1137, 1144 9 (2014) (quoting Gattuso v. Harte-Hanks Shoppers, Inc., 42 Cal. 4th 554, 562 (2007)). 10 Corley also brings the claim under IWC Wage Order 9, section 9, which provides that 11 “[w]hen tools or equipment are required by the employer or are necessary to the 12 performance of a job, such tools and equipment shall be provided and maintained by 13 the employer.” Cal. Code Regs. Tit. 8, § 11090. The gravamen of Corley’s claim is 14 that FedEx “failed to reimburse Plaintiff and Class Members for all business-related 15 expenses and costs delivery workers incurred including, but not limited to, fuel, 16 maintenance, repairs, uniform costs and expenses, scanner fees, cell phone fees, GPS 17 service fees, and liability and other insurance covering work place injuries or property 18 damage.” (FAC ¶ 67.) Instead, each Transportation Service Provider was responsible 19 for paying these expenses itself. 20 The central legal question raised by this claim is whether the members of 21 Subclass A—the Authorized Officers of California Transportation Service 22 Providers—were employees in the first place. If they were not, then they were not 23 entitled to reimbursement of business expenses; if they were, then the expenses may 24 be (but are not necessarily) reimbursable. To determine whether this question is 25 capable of classwide resolution, the Court must first establish which analytical 26 framework governs the employment classification question. In other words: what test 27 governs whether California law required FedEx to classify members of Subclass A as 28 employees? Due to recent developments in California employment law, including 10 1 Dynamex Operations W. v. Superior Court, 4 Cal. 5th 903, which issued in 2018, and 2 Assembly Bill 5, which codified Dynamex’s test for employment status as of January 3 1, 2020, the answer to this question is not straightforward. 4 As explained below, Corley’s business expenses claim arises from two different 5 parts of California labor law and accordingly invokes two different employment tests: 6 the ABC Test and the Borello test. The Borello test is not capable of classwide 7 application at all, and even if the ABC Test is capable of classwide application, Corley 8 fails to articulate a plausible method for both determining and calculating damages on 9 this claim that would not involve a detailed individualized inquiry. Moreover, his 10 11 claims are not typical of those of Subclass A. 1. Both the Borello test and the ABC Test apply in determining whether 12 members of Subclass A are employees entitled to reimbursement of 13 business expenses. 14 In the moving papers, Corley raised three alternative tests for employment 15 status and argued that class certification was appropriate under any test. As a 16 preliminary matter, although at first Corley preemptively raised the potential 17 applicability of the classification framework set forth in Martinez v. Combs, 49 Cal. 18 4th 35 (2010), at this point it is clear that Corley believes that the Martinez framework 19 is inapplicable to this case. (Pl. Supp. Br. 2 (disavowing application of Martinez).) 20 Thus, in determining whether Corley meets his burden on class certification, the Court 21 focuses on the other two tests Corley raises, inquiring whether they are the appropriate 22 tests and whether they are amenable to classwide application. 23 The two remaining tests are set forth in S.G. Borello & Sons, Inc. v. Dep’t of 24 Indus. Rels., 48 Cal. 3d 341 (1989) (the “Borello test”), and in Dynamex (the “ABC 25 Test”), with the latter now codified at California Labor Code section 2775. The two 26 tests and their historical context are as follows: 27 28 For nearly three decades, California courts have used a test based on the decision in [Borello] to determine whether workers are correctly classified as employees or independent contractors. The Borello test 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 considers the “right to control work,” as well as many other factors, including (a) whether the worker is engaged in a distinct occupation or business, (b) the amount of supervision required, (c) the skill required, (d) whether the worker supplies the tools required, (e) the length of time for which services are to be performed, (f) the method of payment, (g) whether the work is part of the regular business of the principal, and (h) whether the parties believe they are creating an employer-employee relationship. In April 2018, the California Supreme Court replaced the Borello test with the “ABC test” for the purpose of determining employment under California wage orders. The court held that under the “suffer or permit to work” language used in all California wage orders, any worker who performs work for a business is presumed to be an employee who falls within the protections afforded by a wage order. However, such a worker can properly be found to be an independent contractor—to whom the wage order would not apply—if the hiring entity establishes: (A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact; (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 for the hiring entity. If the putative employer fails to establish any one of the three prongs with regard to a worker, the worker is properly classified as an employee. California’s Assembly Bill 5 (AB 5) codified Dynamex’s holding and adopted the ABC test for all provisions of the California Labor Code, the Unemployment Insurance Code, and IWC wage orders, with numerous exemptions. 24 Haitayan v. 7-Eleven, Inc., No. CV 17-7454 DSF (ASx), 2021 WL 757024, at *4 (C.D. 25 Cal. Feb. 8, 2021) (citations omitted). 26 The California Supreme Court’s decision in Dynamex was a clarification of 27 existing law, and the ABC Test set forth in Dynamex applies only in the context of 28 IWC Wage Orders. James v. Uber Techs. Inc., 338 F.R.D. 123, 144 (N.D. Cal. 2021). 12 1 Therefore, the ABC Test (or, more accurately, the Dynamex version of the ABC Test) 2 applies to all claims arising from California wage orders that were not yet resolved by 3 final judgment as of the date of the Dynamex decision. Id.; Cal. Lab. Code § 2785. 4 By contrast, for all claims that do not arise from a Wage Order, such as claims brought 5 directly under the California Labor Code, the statutory ABC Test functions only 6 prospectively, from January 1, 2020, forward. Vazquez v. Jan-Pro Franchising Int’l, 7 10 Cal. 5th 944, 958 (2021); Lawson v. Grubhub, Inc., 13 F.4th 908, 912 (9th Cir. 8 2021); Haitayan, 2021 WL 757024, at *5 (“Dynamex applies retroactively, but only 9 to wage orders, and AB 5 is not retroactive.”). 10 Here, as discussed, Corley’s reimbursement of business expense claim arises 11 from both Wage Order 9 and the California Labor Code. This suit was filed, and the 12 limitations period on this claim therefore ended, before January 1, 2020, meaning that, 13 to the extent the claim is based on the Labor Code, the Borello test applies to 14 determine employment classification. By contrast, because the application of the 15 ABC Test to the definition of employment in wage orders is retroactive, to the extent 16 Corley’s claim is based on Wage Order 9, the Dynamex version of the ABC Test 17 applies to determine whether the members of Subclass A are employees. 18 Proceeding from this premise, Subclass A cannot be certified because the 19 Borello test cannot be applied to the business expenses claim on a classwide basis, and 20 moreover, even if the ABC Test is capable of classwide application, individualized 21 damages determinations would nevertheless predominate, and Corley’s claims are not 22 typical of those of Subclass A. 23 24 2. The Borello Test is not capable of classwide application across Subclass A. 25 Under Borello, courts determining whether a given worker is an employee 26 consider primarily the degree of control the putative employer exercises, along with 27 the factors listed above in the extended quote from Haitayan. Additional factors 28 provided by the Borello court include: 13 1 2 3 4 (1) the alleged employee’s opportunity for profit or loss depending on his managerial skill; (2) the alleged employee’s investment in equipment or materials required for his task, or his employment of helpers; (3) whether the service rendered requires a special skill; (4) the degree of permanence of the working relationship; and (5) whether the service rendered is an integral part of the alleged employer’s business. 5 6 48 Cal.3d at 355. The California Supreme Court recently confirmed in Dynamex that 7 courts applying the Borello approach should continue to take all these factors into 8 account, “with deference to the purposes and intended reach of the remedial statute at 9 issue.” 4 Cal. 5th at 932. 10 Here, some of the Borello factors invite classwide resolution and others do not. 11 Ultimately, the question is whether the Court can make an accurate, meaningful legal 12 determination one way or another regarding the employment status of all of 13 Subclass A under Borello. This, in turn, depends on exactly which Borello factors 14 invite classwide resolution, and whether those classwide factors carry enough weight 15 in the analysis so as to allow a uniform determination for all Authorized Officers 16 across all of Subclass A. See Narayan v. EGL, Inc., 285 F.R.D. 473, 478 (N.D. Cal. 17 2012) (“For purposes of class certification, the issue is whether [the Borello] factors 18 may be applied on a classwide basis, generating a classwide answer on the issue of 19 employee status, or whether the determination requires too much individualized 20 analysis.”). 21 Corley’s claim. 22 2020 WL 364221, at *8 (S.D. Cal. Jan. 22, 2020) (“The court is ‘at liberty to consider 23 evidence which goes to the requirements of Rule 23 even though the evidence may 24 also relate to the underlying merits of the case.’” (quoting Hanon v. Dataproducts 25 Corp., 976 F.2d 497, 509 (9th Cir. 1992))). Making this determination requires some inquiry into the merits of See Robinson v. Onstar, LLC, No. 15-CV-1731 JLS (MSB), 26 Factors that lend themselves to classwide resolution in this case include 27 (1) whether linehaul work is customarily done under the direction of a principal or 28 with supervision; (2) the skill required; (3) whether tools were supplied; (4) the 14 1 method of payment; (5) whether the work was part of FedEx’s regular business; and 2 (6) whether linehaul transportation is an integral part of FedEx’s business. 48 Cal.3d 3 at 351, 355. The key consideration, the right to control the manner and means of 4 accomplishing the work, id. at 350, also appears generally capable of classwide 5 resolution. 6 In this case, the amount of control FedEx exercised over Service Providers 7 militates somewhat in favor of finding no employment requirement. The record 8 indicates that Service Providers function as their own independent businesses and 9 retain considerable discretion regarding many substantial components of their 10 operations, including the hiring, training, and firing of employees; human resources 11 and accounting; the purchasing of tractors and equipment; fleet maintenance; and 12 contracts with other companies. 13 Corley argues that the many contractual requirements placed on Service 14 Providers, including behavior expectations for employees, constitute a high level of 15 control. But the mere existence of legally enforceable contract terms—absent some 16 additional method of enforcement, veto power, or ability to direct the other party—is 17 at most a weak indicator of control. If it were otherwise, then any independent 18 contract with legally enforceable terms (that is, virtually all independent contracts) 19 would entail too much control and would therefore be improper contracts of 20 employment under Borello and its progeny. 21 Instead, the indicia of control that invalidate the bona fide independent 22 contracting relationship must be based on something more than the ability to enforce 23 contract rights in court. Here, Corley suggests that the “something more” is FedEx’s 24 ability “to disqualify individual drivers from performing FedEx linehaul work on 25 behalf of a TSP.” (Mot. 4; see id. at 2 n.2 (suggesting drivers cannot start driving for 26 their Service Provider until approved by FedEx’s third party vendor).) Although the 27 details in the record on this point are somewhat complicated, the upshot appears to be 28 that, for matters not related to the violation of a law or regulation that involves FedEx, 15 1 each Service Provider retains sole discretion over discipline, hiring, firing, 2 compensation, benefits, scheduling, leave and vacation policies, vehicle purchases, 3 and assignment of drivers to routes or trucks. This observation is key. Corley 4 otherwise fails to show that FedEx retained any other substantial right to direct, 5 command, or involve itself in the details of the work of Authorized Officers. Without 6 the contractual right to terminate the employment of a Service Provider employee who 7 was not following FedEx’s instructions or meeting FedEx’s expectations or a similar 8 substantial method of implementing or enforcing its expectations, the Court finds that 9 the control consideration militates slightly in favor of finding an allowable 10 independent contracting relationship. 11 Control is the most important factor in the Borello analysis. 48 Cal. 3d at 350. 12 This and the other factors that are amenable to classwide resolution, taken together, 13 militate slightly in favor of finding an allowable independent contracting relationship. 14 By contrast, several factors do not lend themselves to classwide resolution. 15 These factors include (1) whether a given Authorized Officer was engaged in a 16 distinct occupation or business, (2) whether an Authorized Officer had opportunity for 17 profit or loss, and (3) and the Authorized Officer’s degree of investment in his or her 18 business. 48 Cal.3d at 351, 355. Each of these matters will necessarily vary among 19 Service Providers. The question is whether these variations are substantial enough to 20 overcome the classwide factors and create individualized differences in the outcome 21 of the employment classification issue. 22 The answer to this question is “yes.” Some Transportation Service Providers 23 consist of a single owner/operator driving a single truck, and some consist of hundreds 24 of employees and a large fleet of tractors. The latter group of Providers and the 25 former group of Providers are extremely different from one another under the factors 26 set forth in the previous paragraph. 27 Provider”) who does all his or her work for FedEx very strongly does not appear to be 28 engaged in a distinct occupation or business, where as a Provider with two hundred A single-owner/operator Provider (“solo 16 1 employees who maintains several complex contracts with multiple carriers very 2 strongly does appear to be engaged in a distinct occupation or business. 48 Cal.3d 3 at 351. 4 Similarly, a solo Provider appears to have little opportunity for profit or loss; he 5 or she will make a predetermined amount per line set by FedEx, with any variations in 6 profit or loss tied only to variations in the cost of maintaining the Provider’s vehicle. 7 A large Provider outfit, by contrast, has ample opportunity for profit or loss. Large 8 operators can create efficiencies at scale by, for example, hiring their own staff to 9 service their trucks rather than outsourcing this task. Moreover, large operators have a 10 meaningful choice regarding the firms with which they choose to do business and can 11 choose to contract with firms that pay more competitive rates. This latitude provides 12 large Providers with ample opportunity for profit and loss. 48 Cal.3d at 355. 13 The same is true of the degree of investment in the business. Id. Solo 14 Providers might lease their tractors and pay for expenses as they go, representing a 15 minimal investment in the Provider’s business. By contrast, over time, a very large 16 Provider might invest millions of dollars in its fleet and staff. 17 These considerations are substantial, and they lie at the very heart of the issue 18 of whether individuals serving as Authorized Officers are entitled to have FedEx 19 provide them with the employee protections mandated by the California Labor Code. 20 See Dynamex, 4 Cal. 5th at 932 (affirming Borello test requires “deference to the 21 purposes and intended reach of the remedial statute at issue”). The underlying policy 22 concern is ensuring that California’s laborers are protected by those employing 23 them—in this instance, by having their employers reimburse business expenses. See 24 Cochran, 228 Cal. App. 4th at 1144. This concern is extremely salient in the context 25 of small Providers, who might not have access to credit (in case of deficits) or 26 insurance (in case of major loss) or skilled counsel or other professionals who might 27 help them procure these things. Without reimbursement of business expenses, small 28 Providers risk taking in little, no, or negative revenue, and would appear to have little 17 1 recourse in the event of a loss. By contrast, large Providers who take in millions of 2 dollars in annual revenue would be expected to have reserves from which business 3 expenses could be paid. Moreover, larger Providers have opportunities to create 4 expense-reducing efficiencies, which in turn would free up funds for other irreducible 5 expenses. 6 The Court cannot say that any of the classwide factors so strongly indicate 7 employment (or not) that they overcome or erase the differences created by these 8 observations. 9 2019 WL 3858999, at *13 (C.D. Cal. May 29, 2019) (finding that common questions 10 did not predominate in Borello analysis where “analysis of whether a class member 11 operated a distinct occupation or business” would “turn on the individual business 12 practices of each [class member’s business], such as whether it hired drivers, owned 13 multiple trucks, or simultaneously worked for other businesses” (internal quotation 14 marks removed)). 15 drawing a line in the sand between Providers above and below a certain number of 16 employees, as these individualized inquiries go beyond the mere size of the Provider 17 and reach the unique factual details about each Provider’s business practices. Thus, 18 were the Court to attempt to draw such a line, many Providers would fall along or 19 close to the line, necessitating individualized determinations for each of them. Moreno v. JCT Logistics, Inc., No. EDCV 17-2489 JGB (KKx), Moreover, the Court could not solve this problem by simply 20 After examining “the relationship between the common and individual issues,” 21 the Court finds that Subclass A is not “sufficiently cohesive to warrant adjudication by 22 representation.” Stromberg v. Qualcomm Inc., 14 F.4th 1059, 1067 (9th Cir. 2021) 23 (quoting Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935, 944 (9th Cir. 2009)). 24 With respect to the business expenses claim, individualized determinations 25 predominate the Borello approach to employment classification, and class certification 26 is denied to the extent the business expense claim is founded directly upon the 27 California Labor Code. 28 18 3. 1 Even if the ABC Test is capable of classwide application across Subclass A, individualized damages determinations predominate. 2 3 Corley’s business expenses claim is also raised pursuant to IWC Wage Order 9, 4 meaning that the Dynamex version of the ABC Test also applies in determining 5 employment classification for such claims. However, even if the ABC Test is capable 6 of classwide application across Subclass A2, Corley fails to demonstrate that the 7 damages arising from the business expenses claim can be addressed in a classwide 8 manner, or in an individualized manner in a way that would not predominate over 9 classwide issues. 10 Although “[i]ndividual differences in calculating the amount of damages will 11 not defeat class certification where common issues otherwise predominate,” Castillo 12 v. Bank of Am., NA, 980 F.3d 723, 730 (9th Cir. 2020), Corley more fundamentally 13 fails to show that Authorized Officers are a correct proxy for the individuals that are 14 entitled to business expenses under California law. It is axiomatic that the party who 15 paid for the business expenses should be the one who receives compensation for those 16 business expenses, as the purpose of California’s business expense reimbursement law 17 is to prevent employees from shouldering their employers’ business expenses. See 18 Cochran, 228 Cal. App. 4th at 1144. From this point, the natural assumption is that 19 the Providers’ owners were the ones paying the expenses and that they should 20 therefore be reimbursed. But Corley does not demonstrate that Authorized Officers 21 are the Providers’ owners in all cases, and instead appears to concede to FedEx’s 22 assertion that Authorized Officers are “usually” the Service Provider’s owner. (Opp’n 23 3; see generally Reply.) Moreover, some Service Providers had multiple owners, 24 25 26 27 28 2 The statutory exemptions to the ABC Test, including the Business-to-Business Exemption raised by the parties, would not appear to apply in this context. The statutory exemptions were enacted with or after the enacting of AB 5 and the statutory ABC Test, meaning that no statutory exemption applies before January 1, 2020. Based on this case’s limitations periods, this case invokes the Dynamex version of the ABC Test, which does not come with any exceptions or exemptions. 19 1 meaning that some Authorized Officers were partial owners of their respective Service 2 Providers. 3 Thus, individualized questions predominate over classwide ones. Even if the 4 Court did find that the members of Subclass A were employees, it would still have to 5 conduct an individualized inquiry about every Authorized Officer to determine 6 (1) whether that Authorized Officer is the owner of the Provider or otherwise the 7 proper person to whom business expenses should be reimbursed and (2) if so, which 8 specific categories of business expenses should be reimbursed to that Authorized 9 Officer. For example, for a very large Service Provider that might be entitled to 10 hundreds of thousands or even millions of dollars in business expense 11 reimbursements, the Court finds it highly implausible that a single Authorized Officer, 12 especially one who is not the sole owner of the Provider, has a right to recover the 13 totality of these reimbursements. This is not, as Corley suggests, a simple matter of 14 looking to FedEx’s records; determining which business expenses are reimbursable to 15 an Authorized Officer would require an individualized inquiry into the structure and 16 operation of each Service Provider.3 17 4. Corley’s claims are not typical of those of Subclass A. 18 Moreover, to the extent any Authorized Officers in Subclass A are non-owners 19 or partial owners of their respective Service Providers, the claims of Corley, who fully 20 owned his Service Provider, would not be typical of those of Subclass A. Fed. R. Civ. 21 22 23 24 25 26 27 28 3 Corley waffles somewhat between two different points in attempting to convince the Court that business expenses are calculable on a classwide basis. Corley points out that FedEx has records of when it deducted expenses from various Providers’ settlements. (Reply 6.) While such expenses might ultimately be reimbursable business expenses, they represent only a small fraction of the totality of business expenses at issue (as the record reflects that Providers purchased fuel or other supplies directly from FedEx only a small portion of the time). These incomplete records would not obviate the need for each Provider to present its own expense records for the Court’s review. As each provider is an independent company with its own independent recordkeeping practices, the individualized determination of damages would subsume any classwide efficiencies. Corley otherwise fails to articulate a plausible approach to calculating business expense damages that avoids painstaking individualized proof and calculation. 20 1 P. 23(a)(3). The legal propriety of reimbursement of business expenses to the sole 2 owner of a Service Provider is a fundamentally different question that the propriety of 3 reimbursement of business expenses to an Authorized Officer who is one of many 4 owners of a Provider or not an owner at all. The arguments Corley will make in 5 support of reimbursement of business expenses to himself as a putative employee will 6 apply only indirectly (or not at all) to differently situated Authorized Officers, such 7 that the Court will not be confident that a determination with respect to Corley and the 8 structure of his particular business should apply to all Authorized Officers in 9 Subclass A. For all these reasons, Corley’s business expenses claim is not appropriate for 10 11 class certification, and his Motion is DENIED to this extent. 12 C. INACCURATE WAGE STATEMENTS 13 The third claim Corley presents for certification is his claim for inaccurate wage 14 statements. This claim is brought on behalf of the entire class of individuals who 15 performed work pursuant to a Linehaul Transportation Agreement, which includes 16 both Authorized Officers and any worker directly employed by a Service Provider. Corley’s wage statement claim may be brought under Wage Order 9, section 7, 17 18 or directly pursuant to the California Labor Code.4 19 section 226(a) requires employers to furnish employees with a wage statement, 20 typically semimonthly, containing several enumerated items of information, including 21 the applicable hourly rates and the number of hours worked. 22 employers are subject to penalties calculated based on the number of employees and 23 the number of noncompliant pay periods. Cal. Lab. Code § 226(e)(1). Similarly, 24 Wage Order 9, section 7(B) requires employers to furnish a semimonthly itemized 25 wage statement. Cal. Code Regs. Tit. 8, § 11090. California Labor Code Noncomplying 26 27 28 4 The FAC does not make clear that Corley’s wage statement claim is also brought pursuant to Wage Order 9. If it is not, then the Borello test applies to the entire claim and is unworkable for the reasons discussed in the previous section. The Court assumes for the purpose of analysis that the wage statement claim is also brought under Wage Order 9 and nevertheless reaches the same result. 21 1 To the extent Corley’s wage statement claim is brought under the Labor Code, 2 the Borello test applies and raises fatal concerns regarding predominance, as discussed 3 previously. 4 To the extent either party argues the ABC Test (that is, the version of the ABC 5 Test as held and applied in Dynamex) applies to classify any or all members of the 6 class, this argument is not well taken. Corley emphasizes throughout his moving 7 papers that he is not bringing this action under a joint employer theory, but the 8 application of the Dynamex version of the ABC Test is not dependent upon the mere 9 decision to frame one’s allegations in terms of a joint employer theory. Instead, under 10 Salazar v. McDonald’s Corp., 944 F.3d 1024 (9th Cir. 2019), the Dynamex version of 11 the ABC Test does not apply when the plaintiff is already directly employed by 12 another entity, because in such situations, no party is arguing that the plaintiffs are 13 independent contractors. 14 Dynamex rather narrowly by applying it only to cases where a worker was initially 15 expressly classified and treated by the defendant as an independent contractor. That is 16 not the case here; the record as presented by both sides generally indicates that those 17 who worked for Transportation Service Providers did so as employees of the Provider. 18 Moreover, nothing in the record suggests that either party ever classified any 19 employees of a Transportation Service Provider as independent contractors of FedEx. 20 Accordingly, under Salazar, and for the purpose of the wage statement claim, the 21 Dynamex version of the ABC Test is inapplicable to all those who were employees of 22 a Service Provider.5 Id. at 1032. Thus, Salazar directs courts to construe 23 This leaves the Borello test as employment classification test to be applied to 24 class members who were employees of a Service Provider, which appears to constitute 25 the strong majority of the class. But, for all the same reasons discussed in the context 26 27 28 5 This analysis does not necessarily apply to the business expenses claim, as the record does not indicate that most or all members of Subclass A (that is, all Authorized Officers) were employees of their respective Service Providers. 22 1 of the business expenses claim, the Borello framework presents insurmountable 2 concerns regarding class action predominance. For these reasons, Corley’s wage 3 statement claim is not certifiable, and the Court DENIES the Motion to this extent. 4 D. UNFAIR BUSINESS PRACTICES (UCL) 5 The final claim Corley presents for certification is for unfair business practices 6 pursuant to California’s unfair competition law, California Business and Professions 7 Code section 17200. Corley asserts that this claim is “wholly derivative.” (Mot. 23.) 8 That being the case, certification of this claim is inappropriate for the reasons stated 9 above. The Court DENIES the Motion with respect to Corley’s UCL claim. V. 10 11 12 CONCLUSION For the foregoing reasons, Plaintiff Kawaski Corley’s Motion to Certify Class is DENIED WITH PREJUDICE. (ECF No. 69.) 13 14 IT IS SO ORDERED. 15 16 June 2, 2022 17 18 19 ____________________________________ OTIS D. WRIGHT, II UNITED STATES DISTRICT JUDGE 20 21 22 23 24 25 26 27 28 23

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