Bowerman v. Field Asset Servs., Inc.

• Decision Date: 05 July 2022
• Docket Number: s. 18-16303,18-17275
• Citation: 39 F.4th 652
• Parties: Fred BOWERMAN; Julia Bowerman, on behalf of themselves and all others similarly situated, Plaintiffs-Appellees, v. FIELD ASSET SERVICES, INC.; Field Asset Services, LLC, n/k/a Xome Field Services, LLC, Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

39 F.4th 652

Fred BOWERMAN; Julia Bowerman, on behalf of themselves and all others similarly situated, Plaintiffs-Appellees,

v.FIELD ASSET SERVICES, INC.; Field Asset Services, LLC, n/k/a Xome Field Services, LLC, Defendants-Appellants.

Nos. 18-16303

18-17275

United States Court of Appeals, Ninth Circuit.

Argued and Submitted July 20, 2021

Submission Vacated September 23, 2021

Resubmitted June 23, 2022 San Francisco, California

Filed July 5, 2022

Frank G. Burt (argued) and Brian P. Perryman, Faegre Drinker Biddle & Reath LLP, Washington, D.C.; Robert G. Hulteng and Aurelio J. Pérez, Littler Mendelson P.C., San Francisco, California; Barrett K. Green, Littler Mendelson P.C., Los Angeles, California, for Defendants-Appellants.

Monique Olivier (argued), Olivier Schreiber & Chao LLP, San Francisco, California; Thomas E. Duckworth, Duckworth Peters LLP, San Francisco, California; James E. Miller, Shepherd Finkelman Miller & Shah LLP, Chester, Connecticut; for Plaintiffs-Appellees.

Before: William A. Fletcher, Mark J. Bennett, and Bridget S. Bade, Circuit Judges.

BENNETT, Circuit Judge:

Defendant-Appellant Field Asset Services, Inc. ("FAS")¹ appeals the certification of a class of 156 individuals who personally performed work for FAS, the Plaintiffs-Appellees. It also appeals the final judgment for eleven class members under Federal Rule of Civil Procedure 54(b), after the district court granted partial summary judgment to all the class members as to liability. Finally, FAS appeals the accompanying interim award of more than five million dollars in attorneys' fees. We have jurisdiction pursuant to 28 U.S.C. § 1291 and reverse and remand on all three issues.

I. FACTS AND PROCEDURAL HISTORY

A. FAS's Business Model

FAS is in the business of pre-foreclosure property preservation for the residential mortgage industry. But FAS, itself, does not perform pre-foreclosure property-preservation services for its clients. Rather, it contracts with vendors who perform those services. Some vendors are sole proprietorships; others are corporations. Vendors have varying numbers of employees, from at most a few to up to sixty-five. Some work almost exclusively for FAS; others perform work for multiple companies, including FAS's clients and competitors.

FAS exercises some control over the vendors' completion of their work. It requires that jobs be completed within seventy-two hours; provides detailed instructions for particular tasks; and imposes insurance, photo documentation, pricing, and invoicing requirements through its Vendor Qualification Packets ("VQPs") and work orders. It offers training, although the parties dispute whether the training is mandatory. And FAS monitors the vendors' job performance through vendor scorecards and Approved Vendor Quality Policies ("AVQPs"), which implement a discipline scale for vendor noncompliance with FAS's or FAS's clients' instructions. FAS classifies all its vendors as independent contractors.

B. The Initiation of the Lawsuit and Class Certification

Named Plaintiffs Fred and Julia Bowerman² sued in 2013, seeking damages and injunctive relief. Fred Bowerman was the sole proprietor of BB Home Services, which contracted with FAS as a vendor. The operative complaint alleged that FAS willfully misclassified Bowerman and members of the putative class as independent contractors rather than employees, resulting in FAS's failure to pay overtime compensation and to indemnify them for their business expenses.

The complaint also sought class certification under Federal Rule of Civil Procedure 23(b)(3), which the district court granted for a class defined as:

All persons who at any time from January 7, 2009 up to and through the time of judgment (the "Class Period") (1) were designated by FAS as independent contractors; (2) personally performed property preservation work in California pursuant to FAS work orders; and (3) while working for FAS during the Class Period, did not work for any other entity more than 30 percent of the time. The class excludes persons who primarily performed rehabilitation or remodel work for FAS.

The parties later agreed to fix the class period as beginning on January 7, 2009, and ending on December 20, 2016. FAS argued that the proposed class failed Rule 23(b)(3)'s predominance requirement because of the need for individualized damages hearings if liability were found. The district court rejected this argument, quoting our decision in Leyva v. Medline Industries Inc. , 716 F.3d 510 (9th Cir. 2013), for the proposition that "[t]he presence of individualized damages cannot, by itself, defeat class certification under Rule 23(b)(3)." Id. at 514.

C. Summary Judgment

In March 2017, the district court granted partial summary judgment in favor of the class members, finding that they had been misclassified as independent contractors and that as a result, FAS was liable to them for failing to pay overtime and business expenses. In making that determination, the district court relied on California's common law test for distinguishing between employees and independent contractors, as outlined in S.G. Borello & Sons, Inc. v. Department of Industrial Relations , 48 Cal.3d 341, 256 Cal.Rptr. 543, 769 P.2d 399 (1989). Under Borello , "the principal test of an employment relationship is whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired." Id. at 548, 769 P.2d at 404 (citation and alteration omitted). But even though "the right to control work details is the ‘most important’ or ‘most significant’ consideration, ... several ‘secondary’ indicia of the nature of a service relationship" also bear on the employee and independent contractor distinction. Id. For example, Borello noted that "strong evidence in support of an employment relationship is the right to discharge at will, without cause." Id. (citation and alteration omitted). It also listed the following as secondary indicia of an employment versus independent contractor relationship:

(a) whether the one performing services is engaged in a distinct occupation or business;

(b) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;

(c) the skill required in the particular occupation;

(d) whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work;

(e) the length of time for which the services are to be performed;

(f) the method of payment, whether by the time or by the job;

(g) whether or not the work is a part of the regular business of the principal; and

(h) whether or not the parties believe they are creating the relationship of employer-employee.

Id. Borello explained that "[g]enerally, the individual factors cannot be applied mechanically as separate tests; they are intertwined and their weight depends often on particular combinations." Id. (citation and alteration omitted).

Applying this test, the district court granted partial summary judgment on the misclassification issue because it was "convinced that the overwhelming evidence on the most important factor of the [ Borello ] test"—that is, control—"tip[ped] the scales clearly in favor of finding an employee relationship." In particular, the district court found that "[n]o reasonable juror could review the Vendor Packets, the work orders, the trainings, the Vendor Profiles, the discipline, and the Vendor scorecards, and conclude [that] any of the Vendors are independent contractors."

Despite its conviction that the control factor supported the class, the district court's analysis of Borello 's secondary factors was materially different. The district court stated that if it "ignored the right to control analysis, and focused solely on the secondary factors, [it] would not grant summary judgment." In fact, the district court found that many of the secondary factors indicated independent contractor status, including the parties' intent to create an independent contractor relationship, the class members' opportunity for profit or loss, and the class members' employment of assistants. Several of the other secondary factors implicated genuine disputes of material fact.³

But the district court found that FAS's "right to control swamp[ed] [the secondary] factors in importance, and [some] secondary factors favor[ed] plaintiffs' argument that [they] are employees." Thus, the district court granted partial summary judgment to the class on the misclassification issue. The district court also granted partial summary judgment to the class on their overtime and expense reimbursement claims, which were derivative of the misclassification claim. In doing so, the district court relegated the issues of "whether a particular [class member] worked overtime on a specific day" (or ever), and "whether a specific expense" (or any) "was reasonable and necessary" to the damages phase of the trial, rather than the liability phase.

D. The Bellwether Jury Trial

In July 2017, the district court held a bellwether jury trial to determine damages for Named Plaintiff Fred Bowerman and ten of the 156 class members.⁴ The trial lasted eight days, as the class members' damages were neither evident from any records detailing their overtime hours and reimbursable expenses, nor calculable by any common method. After the bellwether trial, FAS filed a second motion for class decertification, which the district court construed as a motion for leave to file a motion for reconsideration. Although the district court denied the motion, it acknowledged the difficulty of calculating every class member's damages on an individualized basis with no method for doing so other than the class members' individualized testimony, noting that "[t]he damages phase of this class action [will be] far messier than promised by plaintiffs' counsel when" the case was certified.⁵

E. Appeal and Stay of Proceedings After t...