Espejo v. Copley Press, Inc.

• Decision Date: 07 July 2017
• Docket Number: D065397
• Citation: 221 Cal.Rptr.3d 1,13 Cal.App.5th 329
• Court: California Court of Appeals Court of Appeals
• Parties: Liliana ESPEJO et al., Plaintiffs and Appellants, v. The COPLEY PRESS, INC., Defendant and Appellant.

13 Cal.App.5th 329

221 Cal.Rptr.3d 1

Liliana ESPEJO et al., Plaintiffs and Appellants,

v.The COPLEY PRESS, INC., Defendant and Appellant.

D065397

Court of Appeal, Fourth District, Division 1, California.

Filed July 7, 2017

Cooley, Steven M. Strauss, San Diego, Seth A. Rafkin, Summer J. Wynn and Heather C. Meservy for Defendant and Appellant.

Callahan & Blaine, Daniel J. Callahan, Michael J. Sachs, Jill A. Thomas, Santa Ana, and Scott D. Nelson ; Cadena Churchill and Raul Cadena, San Diego, for Plaintiffs and Appellants.

McCONNELL, P.J.

Defendant The Copley Press, Inc., owner of the San Diego Union–Tribune newspaper (collectively UT), appeals from a second amended and restated judgment (the judgment) after a court trial in this class action brought by and on behalf of persons whom UT formerly engaged as newspaper home delivery carriers (plaintiffs or carriers). The main issue at trial was whether the carriers were employees of UT or independent contractors. The trial court decided the carriers were employees.

UT contends (1) the plaintiff class must be decertified because the class representatives were inadequate; (2) the court committed reversible error by not limiting the trial to certified issues and by granting plaintiffs' motion to amend their second amended complaint according to proof; (3) the class should be decertified and the judgment reversed because the court did not and could not manage individualized issues; (4) the court's order bifurcating plaintiffs' cause of action under Business and Professions Code section 17200¹ to be tried first deprived UT of its right to a jury trial; (5) the class award must be reversed because UT paid carriers enhanced compensation that reimbursed them for expenses the court awarded; (6) the amounts the court awarded were not restitution; (7) the court erred in awarding plaintiffs prejudgment interest; (8) substantial evidence does not support the court's determination that the carriers were employees rather than independent contractors; (9) the court erred in awarding plaintiffs attorney fees under Code of Civil Procedure section 1021.5 ;² (10) even if attorney fees could be awarded, the court erred by not substantially reducing them for limited success; and (11) the court erred by adopting plaintiffs' lodestar amount in awarding attorney fees.

Plaintiffs appeal the portion of the judgment awarding them attorney fees, contending (1) the court abused its discretion in not awarding an enhancement of the lodestar amount of their fees; and (2) the court erred in ruling they abandoned their cause of action for damages under Labor Code section 2802³ and therefore could not recover attorney fees under that statute. We affirm in part and reverse in part the judgment with directions to redetermine the class award, attorney fees, and prejudgment interest as explained below.

FACTUAL AND PROCEDURAL BACKGROUND

The trial court (Judge Lisa Foster) certified a class consisting of "[t]hose persons who signed contracts directly with [UT] as newspaper home [d]elivery carriers of the San Diego Union–Tribune newspaper in the [S]tate of California between January 2005 and the present."⁴ The carriers each signed a contract with UT entitled "Independent Contractor Distribution Agreement Home Delivery." The contract provided that the carrier owned and operated an independent business enterprise and was not an employee, and that the carrier and UT "fully and freely" intended to create an independent contractor relationship under the contract.

The contract required the carrier to deliver each newspaper "in a clean, dry, undamaged and readable condition at a time and location" that met the subscriber's reasonable requests and expectations. The carrier agreed to complete deliveries by 5:30 a.m. on weekdays and 6:30 a.m. on Saturdays, Sundays, and holidays. The carrier could not directly or indirectly engage in the delivery, sale, or distribution of any other daily or Sunday newspaper in the San Diego area without UT's written consent.

UT paid carriers on a per-piece basis and provided for "[i]nsert [f]ees"—i.e., payment for putting inserts into newspaper—and fees for delivering publications other than the San Diego Union–Tribune, such as the USA Today and the Wall Street Journal. UT tracked subscriber complaints against a carrier by documenting the number of complaints per thousand deliveries (CPT) against the carrier. The contract provided that CPT's "regarding missed or late deliveries; or wet, stolen or damaged newspapers must not exceed 1.0...." UT charged the carrier $4.00 for more than one CPT and $8.00 for more than two CPT's.

The contract required the carriers to obtain accident insurance to cover injury to the carrier or his or her substitutes or helpers, and bonding in the amount of $1,200 through a bonding company acceptable to UT. The minimum bonding for each route was $600, and the carrier could elect to obtain bonding with Wilson Gregory Agency, Inc., for $1.00 per month for each $600 in coverage, which would result in a monthly bond deduction of $2.00 from the carrier's pay.

Carriers picked up the newspapers they were to deliver each morning and "mail" (written communications, including delivery instructions) from UT at one of UT's regional distribution centers. The carriers arrived at the distribution centers between 2:00 and 4:00 a.m. and spent about 45 minutes to an hour assembling their newspapers and preparing them for delivery. The contract required the carriers to assemble their papers at the distribution centers.⁵ The carrier agreed to pay UT a distribution center fee and authorized UT to debit from the carrier's account "[i]nserting [f]ees" to compensate a third party for performing certain inserting services (putting inserts into the newspapers for the carriers).

Plaintiffs filed their original class action complaint in January 2009. Plaintiffs' second amended complaint, the operative complaint at trial, named UT and various other entities as defendants and included causes of action under the Labor Code for (1) failure to pay minimum wage and overtime wages; (2) failure to provide meal breaks or compensation in lieu thereof; (3) failure to provide rest periods or compensation in lieu thereof; (4) failure to reimburse for reasonable business expenses ( § 2802 );⁶ (5) unlawful deductions from wages; (6) failure to provide itemized wage statements; and (7) failure to keep accurate records. The second amended complaint also included an eighth cause of action under section 17200 for unfair business practices.

In 2011, plaintiffs filed a motion to certify a class defined as "[a]ll persons presently or formerly engaged by [UT] as newspaper home delivery carriers of The San Diego Union–Tribune newspaper in the [S]tate of California during the class period, whether engaged directly by [UT] or indirectly through its agents." UT (and other defendants) filed a motion to strike the class allegations from the second amended complaint and opposition to plaintiffs' motion to certify the class.

The trial court granted in part and denied in part plaintiffs' motion for class certification and UT's motion to strike class allegations. With respect to plaintiffs' fourth cause of action and sixth through eighth causes of action only, the court certified a class consisting of "[t]hose persons who signed contracts directly with [UT] as newspaper home [d]elivery carriers of The San Diego Union–Tribune newspaper in the [S]tate of California between January 2005 and the present." The court denied plaintiffs' motion for certification and "concurrently grant[ed] the motion to strike the class allegations, with respect to the large class for whom certification was sought by plaintiffs and with respect to the first, second, third and fifth causes of action." The court excluded from the class persons who contracted with third-party distributors to deliver The San Diego Union–Tribune rather than with UT directly.

In September 2012, plaintiffs filed a motion to bifurcate the trial, requesting that their eighth cause of action under section 17200 for unfair business practices (an equitable claim) be tried before their fourth cause of action under section 2802 for reimbursement of business expenses (a legal claim). In that motion, plaintiffs conceded their sixth and seventh causes of action were time-barred because the limitations period for obtaining penalties under those causes of action had expired when plaintiffs filed their original complaint in 2009. Consequently, the fourth cause of action and eighth cause of action were the only remaining causes of action to be tried.

Plaintiffs argued that equitable claims generally should be tried before legal claims because doing so might dispense with the need to try the legal claims. Specifically, plaintiffs noted that the issue of whether they were employees of UT or independent contractors was the foundational issue under both remaining causes of action, and a determination that they were independent contractors would be dispositive of both causes of action. The court (Judge Gonzalo Curiel) granted the motion to bifurcate and ordered that plaintiffs' equitable cause of action for unfair business practices would be tried first as a bench trial before the trial of their legal claim for reimbursement of expenses under section 2802.

In January 2014, plaintiffs' counsel sent UT's counsel a letter stating: "Please be advised that it is our intention to seek all of the class members' damages in the ... section 17200 cause of action. This includes, but is not limited to, mileage reimbursement, insurance, bonds, warehouse rent, bags and rubber bands, insert charges, carrier collect and complaint charges. We bring this to your attention since it was previously our intention to seek the mileage damages in the ... section 2802 claim. However, since mileage reimbursement is a vested right once the miles are driven, it is also a recoverable item of damage under the section 17200 claim...