Fleming v. Matco Tools Corp.
| Decision Date | 21 February 2021 |
| Docket Number | Case No. 19-cv-00463-WHO |
| Court | U.S. District Court — Northern District of California |
| Parties | JOHN FLEMING, Plaintiff, v. MATCO TOOLS CORPORATION, et al., Defendants. |
Re: Dkt. No. 58
Plaintiff John Fleming moves for class certification on his wage and hour claims. Dkt. No. 58 ("Mot."). Matco opposes the motion, arguing that Fleming has failed to meet the typicality and adequacy requirements of Rule 23(a), that common questions do not predominate under Rule 23(b), and that class treatment is not superior. Dkt. No. 67 ("Opp."). As discussed in detail below, Fleming's motion is GRANTED IN PART and DENIED IN PART. Class certification is granted on the threshold question of misclassification; Matco cannot satisfy the "ABC" test under Dynamex Operations W. v. Superior Court, 4 Cal. 5th 903 (2018), which I find applies here, nor show lack of control under S.G. Borello & Sons, Inc. v. Dep't of Indus. Relations, 48 Cal. 3d 341 (1989), if the ABC test does not apply. Fleming's claims for expense reimbursement, wage statement and UCL (as to the wage statement claim) are also certified. Plaintiffs have not shown that common questions predominate for the overtime, meal and rest break, waiting time, and wage deduction claims; certification is denied for them.
Matco manufactures and distributes professional quality mechanic's tools and service equipment. Compl.¶ 6. Matco's products are distributed primarily by authorized franchisee distributors, who enter into Matco Distributorship Agreements ("DA"s) and are classified as independent contractors by Matco. Dkt. No. 67-1 ("Swanson Decl.") ¶ 3.
Matco franchisees pay an initial fee to Matco and agree to operate their distributorships in line with the requirements outlined in their DAs. Id. Franchisees have the right and obligation under their DAs to distribute Matco brand tools using the Matco system. Id. ¶ 3. New franchisees are required to attend Matco's "New Distributor Training Program" in Ohio and pay for travel and hotel costs associated with their stay. Dkt. No. 58-9, ("DA")1 ¶¶ 3.7, 4.1. The training program includes a minimum of sixty hours of classroom training time as well as eighty hours of field training with a regional trainer over a six-week period. Id. ¶¶ 4.1-42.
Franchisees purchase Matco products from Matco at wholesale prices and resell them at retail prices set by the franchisee. Id. ¶ 6.2. New franchisees purchase a preset "new distributor starter inventory" from Matco, after which they choose which products to purchase. Id. ¶ 6.3. Franchisees are obligated to lease or purchase a Matco Truck with "MATCO TOOLS®" branding, which acts as their Matco "mobile store." DA ¶ 3.6. Franchisees agree to "only sell Products and other merchandise approved by Matco" and not to sell products "competitive with" Matco products without written permission. DA ¶ 3.1. They are given a "list of calls" and "potential customers" and are instructed to operate their mobile stores only at the locations identified as "potential stops along the Distributor's proposed route." DA ¶ 1.2. They are obligated, under the DAs, to "make personal sales calls to at least 80%" of their potential customers each week. DA ¶ 3.4.
Franchisees are required to license and use the Matco Distributor Business System Software. Id. ¶ 3.7. They must also allow Matco to inspect their Matco Truck during regular business hours and correct any identified deficiencies in their operations. Id. ¶ 3.1. They are required to wear Matco branded uniforms while operating their mobile stores. DA ¶ 3.6. Although they set their own prices for retail sales, they must comply with any Matco-institutedsales or marketing programs, such as coupons, gift cards, gift certificates, and incentives. Id. ¶ 6.2. They must also attend at least 80% of Matco-scheduled district sales meetings for the franchisee's district in any 12-month period. Id. ¶ 3.7.
Apart from the specific requirements outlined in the DAs, franchisees are "responsible for managing all aspects of the Matco Business, including sales, collection of accounts receivable, purchases, inventory management, and hiring of Operators, if permitted by Matco." Id. ¶ 3.12. Matco does not track the time or hours that franchisees work and does not require them to track their time. Swanson Decl. ¶ 6. It does not reimburse distributors for any expenses incurred as part of running their Matco franchise, as Matco considers them to be operating their own business. Dkt. No. 58-4, "Matco 30(b)(6) Depo Vol. 2" at 277:20-278:10.
Plaintiff Fleming was a franchisee and distributor for Matco from July of 2012 through December of 2018. Compl. ¶ 9. During part of this period he owned a second Matco franchise that his son operated. Dkt. No. 67-7, Ex. 1 "Fleming Depo" 24:13-23. Fleming operated his franchise through an S corporation, not as a sole proprietorship, called John's Tools. Id. 30:11-17, 62:11-13, 127:24-128:20. He had an accountant who managed payroll and taxes for the franchises. Id. 223:13-24, 228:12-229:11. In 2015, Fleming's son stopped operating his franchise and Fleming hired a former Matco district manager to make collections on that route. Id. 136:6-139:10. Fleming reduced his list of calls in 2016 and, in doing so, signed a revised DA in which he released any existing claims against Matco. Id. 85:9-17, 114:11-115:17, 229:17-230:21. He terminated his franchise and DA in December 2018. Swanson Decl. ¶ 10.
In his lawsuit, Fleming claims that, by allegedly misclassifying him and similarly situated distributors as independent contractors, Matco has sought to avoid various duties and obligations owed to employees under California's Labor Code and Industrial Welfare Commission wage orders. These included: the duty to indemnify employees for all expenses and losses necessarily incurred in connection with their employment; the duty to pay overtime compensation for hours worked in excess of eight hours in a day or forty hours a week; the duty to provide off-duty meal periods; the duty to authorize and permit paid rest periods; the duty to furnish accurate wage statements; the duty to pay employees all wages owed upon termination; and unlawful collectionand receipt of earned wages. Id. ¶ 6.
Fleming seeks to certify the following class under Rule 23(b)(3):
All persons who signed franchise Distributor Agreements in the State of California and personally operated a Mobile Store at the time within four years preceding the filing of this action.
Class actions are governed by Rule 23 of the Federal Rules of Civil Procedure. Plaintiffs bear the burden of showing that they have met each of the four requirements of Rule 23(a) and at least one subsection of Rule 23(b). Berger v. Home Depot USA, Inc., 741 F.3d 1061, 1067 (9th Cir. 2014) (citing Zinser v. Accufix Research Inst., Inc., 253 F.3d 1180, 1186 (9th Cir. 2001)). The plaintiff "must actually prove - not simply plead - that their proposed class satisfies each requirement of Rule 23, including (if applicable) the predominance requirement of Rule 23(b)(3)." Halliburton Co. v. Erica P. John Fund, Inc., 134 S.Ct. 2398, 2412 (2014) (citing Comcast Corp v. Behrend, 133 S.Ct. 1426, 1431-32 (2013); Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541, 2551-52 (2011)).
The court's "class certification analysis must be rigorous and may entail some overlap with the merits of the plaintiff's underlying claim." Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, 133 S.Ct. 1184, 1194 (2013) (quoting Dukes, 131 S.Ct. at 2551 (internal quotation marks omitted)). These analytical principles govern both Rule 23(a) and 23(b). Behrend, 133 S.Ct. at 1342. However, "Rule 23 grants courts no license to engage in free-ranging merits inquiries at the certification stage." Amgen, 133 S.Ct. at 1194-95. "Merits questions may be considered to the extent - but only to the extent - that they are relevant to determining whether Rule 23 prerequisites for class certification are satisfied." Id.
Under Rule 23(a), the class may be certified only if: (1) the class is so numerous that joinder of all members is impracticable, (2) questions of law or fact exist that are common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class. See Fed. R. Civ. P. 23(a). A plaintiff must also establish that one or more of the groundsfor maintaining the suit are met under Rule 23(b): (1) that there is a risk of substantial prejudice from separate actions; (2) that declaratory or injunctive relief benefitting the class as a whole would be appropriate; or (3) that common questions of law or fact predominate and the class action is superior to other available methods of adjudication. See Fed. R. Civ. P. 23(b).
Rule 23(a)(1) requires that "the class is so numerous that joinder of all members is impracticable." Fed. R. Civ. P. 23(a)(1). The party seeking certification "do[es] not need to state the exact number of potential class members, nor is a specific number of members required for numerosity." In re Rubber Chemicals Antitrust Litig., 232 F.R.D. 346, 350 (N.D. Cal. 2005). However, courts within the Ninth Circuit generally agree that numerosity is satisfied if the class includes forty or more members. Villalpando v. Exel Direct Inc., 303 F.R.D. 588, 605-06 (N.D. Cal. 2014); In re Facebook, Inc., PPC Adver. Litig., 282 F.R.D. 446, 452 (N.D. Cal. 2012).
Plaintiffs have adequately established numerosity. They state that there were 288 distributors operating during the Class Period and that most of these distributors were franchisees operating their own route. Mot. at 11-12. Matco does not dispute that the proposed class is sufficiently numerous under Rule 23(a)(1).
The "commonality"...
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