Leyva v. Medline Indus. Inc.

• Decision Date: 28 May 2013
• Docket Number: No. 11–56849.,11–56849.
• Citation: 716 F.3d 510
• Parties: Jesus LEYVA, on behalf of himself and all other members of the general public similarly situated, Plaintiff–Appellant, v. MEDLINE INDUSTRIES INC., a California corporation, Defendant–Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

716 F.3d 510

Jesus LEYVA, on behalf of himself and all other members of the general public similarly situated, Plaintiff–Appellant,

v.MEDLINE INDUSTRIES INC., a California corporation, Defendant–Appellee.

No. 11–56849.

United States Court of Appeals,Ninth Circuit.

Argued and Submitted Dec. 7, 2012.

Filed May 28, 2013.

David M. deRubertis (argued) and Kimberly Y. Higgins, The deRubertis Law Firm, Studio City, CA; N. Nick Ebrahimian and Jordan Bello, Lavi & Ebrahimian LLP, Beverly Hills, CA, for Plaintiff–Appellant.

Steven A. Groode (argued) and Matthew J. Sharbaugh, Littler Mendelson, P.C., Los Angeles, CA, for Defendant–Appellee.

Appeal from the United States District Court for the Central District of California, R. Gary Klausner, District Judge, Presiding. D.C. No. 5:11–cv–00164–RGK–MAN.

Before: HARRY PREGERSON, RICHARD A. PAEZ, and ANDREW D. HURWITZ, Circuit Judges.

OPINION

PREGERSON, Circuit Judge:

Plaintiff–Appellant Jesus Leyva appeals the district court's denial of class certification. Plaintiff seeks to represent approximately 538 employees of Medline Industries, Inc. (Medline). The complaint asserts claims against Medline for violating California labor laws.

I. Allegations of Putative Class Members

Medline manufactures and delivers medical products. The putative class members are current and former hourly employees in Medline's three California distribution warehouses. Because Medline's warehouse employees earn low wages, the amount each could claim for unpaid wages is relatively low—for example, Plaintiff's individual claim is for less than $10,000.

Plaintiff alleges that Medline violated the California Labor Code, California Industrial Commission Wage Order 1–2001, and California's Unfair Business Practices Law. Plaintiff seeks to certify separate sub-classes to pursue the following four claims ¹:

1. Rounding violation: Medline rounded its hourly employees' start times in twenty-nine minute increments. For example, workers who clocked-in between 7:31 a.m. and 8:00 a.m. would be paid only from 8:00 a.m. onward even though they began work beforehand. Putative class members would clock-in before their scheduled start times because they had to complete tasks such as inspecting their machines and picking up scanners before they could begin their duties. Plaintiff alleges that the rounding practices resulted in employees performing unpaid work before their scheduled start times, in violation of California Labor Code §§ 510 and 1197, and that they are entitled to compensation pursuant to California Labor Code §§ 1194, 1194.2, and 1197.1.

2. Bonus violation: Medline allegedly excluded nondiscretionary bonuses from employees' overtime rates, thus lowering overtime pay. Plaintiff claims that this practice violated California law, citing to Marin et al. v. Costco Wholesale Corp., 169 Cal.App.4th 804, 807, 87 Cal.Rptr.3d 161 (2008).

3. Waiting time penalties: Plaintiff alleges that because of the time rounding and bonus violations, Medline owes its employees penalties under California Labor Code § 203, which provides that an employer who willfully fails to pay any wages due to a terminated employee owes waiting time penalties.

4. Wage statement penalties: Plaintiff alleges that because of the rounding and bonus violations, Medline's payroll records did not accurately record the hours employees worked and the wages they earned. California Labor Code § 226(e)(1) provides that an employee can recover up to four thousand dollars in damages, and additional civil penalties, for such violations.

II. Class Certification Requirements and the District Court's Ruling

To be certified, the putative class and sub-classes must meet the four threshold requirements of Federal Rule of Civil Procedure 23(a): numerosity, commonality, typicality, and adequacy of representation. Fed.R.Civ.P. 23(a); see also Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019 (9th Cir.1998). Moreover, the proposed class must satisfy the requirements of Rule 23(b), which defines three different types of classes. Plaintiff argues that the proposed subclasses meet the requirements of Rule 23(b)(3), which requires that “questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” Fed.R.Civ.P. 23(b)(3).

The district court found that “[t]he putative classes appear to meet the requisites of Rule 23(a),” including the “rigorous” commonality standard established in Wal–Mart Stores, Inc. v. Dukes, ––– U.S. ––––, 131 S.Ct. 2541, 2551, 180 L.Ed.2d 374 (2011) (requiring that class members' claims “depend upon a common contention ... [whose] truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.”). However, the district court nonetheless denied class certification, holding that the putative class and subclasses did not meet the requirements of Rule 23(b)(3) for two reasons.First, the district court concluded that common questions did not predominate over individual questions because “although Plaintiff appears to have established that common questions exist with respect to Defendant's liability under state law, the damages inquiry will be highly individualized.” The district court explained:

Each of the 500 putative class members are allegedly entitled to different damage awards for being ‘short-changed’ by the rounding policy and/or the bonus policy. Because evaluating each putative class member's claims would require fact-specific, individualized inquiries into the amount of pay to which he or she was entitled, the Court finds that individual questions predominate over commons questions in this case. Therefore, the proposed classes are not sufficiently cohesive to warrant adjudication by representation.

Second, the district court concluded that because of the size of the class, under Rule 23(b)(3) “alternative methods for resolving this dispute are superior because of the likely difficulties in managing this case as a class action.” The district court did not explain which methods would be superior. Instead, the court reasoned that “if these four classes were certified, the Court would need to determine the extent to which each putative class member lost wages and, consequently, suffered damages. Since there are more than 500 putative class members, this process would tax the Court's resources.” The court also noted that it would have to determine “which of several bonuses offered by Medline to different putative class members were ‘nondicretionary’ ” and that “employees within the bonus group each received different bonuses at different pay periods.”

III. The District Court Abused its Discretion

We review the district court's denial of class certification for abuse of discretion. Knight v. Kenai Peninsula Borough Sch. Dist., 131 F.3d 807, 816 (9th Cir.1997). We apply a two-step test to determine whether a district court abused its discretion. United States v. Hinkson, 585 F.3d 1247, 1263 (9th Cir.2009). First, we “look to whether the trial court identified and applied the correct legal rule to the relief requested. Second, we look to whether the trial court's resolution of the motion resulted from a factual finding that was illogical, implausible, or without support in inferences that may be drawn from the facts in the record.” Id.

We find that the district court abused its discretion in concluding that (1) individual questions predominated over common questions, and (2) class certification was not superior to other means of resolving the dispute.

A. Predominance of Common Questions

The district court applied the wrong legal standard by concluding that individual questions predominate over common questions. The only individualized factor that the district court identified was the amount of pay owed. “In this circuit, however, damage calculations alone cannot defeat certification.” Yokoyama v. Midland Nat'l Life Ins. Co., 594 F.3d 1087, 1094 (9th Cir.2010).

The district court denied certification because for each sub-class “the damages inquiry will be highly individualized.” But damages determinations are individual in nearly all wage-and-hour class actions. Brinker Rest. Corp. v. Superior Court, 53 Cal.4th 1004, 139 Cal.Rptr.3d 315, 273 P.3d 513, 546 (2012) (“In almost every class action, factual determinations of damages to individual class members must be made. Still we know of no case where this has prevented a court from aiding the class to obtain its just restitution. Indeed, to decertify a class on the issue of damages or restitution may well be effectively to sound the death-knell of the class action device.”) (internal citation and quotation marks omitted). Thus, “[t]he amount of damages is invariably an individual question and does not defeat class action treatment.” Blackie v. Barrack, 524 F.2d 891, 905 (9th Cir.1975); see also Yokoyama, 594 F.3d at 1089 (“The potential existence of individualized damage assessments ... does not detract from the action's suitability for class certification.”). In deciding otherwise, the district court abused its discretion by applying the wrong legal standard. See Hinkson, 585 F.3d at 1263.

Indeed, the Supreme Court clarified in Dukes that “individualized monetary claims belong in Rule 23(b)(3).” 131 S.Ct. at 2558. Thus, the presence of individualized damages cannot, by itself, defeat class certification under Rule 23(b)(3). It is true that the plaintiffs must be able to show that their damages stemmed from the defendant's actions that created the legal liability. Comcast Corp. v. Behrend, ––– U.S. ––––, 133 S.Ct. 1426, 1435, 185 L.Ed.2d 515 (2013) (“The first step in a damages study is the translation of the legal theory of the harmful event into an analysis of the economic impact of that event.”) (internal quotation marks omitted). In Comcast, the Supreme Court reversed an order...