Luiken v. Domino's Pizza, LLC

• Decision Date: 04 February 2013
• Docket Number: No. 12–1216.,12–1216.
• Parties: Matt LUIKEN; Jon Sandquist, on behalf of themselves, all others similarly situated, and the Proposed Minnesota Rule 23 Class, Plaintiffs–Appellees v. DOMINO'S PIZZA, LLC, Defendant–Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

705 F.3d 370

Matt LUIKEN; Jon Sandquist, on behalf of themselves, all others similarly situated, and the Proposed Minnesota Rule 23 Class, Plaintiffs–Appellees

v.DOMINO'S PIZZA, LLC, Defendant–Appellant.

No. 12–1216.

United States Court of Appeals,

Eighth Circuit.

Submitted: Oct. 16, 2012.

Filed: Feb. 4, 2013.

Daniel Franklin Katz, argued, Washington DC, Philip Sechler, David Simon Kurtzer–Ellenbogen, Washington DC, Kristin Berger Parker, Tracey Holmes Donesky, Minneapolis, MN, on the brief, for appellant.

Eleanor Michelle Drake, argued, Minneapolis, MN, Matthew H. Morgan, Minneapolis, MN, Matthew C. Helland, San Francisco, CA, on the brief, for appellee.

Before LOKEN, SMITH, and BENTON, Circuit Judges.

BENTON, Circuit Judge.

The district court certified a Rule 23(b)(3) class of about 1,600 Minnesota delivery drivers employed by Domino's Pizza LLC between March 6, 2006, and February 28, 2010. The drivers allege that, under Minnesota law, a fixed delivery charge that customers paid Domino's was a gratuity wrongfully withheld from them. This court granted an interlocutory appeal and now reverses the class certification.

I.

In 2005, Domino's implemented a flat $1 per-delivery charge (raised to $1.50 in 2008) in Minnesota. The drivers received no portion of it. Some explained this to customers, others did not. Disclosure varied by method of order; online purchasers were alerted that “Delivery charge will apply,” and employees taking orders were supposed to say the same. Delivered boxes included a statement of charges listing the delivery charge as “Del Charge.” Credit card receipts requiring signatures included a blank line for tips; the delivery charge was included in the pre-tip “Amount” line. The delivery charge was sometimes disproportionate for a tip (as it was not a percentage-based gratuity). At the end of 2009, Domino's began printing on some boxes, “Any Delivery Charge is not a tip paid to your driver. Please reward your driver for awesomeness.”

II.

Rule 23 authorizes classes that meet requirements of numerosity, commonality, typicality, and fair and adequate representation. Fed.R.Civ.P. 23. “The district court is accorded broad discretion to decide whether certification is appropriate, and we will reverse only for abuse of that discretion.” Prof'l Firefighters Ass'n of Omaha, Local 385 v. Zalewski, 678 F.3d 640, 645 (8th Cir.2012). “The district court's rulings on issues of law are reviewed de novo, and the court abuses its discretion if it commits an error of law.” Blades v. Monsanto Co., 400 F.3d 562, 566 (8th Cir.2005). “The preliminary inquiry of the class certification stage may require the court to resolve disputes going to the factual setting of the case, and such disputes may overlap the merits of the case.” Id. at 567. “In order to obtain class certification, a plaintiff has the burden of showing that the class should be certified and that the requirements of Rule 23 are met.” Coleman v. Watt, 40 F.3d 255, 258 (8th Cir.1994).

A.

Under Minnesota law, “any gratuity received by an employee or deposited in or about a place of business for personal services rendered by an employee is the sole property of the employee.” Minn.Stat. § 177.24 Subdiv. 3.

“Gratuities” means monetary contributions received directly or indirectly by an employee from a guest, patron, or customer for services rendered and includes an obligatory charge assessed to customers, guests or patrons which might reasonably be construed by the guest, customer, or patron as being a payment for personal services rendered by an employee and for which no clear and conspicuous notice is given by the employer to the customer, guest, or patronthat the charge is not the property of the employee.

Minn. Stat. § 177.23 Subdiv. 9.

[O]bligatory charges which might reasonably be construed by the guest, customer, or patron as a sum to be given to an employee as payment for personal services rendered, include, but are not limited to, service charges, tips, gratuities, and/or surcharges which are included in the statement of charges given to the customer.

Minn. R. 5200.0080 Subpara. 4a.

Luiken, the class representative, argues that the delivery charge is a gratuity under Minnesota law, and thus his sole property. He believes that under Rule 5200.0080, the delivery charge is a “service charge” or “surcharge” included in the statement of charges, and thus by definition an obligatory charge “which might reasonably be construed ... as payment for personal services.” Luiken alternatively asserts that the nature of the charge itself shows that it “might reasonably be construed” as such a payment. He reasons that it is therefore a gratuity under Section 177.23 unless Domino's provides “clear and conspicuous notice ... that the charge is not the property of the employee.” Because Domino's did not provide the statutorily-defined notice, Luiken concludes it must pay the delivery charge to the drivers under Section 177.24.

Under Luiken's interpretation, context of specific transactions is irrelevant; the key is only whether notice was given. To the contrary, the plain language of the statute and rule indicate that context matters. Rule 5200.0080 lists service charges and surcharges as examples of “obligatory charges which might reasonably be construed by the guest, customer, or patron ... as payment for personal services.” This does not mean that they must be so construed. The statute and rule's use of “the”—“which might reasonably be construed by the guest, customer, or patron ...”—indicates that they refer to someone specific. See Flandreau Santee Sioux Tribe v. United States, 197 F.3d 949, 952 (8th Cir.1999) (the “use of ‘the person’ refers to someone specific”); State v. Hohenwald, 815 N.W.2d 823, 830 (Minn.2012) ( “The definite article ‘the’ is a word of limitation that indicates a reference to a specific object.”). The customer's circumstances determine whether the delivery charge might reasonably be construed as a payment for personal services. If, for example, Luiken explained to the customer that the delivery charge was not a gratuity (as he sometimes did), that customer could not reasonably believe otherwise—and no notice would be required.

B.

The parties agree that liability under the statute and rule is based on an objective, reasonable person standard. As this court explained in Avritt v. Reliastar Life Ins. Co., 615 F.3d 1023 (8th Cir.2010), context can be critical in applying such a standard. There, a couple who bought retirement annuities sought to bring a class action against the seller (Northern, later merged with Reliastar) for a misleading rate-setting practice. This court concluded that evidence common to the class could not establish liability to the class because “Reliastar would be entitled to introduce evidence about how the contract was explained in various sales discussions and whether each purchaser's understanding of the contract was consistent with the theory the Avritts now advance.” Avritt, 615 F.3d at 1030. In response to the Avritts' claim that Northern breached the implied covenant of good faith and fair dealing, this court explained, “Whether Northern acted in bad faith by emphasizing its non-guaranteed interest rate for new deposits and encouraging purchasers to believe that the introductory rate was indicative of future rates is a question closely tied to the circumstances of each individual plaintiff.” Id. at 1031.

The Avritts cite several cases for the proposition that the extent of the duty of good faith and fair dealing is defined by objectively reasonable conduct, but their argument misses the point that what is objectively reasonable depends on the nature and context of the parties' bargain .... The district court properly concluded that evidence of the parties' justified expectations would be required to establish a breach of the duty of good faith and fair dealing. And those expectations are likely to vary among members of the putative class based on, among other things, each purchaser's individual interaction with sales agents.

Id. at 1032 (emphasis added).

The Avritt analysis applies in this case. Some pizza customers asked about the charge and some did not; some employees volunteered that it was not a gratuity and some did not. Those circumstances determine the objective reasonableness of construing the charge as a payment for personal services. This court has previously rejected certification of classes where trial would require considering varied circumstances. See In re St. Jude Med., Inc., 522 F.3d 836, 838–42 (8th Cir.2008) (reversing grant of certification where class included patients to whom different representations about prosthetic heart valve had been made and where resolution of defendant's liability was dominated by individual issues requiring “plaintiff-by-plaintiff determinations”); Darms v. McCulloch Oil Corp., 720 F.2d 490, 493 (8th Cir.1983) (affirming denial of class certification where transactions involved different representations and degrees of reliance “and the defenses raised in the case would necessarily vary based on the circumstances of each purchase”).

Luiken fails to distinguish Avritt. He claims that this court effectively applied a subjective standard there, holding that the parties' actual expectations “are essential to a determination of whether a defendant's conduct is objectively reasonable under Washington common law.” The “justified expectations” in Avritt were the expectations justified by the contract's terms and the salesperson's representations. Determining what expectations were justified required applying an objective standard to the context of the transaction. See Avritt, 615 F.3d at 1032 (“[W]hat is objectively reasonable depends on the nature and context of the parties' bargain.”). In Avritt, the common question was “a question closely tied to the circumstances of each individual plaintiff.” Id. at 1031. The same is true here. Luiken erroneously concludes...