Stehberger v. Gannett Publ'g Servs.

• Decision Date: 07 February 2023
• Docket Number: 2021AP1403
• Parties: Michael Stehberger, Plaintiff-Respondent-Cross-Appellant, v. Gannett Publishing Services, LLC and Journal Sentinel, Inc., Defendants-Appellants-Cross-Respondents.
• Court: Wisconsin Court of Appeals

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Michael Stehberger, Plaintiff-Respondent-Cross-Appellant, v. Gannett Publishing Services, LLC and Journal Sentinel, Inc., Defendants-Appellants-Cross-Respondents.

No. 2021AP1403

Court of Appeals of Wisconsin, District I

February 7, 2023

This opinion will not be published. See Wis. Stat. Rule 809.23(1)(b)5.

APPEAL and CROSS-APPEAL from an order of the circuit court for Milwaukee County No. 2019CV4641: TIMOTHY M. WITKOWIAK, Judge. Reversed and remanded for further proceedings.

Before Donald, P.J., Dugan and White, JJ.

Per curiam opinions may not be cited in any court of this state as precedent or authority, except for the limited purposes specified in Wis.Stat. Rule 809.23(3).

PER CURIAM.

¶1 Gannett Publishing Services, LLC and Journal Sentinel, Inc. (collectively the Journal) appeal from the order granting class certification for the first claim in the first amended complaint brought by Michael Stehberger, who was also certified in that order as the class representative for an opt-out class of newspaper carriers who alleged they were misclassified as independent contractors instead of employees. In Stehberger's first claim, he alleged that the Journal was making unauthorized wage deductions from the carriers' payments for service error complaints, in violation of Wis.Stat. § 103.455 (2019-20).^[1] We conclude that the circuit court erroneously exercised its discretion when it granted certification on the first claim without adequately explaining its reasoning based on the evidence in the record as required by Wis.Stat. § 803.08(11). The record reflects that the certification order failed to include sufficient factual findings and conclusions of law to support the court's decision. We reverse and remand for further proceedings.

¶2 Further, Stehberger cross-appeals the circuit court's decision in the same order to deny certification for his second claim. In Stehberger's second claim, he alleged that a liquidated damages provision in the carriers' contracts was unreasonable and, therefore, constituted an unlawful penalty. Again, we conclude that the circuit court failed to adequately explain its reasoning for denying certification for the second claim. Because we again conclude the circuit court's decision was an erroneous exercise of discretion, we reverse the order entirely and remand for further proceedings.

BACKGROUND

¶3 In June 2019, Stehberger filed a class action suit against the Journal for unlawful deduction of wages and breach of contract. Stehberger requested to be named the representative of the class of newspaper carriers who were individual parties to a Home Delivery Agreement with the Journal. The carriers delivered the Milwaukee Journal Sentinel as well as "other newspapers, publications, and inserts" to Journal customers in Milwaukee and surrounding counties.

¶4 The parties dispute the meaning of the terms of the Agreement, but in essence, each Agreement set identical terms regarding the rights, duties and obligations of the carriers and the Journal. The carriers had assigned routes and customers. The Journal followed a liquidated damages provision in the Agreement to offset a "liquidated damages" fee of $2 for each service error complaint from the "negotiated fee rate" of compensation earned by the carriers. Service error complaints included missed deliveries and wet or damaged publication deliveries. Stehberger alleged that the carriers were misclassified as independent contractors and should be properly treated as employees. Stehberger then alleged that the Journal's procedure of deducting $2 as stipulated damages violated Wis.Stat. § 103.455, which prohibits wage deductions for "defective or faulty workmanship, lost or stolen property or damage to property" unless the worker is an independent contractor.

¶5 In October 2020, Stehberger filed an amended complaint to which the Journal responded with a motion to dismiss Stehberger's new claim in the amended complaint. Stehberger's amended complaint added a claim that the $2 damages fee was an unlawful penalty on the allegation that the fee exceeded any redelivery costs and was not individually computed for the actual service error cost. Further, Stehberger filed a motion for class certification in November 2020, and the Journal filed a motion opposing class certification in December 2020.

¶6 In April 2021, the circuit court conducted a hearing on the pending motions for and against class certification.^[2] For the first claim for unlawful wage deduction, the court found that Stehberger sufficiently alleged that the proposed class members of carriers were employees, with a basis to raise the Wis.Stat. § 103.455 claim. The court found commonality in the questions and concluded that the claim could be certified for class action. For the second claim that the $2 damages fee was unreasonable and consisted of an unlawful and unenforceable penalty, the court denied class certification because it found there was "no commonality" to determine reasonableness on "a class-wide basis[.]"

¶7 In August 2021, the circuit court issued a written order that granted class certification for Stehberger's first claim certified Stehberger as the class representative, and denied class certification for his second claim. The Journal appeals granting class certification on the first claim. Stehberger cross-appeals the denial of class certification on the second claim.

DISCUSSION

¶8 On appeal, Stehberger and the Journal each argue that the circuit court erred in how it entered the certification order. The Journal asserts that the certification order granting class action for Stehberger's first claim for misclassification and unlawful wage deduction did not include the factual findings and legal conclusions that Wis.Stat. § 803.08(11) requires.^[3] Conversely, Stehberger argues that the circuit court erred when it dismissed Stehberger's second claim that the $2 liquidated damages provision in the Agreement constituted an unlawful penalty. We conclude that the court erroneously exercised its discretion in the certification order by not demonstrating rational decision-making based on relevant facts and applicable law. We remand for further proceedings to correctly determine whether certification of each claim is appropriate.

¶9 The decision whether to grant or deny a motion for class certification is committed to the circuit court's discretion.^[4] Harwood v. Wheaton Franciscan Servs Inc., 2019 WI.App. 53, ¶41, 388 Wis.2d 546, 933 N.W.2d 654. This court "will only reverse the certification decision if the court erroneously exercised its discretion." Hammetter v. Verisma Sys., Inc. 2021 WI.App. 53, ¶9, 399 Wis.2d 211, 963 N.W.2d 874, review denied (WI Apr. 13, 2022) (No. 2019AP2423). The circuit court exercises its discretion when "it examines the relevant facts, applies a proper legal standard and, in a rational process, reaches a conclusion that a reasonable judge could reach." Cruz v. All Saints Healthcare Sys., Inc., 2001 WI.App. 67, ¶11, 242 Wis.2d 432, 625 N.W.2d 344.

¶10 Class actions and the circuit court's decision to certify a class are governed by Wis.Stat. § 803.08. "The statute requires the plaintiff to first establish three facts about the proposed class and the representative-referred to as numerosity, commonality, and typicality-and one fact about the plaintiff's ability to represent the class." Harwood, 388 Wis.2d 546, ¶23; § 803.08(1)(a)-(d). These four facts provide the statutory prerequisites to bring a class action.^[5] If the four prerequisites are satisfied, the class action may be maintained if the circuit court finds that one of three types of class actions are satisfied. Sec. 803.08(2). At issue here is paragraph (2)(c): "The court finds that the 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."

¶11 When a party brings an action seeking a class action certification, the court may only certify the action "on the basis of a written decision setting forth all reasons why the action may be maintained and describing all evidence in support of the determination." Wis.Stat. § 803.08(11). Whether the class certification decision comports with the legal standard set forth in § 803.08(11) is a question of law that this court reviews independently. Shannon v. Mayo Clinic Health Sys.-Nw. Wis. Region, Inc., 2021 WI.App. 49, ¶13, 398 Wis.2d 685, 963 N.W.2d 115, review denied (WI Oct. 18, 2021) (No. 2020AP1186).

I. First claim: misclassification and unlawful wage deduction

¶12 We return to the record with regard to the first claim. The circuit court's written order set forth ten reasons why it decided to certify the class on the first claim for misclassification and unlawful wage deduction. The court found: (1) that the class was ascertainable from the Journal's records; (2) that there were hundreds of proposed class members, making joinder impracticable; (3) that there were common questions of law and fact; (4) that the court could uniformly determine the applicable standard for whether a deduction was authorized by answering questions common to the class; (5) that Stehberger was typical of the class; (6) that Stehberger was an adequate class representative; (7) that damages for class members could be calculated in a manageable way; (8) that it would be manageable to determine whether individual deductions were authorized in writing without an individual inquiry into every proposed class member; (9) that common questions predominate over individual questions; and (10) that the class action was the superior method of adjudication.

¶13 The circuit court must...