Villalpando v. Exel Direct Inc., Case No. 12-cv-04137-JCS
| Decision Date | 03 September 2015 |
| Docket Number | Case No. 12-cv-04137-JCS |
| Court | U.S. District Court — Northern District of California |
| Parties | DANIEL VILLALPANDO, et al., Plaintiffs, v. EXEL DIRECT INC., et al., Defendants. |
Plaintiffs in this case are delivery drivers who assert wage and hour claims against Defendants Exel Direct Inc. (n/k/a MXD Group, Inc.), DPWN Holdings (USA), Inc. and Deutsche Beteiligungen Holding GmbH (collectively, "Exel") based on their alleged misclassification as independent contractors rather than employees. Plaintiffs bring a Motion for Summary Judgment and/or Summary Adjudication of Defendants' Independent Contractor Defense ("Plaintiffs' Motion"). Defendants, in turn, bring a Motion for Summary Judgment ("Defendants' Motion") seeking dismissal of Plaintiffs' claims on a variety of grounds, including federal preemption. The Court held a hearing on the motions of Friday, August 14, 2015 at 2:00 pm. The parties filed supplemental briefs on August 21, 2015. The parties have consented to the jurisdiction of the undersigned United States magistrate judge pursuant to 28 U.S.C. § 636(c). For the reasons stated below, Defendants' Motion is GRANTED in part and DENIED in part. Plaintiffs' Motion is GRANTED.
This action was initiated on June 14, 2012 in the Superior Court of Alameda County,California. Defendants removed the action to federal court on August 6, 2012 under the Class Action Fairness Act ("CAFA"), 28 U.S.C. § 1332(d). The case was subsequently related to Shekur v. Exel Direct Inc., Case No. C-13-3091 KAW, see Docket No. 49, and the plaintiffs in the two related actions filed a Consolidated First Amended Complaint ("CFAC") on October 28, 2013.1
On March 23, 2014, the Court granted in part and denied in part Defendants' motion to dismiss, dismissing Claims Seven, Eight and Thirteen on the basis that there was no private right of action as to those claims. See Docket No. 122 ("March 28, 2014 Order"). The Court rejected Defendants' arguments that: 1) Plaintiffs' claims were insufficiently pled under Rule 8 of the Federal Rules of Civil Procedure because they did not plead specific facts as to each of the named defendants; 2) Plaintiffs' meal and rest break claims were preempted under the Federal Aviation Administration Authorization Act of 1994 ("FAAAA"); and 3) Plaintiffs' claim under California's Private Attorneys General Act ("PAGA") were insufficiently pled because they did not allege facts showing that the requirements of Rule 23 of the Federal Rules of Civil Procedure were met. With respect to Exel's federal preemption argument, the Court found that the allegations in the complaint were not sufficient to establish preemption but left open the possibility that Exel might be able to demonstrate preemption at a later stage of the case, when a factual record had been developed as to the actual or likely effects of meal and rest break requirements on the motor carrier industry. Id. at 20-21 & n. 9.
On November 20, 2014, the Court granted Plaintiffs' Motion for Class Certification, certifying a class of drivers who have "personally provided delivery services" for Exel since June 14, 2008 and excluding any individuals who signed the Independent Truckman's Agreement with Exel but "provided delivery services exclusively through the use of hired second drivers and who . . . never personally made deliveries for Exel." Docket No. 150 at 34-35 (emphasis in original).
In Defendants' Motion, Exel challenges Plaintiffs' claims on numerous grounds. First, Exel seeks summary judgment as to all of Plaintiffs' claims on the grounds that they are subject to federal preemption under the FAAAA. Id. at 4. In particular, Exel contends Plaintiffs' claims seek to impose a state obligation that cannot be avoided by contract and that relates to a motor carrier's prices, routes or services with respect to the transportation of property because by seeking reclassification as employees rather than independent contractors, they are interfering with the financial arrangements between Exel and the class. Id. at 5-6. Such an attempt, it argues, is "inconsistent with the [FAAAA's] deregulatory purpose, since it imposes one system for those that the market might develop." Id. at 6 (quoting S.C. Johnson & Son, Inc. v. Transp. Corp. of Am., Inc., 697 F.3d 544, 552 (7th Cir. 2012)). Further, Exel asserts, because the contractual arrangement between Exel and its drivers relates to "the manner and the financial terms upon which they agreed "to effectuate the 'transportation of property' under Exel's motor carrier authority," Plaintiffs' claims concern a motor carrier's "transportation of property" for the purposes of preemption. Id. (citing Mass. Delivery Ass'n v. Coakley, 769 F.3d 11, 23 (1st Cir. 2014)). A finding of preemption is further required, according to Exel, because there is no right to contract out of California's classification standards. Id. at 6-7 (citing Ruiz v. Affinity Logistics, Corp., 667 F.3d 1318 (9th Cir. 2012)). Nor do the express exceptions to FAAAA preemption apply, Exel asserts. Id. at 7-8. Finally, Exel argues, the Ninth Circuit's decision in Californians for Safe & Competitive Dump Truck Transp. v. Mendonca, 152 F.3d 1184 (9th Cir. 1998) does not stand for a contrary result because it involved the application of a prevailing wage law to employees and therefore did not require the defendant to alter the way in which it provided transportation services. Id. at 8-10.
Second, Exel argues that Claim Two, for failure to pay overtime in violation of California Labor Code sections 510 and 1198, fails even if Plaintiffs were employees because, under California Code of Regulations title 8, section 11090(3)(L)(1), those provisions do not provide coverage to employees whose hours of service ("HOS") are regulated by the United StatesDepartment of Transportation ("DOT"). Id. at 10-13. According to Exel, this exemption ("the California Exemption") applies because the DOT regulates hours of service for commercial motor vehicle drivers operating in interstate commerce. Id. at 11 (citing 49 C.F.R. §§ 395.1, 390.5). As Plaintiffs allege that they were commercial vehicle drivers and the Court has already found that Exel is a motor carrier, the only remaining question is whether Plaintiffs transported goods in interstate commerce, Exel contends. Id. at 11.
Exel argues that Plaintiffs meet the interstate commerce requirement as well because "numerous class members . . . picked up goods in California and delivered them outside the state." Id. at 12 (citing Declaration of James H. Hanson in Support of Defendants' Motion for Summary Judgment ("Hanson Motion Decl."), Ex. 3 (Declaration of Jason Moll2 ("Moll Decl.")), Ex. 7 (Moll Depo.) at 138-39 (), Ex. 8 ().
In addition, Exel contends, "class members picking-up and delivering goods entirely within California likewise satisfy the interstate commerce requirement given the goods transported are part of 'a practical continuity of movement from the manufacturers or suppliers [outside] the state, through a warehouse and on to customers whose orders or contracts are being filled.'" Id. at 12 (quoting Klitzke v. Steiner Corp., 110 F.3d 1465, 1469 (9th Cir. 1997) (quoting Walling v. Jacksonville Paper Co., 317 U.S. 564, 569 (1943))). Exel points to evidence regarding deliveries within California for Sears, Williams-Sonoma and Crate & Barrel to show that the drivers are "on the final leg of the freight's interstate voyage." Id. (citing Ruiz v. Affinity Logistics Corp., 2006 WL 3712942, at *3 (S.D. Cal. Nov. 9, 2006)). In particular, Exel offers declarations of Blanca Reynoso,3 Thomas Moonan4 and Pat Gottman,5 who describe the supply chains for Sears,Williams-Sonoma and Crate & Barrel, respectively. See Hanson Motion Decl., Ex. 4 (Reynoso Decl.), Ex. 5 (Moonan Decl.) & Ex. 6 (Gottman Decl.).
Reynoso states as to the Sears inventory chain, that "[i]nventory, consisting primarily of appliances and patio furniture, is transported from a variety of vendors across the United States and abroad" to distribution centers in California "based on sales forecasts or key promotional events that will drive customer demand or on customer orders for specialized items." Hanson Decl., Ex. 4 (Reynoso Decl.) ¶ 3. Once specific orders are placed for the inventory, they are sent on to MDOs for delivery to the customers. Id. She also states that inventory is tracked as it moves from the vendor to the consumer, that "[t]he products are shipped into California packaged and ready for delivery to the consumer," and that Sears maintains "title to the inventory while it is being transported and is ultimately responsible for the transportation charges." Id. ¶¶ 7-8.
Moonan states as to the Williams-Sonoma inventory chain that Williams-Sonoma furniture is manufactured throughout the United States and worldwide and transported to distribution centers, including distribution centers in California, based on "the anticipated customer needs in the region covered by each distribution center and on special purchase orders from customers." Hanson Decl., Ex. 5 (Moonan Decl.) ¶ 4. "Once a customer order is placed, the furniture to fulfill the order is transported" to hubs "where it is unboxed and, if necessary, assembled for final delivery to Williams-Sonoma's customers by Exel contractors." Id. ¶ 5. According to Moonan, Williams-Sonoma "tracks the furniture as it moves from the point of manufacture to the customer," "maintains title to the furniture while it is being transported and is ultimatelyresponsible for...
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