Castro v. Creative Design Interiors CA3 ( 2014 )

Filed 5/1/14 Castro v. Creative Design Interiors CA3
NOT TO BE PUBLISHED
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
THIRD APPELLATE DISTRICT
(Sacramento)
----
JOSE RAMON CASTRO et al.,
Plaintiffs and Appellants, C070938
v. (Super. Ct. No.
34200900063544UOEGDS)
CREATIVE DESIGN INTERIORS, INC.,
Defendant and Respondent.
Plaintiffs Jose Ramon Castro, Aquilino Espinoza, Arturo Lopez and Miguel
Vargas (the putative class representatives) were employed by defendant Creative Design
Interiors, Inc. (CDI) to install and supervise the installation of tile, primarily in residential
properties. The putative class representatives filed a class action complaint against CDI
for various wage and hour violations. The trial court denied their motion for class
certification, concluding that the class was not sufficiently ascertainable and that common
questions of fact or law did not predominate.
1
The putative class representatives now contend the trial court erred in denying
class certification because (A) the class could be ascertained through CDI payroll
records, and (B) common issues of fact and law predominate if damage questions are
viewed in their proper context.
We conclude the trial court did not abuse its discretion in denying class
certification. Substantial evidence established significant evidentiary challenges which
would have made it difficult to ascertain the identity of class members. In addition, the
trial court’s conclusion that individual questions predominated over common questions
did not improperly conflate liability and damage issues. The trial court applied proper
criteria and legal assumptions in ruling that class certification would not provide
substantial benefits to the litigants and the court in this case.
We will affirm the order denying class certification.
BACKGROUND
CDI’s customers are primarily builders of new housing developments. CDI
installs residential flooring made of stone, tile, vinyl, wood and carpet, all of which it
references as tile.
The putative class representatives sought to define the class in this case as tile
workers, the workers who demolish, finish, set, replace, install or repair those flooring
materials. Installation was accomplished under the direction of crew leaders who
reported to area managers.
Each of the four putative class representatives was a tile worker and former CDI
crew leader. Each of them reported to the same area manager in Stockton. Crew leaders
relied on area managers for instruction on timekeeping, time reporting and paycheck
distribution. Crew leaders recruited, hired and supervised the work of their crew
members; they assured that timecards were completed and they submitted and distributed
paychecks. CDI issued hourly paychecks to all tile workers, and crew leaders set the
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hourly pay rate for their crew members. All payroll records were maintained in the
Sacramento office.
CDI bid for flooring jobs based on an estimate of the combined cost of materials
and labor. Crew leaders who kept a project’s total cost below the bid amount kept the
remainder as a completion bonus. A crew leader had the discretion to keep the entire
bonus or distribute it in whole or in part to crew members. Some crew leaders falsified
payroll records and timesheets, personally cashed paychecks made out to crew members
or themselves and paid workers in cash according to a daily rate or a percentage of the
total received. In addition, some crew leaders used aliases so they could submit multiple
timesheets, cash the resulting paychecks and pay undocumented workers.
The complaint alleged that CDI told tile workers they would be paid on a piece
rate basis, but then on threat of withholding wages and terminating employment, coerced
the workers to complete sham timesheets. The complaint further alleged that workers
were not paid for all the hours they worked, were not always given meal or rest breaks
and, if they failed to meet deadlines, were subject to having money deducted from their
wages. The complaint also alleged numerous other violations of labor law.
The putative class representatives testified that timesheets routinely reported eight
hours of work five days a week, even though the workers sometimes worked six or seven
days a week, 12 or 14 hours a day, and that, contrary to California law, the timesheets did
not record start and stop times.
Crew leaders testified that they were not reimbursed for mileage or the use of
personal vehicles even though CDI had a policy requiring class members to use their
personal vehicles to travel between job sites and pick up materials. CDI admitted that
crew leaders were not reimbursed for travel. CDI also admitted that workers had to pay
for hand tools and power tools out of their own pockets, and if they used a CDI supplier
account, the cost of tools would be deducted from their paychecks. CDI required regular
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daily cell phone communication with crew leaders, but did not reimburse for personal cell
phone costs.
The complaint asserted eight causes of action.1 The putative class representatives
moved for class certification on all but one. The class was described in the motion as
“[a]ll nonexempt employees of [CDI] who worked on-site installing, repairing, or helping
to install or repair wood, vinyl, carpet, tile and/or stone, or who performed pre-
installation or post-installation work related to the installation or repair of wood, vinyl,
carpet, tile and/or stone, on behalf of CDI at any time from November 2, 2005 to the
present.” The putative class representatives estimated that the class would include more
than 275 people; CDI estimated that it may include as many as 450.
After hearing evidence, the trial court denied class certification because the class
would be difficult to ascertain and because common issues of law and fact did not
predominate. It concluded a class action “would not create efficiencies for the parties or
the Court.”
Regarding ascertainment of the class, the trial court cited evidence presented by
CDI that two of the named plaintiffs worked under multiple names, engaged multiple
persons to work under a single name and that one of them even worked and was paid
under the name of a person who never appeared at a CDI jobsite. The trial court also
cited evidence that, as crew leaders, the named plaintiffs routinely hired workers “off the
books,” so there could be “a significant number of persons” who could qualify as class
1 The complaint alleged (1) failure to pay wages (Lab. Code, § 200); (2) failure to pay
overtime compensation (Lab. Code, §§ 510, 1194, 1198); (3) unauthorized repayment of
wages to employer (Lab. Code, § 221); (4) failure to provide meal and rest breaks (Lab.
Code, §§ 226.7, 512, subd. (a)); (5) waiting time penalties for nonpayment of wages
(Lab. Code, § 203); (6) failure to reimburse expenditures (Lab. Code, § 2802); (7) failure
to provide accurate wage statements (Lab. Code, § 226); and (8) unfair business practices
(Bus. & Prof. Code, § 17200). Class certification was sought on all but the fourth cause
of action.
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members but not be identified in any employment records. On the issue of common
questions, the trial court found a predominance of individual issues. It ruled that even if
the alleged wrongful conduct was proven, determining whether an individual employee
suffered harm from the conduct would require a “worker-by-worker and job-by-job”
analysis.
Additional factual details are included in the discussion below.
STANDARD OF REVIEW
Class actions are authorized “when the question is one of a common or general
interest, of many persons, or when the parties are numerous, and it is impracticable to
bring them all before the court . . . .” (Code Civ. Proc., § 382) Parties seeking class
certification must establish both an ascertainable class and a well-defined community of
interest among class members. (Lockheed Martin Corp. v. Superior Court (2003)
29 Cal. 4th 1096, 1104.) The “community of interest” element includes three factors:
“ ‘(1) predominant common questions of law or fact; (2) class representatives with claims
or defenses typical of the class; and (3) class representatives who can adequately
represent the class.’ [Citation.]” (Ibid.) The certification question is procedural,
meaning that instead of looking to whether the claims are legally or factually meritorious,
the inquiry must focus on “whether . . . maintenance of a class action would be
advantageous to the judicial process and to the litigants.” (Collins v. Rocha (1972)
7 Cal.3d. 232, 238.)
We review an order denying class certification for abuse of discretion. (Sav-On
Drug Stores, Inc. v. Superior Court (2004) 34 Cal. 4th 319, 326.) We will not disturb the
trial court’s ruling unless it used improper criteria or made erroneous legal assumptions.
(Id. at p. 327.) If a class certification motion requires the evaluation of disputed facts, we
review the trial court’s factual determinations under the substantial evidence standard.
(Id. at p. 328.)
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DISCUSSION
The putative class representatives contend the trial court erred in denying class
certification because (A) the class could be ascertained through CDI payroll records, and
(B) common issues of fact and law predominate if damage questions are viewed in their
proper context.
A
We first examine the contentions relating to the ascertainment of class members.
The putative class representatives contend that, as a matter of law, the burden of keeping
accurate time and pay records belongs with employers, so to the extent potential class
members were misidentified in CDI personnel records, the problem must be attributed to
CDI. CDI contends that the crew leaders, including the putative class representatives,
were responsible for hiring, firing and submitting payroll data for their crews and their
falsification of records was not revealed until depositions were taken in preparation for
the class certification motion. The putative class representatives concede there is no
evidence “that CDI knew of, controlled, or suffered or permitted to work any individual
not formally on its payroll.”
CDI argues that, given the falsified records, there are no objective means to
determine whether individuals who are not accurately identified in CDI personnel records
are employees -- and class members -- without conducting a fact-intensive “ ‘control
test’ ” for each of them.
The fact that crew leaders hired undocumented workers and paid them cash from
paychecks made out to the leaders created an ascertainment problem. The putative class
representatives respond that only those identified in the official CDI payroll records are
intended to be class members, and the class definition excludes anyone for whom no
records exist. They argue it should not matter what crew leaders did with paychecks once
they were cashed, and individuals hired “under the table” should be of no concern to the
class because they could not be CDI employees if they were not on the CDI payroll. The
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proposed class was defined, however, as those who “worked on-site installing, repairing,
or helping . . .” and it did not exclude individuals who met that definition but were not
issued CDI paychecks. The definition makes no distinction between workers identified
by payroll records and other workers.
To notify only those individuals named in the payroll records necessarily would
have deprived unidentified or misidentified workers of notice. The trial court could not
presume that those individuals were employed by the crew leaders instead of by CDI. As
a matter of law, payroll records are not sufficient to conclusively determine the existence
of an employer-employee relationship. (Futrell v. Payday California, Inc. (2010)
190 Cal. App. 4th 1419, 1435.) Rather, an individualized application of the multifaceted
common law employment test is required when there is ambiguity. (Id. at p. 1434.)
Ignoring workers not identified in payroll records would not have made the class
appropriately ascertainable nor did the putative class representatives proffer any other
way to get around the problems created by the inaccurate payroll records.
Moreover, two of the putative class representatives worked under different names.
One of them under three names, none of them his own, and the other worked under seven
names. They also shared an alias at times while working on separate crews. The same
two individuals testified that they prepared and submitted all timesheets for their crews,
using borrowed social security numbers that did not match actual worker names, then
cashed paychecks for the group and paid the workers in cash using a daily rate that bore
no relationship to the timesheets or paychecks. CDI acknowledges its legal obligation to
maintain accurate time and pay records but denies that it knew about or sanctioned these
practices.
“A class representative has the burden to define an ascertainable class.”
(Sevidal v. Target Corp. (2010) 189 Cal. App. 4th 905, 918.) Class members are
“ascertainable” if they can be readily identified without unreasonable expense or time by
reference to official or business records. (Id. at p. 919.) The standard does not
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distinguish among the types of records from which class members may be “readily
identified” and it allows for no apportionment of blame when records are inadequate. In
this case, the putative class representatives said the tangle of names and social security
numbers ultimately was the fault of CDI. That may be true, but the trial court found that
CDI’s payroll records were unreliable for the purpose of ascertaining class members, and
that also appears to be true. For an ascertainment analysis, we see no logical difference
among records that do not exist and records that are unreliable, whether because of
negligence, malfeasance or other cause. The issue for class certification is how difficult
it would be to ascertain the identity of class members from the records.
“Ascertainability is required in order to give notice to putative class members as to
whom the judgment in the action will be res judicata.” (Hicks v. Kaufman & Broad
Home Corp. (2001) 89 Cal. App. 4th 908, 914.) This is not a case where the uncertainty
lies in identifying which employees worked overtime or which worked on relevant
projects -- it is a case where the uncertainty lies in identifying individuals to notify in the
first place. (Compare Bufil v. Dollar Financial Group, Inc. (2008) 162 Cal. App. 4th
1193, 1208 [class ascertainable from payroll records although some may not have worked
overtime] and Aguiar v. Cintas Corp. No. 2 (2006) 144 Cal. App. 4th 121, 136 [class
ascertainable from payroll records although some were not assigned to relevant projects]
with Sotelo v. Medianews Group, Inc. (2012) 207 Cal. App. 4th 639, 648 [class not
ascertainable because there were no business records to identify class members].)
Because half of the putative class representatives admitted using false identities
for themselves and their crew members, the trial court reasonably concluded that the task
of identifying class members from CDI’s business records would not be easy. The
putative class representatives cite the burden-shifting rule in Hernandez v. Mendoza
(1988) 199 Cal. App. 3d 721, but that case is inapposite. Hernandez involved an
employee who demonstrated that he had performed unpaid work; he was not required to
prove exactly how much unpaid work because the employer failed to maintain accurate
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payroll records. (Id. at p. 727.) Hernandez involved the calculation of damages, not the
ascertainment of class members.
Quantifying damages is not a relevant concern in the evaluation of class
certification. (Hicks v. Kaufman & Broad Home Corp., supra, 89 Cal.App.4th at 914.)
Moreover, the problem of damages is manageable in a class action, but class
ascertainment “ ‘goes to the heart’ ” of class certification. (Global Minerals & Metals
Corp. v. Superior Court (2003) 113 Cal. App. 4th 836, 858.) The critical issue is whether
class members are “ ‘ “presently ascertainable” ’ ” so that adequate notice can be
provided to those who would be bound by the class litigation. (Ibid.)
Substantial evidence supports the trial court’s determination, and the trial court
did not abuse its discretion when it determined the class was not sufficiently
ascertainable.
B
We next turn to the commonality issues. A class action meets the “community of
interest” test when the plaintiffs prove that common questions of law or fact predominate
over individual ones and also that the claims of the class representatives are typical of the
class and they can adequately represent the class. (Lockheed Martin Corp. v. Superior
Court, supra, 29 Cal.App.4th at p. 1104.) The trial court found no community of interest
primarily because common issues did not predominate. Although the trial court called
adequacy of representation “not determinative,” it also expressed concern that the
putative class representatives, who had collected and cashed paychecks and redistributed
the cash based on their own assessments, may have interests antagonistic to those class
members who were underpaid by the practice.
The putative class representatives argued in the trial court that common questions
predominated because certain CDI policies were unlawful. They claimed CDI failed to
record when a worker started and stopped work or took meal and rest breaks; did not pay
for time spent loading, unloading, waiting, or traveling between jobs; and forced workers
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to pay for their own tools. But the complaint focused on allegations that workers were
routinely underpaid due to CDI’s practice of paying on a piece-rate per-job basis and
falsifying time records.
The motion for class certification alleged a common scheme of using job bids to
set pay parameters without respect to actual hours worked. CDI denied that this was a
sanctioned or common practice. The trial court observed that the crew leaders had
apparently run amok; CDI agreed, claiming it had appropriate policies and procedures in
place and had no idea the crew leaders were not following them.
The trial court concluded that even if all the claims of unlawful labor practices in
the complaint were accepted as true, there still would need to be proof that any particular
worker was underpaid as a result. The trial court cited Frieman v. San Rafael Rock
Quarry, Inc. (2004) 116 Cal. App. 4th 29, 40, for the proposition that class certification is
improper when variations in proof of harm require individualized evidence.
The putative class representatives contend the trial court improperly conflated
liability and damages. They are correct that if liability can be established by common
facts, individual proof of damages does not prevent class certification. (Brinker
Restaurant Corp. v. Superior Court (2012) 53 Cal. 4th 1004, 1022.) But a class action is
rarely appropriate where, after class judgment, class members “would be required to
individually prove not only damages but also liability.” (City of San Jose v. Superior
Court (1974) 12 Cal. 3d 447, 463.)
The putative class representatives argue liability can be shown with timesheets
that do not include worker start and stop times. They say CDI’s timesheets uniformly
failed to include such information, a fact that establishes classwide liability. (Cal. Code
Regs., tit. 8, § 11160, subd. 6(A)(1); see Industrial Welfare Com. wage order No. 16-
2001, § 6(A)(1).) We disagree. The timesheets proffered as evidence included spaces for
start and stop times, spaces that were left blank. The putative class representatives
admitted completing and submitting the timesheets for their crews. The trial court did
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not find evidence of a uniform CDI policy unlawfully prohibiting the use of start and stop
times; rather, it found evidence that the crew leaders had been running amok.
In addition, the putative class representatives claim class certification was justified
because CDI had policies that it would not pay for travel time, waiting time, and time
spent loading and unloading. But the cited evidence only shows that CDI initiated a
formal policy in 2009 applying a lower rate of pay for such time, and the deposed
company representative was not sure what the policy had been before 2009.
In any event, resolving these issues would not have markedly narrowed the issues
for trial. (See Sav-On Drug Stores, Inc. v. Superior Court, supra, 34 Cal.4th at 339
[commonality standard requires comparison of issues that may be jointly tried with those
that must be separately adjudicated].) The crux of the complaint was the alleged practice
of disregarding wage and hour rules to pay workers on a piece-rate basis and its alleged
result of widespread underpayment. CDI claimed to be unaware of the practice and there
was no evidence that it was followed by anyone other than the putative class
representatives.
Determining underpayment due to a piece-rate scheme would involve determining
which workers submitted timesheets for themselves and which had timesheets submitted
for them by others, which in turn would involve the identification problems discussed in
part A, ante. Assuming the individual workers could be identified, there would remain a
necessary evaluation of whether the submitted timesheets reflected actual hours worked
and, if not, whether, for each pay period, the workers were nonetheless compensated by
the crew leader (according to a daily or percentage rate) less than if the timesheets had
been accurate. As the trial court concluded, this would require an individualized factual
inquiry on a “worker-by-worker and job-by-job basis.” These circumstances did not
improperly conflate liability and damages and were properly considered by the trial court
as factors weighing against class certification. (Dunbar v. Albertson’s, Inc. (2006)
141 Cal. App. 4th 1422, 1427-1428 [courts deny certification when wrongfulness cannot
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be determined without reference to individuals].) Because of the potential for injustice,
trial courts must carefully weigh benefits and burdens and grant class certification
“ ‘ “only where substantial benefits accrue both to litigants and the courts.” ’ ” (Linder v.
Thrifty Oil Co. (2000) 23 Cal. 4th 429, 435.)
Finally, although the trial court did not find it determinative, substantial evidence
supports the concern that the putative class representatives may have been unable to
adequately represent the class members who were underpaid because the crew leaders
cashed their paychecks and redistributed the payments. The potential for conflict is
significant given CDI’s insistence that this crew leader conduct was unauthorized.
On this record, the trial court did not abuse its discretion in denying class
certification.
DISPOSITION
The order denying class certification is affirmed.
MAURO , J.
We concur:
BLEASE , Acting P. J.
HOCH , J.
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