Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-00620/USCOURTS-cand-3_05-cv-00620-5/pdf.json

Nature of Suit Code: 442
Nature of Suit: Civil Rights Employment
Cause of Action: 28:1332 Diversity-Employment Discrimination

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United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

BRIANT CHUN-HOON, et al,

Plaintiffs,

v

MCKEE FOODS CORPORATION, et al,

Defendants. /

No C-05-620 VRW

ORDER

This putative class action is brought “on behalf of all

persons and entities who entered into ‘Distributorship Agreements’

with defendant McKee Foods Corporation * * *, and functioned as

drivers/distributors of McKee Foods’s products to retail stores.” 

Notice Remov (Doc #1) Ex B (Complaint) ¶1. Plaintiffs allege

violations of various wage and hour laws based on defendant’s

treatment of them as independent contractors rather than employees. 

Defendant removed the case from the superior court of

Alameda to this court on February 10, 2005, on the basis of

diversity of citizenship. Notice Remov (Doc #1). 

//

Case 3:05-cv-00620-VRW Document 76 Filed 10/31/06 Page 1 of 11
United States District Court

For the Northern District of California

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Defendant now moves pursuant to Civ L R 7-9 for

reconsideration of the court’s June 6, 2006, order provisionally

certifying a damages class under FRCP 23(b)(3). Doc #66. For the

reasons that follow, the court DENIES defendant’s motion for

reconsideration, but elaborates on its June 6, 2006, order.

I

A

Plaintiffs’ proposed class consists of all residents of

California who entered into independent distributor agreements with

defendant since January 2001. Cert Mot (Doc #42) at 3. FRCP 23(a)

sets forth the preliminary requirements to certifying a class

action: (1) the class must be so numerous that joinder of all

members is impracticable; (2) there must be questions of law or

fact common to the class; (3) the claims or defenses of the

representative parties must be typical of the claims or defenses of

the class and (4) the representative parties must be able fairly

and adequately to protect the interests of the class. FRCP 23(a);

see also, e g, Armstrong v Davis, 275 F3d 849, 868 (9th Cir 2001);

Walters v Reno, 145 F3d 1032, 1045 (9th Cir 1998).

In addition to satisfying the Rule 23(a) prerequisites,

the class must also satisfy one of the three alternatives listed

under Rule 23(b). Walters, 145 F3d at 1045. Plaintiffs bear the

burden of demonstrating that they have satisfied all four FRCP

23(a) elements and one FRCP 23(b) alternative. Zinser v Accufix

Research Institute, Inc, 253 F3d 1180, 1186 (9th Cir 2001). 

Failure to carry the burden on any FRCP 23 requirement precludes

certifying a class action. Burkhalter Travel Agency v MacFarms

Case 3:05-cv-00620-VRW Document 76 Filed 10/31/06 Page 2 of 11
United States District Court

For the Northern District of California

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Int’l, Inc, 141 FRD 144, 152 (ND Cal 1991) (Jensen, J) (citing

Rutledge v Electric Hose & Rubber Co, 511 F2d 668 (9th Cir 1975)).

“In determining the propriety of a class action, the

question is not whether the plaintiff or plaintiffs have stated a

cause of action or will prevail on the merits, but rather whether

the requirements of Rule 23 are met.” Eisen v Carlisle &

Jacquelin, 417 US 156, 178 (1974) (quoting Miller v Mackey Intl,

452 F 2d 424 (5th Cir 1971)) (internal quotation marks omitted). 

Nonetheless, the court is “at liberty to consider evidence which

goes to the requirements of Rule 23 even though the evidence may

also relate to the underlying merits of the case.” Hanon v

Dataproducts Corp, 976 F 2d 497, 509 (9th Cir 1992). On a motion

for class certification, the court “is bound to take the

substantive allegations of the complaint as true.” Blackie v

Barrack, 524 F2d 891, 901 n17 (9th Cir 1975).

Defendant’s motion for reconsideration concerns FRCP

23(b)(3), which authorizes the court to certify a class action if

“the questions of law or fact common to the members of the class

predominate over any questions affecting only individual members,

and * * * a class action is superior to other available methods for

the fair and efficient adjudication of the controversy.” FRCP

23(b)(3). See also Zinser, 253 F3d at 1189. 

In its motion for reconsideration, defendant contends the

court failed to analyze the elements of plaintiffs’ proof and

defendant’s defenses in determining whether common issues

predominated over individual ones. Specifically, defendant asserts

that the standard form agreement and informational booklets upon

which the court relied in certifying a class are insufficient as a

Case 3:05-cv-00620-VRW Document 76 Filed 10/31/06 Page 3 of 11
United States District Court

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matter of law to establish a predominance of common issues. 

Although the court’s order only addressed these issues briefly,

further analysis does not change the order’s outcome. 

B 

Under Rule 23(b)(3), the court must find that the 

questions of law or fact common to the members of the class

predominate over any questions affecting only individual members,

and that a class action is superior to other available methods for

the fair and efficient adjudication of the controversy. FRCP

23(b)(3). The matters pertinent to such a finding include: (a)

the interest of members of the class in individually controlling

the prosecution or defense of separate actions; (b) the extent and

nature of any litigation concerning the controversy already

commenced by or against members of the class; (c) the desirability

or undesirability of concentrating the litigation of the claims in

the particular forum; (d) the difficulties likely to be encountered

in the management of a class action. Id.

The objective behind the two requirements of Rule

23(b)(3) is the promotion of economy and efficiency. See FRCP

23(b)(3) advisory committee notes. When common issues predominate,

class actions achieve these objectives by minimizing costs and

avoiding the confusion that would result from inconsistent

outcomes. Id.

The court agrees with plaintiffs that common questions of

law and fact predominate. “Because no precise test can determine

whether common issues predominate, the court must pragmatically

assess the entire action and the issues involved.” Romero v

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United States District Court

For the Northern District of California

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Producers Dairy Foods, Inc, 235 FRD 474, 489 (ED Cal 2006).

Here, the common questions concern whether defendant misclassified

its distributors as independent contractors instead of employees,

and these questions predominate over individual ones. Compare

Breedlove v Tele-Trip Co, 1993 US Dist LEXIS 10278, 11-12 (ND Ill

1993) (in a putative ERISA class action, a court should try to

determine employment status on a categorical basis if possible).

Under California law, the “principal test of an

employment relationship is whether the person to whom service is

rendered has the right to control the manner and means of

accomplishing the result desired * * *.” S G Borello & Sons, Inc v

Dept of Industrial Relations, 48 Cal 3d 341, 350 (1989) (quoting

Tieburg v Unemployment Insurance Appeals Board, 471 P 2d 975, 2 Cal

3d 943, 946 (1970)) (internal quotation marks omitted). Courts

have also recognized “several ‘indicia’ of the nature of a service

relationship” including whether an employer has “the right to

discharge at will, without cause.” Id at 350-51. Other secondary

factors, derived principally from the Restatement Second of Agency,

include:

(a) whether the one performing services is engaged

in a distinct occupation or business; (b) the kind

of occupation, with reference to whether, in the

locality, the work is usually done under the

direction of the principal or by a specialist

without supervision; (c) the skill required in the

particular occupation; (d) whether the principal

or the worker supplies the instrumentalities,

tools, and the place of work for the person doing

the work; (e) the length of time for which the

services are to be performed; (f) the method of

payment, whether by the time or by the job; (g)

whether or not the work is a part of the regular

business of the principal; and (h) whether or not

the parties believe they are creating the

relationship of employer-employee.

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Id. “Generally, * * * the individual factors cannot be applied

mechanically as separate tests; they are intertwined and their

weight depends often on particular combinations.” Id (quoting

Germann v Workers’ Comp Appeals Bd, 176 Cal Rptr 868, 123 Cal App

3d 776, 783 n5 (1981)) (internal quotation marks omitted) (omission

in original).

In view of the factors specified in Borello, plaintiffs

have satisfied their burden for certification. Indeed, many common

questions arise from defendant’s own efforts to standardize its

relationship with distributors. First, putative class members must

sign a distribution agreement, upon which plaintiffs now sue. Boyd

Dep (Doc #44, Ex A) 136:21-139:2); Doc #44, Exs G and I). Second,

defendant promotes uniformity through instruction booklets. One

booklet, titled Doing Business with McKee, “provide[s distributors]

with information on various aspects of [their] dealings with McKee

Foods.” Doc #44, Ex D. This 35-page booklet directs distributors

in several critical respects. See, e g, id at 10 (listing

instructions regarding relationships with independent distributor

warehouses); id at 6 (noting methods for receiving deliveries); id

at 11-13 (naming considerations for choosing a warehouse location);

id at 18 (providing distributor payment procedures); id at 29

(noting procedures for a complaint response plan). Another

booklet, titled Marketing Suggestions, sets forth various marketing

strategies that distributors should follow. E g, id, Ex E at 17

(“We suggest that you try to maintain special displays at all

times.”). 

Defendant also provides detailed instructions to their

District Sales Representatives (DSR) in order to standardize new

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United States District Court

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distributor orientations. See, e g, (“Even after the initial

orientation has ended, it is important that you [the DSR] are

available in case questions arise.”). Doc #44, Ex #I at 12. These

instructions direct a DSR to contact regularly the new “independent

distributor” by phone or in person “on a weekly basis.” Id. 

Further, plaintiffs offer deposition testimony

establishing other uniform policies toward distributors. Such

policies include: common standards for a distributor’s warehouse

space (Doc #44, Ex B at 25:8-25); established order and delivery

dates (Id at 81:2-3); procedures for a DSR or regional manager

periodically to ride along with drivers to monitor service (Doc

#44, Ex A at 107:5-109:16) and requirements that the defendant be

named as insured under the vehicle and liability insurance of its

distributors. Doc #44, Ex B at 102:4-7; Doc #44 Ex A at 72:22-

73:4. In sum, the agreements, booklets and deposition statements

evince a significant level of uniform training and supervision,

which constitutes a common issue pertinent to the litigation.

In addition to the actual practices, other common issues 

arise from plaintiffs’ underlying claims. In determining whether

to classify the distributors as independent contractors or

employees, common issues, as alleged in the complaint, include the

following: (1) all distributors were classified as independent

contractors; (2) none of the distributors was awarded overtime pay;

and (3) all the distributors were forced to absorb overhead costs. 

Defendant insists that the “suggestions” in the above

mentioned booklets do not amount to supervision and that not all

distributors, including named plaintiffs, received the booklets. 

Doc #66 at 20. Although the actual practice of class members may

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undercut the pertinence of formal policies, defendant’s anecdotes

do not suffice. Occasional instances of noncompliance do not

override defendant’s purpose for distributing the booklets: to

standardize its arrangement with plaintiffs. 

Moreover, at this early stage of the litigation, the

court must only “determine if the plaintiffs have proffered enough

evidence to meet the requirements of FRCP 23, not weigh competing

evidence. Wang, 231 FRD at 605; see Staton, et al v Boeing

Company, 327 F3d 938, 954 (9th Cir 2003). That each class member

might be “required ultimately to justify an individual claim does

not necessarily preclude maintenance of a class action,” and

“individual issues do not render class certification inappropriate

so long as such issues may effectively be managed.” Sav-On Drug

Stores, Inc v Superior Court, 34 Cal 4th 319, 334. (Cal. 2004). 

A recently-decided case, Tierno v Rite Aid Corp, 2006 US

Dist LEXIS 71794, No 05-02520 (ND Cal Aug 31, 2006), lends support

to the court’s ruling on Rule 23(b)(3). In Tierno, a group of Rite

Aid store managers claimed their classification as exempt employees

violates California labor laws, and moved for class certification. 

Id. The court granted the motion under Rule 23(b)(3), holding that

“significant aspects” of the case could be resolved on a class

basis including “the actual requirements of the job, the realistic

expectations of the employer, the proper classification of Store

Manager tasks as exempt or non-exempt, and Rite Aid’s state of

mind, knowledge, historical actions, and policies with respect to

its classification and treatment of Store Managers.” Id at 16.

A recent decision by the California Supreme Court also

applies to the present action. In Sav-On Drug Stores, Inc v

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Superior Court, the defendant opposed certification on similar

grounds as here, asserting that “whether any individual member of

the class is exempt or nonexempt from the overtime requirements

depends on which tasks that person actually performed and the

amount of time he or she actually spent on which tasks.” 34 Cal

4th at 325. According to the defendant in Sav-On, these individual

issues precluded plaintiffs from proving any meaningful

generalizations about the employment circumstances. Id. The court

disagreed and affirmed certification, concluding that “neither

variation in the mix of actual work activities undertaken * * * nor

differences in the total unpaid overtime compensation owed each

class member, bar certification as a matter of law.” Sav-On, 34

Cal 4th at 335. 

 As in Tierno and Sav-on, defendant in the instant action

argues that individual issues prevent the court from rendering a

class-wide determination regarding employment status. 

Specifically, defendant notes that some distributors use full-time

employees, develop their own pricing formula and “choose to have

little or no contact with McKee representatives.” Doc #66 at 12. 

But defendants in Tierno and Sav-On made similar arguments to no

avail. For example, the defendant in Sav-On asserted that the

actual activities performed by the managers varied “significantly

from store to store and individual to individual, based on multiple

factors, including store location and size, physical layouts, sales

volume, hours of operation * * *.” Sav-On, 34 Cal 4th at 325. 

Hence, as in Sav-On, the variation in sales operation and the

differences in the relationship between each distributor and

defendant does not bar certification. Sav-On, 34 Cal 4th at 335.

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Further, defendant’s evidence — the declarations of

thirty-nine distributors — does not undercut the court’s finding. 

A closer examination of these declarations reveals that among the

thirty-nine distributors, only about 31 percent sell other

products, 21 percent “discuss” selling products or gaining space

not authorized by chain headquarters and 28 percent use full-time

employees. Doc #49, Ex B. These numbers hold even less force

considering they arise from a non-representative sampling of the

entire class. Accordingly, even though individual issues exist,

they do not bar class certification. 

The court also notes that defendant’s motion for

reconsideration misinterprets the law regarding FRCP 23(b)(3). 

Defendant reads Dunbar v Albertson’s, Inc, 141 Cal App 4th 1422

(2006), for the proposition that trial courts are required to

conduct a higher level of inquiry under Rule 23(b)(3). In Dunbar,

the court of appeals reaffirmed the trial court’s decision to deny

certification, concluding that “the [lower] court performed its

duty on the motion thoughtfully and thoroughly, and we have no

cause to disturb its determination.” Dunbar, 141 Cal App 4th at

1434. Id. But this case does not compel a heightened standard. 

To the contrary, the court in Dunbar approved the trial court’s

decision with reluctance, noting that “case law since the trial

court issued its ruling, particularly Sav-On Drug Stores, Inc v

Superior Court, supra, 34 Cal 4th 319, have called into question

the key premises of the trial court’s legal analysis.” Id at 1432. 

Defendant also asserts that Ramirez v Yosemite Water Co,

Inc, 20 Cal 4th 785 (1999), ruled that the necessity of

individualized determinations weighs heavily against certification. 

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Id at 29. Yet the California Supreme Court noted in Sav-On that

“Ramirez was not a class action and, to that extent, is not

apposite. In Ramirez, [the court] did not even discuss

certification standards, let alone change them.” Sav-On, 34 Cal

4th at 336. The court further noted that “Ramirez is no authority

for constraining trial courts ‘great discretion in granting or

denying certification.’” Id. See also id at 338 (“In sum,

defendant’s reliance on Ramirez [to defeat class certification] is

misplaced.”).

 In sum, defendant’s motion for reconsideration fails to

persuade the court. Plaintiffs have met their burden in

establishing that common issues predominate. Accordingly,

defendant’s motion for reconsideration is DENIED.

IT IS SO ORDERED.

 

VAUGHN R WALKER

United States District Chief Judge

Case 3:05-cv-00620-VRW Document 76 Filed 10/31/06 Page 11 of 11