United States Court of Appeals

For the Eighth Circuit

___________________________

No. 12-1216

___________________________

Matt Luiken; Jon Sandquist, on behalf of 

themselves, all others similarly situated, 

and the Proposed Minnesota Rule 23 Class

lllllllllllllllllllll Plaintiffs - Appellees

v.

Domino's Pizza, LLC

lllllllllllllllllllll Defendant - Appellant

____________

 Appeal from United States District Court 

for the District of Minnesota - Minneapolis

____________

 Submitted: October 16, 2012

 Filed: February 4, 2013

____________

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,

-2-
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 businessfor personalservicesrendered 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 patron that 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

-3-
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 istherefore 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 ofspecific 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 determinewhether 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.

 

-4-
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 ratesetting 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 ofthe 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 ofthe putative class based on, among other things, each

purchaser’s individual interaction with sales agents.

Id. at 1032 (emphasis added). 

-5-
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-byplaintiff 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 that

because Domino’s “admits that Minn. Stat. § 177.23 does not require Plaintiffs to

show evidence of customers’ actual, subjective beliefs, Avritt isinapposite.” It istrue

that, as the district court noted, it is not tasked with deciding “whether the factspecific circumstances articulated by Domino’s resulted in a customer’s actual belief

-6-
that the delivery charge was not a tip for the delivery driver,” but the court is tasked

with applying the reasonable customer standard in context.

 

C.

Minnesota decisions confirm that under the statute and rule, context mattersin

determining whether customers might reasonably construe an obligatory charge as a

payment to employees for personal services rendered. See In re Alleged Labor Law

Violation of Chafoulias Mgmt. Co., 572 N.W.2d 326 (Minn. Ct. App. 1997)

[hereinafter Chafoulias]; In re Alleged Labor Law Violation of Gangelhoff Inv.,

Inc., Minn. OAH Docket No. 5-1900-7252-2 (Apr. 28, 1993) [hereinafter

Gangelhoff] (unpublished). 

In Gangelhoff, a hotel billed an obligatory 33% “banquet service charge,”

giving 60% to servers and 40% to other employees. Gangelhoff at 1, 3. The servers

claimed that the entire amount was a gratuity rightfully theirs. Id. at 3-4. Based on

the context, the ALJ held that it was not a gratuity owed solely to the servers,

explaining that it might be “in the more common case where other hotel surcharges

are on the order of 15%, but it strains credulity to assert that customers in this rural

area thought the 33% fee was a mandatory unshared tip for a few direct servers.” Id.

at 6. The ALJ added that because the servers had not “proven by a preponderance of

the evidence that the Respondent’s patrons misunderstood the purpose of the

surcharge or that they reasonably could have done so, no notice was needed.” Id. at

6.

In Chafoulias, a hotel appealed from an administrative decision that it

wrongfully withheld gratuities from employees. Chafoulias, 572 N.W.2d 326. The

hotel imposed a 16% service charge on banquet customers, broken down in the bill

into a 12% “banquet service fee” and a 4% “service charge.” Id. at 328. It did not

-7-
tell customers that only 9.6% went to employees. Id. The court found that the 12%

fee was a gratuity owed the employees, distinguishing Gangelhoff by its context:

“Here, the amount in question is 12%, well within the normal range for a tip.” Id. at

330. Though neither Gangelhoff nor Chafoulias rely on employee interactions with

customers, the point is that circumstances matter. Further, the key circumstances in

both those cases are also present here: Domino’s delivered to diverse areas and the

delivery charge was sometimes within the normal range for a tip, but sometimes well

outside it. 

D.

Because Luiken errs in concluding that context is irrelevant to the statute and

rule, the rest of his arguments fail. He argues that verbal communication by

Domino’s employees would not satisfy the regulatory definition of “clear and

conspicuous notice.” See Minn.R. 5200.0080, Subpara. 4b (imposing requirements

for “clear and conspicuous” notice that the obligatory charge is not a gratuity). That

is true, but notice is relevant only if the charge is the type that might reasonably be

construed as a payment for personal services in the transaction’s circumstances. 

Luiken conteststhe workability of a context-based interpretation ofthe statute,

arguing, “If a determination of how a customer ‘might reasonably construe’ a given

charge cannot be made until after each and every transaction is complete, the clear

and conspicuous notice provision of the statute could never be utilized.” The

provision isin fact utilized, as part of what Luiken labels a “two-step analysis”: first,

a court determines whether the charge might reasonably be construed as a payment

for personal services. If so, the court then analyzes any notice. 

Luiken argues that a context-based application overly emphasizes tips. He

contends that the question is not whether the customers might reasonably believe the

-8-
delivery charge is a tip, but whether they might reasonably believe it is a non-tip

gratuity for “personal services rendered,” such as compensating the driver for using

a personal car. True, more than tips are “obligatory charges” under Section 177.23. 

See Minn. R. 5200.0080 Subpara. 4a (“obligatory charges . . . include, but are not

limited to, service charges, tips, gratuities, and/or surcharges”). However, tips are

expressly mentioned, so contextual factors still affect how customers construe the

charge. Chafoulias and Gangelhoff deal with charges labeled “service charge” and

“service fee,” yet analyze the charges as tips. Most problematic for Luiken is that

even if his interpretation were correct, some drivers explicitly told customersthat the

charge went to Domino’s or that it was not a gratuity. Luiken himself told some

customers, “There’s this delivery charge, but it’s not – that’s not actually a gratuity.” 

Those customers could not then reasonably believe it was. 

E.

Because varying circumstances guide the statutory standard, the certified class

does not meet the requirement of commonality. “Commonality requires the plaintiff

to demonstrate that the class members ‘have suffered the same injury.’” Wal-Mart

Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2551 (2011), quoting Gen. Tel. Co. of Sw. v.

Falcon, 457 U.S. 147, 157 (1982). 

[The plaintiffs’] claims must depend upon a common contention . . . . 

That common contention, moreover, must be of such a nature that it is

capable of classwide resolution – which means that determination of its

truth or falsity will resolve an issue that is central to the validity of each

one of the claims in one stroke.

Dukes, 131 S. Ct. at 2551. 

-9-
In Dukes, Wal-Mart appealed the class certification of female employees

seeking damages for discriminatory promotion practices. Dukes, 131 S. Ct. at 2549. 

Local managers generally had discretion to make pay and promotion decisions. Id.

at 2547. The Court concluded that “demonstrating the invalidity of one manager’s

use of discretion will do nothing to demonstrate the invalidity of another’s. A party

seeking to certify a nationwide class will be unable to show that all the employees’

Title VII claims will in fact depend on the answers to common questions.” Id. at

2554. The Court explained that the plaintiffs did not identify “a common mode of

exercising discretion that pervades the entire company.” Id. at 2554-55. 

Similarly, whether this type of charge might reasonably be construed as a

payment for personalservices in one transaction does not determine whether it might

reasonably be construed that way in another transaction. No decisive context

pervades Domino’s Minnesota deliveries. In Dukes, the Court approved Chief Judge

Kozinski’s summary of the differences among proposed class members’

circumstances. Id. at 2557, quoting Dukes v. Wal-Mart Stores, Inc., 603 F.3d 571,

652 (9th Cir. 2010) (Kozinski, C.J., dissenting). Domino’s offers a similar summary

of differences in delivery transactions. Those differences affect the reasonableness

of construing the delivery charge as a gratuity. Under Dukes, the district court here

erred in finding commonality, because the varied circumstances of deliveries prevent

“one stroke” determination. 

The cases Luiken cites in response to Dukes are inapplicable or distinguishable. 

None of their differences from Dukes are analogous here. In Gray v. Hearst

Communications, Inc., 444 F. Appx. 698 (4th Cir. 2011), purchasers of phone

directory advertising space alleged that the directory misrepresented the extent of its

distribution. The court found that differences in representations did not prevent

commonality because each contract contained the same distribution obligation. Id.

at 701. Certification was upheld because whether the defendant breached that

-10-
obligation could be resolved in one stroke. Id. at 702. Luiken argues that the

similarly decisive question here is whether Domino’s provided the statutorily-defined

notice. That question would be dispositive only if the delivery charge might

reasonably be construed as a payment for personal services. Gray is inapplicable

because the context determines the reasonableness of construing the delivery charge

as a gratuity. 

Luiken cites Sullivan v. DB Investments, Inc., 667 F.3d 273, 299-300 (3d Cir.

2011) (en banc), cert. denied 132 S. Ct. 1876 (2012), for his proposition that “the

focus at certification should be on the defendant’s conduct and whether that conduct

was the same as to all class members.” He again ignores the statute’s emphasis on

whether the charge might reasonably be construed as a payment for personalservices

and asserts that Domino’s was obligated to provide the statutorily-defined notice. 

Contrary to his assertion, Domino’s conduct across the class differed in critical ways

(depending on the context under Section 177.24's objective reasonable person

standard). Some of Domino’s employees told customers the charge was not a

gratuity, but some did not. Luiken also asserts that “Sullivan merely requires a class

proponent to show thatshe will meet ‘certain elements’ of her claimthrough common

proof.” See id. at 305. The common proof Luiken offers is the lack of notice, but the

issue of notice is part of the second step in applying the statute. It is not an absolute

requirement; first, the charge must be one that might reasonably be construed as a

payment for personalservices. Because the lack of notice is not dispositive, Sullivan

does not apply. 

Luiken also misapplies Ross v. RBS Citizens, N.A., 667 F.3d 900 (7th Cir.

2012). There, the plaintiffs alleged that Charter One enforced an unofficial policy

denying overtime pay. Ross, 667 F.3d at 903. That common claim is different from

Luiken’s. The common question – whether the defendant had an unofficial company

policy forcing plaintiffs to perform duties for which they were entitled to overtime –

-11-
had a common answer capable of resolution in one stroke. That was true despite the

“slight variations” between different locations. Ross, 667 F.3d at 909-10. Here, there

is no question resolvable by a single determination.

Certification of a Rule 23(b)(3) class also requiresthat “questions oflaw orfact

common to class members predominate over any questions affecting only individual

members.” Fed. R. Civ. P. 23(b)(3). The rule “tests whether proposed classes are

sufficiently cohesive to warrant adjudication by representation.” Amchem Products,

Inc. v. Windsor, 521 U.S. 591, 623 (1997). It is “far more demanding” than the

requirement of commonality. Id. at 623-24. 

When determining whether common questions predominate, a court

must conduct a limited preliminary inquiry, looking behind the

pleadings, but that inquiry should be limited to determining whether, if

the plaintiffs’ general allegations are true, common evidence could

suffice to make out a prima facie case for the class. While limited in

scope, this analysis should also be rigorous.

In re Zurn Pex Plumbing Prod. Liab. Litig., 644 F.3d 604, 618 (8th Cir. 2011)

(internal citations and quotation marks omitted). Common evidence cannot make out

a prima facie case for this class. 

III.

Domino’s argues that the certified class violates Article III standing

requirements and the Rules Enabling Act. Because the class certification is

unsustainable under Rule 23, there is no need to consider those arguments. See In re

St. Jude Med., 522 F.3d at 841. 

-12-
IV.

The varied context ofthe transactions made it unreasonable for some customers

to construe the delivery charge as a payment for personalservices, thereby preventing

one-stroke determination of a classwide question. The district court abused its

discretion by certifying the class. 

This court reversesthe class certification order ofthe district court and remands

for further proceedings consistent with this opinion.

______________________________

-13-