Opinion ID: 6497769
Heading Depth: 3
Heading Rank: 1

Heading: FAS’s Business Model

Text: FAS is in the business of pre-foreclosure property preservation for the residential mortgage industry. But FAS, itself, does not perform pre-foreclosure propertypreservation services for its clients. Rather, it contracts with vendors who perform those services. Some vendors are sole proprietorships; others are corporations. Vendors have varying numbers of employees, from at most a few to up to sixty-five. Some work almost exclusively for FAS; others perform work for multiple companies, including FAS’s clients and competitors. 1 The joint motion to amend case caption is GRANTED. FAS is now known as Xome Field Services, LLC. BOWERMAN V. FIELD ASSET SERVICES 9 FAS exercises some control over the vendors’ completion of their work. It requires that jobs be completed within seventy-two hours; provides detailed instructions for particular tasks; and imposes insurance, photo documentation, pricing, and invoicing requirements through its Vendor Qualification Packets (“VQPs”) and work orders. It offers training, although the parties dispute whether the training is mandatory. And FAS monitors the vendors’ job performance through vendor scorecards and Approved Vendor Quality Policies (“AVQPs”), which implement a discipline scale for vendor noncompliance with FAS’s or FAS’s clients’ instructions. FAS classifies all its vendors as independent contractors. B. The Initiation of the Lawsuit and Class Certification Named Plaintiffs Fred and Julia Bowerman 2 sued in 2013, seeking damages and injunctive relief. Fred Bowerman was the sole proprietor of BB Home Services, which contracted with FAS as a vendor. The operative complaint alleged that FAS willfully misclassified Bowerman and members of the putative class as independent contractors rather than employees, resulting in FAS’s failure to pay overtime compensation and to indemnify them for their business expenses. The complaint also sought class certification under Federal Rule of Civil Procedure 23(b)(3), which the district court granted for a class defined as: 2 The district court determined that Julia Bowerman did not fall within the class definition. That determination is not challenged on appeal. 10 BOWERMAN V. FIELD ASSET SERVICES All persons who at any time from January 7, 2009 up to and through the time of judgment (the “Class Period”) (1) were designated by FAS as independent contractors; (2) personally performed property preservation work in California pursuant to FAS work orders; and (3) while working for FAS during the Class Period, did not work for any other entity more than 30 percent of the time. The class excludes persons who primarily performed rehabilitation or remodel work for FAS. The parties later agreed to fix the class period as beginning on January 7, 2009, and ending on December 20, 2016. FAS argued that the proposed class failed Rule 23(b)(3)’s predominance requirement because of the need for individualized damages hearings if liability were found. The district court rejected this argument, quoting our decision in Leyva v. Medline Industries Inc., 716 F.3d 510 (9th Cir. 2013), for the proposition that “[t]he presence of individualized damages cannot, by itself, defeat class certification under Rule 23(b)(3).” Id. at 514. C. Summary Judgment In March 2017, the district court granted partial summary judgment in favor of the class members, finding that they had been misclassified as independent contractors and that as a result, FAS was liable to them for failing to pay overtime and business expenses. In making that determination, the district court relied on California’s common law test for distinguishing between employees and independent contractors, as outlined in S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 769 P.2d 399 BOWERMAN V. FIELD ASSET SERVICES 11 (Cal. 1989). Under Borello, “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.” Id. at 404 (citation and alteration omitted). But even though “the right to control work details is the ‘most important’ or ‘most significant’ consideration, . . . several ‘secondary’ indicia of the nature of a service relationship” also bear on the employee and independent contractor distinction. Id. For example, Borello noted that “strong evidence in support of an employment relationship is the right to discharge at will, without cause.” Id. (citation and alteration omitted). It also listed the following as secondary indicia of an employment versus independent contractor relationship:
engaged in a distinct occupation or business;
whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;
occupation;
supplies the instrumentalities, tools, and the place of work for the person doing the work;
are to be performed; 12 BOWERMAN V. FIELD ASSET SERVICES
time or by the job;
regular business of the principal; and
creating the relationship of employer- employee. Id. Borello explained that “[g]enerally, the individual factors cannot be applied mechanically as separate tests; they are intertwined and their weight depends often on particular combinations.” Id. (citation and alteration omitted). Applying this test, the district court granted partial summary judgment on the misclassification issue because it was “convinced that the overwhelming evidence on the most important factor of the [Borello] test”—that is, control— “tip[ped] the scales clearly in favor of finding an employee relationship.” In particular, the district court found that “[n]o reasonable juror could review the Vendor Packets, the work orders, the trainings, the Vendor Profiles, the discipline, and the Vendor scorecards, and conclude [that] any of the Vendors are independent contractors.” Despite its conviction that the control factor supported the class, the district court’s analysis of Borello’s secondary factors was materially different. The district court stated that if it “ignored the right to control analysis, and focused solely on the secondary factors, [it] would not grant summary judgment.” In fact, the district court found that many of the secondary factors indicated independent contractor status, including the parties’ intent to create an independent contractor relationship, the class members’ opportunity for profit or loss, and the class members’ employment of BOWERMAN V. FIELD ASSET SERVICES 13 assistants. Several of the other secondary factors implicated genuine disputes of material fact. 3 But the district court found that FAS’s “right to control swamp[ed] [the secondary] factors in importance, and [some] secondary factors favor[ed] plaintiffs’ argument that [they] are employees.” Thus, the district court granted partial summary judgment to the class on the misclassification issue. The district court also granted partial summary judgment to the class on their overtime and expense reimbursement claims, which were derivative of the misclassification claim. In doing so, the district court relegated the issues of “whether a particular [class member] worked overtime on a specific day” (or ever), and “whether a specific expense” (or any) “was reasonable and necessary” to the damages phase of the trial, rather than the liability phase. D. The Bellwether Jury Trial In July 2017, the district court held a bellwether jury trial to determine damages for Named Plaintiff Fred Bowerman and ten of the 156 class members. 4 The trial lasted eight 3 For example, the district court was “not sure how to evaluate” whether FAS supplied the instrumentalities, tools, and place of work because “[b]oth parties present[ed] evidence supporting their positions.” 4 After trial, FAS renewed its motion for judgment as a matter of law, arguing that the verdict as to five of the eleven claimants in their personal capacity was improper because “any expenses incurred in connection with the businesses of [those] Five Claimants were incurred by the corporate form, and not incurred personally by the claimant.” The district court correctly denied the motion. Under California law, a plaintiff can incur expenses even without ultimately paying them. See, e.g., Cochran v. Schwan’s Home Serv., Inc., 176 Cal. Rptr. 3d 407, 412– 13 (Ct. App. 2014) (“If an employee is required to make work-related 14 BOWERMAN V. FIELD ASSET SERVICES days, as the class members’ damages were neither evident from any records detailing their overtime hours and reimbursable expenses, nor calculable by any common method. After the bellwether trial, FAS filed a second motion for class decertification, which the district court construed as a motion for leave to file a motion for reconsideration. Although the district court denied the motion, it acknowledged the difficulty of calculating every class member’s damages on an individualized basis with no method for doing so other than the class members’ individualized testimony, noting that “[t]he damages phase of this class action [will be] far messier than promised by plaintiffs’ counsel when” the case was certified. 5 E. Appeal and Stay of Proceedings After the California Supreme Court’s Decision in Dynamex Between the district court’s summary judgment decision and FAS’s first notice of appeal in July 2018, the California Supreme Court decided Dynamex Operations West, Inc. v. Superior Court, 416 P.3d 1 (Cal. 2018), which established a different test for distinguishing between employees and independent contractors in certain contexts, commonly known as “the ABC test.” Id. at 34. Unlike the Borello test, “[t]he ABC test presumptively considers all workers to be employees, and permits workers to be classified as calls on a personal cell phone, then he or she is incurring an expense for purposes of [California Labor Code §] 2802. It does not matter whether the phone bill is paid for by a third person, or at all.”). 5 As noted above, the judgment as to the bellwether trial was certified under Federal Rule of Civil Procedure 54(b). The district court was referencing the difficulties in the bellwether trial that would also be present (although obviously on a much greater scale) in the damages phase of the trial for the remaining class members. BOWERMAN V. FIELD ASSET SERVICES 15 independent contractors only if the hiring business demonstrates that the worker in question satisfies each of three conditions”: (a) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of the work and in fact; and (b) that the worker performs work that is outside the usual course of the hiring entity’s business; and (c) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed. Id. We certified the issue of Dynamex’s retroactivity to the California Supreme Court in Vazquez v. Jan-Pro Franchising International, Inc., 939 F.3d 1045 (9th Cir. 2019), and held FAS’s appeal in abeyance. The California Supreme Court held that Dynamex does apply retroactively, Vazquez v. Jan-Pro Franchising Int’l, Inc., 478 P.3d 1207, 1208 (Cal. 2021), and we affirmed that applying Dynamex retroactively comports with due process, Vazquez v. Jan-Pro Franchising Int’l, Inc., 986 F.3d 1106, 1117–18 (9th Cir. 2021). F. The Interim Award of Attorneys’ Fees In July 2018, class counsel moved in the district court for an award of attorneys’ fees and related expenses, with no notice to the class members. In September 2018, the district 16 BOWERMAN V. FIELD ASSET SERVICES court issued an interim order stating that the record was “not sufficient to tell whether all of the time plaintiffs [sought] to have compensated for 32 time-billers was reasonably incurred.” Accordingly, the district court ordered an incamera inspection of class counsel’s contemporaneous time records. Although FAS sought access to those records, the district court never allowed that access. In November 2018, the district court issued an interim fee award of $5,173,539.50. It did not “summarize the facts or posture of the case, except to say that it include[d] novel issues that the Ninth Circuit [would] address and that it was aggressively defended.” The district court thus began by awarding the lead counsel $3,381,540, which it justified with the following brief explanation: The hourly rates they seek . . . are well within the reasonable range. The amount of time they billed in each of the categories is also reasonable, as lead counsel in small firms must not only coordinate all of the work in the case to ensure it is geared to effective advocacy at trial but must also bear the laboring oar on many aspects of the litigation. The district court then awarded non-lead counsel $1,792,138.50 (they sought $1,991,265). It justified that decision with another brief explanation: The contemporaneous records of plaintiffs’ counsel show that the 28 timekeepers were performing substantive work with a minimum of overlap. However, it is inherently inefficient to have so many people BOWERMAN V. FIELD ASSET SERVICES 17 working on a legal project. With such a large group, it is inevitable that information needs to be shared, common issues discussed, and overlapping tasks performed. I will reduce the sum requested for the 28 timekeepers, $1,991,265, by 10% for that inefficiency. See Moreno v. City of Sacramento, 534 F.3d 1106, 1112 (9th Cir. 2008) (“[T]he district court can impose a small reduction, no greater than 10 percent—a ‘haircut’—based on its exercise of discretion and without a more specific explanation.”). The district court reserved decision on whether to apply a multiplier.