Court Opinion

ID: 3064666
Source: CourtListenerOpinion
Date Created: 2015-10-14 22:26:15.412876+00
Date Added: 2024-06-11T11:50:04.740366
License: Public Domain

FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

GINA D’ESTE, on behalf of herself            No. 07-56577
and others similarly situated,                  D.C. No.
                Plaintiff-Appellant,       CV-07-03206-JFW-
                 v.                               PLA
BAYER CORPORATION; DOES, 1-50,              Central District of
             Defendants-Appellees.             California,
                                             Los Angeles
                                                ORDER
                                             CERTIFYING
                                           DETERMINATIVE
                                              QUESTIONS
                                           OF LAW TO THE
                                             CALIFORNIA
                                          SUPREME COURT

                      Filed May 5, 2009

  Before: Daniel M. Freedman,* Andrew J. Kleinfeld and
             Sandra S. Ikuta, Circuit Judges.

                           ORDER

   We respectfully request that the Supreme Court of Califor-
nia exercise its discretion to decide the certified questions set
forth in Part II of this order.

  *The Honorable Daniel M. Friedman, Senior United States Circuit
Judge for the Federal Circuit, sitting by designation.

                              5191
5192                    D’ESTE v. BAYER CORP.
                   I.    Caption and Counsel

A.     The caption of the case is:

     No. 07-56577

     GINA D’ESTE, on behalf of herself and others simi-
     larly situated,

                                        Plaintiff - Appellant,

         v.

     BAYER CORPORATION; DOES, 1-50,

                                     Defendants - Appellees.

B.     The names and addresses of counsel for the parties are:

For Plaintiffs-Appellants:     James A. Jones, Gillespie,
                               Rozen, Watsky & Jones, P.C.,
                               3402 Oak Grove Ave., Suite 200,
                               Dallas, Texas, 75204.

For Defendants-Appellees: Melinda S. Riechert, Morgan,
                          Lewis & Bockius LLP, 2 Palo
                          Alto Square, 3000 El Camino
                          Real, St. 700, Palo Alto, Califor-
                          nia 94306-2122;

                               Thomas M. Peterson and Shannon
                               B. Nakabayashi, Morgan, Lewis
                               & Bockius LLP, One Market,
                               Spear Tower, San Francisco, Cal-
                               ifornia 94105;

                               Jennifer White-Sperling, Morgan,
                               Lewis & Bockius LLP, 5 Park
                     D’ESTE v. BAYER CORP.                  5193
                             Plaza, Suite 1750, Irvine, Califor-
                             nia, 92614.

C. Designation of the party to be deemed petitioner:
Plaintiff-Appellants

                  II.   Questions Certified

   Pursuant to Rule 8.548 of the California Rules of Court, a
panel of the United States Court of Appeals for the Ninth Cir-
cuit, before which this appeal is pending, requests that the
Supreme Court of California answer the questions presented
below. This court will accept the California Supreme Court’s
decisions on these questions. Our phrasing of the questions is
not intended to restrict the California Supreme Court’s con-
sideration of the case. The questions certified are:

1.   The Industrial Welfare Commission’s Wage Orders 1-
     2001 and 4-2001 define “outside salesperson” to mean
     “any person, 18 years of age or over, who customarily
     and regularly works more than half the working time
     away from the employer’s place of business selling tangi-
     ble or intangible items or obtaining orders or contracts for
     products, services or use of facilities.” 8 Cal. Code Regs.,
     tit. 8, §§ 11010, subd. 2(J); 11040, subd. 2(M). Does a
     pharmaceutical sales representative (PSR) qualify as an
     “outside salesperson” under this definition, if the PSR
     spends more than half the working time away from the
     employer’s place of business and personally interacts
     with doctors and hospitals on behalf of drug companies
     for the purpose of increasing individual doctors’ prescrip-
     tions of specific drugs?

2.   In the alternative, Wage Order 4-2001 defines a person
     employed in an administrative capacity as a person whose
     duties and responsibilities involve (among other things)
     “[t]he performance of office or non-manual work directly
     related to management policies or general business opera-
5194                 D’ESTE v. BAYER CORP.
    tions of his/her employer or his employer’s customers”
    and “[w]ho customarily and regularly exercises discretion
    and independent judgment.” Cal. Code Regs., tit. 8
    § 11040, subd. 1(A)(2)(a)(I), 1(A)(2)(b). Is a PSR, as
    described above, involved in duties and responsibilities
    that meet these requirements

                  III.   Statement of Facts

   Gina D’Este worked for Bayer Pharmaceuticals for thirteen
years as a pharmaceutical sales representative. Bayer’s job
description states that her job was to “[p]romote and sell
Bayer Pharmaceutical Division’s anti-infective products to
targeted offices and hospital-based, high-potential physicians,
including specialists.” Bayer gave D’Este a roster of doctors
and hospitals in her area and a list of Bayer products for
which she was responsible. D’Este’s job was to communicate
information about her Bayer products to her roster of doctors
and seek their non-binding commitment to write prescriptions
for those products. She was also responsible for communicat-
ing with hospitals in her territory to influence them to add the
Bayer products for which she was responsible to their formu-
laries.

   Bayer refers to its PSRs as a sales force and individual
PSRs as salespersons; Bayer also trains its PSRs in what it
calls sales skills. Specifically, Bayer trained D’Este in a “con-
sultative” selling method of engaging doctors in a dialogue
about the products in order to influence their prescribing
behavior. D’Este was trained on a message and had to adhere
closely to the information provided by Bayer about its prod-
ucts. Otherwise, she had the freedom to develop her own
strategy for communicating with and influencing doctors.
D’Este learned to customize her sales presentations “based
upon physician style, time constraints, prescribing habits, and
managed care status.” D’Este also received training in how to
handle questions from doctors about the different products for
which she was responsible. D’Este was responsible for plan-
                     D’ESTE v. BAYER CORP.                  5195
ning speaking events and could choose the speakers from the
list provided by Bayer.

   Bayer compensated PSRs in part based on their success in
increasing sales of Bayer products in their areas. Bayer
tracked prescriptions written and filled for D’Este’s list of
products by the doctors in D’Este’s territory. D’Este was
rewarded when sales figures exceeded certain quotas. Accord-
ing to Bayer, D’Este earned between $81,000 and $103,000
per year during the 2000-2004 period at issue here.

   Although Bayer describes D’Este and other PSRs as a sales
force, PSRs do not complete sales transactions with doctors.
PSRs do not receive any payment from doctors for Bayer
products, nor do they sign binding contracts for sales with
doctors. Doctors do not place orders for Bayer products with
PSRs. Rather, PSRs are limited to influencing doctors to
increase the number of prescriptions they write for each drug.
D’Este also solicited hospitals to include Bayer pharmaceuti-
cals on their formularies, and on occasion signed contracts
with hospitals to do so. The hospitals, however, would buy
the pharmaceutical products from a wholesaler, not from
D’Este or Bayer.

   As a PSR, D’Este had flexibility regarding how she spent
her day. She developed her own schedule for meeting with the
doctors on her list. She received little or no daily supervision,
and saw her manager once every six to eight weeks. D’Este
could take care of personal obligations during the day,
although Bayer expected her to make eight to ten calls per day
on doctors in the field. D’Este routinely worked more than
eight hours a day and more than forty hours a week. She also
often worked weekends. In addition, her job required that she
frequently have lunch and dinner with doctors. During the
course of her employment, she regularly had working lunches
with doctors at least three times a week.

   During the course of her employment at Bayer, D’Este was
treated as an exempt employee. She did not receive any addi-
5196                   D’ESTE v. BAYER CORP.
tional overtime compensation or meal breaks, but she was
also not required to keep or maintain set hours.

   In 2004, D’Este left Bayer after Bayer reduced its work-
force. In 2007, she brought this lawsuit in California state
court on behalf of herself and others similarly situated, claim-
ing she had been wrongly classified as an exempt employee
and was entitled to back pay and damages under California’s
wage and hour laws. The district court granted summary judg-
ment in favor of Bayer, finding that D’Este was exempt under
California’s outside sales exemption and declining to reach
the question whether D’Este was exempt under California’s
administrative exemption. D’Este timely appealed.1

              IV.    Explanation of Our Request

   The question whether PSRs are exempt under California’s
outside salesperson and administrative exemptions is the cen-
tral issue in multiple class action lawsuits in the Ninth Circuit
as well as in other circuits. In addition to the three cases pend-
ing before the Ninth Circuit, at least four other class action
suits have been filed in federal court in the Central District of
California. See Yacoubian v. Ortho-McNeil Pharm., Inc., No.
07-00127 (C.D. Cal. Feb. 6, 2009); Delgado v. Ortho-McNeil,
Inc., No. 07-00263 (C.D. Cal. Feb. 6, 2009); Rivera v. Scher-
ing Corp., No. 08-1742 (C.D. Cal. Aug. 14, 2008); Brody v.
Astrazeneca Pharm., LP, No. 06-6862 (C.D. Cal. June 11,
2008). In addition, a class-action arising under California law
has been filed in federal court in the Southern District of New
  1
    On appeal, this case was consolidated with two other cases pending
before the Ninth Circuit, Barnick v. Wyeth, 07-56684, and Menes v.
Roche, 08-55286, both raising nearly identical state law claims. Respect-
ing the California Supreme Court’s limited resources, for the purposes of
this certification order, we request that the California Supreme Court
resolve only the questions presented in D’Este’s claim. If the California
Supreme Court decides these questions, we will resolve the remaining
cases in light of the California Supreme Court’s answers to the certified
questions.
                     D’ESTE v. BAYER CORP.                  5197
York. See In re Novaris Wage & Hour Litig., No. 06-1794,
2009 WL 63433 (S.D.N.Y. Jan. 12, 2009).

   In light of the scope of the pending litigation regarding the
classification of PSRs under California Labor Code section
1171, we respectfully submit that the questions we pose are
worthy of a decision by the California Supreme Court. See
Cal. Rules of Court 8.548(a). The answers given by the Cali-
fornia Supreme Court will dispose of the three pending
appeals currently before the Ninth Circuit, as well as guide
the decisions in the other federal cases applying California
law.

                               A

  In order to assist the California Supreme Court in evaluat-
ing our request, we briefly explain why we believe there is no
controlling precedent or clear state court guidance on the
question whether PSRs are exempt under the outside salesper-
son exemption.

   Section 510 of the California Labor Code requires employ-
ers to compensate non-exempt employees for overtime work.
See Cal. Labor Code § 510(a). However, section 1171 of the
California Labor Code exempts an employee who is “em-
ployed as an outside salesman” from that requirement. See
Cal. Labor Code § 1171. The IWC’s Wage Orders 4-2001 and
1-2001 define “outside salesperson” as someone whose job
involves “selling tangible or intangible items or obtaining
orders or contracts for products, services or use of facilities.”
8 Cal. Code Regs., tit. 8, §§ 11010, subd. 2(J); 11040, subd.
2(M). The regulations do not further define these key terms,
the IWC provides no authoritative guidance regarding how
these regulations apply to PSRs, and the California Supreme
Court has not construed the particular terms “selling” and
“obtaining orders” so as to be instructive in this case.

   In the absence of any authoritative state construction, we
turned first to the plain language of section 1171 and Wage
5198                 D’ESTE v. BAYER CORP.
Orders 1-2001 and 4-2001. In our view, neither the plain lan-
guage of the statute nor the language of the interpretive orders
answer the question whether a PSR is an outside salesperson.
As noted above, the IWC’s Wage Orders 4-2001 and 1-2001
define “outside salesperson” as someone whose job involves
“selling tangible or intangible items or obtaining orders or
contracts for products, services or use of facilities.” 8 Cal.
Code Regs., tit. 8, §§ 11010, subd. 2(J); 11040, subd. 2(M)
(emphasis added). D’Este claims that the ordinary meaning of
“selling” is the transfer of property for consideration. Simi-
larly, D’Este argues that “obtaining orders or contracts”
means acquiring a written direction to deliver property or
obtaining a contractual agreement to exchange property for
consideration. In other words, D’Este contends that outside
salespersons must consummate their own sales, and, because
PSRs do not, they are not outside salespersons.

   Bayer argues that the plain language of the wage order does
not require employees to consummate their own sales. Bayer
contends that the exemption covers employees who engage in
any part of the multiple-step process of selling or obtaining
orders, and therefore does not require that the salesperson
have the capacity to close a sale or receive a completed order.
According to Bayer, D’Este is involved in selling because she
is involved in the sales process and engaged primarily in
“sales activities.” See Walsh v. Ikon Office Solutions, Inc., 148
Cal. App. 4th 1440, 1454 (Cal. Ct. App. 2007) (referring to
cold calls, client visits, and face-to-face contacts as “sales
activities”). Moreover, Bayer argues that D’Este is also
involved in “obtaining orders” because she influences doctors
to write prescriptions, which are “orders” under California
law. See Cal. Bus. & Prof. Code § 4040(a) (defining a pre-
scription as “an oral, written, or electronic transmission order”
that is “given individually for the person . . . for whom
ordered” and “[i]ssued by a physician” or other medical per-
sonnel).

   In reviewing these arguments, we have concluded that the
plain language of the regulation is susceptible to both inter-
                    D’ESTE v. BAYER CORP.                  5199
pretations. The California Supreme Court’s guidance that “ex-
emptions from statutory mandatory overtime provisions are
narrowly construed,” Ramirez v. Yosemite Water Co., 20 Cal.
4th 785, 794 (1999); accord Nordquist v. McGraw Hill
Broad. Co., 32 Cal. App. 4th 555, 562 (Cal. Ct. App. 1995),
does not provide clear direction regarding which of the two
interpretations the California Supreme Court would determine
to be correct.

   We have also considered whether federal interpretations of
the parallel exemption under the Fair Labor Standards Act, 29
U.S.C. § 213(a)(1), provide any guidance in interpreting Cali-
fornia’s outside sales exemption. The California Court of
Appeal has held that “[b]ecause the California wage and hour
laws are modeled to some extent on federal laws, federal
cases may provide persuasive guidance.” Nordquist, 32 Cal.
App. 4th at 562. However, “where the language or intent of
state and federal labor laws substantially differ, reliance on
federal regulations or interpretations to construe state regula-
tions is misplaced.” Ramirez 20 Cal. 4th at 798; accord Moril-
lion v. Royal Packing Co., 22 Cal. 4th 575, 594 (2000). In
Ramirez, the California Supreme Court noted that the IWC’s
interpretation of the outside sales exemption does not closely
track the language of the analogous federal regulations defin-
ing an outside salesperson. Ramirez, 20 Cal. 4th at 796. Com-
pare 29 C.F.R. § 541.500(a) (2004) (defining outside
salesperson as “any employee whose primary duty is making
sales . . . or obtaining orders or contracts for services or for
the use of facilities for which a consideration will be paid by
the client or customer; and [w]ho is customarily and regularly
engaged away from the employer’s place or places of busi-
ness in performing such primary duty”) (internal formatting
altered and emphasis added), with 8 Cal. Code Regs. § 11040
subd. 2(M) (“any person, 18 years of age or over, who cus-
tomarily and regularly works more than half the working time
away from the employer’s place of business selling tangible
or intangible items or obtaining orders or contracts for prod-
ucts, services or use of facilities”) (emphasis added); see gen-
5200                D’ESTE v. BAYER CORP.
erally Cal. Div. of Labor Standards Enforcement, Opinion
Letter, Outside Salesman (July 14, 1994), available at
http://www.dir.ca.gov/dlse/opinions/1994-07-14.pdf. There-
fore, interpretations of the federal outside sales exemption
under the Fair Labor Standards Act, including federal regula-
tions and case law, may be of limited assistance. See Ramirez,
20 Cal. 4th at 797 (“By choosing not to track the language of
the federal exemption and instead adopting its own distinct
definition of ‘outside salespersons,’ the IWC evidently
intended to depart from federal law and to provide, at least in
some cases, greater protection for employees.”).

   Given the importance of correctly interpreting the outside
salesperson exemption under California law, and the lack of
authoritative guidance, we respectfully request that the Cali-
fornia Supreme Court provide us with a ruling on this issue.

                               B

   In the alternative, or if the California Supreme Court deter-
mines that the outside salesperson exemption is not applicable
to PSRs, we ask the California Supreme Court to answer our
second question regarding the applicability of two key sec-
tions of the administrative exemption to pharmaceutical sales
representatives.

   Wage Order No. 4-2001 provides a detailed multi-element
definition of “persons employed in an administrative capaci-
ty,” which delineates the scope of the administrative excep-
tion. At issue in this case is: (1) whether, under California
law, D’Este was engaged in work that “directly related to
management policies or general business operations of his/her
employer or his employer’s customers”; and (2) whether she
“customarily and regularly exercise[d] discretion and inde-
pendent judgment.” 8 Cal. Code Regs., tit. 8, § 11040, subd.
1(A)(2)(a)(I), 1(A)(2)(b); accord Combs v. Skyriver
Commc’ns, Inc., 159 Cal. App. 4th 1242, 1254 (Cal. Ct. App.
2008).
                    D’ESTE v. BAYER CORP.                5201
   In determining whether D’Este was engaged in work that
is “directly related to management polices or general business
operations,” we are guided by Wage Order 4-2001, which
provides that “[t]he activities constituting exempt work and
non-exempt work shall be construed in the same manner as
such terms are construed in the following regulations under
the Fair Labor Standards Act effective as of the date of this
order: 29 C.F.R. Sections 541.201-205 . . . .” 8 Cal. Code
Regs., tit. 8, § 11040 subd. 1(A)(2)(f); accord Bothell v.
Phase Metrics, Inc., 299 F.3d 1120, 1129 (9th Cir. 2002). The
applicable federal regulation, 29 C.F.R. § 541.205(b) (1998),
explains that the “administrative operations of the business
include the work performed by so called white-collar employ-
ees engaged in ‘servicing’ a business.” This work includes
“promoting sales.” In addition, an employee must “perform
work of substantial importance to the management or opera-
tion of the business.” The parties dispute whether D’Este was
“promoting sales” and whether she was engaged in “work of
substantial importance to the management or operation of the
business” as a matter of California law. No California case
has addressed this issue.

   Nor is there any clear state guidance on the second ques-
tion, whether a PSR in D’Este’s position “customarily and
regularly exercise[d] discretion and independent judgment.” 8
Cal. Code Regs., tit. 8, §11040, subd. 1(A)(2)(a)(1),
1(A)(2)(b). The California Court of Appeal has held that an
employee who merely relies on “skills and knowledge” does
not qualify for this exemption. Nordquist, 32 Cal. App. 4th at
563. In order to exercise “discretion and independent judg-
ment,” the employee must be involved in making decisions
related to “matters of consequence,” and which are of “real
and substantial significance to the policies or general opera-
tions of the business of the employer or the employer’s cus-
tomers.” Id., see also Combs, 159 Cal. App. 4th at 1254. In
this case, the record establishes that D’Este had significant
autonomy and decisionmaking authority with respect to
designing and implementing a strategy for influencing doc-
5202                  D’ESTE v. BAYER CORP.
tors’ prescribing behavior and hospitals’ decisions regarding
their formularies. On the other hand, D’Este’s discretion was
substantially constrained by Bayer’s control over the message
and target audience. Neither the language of the exemption
nor the case law clearly answers the question whether, under
California law, D’Este exercised “discretion and independent
judgment” in this context. The one directly applicable federal
case decided prior to the adoption of Wage Order 4-2001,
Cote v. Burroughs Wellcome Co., 558 F.Supp. 883, 887 (E.D.
Pa. 1982), found that PSRs do exercise such responsibility.

  Accordingly, we respectfully urge the California Supreme
Court to address the applicability of the administrative
exemption to PSRs, which is an important issue of first
impression.

                V.   Accompanying Materials

   The clerk of this court is hereby directed to file in the Cali-
fornia Supreme Court, under official seal of the United States
Court of Appeals for the Ninth Circuit, copies of all relevant
briefs and excerpts of the record, and an original and ten cop-
ies of the request with a certification of service on the parties,
pursuant to California Rules of Court 8.548(c), (d).

   Further proceedings before us are stayed pending the Cali-
fornia Supreme Court’s decision regarding certification, and
in the event the California Supreme Court accepts certifica-
tion, pending our receipt of the answers to the questions certi-
fied. Submission of this case is withdrawn.

   After the California Supreme Court makes its determina-
tion whether to accept certification of these questions, the par-
ties shall file a joint report informing this court of the
decision. If the California Supreme Court accepts the certified
questions, the parties shall file a joint status report to our court
every six months after the date of acceptance, or more fre-
quently if circumstances warrant.
                     D’ESTE v. BAYER CORP.                  5203
   If the California Supreme Court denies the request for certi-
fication, this case will be resubmitted automatically upon
notice of that denial. If the California Supreme Court accepts
the request for certification, the case will be resubmitted auto-
matically upon receipt of the California Supreme Court’s
answer to the certified question.

SO ORDERED.
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