Opinion
G043743 Super. Ct. No. 30-2008-00233464
08-29-2011
MANUEL LIZARRAGA et al., Plaintiffs and Appellants, v. CBC RESTAURANT CORPORATION Defendant and Respondent.
Clark & Markham, David R. Markham, R. Craig Clark and James M. Treglio; United Employees Law Group and Walter Haines for Plaintiffs and Appellants. Morrison & Foerster, Karen J. Kubin, Miriam A. Vogel, Samantha P. Goodman and Tritia M. Murata; DLA Piper and Luanne Sacks for Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
OPINION
Appeal from an order of the Superior Court of Orange County, Gail Andrea Andler, Judge. Affirmed.
Clark & Markham, David R. Markham, R. Craig Clark and James M. Treglio; United Employees Law Group and Walter Haines for Plaintiffs and Appellants.
Morrison & Foerster, Karen J. Kubin, Miriam A. Vogel, Samantha P. Goodman and Tritia M. Murata; DLA Piper and Luanne Sacks for Defendant and Respondent.
Plaintiffs Manuel Lizarraga and Francisco Martinez appeal from an order denying their class certification motion. They sought to certify a class of restaurant managers allegedly misclassified as exempt from overtime wage laws by defendant CBC Restaurant Corporation. The court found common issues did not predominate — whether the managers were truly exempt required "a fact-specific, individualized inquiry . . . ." It permissibly exercised its discretion based on substantial evidence the managers had varying levels of authority. We affirm.
FACTS
The Complaint and the Class Certification Motion
In the operative complaint, plaintiffs alleged defendant had employed them as "Managers" at its Corner Bakery restaurants. On behalf of a class of similarly situated current and former Corner Bakery managers in California, plaintiffs asserted three causes of action.
First, plaintiffs alleged defendant violated the overtime wage laws. (See Lab. Code, §§ 510, 1194, 1198.) Defendant required its managers to work more than 40 hours per week, but did not pay them overtime compensation because it wrongly classified them as exempt "executive[s]."
Second, plaintiffs alleged defendant violated the meal and rest period laws. (See Lab. Code, §§ 226.7, 512.) "On occasions too numerous to list," managers worked more than a 5-hour period without receiving a 30-minute meal period and more than a 4-hour period without receiving a 10-minute rest period (or extra compensation in lieu thereof).
Finally, plaintiffs alleged defendant violated Business and Professions Code section 17200. They alleged defendant engaged in unfair practices by denying overtime compensation and meal and rest periods to its managers.
Plaintiffs moved for class certification. They offered evidence to show the class members were ascertainable and numerous (200 plus managers); plaintiffs had claims typical of the class; and plaintiffs and their counsel could adequately represent the class. And they advanced two theories why common issues predominated in this case.
Plaintiffs submitted some of their evidence in response to the court's sua sponte order for further briefing. Defendant also submitted supplemental briefing and evidence.
First, plaintiffs contended a common issue existed whether class members "manage[d] a recognized department or subdivision" of defendant. Plaintiffs asserted that "although [defendant] called the Class Members 'Managers,' in reality they reported to a General Manager on site who actually ran the restaurants for 10 hours a day, and who made all important management decisions." (Fn. omitted.) They offered deposition testimony from defendant's vice-president of operation services, who stated: (1) Each restaurant has one "general manager" and two or more "managers"; (2) "the performance of the cafe is the responsibility of the general manager," who prepares the profit and loss form; (3) the managers report to the general manager and the area director; (4) "[i]n most cases" the general manager assesses the managers' performance; (5) "in most cases" the general manager sets the work schedule for managers and employees; and (6) the general manager has "final approval" over employee hiring.
Second, plaintiffs contended a common issue existed whether class members "act[ed] with independent discretion and judgment . . . ." They asserted "all the duties and tasks performed by the Class Members, including those called by [defendant] as 'managerial,' are performed without independent judgment and discretion." They offered supporting evidence. Defendant's representative testified at a deposition that defendant uses "standardized training manuals" to train the managers, who are expected "to operate the restaurant in accordance with the policies and procedures that they've been taught in their training." Plaintiff Lizarraga stated in a declaration that during his three-month training period, he "was given a large training manual, that told me how to do my job. We [manager trainees] were told to keep these manuals . . . for reference when we were employed as Managers and needed to look up how to do something." The 200-page training manual described how to perform a litany of tasks in exacting detail. Plaintiff Lizarraga testified at his deposition that defendant trained him exhaustively about food preparation, recipes, food waste, meal portions, cash registers operation, food service, beverages, condiments, and restaurant cleanliness.
In opposition, defendant contended plaintiffs' claims raised individual questions whether the managers were properly classified as exempt. Defendant offered evidence contradicting plaintiffs' two theories.
First, defendant offered evidence to show general managers and managers shared duties and authority. The vice-president stated in a declaration the general managers "vary"; some "allow and expect the managers to perform the same managerial tasks that they perform." To bear that out, defendants offered declarations from 35 Corner Bakery personnel. Current and former managers stated they had: "as much authority and responsibility as a General Manager"; "free rein to do whatever I needed to do"; "a lot of autonomy"; and "virtually all the responsibilities and authorities that a General Manager has." One made "many managerial decisions without having to consult" the general manager. Another noted "the General Manager does not do anything that I as a manager do not do." Some managers had authority over hiring, employee scheduling, profit and loss reporting, placing orders, supervising catering, sponsoring fundraisers, collecting customer debts, disciplining employees, and communicating with the corporate office. In some locations, managers "can oversee the entire shift from beginning to end." In other locations, managers could supervise the restaurants without a general manager for months. Moreover, plaintiff Lizarraga testified at deposition he was responsible for "[r]unning the restaurant in the absence of the general manager." Plaintiff Martinez testified at his deposition that he was "responsible for everything" when no other manager was on duty.
Second, defendant offered evidence to show managers exercised discretion. The vice-president stated in his declaration defendant "expects that its cafe managers will regularly exercise their discretion and independent judgment in carrying out [their] responsibility" "to manage all aspects of the cafe business." Managers exercise their discretion over ordering, scheduling, and "dealing with the myriad of unexpected problems that arise at any time." The managers confirmed this in their declarations. One manager initiated promotional opportunities and the hire of a catering administrator. Another "had to constantly use [his] discretion" to "constantly adjust[] the prep lists, order guides, bake charts, and staffing," and on his own initiative "re-zoned the entire Cafe." And one noted, "Managers have a good deal of discretion regarding customer issues, and have the authority to do pretty much whatever it takes to make the guest happy."
Defendants also offered plaintiffs' deposition testimony. Plaintiff Martinez conceded the training manual "didn't provide [him] with precise instructions regarding how to handle each and every issue that might arise during the course of a shift"; rather, "[i]t just gave [him] the tools and background [he] needed so that [he] could exercise good judgment and discretion in handling any particular issue that might arise on any particular day." Plaintiff Lizarraga conceded his training gave him "the tools with which [he] could exercise appropriate discretion" and "exercise independent judgment." He agreed he "exercised [his] best judgment and discretion in deciding what issues to deal with" day to day, "[a]nd in deciding how to deal with them."
"Q: So that you would be able to manage and lead your back-of-the-house staff. Right? [¶] A: Correct. [¶] Q: Exercising independent judgment and discretion. Right? [¶] A: Correct. [¶] Q: Which Corner Bakery expected of you. Right? [¶] A: Correct. [¶] Q: And which you in fact did. [¶] A: Right."
The Order Denying Certification
The court denied the motion. It found: "Plaintiffs did not prove the existence of a well-defined community of interest among the putative class members. Specifically, Plaintiffs did not proffer admissible evidence sufficient to show that common questions of law or fact predominate over individualized ones.
"The dispositive issue as to all causes of action alleged by Plaintiffs is whether Defendant CBC properly classifies its managers as exempt under the executive exemption set forth in Wage Order 5-2001, Cal. Code Regs., tit. 8, § 11050(1)(B)(1). [Citation.] In determining whether a particular employee qualifies for the exemption, the Wage Order requires that '[t]he work actually performed by the employee during the course of the workweek must, first and foremost, be examined and the amount of time the employee spends on such work, together with the employer's realistic expectations and the realistic requirements of the job, shall be considered . . . .' [Citation.]
"For the reasons stated by Defendant CBC, in both its papers filed in opposition to the motion and its counsel's oral argument, the Court finds that common questions of law or fact do not predominate in this case. Substantial evidence proffered by Defendant CBC shows that there is vast variability among the individual managers and the work they perform from cafe to cafe, shift to shift, and week to week, depending on a host of workplace variables, workforce variables, individual manager variables, and other individual circumstances. [Citations.]
"Thus, whether any particular Corner Bakery manager is or was properly classified as exempt can only be determined on a case-by-case basis, based on a fact-specific, individualized inquiry that precludes a finding that common issues predominate. Moreover, Defendant CBC has a due process right to prove its defenses individually as to each manager. The class action mechanism does not appear to the Court to be the superior method for adjudicating these individualized issues.
"Plaintiffs argue that their proposed class should be certified based on two 'theories of the case.' First, Plaintiffs contend that the executive exemption does not apply to Corner Bakery managers because (1) they are the 'number two person' at their cafes and report to the general manager, and (2) Defendant CBC's organizational structure allegedly does not treat each cafe as a 'separate unit or subdivision.' Second, Plaintiffs contend that none of the job duties that Corner Bakery managers perform are exempt functions because all managers allegedly have the same training and are purportedly subject to the same company-wide policies and procedures, and they therefore do not exercise discretion or independent judgment. The Court finds that Plaintiffs have failed to proffer admissible evidence sufficient to show that either of their 'theories of the case' should proceed on a classwide basis."
DISCUSSION
"Code of Civil Procedure section 382 authorizes a class action when a plaintiff meets his or her burden to establish the existence of an ascertainable class and a well-defined community of interest. [Citations.] The Supreme Court has held, 'The community of interest requirement embodies three factors,'" including "'predominant common questions of law or fact.'" (Arenas v. El Torito Restaurants, Inc. (2010) 183 Cal.App.4th 723, 731 (Arenas).)
The predominance determination "is not entirely on the merits but on the procedural issue of what types of questions are likely to arise in the litigation — common or individual." (Arenas, supra, 183 Cal.App.4th at p. 732.) "'[W]e consider whether the theory of recovery advanced by the proponents of certification is, as an analytical matter, likely to prove amenable to class treatment. [Citations.]' A class action may be maintained even if each member must individually show eligibility for recovery or the amount of damages. But a class action will not be permitted if each member is required to 'litigate substantial and numerous factually unique questions' before a recovery may be allowed. [Citations.] The Court of Appeal has explained, '[I]f a class action "will splinter into individual trials," common questions do not predominate and litigation of the action in the class format is inappropriate.'" (Ibid.)
"The trial court's predominance findings are reviewed for an abuse of discretion. When the decision turns on disputed facts or inferences to be drawn from the facts, this court cannot substitute its decision for that of the trial court. [Citation.] If supported by substantial evidence, a trial court's ruling will not be disturbed unless improper criteria were used or erroneous legal assumptions were made." (Arenas, supra, 183 Cal.App.4th at pp. 731-732.) "Trial courts are afforded great discretion in ruling on class certification issues because they are better situated to evaluate the efficiencies and practicalities of permitting a group action." (Id. at p. 731.)
Plaintiffs' Two Class Action Theories
Here, as plaintiffs state, "The central question is whether the class members are properly considered exempt employees under the executive exemption provided by Wage Order 5-2001." "[T]he Industrial Welfare Commission (IWC) is empowered to promulgate administrative regulations known as 'wage orders' to regulate wages, work hours, and working conditions with respect to various industries and occupations." (Singh v. Superior Court (2006) 140 Cal.App.4th 387, 393.) Wage Order 5 is codified at California Code of Regulations, title 8, section 11050. (See Singh, at pp. 393-394.) It governs the "Public Housekeeping Industry," which includes restaurants. (§ 11050, subds. 1, 2(P)(1).) It requires employers to provide overtime pay (id., subd. 3(A)), meal periods (id., subd. 11), and rest periods (id., subd. 12).
All further undesignated section references are to title 8 of the California Code of Regulations.
Wage Order 5 exempts from these requirements "persons employed in . . . executive . . . capacities." (§ 11050, subd. 1(B).) It provides, "A person employed in an executive capacity means any employee: [¶] . . . [¶] (a) Whose duties and responsibilities involve the management of the enterprise in which he/she is employed or of a customarily recognized department or subdivision thereof; and [¶] (b) Who customarily and regularly directs the work of two or more other employees therein; and [¶] (c) Who has the authority to hire or fire other employees . . . ; and [¶] (d) Who customarily and regularly exercises discretion and independent judgment; and [¶] (e) Who is primarily engaged in duties which meet the test of the exemption." (Id., subd. 1(B)(1).)
On appeal, plaintiffs "assert that the putative class members cannot qualify for the executive exemption in Wage Order 5-2001 for either of the following wholly independent reasons: (i) they are not the actual managers of their Corner Bakery store, just subordinate assistants to the real manager (the General Manager); and (ii) the common set of tasks performed by the putative Class Members do not involve the requisite use of independent judgment and discretion." In other words, plaintiffs claim the managers do not meet prong (a) of Wage Order 5 because their "duties and responsibilities" do not "involve the management of" their restaurants. (§ 11050, subd. 1(B)(1)(a).) Nor do they meet prong (d) because they do not "customarily and regularly exercise[] discretion and independent judgment." (Id., subd. 1(B)(1)(d).)
The Court Permissibly Denied Certification
The court did not abuse its "great discretion" by finding common issues did not predominate under either theory. (Arenas, supra, 183 Cal.App.4th at p. 731.)
First, the court permissibly found individual questions abound as to whether the managers' "duties and responsibilities involve the management of" their restaurants. (§ 11050, subd. 1(B)(1)(a).) Plaintiffs assert "[t]his contention is plainly subject to common proof — "each store has a General Manager," and "when you have a 'top man' for a particular unit, others reporting and answering to him or her cannot qualify for the executive exemption." But they are hoisted by their own petard, for they recognize "[t]itles, of course, are not sufficient to determine exempt status." Plaintiffs cannot rely on "the mere conclusions" the managers were "'only'" subordinate underlings due to their job title. (United Parcel Service Wage & Hour Cases (2010) 190 Cal.App.4th 1001, 1018 (United Parcel)[involving Wage Order 9, with management prong similar to that of Wage Order 5].)
Both parties invoke federal employment regulations. The most apt recognizes "an assistant manager in a retail establishment may perform work such as serving customers, cooking food, stocking shelves and cleaning the establishment, but performance of such nonexempt work does not preclude the exemption if the assistant manager's primary duty is management. An assistant manager can supervise employees and serve customers at the same time without losing the exemption. An exempt employee can also simultaneously direct the work of other employees and stock shelves." (29 C.F.R. § 541.106(b) (2010).)
The parties offered conflicting evidence on whether general managers were the "'top men'" to whom managers always answered, across the board. Defendant's evidence showed many managers exercised "free rein" and "as much authority and responsibility as the general manager" — the managers' authority over a host of operations varied over time and across restaurants. The court credited this substantial evidence and found the individual fact questions trumped the common issues; "this court cannot now substitute its own judgment." (Arenas, supra, 183 Cal.App.4th at p. 734.)
Plaintiffs claim the California Division of Labor Standards Enforcement (DLSE) manual clarifies only one managerial employee per department or unit may be exempt. This claim suffers multiple defects. First, "DLSE manuals have been declared void by the Supreme Court for failing to comply with the Administrative Procedures Act (APA) [citation] and are therefore entitled to no weight or deference in any judicial interpretation of a wage order." (United Parcel, supra, 190 Cal.App.4th at p. 1011; accord Church v. Jamison (2006) 143 Cal.App.4th 1568, 1578-1579.) Second, the manual provision upon which plaintiffs rely most heavily concerns the definition of "department or subdivision," not the possible number of exempt managers — it appears to use the singular term "the managerial exempt employee" for convenience. (Enforcement Policies and Interpretations Manual, § 53.3.1 (2002).) Third, the manual relies on outdated federal regulations that were revised in 2004. (Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees, 69 Fed.Reg. 22122-01 (Apr. 23, 2004).) The current federal regulations now provide in discussing the "direct the work of two or more other employees" prong: "The supervision can be distributed among two, three or more employees." (29 C.F.R. § 541.104(b) (2010).)
Similarly, the court did not err by concluding individual questions predominated as to whether managers exercised "discretion and independent judgment." (§ 11050, subd. 1(B)(1)(d).) Plaintiffs' contend defendant's rigorous training and detailed policies foreclosed managers from exercising discretion in any task. But on this point too, the evidence was in conflict. Defendant's evidence showed many managers exercised independent judgment throughout their workday in myriad tasks — ordering, scheduling, promotions, customer relations. Plaintiffs conceded as much in their depositions. Plaintiff Martinez agreed defendant's training "just gave [him] the tools and background [he] needed so that [he] could exercise good judgment and discretion in handling any particular issue that might arise on any particular day." Plaintiff Lizarraga agreed he "exercised [his] best judgment and discretion in deciding what issues to deal with" day to day, "[a]nd in deciding how to deal with them." The court credited defendant's evidence and, having done so, permissibly concluded common questions did not predominate.
Plaintiffs fail to show the court used "improper criteria" or "erroneous legal assumptions." (Arenas, supra, 183 Cal.App.4th at pp. 731-732.) The court expressly considered plaintiffs' "two 'theories of the case,'" but found "Plaintiffs have failed to proffer admissible evidence sufficient to show that either of their 'theories of the case' should proceed on a classwide basis."
Plaintiffs claim the court wrongly excluded some of their evidence, asserting courts should loosen the rules of evidence at the certification stage. "'[W]e must consider whether the record contains substantial evidence to support the trial court's predominance finding.'" (Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 328, italics added.) By definition, inadmissible material is not evidence — let alone substantial evidence. Federal decisions contrary to our Supreme Court mandate are inapt. (See, e.g., Mazza v. American Honda Motor Co. (C.D.Cal. 2008) 254 F.R.D. 610, 616.) Besides, plaintiffs' superficial analysis shows no abuse of discretion in the evidentiary rulings.
Most of plaintiffs' many contentions on appeal reduce to a circularity. In one way or another, they assert common issues must predominate because plaintiffs' theories depend on uniform corporate policies that entrust "the management" to general managers and deny managers discretion over any of their tasks. And because plaintiffs rely on uniform corporate policies, they disregard individual deviations from those policies as immaterial. Plaintiffs thus assume the corporate policies are uniform, then conclude that uniformity makes common issues predominant.
But the court credited defendant's substantial evidence that the corporate policies did not impose blanket restrictions on the managers' duties and discretion. And to defeat certification, it was sufficient for defendant to show only that some managers — enough managers — may have been properly classified to make class treatment unfeasible. "[T]he existence of some common issues of law and fact does not dispose of the class certification issue." (Arenas, supra, 183 Cal.App.4th at p. 732.) "But a class action will not be permitted if each member is required to 'litigate substantial and numerous factually unique questions' before a recovery may be allowed. [Citations.] The Court of Appeal has explained, '[I]f a class action "will splinter into individual trials," common questions do not predominate and litigation of the action in the class format is inappropriate.'" (Ibid.) Here, based on the evidence it credited, the court could reasonably conclude class treatment would require a multiplicity of individual minitrials on whether each of the 200 Corner Bakery managers in California actually managed their restaurant and exercised discretion. These individual questions would overwhelm any common questions about Corner Bakery's training and policies.
Other courts have denied class treatment in employee misclassification cases for similar reasons. In Arenas, the court affirmed an order denying certification of "a class of restaurant managers allegedly misclassified as exempt from overtime wage laws." (Arenas, supra, 183 Cal.App.4th at p. 726.) The trial court had "credited defendants' evidence to the effect that managers' duties and time spent on individual tasks varied widely from one restaurant to another" and permissibly "concluded plaintiffs' theory of recovery — that managers, based solely on their job descriptions, were as a rule misclassified — was not amenable to common proof." (Id. at p. 734.)
In Ali v. U.S.A. Cab Ltd. (2009) 176 Cal.App.4th 1333, the court affirmed an order denying certification of a class of taxi drivers allegedly misclassified as independent contractors. (Id. at p. 1337.) It noted that "[a]lthough the [company's] leases and training manuals are uniform, the court reasonably found the testimony of putative class members would be required on the issues of employment and fact of damage." (Id. at p. 1350.) It found "no abuse of discretion because the declarations of 36 putative class members as to their actual conduct amply support [the court's] finding." (Id. at p. 1349.)
And in Dunbar v. Albertsons's Inc. (2006) 141 Cal.App.4th 1422, the court affirmed an order denying certification of a class of grocery managers — "'the second person [in charge] in the store,'" under the "store director" — allegedly misclassified as exempt executives. (Id. at p. 1424.) The trial court found there was "significant variation in the grocery managers' work from store to store and week to week" (id. at p. 1431) and permissibly concluded any "findings as to one grocery manager could not reasonably be extrapolated to others given the variation in their work" (id. at p. 1432). Same here.
DISPOSITION
The order is affirmed. Defendant shall recover its costs on appeal.
IKOLA, J. WE CONCUR: BEDSWORTH, ACTING P. J. ARONSON, J.