Rosinbaum, et al v. Flowers Foods, Inc., et al

RESPONSE in Opposition regarding 305 MOTION to Certify Class

E.D.N.C.February 25, 2019

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NORTH CAROLINA SOUTHERN DIVISION BOBBY JO ROSINBAUM and ROBERT WILLIAM MORGAN, JR., individually and on behalf of all similarly situated individuals, Plaintiffs, v. FLOWERS FOODS, INC., and FRANKLIN BAKING CO., LLC, Defendants. Civ. A. No. 7:16-cv-00233-FL Oral Argument Requested DEFENDANTS’ OPPOSITION TO PLAINTIFFS’ MOTION FOR CLASS CERTIFICATION Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 1 of 37 1 I. INTRODUCTION Named Plaintiffs Bobby Jo Rosinbaum and Robert Morgan, Jr. (“Plaintiffs”) seek to certify a Rule 23 class of more than 250 North Carolina distributors alleging that they were misclassified as independent contractors (“ICs”) and subjected to illegal wage deductions in violation of the North Carolina Wage and Hour Act (“NCWHA”). Plaintiffs have the burden of establishing each requirement of Rule 23 with competent proof. They have not even come close to doing so here. Instead, Plaintiffs attempt to support their Motion with various high-level, often unsupported assertions regarding Franklin’s and Flowers’ alleged top-down “right to control” and evidence regarding alleged “common policies” provided in other cases involving different subsidiaries and different distributors. The fundamental problem with this, of course, is that the right to control is not the critical inquiry governing Plaintiffs’ NCWHA claims. Rather, as this Court has already recognized, the economic realities test, which necessarily looks to evidence of actual practice with the class members themselves—evidence Plaintiffs conveniently and largely omit—controls. See Martinez v. Mendoza, 2018 WL 3762983, *4 (E.D.N.C. Aug. 9, 2018) (Flanagan, J.). Tellingly, despite a significant number of depositions and verified interrogatory responses from distributors in this case, Plaintiffs only cite testimony from just two: Rosinbaum and Morgan. When the Court conducts the requisite rigorous analysis of the record in this case instead of merely rubber stamping other class certification decisions and/or relying on inapplicable evidence as Plaintiffs advocate, it should quickly conclude that Plaintiffs have not justified (and cannot justify) their broad-based request for class certification. Rather, what the relevant evidence in this case actually shows is a group of diverse distributors who operate their businesses in materially different ways and in ways that directly impact whether they are—or are not—ICs or employees under the governing economic realities test. The putative class includes distributors Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 2 of 37 2 who own and operate other separate businesses, do not operate their businesses personally or own multiple territories run by their own employees, and/or have sold their distribution rights for significant profit contrasted with distributors on the complete opposite end of the spectrum. What is even more problematic is that Named Plaintiffs ask this Court for injunctive and declaratory relief on behalf of a class of distributors despite the fact that neither one is a current distributor with any stake in that relief. Based on the record in this case, it is clear that a determination of liability for all 250+ distributors at once cannot be made without unfairly prejudicing Defendants and violating their due process rights to present their defenses. For these reasons and others discussed more fully below, Plaintiffs’ Motion should be denied. II. FACTUAL BACKGROUND Plaintiffs attempt to support their Motion with evidence they contend “relate[s] specifically to … Franklin” (Doc. 306, p.1). However, as discussed below, much of Plaintiffs’ evidence is from other cases involving other distributors and other subsidiaries.1 When looking at the extensive record in this case, it is clear that the type of common proof necessary for the Court to turn this case into the “exception rather than the rule” and determine that all 250 putative class members are—or are not—ICs or employees on a class-wide basis does not exist.2 A. Plaintiffs’ Attempt to Represent Different Distributors with Different Distributor Agreements Impacting Their Claims in Different Ways. Flowers Foods is the parent holding company for numerous bakeries, each of which is a separate legal entity. (Ex. 1, Decl. of James Edward Brown, ¶ 2). These bakeries produce fresh 1 For example, Plaintiffs cite only to the depositions of 6 witnesses in this matter (4 witnesses of defendant and just the 2 Named Plaintiffs). Plaintiffs wholly ignore 22 of the other depositions and all of the interrogatory responses, likely because this evidence shows that they are markedly different in practice, which is the critical inquiry here as discussed below. 2 It is well-established that the class action device is an “exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only.” General Tel. Co. of the S.W. v. Falcon, 457 U.S. 147, 155 (1982). Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 3 of 37 3 bread, buns, rolls, and snack cakes under such brands as Nature’s Own, Cobblestone Bread Company, Wonder, TastyKake, and others. (Id.) Franklin is one such bakery, operating 22 warehouses in North Carolina. Franklin contracts with independent distributors who purchase the rights to sell and distribute certain products within a defined geographic area pursuant to the terms of a Distributor Agreement. (Id. at ¶ 3). Distributors generate a profit (or, in some cases, loss) based on the difference between the price for which the distributor sells products and the price for which the distributor purchases those products, less business expenses. (Id.) Since December 1, 2013, distributors have operated under different Distributor Agreements depending on when they began their distributor relationship with Franklin. (Doc. 303- 2, ¶7).3 For example, some distributors have entered into an arbitration agreement with a class waiver while others have not. (Id. ¶10). Others have executed a Franchise Disclosure Document designating distributors’ status as “franchisees,” and some have not. (Id. ¶5). Some Distributor Agreements contain a specific provision on how a distributor should raise a breach of the Distributor Agreement by Franklin, while others do not. (Id. at ¶10). Some signed Distributor Agreements with a statute of limitations provision, requiring them to bring a claim within 1 year or bring a claim for Company breach within 30 calendar days of the first occurrence of the alleged breach and others do not. (Id. at ¶8). Importantly, the Distributor Agreement is silent regarding the specific details or manner of how distributors operate their business. And, as discussed below, distributors operate their distributorships in very different ways. 3 Plaintiffs seek class status for North Carolina distributors since “December 1, 2011”—four years back from the filing of the complaint. (Doc. 306, p.25). However, the statute of limitations under the NCWHA is only two years, and the original complaint was filed on December 1, 2015 (Doc. 1)—meaning the furthest back any NCWHA class could reach is December 1, 2013. See N.C.G.S. §95.25.22(f); Lorenzo v. Prime Communications, L.P., 2018 WL 1535476 *3 (W.D.N.C. 2018) (“The statute of limitations under the NCWHA is two years…”). Plaintiffs previously alleged an UDTPA claim which carries a four year statute of limitations (Doc. 1, Count IV), but they dismissed that claim last May (Doc. 293). Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 4 of 37 4 B. The Distributor Agreement, Which Creates an IC Relationship on Its Face, Only Establishes a Basic Framework. All of the Distributor Agreements contain an “Essential Term” section, under which the parties specifically agree that “DISTRIBUTOR shall not be controlled by COMPANY as to the specific details or manner of DISTRIBUTOR’s business, it being understood that the primary interest of COMPANY is the results achieved by DISTRIBUTOR.” (Doc. 303-2, p. 117, ¶16.1).4 Despite the Distributor Agreements vesting distributors with significant control, Plaintiffs seek to characterize the Distributor Agreements—paired with the national accounts teams and local sales management—as a means by which Defendants control the distributors from “the top down.” But neither the Motion nor the record supports this purported top-down-approach. C. The Record Demonstrates Distributors Operate Their Distributor Businesses Much Differently. While largely ignoring putative class members’ own testimony from this case, and relying instead on sweeping generalizations about the amorphous “rights” Defendants have to control distributors (without analyzing what rights were actually exercised in reality), Plaintiffs assert that distributors simply “deliver Flowers’ products to stores and restaurants and stack the products on the shelves according to Defendants’ instructions.” (Doc. 306, p.10). But, the record does not support that all 250 putative class members here simply deliver product, stack shelves and nothing more. Rather, even the limited number of putative class members who have been deposed here 4 Consistent with an IC relationship, the Distributor Agreement grants significant rights to distributors and contains numerous indicia of IC status, including for example: (1) right to control the manner, method, and means of performance (Id. at p.117. at ¶16.1); (2) intent to perform services as an IC (Id.); (3) ownership of exclusive distribution rights (Id. p. 107-108, at ¶ 2.4, 3.1, and 3.2); (4) right not to service the territory personally and freedom to engage other individuals to do so (Id. p.117, at ¶16.2); (5) responsibility for equipment and insurance (Id. p.112, at ¶9.1, 9.2, and 9.3); (6) ability to own and operate outside businesses and carry non-competing products (Id. p. 108 at ¶5.1); (7) responsibility for the collection of cash sales in the territory (Id. p.111, at ¶8.2); and (8) ability to buy and sell distribution rights, among others (Id. p.115, at ¶15.1). Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 5 of 37 5 describe their relationship and duties in very different ways, materially impacting whether they are—or are not—ICs or employees. And, when extended to all 250+ distributors, these differences necessarily become even more pronounced. 1. Some distributors hire helpers or employees. Others do not. Plaintiffs spend pages in their brief discussing various ways in which they are subjected to the “right to control,” including through product placement, pricing, service windows, breach letters, and stale policies, among others. They completely ignore, however, that they have complete control over whether, when or how often they personally perform any of their distributorship duties, if at all, because they can hire employees to do all of the work for them at their discretion.5 The extent to which they actually do so, however, varies. Named Plaintiff Morgan, for example, hired multiple helpers, including his son, a friend, and store employees, to help him in various ways in his territory, and “for a while [Morgan’s] son was doing most of the route.” (Morgan 82:18-82:19; 87:15-89:8)(MH Decl., Att. A12)6. Named Plaintiff Rosinbaum similarly hired, trained, paid, and supported a helper who handled his small and cash accounts while Rosinbaum focused on his major accounts. (Rosinbaum 60:14-64:20) (MH Decl., Att. A15). Plaintiffs and other distributors unilaterally determine what to pay their helpers, and paid them anywhere from $100.00 per week to $700 per week.7 Tim Ressegiue paid his team of helpers $80,000 in 2016 alone. (See Doc. 304, p.7). Various other putative class 5 The ability to hire employees is strong indicia of IC status. See Blair v. TransAm Trucking, 309 F. Supp. 3d 977, 1006 (D. Kan. 2018) (explaining that the fact that a driver hired helpers “weigh[ed] in favor of ‘independent contractor’ status” while drivers who did not have helpers “and drove their trucks themselves” weighed “in favor of ‘employee’ status.”); Luxama v. Ironbound Express, Inc., No. 11-2244, 2012 WL 5973277, at *4 (D.N.J. June 28, 2013) (company did not have sufficient control to find employment relationship when ICs could “hire employees to assist.”) 6 All deposition excerpts are attached to the Declaration of Margaret Hanrahan filed as Exhibit 2 hereto and will be cited as MH Decl., Att. ___. 7 Coniglio 99:13-17; 103:25-103:6 (MH Decl., Att. A3); Ressegiue 136:10-14; 150:10-14 (MH Decl., Att. A13). Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 6 of 37 6 members also hire helpers for certain time periods, territories, accounts, or tasks such as merchandising or pull-ups at their discretion,8 while other distributors outsource all the work associated with their distribution territories to their helpers and don’t do any of it themselves.9 Coniglio, for example, turned over the entire operation of his Franklin distributorship to his helper and spent only 9-10 hours on it every week while he focused his own time on a different distributorship with Snyder-Lance selling other products.10 The putative class includes other absentee owners as well, such as Christian Ronketti (Ronk’s Distribution, Inc.) and formerly Lincoln Spencer. (Brown Decl. ¶12). Yet others do not hire any helpers at all and do the work all by themselves.11 2. Some distributors own multiple territories and run their distributorships through incorporated entities. Others do not. Distributors also have the opportunity to purchase multiple territories. Since December 1, 2013, at least sixteen (16) different Franklin distributors have owned multiple territories, and there 8 Plaintiffs allege distributors “perform ‘pull-ups’” “two days of the Week (Sunday and Wednesday)” (Doc. 306, p.16); however distributors do not all do pull-ups personally as some hire helpers for pull-ups. (Ressegiue 108:21-109:9; 111:16-18 (at various points in time, hired two helpers to run two territories independently, while he runs a third territory) (MH Decl., Att. A13); Clemons 70:16-23 (hired helper to do pull-ups) (MH Decl., Att. A2); Roberts 124:3-138:4 (hired three helpers for his territories who on occasion, ran it independently) (MH Decl., Att. A14)). 9 Coniglio 92:25-101:4 (helper runs territory) (MH Decl., Att. A3); Brunst 32:13-38:18, 42:21-43:2 (has hired two helpers to run each of his territories while he focuses on management activities such as “check[ing] on stores, talk[ing] to managers, if need be, [and] look[ing] for places to improve sales.”) (MH Decl., Att. A1); Herring 95:8-100:12 (hired a helper to run the route while he “would go out and manage the market. Try to get new displays and meet with managers.”)(MH Decl., Att. A7). The interrogatory responses from Opt-In Plaintiffs similarly demonstrate wide variety in the use of helpers. See MH Decl., Att. A20, (Aldrich (one helper on Saturdays); Barefoot (four helpers); Bennett (no helpers); Boseman (hires a helper for vacations); Jones-Hill (one helper twice a week); Kaminski (two helpers); Little (one helper); Locklear (one helper for pull-ups and another helper for vacations); McCauley (one helper once a week); Nairn (no helpers); Parker (one helper); Pate (two helpers); Pilgreen (four helpers); and Rouse (four helpers)). 10 Coniglio 94:6-11; 94:23-95:10; 101:5-9 (MH Decl., Att. A3). 11 Damron 46:12-47:7 (he has not hired helpers because “I can’t trust them to run my business the way that I do it.”) (MH Decl., Att. A4); Williams 49:11-16 (never hired a helper for anything, even pull ups) (MH Decl., Att. A19); Hardison 120:6-121:1 (no helpers because he didn’t want to cut into his profits and didn’t think he made enough money) (MH Decl., Att. A6). Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 7 of 37 7 have been at least fifty (50) distributor-to-distributor territory sales. (Doc. 303-2, ¶¶ 16, 17; Brown Decl. ¶¶ 7-8).12 Daniel Brunst, for example, owns two separate distributorships which are both entirely run by his helpers and Tim Resseguie operates his multi-territory distributorship under the name Doughboy Limited, LLC. (See Doc. 304, p.7). The putative class includes at least thirty distributors operating their businesses through incorporated entities. (See Brown Decl. ¶11). While some distributors personally perform very little work connected to their territories, that experience is not universal. In contrast, some distributors described long hours,13 mandatory service windows,14 and active sales management.15 (See infra § II.C.6). Some distributors also testified that they did believe they could not incorporate. (Hardison 54:17-55:14) (MH Decl., Att. A6). 3. Some distributors operate outside businesses. Others do not. In their brief, Plaintiffs contend they are prohibited from working for competing businesses and imply they have no time to do anything but deliver Flowers’ products. (Doc. 306, p. 26-27). But, yet again, the record establishes that this too varies significantly, demonstrating a complete lack of commonality by and between them. The two named Plaintiffs alone are prime examples: Plaintiff Morgan did not operate any outside businesses but Plaintiff Rosinbaum operated a separate business holding rental properties. (Rosinbaum 129:24-131:19) (MH Decl., Att. A15). Coniglio, an absentee owner, operated multiple other business operations as he obtained 12 Franklin does have the contractual right to approve third party sales, but its discretion is not unfettered. The Distributor Agreement expressly states that Franklin’s approval of third party sales and transfers “shall not be unreasonably withheld,” and it creates a dispute resolution procedure for distributors to challenge Franklin’s decisions in court. (Ex. 303-2, p. 115 ¶ 15.1). 13 Idries 87:12-90:17 (65-75 hours per week) (MH Decl., Att. A8); Damron 89:19-91:12 (same) (MH Decl., Att. A4). 14 Moran 80:23-86:7 (had to comply with mandatory service windows) (MH Decl., Att. A11); Idries 91:9- 92:18 (same) (MH Decl., Att. A8). 15 C. Smith 176:14-181:4 (speaks to sales management every day) (MH Decl., Att. A17); Damron 72:11- 73:21 (sees sales management 3-5 times a week) (MH Decl., Att. A4); but see Coniglio 24:9-24 (has not had a sales manager in over a year) (MH Decl., Att. A3). See also testimony cited in Doc. 304, pp. 14-18). Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 8 of 37 8 distribution rights with Herrs Potato Chips and Snyder-Lance products.16 Ressegiue formerly operated a kitchen remodeling business for a while under the name “Carolina Cabinet.”17 Roberts previously owned the majority interest in a towing company (Roberts 68:16-69:22) (MH Decl., Att. A14), and Brunst baked, sold, and distributed cheesecakes to customers both inside and outside of his distributorship. (Brunst 22:24-25:1) (MH Decl., Att. A1). In stark contrast, other distributors have not operated any outside businesses for a number of reasons, including their belief that: (i) it would have been bad for his distributorship’s value (Williams 35:25-36:13) (MH Decl., Att. A19); or (ii) they “work[ed] too many hours” on the distributorship to pursue other business interests. (R. Smith 66:13-19) (MH Decl., Att. A18).18 4. Some distributors build up equity in their territories and sell them for significant profit in whole or in part. Others do not. Plaintiffs attempt to characterize the ownership interest of distributorship as a façade (Doc. 306, p. 10) likely because the ability to own and sell an asset like this is virtually “unheard of in a normal employee-employer relationship.”19 But, actual record evidence demonstrates wide- ranging experiences. For example, some distributors testified that they didn’t feel like they had much of an ownership interest.20 Others had far different experiences and reaped significant profits. For example, former distributor William McNabb listed his territory for sale on 16 (Coniglio 13:22-14:6) (MH Decl., Att. A3).To facilitate his multiple business lines, Coniglio also invested in a personal warehouse to accept delivery of Herrs Potato Chips and Snyder Lance products and an additional vehicle, a Chevrolet Step-Van, for deliveries relating to that business. (Coniglio 15:19-25; 17:23-24; 85:14-22) (MH Decl., Att. A3). 17 (Ressegiue 52:13-18; 75:13-76:17; 130:9-156:23) (MH Decl., Att. A13). 18 See Goodly v. Check-6, Inc., 2018 WL 5724320, *3 (N.D. Okla. Nov. 1, 2018) (“[T]he plaintiffs pursued various other business opportunities and had various other sources of income…” and that fact is “relevant to assessing each particular plaintiff’s economic dependence on [the alleged employer].”). 19 Daskam v. Allstate Corp., 2012 WL 4420069, at *2 (W.D. Wash. Sept. 24, 2012) (finding that an insurance agent was an independent contractor and noting that having a transferrable interest in the business is “a circumstance unheard of in a normal employee-employer relationship.”). 20 R. Smith 97:14-20 (“I don’t feel like I own anything.”) (MH Decl., Att. A18). Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 9 of 37 9 routesforsale.net and then sold it for more than $100,000 more than he bought it for less than 3 years prior. (Brown Decl. ¶¶ 9-10). Others, including both Named Plaintiffs, similarly sold their territories for significant profits.21 (See Doc. 304, pgs. 21-22). Fifty distributors engaged in distributor-to-distributor sales of their territories. (Brown Decl. ¶8). The record also demonstrates the widely varying level of investment that each distributor has in his business. (Doc. 304 at pgs. 19-20). 5. Distributors have varied experiences with cash accounts. Plaintiffs paint the picture that they are all subject to uniform control because of the presence of national charge accounts, where they contend they have no control over pricing, product selection, service times and more. Some distributors do service mostly charge accounts, like Brunst. But others, like Clemons, primarily serviced cash accounts where they admit they have more discretion.22 For example, in cash accounts, distributors did a number of things Plaintiffs suggests they could not, such as: raise prices to increase profits (Doc. 306, p. 21); market new and different products (Id. at 20); change product facings. (Id. at 19); and adjust the delivery schedule (Id. p.2).23 For cash accounts, distributors also negotiate payment plans (Idries 85:18- 87:11) (MH Decl., Att. A8); refuse to extend personal credit (Williams 39:10-17) (MH Decl., Att. A19); extend personal credit (Ressegiue 128:1-130:4) (MH Decl., Att. A13); and confront 21 Ressegiue 37:14-40:8 (received $40,410 for the sale of a portion of his territory) (MH Decl., Att. A12); Herring 33:1-12 (received approximately $20,000 for the sale of a portion of his territory)(MH Decl., Att. A7); Hardison 33:20-36:17 (received $42,630 for the sale of a portion of his territory) (MH Decl., Att. A6); Roberts 149:19-150:8 (received almost $80,000 for selling his distributorship) (MH Decl., Att. A14); Doc. 303-2 ¶¶ 20, 21 (both Rosinbaum and Morgan sold their territories to third party buyers at prices they negotiated—prices which were above the Company’s valuation of their territories). Others who have not sold their distributorships recognize they have built equity in their territory. (LeSech 18:20-19:2 (estimates $80,000 in equity) (MH Decl., Att. A10); C. Smith 51:1-52:20 (territory has increased in value by approximately $150,000) (MH Decl., Att. A17). 22 Clemons 29:3-30:7 (MH Decl., Att. A2); Brown Decl. ¶15 (noting many distributors service in excess of 20 cash accounts). 23 Compare Coniglio 91:13-92:13 (MH Decl., Att. A3); Clemons 32:10-34:9 (MH Decl., Att. A2); LeSech 95:20-96:17 (MH Decl., Att. A10). Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 10 of 37 10 customers who issue bad checks (Hardison 121:2-14) (MH Decl., Att. A6). The amount of cash accounts varied by geographic territory, with distributors with more rural territories often having more cash accounts. (Brown Decl. ¶15). And, even in national accounts, the opportunities distributors can and do exercise vary significantly. (Doc. No. 304, pp. 14-18, 23-25 and testimony cited therein (containing differences in distributor testimony regarding changes to planograms, control over days of service, and ability to ask for displays, among others)). 6. Distributors had varied experiences on scheduling and other purported “requirements.” While some distributors like Coniglio and Brunst do not worry about any alleged restrictions imposed by national accounts or local sales management because they have delegated operations to helpers, other distributors who actually operate their territories (in whole or in part) testified as to wide disparities in the discretion they exercised and purported control in servicing their accounts:  Some Distributors control their own schedules and do not have to abide by the customer service windows and requirements; others said the exact opposite. (See Doc. 304, pg. 15- 16 (and citations therein)).24  Distributors had different interactions with sales management. Some distributors testified that sales management directed their day-to-day work, while others testified that they hardly ever even saw a sales manager. (See Doc. 304, pg. 18 (and citations therein)).  Varied testimony on product ordering. While Plaintiffs contend uniform evidence exists on sales management adding to distributor orders, actual record testimony was diverse. Some distributors testified that sales management overrides their orders and adds unwanted product, while others testified they were free to reject any overrides as they saw fit. (Id. at 17 (and citations therein)). 7. Experiences on breach letters and “Good Industry Practice” were far from uniform. 24In the interests of brevity, because this evidence was already discussed, in detail, in Defendants’ Motion for Decertification which also involves the economic realities test, Defendants will not present all such evidence again here but rather will cross cite as appropriate. Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 11 of 37 11 Plaintiffs also argue that “[t]he Distribution Agreement grants Flowers unlimited discretion to determine what constitutes ‘best efforts’ or ‘Good Industry Practice”; “freely terminate Distributors for failing to meet these standards[;] and “issue a breach [letter] within the sole discretion of Franklin.” (Doc. 306, p. 23). The putative class members’ testimony, however, demonstrated that actual practice on these issues was far from uniform. Indeed, the interpretation of “good industry practice” varies depending upon the circumstances at issue.25 And, distributors testified about very divergent practices regarding breach letters. In other words, putative class members confirm that breach letters are far from a uniform, common policy.26 III. ARGUMENT A. Rule 23 Places the Burden Squarely On Plaintiffs and They Cannot Meet It. The class action device is “an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only.” Falcon, 457 U.S. at 155. Rule 23 “imposes stringent requirements for certification that in practice exclude most claims.” Am Exp. Co. v. Italian Colors Rest., 570 U.S. 228, 234 (2013). “Rule 23 does not set forth a mere pleading standard.” Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011). The “[p]arty seeking class 25 See Doc. 330-14 at 54:11-19 (“good industry practice is going to vary from distributor to distributor, situation to situation, because all those situations are different”); Doc. 330-24, at 51:20-24 (issuance of breach letters is “not automatic[]”). Further, the use of the term “good industry practice” does not establish commonality because, in each situation, you must look at individualized, extrinsic evidence to determine what the term actually means. See, e.g., Martinez v. Flowers Foods, 2016 WL 10746664 *11 (C.D. Cal. 2016) (the term “good industry practice” is so vague that determining right of control “would necessarily spawn a host of individualized inquiries.”). Putative class members even describe it differently: compare Joyner 69:7-23; 77:18-78:17 (best efforts means “do the best of your ability” and good industry practice means presenting “yourself in a professional manner, maybe.”) (MH Decl., Att. A9) with Damron 50:20- 22 (best efforts means “[c]ommunication, communicate with the customers, communicate with new customers, trying to get new business.”) (MH Decl., Att. A4). 26 Compare Rosinbaum 143:19-22 (2 breach notices and he challenged both with Franklin) (MH Decl., Att. A15); Joyner 62:4-7 (1 breach letter in 22-24 years as a distributor) (MH Decl., Att. A9); Coniglio 123:10- 21 (multiple breach letters) (MH Decl., Att. A3); Fairweather 116:16-25 (multiple breach letters) (MH Decl., Att. A5) with Damron 38:21-38:25 (no breach letters) (MH Decl., Att. A4); Singletary 135:23-136:6 (no breach letters) (MH Decl., Att. A16); C. Smith 208:20-24 (no breach letters) (MH Decl., Att. A17). Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 12 of 37 12 certification must affirmatively demonstrate his compliance with the Rule—that is, he must be prepared to prove that there are in fact sufficiently numerous parties, common questions of law or fact, etc.” Id. at 350 (emphasis in original); Thorn v. Jefferson-Pilot Life Ins. Co., 445 F.3d 311, 319 (4th Cir. 2006). Coupled with “the plaintiffs’ burden to demonstrate compliance with Rule 23 [is] the district court[’s] … independent obligation to perform a ‘rigorous analysis’ to ensure that all of the prerequisites have been satisfied, and failure to conduct this rigorous analysis constitutes an abuse of discretion.” EQT Prod. Co. v. Adair, 764 F.3d 347, 358 (4th Cir. 2014).27 The requisite “rigorous analysis” required under Rule 23 “[f]requently … will entail some overlap with the merits of the plaintiff’s underlying claim.” Dukes, 564 U.S. at 348.28 In that context, Plaintiffs must demonstrate representative evidence that is “sufficiently representative of the class as a whole such that each individual plaintiff could have relied on the sample to establish liability if he or she had brought an individual action.” Reinig v. RBS Citizens, 912 F.3d 115, 128 (3rd Cir. 2018). In their Motion, Plaintiffs seek to certify a class of 250+ IC North Carolina distributors pursuing wage deduction claims under the NCWHA. (See Doc. 306, p.1). To prevail on the merits for any such claim, Plaintiffs must establish that each member of the class—using the same common proof—is an “employee” under the multi-factor economic realities test and not a franchisee otherwise excluded from the NCHWA’s scope. N.C.G.S.A. 95-25.2 (4), (18); 95- 27 See also Ealy v. Pinkerton Gov’t Svcs., Inc., 514 Fed. App’x. 299, 306 (4th Cir. 2013) (unpublished); Carrow v. FedEx Ground Package Sys., Inc., 2018 WL 6630512, at *4 (D.N.J. Dec. 19, 2018) (denying class certification where plaintiffs “conclusory assertions” unsupported by evidence “do not actually permit the Court to engage in the rigorous analysis required to determine if facts or evidence exist to discern whether all putative class members” experienced unlawful wage deductions as allegedly misclassified IC). 28 See also Spotswood v. Hertz Corporation, 2019 WL 498822 at *4 (D. Md. Feb. 7, 2019) (“[C]lass certification determination generally involves considerations that are ‘enmeshed in the factual and legal issues comprising the plaintiff’s cause of action.’”); Adair, 764 F.3d at 361 (“a district court must definitively determine that the requirements of Rule 23 have been satisfied, even if that determination requires the court to resolve an important merits issue.”); Erica P. John Fund, Inc. v. Halliburton, 563 U.S. 804, 809 (2011) (“Considering whether ‘questions of law or fact common to class members predominate’ begins, of course, with the elements of the underlying cause of action.”). Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 13 of 37 13 25.24A. If Plaintiffs can establish they uniformly fall within the purview of the NCWHA, they must next establish that they received “wages.” Id. 95-25.2(16) (defining “wage” as “compensation for labor or services rendered by an employee….”). Even if they surmount those obstacles (which they cannot), they must establish, with common proof applicable to them all, that they were subject to unlawful deductions pursuant to N.C.G.S. 95-25.8. As discussed below, based on the record in this case, Plaintiffs cannot establish any of these three inquiries with common proof, any of one of which is fatal to their Motion. B. Plaintiffs’ Failure to Cite the Correct Legal Standard or Support Their Motion With Evidentiary Proof Is Fatal to Their Motion. Plaintiffs seek the extraordinary relief of class certification based on proof directed towards the wrong legal standard for IC status under the NCWHA—much of which they have not even established is applicable to Franklin distributors. Plaintiffs fail to show, with evidence actually applicable to all putative class members in this case under the appropriate legal test, that the Rule 23 requirements can be satisfied.29 Plaintiffs’ Motion should be summarily denied accordingly. 1. Plaintiffs cite the wrong standard for their IC misclassification claim. To support class certification, Plaintiffs rely on various ways Franklin allegedly retains the right to control distributors.30 Plaintiffs cite all of this “evidence” attempting to show Franklin retains the right to control distributors, which they contend uniformly demonstrates “employee” status under the NCWHA. The threshold problem with Plaintiffs’ argument and evidence, 29 It is not the Court’s obligation to dig up evidence for Plaintiffs. Walker v. Prince George’s Cty. MD, 575 F.3d 426, 429, n. 1 (4th Cir. 2009) (“Judges are not like pigs, hunting for truffles buried in briefs”) (quoting United States v. Dunkel, 927 F.2d 955, 956 (7th Cir. 1991)). Yet, Plaintiffs ask the Court to do so here. 30 For example, Plaintiffs cite Franklin’s alleged: (1) right to control pricing, product authorization, planograms, promotions, and days of service and require compliance with the same; (2) right to control margins; (3) right to control interpretation of the Distributor Agreement and issue breach letters; (4) right to conduct market checks or ensure planogram compliance; (5) right to change product orders; (6) right to control territory sales; and (7) right to terminate the Distributor Agreement. (Doc. 306, pp. 11-12, 15-24). Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 14 of 37 14 however, is that the “right to control” test is not used to determine employment status under the NCWHA. Rather, as this Court very recently held, the proper test for IC status under the NCWHA is the fact-intensive, multi-factor “economic realities” test that examines the totality of the circumstances underlying the parties’ relationship. Martinez, 2018 WL 3762983, *4 (Flanagan, J.) (applying the economic realities test to claims under the NCWHA and holding “the Fourth Circuit’s pronouncements of law pertaining to [the definition of the terms employer and employee] under the FLSA apply also to claims under the NCWHA…”); see also Schultz v. Cap. Int’l Sec., Inc., 466 F.3d 298, 304 (4th Cir. 2006). The economic realities test from the FLSA is materially different from the “right to control” test relied upon by Plaintiffs, which was developed under North Carolina tort and workers’ compensation laws. As Martinez, Rehberg, and multiple other North Carolina federal and state courts31 have concluded, the NCWHA is modeled after the FLSA and therefore the economic realities test applies to claims under NCWHA. Plaintiffs do not articulate any reason—other than their preference for the right to control test—why this Court should depart from its own decision in Martinez; indeed, they don’t even acknowledge it. The economic realities test analyzes the degree of control actually exercised by the putative employer–not abstractly retained in the parties’ contract. See Chao v. Mid-Atlantic Installation Services, Inc., 16 Fed. Appx. 104, 106 (4th Cir. 2001) (affirming IC status under economic realities 31 In addition to this Court, various other North Carolina courts have concluded the “economic realities” test applies to the NCWHA. See Rehberg v. Flowers Baking Co. of Jamestown, LLC, 2015 WL 1346125, *6 (W.D.N.C. Mar. 24, 2015) (“The court agrees” that the right to control test “is inapplicable to claims under the NCWHA.”); Powell v. P2Enterprises, 786 S.E.2d 798, 800 (N.C. Ct. App. 2016) (applying economic realities test under NCHWA because “[t]he NCWHA is modeled after the FLSA”); Garcia v. Frog Island Seafood, 644 F.Supp.2d 696, 707 (E.D.N.C. 2009)(NCWHA modeled on FLSA) Sullivan v. Knight’s Med. Corp., 2013 WL 4524897, at *5 (E.D.N.C. Aug. 27, 2013) (applying economic realities test to NCWHA); Jones v. Am. Airlines, Inc., 2008 WL 9411160, at *3 (E.D.N.C. Oct. 16, 2008) (applying FLSA principles under NCWHA). Rehberg and Martinez cited as support the Laborers Int’l Union of North Am., AFLCIO v. Case Farms, Inc., 488 S.E.2d 632, 634 (N.C. Ct. App. 1997) decision holding that “[t]he [NCWHA] is modeled after the Fair Labor Standards Act.” Rehberg, 2015 WL 1346125, *6. The regulations to the NCWHA further indicate that on similar provisions, FLSA interpretations carry “great weight.” 13 NCAC 12.0103. Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 15 of 37 15 test, and analyzing actual, instead of theoretical, control exercised by putative employer); Schultz, 466 F.3d at 307 (reviewing the actual control exercised over “how the agents did their jobs”); Martinez, 2018 WL 3762983, *6-7.32 Tellingly, none of Plaintiffs’ evidence establishes that the distributors are all in fact actually controlled in the same way across-the-board; rather the record demonstrates the exact opposite with regard to scheduling, product orders, displays, breach letters, management interaction, and many others. (See Doc. 304, pp. 14-18, 23-25 (and evidence cited therein)). Nor does any of the record evidence show that any common proof applying equally to all 250+ NC distributors can be used to adjudicate Plaintiffs’ NCWHA claims “in one stroke,” as required to support class certification. Indeed, under the economic realities test, control is only one of six non-exhaustive factors that a court must consider in determining a worker’s status.33 No single factor is determinative and certain factors—e.g., extent of the relative investments of the worker and opportunities for profit or loss actually exercised—clearly cannot be resolved solely by reference to the Distributor Agreement or alleged commonly applied policies and are wholly unaddressed by Plaintiffs.34 As 32 When faced with the exact same argument Plaintiffs assert here, one district court said that the argument “about right to control, versus actual control, strains common sense” especially when facing varied testimony. See Harris v. Express Courier Int’l, Inc., 2017 WL 5606751 *4 (W.D. Ark. 2017) (“Furthermore, the operative term in ‘economic reality’ is, of course, reality, and courts across the country agree that the actual control a putative employer exerts over its workers is far more important to the misclassification analysis that the employer’s right to control.”) (emphasis in original); see also Troche v. Bimbo Foods Bakeries Distrib., 2015 WL 5098380, *3-6 (W.D.N.C. 2015) (examining the record and denying class certification based on a “wide variation” in actual experiences). 33 Under the economic realities test, the Court considers: (1) the degree of control the putative employer has over the manner in which the work is performed; (2) the worker’s opportunities for profit or loss, dependent on his managerial skills; (3) the worker’s investment in equipment or material, or his employment of other workers; (4) the degree of skill required for the work; (5) the permanence of the working relationship; and (6) the degree to which the services rendered are an integral part of the putative employer’s business. Schultz, 466 F.3d. at 305. 34 See, e.g., Donovan v. Dialamerica Mktg., Inc., 757 F.2d 1376, 1384 (3d Cir. 1985) (admonishing district court for “overemphasiz[ing]” the control factor and failing to analyze totality of circumstances). Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 16 of 37 16 Plaintiffs cite the wrong test and fail to substantively address application of the economic realities factors in the context of Rule 23, their Motion should be summarily denied.35 2. Plaintiffs Ignore the Amendments to the NCWHA. Since 2006, Franklin distributors have been considered “franchisees” and provided the requisite franchise disclosure documents. (Brown Decl. ¶5). In 2017, the North Carolina Legislature specifically amended the NCWHA to exclude a “franchisee” from the scope of the Act. See N.C.G.S. 95-25.24A.36 Accordingly, at least for distributors since 2006, it is possible the putative class cannot maintain any wage deduction claim under the NCWHA since the amendment.37 Moreover, while some putative class members acknowledged their status as franchisees in their depositions, others contested their status as franchisees and thus there will be individualized fact issues in determining the threshold franchisee status and examining the documents that each distributor signed.38 35 Perhaps acknowledging their citation to the wrong standard, Plaintiffs argue in the alternative that they satisfy the economic realities test because they contend all distributors depend on Defendants for “economic survival.” (Doc. 306, pgs. 28-29). This is not sufficient, nor does it address any of the six factors of the economic realities test—all of which must be analyzed and established with common proof—for Plaintiffs’ bid for class certification to be appropriate. 36 Specifically, the statute states: “Neither a franchisee nor a franchisee’s employee shall be deemed to be an employee of the franchisor for any purposes, including, but limited to, this Article…. For purposes of this section, ‘franchisee’ and ‘franchisor’ have the same definitions as set out in 16 C.F.R. 436.1.” N.C.G.S.A. 95-25.24A. 16 C.F.R. 436.1(i) defines a “franchisee” as “any person who is granted a franchise. A “franchisor” is defined as “any person who grants a franchise and participates in the franchise relationship. Id. at 436.1(k). 37 Further, it is unclear whether the amendment is retroactive/clarifying in nature, or purely prospective, as the statute does not specify—thus injecting another layer of analysis into the process. See, e.g., Whiting v. The Johns Hopkins Hosp., 416 Fed. Appx. 312, 315 (4th Cir. 2011)( retroactive application of a statute is generally disfavored but clarifying amendments may guide the court in considering the original meaning). 38 LeSech 33:4-11 (“Yes, I am supposed to be treated as a franchisee.”) (MH Decl., Att. A10); Damron 35:12-15 (acknowledging he knew Franklin would treat him as a franchise) (MH Decl., Att. A4); Clemons 24:23-25:1 (understood he was operating a franchise) (MH Decl., Att. A2); Brunst 51:6-11 (acknowledging signature on a franchise disclosure document) (MH Decl., Att. A1); Roberts 50:13-15 (Franklin told him his distributorship would be treated as a franchise) (MH Decl., Att. A14); Singletary 65:23-66:9 (acknowledging that he received the franchise disclosure document) (MH Decl., Att. A16); but see R. Smith 74:21-75:1 (does not recall receiving a franchise disclosure document) (MH Decl., Att. A18); Joyner 65:9- Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 17 of 37 17 3. Plaintiffs Miscite Evidence from Other Cases and Ignore The Record of This Case. Plaintiffs have the burden to “affirmatively demonstrate” their proposed class in fact meets all of Rule 23(a) and (b)’s requirements. Dukes, 564 U.S. at 350. To do so, they must “present evidence,” not merely “plead compliance” with Rule 23 requirements. Adair, 764 F.3d at 357. Here, Plaintiffs do not cite—rather they conveniently ignore—the majority of the putative class members’ own deposition testimony that was taken. Instead, Plaintiffs misstate the record and rely significantly on deposition testimony from the Rehberg case that was provided several years ago and involved distributors contracted with an entirely unrelated subsidiary (Flowers Baking Co. of Jamestown, LLC). For example, Plaintiffs cite Rehberg testimony from James Hampton on many of the national-accounts-related points, but Mr. Hampton was solely designated to testify regarding the practices and policies in Publix—an account that did not even enter Franklin’s market until 2017 and which only 13 purported class members serviced. (Hampton Dep. 5:7-6:1; Brown Decl. ¶14). Plaintiffs also cite Paul Milazzo’s testimony throughout their Motion, Director of National Accounts for Flowers Foods, provided in another lawsuit against a different bakery (Lepage), for the proposition that sales management constantly monitors distributors’ activities. However, Milazzo said nothing of the sort: he merely testified that Lepage “encourages” distributors to follow suggested orders and that Lepage distributors cannot receive breach letters for ignoring suggested orders. More importantly, Milazzo’s testimony does not relate to any practices at the Franklin bakery or the plaintiffs in this case. (See Doc. 310-17, 21:5-6 (noting he does not have access to the sales numbers for Franklin)). In addition, Plaintiffs’ brief is riddled with factual assertions that are unsupported in the record and ignore critical differences in the record of this case. By way of example: 14 (uncertain what the term franchisee means and therefore unsure if he agreed to be treated as a franchisee) (MH Decl., Att. A9); see also Brown Decl. Ex. 3 (noting various distributors with start dates prior to 2006)). Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 18 of 37 18  Citing Rosinbaum’s and Morgan’s testimony, Plaintiffs allege: “[t]he order in which Distributors service accounts does not vary and is usually dictated by set ‘receiving windows’ negotiated between Defendants and the stores” (Doc. 306, p. 15). On the pages cited, Rosinbaum actually testifies as to how customer service windows impact his helper—not himself. (Doc. 330-21, 69:3-6). Morgan’s testimony does not discuss “receiving windows” and Morgan admits he does not know if it is the customer or Franklin that asks him to service accounts a certain number of times per week. (Morgan 75:1-76:25) (MH Decl., Att. A12). Morgan further admits he does not have any personal knowledge as to the communications between Franklin and, for example, a national account like Food Lion. (Morgan 76:9-13) (MH Decl., Att. A12). In reality, the distributors’ testimony is mixed as to how they control their schedules and customer service windows. (See Doc. 304, pp. 14-18).  Plaintiffs later allege that customer service requirements “limit[] Distributor’s [sic] control over their hours” and as support, cite, inter alia, Morgan and Rosinbaum’s depositions. (Doc. 306, p. 19). However, both testified that customer service requirements did not control their hours because they can and did delegate responsibilities to helpers.39  Plaintiffs allege “Distributors’ days begin early in the morning when they arrive at the warehouse to pick up and verify their load for that day” (Doc. 306, p. 15) when multiple distributors, including Named Plaintiff Morgan, admit, they do not report to the warehouse in the morning or load their truck. (See Doc. 304, pp. 15-16).  Plaintiffs claim distributors are forced to complete a “standardized twelve-week training program with a sales manager” and provided a “Field Operations Manual.” (Doc. 306, pp. 6-7). Deposition testimony, however, demonstrated uniform practices did not exist.40  Plaintiffs incorrectly allege that the Distributor Agreement can be terminated by Defendants at any time in their sole discretion. Instead, the Distributor Agreements contain common business provisions limiting how either party may terminate the contract. (Doc. 303-2, p. 118, ¶17). Plaintiffs’ cap off this unsupported paragraph with a statement “Flowers has for all intents and purposes granted itself the right to terminate Distributors at will” without any citation to the record. (Doc. 306 p. 23).  Plaintiffs imply constant and consistent use of breach letters despite many distributors testifying that they never received one. (See supra p. 11, n.25).  Plaintiffs speculate customer service requirements “often emanate from Flowers” but the cited deposition testimony says the opposite. (Doc. 306, p. 18). On pages 137-138 of 39 Morgan 128:15-24 (stating that he does not go to the warehouse in the morning because the helper does it and “I kind of chill. I sit and have an extra cup of coffee.”) (MH Decl., Att. A12); Rosinbaum 63:4-24 (helper loads the truck, fills it with gas, delivers product to large customers, and collects cash from cash customers) (MH Decl., Att. A15). 40 Idries 22:9-23:2 (3 months training) (MH Decl., Att. A8); Hardison 58:20-59:1 (1.5 weeks of training) (MH Decl., Att. A6); Coniglio 54:11-55:7 (no training) (MH Decl., Att. A3); Damron 34:5-9 (no handbooks or policies) (MH Decl., Att. A4); Clemons 23:11-25 (no handbook) (MH Decl., Att. A2). Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 19 of 37 19 Exhibit 15, Mr. Rich specifically says: “it’s the customer’s requirement, so they set their requirements.” (Doc. 330-15, 137:13-138:13). At most, Flowers assists customers in transcribing their stated or unstated service expectations into writing. (Id.)41 Much of the other “evidence” Plaintiffs cites fares no better to support their Motion, particularly after facing the rigorous analysis required here. C. Even if the Court Excuses Plaintiffs’ Bereft Evidentiary Basis, Plaintiffs’ Motion Still Fails. Before addressing the specific requirements of Rules 23(b)(2) and 23(b)(3), Plaintiffs must first carry their burden of proof of establishing the elements of Rule 23(a): (1) numerosity; (2) commonality; (3) typicality; and (4) adequacy. Because Plaintiffs have failed to establish one or more of these essential elements, the Court should not certify the class. Thorn, 445 F.3d at 318-19. 1. Commonality is Not Supported by a High Level Summary of an Alleged Top- Down Management Structure. To establish commonality, common questions must be one “capable of classwide resolution—which means that the determination of its truth or falsity will resolve an issue that is central to each one of the claims in one stroke[.]” Dukes, 564 U.S. at 350.42 Despite acknowledging Duke’s heighted standard on commonality, Plaintiffs’ Motion offers nothing more than a string- cite of pre-Duke’s case law (applying a lower standard), conclusory assertions that the case “presents common issues of law and fact” based on allege common distribution agreements and a top-down management approach wherein the company retains various “rights to control,” and citations to cases dealing with different Flowers’ subsidiaries, different legal standards, and 41 Plaintiffs’ reference to a single email of an account representative asking a client about its service requirements is not sufficient to support the broad claim that these requirements emanate from Flowers. 42 See also Troche, 2015 WL 5098380, *3 (“Critical to the commonality prerequisite is not necessarily the existence of common questions but the ability of the class action to provide common answers that would resolve the litigation for all the class members.”) Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 20 of 37 20 different facts presented by the distributors. (See Doc. 306, p. 26).43 This does not satisfy Plaintiffs’ burden. See Troche, 2015 WL 5098380, *4 (“Plaintiff’s conclusory assertions … [that] the putative class members satisfy Rule 23(a)(2)’s commonality requirement are clearly belied by the record.”); Reinig, 912 F.3d at 128.44 2. The distributors’ varying circumstances preclude commonality. When the factual record is actually engaged, “dissimilarities within the proposed class” that “have the potential to impede the generation of common answers” are prevalent. See Dukes, 546 U.S. at 350. Distributors have fundamental variance on key points such as the frequency with which they outsource their distributorship duties in whole or in part to employees they hire, incorporation status, levels of purposed control over the manner, method and means of work, differences in territory sales and value, levels of investment,45 sales and entrepreneurial efforts,46 and outside businesses. (See supra § II.C). In considering the economic realities test, these differences are significant and material in determining whether each individual is properly 43 Within the Motion, Plaintiffs cite a series of inapposite cases, particularly as it relates to Plaintiffs’ flawed argument that common classification supports the commonality and predominance requirements. Plaintiffs rely upon pre-Dukes case law, which no longer governs this inquiry (See Doc. 306, pp. 26, 28-30 (citing pre-Dukes law); cases applying the right to control test instead of economic realities (See Doc. 306, pp. 29- 32 (Williams (Doc. 306 p. 31-32), Villalpando, Scovil, Taylor; and Alfred)); and cases interpreting state- specific wage statutes without addressing the combination of state-specific issues presented here relating to the term “wages,” the franchisee exclusion, and multiple permissible deductions. See Ruffin (applying West Virginia state law); Williams (Doc. 306 p. 29) (applying Pennsylvania state law); Venegas (applying Maine state law); and DaSilva (applying Massachusetts state law)). 44 Notably, in Reinig, the Third Circuit reversed the district court’s grant of class certification, finding, among other things, that the court failed to reconcile contradictory testimony regarding the alleged common policies plaintiffs used to support class certification. Id. at 129-130. 45 Ressegiue 86:18-87:5, Doc. 307; 116:7-121:13 (owns 3 territories outright, owns 3 delivery trucks, engaged at least 8 different helpers, and incurred $80,000 in labor cost in 2016 alone) (MH Decl., Att. A13); Brunst 28:4-24, 32:9-33:4; 38:3-10; 39:25-40 (he bought the neighboring territory for $76,000 from another distributor, which he operates with a helper he hired and trained, because “I felt like I could increase the value of and increase the value and making more money”) (MH Decl., Att. A1); R. Smith 97:14-20 (“I don’t feel like I own anything”) (MH Decl., Att. A18); Singletary 79:8-81:11; 98:23-101:15 (financed the purchase of his territory with 0 down and leased a truck) (MH Decl., Att. A16). 46 See Doc. 304, pp. 21-26 and testimony cited therein. Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 21 of 37 21 classified as an IC, and this variance demonstrates how IC status cannot rise or fall in “one stroke.”47 3. Common Classification Does Not Establish Commonality. While Plaintiffs’ purport to rely upon “common policies,” to meet Rule 23’s requirements, the alleged common policies are either unsupported as discussed above, insufficient to establish control as a matter of law, such as any customer-imposed requirements, 48 or were enforced in an extremely uncommon manner and do not create the kind of de facto policy of misclassification sufficient to be the common glue to hold their claims together.49 (See Doc. No. 304, pp. 15-19). Critically, Plaintiffs do not bring forward evidence suggesting these alleged common policies were actually enforced against all Plaintiffs in the same way and exerted such extensive control over them that they created a de facto policy of misclassification, as required to support certification here.50 In fact, the evidence indicates just the opposite, making it clear that Plaintiffs have not— and cannot—establish a “policy to violate the policy” of lawful IC classification under an agreement containing numerous indicia of IC status. (See supra § II.C). Indeed, the Third Circuit recently addressed this same issue when remanding the District Court’s class certification order, 47 Based on these factual differences Plaintiffs ignore, commonality is not established. Spotswood, 2019 WL 498822, *9 (“[A] representative plaintiff cannot establish commonality under [Rule 23(a)(2)] if the court must investigate each plaintiff’s individual claim.”). 48Requiring compliance with customer requirements does not illustrate control by the company. See Penn. v. Virginia Int’l Terminals, 819 F. Supp. 514, 514 (E.D. Va. 1993) (customer’s requirements as to the time of delivery do not indicate control by the motor carrier); Wilson-McCray v. Stokes, 2003 WL 22901569, at *6 (N.D. Ill. Dec. 9, 2003) (defendant “had an interest in making sure that its customers received their goods in a timely manner, and the fact that it monitored this process to ensure prompt delivery no more creates an agency relationship than does designation of overnight delivery on a Federal Express package.”) 49 See also Saleem v. Corp. Transp. Group, LTD, 2013 WL 6061340 (S.D.N.Y. 2013) (common policies are “not necessarily dispositive” of the “degree of control that [the alleged employer] actually exercised over each of the putative class members.”). 50 See Spotswood, 2019 WL 498822, *10 (calling plaintiff’s argument that a common contract satisfies commonality “misguided”); Troche, 2015 WL 5098380, *3 (rejecting plaintiffs’ allegation of a “uniform policy [ ] applicable to all” because the policy relied on “discretion by local supervisors, which ‘[o]n its face … is just the opposite of a uniform employment practice.”). Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 22 of 37 22 finding that “it [wa]s unclear how the District Court reconciled contradictory testimony and other evidence explicitly undermining Plaintiffs’ assertion that [the bank] maintained a companywide ‘policy-to-violate-the-policy.” Reinig, 912 F.3d at 129-130 (emphasis added). This Court should find the same. In addition, when conducting the rigorous analysis required by Rule 23, courts routinely find that relying on common classification or common policy arguments alone is improper.51 Indeed, Dukes specifically said: “Commonality requires the plaintiff to demonstrate that the class members have suffered the same injury, which requires establishing more than the mere fact that the class members all have suffered a violation of the same provision of law.” 546 U.S. at 349- 50 (emphasis added). This is because the IC classification may be proper for some but improper for others. See Marlo v. UPS, Inc., 639 F.3d 942, 948 (9th Cir. 2011) (“existence of a policy classifying [supervisors] as exempt . . . does not necessarily establish [they] were misclassified, because the policy may have accurately classified some employees and misclassified others.”) Relying on common classification “to the near exclusion of other factors,” as Plaintiffs ask the Court to do, amounts to reversible error. Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935, 946 (9th Cir. 2009). If the Court adopted Plaintiffs’ contention that common classification was enough, then every single misclassification or exemption case would result in automatic class certification and no analysis—let alone a rigorous one—would be required. This is wholly 51 Bamgbose v. Delta-T Grp., Inc, 684 F. Supp. 2d 660, 668-69 (E.D. Pa. 2010) (where the allegation is misclassification of ICs, a court “cannot only look to [the defendant’s] uniform classification of the workers or its common payment procedures . . . Instead, it must determine whether the proof to demonstrate that the workers are ‘employees’ or ‘independent contractors’ can be applied to the class as a whole.”); Sherman, 2012 WL 748400, at *12 (finding need for individualized inquiry into actual practice rendered claims “unsuitable for class-wide treatment”); David v. Bankers Life & Cas. Co., No. C14-766RSL, 2015 WL 3994975, at *6 (D. Wash. June 30, 2015) (decertifying Rule 23 class of allegedly misclassified insurance agents and holding that “common evidence . . . (namely agents’ contracts) [was] insufficient to support a classwide finding in light of agents’ varied experiences”). Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 23 of 37 23 inconsistent with Supreme Court and Fourth Circuit precedent and must be rejected outright here.52 See Dukes, 564 U.S. at 350; Adair, 764 F.3d at 363; Troche, 2015 WL 5098380, *11 (“[T]he record here displays a ‘wide variation in [Independent Operator’s] experiences’ which defeat commonality.”) 4. Contractual differences preclude commonality. Distributors signed several different Distributor Agreements, each containing terms that are materially different than the other, such as, for example, an arbitration agreement.53 In addition, numerous putative class members are “franchisees” who received a Franchise Disclosure Document. (See Doc. 303-2 and Ex. 1; Brown Decl. ¶¶ 5-6). Other distributors signed the Distributor Agreements containing statute of limitations provisions require yet another level of individualized inquiries, including when the distributor first believed or reasonably should have believed that they were not being treated as ICs. These types of individualized inquiries, which “focus[] on the contents of the plaintiff’s mind,” also render class certification inappropriate. Thorn, 445 F.3d at 320-21 (statute-of-limitations defense defeats predominance); Spotswood, 2019 WL 498822, *11. 5. Plaintiffs’ NCWHA Claim Raises Even More Individualized Questions. a. Individualized Analysis Is Necessary to Determine if Distributors Were Paid a “Wage”. NCWHA defines the term “wage” as “compensation for labor or services rendered by an employee.” N.C.G.S. § 95-25.2. The term “wage” under the NCWHA does not include situations where “income will be earned by buying products from [Defendant] at one price, selling them to 52 Plaintiffs rely heavily on the Rehberg court’s decision that commonality was satisfied. Doc. 306, p.29. The Rehberg court, of course, did not analyze the record in this case as required for Rule 23 certification. 53 See Doc. 303-2 ¶¶ 8-12; see also Spotswood, 2019 WL 498822, *11 (where some putative class members are subject to arbitration and others are not, it destroys commonality and typicality). Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 24 of 37 24 a customer at a higher price and making money on the difference.” Troche v. Bimbo Foods Bakeries Distribution, Inc., 2015 WL 4920280, *7 (W.D.N.C. Aug. 18, 2015) (“Troche II”) (granting summary judgment to the defendant on the NCWHA deduction claim). This case involves varied testimony by distributors regarding their income structure. Some described an income structure exactly the same as Troche II.54 Others testified they were compensated on a commission basis unlike the independent operators in Troche II.55 Yet a third group of distributors testified they were paid a commission on credit accounts but similar to Troche II for cash accounts. (Ressegiue 59:6-60:4) (MH Decl., Att. A13). As the record reflects, even determining a threshold issue of who received a “wage” under the NCWHA is individualized, defeating commonality. Furthermore, only the individual actually performing the “labor or services” can receive a “wage” pursuant to the NCWHA.56 Thus, to adjudicate these claims on a class basis, Plaintiffs must be able to establish who “actually performed the work” during each day/week based on common evidence. Given the widely variant testimony on the use of helpers by distributor and even by day, and lack of records kept by distributors regarding the same, such common evidence does not exist here.57 b. Individualized Analysis is Necessary to Determine Whether Deductions Were Permissible. 54 LeSech 35:20-36:16 (MH Decl., Att. A10); Joyner 65:18-25 (MH Decl., Att. A9); Doc. 303-2, ¶3. 55 See Williams 35:1-6 (MH Decl., Att. A19); Doc. 306, p. 14 (“Distributors are paid a commission …”). 56 See, e.g., Irwin v. FedEx, 2016 WL 7053383 *8 (M.D.N.C. 2016) (earned wages under NCHWA are “those wages and benefits due when the employee has actually performed the work required to earn them.”) (emphasis in original). also Crespo v. Delta Apparel, 2008 WL 2986279 *8 (W.D.N.C. 2008) (dismissing complaint under NCWHA where plaintiff sought wages for time he was not working). 57 For example, an absentee owner could not claim that work performed by his helpers constitutes his “wages” under the NCWHA—he would not have “actually performed the work” as required to receive wages under the NCHWA. This is not a mere damages issue as Plaintiffs will inevitably contend but one of liability—i.e. whether the distributor even earned a “wage” from which he suffered an unlawful deduction. Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 25 of 37 25 Plaintiffs allege improper deductions under the NCWHA but do not identify what deductions, if any, were impermissible or what authorizations, if any, are invalid.58 The NCWHA provides certain requirements for permissible deductions.59 There are a host of individualized issues that must be determined to adjudicate the unlawful deduction claims. For example, some distributors admitted to executing authorizations for various items and others did not.60 Some distributors claim they did not authorize any deductions.61 Certain deductions may be permissible for some class members but not others.62 Complicating this issue even more is that putative class members may only seek to recoup deductions taken for compensation relating to work they personally performed. Given the extensive use of helpers or employees here, including on a full- time basis, unscrambling this egg will likewise require multiple individualized inquiries that will necessary rely on individualized—and not common—proof, which is wholly inconsistent with class treatment.63 Spotswood, 2019 WL 498822,*9-10. 58 Plaintiffs generally assert that deductions are taken from a settlement statement each week including: “administrative fees, warehouse fees, shrink (lost product), loan payments, invoice discrepancies, insurance and miscellaneous deductions.” Doc. 306, p.16. But Plaintiffs do not specify whether they contend every single deduction is unlawful or not. 59 When the employer has a written authorization from the employee which is “(i) signed on or before the payday for the pay period… [and] (ii) indicates the reason for the deduction.” Then, before the deduction being made, the employee must (i) receive advance written notice of the actual amount to be deducted; (ii) receive written notice of right to withdraw the authorization; and (iii) be given reasonable opportunity to withdraw the authorization in writing.” N.C.G.S. § 95-25.8(a). There are also a number of exemptions to this general rule. See id. § 95.25.8(d); 13 NCAC 12.0305. 60 Hardison 95:20-95:23 (acknowledging he agreed to the administrative and warehouse fee in the distributor agreement) (MH Decl., Att. A6); Clemons 59:8-15 (same) (MH Decl., Att. A2); but see Idries 84:20-85:17 (explaining he understood the distributor agreement called for administrative and warehouse fees, but stating “I don’t authorize to take from me warehouse fees because I don’t use it there.”) (MH Decl., Att. A8). 61 See LeSech 53:12-54:1 (acknowledges he would be responsible for business expenses) (MH Decl., Att. A10); Damron 63:7-18 (acknowledges a number of business fees would be deducted at the time he purchased his distributorship) (MH Decl., Att. A4); but see Singletary 79:14-16, 81:9-11 (denies authorizing deductions from settlement statement.) (MH Decl., Att. A16). 62 In addition, certain deductions, such as loan repayments and expenses for the convenience of the worker are permissible without written authorization. N.G.C.S. § 95.25.8(d); 13 NCAC 12.305(b). 63 Moreover, for the significant number of distributors who incorporated, an additional level of individualized inquires would be needed to determine whether they actually passed down deductions to the Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 26 of 37 26 D. The Named Plaintiffs Claims Are Not Typical, Nor Are They Adequate Class Representatives. Typicality “derives its independent legal significance from its ability to ‘screen out class actions in which the legal or factual position of the representatives is markedly different from that of other members of the class even though common issues of law or fact are present.” Marcus v. BMW of North Am., LLC, 687 F.3d 583, 598 (3rd Cir. 2012). Plaintiffs “must explain with ‘reasonable specificity’ how proving the elements of his individual claim will also prove the class members’ claims.” Troche, 2015 WL 5098380, *13. Morgan and Rosinbaum claim they “are not subject to any unique defenses and their incentives are firmly aligned with the class” but that’s far from an accurate statement of the record, especially in light of the multi-factor economic realities test. For example:  Both are former distributors who have already sold their territories to private buyers at a significant profit. (Doc. 304, p.22). This is significant as they have already cashed out the equity of their distributorships while other class members have not. (See LeSech 18:20-19:2 (estimating he has $80,000 in equity)) (MH Decl., Att. A10). Morgan and Rosinbaum’s “incentives” are not “firmly aligned with” LeSech if Morgan and Rosinbaum’s success negatively impacts the equity LeSech built in his distributorship.  Because both Morgan and Rosinbaum hired helpers, their claims are not typical of other distributors who did not engage helpers.64 On the opposite end of the spectrum, Morgan and Rosinbaum are likewise not typical of distributors like Coniglio, who rarely operates his territory because he delegated the entire operation to a helper.  Morgan and Rosinbaum are not typical as their distributor agreements may vary from others in the putative class on items such as arbitration and “franchisee” status.65 owner, the putative class member. Carrow, 2018 WL 6630512 *5 (denying class certification and noting the individualized issues presented by whether incorporated entities were passing down deductions). 64 For example, if this Court ultimately determines that Morgan and Rosinbaum are ICs primarily because, inter alia, they hired helpers, it would be unjust to hold that decision to distributors who did not engage helpers. Troche, 2015 WL 5098380, *5 (agreeing “it would be fundamentally unfair for [putative class members] to be bound to a judgment based on . . . defenses unique to the [named] plaintiff.”) 65 See Spotswood, 2019 WL 498822, *11 (“Spotswood cannot meet the typicality requirements because he did not sign an arbitration agreement while other putative class members did.”) Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 27 of 37 27 Given these differences, Plaintiffs’ bare-bones assertions that their claims are “typical” are simply insufficient to meet their burden.66 Moreover, because both Named Plaintiffs are former distributors who have sold their territories—and thus cannot benefit from all forms of relief available to current distributors (such as declaratory and injunctive relief)—their interests conflict with the proposed class as a whole, rendering them inadequate class representatives under Rule 23(a)(4).67 E. Plaintiffs Cannot Establish Predominance. 1. Individual questions of fact and law predominate on IC misclassification. “The predominance requirement is similar to but ‘more stringent’ than the commonality requirement of Rule 23(a).” Thorn, 445 F.3d at 319. Plaintiffs must show that “questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods of fairly and efficiently adjudicating the controversy.” Rule 23(b)(3) (emphasis added). The Court must take a “close look” and “take the entire case into account, including the claims, defenses, facts, [and] underlying substantive law . . . .” Farrar & Farrar Dairy, Inc. v. Miller-St. Nazianz, Inc., 254 F.R.D. 68, 72 (E.D.N.C. 2008). Merely identifying common practices or evidence is not sufficient to satisfy predominance. Adair, 764 F.3d at 366 (“[T]he mere fact that the defendants engaged in uniform conduct is not, by itself, sufficient to satisfy Rule 23(b)(3)’s more demanding predominance 66 Troche, 2015 WL 5098380, *4 (rejecting the typicality argument because it was made “at an unacceptable general level, and the examination of the facts reveals meaningful differences between Plaintiff’s claims and those of the putative class members.”). 67 See, e.g., In re Pmt. Card Interchange Fee and Merch. Discount Antitrust Litig., 827 F.3d 223, 233 (2d Cir. 2016) (reversing class certification and settlement approval in light of differing interests between injunctive and monetary relief as either current or former credit card users); Audio-Video World of Wilmington, Inc. v. MHI Hotels Two, Inc., 2010 WL 6239353, at *15 (E.D.N.C. 2010) (adequacy not met because of “significant possibility that a fundamental conflict of remedial interests will arise” in the case); Healey v. Murphy, 2009 WL 6613209, at *10 (D. Mass. 2009) (finding the class representative inadequate because he could only seek monetary relief; not equitable relief). Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 28 of 37 28 requirement.”).68 Rather, this Court must engage in a rigorous analysis as to “why these common practices [are] sufficient to ensure that the class members’ common issues would predominate over individual ones.” Id.69 Where, as here, “proof of the essential elements of the cause of action requires individual treatment, then class certification is unsuitable.” In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 311 (3d Cir. 2008).70 Plaintiffs’ testimony here along with the individualized nature of the claims at issue establishes that individualized inquiries will clearly predominate. First, each distributor’s employment status must be capable of resolution via common proof under the six-factor economic realities test. It is not. (See supra III.C.). Rather, the record is replete with factual differences on virtually all of the “economic realities” test factors, which span from one end of the spectrum to the other and are completely uncommon. (See supra § II.C). Indeed, the question of whether one distributor was an employee (like Coniglio who had outside business and was an absentee owner for some time, both of which are factors strongly indicative of IC status71) would not necessarily yield the same answer as the question of a distributor who did not pursue other business opportunities, did not engage a helper, personally serviced the distributorship, etc.... Plaintiffs 68 See also, e.g., Rea v. Michaels Stores, Inc., 2014 WL 1921754, *4 (C.D. Cal. May 8, 2014) (fact that there are common policies, requirements, or issues does not eliminate need for individualized inquiries because these policies do not establish whether they are actually engaged in exempt duties); Marlo,639 F.3d at 948 (“[T]he existence of a policy classifying [supervisors] as exempt . . . does not necessarily establish [they] were misclassified, because the policy may have accurately classified some employees and misclassified others.”). 69 See also Ealy, 514 Fed. App’x. at 306 (finding district court abused its discretion by failing to provide a rigorous analysis pertaining to predominance requirement). 70 See also Spotswood, 2019 WL 498822, *9 (“[I]n the Fourth Circuit, “[t]he common questions must be dispositive and overshadow other issues.”); Blair, 309 F. Supp. 3d at 1014-15 (decertifying Rule 23 class action where “individualized issues overwhelm those common to the class”); Narayan v. EGL, Inc., 285 F.R.D. 473, 480 (N.D. Cal. 2012) (holding predominance requirement not satisfied because while plaintiffs interacted “on the same terms with defendants,” they were situated “very differently,” requiring individualized inquiries to adjudicate their claims). 71 See Saleem, 854 F.3d at 146 (“The ability to choose how much to work . . . weighs in favor of [IC] status”); and Luxama, 2012 5973277, at *4 (company did not have sufficient control to find employment relationship when ICs could “hire employees to assist.”) Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 29 of 37 29 have not, and cannot, show how these variations could be addressed or adjudicated with common proof—at least without the trial disintegrating into 250+ separate mini-trials. And, the differences do not end here. Next, Plaintiffs must establish that common issues of fact and law predominate over the NCWHA claims. As discussed above, Plaintiffs wholly ignore that distributors who contracted since 2006 have been considered “franchisees” exempted from the NCWHA pursuant to 95-25.24A. This threshold legal issue will apply to class members in different ways depending upon the date that they became a distributor and the documents they have signed. Further, individualized determinations are necessary to determine who received “wages”—both in terms of the type of compensation paid and the identity of the individual actually performing services— which can and does change over time given the varying use of helpers and employees, further defeating predominance. (See supra III.C.5). After clearing each of these first three hurdles, analysis of the actual deductions raises a host of individualized questions regarding the type of deduction; the authorizations signed by each distributor; whether the deduction is permissible under North Carolina law without a written authorization (i.e. advances to loans); and whether the alleged unlawful deduction occurred based on the work of the distributor or during a period the distributor was not personally servicing the territory. The analysis does not end there either. After evaluating the IC and deduction claims, the court must also consider factual issues associated with Defendants’ defenses, including whether: (1) distributors signed a Distributor Agreement with a statute of limitations period and, if so, whether their claims are time-barred; (2) they signed the arbitration agreement with a class action waiver and, if so, whether any contract law defenses preclude enforcement of the same for that individual; and (3) whether any other individualized issues, such as a bankruptcy, exist.72 Plaintiffs 72 For example, putative class members Michael Barefoot and Anthony Scott have bankruptcies during the class period, which may affect their ability to recover claims in this action. See MH Decl., Att. B; Gawry Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 30 of 37 30 simply ignore these significant factual and legal differences and ask the Court to do the same, without offering any suggestion as to how the parties could adjudicate these issues for all 250+ distributors across-the-board in a manageable, efficient manner, without violating Defendants’ due process rights. Dukes, 564 U.S. at 341. Predominance fails accordingly. F. Class treatment is not a superior way to adjudicate each Plaintiff’s claims. For similar reasons, superiority and manageability also fail. Plaintiffs have the burden of showing that “a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” Fed. R. Civ. P. 23(b)(3); Thorn, 445 F.3d at 319, 321-22. As set forth above, a multitude of individualized distributor-by-distributor and week-by-week variances demonstrate that this class is neither manageable nor superior. The evidence already confirms that common proof does not exist on any of the key points at issue in this case. Further, contrary to Plaintiffs’ assertions, this is not a case involving relatively small claims such that a class action is the only realistic way to pursue them. Rather, if Plaintiffs can establish that each deduction was a “deduction” (and they cannot), some long-term distributors could seek to recover up to tens of thousands of dollars. That does not fall into the category of a “very small” claim.73 G. Plaintiffs’ attempts to rely on cases from other jurisdictions involving different facts fail. Recognizing the difficulties of carrying Plaintiffs’ Rule 23 burden with potential class members as diverse as these, Plaintiffs repeatedly cite Rehberg, Richard and Noll asking the Court to adopt the same reasoning.74 Their reliance on these cases is unpersuasive. At class certification, v. Countrywide Home Loans, Inc., 640 F.Supp.2d 942, 956 (N.D. Oh. 2009) (the fact that some putative class members were in bankruptcy required additional individualized inquiries which “does not favor a finding of predominance.”) 73 See Dvorin v. Chesapeak Exploration, LLC, 2013 WL 6003433, at *8 (N.D. Tex. 2013) (citing cases involving $100 or $70 claims as being sufficient). 74 Rehberg, 2015 WL 1346125 (concerning a separate bakery in Jamestown, NC); Richard v. Flowers Foods, Inc. No. 6:15-2557 (W.D. La. Aug. 13, 2018) (report and recommendation) (concerning three Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 31 of 37 31 the court “has an independent obligation to perform a ‘rigorous analysis’” of this record to determine if the Rule 23 prerequisites for class certification are satisfied. Adair, 764 F.3d at 358 (quoting Dukes, 131 S.Ct. at 2551). This rigorous analysis, by definition, cannot be made by merely adopting an opinion from another court that was rendered after analyzing different facts and different circumstances.75 In consideration of Dukes, Adair, and Perry, among others, Plaintiffs do not carry their Rule 23 burden by simply pointing to Rehberg, Richard, and Noll. For one, these cases do not involve “nearly identical fact” as Plaintiffs represent. Richard and Noll involve different legal tests and are from other jurisdictions. In Rehberg, the only decision from this Circuit, the facts were markedly different and in material ways: there were no distributors who owned multiple territories (there are 16 here), an insignificant, if any, number of distributors were actually incorporated (there are 46 here), no absentee owner distributors (there are 3 here), no distributors who owned outside food distributorship businesses (there are here), and only isolated examples of third-party sales (there are 50 here).76 Further, the Judge in Rehberg respectfully got it wrong. The court found the company’s uniform policy of classifying distributors as IC, to the near exclusion of all else, was sufficient for class treatment. 2015 WL 1346125 at *23, 33. In other words, the court seemingly did not carefully analyze the impact of Plaintiffs’ individualized circumstances separate bakeries in Louisiana); Noll v. Flowers Foods, Inc., 2019 WL 206084 (D. Maine, Jan. 15, 2019) (concerning two Maine bakeries). 75 See M.D. ex rel. Stukenberg v. Perry, 675 F.3d 832, 838, 844-45 (5th Cir. 2012)(reversing district court for failing to undertake “rigorous analysis” of the record in that case and further faulting the district court for failing explain how the resolution of the claims “will resolve an issue that is central to the validity of each of the [class members’] claims in one stroke.”) Richard and Noll merely adopt Rehberg in large part and also, respectfully, were incorrectly decided. Noll involved a smaller class, a different subsidiary, and focused on the right to control instead of the economic realities test. The Richard decision is pending on objections to the magistrate’s decision. 76 Moreover, in Rehberg, unlike here: (a) no distributor signed an arbitration agreement, and (b) the NCHWA amendment specifically excluding “franchisees” from its scope was not yet enacted. Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 32 of 37 32 and whether, in light of those circumstances, the Rule 23 prerequisites for class certification were satisfied. Relying on uniform classification alone, however, has been repeatedly rejected by courts across the country. (See III.C.3, supra). This Court should do the same. If the Court is inclined to find any prior decisions persuasive, it should look to the decisions involving class certification for Flowers’ distributors in California—the Martinez and Soares cases—where two different district judges refused to grant class certification. See Martinez v. Flowers Foods, Inc., 2016 WL 10746664, at *11-12 (C.D. Cal. Feb. 1, 2016) and Soares v. Flowers Foods, Inc., 320 F.R.D. 464, 482 (N.D. Ca. 2017). In Martinez, despite noting that the putative class members’ responsibilities all stemmed from the same Distributor Agreement, the Court found that the language was so broad that it did not reflect a uniform policy. Moreover, given the variations among the individual distributor’s experiences, the question of “control” was not amenable to class-wide proof. Martinez, 2016 WL 10746664 *11-13. The court in Soares also denied class certification, finding (in pertinent part) that whether the individual was engaged in a distinct business or occupation was “riddled with individualized inquiries” and, therefore, predominance was not satisfied. 77 Soares, 320 F.R.D. at 482. H. Plaintiffs’ Request for 23(b)(2) Certification Fails. In just two paragraphs of their brief, Plaintiffs seek class-wide injunctive relief under Rule 23(b)(2). This cursory request for extraordinary relief must be denied. 1. The Named Plaintiffs, Both Former Distributors, Lack Standing To Pursue Injunctive Relief. Preliminarily, former distributors, like Named Plaintiffs here, “do not have standing to seek injunctive relief.” See Ellis v. Costco Wholesale Corp., 657 F.3d 970, 986 (9th Cir. 2011); see 77 The court also found that manageability and superiority were not met. See 320 F.R.D. at 485-86. Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 33 of 37 33 also Dukes, 564 U.S. at 364-65 (stating, in the Rule 23(b)(2) context “plaintiffs no longer employed by [the defendant] lack standing to seek injunctive or declaratory relief against its employment practices”).78 This is true because they are not currently subject to the policy they challenge—IC classification—nor would they even benefit from injunctive relief by the Court. See Summers v. Earth Island Inst., 555 U.S. 488, 493 (2009) (a threat of future injury is “conjectural and hypothetical” and cannot support injunctive relief). Plaintiffs’ request for a Rule 23(b)(2) class must be denied on that basis alone. Moreover Rule 23(b)(2) certification must be denied because monetary damages are not incidental in this case, nor could they be calculated in a manner that would not require additional hearings or individualized determinations. Rather, Plaintiffs seek seven different items of relief, including, among others, back pay and punitive damages. [Doc. 1, Prayer for Relief]; see Dukes, 564 U.S. at 366-67 (monetary damages not incidental where individualized backpay is sought).79 And, given the individualized calculations that would be required if Plaintiffs prevail, as discussed above, it is clear “[t]he monetary tail would be wagging the injunction dog,” further requiring denial of Rule 23(b)(2) certification. See Randall v. Rolls-Royce Corp., 637 F.3d 818, 826 (7th Cir. 2011) (denying Rule 23(b)(2) certification).80 2. The injunctive relief sought in this case, without the ability to opt out, raises significant due process considerations. 78 Drayton v. W. Auto Supply Co., No. 01-10415, 2002 WL 32508918, *4-5 (11th Cir. Mar. 11, 2002) (holding former employees “lack standing to seek injunctive relief under Rule 23(b)(2)” because likelihood that such former employees will be “subject to a real and immediate threat of injury from [defendant] is too tenuous and hypothetical to establish standing to seek injunctive relief on behalf of a class”). 79 See also Kabbash v. Jewelry Channel, Inc. USA, No. A-16-CA-212-SS, 2017 WL 2473262, at *8 (W.D. Tex. June 7, 2017) (monetary damages not incidental where plaintiff seeks actual damages, restitution, disgorgement of profits, and punitive damages). 80 See also Dukes, 564 U.S. at 360-61 (Rule 23(b)(2) “does not authorize class certification when each class member would be entitled to an individualized award of monetary damages”). Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 34 of 37 34 Certification under Rule 23(b)(2) is a so-called “mandatory class,” because of the lack of notice and opt-out provisions. Courts have expressed concern about a case where, as here, “Plaintiffs may attempt to shoehorn damages actions into the Rule 23(b)(2) framework, depriving class members of notice and opt-out protections.” Bolin v. Sears, Roebuck & Co., 231 F.3d 970, 976 (5th Cir. 2000).81 It is clear that due process is not satisfied where, as here, individuals will be bound by the outcome of litigation that will decide their entitlement to monetary damages and in which their participation becomes mandatory if the case is certified under Rule 23(b)(2). The only due process protection available to the mandatory class members is the adequacy of the class representatives in protecting their interests in the litigation under Rule 23(a)(4). The adequacy requirement is designed “to uncover conflicts of interest between named parties and the class they seek to represent.” Amchem Products, Inc. v. Windsor, 521 U.S. 591, 594 (1997). Crucially, a plaintiff cannot adequately represent a class when he or she “seeks relief which the class members do not want.” Alberghetti v. Corbin Corp., 263 F.R.D. 571, 578 (C.D. Cal. 2010). That is clearly the case here because the putative class consists of: 1) current distributors who want to become employees and seek such injunctive relief, 2) former distributors who have no stake in whether distributors are employees or ICs going forward, and 3) current distributors who have testified that they are not and do not want to become employees.82 Accordingly, Plaintiffs’ request for Rule 23(b)(2) certification must be denied. 81 See also Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 811-12 (1985)(due process requires “at a minimum that an absent plaintiff be provided with an opportunity to remove himself from the class” when monetary claims are involved); Cuming v. S.C. Lottery Comm’n, 2008 WL 906705, *6 (D.S.C. Mar. 28, 2008) (citing Bolin, and denying a Rule 23(b)(2) class). 82 See LeSech 115:2-7 (“No, I mean, I want to be an independent contractor.”) (MH Decl., Att. A10); Coniglio 136:21-137:5 (does not want to be an employee) (MH Decl., Att. A3); R. Smith 89:5-15 (does not want to be an employee) (MH Decl., Att. A18); Rosinbaum 12:11 (“[I]f we are legal employees I’m asking the court to find that way.”) (MH Decl., Att. A15); Moran 125:10-11 (Moran wants to be an employee) (MH Decl., Att. A11); Morgan (former distributor); Rosinbaum (former distributor). Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 35 of 37 35 IV. CONCLUSION Plaintiffs’ attempts to support their Motion with broad-strokes and high-level assertions, many of which are contradicted by the evidence in this case, must fail. The actual record reveals just how dissimilar Plaintiffs and the others they seek to represent actually are. Common proof does not exist regarding: (i) whether distributors were ICs or employees; (ii) whether distributors received “wages” under the NCWHA; and (iii) whether distributors were subject to unlawful deductions. This is fatal because to satisfy Rule 23, the answer to the misclassification or unlawful deduction questions must be capable of resolution “in one stroke,” and they are not here. Dukes, 564 U.S. at 349-50. Without any way to: (1) try these varied, individualized claims in an efficient manner before a factfinder, or (2) render a one-size-fits-all liability determination for all class members together without violating Defendants’ due process rights, neither of which exists here, class certification must be denied. Respectfully submitted this 25th day of February, 2019. OGLETREE, DEAKINS, NASH, SMOAK & STEWART, P.C. /s/ Margaret S. Hanrahan Benjamin R. Holland (N.C. Bar No. 28580) Michael D. Ray (N.C. Bar No. 52947) Elizabeth R. Gift (N.C. Bar No. 44331) Margaret S. Hanrahan (S.C. Bar No. 72622) 201 South College Street, Suite 2300 Charlotte, N.C. 28244 Telephone: 704.342.2588 Facsimile: 704.342.4379 E-mail: ben.holland@ogletreedeakins.com E-mail: michael.ray@ogletree.com E-mail: liz.gift@ogletreedeakins.com E-mail: maggie.hanrahan@ogletreedeakins.com Attorneys for Defendants Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 36 of 37 CERTIFICATE OF SERVICE I hereby certify that on February 25, 2019, a copy of the foregoing was filed with the ECF system of the United States District Court for the Eastern District of North Carolina, which will give notice to the following counsel of record: Shawn J. Wanta, Esq. Christopher D. Jozwiak, Esq. BAILLON THOME JOZWIAK & WANTA LLP 100 South Fifth Street, Suite 1200 Minneapolis, Minnesota 55402 (612) 252-3570 sjwanta@baillonthome.com cdjozwiak@baillonthome.com Charles E. Schaffer, Esq. LEVIN, FISHBEIN, SEDRAN & BERMAN 510 Walnut Street, Suite 500 Philadelphia, PA 19106 (215) 592-1500 cschaffer@lfsblaw.com Susan E. Ellingstad, Esq. Rachel A. Kitze Collins, Esq. Brian D. Clark, Esq. LOCKRIDGE GRINDAL NAUEN P.L.L.P. 100 Washington Avenue South, Suite 2200 Minneapolis, Minnesota 55402 (612) 339-6900 seellingstad@locklaw.com rakitzecollins@locklaw.com bdclark@locklaw.com David M. Cialkowski, Esq. J. Gordon Rudd, Jr., Esq. Jason P. Johnston, Esq. ZIMMERMAN REED, LLP 1100 IDS Center, 80 South 8th Street Minneapolis, MN 55402 (612) 341-0400 gordon.rudd@zimmreed.com david.cialkowski@zimmreed.com jason.johnston@zimmreed.com Leto Copeley, Esq. COPELEY JOHNSON GRONINGER PLLC 300 Blackwell Street, Suite 101 Durham, NC 27701 (919) 240-4054 leto@cjglawfirm.com /s/ Margaret S. Hanrahan Margaret S. Hanrahan (S.C. Bar No. 72622) Case 7:16-cv-00233-FL Document 335 Filed 02/25/19 Page 37 of 37