Cipolla v. Team Enterprises, LLC

• Court: District Court, N.D. California
• Decided: March 26, 2023
• Docket: 3:18-cv-06867
• Status: Unknown

Opinion

1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 NORTHERN DISTRICT OF CALIFORNIA 8

10 FELICIA CIPOLLA, ALEXIS WOOD, BERNADETTE BLANCHARD, SHIRIN 11 LESSAN, and DENNIS FISHER, No. C 18-06867 WHA individually and on behalf of all others 12 similarly situated,

13 Plaintiffs, ORDER RE MOTIONS FOR CLASS CERTIFICATION AND LEAVE TO 14 v. AMEND COMPLAINT

15 TEAM ENTERPRISES, LLC, and NEW TEAM LLC, doing business as TEAM 16 ENTERPRISES, 17 Defendants.

18 19 INTRODUCTION 20 In this putative wage-and-hour class action, plaintiffs move for class certification for 21 two classes of employees, one class subject to binding arbitration, and the other not. Plaintiffs 22 also seek to amend their complaint for the fourth time. For the following reasons, the motions 23 are GRANTED IN PART AND DENIED IN PART. 24 STATEMENT 25 Plaintiffs are part-time promotional specialists or “models” for defendants Team 26 Enterprises, LLC and New Team, LLC, marketing companies based in Florida which employ 27 individuals to promote their clients’ brands at various locations and events throughout the 1 (usually beers and spirits), provide information about the product, give samples to adult 2 customers, and further engage with customers at the venue to encourage the product’s purchase. 3 They are instructed on how to dress, how to wear their hair and makeup, and to take numerous 4 photos during the events (TAC ¶ 9-10; Br 5). Using an online portal called “Brand Trend,” the 5 models can pick up shifts that work with their schedule and submit their time. In the past, the 6 models were independent contractors, but as of January 2015, they have been reclassified as 7 employees. Plaintiffs claim that the reclassification did not change how they were being treated 8 by defendants, however, and numerous problems allegedly persisted because of an 9 “independent contractor mindset” baked into how defendants treated them (Br. 1). 10 Plaintiffs bought suit in November 2018, alleging violation of the Fair Labor Standards 11 Act and various provisions of the California Labor Code for periods of time both predating and 12 including their reclassification. Defendants would allegedly require plaintiffs to pick up “kits” 13 prior to the start of events, get to the venues 15 minutes early, do a “recap” of the events after 14 completion of their shifts, and travel back-to-back to numerous events without compensation. 15 Plaintiffs also allege violation of meal-and-rest break requirements, noncompliant wage 16 statements, and lack of reimbursements for necessary expenditures such as personal cellphone 17 and camera usage, mileage, tolls, and parking. 18 Plaintiffs, however, signed an affirmation that they received and reviewed their entire 19 employee manual, which contained within it an arbitration agreement. Defendants had 20 motioned to compel arbitration due to a delegation clause within the arbitration agreement. The 21 delegation clause stated: 22 Any questions regarding the validity or enforcement of these 23 Dispute Policies shall be delegated and submitted to an arbitrator, including whether the scope of the claim or dispute is subject to 24 arbitration, and whether these Dispute Policies are enforceable as a matter of law. 25 This Court denied the motion to compel arbitration, holding several unconscionable provisions 26 within the agreement rendered the entire agreement unenforceable (Dkt. No. 25). Our court of 27 appeals reversed this decision, however, finding the only issue that should have been decided 1 was whether or not the delegation clause was valid — if so, the rest of the agreement must be 2 analyzed in arbitration. Thereafter, an order issued staying the case and compelling arbitration 3 (Dkt. Nos. 50, 53). 4 In arbitration, five employees moved to strike the agreement as unconscionable. Four of 5 the five arbiter decisions found the agreement to be so permeated with unconscionability that it 6 was entirely unenforceable. Specifically, Judge Lynn Duryee (Ret.) determined plaintiffs 7 Bernadette Blanchard and Shirin Lessan’s agreements were entirely unenforceable, Judge 8 Rebecca Westerfield (Ret.) so held for then-plaintiff Angela Guerrero, and Arbiter Michael 9 Loeb so held for Alexis Wood.1 Plaintiff Felicia Cipolla’s arbiter, Judge Robert Freedman 10 (Ret.), found the agreement to contain several substantively unconscionable provisions, but 11 concluded it could be enforced after striking the provisions in question (Dkt. No. 133-1, Exh. 1– 12 5). Upon motion by plaintiffs, an October 2021 order lifted the stay as to those plaintiffs whose 13 agreements were found to be unenforceable and allowed amendment of their complaint. 14 Following lengthy motion practice, the Court twice permitted plaintiffs to amend their 15 complaint and approved a stipulation to dismiss their first cause of action under the FLSA (Dkt. 16 No. 73, 80, 105, 134). 17 Now, in a renewed motion for class certification, plaintiffs argue the repeated findings 18 of unenforceability by the arbiters should be imputed onto the estimated class of 1,775 19 employees subject to the same agreement (hereafter “arbitration class”). With named plaintiffs 20 Wood, Blanchard, and Lessan as representatives, plaintiffs seek to certify a class of “current and 21 former promotional specialist who worked at any time in California from November 13, 2014, 22 through entry of judgment in this action” with subclasses regarding an off-the-clock work 23 theory, meal/rest break theory, and overtime theory (Br. i). Plaintiffs argue defendants should 24 be collaterally estopped from forcing everyone in the class to arbitrate given the repeated arbiter 25 findings of unconscionability. They also argue denial of class certification on the basis of the 26 arbitration agreement would be premature, as the class members are not yet before the court 27 1 until certification is approved. Thus, the argument goes, the arbitration class should first be 2 certified and then the onus would be on defendants to force each class member to arbitrate 3 should they choose to invoke that affirmative defense (Br. 10). Defendants counter that such is 4 not the law, and each individual must first arbitrate their claims, so no class can be certified. 5 In a separate motion, plaintiffs also move for certification of a class of approximately 6 357 employees who are subject only to defendants’ updated arbitration agreement, which was 7 changed on February 15, 2019 (hereafter “updated agreement”). In the updated agreement, the 8 terms expressly exclude pending litigation, so those individuals who signed it are not required 9 to arbitrate their claims in this case. That proposed class definition includes “current and former 10 promotional specialists of defendants who worked at any time in California from January 1, 11 2015, through entry of judgment in this action and who signed an arbitration agreement on or 12 after February 15, 2019.” After being allowed 60 days to locate a named plaintiff suitable to 13 represent the updated agreement class, counsel chose Dennis Fisher (Dkt. No. 138). Significant 14 dispute, however, has developed regarding Fisher’s suitability as a class representative. 15 Namely, defendants argue Fisher worked only four three-hour events on separate days and was 16 compensated $5.00 for his kit pickups, thus he does not share the same claims regarding off-the- 17 clock work and rest and meal breaks as the rest of the class (Opp. 6, 18). Defendants also point 18 to Fisher’s numerous declarations and deposition testimony which allegedly evidence his 19 material falsehoods about his experience with Team Enterprise. In response, plaintiffs argue 20 defendants’ own delay in discovery production caused the Fisher inconsistencies alleged, and in 21 any case offer new named plaintiff Jamie Arias as a suitable replacement. To this end, plaintiffs 22 also move for leave to file a fourth amended complaint to add Jamie Arias as a new 23 representative. Defendants oppose. In the mist of this hoopla, plaintiffs also seek to clarify 24 subject-matter jurisdiction and advocate for federal estoppel law to apply rather than California 25 estoppel law. This order follows full briefing and argument. 26 ANALYSIS 27 1. SUBJECT-MATTER JURISDICTION. 1 reply brief. In reply to defendants’ opposition to renewed class certification, plaintiffs deny that 2 they ever adequately alleged diversity jurisdiction because they omitted an amount-in- 3 controversy from all of their complaints. Thus, they argued, the only basis for jurisdiction was 4 federal question jurisdiction (Reply 7). Plaintiffs have since flip-flopped in supplemental 5 briefing, now arguing the Court has subject-matter jurisdiction based on the Class Action 6 Fairness Act of 2005 (Dkt. No. 160). The flip-flop stems from a new strategy on the question of 7 whether to apply state versus federal law on the question of estoppel. More about this question 8 below. 9 This case was not removed from state court; rather, it was filed here under original 10 jurisdiction. The original complaint included a Fair Labor Standards Act claim, plus overlapping 11 state law claims. There were three sources alleged for this Court’s subject-matter jurisdiction: 12 federal question, diversity, and supplemental jurisdiction. Then, plaintiffs voluntarily dismissed 13 their FLSA claim. This Court, however, still had supplemental jurisdiction over the state law 14 claims pursuant to Section 1376. Even if federal question or supplemental jurisdiction did not 15 exist, this Court might have had original jurisdiction under the Class Action Fairness Act. The 16 problem is that this was never called out in any complaint or amended complaint as a basis for 17 subject-matter jurisdiction and Rule 8(a) requires that the complaint provide a short and plain 18 statement of the grounds for the Court’s jurisdiction. Indeed, CAFA was raised as a basis for 19 possible jurisdiction for the first time by the Court in connection with the recent hearing. Even 20 though CAFA was never mentioned in any of the complaints, this order holds that this omission 21 could be cured by amendment under Section 1653. See 28 U.S.C. § 1653 (stating “defective 22 allegations of jurisdiction may be amended, upon terms, in the trial or appellate courts”). 23 Because the record appears to support plaintiffs can meet the diversity and amount-in-controversy 24 requirements under CAFA, amendment will be allowed rather than dismissing with prejudice. 25 See Snell v. Cleveland, Inc., 316 F.3d 822, 828 n.6 (9th Cir. 2002) (“Dismissal without leave to 26 amend is improper unless it is clear, upon de novo review, that the complaint could not be saved 27 by amendment.” (citation omitted)). Defendants will have the opportunity to answer the 1 pleadings. 2 2. MOTION TO CERTIFY UPDATED AGREEMENT CLASS. 3 As previously stated, defendants updated their arbitration agreement in February 2019, to 4 exclude pending litigation. Individuals who signed the updated agreement are not required to 5 arbitrate their claims in this litigation. Plaintiffs move for class certification for this updated 6 agreement class with Dennis Fisher as the only moving party. Fisher was an employee of Teams 7 Enterprise from approximately late 2019 to early 2020 in San Diego. The class claims for this 8 proposed updated agreement class are violations of the California Labor and Business Practices 9 Codes pertaining to (1) off-the-clock work (2) meal and rest breaks and (3) reimbursement for 10 business expenses. See Cal. Lab. Code Ann. §§ 226.7, 510, 512, 1194, 2802. For the following 11 reasons, plaintiffs’ motion is DENIED. 12 To prevail on a motion for class certification, plaintiff Fisher must show he satisfies all 13 prerequisites enumerated in Rule 23(a), namely (1) the class is so numerous that joinder of all 14 members is impracticable; (2) there are questions of law or fact common to the class; (3) the 15 claims or defenses of the representative parties are typical of the claims or defenses of the class 16 and (4) the representative parties will fairly and adequately protect the interests of the class. He 17 must also satisfy through evidentiary proof at least one of the provisions of Rule 23(b). See 18 Wolin v. Jaguar Land Rover North America, 617. F.3d 1168, 1172 (9th Cir. 2010). Fisher 19 maintains he satisfies the predominance requirement under Rule 23(b)(3). Because this order 20 finds that Fisher cannot satisfy typicality, the motion fails. 21 Typicality is fulfilled “if the claims or defenses of the representative parties are typical of 22 the claims or defenses of the class.” Fed. R. Civ. P. 23(a)(3). Claims are “typical” if they are 23 reasonably co-extensive with those of absent class members. Although the claims need not be 24 substantively identical, the test asks “whether other members have the same or similar injury, 25 whether the action is based on conduct which is not unique to the named plaintiff, and whether 26 other class members have been injured by the same course of conduct.” See Hanlon v. Chrysler 27 Corp., 150 F.3d 1011, 1020 (9th Cir. 1998) (overruled on other grounds by Wal-Mart v. Dukes, 1 members will suffer because their representative is preoccupied with defenses unique to him, 2 class certification should not be granted. See Hanon v. Dataproducts Corp. 976 F.2d 497, 508 3 (9th Cir. 1992). 4 Here, Fisher cannot satisfy typicality because there is grave risk of impeachment unique 5 to Fisher that would prejudice the class. In connection with the various motions in this case, 6 Fisher signed two sworn declarations in February 2022 and January 2023. These declarations 7 differ from each other in ways significant to the class claims, and both are in conflict with his 8 deposition testimony as well as data produced by defendants. In particular, Fisher’s 2022 9 declaration stated: 10 Sometimes, I had multiple events in one day. I would take Uber to 11 the next event or walk if the events were close together. I was not paid for the time in between events. If the events were back-to- 12 back, I would not get a meal or rest break because I would have to immediately go from one event to the next and start working 13 continuously through the event. Per company policy, we were not allowed to eat during an event or even take a break. We always 14 had to be “on.”

15 (Fisher Decl. ¶ 7-8). Fisher’s updated 2023 declaration, however, makes no statement that he 16 ever worked back-to-back shifts, and does not mention meal or rest breaks at all. When asked in 17 deposition why this statement was taken out of his most recent declaration, Fisher stated “[t]hat 18 was taken out because I could not recollect if that — if that was the same company or not.” 19 (Depo. 54; lines 8-13). Fisher explained that he worked for numerous employers doing the same 20 kind of work as he did for defendants, and he could not recall which events he promoted for 21 Teams Enterprise versus other unrelated companies. Data produced by defendants shows that 22 Fisher only worked four events on separate days, and never worked any back-to-back shifts. 23 Fisher admitted he could not recall whether or not he worked more than one event for Teams 24 Enterprise in a day (Depo. 52; lines 9-11). This is an uncertainty and impeachment risk directly 25 related to the meal and rest break class claim. Also, in both declarations, Fisher stated: 26 I promoted the brands of companies that sold alcoholic beverages 27 such as beer and spirits . . . I did this by setting up a table with encourage them to sample the beverage, provide them with 1 information about the product, and encourage them to buy it.

2 (Fisher Decl. ¶ 2). Conversely, the produced data shows Fisher never worked any alcohol events 3 for defendants. All of his events were for a cannabis company called “Cresco Labs,” and he 4 stated in deposition testimony that he would not have provided samples of the cannabis product 5 to customers. Fisher’s inability to remember the nature of the work he did for defendants and the 6 frequency of his shifts put his credibility uniquely into question in a manner that would threaten 7 to preoccupy the focus of the case and harm the class. Further, he does not seem to share the 8 meal and rest break claim with other class members. It is well established that a class 9 representative “must be part of the class and possess the same interest and suffer the same injury 10 as class members.” Dukes, 564 U.S. at 348. Having only worked four shifts for approximately 11 three hours each, and with no allegation of back-to-back shifts, Fisher does not appear to have 12 been owed any rest or meal breaks at all. 13 Plaintiffs counter that these differences are irrelevant, emphasizing that Fisher still has the 14 same general interests as the other class members “in recovering their unpaid wages” because he 15 was allegedly unpaid for picking up “kits” prior to the event, arriving fifteen minutes early, and 16 staying late to complete “recaps.” These assertions do not cure the unique impeachment risk 17 Fisher faces as a result of his declarations and deposition. Further, these rebuttals do not satisfy 18 his standing on any meal or rest break claims. Plaintiffs attempt to assert that Fisher does have 19 standing for rest and meal breaks claims because he estimates he worked between one and 2.5 20 additional hours per day without pay (Reply 8). Given Fisher’s deposition testimony that he 21 could not recall what shifts he worked for which company, his “guestimations” hold little weight 22 and cannot satisfy standing as to these claims. Because Fisher cannot satisfy typicality, a 23 mandatory requirement of Rule 23(a), his motion for class certification cannot succeed. 24 Recognizing Fisher is less than ideal, counsel has moved to file a fourth amended complaint 25 substituting Jamie Arias, a Californian who has been employed by defendants from 26 approximately March 2019 to present. Plaintiffs maintain that Ms. Arias is an easy fix to any 27 problems posed by Mr. Fisher as a representative for the updated agreement class, because she 1 “has worked many more events than Mr. Fisher, worked alcohol events, worked back-to-back 2 events with only 30 minutes scheduled to drive between them, and has a more varied work 3 experience than does Mr. Fisher” (Br. 7). Defendants oppose, criticizing counsel’s lack of 4 diligence for not realizing Fisher’s deficiencies sooner and arguing that they had access to 5 information regarding Arias since February 2022 (Opp. 11). 6 Plaintiffs’ motion to amend will be ALLOWED provided plaintiffs’ first reimburse defendants 7 a total of $11,415.90 for all the time wasted defending the Fisher motion for class certification 8 (Dkt. No. 159 at 26). The Fourth Amended complaint should set forth the basis for subject- 9 matter jurisdiction with specificity and clarity. This can be done only after the reimbursement 10 amount has been paid. After the fourth amended complaint is filed, plaintiffs may file a new 11 motion for class certification with Jamie Arias as a class representative, whereupon defendants 12 may depose Ms. Arias and file an opposition. Counsel have 42 DAYS to get all this done. 13 3. MOTION TO CERTIFY ARBITRATION CLASS. 14 Previously, this Court thought it would be useful to have a question on a class-wide 15 basis as to whether defendants should at some point be estopped from enforcing their arbitration 16 agreements after so many findings of unconscionability in private arbitrations. Under 17 California law, however, “a private arbitration award, even if judicially confirmed, can have no 18 collateral estoppel effect in favor of third persons unless the arbitral parties agreed, in the 19 particular case, that such a consequence should apply.” Vandenberg v. Superior Ct., 21 Cal. 4th 20 815, 834 (1999). Thus, as both parties acknowledge, if California law applies, nonmutual 21 offensive collateral estoppel cannot be applied in our case to prohibit defendants from enforcing 22 their arbitration agreements toward each and every class member — there being no prior 23 agreement to do so. It is well established that “federal courts sitting in diversity apply state 24 substantive law and federal procedural law.” Gasperini v. Center for Humanities, Inc., 518 U.S. 25 415, 427 (1996). Plaintiffs’ latest contention to avoid application of this California Supreme 26 Court precedent is to argue collateral estoppel should be considered “procedural” rather than 27 “substantive,” in this case, and thus federal estoppel law should be applied instead under the 1 state choice of law should not apply because this Court is not sitting in diversity jurisdiction. In 2 any case, plaintiffs argument cannot prevail. 3 Under Erie, the Supreme Court has held “when a federal court exercises diversity or 4 pendent jurisdiction over state-law claims, the outcome of the litigation in the federal court 5 should be substantially the same, so far as legal rules determine the outcome of a litigation, as it 6 would be if tried in a state court.” Felder v. Casey, 487 U.S. 131, 151 (1988) (citing Guaranty 7 Trust Co. v. York, 326 U.S. 99, 109 (1945)). This so-called “outcome-determination test” is not 8 mechanically applied, but rather guided by adherence to the two classic aims of Erie: the 9 discouragement of forum-shopping and avoidance of inequitable administration of the laws. 10 See Ellis v. Salt River Project Agric. Improvement & Power Dist., 24 F.4th 1262, 1270 (9th Cir. 11 2022). To hold here that plaintiffs are allowed to wield nonmutual offensive collateral estoppel 12 against defendants where they would otherwise be precluded from doing so in state court would 13 disappoint both Erie aims. This would encourage the precise type of forum-shopping Erie was 14 created to discourage as it would bless class members with a right to pursue a cause of action 15 that would otherwise not exist outside the confines of arbitration. Pursuant to the arbitration 16 agreement, the binding delegation clause as to the question of arbitrability, and California 17 Supreme Court precedent, potential class members would first have to attempt to arbitrate their 18 claims and receive a ruling on enforceability before being freed into the federal court. Despite 19 plaintiffs’ repeated arguments to the contrary, this Court sees no need to wait until after class 20 certification to address the elephant in the room — an elephant capable of dooming all class 21 claims as to every class member besides the named representatives. Because it appears 22 offensive use of collateral estoppel is not allowed in the manner plaintiffs seek under state law, 23 which will inevitably be applied in our case, certification of the arbitration class is DENIED. 24 CONCLUSION 25 For the reasons stated above, plaintiffs motion for class certification as to the updated 26 agreement class is DENIED. Provided that plaintiffs pay defendants $11,415.90 within 14 27 CALENDAR DAYS of this order, plaintiffs motion for leave to file a fourth amended complaint is 1 GRANTED, which must be done within 21 CALENDAR DAYS of this order. Plaintiffs motion for 2 class certification as to the arbitration class is DENIED. 3 4 IT IS SO ORDERED. 5 6 Dated: March 26, 2023. Pee g Al ~ LLIAM ALSUP 9 UNITED STATES DISTRICT JUDGE 10 11 a 12

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