Espejo v. The Copley Press

• Court: California Court of Appeal
• Decided: July 7, 2017
• Docket: D065397
• Status: Published

Opinion

Filed 7/7/17 CERTIFIED FOR PUBLICATION

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

LILIANA ESPEJO et al., D065397

Plaintiffs and Appellants,

v. (Super. Ct. Nos. 37-2009-00082322- CU-OE-CTL, 37-2010-00085012-CU- THE COPLEY PRESS, INC., OE-CTL)

Defendant and Appellant.

APPEALS from a judgment of the Superior Court of San Diego County, John S.

Meyer, Judge. Judgment affirmed in part, reversed in part and remanded with directions.

Cooley, Steven M. Strauss, Seth A. Rafkin, Summer J. Wynn and Heather C.

Meservy for Defendant and Appellant.

Callahan & Blaine, Daniel J. Callahan, Michael J. Sachs, Jill A. Thomas and

Scott D. Nelson; Cadena Churchill and Raul Cadena for Plaintiffs and Appellants.

Defendant The Copley Press, Inc., owner of the San Diego Union-Tribune

newspaper (collectively UT), appeals from a second amended and restated judgment (the

judgment) after a court trial in this class action brought by and on behalf of persons

whom UT formerly engaged as newspaper home delivery carriers (plaintiffs or carriers). The main issue at trial was whether the carriers were employees of UT or independent

contractors. The trial court decided the carriers were employees.

UT contends (1) the plaintiff class must be decertified because the class

representatives were inadequate; (2) the court committed reversible error by not limiting

the trial to certified issues and by granting plaintiffs' motion to amend their second

amended complaint according to proof; (3) the class should be decertified and the

judgment reversed because the court did not and could not manage individualized issues;

(4) the court's order bifurcating plaintiffs' cause of action under Business and Professions

Code section 172001 to be tried first deprived UT of its right to a jury trial; (5) the class

award must be reversed because UT paid carriers enhanced compensation that

reimbursed them for expenses the court awarded; (6) the amounts the court awarded were

not restitution; (7) the court erred in awarding plaintiffs prejudgment interest;

(8) substantial evidence does not support the court's determination that the carriers were

employees rather than independent contractors; (9) the court erred in awarding plaintiffs

attorney fees under Code of Civil Procedure section 1021.5;2 (10) even if attorney fees

could be awarded, the court erred by not substantially reducing them for limited success;

and (11) the court erred by adopting plaintiffs' lodestar amount in awarding attorney fees.

1 Subsequent references to section 17200 are to Business and Professions Code section 17200.

2 Subsequent references to section 1021.5 are to Code of Civil Procedure section 1021.5.

2 Plaintiffs appeal the portion of the judgment awarding them attorney fees,

contending (1) the court abused its discretion in not awarding an enhancement of the

lodestar amount of their fees; and (2) the court erred in ruling they abandoned their cause

of action for damages under Labor Code section 28023 and therefore could not recover

attorney fees under that statute. We affirm in part and reverse in part the judgment with

directions to redetermine the class award, attorney fees, and prejudgment interest as

explained below.

FACTUAL AND PROCEDURAL BACKGROUND

The trial court (Judge Lisa Foster) certified a class consisting of "[t]hose persons

who signed contracts directly with [UT] as newspaper home [d]elivery carriers of the

San Diego Union-Tribune newspaper in the [S]tate of California between January 2005

and the present."4 The carriers each signed a contract with UT entitled "Independent

Contractor Distribution Agreement Home Delivery." The contract provided that the

carrier owned and operated an independent business enterprise and was not an employee,

and that the carrier and UT "fully and freely" intended to create an independent

contractor relationship under the contract.

3 Subsequent references to section 2802 are to Labor Code section 2802.

4 The class period effectively ran from January 2005 through June 2007 because UT began phasing out direct-contract carriers in 2006 and as of July 1, 2007, there were no longer any direct-contract carriers delivering papers for UT. Judge Foster noted in the certification order that by the end of 2007, no carriers contracted directly with UT; they all contracted with third-party distributors.

3 The contract required the carrier to deliver each newspaper "in a clean, dry,

undamaged and readable condition at a time and location" that met the subscriber's

reasonable requests and expectations. The carrier agreed to complete deliveries by 5:30

a.m. on weekdays and 6:30 a.m. on Saturdays, Sundays, and holidays. The carrier could

not directly or indirectly engage in the delivery, sale, or distribution of any other daily or

Sunday newspaper in the San Diego area without UT's written consent.

UT paid carriers on a per-piece basis and provided for "[i]nsert [f]ees"i.e.,

payment for putting inserts into newspaperand fees for delivering publications other

than the San Diego Union-Tribune, such as the USA Today and the Wall Street Journal.

UT tracked subscriber complaints against a carrier by documenting the number of

complaints per thousand deliveries (CPT) against the carrier. The contract provided that

CPT's "regarding missed or late deliveries; or wet, stolen or damaged newspapers must

not exceed 1.0. . . ." UT charged the carrier $4.00 for more than one CPT and $8.00 for

more than two CPT's.

The contract required the carriers to obtain accident insurance to cover injury to

the carrier or his or her substitutes or helpers, and bonding in the amount of $1,200

through a bonding company acceptable to UT. The minimum bonding for each route was

$600, and the carrier could elect to obtain bonding with Wilson Gregory Agency, Inc., for

$1.00 per month for each $600 in coverage, which would result in a monthly bond

deduction of $2.00 from the carrier's pay.

Carriers picked up the newspapers they were to deliver each morning and "mail"

(written communications, including delivery instructions) from UT at one of UT's

4 regional distribution centers. The carriers arrived at the distribution centers between 2:00

and 4:00 a.m. and spent about 45 minutes to an hour assembling their newspapers and

preparing them for delivery. The contract required the carriers to assemble their papers at

the distribution centers.5 The carrier agreed to pay UT a distribution center fee and

authorized UT to debit from the carrier's account "[i]nserting [f]ees" to compensate a

third party for performing certain inserting services (putting inserts into the newspapers

for the carriers).

Plaintiffs filed their original class action complaint in January 2009. Plaintiffs'

second amended complaint, the operative complaint at trial, named UT and various other

entities as defendants and included causes of action under the Labor Code for (1) failure

to pay minimum wage and overtime wages; (2) failure to provide meal breaks or

compensation in lieu thereof; (3) failure to provide rest periods or compensation in lieu

thereof; (4) failure to reimburse for reasonable business expenses (§ 2802);6 (5) unlawful

deductions from wages; (6) failure to provide itemized wage statements; and (7) failure to

5 The court in its statement of decision stated: "The contract stated that the carriers were required to prepare and fold their newspapers in [UT's] distribution centers. . . ." Presumably, the court was referring the following language in the contract: "Contractor agrees to deliver publication (and any products therein) on the specified delivery day and to insert separate pieces and any other sections, inserts, or jackets that are part of that publication together prior to leaving [UT's] designated location."

6 Subdivision (a) of section 2802 provides: "An employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer, even though unlawful, unless the employee, at the time of obeying the directions, believed them to be unlawful."

5 keep accurate records. The second amended complaint also included an eighth cause of

action under section 17200 for unfair business practices.

In 2011, plaintiffs filed a motion to certify a class defined as "[a]ll persons

presently or formerly engaged by [UT] as newspaper home delivery carriers of The

San Diego Union-Tribune newspaper in the [S]tate of California during the class period,

whether engaged directly by [UT] or indirectly through its agents." UT (and other

defendants) filed a motion to strike the class allegations from the second amended

complaint and opposition to plaintiffs' motion to certify the class.

The trial court granted in part and denied in part plaintiffs' motion for class

certification and UT's motion to strike class allegations. With respect to plaintiffs' fourth

cause of action and sixth through eighth causes of action only, the court certified a class

consisting of "[t]hose persons who signed contracts directly with [UT] as newspaper

home [d]elivery carriers of The San Diego Union-Tribune newspaper in the [S]tate of

California between January 2005 and the present." The court denied plaintiffs' motion

for certification and "concurrently grant[ed] the motion to strike the class allegations,

with respect to the large class for whom certification was sought by plaintiffs and with

respect to the first, second, third and fifth causes of action." The court excluded from the

class persons who contracted with third-party distributors to deliver The San Diego

Union-Tribune rather than with UT directly.

In September 2012, plaintiffs filed a motion to bifurcate the trial, requesting that

their eighth cause of action under section 17200 for unfair business practices (an

equitable claim) be tried before their fourth cause of action under section 2802 for

6 reimbursement of business expenses (a legal claim). In that motion, plaintiffs conceded

their sixth and seventh causes of action were time-barred because the limitations period

for obtaining penalties under those causes of action had expired when plaintiffs filed their

original complaint in 2009. Consequently, the fourth cause of action and eighth cause of

action were the only remaining causes of action to be tried.

Plaintiffs argued that equitable claims generally should be tried before legal claims

because doing so might dispense with the need to try the legal claims. Specifically,

plaintiffs noted that the issue of whether they were employees of UT or independent

contractors was the foundational issue under both remaining causes of action, and a

determination that they were independent contractors would be dispositive of both causes

of action. The court (Judge Gonzalo Curiel) granted the motion to bifurcate and ordered

that plaintiffs' equitable cause of action for unfair business practices would be tried first

as a bench trial before the trial of their legal claim for reimbursement of expenses under

section 2802.

In January 2014, plaintiffs' counsel sent UT's counsel a letter stating: "Please be

advised that it is our intention to seek all of the class members' damages in

the . . . section 17200 cause of action. This includes, but is not limited to, mileage

reimbursement, insurance, bonds, warehouse rent, bags and rubber bands, insert charges,

carrier collect and complaint charges. We bring this to your attention since it was

previously our intention to seek the mileage damages in the . . . section 2802 claim.

However, since mileage reimbursement is a vested right once the miles are driven, it is

also a recoverable item of damage under the section 17200 claim pursuant to Cortez v.

7 Purolater Air Filtration Products Co. (2000) 23 Cal.4th 163 [(Cortez)]."7 In December

2012, UT filed a pretrial motion to decertify the class. The court denied the motion

without prejudice.

The case was tried to the court in May and June of 2013. After plaintiffs rested,

UT moved for judgment under Code of Civil Procedure section 631.8 on the grounds the

evidence proved the class representative who testified at trial, Genardo Valderrama, was

an independent contractor, and plaintiffs had not met their burden of proving damages

under section 2802. UT also renewed its motion to decertify the class on the grounds

Valderrama was not an adequate or typical class representative and plaintiffs had failed to

put on "common proof." The court denied both motions. In addition to Valderrama's

testimony, the court heard testimony from 12 other witnesses, including two expert

witnesses and a number of present and former UT employees.

In December 2013, the court filed a statement of decision, in which it found

"[p]laintiffs showed by a significant preponderance of the evidence that the carriers were,

in fact, employees [of UT] and not independent contractors." Accordingly, the court

concluded plaintiffs were "entitled to recover under . . . section 17200." The court

rejected UT's defense that it had "provided enhanced compensation to the carriers such

7 The California Supreme Court in Cortez did not authorize recovery of damages in an action under the unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et seq.), as plaintiffs' counsel's letter suggests. The Cortez court held that unlawfully held wages may be recovered as restitution in a UCL action, even though they might also be recovered as damages in a civil suit for breach of contract or fraud. (Cortez, supra, 23 Cal.4th at pp. 173–178.) The Cortez court confirmed that damages are not available under the UCL. (Id. at p. 173.)

8 that it subsumed all of their expenses, including when gas prices spiked during the Class

Period." In the statement of decision, the court granted plaintiffs' motion to amend their

second amended complaint to conform to proof to include three "categories of damages

they sought recovery for at trial" but did not specify in their complaint, namely, carrier

collect charges, insert charges, and warehouse rent.

The court awarded plaintiffs restitution under section 17200 in the total amount of

$3,188,445, consisting of business expenses in the following amounts: $2,280,059 for

mileage reimbursement; $618,569 for poly bags and rubber bands; $74,014 for insurance

premiums; $29,577 for bond premium; $116,430 for warehouse rent; and $69,796 for

insert charges. The court denied recovery for carrier collect charges and complaint

charges.

Plaintiffs' lead counsel and associate counsel filed separate motions for attorney

fees under section 1021.5 and section 2802. The court ruled that plaintiffs were not

entitled to fees under section 2802 because they had abandoned that cause of action, but

the court granted the motions under section 1021.5. In June 2014, the court entered a

final judgment awarding plaintiffs on their eighth cause of action the principal sum of

$3,188,445 against UT, plus prejudgment interest at the rate of seven percent from

January 1, 2006 to November 27, 2013, in the sum of $1,765,350.27 for a total award of

$4,953,795.27. The judgment awarded attorney fees to plaintiffs and the class members

9 in the amount of $6,160,416, of which $1,250,000 was to be paid from the common

fundi.e., the class award.8

DISCUSSION

UT's Appeal

I. Determination that the Carriers Were Employees and not Independent Contractors

UT contends substantial evidence does not support the court's determination that

the carriers were employees rather than independent contractors. We disagree.

The trial court's determination of employee or independent contractor status is one

of fact if it depends upon the resolution of disputed evidence or inferences and, as such,

must be affirmed on appeal if supported by substantial evidence. (S.G. Borello & Sons,

Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341, 349 (Borello); Estrada

v. FedEx Ground Package System, Inc. (2007) 154 Cal.App.4th 1, 16–17 (Estrada).) The

question is one of law only if the evidence is undisputed. (Borello, at p. 341.) "The label

placed by the parties on their relationship is not dispositive, and subterfuges are not

countenanced." (Id. at p. 349.)

"California decisions applying statutes enacted for the protection of employees

'uniformly declare that "[t]he principal test of an employment relationship is whether the

person to whom service is rendered has the right to control the manner and means of

accomplishing the result desired. . . ." [Citations.]' [Citation.] But courts 'have long

recognized that the "control" test, applied rigidly and in isolation, is often of little use in

8 The judgment also awarded costs to plaintiffs and incentive awards to the class representatives. Those awards are not challenged in this appeal.

10 evaluating the infinite variety of service arrangements.' [Citation.] So, while the right to

control work details 'is the "most important" or "most significant" consideration, the

authorities also endorse several "secondary" indicia of the nature of a service

relationship.' [Citation.] Thus, ' "the right to discharge at will, without cause," ' is

' "[strong] evidence in support of an employment relationship. . . ." ' [Citation.]

Additional factors include '(a) whether the one performing services is engaged in a

distinct occupation or business; (b) the kind of occupation, with reference to whether, in

the locality, the work is usually done under the direction of the principal or by a specialist

without supervision; (c) the skill required in the particular occupation; (d) whether the

principal or the worker supplies the instrumentalities, tools, and the place of work for the

person doing the work; (e) the length of time for which the services are to be performed;

(f) the method of payment, whether by the time or by the job; (g) whether or not the work

is a part of the regular business of the principal; and (h) whether or not the parties believe

they are creating the relationship of employer-employee.' " (Arzate v. Bridge Terminal

Transport, Inc. (2011) 192 Cal.App.4th 419, 426, quoting Borello, supra, 48 Cal.3d at

pp. 350–351.)

Regarding the right-to-control test, "what matters under the common law is not

how much control a hirer exercises, but how much control the hirer retains the right to

exercise. [Citations.] Whether a right of control exists may be measured by asking

' " 'whether or not, if instructions were given, they would have to be obeyed' " ' on pain of

at-will ' " 'discharge[ ] for disobedience.' " ' " (Ayala v. Antelope Valley Newspapers, Inc.

(2014) 59 Cal.4th 522, 533 (Ayala).)

11 The trial court in its statement of decision identified the facts and evidence that

supported its finding that the carriers were employees of UT. The court found that

although the contract provided that the carriers were independent contractors, it was a

contract of adhesion that the carriers entered into "on a take-it-or-leave it basis." The

court cited testimony of former UT management employee Scott Zimmerman that a

carrier never requested a new rate from him,9 and Valderrama's testimony that there was

no negotiation of rates he was to be paid, which were filled in when he was provided the

contract. The court also cited evidence that the occasional rate increases the carriers

received were not the result of negotiations with the carriers, but rather were "pragmatic

business decision[s]" and an effort by some UT "distribution centers to determine

whether the carriers were making similar compensation to occupations that competed

with the pool of persons who worked as carriers."

The court noted that UT's carrier contract was revised 11 times during the class

period, and that all of the revisions were unilateral by UT and for UT's sole benefit. As

examples, the court cited a liquidated damages provision added to the contract in 2006

"on a take-it-or-leave it basis," and UT's unilateral decision to have carriers pay others to

do the inserts for their Sunday papers. The court found credible Valderrama's testimony

that there was no negotiation regarding any amendments or addendums to the contract.

9 UT management employee Nancy Tetrault also testified that she was not aware of any prospective carrier asking at the time of contracting for a higher rate than the rates UT offered.

12 The court cited the following provisions in the contract that showed UT's right to

control the carrier's manner and means of delivery: (1) the contract required the carriers

to prepare and fold their newspapers in the distribution centers unless they had written

waivers of that requirement; (2) the carriers could not insert messages into their papers

with the exception of holiday cards; (3) the carriers could use only bags that were

approved by UT; (4) the carriers could not add a delivery surcharge; (5) the carriers were

required to deliver their papers by a specified deadline; (6) the carriers could not sell their

subscriber lists; (7) the carriers had to be properly attired and wear closed-toed shoes in

the distribution centers; (8) the carriers could deliver only publications authorized by UT;

(9) the carriers could not assign their contracts; and (10) a carrier's compensation would

be reduced if his or her CPT exceeded one.

There was evidence of certain control measures that the court incorrectly cited as

contract provisions, including UT's requirement that the carriers prepare the papers in

accordance with daily specifications that UT provided in order to comply with advertiser

requests, and UT's policy that the carriers could not communicate directly with the home

delivery subscribers.10

In addition to the contract, the court specified other evidence of control supporting

its conclusion that the carriers were employees of UT, including "substantial testimony

10 The court later in its statement of decision noted evidence apart from the contract that UT did not allow carriers to deal with customer complaints and were discouraged from communicating directly with customers, including testimony to that effect from Valderrama and Pierre Savoie, who worked for UT during the class period as a consumer distribution manager.

13 regarding [UT's] employees training, mentoring, and coaching carriers." Zimmerman

testified about a comprehensive "Orientation Procedures" checklist that UT employees

used to train new carriers. The checklist covered every aspect of the carrier's work,

including warehouse safety, how to bill and maintain records for carrier-collect accounts,

double bagging on rainy days, procedures at the distribution center, how Sunday

procedures differed from weekday procedures, how and where to order and pick up

supplies, how to interpret a route/delivery list, how to handle paper shortages, customer

complaint procedures, and contractual obligations and procedures for using substitutes.

The carrier's daily mail from UT included instructions specifying how particular

customers wanted their papers delivered, and the carrier had to comply with those

demands or risk being charged with a customer complaint.

The court noted Savoie's testimony that UT employees were evaluated on their

training, mentoring, and supervision of carriers. Savoie also testified that UT sought to

have uniform policies at the distribution center, including policies regarding the training

of carriers.

The court referenced testimony of former UT employee Richard Conahan that UT

set goals for employees to assist with carrier training and that employees mentored

carriers, and the testimony of former UT employee Victor Diep, who testified that he

trained carriers by taking them on their routes and showing them where to put the papers,

how to read their daily mail and delivery instructions, and how to use a RouteSmart list,

which was a computer program that provided specific instructions on delivering papers

according to customer demands. The court also cited former UT employee Harold

14 Button's testimony about a UT "best practices" document, which was an interoffice

memorandum that established uniform policies for dealing with carriers at UT's

distribution centers.11

As additional evidence of UT's control of the carriers, the court noted that UT

employees at the distribution centers watched over the carriers to make sure they were

assembling their papers correctly and "would counsel, mentor, and supervise the

carriers." The court specifically noted former UT management employee Phillip

Prather's testimony that he would walk around his distribution center and make sure the

carriers were assembling papers correctly, and Valderrama's testimony that UT

employees supervised him while he was assembling papers at the distribution center. The

court also noted "unrefuted" evidence that if carriers failed to arrive at their distribution

centers in a timely fashion, UT employees would call them and sometimes go to a

carrier's residence to wake up the carrier.

The court cited testimony by Zimmerman and Valderrama, whom the court found

to be credible witnesses, that UT employees conducted audits and field checks of the

carriers' deliveries to determine whether the papers delivered by the carriers had been

prepared correctly, and Conahan's testimony that field checks were done on a regular

basis. As additional evidence of UT's right to control the carriers, the court cited Savoie's

testimony that the UT unilaterally changed carrier routes to satisfy advertisers who

wanted their advertisements delivered to specific subscribers.

11 Zimmerman also testified about the "best practices" document.

15 The court found that the carriers delivered "alternate publications" (e.g. the New

York Times and Wall Street Journal) under instructions from UT, and that "[t]here was

no evidence that a carrier who did not want to deliver any or all of the alternate

publications could have chosen to do so. Indeed, it was clear that the carriers had to

deliver these publications, regardless of their preference." These findings are supported

by Zimmerman's and Valderrama's testimony and the provision of the contract stating:

"[UT] agrees to provide [the carrier] . . . with sufficient copies of publications other than

The San Diego Union-Tribune . . . for delivery to locations designated by [UT], which

may include The San Diego Union-Tribune subscriber stops and other designated stops."

Valderrama initialed that provision in the appendix to his contract but testified that the

carriers had no choice whether to sign contract addendums, stating, "We had to sign."

Zimmerman testified that there was no negotiation on the alternate publication

addendums. He stated, "I believe the first one was the Los Angeles Times, and we pretty

much approached the carrier and said, 'You're going to have 12 weekly customers, and

you might have 20 Sunday customers that are Los Angeles Times. . . ."

The court cited the following as additional evidence of UT's right to control the

carriers' work: the carriers had to purchase bonds and accident insurance from UT's

broker; the carriers' invoices were prepared by UT rather than the carriers; and UT

limited the carriers' right to use substitutes. The court cited evidence that if a nonfamily

member substituted for a carrier, UT had to know who the substitute was and "when the

substitute would be there." The court noted Zimmerman's testimony that UT routinely

16 obtained information about a substitute, particularly the substitute's name and phone

number.

After discussing the evidence showing UT's right to control the carriers' manner

and means of performing their work, the court addressed the secondary factors under

Borello that showed the carriers were employees as follows:

(1) The right to discharge at will: The court noted that all of the carrier's contracts

provided that the contract was terminable on 30 days' notice, indicating the contract was

terminable at will. The contract also gave UT the right to terminate the contract

immediately for a "material breach."

(2) Whether the carriers were engaged in a distinct occupation or business: The

court initially addressed this factor by noting UT employees did the same job as the

carriers. The court cited testimony that during the class period up to 10 percent of UT's

home-delivery routes were delivered by UT employees, who delivered the routes in the

same way as the carriers and used their own vehicles.12 However, the employees were

reimbursed for their mileage.

Later in its statement of decision, the court stated: "When the class members first

applied to become carriers, they were not independent newspaper delivery businesses.

They were people looking for a job. They did not have any fictitious business names or

business licenses. The only thing [UT] required was that the carriers had a driver's

12 Savoie was asked whether at certain points during the class period "nearly 10 percent of the routes were open," meaning they were not assigned to a carrier and had to be delivered by UT employees. Savoie responded, "I don't believe it got that high, but it got high."

17 license, acceptable automobile insurance, and a Social Security card." The court's

findings were supported by testimony of Zimmerman and Savoie.

(3) Provision of instrumentalities, tools, and place of work: The court found that

the carriers had to use bags and rubber bands they purchased from UT. The court stated:

"The court supposes that the carriers may have been able to purchase bags and rubber

bands from another source if they were acceptable to [UT], but there is no credible

evidence that actually occurred. Instead, the evidence showed carriers purchased their

supplies from [UT], by filling out a required form." The court cited testimony by

Zimmerman that new carriers were provided a kit they purchased for one dollar to use

while they were learning to be a carrier. The kit provided the necessary supplies for the

carrier's first month. Valderrama testified that when he started working as a carrier for

UT, he was told he was going to be buying rubber bands and plastic bags for the papers

from UT. When he asked if he could buy bags or rubber bands elsewhere, he was told by

a UT management employee that he had to buy them from UT. Zimmerman testified he

was not aware of any carriers that bought supplies from anyone other than UT.

(4) Delivery as part of UT's business: The court correctly noted it was undisputed

that newspaper delivery is an integral part of UT's business. Savoie testified to that

effect.

(5) Duration of services: The court noted the evidence showed a large percentage

of carriers stayed contracted with UT for many years, which is indicative of employment

status. Zimmerman estimated that 25 percent of the carriers stayed four years or longer,

18 and there were carriers who had delivered for UT for decades. He testified that the

average amount of time a carrier would stay with UT was one to three years.

(6) Investment in equipment:13 The court correctly noted there was no evidence

that the carriers had a substantial investment in their work other than their vehicles,

which they also used for their personal needs.

The evidence discussed above sufficiently supports the court's finding that the

carriers were employees of UT rather than independent contractors. California case law

also supports that finding. As the court noted in its statement of decision, Antelope

Valley Press v. Poizner (2008) 162 Cal.App.4th 839 (Antelope Valley) is persuasive

authority because the Court of Appeal in that case affirmed the insurance commissioner's

determination, under facts similar to those presented here, that newspaper carriers were

employees rather than independent contractors for purposes of workers' compensation

insurance. (Id. at pp. 842–843.)

Applying the substantial evidence test and the common law test for employment

approved in Borello, the Antelope Valley court concluded there was substantial evidence

that the Antelope Valley Press (AVP) controlled the manner and means by which its

carriers accomplished their tasks, even though the form contract between AVP and the

13 In addition to the secondary factors noted above, the Borello court noted a "six- factor test developed by other jurisdictions. . . . Besides the 'right to control the work,' the factors include (1) the alleged employee's opportunity for profit or loss depending on his managerial skill; (2) the alleged employee's investment in equipment or materials required for his task, or his employment of helpers; (3) whether the service rendered requires a special skill; (4) the degree of permanence of the working relationship; and (5) whether the service rendered is an integral part of the alleged employer's business." (Borello, supra, 48 Cal.3d at pp. 354–355, italics added.)

19 carriers stated that the carrier " 'has the right to control the manner and means of delivery'

of AVP's publications and 'has the right to determine the equipment and supplies needed

to perform delivery services.' " (Antelope Valley, supra, 162 Cal.App.4th at p. 853.)

Like UT, AVP permitted its customers to dictate where they wanted the papers placed on

their property. (Id. at pp. 853–854.) Any harm to or loss of the paper could result in

financial loss to the carrier, like the charges against the carriers for customer complaints

in the present case. (Id. at p. 854.) The carriers in Antelope Valley had to abide by the

pick up and delivery times specified in the contract or face economic consequences or

termination. (Ibid.) AVP controlled the price paid by customers to AVP, which included

the cost of the delivery service. (Ibid.)

The Antelope Valley court also concluded substantial evidence supported the

finding that most of the secondary factors under Borello indicated an employer-employee

relationship between AVP and its carriers. Like the carriers' contract in the present case,

the carriers' contract in Antelope Valley provided that AVP could terminate the contract

on 30 days' notice to the carrier, which provision the Antelope Valley court viewed as

clearly giving AVP "the right to discharge at will without cause." (Antelope Valley,

supra, 162 Cal.App.4th at p. 854.) The Antelope Valley court further noted the evidence

did not show that in delivering AVP's publication, the carriers were engaged in a distinct

occupation or business of their own; that any of the carriers held themselves out as being

an independent delivery service that happened to have AVP as one of its customers; or

that the carriers had a substantial investment in their AVP delivery duties other than their

time and the vehicles they used, which were the same vehicles they used for their

20 personal activities. (Id. at pp. 354–355.) Similarly, there was no evidence in the present

case that the carriers operated as independent newspaper delivery businesses with

fictitious business names or business licenses or that the carriers had a substantial

investment in their work other than their time and their vehicles, which they also used for

their personal needs.

Other factors supporting the determination that the carriers in Antelope Valley

were employees were that delivering newspapers required no particular skill; AVP

supplied many of the materials used by the carriers, such as the newspapers, bags, and

subscriber lists; and a large percentage of carriers had been contracted with AVP for a

period of more than a year, unlike an independent contractor "hired to achieve a specific

result that is attainable within a finite period of time, such as plumbing work, tax service,

or the creation of a work of art for a building's lobby . . . ." (Antelope Valley, supra, 162

Cal.App.4th at p. 855.) The Antelope Valley court also noted that payment for the

carriers was "essentially in a piecework fashion" and that delivery of its publications was

"part and parcel of the newspaper business," as evidenced by the fact that AVP

employees also delivered AVP's publications. (Id. at pp. 855–856.) Finally, the Antelope

Valley court noted that although the carrier contract allowed the carriers to hire

employees and substitutes, the contract limited that right in certain respects. (Id. at

p. 856.) Each of these factors is also present in this case.

The instant case is also similar to Gonzales v. Workers' Comp. Appeals Bd. (1996)

46 Cal.App.4th 1584 (Gonzalez), in which the Court of Appeal applied the Borello right-

to-control test in determining that a newspaper carrier was an employee of the newspaper

21 rather than an independent contractor for purposes of workers' compensation. The

Gonzalez court noted the carrier "had very little control over the mode and manner in

which he performed his service. [The newspaper] specified the time at which the

newspapers were to be picked up for distribution and specified the time each day by

which the newspapers were to be delivered to the customers. [The newspaper] furnished

both the customers and the routes by which the customers were served. [The carrier] had

almost no interaction with the customers, as the customers paid their subscription fees

directly to [the newspaper] and rendered complaints about delivery directly to [the

newspaper]. Although [the newspaper's] supervision of the performance of the services

was indirect, it was focused on and totally responsive to the complaints received from

customers." (Id. at p. 1593.) The Gonzalez court further noted that the newspaper could

discharge a carrier at will (ibid.); the carriers made no capital investment aside from their

vehicles; the publisher provided bags and rubber bands; newspaper delivery was a form

of manual labor that required no special skill; newspaper delivery was an integral part of

the newspaper's business operation; and "no finite time for service was involved as is

normally the case with a true independent contractor relationship." (Id. at p. 1594.) Each

of these circumstances described in Gonzalez is present in the instant case.

Finally, just as the trial court here found the carriers' form contract was not

controlling on the issue of independent contractor/employment status because it was an

adhesion contract that the carriers entered into "on a take-it-or-leave it basis," the

Gonzalez court noted "there was no indication that [the carrier] had any real choice of

terms of employment or contract." (Gonzalez, supra, 46 Cal.App.4th at p. 1594.) The

22 Gonzalez court concluded: "The totality of the circumstances substantiates

the . . . conclusion that [the publisher's] carrier agreement, which purported to 'disavow'

an employer-employee relationship, was a subterfuge to avoid the workers' compensation

laws of California. 'The label placed by the parties on their relationship is not dispositive,

and subterfuges are not countenanced.' " (Ibid., quoting Borello, supra, 48 Cal.3d at

p. 349.)

UT argues that Antelope Valley and Borello are inapposite because they were

decided in the context of workers' compensation law. We disagree that the common law

test discussed in Borello for determining an employment relationship is limited to

workers' compensation cases. The California Supreme Court in Borello stated that its

answer to the question of whether agricultural laborers engaged to harvest cucumbers

under a written " 'sharefarmer' " agreement were independent contractors exempt from

workers' compensation coverage had "implications for the employer-employee

relationship upon which other state social legislation depends." (Borello, supra, 48

Cal.3d at p. 345, fn. omitted.)

In Ayala, the Supreme Court considered whether a complaint alleging that a

newspaper publisher illegally treated its carriers as independent contractors and thereby

deprived them of various administrative and statutory wage and hour protections could

proceed as a class action. The Ayala court applied the Borello right-to-control test and

secondary factors in considering "whether the operative legal principles, as applied to the

facts of the case, render[ed] the claims susceptible of resolution on a common basis."

(Ayala, supra, 59 Cal.4th at pp. 530, 531–540.) Finally, the Court of Appeal in Estrada

23 held that "[b]ecause the Labor Code does not expressly define 'employee' for purposes of

section 2802, the common law test of employment applies." (Estrada, supra, 154

Cal.App.4th at p. 10.) The trial court did not err in applying the common law test

discussed in Borello to determine whether the carriers were employees or independent

contractors.

UT also argues the trial court erred in disregarding regulations adopted by the

Employment Development Department (EDD) to define what constitutes an independent

contractor relationship with a carrier in the newspaper industry. Specifically, UT

contends that the court should have applied California Code of regulations, title 22,

section 4304-6 (section 4304-6), which sets forth various factors to consider in

determining whether a carrier is an employee or an independent contractor in newspaper

distribution industry, and that had it done so, it would have concluded the carriers were

independent contractors.

The court did not err in not specifically applying section 4304-6 to determine the

employment status of the carriers. The EDD regulations expressly apply the same

common law test for determining employment status articulated in Borello. (Cal. Code

Regs., tit. 22, §§ 4304-1 & 4304-6.) Section 4304-6, subdivision (a) provides that

"determination of whether a carrier is an employee or an independent contractor in the

newspaper distribution industry will be determined generally by the rules set forth in

[section] 4304-1 . . . ." California Code of regulations, title 22, section 4304-1 states:

"Whether an individual is an employee for the purposes of [unemployment

compensation] will be determined by the usual common law rules applicable in

24 determining an employer-employee relationship. Under those rules, to determine

whether one performs services for another as an employee, the most important factor is

the right of the principal to control the manner and means of accomplishing a desired

result. If the principal has the right to control the manner and means of accomplishing

the desired result, whether or not that right is exercised, an employer-employee

relationship exists. Strong evidence of that right to control is the principal's right to

discharge at will, without cause." Subdivision (a) of section 4304-1 lists the same factors

to be considered in applying the right-to-control test that the Borello court listed.

(Borello, supra, 48 Cal.3d at pp. 350–351.)

Section 4304-6, subdivision (c) sets forth "Basic Guidelines" or factors to be

considered in determining the employment/independent contractor status of newspaper

carriers, some of which evidence employment status and some of which evidence

independent contractor status. However, the factors listed in section 4304-6 are merely

what they purport to bei.e., guidelines; they do not establish an absolute test or compel

a particular finding of employment or independent contractor status under particular

circumstances. The trial court was not required to specifically consider the section 4304-

6 guidelines in making its employment status determination; it could properly make that

determination by applying the common law factors set forth in Borello and section 4304-

1. Substantial evidence and California law supports the court's determination that the

carriers were employees rather than independent contractors.

II. Class Action Certification and Trial

A. Adequacy of class representatives

25 UT contends the class must be decertified because the class representatives were

inadequate. "The party advocating class treatment must demonstrate the existence of an

ascertainable and sufficiently numerous class, a well-defined community of interest, and

substantial benefits from certification that render proceeding as a class superior to the

alternatives. [Citations.] 'In turn, the "community of interest requirement embodies three

factors: (1) predominant common questions of law or fact; (2) class representatives with

claims or defenses typical of the class; and (3) class representatives who can adequately

represent the class." ' " (Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th

1004, 1021 (Brinker).)

Typically, "[t]he adequacy of representation component of the community of

interest requirement for class certification comes into play when the party opposing

certification brings forth evidence indicating widespread antagonism to the class suit."

(Capitol People First v. Department of Developmental Services (2007) 155 Cal.App.4th

676, 696–697.) " 'It is axiomatic that a putative representative cannot adequately protect

the class if his interests are antagonistic to or in conflict with the objectives of those he

purports to represent. But only a conflict that goes to the very subject matter of the

litigation will defeat a party's claim of representative status.' " (Richmond v. Dart

Industries, Inc. (1981) 29 Cal.3d 462, 470.)

In the present case, there was no evidence of antagonism to the class suit by any

class members. Thus, representation of the class was adequate as long as the

representative(s) had claims typical of the class (Brinker, supra, 53 Cal.4th at p. 1021)

and could "adequately represent the class by vigorously and tenaciously protecting the

26 class members' interests." (Sharp v. Next Entertainment, Inc. (2008) 163 Cal.App.4th

410, 432.) A relevant factor in the latter analysis is "the competency of class counsel, if

the firm is representing the class as a whole and not simply the interests of the named

representative plaintiffs [citations], and if the named plaintiffs have lent their names to

litigation that is controlled by class counsel." (Id. at p. 433.)

Here, plaintiffs' counsel represented the entire class; class counsel's competency is

not at issue; and nothing in the record suggests the named representatives through

counsel did not vigorously and tenaciously advance the class members' interests

throughout the litigation. In the order certifying the class, the court stated: "With respect

to the claims the Court has certified for class treatment, the class representatives satisfy

the typicality requirement. None of the UT's arguments in this regard undermine

plaintiffs' showing that the class representatives['] claims arise from the same events,

practices and course of conduct that give rise to the claims of the other class members.

[Citation.] Similarly, the Court finds that class counsel unquestionably are qualified to

conduct the proposed litigation on behalf of the class." (Italics added.)

Because UT contends that the class representatives were inadequate at trial and

asks that we decertify the class on appeal, we also consider the legal principles that apply

to a motion to decertify a class. "After certification, a trial court retains flexibility to

manage the class action, including to decertify a class if 'the court subsequently discovers

that a class action is not appropriate.' [Citations.] To prevail on a decertification motion,

a party must generally show 'new law or newly discovered evidence showing changed

circumstances. [Citation.] A motion for decertification is not an opportunity for a

27 disgruntled class defendant to seek a do-over of its previously unsuccessful opposition to

certification. "Modifications of an original class ruling, including decertifications,

typically occur in response to a significant change in circumstances, and '[i]n the absence

of materially changed or clarified circumstances . . . courts should not condone a series of

rearguments on the class issues[.]' [Citation.]" ' [Citation.] A 'class should be decertified

"only where it is clear there exist changed circumstances making continued class

treatment improper." ' " (Kight v. CashCall, Inc. (2014) 231 Cal.App.4th 112, 125–126.)

We find no significant change in circumstances between the time the class was certified

and the time of trial that would support our decertifying the class or reversing the

judgment on the ground of inadequacy of the class representatives.

In arguing that the class representatives were inadequate and, therefore, the class

must be decertified, UT relies on the following three cases for the proposition that class

representatives are inadequate if they merely lend their name to a lawsuit controlled

entirely by class counsel: Howard Gunty Profit Sharing Plan v. Superior Court (2001)

88 Cal.App.4th 572 (Gunty), Soderstedt v. CBIZ Southern California, LLC (2011) 197

Cal.App.4th 133 (Soderstedt), and Jones v. Farmers Ins. Exchange (2013) 221

Cal.App.4th 986 (Jones). UT complains that five of the six class representatives did not

testify at trial and the one who did, Valderrama, was inadequate because he was generally

uninformed about the case and did not consent to be a class representative.

Gunty is inapposite. The trial court in Gunty, in ruling on a motion to certify a

class in an action against a banking corporation for fraud and unlawful market

manipulation, ruled that the proposed representative plaintiffa profit sharing planwas

28 not an adequate representative because it was a " 'professional plaintiff' "14 and was not

typical of the class. (Gunty, supra, 88 Cal.App.4th at p. 575.) The main issues before the

Court of Appeal were whether the plaintiffs should be allowed to send a letter to potential

class members soliciting a new class representative, whether such a communication is

constitutionally protected by the First Amendment as commercial speech, and whether

defendants should be allowed to send a letter urging potential class members not to

participate. (Id. at pp. 576–577.) The Gunty court discussed recent increased concern

over potentially meritless securities lawsuits filed by professional plaintiffs (id. at p. 578),

the potential for misuse and abuse of the class action procedure (id. at p. 579), and the

potential for abuse inherent in precertification communication (id. at p. 580). Concerned

that the trial court had not weighed these potential abuses against the rights of the parties,

the Gunty court remanded the matter and directed the trial court to conduct a hearing on

plaintiffs' motion to certify the class and, if it determined the plaintiffs had "established a

prima facie proper class action," to then determine what controls, if any, it should impose

on the parties' communications to potential class members. (Id. at pp. 580–581.)

In the present case, there is no evidence that Valderrama or any of the other class

representatives is a professional plaintiff. Valderrama testified that he had read the

complaint, and that after he spoke to plaintiffs' counsel about the lawsuit, he decided he

wanted to be a part of it. When UT's counsel asked him if plaintiffs' counsel offered to

14 The Gunty court explained that " '[t]he term professional plaintiff generally is used to refer to a plaintiff who is either a frequent filer . . . or a "hired gun" (one who allows an attorney to sue in his name in exchange for a fee), or both.' " (Gunty, supra, 88 Cal.App.4th at p. 575, fn. 2.)

29 pay him "something depending on how this lawsuit turns out," he testified that he was

told he "might get partial for whatever . . . the amount is, and everyone else will. That

was it." Counsel then asked, "So you were told that you might get something out of this

lawsuit if it's successful?" Valderrama responded, "Yes, sir." He further testified that he

was not told he would recover a specific amount and had not been paid anything so far.

The fact that plaintiffs' counsel discussed with Valderrama the lawsuit's potential to result

in a monetary recovery for the entire class does not make Valderrama a professional

plaintiff. Gunty does not compel the conclusion that Valderrama and the other class

representatives were inadequate.

Nor does the fact that Valderrama was the only class representative who testified

at trial render the other representatives inadequate. Valderrama's testimony describing

his daily routine and the various aspects of his work for UT as a carrier was largely

cumulative to the testimony of UT's present and former management employees who

testified about the carriers' work and how they were trained and managed. Nothing in the

record suggests the class members' interests were harmed by the failure of other class

representatives to provide additional cumulative trial testimony about their experiences as

carriers for UT.

Soderstedt and Jones were appeals from orders denying class certification

motions. In Soderstedt, the trial court found the appellants failed to meet their

evidentiary burden of showing they were adequate class representatives because their

declarations did not show they desired to represent the putative class or understood the

30 obligations of being an adequate representative.15 In affirming the denial of class

certification, the Soderstedt court concluded "[s]ubstantial evidence supported the trial

court's finding that appellants failed to meet their burden to show they were adequate

class representatives." (Soderstedt, supra, 197 Cal.App.4th at p. 156.) However, the

Soderstedt court observed that the same evidence (declarations) on which the trial court

based its finding of inadequacy of the representatives could also have reasonably

supported the opposite findingi.e., that the proposed representatives could adequately

represent the class.16

In Jones, the trial court denied class certification based in part on its finding that

the proposed class representative (Jones) was not an adequate class representative

because he had not filed his own "declaration in support of the motion and therefore

failed to show that he understood his fiduciary obligation owed to the class. . . ." (Jones,

15 The appellants' declarations in Soderstedt each stated: " 'I have been actively involved in this litigation for its entire duration. I am regularly in contact with my counsel. I have assisted counsel in responding to discovery requests. I understand that as a Class Representative, I must assist counsel in prosecuting the action on behalf of the Class. I have made myself available to date, and will continue to do so and to represent the interests of absent class members to the best of my ability.' " (Soderstedt, supra, 197 Cal.App.4th at p. 155.)

16 The Court of Appeal stated: "Although it may have been reasonable on the basis of [the appellants' declarations] for the trial court to have concluded that appellants would adequately represent the interests of the absent class members, that does not mean the trial court's contrary conclusion was necessarily unreasonable." (Soderstedt, supra, 197 Cal.App.4th at pp. 155–156.)

31 supra, 221 Cal.App.4th at p. 992.)17 Although the Jones court reversed the order

denying the class certification motion, it concluded substantial evidence supported the

trial court's finding that Jones was not an adequate representative. (Id. at p. 998.)18

Thus, the Soderstedt and Jones courts did not set forth definitive requirements for

adequacy of class representation; they simply decided the trial court could reasonably

find the representative was inadequate based on the evidence before iti.e., that

substantial evidence supported the trial court's finding. As noted, the Soderstedt court

observed that the trial court could also have reasonably made the opposite finding. We

conclude the trial court here could reasonably find the class representation was adequate,

as the trial court could have done in Soderstedt. We find no basis to decertify the class or

disturb the judgment on the ground the class was not adequately represented.

B. Trial of claims specified in plaintiffs' fourth cause of action

UT contends the trial resulted in abuse of the class action procedure because the

court allowed plaintiffs to litigate claims that were not certified for class treatment.

Plaintiffs disagree with UT's view of the scope of the class certification order. There was

much argument and discussion between the parties and the court over this issue at trial.

17 Plaintiffs' counsel filed a declaration on Jones's behalf stating that Jones had reviewed the complaint and understood the basic theories of the case and his role as a class representative. (Jones, supra, 221 Cal.App.4th at p. 998.)

18 The Jones court concluded that the trial court was required to allow the plaintiffs an opportunity to amend their complaint to name a suitable class representative. (Jones, supra, 221 Cal.App.4th at p. 999.)

32 The fourth cause of action of plaintiffs' operative second amended complaint

sought reimbursement of reasonable business expenses under section 2802 and related

administrative regulations, and specified the following five categories of business

expenses: (1) vehicle expenses (gasoline, maintenance, and insurance); (2) charges for

customer complaints; (3) plastic bags, strings, and rubber bands; (4) insurance to cover

accidental injury on the job; and (5) the cost of a bond to secure the carrier's performance.

The fifth cause of action for "Unlawful Withholding of Wages Due" under Labor Code

sections 221 and 223 and related regulations sought recovery of the same expenses

specified in the fourth cause of action, with the exception of vehicle expensesi.e., it

sought recovery of "illegal deductions" for customer-complaint charges; plastic bags,

strings, and rubber bands; workers' compensation insurance; and surety bonds. As noted,

Judge Foster struck and denied certification as to the fifth cause of action.19

19 The certification order did not explain and it is unclear why the court (Judge Foster) struck the fifth cause of action. As noted, the court struck the first, second, third, and fifth causes of action. The court's explanation of that portion of its ruling indicated it struck those causes of action because it concluded they required proof that was too individualized for class treatment, but the court's explanation specifically addressed only the first, second, and third causes of action for failure to pay minimum and overtime wages, failure to provide or compensate for meal breaks, and failure to provide or compensate for rest periods, respectively. The court discussed "how individualized the determination of liability for minimum wage violations and overtime violations [would] be," and noted the "same [individual] questions make certifying the class on the second and third causes of action problematic." The court concluded that "determining whether there will be any liability for overtime pay, minimum wage violations, rest periods or meal breaks will necessarily involve a myriad of individual inquiries making class certification inappropriate." The court did not explain why litigating the fifth cause of action for unlawful wage deductions would be too individualized for class treatment.

33 In her written certification order, Judge Foster certified the class as to the fourth

cause of action and referred to that cause of action as "the Fourth cause of actionfailure

to pay reimbursement for auto expenses . . . ." UT contends this language clearly shows

Judge Foster certified the fourth cause of action only as to the claim for auto expenses

and not the other categories of expenses specified in that cause of action. UT also

reasons that by denying certification as to and striking the fifth cause of action, Judge

Foster intended that plaintiffs' claims for any expenses that were specified in both the

fourth and fifth causes were not certified for trial, leaving only the claim for vehicle

expenses within the scope of class certification.

We disagree with UT's interpretation of the certification order. Read in context,

the order's reference to "the Fourth cause of actionfailure to pay reimbursement for

auto expenses" is reasonably read as merely exemplifying that plaintiffs' business

expense claims were susceptible to proof on a classwide basis. In that paragraph, Judge

Foster began by "agree[ing] with plaintiffs" that the certified (fourth and sixth through

eighth) causes of action were amenable to class treatment and, to exemplify, addressed

the fourth and sixth causes of action as follows: "For example, if plaintiffs establish that

the carriers properly should have been classified as employees, then without question,

they will prevail on liability for . . . failure to provide an itemized wage statement. The

UT either did or did not provide each class member with an itemized wage statement.

The UT does not contend that it provided wage statements to some carriers but not to

others. Similarly, with respect to the Fourth cause of actionfailure to pay

34 reimbursement for auto expenses, there is no dispute the UT did not reimburse plaintiffs

for auto expenses. If the carriers are found to be employees, the UT will be required to

reimburse plaintiffs for automobile-related expenses. The only question is one of

damages."

Thus, Judge Foster did not expressly rule that the reimbursement/unlawful

deduction claims common to the fourth and fifth causes of action were too individualized

for class treatment and that her certification of the fourth cause of action was limited to

the claim for vehicle expenses.20 Her reference to that claim is reasonably interpreted as

simply intending to illustrate that plaintiffs' claims for reimbursement of business

expenses were not too individualized to be litigated on a classwide basis. In any event,

the court at trial exercised its discretion to allow plaintiffs to litigate all of their business

expense claims notwithstanding any language in Judge Foster's certification order

indicating a contrary intent. During extended argument over the scope of the certification

order and whether litigation of the fourth cause of action was limited to vehicle expenses,

the court (Judge Meyer) stated: "I'm not going to allow this issue to get me off track.

This case is going, and these [business expense claims] are items of damage[.]"

[¶] . . . [¶] "[A]nd . . . I'm not going to be necessarily limited by Judge Foster's

20 In a later hearing before Judge Foster regarding notice to class members, Judge Foster indicated she did not intend to limit certification of the fourth cause of action to vehicle expenses by stating, in reference to the proposed notice's description of the class claims: "I don't have an issue with how the claims are described. Itthe court did reference mileage. I'm not sure there are other expenses that might not properly be encompassed within those claims." (Italics added.) During argument over this point at trial, the court (Judge Meyer) noted that Judge Foster's certification order did not expressly limit litigation of the fourth cause of action to auto expenses only.

35 determination. This is my case, not hers, with all due respect to Judge Foster. And I'm

going to make the same determination that she made: If there is . . . an expense that is

easily determinable on a classwide basis, fine. If it's not, it's not going to be considered."

"Trial courts are afforded broad discretion when managing class actions [citation],

and we presume the correctness of their rulings unless an abuse of discretion is shown."

(In re BCBG Overtime Cases (2008) 163 Cal.App.4th 1293, 1301–1302.) We find no

abuse of discretion in the court's allowing plaintiffs to litigate all of their expense

reimbursement claims.

C. Amendment to conform to proof to add claims not alleged in the second amended complaint

UT contends the court committed reversible error by granting, in its statement of

decision, plaintiffs' motion to amend their second amended complaint to conform to proof

to include claims for three categories of business expensescarrier collect charges, insert

charges, and warehouse rentfor which they sought recovery at trial but did not identify

in their second amended complaint.

" '[T]he allowance of amendments to conform to the proof rests largely in the

discretion of the trial court and its determination will not be disturbed on appeal unless it

clearly appears that such discretion has been abused. [Citations.] Such amendments

have been allowed with great liberality "and no abuse of discretion is shown unless by

permitting the amendment new and substantially different issues are introduced in the

case or the rights of the adverse party prejudiced [citation]." (Italics added.) [Citations.]'

Conversely, ' "amendments of pleadings to conform to the proofs should not be allowed

36 when they raise new issues not included in the original pleadings and upon which the

adverse party had no opportunity to defend." ' " (Garcia v. Roberts (2009) 173

Cal.App.4th 900, 909, quoting Trafton v. Youngblood (1968) 69 Cal.2d 17, 31.) We see

no reason why a trial court has any less discretion to allow amendment of a pleading to

conform to proof in a class action than in other civil actions. (See Town of New Hartford

v. Conn. Res. Recovery Auth. (Conn. 2009) 970 A.2d 592, 625–628 [trial court in

certified class action did not abuse its discretion in allowing posttrial amendment of

complaint to conform to proof]; B.W.I. Custom Kitchen v. Owens-Illinois, Inc. (1987) 191

Cal.App.3d 1341, 1348 [trial court may alter or amend a class certification order before a

decision on the merits].)

We find no abuse of discretion in the trial court's allowing plaintiffs to amend their

second amended complaint to include claims for carrier collect charges, insert charges,

and warehouse rent because plaintiffs sought recovery of the carriers' business expenses

through their fourth cause of action and as restitution under their eighth cause of action,

and the record shows that UT had ample notice of those specific claims and the

opportunity to defend against them. On January 14, 2013, plaintiffs' counsel wrote a

letter to UT's counsel stating their "intention to seek all of the class members' damages in

the Business & Professions Code section 17200 cause of action. This includes, but is not

limited to, mileage reimbursement, insurance, bonds, warehouse rent, bags and rubber

bands, insert charges, carrier collect and complaint charges." (Italics added.) At an ex

parte hearing in February 2013, UT's trial counsel acknowledged receiving that letter and

that plaintiffs were seeking those categories of damages. In a letter dated March 13,

37 2014, plaintiffs' counsel again listed the "categories of damages" plaintiffs would seek at

trial, including warehouse rent, insert charges, and carrier collect charges, and informed

the court of those categories at a trial management conference on March 29, 2013. UT

defended against all of the reimbursement claims during trial, including the claims for

warehouse rent, insert charges, and carrier collect charges.21

Before UT put on its defense, the court addressed whether it would be proper to

allow amendment of the second amended complaint to include plaintiffs' claims to

recover carrier collect charges, insert charges, and warehouse rent, noting that "generally

amendments according to proof are accorded a lot of liberality" and that the court had not

been cited a case that a different rule applies to class actions. The court observed: "[T]he

question is, have you had an opportunity to defend at trial. And there is evidence that

even though the [s]econd [a]mended [c]omplaint didn't specifically identify those three

same components, in the several years that this case has been pending, you have been put

on notice that that's what the class would be claiming. So it would be manifestly unjust

to, at trial, say, we didn't know anything about this, when the evidence is that you cross-

examined their expert, you argued in front of Judge Foster, blah, blah . . . you didn't ask

for a continuance . . . . The usual arguments against amending according to proof." The

court's observation about UT's notice of and opportunity to defend against plaintiffs'

claims to recover carrier collect charges, insert charges, and warehouse rent was accurate.

21 As noted, the court denied recovery for carrier collect charges.

38 Thus, the court acted within its discretion in allowing amendment of the second amended

complaint to include those claims.

D. Bifurcation

UT contends the court's order bifurcating plaintiffs' cause of action under section

17200 to be tried first deprived UT of its right to a jury trial. We find no error in

connection with the bifurcation order and conclude UT waived the right to challenge the

order and was not prejudiced by it.

Plaintiffs first moved to bifurcate in February 2012, and UT opposed the motion,

arguing it was premature and should be denied without prejudice because it was more

appropriately the subject of later case management conferences addressing a

comprehensive trial plan. The court denied the motion without prejudice.

In September 2012, plaintiffs again moved to bifurcate the trial, requesting that

their eighth cause of action under section 17200 for unfair business practices (an

equitable claim) be tried before their fourth cause of action under section 2802 seeking

reimbursement of business expenses (a legal claim). Plaintiffs argued that equitable

claims generally should be tried before legal claims because doing so might dispense

with the need to try the legal claims. Specifically, plaintiffs noted that the issue of

whether they were employees of UT or independent contractors was the foundational

issue under both causes of action and a determination that they were independent

contractors would be dispositive of both causes of action. UT again opposed the motion,

arguing it was still premature and should be denied without prejudice because it would

more appropriately be decided as part of a case and trial management plan. The court

39 (Judge Gonzalo Curiel) granted the motion to bifurcate and ordered that plaintiffs'

equitable cause of action for unfair business practices would be tried by the court before

the trial of their legal claim for reimbursement of expenses under section 2802.

As noted, plaintiffs' counsel sent UT's counsel a letter in January 2013 stating

plaintiffs' "intention to seek all of the class members' damages in the . . . section 17200

cause of action." At an ex parte hearing in February 2013, the parties and the court

(Judge Meyer) discussed Judge Curiel's bifurcation order. The court suggested that the

threshold issue of whether the carriers were employees or independent contractors was a

jury question. Plaintiffs' counsel responded, "No, [Y]our [H]onor. It's been bifurcated so

that's going to be a [section] 17200 action. That's why it was bifurcated because I

think . . . it would be in the best interest of everyone to have that determined first."

However, plaintiffs' counsel asserted that plaintiffs were not waiving a jury trial. The

court asked what a jury would decide and plaintiffs' counsel responded, "Damages,

[Y]our [H]onor."

The court then asked whether the employee-independent contractor determination

was going to be made by the court or by a jury. UT's counsel responded, "Court, [Your]

[H]onor. We're in agreement on that." The court then asked, "You're waiving jury on

that determination?" UT's counsel responded, "It's not a jury issue." The court again

asked what the jury was going to decide, and plaintiffs' counsel said, "[section] 2802, if

your honor decides that we can't recover all under [section] 17200." The court said, "All

right. So it looks like we have got a bench trial." UT's counsel stated, "Looks like a

bench trial, [Y]our [H]onor."

40 At a trial management conference in March 2013, UT's counsel informed the court

the parties "wanted to revisit this question with you as to whether it's a judge or jury trial.

And the dispute on that issue appears to be this question of whether the auto expenses

would be considered restitution under [section] 17200." UT's counsel stated that "if [the

court] were to determine that, then I'm led to believe there wouldn't be a jury." UT's

counsel later said he was "not sure the jury [trial] is buried yet," explaining that if the

court were to determine in a bench trial on plaintiffs' section 17200 claim that plaintiffs

were not entitled to restitution, "then they want a second shot to a jury. And I would like

to see us avoid second shot [i.e., jury trial], and I think you would too." (Italics added.)

The court responded: "I don't care. . . . I mean . . . if you're entitled to a jury, I'm the last

one to keep you from getting it. What would you want a jury to do? To decide what?"

Plaintiffs' counsel stated that "the only thing that would be left for a jury to decide would

be what the mileage is if [Y]our Honor decides that mileage is not recoverable under

[section 17200]." Plaintiffs' counsel stated he was "happy to have [the court] decide [the

mileage claim]." UT's counsel stated, "If the plaintiffs are saying no jury. Then we'll

present that to our client, but I'd recommend it, too, and then at least we know we have a

bench trial . . . , and we have a little more flexibility on how to do it because we've done

this a few times."

"[A]n appellant waives [the] right to attack error by expressly or implicitly

agreeing or acquiescing at trial to the ruling or procedure objected to on appeal." (In re

Marriage of Broderick (1989) 209 Cal.App.3d 489, 501.) It is clear from the record that

UT acquiesced to bifurcation of plaintiffs' section 17200 claim and expressed its

41 preference for a court trial on that claim. The record reflects the parties' and the court's

understanding that because plaintiffs elected to seek their entire recovery as restitution

under their section 17200 cause of action, a jury trial on their section 2802 cause of

action was unnecessary.22 Accordingly, UT waived the right to challenge the bifurcation

order on appeal and, in any event, has not shown or even argued that it was prejudiced by

the order or the resulting trial by the court instead of a jury.23

22 On appeal, UT asserts that it repeatedly objected that it was being deprived of a jury trial. However, UT provides no citation to the record to support that assertion and we are unable to find anything in the record that supports it. UT could have requested a jury trial but did not do so. As noted, the court stated that "if you're entitled to a jury, I'm the last one to keep you from getting it."

23 UT's reason for raising the bifurcation issue appears to be a concern that if plaintiffs are allowed to seek statutory attorney fees under section 2802 despite having sought their monetary award solely under section 17200, UT will have been deprived of a jury trial that could have occurred had plaintiffs not decided to seek their recovery under section 17200 instead of section 2802. This concern is a nonissue because plaintiffs were not and will not be awarded attorney fees under section 2802.

42 E. Challenges to class award

UT contends, generally, that the court erred in relying on individualized evidence

to make classwide determinations and that certain components of the class award reflect

the court's failure to properly manage the class trial.24 UT raises the following specific

challenges to the court's monetary award to the class:

1. Enhanced-compensation defense

UT contends the court erred in awarding the class expenses that UT had already

reimbursed by paying the carriers enhanced compensation to cover their vehicle expenses

and other expenses. UT argues that in rejecting its enhanced-compensation defense, the

court misconstrued and misapplied Gattuso v. Harte-Hanks Shoppers, Inc. (2007) 42

Cal.4th 554 (Gattuso).

24 Regarding individualized evidence supporting classwide findings, UT specifically complains that the court in its statement of decision cited testimony of Valderrama and Zimmerman as support for the following findings: the carriers did not negotiate their pay rate and other contract terms; UT used an "orientation" checklist in training and dealing with carriers; UT employees supervised carriers in the distribution centers and made sure they were assembling the newspapers correctly; carriers were discouraged from communicating directly with other customers; there were audits and field checks of the carrier's deliveries; and new carriers were provided a kit that they purchased for one dollar to use while they were learning to be a carrier. The court reasonably relied on Zimmerman's and Valderrama's testimony to make these findings, over which there was little or no dispute, and most were corroborated by testimony of other witnesses. E.g., Savoie testified that UT would not allow carriers to negotiate hourly rates or lump-sum payments and warehouse fees were not negotiated, and that carriers were told not to tell customers to call them with complaints; Savoie testified that field checks were done "through the whole market" every day; Conahan and Diep also testified that UT employees regularly conducted field checks, and UT zone manager Nancy Tetrault testified that carriers were prohibited from distributing any communications to customers other than holiday greetings and billing notices.

43 Section 2802, subdivision (a) requires an employer to indemnify its employees for

all necessary expenditures they incur in discharging their duties. The California Supreme

Court in Gattuso held that an employer may satisfy its obligation under section 2802 to

reimburse employee business expenses by paying employees enhanced compensation in

the form of increases in base pay or commission rates, provided that (1) the employer

establishes some method or means to apportion the enhanced compensation to identify

what portion is intended as expense reimbursement; and (2) the identified reimbursement

amounts are sufficient to reimburse employees for all expenses they necessarily incurred.

(Gattuso, supra, 42 Cal.4th at pp. 558, 575.)

UT argues that Gattuso does not require employers to give employees the

apportionment information to identify expense reimbursement at the time it pays the

enhanced compensation; it requires only that the employer provide the employee the

information upon request, if the employee challenges the enhanced compensation as

insufficient. We disagree with UT's interpretation of Gattuso and conclude Gattuso

requires that the employer communicate to employees the method or means of identifying

the portion of compensation that is intended to provide expense reimbursement at or near

the time of compensation.

The Gattuso court explained that providing the employee the means of identifying

the portion of compensation intended to reimburse expenses enables employees and

officials charged with enforcing state and federal wage laws to "readily determine

whether the employer has discharged all of its legal obligations as to both wages and

business expense reimbursement. Although section 2802 does not expressly require the

44 employer to provide an apportionment method, it is essential that employees and officials

charged with enforcing the labor laws be able to differentiate between wages and expense

reimbursements. Because providing an apportionment method is a practical necessity for

effective enforcement of section 2802's reimbursement provisions, it is implicit in the

statutory scheme." (Gattuso, supra, 42 Cal.4th at p. 573, italics added.)

This language implies that the method of identifying the amount of compensation

intended to reimburse expenses must be provided at or near the time of payment. If the

apportionment method is revealed only through litigation or some other challenge to the

sufficiency of the expense reimbursement, employees and enforcement officials would

not be able to "readily determine" whether the employee is being sufficiently reimbursed

under section 2802. The Gattuso court's reference to the provision of the apportionment

method as being a "practical necessity for effective enforcement" further implies that the

apportionment method must be reviewable at or near the time of payment, because it

would be impractical to require enforcement officials to review undisclosed

apportionment methods. If officials are required to demand from employers disclosure of

apportionment methods that may or may not be readily available, they would not be able

to readily determine whether the employer is sufficiently reimbursing expenses under

Moreover, in later reiterating that employers must provide a means of apportioning

between wages and expense reimbursement, the Gattuso court stated that "an employer

that uses salary and/or commission increases to discharge its reimbursement obligation

must also communicate to its employees the method or basis for apportioning any

45 increases in compensation between compensation for labor performed and business

expense reimbursement. Such a requirement . . . is necessary for effective enforcement

of section 2802's reimbursement provisions and, thus, implicit in the statutory scheme."

(Gattuso, supra, 42 Cal.4th at p. 574.) The Supreme Court's directive that employers

communicate the apportionment method to employees is inconsistent with UT's view that

an employer is required to disclose the apportionment only if an employee challenges the

sufficiency of the amount intended to reimburse expenses.

Considering the Gattuso court's recognition that the employer's communication of

an apportionment method is a "practical necessity" to enable employees and enforcement

officials to "readily determine" whether the employer has satisfied the reimbursement

obligation of section 2802, we conclude Gattuso requires communication of the

apportionment method to employees in the course of businessi.e., at or near the time of

compensation and not only if and when the employer is called upon to communicate its

apportionment method in the face of a demand or legal claim. As one federal court

noted, "Gattuso is clear . . . that a lump sum payment only satisfies an employer's

obligations if the employee is given sufficient information to determine what part of his

salary constituted 'wages' and what part was for the reimbursement of expenses. There is

no authority to suggest that this obligation is satisfied if that information only becomes

available through litigation, nor would such a rule comport with the reasoning of

Gattuso. Whether the [trier of fact] will be able to easily calculate the amount of the

lump sum payments using information that was not available to [employees] prior

46 to . . . litigation . . is not the issue." (Villalpando v. Exel Direct Inc. (N.D.Cal. 2016) 161

F.Supp.3d 873, 887 (Villalpando), italics added.)25

UT argues the evidence shows it satisfied Gattuso's apportionment requirement,

citing evidence that it factored anticipated business expenses, included route mileage,

into the amount it paid its carriers and communicated that fact to the carriers; that the

carriers' contracts listed the delivery and insert fees UT paid; and that the carriers'

monthly invoices "detailed every reversal, credit and fee for every carrier." This

evidence does not show that UT complied with Gattuso's requirement of communicating

to carriers an apportionment method that enabled the carriers to readily determine the

25 In arguing that it was not required to provide carriers the apportionment information required to identify expense reimbursement at the time it paid the carriers, UT notes that the Gattuso court stated: "In the future, employers that provide business expense reimbursement to employees through increases in base salary or commission rates should, in providing the [itemized wage statement] documentation required by [Labor Code] section 226, subdivision (a), separately identify the amounts that represent payment for labor performed and the amounts that represent reimbursement for business expenses." (Gattuso, supra, 42 Cal.4th at p. 574, fn. 6.) UT contends this "forward- looking instruction" does not apply here because the class period ended before the California Supreme Court decided Gattuso. UT further notes that the quoted language in Gattuso addresses satisfying Labor Code section 226, not section 2802, and there is no section 226 claim in this case. We view the Gattuso court's advice to employers to provide expense reimbursement information in wage statements as simply a recommendation of an obvious and relatively simple way to comply with the court's apportionment requirement in the future; the Gattuso court did not say there was no current or past requirement that employers provide some means to apportion compensation between pay for labor and expense reimbursement to prevail on an enhanced-compensation defense. "The requirement in [Labor Code s]ection 226 that employers separately identify the amounts that represent payment and reimbursement is separate from the requirement that an employer communicate to its employees the method or basis for apportioning any increases in compensation between compensation for labor and expense reimbursement." (Aguilar v. Zep Inc. (N.D.Cal., Oct. 10, 2013, No. 13-CV-00563-WHO) 2013 WL 5615688, at p. 7.)

47 amount of their pay that was intended to reimburse expenses. The cited evidence shows

only that UT communicated that expenses were factored into the amount of compensation

and occasionally may have shared certain information that it considered in determining

pay to certain carriers; it does not show that the carriers were generally provided a means

of determining how much of their gross pay was intended to reimburse expenses.

UT suggests that the deductions from gross pay listed on the carriers' monthly

invoices serve as a breakdown of the amount of enhanced compensation that was

intended to cover those expenses. However, the invoices did not communicate that the

carriers were being reimbursed or compensated in the amount of the deductions stated on

the invoices. In Smith v. Cardinal Logistics Management Corp. (N.D.Cal., Aug. 19,

2009, No. 07-2104SC) 2009 WL 2588879, a class action seeking expense reimbursement

under section 2802, an employer similarly argued that amounts appearing as expense

deductions on weekly statements issued to delivery truck drivers should be construed as

reimbursements because the drivers' compensation rates factored in their projected

expenses. (Id. at p. 3.) The court found that the employer's compensation system did not

satisfy Gattuso's requirements for expense reimbursement through enhanced

compensation because there was no lump-sum payment that included a means of

identifying the amount being paid for labor performed and the amount being paid as

reimbursement for business expenses, and the only payment the drivers received occurred

after expenses had already been deducted. (Id. at p. 4.) The court concluded "[t]his

system of compensation is too far removed from what the California Supreme Court had

48 in mind. The Court will not treat it as equivalent to the lump-sum payment method

endorsed by the California Supreme Court in Gattuso." (Ibid.)

The court in Villalpando discussed the above analysis in Smith and concluded that

while the employers in both cases were not required to pay twice for employee expenses,

they could not meet their obligations under Gattuso "by simply stating that their [pay]

rate covers these expenses; they must provide their employees with a means of

determining whether these assertions are true." (Villalpando, supra, 161 F.Supp.3d at

p. 886.) The court concluded that absent any evidence that class members could have

determined that their unreimbursed expenses or the expenses that were later deducted

from their pay were actually included in their gross pay, that the employer could not

prevail on an enhanced compensation defense under Gattuso. (Id. at p. 887.)

Similarly, the carriers' invoices in the present case did not set forth a lump-sum

payment that included a means of identifying the amount being paid for labor performed

and the amount being paid as reimbursement for business expenses, and the only payment

the carriers received occurred after various expenses had already been deducted.

Moreover, Savoie testified that UT's policy was to explain to carriers that they were

responsible for their expenses and that the fees they were paid were "the gross fee minus

any expenses that they incur through [UT], but that they're going to be responsible."

Savoie also acknowledged that there was no breakdown on carriers' invoices of the

amount carriers were being compensated for auto expenses.

49 UT argues that even if it did not satisfy Gattuso's requirements, equity requires

reversal of the judgment and remand to reconsider crediting UT for its payment of

enhanced compensation. Although plaintiffs elected to seek recovery of their business

expenses as restitution under section 17200, the court properly held UT to Gattuso's

requirements for an enhanced-compensation defense to a section 2802 claim because

section 2802 was the predicate statute for plaintiffs' cause of action under section 17200.

We recognize that the trial court has broad discretion to fashion equitable remedies under

the UCL (Cortez, supra, 23 Cal.4th at p. 180), but conclude the court may not exercise its

equitable powers to disregard the requirements of section 2802 as construed by

Gattusoi.e., to effect an end run around Gattuso.

UT asserts that business expenses under section 2802 are not recoverable as

restitution under section 17200. We disagree. "The 'unlawful' practices prohibited by

section 17200 are any practices forbidden by law, be it civil or criminal, federal, state, or

municipal, statutory, regulatory, or court-made. [Citation.] It is not necessary that the

predicate law provide for private civil enforcement. [Citation.] . . . Section 17200

'borrows' violations of other laws and treats them as unlawful practices independently

actionable under section 17200 et seq." (Saunders v. Superior Court (1994) 27

Cal.App.4th 832, 838–839.)

An order for payment of wages unlawfully withheld from an employee is a

restitutionary remedy authorized by the UCL. (Cortez, supra, 23 Cal.4th at pp. 177–

178.) The term "wages" includes not only an employee's periodic monetary earnings but

also other benefits to which the employee is entitled as part of compensation. (In re

50 Work Uniform Cases (2005) 133 Cal.App.4th 328, 337–338 (Uniform Cases).) In

Uniform Cases, the plaintiffs sought reimbursement under section 2802 for the cost of

work uniforms. (Id. at p. 332.) The Uniform Cases court concluded that "payment to

employees for work uniforms is a part of the employees' compensation and should be

considered like any other payment of wages, compensation or benefits." (Id. at p. 338.)

Accordingly, an employee's recovery of unlawfully withheld expenses under section

2802 is a proper restitutionary remedy under the UCL. (See Harris v. Best Buy Stores,

L.P. (N.D.Cal., Aug. 1, 2016, No. 15-CV-00657-HSG) 2016 WL 4073327, at p. 10 [UCL

claim may be maintained to the extent it is predicated on plaintiff's section 2802 claim];

Ordonez v. Radio Shack (C.D.Cal., Feb. 7, 2011, No. CV 10-7060 CAS (MANx)) 2011

WL 499279, at p. 6 [UCL claim may be maintained to the extent it is predicated on

plaintiff's claim under Labor Code, § 221 and section 2802].) The court did not err or

misapply Gattuso in rejecting UT's enhanced compensation defense.

2. Reversals and credits

UT contends the court ignored individualized issues and improperly awarded

amounts already paid to carriers in the form of credits and reversals on their invoices. It

is important to note that the issue of whether specified credits and reversals on carrier

invoices should be credited to UT in fashioning a restitutionary award is different from

the issue of whether alleged enhanced compensation as a component of gross pay is

properly viewed as reimbursement for business expenses under section 2802 and

51 Gattuso.26 We conclude the court erred in failing to take into account clearly specified

credits, reversals, and payments to carriers in the business expense categories at issue in

determining the amount of restitution to award plaintiffs.

"There must be evidence that supports the amount of restitution necessary to

restore to the plaintiff 'any money . . . which may have been acquired by means of such

unfair competition.' (§ 17203.) The Supreme Court has made clear that the 'object of

restitution is to restore the status quo by returning to the plaintiff funds in which he or she

has an ownership interest.' [Citations.] Thus, 'restitutionary awards encompass

quantifiable sums one person owes to another. . . .' " (Colgan v. Leatherman Tool Group,

Inc. (2006) 135 Cal.App.4th 663, 697–698.) "[R]estitution under the [UCL] must be of a

measurable amount to restore to the plaintiff what has been acquired by violations of the

statutes, and that measurable amount must be supported by evidence." (Id. at

p. 698.) "That the trial court may have discretion as to whether to order restitution as a

remedy [citation] does not mean that when it does, it may select an amount unsupported

by evidence." (Ibid.; In re Tobacco Cases II (2015) 240 Cal.App.4th 779, 792–793

[restitution award under the UCL must be supported by substantial evidence; thus, the

trial court's broad discretion to grant equitable relief does not extend beyond the parties'

26 At the hearing in which the court orally announced its intended decision, the court indicated that it viewed the issue of whether UT was entitled to offset the monetary award to plaintiffs by the amounts of reversals and credits as an enhanced compensation issue governed by Gattuso. UT's counsel offered to provide the court with a report showing all of the gas credits and incentives UT gave the carriers. The court stated, "No, I don't think Gattuso allows it[,]" and "I think Gattuso says if you pay enhanced compensation, you do it at your peril, unless you do it the right way."

52 evidentiary showing].) Accordingly, a restitutionary award based on a failure to

reimburse business expenses improperly charged to a plaintiff cannot properly include

specific quantifiable charges and expenses that the defendant credited back or otherwise

reimbursed to the plaintiff.

As evidence of the business expenses plaintiffs sought to recover, plaintiffs'

counsel prepared a spreadsheet entitled "Unreimbursed Non-Mileage Expense Detail," on

which it entered every debit or charge in each of the subject expense categories on 16,559

carrier invoices and color coded the charges by category. Counsel then added the charges

to arrive at the total amount of unreimbursed expenses in each category for the entire

class. However, Ruth Ortega, an employee of plaintiffs' counsel who prepared the

spreadsheet, testified on cross-examination that she was instructed to list only charges

and not to include any credits or reversals on the invoices.

Plaintiffs' accounting expert James Skorheim took the total amounts from the

spreadsheet and prepared a summary that set forth the total amount in each expense

category by month. Skorheim testified that his summary included only charges and no

credits. He admitted that the carrier invoices specified credits and reversals, but his

analysis did not take any of them into account. He testified, "If counsel asked me to

assume that only the charges are actual in this case and that credits are irrelevant, then I

do my calculation based upon the assumption that's asked of me. And that's what I did in

this case."

53 Carrier invoices that UT presented showed credits and reversals in every

nonmileage expense category, including bags and rubber bands, insurance, bonds,

warehouse rent, insert charges, carrier collect, and complaint charges. Plaintiffs'

restitution award must be recalculated to account for these credits and reversals.

Plaintiffs contend that it was UT's burden to produce evidence proving the amount

of any set off it claimed, and it failed to do so. The record shows that UT did produce the

evidence of the credits and reversals that should have been taken into account in

calculating plaintiffs' restitution award, and they cross-examined plaintiffs' witnesses

Ortega and Skorheim about the credits and reversals. What UT did not do is add up all

the credits and reversals and present the court with a total amount in each expense

category, which would have been helpful.27 However, UT's failure to total the credits is

not fatal to its right to have them taken into account. UT met its evidentiary burden by

showing that the same documentary evidence that plaintiffs and the court used to

calculate the award includes the amounts of credits and reversals by which the court

should have reduced the award. When an offsetting credit or reversal is clearly specified

on the same invoice that specifies a charge to be included in a restitution award, the court

27 UT's financial analyst Anthony Basilio answered "yes" when asked on cross- examination if he had the ability to add up credit reversals, at which point UT's counsel suggested it was unnecessary to do so because it was plaintiffs' burden to prove damages.

54 cannot properly ignore the offsetting credit and impose only the charge against the

defendant, because such an award would not be supported by the evidence.28

In sum, plaintiffs' award should be reduced by the amount of any documented and

readily identifiable payments, credits, or reversals that the class members received in the

subject expense categories. Although the court properly declined to credit UT with

payment of the carrier's business expenses through enhanced compensation because UT

did not meet Gattuso's requirements for an enhanced-compensation defense, Gattuso

does not preclude UT from being credited with the credits and reversals specified on

carrier invoices and other relevant documents in the calculation of plaintiffs' monetary

award.

3. Mileage award

UT contends the judgment's mileage award is flawed because the proof of the

mileage driven by the carriers is "impossibly individualized" and plaintiffs did not

account for the gas and service incentives and credits that UT provided to the carriers.

We conclude the method of calculating the mileage award that the court accepted was

permissible. However, in accordance with our discussion above regarding the other

expense categories, we conclude that the mileage award must be recalculated to take into

28 As noted, UT's counsel offered to provide the court with a report showing all of the gas credits and incentives. If the court had decided to take all of the specifically documented credits and reversals into account in calculating plaintiffs' award, the court could have directed UT's counsel to provide the necessary total amounts from the documentary evidence, and presumably will do so on remand.

55 account any documented credits or payments for gasoline, including any service

incentives that UT can show were tied to compensation for gas.29

As explained by their expert Skorheim, plaintiffs calculated the total mileage

driven by class members during the class period by first identifying the mileage of each

route that class members operated based on Savoie's deposition testimony and exhibits

that he produced at his deposition. For each month of the class period, plaintiffs

determined the routes that were operated by a class member and routes that were being

operated fully or partially by a nonclass member, such as a UT employee covering a route

that was not assigned to a carrier. Plaintiffs excluded the miles that were driven by

nonclass members, calculated the daily mileage driven by class members during the class

period, and multiplied the total daily mileage driven by class members by the number of

days in the class period to arrive at a total number of miles driven by class members

during the class period.30 Skorheim then broke down miles driven by class members for

29 UT presented evidence of gasoline reimbursement in the form of gas credits, addendums, and payments. At trial, the court asked UT's counsel if they had been able to quantify gas credits. Counsel responded that gas credits and certain service incentive credits could be added and totaled, but admitted that they could not total the amounts paid through gas cards given to carriers, stating, "We don't have records of when people were given gas cards. That's not in the invoices. They were handed physical gas cards that they can take to the [gas station]. We don't have evidence of that." Again, UT's counsel offered to provide the court with a report showing all of the gas credits and incentives UT gave the carriers, representing "it's just something under [$]200,000 if you consider that as an offset from mileage."

30 Based on Savoie's deposition testimony, Skorheim testified that the carriers drove an average of 7,000 miles per day, and that there were "somewhere around 600 routes" with an average distance of 11 miles per route.

56 each month of the class period and "applied the IRS mileage rate for the applicable month

to determine the . . . estimated mileage expense."

UT complains that the mileage award based on the IRS mileage rate is only an

estimate, and cites Estrada for the proposition that estimates and educated guesses are not

allowed unless the amount cannot be proven. (Estrada, supra, 154 Cal.App.4th at p. 20

[estimates and educated guesses are not allowed where damages are susceptible of exact

proof].) We conclude the court properly allowed plaintiffs to establish vehicle expenses

on a classwide basis through their expert's reasonable estimate of the mileage driven by

the carriers during the class period because the actual mileage driven by class members

was not susceptible of exact proof. The total mileage driven by carriers during the class

period could not be calculated with mathematical precision for the reasons UT argues

proof of vehicle expenses was not amenable to proof on a classwide basisi.e., plaintiffs

could not establish how much a particular carrier actually drove during a given time

period because many carriers used substitutes.

Generally, "the law tolerates more uncertainty with respect to damages than to the

existence of liability. 'Uncertainty of the fact whether any damages were sustained is

fatal to recovery, but uncertainty as to the amount is not.' " (Duran v. U.S. Bank Nat.

Assn. (2014) 59 Cal.4th 1, 40.) "[W]here the fact of damage has been established, the

precise amount of the damage need not be calculated with absolute certainty. 'As long as

there is available a satisfactory method for obtaining a reasonably proximate estimation

of the damages, the defendant whose wrongful act gave rise to the injury will not be

heard to complain that the amount thereof cannot be determined with mathematical

57 precision.' " (DuBarry Internat., Inc. v. Southwest Forest Industries, Inc. (1991) 231

Cal.App.3d 552, 562.)

We further note that the remedial nature of overtime compensation laws "militates

in favor of a reasonably expeditious means of calculating and distributing classwide

aggregate damages if individual adjudication of the entitlements of all class members, or

a substantial portion of the members, would impose impossible burdens on the courts and

litigants." (Bell v. Farmers Ins. Exchange (2004) 115 Cal.App.4th 715, 751.) Appellate

" 'review of a trial court's plan for proceeding in a complex case is a deferential one that

recognizes the fact that the trial judge is in a much better position than an appellate court

to formulate an appropriate methodology for a trial.' " (Ibid.) The remedial nature of

section 2802 requiring employee compensation for reasonable business expenses likewise

militates in favor of a reasonably expeditions methodology for calculating the class

mileage award in this case, because calculating the exact actual mileage driven by each

class member during the class period would impose an impossible burden. The court

acted within its discretion in adopting plaintiffs' methodology for calculating the mileage

Regarding the IRS mileage rate, we note that Gattuso implicitly approved use of

that rate by recognizing that employers may use either the mileage reimbursement

method or the actual expense method of vehicle expense reimbursement under section

2802 (Gattuso, supra, 42 Cal.4th at pp. 568–569), and that the parties in that case agreed

that "section 2802 permits use of the IRS mileage rate to calculate automobile expense

reimbursement under the mileage reimbursement method." (Gattuso, at p. 569.) The

58 court did not abuse its discretion in adopting the IRS mileage rate to arrive at a

reasonably proximate estimation of the carrier's vehicle expenses during the class period.

Although we conclude the general method of calculating the mileage award that

the court adopted was permissible, as we discussed, the mileage award must be

recalculated to take into account any documented credits or payments for gasoline,

including any service incentive credits that UT can show were given to the carriers as

compensation for gas.

4. Insert charges

UT paid carriers insert fees or credits to compensate for their putting inserts into

newspapers, but also charged carriers an insert fee to compensate third parties to

assemble their Sunday papers, which are the largest papers of the week. The insert

charges and credits were both specified on the carriers' monthly invoices. On some

invoices, the total amount of insert charges exceeded the total amount of insert credits; on

others the amount of insert credits exceeded the amount of insert charges.

As an alternative to awarding the class the total amount of insert charges with no

reduction for insert credits ($849,000, including interest), plaintiffs' counsel asked the

court to award 14 percent of that total amount or $118,992.31 Counsel explained that the

14 percent figure was based on a declaration by Savoie in which he cited one page of a

single carrier invoice on which there was a 14 percent difference between the insert

charge of $9.99 and insert credits totaling $8.64. The court accepted plaintiffs' 14 percent

31 Fourteen percent of $849,000 is actually $118,860.

59 analysis but did not want to include interest in its base award. Based on plaintiffs'

counsel's representation that the total amount of insert charges without interest was

$498,543, the court awarded 14 percent of that amount or $69,796.

In its statement of decision, the court stated: "The Court will not allow inserting

charges as Section 2802 damages. This was a benefit to the class that allowed the class

members to not have to spend Saturday afternoon or Saturday at midnight to assemble[]

their papers. However, the Court does recognize that the carriers had to pay some money

out of pocket to use the inserters. The Court allows recovery of 14% of the insert charges

under . . . Section 17200. This equals $69,796."

UT contends that the award for insert charges should be reversed because (1) the

court expressly found the insert charges were not necessary business expenses under

section 2802; and (2) the amount awarded is not supported by the evidence because it is

arbitrarily based on a single invoice out of 16,559 invoices issued to class members

during the class period. Assuming, without deciding, that the court had authority to

award restitution for insert charges under section 17200 notwithstanding its finding that

those charges were not recoverable under the sole predicate statute for plaintiffs' section

17200 cause of action, we conclude the insert-charge award must be reversed on the

ground it is not supported by substantial evidence.

The court's 14 percent calculation was based on charges and credits for a single

week on a single monthly invoice of a single carrier. There is no evidentiary basis for a

finding that the single invoice on which the court based the award represented even a

reasonable estimate of the difference between insert charges and credits for that carrier

60 over the entire class period, let alone for the entire class. Our review of carrier invoices

in the record confirms that insert credits on some invoices exceeded the amount of insert

charges. Plaintiffs did not meet their burden of proving the class was entitled to a

monetary recovery for insert charges.

5. Time period of award

The class period began on January 29, 2005. Without citation to authority, UT

contends the class award impermissibly includes charges on the carriers' February 2005

invoices that were incurred in January 2005 before the class period began. Plaintiffs

respond that the award properly includes the charges in question on the carriers' February

2005 invoices because that is when the charges were actually incurredi.e., when UT

actually deducted the money from the carriers' payments.

Plaintiffs cite no legal authority for their position, but cite their expert Skorheim's

testimony that "when an invoice is issued, . . . at least from an accounting standpoint,

that's when the charge takes place . . . ." Skorheim further explained, "I excluded all

invoices that were presented to a carrier before January 29, 2005. Similarly, I excluded

all invoices that were presented to the carrier after the end of the . . . class period, which

would include a large part of . . . July of 2007." Thus, under UT's view of the class

period, invoices presented in the first month of the class period would be excluded, but

invoices presented the month following the last month of the class period would be

included. As the trial court observed, "So it's a wash." As long as invoices issued in

either the first month of the class period or the month following the last month of the

class period were excluded, UT was not prejudiced.

61 We conclude the court properly adopted plaintiffs' view that the charges (and

credits) to be taken into account in calculating the class award were properly those that

appeared on invoices issued during the class period, because the recoverable charges

occurred when they were actually deducted from the carriers' pay. This view accords

with the general rule that "[w]hen damages are an element of a cause of action, the cause

of action does not accrue until the damages have been sustained." (City of Vista v. Robert

Thomas Securities, Inc. (2000) 84 Cal.App.4th 882, 886; see Phillis v. City of Santa

Barbara (1968) 264 Cal.App.2d 781, 787 [if charter amendment was unconstitutional

insofar as it authorized any deduction from city employee's salary, employee had a cause

of action for unpaid balance of his salary each time he received a pay check from which a

deduction had been made].)

6. Prejudgment interest

UT contends the court erred by including prejudgment interest in the class award

because section 17200 does not authorize prejudgment interest, all of the amounts

awarded were unliquidated, and equitable considerations weigh against an award of

prejudgment interest.

Courts ordinarily award prejudgment interest under Civil Code section 3287,

subdivision (a), which provides: "A person who is entitled to recover damages certain, or

capable of being made certain by calculation, and the right to recover which is vested in

the person upon a particular day, is entitled also to recover interest thereon from that

day. . . ." (Italics added.) However, the UCL does not authorize an award of

prejudgment interest and "Civil Code section 3287, subdivision (a) . . . is inapplicable [to

62 a UCL claim] because it governs recovery of damages. . . . [U]nder the UCL a plaintiff is

entitled to injunctive relief and restitution, but not damages." (M & F Fishing, Inc. v.

Sea-Pac Ins. Managers, Inc. (2012) 202 Cal.App.4th 1509, 1538 (M & F Fishing.)

Although a court may not award prejudgment interest under Civil Code section

3287, subdivision (a), to a restitutionary award under the UCL, the court nevertheless has

discretion in equity to award prejudgment interest on a UCL award as a component of

restitution. (M & F Fishing, supra, 202 Cal.App.4th at p. 1539; Rodriguez v. RWA

Trucking Company, Inc. (2013) 238 Cal.App.4th 1375, 1411; People v. Beaumont Inv.,

Ltd. (2003) 111 Cal.App.4th 102, 132, 139 [affirming order awarding restitution of rents

charged to tenants in unlawful long-term leases plus prejudgment interest on those

amounts].) The policy underlying an award of prejudgment interest is to make the

injured party whole for the accrual of wealth that could have been produced during the

period of loss. (Cassinos v. Union Oil Co. (1993) 14 Cal.App.4th 1770, 1790.)

Accordingly, the court in Wallace v. Countrywide Home Loans, Inc. (C.D.Cal.

April 29, 2013, No. SACV 08-1463-JST (MLGx) 2013 WL 1944458 (Wallace) ruled that

prejudgment interest on UCL claims was a form of restitution necessary to fully

compensate plaintiffs. (Id. at pp. 7–8.) The Wallace court explained that " '[t]he object

of restitution [under the UCL] is to restore the status quo by returning to the plaintiff

funds in which he or she has an ownership interest.' [Citation.] Restitution under the

UCL is not limited to money that was once in the plaintiff's possession but also includes

money in which the plaintiff had a vested interest. [Citation.] 'The intent of the section is

to make whole, equitably, the victim of an unfair practice.' " (Id. at p. 7.) "Thus,

63 prejudgment interest on wrongfully withheld wages is the property of the employee from

whom the wages have wrongfully been withheld, because, had the employee been in

possession of the withheld wages, he would have been able to earn interest on those

wages. Not awarding prejudgment interest on the withheld wages fails to restore the

status quo and make the victim of the withheld wages whole." (Id. at p. 8.) We agree

with the Wallace court's analysis and conclude it applies equally to wrongfully withheld

reimbursement of employee business expenses, which, as we discussed ante, are a part of

employees' compensation that "should be considered like any other payment of wages,

compensation or benefits." (Uniform Cases, supra, 133 Cal.App.4th at p. 338.)

We further conclude that where, as here, an award of prejudgment interest is a

matter of the trial court's equitable discretion, the requirement under Civil Code section

3287, subdivision (a), that damages be "certain, or capable of being made certain by

calculation" does not apply. Civil Code section 3287, subdivision (b), allows a court, in

its discretion, to award prejudgment interest on unliquidated damages,32 whereas an

award of prejudgment interest under subdivision (a) is mandatory. (Watson Bowman

Acme Corporation v. RGW Construction, Inc. (2016) 2 Cal.App.5th 279, 293 [trial court

has no discretion under subdivision (a) of Civil Code section 3287—it must award

prejudgment interest from the first day there exists both a breach and a liquidated claim].)

32 Civil Code section 3287, subdivision (b), provides: "Every person who is entitled under any judgment to receive damages based upon a cause of action in contract where the claim was unliquidated, may also recover interest thereon from a date prior to the entry of judgment as the court may, in its discretion, fix, but in no event earlier than the date the action was filed."

64 A corollary of the principle that a court has discretion to award prejudgment interest on

unliquidated claims is that where the court has discretion in equity to award prejudgment

interest, it may do so on claims that are not liquidated. The certainty requirement of Civil

Code section 3287, subdivision (a) applies only to mandatory awards of prejudgment

interest under that subdivision.33

In the present case, the court made it clear it was exercising its equitable discretion

to award prejudgment interest, stating: "[Y]ou can say that [UT] profited from the money

because they had earned interest. I mean, just from an equitable standpoint, they get their

money back plus interest. That's just fair." The court later stated, "Well, the court's

visceral reaction, and I think it's pretty obvious, is under the facts of this case, it would be

inappropriate to not award the plaintiffs interest just because that's the way people get

compensated. If you take their money or make them pay for something that they didn't

have to pay for, they get interest for the money that they no longer have that they were

entitled to." In other words, plaintiffs were entitled to recover interest they could have

earned on the class award had that money not been wrongfully withheld. The court's oral

explanation of its discretionary decision to award prejudgment interest accords with the

principle that prejudgment interest is a necessary component of restitution. The court did

not abuse its discretion in awarding prejudgment interest at the rate of seven percent in

accordance with article XV, section 1 of the California Constitution, which provides: "In

33 Although the trial court's discretionary award of prejudgment interest in this case does not require liquidated claims, we note the court's award of business expenses in all of the categories except vehicle expenses is capable of being made certain by totaling the relevant credits and reversals on the carriers' invoices.

65 the absence of the setting of such rate by the Legislature, the rate of interest on any

judgment rendered in any court of the state shall be 7 percent per annum."

UT contends the court erred in awarding prejudgment interest from January 1,

2006, instead of September 21, 2011, the date of the certification order. We find no

abuse of discretion in the court's decision to award prejudgment interest from January 1,

2006. As noted, the class period effectively ran from January 2005 through June 2007.

UT's counsel argued that interest should begin to accrue when the lawsuit was filed or on

July 1, 2007, when UT stopped contracting directly with carriers. Plaintiffs' counsel

argued that beginning interest accrual in 2007 would be unfair because "most of the

damages were incurred in 2005 and then a little bit in 2006, and by 2007, most of the

change had occurred." The court decided to compromise and award prejudgment interest

from January 1, 2006. The court explained, "The problem is you're both taking positions

that just benefit you. [Plaintiffs are] taking the earliest possible date, and [UT is] taking

the latest possible date, and I'm just, frankly, sick of that, and I'm just going to try to do

something in the middle, so that's it."

The court's compromise was reasonable. "[T]he trial court's discretion to award

restitution under the UCL is very broad." (People v. Beaumont Inv., Ltd., supra, 111

Cal.App.4th at p. 135, citing Cortez, supra, 23 Cal.4th at p. 180.) As one court observed,

" 'when necessary in order to arrive at fair compensation, the court in the exercise of a

discretion may include interest or its equivalent as an element of damages.' If the trial

court can, within its discretion, allow interest for the whole period, it can also allow

interest for only a part of the period." (National Union Fire Ins. Co. of Pittsburgh, Pa. v.

66 California Cotton Credit Corp. (9th Cir. 1935) 76 F.2d 279, 291 [interpreting Civ. Code,

§ 3287].) We will not disturb the trial court's decision to award prejudgment interest

from January 1, 2006, although the court will have to recalculate the amount of

prejudgment interest based on the redetermined amount of the class award.

III. Attorney Fee Award

UT contends the court erred in awarding attorney fees under section 1021.5

because plaintiffs failed to meet the requirements for fees under that statute. UT

additionally contends the court improperly awarded fees to plaintiffs for both successful

and unsuccessful claims that were unrelated; the court should have reduced the fee award

for plaintiffs' limited success even if the successful and unsuccessful claims were related;

and the court erred by adopting plaintiffs' lodestar amount in awarding attorney fees. We

conclude the court did not abuse its discretion in awarding attorney fees under section

1021.5 or in adopting plaintiffs' lodestar amount. However, as we explain, we remand

with directions to reconsider the attorney fee award in light of the possible reduction of

plaintiffs' monetary recovery and to determine whether plaintiffs' limited success requires

reduction of the fee award.

"We review an attorney fee award under section 1021.5 generally for abuse of

discretion. Whether the statutory requirements have been satisfied so as to justify a fee

award is a question committed to the sound discretion of the trial court, unless the

question turns on statutory construction, which we review de novo." (Collins v. City of

Los Angeles (2012) 205 Cal.App.4th 140, 152 (Collins).) " 'An abuse of discretion

occurs if, in light of the applicable law and considering all of the relevant circumstances,

67 the court's decision exceeds the bounds of reason and results in a miscarriage of justice.

[Citations.] This standard of review affords considerable deference to the trial court

provided that the court acted in accordance with the governing rules of law. We presume

that the court properly applied the law and acted within its discretion unless the appellant

affirmatively shows otherwise.' " (Id. at p. 153.)

"Section 1021.5 authorizes an award of attorney fees 'to a successful party against

one or more opposing parties in any action which has resulted in the enforcement of an

important right affecting the public interest,' provided that three additional conditions are

satisfied: '(a) a significant benefit, whether pecuniary or nonpecuniary, has been

conferred on the general public or a large class of persons, (b) the necessity and financial

burden of private enforcement, or of enforcement by one public entity against another

public entity, are such as to make the award appropriate, and (c) such fees should not in

the interest of justice be paid out of the recovery, if any.'[34] (§ 1021.5.) All of the

statutory requirements must be satisfied to justify a fee award." (Collins, supra, 205

Cal.App.4th at p. 153.)

"The necessity and financial burden requirement encompasses two issues:

' " 'whether private enforcement was necessary and whether the financial burden of

private enforcement warrants subsidizing the successful party's attorneys.' " [Citation.]'

[Citation.] Private enforcement is necessary only if public enforcement of the 'important

right affecting the public interest' (§ 1021.5) at issue is inadequate. [Citation.] The trial

34 In a footnote at this point the court noted that section 1021.5 codifies the private attorney general doctrine.

68 court's finding that plaintiffs had satisfied the statutory requirements necessarily implies a

finding that private enforcement was necessary. . . .

"The financial burden of private enforcement concerns not only the costs of

litigation, but also the financial benefits reasonably expected by the successful party.

[Citation.] The appropriate inquiry is whether the financial burden of the plaintiff's legal

victory outweighs the plaintiff's personal financial interest. [Citations.] An attorney fee

award under section 1021.5 is proper unless the plaintiff's reasonably expected financial

benefits exceed by a substantial margin the plaintiff's actual litigation costs. [Citation.]

The focus in this regard is on the plaintiff's incentive to litigate absent a statutory attorney

fee award. ' "[S]ection 1021.5 is intended to provide an incentive for private plaintiffs to

bring public interest suits when their personal stake in the outcome is insufficient to

warrant incurring the costs of litigation.' " [Citations.]

"The successful litigant's reasonably expected financial benefits are determined by

discounting the monetary value of the benefits that the successful litigant reasonably

expected at the time the vital litigation decisions were made by the probability of success

at that time. [Citations.] The resulting value must be compared with the plaintiff's

litigation costs actually incurred, including attorney fees, expert witness fees, deposition

costs and other expenses." ' " (Collins, supra, 205 Cal.App.4th at pp. 154–155, fn.

omitted.)

As noted, in reviewing the trial court's attorney fee award for abuse of discretion,

" '[w]e presume that the court properly applied the law and acted within its discretion

unless the appellant affirmatively shows otherwise.' " (Collins, supra, 205 Cal.App.4th at

69 p. 153.) Accordingly, "[w]e presume the trial court . . . was aware of the requirements of

section 1021.5 and specifically of the requirement that 'the necessity and financial burden

of private enforcement . . . [be] such as to make the award appropriate.' " (Vasquez v.

State (2008) 45 Cal.4th 243, 259.)

The trial court's order awarding attorney fees reflects that the court fully

understood and considered the requirements for an award under section 1021.5 and

properly analyzed and applied the statute's financial burden requirement. The court noted

the statutory requirements for the award and set forth the correct analysis under case law

for determining whether the financial burden requirement is satisfied, noting it was

required to consider the estimated value of the case at the time the vital litigation

decisions were being made, rather than plaintiffs' actual recovery, and compare that

amount to actual litigation costs.

The trial court referenced two points in time when "plaintiffs were making vital

litigation decisions as to whether there was sufficient inventive to move forward with this

litigation." The earliest of these was when the court ruled on the class certification

motion. The certification order, in the court's words, "gutted a large part of the class

envisioned and proposed. . . . Once the class certification motion was heard, the litigation

fees and costs were out of proportion to plaintiffs' stake in the matter." The court found

that plaintiffs' second vital litigation decision was the "strategic decision to proceed on

the Bus. & Prof. §17200 claim in order to obtain a larger statute of limitations. This

decision resulted in a much greater recovery for the class, but presented a real possibility

that attorney fees would be limited to 25% of any recovery to the class." Noting that the

70 fees plaintiffs' counsel earned in obtaining recovery for the class amounted "to at least $5

million," the court concluded: "To require counsel to recover fees from the common fund

alone would be a financial disaster." The court expressly found "private enforcement"

was necessary and that the financial burden of private enforcement warranted subsidizing

plaintiffs' counsel.

The court reasonably found the financial burden requirement for section 1021.5

was satisfied from the point in time when it granted class certification. As noted,

plaintiffs' cost of litigation includes attorney fees, expert witness fees, deposition costs,

and other expenses. (Collins, supra, 205 Cal.App.4th at p. 154.) Considering that the

court's attorney fee award alone was $5,847,875, the trial court could reasonably find that

plaintiffs' actual litigation costs substantially exceeded the financial benefits they

reasonably expected to obtain from litigation.35

UT argues that if the financial burden requirement was not met at the outset of the

litigation but was met later, attorney fees should be awarded only from the point when the

financial burden element was met. UT relies on Los Angeles Police Protective League v.

City of Los Angeles (1986) 188 Cal.App.3d 1 (Protective League), in which the Court of

Appeal limited an award of attorney fees under section 1021.5 on remand to fees the

35 Plaintiffs represent in their respondents' brief that their costs of litigation totaled $8,757,137.43. That figure is the sum of the amount of unenhanced attorney fees and costs plaintiffs' counsel Callahan & Blaine requested in their motion for attorney fees. Callahan & Blaine asked the court to award fees in the lodestar amount of $7,967,340.55 plus an enhancement multiplier of 1.5, and costs of $789,796.88 ($7,967,340.55 + $789,796.88 = $8,757,137.43). Plaintiffs' cocounsel, Cadena Churchill, filed a separate motion for attorney requesting fees in the lodestar amount of $152,559.25, plus an enhancement multiplier of 1.5, and costs of $5,501.09.

71 plaintiff incurred in prosecuting a prior appeal because the requirements of benefiting a

large class of persons and financial burden were not at the trial stage of the case; it was

only "at the appellate level the case implicated the public interest and where it might not

have made economic sense to proceed without the incentive of an attorney fee award

should the appeal prove successful." (Id. at p. 17.) Protective League is distinguishable

because the financial burden and public or large-class benefit requirements in the present

case were satisfied at the trial stage and not only on appeal.

In any event, we need not decide at this point whether an award of attorney fees

under section 1021.5 should only take account of lodestar fees incurred after the financial

burden requirement is satisfiedi.e., in this case after the motion for class certification

was decided. The trial court found "an award of fees at 25% of [plaintiffs' common fund]

would not be inequitable," and, accordingly, ordered that 25 percent of plaintiffs' attorney

fee award was "recoverable from [plaintiffs'] common fund in the amount of

$1,250,000,00." From this we can infer that the court took into account plaintiffs'

counsel's financial incentive at the beginning of the litigation in exercising its equitable

discretion to apportion fees between UT and the common fund, rather than ordering UT

to pay the entire fee award.

Although we find no abuse of discretion in the court's determination that the

requirements of section 1021.5 to justify a fee award were satisfied, we conclude the trial

court should reconsider the amount of the award in light of the possible reduction of

plaintiffs' monetary award on remand. We understand that in doing so, the court will

evaluate " 'a number of factors, including the nature of the litigation, its difficulty, the

72 amount involved, the skill required in its handling, the skill employed, the attention

given, the success or failure, and other circumstances in the case.' " (PLCM Group, Inc.

v. Drexler (2000) 22 Cal.4th 1084, 1096, italics added.)36 Because the degree of success

plaintiffs will achieve after redetermination of their monetary award on remand may

change, the court's assessment of the degree of success achieved by plaintiffs' counsel

could also change. (Sokolow v. County of San Mateo (1989) 213 Cal.App.3d 231, 248

[the degree or extent of plaintiffs' success in obtaining the results they sought must be

taken into consideration in determining the reasonable amount of their attorney fee

award].) In addition, plaintiffs are entitled to an award of attorney fees incurred on

appeal. (Protective League, supra, 188 Cal.App.3d at p. 17.)

UT contends the court improperly awarded fees to plaintiffs for both successful

and unsuccessful claims that were unrelated, and that even if the claims were related, the

court should have reduced the fee award for plaintiffs' limited success. "California law,

like federal law, considers the extent of a plaintiff's success a crucial factor in

determining the amount of a prevailing party's attorney fees. [Citation.] 'Although fees

36 "[T]he fee setting inquiry in California ordinarily begins with the 'lodestar,' i.e., the number of hours reasonably expended multiplied by the reasonable hourly rate. 'California courts have consistently held that a computation of time spent on a case and the reasonable value of that time is fundamental to a determination of an appropriate attorneys' fee award.' [Citation.] The reasonable hourly rate is that prevailing in the community for similar work. [Citations.] The lodestar figure may then be adjusted, based on consideration of factors specific to the case, in order to fix the fee at the fair market value for the legal services provided. [Citation.] Such an approach anchors the trial court's analysis to an objective determination of the value of the attorney's services, ensuring that the amount awarded is not arbitrary." (PLCM, supra, 22 Cal.4th at p. 1095.)

73 are not reduced when a plaintiff prevails on only one of several factually related and

closely intertwined claims [citation], "under state law as well as federal law, a reduced

fee award is appropriate when a claimant achieves only limited success." ' [Citations.]

The trial court may reduce the amount of the fee award 'where a prevailing party plaintiff

is actually unsuccessful with regard to certain objectives of its lawsuit.' " (Environmental

Protection Information Center v. California Dept. of Forestry and Fire Protection (2010)

190 Cal.App.4th 217, 238 (Environmental Protection).)

California courts applying section 1021.5 in cases of limited success have adopted

a two-step inquiry set forth in Hensley v. Eckerhart (1983) 461 U.S. 424 (Hensley).

(Environmental Protection, supra, 190 Cal.App.4th at pp. 238–239.) The first step

inquiry is to determine whether the prevailing party's unsuccessful claims are related to

its successful ones. (Id. at p. 239.) If the different claims are based on different facts and

legal theories, they are unrelated; if they involve a common core of facts or are based on

related legal theories, they are related. (Ibid.)

If successful and unsuccessful claims are related, the second step of the Hensley

inquiry is to determine "whether 'the plaintiff achieve[d] a level of success that makes the

hours reasonably expended a satisfactory basis for making a fee award.' [Citation.] In

this step, the court will 'evaluate the "significance of the overall relief obtained by the

plaintiff in relation to the hours reasonably expended on the litigation." ' [Citations.] Full

compensation may be appropriate where the plaintiff has obtained 'excellent results,' but

may be excessive if 'a plaintiff has achieved only partial or limited success.' [Citation.]

'The court may appropriately reduce the lodestar calculation "if the relief, however

74 significant, is limited in comparison to the scope of the litigation as a whole." ' "

(Environmental Protection, supra, 190 Cal.App.4th at p. 239.)

The court's attorney fee order does not reflect that the court applied the Hensley

two-step inquiry or otherwise considered plaintiffs' limited success in determining the

amount of their fee award. Consequently, in redetermining the amount of the fee award

in light of plaintiffs' reduced monetary recovery, the court should also consider whether

the award should be reduced by the amount of any fees that were attributable to

unsuccessful claims that were unrelated to successful claims.

UT contends the court erred by adopting plaintiffs' lodestar amount in awarding

attorney fees. Plaintiffs respond that the court did not fully adopt its lodestari.e., all of

the fees they soughtand that the court's lodestar determination was correct.

Understanding that the trial court's calculation of allowable hours may change on remand,

we find no abuse of discretion in the manner in which court made the lodestar

determination.

" 'It is well established that the determination of what constitutes reasonable

attorney fees is committed to the discretion of the trial court . . . . [Citations.] The value

of legal services performed in a case is a matter in which the trial court has its own

expertise. [Citation.] The trial court may make its own determination of the value of the

services contrary to, or without the necessity for, expert testimony. ' " (PLCM Group v.

Drexler, supra, 22 Cal.4th at p. 1096.) The trial court's exercise of discretion in deciding

whether to increase or reduce the lodestar figure "will not be disturbed unless the

appellate court is convinced the award is clearly wrong." (Downey Cares v. Downey

75 Community Development Com. (1987) 196 Cal.App.3d 983, 994; PLCM, at p. 1095

[" 'The "experienced trial judge is the best judge of the value of professional services

rendered in his court, and while his judgment is of course subject to review, it will not be

disturbed unless the appellate court is convinced that it is clearly wrong." ' "].) A

reviewing court is "entitled to presume the trial court considered all the appropriate

factors in choosing the multiplier and applying it to the whole lodestar." (Downey Cares

v. Downey, at p. 998.)

In its order awarding attorney fees, the court stated it had "carefully reviewed the

billing information submitted by plaintiff, and [had] considered the motions papers and

exhibits submitted." The court further stated: "The Court declines to rely on expert

opinions, as this Court is thoroughly familiar with this case and has adjudicated attorney

fee requests in many other cases." After noting there was "no evidence of pre-litigation

settlement offers," the "litigation was fiercely fought," and "[p]re-litigation attempts to

settle would likely have been futile[,]" the court "calculate[d] 11,695.75 hours of attorney

time as reasonable." The court excluded time for work performed by nonattorneys and

determined "that an across-the-board blended hourly rate of $500 [was] a reasonable rate,

considering the various rates throughout the four years, and considering counsel's

experience and the standards within the community." Bearing in mind that the

experienced trial judge is the best judge of the value of professional services rendered in

the trial court (PLCM, supra, 22 Cal.4th at p. 1095), we find nothing "clearly wrong"

with the court's lodestar determination, although the attorney fee award must be

reconsidered for the reasons discussed above.

76 Plaintiffs' Appeal

I. Denial of Enhancement of Attorney Fee Award

Plaintiffs contend the court abused its discretion in not awarding an enhancement

of the lodestar amount of their attorney fees. As we discussed above, we will not disturb

the trial court's exercise of discretion in deciding whether to increase or reduce the

lodestar figure unless the fee award is clearly wrong (PLCM, supra, 22 Cal.4th at

p. 1095), and we may "presume the trial court considered all the appropriate factors in

choosing the multiplier and applying it to the whole lodestar." (Downey Cares v.

Downey Community Development Com., supra, 196 Cal.App.3d at p. 998.)

Plaintiffs complain that the trial court did not consider the factors that, in their

words, "trial courts must consider in ruling on a fee enhancement request." The factors

that plaintiffs specify are: "(1) the novelty and difficulty of the questions involved, (2)

the skill displayed in presenting them, (3) the extent to which the nature of the litigation

precluded other employment by the attorneys, (4) the contingent nature of the fee award."

(Ketchum v. Moses (2001) 24 Cal.4th 1122, 1132 (Ketchum), citing Serrano v. Priest

(1977) 20 Cal.3d 25, 49 (Serrano III).) The Ketchum court noted that the lodestar "may

be adjusted by the court based on [those] factors . . . ." (Ketchum, at p. 1132.)37

37 The California Supreme Court has not carved these factors "into concrete or barred consideration of other relevant and nonduplicative factors; nor have the courts of appeal sought to do so. On the contrary, . . . the Supreme Court [has] described the factors . . . as among those 'the trial court may consider in adjusting the lodestar figure.' " (Lealao v. Beneficial California, Inc. (2000) 82 Cal.App.4th 19, 40–41, quoting Press v. Lucky Stores, Inc. (1983) 34 Cal.3d 311, 322, fn. 12.)

77 The Ketchum court also noted: "Of course, the trial court is not required to

include a fee enhancement to the basic lodestar figure for contingent risk, exceptional

skill, or other factors, although it retains discretion to do so in the appropriate case;

moreover, the party seeking a fee enhancement bears the burden of proof. In each case,

the trial court should consider whether, and to what extent, the attorney and client have

been able to mitigate the risk of nonpayment, e.g., because the client has agreed to pay

some portion of the lodestar amount regardless of outcome. It should also consider the

degree to which the relevant market compensates for contingency risk, extraordinary

skill, or other factors under Serrano III. We emphasize that when determining the

appropriate enhancement, a trial court should not consider these factors to the extent they

are already encompassed within the lodestar. The factor of extraordinary skill, in

particular, appears susceptible to improper double counting; for the most part, the

difficulty of a legal question and the quality of representation are already encompassed in

the lodestar. A more difficult legal question typically requires more attorney hours, and a

more skillful and experienced attorney will command a higher hourly rate. [Citation.]

Indeed, the ' "reasonable hourly rate [used to calculate the lodestar] is the product of a

multiplicity of factors . . . the level of skill necessary, time limitations, the amount to be

obtained in the litigation, the attorney's reputation, and the undesirability of the case." '

[Citation.] Thus, a trial court should award a multiplier for exceptional representation

only when the quality of representation far exceeds the quality of representation that

would have been provided by an attorney of comparable skill and experience billing at

the hourly rate used in the lodestar calculation. Otherwise, the fee award will result in

78 unfair double counting and be unreasonable. Nor should a fee enhancement be imposed

for the purpose of punishing the losing party." (Ketchum, supra, 24 Cal.4th at pp. 1138–

1139, italics added.)

In the present case, we cannot say the trial court's decision to not enhance the

lodestar was clearly wrong. The court reasonably could have viewed the Serrano III

factors of the difficulty of the questions involved, the skill displayed in presenting them,

and the extent to which the litigation precluded other employment as being encompassed

in the lodestar, and could reasonably decide that the quality of the representation

provided by plaintiffs' counsel was comparable to the quality that would have been

provided by counsel of comparable skill and experience billing at the hourly rate used in

the lodestar calculation. The court did not abuse its discretion in denying plaintiffs'

request to enhance the lodestar.

79 II. Recovery of Attorney Fees Under Section 2802

Plaintiffs contend the court erred in ruling they could not recover attorney fees

under Labor Code section 2802. Plaintiffs state in their opening brief that they "preserve

this issue because if [this] Court for some reason reverses the trial court's award of

attorney's fees under . . . section 1021.5, Plaintiffs reserve the right to seek these fees

under . . . section 2802 . . . ." Although we are reversing the attorney fee award with

directions to redetermine the award, we are not reversing the trial court's decision to

award attorney fees under section 1021.5. Consequently, we will not address plaintiffs'

contention that they are entitled to recover attorney fees under section 2802, other than to

express our view that the court reasonably found plaintiffs abandoned their section 2802

cause of action by electing to seek recovery solely under section 17200, as the court fully

explained in its January 21, 2014 order awarding attorney fees.

DISPOSITION

The portions of the judgment awarding the class members the principal sum of

$3,188,445 plus prejudgment interest and attorney fees in the amount of $6,160,416 are

reversed and the matter is remanded. The court is directed to redetermine the amount of

the class award and prejudgment interest consistent with the views expressed in this

opinion, including reducing the award by the amount of any documented and readily

identifiable payments, credits, or reversals in the subject expense categories that UT is

able to show the class members received, and disallowing recovery for insert credits. The

court is further directed to redetermine attorney fees consistent with the views expressed

in this opinion, taking into consideration any reductions in the class monetary recovery

80 on remand and whether the fee award should be reduced by the amount of any fees that

were attributable to unsuccessful claims that were unrelated to successful claims. In all

other respects, the judgment is affirmed. Plaintiffs are awarded their costs on appeal.

McCONNELL, P. J.

WE CONCUR:

HALLER, J.

DATO, J.