Gallagher v. Community Connection Resource Ctr.

Filed 8/20/08 Gallagher v. Community Connection Resource Ctr. CA4/1

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California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

CONSOLIDATED APPEALS from orders of the Superior Court of San Diego County, Yuri Hofmann, Judge. Affirmed as modified and remanded with directions.

In this opinion, we resolve two consolidated appeals in this action by plaintiff and appellant Joseph Gallagher (plaintiff or appellant) against his former employer Community Connection Resource Center, Inc. (defendant or respondent), alleging violations of several Labor Code provisions governing employee compensation. (Lab. Code,  201-203, 226, subd. (b), 226.7, 512, 558, 1194, 1199.) On the same basis, plaintiff also asserts violations of the Unfair Competition Law. (UCL; Bus. & Prof. Code, 17200 et seq.) Defendant is a provider of group housing for persons in need of various types of counseling and supervision. Plaintiff was formerly employed on the graveyard shift as a case aide or counselor at such a facility. He alleges that due to defendant's policies, he and a purported class of fellow current or former employees are owed unpaid overtime and compensation for meal breaks and rest breaks, among other things, during a period from 2001 to the present.

The first appeal is from the denial of plaintiff's motion to certify a class of nonexempt employees such as himself, to seek awards of unpaid wages and compensation and injunctive relief. (Code Civ. Proc.,  382;^[1]Cal. Code Regs., tit. 8,  11070 [establishing regulations on employee compensation].) The trial court denied the motion mainly for lack of predominant common issues, since out of about 100 employees involved during the subject time period (2001-2005), only about 12 to 15 were on the graveyard shift, working alone, such that any deprivation of meal breaks and rest breaks would have been an issue for them (since there were no relief personnel available). Plaintiff appeals. (D051104.)

In the second appeal, plaintiff challenges the trial court's decision not to grant his motion to amend the complaint, in which plaintiff sought to substitute a new class representative and to add new allegations. The trial court ruled that an automatic stay under section 916, subdivision (a), prevented the court from reaching the merits of the

amendment question, due to the pending first appeal, and it alternatively stated that the motion was unmeritorious on procedural grounds. (D051746.) Plaintiff now appeals that order denying his motion. We consolidated the appeals pursuant to stipulation of the parties.

We first address the class certification issues, and conclude that plaintiff has failed to make an adequate showing for certification of the proposed class, since his claims are not typical of the proposed class, nor has he been shown to be an adequate class representative. (Sav-on Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 334-335 (Sav-on Drug).) Class treatment is not a superior means of adjudicating the present claims, such that the class certification denial was an appropriate exercise of discretion.

We next resolve the related appeal of the trial court's findings regarding the proposed amendment to the complaint, and determine that the trial court appropriately declined to reach the merits, because that same subject matter was embraced within and affected by the previous appeal. ( 916, subd. (a).) However, we conclude that the trial court must allow further appropriate proceedings in which plaintiff may seek amendment of the complaint upon remand, because the record discloses that plaintiff may be able to plead his class claims adequately and to substitute in a new class representative.

We accordingly affirm the order denyingclass certification. We modify the order denying an opportunity to amend the pleadings and affirm that order as modified, to direct the trial court to allow appropriate further proceedings to resolve the remaining pleadings issues.

FACTUAL AND PROCEDURAL BACKGROUND

A. Complaint

Plaintiff brought this action in November of 2005, alleging that during the proposed class period from November 2001 to the present, defendant failed to pay all of its nonexempt employees the proper compensation for all hours worked, including overtime compensation, nor did defendant allow for meal periods, rest periods, or compensation for the same. The complaint includes six causes of action alleging various violations of the Labor Code, with regard to failure to pay overtime compensation, final compensation for former employees, or appropriate meal/rest periods or compensation. (Lab. Code,  201-203, 226, subd. (b), 226.7, 512, 558, 1194, 1199.) Defendants also allegedly failed to provide appropriate itemized wage statements.

Some portion of defendant's nonexempt employees, including plaintiff, worked overnight as case aides or supervisors of residential facilities for persons who had mental problems or substance abuse problems, or who were ex-offenders. Other nonexempt employees worked in defendant's offices during the day. In 2001, defendant had about 100 employees, and in July of 2006, it had 50-60 employees, including 16 case aides and counselors who held plaintiff's type of position.

Plaintiff worked part-time beginning in April 2004, on the graveyard shift at a residential facility, and he started working full time in July 2004. He normally worked the overnight shift, from midnight to 8:30 a.m., and he was usually the only employee on premises. His duties involved maintaining security, such as checking on door locks and doing bed counts of the 10-20 clients sleeping on-site, as well as dealing with any client-related emergencies. At times, plaintiff alleged he was required to begin work early in order to check the logbook from the day's events, or to allow another worker to leave early. At times, plaintiff stayed past his eight hour shift to attend meetings or lead meditation sessions. However, he was instructed by defendant's administrators to fill out his timesheet for an eight hour shift regardless of the actual hours worked. He was aware of at least one other employee who worked overtime without receiving additional compensation.

In defendant's employee handbook, the section dealing with hours and timesheets included a section stating: "Employees at [defendant] are not eligible for overtime or compensatory time as contracts prohibit it. Timesheets must reflect the actual hours and days worked, not to exceed 8 hours per day." Defendant told employees its funding contracts were not sufficient to pay overtime on a regular basis.

Through the deposition of its head of finance and payroll, Merle Guillermo, defendant admitted that before August 2005, it had a policy of not paying overtime wages even if the employees worked overtime. Instead, defendant used a bimonthly itemized wage statement system that calculated employees' salaries on a monthly basis, regardless of actual hours worked. In August 2005, defendant issued a memorandum changing its policy, and it now allows overtime payments to employees.

Plaintiff returned to part-time work in January 2005 and his employment was terminated by defendant in April 2005. This action followed.

B. Motion: Proposed Class

Plaintiff filed his motion for class certification in March 2007. He contended that defendant had a systemwide policy and practice of refusing to pay nonexempt employees overtime wages for such hours worked, or to allow or pay for rest and meal breaks. Plaintiff contended he and similarly situated employees, from November 2001 to the present, were raising common issues of law and fact. Specifically, he argued the admitted pre-2005 policy (no longer in effect since August 2005), that overtime pay was not allowed for nonexempt employees (on the ground that their contract funding did not give defendant enough money to do so), raised issues that were properly subject to class treatment, and he was an appropriate class representative.

In opposing certification, defendant argued that determining its liability, if any, for unpaid overtime compensation necessarily would require individualized computations of how much time each class member actually worked overtime without being paid, and that this was a small subsection of its nonexempt employees. Defendant presented evidence that it currently has about 50 employees, half of whom are nonexempt hourly employees. Most of them work at office jobs. Daily office workers were free to leave the office for lunch or breaks. However, counselors and case aides who worked the overnight shift at residential facilities were not free to leave the workplace if they were the only employees present. Between August 2001 and the present, defendant stated that it had about 12 to 15 such full-time counselors or case aides who worked the overnight shifts at residential facilities.

Prior to August 2005, defendant paid all its nonexempt employees on a salary basis, and instructed them to fill out their timesheets in a uniform manner showing the same start and finish times. Until July 2006, employees were told to list overtime hours on a separate timesheet and they were paid for such hours, although the practice was generally discouraged. Defendant presented a declaration from its executive director Anita Paredes, stating that employees such as plaintiff were not required to report to work prior to the scheduled work time, nor to stay overtime, and if they did so, it was not at the request of defendant.

Defendant therefore argued that the proposed class definition was not presently ascertainable because it erroneously identified members in terms of injuries suffered, such that individualized inquiries were necessary regarding liability determinations, and these were not common issues of law and fact. Defendant contended that plaintiff, as a graveyard shift worker, was not a typical class member nor an adequate representative of all the nonexempt employees.

C. Class Certification Ruling; First Appeal

After oral argument, the trial court issued an order denying class certification as requested. The court analyzed the evidence as showing that plaintiff's employment on the graveyard shift, alone at a residential facility, was not typical of the majority of defendant's nonexempt employees, since only 12 to 15 persons out of approximately 100 potential class members had worked under similar conditions as plaintiff. Plaintiff was making unique claims about being required to arrive early and leave late, and being unable to leave the work premises for breaks, and therefore he was not an adequate class representative with typical claims. The court stated, "On balance, Plaintiff has simply not established that a class action is a superior method of resolving this dispute, and the Court finds that the claims of Plaintiff and others similarly situated employees would best be handled by joinder in Plaintiff's suit as opposed to class action." The court dismissed the class action allegations, and granted plaintiff 30 days leave to file an amended complaint to seek individual rather than class relief. The order was dated April 20, 2007.

D. Motion to Amend Complaint; Second Appeal

In May 2007, plaintiff's attorney prepared and filed a motion for leave to name new class representatives, and obtained a hearing date of August 3, 2007. Shortly before the August 2007 hearing date, he lodged a proposed amended complaint that would have added a new plaintiff, Marcelina Valdez, who was a nonexempt daytime employee, and whose job description was more typical of the class description allegations. Meanwhile, plaintiff had already filed his notice of appeal on June 15, 2007, regarding the denial of class certification.

At the August 3 hearing, the court and counsel discussed whether the pending appeal divested the court of jurisdiction to rule on the motion to amend or substitute a new class representative, and the matter was continued. Ultimately, the court relied on section 916, subdivision (a) to conclude that "[a] motion to amend the complaint to name new class representatives which will in all likelihood be followed by a motion for class certification embraces or affects the order on appeal." The court denied the motion for lack of jurisdiction to hear it, since the action was deemed to be stayed pending appeal.

However, the court went on in its order to assume that it could consider the matter, and noted that plaintiff had not previously filed an amended complaint to seek individual rather than class relief, such that there was no operative class complaint to amend as of the time of hearing. Plaintiff had also failed to include a copy of the proposed amended pleading with his motion, or to identify the new material, so that the motion was procedurally defective under California Rules of Court, rule 3.1324. As such, the motion was not well taken.

Plaintiff separately appealed. In March 2008, this court accepted the parties' stipulation to consolidate these two appeals.

DISCUSSION

We first set out the standards of review and principles governing class certification rulings, to consider the merits of the ruling with respect to the requirements that common issues predominate and that the class action method would be a superior treatment for the particular issues presented. We then turn to the issues presented regarding amendment of the complaint and the effect of the stay resulting from the first appeal.

I

CLASS ACTION RULING

A. Applicable Standards

Trial courts are accorded great discretion in granting or denying certification. (Lockheed Martin Corp. v. Superior Court (2003) 29 Cal.4th 1096, 1106 (Lockheed Martin).) If a trial court ruling is supported by substantial evidence, it normally will not be overturned " ' "unless (1) improper criteria were used [citation]; or (2) erroneous legal assumptions were made [citation]" [citation]. . . . "Any valid pertinent reason stated will be sufficient to uphold the order." ' [Citations.]" (Sav-on Drug, supra, 34 Cal.4th 319, 326-327; Fireside Bank v. Superior Court (2007) 40 Cal.4th 1069, 1089.) "Class certification requires proof (1) of a sufficiently numerous, ascertainable class, (2) of a well-defined community of interest, and (3) that certification will provide substantial benefits to litigants and the courts, i.e., that proceeding as a class is superior to other methods." (Ibid.)

In determining class certification questions, the courts do not decide the merits of the case, but instead focus on whether common or individual questions are likely to arise in the action and are predominant. "[I]n determining whether there is substantial evidence to support a trial court's certification order, we consider whether the theory of recovery advanced by the proponents of certification is, as an analytical matter, likely to prove amenable to class treatment." (Sav-on Drug, supra, 34 Cal.4th at p. 327.) " 'Reviewing courts consistently look to the allegations of the complaint and the declarations of attorneys representing the plaintiff class to resolve this question.' " (Ibid.) The burden is on plaintiff, as the party seeking certification, to demonstrate there is an ascertainable class and a well-defined community of interest among the class members. (Lockheed Martin, supra, 29 Cal.4th 1096, 1103-1104.)

It was made clear in Sav-on Drug, supra, 34 Cal.4th at pages 334 to 335 that "[i]ndividual issues do not render class certification inappropriate so long as such issues may effectively be managed. [Citations.] [] Nor is it a bar to certification that individual class members may ultimately need to itemize their damages. We have recognized that the need for individualized proof of damages is not per se an obstacle to class treatment. [Citations.]"

In this case, the trial court did not expressly address the requirement that the proposed class be ascertainable, and instead focused its analysis on the related requirements for an adequate class representative with typical claims. These are part of the general community of interest requirement, as outlined in Lockheed Martin: " 'The community of interest requirement [for class certification] 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.' [Citation.] Plaintiffs acknowledge it is their burden to establish the requisite community of interest and that 'the proponent of certification must show, inter alia, that questions of law or fact common to the class predominate over the questions affecting the individual members.' [Citation.]" (Lockheed Martin,supra, 29 Cal.4th at p. 1104; see also In re Cipro Cases I and II (2004) 121 Cal.App.4th 402, 410 [" 'The ultimate question in every case of this type is whether . . . the issues which may be jointly tried, when compared with those requiring separate adjudication, are so numerous or substantial that the maintenance of a class action would be advantageous to the judicial process and to the litigants'; "trial court must 'carefully weigh respective benefits and burdens and . . . allow maintenance of the class action only where substantial benefits accrue both to litigants and the courts' "].)

B. Analysis

We now consider whether plaintiff has demonstrated the necessary community of interest among the putative class members, and his own suitability as a class representative. Plaintiff relies on Capitol People First v. Department of Developmental Services (2007) 155 Cal.App.4th 676 (Capitol People First), as an example in which class treatment of an action may be deemed appropriate to redress injury from certain common policies and practices by institutional defendants, even though the life circumstances of the individuals represented by the plaintiffs were different. That was a case in which advocacy organizations for disabled persons, as representative plaintiffs, brought a complaint against California state departments and local officials, that sought injunctive and declaratory relief to enforce certain statutory rights of persons with developmental disabilities, to live in the least restrictive environments that would meet their needs. (Welf. & Inst. Code,  4500 et seq., the Lanterman Developmental Disabilities Services Act.) Although the trial court had denied certification of a class, the appellate court reversed, stating that the plaintiffs had met their burden of showing there were legal and factual issues common to the class members, and they could properly seek classwide injunctive relief to compel state and local entities to remedy alleged classwide deficiencies in the procedures that were used to care for such disabled persons. (Capitol People First, supra, 155 Cal.App.4th 676.)

Plaintiff here is arguing that his proposed class is similarly appropriate, in that it seeks to obtain classwide rulings on defendant's compensation policies. However, we think that the fact situation in Capitol People First, supra, 155 Cal.App.4th 676, is readily distinguishable, in that it deals with issues of entitlement to different governmental benefits on a systemic basis. Plaintiff here is seeking more specialized forms of relief, and the community of interest requirement has not been clearly satisfied here regarding typicality of claims. (See also Reyes v. Board of Supervisors (1987) 196 Cal.App.3d 1263, 1270, fn. 6 [" 'It is well settled that class actions are an appropriate procedure in government benefit cases where statutes and policies are likely to have an impact upon a broad class of recipients.' [Citation.]"].)

By comparison, in Sav-on Drug, in which class treatment was deemed appropriate, the subject issues were whether the defendant employer had a policy and practice of deliberately misclassifying its managerial employees as exempt, in light of their duties as set forth in the job descriptions, or whether the same result had occurred on a de facto basis under certain standardized conditions, as they were alleging. There were some 600-1500 potential class members who were subject to the same treatment by the employer. The high court found those theories were amenable to class treatment, even though individuals' lost compensation would vary. (Sav-on Drug,supra, 34 Cal.4th 319, 329-330.) The relevant set of facts was essentially undisputed and legal issues predominated about how properly to classify those managing employees, according to their specified tasks. (Ibid.)

Here, the evidence brought before the trial court showed that plaintiff was one of about 12 to 15 persons who were subject to unique conditions in their overnight shift work at residential facilities, since they did not have fellow employees who could cover for them during meal or rest periods. The facts are disputed about whether Gallagher in particular was actually required to work overtime on a regular basis, even if he believed he had to do so. The defendant had officially changed its policies during the relevant time period. Under these circumstances, any common issues for the proposed class of about 100 employees, under the pre-2005 policy about overtime, rest and meal break pay, do not predominate over individualized issues for those 12 to 15 persons who worked the overnight shift. There are two different kinds of nonexempt employees, and plaintiff is not typical of the larger group. Even for the smaller group, there would be individualized factual issues about who actually worked overtime on the night shift, how often, and did not get paid for it, and under what version of the compensation policies. All of these were appropriate criteria for the court to consider, and there is no indication that it made any erroneous legal assumptions in analyzing the respective showings before it at this point in the proceedings. (Sav-on Drug, supra, 34 Cal.4th 319, 326-327, 329.)

Moreover, by filing his motion to substitute a new representative and to amend the complaint, Gallagher essentially appears to be conceding that he is not a proper class representative. As we will next discuss, the trial court was correct in declining to reach the merits of that motion to substitute and amend the pleading. (Pt. II, post.) At this time, we need merely conclude the ruling denying class certification appropriately analyzed the respective showings by the parties and is supported by substantial evidence. The trial court was justified in concluding, both expressly and impliedly, that plaintiff had not yet carried his burden of showing the required community of interest for a class action, and there were not currently any perceptible advantages to the judicial process or to the litigants in maintaining a class action. (In re Cipro Cases I and II, supra, 121 Cal.App.4th 402, 409-410.)

II

SECOND APPEAL: STAY AND AMENDMENT ISSUES

A. Stay

The subject of this appeal is the order of denial or refusal to rule on plaintiff's motion to substitute in his new proposed class representative, Marcelina Valdez, who worked the day shift and who is therefore presumably more typical of the putative class. The main problem here is that plaintiff's motion to amend or substitute was filed in May 2007 but was not heard until August 2007, at a time that his appeal from the April 2007 denial of class certification was pending (notice of appeal filed in June 2007). Also, plaintiff had failed to file an amended complaint in a timely manner, as part of his response to the April denial of class certification.

The inquiry here must be whether, under section 916, subdivision (a), the perfecting of the previous appeal removed jurisdiction on the class certification issues to this court, such that the motion to amend or substitute was embraced within or affected by the ruling that was on appeal. (Mallick v. Superior Court (1979) 89 Cal.App.3d 434; Heide v. Betz (1993) 16 Cal.App.4th 931, 938.) Plaintiff's new motion would have added a different putative class representative, and would logically have been followed up by another motion for class certification. However, such a motion could not have been fully resolved until the first appeal was decided. We disagree with plaintiff that the trial court could or should have continued to take action to "manage" the class action in such a way as to replace the putative class representative, at a time that the suitability of the original class representative was before this appellate court. Instead, we find that the trial court correctly interpreted section 916 in this respect, and the second motion's subject matter was embraced within or affected by the previous ruling that was on appeal.

That is not the end of the inquiry on this record, however, since the procedural status and merits of the motion to substitute or to amend will no longer be subject to stay, once this court has resolved the first appeal.

B. Merits of Proposed Amendments

Although we conclude the trial court's refusal to rule on the motion to amend or substitute should be upheld, for lack of its jurisdiction at that time, we may also take into account the trial court's statements about an alternative basis for its ruling. The record reveals that in April 2007, plaintiff was given the opportunity to file an individual complaint, but he failed to do so, instead deciding to pursue the class allegations by bringing his alternative motion to substitute and amend. Whatever the merits of, or errors in, his approach, in the interest of judicial economy and in recognition of the substantive allegations that were before the trial court, we find it necessary and appropriate to consider the amendment issues as they appear in this record.

Even though plaintiff did not take the opportunity to file an operative complaint in a timely manner, no effective dismissal of the action occurred, and the pleadings issues remained open before the trial court. The record shows that the motion to amend or substitute was filed in May 2007, and a due course hearing date in August 2007 was obtained. The first appeal had been filed in June 2007, but at that time, the entire action was neither dismissed nor defunct merely because plaintiff had failed to timely amend. Rather, there were allegations that an appropriate class could still be certified, with an appropriate representative, and those issues remained deferred pending resolution of the first appeal. The trial court noted in its second ruling that it appreciated the concerns of the purported unnamed class representative employees, although the class certification issues remained open at the time.

We therefore deem it appropriate to affirm the trial court's ruling that it lacked jurisdiction to hear the motion to substitute or amend, but also to modify it to direct the trial court to entertain such further proceedings as may be brought before it by the parties, that will allow plaintiff an opportunity to reinstate the complaint and to seek amendment of it to correct any deficiencies. ( 473; Cal. Rules of Court, rule 3.1324.) The trial court has ample discretion to deal with this and other upcoming issues, in order to assure that such matters may be resolved upon the merits, where appropriate. At this time, however, our decision reflects only the record facts before this court.

DISPOSITION

The order denying class certification is affirmed. The order denying hearing on the motion to substitute or amend is affirmed as modified to direct the trial court to allow

any appropriate further proceedings in accordance with the views expressed in this opinion. Each party shall bear its own costs on appeal.

HUFFMAN, Acting P. J.

WE CONCUR:

McDONALD, J.

O'ROURKE, J.

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^[1] All further statutory references are to the Code of Civil Procedure unless otherwise noted.