Case Information
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PREGERSON, Circuit Judge:
Plaintiff-Appellant Jesus Leyva appeals the district court’s denial of class certification. Plaintiff seeks to represent approximately 538 employees of Medline Industries, Inc. (Medline). The complaint asserts claims against Medline for violating California labor laws. I. Allegations of Putative Class Members
Medline manufactures and delivers medical products. The putative class members are current and former hourly employees in Medline’s three California distribution warehouses. Because Medline’s warehouse employees earn low wages, the amount each could claim for unpaid wages is *3 relatively low—for example, Plaintiff’s individual claim is for less than $10,000.
Plaintiff alleges that Medline violated the California Labor Code, California Industrial Commission Wage Order 1-2001, and California’s Unfair Business Practices Law. Plaintiff seeks to certify separate sub-classes to pursue the following four claims : [1]
1. Rounding violation: Medline rounded its hourly employees’ start times in twenty-nine minute increments. For example, workers who clocked-in between 7:31 a.m. and Medline removed this case to federal court under the Class Action [1]
Fairness Act, 28 U.S.C. § 1332(d). M edline demonstrated in its removal notice that its liability exposure to putative class members’ claims exceeds five million dollars.
8:00 a.m. would be paid only from 8:00 a.m. onward even though they began work beforehand. Putative class members would clock-in before their scheduled start times because they had to complete tasks such as inspecting their machines and picking up scanners before they could begin their duties. Plaintiff alleges that the rounding practices resulted in employees performing unpaid work before their scheduled start times, in violation of California Labor Code §§ 510 and 1197, and that they are entitled to compensation pursuant to California Labor Code §§ 1194, 1194.2, and 1197.1.
2. Bonus violation: Medline allegedly excluded
nondiscretionary bonuses from employees’ overtime rates,
thus lowering overtime pay. Plaintiff claims that this practice
violated California law, citing to
Marin et al. v. Costco
Wholesale Corp.
,
3. Waiting time penalties: Plaintiff alleges that because of the time rounding and bonus violations, Medline owes its employees penalties under California Labor Code § 203, which provides that an employer who willfully fails to pay any wages due to a terminated employee owes waiting time penalties.
4. Wage statement penalties: Plaintiff alleges that because of the rounding and bonus violations, Medline’s payroll records did not accurately record the hours employees worked and the wages they earned. California Labor Code § 226(e)(1) provides that an employee can recover up to four thousand dollars in damages, and additional civil penalties, *4 for such violations.
II. Class Certification Requirements and the District
Court’s Ruling
To be certified, the putative class and sub-classes must meet the four threshold requirements of Federal Rule of Civil Procedure 23(a): numerosity, commonality, typicality, and adequacy of representation. Fed. R. Civ. P. 23(a); see also Hanlon v. Chrysler Corp. , 150 F.3d 1011, 1019 (9th Cir. 1998). Moreover, the proposed class must satisfy the requirements of Rule 23(b), which defines three different types of classes. Plaintiff argues that the proposed sub- classes meet the requirements of Rule 23(b)(3), which requires that “questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” Fed. R. Civ. P. 23(b)(3).
The district court found that “[t]he putative classes appear
to meet the requisites of Rule 23(a),” including the “rigorous”
commonality standard established in
Wal-Mart Stores, Inc. v.
Dukes
, __ U.S. __,
Second, the district court concluded that because of the size of the class, under Rule 23(b)(3) “alternative methods for resolving this dispute are superior because of the likely difficulties in managing this case as a class action.” The district court did not explain which methods would be superior. Instead, the court reasoned that “if these four classes were certified, the Court would need to determine the extent to which each putative class member lost wages and, consequently, suffered damages. Since there are more than 500 putative class members, this process would tax the Court’s resources.” The court also noted that it would have to determine “which of several bonuses offered by Medline to different putative class members were ‘nondicretionary’” and that “employees within the bonus group each received different bonuses at different pay periods.” III. The District Court Abused its Discretion
We review the district court’s denial of class certification
for abuse of discretion.
Knight v. Kenai Peninsula Borough
Sch. Dist.
,
We find that the district court abused its discretion in concluding that (1) individual questions predominated over common questions, and (2) class certification was not superior to other means of resolving the dispute.
A. Predominance of Common Questions
The district court applied the wrong legal standard by
concluding that individual questions predominate over
common questions. The only individualized factor that the
district court identified was the amount of pay owed. “In this
circuit, however, damage calculations alone cannot defeat
certification.”
Yokoyama v. Midland Nat’l Life Ins. Co.
,
The district court denied certification because for each
sub-class “the damages
inquiry will be highly
individualized.” But damages determinations are individual
in nearly all wage-and-hour class actions.
Brinker Rest.
Corp. v. Superior Court
,
Indeed, the Supreme Court clarified in
Dukes
that
“individualized monetary claims belong in Rule 23(b)(3).”
131 S. Ct. at 2558. Thus, the presence of individualized
damages cannot, by itself, defeat class certification under
Rule 23(b)(3). It is true that the plaintiffs must be able to
show that their damages stemmed from the defendant’s
actions that created the legal liability.
Comcast Corp. v.
Behrend
,
Here, unlike in Comcast , if putative class members prove Medline’s liability, damages will be calculated based on the wages each employee lost due to Medline’s unlawful practices. In the record, Plaintiff included deposition testimony of Medline’s director of payroll operations, and Medline’s Notice of Removal. Those documents show that Medline’s computerized payroll and time-keeping database would enable the court to accurately calculate damages and related penalties for each claim. For example, in its removal notice, Medline used its electronic database to separately calculate its exposure for each putative class member’s claim. The removal notice states that “to determine the potential amount in controversy with regard to Plaintiff’s minimum wage off-the-clock claim, Medline multiplied each employee’s hourly rate by the number of workweeks he/she was employed by Medline during the applicable period . . . .” Medline listed the amount in controversy for each individual claim and totaled the exposure on all the claims, calculating a total amount in controversy of $5,934,761. Medline’s removal notice thus demonstrates that damages could feasibly and efficiently be calculated once the common liability questions are adjudicated.
B. Superiority of Class Adjudication The district court also applied the wrong legal standard when it concluded that a class action was not the superior method for resolving the putative class members’ claims. The district court acknowledged that certification was superior when considering three of the four Rule 23(b)(3) factors—the class members’ interests in controlling litigation, the nature of litigation, and the desirability of concentrating the litigation of the claims—but denied class certification based on manageability concerns.
The district court incorrectly held that class certification
was not the superior method of adjudication because of the
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10
L EYVA V . M EDLINE I NDUSTRIES , I NC .
difficulty of managing the approximately 500 member class
and determining “the extent to which each putative class
member lost wages, and, consequently, suffered damages.”
The district court again abused its discretion when it based its
manageability concerns on the need to individually calculate
damages.
See Cooter & Gell v. Hartmarx Corp.
, 496 U.S.
384, 405 (1990) (“A district court would necessarily abuse its
discretion if it based its ruling on an erroneous view of the
law . . . .”);
Blackie
,
Moreover, the district court’s reasoning regarding
manageability of the class action is “implausible” under
Hinkson
’s second step.
The California Labor Code protects all workers regardless of their immigration status or financial resources. California Labor Code § 1171.5; see also Reyes v. Van Elk, Ltd. , 56 Cal. Rptr. 3d 68, 78 (Ct. App. 2007). In light of the small size of the putative class members’ potential individual monetary recovery, class certification may be the only feasible means for them to adjudicate their claims. Thus, class certification is also the superior method of adjudication. See Local Joint Exec. Bd. of Culinary/Bartender Trust Fund v. Las Vegas Sands, Inc. , 244 F.3d 1152, 1163 (9th Cir. 2001) (“If plaintiffs cannot proceed as a class, some—perhaps most—will be unable to proceed as individuals because of the disparity between their litigation costs and what they hope to recover.”).
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The district court’s denial of class certification because of
manageability concerns also lacks “support in inferences that
may be drawn from the facts in the record.”
See Hinkson
,
585 F.3d at 1262 (internal citations and quotation marks
omitted). The putative class and proposed sub-classes
contain approximately 538 people, and courts routinely
certify larger and more complex classes.
See, e.g.
,
Ortega v.
J.B. Hunt Transp., Inc.
,
Moreover, as noted above, Medline’s own documents demonstrate the feasibility of calculating damages in this case. Medline’s electronic payroll records contain much of the data needed to calculate damages. In its notice removing the case from state to federal court, Medline calculated the damages exposure through a review of company payroll records. Through a query of the computerized timekeeping database, Medline’s director of payroll operations calculated the amount of money plaintiff Leyva had lost due to Medline’s rounding policy. The payroll director said the calculation took him “probably an hour and a half,” and that he could repeat the process for the entire class. The district court, or a special master appointed under Federal Rule of Civil Procedure 53, could use a similar method to calculate damages once the court adjudicates liability. Thus, the district court abused its discretion by ignoring the database’s potential to alleviate the burden of determining damages.
IV. Conclusion
The district court applied the wrong legal standard and abused its discretion when it denied class certification on the grounds that damages calculations would be individual. The court also abused its discretion by finding that the class would be unmanageable despite the record’s demonstration to the contrary. The district court’s order denying class certification is REVERSED and REMANDED with directions to the district court to enter an order granting Plaintiff’s motion for class certification. Plaintiff is entitled to costs on appeal.