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Ridgeway v. Walmart Inc.

United States Court of Appeals, Ninth Circuit

January 6, 2020

Charles Ridgeway; Jaime Famoso; Joshua Harold; Richard Byers; Dan Thatcher; Willie Franklin; Time Opitz; Farris Day; Karl Merhoff, Plaintiffs-Appellees/ Cross-Appellants,
v.
Walmart Inc., DBA Wal-Mart Transportation LLC, Defendant-Appellant/ Cross-Appellee.

          Argued and Submitted August 6, 2019 San Francisco, California

          Appeal from the United States District Court for the Northern District of California Susan Illston, District Judge, Presiding D.C. No. 3:08-cv-05221-SI

          Theodore J. Boutrous, Jr. (argued) and Lauren M. Blas, Gibson, Dunn & Crutcher LLP, Los Angeles, California; Rachel S. Brass and Joseph A. Gorman, Gibson, Dunn & Crutcher LLP, San Francisco, California; James H. Hanson, Scopelitis, Garvin, Light, Hanson & Feary, P.C., Indianapolis, Indiana; for Defendant-Appellant/Cross-Appellee.

          Michael Rubin (argued) and Matthew Murray, Altshuler Berzon LLP, San Francisco, California; Lawrence M. Artenian and Laura E. Brown, Wagner Jones Kopfman & Artenian LLP, Fresno, California; Jacob M. Weisberg, Law Office of Jacob M. Weisberg, Fresno, California; Stanley Saltzman, Marlin & Saltzman LLP, Agoura Hills, California; for Plaintiffs-Appellees/Cross-Appellants.

          Before: Diarmuid F. O'Scannlain, Eugene E. Siler, [*] and Jacqueline H. Nguyen, Circuit Judges.

         SUMMARY[**]

         Class Action / California Employment Law

         The panel affirmed the district court's judgment awarding tens of millions of dollars in damages in a class action brought by Wal-Mart California truck drivers alleging employment-related claims.

         The case was initially filed in state court by four truck drivers. Wal-Mart removed the suit to federal court, and the parties agreed to a stay until the California Supreme Court issued Brinker Restaurant Corp. v. Superior Court, 273 P.3d 513 (Cal. 2012) (holding that employers must make meal and rest breaks available, but do not have to ensure that employees take such breaks). After the stay was lifted, plaintiffs filed their fourth amended complaint and dropped some initial plaintiffs while adding new class plaintiffs. The district court certified the new class, granted partial summary judgment to plaintiffs on their minimum wage liability claims, and eventually conducted a jury trial and entered judgment.

         The panel held that Wal--Mart raised no reversible error.

         The panel rejected Wal--Mart's claim that the district court erred by failing to dismiss for lack of jurisdiction. The panel held that the district court correctly concluded that the case presented an Article III case or controversy because two lead plaintiffs remained in the action after the stay was lifted.

         The panel rejected Wal-Mart's claims that plaintiffs should not have been awarded damages for layovers, rest breaks, and inspections. Specifically, the panel held that the district court correctly concluded that, under California law, time drivers spent on layovers was compensable if Wal-Mart exercised control over the drivers during those breaks. The panel further held that a comprehensive review of the Wal-Mart pay manual demonstrated that it unambiguously required drivers to obtain preapproval to take a layover at home, and therefore, the district court did not err in granting partial summary judgment on this issue to plaintiffs. The panel also held that the district court correctly determined that Wal-Mart's written policies, if applied as written, resulted in Wal-Mart exercising control over employees during mandated layovers as a matter of California law. The panel held that the district court properly instructed the jury on layovers. The panel also held that there was sufficient evidence for the jury to find that Wal-Mart had exercised control over its drivers. The panel rejected Wal-Mart's contention that the Federal Aviation Administration Authorization Act preempted California law governing layovers. The panel also affirmed the district court's judgment awarding damages to plaintiffs for rest breaks and inspections.

         The panel held that the district court did not err in certifying a class and allowing representative evidence as proof of classwide damages - including plaintiffs' expert Dr. Phillips' testimony and sample.

         On cross-appeal, plaintiffs argued that the district court erred in denying liquidated damages. The panel held that the district court did not err in finding that Wal-Mart acted in good faith and with a reasonable belief in the legality of its action, and therefore affirmed the district court's denial of liquidated damages.

         Judge O'Scannlain concurred in the majority's opinion, except for Part II.B.1.b. Judge O'Scannlain did not agree with the majority's conclusion that the district court correctly granted partial summary judgment to the plaintiffs when it found that Wal-Mart's written pay policies necessarily establish that the company "controlled" drivers during layovers. In his view, the jury should have been allowed to decide the meaning of these ambiguous policies and the extent to which the policies actually "control" what drivers may do and where they may go.

          OPINION

          SILER, CIRCUIT JUDGE.

         Long-haul truckers perform a vital service in the nation's economy. No wonder then, that Wal-Mart, among the world's largest retail companies, employs hundreds of truck drivers. Still, over a decade ago, drivers in California felt that Wal-Mart did not pay them properly in accordance with California law. So they sued in a class action. After a sixteen-day trial, the jury agreed with Wal-Mart on most issues. On some claims, however, the jury sided with the class of truckers and awarded tens of millions of dollars in damages.

         Now, Wal-Mart asks this panel to erase that judgment. Wal-Mart contends that the district court erred at every step along the way-in concluding that it had jurisdiction, in certifying a class, in interpreting California minimum wage law, in allowing expert testimony, and in providing jury instructions.

         But it is improper for this court to play armchair district judge. In the end, while Wal-Mart makes some compelling points, Wal-Mart raises no reversible error. Additionally, the district court properly concluded that liquidated damages are not owed under California law because Wal-Mart demonstrated that it acted in good faith and with a reasonable belief in the legality of its conduct. Accordingly, we AFFIRM.

         I. Background

         A. The Original Lawsuit, the Stay, and the Named Plaintiffs

         More than a decade ago, four truck drivers sued Wal-Mart in Alameda County Superior Court claiming Wal-Mart violated state meal and rest break laws. Those drivers worked out of several distribution centers in California that served as hubs through which Wal-Mart delivered items across the western United States. As part of their job, truckers would travel a wide range of routes, to different locations, hauling different freight. And, by industry standards, the truckers were paid well-an average of $300 per day and between $80, 000 and more than $100, 000 annually.

         Still, drivers claimed that they were not receiving adequate minimum wage pay. Wal-Mart paid truckers through what it called an activity-based pay system. That system included pay for (1) mileage, (2) tasks that constituted "activity," such as arriving and departing a facility, as well as hooking a new trailer to the truck, and (3) hourly wages of fourteen dollars per hour for limited events like time spent waiting at a store or supplier, delays due to inclement weather, or delays caused by a truck breakdown.

         Wal-Mart removed the suit to federal court. Subsequently, the parties agreed to stay the suit while the California Supreme Court considered an issue that would affect the truckers' claims. Three years later, in Brinker Restaurant Corp. v. Superior Court, 273 P.3d 513 (Cal. 2012), the California Supreme Court ruled that an employer must make meal and rest breaks available, but employers did not have to ensure that employees took such breaks.

         Consequently, the stay was lifted. Just one problem: it was unclear if any of the named plaintiffs remained in the lawsuit. Of the four original plaintiffs, two had died during the stay, one had lost interest in pursuing the case, and class counsel had concerns about the fourth plaintiff's ability to adequately represent the class.

         Thus, plaintiffs' counsel asked the court to order Wal-Mart to turn over information about potential class members so that counsel could determine the identity of new plaintiffs and class representatives. Wal-Mart objected, arguing that without an adequate plaintiff, the district court did not have jurisdiction. Citing the "unique circumstances" of the case, and noting that information about putative class members would serve purposes other than finding new plaintiffs, the district court granted plaintiffs' motion.

         After obtaining new information from Wal-Mart, plaintiffs' counsel found new named plaintiffs and filed an amended complaint. Under plaintiffs' theory, Wal-Mart did not pay drivers for time spent under the company's control- such as during layovers, rest breaks, and inspections-in violation of California law. Plaintiffs filed their fourth amended complaint in 2013, seeking damages, restitution, and statutory penalties under California law.

         B. Class Certification

         Next, plaintiffs moved to certify a class. They argued that all Wal-Mart drivers in California after October 10, 2004, were subject to the same written pay policies. Additionally, plaintiffs contended that common issues predominated over any individual issues because there were only "minor variations" among the class members.

         Wal-Mart objected. It argued that huge variations among truckers' locations, routes, and duties could lead to differences in pay, so individual issues infected the class, making certification inappropriate.

         The district court agreed with plaintiffs and certified the class.

         C. Pre-Trial Partial Summary Judgment for Plaintiffs

         Then, plaintiffs moved for partial summary judgment. Plaintiffs argued that Wal-Mart did not pay drivers for all job duties, required drivers to take rest breaks without pay, and "controlled" drivers during ten-hour layover periods, entitling drivers to minimum wage pay.

         The district court granted partial summary judgment as to plaintiffs' minimum wage liability claims. The district court found that under Wal-Mart's pay policy-if applied as written-drivers were not paid separately for some activities and that those activities "may not properly be built in or subsumed into the activity pay component of Wal-Mart's pay policies." The court also held that, under the policy, drivers were subject to Wal-Mart's "control"-as defined by California law-during layovers. Thus, the district court found that Wal-Mart must pay minimum wages during those times. Although the district court found that Wal-Mart's policies described practices that would violate California law, the court presented to the jury the factual question of whether Wal-Mart had implemented those policies.

         D. Wal-Mart's Pre-Trial Motions

         After discovery concluded, Wal-Mart made several pretrial motions. First, it argued that the case could not proceed on a classwide basis based on variations in the routes, daily tasks, and duties of each driver. The district court denied the motion.

         Second, Wal-Mart moved for summary judgment on the minimum wage claims. It argued that the Federal Aviation Administration Authorization Act ("FAAAA") preempted California law. Again, the district court denied the motion.

         Third, Wal-Mart moved to exclude Dr. G. Michael Phillips from providing expert testimony about classwide damages. Phillips said he could "estimate how much time [truckers] spent performing various activities[, ] and then, under various assumptions, . . . estimate dollar equivalent values for such time." The district court also denied Wal-Mart's motion to exclude, ruling that Wal-Mart's issue with Phillips's proposed testimony went toward "weight rather than . . . admissibility."

         E. Trial and Jury Instructions

         The trial occurred in 2016, focusing on plaintiffs' minimum wage claims for eleven separate activities from October 2004 to October 2015.

         Among the jury instructions, the district court issued a California minimum wage instruction stating:

"Wages" includes all amounts for labor performed by an employee, whether the amount is calculated by time, task, piece, commission, or some other method. The rate of the minimum wage is set forth in Instruction No. 13.
The Court has previously found that Wal-Mart's 2008 driver pay manual states that no pay is earned for certain tasks. Such a policy, if enforced or applied, does not comply with California's minimum wage laws. A policy that does not compensate directly for all time worked does not comply with California Labor Codes, even if, averaged out, it would pay at least minimum wage for all hours worked. Therefore, if Wal-Mart applied the policy as it is stated in the driver pay manual, such that no pay was earned for certain tasks, then it did not comply with California's minimum wage law. Wal-Mart may, however, pay drivers for certain tasks through activity codes that include those tasks.
What is stated in any pay plan or written policy does not itself establish whether someone was paid the minimum wage. Rather, plaintiffs must still prove that, in accordance with the pay policy, the class members in fact were not paid for certain tasks. Plaintiffs have the burden to prove their claims.

         The court also instructed the jury about layovers:

Plaintiffs claim that Wal-Mart owes them unpaid wages for time spent during 10-hour "layovers" at the end of a shift. Plaintiffs claim that Wal-Mart owes them the difference between the layover fee paid by Wal-Mart and the wages that plaintiffs claim should have been paid according to the minimum wage rate required by state law.
Under California law, employers must pay employees at least the minimum wage per hour for all hours worked. "Hours worked" is defined as "the time during which an employee is subject to the control of an employer, and includes all the time the employee is suffered or permitted to work, whether or not required to do so." The level of the employer's control over its employees, rather than the mere fact that the employer requires the employee's activity, is determinative.
The Court has previously found that the policies stated in Wal-Mart's driver pay manuals subjected drivers to Wal-Mart's control during layover periods. Under California law, the drivers must be paid for all of the time that they were subject to Wal-Mart's control. Therefore, if plaintiffs prove by a preponderance of the evidence that Wal-Mart applied the policy as it is stated in the driver pay manuals, then plaintiffs are entitled to the amount of additional pay that will bring Wal-Mart's payment for each 10hour layover up to the amount of the minimum wage that was applicable at that time.
You must limit your calculations to wages for layovers that occurred during the period beginning on October 10, 2005 and ending on October 15, 2015.

         The court further gave the following damages instruction:

If you find for the plaintiffs on the plaintiffs' minimum wage claim, you must determine the plaintiffs' damages. The plaintiffs have the burden of proving damages by a preponderance of the evidence. Damages means the amount of money that will reasonably and fairly compensate the plaintiffs for any injury you find was caused by Wal-Mart, in accordance with these instructions.
It is for you to determine what damages, if any, have been proved.
Your award must be based upon evidence and not upon speculation, guesswork or conjecture.
In instances where Wal-Mart did not maintain records of the number of times certain work duties were performed or the amount of time it took class members to perform those duties, the plaintiffs can satisfy their burden of proof if they produce sufficient evidence to show the amount and extent of that work as a matter of just and reasonable inference. Wal-Mart may dispute the reasonableness of the inference to be drawn from the plaintiffs' evidence.

         The jury, seemingly confused about the instruction on layovers, asked a question, seeking a "definition regarding Wal-Mart's control during layover period." In response, the court instructed the jury as follows:

There is no clear definition of control in the California Labor Code. The cases from the California courts have stated that the level of the employer's control over its employees, rather than the mere fact that the employer requires the employees activity, is determinative. To determine if a driver was subject to Wal-Mart's control during the layover, you must determine whether the driver was able to use that time effectively for his or her own purposes.
I will give you two examples from other cases. These involve different factual situations, and they may be helpful to you as guidance only. They may be helpful to you as analogies. The facts in those cases were different from these facts. But here are the two examples.
When an employer directs, commands or restrains an employee from leaving the workplace during his or her lunch hour and thus prevents the employee from using the time effectively for his or her own purposes, the employee remains subject to the employer's control.
And here is the second example. When agricultural worker employees were required by their employer to meet at designated places to take the employer's buses to work and were prohibited from taking their own transportation, the employees were subject to the control of the employer, although they could read on the bus or perform other personal activities.

         Wal-Mart called the supplemental instruction one it "c[ould] live with" because it was "a fair compromise." Following deliberations, the jury returned a verdict for Wal-Mart on seven of the eleven tasks in dispute, and for plaintiffs on four issues. The jury awarded $44, 699, 766 for layovers, $3, 961, 975 for rest breaks, $2, 971, 220 for pre-trip inspections, and $2, 971, 220 for post-trip inspections.

         The district court denied plaintiffs' post-trial motion for liquidated damages and civil penalties. And the court denied Wal-Mart's motions for a new trial and for judgment as a matter of law. This appeal followed.

         II. Discussion

         Wal-Mart raises multiple issues, claiming each constitutes reversible error. First, it claims the district court erred by failing to dismiss for lack of jurisdiction. Second, it contends that it was error to award damages to plaintiffs based on layovers, rest breaks, and inspections. Third, it argues that the district court erred in certifying a class. We affirm the district court on all assertions of error raised by Wal-Mart.

         Plaintiffs filed a cross-appeal. They contend that the district court erred by denying liquidated damages to plaintiffs as required under California law. We disagree. As a result, we affirm on the issue of liquidated damages.

         A. Jurisdiction After Stay Was Lifted

         1. Active Case or Controversy

         We review the district court's ruling on jurisdiction de novo. Smith v. T-Mobile USA Inc., 570 ...


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