Case Name: Derrick Fenley, et al. vs. Rite Aid Corporation.
Case No.: 1-12-CV-229127

This is a putative wage and hour class action by plaintiffs Derrick Fenley (“Fenley”), Stacy Wolchow (“Wolchow”), Steve Ton (“Ton”) and Anthony Centeno (“Centeno”) (collectively “Plaintiffs”) on behalf of themselves and others who are or have been employed by defendant Rite Aid Corporation (“Defendant”) and misclassified as overtime-exempt retail managers in any store in the State of California within the applicable class period. The class period is defined as the time from November 4, 2009 through trial. Plaintiffs allege that during the class period, Defendant has had a consistent policy of (1) permitting, encouraging and/or requiring its allegedly overtime-exempt Store Managers to work in excess of eight hours per day and in excess of forty hours per week without paying them overtime compensation as required by California’s wage and hour laws, (2) unlawfully denying Plaintiffs and putative class statutorily-mandated meal and rest periods, and (3) willfully failing to provide Plaintiffs and putative class with accurate semimonthly itemized wage statements reflecting the total number of hours each worked, the applicable deductions, and the applicable hourly rates in effect during the pay period, and (4) failing to reimburse putative class members for business expenses related to the operations of Defendant. In addition, Plaintiffs allege on information and belief that Defendant has had a consistent policy of willfully failing to pay compensation (including unpaid overtime) in a prompt and timely manner to the Plaintiffs and those putative class members whose employment with Defendant has terminated.

The operative Second Amended Complaint (“SAC”), filed on March 24, 2014, asserts seven causes of action for: (1) unlawful failure to pay overtime wages; (2) failure to provide meal and rest periods; (3) failure to provide accurate itemized wage statements; (4) failure to pay wages on termination; (5) failure to reimburse expenses and/or prohibited cash bond; (6) unfair business practices under the Unfair Competition Law (“UCL”); and (7) violation of the Private Attorneys General Act (“PAGA”) (Cal. Lab. Code, § 2698 et seq.).

Plaintiffs now move for class certification.

Defendant objects to/moves to strike the Store Manager declarations submitted by Plaintiffs as Exhibit E to the declaration of Molly A. DeSario in support of the motion for class certification. Defendant argues that 94 of the 99 declarations contain “DocuSigned” electronic signatures in violation of California Code of Civil Procedure 2015.5 and California Rules of Court, rule 2.257(a). Defendant also objects to/moves to strike the Declaration of Molly A. DeSario and its exhibits submitted in opposition to Defendant’s objection/motion to strike the Store Manager declarations.

Plaintiffs object to/move to strike the following portions of Defendants’ opposition evidence: (1) Compendium of Store Manager Declarations; (2) Compendium of Executive Management Declarations; (3) Declaration of Jullie Z. Lal; and (4) Summary of Evidence.

Defendant’s Objection/Motion to Strike

Defendant’s request for judicial notice of the docket information in unrelated California cases is DENIED because the request (which was contained within the supporting declaration of Jullie Z. Lal) is not made in a separate document. (Cal. Rules of Court, rule 3.113(l).) Furthermore, the judicially-noticed materials are not relevant to the main issues considered by the Court in this motion.

Under California Code of Civil Procedure section 2015.5, a written declaration made under penalty of perjury may be used as evidence if, among other requirements, it “is subscribed by” by the declarant. (See Cal. Code Civ. Proc., § 2015.5.) “‘Subscribe’ as used in section 2015.5 means to sign with one’s own hand. [Citation.]” (Stockinger v. Feather River Community College (2003) 111 Cal.App.4th 1014, 1027.) In Stockinger, the court held that transcripts of a telephone conversation did not comply with section 2015.5. Here however, the declarants used a secure electronic signature system to provide unique signatures by touch screen or mouse. This method does not clearly conflict with section 2015.5’s subscription requirement because it is still essentially using one’s own hand to create the mark of the signature. Because of the uniqueness of the DocuSign signatures and the measures taken by DocuSign to prevent tampering and repudiation, the digital signatures would appear to comply with California Government Code section 16.5, subdivision (a).

However, California Rules of Court, rule 2.257(a) presents a different issue. Under this rule, “[w]hen a document to be filed electronically provides for a signature under penalty of perjury…[t]he document is deemed signed by the declarant if, before filing, the declarant has signed a printed form of the document.” (Cal. Rules of Court, rule 2.257(a)(1).) “By electronically filing the document, the electronic filer certifies that (1) has been complied with and that the original, signed document is available for inspection and copying at the request of the court or any other party.” (Id., (a)(2).) “At any time after the document is filed, any other party may serve a demand for production of the original signed document” (id., (a)(3)) and “[w]ithin five days of service of the demand under (3), the party on whom the demand is made must make the original signed document available for inspection and copying by all other parties.” (Id., (a)(4).)

Here, to the extent the DocuSigned portions of Plaintiffs’ Store Manager declarations are submitted as electronic filings of a signature under penalty of perjury, it does not appear that the declarants signed a printed form of the document before their declarations were filed. When Defendant requested the hand-signed originals, Plaintiffs’ counsel stated they were not sure if hand-signed originals existed, and later, Plaintiffs produced hand-signed declarations that were dated after the DocuSigned declarations. Plaintiffs do not contend that printed forms of the Store Manager declarations were signed before the declarations were filed. Thus, under rule 2.257(a)(1), the original 94 Store Manager declarations cannot be “deemed signed by the declarant[s.]”

At any rate, Plaintiffs have now submitted 66 hand-signed Store Manager declarations. Although the Court cannot “deem” the 94 DocuSigned declarations to have been signed by the declarants due to Plaintiffs’ noncompliance with rule 2.257(a)(1), the Court can still exercise its discretion to accept the 66 hand-signed declarations as late-filed evidence, provided there is no prejudice to Defendant. Defendant does not demonstrate prejudice by the Court’s acceptance of the 66 hand-signed declarations, but does object to the fact that five of the 66 hand-signed declarations were not previously filed.

Defendant’s objections/motions to strike are GRANTED IN PART. The Court will accept 61 of the hand-signed declarations submitted as Exhibit D to the DeSario Opposition Declaration. The Court will not accept the five declarations in Exhibit D that were not previously filed in any form with the class certification motion. Those declarations were signed by Guillermo Alcoser, Michael Carpenter, Heidi Evangelista, George Kane, and Gerald Simpson.

Defendants’ remaining objections to Plaintiffs’ declarations are OVERRULED.

Plaintiffs’ Objection/Motion to Strike

On April 4, 2014, Defendants submitted their opposition to the class certification motion, including a Compendium of Store Manager Declarations, a Compendium of Executive Management Declarations, the Declaration of Jullie Z. Lal, and a Summary of Evidence.

 The Store Manager Compendium contains three types of declarations regarding: (1) Work Duties; (2) Hours and Meal and Rest Periods; and (3) a “Day in the Life”. Some of the declarants provide more than one type of declaration (e.g., Rick Bennett provides three declarations, one for each category). The declarations for Work Duties and Hours and Meal and Rest Periods are forms that contain blanks for the declarants to fill in. In total, the Compendium of Store Manager declarations contains a 151 declarations by 63 declarants.

 The Lal declaration sets forth facts regarding employee interviews conducted in 2012 in connection with the federal case filed by Fenley and Wolchow. Ms. Lal also provides summaries of the Store Manager declarations, including statistics on how the declarants responded to particular questions in the forms.

 The Executive Management Compendium contains nine declarations of management-level employees of Rite Aid including District Managers and Group Senior Directors.

 The Summary of Evidence provides a separate statement-like table of facts and citations to supporting evidence.

Plaintiffs argue the Compendium of Store Manager declarations should be stricken because the vast majority of the declarations were obtained in 2012 before the action was pending and there is no indication that the declarants were classified as exempt and are part of the putative class. Plaintiffs argue that the Work Duties declarations and the Hours and Meal and Rest Period declarations are flawed, imprecise, inherently biased, contain legal conclusions, and are irrelevant to certification (because they focus on damages). Plaintiffs argue there is a heightened potential for coercion where absent class members are employees of the defendant. Plaintiffs argue the “Day in the Life” declarations were also procured through ethically questionable circumstances, are misleading, irrelevant, and do not specify whether they were classified as exempt or non-exempt. Plaintiffs argue the Executive Management declarations should be stricken because they are unreliable, irrelevant to class certification, contain legal conclusions, prejudiced information, and personal attacks on class members, which could have a chilling effect on class member participation. Plaintiffs also seek to strike the declarations of Ember Bowlds and Clementina Perez on the grounds that Defendant omitted these individuals from the list of putative class members and their contact information that Defendant was previously ordered to produce. Plaintiffs argue Lal’s summary of Store Manager declarations should be stricken because it has no statistical validity and violates the secondary evidence rule. Plaintiffs argue that Lal is not qualified to draw conclusions about class member responses based on the biased surveys. Plaintiffs argue the Summary of Evidence should be stricken because it relies heavily on invalid evidence, states facts not in the record, and mischaracterizes evidence. Finally, Plaintiffs move to strike four pieces of evidence submitted by Defendant in its opposition papers that Defendant never produced in discovery: (1) internal messages criticizing the job performance of Fenley; (2) the FY2014 Performance Review form for Store Managers; (3) the Store Manager Job Description (Jan. 2001-May 2005); and (4) the Store Manager Job Description (June 2005-July 2009). Plaintiffs argue that Defendant’s concealment of this evidence during discovery is grounds for an evidence sanction.

Plaintiffs’ arguments are not well-taken. Regarding the issue of employer coercion, courts generally will not prohibit or limit precertification communications with putative class members absent a showing of actual or threatened abuse. (See Atari, Inc. v. Superior Court (1985) 166 Cal.App.3d 867, 871; Parris v. Superior Court (2003) 109 Cal.App.4th 285, 298.) “In considering whether pre-certification communications between employers and employees are sufficiently deceptive or coercive to warrant relief, courts have considered several factors, including whether the employer adequately informed the employees about: (1) the details underlying the lawsuit, (2) the nature and purpose of the communications, and (3) the fact that any defense attorneys conducting the communications represent the employer and not the employee. [Citations.]” (Quezada v. Schneider Logistics Transloading & Distribution (C.D. Cal. 2013) 2013 U.S. Dist. LEXIS 47639, *11.) Plaintiffs present no evidence of abuse to justify striking Defendant’s Store Manager declarations. Each declarant states that he or she “received and read a document entitled ‘Who We Are and Purpose of the Interview” and a copy of this document is provided with each declarants’ declarations. The Opening Statement sets forth the details of the underlying lawsuit, the nature and purpose of the interview, and the potential adversity between counsel and the putative class members. The Opening Statement further states that participation is “completely voluntary” and that “no action will be taken against you if you decline to participate in this interview.” Absent other evidence to suggest coercion, it appears the declarants were adequately informed of the nature of the interview and voluntarily participated.

The fact that the declarations regarding Work Duties and Hours and Meal and Rest Periods are form documents (presumably drafted by Defendant or its counsel) does not justify striking them in their entirety. There is nothing so imprecise or inherently biased about the forms that would cast serious doubt on the information provided by the declarants therein. Nor do the forms call upon the declarants to make legal conclusions. The forms mostly seek factual information about the positions the employees held, their dates of employment, average hours worked, the general frequency of meal and rest breaks taken, number of employees supervised, and estimates of time spent on various enumerated (and defined) duties (e.g., administrative duties, sales management, cash management, staff supervision, personnel administration, merchandise management, customer service management).

Plaintiffs argue that the Executive Management declarations contain personal attacks on class members and therefore constitute an attempt to dissuade putative class members from participating in this action. The discussions of Store Managers in these declarations are not necessarily construed as personal attacks, as they relate to the putative class members’ job performance. Also, these discussions are responsive to the declarations already submitted by Plaintiffs in support of the motion, and fairness dictates that Defendants should be able to rebut their statements or challenge their credibility. This is not clearly an attempt to dissuade putative class members from participating.

Regarding whether the 63 declarants in the Store Manager Compendium are all putative class members, Defendant confirms that all 25 “Day in the Life” declarants and 61 of the 63 Store Manager declarants were identified in the putative class member contact list that Defendant provided to Plaintiffs pursuant to the Belaire process. As for Bowlds and Perez (the two declarants who did not appear in the class member list), Defendant contends these individuals chose not to disclose their contact information to Plaintiffs’ counsel, but they are still putative class members. Thus, Defendant demonstrates that it did not intentionally withhold the names of Bowlds and Perez as surprise witnesses.

Regarding the summaries in the Lal declaration, for the most part, Ms. Lal simply calculated percentages based on how the declarants responded to various questions in the form declarations. Under Evidence Code section 1521, subdivision (a), “[t]he content of a writing may be proved by otherwise admissible secondary evidence. The court shall exclude secondary evidence of the content of writing if the court determines either of the following: [¶] (1) A genuine dispute exists concerning material terms of the writing and justice requires the exclusion [¶] (2) Admission of the secondary evidence would be unfair.” Here, there is no genuine dispute about the contents of the putative class member declarations. Thus, Ms. Lal’s secondary evidence regarding the content of the 63 declarations may be accepted. Furthermore, Evidence Code section 1523 subdivision (d) provides that “[o]ral testimony of the content of a writing is not made inadmissible…if the writing consists of numerous accounts or other writings that cannot be examined in court without great loss of time, and the evidence sought from them is only the general result of the whole.” Here, the Lal declaration simply provides summaries of numerous separate declarations and provides “the general result of the whole.” Ms. Lal is not required to have proficiency with surveys or statistics to make these basic calculations. Plaintiffs suggest the data may be skewed, but there is nothing stopping them from checking the calculations themselves and bringing any errors to the Court’s attention.

Plaintiffs argue that the Lal declaration exceeds the page limits for law and motion briefs because it contains many pages of argument discussing Defendant’s interview procedures. On the contrary, the declaration provides not so much argument but averments of fact that are appropriately made in a declaration.

As for the Summary of Evidence, Plaintiffs’ point is well-taken that this document mischaracterizes some of the evidence, but Defendant has submitted a Notice of Errata correcting the errors.

Regarding the allegedly withheld documents, Defendant adequately rebuts Plaintiffs’ claims that any evidence was intentionally withheld from discovery. Regarding the job descriptions, Defendant submits that it objected to producing these documents in discovery because they were outside the class period, and Plaintiffs never brought a motion to compel their production. Regarding the FY2014 performance appraisal form, Defendant submits that this document did not exist when Plaintiffs served initial discovery in November 2012. Regarding the emails criticizing Fenley’s job performance, Defendant submits that it produced Fenley’s personnel file, performance appraisals and written discipline/coaching forms in discovery, and after meeting and conferring over emails, the parties agreed that Defendant would produce emails sent to or received by Fenley between January 4, 2010 and June 30, 2010, which Defendant did. Thus, emails between Fenley’s subordinates did not fall into this category and Plaintiffs never moved to compel these emails.

For all of these reasons, Plaintiffs’ objection/motion to strike is DENIED.

Motion for Class Certification

“The party seeking certification has the burden to establish the existence of both an ascertainable class and a well-defined community of interest among class members. [Citations.] 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. [Citation.] [¶] The certification question is ‘essentially a procedural one that does not ask whether an action is legally or factually meritorious.’ [Citation.] A trial court ruling on a certification motion determines ‘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.’ [Citations.]” (Sav-On, Inc. v. Superior Court (2004) 34 Cal.4th 319, 326.)

Here, there is no dispute regarding numerosity of the putative overtime/meal/rest break class (approx. 900 putative class members), ascertainability of the putative overtime/meal/rest break class (from Defendant’s employment records), or the adequacy of representation by Plaintiffs and/or their counsel. Although Defendant argues that Plaintiffs’ claims are not typical of the putative class because Plaintiffs failed to meet certain performance expectations, this does not bear upon whether Plaintiffs have “the same or similar injury” as the members of the putative class (see Seastrom v. Neways, Inc. (2007) 149 Cal.App.4th 1496, 1502), or whether Plaintiffs have the motive to litigate on behalf of all putative class members (see Classen v. Weller (1983) 145 Cal.App.3d 27, 45).

The main issue here is whether Plaintiffs have demonstrated that common questions of law or fact will likely predominate over individual ones for their overtime, meal/rest break, wage statement, and waiting time penalty claims. “The ‘ultimate question’ the element of predominance presents 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.’ [Citations.] The answer hinges on ‘whether the theory of recovery advanced by the proponents of certification is, as an analytical matter, likely to prove amenable to class treatment.’ [Citation.] A court must examine the allegations of the complaint and supporting declarations [citation] and consider whether the legal and factual issues they present are such that their resolution in a single class proceeding would be both desirable and feasible. ‘As a general rule if the defendant’s liability can be determined by facts common to all members of the class, a class will be certified even if the members must individually prove their damages.’ [Citations.]” (Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, 1021-1022.)

Here, Plaintiffs’ theory of recovery for the misclassification of Store Managers is based on certain uniform policies and practices of Defendant such as its policy of promoting from within, oversight of Store Managers by District Managers who visit the stores twice a month, a uniform training program for Store Managers called the Management Development Program or MDP, the use of standardized operations documents like checklists, planograms and corporate memoranda, and the use of software applications that project sales, and determine weekly tasks and staffing needs. Plaintiffs contend that by standardizing every aspect of its stores (including predetermining sets of tasks each day) and demanding that Store Managers spend as much time as needed to make a profit, Defendant’s uniform policies lead to the widespread de facto misclassification of Store Managers as exempt.

However, “[f]or class certification purposes,…[Plaintiffs are] required to present substantial evidence that proving both the existence of [Defendant’s] uniform policies and practices and the illegal effects of [Defendant’s] conduct could be accomplished efficiently and manageably within a class setting. [Citation.]” (Dailey v. Sears Roebuck and Co. (2013) 214 Cal.App.4th 974, 996, original italics.) The Court is not convinced that Plaintiffs have met their burden of proving that the illegal effects of Defendant’s policies can be accomplished within a class setting. The evidence of Defendant’s policies and practices does not foreclose the exercise of discretion by Store Managers or their delegation of routine tasks to subordinates. (See Marlo vs. United Parcel Service, Inc. (2010 9th Cir.) 639 F.3d 942, 948, citing Donovan v. Burger King Corp. (2d Cir. 1982) 675 F.2d 516, 521-522 [noting that the defendant’s detailed policies and procedures did not foreclose the exercise of discretion by employees].) Meanwhile, Defendant’s evidence in opposition to the motion supports the view that Store Managers retain considerable discretion and flexibility in carrying out policies related to the conditions of the stores, and that they exercise this discretion in different ways from store-to-store. Defendant’s declarations re: work duties rebut the generalized statements in Plaintiffs’ declarations that the “vast majority” of Store Managers’ time is spent on routine, non-managerial tasks. Defendant’s Day in the Life declarations suggest Store Managers have considerable flexibility in the ways they comply with Defendant’s uniform policies and guidelines, and therefore, the uniform policies do not have the effect of requiring Store Managers to engage primarily in non-exempt work.

For example, Plaintiffs argue that Defendant’s checklists dictate what tasks must be completed each day, and the supporting evidence includes a Daily Store Activity Tour document that lists various activities with boxes that can be checked off, as well as a “Front End Workload Efficiency Manager’s Guide” that also includes various checklists, such as “Cashiering Checklist,” Signing Shelves Checklist,” etc. However, nothing in these policies forecloses the discretion of Store Managers to delegate the tasks in the checklists, and Defendant submits evidence supporting the ability of Store Managers to delegate such manual work, depending on the circumstances of each store (e.g., more delegation in stores with higher volume and higher labor budgets). Notably, the checklists in the Front End Workload Efficiency Manager’s Guide repeatedly refer to monitoring the work of “associates.” Plaintiffs also contend that Defendant’s planograms strictly dictate product placement in the stores. However, many of Defendants’ declarants state that in addition to implementing the planograms, they make other independent decisions on items to stock in the store and how to place them in order to maximize sales.

Plaintiffs suggest that Defendant’s overall focus on profits predominantly results in Store Managers performing non-exempt work along with their associates. However, none of Plaintiffs’ declarants state that their performance of primarily routine, non-managerial tasks is the result of Defendant’s focus on profits. Meanwhile, as discussed above, many of Defendants’ declarants suggest that focusing on increased profitability actually causes them to exercise discretion regarding what items to order and how to place them in the stores in a way that is tailored to their neighborhood customer base.

As in Dailey, evidence of flexibility in applying allegedly uniform policies, if credited, can defeat class certification, and trial courts are permitted to credit one party’s evidence over the other’s in determining whether the requirements for class certification have been met. (See Dailey, supra, 214 Cal.App.4th at pp. 991, 996-997.) Here, between Plaintiffs’ mostly identical declarations and Defendant’s more detailed declarations (particularly the Day in the Life declarations), the Court credits Defendant’s.

The Court is mindful of the fact that the certification question generally does not ask whether an action is legally or factually meritorious. Yet, “whether common or individual questions predominate will often depend upon resolution of issues closely tied to the merits” (Brinker, supra, 53 Cal.4th at p. 1024), and when issues or evidence on the merits are “enmeshed” with the class action requirements, courts are permitted to conduct “closely circumscribed” inquiries into the merits at the certification stage as to “‘those aspects of the merits that affect the decisions essential’ to class certification. [Citation.]” (Ibid.) Here, the Court has attempted to narrowly focus on a flaw in the underlying premise of Plaintiffs’ theory that Defendant’s uniform policies and practices result in Store Managers primarily performing non-exempt work, and this analysis is consistent with the discussion in Dailey.

Because Plaintiffs’ claims for meal and rest period violations, wage statement violations, and waiting time penalties are derivative of their overtime/misclassification claim, class treatment is inappropriate for the same reasons. (See Dailey, supra, 214 Cal.App.4th at p. 1000, fn. 12.)

In the fifth cause of action for failure to reimburse expenses and/or prohibited cash bond, Plaintiffs allege that Defendant required Plaintiffs and the putative class to incur expenses related to Defendant’s business operations, including mileage for performing deliveries to other stores, but have not reimbursed them. Plaintiffs allege that this violates California Labor Code sections 406 and 2802 subdivision (a). Plaintiffs further allege that they were forced and/or brought to contribute to the capital and expenses of Defendant’s business which is legally a cash bond and which must be refunded by Defendant.

Plaintiffs argue this claim based on the legality of Defendant’s reimbursement policy does not require the review of any individualized issues. Plaintiffs add that the legality of the policy is in question because it permits reimbursement at a rate below the IRS standard. Defendant argues the reimbursement claim should not be certified because: Plaintiffs have identified only four individuals who allege unreimbursed mileage (defeating the numerosity requirement); the reimbursement policy allows for mileage reimbursement and Plaintiffs present no substantial evidence of a deviating practice (defeating the requirement that common issues of law or fact predominate); and (3) individualized inquiries will predominate on whether the employee incurred a reasonable and necessary business expense, whether the employee requested a reimbursement, whether the expense was not reimbursed, and whether any reimbursement did not cover the full expense.

The Court finds that Plaintiffs’ reimbursement claim is appropriate for class treatment. It is based on a uniform reimbursement policy that applies to all Store Managers, which satisfies the commonality and numerosity requirements regardless of how many putative class members were ultimately damaged by the policy. (See Hicks v. Kaufman & Broad Home Corp. (2001) 89 Cal.App.4th 908, 916 [class may be certified even if members must individually prove damages].) Whether the reimbursement policy is permissibly below the IRS standard rate goes to the merits of the claim. Regarding the reasonableness and Defendant’s knowledge of the expenses, Plaintiffs’ theory is the claims include mileage for performing deliveries to other stores and for bank deposits, which Defendant knows through bank deposit records and inter-store transfer reports.

In the sixth cause of action under the UCL, Plaintiffs incorporate the prior causes of action and seek equitable and statutory relief, including restitution, to stop Defendant’s alleged unfair, unlawful, and fraudulent business practices. To the extent the sixth cause of action’s allegations of unlawful business practices are derivative of the fifth cause of action for violation of Labor Code sections 406 and 2802 subdivision (a), the UCL claim is amenable to class treatment for the same reasons discussed above.

For all of these reasons, the motion for class certification is GRANTED IN PART as to the fifth and sixth causes of action, but DENIED as to the first, second, third, and fourth causes of action.