McCarty v. SMG Holdings, I, LLC

Background

The action alleges violations of California employment laws by SMG Holdings, I, LLC, SMG Holdings II, LLC, and SMG. Named plaintiffs Shawn McCarty, Fabian Guerrero, and David Babcock moved for class certification under Federal Rule of Civil Procedure 23. They proposed two location-based classes—one for San Francisco and one for Stockton—and twelve related subclasses concerning rounding, meal periods, rest breaks, cell-phone reimbursement, wage statements, and waiting-time claims.

The proposed class claims covered eight theories: failure to provide meal periods; failure to provide rest breaks; failure to pay overtime; failure to pay minimum wages; failure to pay all wages due to employees who quit; failure to provide accurate itemized wage statements; failure to reimburse necessary business expenses; and violation of California’s Unfair Competition Law.

Court’s Analysis

Under Rule 23, plaintiffs seeking class certification must prove numerosity, commonality, typicality, and adequate representation, as well as predominance and superiority under Rule 23(b)(3). Numerosity asks whether the proposed class is so large that joining every member in one lawsuit would be impractical. Commonality asks whether the case presents questions capable of producing common answers. Predominance asks whether common questions outweigh individual ones.

The court held that the plaintiffs did not establish numerosity for any of the twelve proposed subclasses. Their motion did not state how many people belonged to each subclass, and the plaintiffs appeared to lack that information. The court said this failure alone required denial of certification of the subclasses.

The court also found problems with commonality and predominance. For the rest-break claims, the plaintiffs relied mainly on written or verbal policies but did not provide sufficient evidence showing that those policies were implemented unlawfully in practice. The court found similar deficiencies in the rounding claims. It said the plaintiffs did not show that the legality of the rounding practice, or any alleged grace-period practice, could be resolved for the class in one decision.

For the cell-phone reimbursement claims, the court found that the plaintiffs devoted little argument to certification and cited no supporting evidence in their motion. The named plaintiffs’ declarations described supervisors contacting them about work on their personal phones, but the court found that evidence anecdotal and uncertain rather than significant proof of a common unlawful practice.

The court acknowledged that time records showing noncompliant meal periods could create a rebuttable presumption of meal-period violations. It nevertheless found that individual issues prevented class certification. In San Francisco, union and nonunion employees were subject to different meal-period arrangements, and managers were responsible for ensuring that employees took breaks. In Stockton, employees worked at five locations, and the record did not adequately show how meal-period waiver forms were used. The court concluded that questions about managers’ actions, union status, applicable policies, timekeeping methods, and handwritten records would require individualized inquiries.

The plaintiffs described their wage-statement and unfair-competition claims as derivative of the other claims and sought certification only if the underlying claims were certified. Because the court denied certification of the underlying claims, it found certification of the derivative claims unwarranted as well. The court declined to discuss the remaining Rule 23 factors because the issues already identified were sufficient to deny the request in its entirety.

Disposition

The court denied class certification. It re-opened the case, set a jury trial on the plaintiffs’ individual claims for November 28, 2022, at 9:00 a.m., and set a pretrial conference for October 27, 2022, at 1:30 p.m.