Usw v. Conocophillips Company

FOR PUBLICATION UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT UNITED STEEL, PAPER & FORESTRY,  RUBBER, MANUFACTURING ENERGY, ALLIED INDUSTRIAL & SERVICE WORKERS INTERNATIONAL UNION, AFL-CIO, CLC, On behalf of its members employed by defendants; RAUDEL COVARRUBIAS, individually and on behalf of all similarly situated current and former No. 09-56578 employees; DAVID SIMMONS, individually and on behalf of all  D.C. No. 2:08-cv-02068-PSG- similarly situated current and FFM former employees; STEPHEN S. SWADER Sr., individually and on behalf of all similarly situated current and former employees, Plaintiffs-Appellants, v. CONOCOPHILLIPS COMPANY, Defendant-Appellee.  377 378 UNITED STEEL v. CONOCOPHILLIPS UNITED STEEL, PAPER & FORESTRY,  RUBBER, MANUFACTURING ENERGY, ALLIED INDUSTRIAL & SERVICE WORKERS INTERNATIONAL UNION, AFL-CIO, CLC, On behalf of its members employed by defendants; RAUDEL COVARRUBIAS, individually and on behalf of all similarly No. 09-56579 situated current and former employees; DAVID SIMMONS, D.C. No. individually and on behalf of all  2:08-cv-02068-PSG- similarly situated current and FFM former employees; STEPHEN S. OPINION SWADER Sr., individually and on behalf of all similarly situated current and former employees, Plaintiffs-Appellees, v. CONOCOPHILLIPS COMPANY, Defendant-Appellant.  Appeal from the United States District Court for the Central District of California Philip S. Gutierrez, District Judge, Presiding Argued and Submitted November 4, 2009—Pasadena, California Filed January 6, 2010 Before: Thomas G. Nelson, Jay S. Bybee, and Milan D. Smith, Jr., Circuit Judges. Opinion by Judge Bybee UNITED STEEL v. CONOCOPHILLIPS 381 COUNSEL Anne Richardson, Hadsell, Stormer, Keeny, Richardson & Renick, LLP, Pasadena, California, for plaintiffs-appellants- appellees Raudel Covarrubias, David Simmons, and Stephen S. Swader, Sr. Robert A. Cantore, Gilbert & Sackman, Inc., Los Angeles, California, for plaintiff-appellant-appellee United Steel, Paper & Forestry, Rubber, Manufacturing, Energy, Allied Industrial & Service Workers International Union, AFL-CIO, CLC. Rex S. Heinke, Akin Gump Strauss Hauer & Feld, LLP, Los Angeles, California, for defendant-appellant-appellee Cono- coPhillips Co. OPINION BYBEE, Circuit Judge: These consolidated appeals raise two issues: first, whether the district court abused its discretion when it denied plain- tiffs’ motion to certify a putative class out of concern that practical obstacles could potentially develop if plaintiffs’ legal theory were ultimately rejected; and second, whether the district court erred in remanding, in light of its certification decision, state law claims to state court for lack of subject matter jurisdiction. We hold that the district court abused its discretion when it assumed, for the purpose of Federal Rule of Civil Procedure 23 certification analysis and without any separate inquiry into the merits, that plaintiffs’ legal theory would fail. Accordingly, we reverse and remand for reconsid- eration of plaintiffs’ certification motion and dismiss as moot the appeal of the remand order. 382 UNITED STEEL v. CONOCOPHILLIPS I Defendant ConocoPhillips Company is an international oil company that operates oil refineries in Los Angeles,1 Santa Maria, and Rodeo, California. United Steel, Paper & Forestry, Rubber, Manufacturing, Energy, Allied Industrial & Service Workers International Union, AFL-CIO, CLC (“USW”) is a labor union that represents many of the employees who work at ConocoPhillips’ refineries. ConocoPhillips and USW are parties to a collective bargaining agreement that sets forth wages, hours, and working conditions for USW-represented employees at ConocoPhillips’ California refineries. On February 15, 2008, USW and representative plaintiffs David Simmons, Raudel Covarrubias, and Stephen Swader2 filed a class action complaint against ConocoPhillips and ten John Doe Defendants in Los Angeles Superior Court. The complaint sought “class-wide relief under California law for defendants’ breaches of their legal obligation to provide employees with unpaid, 30-minute meal periods, totally relieved of all duties, for every 5 hours of work.” The basic premise of plaintiffs’ complaint was that because operators cannot leave their units during their meal breaks and are sub- ject to interruptions to which they must respond, their meal periods are “on duty” within the meaning of California law.3 Plaintiffs sought both damages and injunctive relief. 1 ConocoPhillips’ Los Angeles refinery is composed of two linked facili- ties located approximately five miles apart in Carson and Wilmington. 2 The representative plaintiffs are various types of operators at the Los Angeles and Santa Maria ConocoPhillips refineries. No representative plaintiff is a laboratory employee, nor does any representative plaintiff work at the Rodeo refinery. 3 In order for an “on duty” meal period to be permissible under Califor- nia law, all three of the following conditions must be met: (1) the nature of the work must prevent the employee from being relieved of all duty during the meal period; (2) the employee and employer must have entered into a written agreement authorizing an on duty meal period; and (3) the UNITED STEEL v. CONOCOPHILLIPS 383 On March 27, 2008, ConocoPhillips removed the action to the United States District Court for the Central District of Cal- ifornia, citing the Class Action Fairness Act of 2005 (“CAFA”), Pub. L. No. 109-2, 119 Stat. 4 (codified at 28 U.S.C. §§ 1332(d), 1453, 1711-15), as the basis for federal subject matter jurisdiction. CAFA vests a district court with original jurisdiction over “a class action” where: (1) there are one-hundred or more putative class members; (2) at least one class member is a citizen of a state different from the state of any defendant; and (3) the aggregated amount in controversy exceeds $5 million, exclusive of costs and interest. 28 U.S.C. §§ 1332(d)(2), (5)(B), (6). In its notice of removal, Cono- coPhillips stated that “Plaintiffs, at the time this action was commenced, were citizens and residents of the State of Cali- fornia,” while ConocoPhillips, as a Delaware corporation with its principal place of business in Texas, was not a citizen of California under 28 U.S.C. § 1332(c)(1). Plaintiffs did not contest removal. After removal, the parties proceeded with discovery, and in early 2009, plaintiffs moved for class certification under Fed- eral Rule of Civil Procedure 23. The putative class encom- passed all former, current, and future non-exempt hourly employees of Defendant ConocoPhillips who, at any time since February 15, 2004, worked as an Operator written agreement must expressly state that the employee may, in writing, revoke the agreement at any time. Cal. Code Regs. tit. 8, § 11010, subd. 11(C); see also DLSE Opinion Letter 2002-09-04. The specifics of the labor dispute underlying plaintiffs’ suit are not rele- vant to the certification question at issue in this appeal. However, the gra- vamen of plaintiffs’ complaint is that because operators at ConocoPhillips’s California refineries must respond to their radios and to any audible alarms throughout their twelve-hour shifts, any meal breaks operators take are “on duty” under California law and must be compen- sated as such. 384 UNITED STEEL v. CONOCOPHILLIPS or in the laboratory on a shift schedule at a Cono- coPhillips refinery located in Los Angeles, Santa Maria, or Rodeo, California. On March 16, 2009, the district court denied class certifica- tion, but did so without prejudice. In this order, the district court held that although plaintiffs had demonstrated the exis- tence of three of the four Rule 23(a) prerequisites to class cer- tification — numerosity, commonality, and typicality, see Fed. R. Civ. P. 23(a)(1)-(3) — plaintiffs failed to satisfy the “adequate representation” requirement under Rule 23(a)(4). Specifically, the district court held that due to counterclaims then pending against USW, “USW’s interests [we]re not properly aligned with those of the class” and that because then-class counsel also represented USW, “it could not ade- quately represent the interests of the class.” After the March 2009 order, the representative plaintiffs obtained new counsel unrelated to USW, USW successfully moved for Rule 12(b)(6) dismissal of all pending counter- claims against it, and plaintiffs renewed their motion for class certification under Rule 23. In an order dated June 11, 2009, the district court again denied class certification. The district court held that plaintiffs had satisfied all four requirements of Rule 23(a), but failed to satisfy any of the three provisions in Rule 23(b).4 The court held that although plaintiffs had relied on both Rule 23(b)(2) and Rule 23(b)(3) in support of class certification, plaintiffs had not carried their burden of satisfy- ing either of these provisions. With respect to Rule 23(b)(3), the so-called “predominance” requirement, the district court reasoned that “if Plaintiffs’ ‘on duty’ theory is rejected . . . the Court will be faced with a case . . . requiring individualized trials on each class member’s meal period claims,” and “a 4 Although a putative class must satisfy all four requirements of Rule 23(a) to achieve certification, the three provisions of Rule 23(b) are dis- junctive: a class can be certified where it satisfies only one Rule 23(b) requirement. UNITED STEEL v. CONOCOPHILLIPS 385 class action w[ould] not be the superior method of resolving this suit.” The court ultimately held that “this problem . . . is an insurmountable barrier to class certification,” and therefore “decline[d] to certify the class under Rule 23(b)(3).” The same day it issued the order denying certification, the district court remanded this action to Los Angeles Superior Court. The district court explained that “district courts are split on the issue” of whether remand is required after denial of class certification and noted that “[t]he Ninth Circuit has never addressed this question,” before ultimately concluding: In the instant case there is no “reasonably foresee- able possibility” that a class will be certified, given that Plaintiffs have brought two unsuccessful certifi- cation motions and that insurmountable problems preclude certification under Rule 23(b)(3). The Court is persuaded by the reasoning of these authori- ties: a determination that class certification is not a “reasonably foreseeable possibility” is not a post- removal change in jurisdictional facts, but rather is equivalent to a finding that jurisdiction never existed under CAFA in the first place. Accordingly, CAFA does not provide a basis for jurisdiction over this action. (Internal citations omitted). Having held that CAFA did not provide subject matter jurisdiction, the district court then rejected any other possible bases for jurisdiction, including supplemental jurisdiction and diversity jurisdiction. Finding no subject matter jurisdiction over this case, the district court remanded to Los Angeles Superior Court.5 5 After the district court remanded, plaintiffs’ Case Management State- ments in state court continued to assert that this case was a class action, indicated that class certification would be sought, and sought class discov- 386 UNITED STEEL v. CONOCOPHILLIPS Plaintiffs timely petitioned for permission to appeal the June 2009 order denying class certification, and ConocoPhil- lips timely petitioned for permission to appeal the remand order. On September 30, 2009, this court granted both parties’ petitions to appeal. We reverse and remand in plaintiffs’ appeal of the order denying certification and dismiss as moot ConocoPhillips’ appeal of the order remanding this case to state court.6 II [1] Federal Rule of Civil Procedure 23, which governs class certification, contains two distinct sets of requirements. Rule 23(a) outlines four requirements, all of which must be met for class certification: (1) the class must be so numerous that join- der of all members is impracticable; (2) there must be ques- tions of law or fact common to the class; (3) the claims or defenses of the class representatives must be typical of the claims or defenses of the class; and (4) the class representa- ery. In response to plaintiffs’ filings, ConocoPhillips again removed to dis- trict court under CAFA. Plaintiffs filed a motion for remand, asserting that because the district court had held that class certification was not reason- ably possible, there could be no CAFA jurisdiction. The district court ulti- mately granted plaintiffs’ remand motion, holding that ConocoPhillips failed to present new facts or events sufficient to justify its second removal attempt. 6 CAFA imposes strict deadlines for the rendering of judgment by Courts of Appeals. Under 28 U.S.C. § 1453(c)(2), “[i]f the court of appeals accepts an appeal under paragraph (1), the court shall complete all action on such appeal, including rendering judgment, not later than 60 days after the date on which such appeal was filed, unless an extension is granted under paragraph (3)” (emphasis added). Paragraph (3) provides that “[t]he court of appeals may grant an extension of the 60-day period described in paragraph (2) if — (A) all parties to the proceeding agree to such extension, for any period of time; or (B) such extension is for good cause shown and in the interests of justice, for a period not to exceed 10 days.” Id. § 1453(c)(3). Both parties graciously agreed to an extension in this case, and we grant an extension to the filing of this opinion. UNITED STEEL v. CONOCOPHILLIPS 387 tives must fairly and adequately protect the interests of all members of the class. Fed. R. Civ. P. 23(a). The four require- ments of Rule 23(a) are commonly referred to as “numerosi- ty,” “commonality,” “typicality,” and “adequacy of representation” (or just “adequacy”), respectively. See, e.g., Rodriguez v. Hayes, 578 F.3d 1032, 1047-51 (9th Cir. 2009). Where a putative class satisfies all four requirements of Rule 23(a), it still must meet at least one of three additional requirements outlined in Rule 23(b) in order to be eligible for certification. Rule 23(b) provides that [a] class action may be maintained if Rule 23(a) is satisfied and if: (1) prosecuting separate actions by or against indi- vidual class members would create a risk of: (A) inconsistent or varying adjudications with respect to individual class members that would establish incompatible standards of conduct for the party opposing the class; or (B) adjudications with respect to individual class members that, as a practical matter, would be dispo- sitive of the interests of the other members not par- ties to the individual adjudications or would substantially impair or impede their ability to protect their interests; (2) the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declara- tory relief is appropriate respecting the class as a whole; or (3) the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and 388 UNITED STEEL v. CONOCOPHILLIPS that a class action is superior to other available meth- ods for fairly and efficiently adjudicating the contro- versy. The matters pertinent to these findings include: (A) the class members’ interests in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concern- ing the controversy already begun by or against class members; (C) the desirability or undesirability of concentrat- ing the litigation of the claims in the particular forum; and (D) the likely difficulties in managing a class action. Fed. R. Civ. P. 23(b). The requirement outlined in Rule 23(b)(3) is generally referred to as “predominance” and is the focus of plaintiffs’ appeal.7 The party seeking class certification bears the burden of demonstrating that the requirements of Rules 23(a) and (b) are met. See Zinser v. Accufix Research Inst., Inc., 253 F.3d 1180, 1186 (9th Cir. 2001). Rule 23(b) states: A class action may be maintained if Rule 23(a) is satisfied and if . . . (3) the court finds that the ques- tions of law or fact common to class members pre- 7 The district court held that although plaintiffs had satisfied all four Rule 23(a) requirements, they did not establish an entitlement to certifica- tion under Rule 23(b)(2) or (3). Plaintiffs did not argue that they had satis- fied Rule 23(b)(1). On this appeal, plaintiffs have disavowed any reliance on Rule 23(b)(2) and argue only that the district court erred in holding that plaintiffs did not satisfy Rule 23(b)(3). UNITED STEEL v. CONOCOPHILLIPS 389 dominate over any questions affecting only individual members, and that a class action is supe- rior to other available methods for fairly and effi- ciently adjudicating the controversy. . . . We review both the ultimate decision whether to certify a class and the underlying determination whether the predomi- nance requirement of Rule 23(b)(3) has been satisfied for abuse of discretion. See Zinser, 253 F.3d at 1186 (class certi- fication generally), 1192 (predominance). In holding that Rule 23(b)(3) posed an “insurmountable barrier to class certification” in this case, the district court rea- soned: Defendant correctly points out that if Plaintiffs’ “on duty” theory of liability fails, then common ques- tions will no longer predominate over individual ones. In other words, if it is ultimately determined that (1) class members’ meal periods were not “on duty” or, alternatively, that (2) the conditions prereq- uisite to a lawful “on duty” meal period were satis- fied, then in order to establish Defendant’s liability, Plaintiffs will need to show that they actually missed meal breaks. The district court then stated that it appeared that “the exis- tence of a uniform policy as to the availability of a meal period could be proved on a classwide basis . . . .” However, in the district court’s view, “there c[ould] be no assurances that [plaintiffs] w[ould] prevail on [their ‘on duty’] theory.” And if plaintiffs did not prevail on this theory, the district court reasoned, the inquiry would then shift to whether plain- tiffs actually missed meal breaks, and “the Court w[ould] be faced with a case . . . requiring individualized trials on each class member’s meal period claims,” thus making “a class action . . . not . . . the superior method of resolving this suit.” 390 UNITED STEEL v. CONOCOPHILLIPS As support for its conclusion that the possibility of numer- ous future mini-trials proved “an insurmountable barrier to class certification” under Rule 23(b)(3), the district court quoted an Eleventh Circuit decision, Andrews v. American Telephone & Telegraph Co., 95 F.3d 1014, 1023 (11th Cir. 1996), which in turn quoted a decision by the Fourth Circuit, Windham v. American Brands, Inc., 565 F.2d 59, 70 (4th Cir. 1977), stating: “[A] district court should not decline to certify a class because it fears that insurmountable problems may later appear. But where the court finds, on the basis of sub- stantial evidence as here, that there are serious problems now appearing, it should not certify the class merely on the assur- ance of counsel that some solution will be found.” (alteration in district court order). “We limit our [certification] review to whether the district court correctly selected and applied Rule 23’s criteria. An abuse of discretion occurs when the district court, in making a discretionary ruling, relies upon an improper factor, omits consideration of a factor entitled to substantial weight, or mulls the correct mix of factors but makes a clear error of judgment in assaying them.” Parra v. Bashas’, Inc., 536 F.3d 975, 977-78 (9th Cir. 2008) (internal quotation marks and citation omitted). Plaintiffs’ basic argument is that the district court abused its discretion by declining certification based on the possibility that plaintiffs would not prevail on the merits on their “on duty” theory. We agree. [2] Critically, the district court did not hold that plaintiffs’ actual legal theory (what the district court referred to as “Plaintiffs’ ‘on duty’ theory of liability”) was one in which common issues of law or fact did not predominate over indi- vidual questions. Instead, the district court treated plaintiffs’ actual legal theory as all but beside the point, holding that because “there can be no assurances that [plaintiffs] w[ould] prevail on this theory,” (emphasis added), the district court’s predominance inquiry would instead focus on the question whether plaintiffs “actually missed meal breaks,” an admit- UNITED STEEL v. CONOCOPHILLIPS 391 tedly individualized inquiry. By refusing to analyze plaintiffs’ “on duty” argument as the basis for its predominance inquiry because “there c[ould] be no assurances that they w[ould] prevail on this theory,” the district court ignored Ninth Circuit precedent and ultimately abused its discretion. [3] “In determining the propriety of a class action, the ques- tion is not whether the plaintiff or plaintiffs have stated a cause of action or will prevail on the merits, but rather whether the requirements of Rule 23 are met[,]” and “nothing in either the language or history of Rule 23 . . . gives a court any authority to conduct a preliminary inquiry into the merits of a suit in order to determine whether it may be maintained as a class action.” Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 177-78 (1974) (quotation marks and citation omitted). Although certification inquiries such as commonality, typical- ity, and predominance might properly call for some substan- tive inquiry, “[t]he court may not go so far . . . as to judge the validity of these claims.” Staton v. Boeing Co., 327 F.3d 938, 954 (9th Cir. 2003). “[N]either the possibility that a plaintiff will be unable to prove his allegations, nor the possibility that the later course of the suit might unforeseeably prove the orig- inal decision to certify the class wrong, is a basis for declining to certify a class which apparently satisfies [Rule 23].” Blac- kie v. Barrack, 524 F.2d 891, 901 (9th Cir. 1975). [4] Here, the district court not only “judge[d] the validity” of plaintiffs’ “on duty” claims, it did so using a nearly insur- mountable standard, concluding that merely because it was not assured that plaintiffs would prevail on their primary legal theory, that theory was not the appropriate basis for the pre- dominance inquiry. But a court can never be assured that a plaintiff will prevail on a given legal theory prior to a disposi- tive ruling on the merits, and a full inquiry into the merits of a putative class’s legal claims is precisely what both the Supreme Court and we have cautioned is not appropriate for a Rule 23 certification inquiry. See Eisen, 417 U.S. at 177-78; Cummings v. Connell, 316 F.3d 886, 896 (9th Cir. 2003) (not- 392 UNITED STEEL v. CONOCOPHILLIPS ing that “this circuit does not favor denial of class certification on the basis of speculative conflicts”); Staton, 327 F.3d at 954; Moore v. Hughes Helicopters, Inc., 708 F.2d 475, 480 (9th Cir. 1983) (holding that “it is improper to advance a deci- sion on the merits to the class certification stage”). The only legal authority cited by the district court for its decision to ignore plaintiffs’ “on duty” legal theory in its pre- dominance analysis was the Eleventh Circuit’s decision in Andrews v. American Telephone & Telegraph Co., 95 F.3d 1014. We do not think Andrews bears the weight assigned it by the district court. In Andrews, a district court in Georgia certified two classes totaling several million members in liti- gation raising legal claims premised on the gaming laws of all fifty states and involving telephone calls to “hundreds of widely differing 900-number programs.” Id. at 1023. The Eleventh Circuit held that the district court abused its discre- tion in certifying these classes due to the fact that the district court would have to “try millions of small claims,” id., citing a Fourth Circuit case from 1977 for the proposition that “while the district court should not decline to certify a class because it fears that insurmountable problems may later appear, if the court finds that there are serious problems now appearing, it should not certify the class merely on the assur- ance that some solution will be found.” Id. (internal quotation marks, ellipses, and citation omitted). Andrews is simply nothing like this case: in Andrews, the plaintiffs’ own legal theory required millions of mini-trials, a clear case of “serious problems now appearing,” while in this case the prospect of mini-trials would only appear if plaintiffs’ legal theory were actually rejected on its merits, a clear case of a “problem[ that] may later appear.” [5] Moreover, a district court retains the flexibility to address problems with a certified class as they arise, including the ability to decertify. “Even after a certification order is entered, the judge remains free to modify it in the light of sub- sequent developments in the litigation.” Gen. Tel. Co. of the UNITED STEEL v. CONOCOPHILLIPS 393 Sw. v. Falcon, 457 U.S. 147, 160 (1982); see also Rodriguez v. West Publ’g Corp., 563 F.3d 948, 966 (9th Cir. 2009) (“A district court may decertify a class at any time.”); Cummings, 316 F.3d at 896 (finding “the district court’s approach [to be] entirely appropriate” where the court determined that a poten- tial class “conflict was too speculative at the time [of the cer- tification motion] to prevent finding the named plaintiffs to be adequate representatives,” but “remained willing to reconsider and decertify the class if . . . there was evidence of an actual conflict”); Armstrong v. Davis, 275 F.3d 849, 871 n.28 (9th Cir. 2001) (“Federal Rule of Civil Procedure 23 provides dis- trict courts with broad discretion to determine whether a class should be certified, and to revisit that certification throughout the legal proceedings before the court.”). What a district court may not do is to assume, arguendo, that problems will arise, and decline to certify the class on the basis of a mere potenti- ality that may or may not be realized. If, on remand, the dis- trict court certifies the class and plaintiffs’ “on duty” legal theory is ultimately rejected, the district court can revisit its certification decision at that time. See Cummings, 316 F.3d at 896. III [6] We remand to the district court for reconsideration of plaintiffs’ motion for class certification in light of our deci- sion. With respect to the proceedings on remand, we note that “[w]hile the court may not put the plaintiff[s] to preliminary proof of [their] claim[s], it does require sufficient information to form a reasonable judgment,” and “may request the parties to supplement the pleadings with sufficient material to allow an informed judgment on each of the Rule[ 23] requirements.” Blackie, 524 F.2d at 901 n.17. Because we find the district court abused its discretion in its order denying certification, we need not address the issue raised by ConocoPhillips’ appeal. 394 UNITED STEEL v. CONOCOPHILLIPS The judgment in No. 09-56578 is REVERSED; the appeal in No. 09-56579 is DISMISSED AS MOOT. The parties shall bear their own costs on appeal.