Case 5:18-cv-00388-TES Document 204 Filed 04/15/19 Page 1 of 9 IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF GEORGIA MACON DIVISION VC MACON GA, LLC, Plaintiff, v. Civil Action No. 5:18-cv-00388-TES VIRGINIA COLLEGE, LLC; and EDUCATION CORPORATION OF AMERICA, Defendants. MOTION FOR APPLICATION OF FEDERAL RULE OF CIVIL PROCEDURE 23 AND/OR FEDERAL RULE OF BANKRUPTCY PROCEDURE 7023 TO CLAIMANTS PROOF OF CLAIM Claimants Deborah Santos and Pamala Miller, on behalf of themselves and all other similarly situated class members make the within motion seeking application of Federal Rules of Civil Procedure ( FRCP, Rule 23, and Federal Rules of Bankruptcy Procedure ( FRBP, Rule 7023, to the extent FRBP are applicable to the receivership case, in order that class treatment may be applied to Claimants Proof of Claim through all stages of the receivership case, including claims resolution of class claims. 1 Claimants have submitted a Proof of Claim on behalf of the Class on the assumption that this Court will determined FRCP 23 and/or FRBP 7023 to be applicable and that this Court will 1 The Proof of Claim, attached hereto as Exhibit 1, is also submitted by Claimant Miller on behalf of the State of California pursuant to California s Private Attorneys General Act, Cal. Labor Code 2698 et seq. PAGA proceedings are representative proceedings brought on behalf of the State of California to redress violations committed by employers against their employees, who are referred to under PAGA statute as aggrieved employees. A PAGA action is not a class action and does not require class certification. Arias v. Superior Court, 46 Cal. 4th 969, 980-987, 209 P.3d 923, 929-934 (Cal. 2009. 1
Case 5:18-cv-00388-TES Document 204 Filed 04/15/19 Page 2 of 9 certify the proposed class and allow the class proof of claim filed in this case. See In re American Reserve Corp., 840 F.2d 487, 493 (7th Cir. 1998 ( It follows that there may be class proof of claims in bankruptcy. ; In re Charter Co., 876 F.2d 866, 873-876 (11th Cir. 1989 (allowing the filing of a class proof of claim. WHEREFORE, the Claimants respectfully request that the Court grant their Motion and apply class treatment to the attached Proof of Claim. This 15th day of April, 2019. Respectfully submitted, By: /s/ Julian A. Hammond Julian A. Hammond (*admitted pro hac vice CA State Bar No. 268489 HAMMONDLAW, P.C. 1829 Reisterstown Road, Suite 410 Baltimore, MD 21208 Tel: (310 601-6766 Fax: (310 295-2385 jhammond@hammondlawpc.com F. Bradford Wilson, Jr. (*local counsel Ga. State Bar No. 767975 ADAMS, HEMINGWAY, WILSON & RUTLEDGE, LLC 544 Mulberry Street, Suite 1000 P.O. Box 1956 Macon, GA 31202-1956 Office: (478 743-4601 Direct: (478 254-3635 Fax: (478 746-8215 Brad.wilson@adamshemingway.com 2
Case 5:18-cv-00388-TES Document 204 Filed 04/15/19 Page 3 of 9 MEMORANDUM OF POINTS AND AUTHORITIES Claimants Deborah Santos and Pamala Miller, on behalf of themselves and all other similarly situated class members ( Class Claimants, make the within motion seeking application of Federal Rules of Civil Procedure ( FRCP, Rule 23, and Federal Rules of Bankruptcy Procedure ( FRBP, Rule 7023, to the extent FRBP are applicable to the receivership case, in order that class treatment may be applied to Claimants Proof of Claim through all stages of the receivership case, including claims resolution of class claims. I. FACTUAL AND PROCEDURAL HISTORY A. Class Claims Claimants Santos and Miller worked as Adjunct Instructors at Defendants campuses in California during the Class Period (November 2014 through to November 2018. Claimant Santos was employed by Defendants from approximately October 2017 until approximately the end of November 2018 when Defendants closed their campuses and their assets were placed into receivership by the Order of this Court. Claimant Miller was employed until approximately August 2017. During the Class Period, Defendants paid Claimants Santos and Miller and other Class Claimants on an hourly basis. As a result, they and other Class Claimants were nonexempt employees under California law (see Industrial Wage Commission ( IWC Wage Order No. 4, 1(A(3(d 2 and were entitled to certain protections under California wage and hour laws, including the right to be paid at least at the minimum wage for all hours worked, and to receive off-duty rest and meal breaks, among other things. However, Defendants maintained common policies and practices that denied Class Claimants these protections. Specifically, Defendants compensated Class Claimants/Adjunct Instructors on an hourly basis for the hours of classroom instruction, but failed to pay them for 2 Under California law, employees are non-exempt if they are paid on an hourly basis. In order to be exempt under California law, among other things, employees must earn a monthly salary equivalent to no less than two (2 times the state minimum wage for full-time employment. IWC Wage Order No. 4, 1(A(3(d. Full-time employment is defined in [California] Labor Code Section 515 (c as 40 hours per week. Id. 3
Case 5:18-cv-00388-TES Document 204 Filed 04/15/19 Page 4 of 9 the many hours they spent working outside the classroom performing tasks required and/or expected of them by Defendants, in violation of California Labor Code 1194 and IWC Wage Order No. 4, 4. Defendants also maintained common policies and/or practices, including common job expectations, which denied Class Claimants off-duty meal periods in violation of California Labor Code 512 and IWC Wage Order No. 4, 11. For example, Defendants maintained a written policy prohibiting Adjunct Instructors from leaving campus during work hours, thus restricting Adjunct Instructors from taking meal periods that were truly off-duty. Defendants also failed to authorize and permit Class Claimants to take off-duty rest breaks in violation of California Labor Code 226.7 and IWC Wage Order No. 4, 12. Specifically, the nature of Adjunct Instructors duties and Defendants policies and/or practices were such that Adjunct Instructors had to remain in the classroom during classroom breaks to respond to students questions. As a result, when Adjunct Instructors taught a class that was 3.5 or longer on a day where they worked for 4 hours or more, and thus were entitled to a rest break, they were routinely not able to take off-duty rest breaks. Pursuant to Labor Code 226.7 and IWC Wage Order No. 11, 12 Defendants were required to pay Adjunct Instructors premium pay equivalent to one hour of their pay for each day on which they suffered a missed meal period or missed rest break. Under California law, premium pay for missed rest and meal breaks constitutes wages. As a result, Class Claimants are owed by Defendants unpaid wages in form of premium pay equivalent to one hour of employee s pay for each missed period and/or break. See Murphy v. Kenneth Cole Productions, Inc., 40 Cal. 4th 1094, 1108, 155 P.3d 284, 293 (Cal. 2007 (premium pay equivalent to one of employees pay constitutes wages. Additionally, Class Claimants were entitled to receive wage statements containing accurate information as to their net and gross wages earned, total hours worked, and applicable hourly rates pursuant to California Labor Code 226(a(1, (a(5, and (a(9. Defendants 4
Case 5:18-cv-00388-TES Document 204 Filed 04/15/19 Page 5 of 9 knowingly and willfully failed to issue wage statements to Class Claimants containing accurate entries for the above information, injuring them thereby and entitling them to statutory penalties from Defendants under subdivision (e of section 226(a. Finally, Class Claimants were also entitled to be reimbursed for all their necessarily incurred business expenses pursuant to California Labor Code 2802. Defendants required and/or expected Class Claimants to be generally available to students, thus requiring and/or expecting Class Claimants to maintain and use their personal cell phones for work. However, Defendants did not reimburse them for their cell phone expenses incurred in carrying out their job duties, and Class Claimants are owed reasonable reimbursement for these expenses. As a result of Defendants violations of the California Labor Code sections discussed above, Defendants engaged in unlawful and unfair business practices, in violation of California s Unfair Competition Law, Business & Professions Code 17200 et seq. ( UCL. See Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal. 4th 163, 180, 973 P.2d 527, 539-540 (Cal. 1999 (UCL borrows violations of other laws and treats them as unlawful practices that unfair competition law makes independently actionable. ; Id. at 544 (the word unfair [in UCL] means conduct that threatens an incipient violation of an antitrust law, or violates the policy or spirit of one of those laws because its effects are comparable to or the same as a violation of the law, or otherwise significantly threatens or harms competition.. Under UCL, Class Claimants are entitled to equitable restitution in the amount of unpaid wages and unreimbursed expenses for the four years preceding the filing of their Proof of Claim. Cal. Bus. & Prof. Code 17208; Blanks v. Seyfrath Shaw LLP, 171 Cal. App. 4th 336, 364, 89 Cal. Rptr. 3d 710, 731 (Cal. App. 2009 (UCL has a four-year statute of limitations. B. PAGA Claims California Private Attorneys General Act of 2004, California Labor Code 2698 et seq. ( PAGA gives aggrieved employees the right to bring a lawsuit for penalties based on violations of the California Labor Code and for unpaid wages based on violations of California 5
Case 5:18-cv-00388-TES Document 204 Filed 04/15/19 Page 6 of 9 Labor Code 558 (see Thurman v. Bayshore Transit Management, Inc., 203 Cal. App. 4th 1112, 1144-1145, 138 Cal. Rptr. 130, 145-147 (Cal. App. 2012 (penalties for each violation are in addition to an amount sufficient to recover underpaid wages as proxies or agents of the State. Cal. Labor Code 2699; Arias, 46 Cal. 4th at 986, 209 P.3d at 929-934. An aggrieved employee is defined by PAGA as any person who was employed by the alleged violator and against whom one or more of the alleged violations was committed. Cal. Labor Code 2699. Prior to commencing an action under PAGA, an aggrieved employee is required to sent notice to the employer of the intent to file such an action. Cal. Labor Code 2699.3. In or about February 2017, Claimant Miller sent a letter to the Defendants pursuant to Private Attorneys General Act of 2004, California Labor Code 2698 et seq. on behalf of herself and other aggrieved employees (at least some of whom are Class Claimants here informing Defendants of her intent to seek from Defendants civil penalties and penalties in form of wages pursuant to PAGA, based on the above-described violations. A true and correct copy of Claimant Miller s PAGA letter is attached as an exhibit to Claimants Proof of Claim. Pursuant to California Labor Code 2698 et seq. and 558, Claimant Miller then filed a representative PAGA lawsuit in California state court seeking civil penalties and penalties in form of wages. 3 Claimants now file a Proof of Claim on behalf of themselves, the Class, and the State of California seeking unpaid wages, statutory penalties, equitable restitution, and civil penalties. As set forth in the Proof of Claim, Claimant Santos seeks to represent Class Claimants. Claimant Miller also seeks to represent, as an agent, the State of California. /// /// 3 Claimant Miller s lawsuit against Defendant Virginia College styled Miller, et al. v. Virginia College, Case No. 37-2017-00026996-CU-OE-CTL (San Diego Super Cty. Ct. is currently pending in California state court, and is on appeal before the California Court of Appeal, Fourth Appellate District, Div. One, Case No. D073811. 6
Case 5:18-cv-00388-TES Document 204 Filed 04/15/19 Page 7 of 9 II. ARGUMENT The Court should exercise its discretion and apply FRCP 23 and/or FRBP 7023 to Claimants Proof of Claim. First, pursuant to FRCP 23, this Court should apply class treatment to the Proof of Claim because class treatment will aggregate claims of the Adjunct Instructors into one lawsuit thus avoiding the need for the filing of individual proofs of claim, and will achieve significant measure of judicial economy by lowering the costs of litigation. See General Tel. Co. v. Falcon, 457 U.S. 147, 148 (1982; Rhodes v. Cracker Barrel Old Country Store, Case No. 4:99-CV-217-HLM, 2002 U.S. Dist. LEXIS 25962, at *170 (11th Cir. Dec. 31, 2002. Class treatment is appropriate where claims of class members are base on common facts and theories, such that they may be resolved in one proceeding and multiple adjudication of the same issue may be avoided. Nation v. Winn-Dixie Stores, Inc., 95 F.R.D. 82, 85 (N.D. Ga. 1982. Second, this Circuit, along with the Third, Sixth, Seventh, and Ninth Circuits unequivocally allows class proofs of claim in bankruptcy proceedings, which are similar to receivership proceedings. See In re American Reserve Corp. See also In re Charter Co., 876 F.2d 866 (11th Cir. 1989; In re Spring Ford, Industries, Inc., Case No. 02-15015DWS, 2004 WL 231010, at *2 (Bankr. E.D. Pa. Jan 20, 2004 ( the Debtor concedes the overwhelming majority view that such claims are permissible in a bankruptcy case., citing In re American Reserve Corp. See also In re Charter Co., 876 F.2d 866 (11th Cir. 1989; In re Birting Fisheries, Inc., 92 F.3d 939, 940 (9th Cir. 1996; Reid v. White Motor Corp., 886 F.2d 1462 (6th Cir. 1989; In re First Interregional Equity Corp., 227 B.R. 358 (Bankr. N.J. 1998; In re First Alliance Mortgage Corp., 269 B.R. 428, 446 (C.D. Cal. 2001; Barnett v. Jamesway Corp (In re Jamesway Corp., Case No. 95-B-44821-JLG, 1997 WL 327105, at *6 (Bankr. S.D.N.Y. June 12, 1997 (discussing instances where a class proof of claim can further the important bankruptcy goals of martialing and addressing all claims against the Debtor in a single centralized proceeding. 7
Case 5:18-cv-00388-TES Document 204 Filed 04/15/19 Page 8 of 9 Although the right to a class action is not automatic, bankruptcy courts have granted class certification in a case where the common core of operative facts is the same for all claimants. In re ABMD Ltd., 439 B.R. 475, 490 (Bankr. S.D. Ohio 2010 (granting class certification in WARN action; In re Bill Heard Enterprises Inc., 400 B.R. 795, 801 (Bankr. N.D. Ala. 2009 (same; In re Protected Vehicles, Inc., 397 B.R. 339, 346 (Bankr. D.S.C. 2008 (same. Here, Class Claimants would benefit tremendously from having their claims aggregated and having their claims aggregated will achieve significant measure of judicial economy by lowering the costs of litigation. The common core of operative facts is the same for all Claimants and therefore lends itself to resolution in a single proceeding. Claimants Proof of Claim is brought as a result of Defendants violations of the above-referenced Labor Code provisions and applicable Wage Order, which also constitute a violation of the UCL, and seeks to recover appropriate relief to remedy these violations. Claimants Santos and Miller and Class Claimants they seek to represent were employed by Defendants at their California campuses as adjunct instructors and were non-exempt employees entitled to certain protections under the California Labor Code. Claimants bring their action individually and on behalf of all other similarly situated adjunct instructors employed by Defendants in California between approximately November 2014 and November 2018. Claimants seek damages, equitable restitution and statutory penalties in the amounts specified in the attached Proof of Claim. The attached Proof of Claim also asserts claims on behalf of Claimants and on behalf of the State of California under PAGA for the same violations of the California Labor Code and IWC Wage Order No. 4 as above. III. CONCLUSION For the reasons set forth above, Claimants Santos and Miller respectfully request that the Court apply FRCP 23 and/or FRBP 7023 to Claimants Proof of Claim and allow for class treatment. Claimant Miller also respectfully requests that the Court permit Claimants Proof of Claim to seek relief on behalf of the State of California. 8
Case 5:18-cv-00388-TES Document 204 Filed 04/15/19 Page 9 of 9 This 15th day of April, 2019. Respectfully submitted, By: _/s/ Julian A. Hammond Julian A Hammond (*admitted pro hac vice CA State Bar No. 268489 HAMMONDLAW, P.C. 1829 Reisterstown Road, Suite 410 Baltimore, MD 21208 Tel: (310 601-6766 Fax: (310 295-2385 jhammond@hammondlawpc.com F. Bradford Wilson, Jr. (*local counsel Ga. State Bar No. 767975 ADAMS, HEMINGWAY, WILSON & RUTLEDGE, LLC 544 Mulberry Street, Suite 1000 P.O. Box 1956 Macon, GA 31202-1956 Office: (478 743-4601 Direct: (478 254-3635 Fax: (478 746-8215 Brad.wilson@adamshemingway.com 9