LOS ANGELES — Gruma Corp. has agreed to pay $5 million to settle a class-action lawsuit involving distributors and delivery drivers. The US District Court for the Central District of California on July 1 approved the settlement between Gruma and plaintiff Citywide Consultants & Food Management, LLC, which acted on behalf of nearly 900 distributors/delivery drivers who contracted with Gruma from March 26, 2015, through March 5, 2020.
The lawsuit involved agreements that distributors were required to sign saying they would agree to buy products from Gruma and resell them to certain retailers, including chain stores. The distributors, who were classified as independent contractors under the agreement, contracted through Citywide.
Gruma agreed to pay distributors the difference between the price distributors paid Gruma and the price the chain stores negotiated with Gruma. In the lawsuit, Citywide made antitrust claims based on California’s Cartwright Act, which prohibits two or more people from keeping the price of “such article, commodity or transportation at a fixed or graduated figure.” Citywide contended that fixing the prices distributors may charge chain stores constitutes resale price maintenance or vertical price-fixing in violation of the Cartwright Act.
Citywide retained Jon M. Riddle, PhD, an economist who analyzed the differences between Gruma’s distributors’ profits and other grocery distributors’ profits whose prices were not fixed.
The lawsuit also involved wage and hour claims associated with Gruma’s classification of the distributors as independent contractors. The claims included minimum wage, overtime, meal breaks, rest breaks, deductions from wages and unreimbursed expenses. Citywide claimed Gruma failed to pay overtime, conducted unlawful wage deductions and failed to provide meal periods, rest periods, paid sick leave, reimbursements and itemized wage statements.
The agreement contained a class-action waiver and a provision compelling arbitration of any disputes between Gruma and the distributors under the Federal Arbitration Act. Citywide said the distributors were exempt from the arbitration mandate because the Federal Arbitration Act excludes transportation workers engaged in interstate commerce.
Gruma said the exemption applied because the distributors did not cross state lines when making deliveries and that interstate delivery of goods was not the distributors’ primary responsibility. Gruma also said the contract was signed with Citywide, an entity and not an individual or worker engaged in interstate commerce. Citywide stated that some of Gruma’s products are manufactured in Mexico, which triggered the interstate commerce exemption, and that the definition of worker included anyone who works for an employer.