Wednesday, November 25, 2009

Central District Grants Class Certification of Nationwide Internet Pay-Per-Click Advertising Action: Menagerie Prods. v. Citysearch

On November 9, 2009, Judge Christina A. Snyder of the Central District granted in part plaintiff’s motion to certify a nation-wide pay-per-click advertising class action in Menagerie Prods. v. Citysearch, 2009 U.S. Dist. LEXIS 108768 (C.D. Cal. Nov. 9, 2009). Plaintiffs’ complaint alleged various claims for breach of contract and unfair and deceptive business practices based on defendant Citysearch’s alleged systemic practice of billing clients for fraudulent “clicks” on prepaid internet advertisements purchased through defendant on a per-click basis. See id., at 11-12.

With regard to plaintiff’s’ breach of contract claim the Court concluded that common issues predominated because plaintiffs’ claim was predicated upon a standard form contract used by defendant as to all advertisers, and that to the extent necessary, any issues regarding interpretation would be based on common representations made by defendant on its website. See Citysearch, 2009 U.S. Dist. LEXIS 108768, at 36-37. Similarly, the Court also concluded that common issues predominated as to plaintiffs’ claim for breach of the implied covenant of good faith and fair dealing because “the alleged breach of contract--namely failing to filter and otherwise monitor for click fraud--if proven, is objectively unreasonable conduct that can be established without resort to individualized proof.” See id., at 38-41.

However, the Court split on plaintiffs’ claims under the UCL. With regard to plaintiff’s claims under the fraudulent prong, the court concluded that common issues predominated because defendant uniformly failed to disclose that it would charge clients for fraudulent clicks, and that, post Tobacco II, the defendant's conduct must be adjudicated under the objective "reasonable consumer" standard rather than by examining the individual circumstances of each class member:
The Court agrees with plaintiffs that common issues predominate with regard to plaintiffs' claim of a common classwide omission under the "fraudulent" prong of the UCL. See Day, 63 Cal. App. 4th at 332-334 (finding defendant liable for failing to disclose material information to all class members under the "fraudulent" prong of the UCL). This UCL claim will be adjudicated under the "reasonable consumer" standard rather than by examining the individual circumstances of each plaintiff. The "reasonable consumer" standard requires plaintiffs to "show that members of the public are likely to be deceived." Williams, 523 F.3d at 938. Here, the "focus is on the defendant's conduct, rather than the plaintiff's damages." In re Tobacco II Cases, 46 Cal. 4th at 312, 320 ("relief under the UCL is available without individualized proof of deception, reliance and injury"). Because the UCL claim arises out of Citysearch's common course of conduct towards all class members, and the "reasonable consumer" standard is employed to adjudicate the claim, the Court finds that predominance prong is met with regards to plaintiffs' claim under the "fraudulent" prong of the UCL.
Citysearch, 2009 U.S. Dist. LEXIS 108768, at 44-45.

With regard to plaintiffs’ claims under the unfair prong, however, the Court concluded that common issues did not predominate.  As reasoned by the Court, the requisite unfairness balancing test (which involves an examination of the practice's impact on its alleged victim, balanced against the reasons, justifications and motives of the alleged wrongdoer), would entail individualized inquiry into each class member’s expectations about the challenged business practice to determine the extent of harm. See id., at 48.

Finally, the Court concluded that certification of nationwide contract and UCL claims was appropriate insofar as (1) all versions of the contract between the class and Citysearch in force during the class period contain a choice of law clause stating that California law governs the contract, and (2) defendant’s challenged conduct originated and emanated from California. See id., at 49-52.

Monday, November 23, 2009

Second District Issues New UCL Standing Opinion re Claims for Permanent Injunctive Relief: Dowell v. Pacesetter, Inc.

In Dowell v. Pacesetter, Inc., __ Cal. 4th __ (2009), the CAP held that the trial court did not abuse its discretion in denying a demand by plaintiff St. Jude to permanently enjoin a competitor’s (“Biosense”) use of a non-compete clause by way of the UCL. Although the non-compete clauses violated California law, giving rise to a violation of Bus. & Prof. 17200, the Court concluded that imposition of a permanent injunction precluding use of the challenged non-compete clause would impact all affected employees (rather than just the 3 former Biosense employees before the court), and therefore, require satisfaction of standing requirements and certification of a class. See Slip Opinion, at 22-26.

As noted by the CAP, the trial court declined to issue a permanent injunction with respect to the agreements involving two of the individual employee plaintiffs because the noncompete clauses had already expired by the time of the court‘s ruling and any such relief would have been moot. See id., at 24. Based on this fact “[t]he permanent injunction that St. Jude otherwise sought with respect to all agreements used by Biosense in California would unquestionably affect agreements with persons not before the trial court and would involve representative claims or relief on behalf of others.” See id.

The CAP reasoned that St. Jude could not meet 17204 standing requirements because, even if it were assumed litigation costs were sufficient to establish injury in fact requirements under applicable law, St. Jude failed to establish injury in fact beyond those employees who were before the court:
Even if such injuries may arguably have been sufficient were St. Jude merely seeking to obtain a permanent injunction with respect to three employees, St. Jude sought an injunction that went well beyond the agreements with these three individuals. St. Jude never offered to produce evidence that it expended resources in connection with Biosense‘s alleged use of the same or similar agreements with other employees whom St. Jude considered employing.
 See id., at 25.

Thus, in the present context, Section 17204 standing was conditioned on the prospective employer (St. Jude) establishing a showing of injury-in-fact which encompassed prospective employees who arguably would be covered by the permanent injunction that was sought.

Friday, November 20, 2009

Second District Holds Class Counsel’s Obligation to the Class Extends to Enforcement of Judgment Against Insolvent Defendant in Barboza v. West Coast Digital GSM, Inc

On November 19, 2009, the Second District (Division 4) issued an interesting opinion relating to class counsel’s post judgment obligations to the class when the defendant is essentially judgment proof. The opinion, Barboza v. West Coast Digital GSM, Inc., __ Cal. App. 4th __ (2009), involved somewhat unique facts, as class counsel was able to obtain a stipulated default judgment on behalf of the class specifically because the defendant had ceased operations, sold its assets to a third party, and stated its intent to file for bankruptcy. See Slip Opinion, at 4. An issue arose, however, when class counsel sought approval of the proposed class notice, which advised the class that class counsel would not be taking further steps to enforce the judgment. See id., at 4-5. The trial court denied approval, concluding that class counsel’s obligations to the class included a duty to actually enforce the judgment. See id., at 5.

The CAP agreed. The Court reasoned that unlike traditional single party litigation, class litigation, and specifically the element of adequacy, requires that the named plaintiff retain counsel that will adequately represent the interests of the class as a whole. See id., at 7. As explained by the Court, the fiduciary duty owed to the class under standards of adequacy does not end at judgment, but extends in scope to all stages of the litigation where class issues are implicated. See id., at 7-8. Moreover, the Court noted that class counsel’s position was deemed to rest upon an inherent conflict, as class certification was achieved based on the principle that individual claims were too small to justify individual actions, but by seeking to abandon the case at judgment, class counsel would effectively strand class members with an aggregated, class-wide judgment that no individual class member could enforce. See id. at 8.

In short, Barboza is a good example of the importance of evaluating cases thoroughly prior to certification and being selective in the type of class cases counsel elects to take on. However, in fairness to counsel in this case, the risk of having a case turn south on you post certification is a scenario that one cannot always foresee. While Barboza confirms that class counsel’s duty extends to enforcement of the class judgment against an insolvent defendant, the opinion largely leaves unresolved the ultimate question regarding the scope of that duty. At the close of its opinion, the Court proposes one potential resolution: associating in counsel experienced in enforcing judgment (at the expense of the class), and if unsuccessful, moving the Court to be relieved as class counsel.

Thursday, November 19, 2009

Eastern District Denies Request to Decertify Class in Cartwright v. Viking Industries

On November 17, 2009, the Court in Cartwright v. Viking Indus., 2009 U.S. Dist. LEXIS 107066 (E.D. Cal., 2009) issued an order denying a request to decertify a class composed of California residential property owners having a specific model of defendant’s windows installed in their homes.

The defendant’s decertification request, which was couched in a motion for reconsideration, claimed that “it was clear error (1) to rely on Viking's lifetime warranty and associated marketing to support certification of fraud claims by subsequent owners; (2) to adopt a presumption of reliance with respect to plaintiffs' UCL, CLRA, and fraud claims; and (3) to accept plaintiffs' theory of defect as a sufficient basis for certification.” See id., at 4. As for the first and second argument, the Court rejected the defendant’s position regarding certification of the UCL, CLRA, and fraud claims on the grounds that allegations and evidence of concealment presented common issues with regard to causation:
With respect to defendant's first and second arguments, the court notes that, contrary to defendant's assertion, the court did not rely solely on the lifetime warranty and associated marketing in finding that common issues of law and fact predominated. Rather, the court emphasized plaintiffs' allegations and supporting evidence that defendant fraudulently concealed the defective nature of the window products in order to induce plaintiffs and class members to purchase them. This allegation of non-disclosure applied to all owners, original and subsequent. The court concluded that plaintiffs' allegations of fraudulent concealment satisfied the predominance requirement because the common question of the materiality of the non-disclosed defects may establish common causation. Further, the court relied upon various California and federal court decisions that supported this conclusion. While defendant may seek to distinguish these cases and may disagree with the court's interpretation, it has failed to demonstrate that the court committed clear error.
See Cartwright, 2009 U.S. Dist. LEXIS 107066, at 4-5.

The opinion is noteworthy, as it reflects ongoing efforts of the defense bar to lump certification of UCL claims as being on par with common law fraud and CLRA – both of which involve an element of reliance that must be established by members of the putative class. Of course, the element of reliance is not even a component of absent class members’ UCL claim. This position has been rejected by the California Supreme Court, which held that the “may have been acquired” language of Section 17203 “has led courts repeatedly and consistently to hold that relief under the UCL is available without individualized proof of deception, reliance and injury.” See Tobacco II, 46 Cal. 4th 298, 320 (2009) (reasoning that “to hold that the absent class members on whose behalf a private UCL action is prosecuted must show on an individualized basis that they have ‘lost money or property as a result of the unfair competition’ (§ 17204) would conflict with the language in section 17203 authorizing broader relief—the ‘may have been acquired’ language—and implicitly overrule a fundamental holding in our previous decisions, including Fletcher, Bank of the West and Committee on Children's Television.”).

The Court did not discuss this distinction, which out of fairness was likely due to the fact the Court’s primary concern involved the defendant’s failure to undertake any effort to couch its motion under the requirements of FRCP Rule 59. See Cartwright, 2009 U.S. Dist. LEXIS 107066, at 7 (“Because defendant's motion is based upon the same factual and legal arguments previously addressed in the court's September 14 order, there is insufficient bases for the court to reconsider class certification.”).

At any rate, absent an appellate opinion that engages in detailed analysis unpacking all components of Tobacco II’s ten page analysis on class member standing, this issue no doubt will continue propel substantial litigation activity by members of both the plaintiff and defense bars.

Tuesday, November 17, 2009

Third District Overturns Dismissal of Proposed DPA Class Action in Louie v. BFS Retail & Commercial Operations, LLC

On November 9, 2009, the Third District issued an opinion in Louie v. BFS Retail & Commercial Operations, LLC, __ Cal.App.4th __ (2009), reversing dismissal of a proposed California Disabled Persons Act (DPA) class action based on res judicata grounds.

In that case, the trial court granted the defendant’s demurrer on the grounds that an ADA consent decree entered in a prior Florida District Court class action barred the plaintiff’s from subsequently litigating a proposed California class seeking damages under the DPA. The CAP reversed, concluding that because the consent decree in the Florida action included a carve out that expressly reserved any damage claims, the prior action could not bar the plaintiff’s proposed state law damages claim on res judicata grounds.

According to the Court, the exclusion of damages from the prior settlement was material from a due process standpoint, as it enabled the Florida court to provide a lesser standard of notice under Rule 23(b)(2). See Slip Opinion, at 23, 26. Moreover, the Court further reasoned that due process could not be met because the notice did not apprized class members that they were giving up their right to damages, or provide class members an opportunity to opt-out. See id., at 29-30. Based on these facts, the CAP reasoned that res judicata could not apply, but even if it could, the “manifest injustice” exception (to the extent the doctrine is still viable) would preclude such application. See id., at 30-31.

Bottom line, the Court’s decision was one rooted in equity and common sense. This was clearly a case of a defendant seeking to have its cake and eat it too.

Thursday, November 12, 2009

Multi-Blog Post and Message to Plaintiffs' attorneys: Join CAOC!

George Washington once said:
Discipline is the soul of an army. It makes small numbers formidable; procures success to the weak, and esteem to all.
Letter of Instructions to the Captains of the Virginia Regiments [July 29, 1759]. The advocates of consumer rights, viewing the resources of defense firms and corporate defendants, can relate to the trepidation felt by the out-numbered and out-gunned Continental Army. Because of that disparity in resources, Consumer Attorneys of California ("CAOC") consolidates the voices of consumer attorneys throughout the state to (1) preserve and protect the constitutional right to trial by jury for all consumers, (2) champion the cause of those who deserve redress for injury to person or property, (3) encourage and promote changes to California law by legislative, initiative or court action, (4) oppose injustice in existing or contemplated legislation, (5) correct harsh, unjust and oppressive legislation or judicial decisions, (6) advance the common law and promote the public good through the civil justice system and concerted efforts to secure safe products, a safe workplace, a clean environment, and quality health care, (7) uphold the honor, integrity and dignity of the legal profession by encouraging mutual support and cooperation among members, (8) promote the highest standards of professional conduct, and (9) inspire excellence in advocacy. This post is a multi-blog effort to inform consumer attorneys about CAOC's value and encourage participation in CAOC through membership.

CAOC works tirelessly to protect or advance those causes of import to consumers and their attorneys in California. Often those efforts, though valuable, receive little fanfare. For example, CAOC recently sponsored SB 510, which affects the re-sale of what are known as "structured settlements," in which victims receive financial compensation over a period of time for medical expenses and basic living needs, as determined by a jury. Before SB 510 was signed by the Governor, Courts expressed frustration at their inability to prevent the sale of structured settlements on terms that might ultimately lead to long-term financial hardship for the victim. Now, SB 510 gives judges the information they need to make a reasoned decision about the propriety of a structured settlement sale.

Measures like CAOC-sponsored SB 510 help protect the most vulnerable members of our society and ask for nothing in return. They exemplify the spirit of CAOC. However, CAOC is only as effective in its mission as its membership allows it to be. When consumer attorneys join the ranks of CAOC, its voice gains in power and clarity. But if consumer advocates sit on the sidelines, hoping to benefit from the work of others, CAOC is stretched thin, and we are all at risk as a result.

Now, consumer advocate bloggers from across the state are combining their voices to call upon each and every lawyer and firm that regularly represents plaintiffs to join CAOC, thereby strengthening the consumer's first line of defense. The blogs participating in this unified call to action are:
Show your support of consumers' rights by joining and supporting CAOC. Together we can make an impact that we cannot make alone.

Tuesday, November 10, 2009

Are Issues Relating to UCL Standing Irrelevant to Predominance? Not According to the Court in Plascencia v. Lending 1st Mortage

Of note, I just stumbled across an insightful UCL certification opinion out the Northern District addressing the issue of predominance, post Tobacco II. The opinion, Plascencia v. Lending 1st Mortage, 2009 U.S. Dist. LEXIS 79585 (N.D. Cal. Aug. 21, 2009), granted a plaintiff’s motion to certify a claim under the fraudulent prong of the UCL based on principles of absent class member standing articulated in Tobacco II.  The plaintiff's UCL claim was predicated upon an alleged failure to disclose that a specific type of home loan offered by the defendant was subject to negative amortization.

As concluded by the Court, predominance was met in that case because liability under the fraudulent prong of the UCL required only a singular showing of “likelihood of deception.” See Plascencia, 2009 U.S. Dist. LEXIS 79585, at 30-31 (“[w]ith respect to fraudulent conduct, the UCL prohibits any activity that is ‘likely to deceive’ members of the public” and as such, “liability under the UCL does not require reliance and injury.”). Importantly, the Court reasoned that individualized issues relating to each class member’s reliance and damage were not properly a component of the court’s predominance analysis after In re Tobacco II:
The degree to which the UCL claim involves individual issues turns on whether Proposition 64 imposed a new standing requirement that all class members must satisfy, or whether it is sufficient for Plaintiffs to show that they have standing. The California Supreme Court recently answered this question in In re Tobacco II Cases, 46 Cal. 4th 298, 93 Cal. Rptr. 3d 559, 207 P.3d 20 (2009). The court clarified that only the named plaintiff in a UCL class action need demonstrate injury and causation.

Plaintiffs may prove with generalized evidence that Defendants' conduct was "likely to deceive" members of the public. The individual circumstances of each class member's loan need not be examined because the class members are not required to prove reliance and damage. Common issues will thus predominate on the UCL claim.
See Plascencia v. Lending 1st Mortage, 2009 U.S. Dist. LEXIS 79585, at 31-32.

Of course, such analysis runs counter to the Second District’s recent decision in Cohen v. DirecTV, which inexplicably found “Tobacco II to be irrelevant because the issue of ‘standing’ simply is not the same thing as the issue of ‘commonality.’” See Cohen, 2009 Cal. App. LEXIS 1728, 29. The Cohen court’s statement in this regard is absolutely mystifying, as a court’s predominance analysis by necessity is built upon the foundation of the requirements necessary to state a claim.

Saturday, November 7, 2009

Fourth District Upholds Denial of Certification in Evans v. Lasco Bathware

On November 6, 2009, the Fourth District (Division One) issued an opinion in Evans v. Lasco Bathware, __ Cal. App. 4th __ (2009), upholding denial of class certification of a design defect action relating to shower components.

In this case, the plaintiffs sought certification of claims based on the theory that defendant “manufactured defectively designed shower pans that caused the pans to leak and cause water damage to adjacent shower components.” See Slip Opinion, at 5. The crux of plaintiff’s certification theory rested upon the use of expert testimony to establish uniformity, not only as to the existence of a common defect, but also uniformity as to class member damages. See id., at 5-6. On the damages issue, Plaintiff’s expert opined that the uniqueness of damage attributable to the purported defect rendered it “distinguishable from water leakage damage attributable to other causes[,]” and that the amount of damages was calculable on a class-wide basis “through a formula that estimated the average cost to replace the shower pan….” See id., at 6. Defendant's expert claimed, however, that “actual costs of replacement were not amenable to estimation because the costs associated with removing and replacing each individual shower pan could vary widely from one class member to the next.” See id., at 7-9, 13.

The Court’s opinion identifies three distinct grounds for upholding the trial court’s denial of certification in this case – all of which are hallmark issues that generally arise when trying certify a mass tort as a class action.
First, the Court concluded that trial court did not abuse its discretion by finding that the inherently individualized nature of each class member’s damages destroyed predominance. While it is true that individualized damages inquiry relating to damage is generally no bar to certification under California law, this rule is subject to being stretched to the breaking point in the mass tort context, as wide variances in the presence, degree and uniqueness of each individual’s damage causes the damage issue to become so unwieldy that it begins to bleed into the issue of liability itself. Thus, the plaintiff’s claim that the trial court erred when it concluded that individualized issues relating to damages predominated was overcome by the fact that the record supported the trail court's conclusion that the complexity of the damages issue alone would require “individualized trials for each class member's damages ….” See id., at 12-16.
Similarly, the Court also concluded that plaintiffs could not predicate error based on the trial court’s refusal to permit the use of statistical damage modeling to overcome individualized damage issues. As reasoned by the Court, “although a trial court has discretion to permit a class action to proceed where the damages recoverable by the class must necessarily be based on estimations, the trial court equally has discretion to deny certification when it concludes the fact and extent of each member's injury requires individualized inquiries that defeat predominance.” See id., at 17-18 (emphasis in original).
Second, the Court also ruled that the trial court did not err in concluding that plaintiffs failed to establish adequacy by pursuit of a certification theory that expressly disclaimed any damage beyond the cost of replacing the shower pans. Plaintiffs' assertion that this issue could be resolved by way of the opt-out mechanism, post certification, was deemed insufficient grounds to establish error. While the Court acknowledged that in some cases the opt-out mechanism may be used to overcome unique damage issues, the decision of whether to use the opt-out device is vested generally within a trial court’s discretion. See id., at 22-23. As reasoned by the Court, the trial court here was reasonable in its conclusion that the opt-out mechanism "would not cure under the peculiar facts of this case” (i.e. the wide diversity of potential damages that could be claimed by the proposed class as a whole). See id., at 23-24.  Boiled to its essence, the Court's analysis underscores that the reality that there is a limit on the use of the opt-out mechanism to overcome issues posed by a fact pattern that does not readily lend itself to class treatment.
Finally, the Court concluded that the trial court did not err in refusing to certify a liability only class. From an appellate perspective, such an argument was long shot, and in fact, perhaps logically incompatible with any argument establishing err (indeed, such argument would itself only come into play after the CAP concluded that the trial court had acted within its discretion in discretion in denying certification). While the plaintiffs cited to Hicks v. Kaufman & Broad Home Corp., 89 Cal.App.4th 908 (2001) for the position that a liability only certification was permissible, the Court reasoned that plaintiffs argument completely ignored the fact that the Hicks court not only denied certification of the very claims pursued by plaintiffs (i.e. for strict liability and negligence), but did so specifically because such claims would require individualized trials to establish liability. See id., at 24-25.
In short, I do not believe that Evans necessarily ads much to the class action landscape. Rather, Evans is really a useful tool to demonstrate that some types of cases just are not appropriate for class adjudication. As a general rule of thumb, the more one needs to compromise a case to fit it within the class action framework, the less likely it is that the case is one amenable to class adjudication.

Friday, November 6, 2009

Petition for Review Filed in Cohen v. Directv

Busy day.  Today, counsel for the plaintiffs filed a Petition for Review in Cohen v. Directv, Inc., __ Cal.App.4th __(2009).  I have a copy of the petition and will post when I get a chance to review.

Fourth District Upholds Denial of Certification in Evans v. Lasco Bathware

On November 6, 2009, the Fourth District (Division One) issued an opinion in Evans v. Lasco Bathware, __ Cal. App. 4th __ (2009), upholding denial of class certification of a design defect action relating to shower components.  Discussion of this case is contained here.

48th Annual CAOC Convention

I just wanted to take a second to promote the class action component of the upcoming Annual CAOC Convention. The Class Action Section will take place on Friday, November 13th between 1:30 and 5:00 at the Fairmont Hotel in San Francisco. Information may be found here.  I attended last year, and took home a few great nuggets of information. This is a really good opportunity for both new and experienced class action practitioners to pick up some useful tips, so I encourage everyone from the plaintiffs bar to come (not to discriminate against you defense guys and gals ... as I know there are several of you who visit regularly).

This year Shawn Khorrami (a.k.a. my "Boss") will be moderating a panel of some very distinguished speakers, including my counterpart Robert Drexler, who will be speaking on the topic of “Getting Your Case Certified” (which will include discussion of the current law of certification, and provide tips about pleading your complaint to maximize certification, precertification contact with class members, the use of class member declarations, discovery plans to maximize certification and the role of experts in the certification process). Bob is not only an excellent practitioner, he is a really great guy.

Other panelists, divided between both class action and mass tort practitioners, include Elizabeth Cabraser, Timothy Blood, Thomas Girardi, Mary Alexander, Raymond Boucher and Christopher Seeger.  Definitely a must see event.

Tuesday, November 3, 2009

California Supreme Court Carves Out Additional Exception to Definition of Accrued Wages in Schachter v. Citigroup, Inc.

On November 2, 2009, the California Supreme Court issued an opinion in Schachter v. Citigroup, Inc., __ Cal.4th __ (2009), holding that an employment incentive provision calling for the forfeiture of restricted company stock if the employment relationship was terminated before vesting did not run afoul California Labor Code sections 201, 202, and 219.

Under the specific facts of the case, Citigroup had offered a voluntary employee incentive compensation plan that provided employees with shares of restricted company stock at a reduced price in lieu of a portion of the participating employee’s annual cash compensation. Under the provision at issue, employees agreed that, should they resign or be terminated for cause before their restricted shares of stock vest, they would forfeit the stock and the portion of cash compensation they directed be paid in the form of the restricted stock. Thus, the issue at hand turned on whether the forfeiture provision violated Labor Code sections 201, 202, and 219 by requiring employees to forfeit “earned and unpaid” wages upon resigning or being terminated for cause. Id., at 8. The Court held that it did not.

As a beginning point, the Court noted that there was no dispute among the parties as to whether both the cash compensation and restricted stock constituted “wages” under Labor Code section 200. Id., at 8-9. All parties agreed that both were wages. Moreover, the plaintiff did not allege that the company failed to “pay” him the compensation he elected to receive in lieu of his annual cash compensation. Id. Rather, the plaintiff alleged that he and other similarly impacted employees were entitled to receive the portion of the cash compensation used to purchase the unvested stock upon termination because Labor Code section 219 prevented employees from agreeing to the Plan (and the forfeiture clause) in the first instance. Id., at 9-10.

The Court disagreed, reasoning that plaintiff could not assert the Plan constituted an improper agreement under section 219 without first establishing the Plan’s forfeiture provision violated sections 201 and 202 – a point which the plaintiff conceded. Id., at 9-10. The Court further reasoned that the Plan’s forfeiture provision did not violate sections 201 and 202, as employees who opted into the Plan entered into a lawful agreement to alter the terms of their employment (i.e. an agreement to exchange a portion of present wages for contingent incentive compensation). Id., at 10-11. Based on this fact, plaintiff was bound by the terms of that agreement, including the Plan’s forfeiture provision, and was not entitled to leverage section 219 to overcome his failure to perform a material condition the agreement (i.e. remain employed until the point off the stock’s vesting) to achieve reimbursement of the wages used to purchase the unvested stock upon termination. Id., at 11-14.

All in all, the Court’s opinion is seems logical and strait forward. As the plaintiff voluntarily entered into the Plan, and voluntarily terminated his employment with the company, the plaintiff really was not in the greatest position to establish wrongdoing on the part of the employer. The future impact of the Court’s decision likely will turn on cases presenting facts which vary from these two distinctions.

Monday, November 2, 2009

California Lawyer: Class Notice in the Electronic Age

I am privileged this month to have an article featured in the class action section of California Lawyer. The article deals with the fascinating subject (at least I think it is) of the future of class notice.  The  article may be found online here.