Wednesday, September 29, 2010

Ninth Circuit Reverses Order Denying FACTA Class Certification Grounded on Concerns Penalty Liability Was Too Large: Bateman v. American Cinema, Inc.

On September 27, 2010, the Ninth Circuit reversed a district court order denying certification of a Fair and Accurate Credit Transactions Act (“FACTA”) claim in Bateman v. American Cinema, Inc., __ F.3d __ (2010). The district court couched its denial on a failure to meet the element of superiority due to concerns that FACTA’s statutory damages provision, which allows a consumer to recover damages between $100 and $1,000, would impose undue liability on the defendant. The Ninth Circuit deemed this to be an abuse of discretion:
The district court refused to certify the class because it concluded that the proposed class failed to meet Rule 23(b)(3)’s superiority requirement. See Bateman, 252 F.R.D. at 650-51. At the heart of its ruling, the district court determined that class treatment would render the magnitude of the defendant’s potential liability “enormous and completely out of proportion to any harm suffered by Plaintiff.” Id. at 651. In its first order denying class certification without prejudice, the court also considered significant AMC’s good faith efforts to bring its machines into compliance with FACTA shortly after the lawsuit was filed. We conclude that none of these three grounds —the disproportionality between the potential liability and the actual harm suffered, the enormity of the potential damages, or AMC’s good faith—justified the denial of class certification and hold that the district court abused its discretion in relying on them.
Slip Opinion, at 16365-66.

As reasoned by the Court, Rule 23(b)(3) does not permit consideration of a comparison of actual harm relative to the aggregate amount of statutory liability when deciding whether to certify FACTA class case. Slip Opinion, at 16366-81.

The Court further reasoned that while a court’s decision to certify a class may put pressure on a defendant to settle “even unmerited claims”, this fact standing alone cannot provide a basis to deny certification. See id., at 16382-83 (“If the size of a defendant’s potential liability alone was a sufficient reason to deny class certification, however, the very purpose of Rule 23(b)(3) – 'to allow integration of numerous small individual claims into a single powerful unit' – would be substantially undermined.”). The issue of “whether the potential for enormous liability can justify a denial of class certification depends on congressional intent” [See id., at 16383], which in light of the record surrounding enactment of FACTA’s statutory penalty provisions, did not support denial of certification. See id., at 16383-84 (“To limit class availability merely on the basis of ‘enormous’ potential liability that Congress explicitly provided for would subvert congressional intent.”).

Finally, the Court reasoned that the district court’s consideration of the defendant’s post-complaint good faith compliance was inconsistent with congressional intent in enacting FACTA, as “Congress did not include any safe harbor or otherwise limit damages for good faith compliance with the statute after an alleged violation.” See id., at 16385. Rather, certification was required to further the purpose of deterrence underpinning FACTA’s statutory penalty scheme. See id.

Monday, September 27, 2010

Ninth Circuit Upholds Rule 23(b)(2) Certification of Wage Claims, Weighs in On Pressure-Based Meal Break Violations: Wang v. Chinese Daily News, Inc.

On September 27, 2010, the Ninth Circuit issued an opinion in Wang v. Chinese Daily News, Inc., __ F.3d. __ (2010), addressing numerous challenges by the employer to a judgment entered in favor of classes certified under Rule 23(b)(2).  The opinion addresses numerous issues that are noteworthy.

Perhaps most significant, the Court upheld the district court’s certification of wage related claims under Rule 23(b)(2). The Court concluded that certification of wage claims under this subpart is appropriate under the framework set forth in Dukes v. Wal-Mart when claims for monetary relief are on equal footing with the claims for injunctive relief. See id., at 16402-03. As reasoned by the Court, the record supported the district court’s finding that monetary relief claims did not predominate, as the injunctive/monetary claims were closely related and did not introduce new and significant legal/factual issues:
Nor did the district court abuse its discretion in holding that plaintiffs’ claims for monetary relief did not, in fact, predominate. There were substantial claims for injunctive relief in this case. Plaintiffs sought to enjoin a longstanding set of employment policies and sought monetary relief for current and past employees allegedly injured by those policies. Because the claims for monetary and injunctive relief were closely related, the request for monetary relief neither “introduce[d] new and significant legal and factual issues,” nor raised particular due process or manageability concerns. See Dukes, 603 F.3d at 617, 621-22. CDN’s current employees – who constitute the vast majority of the class – stood to benefit significantly from an award of injunctive relief. As the district court pointed out in its certification ruling, “[d]efendant’s future compliance with the law may be more valuable to the class than the present claims for back pay.” Wang, 231 F.R.D. at 612.
Slip Opinion, at 16403-04.

Additionally, the Court also upheld the district court’s judgment on the class’ meal period claims. Significantly, the Court concluded that the California Supreme Court's pending decision in Brinker was largely irrelevant, reasoning that the evidence of a barrier to meal periods was sufficient to establish class member’s claims regardless of how the California Supreme Court rules on the meaning of the term “provide”:
We need not resolve this dispute or wait for the California Supreme Court to do so. Even if the California Supreme Court interprets California law to place only minimal obligations on employers, the evidence presented to the jury was sufficient to support a finding that CDN did not “provide” reporters with meal breaks. The evidence showed that reporters did not have time to take meal breaks because they worked long, harried hours and faced tight deadlines. There was testimony that reporters were required to carry pagers all the time and be on call from morning until night without ever getting a sustained off-duty period. The evidence showed that reporters did not keep time cards and that pay stubs did not reflect time actually worked. Several reporters also testified that they could rarely take uninterrupted 30 minute breaks. CDN never told reporters that meal breaks were available and never told them to keep track of meal breaks on a time card.
In short, reporters could not take daily, uninterrupted 30 minute breaks regardless of whether they desired to do so. Under either possible reading of California Labor Code § 512(a), CDN did not “provide” its reporters with meal breaks. Substantial evidence therefore supports the jury’s verdict.
Slip Opinion, at 16410-11.

In addition to the forgoing, the Court also upheld the district court’s finding that (1) reporters were non-exempt employees that did not qualify for the professional exemption (under either California law or the FLSA), and (2) that the district court did not abuse its discretion in entertaining a UCL claim predicated upon violation of the FLSA.

Central and Southern District Courts Conclude “Pioneer Notice” Unnecessary for Federal Wage & Hour Class Actions:

On September 21, 2010, magistrate judges in two separate actions issued rulings concluding that the “opt-out” notice procedure approved in Pioneer Electronics, Inc. v. Superior Court, 40 Cal. 4th 360 (2007) was unnecessary for wage and hour class actions brought in Federal court.  Both orders collectively provide a solid basis for dispensing with an employer’s resistance to producing the contact information of the putative class, precertification.

In Alvarez v. Hyatt Regency Long Beach, 2010 U.S. Dist. LEXIS 99281 (C.D. Cal. 2010), Central District Magistrate Judge, Hon. Victor B. Kenton, noted that “[i]n the class action context, disclosure of names, addresses and telephone numbers is common practice” and that “federal courts faced with these types of discovery issues routinely overcome objections as to privacy interests when balanced against reasonable discovery needs.” See id., at 5. As reasoned by the Court, these considerations, in conjunction with the limited period for conducting precertification discovery, led the Court to conclude that a Pioneer opt-out style notice unnecessary:
Moreover, the Court is not persuaded that an opt-out system is necessary, both for pragmatic and legal reasons. As to the first, such a procedure would be extremely time-consuming, given the short pre-certification discovery period. Further, in Pioneer Electronics, supra, the California Supreme Court supported the proposition that an opt-in style of notice would not be required, but did not impose an opt-out style of notice. See also Tierno v. Rite Aid Corp., 2008 U.S. Dist. LEXIS 58748, 2008 WL 3287035 (N.D. Cal. 2008). Although Plaintiffs initially offered, as a compromise, to utilize a third party and an opt-out system, that is no longer feasible, given the looming deadline for the class certification motion.
See Alvarez, 2010 U.S. Dist. LEXIS 99281, at 5-6.

In Stone v. Advance America, Cash Advance Centers Inc., 2010 U.S. Dist. LEXIS 99754 (S.D. Cal. 2010), Southern District Magistrate Judge, Hon. William McCurine, Jr., followed the court's analysis in Puerto v. Superior Court, 158 Cal. App. 4th 1242 (2008), which had concluded that a “Pioneer” opt-out notice was inapplicable because (1) disclosure of contact information of employees making up the class was “witness” information required by statute, and (2) “‘… a percipient witness’s willingness to participate in civil discovery has never been considered relevant -- witnesses may be compelled to appear and testify whether they want to or not.’” See Stone, 2010 U.S. Dist. LEXIS 99754, at 5-6. Based on this reasoning, the Court concluded that such information was of the variety that should be disclosed in an employer’s pretrial disclosures without a formal discovery demand:
Further, under Federal Rule of Civil Procedure 26(a)(1)(A) "[a] party must, without awaiting a discovery request, provide to the other parties... [t]he name and, if known, the address and telephone number of each individual likely to have discoverable in the information...." Moreover, subsection (b) of that Rule states a party "may obtain discovery regarding any non-privileged matter that is relevant to any parties claim or defense-including... The identity and location of persons who know any discoverable matter." Under the Federal Rules, the information plaintiff seeks is clearly discoverable. Moreover, there is no requirement for any notice provision that would limit this very basic discovery to which plaintiff is clearly entitled under our rules.
See Stone, 2010 U.S. Dist. LEXIS 99754, at 6-7.

Tuesday, September 21, 2010

First District Follows Fifth District in Concluding that Meal/Rest Break Statutes Are Inapplicable to Public Employees: California Correctional Peace Officers’ Association v. State of California

On September 17, 2010, the First District (Division Four) changed the status of its opinion in California Correctional Peace Officers’ Association v. State of California from unpublished to published. The opinion affirmed the trial court’s determination that Labor Code Sections 226.7 and 512 relating to meal and rest periods  do not apply to public employees. As reasoned by the Court, “[a] traditional rule of statutory construction is that, absent express words to the contrary, governmental agencies are not included within the general words of a statute.” See Slip Opinion, at 5. From this starting point, the Court rejected arguments that the Legislature’s failure to expressly exclude public entities in Section 226.7 and 512, while expressly excluding public entities in other Labor Code provisions was a sufficient basis to conclude that the Legislature intended such provisions to extend to public employees. See id., at 5-6.

The Court’s holding follows similar analysis by the Fifth District last year in Johnson v. Arvin-Edison Water Storage Dist., 174 Cal.App.4th 729 (2009)

Monday, September 20, 2010

District Court Extends Dukes v. Walmart To Certify Off-the-Clock and Meal Period Claims Using Statistical Sampling: Adoma v. Univ. of Phoenix

On August 31, 2010, Eastern District Court Judge, Lawrence K. Karlton, certified off-the-clock and meal period claims of enrollment counselors in Adoma v. Univ. of Phoenix, 2010 U.S. Dist. LEXIS 96388 (E.D. Cal. Aug. 31, 2010).  Plaintiffs’ off-the-clock and meal period claims derived from an alleged requirement that enrollment counselors be available at any time to take calls forwarded by defendant’s nationwide automated call-routing system, which plaintiffs claimed resulted in employees not being paid for time spent working through meal periods.  The Court’s analysis in certifying such claims is noteworthy for the use of statistical sampling to overcome issues with predominance.

With regard to the off-the-clock claim – which “a plaintiff may establish … by proving that (1) he performed work for which he did not receive compensation; (2) that defendants knew or should have known that plaintiff did so; but that (3) the defendants stood ‘idly by’” [See id., at 11] – plaintiffs asserted that the requisite elements would be established by using records from defendant’s automated call-routing system. Significantly, Court noted that this method of proof was imperfect, as it included defects which would necessitate an individualized fact specific inquiry:
Plaintiffs argue that rather than relying on login/logout times, they can look at records of calls made in combination with the aux codes to determine what work an employee was actually doing and when. [] Defendants respond that the aux codes are also unreliable. Some evidence, including depositions of the named plaintiffs, indicates that employees often fail to enter the appropriate aux code or change in aux code when the employee leaves for or returns from lunch, especially when the employee is in a meeting or engaged in another "aux" activity immediately prior to or after lunch. Although defendants further argue that employees inappropriately fail to distinguish between other aux codes, the "meal break" code is the only potentially non-compensable code, so ambiguity among the others is not relevant to the reconstruction of hours worked. Plaintiffs acknowledge that employees sometimes improperly record meal periods. Plaintiffs nonetheless argue that the question is whether an employee, or employees generally, "regularly forgot to log out for lunch." The court cannot agree. Plaintiffs' claim is for failure to pay for hours actually worked, and this is a fact specific inquiry. This is not to say that individual issues predominate: trends may establish, by a preponderance of evidence, that most days in which meal periods were not recorded, the employee in fact took no meal period. The issue, however, is whether the trend is evidence of individual days, not vice versa.
See Adoma, 2010 U.S. Dist. LEXIS 96388, at 15-16.

Yet, despite acknowledging that “[a]nother court has held that similar computerized data could not demonstrate predominance of common issues where the data did not ‘take into account the possibility that an employee may not have actually worked between the punch-in time and start time or between the end-time and punch-out time.’” [Adoma, 2010 U.S. Dist. LEXIS 96388, at 14 (citing Forrand v. Federal Exp. Corp., 2009 U.S. Dist. LEXIS 22912, *12 (C.D. Cal. Feb. 18, 2009)], a point which even plaintiffs agreed was an issue here, the Court concluded that individual inquiry could be overcome by the use of statistical sampling similar to that approved by the Ninth Circuit in Hilao v. Estate of Marcos, 103 F.3d 767 (9th Cir. 1996), and reaffirmed  in Dukes v. Walmart, 603 F.3d at 625-27:
All potential class members used both the Avaya and MyHR systems. While defendants argue that the Avaya system provides an inadequate indicator of the number of hours employees actually worked, the types of arguments are common to all class members. Hilao appears to permit a representative inquiry to determine the magnitude of these effects, and at this stage, the court cannot distinguish Hilao. The remaining questions are also common. Notably, the question of whether the Avaya system gave defendants at least constructive knowledge of the employee overtime is a common question. Thus, it appears that common questions predominate. Although defendants argue that the named plaintiffs are not typical, the asserted atypicalities pertain to facts irrelevant to the above theories of liability and proof. Accordingly, plaintiffs have shown commonality, typicality, and predominance of common issues as to their state law off-the-clock claim.
See Adoma, 2010 U.S. Dist. LEXIS 96388, at 22-23.

With regard to meal period claims, the Court acknowledged the Brinker issue, but nonetheless concluded that certification was appropriate (at least for now), based on the same statistical analysis:
Of course, the legal question regarding the scope of the employer's obligation is itself a common question of law. As to common questions of fact, plaintiffs contend that they will use the Avaya phone records system to demonstrate how often employees skipped meal periods. For the reasons stated above it appears that this predicate factual question is susceptible to common proof. Accordingly, common issues predominate.
See Adoma, 2010 U.S. Dist. LEXIS 96388, at 26-27.

Thursday, September 16, 2010

Southern District Certifies "Vacation/Uniform/Paycheck/Wages/Breach of Contract" Class in Lopez v. G.A.T. Airline Ground Support

On September 13, 2010, Southern District Judge Irma E. Gonzalez, issued an order granting (in part) plaintiffs’ motion for certification of multiple wage claims in Lopez v. G.A.T. Airline Ground Support, 2010 U.S. Dist. LEXIS 95636, 22-23 (S.D. Cal. Sept. 13, 2010).  As discussed previously in a post here, the Court granted a plaintiff-side summary judgment as to two of the claims at issue (i.e. the vacation claim and the wage statement clam).

Over the defendant’s objection that the sheer number of distinct wage violations at issue should itself compel the denial of certification, the concluded that common issues predominated, based in large part, on evidence that company policies applied uniformly at all locations:
Defendants argue that Plaintiffs' proposed "Vacation/Uniform/Paycheck/Wages/Breach of Contract" Class requires individual inquiries of fact and the application of five different areas of law, such that the proposed class fails the predominance inquiry under Rule 23(b)(3). As explained below, however, each of the claims asserted by this proposed class are based upon company policies which were consistently applied to all of GAT's employees at the four designated airports. Although individual inquiries would be necessary to determine whether the class members were damaged by the policies, the Court believes most of these individual inquiries are manageable in light of the size of the class.
See Lopez v. G.A.T. Airline Ground Support, 2010 U.S. Dist. LEXIS 95636, at 22-23.

The thrust of the Court’s predominance analysis on each of these claims is as follows:
  • Vacation Pay Claim: “Plaintiffs challenge GAT's policy of denying accrued and vested vacation benefits to those employees who leave the company before their one year anniversary. The Court has already found that the policy required employees to forfeit vested vacation pay in violation of Labor Code § 227.3. … Where, as here, the claim asserted by a proposed class is based upon a consistent employer practice, class certification is usually appropriate.” See id., at 24.
  • Uniforms Claim: “Although Plaintiffs' uniform deposit/refund claim presents more questions of individual fact than their unpaid vacation benefits claim, it also stems from a consistently applied company-wide policy.” See id., at 23-24.
  •  Paycheck Claim: “Plaintiffs' paycheck claim also stems from a consistently applied company-wide policy of issuing payroll checks to California employees from an out-of-state bank, without indicating on the face of the check where it could be cashed on demand and without discount. The Court has already determined this practice violated Labor Code § 212, regardless of whether any individual plaintiff suffered actual injury. If a putative class member incurred a fee or delay in cashing the check, that plaintiff may be entitled to damages. However, those individual issues do not predominate over the common issue of law regarding whether GAT's consistently applied policy was unlawful.” See id., at 24-25.
  • Section 203/Late Wage Claim: “Plaintiffs' claim that GAT failed to pay its employees all wages due within the required time upon separation of employment arises out of the same nucleus of facts as its Vacation claim and Uniform claim. Plaintiffs allege GAT's practice of not paying vested vacation time to those employees who separated from employment before their one-year anniversary, and GAT's practice of mailing deposit checks to separated employees, both result in wages not being paid when due. Both of these claims are predicated on common legal issues.” See id., at 25.
  • Unpaid Compelled “Shuttle” Time: “As to each of the three airports subject to this claim, Plaintiffs allege GAT has designated employee parking lots far from the work area and requires employees to park in those lots and take a shuttle bus to the site.… Based upon GAT's alleged policy of requiring employees to use these shuttles, there is a common question of law as to whether GAT is required to compensate its employees for that travel time. Although Defendants argue there are individual inquiries regarding whether employees could have utilized other methods of transportation or were required to park in the employee lots and travel to the site on the employee shuttle, these inquiries go directly to the common legal question of whether GAT should have compensated employees for their travel time.” See id., at 26-27.

Thursday, September 9, 2010

Second District Concludes Los Angeles Ordinance Requiring LAX Hotel Employees Retain Service Charge Funds Not Preempted By Labor Code Tip Provisions: Garcia v. Four Points Sheraton Lax

On September 8, 2010, the Second District Court of Appeal (Division Three) reversed a trial court order concluding that the Los Angeles Hotel Service Charge Reform Ordinance was preempted by Labor Code sections 350 through 356, which govern the disposition of gratuities. See Garcia v. Four Points Sheraton Lax, __ Cal.App.4th __ (2010). The Ordinance was enacted by the City of Los Angeles to require non-unionized hotels in the Century Corridor near LAX to pass along the mandatory service charges to workers who render the services for which the charges have been collected:
Section 184.02 states in pertinent part: "Service Charges shall not be retained by the Hotel Employer but shall be paid in the entirety by the Hotel Employer to the Hotel Worker(s) performing services for the customers from whom the Service Charges are collected." (LAMC, § 184.02, subd. (A).) Service charges may not be paid to "supervisory or managerial employees," and must be paid to "Hotel Worker(s) equitably and according to the services that are or appear to be related to the description of the amounts given by the hotel to the customers." n6 (LAMC, § 184.02, subd. (A).) Service charges collected for banquets or catered meetings "shall be paid equally to the Hotel Workers who actually work the banquet or catered meeting"; service charges collected for room service "shall be paid to the Hotel Workers who actually deliver the food and beverage associated with the charge"; and service charges collected for porterage services "shall be paid to the Hotel Workers who actually carry the baggage associated with the charge." (LAMC, § 184.02, subd. (A)(1)-(3).) Gratuities and tips left by customers for a hotel worker are excluded.
Slip Opinion, at 8-9.

In concluding that the Ordinance was not preempted, the Court reasoned that “a service charge by definition is not a gratuity” under Labor Code Section 350, and rejected outright the hotel employer’s counter argument that this finding would vest them with a property right to such funds under Section 351. See id., at 10-11 (“We do not read section 351 or any other provision in the Labor Code governing gratuities to address employers' property rights.”).