Bailey Class Action Daily

First District Holds That Trial Court Erred In Using Sampling Evidence To Establish Class-Wide Liability: Duran v. United States Bank National Association

2012-02-07T14:40:00.000-08:00

On February 6, 2012, the First District Court of Appeal (Division 1) reversed a $15 million wage judgment in Duran v. United States Bank Nat’l Ass’n, __ Cal. App. 4th __ (2012), based on the Court’s finding that trial court erred in relying upon representative sampling evidence to find class-wide liability:

The plaintiffs in the class action are 260 current and former business banking officers (BBO's) who claimed they were misclassified by USB as outside sales personnel exempt from California's overtime laws, and were thus unlawfully denied overtime pay. In addition to arguing the case should not have been certified as a class action, USB contends the trial court's trial management plan deprived it of its constitutional due process rights in that the plan prevented it from defending against the individual claims for over 90 percent of the class. We agree the trial management plan was fatally flawed and reverse the judgment.

See Slip Opinion, at 1.

Boiled to its essence, the thrust of the Court’s 75 page opinion takes issue with the use of extrapolation/sampling evidence to establish class-wide “liability”, claiming that doing in this case violated the defendant’s due process right to present an individualized defense to each class member’s claims. The Court’s opinion serves to underscore the inherent problems with using extrapolation evidence as an alternative to standardized policy/practice evidence to establish the class element of predominance, and to adjudicate liability as to the class as a whole.

Specifically, the Court of Appeal explained that “the trial court appears to have relied on the lack of a uniform policy requiring BBO's to spend the majority of their time outside the office” [id., at 57], which the Court concluded was a fact that, without more, would necessitate individualized inquiry into the claims of each class member. Id., at 58. To overcome this issue at the certification stage, the trial court certified the class based on the premise that the issue of the defendant’s liability (i.e. whether employees spent more than 50% in-office) could be determined by a limited sampling of testimony from 21 employees – a proposition which was deemed in this case to be an error:

Plaintiffs refer us to Dilts v. Penske Logistics, LLC (S.D.Cal. 2010) 267 F.R.D. 625, 638 (Dilts), in which the district court found the use of statistical sampling would be an "acceptable method" to prove liability in a class action. The court in Dilts first noted that "California and Federal courts have not discouraged the use of statistical sampling in determining class member damages." (Ibid.) As to liability, the court stated "the use of statistical sampling, at least when paired with persuasive direct evidence, is an acceptable method of proof in a class action. [Citation.] Thus, certification will not be denied simply because Plaintiffs anticipate using representative evidence at trial." (Ibid., italics added.) While we do not disagree with the proposition that statistical sampling is a tool that may be utilized in appropriate cases, it does not follow that it was proper for the trial court in this case to limit presentation of USB's affirmative defense solely to the 21 members of the representative group.

See Slip Opinion, at 60-61.

The problem with this approach, according to the Court, was that it did not eliminate the “individualized” nature of the case, but rather, imposed an artificial trial structure which simply disregarded relevant individualized testimony in violation of the defendant’s due process rights. Id., at 60 (“In sum, the court erred when, in the interest of expediency, it constructed a set of ground rules that unfairly prevented USB from defending itself. These ground rules were the product of the trial court.”). According to the Court, “[t]he trial court's error was prejudicial as there was evidence in the form of deposition testimony, as well as the pretrial declarations obtained by USB, that a substantial portion of the class was properly classified as exempt.” See id., at 66.

Importantly, the Court’s decision does not stand for the sweeping proposition that a defendant is now legally entitled in all cases to conduct an individualized defense, or that certification is to be denied if the defendant submits declarations from individual class members that dispute the plaintiff’s theory of liability. The Court was very clear that “[f]undamentally, the issue here is not just that USB was prevented from defending each individual claim but also that USB was unfairly restricted in presenting its defense to class-wide liability.” See id., at 58.

Indeed, it is well established that a defendant may not defeat certification by class member declarations claiming that the employer’s standardized company policies were not enforced [see e.g. Kurihara v. Best Buy Co., 2007 U.S. Dist. LEXIS 64224, 29-30 (N.D. Cal. Aug. 29, 2007) (“defendant's ‘litigation-driven,’ selective sampling of employees … [is] insufficient to inject fatal uncertainty into the question of liability…. Where a plaintiff challenges a well-established company policy, a defendant cannot cite poor management to defend against class certification.”)], or by class member declarations claiming that the company‘s written policies do not impact all employees. See Ghazaryan v. Diva Limousine, Ltd., 169 Cal. App. 4th 1524, 1529-1530, 1536 (2008).

In fact, contrary to the Court's finding in the present case, in Ghazaryan, the Second District deemed the trial court abused its discretion by denying certification based on employee declarations claiming that the company’s policies did not impact them personally. See id., at 1536 (“Although individual testimony may be relevant to determine whether these policies unduly restrict the ability of drivers as a whole to utilize their on-call time for personal purposes, the legal question to be resolved is not an individual one. To the contrary, the common legal question remains the overall impact of Diva's policies on its drivers, not whether any one driver, through the incidental convenience of having a home or gym nearby to spend his or her gap time, successfully finds a way to utilize that time for his or her own purposes.”).

First District Dismisses Appeal Challenging Trial Court’s Refusal to Compel Arbitration of “Individual” PAGA Claims: Reyes v. Macy’s, Inc.

2012-01-20T11:44:00.000-08:00

On January 19, 2012, the First District (Division 3) published its opinion in Reyes v. Macy’s, Inc., __ Cal.App.4th __ (2012), which dismissed Macy’s appeal “from an order granting Macy’s motion to compel arbitration of plaintiff’s individual claims but denying the request to dismiss class allegations and plaintiff’s claim under the Labor Code Private Attorneys General Act of 2004 (PAGA)….” See Slip Opinion, at 1. As reasoned by the Court, the trial court's ruling on Macy's motion to dismiss the class allegations and the PAGA claim was a non-appealable interlocutory order, and could not be construed as a denial of the motion to compel arbitration insofar as Macy’s did not seek to compel arbitration of the class allegations and the PAGA claim. See Slip Opinion, at 2-3.

In reaching its holding, the Court expressly rejected Macy’s argument that the trial court’s failure to order arbitration of plaintiff’s individual PAGA claim affected a denial, in part, of the motion to compel arbitration. Relying on the analysis of Brown v. Ralphs Grocery Co., 197 Cal.App.4th 489 (2011) – previously discussed here and here – and Arias v. Superior Court, 46 Cal.4th 969 (2009), the Court reasoned that a “plaintiff may not and does not bring the PAGA claim as an individual claim, but ‘as the proxy or agent of the state’s labor law enforcement agencies.” See Slip Opinion, at 3. As further explained by the Court, a PAGA action can only be pursued as a representative claim. See id., at 4 (“The PAGA statute does not enable a single aggrieved employee to litigate his or her claims, but requires an aggrieved employee ‘on behalf of herself or himself and other current or former employees to enforce violations of the Labor Code by their employers.’”) (emphasis in original). Based thereon, the Court expressly rejected the conclusions of three Federal District Court opinions finding that PAGA claims were “personal” claims which an individual employee could agree were arbitrable in the first instance:

Macy’s argues that Machado was incorrectly decided, relying on three district court cases for the proposition that PAGA permits plaintiffs to maintain individual claims. (See Grabowski v. Robinson (S.D.Cal. Sept. 19, 2011, No. 10cv1658-WQH-MDD) 2011 U.S.Dist. Lexis 105680; Valle v. Lowe’s HIW, Inc. (N.D.Cal. Aug. 22, 2011[]) 2011 U.S.Dist. Lexis 93639; Quevedo v. Macy’s, Inc. (C.D.Cal., June 16, 2011[]) 2011 U.S.Dist. Lexis 83046.) None of these cases, however, addresses PAGA’s statutory language and purpose. They rely on AT&T Mobility LLC v. Concepcion (2011) 563 U.S. __ [179 L.Ed.2d 742, 131 S.Ct. 1740], which does not address the question of whether a PAGA claim may be asserted individually. The court in Brown v. Ralphs Grocery Co., supra, 197 Cal.App.4th 489 pointed out that Quevedo v. Macy’s, Inc. failed to mention Machado, although Machado explicitly concluded that a PAGA claim cannot be brought on an individual basis. (197 Cal.App.4th at p. 503, fn. 8.)

See Slip Opinion, at 4 n. 3

Second District Creates Division in Authority on Whether Denial of Certification May Have Collateral Estoppel Effect: Bridgeford v. Pacific Health Corp.

2012-01-18T13:40:00.000-08:00

On January 18, 2012, the Second District (Division Three) issued an opinion “holding that the unnamed putative members of a class that was never certified cannot be bound by collateral estoppel.” See Bridgeford v. Pacific Health Corp., __ Cal.App.4th __ (2012). The Court’s opinion adopts the U.S. Supreme Court’s analysis in Smith v. Bayer Corporation, 131 S.Ct. 2368 (2011), which I discussed previously in a post found here. As the Bridgeford Court’s opinion acknowledges, the decision creates a split among various Courts of Appeal on this issue (including within the Second District itself):

California courts have held or suggested that the denial of class certification can establish collateral estoppel against absent putative class members on issues that were actually decided in connection with the denial. (Alvarez v. May Dept. Stores Co. (2006) 143 Cal.App.4th 1223, 1236; Bufil v. Dollar Financial Group, Inc. (2008) 162 Cal.App.4th 1193, 1202-1203 (Bufil); see also Johnson v. GlaxoSmithKline, Inc. (2008) 166 Cal.App.4th 1497, 1510-1513 & fn. 8 (Johnson) [assuming the point while expressing reservations].) Alvarez stated that the principles of collateral estoppel ensure that the absent putative class members‟ interests were adequately represented in the prior proceeding. (Alvarez, supra, at p. 1236.) We conclude to the contrary that if no class was certified by the court in the prior proceeding, the interests of absent putative class members were not represented in the prior proceeding and the requirements for collateral estoppel cannot be established….

See Slip Opinion, at 11.

California Supreme Court Rejects Finding That Insurance Claims Adjusters Are Non-Exempt As Matter of Law: Harris v. Superior Court

2012-01-02T10:46:00.000-08:00

On December 29, 2011, the California Supreme Court overturned a court of appeal opinion finding that insurance claims adjusters are categorically “non-exempt” employees in Harris v. Superior Court, __ Cal.4th __ (2011). The Supreme Court found that the court of appeal’s conclusion that work “not carried on at the level of policy or general operations” is not administrative, thereby falling outside of Wage Order 4’s administrative exemption as a matter of law, failed to consider the facts under all relevant components of FLSA regulations incorporated by reference in 8 CCR 11040(2)(a)(f). As explained by the Court “[t]he essence of our holding is that, in resolving whether work qualifies as administrative, courts must consider the particular facts before them and apply the language of the statutes and wage orders at issue.” Slip Opinion, at 22. The judgment of the court of appeal – which had reversed the trial court’s denial of a plaintiff-filed MSJ – was reversed with instructions to apply the correct legal standard. The Court expressed no opinions on the propriety of certification, declining the defendant’s request to decertify the class. Id., at fn. 9.

Northern District Court Declines to Decertify Rule 23(b)(2) Restitutionary Class In Light of Dukes: In re Conseco Life Ins. Co.

2011-12-28T09:34:00.000-08:00

On December 20, 2011, Northern District Court Judge, Susan Illston, denied a request to decertify a nationwide Rule 23(b)(2) class based on the premise that the U.S. Supreme Court’s decision in Wal-Mart v. Dukes bars certification of claims seeking money damages under Rule 23(b)(2). See In re Conseco Life Ins. Co., 2011 U.S. Dist. LEXIS 146139 (N.D. Cal. Dec. 20, 2011). Defendant Conseco challenged certification of the plaintiffs’ lawsuit – which alleges that defendant increased monthly cost-of-insurance deductions and expense charges in breach of the policy terms – on the grounds that individualized damage determinations for each policyholder would predominate over injunctive and declaratory relief, precluding certification under Rule 23(b)(2).

Although the Court did conclude that Dukes required that Rule 23(b)(2) classes involving monetary claims be limited exclusively to individuals impacted by ongoing conduct, which in this case required the exclusion of former policyholders from the certified class [In re Conseco Life Ins. Co., 2011 U.S. Dist. LEXIS 146139, at 17 (concluding that monetary claims for former policyholders “would by definition predominate over claims for injunctive or declaratory relief”)], the Court found certification appropriate with regard to existing policyholders notwithstanding Dukes because the plaintiff’s theory of damage flowed directly from the harm at issue in the underlying claim. In reaching this conclusion, the Court adopted the Fifth Circuit’s “incidental test”, which permits (b)(2) certification where the monetary relief sought is predicated primarily on the same facts and law relied upon to establish liability in the underlying claim:

In Dukes, the Supreme Court discussed but did not explicitly adopt the Fifth Circuit's "incidental test." Dukes, 131 S.Ct. at 2560. In Allison v. Citgo Petroleum Corp., 151 F.3d 402, 415 (5th Cir. 1998), the Fifth Circuit held that a (b)(2) class would permit the certification of monetary relief that is "incidental to requested injunctive or declaratory relief," which it defined as "damages that flow directly from liability to the class as a whole on the claims forming the basis of the injunctive or declaratory relief." According to the Allison court, such "incidental damage should not require additional hearings to resolve the disparate merits of each individual's case; it should neither introduce new substantial legal or factual issues, nor entail complex individualized determinations." Id. Numerous courts within the Ninth Circuit have since adopted the incidental test to determine proper certification under (b)(2). See Delarosa v. Boiron, Inc., 275 F.R.D. 582, 2011 WL 4389919 (C.D.Ca. Aug. 24, 2011) (Tucker, J.); Aho v. AmeriCredit Financial Services, Inc., 2011 U.S. Dist. LEXIS 80407, 2011 WL 3047677 (S.D.Ca. Jul. 25, 2011) (Sabraw, J.) This Court also adopts the incidental test as the appropriate test for Conseco's motion for decertification of the current policyholders.

See In re Conseco Life Ins. Co., 2011 U.S. Dist. LEXIS 146139, 21-22.

The Court reasoned that while a damage theory seeking broad return of all monies paid toward premiums would be incapable of satisfying this inquiry [In re Conseco Life Ins. Co., 2011 U.S. Dist. LEXIS 146139, 24 (“The Court agrees with Conseco that if plaintiffs' theory of damages required return of premiums paid, there would necessarily be individualized inquiries of the type that fail the incidental test”)], the plaintiffs here had put forward a more limited theory of damage that was tailored to the amounts of the alleged inflated costs of insurance and expense charges that formed the basis of liability. See id., at 25. As explained by the Court, such a damages theory permitted adjudication of damages based largely on the same facts and law without complex individualized damage calculations:

Seeking return of wrongfully charged costs and fees of this sort will not require additional hearings to resolve the disparate merits of each individual's case; nor will it introduce "substantial legal or factual issues, nor entail complex individualized determinations." Allison, 151 F.3d at 415. It will simply entail "computation by means of objective standards" based on data in Conseco's records. Id. As a result, the return of the improper deductions would flow directly from the claims forming the basis of the declaratory and injunctive relief. Damages arising from the costs of insurance and expense charges are therefore incidental to the declaratory and injunctive relief sought, and allowed under 23(b)(2).

In re Conseco Life Ins. Co., 2011 U.S. Dist. LEXIS 146139, 25-27.

Thus, “[t]he primary inquiry post-Dukes for classes seeking monetary damages under 23(b)(2) is the theory of damages that the class seeks” [Id ., at 24], which based on the forgoing analysis, would be appear to encompass claims seeking restitutionary disgorgement (rendering (b)(2) certification a useful vehicle for many claims brought under the UCL).

Fourth District Upholds Trial Court's Refusal to Enforce Arbitration Provision, Post-Concepcion: Roberts v. El Cajon Motors, Inc.

2011-11-11T09:49:00.000-08:00

On November 8, 2011, the Fourth District (Division 1) upheld a trial court order denying a motion to compel individual arbitration of a class action case, post Concepcion, in Roberts v. El Cajon Motors, Inc., __ Cal.App.4th __ (2011). The Court upheld the trial court’s denial based on the finding that the defendant had waived any right to arbitration by actively engaging in litigation rather than promptly moving to compel:

Assuming, without deciding, the waiver of classwide claims in the arbitration provision at issue here is valid and enforceable in light of Concepcion, as El Cajon argues, we nonetheless conclude El Cajon waived arbitration when it waited five months to invoke arbitration.

Indeed, if El Cajon either had promptly moved to compel arbitration at or near the time it answered the complaint or informed Roberts at that time of its intention to compel arbitration (such as in its answer to the complaint), Roberts likely would not have propounded extensive written discovery involving the class action allegations in her complaint. Of course, if Roberts had been given timely notice by El Cajon of its intent to arbitrate and propounded the discovery in any event, it would have been at her peril.

However, because the record shows El Cajon waited months after Roberts propounded extensive written discovery (undoubtedly at great expense) to notify Roberts of its intent to arbitrate and because most, if not all, of this discovery would—under El Cajon's own analysis of Concepcion—be useless in arbitration, we conclude there is ample evidence in the record showing El Cajon's conduct (including in responding to this discovery) was inconsistent with the intent to arbitrate and that Roberts was prejudiced by that conduct. (See St. Agnes Medical Center v. PacifiCare of California, supra, 31 Cal.4th at p. 1196.)

See Slip Opinion, at 18-19.

The Court’s decision joins the ever growing list of potential exceptions to the U.S. Supreme Court’s ruling in Concepcion. (See previous posts here, here and here).

Debriefing Brinker: A Few Surprises and 7 Minutes of Frustrating Silence

2011-11-08T16:36:00.000-08:00

I have spent the better part of the morning reviewing and digesting oral argument in Brinker. Initially, I had planned on attending the hearing in person, but cancelled my ticket yesterday after learning that the California Channel would be televising the event. Obviously, that was a mistake. However, notwithstanding the nearly seven minutes of dead air (due to problems with the feed), oral argument has left me with a few overarching impressions.

First, it would seem to be universally apparent that claims predicated on barriers impeding access to meal and rest periods will be largely unaffected by Brinker. Both the Court and the Parties seemed to agree on the point that whatever the standard ultimately is deemed to be, an employee must at a minimum have the opportunity to access a break. In the words of Justice Baxter when this issue arose in the context of rest breaks, “you cannot waive something that you were not authorized to take.” As my firm only takes cases which implicate this type of theory, this was good news to me.

Second, the Court appears to be seriously leaning in the direction of meal and rest period standards having a temporal component. With regard to meal breaks, the Court appears to believe that an employee is entitled to a new meal break on a “rolling 5 hour basis” (this is discussed in detail below). With regard to rest periods, the Court appears to be at least warm to the proposition that rest breaks must be provided before the employee completes a work period of 4 hours (as opposed to making the employee work 4 hours as the triggering event).

Finally, as expected, the Court appears to be grappling with multiple facets of a construction utilizing the “ensure” standard. Questioning on this front not only appeared to test the underlying scope and meaning of the rights at issue, but also the administrative feasibility and equitable impact of implementing an ensure standard. While popular thought on this issue seems to be that it cannot be done, or that it is simply bad for business, all of these very same arguments were asserted to the advent of overtime compensation. Of course, the Court has already analogized the right at issue with overtime compensation in Murphy to conclude that meal period premium pay is compensation (as opposed to a penalty). Whether the Court ultimately continues down that path is the $64,000 dollar question.

That said, here are my observations of the oral argument, with my own delineation of the various issues in play:

Real Party In Interest (Plaintiffs) (Kralowec)

Issue #1 (Are The Break Statutes A Ceiling or Floor?): Justice Kennard opens questioning by asking whether the Statutes (i.e. Labor Code 226.7 and 512) could be harmonized with the meal and rest period provisions of the Wage Orders, and if not, which would govern? First, Real Parties In Interest maintained that the statutes can be harmonized, asserting as an example the fact that the term “provide” contained in the Section 226.7 expressly incorporates the Wage Order standards by reference. See Cal Lab Code § 226.7(b) (“If an employer fails to provide an employee a meal period or rest period in accordance with an applicable order of the Industrial Welfare Commission….”). Second, Real Parties further contend that if the Court were to find that the Wage Orders provide more protection that the statutes, the Wage Orders should be given effect on the grounds that the statutes provide a baseline “floor” which the IWC would be entitled to go beyond in the Wage Order.

Justice Kennard questioned the premise that both statutes incorporated the Wage Orders by reference to Labor Code § 516, which she asserted overtly contradicts an intention by the Legislature to incorporate the Wage Orders into Section 512. [See Cal Lab. Code § 516 (“Except as provided in Section 512, the Industrial Welfare Commission may adopt or amend working condition orders with respect to break periods, meal periods, and days of rest for any workers in California consistent with the health and welfare of those workers.”)].

Before Real Party was able to complete a response to this issue, Chief Justice Cantil-Sakauye interrupted, inquiring as to the impact of the Court’s previous decision in Industrial Welfare Com. v. Superior Court, 27 Cal. 3d 690, 725 (1980) [which concluded that “[n]either federal nor state labor relation legislation precludes the IWC from establishing minimum wages, maximum hours or standard conditions of employment to protect the health and welfare of California employees”], and whether that decision permitted the IWC to construct wage order imposing more stringent requirements. Real Party acknowledged this seeming softball pitch by noting that to the extent that the current Wage Orders are more protective, this would be entirely permissible under this general principle.

Issue #2 (What Exactly Is the Right At Issue?): Thereafter, Justice Liu raises what he perceives to be a dilemma – namely, as the principle right at issue with regard to meal breaks is suspension of control over the employee, once released of that control, can’t an employee exercise that right by simply choosing to work? Real Party states no, asserting that control is only part of the equation. In addition to relinquishing control, the employer must also prevent an employee from being permitted to work. [Admittedly, this proposition is consistent with the definition of “hours worked” under the Wage orders, which includes both of these components. See e.g. 8 CCR 11050(2)(K) (“‘Hours worked’ means the time during which an employee is subject to the control of an employer, and includes all the time the employee is suffered or permitted to work, whether or not required to do so….)]. Real Party asserted that the employer can, and must, ensure that the employee is not performing work for an employee to even enjoy the underlying right.

Issue #3 (Can An Employer Comply With An Ensure Standard?): Real Parties’ statement in this regard immediately invokes questioning by Justice Kennard on the central issue at play – how does an employer implement a standard requiring it to ensure that hundreds (or thousands) of employees are actually not performing work during a meal period? Real Party responded by noting that employers control employee conduct in this regard all the time, such as scheduling standard workdays to avoid incurring overtime.

Issue #2 (What Exactly Is the Right At Issue): Justice Liu returns to his prior line of questioning exploring the nature of the right at issue. Justice Liu asks – based on the interpretative policy of the Court to construe labor provisions in favor of the employee – whether it is true that the most worker friendly construction the Court could provide is a construction that permits the employee to do whatever they chose during the meal period? Real Party disagrees, stating that a construction that also precludes the employee from being suffered or permitted to work is the most the most expansive construction [and technically Real Party is correct considering the dual definitional standards for “hours worked” under the wage orders]. Real party further asserts that a construction that prevents any work from being performed is necessary to protect the average employee, who otherwise would be deprived of any meal period for their entire shift absent such a construction (presumably under the guise that the employer would always claim that the employee simply chose to continue working).

Issue #3 (Can An Employer Comply With An Ensure Standard?): This prompted a question from Justice Baxter – should employees be punished or terminated for working through their break? Real Party asserts yes, eliciting a response from Justice Baxter highlighting the paradox; namely, that an employee who works through a break because he/she loves the job being fired would not serve to protect the employee. Real Party responds that this is no different than an employee being terminated for repeatedly working unauthorized overtime, and that employers can, and in fact do, control employee behavior in this scenario by imposing a system of incremental discipline.

Justice Baxter further questions what should happen when an employee disobeys the employer's order to take a meal break and not work, and the employer is aware of it – does the employer then have to compensate the employee with premium pay? Real Party responds in the affirmative, highlighting that this is analogous to the same scenario in the context of overtime; an employer must compensate the employee with premium pay when it knew or should have know that the employee was working though breaks, even if the employee is ultimately terminated for violating the employer's directive not to work.

[It is important to highlight that the analogy to overtime in this context was not happenstance, as the Court’s holding in Murphy that Section 226.7 proscribed a wage (as opposed to a penalty) rested upon the finding that Section 226.7 was squarely analogous to daily overtime compensation in all material respects, including (1) that Section 226.7 compensation, exactly like daily overtime compensation, represents a statutorily proscribed rate of pay assigned by the Legislature to a situation “[w]here damages are obscure and difficult to prove…” (Murphy, 40 Cal. 4th at 1112-13), (2) that Section 226.7 compensation, exactly like daily overtime compensation, was intended from the outset to create an immediate statutory entitlement to compensation that would be due and payable without filing an enforcement action (Murphy, 40 Cal. 4th at 1108), and (3) that the objective of the premium compensation provided by Section 226.7, exactly like daily overtime compensation, was intended to shape employer behavior regarding the maximum hours an employee should work. (Murphy, 40 Cal. 4th at 1110, 1113-14)]

Real Party In Interest (Rubin)

Issue #4 (Are Rest Period Claims Susceptible to Class Adjudication?): Justice Liu opens up questioning on rest breaks, asking how rest breaks, which do not have a recordation requirement like meal breaks under the wage order, may be susceptible to class treatment? Acknowledging that rest periods operate under the differing “authorize and permit” standard, Real Party contends that class treatment is proper where there is class-wide evidence that an employer “impedes, discourages or dissuades” an employee from taking a rest break. Real Party asserts three grounds, including a practice which deprives the employee of taking tips when they leave for break [later, Justice Liu questions the foundation for the assertion that the employees in this case have a legal entitlement to tip money. In my opinion, this issue would not seem to be material here, as that issue is one relating to the merits of the case which would play out post certification].

Issue #5 (Are Rest Periods Governed by a Timing Requirement?): Justice Werdegar interrupts, questioning on whether Brinker has a uniform rest period policy susceptible to common resolution. At issue is whether Brinker’s policy of not permitting a rest period until the end of the fourth hour violates Wage Order 5 because it only permits a single rest break over the course of an 8 hour shift. Justice Werdegar essentially communicates that she is of the view that this would be a proper issue for class adjudication, as the issue of whether this policy complied with the Wage Order would be resolved as to the class as a whole.

Justice Baxter asks whether the fact that company policy did not permit an employee the option to take this second rest period precludes a claim of waiver (in the words of Justice Baxter, “you cannot waive something that you were not authorized to take.”). Real Party responds in the affirmative, stating an employee can waive a rest period only if there is no pressure from the employer.

[This is where the feed disruption occurred, which cut off the end of questioning of Real Party and approximately 7 minutes of oral argument by Petitioner]

Petitioner (Defendant)

Issue #6 (Does the Employer Have An Obligation to Remove Pressures To Perform Work?): The feed resumes with Justice Liu – in a devils’ advocate line of questioning (at least in relation to his questioning above) – asking Petitioner whether an employer must adjust the workload to enable the employee exercise his or her ability to take a break. In the words of Justice Liu, “the employer can’t say that I am giving you this 30-minutes and you are not expected to work, but meanwhile your work is piling-up and you are obligated to discharge the work later.” Petitioner agreed that the employer must adjust the workload for the 30 minutes to be 30 duty-free minutes.

Issue #7 (Does the Wage Order Require Meal Periods on a Rolling 5-Hour Basis?): Justice Baxter thereafter asks whether its Petitioner’s position that the Wage Order does not impose a “rolling 5 hour” requirement (i.e. that the Order requires a meal break every 5 hours, as opposed to before the 5th hour of a shift only), or that the Wage Order does impose this requirement, but that this requirement conflicts with the statutes (Section 226.7 and 512). Petitioner states that it believes both positions are true. Justice Baxter is quick to note, however, that the Wage Order in question has no provision for a section meal period.

[Note: There was some confusion on this point, as Section 11(D) technically refers to a second break, but upon close reading, that section only makes passing reference to waiver of a second meal break by persons employed in the health care field. Thus, it is clear that the point being made here is that if Section 512 constitutes the “floor”, and if Section 512 imposes two meal breaks (one at the 5th and the other at the 10th hour), then the Wage Order necessarily must be interpreted as requiring meal breaks be provided on a “rolling 5 hour” standard. This is so because a contrary construction would force the Wage Order to fall below the “floor.” This becomes more apparent based on Justice Liu’s follow-up questioning below].

Justice Liu follows up, noting that although Section 11(a) of the Wage Order does not clearly state that the standard is a rolling 5 hour requirement, the Wage Order provides that a 30 minute meal period is required for every 5 hour work period, EXCEPT when a work period of not more than six (6) hours will complete the day's work the meal period may be waived by mutual consent. Justice Liu states that he believes the language of this exception logically requires a rolling 5 construction. To demonstrate this point, Justice Liu poses a hypothetical of an employee who works a shift between 9am to 6pm, with lunch taken at 12:30, leaving 5 ½ remaining hours to finish the work day. Justice Liu asserts that the plain language of the Wage Order requires a meal period to be provided during this 5½ hour period (despite the lack of reference to a second meal break in the Wage Order language), and that not adhering to this construction would render the second clause meaningless because if it did not there would be nothing to be waived.

Issue #1 (Are The Break Statutes A Ceiling or Floor?): Petitioner thereafter poses his own hypothetical in response to Justice Liu’s. Petitioner’s hypothetical involves an employee scheduled to work 9 hours, who takes a meal break at the 4th hour, and then works another 5 hours. Petitioner contends that under Real Party’s construction, the employer would be required to provide an additional meal period – a proposition which Petitioner believes violates the 10-hour requirement imposed by Section 512. Justice Liu disagreed, stating “it’s not contrary, it’s just more protective.” According to Justice Liu, that the Wage Order would require a second break at the 9th hour "is not inconsistent with the statute, it’s just more protective."

Justice Werdegar poses the question to Petitioner as to whether, assuming the Section 512 only imposes a set number of meal breaks (as opposed to standards relating to timing), whether he would concede that the Wage Orders can properly go beyond the statute to impose meal breaks based on timing? Petitioner dodged the premise of the question, claiming that the language of the Wage Order does not impose a meal break requirement based on timing. Justice Werdegar overtly stated her disagreement this proposition, citing the IWC’s use of the phrase “work period”, which she stated meant a “sub-set of a shift.” Based on this construction, meal breaks must be provided based on “blocks of time” during any given shift.

Issue #8 (Will The Court’s Opinion Have Retroactive Application?): At the close, Justice Baxter inquired whether a decision of the court would have prospective application only, or whether it would have retroactive application. Petitioner conceded that he was not in a position to respond on that point (as this exceeded the scope of issues), but that he believed that under applicable U.S. Supreme Court standards, a decision would have retroactive application.

Real Party In Interest Rebuttal (Kralowec)

On rebuttal, Real Party asserted several points, without much direct questioning by the Court.

First, that without a timing requirement, an employer could require an employee to work an entire 9 hour shift without providing a meal break (presumably, the employer complies in this hypothetical by proving a meal period at the very end of the shift).

Second, that there are numerous methods for employers to comply with the timing requirement, such as (1) by scheduling the meal period during the window of the 3rd and 5th hour, (2) scheduling short shifts, (3) pay the premium wage. Justice Werdegar questioned whether an employer and employee could utilize a mutual waiver, which Real Party agreed was permitted, but only if the specific requirements for waiver are met. Real part asserted that to permit a universal waiver would render the express waiver provisions meaningless. This proposition was not really explored by the Court.

Second District Upholds Order Finding Arbitration Provision Unconscionable, Post-Concepcion: Sanchez v. Valencia Holding Co.

2011-10-25T14:00:00.000-07:00

On October 24, 2011, the Second District (Division 1) upheld a trial court order denying a motion to compel arbitration of a class action case, post Concepcion, in Sanchez v. Valencia Holding Co., __ Cal.App.4th __ (2011). Although the trial court had denied the defendant’s motion on the grounds that the class action waiver was unenforceable because it violated statutory rights under CLRA, the Court of Appeal did not affirm the trial court’s order on these grounds, finding instead that the arbitration agreement was unconscionable under the Armendariz balancing test. As held by the Court, this test continues to survive notwithstanding Concepcion:

Before applying Armendariz to the present case, we note that Concepcion, supra, 131 S.Ct. 1740, does not preclude the application of the Armendariz principles to determine whether an arbitration provision is unconscionable. Concepcion disapproved the "Discover Bank rule," stating: "In Discover Bank, the California Supreme Court applied [the doctrine of unconscionability] to class-action waivers in arbitration agreements and held as follows: [¶] '[W]hen the [class action] waiver is found in a consumer contract of adhesion in a setting in which disputes between the contracting parties predictably involve small amounts of damages, and when it is alleged that the party with the superior bargaining power has carried out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money, then . . . the waiver becomes in practice the exemption of the party "from responsibility for [its] own fraud, or willful injury to the person or property of another." Under these circumstances, such waivers are unconscionable under California law and should not be enforced.'" (Concepcion, at p. 1746, italics added.) With the exception of the Discover Bank rule, the Court acknowledged that the doctrine of unconscionability is still a basis for invalidating arbitration provisions. (Concepcion, at pp. 1746, 1747; see Kanbar v. O'Melveny & Myers (N.D.Cal. 2011) 2011 U.S. Dist. Lexis 79447, pp. *15-*16, *23-*24, 2011 WL 2940690, pp. *6, *9.) Thus, Concepcion is inapplicable where, as here, we are not concerned with a class action waiver or a judicially imposed procedure that conflicts with the arbitration provision and the purposes of the Federal Arbitration Act (FAA) (9 U.S.C. §§ 1-16). (See Concepcion, at pp. 1748-1753.)

Slip Opinion, at 11-12.

The Court's decision joins a growing list of potential exceptions to the U.S. Supreme Court’s ruling in Concepcion. (See previous posts here and here)

Second District Overturns Cert Denial in Bait-and-Switch/Fraud Action Brought on Behalf of Residents of a Senior Citizen Mobilehome Park: Marler v. E.M. Johansing LLC

2011-10-20T07:39:00.000-07:00

On October 19, 2011, the Second District Court of Appeal (Division 6) reversed the denial of certification of contract and fraud claims arising out of an alleged scheme designed to secure consent from residents of a rent controlled senior citizen mobilehome park to convert the park to a condominium development. See Marler v. E.M. Johansing LLC, __ Cal.App.4th __ (2011). As stated in the Opinion, plaintiffs allege “that Park owners induced them to convert the Park to a condominium development through false promises about the purchase price they would pay for their lots; after Park residents approved the conversion, Park owners raised the lots prices so high that the majority of Park residents could not afford them.” Slip Opinion, at 1-2. By way of example, the named plaintiffs “lot price increased from $126,500 to $215,000, a price they could not afford. See id., at 4. The trial court denied certification on the grounds that the class was not ascertainable and that there was no community of interest, which the Court of Appeal deemed an abuse of discretion for multiple reasons.

The Court’s Opinion is one that plaintiff attorneys will want to note, as it contains excellent discussion of applicable rules relating to acertainability, including:

Identification of dual tests concerning the evaluation of the class definition [Slip Opinion, at 7-8],
Standards for addressing overly-broad definitions [Id., at 9],
The permissibility of defining the class by facts relating to “ultimate issues” in the action [Id., at 9-10], and
The obligation of the trial court to permit the class to be redefined if doing so would facilitate certification. Id., at 10.

Similarly, the Opinion also contains great discussion on the use of “inferred reliance” in the context of fraud, which in this case was deemed appropriate based on the use of a standardized “pitch” letter sent to park residents, as well as a survey utilized to gauge support of the conversion to condominium tracts. Id., at 13-14.

Central District Finds PAGA Waiver Unconscionable, Post-Concepcion: Urbino v. Orkin Services of California

2011-10-07T08:43:00.000-07:00

On October 5, 2011, Central District Court Judge, Cormac J. Carney, denied a motion to compel arbitration of a PAGA claim brought by Orkin Services of California, Inc. and Rollins, Inc. (“Defendants”) on the grounds that the arbitration agreement contained an unconscionable PAGA arbitration waiver, rendering the agreement unenforceable under California law. See Urbino v. Orkin Servs. of Cal., 2011 U.S. Dist. LEXIS 114746 (C.D. Cal. Oct. 5, 2011). As reasoned by the Court, the U.S. Supreme Court's analysis in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011) was inapplicable, as PAGA embodies “representative” and “public right” aspects which are fundamental and inseparable features of a PAGA claim, and as such, cannot be set aside by private agreement:

[A]s Plaintiff correctly notes, AT&T concerned the enforceability of a consumer class action arbitration waiver, rather than a representative PAGA claim waiver. (Pls.' Opp. at 21 (citing Brown v. Ralphs Grocery Co., 197 Cal. App. 4th 489, 500 (2011); Plows v. Rockwell Collin, Inc., No. SACV 10-01936, 2011 U.S. Dist. LEXIS 88781, at *14–*15 (C.D. Cal. Aug. 9, 2011)).) In Brown, the California appellate court refused to extend AT&T to a PAGA action in light of the fundamental nature and purpose of a PAGA claim. Brown, 197 Cal. App. 4th at 500-03; see also Plows, 2011 U.S. Dist. LEXIS 88781, at *14–*15. Specifically, the Brown court explained that the purpose of PAGA "contrasts with the private individual right of a consumer to pursue class action remedies in court or arbitration, which right, according to AT&T may be waived by agreement so as not to frustrate the FAA – a law governing private arbitration. AT&T does not provide that a public right, such as that created under the PAGA, can be waived if such a waiver is contrary to state law." Brown, 197 Cal. App. 4th at 500. Furthermore, as noted by the Brown court, the Quevedo court failed to take into account that there are no separate individual claims in a PAGA action; rather, the individual must bring a PAGA claim as a representative action on behalf of himself and other aggrieved employees. See id. at 503 n.8.n13 The Court finds the reasoning offered by the Brown court persuasive. See also Plows, 2011 U.S. LEXIS 88781, at *14–*15 (agreeing with the Brown court's reasoning of why class action waivers in arbitration agreements may not be used to divest plaintiffs of their right to bring representative actions under PAGA and denying defendant's motion to compel arbitration of plaintiffs' PAGA claims). Because the PAGA arbitration waiver in the Agreement is unconscionable, and the waiver taints the entirety of the Agreement with illegality, the Court deems the Agreement unenforceable.

See Urbino, 2011 U.S. Dist. LEXIS 114746, at 39-40.

The Court's decision joins a growing list of opinions finding Concepcion inapplicable in the wage and hour context. (See previous post here)

California Supreme Court Sets Oral Argument in Brinker v. Superior Court

2011-10-04T16:18:00.000-07:00

On October 4, 2011, the California Supreme Court issued Notice that oral argument in Brinker Restaurant v. Superior Court will take place on Tuesday, November 8, 2011 at 9:00 a.m. in San Francisco. There is little need for me to state the issues in play. For all wage and hour practitioners, this decision has been a long time coming.

Concepcion Revisited: Developing Exceptions to FAA Preemption

2011-09-14T08:07:00.000-07:00

It has been a while since I have discussed the impact of the U.S. Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011) (previously discussed here). As generally occurs after a decision of this magnitude has some time to settle, exceptions begin to percolate to the surface. Below are two recent favorable District Court opinions highlighting separate exceptions Concepcion’s preemption analysis:

First, in Plows v. Rockwell Collins, Inc., 2011 U.S. Dist. LEXIS 88781, 12-14 (C.D. Cal. Aug. 9, 2011), Central District Court Judge David O. Carter concluded that in the employment context, the California Supreme Court’s decision in Gentry v. Superior Court, 42 Cal.4th 443 (2007) remained valid law not withstanding Concepcion. Citing to the recent decision in Brown v. Ralphs Grocery Co., 197 Cal. App. 4th 489, 494 (2011) – previously discussed here – the Court concluded that Gentry remained valid law because the Gentry rule (i.e. the modest size of the potential individual recovery, the potential for retaliation against members of the class, the fact that absent members of the class may be ill informed about their rights, etc) is not predicated upon unconscionability:

[T]he Brown opinion highlights the differences between Discover Bank and Gentry, citing Arguelles-Romero v. Superior Court, 184 Cal. App. 4th 825, 836, 109 Cal. Rptr. 3d 289 (2010) for the proposition that "Discover Bank is a rule about unconscionability, [whereas] the rule set forth in Gentry is concerned with the effect of a class action waiver on unwaivable rights regardless of unconscionability." Id. (emphasis in original). The California Court of Appeals goes on to state that Concepcion "specifically deals with the rule enunciated in Discover Bank," declining to adopt a broad interpretation of the Supreme Court's opinion. 197 Cal. App. 4th 489, Id. at 5. Finally, Judge Kriegler, concurring in the Brown decision, notes that, although Concepcion may have called Gentry's survival into doubt, "Gentry remains the binding law of this state which we must follow," until the California or United States Supreme Court rules otherwise. 197 Cal. App. 4th 489, Id. at 8 (Krieger, J., concurring) (citing Auto Equity Sales v. Superior Court, 57 Cal. 2d 450, 455, 20 Cal. Rptr. 321, 369 P.2d 937 (1962)).

Finding this reasoning persuasive, the Court holds that, for the purposes of the present Motion to Compel Arbitration, Gentry is valid law. Plows thus may avoid arbitration if he can demonstrate that his arbitration agreement is unenforceable under Gentry. As in Brown, however, the Court finds that there is insufficient evidence to determine whether the Gentry test is satisfied. This lack of evidence makes sense: the fact that Defendant did not move to compel arbitration until the filing of the instant motion means that there previously was no need to conduct discovery on this issue. Now that this need for information has arisen, however, the parties must be afforded an opportunity to gather the appropriate evidence.

See Plows, 2011 U.S. Dist. LEXIS 88781, at 12-14.

Second, in In re Directv Early Cancellation Fee Mktg. & Sales Practices Litig., 2011 U.S. Dist. LEXIS 102027, 37-39 (C.D. Cal. Sept. 6, 2011), Central District Court Judge Andrew J. Guilford declined to compel arbitration of UCL and CLRA injunctive relief claims on the grounds that they were brought by the plaintiffs “as private attorneys general, seeking to vindicate a public right.” This is analogous the the decision in Brown, which concluded that Conepcion did not apply to PAGA claims. As held by the Court here, the California Supreme Court’s prior finding that UCL and CLRA private attorney general claims were not arbitrable in Broughton v. Cigna Healthplans of California, 21 Cal. 4th 1066 (1999) and Cruz v. PacifiCare Health Systems, Inc., 30 Cal. 4th 303 (2003) remained valid law not withstanding Concepcion:

The Court has also reviewed subsequent authority submitted by the parties and the Court is not convinced that Cruz and Broughton are overruled by Concepcion.

Both Cruz and Broughton are more nuanced in their holdings than an "outright" prohibition of certain claims. In Cruz, the court held that arbitration was improper for injunctive claims brought on behalf of the general public but declined to rule on all injunctive claims, such as "UCL injunctive relief actions brought by injured business competitors." Cruz, 30 Cal. 4th at 315. And in Broughton, the court again shied away from a broad holding about all injunctive relief claims. Broughton, 21 Cal. 4th at 1079 ("We need not decide the broad question framed by the Court of Appeal and by plaintiffs as to whether an arbitrator may ever issue a permanent injunction."). Instead, the holding in Broughton is that, when a plaintiff is functioning as a private attorney general, the injunctive claim is not arbitrable. Id. at 1080. Thus, both Cruz and Broughton acknowledge that certain injunctive claims may be arbitrable and instead provide guidelines for determining when injunctive claims are not subject to arbitration. It is not clear that Concepcion intended to overrule the Cruz and Broughton line of cases.

Further, as set forth thoroughly in Broughton, there are compelling reasons why arbitration is not the proper forum for vindicating a broad public right. Broughton notes that "[o]ur path . . . begins by recalling that the purpose of arbitration is to voluntarily resolve private disputes in an expeditious and efficient manner." Id. at 1080. And the court was "cognizant of the evident institutional shortcomings of private arbitration in the field of such public injunctions." Id. at 1081. Broughton goes on to discuss these shortcomings. For example, a superior court retains jurisdiction over a public injunction, but arbitrators are not bound by earlier decisions of arbitrators in the same case, and this could cause inconsistency. Id. at 1081. And arbitration awards don't automatically have effect on non-parties, so even a public injunction could be enforceable only by the parties to the original case. Id. If another consumer plaintiff sought to enforce an injunction, he or she would need to re-arbitrate the same claim. Further, judges are accountable to the public in ways that arbitrators are not, so Broughton stated that judges are more suitable for overseeing injunctive remedies designed for public protection. Id.

See In re Directv, 2011 U.S. Dist. LEXIS 102027, at 37-39.

Northern District Certifies Meal Period Class on Behalf of Tesoro Refinery Plant Operators: Delagarza v. Tesoro Ref. & Mktg. Co.

2011-09-10T08:00:00.000-07:00

On September 8, 2011, Northern District Judge Edward M. Chen granted certification of meal period claims on behalf of “12-hour shift employees at the Golden Eagle refinery in Martinez, … alleging that they were required to be on duty at the refinery for the entirety of their shifts due to the dangerous work environment under which they operate, the potential need for emergency response, and Tesoro's efforts to keep the refinery running 24 hours a day, 365 days a year.” See Delagarza v. Tesoro Ref. & Mktg. Co., 2011 U.S. Dist. LEXIS 101127 (N.D. Cal. 2011). The Court’s certification opinion and analysis is analogous to Judge Claudia Wilken’s order in Gardner v. Shell Oil Co., 2011 U.S. Dist. LEXIS 44851 (N.D. Cal. Apr. 21, 2011), discussed previously here.

While the Court’s opinion contains discussion on several important points – including the non-impact of Wal-Mart v. Dukes, 131 S. Ct. 2541(2011), as was predicted in a previous post contained here – the most interesting point concern the Court’s discussion of a meal break theory predicated upon the issue of “control.” It bears noting that one of the biggest misconceptions with regard to meal period compliance is that an employer’s duty is exhausted by merely affording employees an opportunity to eat. This, however, narrowly construes the law, as compensable working time in not confined to time spent working. To the contrary, “California law requires that employees be compensated for all time ‘during which an employee is subject to the control of an employer’” [Rutti v. Lojack Corp., 596 F.3d 1046, 1061 (9th Cir., 2010)], and importantly, “an employee who is subject to an employer's control does not have to be working during that time to be compensated under [the] Wage Order.” See Morillion v. Royal Packing Co., 22 Cal. 4th 575, 582 (2000).

As explained by Judge Chen, making breaks "available" is not synonymous with giving employees 30 minutes to eat, and as such, the fact that “an employee had time to eat during his or her shift does not establish that such a meal satisfied the California requirements for off-duty meal periods”:

“Defendant's argument that it need only make meal periods available in order to satisfy the law does not answer Plaintiffs' central allegations; it merely begs the question whether those meal periods that were made available complied with applicable law regarding off-duty meal breaks. For example, Defendant emphasizes Plaintiffs' acknowledgments that they have been able to eat during their employment at the refinery. See, e.g., Gutierrez Depo., Docket No. 139, Exh. L, at 67-68; Brunell Decl., Docket No. 142, ¶ 5 (Operators "regularly have much more than 30-minutes of uninterrupted time every five hours during their shifts to eat their meals"). However, that an employee had time to eat during his or her shift does not establish that such a meal satisfied the California requirements for off-duty meal periods. See IWC Wage Order 1-2001 § 11(C) ("Unless the employee is relieved of all duty during a 30 minute meal period, the meal period shall be considered an "on duty" meal period and counted as time worked.").

Delagarza, 2011 U.S. Dist. LEXIS 101127, at 39-40.

Rather, as the Court properly pointed out, “Courts have interpreted [meal period] provisions to mandate that employers ‘ensure that [their] employees are free from [their] control for thirty minutes.’” See id., at 42. Based on this distinction, the Court reasoned that the issue of whether Tesoro made meal breaks “available” within the meaning of the law existed whether or not employees were given 30 minutes to eat their lunch:

Even under the more lenient "available" standard advocated by Defendant, there is still a classwide dispute over whether Plaintiffs' meal periods were "off-duty" given the restrictions on their activities during shifts. This dispute "can be resolved for all members of the class in a single adjudication." Hanlon, 150 F.3d at 1022. That Defendant disputes Plaintiffs' interpretation of its legal duties to the class does not make the resolution of such a dispute "individualized"; quite the opposite.

See Delagarza, 2011 U.S. Dist. LEXIS 101127, at 43.

Ninth Circuit Reverses Denial of UCL Certification in Deceptive Online Coupon Scheme: Stearns v. Ticketmaster Corp.

2011-08-23T09:55:00.000-07:00

On August 22, 2011, the Ninth Circuit issued an opinion in Stearns v. Ticketmaster Corp., 2011 U.S. App. LEXIS 17454, 4-5 (9th Cir. Cal. Aug. 22, 2011), reversing a district court’s denial of certification of the plaintiffs' claim under the UCL. The practice at issue pertained to consumers – subsequent to making an online Ticketmaster purchase – allegedly being signed up for a third party service through a standardized money-back coupon scheme which imposed a reoccurring monthly service charge without the purchaser’s knowledge or consent. As acknowledged by the Court, this type of business practice poses a unique “reliance” scenario capable of fragmenting a proposed class, as the alleged deception is one based on a complete omission which potentially engenders no affirmative reliance whatsoever with regard to the subsequent reoccurring charge:

The gravamen of Appellants' claims is that the Appellees’ website presentations and practices are designed to lull and induce people, who really only intended to purchase tickets from Ticketmaster, into inadvertently becoming committed to purchasing EPI's services, which they neither expected, nor wanted, nor used, and that EPI then proceeds to mulct them with continuing charges. EPI even goes so far as to make charges to their credit cards, or take money directly from their bank accounts, all without specific authorization. And EPI does not issue a confirmation at the end of the internet transaction to memorialize the fact that a deal has been consummated.

See Stearns, 2011 U.S. App. LEXIS 17454, at 4-5.

Because class members generally will have no idea how they were signed up for the service under this type of practice, it is only reasonable that a defendant will seek to defeat certification by eliciting a wide array of potential factual scenarios from class members as to how they believe the subscription came to be, wreaking havoc on framing a certifiable class. This was an apparent issue in this case, as the Court upheld the district court’s finding that two of the named representative’s were inadequate based on an inability to articulate just how such charges were initiated:

As the district court pointed out, because Mancini insisted that he was not really deceived into joining the Entertainment Rewards program and, indeed, decided that he would not do so, but must have accidentally clicked on "Yes," he is not at all typical of the proposed class. And Sanders never saw the site or signed up for the program, and does not really know how his son did so; he too is far from typical of the class. His claim to the contrary abounds in crocodility. The district court did not err in refusing to accept Mancini and Sanders as class representatives.

Stearns, 2011 U.S. App. LEXIS 17454, at 10-11.

While this approach was successful in making a mess of the plaintiff’s CLRA claim (the denial of which the Court upheld), the potential for diverging reliance scenarios among class members was deemed an improper criteria on which to rest denial of certification of the plaintiff's UCL claim. In fact, the Court concluded that the district court erred in finding that predominance was lacking based on concerns that individualized proof of reliance and causation would be required. See id., at 13 (noting that Prop 64 “decidedly did not change the California rule ‘that relief under the UCL is available without individualized proof of deception, reliance and injury’” and as such “the district court's concerns about reliance and causation were not well taken.”). As reasoned by the Court, the determinative factor was whether class members were exposes to uniform representations / omissions which were reasonably likely to deceive, not whether each putative class member was in fact so deceived:

We do not, of course, suggest that predominance would be shown in every California UCL case. For example, it might well be that there was no cohesion among the members because they were exposed to quite disparate information from various representatives of the defendant. See, e.g., Wal-Mart, U.S. at , 131 S. Ct. at 2554-57; Kaldenbach v. Mut. of Omaha Life Ins. Co., 178 Cal. App. 4th 830, 849-50, 100 Cal. Rptr. 3d 637, 652 (2009). On this record, that does not appear to be the case, and the district court did not rule that it was.

Nor do we agree with Appellees' argument that because it need not be shown that class members have suffered actual injury in fact connected to the conduct of the Appellees, the alternative to the district court's ruling must be that the class lacks standing under Article III of the United States Constitution. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S. Ct. 2130, 2136, 119 L. Ed. 2d 351 (1992). No doubt a plaintiff's injury must be "concrete and particularized." Id. at 560, 112 S. Ct. at 2136. The injury here meets both of those requirements. Each alleged class member was relieved of money in the transactions. Moreover, it can hardly be said that the loss is not fairly traceable to the action of the Appellees within the meaning of California substantive law. Id.; see also Canyon Cnty. v. Syngenta Seeds, Inc., 519 F.3d 969, 974-75 n.7 (9th Cir. 2008). That law, as already noted, keys on the wrongdoing of Appellees and is designed to protect the public (including the proposed class members). Tobacco II, 46 Cal. 4th at 312, 207 P.3d at 30, 93 Cal. Rptr. 3d at 570. In other words, this is not a case, as was possible under California's UCL before it was amended, where the representative plaintiff need not even show any connection to a defendant's conduct;[] it is plainly a case where Appellants' claim is that they came, saw, were conquered by stealth, and were relieved of their money.[] Basically, Appellees' real objection is that state law gives a right to "monetary relief to a citizen suing under it"[] (restitution) without a more particularized proof of injury and causation.[] That is not enough to preclude class standing here.

Stearns, 2011 U.S. App. LEXIS 17454, 13-15.

Ninth Circuit Finds Strategic Use of Rule 68 Offers of Judgment Incompatible with Rule 23: Pitts v. Terrible Herbst, Inc.

2011-08-11T09:39:00.000-07:00

On August 9, 2011, the Ninth Circuit issued an opinion in Pitts v. Terrible Herbst, Inc. concluding that “an unaccepted Rule 68 offer of judgment – for the full amount of the named plaintiff's individual claim and made before the named plaintiff files a motion for class certification – does not moot a class action.” See Pitts, 2011 U.S. App. LEXIS 16368, at 23 (9th Cir. Nev. Aug. 9, 2011). Conversely, the Court further held that an offer made subsequent to denial of certification still does not necessarily moot a proposed class action. Rather, “[o]nly once the denial of class certification is final does the defendant's offer – if still available – moot the merits of the case because the plaintiff has been offered all that he can possibly recover through litigation.” See id., at 24.

This method of mooting a class-wide claim is generally asserted in the context of a FLSA collective action where it has received a small degree of success due to the “opt-in” nature of the class mechanism. In rejecting this litigation strategy in the Rule 23 context, the Ninth Circuit reasoned that the practice of "buying off" the named plaintiff affirmatively creates a “transitory claim” in the same respects as a claim that is inherently transitory, and as such, mootness is to be evaluated under “relation back” principles to the date of filing of the complaint:

[W]e conclude that Terrible's unaccepted offer of judgment did not moot Pitts's case because his claim is transitory in nature and may otherwise evade review. Accordingly, if the district court were to certify a class, certification would relate back to the filing of the complaint. We recognize that the canonical relation-back case—such as Gerstein or McLaughlin—involves an "inherently transitory" claim and, correspondingly, "a constantly changing putative class." Wade v. Kirkland, 118 F.3d 667, 670 (9th Cir. 1997). But we see no reason to restrict application of the relation-back doctrine only to cases involving inherently transitory claims. Where, as here, a defendant seeks to "buy off" the small individual claims of the named plaintiffs, the analogous claims of the class—though not inherently transitory—become no less transitory than inherently transitory claims. Thus, although Pitts's claims "are not 'inherently transitory' as a result of being time sensitive, they are 'acutely susceptible to mootness' in light of [the defendant's] tactic of 'picking off' lead plaintiffs with a Rule 68 offer to avoid a class action." Weiss v. Regal Collections, 385 F.3d 337, 347 (3d Cir. 2004) (internal citation omitted). The end result is the same: a claim transitory by its very nature and one transitory by virtue of the defendant's litigation strategy share the reality that both claims would evade review.

See Pitts, 2011 U.S. App. LEXIS 16368, at 20-21.

Importantly, the Court found that permitting a defendant to dispose of a class action through such strategic conduct would not only undermine the objectives of Rule 23 as a mechanism to adjudicate small value claims, but burden the courts by encouraging the filing of multiple, successive lawsuits:

Invoking the relation back doctrine in this context furthers the purposes of Rule 23. Where the class claims are so economically insignificant that no single plaintiff can afford to maintain the lawsuit on his own, Rule 23 affords the plaintiffs a "realistic day in court" by allowing them to pool their claims. Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 809, 105 S. Ct. 2965, 86 L. Ed. 2d 628 (1985); see also Roper, 445 U.S. at 339 ("Where it is not economically feasible to obtain relief within the traditional framework of a multiplicity of small individual suits for damages, aggrieved persons may be without any effective redress unless they may employ the class-action device."). A rule allowing a class action to become moot "simply because the defendant has sought to 'buy off' the individual private claims of the named plaintiffs" before the named plaintiffs have a chance to file a motion for class certification would thus contravene Rule 23's core concern: the aggregation of similar, small, but otherwise doomed claims. Roper, 445 U.S. at 339; see also Weiss, 385 F.3d at 344 ("[A]llowing the defendants here to 'pick off' a representative plaintiff with an offer of judgment less than two months after the complaint is filed may undercut the viability of the class action procedure, and frustrate the objectives of this procedural mechanism for aggregating small claims . . . ."). It would effectively ensure that claims that are too economically insignificant to be brought on their own would never have their day in court. See Zeidman v. J. Ray McDermott & Co., 651 F.2d 1030, 1050 (5th Cir. 1981) ("[I]n those cases in which it is financially feasible to pay off successive named plaintiffs, the defendants would have the option to preclude a viable class action from ever reaching the certification stage."); Stewart v. Cheek & Zeehandelar, LLP, 252 F.R.D. 384, 386 (S.D. Ohio 2008) ("[T]reating pre-certification settlement offers as mooting the named plaintiffs' claims would have the disastrous effect of enabling defendants 'to essentially opt-out of Rule 23.'" (citation omitted)). And even if it does not discourage potential claimants, it "may waste judicial resources by 'stimulating successive suits brought by others claiming aggrievement.'" Weiss, 385 F.3d at 345 (quoting Roper, 445 U.S. at 339).

See Pitts, 2011 U.S. App. LEXIS 16368, at 21-23.

Central District Certifies Meal Period and Off-The-Clock Claims on Behalf of California H&R Block Workers: Ugas v. H&R Block Enterprises, LLC

2011-08-09T11:02:00.000-07:00

On Aug. 4, 2011, Central District Judge Christina A. Snyder granted certification of meal period and overtime claims on behalf of California “Tax Professionals" employed by H&R Block. See Ugas v. H&R Block Enters., 2011 U.S. Dist. LEXIS 86769 (C.D. Cal. Aug. 4, 2011). According to plaintiffs, the (1) defendant maintained a policy of not paying Section 226.7 premium wages despite utilizing a standardized computer time tracking system which placed defendant on actual notice that meal breaks were regularly being missed, and (2) alleged that a district manager overseeing the plaintiff’s location maintained a de-facto policy of having employees adjust their working time to exclude overtime hours and record meal breaks as having been taken. See id., at 11-13. According to plaintiffs, the later was to be established by testimony of the manager of plaintiff's location, as well as a comparison of time records and times recorded through the tax preparation software utilized by employees.

In certifying plaintiff’s meal break claim, the Court reasoned that defendant’s absolute policy of not paying section 226.7 premium wages provided a common issue upon which defendant's liability could be adjudicated as to the class as a whole:

In this case, the Court need not reach the question of whether defendants were required to ensure that employees took their meal breaks or whether defendants were required only to make them available. Plaintiffs have presented sufficient evidence that defendants, as a policy, do not pay the legally required meal break premium pursuant to Cal. Labor Code § 226.7. This question of law and fact will be common to the class members and is central to plaintiffs' meal break claim. See Exh. 2, Plaintiffs' Compendium of Cited Portions of Depositions (deposition testimony of Kaye Micek stating that an associate will be paid "for the time that he is working" when a meal break is missed); Ugas Decl. ¶ 18, Guerra Decl. ¶ 18 ("While I was paid for working through the meal breaks, I was not reimbursed by H&R Block at a rate of an hour's pay at my regular rate of pay"). n5 Moreover, plaintiffs meets the typicality standard of Rule 23(a) because they, and all class members, were employed by defendants on an hourly basis during the class period, were subject to the same policies and procedures, and were allegedly improperly compensated. Therefore, the Court concludes that it is proper to certify the California subclass with respect to plaintiffs' meal break claim, and it is not necessary to stay that decision until the resolution of Brinker.

See Ugas, 2011 U.S. Dist. LEXIS 86769, at 23-25.

However, with regard to plaintiff’s off-the-clock claim, the Court concluded that deposition testimony by the office manager that district manager had instructed her to have employees adjust time records to exclude overtime was sufficient to only certify a sub-class for the specific district which the plaintiff worked:

In reaching this conclusion, the Court first finds that plaintiffs have satisfied the requirements of Rule 23(a). With respect to numerosity, plaintiffs establish that even if the class were limited to the Pomona region, it would include 148 putative class members, which is sufficient to meet this requirement. Moreover, as to commonality, plaintiffs have offered sufficient evidence that they may be able to show that defendants pursue an unwritten policy to improperly withhold overtime wages from class members in this district. Plaintiffs' evidence includes the comparison of computer programs tracking clock-in and clock-out times with time logged in to Tax Preparation Software, and testimony by Cabrera that she was instructed by the District Manager that she should alter time records to remove overtime and to add meal breaks. Cabrera Depo. 82:21-83:2 ("[I]f there was over time, there was yellow. And she says, 'Okay, you're going to take this off.' And then, 'Look, this person, so-and-so doesn't have a lunch break. You need to put at least 15 to 30 minutes in there.' Okay. So I'd go and fix it. And that's how I was taught how to do it"); Cabrera Depo. 87:7-12 ("She was training me, and she was telling me what all this is, yellow and red, and says 'See how this is? This has overtime here. You have to take that overtime because there's no overtime allowed right now. . .' it was part of what she was showing me how to do"). n6 This evidence is sufficient to establish a common method of proof as to the liability of defendants, based on the existence of an unwritten company policy. It is also sufficient to establish a common method of proof as to damages, as the Court finds the comparison of the STAR data with the TPS data seems to the Court to be a viable methodology to make a class-wide calculation.

See Ugas, 2011 U.S. Dist. LEXIS 86769, at 26-28.

In certifying the subclass, the Court rejected the defendant’s argument that the Supreme Court’s decision Wal-Mart precluded a finding of commonality based solely on the testimony of the discrict managers alleged de facto policy:

The Court also rejects defendants' argument that the recent Supreme Court decision in Wal-Mart Stores, Inc. v. Dukes, et al., No. 10-277, 564 U.S. (June 20, 2011) precludes certification in the instant case. Unlike in Wal-Mart, here plaintiffs have shown that there was "a common mode of exercising discretion that pervades the entire company," at least with respect to the Pomona district. Defendants may be able to prove at trial, or on a motion for summary judgment, that their policies, written and unwritten, do not violate any labor laws. However, plaintiffs' claims, as alleged, and as supported by sufficient, though controverted, evidence, support certification of the subclasses as defined by the Court.

See Ugas, 2011 U.S. Dist. LEXIS 86769, at 30.

California Supreme Court Grants Review in In Re Lamps Plus Overtime Cases

2011-07-20T17:03:00.000-07:00

On July 20, 2011, the California Supreme Court granted review of the Second District (Division 8) opinion upholding denial of certification of meal break claims in In Re Lamps Plus Overtime Cases, 195 Cal. App. 4th 389 (2011). This comes on the heels of the Court taking the same action with regard Division 8’s identical opinions in Hernandez v. Chipotle Mexican Grill, Inc., Case No. S188755, and Tien v. Tenet Healthcare, Case No. S191756.

Per the Court's website, briefing in Lamps Plus is stayed pending the Court’s decision in Brinker:

The petition for review is granted. Further action is this matter is deferred pending consideration and disposition of a related issue in Brinker Restaurant v. Superior Court, S166350 (see Cal. rules of Court, rule 8.524 (c)), or pending further order of the court. Submission of additional briefing, pursuant to California Rules of Court, rule 8.528, is deferred pending further order of the court. Votes: Cantil-Sakauye, C.J., Kennard, Baxter, Werdegar, Chin, Corrigan, JJ.

Second District Finds PAGA Claims Not Subject to FAA Preemption Under Concepcion: Brown v. Ralphs Grocery

2011-07-12T15:55:00.000-07:00

On July 12, 2011, the Second District (Division Five) held that the U.S. Supreme Court’s preemption analysis in AT&T Mobility LLC v. Concepcion does not apply to PAGA claims. See Brown v. Ralphs Grocery, __Cal.App.4th __ (2011). The Court remanded the action for further consideration as to “whether the provision in the arbitration agreement waiving plaintiff’s right to pursue a representative action under the PAGA can be severed or whether the presence of that one invalid provision in the arbitration agreement renders the entire agreement or portions thereof unenforceable.” The ultimate holding on this question may provide a basis to exclude labor class actions from the scope of FAA preemption under Concepcion whenever a PAGA claim is alleged. More on this decision later.

California Supreme Court Holds California Overtime Provisions Apply to Colorado / Arizona Residents Working in California, But that the UCL Does Not Permit Enforcement of FLSA Overtime Claims For Work Performed By Nonresidents In Other States: Sullivan v. Oracle Corp.

2011-07-01T13:27:00.000-07:00

On June 30, 2011, the California Supreme Court issued an opinion in Sullivan v. Oracle Corp., __ Cal. 4th __ (2011) resolving the set of questions pertaining to the scope of California’s Overtime and UCL provisions certified by the Ninth Circuit in Sullivan v. Oracle Corp., 557 F.3d 979 (9th Cir. Cal. 2009). These questions, and the Court’s response thereto, is as follows:

First, the Court was asked to determine whether the California Labor Code's overtime provisions apply to work performed in California by nonresidents. In ruling on this question, the Court acknowledged that it could not provide a sweeping response applicable to the residents of all 50 States, as a response to this question was not simply dependent on whether the applicable provisions of the California Labor Code covered non-residents working in California, but also turned on “whether conflict-of-laws principles direct us to apply California law in the event another state also purports to regulate work performed here.” See Sullivan, 2011 Cal. LEXIS 6537, at 7-8.

With regard to the first component, the Court concluded that California overtime provisions expressly applied to “any work” and “any employee” [see id., at 8 (citing Labor Code §510(a) and 1194(a))], and that the “preambular section of the wage law [] confirms that our employment laws apply to ‘all individuals’ employed in this state[.]” See id. (citing (Lab. Code § 1171(a)). Moreover, the Court reasoned that a construction of these provisions as governing work performed by non-residents not only fell squarely within the State’s police powers to regulate activity with California’s borders, but was actually necessary to ensure that the objectives of California’s overtime provisions were given full effect:

That California would choose to regulate all nonexempt overtime work within its borders without regard to the employee's residence is neither improper nor capricious. As a matter of federal constitutional law, "[s]tates possess broad authority under their police powers to regulate the employment relationship to protect workers within the State. Child labor laws, minimum and other wage laws, laws affecting occupational health and safety, and workmen's compensation laws are only a few examples." (De Canas v. Bica (1976) 424 U.S. 351, 356.) Furthermore, the overtime laws serve important public policy goals, such as protecting the health and safety of workers and the general public, protecting employees in a relatively weak bargaining position from the evils associated with overwork, and expanding the job market by giving employers an economic incentive to spread employment throughout the workforce. (Gentry v. Superior Court (2007) 42 Cal.4th 443, 456.) The Legislature has considered these purposes sufficiently important to make the right to overtime compensation unwaivable (Lab. Code, § 1194) and the failure to pay overtime a crime (id., § 1199; see Gentry, at p. 456). To exclude nonresidents from the overtime laws' protection would tend to defeat their purpose by encouraging employers to import unprotected workers from other states. Nothing in the language or history of the relevant statutes suggests the Legislature ever contemplated such a result. A contrary conclusion would be difficult, if not impossible, to reconcile with the Legislature's express declaration that "[a]ll protections, rights, and remedies available under state law . . . are available to all individuals . . . who are or who have been employed, in this state." (Lab. Code, § 1171.5, subd. (a).)

See Sullivan, 2011 Cal. LEXIS 6537, at 10-12.

With regard to the second component, the Court made clear that whether California overtime provisions applied to the residents of any given State turned (in part) on whether such application would create a conflict with the resident's home state law. The Court’s analysis here – which was limited to the laws of Colorado and Arizona – determined that no arguable conflict could exist because Arizona has no overtime laws and Colorado's overtime law only governs work performed within the boundaries of Colorado:

Whether a true conflict exists under the circumstances of this case is doubtful, at best. California has, and has unambiguously asserted, a strong interest in applying its overtime law to all nonexempt workers, and all work performed, within its borders. (See Lab. Code, § 1171.5, subd. (a) ["All protections, rights, and remedies available under state law . . . are available to all individuals . . . employed, in this state."]; see also id., §§ 510, subd. (a) ["[a]ny work"], 1194, subd. (a) ["any employee"], 1199 [criminal sanctions]; see also discussion ante, at p. 6 et seq.) California's interests, as this court has identified them, are in protecting health and safety, expanding the labor market, and preventing the evils associated with overwork. (Gentry v. Superior Court, supra, 42 Cal.4th 443, 456.) Similar interests underlie the FLSA's overtime provisions (Barrentine v. Arkansas-Best Freight System (1981) 450 U.S. 728, 739) and, we may assume, Colorado law as well. Neither Arizona nor Colorado, however, has asserted an interest in regulating overtime work performed in other states. Arizona, as mentioned, has no overtime law at all, and Colorado's overtime law purports to govern only "work performed within the boundaries of the state of Colorado . . ." (7 Colo. Code Regs. § 1103-1(1) (2011)). These circumstances reveal no genuine basis for concluding a true conflict exists.

See Sullivan, 2011 Cal. LEXIS 6537, at 24-25.

Based on these two findings, the Court concluded that “[t]he California Labor Code does apply to overtime work performed in California for a California-based employer by out-of-state plaintiffs in the circumstances of this case….” See id., at 30.

Second, the Court was asked to determine whether the violation of the overtime provisions in Question 1 also constituted a violation under the UCL. The Court answered this in the affirmative:

We have already decided that the failure to pay legally required overtime compensation falls within the UCL's definition of an "unlawful . . . business act or practice" (Bus. & Prof. Code, § 17200; see Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 177 [UCL authorizes, as restitution, order for payment of unlawfully withheld wages]), and the parties offer no argument on the point.

Sullivan, 2011 Cal. LEXIS 6537, 32 (Cal. June 30, 2011)

Third, the Court was asked to determine whether the UCL applies to a FLSA overtime claim for work performed by nonresidents in other States, which here, was predicated on the fact the decision to classify such workers as exempt was made at the company’s corporate headquarters in California. The Court held it did not. The Court’s reasoning was based on the fact that an erroneous classification determination is not what is prohibited under the FLSA; rather, the prohibited activity is the failure to pay overtime compensation:

The Ninth Circuit has asked us to decide whether the UCL applies to plaintiffs' FLSA claims "in the circumstances of this case" (Sullivan III, supra, 557 F.3d 979, 983), which we understand to mean in accordance with the same stipulated facts on which the federal courts have based their decisions. Those stipulated facts identify only a single instance of relevant conduct occurring in California: "The decision-making process to classify Instructors as exempt from the requirement to be paid overtime wages under the FLSA occurred primarily from within the headquarters offices of Oracle Corporation located in Redwood Shores, California." Certainly the UCL reaches any unlawful business act or practice committed in California. (See Bus. & Prof. Code, § 17200 ["As used in this chapter, unfair competition shall mean and include any unlawful, unfair or fraudulent business act or practice . . . ."].) But for an employer to adopt an erroneous classification policy is not unlawful in the abstract. (Cf. Walsh v. IKON Office Solutions, Inc. (2007) 148 Cal.App.4th 1440, 1462 [addressing California wage law].) What is unlawful, and what creates liability under the FLSA, is the failure to pay overtime when due. (See 29 U.S.C. § 207(a)(1) ["no employer shall employ any of his employees . . . for a workweek longer than forty hours unless such employee receives [overtime] compensa tion"].) Accordingly, that Oracle's decision to classify its Instructors as exempt was made in California does not, standing alone, justify applying the UCL to the nonresident plaintiffs' FLSA claims for overtime worked in other states. n10 Nor does any other basis for applying the UCL to those claims appear in the stipulated facts.

See Sullivan, 2011 Cal. LEXIS 6537, at 34-35.

Importantly, the court reasoned that “the UCL might conceivably apply to plaintiffs' claims if their wages were paid (or underpaid) in California,” but explained that this issue was not before the Court as “the stipulated facts do not speak to the location of payment.” See Sullivan, 2011 Cal. LEXIS 6537, at 36.

Central District Certifies Paystub Claim Against FedEx: McKenzie v. Fed. Express Corp.

2011-07-01T09:29:00.000-07:00

On June 16, 2011, Central District court Judge Gary Allen Feess ordered certification of a Labor Code section 226(e) paystub claim against FedEx in McKenzie v. Fed. Express Corp., 2011 U.S. Dist. LEXIS 65278 (C.D. Cal. June 16, 2011). Plaintiff's alleged that Fedex violated Cal Lab Code § 226(a) by (1) failing to provide a separate category calculating the total hours worked, (2) including an overtime rate that only identified the amount above the regular rate, rather than expressly identifying an all-inclusive, precise overtime rate, and (3) failing to provide an end-date for the pay-period.

The case is somewhat noteworthy as it really underscores the fact that the threshold burden necessary to certify a paystub claim is very low. Due to the systemic nature which pay-stubs are created, the only defense an employer generally has is to focus on the element of injury. However, as the Court’s predominance analysis makes clear, how each class member was injured does not require an individualized inquiry under section 226(e). See McKenzie, 2011 U.S. Dist. LEXIS 65278, at 25.

First, citing to the prior decision in Jaimez v. DAIOHS USA, Inc., 181 Cal. App. 4th 1286 (2010), the Court concluded that an alleged practice of failing to adhere to the requirements of Section 226 itself – not the alleged injury – is the basis on which certification of a paystub claim must rest. As explained by the Court, Jaimez made clear that certification was required “even though there was no evidence in the record of the plaintiff's injury resulting from the inaccurate paystubs….” See McKenzie, 2011 U.S. Dist. LEXIS 65278, at 25-26. As further noted by the Court on this point:

[E]ven if there was no evidence in the record that McKenzie suffered an injury from the wage statements issued by FedEx, and some individualized proof of damages may be necessary in this case, the holding in Jaimez also supports McKenzie's position that common issues nevertheless predominate in the present action. See 105 Cal. Rptr. 3d at 460 (holding that "[t]he fact that individualized proof of damages may ultimately be necessary does not mean . . . that [the plaintiff's] theory of recovery is not amenable to class treatment. A common legal issue predominates the claim, and it makes no sense to resolve it in a piecemeal fashion.")

See McKenzie, 2011 U.S. Dist. LEXIS 65278, at 30 fn. 3.

Second, citing to the decision in Ortega v. J.B. Hunt Transp., Inc., 258 F.R.D. 361 (C.D. Cal. 2009), the Court reasoned that an inherent injury necessarily accompanies a violation of a section 226(e) that will be common to the class. Specifically, “the court in Ortega explained that the plaintiff's ‘statement that he could usually do the math in [his] head and figure out approximately what [he] was going to get gross is consistent with the type of injury that has been found sufficient to support a claim for violation of Section 226.’” See McKenzie, 2011 U.S. Dist. LEXIS 65278, at 26-27. Moreover, the Court reasoned that “this lawsuit, and the difficulty and expense incurred by McKenzie and the proposed class in reconstructing time and pay records is sufficient evidence that they suffered a common injury.” See id., at 29-30.

Thus, based on the forgoing analysis, it is fairly clear that the threshold burden necessary to certify a paystub claim under Section 226 is very low. Essentially all that is required is evidence that the alleged violation was standardized among the employees which comprise the class.

U.S. Supreme Court’s Decision in Wal-Mart Stores, Inc. v. Dukes et al Unlikely To Significantly Impact Rule 23(b)(3) Certification

2011-06-21T09:50:00.000-07:00

On June 20, 2011, the U.S Supreme Court reversed the Ninth Circuit’s certification decision in Wal-Mart Stores, Inc. v. Dukes et al, 564 U. S. ____ (2011), concluding that the Ninth Circuit applied improper criteria with regard to Rule 23(b)(2) (which was expected) and commonality under Rule 23(a)(2), which was somewhat surprising.

The Court’s Rule 23(a)(2) analysis unquestionably elevates the burden required to establish commonality, which up until now “has been construed permissively.” See Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019 (9th Cir. Cal. 1998). As held by the Majority, this standard was improper, as the element of commonality requires a more demanding showing establishing that the defined class is not simply bound together by the same legal claim or common questions, but rather, is bound by (1) the same theory of liability that (2) is also capable of classwide resolution:

Commonality requires the plaintiff to demonstrate that the class members “have suffered the same injury,” Falcon, supra, at 157. This does not mean merely that they have all suffered a violation of the same provision of law. Title VII, for example, can be violated in many ways—by intentional discrimination, or by hiring and promotion criteria that result in disparate impact, and by the use of these practices on the part of many different superiors in a single company. Quite obviously, the mere claim by employees of the same company that they have suffered a Title VII injury, or even a disparate impact Title VII injury, gives no cause to believe that all their claims can productively be litigated at once. Their claims must depend upon a common contention—for example, the assertion of discriminatory bias on the part of the same supervisor. That common contention, moreover, must be of such a nature that it is capable of classwide resolution—which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.

Slip Opinion, at 19.

The clear objective of this standard, in the view of the Majority, is to produce cohesion to the class found lacking in this case. See id., at 12 (“Without some glue holding the alleged reasons for all those decisions together, it will be impossible to say that examination of all the class members’ claims for relief will produce a common answer to the crucial question why was I disfavored.”).

As the dissent points out, however, the practical effect of the Majority's standard elevates a court's commonality analysis to the functional equivalent of a Rule 23(b)(3) predominance analysis. See Dissent, at 9 (“The Court’s emphasis on differences between class members mimics the Rule 23(b)(3) inquiry into whether common questions “predominate” over individual issues.”). The majority rejects this criticism:

The dissent misunderstands the nature of the foregoing analysis. It criticizes our focus on the dissimilarities between the putative class members on the ground that we have “blend[ed]” Rule 23(a)(2)’s commonality requirement with Rule 23(b)(3)’s inquiry into whether common questions “predominate” over individual ones. See post, at 8–10 (GINSBURG, J., concurring in part and dissenting in part). That is not so. We quite agree that for purposes of Rule 23(a)(2) “‘[e]ven a single [common] question’” will do, post, at 10, n. 9 (quoting Nagareda, The Preexistence Principle and the Structure of the Class Action, 103 Colum. L. Rev. 149, 176, n. 110 (2003)). We consider dissimilarities not in order to determine (as Rule 23(b)(3)requires) whether common questions predominate, but in order to determine (as Rule 23(a)(2) requires) whether there is “[e]ven a single [common] question.” And there is not here. Because respondents provide no convincing proof of a companywide discriminatory pay and promotion policy, we have concluded that they have not established the existence of any common question.

Slip Opinion, at 19

While it is true that the procedural standard articulated by the Majority does not focus on whether common questions predominate, the Majority’s explanation on this point does not dispute the fact that the substantive effect of this commonality standard will likely limit the requisit issues to only those capable of satisfying predominance (which seemed to be the point articulated by Justice Ginsburg).

While the Court's standard likely will substantially impact certification under Rule 23(b)(1) and (b)(2) moving forward, it is unlikely to have significant impact Rule 23(b)(3) certification. It is generally held that “the commonality element is of less importance in a Rule 23(b)(3) class action … because the class must also meet the more stringent predominance requirement of Rule 23(b)(3).” See In re Educ. Testing Serv. Praxis Principles of Learning & Teaching: Grades 7-12 Litig., 2006 U.S. Dist. LEXIS 9726, 10 (E.D. La. Mar. 13, 2006). “The Rule 23(b)(3) predominance inquiry tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation.” See Amchem Prods. v. Windsor, 521 U.S. 591, 623 (U.S. 1997). Based on this fact, a court’s Rule 23(b)(3) inquiry generally subsumes Rule 23(a)(2) analysis altogether. See Hanlon v. Chrysler Corp., 150 F.3d 1011, 1022 (9th Cir. Cal. 1998) (a court’s “[Rule 23(b)(3) predominance] analysis presumes that the existence of common issues of fact or law have been established pursuant to Rule 23(a)(2)[.]”); In re Ford Motor Co. Bronco II Prod. Liab. Litig., 177 F.R.D. 360, 366 (E.D. La. 1997) (“courts usually do not spend a great deal of time addressing whether common issues exist, but instead focus on the related issue under Rule 23 (b)(3) of whether common issues predominate over individual ones.”).

U.S. Supreme Court Severely Limits Preclusive Effect Afforded To Denials of Class Certification: Smith v. Bayer Corp.

2011-06-17T14:04:00.000-07:00

On June 16, 2011, the U.S. Supreme Court issued an important class action decision in Smith v. Bayer Corp., 564 U. S. ____ (2011) (2011 U.S. LEXIS 4559) relating to the preclusive effect which may be given to a Federal court order denying class certification. This opinion involves an issue I have litigated at length before. See Johnson v. GlaxoSmithKline, Inc., 166 Cal. App. 4th 1497 (2d Dist. 2008). In Smith, the Court considered whether a district court exceeded the bounds of its authority under the “relitigation exception” to the Anti-injunction Act (28 U.S.C. § 2283) by enjoining a State court class action from proceeding based on a prior certification denial in Federal court. The Court resolved this question in the affirmative, finding that two elements of issue preclusion – i.e. the “identity of issues” and “identity of parties” requirements – could not be met.

With regard to the “identity of issues” requirement, the Court focused on whether variations in class action procedure at the State and Federal level could ever produce a finding that the "same issues" had actually been litigated and decided. The Court concluded that while such a finding was possible, this finding could not be predicated upon the mere fact that the State adopted Rule 23 procedural standards, as doing so would infringe upon each State’s right to develop its own class action jurisprudence. According to the Court, this was the starting point in the analysis, and to the extent any uncertainty exists, this requires the issue be left for resolution at the state court level:

The Court of Appeals and Smith offer us two competing ways of deciding whether the West Virginia and Federal Rules differ, but we think the right path lies somewhere in the middle. The Eighth Circuit relied almost exclusively on the near-identity of the two Rules' texts. See 593 F.3d at 723. That was the right place to start, but not to end. Federal and state courts, after all, can and do apply identically worded procedural provisions in widely varying ways. If a State's procedural provision tracks the language of a Federal Rule, but a state court interprets that provision in a manner federal courts have not, then the state court is using a different standard and thus deciding a different issue. See 18 Wright & Miller § 4417, at 454 (stating that preclusion is "inappropriate" when "different legal standards . . . masquerad[e] behind similar legal labels"). At the other extreme, Smith contends that the source of law is all that matters: a different sovereign must in each and every case "have the opportunity, if it chooses, to construe its procedural rule differently." Brief for Petitioners 22 (quoting ALI, Principles of the Law, Aggregate Litigation § 2.11, Reporters' Notes, cmt. b, p. 181 (2010)). But if state courts have made crystal clear that they follow the same approach as the federal court applied, we see no need to ignore that determination; in that event, the issues in the two cases would indeed be the same. So a federal court considering whether the relitigation exception applies should examine whether state law parallels its federal counterpart. But as suggested earlier, see supra, at 6, the federal court must resolve any uncertainty on that score by leaving the question of preclusion to the state courts.

See Smith, 2011 U.S. LEXIS 4559, at 20-21.

With regard to the “identity of parties” requirement, the Court extended its "virtual representation" analysis in in Taylor v. Sturgell, 553 U.S. 880 (2008) to conclude that a prior order denying certification of a class cannot be imposed on a completely different representative plaintiff, even if the subsequent action is otherwise identical in all other respects. As reasoned by the Court, the proposition that a denial of certification can itself be imposed on a class-wide basis rests squarely upon fallacious logic:

Indeed, the very ruling that Bayer argues ought to be given preclusive effect is the District Court's decision that a class could not properly be certified. So Bayer wants to bind Smith as a member of a class action (because it is only as such that a nonparty in Smith's situation can be bound) to a determination that there could not be a class action. And if the logic of that position is not immediately transparent, here is Bayer's attempt to clarify: "[U]ntil the moment when class certi-fication was denied, the McCollins case was a properly conducted class action." Brief for Respondent 37. That is true, according to Bayer, because McCollins' interests were aligned with the members of the class he proposed and he "act[ed] in a representative capacity when he sought class certification." Id., at 36.

But wishing does not make it so. McCollins sought class certification, but he failed to obtain that result. Because the District Court found that individual issues predominated, it held that the action did not satisfy Federal Rule 23's requirements for class proceedings. In these circumstances, we cannot say that a properly conducted class action existed at any time in the litigation. Federal Rule 23 determines what is and is not a class action in federal court, where McCollins brought his suit. So in the absence of a certification under that Rule, the precondition for binding Smith was not met. Neither a proposed class action nor a rejected class action may bind nonparties. What does have this effect is a class action approved under Rule 23. But McCollins' lawsuit was never that.

See Smith, 2011 U.S. LEXIS 4559, at 29-30.

This latter conclusion is the kicker, as it all but eliminates any argument that issue preclusion can be applied to subsequent lawsuits. The Court acknowledged as much, asserting that the policy objective of preventing a successive line of separate actions “flies in the face of the rule against nonparty preclusion.”

Northern District Certifies False Advertisement Class Based on Walnut Manufacturer Health Claims: Zeisel v. Diamond Foods, Inc.

2011-06-10T12:14:00.000-07:00

On June 7, 2011, Northern District Judge Jeffrey S. White certified a nationwide UCL/CLRA class based on allegations that the defendant engaged in promotional activities that “‘used express and implied statements about the positive effects of omega-3 fatty acid consumption on health to entice consumers to purchase its’ Shelled Walnut Products.” See Zeisel v. Diamond Foods, Inc., 2011 U.S. Dist. LEXIS 60608, 12-13 (N.D. Cal.). The Court’s opinion contains interesting analysis on issues relating to absent class member standing, as well as the element of ascertainability.

With regard to the first issue, the defendant attempted to re-hatch an issue, raised and rejected in Tobacco II, that absent class members must independently establish Article III standing. The defendant maintained that the California Supreme Court’s ruling in Tobacco II only applies in State court (a line of argumentation that I have been seeing with increasing frequency on various issues). The Court rejected the argument, reasoning that the Tobacco II court relied on Federal authorities interpreting Article II standing under Rule 23 in making its determination:

Diamond also urges the Court to deny class certification because absent class members lack Article III standing. [] Diamond argues that although the California Supreme Court has held that "state courts may permit uninjured individuals to pursue UCL actions in state court, so long as the class representative has established standing," the Supreme Court's decision did not and could not "remove the standing requirements set forth in Article III, including injury-in-fact and causation." (Opp. Br. at 14:8-13 (emphasis in original, citing Tobacco II, 46 Cal. 4th at 324).) The Court does not read Tobacco II to hold that a class may include members who have not been injured by a defendant's conduct. Rather, the Tobacco II court held that Proposition 64 "was not intended to, and does not, impose section 17204's standing requirement on absent class members in a UCL class action where class requirements have otherwise been found to exist." Tobacco II, 46 Cal. 4th at 324. This holding appears to be in accord with federal authority construing Rule 23. Indeed, the Tobacco II court relied heavily on federal cases interpreting the requirements of Rule 23. Thus, it noted that, in general, "standing in a class action is assessed solely with respect to class representatives, not unnamed members of the class." Id., 46 Cal. 4th at 319 (quoting In re General Motors Corp. Dex-Cool Prod. Liab. Litig., 241 F.R.D. 305, 310 (S.D. Ill. 2007)).

See Zeisel, 2011 U.S. Dist. LEXIS 60608, at 13-14.

With regard to the second issue, the Court the rejected the defendant’s argument that the lack of records enabling one to confirm whether individual consumers actually purchased the products in question foreclosed a finding of ascertainability. As reasoned by the Court, it was sufficient that the class was defined in such a way that consumers could identify themselves:

Diamond argues that it is not administratively feasible to determine if a person is a member of the proposed class because it sells its Shelled Walnut products to retailers and it does not track consumer purchases. Diamond also argues that it sells numerous other nut products and that neither the prospective class members nor the Court would have a means by which they could determine whether they purchased the Shelled Walnut products at issue in this litigation. The Court is not persuaded. [] The proposed class includes (1) all persons (2) who purchased Shelled Walnut Products in 6 ounce, 10 ounce, 16 ounce and/or 3 pound bags (3) which bore labels bearing the Structure Function Claim and Banner (4) from March 22, 2006 through the present. The Court does not find this definition to be subjective or imprecise. Rather, it includes objective characteristics that would permit a consumer to identify themself as a member of the proposed class. See, e.g. Parkinson v. Huyndai Motor America, 258 F.R.D. 580, 594 (C.D. Cal. 2008); cf. Keilholtz, 268 F.R.D at 336 (finding class definition that included persons who lived in the United States who own a home in which the disputed product was installed after a particular date was not subjective or imprecise); Chavez v. Blue Sky Nat. Bev. Co., 268 F.R.D. 365, 377 (N.D. Cal. 2010) (concluding that class of persons who purchased beverage bearing disputed mark or brand, in the United States, during a particular period was ascertainable).

See Zeisel, 2011 U.S. Dist. LEXIS 60608, at 20-21.

Second District Publishes Two New Beverly-Song “Zip Code” Opinions: Archer v. United Rentals and Folgelstrom v. Lamps Plus

2011-05-23T08:47:00.000-07:00

On May 19, 2011, the Second District (Division 1) in Archer v. United Rentals, __ Cal.App.4th __ (2011) considered several questions left unanswered in Pineda v. Williams-Sonoma Stores, Inc., 51 Cal.4th 524 (2011), previously discussed here, including (1) whether the practice of obtaining ZIP code information in credit card transactions could give rise to UCL standing, (2) the extent to which Civil Code section 1747.08 extends to business transactions, and (3) whether the trial court erred by concluding that a class was not ascertainable based on the purported need to sort through individual transactions to determine whether they were personal (and not business) in nature.

With regard to the first issue, the Court concluded that the lack of casual relationship between the practice of obtaining a consumer’s ZIP code information and a loss of money/property deprived the plaintiff of any ability to establish UCL standing:

In this case, plaintiffs essentially claim the unfair business practice is the unlawful collection and recordation of their personal identification information, an invasion of their right of privacy, which, they maintain, constitutes an “injury in fact.” (See Kwikset, supra, 51 Cal.4th at pp. 322–323.) Yet plaintiffs have failed to demonstrate how such privacy violation translates into a loss of money or property. Thus, the absence of “lost money or property” is fatal to plaintiffs’ UCL class claim for injunctive relief.

Slip Opinion, at 8.

The remaining two issues turned on the trial court’s finding that section 1747.08 applied only to personal credit card transactions, which not only excluded business credit cards on their face, but required a factual inquiry into whether personal credit card transactions were business related. Based on this construction of the statute, the trial court denied certification of a class action based on the purported need to sort through individual transactions to determine class membership. The Court of Appeal disagreed, concluding that the statute applies across the board to personal credit cards without regard to how the card is used:

We hold that section 1747.08 does not apply to credit cards issued for business purposes. But we further hold that the privacy protection of section 1747.08 applies to “a natural person to whom a credit card is issued for consumer credit purposes” (§ 1747.02, subd. (d), italics added) without regard to the actual purpose for which the card is used, namely, business or otherwise.

Slip Opinion, at 8-22.

Based on the Court’s construction of the Statute, the Court remanded the matter for reconsideration of the trial court’s findings with regard to ascertainability:

We note that the trial court did not address whether a class could be ascertained under the SBCCA and CLRA claims if no inquiry and determination had to be undertaken regarding the purpose, either consumer or business, to which the personal credit card had been used on a transaction-by-transaction basis. We further note the court did not address in its order whether it would be unreasonably time-consuming or expensive to distinguish between transactions in which a business card as contrasted with a personal card were used.

In view of this procedural posture, we reverse the order denying certification of a class under the SBCCA and CLRA claims and remand for the trial court to conduct further proceedings to determine whether a class of personal credit card holders could be ascertained without regard to the purpose for which the personal credit card was used in a particular transaction.

Slip Opinion, at 8.

In Folgelstrom v. Lamps Plus, __ Cal.App.4th (2011), the Second District (Division 5) reviewed dismissal of privacy claims ancillary to a plaintiff’s Beverly Song claim, including (1) Violation of the state constitutional right to privacy, (2) Common law tort of invasion of privacy, and (3) Violation of the UCL.

Like Archer, the Court concluded that plaintiff lacked standing to assert a claim under the UCL, as the plaintiff did not allege an economic injury that occurred as a result of the challenged business practice of obtaining customer ZIP code information. See Slip Opinion, at 7-8.

With regard to the right to constitutional claim, the Court held that an individual’s privacy interest in their residential address in relation to product marketing was an insufficient interest on which to support a claim for relief:

"Actionable invasions of privacy must be sufficiently serious in their nature, scope, and actual or potential impact to constitute an egregious breach of the social norms underlying the privacy right." (Hill, supra, 7 Cal.4th at p. 37.) Here, the supposed invasion of privacy essentially consisted of Lamps Plus obtaining plaintiff's address without his knowledge or permission, and using it to mail him coupons and other advertisements. This conduct is not an egregious breach of social norms, but routine commercial behavior.

Slip Opinion, at 5-6.

With regard to plaintiffs invasion of privacy claim – which was predicated upon conduct of obtaining customer ZIP code information under false pretenses – the Court similarly held that the subsequent use of such information for marketing purposes did not rise to the level of being “highly offensive”:

As with the alleged constitutional violation, whether or not plaintiff has sufficiently alleged an intrusion into his private matters, the conduct of which he complains does not meet the standard of "highly offensive." Indeed, we have found no case which imposes liability based on the defendant obtaining unwanted access to the plaintiff's private information which did not also allege that the use of defendant's information was highly offensive. However questionable the means employed to obtain plaintiff's address, there is no allegation that Lamps Plus used the address once obtained for an offensive or improper purpose.

Slip Opinion, at 6.

California Supreme Court Grants Review in Tien v. Tenet Healthcare

2011-05-19T07:38:00.000-07:00

On May 18, 2011, the California Supreme Court granted review of the Second District (Division 8) opinion upholding denial of certification of meal break claims in Tien v. Tenet Healthcare, 192 Cal. App. 4th 1055 (2011). This comes on the heels of the Court taking the same action with regard Division 8’s opinion in Hernandez v. Chipotle Mexican Grill, Inc., Case No. S188755 (discussed here), teeing up the same action to be taken for Division 8’s recent publication of an identical opinion last week in Lamps Plus Overtime Cases, __ Cal.App.4th __ (2011)).

Per the Court's website, briefing in Tien is stayed pending the Court’s decision in Brinker:

The petition for review is granted. Further action is this matter is deferred pending consideration and disposition of a related issue in Brinker Restaurant v. Superior Court, S166350 (see Cal. rules of Court, rule 8.524 (c)), or pending further order of the court. Submission of additional briefing, pursuant to California Rules of Court, rule 8.528, is deferred pending further order of the court. Votes: Cantil-Sakauye, C.J., Kennard, Baxter, Werdegar, Chin, and Corrigan, JJ.

Excused Absence: My Most Recent Court Appearance

2011-05-19T06:55:00.000-07:00

Pictured: Myself and “opposing counsel” in the Mural Room at the Santa Barbara Courthouse.

UPDATE: AT&T Mobility LLC v. Concepcion

2011-05-02T08:05:00.000-07:00

I received an email this weekend from a reader questioning whether the Marks test could be considered here based on the fact that Justice Thomas did not technically “concur in judgment.” I appreciate criticism like this, as I write my blog in large part to provoke thought and discussion on issues. As we are in the business of crafting the perfect argument, which I view as an ideal rather than an attainable end, criticism is my best friend. That said, I am not sold at this point that the distinction raised disposes of the issue I previously discussed.

First, placing labels aside, and focusing solely on the substance of the Majority’s and Thomas’ analysis, it is apparent that the Majority and Justice Thomas do not agree on the grounds for finding preemption. The majority believes that preemption of the Discover Bank rule occurs “[b]ecause it ‘stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress….” See Slip Opinion, at 18 (citing Hines v. Davidowitz, 312 U. S. 52, 67 (1941)). Conversely, although Justice Thomas states that he joins the Court’s opinion, he expressly conditions his participation on a continued rejection of “purposes-and-objectives pre-emption.” See Slip Opinion (Concurrence), at 1-2 (“although I adhere to my views on purposes-and-objectives pre-emption, see Wyeth v. Levine, 555 U. S. 555, ___ (2009) (opinion concurring in judgment), I reluctantly join the Court’s opinion.”). Justice Thomas’ view on this type of preemption – as explained in Wyeth – is that it is “inconsistent with the Constitution.” I do not see how he can simultaneously maintain that he still rejects “purposes-and-objectives pre-emption” and join the Majority’s analysis finding preemption on that very basis. Thus, placing substance over form, Thomas’ statement in this regard necessarily demonstrates a logical disconnect from the Majority’s underlying analysis.

Second, assuming the Marks rule is inapplicable as suggested, this does not really dispose of the issue – namely, whose analysis governs moving forward? This would seem to be a legitimate issue, as Justice Thomas not only acknowledges that he and the Majority have different tests, but even suggests that these tests may not always result in the same outcome. See Slip Opinion (Concurrence), at 1-2 (“I think that the Court’s test will often lead to the same outcome as my textual interpretation …”).

Again, it is important to note that my prior analysis sought to get to the underlying meaning of the Court’s opinion to evaluate the potential legal options, if any, that now exist. To do this one must know which test is applicable; Is it the test proposed by the majority or the test proposed by Justice Thomas? More to follow.

AT&T Mobility LLC v. Concepcion: Whose Analysis Controls, if Any? Some Grist For The Mill:

2011-04-29T16:38:00.000-07:00

So, having given myself a full day to absorb the Court’s opinion, the most striking (and perplexing) point in my mind is that the Court does not expressly order the class allegations stricken, or even order the case to arbitration. Rather, the Court only deems the Discover Bank rule to be pre-empted:

Because it “stands as an obstacle to the accomplishmentand execution of the full purposes and objectives of Congress,” Hines v. Davidowitz, 312 U. S. 52, 67 (1941), California’s Discover Bank rule is preempted by the FAA. The judgment of the Ninth Circuit is reversed, and the case is remanded for further proceedings consistent with this opinion.

See Slip Opinion, at 18.

Thus, to understand what the Court’s opinion means, it would seem that one must look beyond the majority’s holding that the Discovery Bank rule is preempted and examine the more complex issue of the applicable standard that must be applied by the courts below moving forward. There may not be a simple answer to this question, however. As Justice Thomas only joined the five member majority in its holding, parting ways with regard to the underlying rationale, an issue exists as to whose analysis will deemed to prevail.

As a general rule, “[w]hen a fragmented Court decides a case and no single rationale explaining the result enjoys the assent of five Justices, ‘the holding of the Court may be viewed as that position taken by those Members who concurred in the judgments on the narrowest grounds….’” See Marks v. United States, 430 U.S. 188, 193 (1977). However, applying the Marks rule may not be as simple as one may think. See United States v. Kratt, 579 F.3d 558, 562 (6th Cir., 2009) (“That is easier said than done. Sometimes it is possible to identify the concurring opinion that ‘is a logical subset’ of the other opinion (or opinions). [] And sometimes it is not, making Marks an exercise in chasing the wind.”). “When … a concurrence that provides the fifth vote necessary to reach a majority does not provide a ‘common denominator’ for the judgment, the Marks rule does not help to resolve the ultimate question.” See United States v. Heron, 564 F.3d 879, 884 (7th Cir., 2009). Rather, “[w]hen it is not possible to discover a single standard that legitimately constitutes the narrowest ground for a decision on that issue, there is then no law of the land because no one standard commands the support of a majority of the Supreme Court.” See United States v. Alcan Aluminum Corp., 315 F.3d 179, 189 (2d Cir. N.Y. 2003); Anker Energy Corp. v. Consolidation Coal Co., 177 F.3d 161, 170 (3d Cir. 1999) (“[I]n cases where approaches differ, no particular standard is binding on an inferior court because none has received the support of a majority of the Supreme Court.”).

Here, it is not entirely clear whether there exists any common overlap between the analysis of the Majority and Justice Thomas. Specifically, the majority reasoned that the “saving clause [in § 2] permits agreements to arbitrate to be invalidated by ‘generally applicable contract defenses, such as fraud, duress, or unconscionability’” [Slip Opinion, at 5], but concluded that preemption must be found when doing so “stand[s] as an obstacle to the accomplishment of the FAA’s objectives.” See Slip Opinion, at 9. Justice Thomas’ concurrence unequivocally rejected the majority’s “purposes-and-objectives preemption”, however, finding instead that the Discovery Bank rule was in direct conflict with § 2:

I write separately to explain how I would find that limit in the FAA’s text. As I would read it, the FAA requires that an agreement to arbitrate be enforced unless a party successfully challenges the formation of the arbitration agreement, such as by proving fraud or duress. 9 U. S. C. §§2, 4. Under this reading, I would reverse the Court of Appeals because a district court cannot follow both the FAA and the Discover Bank rule, which does not relate to defects in the making of an agreement.

This reading of the text, however, has not been fully developed by any party, cf. Brief for Petitioner 41, n. 12, and could benefit from briefing and argument in an appropriate case. Moreover, I think that the Court’s test will often lead to the same outcome as my textual interpretation and that, when possible, it is important in interpreting statutes to give lower courts guidance from a majority of the Court. See US Airways, Inc. v. Barnett, 535 U. S. 391, 411 (2002) (O’Connor, J., concurring). Therefore, although I adhere to my views on purposes-and-objectives pre-emption, see Wyeth v. Levine, 555 U. S. 555, ___ (2009) (opinion concurring in judgment), I reluctantly join the Court’s opinion.

See Slip Opinion (Concurrence), at 1-2.

Indeed, the language highlighted above indicates that Justice Thomas himself believed his test to be completely distinct than that of the majority, but that he "reluctantly" joined the majority based on his belief that the “outcomes” of both tests would sometimes overlap. To the extent there is no common overlap in "standards," there would be no controlling rule of law (at least, that is the conclusion of the various Courts of Appeal above). Accordingly, this issue would seem to be one needed to be resolved to even determine exactly what Concepcion means moving forward (aside from the preemption of the Discover Bank rule, of course).

My Initial Thoughts on the Supreme Court’s Decision in AT&T Mobility LLC v. Concepcion

2011-04-29T06:13:00.000-07:00

On April 27, 2011, the U.S Supreme Court ruled the “Discover Bank rule” was preempted by the FAA in AT&T Mobility LLC v. Concepcion, 563 US. __ (2011). After finishing my first read of the decision, I recalled something my father used to say growing up, which apparently was handed down to him by his father. It went like this: “Son, there are only two rules in this house: Rule Number 1, your father is always right; Rule Number 2, when wrong, see Rule Number 1.”

That being said, I’d like to welcome everyone to my new blog: The Bailey "Bilateral Arbitration" Daily. And to my friends on the other side (which I know read this Blog) – I will see you in arbitration!! All 100 of them, substantively identical, but litigated and billed separately.

But seriously, there can be no denying Court’s decision is both significant and impactful. Does it signify the end of employment and consumer class action litigation? That may be a different story. For the sake of the little guy, let’s hope not. I am going to spend a few posts exploring that question, beginning with what the Court’s decision actually means. Once that is determined, I will examine the question of “if, where and how” we can move forward.

Northern District Certifies Meal Period Class on Behalf of Refinery Plant Operators: Gardner v. Shell Oil Co.

2011-04-28T09:22:00.000-07:00

On April 21, 2011, Northern District Judge Claudia Wilken granted certification of meal period claims on behalf of shift workers employed at the Shell Oil refinery located in Martinez, California. See Gardner v. Shell Oil Co., 2011 U.S. Dist. LEXIS 44851 (N.D. Cal. Apr. 21, 2011). According to plaintiffs, the proposed class was deprived of access to meal periods based on the fact that employees could not leave the premises, and hence, were never relieved of duty:

Operators are paid hourly, work rotating twelve-hour shifts, and are required by refinery policies to remain in communication at all times, and to remain on the premises. They must refrain from sleeping, reading non-work related materials, using headphones, and using the internet for personal purposes for more than fifteen minutes per shift. There are no set times for meal breaks. Operators work as Board Operators and Outside Operators and are assigned to one of six departments: Operations Central, Delayed Coker, Distillation and Hydroprocessing, Cracked Products, Utilities, and Logistics. Board Operators work at a console in a control center, tracking on various screens how a particular unit is running. Outside Operators work outside of the control centers, and are responsible for maintaining, monitoring and inspecting equipment, as well as responding to directions from Board Operators. In contrast to Operators, employees on a "day schedule" generally work between eight and ten hours per day, and receive an unpaid thirty-minute meal period free from any work responsibilities. Communication between and among Board and Outside Operators is required to run the Martinez refinery properly.

See Gardner, 2011 U.S. Dist. LEXIS 44851, at 2-3.

In opposing certification, the defendant sought to shoehorn plaintiff’s claims into a Brinker type analysis -- claiming that breaks were made available, and thereon, required individualized analysis as to whether employees "chose not to take it." See id., at 21. The Court rejected this argument, reasoning it “disregard[ed] the nature of Plaintiffs' claims….” See id., at 21. As reasoned by the Court, claims based on employer policies which preclude employees from leaving the premises and/or restricting employee activities during breaks presents an issue of whether breaks could even be deemed to have been "offered" in the first instance, which was an issue to be resolved uniformly on behalf of the class as a whole:

Under California's meal period provisions, "[i]t is an employer's obligation to ensure that its employees are free from its control for thirty minutes, not to ensure that employees do any particular thing during that time." Brown v. Federal Express Corp., 249 F.R.D. 580, 585 (C.D. Cal. 2008) (applying Murphy v. Kenneth Cole Productions., Inc., 40 Cal. 4th 1094, 1104 (2007)). Employers are obliged "not to force employees to work through breaks." Id. at 585 (citing Murphy, 40 Cal. 4th at 1104). Accordingly, Plaintiffs claim that Defendants' refinery-wide policies, requiring all Operators to remain on the premises, close to their work stations, to respond to radio calls and alarms throughout their shifts, to remain responsible for assigned units at all times, and to refrain from engaging in common break-time activities, deprived Operators of off-duty thirty-minute meal periods. Essentially, Plaintiffs claim that Defendants have not relinquished sufficient control over Operators during their meal breaks so as to make available an off-duty meal break and, thus, the Operators are entitled to payment of an hour's premium wage for each on-duty meal break. In this respect, the common issues presented by Plaintiffs' claims plainly predominate over any individual issues.

Defendants assert that, as a matter of law, the policies and practices that are the focus of this suit do not deprive Plaintiffs of an off-duty meal break. The Court need not resolve the merits of Plaintiffs' claims based on the present motions. However, for purposes of class certification, Plaintiffs' claims are adequately supported by law. In the USW case, on August 27, 2010, Judge Klausner granted summary judgment in favor of the plaintiffs on their meal break claims, which were based on the same restrictions and requirements attacked in this action. After analyzing Labor Code §§ 226.7 and 512(a), IWC Wage Order 1-2001 § 11, and related case law, the court found that the plaintiffs had established that they were not relieved of all duty during their meal breaks.

See Gardner, 2011 U.S. Dist. LEXIS 44851, at 22-24.

Fourth District Holds Court Erred in Ordering Replacement-Rep Discovery in “Headless” Class Action Case: Starbucks Corp. v. Super. Ct.

2011-04-26T11:38:00.000-07:00

On April 26, 2011, the Fourth District (Division 3) issued a second appellate opinion in an action alleging Starbucks violated Labor Code sections 432.7 and 432.8 by using a preprinted job application inquiring into applicant’s prior drug marijuana convictions. See Starbucks Corp. v. Super. Ct., __ Cal.App. 4th __ (2011). The Court's opinion considered the propriety of a trial court order directing Starbucks to produce class member contact information to facilitate the replacement of the named plaintiffs who, due to the Court's prior opinion construing these statutory provisions, now lacked standing to bring the claims alleged due to never having been convicted of any such crime. The Court concluded that the trial court necessarily erred, as (1) the “Parris balancing test” could not be satisfied in light of the complete lack of the named plaintiff’s standing, coupled fact the remedial discovery violated the very privacy protections the action aimed to protect [Slip Opinion, at 5-10], and (2) that the factual scenario in this case did not implicate the “headless” class action exception detailed in CashCall, Inc. v. Superior Court, 159 Cal. App. 4th 273 (2008) insofar as the class was comprised of people who themselves necessarily where consciously “aware” of Starbuck’s activities. Slip Opinion, at 10-13.

In addition to the fact the Court fails to address the import of the fact that it was the Court's prior opinion that caused the named plaintiffs to lose standing (a fact relevant to whether granting discovery would amount to "abuse" of the class action process under Paris), the Court’s opinion also contains two points that I believe are worth comment. The first relates to the Court’s critique of using the class mechanism to enforce penalty claims under Labor Code Section 432.7 and 432.8:

We recognize class counsel’s tactical motivations to increase their side’s bargaining leverage, but the argument militates against a class action, rather than in its favor. The excessive penalties sought by class counsel bear little relationship to any true public interest for what, at most, appears to be a technical violation of Labor Code section 432.8 by Starbucks. The strength that may be gained in numbers also may produce the “absurd result of turning the statute into the veritable, adding machine” that has been decried by our Supreme Court.” (Starbucks I, supra, 168 Cal.App.4th at p. 1451.) The proper exercise of the Parris balancing test requires precertification discovery to be denied “in those cases in which that potential abuse of the class action procedure outweighs the rights of the class members.” (CashCall, supra, 159 Cal.App.4th at p. 295.)

Slip Opinion, at 11-12.

The Court’s policy analysis here is somewhat troubling, as the proposed class was actually limited solely to individuals who sustained an arguable violation of Section 432.7/432.8 to conform with the Court’s own construction of these statutes in Starbucks I. Thus, the Court’s criticism of the proposed class being comprised of persons sustaining only “technical violations” or labelling the statutorily proscribed remedy as being “excessive” is necessarily rested upon a critique of the substantive merit of the underlying statutory law (criticisms which were not expressed within the Court’s statutory construction analysis in Starbucks I). Of course, it is the province of the Legislature to enact laws which impose penalties, which may be set aside by a reviewing court as exceeding the “public interest” only upon a clear showing that the Legislature exceeded its constitutional bounds. See e.g. Home Depot U.S.A., Inc. v. Superior Court, 191 Cal. App. 4th 210, 225-26 (2010) (rejecting argument that penalty provisions of Wage Orders pertaining to “suitable seating” exceeded “the Legislature's broad authority to enact civil penalty statutes”). Absent such a showing, it would seem that aggregating pentality claims could only further the public interest of “securing obendience” that necessarily underpins the penalty statute. See id. (“‘Civil penalties are inherently regulatory, not remedial,’ and are intended to secure obedience ‘to statutes and regulations validly adopted under the police power.’”). With all due respect to the Court, its analysis on this point would seem to be logically defective.

Second, the Court opined at the close of its opinion that a class action may be uncertifiable, per se, when identification of class members implicates privacy issues:

With no readily apparent means by which class members may be identified without also violating their statutory privacy rights, there may well be no ascertainable class, let alone a class representative plaintiff. But these matters are not currently before us on this challenge to the discovery order.

Slip Opinion, at 12-13.

Significantly, such a proposition – which seemingly would completely wipe out class litigation of claims implicating any financial and/or medical issue – was recently rejected by the Second District in Los Angeles Gay & Lesbian Center v. Superior Court, __ Cal. App. 4th __ (2011), previously discussed in a post here. As the LA Gay & Lesbian Center case demonstrates, it is possible to construct means of effecting notice in cases where the most sensitive forms of medical information is at issue. Although the Starbucks Court's above supposition on this point is just dicta, it nonetheless seeks to tee up an issue which the Court believes is created by its opinion.

Southern District Rejects Proposition that Oral Statement Based Claims Are Uncertifiable: Thomasson v. GC Servs., Ltd. P’ship

2011-04-19T07:43:00.000-07:00

On February 4, 2011, Southern District Judge, John A. Houston, entered an order certifying Fair Debt Collection Practices Act claims in Thomasson v. GC Servs., Ltd. P'ship, 2011 U.S. Dist. LEXIS 40445 (S.D. Cal. Feb. 4, 2011) based on a debt collector’s alleged practice of not providing disclosures the call was being monitored until after a consumer had disclosed contact and identifying information to defendant's representative. The Court’s opinion is interesting, as the plaintiff’s claims were certified based on deviations from defendant's policy to provide disclosures up-front. The defendant maintained that this rendered the claim uncertifiable because it necessarily predicated the claim upon the unique content of each individual class member’s conversion. The Court disagreed, finding that the uniform lack of disclosure, not the content of the conversation was the proper focus of the substantive claim. See id., at 10-14. According to the Court, the fact that tape recordings of each conversation would have to be reviewed individually related to determining class membership, a situation which does not preclude class treatment:

Plaintiffs' class definition may require a threshold inquiry to determine class membership. It clearly requires an individualized inquiry into the content of the telephone calls to determine whether the advisement was given and, if so, when it was given. However, this limited, basic inquiry does not make class certification "administratively infeasible." See Spencer, 2006 U.S. Dist. LEXIS 98565, 2006 WL 6500597 ("[A] proposed class must be clearly defined so that it is administratively feasible for a court to determine whether a particular individual is a member"). Accordingly, the Court finds the class definition is adequately defined and clearly ascertainable.

See Thomasson, 2011 U.S. Dist. LEXIS 40445, at 9.

First District Affirms Rule Limiting Employer Discretion to Define “Workweek” to Avoid Payment of Overtime Compensation: Seymore v. Metson Marine

2011-04-18T09:35:00.000-07:00

On April 14, 2011, the First District (Division Three) reversed an order granting an employer summary judgment on employee “seventh day premium pay” overtime claims in Seymore v. Metson Marine, __ Cal.App.4^th __ (2011). According to the Court, such relief was foreclosed by a factual dispute as to whether the employer’s workweek definition was actually an “artifice” designed to evade payment of overtime.

At issue, the employer’s definition of workweek (which ran from Monday through Sunday) conflicted with the actual workweek structure used – which was comprised of a 14-day employment "hitch" that began and ended every two weeks on a Tuesday at noon. The net result of this pay-structure was that employees would be deprived of one day of “seventh day” double-time compensation required by Labor Code ¶510(a). According to the Court, summary judgment based on these facts was improper, as “an employer may designate a workweek used to calculate compensation that differs from the work schedule of its employees only if there is a bona fide business reason for doing so, which does not include the primary objective of avoiding the obligation to pay overtime.” Slip Opinion, at 9. According to the Court, the employer's burden under this standard was clearly not met. See id., at 8-11 (“the undisputed evidence raises a reasonable inference that Metson designated its workweek in a manner primarily designed to evade its overtime obligations and Metson failed to rebut that inference.”).

Second District Affirms Mandatory Use of Opt-Out Class in Case Implicating Class Member Medical Privacy Interests: L.A. Gay & Lesbian Center v. Super Ct.

2011-04-14T08:16:00.000-07:00

On April 13, 2011, the Second District (Division One), issued an opinion in L.A. Gay & Lesbian Center v. Super Ct., __ Cal. 4^th __ (2011), upholding the trial court’s refusal to permit use of an “opt-in” certification notice to ensure protection of privacy interests inherent in the action. As discussed here, the trial court previously certified negligence claims arising out defendant’s alleged systematic usage of an improper form of penicillin in treating syphilis between 1999 and 2004. In this appeal, the defendant argued that because the opt-out class mechanism would facilitate disclosure of class members' privileged and private medical information, use of an opt-in was required to protect these interests. Slip Opinion, at 11. The Court disagreed, concluding that “that the trial court did not err in establishing an opt-out class, but that it erred in ordering the Center to disclose the class members’ names and addresses to plaintiffs’ counsel.” See id., at 2.

With regard to the first issue, the Court reasoned that the risk of disclosing the private information at issue here was not a sufficient basis to overcome the rationale for rejecting the use of the “opt-in” class, as explained in Hypertouch Inc. v. Superior Court, 128 Cal.App.4th 1527 (2005). In particular, the Court concluded that an opt-in mechanism undermined the purpose of class actions, which “was designed for matters where joinder of all parties was impracticable, and was meant to eliminate the need to join absent parties.” Slip Opinion, at 15. Moreover, “[a]n opt-in procedure would have the effect of decreasing the number of class members bound by the judgment and increase the likelihood of redundant litigation.” See id., at 15. In short, the Court concluded that “[w]ithout the mandatory joinder effect of an opt-out class action, the Center will not obtain res judicata effect of a judgment; small individual class plaintiffs will not obtain the benefit of a settlement; and the cost of administering many small actions will not be avoided.” See id., at 16-17.

That issue aside, the Court concluded that the trial court did err in ordering production of the class list to plaintiff based solely on the fact such individuals did not opt-out, as medical records implicate a privacy interest that cannot be waived by inference. As resoned by the Court, “[i]n an opt-out class action, merely by passively consenting to membership in the class, a class member does not expressly place his or her medical condition at issue, therefore the exception of Evidence Code section 996 or Evidence Code section 912, subdivision (a) do not apply.” Slip Opinion, at 23. Thus, to give full meaning to the fact that “[t]he physician-patient privilege may only be waived through a clear manifestation of an intent to waive” [Slip Opinion, at 22], the Court reasoned that trial court was required to utilize a court-appointed third party to administer the notice, and disclose to plaintiff only those individuals who both did not opt-out and affirmatively authorized disclosure of their medical information. See id., at 23-24.

Northern District Certifies TILA/UCL Class Action Against Chase: Hofstetter v. Chase Home Fin., LLC

2011-04-12T09:10:00.000-07:00

On March 31, 2011, Northern District Judge, William Alsup, certified a TILA/UCL class action against Chase “involving lender-imposed flood-insurance requirements for property securing home-equity lines of credit.” See Hofstetter v. Chase Home Fin., LLC, 2011 U.S. Dist. LEXIS 38124, 1-2 (N.D. Cal. Mar. 31, 2011). The plaintiffs’ action is based on a 2009 unilateral change of policy which had the impact of increasing the minimum amounts of flood insurance required for customers having existing home-equity line of credit. According to plaintiffs, this change in policy in many instances (1) imposed a level of coverage exceeding that required by law and (2) resulted in “forced” purchase of insurance at inflated rates. The plaintiffs claim that this practice violated TILA and the UCL, in part, because the alteration in policy materially altered existing agreements without adequate disclosures.

Of note, the Court’s opinion includes analysis rejecting the defendant's efforts to splinter the action by highlighting variations in the underlying loan documents. This type of argument -- which is typical in actions involving adequacy of disclosure and/or misrepresentation -- is designed to overcome certification by proposing that a multitude of individual, independent actions are required. According to the Court, any variations in such documents were capable of "grouping" -- rendering class adjudication manageable:

Defendants argue that individual questions would predominate over the common ones, but defendants' reasoning on this point is not persuasive. First, defendants emphasize that in order to determine whether the December 2009 policy change adversely altered the terms of a borrower's credit agreement, a trier of fact must consider the language of the agreement the borrower originally signed when opening his or her credit line (Opp. 21-22). Even assuming defendants will be allowed to rely on evidence of variation among the underlying deeds at trial, this issue would not frustrate class proof. Defendants have produced a relatively small random sample of these agreements, and they are not all identical forms. The variations among these agreements, however, are manageable, can be kept straight, and will not overwhelm the main themes of the case. After Chase produces all credit agreements for all class members, counsel could review the relevant language and divide the agreements into several corresponding categories, just as defendants did in their own brief (id. at 16). The jury then would be presented with representative language from each group of credit agreements, not the overwhelming volume of individual agreements themselves.

See Hofstetter, 2011 U.S. Dist. LEXIS 38124, at 29-30.

In certifying Plaintiff’s UCL claims, the Court also highlighted that the small value of the claims at stake rendered the claims substantively dependent on the class action mechanism. In my opinion, this argument carries powerful "equitable" weight, especially in cases where the question of certification is otherwise a close call:

With respect to the members of the Section 17200 class seeking restitution, plaintiffs have carried their burden of showing that common questions would predominate the analysis, and that the class action mechanism is preferable for adjudicating their claims — most of which are of too little value to justify bringing individual suits. The alleged unfairness and unlawfulness of defendants' challenged practices stems from requiring borrowers to carry an amount of flood-insurance coverage larger than the maximum limits on their home-equity lines of credit. The comparison between a borrower's credit limit and the amount of flood-insurance coverage the borrower was required to carry is a matter of mathematical computation to be performed on defendants' records.

See Hofstetter, 2011 U.S. Dist. LEXIS 38124, at 41.

Northern District Certifies Product Defect/False Ad Action Against Acer America Corporation: Wolph v. Acer Am. Corp.

2011-04-04T09:08:00.000-07:00

On March 25, 2011, Northern District Court Judge Jeffrey S. White granted plaintiff’s motion to certify a nationwide product defect/false advertising action against defendant Acer America Corporation in Wolph v. Acer Am. Corp., 2011 U.S. Dist. LEXIS 35003 (N.D. Cal. Mar. 25, 2011). Plaintiff’s action alleges that defendant marketed and sold certain notebook computers with insufficient memory to properly run Vista Premium, which came in the notebook computers pre-installed. See Wolph, 2011 U.S. Dist. LEXIS 35003, at 2. Plaintiff alleged claims under the CLRA, UCL, FAL and breach of express warranty.

The Court reasoned that plaintiff’s claims were appropriate for class adjudication because the core issue of the case – i.e. whether defendant’s computers lacked sufficient memory to run the Vista operating system – presented a common factual issue [See id., at 12-13] which would be typical for all purchasers. See id., at 21-22 (“the typicality of the claims at issue here arises from the question whether Acer sold notebook computers that were incapable of properly operating the Microsoft® Vista Premium operating system with which they were marketed, packaged and sold.”). Predominance was met because this issue, as well as related issues concerning defendant’s marketing, could be established based on common proof:

Plaintiffs allege that the packaging for the notebooks misrepresented that the notebooks met the recommended system requirements for running Vista Premium and that the notebooks could effectively and adequately run with a Vista Premium operating system. (See FAC ¶ 160.) Plaintiffs contend that Acer made these misrepresentations on a label on the outside of the box, as well as a Windows Vista sticker on the notebook itself. (Mot. at 13; Pizzirusso Decl., Ex. 17 (filed under seal).) The statements made on the packaging and labels present common proof on the issues of materiality and falsity. Without deciding here the question whether any of these alleged misrepresentations were material, it is reasonable to infer that they were communicated to all class members because they were shown at the point of purchase. Brazil, 2010 WL 5387831 at *5. See Kwikset Corp. v. Superior Court, 51 Cal. 4th 310, 210 Cal. Rptr. 3d 741, 755 (2011) (recognizing materiality of label representations). Plaintiffs have identified other common sources of proof. Plaintiffs' experts have established mechanisms that purport to examine the existence of the alleged defect under out-of-the-box conditions to eliminate individualized user variables. (Alepin Decl. ¶¶ 52-69 (filed under seal).)

Plaintiffs also rely on Acer's benchmarking results, retailer return rates, consumer return surveys, customer inquiry databases and third party recommendations regarding Vista. (Pizzirusso Decl., Exs. 10-16 (filed under seal).) The Court concludes that Plaintiffs have presented a plausible class-wide method of proof. Thus, Plaintiffs have met their burden to show that common questions predominate.

See Wolph, 2011 U.S. Dist. LEXIS 35003, at 27-28.

First District Contemplates Impact of Pleading a Case as a Class Action On Bilateral Fee Shifting: Turner v. Ass'n of Am. Med. Colleges

2011-03-25T08:14:00.000-07:00

Can pleading a case as a class action impair a defendant's ability to recover fees under a bilateral fee shifting statute? According to the First District (Division Five), it may. On March 24, 2011, the Court issued an opinion in Turner v. Ass'n of Am. Med. Colleges, __ Cal.App.4th __ (2011), considering whether “a trial court [is] required to award attorney fees to a prevailing defendant under the bilateral, ‘prevailing party’ statutory fee-shifting provision in [Civil Code] section 55 for attorney hours that were inextricably intertwined with the hours incurred in defending claims under sections 52 and 54.3[.]” Slip Opinion, at 2. According to the Court it was not, due in part to the fact that doing so would undermine the policy underpinning the Legislatures’ enactment of the unilateral-fee shifting provision. See id., at 24.

However, the Court also noted another ground, specific to class actions. At footnote 17 of the Opinion, the Court explores an issue of a “conflict” that is unique to class cases, essentially stating that the named plaintiff cannot intentionally avoid pleading a claim to avoid a bilateral fee shifting provision without breaching his/her obligation to the class, who are not subject to any obligations regarding fees:

Although the above analysis is sufficient to support our conclusion that sections 52 and 54.3 should prevail as a matter of public policy, an additional case-specific consideration applies here. This case was pled as a class action, which complicated the risk-benefit calculus alluded to in Molski, supra, 164 Cal.App.4th at pages 790-791. "A class action is a representative action in which the class representatives assume a fiduciary responsibility to prosecute the action on behalf of the absent parties. [Citation.]" (Earley, supra, 79 Cal.App.4th at p. 1434.) It was in the interest of the prospective class that relief be sought under all potentially applicable statutes, particularly where section 55 has lower standing requirements. Moreover, unnamed class members are not liable for statutory fees awarded to a prevailing defendant. (Earley, at pp. 1435-1436.) Accordingly, to conclude that section 55 should prevail in cases such as the present one would create a conflict of interests between class representatives and unnamed class members: from the perspective of the unnamed class members, there would be no reason [*49] not to seek an injunction under section 55, but seeking such relief would involve great risk for the class representatives. And it is no answer that plaintiffs could have avoided such a dilemma by declining to seek certification of a class, because that solution—effectively, encouraging individual actions—would undermine judicial efficiency and "the effectiveness of the group remedy provided by the class action." (Earley, at p. 1435; see also Vasquez v. Superior Court (1971) 4 Cal.3d 800, 807 ["If each is left to assert his rights alone if and when he can, there will at best be a random and fragmentary enforcement, if there is any at all. This result is not only unfortunate in the particular case, but it will operate seriously to impair the deterrent effect of the sanctions which underlie much contemporary law. The problem of fashioning an effective and inclusive group remedy is thus a major one.' [Citation.]"].)

Slip Opinion, at 24.

While the Court’s analysis was limited to the procedural circumstances of this case, the logic of the Court’s reasoning is interesting, and conceivably could be applied in other areas, such as wage actions implicating both Labor Code section 218.5 (bilateral) and Section 1194 (unilateral) fee shifting.

California Supreme Court’s Decision in Kwikset Turns the Tide On UCL Standing Challenges:

2011-03-18T06:22:00.000-07:00

In less than two months since publication, the California Supreme Court’s decision in Kwikset Corp. v. Superior Court, 51 Cal. 4th 310 (2011), previously discussed here, appears to have curtailed the success of defense efforts to dispose of UCL claims based on standing. Below is a list of cases which have rejected such challenges outright:

In Smit v. Charles Schwab & Co., 2011 U.S. Dist. LEXIS 25589 (N.D. Cal. Mar. 8, 2011), the court rejected the defendant’s claim that standing was lacking to pursue investor action under the UCL based on the fact “Plaintiff gained money by her investment in the Fund”:

Given the UCL standing principles set forth in Kwikset, the Court finds that Plaintiff has sufficiently alleged economic loss resulting from the alleged unlawful activity. Plaintiff alleges that Fund share values declined when the Fund deviated from its fundamental investment objective without first holding a shareholder vote. Even if Plaintiff gained money through dividends, as defendants claim, Plaintiff's argument is that she would have gained more if the Fund had not deviated from its investment objective. This alleged loss satisfies the "identifiable trifle" of economic harm required for standing under the UCL. Therefore, defendants' Motion to Dismiss on the basis of a lack of standing is DENIED.

See Smit, 2011 U.S. Dist. LEXIS 25589, at 26-27.

In Shaw v. BAC Home Loans Servicing, LP, 2011 U.S. Dist. LEXIS 19875 (S.D. Cal. Feb. 28, 2011), the court rejected the defendant’s claim that standing was lacking in deceptive home loan modification action based on the fact “the payments Plaintiff made pursuant to the terms of the alleged loan modification were due under the original note anyway”:

Assuming there was a loan modification agreement, Plaintiff was economically injured because he made the monthly payments to obtain, among other things, BAC's forbearance with respect to foreclosure proceedings. BAC may not have been under any duty to modify the original note. But if BAC agreed to a loan modification, Plaintiff was entitled to the benefit of the bargain.

BAC's argument that Plaintiff must identify a loss of money that is eligible for restitution has been rejected by the California Supreme Court. In Kwikset, the California Supreme Court explained that nothing in the text or history of Proposition 64 suggests that voters intended for standing under § 17204 to be dependent on eligibility for restitution under § 17203. 51 Cal. 4th 310, Id. at *14. "Accordingly, we hold ineligibility for restitution is not a basis for denying standing under section 17204 and disapprove those cases that have concluded otherwise." 51 Cal. 4th 310, Id. at *15.

Even if Plaintiff is not eligible for restitution, Plaintiff has sufficiently pled economic injury and has standing to pursue a UCL claim. [] Therefore, BAC's motion for judgment on the pleadings is denied.

Shaw, 2011 U.S. Dist. LEXIS 19875, at 5-8.

In Bottoni v. Sallie Mae, Inc., 2011 U.S. Dist. LEXIS 18874 (N.D. Cal. Feb. 11, 2011), which challenged a student loan lender’s practice of imposing liquidated damages, the court rejected defendant’s argument that standing was lacking “based on the attempts to collect the fees and the alleged collection practices”:

[T]he court in Kwikset held "ineligibility for restitution is not a basis for denying standing under section 17204" and disapproved of those cases — including Buckland — that concluded otherwise. Id. Accordingly, the court rejects Sallie Mae's argument that Plaintiffs must show losses of money or property eligible for restitution.

See Bottoni, 2011 U.S. Dist. LEXIS 18874, at 3-4, 37-38.

In Hamana v. Kholi, 2011 U.S. Dist. LEXIS 26944, 10-11 (S.D. Cal. Mar. 15, 2011), the court rejected defendant’s argument that standing was lacking “because Plaintiff has received more money in principal than he has paid in allegedly unlawful interest”:

The California Supreme Court in Kwikset recently explained that showing loss of money or property requires a plaintiff to demonstrate "some form of economic injury" and that there are "innumerable ways in which economic injury from unfair competition may be shown." Id. at 323. For example, a plaintiff who has been "deprived of money or property to which he or she has a cognizable claim" demonstrates economic injury. Id.

Plaintiff's section 17200 claims meet this broad standard. Plaintiff has alleged the payment of interest on loans at usurious rates, and Defendants do not seek dismissal of Plaintiff's usury claims. California law allows under certain circumstances treble recovery of such interest payments without reference to whether the interest payments made exceeded principal received. See Cal.Civ.Code § 1916-3.

Accordingly, Plaintiff's usury cause of action contains facts that show a deprivation of money to which Plaintiff has a cognizable claim, independent of the fact that Plaintiff may have retained more money in principal than he paid in wrongful interest. Thus, Plaintiff has standing under § 17204, and Defendants' motions to dismiss the eighth cause of action are DENIED.

See Hamana, 2011 U.S. Dist. LEXIS 26944, at 10-11.

California Supreme Court Concludes Death Knell Doctrine Limited to Orders Terminating Class’ Claims Where Individual Claims Persist: In re Baycol Cases I and II

2011-03-01T07:50:00.000-08:00

On February 28, 2011, the California Supreme Court concluded that a court of appeal erred by applying the “death knell doctrine” to dismiss the class component of an appeal that was taken subsequent to judgment, rather than the order sustaining a demurrer, when the demurrer simultaneously sustained both the class’ and the named plaintiff’s claims in their entirety. See In re Baycol Cases I and II, __ Cal.4th __ (2011). As held by the Court, “where an order sustains a demurrer as to both class and individual claims, appeal lies from the subsequent entry of final judgment, not the order.” Slip Opinion, at 10. “[T]he [death knell] doctrine comes into play for class claims only when an order ‘is tantamount to a dismissal of the action as to all members of the class other than plaintiff.’” Slip Opinion, at 11.

Second District Narrows Applicability of Labor Code Section 218.5 Fee Shifting Provision: United Parcel Service Wage and Hour Cases

2011-02-28T07:53:00.000-08:00

On February 24, 2011, the Second District (Division 8) concluded that the bi-lateral fee shifting provision of Section 218.5 did not apply to various wage related causes of action, including meal and rest period claims. See United Parcel Service Wage and Hour Cases, __ Cal.App.4th __ (2011).

With regard to meal and rest periods, the Court rejected the employer’s argument that the California Supreme Court’s analysis in Murphy v. Kenneth Cole Productions, Inc., 40 Cal. 4th 1094 (2007) establishes that an action for recovery of the statutory remedies for missed meal and rest breaks is a claim for “nonpayment of wages” within the meaning of Labor Code section 218.5. As reasoned by the Court, “nothing in the Murphy opinion suggests the court intended its decision to permit a prevailing employer-defendant in a section 226.7 action to recover attorney fees from the unsuccessful employee” and that “[t]o so find would undermine the Supreme Court's heavy reliance in its analysis on the principle that statutes governing working conditions must be liberally construed in favor of employees.” Slip Opinion, at 12. Rather, citing to the analysis in Earley v. Superior Court, 79 Cal. App. 4th 1420 (2000), the Court concluded that Section 226.7 was properly covered by the unilateral fee shifting provisions of Section 1194 because, like overtime compensation, the obligation to pay the Section 226.7 premium wage derives from statute. See id., at 12-13. Significantly, such reasoning is a complete refutation of the court's analysis in Kirby v. Immoos Fire Protection, 186 Cal. App. 4th 1361 (2010), which as previously discussed here, is pending review before the California Supreme Court.

In addition to the foregoing, the UPS Court also deemed Section 218.5 inapplicable to (1) wage statement claims, due to the fact Labor Code Section 226(e) itself contains a unilateral fee shifting provision, (2) conversion, based on the finding that Section 218.5 does not apply to common law torts, and (3) the UCL, based on existing authority concluding that the UCL does not incorporate fee provisions of the underlying predicate statute. See id., at 10-11.

California Supreme Court Concludes an Employee’s Statutory Right to a Berman Hearing Is Unwaivable: Sonic-Calabasas A, Inc. v. Moreno

2011-02-24T10:24:00.000-08:00

On February 24, 2011, the California Supreme Court issued its opinion in Sonic-Calabasas A, Inc. v. Moreno, __ Cal.4th __ (2011), concluding that an employee’s statutory right to a Berman Hearing before the Labor Comissioner may not be waived by an arbitration agreement, and that this rule is not preempted by the FAA.

Fourth District Holds That Affirmance of Order Denying Certification on Appeal Bars Subsequent Efforts to Certify Class: Safaie v. Jacuzzi Whirlpool Bath, Inc.

2011-02-24T08:16:00.000-08:00

On February 22, 2011, the Fourth District (Division One) published its opinion in Safaie v. Jacuzzi Whirlpool Bath, Inc., __ Cal. App. 4th __(2011), holding that a trial court’s order denying certification, once affirmed on appeal, bars subsequent efforts by the plaintiff to certify a class. Importantly, the Court’s decision makes clear that once remittituer is issued the trial court no longer has any discretion to revisit the issue, even if there is a subsequent change in the law or discovery of new facts. Slip Opinion, at 11-13; 15-17.

In making this ruling, the Court highlighted two distinctions that are important to note.

First, the bar can only operate if the trial court denies certification of all claims alleged by plaintiff. Slip Opinion, at 14. Citing the procedural posture of Tobacco II as an example, the Court reasoned that “[b]ecause the first order denying class certification [in that case] pertained to only one of the claims alleged in the complaint, it did not dispose of all claims between the parties, and thus was not a final, binding appealable order.” See id. “Thus, the plaintiff was free to seek certification on other causes of action alleged in the newly amended complaint.” See id. This distinction sanctions successive certification motions, so long as they are made on a claim by claim basis. Moreover, insofar as a "death knell" order cannot result under this procedural scenario, a plaintiff presumably would not be precluded from seeking reconsideration of the prior denial itself if armed with new facts or new law. Simply put, as the Court's analysis on this point affords plaintiff counsel a degree of control over when the trial court would be permitted to make a "death knell" certification ruling, plaintiff counsel desiring flexibility to seek reconsideration of a certification ruling (and avoid the Court's ultimate holding) may consider following the procedural path described by the Court when moving for certification.

Second, the Court concluded that this rule did not preclude successive motions challenging an order certifying a class, in large part, because “when a court certifies a class, the order is not final and cannot be appealed because the action continues between the parties.” See id., at 13. Based on this fact, “‘the rule against successive motions does not … apply to [class action] defendants, who may make any number of motions to decertify” based on new facts elicited during discovery.’” See id., at 14. Of course, as previously discussed in a post located here, any subsequent decertification motion must actually put forward new facts or new law, as a trial court abuses its discretion by decertifying a class absent a material change in the law or the evidence. See Weinstat v. Dentsply International, Inc., 180 Cal. App. 4th 1213, 1226 (2010).

Second District (Division 8) Issues Two New Opinions Involving Meal and Rest Periods: UPS v. Super. Ct. & Tien v. Tenet Healthcare

2011-02-17T12:21:00.000-08:00

On February 16, 2011, the Second District Court of Appeal, Division 8, issued two new opinions involving meal and rest period claims. The first, UPS v. Super. Ct., __ Cal. App. 4th __ (2011), considered whether Labor Code Section 226.7 “authorizes one premium payment per work day regardless of the number or type of break periods that were not provided, or two premium payments per work day – one for failure to provide a meal period and another for failure to provide a rest period.” Slip Opinion, at 1. According to the Court, Section 226.7 permits employees to recover the latter:

In short, we conclude, based upon the wording of section 226.7, subdivision (b), the legislative and administrative history of the statute and IWC wage orders, the public policy behind the statute and wage orders, and also the principle that we are to construe section 266.7 broadly in favor of protecting employees, that the employees in this case may recover up to two additional hours of pay on a single work day for meal period and rest period violations – one for failure to provide a meal period and another for failure to provide a rest period.

Slip Opinion, at 12.

The second opinion, Tien v. Tenet Healthcare, __ Cal. App. 4th (2011), upheld a trial court’s order denying certification of the plaintiff’s meal and rest period claims. The Court opinion essentially tracks the same analysis of its previous opinion in Hernandez v. Chipotle Mexican Grill, Inc., 189 Cal.App.4th 751 (2010), which was recently depublished by the California Supreme Court’s January 26, 2011 grant-and-hold order pending its decision in Brinker.

The Tien opinion does include a somewhat unique wrinkle – it affirmatively concludes that “an employer who frustrates its employees’ exercising of their right to meal periods violates the employer’s obligation to ‘provide’ meal periods” in the first instance:

“The California Supreme Court has described the interest protected by meal break provisions [to mean] that ‘[a]n employee forced to forgo his or her meal period . . . has been deprived of the right to be free of the employer’s control during the meal period.’ ” (Brown v. Federal Express Corp. (C.D.Cal. 2008) 249 F.R.D. 580, 585 (Brown), quoting Murphy v. Kenneth Cole Prods., Inc. (2007) 40 Cal.4th 1094, 1104.) Consistent with the purpose of requiring employers to provide employees with meal breaks, the Labor Code uses mandatory language (e.g., Lab. Code, § 226.7, subd. (a) [“No employer shall require any employee to work during any meal or rest period . . . .”]) precluding employers from pressuring employees to skip breaks, declining to schedule breaks, or establishing a work environment that discourages employees from taking their breaks. A corollary to an employer’s obligation to ensure that its employees are free from its control for 30 minutes is the employer must not compel the employees to do any particular thing during that time – including, if employees so choose, not taking their meals. (Brown, supra, at p. 585.)

Slip Opinion, at 13.

While there are numerous cases which have made this distinction, the highlighted language perhaps goes the furthest of any opinion which I am aware in defining what I will refer to as the "barrier theory" (which, as the Tien Court explains, is distinct from the issue before the California Supreme Court in Brinker). At any rate, as the Court's analysis upholding the denial of certification largely mirrors Brinker, Brinkley and Chipotle, it is likely that this Opinion's shelf-life will be a short one.

California Supreme Court Holds that Requesting and Recording Consumer Zip Code During Credit Card Transactions Violates Song-Beverly Credit Card Act: Pineda v. Williams-Sonoma Stores, Inc.

2011-02-10T10:42:00.000-08:00

On February 10, 2011, the California Supreme Court issued its opinion in Pineda v. Williams-Sonoma Stores, Inc., __ Cal.4th__ (2011), holding that a retailer’s practice of requesting and recording a consumer’s zip code during a credit card transaction violates Cal. Civ. Code, § 1747.08(a)(2). That provision states in relevant part that “no person … that accepts credit cards for the transaction of business shall …[r]equest, or require as a condition to accepting the credit card as payment in full or in part for goods or services, the cardholder to provide personal identification information, which the person … accepting the credit card writes, causes to be written, or otherwise records upon the credit card transaction form or otherwise.” Pursuant to Section 1747.08, subpart (e), an action may be brought “by the person paying with a credit card” to recover civil penalties “not to exceed two hundred fifty dollars ($250) for the first violation and one thousand dollars ($1,000) for each subsequent violation….”

As held by the Court, “requesting and recording a cardholder’s ZIP code, without more, violates the Credit Card Act.” Slip Opinion, at 2. The Court rejected the argument that such an interpretation rendered the statute “unconstitutionally oppressive because it would result in penalties ‘approach[ing] confiscation of [defendant’s] entire business . . . .’” See id., at 14. As the Court reasoned, the penalty provisions of Section 1747.08 (e) were not “fixed” amounts, but rather, maximum amounts which could be imposed at the trial court’s discretion. See id.

This opinion will likely have a significant impact, as the collection of zip code information when paying by credit card is a fairly widespread practice throughout California.

More on the California Supreme Court’s Decision in Kwikset Corp. et al. v. Superior Court

2011-01-31T16:55:00.000-08:00

Having had some time to digest the Court’s opinion (located here), it is evident that Prop 64 “injury in fact” standing requirement may be satisfied simply by allegations that the named plaintiff purchased a product as the direct result of reliance upon a material promotional misrepresentation. In making this determination, the Court reviewed the requisite elements of Prop 64 standing, as follows:

As an initial point, the Court reasoned that separate analysis of Prop 64’s “injury in fact” requirement was largely redundant of the “lost money or property” requirement, as the later (which the Court termed “economic injury”) was essentially a “type” or “subset” of “injury in fact”:

We offer a further observation concerning the order in which the elements of standing are best considered. Because, as noted, economic injury is itself a form of injury in fact, proof of lost money or property will largely overlap with proof of injury in fact. [] (See Troyk v. Farmers Group, Inc., supra, 171 Cal.App.4th at p. 1348 [where the alleged harm is economic injury, injury in fact and lost money or property are “one and the same”].) If a party has alleged or proven a personal, individualized loss of money or property in any nontrivial amount, he or she has also alleged or proven injury in fact. Because the lost money or property requirement is more difficult to satisfy than that of injury in fact, for courts to first consider whether lost money or property has been sufficiently alleged or proven will often make sense. If it has not been, standing is absent and the inquiry is complete. If it has been, the same allegations or proof that suffice to establish economic injury will generally show injury in fact as well (ibid.), and thus it will again often be the case that no further inquiry is needed.

Slip Opinion, at 9-14.

According to the Court, the degree of “economic injury” required by Prop 64 is minimal, as Prop 64’s “lost money or property” requirement only imposes a “qualitative” difference in the type of injuries required, not a “quantitative” difference in the degree of harm sustained. Slip Opinion, at 12-13. Thus, as applicable precedent only requires “a trifle” amount of injury to establish injury in fact, Prop 64’s “lost money or property” element necessarily must be read as requiring only a nominal amount of economic harm. Slip Opinion, at 13. The Court went on to identify numerous forms which economic injury could take, which the Court was careful to note was not an “an exhaustive list”:

There are innumerable ways in which economic injury from unfair competition may be shown. A plaintiff may (1) surrender in a transaction more, or acquire in a transaction less, than he or she otherwise would have; (2) have a present or future property interest diminished; (3) be deprived of money or property to which he or she has a cognizable claim; or (4) be required to enter into a transaction, costing money or property, that would otherwise have been unnecessary. (See, e.g., Hall v. Time Inc., supra, 158 Cal.App.4th at pp. 854–855 [cataloguing some of the various forms of economic injury].) Neither the text of Proposition 64 nor the ballot arguments in support of it purport to define or limit the concept of “lost money or property,” nor can or need we supply an exhaustive list of the ways in which unfair competition may cause economic harm. It suffices to say that, in sharp contrast to the state of the law before passage of Proposition 64, a private plaintiff filing suit now must establish that he or she has personally suffered such harm.

Slip Opinion, at 11.

With regard to Prop 64’s “as a result of” requirement -- which the Court termed “causation or reliance” -- the Court referred to its ruling in Tobacco II, which the Court explained had previously resolved issues concerning the construction of this phrase in the context of the UCL’s fraud prong. Slip Opinion, at 15-16.

Applying these standards, the Court concluded that “[a] consumer who relies on a product label and challenges a misrepresentation contained therein can satisfy the standing requirement of section 17204 by alleging, as plaintiffs have here, that he or she would not have bought the product but for the misrepresentation.” Slip Opinion, at 21. Stated differently, the Court concluded that the mere purchase of a fully functioning product based on an alleged misrepresentation is, standing alone, sufficient to establish the requisite “economic injury” necessary for UCL standing.

As reasoned by the Court, for “each consumer who relies on the truth and accuracy of a label and is deceived by misrepresentations into making a purchase, the economic harm is the same: the consumer has purchased a product that he or she paid more for than he or she otherwise might have been willing to pay if the product had been labeled accurately.” Slip Opinion, at 20. According to the Court, “[t]his economic harm—the loss of real dollars from a consumer's pocket—is the same whether or not a court might objectively view the products as functionally equivalent.” See id.

In rendering this conclusion, the Court gave due regard to the fact that in the advertising world, “labels matter.” As the Court explained, “[t]he marketing industry is based on the premise … that consumers will choose one product over another similar product based on its label and various tangible and intangible qualities they may come to associate with a particular source.” Slip Opinion, at 18-21. In this regard, the Court directly linked the policy objectives underpinning the UCL’s fraud prong as being contingent on the Court's liberal construction of economic injury. As the Court explained, “if we were to deny standing to consumers who have been deceived by label misrepresentations in making purchases, we would impair the ability of consumers to rely on labels, place those businesses that do not engage in misrepresentations at a competitive disadvantage, and encourage the marketplace to dispense with accuracy in favor of deceit.” Slip Opinion, at 22-23.

Moreover, the Court’s conclusion that “labels matter” also exposed the flaw in the CAP’s conclusion that the named plaintiff had received the “benefit of the bargain” notwithstanding the alleged misrepresentations, as Kwikset’s use of the alleged deceptive promotions was itself evidence that Kwikset likely viewed the representations to be material to the consumer's decision to purchase the product. Slip Opinion, at 25-26 (“Kwikset packaged its products with labels like ‘All American Made & Proud Of It’ and ‘Made in U.S.A.’ because it determined such marketing might sway reasonable people in their purchasing decisions.”).

Finally, the Court concluded that the CAP erred in equating standing and the remedy of restitution under the UCL, as standing and the right to recover restitution are not only distinct concepts, but permitting such a construction would eliminate completely any ability to pursue a UCL claim for purely injunctive relief. Slip Opinion, at 29-32. Based thereon, the Court expressly disapproved several cases which reached a contrary finding:

Accordingly, we hold ineligibility for restitution is not a basis for denying standing under section 17204 and disapprove those cases that have concluded otherwise. (See Silvaco Data Systems v. Intel Corp., supra, 184 Cal.App.4th 210, 245; Citizens of Humanity, LLC v. Costco Wholesale Corp., supra, 171 Cal.App.4th 1, 22; Buckland v. Threshold Enterprises, Ltd., supra, 155 Cal.App.4th 798, 817.)

Slip Opinion, at 32.

California Supreme Court Holds that Reliance on Alleged Deceptive Promotional Statements May Alone Satisfy UCL Standing: Kwikset Corp. et al. v. Superior Court

2011-01-27T17:13:00.000-08:00

On January 27, 2011, the California Supreme Court issued its opinion in Kwikset Corp. et al. v. Superior Court, __ Cal.4th __ (2011), reversing the Fourth District’s determination that UCL standing under the fraud prong was contingent on allegations that the product was overpriced or defective. The Court of Appeal had previously concluded that standing was lacking in that case because the named plaintiff, who purchased a lockset promoted as being made in America, received the benefit of the bargain, and as such was foreclosed from claiming any loss of money or property. The California Supreme Court reversed, concluding that “plaintiffs who can truthfully allege they were deceived by a product’s label into spending money to purchase the product, and would not have purchased it otherwise, have ‘lost money or property’ within the meaning of Proposition 64 and have standing to sue.” See Slip Opinion, at 2.

The Court’s opinion is fairly dense. However, based on my first read, it appears that the Court’s overarching conclusion is that the UCL’s provisions governing standing and restitution are not coterminous, and that equating the two improperly would limit the primary function of the UCL to enjoin deceptive conduct. I will post more on this important opinion in the next few days.

Ninth Circuit Rules CAFA “Local Controversy” Exception Elements to Be Established Based on Allegations in Complaint: Coleman v. Estes Express Lines

2011-01-27T07:49:00.000-08:00

On January 25, 2011, the Ninth Circuit issued an opinion in Coleman v. Estes Express Lines, 2011 U.S. App. LEXIS 1538, concluding that a district court is limited to the complaint in deciding whether two of the criteria for CAFA’s “local controversy exception” are satisfied. The local controversy exception requires remand notwithstanding establishment of the CAFA removal requirements when the plaintiff establishes the following:

(I) greater than two-thirds of the members of all proposed plaintiff classes in the aggregate are citizens of the State in which the action was originally filed;
(II) at least 1 defendant is a defendant —
     (aa) from whom significant relief is sought by members of the plaintiff class;
     (bb) whose alleged conduct forms a significant basis for the claims asserted by the proposed plaintiff class; and
     (cc) who is a citizen of the State in which the action was originally filed; and
(III) principal injuries resulting from the alleged conduct or any related conduct of each defendant were incurred in the State in which the action was originally filed.

28 § 1332(d)(4)(A)(i).

As held by the Colman Court, a district court must make its determination on the issues under subsections (aa) and (bb) based on allegations in the complaint, as opposed to extrinsic evidence. The Court reasoned that this conclusion was not only required by the plain language of these subparts, but because a contrary holding would result in an expansive mini-trial, contrary to Congress’ intent that jurisdiction determinations be made quickly under CAFA. See Coleman, 2011 U.S. App. LEXIS 1538, at 12-15.

The Court's holding would appear to be a significant one from the plaintiff's perspective, as the Court basically found both subparts met in this case by virtue of the fact the complaint sought relief equally among both defendants for the same harm:

We hold that Coleman’s complaint seeks sufficient relief against Estes West to satisfy subsection (aa). The complaint seeks damages equally from Estes West and Estes Express. There is nothing in the complaint to suggest that Estes West is a nominal defendant, or that Estes West has so few assets (including, for instance, buildings and trucks) that Coleman is not seeking significant monetary relief from it. Further, the complaint seeks injunctive relief against Estes West. There is nothing in the complaint to suggest either that the injunctive relief sought is itself insignificant, or that Estes West would be incapable of complying with an injunction.

Coleman’s complaint also sufficiently alleges conduct of Estes West that forms a significant basis for the claims asserted on behalf of the class under subsection (bb). The complaint alleges that Estes West employed the putative class members during the relevant period, and that Estes West has violated California law in a number of ways with respect to those employees. The complaint also alleges that Estes Express has violated the same provisions of California law, but the allegations against Estes Express in no way make the allegations against Estes West, the actual employer, insignificant.

See Coleman, 2011 U.S. App. LEXIS 1538, at 23-25.

Significantly, the Court closed its opinion noting that in many cases a Plaintiff may be required to amend their complaint, as complaints originally filed in state court may not address these local controversy issues:

We are aware of the difficulties that can be created by different pleading requirements in state and federal courts. A plaintiff filing a putative class action in state court need satisfy only the pleading standards of that court. It is therefore possible that if a putative class action is removed from state to federal court under CAFA the complaint, as originally drafted, will not answer the questions that need to be answered before the federal court can determine whether the suit comes within the local controversy exception to CAFA jurisdiction. In that circumstance, the district court may, in its discretion, require or permit the plaintiff to file an amended complaint that addresses any relevant CAFA criteria.

See Coleman, 2011 U.S. App. LEXIS 1538, at 25-26.

California Supreme Court to Issue Opinion in Kwikset Corp. et al. v. Superior Court:

2011-01-26T16:19:00.000-08:00

The California Supreme Court has issued a Notice that it will be issuing its opinion in Kwikset Corp. et al. v. Superior Court tomorrow. The issue in Kwikset is as follows:

Does a plaintiff’s allegation that he purchased a product in reliance on the product label’s misrepresentation about a characteristic of the product satisfy the requirement for standing under the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.) that the plaintiff allege a loss of money or property, or is such a plaintiff unable to allege the required loss of money or property because he obtained the benefit of his bargain by receiving the product in exchange for the payment?

California Supreme Court Issues “Grant and Hold” in Hernandez v. Chipotle Mexican Grill Pending its Decision in Brinker:

2011-01-26T15:16:00.000-08:00

On January 26, 2011, the California Supreme Court granted review of the Second District’s decision in Hernandez v. Chipotle Mexican Grill, 189 Cal. App. 4th 751 (2010), pending the Court decision in Brinker Restaurant Corp. v. Superior Court. The Court's action should come as no surprise, as the Hernandez opinion essentially mirrored the Brinker decision. The Court’s Order, which deprives Hernandez of value as precedent, is was as follows:

The petition for review is granted. Further action is this matter is deferred pending consideration and disposition of a related issue in Brinker Restaurant Corp. v. Superior Court, S166350 (see Cal. rules of Court, rule 8.524 (c)), or pending further order of the court. Submission of additional briefing, pursuant to California Rules of Court, rule 8.528, is deferred pending further order of the court. Votes: Cantil-Sakauye, C.J., Kennard, Baxter, Werdegar, Chin, Moreno and Corrigan, JJ.

Southern District Certifies Rule 23 and FLSA “Off-the-Clock” Classes Based on Store Closing “Lockdown” Policy: Stiller v. Costco

2011-01-26T07:15:00.000-08:00

On December 13, 2010, Southern District Court Judge, Marilyn L. Huff, certified a nationwide FLSA collective action and a California Rule 23 action arising from an alleged policy maintained by Costco which required closing shit hourly employees to remain locked inside Costco warehouses without pay while supervisors performed closing activities, such as removing jewelry from cases and emptying cash registers. See Stiller v. Costco, 2010 U.S. Dist. LEXIS 140297, at 3-4.

In certifying plaintiffs’ claims under Rule 23, the Court rejected Costco’s argument that off-the-clock claims are generally not certifiable based on (1) evidence that lockdowns occurred due to a centralized corporate policy, and (2) that issues regarding occurrences of off-the-clock work was a damages issue:

In opposing Plaintiffs' motion for class certification, Costco argues that common issues do not predominate over individualized issues, and that individual inquiries would govern attempts to determine liability arising from Costco's practices. (Doc. No. 98 at 20.) Costco argues that certification is inappropriate in cases where no uniform policy creates off-the-clock work. (Id.) In their reply, Plaintiffs point out that in this case, Costco had a centralized policy outlined in the 2004 Manual, which caused class members to be detained on a regular basis without pay during lockdowns. (Doc. No. 102 at 10.) Plaintiffs also brought substantial allegations of Costco's centralized policies that discouraged class members from seeking compensation for the recurring wait time. Thus, Plaintiffs argue that these generalized off-the-clock claims present a common, class-wide core of disputes between Costco and the class members. Plaintiffs argue that here, as in Local Joint Exec. Bd. of Culinary/Bartender Trust Fund v. Las Vegas Sands, Inc., 244 F.3d 1152 (9th Cir. 2001), the individualized issues are few. In Local Joint, the Ninth Circuit concluded that given the number and importance of the common issues, the need for individual damages determinations does not bar class certification, and the variation in individual damages was enough to defeat predominance under Rule 23(b)(3). 244 F.3d at 1163.

See Stiller, 2010 U.S. Dist. LEXIS 140297, at 20-22.

Another point of note involved the Court’s rejection of Costco’s argument that the plaintiffs proposed class action was barred by principles of collateral estoppel due to a February 1, 2010 decision in another action denying class certification pursued on behalf of all California non-exempt employees. The Court noted that Costco could not meet its heavy burden of demonstrating an identity of interest absent a detailed order in the prior action establishing that the precise issues were actually litigated and decided in the prior action:

The Court notes that that the state court in Castaneda did not issue a written opinion, or make findings of fact or conclusions of law. Here, Costco does not cite any portion of the Castaneda transcript where the court purportedly found a lack of predominating common issues as to all hourly, non-exempt, non-union employees who were subject to Costco's closing lockdown procedures. The Court concludes that Costco has not met its burden of establishing that the issues decided in Castaneda were identical to those in this case such that collateral estoppel would bar class certification in this case.

See Stiller, 2010 U.S. Dist. LEXIS 140297, at 24-25.

First District Holds No Conflict of Interest Created By Counsel’s Concurrent Representation of Settlement Objector and Overlapping Class Action: Kullar v. FootLocker

2011-01-19T08:21:00.000-08:00

On January 18, 2011, the First District (Division 3) upheld a trial court order declining to disqualify counsel representing the plaintiff in an apparent tag-along class action based on counsel’s simultaneous representation of that individual in her objection (and subsequent appellate challenge) to the fairness of a settlement in the first-filed action. See Kullar v. FootLocker, __ Cal.App.4th __ (2011). The motion, brought by the defendant in both actions, claimed that “[b]y knowingly representing both the objectors to the Kullar v. Foot Locker settlement and putative class members in the Echeverria v. Foot Locker case who want to participate in that settlement, [counsel] has a conflict of interest that requires disqualification from both matters.” Slip Opinion, at 3. More simply stated, Foot Locker claimed that counsel could not represent the class in the tag-along action because it took a position adverse to that very same class by objecting to a settlement the class favored.

The Court disagreed. In addition to concluding that counsel had no attorney-client relationship with the class absent certification in the tag-along action (i.e. precluding the requisite “relationship” on which to hang an actual conflict) [id., at 5-6], the Court concluded that no actual conflict existed. The Court reasoned that Foot Locker’s claim of “conflict” was predicated upon on the false premise that there mere failure to object or opt-out equates to an affirmative showing of approval by the class as a whole. See id., at 6-7. According to the Court, something more is needed. By way of contrast, the Court explained that an actual conflict may be shown by evidence that counsel also represented other class members who submitted a claim in the settlement, as this would constitute a concrete conflict between actual clients. See id., at 7 (citing Moreno v. Autozone, Inc., 2007 U.S. Dist. Lexis 98250 (N.D.Cal. 2007)).

Although I believe that the Court's analysis may have gone a bit far hailing the virtues of the class action objector (as every settlement is a compromise, and thereon, susceptible to the claim that "more" recovery is in the interest of the class), the Court's above analysis does provide another basis to deal with unscrupulous objector counsel. I previously wrote an article on this topic, which may be found here (although I don't take ownership for the horrible title the DJ assigned to it).

8th Circuit’s Disapproval of Tobacco II Deemed Unpersuasive by a Second California District Court: Chavez v. Blue Sky Natural Bev. Co.

2011-01-07T08:20:00.000-08:00

On November 22, 2010, a second Northern District Court declined a request to follow the 8th Circuit’s recent decision in Avritt v. Reliastar Life Ins. Co., 615 F.3d 1023 (8th Cir. 2010) as a basis for decertification of a UCL deceptive advertising class. As previously discussed here, Avritt disapproved of Tobacco II’s holding that absent class members are excused from establishing individual reliance on misrepresentations which form the basis of a UCL claim.

In Chavez v. Blue Sky Natural Bev. Co, 2010 U.S. Dist. LEXIS 138696 (N.D. Cal. Nov. 22, 2010), Judge Vaughn R. Walker denied defendant’s motion for leave to reconsider the Court’s order certifying a UCL deceptive advertising class (268 F.R.D. 365) based on Avritt, which defendant claimed constituted “new law” on the issue of “whether unnamed plaintiffs pursuing section 17200 claims must have independent Article III standing….” See id, at 4. The Court disagreed, citing to analysis contained in the Court’s certification order concluding that only the named plaintiff is required to establish standing. Id.

As previously discussed here, Judge Claudia Wilken similarly declined to follow Avritt in Greenwood v. Compucredit Corp., 2010 U.S. Dist. LEXIS 127719 (N.D. Cal. Nov. 19, 2010).

Further discussion of the Chavez Court’s certification order may be found at the UCL Practitioner here.

Second District Again Holds That Wage Order 7's “Suitable Seating” Provision is a Mandatory Labor Requirement Subjecting Employers to PAGA Penalties: Home Depot U.S.A., Inc. v. Superior Court

2010-12-23T08:03:00.000-08:00

On December 22, 2010, the Second District, Division 4, joined its sister division’s conclusion in Bright v. 99¢ Only Stores, 189 Cal. App. 4th 1472 (2010) that Wage Order 7’s "suitable seating" requirement (8 CCR 11070(14)) imposes a mandatory labor requirement that is governed by the enhanced PAGA penalty ascribed by Labor Code section 2699(f). See Home Depot U.S.A., Inc. v. Superior Court, __ Cal. App. 4th __ (2010).

Relying largely on the analysis in Bright (discussed in a previous post contained here), the Court denied Home Depot’s petition for writ relief from the trial court’s order overruling demurrer to plaintiff’s PAGA claim (predicated on Home Depot’s alleged failure to provide seating to employees at cashier and counter areas):

On November 12, 2010, while Home Depot’s petition was pending before us, Division Five of this district held that the default remedy stated in section 2699, subdivision (f), encompasses violations of section 1198 based on the seating requirement in Wage Order 7-2001. (Bright v. 99¢ Only Stores (2010) 189 Cal.App.4th 1472 (Bright).) We agree with this conclusion. Subdivision (f) of section 2699 establishes civil penalties for violations of “all provisions of [the Labor Code] except those for which a civil penalty is specifically provided.” As we elaborate below, section 1198 meets this description: an employer’s failure to provide seating under Wage Order 7-2001 is unlawful under section 1198, but no civil penalty for such conduct is “specifically provided” in section 1198 or elsewhere. Accordingly, violations of this type are subject to the default remedy stated in section 2699, subdivision (f).

See Slip Opinion, at 7-18.

Northern District Holds CAFA Not Implicated in PAGA Representative Action: Sample v. Big Lots Stores, Inc.

2010-12-15T08:48:00.000-08:00

On November 29, 2010, Northern District Court judge, Saundra Brown Armstrong, granted plaintiff’s motion to remand a PAGA action (predicated on alleged overtime, meal and rest period violations) on the grounds that a PAGA representative action does not trigger CAFA jurisdiction as a matter of law. See Sample v. Big Lots Stores, Inc., 2010 U.S. Dist. LEXIS 131130 (N.D. Cal. Nov. 29, 2010).

In evaluating the defendant’s removal under CAFA, the Court explained that “[t]he salient issue presented is whether a representative enforcement action under PAGA is a ‘class action’ subject to removal under CAFA.” See id., at 6. Relying largely on the California Supreme Court's decision in Arias v. Super. Ct., 46 Cal.4th 969 (2009) – which concluded that a PAGA action is distinct from a class action, and therefore, not subject to the requirements necessary maintain a class action – the Court held that it was not. See id., at 6-8. As reasoned by the Court, Arias’ explanation of PAGA as fundamentally a law enforcement action to recover penalties on behalf of the State removes PAGA claims from the reach of CAFA:

While it is true that Arias did not address CAFA per se, the California Supreme Court's decision nonetheless informs the Court's analysis in this case. C.f., Murtishaw v. Woodford, 255 F.3d 926, 964 (9th Cir. 2001) (noting that the California Supreme Court's interpretations of California law are binding on federal courts). On its face, CAFA applies only to state statutes or procedural rules that are "similar" to a federal class action brought under Rule 23. While Arias may not have directly involved CAFA, it clarifies that a PAGA claim is fundamentally distinct in both purpose and effect from a class action. Arias, 46 Cal.4th at 986. "Unlike a class action seeking damages or injunctive relief for injured employees, the purpose of PAGA is to incentivize private parties to recover civil penalties for the government that otherwise may not have been assessed and collected by overburdened state enforcement agencies." Ochoa-Hernandez v. Cjaders Foods, Inc., No. C 08-2073 MHP, 2010 U.S. Dist. LEXIS 32774, 2010 WL 1340777, at *4 (N.D. Cal. April 2, 2010) (citing Arias, 46 Cal.4th at 986) (Patel, J.). As such, Arias instructs that "PAGA claims are law enforcement actions, not class actions." Mendez v. Tween Brands, Inc., No. 2:10-CV-00072-MCE-DAD, 2010 U.S. Dist. LEXIS 66454, 2010 WL 2650571, 4 (E.D. Cal., July 1, 2010) (emphasis added).

See id., at 8-9.

8th Circuit’s Disapproval of Tobacco II Deemed “Unpersuasive” by Northern District Court: Greenwood v. Compucredit Corp.

2010-12-07T07:24:00.000-08:00

On November 19, 2010, Northern District Judge Claudia Wilken declined to follow the 8^th Circuit’s recent decision in Avritt v. Reliastar Life Ins. Co., 615 F.3d 1023 (8th Cir. 2010) as a basis for decertification of a UCL deceptive advertising class. See Greenwood v. Compucredit Corp., 2010 U.S. Dist. LEXIS 127719 (N.D. Cal. Nov. 19, 2010). As explained by the Court, Avrit “disapproved of Tobacco II’s holding that absent class members were excused from establishing individual reliance on misrepresentations alleged in UCL claims.” See id., at 7. In no uncertain terms, the Court concluded that “[t]he decision in Avritt does not bind this Court, and it is unpersuasive.” See id. As reasoned by the Court, Arvitt’s conclusion regarding absent class member standing was contrary to Ninth Circuit authority [see id.], and ultimately, the issue of absent class member reliance “is a question of the meaning of a California state law, on which the California Supreme Court's decision in Tobacco II is determinative.” See id., at 15.

Discussion of the Court's certification order in Greenwood is contained in a previous post contained here.

U.S. Supreme Court To Review Propriety of Rule 23(b)(2) Certification of Claims Involving Monetary Relief in Dukes. v. Wal-Mart

2010-12-06T09:18:00.000-08:00

On December 6, 2010, the U.S. Supreme Court granted Wal-Mart’s petition for a writ of certiorari in Dukes. v. Wal-Mart. The petition challenges the Ninth Circuit's ruling earlier this year upholding grant of certification of the largest gender discrimination class action in U.S. history. As stated on the Supreme Court's website (here), the issue presented is limited to the following:

Petition GRANTED limited to Question I presented by the petition. In addition to Question I, the parties are directed to brief and argue the following question: "Whether the class certification ordered under Rule 23(b)(2) was consistent with Rule 23(a)."

Question I, as stated in the Petition (here), is as follows:

I. Whether claims for monetary relief can be certified under Federal Rule of Civil Procedure 23(b)(2)—which by its terms is limited to injunctive or corresponding declaratory relief—and, if so, under what circumstances.

A detailed discussion of the Ninth's Circuit's class certification analysis was dicussed previously here (Rule 23(a) analysis), and here (Rule 23 (b)(2)).

California Supreme Court Holds 3 Year Statute Governs All Section 203 Penalty Actions, But Finds Penalties Non-Restitutionary Under the UCL: Pineda v. Bank of America

2010-11-19T07:35:00.000-08:00

On November 18, 2010, the California issued its opinion in Pineda v. Bank of Am., N.A., __ Cal. 4th __ (2010), on the issues of whether (1) a Labor Code 203 penalty action brought without alleging an underlying wage claim is governed by the one year statute of limitations of CCP 340(a), rather than the limitations period under Labor Code 203(b), which references “an action for the wages from which the penalties arise”, and (2) whether Section 203 penalties, which the statute itself identifies as a continuation of “wages”, may be recovered as restitution under the UCL. The Court resolved both issues in the negative.

With regard to the first issue, the Court reasoned that an interpretation of section 203(b) which would condition the application of the 3 year statute for wages on the concurrent filing of an underlying wage claim was not reasonable construction of the language of Section 203(b), and would “lead to unwieldy and inconsistent results”, inlcuding (1) rendering it impossible to know what statute of limitation governed at the time a Section 203 claim accrued, and (2) permiting the anomalous situation of an employer escaping Section 203 liability altogether by waiting a year to pay unpaid wages. Slip Opinion, at 5-10.

Moreover, the Court deemed such a construction contrary to the important public policy objective underpinning Section 203 penalties, which is to prevent injury to the “public at large” in addition to the individuals affected:

Finally, as we have acknowledged on multiple occasions, "[t]he public policy in favor of full and prompt payment of an employee's earned wages is fundamental and well established" and the failure to timely pay wages injures not only the employee, but the public at large as well. (Smith, supra, 39 Cal.4th at p. 82.) We have also recognized that sections 201, 202, and 203 play an important role in vindicating this public policy. (Smith v. Rae-Venter Law Group (2002) 29 Cal.4th 345, 360.) To that end, the Legislature adopted the penalty provision as a disincentive for employers to pay final wages late. (See BLS, 20th Biennial Rep.: 1921-1922, supra, p. 36.) It goes without saying that a longer statute of limitations for section 203 penalties provides additional incentive to encourage employers to pay final wages in a prompt manner, thus furthering the public policy.

Slip Opinion, at 12-13.

Based on these considerations, the Court concluded “there is but one reasonable construction: section 203(b) contains a single, three-year limitations period governing all actions for section 203 penalties irrespective of whether an employee's claim for penalties is accompanied by a claim for unpaid final wages.” See id., at 10, 13.

With regard to the Second issue, the Court concluded Section 203 penalties are not restitutionary in nature for purposes of the UCL because they are not “earned” wages within the meaning Labor Code 200, but rather wages which an employee is entitled to recover to punish an employer’s inaction when failing to pay “earned” wages when the become due:

[P]ermitting recovery of section 203 penalties via the UCL would not "restore the status quo by returning to the plaintiff funds in which he or she has an ownership interest." (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1149.) Section 203 is not designed to compensate employees for work performed. Instead, it is intended to encourage employers to pay final wages on time, and to punish employers who fail to do so. In other words, it is the employers' action (or inaction) that gives rise to section 203 penalties. The vested interest in unpaid wages, on the other hand, arises out of the employees' action, i.e., their labor. Until awarded by a relevant body, employees have no comparable vested interest in section 203 penalties. We thus hold section 203 penalties cannot be recovered as restitution under the UCL.

Slip Opinion, at 13-15.

California Supreme Court Grants Review in Kirby v. Immoos Fire Protection

2010-11-17T15:42:00.000-08:00

On November 17, 2010, the California Supreme Court granted review of the Third District’s decision in Kirby v. Immoos Fire Protection, 186 Cal. App. 4th 1361 (2010). The Kirby decision upheld a fee award in favor of an employer who successfully defended a rest period claim, concluding that meal and rest period claims were governed by Labor Code 218.5’s two-way fee shifting provisions, rather than the one way fee shifting of Section 1194. This holding poses a significant issue, as two way fee shifting would severely chill private enforcement of an employee's statutory right to recover meal and rest period premium wages.

The thrust of the argument in opposition is that Section 226.7 premium wages should be governed by Section 1194, not only because Section 226.7 proscribes a statutorily mandated wage, but also because the California Supreme Court concluded in Murphy v. Kenneth Cole Productions, Inc., 40 Cal. 4th 1094 (2007) that meal and rest break premium pay is itself a form of overtime compensation.

As set forth on the California Supreme Court’s website, the issue on review is as follows:

Does Labor Code section 218.5 govern attorney's fees awarded on a cause of action alleging violation of the statutorily mandated wage payment for missed meal and rest periods (Lab. Code, 226.7), or is an attorney's fee award governed by Labor Code section 1194?

The plaintiff’s Petition was supported numerous Amici, including one drafted by myself on behalf of the CAOC. Congratulations to everyone involved on a great effort securing review of such an important issue.

Second District Holds That Employer Subject to PAGA Penalties For Failure to Provide “Suitable Seating”: Bright v. 99¢ Only Stores

2010-11-12T12:55:00.000-08:00

On November 12, 2010, the Second District (Division 5), in Bright v. 99¢ Only Stores, __ Cal.App. 4th __ (2010), overturned a trial court order dismissing a PAGA claim predicated upon Wage Order 7’s “suitable seating” requirement. The requirement, which is codified under various wage orders within subpart 14, states as follows:

(A) All working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats.

(B) When employees are not engaged in the active duties of their employment and the nature of the work requires standing, an adequate number of suitable seats shall be placed in reasonable proximity to the work area and employees shall be permitted to use such seats when it does not interfere with the performance of their duties.

See 8 CCR 11070(14).

The trial court concluded that the plaintiff’s PAGA claim was non-viable, asserting that “suitable seating” was not required under the language of the Wage Order, and that PAGA penalties were not recoverable insofar as subpart 20 of the Wage Order provided penalties, which were restricted to instances where the employee was underpaid. Slip Opinion, at 4. The Court of Appeal reversed.

First, the Court rejected the argument that the “suitable seating” provision, which the employer claimed was phrased in permissive terms, was not a requirement under the Wage Order. As reasoned by the Court, everything detailed in the Wage Order, as part of an “order” enacted by the IWC pursuant to Labor Code 1198, is mandatory:

Under 99¢ Only Stores’ theory, because the mandatory provisions are not expressed in prohibitory language, they are merely suggestions, a conclusion we reject as not in keeping with the remedial purpose of the statute. “[The suitable seating provision] is not permissive. It is a part of an order which states what employers ‘shall’ do. It is implied that failing to do what the provision orders is prohibited. To interpret the Wage Orders as not prohibiting, and therefore allowing, any work condition unless the provision is phrased in the negative, i.e., using the word ‘not,’ would be contrary to common sense.” (Kilby v. CVS Pharmacy, Inc. (S.D.Cal. 2010) __ F.Supp.3d __ [2010 U.S.Dist.Lexis 86515, *7].) Moreover, if the mandatory conditions are not required by law, they could not be enforced, yet violations are enforceable in both criminal actions and injunctive proceedings. (See §§ 1199, 1194.5.) Further, compliance with the mandatory conditions of labor is required by section 1185, which provides that orders fixing standard conditions of labor are “valid and operative.”

Slip Opinion, at 6-7.

Second, the Court rejected the employer’s argument that the penalties provision of subpart 20 of the Wage Order governed. See id, at 8-10. The Court reasoned that subpart 20 – which was a generalized penalty provision – did not provide an “exclusive penalty” for violation of the suitable seating under subpart 14. Id., at 9-10. As a result, PAGA’s default penalty provision under Labor Code 2699(f) applied, permitting for the recovery of a penalty amount of $100 for initial violations, and subsequent penalties in the amount of $200 per pay period.

U.S. Supreme Court Hears Oral Argument in AT&T Mobility LLC v. Concepcion

2010-11-10T08:19:00.000-08:00

On Tuesday, November 9, 2010, the U.S. Supreme Court heard oral argument AT&T Mobility LLC v. Concepcion, which considers whether the invalidation of class action waivers on state-law unconscionability grounds (i.e. the Discover Bank rule) is preempted under the Federal Arbitration Act. The case involves the 9^th Circuit’s decision in Laster v. AT&T Mobility LLC, 584 F.3d 849 (9th Cir. Cal. 2009), which upheld an order denying a motion to compel “individual” arbitration based on the Discover Bank rule. This one is potentialy a game-changer. A transcript of the oral argument may be obtained on the official Supreme Court website here. Although one would think that the present composition of the Court would tend to favor AT&T, I have read through it, and admittedly, the Court seems to be leaning against preemption.

Courts Of Appeal Uphold Denial of Certification in Two Cases: Sevidal v. Target Corp. and Hernandez v. Chipotle Mexican Grill

2010-11-02T08:10:00.000-07:00

On October 29, 2010, the Fourth District (Division 1) upheld denial of certification of a “made in the USA” false advertising class in Sevidal v. Target Corp., __ Cal.App.4th __ (2010). In upholding the trial court’s order, the Court concluded that the element of ascertainability was lacking based on evidence that Target “was unable to determine from its computer records the identity of the individuals who purchased an item when its country of origin was improperly designated.” Slip Opinion, at 16-22. Further, the Court concluded that the class was overlybroad, as the evidence demonstrated that only a minority of consumers clicked the “additional info” icon containing the alleged offending statements on Target’s website, causing a substantial portion of the class to lack any right to recover on the asserted legal claims. See id., at 23-31.

On October 28, 2010, the Second District (Division 8) altered the status of its opinion in Hernandez v. Chipotle Mexican Grill, __ Cal.App.4th __ (2010) from unpublished to published. The opinion, which upheld a trial court’s denial of certification of meal and rest period claims, does not add much to the mix in terms of new law, and appears to simply mirror the issues presently before the California Supreme Court in Brinker. In fact, the Court ruled on the Brinker issue itself. This being the case, there was no basis for the status of this case being altered to published, and it is worth noting that Division 7, in an opinion going the opposite direction on the Brinker issue (previously discussed here), refused to publish its opinion despite publication requests. That issue aside, it appears that plaintiff counsel may have invited the Brinkeresque result, as plaintiff attempted to establish certification of an alleged barrier to breaks based solely on class member testimony and time records, as opposed to focusing on evidence of the defendant’s standardized company policies.

Second District Holds that PAGA Claims Are Encompassed Within a Wage Settlement Regardless of Whether Basis For Claims Are Pled or Litigated: Villacres v. Abm Indus.

2010-10-25T10:40:00.000-07:00

On October 22, 2010, the Second District Court of Appeal in Villacres v. Abm Indus., __ Cal. App. 4^th __ (2010) held that a PAGA action brought by an individual encompassed within a prior class action settlement was barred on res judicata grounds. As explained in the Court’s opinion, the plaintiff’s participation in the settlement of a prior action involving overtime claims precluded his PAGA action despite the fact that (1) the settlement agreement released only those claims that “could have been raised as part of the Plaintiffs’ claims”, and (2) the bulk of violations alleged in his action were not included in the prior action, including meal and rest break violations, wage statement violations, untimely mage payments.

Although the Court declined to delve into whether a PAGA claim involves a different primary right [Slip Opinion, at 17 (“We need not decide whether, as defendants argue, the primary rights theory treats all wage-related Labor Code violations and PAGA penalties as a single cause of action or whether, as Villacres contends, every Labor Code violation and PAGA penalty involves a separate primary right.”)], the Court nonetheless concluded that plaintiff’s PAGA action implicated the same claims asserted and settled in the prior action. The Court based this determination on the more broad finding that “Villacres's PAGA claims could have been raised in the prior action for purposes of res judicata.” See id., at 14-29. According to the Court, plaintiff could have acted in numerous ways to preserve and/or protect his rights subsequent to receiving notice:

In response to the Notice, Villacres could have (1) objected to the proposed settlement on the ground it should have included additional Labor Code violations and corresponding PAGA penalties, (2) sought to intervene in Augustus to pursue the same goal, or (3) opted out of the settlement and preserved his right to bring an independent action. (See Home Sav. & Loan Assn. v. Superior Court, supra, 42 Cal.App.3d at p. 1010; accord, Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial, supra, P 14:133, p. 14-80; Cohelan on California Class Actions (2009-2010 ed.) §§ 4:28, 9:11-9:12, pp. 64-65, 377-381; 4 Newberg on Class Actions (4th ed. 2002) §§ 11:55, 11:58, pp. 168-181, 186-211 [discussing objections]; 5 Newberg on Class Actions, supra, § 16:9, at pp. 171-179 [discussing intervention]; Cal. Rules of Court, rule 3.767(a)(4).)

Slip Opinion, at 21.

As asserted by Justice Chaney in the dissent, this approach was flawed for several reasons, not the least of which, it ignored the language in settlement agreement purporting to release only those claims that “‘could have been raised as part of the Plaintiffs’ claims….’” See id., at 8 (dissent). As Justice Chaney reasoned, this limiting language not only reflected an intent by the parties to confine the release to wage issues that were actually raised in the lawsuit [id.], such limiting language was required by existing class action settlement precedent:

[T]he parties had good reason to install a limited release-they needed court approval of the settlement. Class representatives have no standing to release all claims, and overbroad general releases should be avoided. "Any attempt to include in a class settlement terms which are outside the scope of the operative complaint should be closely scrutinized by the trial court to determine if the plaintiff genuinely contests those issues and adequately represents the class." (Trotsky v. Los Angeles Fed. Sav. & Loan Assn. (1975) 48 Cal.App.3d 134, 148.) "[T]o exercise this power of careful scrutiny over the inclusion of additional claims in the settlement, the trial court has the right to expect the settling parties to disclose the effect of such terms at the time the proposed settlement is brought to the attention of the court." (Ibid.) Judge Minning presumably would have found a release of all conceivable claims to be overbroad.

Slip Opinion, at 8-9.

The insightful issues raised by Justice Chaney are significant, and poke material holes in the analysis of the majority.

First, the existence of such limiting language in the scope of the settlement release would eliminate any basis for a class member to believe they were required to object or opt-out to preserve their rights on other issues. Indeed, the release language expressly stated that it did not encompass wage/employment issues not raised in the lawsuit. From this proposition, as Justice Chaney highlights, the majority’s position encourages (if not requires) class members to always take affirmative action to preserve their rights, by way of opt-out or objection, on grounds that are infinite. See id., at 10 (“a release of any claim that can be articulated in an objection or complaint in intervention, even frivolously, would be truly limitless”).

Second, insofar as this limiting language was insufficient to exclude other wage issues not raised in the litigation, the majority’s broad holding seemingly compels a de facto release of all wage/employment claims in every class settlement regardless of efforts to restrict the release of claims in the settlement agreement to the claims actually litigated in the action. This proposition has the potential to unleash a due process Pandora’s Box by compelling the inclusion of “all claims” within every class action settlement – even those claims that, if included in the lawsuit, would render class adjudication improper. As Justice Chaney aptly explains, “[a] class member would not be permitted to intervene where his or her separate claim threatens to destroy the community of interest” and “[e]ven if the trial court were to contemplate establishing a subclass, it would not do so to accommodate a single class member's separate claim.” See id., at 10-11.

In sum, the majority's res judicata analysis appears to be detached from numerous class adjudication principles, not the least of which being that settlement of a class action is contractual in nature.

California Supreme Court Grants Review in Aryeh v. Canon Business Solutions

2010-10-22T07:15:00.000-07:00

On October 20, 2010, the California Supreme Court granted plaintiff/appellant’s petition for review in Aryeh v. Canon Business Solutions, Inc., 185 Cal. App. 4th 1159 (2010). As previously discussed here, the Second District concluded that the continuing violations doctrine does not apply to claims brought under the UCL, barring claims predicated on reoccurring conduct commencing more than four years prior to filing. The statement of issues contained on the California Supreme Court's website is as follows:

Petition for review after the Court of Appeal affirmed the judgment in a civil action. This case presents the following issues: (1) May the continuing violation doctrine, under which a defendant may be held liable for actions that take place outside the limitations period if those actions are sufficiently linked to unlawful conduct within the limitations period, be asserted in an action under the Unfair Competition Law (Bus. & Prof. Code, ? 17200 et seq.)? (2) May the continuous accrual doctrine, under which each violation of a periodic obligation or duty is deemed to give rise to a separate cause of action that accrues at the time of the individual wrong, be asserted in such an action? (3) May the delayed discovery rule, under which a cause of action does not accrue until a reasonable person in the plaintiff's position has actual or constructive knowledge of facts giving rise to a claim, be asserted in such an action?

Northern District of California Certifies UCL Class Against Ebay: Ewert v. Ebay, Inc.

2010-10-15T10:00:00.001-07:00

On September 30, 2010, Northern District Court Judge, Ronald M. Whyte, certified a deceptive promotion/advertisement UCL class against Ebay arising out of alleged systemic delays in fulfilling material terms of service in Ebay’s “But It Now” listing service. See Ewert v. Ebay, Inc., 2010 U.S. Dist. LEXIS 108838 (N.D. Cal. Sept. 30, 2010). Under plaintiff’s theory, individuals who post items for auction on Ebay are offered the option, for an additional fee, “to have a ‘Buy It Now’ price on an auction-style listing” which is purchased for a set “duration, such as 1, 3, 5, 7, or 10 days.” See id., at 3. The rub, as alleged by plaintiffs, is that “[a]ll listings are affected by technical delays caused by the time necessary to index and load listings” and “eBay also does not extend the listing period to compensate for these delays.” See id. at 3-4. Ebay’s opposition, which was predicated largely upon the argument that individualized inquiry would be required as to reliance and restitution under the UCL, failed to carry the day. See id. at 34-35 (As “there is no need for individualized inquiries into contract interpretation, reliance, consumer status, damages, or restitution, the court concludes that the proposed class is sufficiently cohesive to warrant adjudication by representation….”).

California Supreme Court Grants Review in Faulkinbury v. Boyd & Associates

2010-10-13T16:37:00.000-07:00

On October 13, 2010, the California Supreme Court granted review of the Fourth Distirct's decision in Faulkinbury v. Boyd & Associates, Inc., 185 Cal. App. 4th 1363 (2010). I previously discussed this case in a post located here. As stated on the California Supreme Court’s website, briefing on the case is deferred pending the Court’s decision in Brinker:

The petition for review is granted. Further action is this matter is deferred pending consideration and disposition of a related issue in Brinker Restaurant v. Superior Court, S166350 (see Cal. rules of Court, rule 8.524 (c)), or pending further order of the court. Submission of additional briefing, pursuant to California Rules of Court, rule 8.528, is deferred pending further order of the court. Votes: George, C.J., Kennard, Baxter, Werdegar, Chin, Moreno and Corrigan, JJ.

Kudos to Kim Kralowec and the other counsel whose efforts securing review here clearly paid off.

Governor Signs Bill Limiting Meal Period Provisions of Labor Code Section 512: AB 569

2010-10-08T11:40:00.000-07:00

Perhaps a bit late to the game on this, but on September 30, 2010 the Governor signed into law AB 569, which amended Labor Code Section 512's provisions regarding meal breaks. The amendments -- which presumably do not operate retroactively -- provide the following changes (per the statement in the legislative digest):

This bill would exempt from these provisions employees in a construction occupation, commercial drivers, employees in the security services industry employed as security officers, and employees of electrical and gas corporations or local publicly owned electric utilities, as defined, if those employees are covered by a valid collective bargaining agreement containing specified terms, including meal period provisions. It would specify that its provisions do not affect the requirements for meal periods for certain other employees or employers.

Second District Concludes that Invalidation of Wage Order 16 CBA Exception Does Not Insulate Employer From Meal Period Premium Pay Obligations: Lazarin v. Superior Court

2010-10-08T06:58:00.000-07:00

On October 7, 2010, the Second District (Division 7) issues an opinion in Lazarin v. Superior Court, __ Cal.App. 4th __ (2010), concluding that a proposed class of employees governed by Wage Order 16 were entitled to premium meal period wages for second meal periods notwithstanding Division Four’s prior opinion in Bearden v. U.S. Borax, Inc., 138 Cal.App.4th 429 (2006):

The superior court erred in applying Bearden, supra, 138 Cal.App.4th 429, which held the IWC had exceeded its statutory authority in adopting the exemption for union-represented employees contained in wage order 16, section 10(E), but gave its decision prospective effect only. The failure of an employer to provide second meal periods as required by section 512, subdivision (a), and wage order 16, section 10(B), is subject to an award of premium pay as specified in section 226.7. Accordingly, we grant the petition for writ of mandate filed by Lazarin, Quamina and Skinner and direct the court to vacate its order of February 11, 2010 granting TWI‟s motion for summary adjudication as to the fifth cause of action and to enter a new and different order denying that motion.

See Slip Opinion, at 3.

According to the Court, invalidation of section 10(E) does not insulate an employer for the time period prior to the invalidation of the provision. The Court based this finding on the fact the Wage Order 16 contained a severability clause (section 19), causing section 10(E) to be surgically excised, leaving section 10(A) and (B) in place. See id., at 19-20. Moreover, the Court distinguished Bearden’s finding that its opinion could only have prospective application based in large part on the fact the Bearden was decided prior to Kenneth Cole when the additional hour of pay required by section 226.7 was viewed as a penalty (as opposed to a premium wage). See id., at 22-25.

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

2010-09-29T14:10:00.000-07:00

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.

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.

2010-09-27T17:45:00.000-07:00

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:

2010-09-27T06:48:00.000-07:00

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.

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

2010-09-21T07:39:00.000-07:00

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)

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

2010-09-20T08:09:00.000-07:00

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.

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

2010-09-16T08:33:00.000-07:00

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.

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

2010-09-09T07:47:00.000-07:00

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.”).

Second District Reverses Decertification of Meal Period Claim, Siding With Third District’s Cicairos Analysis Pending Ruling in Brinker

2010-08-27T07:38:00.000-07:00

On August 26, 2010, the Second District (Division Seven), issued an unpublished opinion regarding meal periods in Brookler v. Radio Shack, siding with the Third District’s opinion in Cicairos v. Summit Logistics, Inc., 133 Cal.App.4th 949 (2005). The opinion reversed a trial court order decertifying a previously certified class based on Brinker. The Court concluded that “[u]nless and until our Supreme Court holds otherwise, we agree with the analysis in Cicairos which held an employer’s obligation under the Labor Code and related wage orders is to do more than simply permit meal breaks in theory; it must also provide them as a practical matter.”

As reflected on the Supreme Court website – still no date set for oral argument (here).

Sixth District Hold Court’s UCL Does Not Provide Court Broad Power to Set Aside Judgments: Fireside Bank Cases

2010-08-27T07:33:00.000-07:00

On August 25, 2010, the Sixth District altered its opinion in Fireside Bank Cases from unpublished to published. There, the Court concluded that a court’s equitable power under the UCL does not include the ability to sidestep principles of res judicata to set aside existing judgments, en masse.

Second District Reaffirms Strict Limitations on Disposing of Proposed Wage Class Actions By Way of Demurrer: Gutierrez v. Cal. Commerce Club

2010-08-24T08:33:00.000-07:00

On August 23, 2010, the Second District (Division One) issued an order changing the publication status of Gutierrez v. Cal. Commerce Club, __ Cal. App. 4th __ (2010) from unpublished to published. The opinion deals with the impropriety of forcing a named plaintiff to establish an entitlement to certification of a class through allegations in the operative complaint.

At issue was a trial court order sustaining a demurrer to the plaintiff’s third amended complaint (alleging meal/rest period claims) without leave “on the ground the plaintiffs had failed to show the existence of a class….” Slip Opinion, at 2. Significantly, the trial court had previously overruled demurrer to the plaintiff’s first amended complaint, finding the allegations of that pleading minimally adequate. See id., at 3-4. The third amended complaint came about after the plaintiff had sought, and obtained, leave from the court to file a second amended complaint. Id.

In reversing, the Court of Appeal concluded that “[i]n this action, as in the vast majority of wage and hour disputes, class suitability should not be determined on demurrer.” Slip Opinion, at 2. As reasoned by the Court, a demurrer can be used to dispose of class allegations only when class certification can be shown, based on the face of the complaint, that that there is no reasonable possibility a class will be certified (which is the applicable standard for dismissal by way of demurrer). See id., at 7-10. Importantly, the Court concluded that in actions involving claims in the wage and hour context – which have historically been recognized as especially amenable to class-wide adjudication – class allegations should not be disposed by way of demurrer:

We return again to and rely upon the well-established principle, that “only in mass tort actions (or other actions equally unsuited to class action treatment) [should] class suitability . . . be determined at the pleading stage. In other cases, particularly those involving wage and hour claims, [such as the instant action,] class suitability should not be determined by demurrer.” (Prince, supra, 118 Cal.App.4th at p. 1325, italics added; see also Tarkington, supra, 172 Cal.App.4th at p. 1512.)

Slip Opinion, at 11.

Moreover, the Court further noted that the trial court abused its discretion by doing an about-face on the sufficiency of the plaintiff’s complaint without any change in circumstances:

The trial court found far the less specific allegations minimally adequate when it overruled the Club‘s demurrer to the FAC. At that time it noted, correctly, that there would be “ample time later to determine whether there is a single class, several classes and whether this plaintiff can represent some or all of the classes . . . [and that,] in this case, the statement that defendant has not provided its employees with proper rest periods states both the facts and the theory.” The record reveals no explanation for the court‘s abrupt reversal of course in sustaining demurrers to the SAC and TAC, which contain virtually identical (or more specific) allegations.

Slip Opinion, at 10 n.5.

This line of analysis, which also was at issue in the Fourth District’s opinion in Weinstat v. Dentsply Internat., Inc, 180 Cal.App.4th 1213 (2010), demonstrates that a trial court use of its discretion to change its mind must be rooted in a legitimate change in circumstances capable of justifying the reversal in position.

Third District Upholds Class Action Waiver: Walnut Producers of California v. Diamond Foods, Inc.

2010-08-18T09:40:00.000-07:00

On August 16, 2010, the Third District issued an opinion in Walnut Producers of California v. Diamond Foods, Inc., __ Cal.App.4th __ (2010), upholding the trial’s court order striking class allegations based on a class action waiver. The case was not a typical consumer case, as it involved a walnut marketing association challenge to “marketing agreement” with a walnut processor brought on the behalf of a class of walnut growers.

Material to the Court’s decision was its finding that the plaintiff could not establish procedural unconsciability due to the fact the association was comprised of sophisticated business people who, as members of the association, yielded significant power and control:

Plaintiffs have not successfully pleaded the Agreement is a contract of adhesion under the unusual circumstances of this case. It is true that plaintiffs pleaded the Agreement is a standardized contract drafted by Diamond Foods that was presented to plaintiffs without any opportunity to negotiate its terms. However, it is not true according to plaintiffs' allegations that Diamond Foods had superior bargaining strength or that plaintiffs had no real alternatives available to them at the time they entered into the Agreement.

The obvious alternative for plaintiffs was not to approve the Co-op's merger into Diamond Foods. Plaintiffs' choice was not limited to entering into the Agreement. Rather, their choice was between continuing in the Co-op, or merging the Co-op with Diamond Foods and entering into the Agreement. Since plaintiffs controlled the Co-op as members, we cannot say the Agreement was imposed on the members by a party of superior bargaining strength or that they had no other alternative but to merge the Co-op and enter into the agreement.

Slip Opinion, at 15-16.

On the issue of substantive unconscionability, the Court concluded that under Discovery Bank, “the issue of a class action waiver's substantive unconscionability must be decided on its exculpatory effect, not merely on whether a class action may be an amenable or even favored remedy.” See Slip Opinion, at 22-23. As reasoned by the Court, the claims of each individual walnut grower was sufficiently large so as to not render adjudication contingent on the class mechanism:

Unlike in Discover Bank, plaintiffs' complaint does not establish that the Agreement's class action waiver acted as an exculpatory clause or unduly hindered plaintiffs from pursuing a legal remedy. Plaintiffs' amended complaint shows that a class action is not the only viable means for recovering plaintiffs' damages or enforcing the contract against Diamond Foods. The amended complaint seeks damages for the class of “at least $ 70 million.” Divided evenly among 1,600 class action plaintiffs, the alleged size of the class, a damage award of $ 70 million would provide each plaintiff with an award of $ 43,750. Obviously, the actual awards would be larger or smaller than that depending on each grower's claim, but, when considered for unconscionability, requiring a grower to file an individual action for roughly $ 43,000 in damages does not shock the conscience. n6 (See Arguelles-Romero v. Superior Court (2010) 184 Cal.App.4th 825, 844 [109 Cal. Rptr. 3d 289] [a claim for $ 16,000 is not so small as to justify not enforcing class action waiver].)

Slip Opinion, at 20-21.

California Supreme Court Holds Section 3345(b) Trebling For Acts Against Senior Citizens Inapplicable to UCL: Clark v. Superior Court

2010-08-09T12:03:00.000-07:00

On August 9, 2010, the California Supreme Court issued its opinion in Clark v. Superior Court, __ Cal.4th __ (2010), concluding that “an award of restitution under the unfair competition law ... is not subject to section 3345’s trebling provision.” In reaching its decision, the Court concluded that Civil Code Section 3345(b)’s trebling provision was not limited to claims brought under the CLRA [Slip Opinion, at 5-7], but rather, was applicable any statute which “permits a remedy that is in the nature of a penalty.” See id., at 7-9. From that point, the Court reasoned that “[b]ecause restitution in a private action brought under the unfair competition law is measured by what was taken from the plaintiff, that remedy is not a penalty and hence does not fall within the trebled recovery provision of Civil Code section 3345, subdivision (b).” See id., at 9-10.

California Supreme Court Holds Labor Code Section 351 Does Not Provide Employees A Private Right of Action to Recover Tips: Lu v. Hawaiian Gardens Casino, Inc

2010-08-09T11:03:00.000-07:00

On August 9, 2010, the California Supreme Court issued its opinion in Lu v. Hawaiian Gardens Casino, Inc, __ Cal.4th __ (2010), concluding “section 351 does not contain a private right to sue.” As reasoned by the Court, Section 351 does not contain an enabling provision, or language susceptible of legislative intent to afford employees a private right to sue. That was not the end of the story, however, as the Court held that Section 351’s acknowledgement that employees have a property right to tip income provided other avenues on which to adjudicate a violation of that right, such as a claim for conversion. The opinion was silent as to whether Section 351 could serve as a predicate violation under the unlawful prong of the UCL.

Drug Manufacturer's Precertification Settlement Effort Invalidated As Improper Class Communication: County of Santa Clara v. Astra USA, Inc.

2010-08-06T15:04:00.000-07:00

On July 8, 2010, District Court Judge William Alsup entered an interesting order in County of Santa Clara v. Astra USA, Inc., 2010 U.S. Dist. LEXIS 78312, 22-23 (N.D. Cal. July 8, 2010), relating to defendant Bristol-Meyers Squibb’s effort to obtain accord and satisfaction of pending, but uncertified, overcharging claims by mass-mailing refund checks to putative class members. The Court noted that 2003 amendments to Rule 23 made it unclear whether pre-certification settlements required court approval. However, the plaintiffs approached the issue from a different angle, attacking the substance of the communication with the class as improper. The Court agreed, concluding that the defendant had omitted significant information in its communication, and as a result, the release obtained was deemed invalid under California law:

The duty and authority to protect the putative plaintiff class and uphold the policies of Rule 23 extends to the limited ruling in this case. BMS has omitted material information and misled the putative plaintiff class: the letter did not contain the complaint or Ninth Circuit opinion, did not describe the claims, did not contain the current status of the case, did not provide contact information for the plaintiffs' attorneys, did not explain how the aggregate net basis methodology can actually decrease the payment amount, and tried to establish a veneer of CMS authorization that was clearly not accurate. Indeed, misleading the putative plaintiffs, offering a potentially much decreased settlement, and not cooperating with the plaintiffs all show a lack of good faith. Thus, the plaintiffs' motion for corrective action is Granted. The accord and satisfaction release is invalid in California. Any checks cashed will be deducted from any recovery obtained herein (or presumably elsewhere) by the recipients. It is not necessary for BMS to make any corrective communications.

See County of Santa Clara, 2010 U.S. Dist. LEXIS 78312, 22-23.

First District Publishes Class Objector Opinion: Cellphone Fee Termination Cases

2010-08-03T08:19:00.000-07:00

On July 27, 2010, the First District (Division five) issued an order changing the publication status of the Cellphone Fee Termination Cases, __ Cal.App.4th __ (2010) from unpublished to published. The opinion, which deals with an objector appeal to a class settlement, discusses several issues relating to settlement notice standards, and the propriety of incentive payments to the named plaintiff.

First, the Court rejected an objection to the use of an abbreviated “short-form notice” which referred class members to a website containing a more detailed “long-from notice.” As reasoned by the Court, this method of providing notice was the most practicable and met minimal standards of due process:

A similar procedure for notice of a class settlement, utilizing a summary notice directing class members to a Web site containing more detailed notice, was approved in Chavez as a “perfectly acceptable” manner of giving notice. (Chavez, supra, 162 Cal.App.4th at p. 58.) We agree with the observation in Chavez that “[u]sing the capability of the Internet in [this] fashion was a sensible and efficient way of providing notice, especially compared to the alternative [objector] apparently preferred—mailing out a lengthy legalistic document that few class members would have been able to plow through.” (Id. at p. 58, fn. omitted.) We do not look for perfection. “[A] large body of case law reflect[s] the view that ‘the whole concept of a large class-action might easily be stultified by insistence upon perfection in actual notice to class-members … .’ [Citation.]” (Hypertouch, supra, 128 Cal.App.4th at p. 1540.

Slip Opinion, at 12-13.

[More on electronic class notice may be found in an article I authored, located here]

Second, citing to federal authority, the Court concluded that minimal standards of adequacy of the notice does not require disclosure of class size:

Zobrist also argues that notice was defective in failing to disclose the “enormous size” of the class to the EFT Assessed Class. She contends that this did not provide the class members with adequate information for the members to make an informed decision about whether to participate, object, or opt out. She cites no authority for her position that information as to the size of the potential class, or the contingencies of recovery in any particular amount, is required. Courts which have considered such objections in the context of class settlement have rejected the claim. n18 “[T]here is no requirement that the class size be specified in the notice [citations] … .” (In re Lorazepam & Clorazepate Antitrust Litigation (D.D.C. 2002) 205 F.R.D. 369, 379; see also In re Insurance Brokerage Antitrust Litigation (D.N.J., Feb. 16, 2007, MDL No. 1663, No. 04-5184(FSH)) 2007 U.S. Dist. LEXIS 11163 [nonpub. opn.] [rejecting objection to notice that it “do[es] not provide details about the size of the class and the actual individual settlement values”]; In re: Managed Care Litigation; Class Plaintiffs v. Aetna Inc. (S.D.Fla., Oct. 24, 2003, MDL No. 1334, No. 00-1334-MD-Moreno) 2003 U.S. Dist. LEXIS 27228 [nonpub. opn.] [rejecting objection to notice that there was “no way to calculate the actual value of the settlement as to each class member since no estimate of size of class was provided”].)

Slip Opinion, at 13.

Finally, the Court rejected the objector’s argument that incentive awards provide preferential treatment to the named plaintiff that amount to a breach of the named plaintiff’s fiduciary duty to the class. As reasoned by the Court, incentive payments are a necessary aspect of class litigation, in that such compensation may be required to induce the representative to participate in the suit, but that such payments must be proportionate to the circumstances of the case:

“[T]he rationale for making enhancement or incentive awards to named plaintiffs is that they should be compensated for the expense or risk they have incurred in conferring a benefit on other members of the class.” (Clark, supra, 175 Cal.App.4th at p. 806.) An incentive award is appropriate “‘if it is necessary to induce an individual to participate in the suit.’ [Citation.]” (Id. at p. 804.) “[C]riteria courts may consider in determining whether to make an incentive award include: 1) the risk to the class representative in commencing suit, both financial and otherwise; 2) the notoriety and personal difficulties encountered by the class representative; 3) the amount of time and effort spent by the class representative; 4) the duration of the litigation and; 5) the personal benefit (or lack thereof) enjoyed by the class representative as a result of the litigation. [Citation.]” (Van Vranken v. Atlantic Richfield Co. (N.D.Cal. 1995) 901 F.Supp. 294, 299.) These “incentive awards” to class representatives must not be disproportionate to the amount of time and energy expended in pursuit of the lawsuit. (See Dornberger v. Metropolitan Life Ins. Co. (S.D.N.Y. 2001) 203 F.R.D. 118, 124–125.)

Slip Opinion, at 21-22.

Southern District Certifies Newspaper Carrier Misclassification Suit: Dalton v. Lee Publ'ns, Inc

2010-07-29T08:39:00.000-07:00

On July 27, 2010, Southern District Court judge, Barry Ted Moskowitz, entered an order in Dalton v. Lee Publ'ns, Inc, 2010 U.S. Dist. LEXIS 75132 (S.D. Cal. July 27, 2010), granting certification of a class of newspaper carriers. As set forth within the Court’s order, plaintiffs alleged various wage violations based on the theory that defendant had uniformly misclassified news carriers as independent contractors. The Court’s decision to certify turned in large part on the element of “control” being subject to common proof through form contracts utilized by the defendant:

The primary factor, the right to control, is also susceptible to common proof. This is because the rights and obligations of the class members and Defendant are set forth in two sets of substantially identical contracts. The contracts set forth the following: (a) the carrier's primary duties, including assembling and delivering the newspapers timely and in good condition; (b) the carrier's obligation to supply a vehicle and equipment; (c) the carrier's pay schedule; (d) the purported understanding of the parties regarding the carrier's independent contractor status; (e) the penalties for excessive complaints, misdeliveries, and subscription cancellations; (f) the requirement to get auto insurance in specific liability amounts; (g) which party bears the risk of loss from non-payment, non-delivery, and other liabilities; (h) the contract is unassignable, but the carrier may hire substitutes or helpers; (i) the carrier will not attend employee meetings and is free to ignore all suggestions offered by the Defendant; (j) the manner and rate of compensation; (k) the carrier must use his or her best effort to increase circulation; (I) the parties must exchange updated information regarding subscriber cancellations and enrollments; (m) the duration of the contract; and (n) termination rights, among other things. There is no evidence before the Court that the parties' rights and obligations were substantially different from those set forth in the contracts.

Thus, the contracts sets forth the contours of Defendant's control over the class. The Court makes no findings yet about the extent of Defendant's control, but only observes that the contracts provide a basis to do so.

See Dalton, 2010 U.S. Dist. LEXIS 75132, 19-21.

The Court’s opinion is quite detailed, as it appears that the defendant pulled out all the stops in its attempt to defeat certification. One of the more interesting arguments raised was that class members would be unable to establish liability by overcoming the independent contractor defense alone, but rather, would have to overcome a second-level “outside sales” exemption defense. The Court reasoned that this defense was implausible on its face, but in any event, would not create individualized issues sufficient to overcome certification:

Lastly, Defendant argues that its outside-salesperson defense will require individualized analysis. Under California regulations, an outside salesperson is defined as someone "who customarily and regularly works more than half the working time away from the employer's place of business selling tangible or intangible items or obtaining orders or contracts for products, services, or use of facilities." Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935, 938 (9th Cir. 2009) (citing California Industrial Wage Commission Wage Order 4-2001, § 2(M)). The claim that home-delivery newspaper carriers are salesman is dubious on its face. They deliver newspapers; they generally do not sell them. Moreover, because of Defendant's estimates and records--including Plaintiffs' time spent folding newspapers, whether they used Defendant's facilities to do so, and Plaintiff's time spent delivering newspapers--one could easily calculate whether a particular Plaintiff spent "more than half the working time away from the employer's place of business." Vinole, 571 F.3d at 938. So even if the carriers could be considered salespeople, determining where they spent their time would not entail so much individual analysis as to defeat certification.

See Dalton, 2010 U.S. Dist. LEXIS 75132, 26-27

The Court’s opinion covers many issues, too many to discuss in detail. Definitely a must read.

District Court Grants Plaintiffs Summary Judgment On Vacation and Wage Statement Claims: Lopez v. G.A.T. Airline Ground Support, Inc.

2010-07-23T08:52:00.000-07:00

On July 19, 2010, Southern District Judge Irma E. Gonzalez, issued an order granting (in part) a plaintiff-side motion for summary judgment of various wage claims in Lopez v. G.A.T. Airline Ground Support, Inc., 2010 U.S. Dist. LEXIS 73029 (S.D. Cal. July 19, 2010). In my opinion, the Court’s discussion regarding the plaintiffs’ vacation pay and wage statement claims are noteworthy.

With regard to plaintiffs’ vacation pay claim, the Court held that the following policy contained in the defendant’s employee handbook violated Labor Code § 227.3 as a matter of law: “Upon completion of one year of continuous employment, hourly employees will receive 5 days of paid vacation. Employees will continue to receive 5 days of paid vacation annually on their Anniversary Date.” See Lopez, 2010 U.S. Dist. LEXIS 73029, at 10. Plaintiff claimed that this policy required employees to forfeit vested vacation pay if they are not employed on the one-year anniversary of their start date, in violation of Section 227.3. See id. Conversely, the defendant claimed that the policy merely conditioned an employee’s right to vacation on satisfying a “probationary period”, a practice which the defendant claimed was deemed lawful in Owen v. Macy's, Inc., 175 Cal. App. 4th 462 (2009).

The Court sided with plaintiffs, reasoning that defendant’s policy was distinguishable from Owen because it did not condition the “accrual” of vacation rights on satisfying the one year probationary period:

GAT's policy is distinguishable from the one in Owen. The policy in Owen expressly stated that employees did not "earn and vest in paid vacation" for the first six months of employment. [] Then, after the first six months, the employees in Owen received vacation days as an advance for the coming year, on the assumption that the employees would remain with the company during the coming year. Here, GAT's policy does not specify that no vacation is earned or vested during the first year, only that employees do not "receive" the five vacation days until their one-year anniversary. Also, unlike the policy in Owen, the vacation GAT employees receive on their first-year anniversary is not an "advance" for vacation earned during the second year of employment. Douglas Gray, a GAT payroll manager, testified employees receive five days of vacation after one year, and then accrue vacation time on a pro-rata basis going into their second year of employment (and continuing onward). [] Therefore, GAT's vacation policy requires employees to forfeit vested vacation pay in violation of Section 227.3.

See Lopez, 2010 U.S. Dist. LEXIS 73029, 11-12.

The Court also granted summary judgment in favor of plaintiffs with regard to their Section 226 wage statement claims. There, the Court concluded that the defendant’s failure to include the applicable hourly rate of pay for regular and overtime hours required plaintiffs to do complex mathematical calculations to determine the accuracy of their paychecks, and thereon, violated Section 226(a) as a matter of law:

It is undisputed that GAT's paychecks do not indicate the applicable hourly rate of pay for the employee's regular rate, overtime rate, or double-time rate of pay. Plaintiffs' paychecks included only the total number of hours worked and the total amount paid. Therefore, Plaintiffs had to perform mathematical calculations to determine if their paychecks were accurate. Cicairos v. Summit Logistics, Inc., 133 Cal. App. 4th 949, 35 Cal. Rptr. 3d 243, 247 (Ct. App. 2005) ("If it is left to the employee to add up the daily hours shown on the time cards or other records so that the employee must perform arithmetic computations to determine the total hours worked during the pay period, the requirements of section 226 would not be met."). The failure to provide this information violates Section 226(a).

It is also undisputed that GAT's wage statements indicate only the end date for each pay period, and do not list the beginning date. Defendants argue the pay period was sufficiently identified on the paychecks, because the paychecks provide the pay period when reviewed sequentially. However, the Labor Code requires each wage statement to provide "the inclusive dates of the period." See Cal. Labor Code. § 226(a).

Therefore, Plaintiff is entitled to summary judgment on the issue of whether Defendants furnished accurate itemized wage statements. Defendants violated Labor Code § 226(a) by failing to include the inclusive dates of the period for which employees were paid, the applicable hourly rates, and the corresponding number of hours worked at each hourly rate.

See Lopez, 2010 U.S. Dist. LEXIS 73029, 18-19.

Second District Publishes Section 226 “Wage Statement” Opinion: Morgan v. United Retail

2010-07-20T07:13:00.000-07:00

On July 19, 2010, the Second District (Division 7) issued an order (pursuant to requests filed by Starbucks Corporation and Ralph's Grocery Company) changing the publication status of Morgan v. United Retail, __ Cal.App.4th __ (2010) from unpublished to published. The Court’s opinion concludes that the Labor Code Section 226(a) requirement of providing the “total hours” worked in employee wage statements is met where the employer provides an accurate statement of both regular and overtime hours that were worked within a pay period. Slip Opinion, at 15 (“United Retail's wage statements complied with section 226's requirement regarding the total hours worked by showing the actual number of regular hours worked and the actual number of overtime hours worked during the applicable pay period.”).

California Supreme Court Holds that Prop 64 Standing Cannot Be Negated by the Defense of Mitigation: Clayworth v. Pfizer

2010-07-14T10:49:00.000-07:00

On July 12, 2010, the California Supreme Court issued its opinion in Clayworth v. Pfizer, __ Cal.4th __ (2010), concluding, among other things, that Prop 64 standing cannot be eliminated based on a plaintiff’s ability to mitigate the harm suffered. At issue were UCL claims brought by pharmacies predicated on alleged price fixing by a collective of drug manufacturers. The dismissal of such claims was subsequently upheld by the Court of Appeal on the grounds that the alleged “overcharging” injury was mitigated completely by pharmacies passing the increased drug costs to third parties (i.e. the consumer and third party payers), thereby eliminating completely the plaintiff’s standing and entitlement to a remedy under the UCL.

The Supreme Court reversed. As reasoned by the Court, the argument put forward by defendant manufacturers conflated the issue of plaintiffs' standing with the plaintiffs' ultimate entitlement to a remedy under the UCL, of which only the later was arguably subject to a defense based on “mitigation”:

While Manufacturers argue that ultimately Pharmacies suffered no compensable loss because they were able to mitigate fully any injury by passing on the overcharges, this argument conflates the issue of standing with the issue of the remedies to which a party may be entitled. That a party may ultimately be unable to prove a right to damages (or, here, restitution) does not demonstrate that it lacks standing to argue for its entitlement to them. (See Southern Pac. Co. v. Darnell-Taenzer Co., supra, 245 U.S. at p. 534 ["The plaintiffs suffered losses . . . when they [over]paid. Their claim accrued at once in the theory of the law and it does not inquire into later events."]; Adams v. Mills, supra, 286 U.S. at p. 407 ["In contemplation of law the claim for damages arose at the time the extra charge was paid," notwithstanding any subsequent reimbursement].) The doctrine of mitigation, where it applies, is a limitation on liability for damages, not a basis for extinguishing standing. (See Pool v. City of Oakland (1986) 42 Cal.3d 1051, 1066 [" 'The rule of [mitigation of damages] comes into play after a legal wrong has occurred, but while some damages may still be averted' " (quoting Prosser & Keeton, Torts (5th ed. 1984) § 65, p. 458)].) This is so because mitigation, while it might diminish a party's recovery, does not diminish the party's interest in proving it is entitled to recovery.

Slip Opinion, at 39-40.

Moreover, the Court further concluded that a defense based on “mitigation” was incapable of eliminating plaintiffs' right to pursue injunctive relief. As reasoned by the Court, the lower court's analysis impermissibly linked the plaintiff’s right to an injunctive remedy to the plaintiff also establishing an entitlement to restitution:

The Court of Appeal held Pharmacies were barred from seeking injunctive relief because, it concluded, they had suffered no monetary loss. To the extent this holding rests on the conclusion Pharmacies lacked standing under section 17204, it is erroneous; as discussed ante, Pharmacies have standing. To the extent the holding rests on the conclusion that even if Pharmacies had standing, they could not seek injunctive relief unless they could also seek restitution, it similarly is erroneous. Section 17203 makes injunctive relief "the primary form of relief available under the UCL," while restitution is merely "ancillary." (In re Tobacco II Cases (2009) 46 Cal.4th 298, 319.) Nothing in the statute's language conditions a court's authority to order injunctive relief on the need in a given case to also order restitution. Accordingly, the right to seek injunctive relief under section 17203 is not dependent on the right to seek restitution; the two are wholly independent remedies. (See ABC Internat. Traders, Inc. v. Matsushita Electric Corp. (1997) 14 Cal.4th 1247, 1268 [§ 17203 "contains . . . no language of condition linking injunctive and restitutionary relief"]; Prata v. Superior Court (2001) 91 Cal.App.4th 1128, 1139 [plaintiff could pursue injunctive relief even though restitution was unavailable].)

Slip Opinion, at 41.

Two PAGA Decisions of Note: Mendez v. Tween Brands and Nordstrom Commission Cases

2010-07-08T09:16:00.000-07:00

On June 30, 2010, Eastern District Judge Morrison C. England, Jr. issued an opinion in Mendez v. Tween Brands, 2010 U.S. Dist. LEXIS 66454 (E.D. Cal. June 30, 2010), concluding that a PAGA representative claim need not be certified as a class action in Federal Court. Defendants sought to strike the plaintiff’s PAGA claims, which were pled in a representative capacity, on the grounds that PAGA claims are procedural in nature, and under Erie, needed to be certified under Rule 23. See Mendez, 2010 U.S. Dist. LEXIS 66454, at 6-7. Based on this argument, the defendants maintained that litigation of PAGA claims were governed by Federal Rules of Procedure, rendering inapplicable the California Supreme Court’s decision in Arias v. Superior Court, 46 Cal. 4th 969 (2009) that PAGA claims need not satisfy class action requirements.

The Court Disagreed. In addition to reasoning that such a result would encourage forum shopping by employers [Id, at 10], the Court reasoned that the defendant’s argument was based on the misperception that PAGA claims vest employees with an entitlement to PAGA penalties, rather than implicating a purely “law enforcement” action that is conducted on behalf of the State:

Defendants fundamentally misstate the nature of PAGA claims. PAGA claims are law enforcement actions, not class actions. A plaintiff brings claims pursuant to PAGA as "the proxy or agent of the state's labor law enforcement agencies." Arias, 209 P.3d at 933. n4 The remedy sought in a PAGA suit consists of civil penalties, not individual or class damages. Cal. Lab. Code § 2699(a). "[A PAGA] action is fundamentally a law enforcement action designed to protect the public and penalize the employer for past illegal conduct. Restitution is not the primary object of a PAGA action, as it is in most class actions." Franco v. Athens Disposal Co., Inc., 171 Cal. App. 4th 1277, 1300 (2009). Defendant relies on the Supreme Court's ruling in Shady Grove that Rule 23 governs all class actions brought in federal court, Shady Grove Orthopedic Assocs. v. Allstate Ins. Co., 130 S. Ct. 1431 (2010), but PAGA claims, by definition, are not class actions. This renders Defendant's argument moot.

See Mendez, 2010 U.S. Dist. LEXIS 66454, at 10-11.

In a second PAGA related decision, on July 7, 2010, the Fourth District (Division 3) published its decision in Nordstrom Commission Cases, __ Cal.App.4th __ (2010) upholding final approval of a class action settlement which expressly allocated "nothing" to PAGA claims. It is important to note that the Court’s decision does not ratify a wholesale abandonment of PAGA claims to facilitate a wage settlement, but rather, approved an allocation of "nothing" based on a very narrow set of circumstances.

First, the Court’s decision appears to ratify the release of PAGA claims which were actually pled by employee. As noted by the Nordstrom Court, “PAGA ... allows aggrieved employees to bring civil actions to recover already existing penalties if the Labor and Workforce Development Agency, which is authorized to recover such penalties, does not do so.” Slip Opinion, at 13. Indeed, under Labor Code § 2699.3 an employee has no standing to pursue a PAGA claim unless and until (1) written notice is provided to the Labor and Workforce Development Agency and (2) the Agency indicates that it does not intend to pursue the claim. (Thus, contrary to the efforts of some defense counsel, a broad releases of PAGA claims may not be achieved as part and parcel of a wage and hour settlement absent an employee's prior satisfaction of the requirements of Section 2699.3). Here, PAGA claims were apparently before the Court, as the the Nordstrom Court noted that “the PAGA penalty claims were at issue, and were resolved as a part of the overall settlement of the case.” See Slip Opinion, at 15.

Second, the Nordstrom Court’s approval of the allocation of nothing to plaintiff’s PAGA claims was based on the trial court’s determination that the record reflected that the PAGA claims were arguably not viable, and thereon, worth nothing. Specifically, the Court concluded that Nordstrom was acting under a consent judgment that was the product of a prior class action settlement, and as such, there was a good faith dispute as to whether Nordstrom engaged in any PAGA violation:

The Nordstrom Commission Cases settlement agreement identifies liability for PAGA penalties as a claim against Nordstrom and includes the following language: “The Parties allocate $0 to any Private Attorneys General Act penalty claim under Labor Code § 2699 et seq., for penalty claims based on the Released Claims. During the Class Period, Nordstrom paid Putative Class Members’ commissions pursuant to a commission plan that it contends was approved by the United States District Court in Rios, and consequently, Nordstrom contends no claim for penalties of any nature is valid.” Thus, the PAGA penalty claims were at issue, and were resolved as a part of the overall settlement of the case. We find no abuse of discretion in the trial court’s approval of the settlement agreement containing these terms.

Slip Opinion, at 14-15.

Thus, Nordstrom does not appear to stand for the proposition that a plaintiff may simply settle out PAGA claims for nothing without a justification that would warrant doing so.

Second District Further Clarifies Class Settlement Approval Standards: Munoz v. BCI Coca-Cola Bottling Company Of Los Angeles

2010-07-06T10:25:00.000-07:00

On July 2, 2010, the Second District (Division 8) changed the status of its class settlement opinion in Munoz v. BCI Coca-Cola Bottling Company Of Los Angeles, __ Cal.App.4th __ (2010) from unpublished to published. The Munoz appeal was initiated and prosecuted by a class member who objected to the grant of final approval based on a record he argued was insufficient to determine whether the settlement terms were fair, adequate and reasonable.

The Court’s opinion resolves any ambiguity as to whether the decisions in Kullar v. Foot Locker Retail, Inc., 168 Cal.App.4th 116 (2008) and Clark v. American Residential Services LLC, 175 Cal.App.4th 785 (2009) require an affirmative evidentiary showing capable of determining the maximum amount that is placed in controversy by class member claims to substantiate the fairness of a proposed settlement. As held by the Court, they do not, but rather require only a record capable of affording a more lose “understanding” of the amount in controversy sufficient to demonstrate realistic ranges in potential outcomes in the action:

Greenwell misunderstands Kullar, apparently interpreting it to require the record in all cases to contain evidence in the form of an explicit statement of the maximum amount the plaintiff class could recover if it prevailed on all its claims--a number which appears nowhere in the record of this case. But Kullar does not, as Greenwell claims, require any such explicit statement of value; it requires a record which allows “an understanding of the amount that is in controversy and the realistic range of outcomes of the litigation.” (Kullar, supra, 168 Cal.App.4th at p. 120.) That record exists in this case.

Slip Opinion, at 11.

Moreover, the Court rejected the view that class counsel must affirmatively prove that sufficient discovery/investigation was conducted to evaluate the strength of class member claims, concluding that “[t]he salient point is whether the factual record before the court is sufficiently developed to allow the court independently to satisfy itself ‘that the consideration being received for the release of the class members’ claims is reasonable in light of the strengths and weaknesses of the claims and the risks of the particular litigation.’” See id., at 12-13. Importantly, while the Court does not proscribe a set amount of information required for a trial court to fulfill its duties in this regard, or a set form which such information is to be submitted, the Court was clear that the underlying record must be something more than “nothing” that would enable the trial court to evaluate the strengths and weaknesses of the claims at issue:

As a final observation on this topic, we note that the evidentiary records in Kullar and Clark, upon which Greenwell relies so heavily, are significantly different from this case. In Kullar (which did not involve the misclassification of exempt employees), there was no discovery at all on meal period claims that were added in an amended complaint and were the focal point of the objections to the settlement. (Kullar, supra, 168 Cal.App.4th at pp. 121-122.) While Kullar class counsel argued that the relevant information had been exchanged informally and during mediation (id. at p. 126), nothing was presented to the court--no discovery, no declarations, no time records, no payroll data, nothing (id. at pp. 128-129, 132)--to allow the court to evaluate the claim. And in Clark, the problem was that the trial court was not given sufficient information on a core legal issue affecting the strength of the plaintiffs’ case on the merits, and therefore could not assess the reasonableness of the settlement terms. (Clark, supra, 175 Cal.App.4th at p. 798.) The record in this case contains neither of the flaws that doomed the Kullar and Clark settlements.

Slip Opinion, at 13.

In light of the standard articulated by the Court, the showing on both points would not require submission of a fully developed evidentiary record, but rather, could be satisfied in class counsel’s supporting declaration by laying out the foundational facts and issues on which the compromise of class member claims is based.

District Court’s Denial of Reconsideration Motion Counsels Duty to Promptly Alert Court of New Authority: Keilholtz v. Lennox Hearth Prods

2010-07-01T09:25:00.000-07:00

On June 4, 2010, Northern District Judge Claudia Wilken denied a motion requesting reconsideration of the Court’s previous order certifying National and California classes on behalf of single-pane sealed glass front fireplaces owners, previously discussed here. As reasoned by the Court, the defendant’s reconsideration motion, which was based on new Ninth Circuit authority, failed to meet the requirements of Local Rule 7-9 insofar as the opinion was actually issued prior to the Court’s certification order:

Although the parties cannot be faulted for not knowing the precise date the Court will file its orders, they should bring to the Court's attention as soon as possible any facts or law that may affect the motion. Because Defendants waited until after the Court filed its order granting Plaintiff's motion for class certification to notify it of a decision published before the filing of the order, Defendants' motion for leave to file a motion for reconsideration does not fall under any of the three categories described above.

See Keilholtz, 2010 U.S. Dist. LEXIS 63917, 3.

The decision is one of note for class counsel, who in some cases can face multiple motions for reconsideration of a certification order wherein it is claimed everything under the sun constitutes “new authority” impacting the court’s opinion.

New Wage Class Certification Opinion: Faulkinbury v. Boyd & Associates, Inc.

2010-07-01T09:21:00.000-07:00

On June 24, 2010, the Fourth District (Division Three) in Faulkinbury v. Boyd & Associates, Inc., __ Cal.App.4th __ (2010) upheld a trial court order denying certification of meal and rest period claims. As reflected in the Court’s opinion, the underlying record was deemed distinguishable from that at issue in Bufil v. Dollar Financial Group, Inc., 162 Cal. App. 4th 1193, 1203 (2008), and the Second District’s recent decision in Jaimez v. Daiohs USA, Inc., 181 Cal.App.4th 1286 (2010), as individualized issues would predominate adjudicating defendant’s liability under the class proposed. From the discussion contained in the opinion, the ultimate failure of certification appears to center on a failure to tightly focus the class definition at the certification stage to the specific uniform facts and theories exposed. Slip Opinion, at __ (“in contrast to Bufil, Plaintiffs structured the case in a way that defines the Meal Break Class very broadly to include all Boyd security guard employees in the class period.”). In this regard, the opinion really presents little new, but in fact, mirrors the factual/procedural underpinnings of Bufil itself, wherein certification was also initially denied on the first go-round for this very reason. In my view, the opinion really underscores the importance of critically examining and tightening your certification theory and class definion prior to certification. In fact, following Bufil as a guide, I think some variant of this proposed class could still be certified utilizing a more narrowly framed definition and corresponding legal theory.