Wage Law

The Various Views on Pioneer Electronics

The ink is starting to dry on the Pioneer Electronics decision, and there is already plenty of commentary to read.

• The UCL Practitioner sees it as a very pro-class action case.
• CalBizLit, which we might add to the blogroll, says "I think there are occasions, and consumer information, that can be distinguished. But my goodness, you can't call this a defense win" but called the ruling one that allowed" fishing for plaintiffs." I don't read the case that broadly, but maybe someday I'll want to fish for a plaintiff and I'll try to use Pioneer Electronics to do it. We'll see then whether the defense bar thinks it can be used to fish for plaintiffs.
• Overlawyered, which might still be waiting to see the first lawsuit it thinks has merit, compared and contrasted this case with a stripper's privacy case.
• The San Francisco Chronicle observed that this was also a victory for plaintiffs in employment and civil rights cases.
• Mofo was quick to put up an alert declaring that "although the Pioneer Electronics decision reaffirms a trial court’s broad discretion to weigh and balance the competing interests in the cases before them, the case likely will present the starting point from which they will perform their analysis."

Before the oral argument was conducted in Pioneer Electronics, we did not know a single defense lawyer who professed any concern about this case. Even after the argument, which we thought telegraphed at least a 7-2 decision in favor of the plaintiffs (it actually ended up a unanimous opinion), most defense lawyers told me they thought the Court of Appeal decision would be affirmed. In that respect, this decision feels a lot like the Sav-On class certification case felt. Defense firms are expressing the same confidence in Murphy, and once again, we are among the minority of optimists. Hopefully, that decision will be out some time in 2007.

Wal*Mart To Pay $33 Million To Settle FLSA Proceeding

Wal*Mart will pay more than $33 million in back wages to settle a self-reported wage violation case with the U.S. Department of Labor. The U.S. Labor Department's Fair Labor Standards Division, announced that the case involves about 87,000 employees. By settling, Wal*Mart avoids payment of any fines or penalties. A similar claim addressed in a suit by the California Labor Commissioner filed has not reached a settlement.

Though it sounds like a large settlement, it is probably far below Wal*Mart's true liability. In the current settlement, employees had no input and no legal representation. In other cases involving similar claims by classes of employees represented by counsel, Wal*Mart has been found to have much greater liability. For example, in October, a group of Pennsylvania Wal*Mart employees won a $78.5 million judgment for off-the-clock work and rest break violations, and in December 2005, a California jury awarded more than $172 million on similar claims.

As some readers may recall, a January 2005 Wal*Mart settlement with the DOL called for payment of just $135,540 by the retailer, and the Inspector General's report on the settlement, issued later that year, declared that it contained significant concessions and was significantly different from similar settlements with other companies, particularly with respect to some highly unusual restrictions on the DOL's ability to assess monetary penalties. The next time you wonder about the value of an attorney's services when the seven-figure fee application is approved in a large wage and hour case, compare and contrast these figures:

2007 DOL v. Wal*Mart: $33 million nationwide
2005 DOL v. Wal*Mart: $134,540 nationwide

2006 Private class action v. Wal*Mart: $172.2 million (California only)
2006 Private class action v. Wal*Mart: $78.5 million (Pennsylvania only)

We've Hit a New Milestone

Oddly enough, just two days after one of our favorite blogs (the UCL Practitioner) crossed the 150,000 visit mark, we crossed the same mark as to page views (we don't know how many unique visits that makes). We remember back in the day, when we were paying $3,000 a year for a website hosted by Martindale Hubbell or Lexis or Westlaw (we can't even remember who), we would get monthly emails that said something like "Mr. Walsh, great news! Your website received 139 hits in the month of October!" We did get some clients from it, but not many. Today, we get an average of more than 300 hits per day, and only 3-4 of those hits come from us checking comments or our own posts. The difference: less money, more content. Thank you all for reading, and especially thank you to those who leave comments. We welcome all points of view, even those who disagree with us.

We'll keep doing this as long as we have both the time and energy and the content remains relevant. Right now, there seems to be something worth discussing every day. At other times, several days or weeks will pass without us reading something that makes us want to type. At yet other times, there are great things to talk about, but we are in the middle of 20 days straight of depositions, or we're in trial, or gearing up for a big mediation or class certification motion. When that happens, the blog must sleep. Luckily, it seems like every time we start adding content, the readership jumps right back up.

The California Wage Law blog does not constitute legal advice. It is for informational and entertainment purposes only, and none of its posts should be detrimentally relied upon. We make no guarantees, warranties or promises about the accuracy, completeness, or adequacy of the information contained in or linked to from this blog, especially as it may apply to claimants or litigants outside the State of California. For a full list of disclaimers, notices and explanations of why you can't sue us over anything we write, please read our official disclaimer here. Enjoy. Now, on to a quarter million....

On Calendar Today: Alan v. American Honda Motor

The Supreme Court is again in session this morning and another case potentially of interest to wage and hour attorneys is set for oral argument on the 9:00 a.m. calendar: Alan v. American Honda Motor Co. Inc., S137238, B165756; 131 Cal.App.4th 886; Superior Court of Los Angeles County; BC195461. The order granting review framed the issue as follows:

Petition for review after the Court of Appeal dismissed an appeal in a civil action. The court limited review to the following issue: Did the Statement of Decision and Minute Order dated January 2, 2003, trigger the 60-day period within which to notice an appeal under California Rules of Court, rule 8.104 (formerly rule 2(a)(1))?

The Statement of Decision and Minute Order pertained to the denial of a class certification motion, which makes the case of some interest to wage and hour class action attorneys. The relevant facts are as follows:

On January 2, 2003, the trial court clerk mailed to plaintiff a file-stamped copy of an appealable order and a minute order showing the date it was mailed, thus triggering the 60-day time period set forth in Cal. R. Ct. 2(a)(1). Plaintiff filed his notice of appeal on March 6, 2003, which was 63 days after the court clerk mailed to the parties the appealable order. The Court of Appeal held that plaintiff's notice of appeal was not timely filed, rejecting plaintiff's argument that the trial court's ruling did not comply with Rule 2 because it consisted of two documents as opposed to one. The Court of Appeal found that Rule 2(a)(1) (now Rule 8.104) expressly contemplated the practice of a clerk mailing two documents, a file-stamped copy of the appealable order or judgment and a document showing the date it was mailed, but in any event, the minute order, which showed the date it was mailed, expressly incorporated the statement of decision and stated that the statement of decision constituted the trial court's ruling. The appeal was dismissed. That dismissal, on those grounds, is under review.

The plaintiff also argued that the court order denying class certification was only a partial denial of certification, and therefore not a "death knell" and not immediately appealable, because the plaintiff also asserted pre-Proposition 64 unfair competition claims. Thus, plaintiff filed a cautionary appeal, asking that the court exercise its discretion to consider the premature appeal as a petition for a writ of mandate. This argument was also rejected and apparently is not subject to debate this morning.

Class Rep Who Never Had Standing Cannot Use Discovery To Find Substitute Who Does

In many class action cases, defendants succeed in convincing the court that the representative plaintiff who filed the class action would not be a suitable class representative. The reasons can include, among the things, conflicts of interest (i.e., where the class representative is also an attorney with the firm representing the class), satisfaction (where the defense settles or tenders an offer to make the plaintiff whole), unique defenses, an inability to understand or participate in the proceedings, death or incapacity, or a lack of standing by a plaintiff who once had standing.

When it is determined that a class representative lacks standing to represent the class or is otherwise unsuitable to represent the class, the representative must be granted leave to amend to redefine the class or add new individual plaintiffs, or both. La Sala v. American Sav. & Loan Assn. (1971) 5 Cal.3d 864, 872.) This rule is usually applied in situations where the class representative originally had standing, but has since lost it by intervening law or facts. La Sala [class action plaintiff challenged defendant’s loan acceleration clause; defendant waived enforcement of the clause against plaintiff]; Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235, 243 [plaintiff in pending unfair competition case lost standing by intervening adoption of Proposition 64]; Kagan v. Gibraltar Sav. & Loan Assn. (1984) 35 Cal.3d 582, 588-589, 596 [class representative had standing when she sent the defendant a demand letter threatening suit, but lacked standing when the suit was filed because the defendant had granted plaintiff individual relief in response to her demand letter.]. But what if the plaintiff lacks standing because, as it turns out, he never was part of the alleged class in the first place? Must notice be given to the class, and an opportunity to amend be afforded the absent class members if the original plaintiff never had any standing whatsoever? The Second District Court of Appeal says no.

In First American Title Insurance Company v. Superior Court (Sjobring) 1/25/07, Second District Court of Appeal, B194004 (Los Angeles County Super. Ct. No. BC329482) the trial court found that, although the plaintiff was not  – and never had been – a member of the class he purported to represent, he was entitled to conduct precertification discovery from the defendants for the purpose of identifying a member of the class who is willing to become a named plaintiff and pursue the action. On a writ petition, the Court of Appeal reversed.

As the current plaintiff is, in effect, a stranger to the action, we conclude the grant of such discovery would sanction an abuse of the class action procedure. We therefore conclude the trial court’s order granting the discovery was an abuse of discretion, and grant the defendants’ petition for writ relief.

The facts of the case will prove to be important, because it was a crucial factual distinction between this case and La Sala and its progeny that resulted in the finding for the defense. In February 2004, plaintiff Sjobring bought a house. Sjobring’s loan broker obtained a purchase money loan for Sjobring from Wilmington Finance. Though the choice of a title insurer should be of little concern to the seller, the seller’s real estate agent demanded that Sjobring used First American. Sjobring’s loan agent thought the cost of title insurance to be "suspiciously high." Later, Sjobring discovered that the Colorado Division of Insurance had settled a claim against First American for unlawful title insurance practices involving a reinsurance kickback scheme, under which that entity agreed to refund $24 million to consumers nationwide, and also agreed to end the practice. Four days later, Sjobring filed a class action against First American Title Company of Los Angeles, Wilmington Finance, and numerous Doe defendants for breach of fiduciary duty, constructive fraud, unjust enrichment, violation of the Consumer Legal Remedies Act (“CLRA”), unfair business practices, and declaratory relief.

Sjobring alleged that he was “directed in part through his lender [Wilmington Finance] to purchase a title insurance policy from defendant First American Title Company of Los Angeles.” Sjobring defined the class as all persons “[w]ho paid in whole or in part for a title insurance policy, from First American Title Company of Los Angeles and/or Does 1 through 249, which provided coverage for property located in the State of California . . . [f]or whom part of the premium paid for the title insurance policy was received by Wilmington Finance, Inc., and/or Does 250 through 500.”

In July 2005, the California Department of Insurance announced a $37.8 million settlement with nine different title insurance companies, including First American. A "full refund of the ceded premium,” was to be refunded on 38,000 affected customers. However, the affected customers represented less than one percent of First American's 5 million customers during the relevant time period. When the California Department of Insurance identified the list of builders, realtors and lenders who were implicated in the reinsurance scheme, Wilmington Finance was not mentioned. As it turned out, Wilmington Finance had not entered into any reinsurance agreements with any First American entities and Wilmington Finance had not been paid any compensation by First American entities for the referral of title insurance business.

In a case management statement, plaintiff wrote: “Plaintiff’s counsel is considering the substitution or addition of a class representative. It is possible that no improper kickbacks were directly connected to ... Sjobring’s purchase of title insurance. However, plaintiff may have suffered a direct injury if his title insurance premium was artificially inflated as a result of defendant’s practice of paying improper kickbacks on other title insurance policies. [¶] If it is determined that plaintiff Sjobring cannot represent the class, the court should allow plaintiff the opportunity to amend the complaint to ‘redefine the class, or to add new individual plaintiffs, or both, in order to establish a suitable representative.’ [Citation.]”

In April 2006, Sjobring served discovery requests on the First American defendants seeking the names and addresses of the 38,000 individuals who had received refunds pursuant to the California Department of Insurance for the purpose of assisting the plaintiffs to "identify a suitable class representative and also lead to potential witnesses to First American’s improper rebatings, kickback and/or payment practices." First American refused and moved for summary adjudication, based primarily on the fact that the defendants had not paid Wilmington Finance for the referral of Sjobring’s business. Sjobring responded with a motion for precertification discovery to seek class representatives, and an order compelling notice to the 38,000 California homeowners involved in the settlement with the California Department of Insurance.

At the hearing, Sjobring conceded that Wilmington Finance did not have a kickback agreement with any First American entity. He argued, however, that he still had two potential theories of liability against the First American entities: first, that perhaps another entity had channeled Sjobring into buying his title policy from First American in return for a kickback; and second, that Sjobring was indirectly harmed by the reinsurance scheme, in that the reinsurance scheme resulted in elevated premiums for all First American customers “to some extent.”

First American put it this way: “We have a fundamental jurisdictional issue. We don’t have a lawsuit here. There is nobody who is in front of the court as a plaintiff other than a bunch of lawyers looking for a client.” Defendants argued that while Sjobring might be entitled to such discovery if he was a member of the class who, due to a change in law, could no longer represent the class, Sjobring was never a member of the class alleged in his complaint, and therefore lacked standing to obtain discovery to locate a proper class representative. In his reply, Sjobring conceded that he is not a member of the class he proposed in his complaint, but argued that he still had standing to bring other causes of action against defendants. He argued, “Sjobring is seeking to determine whether another individual or individuals would be interested in stepping forward to represent the class that was proposed in his complaint. But Sjobring still has standing to bring other claims against First American and he could serve as a class representative for a class consisting of First American policyholders who have otherwise been harmed by wrongful practices. Sjobring is just not a good class representative for the ‘reinsurance’ class.”

The trial court granted the motion for precertification discovery, "apparently based on its determination of Sjobring’s good faith." The court approved a letter to be sent by the third-party administrator to the recipients of refunds pursuant to the Department of Insurance settlement. Defendants filed a petition for writ of mandate and request for immediate stay. The Court of Appeal framed the issue like this:

Can a plaintiff who purports to bring a cause of action on behalf of a class of which he was never a member obtain precertification discovery to find a new class representative? Framed as such, the answer must be “no.”

Issues of standing are generally determined by reference to the allegations made in the complaint. Sjobring conceded that the allegations in his original complant were false. Regardless of whether Sjobring may have another, unpleaded, claim against a First American entity, and regardless of whether Sjobring made his initial allegations in good faith, the fact remains that Sjobring is not, and never has been, a member of the class he sought to represent. La Sala and the cases which follow La Sala are "distinguishable on that ground." Sjobring relied on the post-Prop 64 case Branick v. Downey Savings & Loan Assn. for the proposition that a plaintiff who has never been a member of the class may amend the complaint to substitute in a plaintiff with standing to represent the class. Whether Sjobring should be granted leave to amend his complaint to name a new class representative, if he so moved, was not at issue in this proceeding, because Sjobring was apparently unaware of the identity of any member of the alleged class who seeks to become a representative plaintiff in this action. The defendants need not provide Sjobring with discovery to enable him to find a new plaintiff.

"We cannot permit attorneys to make an 'end-run' around Proposition 64 by filing class actions in the name of private individuals who are not members of the classes they seek to represent and then using precertification discovery to obtain more appropriate plaintiffs. Balanced against this potential abuse of the class action procedure are the rights of the parties under the circumstances. Sjobring’s interest in obtaining a proper plaintiff to represent the class is non-existent. Sjobring is not a member of the class and never has been; he has no cognizable interest in seeing this class action proceed. [Moreover,] Sjobring makes no argument that any future action they might pursue would be time-barred, or offer any other reason why the class members might be denied relief if this action is unable to proceed on their behalf. In short, the potential for abuse of the class action procedure is overwhelming, while the interests of the real parties in interest are minimal. Precertification discovery under these circumstances would be an abuse of discretion."

The holding appears to be somewhat in conflict with Budget Finance Plan v. Superior Court (1973) 34 Cal.App.3d 794, and thus might be suitable for Supreme Court review. However, even Budget Finance is distinguishable. The Budget Finance, the plaintiffs had been defrauded by the seller in a scheme in which the seller had used three additional defendants. The named plaintiffs were proper representatives of a subclass of victims of one finance company, and sought discovery to obtain similarly situated plaintiffs with respect to the other finance companies. Sjobring, however, was never a member of any class he sought to represent.

The case is of interest to wage and hour practitioners who prosecute or defend such cases as class actions. We have had similar issues arise in several of our cases, always being able to obtain the discovery and amendments necessary to advance the case. The defense has often asked the proverbial question, "at what point do you draw the line?" For now, at least, First American seems to draw that line quite clearly. You can download the full text of First American Title Insurance Company v. Superior Court here in pdf or word format.

On Calendar Today: Fireside Bank

The Supreme Court is in session this afternoon in Sacramento, and on the 1:00 p.m. calendar is a case regarding a trial court's ability to make rulings on the merits in a class action which has not been certified: Fireside Bank v. Superior Court (Gonzalez), S139171, H027976; 133 Cal.App.4th 742; Superior Court of Santa Clara County; CV817959. The grant of review framed the issue like this:

Petition for review after the Court of Appeal denied a petition for peremptory writ of mandate. This case includes the following issue: Can a trial court ever depart from the preferred practice of deciding whether to certify a class action before adjudicating any class claims on the merits, or is the rule against such "one-way intervention" in class actions a firm prohibition applicable in all circumstances?

The "one-way intervention" doctrine was set forth in a pair of cases involving class actions against a bank. Home Sav. & Loan Assn. v. Superior Court (1974) 42 Cal.App.3d 1006, and Home Sav. & Loan Assn. v. Superior Court (1976) 54 Cal.App.3d 208 stand for the proposition that a merits ruling may not be made until after class certification if the defendant objects.

The vice in the procedure followed by the trial court is that it allows so-called "one-way intervention," a procedure under which potential members of the class can reserve their decision to become part of the class until the validity of the cause asserted by the named plaintiffs on behalf of the class has been determined. While one-way intervention has obvious attractions for members of the class on whose behalf an action has been brought in that it creates for them a no-lose situation, for a defendant it holds the terrors of an open-ended lawsuit that cannot be defeated, cannot be settled, and cannot be adjudicated. To him it presents a classic no-win option.

Essentially, it lets class members find out whether they win or lose on certain issues -- maybe even the biggest issues -- before they have to commit to being part of the class. If the class is going to lose, most reasonable class members would opt out and wait for a case with a better trial court ruling. If they class has been declared a winner, most will join.

In Fireside Bank, the trial court granted the borrower's motion for judgment on the pleadings against the bank's complaint on the basis that the bank failed to comply with the notice requirements under the Rees-Levering Motor Vehicle Sales and Finance (Rees-Levering) Act. The bank argued that by ruling on that motion before notice was given to the class, the trial court impermissibly provided class members an opportunity for one-way intervention. The Court of Appeal disagreed, holding that there was no categorical rule against one-way intervention, just a general preference against such proceedings. Beyond that, the preference for resolving class issues before entering a dispositive order on the merits of class claims was not triggered because the judgment on the pleadings did not address the class causes of action but rather addressed the claim that the bank brought against the borrower.

Another Denial of Review: Aguiar v. Cintas Corp. No. 2

Last month, we mentioned three interesting cases with petitions for review pending before the California Supreme Court. One petition for review (JKH Enterprises Inc. v. Department of Industrial Relations (2006) 142 Cal.App.4th 1046) was denied in December.

On Wednesday, review was denied in Aguiar v. Cintas Corp. No. 2 (2006) 144 Cal.App.4th 121 (reversing and remanding a Los Angeles County Superior Court order denying class certification of a claim for violations of the Los Angeles Living Wage Ordinance).

In the same order, the Supreme Court denied review of the unpublished opinion in Marx v. Storage Technology Company, 2006 Cal. App. Unpub. LEXIS 10200. In Marx, defendant and appellant Storage Technology Corporation (STK) appealed from a judgment entered against it and in favor of its former employee Ted Marx. STK contended that the trial court erred in denying its motion for judgment notwithstanding the verdict (JNOV) on the two causes of action that proceeded to trial: (1) failure to pay wages due, and (2) wrongful termination in violation of public policy. Alternatively, it sought a new trial on the grounds that the trial court erroneously instructed the jury that all Marx was required to establish on his wrongful termination claim was that STK's alleged retaliation against him was "a motivating reason" for his dismissal.

The Court of Appeal agreed that Marx failed to establish a claim for failure to pay wages due. Pursuant to the terms of Marx's compensation agreement with STK, no commissions were due Marx. Likewise, Marx failed to establish his claim for wrongful termination in violation of public policy. No public policy is at issue. Because Marx had no valid claim for wages due, his demands to STK for payment of those monies cannot support a public policy claim. Similarly, because the complaint he filed with the Division of Labor Standards Enforcement (DLSE) was baseless, he cannot substantiate his retaliation theory upon that purported public policy as well. Thus, the order denying STK's motion for JNOV was reversed, and the matter was remanded to the trial court with directions to issue a new order granting STK's motion for JNOV and entering judgment in favor of STK. You can download Marx v. Storage Technology Corporation here in pdf or Word format.

Finally, there is still no word from the Supreme Court on Alvarez v. May Department Stores Co.. (2006) 143 Cal.App.4th 1223 (upholding demurrer to a wage and hour class action on the basis of collateral estoppel arising out a previous denial of class a certification motion in another matter). A petition for review has been filed, along with a request for depublication. In a bold move, the employer chose not to file an answer to the petition for review. We would not have been so bold. If you are curious, the UCL Practitioner has a link to download a copy of the petition for review. On January 11, 2007, the Supreme Court granted itself an extension of time to grant or deny review, through February 16, 2007. No decision will be made next week, as the Supreme Court does not have its weekly meetings if there are arguments scheduled.

Class Conflict

Douglas N. Silverstein and Alexandra M. Steinberg have written an excellence article, published this week in the Daily Journal, entitled Class Conflict. It discusses the the recent (and semi-recent) Konig and Gentry cases, and addresses why courts should not uphold class action waivers in adhesive arbitration agreements.

A Resounding Victory For Plaintiffs in Pioneer Electronics

This morning, the California Supreme Court handed down its long-awaited decision in the review of Pioneer Electronics (USA), Inc. v. Superior Court (2005) 128 Cal.App.4th 246. Pioneer Electronics dealt with the requisite notice and opportunity to assert a consumer's privacy right accompanying a precertification communication to members of a putative class in a consumer case. The trial court ordered that notices be sent to certain putative class members, and the notices were to state that their names and addresses would be released to the attorneys for the putative class representative unless they affirmatively objected. The Court of Appeal reversed, holding that a trial court must take reasonable steps to assure that the consumer receives actual notice of his or her right to grant or withhold consent of the release of personal information, and that consent for such release be by the consumer's positive act, rather than by mere failure to respond.

The Supreme Court overturned the reversal, finding that the trial properly exercised its discretion. Disregarding the crocodile tears shed by defense counsel as they wept for the privacy rights of their client's customers, the court wrote:

Did these customers have a reasonable expectation that the information would be kept private unless they affirmatively consented? We think not. Pioneer’s complaining customers might reasonably expect to be notified of, and given an opportunity to object to, the release of their identifying information to third persons. Yet it seems unlikely that these customers, having already voluntarily disclosed their identifying information to that company in the hope of obtaining some form of relief, would have a reasonable expectation that such information would be kept private and withheld from a class action plaintiff who possibly seeks similar relief for other Pioneer customers, unless the customer expressly consented to such disclosure. If anything, these complainants might reasonably expect, and even hope, that their names and addresses would be given to any such class action plaintiff.

The Supreme Court went on to note that the release of names and addresses did not constitute a serious invasion of privacy.

"As the trial court stated, the proposed disclosure was not 'particularly sensitive,' as it involved disclosing neither one’s personal medical history or current medical condition nor details regarding one’s personal finances or other financial information, but merely called for disclosure of contact information already voluntarily disclosed to Pioneer."

The Supreme Court also reaffirmed long-standing precedent holding that contact information regarding the identity of potential class members is generally discoverable, so that the lead plaintiff may learn the names of other persons who might assist in prosecuting the case. (Bartold v. Glendale Federal Bank (2000) 81 Cal.App.4th 816, 820-821, 836; Budget Finance Plan v. Superior Court (1973) 34 Cal.App.3d 794, 799-800; Code of Civil Procedure § 2017.010.) Such disclosure involves no revelation of personal or business secrets, intimate activities, or similar private information, and threatens no undue intrusion into one’s personal life, such as mass-marketing efforts or unsolicited sales pitches.

The Court of Appeal's concern that notice letters might never be delivered and read was "misplaced, assuming the notice clearly and conspicuously explains how each customer might register an objection to disclosure." Moreover, a faxed or e-mailed notice might be reasonable and appropriate if the class member has used such communication methods in the past.

Of particular concern and benefit to attorneys representing classes of employees in wage and hour class actions, the Supreme Court focused on the fact that both sides are entitled to have access to percipient witnesses. And a plaintiff’s interest in obtaining contact information for those witnesses "outweighed the possibility that some of these customers might fail to receive their notice and thus lose the opportunity to object to disclosure."

Our discovery statute recognizes that “the identity and location of persons having [discoverable] knowledge” are proper subjects of civil discovery. (Code Civ. Proc., § 2017.010; see Judicial Council Form Interrogatories 12.1 through 12.7.) In a real sense, many of Pioneer’s complaining customers would be percipient witnesses to relevant defects in the DVD players. From the standpoint of fairness to the litigants in prosecuting or defending the forthcoming class action, Pioneer would possess a significant advantage if it could retain for its own exclusive use and benefit the contact information of those customers who complained regarding its product. Were plaintiff also able to contact these customers and learn of their experiences, he could improve his chances of marshalling a successful class action against Pioneer, thus perhaps ultimately benefiting some, if not all, those customers. It makes little sense to make it more difficult for plaintiff to contact them by insisting they first affirmatively contact Pioneer as a condition to releasing the same contact information they already divulged long ago.

This, to us, was at the heart of the dispute. Privacy is often used as a red herring to allow the side with access to the facts to prevent the other side from getting the same access. Too many times, we have struggled to get access to class members, over the objection of defense counsel whom we know (sometimes only based upon information given to us by class members who refuse to provide sworn statements out of a fear of retaliation) to be out interviewing, or overseeing the interviewing of, putative class members who want nothing to do with any conversation with a defense lawyer. The Supreme Court saw through this charade, and rendered a holding that creates fairness and balance to both sides.

Your can download the full text of the opinion here in pdf or word format.

Pioneer Electronics Opinion Due Out Tomorrow

This afternoon, the Supreme Court posted a notice of forthcoming filing regarding two cases, one of which is of interest to wage and hour class action practitioners. In Pioneer Electronics, Inc. v. Superior Court (Olmstead), the Supreme Court will determine to what extent class counsel shall have access to pre-certification communications with putative class members.

PIONEER ELECTRONICS v. SUPERIOR COURT
S133794 (B174826, Los Angeles County Superior Court ― BC257222)
Argued in Los Angeles 12-05-06

This case includes the following issue: In a putative class action, would the privacy rights of potential class members be violated by a pre-certification letter to be sent to those potential class members who had complained to defendant regarding the alleged defect upon which the action is based, when the letter states that failure to respond to the letter will be treated as consent to disclose the identity of the potential class member to plaintiffs' counsel for the purpose of this action?

The following transaction has occurred in: PIONEER ELECTRONICS v. S.C. (OLMSTEAD) Case: S133794, Supreme Court of California Date (YYYY-MM-DD): 2007-01-24 Event Description: Notice of forthcoming opinion posted For more information on this case, go to: http://appellatecases.courtinfo.ca.gov/search/dockets.cfm?dist=0&doc_id=369455

Confined Space Shutting Down

Meet blogger Jordan Barab. Jordan writes:

I spent 16 years running AFSCME's health and safety program, defending and expanding the rights of public employees to work in a safe workplace. Many people don't know it, but in 26 states, public employees don't even have the federally guaranteed right to a safe workplace. And it's not just those "backward" southern states. It's also "progressive" northern states like Massachusetts and Pennsylvania. And we're not talking "just" bureaucrats. We're talking highway workers, public works, wastewater treatment, corrections officers, firefighters, health care workers, mental health workers, social workers, bridge workers and on and on. Some of the most dangerous, undervalued, unappealing, but necessary work that this society demands to be able to live the relatively safe and comfortable lives Americans have become accustomed to. In 1998, I was appointed a Special Assistant to the Assistant Secretary for OSHA, serving as national Labor Liaison, ergonomics coordinator and other duties. That was a "political appointment," so I turned into a pumpkin at noon, January 20, 2001. I then "consulted" for the AFL-CIO Health and Safety Department for a year and a half. Now I have a different day job, and in my "spare" time, this.

"This" refers to the excellent and award-winning blog "Confined Space", which has been on our list of blog links for a long time. Jordan is shutting it down on January 24, 2007, for reasons explained in one of the final posts of the blog, Moving On: Closing Up Shop. Good night and good luck, Jordan.

More Notes on Reversing Certification Orders

We meant to discuss this a while back. At a recent class action seminar, we opined that the recurring theme of class action certification appeals was this: you win or lose at the trial court, and appeals stand a poor chance once that war has been lost in Superior Court.

Since then, there have been two opinions reversing orders denying class certification. In Aguiar v. Cintas Corporation No. 2 (B182477) the Court of Appeal reversed and remanded a Los Angeles County Superior Court order denying class certification of a claim for violations of the Los Angeles Living Wage Ordinance (LWO) (Los Angeles Admin. Code, § 10.37 et seq.) and related claims. We discussed Aguiar last fall. It was originally unpublished, but a petition to order the opinion published was granted, and the case is now citeable as Aguiar v. Cintas Corp. No. 2 (2006) 144 Cal.App.4th 121.

Then there was this one: Barboza v. West Coast Digital GSM, Inc. (2nd District Court of Appeal, No. B188151, November 15, 2006) fka Ahrns v. West Coast Digital GSM, Inc., another reversal of an order denying class certification. A request for publication has been denied.

In Barboza, Los Angeles County Superior Court Judge William F. Fahey, Judge denied plaintiffs' motion for class certification, and plaintiffs appealed from that order. On appeal from the order denying class certification, plaintiffs contend (1) the trial court made erroneous evidentiary rulings; (2) the court applied improper legal criteria when denying their certification motion; and (3) the court's ruling was not supported by substantial evidence. The Court of Appeal found that substantial evidence did not support the trial court's denial of the certification motion, and reversed the order denying class certification.

In November 2004, nine employees filed a class action complaint alleging wage and hour claims against WCD and its agent. The complaint alleged that WCD had a practices of (1) making unlawful deductions from its retail employees' paychecks in violation of Labor Code sections 221, 400 through 410, and 2802; (2) failing to pay overtime in violation of Labor Code section 1194; (3) failing to provide required meal periods and rest periods in violation of Labor Code sections 512 and 226.7; (4) failing to pay the deducted amounts and the withheld overtime payments upon the employee's termination in violation of Labor Code section 201; and (5) improperly classifying its salaried retail employees as exempt from provisions of the Labor Code governing overtime and meal and rest periods. Plaintiffs moved for class certification in August 2005.

WCD opposed certification, arguing that there was no need for a class judgment because WCD conceded liability on the wrongful deductions issue, and therefore the only issue remaining was what deductions were suffered by each plaintiff. Because a separate calculation would be required for each plaintiff, WCD argued that individual, rather than common, issues predominated. WCD also contended that each plaintiff had different contracts and "signed attestations," although it did not explain how those contracts or documents related to the issues raised in the complaint. WCD contended that the named plaintiffs did not adequately represent the proposed class because four of the nine original plaintiffs had already settled with WCD, and thus disregarded their fiduciary duty to the class. It contended that inadequate responses to its discovery requests demonstrated that the named plaintiffs have little information about their claims or motivation to pursue them. Finally, WCD argued that plaintiffs' counsel was not qualified to represent the class because the attorneys did not specifically identify any case in which a court approved either of them to serve as class counsel, and because counsel refused to settle on behalf of the named plaintiffs. The only evidence WCD offered in support of any of these arguments was the declaration of former attorney, who by then had been disqualified for improper indirect contact with the named plaintiffs, in violation of California Rules of Professional Conduct, rule 2-100.

The trial court denied certification for three reasons. First, the court found that the proposed class and subclass definitions were "overbroad and do not state ascertainable classes. Second, the court found that common questions of fact did not appear to predominate in this case. Third, the court found there was no competent evidence that plaintiffs' attorneys met the standards required of class counsel, i.e., counsel with the professional qualifications, skill, experience, and resources to represent plaintiffs in a class action. In reaching this conclusion, the court found that one of the attorneys had no class action experience.

The Court of Appeal reversed, finding that substantial evidence did not support the trial court's reasons for denying certification. The opinion includes the usual discussion of certification standards that is of interest mostly because it discusses a rarely mentioned standard regarding the adequacy of class counsel.

Part of the determination of adequacy of representation rests on whether the attorney representing the class is qualified to conduct the litigation. (See, e.g., McGhee v. Bank of America (1976) 60 Cal.App.3d 442, 450, 131 Cal. Rptr. 482.) And, as one federal court explained, the court looks "to the professional qualifications, skills, experience and resources of the lawyers" to determine if the attorney representing the class is qualified. (Haley v. Medtronic, Inc. (C.D.Cal. 1996) 169 F.R.D. 643, 650.) In the present case, the trial court concluded "[t]here is no competent evidence before this Court that proposed class counsel meet these standards." The court apparently based this conclusion on its finding that plaintiffs' counsel had no class action experience. However, both Smith and Barritt submitted competent evidence -- their own declarations -- in which they stated, under penalty of perjury, that they represented plaintiffs in this action and that they currently were representing plaintiffs in other wage and hour class actions. In addition, Barritt stated that he had been appointed class counsel in prior wage and hour litigation. Although neither Smith nor Barritt provided the case names or numbers of these other class actions, there was no evidence submitted to suggest that their statements were false. [fn] Further, the relevant inquiry is whether the attorneys have sufficient skill and experience in the subject matter of the lawsuit, and the diligence and resources necessary to adequately prosecute the case. The ultimate issue is whether counsel is capable of adequately representing all interests, including those of absent class members. (See Cal Pak Delivery, Inc. v. United Parcel Service, Inc. (1997) 52 Cal.App.4th 1, 12.) In this case, Smith and Barritt submitted evidence that they had substantial experience litigating employment matters, including wage and hour issues, on behalf of plaintiffs and defendants. WCD produced no evidence to suggest that they lacked the skill, diligence, or resources necessary to prosecute this case. Indeed, the motion for class certification itself demonstrated the attorneys' understanding of both the substantive and procedural issues presented by this case, their diligence in prosecuting it, and their willingness and ability to devote the resources necessary to prosecute it. We conclude that the trial court's determination that counsel did not meet the standards necessary to represent the class, based solely on their purported lack of experience in class actions, was not supported by substantial evidence.

No petition for review was filed, and a request for publication was denied. There is already another related appeal. We do not know the issues in the new appeal, but we suspect they arise from the judgment in the post-appeal trial that went forward on the individual plaintiff's claims. Over the plaintiffs' objection, and following a denial of plaintiffs' petition for writ of supersedeas, the case proceeded to trial as to the individual plaintiffs, resulting in a judgment in their favor. WCD settled with several of the named plaintiffs shortly after the motion for class certification was filed, and those plaintiffs were never parties to this appeal. Two other plaintiffs, Sandra Ahrns and Constance Smith, were parties at the time the notice of appeal was filed, but subsequently settled with WCD. They were no longer parties to the appeal. As to the suitability of the remaining plaintiffs/judgment creditors, the court wrote: "On remand, the trial court may determine they no longer are suitable representatives of the class. But if that determination is made, plaintiffs must be given an opportunity to substitute new plaintiffs to represent the class."

Employees Prevail in Class Action Against Chinese Daily News

You may have read last week in the Los Angeles Times about a $2.5 million federal jury verdict in a wage and hour class action against the Chinese Daily News. Here are some more details.

The case is entitled Wang et al v. Chinese Daily News Inc et al, U.S. District Court, Central District of California, case number 2:04-cv-01498-CBM-JWJ. Plaintiffs Lynne Wang, Yu Fang Ines Kai, and Hui Jung Pao, on behalf of themselves and all others similarly situated, filed this suit on March 5, 2004, alleging multiple labor violations by Defendant Chinese Daily News, Inc. pursuant to the Fair Labor Standards Act ("FLSA"), the California Business and Professions Code § 17200 et seq. and the California Labor Code. Defendant publishes the largest Chinese language newspaper in North America. Plaintiffs are current and former employees of Defendant's Monterey Park office, which has nearly 200 employees. None of the Plaintiffs is a native English speaker, and some cannot read or write in English. Plaintiffs allege that Defendant violated California Labor laws by denying its employees the following protections: (1) overtime wages and statutory penalties to which they are entitled; (2) the opportunity to take meal and rest breaks or to receive appropriate penalties in lieu of such breaks; and (3) appropriate payroll records and itemized wage statements containing the information required by state law.

In November 2004, Judge Consuelo B. Marshall granted a motion certifying the class under FRCP 23(b)(2). The order provided that:

1. The class is certified with respect to the following claims set forth in the Plaintiff Complaint, and all issues and defenses applicable to such claims: Second Claim for Relief (failure to pay overtime compensation and other wages, failure to pay wages on termination, failure to provide accurate itemized wage statements, failure to provide paid breaks and unpaid meal breaks, and failure to pay of one hour of additional pay for each missed break) and the Third Claim for Relief (unfair business practices under Cal. Bus. and Prof. Code 17200, et seq.). 2) The class is certified on behalf of all former, current, and future non-exempt employees of Defendants who worked at Chinese Daily News in Monterey Park, California at any time since March 5, 2000.

The case lead to several published trial court decisions. After a motion for reconsideration, the court issued a certification order published as Wang v. Chinese Daily News, Inc. (CD Cal., Jan. 20, 2005) 231 F.R.D. 602, pet.denied by Wang v. Chinese Daily News, 2005 U.S. App. LEXIS 29407 (9th Cir. Cal., Aug. 5, 2005). The court reasoned that the numerosity requirement was satisfied where the evidence presented by the employer indicated that approximately 40 current employees in the Monterey Park Office were classified as exempt. This left approximately 160 employees who were classified as non-exempt by the employer. The court also found that the employees set forth numerous common questions of law and fact arising from the employer's alleged pattern of violating state labor standards. Additionally, since the named plaintiffs raised the same Labor Code violations as other putative class members, their claims were typical of the class. Next, the court found that the class should be certified under Rule 23(b)(2). The court reasoned in part that the Second Claim for Relief appeared to be predominantly for monetary damages. Moreover, California's wage and hour laws did not provide an explicit, private right to injunctive relief.

The defendant's later motion to decertify the class action and collective action under the FLSA was denied at Wang v. Chinese Daily News, 2006 U.S. Dist. LEXIS 43274 (C.D. Cal., May 9, 2006). Defendant argued that the class no longer fulfilled Rule 23(a)(1) or (a)(4) in light of the numerous opt outs filed. The Plaintiffs filed a motion to invalidate the opt outs.

The plaintiffs' motion resulted in an order invalidating opt-outs, requiring a curative notice, and restricting the defendant's communications with the class. Wang v. Chinese Daily News, Inc., 236 F.R.D. 485 (June 6, 2006).

A court's authority under Rule 23(d) includes the invalidation of opt outs where the court finds that the opt outs were procured through fraud, duress, or other improper conduct. See, e.g., Kleiner v. First National Bank of Atlanta, 751 F.2d 1193, 1202 (11th Cir. 1985); Impervious Paint Indus. v. Ashland Oil, 508 F. Supp. 720 (D.Ky. 1981); Georgine v. Amchem, 160 F.R.D. 478 (E.D. Pa. 1995). Courts need to ensure that individual decisions to opt out are independent and free from coercion. Manual for Complex Litigation, Fourth § 21.33 (2004). It is obviously in defendants' interest to diminish the size of the class and thus the range of liability by soliciting opt out requests. Kleiner, 751 F.2d at 1202. The danger of improper tampering is only enhanced when, as here, the class and the class opponent are involved in an ongoing business relationship. Id. Indeed, the relationship at issue in Kleiner was between a bank and its borrowers; here the relationship is even more potentially coercive where Defendants are the individuals' employers and there is evidence that implicit and explicit threats were made linking participation in the lawsuit with job security. ... Where there is unsupervised, unilateral communications with the putative class members, there is a particular risk of the sabotage of informed and independent decision-making. Kleiner, 751 F.2d at 1203.

Finally, a few months before trial, the court granted a summary judgment motion by the plaintiffs regarding liability on several counts. Wang v. Chinese Daily News, Inc. (C.D. Cal., 2006) 435 F. Supp. 2d 1042, 11 Wage & Hour Cas. 2d (BNA) 998. (under Cal. Lab. Code § 227.3 the employer's "buy back" of unused, but accrued, vacation days should have been computed by reference to the employees' regular rate of pay, the wage statements violated Cal. Lab. Code § 226, and reporters and salespersons were not exempt employees under FLSA). The court also ruled (at pages 1058-1059) that the hour of pay for break violations, under Labor Code § 226.7, was a wage, not a penalty.

After reading the various California appellate opinions on the matter, this Court finds that the stronger and more persuasive argument is in favor of characterizing the compensation as a wage, and thus applying the longer statute of limitations. Courts that have so found have noted that payments for violations of the meal and rest period requirements are restitutionary in nature. Employees earn an additional hour of pay when they have not been given their break. Such compensation is akin to the payment of overtime wages. Second, courts have noted that characterizing the compensation as wages is consistent with the definition of wages found in the California Labor Code, which is "all amounts for labor performed by employees." Under Section 226.7, employees are paid an amount for labor performed during their meal break or rest period. Third, courts have held that the statute is self-executing, which further supports that the compensation is not a penalty, The statute creates an affirmative duty on the employer to provide one hour's pay for each day an employee works through her meal or rest period. Thus, the employee is immediately entitled to the Section 226.7 payment, akin to the immediate entitlement to overtime. See, e.g., National Steel & Shipbuilding Co. v. Superior Court, 135 Cal. App. 4th 1072, 38 Cal. Rptr. 3d 253 (2004). The Court finds that Section 226.7 compensation is properly characterized as wages and accordingly finds that the four-year statute of limitation applies here.

The case went to trial in November 2006. In January 2007, after 16 days of trial, the jury returned a unanimous verdict awarded the employee $2.5 million for violating state and federal labor laws concerning overtime, meal and rest breaks. Congratulations to Virginia Keeny, Randy Renick, and Cornelia Dai, who represented the class at trial.

Incidentally, this case makes for the third rest period certification we've heard about. The other two include a case our firm is handling against Main Street Restaurant Group, Inc. (TGI Friday's franchisee) and a case against the Brinker Restaurant Group. If you know of others, let us know.

He Called Them a What Court?

This is way off topic for a wage and hour blog, but we got a big chuckle out of a partially published appellate decision that got dropped in our in box last week. In People v. Zackery, case number: C051431, the Court of Appeal was reviewing a sentence and revocation of driver's license based on a no contest plea to assault with deadly weapon on a police officer and evading a pursuing police officer, plus admission to two prior strikes. The decision was reverse because the clerk included in the minutes and the abstract of judgment certain provisions that were not in the pronouncement of sentence. The court also erroneously sentenced the defendant on a count for which he was not convicted. That's not very interesting to us.

What was interesting to us was the Court of Appeal taking offense to a flippant remark by the judge during the plea bargaining proceeding. Judge K. Peter Saiers commented to the prosecutor about following some procedural requirement to make sure the defendant's guilty plea was not reversed by the Court of Appeal.

"Oh, that’s right. You can’t offend the kangaroos up there in kangaroo court."

Naturally, the case got appealed. And how happy were the purported kangaroos about the remark? If you guessed that they were not all that happy about it, you guessed right. We mentioned that the case was partially published. You might have also guessed that the discussion of the "kangaroo court" remarks were included in the unpublished portion of the opinion. That guess would be wrong. Check out section VI of the opinion:

Trial Court’s Kangaroo Court Remarks

During the change of plea hearing, after the court explained the “offer” that the court would dismiss one strike and impose the low term of three years, doubled, for assault with a deadly weapon on a peace officer, defendant’s counsel indicated defendant was prepared to withdraw his not guilty pleas and enter no contest pleas as to all counts.

The trial court, Judge K. Peter Saiers presiding, then asked the prosecutor, “You’re going to dismiss Count Two, aren’t you?”  The prosecutor responded, “No, it’s a strike case.”  To this, Judge Saiers replied, “Oh, that’s right.  You can’t offend the kangaroos up there in kangaroo court.”

This was a perjorative remark.  Thus, Webster’s dictionary defines “kangaroo court” as follows:  “kangaroo court n (1853) 1: a mock court in which the principles of law and justice are disregarded or perverted  2: a court characterized by irresponsible, unauthorized, or irregular status or procedures  3: judgment or punishment given outside of legal procedure.”  (Webster’s 11th Collegiate Dict. (2006) p. 681.)

But the first question is:  To what court was Judge Saiers referring?

The kangaroos are described as being “up there.”  This implies a higher court than the trial court--higher in the sense that the “higher” court reviews the work of the trial court.  As a practical matter, that leaves the Court of Appeal for the Third Appellate District and the California Supreme Court.  We will give Judge Saiers the benefit of the doubt and assume he was referring to this court, not the Supreme Court.

In making his “kangaroo court” remark, on the record in open court, Judge Saiers violated Canon 1 of the Code of Judicial Ethics, which provides as pertinent:  “A JUDGE SHALL UPHOLD THE INTEGRITY AND INDEPENDENCE OF THE JUDICIARY.  [¶]  An independent and honorable judiciary is indispensable to justice in our society.  A judge should participate in establishing, maintaining, and enforcing high standards of conduct, and shall personally observe those standards so that the integrity and independence of the judiciary will be preserved.  The provisions of this Code are to be construed and applied to further that objective.”  (Cal. Code Jud. Ethics, canon 1.)

But it is appropriate to study the context of the “kangaroo court” remark more closely.

It appears that Judge Saiers was chafing at the possibility that this court would find legal error if the prosecutor dismissed a count to reach a plea bargain.

The prosecutor apparently had in mind that dismissal of a count would violate section 1192.7, subdivision (a), which provides:

Plea bargaining in any case in which the indictment or information charges any serious felony, . . . or any offense of driving while under the influence of alcohol, drugs, narcotics, or any other intoxicating substance, or any combination thereof, is prohibited, unless there is insufficient evidence to prove the people’s case, or testimony of a material witness cannot be obtained, or a reduction or dismissal would not result in a substantial change in sentence.”  (§ 1192.7, subd. (a); italics added.)

In this case, we have not been asked to determine, and we do not determine, whether dismissal of count 2 would have resulted in an unlawful plea bargain under subdivision (a) of section 1192.7.  It is sufficient to note that the prosecutor apparently thought the bargain would be unlawful, and Judge Saiers apparently thought this court might declare the bargain unlawful.

Reading a little between the lines, it appears that Judge Saiers’s “kangaroo court” remark was provoked by his frustration at not being able to dispose of a pending case in a way he thought sensible.  It would appear that, in his eyes, this court was a naive, ivory-tower, obstructionist, oblivious to the real-world problems of trial courts faced with staggering caseloads.

This view is not accurate.

As former trial judges, we have all experienced the stressful crush of pending cases.  We are also aware of the desperate plight of the San Joaquin County Superior Court, which, until recently, had not been allocated a new judicial position in two decades, despite significant population increases and rising caseloads.  (Meath, New Judges for San Joaquin County? XXI Across the Bar (Sept. 2006) p. 9.)

But trial judges must understand this overarching fact about the Court of Appeal:  despite our awareness of and sympathy for your plight, we have no warrant to disregard the law.  Rather, we have all taken an oath to enforce it.

And so, if a trial judge violates the law, even in the name of short-term efficiency, matters are simply made worse.  Things have to be done again.  More lawyers must be hired, more judges involved, more transportation of prisoners, etc.  All at taxpayer expense.  It is more expensive to do things twice than to do them once correctly.  The truth of the matter is that Judge K. Peter Saiers has wasted taxpayers’ dollars.

How's that for a campaign slogan for your challenge to Judge Saiers on the 2008 ballot? The moral of the story for wage and hour practitioners is pretty generic. Never utter the word "kangaroo" in open court unless you are representing  a zookeeper who was misclassified as exempt. If you care about the criminal law stuff, you can read the rest of the opinion here in pdf or word format.

Review Denied in Church v. Jamison

The Supreme Court denied a petition for review filed by the defendant/employer/respondent in Church v. Jamison, a partially-published decision we discussed last November.

All Deliberate Speed, What Happened?

There once was a good employment law blog known as All Deliberate Speed. It is now a nonsensical spam site. Its January 16, 2007 post reads: La Police Gear featuring Surefire flashlights, police uniforms, Galco holsters and Luminox watches. WTF?

Another Companion Case For Murphy

Murphy v. Kenneth Cole Productions, Inc., the pending case that will determined whether meal and rest break pay is a penalty or a wage, has another companion case. The Supreme Court has granted review of a writ petition denial in Dunn v. Superior Court (Kroger Company). Review was granted and the case held pending determination of Murphy:

Application for stay and petition for review GRANTED. Further action in this matter is deferred pending consideration & disposition of a related issue in Gentry v. Superior Court, S119334 and Murphy v. Kenneth Cole Productions, Inc., S140308 (see Cal. Rules of Court, rule 8.512(d)(2)), or pending further order of the court. Submission of additional briefing pursuant to Cal. Rules of Court, rule 8.520, is deferred pending further order of the court Votes: George, C. J., Kennard, Baxter, Werdegar, Chin & Moreno, JJ. Corrigan, J., was absent and did not participate.

The case also awaits determination of Gentry v. Superior Court, which will determine to what extent the Discovery Bank case applies to class action waivers in arbitration agreements that purport to govern wage and hour claims.

We recently had a defendant assert, in a mediation brief, that the majority of federal courts that have addressed the "wage or penalty" issue under under Labor Code § 226.7 have held that the compensation paid under Section 226.7 is properly characterized as a penalty. There are two such decisions. However, there are actually at least four federal decisions characterizing the pay as a wage:

1. Tomlinson v. Indymac Bank, F.S.B. (C.D. Cal. 2005) 359 F. Supp. 2d 89;
2. Cornn v. United Parcel Service, Inc. (N.D. Cal. 2006) 2006 U.S. Dist. LEXIS 20095;
3. Abbe v. City of San Diego (S.D. Cal 2006) 2006 U.S. Dist. LEXIS 79010; and
4. Wang v. Chinese Daily News, Inc. (C.D. Cal., 2006) 435 F. Supp. 2d 1042, 1058-1059, 11 Wage & Hour Cas. 2d (BNA) 998.

Conversely, two cases hold it to be a penalty:

1. Corder v. Houston's Restaurants, Inc. (C.D. Cal 2006) 424 F.Supp 2d 1205, 1209-1210;
2. Pulido v. Coca-Cola Enterprises, Inc. (C.D. Cal May 26, 2006) 2006 WL 1699328.

There is still no argument date set for Murphy. Many state and federal courts have stayed pending class actions while awaiting the outcome of Murphy (See e.g., Filion v. Ethan Allen Retail, Inc., 2006 U.S. Dist. LEXIS 79861 [stayed until May 2007]) or deferred ruling on the issue (e.g., Toll v. Digirad Corp., 2006 U.S. Dist. LEXIS 52757, West v. Circle K Stores, Inc., 2006 U.S. Dist. LEXIS 25164).

Class Certification Denied For Lack of Objective Class Definition

A consumer class action certification order was reversed on appeal last month in Sony Electronics v. Superior Court (2006) ___ Cal.App.4th ___. The Fourth District Court of Appeal found that the trial court erred in defining the class as "[a]ll persons or entities [in the United States] who purchased Sony Vaio GRX [Series Notebook computers]"] in which the memory connector pins for either of the two memory slots were inadequately soldered" because an ascertainable class must be defined according to objective facts, not conclusions of liability:

the class definition requires a merits-based determination in order to establish whether a particular GRX Series Notebook owner is a member of the class. The members of such a class are thus not readily identifiable so as to permit appropriate notice to be given and the definition would not permit persons who receive notice of this action to determine whether they are part of the class.

The case was remanded with directions for further proceedings to determine whether an ascertainable class could be determined. Sony Electronics serves as a reminder that class definitions must always be defined according to objective, readily ascertainable criteria. You can download the full text of Sony Electronics from these links to the court's website in pdf or Word format.

Wal-Mart Cert. Denial Appealed

A pro-employer decision in an assistant manager class action case against Wal-Mart is making its way to the 9th Circuit for review. Last May, Judge Dale Fischer, USDC CD Cal., denied a motion for class certification in Sepulveda v. Wal-Mart (C.D. Cal. 2006) 237 F.R.D. 229. As we learned from a declaration submitted by the plaintiff's counsel in Sepulveda, some defendants continue to cite Sepulveda in opposition to motions for class certification in similar cases (perhaps because it was mentioned in Tierno v. Rite Aid Corp. (N.D. Cal. Aug. 31, 2006) 2006 U.S. Dist. LEXIS 71794). However, on August 11, 2006, the Ninth Circuit Court of Appeals granted the Sepulveda plaintiffs permission to appeal the order denying class certification under Federal Rule 23(f). Sepulveda v. Wal-Mart Stores, Inc., U.S.D.C. Case No. CV 04-1003 DSF (EX), Ninth Circuit Court of Appeals Case No. 06-56090.

The standard for such appeals is very high. Interlocutory appeals of orders denying class certification are granted only in the most limited circumstances: (1) where there is a death-knell situation for either the plaintiff or defendant that is independent of the merits of the underlying claims, coupled with a class certification decision by the district court that is questionable; (2) where the certification decision presents an unsettled and fundamental issue of law relating to class actions, important both to the specific litigation and generally, that is likely to evade end-of-the-case review; or (3) where the district court’s decision is manifestly erroneous. Chamberlan v. Ford Motor Co. (9th Cir. 2005) 402 F.3d 952, 959.

Curiously enough, the Sepulveda plaintiffs argued that the District Court’s decision denying class certification was “manifestly erroneous,”  and on June 26, 2006, before the Ninth Circuit even granted plaintiffs’ petition for permission to appeal, the District Court agreed that the petition was likely to be granted and stayed the action. The Court found that the stay was appropriate because the class certification decision involves an unsettled, fundamental issue of law. The Court then found: “Thus there is at least some likelihood that the Ninth Circuit may grant the Petition, and ultimately find in Plaintiffs’ favor.”

The appeal is noteworthy because, unlike several other pending appeals in similar cases, this is a discretionary, interlocutory appeal, rather than a standard, post-judgment appeal. The standard for allowing such an appeal is extremely high, and the fact that the Ninth Circuit allowed the appeal suggests that the District Court’s decision to deny certification will be reversed. This should be pointed out in any brief responding to an employer's opposition which cites Sepulveda v. Wal-Mart (C.D. Cal. 2006) 237 F.R.D. 229.

Siebel Systems Pays $27.5 Million To Settle Overtime Class Action

Siebel Systems, Inc. has agreed to pay up to $27.5 million to settle an overtime class action complaint filed on behalf of its software engineers. The settlement has been preliminarily approved by San Mateo Superior Court Judge Marie Weiner, and awaits final approval in late April 2007. The settlement affects approximately 800 California employees with the job title "software engineer" or "senior software engineer" who worked for the company between 2000 and 2005. A typical employee who worked throughout the claims period is expected to recover as much as $27,000.

Marriott Settles Class Action For SF Living Wage Violations

A wage and hour class action against the San Francisco Marriott Hotel to enforce the city’s $9.14 per hour living wage ordinance has settled for $1.35 million. The settlement in the action, Aubrey v. Marriott, is subject to final court approval. The settlement announced is a claims-made settlement, with any undistributed residue from the settlement fund being paid to the City’s Office of Labor Standards and Enforcement for enforcement of the local minimum wage ordinance. The plaintiffs' attorney, Matt Gonzalez, is a former supervisor who supported the ballot measure that established the living wage ordinance.

Renumbered Rules of Court Now Apply

Amendments to the California Rules of Court are in effect, as of January 1, 2007. The rules were reorganized and renumbered. Conversion tables can be obtained here.

New Judicial Council Forms

In addition to renumbered Rules of Court, there are a great many revised and renumbered judicial council forms, ranging from new civil cover sheets to new form interrogatories. The new forms are available from the California Courts official website and can be downloaded immediately if you do not have a subscription service that has already provided the new forms to you.

New Rates in Effect For Computer Software Professionals

Effective January 1, 2007, the minimum hourly rate for exempt computer software professionals in California is increased to $49.77 per hour. Under California Labor Code § 515.5, the computer professional overtime exemption in California applies only to employees who meet a duties test and a minimum hourly pay rate, as established each year by the California Division of Labor Statistics.

A recently clarification of the law provides that such employees can be paid a salary, but will only be considered exempt from time-and-a-half overtime pay if the employee is paid the minimum statutory rate for all hours actually worked. For salaried workers, this equates to an annualized salary of not less than $103,521.60, plus $49.77 for each hour worked in excess of 40 in a work week.

New Minimum Wage in Effect

Effective January 1, 2007, the minimum wage increases from $6.75 to $7.50 per hour under Assembly bill 1835 (Lieber), approved by Governor Arnold Schwarzenegger on September 12, 2006. Under the same bill, the minimum wage will increase to $8.00 per hour on January 1, 2008.

The increased minimum wage increases the minimum salary that must be paid to exempt executive, administrative and professional employees, who must be paid no less than twice the minimum wage if they are to be denied overtime pay for work in excess of eight hours per day or forty hours per week. Thus, an employee who was paid an annual salary of $28,080 might have been exempt (assuming that the duties test was also met) last month, but now must make at least $31,200 annually to remain exempt from overtime pay.