Wage Law

Unclean hands and other equitable defenses cannot be used to defeat class certification in an unfair competition lawsuit based upon violations of statute, even if the defenses might be taken into account when fashing a remedy, and even if they involve the determination of facts and legal issues that vary greatly among class members. Ticconi v. Blue Shield of California Life & Health (2007) __ Cal.App.4th __.

In Ticconi, the Court of Appeal began its analysis by noting that

Courts have long held that the equitable defense of unclean hands is not a defense to an unfair trade or business practices claim based on violation of a statute. To allow such a defense would be to judicially sanction the defendant for engaging in an act declared by statute to be void or against public policy. (Kofsky v. Smart & Final Iris Co. (1955) 131 Cal.App.2d 530, 532; Page v. Bakersfield Uniform Etc. Co. (1966) 239 Cal.App.2d 762, 770 [“The equitable doctrine of the refusal of aid to anyone with ‘unclean hands,’ does not, as such, apply to actions under [the unfair practices act].”)

At the trial court, Ticconi's class certification motion had been denied because the trial court found that "legal and factual issues concerning the defenses of fraud and unclean hands outweighed those related to liability rendering class treatment disadvantageous." However,

our Supreme Court explained that “equitable defenses may not be asserted to wholly defeat a UCL claim [under Bus. & Prof. Code, § 17200] since such claims arise out of unlawful conduct. . . .” (Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 179.) In Cortez, the plaintiff brought an action under the UCL seeking restitution of overtime wages withheld from her and other employees. The defendant argued that where the UCL sounded in equity, the trial court was obligated to consider equitable defenses. The Supreme Court held that the equities may be considered when the trial court exercises its discretion to fashion a remedy under Business and Professions Code section 17203. (Ibid.) But, equitable defenses may not be used to defeat the cause of action under the UCL. As more fully explained by Justice Werdegar in her concurrence in Cortez, “in general, as between a person who is enriched as the result of his or her violation of the law, and a person intended to be protected by the law who is harmed by its violation, for the violator to retain the benefit would be unjust.”

Therefore, the diverse facts making up Blue Shield Life’s fraud and unclean hands defenses could not be factored in when determining whether the community interest requirement for class certification had been met.

"Legal and factual issues that go to remedies simply cannot outweigh the common issues related to liability."

Because wage and hour cases are generally based upon statutory violations, and UCL claims are a part of any sound wage and hour class action complaint, Ticconi v. Blue Shield of California Life & Health should be required reading for every wage and hour class action attorney. You can read the full text here in pdf or word format.

The Division of Labor Standards Enforcement (DLSE) will be holding a forum later this week in Sacramento and on a second date, to be determined, in Southern California, "to provide members of the public an opportunity to inform the newly appointed California State Labor Commissioner, Angela Bradstreet, of their concerns regarding how recent changes to the meal and rest period enforcement practices required by legislation and recent court decisions has impacted their daily work-lives."

The Sacramento hearings will be held on Thursday, August 2, 2007, from 9 a.m. to 2 p.m., at the Sacramento State Alumni Center, Capital Room, California State University, Sacramento, located at 6000 J. Street, Sacramento, California 95819.

All members of the public are invited to address the Labor Commissioner. Additionally, the Office of the Labor Commissioner will be accepting written comments received by the close of business on Friday, August 31, 2007. Written comments may be sent to:

Chief Counsel
Division of Labor Standards Enforcement
P.O. Box 420603
San Francisco, CA 94142

We suggest workers send written comments, pointing out that the Commissioner is unlikely to hear from real working class folks at a midweek, mid-workday hearing. If prior experience serves as a guide, there is a likelihood that the Chamber of Commerce and/or California Restaurant Association will be packing the room with workers paid or otherwise strongly encouraged to accompany them and testify against employee meal and rest periods.

On Tuesday, the U.S. Court of Appeals for the D.C. Circuit invalidated a Bush administration regulation that relaxed limitations on the working hours of truck drivers, holding that the regulatory changes lacked adequate justification. Owner-Operatore Independent Drivers Assocation, Inc. v. Federal Motor Carrier Safety Administration (DC Cir. 2007) __ F3d. __. In 2005, the Federal Motor Carrier Safety Administration increased the maximum driving hours of truck drivers from 60 to 77 over 7 consecutive days, and from 70 to 88 hours over any 8 day period. The change had been made in response to a similar appellate ruling issued in 2004.

[Hat tip: Public Citizen]

Yesterday, the Supreme Court denied review of Belaire-West Landscaping, Inc. v. Superior Court (2007) 149 Cal.App.4th 554, which held that the precertification discovery, notice and disclosure opt-out standards expressed in Pioneer Electronics (USA), Inc. v. Superior Court (2007) 40 Cal.4th 360 also apply to wage and hour cases. We previously discussed Belaire-West Landscaping, Inc. v. Superior Court in a post that can be found at this link.

The Third District Court of Appeal has ruled that, under the Proposition 64 revisions to the Unfair Competition Law [UCL] (Business & Professions Code § 17203), a representative claim must be brought as a class action because the UCL now requires compliance with the class action provisions of Code of Civil Procedure § 382; however, the Private Attorneys General Act [PAGA] expressly allows a person to prosecute a representative claim without requiring that it be brought as a class action. In Arias v. The Superior Court of San Joaquin County (Angelo Dairy) (2007) __ Cal.App.4th __, plaintiff brought an action for overtime wages, and meal and rest period claims on behalf of a group of dairy workers. He did not style the complaint as a class action, but alleged claims under the UCLA and PAGA.

As to the UCL claim, Arias argued that the plain language of Proposition 64 is clear and unambiguous, and that it contains no requirement that a representative suit be brought as a class action. The court disagreed, holding that

although Proposition 64 does not on its face require a representative claim to be pled as a class action, it requires that the claim comply with section 382, which is commonly understood to authorize class actions. The requirement that a representative claim comply with section 382 makes plain that a representative UCL claim must be pursued as a class action. To the extent that Proposition 64 presents any ambiguity, we resolve it by the indicia of the voters’ intent. That intent, as set forth in the official ballot pamphlet, was that representative claims under the UCL be brought as class actions.

Thus, the court upheld the trial court's order granting a motion to strike the UCL claims. However, with respect to the PAGA claim, Arias's writ petition was granted. The court held that, unlike the UCL,

the Labor Code statute authorizing a private enforcement action is an exception to the class action requirement.

So, one must allege class allegations to bring a representative claim under the UCL, but need not do so under the PAGA. Both issues are of potential interest to the Supreme Court, so we'll be watching to see if this one gets review, and if so, as to what issues. The full text of Arias can be found at the court's opinion pages, in pdf or word format.

The Fair Minimum Wage Act of 2007 amended the FLSA to increase the federal minimum wage in three steps. The first step raise to $5.85 per hour is effective today, July 24, 2007. The second raise, to $6.55 per hour, goes into effect July 24, 2008; and the third, to $7.25 per hour, is effective July 24, 2009. Here is a list of the various states' minimum wages:

State	Minimum hourly wage
Alabama	No minimum wage law
Alaska	$7.15
Arizona	$6.75
Arkansas	$6.25
California	$7.501
Colorado	$6.85
Connecticut	$7.65
Delaware	$6.652
District of Columbia	$7.00
Florida	$6.67
Georgia	$5.15
Hawaii	$7.25
Idaho	$5.15
Illinois	$7.503
Indiana	$5.15
Iowa	$6.20
Kansas	$2.65
Kentucky	$5.15
Louisiana	No minimum wage law
Maine	$6.754
Maryland	$6.15
Massachusetts	$7.50
Michigan	$7.155
Minnesota	$6.156
Mississippi	No minimum wage law
Missouri	$6.50
Montana	$6.15
Nebraska	$5.15
Nevada	$6.15
New Hampshire	$5.15
New Jersey	$7.15
New Mexico	$5.15
New York	$7.15
North Carolina	$6.15
North Dakota	$5.15
Ohio	$6.85
Oklahoma	$5.15
Oregon	$7.80
Pennsylvania	$6.25
Rhode Island	$7.40
South Carolina	No minimum wage law
South Dakota	$5.15
Tennessee	No minimum wage law
Texas	$5.15
Utah	$5.15
Vermont	$7.53
Virginia	$5.15
Washington	$7.93
West Virginia	$6.557
Wisconsin	$6.50
Wyoming	$5.15
1= $8 as of Jan. 1, 2008; 2= $7.15 as of Jan. 1, 2008; 3= $7.75 as of July 1, 2008, $8 as of July 1, 2009, $8.25 as of July 1, 2010; 4= $7 as of Oct. 1; 5= $7.40 as of July 1, 2008; 6= $5.25 for small employer; 7= $7.25 as of July 1, 2008 Source: Department of Labor

Sony Computer Entertainment America will pay up to $8.5 million to settle a wage and hour class action lawsuit brought on behalf of current and former employees who worked as artists and modelers known as "Image Production Employees." The suit, filed in 2005, and settlement will cover employees who worked at Sony February 2001 and September 2007. Under the terms of the settlement, Sony will also reclassify class members with a job title of Associate Artist and Artist 1 as nonexempt employees. As usual, the employer denies any liability or wrongdoing. The settlement is subject to court approval at a hearing set in September.

A very interesting opinion was recently published by the Second District Court of Appeal in Acosta v. Kerrigan, affirming an order awarding interim attorney fees in connection with his successful petition to compel arbitration of a dispute between the parties arising under a lease agreement and denying a petition to compel arbitration of the actual request for those same attorney fees. Acosta and Kerrigan had a lease agreement that including an arbitration clause and the following fee-shifting provision regarding petitions to compel arbitration:

Should any party to this Agreement hereafter institute any legal action or administrative proceeding against the other by any method other than arbitration, the responding party shall be entitled to recover from the initiating party all damages, costs, expenses and attorneys' fees incurred as a result of such action.

We've been seeing more and more of these. For now, at least, they are enforceable. In all likelihood, under Civil Code section 1717, a losing petitioner would also be on the hook for fees if the trial court found the arbitration agreement to be unenforceable, but that is another case for another day. We recently filed an opposition to an arbitration agreement in which our opposition prayed for interim fees under an identical fee-shifting provision, and the petitioner took the petition off calendar.

You can download the full text of Acosta v. Kerrigan here in pdf or word format.

One of the pioneers of California employment litigation, Mr. John C. McCarthy, passed away earlier this month after a battle with cancer and a life of great accomplishment. He was a founding member of the California Employment Lawyers Association. He was a graduation of USC and the UCLA law school, where he was a member of its first graduating class. He tried the first case in the nation to a jury verdict for wrongful termination in violation of public policy on the heels of the the California Supreme Court's landmark decision in Tameny v. ARCO, allowing such claims. In 1988, he won a $38 million verdict against the Las Vegas Hilton on behalf of 37 blackjack dealers. It was the largest civil verdict by a California lawyer that year. He was a tireless advocate and inspiration for all attorneys who stand up for the rights of employees.

A memorial service for John will be held on Saturday July 21, at 2:00 p.m., at Our Lady of the Assumption Catholic Church, 435 Berkeley Avenue, Claremont. To get there, take I-10 to Indian Hill Boulevard in Claremont. Exit and go north one mile, to Bonita Avenue. Turn left and continue to the first stop sign. The church is on the corner. Turn right on Berkeley and turn left into the parking lot.

Approximately 75 employees of the City and County of San Francisco will share $625,000 to settle an FLSA claim filed in April 2005. The case Alba, et al. v. City and County of San Francisco (ND Cal., case number 3:05-CV-01667-TEH) is not a class action and need not be approved by the court. It is, however, still subject to approval by the Board of Supervisors.

Every employer of employees subject to the Fair Labor Standards Act's minimum wage provisions must post, and keep posted, a notice explaining the Act in a conspicuous place in all of their establishments so as to permit employees to readily read it. The content of the notice is prescribed by the Wage and Hour Division of the Department of Labor. An approved copy of the minimum wage poster is made available for informational purposes or for employers to use as posters.

http://www.dol.gov/esa/regs/compliance/posters/flsa.htm

Q: May a party lose its contractual right to compel arbitration if, when negotiating and seeking approval of a class action settlement, it misrepresents the benefits of the proposed settlement to the court, opposing counsel and others?
A: Yes.

In Aviation Data, Inc. v. American Express Travel Related Services Company, Inc., the trial court refused to approve a class action settlement when it concluded that counsel for defendant American Express Travel misled the plaintiffs in the course of negotiations by offering to make significant modifications to its travel insurance program that, unbeknownst to the plaintiffs, it had already made for reasons unrelated to the lawsuit. The trial court then ruled that, that due to its misleading conduct, Amex lost its right to compel arbitration. The Court of Appeal affirmed.

By soliciting amendment of the complaint to allege a nationwide class and then crafting a proposed settlement structured around largely illusory relief, Amex forced ADI to intervene in the California action and required ADI and the plaintiff class to engage in protracted and costly discovery and appearances before the court as its deception about the implementation of the TAA code gradually surfaced. Only after the truth was unearthed and the settlement failed did Amex move to compel arbitration. Amex’s conduct smacks both of “substantive” prejudice “such as when a party loses a motion on the merits and then attempts, in effect, to relitigate the issue by invoking arbitration”; and of the situation in which a party “too long postpones his invocation of his contractual right to arbitration, and thereby causes his adversary to incur unnecessary delay or expense.” (Thyssen, Inc. v. Calypso Shipping Corp., S.A., supra, 310 F.3d at p. 105.)

It's interesting reading for anyone who does class action litigation or needs, from time to time, to challenge an arbitration agreement. You can download the full opinion here in pdf or word format.

The Supreme Court denied several depublication requests in Walsh v. Ikon Office Solutions (S152244, A113172).

CJAC and the Chamber of Commerce have turned Nicole Parra's unsuccessful class action bill (AB 1505) into a ballot initiative and have filed papers to get it on the June 2008 ballot. The changes included in this initiative would make it virtually impossible to get class actions certified in California. Here's a link to CAOC's website regarding the proposed initiative.

This week, the Supreme Court denied review of Savaglio v. Wal-Mart Stores (S152827, A111606) regarding sealing portions of the record on appeal in that mammoth meal period class action.

Though it was already rendered moot by the Supreme Court's decision in Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, the Third District Court of Appeal has invalidated the Labor Commissioner's designation of Hartwig v. Orchard Commercial, Inc. (Cal. Dept. of Industrial Relations, DLSE, May 11, 2005, No. 12-56901RB) as a "precedent decision" regarding the characterization of Labor Code § 226.7 pay as penalties, rather than wages. The Labor Commissioner has no authority to issue and enforce precedent decisions.

In Corrales v. Bradstreet, which was tried and argued on appeal as Corrales v. Dell (Angela Bradstreet having just replaced Donna Dell as Labor Commissioner), two claimants appealed from a judgment denying their petition for a writ of mandate and complaint for declaratory relief against Donna Dell, as Labor Commissioner for the State of California. They claimed that the Commissioner violated statutory duties relating to timely processing of employee claims under Labor Code § 98, and improperly issued a precedent decision purporting to be binding in all section 98 hearings, in circumvention of rulemaking requirements of the Administrative Procedure Act, Government Code § 11340 et seq.

On the abeyance and delay issue, the Court of Appeal found no reversible error, not because the practice of holding meal period and rest period claims in abeyance was lawful, but because the appellants apparently obtained hearings on their claims; the Commissioner’s attorney represented that the Commissioner would not violate the law by resuming the abeyance policy; that there was no evidence that the practice would be resumed. On the precedent decision issue, the Court of Appeal held that the Commissioner’s attempt to issue a binding precedent decision was an invalid circumvention of the APA’s rulemaking requirements. Even though the California Supreme Court has already held that section 226.7 payments are wages, not penalties, effectively invalidating the particular precedent decision at stake. Nonetheless, the Court of Appeal decided the matter because it is a matter of general public interest and is likely to recur.

The full opinion in Corrales v. Bradstreet is 55 pages long and at times, is dreadfully dulll. You can read the whole thing, however, here in pdf or word format.

For anyone who has to deal with the argument that wage and hour claims should not be certified as class actions because the availability of Berman hearings makes DLSE claims superior to classwide litigation, the opinion has some useful language about the Labor Commissioner's lack of resource to handle even its existing caseload, e.g., "the Commissioner 'admits that there are some claims filed in Labor Commissioner offices in California which do not proceed to hearing within 90 days of the date that a determination is made to hold a hearing,' and the Commissioner 'admits that there are some cases where ODAs have not been issued within 15 days after holding a hearing.' Appellants cite evidence of a system-wide problem of untimely processing of employee claims (which the Commissioner attributes to a lack of sufficient resources)."

From the American Enterprise Institute for Public Policy Research:

If America is a “lawsuit hell,” then contingent-fee lawyers are often considered its devils. Contingent fees have been called unwarranted and the lawyers who accept them have been denounced as unethical and uncivilized. Furthermore, in the midst of increased filings and escalating awards, it is difficult not to notice that some plaintiffs’ lawyers have become very rich. As a result, tort reformers have called for limits on contingent fees and many states have obliged. But limits have been enacted without any evidence that contingent fees were either responsible for the liability crisis or that limiting them would produce benefits.

This study, one of the first empirical examinations of contingent-fee limits, finds that contingent fees benefit plaintiffs and do not cause higher awards. Furthermore, contingent-fee limits are unlikely to reduce lawyers’ income very much, since they will simply switch to hourly fees. Since hourly fee lawyers are willing to take more cases to court than contingent-fee lawyers, contingent-fee limits can increase the number of low-value “junk suits.”

Tort reform is an important goal, but limiting the contractual rights of plaintiffs and their lawyers is an unattractive and likely ineffective method of achieving that goal.

The study, entitled Two Cheers for Contingent Fees, can be downloaded at http://www.aei.org/docLib/20050817_book827text.pdf.

After rehearing before the D.C. Circuit, the original ruling in Murphy v. IRS has been discarded in favor of a holding that emotional distress damages in employment cases are taxable. You can download Murphy v. IRS here.

While doing a little research for a WARN Act case we have pending, we found a cool feature on the 7th Circuit's website. Certain cases, including the infamous WARN Act case against Arthur Anderson, have not only the opinion listed on the court's website, but also an mp3 of the argument.

Happy Independence Day.

This is off topic, especially since its tenuous connection to wage and hour law will disappear after Gentry v. Superior Court, but we aren't doing any work today, and posting about wage and hour developments is work. Anyhow, it looks like you don't have to worry about the arbitration clause on your cell phone agreement anymore if T-Mobile is your carrier. Kudos to Bruce Gatton and Christina Nguyen, the lead plaintiffs in Gatton v. T-Mobile USA, Inc.

From the American Enterprise Institute for Public Policy Research:

On February 18, 2005, President George W. Bush signed into law the Class Action Fairness Act (CAFA) of 2005, the most significant civil justice reform of his administration. Has it succeeded in curbing abusive class actions? Because litigation tactics are dynamic, the long-term answer will depend in part on the plaintiffs bar's response.

CAFA addressed two sizable problems in the area of class action litigation by expanding federal jurisdiction over class actions and scrutiny over class action settlements. First, the plaintiffs bar would use "magnet jurisdictions," sometimes called "judicial hellholes," to bring cases of nationwide significance in local courts that tended to rubber-stamp illegitimate certifications.[2] Such certifications, by creating aggregate litigation in which individualized issues predominated, prevented defendants from being able to adequately defend themselves, and created settlement pressure on defendants where none would otherwise exist.[3] Second, there were negotiated settlements (often approved by these same courts) that rewarded attorneys at the expense of the unrepresented class members. In one notorious example involving an Alabama state court class action settlement against Bank of Boston approved by an elected judge, class members found that their escrow accounts faced deductions because the attorneys' fees exceeded the minimal recovery for the class.[4] Even more common and less extreme "coupon" settlements involved situations in which class members received rarely redeemed coupons of questionable value while attorneys received fees reflecting the exaggerated face value of the entire coupon issue.

Two years later, how well is CAFA working? What remains to be done?

The entire essay can be downloaded at http://www.aei.org/docLib/20070327_Liability.pdf.

Why do employers like arbitration so much? In a bit of a Jerry Maguire moment, Cory J. King, a lawyer with the defense firm of Fine, Boggs & Perkins, LLP, admits that it is because whether an employer wins a case depends almost as much on the forum as it does on the facts, and they tend to win arbitrations, and lose trials. Two of the slides in his presentation entitled "Top Secret! Owners Eyes Only! Dealing with the Entitlement Generation (go to page six of the ppt) boast that "when the judge sits as an arbitrator, statistics show that employer prevails 76% of the time" but "when the jury has a case, statistics show the employers prevail at best 50% of the time." In other words, half of all winning plaintiffs would have lost their case had they gone to arbitration.

Of course, that is never offered as a reason why arbitration agreements should be enforced. If an employee's attorney were to make such a claim in a pleading, 99.9% of defense attorneys would argue that it is not true, or at least unproven. In open court, it has almost become sacrilege to deny that arbitration is every bit as "separate but equal" as a courtroom with a jury.

While arbitration doesn't present nearly the same problems to wage and hour plaintiffs as it presents to other employee plaintiffs, the arbitration fight is always an important one. Does anyone out there know what statistics Mr. King is citing? We'd love to read those studies.

[If the link gets removed, you can check the page here, via google cache.]