Wage Law

Here's the third of three 2008 cases we'll mention today that pertain to attorney's fees, which often present an important issue in wage and hour cases. This one comes from New York. In Barfield v. New York City Health and Hospitals Corp., Case No. 06-4137-cv, the Second Circuit upheld a District Court order cutting a $340,375 fee request to $49,889, because the attorney had been unable to certify an overtime collective action.

So how much did the plaintiff get in her individual case? You'll be surprised at how little it takes to justify the fee award.

Having concluded, as a matter of law, that Bellevue was liable under the FLSA for Barfield’s overtime compensation, the district court awarded her compensatory overtime in the amount of $887.25. See Barfield v. N.Y. City Health & Hosps. Corp., 2006 WL 2356152. Further, having observed that nothing in the record indicated that defendants had made any effort to ensure that their employment of temporary health care workers complied with the FLSA, see Barfield v. N.Y. City Health & Hosps. Corp., 432 F.Supp. 2d at 395, the district court ordered defendants to pay Barfield liquidated damages in an equal amount, for a total damages award of $1,774.50, See Barfield v. N.Y. City Health & Hosps. Corp., 2006 WL 2356152.

The plaintiff also recovered $6,565.79 in costs. With the $49,889 in attorney’s fees, the compensatory and liquidated damages and costs, plaintiff recovers a total award of $58,229.29. You can download the opinion in Barfield here in pdf. Curiously, the case was argued in December 2007, but the opinion was not issued until August 2008.

Here's the first of three 2008 cases we'll mention today that pertain to attorney's fees, which often present an important issue in wage and hour cases and class actions. In and unpublished case entitled Fernandez v. Victoria’s Secret Stores, LLC (CD Cal. 2008) Case 2:06-cv-04149-MMM-SH,  the U.S. District Court gave final approval to a wage and hour class action settlement in a case against Victoria’s Secret stores, alleging a failure to pay wages, unfair trade practices and unfair competition, and conversion of wages. The basic underlying claim was the the company required job applicants to participate in a sales tryout during which they are trained and directed to work in Victoria’s Secret stores without pay.

The settlement included payment to class members in the form of $67.50 in store gift cards ("Each class member who submits a valid claim form will receive a gift card from Victoria’s Secret in the amount of $67.50. This gift card will not expire, will be freely transferrable, and can be used to purchase products sold at any Victoria’s Secret store or online."). The agreement calls for Victoria’s Secret to pay up to a maximum of $10 million, with $3.5 million going toward attorney fees. Because the settlement involved gift cards, the court reduced the actual cash value of the settlement to $8.5 million. At that amount, the attorney fee request represented 39.4% of the total settlement compensation. The court found this to be too high, and cut the fees to $2.9 million, or 34% of the value of the settlement. The amount reflected a lodestar multiplier of 1.82.

It is quite uncommon to see "coupon settlement" in a wage and hour case, particularly a case that was removed from Superior Court under CAFA. The only kind of wage and hour case in which this is common is when the claims include "wardrobing" claims, whereby clothing stores (Gap, Polo, J. Jill, Chico's, etc.) require their employees to buy clothes from their employer. We've had restaurants offer food coupons as part of meal and rest break settlements, but we've never accepted such offers.

The order also reflects an interesting tactic the class counsel used to increase notice. In additional to mailings to 77,411 class members, a notice was published in five major California newspapers and a Facebook flyer was also made available to visitors at Facebook.com. "According to Facebook, the flier was viewed 584,000 times." Approximately 4.4% of the notices were returned as undeliverable. There were 7,280 timely claim forms, a 9.4% response rate. There were 29 opt-outs and three objectors, one of whom objected because she felt she had been treated well as a Victoria’s Secret employee and would like to be rehired.

You can download the order here.

We got a copy of the WARN Act class action complaint against Thelen. The case is entitled Bergman v. Thelen LLP et al., U.S District Court case no. 3:2008cv05322, filed: November 24, 2008, assigned to Magistrate Judge Elizabeth D. Laporte. The complaint alleges causes of action for violation of the WARN Act, breach of contract and promisory estoppel. The first case management conference is set for March 3, 2009.

We were shocked by this story about Sandeep Baweja, an Irvine attorney who admits he stole most of the money from a $3.55 million wage and hour class action settlement in a case against ZipRealty. Lubocki, et al. v. ZipRealty, Inc., Case No. CV 07 2959 SJO (JCX) (C.D. Cal.)

As resumes and accomplishments go, Irvine attorney Sandeep Baweja was a superstar. Then, in the span of a few months this year, he threw it all away. In an unfolding case that has stunned colleagues, Baweja, 38, has admitted to burning through almost all of a $2.7-million settlement that was supposed to be shared by about 1,000 plaintiffs he represented in a class-action labor lawsuit. In legal filings, Baweja cites his inexperience as a stock market investor and this year's market freefall for the massive losses — money he had no right to transfer without court approval, according to legal documents.

We'd never met or heard of him, but apparently "superstar" Baweja is a ten year lawyer, active in politics and civic matters. And apparently, ZipRealty and/or the claims administrator Garden City Group released all of the settlement money to Baweja, who then spent several months playing the stock market with the money. Unfortunately for Baweja and his clients, mid-2008 was a bad time to be playing the stock market. He blew all but $54,846.90 of the settlement money.

Baweja and his co-counsel have taken down most of their website about the ZipRealty case, and replaced it with an update informing class members that Baweja is withdrawing due to a conflict of interest.

On December 24, 2008, Mr. Baweja filed a Motion to Withdraw as counsel in Lubocki v. Zip Realty, Inc. Case No. CV 07-2959-SJO (JCx). Mr. Baweja is asking to be removed as class counsel due to a conflict of interest. All class members should expect to receive a letter explaining the basis of the conflict of interest, with a copy of the Motion to Withdraw. The hearing on the Motion to Withdraw is currently set for January 26, 2009.

That motion will be granted. He also sent an email to class members that same day, confessing what he had done with their money. For a cached version of the site, check here. For a copy of the class notice, check out this blog post. There is no evidence that Ernest J. Franceschi or any of the other lawyers involved in the case played any role in the disappearance of the money.

What's next? A new class action to represent the class members in the pursuit of their class settlement money. Disciplinary proceedings are also a certainty. Playing with and losing your clients' money is about as serious a violation as a lawyer can commit. As one lawyer asked about the case and the rule Baweja violated put it this way: "That's Ethics 101." Actually, that's one you learn in kindergarten. Don't take what doesn't belong to you. Don't borrow without permission. You don't have to be a lawyer to know that.

On a side note, as further evidence that Avvo.com ratings are worthless, here's a link to his Avvo rating. "No ratings yet. ... We have not found any instances of professional misconduct for this lawyer." Perhaps when the angry clients and newspaper readers find out about Avvo, that will change. Baweja does have a wikipedia page now, though. Baweja was also the treasurer in Irvine for the Yes on Measure R and Yes on Measure S campaign committees. You can't help but wonder how clean those campaign accounts were kept.

In 2007, the California Supreme Court held in Pioneer Electronics (USA), Inc. v. Superior Court (2007) 40 Cal.4th 360, that a trial court has the discretion to authorize a pre-certification communication to members of a putative class in a consumer case, informing the putative class members that their names and addresses would be released to the attorneys for the putative class unless they affirmatively objected. Pioneer Electronics was quickly applied to a wage and hour case in Belaire-West Landscape, Inc. v. Superior Court (2007) 149 Cal.App.4th 554.

Since Belaire-West, there have been several cases strengthening the right to discovery and access to witnesses in class actions. The latest: Alch v. Superior Court (2008) 165 Cal.App.4th 1412, involving subpoenas to third parties. The need for balancing of privacy rights is not a sufficient ground to prevent plaintiffs from access to data necessary to their attempt to prove their case, and a statistical study need not be proven valid in advance simply because the underlying data is subject to privacy claims.

Television writers filed class action lawsuits against studios, networks, production companies and talent agencies, asserting an industry-wide pattern and practice of age discrimination. The writers served subpoenas on third parties, including the Writers Guild of America, seeking data on Writers Guild members from which they could prepare a statistical analysis to support their claims of age discrimination. A privacy notice was sent to 47,000 Writers Guild members, advising them of their right to object to disclosure of personal information on privacy grounds. Some 7,700 individuals filed objections. The writers moved to overrule the objections. The trial court sustained the objections in their entirety. The writers sought a writ directing the trial court to vacate its order and allow access to certain of the requested information, arguing the information was critical to proving their claims and privacy concerns were minimal. We grant the writ petition.

Thus, notwithstanding the privacy objections of the members, the plaintiffs get work history information and demographic data. You can download the full text of Alch here in PDF or MS Word format. A petition for review was denied.

A trial court order denying class certification must be reversed if the trial court refused to allow discovery of class member identity and contact information. Lee v. Dynamex (2008) 166 Cal.App.4th 1325. Following the trend that began with Pioneer Electronics (USA), Inc. v. Superior Court (2007) 40 Cal.4th 360, the Courts of Appeal are leaving no doubt that denying information to class representatives and their counsel cannot be used as a means to defeat class certification. 

After first denying Lee’s motion to compel Dynamex to identify and provide contact information for potential putative class members, the trial court denied Lee’s motion for class certification. Because the trial court’s discovery ruling directly conflicts with the Supreme Court’s subsequent decision in Pioneer Electronics (USA), Inc. v. Superior Court (2007) 40 Cal.4th 360 (Pioneer), as well as our decisions in Belaire-West Landscape, Inc. v. Superior Court (2007) 149 Cal.App.4th 554 and Puerto v. Superior Court (2008) 158 Cal.App.4th 1242 (Puerto), and that ruling improperly interfered with Lee’s ability to establish the necessary elements for class certification, we reverse both orders and remand for further proceedings regarding class certification.

If you have discovery disputes pending in a putative class action, be sure to read Lee. You can download the full text of Lee at these links in PDF or MS Word format.

In light of this and the Alch case, which we discussed in today's first post, it would seem to us that delay (or hoping to capitalize upon an inexperienced class counsel's mistake) is the only benefit a defendant can hope to achieve by resisting plaintiffs' efforts to obtain putative class member contact information.

U.S. District Judge Morrison C. England Jr. has approved a $3 million settlement between Starbucks and approximately 6,000 of its California shop managers, arising out of claims for reimbursement of travel expenses - mileage for business errands run using the employees' own vehicles. The settlement will net the average class member about $86. The class consists of managers, assistant managers and shift supervisors who worked in California Starbucks coffee shops between March 12, 2003, and March 19, 2008. Starbucks also agreed to change its policy to reimburse store managers for mileage expenses. The court also awarded an enhancement of $5,000 to class representative Jonelle Lewis.

The trend toward reversing certification decisions on appeal is no longer limited to state courts in California. If you have a certification order up on appeal in the Ninth Circuit, you need to read Parra v. Bashas', Inc. (9th Cir. 2008) 536 F.3d 975. The Ninth Circuit has repeatedly affirmed commonality findings in employment cases (Dukes v. Wal-Mart, Inc. (9th Cir. 2007) 474 F.3d 1214), but the converse was not true. In fact, until this year, the Ninth Circuit had never reversed a district court finding that commonality was lacking in an employment suit. They did, however, in Parra, wherein the Ninth Circuit held that where the denial of certification was predicated on lack of commonality, and commonality is apparent from the record, District Court’s order denying class certification in a pay discrimination class action is an abuse of discretion and must be reversed.

[T]he Plaintiffs here establish commonality even though their individual factual situations differ because they all seek a common legal remedy for a common wrong. Plaintiffs here not only presented evidence of discriminatory pay scales, but also provided statistical and anecdotal evidence of discrimination by Bashas’, Inc. These pay scales were common for all Bashas’, Inc. employees and provided for different pay for similar jobs based only on the store where the employee worked. The proposed class here shares the alleged discriminatory pay scales of Bashas’, Inc. The class definition seeks to reach those Hispanic employees who suffered past discrimination under these pay scales.

The defendant argued that "the difficulty in redressing the harm and calculating the various pay disparities for the different employment positions precludes class certification." The Ninth Circuit disagreed. "We have previously held that classes with far more complex remedies can seek redress in the form of a class action. ... The claimed difficulties in the calculations of damages, as they affected the various class members, do not preclude class certification." (citing Staton v. Boeing Co. (9th Cir. 2003) 327 F.3d 938).

Back to the District Court.

The nation's largest retailer announced yesterday that it will pay up to $640 million to settle 63 class action wage and hour lawsuits across the country, some of which date back to 2000. Not among the cases settled: Savaglio v. Wal-Mart Stores, Inc., which we previously discussed in posts you can find at links here, here, here and here.

Plaintiffs who opt-in during a collective action under the FLSA must disclose their computation of damages under Rule 26(a), just as any other plaintiff must, or risk exclusion of such evidence at trial. Hoffman v. Construction Protective Services, Inc. (9th Cir. 2008) 541 F.3d 1175.

The trial court certified an FLSA collective action, but there was no pre-trial disclosure of damage calculations for the individual opt-in plaintiffs. At trial, the court excluded all evidence of damage for the opt-ins, but allowed evidence regarding claims of the named plaintiffs. The class appealed the exclusion of damages evidence and an award of attorney fees. The Ninth Circuit affirmed.

The Class Action Fairness Act of 2005 provides, at 28 U.S.C.A. § 1715(b), for notice of class action settlements to be given by the defendant to the appropriate federal and state attorneys:

In General.— Not later than 10 days after a proposed settlement of a class action is filed in court, each defendant that is participating in the proposed settlement shall serve upon the appropriate State official of each State in which a class member resides and the appropriate Federal official, a notice of the proposed settlement consisting of—

(1) a copy of the complaint and any materials filed with the complaint and any amended complaints (except such materials shall not be required to be served if such materials are made electronically available through the Internet and such service includes notice of how to electronically access such material);

(2) notice of any scheduled judicial hearing in the class action;

(3) any proposed or final notification to class members of—

(A) (i) the members’ rights to request exclusion from the class action; or

       (ii) if no right to request exclusion exists, a statement that no such right exists; and

(B) a proposed settlement of a class action;

(4) any proposed or final class action settlement;

(5) any settlement or other agreement contemporaneously made between class counsel and counsel for the defendants;

(6) any final judgment or notice of dismissal;

(7)

(A) if feasible, the names of class members who reside in each State and the estimated proportionate share of the claims of such members to the entire settlement to that State’s appropriate State official; or

(B) if the provision of information under subparagraph (A) is not feasible, a reasonable estimate of the number of class members residing in each State and the estimated proportionate share of the claims of such members to the entire settlement; and

(8) any written judicial opinion relating to the materials described under subparagraphs (3) through (6).

An order giving final approval of a proposed settlement may not be issued earlier than 90 days after the later of the dates on which the appropriate federal official and the appropriate state official are served with the required notice. 28 U.S.C.A. § 1715(d). If the notices are not provided, a class member may choose not to be bound by a settlement agreement or consent decree in a class action. Take it from a defense attorney whom we will not name: This is one of those many lessons in life that are best learned by observing the mistakes of others, rather than learning from one's own mistakes.

A group of former Heller, Ehrman employees have filed a class action lawsuit against the firm under the WARN Act (29 U.S.C. § 2101) and the California WARN Act (Labor Code § 1400)  Werth v. Heller, Ehrman, White, & McAuliffe LLP (N.D. Cal., Case No. C084799). The complaint alleges, among other things, that the firm conducted a mass layoff without providing sixty days advance written notice. We hear that a similar complaint has been filed against Thelen, but we haven't seen the complaint yet.

Personally, we think getting $303 million from a company that might not exist in six months is a great result, and if the large team of lawyers from five firms who chased that result for the past three years, with the risk that they might get nothing for their 25,000 hours of work, might end up with 19% of such an all-cash settlement (roughly equivalent to the cost of two to three very good pitchers winning about 20 games each at the major league level), the shareholders should be pleased that their nickel per share is getting a 400% return on those attorney's fee expenses.

Not everyone would agree with us, however. To some, $303 million now qualifies as a "nuisance settlement to avoid further litigation" that reaps "minimal benefit" for class members. A judge will decide who is right at a hearing on Monday December 22.

Trial courts must determine the fairness of a class action settlement agreement based upon admissible evidence presented to the court during the approval process. Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116.

Objector Crystal Echeverria and two other objectors appeal from a judgment approving the terms of a settlement agreement entered in this class action against defendant Foot Locker Retail, Inc. (Foot Locker). They contend the trial court erred in finding the terms of the settlement to be fair, reasonable and adequate without any evidence of the amount to which class members would be entitled if they prevailed in the litigation, and without any basis to evaluate the reasonableness of the agreed recovery. The settlement was reached in arms-length negotiations between competent counsel with the assistance of an experienced mediator and may well, in fact, be entirely reasonable in view of the strength of the claims and defenses and the cost and risks of further litigation. Nonetheless, we agree with objectors that the court bears the ultimate responsibility to ensure the reasonableness of the settlement terms. Although many factors must be considered in making this determination, and the court is not required to decide the ultimate merits of the class members’ claims before approving a proposed settlement, an informed evaluation cannot be made without an understanding of the amount that is in controversy and the realistic range of outcomes of the litigation. It is possible that the data necessary to make such an evaluation in this case was given to the trial court during informal discussions with counsel, but no such information appears in the record. Therefore, we must vacate the order approving the settlement and remand the matter to permit the trial court to reconsider the fairness and adequacy of the settlement in light of such additional information as the parties may present concerning the value of the class members’ claims should they prevail in the litigation and the likelihood of their so prevailing.

The approval was reversed on appeal because the trial court and the objectors were not given sufficient information with which to evaluate the fairness of the settlement.

More fundamentally, neither Dunk, 7-Eleven, nor any other case suggests that the court may determine the adequacy of a class action settlement without independently satisfying itself that the consideration being received for the release of the class members’ claims is reasonable in light of the strengths and weaknesses of the claims and the risks of the particular litigation. The court undoubtedly should give considerable weight to the competency and integrity of counsel and the involvement of a neutral mediator in assuring itself that a settlement agreement represents an arm’s length transaction entered without self-dealing or other potential misconduct. While an agreement reached under these circumstances presumably will be fair to all concerned, particularly when few of the affected class members express objections, in the final analysis it is the court that bears the responsibility to ensure that the recovery represents a reasonable compromise, given the magnitude and apparent merit of the claims being released, discounted by the risks and expenses of attempting to establish and collect on those claims by pursuing the litigation. “The court has a fiduciary responsibility as guardians of the rights of the absentee class members when deciding whether to approve a settlement agreement.” (4 Newberg on Class Actions, supra, § 11.41 at p. 118; 7-Eleven, supra, 85 Cal.App.4th at p. 1151.) “The courts are supposed to be the guardians of the class.” (Dickerson, Class Actions: The Law of 50 States (2008 ed.) § 9.02[2], p. 9-6.)

On remand, the settling parties shall have the opportunity to supplement their showing in support of the settlement; the objectors will be permitted to renew their discovery requests, "which should not be denied simply because the requested information was disclosed during the mediation leading to the proposed settlement." The trial court will limit discovery in view of the context in which it is being requested, namely, to provide sufficient information to permit an intelligent evaluation of the terms on which the case is proposed to be settled. "The objecting parties should not be permitted to frustrate the mutual interest of the class members and the defendant to resolve the litigation promptly by conducting extended or unnecessary discovery." Thereafter, the trial court shall redetermine whether the proposed settlement is fair, adequate and reasonable.

The court may and undoubtedly should continue to place reliance on the competence and integrity of counsel, the involvement of a qualified mediator, and the paucity of objectors to the settlement. But the court must also receive and consider enough information about the nature and magnitude of the claims being settled, as well as the impediments to recovery, to make an independent assessment of the reasonableness of the terms to which the parties have agreed. We do not suggest that the court should attempt to decide the merits of the case or to substitute its evaluation of the most appropriate settlement for that of the attorneys. However, as the court does when it approves a settlement as in good faith under Code of Civil Procedure section 877.6, the court must at least satisfy itself that the class settlement is within the “ballpark” of reasonableness. (See Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985) 38 Cal.3d 488, 499-500.)
...
By remanding we do not suggest that the proposed settlement ultimately may not pass muster. We hold only that the trial court may not finally approve the settlement agreement until provided with sufficient information to assure itself that the terms of the agreement are indeed fair, adequate and reasonable.

We've seen Superior Court judges compare the "good faith settlement" standards under Tech-Bilt with the fairness analysis under Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794. After Kullar, we'll probably see more of that. The mediator in this case, by the way, was Mark Rudy. 

You can download the full text of Kullar here in PDF or MS Word format. If you handle wage and hour class actions in California, this is must-read material. 

A request for depublication has been filed with the Supreme Court.

Objectors sometimes fail to recognize that there are often very good reasons why class action settlements are lower than the amount each class member would receive in an individual trial with a favorable result. The risks are many: that the class would not be certified, or would be decertified after the initial certification; that the defendant could win on liability at trial, or before; that the defendant would go broke; that the damages would come in lower than expected; that the law will change while the case is pending. Sometimes, a bird in the hand is worth two a flock in the bush. There were a couple of interesting objection cases that came down recently, and we'll have a post on those soon, but first, we'd like to share this cautionary tale, as set forth in the very specialized blog Freelance Rights, published by one of the objectors in a case entitled Reed Elsevier Inc. v. Muchnick, which was known in the trial court as In re Freelance Literary Works in Electronic Databases Copyright Litigation.

This is a case that settled in 2005 for $11.8 million, and was approved in district court, but thrown out by the Second Circuit Court of Appeals last November. The objectors, led by Mr. Muchnick, challenged the terms of a global settlement of publishers’ alleged infringement of the works of freelance writers. The objectors appealed the trial court's approval of the settlement, and the Second Circuit invalidated the settlement, not on the basis of the merit arguments, but on the ground that a class action copyright settlement could not include the claims of copyright holders whose works were not formally registered with the Copyright Office. Thus, no one gets anything.

The U.S. Supreme Court is now considering a petition for writ of certioriari, and it was on the agenda on September 29, 2008, November 14, 2008, November 25, 2008, December 5, 2008, and again December 12, 2008. So far, no order has been entered.

One anonymous class member had this reaction:

The bottom line is that if Mr. Muchnick and the other objectors had not filed an appeal, the settlement would have been final and the claims paid. With the additional attorneys fees incurred through appeals the settlement now, as Mr. Muchnick phrased it, would indeed be worth "crumbs" even if the court grants Cert and the appeal is eventually denied. The objectors will tell you that they were against the settlement on principle. The truth is that they were greedy and felt the settlement was not enough. They envisioned the Second Circuit ruling in their favor and sending the case back to District Court for more negotiations and eventually more cash. Well it backfired. The court threw the entire case out on jurisdictional grounds, which could easily have been predicted by reading the federal code concerning copyright registration. Because of their greed, thousands of freelance writers will get zero for past works.

In full disclosure, I am a freelance newspaper writer who submitted thousands of columns over the years. If the Supreme Court does not overturn the Circuit Court's ruling, I stand to lose a great deal of money.

If the SCOTUS denies certiorari, as they usually do, the class member will be right. That'll be $11.8 million down the drain for the class members, the attorneys, and everyone except, of course, the defendants.

A fee splitting agreement amongst class counsel must always be disclosed to the court as part of the class action settlement process. In Mark v. Spencer (2008) 166 Cal.App.4th 219, there was a legitimate fee splitting agreement, but it was not disclosed to the court. The court awarded attorney fees in conformity with the declarations, rather than the fee splitting agreement. The attorney who got less the agreement provided then sought to enforce the agreement, but was bound by the order establishing the distribution of fees.

Plaintiff Ronald H. Mark appeals from a judgment of dismissal entered after the trial court sustained a demurrer to his first amended complaint without leave to amend. The complaint sought enforcement of an agreement between Mark and defendant Jeffrey P. Spencer to divide fees awarded to them as cocounsel representing plaintiffs in an earlier class action lawsuit. Mark contends his failure to disclose the fee-splitting agreement to the court in the class action, as required by California Rules of Court, rule 3.769, did not preclude him from bringing a separate action to enforce the agreement.

We conclude the trial court did not err in sustaining the demurrer without leave to amend. Rule 3.769 was designed to protect class members from potential conflicts of interest with their attorneys by requiring the full disclosure of all fee agreements in any application for dismissal or settlement of a class action. Rule 3.769 would be effectively nullified if attorneys could conceal a fee-splitting agreement from the court in seeking approval of a class action settlement and later enforce the agreement in a separate action.

As a separate and independent basis for upholding the trial court's action, we conclude Mark's claims are barred by res judicata. Mark was provided a fair opportunity to litigate the fee-splitting agreement before the court in the class action. Because the class action court fully and finally determined the attorneys' respective entitlement to fees, Mark may not relitigate the issue here. We therefore affirm the judgment.

The pertinent facts: Mark brought Spencer in to help with a labor law class action against GNC (Capelouto v. General Nutrition Corp.), and the two attorneys agreed to split fees, along these terms: (a) Mark and Spencer would evenly split any attorney fees generated in the action; (b) the 50-50 split shall “be in effect even if counsel are required to submit fee applications individually”; (c) in the event “either attorney or firm fails to perform their reasonable share of the joint representation,” the parties “shall renegotiate the fee split set forth above”; (d) Mark and Spencer “will both have equal duties and responsibilities in the litigation . . .”; and (e)  their respective firms would split the costs evenly. The case settled, and the attorneys sought $600,000 in fees. At no time, in the filings or in open court, did the attorneys disclose the existence of the fee-splitting agreement.

Spencer appeared at the final fairness hearing; Mark, apparently, did not. Orange County Superior Court Judge Ronald Bauer entered an order approving attorney fees in the amount of $401,275.43 to Spencer and $76,470 to Mark, to be paid within 30 days. Mark then asked Spencer to honor the fee-splitting agreement by transferring enough money to make their receipt of fees equal. Spencer refused, and Mark responded by suing to enforce the fee-sharing agreement.

The morals of the story: (i) always disclose your fee-splitting agreement to the court, and make sure you ask that the court award the fees in accordance with that agreement; (ii) always personally attend the final fairness hearing, even if there will be another half-dozen attorneys there for the class; and (iii) be careful about entering into fee-splitting deals with Jeffrey Pincock Spencer.

After a minor modification to the opinion, a petition for review was filed, and on Wednesday, the Supreme Court denied review. You can download the full text of Mark v. Spencer here in PDF or MS Word format.

[Update: A representative of Mr. Spencer sought to comment upon our list of morals, but, as Typepad puts it, Some users are experiencing issues with the comment form on their weblogs. We are working on this currently, so we'll give him the ability to comment a different way:

Mr. Spencer's counsel, Jeffrey Wilens, responds.

I am Mr. Spencer's appellate counsel. Mr. Walsh's characterization of the facts of this lawsuit is a ridiculous distortion in a lame effort to be funny.  The fee agreement between Mark and Spencer required each side to do half of the work or the fee arrangement would be modified; it did not require each attorney to get paid equally under all circumstances.  Mark shirked his responsibilities (which was the opinion stated by Superior Court Judge Ronald L. Bauer).  He did not bother showing up at the first fees hearing or (after being put on notice his fees were in jeopardy) at the second hearing and ended up with a much lower fee award which also lowered the aggregate fee award.  In Judge Bauer's opinion, Mr. Mark's effort was "short of the mark."  Accordingly, Judge Bauer did not award much to Mark.

Here are the morals of the story.  Yes, attorneys should disclose a fee splitting agreement but should not expect it will necessarily be upheld.  Yes, attorneys should attend the hearing on their requess for fees, especially when the Judge states at the first hearing that the fees request is excessive.  Finally, attorneys should always take care drafting fee-splitting agreements with anyone but there was no call for the cheap shot against Mr. Spencer.  The fact is Mr. Spencer attempted to honor the fee splitting agreement by re-negotiating the allocation as contemplated in the agreement if both sides did not do equal amounts of work.  Mr. Mark refused to accept anything less than half of the fee even though Judge Bauer thought his work was not even worth 20 percent of the aggregate fee award.  Instead, Mr. Mark decided to sue, but he lost in the trial court and then in the appellate court.

We reply:

We did not characterize the facts, much less (with the exception of initially crediting Judge McEachen for the underlying fee order) distort them. We just pulled the facts from the appellate opinion. We did characterize the lessons to take from the case, but we were being more serious than Mr. Wilens assumes. We've had co-counsel arrangements go south, too, and we've always honored the fee split. We would have disclosed the arrangement to the court and requested that fees be awarded and divided evenly between the firms. If the case had originated with another lawyer, we wouldn't have ever considered aiming for a larger split. Obviously, the courts have determined that what Mr. Spencer did was lawful, but nonetheless, if we were entering into an agreement with an attorney we knew to hold such a different view of joint venturing cases, we'd be very careful about doing business with him.]

In our post earlier today regarding Freedom Communications, Inc. v. Superior Court (2008) 167 Cal.App.4th 150, we neglected to mention that the case settled recently.

The Orange County Register and the home delivery carriers who deliver the newspaper have agreed to a settlement of a class action lawsuit filed on behalf of those carriers. Through such settlement, The Register will pay to the class members not more than $22 million through a claims-made settlement process. The ultimate amount paid will be based on the number of claims submitted and validated through this process.

No amount has been set for Plaintiffs’ attorneys’ fees. It is up to the sound discretion of the trial court to determine the reasonable amount of such fees. Although Plaintiffs’ counsel is seeking $12 million in fees, it is by no means certain that the Court will award that amount, and it can award less.

The Register also changed the way it classifies its carriers some of its policies and practices regarding newspaper carriers.

A petition for review has been filed in Brinkley v. Public Storage, Inc. (2008) 167 Cal.App.4th 1278, the paystub violation and meal and rest break case that was published on October 28, 2008. We previously discussed Brinkley in posts that can be found here and here. We think that, even if there was no Brinker Restaurant Corp. v. Superior Court (2008) 165 Cal.App.4th 25, the Brinkley opinion's break with Cicairos v. Summit Logistics, Inc. (2005) 133 Cal.App.4th 949 would make a compelling case for Supreme Court review. Among other things, Brinkley draws the conclusion that it would be "impossible" for employers with large work forces to enforce meal breaks; that there is no requirement for employers to schedule breaks within the first five hours; and that employers only have to make breaks available, applying a standard that equates the "provide" language in the meal period regulations with the "permit and authorize" language of the rest period regulations.

You can download Brinkley here in pdf or MS Word format. The Supreme Court has 60 days from December 4, 2008, to decide whether to grant or deny review. Absent an order granting themselves another 30 days, which is somewhat unlikely in this case, that means that a decision on the petition for review can be expected on or before January 28, 2009. We expect the Supreme Court to issue a "grant and hold" review order, deeming this a related case to Brinker Restaurant Corp. v. Superior Court.

The need to individually examine each class member's records to determine whether he or she qualifies for inclusion in the class does not establish a lack of ascertainability or manageability or establish that common questions of fact or law do not predominate, therefore, an order decertifying class was error and must be reversed. Harper v. 24 Hour Fitness, Inc. (2008) 167 Cal.App.4th 966.

Putative class representatives Bryan Harper and Mark Salzwedel appeal from the trial court’s order decertifying a limited class that had previously been recognized for their unfair competition claims under Business and Professions Code sections 17200 and 17500 (UCL claims) challenging a form contract 24 Hour Fitness, Inc. used to enroll new members. Because the trial court’s decertification order is largely predicated on its erroneous legal assumptions concerning the scope of relief available in an individual action under sections 17200 and 17500, we reverse.

If you prosecute wage and hour class actions, the heart of the opinion can be found here:

The other factor central to the trial court’s analysis, the ongoing difficulty in properly identifying the members of the certified class from 24 Hour Fitness’s records, may be considered as part of a properly conducted evaluation of the superiority of proceeding by class action. However, the need to individually examine each member’s contract to ultimately determine whether he or she qualifies for inclusion in the class does not, as suggested, demonstrate a lack of ascertainability or manageability or establish that common questions of fact or law do not predominate. (See Lee v. Dynamex, Inc. (2008) 166 Cal.App.4th 1325.) [fn. 5]

With respect to the difficulty in confirming the identity of all class members prior to a determination on the merits, Division One of this court recently affirmed certification of a class consisting of FedEx drivers over FedEx’s objection “the members of this class shifted ‘in and out, sometimes on a day-to-day basis.’” (Estrada v. FedEx Ground Package System, Inc. (2007) 154 Cal.App.4th 1, 14.) The court explained, “The class is ascertainable if it identifies a group of unnamed plaintiffs by describing a set of common characteristics sufficient to allow a member of that group to identify himself as having a right to recover based on the description. [Citation.] [¶] . . . If FedEx’s claim is that every member of the class had to be identified from the outset, FedEx is simply wrong.” (Ibid.; accord, Lee v. Dynamex, Inc., supra, 166 Cal.App.4th at p. 1335; see also Sav-On Drug Stores, supra, 34 Cal.4th at p. 333 [“‘a class action is not inappropriate simply because each member of the class may at some point be required to make an individual showing as to his or her eligibility for recovery’”]; Bufil v. Dollar Financial Group, Inc. (2008) 162 Cal.App.4th 1193, 1207 [class of employees ascertainable in spite of absence of specific rest period records; “speculation that goes to the merits of ultimate recovery [is] an inappropriate focus for the ascertainability inquiry”]; Bell v. Farmers Ins. Exchange (2004) 115 Cal.App.4th 715, 744 [fact that class may ultimately turn out to be overinclusive not determinative; most class actions contemplate eventual individual proof of damages, including possibility some class members will have none].)

[Fn. 5: It appears this difficulty in identifying class members    and, in particular, in determining which contracts have the words “bonus,” “bonus time” or similar handwritten notations on their face    is attributable, at least in substantial part, to the inadequacy of 24 Hour Fitness’s computer records.  We have previously cautioned an employer may not avoid class certification by making a business decision to commingle or fail to document particular job assignments or tasks.  (Aguiar, supra, 144 Cal.App.4th at p. 134.)  A similar principle would seem applicable here.]

The opinion is bit unusual in that it reverses an order granting a motion to decertify a class, thus the standard of review on appeal was abuse of discretion. It was also noteworthy that the opinion was 2-1, with a dissent by Justice Woods.

A petition for review was filed on December 2, 2008. You can download the full text of Harper here in pdf or MS Word format.

One defendant's timely notice of removal under the Class Action Fairness Act of 2005 is sufficient to remove the entire action, even if other defendants file their notices of removal too late. United Steel, Paper & Forestry v. Shell Oil Company (9th Cir. 2008) __ F.3d __.

Defendants Shell Oil Company and Tesoro Refining and Marketing Company were sued in a single wage and hour class action in state court. Each filed separate notices of renewal, relying, in part, upon CAFA's provisions at 28 U.S.C. §§ 1332(d), 1453, as a basis of jurisdiction. Shell's notice was filed on the 30th day after service upon the first defendant. Tesoro's notice was filed a day later.

After opening two separate cases, the District Court remanded Shell’s case on the ground that Tesoro had failed to consent to removal within thirty days of service on the first-served defendant, and then remanded Tesoro’s case for the same reason. Shell and Tesoro filed separate petitions for permission to appeal, which were granted. The Ninth Circuit then held that under § 1453(b) of CAFA, Shell’s timely notice of removal effected removal of the entire action, including the claims against Tesoro, and the trial court's orders to remand the cases back to state court were erroneous.

You can download the full text of the opinion at this link.

In Alvarez v. May Department Stores Co. (2006) 143 Cal.App.4th 1223, the Court of Appeal established that collateral estoppel could prevent future class actions once a court denies certification of a particular class. However, in Bufil v. Dollar Financial Group, Inc. (2008) 162 Cal.App.4th 1193, the courts distinguished Alvarez, holding, among other things, that a narrower class can be certified later, even if a larger putative class had earlier been denied certification.

In Johnson v. GlaxoSmithKline, Inc. (2008) 166 Cal.App.4th 1497, Alvarez has been further distinguished and its reach limited. Where a prior attempt to certify a nationwide class action was not identical to the current attempt and the current putative class is not the same as the prior class which was not certified, collateral estoppel does not bar plaintiff’s efforts to certify a class action.

In two published decisions the United States District Court for the Central District of California denied class certification in putative class actions brought by current and former users of the prescription drug Paxil against GlaxoSmithKline, Inc. (GSK), the drug’s manufacturer, which alleged GSK had deceptively advertised Paxil as nonhabit-forming. Relying upon those decisions and Alvarez v. May Dept. Stores Co. (2006) 143 Cal.App.4th 1223 (Alvarez), which applied established principles of collateral estoppel to class certification issues, the trial court granted GSK’s motion for summary adjudication precluding this case from proceeding as a class action, ruling Kevin Johnson’s superior court lawsuit against GSK sought to certify the identical putative class, pursuing the same legal claims, as had been disallowed in the federal actions. Because the class issues actually litigated in the federal court Paxil cases differ from those presented by Johnson’s putative class action, we reverse.

In dictum, the Court of Appeal cited a recent SCOTUS case, Taylor v. Sturgell (2008) ___ U.S. ___ [128 S.Ct. 2161, 2171 & fn. 4, 171 L.Ed.2d 155, 167] and noted that it appears to preclude the use of collateral estoppel to bar absent putative class members from seeking class certification following the denial of a certification motion in any earlier lawsuit.

A motion for rehearing was denied by the Court of Appeal, and an immaterial modification was made to the opinion. A petition for review was filed on October 29, 2008, and a decision to grant or deny review by the California Supreme Court is expected before the end of the year. You can download the full text of Johnson here in pdf or MS Word format.

Wal-Mart Stores Inc. has agreed to pay up to $54.25 million to settle a wage and hour class action lawsuit involved breaks and off the clock work brought on behalf of roughly 100,000 employees in Minnesota. The class period runs from September 11, 1998 to November 14, 2008. As part of the settlement, Wal-Mart also agreed to maintain electronic systems, surveys and notices to stay compliant with wage and hour requirements under Minnesota law. Earlier this year, a judge found Wal-Mart to have committed two million violations. At the punitive damages stage, Wal-Mart faced a potential $2 billion liability. The court will hear a motion for preliminary approval of the settlement on January 14, 2009.

Can a defendant bring a motion to decertify a class action before the court has certified the class in the first place? The answer, it appears, is sometimes. In re BCBG Overtime Cases (2008) 163 Cal.App.4th 1293.

Christina Denkinger appeals from the order granting the motion made by the defendant, AZ3, Inc., to strike class allegations from her complaint. She contends the trial court erred in granting the motion to strike based on evidence outside the pleadings; at the least, she contends, the trial court should have given her leave to amend the 2 complaint. Alternatively, Denkinger contends if the trial court properly relied on evidence outside the pleadings, it erred in striking the class allegations without affording her an opportunity to test the evidence through discovery. We find the trial court correctly handled the motion under class certification guidelines, properly receiving evidence on the class certification issue and exercising its discretion in denying certification. Accordingly, we affirm.

More than four years after the action was filed, the defendant filed a motion to strike the class allegations. The Plaintiffs opposed the motion, contending it was an improper attempt to circumvent the class certification process. At oral argument, the plaintiffs requested leave to amend, time to conduct further depositions, and a Pioneer notice. The trial court refused, and granted the motion to strike the class allegations, finding the motion was properly before it because “class certification issues may be determined at any time during the litigation.” It found that BCBG had met its burden to show that the action is not suitable for class certification by producing “substantial evidence which establishes that Plaintiffs cannot prove the elements of typicality or commonality necessary for class certification.”

On appeal, plaintiffs contended the motion to strike was improper because (i) evidence outside the pleadings cannot be considered on a motion to strike; and (2) the motion was a premature challenge to class certification. THe Court of Appeal rejected both arguments. First, a

motion filed under rule 3.767 was not an attack on the pleadings ... a traditional motion to strike; rather, it was a request to initiate the class certification process. The motion was timely, and the trial court properly took evidence outside the pleadings and denied the belated discovery request. Trial courts are given broad flexibility when dealing with the certification of class actions. (Fireside Bank v. Superior Court (2007) 40 Cal.4th 1069, 1087.) In fact, our Supreme Court has urged trial courts “to be procedurally innovative, encouraging them to incorporate procedures from outside sources in determining whether to allow the maintenance of a particular class suit.” (City of San Jose v. Superior Court (1974) 12 Cal.3d 447, 453.) motion and when discovery on the issue is still on-going.” (Ibid.)

Second,

The record in the case before us presents a different procedural posture. BCBG’s motion was filed 22 months after the filing of Plaintiffs’ coordinated complaint, 33 months after Denkinger’s complaint, and four years after Williams and Thornhill’s complaint. During the time between the filing of the coordinated complaint and the motion, Plaintiffs had, as Deckinger puts it, been engaged in “an extensive law and motion battle regarding the identity of members of the putative class and the declarations filed in support of Respondent’s Motion ....

Had this motion been brought at the beginning of the case, it almost certainly would have been denied. See, e.g., Sharp v. Next Entertainment, Inc. (2008) 163 Cal.App.4th 410 (motion to determine class representatives’ adequacy was an "end-run around the certification procedures and an attempt to deny plaintiffs the ability to present their case.") But because the plaintiffs had the benefit of several years of prosecuting their case, the court was willing to entertain an evidentiary motion on certification filed by either side.

The record on appeal wasn't clear, but there appear to have been some discovery motions rendered moot by the order granting the motion to strike. However, the Court of Appeal was not swayed by this detail, for a variety of procedural reasons:

BCBG’s motion to strike the class allegations was not made before the Plaintiffs had a chance to conduct discovery on class certification issues. Such discovery had been going on for some time, although some of the plaintiffs’ efforts had apparently been thwarted by adverse rulings from the court. The propriety of these rulings is not before us. The Plaintiffs received proper notice of BCBG’s motion and had the opportunity to respond with evidence of their own. They presented nothing to counter BCBG’s evidence that the action did not meet the requirements of a class action. Deckinger complains Plaintiffs have not had the opportunity to test the veracity of the declarations submitted by BCBG in support of its motion; she argues they should have been granted leave to depose the declarants. But she could have asked for leave to conduct discovery and a continuance after she received notice of the motion. The only discovery request Plaintiffs made was at oral argument, and that request was for an opportunity to explore their suspicion that BCBG had engaged in misrepresentations to the declarants.

One bit of dictum in this opinion is noteworthy for anyone seeking a class representative enhancement award, particularly in Orange County. During oral argument, Judge Sundvold remarked

“[T]his is frankly when a class rep ought to be out there dialing for dollars, talk[ing] to their friends and former employees, . . . and saying what’s going on out there, what have you heard. And that’s the kind of investigative work that would really, to me, make a class rep worth their weight in gold.”

A class rep's weight in gold is a lot less than most receive in some courts.

The Supreme Court denied a petition for review and a request for depublication. Justice Kennard voted in favor of review. You can download In re BCBG Overtime Cases here in pdf or MS Word format.

The Supreme Court will neither review nor publish the opinion in Gonzalez v. Western Pacific Roofing Corp. (2008) Case Number S162086. The Court of Appeal has reversed the sustaining of a demurrer in a Los Angeles County Superior Court class action case in which the Plaintiffs alleged they were not paid the correct wages in public works projects.

They set forth the hourly rate they were paid and the minimum wage they should have been paid. Their claims are on behalf of themselves and for others. Thus, the action is a class action. We hold that plaintiffs for themselves stated facts sufficient to state a cause of action with respect to each of the alleged causes of action, and that the validity of the class action allegations should await determination in a certification proceeding. Therefore, we reverse the judgment entered pursuant to a court order sustaining a demurrer.

The case had a good overview of prevailing wage law in California, and what it takes to plead such a case.

In general, publicly financed construction projects are governed by the prevailing wage law. (Lab. Code, §§ 90.5, 1720-1861; see Lusardi Construction Co. v. Aubry (1992) 1 Cal.4th 976, 985-988.) With certain exceptions, a contractor on a public works project must pay workers "not less than the general prevailing rate of per diem wages for work of a similar character in the locality in which the public work is performed." (Lab. Code, § 1771.) The Department of Industrial Relations ("DIR") is responsible for determining that wage for each "craft, classification, or type of worker." (Lab. Code, §§ 1770, 1773; Cal.Code Regs., tit. 8, § 16200; Pipe Trades Dist. Council No. 51 v. Aubry (1996) 41 Cal.App.4th 1457, 1466-1467.)

Plaintiffs allege the following: plaintiffs are sheet metal workers formerly employed by defendants to work on public works projects; the legal minimum wage for workers employed on California public works projects is known as the general prevailing rate of per diem wages (Lab. Code, § 1771) or the "prevailing wage"; the proper prevailing wage classification for plaintiffs, defined by the actual work they performed on the public works, is sheet metal worker, and defendants were required to pay plaintiffs the prevailing wage for such workers as published by the DIR; the two defendants are in reality a single company owned and operated by the same owner, with a common place of business, common management, common policies and procedures and common employees; plaintiffs would routinely receive paychecks from either company, without explanation, although their supervisors and managers remained the same; the defendants employed hundreds of workers on public works projects throughout California; as a matter of common company policy, defendants did not pay prevailing wages and other wages--overtime, travel time and subsistence--to the individual plaintiffs or to hundreds of other workers who were employed by public works projects; each plaintiff, as an individual, is owed back wages for work performed for defendants on California public works; in addition to their individual claims, plaintiffs seek to represent the claims of all other current and former employees of defendants who were subject to the common policy to deny workers their lawfully earned wages. The subclasses are for each defendant and for each type of compensation due.

Plaintiffs specifically alleged the two defendants are, in fact, the same entity; they were employed by the defendants, and worked on, one or more public works projects, including but not limited to 25 specifically identified projects; the hourly wage that they each were paid; and the prevailing hourly wage that the defendants were required by law and contract to pay them.

Specifically, plaintiffs alleged they were sheet metal workers. They alleged that the work they performed was that of a sheet metal worker, and they alleged the specific work they performed. They alleged that instead of the $39 to $46 per hour rate required by California law, they received as low as $11 per hour. They also alleged that defendants failed to pay overtime at all or travel time and subsistence pay, all required by law. They set forth the dates each of the named plaintiffs worked and the specific hourly rate each received. They listed all of the various projects on which one or more of the plaintiffs worked.

Plaintiffs set forth the prevailing wage for straight time, overtime, and Sunday and holiday work for sheet metal workers for 2001, 2002, 2003, 2004, and 2005. The rates begin at $39.76 per hour (straight time wage for 2001-2002) and top out at $ 78.84 per hour for Sunday and holiday overtime in 2005. The allegations are that Gonzalez and Sanchez were paid approximately $11.50 per hour, Alcantar approximately $20.00 per hour during the last four years of his employment, Allen approximately $ 14 per hour, and Smith approximately $11 per hour during the last four years of his employment. Plaintiffs alleged that they were paid less than required prevailing wage for holiday and overtime work and travel time, and that they were not paid overtime, travel time, or required subsistence at all. They alleged that defendants required them to work "excessive hours of overtime."

The prevailing wage law requires a contractor to keep records, verified under penalty of perjury, showing "the name, address, social security number, work classification, straight time and overtime hours worked each day and week, and the actual per diem wages paid" for each employee on a public works project. (Lab. Code, § 1776.)

Plaintiffs are required only to set forth the essential facts of their case with reasonable precision and with particularity sufficient to acquaint a defendant with the nature, source and extent of his cause of action. (Youngman v. Nevada Irrigation Dist., supra, 70 Cal.2d at p. 245.) Plaintiffs are not required to plead the specific amount of damages. (Furia v. Helm (2003) 111 Cal.App.4th 945, 957.)

The amount of unpaid wages due to each plaintiff is only a matter of proof (the number of hours worked on public works projects multiplied by the difference between the lawful wage and the wages actually paid). The amount of waiting time penalties under section 203 is also a simple matter of proof; the penalty is the amount of unpaid wages for a 30-day period. (Lab. Code, § 203.) Defendants should have full and complete records dealing with this subject. "Once an employee shows that he performed work for which he was not paid, the fact of damage is certain; the only uncertainty is the amount of damage. [Citations.] In such a case, it would be a perversion of justice to deny all relief to the injured person, thereby relieving the wrongdoer from making any restitution for his wrongful act. [Citation.]" (Hernandez v. Mendoza (1988) 199 Cal.App.3d 721, 726-727.)

We thought that last part would have made the case worthy of publication.

Before it becomes even more irrelevant, here's a list we compiled of commentary about Brinker Restaurant Corp. v. Superior Court (2008) 165 Cal.App.4th 25:

• Brinker International simply announced it as a "Favorable Ruling From California Court of Appeal"
• Shaw Valenza blogged: Brinker: The Watershed Meal Period Decision Comes Down
• The UCL Practitioner quoted from the Recorder: "Workers Can't Catch a Break from Calif. Court"
• and then published this analysis: REST BREAK AND MEAL PERIOD CLAIMS AFTER MURPHY V. KENNETH COLE PRODUCTIONS.
• Cal Labor Law blogged about "Brinker Court Favorably Resolves Dispute on "Providing" Meal Breaks"
• Storm was his usual cautious self with: Brinker: Not So Fast
• California Workforce Resource blogged about how there were Meal and Rest Break Requirements Clarified By Court in Brinker v. Hohnbaum
• The Complex Litigator had Meal break class actions dealt major blow in Brinker Restaurant Corporation, et al. v. Hohnbaum, et al.
• The Retail Law Observer had a post titled after the case name.
• Class Action Defense chimed in with the long title: Labor Law Class Action Defense Cases–Brinker v. Superior Court: California Appellate Court Reverses Trial Court Order Certifying Labor Law Class Action Holding Employers Need Not “Ensure” Employees Take Meal And Rest Breaks
• First Mediation's blog had this: The Clock is Ticking … The Future of Meal and Rest Break Class Actions Remains to be Seen
• Sheppard Mullin wrote: Appellate Court Clarifies Meal and Rest Period Obligations
• Crowell Moring published this alert: Anxiously-Awaited Brinker Decision Holds That Employers Need Not Police Whether Employees Take Meal Periods
• Mofo was quiet, for obvious reasons. They said what they had to say in a lunch seminar.
• Ford Harrison issued a Legal Alert: California Court of Appeal Clarifies Meal and Rest Period Requirements for California Employees
• Wilson Sonsini put out a WSGR alert: California Appellate Court Clarifies Employers' Obligations Regarding Meal Period and Rest Breaks
• Littler told us how they really felt with: A Ray of Hope: California Court of Appeal Decides Compliance with Meal Period Obligations Requires an Opportunity, Not a Guarantee
• Gibson Dunn wrote: State Court of Appeal Holds That California Employers Need Only "Provide" Meal Periods, Not Ensure That Employees Take Them
• Jones Day had: ALERT: California Appellate Court Holds that Meal Periods Must be Made Available to Employees; California Labor Commissioner Follows Suit
• Nixon Peabody published this pdf: A major break for California employers: Court rules on longstanding meal and rest period issues.
• McGuire Woods published New Major Decision Holds California Meal Period, Rest Period, Off-The-Clock And “Time Shaving” Wage Claims “Not Amenable To Class Treatment”
• Seyfarth Shaw wrote: Court Provides Better Meal Deal For California Employers

If we didn't include your blog or firm alert on this list, you need to read up on Google's search algorithms.

Last week, the Supreme Court granted review of the pro-employer meal period opinion in Brinker Restaurant Corp. v. Superior Court (2008) 165 Cal.App.4th 25. Now comes Brinkley v. Public Storage, Inc. (2008) __ Cal.App.4th __, in which the Second District Court of Appeal also disagrees with Cicairos v. Summit Logistics, Inc. (2005) 133 Cal.App.4th 949 regarding the extent of an employer's duty to make sure employees can take their lunch breaks. The case also involves an issue regarding the need to prove intent and injury from a paystub violation. The appeal arises out of an order granting summary adjudication of three claims asserted in a certified class action pending in Los Angeles. The holding reads:

Plaintiff asserts class action and individual claims for violations of the Labor Code. He alleges that defendant, his former employer, provided paystubs containing misstatements in violation of Labor Code section 226. An employer, however, cannot be liable for misstatements on paystubs unless it knowingly and intentionally makes such misstatements and an employee suffers injury as a result. Plaintiff cannot prove either element in this case.

Plaintiff also asserts causes of action based on section 226.7 on the ground that defendant failed to ensure that plaintiff and other class members took all meal periods and rest periods they were entitled to take. California law, however, only requires that employers make available such periods, which defendant did here.

 We affirm the trial court’s order granting defendant summary adjudication with respect to plaintiff’s section 226 and section 226.7 causes of action.

On the more interesting issue concerning meal periods, the court followed White v. Starbucks Corp. (N.D.Cal. 2007) 497 F.Supp.2d 1080, 1089, while attempting to reconcile itself with Cicairos.

The court noted that it would be impossible for employers with large work forces to enforce such meal breaks. (Ibid.) It further stated that “employees would be able to manipulate the process and manufacture claims by skipping breaks or taking breaks of fewer than 30 minutes, entitling them to compensation of one hour of pay for each violation.[ ] This cannot have been the intent of the California Legislature, and the court declines to find a rule that would create such perverse and incoherent incentives.” (Id. at p. 1089.) We agree with this analysis.

The court doesn't explain how it came to the conclusion that an employer with a large work force would find it impossible to schedule enforceable meal periods any more than it finds it impossible to schedule starting and quitting times for its employees, but in so doing, it found no triable issue of material fact as to whether the employer had met its burden.

The court also weighed in on the issue of meal period timing, stating that there is nothing in the law that mandates that a meal period occur "within the first five hours" of a shift.

Plaintiff argues that California law requires defendant to provide meal periods within the first five hours of a shift. We disagree. Nothing in the applicable statutes or wage order supports plaintiff’s position.

The evidence supporting the employer was summed up as follows:

In the present case, defendant produced substantial evidence that the employer provided meal periods to plaintiff and other meal period subclass members. Defendant showed that (1) defendant had a written policy providing for meal periods; (2) plaintiff and other managers were aware of this policy; (3) defendant reprimanded employees for not taking meal periods; and (4) defendant advised plaintiff and others at a meeting that they were required to take lunch and rest breaks. Defendant also produced 21 declarations of managers who worked for defendant. Each of these managers stated that they were allowed to take meal periods at their own discretion.

In response, the court found that the Plaintiff failed to meet his burden of showing a material issue of fact, supported by admissible evidence:

Plaintiff stated in a declaration: “I rarely if ever took timely rest breaks, that is a ten (10) minute break during the middle of any four (4) hour shift. As [an] hourly Bench Property Manager employee I was generally the manager on duty and could not take breaks.” We agree with the trial court that “[t]his is not an unequivocal statement that he was not authorized or permitted to take a ten-minute break every four hours.”

This is significant for at least two reasons: (i) the court essentially holds that "provide" means precisely the same thing as "authorize and permit", and (ii) the court expects clearer evidentiary facts to be set forth with specificity in the declarations. Worse for the plaintiff, an argument that might have carried the day was deemed waived:

Plaintiff claims on appeal that he and other employees were not allowed to leave the premises or lock the office during their meal periods. Such meal periods, plaintiff contends, were effectively “on duty,” and thus entitled employees to one hour of wages per meal period. (See Bono Enterprises, Inc. v. Bradshaw (1995) 32 Cal.App.4th 968, 975, disapproved on other grounds in Tidewater Marine Western, Inc. v. Bradshaw (1996) 14 Cal.4th 557, 574.) Plaintiff, however, did not raise these facts or this argument in his brief or separate statement opposing defendant’s motion for summary adjudication. We therefore deem the argument waived. (City of San Diego v. Rider (1996) 47 Cal.App.4th 1473, 1493.)

Similar evidentiary issues plagued the plaintiff class's certified claims for rest period violations.

Plaintiff did not set forth any facts indicating that as a practical matter, he could not take rest breaks. Instead, he simply alleged that he “could not” do so, without describing any factual basis for this allegation. The closest plaintiff came was his statement that “[a]s a Bench Property Manager, I was required to be on the property at all times during my shift.” An employer’s requirement that an employee be “on the property” at all times, however, does not necessarily prohibit rest periods. Indeed, in many employment settings, there is no practical way for an employee to take a 10-minute rest period without staying on the property. Plaintiff therefore failed to raise a triable issue of material fact with respect to his rest period cause of action. (See Toigo v. Town of Ross (1998) 70 Cal.App.4th 309, 329.) ¶ Moreover, plaintiff’s statement that he “could not” take rest breaks is a conclusory allegation and does not raise a triable issue of material fact. [our emphasis]

In other words, don't just say you can't take a break. Tell the court specifically why you can't take a break, so that the court can decide whether the employer is to blame.

Finally, on the issue of paystub violations under  Labor Code § 226, the court upheld the summary adjudication order because (i) plaintiff could not prove that the violations were intentional; and (ii) the violations did not cause any sort of injury. On the first point:

Defendant met its burden of production by filing a declaration stating that the misstatement of the associated mileage rate was inadvertent and, when discovered, corrected. This evidence showed that plaintiff could not establish an essential element of his claim, namely that defendant intentionally and knowingly failed to provide required information on its paystubs. The burden of production thus shifted to plaintiff. Plaintiff, however, produced no evidence of knowing or intentional conduct by defendant.

With respect to the second element, the court distinguished Brinkley's claims with those in Wang v. Chinese Daily News, Inc. (C.D.Cal. 2006) 435 F.Supp.2d 1042, which continues to stand as a good example of how a paystub violation can cause actual injury.

Plaintiff argues that the receipt of an inaccurate paystub ipso facto constitutes injury within the meaning of section 226, subdivision (e). This interpretation, however, renders the words “suffering injury” surplusage and meaningless. Such an interpretation is disfavored. (Jones v. The Lodge at Torrey Pines Partnership (2008) 42 Cal.4th 1158, 1184.) We hold that section 226 means what it says: a plaintiff must actually suffer injury to recover damages or statutory penalties. The present case is distinguishable from Wang v. Chinese Daily News, Inc. (C.D.Cal. 2006) 435 F.Supp.2d 1042. In Wang, the paystubs stated that the employees worked 86.66 hours regardless of the number of hours actually worked, the length of the pay period, or the number of work days in the pay period. This caused the employees to suffer injury because they might not be paid for overtime work to which they were entitled and they had no way of challenging the overtime rate paid by the employer. (Id. at p. 1050.) Here, by contrast, plaintiff was not underpaid or given insufficient information to challenge the payments he received. This inadvertent technical violation of section 226 caused no resulting damages.

You can download Brinkley here in pdf or MS Word format. Mark your calendars for the last week in January, when the Supreme Court is likely to issue a "grant and hold" review order, deeming this a related case to Brinker Restaurant Corp. v. Superior Court.

The Supreme Court has scheduled oral argument for Wednesday, December 3, 2008, at 9:00 a.m., in Los Angeles, in Meyer v. Sprint Spectrum L.P. (2007) 150 Cal.App.4th 1136 (Supreme Court No. S153846). In Meyer, the Fourth District Court of Appeal held that Proposition 64 created a two-part, standing test, and applied that test to bar claims by plaintiffs who were unable to show that the defendant had attempted to enforce the unlawful and unconscionable provisions in their agreements. The formal statement of issues on review reads as follows:

Petition for review after the Court of Appeal affirmed a judgment of dismissal of a civil action. This case presents the following issues: (1) Has a person suffered "damage" within the meaning of the Consumer Legal Remedies Act (Civil Code, section 1780, subd. (a)), such as to allow that person to bring an action under the Act if that person is a party to an agreement containing an unconscionable term (see Civil Code, section 1770, subd. (a)(19)), even though no effort has been made to enforce the unconscionable term? (2) Did plaintiffs have standing to seek declaratory relief?

Given that statement of issues, the opinion might be completely inapplicable to wage and hour cases, but it might also be broad enough to affect some unfair competition claims arising from illegal employment policies that have never resulted in discipline, as long as voluntary compliance by the employees has caused a monetary loss of some sort. Believe it or not, the scenario is not that unusual. We're following the case, therefore, for that reason and because we just like the idea of someone suing Sprint and winning.

Review was granted in August 2007.

The Supreme Court has posted the following statement of issues in Brinker Restaurant Corp. v. Superior Court (2008) 165 Cal.App.4th 25:

Petition for review after the Court of Appeal granted a petition for peremptory writ of mandate. This case presents issues concerning the proper interpretation of California's statutes and regulations governing an employer's duty to provide meal and rest breaks to hourly workers.

NOTE: The statement of the issues is intended simply to inform the public and the press of the general subject matter of the case. The description set out above does not necessarily reflect the view of the court, or define the specific issues that will be addressed by the court.

It looks like anything and everything in the briefs is up for discussion.

Earlier this month, Federal District Court Judge Consuelo Marshall awarded attorneys fees of $3,515,985 in 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. The plaintiffs were awarded a total of more than $5 million after a jury and bench trial verdict in favor of the Chinese Daily News workers. In the fee order, Judge Marshall applied a multiplier of 1.5 and affirmed hourly rates of $425 to $575 per hour. We previously talked about the case in posts here and here.

The Supreme Court granted review today in Brinker Restaurant Corp. v. Superior Court (2008) 165 Cal.App.4th 25. Justice Werdegar was absent for this week's conference. The vote among the participating justices was 6-0 in favor of review.

We discussed the opinion when it was published in July; we saw this review coming,

With Brinker and Cicairos presenting such starkly contrasting views on California law, with Brinker presenting so many novel ideas regarding wage and hour claims and class actions, and with so many U.S. District Court cases disagreeing with Cicairos and each other, this case looks like an outstanding candidate for Supreme Court review.

Judging from past performance under the Schwarzenegger administration, which is undoubtedly disappointed by today's decision, the DLSE enforcement memo, on the need to change policies because of Brinker, will probably stay in place until and unless a court invalidates it.

The petition for review is fully briefed in Brinker Restaurant Corp. v. Superior Court (2008) 165 Cal.App.4th 25. Within three weeks, the court will grant review, deny review or issue an order extending their time to decide. So far, there are a dozen letters on file urging the court to review the case, including one from the California State Legislature and the Attorney General. If review is denied, there will be a lot of discussion about this case in your year-in-review seminars concerning employment litigation, wage and hour law and class action procedures. If review is granted, this will be the most highly anticipated wage and hour case since Gentry v. Superior Court (Circuit City Stores) (2007) 42 Cal.4th 443.

We got a copy of an article called Class Certification in the Age of Aggregate Proof and thought it was a good read, so we pass it along to you. You have to register at SSRN to get it, but the registration is free.

The Supreme Court has denied petitions for review and depublication in Amaral v. Cintas Corporation No. 2 (2008) 163 Cal.App.4th 1157. Amaral addressed the constitutionality and application of a living wage ordinance enacted by the City of Hayward and incorporated into its municipal contracts, as well as several issues regarding penalties, fees and costs in wage and hour cases. Cintas was the petitioner seeking review. The Supreme Court docket reflects that both sides sought depublication or partial depublication, and each opposed the other's depublication requests. There were depublication requests and oppositions to depublication requests filed by various non-parties, too. We discussed the opinion in a June post that can be found at this link.

According to its most recent SEC filing, Darden Restaurants paid $700,000 to settle another wage and hour class action filed by a former Olive Garden server in California. The employee alleged that Olive Garden had failed to properly make minimum shift payment and pay minimum wage, and that Olive Garden had failed to provide itemized wage statements and to timely pay employees such wages upon termination. Darden previously $9.5 million settle two class action lawsuits brought by its California Red Lobster and Olive Garden employees.

Here's a novel way to improve your bottom line:

1. Hire illegal aliens
2. Cheat them out of their wages
3. Lose your wage case
4. Sue the Labor Commissioner for giving illegal aliens a forum for collecting wages
5. Profit.

Sooner or later, we'll find out whether it works. Sushi Sharon filed its lawsuit against the Labor Commissioner as a class action, on behalf of “all California employers who are presently subject to or in the future may be subject to an administrative action before the California labor commissioner in which an award of wages is sought by a person not illegally authorized to work in the United States.”

We're assuming that the double-negative is a typo.

It will be interesting to see how they ascertain such a class. How many employers are going to line up to admit that they hire undocumented workers, entitling them to share in the fruits of the case as "California employers who ... in the future may be subject to an administrative action before the California labor commissioner in which an award of wages is sought by a person not [legally] authorized to work in the United States”?

The MCLE article in the July/August edition of Los Angeles Lawyer, Confirmation Class, by Aashish Desai, discusses the process of getting your class action settlement approved. Once you finish reading it, you can take a test and get an hour of MCLE credit.

The Supreme Court today denied the petition for review in Bufil v. Dollar Financial Group, Inc. (2008) 162 Cal.App.4th 1193, an opinion regarding meal period and rest period claims and class certification. Bufil followed Cicairos v. Summit Logistics, Inc. (2005) 133 Cal.App.4th 949, and contained several passages that are difficult to reconcile with last week's opinion in Brinker Restaurant Corp. v. Superior Court of San Diego County (Hohnbaum) (2008) ___ Cal.App.4th ___. We previously discussed the case in a post that can be found at this link.

The repackaged opinion in Brinker Restaurant Corp. v. Superior Court (2008) __ Cal.App.4th __ was finally published today. The opinion is 53 pages long, and as interesting as it is, I'm going to have to pass on the opportunity to do an in-depth analysis for the same reason that I missed a wage and hour class action mediation today - my son's birth. The opinion is just as pro-employer and just as adverse to class action litigation as the original opinion, which was vacated shortly after a petition for review was filed last October. The case can be summed up with the following excerpts from the opinion:

In this action involving alleged violations of laws governing rest and meal breaks, we are presented with the following question:  Did the trial court err in certifying this matter as a class action without first determining the elements of plaintiffs and real parties in interest Adam Hohnbaum, Illya Haase, Romeo Osorio, Amanda June Rader and Santana Alvarado's (collectively plaintiffs) claims against defendants Brinker Restaurant Corporation, Brinker International, Inc., and Brinker International Payroll Company, LP (collectively Brinker)?

Reconsidering the matter following a transfer from the California Supreme Court and our vacating of the original opinion in this matter, we first recognize that "in light of the remedial nature of the legislative enactments authorizing the regulation of wages, hours and working conditions for the protection and benefit of employees, the statutory provisions are to be liberally construed."  (Industrial Welfare Com. v. Superior Court (1980) 27 Cal.3d 690, 702.)   We also recognize mandatory rest and meal breaks have "have long been viewed as part of the remedial worker protection framework" designed to protect workers' health and safety.  (Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1105, 1113 (Murphy).)  In addition, we note that in construing the applicable statutes and regulations, we look to the plain language of the laws and interpret them in a manner consistent with the Legislature's intent.  (Fitch v. Select Products Co. (2005) 36 Cal.4th 812, 818.)

With these principles in mind, we conclude the class certification order is erroneous and must be vacated because the court failed to properly consider the elements of plaintiffs' claims in determining if they were susceptible to class treatment.  Specifically, we conclude that (1) while employers cannot impede, discourage or dissuade employees from taking rest periods, they need only provide, not ensure, rest periods are taken; (2) employers need only authorize and permit rest periods every four hours or major fraction thereof and they need not, where impracticable, be in the middle of each work period; (3) employers are not required to provide a meal period for every five consecutive hours worked; (4) while employers cannot impede, discourage or dissuade employees from taking meal periods, they need only provide them and not ensure they are taken; and (5) while employers cannot coerce, require or compel employees to work off the clock, they can only be held liable for employees working off the clock if they knew or should have known they were doing so.  We further conclude that because the rest and meal breaks need only be "made available" and not "ensured," individual issues predominate and, based upon the evidence presented to the trial court, they are not amenable to class treatment.  Finally, we conclude the off-the-clock claims are also not amenable to class treatment as individual issues predominate on the issue of whether Brinker forced employees to work off the clock, whether Brinker changed time records, and whether Brinker knew or should have known employees were working off the clock.  Accordingly, we grant the petition and order the superior court to vacate its order granting class certification and enter a new order denying certification of plaintiffs' proposed class.

You can download the full text of Brinker Restaurant Corp. v. Superior Court here in pdf or Word format. If you do any wage and hour work, or any class action work, this is must reading until and unless the Supreme Court grants review.

Glancing over the opinion, I couldn't help but think that if this had been the first appellate decision in California concerning wage and hour class actions, there might never have been a second wage and hour class action. However, it was not the first, and Brinker disagrees with many prior opinions, most specifically, Cicairos v. Summit Logistics, Inc. (2005) 133 Cal.App.4th 949, 962-963, which it discussed at length, and Bufil v. Dollar Financial Group, Inc. (2008) 162 Cal.App.4th 1193, which it did not even mention, and more generally, a string of cases which promote class actions as an efficient way to resolve wage and hour disputes and a string of cases which discuss the remedial nature of wage and hour laws in California. With Brinker and Cicairos presenting such starkly contrasting views on California law, with Brinker presenting so many novel ideas regarding wage and hour claims and class actions, and with so many U.S. District Court cases disagreeing with Cicairos and each other, this case looks like an outstanding candidate for Supreme Court review.

Until last month, no California appellate decision had construed the requirements of any municipality’s living wage ordinance, or addressed the constitutional challenges to any such ordinances. Now, however, most of the defenses commonly raised when employers challenge living wage ordinances have been rejected in an opinion published last month by the First District Court of Appeal in Amaral v. Cintas Corporation No. 2 (2008) __ Cal.App.4th __. Amaral addressed the constitutionality and application of a living wage ordinance enacted by the City of Hayward and incorporated into its municipal contracts. Defendant Cintas entered into such contracts with the City, but did not provide the minimum wages or benefits required by the ordinance to employees who worked in the company’s stockroom or laundry production facilities, which are located outside the City of Hayward. Some of those employees filed a class action seeking the living wages due, benefits, civil penalties and waiting time penalties. On cross-motions for summary judgment, the trial court found that Cintas violated the ordinance, which was enforceable; that it breached its contracts with the City, and violated the Unfair Competition Law and numerous Labor Code provisions. The court awarded back wages and unpaid benefits, imposed penalties under the Private Attorneys General Act of 2004 and awarded plaintiffs statutory attorneys’ fees and costs. However, the trial court found that, prior to the determination of its legal duties under the new ordinance, Cintas’s conduct was not “willful” so as to justify waiting time penalties. The Court of Appeal affirmed all of the trial court's rulings. The opinion is most noteworthy for its analysis of the constitutionality and vagueness attacks on the living wage ordinance, but for wage and hour lawyers, its 60+ pages were full of interesting analysis of wage and hour issues.

At issue was Hayward's Living Wage Ordinance, which provides:

Service contractors subject to this Ordinance shall pay their employees a wage of no less than eight dollars ($8.00) per hour, if health benefits are paid to the employees, or nine dollars and twenty-five cents ($9.25) per hour if no such health benefits are paid.” (Hayward Mun. Code, § 2-14.020, subd. (c).) For purposes of the ordinance, an employee is defined as “any individual employed by a service contractor on or under the authority of any contract for services with the City . . . .” (Hayward Mun. Code, § 2-14.010, subd. (c).) Considering these two provisions together, the plain language of the ordinance requires contractors to compensate every individual they employ to perform work on or under a service contract with Hayward with a wage of at least $9.25 per hour, or $8.00 per hour if the employer provides health benefits.

The court first disposed of Cintas's constitutional arguments:

Cintas’s first constitutional challenge to the LWO rests on article XI, section 7 of the California Constitution, a provision which Cintas contends prohibits attempts by a municipality to exercise power outside its territorial boundaries. However, the language of the provision and cases interpreting it make it clear the prohibition applies only where a local government exercises its regulatory or police power, as opposed to its contracting or proprietary power. (Burns Internat. Security Services Corp. v. County of Los Angeles (2004) 123 Cal.App.4th 162, 168.
...
Cintas also argues the LWO is so vague that it violates due process under the federal and state constitutions. “[D]ue process of law is violated by ‘a statute which either forbids or requires the doing of an act in terms so vague that men of common intelligence must necessarily guess at its meaning and differ as to its application.’ [Citations.]” (Britt v. City of Pomona (1990) 223 Cal.App.3d 265, 278.) It is true that the terms of the LWO do not spell out precisely how the ordinance will apply in situations where contractors perform work outside of Hayward or commingle an employee’s contract-related work with work for other customers. However, due process “does not . . . require that statutes must be drafted with the precision of a laser.” (Personal Watercraft Coalition v. Marin County Bd. of Supervisors, supra, 100 Cal.App.4th at p. 138.) “ ‘ “Reasonable certainty is all that is required. . . .” [Citation.] . . .’ [Citations].”

Cintas also contended that the plaintiff class members did not fit the LWO’s definition of employees because they rendered a service to Cintas, not to the City. The court noted that this argument was waived because it was not presented to the trial court, but went on to add that "[i]t is also nonsensical. ... When they laundered and maintained uniforms used by the City of Hayward, plaintiffs were carrying out Cintas’s obligations under service contracts with the City. Accordingly, these employees were working “on or under the authority of” a service contract."

The court rejected claims that the employees lacked a private right of action to enforce the living wage ordinance.

This issue has been addressed by courts of appeal in the analogous context of California’s prevailing wage law. (Lab. Code, §§ 90.5, 1720-1861.) This law requires that all contractors and subcontractors working on a public works contract must pay their employees the prevailing wage rate for work performed on the contract. (Lab. Code, §§ 1771, 1774.) Although the Labor Code imposes a statutory duty to pay prevailing wages and the prevailing wage law is incorporated into public works contracts, our Supreme Court has not yet decided whether employees have a right to enforce the prevailing wage law absent a specific provision in their employment contracts. (Department of Industrial Relations v. Fidelity Roof Co. (1997) 60 Cal.App.4th 411, 425 (Fidelity Roof); see Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 969, fn. 5.) Two appellate court decisions have considered the issue, however, and both conclude aggrieved employees are third party beneficiaries who may sue to enforce a contractor’s promise to pay prevailing wages.

Cintas also failed in its claim that the enforcement of Labor Code penalties under the Private Attorneys General Act (PAGA), Labor Code § 2698 et seq., constituted an unlawful retroactive application of a new statute. PAGA went into effect on January 1, 2004. PAGA allowed aggrieved employees to recover Labor Code penalties directly from their employers, whereas only the Labor Commissioner could do so before. Because PAGA did not become effective until after plaintiffs filed their lawsuit, Cintas argued its provisions could not be applied retroactively. The trial court and the Court of Appeal disagreed.

In this case, the only effect of the new statute was to allow private parties—class members who are present or former employees of Cintas—to recover penalties that previously could have been recovered only by the state Labor Commissioner. This change did not increase Cintas’s liability in any way, because the Labor Commissioner could have recovered the same penalties for Cintas’s violations before the passage of PAGA. It does not matter that Cintas’s wrongful conduct occurred before PAGA was enacted because the legal consequences of this conduct remained the same. “A statute is retroactive if it substantially changes the legal effect of past events. [Citations.] A statute does not operate retroactively merely because some of the facts or conditions upon which its application depends came into existence prior to its enactment. [Citations.]” (Kizer v. Hanna (1989) 48 Cal.3d 1, 7-8.) Nor does it matter that Cintas may have expected to be held accountable for penalties to the Labor Commissioner instead of to plaintiff class members. “A statute does not operate ‘retrospectively’ merely because it is applied in a case arising from conduct antedating the statute’s enactment [citation] or upsets expectations based in prior law. Rather, the court must ask whether the new provision attaches new legal consequences to events completed before its enactment.” (Landgraf v. USI Film Products, supra, 511 U.S. at pp. 269-270, fn. omitted.) Because PAGA did not increase Cintas’s liability for Labor Code penalties, its application in this case was not retroactive.

The Court of Appeal also found support for this position in the Supreme Court’s decision in Californians for Disability Rights v. Mervyn’s, LLC (2006) 39 Cal.4th 223, regarding the effect of Proposition 64's amendment of the standing provisions of the unfair competition law.

The Court upheld the trial court's findings of violations of Labor Code § 223: “Where any statute or contract requires an employer to maintain the designated wage scale, it shall be unlawful to secretly pay a lower wage while purporting to pay the wage designated by statute or by contract.”

The court addressed the meaning of "initial" violations under penalty provisions which increase for "subsequent violations". These statutes, which are substantially identical, provide for civil penalties as follows: "(a) For any initial violation, [fifty dollars ($50)] for each failure to pay each employee. (b) For each subsequent violation, or any willful or intentional violation, [one hundred dollars ($100)] for each failure to pay each employee...." The employees asserted that a violation occurs every pay period that an employee’s wages are underpaid, and that the first underpayment constitutes an “initial” violation, and all future pay periods are “subsequent” violations, penalized at the higher rate. Cintas argued that an employer could not be penalized at the higher rate for subsequent violations until it received some notice that its previous underpayment was a violation of the law. The court agreed with a different approach set forth in a February 22, 1984 DLSE memorandum.

an “initial” violation is “[a]ny violation occurring [after the penalty becomes law], regardless of whether penalties were assessed,” whereas a “subsequent” violation is “[a]ny violation which occurs after notice of a previous violation, regardless of whether penalties were assessed.” In describing how an investigating deputy should calculate penalties, the memorandum states: “If the violation is an initial violation, the citing officer will assess a penalty of $50 per each employee per each pay period. [¶] If the violation is a subsequent violation, the citing officer will assess a penalty of $100 per each employee per each pay period.”
...
The statutes state that a penalty for an initial violation is to be imposed “for each failure to pay each employee.” (§§ 210, subd. (a), 225, subd. (a).) This language conveys two things. First, by specifying a $50 penalty must be imposed “for each failure to pay each employee” (italics added), the language contemplates that an “initial violation” can result in more than one penalty at the $50 level. In other words, multiple $50 penalties can result from a single initial violation. The only way this could conceivably occur is if penalties are assessed at each pay period.
...
Until the employer has been notified that it is violating a Labor Code provision (whether or not the Commissioner or court chooses to impose penalties), the employer cannot be presumed to be aware that its continuing underpayment of employees is a “violation” subject to penalties. However, after the employer has learned its conduct violates the Labor Code, the employer is on notice that any future violations will be punished just the same as violations that are willful or intentional—i.e., they will be punished at twice the rate of penalties that could have been imposed or that were imposed for the initial violation. Accordingly, we conclude the trial court properly assessed penalties against Cintas under sections 210 and 225.5 at the rate of $50 per pay period per class member.

The court rejected Cintas's claim that the trial court incorrectly determined that it lacked discretion not to award civil penalties (as opposed to discretion to reduce them):

Sections 210 and 225.5 state that “every person who” fails to pay wages (§ 210) or unlawfully withholds wages due (§ 225.5) “shall be subject to a civil penalty” as described in the statute. The parties disagree about whether the trial court was required to impose penalties under sections 210 and 225.5, or whether it had discretion to forgo imposing any penalties because Cintas had a good faith dispute about whether wages were due. No authority brought to our attention supports Cintas’s claim of legal error. Cintas argues that a trial court imposing PAGA penalties can exercise its discretion based only on the considerations mentioned in section 2699, subdivision (e)(2). This argument rests on a misunderstanding of the nature of PAGA penalties: As we have explained, they are mandatory, not discretionary.

The court rejected Cintas's claims that the $258,900 penalty assessment was confiscatory.

The court received evidence that Cintas’s parent company had $2.81 billion in sales and $272 million in profits during fiscal year 2004. The penalty award is certainly not “astronomical” in comparison. (See, e.g., City and County of San Francisco v. Sainez (2000) 77 Cal.App.4th 1302, 1318-1319 [approving $663,000 penalty for housing code violations, which represented about 28.4 percent of the defendants’ net worth].) The penalty award, which totaled less than one-third of plaintiffs’ $804,783 damage award, was also proportional to Cintas’s misconduct. (See Kinney v. Vaccari (1980) 27 Cal.3d 348, 356 [punitive assessment should be proportional to defendant’s misconduct, sufficient to achieve penalty’s deterrent purpose, and not constitutionally excessive].)

Some of the statutory penalties sought by the plaintiffs, including waiting time penalties under section 203 and paystub penalties under section 226, are imposed only if an employers’ violation was “willful” or “knowing.” The trial court concluded that Cintas’s conduct was not “willful,” and it declined to impose or increase penalties under all provisions that include a “willfulness” component. The Court of Appeal followed Barnhill v. Robert Saunders & Co. (1981) 125 Cal.App.3d 1 and decided that the failure to pay wages was not “willful” because the legal duty to pay them was unclear at the time of the violation.

Even more so than in Barnhill, the legal obligations imposed on employers by the LWO were unclear at the time of Cintas’s violations. As Cintas’s vigorous defense of this class action has made clear, numerous arguments exist concerning the constitutionality of the LWO and its proper interpretation.

In so holding, the court distinguished the facts of this case from those in Armenta v. Osmose, Inc. (2005) 135 Cal.App.4th 314, where the presumption of good faith was outweighed by evidence that the employer was in fact aware that its employees were not being fully compensated for their time, and Road Sprinkler Fitters Local Union No. 669 v. G & G Fire Sprinklers, Inc. (2002) 102 Cal.App.4th 765, where the employer’s legal obligation was clear and substantial evidence supported the lower court’s finding that the employer had acted in bad faith.

The court passed on the opportunity to address whether interest could be awarded on the restitutionary relief under the Unfair Competition Law claims pursuant to Civil Code § 3287(a), which provides for interest on an award of “damages certain, or capable of being made certain by calculation.” An award of interest was also authorized under the Labor Code for the wage claims, so the decision would have no practical effect on the judgment.

Finally, the court upheld the trial court's award of fees to plaintiffs’ attorneys based upon a lodestar multiplier of 1.65, which was less than the multiplier of 2.0 requested by the plaintiffs.

There certainly is a change that the Supreme Court will review this opinion, and the PAGA and other penalty issues add to the likelihood of review. Until and unless the case gets reviewed or depublished, however, it puts an end to the strongest and most frequently asserted defenses to living wage ordinances in California. You can download Amaral v. Cintas Corporation No. 2 here in pdf or word format.

From the Associated Press:

(AP) - A judge has ruled against Wal-Mart in a class-action lawsuit, saying the discount retailer violated state labor laws 2 million times by cutting worker break time and "willfully" allowing employees to work off the clock.

Dakota County Judge Robert King Jr. on Monday ordered Wal-Mart to pay $6.5 million in compensatory damages, but Wal-Mart could end up paying more than $2 billion after a jury in October considers civil penalties and punitive damages.

We've been told that there are several Superior Court judges, particularly in the Bay Area, who believe that a so-called "claims made" class action settlement should never be approved in a wage & hour case. If there was a Bible for such believers to follow, one of the Gospels would be the original opinion written by U.S. District Court Judge William Alsup in Kakani v. Oracle Corp. (N.D. Cal 2007) 2007 U.S. Dist. LEXIS 47515; 12 Wage & Hour Cas. 2d (BNA) 1308; 154 Lab.L.Rep. (CCH) 35,310.

Judge Alsop initially rejected a class action settlement in that case, a nationwide class involving "about ten job classifications (although the complaint remained unchanged and narrower)". Only after dramatic changes to the structure of the agreement did the parties obtain court approval for their deal. Why did he deny preliminary approval at first? Let him count the ways:

“Under the settlement, all wage-and-hour rights (not just overtime) of putative class members would be completely extinguished and replaced by an exclusive claims procedure. By expressly obligating itself only on a "claims-made" approach, Oracle would pay only those who submit claims up to a total of nine million dollars less all fees and expenses. Counsel wants $2.25 million in attorney's fees and $75,000 in expenses. In addition to their own shares of the settlement, $45,000 total would be paid to the three named plaintiffs as "incentive payments." Costs of administration would also be deducted. Because it will be a "claims-made" settlement, there will be no residue. All unclaimed amounts will revert to Oracle. Counsel now desire preliminary approval under Rule 23(e) and recommend notice be sent by mail to last known addresses of 1500 or so workers granting them a brief period for filing claims -- after which all of their claims and rights would be forever barred, even as to those who never receive actual notice or submit a claim.”

The release also forfeited "any and all claims that were asserted or could have been asserted" (language we've seen many a defendant try to negotiate) in the action. Judge Alsop explained that he was “at a loss to understand how counsel can portray the release as benignly as they have.” Instead, Judge Alsop used words like "draconian" and "unfair to class members" and rejected the agreement, but not before first pointing out that, in his opinion, all of the flaws in the deal should have been caught by the class counsel before they ever entered his courtroom.

“Virtually none of the foregoing problems were raised by counsel, illustrating the sad fact that once a collusive settlement is reached, counsel have no incentive to critique their joint proposal. The district judge must dig through the file on his or her own. No doubt, this Court has missed some further issues not having an advocate to call out the weak spots. … Preliminary approval is DENIED.”

In Kakani v. Oracle Corp. (N.D. Cal. 2007) 2007 U.S. Dist. LEXIS 58740, 154 Lab.Cas. (CCH) P35,323, the settlement was preliminarily approved.

For all of the above-stated reasons, plaintiffs' and defendant's motion for preliminary approval of the proposed settlement agreement is GRANTED, subject to the following conditions. First, the notice to class members must include a statement that named plaintiffs will be eligible to receive payments of up to 25% of the $ 15,000 paid to the California Labor Workforce Development Agency under the California Private Attorneys General Act and that these amounts will be over and above what the absent class members will receive. Second, after the deadlines to submit claims and opt-out notices have passed, class counsel and the claims administrator are ordered to submit a list of all class members by name, divided into categories of those who opted in, those who opted out, and those whose notices were returned undeliverable. At this time, the Court reserves the issue of final approval of the settlement agreement. In no way should the notice suggest that the Court has given approval to the settlement; instead the notice should state that the Court invites class members to comment on the adequacy of the settlement and it should state that the settlement represents about 15% of the maximum that might be recovered if the case went to trial. Counsel must submit a copy of the notice including the above-mentioned amendments no later than AUGUST 13, 2007.

The court later characterized the process like this:

There was no meeting of the minds as to the scope of the release -- defendants contended that it would bar all future state-law claims throughout America, while plaintiffs contended that it would only bar California and FLSA claims. The settlement also was on a "claims-made" basis. Oracle would make available a pool of nine million dollars from which all claims would be paid. Any residue would revert to Oracle. Regardless of the claims paid, however, plaintiffs' counsel would have received $ 2.25 million in fees (25% of the total amount theoretically "available"). Notice to class members would have been inadequate under the first settlement, and the period given to putative class members to learn about the case and to opt out or file claims was far too short. The settlement allowed only 35 days from the date of mailing of notice to file objections and opt-out notices, and 45 days to submit claims. The proposed notice was nearly incomprehensible, with its tangle of subclasses, inattention to the serious jurisdictional issues in the state-law claims, and general legalese rhetoric. Even class members who received no notice at all or received late notices because of delivery problems would lose everything and recover nothing. Under the original agreement, California claimants would have received at least twice as much as non-California claimants. No cogent reason was given to justify the disparity in treatment between Californian claimants and Non-Californian claimants. In addition, class members would forfeit about 87.7% of their maximum claims, settling for nine million dollars, while the maximum recovery was about $ 52.7 million. In short, the proposal was collusive. Oracle would have wiped out its national wage-and-hour liabilities off its books, counsel would have received a bonanza, and a vast number of absent class members would have received little or nothing in exchange for forfeiture of their actions. The proposal was rejected at the threshold by an order dated June 19. An amended settlement agreement was submitted on June 29, and a further hearing was held on July 5. Some of the Court's concerns had been addressed, but others remained. The parties agreed to submit a further amended settlement agreement, which was received on July 16. An order dated August 2 found that the parties had remedied many of the problems outlined above and had reached a settlement that was sufficiently fair and reasonable to warrant preliminary approval. Preliminary approval of the three subclasses was granted.

At the time of the final hearing, the $2.25 million in requested attorney's fees were reduced significantly. Kakani v. Oracle Corp. (N.D. Cal. 2007) 2007 U.S. Dist. LEXIS 95496:

In this action alleging violations of California labor laws and the federal Fair Labor Standards Act, plaintiffs move for approval of award of attorney's fees and costs as set forth in the second amended settlement agreement. The excessive amount of attorney's fees requested, however, cannot be justified. Accordingly, the motion for attorney's fees and costs is approved in the lower amount of $ 664,000 for fees and $ 75,000 for costs.

Any time you are negotiating the fine points of a class action settlement agreement, and you are certain that the defendant is overreaching, be sure to open up a copy of the opinions in Kakani v. Oracle Corp. before you agree to terms that seem too sweet for the defense. There's a good chance your judge is going to do the same thing when considering approval of the settlement and the fees.

A collective bargaining unit's attorneys can represent employees (who are not members of the unit) in a wage and hour class action even if the unit is subsidizing the litigation costs, as long as the attorneys' representation complies with Rule 3-310's disclosure and consent requirements. Sharp v. Next Entertainment, Inc. (2008) __ Cal.App.4th __.

The Writers Guild of America (the Guild) had reason to believe that reality television production companies and television networks violated wage and labor laws.  The Guild held meetings during which employees of reality television discussed the purported violations.  Some who participated in the meetings, along with other reality television employees, agreed to be the named plaintiffs in two wage and labor law class action lawsuits against the production companies and the networks (collectively defendants).  Thereafter, the trial court denied defendants’ motion to disqualify plaintiffs’ counsel, but did disqualify some plaintiffs from acting as representatives of the putative classes. 

On appeal from the trial court’s order denying the disqualification order, defendants rely on California Rules of Professional Conduct of the State Bar, rule 3-310 (Rule 3-310) to contend that the trial court erred in failing to disqualify counsel for plaintiffs.  This contention is based upon the facts that the firm who represented the Guild was also counsel for plaintiffs, the Guild paid for plaintiffs’ attorney fees and costs, and the litigation was conceived by the Guild as part of its organizing campaign, a campaign which many plaintiffs supported.  Defendants use many of the same facts to further contend that the trial court erred in failing to disqualify all plaintiffs from their roles as representatives of the uncertified classes.

In the published portion of this opinion (pts. I., II., III.A. & IV.), we hold that the trial court did not err in failing to disqualify class counsel and the trial court did not err in refusing to disqualify all plaintiffs from acting as the named representatives of the putative classes.

In their cross-appeal, plaintiffs appeal from the trial court’s orders directing their counsel to ask them certain questions relating to their association with the Guild.  In the unpublished portion of this opinion (pt. III.B.), we hold that the trial court’s orders were vague.

Thus, we affirm in part and reverse in part.

Santa Clara Superior Court Judge Jack Komar has certified a class of approximately 300 technical writers currently or formerly employed by Sun Microsystems, but has ordered the class counsel to find a second class representative. The class action seeks to recover overtime and meal period pay for a group of employees classified by Sun Microsystems as exempt under Labor Code § 515.5 and its computer professional's exemption.

A reader asked if there were any recent federal court decisions applying Pioneer Electronics (USA), Inc. v. Superior Court (2007) 40 Cal.4th 360, to wage and hour class actions. There are two unpublished District Court decisions that we've seen:

Salazar v. Avis Budget Group, Inc. (S.D. Cal. 2007) 2007 WL 2990281 (defendant ordered to disclose class members' contact information after an “opt-out” notice given); and Hill v. Eddie Bauer (C.D. Cal. 2007) 242 F.R.D. 556, 563, 2007 U.S. Dist. LEXIS 35940 (order disclosing class member identities, including names and addresses).

In Salazar, Magistrate Judge McCurine made the obvious, yet still useful observation that the employer's declaration of concern for class members' privacy rights was "actually driven more by [the employer's own] self-interest."

Pioneer Electronics was also cited with favor in in Bible v. Rio Props., Inc. (C.D. Cal. 2007) 246 F.R.D. 614, 2007 U.S. Dist. LEXIS 80017, but only for general propositions regarding witness identification and balancing privacy interests. It was neither a class action nor a wage and hour case.

Most California casewatchers are focusing their attention this week on In re Marriage Cases. Wage and hour lawyers, however, are also busy talking about Bufil v. Dollar Financial Group, Inc. (2008) __ Cal.App.4th __.

Do you remember Alvarez v. May Department Stores Co. (2006) 143 Cal.App.4th 1223, the case that held collateral estoppel could apply to prevent future class actions once a court, any court, denies certification of a class? Well, what if the certification motion was denied because the group was too big and its putative members were too different to warrant certifying a class. Can you file a new class action and seek to pursue a smaller class, chosen from within the larger class that was denied certification? San Francisco Judge Peter Busch thought you could not. The Court of Appeal in Bufil suggests that you can and perhaps should.

On the heels of the denial of class certification against employer and respondent Dollar Financial Group, Inc. (Dollar), in a suit alleging violation of meal and rest break labor laws, appellant Caren Bufil pursued class certification in a new suit which significantly narrowed the class definition. Relying on the doctrine of collateral estoppel, the trial court granted judgment on the pleadings in favor of Dollar. Also relying on this doctrine as well as traditional concerns relevant to the issue of certification, the court denied Bufil’s motion for class certification. We reverse.

The trial court's two errors were (i) applying collateral estoppel to the earlier certification denial in another case and (ii) assuming that each class member would have to testify about their own understanding about meal period waivers.

Here the trial court denied the motion for class certification on the same basis it granted judgment on the pleadings—that is, on collateral estoppel grounds. Continuing, the court additionally indicated that liability as to the class involved substantial and numerous individual factual questions, giving, as the sole example, each employee’s understanding of his or her rights under the meal plan. Elaborating, the court explained: “Similar to the class in Nguyen, employees would have to individually testify as to their perceptions of their rights in signing or refusing to execute the meal agreement without suffering adverse consequences. These issues apply to both the rest period and meal period components of the class, thus the individual issues predominate over Plaintiff’s [claim that common issues predominate].” Finally, the court held that Bufil did not prove the existence of an ascertainable class of employees who purportedly missed off-duty rest periods.

The meal period waiver issue is one we often see. Trial courts don't seem to buy it, but defendants always argue that you can't litigate meal period claims as a class because they will be forced to frogmarch every single class member into court to cross-examine them to determine whether their intent to waive a meal period was the same as every other employees' intent. Bufil busts this myth.

The court made an erroneous assumption that each class member would need to testify as to his or her understanding of the meal period waiver. This was an issue in Chin/Nguyen but it is irrelevant to Bufil’s lawsuit. Bufil’s theory is that the two circumstances—single employee on duty or providing training—do not come within the “nature of the work” exception set forth in Wage Order No. 4-2001, so as to permit an “on-duty” meal period. This is a legal question concerning the liability of Dollar to each putative class member. Bufil is not concerned with whether a given employee signed a meal period waiver, does not assert that anyone was forced to sign anything, and does not attack the execution of the agreements or the intent and understanding of the parties regarding the same. Her position is that either the putative class employees were denied an off-duty meal for an improper purpose, or they were not. Under Bufil’s structuring of the case, the court could identify the class from Dollar’s records and determine liability as a matter of law. In this case Bufil proposes a class that on its face attempts to correct flaws identified in the Chin/Nguyen lawsuit resulting in denial of certification. The trial court here erred in ruling that the class proposed by Bufil involved “the same class problems involving liability” as were implicated in Chin/Nguyen, and thus erroneously concluded that issue preclusion should bar her quest for class certification. (See OShana v. Coca-Cola Bottling Co. (N.D. Ill. 2005) 225 F.R.D. 575, 579.)

The court also pointed out that one could ascertain a class of rest period claimants even though there are no records kept for the rest periods.

Arguing that the proposed class was not ascertainable as to rest period claims, Dollar states there are no records identifying whether any employee missed a rest period and it has no obligation to maintain such records. There is no disagreement on these points, but they are not pertinent to the issue of ascertainability because Bufil has defined a class precisely identified by Dollar records.

We loved this language:

Dollar does not notify its employees that they are authorized and permitted to take a 10 consecutive minute off-duty rest break every four hours. Nor does Dollar instruct supervisory personnel to take steps to provide employees with the opportunity to take the required rest breaks. The onus is on the employer to clearly communicate the authorization and permission to its employees. (citing Cicairos v. Summit Logistics, Inc. (2005) 133 Cal.App.4th 949, 963.)

The myth that class actions are not superior ways to adjudicate wage and hour claims is also busted.

The trial court made a passing, perfunctory reference to superiority in its order denying class certification, finding that plaintiffs did not establish that the class action is a superior method for resolving the litigation. Courts regularly certify class actions to resolve wage and hour claims. (See Pressler v. Donald L. Bren Co. (1982) 32 Cal.3d 831, 837; see also Sav-On, supra, 34 Cal.4th at p. 340; Morillion v. Royal Packing Co. (2000) 22 Cal.4th 575, 579-580; Earley v. Superior Court (2000) 79 Cal.App.4th 1420, 1423.) In this arena the class action mechanism allows claims of many individuals to be resolved at the same time, eliminates the possibility of repetitious litigation and affords small claimants with a method of obtaining redress for claims which otherwise would be too insignificant to warrant individual litigation. (Sav-On, supra, 34 Cal.4th at p. 340.)

Bufil was originally issued in April as an unpublished opinion, but the California Employment Lawyers Association prevailed Tuesday in a request to have the opinion published. You can download the full text of the opinion here in pdf or word format.

The second round of oral argument in Brinker Restaurant Corporation v. Hohnbaum is now set for May 13, 2008, before the Fourth District Court of Appeal, Division One, in San Diego. The latest developments:

Petitioner Brinker Restaurant corporation's request for leave to file a supplemental brief filed April 22, 2008, is GRANTED. The supplemental brief is deemed filed this date. Real parties in interest shall have seven days from the date of this order to file a supplemental reply brief addressing the issues raised in the supplemental brief. Real parties in interest Adam Hornbaum, Illya Haasf, Romeo Osorio, Amanda June Rader, and Santana Alvarado's motion and requests for judicial notice, filed on December 17, 2007 and April 22, 2008, are GRANTED in part and DENIED in part. Real parties in interest's motion requesting we take judicial notice of the depositions of plaintiffs' experts Jon A Krosnick and Harold S. Javitz is denied. Real parties in interest's request we take judicial notice of a February 16, 1999 Division of Labor Standards Enforcement (DLSE) Opinion Letter, a September 17, 2001 DLSE Opinion Letter, Industrial Welfare Commission Wage Order 5-76, a June 14, 2002 DLSE Opinion Letter and excerpts from the DLSE Enforcement Policies and Interpretations Manual is denied as unnecessary as these are items that we are entitled (but not required) to rely upon as authority, without having to formally take judicial notice. The denial as unnecessary of real parties in interest's request we take judicial notice of these items should not be construed as meaning this court will not consider them in ruling of the petition for writ of mandate in this matter. Real parties in interest's request we take judicial notice of the August 28, 2000 Senate Floor Bill Analysis and September 9, 2000 Assembly Floor Bill Analysis for Assembly Bill No. 2509 is granted.

Since then, several letters were written to the court informing the panel about the depublication of Bell v. Superior Court (H.F. Cox, Inc.), and the petitioner has filed a supplemental brief concerning the Brown v. Federal Express Corp. case.

We've been following the case closely, and have discussed it in several prior posts, including here and here.

In Alan v. American Honda Motor Co. Inc. (2006) 131 Cal.App.4th 886, the Supreme Court reviewed the dismissal of an appeal and considered a discreet 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. They concluded that it did not, and so the case was remanded to the Court of Appeal for a review on the merits. On remand, in an unpublished opinion, they still ruled against the plaintiffs. Alan v. American Honda Motor Co. Inc. (2008 Cal. App. Unpub. LEXIS 829).

As explained in Massachusetts Mutual, we will not disturb a trial court ruling on class certification which is supported by substantial evidence unless (1) improper criteria were used; or (2) erroneous legal assumptions were made. (Massachusetts Mutual, supra, 97 Cal.App.4th at p. 1287.)

In this case, we conclude that the trial court finding that Alan did not make a sufficient showing of class-wide damages is supported by substantial evidence and that the trial court did not use improper criteria or make erroneous legal assumptions. As noted by the trial court, Alan's exhibits failed to show commonality as to damages. Alan failed to present sufficient evidence that purported class members knew of the alleged service concealment or relied upon it and then suffered damages as a result of the reliance. Without awareness of the alleged concealment and a detrimental change of position because of the alleged concealment, there can be no injury. Thus, there are no facts showing a common injury. In conclusion, the trial court finding that commonality does not exist with respect to damages is supported by substantial evidence.

DISPOSITION The order is affirmed. Defendant Honda is awarded costs on appeal.

You can download the full text of the two earlier opinions in Alan v. American Honda Motor Co. Inc. here: the 2005 opinion and the Supreme Court opinion are still posted. Last week, the Supreme Court denied a request to publish. We last talked about it in January, 2007.

In a short, unpublished opinion, the Ninth Circuit has reversed a significant portion of District Court order denying class certification in a wage and hour class action against Wal-Mart. In Sepulveda v. Wal-Mart Stores, Inc., a group of assistant managers asserting various wage and hour claims (overtime and meal and rest period pay) brought a putative class action against against the retailer. The District Court denied the plaintiffs' motion for class certification in Sepulveda v. Wal-Mart Stores, Inc. (C.D.Cal. 2006) 237 F.R.D. 229, because the claims for monetary relief in the class action complaint were not incidental (failing the requirements for certification under Rule 23(b)(2)) and the duties of assistant managers were not susceptible to collective proof (failing the requirements for certification under Rule 23(b)(3)). On appeal, the Ninth Circuit held:

Plaintiffs, current and former Assistant Managers of Defendant, Wal-Mart Stores, Inc., appeal the district court’s order denying their motion for class certification. We have jurisdiction under 28 U.S.C. § 1292(e) and Federal Rule of Civil Procedure 23(f).

The district court misapplied Ninth Circuit precedent when, relying on its conclusion that Plaintiffs’ claims for monetary relief were non-incidental, it denied class certification under Federal Rule of Civil Procedure 23(b)(2). See Molski v. Gleich, 318 F.3d 937, 949–50 (9th Cir. 2003) (refusing to adopt the incidental damages approach set forth by the Fifth Circuit in Allison v. Citgo Petroleum Corp., 151 F.3d 402 (5th Cir. 1998)). The district court must focus on the intent of the Plaintiffs in bringing suit. Id. at 950. We therefore hold that the district court abused its discretion in denying class certification. See Sw. Voter Registration Educ. Project v. Shelley, 344 F.3d 914, 918 (9th Cir. 2003) (en banc) (per curiam). On remand the district court shall reconsider class certification under Federal Rule of Civil Procedure 23(b)(2), and, in the alternative, also reconsider using Rule 23(c)(4) to certify specific issues under the Rule 23(b)(2) standard. See Society for Individual Rights, Inc. v. Hampton, 528 F.2d 905, 906 (9th Cir. 1975). In reconsidering these issues, the district court may find the California Supreme Court’s decision in Gentry v. Superior Court, 42 Cal. 4th 443, 457–59, 462, 464–65 (2007), instructive.

The district court did not abuse its discretion in denying class certification under Federal Rule of Civil Procedure 23(b)(3), and we therefore affirm that portion of its order. Each party shall bear its own costs on appeal.

We previously discussed the case in a January 2007 post that can be found at this link, where we observed:

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.

The result was very close to what we expected.

Last week's decision in Negrete v. Allianz Life Insurance Co. (9th Cir. 2008) __ F.3d __ is not a wage and hour case, but its holding concerning class action procedure could affect every wage and hour class action filed in the State of California. Essentially, the case holds that the mere risk that someone will file on top of an existing class action, even one which has been certified, and will then attempt to undermine the class by pursuing a so-called "reverse auction" settlement does not empower the court to issue orders which amount to an injunction against other courts and other proceedings which have overlapping parties, claims or issues.

Vida F. Negrete filed this class action lawsuit against Allianz Life Insurance Company of North America. Allianz appeals a district court order that effectively prevents it from proceeding with any settlement negotiations on similar class action claims raised in any federal or state court without first obtaining permission from Negrete’s Co-Lead Counsel, and from finalizing a settlement in any other court “that resolves, in whole or in part, the claims brought in [the Negrete] action,” without first obtaining the district court’s approval. We reverse.

It is important to note that there were "no facts before the district court that supported the notion that some kind of collusion was afoot."

Negrete Counsel floated out the specter of a reverse auction, but brought forth no facts to give that eidolon more substance. A reverse auction is said to occur when “the defendant in a series of class actions picks the most ineffectual class lawyers to negotiate a settlement with in the hope that the district court will approve a weak settlement that will preclude other claims against the defendant.” Reynolds v. Beneficial Nat’l Bank, 288 F.3d 277, 282 (7th Cir. 2002). It has an odor of mendacity about it. Even supposing that would be enough to justify an injunction of one district court by another one, there is no evidence of underhanded activity in this case. That being so, if Negrete’s argument were accepted, the “reverse auction argument would lead to the conclusion that no settlement could ever occur in the circumstances of parallel or multiple class actions — none of the competing cases could settle without being accused by another of participating in a collusive reverse auction.” Rutter & Wilbanks Corp. v. Shell Oil Co., 314 F.3d 1180, 1189 (10th Cir. 2002) (internal quotation marks omitted). In short, the district court’s order must be set aside. There simply was no proper support for the district court’s enjoining of proceedings in other courts.

The court wouldn't necessarily have endorsed the idea of an injunctive even if there were some reverse acution shenanigans going on, adding that they "need not decide whether reverse auction evidence would justify an injunction of state court proceedings, as opposed to leaving correction up to the usual appellate processes." Parsons Steel, Inc. v. First Ala. Bank, 474 U.S. 518, 525, 106 S. Ct. 768, 772-73, 88 L. Ed. 2d 877 (1986); Atl. Coast Line, 398 U.S. at 287, 90 S. Ct. at 1743.

The district court was troubled by the fact that settlements in other courts might draw the fangs from at least a portion of the class action case that it was then considering. Perhaps they will. But in this instance it was improper for the district court to react by issuing an injunction against other federal and state court proceedings. Rather, the district court must live with the vicissitudes and consequences of our elegantly messy federal system. The restrictions inherent in the All Writs Act and explicit in the Anti-Injunction Act have helped to concinnate the elements of our national polity; this is not the time to disrupt the harmony.

You can download the full opinion at this link.

...became slightly less thin with the publication of Chavez v. Netflix, Inc. (2008) __ Cal.App.4th __.

Frank Chavez sued Netflix, Inc. (Netflix) over its practice of advertising that it would send customers " 'unlimited' " DVD rentals with "1 Day Delivery" for a flat monthly fee. Alleging that both selling points were false, Chavez sought injunctive relief and damages on behalf of himself and a class of current and former Netflix subscribers. Before the class was certified, Netflix agreed to settle the class action by providing one month of free DVD rental services or upgrades to class members who claimed the benefit. The trial court approved the settlement and awarded attorney fees of $2,040,000 to be paid by Netflix to class counsel. The appellants in these consolidated appeals objected to the class action settlement and fee award in the trial court. They contend that the trial court abused its discretion in approving the settlement, affording notice to class members, and determining the amount of fees. Finding no abuse of discretion, we affirm the orders in issue.

The case is full of interesting language supporting settling parties. A detailed analysis has been posted over at the UCL Practitioner. We're in trial, so we'll just point you in that direction. You can download the case here in pdf or word format.