Wage Law

Court Orders Production of Costco's Attorney-Client Communication in Overtime Class Action

In an unusual opinion, the Second District Court of Appeal ordered Costco Wholesale Corp. to turn over some of its attorney-client communications during discovery in a putative class action alleging misclassification of Costco managers. In Costco Wholesale Corp. v. Superior Court (2008) __ Cal.App.4th __, the Court of Appeal held that the trial court was correct to order Costco to produce portions of a pre-litigation attorney-client memo prepared for Costco by its outside counsel. The memo analyzed whether Costco's department managers qualified for exempt status. Counsel took interviews, reviewed job descriptions, and prepared a detailed and lengthy memo analyzing the status of the managers. The trial court ordered an in-camera review by a referee, who determined that portions of the memorandum regarding the managers’ job duties were not privileged and should be produced.

Costco petitioned for a writ of mandate. After some odd procedural quirks, the Court of Appeal denied the writ, holding that Costco had not shown "irreparable harm” because the portions to be produced came from job descriptions and interviews with two managers; it was “inconsequential; and it did not “infringe on the attorney-client relationship.” The Court found that these were not work product, and that disclosure would cause no harm because the information would be readily available from other sources.

You can download the full text of Costco Wholesale Corp. v. Superior Court here in pdf or word format. A modification order was issued yesterday, which did not change the judgment. We read the whole thing, twice, and we might be incorporating a request for in camera review of much more from the privilege logs than ever before.

Supreme Court Depublishes Bell v Superior Court (HF Cox, Inc.)

The Supreme Court has denied a petition for review, but granted a request for depublication in Bell v. Superior Court (H.F. Cox, Inc.) (2007) 158 Cal.App.4th 147, a class certification opinion involving truck drivers with overtime, off-the-clock, meal/rest period and vacation pay claims.

The petition for review is denied. The requests for an order directing depublication of the opinion are granted. The Reporter of Decisions is directed not to publish in the Official Appellate Reports the opinion in the above-entitled appeal filed November 21, 2007, which appears at 158 Cal.App.4th 147. (Cal. Const., art. VI, section 14; rule 8.1125(c)(1), Cal. Rules of Court.) George, C.J., was absent and did not participate. Kennard J., is of the opinion the petition should be granted.

The Court of Appeal had affirmed in part and reversed in part a multiple-issue certification ruling by the Superior Court.

Four employees of a petroleum transportation company sought to bring a wage and hour class action against their employer, alleging: (1) the failure to pay overtime; (2) the requirement of off-the-clock work; (3) the failure to provide meal and rest breaks; (4) the incorrect calculation of vacation pay; and (5) the failure to pay pro rata vacation pay upon termination of employment. The plaintiffs filed a motion for class certification. The trial court granted the motion in part, certifying only a class with respect to the claim for failure to pay vacation pay upon termination of employment. In all other respects, the motion was denied. Plaintiffs sought review by means of a petition for writ of mandate. We issued an order to show cause why relief should not be granted and stayed further proceedings. We now conclude the trial court erred in failing to certify a class with respect to the overtime pay and vacation pay claims. We therefore grant the writ petition and direct the trial court to vacate its order, and enter a new and different order granting certification of a class with respect to those claims.

While on its face, the opinion had seemed to favor the plaintiff (who was the petitioner seeking Supreme Court review) the Court of Appeal's endorsement of the denial of certification in the off-the-clock and meal period causes of action had been embraced by the employers' bar, who will lament the depublication of the case.

We previously discussed the publication of and holding in Bell in a post here.

Another U.S. District Court Rejects Cicairos Regarding Employers' Meal Period Obligations

A second U.S. District Court judge has decided not to follow the holding in Cicairos v. Summit Logistics (2005) 133 Cal.App.4th 949, endorsing the DLSE's interpretation of California regarding what it means to "provide" employees with meal breaks, instead following another District Court ruling (White v. Starbucks (N.D. Cal. 2007) 497 F.Supp.2d 1080). As a result, Judge Dale Fischer denied certification in Brown v. Federal Express Corporation (C.D. Cal. 2008) 2008 WL 906517, 2008 U.S. Dist. LEXIS 17125, a putative class action brought on behalf of a subclass of drivers who alleged that they were denied meal and rest breaks. The plaintiffs asserted that FedEx had an affirmative obligation to ensure that employees took meal breaks. Judge Fischer held that FedEx's duty to "provide" meal periods merely meant to make meal periods available to employees. "It does not suggest any obligation to ensure that employees take advantage of what is made available to them."

In the absence of California Supreme Court precedent, this Court must apply the rule it believes the court would adopt under the circumstances. ... The court does not believe that the California Supreme Court would adopt the enforcement rule advocated by Plaintiffs.

Consequently, the court determined that, applying this standard, to prevail, the plaintiffs would have to prove that FedEx forced them to forego the meal breaks, a burden which, to meet, would cause the trial to focus on individualized issues, making class action treatment inappropriate.

The decision has no precedential value, as unpublished federal decisions are unciteable in U.S. District Court, and California trial courts are bound to follow Cicairos v. Summit Logistics under the principle of stare decisis.

Why Class Certification Orders Are Not Immediately Appealable

This is double-hearsay, but attorney H. Scott Leviant, who authors the legal blog The Complex Litigator, published a Forum piece in last week's Daily Journal, entitled "Cutting Class". We can't link to the article for non-subscribers, but there's a nice summary of the article over at the UCL Practitioner. The article explains why A.B. 1905, which would have allowed defendants to immediately appeal orders granting class certification, appropriately died in committee last month.

Courts Uphold Discovery to Replace Class Representative Who Never Had Standing

There is yet another published opinion applying both Pioneer Electronics (USA), Inc. v. Superior Court (2007) 40 Cal.4th 360 and Best Buy Stores, L.P. v. Superior Court (2006) 137 Cal.App.4th 772, to wage and hour class actions with respect to obtaining class member identities and contact information, even for the purpose of "identifying class members who may become substitute plaintiffs in place of named plaintiffs who were not members of the class they purported to represent" (our emphasis).

In CashCall, Inc. v. Superior Court (2008) 159 Cal.App.4th 273, the Fourth District Court of Appeal held that the trial court correctly allowed precertification discovery in a class action for that purpose, following Pioneer Electronics and Best Buy Stores, and distinguishing First American Title Ins. Co v. Superior Court (2007) 146 Cal.App.4th 1564, in which the Court of Appeal rejected the idea of permitting such discovery to a class action representative who had never been a member of the class he purported to represent because, under the circumstances of that case, "the grant of such discovery would sanction an abuse of the class action procedure." In essence, the Court of Appeal limited the First American holding only to those situations in which the substitution of plaintiffs would constitute an abuse of the class action procedure. The court noted that in First American, the plaintiff had, for all intents and purposed "appointed himself enforcement officer for the California Department of Insurance settlement agreement" to piggyback his case onto a settlement agreement and perhaps generate attorney's fees for the plaintiff's counsel. 

In contrast, in the Cashcall case, there was no state or other investigation, much less a settlement pending. Absent continuation of the class action, there would likely will be no other investigation of CashCall's conduct or potential relief obtained by class members for its alleged violations of their privacy rights. Furthermore, because only CashCall had knowledge of which customers' calls were monitored, the plaintiffs could not be faulted for filing a class action based on the suspicion their privacy rights may have been violated and only later learning from CashCall that their particular calls had not been monitored, leaving them without standing.

Because Kagan and the other cases discussed above recognize the general rule liberally allowing amendments of complaints to substitute new plaintiffs who have standing and, in particular, allowing an original plaintiff without standing to substitute in a new plaintiff with standing (whether in a class action or otherwise), an original plaintiff who lacks standing in a class action should be allowed to file a motion for, and potentially obtain, precertification discovery of the identities of actual class members (i.e., potential plaintiffs with standing who may elect to serve as substitute class representative plaintiffs). There is no reason to necessarily treat original plaintiffs who never had standing differently from, and more favorably than, original plaintiffs who had, but lost, standing. We conclude the Parris balancing test should be applied by trial courts in exercising their discretion whether to grant or deny an original plaintiffs' precertification motion for discovery of the identities of class members regardless of whether that original plaintiff had standing at the beginning of the action. (See, e.g., Best Buy Stores, L.P. v. Superior Court, supra, 137 Cal.App.4th at p. 779; Parris, supra, 109 Cal.App.4th at pp. 300–301; Budget Finance Plan v. Superior Court, supra, 34 Cal. App. 3d at p. 799; Pioneer Electronics (USA), Inc. v. Superior Court, supra, 40 Cal.4th at p. 373.) Accordingly, we reject CashCall's contention that a bright-line rule should apply in class actions to require trial courts to necessarily reject precertification discovery motions by plaintiffs who never had standing. First American, supra, 146 Cal.App.4th 1564, and Cryoport Systems v. CNA Ins. Cos. (2007) 149 Cal.App.4th 627 [57 Cal. Rptr. 3d 358], cited by CashCall, are factually inapposite and do not persuade us to conclude otherwise. Furthermore, neither case adopted or applied the bright-line rule proposed by CashCall in its petition.
...
Accordingly, unlike in First American, the potential for abuse of the class action procedure in this case is minimal. Neither the reasoning nor the result in First American persuades us that the trial court in this case abused its discretion by granting plaintiffs' motion for precertification discovery of the identities of class members. Rather, we conclude the trial court, in applying the Parris balancing test, did not abuse its discretion.

You can download the full text of CashCall, Inc. v. Superior Court here in pdf or word format. A petition for review and application for stay were denied by the California Supreme Court earlier this month.

No Fees Upon Remand When Right to CAFA Removal Was Unsettled at Time of Removal

Upon remand, a plaintiff whose case was wrongfully removed under the Class Action Fairness Act is generally entitled to recover reasonable attorney's fees incurred in connection with the wrongful removal and remand. However, when the right to remove is unsettled at the time of the removal, the District Court has the discretion to deny fees to the plaintiff. Lussier v. Dollar Tree Stores, Inc. (9th Cir. 2008) __ F.3d __.

John Lussier and Mary Hawks, putative class representatives in litigation against Dollar Tree Stores, Inc., appeal the district court’s denial of their request for attorney’s fees following their successful motion to remand the underlying action after it had been removed by Dollar Tree pursuant to the recently enacted Class Action Fairness Act of 2005 (CAFA). 28 U.S.C. § 1332(d)(2) (2005). We conclude that the district court did not abuse its discretion in finding that, given the lack of clarity in the law at the time, Dollar Tree’s removal arguments were not unreasonable. Accordingly, we affirm.

Of course, since the case arises out of unpaid wages, the plaintiffs can ultimately still recover those fees if they prevail in the action.

Court Must Review Class Action Settlement, Even If Judge Has Drafted MSJ Order

When parties to a class action notify the District Court that they have reached a settlement, the court is required to review and approve or disapprove the settlement under Rule 23(e)(2)'s preliminary approval process, even if the court has taken dispositive motions under submission, and even if the court has already drafted an order or memorandum of decision. In re: Syncor Erisa Litigation, Pilkington v. Cardinal Health, Inc. (9th Cir. 2008) __ F.3d __ (February 19, 2008). Thus, Judge R. Gary Klausner abused his discretion by granting the defendant's pending summary judgment motion rather than permitting the parties to file a motion for preliminary approval of the settlement.

the requirement that the district court approve a class action settlement does not affect the binding nature of the parties’ agreement. See Collins v. Thompson, 679 F.2d 168, 172 (9th Cir. 1982) (“Judicial approval of a [class action settlement] is clearly a condition subsequent, and should not affect the legality of the formation of the proposed [settlement] as between the negotiating parties.”) At the time of the settlement, Defendants knew they had dispositive motions pending and chose the certainty of settlement rather than the gamble of a ruling on their motions. Thus, Defendants chose to forego the chance that the district court would grant summary judgment in their favor. Because the parties bound themselves to a settlement agreement subject only to court approval (which they had agreed to seek) and gave the required notice of the agreement, the district court should not have (1) filed its order granting the motions for summary judgment and (2) entered final judgments against the Class.
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That the district court had already drafted a summary judgment order is not justification for refusing to approve an otherwise enforceable settlement agreement between the parties.

In a second holding of less interest to wage and hour lawyers and litigants, the Ninth Circuit added that there were triable issues of material fact and the court should not have granted the summary judgment motion anyhow.

Supreme Court Denies Certiorari in Gentry v. Superior Court

The US Supreme Court has denied certiorari in Circuit City Stores, Inc. v. Gentry, No. 07-998 (U.S. Mar. 31, 2008, cert. denied) on a petition filed to review the California Supreme Court's ruling in Gentry v. Superior Court (Circuit City Stores) (2007) 42 Cal.4th 443. We previously discussed the case is several posts, including this post regarding the argument and this post regarding the opinion:

In a 4-3 decision, the Supreme Court has reversed an appellate decision upholding a ban on class actions in wage and hour arbitrations, holding that, in certain cases, class action waivers/bans are unenforceable, even if the arbitration agreement itself was not procedurally unconscionable as a whole. The key part of the holding in Gentry v. Superior Court provided that:

[C]lass arbitration waivers should not be enforced if a trial court determines, based on [certain] factors ... that class arbitration would be a significantly more effective way of vindicating the rights of affected employees than individual arbitration. We therefore reverse the judgment of the Court of Appeal upholding the class arbitration waiver and remand for the above determination.

The questions presented by the petition were:

1.  Whether the Federal Arbitration Act permits a court to refuse to enforce an agreement calling for individual arbitration based on state labor law policies that do not apply generally to "any contract." 9 U.S.C. § 2.

2.   Whether the Federal Arbitration Act permits a state court to refuse to enforce an agreement to arbitrate based upon an unconscionability analysis "that takes its meaning precisely from the fact that a contract to arbitrate is at issue." Perry v. Thomas, 482 U.S. 483, 492 n.9 (1987).

For employers, this certainly looked like the best chance they had to get the SCOTUS to come to their rescue on this issue, using the Federal Arbitration Act. The court is currently packed with as pro-business and pro-arbitration a panel as we've seen in many decades, there were amicus briefs filed by the Chamber of Commerce of the United States, Ace American Insurance Company, et al., and the Pacific Legal Foundation. Circuit City was represented by veteran Supreme Court advocate Carter G. Phillips.

Gentry v. Superior Court looks like it will be the controlling law in California for the foreseeable future. The other arbitration-related petitions pending in the U.S. Supreme Court are procedurally and substantively distinguishable.

$200M Price Tag for Wal-Mart Cheating Its Pennsylvania Workers

Remember that 2006 Philadelphia jury verdict against Wal-Mart for $78 million? Well, it's grown to $188 million now, including $49,568,541 for the Wage Payment and Collection Law (WPCL) verdict, $29,178,873.35 for the common law verdict, $62,253,000 for statutory liquidated damages, $33,813,986.24 in WPCL fees, $2,670,325.52 in wage payment and collection law expenses, $29,178,873.35 in common law nonstatutory claims, $10,163,863. in statutory interest, $11,880,589.76 in non-statutory attorney fees and $938,222.48 in nonstatutory expenses. The total cost is over $200 million, however, because Wal-Mart's defense costs included $10,048,944 in attorney fees and $7,006,982 in costs.

Don't feel too bad for Wal-Mart, though. The jury found that Wal-Mart had saved $1,031,430 by not paying their 124,506 employees for the time they worked off the clock, and another $48,258,111 by making them work instead of taking legally required breaks. And it's a pretty safe bet that the case could have been settled for less than the original savings.

Quotes on the Starbucks Judgment

California law prohibits managers and supervisors from sharing in employee gratuities. However, for years, that has happened at Starbucks coffee shops. As we mentioned yesterday, Starbucks was been found liable to 135,000 of its California baristas for more than $100 million in back tips and interest ($87 million in tips and $19 million in interst) that the coffee chain paid to shift supervisors. The parties have now put out some comments:

• Starbucks spokeswoman Valerie O'Neil said the company planned an immediate appeal of the ruling, calling it "fundamentally unfair and beyond all common sense and reason ... The decision today, in our view, represents an extreme example of an abuse of the class-action procedures in California's courts."
  
• Plaintiff Jou Chou said: "I feel vindicated ... Tips really help those receiving the lowest wages. I think Starbucks should pay shift supervisors higher wages instead of taking money from the tip pool."
  
• The coffee company also took issue with the brevity of the judge's ruling, which was only four paragraphs, saying she failed to address the unfairness to shift supervisors. "This case was filed by a single former barista and, despite Starbucks request, the interests of the shift supervisors were not represented in litigation," O'Neil said.
• Attorney Laura Ho, who tried the case for the plaintiffs, said the court's verdict follows state law. "Starbucks illegally took a huge amount of money from the tip pool to pay shift supervisors, rather than paying them out of its own pocket. The court's verdict rightfully restores that money to the baristas."

Essentially, Starbucks boosted its profits by about 1.6% annually (Starbucks earned more than $672 million on revenue of $9.4 billion during its 2007 fiscal year), by suppressing the wages of its shift supervisors and making up the difference by letting them dip their fingers into the tip jars of the employees who are entitled to the tips, as a matter of mandatory corporate policy. That sort of ripoff is exactly why class actions are permitted, because no one barista would be able to find the resources to make it feasible to challenge such a policy. The class action remedy merely allows the employees' claims, which are practically identical to one another, to be aggregated. And now the court has ordered Starbucks to pay their illegal savings back. We find that quite reasonable and have no trouble seeing how common sense permits such a fair redistribution. What strikes us as unfair is Starbucks complaining, after it failed to represent the interests of its management/supervisory employees, that those interests weren't represented.

Breaking News: Starbucks Found Liable for Over $100 Million to Baristas

San Diego County Superior Court Judge Patricia Cowett has ruled in favor of more than 100,000 Starbucks baristas and ordered the company to pay the employees more than $100 million in tip pool money that was diverted to management employees. The court had ruled last month that Starbucks's practice of paying shift supervisors from the tip pool violated California law. We previously discussed the case in a post found here. The ruling affects only California employees, and only the period October 8, 2000 to the date of trial.

Modification to Murphy v. Check 'n' Go

It has been brought to our attention that the First District Court of Appeal modified an October 2007 opinion in Murphy v. Check 'N Go of California, Inc. (2007) 156 Cal.App.4th 138, regarding arbitrations and class action waivers, as follows:

The words “involving unwaivable statutory rights” are added to the second sentence of the first full paragraph on page 10, so that the sentence reads: Gentry confirmed that Discover Bank’s reasoning was not confined to consumer actions involving miniscule damages, and extended Discover Bank’s rationale to wage and hour cases involving unwaivable statutory rights where a class action waiver could likewise be “exculpatory in practical terms because it can make it very difficult for those injured by unlawful conduct to pursue a legal remedy.”

We previously discussed Murphy v. Check 'N Go of California, Inc. at a post that can be found at this link. The modification order was entered shortly after we posted about the case.

Supreme Court Denies Review of Post-Judgment Certification Case

Last July, we discussed a landlord-tenant case with a novel class certification twist (Justices: Are You Serious?). In Ortiz v. Lyon Management Group, Inc., the defendant won a summary judgment motion, before hearing any class certification motion was heard. Hoping to apply res judicata to any similar future claims by any putative class members, the defendant moved for certification, seeking to force the vanquished plaintiff to serve as an unwilling class representative on a doomed claim, and to serve a notice to class members informing them that they were bound by the loss of the uncertified class. The Superior Court denied the motion. The Court of Appeal affirmed the denial (No Post-Judgment Class Certification Orders) in Ortiz v. Lyon Management Group, Inc. (2007) 157 Cal.App.4th 604. Finally, now, the Supreme Court has denied review (sought by the plaintiff, and presumably limited to the review of the underlying judgment, rather than the post-judgment orders), and several requests for depublication were also denied.

No Class Action for Home Depot Assistant Managers

meFor the past seven years, assistant managers have been pursuing overtime claims against The Home Depot in California. The first of three consolidated class actions was filed in Riverside County Superior Court in July 2001. In 2005, those plaintiffs filed a motion for class certification that was granted by Superior Court Judge Roger A. Luebs. Home Depot sought a writ petition, challenging the order in the Fourth District Court of Appeal. In an unpublished opinion, the petition was granted and the trial court was ordered to reconsider the motion using different standards. Judge Edward D. Webster reconsidered the motion and denied class certification the second time around.

In November 2007, in another unpublished opinion, the Fourth District upheld Judge Webster's order denying certification, finding that the lower court did not abuse its discretion in determining that individual questions of fact predominated over common issues, making the case unsuitable as a class action. Specifically, the court noted that the number of employees and departments supervised by each of the 1,400 to 2,700 class members varied considerably among stores. The plaintiffs filed a petition for review.

On March 12, 2008, the Supreme Court denied review of the unpublished opinion. Home Depot Overtime Cases, Supreme Court case no. S159596. Justices Chin and Moreno did not participate. A request to publish the opinion was filed by The Employers Group on December 7, 2007, and quickly withdrawn on December 11, 2007.

The decision means that Home Depot assistant managers will have to file and pursue individual claims against the retailer, which may still prove quite worthwhile to pursue, in light of the declarations of 42 assistant managers who said they always worked at least 55 hours a week and often worked many more hours (as many as 90 hours a week), including on scheduled days off and during vacations, did not get lunch and rest breaks, and in more than half of the cases, performed the same tasks as hourly employees. It will be interesting to see how many individual cases are brought.

Chinese Daily News Loses Again

In January 2007, after 16 days of trial, a jury returned a unanimous verdict awarding $2.5 million to a group of employees of the Chinese Daily News, Inc. for violations of state and federal labor laws concerning overtime, meal and rest breaks. We first discussed the case in a post that can be found here: http://wagelaw.typepad.com/wage_law/2007/01/employees_preva.html. On February 28, 2008, Federal District Court Judge Consuelo B. Marshall issued a post-trial ruling and entered a judgment awarding the employees $3,514,998.00 in damages and penalties plus $1,676,019.74 in interest. The newspaper published announced last week that it intends to appeal.

The Cautionary Tale of the Day

If the son of Aeacides had ever become a lawyer, this is exactly the kind of case he'd have taken, all the way to the Supreme Court. Technically, the wage and hour attorney representing the plaintiff/employee won the appeal. Technically. But make no mistake about it, when the parties read the opinion issued this morning in Harrington v. Payroll Entertainment Services, Inc. (2008) __ Cal.App.4th __, it wasn't Mr. Harrington who was smiling.

Here's what the Second District Court of Appeal had to say in its opening paragraph:

This was a dispute about $44.63 in unpaid overtime, which was settled for $10,500, after which the plaintiff asked the trial court for about $46,000 for his attorneys’ fees. The trial court denied the motion outright, and the plaintiff now appeals on the ground that he has a statutory right to recover his reasonable fees. We agree, reverse the order, and award him $500 for his fees.

No, those are not typos. Those are the numbers. Suffice it to say, the rest of the opinion included little praise for the plaintiff or his lawyers. We suspect, although we didn't attend Tuesday's oral argument (yes, the opinion was published just a day and a half later), that the justices were quite hostile to the appellant during those proceedings. If you want to read their entire opinion, you can find it here in pdf or word format.

Ticconi: Yet Another Opinion After Yet Another Rehearing

In July 2007, we discussed a case called Ticconi v. Blue Shield of California Life & Health (2007) 153 Cal.App.4th 1123 (Diverse Facts and Legal Arguments Concerning Equitable Defenses in UCL Claims Do Not Bar Class Certification). It held that unclean hands and other equitable defenses could not be used to defeat class certification in an unfair competition lawsuit based upon violations of statute, even if the defenses might be taken into account when fashioning a remedy, and even if they involve the determination of facts and legal issues that vary greatly among class members. In August, on the Court granted rehearing on its own motion, to make non-substantive changes to the opinion. The opinion on rehearing was issued in December. The holding remained undisturbed. If anything, it looks a bit worse for the defendant.

On January 3, 2008, the court granted the defendant's petition for rehearing. The third opinion has now been issued. Again, the holding is not meaningfully different, at least not with respect to the issues relevant to wage and hour lawyers who litigate UCL class actions. On those counts, if anything, it looks a bit worse for the defendant.

The trial court denied plaintiff’s motion for certification of a class of similarly situated insureds on the ground that Blue Shield Life’s defenses of fraud and unclean hands raised individual issues that predominated over the common issues related to liability. Plaintiff appeals.

We conclude that the trial court erred as a matter of law in ruling on the motion for class certification. The equitable defense of unclean hands is not available in a UCL action based on the violation of statutes such as sections 10113 and 10381.5. Also, sections 10113 and 10381.5 preclude an insurer from raising the defense of fraud based on statements that an insured made in an application for insurance if the application had not been attached to or endorsed on the policy when issued (§§ 10113 & 10381.5). Therefore, the trial court relied on erroneous legal assumptions in ruling that the individual issues raised by the defenses of unclean hands and fraud predominated over the common issues pertaining to liability. Accordingly, we reverse the order with instructions.

There remain some questions about whether the plaintiff is still a suitable class representative, but that doesn't look like it will impair the ability to certify the class.

The indications are that plaintiff had standing when he filed this lawsuit but was paid some money thereafter. “Even if the named plaintiff receives all the benefits that he seeks in the complaint, such success does not divest him of the duty to continue the action for the benefit of others similarly situated.” (La Sala v. American Sav. & Loan Assn., supra, 5 Cal.3d at p. 871.) We observe that plaintiff has declared “his desire to continue with this case[] . . . . after being publicly called a fraud by Blue Shield Life.”

“If, however, the court concludes that the named plaintiff[] can no longer suitably represent the class, it should at least afford plaintiff[] the opportunity to amend the[] complaint, to redefine the class, or to add new individual plaintiffs, or both, in order to establish a suitable representative. [Citations.] If, after the court has thus extended an opportunity to amend, the class still lacks a suitable representative, the court may conclude that it must dismiss the action. At this point, the further issue arises whether the court must notify the class of the proposed dismissal.” (La Sala v. American Sav. & Loan Assn., supra, 5 Cal.3d at p. 872.) All of these issues must be considered by the trial court on remand.

You can download the new opinion here in pdf or word format.

Not Everyone Lerachs

Earlier this month, a prominent former class action attorney, William Lerach, was sentenced to two years in prison for his role in a scheme to pay huge cash kickbacks to class action plaintiffs. It was the maximum sentence possible under his guilty plea agreement. He'll pay about $8 million in fines, too. The thing that struck us about his case was the assertion that Lerach's kickback scheme was widespread among all class action lawyers. Lerach has been quoted saying:

"Believe me, it was industry practice. We kept it quiet because obviously if a judge knew about it you're not going to get appointed as lead counsel and the class representative is not going to get certified because it's an ethical violation and you're not allowed to split a fee with a non-lawyer."

An industry practice? It's not an industry practice. Basically, it's capping. Some lawyers need to do it to get the cases they want, but not everyone is doing it. Most are not, which is why most of us only have a handful of these cases at a time.

It's like cheating on your wife. If you do it, your brain feels better if you convince yourself that everyone does it, even though we don't. Have you ever met a cheater who didn't think everyone else was doing it, too? It reminds us of an expression our grandfather used to say. We can't repeat verbatim because he said it in French, but it translates like this: "No man ever looks under the bed unless he has hidden there himself." Lerach thinks we're all hiding under the bed.

Ethical Obligations When Interviewing Adverse Putative Class Members

Do defense lawyers owe any duty to putative class members when interviewing them on behalf of their employer prior to certification of the class? While there is still little guidance from the courts of appeal on the subject, if you've never read it before, you might consider reviewing a September 2005 order by Judge Brick (Alameda County Superior Court) in a case called Shahrokhshahi v. Round Table Pizza. Although Judge Brick denied the plaintiff's motion to disqualify the defense firm for conducting interviews of putative class members without making full and fair disclosures to them beforehand, he did rule that the firm had violated ethical rules by not disclosing to putative class members when they first contacted them that:

• The class members' potential rights to overtime wages were at issue in the pending litigation;
• Their interests were adverse to the corporation's in the litigation;
• The defense firm represented only the corporation's interests, not those of the putative class members;
• Information given to the defense firm was not confidential and could be used against the class members' interests in the overtime litigation; and
• The managers may want to speak to independent counsel about their interests in the litigation.

Because the defense firm failed to make any such disclosures, he ordered the distribution of a curative letter, on employer letterhead, to all putative class members. The firm's writ petition was summarily denied in Round Table Pizza, Inc. v. Superior Court, Case No. A111674. We've had the issue come up several times recently, and our judges have all been receptive to Judge Brick's rationale.

Opt-In Precertification Notice Rejected

After Pioneer Electronics (USA), Inc. v. Superior Court (2007) 40 Cal.4th 360 and Belaire-West Landscaping, Inc. v. Superior Court (2007) 149 Cal.App.4th 554 is was clear that trial courts had the discretion to authorize a precertification notice to putative class members in a wage and hour case, as long as the employees could opt-out of having their contact information being disclosed to class counsel. Many employers, however, have argued that the courts could and should have such notices go out with the proviso that employee contact information would only be disclosed to workers who affirmatively opt-in. Is such an order within the court's discretion? This wee, in Puerto v. Superior Court (Wild Oats), the Court of Appeal says it was not, reversing an order by Los Angeles County Superior Court judge Ronald Sohigian.

"Petitioners Jason Puerto, Jeffrey Armstrong, Thomas J. Baer, Charles Allen Schreck, Kelvin Nettleton, John Heim, Dennis Tucker, and Christopher Michael Williamson filed suit against their former employer, Wild Oats Markets, Inc., alleging wage and hour violations. During discovery, the trial court partially granted a motion to compel Wild Oats to provide the telephone numbers and addresses of individuals previously identified by name by Wild Oats in response to a form interrogatory, adopting a procedure to protect their privacy by sending a notice that would have required those individuals to fill in a postcard authorizing a third party administrator to disclose their addresses and phone numbers to petitioners. We conclude that the opt-in notice unduly hampers petitioners in conducting discovery to which they are entitled by erecting obstacles that not only exceed the protections necessary to adequately guard the privacy rights of the employees involved but also exceed the discovery protections given by law to far more sensitive personal information. Based on this conclusion, we hold that the trial court abused its discretion, and grant the writ."

The context of the notice, curiously, came as part of an order to compel responses to Judicial Council form interrogatory 12.1 “State the name, ADDRESS, and telephone number of each individual: [¶] (a) who witnessed the INCIDENT or the events occurring immediately before or after the INCIDENT; [¶] (b) who made any statement at the scene of the INCIDENT; [¶] (c) who heard any statements made about the INCIDENT by any individual at the scene; and [¶] (d) who YOU OR ANYONE ACTING ON YOUR BEHALF claim has knowledge of the INCIDENT (except for expert witnesses covered by Code of Civil Procedure section 2034).”

Code of Civil Procedure section 2017.010 provides that unless the court imposes limits, “any party may obtain discovery regarding any matter, not privileged, that is relevant to the subject matter involved in the pending action or to the determination of any motion made in that action, if the matter either is itself admissible in evidence or appears reasonably calculated to lead to the discovery of admissible evidence.” “The scope of discovery is very broad”  [citation] and it includes the right to “obtain[] . . . the identity and location of persons having knowledge of any discoverable matter . . . .” (§ 2017.010.) The “expansive scope of discovery” [citation] is a deliberate attempt to “take the ‘game’ element out of trial preparation” and to “do away ‘with the sporting theory of litigation—namely, surprise at the trial.’”
...it is only under unusual circumstances that the courts restrict discovery of nonparty witnesses’ residential contact information.

The court made clear that this is not to say that the trial court was without the ability to enter a protective order:

Certainly the trial court may require that the information be kept confidential by the petitioners and not be disclosed except to their agents as needed in the course of investigating and pursuing the litigation. Moreover, should the trial court find that the record evidences discovery abuse warranting a protective order as to the manner and means of contacting witnesses, the trial court always retains the discretion to impose such an order. However, the procedure selected here, an opt-in letter, effectively gave more protection to nonparty witnesses’ contact information than the Discovery Act gives to much more sensitive consumer or employment records. We are aware of no logic or authority that would justify such disproportionate protection of this private but under these circumstances relatively nonsensitive information. We therefore hold that requiring petitioners to secure affirmative consent to the disclosure of their contact information via an opt-in letter mechanism exceeded the protections necessary to safeguard the legitimate privacy interests in the addresses and telephone numbers of the witnesses, and as such was an abuse of discretion.

Rejecting the defense argument that providing contact information leads to class counsel shopping for new plaintiffs, the court noted:

"Provided that counsel observes ethical rules in interactions with prospective witnesses, "[t]o the extent that plaintiff's attorney, on request, provides information to other claimants which causes them to 'recognize legal problems,' his [or her] behavior is laudable."

You can download Puerto v. Superior Court here in pdf or word format.

Another Rehearing in Ticconi

Back in July, we discussed Ticconi v. Blue Shield of California Life & Health (2007) 153 Cal.App.4th 1123 (Diverse Facts and Legal Arguments Concerning Equitable Defenses in UCL Claims Do Not Bar Class Certification). It held that unclean hands and other equitable defenses cannot be used to defeat class certification in an unfair competition lawsuit based upon violations of statute, even if the defenses might be taken into account when fashioning a remedy, and even if they involve the determination of facts and legal issues that vary greatly among class members. In August, on the Court granted rehearing on its own motion, to make non-substantive changes to the opinion. The holding remained undisturbed. On January 3, 2008, however, the court granted the defendant's petition for rehearing. A new opinion, briefing schedule or argument date is expected by February 4.

Darden Settles More Wage & Hour Class Actions

Darden Restaurants, Inc. has agreed to pay another $4 million to settle another two class action lawsuits involving California employees of Red Lobster and Olive Garden restaurants. The suits accused the company of requiring servers and bartenders to make up for cash shortages at the end of their shifts. The settlements were disclosed in recent S.E.C. filings. A company spokesman said the settlements the allegations were "almost impossible to prove one way or the other," but that the defending the cases would be too costly.

Denial of Certification Reversed in Part, Affirmed in Part, in Wage & Hour Case

A previously unpublished class certification opinion involving truck drivers with overtime, off-the-clock, meal/rest period and vacation pay claims has been ordered published in Bell v. Superior Court (H.F. Cox, Inc.) (2007) __ Cal.App.4th __.

Four employees of a petroleum transportation company sought to bring a wage and hour class action against their employer, alleging: (1) the failure to pay overtime; (2) the requirement of off-the-clock work; (3) the failure to provide meal and rest breaks; (4) the incorrect calculation of vacation pay; and (5) the failure to pay pro rata vacation pay upon termination of employment. The plaintiffs filed a motion for class certification. The trial court granted the motion in part, certifying only a class with respect to the claim for failure to pay vacation pay upon termination of employment. In all other respects, the motion was denied. Plaintiffs sought review by means of a petition for writ of mandate. We issued an order to show cause why relief should not be granted and stayed further proceedings. We now conclude the trial court erred in failing to certify a class with respect to the overtime pay and vacation pay claims. We therefore grant the writ petition and direct the trial court to vacate its order, and enter a new and different order granting certification of a class with respect to those claims.

In Bell, it was undisputed that the drivers worked over 8/40, without overtime pay. The overtime dispute centered upon whether drivers were engaged in interstate commerce and therefore exempt. In addition to discussing certification standards in the course of holding that the overtime claims should have been certified, the opinion discusses the "4 month rule" and the broad inclusive definition of "interstate commerce." With respect to off-the-clock claims, the court found that the particular facts and evidence in this case left the court with ample discretion to deny certification.

The trial court denied the motion for class certification with respect to the claim for off-the-clock work on the basis that there was no way to determine which members of the proposed class had actually worked off the clock. Given that plaintiffs themselves disagreed on when or if they had worked off the clock, the court found no common issues with respect to this claim.

On the meal/rest period claims, the trial court was within its discretion to deny certification in light of evidence that drivers were scheduled for 10 hours of work within a 12-hour period to allow for breaks; that  all terminals have break areas; that drivers testified that they took breaks, were permitted to take breaks, and saw others taking breaks; that the employer stressed to its workers the importance of breaks and allowed meal and rest breaks at the discretion of its drivers; and that drivers had seen two of the named plaintiffs taking breaks; such that there was no way of determining which drivers were permitted to take breaks and which were not, and there was no evidence of a companywide policy denying breaks.

Finally, the opinion holds that the trial court abused its discretion in denying class certification on the vacation pay claims because a common legal question predominated over any individual issues. The opinion includes some nice language about how improper it is for the trial court to conclude that class certification is not a superior means of adjudicating disputes regarding overtime pay and vacation pay simply because of the amount of money recoverable in individual actions and the availability of Berman hearings with the DLSE.

You can download the full text of Bell v. Superior Court here in pdf or word format.

New Ground For Denial of Certification?

It would break the company, it would give the class a windfall, and the judge doesn't like the law.

Perhaps we oversimplify, but the heart of the order denying class certification in Spikings v. Cost Plus, Inc. (C.D. Cal. May 25, 2007) 2007 U.S. Dist. LEXIS 44214, a case we saw in a year-end class action roundup, seems to come down to those three factors. In Spikings, the plaintiff filed a motion for certification under Rule 23, and the court found the superiority element required under Rule 23(b)(3) lacking.

The case was filed under the FACTA (Fair and Accurate Credit Transactions Act), alleging a violation of the rule that requires that no more than the last 5 digits of a credit card number be shown on customer receipts, and that the expiration date of the credit card not be disclosed on the receipt. 15 U.S.C. § 1681c(g). Spikings bought an item at Cost Plus on December 19, 2006, and filed her putative class action just a few hours later. Apparently, the judge thought those facts didn't pass the smell test. "[T]he superiority requirement allows the Court to exercise its considerable discretion in deciding whether or not to certify a class for a category of cases for which a class action may not be the best method.”

[C]ourts may refuse to certify class action treatment where the defendant’s liability ‘would be enormous and completely out of proportion to any harm suffered by the plaintiff.’

In these cases, certification is not denied solely because of the possible financial impact that it would have on a defendant, but based on the disproportionality of a damage award that has little relation to the harm actually suffered by the class, and on the due process concerns attendant upon such an impact. (Citations omitted.) Put simply, class action treatment may be denied where the damages would be ‘ad absurdum.’
...
Plaintiff’s class action sought to represent an estimated 3.4 million people nationwide, at $100-$1000 per violation; thus, “statutory damages alone would range from a minimum of $340 million to a maximum of $3.4 billion,” Defendant’s net worth, however, is only $316 million, Id. “Thus, an award of even the minimum statutory damages of $340 million would put Defendant out of business,” Id. Such an outcome is particularly absurd in light of plaintiff’s admission that “she did not suffer any actual damage, such as identity theft, as a result of her expiration date appearing on her credit card receipt from Defendant’s store, and there is no evidence that any customer making a purchase from Defendant’s store...suffered any actual harm due to the inclusion of the expiration date on credit card and debit card receipts.”

Since then, several other cases involving identical violations of FACTA's truncation requirement have been denied class treatment on the same ground. Serna v. Big A Drug Stores, Inc., 2007 U.S. Dist. LEXIS 82023, (C.D. California, October 9, 2007); Lopez v. KB Toys Retail, Inc. 2007 U.S. Dist. LEXIS 82025 (C.D. Cal. July 17, 2007); Najarian v. Avis Rent A Car Sys. LLC, 2007 U.S. Dist. LEXIS 59932 (C.D. Cal. June 13, 2007); Torossian v. Vitamin Shoppe Indus. 2007 U.S. Dist. LEXIS 81961 (C.D. Cal. Aug. 9, 2007); Soualian v. Int'l Coffee & Tea LLC, 2007 U.S. Dist. LEXIS 44208 (C.D. Cal. June 11, 2007).

This ground would not likely be a basis for denial of class certification in a wage and hour case, but we can envision some jurists applying it to PAGA claims.

Supreme Court Specified Issues in Harris v. Superior Court

The Supreme Court has listed its issues on review in Harris v. Superior Court (Liberty Mutual Insurance) (2007) 154 Cal.App.4th 164:

Petition for review after the Court of Appeal granted and denied petitions for peremptory writ of mandate. This case presents the following issue: Do claims adjusters employed by insurance companies fall within the administrative exemption (Cal. Code Regs, tit. 8, § 11040) to the requirement that employees are entitled to overtime compensation?

There were several issues addressed in the opinion, but it appears that the exemption is going to be the only topic that matters nowOur prior post can be read here.

Ticconi: New Opinion After Rehearing

Back in July, we discussed a case called Ticconi v. Blue Shield of California Life & Health (2007) 153 Cal.App.4th 1123 (Diverse Facts and Legal Arguments Concerning Equitable Defenses in UCL Claims Do Not Bar Class Certification). It held that unclean hands and other equitable defenses cannot be used to defeat class certification in an unfair competition lawsuit based upon violations of statute, even if the defenses might be taken into account when fashioning a remedy, and even if they involve the determination of facts and legal issues that vary greatly among class members. In August, on the Court granted rehearing on its own motion, to make non-substantive changes to the opinion. The opinion on rehearing was issued on Tuesday. The holding remains undisturbed.

No Post-Judgment Class Certification Orders

In July, we discussed a landlord-tenant case with a very novel class certification twist (Justices: Are You Serious?). In Ortiz v. Lyon Management Group, Inc., the defendant won a summary judgment motion, before hearing any class certification motion was heard. Hoping to apply res judicata to any similar future claims by any putative class members, the defendant moved for certification, seeking to force the vanquished plaintiff to serve as an unwilling class representative on a doomed claim, and to serve a notice to class members informing them that: (i) there was a class action pending; (ii) they already lost; and (iii) they were not going to be permitted to opt out of it. The tenant appealed the summary judgment, and the landlord appealed the post-MSJ denial of the defense's motion for class certification. How novel was the theory?

"Despite 50-plus pages of exhaustively researched briefing covering 30 years of federal and California class action jurisprudence, defendant cannot cite a single case in which a defendant obtained class certification after first obtaining summary judgment against the named plaintiff’s individual claim."

As most observers expected, the post-MSJ class certification denial was upheld.

We hold defendant could not obtain class certification after the court decided the merits of plaintiff’s individual claim. As a general procedural rule, class certification should be determined before the merits are adjudicated. And as a general substantive rule, a precertification decision on the merits against a named plaintiff does not bind absent class members. The court did not abuse its discretion by holding defendant to these general rules.

It's a curious opinion, which begins its discussion with a comparison of certain California statutes with monotremes (e.g., the duck-billed platypus or the spiny anteater), and pivots, seven and a half pages into its analysis, with a transitional paragraph the reads, simply: "Enter the platypus." The part of the opinion that matters to wage and hour lawyers who defend or prosecute class actions begins on page 15 of the slip opinion.

"May a defendant obtain certification of a plaintiff’s class after it has obtained a favorable ruling on the merits of the named plaintiff’s individual claim? The parties cite no case in which a defendant has even tried this tactic. Lacking direct guidance, we turn to the general rule governing the timing of class certification and apply it to this unprecedented context."

Defendant's tactic conflicted with the general “Home Savings” rule requiring courts to determine class certification before adjudicating the merits, for both procedural and substantive reasons.

First, the procedure allows so-called ‘one-way intervention,’ a procedure under which potential members of the class can reserve their decision to become part of the class until the validity of the cause asserted by the named plaintiffs on behalf of the class has been determined. The California Supreme Court adopted the Home Savings rule in Green v. Obledo (1981) 29 Cal.3d 126, expanding it to protect plaintiffs against postmerits class decertification. It noted, “Although this rule has thus far been applied only for the benefit of defendants, no reason appears why plaintiffs should not also enjoy its benefits . . . .” Thus, it required class certification be decided before the merits “whether the motion to certify or decertify be made by the plaintiff or the defendant.” It left only a narrow exception to postmerits decertification where a party could show “changed circumstances making continued class action treatment improper.” Here, like in Fireside Bank v. Superior Court (2007) 40 Cal.4th 1069, "[t]he record suggests no practical reason why defendant could not have moved for class certification sooner, other than to maximize its strategic advantage."

Lyon argued that this rule shouldn't apply because this case presented issues that could make this a “mandatory” class action posing no risk of one-way intervention because absent class members cannot opt out of a "mandatory" class action. Without determining whether the case was a "mandatory" class action, the court affirmed the denial.

[E]ven if the Home Savings rule does not necessarily apply here as a matter of law, the court still could choose to apply it to maximize efficiency without abusing its broad discretion to structure this case. Either way, we affirm.

Substantively, the denial was appropriate because “failure to require notification of the class before a decision on the merits prevents a binding adjudication against the class because members of the class who were not notified are not barred by the determination in the defendant’s favor since they were not parties.” As the court noted, this consistent judicial warning to defendants seeking precertification summary judgment must mean something. After all, it would be meaningless to warn defendants that winning summary judgment before class certification will not bind class members, if defendants could simply move for class certification after obtaining summary judgment.

They can't.

You can download the full opinion in Ortiz v. Lyon Management Group, Inc. here in pdf or word format.

Post-Gentry Transfers: Ralphs and U-Haul Cases Transferred Back to Courts of Appeal

The Supreme Court closed and transferred two cases for reconsideration in light of Gentry v. Superior Court (2007) 42 Cal.4th 443. The two cases, both of which were discussed here previously, are Massie v. Ralphs Grocery and Konig v. U-Haul Co. of California.

Massie:

Petition for review after the Court of Appeal affirmed orders denying petitions to compel class arbitration in a civil action. The court ordered briefing deferred pending decision in Gentry v. Superior Court (S141502), which presents issues regarding the enforceability of an arbitration provision that prohibits employee class actions in litigation concerning alleged violations of California's wage and hour laws.

The above-entitled matter is transferred to the Court of Appeal, Second Appellate District, Division Seven, with directions to vacate its decision and to reconsider the cause in light of Gentry v. Superior Court (2007) 42 Cal.4th 443. (Cal. Rules of Court, rule 8.528(d).)

Konig:

Petition for review after the Court of Appeal affirmed an order granting a motion to compel arbitration in a civil action. The court ordered briefing deferred pending decision in Gentry v. Superior Court (S141502), which presents issues regarding the enforceability of an arbitration provision that prohibits employee class actions in litigation concerning alleged violations of California's wage and hour laws.

The above-entitled matter is transferred to the Court of Appeal, Second Appellate District, Division Five, with directions to vacate its decision and to reconsider the cause in light of Gentry v. Superior Court (2007) 42 Cal.4th 443. (Cal. Rules of Court, rule 8.528(d).

[Update] The court did the same in three other cases:

Dunn v. Superior Court (Kroger Co.):

Application for stay and petition for review GRANTED. Further action in this matter is deferred pending consideration & disposition of a related issue in Gentry v. Superior Court, S119334 and Murphy v. Kenneth Cole Productions, Inc., S140308 (see Cal. Rules of Court, rule 8.512(d)(2)), or pending further order of the court. Submission of additional briefing pursuant to Cal. Rules of Court, rule 8.520, is deferred pending further order of the court.

The above-entitled matter is transferred to the Court of Appeal, Second Appellate District, Division Two, with directions to vacate its decision and to reconsider the cause in light of Gentry v. Superior Court (2007) 42 Cal.4th 443. (Cal. Rules of Court, rule 8.528(d).)

Firchow v. Citibank:

Petition for review after the Court of Appeal reversed an order denying a motion to compel arbitration. The court ordered briefing deferred pending decision in Gentry v. Superior Court (S141502), which presents issues regarding the enforceability of an arbitration provision that prohibits employee class actions in litigation concerning alleged violations of California's wage and hour laws.

In light of the decision in Gentry v. Superior Court (2007) 42 Cal.4th 443, review in the above-entitled matter is dismissed. (Cal. Rules of Court, rule 8.528(b)(1).)

and Jones v. Citigroup:

Petition for review after the Court of Appeal reversed an order denying a motion to compel arbitration in a civil action. The court ordered briefing deferred pending decision in Gentry v. Superior Court (S141502), which presents issues regarding the enforceability of an arbitration provision that prohibits employee class actions in litigation concerning alleged violations of California's wage and hour laws.

The above-entitled matter is transferred to the Court of Appeal, Fourth Appellate District, Division Three, with directions to vacate its decision and to reconsider the cause in light of the decision in Gentry v. Superior Court (2007) 42 Cal.4th 443. (Cal. Rules of Court, rule 8.528(b)(1).)

To our knowledge, that means that all Gentry companion cases are now back at the trial courts or Courts of Appeal.

Supreme Court Posts Statement of Issues on Review For Arias

Statement of issues on review have finally been posted in Arias v. Superior Court (Angelo Dairy), no. S155965:

Petition for review after the Court of Appeal granted a petition for peremptory writ of mandate. This case presents the following issues:

(1) Must an employee who is suing an employer for labor law violations on behalf of himself and others under the Unfair Competition Law (Bus. & Prof. Code, section 17203) bring his representative claims as a class action?

(2) Must an employee who is pursuing such claims under the Private Attorneys General Act (Lab. Code, § 2699) bring them as a class action?

Apparently, Amalgamated Transit Union, Local 1756, AFL-CIO v. Superior Court (2007) 148 Cal.App.4th 39, is the lead case. The first issue looks like an interesting one. The second one looks like a no-brainer.

Savaglio v. Wal-Mart Still Not Briefed

We overheard someone (not a speaker) at a recent seminar opining that Wal-Mart settled its California meal period case for a fraction of the amount of the jury verdict. Not true. The appeal is still pending, and just a few days ago, Wal-Mart received yet another extension of time to file its opening brief. Savaglio filed an opening brief on the plaintiffs' appeal on August 24, 2007. Wal-Mart's brief is due on Christmas Eve.

Staples to Pay $38 Million to Settle Asst. Manager OT Case

A wage & hour class action lawsuit brought against Staples Inc. on behalf of approximately 1,700 current and former assistant store managers in California has been settled for $38 million. The settlement is still subject to court approval. A trial had been scheduled to start earlier this month. The suit alleged that the stores misclassified assistant managers as exempt under overtime pay regulations. According to a 2003 SEC filing, the lawsuit alleged damages of up to $150 million. The company denied the claims and admitted no wrongdoing in the settlement. A spokesperson for the office products firm said that "Staples believes that its store labor model, which is based on a commitment to fair and respectful treatment of its associates, is fully compliant with applicable California law.''

Is CAFA Increasing the Scope and Number of Wage and Hour Class Actions?

We had someone forward a press release informing us that a group of assistant managers for a 116 store fastener company have filed an overtime claim under California law and the FLSA. In Calhoun et al v. Fastenal Company, Civ. No. 07- CV- 5326, Northern District of California, two assistant managers who worked for Fastenal in California and Pennsylvania are bringing claims in a state law class action as well as an FLSA collective action. The case itself isn't that remarkable, but it does serve as a potential example of one unintended side effect of the passage of the Class Action Fairness Act (CAFA).

As long as plaintiffs expect the defendant to force the case into federal court under CAFA, the employees might as well add a nationwide FLSA collective action to the pleadings. As a result, CAFA may be triggering a lot more national FLSA collective actions than would otherwise have been filed. That may or may not be what happened with Calhoun, but after some of what we've seen in our cases and those of some close colleagues, the thought crossed our minds when we saw the press release.

"Two Words of Advice: Set-tle."

A summary judgment in favor of UPS on a wage & hour misclassification case has been reversed by the Ninth Circuit. Here's the order is Marlo v. United Parcel Service, Inc. There wasn't much analysis needed:

Appeal from the United States District Court for the Central District of California, Dean D. Pregerson, District Judge, Presiding

Argued and Submitted October 17, 2007 Pasadena, California Before: KOZINSKI and McKEOWN, Circuit Judges, and JONES, District Judge.

Michael Marlo appeals the district court’s grant of summary judgment in favor of United Parcel Service (“UPS”) on his claim that UPS misclassified its FILED OCT 25 2007 CATHY A. CATTERSON, CLERK U.S. COURT OF APPEALS Full-Time Supervisors (“FTS”) as nonexempt employees. Summary judgment is appropriate where, viewing the evidence in the light most favorable to the nonmoving party, there is no genuine issue of material fact. Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). Marlo has raised material issues of fact related to whether the FTS “customarily and regularly exercise[] discretion and independent judgment.” Cal. Code Regs. tit. 8, § 11090(1)(A)(1)(d) (2005). Accordingly, summary judgment as to that issue was improper.

REVERSED AND REMANDED.

You can listen to the oral argument by going to the court's website at http://www.ca9.uscourts.gov/ca9/media.nsf/Media%20Search?OpenForm&Seq=2. Enter case number 05-56446 to download or launch the audio file. While both sides performed admirably during their remarks, it was quite apparent that there were triable issues that compelled the court to reverse the summary judgment. Judge Kozinski's parting words to Mr. Wilcox were: "Let me give you two words of advice: Set-tle." That ended any meaningful drama for parties waiting for the opinion.

Divide and Do Not Conquer

Michael Hassen of Jeffer, Mangels, Butler & Marmaro, who publishes the Class Action Defense Blog put up an interesting post last month about a case called Guevarra v. Progressive Financial. In it, the U.S. District Court ofr the Northern District of California denied class certification without prejudice, and ordered the putative class counsel to show cause why the case shouldn't be referred to the California State Bar. Ultimately, United States District Chief Judge Vaughn Walker did not refer the matter for discipline, but the fact that a District Court Judge pondered the idea is interesting, to say the least.

The plaintiff's counsel's "offense" was to agree to divide a putative class to separate the prosecution of claims under the Fair Debt Collection Practices Act (FDCPA) under circumstances where the putative class could seek more damages in multiple proceedings than in a single proceeding. The reason for this was a peculiarity in the FDCPA which capped damages in any class action at one percent of a company's net worth in . The District Court was outraged, and considered this a move done solely to increase attorney's fees. The court ignored the fact that the tactic also dramatically increased the potential recovery by the class because of the quirk in the FDCPA.

In response to the court’s order to show cause, counsel cites Mace v. Van Ru Credit Corp. (7th Cir 1997) 109 F.3d 338 as authorizing their tactics. But in Mace, the court declined to impose a duty on the plaintiff to bring suit on behalf of the broadest possible class. Mace does not, however, condone post-suit collusion between counsel in separate actions in order to cut a class in two.

Mace nevertheless highlights a troubling aspect of the FDCPA, 15 USC §§ 1692 et seq, which provides that:

(a) [A]ny debt collector who fails to comply with any provision of this subchapter with respect to any person is liable to such person in an amount equal to the sum of:
(1) any actual damage sustained by such person as a result of such failure;
(2) (A) in the case of any action by an individual, such additional damages as the court may allow, but not exceeding $ 1,000; or (B) in the case of a class action,
(i) such amount for each named plaintiff as could be recovered under subparagraph (A), and (ii) such amount as the court may allow for all other class members, without regard to a minimum individual recovery, not to exceed the lesser of $500,000 or 1 per centum of the net worth of the debt collector; and
(3) ... the costs of the action, together with a reasonable attorney fee....

(15 USC § 1692k)

The problem lies with the statutory limit on damages in § 1692k(a)(2)(b)(ii), which applies to each FDCPA class action, not to all FDCPA class actions involving a particular debt collector. This encourages the multiplication of proceedings. If the debt collector has a net worth of less than $50 million, then the class may recover only 1 percent of that amount. Accordingly plaintiffs might divide into 100 classes which each take 1 percent. If the debt collector is worth more than $50 million, then each class may recover only $500,000, and plaintiffs might divide into an increasing number of classes, each taking a bite at the golden apple until the company is broke.

Maybe we're missing something, but it appears to us that the class counsel was entirely in the right here, and that a class action was appropriate, and it was a superior means of litigating these claims, but that, according to the best interests of the class, it was logical and appropriate to separate the classes into logically related smaller groups so that fewer class members would have their claims reduced by the recovery cap under the FDCPA. We can see why a defendant wouldn't like this, but that's how Congress designed the statute.

The case, incidentally, was dismissed with prejudice after the show cause hearing, pursuant to a stipulation filed three months earlier.

Class Action Settlement Order Reversed Because Fees Were Too Low

Last month, the Seventh Circuit reversed a U.S. District Court order regarding attorneys' fees in a class action settlement because the trial court used the wrong method and, consequently, may not have awarded enough fees. Sutton v. Bernard (7th Cir. 2007) __ F.3d __ will be going into our research folder immediately.

Robinson Ford Sales: Another Class Certification Denial Reversed

In September, the Fourth Appellate District reversed an order denying class certification in Lewis v. Robinson Ford Sales, Inc., a case involving negative equity financing under the Automobile Sales Finance Act, Consumer Legal Remedies Act, and Unfair Competition Law. The matter was ordered remanded with directions to enter an order certifying the class. Last month, the court granted a half dozen requests to publish the opinion.

The plaintiff alleged that the dealership inflated prices due by including deficiency balances on previous automobile loans without adequate written disclosure. The plaintiff's position was that mandatory disclosures regarding purchase price should be treated like strict liability claims for certification purposes, and individualized proof of reliance or harm was not required to establish liability.

The trial court applied incorrect standards, focusing on what the defendant characterized as individualized fraud and reliance issues. However, the claims were amenable to certification, with common questions of law and fact, because the statutory violations could be determined by examining the face of the defendant's own records; common law fraud, requiring specific findings of causation and reliance, was not an issue because CRLA claims do not require individualized proof of causation of injury from a deceptive practice. Moreover, individualized issues pertaining to potential punitive damages were not a ground for denial of certification. It was premature for the trial court to consider that issue because the merits had not been determined, but in any event, is has long been the law in California that a plaintiff seeking punitive damages is not barred from pursuing class certification. Legal and factual issues that go to remedies simply cannot outweigh the common issues related to liability when deciding certification.

A petition for rehearing was denied today. You can download the full text of is Lewis v. Robinson Ford Sales, Inc. here in pdf or word format.

DIR's Depublication Request Denied in Corrales

The Supreme Court has denied the Labor Commissioner's request to depublish the opinion in Corrales v. Bradstreet. From a non-political, legal standpoint, we thought it was a silly request, since the heart of the opinion would apply to the DIR in future cases whether or not the opinion was published, but we're sure there were political reasons why the administration and/or its favorite campaign donors wanted the opinion gone. We discussed the opinion a few months ago in a post entitled, simply enough, Corrales v. Bradstreet.

Live Blogging "Class Actions in Alameda County: Advanced Seminar"

Kim Kralowec liveblogged the recent Class Actions in Alameda County: Advanced Seminar:

Many thanks to the Alameda County Bar Association, Judges Freedman and Sabraw, and Messrs. Obbard and Stemmler for allowing me to bring this to my readers. Press the "refresh" button periodically for updates to this post throughout the evening. I'm told that the program will begin at approximately 6:00 p.m.

And then she shared her detailed notes from the seminar. The post is long and includes a lot of the best information conveyed at the seminar. It might be the single best legal blog post we've ever read. While we were busy with fire-related hassles and the wrap-up of three fairly sizable class action settlements, our blog was quasi-dormant for half of October, or we'd have posted this link a week ago. We're posting two-a-days to get caught up, because there has been much to talk about lately.

First Post-Gentry Arb Case: Agreement Invalidated

In the first published post-Gentry class action arbitration case, the First District Court of Appeal has affirmed an order denying a motion to compel arbitration. Murphy v. Check 'N Go of California, Inc. (2007) __ Cal.App.4th __. In Gentry, the Supreme Court set forth a standard for reviewing arbitration clauses with class action waivers, requiring lower courts to consider several factors which inherently favor employees seeking to invalidate the provisions, including: the modest size of any potential individual employee's wage claim, the possibility that putative class members would be retaliated against if they pursued individual claims, the fact that absent class members might not be well informed about their rights, and the difficulties in enforcement of putative class members' rights through individual arbitrations. After considering these factors, if the court finds that class arbitration is likely to be a significantly more effective means of enforcing employee rights, it must invalidate the class action waiver.

In Check ‘N Go, the court of appeal applied those factors and concluded that the agreement was both substantively and procedurally unconscionable with respect to the mandatory arbitration provision, the class action waiver and a third provision that bestowed upon the arbitrator the right to determine whether the arbitration agreement was enforceable.

Defendant Check ’N Go of California, Inc., appeals from an order denying its motion to compel arbitration of a wage and hour case filed by plaintiff Lisa Murphy.  The main issues are whether the class action waiver in the arbitration agreement is unconscionable, a question we review with the benefit of the recent decision in Gentry v. Superior Court (2007) 42 Cal.4th 443 (Gentry), and whether that question should be resolved by the court, rather than an arbitrator appointed under the agreement.  We conclude that the court was empowered to decide the unconscionability issue, agree with its ruling that the class action waiver is unconscionable, and affirm the order denying the motion to compel arbitration.

The court found that the agreement was a contract of adhesion. It was undisputed that employee received the agreement through interoffice mail, the terms were never explained to her, and she was never told that the agreement was optional or negotiable, supporting an inference, under the Gentry standards, that the employee reasonably expected that she was required to sign the contract as a condition of continued employment. The provisions were one-sided, and exculpatory, given the relatively small size of individual claims and the need for the class action remedy to deter the employer from misclassifying employees. Furthermore, the trial court did not abuse its discretion in refusing to enforce the entire arbitration agreement, rather than just severing the unconscionable provisions, because the agreement was permeated with unconscionability.

You can download the full text of Check ‘N Go here in pdf or word format.

Depublication Request Denied for Benson v. Kwikset

Last week, the Supreme Court denied a request to depublish the opinion in Benson v. Kwikset. This was another of the many cases involving Proposition 64, and how to handle requests to amend to substitute new suitable plaintiffs in 17200 cases for which the plaintiff lost standing after the ballot initiative was passed. The 4th District held:

In accordance with Branick, we will remand the case to the trial court to consider whether plaintiff should be permitted to amend the complaint to plead facts satisfying the standing requirements under the revised statute. If so, the trial court shall conduct further proceedings limited to a determination of whether plaintiff can prove he has standing and can maintain this lawsuit as a representative action. In the event plaintiff does so successfully, the original judgment shall be reimposed and the balance of our opinion shall stand as resolution of the issues previously raised by the parties.

Benson presented an interesting twist because a judgment had been entered before Prop 64 passed.

Brinker Meal Break Opinion Vacated

More than ten requests for publication were filed in the Brinker case: Cross Country Healthcare, California Employment Law Council, Atkinson, Andelson, Loya, Ruud & Romo, Paul, Plevin, Sullivan, etc., Akin, Gump, Strauss, etc., Winston & Strawn, McKenna, Long & Aldridge, Sheppard Mullin, Wells Fargo, Proskauer Rose and Manatt Phelps Phillips. And the DIR. Proving that it is now little more than a political spoil, Labor Commissioner Angela Bradstreet also sought publication of the opinion, even though it contradicted a long-standing DLSE position (taken when the GOP did not control the DLSE's policies). The 4th District responded to the requests, and a petition for review, by sending a letter to the Supreme Court saying this:

Enclosed are 10 requests to publish the opinion in the above matter, together with a copy of the opinion. By separate letter, this court is requesting that the Supreme Court grant review and transfer the case to this court. This court recommends the opinion not be published on the ground it does not yet meet the standards for publication.

The separate letter said:

Chief Justice George: In the matter of Brinker Restaurant Corporation v. Superior Court of San Diego County/Hohnbaum, et al. (S157479, D049331), the Fourth Appellate District, Division One issued an opinion on October 12, 2007, stating the opinion is final as to this court immediately. The portion of the opinion stating it is final immediately is a clerical error, therefore this court respectfully requests that the Supreme Court grant review and transfer the case to this court. Please note a Petition for Review was filed on October 22, 2007. By separate letter from Acting Presiding Justice Gilbert Nares in response to the 10 requests to publish the opinion in the above matter, the court has recommended the opinion not be published on the ground that it does not yet meet the standards for publication.

In response, the Supreme Court quickly vacated the opinion:

At the request of the Court of Appeal, review is granted on this court's own motion. The cause is transferred to the Court of Appeal, Fourth Appellate District, Division One, with directions to vacate its opinion and reconsider the matter as it sees fit. The petition for review is denied as moot. The requests for publication are denied as moot. Votes: George, C.J., Kennard, Baxter, Werdegar, Chin, Moreno and Corrigan, JJ.

As a result, the opinion is, for the time being, not only unpublished, but vacated. When and in what form the final opinion will be published is anyone's guess. The court's website says a remittitur will be issued on November 13, 2007, but that clearly will not happen. Whether further briefing or argument will be permitted in connection with the reconsideration is unclear.

Rehearing Denied in Gentry

The Supreme Court has denied Circuit City's petition for rehearing in Gentry v. Superior Court. The three dissenting justices voted in favor of granting rehearing.

Supreme Court Reverses Gattuso

Labor Code § 2802 requires employers to indemnify employees for necessary expenditures incurred in discharge of their duties. What if an employer doesn't want to be bothered with that requirement, and instead, "ballparks" the usual costs and increases its workers' wages accordingly? In October 2005, in Gattuso v. Harte-Hanks Shoppers, Inc., the Second District Court of Appeal held that Section 2802 does not preclude employers from paying increased salaries or commissions "in lieu of" reimbursement for actual expenses, at least with respect to the expenses at issue in that case (automobile expenses). The Supreme Court granted review on the following issue:

Petition for review after the Court of Appeal affirmed orders in a civil action denying class certification. This case includes the following issue: May an employer comply with its duty under Labor Code section 2802 to indemnify its employees for expenses they necessarily incur in the discharge of their duties by paying the employees increased wages or commissions instead of reimbursing them for their actual expenses?

So, can the employer do this? The answer is, yes, but only if they do it carefully and they don't save underpay the employees by doing it that way.

Labor Code section 2802, subdivision (a), requires an employer to indemnify its employees for expenses they necessarily incur in the discharge of their duties. May an employer satisfy this statutory obligation by paying employees increased wages or commissions instead of separately reimbursing them for their actual expenses?

We conclude that an employer may satisfy its statutory reimbursement obligation by paying employees enhanced compensation in the form of increases in base salary or increases in commission rates, or both, provided there is a means or method to apportion the enhanced compensation to determine what amount is being paid for labor performed and what amount is reimbursement for business expenses.

As we will explain, our conclusion differs somewhat from that reached by the trial court and the Court of Appeal, and the differences affect the analysis of another issue presented here, whether the trial court abused its discretion in denying class certification. Accordingly, we reverse the Court of Appeal’s judgment and remand the matter to that court for further proceedings consistent with our opinion.

In essence, the court held that section 2802 does not prohibit an employer’s use of a lump-sum method to reimburse employees for work-related expenses, as long as (1) the amount paid is sufficient to actually fully reimburse employees for the expenses they necessarily incur, and (2) the reimbursement is accounted for separately from their regular income.

Regarding the first point, an employee must be permitted to challenge the lump-sum payment as being insufficient under section 2802, by comparing the payment with the amount that would be payable under either the actual expense method or the mileage reimbursement method. If the comparison reveals that the lump sum is inadequate, the employer must make up the difference.

As to the second point, an employer is not prohibited from combining wages and business expense reimbursements in a single enhanced employee compensation payment or from discharging its section 2802 business expense reimbursement obligation through an increase in salary or in commission rates, but the employer must provide some method or formula to identify the amount of the combined employee compensation payment that is intended to provide expense reimbursement. That method or formula must afford the employee (and state and federal officials) the ability to differentiate between wages and expense reimbursements. And a lump sum reimbursement formula does not violate Labor Code § 226, per se.

In light of the court's interpretation of section 2802, the trial court's denial of class certification was also reversed, and the case is to be remanded to the trial court for reconsideration of the class cert issues in light of the Supreme Court's ruling.

Harte-Hanks has taken the position that as to the members of this proposed class, it fulfilled its reimbursement obligation under section 2802 by paying them higher commission rates and higher base salaries than it paid to inside sales representatives. As we explained in the previous section, the validity of this claim will turn on the resolution of these questions: (1) Did Harte-Hanks adopt a practice or policy of reimbursing outside sales representatives for automobile expenses by paying them higher commission rates and base salaries than it paid to inside sales representatives? (2) If so, did it establish a method to apportion the enhanced compensation payments between compensation for labor performed and expense reimbursement? (3) If so, was the amount paid for expense reimbursement sufficient to fully reimburse the employees for the automobile expenses they reasonably and necessarily incurred? Neither the trial court nor the Court of Appeal framed the class certification issue in that way, and so neither court considered whether these inquiries are capable of resolution on a class-wide basis. Accordingly, the class certification issue is to be reconsidered upon remand.

We previously discussed the case here: "Supreme Court Appears Ready to Reverse Gattuso."

The court appears likely to hold that, to comply with this obligation by increasing compensation to cover expenses, there must be a specific allocation between expense reimbursement and other compensation; and in a dispute, the employer should be required to prove that the amount allocated to expenses exceeds the amount of actual expenses. Any other outcome would essentially permit employers to evade the legislature's objective under Section 2802 in almost any situation where the wages paid exceed the sum of an employee's expenses plus minimum wage. Harte-Hanks Shoppers, Inc.'s plan also unfairly saddled employees with additional tax obligations, since the reimbursements would have been fully taxable, but the expenses would have been subject to the two percent floor, and not available to all filers.

Once again, our friends in the audience brought us accurate information. Thanks, all.

Brinker Certification Reversed

An opinion was issued today in Brinker Restaurant Corp. v. Superior Court (Hohnbaum) (4th Dist. No. D049331), regarding meal and rest period criteria and class certification. It isn't yet on the court's website, but here is the holding:

We conclude that the class certification order is erroneous and must be vacated because (1) the order rests on improper criteria and incorrect assumptions with respect to the rest break claims, and the court abused its discretion in finding that those claims are amenable to class treatment; (2) the court's "rolling five-hour" meal period ruling in its July 2005 order was erroneous, and thus the class certification order rests on improper criteria with respect to the rolling five-hour meal period claims; (3) the class certification order rests on an incorrect assumption with respect to the meal period claims to the extent those claims are based on the theory that Brinker had a duty to ensure that its hourly employees took the meal periods it provided to them, and thus the court abused its discretion in finding that these claims are amenable to class treatment; and (4) the court incorrectly assumed it did not have to examine the elements of plaintiffs' "off-the-clock" claims, and thus abused its discretion by finding without such an examination that those claims are amenable to class treatment. Accordingly, we order that a peremptory writ shall issue with directions that the superior court vacate its order granting class certification.
...
Let a peremptory writ of mandate issue directing the superior court to vacate its July 6, 2006 class certification order, enter a new order denying with prejudice certification of the proposed rest break subclass, and denying without prejudice certification of the proposed meal period and off the clock subclasses. The matter is remanded with directions that the court examine and consider the elements of plaintiffs' meal period and off the clock claims, including the issue of whether Brinker had a duty under section 512(a) and IWC Wage Order No. 5 to ensure that its hourly employees actually took the meal periods it provided to them. The stay issued on December 7, 2006, is vacated. Brinker is entitled to its own costs in this writ proceeding. This opinion is made final immediately as to this court.

The opinion is unpublished.

[Update: The opinion is on the website now in pdf and word format.]

Another Class Certification Denial Reversed

A few months ago, we were beginning to come to the conclusion that nearly every class action certification was going to rise or fall based upon the rulings made in Superior Court. Since then, there have been a surprising number of reversals, not only of certification orders, but also denials of certification motions. A recent example can be found in Capitol People First v. Department of Developmental Services (2007) __ Cal.App.4th __, in which the First District Court of Appeal reversed an order by Alameda County Superior Court judge Ronald Sabraw denying certification of a class action, and remanded the case with directions to enter an order granting certification.

Trial courts have wide discretion with regard to class certification. Thus we will not overturn the lower court’s certification decision which is supported by substantial evidence unless it (1) used improper criteria; or (2) made erroneous legal assumptions. (Richmond v. Dart Industries, Inc. (1981) 29 Cal.3d 462, 470; Reese v. Wal-Mart Stores, Inc. (1999) 73 Cal.App.4th 1225, 1229, 1233.) We do not decide in the first instance whether the requested class is appropriate. Rather, our job is to decide whether the trial court abused its discretion in denying certification. (Reese, supra, 73 Cal.App.4th at p. 1233.) A certification ruling not supported by substantial evidence will not stand. (Lockheed Martin Corp. v. Superior Court, supra, 29 Cal.4th at p. 1106.) By the same token, even if the decision denying certification is supported by substantial evidence, we will reverse if it is based on improper criteria or incorrect assumptions. (Linder v. Thrifty Oil Co., supra, 23 Cal.4th at p. 436.)

Though not a wage and hour case, the holding in Capitol People First v. Department of Developmental Services certainly applies to most wage and hour class actions.

The decision is very interesting and definitely worth reading. Among other things, the Court of Appeal held that the trial court had improperly "restricted" the "use of sampling or statistical proof" at the class certification stage. Slip op. at 16.

The trial court delivered a ruling on the issue of commonality that was marked by contradictions and inconsistencies. While acknowledging that appellants were seeking only systemic relief, and not individual solutions to individual problems, it nonetheless insisted on defining the claims asserted in the litigation with respect to the “common discrete wrongs that affect individual class members.” Thus, instead of focusing on the similar but broader list of common legal and factual questions which appellants provided, and the proof offered for the same, the court seized instead on appellants’ examples of typicality to define discrete wrongs common to each individual which it concluded demanded individualized inquiries. ¶ Compounding this error, the trial court filtered the analysis and considerations required to address these issues solely through the lens of the individual ... rather than taking a broader, systemic view concentrating on respondents’ policies and practices.

The case is filled with language useful to litigants embroiled in a contested certification. Some quotes that we will be cutting and pasting for briefs we'll be filing in the next month include these:

Sav-On teaches that in resolving whether there is substantial evidence to support the trial court’s certification order, “we consider whether the theory of recovery advanced by the proponents of certification is, as an analytical matter, likely to prove amenable to class treatment.” (Sav-On, supra, 34 Cal.4th at p. 327.) As part of this process, we consistently look to the allegations in the complaint and the declarations of attorneys representing the class. (Ibid.)

...

The court misunderstood the nature of practice and pattern litigation and therefore based its determination that common factual and legal issues did not predominate on improper criteria and erroneous legal assumptions. These errors led the court to prejudge the merits of appellants’ case. Either sampling is valid and reliable, or it is not. Either statistical proof is compelling and convincing, or it is not. These inquiries go to the merits—the quantum of proof appellants are able to amass. It is not the trial court’s role to become enmeshed with the merits of the underlying action, or to concern itself with which side’s experts are more qualified. At the class certification stage, the concern is whether the evidence plaintiffs will offer is “sufficiently generalized in nature.” (In re Cipro Cases I & II (2004) 121 Cal.App.4th 402, 412-413.)

Judge Sabraw, for whatever it's worth, is also the judge whose order denying certification was upheld in Dunbar v. Albertson's, which is widely applauded by defendants as the antidote to Sav-On. He is now a JAMS arbitrator/mediator who lectures from time to time about class litigation and certification issues. If you litigate wage and hour class actions, you can and should download Capitol People First v. Department of Developmental Services, which for now can be found here in pdf or word format.

Supreme Court Grants Review of Arias

The Supreme Court has issued a grant-and-hold review order in Arias v. The Superior Court of San Joaquin County (Angelo Dairy). We discussed the case in a July 2007 post:

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

The petition, filed by Arias, did not seek review of the holding that authorized PAGA claims outside of class action litigation, but instead challenged only the portions of the holding addressing the pleading of UCL claims without meeting class action pleading requirements. The granting of review renders the entire opinion uncitable under Rules of Court 8.1105(e).

Petition for Rehearing Filed in Gentry

Circuit City has filed a petition for rehearing in Gentry v. Superior Court (Rehearing petition filed Circuit City Stores, Inc., real party in interest by Steven B. Katz, Thelen Reid Brown Raysman & Steiner, LLP CRC 8.25(b)). Almost immediately, the Supreme Court extended its time to consider modification or rehearing to and including November 28, 2007. Gentry filed an answer to the petition last week.

Flight Attendants Wage Claims Governed by Railway Labor Act

A flight attendant's claims under California labor law regarding minimum wages, overtime and meal/rest breaks are preempted by the Railway Labor Act (45 U.S.C. § 151 et seq.), according to an opinion published this week by the Second District Court of Appeal in Fitz-Gerald v. SkyWest Airlines, Inc. Accordingly, a summary judgment in favor of SkyWest on the employee's class action for such wage claims was upheld.

The case arose, at least in part, from a practice under which flight attendants are paid a per diem to cover all work performed other than "gate-to-gate" flight time. This "block time pay" averages $1.60 per hour, but only reduces the flight attendants' overall compensation rate to $23.13 an hour (flight time plus block time, averaged over a month). The employees, citing Armenta v. Osmose, Inc. (2005) 135 Cal.App.4th 314, contended that that wage averaging under the FLSA could not trump state minimum wage law. However, the court distinguished Armenta on several grounds: it did not involve an interstate air carrier, it not involve the RLA or a CBA sanctioned under the RLA, and it did not involve a state wage order that contained a RLA exemption.

The RLA regulates labor relations between common interstate air carriers and their employees. In United Air Lines, Inc. v. Industrial Welfare Com. (1963) 211 Cal.App.2d 729, the court held that a California IWC order requiring employers to pay for flight attendant uniforms did not apply to an interstate airline because the collective bargaining agreement provided that the cost of uniforms was to be paid in part by the employee. The court concluded that the IWC order was preempted by the RLA and that enforcement of the IWC order would burden interstate commerce.

Similarly, here, the court found that there was a CBA (even though SkyWest is a non-union employer), and that although the RLA contains no specific language with respect to state minimum wage law and meals/rest breaks, the RLA preempts all state law causes of action that depend upon interpretation of a CBA, including claims for state minimum wages, meal/break time damages and overtime wages. Because the first, second, and third causes of action were preempted by the RLA, the trial court properly ruled that the fourth cause of action for waiting time penalties (Labor Code § 203) and fifth cause of action for violation of the Unfair Business Practices Act were also barred.

Alternatively, the trial court ruled that the complaint was barred by the Airline Deregulation Act of 1978. The ADA provides that a state "may not enact or enforce a law, regulation or other provision having the force and effect of law related to a price, route, or service" of an air carrier. The United States Supreme Court has held that claims under a state unfair business practices statute are preempted by the Airline Deregulation Act because the state claims would impose economic regulation on airlines. Based on those federal cases, the court concluded that the ADA separately bars the fifth cause of action for relief under the California Unfair Business Practices Act.

You can download the opinion in Fitz-Gerald v. SkyWest Airlines, Inc. here in pdf or word format.

Brinker Could Clarify Further the Meaning of "Providing" a Meal Period

The Fourth District has heard oral argument in Brinker Restaurant Corp. v. Hohnbaum (4th Dist. No. D049331), noted as one of the first five large meal period class actions to be certified. Among other things, the case casts a second look at what it means to provide a meal period, as is required under the IWC wage orders, perhaps with an eye toward revisiting another appellate district's 2005 ruling in Cicairos v. Summit Logistics, Inc. (2005) 133 Cal.App.4th 949. The earlier case affirmatively required employers to ensure that workers are actually relieved of all duty during meal periods. Employers argue for "provide" to mean something more synonymous with the rest period duties to "permit and authorize." They also argue that the difference substantially affects the likelihood that a case could be suitable for class action treatment.

The case was ably argued on both sides, but none of the observers we've chatted, texted, IMd or emailed with had any strong opinions as to whether or where the court will end up on the certification issues. If you saw the arguments and have an opinion, please leave a comment. The one and only unanimous view we've heard is that Miles Locker argued well for the amici and that the justices seemed very interested in what he had to say about the DLSE regulations and practices. Aside from that, defense lawyers seemed to believe the employer's side was better presented, and employees' lawyers thought the opposite.

You can track the progress of Brinker here.

Bill Lerach To Plead Guilty, Go To Prison

The Washington Post has reported that prominent class action attorney Williams S. Lerach has agreed to pay the government $8 million in fines and penalties and to plead guilty to a charge of obstructing justice. Lerach’s plea stems from charges that he and his former law firm provided kickbacks to plaintiffs in class action cases. Prior reports alleged that the kickbacks were millions of dollars. Under the terms of the plea, which is not yet approved by the judge, Lerach will serve at least one year, and no more than two years, in a federal penitentiary.