Wage Law

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

Happy Independence Day.

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

The Class Action Fairness Act has undoubtedly resulted in a larger number of wage and hour class actions being sent to U.S. District Court. So many, in fact, that some lawyers have started filing their class actions in District Court to begin with, denying the defense the opportunity to choose a (perceived) better forum for the employer, particularly if they believe that there could be a nationwide FLSA claim included in the complaint. Some now do so whether or not their class action meets the subject matter jurisdictional requirements under CAFA, assuming that, once it has jurisdiction over the case as a federal (FLSA) question, the District Court will exercise supplemental jurisdiction over all related wage and hour claims arising under state law. That assumption isn't always correct.

In one recent case filed in U.S. District Court in Connecticut, a group of employees alleged that their employer failed to pay overtime required under both the FLSA and Connecticut law. Neary v. Metropolitan Prop. & Cas. Ins. Co. (D. Conn. 2007) 472 F.Supp.2d 247, 248. Their fourth and fifth causes of action sought sought remedies for alleged violations of state wage and hour laws "in each state in which each plaintiff worked." The defendant filed a motion to dismiss, arguing that the court needn't and shouldn't exercise its discretion to here both an opt-in FLSA collective action and an opt-out class action based upon state law. The District Court agreed, finding that an irreconcilable conflict existed between the state law class procedures and the FLSA collective action procedures, such that it would be better for the court and the litigants if the court declined to exercise supplemental jurisdiction over the state wage and hour class action.

The rationale expressed by the court in Neary won't apply to every mixed FLSA and state law case. It certainly would not apply if the court already had jurisdiction over state law claims under CAFA, and its persuasive value might not be as powerful in cases involving just one state's wage and hour laws, because the court based its ruling in part on the unusual circumstances presented where “the proposed class ... involves not just one state's wage and hour statute in addition to FLSA claims, but potentially involves claimed violations of fifty states' wage and hour statutes, each with potential novelties ... and complexities."

There have been numerous cases, before and since, in which the trial court invoked supplemental jurisdiction over state law (opt-in) wage and hour class actions filed along with FLSA claims (e.g., Cryer v. Intersolutions (D. D.C.) Case No. 06-2032, April 20, 2007), but the possibility that a motion to dismiss will be granted must be considered when the class action plaintiff is deciding which forum to choose.

It looks like the principles of Fireside Bank v. Superior Court (Gonzalez) (2006) 40 Cal.4th 1069, will doom the novel theory advanced in Ortiz v. Lyon Management Group, Inc., where the defendant won a summary judgment motion, before hearing a certification motion, and then asked the court to go back and certify the case. In the appeal, the defendant argued that the trial court abused its discretion by refusing to certify the case, after entry of the summary judgment order. The defendant claimed that the court should have forced the plaintiff to serve as an unwilling class representative on a doomed claim, and should have ordered publication and service of 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.

At today's oral argument, the first question directed to the appellant came from Justice Ikola, who asked (and we admittedly paraphrase here) whether the appellant could direct the court to any case in which any court had ever done anything remotely similar to what the defendant asked of the court in this case. This question seemed to set the tone for the rest of the appellant's argument.

If you check the case docket, you may notice quite a few friends of the court submitting papers in favor of Lyon Management Group, Inc. Upon closer examination, you will note that they submitted their amicus papers in support of Lyon Management as a respondent, on the underlying creditor issue that was at stake in the summary judgment motion. As appellant, on its appeal seeking retroactive certification by a prevailing party after determination of the merits, Lyon Management seems to be without any friends.

We leave the argument wondering not whether the appeal will be denied, but whether the cross-appeal will reinstate the case. On the appeal, we also wonder whether the court will find that there can be no after-the-fact certification; or merely that there can be no after-the-fact involuntary no-opt-out class; or merely that the trial court was within its discretion to deny certification. If the cross-appeal succeeds, it is possible that the opinion will be an unpublished reversal. If the cross-appeal fails, an interesting published opinion seems more likely.

In Massie v. Ralphs Grocery Company, another Second District Court of Appeal panel has declared invalid an arbitration agreement that purports to forbid employees from bringing class actions or representative suits. The opinion is unpublished, but the discussion in the opinion should be of interest to parties arguing this issue while we await the Supreme Court's decision in Gentry.

The arbitration agreement Ralphs uses provides, among other things, that

unless controlling legal authority requires otherwise, there will be no right or authority for any dispute to be heard or arbitrated on a class action basis, as a private attorney general, or on bases involving disputes brought in a representative capacity on behalf of the general public, of other Ralphs employees (or any of them), or of other persons similarly situated. The individual claim of any Employee bound by this Policy is subject to this Policy. Any action brought against Ralphs (or any of them) by any other person (whether an Employee bound by this Policy or not) in a representative capacity on behalf of or for the benefit of any Employee bound by this Policy will be designated as a ‘Representative Action.’ To the fullest extent permitted by law, any individual claim by an Employee for a remedy pursuant to or under the authority of a Representative Action is subject to this Policy. Thus, even though some of the Federal Rules of Civil Procedure apply as set forth above, there shall be no judge or jury trials, and there shall be no class actions or Representative Actions permitted, unless controlling legal authority requires otherwise.

¶ The Store Member must not challenge, or have challenged, the legality, validity, or enforceability of this Bonus Plan or any predecessor or successor plan(s) on behalf of the Store Member himself or herself, in any type of representative capacity on behalf of any other current or former employees of the Company, or as a participant in any type of representative action making any such challenge(s). . . .

The terms were set forth in the complany's 2003 bonus plan. The following year, Ralphs got even bolder, adding this to its 2004 Bonus Plan, in which the company violated Labor Code § 206.5 by forcing employees to forego their bonus unless they waived wage claims brought in other representative and class actions:

Acceptance of any payment under this Bonus Plan by any participant constitutes a waiver, release, relinquishment and discharge of any and all claims the participant has, had or may have against Ralphs Grocery Company (and/or its predecessor, successor, parent, subsidiary and/or affiliated entities) arising out of or related to any and all previous bonus plans (and the payments made thereunder) and/or any actual or claimed misclassification as a salaried employee rather than as an hourly employee, as previously, now or hereafter made or asserted by such participant, regardless of whether such claims were or are made or asserted by or for such participant individually, collectively, putatively, on a representative basis, or otherwise, including without limitation in connection with the following litigation: Eddy Korkiat Prachasaisoradej vs. Ralphs Grocery Company, Los Angeles County Superior Court Case No. BC254143 (commenced July 13, 2001), California Court of Appeal (Second Appellate District) Case No. B165498 (commenced March 3, 2003); David Swanson vs. Ralphs Grocery Company, Los Angeles County Superior Court Case No. BC284875 (commenced November 7, 2002), California Court of Appeal (Second Appellate District) Case No. B168257 (commenced June 30, 2003); and James Massie, Eddie Korkiat Prachasaisoradej, Teresa Lee, Jose Mendez and Jaime Rosales vs. Ralphs Grocery Company, Los Angeles County Superior Court Case No. BC321144 (commenced September 7, 2004).

The court found that the opportunity to opt out of the bonus plan was not an opportunity to opt out of the arbitration agreement, and that this was still a "take it or leave it" imposition. The court noted that:

"Without even addressing the brief (apparently 14-day) window of time in which the employees were required to exercise the “opportunity to opt out,” the obstacles presented to communicating the exercise of this purported option (given the vague reference to the registered agent for service of process without contact or other information) and other such issues, the point is the employees were merely given the opportunity to “opt out” of the Bonus Plan (after working for almost the entirety of the fiscal year on which it was based); as to the arbitration provision, the employees were still forced to “take it or leave it,” with no meaningful opportunity to negotiate the arbitration provision or class action waiver. As such, the purported “opt out” opportunity is effectively illusory. (Cf. Circuit City Stores, Inc. v. Mantor (9th Cir. 2003) 335 F.3d 1101, 1107 [in light of “Circuit City’s insistence that Mantor sign the arbitration agreement under pain of forfeiting his future with the company the fact that in 1995 Mantor was presented with an opt-out form does not save the agreement from being oppressive, for Mantor had no meaningful choice nor any legitimate opportunity, to negotiate or reject the terms of the arbitration agreement”].)"

The court found no basis for distinguishing the reasoning of Discover Bank in the employment setting, as in the consumer credit context, in that the contract is adhesive, and the “manifest onesidedness” of the class action waiver is “blindingly obvious,” since Ralphs would have no reason to use the class action device in disputes with its employees.

While the advantages to [Ralphs] are obvious, such a practice [prohibiting class or representative actions under these circumstances] contradicts the California Legislature’s stated policy of discouraging unfair and unlawful business practices, and of creating a mechanism for a representative to seek relief on behalf of the general public as a private attorney general. (See, e.g., Bus. & Prof. Code § 17200 et seq.) It provides the [employee] with no benefit whatsoever; to the contrary, it seriously jeopardizes [employees’] rights by prohibiting any effective means of litigating [Ralphs’] business practices. This is not only substantively unconscionable, it violates public policy by granting [Ralphs] a ‘get out of jail free’ card while compromising important consumer [and employee] rights.” (See also Civ. Code § 1668.)

There is a pending request to publish this opinion. If the names of the parties sound familiar, you may want to note that this Massie is different from the Massie whose suit against Ralphs led to the 2004 appellate opinion in Ralphs Grocery Co. v. Massie (2004) 116 Cal.App.4th 1031, regarding arbitration agreements and DLSE claims, that was subsequently ordered depublished.

In light of the decision in Murphy v. Kenneth Cole Productions, Inc., the Supreme Court has transferred Mills v. Superior Court (Bed, Bath & Beyond), Chalecki v. Superior Court (State Farm Mutual Insurance), Banda v. Richard Bagdasarian, Inc., to their respective courts of appeal for further proceedings consistent with the holding in Murphy. In National Steel & Shibuilding v. Superior Court (Godinez), review has been dismissed, and the case was remanded. The same happened to the writ petition matter in Albertson's v. Wilcox. However, Dunn v. Superior Court (Kroger Company) is still with the high court, but it is also related to the Gentry class action arbitration case on next month's calendar, so a dismissal or transfer isn't expected in that case for several months.

Pursuant to Rule 8.528(b)(3), after an order dismissing review, the Court of Appeal opinion remains unpublished unless the Supreme Court orders otherwise. There was no order republishing the Fourth District's wage-penalty hybrid opinion, so National Steel & Shipbuilding remains unciteable.

The Supreme Court will not review Small v. Superior Court, a published case we discussed in March, in which an Orange County Superior Court ruling declaring invalid a wage order promulgated by the California Industrial Welfare Commission (IWC) was reversed by the Fourth District Court of Appeal.  The trial court had ruled that IWC Wage Order No. 16-2001 (wages, hours and working conditions for employees in the on-site construction industry and other occupations) was not accompanied by a sufficient statement of the basis, was not properly published, and contained an unworkable definition of “given craft,” which made the order "unreasonable, arbitrary, capricious and unfair."

The case of Corrales v. Dell, Labor Commissioner, will be argued in the Third District Court of Appeal on this morning at 9:30 a.m. The case involves a challenge by the California Labor Federation to DLSE precedent decisions and the DLSE policy of holding ODAs in abeyance and issuing one-year awards for rest and meal period claims. We are curious to find out how Murphy has affected the issues in that case.

The Supreme Court has denied a request to publish a decision by the First District Court of Appeal in Southern California Labor/Management Operating Engineers Contract Compliance Committee v. Rea (Ford Construction Company), S150828, A113481, affirming a judgment that denied a petition for writ of mandate against acting director John M. Rea of the California Department of Industrial Relations. The judgment upheld Rea's “Decision on Administrative Appeal” that certain work done under contract in the remediation of a toxic waste site pursuant to a consent decree obtained by the Environmental Protection Agency, is not subject to this state’s Prevailing Wage Law because it is not a “public works” project as defined by the PWL..

Graham v. DaimlerChrysler Corporation and its catalyst theory issues continue to work their way up and down the California courts. The latest appellate case is now done, and the case is headed back to Superior Court for a third time.

Robert Graham, Truman Trekell, and Daniel Hawkins, on behalf of a nationwide class, sued DaimlerChrysler Corporation for breach of warranty on trucks which Chrysler represented could tow 6,400 pounds but which actually could tow only 2,000 pounds. Shortly after the suit was filed, Chrysler offered plaintiffs and all other similarly situated buyers various remedies, including repurchase or replacement of the trucks without any reduction for usage. Because plaintiffs had obtained full remedies, the trial court dismissed the case as moot, but, under the “catalyst theory,” awarded plaintiffs $762,830 in private attorney general attorney fees pursuant to Code of Civil Procedure section 1021.5, using a multiplier of 2.25.

The Court of Appeal affirmed the judgment, but on review, the Supreme Court reversed (Graham v. DaimlerChrysler Corp. (2004) 34 Cal.4th 553), holding that in order to recover attorneys fees, in addition to demonstrating that the lawsuit was a “catalyst” for the defendant’s changed conduct, plaintiffs must show that they made a reasonable attempt to settle the dispute before litigation, and that their lawsuit has merit. The Supreme Court also clarified that any multiplier for fees incurred in litigating attorney fees ("fees on fees") generally should be lower than that applied to fees for the underlying litigation, and held that the trial court had erred in partially basing its multiplier for fees on fees on the “results obtained” factor. The case was then remanded for a hearing on the two new elements of the catalyst theory, and if plaintiffs succeeded, for the trial court to make a new fee award based on the criteria discussed in the opinion.

On remand, the trial court found that the plaintiffs had proven both of the new elements of the catalyst theory and awarded them fees on fees by applying a multiplier of 2.0 for the work done before appeal and applying no multiplier for the work done after remand. The trial court award no fees for work on the appeals. Plaintiffs appealed and Chrysler cross-appealed.

On appeal, the award of fees was upheld, except that the trial court was ordered to reconsider whether to enhance some of the fees, and award fees for appellate work.

Those portions of the order enhancing plaintiffs’ attorney fees on fees for the first trial court proceeding by a 2.0 multiplier and denying plaintiffs appellate attorney fees are reversed. The case is remanded for the court to reconsider whether to enhance any of plaintiffs’ fees on fees for the first trial court proceeding, and if so by what multiplier, in accord with the views expressed in section III, and further to determine plaintiffs’ entitlement to and the amount of appellate attorney fees for the three appeals, including this one. In all other respects (plaintiffs’ entitlement to attorney fees in both trial court proceedings, the related lodestar amounts, and the decision not to multiply the fees for the second trial court proceeding) the judgment is affirmed. The parties shall bear their own costs on this appeal.

The defendant sought review. The Supreme Court has denied DaimlerChrysler's petition for review. Justices Chin and Baxter voted in favor of review. The appellate decision was unpublished, but interesting reading for any attorney dealing with catalyst theory issues. You can get a copy of the unpublished opinion on Westlaw or Lexis, and Google has a copy of the opinion cached at this webpage.

Suppose a plaintiff files a class action complaint in state court alleging aggregate damages "in an amount less than $5 million." What must the defendant do to invoke the Class Action Fairness Act and keep the case in U.S. District Court. In Tate v. U.S. Bank National Association (D. Or. 2007) 2007 WL 1170608, an Oregon judge has followed a 9th Circuit case, Lowdermilk v. U.S. Bank National Association (9th Cir. 2007) 479 F.3d 994, slip op. at 10, and remanded a case back to state court, finding that

Where, as here, there is no evidence of bad faith on the part of the plaintiff, defendant must not only contradict the plaintiff's own assessment of damages, but must overcome the presumption against federal jurisdiction by showing that plaintiff is legally certain to recover at least five million dollars.

"Legally certain to recover." We're bound to see those words pop up quite a bit in future proceedings.

Santa Clara County Superior Court Judge Jack Komar has ruled that public-entity plaintiffs may not retain outside attorneys on a contingency fee basis to handle public nuisance lawsuits. Judge Komar cited People ex rel. Clancy v. Superior Court (1985) 39 Cal.3d 740, which held that a contingent fee arrangement between a city government and a private attorney whom it hired to bring abatement actions against alleged pornography distributors, under the city's nuisance ordinance, was inappropriate under the circumstances, and in the interests of justice, the outside attorney was disqualified. A copy of his order can be downloaded and read here. Santa Clara County is likely to appeal. County Counsel Ann Ravel remarked "if that decision stands, it will impair the ability of cash-strapped public entities from proceeding against defendants who create nuisances in their communities." The issue could make for an interesting debate regarding the role of Business & Professions Code § 17200, and any time Section 17200 is discussed, there is a potential to affect wage and hour cases. However, we've never heard of a public entity hiring outside counsel to enforce wage and hour provisions, much less hiring them under contingent fee arrangements. Most of the time, enforcement of Labor Code and other wage and hour provisions are enforced via class actions or representative actions on behalf of affected representative employees, or are brought under PAGA.

Can an employer who illegally hires an undocumented alien and then refuses to pay wages due to that employee raise the worker's immigration status as a defense to nonpayment of wages? A Superior Court said yes, but the Second District Court of Appeal says "No."

In Reyes v. Van Elk, four workers hired by a public works contractor filed suit alleging failure to pay prevailing wages (Labor Code §§ 1720-1861) on a public work of improvement. The Superior Court granted summary judgment in favor of defendants on the grounds undocumented workers were precluded by the federal Immigration Reform and Control Act of 1986 (“the IRCA”) (8 U.S.C. §§ 1101 et. seq.) and Hoffman Plastic Compounds, Inc. v. NLRB (2002) 535 U.S. 137 from asserting such claims. The Superior Court also found the Supremacy Clause preempted California statutes declaring immigration status irrelevant to claims under California’s labor, employment, civil rights and employee housing laws (e.g., Labor Code § 1171.5, Civil Code § 3339, Government Code § 7285). The plaintiffs argued that the IRCA and Hoffman do not preclude undocumented workers from asserting such claims, and that the California statutes are not preempted. On appeal, the trial court was reversed, and the trial court was ordered to enter an order denying the motion for summary judgment.

The court did not express an opinion about whether the wage claim would survive a showing that the undocumented workers submitted false work authorization documents to the employer. However, it did not that “Earned but unpaid salary or wages are vested property rights.” (Loehr v. Ventura County Community College Dist. (1983) 147 Cal.App.3d 1071, 1080.) And noncitizens are guaranteed the same property rights as citizens. (Cal. Const, art. I, § 20.) It is well established that California’s prevailing wage law is a minimum wage law. (Road Sprinkler Fitters Local Union No. 669 v. G & G Fire Sprinklers, Inc. (2002) 102 Cal.App.4th 765, 778.) The duty to pay prevailing wages is mandated by statute and is enforceable independent of an express contractual agreement. (§§ 1771, 1774-1775.) Thus, while the obligation to pay prevailing wages arises from an employment relationship which gives rise to contractual obligations and claims, the duty to pay the prevailing wage is statutory. (§§ 1771, 1774.) For these reasons we conclude that, because the prevailing wage law is a minimum wage law mandated by statute and serves important public policy goals, section 1194 provides an employee with a private statutory right to recover unpaid prevailing wages from an employer who fails to pay that minimum wage. (Id., at p. 779.)

Moreover, Hoffman only held that allowing the National Labor Relations Board (“NLRB”) “to award backpay [wages that would have been earned but for an unlawful firing] to illegal aliens would unduly trench upon explicit statutory prohibitions critical to federal immigration policy, as expressed in IRCA." It did not speak to payment of wages already earned by the actual provision of labor. In Patel v. Quality Inn South (11th Cir. 1988) 846 F.2d. 700, 704), the 11th Circuit held the IRCA did not purport to limit remedies for unpaid wages available to undocumented aliens under the Fair Labor Standards Act (“FLSA”) reasoning that if the FLSA did not cover undocumented aliens, employers would have an incentive to hire them. The court concluded the legislative history of the IRCA “strongly suggest[ed]” Congress believed undocumented workers would continue to be protected by state and federal wage laws. (Ibid.) The also court reasoned that minimum wage laws supported the IRCA policy of reducing illegal immigration because such laws offset the most “attractive feature” of such workers -- their willingness to work for less than the minimum wage. Other courts have also agreed that the IRCA did not foreclose all remedies for undocumented workers under FLSA, NLRA or other federal labor statutes. (See e.g., cases cited in Patel, supra, 846 F.2d at p. 703 & p. 703, fn. 4; Mester Mfg. Co. v. I.N.S. (9th Cir. 1989) 879 F.2d 561, 567; Contreras v. Corinthian Vigor Ins. Brokerage, Inc. (N.D.Cal. 1998) 25 F.Supp.2d 1053, 1056.)

The Court also found no preemption intended by the IRCA:

Because legislation providing for the payment of prevailing wages comes under the historic police powers of the state, the presumption is that legislation is not superseded by the IRCA. Defendants do not cite any provision in the IRCA preempting state wage and hour legislation. The only specific preemption provision prohibits state or local law from imposing civil or criminal sanctions upon those who employ unauthorized aliens. (8 U.S.C. § 1324a(h)(2).) That provision is irrelevant to the wage claims asserted by plaintiffs. Thus, the IRCA does not expressly preempt state wage laws.

You can download Reyes v. Van Elk here in pdf or Word format.

The Supreme Court will issue an opinion tomorrow in Alan v. American Honda Motor Co. Inc., S137238, B165756; 131 Cal.App.4th 886; Superior Court of Los Angeles County; BC195461. The matter was argued on January 30, 2007. The order granting review framed the issue as follows:

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

We mentioned the case in January, because the Statement of Decision and Minute Order pertained to the denial of a class certification motion, which makes the case of some interest to wage and hour class action attorneys. Perhaps Fireside Bank, which was argued one day earlier, will be decided soon as well.

Tomorrow afternoon in San Francisco, the Supreme Court will be hearing oral arguments in Murphy v. Kenneth Cole Productions. As our regular readers know, we're extremely interested to see what questions are posed, how well the parties present their arguments, and how well each argument is received. We are so interested in the case, we wanted to fly up just to watch, but some personal setbacks have cost us too much time this month, and we must stay glued to our desks. To our dismay, a request for extended media coverage was denied on Friday. If you are thinking about attending, let us know. If you attend, and you would like to send us your comments, we'd be happy to post them, with or without attribution as you see fit.

In a unanimous, but unpublished opinion (Scott v. County of Los Angeles, 2nd District Court of Appeal, B192591), the Court of Appeal has reversed an order by Los Angeles County Superior Court Judge Conrad Aragon which limited the plaintiff's attorney's fee award to an amount equal to her $100,000 jury award. The court held that Judge Aragon abused his discretion by not applying the loadstar system and a multiplier to the fee application.

In Scott, a sexual harassment case, the jury awarded damages of $100,000 against the County of Los Angeles and Los Angeles County Sheriff’s Department, as well as an individual harasser. After prevailing at trial, the plaintiff moved for $456,425 in attorney fees -- a lodestar of $228,212.50, with a multiplier of two -- under Government Code § 12965(b) and Code of Civil Procedure § 1021.5. Judge Aragon awarded precisely $100,000, finding “compelling justification for limiting fees to no greater than the monetary [damages] award given by the jury." The Court of Appeal reversed.

Although the trial court has wide discretion in determining the amount of reasonable attorney fees to be awarded, the California Supreme Court has mandated that the exercise of that discretion be based upon the lodestar adjustment method. In other words, the trial court must determine the appropriate lodestar figure, and then may increase or decrease that amount after considering certain factors. The trial court in this case did not follow that method, and therefore abused its discretion.

Judge Aragon's order showed that he clearly gave maximum weight to the amount of the recovery. “To put the matter in context, it should be first noted that the total verdict amounted to $100,000 as and for non-economic damages only. In this context, the fee request, exclusive of a multiplier, more than doubles the jury’s verdict." After a lengthy discussion of the lodestar method, including a list of various factors the trial court could have used to limit the recovery, the Court of Appeal found Judge Aragon's analysis improper. The case shall be remanded for recalculation of the hours and correct application of the loadstar multiplier. The opinion can be read here in pdf or word format. It does not set any new standard, and we can't imagine it would be reviewed or published, but it certainly would be of interest to any counsel with cases assigned to Judge Aragon. Since we know of a few such persons, we thought we'd pass it along.

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

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

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

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

Trial Court’s Kangaroo Court Remarks

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

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

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

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

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

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

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

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

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

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

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

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

This view is not accurate.

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

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

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

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

The Supreme Court today denied review of an unpublished opinion of the Fourth District Court of Appeal adhering to La Sala v. American Savings & Loan Association (1971) 5 Cal.3d 864 and its minimum standards for dismissing a yet-to-be-certified class action where the lead plaintiff is determined to be unsuitable to continue to represent the class.

In Andrade v. Dollar Tree Stores, Inc., the lead plaintiff accepted his share of a settlement in a related class action which addressed the claims of only part of the class that he had sought to represent. The defendant brought a motion to dismiss, and another putative class member simultaneously sought to intervene or join the suit as class representative in an amended complaint. The class urged the trial court to follow La Sala, which held that, if a court concludes that the plaintiff can no longer represent the class, "it should at least afford plaintiffs the opportunity to amend their complaint, to redefine the class, or to add new individual plaintiffs, or both, in order to establish a suitable representative." However, the trial court chose not to follow La Sala, and dismissed the action, holding that putative class members have no right to intervene in or amend the pleadings in an action which has not yet been certified. On appeal, the Fourth District Court of Appeal reversed the trial court's order in full, and remanded with instructions to file the proposed first amended complaint.

The petition for review sought to make it significantly easier for defendants to obtain dismissals of class actions before a certification hearing and without any adjudication on the merits of the cases. A letter brief joining in the request for review was filed on Dollar Tree's behalf by the California Employment Law Council, an employment defense organization headed by the law firm of Paul, Hastings, Janofsky & Walker LLP.

Any current or former retail store workers at any California Dollar Tree store can get more information by contacting us here. We'll be posting copies of the Supreme Court briefs on our website dollartreeclassaction.com within the next few days.

The Supreme Court has denied a petition to publish a scathing Court of Appeal opinion in Zamani v. St. John Knit's, Inc. We discussed the case and the opinion in a post last August.

While we were out trying cases, the Supreme Court denied review in Dunlap v. Superior Court (2006) 142 Cal.App.4th 330 (employees need not follow the Labor Code Private Attorneys General Act of 2004's administrative procedures as long as they are not seeking PAGA civil penalties which would otherwise only be available to the Labor Commissioner). And in Koehl v. Verio, Inc. (2006) 142 Cal.App.4th 1313 (upholding verdict determining commission chargebacks to be lawful reimbursement of non-wage advances), a petition for review was denied.

We recently found out that the judgment in Savaglio v. Wal-Mart Stores, Inc., the $172 million break case tried in late 2005, was entered on October 11, 2006. The appeal clock is now ticking. Wal-Mart has already appealed several orders in the case, and their attorneys have been quoted promising to appeal this judgment. The opinion(s) should be interesting and will likely be published. We see at least a half-dozen substantial matters of first impression that could be raised in a well-drafted opening brief. In the interim, our spies tell us there is a motion for a new trial being heard on December 4.

Does the existence of the collateral estoppel doctrine trump the right to proceed as a class action? We recently read a ruling issued earlier this year by Los Angeles County Superior Court Judge Ronald Sohigian in which he denied certification of a case involving overtime, missed meal and rest periods and inadequate payroll statements largely on the ground that “this is not a case in which substantial benefits accrue to both litigants and the court that cannot be achieved by other means.” Citing Lindner v. Thrifty Oil, the court wrote that the case would be better served by a series of individual actions because the doctrine of collateral estoppel would give the other employees who would otherwise be members of the class "much of the benefit of prior adjudication if plaintiff wins.”

We would have expected the ruling to be overturned on appeal, because the order does not reflect the discretion and balancing of benefits and burdens expected under the Sav-on case and its progeny. Instead, it looks almost like a standing order from judge who simply does not believe in the concept of class litigation. How can any class action ever be certified in the courtroom of a judge who believes that the availability of collateral estoppel makes individual lawsuit superior to class action litigation?

[Update: We just learned that the plaintiffs accepted a 998 offer and abandoned the appeal, so we'll never know what the Second District thinks about the superiority of collateral estoppel doctrine.]

As we expected, last month the Supreme Court granted review of the unpublished opinion in Banda v. Richard Bagdasarian, Inc., maintaining its practice of issuing a "grant and hold" review order for all cases -- published or unpublished -- involving the issue meal period and rest period pay under Labor Code S 226.7. There are now five related cases. Murphy v. Kenneth Cole Productions, meanwhile, is fully briefed by the parties, but various amici briefs are being filed and answered.

In an unpublished 3-0 decision, the Fourth District Court of Appeal has reversed the dismissal of our firm's meal and rest period class action lawsuit against Dollar Tree Stores, Inc. As we mentioned last month, the primary issue was whether a putative class member has the right to intervene or amend a complaint when the original class representative tentatively releases his claims as a part of a settlement which does not settle the claims of his entire class. A secondary issue involved whether the court could dismiss the class action, over the objection of putative class members, without notice to the class.

The case began as an overtime, meal and rest period class action entitled Edmisten v. Dollar Tree Stores, Inc. After we filed the complaint, we discovered that there was already a consolidated action (Williams v. Dollar Tree Stores, Inc.) seeking overtime pay for Dollar Tree store managers, so we dropped the overtime claims and proceeded with a meal and rest period claim on behalf of all Dollar Tree retail store workers in California, including both hourly and salaried workers. Eventually, the Williams case (with which we were not involved) settled, and the agreement included a release of meal and rest period claims for store managers. Mr. Edmisten decided to participate in that settlement so he could recover his overtime pay.

As a result of the Williams settlement, and Mr. Edmisten's decision to include himself in it, Dollar Tree moved to dismiss the entire Edmisten case. Not surprisingly, employees who didn't get anything from the Williams settlement objected. Ms. Andrade, an assistant manager not included in the Williams settlement, sought to replace Mr. Edmisten with a motion to amend, or, alternative intervene.

In a single hearing, the trial court denied her motion and instead granted Dollar Tree’s motion to dismiss. The trial court explained the reasons for its rulings, emphasizing two points. First, because the class was uncertified, the court concluded Andrade was not a class member and therefore not entitled to intervene. Second, the court reasoned Andrade was not a suitable class representative to take Edmisten’s place because Edmisten “asserted the claims of . . . salaried employees” alleging they were misclassified, whereas Andrade was an hourly employee. On Andrade's behalf, we appealed in the matter entitled Andrade v. Dollar Tree Stores, Inc.

The Court of Appeal agreed with us, holding that "[b]ecause the court’s rulings contravened La Sala and Rule 1860, and were based on unsupported factual findings, we must reverse the order." From the moment we were served with the motion to dismiss, we thought Dollar Tree's positions were tenuous, at best, and bordering on frivolous. We were unable to persuade the trial judge, but to our delight, the Court of Appeal agreed with virtually everything we said.

If a named plaintiff can no longer suitably represent the class, the court must "at least afford plaintiffs the opportunity to amend their complaint, to redefine the class, or to add new individual plaintiffs, or both, in order to establish a suitable representative.” ... The court erred by failing to do so. In addition, the court’s dismissal of the action failed to comply with California Rules of Court, Rule 1860. Rule 1860 governs dismissals of class actions and is “illustrative of the protection afforded absent class members.” (citing Shapell Industries, Inc. v. Superior Court (2005) 132 Cal.App.4th 1101, 1109, 1110 [“California courts recognize and preserve the rights of absent class members, even before the issue of certification has been determined”].) Rule 1860(a) requires, inter alia, that any request for dismissal be accompanied by an affidavit or a declaration “clearly stat[ing] whether consideration, direct or indirect, is being given for the dismissal and . . . describ[ing] the consideration in detail.” Subdivision (c) provides that “[i]f the court has not ruled on class certification . . . , the action may be dismissed without notice to the class members if the court finds that the dismissal will not prejudice them.” Here, the court’s dismissal of the action did not comply with the foregoing requirements. ... And while the court found (wrongly, as we discuss post) that Andrade would not be harmed by the dismissal, the court did not address the issue of whether other putative class members would be prejudiced.

During oral argument in the trial court, we were frustrated by the fact that Dollar Tree made several critical false assertions of fact, none of which were anywhere in the declarations. Yet, over our objection, the trial court adopted those false assertions in its findings of fact in its ruling. The Court of Appeal looked at those assertions closely and caught them all, noting that the trial court "made unsupported factual findings in reaching its rulings" with "no support in the record" for any of the crucial factual determinations. In a footnote, the Court of Appeal also criticized Dollar Tree for misrepresenting the record, and specifically, for "falsely contend[ing]" that the Williams and Edmisten cases were identical. The court also noted that one of Dollar Tree's misrepresentations was exposed by an admission their own counsel had made in a January 2004 letter to the Williams class counsel.

The motion to dismiss is a tool more class action defense counsel are trying to use as a way of avoiding certification motions. The motions are almost never properly taken. To date, Dollar Tree was the only case in which our opposition to such a motion failed. Though unpublished, Andrade v. Dollar Tree offers a good roadmap to class representatives opposing these motions. If you would like to read the opinion, you can download it here in pdf or Word format. Any current or former retail store workers at any California Dollar Tree store can get more information by contacting us here.

In an unpublished opinion, the First District Court of Appeal has upheld an employment arbitration agreement asserted by CornerStone Staffing, Inc. The opinion in Reynolds v. CornerStone Staffing Solutions, Inc. is interesting in that the court offers a good discussion of an arbitration agreement, the enforcement of which it thought to be a very close call. The opinion also has a concise list of typical provisions in employment arbitration agreements that have been found to be substantively unconscionable post-Armendariz, including cases: (1) where the agreement unfairly favored the employer by allowing for appeal of arbitration awards in excess of $50,000 (Little); (2) where the employer imposed forum costs on the employee (McManus); (3) where the employee’s damage remedy was limited, the employee was required to pay all costs, and the required hearing location was inconvenient (Pinedo); (4) where the contract provided that, pending the arbitration hearing, the employee lost his job, salary, and benefits. (Stirlen); (5) where the employee’s claim had to be filed within 180 days irrespective of any longer deadlines that may be allowed by statutes of limitations; (6) where the agreement requires participation in pre-arbitration dispute resolution programs that require the employee “to submit to discussions with his supervisors in advance of, and as a condition precedent to, having his dispute resolved through binding arbitration” so as to give defendants a ‘free peek’ at the plaintiff’s case (Nyulassy); or (7) where the agreement contains unilateral language such as "I agree," rather than "the parties agree..." (Higgins).

You can read Reynolds v. Cornerstone for yourself by downloading it here in pdf or word format.

As reported in the L.A. Daily Journal last week,

An appellate panel criticized an Irvine law firm Tuesday for not playing fair while defending a company against an employee's discrimination complaint. "In this case, we deal with tactics which were heavy-handed at best, and at worst could be viewed as a deliberate attempt to deprive a pro per plaintiff the opportunity to air his grievance in any form," Acting Presiding Judge William W. Bedsworth wrote on behalf of the three-judge panel of the 4th District Court of Appeal. Zamani v. St. John Knits Inc., G035818. In its unpublished ruling, the panel unanimously reversed an Orange County Superior Court judge's dismissal of Behzad Zamani's complaint against St. John Knits Inc., where he had worked as head mechanic for five years. Zamani sued the company after being fired, alleging discrimination. Daniel F. Fears of the Irvine firm Payne & Fears represented the company. Before the trial court, the law firm cited arguments that were already defeated by the appellate court three years earlier, the panel said. Payne & Fears should have known about the ruling because the firm represented the prevailing party in that case. Kalai v. Gray 109 Cal.App.4th 768 (2003). "To characterize counsel's efforts as disturbing would be mild," Bedsworth wrote. Fears could not immediately be reached for comment Tuesday. © 2006 Daily Journal Corporation.

Remember 24 Hour Fitness, Inc. v. Superior Court (1998) 66 Cal.App.4th 1199, and its arbitration waiver issue? Dead forever is that part of the opinion which defense lawyers (and some trial judges) misquoted to claim that a person cannot demand a court determination of an arbitration agreement's validity without waiving the right to arbitrate should the agreement be found enforceable. Three years ago, in Kalai v. Gray (2003) 109 Cal.App.4th 768, the Fourth District Court of Appeal held that a plaintiff will not be deprived of his right to proceed with his claim in arbitration merely because he first attempted to litigate it in court. The Supreme Court had previously held that a waiver of the right to proceed in arbitration only occurs "when the merits of the dispute have been litigated by the parties” (Doers v. Golden Gate Bridge etc. Dist. (1979) 23 Cal.3d 180), but the 24 Hour Fitness case suggested that one who "repudiates" the arbitration agreement may never again seek to arbitrate -- an absurd rule that would have rendered any unconscionable arbitration agreement into an ad terrorem clause. Though California law clearly provides parties the right to seek a determination regarding the validity of a contract, including a contract for arbitration, St. John Knits and its counsel, Payne & Fears, claimed that it did not. They cited 24 Hour Fitness and its progeny, Martinez v. Scott Specialty Gases, Inc. (2000) 83 Cal.App.4th 1236, but made no mention of Kalai, even though the losing counsel in the Kalai case was Payne & Fears. The Court of Appeal did not appreciate that tactic. We don't know of any sanction being issued, but the opinion contained a number of gems, which, if it is ever published, would make for powerful support of many common employee arguments:

Much as our legal system favors the resolution of disputes on their merits, we still sometimes run into a case in which a party manages to rope the trial court into the kind of “gotcha!” resolution that usually frustrates justice.  In this case, we deal with tactics which were heavy-handed at best, and at worst could be viewed as a deliberate attempt to deprive a pro per plaintiff of the opportunity to air his grievance in any forum. ...

In this case, we reject St. John’s contention that plaintiff Behzad Zamani “waived” his right to pursue his claim in arbitration, merely because he first attempted to pursue it in court.  The fact he also stated, during the court proceedings, that he was “refusing” to arbitrate – at a time when no arbitration proceeding had ever been initiated, and St. John’s counsel had been badgering him to stipulate to it – changes nothing.  Zamani was entitled to “refuse” to arbitrate his own claims as part of his argument he was entitled to litigate in court.  As a practical matter, every party who files an opposition to a petition or motion to compel arbitration does that.  What Zamani might not be entitled to do, if he entered in to an enforceable arbitration agreement, is litigate those claims.  And that issue – whether Zamani could proceed with his claim in court – is the only issue which should have been determined below.

... the judgment is reversed, and the case is remanded with directions to modify the summary judgment order so as to delete any finding that Zamani waived his right to arbitrate.  The court is also directed to consider whether St. John’s conduct in attempting to deprive Zamani of any forum in which to adjudicate his claim amounts to a violation of the covenant of good faith and fair dealing, and warrants a finding that St. John itself relinquished its right to compel arbitration in this case.

First, we must address the conduct of St. John’s counsel in attempting to persuade the trial court of the merits of its summary judgment motion, without so much as acknowledging the existence of our prior Kalai opinion. Of course, counsel is always free to disagree with our published opinions (even to disparage them, privately); to distinguish them; or perhaps to argue they are inconsistent with other, more persuasive authority. What counsel cannot do is mischaracterize the state of the law. “An attorney has a duty ‘[t]o employ, for the purpose of maintaining the causes confided to him or her such means only as are consistent with truth, and never to seek to mislead the judge or any judicial officer by any artifice or false statement of fact or law.’ (Bus. & Prof. Code, § 6068, subd. (d).) Further, a member of the State Bar ‘[s]hall not seek to mislead the judge, judicial officer, or jury by an artifice or false statement of fact or law.’ (Rules Prof. Conduct, rule 5-200(B).) ‘“Honesty in dealing with the courts is of paramount importance, and misleading a judge is, regardless of motives, a serious offense.”’ (Paine v. State Bar (1939) 14 Cal.2d 150, 154; see also Di Sabatino v. State Bar (1980) 27 Cal.3d 159, 162-163; Garlow v. State Bar (1982) 30 Cal.3d 912, 917.) ‘Counsel should not forget that they are officers of the court, and while it is their duty to protect and defend the interests of their clients, the obligation is equally imperative to aid the court in avoiding error and in determining the cause in accordance with justice and the established rules of practice.’ (Furlong v. White (1921) 51 Cal.App. 265, 271.” (Williams v. Superior Court (1996) 46 Cal.App.4th 320, 330.) ...

No attorney in her right mind would have acceded to the stipulation shortening time for a summary judgment motion from 75 days to only 21 days, without knowing what St. John intended to do with it – and certainly would not have if she did know. ...

In 24 Hour Fitness, the court concluded, in accordance with Charles J. Rounds, that defendants were entitled to summary judgment based upon their arbitration agreement. It then went on to say, in a footnote contained in the disposition portion of its opinion, that: “[w]e recognize the result of our decision here is that Munshaw has no avenue for recourse against Nautilus, Rodriguez, Harmon or Cunningham. This consequence flows from her decision to repudiate the arbitration agreement.” (24 Hour Fitness, Inc. v. Superior Court, supra, 66 Cal.App.4th at p. 1216, fn. 12.) The court does not, however, make any effort to explain exactly why that would be the result. In Kalai, we attributed the court’s statement to the fact the arbitration provision at issue expressly required an arbitration be commenced within a year, which had not occurred. That factor distinguished 24 Hour Fitness from both Kalai and this case, and we consequently have no need to consider whether we might agree with the court’s conclusion on that basis. However, if the 24 Hour Fitness court meant to suggest that a plaintiff’s mere repudiation of the agreement would entitle defendant to avoid any adjudication of plaintiff’s claims, we simply disagree. That conclusion is inconsistent with both basic contract law and the precedents discussed above. ...

Rather than employing the arbitration provision in the parties’ agreement as a means of resolving this dispute in arbitration, as is clearly intended, it appears St. John was attempting to spin it into a means of avoiding resolution altogether. If that is true, it would constitute grounds for concluding that it is St. John, rather than Zamani, that has waived its right to arbitration in this case. As explained in Davis v. Blue Cross of Northern California (1979) 25 Cal.3d 418, 427, the covenant of good faith and fair dealing, which “requires each contracting party to refrain from doing anything to injure the right of the other to receive the benefits of the agreement” is implied in arbitration agreements as well as others. And conduct by one party which amounts to a deliberate effort to deprive the opposing party of those arbitration benefits can be construed as a violation of the covenant of good faith and fair dealing, and can be used to preclude the first party from thereafter seeking to enforce the arbitration agreement. We remand this case to the trial court with directions to consider whether St. John’s conduct rises to that level, and to determine whether, as a consequence, St. John has relinquished its own right to compel arbitration.

Zamani v. St. John Knits, Inc. can be downloaded here in pdf or word format.

A few months ago, the Second District Court of Appeal affirmed an order denying a motion to certify a meal and rest period class action in Nguyen v. Dollar Financial Group, on the ground the trial court could properly rule the action was not suitable for class treatment because the common questions of law and fact did not predominate over individualized issues. A petition for review in the same case, albeit entitled, Chin v. Dollar Financial, was denied last month. A petition for publication, filed by non-party Radio Shack Corp., was denied this week by the California Supreme Court.

In an unpublished opinion, the Second District Court of Appeal has upheld the enforceability of El Torito Restaurants, Inc.'s employee arbitration agreement. In a typical Armendariz/Little analysis, the court ordered stricken the unconscionable portion of the agreement requiring employees to share in the cost of the arbitration, but otherwise ordered the agreement enforced. There are several pending class actions against El Torito Restaurant arising from meal and rest period claims, including one which our office recently settled. The appeal did not involve any class action cases.

Wal-Mart filed two post-trial motions in the Savaglio case in Alameda County, seeking to decertify the class after trial, and, alternatively, seeking for force the class to elect remedies, under the premise that the hour of pay is a penalty, and one cannot recover both penalties and punitive damages for the same wrong. The motions were heard and taken under submission on July 13, 2006. Judge Sabraw denied both motions on August 3, 2006, holding that the case is still suitable for class adjudication, and that the hour of pay under Labor Code 227 is compensation, not a penalty, and hence, no election of remedies is required. His his original decision is available on Westlaw. I'll try to scan and post the new orders soon.

You can check the latest developments and view documents right from the court's website here. (The Wal-Mart case number is C-835687). Wal-Mart has vowed to appeal. The Court of Appeal denied a prior writ petition and the Supreme Court denied review, but neither of those defeats prevents Wal-Mart from challenging the verdict and soon-to-be-entered judgment in a new appeal.

On August 10, 2006, the Fourth District  Court of Appeal, Division One, denied two writ petitions filed by Starbucks in the Chou v. Starbucks tip-pooling case after the trial court granted class certification and denied a defense summary judgment motion. In the latter proceeding, the Fourth District requested a letter brief concerning whether Labor Code § 351 provides a private right of action and whether restitution is available under the UCL for such claims. After considering the petition, a letter brief and preliminary reply, the court denied both petitions without formal briefing, argument or opinion.

The petitions represented to the court that there were a great many tip pooling cases pending statewide and several trial courts have ruled there is no private right of action under section 351. We have difficulty believing that, especially after Jameson v. Five Feet Restaurant, Inc. (2003) 107 Cal. App. 4th 138, but maybe there are judges out there who think that labor laws were made to be broken and there isn't a damn thing employees can do about it. If you know of such a judge, let us know.

The California Rules of Court changed, effective July 1, 2006, so as to require each party to an appeal to serve and file a Certificate of Interested Entities or Persons at the time it files its first document in an appellate court. Each party must also include a copy of the Certificate of Interested Entities or Persons in its principal brief. The certificate must appear after the cover and before the tables. A party that learns of changed or additional information that must be disclosed must promptly serve and file a Supplemental Certificate of Interested Entities or Persons. See Rule 14.5. Also effective July 1, 2006, similar requirements apply to writ petitions. See Rules 56(i), 57(c), 58(c), 59(d).

A model Certificate of Interested Entities or Persons used by the First District Court of Appeal can be downloaded here.

The Court of Appeal, Second District, has dismissed an appeal in an employment class action against Labor Ready, Inc., arising out of alleged conflicts of interest between class counsel and individual parties. In Balandran v. Labor Ready, Inc., the defendant sought to disqualify class counsel by asserting an actual conflict of interest caused by the concurrent representation of a class of employees and two cross-defendants that the employer blamed for the alleged basis of the class action. The trial court granted the motion in part, concluding a potential for a conflict existed and requiring plaintiffs’ counsel to choose between representing the class and representing the cross-defendants. Plaintiffs’ counsel chose to continue representing the class, and withdrew from the representation of the cross defendants.

The defendants appealed, arguing plaintiffs’ counsel possessed an actual conflict and should have been disqualified from representing both the class and the cross-defendants. While the appeal was pending, plaintiffs’ counsel withdrew from the representation of the class and sought to dismiss the appeal as moot. The defendants opposed, claiming that the disqualification issue was still ripe because it should serve to disallow any subsequent attempt by the class counsel to recover attorney's fees.

The Court of Appeal disagreed. "As plaintiffs’ counsel no longer represents any party in the litigation, the issue of whether the trial court erred in failing to order disqualification is moot. We therefore dismiss the appeal." Moreover, the class counsel is not necessarily unentitled to recover fees at a later date.

The issue presented by this appeal is whether, at the time the trial court ruled on the motion for disqualification, class counsel had a disqualifying conflict of interest. The issues that may be presented by a subsequent motion for attorney’s fees are: (1) at what point in time did any conflict of interest arise; and (2) whether the conflict of interest is serious enough to compel a forfeiture of fees. Neither inquiry is controlled by whether the conflict was disqualifying. Cal Pak Delivery, Inc. v. United Parcel Service, Inc., supra, 52 Cal.App.4th 1 is illustrative. In that case, counsel for the plaintiff class offered to dismiss the action in exchange for a payment to him of ten million dollars. The trial court correctly concluded this was a sufficient conflict of interest to mandate counsel’s disqualification. (Id. at pp. 5 6.) However, at the time the trial court ordered the disqualification, the court also entered an order denying counsel all attorney’s fees he had incurred. This constituted an abuse of discretion. ... In other words, the appellate court in Cal Pak affirmed the order disqualifying counsel but reversed the order denying him fees because counsel’s entitlement to fees is not controlled by whether counsel had a disqualifying conflict of interest. Similarly, the issue raised by this appeal -- whether class counsel had a disqualifying conflict of interest in this case -- is not the issue that would arise if class counsel eventually seeks attorney’s fees. As such, the issue is not likely to recur, and there is no exception to the mootness doctrine.

Class counsel recovered their costs of appeal, and may recover more later, if the class action ends well for the class. The opinion is unpublished, but interesting reading for both plaintiff's lawyers and defense lawyers.

In spite of clear authority under the Caliber Bodyworks (134 Cal.App.4th 365) decision, defense lawyers continue to argue that plaintiffs cannot file suit for remedies such as waiting time penalties, meal and rest period pay, and other claims under Labor Code §§ 203, 226, 226.7, etc. Every so often, a trial court agrees. To our knowledge, no appellate court has ever agreed.

Yesterday, in an unpublished opinion, yet another Court of Appeal (addressing a trial court ruling that was issued pre-Caliber Bodyworks) upheld an employee's right of private action, without any regard for or compliance with the Labor Code Private Attorneys General Act of 2004 (PAGA), to seek damages and statutory penalties for those various Labor Code violations. Dunlap v. Superior Court (Bank of America) (2nd District, Div. 3, 7/27/2006, Case No. B185247)

After a motion to strike was granted by Los Angeles County Superior Court Judge Judith Chirlin, Dunlap filed a petition for writ of mandate, seeking the issuance of a writ directing the trial court to vacate its order granting the motion to strike and to enter a new order denying the motion. The Court of Appeal granted the writ.

Plaintiff Omar Dunlap, a former employee of defendant Bank of America, N.A. (“Bank”), seeks a writ of mandate directing the trial court to vacate its order granting the Bank’s motion to strike certain portions of Dunlap’s first amended class action complaint and to enter an order denying the motion to strike. The essential issue presented is whether the trial court properly struck Dunlap’s claims for statutory penalties on the ground he failed to exhaust his administrative remedies in accordance with the Labor Code Private Attorneys General Act of 2004 (PAG Act) (Lab. Code, § 2698 et seq.). Dunlap’s second through fifth causes of action, which are at issue herein, did not seek any penalties which previously were recoverable only by the Labor and Workforce Development Agency (LWDA). The only penalties being sought therein were various statutory penalties, which penalties already were recoverable by employees under the Labor Code prior to the adoption of the PAG Act. Therefore, Dunlap was not required to comply with the PAG Act’s administrative prerequisites to filing suit before pursuing statutory penalties in said causes of action. Accordingly, the trial court erred in granting the motion to strike. We grant the relief requested.

The decision took quite some time to reach, as far as writ proceedings go. The petition for writ of mandate was filed on August 19, 2005; the case was argued on January 18, 2006; and the opinion was issued on July 27, 2006. Govern yourselves accordingly if you are before this panel, as they noted in April that "[d]ue to the press of other court business and the complexity of the issue in this case, a brief additional amount of time is needed to complete and file the opinion in this matter." You can download the opinion here in pdf or Word format.

If you checked the status of Murphy v. Kenneth Cole Productions, in addition to noting that the respondent has requested and received an extension to file its brief, you may have noticed that there is now a fourth related case. The fourth related case is Chalecki v. State Farm Mutual Automobile Insurance Co., a Los Angeles case in which the trial court (Judge Anthony J. Mohr) appears to have ruled that meal and rest period pay is an hour of penalties. The employee filed a writ petition, which received a "postcard denial" from the Second District Court of Appeal on April 4, 2006. Shortly thereafter, the employee filed a petition for review, which was granted on May 24.

Petition for review GRANTED. Further action in this matter is deferred pending consideration and disposition of a related issue in Murphy v. Kenneth Cole Productions Inc., S140308 (see Cal. Rules of Court, rule 28.2(d)(2)), or pending further order of the court. Submission of additional briefing, pursuant to California Rules of Court, rule 29.1, is deferred pending further order of the court. Votes: George, C.J., Kennard, Baxter, Werdegar, Chin, Moreno, and Corrigan, JJ.

Although we know this is meaningless, we were pleased to read that the remittitur is expected by September.

The Superior Court case docket looks interesting. There are almost 50 plaintiff in intervention, and there is something called a defense "Motion to Determine Threshold Legal Issue re the Tolling of the Statute of Limitations" pending. Our curiousity is piqued.

Most class action settlements include a provision establishing an enhanced settlement share for the class representatives, who take all of the risk, and incur most of the time, pursuing the rights of their class. The case law discussing the standards for such an award is quite scant. Last month, in Edelist v. First USA Bank, the 4th District issued an unpublished opinion dealing with the objections of one Rosie Ross, who complained about certain class action settlement terms and attorney's fees in a consumer class action. The opinion did not address class representative enhancements, but apparently, the objector wanted those discussed, too. Hence, this week, the 4th District added a section to their opinion, still unpublished, discussing the representative's incentive award.

Edelist requested an incentive award of $5000. In a footnote in her preliminary opposition, the objector argued there was no justification or support for the award. The trial court agreed, noting that "Counsel has not offered any evidence justifying the $5000.00 incentive award. There is no indication Mr. Edelist participated in this litigation whatsoever (with the exception of lending his name to the caption)." The trial court then reduced the award to $2500 (a common order in Orange County). The 4th District said that "the trial court apparently felt the $2500 incentive award was an appropriate amount for a plaintiff lending his name to the caption in this case, and held that the case law, though scant, supports the trial court’s conclusion. Here is what the court noted about that case law:

In Staton v. Boeing Company (9th Cir. 2003) 327 F.3d 938, the court refused to approve a class action settlement because, inter alia, it awarded the named class representatives damages averaging sixteen times more that the amount to be received by each unnamed class member. The total payment to the class of 15,000 was over $7 million, and ‘29 named class representatives are designated to receive payments totaling $890,000.’ (Id. at p. 977.) The court found the ‘large differential’ in damages could not stand on the record before it. (Id. at p. 978.) “The Staton court remarked, however, that ‘named plaintiffs, as opposed to designated class members who are not named plaintiffs, are eligible for reasonable incentive payments,’ pointing out that it had approved incentive awards of $5000 each to two named plaintiffs in In re Mego Fin. Corp. Sec. Litig. (9th Cir. 2000) 213 F.3d 454. (Staton v. Boeing Corporation, supra, 327 F.3d at pp. 976-977.) In Mego, the incentive awards were approved without discussion; the opinion revealed no evidence of the extent of the named plaintiffs’ involvement in the litigation. (In re Mego Fin. Corp. Sec. Litig., supra, 213 F.3d 454.) “In In re Continental Illinois Sec. Litig. (7th Cir. 1992) 962 F.2d 566, the court upheld the trial court’s refusal to approve a $10,000 award to a named plaintiff whose involvement consisted of a few hours of deposition and a ‘slight risk of being made liable for sanctions, costs, or other fees should the suit go dangerously awry.’ (Id. at pp. 571-572.) The court observed that the risk was slight ‘because the case was a clear winner and ... if the named plaintiff had dropped out because he couldn’t hope to be compensated for his modest efforts there were plenty of others to take his place without demanding compensation. The implicit reasoning is that the market would have produced a named plaintiff willing to charge a price of zero ....’ (Id. at p. 572.) The court observed, however, that an incentive award was not per se inappropriate. ‘Since without a named plaintiff there can be no class action, such compensation as may be necessary to induce him to participate in the suit could be thought the equivalent of the lawyers’ nonlegal but essential case-specific expenses, such as long-distance phone calls, which are reimbursable.’ (Id. at p. 571.) “Here, there was considerable risk that the case would be unsuccessful, thus exposing Edelist to costs or sanctions. Where the litigation resulted in a $7 million settlement fund and the value of the injunctive relief as much as $50 million, the modest $2500 incentive award to Edelist for merely ‘lending his name to the caption’ was not an abuse of discretion.”

With the modification, we are considering asking the 4th District to publish the case so that we can all stop citing (and attaching copies of) 7th Circuit authority in support of our final fairness motions.

A San Diego Superior Court judge reversed her earlier tentative ruling and ruled that a group of Starbucks employees can proceed to trial on a class action alleging that they were unlawfully forced to pool and share their tips with shift supervisors. The case, Chou v. Starbucks Corp., could affect more than 100,000 at over 1,400 California Starbucks locations. Judge Patricia Yim Cowett had issued a tentative ruling against the class, which was certified in March, but after hearing argument on the matter, took the issue under submission for a week, and reversed course. Congratulations to class counsel Terry Chapko and Eric Aguilera.

The general rule on tip-pooling in California is that employees who serve the public and receive tips can be required to pool their tips with the other tipped employees, but owners and management are not permitted to take any share of those tips. In the Starbucks case, the issue is whether shift supervisors are considered "management" for the purpose of determining eligibility for tip pool revenues.

Starbucks did secure one favorable ruling, in which the judge threw out "waiting time penalties" on behalf of former employees who might have been eligible for up to 30 days pay for having to wait too long after termination or resignationto receive their wages. Tips, like most employee compensation, are considered wages under the California Labor Code.

One of the tactics employers often use to get around overtime class actions is the standard general release upon termination. We have encounted a few of these, and employers generally use the release as a bargaining chip to try to minimize the settlement. Most do not try to test the validity of the release in court. Hence, we know of few actual court decisions in which such releases have been considered. The most recent was a San Mateo County case in which Judge Weiner held that the releases were not valid, allowing an overtime class action to proceed. The ruling includes a decent analysis of Labor Code § 206.5. We have a copy of the order if you'd like to read it.

In an unpublished opinion in the case of Utgard v. Employment Development Department, (G035811, Superior Court. No. 04CC09382), the 4th District Court of Appeal affirmed Orange County Superior Court judge Gregory Munoz's order sustaining a demurrer by the Employment Development Department (EDD) and the Department of Industrial Relations (DIR) for denial of unemployment benefits and failure to act on a claim for nonpayment of wages and unfair labor practices.

In connection with the wage portion of the claims, the plaintiff, representing himself, filed 10 complaints with the Labor Commissioner and the DIR, in the form of mere emails and letters, for unpaid wages and unfair labor practices in violation of the Labor Code. He alleged they were never answered, and thus, he filed a complaint against the DIR for “due process,” “negligence,” and “misfeasance.” After the court sustained a demurrer without leave to amend as to all causes of action except negligence (we are curious as to how that one remained), the plaintiff filed a second amended complaint with two causes of action: (i) “failure to discharge a statutory duty” (Government Code § 815.6); and (ii) negligence per se. He claimed general and a variety of special damages on both causes of action, including loss of wages, personal property and income, damage to his credit, "loss of the ability to seek restitution from his employers", and costs. He also requested "that the state investigate the manner in which its agencies operate." The court sustained the demurrer to the second amended complaint without leave to amend.

For a myriad of reasons, the Court of Appeal affirmed, including the trial court's refusal to grant leave to amend. On appeal, the plaintiff had the burden to show “there is a reasonable possibility the defect in the pleading can be cured by amendment." Mr. Utgard would not or could not do so. Consequently, his wage claims are now gone. As he learned the hard way, sometimes it is best just to get a lawyer.

In a consumer case, the Fourth District Court of Appeal has upheld Judge Jonathan Cannon's order approving a class action settlement over the objection of an absent class member who sought to reduce the attorney's fees awarded. It makes for interesting reading for any class action attorneys with practices before the complex civil panel in Orange County. The case is Edelist v. First USA Bank, Inc.

In Banda v. Richard Bagdasarian, Inc. the Fourth District Court of Appeal, Division Two, has issued a tentative opinion, not to be published, calling meal and rest period pay a penalty.

The opinion is peculiar in several respects. First and foremost, it admits that "the hour of pay in section 226.7 ... is calculated to compensate an employee for the employer's statutory violation." That's a good enough start for one's analysis. But that sentence ends with "and as such is a penalty." We don't see the connection.

We might expect that conclusion to follow after a statement that the hour of pay is intended to punish the employer for breaking the law. But if it is to compensate the employee, the remedy is compensatory, not penal. Nobody ever says, for example, that someone who recovers $100,000 in damages and $5,000,000 in punitive damages was "compensated" $5.1 million. They were compensated $100,000, and awarded another $5 million in punitive damages.

The Court of Appeal also found "incalculable" the monetary value of a lost 10-minute break, saying that it "more accurately should be called a restroom break." While we admit that the loss of the ability to kick back for ten minutes is hard to measure, the monetary loss is easy to calculate, because what was lost was ten minutes of pay for one's first ten minutes of rest. If the employee has to work through what should be ten minutes of leisure, the value of the ten minutes of labor is the minimum value of the loss.

The opinion was not a total loss for the workers, however. The Court of Appeal reversed a finding by the trial court that there is no private right of action for meal and rest pay, relying upon the Caliber Bodyworks holding entitling workers to sue directly  for "statutory" penalties, without pursuing claims through the DLSE or under the PAGA. The opinion also holds that grape pickers who are forced to sample the crops, without washing the grapes or their hands first, can seek injunctive relief outside the scope of the Workers' Compensation Act. And the opinion rejects any applicability of the "primary jurisdiction" doctrine.

[Update: The opinion was filed later in the day. You can read the whole thing for yourself here. We did not post about this decision earlier because we did not get a copy of the tentative ruling until June 7, 2006. Neither side requested oral argument. It is still possible that one side or the other will file petitions for review.]

In an unpublished opinion issued last week, the Second District Court of Appeal upheld an order by Los Angeles County Superior Court judge Wiliam Fahey rejecting a petition to compel arbitration in a meal and rest period case. Zavala v. Scott Brothers Dairy, Inc. includes no novel issues, but has a good discussion of recent meal and rest period precedent in the context of arbitration rights and LMRA preemption for claims advanced on behalf of unionized workers. You can download the unpublished opinion here.

California Labor Code § 226 governs what employers must include on their wage statements that accompany payroll checks. Section 226(a) sets forth the list of necessary information:

an accurate itemized statement in writing showing (1) gross wages earned, (2) total hours worked by the employee, except for any employee whose compensation is solely based on a salary and who is exempt from payment of overtime under subdivision (a) of Section 515 or any applicable order of the Industrial Welfare Commission, (3) the number of piece-rate units earned and any applicable piece rate if the employee is paid on a piece-rate basis, (4) all deductions, provided that all deductions made on written orders of the employee may be aggregated and shown as one item, (5) net wages earned, (6) the inclusive dates of the period for which the employee is paid, (7) the name of the employee and his or her social security number, except that by January 1, 2008, only the last four digits of his or her social security number or an employee identification number other than a social security number may be shown on the itemized statement, (8) the name and address of the legal entity that is the employer, and (9) all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee. The deductions made from payments of wages shall be recorded in ink or other indelible form, properly dated, showing the month, day, and year, and a copy of the statement or a record of the deductions shall be kept on file by the employer for at least three years at the place of employment or at a central location within the State of California.

If the employer does not comply, penalties may be imposed under Labor Code § 226(e), which states:

An employee suffering injury as a result of a knowing and intentional failure by an employer to comply with subdivision (a) is entitled to recover the greater of all actual damages or fifty dollars ($50) for the initial pay period in which a violation occurs and one hundred dollars ($100) per employee for each violation in a subsequent pay period, not exceeding an aggregate penalty of four thousand dollars ($4,000), and is entitled to an award of costs and reasonable attorney's fees.

So what does it mean to be knowing and intentional? According to Los Angeles County Superior Court Judge Tricia Ann Bigelow, you have to show not only that the defendant knew and intended to put incorrect information on the pay stub, but also that the defendant knew about Section 226, and intended, by its actions, to willfully violate its terms.

In a ruling on a motion for summary adjudication in a case entitled Mutec v. Huntington Memorial Hospital , Judge Bigelow granted summary adjudication of the claim for damages (penalties) against the employer because the plaintiffs did not have evidence that the employer knew about Section 226, and how its actions violated section 226.

Judge Bigelow accepted as true the defendant's self-serving claims that, although their violations of Section 226 were "knowing," and there was no evidence that the mistakes were inadvertent, they did not mean to violate the statute, specifically, and therefore, the violations were not "knowing and intentional." In other words, knowingly provided false information on a paystub is not necessarily an intentional violation of the law. The court agreed with their analysis, and focused on the lack of evidence that the violation of 226 was motivated by a desire or a "deliberate decision to violate Labor Code § 226."

The ruling was a bit surprising because normally, where the issue is the moving party's intent, or where the defendant is the sole witness to the facts stated in its declaration, the court has discretion to deny summary judgment so that the moving party's credibility can be determined at trial (Code of Civil Procedure§ 437c(e)) and most judges, in fact, do let such disputes get resolved by trial.

More remarkably, however, the statement of decision began with this remarkable preface that would have made us certain that the employees were going to prevail:

"Huntington concedes that in Phillips v. Huntington Memorial Hospital (2005) 2005 Ca;.App. LEXIS 7880 the court of appeal determined that Huntington's pay stubs violated Labor Code § 226."

In the Phillips case, the trial court had determined that Huntington Memorial Hospital's pay stub policies did not violate Section 226. However, on appeal, the Court of Appeal reversed, holding "we necessarily reject the hospital's contention that section 226 permits it to knowingly provide incorrect figures for "gross wages and "total hours worked," thereby putting the burden on employees to determine the correct amounts."

Judge Bigelow, however, said that the conclusions of the appellate court should be disregarded.

The DCA [Court of Appeal] found that the defendant has "knowingly provide incorrect figures for "gross wages and "total hours worked," thereby putting the burden on employees to determine the correct amounts, [but] the evidence does not support the statement."

We had never seen a trial court purport to correct the Court of Appeal, but it seems that this is precisely what the judge did here. If this ruling stands, there is no such thing as a provable violation of Labor Code 226. If an existing court of appeal opinion finding that a defendant knowingly put false information on their paystubs is not enough, nothing will ever be enough. We wish the plaintiffs and their counsel the best of luck on appeal.

On a side note, the plaintiffs bolstered their claim with an expert declaration, to which no objection was made or sustained, by Donna Dell. Ms. Dell, the former Labor Commissioner (appointed by Arnold Schwarzenegger) does not have a reputation as a great friend of labor, so her declaration in support of the plaintiffs makes for fascinating reading.

Appearances may be deceiving, but the Norm’s Restaurants case seems to have turned into nothing but extended fight over the statute of limitations (Norm's Restaurant is not one of our cases). First, the defendant filed a motion to strike much of the plaintiff's complaint with respect to meal and rest break claims, on the ground that break pay under Labor Code § 226.7 is a penalty, not a wage. Judge Kim Dunning denied the motion. Norm's Restaurants appealed with a petition for writ of mandate, which the Fourth District denied. The denial came after Murphy, but before National Steel and Shipbuilding Company. It also came after Judge Thierry Colaw replaced Judge Dunning on the Orange County Superior Court complex litigation panel.

After Murphy was decided, the defendant filed another motion to strike. The opposition was filed before National Steel and Shipbuilding Company. The hearing was scheduled for tomorrow. It won't go forward just yet. With the benefit of both Murphy and National Steel and Shipbuilding Company, Judge Colaw paused to reflect further, after yet more input from the parties.

The court to Strike Portions of Plaintiff’s 2nd Amended Complaint: We now have National Steel v. Superior Court from Division One of the Fourth Appellate District. At page seven [7] of the opinion the court held that it was both a wage and a penalty! They looked at the legislative history and determined that it was “not particularly enlightening” [page 12]. They then moved on to an examination of the entire statutory scheme. The court stated that the legislature was aware of how the word “penalty” impacts applicable statutes of limitations, and could have but did not label the statutory payment of section 226.7 a “penalty”. The court concluded at page 15 that the payment of Labor Code § 226.7 is an obligation created by statute, other than a penalty, and is governed by the 3 year statute of C.C.P. § 338(a). There was a dissenting opinion. So where are we? We have dueling opinions, and one is from the Fourth District. The matter is continued to 2-10-06. Both Parties are to submit concise further briefs, no more than ten pages, on the issue of which of the competing cases is better reasoned and adopts the better rule. There shall be no replies. Moving Party to give Notice.

If you are aware of any other trial court rulings which are post Murphy and National Steel and Shipbuilding Company, let us know who ruled what.

From Judge Sundvold last week:

"The First District Court of Appeal has ruled in Murphy v. Kenneth Cole Productions (2005) 134 Cal. App 4th 728 that the payment imposed by Labor Code Section 226.7 is a penalty and is therefore subject to a one-year statute of limitations. While the Federal decision cited by Plaintiff may be better reasoned, this Court is bound by the Murphy decision."

It's pretty clear from that comment in a tentative ruling that if Murphy is reviewed, meal and rest period pay will become a wage again in Orange County, at least among the current panel of jurists. If not, of course, the issue becomes settled until and unless the legislature acts.

Yesterday, we reported that the writ petition in Norm's Restaurants, Inc. v. Superior Court (4th District, Division 3) was still being considered by the Court of Appeal. We were correct at the time, but only a few hours later, the writ petition was given a "postcard" denial. While that ruling does leave standing the trial court's determination that meal and rest period pay is a wage, not a penalty, the denial of the writ petition has no precedential value in any other cases.

Orange County Superior Court Judge Stephen Sundvold recently approved a $500,000 class action settlement in a case brought by a group of current and former employees of consumer lender Speedy Cash (Rivas v. Speedy Cash). The case involved alleged for denials of meal and rest periods. Though we aren't intimately familiar with the case, it appears, from some of the court records, that the settlement was previously given preliminary approval, including approval of a class representative enhancement of $10,000 and approval of an attorney's fee to the class counsel of $166,666.

Unfortunately for the class counsel, only $67,600 of the class fund was claimed by the interested employees. The judge wasn't about to trash the entire deal over that, but the apathy of the claimants certainly influenced his final approval decision, as he slashed the fees (from $166,666 to $45,000) and class representative enhancement (from $10,000 to $1,500). The ruling published last week was as follows:

The Settlement is fair, adequate and reasonable. It is approved.

This Action and its settlement cause the Court to ponder the efficiency and efficacy of the use of the time and efforts of Plaintiff’s Counsel. Barely 30% of the potential class members have made claims. This is a sad reflection on the Action, especially since each will receive in excess of $500 for a total of $67,600.

The requested attorney fees in the amount of $116,666 amount to nearly 200% of the benefits paid to the class members.

There is no legal justification for an enhancement of $10.000. An enhancement of $1,500 is awarded. Attorney costs in the amount of $2,433.35 are awarded. Administrative costs of $16,500 are approved. Attorney fees in the amount of $45,000 are granted. This amounts to over 66% of the payout to the class.

Who is the lucky beneficiary of these reductions? If the settlement was a typical "claims made" settlement, then the money is kept by the defendant rather than spread among the class members who made claims.

At a recent class action defense seminar I attended, one of the key pieces of advice offered to class action defendants was this:

"Do not ever tie the class counsel's fees to the number or amount of submitted claims."

The implication of that advice is that, unless the class counsel's recovery depends upon it, they will not actively seek to rally the class members to submit claims. But, as the Speedy Cash case demonstrates, even if the defendant does not correlate those two figures, the court might. And while some class lawyers will recite the old cliche about leading a horse to water, the prudent class counsel will always make sure he is not only leading the horses to water, but that he is also strongly encouraging them to drink.

The 4th District Court of Appeal, Division 3 (Orange County) has requested an informal opposition to a writ petition filed in the Norm's Restaurants case, Ayala v. Norm's Restaurants, dealing with statutes of limitation and wage/penalty issues in a meal and rest period class action. This is from the same panel that denied a writ petition in one of our cases against Dollar Tree Stores a year or two ago. We are familiar with the attorneys for both sides. Roger Carter, our co-counsel in the El Torito case, represents Ayala. Greg Labate of Sheppard Mullin represents Norm's. We've been across the table from Greg once or twice, and we are familiar with many of his colleagues at Sheppard Mullin. We'll be watching this case with interest, since we have many cases dealing with this issue in Orange County.

On September 2, the 1st District Court of Appeal in Murphy v. Kenneth Cole declined to accept an amicus brief offered by Richard Simmons on behalf of The Employer's Group, arguing that Labor Code 226.7 remedies are penalties, not wage compensation. An employers group had already filed an animus brief drafted Steve Drapkin, and the court found the brief to be cumulative.

So far, three groups have filed amicus briefs supporting the employee position, and one has filed a brief favoring the employer's position. Perhaps the court finds the arguments favoring the designation as a wage to be more varied and interesting. In his application, Simmons represented to the court that hundreds of hours were spent drafting the brief, but from what I can tell, he must have been including the time spent on the almost identical briefs filed in support of the employer's position in the 4th district Banda and Orco Block cases.

In an unpublished opinion, the California Court of Appeal, Second District, Division Four has affirmed an attorney's fee award of $800 per hour for employment lawyer Ian Herzog. In the case, Clifford v. American Drug Stores, Inc. (Sav-On Drug Stores), Clifford prevailed on Fair Employment and Housing Act claims and moved for an award of reasonable attorney's fees in the amount of $800 for every hour her lawyer was forced to spend beating back Sav-On's meritless defenses.

Sav-On argued that the trial court erred in setting Clifford’s attorney fees, because it did not correctly determine the lodestar figure.

“[T]he lodestar is the basic fee for comparable legal services in the community; it may be adjusted by the court based on factors including, as relevant herein, (1) the novelty and difficulty of the questions involved, (2) the skill displayed in presenting them, (3) the extent to which the nature of the litigation precluded other employment by the attorneys, (4) the contingent nature of the fee award. [Citation.] The purpose of such adjustment is to fix a fee at the fair market value for the particular action. In effect, the court determines, retrospectively, whether the litigation involved a contingent risk or required extraordinary legal skill justifying augmentation of the unadorned lodestar in order to approximate the fair market rate for such services.” (Ketchum v. Moses (2001) 24 Cal.4th 1122, 1132 (Ketchum), citing Serrano v. Priest (1977) 20 Cal.3d 25, 49 (Serrano III).) The hourly rate used to determine the lodestar amount has typically been described as the “prevailing hourly rates,” or “the basic fee for comparable legal services in the community” (Ketchum, supra, 24 Cal.4th at p. 1132); “‘comparable salaries earned by private attorneys with similar experience and expertise in equivalent litigation,’” or “‘hourly amount to which attorneys of like skill in the area would typically be entitled’” (Serrano v. Unruh (1982) 32 Cal.3d 621, 640, fn. 31 (Serrano IV); and “that prevailing in the community for similar work” (PLMC Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1095).

The unadorned lodestar reflects the general local hourly rate for a fee-bearing case; it does not include any compensation for contingent risk, extraordinary skill, or any other factors a trial court may consider. Such adjustments to the lodestar figure, for example, to provide a fee enhancement reflecting the risk that the attorney will not receive payment if the suit does not succeed, may be made to approximate market-level compensation for such services, which typically includes a premium for the risk of nonpayment or delay in payment of attorney fees.

In this case, the trial court offered no enhancement, but found that an hourly rate of $800 for trial attorney Ian Herzog was reasonable, and concluded that this amount was the lodestar rate. Sav-On argued that there was no evidence that lawyers in Los Angeles "are paid anything close to $800/hour in non-contingent fee cases.” The appellate court found that to be unimportant, noting that there "is no requirement ... mandating that the “prevailing hourly rates” be determined without regard to the skill and experience of the particular attorney before the court, or that they be equal to the prevailing rate charged by attorneys in noncontingent cases. The lodestar rate may be based upon "the skill and experience of the attorneys, as well as the nature of the work performed," as long as those considerations are not duplicated in the application of an adjustment to the lodestar rate.

For a short while, the opinion will be available on the court's website here. Our congratulations go out to Ian Herzog. It takes a lot more skill and expertise to win a huge can than it takes to lose one. For once, a court has recognized that fact.

In Maria L. Banda et al. v. Richard Bagdasarian, Inc., in the 4th District Court of Appeal, Division 2, the court, which previously granted leave to file an amicus brief to the Employers Group and to Western Growers, who support the employer's position, has denied the California Employment Lawyers Association leave to file an amicus brief in support of the employees' position. There is no tentative ruling yet issued and no timetable for oral argument.

In Murphy v. Kenneth Cole in the 1st District Court of Appeal, the court has permitted the California Labor Federation to file an amicus brief, which was filed on August 8, 2005. Kenneth Cole's response to that brief is due August 29, 2005. The case involves two related appeals: case no. A107209 and case no. A108346.