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Thursday, July 30, 2009

Quote of the Day: Leviticus

Do not unjustly withhold that which is due your neighbor.
Do not let a worker’s wages remain with you overnight until morning.
Leviticus 19:13

Some employers complain about California wage law being too strict, but at least we don't have to pay wages every night!

Friday, July 24, 2009

A Pair of New Cases on Class Action Settlements

I've been wanting to note these cases for a couple of weeks, but haven't had the chance. Both deal with the class action settlement approval process. As everyone knows, it's a two-step process. If the Court makes a preliminary determination that the settlement is fair, it orders notice to be sent to the parties and holds a final approval hearing where it hears any objections and determines whether the settlement is fair.

In In re Consumer Privacy Cases (June 30, 2009), the First District Court of Appeal considered objections to the settlement of consolidated actions against Bank of America. The settlement provided up to $10.75 million in various fee waivers and other benefits to class members, $3.25 million to cy pres beneficiaries, and up to $4 million in fees and costs to class counsel.

Noting the trial court's "broad discretion" to determine "whether a settlement was fair and reasonable, whether notice to the class was adequate, whether certification of the class was proper, and whether the attorney fee award was proper," the Court of Appeal affirmed to order approving the settlement, finding that:
The settlement agreement here met the four Kullar requirements entitling it to a presumption of fairness. Experienced counsel negotiated the settlement after seven years of litigation, including extensive investigation and discovery. The court found that the settlement was ―the product of arm‘s-length negotiations, and only a very low percentage, approximately .000454 percent, of the over 35 million class members objected. ... The court, moreover, contrary to the [objectors'] claim, conducted an extended analysis of the fairness of the settlement.
With regard to attorney fees, the Court approved use of the lodestar method, and noted that the trial court may, but need not, cross-check the lodestar against the total common fund, including the attorney fee award.

On July 6, the Second District Court of Appeal issued its opinion in Clark v. American Residential Services LLC, reversing a trial court's final approval order. The Court of Appeal held:
We conclude the order approving the settlement must be vacated because the trial court lacked sufficient information to make an informed evaluation of the fairness of the settlement. This was due to the court's apparent reliance on counsel's evaluation of the class's overtime claim as having "absolutely no" value, without regard to the objectors' claim that counsel's evaluation was based on an allegedly "staggering mistake of law." While the court need not determine the ultimate legal merit of a claim, it is obliged to determine, at a minimum, whether a legitimate controversy exists on a legal point, so that it has some basis for assessing whether the parties' evaluation of the case is within the "ballpark" of reasonableness. We further conclude that the court abused its discretion in finding that the $25,000 enhancements for [the class representatives] were fair and reasonable, and that it erred in awarding costs greater than the maximum amount specified in the notice given to the class.

Federal Minimum Wage Increases to $7.25 per Hour

Good news today for low wage workers. The federal minimum wage increases today from $6.55 to $7.25 per hour. That is a big increase, but it still leaves many working families at or below the poverty level. Our friends at Workplace Fairness explain:
With this new increase to $7.25 an hour, a full-time worker still only earns $15,080 a year. At the nationwide work-week average of 33 hours, the worker would earn only $12,441. The United States government sets the poverty level at $10,830 for one person or $22,050 for a family of four in 48 states and D.C. A worker who is above this low poverty level would not be eligible for certain welfare-related assistance. Thereby, the new federal minimum wage will just barely put many Americans above the poverty level, exempting them from certain assistance, yet barely allowing them to live comfortably.
You can find more information on the federal minimum wage increase here. California minimum wage remains unchanged at $8.00 per hour.

Thursday, July 23, 2009

Quote of the Day: Deuteronomy

From time to time, I am going to post some of my favorite quotes. No better place to start than this:

Do not withhold the wages due to your poor or destitute hired hand, whether he
is one of your brethren or a proselyte living in a settlement in your land.

You must give him his wage on the day it is due, and not let the sun set with him
waiting for it. Since he is a poor man, and his life depends on it, do not let
him call out to God, causing you to have a sin.

Deuteronomy 24:14-15.

Friday, July 17, 2009

Court of Appeal Does an Emily Litella

Do you remember Emily Litella? The brilliant and amazing Gilda Radner played her on Saturday Night Live's Weekend Update. She would come in and say things like, "What's all this fuss about Soviet Jewelry?" or "What's all this fuss about violins on television?"

The Court of Appeal just had a real Emily Litella moment. Last week, I blogged about Martorana v. Marlin & Saltzman, holding that a class member who fails to submit a settlement claim form can't sue class counsel. Yesterday, the Court modified its decision. Here is the full text of the modification:
On pages 2 and 3, the last sentence: "After several years of litigation, the parties in the Sekly action agreed to a class action settlement totaling $1.2 million." The sentence should read: "after several years of litigation, the parties in the Sekly action agreed to a class action settlement totaling $120 million."
"Oh. That's different."

Thursday, July 9, 2009

Class Member Who Fails to Submit Claim Form May Not Sue Class Counsel

This case arises out of an unfortunate situation, but the plaintiff here was on the wrong track, and the Court reached the only proper result. Regardless, this case illustrates one reason why claims made settlements are a bad idea, and neither class representatives nor class counsel should ever agree to them.

In Martorana v. Marlin & Saltzman (July 1, 2009, 2d Dist., Div. 7) (full text available here) the plaintiff was a senior adjuster for Allstate Insurance Company. An overtime class action was filed in 2000 and settled in 2005. The Court preliminarily approved the settlement, and class notice went out. The settlement required class members to file a claim in order to receive any benefit of the settlement.

The plaintiff was a class member and would have received $65,000 if he had filed a claim. Unfortunately, he had been diagnosed with prostate cancer and, perhaps because of his condition, he did not timely file a claim and received nothing.

In 2007, the plaintiff sued Allstate and class counsel, alleging that they should have agreed to a more thorough notice procedure and should have contacted him before the claim filing deadline to find out why he had not filed a claim. Allstate and class counsel demurred. The Court sustained Allstate's demurrer and sustained class counsel's demurrer with leave to amend, reasoning that class counsel could be liable if they had an "active role" in the plaintiff's failure to timely file a claim.

The plaintiff filed a first amended complaint against class counsel, again alleging that they had a duty to negotiate a better class notice mechanism and to contact him individually prior to the claim deadline. He did not allege that class counsel knew that he was sick or had caused him to miss the claim deadline. The court sustained the demurrer without leave, holding that class counsel had duties to the plaintiff as a class member, but that they did not breach any such duty.

The Court of Appeal affirmed. First, the Court held that the plaintiff was collaterally estopped by the orders granting approval from alleging that class counsel should have negotiated a different notice procedure. 
When the trial court granted final approval of the settlement in the action, it necessarily found that the notice procedure agreed upon by the parties complied with the requirements of due process and that the settlement itself was fair, adequate, and reasonable. To the extent that Martorana had any objection to either the settlement or the notice procedure, he had an opportunity to file a written objection with the trial court and to appear at the fairness hearing.
Slip opinion at p. 9. The plaintiff did not timely object and he could not attack the trial court's due process finding in his malpractice action.

Second, the Court held that the plaintiff could not allege that class counsel committed malpractice "based solely on their failure to provide more notice to him than was required by the judicially-approved settlement notice procedure. Based on the allegations in Martorana‟s complaint, such conduct by Class Counsel cannot support a malpractice action as a matter of law." Slip opinion at p. 12.

As in Janik v. Rudy, this is a case that never should have been filed, and there's no question that the Court of Appeal here got it right. Class counsel, whom I respect tremendously, undoubtedly worked hard to do a good job for the class reps and class members and they did not deserve this case as a thank you.

On the other hand, this case illustrates one of the reasons why I hate claims made settlements. Defendants like them because they can demand that any money that is not claimed by class members should revert to them. Defendants also like these settlements because they force class counsel's fees down, particularly when a small number of class members file claims.

Reversionary settlements never make sense, as a matter of policy or practice. If the class representative and the defendant agree to a gross settlement figure, none of that money should go back to the defendant. If money cannot be distributed to class members because they cannot be found, then the money must go to a cy pres beneficiary under CCP 384. Courts should keep their oversight role clearly in mind, should subject reversionary settlements to particular scrutiny, and absent truly extraordinary circumstances should deny approval of these settlements.

Court of Appeal Holds That Some Employees Do Not Get Vacation

This seems evident to me, but it's surprising how many employees think that employers must provide vacation time. In Owen v. Macy’s Inc. (June 29, 2009, Second District, Div. Two), the employer had a policy that new employees would not earn vacation time during their first six months of employment. After termination, an employee alleged that this policy violated California Labor Code Section 227.3. The trial court disagreed and granted summary judgment for the employer.

The Court of Appeal affirmed:
An employer is entitled to adopt a policy specifying "the amount of vacation pay an employee is entitled to be paid as wages," depending on length of service. (Suastez v. Plastic Dress-Up Co. (1982) 31 Cal.3d 774, 783.) The law permits an employer to offer new employees no vacation time: If an express written company policy forewarns new employees that their compensation package does not include paid vacation during their initial employment, then no vacation pay is earned and none is vested. When such a policy is in place, as it is in this appeal, employees cannot claim any right to vested vacation during their initial employment, because they know in advance that they will not earn or vest vacation pay during this period. The trial court correctly determined that plaintiff was not unlawfully denied vacation pay when her employment ended.
Owen includes a good explanation of the limits on LC 227.3 and Suastez. The full text of the opinion is here.

Tuesday, July 7, 2009

Ninth Circuit Reverses Class Certification Order

In In re Wells Fargo Home Mortg. Overtime Pay Litigation (2009) --- F.3d ---, the Ninth Circuit Court of Appeals considered "whether the court abused its discretion in finding that the predominance requirement of Federal Rule of Civil Procedure 23(b)(3) was satisfied, based-in large part-on an employer's internal policy of treating its employees as exempt from overtime laws." Slip op. at 1. The Court held that while "such uniform exemption policies are relevant to the Rule 23(b)(3) analysis," "it is an abuse of discretion to rely on such policies to the near exclusion of other relevant factors touching on predominance." Ibid.

Thursday, July 2, 2009

New California Electronic Discovery Act Takes Effect Immediately

In her most excellent blog, The UCL Practitioner, Kim Kralowec notes that Governor Schwarzenegger on Monday signed into law A.B 5, the Electronic Discovery Act. The Act takes effect immediately, so everyone should read up. The full text of the Act is here. Kim's post is here.