American Express Co. v. Italian Colors Restaurant: SCOTUS Hears Oral Argument in Arbitration Class Action Waiver Case

The Supreme Court of the United States yesterday heard oral argument in American Express Co. v. Italian Colors Restaurant (Case No. 12-133), in which the Court will decide the following issue: 

Whether the Federal Arbitration Act permits courts, invoking the “federal substantive law of arbitrability,” to invalidate arbitration agreements on the ground that they do not permit class arbitration of a federal-law claim. 

The Second Circuit's opinion in In re American Express III 667 F.3d 204 (2d Cir. 2012) is here. In a series of three decisions, the Second Circuit has held: (1) the class action waiver at issue is unenforceable "because enforcement of the clause would effectively preclude any action seeking to vindicate the statutory rights asserted by the plaintiffs;" and (2) the Supreme Court's decisions in Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp. and AT & T Mobility LLC v. Conception do not affect that conclusion. 

Justice Sotomayor recused herself from the case because she sat on the Second Circuit panel that issued the first of the three decisions, In re American Express I, 554 F.3d 300 (2d Cir. 2009). 

The Supreme Court's docket is here, and SCOTUSblog has a web page for the case here.

The case is on our Watch List of Pending Cases, and the State Bar of California will present a webinar on it when the Court issues its decision.

Richey v. AutoNation: Cal. Supremes Grant Review In CFRA Arbitration Matter

In Richey v. AutoNation, Inc. (11/13/12, mod. 12/12/12) (discussed here), the Court of Appeal vacated an arbitration award in favor of an employer in a CFRA action, holding that the arbitrator improperly relied on a defense that the employer held an "honest belief" or "honest suspicion" that the employee had abused his medical leave.

On February 13, 2013, the California Supreme Court granted review.  The issues presented are as follows:

1. Is an employer's honest belief that an employee was violating company policy or abusing medical leave a complete defense to the employee's claim that the employer violated the Moore-Brown-Roberti Family Rights Act (Gov. Code ?? 12945.1, 12945.2)? 
2. Was the decision below to vacate the arbitration award in the employer's favor consistent with the limited judicial review of arbitration awards?

The "complete defense" question brings to mind the Court's recent decision in Harris v. City of Santa Monica, but even if you do not practice in this area, the prevalence of arbitration agreements in employment makes this a very important case.  Richey is Case No. S207536, and the Court's web page for it is here. 

I have added Richey to our Watch List of Pending Cases, and we will present a webinar on it promptly upon the decision being issued.  

Reminder: Harris Webinar Today at Noon!

Today at noon, David deRubertis and Paul Cane will join me for a discussion of Harris v. City of Santa Monica, the issues it settles, and the questions it leaves for another day. The Supreme Court in Harris decided a number of highly important issues under California’s Fair Employment and Housing Act: 

A plaintiff in a FEHA disparate impact action must prove that unlawful discrimination was a “substantial factor motivating” the alleged adverse employment action; 

A defendant in such an action may use a “mixed-motive” defense by proving, by a preponderance of the evidence, that it would have made the same decision absent such discrimination;  

A defendant making such a showing need not concede that unlawful discrimination played any role in its decision-making process; and  

A same-decision showing is not a complete defense. If the defendant makes such a showing, the plaintiff may not obtain reinstatement, backpay, front pay, or noneconomic damages, but may obtain declaratory relief, injunctive relief, and reasonable attorney’s fees and costs.

Harris left a number of other issues unanswered:  

What does “substantial motivating factor” really mean? How should trial judges instruct juries on this issue?  

Are all discrimination cases mixed-motive cases? If not, how can attorneys and trial courts determine which cases may lead to mixed-motive findings? And if so, does the McDonnell Douglas burden-shifting analysis still apply to discrimination cases under California law?  

What is the impact of Harris on pleading standards and practices, motions for summary judgment, and trial? Will we see requests for injunctive and declaratory relief in all FEHA cases going forward? And what proof will be required to obtain injunctive or declaratory relief?

Register here and join us at noon today! 

See’s Candy Shops, Inc. v. Superior Court (Silva): Supreme Court Denies Review and Depublication of Time Rounding Case

In See’s Candy Shops, Inc. v. Superior Court (Silva) (10/29/12) 210 Cal.App.4th 889 (2012) (discussed here), the trial court order granted summary adjudication to a plaintiff in a certified class action, holding that the employer's policy of rounding its employees' time entries to the nearest tenth of an hour violated California and federal law. 

The Court of Appeal reversed, holding that a nearest-tenth rounding policy is lawful if it is fair and neutral on its face and "it is used in such a manner that it will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked," and that either the plaintiff failed to show that she was entitled to judgment as a matter of law, or the employer raised a triable issue of fact. 

On February 13, 2013, the California Supreme Court denied petitions for review and depublication filed by the plaintiff. 

Franco v. Arakelian Enterprises: Supreme Court Issues Another Iskanian Grant-and-Hold

In Franco v. Arakelian Enterprises, Inc. (11/26/12) (discussed here), the Court of Appeal affirmed a trial court order denying individual arbitration of a putative wage and hour class action, holding:

Gentry v. Superior Court (2007) 42 Cal.4th 443, remains good law after AT&T Mobility LLC v. Concepcion (2011) 563 U.S. ___, and the class action waiver at issue was invalid.  

Because the class action waiver was invalid, Stolt-Nielsen S.A. v. AnimalFeeds International Corp. (2010) 559 U.S. ___, required that the action remain in court, where plaintiff could pursue class certification. 

Not surprisingly, on February 13, 2013, the California Supreme Court granted review and held briefing pending its decision in Iskanian v. CLS Transportation Los Angeles, LLC (6/4/12) (discussed here), which includes the following issue: 

Did Concepcion impliedly overrule Gentry with respect to contractual class action waivers in the context of non-waivable labor law rights?

Franco v. Arakelian is Case No. S207760, and the Court's web page for it is here.  Iskanian is Case No. S204032, and the Court's web page for it is here.  

As always, you can register for email alerts on the Supreme Court's case summary pages.

Monarrez v. Automobile Club of Southern California: Supreme Court Issues Grant-and-Hold Order in Independent Contractor Action

In Monarrez v. Automobile Club of Southern California (12/12/12) (discussed here) the Court of Appeal reversed a trial court order granting summary judgment to a defendant in a third party liability case alleging that a tow truck driver was an Automobile Club employee, rather than an independent contractor. 

On February 13, 2013, the California Supreme Court granted review and held briefing pending its decision in Patterson v. Domino's Pizza (6/27/12) (discussed here).  In Patterson, the plaintiff sued a Domino's Pizza franchisee and the franchisor, alleging that both were responsible for sexual harassment by her supervisor.  The Court of Appeal reversed a trial court order granting summary judgment for the franchisor, holding that evidence of control by the franchisor raised "reasonable inferences" supporting the plaintiff's claim that the franchisee was not merely an independent contractor, and that this was sufficient to defeat summary judgment. 

The Supreme Court granted review, limited to the question of "whether the defendant franchisor is entitled to summary judgment on plaintiff's claim that it is vicariously liable for tortious conduct by a supervising employee of a franchisee." 

This is very interesting because, as I noted in my original post on Monarrez, that is a third party tort liability case, while the cases on which the Court of Appeal relied, S.G. Borello & Sons, and Estrada v. FedEx, were cases by putative independent contractors against a putative employer. I have always understood that the tests in these two types of cases differed substantially, and it will be interesting to see whether the Supreme Court draws a distinction. 

Patterson is Case No. S204543, and the Court's case summary page is here.  Monarrez is Case No. S207726, and the Court's case summary page is here. 

If you want to stay current on developments in these cases, you can register for email alerts on the Supreme Court's case summary pages. 

Registration for Harris Webinar Now Available

OK, I promise that this will be my last post for a while on Harris v. City of Santa Monica, but a few people have asked for more information on the webinar, which will air on February 22, 2013, from 12:00 to 1:15 p.m.  

You can register for the webinar on the State Bar Labor and Employment Law Section's web site, here.  If you cannot attend the webinar live, the State Bar will have it available for later viewing.  

Harris v. City of Santa Monica Webinar February 22 at 12:00 p.m.

Mark your calendars for February 22, 2013, at noon. David deRubertis and Paul Cane will join me for a discussion of Harris v. City of Santa Monica -- the issues it settles and the questions it leaves for another day. Here is our write-up for the webinar:

In Harris v. City of Santa Monica (2/7/13) --- Cal.4th ---, the Supreme Court of California decided a number of highly important issues under California’s Fair Employment and Housing Act: 

A plaintiff in a FEHA disparate impact action must prove that unlawful discrimination was a “substantial factor motivating” the alleged adverse employment action;  

A defendant in such an action may use a “mixed-motive” defense by proving, by a preponderance of the evidence, that it would have made the same decision absent such discrimination;  

A defendant making such a showing need not concede that unlawful discrimination played any role in its decision-making process; and  

A same-decision showing is not a complete defense. If the defendant makes such a showing, the plaintiff may not obtain reinstatement, backpay, front pay, or noneconomic damages, but may obtain declaratory relief, injunctive relief, and reasonable attorney’s fees and costs. 

Harris also left unanswered a number of other issues: 

What does “substantial motivating factor” really mean? How should trial judges instruct juries on this issue?  

Are all discrimination cases mixed-motive cases? If not, how can attorneys and trial courts determine which cases may lead to mixed-motive findings? And if so, does the McDonnell Douglas burden-shifting analysis still apply to discrimination cases under California law?  

What is the impact of Harris on pleading standards and practices, motions for summary judgment, and trial? Will we see requests for injunctive and declaratory relief in all FEHA cases going forward? And what proof will be required to obtain injunctive or declaratory relief? 

Paul W. Cane, Jr. – who argued the case for amici California Employment Law Council and Employers Group – and David deRubertis – who argued the case for the plaintiff, Wynona Harris – will discuss these issues and more with moderator (and mediator) Steven G. Pearl on February 22, 2013, at 12:00 p.m. Please join us.  

Harris v. City of Santa Monica: Supreme Court Rules on Causation, Mixed Motive

The California Supreme Court this morning issued its decision in Harris v. City of Santa Monica (2/7/13) --- Cal. ---. The main holdings are as follows:

We hold that under the FEHA, when a jury finds that unlawful discrimination was a substantial factor motivating a termination of employment, and when the employer proves it would have made the same decision absent such discrimination, a court may not award damages, backpay, or an order of reinstatement.  But the employer does not escape liability.  In light of the FEHA's express purpose of not only redressing but also preventing and deterring unlawful discrimination in the workplace, the plaintiff in this circumstance could still be awarded, where appropriate, declaratory relief or injunctive relief to stop discriminatory practices.  In addition, the plaintiff may be eligible for reasonable attorney‘s fees and costs.  Therefore, we affirm the Court of Appeal's judgment overturning the damages verdict in this case and remand for further proceedings in accordance with the instructions set forth below.

The per curiam opinion, with Baxter recused, was written by Justice Liu and is available here.

More to follow once I have a chance to review at length. 

Please remember that Paul Cane and David deRubertis will speak on Harris for the State bar's Watch List Webinar series in the next couple of weeks.  This is going to be a very lively and important discussion.  

Harris v. City of Santa Monica Decision Out This Morning

The California Supreme Court announced yesterday that it would publish its decision in Harris v. City of Santa Monica this morning at 10:00 a.m. Most anticipated that the Court would use the full 90 days to issue its decision, so this is a bit of a surprise, particularly in light of Justice Baxter's recusal. I will not try to read the tea leaves (at least not beyond what I've already said). 

I will post the result as soon as we have it. 

And please remember that we will present a Watch List Webinar within the next couple of weeks, with Paul Cane, David deRubertis, and yours truly moderating. 

Aryeh v. Canon Business Solutions: Common Law Accrual Rules and Exceptions Apply to UCL Actions

Aryeh v. Canon Business Solutions, Inc. (1/24/13) is not an employment law case, but the issues involved arise frequently in employment litigation.  

Aryeh filed a putative class action against Canon, alleging that it violated the unfair competition law (UCL) by charging him for too many copies on his leased Canon copiers.  Canon demurred to his complaint, arguing that he knew or should have known of the alleged wrong more than four years before he filed suit, and the statute of limitations barred his action.  The trial court sustained the demurrer without leave to amend. Aryeh appealed, and the Court of Appeal reversed. 

First, the Court held that common law accrual rules apply in UCL actions.   Slip op. at 6-12. This includes both the "last element rule" that "a cause of action accrues when it is complete with all of its elements," and that the last element rule's numerous equitable exceptions: 

1. The discovery rule (no accrual until plaintiff discovers or should discover the cause of action); 
2. Equitable tolling (tolling the statute when the plaintiff reasonably and in good faith chooses among several remedies, and the statute's notice function is served); 
3. Fraudulent concealment (tolling the statute when the defendant causes a claim to grow stale through deceptive conduct); 
4. Continuing violation (aggregating a series of wrongs or injuries and treating the limitations period as accruing for all of them upon the commission or sufferance of the last of them); and 
5. Continuous accrual (each event in a series of wrongs or injuries triggers its own limitations period, such that claims for some wrongs or injuries may be time barred, and others may be timely). 

Second, the Court held that the defendant bears the burden of proving the limitations defense, and the plaintiff bears the burden of proving an exception to it.  Slip op. at 12. 

Third, the Court held that the continuing violation doctrine did not apply in the present case because the complaint identified "a series of discrete, independently actionable alleged wrongs," rather than "a wrongful course of conduct [that] became apparent only through the accumulation of a series of harms." Slip op. at 12-14.  However, the continuous accrual doctrine did apply because Aryeh alleged a continuing duty on Canon's part, susceptible to recurring breaches. "Accordingly, each alleged breach must be treated as triggering a new statute of limitations." Slip op. at 14-20. 

The Court concluded as follows:

At the demurrer stage, Aryeh is the master of his complaint, and we must accept his allegations at face value. He has alleged a recurring unfair act—the inclusion in monthly bills of charges for copies Canon itself made. The theory of continuous accrual applies to such allegations, and insofar as the operative complaint alleges at least some such acts within the four years preceding suit, the suit is not entirely time-barred.

Slip op. at 20.  

The opinion is available here. 

Noel Canning v. NLRB: D.C. Court of Appeals Invalidates Recess Appointments to NLRB and NLRB Decision

On January 4, 2012, President Obama used recess appointments to name three members to the National Labor Relations Board.  U.S. Const. art. II, § 2, cl. 3.  On January 25, 2013, the federal Court of Appeals for the D.C. Circuit in Noel Canning v. NLRB, ___ F.3d ___, (D.C. Cir., 1/25/13) held that the President lacked constitutional authority to make these recess appointments, for two reasons.  

First, the Court held that President Obama did not make the appointments "during the Recess of the Senate," as required by the Constitution.  In short, the Court held that the time period during which the President may make recess appointments is limited to "the Recess," meaning "the period between sessions that would end with the ensuing session of the Senate."  Slip op. at 18.  

Second, the Court held that the three vacancies filled by the President did not "happen during the Recess of the Senate," as required.  Slip op. at 30.  The Court held that "to happen" means "to arise," and that only vacancies that "arise" during the period between Senate sessions may be filled by recess appointments. Slip op. at 39.  

The Court then held that none of the three recess appointments arose, and the President made none of the appointments, during the Recess of the Senate.  Slip op. at 30, 40. The Court found that the Senate did not recess between the first and second sessions of the 112th Congress, so no recess appointments were possible.  Slip op. at 42-43.  

As a result, the Board had no quorum when it decided the case at issue on February 8, 2012, and its decision is void.  Slip op. at 44.  

Many have asked how this case impacts the Board's decision in In re DR Horton, Inc., 357 NLRB 184 - 2012. It's a good question. The Board decided Horton on January 3, 2012, the day before President Obama made the recess appointments at issue in Noel Canning. However, one of the three Board members who signed off on Horton, Craig Becker, was himself the subject of a recess appointment on March 27, 2010. And DR Horton's counsel has filed a letter with the Fifth Circuit arguing that the reasoning in Noel Canning invalidates Becker's appointment and the Horton decision along with it.  Only time will tell whether this argument will carry the day.  

In the mean time, you can find Noel Canning v. NLRB here. 

Ayala v. Antelope Valley Newspapers: Supreme Court Grants Review In Independent Contractor Class Action

In Ayala v. Antelope Valley Newspapers, Inc. (9/19/12, pub. 10/17/12) (discussed here), the plaintiffs "sought to certify a class of newspaper home delivery carriers ... alleging that AVP improperly classified the carriers as independent contractors rather than employees... The trial court found there were numerous variations in how the carriers performed their jobs, and therefore common issues did not predominate." Slip op. at 2. The Court of Appeal reversed in part, holding that variations in how individuals performed their work did not preclude class certification under S.G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341.  

On January 30, the Supreme Court  granted the defendant's petition for review.  Ayala is Case No. S206874.  The Supreme Court's web site for it is here.