Ninth Circuit Issues Two Class Action Decisions: Bateman v. American Multi-Cinema and Wang v. Chinese Daily News

In Bateman v. American Multi-Cinema, Inc., --- F.3d --- (9th Cir., September 27, 2010), the Court held that the district court abused its discretion in denying class certification in lawsuit based on defendant’s printing of more than the last five digits of consumers’ credit or debit card numbers on electronically printed receipts in violation of the Fair and Accurate Credit Transactions Act. Full opinion here.

In Wang v. Chinese Daily News, Inc., --- F.3d --- (9th Cir., September 27, 2010), the Court affirmed a judgment in favor of a newspaper's employees under the Fair Labor Standards Act and California law:

Chinese Daily News, Inc. (“CDN”), a Chinese-language newspaper, appeals the district court's judgment in an action brought by some of its California-based employees under the federal Fair Labor Standards Act (“FLSA”) and under California law. The district court certified the FLSA claim as a collective action. It certified the state-law claims as a class action under Rule 23(b)(2) and, alternatively, under Rule 23(b)(3). In the state-law class action, it provided for notice and opt out, but subsequently invalidated the opt outs. It granted partial summary judgment to plaintiffs; held jury and bench trials; entered judgment for plaintiffs; awarded attorney's fees to plaintiffs; and conducted a new opt-out process. CDN appeals, challenging aspects of each of these rulings, as well as the jury's verdict. We have jurisdiction under 28 U.S.C. § 1291 and we affirm.

Slip op. at 1. More on this as soon as I have the chance.

Full opinion here.

Governor Schwarzenegger Vetoes Wage and Hour Bills

On Friday, Governor Schwarzennegger vetoed a number of wage and hour bills:

AB 677 (Solorio, D-Santa Ana) - Public works: prevailing wages. Veto message:

Defining projects for renewable energy generating facilities serving school and community college districts as public works when the only public funds are those spent to purchase power produced is an unwarranted expansion of prevailing wage requirements into private works of improvement. Because the payment of prevailing wages results in higher costs, the bill may potentially reduce the number of renewable energy projects undertaken.

AB 1881 (Monning, D-Carmel) - Recovery of wages: liquidated damages. Veto message:

This bill would increase liquidated damages in civil actions for minimum wage violations to twice the wages unlawfully unpaid and interest thereon. Existing law allows for liquidated damages equal to wages owed, in addition to interest, other penalties, and attorneys’ fees. There is no information to show that the existing enforcement and protections of California’s minimum wage laws are insufficient.

AB 2187 (Arambula, I-Fresno) - Employment: payment of wages. Veto message:

AB 2187 would create a new criminal prohibition against a person or an employer who, having the ability to pay, willfully fails to pay all wages to an employee who has been discharged or who has quit within 90 days of the date of the wages becoming due. The bill contains an exemption for instances in which the employee’s entitlement to unpaid wages is disputed by the employer in a civil action or proceeding by the Labor Commissioner unless there is a final judgment in favor of the employee.

Waiting time penalties and defined timeframes for the payment of final wages currently exist in California law, as do mechanisms for enforcement of these obligations. Therefore, this bill is unnecessary.

AB 2773 (Swanson, D-Alameda) - Civil actions: costs. Would have reversed the California Supreme Court decision in Chavez v. City of Los Angeles. See our post on Chavez here. Veto message:

This measure would require an award of attorney’s fees in all fair employment and housing cases even when nominal damages are awarded and even if the case was improperly filed in a court of unlimited jurisdiction. While there may be instances when an award of attorneys fees may be proper, this measure removes all discretion from a judge and encourages frivolous lawsuits.

The Governor also vetoed a number of other employment bills:

AB 482 (Mendoza, D-Norwalk) - Employment: credit reports. Veto message.

AB 1765 (Solorio, D-Anaheim) - Public employment: furloughs. Veto message.

AB 2008 (Arambula, I-Fresno) - Public employment: furloughs. Veto message.

AB 2494 (Blumenfield, D-San Fernando Valley) - Personal services contracts. Veto Message.

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Meal Period Laws Do Not Apply to Public Entities, Court of Appeal Holds

In California Correctional Peace Officers’ Association v. State of California (August 18, 2010, publ. September 17, 2010), the Court of Appeal held that Labor Code Sec. 512 and 226.7, which require employers to provide employees with meal periods or pay them for their missed peal periods, and Industrial Welfare Commission (IWC) Wage Order No. 17-2001, which sets wage-and-hour standards for "miscellaneous employees," do not apply to public entities.

The California Correctional Peace Officers' Association (CCPOA) contends that the State of California (the State), through the California Department of Corrections and Rehabilitation (CDCR), has violated various Labor Code provisions, as well as wage orders promulgated by the Industrial Welfare Commission (IWC), by failing to provide correctional officers with meal periods and by failing to pay for the missed wage periods. According to CCPOA, the Legislature intended that the State provide its correctional officers with meal periods as required by Labor Code section 512 and IWC Wage Order No. 17, and that the State must pay for missed meal periods as required by Labor Code section 226.7. We disagree, and affirm the trial court's determination that the subject wage and hour statutes do not apply to public employees.

Slip op. at 1. The Court followed Johnson v. Arvin-Edison Water Storage Dist. (2009) 174 Cal.App.4th 729, 734-735, which rejected similar claims:

[U]nless Labor Code provisions are specifically made applicable to public employers, they only apply to employers in the private sector. Since section[ ] ... 512 do[es] not expressly apply to public entities, [it is] not applicable here. Further, applying section[ ] ... 512 to the District would infringe on its sovereign power to regulate its workforce.

Slip op. at 2, citing Johnson, 174 Cal.App.4th at p. 733.

The Court also rejected the contention that public employees are covered by Wage Order No. 17-2001, the "catch-all order, which subsumes 'Miscellaneous Employees' who are not otherwise covered specific wage orders." Slip op. at 3.

CCPOA contends that Wage Order No. 17 applies to the CDCR's employees because
peace officers were not covered or exempted by any wage order in effect in 1997. CCPOA misreads the scope of the wage orders in effect in 1997. It is well established that public employees have been historically exempt from IWC wage orders. (See, e.g., Monzon v. Schaefer Ambulance Service, Inc. (1990) 224 Cal.App.3d 16, 29, 273 Cal.Rptr. 615 [noting exclusion of public employees from general minimum wage order]; see also Kim v. Regents of University of California (2000) 80 Cal.App.4th 160, 166-167, 95 Cal.Rptr.2d 10 [holding public employee not entitled to overtime provisions in IWC Order No. 4].) Indeed, with two exceptions pertaining to agricultural occupations and household occupations (Cal.Code Regs., tit. 8, §§ 11140 & 11150), public employees were expressly exempted from the IWC wage orders in effect in 1997 [citations omitted]. By its terms, Wage Order No. 17 applies to “all employees not specifically exempted ” in the wage orders in effect in 1997. As public employees were exempt from all but two of the wage orders in effect in 1997, Wage Order No. 17 does not apply to CDCR employees.

Ibid. The opinion is available here.

Court of Appeal Holds that Court May Award Supplemental Attorney Fees After Successful Appeal

In Center for Biological Diversity v. County of San Bernardino (Hawarden Development Company) (September 17, 2010), the Court held that the entry of final judgment, including an award of attorney fees, does not necessarily preclude an award of supplemental fees when the plaintiff prevails in an appeal from that judgment.

Center for Biological Diversity, Inc., San Diego Audubon Society, Save our Forest Association, and Sierra Club, plaintiffs in a CEQA (California Environmental Quality Act; Pub. Resources Code, § 21000 et seq.) action, appeal an order on attorney fees that was rendered on remand after an earlier appeal on the merits. The trial court originally awarded plaintiffs a reduced amount of fees under Code of Civil Procedure section 1021.5, the private attorney general statute, based on their limited success at trial; they lost on two CEQA claims and won on one non-CEQA claim. On remand, plaintiffs moved for fees incurred on the appeal, and for supplemental fees incurred at the trial court level based on their greater success on appeal on the CEQA claims. The court determined it lacked jurisdiction to hear the supplemental fees matter because plaintiffs had dismissed their appeal of the postjudgment order on fees and the order was final. Plaintiffs persuasively contend the court's jurisdictional finding was in error. A motion for supplemental fees based on greater success on appeal does not challenge the original fee order and poses no jurisdictional impediment. Thus, we remand for consideration of supplemental fees.

Slip op. at 1. The opinion is available here.

Ninth Circuit Invalidates Arbitration Clause in Franchise Agreement

In Bridge Fund Capital Corp. v. Fastbucks Franchise Corp. (9th Cir., September 16, 2010) --- F.3d ----, 2010 WL 3584060, the franchisees of a payday loan and check cashing company sued the franchisor in state court, alleging breach of franchise agreements, fraud and deceit, negligent misrepresentation, violation of the California Franchise Investment Law (CFIL), declaratory relief, and unfair trade practices. After removal, the district court (Judge England, E.D.Cal.)denied the franchisor's motion to dismiss or to stay pending arbitration, and the franchisor appealed.

The Ninth Circuit affirmed the order, holding:

As long as the plaintiff's challenge to the validity of an arbitration clause is a distinct question from the validity of the contract as a whole, the question of arbitrability is for the court to decide, regardless of whether the specific challenge to the arbitration clause is raised as a distinct claim in the complaint. Slip op. at 4-5.

The district court did not err in determining that California law governed the unconscionability question, despite a Texas choice of law clause and the defendant's residence in Texas, because California possessed a materially greater interest in the matter, where enforcement of the arbitration clause would contravene fundamental California public policy in favor of protecting California franchisees from unfair and deceptive business practices, as established by the CFIL. Slip op. at 6.

Because most of the arbitration clause was both procedurally and substantively unconscionable under California law, and severance of the unconscionable provisions would have left almost nothing to the clause, the district court did not abuse its discretion in invalidating the entire clause, rather than redacting the offending portions of it. Slip op. at 7-8.

Parties seeking to invalidate arbitration clauses in employment agreements undoubtedly will want to analogize to this case.

The opinion is available here.

Court of Appeal Affirms Jury Verdict on Tameny Claim for Employee Discharged for Wage Complaints

Thank you to Christopher Bello for pointing out this unpublished decision from the Fourth Circuit Court of Appeal.

Carol Belk (Belk) brought an action against her former employer, Electra Cruises, Inc. (Electra), for breach of contract and wrongful termination. The jury returned a verdict in her favor, awarding her $36,736 for breach of contract, $80,000 for wrongful termination, and $225,000 in punitive damages. The trial court granted Electra's motion for judgment notwithstanding the verdict on the breach of contract cause of action only. It also granted Electra's motion for new trial on the punitive damages, subject to Belk's acceptance of a reduced remittitur of $80,000. Belk accepted the reduced award.

Electra appeals, claiming the trial court erred in failing to grant its motion for judgment notwithstanding the verdict on the wrongful termination cause of action because Belk did not prove she was terminated in violation of a fundamental public policy. It also claims the trial court erred in failing to grant its motion for new trial on punitive damages because, even though reduced, the award is still excessive. Belk also appeals, claiming the original punitive damages award was not excessive and the reduction of the award was erroneous. We affirm.

Slip op. at 1. Although the opinion cannot be cited, it includes a good discussion of the cases on wrongful termination for wage complaints (Gould v. Maryland Sound and Phillips v. Gemini Moving), jury instructions, and punitive damages.

Court of Appeal Upholds Los Angeles Hotel Service Charge Ordinance

In Garcia v. Four Points Sheraton LAX (September 8, 2010) --- Cal.Rptr.3d ---, 2010 WL 3491954, hotel banquet captains and servers sued their employers under the Los Angeles Hotel Service Charge Reform Ordinance and the Unfair Competition Law (UCL). The trial court (LASC, Highberger) sustained the defendant employers' demurrers without leave to amend. The Court of Appeal reversed. It held:

In this appeal, we address the validity of the Hotel Service Charge Reform Ordinance (Ordinance) enacted by the City of Los Angeles (the City), requiring non-unionized hotels in the Century Corridor near Los Angeles International Airport (LAX) to pass along mandatory service charges to workers who render the services for which the charges have been collected. The Ordinance is based upon the City’s determination that LAX-area hotels reap economic benefits from their location and have the responsibility and ability to pay these workers a decent compensation. Service workers have seen their income decline as a result of the hotels’ practice of imposing mandatory service charges because patrons assume these charges are paid to the workers and therefore do not leave them a gratuity.

Appellants are service workers who challenge the trial court’s dismissal of their lawsuits to enforce the Ordinance on the grounds that it is preempted by Labor Code sections 350 through 356, which govern the disposition of gratuities. Appellants contend the Ordinance does not conflict with the Labor Code because it neither contradicts the Labor Code nor enters the field of regulating gratuities. Although not addressed by the trial court, appellants also contend the Ordinance does not violate the equal protection clauses of the federal and state Constitutions, is not void for vagueness under the due process clause, and is not an unconstitutional taking.

We conclude the Labor Code does not preempt the Ordinance because the Labor Code provisions regulating gratuities are not irreconcilable with the Ordinance, and the Legislature has not demonstrated its intent to regulate in the field of service charges. We further conclude there is no equal protection violation under the deferential, rational basis standard, and the Ordinance is not otherwise Constitutionally infirm. Therefore, we reverse the judgments of dismissal entered following the trial court’s order sustaining the demurrers to the complaints without leave to amend.

Slip op. at 1. The full text of the opinion is available here.

Cal. Supremes Schedule Oral Argument in UCL, Waiting Time Penalty Case

On Tuesday, October 5, 2010, at 1:30 p.m., the California Supreme Court will hear oral argument in Pineda v. Bank of America, in which the Court of Appeal held, among other things, that Labor Code Section 203 "waiting time" penalties are not available as restitution under the Unfair Competition Law. Oral argument will be in Fresno at the Court of Appeal, Fifth Appellate District. If any of you will be at the oral argument, I would love to hear your impressions.

Court of Appeal Reverses Summary Judgment in FEHA Age and Disability Case

In Sandell v. Taylor-Listug, Inc. (September 7, 2010) --- Cal.App.3d ---, 2010 WL 3470388, the Court of Appeal reversed an order granting summary judgment (SDSC, Halgren) in an age and disability discrimination FEHA action. The Court held:

Approximately six months into his employment at Taylor-Listug, Sandell suffered a stroke after receiving a chiropractic adjustment. Sandell returned to work at Taylor-Listug in late 2004. During the remainder of Sandell's employment at Taylor-Listug, he required a cane to walk, and his speech was noticeably slower than it had been prior to his stroke. Taylor-Listug's chief executive officer terminated Sandell's employment in late 2007, a few days after Sandell's 60th birthday, citing displeasure with Sandell's performance as vice president of sales.

The trial court concluded that there were no triable issues of fact with respect to Sandell's discrimination claims, and granted summary judgment in favor of Taylor-Listug. Having reviewed the record presented on summary judgment, we conclude that Sandell presented evidence sufficient to establish a prima facie case of disability and age discrimination, and in response to Taylor-Listug's proffer of legitimate nondiscriminatory reasons for terminating his employment, Sandell presented sufficient evidence to raise a triable issue of fact as to whether the motivation for his termination was discriminatory. We therefore reverse the judgment of the trial court and remand the matter for further proceedings.

Slip op. at 1. The opinion is available here.