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Friday, October 29, 2010

Dukes v. Wal-Mart: Plaintiffs File Opposition to Wal-Mart Petition for Certirorari

On October 21, 2010, plaintiffs filed their opposition to the petition for certiorari filed by Wal-Mart in Dukes v. Wal-Mart Stores, Inc. The introduction lays out the arguments:

The Petition seeks review of an interlocutory class certification order that the appeals court affirmed in part, reversed in part, and remanded for reconsideration on two issues central to the questions presented by Petitioner. Class certification orders are inherently provisional, but the two issues still to be resolved render this order particularly ill-suited for certiorari review at this time. As a result, the Petition raises questions that this case does not present – and may never present. The request for review is, thus, premature.

The First Question ["Whether claims for monetary relief can be certified under Federal Rule of Civil Procedure 23(b)(2)—which by its terms is limited to injunctive or corresponding declaratory relief—and, if so, under what circumstances"] posits the existence of a circuit split as to whether and how “monetary relief” claims may be certified in a Rule 23(b)(2) injunctive class action. While the circuits have treated claims for legal damages under Rule 23(b)(2) somewhat differently, there is no circuit split presented by the en banc ruling, as the only form of monetary relief that the Ninth Circuit allowed to proceed collectively was equitable back pay. All the circuits that have addressed the issue agree that equitable back pay may properly be certified in a Rule 23(b)(2) class action.

The Second Question ["Whether the certification order conforms to the requirements of Title VII, the Due Process Clause, the Seventh Amendment, the Rules Enabling Act, and Federal Rule of Civil Procedure 23"] – an amalgam of purported errors, large and small, based on a host of legal doctrines – makes little pretense of meeting this Court’s requirements for certiorari. No circuit split exists as to any of these issues. Instead, the Petition exhorts this Court to second-guess the case-specific findings of the district court or to adopt, in the first instance, legal theories never accepted by any appellate court.

Petitioner returns repeatedly to the refrain that the certified class is very large, a fact that is indisputably true but legally irrelevant. The class is large because Wal-Mart is the nation’s largest employer and manages its operations and employment practices in a highly uniform and centralized manner. The district court was keenly aware of the implications of the class size but ultimately concluded that “Title VII . . . contains no special exception for large employers.” App. 165a. The certification decision was firmly grounded in this Court’s Title VII class action jurisprudence and “[c]ertification does not become an abuse of discretion merely because the class has 500,000 members.” App. 112a (Graber, J., concurring).

Sorry for the long block quote, but the intro does a good job of laying out the arguments. I understand that we should know by the end of November whether the Court will grant cert.

Our post on Wal-Mart's petition is here. The opposition brief and other relevant documents are available here. The Supreme Court's docket is here.

Hernandez v. Chipotle: Court of Appeal Jumps Into Brinker Breach

Lately we've been hearing about some trial court judges wanting to stay cases that include meal and rest period claims until the Supreme Court decides Brinker v. Superior Court (Hohnbaum). Never mind that no one knows when the Court will decide Brinker or exactly what issues it will decide. People seem to forget that the Court has no deadline for hearing cases on its docket, as demonstrated by the fact that it took more than five years to decide Martinez v. Combs.

The trial court in Hernandez v. Chipotle Mexican Grill, Inc. (October 28, 2010) --- Cal.App.4th ---, 2010 WL 4244583, decided not to wait for Brinker.

Rogelio Hernandez worked at a Chipotle restaurant as an hourly worker. He sued Chipotle for failure to provide meal and rest periods to hourly employees. Chipotle moved to deny class certification, and Hernandez moved to certify the class. The Court found Hernandez had established numerosity, ascertainability, typicality, and adequacy, but denied certification on the grounds that individual issues predominated over common issues, and class treatment was not superior to individual actions.
The trial court held that with regard to rest breaks, as conceded by Hernandez, employers need only authorize and permit such breaks, which means to make them available. The trial court recognized that the California Supreme Court had granted review of two cases to decide whether California law required employers to ensure employees take meal breaks, or if the proper standard was that employers need only provide employees with the opportunity to take such breaks. The trial court concluded the Supreme Court likely was to decide California employers were required to provide employees with the ability to take breaks, not to ensure breaks be taken. The trial court further ruled that although there were common questions regarding whether Chipotle's policy was to provide breaks, whether employees “missed or received shorten[ed] meal and rest breaks[,] and whether such constituted an unfair business practice, these questions do not predominate.” The trial court stated that if the Supreme Court held employers had to ensure employees take breaks, class action treatment of this case would be appropriate.

The trial court found that class adjudication of the wage and hour break claims was not manageable, nor would it provide a substantial benefit to the court or parties. Rather, individual inquiry was “required to determine if [Chipotle] is liable for denying proper meal and rest breaks to each of its thousands of employees.” Further, adjudication of these individual issues rendered classwide adjudication unmanageable because, even if an employee's time record indicated a break was missed, that in and of itself did not establish that Chipotle failed to provide, authorize or permit the employee to take a meal or rest break. Additionally, Hernandez failed to present a clear outline of how the court and parties could use a sampling of testimony to address all of the individual questions that had to be answered.
Slip op. at 3-4.

The Court of Appeal affirmed. First, the Court held that employers must make meal and rest periods available, not ensure that they are taken. Slip op. at 5-6. The Court distinguished Cicairos v. Summit Logistics, Inc. (2005) 133 Cal.App.4th 949 on grounds that Cicairos relied on a now withdrawn DLSE opinion letter and that the employer in Cicairos effectvely precluded its employees from taking their meal and rest periods. Slip op. at 6-7.

The Court next held that California law did not foreclose the trial court from addressing the "make available v. ensure" issue in the context of class certification.
[N]either Linder [v. Thrifty Oil Co. (2000) 23 Cal.4th 429] nor other Supreme Court authority forecloses courts from examining a legal issue in addressing certification. “[Linder] said only that a plaintiff need not establish a likelihood of success on the merits in order to obtain class certification. It does not follow that, in determining whether the criteria of Code of Civil Procedure section 382 are met, a trial or appellate court is precluded from considering how various claims and defenses relate and may affect the course of the litigation, considerations that may overlap the case's merits.
Slip op. at 8. The Court distinguished the recent decision in Jaimez v. Daiohs USA, Inc. (2010) 181 Cal.App.4th 1286, on the following grounds:
In Jaimez, Division One of this district reversed the denial of class certification in a case that, like Cicairos, involved employees who were on the road most of the day or at customers' places of business. Jaimez found it unnecessary to decide whether employers need only “provide” meal breaks and not ensure employees take them. The declarations established there were predominant common factual issues whether the employees missed meal breaks because of the employer's practice of designating delivery schedules and routes that made it impossible for employees to both take their breaks and complete their deliveries on time. Before 2006, the employer had a practice of deducting 30 minutes per shift for meal breaks even if no break was taken, and after 2006, employees had to sign a manifest indicating they took a meal break, regardless of whether they took the break, in order to get paid. Since the employer's practices presented the predominant common factual issues on the meal and rest break claims, Jaimez did not have to consider whether the employer violated a duty to provide or to ensure breaks. Jaimez does not hold that in every wage-and-hour case, even those presenting entirely different factual issues, courts may not consider the merits of a legal issue in order to rule on class certification. The trial court appropriately decided the threshold legal issue as it could not otherwise assess whether class treatment was warranted.
Slip op. at 8.

Given the foregoing, the Court held that the trial court did not abuse its discretion in denying class certification. The Court held that: substantial evidence supported the trial court's finding that individual issues predominate (slip op. at 8); the employer's time records did not demonstrate that Hernandez could prove classwide failure to provide meal and rest periods (slip op. at 9); Hernandez's evidence did not undermine the trial court's ruling (slip op. at 9); and there was substantial evidence of conflicts of interest among the putative class members because some class members also acted as supervisors and some class members may accuse others of violating the wage laws (slip op. at 10).

People have asked me whether this decision gives any indication of which way the Supreme Court will decide Brinker or might influence the Court in Brinker. The answer to both questions is no.

A few years ago, when we were all waiting for a decision in Murphy v. Kenneth Cole, several appellate courts and federal district courts published decisions on the same issue. The strong majority held that meal and rest period compensation was a penalty, not a wage. The Supreme Court granted review of the California cases and held pending its decision in Murphy.

I remember being on an MCLE panel with a well-known defense attorney the day after the Murphy oral argument. He boldly predicted that the Court would hold that meal period compensation was a penalty.

Of course, the majority of courts and my colleague were wrong. The Supreme Court in Murphy held that meal and rest period compensation is a wage.

I assume that the Supreme Court will grant the plaintiff's petition for review in Hernandez and hold pending Brinker. If the Court ultimately decides that employers need only make meal and rest periods available, it will be because the Court finds that to be the most reasonable and persuasive interpretation of the law, not because appellate courts or district courts said so.

The opinion is available here.

Thursday, October 28, 2010

Supreme Court Announces Oral Argument in Arbitration Matter

The California Supreme Court will hear oral argument in Sonic-Calabasas A, Inc. v. Moreno on December 8, 2010, at 9:00 a.m., in Los Angeles. Sonic-Calabasas is represented David Reese of Fine Boggs & Perkins in Long Beach. Moreno is represented by Miles Locker and Rachel Folberg. It should be an interesting argument.

The case presents the following issues, as stated by the Court:
  1. Can a mandatory employment arbitration agreement be enforced prior to the conclusion of an administrative proceeding conducted by the Labor Commissioner concerning an employee's statutory wage claim?
  2. Was the Labor Commissioner's jurisdiction over employee's statutory wage claim divested by the Federal Arbitration Act under Preston v. Ferrer (2008) __ U.S. __, 128 S.Ct. 978, 169 L.Ed.2d 917?

The Supreme Court's docket is located here.

Wednesday, October 27, 2010

Court of Appeal Affirms Dismissal of PAGA Representative Action Based on Prior Class Action Settlement

Villacres v. ABM Industries, Inc. (October 22, 2010) --- Cal.App.4th ----, 2010 WL 4142264, is one of the few California cases dealing with the 2004 Labor Code Private Attorneys General Act (PAGA).

An employee filed a class action against his employer for violation of California wage laws. He sought civil penalties under PAGA and Labor Code section 558. The case settled for $2.5 million, with $730,000 being allocated to civil and statutory penalties. The superior court approved the settlement and dismissed the case with prejudice.

Just two days after final approval, a member of the prior class filed a second class action against the same employer. In his first amended complaint, he dropped the class allegations and sought to pursue a representative action for civil penalties under PAGA. See Arias v. Superior Court, discussed here.

The trial court (Judge Lichtman, LASC) granted the employer's motion for summary judgment on the ground that plaintiff's claims were barred by res judicata. The Court of Appeal affirmed:
We agree with the trial court. A court-approved settlement in a prior suit precludes subsequent litigation on the same cause of action. Res judicata bars not only issues that were raised in the prior suit but related issues that could have been raised. Here, plaintiff attempted a second time to recover civil penalties for alleged Labor Code violations. But he could have sought to expand the scope of the prior action to include his additional penalty claims. In the alternative, he could have opted out of the class. Instead he reaped the benefits of the settlement in the prior action and then promptly filed this suit, seeking more penalties. We conclude res judicata applies and affirm.
Slip op. at 1.

The Court explained that "cause of action" in the res judicata context means more than the mere count alleged by the plaintiff. It entails the primary right allegedly injured:
The cause of action is the right to obtain redress for a harm suffered, regardless of the specific remedy sought or the legal theory (common law or statutory) advanced.... ‘[T]he “cause of action” is based upon the harm suffered, as opposed to the particular theory asserted by the litigant.... Even where there are multiple legal theories upon which recovery might be predicated, one injury gives rise to only one claim for relief. “Hence a judgment for the defendant is a bar to a subsequent action by the plaintiff based on the same injury to the same right, even though [the plaintiff] presents a different legal ground for relief.” ...’ Thus, under the primary rights theory, the determinative factor is the harm suffered. When two actions involving the same parties seek compensation for the same harm, they generally involve the same primary right.”
Slip op. at 6.

The defendant here argued "that employees must assert all known Labor Code violations and PAGA penalties in a single suit, at least where the violations are related to wages." Slip op. at 10. The plaintiff argued that "each Labor Code violation and each corresponding PAGA penalty constitute a separate primary right." Ibid. The Court declined to resolve this dispute:
We need not decide whether, as defendants argue, the primary rights theory treats all wage-related Labor Code violations and PAGA penalties as a single cause of action or whether, as Villacres contends, every Labor Code violation and PAGA penalty involves a separate primary right. The disposition in this case does not turn on such broad propositions. Instead, we focus on the specific circumstances of this litigation.
Slip op. at 10.

Instead, the Court noted: "Villacres could have (1) objected to the proposed settlement on the ground it should have included additional Labor Code violations and corresponding PAGA penalties, (2) sought to intervene in Augustus to pursue the same goal, or (3) opted out of the settlement and preserved his right to bring an independent action." Slip op. at 11. The Court held his failure to take any such action barred him from pursuing the second action:
Villacres's PAGA claims could have been raised in the prior action for purposes of res judicata.... Because Villacres did not raise his PAGA claims in Augustus-through objection, intervention, or by way of appeal- or opt out of the class, this suit is barred by res judicata.
Slip op. at 13.

The Court then held that Villacres was in privity of contract with the prior plaintiffs because he was a member of the class:
On a similar point, Villacres contends the State of California is, as a legal matter, the actual plaintiff here. Not so. The PAGA authorized Villacres to file this action “on behalf of himself ... and other current or former employees.” (§ 2699, subd. (a).) The act “empowers or deputizes an aggrieved employee to sue for civil penalties ... as an alternative to enforcement by the [State].” (Dunlap v. Superior Court (2006) 142 Cal.App.4th 330, 337; see § 2699, subd. (a).) “[A] PAGA claim can only be filed where the State has made an affirmative decision not to pursue the matter, either by deciding not to investigate at all or by investigating and then deciding the employer should not be cited and subjected to penalties.” (Waisbein v. UBS Financial Services Inc ., supra, 2007 WL 4287334, at p.*2; see § 2699.3.) “ ‘[The] PAGA [is] a powerful tool for aggrieved employees.’ “ (Franco v. Athens Disposal Co., Inc., supra, 171 Cal.App.4th at p. 1302, italics added.)
Slip op. at 20.

Finally, the Court found "no public policy reason for refusing to invoke the doctrine of res judicata." Slip op. at 19.

The full text is available here.

Court Invalidates Arbitration Agreement in FEHA Action

In Trivedi v. Curexo Technology Corporation (September 28, 2010, pub. October 20, 2010) --- Cal.App.4th ----, 2010 WL 3760224, the First District Court of Appeal affirmed an order denying an employer's petition to compel arbitration of an action alleging violation of the Fair Employment and Housing Act ("FEHA") and other causes of action. The Court held:

The arbitration agreement was procedurally unconscionable because it was prepared by the employer, it was a mandatory part of the employment agreement, and the employer did not give the employee a copy of the AAA Rules, which were incorporated by reference. Slip op. at 3.

The arbitration agreement was substantively unconscionable because it included a mandatory attorney fee and cost provision in favor of the prevailing party that placed the employee at greater risk than if he retained the right to bring his FEHA claims in court.

In contrast to case law under FEHA, the agreement does not limit Curexo's right to recover to instances where Trivedi's claims are found to be “frivolous, unreasonable, without foundation, or brought in bad faith.” Thus, enforcing the arbitration clause and compelling Trivedi to arbitrate his FEHA claims lessens his incentive to pursue claims deemed important to the public interest, and weakens the legal protection provided to plaintiffs who bring nonfrivolous actions from being assessed fees and costs.

Slip op. at 4.

The provision allowing either party to seek injunctive relief in court was not unconscionable on its face because it mirrored the injunctive relief provisions in the the California Arbitration Act. However, it was unconscionable in that the employer was much more likely to benefit from this provision. Slip op. at 6-7.

Finally, the trial court did not abuse its discretion in refusing to sever the unconscionable provisions from the remainder of the agreement.

At least two provisions were properly found to be substantively unconscionable, a circumstance considered by our Supreme Court to “permeate” the agreement with unconscionability. We disagree with [the employer] that the two provisions were “collateral” to the arbitration clause's primary purpose. We have already noted how highly our Legislature values the importance of attorney fee and cost recovery in wrongful employment termination litigation. While the trial court was free to sever the offending provisions, it was not required to do, and [the employer] has not convinced us on appeal that the court abused its discretion. The defects in the agreement, when coupled with the procedural unconscionability underlying its formation, leads us to conclude that to enforce the agreement would, in practical effect, “impose arbitration on an employee ... as an inferior forum that works to the employer's advantage.”

Slip op. at 7.

The full opinion is available here.

Plaintiffs File Opposition to Wal-Mart Petition for Certiorari

On October 21, 2010, plaintiffs filed their opposition to the petition for certiorari filed by Wal-Mart in Wal-Mart Stores, Inc. v. Dukes. We have followed this case very closely and will provide a full analysis of the opposition as soon as possible.

The opposition brief is available here. The Supreme Court's docket is here.

Friday, October 22, 2010

Cal. Supremes Grant Review in Security Guard Class Action

On October 13, the California Supreme Court granted the plaintiffs' petition for review in Faulkinbury v. Boyd & Associates, Inc. (June 24, 2010) 185 Cal. App. 4th 1363.
Petition for review after the Court of Appeal affirmed in part and reversed in part an order denying class certification in a civil action. The court ordered briefing deferred pending decision in Brinker Restaurant Corp. v. Superior Court, S166350, which presents issues concerning the proper interpretation of California's statutes and regulations governing an employer's duty to provide meal and rest breaks to hourly workers.
Our post on the Faulkinbury appellate decision is here. The Supreme Court's docket is here.

Thursday, October 21, 2010

Defense Counsel Disqualified from Barnes & Noble Class Action

Alameda County Superior Court Judge Steven Brick has disqualified Jackson Lewis from representing Barnes & Noble in a wage and hour class action, after Jackson Lewis negotiated a settlement with the named class plaintiff. The situation is unusual because the plaintiff, Sara Minor, first filed an individual wrongful termination action against Barnes & Noble, then retained counsel to represent her in an class action alleging that Barnes & Noble illegally pays its employees with out-of-state checks. The trouble arose because Jackson Lewis negotiated an individual settlement with Ms. Minor that required her to withdraw as class representative, and class counsel alleged that Jackson Lewis did not advise her of this aspect of the negotiations., which reported on the disqualification order here, noted: 
In his tentative ruling, Brick noted that Jackson Lewis had put Minor's lawyer, Amy Carlson of San Jose firm Williams, Pinelli & Cullen, in an ethically compromising position and "intruded upon the attorney-client relationship between Minor and class counsel without the consent of class counsel, thereby threatening that relationship."
Are ex parte communications with represented parties becoming more of a problem? Earlier this year, the State Bar suspended an attorney who directed his client's direct settlement negotiations with the plaintiffs in a wage and hour case. See our post here

Friday, October 15, 2010

9th Circuit Issues Wide-Ranging Opinion in Wang v. Chinese Daily News

Wage and Hour practice has changed dramatically over the past ten to fifteen years. In the 1990s and early 2000s, cases rarely if ever went to trial. (Bell v. Farmers Insurance Exchange being a notable exception.) The majority of cases resolved prior to certification, let alone trial. As wage and hour law has developed, more cases have gone through certification and approached or gone through trial.

Wang v. Chinese Daily News, Inc., --- F.3d --- (9th Cir., September 27, 2010), is one of those cases. It went to trial before both a jury (on legal issues) and the court (on equitable issues). Because the appeal is from a judgment on the merits, it addresses a number of important points.

The Ninth Circuit described the case as follows:
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 [Judge Marshall, C.D.Cal] 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.

Exempt Status of Reporters

CDN argued "that the district court erred in holding on summary judgment that CDN's reporters were non-exempt employees entitled to overtime. Specifically, CDN argues that its reporters were subject to the 'creative professional exemption' and were therefore exempt employees not subject to FLSA and state-law overtime pay and break requirements." Slip op. at 3.

The Court noted the Department of Labor regulation, which explains that “[t]he majority of journalists, who simply collect and organize information that is already public, or do not contribute a unique or creative interpretation or analysis to a news product, are not likely to be exempt.” 29 C.F.R. § 541.302(d) (2004). Slip op. at 4. The Court also looked at other reporter exemption cases, noting that reporters typically are not considered exempt unless they are "high-level investigative journalist[s]." Ibid.

After reviewing the evidence on summary judgment, the Court "agree[d] with the district court that, even when viewing the facts in the light most favorable to CDN, the reporters do not satisfy the criteria for the creative professional exemption." Slip op. at 5. The Court affirmed the order granting summary judgment. Slip op. at 6.

Class Certification Order

Next, the Court examined whether the district court properly certified the case under Rules 23(b)(2) and, in the alternative, 23(b)(3).

CDN argued that 23(b)(2) certification was not appropriate because "claims for money damages predominated." Slip op. at 6. The Court held that the district court acted properly because it employed a certification standard "at least as stringent" as the one set forth recently in Dukes v. Wal-Mart.
The district court certified the class only after concluding that “the monetary relief claims do not predominate in this case but rather appear to be on equal footing with the claims for injunctive relief.” Wang, 231 F.R.D. at 612. Because Dukes interpreted Rule 23(b)(2) to require only that claims for monetary relief not predominate over claims for injunctive relief, the district court did not err in applying a standard allowing Rule 23(b)(2) certification when the claims are on “equal footing.”
Slip op. at 6.
Nor did the district court abuse its discretion in holding that plaintiffs' claims for monetary relief did not, in fact, predominate. There were substantial claims for injunctive relief in this case. Plaintiffs sought to enjoin a longstanding set of employment policies and sought monetary relief for current and past employees allegedly injured by those policies. Because the claims for monetary and injunctive relief were closely related, the request for monetary relief neither “introduce[d] new and significant legal and factual issues,” nor raised particular due process or manageability concerns. See Dukes, 603 F.3d at 617, 621-22. CDN's current employees-who constitute the vast majority of the class-stood to benefit significantly from an award of injunctive relief. As the district court pointed out in its certification ruling,”[d]efendant's future compliance with the law may be more valuable to the class than the present claims for back pay.” Wang, 231 F.R.D. at 612.
Slip op. at 7.

Attorneys and courts frequently overlook this point, not only in analyzing class certification, but also in analyzing settlements. An employer's agreement to re-classify employees or to change policies and practices can bring great benefits going forward, and those benefits frequently outweigh the monetary payments being made.

Because the Court held that the district court properly certified the class under Rule 23(b)(2), it did not examine whether certification was proper under Rule 23(b)(3). Given Wal-Mart's pending petition for certiorari in Dukes, it may have been more helpful to have a 23(b)(3) analysis here.

Invalidation of Opt Outs

The district court found that CDN had pressured class members to opt out and invalidated the opt outs. After noting the district court's broad discretion "to regulate the notice and opt-out processes," especially when notice and the opportunity to opt out are not required by Rule 23 but are ordered by the district court in the exercise of its discretion, the Court held that invalidating the opt outs was not an abuse of discretion.

After reviewing the evidence, the district court found that “the opt out period was rife with instances of coercive conduct, including threats to employees' jobs, termination of an employee supporting the litigation, the posting of signs urging individuals not to tear the company apart, and the abnormally high rate of opt outs.” Wang, 236 F.R.D. at 491. Although CDN disputes whether some of this conduct took place, the district court's factual findings were supported by the evidence before it and were not clearly erroneous. Based on these findings, the district court did not abuse its discretion in invalidating the opt outs and in restricting CDN's ability to communicate with class members.

Slip op. at 9. Given CDN's alleged conduct, it is not surprising that the district court would act as it did, or that the Ninth Circuit would affirm those actions.

Deferral of Second Opt-Out Procedure Until After Trial on the Merits

CDN next challenged the district court's order that a second opportunity to opt out be deferred until after trial on the merits. "CDN argues that the process must take place early in the litigation so that members of the putative class cannot gauge the progress of the case, or know the result, before choosing whether to opt out." Slip op. at 9. The Court held that the district court did not abuse its discretion.

The ordinary procedure is to give notice at the time of class certification. But the rule does not mandate notice at any particular time. See Fed.R.Civ.P. 23(c)(2). When, as here, there is a need to regulate the notice and opt-out processes to maintain the integrity of the action in the face of a party's coercive activity, a district court does not abuse its discretion in delaying the process substantially-even, if necessary, until after the trial on the merits. We reiterate that a district court's discretion to manage the notice and opt-out processes is particularly broad in a Rule 23(b)(1) or (b)(2) class action where notice and the opportunity to opt out are not mandatory.

The district court in this case determined that holding another opt-out election immediately would not only delay the trial, but also would not avoid the coercion that had tainted the initial process. The court made these determinations only after it made specific findings regarding CDN's coercive behavior. We hold that in these circumstances the district court acted within its discretion to regulate the opt-out process to diminish the effects of the prior coercion and to avoid further coercion.

Slip op. at 10.

Reduction of Damages Award

CDN next challenged the district court's decision not to reduce the damage award to account for a smaller class size than presented to the jury. The Court held that this argument was premature, given the district court's decision to "await the running of the statute of limitations on the filing of individual suits against CDN before calculating any distribution of excess and unclaimed funds."

Slip op. at 10. CDN apparently did not challenge – and the Court did not discuss – the propriety of waiting until after each individual’s statutory period runs before calculating the distribution of any excess or unclaimed funds.

Challenge to Jury Verdict

CDN next challenged the jury's finding that it failed to provide its reporters with meal periods under California law. CDN argued that it only need make meal periods available, not ensure that they be taken. The Court noted that Brinker v. Superior Court (Hohnbaum) is pending in the Cal. Supreme Court, then held:

We need not resolve this dispute or wait for the California Supreme Court to do so. Even if the California Supreme Court interprets California law to place only minimal obligations on employers, the evidence presented to the jury was sufficient to support a finding that CDN did not “provide” reporters with meal breaks. The evidence showed that reporters did not have time to take meal breaks because they worked long, harried hours and faced tight deadlines. There was testimony that reporters were required to carry pagers all the time and be on call from morning until night without ever getting a sustained off-duty period. The evidence showed that reporters did not keep time cards and that pay stubs did not reflect time actually worked. Several reporters also testified that they could rarely take uninterrupted 30 minute breaks. CDN never told reporters that meal breaks were available and never told them to keep track of meal breaks on a time card.

Slip op. at 11. This discussion should help to guide parties and courts deciding these issues while we await the Supreme Court's decision in Brinker.

Preemption of Unfair Competition Law Claim

CDN next argued that FLSA preempts the plaintiffs' claims under California's Unfair Competition Law (UCL). Cal. Bus. & Prof. Code section 17200.

The Court first noted a number of Ninth Circuit and district court decisions that hold that FLSA does not preempt state wage law and that FLSA "sets a floor rather than a ceiling on protective legislation." Slip op. at 12. The Court then held that a prior case, Williamson v. General Dynamics Corp., 208 F.3d 1144, 1152-53 (9th Cir.2000), "forecloses the possibility of express or conflict preemption in this case. In Williamson, we held express preemption inapplicable to FLSA because no statutory language expressly preempted state law claims. Id. at 1151-53. We held field preemption inapplicable because FLSA explicitly permits states and municipalities to enact stricter wage and hour laws. Id." Slip op. at 12.

The Court then explained that the third type of preemption, conflict preemption, does not apply because there is no conflict between the purposes of federal and California wage law.

In Williamson, we rejected the argument that the purpose of FLSA “was to protect employers as well as employees,” instead holding that “the central purpose of the FLSA is to enact minimum wage and maximum hour provisions designed to protect employees.” 208 F.3d at 1153-54. Allowing the § 17200 claim in this case to proceed furthers this purpose of protecting employees.

Slip op. at 13. The Court thus disposed of this issue, which arises occasionally in actions removed to district court.

Supplemental Jurisdiction Over State Law Claims

CDN next argued that the district court erred in exercising supplemental jurisdiction over the plaintiffs' state law claims. First, the Court noted that FLSA collective actions use an "opt in" procedure and typically involve fewer individual claimants than Rule 23 "opt out" class actions. Slip op. at 13.

Next, the Court considered opinions from two other circuits that considered supplemental jurisdiction. It distinguished De Asencio v. Tyson Foods, Inc., 342 F.3d 301, 309-11 (3d Cir.2003), in which the Third Circuit held that the district court abused its discretion in exercising supplemental jurisdiction over a state law wage class action. Analogizing to Lindsay v. Government Employees Insurance Co., 448 F.3d 416 (D.C.Cir.2006), the Court held:

[I]t was within the district court's discretion to exercise supplemental jurisdiction over the § 17200 claim in this case. The § 17200 claim does not pose novel questions of state law akin to those present in De Asencio. Indeed, the FLSA and § 17200 claims are closely related. Although the number of claimants and amount of potential damages in the § 17200 claim may have been higher, as Lindsay states, "[p]redomination under section 1367(c)(2) relates to the type of claim and here the state law claims essentially replicate the FLSA claims-they plainly do not predominate. Id. at 425 (emphasis added).

Slip op. at 14. Moreover, the Court noted that CDN waited until "after class certification, summary judgment, and opt-out invalidation motions - all of which were largely decided against CDN - before raising its objection based on § 1367(c)." Ibid.

Attorney Fees

Finally, CDN asked the Court to reverse or modify the award of attorney fees to plaintiffs' counsel to the extent that the Court reversed or modified the judgment. Because the Court affirmed the judgment, it affirmed the attorney fee award as well.


Wang deals with a number of important issues that more parties and courts will face as more wage cases move deeper in the litigation process before resolving -- if they resolve at all.

The opinion is here.

Supreme Court Weighs FLSA Protection for Oral Complaints

The Supreme Court of the United States on Wednesday heard oral argument in a case that should help determine the scope of the Fair Labor Standards Act's (FLSA) anti-retaliation provision.

In Kasten v. Saint-Gobain Performance Plastics, the plaintiff employee sued his former employer, alleging that it terminated him in retaliation for verbal complaints that he lodged with the company regarding the location of its time clocks. Specifically, the employee alleged that he told his supervisors that the location of the clocks prevented employees from being paid for time spent donning and doffing required protective gear.

FLSA provides:
[I]t shall be unlawful for any person . . . to discharge or in any other manner discriminate against any employee because such employee has filed any complaint or instituted or caused to be instituted any proceeding under or related to this chapter, or has testified or is about to testify in any such proceeding, or has served or is about to serve on an industry committee.

29 U.S.C. § 215(a)(3).

The district court granted the defendant's summary judgment motion, finding that Kasten had not engaged in protected activity because he had not “filed any complaint” about the allegedly illegal location of the time clocks.

Kasten v. Saint-Gobain Performance Plastics Corp. (7th Cir. 2009) Slip op. at 4. Kasten appealed, and the Seventh Circuit affirmed. It held:

  1. FLSA protects internal, intra-company complaints. "As Kasten points out, the statute does not limit the types of complaints which will suffice, and in fact modifies the word 'complaint' with the word 'any.' Thus, the language of the statute would seem to include internal, intra-company complaints as protected activity." Slip op. at 6-7.
  2. However, FLSA only protects complaints that are "filed" and does not protect verbal complaints. "Looking only at the language of the statute, we believe that the district court correctly concluded that unwritten, purely verbal complaints are not protected activity. The use of the verb 'to file' connotes the use of a writing." Slip op. at 9.

The Supreme Court granted the employee's petition for certiorari and heard oral argument on Wednesday. A decision is due by the end of the Court's term in June.

The Supreme Court's docket is here. The transcript of oral argument is available here.

Thursday, October 14, 2010

Court of Appeal Clears the Way for Estrada v. FedEx Attorney Fee Dispute

The Court of Appeal ruled Tuesday in Leonard Carder LLP v. Patten Faith & Sandford (10/12/10) --- Cal.App.4th ---, that an actual controversy exists between the two law firms that represented the employee plaintiffs in the Estrada v. FedEx litigation, in which a court found that certain FedEx drivers are employees, rather than independent contractors. The Court held that Leonard Carder can sue Patten Faith & Sandford for declaratory relief regarding the division of Estrada attorney fees. Leonard Carder brought the declaratory relief action to determine whether Patten Faith & Sandford can claim 40% of the $12 million attorney fee award (as the firms apparently agreed) or whether it is limited to $373,000 (based on the firms' lodestars). The action will return to Los Angeles Superior Court for a determination on the merits.

The decision is available here.

Tuesday, October 12, 2010

Ninth Circuit Rejects Erroneous Grounds for Denying Class Certification

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. The Court held that none of the grounds relied on by the district court – the disproportionality between the potential liability and the actual harm suffered, the enormity of the potential damages, or the defendant’s good faith compliance with the Act after the action was filed – justified the denial of class certification on superiority grounds and that the district court abused its discretion in relying on them.

The full opinion is available here.

Court of Appeal Confirms That Portion of Wage Order Is Invalid, Clears the Way for Action on Second Meal Periods

In Lazarin v. Superior Court (Total Western, Inc.) (October 7, 2010) --- Cal.App.4th ---, the Court of Appeal invalidated IWC Wage Order No. 16-2001, section 10(E), which allows employees to waive their second meal period if they are covered by a collective bargaining agreement (CBA) that meets certain minimum standards. The Court held that the IWC exceeded its authority in promulgating section 10(E) because it conflicts with Labor Code section 512. The Court summarized the opinion as follows:

Three union-represented construction workers ... sued their former employer ... TWI, on behalf of themselves and a putative class of former and current nonexempt hourly employees of TWI providing on-site construction services at oil refineries, power plants or other industrial facilities, alleging in part TWI had failed to provide second meal periods in the manner required by Labor Code section 512, subdivision (a), and section 10(B) of Industrial Welfare Commission (IWC) wage order No. 16-2001 (Cal.Code Regs. tit. 8, § 11160) (wage order 16). In their fifth cause of action the workers seek damages for TWI's failure to pay premium wages required by section 226.7 to compensate its employees for the missed second meal periods. In their second cause of action the workers allege TWI's practice of failing to provide the required second meal periods constitutes an unfair and unlawful business practice in violation of Business and Professions Code section 17200 et seq.

Based on its understanding of the decision by Division Four of this court in Bearden v. U.S. Borax, Inc. (2006) 138 Cal.App.4th 429 (Bearden), respondent Los Angeles Superior Court granted TWI's motion for summary adjudication as to the fifth cause of action, ruling the exemption from the second-meal-period provision for employees covered by certain collective bargaining agreements contained in wage order 16, section 10(E), was invalid but, because that exemption remains part of the wage order, TWI could not be liable for damages under section 226.7. The court denied TWI's motion for summary adjudication as to the second cause of action, concluding the workers had asserted a viable claim for unfair business practices based on the alleged violations of section 512, subdivision (a).

The superior court erred in applying Bearden, ... which held the IWC had exceeded its statutory authority in adopting the exemption for union-represented employees contained in wage order 16, section 10(E), but gave its decision prospective effect only. The failure of an employer to provide second meal periods as required by section 512, subdivision (a), and wage order 16, section 10(B), is subject to an award of premium pay as specified in section 226.7. Accordingly, we grant the petition for writ of mandate filed by [plaintiffs] and direct the court to vacate its order of February 11, 2010 granting TWI's motion for summary adjudication as to the fifth cause of action and to enter a new and different order denying that motion.

Slip op. at 1.

The full text of the opinion is available here.

Wednesday, October 6, 2010

Governor Signs and Vetoes More Labor and Employment Bills

Governor Schwarzenegger has signed and vetoed the following labor and employment law bills.
SB 657 (Steinberg, D-Sacramento). Enacts the California Transparency in Supply Chains Act of 2010. Beginning January 1, 2012, requires certain retailers and manufacturers doing business in California to disclose their efforts to eradicate slavery and human trafficking from their direct supply chains for tangible goods offered for sale.
SB 677 (Yee, D-San Francisco). Permits the seizure of real property used to facilitate human trafficking and forced labor.
SB 1304 (DeSaulnier, D-Concord). Requires private employers to permit certain employees to take paid leaves of absence for organ and bone marrow donation.
AB 569 (Emmerson, R-Hemet). Amends Labor Code Section 512 to exempt employees who are: in a construction occupation; commercial drivers; employees in the security services industry employed as security officers; and employees of electrical and gas corporations or local publicly owned electric utilities; if those employees are covered by a valid collective bargaining agreement containing specified terms, including meal period provisions.

SB 1230 by Senator Mark DeSaulnier (D-Concord) - Employment: posting requirements. Veto message:
This bill requires employers to post information related to slavery and human trafficking, including information related to nonprofit organizations that provide services in support of the elimination of slavery and human trafficking. I support efforts to eliminate human trafficking. However, this measure will burden legitimate businesses while having little to no impact on human slavery. After all, businesses likely to comply with his law are not likely to have employees that would benefit from such postings.
AB 2770 (Monning, D-Santa Cruz) - Employee wages and working hours: violators. Veto message:
This bill would 1) create a pilot program to investigate employment and payment
practices within the swimming pool and spa construction industry; and, 2) require the Employment Development Department, in consultation with the Franchise Tax Board, the Department of Justice, the Department of Insurance, the Labor and Workforce Development Agency, and industry representatives, to develop and implement a set of criteria that, if met by an employer, would trigger a recommendation for an audit or investigation by the appropriate state tax authorities.
My Administration has been committed to vigorously enforcing the laws of this state and maximizing resources to combat the underground economy. As shown in creation of the Economic and Employment Enforcement Coalition, I support implementing targeted systems of coordination. However, as I have repeatedly indicated, legislating that coordination and the adoption of protocols or standards for that is unnecessary. If existing laws impeded this coordination, it would be
appropriate to alter those. However, simply statutorily instructing the respective enforcement agencies to in essence work together does not assist them in a substantive and practical way.
Moreover, I also note that this bill fails to prescribe what it is intended to achieve. Rather than creating a trigger for a tax audit when labor laws are found to have been violated as the bill intends, this bill instructs tax authorities to recommend and
conduct audits or investigations to determine specifically whether labor laws, rather than tax laws, have been violated. Having tax authorities audit and investigate for potential labor law violations is inconsistent with their expertise, and instead is a function of the Division of Labor Standards Enforcement.