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Thursday, March 28, 2013

Comcast v. Behrend: SCOTUS Issues Decision on Damages Evidence Required for Class Certification

The Supreme Court of the United States on Tuesday issued its opinion in Comcast Corp. v. Behrend (Case No. 11-864). Comcast is an antitrust action raising issues about the damages evidence required for certification under Federal Rule 23. Here is the syllabus from the opinion, which was written by Scalia, with Roberts, Kennedy, Thomas, and Alito joining: 
Petitioners, Comcast Corporation and its subsidiaries, allegedly “cluster” their cable television operations within a particular region by swapping their systems outside the region for competitor systems inside the region. Respondents, named plaintiffs in this class-action antitrust suit, claim that they and other Comcast subscribers in the Philadelphia “cluster” are harmed because Comcast’s strategy lessens competition and leads to supra-competitive prices. They sought class certification under Federal Rule of Civil Procedure 23(b)(3), which requires that “questions of law or fact common to class members predominate over any questions affecting only individual members.”The District Court required them to show (1) that the “antitrust impact” of the violation could be proved at trial through evidence common to the class and (2) that the damages were measurable on a classwide basis through a “common methodology.” The court accepted only one of respondents’ four proposed theories of antitrust impact:that Comcast’s actions lessened competition from “overbuilders,” i.e., companies that build competing networks in areas where an incumbent cable company already operates. It then certified the class, finding that the damages from overbuilder deterrence could be calculated on a classwide basis, even though respondents’ expert acknowledged that his regression model did not isolate damages resulting from any one of respondents’ theories. In affirming, the Third Circuit refused to consider petitioners’ argument that the model failed to attribute damages to overbuilder deterrence because doing so would require reaching the merits of respondents’ claims at the class certification stage.  
Held: Respondents’ class action was improperly certified under Rule 23(b)(3). Pp. 5–11.  
(a) A party seeking to maintain a class action must be prepared to show that Rule 23(a)’s numerosity, commonality, typicality, and adequacy-of-representation requirements have been met, Wal-Mart Stores, Inc. v. Dukes, 564 U. S. ___, ___, and must satisfy through evidentiary proof at least one of Rule 23(b)’s provisions. The same analytical principles govern certification under both Rule 23(a) and Rule 23(b). Courts may have to “ ‘probe behind the pleadings before coming to rest on the certification question,’ and [a] certification is proper only if ‘the trial court is satisfied, after a rigorous analysis, that [Rule 23’s] prerequisites . . . have been satisfied.’ ” Ibid. The analysis will frequently “overlap with the merits of the plaintiff ’s underlying claim” because a “ ‘class determination generally involves considerations that are enmeshed in the factual and legal issues comprising the plaintiff ’s cause of action.’ ” Ibid. Pp. 5–6.  
(b) The Third Circuit ran afoul of this Court’s precedents when it refused to entertain arguments against respondents’ damages model that bore on the propriety of class certification simply because they would also be pertinent to the merits determination. If they prevail, respondents would be entitled only to damages resulting from reduced overbuilder competition. A model that does not attempt to measure only those damages attributable to that theory cannot establish that damages are susceptible of measurement across the entire class for Rule 23(b)(3) purposes. The lower courts’ contrary reasoning flatly contradicts this Court’s cases, which require a determination that Rule 23 is satisfied, even when that requires inquiry into the merits of the claim. Wal-Mart, supra, at ___, and n. 6. Pp. 6–8.  
(c) Under the proper standard for evaluating certification, respondents’ model falls far short of establishing that damages can be measured classwide. The figure respondents’ expert used was calculated assuming the validity of all four theories of antitrust impact initially advanced by respondents. Because the model cannot bridge the differences between supra-competitive prices in general and supracompetitive prices attributable to overbuilder deterrence, Rule 23(b)(3) cannot authorize treating subscribers in the Philadelphia cluster as members of a single class. Pp. 8–11.
Justices Ginsburg and Breyer wrote a dissenting opinion, in which Justices Sotomayor and Kagan joined, arguing that review was improvidently granted, that the question decided was not properly before the Court, and that the majority’s decision was wrongly decided and subject to misinterpretation: 
While the Court’s decision to review the merits of the District Court’s certification order is both unwise and unfair to respondents, the opinion breaks no new ground on the standard for certifying a class action under Federal Rule of Civil Procedure 23(b)(3). In particular, the decision should not be read to require, as a prerequisite to certification, that damages attributable to a classwide injury be measurable “‘on a class-wide basis.’” See ante, at 2–3 (acknowledging Court’s dependence on the absence of contest on the matter in this case); Tr. of Oral Arg. 41.

The opinion is available here.  

I am very pleased to announce that Miguel A. Estrada of Gibson, Dunn & Crutcher, who argued the case in the Supreme Court for the petitioners, and Barry C. Barnett of Susman Godfrey, who argued for the respondents, have agreed to speak on our Watch List program, which will be presented jointly by the State Bar's Labor and Employment Law and Antitrust and Unfair Competition Law Sections. Thank you to Niall Lynch of Latham & Watkins for organizing this event. I will post the program date and time once we have them.  

Wednesday, March 27, 2013

Bradley v. Networkers International: Supreme Court Denies Review of Post-Brinker Decision Reversing Denial of Meal and Rest Period Certification

The California Supreme Court on March 20 denied review in Bradley v. Networkers International (12/12/12) 211 Cal.App.4th 1129 (discussed here), modified 1/8/13 (discussed here).

Of the eight Brinker grant-and-hold cases (discussed here) Bradley is one of only two that has resulted in a citable post-Brinker decision. The other is Muldrow v. Surrex Corporation (8/29/12) 208 Cal. App. 4th 1381, depub. denied 1/3/13 (discussed here). Here's how the others have fared: 
Brookler v. Radioshack Corporation: Unpublished    
Hernandez v. Chipotle Mexican Grill: Depublished  
Tien v. Tenet Healthcare: Depublished  
Lamps Plus Overtime Cases: Depublished 
Brinkley v. Public Storage: Pending  
Faulkinbury v. Boyd & Associates: Pending  

Tuesday, March 26, 2013

Compton v. Superior Court: Court Finds Arbitration Agreement Unconscionable

In Compton v. Superior Court (American Management Services, LLC) (3/19/13) --- Cal.App.4th ---, the plaintiff, Compton, filed a putative class action against her former employer, AMS. After the Supreme Court's decision in AT&T Mobility, LLC v. Concepcion, ___ U.S. ___ (2011), AMS sought to enforce its arbitration agreement, which included a class action waiver. The trial court granted the motion to compel individual arbitration. The Court of Appeal reversed, holding:
Although the order compelling arbitration was not appealable, the Court elected to treat the appeal as a petition for writ of mandate. The Court did not consider whether the death knell doctrine applied. Slip op. at 10-11.

The unconscionability defense to enforcement of the agreement survives Concepcion. Slip op. at 11-12.  
The arbitration agreement was substantively unconscionable because it was unfairly one-sided: it required employees to arbitrate all claims; it imposed a one-year statute of limitations on employee claims, but did not impose the same period on employer claims for unfair competition and trade secret violations; and it gave the arbitrator discretion on attorney fees that may be mandatory in certain claims. Slip op. at 12-17.

Concepcion does not abrogate the rule, which the Court imputed to Armendariz, that an may be found unconscionable where it is unfairly one-sided. Slip op. at 17-22.

Excluding claims for workers compensation, unemployment benefits, and disability insurance did not make the agreement bilateral. Slip op. at 22-23.

The broad equitable relief that the agreement allowed AMS to seek in court exceeded what would be allowed under the California Arbitration Act. Slip op. at 24-25.

AMS did not show that the "business realities" exception to unconscionability analysis applied. Slip op. at 26-27.

The agreement was presented on a take-it-or-leave-it basis and was procedurally unconscionable. Slip op. at 28-32.
The opinion is available here.  I assume that the employer will petition for review and that the Supreme Court will grant and hold pending Sanchez v. Valencia Holding Co., LLC (discussed here).  

Monday, March 25, 2013

Riverside County Sheriff’s Dep’t v. Stiglitz: Cal. Supreme Court to Decide Whether Hearing Officer in Public Employee Termination Matter May Grant Pitchess Motion

On January 16, 2013, the California Supreme Court granted review in Riverside County Sheriff’s Department v. Stiglitz (Case No. S206350).  The court limited review to the following issue: 
Does the hearing officer in an administrative appeal of the dismissal of a correctional officer employed by a county sheriff's department have the authority to grant a motion under Pitchess v. Superior Court (1974) 11 Cal.3d 531? 
In the underlying opinion (available here), the Court of Appeal reversed an order granting a petition for writ of administrative mandate, holding that a hearing officer in such a case has authority to to grant a Pitchess motion. 

The Supreme Court's case summary page is here.  I have added the case to our Watch List of pending cases.  

Thursday, March 21, 2013

Standard Fire Ins. Co. v. Knowles: Plaintiff Cannot Defeat CAFA Jurisdiction By Stipulating To Recover Less Than $5 Million

In a unanimous opinion written by Justice Breyer, the Supreme Court of the United States in Standard Fire Insurance Co. v. Knowles, ___ U.S. ___ (3/19/13), has held that a plaintiff in a putative class action may not defeat federal jurisdiction under the Class Action Fairness Act (CAFA) by stipulating at the start of the case that he or she will not seek to recover more than $5 million.  The official syllabus does a good job of stating the Court's decision succinctly:  
The Class Action Fairness Act of 2005 (CAFA) gives federal district courts original jurisdiction over class actions in which, among other things, the matter in controversy exceeds $5 million in sum or value, 28 U. S. C. §§ 1332(d)(2), (5), and provides that to determine whether a matter exceeds that amount the "claims of the individual class members must be aggregated," § 1332(d)(6). When respondent Knowles filed a proposed class action in Arkansas state court against petitioner Standard Fire Insurance Company, he stipulated that he and the class would seek less than $5 million in damages. Pointing to CAFA, petitioner removed the case to the Federal District Court, but it remanded to the state court, concluding that the amount in controversy fell below the CAFA threshold in light of Knowles' stipulation, even though it found that the amount would have fallen above the threshold absent the stipulation. The Eighth Circuit declined to hear petitioner's appeal.
Held: Knowles' stipulation does not defeat federal jurisdiction under CAFA. Pp. 3-7. 
(a) Here, the precertification stipulation can tie Knowles' hands because stipulations are binding on the party who makes them, see Christian Legal Soc. Chapter of Univ. of Cal., Hastings College of Law v. Martinez, 561 U. S. ___. However, the stipulation does not speak for those Knowles purports to represent, for a plaintiff who files a proposed class action cannot legally bind members of the proposed class before the class is certified. See Smith v. Bayer Corp., 564 U. S. ___, ___. Because Knowles lacked authority to concede the amount in controversy for absent class members, the District Court wrongly concluded that his stipulation could overcome its finding that the CAFA jurisdictional threshold had been met. Pp. 3-4.  
(b) Knowles concedes that federal jurisdiction cannot be based on contingent future events. Yet, because a stipulation must be binding and a named plaintiff cannot bind precertification class members, the amount he stipulated is in effect contingent. CAFA does not forbid a federal court to consider the possibility that a nonbinding, amount-limiting, stipulation may not survive the class certification process. To hold otherwise would, for CAFA jurisdictional purposes, treat a nonbinding stipulation as if it were binding, exalt form over substance, and run counter to CAFA's objective: ensuring "Federal court consideration of interstate cases of national importance." § 2(b)(2), 119 Stat. 5 
It may be simpler for a federal district court to value the amount in controversy on the basis of a stipulation, but ignoring a nonbinding stipulation merely requires the federal judge to do what she must do in cases with no stipulation: aggregate the individual class members' claims. While individual plaintiffs may avoid removal to federal court by stipulating to amounts that fall below the federal jurisdictional threshold, the key characteristic of such stipulations — missing here — is that they are legally binding on all plaintiffs. Pp. 4-7.  
Vacated and remanded.  
The opinion is available here. has a page for the case here, which includes the opinion below, transcript of oral argument, and other materials.  

I had thought that we would present a Watch List program on this case, but the decision is pretty straight-forward, and there likely would not be tremendous interest in the program, so we are going to skip this one. Stay tuned for information on other Watch List programs.  

Tuesday, March 12, 2013

City of L.A. v. Superior Court: Supreme Court To Hear Oral Argument In Action To Compel Arbitration Of City's Furlough Plan

Thank you to Erich Shiners of Renne Sloan Holtzman Sakai LLP,  my colleague on the State Bar Labor and Employment Law Executive Committee, for pointing out that the California Supreme Court has scheduled oral argument in City of Los Angeles v. Superior Court (Engineers & Architects Association) (Case No. S192828). 

In the decision below, the Court of Appeal overturned a trial court order compelling the City to arbitrate grievances filed by City employees and their union over the City's plan to furlough those employees. The Court held: 
While there are questions as to whether the issue of furloughs is grievable under the terms of the controlling Memoranda of Understanding (MOUs), we conclude that any agreement to arbitrate the issue of furloughs would constitute an improper delegation of discretionary policymaking power vested in the City Council. 
The Supreme Court granted the union's petition for review. After initial briefing, the Court requested briefing on the following issue: 
Do the memorandums of understanding at issue here, including but not limited to their management rights clauses (article 1.9), render the decision whether to impose employee furloughs inarbitrable? 
The Court's case summary page is here.   You can request email notification of developments here.  

Argument will be Wednesday, April 3, 2013, at 9:00 a.m., at the Ronald Reagan State Office Building, 300 South Spring Street, Third Floor, North Tower, Los Angeles. This is the same session at which the Court will hear argument in
Sonic-Calabasas A, Inc. v. Moreno, which considers whether an employer can compel its employees to waive their right to bring claims to the Labor Commissioner.  Should be a very interesting morning.  

I have added City of L.A. to our Watch List of Pending Cases.  Erich has agreed very generously to shepherd our Watch List webinar, which we will present within a week or two of the Court announcing its decision.

Friday, March 8, 2013

Sonic-Calabasas A, Inc. v. Moreno: California Supreme Court Schedules Oral Argument

The California Supreme Court will hear oral argument in Sonic-Calabasas A, Inc. v. Moreno on Wednesday, April 3, 2013, at 9:00 a.m., in Los Angeles. Hearings are at the Ronald Reagan State Office Building, 300 South Spring Street, Third Floor, North Tower.

As a reminder, in Sonic-Calabasas A, Inc. v. Moreno (2011) 51 Cal.4th 659, the California Supreme Court held: (1) an employee's "statutory right to seek a Berman hearing [a wage hearing before the DLSE or Labor Commissioner], with all the possible protections that follow from it, is itself an unwaivable right that an employee cannot be compelled to relinquish as a condition of employment;" (2) waiver of an employee's right to seek a Berman hearing is a substantively unconscionable contract term; and (3) the Federal Arbitration Act does not preempt the Court's holdings on points one and two.

The Supreme Court of the United States granted review and vacated that decision, remanding the case for further consideration in light of AT&T Mobility LLC v Concepcion 563 U.S. ___ (2011).

The issues presented are as follows:

  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 Court's web page for the case is here.  

Thursday, March 7, 2013

McGrory v. Applied Signal Technology: Refusing to Answer Questions In Employer's Investigation And Lying To Investigator Are Not Protected Activity

In McGrory v. Applied Signal Technology, Inc. (1/24/13) --- Cal.App.4th ---, the defendant terminated the plaintiff after an outside investigator retained by the defendant "concluded that, while Employee had not discriminated against a lesbian subordinate on the basis of her sex or sexual orientation, in other ways Employee had violated Employer's policies on sexual harassment and business and personal ethics and he had been uncooperative and deceptive during the investigation." Slip op. at 1.

The plaintiff sued for wrongful termination in violation of public policy and defamation. The trial court granted the defendant's motion for summary judgment, and the Court of Appeal affirmed, "concluding that there is no evidence warranting a reasonable inference that Employee was actually terminated for being male, that being uncooperative or deceptive in an employer's internal investigation is not a protected activity under state or federal law, and that Employer's statements to its employees about Employee's termination were conditionally privileged." Slip op. at 3. 

The most interesting issue here is whether refusing to participate in an employer's investigation of discriminatory conduct constitutes protected activity under the FEHA. The Court held that it does not. 
While refusing to participate in or cooperate with an employer's discriminatory action may be a protected activity when it amounts to opposition to a forbidden practice, refusing to participate in or cooperate with an investigation into a discrimination claim is not participation or assistance and is not a protected activity.
We find these federal decisions to be eminently reasonable, and we conclude that Government Code section 12940, subdivision (h), does not shield an employee against termination or lesser discipline for either lying or withholding information during an employer's internal investigation of a discrimination claim. In other words, public policy does not protect deceptive activity during an internal investigation. Such conduct is a legitimate reason to terminate an at-will employee.
Slip op. at 18-19 (citations omitted).  The more interesting factual scenario would be one in which the plaintiff alleges that he or she refused to cooperate in an internal investigation because it was a sham proceeding designed to further or cover for discriminatory conduct.  The Court here found no such facts.

The opinion is available here.

Wednesday, March 6, 2013

Avidor v. Sutter's Place: Court of Appeal OKs Casino Card Dealer Tip Pooling

In Avidor v. Sutter's Place, Inc. (1/23/13) --- Cal.App.4th ---, the Court of Appeal held that a casino's policy of requiring card dealers to contribute a portion of their tips to a tip pool did not violate California law.  The Court held: 
  1. Evidence of the tipping customer's intent in leaving or providing the tip is not relevant, and the trial court did not err in excluding evidence of such intent at trial.  Even if the patron intended the tip to go only to the tipped employee, "that does not mean that the employee to whom it is given may keep it notwithstanding a policy he or she has agreed to in accepting employment."  Slip op. at 6-10.
  2. Mandatory tip pools in casinos, where patrons typically give tips directly to individual employees -- rather than leaving them on the table to be picked up, as typically happens in restaurants -- does not violate Cal. Labor Code section 351.  Slip op. at 10-12. 
  3. Substantial evidence supported the trial court's finding that the casino did not impermissibly include its agents -- those "having the authority to hire or discharge any employee or supervise, direct, or control the acts of employees" -- in the pool.  Slip op. at 12-14.  
  4. Tips given to dealers were not their property, and the casino did not commit conversion by requiring the dealers to contribute tips to the pool.  Slip op. at 14-15. 
  5. The dealers failed to show that they contributed more to the tip pool than they received in tips, thus reducing their hourly wages below the minimum wage rate, and the trial court did not err in granting summary judgment on the minimum wage claim.  Slip op. at 15-16.  
  6. Because tips given to dealers were not their property, and every dealer understood that tips contributed to the pool were contributed for the benefit of the other employees in the pool, the dealers could not state a cause of action for money had and received.  Slip op. at 16-19.  
The opinion is available here.  

Monday, March 4, 2013

Amgen v. Connecticut Retirement: SCOTUS Holds That Plaintiff Need Not Prove Materiality of Misrepresentation to Win Cerification Of Securities Class Action

The Supreme Court of the United States on February 27 issued its decision in Amgen, Inc. v. Connecticut Retirement Plans and Trust Funds (Case No. 11-1085).  In an opinion written by Justice Ruth Bader Ginsburg, a six-member majority held that a plaintiff in a securities class action need not prove at the time of certification that the defendant's alleged misrepresentations were material.  Justice Ginsburg wrote: 
Seeking class-action certification under Federal Rule of Civil Procedure 23, Connecticut Retirement invoked the "fraud-on-the-market" presumption endorsed by this Court in Basic Inc. v. Levinson, 485 U. S. 224 (1988), and recognized most recently in Erica P. John Fund, Inc. v. Halliburton Co., 563 U. S. ___ (2011). The fraud-on-the-market premise is that the price of a security traded in an efficient market will reflect all publicly available information about a company; accordingly, a buyer of the security may be presumed to have relied on that information in purchasing the security.

The issue presented concerns the requirement stated in Rule 23(b)(3) that "the questions of law or fact common to class members predominate over any questions affecting only individual members." Amgen contends that to meet the predominance requirement, Connecticut Retirement must do more than plausibly plead that Amgen's alleged misrepresentations and misleading omissions materially affected Amgen's stock price. According to Amgen, certification must be denied unless Connecticut Retirement proves materiality, for immaterial misrepresentations or omissions, by definition, would have no impact on Amgen's stock price in an efficient market.  
While Connecticut Retirement certainly must prove materiality to prevail on the merits, we hold that such proof is not a prerequisite to class certification. Rule 23(b)(3) requires a showing that questions common to the class predominate, not that those questions will be answered, on the merits, in favor of the class. Because materiality is judged according to an objective standard, the materiality of Amgen's alleged misrepresentations and omissions is a question common to all members of the class Connecticut Retirement would represent. The alleged misrepresentations and omissions, whether material or immaterial, would be so equally for all investors composing the class. As vital, the plaintiff class's inability to prove materiality would not result in individual questions predominating. Instead, a failure of proof on the issue of materiality would end the case, given that materiality is an essential element of the class members' securities-fraud claims. As to materiality, therefore, the class is entirely cohesive: It will prevail or fail in unison. In no event will the individual circumstances of particular class members bear on the inquiry.
Slip op. at 1-2.  

Chief Justice Roberts and Justices Breyer, Alito, Sotomayor, and Kagan joined. Justices Scalia, Thomas, and Kennedy dissented, arguing in part that a plaintiff may not rely on the fraud-on-the market presumption until it has shown materiality.   

Amgen was argued on the same day as Comcast Corp. v. Behrend (Case No. 11-864), which raises the following issue: 
Whether a district court may certify a class action without resolving whether the plaintiff class has introduced admissible evidence, including expert testimony, to show that the case is susceptible to awarding damages on a class-wide basis.
I had thought that the Court would announce its decisions in the two cases together, but it obviously has not done so.  In any case, we will present a Watch List program on Comcast shortly after it comes down, and we will include a discussion of Amgen.  Please watch this space for additional information.  

Friday, March 1, 2013

Salas v. Sierra Chemical: Supreme Court Orders Additional Briefing on Remedies Available to Undocumented Workers

In Salas v. Sierra Chemical Co. (Case No. S196568), the California Supreme Court will consider whether an employee's use of a false social security number to obtain employment prevents the employee from later suing his employer for disability discrimination. The issues stated:
Did the trial court err in dismissing plaintiff's claims under the Fair Employment and Housing Act (Gov. Code § 12900 et seq.) on grounds of after-acquired evidence and unclean hands, based on plaintiff's use of false documentation to obtain employment in the first instance?  
Did Senate Bill No. 1818 (2001-2002 Reg. Session) preclude application of those doctrines in this case? (See Civ. Code § 3339; Gov. Code § 7285; Health & Saf. Code § 24000; Lab. Code § 1171.5.) 
On February 27, the Court asked the parties to address an additional issue:
Does federal immigration law preempt state law and thereby preclude an undocumented worker from obtaining, as a remedy for a violation of "state labor and employment laws" (Lab. Code § 1171.5; Civ. Code § 3339; Gov. Code § 7285; Health & Saf. Code § 24000), an award of compensatory remedies, including backpay? (See Hoffman Plastic Compounds, Inc. v. NLRB (2002) 535 U.S. 137.) 
I take this as a sign of Justice Liu's influence on the Court.  Maybe I'm reading too much into this, but it reminds me of his focus on available remedies at the Harris v. City of Santa Monica oral argument, and I believe that he is likely the one turning the Court's focus to the remedies available here.  Very interesting.  

The Court's Case Summary page is here, and Salas is on our watch list.