Nachshin v. AOL: Ninth Circuit Reverses Cy Pres Award

In Nachshin v. AOL, LLC (11/21/11) --- F.3d ----, 2011 WL 5839610, plaintiffs brought a class action against AOL on behalf of a putative class of more than 66 million paid AOL subscribers, alleging that AOL wrongfully inserted footers containing promotional messages into e-mails sent by AOL subscribers.

At mediation, the parties agreed that the maximum recovery at trial would have been the unjust enrichment AOL received as a result of its footer advertisement sales, or about $2 million. Divided among the more than 66 million AOL subscribers, each member of the class would receive only about 3 cents. The cost to distribute these payments would far exceed the maximum potential recovery.

In lieu of a cost-prohibitive distribution to the plaintiff class, the parties agreed that AOL would provide certain notices to its subscribers and make a series of donations to Los Angeles area charities.

The district court (C.D.Cal., Judge Christina A. Snyder) granted preliminary and final approval, and an objector appealed. The Ninth Circuit affirmed in part and reversed in part. Noting that "The cy pres doctrine takes its name from the Norman French expression, cy pres comme possible, which means as near as possible," the Court held that the charitable donations here failed to meet the test for cy pres distributions. Six (6) Mexican Workers v. Arizona Citrus Growers (9th Cir. 1990) 904 F.2d 1301. Two thirds of the donations would be made to Los Angeles-area charities. The proposed donation to the Federal Judicial Center Foundation would benefit a national organization, but this organization has no apparent relation to the objectives of the underlying statutes, and it is not clear how this organization would benefit the class. The Court thus concluded that the district court applied the incorrect legal standard and abused its discretion in approving the proposed cy pres distribution. Slip op. at 6. The Court even suggested that the parties find a beneficiary that "works to protect internet users from fraud, predation, and other forms of online malfeasance."  Ibid.  

The Court rejected the contention that Judge Snyder should have recused herself because her husband sat on the board of one of the proposed cy pres beneficiaries, the Legal Aid Foundation of Los Angeles.  Id. at 6-7.

The opinion is available here.

Pirjada v. Superior Court: Court Denies Leave to Find New Class Rep.

Can a defendant in a putative class action defeat or moot the action by settling with the putative class representative -- or merely by offering to settle?  

In Pitts v. Terrible Herbst, Inc., --- F.3d ----, 2011 WL 3449473 (9th Cir. 8/9/11) (blogged here) the Ninth Circuit held that a full value offer to a putative class representative in an action under the Fair Labor Standards Act (FLSA) and Nevada state law does not moot the action.  In Damasco v. Clearwire Corp., --- F.3d --- (7th Cir. 11/18/11), the Seventh Circuit held that such a full-value offer, if made before a class certification motion is filed, renders the putative collective action moot.  

A different issue arises when the putative class representative actually accepts the defendant's offer.  See Cameron-Grant v. Maxim Healthcare Serv., Inc., 347 F.3d 1240, 1248-49 (11th Cir. 2003) (accepted offer to class representatives moots FLSA collective action).  

In California class actions, this situation typically is addressed by allowing putative class counsel to conduct discovery to find a new class representative.  Best Buy Stores, L.P. v. Superior Court (2006) 137 Cal.App.4th 772.  

In Pirjada v. Superior Court (Pacific National Security, Inc.) (12/12/11), the Second District Court of Appeal held that the trial court (L.A. Superior Court, Judge Michael M. Johnson) did not abuse its discretion in denying as moot counsel's motion to compel defendant to identify the putative class members in response to pre-settlement discovery requests: 

[T]he decision to deny the motion to compel was also within the broad discretion of the court: By the time the motion was filed, the court had already chosen other means to protect the absent class members—it gave [counsel] leave to amend the complaint after using informal means to identify potential replacement class representatives and deferred any determination whether the entire case should be dismissed and, if so, how to comply with the notice requirements of Rule 3.770(c), to a later date. Although the court's decision to deny [counsel's] motion for notice to the class was based largely on a distinction between consumer and employee class actions, a distinction we implicitly rejected in Belaire–West Landscape, Inc. v. Superior Court, supra, 149 Cal.App.4th 554, the propriety of that ruling is not before us. [Counsel] did not seek writ review of the court's May 26, 2011 order. Instead, it elected to proceed by way of a motion to compel. The court's subsequent decision to deny that motion, finding the outstanding discovery requests propounded by Pirjada moot in light of his individual settlement, was in no way arbitrary or capricious or otherwise in excess of the bounds of reason. 

Slip op. at 8.  The Court also rejected counsel's argument that the trial court's refusal to require the defendant to identify the class members would interfere with notice to the class prior to dismissal of the action.  The court noted that the trial court had not yet dismissed the action and held, in essence, that the trial court should cross that bridge when it comes to it.  At that point, counsel "will have an opportunity to demonstrate to the court that some form of notice is required to avoid prejudice to absent class members."  Slip op. at 9.  

The opinion is available here. 

Sullivan v. Oracle Corp. Returns to Ninth Circuit

In 2009, the Ninth Circuit asked the California Supreme Court to rule on certain issues regarding work performed inside and outside of California by non-California residents.  

In Sullivan v. Oracle Corp. (2011) 541 Cal.4th 1191 (blogged here) the California Supreme Court held: (1) California's overtime requirements apply to work performed in California for a California employer by non-residents; and (2) Business and Professions Code section 17200, known as the Unfair Competition Law or "UCL" applies to such overtime work; but (3) the UCL does not apply to overtime work performed outside California for a California-based employer by out-of-state plaintiffs.  

In an opinion yesterday, the Ninth Circuit addressed two remaining issues, holding that application of the California Labor Code to non-residents working in California does not violate violates Due Process Clause of the Fourteenth Amendment or the Dormant Commerce Clause of the United States Constitution.  Sullivan v. Oracle Corp., --- F.3d ----, 2011 WL 6156942 (9th Cir. 12/13/11).  

The opinion is available here.  

Sonic-Calabasas A, Inc. v. Moreno: SCOTUS Vacates and Remands to California Supreme Court

On October 31, the Supreme Court of the United States granted certiorari and vacated the California Supreme Court's decision in Sonic-Calabasas A, Inc. v. Moreno (2011) 51 Cal.4th 659, which 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.

SCOTUS remanded the case to the California Supreme Court for further consideration in light of AT&T Mobility LLC v Concepcion.

The California Supreme Court lists the issues presented 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.

Kairy v. SuperShuttle: Ninth Circuit Holds that District Court Has Jurisdiction to Determine Whether Drivers Are Employees or Independent Contractors

In Kairy v. SuperShuttle International, 660 F.3d 1146 (9th Cir. 11/3/11), the Ninth Circuit Court of Appeals considered whether the district court lacks subject matter jurisdiction to determine whether certain drivers are employees or independent contractors under California law. Specifically, the Court considered whether such a decision by the district court would hinder, frustrate, interfere with, or obstruct the regulatory authority exercised by the California Public Utilities Commission (“PUC”) over passenger stage corporations (“PSCs”), as prohibited by California Public Utilities Code section 1759(a). 

On review of a district court (N.D.Cal., Judge Jeffrey S. White) order granting the defendants' motion to dismiss, the Court examined the relationship of section 1759 and section 2106, which allows a private right of action against any public utility that violates the law. Applying a three-part test adopted by the California Supreme Court, the Court found:

1. The Public Utilities Commission has the authority to regulate the relationship between PSCs and their drivers. 660 F.3d at 1151. 
2. The PUC may have exercised its authority to regulate that relationship. 660 F.3d at 1153. 
3. Judicial action in this case would not hinder or interfere with the PUC's exercise, if any, of regulatory authority over the PSC-driver relationship. 660 F.3d at 1154. 

Because this third factor is not present, Public Utilities Code section 1759 is not implicated, and the district court retains subject matter jurisdiction over the case. 660 F.3d at 1155.  On remand, the Court directed the district court to determine whether the drivers at issue were employees or independent contractors under California law.  

The opinion is available here. 

California Supreme Court Schedules Oral Argument in Brinker

The California Supreme Court just announced that it will hear oral argument in Brinker v. Superior Court (Hohnbaum) on Tuesday, November 8, 2011 at 9:00 a.m. in San Francisco. So we will have a decision by Valentine's Day. That's about 3 1/2 years after the petition for review was filed. Still well short of the 5 years that they spent on Martinez v. Combs.

Wang v. Chinese Daily News: SCOTUS Vacates Judgment, Remands for Reconsideration in Light of Dukes

The Supreme Court of the United States yesterday vacated the judgment in Wang v. Chinese Daily News, the long-running Fair Labor Standards Act (FLSA) class action by employees of the Chinese language newspaper. The Court granted certiorari, vacated the judgment, and remanded to the Ninth Circuit for further consideration in light of Wal-Mart Stores, Inc. v. Dukes, 564 U.S. ___ (2011).

The Ninth Circuit's opinion (blogged here) had addressed a number of important issues, including exempt status of reporters, class certification, invalidation of coerced opt outs, trial issues, preemption of claims under California's Unfair Competition Law (UCL), and attorney fees.