Kuxhausen v. BMW: Ninth Circuit Issues Decision on Timeliness of CAFA Removal

A quick note on this decision. In Kuxhausen v. BMW Financial Services NA LLC (9th Cir. 2/25/13) the Ninth Circuit held that where an initial pleading does not state the amount in controversy, the plaintiff has not pled all the facts necessary for diversity jurisdiction under the Class Action Fairness Act (CAFA), and the removal clock under Section 1446(b) is not triggered.

The plaintiff filed a putative class action against a car dealer and financing company, asserting ten California causes of action, including alleged violations of the Consumer Legal Remedies Act (CLRA), and the Automobile Sales Finance Act. She sought statutory damages of up to $1,000 per consumer and $5,000 for senior-citizen consumers under the CLRA. The plaintiff filed a first amended complaint, and the defendants removed the action to district court. The district court remanded, and the defendants appealed.

The Ninth Circuit reversed, holding:

"To avoid saddling defendants with the burden of investigating jurisdictional facts, we have held that 'the ground for removal must be revealed affirmatively in the initial pleading in order for the first thirty-day clock under § 1446(b) to begin.'" Slip op. at 7.

The complaint's statement that it sough to "provide remedies for hundreds of affected consumers" satisfied CAFA's requirement that the proposed class must have at least 100 members because "hundreds" means "at least 200." Slip op. at 8.

However, because the complaint did not state that each of the 200 alleged class members was owed at least $25,000 (200 x $25,000 = $5 million), it did not allege that the amount in controversy was at least $5 million, and "it fell short of triggering the removal clock under Section 1446(b)." Slip op. at 8-11.

The opinion is available here.

Choate v. Celite Corporation: Waiver of Vacation Pay in CBA Must Be "Clear and Unmistakable"

In Choate v. Celite Corporation (5/2/13) --- Cal.App.4th ---, the Court of Appeal held that a collective bargaining agreement abrogates an employee's statutory right under Labor Code section 227.3 to immediate payment for vested vacation time "only if the agreement clearly and unmistakably waives that right."  

I will not go through the facts at any length.  The plaintiffs worked for Celite under a collective bargaining agreement.  They alleged that Celite failed to pay them all earned vacation time promptly on termination.  Celite paid the vacation pay at issue, the plaintiffs dismissed their unfair competition claim to expedite appellate review, and the parties stipulated to class certification on the plaintiffs' claim for waiting time penalties.  

The Court of Appeal held: 

• A waiver of an employee's right to vacation pay under Labor Code section 227.3 must be "clearly and unmistakably" stated in the CBA itself.  It may not be inferred from parole evidence of mutual understanding or past practices. Slip op. at 4-7. 
• The CBA at issue did not "clearly and unmistakably" waive the employees' section 227.3 rights.  Slip op. at 7. 
• Substantial evidence did not support the trial court's finding that Celite acted "willfully" in failing to pay the employees their vacation pay and was not liable for Labor Code section 203 waiting time penalties.  Slip op. at 8-9. 
• Determining the plaintiffs' Labor Code claims did not require the court to interpret the CBA, and Section 301 of the Labor Management Relations Act (LMRA) did not preempt those claims.  Slip op. at 9-10. 

The opinion is available here.  

Gutierrez v. Wells Fargo Bank: Ninth Circuit Rules on Preemption and Class Certification In Action Alleging that Bank Charged Improper Overdraft Fees

In Gutierrez v. Wells Fargo Bank, NA, 704 F.3d 712 (9th Cir. Dec. 26, 2012), the plaintiffs alleged that Wells Fargo violated the Unfair Competition Law (UCL) by imposing overdraft fees based on the high-to-low posting order and by misleading clients as to the actual posting order used. The district court enjoined Wells from using the high-to-low method and ordered it to pay over $200 million in restitution. Wells appealed, and the Ninth Circuit affirmed in part and reversed in part, holding:

Wells waived the right to demand arbitration by failing to make the demand in the district court, and only doing so on appeal, and ordering the case into arbitrate would frustrate, rather than advance, the Federal Arbitration Act (FAA) goal of expeditious litigation. Slip op. at 10-17.

The National Bank Act of 1864, 12 U.S.C. § 1 et seq., preempts application of the UCL's "unfair" prong to control a bank's method of posting transactions. Slip op. at 17-25. 

The National Bank Act does not preempt application of the UCL's "fraudulent" prong to control a bank's use of allegedly fraudulent communications with customers regarding the method of posting transactions or the impact of use of that method.  Slip op. at 25-30. 

The district court did not err in finding that the plaintiffs had standing to pursue the UCL claims because each had read and relied upon the bank's statements regarding its posting methods.  Slip op. at 30-31.  

The district court did not err in certifying the class because "class members, like the named plaintiffs, were exposed to the materials and likely relied on them." Citing Tobacco II, 46 Cal. 4th at 312 (to establish fraud under the Unfair Competition Law, plaintiffs must show 'that members of the public are likely to be deceived').  Slip op. at 31-32. 

In a line that reminds me of Jimmy Fallon's Capitol One commercials, the court said: "Unlike McLaughlin v. Am. Tobacco Co., 522 F.3d 215, 223 (2d Cir. 2008) ... where individual class members could have had different motives for choosing 'light' cigarettes, we are hard pressed to agree that any class member would prefer to incur multiple overdraft fees." Slip op. at 32.  

Finally, the Court held that the district court did not err in holding that "Wells Fargo violated the Unfair Competition Law by making misleading statements likely to deceive its customers."  Slip op. at 32-34.  

The opinion is available here. 

Sanchez v. Swissport: Employer's Compliance With PDLL Does Not Invalidate Employee's Causes of Action Under Other Provisions of the FEHA

In Sanchez v. Swissport, Inc. (2/21/13) --- Cal.App.4th ---, the Court of Appeal has held that an employee who has exhausted all of her leave under the Pregnancy Disability Leave Law (PDLL) may nevertheless state a cause of action under other provisions of the Fair Employment and Housing Act (FEHA).

Sanchez sued her former employer, Swissport, alleging, inter alia, that it violated California law by terminating her because she could not return to work after taking just over 19 weeks in accrued vacation, CFRA leave, and PDLL leave. The trial court sustained Swissport's demurrer without leave, and the Court of Appeal reversed.

After reviewing the basics of the PDLL and the FEHA, the Court held that the PDLL's "remedies augment, rather than supplant, those set forth elsewhere in the FEHA." Slip op. at 8.

In short, we conclude the superior court erred in sustaining the demurrer on the ground that appellant had no actionable claim under the FEHA because respondent had provided her with 19 weeks of leave under the PDLL.

Slip op. at 12. 

The opinion is available here. 

Natalini v. Import Motors: Supreme Court Grants Review of Arbitration Unconscionability Decision

As anticipated, the California Supreme Court on May 1 granted review of Natalini v. Import Motors (1/7/13, pub. 2/5/13) (discussed here), in which the Court of Appeal held:

• Concepcion does not invalidate unconscionability analysis. 
• The arbitration agreement was procedurally unconscionable because: (a) the seller presented it on a take it or leave it basis, and the buyer could not negotiate it; and (b) it was located on the back of the purchase contract and was not pointed out to the buyer. 
• The arbitration agreement was substantively unconscionable because it was designed to benefit the seller in a number of ways: (a) it permitted an appeal only in case of an award of $0 or greater than $100,000; (b) it permitted an appeal if the award included injunctive relief; and (c) it allowed self-help remedies, including repossession. 

The Court has deferred briefing pending its decision in Sanchez v. Valencia Holding Co. (Case No. S199119), which raises the following issue:

Does the Federal Arbitration Act, as interpreted in AT&T Mobility LLC v. Concepcion (2011) 563 U. S. __, 131 S.Ct. 1740, preempt state law rules invalidating mandatory arbitration provisions in a consumer contract as procedurally and substantively unconscionable?  

Sanchez is fully briefed.  The Court's web page for it is here.  

Natalini is case no. S209324. The Court's web page for it is here.  

Mendoza v. Hamzeh: Attorney's Extortionate Demand Letter Not Protected Under Anti-SLAPP Statute

From time to time I have reported on employment cases in which attorneys have acted too zealously in representing their clients.  Mendoza v. Hamzeh (4/22/13) --- Cal.App.4th ---, is such a case.  

In 2009, an attorney (Hamzeh) sent a demand letter to an employer (Mendoza) threatening to file suit for unpaid wages and to report the employer to authorities for alleged fraud. In 2011, Mendoza filed suit against Hamzeh for civil extortion, intentional infliction of emotional distress, and violation of the Unfair Competition Law. The trial court denied Hamzeh's anti-SLAPP motion to strike and awarded attorney fees to Mendoza, holding that the demand letter was not a protected communication. The Court of Appeal affirmed, confirming that the demand letter was not protected, and the trial court did not abuse its discretion in awarding attorney fees to Mendoza. 

The anti-SLAPP statute does not apply to the threats at issue in Hamzeh's demand letter. Hamzeh threatened to report Mendoza “to the California Attorney General, the Los Angeles District Attorney, the Internal Revenue Service regarding tax fraud, [and] the Better Business Bureau,” and to disclose the alleged wrongdoing to Mendoza's customers and vendors if Mendoza did not pay “damages exceeding $75,000.” Regardless of whether Mendoza committed any crime or wrongdoing or owed Chow money, Hamzeh's threat to report criminal conduct to enforcement agencies and to Mendoza's customers and vendors, coupled with a demand for money, constitutes “criminal extortion as a matter of law,” as articulated in Flatley [v. Mauro (2006) 39 Cal.4th 299, 330]. 

Slip op. at 7.

The opinion is available here. 

Guerrero v. Superior Court: Court of Appeal Reverses Order Sustaining Demurrer on Joint Employment Issues

In Guerrero v. Superior Court (Weber) (2/11/13) --- Cal.App.4th ---, the plaintiff, Guerrero, was employed to provide in-home support services (IHSS) to eligible recipients in Sonoma County (County) under the In-Home Support Services Act. Cal. Welf. & Inst. Code § 12300 et seq. She sued the County and its In-Home Support Services Public Authority (the Authority) for violation of federal and state wage law, alleging that they jointly employed her along with the individual to whom she rendered services.

The trial court sustained without leave to amend the demurrer of the County and the Authority. The Court of Appeal reversed, holding:

Although providing IHSS-funded care does not constitute employment for all purposes, the County and the Authority were Guerrero's joint employers for FLSA purposes because: (1) "their power over the employment relationship by virtue of their control over the purse strings was substantial"; (2) her wages were determined and paid by the state and its agents, the County and the Authority; (3) the County and the Authority maintained employment records on Guerrero; and (4) the County had an inherent role in in supervising the provision of services by IHSS providers such as Guerrero. Slip op. at 12-30. The Court relied heavily on Bonnette v. California Health and Welfare Agency (9th Cir. 1983) 704 F.2d 1465 (state and counties were employers under California's IHSS program) and distinguished Moreau v. Air France (9th Cir. 2003) 356 F.3d 942 (airline was not joint employer of service workers hired by outside entities for purposes of FMLA and CFRA).

Because Guerrero alleged that she "performed general household work exceeding twenty percent of her total weekly hours worked," the trial court erred in sustaining the demurrer on grounds that her job was exempt from FLSA minimum wage and overtime protections pursuant to the domestic service companionship exception. 29 U.S.C. section 213. "Determining whether or not all of the elements of the exemption have been established is a fact-intensive inquiry. The appropriateness of any employee's classification as exempt must be based on a review of the actual job duties performed by that employee." Slip op. at 30-34.

The Court rejected the concern that allowing such wage claims on a joint employment basis make the County and the Authority "liable for wages that they have no power to control."  

The IHSS program pays for specified services delivered to qualified recipients up to a maximum number of hours. Where a qualified provider delivers services other than those authorized and covered by the program or for a greater number of hours than authorized and real parties have no knowledge that such is occurring and are realistically unable to inform themselves of such, we agree it would be inappropriate to impute the recipient's knowledge to real parties so as to require real parties to pay for such services. 

However, this was a factual issue not ripe for adjudication on demurrer.  Slip op. at 34-36.

The County and the Authority were Guerrero's employers for purposes of California wage law because: (1) California's protections cannot be any less protective of employees than federal law; (2) while they did not directly hire, fire or supervise providers, through their "power of the purse" and quality control authority, the County and the Authority had "the ability to prevent recipients and providers from abusing IHSS authorizations both as to the type of services performed and the hours worked." The trial court thus erred in finding that they did not suffer or permit Guerrero to work and were not her employers.  Slip op. at 36-45. 

Public agencies are not exempt from the provisions of Wage Order No. 15-2001.  Slip op. at 45-50. 

The trial court erred in holding that the personal attendant exemption barred Guerrero's claims because whether she rendered services as a personal attendant was a question of fact. Guerrero's allegation that she spent more than 20 percent of her time performing "general household work" raised an issue of fact as to her personal attendant status under the wage order.  Slip op. at 50-52.  

The opinion is available here.  

The County and the Authority just last week filed their petition for review in the California Supreme Court. The Court last year granted review in Patterson v. Domino's Pizza (discussed here), in which the Court of Appeal held that a franshisor may be liable for a franchisee's alleged violations of the Fair Employment and Housing Act, but denied review in Aleksick v. 7-Eleven (2012) 205 Cal.App.4th 1176, in which the Court of Appeal held that 7-Eleven is not liable for allegedly failing to pay its franchisees' employees their earned wages. If I had to wager, I would say that the Court will deny review, particularly because Guerrero arises on the defendants' demurrer.