Ellis v. Costco: On Remand Following Dukes, Ninth Circuit Vacates Order Granting Certification in Discrimination Action

The theory of liability in Dukes v. Wal-Mart (discussed here) is that a company's policy of allowing local decision-makers to make hiring and promotion decisions can have a disparate impact on women and violate Title VII.  Brad Seligman, lead counsel for the plaintiffs in Dukes, has said that this is a very narrow and rarely used theory.  Regardless, the same theory is at issue in another of Seligman's cases, Ellis v. Costco Wholesale Corporation, 657 F.3d 970 (9th Cir. 9/16/11). 


On remand following the SCOTUS decision in Wal-Mart, the Ninth Circuit vacated the district court's order granting class certification under Federal Rules 23(b)(2) and 23(b)(3).  The Court held as follows:

1. Because at least one named plaintiff (Sasaki) alleged a concrete injury that is both directly traceable to Costco's allegedly discriminatory practices and is redressable by both injunctive relief and monetary damages, the Court affirmed the district court's holding that she had standing to pursue the action.
2. The Court  vacated and remanded the district court's ruling as to commonality under Rule 23(a) because the district court failed to conduct the required “rigorous analysis” to determine whether there were common questions of law or fact among the class members' claims and instead relied on the admissibility of the plaintiffs' evidence to reach its conclusion on commonality.
3. The Court vacated the district court's ruling as to typicality under Rule 23(a) because the district court failed to consider the effect that defenses unique to the named Plaintiffs' claims have on that question. 
4. The Court affirmed the district court's ruling that Sasaki, a current employee who continues to be denied promotion, has incentive to vigorously pursue injunctive relief as well as monetary damages on behalf of all the class members and is an adequate class representative under Rule 23(a).  However, the Court vacated the district court's finding that the other named plaintiffs, as former employees with "no incentive" to pursue injunctive relief, could adequately represent the class. 
5. In light of Wal-Mart's rejection of the predominance test under Rule 23(b)(2), the Court vacated the district court's certification of the class under that Rule and remanded for the district court to consider whether the claims for various forms of monetary relief will require individual determinations and are therefore only appropriate for a Rule 23(b)(3) class. 

The opinion is available here. 

Supreme Court Schedules Oral Argument in Exemption Case

The California Supreme Court will hear oral argument in Harris v. Superior Court (Liberty Mutual Insurance) on Monday, October 3, 2011, at 9:00 a.m., in San Francisco. Harris raises the following issue:

Do claims adjusters employed by insurance companies fall within the administrative exemption (Cal. Code Regs, tit. 8, section 11040) to the requirement that employees are entitled to overtime compensation?

For more information on this case, go here.

Goodwin Liu and Julie Su Confirmed

Governor Brown on Thursday swore in Goodwin Liu as the California Supreme Court's newest justice. Brown nominated Liu to the Supreme Court in July, after Liu withdrew his name from consideration for the Ninth Circuit Court of Appeals. Republicans had blocked Liu's nomination by President Obama, complaining that he was too liberal for the Ninth Circuit. Liu replaces Justice Carlos Moreno, the author of a number of important employment and class action decisions, who retired in February. Recent articles re. Liu: Sacramento Bee; Los Angeles Times.

On Tuesday, Julie Su was confirmed as California's Labor Commissioner. Su will lead the Division of Labor Standards Enforcement, or DLSE.

Congratulations to Justice Liu and Commissioner Su.

Supreme Court to Determine Federal Preemption of Driver Misclassification Action

On August 10, 2011, the California Supreme Court granted review in People ex rel. Harris v. Pac Anchor Transportation, Inc. This is the issue on review:

Is an action under the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.) that is based on a trucking company's alleged violation of state labor and insurance laws "related to the price, route, or service" of the company and, therefore, preempted by the Federal Aviation Administration Authorization Act of 1994 (49 U.S.C. § 14501)?

The Court of Appeal held that the federal statute, popularly known as the FAAAA, did not preempt such an action. Discussed here.

The Supreme Court's web page on the case is here. It is Case No. S194388. Go here to sign up for automatic email notifications about developments in the case. 

Zelasko-Barrett v. Brayton-Purcell: Court Finds that Law School Graduate Was Exempt Professional

A number of recent cases address the scope of the white collar exemptions under California law. The Cal. Supremes have Harris v. Superior Court, (blogged here) in which they will determine whether insurance adjustors are exempt administrative employees, on their docket. They have granted review in two other cases pending their decision in Harris:

Hodge v. AON Insurance Services (blogged here) (whether insurance adjustors are administrative exempt) and Pellegrino v. Robert Half Intern., Inc. ("Pellegrino I," blogged here) (whether account executives are administrative exempt).

In June, the Second District Court of Appeal issued Soderstedt v. CBIZ (blogged here) holding that unlicensed employees of a public accounting firm may be exempt as learned professionals, and the Ninth Circuit Court of Appeals issued Campbell v. PricewaterhouseCoopers LLP (blogged here) reaching the same conclusion.

And now the First District Court of Appeal has issued the battle of the hyphenated names, Zelasko-Barrett v. Brayton-Purcell, LLP (8/17/11) --- Cal.App.4th ----, 2011 WL 3594015, holding that a law school graduate who was not licensed to practice law but who worked for a law firm and performed tasks customarily performed by junior attorneys was exempt as a learned professional.

I will not get into the details of the case, because I assume that the plaintiffs will petition for review and have an odd's on chance of it being granted pending Harris.

The opinion is available here.

Plancich v. UPS: Another Court Addresses Prevailing Defendant Costs in Wage Dispute

In Kirby v. Immoos Fire Protection, Inc. (blogged here), the Cal. Supreme Court will address the following issues:

1. Does Labor Code section 1194 apply to a cause of action alleging meal and rest period violations (Lab. Code 226.7) or may attorney's fees be awarded under Labor Code section 218.5?
2. Is our analysis affected by whether the claims for meal and rest periods are brought alone or are accompanied by claims for minimum wage and overtime?

In Plancich v. United Parcel Service, Inc. (8/11/11) --- Cal.App.4th ----, 2011 WL 3506066, the Fourth District Court of Appeal held that while Labor Code section 1194 gives a prevailing employee the right to recover attorney's fees and costs, it "does not contain express language excluding prevailing employers from recovering their costs. Slip op. at 3.

Accordingly, based on the plain meaning of the words of the statutes in question, section 1194 does not provide an “express” exception to the general rule permitting an employer, as a prevailing party, to recover costs under Code of Civil Procedure section 1032, subdivision (b), because section 1194 makes no mention of prevailing employers.

Ibid. To avoid this result, the plaintiff argued that Labor Code section 218.5, rather than section 1032, controlled. The Court responded to this argument:

Assuming, without deciding, that Plancich is correct and Labor Code section 218.5 controls the awarding of costs in suits brought for unpaid wages, then UPS should still be awarded its costs. UPS was the prevailing party in this action. In UPS's answer to Plancich's complaint, UPS requested that UPS “be awarded its reasonable costs and attorneys' fees.” Accordingly, UPS fulfilled the requirements for being awarded costs under Labor Code section 218.5, namely, it was the prevailing party and it requested costs be awarded at the initiation of the action. Accordingly, we are not persuaded by Plancich's argument.

Slip op. at 4. Finally, the Court distinguished Earley v. Superior Court (2000) 79 Cal.App.4th 1420, in which the Court held that a successful defendant cannot recover its attorney fees and costs in a minimum wage action under Labor Code section 1194.

We do not find the Earley opinion to be persuasive authority in this case, because the Earley opinion did not discuss the costs provision of section 1194 in relation to Code of Civil Procedure section 1032, subdivision (b). Rather, the opinion was focused on the issue of attorney's fees in section 1194, and how that provision related to Labor Code section 218.5, as well as issues related to absent class members.

Slip op. at 5. Having distinguished Earley, the Court again reasoned that section 1194 does not provide an express exception to section 1032.

Will the Supreme Court grant and hold Plancich pending its decision in Kirby? The Court already has one case on hold, In re. UPS Wage and Hour Cases (2/24/11) (blogged here). Perhaps Plancich will be grant-and-hold number two.

The opinion is available here.

Pitts v. Terrible Herbst: Ninth Circuit Holds that Offer of Judgment for Full Amount Owed to Class Rep. Does Not Moot Class Action

In Pitts v. Terrible Herbst, Inc., --- F.3d ----, 2011 WL 3449473 (9th Cir. 8/9/11) , the plaintiff filed a putative class and collective action under the Fair Labor Standards Act (FLSA) and Nevada state law. Before the plaintiff filed her motion for class certification, the defendant made a Rule 68 offer of judgment for $900, even though the plaintiff claimed only $88 in damages for himself. The plaintiff rejected the offer.

Because Terrible's offer fully compensated Pitts for his individual monetary claim, Terrible filed a motion to dismiss the action for lack of subject matter jurisdiction. Specifically, Terrible argued that its offer of judgment rendered the entire case moot. Following the Fifth Circuit's decision in Sandoz v. Cingular Wireless LLC, 553 F.3d 913 (5th Cir.2008), the district court, in March 2010, held that a Rule 68 offer of judgment does not moot a putative class action so long as the class representative can still file a timely motion for class certification. Nevertheless, the district court then held that Terrible's offer mooted the action because Pitts failed to timely seek class certification.... The court then dismissed the entire action with prejudice for lack of subject matter jurisdiction, entered judgment in the defendant's favor, and ordered Terrible to pay $900 to Pitts and $3,500 to Pitts's attorney.

Slip op. at 1-2.

The Ninth Circuit reversed. Reviewing a line of Supreme Court decisions regarding mootness of class actions, the Court discerned several important principles:

First, if the district court has certified a class, mooting the putative class representative's claim will not moot the class action. [After certification], a defendant may moot a class action through an offer of settlement only if he satisfies the demands of the class; an offer to one cannot moot the action because it is not an offer to all.

Second, if the district court has denied class certification, mooting the putative class representative's claim will not necessarily moot the class action. The putative class representative retains an interest in obtaining a final decision on class certification that allows him to litigate the denial of class certification on appeal.

Third, even if the district court has not yet addressed the class certification issue, mooting the putative class representative's claims will not necessarily moot the class action. “[S]ome claims are so inherently transitory that the trial court will not have even enough time to rule on a motion for class certification before the proposed representative's individual interest expires.” McLaughlin, 500 U.S. at 52 (internal quotation marks omitted). An inherently transitory claim will certainly repeat as to the class, either because “[t]he individual could nonetheless suffer repeated [harm]” or because “it is certain that other persons similarly situated” will have the same complaint. Gerstein, 420 U.S. at 110 n. 11. In such cases, the named plaintiff's claim is “capable of repetition, yet evading review,” id., and “the ‘relation back’ doctrine is properly invoked to preserve the merits of the case for judicial resolution,” McLaughlin, 500 U.S. at 52; see also Geraghty, 445 U.S. at 398; Sosna, 419 U.S. at 402 n. 11. Application of the relation back doctrine in this context thus avoids the spectre of plaintiffs filing lawsuit after lawsuit, only to see their claims mooted before they can be resolved.

Slip op. at 6. Applying these principles to the case at hand, the Court held that "Terrible's unaccepted offer of judgment did not moot Pitts's case because his claim is transitory in nature and may otherwise evade review. Accordingly, if the district court were to certify a class, certification would relate back to the filing of the complaint." Slip op. at 7. The Court reasoned that allowing a defendant to "buy off" a class action by offering to satisfy the named plaintiff's claim would make the matter transitory such that it would evade review. Ibid.

Accordingly, we hold that an unaccepted Rule 68 offer of judgment-for the full amount of the named plaintiff's individual claim and made before the named plaintiff files a motion for class certification-does not moot a class action.

Slip op. at 8.

The opinion is available here.