Wage Law

DLSE Hearings Do Not Preclude Other Civil Claims

A defense judgment in a case brought by employees against their former employer after the conclusion of Labor Commissioner proceedings has been reversed in part and affirmed in part. Contrary to the trial court's determinations, civil claims other than wage and hour claims, such as causes of action alleging fraudulent inducement to enter employment, are not precluded by the prior pursuit of wage claims in an administrative forum before the Labor Commissioner pursuant to Labor Code §§ 98 et seq. Noble v. Draper (2008) __ Cal.App.4th __. In an unpublished portion of the opinion, the Court of Appeal held that, to the extent that an employee's claims rely upon the finding of an employer/employee relationship, an undisturbed Labor Commissioner’s ruling that the plaintiff was not an employee can preclude them. Section II-B has been ordered not to be published. The rest of the opinion is published. You can download the opinion in Noble v. Draper here in pdf or word format.

The Cautionary Tale of the Day

If the son of Aeacides had ever become a lawyer, this is exactly the kind of case he'd have taken, all the way to the Supreme Court. Technically, the wage and hour attorney representing the plaintiff/employee won the appeal. Technically. But make no mistake about it, when the parties read the opinion issued this morning in Harrington v. Payroll Entertainment Services, Inc. (2008) __ Cal.App.4th __, it wasn't Mr. Harrington who was smiling.

Here's what the Second District Court of Appeal had to say in its opening paragraph:

This was a dispute about $44.63 in unpaid overtime, which was settled for $10,500, after which the plaintiff asked the trial court for about $46,000 for his attorneys’ fees. The trial court denied the motion outright, and the plaintiff now appeals on the ground that he has a statutory right to recover his reasonable fees. We agree, reverse the order, and award him $500 for his fees.

No, those are not typos. Those are the numbers. Suffice it to say, the rest of the opinion included little praise for the plaintiff or his lawyers. We suspect, although we didn't attend Tuesday's oral argument (yes, the opinion was published just a day and a half later), that the justices were quite hostile to the appellant during those proceedings. If you want to read their entire opinion, you can find it here in pdf or word format.

No Expert Fees Recoverable Under Code of Civil Procedure § 1021.5

The Supreme Court has just issued a ruling in Olson v. Automobile Club of Southern California (2008) __ Cal.4th __, regarding the recovery of expert witness fees under Code of Civil Procedure § 1021.5. Or, we should say, the non-recovery of expert witness fees under Code of Civil Procedure § 1021.5. The statement of issues on review was as follows:

Petition for review after the Court of Appeal modified and affirmed the judgment in a civil action. The court limited review to the following issue: Is a prevailing plaintiff who is awarded attorney's fees under the private attorney general statute (Civ. Code § 1021.5) entitled to recover expert witness fees?

The holding:

Code of Civil Procedure section 1021.5 provides, in pertinent part, that “[u]pon motion, a court may award attorneys’ fees to a successful party . . . in any action which has resulted in the enforcement of an important right affecting the public interest if . . . a significant benefit . . . has been conferred on the general public . . . .” We granted review in this matter to decide whether, under this statute, a prevailing plaintiff who is awarded attorney fees is also entitled to recover expert witness fees. In Davis v. KGO-T.V., Inc. (1998) 17 Cal.4th 436 (Davis), we considered a similar issue, and concluded that Government Code section 12965, former subdivision (b), which then provided for an award of “ ‘reasonable attorney fees and costs’ ” to a prevailing party, did not permit an award of expert witness fees. (Davis, supra, 17 Cal.4th at pp. 438, 446; Gov. Code § 12965, former subd. (b), as amended by Stats. 1992, ch. 912, § 7.1, p. 4276.) Consistent with Davis and the plain language of the statute, we hold that a prevailing plaintiff is not entitled to an award of expert witness fees in addition to attorney fees under Code of Civil Procedure section 1021.5.

For most wage and hour lawyers and plaintiffs, the ruling changes little. Expert witness fees are relatively modest in wage and hour cases, and most wage claims have attorney's fee statutes that do not require the plaintiffs to rely upon the UCL or section 1021.5, and there are few wage and hour cases in which section 1021.5 is an important issue. If it's important to you, however, you can find the opinion here in pdf or word format.

Ticconi: Yet Another Opinion After Yet Another Rehearing

In July 2007, we discussed a case called Ticconi v. Blue Shield of California Life & Health (2007) 153 Cal.App.4th 1123 (Diverse Facts and Legal Arguments Concerning Equitable Defenses in UCL Claims Do Not Bar Class Certification). It held that unclean hands and other equitable defenses could not be used to defeat class certification in an unfair competition lawsuit based upon violations of statute, even if the defenses might be taken into account when fashioning a remedy, and even if they involve the determination of facts and legal issues that vary greatly among class members. In August, on the Court granted rehearing on its own motion, to make non-substantive changes to the opinion. The opinion on rehearing was issued in December. The holding remained undisturbed. If anything, it looks a bit worse for the defendant.

On January 3, 2008, the court granted the defendant's petition for rehearing. The third opinion has now been issued. Again, the holding is not meaningfully different, at least not with respect to the issues relevant to wage and hour lawyers who litigate UCL class actions. On those counts, if anything, it looks a bit worse for the defendant.

The trial court denied plaintiff’s motion for certification of a class of similarly situated insureds on the ground that Blue Shield Life’s defenses of fraud and unclean hands raised individual issues that predominated over the common issues related to liability. Plaintiff appeals.

We conclude that the trial court erred as a matter of law in ruling on the motion for class certification. The equitable defense of unclean hands is not available in a UCL action based on the violation of statutes such as sections 10113 and 10381.5. Also, sections 10113 and 10381.5 preclude an insurer from raising the defense of fraud based on statements that an insured made in an application for insurance if the application had not been attached to or endorsed on the policy when issued (§§ 10113 & 10381.5). Therefore, the trial court relied on erroneous legal assumptions in ruling that the individual issues raised by the defenses of unclean hands and fraud predominated over the common issues pertaining to liability. Accordingly, we reverse the order with instructions.

There remain some questions about whether the plaintiff is still a suitable class representative, but that doesn't look like it will impair the ability to certify the class.

The indications are that plaintiff had standing when he filed this lawsuit but was paid some money thereafter. “Even if the named plaintiff receives all the benefits that he seeks in the complaint, such success does not divest him of the duty to continue the action for the benefit of others similarly situated.” (La Sala v. American Sav. & Loan Assn., supra, 5 Cal.3d at p. 871.) We observe that plaintiff has declared “his desire to continue with this case[] . . . . after being publicly called a fraud by Blue Shield Life.”

“If, however, the court concludes that the named plaintiff[] can no longer suitably represent the class, it should at least afford plaintiff[] the opportunity to amend the[] complaint, to redefine the class, or to add new individual plaintiffs, or both, in order to establish a suitable representative. [Citations.] If, after the court has thus extended an opportunity to amend, the class still lacks a suitable representative, the court may conclude that it must dismiss the action. At this point, the further issue arises whether the court must notify the class of the proposed dismissal.” (La Sala v. American Sav. & Loan Assn., supra, 5 Cal.3d at p. 872.) All of these issues must be considered by the trial court on remand.

You can download the new opinion here in pdf or word format.

Not Everyone Lerachs

Earlier this month, a prominent former class action attorney, William Lerach, was sentenced to two years in prison for his role in a scheme to pay huge cash kickbacks to class action plaintiffs. It was the maximum sentence possible under his guilty plea agreement. He'll pay about $8 million in fines, too. The thing that struck us about his case was the assertion that Lerach's kickback scheme was widespread among all class action lawyers. Lerach has been quoted saying:

"Believe me, it was industry practice. We kept it quiet because obviously if a judge knew about it you're not going to get appointed as lead counsel and the class representative is not going to get certified because it's an ethical violation and you're not allowed to split a fee with a non-lawyer."

An industry practice? It's not an industry practice. Basically, it's capping. Some lawyers need to do it to get the cases they want, but not everyone is doing it. Most are not, which is why most of us only have a handful of these cases at a time.

It's like cheating on your wife. If you do it, your brain feels better if you convince yourself that everyone does it, even though we don't. Have you ever met a cheater who didn't think everyone else was doing it, too? It reminds us of an expression our grandfather used to say. We can't repeat verbatim because he said it in French, but it translates like this: "No man ever looks under the bed unless he has hidden there himself." Lerach thinks we're all hiding under the bed.

Review Denied: Lewis v. Robinson Ford Sales, Inc.

Last week, the Supreme Court denied a petition for review in Lewis v. Robinson Ford Sales, Inc. (2007) 156 Cal.App.4th 359. We discussed the case in a previous post you can find at this link. The Fourth Appellate District had reversed an order denying class certification in a case involving negative equity financing under the Automobile Sales Finance Act, Consumer Legal Remedies Act, and Unfair Competition Law. The matter was ordered remanded with directions to enter an order certifying the class. The remittitur has been issued.

Wrongful Term Based Upon Labor Code § 923 Pre-Empted by NLRA

An unpublished January 2008 opinion regarding NLRA preemption has been ordered published. In Luke v. Collotype Labels USA, Inc. (2007) __ Cal.App.4th __, the First District Court of Appeal affirmed a summary judgment against an employee who asserted, among other things, wrongful termination in violation of public policy. One of the public policies at play was that set forth in Labor Code § 923:

Negotiation of terms and conditions of labor should result from voluntary agreement between employer and employees. Governmental authority has permitted and encouraged employers to organize in the corporate and other forms of capital control. In dealing with such employers, the individual unorganized worker is helpless to exercise actual liberty of contract and to protect his freedom of labor, and thereby to obtain acceptable terms and conditions of employment. Therefore it is necessary that the individual workman have full freedom of association, self-organization, and designation of representatives of his own choosing, to negotiate the terms and conditions of his employment, and that he shall be free from the interference, restraint, or coercion of employers of labor, or their agents, in the designation of such representatives or in self-organization or in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.

The other was Section 232.5:

No employer may do any of the following:

(a) Require, as a condition of employment, that an employee refrain from disclosing information about the employer's working conditions.

(b) Require an employee to sign a waiver or other document that purports to deny the employee the right to disclose information about the employer's working conditions.

(c) Discharge, formally discipline, or otherwise discriminate against an employee who discloses information about the employer's working conditions.

(d) This section is not intended to permit an employee to disclose proprietary information, trade secret information, or information that is otherwise subject to a legal privilege without the consent of his or her employer.

The plaintiff alleged that he was terminated because he told other employees that they should keep a record of problems they encountered and express their concerns to management, “provided support and ideas to other employees who complained about working conditions" and discussed “working conditions such as heat, bathroom availability, no seating during breaks and lunch, and promotion decisions.” The trial court granted the defendant employer's motion for summary judgment on the basis that plaintiff's claims were preempted by the National Labor Relations Act, finding that the complaint alleged “nothing more than unfair labor practices that are preempted by federal law and, therefore, are not properly heard in this tribunal.” The Court of Appeal affirmed.

You can download Luke v. Collotype Labels USA, Inc. here in pdf or word format. One is left to wonder to what extent Grant-Burton v. Covenant Care (2002) 99 Cal.App.4th 1361 (plaintiff can assert wrongful termination claim under Labor Code § 232's prohibition against discipline for disclosing wages with other employees) remains viable.

Happy [Belated] Anniversary, Justice Thomas

Do you remember the last time U.S. Supreme Court Justice Clarence Thomas spoke? We heard him talk about football during the USC - Nebraska game last September (which we fondly recall as "departing of the Red Sea"), but when was the last time Justice Thomas spoke up during session? It was in a death penalty case heard on February 22, 2006. That makes two years and 142 cases without an utterance by Justice Thomas.

One might suggest that Justice Thomas is strictly construing and personally adhering to the prohibitions of 40 U.S.C. 6134, which makes it "unlawful to discharge a firearm, firework or explosive, set fire to a combustible, make a harangue or oration, or utter loud, threatening, or abusive language in the Supreme Court Building or grounds." But that's probably not it. When he started his dissent earlier this month in Preston v. Ferrer (2008) __ U.S. __, with the words "as I have stated on many previous occasions," we chuckled just a little, but not nearly as much as our liberal friends chuckled when we praised Justice Thomas's dissent in that case and suggested that we would love to see at least four more justices just like him.

The dissent, for what it's worth, read as follows:

JUSTICE THOMAS, dissenting. As I have stated on many previous occasions, I believe that the Federal Arbitration Act (FAA), 9 U. S. C. § 1 et seq. (2000 ed. and Supp. V), does not apply to proceedings in state courts. See Allied-Bruce Terminix Cos. v. Dobson, 513 U. S. 265, 285–297 (1995) (THOMAS, J., dissenting); see also Buckeye Check Cashing, Inc. v. Cardegna, 546 U. S. 440, 449 (2006) (same); Green Tree Financial Corp. v. Bazzle, 539 U. S. 444, 460 (2003) (same); Doctor’s Associates, Inc. v. Casarotto, 517 U. S. 681, 689 (1996) (same).Thus, in state -court proceedings, the FAA cannot displace a state law that delays arbitration until administrative proceedings are completed. Accordingly, I would affirm the judgment of the Court of Appeals.

We'd love to hear more from him on these matters, although it may become moot if the Arbitration Fairness Act of 2008 passes.

Ethical Obligations When Interviewing Adverse Putative Class Members

Do defense lawyers owe any duty to putative class members when interviewing them on behalf of their employer prior to certification of the class? While there is still little guidance from the courts of appeal on the subject, if you've never read it before, you might consider reviewing a September 2005 order by Judge Brick (Alameda County Superior Court) in a case called Shahrokhshahi v. Round Table Pizza. Although Judge Brick denied the plaintiff's motion to disqualify the defense firm for conducting interviews of putative class members without making full and fair disclosures to them beforehand, he did rule that the firm had violated ethical rules by not disclosing to putative class members when they first contacted them that:

• The class members' potential rights to overtime wages were at issue in the pending litigation;
• Their interests were adverse to the corporation's in the litigation;
• The defense firm represented only the corporation's interests, not those of the putative class members;
• Information given to the defense firm was not confidential and could be used against the class members' interests in the overtime litigation; and
• The managers may want to speak to independent counsel about their interests in the litigation.

Because the defense firm failed to make any such disclosures, he ordered the distribution of a curative letter, on employer letterhead, to all putative class members. The firm's writ petition was summarily denied in Round Table Pizza, Inc. v. Superior Court, Case No. A111674. We've had the issue come up several times recently, and our judges have all been receptive to Judge Brick's rationale.

Depublication Denied in Fitz-Gerald v. SkyWest Airlines, Inc.

The Supreme Court denied a request last month to depublish the Second District Court of Appeal's opinion in Fitz-Gerald v. SkyWest Airlines, Inc. (2007) 155 Cal.App.4th 411. The case affirmed a trial court decision that a flight attendant's claims under California labor law regarding minimum wages, overtime and meal/rest breaks were preempted by the Railway Labor Act (45 U.S.C. § 151 et seq.). We previously discussed the case in a post you can read at this link.