Wage Law

Court Approves $85 Million Settlement Involving Wal-Mart Wage Disputes

U.S. District Judge Philip M. Pro has given preliminary approval to an $85 million wage and hour class action settlement resolving 30 cases against Wal-Mart Stores Inc. in coordinated proceedings entitled In Re: Wal-Mart Wage and Hour Employment Practices Litigation, MDL 1735, U.S. District Court, District of Nevada (Las Vegas). The approval covers just part of a larger $640 million settlement reached last December.

Picking Off The Class One at a Time - Chindarah v. Pick Up Stix

Probably the most important wage-and-hour case to be published so far in 2009 has been Chindarah v. Pick Up Stix Inc. (2009) 171 Cal.App.4th 796, which holds that Labor Code § 206.5 does not apply to any wage release that is given in connection with payment that settles a good faith dispute.

Pick Up Stix was the defendant in a wage-and-hour class action involving, among other things, a claim for overtime brought by two plaintiffs, on behalf of a group of employees who were alleged to have been misclassified. After an unsuccessful mediation, Pick Up Stix went to the individual employee class members, many of whom weren't even aware that there was a case pending, and offered to pay them their share of what was offered at the mediation (the opinion does not explain how the amount was calculated) in exchange for a full release."By signing the agreement, the employee acknowledged that he or she had spent more than 50% of the time performing managerial duties, released Stix from all claims for unpaid overtime and any other Labor Code violations during the relevant time period, and agreed “not to participate in any class action that may include ... any of the released Claims ....”  The plaintiffs and several other employees, including eight current and former employees who had signed the releases, alleged that the releases were not valid under Labor Code §§ 206.5 and 1194(a).

Labor Code § 206.5 provides: 

 “An employer shall not require the execution of a release of a claim or right on account of wages due, or to become due, or made as an advance on wages to be earned, unless payment of those wages has been made.  A release required or executed in violation of the provisions of this section shall be null and void as between the employer and the employee.  Violation of the provisions of this section by the employer is be a misdemeanor.” 

Labor Code § 1194(a) provides:

“Notwithstanding any agreement to work for a lesser wage, any employee receiving less than the legal minimum wage or the legal overtime compensation applicable to the employee is entitled to recover in a civil action the unpaid balance of the full amount of this minimum wage or overtime compensation, including interest thereon, reasonable attorney’s fees, and costs of suit.”

After some of those employees joined the putative class action, Pick Up Stix filed a cross-complaint against them, alleging breach of contract, and it defended the underlying wage claims asserting the release as an affirmative defense.  Both sides brought summary judgment motions. The trial court found the Labor Code did not prohibit the release of a claim for unpaid wages where there is a bona fide dispute over whether any wages were owed, and that Pick Up Stix “produced evidence showing a good faith dispute with regard to classification of the employees,” and thus had a bona fide dispute as to "whether or not [plaintiffs] were owed any additional wages.”  Finding the releases valid as a matter of law, the trial court then granted Pick Up Stix’s motion for summary judgment and denied the motion brought by the plaintiffs.

The Court of Appeal affirmed.

This public policy is not violated by a settlement of a bona fide dispute over wages already earned.  The releases here settled a dispute over whether Stix had violated wage and hour laws in the past; they did not purport to exonerate it from future violations.  Neither did the releases condition the payment of wages concededly due on their executions.  The trial court correctly found the releases barred the Chindarah plaintiffs from proceeding with the lawsuit against Stix.

Unfortunately, the short (10-page) opinion offers no guidance as to what must be shown to render a dispute sufficiently bona fide to get around Section 206.5's language that invalidates releases given in exchange for less than all wages actually owed. It appears that any "good faith" belief by the employer will suffice, whether or not it would have actually passed scrutiny:

 “[W]ages are not ‘due’ if there is a good faith dispute as to whether they are owed.  Because [the employer’s] defense that [the plaintiff] was an exempt employee under California law would, if successful, preclude any recovery for [the plaintiff], a bona fide dispute exists and the overtime pay cannot be considered ‘concededly due.’” 

Rare is the case in which an employer cannot argue that its misclassification of employees was done, subjectively, in good faith. Thus, almost any misclassification case would be subject to this sort of tactic. Moreover, since the quantification of hours in almost any off-the-clock case is usually subject to bona fide disputes, this tactic would also seem easily available in any off-the-clock cases.

The opinion does not offer any guidance as to what - or even whether - employees need to know about the existence of the bona fide dispute. It would appear that the employee need not even know that there is a good faith dispute, or any dispute, about the wages due. In the case of Pick Up Stix, there is no indication that most, if any, of the unnamed class members even knew that a dispute existed until they were offered money in exchange for a release.

The opinion does not set any standard as to the amount that must be paid, as long as the wages that are "concedely due" are paid. Theoretically, as long as the employer knows of the dispute, and it holds a good faith belief in the dispute, any sum, no matter how small, that exceeds the "concedely owed" wages, would be sufficient consideration for a release that would withstand any contrary requirements specified in Labor Code § 206.5.

The opinion offers no standards to follow for the communications used by the employer when soliciting such releases. Thus, for example, there seems to be no obligation for an employer to disclose to employees that there is a matter pending. If it does, the employer is under no apparent obligation to engage in neutral, honest communication. An offer could be accompanied by a notice, for example, explaining that the company is aware that some employees have asserted the right to this additional money, and that the company is offering this additional payment simply to keep its workers happy and to prevent greedy lawyers from charging them outrageous attorney's fees. Such a communication would be improper as part of a court-supervised communication with class members (See, e.g., Gainey v. Occidental Land Research (1986) 186 Cal.App.3d 1051, 1058 [“One of the purposes of the court's supervisory role is to assure that the notice be "neutral and objective in tone, neither promoting nor discouraging the assertion of claims."]) but would not run afoul of anything in the Pick Up Stix opinion.

Perhaps most troubling for plaintiffs is the fact that, although the case was pending as a putative class action, the court did not impose any requirements for judicial oversight of the payments or releases. The Court of Appeal considered, but rejected the concept that court oversight or approval should be required:

The Legislature is capable of expressly providing oversight for employee releases or compromises of claims.  It did so when enacting Labor Code section 5001, which bars any compromise or release of such a claim unless approved by the workers’ compensation appeals board.  The Legislature did not enact a similar provision for wage claims.

As an employee's counsel, my first reaction to that language is to observe that judicial oversight of a compromise would be superfluous where the Legislature has already dictated that such releases are only valid upon payment of all wages that are actually due. In other words, the reason the Legislature didn't impose such a requirement is because the Labor Code's plain language doesn't permit any release to be valid until after all wages that were due have been paid. My second reaction would be to note that allowing this settlement mechanism not only defeats the purpose of Section 206.5 - which is to prohibit employers from persuading employees to accept less than their full wages due - but that it creates an ethical dilemma for judges and class counsel who are faced with settlement offers in class action cases where the offers are clearly unreasonable, but might be accepted by unsophisticated or intimidated employees. Essentially, Pick Up Stix did an end-run around the class action, and although the court (and in particular, this trial judge) is always concerned about the fairness of a class action settlement, there was no analysis, much less concern, over whether Pick Up Stix's offers to settle out from under the class action were fair or adequate.

To prevent fraud, collusion or unfairness to the class, settlement or dismissal of a class action, or a cause of action in a class action, or a party requires court approval. Dunk v. Ford Motor Co.(1996) 48 Cal.App.4th 1794, 1800-1801. Any settlement of a class action must be shown to be fair, adequate and reasonable. California Rules of Court Rule 3.769(a), 3.770(a); In re Microsoft I-V Cases(2006) 135 Cal.App.4th 706, 723. The trial court has broad discretion in determining whether the settlement is fair, but normally must consider certain factors, including the strength of plaintiff's case; the risk, expense, complexity and likely duration of further litigation; the risk of maintaining class action status through trial; the amount offered in settlement; the extent of discovery completed and stage of the proceedings; the experience and views of counsel; the presence of a governmental participant; and the reaction of the class members to the proposed settlement. The court is free to balance and weigh the factors depending on the circumstances of the case, but must take them all into consideration. Wershba v. Apple Computer, Inc.(2001) 91 Cal.App.4th 224, 244-245.

If the plaintiff's case appears very strong, there is relatively little risk and expense being faced taking the case to trial, there is little discovery completed, and an experienced attorney representing the putative class believes the damages to be significant, a lowball offer at mediation must be rejected. If that lowball offer is accepted, the court must scrutinize the settlement, whether or not any objectors challenge the settlement. If the settlement is not fair, adequate and reasonable, the court must reject the settlement. In fact, even if the settlement is actually fair and adequate, if the court is not given sufficient evidence to support the fairness, adequacy and reasonableness of the settlement, it must reject the settlement. Kullar v. Foot Locker Retail, Inc.(2008) 168 Cal.App.4th 116. This is true even though putative class members always have the right to opt out of a settlement that they do not wish to accept.

However, if (to borrow a phrase coined by one of my defense counsel colleagues) a defendant decides to "pull a Pick Up Stix" on the case, the very same offer, already rejected by class counsel and/or rejected by the trial court, can be repackaged and stuffed, along with a coercive memo, into a payroll envelope during the holidays, and any employees who accept it are bound by the release. Those who reject the offer, like those who opt out of a class action settlement, get nothing, not even the "concededly due" wages. Failure to pay those employees their "concededly due" wages does not appear to have any bearing upon the validity of the other employees' releases, and the releases can be as broad and heavy-handed as the employer wishes. In a class action settlement, of course, there are limits as to how overbearing the employer can be in the release. See, e.g., Kakani v. Oracle Corp.(N.D. Cal 2007) 2007 U.S. Dist. LEXIS 47515; 12 Wage & Hour Cas. 2d (BNA) 1308; 154 Lab.L.Rep. (CCH) 35,310. Why the greater scrutiny should apply when the employees are being represented by putative class counsel, who have fiduciary duties to the employees, and no scrutiny should apply with the employees are left flapping in the wind, facing an inherently coercive request from their employer, makes no sense to us.

The plaintiffs in Chindarah have filed a petition for review. There have been If review is denied, we can expect to see a lot of lowball settlement offers, followed by individual lowball offers, at least to existing employees. It will be interesting to see how courts handle objections to low, unfair settlements when the only response that can be offered in reply to an objection is "but if we don't take the deal, they will just cram it down the employees' throats anyhow."

You can download the full text of Chindarah v. Pick Up Stix here in PDF or Word format.

Supreme Court Ruling Favors of Class Action Plaintiffs in UCL Cases

In a close 4-3 vote, the Supreme Court has rendered its decision in the landmark case In re Tobacco II Cases (2009) __ Cal.App.4th __, and it's a huge victory for class action plaintiffs in California. Because the opinion has such broad implications for future unfair competition claims, it is of interest to wage and hour lawyers, even though the case has nothing to do with wages or employment disputes. 

Prior to the 2004 amendment of the unfair competition law by Proposition 64, “[a]ctions for relief [under the UCL could be] prosecuted ... by the Attorney General or any district attorney or by any county counsel ... [or] by a city prosecutor ... [or] by a city attorney ... or upon the complaint of any board, officer, person, corporation or association or by any person acting for the interests of itself, its members or the general public.”  Former Business & Professions Code § 17204; see also Californians for Disability Rights v. Mervyn’s, LLC (2006) 39 Cal.4th 223, 227. After Proposition 64, the section provides

“[a]ny person may pursue representative claims or relief on behalf of others only if the claimant meets the standing requirements of Section 17204 and complies with section 382 of the Code of Civil Procedure”

In other words, the plaintiff must be a “person who has suffered injury in fact and has lost money or property as a result of [such] unfair competition.” Business & Professions Code § 17204, as amended by Prop. 64, § 3.

The plaintiffs in In re Tobacco Cases II alleged that the tobacco industry defendants violated the UCL by conducting a decades-long campaign of deceptive advertising and misleading statements about the addictive nature of nicotine and the relationship between tobacco use and disease.  Prior to passage of Proposition 64, the trial court had certified the case as a class action.  The class was defined as “All people who at the time they were residents of California, smoked in California one or more cigarettes between June 10, 1993 to April 23, 2001, and who were exposed to Defendants’ marketing and advertising activities in California.”  After Proposition 64 was approved, the trial court granted defendants’ motion to decertify the class on the grounds that each class member was now required to show an injury in fact, consisting of lost money or property, as a result of the alleged unfair competition.  The Court of Appeal affirmed.

On review, the Supreme Court addressed two questions: 

1. Who in a UCL class action must comply with Proposition 64’s standing requirements, the class representatives or all unnamed class members, in order for the class action to proceed? 

We conclude that standing requirements are applicable only to the class representatives, and not all absent class members. 

2. What is the causation requirement for purposes of establishing standing under the UCL, and in particular what is the meaning of the phrase “as a result of” in section 17204? 

We conclude that a class representative proceeding on a claim of misrepresentation as the basis of his or her UCL action must demonstrate actual reliance on the allegedly deceptive or misleading statements, in accordance with well-settled principles regarding the element of reliance in ordinary fraud actions.  Those same principles, however, do not require the class representative to plead or prove an unrealistic degree of specificity that the plaintiff relied on particular advertisements or statements when the unfair practice is a fraudulent advertising campaign.  Accordingly, we reverse the order of decertification to the extent it was based upon the conclusion that all class members were required to demonstrate Proposition 64 standing, and remand for further proceedings regarding whether the class representatives in this case have, or can demonstrate, standing. 

This doesn't entirely save the case for the plaintiffs just yet, but their prospects, as a class, seem good. In granting the motion to decertify the class, and in concluding that the entire class was required to demonstrate standing, the trial court’s order also stated, “Further, it appears from the record that not even Plaintiffs’ named representatives satisfy Prop[osition] 64’s standing requirement.”  The trial court did not elaborate on the basis for its conclusion, so the appellate courts cannot ascertain whether or not the named plaintiffs are adequate post-Proposition 64 class representatives. However, assuming that they are no longer adequate representatives of the class because they lack standing,

the proper procedure would not be to decertify the class but grant leave to amend to redefine the class or add a new class representative. “This rule is usually applied in situations where the class representative originally had standing, but has since lost it by intervening law or facts.”  (First American Title Ins. Co. v. Superior Court (2007) 146 Cal.App.4th 1564, 1574.)  We ourselves sanctioned this procedure in a post-Proposition 64 case.  (Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235, 243 [“courts have permitted plaintiffs who have been determined to lack standing, or who have lost standing after the complaint was filed, to substitute as plaintiffs the true parties in interest”].)  Accordingly, we reverse the order granting the decertification motion and remand the case for further proceedings to determine whether these plaintiffs can establish standing as we have now defined it and, if not, whether amendment should be permitted.

Taking all this in, one must conclude that the case is now likely to proceed as a class action with new or additional plaintiffs who can meet the new standing requirements. You can download the full text of the opinion here in PDF or Word format. For more detailed analysis, we recommend visiting the UCL Practitioner blog, where yesterday's post on the opinion is sure to be followed up with more links and analysis in the days to come.

People who read this blog often ask "where do you find the time?" The answer, sometimes, is "we can't." But now that we've taken our leave of absence, bookended by the argument and opinion in the Tobacco II Cases, we are working on catching up with all the really important wage and hour cases and developments that we've been tracking since March. There's been a lot to talk about, and we'll have it here soon.

Whatever Happened in Banda v. Richard Bagdasarian?

We wondered what happened in Banda v. Richard Bagdasarian, Inc. 2008 WL 888524, one of the penalty/wage cases that was a companion case to Murphy v Kenneth Cole Productions, Inc. (2007) 40 C4th 1094, and checked to see if it was still pending. It is not. In April 2008, in an unpublished opinion, the Fourth District, Division Two, ordered the Superior Court to approve a settlement agreement in the matter. In Banda, a class of farmworkers challenged the defendant’s failure to provide meal periods and rest breaks, and its practice of requiring them to taste unwashed and pesticide-laden grapes for sweetness. The claims were brought under the Unfair Competition Law. The first unpublished Fourth District opinion, 2006 WL 1554441, had been transferred by the Supreme Court back to the Fourth District on May 23, 2007, for reconsideration in light of Murphy.

The main provisions of the settlement agreement create a settlement fund to be distributed by a settlement administrator (1) to pay specified fees, costs, and expenses and (2) to make specified payments in compensation for omitted breaks ( Lab.Code, § 226.7) to plaintiffs and other persons employed by defendant during the 2001 and 2002 harvests who show their entitlement under the settlement agreement by timely submitting a settlement claim form. No provision is made for payment of wait time penalties. ( Lab.Code, § 203.) Claimants must execute a release of any and all claims “resulting from or occurring in connection with [the claimant's] employment by [defendant].” The settlement agreement includes a procedure to notify potentially eligible claimants.

...

Pursuant to the Supreme Court's transfer order, the opinion previously filed June 8, 2006, is vacated. Pursuant to the stipulation of the parties, the judgment is reversed. This reversal of the judgment does not indicate a ruling on the merits of the judgment, but serves only to vacate the judgment and restore jurisdiction to the trial court so that it may carry out the following directions implementing and enforcing the parties' settlement agreement.

The clerk of this court is directed to send, with the copy of this opinion sent to the superior court, a copy of the recitals re: stipulation to reverse, with the attached settlement agreement, filed in this court April 2, 2008. The trial court is directed: (1) to approve the settlement agreement, and to approve the form and content of the settlement notice and claim form attached to the settlement agreement; (2) to enter a judgment ordering the agreed permanent injunction, which shall terminate at the conclusion of the 2012 grape harvest, and ordering the parties to abide by the terms of the settlement agreement; and (3) to retain jurisdiction until the permanent injunction is terminated to take any actions necessary to implement and enforce the injunction, the judgment, and the settlement agreement.

The opinion did not mention the dollar amount of the settlement, but two news stories reported that the cash value of the settlement was $585,000.

Litigation Increased From 2007 to 2008

Portfolio Media Inc.'s Law 360 Litigation Almanacs reports that U.S. District Court civil case filings increased 9% from 2007 to 2008, and class actions increased 8% (to 7,661). Employment cases were up just 6% from 2007. With the economy bringing layoffs and other terminations in large numbers, employment litigation will probably increase more in 2009 that other types of litigation.

Court Upholds Verdict Finding Drivers to be Independent Contractors

Employers frequently lose determinations of their staffs' independent contractor status. However, in Cristler v. Express Messenger Systems, Inc.  (2009) __ Cal.App.4th __, the employer prevailed at trial, and the Court of Appeal has affirmed the finding that California Overnight's package delivery drivers were bona fide independent contractors.

James W. Cristler, John Purves, James G. Harrod, Sydney Moroff and Mark Lambert, individually and as the representative of a class of similarly situated persons (collectively Cristler), sued a parcel delivery company, Express Messenger Systems, Inc., doing business as California Overnight (Express Messenger).  The lawsuit contained a number of causes of actions, all based on a core contention that Express Messenger improperly classified its employees as independent contractors.  The case was litigated before a jury and, with respect to certain claims, a trial court.  Express Messenger prevailed.

Cristler appeals, contending that the trial court erred in a number of respects.  Cristler argues that the trial court:  (i) abused its discretion by failing to amend the class definition in light of developments subsequent to class certification; (ii) erred in instructing the jury as to both the burden of proof and with respect to the pertinent classification factors that distinguish employees from independent contractors; (iii) applied incorrect legal standards in adjudicating Cristler's unfair and unlawful business practices causes of action; (iv) abused its discretion by allowing the introduction of irrelevant and "inflammatory" evidence as to the relative benefits of independent contractor status; and (v) erroneously permitted Express Messenger to recover costs for the production of exhibits that were not used at trial.  As discussed below, we conclude these contentions are without merit and affirm.

The complaint alleged causes of action for: (1) unfair and unlawful business practices in violation of Business and Professions Code section 17200; (2) failure to pay overtime compensation in violation of Labor Code sections 510, 515, and 1194; (3) failure to provide properly itemized wage statements in violation of section 226; (4) failure to fully compensate for business expenses in violation of section 2802; and (5) wrongful termination in violation of public policy. Each cause of action arose from the claim that the employer's classification of its delivery personnel as independent contractors was improper. The plaintiffs certified a class and tried the case to a jury and, on some equitable issues, the court. The result was a determination that the drivers were independent contractors.

On appeal, the plaintiffs cited various published opinions in which similar groups of workers were found to be employees, rather than independent contractors, essentially arguing that this dictated an identical result for the California Overnight drivers. The Court of Appeal disagreed.

The simple answer to these references is that these cases concerned different circumstances presented to a different finder of fact. Indeed, even if the facts of this case were identical to those in the cases Cristler cites (and they are not), we would not be authorized to overrule the determination of the jury to achieve conformity with other cases — particularly as Cristler does not even argue that the jury's verdict is unsupported by substantial evidence.

The opinion contains an interesting analysis of the jury instructions given on the core issue of independent contractor status. The trial court instructed the jury that "The issue for you to decide is whether or not the Plaintiffs are employees or independent contractors. "The Plaintiffs allege that they . . . were Defendant's employees. "The Defendant . . . claims that the Plaintiffs were independent contractors, and were not employees. "Plaintiffs have the obligation to prove that they were Defendant's employees. The Defendant has the obligation to prove that the Plaintiffs were independent contractors."

Plaintiff contended that these instructions were erroneous because they obscured the fact that California law required Express Messenger to bear the burden of establishing that persons in its service were independent contractors. (Labor Code § 3357: "Any person rendering service for another, other than as an independent contractor, or unless expressly excluded herein, is presumed to be an employee.") However, the Court of Appeal found no error, because the instructions included these:

• "Any person rendering service for another, other than as an independent contractor, is presumed to be an employee."
• "With respect to this challenge, the trial court instructed the jury as follows: "In determining whether the Plaintiffs and other class members ('drivers') were employees or independent contractors, you must consider a number of factors. You will need to weigh all of these factors based on the evidence that you have heard. 1. The most important factor to consider is the extent to which the Defendant has the right to control the details of the work performed. The following additional factors are to be considered: 2. The right to discharge at will without cause; 3. Whether the drivers are engaged in a distinct occupation or business; 4. The skill required in this occupation; 5. Whether the driver or California Overnight pays for vehicles, equipment, and business expenses; 6. The length of time for which the services are to be performed; 7. The method of payment to drivers, whether by the hour or by the job; 8. Whether or not the work done by drivers is part of the regular business of California Overnight; 9. Whether or not the parties believe they are creating an employer-employee relationship; 10. The driver's opportunity for entrepreneurial profit or loss depending upon his/her managerial skill; 11. The drivers' use of helpers/replacements; and 12. The degree of permanence of the working relationship.
• "These individual factors cannot be applied mechanically as separate tests; they are intertwined and their weight depends often upon particular combinations."

In totality, listing these factors appropriately allowed the jury to apply the factors as it saw fit, and the findings were supported by adequate evidence. You can download the full text of the Christler opinion here in Word or PDF.

En banc review for Dukes v. Wal-Mart, Inc.

Dukes v. Wal-Mart, Inc. (9th Cir. 2007) 509 F.3d 1168 (one of very few pending cases to have an extensive wikipedia page) is no longer good law; the 9th Circuit is reviewing it en banc. The order provides:

Upon the vote of a majority of nonrecused active judges, it is ordered that this case be reheard en banc pursuant to Circuit Rule 35-3. The three-judge panel opinion shall not be cited as precedent by or to any court of the Ninth Circuit. Judges McKeown, Rawlinson and Bybee did not participate in the deliberations or vote in this case.

If the prior order permitting the case to proceed as a class action is upheld, the number of plaintiffs could approach two million.

Modification of Opinion in Lu v. Hawaiian Gardens Casino

The Second District Court of Appeal has modified its opinion in Lu v. Hawaiian Gardens Casino (2009) __ Cal.App.4th __ (Labor Code § 351 and Labor Code § 450 do not provide for a private right of action, but may serve as predicate statutes for suits under the unfair competition law). The modification does affect the judgment. The modification is as follows:

The opinion filed by this court on January 22, 2009 is hereby modified as follows:

On page 2, line three of the second full paragraph starting with “to sue, that they”, insert the word “may” before the word “nonetheless”.

On page 6, delete heading 1 and insert, “1.  Lu does not have a private right to sue directly under Labor Code sections 351 and 450 but said statutes may serve as predicates to causes of action under the UCL for violation thereof.”

On page 11, line one of the second full paragraph starting with “Nevertheless,” insert the word “possible” before the words “cause of action”.

On page 11, lines seven and eight of the second full paragraph, delete the sentence starting with “The UCL is a proper avenue”, and insert, “It therefore follows that sections 351 and 450 can serve as predicates for a UCL claim by Lu.”

On page 11, at the end of the second full paragraph, insert “We express no opinion about whether Lu’s UCL claim can withstand demurrer.  We simply hold that these statutes can serve as predicates to a UCL cause of action.”

On page 24, delete the first full sentence and insert, “The trial court’s order granting summary adjudication with respect to the UCL cause of action premised on a violation of Labor Code section 351 is reversed with directions to deny summary adjudication of that cause of action.”

The modifications affect the judgment.

We discussed the original opinion in a recent post found at this link.

Review Denied in Harper v 24 Hour Fitness

The Supreme Court has denied a petition for review in Harper v. 24 Hour Fitness, Inc. (2008) 167 Cal.App.4th 966, wherein the Court of Appeal reversed a decertification order. The reversal was based upon a holding that the need to individually examine each class member's records to determine whether he or she qualifies for inclusion in the class does not establish a lack of ascertainability or manageability or establish that common questions of fact or law do not predominate.

We discussed Harper v. 24 Hour Fitness, Inc. at length in a post last December.

Kullar v Foot Locker Remains Published

The Supreme Court has denied a depublication request in Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116 (trial courts must determine adequacy and fairness of a class action settlement agreement based upon admissible evidence presented to the court during the approval process). We discussed Kullar in a post last December.

Federal Courts on the Brinker Issues

As we wait for the California Supreme Court to decide Brinker Restaurant Corp. v. Superior Court (2008) 165 Cal.App.4th 25, we can assume with a high degree of certainty that any state court opinion dealing with provide/permit issues or meal/rest break certification orders will be reviewed as a companion case to Brinker. For the next few months, therefore, we will have only Cicairos v. Summit Logistics (2005) 133 Cal.App.4th 949 as controlling authority in Superior Court, but in U.S. District Court, judges are free to guess what they think the California Supreme Court would decide.** When interpreting state law, federal courts are bound by decisions of the state's highest court (In re Kirkland (9th Cir.1990) 915 F.2d 1236, 1238), but in the absence of such a decision, a federal court shall apply the rule that it believes the state supreme court would adopt if faced with the same issue. Arizona Electric Power Cooperative, Inc. v. Berkeley (9th Cir.1995) 59 F.3d 988, 991.

The "make available" and/or denied certification cases that reject or distinguish Cicairos include:

White v Starbucks (N.D. Cal. 2007) 497 F.Supp.2d 1080

Brown v FedEx (C.D. Cal.2008) 249 F.R.D. 580

Salazar v. Avis (S.D. Cal. 2008) 251 F.R.D. 529

Kenny v. Supercuts, Inc. (N.D. Cal 2008) 252 F.R.D. 641

Perez v. Safety-Kleen Systems, Inc. (N.D.Cal. 2008) 253 F.R.D. 508

Kimoto v. McDonald's Corps. (C.D.Cal. 2008) 2008 WL 4690536

Watson-Smith v. Spherion Pacific Workforce, LLC (N.D.Cal. 2008) 2008 WL 5221084

If you are aware of any others, please drop us an email or leave a comment and we will add them to the list. The opening brief in Brinker has been filed. 

** Well, maybe not entirely free to guess. As a reader points out, a Ninth Circuit case from Oregon holds that a federal court is obligated to follow the decisions of the state's intermediate appeallate courts, unless there is convincing evidence that the state supreme court would decide differently. Ryman v. Sears-Roebuck & Co. (9th Cir. 2007) 505 F.3d 993, 995. 

‘[W]here there is no convincing evidence that the state supreme court would decide differently, a federal court is obligated to follow the decisions of the state's intermediate appellate courts.’ ” Vestar Dev. II, LLC v. Gen. Dynamics Corp., 249 F.3d 958, 960 (9th Cir.2001) (quoting Lewis v. Tel. Employees Credit Union, 87 F.3d 1537, 1545 (9th Cir.1996) (internal quotation marks omitted)). The district court did not cite any evidence that the Oregon Supreme Court would disaffirm Yeager. It merely disagreed with Yeager. FN1 Because there is no evidence that the Oregon Supreme Court would have decided the OFLA issue differently, the district court erred in not applying the Yeager rule.FN2

FN1. We note that the district court did cite opinions by other federal district judges expressing their disagreement with the Yeager rule. The opinions of other federal judges on a question of state law do not constitute “convincing evidence that the state supreme court would decide [an issue] differently,” Vestar, 249 F.3d at 960, nor do those opinions contain any relevant “convincing evidence.”

FN2. Although not dispositive, we note that the Oregon Supreme Court declined to grant review of Yeager. See Yeager v. Providence Health Sys. Or., 337 Or. 658, 103 P.3d 641 (2004) (table).

Given the decision of the Supreme Court not to review Cicairos v. Summit Logistics (2005) 133 Cal.App.4th 949 and Bufil v. Dollar Financial Group, Inc. (2008) 162 Cal.App.4th 1193, and their decision to grant review in Brinker Restaurant Corp. v. Superior Court (2008) 165 Cal.App.4th 25, and Brinkley v. Public Storage, Inc. (2008) 167 Cal.App.4th 1278, in a case where the employer cannot clearly distinguish Cicairos, the District Court should feel obligated to follow it.

Motions to Stay Pending Brinker

We know of several judges who are encouraging parties to delay briefing schedules on class certifications pending the outcome of the Supreme Court's decision in Brinker v. Superior Court. The Court of Appeal has granted a request to stay the proceedings in Sepulveda v. Wal-Mart. Do any readers know of formal motions that have been brought in Superior Court to impose a stay pending the decision in Brinker v. Superior Court? If you do, leave a comment or send us an email.

5th Circuit Opinion on Class Action Tolling

In a recent 5th Circuit decision, the Court of Appeal reversed the dismissal of a labor law class action that was filed within the limitations period, as extended by a tolling period that continued throughout the entire proceedings, including appeal, of a prior, certified, class action. The opinion contains a good explanation of the development of the law regarding tolling while a class action in pending. In Taylor v. United Parcel Service, Inc. (9th Cir. 2008) __ F.3d __, 2008 WL 5401487, the plaintiff, a member of a certified labor law class that had been dismissed filed a new putative class action during the period in which the prior class action was on appeal. The District Court dismissed the new class action, holding that the claims were barred by various statutes of limitations.

Existing Supreme Court precedent holds that members of a certified class are to be treated essentially as named plaintiffs—and are bound by the resulting judgment—when they are adequately represented by the class representative and the other requirements of FRCP 23 are met. Matsushita Elec. Indus. Co. v. Epstein (1996) 516 U.S. 367, 395. The purpose of Rule 23 would be subverted by requiring a class member who learns of a pending suit involving a class of which he is a part to monitor that litigation to make certain that his interests are being protected. That responsibility does not end at the district court. "It is axiomatic that an appeal is a significant element in the judicial process.”

This rule does not apply equally to members of a putative class that has not been certified. See American Pipe & Construction Co. v. Utah (1974) 414 U.S. 538; Crown, Cork & Seal Co. v. Parker (1983) 462 U.S. 345. However, in Taylor, because the District Court certified the prior class action, the 5th Circuit held that American Pipe and Crown, Cork & Seal did not apply.

Because Taylor remained a member of a certified class while Morgan was on appeal, he was entitled to assume that the class representatives continued to represent him and protect his interests in appealing the order dismissing the class claims on the merits. This is consistent with the general rule that all members of a certified class enjoy the same rights as individually named plaintiffs in the suit. Thus, we conclude that Taylor’s claims were tolled until August 30, 2004, when the Eighth Circuit affirmed the district court’s order in Morgan. This action by the Court of Appeals was the final adverse determination of the claims of the certified class of which Taylor was a member.

As a result, the applicable statutes of limitation did not expire, the judgment of dismissal was reversed, and the case remanded to the District Court. You can download a copy of the Taylor decision in PDF at this link.

Certification Order in Polo Ralph Lauren Case

An interesting certification order was entered last year in a wage case entitled Otsuka v. Polo Ralph Lauren Corp. (N.D. Cal. 2008) 251 F.R.D. 439. For those of you who like to collect such orders, here is a link to the order by District Court Judge Susan Illston, who held that: (1) numerosity requirement was satisfied; (2) commonality requirement was satisfied with respect to main class; (3) commonality requirement was satisfied with respect to subclass that consisted of former sales associates who had been misclassified as exempt from premium overtime compensation; (4) commonality requirement was satisfied with respect to arrears subclass; (5) named plaintiffs who had been forced or coerced to skip rest breaks as part of culture established by employer that discouraged taking of rest breaks were typical of main class; (6) employer's payment of overtime to named plaintiffs did not prevent claims of those plaintiffs from being typical of absent class members; (7) disagreements that had arisen in past between class counsel and named plaintiff did not adversely affect adequacy of representation requirement; and (8) common questions predominated over individual questions.

Review Denied in Glaxosmithkline

This one escaped our radar initially. Last month, the California Supreme Court denied a petition for review in Johnson v. Glaxosmithkline (2008) 166 Cal.App.4th 1497, which we discussed last month in a post found at this link. The case involved the applicability of collateral estoppel to prior orders denying class certification in actions brought on behalf of a similar putative class.

Sandeep Baweja Withdraws

On Monday, Judge S. James Otero granted Sandeep Baweja's motion to withdraw as counsel for the class of employees from whom he took several million dollars in settlement money in the matter of Lubocki v. ZipRealty, Inc. In the order, Judge Otero expressly retains jurisdiction over Baweja.

On December 24, 2008, Baweja filed this Motion to Withdraw as Counsel for David Lubocki, et al. pursuant to California Rules of Professional Conduct 3-300 and 3-310. On December 30, 2008, this Court sent letters to Sal Hernandez, Assistant Director in Charge, FBI Los Angeles; Thomas P. O'Brien, United States Attorney; William J. Bratton, Chief of the Los Angeles Police Department; Steve Cooley, Los Angeles County District Attorney; Scott Drexel, Chief Trial Counsel of the State Bar of California; and the Standing Committee on Discipline for the Central District of California, notifying them of Baweja's admissions.

The order declares, quite matter-of-factly, that the court grants the motion because Baweja's interests are now adverse to his clients.

In secretly taking and investing $2.72 million of the class settlement funds, without notifying or seeking the permission of class members, Baweja acquired an interest adverse to his clients without their informed consent in violation of California Rule of Professional Conduct 3-300. See Connor, 791 P.2d at 317; Cal. R. Prof'l Conduct 3-300; Baweja Decl. ¶ 5. Because he currently owes his clients approximately $2 million, his own interests are likely to conflict with those of his clients and, thus, he cannot fulfill his duty of absolute and undivided loyalty to his clients.

Ernest J. Francheschi, Jr., who has not been accused of any wrongdoing, remains as class counsel "pending this Court's decision on any objection to his representation." The next status conference in the case is set for April 27.

We discussed the case in a post earlier this month, found at this link.

Unconscionable Contract Terms, Without Actual Damage, Do Not Bestow Standing

Has a person suffered “damage” within the meaning of the Consumer Legal Remedies Act (Civil Code § 1780(a)), such as to allow that person to bring an action under the act, if that person is a party to an agreement containing an unconscionable term, but no effort has been made to enforce the unconscionable term? No; and without such damage, a person lacks standing to bring any action, including one for declaratory relief. Meyer v. Sprint Sprectrum L.P. (2009) __ Cal.4th __.

In this case, plaintiffs sued defendant cellular telephone company alleging that its arbitration agreement and other remedial provisions were unconscionable, although plaintiffs did not otherwise allege that these provisions had been enforced against them or caused them damage. There are two questions before us. First, whether under these circumstances, a plaintiff may obtain injunctive relief to compel the removal of the allegedly unconscionable provisions under the California Consumer Legal Remedies Act (CLRA; Civ. Code, § 1750 et seq.). Second, whether a plaintiff may obtain declaratory relief pursuant to Code of Civil Procedure section 1060 to declare these provisions unlawful and unenforceable.

We conclude that a plaintiff has no standing to sue under the CLRA without some allegation that he or she has been damaged by an alleged unlawful practice, an allegation plaintiffs do not sufficiently make here. Moreover, we conclude the trial court did not abuse its discretion in ruling that declaratory relief was not appropriate under these circumstances. We therefore uphold the Court of Appeal’s judgment affirming the trial court’s order sustaining a demurrer to plaintiffs’ complaint.

You can download the opinion in Meyer v. Sprint Sprectrum L.P. here in PDF or Word format. The opinion has little applicability to wage-and-hour class actions or labor law claims brought under the UCL, but we've been following it, so we followed it to its conclusion.

Release Bars PAGA Claims, but Not Subsequent Claims

A prior release of various labor code claims might preclude later actions brought under the PAGA for the same underlying violations, but cannot preclude subsequent actions based upon continuing or repeated violations that occur after the release date. Deleon v. Verizon Wireless (2009) __ Cal.App.4th __.

Saul Deleon, on behalf of himself and other aggrieved employees, brought this action under the Labor Code Private Attorneys General Act (Labor Code § 2698) against AirTouch Cellular, doing business as Verizon Wireless, alleging various Labor Code violations. The trial court sustained without leave to amend the demurrer brought by Verizon Wireless ruling that Deleon’s lawsuit was barred by the doctrine of res judicata to the extent Deleon seeks relief on behalf of class members who settled a prior class action against Verizon Wireless that adjudicated the same claims. While we agree with the trial court’s analysis, we conclude that it abused its discretion in denying Deleon leave to amend to state claims that accrued after the date of the earlier action. Accordingly, we reverse.

In 2006, a class was certified, for settlement purposes, comprising “all individuals who worked for Verizon Wireless as an hourly commissioned sales employee ... who were subject at any time during the Class Period to Verizon Wireless’ policy providing that sales commission advances are not earned if the customer cancelled service for any reason within 365 days...." The class period was from March 6, 1999 to April 1, 2006. Class members who did not opt out released Verizon from all “Released Claims,” which were defined to include

all claims, actions, suits, causes of action, damages whenever incurred, liabilities of any nature whatsoever, including penalties arising out of “any conduct, events, or transactions occurring during the class period” that were alleged or which were required to have been alleged in the litigation under the doctrine of compulsory joinder in the prior suit.

In exchange for this release, Verizon agreed to pay a maximum settlement of $5.2 million. Deleon and a few others opted out of the settlement. Deleon then brought a complaint under the PAGA on essentially the same factual grounds as the original lawsuit. Deleon contended that the prior action made no PAGA allegations and “hence Plaintiff and the aggrieved employees are entitled to recover the civil penalties available under PAGA.” Verizon demurred, asserting res judicata.

Deleon opposed the motion “for one simple reason,” namely, that the element of privity was lacking. According to Deleon, the State or the Attorney General is the “real party in interest” in a PAGA action, not the employees on whose behalf the PAGA action is brought. Hence, the question is not whether he as private attorney general is in privity with the Evenson plaintiffs, but whether the State is in privity with the Evenson plaintiffs, Deleon reasoned. Also, Deleon argued that the Evenson plaintiffs had never exhausted the administrative prerequisites to sue under PAGA, and so unlike he, they were never authorized to pursue their action on behalf of the State

Next, after assuming the State is the interested party, Deleon argues that the State could not be in privity with the Evenson plaintiffs because Evenson made no attempt to demonstrate compliance with PAGA’s prerequisites. This same contention was rejected by the Federal District Court in Waisbein v. UBS Financial Services, Inc. (N.D.Cal. Dec. 5, 2007, No. C-07-2328) 2007 WL 4287334. There, the plaintiffs filed a prior class action against UBS for violations of various Labor Code provisions and pursuant to PAGA. In the ensuing settlement, the class released UBS for the state law claims. (Id. at p. *1.) As did Deleon here, Waisbein opted out of the class and filed his action against UBS on behalf of himself and “ ‘other aggrieved employees’ ” bringing, among other things, PAGA claims for many similar Labor Code violations. (Ibid.)

The Court of Appeal rejected Deleon's arguments concerning the PAGA claims, but held that Deleon must be given the opportunity to amend his complaint to allege violations of the Labor Code that accrued after the Evenson release period. Therefore, the judgment is reversed and remanded to allow Deleon to amend his complaint to allege violations that occurred after April 1, 2006. Deleon may continue to bring this lawsuit on behalf of himself and those Evenson plaintiffs who opted out of the Evenson settlement.

You can download the full text of Deleon here in PDF or Word format.

Cundiff Remains Published

The Supreme Court of California has denied a depublication request by California Employment Law Council in Cundiff v. Verizon California, Inc. (2008) 167 Cal.App.4th 718, a case concerning Code of Civil Procedure § 384 and the disposition of unpaid residuals in claims-made settlements in class action lawsuits. We mentioned the case in a post earlier this month.

Tip Pooling and Private Rights of Action

Labor Code § 351 does not prohibit mandatory tip pooling in California casinos. Labor Code § 351 and Labor Code § 450 do not provide for a private right of action, but either may serve as predicates for suits under the unfair competition law (Business & Professions Code § 17200). Lu v. Hawaiian Gardens Casino (2009) __ Cal.App.4th __. Therefore, most of the trial court's order granting summary judgment of this casino worker wage-and-hour class action is upheld.

A triable factual issue about whether some tip pool recipients are “agents” in contravention of section 351 precludes summary judgment of the UCL cause of action based on that statute only. In all other respects, summary judgment was properly granted. Accordingly, we affirm the judgment in part and reverse it in part.

There was a prior District Court case holding that Labor Code § 351 does not contain a private right of action. Matoff v. Brinker Restaurant Corp. (C.D.Cal. 2006) 439 F.Supp.2d 1035. Labor Code § 351 reads:

“No employer or agent shall collect, take, or receive any gratuity or a part thereof that is paid, given to, or left for an employee by a patron, or deduct any amount from wages due an employee on account of a gratuity, or require an employee to credit the amount, or any part thereof, of a gratuity against and as a part of the wages due the employee from the employer. Every gratuity is hereby declared to be the sole property of the employee or employees to whom it was paid, given, or left for. An employer that permits patrons to pay gratuities by credit card shall pay the employees the full amount of the gratuity that the patron indicated on the credit card slip, without any deductions for any credit card payment processing fees or costs that may be charged to the employer by the credit card company. Payment of gratuities made by patrons using credit cards shall be made to the employees not later than the next regular payday following the date the patron authorized the credit card payment.”

Labor Code § 450 reads, in relevant part,

“No employer, or agent or officer thereof, or other person, may compel or coerce any employee, or applicant for employment, to patronize his or her employer, or any other person, in the purchase of any thing of value.”

We still believe that there is a private right of action under Labor Code § 450 as it applies to the compelled purchase of clothing that constitutes a uniform. See Department of Industrial Relations v. UI Video Stores, Inc. (1997) 55 Cal.App.4th 1084, 1088, 1091-1092 (where the employer requires its employees to wear uniforms at work, the employer must furnish the uniform and pay for its upkeep; these payments are "wages." 8 CCR § 11070, ¶9(A).) There is clearly a private right of action to recover wages. Labor Code § 218.

You can read the entire text of Lu v. Hawaiian Gardens Casino here in PDF or Word format.

Modification Upon Rehearing in Marin v. Costco

The Second District Court of Appeal has modified its opinion and denied rehearing in Marin v. Costco Wholesale Corp. (2008) 169 Cal.App.4th 804. The modification does not change the judgment. The modification is as follows:

It is ordered that the opinion filed herein on December 23 2008, be modified as follows:

1. On page 13, the second full paragraph is modified to read: In sum, no California court decision, statute, or regulation governs bonus overtime, the DLSE Manual sections on the subject do not have the force of law, and the DLSE advice letters on the subject are not on point. Thus, there is no controlling California authority apart from the directive that overtime hours be compensated at a rate of no less than one and one-half times the regular rate of pay. (Lab. Code, § 510, subd. (a).) In deciding whether defendant’s bonus plan fulfills that directive, we are persuaded that the DLSE Manual provisions for overtime on production bonuses set forth a valid formula. (See Gattuso v. Harte-Hanks Shoppers, Inc. (2007) 42 Cal.4th 554, 563 [court may adopt a DLSE statutory interpretation embodied in a void regulation if it independently determines that the interpretation is correct].) We conclude that defendant’s plan is consistent with that formula, and thus that the plan does not violate California law. 
2. On page 14, the third sentence in the first full paragraph is modified to read as follows (the citation following the sentence is unchanged): Therefore, as one commentator has observed, overtime on a bonus based on hours worked should be calculated in the same manner as overtime on a bonus based on production, under the formula set forth in section 49.2.4 of the Manual.

There is no change in the judgment. The petition for rehearing is denied.

We discussed the original opinion in a recent post found at this link.

On-Call Gap Time Claims Can Be Certified as a Class

The Second District Court of Appeal has reversed Los Angeles County Superior Court Judge Michael L. Stern's order denying certification of a class action brought by a limousine driver against his employer for wage and hour violations arising from on-call time and related claims. In Ghazaryan v. Diva Limousine, Ltd. (2009) __ Cal.App.4th __,  the court held that a proposed class of all drivers employed by the company during a specific period was ascertainable; a sufficient community of interest existed for class certification; and that a class action was the superior method for resolving the dispute.

Diva operates a limousine service in the Greater Los Angeles area. At the time Ghazaryan filed his class certification motion in May 2006, Diva indicated it had employed approximately 190 drivers during the previous four years; approximately 100 still worked for the company. On any given day Diva places between 40 to 45 drivers in the field, and those drivers are dispatched on 140 to 150 trips or runs. However, the number of trips can fluctuate between 100 on a slow day and more than 200 on days when special events occur (for example, the Academy Awards). Typically, Diva notifies drivers of their first few assignments before their shift begins in part to allow them to plan their gap time. Approximately 75 percent of Diva's drivers have permission to take their Diva vehicles home and commute to their first run using their Diva vehicles. After these initial runs have been completed, drivers are assigned by the dispatcher to additional trips according to location, availability and fairness among drivers. On a busy day a driver may receive six to eight assignments. On a slow day that number often falls below five trips. Drivers have no way of predicting the length of any particular period of gap time although, on occasion, dispatchers may accommodate requests to schedule assignments around the drivers' personal appointments. According to anecdotal and statistical estimates submitted by both sides, it is clear drivers were placed on-call daily for substantial periods of time.
...
Ghazaryan filed his lawsuit in May 2006 alleging Diva by its practice of paying drivers by the job, not by the hour, had failed to pay earned wages and overtime or to provide required rest breaks and meal periods in violation of multiple provisions of the Labor Code and implementing administrative regulations. He further also alleged Diva had engaged in unlawful business practices under Business and Professions Code section 17200 et seq. Although Ghazaryan's complaint originally identified one broad class with four subclasses, his motion sought to certify only two overlapping subclasses: (1) based on Diva's alleged failure to pay earned overtime and straight time, “All current and former employees of Defendant who worked as Limousine Drivers during the period of May 10, 2002 to the present”; and (2) targeting Diva's failure to provide mandatory rest breaks, “All current and former employees of Defendant who work as Limousine Drivers at any time during the period of May 10, 2002 to the present, worked one or more four-hour increments of time without being given a rest break for each such increment and who were not properly compensated therefor[ ].”
...
Diva opposed class certification principally because of the purported difficulties in identifying eligible members of the class and assessing the validity of Diva's compensation policy as applied to different drivers who may or may not have used their gap time for personal pursuits. Diva explained it has several categories of drivers, some of whom are paid for gap time. Thus, dedicated event drivers, L'Ermitage Hotel drivers and organ transplant drivers are paid on a strictly hourly basis including any on-call time. Diva also submitted declarations from a number of drivers who typically use unpaid gap time for their own purposes, such as working out at the gym, napping or eating at home or running personal errands. Several of those drivers stated they are not in favor of Ghazaryan's lawsuit and do not want Diva to change the way it compensates its drivers.

The trial court found these declarations convincing and denied the motion on the ground certification would raise too many individualized issues.

Held: the trial court utilized improper criteria in analyzing the class certification request by evaluating class suitability as dependent on determination of the merits rather than evaluating whether the theory advanced by plaintiff was amenable to class treatment; and plaintiff proposed two classes which satisfied the ascertainability, community of interest and superiority of class treatment requirements. Reversed and remanded.

The court spent considerable time discussing the interpretation of the term “hours worked” under IWC Wage Order No. 9, which defined it as "time during which an employee is subject to the control of an employer, and includes all the time the employee is suffered or permitted to work, whether or not required to do so.” The court also considered two opinion letters from the Division of Labor Standards Enforcement ("DLSE").

The letter dated March 31, 1993, acknowledges the inquiry is “highly fact-driven,” but “[t]he bottom line consideration is the amount of ‘control’ exercised by the employer over the activities of the worker.... [I]mmediate control by the employer which is for the benefit of the employer must be compensated.” In a subsequent advisory letter dated December 28, 1998,, the DLSE summarized the factors relevant to this inquiry: “1. Whether there are excessive geographic restrictions on the employee's movements[;][¶] 2. Whether the frequency of calls is unduly restrictive[;][¶] 3. Whether a fixed time limit for response is unduly restrictive[;][¶] 4. Whether the on-call employee can easily trade his or her on-call responsibilities with another employee[;] and [¶] 5. Whether and to what extent the employee engages in personal activities during on-call periods.”

There is no question class treatment constitutes the superior mode of resolving Ghazaryan's claims in this action. Based on the evidence submitted by Diva in opposition to the motion, its compensation policy has been carefully drafted; and Diva very well may find its policy upheld as reasonable under the existing DLSE standard. We see no advantage to either party to resolution of this question on a piecemeal basis and agree with Ghazaryan such a prospect would jeopardize the ability of employees to find competent representation if restricted to their own individual claims. (See Harper v. 24 Hour Fitness (2008)167 Cal.App.4th 966, 976, 84 Cal.Rptr.3d 532.) In light of this conclusion, we need not accept Ghazaryan's invitation to decide whether a trial court has a duty to modify the class definition put forth by counsel for the putative class.

You can download the full text of Ghazaryan here in Word or PDF. Perhaps in the next appeal, we will get an interesting ruling on the merits, answering the question of whether an employer is obligated to pay an employee for such on-call time.

Crab Addison Adds to Line of "Opt-Out" Class Action Privacy Notice Cases

The Second District Court of Appeal has further clarified the broad discovery rights that class action litigants enjoy. In Crab Addison v. Superior Court (2008) 169 Cal.App.4th 958, the employer's tactics, after a wage-and-hour class action was filed, included having employees sign forms indicating whether or not they wanted their personal information disclosed to third parties. Not surprisingly, many employees chose the privacy option. This, argued the employer, meant that the plaintiffs could not have access to such personal data as the putative class members' contact information, because the completion of those forms gave the employees a "heightened expectation of privacy as to their contact information."

The trial court weighed the privacy interests of potential class members against the compelling need for discovery of their names and contact information, and found that plaintiffs were entitled to the requested information subject to an ‘opt-out’ notice. The employer sought a writ of mandate directing the trial court to vacate the two discovery orders that pertained to the issue. The Court of Appeal denied the petition. The primary issue on appeal was whether Puerto v. Superior Court (2008) 158 Cal.App.4th 1242 applied to the case against Crab Addison (CAI).

There are two significant differences between Puerto and the instant case. First, in Puerto, the employer voluntarily disclosed the identities of the witnesses but sought to protect addresses and telephone numbers. Here, CAI seeks to protect identities as well as addresses and telephone numbers. Second, in Puerto there was no release form like the one utilized by CAI. We attach no great significance to the fact that CAI did not voluntarily disclose the identities of the witnesses whose contact information it sought to protect. As noted in Pioneer Electronics (USA), Inc. v. Superior Court [(2007) 40 Cal.4th 360], at page 373, “[c]ontact information regarding the identity of potential class members is generally discoverable, so that the lead plaintiff may learn the names of other persons who might assist in prosecuting the case. [Citations.]
...
This brings us to the key question in this case: the effect of the release forms. CAI argues that these forms gave their employees a heightened expectation of privacy in their contact information, requiring that the contact information be given greater protection and making an “opt in” notice procedure proper. We are unconvinced by this argument. ... Gentry also highlights the dangers of placing in the employer’s hands the responsibility for notifying employees of the pending litigation and requiring employees to opt in to the litigation. Current employees may decline to opt in to the litigation for fear of retaliation by their employer. This in turn could immunize the employer from liability for violation of statutory wage and overtime requirements. This would violate the public policy protecting employee rights. The public policy concerns expressed in Gentry weigh against enforcing a release form that may have the effect of waiving an employee’s right to notice of a pending class action lawsuit concerning the employer’s alleged violations of overtime and wage statutes. Gentry did not stop its analysis with public policy concerns, however. ... The language of the release forms was not sufficient to apprise employees that by checking the “no” box they were declining to have their contact information released to “plaintiffs seeking relief for violations of employment laws in the workplace that they shared.” (Puerto v. Superior Court, supra, 158 Cal.App.4th at p. 1253.) The release forms stated that CAI “may be asked to provide such information in the context of legal proceedings, including class action lawsuits.” We do not believe that a lay employee reading this language would realize that the reference to “class action lawsuits” meant lawsuits intended to vindicate their rights, rather than lawsuits by third parties against CAI that would be of no benefit to the employees. In other words, any “heightened” expectation of privacy the employees may have does not extend to situations in which CAI is required by law to disclose their contact information, including in the course of litigation.

Furthermore, reading the note in the context of the release form as a whole, an employee reasonably would interpret the form to mean that checking the “no” box meant that CAI would not provide employee contact information to third parties seeking it for use “in the context of legal proceedings, including class action lawsuits,” unless compelled to do so by law. The trial court’s discovery order falls within this exception. Thus, the court followed Puerto and upheld the opt-out notice procedure.

The form, for what it's worth, reads as follows:

RELEASE OF CONTACT INFORMATION

From time to time, Joe’s Crab Shack (the “Company”) may be asked to provide your contact information, including your home address and telephone number, to third parties. The Company may be asked to provide such information in the context of legal proceedings, including class action lawsuits.

We understand that many employees may consider this information to be private and may not want it released. Accordingly, please indicate whether you consent to the disclosure of your contact information by marking the appropriate box.

‪___ No, I do not consent to the Company’s disclosure of my contact information to third parties.

___ Yes, I consent to the Company’s disclosure of my contact information to third parties.

___ I would like to be asked on a case-by-case basis whether I consent to the disclosure of my contact information to a particular third party, and my contact information should only be provided if I affirmatively consent in writing.

You can download the full text of Crab Addison here in PDF or Word format. A petition for rehearing is pending. A request for leave to seek a modification of the opinion was denied.

Unless we find something really interesting that we haven't seen before (perhaps a District Court or out-of-state decision), this is the last of the 2008 cases we'll be discussing. Next week, we'll start posting about the first half-dozen wage and hour cases of 2009.

Another Certification Denial Reversed With Instructions

Another trial court denial of class certification was reversed in Medrano v. Honda of North Hollywood (2008) 166 Cal.App.4th 89, a consumer case involving the sale of new and used Honda, Suzuki and Yamaha motorcycles, allegedly in violation of sections 11712.5 and 24014 of California’s Vehicle Code, which require sellers to attach a label, or “hang tag”, setting forth the manufacturer’s suggested retail price for the motorcycle and defendant’s added charges.

The class representative brought claims under California’s Unfair Business Practices Act and its Consumer Legal Remedies Act, seeking injunctive and restitutionary relief. The trial court denied class certification on the grounds that dealers are not obligated to attach hang tags unless they are supplied by the manufacturer, the sales agreement plaintiff signed set forth the dealer-added costs, putting her on notice of those costs, and the class was not ascertainable because defendant’s records did not indicate which motorcycles had hang tags attached and which did not.

Citing well-worn authorities, the Court of Appeal rejected each of the three bases. The defenses on the merits were not grounds for denial of certification, and on the ascertainability issue, a class is ascertainable if it identifies a group of unnamed plaintiffs by describing a set of common characteristics sufficient to allow a member of that group to identify himself or herself as having a right to recover based on the description. Bartold v. Glendale Federal Bank (2000) 81 Cal.App.4th 816, 828. Therefore, the order denying certification was reversed, and on remand, the trial court is directed to certify the class.

You can download the full text of the opinion here in PDF or Word format. A petition for review was denied by the Supreme Court.

Whereupon the District Court Dismisses All Remaining Claims

If the only claim invoking federal court jurisdiction fails, do not count on the court exercising supplemental jurisdiction over remaining state law claims. Rojas v. Brinderson Constructors Inc. (C.D. Cal. 2008). 567 F.Supp.2d 1205.

In Rojas, a wage and hour class action, the defendant moved for a dismissal under Rule 12(b)(6) on the plaintiff's Labor Code § 2810 claim, which the district court had previously dismissed with leave to amend. That claim was the only one, among plaintiff's six claims, over which the District Court had original jurisdiction. Judge Otis D. Wright II granted the motion, holding that the plaintiff failed to state a claim on which relief could be granted. That left nothing but five causes of action over which the U.S. District Court lacked original jurisdiction. "Where the federal head of jurisdiction has vanished from the case, and there has been no substantial commitment of judicial resources to the nonfederal claims, it is … akin to making the tail wag the dog for the District Court to retain jurisdiction." Murphy v. Kodz (9th Cir. 1965) 351 F.2d 163, 167-68. Therefore, the court declined to exercise supplemental jurisdiction over the state court claims, and the entire case was ordered dismissed.

Plaintiffs fail to state a claim under California Labor Code section 2810, and this sixth cause of action is hereby DISMISSED WITHOUT LEAVE TO AMEND. The court declines to exercise supplemental jurisdiction over the remaining state law claims against Brinderson and, accordingly, claims one through five are also DISMISSED. Brinderson’s motions to dismiss, stay and/or strike are all rendered MOOT.

You can download a copy of the Rojas order here in PDF.

Bonus Calculations and Regular Rates of Pay

Where a bonus payment is considered a part of the regular rate at which an employee is employed, it must be included in computing his regular hourly rate of pay and overtime compensation. No difficulty arises in computing overtime compensation if the bonus covers only one weekly pay period. The amount of the bonus is merely added to the other earnings of the employee (except statutory exclusions) and the total divided by total hours worked. Under many bonus plans, however, calculations of the bonus may necessarily be deferred over a period of time longer than a workweek. In such a case the employer may disregard the bonus in computing the regular hourly rate until such time as the amount of the bonus can be ascertained. Until that is done he may pay compensation for overtime at one and one-half times the hourly rate paid to the employee, exclusive of the bonus. When the amount of the bonus can be ascertained, it must be apportioned back over the workweeks of the period during which it may be said to have been earned. The employee must then receive an additional amount of compensation for each workweek that he worked overtime during the period equal to one-half of the hourly rate of pay allocable to the bonus for that week multiplied by the number of statutory overtime hours worked during the week. 29 C.F.R. § 778.209(a).

Applying that standard, the Court of Appeal in Marin v. Costco Wholesale Corp. (2008) 169 Cal.App.4th 804 reviewed the bonus/overtime payment plan of Costco, and reversed a $5.3 million class action judgment.

This case concerns the lawfulness of defendant Costco Wholesale Corporation’s formula for computing overtime compensation on semi-annual bonuses paid to hourly employees. The trial court determined that defendant’s bonus overtime formula for the class of employees who qualify for the maximum base bonus (plaintiffs) violates California law, and ordered use of a different formula.  We conclude that defendant’s formula violates neither California nor federal law, and reverse the judgment with directions to enter judgment for defendant.

The description of the bonus and overtime payment plan goes on for several pages. If you have a bonus/overtime case that could be affected by the holding in Marin v. Costco, you can download the full text of the opinion here in PDF or Word format. A petition for rehearing is pending. A petition for review would appear likely.

No Appeal of Class Certification Denial After You Settle

If you lose a summary adjudication motion and motion for class certification, you cannot settle all of your individual claims and stipulate to the entry of a judgment bawed upon that settlement while still preserving your right to appeal the summary adjudication and class certification issued. If you try, your appeal will be dismissed as moot. Larner v. L.A. Doctors Hosp. Assocs. (2008) 168 Cal.App.4th 1291.

Josephine Larner, a nurse, sued her former hospital employer for violation of overtime laws, purporting to represent a class of current and former nonexempt employees. The trial court granted in part the hospital’s motion for summary adjudication of Larner’s claim that the hospital failed to pay for overtime hours. Larner then amended her complaint, stating individual and class claims for failure to properly calculate overtime pay rates and for failure to keep accurate and complete wage records. The trial court denied Larner’s motion for class certification. The parties entered into a settlement agreement and stipulated to the entry of final judgment in favor of the hospital. Larner appeals both the summary adjudication of her overtime hours claim and the denial of her certification motion. We dismiss the appeal as moot. 

“Generally, courts decide only ‘actual controversies’ which will result in a judgment that offers relief to the parties. [Citations.] Thus, appellate courts as a rule will not render opinions on moot questions . . . . The policy behind this rule is that courts decide justiciable controversies and will normally not render advisory opinions. [Citations.] [¶] One such event occurring for which a reviewing court will dismiss an appeal is when the underlying claim is settled or compromised.” (Ebensteiner Co., Inc. v. Chadmar Group (2006) 143 Cal.App.4th 1174, 1178-1179.) When a case has settled, dismissal of the appeal is the appropriate disposition because “settlement operates as a merger and ban as to all preexisting claims and those alleged in the lawsuit that have been resolved.” (Id. at p. 1179, citing Armstrong v. Sacramento Valley R. Co. (1919) 179 Cal. 648, 651].)

This may not mean that a plaintiff cannot settle a case individually and still proceed with some classwide claims on behalf of others. See La Sala v. American Sav. & Loan Assn. (1971) 5 Cal.3d 864, 871. Individual relief to the named plaintiffs in a class action does not, in itself, render those plaintiffs unfit per se to represent the class. Kagan v. Gibraltar Sav. & Loan Assn. (1984) 35 Cal.3d 582, 594. A defendant’s offer to settle, by waiving its right to enforce a complained-of clause in a contract against class representatives, or by offering the named plaintiff reimbursement of fees the class action challenged as improperly deducted, does not necessarily end the class action. Even after an offer of individual relief, the named plaintiff may retain an interest in proceeding on behalf of the other members of the class who are similarly situated. If, because of such relief, the court concludes that the named plaintiff is no longer a suitable representative, the court should grant the plaintiff leave to amend the complaint to redefine the class, or add new class representatives, or both.

You just can't do it by stipulating to a final judgment on the settlement after losing your class certification motion, and then appealing, as they did here. You can download the full text of Larner here in PDF or Word format. 

Peculiar procedural detail: "After a number of continuances, the court set a final trial date of July 11, 2007 on Larner’s remaining claims. On May 23, 2007, Larner moved for certification of two separate classes, one for each of her two remaining issues: improper calculation of overtime rates and failure to keep accurate and complete wage records. The trial court denied the motion on June 20, 2007, because the motion was unduly tardy, because Larner’s claims were not typical of the proposed classes, and because the class definitions were overbroad." A certification motion set for hearing three weeks before trial? That must have been a nightmare.

California Labor Laws, Non-Residents and Work Outside California

Does the California Labor Code protect out-of-state residents who work in California? Can the California Unfair Competition Law be used as a long-arm statute to pursue remedies for FLSA violations that occur outside of California? Yes. And no. Non-Californians may invoke the Labor Code or the UCL for labor they perform in California, but cannot assert a cause of action under California’s UCL for violations of the FLSA which occurred outside the State of California. Sullivan v. Oracle Corp. (9th Cir. 2008) 547 F.3d 1177, 14 Wage & Hour Cas.2d (BNA) 321.

We reverse the district court’s grant of summary judgment on Plaintiffs’ first two claims. We hold that California’s Labor Code applies to work performed in California by nonresidents of California. We affirm the district court’s grant of summary judgment on Plaintiffs’ third claim. We hold that § 17200 does not apply to allegedly unlawful behavior occurring outside California causing injury to nonresidents of California.

You can download the full text of the case here in PDF.

More on Reversions and Claims-Made Settlements

Code of Civil Procedure § 384 governs the disposition of unpaid residuals in class action lawsuits. When a claims-made settlement results in some of the checks being returned as undeliverable, and some of the checks are never cashed, the unpaid funds constitute "unpaid residue" required to be paid under Code of Civil Procedure § 384 to "nonprofit organizations or foundations to support projects that will benefit the class or similarly situated persons," notwithstanding the claims-made nature of the settlement. Cundiff v. Verizon California, Inc. (2008) 167 Cal.App.4th 718.

In Cundiff, the parties reached an agreement for a claims-made settlement. Some of the class members submitted claims, but then did not receive or did not cash their settlement checks. At the end of the administration, more than $400,000 in funds remained undisbursed. Verizon wanted that money returned to Verizon, to be treated as if the intended recipient of the uncashed checks had never submitted a claim in the first place. Instead, the money must go to a charitible organization.

Consider the possibility, however, that in wage and hour class actions, a different rule may apply. Code of Civil Procedure § 1513 provides that

“Subject to Sections 1510 and 1511, the following property held or owing by a business association escheats to this state: … (g) Any wages or salaries that have remained unclaimed by the owner for more than one year after the wages or salaries become payable.”

Adhering to that provision, it would appear that any unclaimed checks in a wage and hour settlement should escheat to the State of California’s unclaimed property program, at least to the extent that the checks represented wages.

You can download a copy of Cundiff here in PDF or Word format. A depublication request was filed in December 2008 by the California Employment Law Council.

Supreme Court Grants Review in Brinkley v. Public Storage

A petition for review has been granted in Brinkley v. Public Storage, Inc. (2008) 167 Cal.App.4th 1278, the paystub violation and meal and rest break case that was published on October 28, 2008. As we predicted, the case was given a Rule 8.512(d) grant-and-hold review, and is now a companion case to Brinker Restaurant Corp. v. Superior Court (2008) 165 Cal.App.4th 25.

The petition for review is GRANTED. Further action in this matter is deferred pending consideration and disposition of a related issue in Brinker Restaurant Corp. v. Superior Court, S166350 (see Cal. Rules of Court, rule 8.512(d)(2)), or pending further order of the court. Submission of additional briefing, pursuant to California Rules of Court, rule 8.520, is deferred pending further order of the court.

George, C.J., was absent and did not participate. Votes: Corrigan, A.C.J., Kennard, Baxter, Werdegar, Chin and Moreno, JJ.

 We previously discussed Brinkley in posts that can be found here and here.

Brinkley is no longer good law and cannot be cited in California courts. California Rules of Court, Rule 8.115 prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, and Rule 8.1105(e)(1) provides that unless otherwise ordered, an opinion is no longer considered published if the Supreme Court grants review.

Briefing in the Brinker case gets underway next week.

Failure to Certify Justifies Dramatic Reduction of Fee Award

Here's the third of three 2008 cases we'll mention today that pertain to attorney's fees, which often present an important issue in wage and hour cases. This one comes from New York. In Barfield v. New York City Health and Hospitals Corp., Case No. 06-4137-cv, the Second Circuit upheld a District Court order cutting a $340,375 fee request to $49,889, because the attorney had been unable to certify an overtime collective action.

So how much did the plaintiff get in her individual case? You'll be surprised at how little it takes to justify the fee award.

Having concluded, as a matter of law, that Bellevue was liable under the FLSA for Barfield’s overtime compensation, the district court awarded her compensatory overtime in the amount of $887.25. See Barfield v. N.Y. City Health & Hosps. Corp., 2006 WL 2356152. Further, having observed that nothing in the record indicated that defendants had made any effort to ensure that their employment of temporary health care workers complied with the FLSA, see Barfield v. N.Y. City Health & Hosps. Corp., 432 F.Supp. 2d at 395, the district court ordered defendants to pay Barfield liquidated damages in an equal amount, for a total damages award of $1,774.50, See Barfield v. N.Y. City Health & Hosps. Corp., 2006 WL 2356152.

The plaintiff also recovered $6,565.79 in costs. With the $49,889 in attorney’s fees, the compensatory and liquidated damages and costs, plaintiff recovers a total award of $58,229.29. You can download the opinion in Barfield here in pdf. Curiously, the case was argued in December 2007, but the opinion was not issued until August 2008.

District Court Discounts Fee Request for Coupon Settlement

Here's the first of three 2008 cases we'll mention today that pertain to attorney's fees, which often present an important issue in wage and hour cases and class actions. In and unpublished case entitled Fernandez v. Victoria’s Secret Stores, LLC (CD Cal. 2008) Case 2:06-cv-04149-MMM-SH,  the U.S. District Court gave final approval to a wage and hour class action settlement in a case against Victoria’s Secret stores, alleging a failure to pay wages, unfair trade practices and unfair competition, and conversion of wages. The basic underlying claim was the the company required job applicants to participate in a sales tryout during which they are trained and directed to work in Victoria’s Secret stores without pay.

The settlement included payment to class members in the form of $67.50 in store gift cards ("Each class member who submits a valid claim form will receive a gift card from Victoria’s Secret in the amount of $67.50. This gift card will not expire, will be freely transferrable, and can be used to purchase products sold at any Victoria’s Secret store or online."). The agreement calls for Victoria’s Secret to pay up to a maximum of $10 million, with $3.5 million going toward attorney fees. Because the settlement involved gift cards, the court reduced the actual cash value of the settlement to $8.5 million. At that amount, the attorney fee request represented 39.4% of the total settlement compensation. The court found this to be too high, and cut the fees to $2.9 million, or 34% of the value of the settlement. The amount reflected a lodestar multiplier of 1.82.

It is quite uncommon to see "coupon settlement" in a wage and hour case, particularly a case that was removed from Superior Court under CAFA. The only kind of wage and hour case in which this is common is when the claims include "wardrobing" claims, whereby clothing stores (Gap, Polo, J. Jill, Chico's, etc.) require their employees to buy clothes from their employer. We've had restaurants offer food coupons as part of meal and rest break settlements, but we've never accepted such offers.

The order also reflects an interesting tactic the class counsel used to increase notice. In additional to mailings to 77,411 class members, a notice was published in five major California newspapers and a Facebook flyer was also made available to visitors at Facebook.com. "According to Facebook, the flier was viewed 584,000 times." Approximately 4.4% of the notices were returned as undeliverable. There were 7,280 timely claim forms, a 9.4% response rate. There were 29 opt-outs and three objectors, one of whom objected because she felt she had been treated well as a Victoria’s Secret employee and would like to be rehired.

You can download the order here.

The Thelen WARN Act Class Action

We got a copy of the WARN Act class action complaint against Thelen. The case is entitled Bergman v. Thelen LLP et al., U.S District Court case no. 3:2008cv05322, filed: November 24, 2008, assigned to Magistrate Judge Elizabeth D. Laporte. The complaint alleges causes of action for violation of the WARN Act, breach of contract and promisory estoppel. The first case management conference is set for March 3, 2009.

He Did WHAT With The Settlement Money?

We were shocked by this story about Sandeep Baweja, an Irvine attorney who admits he stole most of the money from a $3.55 million wage and hour class action settlement in a case against ZipRealty. Lubocki, et al. v. ZipRealty, Inc., Case No. CV 07 2959 SJO (JCX) (C.D. Cal.)

As resumes and accomplishments go, Irvine attorney Sandeep Baweja was a superstar. Then, in the span of a few months this year, he threw it all away. In an unfolding case that has stunned colleagues, Baweja, 38, has admitted to burning through almost all of a $2.7-million settlement that was supposed to be shared by about 1,000 plaintiffs he represented in a class-action labor lawsuit. In legal filings, Baweja cites his inexperience as a stock market investor and this year's market freefall for the massive losses — money he had no right to transfer without court approval, according to legal documents.

We'd never met or heard of him, but apparently "superstar" Baweja is a ten year lawyer, active in politics and civic matters. And apparently, ZipRealty and/or the claims administrator Garden City Group released all of the settlement money to Baweja, who then spent several months playing the stock market with the money. Unfortunately for Baweja and his clients, mid-2008 was a bad time to be playing the stock market. He blew all but $54,846.90 of the settlement money.

Baweja and his co-counsel have taken down most of their website about the ZipRealty case, and replaced it with an update informing class members that Baweja is withdrawing due to a conflict of interest.

On December 24, 2008, Mr. Baweja filed a Motion to Withdraw as counsel in Lubocki v. Zip Realty, Inc. Case No. CV 07-2959-SJO (JCx). Mr. Baweja is asking to be removed as class counsel due to a conflict of interest. All class members should expect to receive a letter explaining the basis of the conflict of interest, with a copy of the Motion to Withdraw. The hearing on the Motion to Withdraw is currently set for January 26, 2009.

That motion will be granted. He also sent an email to class members that same day, confessing what he had done with their money. For a cached version of the site, check here. For a copy of the class notice, check out this blog post. There is no evidence that Ernest J. Franceschi or any of the other lawyers involved in the case played any role in the disappearance of the money.

What's next? A new class action to represent the class members in the pursuit of their class settlement money. Disciplinary proceedings are also a certainty. Playing with and losing your clients' money is about as serious a violation as a lawyer can commit. As one lawyer asked about the case and the rule Baweja violated put it this way: "That's Ethics 101." Actually, that's one you learn in kindergarten. Don't take what doesn't belong to you. Don't borrow without permission. You don't have to be a lawyer to know that.

On a side note, as further evidence that Avvo.com ratings are worthless, here's a link to his Avvo rating. "No ratings yet. ... We have not found any instances of professional misconduct for this lawyer." Perhaps when the angry clients and newspaper readers find out about Avvo, that will change. Baweja does have a wikipedia page now, though. Baweja was also the treasurer in Irvine for the Yes on Measure R and Yes on Measure S campaign committees. You can't help but wonder how clean those campaign accounts were kept.

Privacy Rights Do Not Trump Plaintiffs' Right to Statistical Data

In 2007, the California Supreme Court held in Pioneer Electronics (USA), Inc. v. Superior Court (2007) 40 Cal.4th 360, that a trial court has the discretion to authorize a pre-certification communication to members of a putative class in a consumer case, informing the putative class members that their names and addresses would be released to the attorneys for the putative class unless they affirmatively objected. Pioneer Electronics was quickly applied to a wage and hour case in Belaire-West Landscape, Inc. v. Superior Court (2007) 149 Cal.App.4th 554.

Since Belaire-West, there have been several cases strengthening the right to discovery and access to witnesses in class actions. The latest: Alch v. Superior Court (2008) 165 Cal.App.4th 1412, involving subpoenas to third parties. The need for balancing of privacy rights is not a sufficient ground to prevent plaintiffs from access to data necessary to their attempt to prove their case, and a statistical study need not be proven valid in advance simply because the underlying data is subject to privacy claims.

Television writers filed class action lawsuits against studios, networks, production companies and talent agencies, asserting an industry-wide pattern and practice of age discrimination. The writers served subpoenas on third parties, including the Writers Guild of America, seeking data on Writers Guild members from which they could prepare a statistical analysis to support their claims of age discrimination. A privacy notice was sent to 47,000 Writers Guild members, advising them of their right to object to disclosure of personal information on privacy grounds. Some 7,700 individuals filed objections. The writers moved to overrule the objections. The trial court sustained the objections in their entirety. The writers sought a writ directing the trial court to vacate its order and allow access to certain of the requested information, arguing the information was critical to proving their claims and privacy concerns were minimal. We grant the writ petition.

Thus, notwithstanding the privacy objections of the members, the plaintiffs get work history information and demographic data. You can download the full text of Alch here in PDF or MS Word format. A petition for review was denied.

Denial of Class Certification Reversed After Trial Court Restricted Access to Class Member Data

A trial court order denying class certification must be reversed if the trial court refused to allow discovery of class member identity and contact information. Lee v. Dynamex (2008) 166 Cal.App.4th 1325. Following the trend that began with Pioneer Electronics (USA), Inc. v. Superior Court (2007) 40 Cal.4th 360, the Courts of Appeal are leaving no doubt that denying information to class representatives and their counsel cannot be used as a means to defeat class certification. 

After first denying Lee’s motion to compel Dynamex to identify and provide contact information for potential putative class members, the trial court denied Lee’s motion for class certification. Because the trial court’s discovery ruling directly conflicts with the Supreme Court’s subsequent decision in Pioneer Electronics (USA), Inc. v. Superior Court (2007) 40 Cal.4th 360 (Pioneer), as well as our decisions in Belaire-West Landscape, Inc. v. Superior Court (2007) 149 Cal.App.4th 554 and Puerto v. Superior Court (2008) 158 Cal.App.4th 1242 (Puerto), and that ruling improperly interfered with Lee’s ability to establish the necessary elements for class certification, we reverse both orders and remand for further proceedings regarding class certification.

If you have discovery disputes pending in a putative class action, be sure to read Lee. You can download the full text of Lee at these links in PDF or MS Word format.

In light of this and the Alch case, which we discussed in today's first post, it would seem to us that delay (or hoping to capitalize upon an inexperienced class counsel's mistake) is the only benefit a defendant can hope to achieve by resisting plaintiffs' efforts to obtain putative class member contact information.

Court Approves Starbucks Mileage Settlement

U.S. District Judge Morrison C. England Jr. has approved a $3 million settlement between Starbucks and approximately 6,000 of its California shop managers, arising out of claims for reimbursement of travel expenses - mileage for business errands run using the employees' own vehicles. The settlement will net the average class member about $86. The class consists of managers, assistant managers and shift supervisors who worked in California Starbucks coffee shops between March 12, 2003, and March 19, 2008. Starbucks also agreed to change its policy to reimburse store managers for mileage expenses. The court also awarded an enhancement of $5,000 to class representative Jonelle Lewis.

Reversing Denials of Class Certification in the 9th Circuit

The trend toward reversing certification decisions on appeal is no longer limited to state courts in California. If you have a certification order up on appeal in the Ninth Circuit, you need to read Parra v. Bashas', Inc. (9th Cir. 2008) 536 F.3d 975. The Ninth Circuit has repeatedly affirmed commonality findings in employment cases (Dukes v. Wal-Mart, Inc. (9th Cir. 2007) 474 F.3d 1214), but the converse was not true. In fact, until this year, the Ninth Circuit had never reversed a district court finding that commonality was lacking in an employment suit. They did, however, in Parra, wherein the Ninth Circuit held that where the denial of certification was predicated on lack of commonality, and commonality is apparent from the record, District Court’s order denying class certification in a pay discrimination class action is an abuse of discretion and must be reversed.

[T]he Plaintiffs here establish commonality even though their individual factual situations differ because they all seek a common legal remedy for a common wrong. Plaintiffs here not only presented evidence of discriminatory pay scales, but also provided statistical and anecdotal evidence of discrimination by Bashas’, Inc. These pay scales were common for all Bashas’, Inc. employees and provided for different pay for similar jobs based only on the store where the employee worked. The proposed class here shares the alleged discriminatory pay scales of Bashas’, Inc. The class definition seeks to reach those Hispanic employees who suffered past discrimination under these pay scales.

The defendant argued that "the difficulty in redressing the harm and calculating the various pay disparities for the different employment positions precludes class certification." The Ninth Circuit disagreed. "We have previously held that classes with far more complex remedies can seek redress in the form of a class action. ... The claimed difficulties in the calculations of damages, as they affected the various class members, do not preclude class certification." (citing Staton v. Boeing Co. (9th Cir. 2003) 327 F.3d 938).

Back to the District Court.

Wal-Mart Settles 63 Wage and Hour Class Actions

The nation's largest retailer announced yesterday that it will pay up to $640 million to settle 63 class action wage and hour lawsuits across the country, some of which date back to 2000. Not among the cases settled: Savaglio v. Wal-Mart Stores, Inc., which we previously discussed in posts you can find at links here, here, here and here.

Rule 26 Disclosures Required for Opt-In Plaintiffs in Collective Actions

Plaintiffs who opt-in during a collective action under the FLSA must disclose their computation of damages under Rule 26(a), just as any other plaintiff must, or risk exclusion of such evidence at trial. Hoffman v. Construction Protective Services, Inc. (9th Cir. 2008) 541 F.3d 1175.

The trial court certified an FLSA collective action, but there was no pre-trial disclosure of damage calculations for the individual opt-in plaintiffs. At trial, the court excluded all evidence of damage for the opt-ins, but allowed evidence regarding claims of the named plaintiffs. The class appealed the exclusion of damages evidence and an award of attorney fees. The Ninth Circuit affirmed.

Don't Forget To Give Notice of Your CAFA Settlements

The Class Action Fairness Act of 2005 provides, at 28 U.S.C.A. § 1715(b), for notice of class action settlements to be given by the defendant to the appropriate federal and state attorneys:

In General.— Not later than 10 days after a proposed settlement of a class action is filed in court, each defendant that is participating in the proposed settlement shall serve upon the appropriate State official of each State in which a class member resides and the appropriate Federal official, a notice of the proposed settlement consisting of—

(1) a copy of the complaint and any materials filed with the complaint and any amended complaints (except such materials shall not be required to be served if such materials are made electronically available through the Internet and such service includes notice of how to electronically access such material);

(2) notice of any scheduled judicial hearing in the class action;

(3) any proposed or final notification to class members of—

(A) (i) the members’ rights to request exclusion from the class action; or

       (ii) if no right to request exclusion exists, a statement that no such right exists; and

(B) a proposed settlement of a class action;

(4) any proposed or final class action settlement;

(5) any settlement or other agreement contemporaneously made between class counsel and counsel for the defendants;

(6) any final judgment or notice of dismissal;

(7)

(A) if feasible, the names of class members who reside in each State and the estimated proportionate share of the claims of such members to the entire settlement to that State’s appropriate State official; or

(B) if the provision of information under subparagraph (A) is not feasible, a reasonable estimate of the number of class members residing in each State and the estimated proportionate share of the claims of such members to the entire settlement; and

(8) any written judicial opinion relating to the materials described under subparagraphs (3) through (6).

An order giving final approval of a proposed settlement may not be issued earlier than 90 days after the later of the dates on which the appropriate federal official and the appropriate state official are served with the required notice. 28 U.S.C.A. § 1715(d). If the notices are not provided, a class member may choose not to be bound by a settlement agreement or consent decree in a class action. Take it from a defense attorney whom we will not name: This is one of those many lessons in life that are best learned by observing the mistakes of others, rather than learning from one's own mistakes.

WARN Act Class Action Filed Against Heller Ehrman

A group of former Heller, Ehrman employees have filed a class action lawsuit against the firm under the WARN Act (29 U.S.C. § 2101) and the California WARN Act (Labor Code § 1400)  Werth v. Heller, Ehrman, White, & McAuliffe LLP (N.D. Cal., Case No. C084799). The complaint alleges, among other things, that the firm conducted a mass layoff without providing sixty days advance written notice. We hear that a similar complaint has been filed against Thelen, but we haven't seen the complaint yet.

 

Objections to the $303 Million GM Settlement

Personally, we think getting $303 million from a company that might not exist in six months is a great result, and if the large team of lawyers from five firms who chased that result for the past three years, with the risk that they might get nothing for their 25,000 hours of work, might end up with 19% of such an all-cash settlement (roughly equivalent to the cost of two to three very good pitchers winning about 20 games each at the major league level), the shareholders should be pleased that their nickel per share is getting a 400% return on those attorney's fee expenses.

Not everyone would agree with us, however. To some, $303 million now qualifies as a "nuisance settlement to avoid further litigation" that reaps "minimal benefit" for class members. A judge will decide who is right at a hearing on Monday December 22.

Kullar v. Foot Locker: Objectors Must Be Given Access to Settlement Data

Trial courts must determine the fairness of a class action settlement agreement based upon admissible evidence presented to the court during the approval process. Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116.

Objector Crystal Echeverria and two other objectors appeal from a judgment approving the terms of a settlement agreement entered in this class action against defendant Foot Locker Retail, Inc. (Foot Locker). They contend the trial court erred in finding the terms of the settlement to be fair, reasonable and adequate without any evidence of the amount to which class members would be entitled if they prevailed in the litigation, and without any basis to evaluate the reasonableness of the agreed recovery. The settlement was reached in arms-length negotiations between competent counsel with the assistance of an experienced mediator and may well, in fact, be entirely reasonable in view of the strength of the claims and defenses and the cost and risks of further litigation. Nonetheless, we agree with objectors that the court bears the ultimate responsibility to ensure the reasonableness of the settlement terms. Although many factors must be considered in making this determination, and the court is not required to decide the ultimate merits of the class members’ claims before approving a proposed settlement, an informed evaluation cannot be made without an understanding of the amount that is in controversy and the realistic range of outcomes of the litigation. It is possible that the data necessary to make such an evaluation in this case was given to the trial court during informal discussions with counsel, but no such information appears in the record. Therefore, we must vacate the order approving the settlement and remand the matter to permit the trial court to reconsider the fairness and adequacy of the settlement in light of such additional information as the parties may present concerning the value of the class members’ claims should they prevail in the litigation and the likelihood of their so prevailing.

The approval was reversed on appeal because the trial court and the objectors were not given sufficient information with which to evaluate the fairness of the settlement.

More fundamentally, neither Dunk, 7-Eleven, nor any other case suggests that the court may determine the adequacy of a class action settlement without independently satisfying itself that the consideration being received for the release of the class members’ claims is reasonable in light of the strengths and weaknesses of the claims and the risks of the particular litigation. The court undoubtedly should give considerable weight to the competency and integrity of counsel and the involvement of a neutral mediator in assuring itself that a settlement agreement represents an arm’s length transaction entered without self-dealing or other potential misconduct. While an agreement reached under these circumstances presumably will be fair to all concerned, particularly when few of the affected class members express objections, in the final analysis it is the court that bears the responsibility to ensure that the recovery represents a reasonable compromise, given the magnitude and apparent merit of the claims being released, discounted by the risks and expenses of attempting to establish and collect on those claims by pursuing the litigation. “The court has a fiduciary responsibility as guardians of the rights of the absentee class members when deciding whether to approve a settlement agreement.” (4 Newberg on Class Actions, supra, § 11.41 at p. 118; 7-Eleven, supra, 85 Cal.App.4th at p. 1151.) “The courts are supposed to be the guardians of the class.” (Dickerson, Class Actions: The Law of 50 States (2008 ed.) § 9.02[2], p. 9-6.)

On remand, the settling parties shall have the opportunity to supplement their showing in support of the settlement; the objectors will be permitted to renew their discovery requests, "which should not be denied simply because the requested information was disclosed during the mediation leading to the proposed settlement." The trial court will limit discovery in view of the context in which it is being requested, namely, to provide sufficient information to permit an intelligent evaluation of the terms on which the case is proposed to be settled. "The objecting parties should not be permitted to frustrate the mutual interest of the class members and the defendant to resolve the litigation promptly by conducting extended or unnecessary discovery." Thereafter, the trial court shall redetermine whether the proposed settlement is fair, adequate and reasonable.

The court may and undoubtedly should continue to place reliance on the competence and integrity of counsel, the involvement of a qualified mediator, and the paucity of objectors to the settlement. But the court must also receive and consider enough information about the nature and magnitude of the claims being settled, as well as the impediments to recovery, to make an independent assessment of the reasonableness of the terms to which the parties have agreed. We do not suggest that the court should attempt to decide the merits of the case or to substitute its evaluation of the most appropriate settlement for that of the attorneys. However, as the court does when it approves a settlement as in good faith under Code of Civil Procedure section 877.6, the court must at least satisfy itself that the class settlement is within the “ballpark” of reasonableness. (See Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985) 38 Cal.3d 488, 499-500.)
...
By remanding we do not suggest that the proposed settlement ultimately may not pass muster. We hold only that the trial court may not finally approve the settlement agreement until provided with sufficient information to assure itself that the terms of the agreement are indeed fair, adequate and reasonable.

We've seen Superior Court judges compare the "good faith settlement" standards under Tech-Bilt with the fairness analysis under Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794. After Kullar, we'll probably see more of that. The mediator in this case, by the way, was Mark Rudy. 

You can download the full text of Kullar here in PDF or MS Word format. If you handle wage and hour class actions in California, this is must-read material. 

A request for depublication has been filed with the Supreme Court.

Sometimes, The Objectors Just Cost Everyone Everything

Objectors sometimes fail to recognize that there are often very good reasons why class action settlements are lower than the amount each class member would receive in an individual trial with a favorable result. The risks are many: that the class would not be certified, or would be decertified after the initial certification; that the defendant could win on liability at trial, or before; that the defendant would go broke; that the damages would come in lower than expected; that the law will change while the case is pending. Sometimes, a bird in the hand is worth two a flock in the bush. There were a couple of interesting objection cases that came down recently, and we'll have a post on those soon, but first, we'd like to share this cautionary tale, as set forth in the very specialized blog Freelance Rights, published by one of the objectors in a case entitled Reed Elsevier Inc. v. Muchnick, which was known in the trial court as In re Freelance Literary Works in Electronic Databases Copyright Litigation.

This is a case that settled in 2005 for $11.8 million, and was approved in district court, but thrown out by the Second Circuit Court of Appeals last November. The objectors, led by Mr. Muchnick, challenged the terms of a global settlement of publishers’ alleged infringement of the works of freelance writers. The objectors appealed the trial court's approval of the settlement, and the Second Circuit invalidated the settlement, not on the basis of the merit arguments, but on the ground that a class action copyright settlement could not include the claims of copyright holders whose works were not formally registered with the Copyright Office. Thus, no one gets anything.

The U.S. Supreme Court is now considering a petition for writ of certioriari, and it was on the agenda on September 29, 2008, November 14, 2008, November 25, 2008, December 5, 2008, and again December 12, 2008. So far, no order has been entered.

One anonymous class member had this reaction:

The bottom line is that if Mr. Muchnick and the other objectors had not filed an appeal, the settlement would have been final and the claims paid. With the additional attorneys fees incurred through appeals the settlement now, as Mr. Muchnick phrased it, would indeed be worth "crumbs" even if the court grants Cert and the appeal is eventually denied. The objectors will tell you that they were against the settlement on principle. The truth is that they were greedy and felt the settlement was not enough. They envisioned the Second Circuit ruling in their favor and sending the case back to District Court for more negotiations and eventually more cash. Well it backfired. The court threw the entire case out on jurisdictional grounds, which could easily have been predicted by reading the federal code concerning copyright registration. Because of their greed, thousands of freelance writers will get zero for past works.

In full disclosure, I am a freelance newspaper writer who submitted thousands of columns over the years. If the Supreme Court does not overturn the Circuit Court's ruling, I stand to lose a great deal of money.

If the SCOTUS denies certiorari, as they usually do, the class member will be right. That'll be $11.8 million down the drain for the class members, the attorneys, and everyone except, of course, the defendants.

Always Disclose Fee Splitting Deals in Class Actions

A fee splitting agreement amongst class counsel must always be disclosed to the court as part of the class action settlement process. In Mark v. Spencer (2008) 166 Cal.App.4th 219, there was a legitimate fee splitting agreement, but it was not disclosed to the court. The court awarded attorney fees in conformity with the declarations, rather than the fee splitting agreement. The attorney who got less the agreement provided then sought to enforce the agreement, but was bound by the order establishing the distribution of fees.

Plaintiff Ronald H. Mark appeals from a judgment of dismissal entered after the trial court sustained a demurrer to his first amended complaint without leave to amend. The complaint sought enforcement of an agreement between Mark and defendant Jeffrey P. Spencer to divide fees awarded to them as cocounsel representing plaintiffs in an earlier class action lawsuit. Mark contends his failure to disclose the fee-splitting agreement to the court in the class action, as required by California Rules of Court, rule 3.769, did not preclude him from bringing a separate action to enforce the agreement.

We conclude the trial court did not err in sustaining the demurrer without leave to amend. Rule 3.769 was designed to protect class members from potential conflicts of interest with their attorneys by requiring the full disclosure of all fee agreements in any application for dismissal or settlement of a class action. Rule 3.769 would be effectively nullified if attorneys could conceal a fee-splitting agreement from the court in seeking approval of a class action settlement and later enforce the agreement in a separate action.

As a separate and independent basis for upholding the trial court's action, we conclude Mark's claims are barred by res judicata. Mark was provided a fair opportunity to litigate the fee-splitting agreement before the court in the class action. Because the class action court fully and finally determined the attorneys' respective entitlement to fees, Mark may not relitigate the issue here. We therefore affirm the judgment.

The pertinent facts: Mark brought Spencer in to help with a labor law class action against GNC (Capelouto v. General Nutrition Corp.), and the two attorneys agreed to split fees, along these terms: (a) Mark and Spencer would evenly split any attorney fees generated in the action; (b) the 50-50 split shall “be in effect even if counsel are required to submit fee applications individually”; (c) in the event “either attorney or firm fails to perform their reasonable share of the joint representation,” the parties “shall renegotiate the fee split set forth above”; (d) Mark and Spencer “will both have equal duties and responsibilities in the litigation . . .”; and (e)  their respective firms would split the costs evenly. The case settled, and the attorneys sought $600,000 in fees. At no time, in the filings or in open court, did the attorneys disclose the existence of the fee-splitting agreement.

Spencer appeared at the final fairness hearing; Mark, apparently, did not. Orange County Superior Court Judge Ronald Bauer entered an order approving attorney fees in the amount of $401,275.43 to Spencer and $76,470 to Mark, to be paid within 30 days. Mark then asked Spencer to honor the fee-splitting agreement by transferring enough money to make their receipt of fees equal. Spencer refused, and Mark responded by suing to enforce the fee-sharing agreement.

The morals of the story: (i) always disclose your fee-splitting agreement to the court, and make sure you ask that the court award the fees in accordance with that agreement; (ii) always personally attend the final fairness hearing, even if there will be another half-dozen attorneys there for the class; and (iii) be careful about entering into fee-splitting deals with Jeffrey Pincock Spencer.

After a minor modification to the opinion, a petition for review was filed, and on Wednesday, the Supreme Court denied review. You can download the full text of Mark v. Spencer here in PDF or MS Word format.

[Update: A representative of Mr. Spencer sought to comment upon our list of morals, but, as Typepad puts it, Some users are experiencing issues with the comment form on their weblogs. We are working on this currently, so we'll give him the ability to comment a different way:

Mr. Spencer's counsel, Jeffrey Wilens, responds.

I am Mr. Spencer's appellate counsel. Mr. Walsh's characterization of the facts of this lawsuit is a ridiculous distortion in a lame effort to be funny.  The fee agreement between Mark and Spencer required each side to do half of the work or the fee arrangement would be modified; it did not require each attorney to get paid equally under all circumstances.  Mark shirked his responsibilities (which was the opinion stated by Superior Court Judge Ronald L. Bauer).  He did not bother showing up at the first fees hearing or (after being put on notice his fees were in jeopardy) at the second hearing and ended up with a much lower fee award which also lowered the aggregate fee award.  In Judge Bauer's opinion, Mr. Mark's effort was "short of the mark."  Accordingly, Judge Bauer did not award much to Mark.

Here are the morals of the story.  Yes, attorneys should disclose a fee splitting agreement but should not expect it will necessarily be upheld.  Yes, attorneys should attend the hearing on their requess for fees, especially when the Judge states at the first hearing that the fees request is excessive.  Finally, attorneys should always take care drafting fee-splitting agreements with anyone but there was no call for the cheap shot against Mr. Spencer.  The fact is Mr. Spencer attempted to honor the fee splitting agreement by re-negotiating the allocation as contemplated in the agreement if both sides did not do equal amounts of work.  Mr. Mark refused to accept anything less than half of the fee even though Judge Bauer thought his work was not even worth 20 percent of the aggregate fee award.  Instead, Mr. Mark decided to sue, but he lost in the trial court and then in the appellate court.

We reply:

We did not characterize the facts, much less (with the exception of initially crediting Judge McEachen for the underlying fee order) distort them. We just pulled the facts from the appellate opinion. We did characterize the lessons to take from the case, but we were being more serious than Mr. Wilens assumes. We've had co-counsel arrangements go south, too, and we've always honored the fee split. We would have disclosed the arrangement to the court and requested that fees be awarded and divided evenly between the firms. If the case had originated with another lawyer, we wouldn't have ever considered aiming for a larger split. Obviously, the courts have determined that what Mr. Spencer did was lawful, but nonetheless, if we were entering into an agreement with an attorney we knew to hold such a different view of joint venturing cases, we'd be very careful about doing business with him.]

Settlement in OC Register's Wage & Hour Case

In our post earlier today regarding Freedom Communications, Inc. v. Superior Court (2008) 167 Cal.App.4th 150, we neglected to mention that the case settled recently.

The Orange County Register and the home delivery carriers who deliver the newspaper have agreed to a settlement of a class action lawsuit filed on behalf of those carriers. Through such settlement, The Register will pay to the class members not more than $22 million through a claims-made settlement process. The ultimate amount paid will be based on the number of claims submitted and validated through this process.

No amount has been set for Plaintiffs’ attorneys’ fees. It is up to the sound discretion of the trial court to determine the reasonable amount of such fees. Although Plaintiffs’ counsel is seeking $12 million in fees, it is by no means certain that the Court will award that amount, and it can award less.

The Register also changed the way it classifies its carriers some of its policies and practices regarding newspaper carriers.

Petition for Review Filed in Brinkley

A petition for review has been filed in Brinkley v. Public Storage, Inc. (2008) 167 Cal.App.4th 1278, the paystub violation and meal and rest break case that was published on October 28, 2008. We previously discussed Brinkley in posts that can be found here and here. We think that, even if there was no Brinker Restaurant Corp. v. Superior Court (2008) 165 Cal.App.4th 25, the Brinkley opinion's break with Cicairos v. Summit Logistics, Inc. (2005) 133 Cal.App.4th 949 would make a compelling case for Supreme Court review. Among other things, Brinkley draws the conclusion that it would be "impossible" for employers with large work forces to enforce meal breaks; that there is no requirement for employers to schedule breaks within the first five hours; and that employers only have to make breaks available, applying a standard that equates the "provide" language in the meal period regulations with the "permit and authorize" language of the rest period regulations.

You can download Brinkley here in pdf or MS Word format. The Supreme Court has 60 days from December 4, 2008, to decide whether to grant or deny review. Absent an order granting themselves another 30 days, which is somewhat unlikely in this case, that means that a decision on the petition for review can be expected on or before January 28, 2009. We expect the Supreme Court to issue a "grant and hold" review order, deeming this a related case to Brinker Restaurant Corp. v. Superior Court.

Harper v. 24 Hour Fitness - Individual Analysis Not Enough to Defeat Certification

The need to individually examine each class member's records to determine whether he or she qualifies for inclusion in the class does not establish a lack of ascertainability or manageability or establish that common questions of fact or law do not predominate, therefore, an order decertifying class was error and must be reversed. Harper v. 24 Hour Fitness, Inc. (2008) 167 Cal.App.4th 966.

Putative class representatives Bryan Harper and Mark Salzwedel appeal from the trial court’s order decertifying a limited class that had previously been recognized for their unfair competition claims under Business and Professions Code sections 17200 and 17500 (UCL claims) challenging a form contract 24 Hour Fitness, Inc. used to enroll new members. Because the trial court’s decertification order is largely predicated on its erroneous legal assumptions concerning the scope of relief available in an individual action under sections 17200 and 17500, we reverse.

If you prosecute wage and hour class actions, the heart of the opinion can be found here:

The other factor central to the trial court’s analysis, the ongoing difficulty in properly identifying the members of the certified class from 24 Hour Fitness’s records, may be considered as part of a properly conducted evaluation of the superiority of proceeding by class action. However, the need to individually examine each member’s contract to ultimately determine whether he or she qualifies for inclusion in the class does not, as suggested, demonstrate a lack of ascertainability or manageability or establish that common questions of fact or law do not predominate. (See Lee v. Dynamex, Inc. (2008) 166 Cal.App.4th 1325.) [fn. 5]

With respect to the difficulty in confirming the identity of all class members prior to a determination on the merits, Division One of this court recently affirmed certification of a class consisting of FedEx drivers over FedEx’s objection “the members of this class shifted ‘in and out, sometimes on a day-to-day basis.’” (Estrada v. FedEx Ground Package System, Inc. (2007) 154 Cal.App.4th 1, 14.) The court explained, “The class is ascertainable if it identifies a group of unnamed plaintiffs by describing a set of common characteristics sufficient to allow a member of that group to identify himself as having a right to recover based on the description. [Citation.] [¶] . . . If FedEx’s claim is that every member of the class had to be identified from the outset, FedEx is simply wrong.” (Ibid.; accord, Lee v. Dynamex, Inc., supra, 166 Cal.App.4th at p. 1335; see also Sav-On Drug Stores, supra, 34 Cal.4th at p. 333 [“‘a class action is not inappropriate simply because each member of the class may at some point be required to make an individual showing as to his or her eligibility for recovery’”]; Bufil v. Dollar Financial Group, Inc. (2008) 162 Cal.App.4th 1193, 1207 [class of employees ascertainable in spite of absence of specific rest period records; “speculation that goes to the merits of ultimate recovery [is] an inappropriate focus for the ascertainability inquiry”]; Bell v. Farmers Ins. Exchange (2004) 115 Cal.App.4th 715, 744 [fact that class may ultimately turn out to be overinclusive not determinative; most class actions contemplate eventual individual proof of damages, including possibility some class members will have none].)

[Fn. 5: It appears this difficulty in identifying class members    and, in particular, in determining which contracts have the words “bonus,” “bonus time” or similar handwritten notations on their face    is attributable, at least in substantial part, to the inadequacy of 24 Hour Fitness’s computer records.  We have previously cautioned an employer may not avoid class certification by making a business decision to commingle or fail to document particular job assignments or tasks.  (Aguiar, supra, 144 Cal.App.4th at p. 134.)  A similar principle would seem applicable here.]

The opinion is bit unusual in that it reverses an order granting a motion to decertify a class, thus the standard of review on appeal was abuse of discretion. It was also noteworthy that the opinion was 2-1, with a dissent by Justice Woods.

A petition for review was filed on December 2, 2008. You can download the full text of Harper here in pdf or MS Word format.

United Steel: Timely CAFA Removal by One Removes For All

One defendant's timely notice of removal under the Class Action Fairness Act of 2005 is sufficient to remove the entire action, even if other defendants file their notices of removal too late. United Steel, Paper & Forestry v. Shell Oil Company (9th Cir. 2008) __ F.3d __.

Defendants Shell Oil Company and Tesoro Refining and Marketing Company were sued in a single wage and hour class action in state court. Each filed separate notices of renewal, relying, in part, upon CAFA's provisions at 28 U.S.C. §§ 1332(d), 1453, as a basis of jurisdiction. Shell's notice was filed on the 30th day after service upon the first defendant. Tesoro's notice was filed a day later.

After opening two separate cases, the District Court remanded Shell’s case on the ground that Tesoro had failed to consent to removal within thirty days of service on the first-served defendant, and then remanded Tesoro’s case for the same reason. Shell and Tesoro filed separate petitions for permission to appeal, which were granted. The Ninth Circuit then held that under § 1453(b) of CAFA, Shell’s timely notice of removal effected removal of the entire action, including the claims against Tesoro, and the trial court's orders to remand the cases back to state court were erroneous.

You can download the full text of the opinion at this link.