Wage Law

New Oral Argument Set in Brinker

The second round of oral argument in Brinker Restaurant Corporation v. Hohnbaum is now set for May 13, 2008, before the Fourth District Court of Appeal, Division One, in San Diego. The latest developments:

Petitioner Brinker Restaurant corporation's request for leave to file a supplemental brief filed April 22, 2008, is GRANTED. The supplemental brief is deemed filed this date. Real parties in interest shall have seven days from the date of this order to file a supplemental reply brief addressing the issues raised in the supplemental brief. Real parties in interest Adam Hornbaum, Illya Haasf, Romeo Osorio, Amanda June Rader, and Santana Alvarado's motion and requests for judicial notice, filed on December 17, 2007 and April 22, 2008, are GRANTED in part and DENIED in part. Real parties in interest's motion requesting we take judicial notice of the depositions of plaintiffs' experts Jon A Krosnick and Harold S. Javitz is denied. Real parties in interest's request we take judicial notice of a February 16, 1999 Division of Labor Standards Enforcement (DLSE) Opinion Letter, a September 17, 2001 DLSE Opinion Letter, Industrial Welfare Commission Wage Order 5-76, a June 14, 2002 DLSE Opinion Letter and excerpts from the DLSE Enforcement Policies and Interpretations Manual is denied as unnecessary as these are items that we are entitled (but not required) to rely upon as authority, without having to formally take judicial notice. The denial as unnecessary of real parties in interest's request we take judicial notice of these items should not be construed as meaning this court will not consider them in ruling of the petition for writ of mandate in this matter. Real parties in interest's request we take judicial notice of the August 28, 2000 Senate Floor Bill Analysis and September 9, 2000 Assembly Floor Bill Analysis for Assembly Bill No. 2509 is granted.

Since then, several letters were written to the court informing the panel about the depublication of Bell v. Superior Court (H.F. Cox, Inc.), and the petitioner has filed a supplemental brief concerning the Brown v. Federal Express Corp. case.

We've been following the case closely, and have discussed it in several prior posts, including here and here.

Alan II Not Published

In Alan v. American Honda Motor Co. Inc. (2006) 131 Cal.App.4th 886, the Supreme Court reviewed the dismissal of an appeal and considered a discreet issue: Did the Statement of Decision and Minute Order dated January 2, 2003, trigger the 60-day period within which to notice an appeal under California Rules of Court, rule 8.104. They concluded that it did not, and so the case was remanded to the Court of Appeal for a review on the merits. On remand, in an unpublished opinion, they still ruled against the plaintiffs. Alan v. American Honda Motor Co. Inc. (2008 Cal. App. Unpub. LEXIS 829).

As explained in Massachusetts Mutual, we will not disturb a trial court ruling on class certification which is supported by substantial evidence unless (1) improper criteria were used; or (2) erroneous legal assumptions were made. (Massachusetts Mutual, supra, 97 Cal.App.4th at p. 1287.)

In this case, we conclude that the trial court finding that Alan did not make a sufficient showing of class-wide damages is supported by substantial evidence and that the trial court did not use improper criteria or make erroneous legal assumptions. As noted by the trial court, Alan's exhibits failed to show commonality as to damages. Alan failed to present sufficient evidence that purported class members knew of the alleged service concealment or relied upon it and then suffered damages as a result of the reliance. Without awareness of the alleged concealment and a detrimental change of position because of the alleged concealment, there can be no injury. Thus, there are no facts showing a common injury. In conclusion, the trial court finding that commonality does not exist with respect to damages is supported by substantial evidence.

DISPOSITION The order is affirmed. Defendant Honda is awarded costs on appeal.

You can download the full text of the two earlier opinions in Alan v. American Honda Motor Co. Inc. here: the 2005 opinion and the Supreme Court opinion are still posted. Last week, the Supreme Court denied a request to publish. We last talked about it in January, 2007.

Ninth Circuit Reverses Denial Of Class Cert. in Wal-Mart Assistant Manager Case

In a short, unpublished opinion, the Ninth Circuit has reversed a significant portion of District Court order denying class certification in a wage and hour class action against Wal-Mart. In Sepulveda v. Wal-Mart Stores, Inc., a group of assistant managers asserting various wage and hour claims (overtime and meal and rest period pay) brought a putative class action against against the retailer. The District Court denied the plaintiffs' motion for class certification in Sepulveda v. Wal-Mart Stores, Inc. (C.D.Cal. 2006) 237 F.R.D. 229, because the claims for monetary relief in the class action complaint were not incidental (failing the requirements for certification under Rule 23(b)(2)) and the duties of assistant managers were not susceptible to collective proof (failing the requirements for certification under Rule 23(b)(3)). On appeal, the Ninth Circuit held:

Plaintiffs, current and former Assistant Managers of Defendant, Wal-Mart Stores, Inc., appeal the district court’s order denying their motion for class certification. We have jurisdiction under 28 U.S.C. § 1292(e) and Federal Rule of Civil Procedure 23(f).

The district court misapplied Ninth Circuit precedent when, relying on its conclusion that Plaintiffs’ claims for monetary relief were non-incidental, it denied class certification under Federal Rule of Civil Procedure 23(b)(2). See Molski v. Gleich, 318 F.3d 937, 949–50 (9th Cir. 2003) (refusing to adopt the incidental damages approach set forth by the Fifth Circuit in Allison v. Citgo Petroleum Corp., 151 F.3d 402 (5th Cir. 1998)). The district court must focus on the intent of the Plaintiffs in bringing suit. Id. at 950. We therefore hold that the district court abused its discretion in denying class certification. See Sw. Voter Registration Educ. Project v. Shelley, 344 F.3d 914, 918 (9th Cir. 2003) (en banc) (per curiam). On remand the district court shall reconsider class certification under Federal Rule of Civil Procedure 23(b)(2), and, in the alternative, also reconsider using Rule 23(c)(4) to certify specific issues under the Rule 23(b)(2) standard. See Society for Individual Rights, Inc. v. Hampton, 528 F.2d 905, 906 (9th Cir. 1975). In reconsidering these issues, the district court may find the California Supreme Court’s decision in Gentry v. Superior Court, 42 Cal. 4th 443, 457–59, 462, 464–65 (2007), instructive.

The district court did not abuse its discretion in denying class certification under Federal Rule of Civil Procedure 23(b)(3), and we therefore affirm that portion of its order. Each party shall bear its own costs on appeal.

We previously discussed the case in a January 2007 post that can be found at this link, where we observed:

The appeal is noteworthy because, unlike several other pending appeals in similar cases, this is a discretionary, interlocutory appeal, rather than a standard, post-judgment appeal. The standard for allowing such an appeal is extremely high, and the fact that the Ninth Circuit allowed the appeal suggests that the District Court’s decision to deny certification will be reversed.

The result was very close to what we expected.

District Courts Cannot Enjoin Other Actions, Even With Certified Class Action Pending

Last week's decision in Negrete v. Allianz Life Insurance Co. (9th Cir. 2008) __ F.3d __ is not a wage and hour case, but its holding concerning class action procedure could affect every wage and hour class action filed in the State of California. Essentially, the case holds that the mere risk that someone will file on top of an existing class action, even one which has been certified, and will then attempt to undermine the class by pursuing a so-called "reverse auction" settlement does not empower the court to issue orders which amount to an injunction against other courts and other proceedings which have overlapping parties, claims or issues.

Vida F. Negrete filed this class action lawsuit against Allianz Life Insurance Company of North America. Allianz appeals a district court order that effectively prevents it from proceeding with any settlement negotiations on similar class action claims raised in any federal or state court without first obtaining permission from Negrete’s Co-Lead Counsel, and from finalizing a settlement in any other court “that resolves, in whole or in part, the claims brought in [the Negrete] action,” without first obtaining the district court’s approval. We reverse.

It is important to note that there were "no facts before the district court that supported the notion that some kind of collusion was afoot."

Negrete Counsel floated out the specter of a reverse auction, but brought forth no facts to give that eidolon more substance. A reverse auction is said to occur when “the defendant in a series of class actions picks the most ineffectual class lawyers to negotiate a settlement with in the hope that the district court will approve a weak settlement that will preclude other claims against the defendant.” Reynolds v. Beneficial Nat’l Bank, 288 F.3d 277, 282 (7th Cir. 2002). It has an odor of mendacity about it. Even supposing that would be enough to justify an injunction of one district court by another one, there is no evidence of underhanded activity in this case. That being so, if Negrete’s argument were accepted, the “reverse auction argument would lead to the conclusion that no settlement could ever occur in the circumstances of parallel or multiple class actions — none of the competing cases could settle without being accused by another of participating in a collusive reverse auction.” Rutter & Wilbanks Corp. v. Shell Oil Co., 314 F.3d 1180, 1189 (10th Cir. 2002) (internal quotation marks omitted). In short, the district court’s order must be set aside. There simply was no proper support for the district court’s enjoining of proceedings in other courts.

The court wouldn't necessarily have endorsed the idea of an injunctive even if there were some reverse acution shenanigans going on, adding that they "need not decide whether reverse auction evidence would justify an injunction of state court proceedings, as opposed to leaving correction up to the usual appellate processes." Parsons Steel, Inc. v. First Ala. Bank, 474 U.S. 518, 525, 106 S. Ct. 768, 772-73, 88 L. Ed. 2d 877 (1986); Atl. Coast Line, 398 U.S. at 287, 90 S. Ct. at 1743.

The district court was troubled by the fact that settlements in other courts might draw the fangs from at least a portion of the class action case that it was then considering. Perhaps they will. But in this instance it was improper for the district court to react by issuing an injunction against other federal and state court proceedings. Rather, the district court must live with the vicissitudes and consequences of our elegantly messy federal system. The restrictions inherent in the All Writs Act and explicit in the Anti-Injunction Act have helped to concinnate the elements of our national polity; this is not the time to disrupt the harmony.

You can download the full opinion at this link.

The Thin Body of Law Regarding Class Action Objections

...became slightly less thin with the publication of Chavez v. Netflix, Inc. (2008) __ Cal.App.4th __.

Frank Chavez sued Netflix, Inc. (Netflix) over its practice of advertising that it would send customers " 'unlimited' " DVD rentals with "1 Day Delivery" for a flat monthly fee. Alleging that both selling points were false, Chavez sought injunctive relief and damages on behalf of himself and a class of current and former Netflix subscribers. Before the class was certified, Netflix agreed to settle the class action by providing one month of free DVD rental services or upgrades to class members who claimed the benefit. The trial court approved the settlement and awarded attorney fees of $2,040,000 to be paid by Netflix to class counsel. The appellants in these consolidated appeals objected to the class action settlement and fee award in the trial court. They contend that the trial court abused its discretion in approving the settlement, affording notice to class members, and determining the amount of fees. Finding no abuse of discretion, we affirm the orders in issue.

The case is full of interesting language supporting settling parties. A detailed analysis has been posted over at the UCL Practitioner. We're in trial, so we'll just point you in that direction. You can download the case here in pdf or word format.

Court Orders Production of Costco's Attorney-Client Communication in Overtime Class Action

In an unusual opinion, the Second District Court of Appeal ordered Costco Wholesale Corp. to turn over some of its attorney-client communications during discovery in a putative class action alleging misclassification of Costco managers. In Costco Wholesale Corp. v. Superior Court (2008) __ Cal.App.4th __, the Court of Appeal held that the trial court was correct to order Costco to produce portions of a pre-litigation attorney-client memo prepared for Costco by its outside counsel. The memo analyzed whether Costco's department managers qualified for exempt status. Counsel took interviews, reviewed job descriptions, and prepared a detailed and lengthy memo analyzing the status of the managers. The trial court ordered an in-camera review by a referee, who determined that portions of the memorandum regarding the managers’ job duties were not privileged and should be produced.

Costco petitioned for a writ of mandate. After some odd procedural quirks, the Court of Appeal denied the writ, holding that Costco had not shown "irreparable harm” because the portions to be produced came from job descriptions and interviews with two managers; it was “inconsequential; and it did not “infringe on the attorney-client relationship.” The Court found that these were not work product, and that disclosure would cause no harm because the information would be readily available from other sources.

You can download the full text of Costco Wholesale Corp. v. Superior Court here in pdf or word format. A modification order was issued yesterday, which did not change the judgment. We read the whole thing, twice, and we might be incorporating a request for in camera review of much more from the privilege logs than ever before.

Supreme Court Depublishes Bell v Superior Court (HF Cox, Inc.)

The Supreme Court has denied a petition for review, but granted a request for depublication in Bell v. Superior Court (H.F. Cox, Inc.) (2007) 158 Cal.App.4th 147, a class certification opinion involving truck drivers with overtime, off-the-clock, meal/rest period and vacation pay claims.

The petition for review is denied. The requests for an order directing depublication of the opinion are granted. The Reporter of Decisions is directed not to publish in the Official Appellate Reports the opinion in the above-entitled appeal filed November 21, 2007, which appears at 158 Cal.App.4th 147. (Cal. Const., art. VI, section 14; rule 8.1125(c)(1), Cal. Rules of Court.) George, C.J., was absent and did not participate. Kennard J., is of the opinion the petition should be granted.

The Court of Appeal had affirmed in part and reversed in part a multiple-issue certification ruling by the Superior Court.

Four employees of a petroleum transportation company sought to bring a wage and hour class action against their employer, alleging: (1) the failure to pay overtime; (2) the requirement of off-the-clock work; (3) the failure to provide meal and rest breaks; (4) the incorrect calculation of vacation pay; and (5) the failure to pay pro rata vacation pay upon termination of employment. The plaintiffs filed a motion for class certification. The trial court granted the motion in part, certifying only a class with respect to the claim for failure to pay vacation pay upon termination of employment. In all other respects, the motion was denied. Plaintiffs sought review by means of a petition for writ of mandate. We issued an order to show cause why relief should not be granted and stayed further proceedings. We now conclude the trial court erred in failing to certify a class with respect to the overtime pay and vacation pay claims. We therefore grant the writ petition and direct the trial court to vacate its order, and enter a new and different order granting certification of a class with respect to those claims.

While on its face, the opinion had seemed to favor the plaintiff (who was the petitioner seeking Supreme Court review) the Court of Appeal's endorsement of the denial of certification in the off-the-clock and meal period causes of action had been embraced by the employers' bar, who will lament the depublication of the case.

We previously discussed the publication of and holding in Bell in a post here.

Another U.S. District Court Rejects Cicairos Regarding Employers' Meal Period Obligations

A second U.S. District Court judge has decided not to follow the holding in Cicairos v. Summit Logistics (2005) 133 Cal.App.4th 949, endorsing the DLSE's interpretation of California regarding what it means to "provide" employees with meal breaks, instead following another District Court ruling (White v. Starbucks (N.D. Cal. 2007) 497 F.Supp.2d 1080). As a result, Judge Dale Fischer denied certification in Brown v. Federal Express Corporation (C.D. Cal. 2008) 2008 WL 906517, 2008 U.S. Dist. LEXIS 17125, a putative class action brought on behalf of a subclass of drivers who alleged that they were denied meal and rest breaks. The plaintiffs asserted that FedEx had an affirmative obligation to ensure that employees took meal breaks. Judge Fischer held that FedEx's duty to "provide" meal periods merely meant to make meal periods available to employees. "It does not suggest any obligation to ensure that employees take advantage of what is made available to them."

In the absence of California Supreme Court precedent, this Court must apply the rule it believes the court would adopt under the circumstances. ... The court does not believe that the California Supreme Court would adopt the enforcement rule advocated by Plaintiffs.

Consequently, the court determined that, applying this standard, to prevail, the plaintiffs would have to prove that FedEx forced them to forego the meal breaks, a burden which, to meet, would cause the trial to focus on individualized issues, making class action treatment inappropriate.

The decision has no precedential value, as unpublished federal decisions are unciteable in U.S. District Court, and California trial courts are bound to follow Cicairos v. Summit Logistics under the principle of stare decisis.

Why Class Certification Orders Are Not Immediately Appealable

This is double-hearsay, but attorney H. Scott Leviant, who authors the legal blog The Complex Litigator, published a Forum piece in last week's Daily Journal, entitled "Cutting Class". We can't link to the article for non-subscribers, but there's a nice summary of the article over at the UCL Practitioner. The article explains why A.B. 1905, which would have allowed defendants to immediately appeal orders granting class certification, appropriately died in committee last month.

Courts Uphold Discovery to Replace Class Representative Who Never Had Standing

There is yet another published opinion applying both Pioneer Electronics (USA), Inc. v. Superior Court (2007) 40 Cal.4th 360 and Best Buy Stores, L.P. v. Superior Court (2006) 137 Cal.App.4th 772, to wage and hour class actions with respect to obtaining class member identities and contact information, even for the purpose of "identifying class members who may become substitute plaintiffs in place of named plaintiffs who were not members of the class they purported to represent" (our emphasis).

In CashCall, Inc. v. Superior Court (2008) 159 Cal.App.4th 273, the Fourth District Court of Appeal held that the trial court correctly allowed precertification discovery in a class action for that purpose, following Pioneer Electronics and Best Buy Stores, and distinguishing First American Title Ins. Co v. Superior Court (2007) 146 Cal.App.4th 1564, in which the Court of Appeal rejected the idea of permitting such discovery to a class action representative who had never been a member of the class he purported to represent because, under the circumstances of that case, "the grant of such discovery would sanction an abuse of the class action procedure." In essence, the Court of Appeal limited the First American holding only to those situations in which the substitution of plaintiffs would constitute an abuse of the class action procedure. The court noted that in First American, the plaintiff had, for all intents and purposed "appointed himself enforcement officer for the California Department of Insurance settlement agreement" to piggyback his case onto a settlement agreement and perhaps generate attorney's fees for the plaintiff's counsel. 

In contrast, in the Cashcall case, there was no state or other investigation, much less a settlement pending. Absent continuation of the class action, there would likely will be no other investigation of CashCall's conduct or potential relief obtained by class members for its alleged violations of their privacy rights. Furthermore, because only CashCall had knowledge of which customers' calls were monitored, the plaintiffs could not be faulted for filing a class action based on the suspicion their privacy rights may have been violated and only later learning from CashCall that their particular calls had not been monitored, leaving them without standing.

Because Kagan and the other cases discussed above recognize the general rule liberally allowing amendments of complaints to substitute new plaintiffs who have standing and, in particular, allowing an original plaintiff without standing to substitute in a new plaintiff with standing (whether in a class action or otherwise), an original plaintiff who lacks standing in a class action should be allowed to file a motion for, and potentially obtain, precertification discovery of the identities of actual class members (i.e., potential plaintiffs with standing who may elect to serve as substitute class representative plaintiffs). There is no reason to necessarily treat original plaintiffs who never had standing differently from, and more favorably than, original plaintiffs who had, but lost, standing. We conclude the Parris balancing test should be applied by trial courts in exercising their discretion whether to grant or deny an original plaintiffs' precertification motion for discovery of the identities of class members regardless of whether that original plaintiff had standing at the beginning of the action. (See, e.g., Best Buy Stores, L.P. v. Superior Court, supra, 137 Cal.App.4th at p. 779; Parris, supra, 109 Cal.App.4th at pp. 300–301; Budget Finance Plan v. Superior Court, supra, 34 Cal. App. 3d at p. 799; Pioneer Electronics (USA), Inc. v. Superior Court, supra, 40 Cal.4th at p. 373.) Accordingly, we reject CashCall's contention that a bright-line rule should apply in class actions to require trial courts to necessarily reject precertification discovery motions by plaintiffs who never had standing. First American, supra, 146 Cal.App.4th 1564, and Cryoport Systems v. CNA Ins. Cos. (2007) 149 Cal.App.4th 627 [57 Cal. Rptr. 3d 358], cited by CashCall, are factually inapposite and do not persuade us to conclude otherwise. Furthermore, neither case adopted or applied the bright-line rule proposed by CashCall in its petition.
...
Accordingly, unlike in First American, the potential for abuse of the class action procedure in this case is minimal. Neither the reasoning nor the result in First American persuades us that the trial court in this case abused its discretion by granting plaintiffs' motion for precertification discovery of the identities of class members. Rather, we conclude the trial court, in applying the Parris balancing test, did not abuse its discretion.

You can download the full text of CashCall, Inc. v. Superior Court here in pdf or word format. A petition for review and application for stay were denied by the California Supreme Court earlier this month.