Wage Law

Court Reverses Denial of Large Fee Award on $11,500 Verdict

As a general rule, under Code of Civil Procedure § 1033(a), the trial court has the discretion to deny attorney's fees as an element of costs of suit under Code of Civil Procedure § 1033.5(a)(10)(B) if the plaintiff recovers less than the minimum jurisdictional amount of the court. Thus, for example, if a plaintiff sues in unlimited civil court and recovers only $25,000, and not a penny more, the case could have been brought in the limited  civil division and therefore, some costs may be denied. In Chavez v. City of Los Angeles (2008) __ Cal.App.4th __,

a jury awarded appellant Robert Chavez $11,500 in a statutory retaliation action brought against his employer and a supervisor. Chavez then filed a motion seeking approximately $871,000 in attorney fees under the fee provisions of the Fair Employment and Housing Act (FEHA), Government Code section 12965, subdivision (b). Ignoring that statute, and instead exercising its discretion under Code of Civil Procedure section 1033, subdivision (a) to deny costs because Chavez’s recovery was below its jurisdictional minimum, the trial court denied the motion. Chavez appeals from the denial of the motion, contending the court applied the wrong statutory standard and abused its discretion by denying him fees. We agree and reverse the order.

The opinion contains a lengthy discussion regarding the court's proper exercise of discretion, the conflicting purposes of  Code of Civil Procedure § 1033(a) and Government Code § 12965, and the language in the latter which limits the exercise of discretion in a FEHA case. In certain important respects, the holding can be distinguished in a wage case, but significant elements of the opinion apply as clearly to a Labor Code case as to a FEHA case.

You can download Chavez v. City of Los Angeles here in pdf and 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.

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.

Public Entities Are Permitted to Retain Counsel on Contingent Fee Basis

Public entities are permitted to enter into contingency-fee agreements with outside counsel. County of Santa Clara v. Superior Court (Atlantic Richfield Co.) (2008) __ Cal.App.4th __. A Santa Clara County Superior Court judge had previously ruled that such arrangements were "antithetical to the standard of neutrality that an attorney representing the government must meet when prosecuting a public nuisance abatement action." The decision was based upon a 1985 case, Clancy v. Superior Court (1985) 39 Cal.3d 740, in which the California Supreme Court called the contingent fee agreement between a city government and a private attorney in a lawsuit against an adult bookstore “inappropriate under the circumstances.”

Federal government agencies will continue to avoid such arrangements, under an executive order signed by President Bush barring the federal government from entering contingent-fee arrangements to compensate lawyers or witnesses. If you are interested in this kind of work, you can download the opinion here in pdf or word format.

Don't Try This in Your Case

We recently had a defense lawyer demand, during privileged mediation discussions, that we agree not to pursue other claims, nor represent other employees in connection with any future lawsuits against the defendant company seeking to settle a class action we had brought against it. We refused, of course, citing California Professional Conduct Rule 1-500, which prohibits an attorney from offering, making or participating in an agreement that restricts the right of any attorney to practice law. Rule 1-500(A) expressly includes such deals that are part of settlement agreements. The rule is not limited to California. ABA Model Rule 5.6 contains a similar prohibition. Does anyone ever really do that, and if so, do they get into trouble for agreeing not to represent someone suing a company in the future? Absolutely, they do.

Last year, the Florida Supreme Court disbarred one lawyer and suspended another for two years for taking a $6.4 million fee from the defense to file no more cases against E.I. du Pont de Nemours & Co. Attorneys Roland R. St. Louis Jr. and Francisco R. Rodriguez of Miami law firm Friedman, Rodriguez, Ferraro & St. Louis had sued DuPont on behalf of about 20 clients for injuries caused by exposure to a dangerous fungicide. After winning a major procedural battle, they persuaded DuPont to pay the plaintiffs $59 million for a stipulation to vacate and seal an order, and settlement of the two key cases and, contingent upon approval of those, the other 18 cases, all to be kept strictly confidential. St. Louis and Rodriguez then agreed to a side deal by which the firm would receive a separate $6,445,000 fee from DuPont to refrain from further litigation against the company and to serve as counsel and/or consultants for the company in future matters, essentially conflicting them out of future engagements. For this, the state Supreme Court disbarred St. Louis and ordered him to disgorge more than $2 million in fees (Florida Bar v. St. Louis, No. SC04-49) and suspended Rodriguez for two years plus a fine (Florida Bar v. Rodriguez, No. SC03-909). Their partners who were not involved in the case also received discipline ranging from a public reproval to a brief suspension.

We couldn't find a story about what happened to DuPont's lawyers, but if it had happened in California, they would have been in trouble, too.

Writs of Attachment for Wage Claims

Many wage and hour lawyers do not know that a plaintiff with a claim for unpaid wages can apply for a right to attach order and obtain a prejudgment writ of attachment, and then levy upon the employer's assets to satisfy the eventual judgment.

In general, an unsecured claim for a certain or reasonably ascertainable sum, based upon an express or implied contract, can be secured by a right to attach order. Code of Civl Procedure § 483.010(a); Korea Water Resources Corp. v. Lee (2004) 115 Cal.App.4th 389. Even claims based upon quasi-contract qualify. "Implied contract" covers restitutionary obligations; e.g., where defendant has acquired plaintiff's property through fraud, conversion or mistake and refuses to return it. Klein v. Benaron (1967) 247 Cal.App.2d 607, 610. An attachment will lie upon an employment contract. Lewis v. Steifel (1950) 98 Cal.App.2d 648; Rose v. Pearman (1958) 163 Cal.App.2d 480, 483. Arguably, any wage claim arising out of the Labor Code can justify an attachment, because statutory obligations arise out of contract in their nature. Arcturus Manufacturing Corp. v. Rork (1962) 198 Cal.App.2d 208, 210.

However, by obtaining an attachment, the plaintiff is electing non-tort remedies for those particular claims. Because attachment lies only on contract claims, a plaintiff with alternative tort and contract claims based on the same set of facts waives the tort claim by obtaining a writ of attachment, or, to be more precise, the plaintiff is equitably estopped by virtue of having obtained an advantage by proceeding on the contract claim. Baker v. Superior Court (San Diego Best Builders, Inc.) (1983) 150 Cal.App.3d 140, 145. Hence, punitive damages cannot be recovered once a right to attach order and writ of attachment have been issued.

Don't be fooled by defense counsel who will argue that prejudgment attachment of earnings is prohibited under Code of Civl Procedure § 487.020(c). Some of our adversaries have cut and pasted language to that effect from Rutter's Practice Guide, without understanding that the prohibition applies not to an employee seeking attachment, but rather, to an employee's creditors seeking to attach the employee's wages.

In addition to the primary purpose of securing the satisfaction of an employee's inevitable judgment for unpaid wages, a prejudgment right to attach order is also a powerful settlement tool and one of the best discovery devices out there. When you serve interrogatories, the defense often begins with boilerplate frivolous objections, triggering the meet and confer process, followed by motions to compel. It can be months before you really find out what defenses are being asserted and what supports them. Apply for a right to attach order and the defense will lay their cards out on the table, all of them, in the opposition. It's better than a half dozen motions to compel.

Is Your E-Mail To Your Client Not Privileged?

Apparently, there are more than a few employers who are mining their email archives to search for email communications between employees and former employees and the attorneys representing them in claims against the employer. One judge in New York issued a ruling last year that such communications are not protected by attorney-client privilege. The case is Scott v. Beth Israel Medical Center, Inc. You can read the order here. We haven't researched whether any California cases are on point. We're just passing it along.

Ethical Obligations When Interviewing Adverse Putative Class Members

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

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

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

How to Pay Undocumented Aliens With Wage Claims

While an undocumented alien generally cannot recover front pay in employment litigation, anyone, documented or not, is generally entitled to recover wages due for actual labor performed, even if they laborer lacked the requisite papers for lawful employment. Employers who discover that they owe wages to undocumented aliens often do not know how to process the payroll without a valid social security number. There is, however, a way to do it. The employee needs to obtain an individual taxpayer identification numbers (ITIN).

Since May 29, 1996, the IRS has assigned ITINs to aliens who are otherwise ineligible for SSNs but who need taxpayer identification numbers for tax purposes. 61 Fed. Reg. 26,788. A valid ITIN is a nine-digit number, like a social security number or any taxpayer identification number, and always begins with a 9. An ITIN is a tax processing number for both resident and nonresident aliens, as well as their spouses and dependents. It can be used only for income tax purposes. It does not entitle them to social security benefits or the earned income tax credit. It does not create any inferences regarding their immigration status. It bestows upon them no right to work in the U.S. Aliens must apply for an ITIN on IRS Form W-7 (Application for IRS Individual Taxpayer Identification Number). IRS Tax Topic 857.

The application must show a federal tax purpose for seeking the ITIN. In most cases, this will require attaching a federal tax return to the most current revision of the Form W–7 available. Along with the completed Form W-7, they will submit identity documents, and either a federal tax return, or other documentation to show the federal tax purpose for which they need the ITIN.

The identity documents are needed to verify both identity and foreign status; one must include a recent photograph. If one submits an original valid passport (or a notarized or certified copy of a valid passport) there is no need to submit any other documents. If one does not submit a passport document, one must provide a combination of documents (at least two or more) that are current and that (1) verify identity (that is, contains a name and a photograph), and (2) support your claim of foreign status.

If the ITIN is for a dependent, the documentation must prove that the dependent lives in the United States, Mexico, Canada, Japan, The Republic of Korea, and India. If the dependent is a minor, the documentation must establish the relationship between the dependent and the representative signing the application on the dependent's behalf. Such documentation could include a birth certificate, adoption papers, or other court-appointed papers showing legal guardianship.

In addition to a passport, examples of acceptable documentation include: national identification card (showing photo, name, current address, date of birth and expiration date); civil birth certificate; foreign driver's license; or visa. A complete list of acceptable documentation can be found in the instructions to the Form W-7. The documents must be originals or certified copies.

Aliens can apply for an ITIN by mail or in person at most IRS offices in the United States. If they apply in person, the documents will be reviewed and returned to them. Publication 1915, Understanding Your IRS Individual Taxpayer Identification Number, has a list of IRS offices abroad which can accept Form W–7. If applying by mail, use the address shown in the Form W–7 instructions and in Publication 1915. If the original documents have not been returned within 60 days, call 1–800–829–1040 (in the United States), or 1–215–516–2000 (outside the United States), to find out about the status. It takes approximately 4 to 6 weeks for the IRS to notify the application in writing of his or her ITIN. For more information, refer to Publication 1915. You may also want to obtain Publication 519, U.S. Tax Guide for Aliens. For information about who qualifies to be claimed as a dependent, refer to Topic 354.