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The Daily Journal had two interesting articles this week — on Monday, "Strategy Uses Arbitration Terms to Break Up Class," discussing a new defense strategy involving arbitration clauses in employment cases, and on Tuesday, "Reversed Intervention" discussing the Supreme Court's decision in Fireside Bank v. Superior Court (Gonzalez), 40 Cal.4th 1069 (2007). A subscription is required to access these articles online.
A bunch of new UCL and class action decisions have been handed down over the past week and a half:
Schultz v. Neovi Data Corp., ___ Cal.App.4th ___ (June 15, 2007) (Fourth Appellate District, Division Three) (a Mervyn's "grant and hold" case on remand to the Court of Appeal)
Linear Technologies Corp. v. Applied Materials, Inc., ___ Cal.App.4th ___ (June 18, 2007) (Sixth Appellate District) (a UCL competitor action)
Gatton v. T-Mobile USA, Inc., ___ Cal.App.4th ___ (June 22, 2007) (First Appellate District, Division Five) (another case invalidating a no-class-action arbitration clause)
In re: Ocwen Loan Servicing, LLC Mortgage Servicing Litigation, ___ F.3d ___ (7th Cir. June 22, 2007) (the Seventh Circuit mentions the UCL again, and the CLRA, too, and warns lawyers not to file "a hideous sprawling mess" of a complaint)
Lott v. Pfizer, Inc., ___ F.3d ___ (7th Cir. June 25, 2007) (addresses CAFA and the right to recover attorneys' fees after improper removal; see this post on the Seventh Circuit's prior opinion in the same case)
McAdams v. Monier, Inc., ___ Cal.App.4th ___ (May 30, 2007, modified June 25, 2007) (Third Appellate District) (court just issued an order modifying the original opinion; an interesting change in wording re "restitution" "reliance")
Juarez v. Arcadia Financial., Ltd., ___ Cal.App.4th ___ (June 26, 2007) (Fourth Appellate District, Division One) (probably the most interesting of the bunch; addresses UCL remedies)
I've had limited time to read or analyze these decisions. Time permitting, I will post more about them later on.
As I reported last week, the Supreme Court granted review in Amalgamated Transit Union, Local 1756, AFL-CIO v. Superior Court, no. S151615. The Court's statement of issues on review is now available online:
This case presents the following issues: (1) Does a worker’s assignment to the worker’s union of a cause of action for meal and rest period violations carry with it the worker’s right to sue in a representative capacity under the Labor Code Private Attorneys General Act of 2004 (Lab. Code, § 2698 et seq.) or the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.)? (2) Does Business and Professions Code section 17203, as amended by Proposition 64, which provides that representative claims may be brought only if the injured claimant “complies with Section 382 of the Code of Civil Procedure,” require that private representative claims meet the procedural requirements applicable to class action lawsuits?
If anyone has a copy of the petition for review, please send it along by email (uclpractitioner@gmail.com).
In Burnside v. Kiewit Pacific Corp., ___ F.3d ___, 2007 WL 1760747 (9th Cir. Jun 20, 2007), the Ninth Circuit held that section 301 of the Labor Management Relations Act (29 U.S.C. § 185(a)) did not preempt the plaintiffs' UCL and other claims. Accordingly, it reversed the district court's order granting summary judgment in the defendants' favor, and ordered the case remanded to San Diego County Superior Court (from which it had been removed).
In 2005, the Federal Judicial Center published "Managing Class Action Litigation: A Pocket Guide for Judges" (pdf). The preface states that "[t]his pocket guide is designed to help federal judges manage the increased number of class action cases expected as a result of the Class Action Fairness Act of 2005." The guide makes for interesting reading.
Yesterday, the Supreme Court granted review in Amalgamated Transit Union v. Superior Court (First Transit) (no. S151615).
The Supreme Court's docket does not yet indicate the specific issues on which review has been granted, but the Court of Appeal's opinion addressed a union's standing to assert a UCL claim on behalf of its members post-Prop. 64:
In this writ proceeding, we hold:
(1) An individual’s statutory right to sue in a representative capacity, conferred under the Labor Code Private Attorneys General Act of 2004 (Labor Code section 2699) and under the unfair competition law (Business and Professions Code section 17203), may not be assigned to a third party.
(2) Section 17203 of the unfair competition law, as amended by Proposition 64, providing that representative claims may be brought only if the injured claimant “complies with Section 382 of the Code of Civil Procedure,” means that private representative claims must meet the procedural requirements applicable to class action lawsuits.
Amalgamated Transit Union, Local 1756, AFL-CIO v. Superior Court, 148 Cal.App.4th 39 (2007) (modified Mar. 22, 2007) (slip op. at 2). My original post on the Court of Appeal's decision (now no longer citable) is at this link.
In Sisemore v. Master Financial, Inc., ___ Cal.App.4th ___ (Jun. 12, 2007), the Court of Appeal (Sixth Appellate District) addressed a UCL "unlawful" prong claim predicated on alleged violations of the Fair Employment and Housing Act (Gov. Code §§12955 et seq.) and the Unruh Act (Civ. Code §§51 et seq.). Notably, this case is an individual UCL action, not a putative class action.
(For a discussion of the appellate practice aspects of the Sisemore decision, see this post at The Appellate Practitioner.)
In Daro v. Superior Court, ___ Cal.App.4th ___ (Jun. 6, 2007), the Court of Appeal (First Appellate District, Division Three) addressed the UCL's injunctive relief remedy post-Prop. 64.
In Chavez v. Blue Sky Natural Beverage Co., 2007 WL 1691249 (N.D. Cal. Jun. 11, 2007), Judge Conti dismissed UCL and CLRA claims alleging that the defendant falsely represented that its beverages were manufacturered and bottled in New Mexico. The Court rejected the plaintiff's argument that "he would not have purchased Blue Sky beverages had he known the truth about the geographic origin of the products" and that he "lost the full value of the price paid for each can or bottle of soda" (id. at *3):
In contrast to Daghlian [v. DeVry Univ., Inc., 461 F.Supp.2d 1121, 1153-57 (C.D. Cal. 2006)] and Laster [v. T-Mobile, 407 F.Supp.2d 1181, 1194 (S.D. Cal. 2005)], the Plaintiffs in this case suffered no injury or damages as a result of Defendants' conduct. Plaintiff did not pay a premium for Defendants' beverages because the drinks purportedly originated in Santa Fe, New Mexico. Accepting the facts as stated by Plaintiffs and drawing all inferences in their favor, Defendants' promise concerning geographic origin had no value and Plaintiffs have suffered no damages by purchasing beverages they thought were produced in New Mexico by a New Mexico-based company, but actually originated in California. As a result of Plaintiffs' failure to allege any damages under all four causes of action, Plaintiffs have no standing to pursue their claims against Defendants.
Id. at *4. In other words, the plaintiff got what he paid for (the soda). Perhaps the plaintiff would have fared better if he had sought only a portion of the soda's purchase price, rather than "the full value of the price paid." Under Colgan v. Leatherman Tool Group, Inc., 135 Cal.App.4th 663, 700 (2006), evidence of the “value of the consumer impact or the advantage realized by [the defendant]” is admissible to prove “the amount of restitution necessary to restore [the plaintiffs] to the status quo ante” (citing Korea Supply)). Evidently, Judge Conti thought that the alleged misrepresentation did not affect the soda's price and thus caused no harm as a matter of law.
On June 11, 2007, in "A Blog of Their Own," the Recorder reported on blogs by legal secretaries, librarians, paralegals, and other non-attorney legal professionals. Here are some of the blogs mentioned in the article:
Wage Law points out that on Wednesday, the Supreme Court denied review in Lee v. Southern California University, no. S151885. In Lee, the Court of Appeal affirmed an order denying a motion to compel arbitration, despite the fact that many of the putative class members had signed contracts with arbitration clauses. This development indirectly supports my observation that the Supreme Court does not appear to be granting review in cases in which the lower courts declined to enforce arbitration clauses, particularly those that purport to ban classwide relief.
The Court of Appeal's opinion is Lee v. Southern California University for Professional Studies, ___ Cal.App.4th ___ (Mar. 16, 2007). My original post on the Lee decision is here.
Three recent federal decisions discuss the CLRA and its applicability to extensions of credit:
For more decisions on that subject, see this blog post.
In Belton v. Comcast Cable Holdings, LLC, ___ Cal.App.4th ___ (June 8, 2007), the Court of Appeal (First Appellate District, Division One) addressed the interplay between the UCL, the CLRA, and the Unruh Act (Civ. Code §51). Among other things, the Court applied the post-Cel-Tech formulation of "unfair" to this consumer action:
[Plaintiffs] rely upon the definition of “unfair” set forth in Cel-Tech, supra, 20 Cal.4th 163. In Cel-Tech, the court, in the context of an unfair competition claim by a competitor, defined “unfair” as “conduct that threatens an incipient violation of an antitrust law, or violates the policy or spirit of one of those laws because its effects are comparable to or the same as a violation of the law, or otherwise significantly threatens or harms competition.” (Id. at p. 187.) The Cel-Tech court further required “that any finding of unfairness to competitors under [Business and Professions Code] section 17200 be tethered to some legislatively declared policy or proof of some actual or threatened impact on competition.” (Id. at pp. 186-187.) The court left open the question whether this definition should also apply in the context of unfair competition claims brought by consumers (id. at p. 187, fn. 12), leading to a split of authority on this question among the courts of appeal. (See Bardin v. DaimlerChrysler Corp. (2006) 136 Cal.App.4th 1255, 1273-1274 [noting the split of authority and urging the California Supreme Court to resolve it].) This court, however, has followed the line of authority that also requires the allegedly unfair business practice be “tethered” to a legislatively declared policy or has some actual or threatened impact on competition. (See Gregory v. Albertson’s, Inc. (2002) 104 Cal.App.4th 845, 853-854.)
Slip op. at 14. The Court of Appeal affirmed the judgment in the defendant's favor on all causes of action.
I recently found an interesting paper by Michael F. Ram of Levy, Ram & Olson in San Francisco. The paper is called "Recent Developments in Class Certification of Consumer Products Cases in California Under the Consumers Legal Remedies Act and the Unfair Competition Law." The paper, which appears to be dated late 2006, discusses Chamberlan, Bardin, Pfizer, and other relatively recent decisions. It's quite good and is worth a read.
On Thursday, the Daily Journal had another article, "Pioneering Intrusion" (subscription), on Pioneer Electronics (USA) Inc. v. Superior Court, 40 Cal.4th 360 (2007). In the article, attorney Gordon E. Bosserman argues that "Belaire-West Landscape Inc. v. Superior Court, 2007 DJDAR 4611 (April 9, 2007), [in which] the 2nd District Court of Appeal applied the holding in Pioneer to employee contact information for a class action regarding wage-and-hour violations ... is an unnecessary and paternalistic extension of the Pioneer decision."
On Wednesday, the Sacramento Bee reported here on a very interesting UCL and CLRA class action in which trial began last week. As the article explains:
The lawyers outlined their cases in opening statements Tuesday in a class-action lawsuit filed on behalf of more than 400,000 Ford Explorer owners statewide.
The lawsuit consolidates cases from Northern and Southern California and seeks a return of unjust profits under the state's unfair competition and false advertising laws.
With a half-dozen high-powered lawyers on each side, it is being tried in Sacramento Superior Court before Judge David DeAlba, who will decide the case without a jury.
The case is Ford Explorer Cases, JCCP Nos. 4266 & 4270. I am informed that in March, Judge DeAlba denied defense motions to decertify the class and for summary judgment on the UCL and CLRA claims, allowing the action to proceed to trial.
As I reported in March, the Supreme Court depublished the Court of Appeal's opinion in Sony Electronics, Inc. v. Superior Court (Hapner), 145 Cal.App.4th 1086 (2006). The depublication request, which was drafted by Michael Singer of Cohelan & Khoury in San Diego, is available at this link. It is very good and exemplifies the kinds of arguments the Supreme Court finds persuasive when considering whether to depublish an opinion.
Thanks to Anthony Zaller and Brian Van Vleck, authors of California Labor & Employment Defense Blog, for sending in their perspective on the Gentry argument:
We probably can’t improve much on Kelly Chen’s excellent factual reportage of the oral arguments in Gentry. Kelly concludes, however, that “as a recent law school graduate, I have to humbly admit I’m too junior to make a prediction.” Our predictions are surely no better than Kelly’s but we aren’t constrained by her prudent good sense. Consequently, below is our take on the hearing as well as some speculation about where we think the Justices may be heading with their eventual opinion.
Certain aspects of the hearing had an unmistakable “play within a play” quality. For example, the respective parties and their counsel were arguing first and foremost about whether the particular arbitration agreement drafted by Circuit City and signed by Mr. Gentry would be upheld and enforced. On the other hand, the assembled observers (and the larger community of class action practitioners), were more intently focused on just one sub-issue -- i.e, the enforceability of the agreement’s provision prohibiting Gentry from pursuing a class-wide arbitration.
Based on the representations of counsel at the hearing (and, as a disclaimer, we are not independently familiar with the briefs or appellate record), the record appears to contain more than enough ammunition for the Court to shoot down Circuit City’s agreement based on the application of familiar Armendariz factors, including lack of mutuality, a purported waiver of certain damages, a shortened statute of limitations, etc. But will the Court simply strike down the agreement based on the “totality of the circumstances,” and thereby leave open the possibility that a class arbitration ban could be upheld if it were part of a less unconscionable agreement? Or will the Court use Gentry as a vehicle to create a categorical rule that invalidates all pre-dispute restrictions on class arbitration?
Cliff Paleski, appearing on behalf [of] amici, argued forcefully in favor of a nearly per se rule that would prohibit any restrictions on class arbitration under any circumstances in employment disputes. His advocacy, while forceful and persuasive as always, was based essentially on public policy arguments. Moreover, to our bourgeois ears at least, his arguments had a radical flavor – advocating for example, that “all employment is inherently oppressive,” and that leaving the door open even a crack will lead to “no end of mischief” by avaricious employers seeking to strip workers of their rights.
As legal support for their proposition that employees can never waive their right to act as a class representative in arbitration, Gentry’s team could only cite to Labor Code section 923. This is nothing more than a vague Depression-era proclamation that collective bargaining is favored by public policy. We’ve never heard of anyone invoking Section 923 as support for employee class action rights and the argument didn’t seem to get a foothold with any of the justices either. All things considered, we’d have to rate this Section 923 argument as a prohibitive long shot.
Justice Kennard was by far the most active questioner and we wouldn’t be surprised if she is the author [of] the majority opinion. Some of her questions implied that she might have reservations about whether there was any principled basis for a broad ruling on the permissibility of class arbitration waivers. Justice Chin also focused on the tension between the competing public policies to enforce agreements and yet allow class wide procedural remedies. Chin seemed to come down on the side of enforcing arbitration agreements. The other Justices, by and large, avoided the big issues and focus[ed] more on the facts of this particular case that might render the agreement procedural or substantive unconscionability.
So what’s the bottom line? Our prediction is that the Court will hold the Circuit City agreement to be unenforceable. We are also willing to bet that, while the Court’s opinion may contain some language that the class arbitration ban contributed to this result, it will stop short of announcing any categorical rule against such provisions. As a result, a case-by-case analysis will be required and a properly drafted arbitration agreement may still offer an arguable defense to class certification. But it goes without saying that we could be wrong.
Thanks, Anthony and Brian, for that analysis. In addition to Kelly's summary, two readers (one of whom is Michael Walsh of the blog Wage Law) provided their thoughts in the comments to this post.
A couple of the reports on the argument mentioned Armendariz, but it will also be interesting to see how Discover Bank plays out as precedent in the employment context. As mentioned in these posts, I noticed a while back that the Supreme Court appeared to be granting review in cases upholding no-class-action arbitration clauses, and denying review in cases striking them down. The outcome predictions so far in Gentry are consistent with the idea that the Supreme Court felt that Discover Bank was being applied too leniently, or at least that lower courts needed more guidance. It would not be unreasonable for the Court to conclude that a public policy favoring access to the judicial system (which is what the class action device facilitates) should outweigh any countervailing public policy favoring a procedural device (arbitration) that serves to limit access. To a large degree, Discover Bank stands for exactly that proposition.
Two cases involving UCL claims are set to be heard this morning at 9:00 a.m. in Los Angeles. Prachasaisoradej v. Ralph’s Grocery Co., no. S128576, is a UCL/employment case (decided on preemption grounds below). In re Tobacco Cases II, no. S128576, is a preemption case. For more detail, see these posts. If you attended one or both of these arguments, it would be great if you'd send me a report by email for posting here (with or without attribution). Meanwhile, the first report I received on the Gentry argument is immediately below.
Many thanks to Kelly Chen, a recent graduate of U.C. Hastings Law School, who attended the Gentry argument yesterday and wrote up this detailed report:
Kelly Chen’s Notes Re: Gentry Oral Argument
California Supreme Court Case No. S141502
June 5, 2007 -- 2pm
(NOTE: I observed the argument from a staff lounge on a 28” tv with a room full of about 40 people. It was quite difficult to “see” anything. Although I could distinguish the voices amongst the female justices, I was unable to differentiate the voices of the male justices.)
This afternoon in Los Angeles, the California Supreme Court heard oral argument regarding the enforceability of an arbitration provision that prohibits employee class actions in litigation concerning alleged violations of California's wage and hour laws. Michael Rubin and Cliff Palefsky argued on behalf of the employees. Rex Berry argued for Circuit City.
Mr. Rubin started by pointing to the exculpatory purpose and effect of class action bans in employment cases. He argued that such a class action ban is inconsistent with the policy underlying Labor Code section 923, which provided that employees shall be free from employers' interference in “concerted activities” for the purpose of “mutual aid and protection.”
Justice Kennard quickly jumped in and asked: “Would this court take into consideration the relatively small awards in wage and hour cases?” She then cited the statistical average of $6,000 in individual wage claims. Mr. Rubin indicated that in overtime claims where the statute of limitation is running, some workers in a class might have begun work at the end of the claim period.
One of the male justices (not Moreno) then asked: “Would you say that the public policy in favor of class actions should trump the public policy in favor of arbitration?” Mr. Rubin indicated that he would not characterize it that way. He explained that Gentry’s position actually furthers the public policy regarding arbitration -- that is, a “fair” policy of arbitration. He argued that employers can not have an arbitration policy that undermines the policy of a fair arbitration.
Another male justice (Moreno I think) then interjected by saying that this case is not like Discover Bank where the contract of adhesion was sent in stuffed mails. Mr. Rubin responded by arguing that there is still a procedural unconscionability issue here, because this case involved a scenario where employees were asked to “take it or leave it.” Rubin explained that the nature of the work environment itself is inherently oppressive.
At this time, Justice Kennard interjected and asked about the employment handbook. Mr. Rubin said that the employment handbook indicated the oppressive nature of the agreement, given that Circuit City retained the right to unilaterally change the terms of the agreement. “That goes beyond the reasonable expectations of the employees,” Mr. Rubin argued. Mr. Rubin articulated that certain special provisions just cannot be "buried" in the handbook, including things like a class action bar, the unilateral change of the terms, and the reduction of the statute of limitations. He argued that these special provisions must be explained in a “pre-dispute” scenario.
One of the male justices (Baxter or George) then asked if it is Mr. Rubin’s opinion that his client's claims cannot be adequately adjudicated through a Berman hearing? Mr. Rubin indicated that individual claimants in a Berman hearing have to pay for attorneys fees; he then focused on his class action argument. The Justice commented that isn’t it the purpose of the Berman hearing that the employees can represent themselves in these wage claims without representation. The Justice did not seem eager to hear the class action argument. Rather, the Justice pursued his original inquiry and asked Rubin: “What’s wrong with the Berman hearing process? Or arbitration?”
At this time, Mr. Rubin’s time was up. Mr. Rubin quickly answered the questions. With the Berman hearing, Mr. Rubin pointed to the limited resources and attorneys fees as two problems. I wish Mr. Rubin had had a little bit more time to discuss the inadequacy of the Berman process in a more comprehensive manner.
Mr. Palefsky argued also on behalf of the employees.
I missed the beginning of Mr. Palefsky’s presentation and the first question posed by Justice Corrigan.
A male justice (George, Chin, or Baxter) asked a hypothetical of whether it would make a difference if the plaintiff is an employment specialist working at a law firm who is capable of understanding the terms of the employment agreement. Mr. Palefsky responded in the negative. Mr. Palefsky’s position was that employers just can’t prohibit class actions.
Justice Moreno then asked if Circuit City gave up its rights in any way in the agreement. Mr. Palefsky firmly responded: “No!” Mr. Palefsky then argued that that if one has to waive his right to a jury, etc… you can’t do it in a document with a title “Receipt.”
Justice Kennard eagerly interjected: “Is it your view that class action waiver is always invalid? Or is it a case by case analysis?” Mr. Palefsky answered that class action bars (in this context) are always invalid. He, like Mr. Rubin, cited Labor Code section 923. At one point, Mr. Palefsky used the phrase “in a wage case” during his response to Justice Kennard’s question. Upon hearing the phrase, Justice Kennard commented: “ah….you just said the magic term! It is this case!” Mr. Palefsky then used “in an employment case” when he moved on to explain the pre-dispute waiver in this case (and how it shouldn’t be allowed).
Justice Werdgar then asked whether the particularity of this case is irrelevant (i.e., whether the fact that the relevant provisions were buried in the handbook?). Mr. Palefsky indicated that the particularity of this case tells us the importance of a clear cut rule. He argued that we just can’t open the door to a class action bar with an opt-out process; hence, there must be a clear cut rule.
Justice Werdgar then followed up by asking about Gentry’s options to resolve his dispute: “If he had opted out, what are you saying it will happen to him?” Mr. Palefsky went on with his argument, but the justices interrupted and asked him to directly answer the question. “Retaliation!” Mr. Palefsky responded.
At this time, Mr. Berry argued on behalf of Circuit City. He started out by arguing that there are two flaws to Gentry’s arguments. First, he pointed to what’s on the record -- the agreement. One of the male justices (George I think) then interjected and asked about the “voluntariness” of the context of the agreement -- whether it is a contract of adhesion. Berry responded: “absolutely not… if he (i.e., Gentry) felt coerced, I suppose he could put a declaration before the Superior Court…but he did not.”
Justice Werdgar asked: “We’ve been told that Labor Code section 923 prohibits class action waivers. Is that correct?” Berry responded in the negative and argued that assertion is a stretch.
Berry then moved on and focused his arguments on the pro-arbitration public policy.
Justice Werdgar then commented that the opposing counsels focused on the class action part, not arbitration part. She asked: “Are we not talking about class action waivers?”
Berry then argued that Gentry is asking this court to render the agreement unenforceable because there was a class action waiver. He argued that this is not a commercial contract of adhesion. He indicated that employees were given a presentation about the terms of the agreement and an opportunity to opt out. At this time, one of the male justices added: “didn’t they go beyond and advise…the employees to counsel with attorneys?” (I really couldn’t “see” which of the male justices said this.)
Justice Chin (I think) then said that he sees this as a tension between class action policy verses the arbitration policy. He asked if they are both legislative policies? Berry said that the policy concerning arbitration is a legislation policy, but the policy concerning class actions is a “judicial” policy. Justice Kennard then quickly pointed out that the policy concerning overtime wages is a legislative concern. She said: “why are we in dangerous territory? I think we’re simply looking at whether a class waiver is okay. I think everyone will agree that arbitration is favored. But legislature also concerns overtime…etc…”
Justice Kennard then asked Berry to articulate what is (and what is not) in the employment handbook. She specifically asked for examples like: (i) the reduction of the statute of limitation from four to one year, and (ii) the restriction of backpay to one year. Berry didn’t address Kennard’s question directly. Instead, he talked about the presentation to the employees and how even till now no one else indicated to them what they should have said to the employees. Kennard interjected and asked Berry to respond to the question posed. Berry said “yes” and indicated that the employees signed a receipt, etc.
Justice Moreno then asked Berry to address to the issue regarding reciprocity of the contractual terms, specifically whether Circuit City gave up some rights? “Absolutely,” said Berry. He explained that his clients gave up appellate review (i.e., given that arbitration awards are not subject to appellate review). Also, he gave an example of how Circuit City also gave up suing its employees (i.e., something about collecting money from employees about traveling expenses -- I thought this was weak in comparison to the rights that the employees are giving up…for obvious reasons).
At this time, it’s Mr. Rubin’s turn again. Justice Kennard asked Mr. Rubin, in response to Berry’s earlier assertions, whether the employment handbook indeed expressly contained certain explanations about things like the reduction of the statute of limitations, etc? Mr. Rubin responded with confidence: “No!” He then referenced specific page numbers in the handbook. Rubin said: “It doesn’t say ‘no statute of limitation of more than 1 year’ or ‘no punitive damages.’” He then took the opportunity and went back to Justice Moreno’s question regarding reciprocity by referencing a page in the handbook which expressly bars lawsuits “brought by associates.”
One justice asked about Labor Code section 923 and how Circuit City claimed this section only applies to a collective bargaining situation. One of the male justices asked: “Is there any legislative intent you can cite that favors class action over arbitration?” Mr. Rubin once again indicated that they are not making such a distinction (see above). The Justice then asked about the term “concerted activity” in the section 923. Mr. Rubin responded by saying that federal courts have permitted people to apply the term “concerted activity” to consolidate cases.
At this time, Mr. Rubin articulated that a class action bar in pre-dispute employment cases (as in Gentry’s case) is unenforceable “if it is reasonably foreseeable that the ‘effect’ is to eliminate non-waiveable statutory claims.” I thought this point beautifully tied to his opening remark!
Justice Werdgar then asked: if this court were to agree with you….are you saying that class action arbitration is not okay?” Mr. Rubin said: “Oh, no.” Werdgar then cleared out two issues: (1) class action waiver, and (2) the arbitration agreement itself. She asked if Gentry’s first position is to strike out the entire agreement, and the second position is to allow arbitration without the class action bar. Rubin affirmed.
The next question posed at Mr. Rubin is whether a class action waiver is never enforceable. Mr. Rubin responded, again, that it is unenforceable in a pre-dispute situation in the employment context if it is reasonably foreseeable that the effect is to eliminate non-waiverable statutory claims.
As a recent law school graduate, I have to humbly admit I’m too junior to make a prediction.
Thanks, Kelly! Readers, what do you think? Feel free to post a comment based on Kelly's summary as well as the summary posted by a reader in the comments to this post. I'm hoping to receive at least one more summary later today.
This afternoon at 2:00 p.m., the Supreme Court will hear oral argument in the no-class-action arbitration case, Gentry v. Superior Court, no. S141502. The argument will take place in Los Angeles, and I hope to be able to post at least one report here tomorrow. Meanwhile, for everyone's reading pleasure, the Court of Appeal's opinion is here: Gentry v. Superior Court (Circuit City Stores, Inc.), 135 Cal.App.4th 944 (2006) (Second Appellate District, Division Five).
UPDATE: A reader who attended the argument today has put up a nice summary as a comment to this post. I'm expecting to receive additional reports shortly.
In Iliadis v. Wal-Mart Stores, Inc., ___ A.2d ___ (N.J. May 31, 2007), the New Jersey Supreme Court reversed an order denying class certification of meal and rest break and off-the-clock claims against Wal-Mart. Last Friday, the New Jersey Law Journal reported that "Wal-Mart Workers' Wage and Hour Suit Valid as Class Action, N.J. Court Says."
The opinion addresses the predominance, superiority, and manageability prongs of class certification. The Court's discussion of predominance and affirmative defenses (which it termed "remainder issues") is particularly interesting:
The core of the present dispute is whether Wal-Mart engaged in a systematic and widespread practice of disregarding its contractual, statutory, and regulatory obligations to hourly employees in this State by refusing to provide earned rest and meal breaks and by encouraging off-the-clock work. Essential to that issue are other salient and common questions, most notably the meaning and significance of Wal-Mart’s corporate policies concerning breaks and off-the-clock work. The impact of the Associate Handbook’s disclaimer and the uniformity of new employee orientation also are prominent common questions.
....
To be sure, as plaintiffs conceded at oral argument, resolution of those and other common questions may not dispose of the litigation. Individual questions may yet remain, such as: whether particular employees voluntarily missed rest and meal breaks; why employees who worked off-the-clock did not avail themselves of the curative time-clock procedures; how much time was worked off-the-clock; whether employees worked off-the-clock with the expectation of compensation; and how much in damages employees suffered, if any. However, the mere existence of remainder issues is insufficient to defeat class certification in New Jersey ... and elsewhere ....
So too, the individualized defenses advanced by Wal-Mart do not necessarily foreclose a finding of predominance. Although “different factual situations may arise with respect to the defenses as to different plaintiffs[, such] does not derogate from the fact that the affirmative cause of action itself has the community of interests and of questions of law or fact which justify the class action concept.” Our Appellate Division has stated: “[i]t is true that possibly different factual questions may come into play when the defense of waiver or other defenses are raised as against individual members of the class. This is not a bar to maintainability of the action as a class action.”
Slip op. at 26-29 (citations omitted) (italics added). The Court also explained that class certification would not diminish Wal-Mart's ability to present its defenses:
In finding that common questions predominate, however, we do not limit Wal-Mart’s defenses nor diminish its procedural safeguards and rights. Rather, in defending itself, Wal-Mart may argue that employees voluntarily worked through rest or meal breaks for myriad personal reasons, may contend that the conclusions of Baggett and Shapiro are flawed, may question the credibility of the July 2000 internal audit, and may advance any other relevant contentions. We are confident that, on remand, the trial court and parties’ counsel can resolve the practical challenges presented by this litigation’s individualized questions of law or fact.
Slip op. at 30-31.
The Court then addressed the superiority prong, and concluded that "[w]e cannot ignore the reality that if the proposed class is not certified, thousands of aggrieved employees will not seek redress for defendant’s alleged wrongdoing." Slip op. at 35.
Finally, as to the manageability prong, the Court noted that courts in other states (notably, California and my firm's own Wal-Mart case, Savaglio v. Wal-Mart), successfully managed "similarly-pled, state-wide class actions against Wal-Mart." Slip op. at 38. The Court went on:
We are confident that the Law Division will properly employ its broad, equitable authority and sound discretion to manage the instant litigation and appropriately address the important concerns of both parties in respect of the permissible uses of statistical extrapolation, evidentiary redundancy, and any other procedural, administrative, and evidentiary issues that may arise. We are guided by the observation that “[e]xperience . . . shows that visions of unmanageability soon disappear, because courts, together with counsel, have been able to manage litigation of constantly increasing complexity and magnitude.”
Slip op. at 40 (citation omitted).
The opinion concludes with a strong statement of the important public policies that underlying the class action device:
By equalizing adversaries, we provide access to the courts for small claimants. By denying shelter to an alleged wrongdoing defendant, we deter similar transgressions against an otherwise vulnerable class -- 72,000 hourly-paid retail workers purportedly harmed by their corporate employer’s uniform misconduct. Individually, the aggrieved Wal-Mart employees lack the strength in terms of resources and motivation to assert their grievances in court. Collectively, as a class, they are able to pursue their claims.
Slip op. at 40-41.
Tuesday's Daily Journal had an article by reporter Rebecca Beyer called "Coupon-Based Settlements Get Tougher" (subscription). The article discusses limitations on coupon settlements that appear to be judicially emerging in state courts on the heels of CAFA.
Many thanks to my good friend Laurent Liscia of Webmotion for designing an amazing new header for the blog! I also want to thank another good friend, Jack Gescheidt, for his great photography in front of the Supreme Court building.
In addition to the new header, I've updated my welcome page, moved my bio into a separate page of its own, and added a description of the legal services that I provide. I've also added a new site map and a separate page listing my press mentions since 2004.
Last but not least, today is my dad's birthday. Happy Birthday, Dad!
According to the Supreme Court's docket, four separate letters have been filed requesting depublication of Walsh v. IKON Office Solutions, Inc., 148 Cal.App.4th 1440 (2007). One of the depublication requests was filed last Friday by yours truly. No petition for review has been filed.
As explained in my two prior posts, the opinion adds nothing to class certification jurisprudence and therefore does not meet the standards for publication of Rule of Court 8.1105(c). Worse, the opinion contains language that contradicts the Supreme Court's holdings in Sav-on and Lockheed, and that could lead to misuse of the opinion as precedent, especially if the language is quoted out of context. The latter point is the basis for my depublication request.
UPDATE: On July 11, 2007, the Supreme Court denied the depublication requests.