The UCL Practitioner

"Class Action Seminar: Secrets from the Bench and Bar"

On Wednesday, May 21, 2008, Consumer Attorneys of California (Class Action Section) and the Consumer Attorneys Association of Los Angeles will jointly present an MCLE program called "Class Action Seminar: Secrets from the Bench and Bar." The program runs from 1:00 to 4:15 p.m. at CAALA's office (800 W. 6th Street, Suite 700, Los Angeles), and will be followed by a "meet the judges" reception. It sounds like an excellent program, and if I were in Southern California I would definitely plan to attend.

Off-topic post: Supreme Court to decide In re Marriage Cases today

This is way off topic, but the Supreme Court will be handing down its eagerly-anticipated decision in In re Marriage Cases, no. S147999, today at 10:00 a.m. Some of the briefs from the case are collected at this link. When the opinion is posted, it should be available here: In re Marriage Cases, ___ Cal.4th ___ (May 15, 2008). This is the issue on review:

Does California's statutory ban on marriage between two persons of the same sex violate the California Constitution by denying equal protection of the laws on the basis of sexual orientation or sex, by infringing on the fundamental right to marry, or by denying the right to privacy and freedom of expression?

UPDATE: The Supreme Court, by a vote of 4-3, has answered that question in the affirmative:

Accordingly, in light of the conclusions we reach concerning the constitutional questions brought to us for resolution, we determine that the language of [Family Code] section 300 limiting the designation of marriage to a union “between a man and a woman” is unconstitutional and must be stricken from the statute, and that the remaining statutory language must be understood as making the designation of marriage available both to opposite-sex and same-sex couples.

Slip op. at 120.

New class certification decision: Bufil v. Dollar Financial Group, Inc.

In Bufil v. Dollar Financial Group, Inc., ___ Cal.App.4th ___ (Apr. 17, 2008; pub. ord. May 13, 2008), the Court of Appeal (First Appellate District, Division Four) reversed an order denying class certification of certain wage and hour claims. Notably, the Court distinguished Alvarez v. May Department Stores Co., 143 Cal.App.4th 1223 (2006), the collateral estoppel case.

"2007 Developments in California Class Action Law"

The Spring/Summer 2008 issue of Competition, the journal of the Antitrust and Unfair Competition Law Section of the State Bar of California, arrived in the mail last week. It includes several articles on antitrust law and one of interest to class action practitioners, "2007 Developments in California Class Action Law" by Pamela M. Parker of Coughlin Stoia Geller Rudman & Robbins LLP. The article is very comprehensive and discusses a number of recent class action cases of interest, including Capitol People First v. State Department of Developmental Services, 155 Cal.App.4th 676 (2007) and Lewis v. Robinson Ford Sales, Inc., 156 Cal.App.4th 359 (2007).

Articles from the Spring/Summer 2008 issue of Competition are not yet available online.

"SF Weekly penalty could rise to $15.6 million"

In today's San Francisco Chronicle, Bob Egelko reports that "SF Weekly penalty could rise to $15.6 million":

Judge Marla Miller of San Francisco Superior Court said she believes she's required under state law to increase the damages and issue an injunction in light of the jury's March 5 verdict that the SF Weekly, part of a national chain of alternative newspapers, cut its advertising rates below its costs to undermine the locally owned Guardian.

The jury awarded $6.3 million to the Guardian for its losses. Miller, in what she described as a tentative decision, said Friday she would triple the portion of those damages that equals one year of losses, bringing the total to $15.6 million, and prohibit the Weekly from selling below-cost ads in order to hurt the Guardian.

My prior post on this interesting Unfair Practices Act (and UCL) case is here. Business & Professions Code section 17082 requires trebling of any damages award in a UPA case ("any plaintiff in any such action shall be entitled to recover three times the amount of the actual damages, if any, sustained by the plaintiff"). It is unclear why the trebling would be limited to "one year of losses," however.

Interesting UCL restitution order: Ybarra v. Aramark Corp.

On May 1, 2008, Judge David C. Velasquez, Supervising Judge of the Orange County Superior Court Complex Civil Panel, issued an interesting order in a wage and hour case, Ybarra v. Aramark Corp., No. 30-2008-0018008-CU-OE-CXC (Orange Cty. Super.). Judge Velasquez held that waiting time penalties under Labor Code section 203 were recoverable under the UCL as "restitution":

In similar fashion to the "additional hour of pay" [in Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1108], the instant court observes that Labor Code §203 does not provide that the employer is "subject to" the imposition of the waiting time penalty. Rather that section states "the wages of the employee shall continue" if the employer does not pay separation wages within 72 hours of the employee's termination. The employee is not required to do anything affirmative — "take action" — in order to be entitled to the continuing right to wages. The right to the waiting time penalty is self-executing, i.e., the employee's right to payment of the waiting time penalty arises immediately upon the satisfaction of the condition precedent, late payment of the last wages due to the employee at the time of termination from employment. In that respect, because the waiting time penalty becomes immediately due and payable to the employee, the right to receive the penalty becomes a vested property right of the employee and the proper subject of restitution. (Cf. Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 178 [wages which are due but unpaid are the proper subject of restitution].)

Minute Order at 2. This would be a form of what I call "vested interest" restitution. Judge Velasquez therefore denied the motion to strike the complaint's references to UCL restitution and to the four-year statute of limitations (and overruled the defendant's demurrer to the UCL cause of action as a whole).

Many thanks to the blog reader who emailed this order to me. If you know of an interesting trial-level order like this one, I'd be glad to receive a copy of it (uclpractitioner@gmail.com).

Ninth Circuit memdispo partially reverses denial of class certification: Sepulveda v. Wal-Mart Stores, Inc.

In an unpublished memorandum disposition, Sepulveda v. Wal-Mart Stores, Inc., 2008 WL 1868333 (Apr. 25, 2008), the Ninth Circuit partially reversed an order denying class certification, holding that the district court correctly denied certification under Rule 23(b)(3), but applied the wrong standard in denying certification under Rule 23(b)(2). The underlying suit alleges misclassification of certain Wal-Mart assistant managers as exempt from California overtime laws, and it includes a UCL claim. See Sepulveda v. Wal-Mart Stores, Inc., 237 F.R.D. 229 (C.D. Cal. 2006).

The Ninth Circuit remanded for the district court to reconsider class certification under Rule 23(b)(2). The memdispo reads, in its entirety:

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.

REVERSED in part; AFFIRMED in part.

The Ninth Circuit cited some of the most pro-class-action parts of Gentry. For example, in the middle of page 462 of Gentry, the Supreme Court wrote:

We also agree with the Bell court that “class actions may be needed to assure the effective enforcement of statutory policies even though some claims are large enough to provide an incentive for individual action. While employees may succeed under favorable circumstances in recovering unpaid overtime through a lawsuit or a wage claim filed with the Labor Commissioner, a class action may still be justified if these alternatives offer no more than the prospect of ‘random and fragmentary enforcement’ of the employer's legal obligation to pay overtime.” (Bell, supra, 115 Cal.App.4th at p. 745, quoting Vasquez, supra, 4 Cal.3d at p. 807.) “By preventing ‘a failure of justice in our judicial system’ (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 434), the class action not only benefits the individual litigant but serves the public interest in the enforcement of legal rights and statutory sanctions.” (Bell, supra, at p. 741.) In other words, absent effective enforcement, the employer's cost of paying occasional judgments and fines may be significantly outweighed by the cost savings of not paying overtime.

Gentry, 42 Cal.4th at 462. And here is what the Supreme Court said at pages 464-65:

It is true that an employee may seek administrative relief from overtime violations with the Labor Commissioner through a “Berman” hearing procedure pursuant to [Labor Code] sections 98 to 98.8. (Added by Stats.1976, ch. 1190, §§ 4-11, pp. 5368-5371.) But a losing employer has a right to a trial de novo in superior court, where the ruling of the Labor Commissioner's hearing officer is entitled to no deference. (§ 98.2, subds. (b), (c); Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1116 (Murphy).) Thus, Berman hearings may result in no cost savings to the employee. Moreover, in Bell, in rejecting the same argument, the court considered a declaration by a former chief counsel of the DLSE, who stated that “ ‘[r]equiring two thousand or so class members to go through individual “Berman” hearings would obviously be extremely inefficient as compared to a single class action. Also, a deluge of claims would simply outstrip the resources of the DLSE ... impacting not only these claimants but others unrelated to this suit.’ ” [*465] (Bell, supra, 115 Cal.App.4th at p. 746, 9 Cal.Rptr.3d 544.) In short, Berman hearings are neither effective nor practical substitutes for class action or arbitration.

Id. at 464-65. I think we know where the Ninth Circuit wants the district court to go on remand.

[Via ClassActionBlawg.com; Class Action Defense Blog]

New Second Circuit decision: Ross v. Bank of America, N.A.

Ross v. Bank of America, N.A., ___ F.3d ___ (2d Cir. Apr. 25, 2008), is technically an antitrust case, but the Second Circuit's opinion is noteworthy for its discussion of arbitration clauses that ban class actions. The plaintiffs alleged that, beginning in late 1998 or early 1999, a group of banks met and agreed to include mandatory arbitration clauses with class action bans in all of their credit card agreements. Slip op. at 4-5. The plaintiffs claimed that the conspiracy violated federal antitrust laws, specifically, Section 1 of the Sherman Act (15 U.S.C. § 1). Id. at 5-6. The district court granted the defendant's motion to dismiss, holding that the plaintiffs lacked Article III standing because no defendant had threatened to enforce a collusively-formed arbitration provision against them. Id. at 6-7. The Second Circuit disagreed, and reversed:

The cardholders have adequately alleged antitrust injuries in fact. The Complaint asserts that, as a result of an illegal conspiracy and group boycott, the cardholders have been subjected to suppressed competition and “deprived of any meaningful choice on a critical term and condition of their general purpose card accounts.” Further, the district court recognized that “reduced choice and diminished quality of credit card services” were among the injuries asserted by the cardholders. In re Currency Conversion, 2006 U.S. Dist. LEXIS 66986, at *9. The Supreme Court has opined that one form of antitrust injury is “[c]oercive activity that prevents its victims from making free choices between market alternatives.” Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 528 (1983); see also Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 127 S.Ct. 2705, 2736 (2007) (Breyer, J., dissenting) (identifying “providing consumers with a free choice” about whether to choose lower prices or more services as “a basic antitrust objective”); FTC v. Ind. Fed’n of Dentists, 476 U.S. 447, 459 (1986) (“A refusal to compete with respect to the package of services offered to customers, no less than a refusal to compete with respect to the price term of an agreement, impairs the ability of the market to advance social welfare by ensuring the provision of desired goods and services to consumers at a price approximating the marginal cost of providing them.”). The Complaint alleges that reduced choice and diminished quality in credit services result directly from the banks’ illegal collusion to constrict the options available to cardholders. These harms are sufficiently “actual or imminent,” as well as “distinct and palpable,” to constitute Article III injury in fact. Denney [v. Deutsche Bank AG], 443 F.3d [253,] 264 [(2d Cir. 2006)].

The harms claimed by the cardholders, which lie at the heart of their Complaint, are injuries to the market from the banks’ alleged collusion to impose a mandatory term in cardholder agreements, not injuries to any individual cardholder from the possible invocation of an arbitration clause. The antitrust harms set forth in the Complaint – for example, the reduction in choice for consumers, many of whom might well prefer a credit card that allowed for more methods of dispute resolution – constitute present market effects that stem directly from the alleged collusion and are distinct from the issue of whether any cardholder’s mandatory arbitration clause is ever invoked. The reduction in choice and diminished quality of credit services to which the cardholders claim they have been subjected are present anti-competitive effects that constitute Article III injury in fact.

Id. at 8-9, 10. Interestingly, the Second Circuit accepted the argument that the cards were less valuable to consumers because (among other things) the class action bans meant that the class action bar would not be motivated to police the banks' conduct:

According to the cardholders, the conspiracy among the banks was designed to limit the choice of terms offered to cardholders, resulting in at least two ways in their receiving objectively less valuable cards than would otherwise have been the case. First, because the banks conspired not to offer cards permitting class actions, the cardholders will be forced to expend time and legal fees to monitor the legality of the banks’ behavior, whereas if the cardholders had access to a card that permitted class actions, they would have the option of relying on motivated class action attorneys to perform this function. If the cardholders chose not to monitor the banks – which would perhaps be more likely because, as the Complaint observes, actions that result in significant aggregate revenue to the banks (concerning, e.g., late fees, overlimit fees, foreign transaction fees, APR, etc.) generally harm individual consumers in only small amounts – they would still lose the services of class action attorneys. Either way, the cardholders would have been forced to accept a less valuable card as a result of the banks’ alleged collusion.

Second, the alleged conspiracy to limit the cardholders to cards that require arbitration of disputes also diminished the present value of the cards offered to the cardholders. A card that limits the holder to arbitration is less valuable (all other factors being equal) than a card that offers the holder a choice between court action or arbitration. Even assuming that the cardholders might be able to void that limitation when an actual dispute arises by opposing the banks’ motion to compel arbitration via a claim of antitrust collusion, that possibility is more theoretical than real for two reasons. The cost of litigating the antitrust issue when the particular dispute arises will almost certainly be disproportionate to the dispute. (A plaintiff will not spend a hundred thousand dollars in legal fees to litigate a five thousand dollar dispute.) Furthermore, the cardholders’ ability to prove the illegal collusion may well have evaporated with the passage of time, due to the deaths, retirements, changes of jobs, and fading memories of the participants and observers of the conspiratorial meetings, as well as the loss and destruction of documents.

We believe that at least in these two independent respects the cardholders have alleged an illegal conspiracy that resulted in a present injury by requiring them to accept less valuable cards than would otherwise have been available, but for the illegal collusion.

Id. at 10-12 (emphasis added). [Via Blawgletter]

"The Search for Intelligent Life in the Blogosphere"

The May 2008 issue of California Lawyer has a cover story called "The Search for Intelligent Life in the Blogosphere: A survival guide to legal blogs and blogging." The article mentions a number of California law blogs, including May it Please the Court by J. Craig Williams, Bag and Baggage by Denise Howell, and the California Biotech Law Blog by Kristie Prinz. It also discusses the history of law blogs, the benefits of blogging for lawyers (and readers), and offers "7 Tips for Successful Blogging."

I owe a particular debt of gratitude to Craig for mentioning my blog to the reporter who wrote the article:

For instance, if Williams needs an update on developments in California's Unfair Competition Law (Bus. & Prof. Code §§ 17200-17209), he goes straight to The UCL Practitioner (www.uclpractitioner.com). "I look there if I need to know the latest in the law," Williams says of the blog written by Kimberly A. Kralowec, a partner at Schubert & Reed in San Francisco. "I can count on Kimberly for that."

Craig has a new book coming out next month, How to Get Sued: An Instructional Guide, which I am looking forward to reading and hope to be able to review here.

Blog hiatus

The blog will be on a short hiatus, resuming next week. Please continue to email me at uclpractitioner@gmail.com.