Many thanks to attorney Kelly Chen for attending the Arias and Amalgamated arguments last week and for providing very detailed reports. Read Kelly's reports after the jump.
By Kelly Chen:
This morning the California Supreme Court heard oral argument in the Amalgamated and Arias cases. I arrived an hour early. This is the sixth time I’ve observed oral arguments before the California Supreme Court in my short legal career - - I was thinking: “I’m indeed lucky!” So enjoy:
Case No. S155965
Reporter: Kelly Y. Chen of Law Office of Kelly Y. Chen
Date: April 8, 2009 at 9:00 am.
This morning in Los Angeles, the California Supreme Court heard oral argument regarding whether Labor Code claims brought under the UCL and PAGA must be brought as a class action. Blanca Banuelos argued for the employees. Anthony Raimondo and Steven Drapkin argued on behalf of the employers.
The precise issues presented before the Court are as follows:
(1) Must an employee who is suing an employer for labor law violations on behalf of himself and others under the Unfair Competition Law (Bus. & Prof. Code, § 17203) bring his representative claims as a class action?
(2) Must an employee who is pursuing such claims under the Private Attorneys General Act (Lab. Code, § 2699) bring them as a class action?
Ms. Banuelos argued first and reserved five minutes for rebuttal. She began by discussing how UCL is a powerful procedural tool, until she was asked by Justice Corrigan to speak slowly (Corrigan also joked about that her brain does not process info as fast as it used to). Ms. Banuelos then proceeded with her prepared opening and discussed how PAGA actions are law enforcement actions that do not require class certifications.
She then informed the Court that she would start by addressing the first issue (i.e., re: UCL). As soon as she started to talk about the “plane language” of the statute, Justice Kennard interjected.
Justice Kennard and Ms. Banuelos then had an exchange about whether the plain language of UCL helps the employees. She asked: Do you think the average voter would have figured out what CCP 382 means? Ms. Banuelos said: No (then she referred to the voter info guide and how it focuses on the standing issue.)
Justice Kennard then noted that it is agreed the amendment to UCL was intended to change the standing requirement. Justice Kennard then talked about the voter information guide which the voters were asked to refer to and also the declaration by the Attorney General along with the voter information guide which requires private representative claims to “comply with the procedural requirement of class action.” She asked: “Should we ignore this??” I didn’t quite catch the response, before Chief Justice George jumped in: “These are materials for voters?” Ms. Banuelos said: Yes, but we have to look at the intent on its face….
Justice Kennard: When one goes to the information put before voters…I quote from the Attorney General “new proposed law requires the satisfaction of class action procedure”…Also, we have in the [ballot pamphlet material] which told the voters “a yes vote means a person pursuing UCL would have to meet the requirement of class action.” You are asking this Court to ignore these. You started by saying we should ascertain the intent of voters. How can we do this when we look at the ballot pamphlet material?
Justice Moreno then asked Ms. Banuelos what is her argument that would say UCL does not require class action? Ms. Banuelos responded by referring to the language of CCP 382 (i.e., commonality, numerosity, and impracticality) and when those are met there are no other requirements. She then argued that CCP 382 is not strictly a class action statute.
At the time, Justice George noted that this Court has made clear ruling that CCP 382 does encompass class action. Ms. Banuelos said: Yes it does, but it also allows representative actions. Justice George then clarified that Ms. Banuelos meant there is no inconsistency meaning that it’s either/or? Ms. Banuelos said: Yes.
Justice Kennard then broke in and said: If we agree with you, wouldn’t it be against action of voters? Before Prop 64, it was very easy to bring lawsuit under UCL. Voters, obviously, wanted to change something. What do you think they want to change? Ms. Banuelos responded that there are two changes: (1) the standing requirement, (2) the procedural requirement of CCP 382 that requires a common general interest.
Justice Werdegar then asked her first question: Before Prop 64, there was no requirement of common general interest? Ms. Banuelos said: No. Justice Werdegar continued: So in this respect, Prop 64 narrows [UCL] in what way? Ms. Banuelos said: Plaintiff has to have a common interest with the rest of the people it seeks to represent. Justice Werdegar then asked: Before Prop 64, any individual could bring a UCL action? Response: Yes. Justice Werdegar: So Prop 64 did have significant narrowing effect with respect to standing and the representative aspect? Response: Yes.
Justice Baxter then asked his first question of the day: So what is the disadvantage of class action? Ms. Banuelos responded by saying how some plaintiffs may not meet the requirements of class action. For example, an employee working for a small defendant may not satisfy the numorisity requirement. She then noted how in these smaller cases, the trial court should be allowed with its equitable power to decide how the case should proceed.
At this point, Ms. Banuelos returned to her prepared statement and cited various case law. When she began to discuss a PAGA case (I didn’t get the case name), Justice Kennard interrupted her: What you want us to conclude is that it does not requirement class certification…Why? Ms. Banuelos responded by referring to the legislative history and the language of the statute.
Justice Kennard stated: When you said the “language of the statute,” that is a pretty broad statement. I think Ms. Banuelos responded by discussing about notice requirement, the time period, etc in the language of PAGA….
Justice Kennard then asked: If we agree with you on the issue of UCL (i.e., Issue #1)…and say that CCP 338 requires only commonality, numerosity, etc…and that the voters just have that in mind and nothing in the ballot pamphlet material is considered, is there a due process problem? Ms. Banuelos responded “No” and referred to a prior UCL decision by this court and a line of other cases in which the court determined that the trial court can decide….(sorry, I didn’t catch it).
Justice Kennard then suggested that Ms. Banuelos meant to put it to trial court to decide due process violation. She responded: Yes.
Justice Werdegar then revisited the issue on the voter material and the declaration by the Attorney General: Do you have any authority that the court can interpret voter initiative contrary to what the ballot material says? Ms. Banuelos said no, but then she pointed out that the “ballot arguments” didn’t say that there is a class action requirement. Werdegar: But the Attorney General declaration said it does. Response: Yes. Werdegar then asked: If this court agrees with you, would it be the first time a court decide on the tension between the description and the actual language of the statute? Ms. Banuelos said that she does not have any authority to cite now, but she suggested that the court look at the plane language of the statute.
Justice Kennard then asked what do we do when the literal construction of the language would frustrate voter intent? I think Banuelos responded by saying something like this court is assuming that voter intent is what’s in the voter info guide. She then noted that the voter info guide actually creates a conflict with the plain language of the statute. She then said something about how the voter info guide is extrinsic evidence, etc.
Justice Werdegar then explained that the difficulty is we are talking about a voter initiative without legislation. She and Ms. Banuelos then had an exchange about what the voters understand in terms of class action procedure.
Ms. Banuelos’ time was up before she had the opportunity to address the PAGA issue (i.e., Issue #2 before the Court).
Mr. Raimondo began his argument by discussing the Fireside case in 2008 in which the court discussed the due process concerns. He then discussed how every Court of Appeal cases and the California Supreme Court in two cases concluded that Prop 64 does have the requirement of class action. He said that voter intent is clear from the passage of the voter initiative.
Justice Kennard quickly interjected and had an exchange with Mr. Raimondo about there is no need to construe the intent of the voter when it is clear by looking at the statute itself - - Mr. Raimondo agreed. Justice Kennard continued: Even though usually when we see the language is clear, there is no need for construction…I presume your view is the opposite? Mr. Raimondo responded: yes, late ambiguity can be created…Justice Kennard then asked: I presume intent prevails over the letters? Mr. Raimondo responded by discussion how the incorporation of CCP 382 into the statute made it clear.
Justice Kennard then continued: Since you agree here it is important to construe intent, I presume your position is that it is proper to look at the ballot material and the statement by the Attorney General. In addition, we have the ballot measure summary written by the Secretary of the State, which says “..the requirement of class action procedure…” Also, we have the initiative analysis which says that the new law has a class action requirement.
In response, Mr. Raimondo said: Yes, I don’t see how you can ignore such a clear intent.
Justice Kennard then asked Mr. Raimondo if there is a due process problem if this Court go with the opponent’s view which says that we can simply look at CCP 382 which does not say anything about class action. Mr. Raimondo said he agreed there will be a due process problem if this Court interpret that UCL does not require class action procedure. He then cited two cases and discussed how the court should ensure notice to be heard and adequate representation, etc.
At this point, Justice Moreno jumped in: Clearly CCP 382 authorizes class action, but does it preclude other types of actions? Mr. Raimondo said: Yes, especially in this type of case when one is seeking to recover for unnamed and unidentified plaintiffs. He then briefly discussed the need for unified procedure and the binding effect of settlements. He also discussed the risk of repetitive lawsuits in this type of representative actions. He suggested that the problem is there is no advance knowledge of who opted out.
Justice Moreno then asked: If we agree with you on UCL, what is the effect on PAGA? Mr. Raimondo said that it would have the same problem. If plaintiff brings a PAGA claim without class cert, the case is essentially hard to settle by the employer because penalty is calculated on a employee basis and there will be no way to value the case. However, if there is a settlement without class certification, then it’s unsure whether the settlement binds the rest of the employees. He then noted that only the class action procedure will remedy this problem. He also added that this is not just about the due process right of employers, but also the due process right of the employees.
Justice Baxter then asked Mr. Raimondo if he can imagine a circumstance in which, from the employer’s point of view, is better to have employees bring these claims as representative action instead of class action. He responded “no” because for settlement purposes employers need to make sure that the settlement binds all plaintiffs.
Justice Baxter then asked Mr. Raimondo to assume a small case with 3 or 4 employees and asked whether in that sense it is preferable to bring a representative claim? Mr. Raimondo responded by discussing the lack of binding effect and how it may create an even more adverse effect for a small employer.
Justice Baxter then asked a question which I didn’t catch. Mr. Raimondo’s response was: the City of San Jose case says due process of unnamed plaintiffs should not be left to the windfall of the litigants (or something like that).
At this point, Justice Werdegar had an exchange with Mr. Raimondo about whether the courts accepted/rejected the representative action procedure prior to Prop 64. She then asked: Is it your position that, without the class action requirement we would violate Prop 64? Response: Yes. Justice Werdegar then pointed out how all the voters can grasp is something about how going forward (i.e., post Prop 64) would require actual injury of the plaintiff - - which is the most prominent in the mind for voters when looking at Prop 64. Mr. Raimondo responded by commenting about the sophistication of voters.
Justice Werdegar and Mr. Raimondo then had an exchange about what’s required before and after Prop 64, before his time was up.
Mr. Drapkin began his argument by pointing out that the lower court was wrong by holding that PAGA does not require class action. He then went into details about the language of the statute. He then discussed the popularity of overtime litigation violations of Labor Code 1194 enables private suit under the Labor Code. He said it does not require class action, but everyone says we should bring them as class actions. He then cited some famous wage and hour class actions (e.g., Savon, Albertsons, etc). He then said that when plaintiffs can’t certify the underlying requirement of Labor Code violations, but they can turn around and sue for penalties under PAGA without the requirement of class action - - and how he thinks this is “wrong.”
Justice Kennard interrupted him and noted four reasonings given by the Court of Appeal to reach the holding that PAGA claims do not require class action procedure. She mentioned two of those reasonings: (1) the language of the statute does not reference 382 (2) under PAGA, private litigants essentially are brining law enforcement actions. Mr. Drapkin commented the notion that a private litigant may step in the shoe of Attorney General is “wrong” because there is a difference between public prosecution of a case and private litigants bringing a case. He then noted that nothing exempts PAGA from the requirement of a class action procedure.
Ms. Banuelos began her rebuttal by discussing the issue on PAGA (i.e., second issue before the court) which she didn’t have time to do so earlier. She discussed mainly about the actual language of PAGA that refers to the procedural requirement of PAGA.
Ms. Banuelos also noted that class action procedure is not the only way to eliminate due process problems. She suggests that trial court may figure that out.
In addition, she spoke about how the legislature could have amend PAGA, but it chose to pass it without the class action requirement.
Finally, she reiterated that the legislative intent is clear that PAGA does not require class action certification.
Case No. S151615
Reporter: Kelly Y. Chenof Law Office of Kelly Y. Chen
Date: April 8, 2009 at 10:00 am.
Immediately following the Arias argument, the Court proceeded to hear the Amalgamated case which concerns 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?
John L. Anderson argued on behalf of the union. James N. Foster argued on behalf of First Transit (i.e., employers). Marcus Torrano argued on behalf of Progressive Transportation Services (i.e., employers.). Mr. Dunham Also argued on behalf of the employers.
Mr. Anderson began his argument by discussing the standing requirement under the UCL and the standing requirement under the Constitution. He then discussed the Sprint Communications case and how the court found the same standing right of the assignee v. assignor (i.e., for standing granted under the Constitution).
He then cited another case in which class claims were brought by an assignee and the court was acting as a class representative.
With respect to PAGA, he mentioned that “aggrieved employee” has standing to sue. He then explained that “aggrieved” means that one suffers from an “injury” listed under the statute which includes meal and rest period provisions. He said the assignment to the union basically transfers that “injury.”
Justice Kennard then broke in and discussed the “rule of assignment” in general is that a cause of action is assignable because it involves the transfer of legal rights. She then said when one looks at the PAGA language, there is no substantive right or legal right. Instead, it is just a procedural aspect. She then noted that this Court held previously that there is no assignment of penalties.
Mr. Anderson explained that what is being assigned is the cause of action (rather than the penalties). Justice Kennard responded: But I just said there is no legal rights….
Mr. Anderson responded by explaining that the predicate injury (which is the violation of the labor code provisions) give rise to LC 2699 (a) or (f). He then noted: Without that, no person has a right to sue under PAGA. He added that whether PAGA results in collection of penalties seems to him irrelevant.
Mr. Anderson then said that there is nothing in the statute that says one has to be an “actual” person to bring a claim under PAGA. He said the word “person” is defined in Labor Code section 18 which also includes “association, organization, etc.”
He then moved on to Issue #2.
He started out his argument on this issue by referring to what this Court has already heard from the earlier Arias oral argument. He then said: I can only reiterate CCP 382 says absolutely nothing about class action requirement.
At this point, Justice Chin asked his first question: How do you get around the “aggrieved employee” language? The union is not an employee. Mr. Anderson responded by saying that the phrase “aggrieved employee” is meant to describe the predicate violation. He then went on and said that in a PAGA action, an aggrieved employee is a “person” which can be an actual person, an organization, a corporation, etc as defined by Labor Code section 18. He then said that he doesn’t think it’s a stretch to say that assignment to union means the union is now the “aggrieved employee.”
Mr. Anderson then continued with his prepared argument by discussing about the history of CCP 382. He then said the requirement in the UCL to comply with section 382 means two things: (1) the case should proceed with class action, (2) the case should proceed without class action. He then said it all depends on the type lawsuit. He said union lawsuits have always been okay without proceeding as class action on the claims brought on behalf of the members.
Additionally, he commented how voters were voting on the law, not on the Attorney General’s declaration or the analyst summary. If there is any ambiguity, he said, we should look at the language of Prop 64. He said: if they really mean to include class action requirement, why not just include it. He then noted there is a whole body of law that discussed section 382 without class action.
Justice Werdegar interrupted: Before Prop 64, did they have to comply with section 382. Response: Off course. Justice Werdegar: So Prop 64 allows that to continue, what changes did it make? I didn’t get Mr. Anderson’s response (my bad).
Mr. Anderson then went on to discuss the professional firefighter’s case and cases brought by homeowner associations and how these cases brought under UCL never had to satisfy the class action procedure.
Mr. Foster began by pointing out that a “union” is not a “aggrieved employee.”
Justice Kennard quickly jumped in and had an exchange with Mr. Foster about what “aggrieved employee” means.
Justice Kennard proceeded to ask why did the voters include that section 382 language, given that Mr. Anderson just said that there was also the requirement of section 382 even before Prop 64? Mr. Foster’s response: To curve out the unions from suing. He said because the language is clear that only an injured person may sue.
Mr. Foster then proceeded with his argument with respect to the standing issue. He said it would be a due process nightmare. Also, there is a problem when not everyone assigns the right to the union. He then reminded the Court that claims with penalties are definitely not assignable, although the Labor Code causes of action may be assignable.
Justice Kennard interjected again: But you may recall the opponent’s argument which referenced Labor Code 2699.3(a)(1) which says “aggrieved employee or representative….” Is it your position that this section says nothing about standing? Response: Correct.
Mr. Torrano wanted to start his argument by throwing some facts into the game. Interestingly, Justice Kennard immediately interrupted him.
She asked: Based on the doctrine of associational standing, would you agree that doctrine was developed in federal court? Mr. Torrano responded by commenting that concept of associational standing was eliminated by Prop 64.
Justice Kennard further asked: So, the language of UCL by Prop 64 is inconsistent with federal doctrine of associational standing? Mr. Torrando responded: Yes.
Mr. Torrando then continued to return to his prepared argument and discussed the facts. He then commented that union interjection seems like a side show. He suggested that if the Court look at all of the law discussed today, it would find that union is not an “aggrieved” party. He went on and then told the court that he’d be happy to address any question. I think it was Justice Corrigan who said to him: “No questions.”
He then ended his argument by asking the Court to look at the facts.
Mr. Dunham started by discussing the assignment issue. He asked whether the statute provides for penalty or something else. He said: Clearly penalty!
Justice Baxter then asked if these claims brought under PAGA will pass to the executor of estate or personal representative upon death? Mr. Dunham said he does not know estate law enough to answer that question.
Mr. Dunham went on and even cited Murphy where the Court said legislature certainly knows when to impose penalty when it wants to. Here, he said, the legislature certainly may impose associational standing if it really wants to. [I thought this was a stretch…but maybe it’s just me being too junior].
Mr. Dunham then stated that, EVEN if PAGA claims are assignable, what is assigned is the penalty, not the cause of action. He said PAGA is a procedural mechanism which is not assignable, since one can only assign rights to recover money or property. He suggested that such assignment of PAGA claims is defective.
Again, he reiterated how penalty is not assignable, nor is procedural rights.
At this time, Mr. Dunham turned to address the issue on UCL. Justice Kennard quickly asked him how would he respond to the idea that the inclusion of section 382 means the inclusion of “common interest.” Mr. Dunham responded by noting that Prop 64 did make many changes, one of which is the elimination of associational standing. He said there must be injury in fact, loss of property, etc. He then mentioned that if there is ambiguity then we must look at voter intent. Again, he argued that there is class action requirement. He said: “Attorney General said that. The Secretary of State said that.”
Justice Baxter then asked whether there might be circumstances, for example, when a homeowner association might suffer an injury in addition to the injury its members suffer? Mr. Dunham responded: Yes.
At this time, Mr. Anderson began his rebuttal by stating that he might be mistaken because it seems to him that the issue concerning the UCL is whether the union may bring a representative action. He said, a union may sue on behalf of its assignors, but also others who are similarly situated. He said the assignment is the injury in fact suffered by the assignor which has been assigned to the union. He then commented that there are circumstances in which a HOA can suffer injury, and there are two ways this could happen: (1) the HOA actually suffered an injury, or (2) the HOA is assigned an injury suffered by its members.
With respect to PAGA, he discussed a bit regarding the issue of penalty and cited various Labor Code sections. He said, for example, section 203 penalty is assignable. Also, Labor Code section 218 actually says: “sue directly or through an assignee…”
He said the opponent said union is not an employee (under PAGA I think), so there is no standing. He then said that the opponent also said there is no injury in fact, so there is no standing under UCL. He then suggested that the opponent can only prevail if they can show that an union has no standing under assignment for both of these.
[Kelly, many thanks again for your great reporting. --KAK]