In Abdullah v. U.S. Security Associates, Inc., ___ F.3d ___ (9th Cir. Sept. 27, 2013), the Ninth Circuit affirmed class certification in a case involving security guards who were required to sign "on duty" meal period agreements. The court's analysis relies heavily on Brinker and Faulkinbury.
This morning's Daily Journal has a story by Laura Hautala on Judge Dato's order yesterday granting class certification of the meal period class on remand in Brinker. The story begins:
The meal and rest breaks case against Brinker Restaurant Corp. that led to a landmark state Supreme Court decision in 2012 is moving closer to trial after a judge Thursday granted class certification to hourly employees seeking damages for missed breaks.
This afternoon, San Diego County Superior Court Judge William S. Dato certified the meal period subclass in Brinker. He also denied a motion filed by Brinker to decertify the rest break subclass. His tentative ruling, which he confirmed as an order at the hearing today, is available at this link.
As you may remember, in Brinker, the Supreme Court affirmed certification of the rest break subclass, but reversed certification of the meal period subclass with directions to reconsider on remand. Now, both subclasses are certified.
Judge Dato's ruling extensively cites the Supreme Court's opinion, and also favorably cites Faulkinbury and Brinkley (two of the Brinker "grant and hold" cases).
[Disclosure: I was the employees' lead appellate counsel in the Supreme Court in this case.]
Back in February, I reported on Jolley v. Chase Home Finance, LLC, 213 Cal.App.4th 872 (2013), in which the Court of Appeal (First Appellate District, Division Two), applying the post-Cel-Tech formulation, held that a finding of "unfair" conduct could be predicated on an expression of
legislative policy embodied in the Legislature's subsequent enactment of
a bill outlawing the conduct.
In a recently-published opinion, another Division of the Court of Appeal (the Fourth Appellate District, Division One) disagreed with this part of Jolley. Aspiras v. Wells Fargo Bank, N.A., ___ Cal. App. 4th ___ (Aug. 21, 2013; pub. ord. Sept. 17, 2013).
The Aspiras opinion explains:
[I]n our view, use of the Legislature's enactment of laws
against dual tracking as the underlying basis for a UCL cause of action where
the assertedly unfair conduct occurred before January 1, 2018, as here, is to
effectuate an improper retroactive application of the law. Where a plaintiff predicates a claim of an
unfair act or practice on public policy, it is not sufficient to merely allege
the act violates public policy or is immoral, unethical, oppressive or
unscrupulous. (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1365.) Rather, this court on numerous occasions has
held that to establish a practice is "unfair," a plaintiff must prove
the defendant's "conduct is tethered to an underlying constitutional,
statutory or regulatory provision, or that it threatens an incipient violation
of an antitrust law, or violates the policy or spirit of an antitrust
law." (Id.,at p. 1366; Levine
v. Blue Shield of California (2010) 189 Cal.App.4th 1117, 1137; Scripps Clinic v. Superior Court (2003) 108 Cal.App.4th 917, 940; Byars
v. SCME Mortgage Bankers, Inc. (2003) 109 Cal.App.4th 1134, 1147.)
plaintiffs' operative complaint fails to state a claim under the unfairness
prong of the UCL because they cannot allege Wells Fargo's alleged dual
tracking, when it occurred in 2010, offended a public policy tethered to any
underlying constitutional, statutory or regulatory provision. (Durell v. Sharp Healthcare, supra, 183 Cal.App.4th at p.
1366.) The trial court properly
sustained Wells Fargo's demurrer to that cause of action without leave to
Slip op. at 19-20.
This case might be a good one for Supreme Court review. The opinion not only creates a split in authority with Jolley (and, in doing so, articulates principles inconsistent with Rose), but also appears to squarely present the three-way split on the definition of "unfair." The Court applied the post-Cel-Tech formulation, found the allegations inadequate, and ended its analysis. Under the pre-Cel-Tech formulation, which the panel declined to consider, the outcome might have been different. I think that's what it will take for the Supreme Court to accept a case presenting the split. What I can't tell from the opinion is whether the argument has been preserved; possibly, the plaintiffs conceded that the post-Cel-Tech formulation applied.
The plaintiffs in Rodriguez v. RWA Trucking Co., ___ Cal.App.4th ___ (Sept. 12, 2013; mod. Sept. 20, 2013), a certified class action, were owner-drivers who contracted with the defendant trucking company to haul cargo in their rigs. They brought UCL "unlawful" prong claims based on the defendant's practice of charging them for auto insurance, physical damage insurance, cargo insurance, and workers’ compensation insurance. Plaintiffs asserted that none of these forms of insurance could be sold except by a licensed insurance broker (under Ins. Code section 1631), which the defendant was not, and that the workers' compensation insurance charges were prohibited by the Labor Code (section 3751). Slip op. at 2-7.
The trial court ruled in plaintiffs' favor on all claims. The Court of Appeal (Second Appellate District, Division Four) reversed in part, holding that the claims related to the liability, damage and cargo insurance were preempted by federal law, but that the claim based on the workers' compensation insurance charges was not. Slip op. at 8-39.
In the next section of the opinion, the Court of Appeal addressed the prejudgment interest awarded by the trial court on the original judgment. Id. at 39-43. Following M&F Fishing, Inc. v. Sea-Pac Ins. Managers, Inc., 202 Cal.App.4th 1509 (2012), the Court held that "Civil Code section 3287 does not authorize prejudgment interest on an award of restitution under the UCL." Id. at 40. However, the Court concluded, the trial court does have power to award such interest under its "inherent discretionary authority." Id. at 43. The Court remanded for determination of whether interest was appropriate on the affirmed part of the judgment. Id. at 40, 43.
Other courts have reached a different conclusion on the prejudgment interest question,1 but if Rodriquez and M&F stand up, what it means as a practical matter is that prejudgment interest is discretionary, but not mandatory, in UCL actions.
1See, e.g., In re Neurontin Marketing and Sales Practices Litigation, 2011 WL 3852254, *60 (D. Mass. Aug. 31, 2011); Irwin v. Mascott, 112 F.Supp.2d 937, 956 (N.D. Cal. 2000) (citing Tripp v. Swoap, 17 Cal.3d 671, 681 (1976)).
UPDATE: On December 11, 2013, the Supreme Court issued a "grant and hold" order in this case, making the Court of Appeal opinion uncitable as precedent. Rodriguez v. RWA Trucking Co., No. S214150. Briefing has been deferred pending resolution of People ex rel. Harris v. Pac Anchor Transportation, Inc., No. S194388, in which the Court is considering preemption by the Federal Aviation Administration Authorization Act of 1994 (49 U.S.C. § 14501) ("FAAAA").
First off, on a personal note, I was away on vacation the first two weeks of September. My husband and I went to French Polynesia for our tenth anniversary. We had a wonderful time. (Things were so busy right before we left that I did not have time to put up an "on hiatus" post.)
Upon my return, among two weeks' worth of emails, was news that the Ninth Circuit had withdrawn its opinion in the Wang case (previously published at 709 F.3d 829 (9th Cir. 2013)), and issued a new opinion, Wang v. Chinese Daily News, Inc., ___ F.3d ___ (9th Cir. Sept. 3, 2013).
The new opinion still reverses the district court's class certification order, and still remands for redetermination of whether common questions exist and predominate. Slip op. at 16. Technically speaking, the plaintiffs' rehearing petition was denied. Id. at 4-5. The new opinion, however, is different from the original opinion in several important respects.
Most significantly, the new opinion entirely omits a paragraph that had misconstrued Dukes (as I observed in my post on the original opinion). The now-omitted paragraph read:
In Wal-Mart, the Supreme Court disapproved what it called “Trial by Formula,” wherein damages are determined for a sample set of class members and then applied by extrapolation to the rest of the class “without further individualized proceedings.” Wal-Mart, 131 S. Ct. at 2561. Employers are “entitled to individualized determinations of each employee’s eligibility” for monetary relief. Id. at 2560. Employers are also entitled to litigate any individual affirmative defenses they may have to class members’ claims. Id. at 2561. If the district court again certifies a class under Rule 23(b)(3), it should calculate damages in light of the Supreme Court’s admonitions in Wal-Mart.
Withdrawn opn., slip op. at 15.
The deletion of this paragraph from the new opinion is very significant, because Dukes simply did not hold that defendants are "entitled" to insist on litigating "any" affirmative defenses with individualized proof. The discussion of "Trial by Formula" appeared in a section of Dukes addressing special statutory requirements applicable only in Title VII cases, not in ordinary wage and hour cases like Wang. Nor did Dukes disapprove the use of evidentiary extrapolations in class litigation, as the paragraph suggested. See Kimberly A. Kralowec, "Dukes and Common Proof in California Class Actions," 21 Competition 9, 11-12 (Summer 2012).
The second important change is the deletion of this sentence: "Plaintiffs must show 'significant proof that [CDN] operated under a general policy of [violating California labor laws].' Ellis, 657 F.3d at 983 (quoting Wal-Mart, 131 S. Ct. at 2553 (alteration omitted))." Withdrawn opn., slip op. at 10. This sentence, too, erroneously imported a legal standard unique to Title VII (and discussed in that context in both Dukes and Ellis).
NELA's amicus brief in support of rehearing urged both of these changes, and explains in detail why they are so important.
Finally, the new opinion acknowledges that certification of the injunctive relief claim may be appropriate on remand under Rule 23(b)(2). New opn., slip op. at 12, 16. The earlier opinion held (incorrectly) that the class representatives lacked standing to seek such relief because they were all former employees. Withdrawn opn., slip op. at 11.
Standard Fire addressed whether the plaintiff could avoid federal jurisdiction under CAFA by stipulating that classwide damages did not exceed $5 million or by attempting to waive damages above that figure. The answer was no, although this did not relieve the defendant (as the removing party) of its burden to prove that the amount-in-controversy requirement was met.
In Rodriguez, the parties agreed that Standard Fire required reversal of the district court's remand order, which was issued before the opinion in Standard Fire. The Ninth Circuit directed the district court to reconsider the remand motion. Slip op. at 7.
Regarding the burden of proof, the panel determined that Standard Fire overruled Lowdermilk v. U.S. Bank National Association, 479 F.3d 994 (9th Cir. 2007) (discussed here), which had imposed a "legal certainty" standard, instead of an ordinary preponderance of the evidence standard, for countering the complaint's amount-in-controversy allegations:
Lowdermilk's imposition of the legal certainty standard is clearly irreconcilable with
Standard Fire. We hold that
Standard Fire has so undermined the reasoning of our decision in
Lowdermilk that the latter has been effectively overruled. A
defendant seeking removal of a putative class action must demonstrate,
by a preponderance of evidence, that the aggregate amount in controversy
exceeds the jurisdictional minimum. This standard conforms with a
defendant's burden of proof when the plaintiff does not plead a specific
amount in controversy.
A lead plaintiff of a putative class cannot reduce the amount in controversy on behalf of absent class members, so there is no justification for assigning to the allegation weight so significant that it affects a defendant's right to a federal forum under § 1332(d)(2). Our reasons for applying a legal certainty standard are now clearly irreconcilable with intervening Supreme Court authority. Accordingly, Lowdermilk has been effectively overruled by Standard Fire.
Slip op. at 14, 15.
Back when Standard Fire was first handed down, a blog reader emailed me to suggest that it overruled Lowdermilk. It turns out this reader was right on according to Rodriguez.
This is one of the three cases in which the U.S. Supreme Court issued a "grant, vacate and transfer" (or "GVR") order post-Comcast. As it did in its original opinion, the Seventh Circuit (in an opinion by Judge Posner) reversed the district court's order denying class certification of claims for breach of warranty arising out of alleged defects in the defendant's front-load washers.
A lot of language from the original opinion was retained and appears in the new one. The discussion of Comcast appears at pp. 5-8. Here are a few sound bites:
"Sears is wrong to think that anything a dissenting opinion approves of the majority must disapprove of." Slip op. at 7 (emphasis in original). (This brings to mind Justice Werdegar's concurrence in Brinker; some litigants have argued that the rest of the justices must have disagreed with everything she said, or they would have joined it. It is equally possible that they considered the matters unnecessary to the opinion.)
"As we explained in McReynolds v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 672 F.3d 482, 491-92 (7th Cir.2012), distinguishing Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541 (2011), a class action limited to determining liability on a class-wide basis, with separate hearings to determine—if liability is established—the damages of individual class members, or homogeneous groups of class members, is permitted by Rule 23(c)(4) and will often be the sensible way to proceed. " Slip op. at 7.
"Sears thinks that predominance is determined simply by counting noses: that is, determining whether there are more common issues or more individual issues, regardless of relative importance. That's incorrect. An issue “central to the validity of each one of the claims” in a class action, if it can be resolved “in one stroke,” can justify class treatment. Wal–Mart Stores, Inc. v. Dukes, supra, 131 S.Ct. at 2551. That was said in the context of Rule 23(a)(2), the rule that provides that class actions are permissible only when there are issues common to the members of the class (as of course there are in this case). But predominance requires a qualitative assessment too; it is not bean counting." Slip op. at 8-9 (citing Amgen).
"It would drive a stake through the heart of the class action device, in cases in which damages were sought rather than an injunction or a declaratory judgment, to require that every member of the class have identical damages. If the issues of liability are genuinely common issues, and the damages of individual class members can be readily determined in individual hearings, in settlement negotiations, or by creation of subclasses, the fact that damages are not identical across all class members should not preclude class certification. Otherwise defendants would be able to escape liability for tortious harms of enormous aggregate magnitude but so widely distributed as not to be remediable in individual suits." Slip op. at 9-10.
"There is a single, central, common issue of liability: whether the Sears washing machine was defective. Two separate defects are alleged, but remember that this class action is really two class actions. In one the defect alleged involves mold, in the other the control unit. Each defect is central to liability. Complications arise from the design changes and from separate state warranty laws, but can be handled by the creation of subclasses." Slip op. at 10-11.
My post on the Sixth Circuit's post-Comcast Whirlpool opinion is here. In other blog coverage on Butler v. Sears, Paul Karlsgodt predicts that moldy washing machines will save the consumer class action from extinction.
We still await the Seventh Circuit's post-Comcast opinion in the third GVR case, RBS Citizens, N.A. v. Ross, no. 12-165. This one is an employment matter.
In Glaski v. Bank of America, N.A., ___ Cal.App.4th ___ (Jul. 31, 2013; pub. ord. Aug. 8, 2013), an individual wrongful foreclosure action, the Fifth District has a single paragraph addressing the UCL:
on the foregoing, we conclude that Glaski’s fourth cause of action has stated a
claim for wrongful foreclosure. It
follows that Glaski also has stated claims for quiet title (third cause of
action), declaratory relief (fifth cause of action), cancellation of
instruments (eighth cause of action), and unfair business practices under
Business and Professions Code section 17200 (ninth cause of action). (See Susilo
v. Wells Fargo Bank, N.A. (C.D.Cal. 2011) 796 F.Supp.2d 1177, 1196
[plaintiff’s wrongful foreclosure claims served as predicate violations for her
Slip op. at 26-27. The citation to a federal district court decision suggests that no other California Court of Appeal opinion has addressed whether conduct constituting wrongful foreclosure (which is a catch-all term that can encompass a variety of defects in the foreclosure process, including statutory violations) can form the predicate for a UCL claim. There's no reason why it shouldn't, particularly after Rose and Zhang reconfirmed the broad scope of the UCL's "unlawful" prong.
In Hendelman v. Los Altos Apartments, L.P., ___ Cal.App.4th ___ (Jul. 22, 2013; pub. ord. Aug. 20, 2013), the Court of Appeal (Second Appellate District, Division Three) affirmed the trial court's order denying class certification in an action by tenants against their landlord for breach of the implied warranty of habitability (and related claims).
The only new cases added to the list are five more "grant and holds" involving arbitration issues and stayed pending resolution of Sanchez or Iskanian. Removing all the "grant and hold" cases from the list, here's what's pending. (If I've missed any, please drop me an email.)
There are two class certification cases (Ayala and Duran); three arbitration-related cases (Sonic-Calabasas, Sanchez, and Iskanian); one preemption case (Pac Anchor); and one "unfair" prong case (Cipro):
Issue: This case presents questions concerning the determination of whether
common issues predominate in a proposed class action relating to claims
that turn on whether members of the putative class are independent
contractors or employees.
Issues: (1) Did AT&T Mobility LLC v. Concepcion (2011) 563 U.S. __ [131 S.
Ct. 1740, 179 L.Ed.2d 742] impliedly overrule Gentry v. Superior Court
(2007) 42 Cal.4th 443 with respect to contractual class action waivers
in the context of non-waivable labor law rights? (2) Does the high
court's decision permit arbitration agreements to override the statutory
right to bring representative claims under the Labor Code Private
Attorneys General Act of 2004 (Lab. Code, § 2698 et seq.)? (3) Did
defendant waive its right to compel arbitration?
Issue: This case presents issues concerning the
certification of class actions in wage and hour misclassification
litigation and the use of representative testimony and statistical
evidence at trial of such a class action.
Issue: Does the Federal Arbitration Act (9 U.S.C. § 2), as interpreted in AT&T Mobility LLC v. Concepcion
(2011) 563 U. S. __, 131 S.Ct. 1740, preempt state law rules
invalidating mandatory arbitration provisions in a consumer contract as
procedurally and substantively unconscionable?
Issue: May a suit under the Cartwright Antitrust
Act (Bus. & Prof. Code, § 16720 et seq.) be brought to challenge
"reverse exclusionary payments" made by pharmaceutical manufacturers to
settle patent litigation with generic drug producers and prolong the
life of the patents in question?
Issue: Is an action under the Unfair Competition
Law (Bus. & Prof. Code, § 17200 et seq.) that is based on a trucking
company's alleged violation of state labor and insurance laws "related
to the price, route, or service" of the company and, therefore,
preempted by the Federal Aviation Administration Authorization Act of
1994 (49 U.S.C. § 14501)?
Issues: (1) Can a mandatory
employment arbitration agreement be enforced prior to the conclusion of
an administrative proceeding conducted by the Labor Commissioner
concerning an employee's statutory wage claim? (2) Was the Labor
Commissioner's jurisdiction over employee's statutory wage claim
divested by the Federal Arbitration Act under Preston v. Ferrer (2008) __ U.S. __, 128 S.Ct. 978, 169 L.Ed.2d 917?
U.S. Supreme Court Order (10/31/11): The petition
for writ of certiorari is granted. The judgment is vacated, and the
case is remanded to the Supreme Court of California for further
consideration in light of AT&T Mobility LLC v. Concepcion, 563 U.S. ___ (Apr. 27, 2011).
Supreme Court Order (01/11/12): In light of the
United States Supreme Court's order vacating our judgment in the
above-entitled case and remanding the cause to this court "for further
consideration in light of AT&T Mobility LLC. v. Concepcion,
563 U.S. __ (2011) [131 S.Ct. 1740]," the parties are requested to
brief the significance of that case. The parties are requested to file
and serve simultaneous briefs by February 10, 2012, and may file and
serve reply briefs by February 24, 2012.
In People v. Persolve LLC, ___ Cal.App.4th ___ (Aug. 15 2013), the Court of Appeal (Fifth Appellate District) reinstated a UCL "unlawful" prong claim brought by the Kern County District Attorney against a debt collection company for violation of the Rosenthal Act (Civ. Code §§ 1788 et seq.) and the federal Fair Debt Collection Practices Act (15 U.S.C. §§ 1692 et seq.).
The trial court held that the litigation privilege barred the action because the challenged debt-collection activity related to anticipated litigation. Slip op. at 2. The parties did not really dispute, and the Court of Appeal seemed to agree, that the conduct fell within the scope of the privilege because it bore some relation to anticipated litigation (i.e., a lawsuit to enforce the debt). See id. at 5-6.
The disputed question was whether applying the privilege would make the fair debt collection practices statutes effectively inoperable, and in turn, whether a UCL "unlawful" prong claim predicated on those statutes' violation should be permitted notwithstanding the privilege. See id. at 6-7. The Court of Appeal noted that the privilege is "not without limit," and that "Courts
have found exceptions to [it] based on irreconcilable
conflicts between the privilege and other coequal state laws." Id. at 6. An earlier decision, Komarova v. National Credit Acceptance, Inc., 175 Cal.App.4th 324 (2009), held that "the privilege cannot be used to shield violations" of the Rosenthal Act. Id. at 7. The same reasoning applied to the federal Act, the Court held. Id. at 8.
The defendants pointed out that the DA's enforcement action was brought under the UCL, not the state or federal debt collection statutes. They relied on two decisions holding that the litigation privilege can bar UCL claims. Id. at 8-9 (citing Rubin v. Green, 4 Cal.4th 1187 (1993); People ex rel. Gallegos v. Pacific Lumber Co., 158 Cal.App.4th 950 (2008) (discussed in this blog post)).
The Court of Appeal was not persuaded:
as here, the “borrowed” statute is more specific than the litigation privilege
and the two are irreconcilable, unfair competition law claims based on conduct
specifically prohibited by the borrowed statute are excepted from the
litigation privilege. Applying the
privilege to unlawful practices based on specific violations of the California
Act and the Federal Act would effectively render the protections afforded by
those acts meaningless. In contrast, in
both Rubin and Gallegos, the application of the litigation privilege did not
render the prohibitions underlying the unfair competition claims significantly
or wholly inoperable. Civil statutes for the protection of the
public should be interpreted broadly in favor of their protective purpose. Accordingly, the People’s unfair competition
law claims that are based on conduct that is specifically prohibited by the
California Act and/or the Federal Act are not barred by the litigation
privilege. (Komarova, supra, 175 Cal.App.4th at pp. 339-340.)
Id. at 9-10 (emphasis added). This reasoning should apply not only in public prosecutor actions, but also in cases brought by private litigants.
month the California Supreme Court issued two significant Unfair
Competition Law cases, Zhang v. Superior Court and Rose v. Bank of
America. With these two decisions, the California Supreme Court appears
to be embracing a more expansive interpretation of UCL. In this
informative program, the lawyers who argued the two cases before the
California Supreme Court will discuss the impact these decisions will
have on future UCL cases.
On August 2, 2013, Judge Breyer denied the renewed motion for class certification filed in Dukes v. Wal-Mart after remand. Dukes v. Wal-Mart Stores, Inc., 2013 WL 3993000 (N.D. Cal. Aug. 2, 2013).
The renewed motion sought certification of a much smaller class, consisting of employees of stores in Wal-Mart's "California regions." The class of 150,000 proposed members was only 10% the size of the nationwide class of 1.5 million originally certified by Judge Jenkins. But Judge Breyer found that the smaller proposed class "suffers from the same problems identified by the Supreme Court, but on a somewhat smaller scale." Id. at *10.
Interestingly, he said that what the plaintiffs should have done was "identify an employment practice and define a class around it." Id. He was "not impressed" with their effort to connect Wal-Mart's disparate treatment of women (which the statistical evidence appears to establish) with assertedly common practices that they had not identified or advanced in their earlier motion.
A complete list of links to all the briefs filed in this case is here. (Disclosure: I am one of the attorneys for CELA in this case and authored CELA's amicus brief.)
Briefing is now complete in this case, unless the Supreme Court grants leave for additional briefs to be filed.
On an unrelated subject, last week I noted that the oral argument calendar for September had been announed, and that no cases of interest were scheduled. However, At the Lecternpointed out that on September 4, 2013, the Court will hear argument in Garcia on Admission, no. 202512, which involves whether an undocumented immigrant who graduated from law school and passed the bar exam can be admitted to practice law.
This is an interesting case for sure, although unrelated to what I normally cover on this blog. The briefs in the case are here.
Yesterday, the California Supreme Court posted its oral argument calendar for September 2013. None of the cases I'm following has been set. More than one arbitration-related case is fully briefed and ready for argument, including Sanchez v. Valencia Holding Co., no. S199119 (review granted 03/21/12). Sanchez has calendar preference, and briefing was completed last November.
In other news, this week the parties filed their responses to the amicus briefs in Duran v. U.S. Bank National Association, no. S200923 (review granted 05/16/12). I will be posting those online and adding them to my list of Duran briefs later. Duran is now fully briefed, although it may be a very long time before the case is argued.
On July 26, 2013, a petition for a writ of certiorari was filed with the U.S. Supreme Court by the objectors in the Lane v. Facebook case. Marek v. Lane, no. 13-136.
In its original opinion in this case, the Ninth Circuit affirmed a class action settlement with a significant cy pres component. Lane v. Facebook, Inc., 696 F.3d 811 (9th Cir. 2012). En banc rehearing was denied in February, with six judges strenuously dissenting. Lane v. Facebook, Inc., 709 F.3d 791 (9th Cir. 2013).
The cert. petition describes the issue presented as follows:
Federal Rule of Civil Procedure 23(e)(2) requires that a settlement that binds class members must be“fair, reasonable, and adequate.” In this case, the Ninth Circuit upheld approval of a settlement that disposed of absentee class members’ claims while providing those class members no relief at all. Breaking with decisions of the Second, Third, Fifth, Seventh, and Eighth Circuits, the Ninth Circuit held that the settlement’s award of $6.5 million to establish a new foundation controlled by the lead defendant and class counsel was a fair and adequate remedy under the trust-law doctrine of cy pres. The question presented is:
Whether, or in what circumstances, a
cy pres remedy that provides no direct relief to class members comports with the requirement of Rule 23(e)(2) that a settlement that binds class members must be“fair, reasonable, and adequate.”
It will of course be very interesting to see whether this case is taken up. The other pending U.S. Supreme Court petition that I'm currently following is POM Wonderful LLC v. The Coca Cola Co., No. 12-761 (U.S.) (discussed here). This case has already been relisted once.
If you are aware of any other pending cert. petitions of interest, please drop me an email.
hold that Moradi-Shalal does not
preclude first party UCL actions based on grounds independent from section
790.03, even when the insurer’s conduct also violates section 790.03. We have made it clear that while a plaintiff
may not use the UCL to “plead around” an absolute
bar to relief, the UIPA does not immunize insurers from UCL liability for
conduct that violates other laws in addition to the UIPA. (Manufacturers
Life Ins. Co. v. Superior Court (1995) 10 Cal.4th 257, 283-284 (Manufacturers Life); see also Cel-Tech Communications, Inc. v. Los Angeles
Cellular Telephone Co. (1999) 20 Cal.4th 163, 182-183 (Cel-Tech); Quelimane Co. v.
Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 43 (Quelimane); Stop Youth
Addiction, Inc. v. Lucky Stores, Inc. (1998) 17 Cal.4th 553, 565 (Stop Youth Addiction).)
Here, plaintiff alleges causes of action for
false advertising and insurance bad faith, both of which provide grounds for a
UCL claim independent from the UIPA.
Allowing her also to sue under the UCL does no harm to the rule
established in Moradi-Shalal.
Slip op. at 2 (footnote omitted) (citing Moradi-Shalal v. Fireman’s Fund Ins. Companies, 46 Cal.3d 287 (1988)).
Time permitting later in the week, I will provide more thoughts on Zhang in a future post.
The opinions handed down yesterday in Rose v. Bank of America, N.A., ___ Cal.4th ___ (Aug. 1, 2013), and Zhang v. Superior Court (Cal. Capital Ins. Co.), ___ Cal.4th ___ (Aug. 1, 2013), were both unanimous and both authored by Justice Corrigan (with a concurrence by Justice Werdegar in Zhang). Both decisions reaffirm the longstanding general rule that a UCL "unlawful" prong claim may be predicated on a violation of any law — state or federal, statutory or court-made — regardless of whether the underlying law independently carries a private right of action.
Here are my thoughts on Rose, and I'll discuss Zhang on Monday.
Rose involved a UCL "unlawful" prong claim predicated on violations of the federal Truth in Savings Act ("TISA") (12 U.S.C. §§ 4301 et seq.). TISA previously carried an explicit statutory private right of action, but Congress allowed that provision to expire 10 years after it was enacted. Rose, slip op. at 1-2. The Court of Appeal held that this (in)action evinced an intention by Congress to preclude private civil enforcment, and that the UCL claim was therefore barred. Id. at 3.
The Supreme Court disagreed, and reversed.
The opinion discusses a series of "familiar principles on which the UCL operates." Id. at 5. One of them is that the UCL's "unlawful" prong may "borrow" a federal statute as the predicate violation even if "Congress has decided not to allow private enforcement of the federal law." Id. The opinion explains:
have made it clear that by borrowing requirements from other statutes, the UCL does
not serve as a mere enforcement mechanism.
It provides its own distinct and limited equitable remedies for unlawful
business practices, using other laws only to define what is “unlawful.” (See Korea
Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1150 [UCL provides
equitable avenue for prevention of unfair business practices, with streamlined
procedures and limited remedies].) The
UCL reflects the Legislature’s intent to discourage business practices that
confer unfair advantages in the marketplace to the detriment of both consumers
and law-abiding competitors.
Id. at 7.
The only exceptions to this general rule are narrow ones: if the UCL action is actually barred by some other prinicple of law, or if some other law explicitly authorizes or immunizes the challenged conduct, the UCL claim may not proceed. As Rose explains:
is settled that a UCL action is not precluded “merely because some other
statute on the subject does not, itself, provide for the action or prohibit the
challenged conduct. To forestall an
action under the [UCL], another provision must actually ‘bar’ the action or
clearly permit the conduct.” (Cel-Tech, supra, 20 Cal.4th at p. 183; see Zhang v. SuperiorCourt (Aug.
1, 2013, S178542) __ Cal.4th __ [pp. 12-14]; Stop Youth Addiction, supra,
17 Cal.4th at p. 566.)
Id. at 8 (emphasis added). Even evidence of a legislative "intent to create a comprehensive, exclusive scheme" for regulating a particular field is not enough to "actually bar" a UCL action. Id. at 6 (citing Stop Youth Addiction, Inc. v. Lucky Stores, Inc., 17 Cal.4th 553, 560 (1998)). Such an action "enforc[es] the UCL, not the statutes underlying [the] claim of unlawful business practice." Id.
In Rose, no such bar existed. The proposed UCL claim was not actually precluded by any other act of Congress or by any other affirmative expression of legislative intent. On the contrary, an unexpired TISA provision expressly permitted "private actions under state laws consistent with TISA. Thus, the abolition of the TISA remedy does not amount to a bar against UCL claims." Id.
The opinion reiterates this fundamental point:
UCL ... is meant to provide remedies cumulative to those established by other
laws, absent express provision to the contrary.
(Bus. & Prof. Code, § 17205.)
We have long recognized that the existence of a separate statutory
enforcement scheme does not preclude a parallel action under the UCL. (Stop
Youth Addiction, supra, 17
Cal.4th at pp. 572-573, citing cases.)
Id. at 9-10 (italics in original; bold added) (footnote omitted).
The opinion ends with an interesting footnote citing Bowen v. Ziasun Technologies, Inc., 116 Cal.App.4th 777 (2004) (discussed in theseblogposts). Bowen held that "the UCL does not apply to claims arising from securities transactions." Rose, slip op. at 10 n.8. The Supreme Court observed that "[w]hatever the scope and merits of that holding may be, it does not apply here." Id. (citations omitted). I think this suggests that the Court may view Bowen as inconsistent with the principles reaffirmed in Rose. (In Overstock.com, Inc. v. Gradient Analytics, Inc., 151 Cal.App.4th 688 (2007) (discussed here), another Court of Appeal panel declined to follow Bowen.) The Court has reserved that question for another case and another day.
As between Rose and Zhang, Rose was the more straightforward case. The opinion is shorter (11 vs. 24 pages) and, unlike Zhang, unanimous in its reasoning (7-0 with no concurrence). It does not really break any unbroken ground, and is based instead on "familiar principles" long established in the Supreme Court's UCL jurisprudence. I think the opinion will serve to restrain lower courts from construing the UCL's "unlawful" prong more narrowly than the Supreme Court's older precedents warranted (as may have happened in Bowen, for example, as well as in Rose below, and in another case even more recently).
In Murphy v. DirecTV, Inc., ___ F.3d ___ (9th Cir. Jul. 30, 2013), the Ninth Circuit examined whether Best Buy was entitled to invoke, as an an agent, third-party beneficiary, of otherwise, an arbitration clause in a contract between the consumer plaintiffs and DirecTV. The answer was no, allowing the UCL and CLRA class action to proceed against Best Buy.
The Supreme Court recently denied review in two cases involving class certification of wage and hour claims.
On July 24, 2013, the Court denied review and depublication in Faulkinbury v. Boyd & Associates, no. S211515. Faulkinbury was the last remaining Brinker "grant and hold" case. The Court of Appeal's original 2010 opinion affirmed the trial court's order denying class certification of meal period and rest break claims, but on transfer after Brinker, the Court of Appeal reversed, and directed the trial court to certify those classes. See this blog post for more on the new Faulkinbury opinion.
On July 10, 2013, the Court denied review and depublication in Dailey v. Sears Roebuck and Co., no. S210355. This case involved class certification of claims stemming from an employer's alleged misclassification of certain employees. The trial court denied class certification, and the Court of Appeal affirmed. My original, short post on Dailey is here.
The Court also recently denied review in a third wage and hour case, Gonzalez v. Downtown LA Motors, no. S210681 (rev. den. Jul. 17, 2013). (This case does not involve class certification issues, so I did not previously cover it here.)
It appears that the Supreme Court remains uninterested in taking up additional wage and hour cases after Brinker and Duran. That won't last forever, of course.
In Avery v. Integrated Healthcare Holdings, Inc., ___ Cal.App.4th ___ (Jun. 27, 2013; pub. ord. Jul. 23, 2013), the Court of Appeal (Fourth Appellate District, Division Three) affirmed an order denying the defendant's petition to compel individual arbitration in a wage and hour class action. The panel determined that the plaintiffs had not agreed to be bound by the arbitration clause, which was contained in an employee handbook.
The opinion concludes with this paragraph:
emphasize our decision is based solely on the insufficiency of Integrated’s
evidence. We do not suggest an
arbitration provision in an employee handbook is unenforceable or that
employees cannot agree to arbitration by signing an acknowledgment form
regarding an employee handbook that contains an arbitration provision. Rather, we affirm the trial court decision
because the incomplete and confusing patchwork of documents Integrated
submitted prevents us from finding an enforceable arbitration agreement. Because we affirm the trial court’s decision
based on the insufficiency of Integrated’s evidence, we do not address the
merits of the parties’ contentions concerning the unconscionability of the [arbitration clause].
In Shearin v. Brown, ___ Cal.App.4th ___ (Jul. 11, 2013), the Court of Appeal (Second Appellate District, Division Five) affirmed the trial court's order denying class certification in an action alleging that the plaintiffs and similarly situated inmates had been unlawfully detained in prison beyond their release dates.
UPDATE: Although the slip opinion identified the case title as Shearin v. Brown, this case was published in the official reports as Lopez v. Brown, 217 Cal.App.4th 1114 (2013).
In Watkins v. Vital Pharmaceuticals, Inc., ___ F.3d ___ (9th Cir. Jul. 2, 2013) (per curiam), the Ninth Circuit reversed another remand order after holding that the district court had jurisdiction under CAFA. This time, the opinion addresses the $5 million amount-in-controversy requirement and how it is established.
Judge Fisher filed a separate opinion concurring and dissenting in part.
In Roth v. CHA Hollywood Medical Center L.P., ___ F.3d ___ (9th Cir. Jun. 27, 2013), the Ninth Circuit reversed the district court's remand order, finding that the federal courts had jurisdiction under CAFA and that the defendants' removal petition was not untimely.