The UCL Practitioner

"$40 million damages in hair-regrowth scam upheld"

An article by Bob Egelko in today's San Francisco Chronicle reports on an unpublished opinion handed down on Wednesday by the First Appellate District, Division Five.  Thomas v. Imbriolo, case no. A130517. 

The opinion upholds the jury verdict and judgment in a UCL and CLRA class action (certified by Judge Freedman) against the owner of a company that misrepresented the efficacy of its hair-regrowth product.

First post-Brinker class certification decision

In Schulz v. QualServ LLC, 2012 U.S. Dist. LEXIS 58561 (C.D. Cal. Apr. 26, 2012), Judge Anthony J. Battaglia of the Central District of California granted class certification of meal period, rest break and off-the-clock claims, relying heavily on Brinker.

This is the first post-Brinker order of this kind that I am aware of.  Many thanks to the blog reader who forwarded it.

U.S. Supreme Court denies cert. in Brown v. Ralphs Grocery Co.

Before getting back to Brinker, here is some news on the arbitration front. 

As I reported last week, the U.S. Supreme Court was scheduled to consider Brown v. Ralphs Grocery Co. during its conference last Friday.  Ralphs Grocery Co. v. Brown, no. 11-800. 

Yesterday, the Supreme Court denied the cert. petition.  Here is a link to the order list.

No further appellate review is possible.  In Brown v. Ralphs Grocery Co., 197 Cal.App.4th 489 (2011), the Court of Appeal (Second Appellate District, Division Five) held that representative PAGA claims are not subject to arbitration, even after Concepcion. 

Six takeaways from Brinker for California workers

As I said in a post on Thursday after the Supreme Court handed down Brinker Restaurant Corp. v. Superior Court (Hohnbaum), ___ Cal.4th ___ (Apr. 12, 2012), the decision overall is a victory for California workers. To explain this, here are six takeaways from the opinion.  (For my regular audience, I will have more on the class certification aspects of the opinion in a future post.) 

1.    California law guarantees lunch breaks for hourly workers in California. 

In Brinker, the Supreme Court confirmed that California law "guarantee[s] ... meal and rest periods intended to ameliorate the consequences of long hours."  Slip op. at 1 (emphasis added). Misleading news reports may have created doubt about this, but no one should harbor any doubt.  Everyone who works more than five hours in a shift and who wants a lunch break still gets to take one after Brinker. 

2.    Workers must be actually relieved of all duty by their employers for their meal periods.  Workers must be free to leave the workplace and may use the meal period time for whatever purpose they desire. 

In the Brinker case, the Supreme Court addressed the scope of an employer's obligation to "provide" meal periods under California law, and considered exactly what employers must do to comply with the law. 

Here is how the petition for review described this issue: 

Under the Labor Code (§§226.7 and 512) and Industrial Welfare Commission (“IWC”) Wage Orders (¶11), must an employer actually relieve workers of all duty so they can take their statutorily-mandated meal periods, as held in Cicairos v. Summit Logistics, Inc., 133 Cal.App.4th 949 (2005), review & depub. denied, no. S139377 (01/18/06)? Or may employers comply simply by making meal periods “available,” as held in Brinker Restaurant Corp. v. Superior Court (Hohnbaum), 165 Cal.App.4th 25 (Jul. 22, 2008)?

Petition for Review at 1 (footnote omitted); see also Opening Brief on the Merits at 1, 4, passim. 

The Supreme Court agreed with the workers that an employer must actually relieve workers of all duty so they can take their statutorily-mandated meal periods, as held in a 2005 case called Ciciaros v. Summit Logistics, Inc., 133 Cal.App.4th 949 (2005).   Slip op. at 36 (citing Cicairos).  In so holding, the Court also cited two other worker-friendly decisions that interpreted the employer's duty in the same protective way.  See id. (citing Jaimez v. Daiohs USA, Inc., 181 Cal.App.4th 1286 (2010), Dilts v. Penske Logistics, LLC, 267 F.R.D. 625 (S.D. Cal. 2010)).

Notably, the Brinker opinion does not so much as mention the main decisions relied on by the employer (and by the Court of Appeal below and by other appellate panels thereafter), Brown v. Federal Express Corp., 249 F.R.D. 580 (C.D. Cal. 2008) and White v. Starbucks Corp., 497 F.Supp.2d 1080 (N.D. Cal. 2007).  Brown and White tried to distinguish Cicairos and held that the employer need only "offer" meal breaks or make them "available."  Those courts relied on a dictionary definition of the word "provide," which the Supreme Court conspicuously did not adopt, holding instead that the word "provide" in Labor Code section 512 is "shorthand for the requirement contemplated in subdivision 11 of most of the IWC's wage orders."  Slip op. at 31. 

In short, it is safe to say that for guidance after Brinker, lower courts should look to Cicairos, Jaimez, and Dilts, as Brinker construed those decisions, and not Brown or White. 

The Supreme Court did reject an additional part of the workers' argument, based on a 2010 Supreme Court decision, Martinez v. Combs, 49 Cal.4th 35 (2010), which interpreted the word "employ" as used in the Wage Orders.  The Supreme Court held that the employer is not obligated to "prohibit work" during meal periods.  Brinker, slip op. at 33.  While the term "employ" is defined in the Wage Orders as to "engage, suffer or permit" to work, the Court reasoned that the phrase "[n]o employer shall employ," which appears in the Wage Orders' meal period provisions, is "part of the definition of the trigger [of the meal period obligation], not of the obligation [itself]."  Id. at 34.  Put another way, if a worker is "employed" (that is, suffered or permitted to work) for a shift exceeding five hours, that worker is entitled to the thirty-minute meal period described in the Wage Orders.  See id. 

This part of the holding is why many employers have expressed satisfaction with the Brinker opinion.  We argued, in part, that employers were required to ensure that workers actually took their meal periods, not merely by relieving workers of all duty, but also by prohibiting work during meal periods.  The Court held employers need not "police" the workplace for this purpose (id. at 36) — which is not something we argued was necessary to comply with the standard we advanced.  Nonetheless, many employer-side interests have expressed relief that the Court did not go that far. 

Still, the employer who sits back and takes "no responsibility" for complying with the meal period laws beyond making meal periods "available" does so at its peril.  Id. at 27.  Brinker holds that the employer must take the active step of "afford[ing] an off duty meal period," which means "actually relieving an employee of all duty" and "relinquish[ing] control over their activities," without "pressuring employees to perform their duties in ways that omit breaks," and without "exerting coercion against the taking of, creating incentives to forego, or otherwise encouraging the skipping of legally protected breaks."  Id. at 35-36 (emphasis added).  Adopting a written policy that purportedly "allows" meal periods is not going to be enough.  See id. at 36.  What is required of the employer is to afford workers "[b]ona fide relief from duty and the relinquishing of control" over the workers' activities.  Id. 

Brinker thus preserves significant worker protections that the lower court's opinion, and the employer-side interests, would have stripped entirely away.  Given where things stood after the Court of Appeal issued its (now-superseded) opinion in 2008, this is a major win for workers. 

3.    Workers are entitled to a ten-minute rest break for every four hours worked or major fraction thereof.

The Court of Appeal's superseded opinion in this case would have halved the number of rest breaks that workers would get during an ordinary workday. Here is the statement of this issue in the petition for review:

Under the Labor Code (§226.7) and Wage Orders (¶12), which require ten minutes’ rest time “per four (4) hours or major fraction thereof,” must employers provide a ten-minute rest break to employees who work between two and six hours, a second ten-minute rest break to employees who work more than six hours and up to ten, a third ten-minute rest break to employees who work more than ten hours and up to fourteen (etc.), as stated in DLSE Op.Ltr. 1999.02.16? Or may an employer compel employees to work an eight-hour shift with only a single rest break, as held in Brinker?

Petition for Review at 1-2.

Answering this question, the Supreme Court rejected the Court of Appeal's holding in Brinker and adopted the workers' position, ruling as follows:

Employees are entitled to 10 minutes’ rest for shifts from three and one-half to six hours in length, 20 minutes for shifts of more than six hours up to 10 hours, 30 minutes for shifts of more than 10 hours up to 14 hours, and so on.

Brinker, slip op. at 20.  What this means as a practical matter is that 10-minute rest breaks accrue at the second, sixth, and tenth hours of work, rather than at the fourth and eighth hours, as the Court of Appeal erroneously held.  The Supreme Court reached this conclusion by adopting the workers' argument as to the meaning of the phrase "ten (10) minutes net rest time per (4) hours or major fraction thereof."  Id. at 18-22 (quoting Wage Order 5, ¶12(A) (8 Cal. Code Regs., §11050, ¶12(A)) (emphasis added).  As we pointed out, in longstanding IWC and DLSE parlance, "major fraction" of four hours means any time over two hours.  Id. at 19. 

So, on an eight-hour shift, your first ten-minute rest break accrues once you've completed two hours' work and begun the third hour, and your second ten-minute rest break accrues once you've completed six hours' work and started the seventh hour.  The rest breaks must then be scheduled, to the extent practicable in good faith, "in the middle of each work period."  Id. at 22 (quoting Wage Order 5, ¶12(A)). 

The Supreme Court rejected the employers' construction of the Wage Orders, adopted by the Court of Appeal below, which would have meant that "[a]n employee working a seven-hour shift ... would be entitled to only 10 minutes' rest" — in effect, a single rest break in an 8-hour day.  Id. at 20. This again is an important win for workers. 

4.    Employers may not require workers to push their lunch to the end of the workday.  Instead, workers must be relieved of duty for lunch no later than the end of the fifth hour of work.

The Supreme Court also addressed whether employers are required to relieve workers of duty for their lunch periods at any particular time during the workday. 

This is how the issue was described in the petition for review:

Do the Labor Code (§§226.7 and 512) and Wage Orders (¶11) impose a timing requirement for meal periods? Or can employers provide a meal period at any time during a shift of up to ten hours without becoming liable for an extra hour of pay under section 226.7(b), as held in Brinker?

Petition for Review at 1.

The Supreme Court held that California law "requires a first meal period no later than the end of an employee's fifth hour of work."  Brinker, slip op. at 37 (emphasis added); see id. at 38 ("first meal periods must start after no more than five hours").  For employees on long shifts, the law also requires "a second meal period no later than the end of an employee's 10th hour of work."  Id.

What this means as a practical matter is that employers cannot require workers to take "lunch" during the last hour of an eight-hour workday or just before the worker goes home.  This is a significant ruling for employees, because pushing meal times to the end of the workday has been a common form of employer subterfuge, and the Court of Appeal's opinion in this case (now superseded by the Supreme Court's ruling) would have allowed it. 

The second part of this question is whether employers may require workers to take "lunch" at the beginning of the workday, as opposed to the end of the workday.  The answer to this question, according to the Supreme Court, is yes.  Unless you are fortunate enough to work in the motion picture industry (governed by Wage Order 12), your employer may adopt an "early lunching" schedule and require you to take "lunch" during your first hour of work, and then continue working the rest of the day, potentially up to 9.5 more hours straight, without a second meal period. Brinker, slip op. at 43-47. 

Motion picture industry workers, by contrast, are entitled to meal periods at six-hour intervals.  Id. at 47 & n.26.  If an employer in that industry requires workers to take "lunch" from 9:00-9:30 a.m., the employer must relieve those workers of duty for a second meal period no later than six hours after the first one, at 2:30 p.m.  For everyone else, the employer can require them to keep working until 7:30 p.m., for a total of 10 hours, with no further meal period. 

This is probably the biggest loss for workers in the Brinker opinion.  As a result of this holding, it is now a very real possibility that many California employers will try to flout the purpose of the meal period laws by adopting mandatory "early lunching" schedules, which were relatively uncommon before.  It requires a legislative fix, especially given the disparity in treatment of certain workers in the motion picture industry, who now enjoy significantly greater protections for no discernible industry-specific reason. 

The Supreme Court agreed with our painstakingly-developed argument that the historical Wage Orders, dating back to the 1940s, prohibited "early lunching" without a second meal five hours later.  Slip op. at 41-43.  The Court went on to hold, however, that in the 2001 series of Orders, the IWC "abandoned any requirement that work intervals be limited to five hours following the first meal break." Id. at 44.  I must very respectfully disagree with the Court's conclusion here, and hope that a legislative fix will be soon adopted. 

5.    As a general matter, meal and rest break time should be appropriately spaced throughout the workday.

The second rest break question raised in the Brinker case was whether the first rest break must be allowed before the first meal period.  As framed in the petition for review:

Under the Labor Code (§226.7) and Wage Orders (¶12), may employers withhold the first rest break until after the first meal period, as held in Brinker?

Petition for Review at 2.  

The Supreme Court held that the wage orders do not categorically require that the first rest break precede the first meal period.  Brinker, slip op. at 22-23. "Employers are ... subject to a duty to make a good faith effort to authorize and permit rest breaks in the middle of each work period, but may deviate from that preferred course where practical considerations render it infeasible."  Id. at 22 (emphasis added).

However, the Supreme Court did agree that as a general matter, in the context of an ordinary eight-hour shift, "one rest break should fall on either side of the meal break."  Id. at 23. While "[s]horter or longer shifts and other factors that render such scheduling impracticable may alter this general rule" (id.), it follows that the ordinary workday should generally consist of a rest break in the morning (accrued at the end of the second hour), a lunch break near the middle of the day (no later than the end of the fifth hour), and another rest break in the afternoon (accrued at the end of the sixth hour).  To deviate from this "general," "preferred" schedule, the employer will have to make a case that adhering to it is "impracticable" or "infeasible." 

Thus, if an employer adopts a companywide practice of not authorizing a rest break before the first meal period (such as, for example, by adopting "early lunching" schedules that leave no time for a rest break before the meal), that practice can still be challenged under Brinker.  It is not categorically unlawful in every workplace, but in some workplaces, it may be. 

In other words, the Court confirmed the basic outlines of the protective meal and rest break structure of the Wage Orders, first established by the IWC decades ago. 

6.    The IWC may adopt meal period and rest break requirements that are more protective than those of the Labor Code

This part of the Supreme Court's holding may be of more direct interest to employment lawyers than to laypersons.  The Supreme Court reconfirmed the longstanding rule of Industrial Welfare Commission v. Superior Court (Cal. Hotel & Motel Assn.), 27 Cal.2d 690 (1980), which held that the IWC Wage Orders may be more protective than the Labor Code's minimum floor.  The Supreme Court applied that rule to meal periods notwithstanding Labor Code section 516, which the employers had argued (and the Court of Appeal held) repealed that holding for meal periods.  Brinker, slip op. at 39-40. 

The IWC has long been understood to have the power to adopt requirements beyond those codified in statute.  (Industrial Welfare Com. v. Superior Court, supra, 27 Cal.3d at p. 733; Cal. Drive-in Restaurant Assn. v. Clark, supra, 22 Cal.2d at pp. 292-294; see also ante, at p. 17.)  Section 516 creates an exception; it bars the use of this power to diminish section 512’s protections:  Except as provided in Section 512, the Industrial Welfare Commission may adopt or amend working condition orders with respect to break periods, meal periods, and days of rest for any workers in California consistent with the health and welfare of those workers.”  (Italics added).  While the Legislature in section 516 generally preserved the IWC’s authority to regulate break periods, it intended to prohibit the IWC from amending its wage orders in ways that “conflict[] with [the] 30-minute meal period requirements” in section 512.  (Legis. Counsel’s Dig., Sen. Bill No. 88 (1999-2000 Reg. Sess.) 6 Stats. 2000, Summary Dig., p. 212; see Bearden v. U.S. Borax, Inc. (2006) 138 Cal.App.4th 429, 438.)  In the absence of a conflict, however, the IWC may still augment the statutory framework with additional protections on matters not covered by section 512; that is, the Legislature did not intend to occupy the field of meal period regulation.  (See, e.g., Assem. Com. on Labor & Employment, 3d reading analysis of Sen. Bill No. 88 (1999-2000 Reg. Sess.) as amended Aug. 10, 2000, p. 4 [authorizing the IWC to regulate so long as the orders it adopts are “consistent” with § 512]; § 226.7 [imposing premium wages for violations of the IWC’s meal period provisions, rather than § 512].)

Brinker, slip op. at 39-40 (italics in original; bold added).  The opinion went on to discuss whether the Wage Orders provided greater protections than the Labor Code when it comes to meal period timing (addressed above).

The IWC has been defunded since 2004 (as the Brinker opinion itself notes (slip op. at 17 n.8)), but whenever its activities resume, this part of Brinker will provide helpful guidance.

In conclusion, there are parts of Brinker that each side can be proud of.  But I for one am most proud of how far the Court was willing to go to maintain meaningful meal period and rest break protections for California workers.

As will be seen in my next post on this case, the Court was likewise willing to preserve the class action mechanism as a means of enforcing these protections. 

"Employer liability for rest breaks clarified by high court"

The Daily Journal reports this morning that "both management and labor find something to tout in high court's employment decision." 

Unfortunately, the article makes a significant misstatement that needs to be corrected.  According to the article, Brinker held that "[e]mployers must only make meal-and-rest breaks available."  That is not what Brinker held.

Brinker rejected that argument, holding instead that employers must take significant affirmative steps beyond making meal periods "available":

The employer satisfies [its meal period compliance] obligation if it relieves its employees of all duty, relinquishes control over their activities and permits them a reasonable opportunity to take an uninterrupted 30-minute break, and does not impede or discourage them from doing so.  What will suffice may vary from industry to industry, and we cannot in the context of this class certification proceeding delineate the full range of approaches that in each instance might be sufficient to satisfy the law.

 Slip op. at 36 (emphasis added) (citing, e.g., Cicairos v. Summit Logistics, Inc., 133 Cal.App.4th 949 (2005)); see id. at 31 ("Employers must afford employees uninterrupted half-hour periods in which they are relieved of any duty or employer control and are free to come and go as they please."); id. at 6, 27 (describing rejected employer argument that "an employer is obligated only to 'make available' meal periods"). 

Yes, the Court declined to accept the final additional bit of our argument, that employers must also "prohibit work" during meal periods (which, by the way, is not the same thing as "policing" the workplace, which was never part of our argument).  Slip op. at 33.  But the opinion adopts 90% of what we contended employers were obligated to do to comply with their meal period obligations, while rejecting the employers' contention that meals need only be "offered." 

Brinker press coverage

Here are links to some of the press coverage.  Some the press reports are misconstruing the opinion.  I recommend reading the opinion rather than relying on headlines:

"Brinker a win for employers, but plaintiffs cheering, too" (The Recorder) (This article says that "the court ruled that employers need only permit meal breaks for employees."  That is a misreading of the opinion.  Employers must not merely "permit" meal periods but must also take action to relieve workers of all duty, relinquish control over their activities, and create bona fide and uninterrupted breaks, without doing anything to interfere with breaks as in Cicairos.  Slip op. at, e.g., 36.  In other words, employers must take almost all of the affirmative steps that we advanced. The opinion places a significantly greater burden on employers than "offer" or "make available," the standard the employers advanced and that was adopted by the Court of Appeal below and in federal district court decisions like Brown and Starbucks.  The only step the employer need not take, according to the Court, is to "prohibit work.") 

"Workers' class action against Brinker can proceed, in part" (Reuters)

"California employers must give workers breaks, court rules" (Bloomberg)

"California employers must provide meal breaks, court says" (Wall Street Journal Law Blog)

"State high court rules workers get half-hour break" (San Francisco Chronicle)

"Restaurants must give employees breaks every five hours, state supreme court rules" (SF Weekly)

"California Supreme Court: It's not the boss's problem if employees work during breaks" (San Jose Mercury News) (See my comments above.)

"Employers not liable if workers skip breaks" (Los Angeles Times) (Again, that does not capture the opinion, which plainly held that employers must relieve workers of all duty for their meal periods, and that employers are liable if they don't -- which is precisely what we argued.)

"California businesses relieved by ruling on workplace breaks" (Ventura County Star)

Brinker: the opinion is up

The opinion is up.  Brinker Restaurant Corp. v. Superior Court (Hohnbaum), ___ Cal.4th ___ (Apr. 12, 2012). 

More later.

UPDATE:  I've never gotten so many calls from reporters in a single day before.  With all the calls, and reviewing and analyzing the 50-page opinion, I haven't had time to write up my thoughts yet.  I will do that as soon as I can, hopefully by tomorrow. 

In the meantime, suffice it to say we are extremely pleased with the opinion.  Brinker is a win for California workers, no two ways about it. 

The Supreme Court rejected the employers' primary argument that meal periods need only be "offered"; adopted almost all of our arguments regarding the steps an employer must take to comply with the meal period laws; and reconfirmed the availability of the class action device as a means to vindicate California wage and hour protections for the benefit of workers.  The Court reinstated the trial court's order granting certification of the rest break class in full.  The Court held that employers may not push workers' meal periods to the end of the workday, and that "as a general matter," on a typical eight-hour shift, one rest break should fall on either side of the meal period.  In other words, the Court confirmed the most important components of the basic protective structure of the Wage Orders, first established decades ago. 

There's a lot more to say about the opinion and I hope to have time soon to say it.

BREAKING NEWS: Supreme Court to hand down Brinker opinion tomorrow

As expected, the Supreme Court has announced that it will hand down its opinion tomorrow in Brinker Restaurant Corp. v. Superior Court (Hohnbaum), no. S166350.  Tomorrow is the ninetieth day following resubmission on January 13, 2012. 

When posted tomorrow morning at approximately 10:00 a.m., the opinion should be available at this link:

• Brinker Restaurant Corp. v. Superior Court (Hohnbaum), ___ Cal.4th ___ (Apr. 12, 2012)

I will try to cover the opinion here in the morning (although I expect to be just a little busy). 

At least two MCLE programs on Brinker have already been announced.

On Wednesday, April 18, 2012, at noon-1:00 p.m., the Labor and Employment Law Section of the State Bar of California will present a webinar entitled "Letters from the Brink: Life in California after Brinker."  The speakers will be Eric Kingsley of Kingsley and Kingsley, Mark Rudy of Rudy, Exelrod & Zieff, and Dominic Messiha of Littler Mendelson.

On Monday, April 23, 2012, at noon-1:45 p.m., the Labor and Employment Law Section of the Bar Association of San Francisco will present an in-person seminar with simultaneous live webcast:  "CA Supreme Court's Decision in Brinker v. Superior Court."  The panelists are Paul Cane of Paul Hastings LLP, Michael Rubin of Altshuler Berzon LLP, and Diane Sidd-Champion of McCarthy, Johnson & Miller Law Corporation.

As some of you may recall, Michael Rubin is my co-counsel in Brinker and argued along with me before the Supreme Court. 

U.S. Supreme Court distributes Brown v. Ralphs Grocery Co. for conference this Friday

We may know as early as Monday, April 16, 2012 whether the U.S. Supreme Court will review the Court of Appeal's decision in Brown v. Ralphs Grocery Co., 197 Cal.App.4th 489 (2011).   The Court in Brown refused to compel arbitration of plaintiff's PAGA claim, notwithstanding Concepcion. 

A cert. petition was filed in January 2012, after the California Supreme Court denied review.  Now, the case has been distributed for conference on Friday, April 13, 2012.  Ralphs Grocery Co. v. Brown, no. 11-800.  The conference results are normally announced the following Monday, although it's always possible a case will be relisted.  

I have reviewed the opposition to the cert. petition (pulled from Lexis) and it is very well done.

Two more cert. petitions of interest now pending in the U.S. Supreme Court:

• Ticketmaster et al. v. Stearns, no. 11-983.  The cert. petition was filed in February, and the case has been distributed for confernce on April 20, 2012.  The defendant is attempting to obtain review of Stearns v. Ticketmaster Corp., 655 F.3d 1013 (9th Cir. 2011), in which the Ninth Circuit reversed an order denying class certification of a UCL "fraudulent" prong claim.  The cert. petition claims a split in authority between Stearns and Avritt v. Reliastar Life Ins. Co., 615 F.3d 1023 (8th Cir. 2010) on the issue of whether Article III standing must be established for all unnamed class members in federal-court actions.  (Frankly, I don't see it. If you read Stearns carefully it says that such a requirement, if there is one, was satisfied.)


• Comcast Corp. v. Behrend, no. 11-864.  The cert. petition was filed in January 2012 and plaintiffs elected not to file a reponse.  After the case was distributed for conference, the Court ordered a response filed by April 9.   The defendant is attempting to obtain review of Behrend v. Comcast Corp., 655 F.3d 182 (3d Cir. 2011), in which the Third Circuit affirmed class certification in an antitrust case, holding: "The factual and legal underpinnings of Wal-Mart—which involved a massive discrimination class action and different sections of Rule 23—are clearly distinct from those of this case. Wal-Mart therefore neither guides nor governs the dispute before us." 

Collateral estoppel in class action cases: Bridgeford v. Pacific Health Corp.

I am still catching up on relevant decisions from as far back as December. This one is worth looking at.

In Bridgeford v. Pacific Health Corp., 202 Cal.App.4th 1034 (Jan. 18, 2012), the Court of Appeal (Second Appellate District, Division Three) departed ways from their brethren in Division Four by holding that an order denying class certification is not binding on unnamed class members who might commence future class litigation.

The Bridgeford panel followed the U.S. Supreme Court's lead in Smith v. Bayer Corp., 131 S.Ct. 2368 (2011), handed down in June.  Smith held that "the unnamed putative members of a class that was never certified cannot be bound by collateral estoppel."  Slip op. at 1.  (At least they got something right last year.)

This creates a split in authority with Alvarez v. May Department Stores Co., 143 Cal.App.4th 1223 (2006) (Second Appellate District, Division Four):

California courts have held or suggested that the denial of class certification can establish collateral estoppel against absent putative class members on issues that were actually decided in connection with the denial.  (Alvarez v. May Dept. Stores Co. (2006) 143 Cal.App.4th 1223, 1236; Bufil v. Dollar Financial Group, Inc. (2008) 162 Cal.App.4th 1193, 1202-1203 (Bufil); see also Johnson v. GlaxoSmithKline, Inc. (2008) 166 Cal.App.4th 1497, 1510-1513 & fn. 8 (Johnson) [assuming the point while expressing reservations].)  Alvarez stated that the principles of collateral estoppel ensure that the absent putative class members’ interests were adequately represented in the prior proceeding.  (Alvarez, supra, at p. 1236.)  We conclude to the contrary that if no class was certified by the court in the prior proceeding, the interests of absent putative class members were not represented in the prior proceeding and the requirements for collateral estoppel cannot be established, as we shall explain.

Bridgeford, slip op. at 11.  (Here is my original blog post on Alvarez and my original post on Johnson.) 

Notwithstanding the split in authority, it appears that no petition for review was filed.  I think the Alvarez rule is unlikely to survive the Bridgeford/Smith duo of cases.  An order denying class certification usually turns on a finding that the unnamed class members did not share common questions with the class representatives and could not be adequately represented by them.  It makes little sense to then conclude that the unnamed class members are nevertheless bound. 

Scott Leviant had an interesting post on Bridgeford on his blog, The Complex Litigator, back in January. 

New unpublished opinion addresses Concepcion: Samaniego v. Empire Today LLC

In Samaniego v. Empire Today LLC, 2012 WL 1141054 (nonpub. Apr. 5, 2012), the Court of Appeal (First Appellate District, Division Three) refused to enforce an arbitration clause, finding it unconscionable under Armendariz, and flatly rejected the defendant's argument that Concepcion precluded that result:

Concepcion addresses whether the FAA preempts the Discover Bank rule.  (131 S.Ct. at p. 1746.)  The United States Supreme Court held that it does, because “[r]equiring the availability of classwide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA.”  (Id. at p. 1748.)  But at the same time as the Court repudiated the categorical rule in Discover Bank, it explicitly reaffirmed that the FAA “permits agreements to arbitrate to be invalidated by ‘generally applicable contract defenses, such as fraud, duress, or unconscionability,’ [although] not by defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue.”  (Id. at p. 1746; 9 U.S.C. § 2; see Mission Viejo Emergency Medical Associates v. Beta Healthcare Group (2011) 197 Cal.App.4th 1146, 1158, fn. 4.)  In short, arbitration agreements remain subject, post-Concepcion, to the unconscionability analysis employed by the trial court in this case. 

Slip op. at 11-12.

The case was a putative class action (for Labor Code violations), but the arbitration clause did not appear to contain a class-action ban. 

UPDATE:  The unpublished opinion was ordered published on May 7, 2012.  Thereafter, the California Supreme court denied review.  See this update.

"Class Dismissed"

The April 2012 issue of California Lawyer has an article by Pamela MacLean on the Ninth Circuit's decision in Mazza v. American Honda Motor Co., 666 F.3d 581 (9th Cir. 2012). 

As I mentioned in this blog post, rehearing was denied in Mazza on March 16, 2012.

Incidentally, on March 6, 2012, Judge David O. Carter of the Central District of California issued a very interesting order construing Mazza.  Bruno v. Quten Research Inst., LLC, ___ F.R.D. ___, 2011 WL 5592880, *15-*26 (C.D. Cal. Nov. 14, 2011). (For some reason, Westlaw appended the March 2012 order to the end of an earlier order and gave them both the same cite. The new order starts at page *15.)

Judge Carter denied the defendants' motion to decertify the nationwide class and/or for reconsideration of the class certification order based on Mazza:

Defendants' argument fails because Mazza is not a material change in the law, given that: (1) Mazza did not and could not change state substantive law articulated by the California Supreme Court; (2) Mazza did not and could not overrule Ninth Circuit precedent interpreting state law; and (3) Defendants' interpretation of Mazza contradicts the express purpose of the Class Action Fairness Act. Alternatively, Mazza is distinguishable from the present case because Defendants' briefing in the prior motion differs from that of the defendants in Mazza and the facts of this case differ from those in Mazza.

Id. at *15 (emphasis in original).  In short, Judge Carter recognized what many commentators have also perceived:  Mazza misapplied California choice-of-law rules.   The complete order is worth a careful read. 

Review petition in Rose v. Bank of America

Here are the review petition and other documents from Rose v. Bank of America, no. S199074, in which the Supreme Court granted review on March 14, 2012:

• Petition for review (filed 12/30/11)
• Answer to petition for review (filed 01/20/12)
• Reply in support of petition for review (filed 01/31/12)
• Amicus letter of AG's office in support of petition for review (dated 01/31/12)

I have not seen the answer to the petition for review.  If you have a copy, please forward it and I will add it to the list above.  [UPDATE:  Many thanks to the blog reader who provided a copy of the answer to the petition for review. ]

The AG's letter is interesting.  According to the letter (at p. 4), the Court of Appeal in Rose held that a UCL "unlawful" prong claim may not be "predicated on violations of federal laws where Congress did not provide a private right of action."  I did not read the Rose opinion quite so broadly, but if this is what it held, that is certainly inconsistent with California Supreme Court precedents.  The letter makes a series of excellent arguments in support of review. 

Here is the docket's statement of the issue on review in Rose:

Can a cause of action under the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.) be predicated on an alleged violation of the Truth in Savings Act (12 U.S.C. § 4301 et seq.), despite Congress's repeal of the private right of action initially provided for under that Act?

Ninth Circuit holds again that parens patriae actions are not removable under CAFA: Nevada v. Bank of America

In State of Nevada v. Bank of America Corp., ___ F.3d ___ (9th Cir. Mar. 2, 2012), the Ninth Circuit confirmed again that parens patriae actions brought by the government are neither "class actions" nor "mass actions" and therefore are not removable under CAFA. 

In October, it reached the same conclusion in Washington v. Chimei Innolux Corp., 659 F.3d 843 (9th Cir. 2011), discussed in this blog post.