The UCL Practitioner

"Wage and Hour Class Actions: The Sky is Falling [Or is it?]: After Brinker and Duran, What Lies Ahead?"

The September 2012 issue of Plaintiff Magazine has an interesting and lengthy article by Oakland attorney Bryan Schwartz, who is a member of the Executive Committee of the State Bar Labor and Employment Law Section.  An excerpt:

I remember well April 12, 2012, because it was the day the sun broke through again on wage/hour class litigation: The long-awaited day the California Supreme Court ruled in Brinker (2012) 53 Cal.4th at 1004. Sure, the Court did not hand us strict liability for premiums where workers work during meal or rest breaks. Ironically, the employer-side spin doctors used this one holding, that employers cannot be liable for premiums by simply failing to police workers to ensure every break is taken, to paint Brinker as a great victory for their team. But those of us in the trenches of wage/hour class litigation – on both sides – immediately knew differently: That the chief result of Brinker would be to again empower employee advocates in claims where employers, with policies and common practices, refuse to relinquish all control over meal and rest periods owed to workers.

....

[The Court's]  holding that the “employer need not ensure that no work is done” during meal periods is really an employee victory, because of the reasoning behind it: “[T]he obligation to ensure employees do no work may in some instances be inconsistent with the fundamental employer obligations associated with a meal break: to relieve the employee of all duty and relinquish any employer control over the employee and how he or she spends the time.” (Brinker, 53 Cal.4th at 1038-1039.)  In other words, Brinker reasoned that employers cannot police employees to make sure that no work is performed because employers may exercise no control over employees during their meal periods. If an employer has a policy restricting employees’ activities during meal periods, that may now clearly be the basis for a meal period class action.

The article goes on to discuss numerous other issues of interest, including arbitration agreements post-Concepcion.  Bryan predicts that "[i]f the Supreme Court takes up Iskanian, it may be the defining case about the effect of Concepcion and Stolt-Nielsen on California laws protecting workers."  The Supreme Court granted review in Iskanian last week, so we will see if Bryan's prediction comes to pass.

Documents from Kilgore v. KeyBank N.A.

Many thanks to the blog readers who forwarded the following documents from Kilgore v. KeyBank National Assn., No. 09-16703 (9th Cir.), in which the Ninth Circuit granted en banc rehearing last week:

• Petition for Rehearing and Rehearing En Banc (filed 03-21-12)
• Amicus Brief of Arbitration Professors (filed 03-27-12)
• Amicus Brief of National Association of Consumer Advocates et al. (filed 03-29-12)
• Amicus Brief of National Employment Lawyers Association et al. (filed 04-02-12)

If you have copies of additional documents that should be added to the list above (such as the defendant's filing(s)), please forward them. 

Since my post on Monday, Kilgore has been added to the Ninth Circuit's pending en banc cases page.  That page indicates that the case is "[t]o be calendared the week of December 10, 2012, in Pasadena, California."

New class appealability opinion: Aleman v. AirTouch Cellular

As reported in the Bailey Class Action Daily, the Court of Appeal (Second Appellate District, Division Two) has handed down a new opinion addressing appealability of orders denying class certification.  Aleman v. AirTouch Cellular, ___ Cal.App.4th ___ (Sept. 20, 2012).  

The relevant discussion appears at pp. 29-31 of the slip opinion.  

New Ninth Circuit class settlement opinion: Lane v. Facebook, Inc.

In Lane v. Facebook, Inc., ___ F.3d ___ (9th Cir. Sept. 20, 2012), the Ninth Circuit affirmed final approval of a class action settlement, summarizing its holding as follows:

The question presented is whether the district court abused its discretion in approving the parties’ $9.5 million settlement agreement as “fair, reasonable, and adequate,” either because a Facebook employee sits on the board of the organization distributing cy pres funds or because the settlement  amount was too low. We hold that it did not.

Slip op. at 11537.  Senior Circuit Judge Kleinfeld filed a dissenting opinion. 

BREAKING NEWS: Ninth Circuit grants en banc rehearing in arbitration case: Kilgore v. KeyBank N.A.

Many thanks to the blog reader who wrote to advise that last Friday, the Ninth Circuit granted en banc rehearing in Kilgore v. KeyBank National Assn., No. 09-16703 (9th Cir.).  A copy of the order is here.

In Kilgore, the three-judge panel held (among other things) that the FAA, as interpreted in Concepcion, preempts the California Supreme Court's Broughton and Cruz decisions, which held that CLRA and UCL claims seeking public injunctions are not arbitrable as a matter of public policy.  Kilgore v. KeyBank Nat'l Assn., 673 F.3d 947 (2012). 

My original post on Kilgore is here.

It will be very interesting to see what the en banc panel does with this case. Notably, the California Supreme Court just denied review a week and a half ago in Hoover, in which the Court of Appeal had this to say about UCL public injunction claims:

Certainly, the injunctive relief claim under the Unfair Business Practices Act (Bus. & Prof. Code, § 17200) is not arbitrable.  (Cruz v. PacifiCare Health Systems, Inc. (2003) 30 Cal.4th 303, 315-316; Brown v. Ralphs Grocery Co., supra, 197 Cal.App.4th at pp. 500-501.)

Hoover v. American Income Life Ins. Co., 206 Cal.App.4th 1193, 1209 (2012) (see this blog post for more on Hoover).

And in April, the U.S. Supreme Court denied cert. in Brown, in which the Court of Appeal relied on Broughton and Cruz in concluding that PAGA claims were inarbitrable:

The purpose of the PAGA is not to recover damages or restitution, but to create a means of "deputizing" citizens as private attorneys general to enforce the Labor Code. (See Nicholson, Businesses Beware: Chapter 906 Deputizes 17 Million Private Attorneys General to Enforce the Labor Code (2004) 35 McGeorge L.Rev. 581.) Here, the relief is in large part "for the benefit of the general public rather than the party bringing the action" (Broughton, supra, 21 Cal.4th at p. 1082), just as the claims for public injunctive relief in Broughton and Cruz, supra, 30 Cal.4th 303.

Brown v. Ralphs Grocery Co., 197 Cal.App.4th 489, 501 (2011) (footnote omitted).  (Here is this blog's original post on Brown.)

Meanwhile, the California Supreme Court has posted its statement of the issues on review in Iskanian (review granted last week):

(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?

Iskanian v. CLS Transportation, No. S204032 (emphasis added).

If you have copies of the rehearing petition and other briefs in Kilgore, I would appreciate receiving them.  Presumably the case will soon be added to the Court's pending en banc cases page. 

"Food companies targeted for misleading consumers in class actions"

The Daily Journal had an interesting article Monday, noting an increase in food-related consumer class action filings since Concepcion and the Ninth Circuit's 2008 opinion, Williams v. Gerber Products Co., 523 F.3d 934 (9th Cir. 2008) (discussed in these blog posts).

A couple of snippets from the article:

[David T.] Biderman [of Perkins Coie] and others think the growth in filings can be credited in part to AT&T Mobility v. Concepcion, the landmark Supreme Court decision last year that excludes many consumers from class actions because of contracts they signed. Unlike many consumer products, food or goods bought in a local grocery store do not come with a contract.

....

Some attorneys say the Gerber decision has swayed some judges - particularly in the Northern District - to throw out motions to dismiss. 

"In the Northern District, they have been more accommodating to plaintiffs," [William L.] Stern said.

The article features a great photo of my former partner Will Stern of MoFo, as well as quotations from Tim Blood of Blood Hurst & O'Reardon and several other attorneys. 

Supreme Court grants review in arbitration case: Iskanian v. CLS Transportation

Yesterday, the Supreme Court granted review in Iskanian v. CLS Transportation, No. S204032.

In Iskanian, the Court of Appeal affirmed an order compelling arbitration of wage and hour claims, in heavy reliance on Concepcion.  Iskanian v. CLS Transp. Los Angeles, LLC, 206 Cal.App.4th 949 (2012). My original post on the Court of Appeal opinion is here.  The statement of issues on review has not yet been posted. 

Copies of documents from the case are available at these links:

• Petition for review (filed 07/16/12)
• Answer to petition for review (filed 08/06/12)
• Reply to answer to petition for review (filed 08/17/12)

We may see some "grant and hold" cases post-Iskanian. At least two other review petitions are pending:

• Nelsen v. Legacy Partners Residential, No. 204953 (petition for review filed 08/27/12)
• Caron v. Mercedes Benz Financial Services USA, No. S205263 (petition for review filed 09/10/12)

Yet another new class arbitration opinion: Goodridge v. KDF Automotive Group, Inc.

In Goodridge v. KDF Automotive Group, Inc., ___ Cal.App.4th ___ (Aug. 24, 2012; pub. ord. Sept. 13, 2012), the Court of Appeal (Fourth Appellate District, Division One) affirmed an order declining to enforce an arbitration clause in a used car dealership's sales contract, agreeing with the trial court that the clause was unconscionable under Armendariz.

Scott Leviant has more on Goodridge on his blog, The Complex Litigator.  He also has a post on Reyes v. Liberman Broadcasting, Inc., ___ Cal.App.4th ___ (Aug. 31, 2012) (discussed on this blog here).

Registration now open for 22nd Annual Golden State Antitrust and UCL Institute, Oct. 25, 2012

The 22nd Annual Golden State Antitrust and Unfair Competition Law Institute, sponsored by the State Bar of California, will take place on October 25, 2012 at the St. Regis Hotel in San Francisco.  Click here to register.

Here is the complete brochure for the event.   The morning plenary "updates" panel is always very good, and the two afternoon UCL breakout sessions (see below) are of particular interest.  This is the third year in a row that I've had a significant level of involvement in organizing this event, and I hope folks will register and attend. 

UCL Breakout Session #1: CAFA at Age Seven: State and Federal Court Differences in Litigating UCL Cases

As a result of the Class Action Fairness Act of 2005 (“CAFA”), many more UCL cases are finding their way into the federal court system. This panel will discuss the procedural and substantive differences between litigating a UCL case in state court vs. federal court. Topics include removal under CAFA, pleading and the particularity requirement, how the standing rules operate differently in federal and state courts, and the impact of forum on the class certification analysis in the post-Tobacco II and post-Dukes world. Our distinguished panelists will offer practical, real-world advice on shepherding a UCL case through the two different court systems.

• Hon. Robert D. Freedman, Judge of the Superior Court, Alameda County Superior Court, Oakland
• Hon. Elizabeth D. Laporte, U.S. Magistrate Judge, Northern District of California, San Francisco
• Paula L. Blizzard,. Keker & Van Nest LLP, San Francisco
• Eric B. Fastiff, Lieff Cabraser Heimann & Bernstein LLP, San Francisco
• Susan G. Kupfer, moderator; Glancy Binkow & Goldberg LLP, San Francisco

UCL Breakout Session #2: The Supreme Court Theater: Now Playing and Coming Soon

This panel will cover the cutting-edge UCL cases now pending before the California Supreme Court, including Rose v. Bank of America and the “unlawful” prong, Sanchez v. Valencia Holding and arbitration clauses in UCL actions, Zhang v. Superior Court and UCL claims against insurers, and the sleeper UCL issue in In re Cipro Cases I & II. The panel will also cover critical unresolved issues the Supreme Court may take up. The panel will offer best strategies on litigating UCL cases when so many important questions remain unresolved, and will forecast the Supreme Court’s UCL jurisprudence in the coming years.

• Hon. Kathleen M. Banke, Associate Justice of the California Court of Appeal, First District, San Francisco
• Sarah A. Good, Pillsbury Winthrop Shaw Pittman LLP, San Francisco
• Kevin K. Green, Robbins Geller Rudman & Dowd LLP, San Diego
• Angel A. Garganta, moderator; Arnold & Porter LLP, San Francisco

Supreme Court denies review and depublication in arbitration case: Hoover v. American Income Life Ins.

Last Wednesday, September 12, 2012, the Supreme Court denied review, and the depublication requests, in Hoover v. American Income Life Ins., No. S204218.  

In Hoover, the Court of Appeal refused to enforce an arbitration clause in a collective bargaining agreement.  Hoover v. American Income Life Ins. Co., 206 Cal.App.4th 1193 (2012) (discussed in this blog post). 

Several other review petitions remain pending in class arbitration cases, including a new one just filed last week: 

• Iskanian v. CLS Transportation, No. S204032 (petition for review filed 07/16/12)
• Nelsen v. Legacy Partners Residential, No. 204953 (petition for review filed 08/27/12)
• Caron v. Mercedes Benz Financial Services USA, No. S205263 (petition for review filed 09/10/12)

On September 5, the Supreme Court gave itself an extension of time to grant or deny review in Iskanian.   With the extension, the petition for review must be acted on by October 12. 

It is interesting that the Supreme Court took no similar action in Hoover.  In July, the Supreme Court denied review in two other class arbitration cases, Kinecta and Samaniego.  In all three cases, the lower courts declined to enforce the arbitration clauses.  CORRECTION:  The lower courts declined to enforce the arbitration clauses in Hoover and Samaniego.  In Kinecta, the trial court granted the defendant's petition to compel arbitration but declined to strike the class allegations from the complaint, and the Court of Appeal reversed the latter order.

UCL "unlawful" prong opinion: Medrazo v. Honda of North Hollywood

This UCL opinion published in April got lost in the Brinker blizzard, but it is important and warrants  a belated post.  

In Medrazo v. Honda of North Hollywood, 205 Cal.App.4th 1 (Mar. 27, 2012; pub. ord. Apr. 16, 2012), the Court of Appeal (Second Appellate District, Division Four) addressed a UCL "unlawful" prong claim that went to trial on behalf of a certified class of motorcycle buyers.  Previously, in 2008, the Court of Appeal had reversed the trial court's order denying class certification.   Medrazo v. Honda of North Hollywood, 166 Cal.App.4th 89 (2008) (discussed in this blog post). In its 2012 opinion, the Court of Appeal reversed the trial court's order granting the defendant's motion for judgment at the conclusion of the plaintiff's case-in-chief (essentally, a motion for nonsuit). 

First, the opinion addresses the famous footnote of Tobacco II, where the Supreme Court explained that while reliance is an element of UCL standing in "fraudulent" prong cases, "there are doubtless many types of unfair business practices in which the concept of reliance, as discussed here, has no application."   In re Tobacco II Cases, 46 Cal.4th 298, 325 n.17 (2009). 

I have always thought the concept of reliance would be irrelevant in most "unlawful" prong cases, and the Court of Appeal confirmed this in Medrazo: 

[T]he Supreme Court ... explained [in Tobacco II] that an actual reliance requirement does not apply to UCL actions that are not based upon a fraud theory. (Id. at p. 325, fn. 17). In those actions, the plaintiff must simply show that the alleged violation caused or resulted in the loss of money or property.

Medrazo, 205 Cal.App.4th at12 (emphasis added).

The relevant question, for standing purposes in an "unlawful" prong case, is going to be whether the defendant's statutory violation caused the plaintiff to lose money.  In Medrazo, the defendant violated a Vehicle Code provision requiring that a hanger tag disclosing dealer-added charges be attached to all motorcycles offered for sale.  Id. at 4.  If the hanger tag is not attached, or if the dealer-added charges are not disclosed on the tag, the dealer may not collect the charges.  See id.  The plaintiff class lost money as a result of the defendant's violation because the class members paid such charges even though the defendant had not attached the required hanger tags.  Id. at 13-14.  It did not matter whether the class members had "relied" on the missing hanger tags, nor was proof required that they would or would not have bought the motorcycles if the hanger tags had been attached and read.  See id.  It was sufficient that the defendant had violated the law, that the plaintiffs had purchased the products, and that they paid the unlawfuly-imposed charges.  See id.

Put another way, the violation was not the dealer's failure to disclose the added charges, but rather its collection of those charges in violation of the statute. 

 The second important holding relates to the measure of restitution to be awarded at trial.  Medrazo is really the only helpful opinion on this issue since Colgan v. Leatherman Tool Group, Inc., 135 Cal.App.4th 663 (2006).  While Colgan was a "fraudulent" prong case, Medrazo addresses the measure of restitution in the context of the "unlawful" prong.

Medrazo held that the proper measure of restitution was the full amount of the unlawfully-imposed charges:

If, on retrial, the court determines that [the defendant's] sale of motorcycles without hanger tags (or without tags that disclosed dealer-added charges) violated the UCL, class members will be entitled to restitution of any money “which may have been acquired [by defendant] by means of such unfair competition” (Bus. & Prof.Code, § 17203)—i.e., the dealer-added charges that were not disclosed on hanger tags. 

205 Cal.App.4th at 13-14 (footnote omitted) (emphasis added).  There was no question about the value of the motorcycles or whether the defendant could have sold them for the same price if the dealer-added charges had been properly disclosed.  No, the defendant will be required on remand to refund the full amount of the unlawfully-collected charges, period. 

In short, Medrazo is a very significant opinion that should be widely cited in other "unlawful" prong cases.  Here is my publication request filed in April on behalf of CAOC. Several other publication requests were also filed. 

Ninth Circuit withdraws and issues new opinion in class action settlement case: Dennis v. Kellog Co.

On September 4, 2012, the Ninth Circuit withdrew its earlier opinion and handed down a new opinion in a class action settlement case, Dennis v. Kellog Co., ___ F.3d ___ (9th Cir. Sept. 4, 2012).  Here is my blog post on the earlier opinion. 

The new opinion still reverses the final approval order because the cy pres recipients who would have received the settlement fund residual were "divorced from the concerns embodied in consumer protection laws such as the UCL and the CLRA."  Slip op. at 10540. 

The new opinion also vacates the attorneys' fees award, but unlike the earlier opinion, contains no separate section discussing the award.  Id. at  10544.  Instead, in a footnote, the opinion says that "[o]ur decision on the merits of the settlement renders moot the attorneys’ fees issue."  Id. at 10544 n.2 (citing Waggoner v. C&D Pipeline Co., 601 F.2d 456, 459 (9th Cir. 1979)). 

As a result, the new opinion no longer contains this language from the withdrawn opinion, which was widely quoted in the press:

[L]et us not forget that the $2 million fee award breaks out to just over $2,100 per hour. Not even the most highly sought after attorneys charge such rates to their clients.

Withdrawn opinion, slip op. at 8128.  That, of course, is not the standard by which the propriety of a fee award is measured in the Ninth Circuit in a contingency-fee action.  Under well-established Ninth Circuit decisional law, multipliers may be approved in a proper case, so it misses the mark to consider the total rate that a fee award "breaks out" to, without considering whether a multiplier is appropriate under relevant Ninth Circuit standards.   The language was appropriately omitted from the new opinion. 

Opinions issued in three Brinker "grant and hold" cases: Muldrow v. Surrex Solutions Corp., Lamps Plus Overtime Cases, and Hernandez v. Chipotle Mexican Grill

Three published post-transfer opinions have been handed down in Brinker "grant and hold" cases (of which there are nine).  The first opinion to be published comes in the last "grant and hold" case, in which the Supreme Court granted review on April 11, 2012 (one day before the Brinker opinion issued). 

In Muldrow v. Surrex Solutions Corp., ___ Cal.App.4th ___ (Aug. 29, 2012), the Fourth Appellate District, Division One, affirmed the trial court's judgment in a non-class-certification context.   According to the Muldrow panel, "In Brinker, the Supreme Court held that an employer need only provide for meal periods, and need not ensure that employees take such breaks."  Slip op. at 24. 

As I have explained elsewhere, that is not a correct reading of Brinker; in fact, the Supreme Court held that employers have an affirmative obligation to relieve employees of all duty for their meal periods.  Brinker Restaurant Corp. v. Superior Court, 53 Cal.4th 1004, 1017 (2012) ("an employer’s obligation is to relieve its employee of all duty").   For unknown reasons, however, the parties' counsel in Muldrow conceded the incorrect reading.  See id. at 25 n.17 ("In their supplemental brief, filed after transfer from the Supreme Court, appellants concede that the Brinker court 'answered [their claim on appeal] in the negative.'"). The analysis consists of a single paragraph at the end of an opinion primarily focused on other issues. 

The Second Appellate District, Division Eight has published post-transfer opinions in two of the nine "grant and hold" cases:

• Lamps Plus Overtime Cases, ___ Cal.App.4th ___ (Aug. 20, 2012; pub. ord. Sept. 5, 2012)
• Hernandez v. Chipotle Mexican Grill, Inc., ___ Cal.App.4th ___ (Aug. 21, 2012; pub. ord. Aug. 30, 2012)

Both opinions come from the same panel (Bigelow, P.J., Grimes J., and Flier, J.).  Both affirm lower court orders denying class certification.  I will try to have more on these opinions later.

UPDATE:  On December 12, 2012, the Supreme Court depublished the Lamps Plus and Hernandez opinions.   Depublication requests remain pending in Muldrow and in another post-transfer opinion, Tien v. Tenet Healthcare Corp., 209 Cal.App.4th 1077 (2012).

Another new arbitration opinion: Reyes v. Liberman Broadcasting, Inc.

On August 31, 2012, the Court of Appeal (Second Appellate District, Division One) handed down another post-Concepcion arbitration opinion in another wage and hour case, Reyes v. Liberman Broadcasting, Inc., ___ Cal.App.4th ___ (Aug. 31, 2012). 

Citing many of the recent cases, the panel reversed the trial court's order denying the defendant's petition to compel arbitration. If the Supreme Court decides to grant review in Iskanian, Hoover, and/or Nelsen, then Reyes is likely to become a "grant and hold." 

New Ninth Circuit UCL and FAL opinion: Davis v. HSBC Bank Nevada, N.A.

In Davis v. HSBC Bank Nevada, N.A., ___ F.3d ___ (9th Cir. Aug. 31, 2012), the Ninth Circuit affirmed dismissal of UCL and FAL claims at the pleading stage:

Turning to the claims in the FAC, Davis first alleges that Best Buy’s advertising was misleading because it failed to disclose the existence of an annual fee. We agree with the district court that no reasonable consumer would have been deceived by these advertisements into thinking that no annual fee would be imposed.

Slip op. at 10377. 

The opinion also addresses and applies the Cel-Tech "safe harbor."  Id. at 10382-88.  The last sections cover the UCL's "unlawful" prong (here, the "unlawful" prong claim was predicated, interestingly, on a federal regulation requiring national banks to comply with section 5 of the FTC Act) and the "unfair" prong (here, the court noted the three-way split but found the complaint stated no claim under any formulation).  Id. at 10389-94. 

Review petition filed in another arbitration case: Nelsen v. Legacy Partners Residential Inc.

Many thanks to the blog reader who forwarded the petition for review filed on August 27, 2012 in Nelsen v. Legacy Partners Residential, No. 204953.  My original blog post on Nelsen is here.  The Court of Appeal opinion is Nelsen v. Legacy Partners Residential, Inc., 207 Cal.App.4th 1115 (2012).

We now have quite a few pending review petitions to watch on the arbitration front:

• Iskanian v. CLS Transportation, No. S204032 (petition for review filed 07/16/12)
• Hoover v. American Income Life Ins., No. S204218 (petition for review filed 07/23/12)
• Nelsen v. Legacy Partners Residential, No. 204953 (petition for review filed 08/27/12)

Yesterday, the Supreme Court granted itself an extension of time, through October 12, 2012, to grant or deny review in Iskanian, the first-filed of these three petitions.

Cert. petitions filed in cases of interest: In re AmEx and Ross v. RBS Citizens

Cert. petitions have recently been filed with the U.S. Supreme Court in two cases of interest:

• American Express Co. v. Italian Colors Restaurant, No. 12-133 (petition filed 07-30-12)
• RBS Citizens, N.A. v. Ross, No. 12-165 (petition filed 08-01-12)

In In re American Express Merchants Litigation, 667 F.3d 204 (2d Cir. 2012), the Second Circuit refused to enforce a no-class-action arbitration clause notwithstanding Concepcion.  As discussed in this blog post, a petition for en banc rehearing was denied in late May. 

In Ross v. RBS Citizens, N.A., 667 F.3d 900 (7th Cir. 2012), the Seventh Circuit affirmed class certification of claims for unpaid overtime wages under FLSA and Illinois state law.  The opinion closely analyzes Dukes. 

A copy of the cert. petition in Ross is available here.  I have not yet seen any documents from AmEx.  If you have copies of those, please forward. UPDATE:  Many thanks to the blog reader who kindly forwarded a copy of the cert. petition in AmEx.

Reply brief on the merits filed in Rose v. Bank of America

The reply brief on the merits was filed on August 21, 2012 in in Rose v. Bank of America, no. S199074.  The merits briefing is now complete.

• Opening Brief on the Merits (filed 05-15-12)
• Answer Brief on the Merits (filed 07-17-12)
• Reply Brief on the Merits (filed 08-21-12)

Amicus briefs, if any, will be due 30 days after the reply was filed (or by approximately September 20, 2012).  See Rule of Court 8.520(f). 

U.S. Supreme Court grants cert. in CAFA case: The Standard Fire Ins. Co. v. Knowles

On Friday, August 31, 2012, the U.S. Supreme Court granted cert. in a CAFA case involving the $5 million amount-in-controversy requirement for federal diversity jurisdiction over putative class actions.  The Standard Fire Ins. Co. v. Knowles, No. 11-1450. 

According to the defendant's cert. petition, the case presents the following question:

Last Term, this Court held that in a putative class action "the mere proposal of a class ... could not bind persons who were not parties." Smith v. Bayer Corp., 131 S. Ct. 2368, 2382 (2011). In light of that holding, the question presented is:

When a named plaintiff attempts to defeat a defendant's right of removal under the Class Action Fairness Act of 2005 by filing with a class action complaint a "stipulation" that attempts to limit the damages he "seeks" for the absent putative class members to less than the $5 million threshold for federal jurisdiction, and the defendant establishes that the actual amount in controversy, absent the "stipulation," exceeds $5 million, is the "stipulation" binding on absent class members so as to destroy federal jurisdiction?

In an unpublished order, District Judge P.K. Holmes, III, of the Western District of Arkansas accepted the stipulation and remanded the case back to state court.  Knowles v. Standard Fire Ins. Co., 2011 WL 6013024 (W.D. Ark. Dec. 1, 2011).  According to that order,

Exhibit A attached to the Complaint [was] a “Sworn and Binding Stipulation,” signed by Plaintiff, affirming that he will not at any time during the pendency of the case “seek damages for myself or any other individual class member in excess of $75,000 (inclusive of costs and attorneys' fees) or seek damages for the class as alleged in the complaint to which this stipulation is attached in excess of $5,000,000 in the aggregate (inclusive of costs and attorneys' fees).”

Id. at *2.   In the face of that stipulation, the defendant presented evidence that the actual amount in controversy exceeded $5 million by approximately $24,000.  As a result,

the burden shifts to Plaintiff to prove to a legal certainty that his claim falls under the $5 million threshold for remand to state court. The question is whether a plaintiff may meet his burden of proof by stipulating at the time the complaint is filed that he will not seek more than the federal jurisdictional minimum for himself and the putative class. Even though the Bell court did not specifically reference the legal certainty burden, it did conclude that a clear stipulation would meet the requirements for defeating removal. It follows, therefore, that if a stipulation is legally binding and made in good faith, it can satisfy the plaintiff's legal certainty burden and defeat removal. Bell [v. Hershey Co.], 557 F.3d [953,] 956 [(8th Cir. 2009)]; see also Tuberville v. New Balance Athletic Shoe, Inc., 2011 WL 1527716, *3 (W.D. Ark., April 21, 2011).

Id. at *4 (emphasis added).  The court evaluated the stipulation and found it sufficient.  On the specific issue that has caught the U.S. Supreme Court's attention, the court stated: 

Defendant believes Plaintiff has exhibited bad faith in seeking to limit the as-yet-unknown class members to damages over a two-year period, rather than the full five years of damages potentially recoverable under the statute of limitations. See Doc. 9, p. 13. As the master of his complaint, Plaintiff may choose what claims to bring and what claims to leave out. “[A] removing defendant can't make the plaintiff's claim for him; as master of the case, the plaintiff may limit his claims (either substantive or financial) to keep the amount in controversy below the threshold.” Brill v. Countrywide Home Loans, Inc., 427 F.3d 446, 449 (7th Cir.2005). Defendant fails to cite any authority which states that a plaintiff may not seek to recover damages for a period of time shorter than the statute of limitations provides. Nor is the Court persuaded that Plaintiff's temporal limitation on recovery evidences his bad faith.

Defendant cites to the case of Bass v. Carmax Auto Superstores, Inc., 2008 WL 441962 (W.D. Mo., Feb. 14, 2008), for the proposition that a class plaintiff has no right to limit recovery for a class without court approval. However, the Bass case was decided before Bell, and the holding in Bass contradicts both the plain language and the spirit of the Eighth Circuit's holding in Bell. Furthermore, putative class members may simply opt out of the class and pursue their own remedies if they feel that the limitations placed on the class by Plaintiff are too restrictive. See Murphy, 2011 WL 1559234 at *3 (“... the plaintiffs in state court who choose not to opt out of the class must live with it,” quoting Morgan v. Gay, 471 F.3d 469, 477-78 (3rd Cir.2006), cert. denied, 128 S.Ct. 66 (2007)).

Id. at *6. 

According to the cert. petition, the Eighth Circuit denied the defendant's petition for permission to appeal, and then denied both panel and en banc rehearing. 

Consumer Law & Policy Blog has a post on the case. 

The following links to materials from the case are courtesy of SCOTUSblog:

• Opinion below (W.D. Ark.)
• Petition for certiorari
• Brief in opposition
• Amicus brief of Chamber of Commerce of the United States of America
• Amicus brief of Center for Class Action Fairness
• Reply of petitioner