The UCL Practitioner

New Ninth Circuit class certification opinion: Abdullah v. U.S. Security Associates, Inc.

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.

"Brinker case closer to trial, nine years after filing"

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.

BREAKING NEWS: Judge Dato certifies meal period subclass in Brinker on remand

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.]

New UCL "unfair" prong opinion: Aspiras v. Wells Fargo Bank, N.A.

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.) 

Here, 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 amend.

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. 

New UCL preemption and prejudgment interest opinion: Rodriguez v. RWA Trucking Co. (Updated)

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. 

¹ See, 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").  

Ninth Circuit modifies class certification opinion: Wang v. Chinese Daily News

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.