The UCL Practitioner

Pound Civil Justice Institute Appellate Advocacy Award, with High Distinction, for my work on Frlekin v. Apple Inc.

I'm honored to announce that I received the 2022 Pound Civil Justice Institute Appellate Advocacy Award, with High Distinction, for my work on Frlekin v. Apple Inc., 8 Cal.5th 1038 (2020). The award "recognizes excellence in appellate advocacy in America."  The 2022 award citation says that my work in Frlekin has had and will have "a significant impact on access to justice in future civil cases."  The award ceremony took place last month in Seattle in conjunction with the AAJ's annual convention.  So many thanks to the members of the Pound Institute committee who selected me for the award, as well as to Kevin Green, who nominated me. 

In Frlekin (discussed in this blog post), I represented a certified class of retail sales employees who worked in Apple's California stores.  The employees were required to undergo onsite security searches of their bags, Apple-branded technology devices, and other personal belongings when leaving the store for lunch or at the end of the day.  The California Supreme Court held that time spent waiting for and undergoing these searches was "controlled" by the employer and therefore met the definition of compensable "hours worked" within the meaning of the California Industrial Welfare Commission's Wage Orders.  This central legal question was referred by the Ninth Circuit to the California Supreme Court for decision.  I wrote all the appellate briefs and presented the oral argument in both the Ninth Circuit and the California Supreme Court.  Summary judgment on liability was subsequently entered in favor of the certified class. 

California Supreme Court victory: Frlekin v. Apple Inc.

To my dear, loyal readers:  I know I haven't been blogging regularly for some time, but I wanted to post today to share some excellent news.  I won my second California Supreme Court case!  In Frlekin v. Apple Inc., ___ Cal.5th ___ (Feb. 13, 2020), in a unanimous opinion by Chief Justice Cantil-Sakauye, the Supreme Court held that time spent by my clients undergoing security searches of their purses, bags, backpacks, and Apple-branded technology devices is compensable "hours worked" under Wage Order 7.

This decision has been a long time coming.  The case was filed in 2013 and class certification was granted in 2015.  We then lost on cross-motions for summary judgment on liability.  We appealed to the Ninth Circuit, and asked that Court to refer the question to the California Supreme Court, which it did in 2017.  Frlekin v. Apple, Inc., 870 F.3d 867 (9th Cir. 2017).  (The Ninth Circuit oral argument video can be viewed at this link, and the audio is at this link.)  After full briefing, I presented oral argument in the California Supreme Court on December 4, 2019 (viewable here). 

Many people provided assistance and support throughout this process, including my co-counsel Lee Shalov of McLaughlin & Stern in New York, my colleague Kate Rogers, and the authors of the amicus curiae briefs, namely, Gregg Adam (whose brief was quoted in the opinion), Aaron Kaufmann, Ari Stiller, and Dave Mara.  My sincere thanks to all.  We still have work to do in the case but this is a huge milestone. 

I have received calls from many reporters today.  The press coverage has been rather extensive, including articles in the San Francisco Chronicle, the Los Angeles Times, The Recorder, Bloomberg Law, and numerous other outlets.  From The Recorder: 

Plaintiffs' attorney, Kimberly Kralowec of San Francisco's Kralowec Law Group, praised the decision.  "The court carefully adhered to both the text and the purpose of the wage orders, which is to protect California employees and ensure employees are compensated for all time worked," she said.  "This is a very good day for employees working in California."

A very good day, indeed. 

McGill v. Citibank re-set for argument in December

The Supreme Court just posted its December argument calendar.  On Wednesday, December 7, 2016 at 1:30 p.m., the Court will hear argument in McGill v. Citibank, No. S224086.  The argument will take place at the Ronald Reagan State Office Building in Los Angeles.

In this case, the Court will consider whether the Federal Arbitration Act, as construed in Concepcion, preempts the Broughton-Cruz rule.  See this blog post for more. 

Supreme Court now publishes a "Pending Issues Summary"

Sometime earlier this year, the California Supreme Court started publishing a Pending Issues Summary for civil cases (and one for criminal cases).  This useful document serves as a list of all cases accepted for review and summarizes the issues presented in those cases.

The current civil case list is available at this link. 

Thoughts on the oral argument in In re Cipro Cases I & II

On Tuesday, March 3, 2015, I attended the oral argument in In re Cipro Cases I & II, No. S198616.  (See this post for more on the case.)

The argument was extremely interesting, and very well handled by both sides.  The UCL issue was not mentioned at all, which is not surprising, given the significant and complex antitrust issue the case presents.  All of the justices were active questioners, with the exception of Justice Corrigan, who had no questions until the rebuttal argument.   The two new justices, Justice Cuéllar and Justice Kruger, asked as many questions as any of their colleagues.  This was the first time I had the pleasure of attending an argument since they joined the Court.  They were both very astute questioners.  (Justice Cuéllar's questions boomed out very audibly across the courtroom, but I sometimes had trouble hearing Justice Kruger, even though I was sitting closer to her.) 

On the antitrust question -- which is whether pay-for-delay agreements between pharmaceutical patent-holders and generic-manufacturer competitors should be judged under the per se rule, the rule of reason, or some modified version of the latter -- I predict a split decision. Justice Liu's questions suggested that he favored the per se rule, but the other justices seemed skeptical.  I would not be surprised if they decide to follow the U.S. Supreme Court's lead in Actavis, albeit in a split decision.  That having been said, predicting case outcomes based on appellate arguments is an art that can't be mastered. 

I must say that both of the lawyers who argued this case were extremely well prepared and both did a very good job. 

The opinion is due in 90 days, which means we should see it by no later than Thursday, May 28 (the last opinion-issuance day before the deadline).

Oral argument preview: In re Cipro Cases I & II

This morning at 9:00 a.m. in San Francisco, the Court will hear oral argument in In re Cipro Cases I & II, No. S198616.   This case involves some interesting questions of antitrust law as well as a sleeper UCL issue. 

From the court's docket:

This case presents the following 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?

Put another way, this is a "pay-for-delay" case.  The question before the Court is whether "pay for delay" agreements are per se unlawful under the Cartwright Act.  In 2013, the U.S. Supreme Court held that such agreements "can sometimes" violate the Sherman Act, and that they should be evaluated under the "rule of reason."  FTC v. Actavis, Inc., 133 S.Ct. 2223 (2013).  In late 2013, the California Supreme Court ordered the parties to file supplemental briefs on the impact of Actavis. 

The sleeper UCL issue is whether a defendant's conduct may be found "unfair" within the meaning of the UCL even if the conduct does not violate the Cartwright Act. The Court of Appeal said no (as discussed here).  I believe this answer contravenes Cel-Tech (as explained here and in my amicus brief for CAOC).

If my schedule permits, I plan to attend the argument today and report back on whether the Court or the parties discuss the UCL issue during what promises to be a very engaging argument.

More thoughts on Iskanian as well as Ayala

I have not seen any news or blog coverage of the oral argument last Thursday in Ayala v. Antelope Valley Newspapers, No. S206874, but I have heard from more than one source that the justices had no questions about the class certification issues that the case raises.  Instead, the questioning apparently focused solely on the question of what legal standard governs in determining whether the newspaper carriers are employees or independent contractors. 

The Court ordered the parties to submit supplemental briefing on this question last year, and if the reports are accurate, the Court is much more interested in this question than on the class certification issues that appeared to have prompted the grant of review.  Bryan Schwartz has more thoughts on Ayala on his blog (which is called simply Bryan Schwartz Law).

I have received additional impressions on Iskanian from attorney Eric Kingsley of Kingsley & Kingsley in Encino.  Eric graciously allowed me to share them here:

****

I attended the argument in Iskanian v. CLS on April 3, 2014.  It was exhilarating.  What fun to be there as part of this historic day.  To start the day Justice Baxter gave a very moving tribute to Justice Kennard and honored her 25 years of service on the court. The argument itself was as expected, but so much better.  While many prognosticated about the likely result in the case, hearing the Justices ask very robust questions was fascinating.  All the Justices except Justice Baxter participated in the questioning, but as expected Justice Liu dominated the proceedings. 

Many defense lawyers have attacked and argued that Gentry died in 2011 the same day that Concepcion invalidated Discover Bank.  Many Court of Appeal decisions have held off pronouncing the time of death until they were sure the patient was actually dead.  They did not want to be the ones to do it, but rather thought the parents (CA Supreme Court) should be the ones to put her to rest.  Well, Thursday’s argument made it clear that the patient did not survive.  My condolences.

I believe this was a wise decision by Justice Liu and a necessary sacrifice to ensure SCOTUS does not wade into these waters.  Justice Liu came out hard and strong, so it appears Gentry’s death will unequivocal.  He swatted away Glen Danas’s arguments and his attempt to fashion an alternative Gentry test fell completely flat.  Gentry was not to be saved and it was for the plaintiff’s lawyer’s own good.  If Gentry survived, it was a certainty that Iskaniain would be taken up.  Even without a Gentry survival we don’t know if SCOTUS will still seek to crush our hopes.

While the passion to kill Gentry should’ve dampened my spirits, the passion to save PAGA was equally so.  Justice Liu at one point compared PAGA to a Qui Tam action, seemed convinced it was at its core a “law enforcement action.”  Further, he argued that the employee had no ability to waive the states claim comparing it to the case of EEOC v. Waffle House.  Even, the sometimes conservative Justice Corrigan attacked Andrew Pincus (attorney for amicus Chamber of Commerce) because of her perception that his line of reasoning “could insulate them [companies] from liability.”  This could not be so.  His response was just FAA trumps all.  That was the theme of the day for defense, FAA is the trump card.

In fact the lawyer for CLS, Faustman, refused to answer Justice Liu’s questions to the  point that it seemed he was doing an Abbott & Costello routine. 

(Paraphrased and abbreviated based on my notes)

Liu:  FAA and NLRA are in conflict, how do you reconcile?

F: FAA trumps

Liu: Why?

F: Congress needs to say.

Liu: Reason? Text, order, specificity, How do you reconcile?

F: Reconciliation,  NLRA says nothing about arbitration.

Liu:  FAA says nothing about collective activity.

This went on for many a minute or more.

This brings up the DR Horton/NLRA arguments, and before I address that, let me say Michael Rubin was absolutely an amazing advocate.  He was poised and unbelievably prepared to the point that answers to questions that would scare even the most seasoned advocate were at this fingertips.  For example, Liu asked him when class actions began and he knew the modern class action was recognized in 1966 but that early century there was some other vehicle which I did not entirely follow.  [Editor’s Note:  See Justice Werdegar’s concurring opinion in Arias.]  He advocated in a way that was smart on the issues and made you incredibly proud to be a plaintiff’s lawyer.  He advocated on behalf of employees everywhere in that if they have the right to picket and strike, then they should equally have the right to band together to fight to enforce the labor laws of this state.

Where the court comes down on the Horton question is hard to predict.  I would think not based on the argument but based on Liu’s wisdom that he may not take the bait.  A Horton victory would undoubtedly bring the ire of SCOTUS.  While it might feel great now, in 2015 the hangover might set in and everything will be gone.  If Horton and Gentry die, and PAGA is saved, you would think SCOTUS would leave California alone. 

****

My sincere thanks to Eric for sharing his thoughts.

Oral argument report #2 on Iskanian v. CLS Transportation

Report #2 on the Iskanian oral argument comes to us from attorney Edie Mermelstein of the Law Offices of F. Edie Mermelstein in Huntington Beach.  Thank you, Edie!

***

Thursday the California Supreme Court heard oral argument in the much anticipated Iskanian v. CLS Transportation case.  This post-Concepcion case is the second of three lead cases to be heard regarding arbitration.  The first, Sonic-Calabasas v. Moreno was decided October 17, 2013, with Justice Liu authoring the opinion that the FAA preempts state-law rule requiring a Berman hearing prior to arbitration and the trial court could consider waiver of Berman protections when considering whether arbitration provision is unconscionable due to the forced waiver by the employee of affordable and accessible dispute resolution forum.

In a packed Los Angeles appellate courtroom and equally packed overflow room, Justice Liu opened questioning by requesting Appellant-Employees’ Counsel Glenn A. Danas give his best argument on why Concepcion has not preempted Gentry. Justice Kennard also wanted a quick overview of whether Gentry survived the SCOTUS decision in Concepcion, while Chief Justice Cantil-Sakauye inquired as to whether there could be a two-step modified Gentry rule, although Justice Liu seemed to disfavor a modified Gentry rule post-Concepcion and American Express v. Italian Colors.  Justice Liu also noted the Berman waiver at issue in Sonic II is very different than the class action waiver at issue here, but Justice Chin’s inquiry focused on whether PAGA is a “representative” action with Justice Werdegar following suit by requesting counsel address the waiver of a representative action.  Danas cited to the SCOTUS decision in Mitsubishi and argued that waiver of statutory rights is against public policy and this has been reaffirmed in Italian Colors.

Michael Rubin representing amici Service Employees International Union and the California Employment Lawyers Association took to the lectern and immediately addressed the procedural and substantive private right of action under the labor codes which confer civil penalties and attorneys fees and are inherently “representative.”  Justice Werdegar raised SCOTUS decision in Kaiser Steel which stated the general rule that federal courts do not have jurisdiction over activity which is arguably subject to §7 of the National Labor Relations Act and inquired on whether amici was in favor or against the holding in Kaiser Steel.  Then Justice Liu launched into a §7/PAGA/Class initiated inquiry into the timing of the statutes and class actions and what pre-existed Rule 23.  Rubin eloquently laid out legislative history concluding that an opt-out system has been created which deprives individual employees of protections enshrined in the labor code. 

David Faustman representing the Respondent-Employer introduced himself, ingratiated himself to the esteemed panel and gave special mention to Justice Kennard.  Faustman’s opening statements went right to Gentry’s survival stating, “Gentry must fall.”  Justice Kennard lodged the first question asking counsel if there was a distinction between Discover Bank as a categorical rule and Gentry which sets forth factors.  Faustman quickly replied there is no distinction in the rules and that class waiver is “the center of the orbit” of Gentry and a modified test will never hold up upon SCOTUS review.   Justice Kennard asked Faustman to consider Gentry’s survival and whether it would be inconsistent with Concepcion and Italian Colors.  Faustman reiterated that there is no distinction between Discover Bank and Gentry and that unconscionability argument and facts to support unconscionability have only been raised by appellant in light of Sonic II and that the trial court below found there is absolutely no procedural unconscionability on the facts in this record.  At that point, both Justice Kennard and Liu actively paged through the briefs before them. 

Next, Justice Liu asked whether the FAA and the NLRA are in conflict.  Faustman boldly pronounced that the FAA “trumps” the NLRA.  Justice Liu aggressively challenged Faustman’s stance focusing on rules of construction culminating with Faustman’s acquiescence that “trumps” was the wrong term.  Justice Liu continued analyzing the FAA and its omission or inclusion of the term “collective activity.”  Faustman disagreed.  Chief Justice agreed with Justice Liu.  Faustman argued that a class action is a legal fiction.  Justice Liu appeared to defend the class action procedure as a form of “collective action” by definition.  Faustman vehemently disagreed stating it is not a “textual” argument.  Justice Liu asked, “[w]hy is PAGA preempted?”  Then, Liu moved to this court’s decision in Arias focusing on the employee standing as a proxy for the State and likening PAGA to a Qui Tam action.  Faustman argued that although he has “no quarrel with Arias” there is no proxy by the State.  Faustman claimed that here there are different procedural practices in play.  Justice Liu’s reliance on Arias appeared resolute.  Faustman simply claimed that the Arias argument may go to far.  However, Justice Liu continued to further develop the analysis by drawing an inverse relationship to the SCOTUS’s EEOC v. Waffle House case.  Faustman ended his time cautioning the court of SCOTUS’s power to overrule this Court as it has done previously in Discover Bank.

Andrew Pincus, amicus for the Chamber of Commerce of the United States, finished up Respondent’s argument by first addressing Justice Liu’s question regarding a modified Gentry rule.  Pincus claimed that the unconscionability reasoning in Sonic II cannot be applied here.  Justice Liu continued on the inverse Waffle House analysis questioning the permissibility of a plaintiff to file an initial complaint with the EEOC for any and all claims.   Pincus responded that the EEOC is in command of the case and it is indisputable that the employee here controls the case.  Chief Justice pointed out that under Pincus’ interpretation if an employee waives the right to bring a PAGA claim it undermines the purpose of the State.  Pincus answered that PAGA claims cannot be individual and although important public rights may be lost, Concepcion dictates that class procedures cannot be enacted if waived even if a desirable policy is at issue.

Justice Corrigan raised the issue of assignment of a State’s right to an employee and whether an arbitration agreement is binding where the employee has waived that right. Justice Corrigan ended the Respondent’s argument by pointing out that a given employer could insulate itself from PAGA claims by demanding that every employee sign an arbitration agreement with a waiver.

On rebuttal, other than reciting a few clarifying citations to the record the argument came to a natural end with Justice Kennard asking the last question which was Appellant’s take on Faustman’s comment that he had “no quarrel with Arias” and whether Arias is controlling here.  It should be noted that Justice Kennard penned Arias which held that an employee need not satisfy class action requirements to bring a representative action under PAGA.  It also held that an employee plaintiff suing under the Labor Code Private Attorneys General Act of 2004, does so as the proxy or agent of the state's labor law enforcement agencies. 

With that said, I believe this panel is going to try and salvage PAGA, and could potentially save the Cruz and Broughton line of cases.  The inverse would be a crippling defeat for employees and consumers to police bad acts where public agencies, which lack adequate resources, are unable to bring actions. This would effectively insulate corporations and employers from blatant violations simply by requiring individual arbitration with a PAGA waiver as a condition of employment.  One can only hope Faustman’s chiding of SCOTUS power does not dissuade this panel from doing the right thing.

***

That's the end of Edie's report.  Again, the opinion is due by July 2, 2014.

Oral argument report: Iskanian v. CLS Transportation

Many thanks to attorney Matthew B. Butler of The Butler Firm in San Diego, who attended yesterday's oral argument in Iskanian v. CLS Transportation, No. S204032, and provided the following report.

***

I attended the oral argument in the Iskanian v. CLS Transportation matter today. Overall, the court appeared unpersuaded that Gentry v. Superior Court, 42 Cal.4th 443 (2007) remains viable law post-AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740, 1742 (2011) but reluctant to extend a class action waiver to PAGA claims or to rule on the federal question of what constitutes acting in concert for the National Labor Relations Act. 

 

1.  Is Gentry still viable law given Concepcion?

 

Justice Liu led the questioning, immediately challenging Iskanian's attorney, Glenn Danas, with questions like "Why isn't Gentry preempted by the FAA after Concepcion?" and pointedly arguing that Gentry's sole focus was the class action waiver within the arbitration provision -- falling squarely within Concepcion, while Sonic-Calabasas A, Inc. v. Moreno, 57 Cal.4th 1109, 1124 (2013) focuses on other procedural issues. Justice Liu did not hide his analysis, going as far as to say that Gentry is "endangered" after Concepcion. Glenn Danas did the best he could to argue that the procedural issues identified in Gentry are tied to a de facto waiver of substantive rights -- that employees in a weaker bargaining position are required to sign an arbitration agreement as a term of employment, and are in fear of retaliation when attempting to enforce statutory rights individually.  He argued that without an affordable forum for the statutory rights to be heard, an arbitration agreement with a class action waiver is unconscionable and the appropriate forum is in court.  Without Gentry, there is too much risk that substantive rights will slip through the cracks.  He drew the comparison to a waiver of Berman hearing rights but Justice Liu was not persuaded.  

 

Justice Liu continued, identifying Concepcion's logic that even if claims slip through the cracks, the Federal Arbitration Act preempts Gentry.  Mr. Danas countered that Concepcion did not specifically address the issue of waiver of statutory rights.  Justice Kennard joined Justice Liu at that point, directly saying "You try to distinguish Gentry," "Gentry is still inconsistent with the FAA" and "I haven't heard anything to show Gentry survives."

 

The Chief Justice then asked Mr. Danas if he was advocating a modified Gentry rule, to which he replied yes, in a two step process: 1. Is there a de facto waiver of rights, and if so, 2. Does the employer have other procedures in place to ameliorate that condition.  Justice Liu was not convinced such a modified rule would survive Concepcion, because without regard for the sacrifice of other claims, the test is centralized on the class action waiver which was squarely addressed in Concepcion.   Mr. Danas argued that there are other considerations, like fear of retaliation, but did not gain traction with any other justices.  

 

David Faustman argued for CLS.  Justice Kennard greeted him with questions about Gentry's viability -- asking if it is proper to say Discover Bank v. Superior Court, 36 Cal.4th 148 (2005) was a categorical rule whereas Gentry set forth factors to avoid waiver of statutory rights?  Mr. Faustman aptly followed the justices' lead and argued that Gentry was solely about class action waivers and thus is specifically overruled by Concepcion.  Mr. Faustman repeatedly reminded the Court that any contrary finding would be quickly disposed of by the High Court.   He also criticized Iskanian's argument on unconscionability -- pointing out that Iskanian had not argued unconscionability in the lower court, but that at the trial level there was a factual finding against procedural unconscionability which was not appealed.  

 

Overall, it appeared that neither public policy nor unconscionability arguments gained traction with any of the justices.  Certainly none of the justices articulated support for the position.    

2. Private Attorney General Act

 

Mr. Danas did not have much time to address PAGA, but was asked squarely by Justice Werdeger to do so. He quickly argued that if an arbitration agreement results in total waiver of statutory rights the agreement cannot stand.  Michael Rubin later argued that PAGA provides substantive private rights of action that did not exist before the statute, and provides remedies for the state.  The express purpose of the statute was to reduce the burden of enforcement of the labor code by enlisting private individuals and their attorneys to bring and prosecute the action.  

 

CLS' counsel, Mr. Faustman, tried to carry momentum from the Gentry argument into the PAGA argument.  Justice Liu asked him directly why PAGA is preempted by the FAA.  Despite the court's finding in Arias v. Superior Court, 46 Cal.4th 969 (2009)  and the recent Ninth Circuit cases such as Baumann v. Chase Inv. Services Corp., ___ F.3d ___, 2014 WL 983587 (9th Cir. Mar. 14, 2014) and Urbino v. Orkin Services of California, Inc., 726 F.3d 1118 (9th Cir. 2013).  Mr. Faustman asserted that there is no principle distinction between PAGA and class actions.  

 

Justice Liu challenged such a proposition, asking "haven't we said in Arias that the individual is a proxy for the state in PAGA claims?" Justice Liu asked if Arias is controlling for the propositions that PAGA is not a dispute arising from employment relations, but rather is like Qui Tam.  The individual is collecting primarily for the state.  Mr. Faustman did not agree that Arias had such a broad finding, and distinguished Qui Tam from PAGA -- asserting that Qui Tam cases are run by the state to collect damages to the state whereas PAGA claims are run by individuals to collect penalties for both the state and the individual.  

 

Justice Liu read language from Arias to Mr. Faustman -- indicating that a PAGA action is a substitute for government action, and opined that, in effect, PAGA acts as an assignment of the state's claims to the employee.  Justice Liu then relied upon E.E.O.C. v. Waffle House, Inc., 534 U.S. 279 (2002), where an employee filed an EEOC claim, and the EEOC investigated and filed an action against the company.  The employee was not a party to the litigation, but the employee's individual damages were at issue.  Justice Liu repeatedly pressed Mr. Faustman as to why an individual could bring an EEOC claim and not run afoul of the FAA or an arbitration provision.  Justice Liu pushed until Mr. Faustman acknowledged that an EEOC's own claim is not impacted by the arbitration agreement between the employee and the employer.  

 

Andrew Pincus, counsel for amicus U.S. Chamber of Commerce, argued that PAGA is a hybrid of individual claims and state claims.  "An odd duck."  He argued that if it is like an assignment, then the employee's agreement with the employer governs the forum in which that employee can bring the assigned claims.  He did not cite case or statutory support for this position.  He did respond to Justice Liu's reliance on Waffle House, indicating it was instructive because the EEOC was in charge of the litigation, whereas here the employee is in charge of the litigation.  

 

Justice Corrigan further challenged the employer's position on PAGA, walking Mr. Pincus down a series of questions to make the point that an arbitration agreement can be craftily drafted to completely insulate the employer from PAGA penalties, thus eviscerating the statute.  Mr. Pincus argued that PAGA can be brought by one employee for just that individual's rights under PAGA, and therefore the statute can be read consistent with the FAA.

 

From the questioning by the justices, it appears the Court is friendly to PAGA claims remaining outside of any waiver in an arbitration agreement.  No justices asked questions appearing fascially in opposition to this view.

 

3. Employee Rights under National Labor Relations Act

 

Iskanian's counsel divided the oral argument, and Michael Rubin handled the argument for amici. Specifically he addressed the federal issues such as the right of employees to organize and act collectively. He argued that the arbitration provision strips employees of the right to collectively bring an action to enforce the labor code, in violation of the Norris LaGuardia Act and the NLRA.  Justice Werdeger quickly raised the 5th Circuit overturning the NLRB's ruling in D.R. Horton v. NLRB, 737 F.3d 344 (5th Cir. 2013), and Justice Liu picked up with "Has any court of appeal supported your position?"  Mr. Rubin had to concede the point, but not without the caveat that several decisions are pending further appeal.  

 

Justice Liu expressed concern with the intersection of the FAA and the NLRA and the fact that these representative actions came after the enactment of both.  Mr. Rubin agreed, but identified that 70 years of NLRB decisions have interpreted the right to organize, and specifically to extend that right to the level of litigation.  Mr. Rubin eloquently articulated that employees are powerless to effect change in the workplace on an individual level, reinforcing the public policy of the United States to allow employees to organize and act in concert.  As the CLS agreement currently stands, an opt-out system is created -- leaving the employees to effectively waive statutory rights.  

 

Justice Werdeger asked if Amici argues there is no viable class action waiver in the employment context, and if so wouldn't such a rule interfere with the FAA?  Mr. Rubin reiterated that any waiver of a class action violates the NLRA and Norris LaGuardia.  This does not run afoul of the FAA, because as the NLRB articulated, the employer can continue to demand individual claims be asserted in arbitration and class claims must be heard in court.   

 

CLS's attorney, Mr. Faustman, argued that courts need not follow NLRB rulings, and in fact the NLRB does not have the jurisdiction to interpret the NLRA.  In response to questions from Justice Kennard and Justice Liu, Mr. Faustman initially posited that the FAA trumps the NLRA unless and until Congress acts. Justice Liu pressed him on the issue, since the two statutes are both federal statutes passed by Congress that must be given equal weight and read together.  Mr Faustman retreated, agreeing that "trump" is not the right word.  He then found respite in two other arguments -- that the FAA predates the NLRA and the FAA talks of the primacy of arbitration but the NLRA does not.  Justice Liu made quick work of these arguments, stating that the issue here is about what constitutes collective activity and the NLRA speaks specifically to that while the FAA does not, so the NLRA governs.  Mr. Faustman argued that all federal courts that have addressed this issue disagree.  Then attacked class actions directly, arguing that it is "quite a stretch" to say a class action is concerted activity, but it is rather "a legal fiction" created by one employee and his/her lawyer.  Justice Liu did not respond positively to this argument.     

 

The justices did express some hesitation to address the federal question of the scope of both the NLRA and the FAA.  

 

In retort, Mr. Rubin argued that statements in the record indicated that Iskanian acted in concert with other employees who desired that he pursue the claims, making the action a concerted effort by employees, protected by the NLRA.  Further, there is no conflict with the FAA since the FAA exempts agreements that are otherwise unenforceable on grounds that exist in law or equity and prohibits the enforcement of arbitration agreements that strip other statutory rights.  

 

The justices did not appear to lean one way or another on this issue.  Although, Justice Liu certainly questioned extensively about it.  

Overall, the argument was engaging, the justices were prepared and active.  There did not appear to be too much question left in the justices' decision making process.  Assuredly, this one-hour argument will have a vast impact on the practice of employment law in California.

***

Thank you again, Matthew, for providing such an interesting report for us.  I did not expect the NLRA issue to be the focus of so much discussion.  For another report on the argument, see this writeup by Shawn Westrick of Kawahito Shraga & Westrick, LLP in Los Angeles.  The opinion is due in 90 days, or by Wednesday, July 2, 2014.

Oral argument preview: Iskanian v. CLS Transportation and Ayala v. Antelope Valley Newspapers

Today, the Supreme Court will be hearing oral argument in two cases of interest. 

• At 9:00 a.m., the Court will hear Iskanian v. CLS Transportation, No. S204032, which involves the enforceability of a no-class-action arbitration clause in an employment contract, and the continued vitality of Gentry post-Concepcion. These are the issues on review, per the docket: 

  (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?

  The Court of Appeal, in a 2012 opinion, affirmed the trial court's order compelling arbitration.   Iskanian v. CLS Transp. Los Angeles, LLC, 206 Cal.App.4th 949 (2012).  See this blog post for more.

• At 1:30 p.m., the Court will hear argument in Ayala v. Antelope Valley Newspapers, No. S206874.  This case involves newspaper carriers who assert that their employer improperly classified them as independent contractors rather than employees.  The question on review is whether the Court of Appeal properly reversed, in large part, the trial court's order denying class certification of their wage and hour claims.  Here is the docket's description of the issues on review:

  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.

  In Ayala v. Antelope Valley Newspapers, Inc., 210 Cal.App.4th 77 (Sept. 19, 2012; pub. ord. Oct. 17, 2012), after the trial court denied class certification, the Court of Appeal (Second Appellate District, Division Four) reversed the order as to five of the eight claims.  For more on the case, see this blog post.

Both of these arguments are happening in Los Angeles.  I am expecting to receive a report from at least one blog reader on Iskanian, which I will post here when received.  If you attended either of these arguments and would like to share your impressions, please email me. 

California Supreme Court developments of interest in three cases (Updated)

Not one, but two cases of interest have been scheduled for oral argument in April: 

• On March 5, 2014, the Court scheduled oral argument in Ayala v. Antelope Valley Newspapers, No. S206874, in which the plaintiff newspaper carriers assert that their employer improperly classified them as independent contractors rather than employees.  The question on review is whether the Court of Appeal properly reversed, in large part, the trial court's order denying class certification of their wage and hour claims.  The argument will take place on Thursday, April 3, 2014 at 1:30 p.m. in Los Angeles.  For more information on the case, see this blog post. 

• On March 5, 2014, oral argument was also scheduled in one of the pending arbitration-related cases, Iskanian v. CLS Transportation, No. S204032 (as I previously reported). The argument was set for Thursday, April 3, 2014 at 9:00 a.m. in Los Angeles.  On March 10, 2014, petitioners' counsel filed a request to continue the argument to the June calendar.  On March 11, 2014, this request was denied, so the argument will proceed on April 3 as originally set. 

And, in other developments: 

• On March 7, 2014, the Supreme Court gave itself an extension of time, through April 15, 2014, to grant or deny review in Williams v. Superior Court (Allstate Ins. Co.), No. S215887.   This is one of the twelve post-Brinker class certification decisions.  UPDATE:  On March 19, 2014, the Supreme Court denied review in this case.

Oral argument report: Duran v. U.S. Bank

Last Tuesday, March 4, 2014, the Supreme Court heard oral argument in Duran v. U.S. Bank National Association, no. S200923.  Edward Wynne of the Wynne Law Firm argued for the plaintiffs, sharing his argument time with Michael Rubin of Altshuler Berzon, counsel for The Impact Fund and several other amici.  Timothy Freudenberger argued for the defendant.

This is not a verbatim transcript, nor does it include all the exchanges between counsel and the justices.  It is a summary based on my notes and recollections of the argument.  

By way of background, the theory of liability in this case is that the bank failed to pay overtime (or provide meal or rest periods) to its Business Banking Officers (or “BBOs”).  The bank’s defense is that the BBOs fall within the outside sales exemption.  This exemption applies to any “outside salesperson,” defined as “any person … who customarily and regularly works more than half the working time away from the employer’s place of business selling tangible or intangible items or obtaining orders or contracts for products, services or use of facilities.”  E.g., Wage Order 4, 8 Cal. Code Regs. §11040, ¶¶1(D), 2(M). 

Argument for Plaintiffs: Ed Wynne

Ed Wynne began by explaining that he would address liability and trial management issues, and Michael Rubin would cover class certification. 

He went on:  The trial court’s finding of classwide liability was not based just on the testimony of the 21-witness sample, but also on other evidence.  The bank had a classwide, categorical exemption for all BBOs yet made no inquiry to support the practice, kept no records of how much time the BBOs spent outside the bank, and had no expectation that the BBOs would spend more than half their time outside the bank. 

Justice Baxter: Your opponent says that $6 million was awarded to 75 BBOs who signed declarations saying that they were properly classified.  Is this true, and if so, how do you justify it?  Wynne:  This is not true.  It assumes that the declarations were credible.  The trial court found their weight had to be adjusted.  Justice Corrigan:  There is evidence in the record but we shouldn’t believe it?  Wynne:  That’s up to the trial court.  Justice Baxter: Even when they don’t testify? Credibility presupposes that the trial court had the opportunity to look the witnesses in the eye and judge their credibility.  Wynne:  Five class members testified about the circumstances of their declarations.  Defendants cherry-picked nine witnesses who testified they were exempt. 

Justice Werdegar:  Weren’t plaintiffs cherry picking the witnesses to substitute in?  [She is referring to the fact that two members of the randomly-selected sample group of witnesses did not wish to participate.]  Wynne:  They were amended because one didn’t want to testify; the others’ testimony was ambiguous.  Justice Werdegar: That’s what I mean.  Wynne:  All of them were chosen through a random selection process.

Justice Corrigan:  Wasn’t there a group of named plaintiffs who testified that they worked 60-90% of the time outside the office?  Wynne:  These are the witnesses whose testimony was ambiguous.  Their testimony was that they worked outside their branch, which does not mean outside the bank. 

Chief Justice Cantil-Sakauye:  The process led to an award to all plaintiffs when we know for some of them it would be windfall to the tune of $6 million.  But I have questions about the sampling of 20 to represent the group, including two of the named plaintiffs.  How did you get to 20?  Wynne:  The trial court had expert testimony of defendant’s expert Dr. Gorman, a table with all the various sample sizes, including 20 and also 50.  The margin of error for 20 was 4-6%.  This was before the court decided to go with 20.  After that, Dr. Drogin affirmed that 20 is an appropriate number, representative, not biased.  He affirmed that opinion at trial.  The Court of Appeal was wrong to conclude that the number was picked out of thin air.

Justice Baxter:  My concern is – there’s no contention here that defendants violated California law in any respect merely by classifying them as they did or that this as a violation of law.  In contrast to Brinker, there is no evidence of a policy or practice that required employees to work more than 50% of their time at the bank, correct?  Wynne.  No.  Two points.  The bank had a categorical classification as exempt— Justice Baxter:  But there’s nothing illegal about that.  These are sales jobs and they understand 50%—   Wynne:  It is illegal if there is no basis for that classification.  Baxter:  But it’s a sales job and employees understand 50% of the time outside.  How do you have common proof?  Here you have 75 declarations.

Wynne:  The RWGs [Representative Witness Group] were counseled to spend more than 50% of the time inside.  They were encouraged and rewarded for doing so.  So it is consistent with cases like Brinker, Faulkinbury.  The job was set up to be more than 50% inside.  Justice Werdegar:  In this case clearly, different employees worked the job in different ways.  How can the trial court certify – and I suppose your answer will get to the issue of sampled evidence.  Wynne:  Both side’s declarations and the PMK testimony showed that the job was standardized. 

Justice Chin:  What was standardized?  [I believe this question was posed by Justice Chin.  However, I have read other reports saying that Justice Chin asked no questions during the argument.  If that’s true, then this question must have been by Justice Baxter.]  Wynne:  The tasks, how they were to go about doing their job.  Top sales person Chad Penza said that the best way to make sales was to stay in the office and make calls.  He was held up as an example.  They were encouraged, trained and rewarded for staying inside the office.

Argument for Plaintiffs’ Amici:  Michael Rubin

Michael Rubin:  Substantial evidence supports the trial court’s finding of liability under the correct legal standard, but even if the judgment is reversed on liability, it should be remanded on a class basis.  There was a common policy.  When the trial court found that the defendant actively encouraged, trained and rewarded BBOs for working inside the office, that is a policy contrary to the way they were classified.  The bank did nothing to encourage people to do the job in a way that would be exempt.

Justice Liu:  So you have class treatment.  That doesn’t necessarily presage fairness in the liability determination.  Rubin:  Through the prism of great deference to the trial court’s ruling, you look at two things: The nature of the job itself.  As a general matter do they perform the job in basically the same way. That’s the predominance concept.  Comparative predominance.  And whether there’s a trial plan that can be developed. 

Justice Liu: Let’s focus on sampling.  In any sampling there will be some margin of error.  Rubin:  The experts agree it’s 13%.  Justice Liu:  Is that an acceptable number?  Does it mean 13% aren’t misclassified?  Rubin:  That’s the starting point.  They you look at the experts’ testimony on the point estimate.  And then you look at the rest of the evidence.  The range is 113% to 87%.  For example, Chad Penza, and Bradley, who kept expense records that showed he spent less than 50% of his time outside the bank.  You use this evidence to determine where on the margin the case falls.  Justice Liu:  For each individual you don’t know who falls within the 13%, or the 87%?  Rubin:  When the judge looked at Penza and Bradley, along with the adverse inference drawn from the defendant’s failure to keep records—

Justice Werdegar:  Dr. Drogin calculated it at 43%.  Rubin:  That is for the damages phase.  And plaintiffs conceded this was too high.  Justice Liu:  At least with respect to the 13%, how are we to reconcile that general figure with the notion of due process of law, which is you can put forward any number of practices, patterns, you can even allege defendant stymied plaintiffs’ efforts by not keeping good records, but defendant will want to say we want to call everyone to the stand. 

Rubin:  In Sav-on this Court said you can have classwide determinations where there is widespread, but not necessarily uniform, misclassification.  How is it actually done?  The trial court has discretion to determine, based on all the evidence, what point on the margin of error the case falls.  Suppose it’s 90%.  What do you do about the 10%?  A couple of things:  One:  if there’s a common factor that segregates those, there could be further inquiry.  [He gave a couple of examples.]  Recognizing that there will be uncertainty apart from certification.  Even in an individual case there will always be some extrapolation.  Two:  at the damages phase, you can conduct further inquiry.  In Bell, 9% of the individuals were found that there was no liability to them.  You can do claim forms, surveys.  The way the defendant is protected is the total damages are reduced and the trial court conducts further proceedings on allocation.  

Argument for Defendant:  Tim Freudenberger

Before Tim Freudenberger could say a word, Justice Corrigan jumped in with a question:  You aren’t taking the position that statistical analysis are never admissible, are you?  Freudenberger:  No.  Justice Corrigan: So what was wrong with this one?  Freudenberger:  Just about everything … [and he explained.  The Chief Justice interjected a question here that I did not catch.]  Dr. Gorman never said that representative testimony was proper in this case to determine the amount of time spent outside.  The issue of liability in this case is an individualized issue.

Justice Liu:  Is this a blanket statement of law?  That liability for these purposes can never be determined on a classwide basis?  Are you saying that Sav-on was incorrectly decided?  Freudenberger:  Sav-on was not incorrectly decided.  It supports our position.  Justice Liu: Isn’t it your position that this is always individualized, so statistics can never be used?  Freudenberger:  It can’t when the liability issue depends on an individualized analysis.  There may be other cases where it’s appropriate, but it can’t be here.  Justice Liu:  So never in a misclassification case?  Freudenberger:  No.  Justice Liu:  Never?  So in Sav-on …?  Freudenberger:  Sav-on is an example where it might work because it was a task-based system.  Task classification, where work performed was managerial work or non-managerial work.  Here everyone agreed that the work was sales work.  The disputed question was how much time they spent outside.

Justice Chin:  [Again this may actually have been Justice Baxter.]  How did the trial court decide on 20?  Freudenberger: It was completely arbitrary.  It was a matter of case management and convenience.

Justice Werdegar:  Could not an agreement among statistical experts and a wider sample make it possible to have a class action?  Freudenberger:  Not in this case.  Because it was actually tried and because we know the central issue is how much time they spent.  Justice Werdegar:  Exempt or non-exempt.  Freudenberger: That’s what determines the exemption.  Justice Werdegar:  Could you not with a different sampling, statistically show that a majority of the employees spent more time outside than inside?  Freudenberger:  No. The problem is it’s a due process problem, it violates Dukes v. Wal-Mart.

Chief Justice Cantil-Sakauye:  Do we need to answer the abstract question of whether statistical evidence could ever be used?  Freudenberger:  Absolutely not.  The Chief:  Why?  Freudenberger: This case is unusual and there’s no need to speculate about what might happen in other cases.  There was no task-based compensation system.  The case went to trial only on the UCL claim.  This is not a typical, garden-variety class action.  We went to trial so we know liability cannot be determined on common proof.  Every individual who testified spoke of their individual experience; they only spoke for themselves.  None said their experiences are representative of the others.

Justice Liu:  What probative value does your opponent’s references to incentives, company policies, the star performer, what probative value should be assigned to those pieces of evidence?  Surely they are probative of something.  Your position seems to me very categorical.  You’re saying in this type of case statistical evidence can never, never be used.  Unless every individual can be shown to have worked outside, there will always be uncertainties that can never be dispelled by inferences, unless you hear it straight from the person’s mouth.  Do the employees keep their own records? Can the trial court accept that what the employees are saying are themselves estimates?  Those things are necessarily imperfect. So what would satisfy due process?

Freudenberger:  Standardized practices have no effect on the liability question at stake.   It could be different in a task-based class case, but that’s not this case.  The other evidence doesn’t get to the issue of where they spent their time.  Justice Liu: Short of declarations or live testimony by each individual, is there anything that would satisfy due process?  Freudenberger:  In this case, no.  Justice Liu:  Even that information [the live testimony or declarations] is imperfect unless you assign them 100% credibility, unless they do keep records.  We are relying on inference, gap-filling, credibility.  Why do you privilege that evidence above other kinds of evidence?

Freudenberger:  It’s the best evidence available.  You’re right it’s not perfect.  Even Penza signed two declarations saying he spent the majority of his time outside.  The court was in its power to determine that his testimony at trial could be credited over his prior inconsistent statements.  But that can’t be done with absent class members who don’t testify. 

Justice Baxter:  I’m confused by the class definition:  All employees who worked during the class period.  It says nothing about people who worked more than 50% outside.  Why wasn’t it so limited?  Freudenberger:  Because certification would not have been appropriate on that basis.  You can’t have a class where to determine membership you have to determine liability.  Over 90% of the class members never testified despite repeated efforts to call them. They never had their cases tried yet they stand to recover money.

Justice Baxter:  But you don’t necessarily have to define a class as “all employees,” do you?  You can define it more narrowly to include the theory of liability.  You could have a narrower class. Freudenberger:  Two responses:  For example, if there are multiple job positions within the same class, where you can subclass.  This class all had the same position.  It’s not appropriate to cut out the people who signed declarations.  The bank’s position was that none of the rest were non-exempt either.   [Justice Baxter interposed a further question here that I didn’t catch.]  We’re focused on an improper denial of a decertification motion after trial.  Plaintiffs said they will present common evidence at trial. We now know for certain there is no common evidence.

Justice Corrigan:  Even if it may have appeared to counsel that certification was proper, at some point in trial it became evident that non-common issues were swamping.  At that point the trial court had an obligation to reassess.  Now that it’s all over we know the case wasn’t fairly tried.  [Freudenberger agreed.]  Justice Corrigan:  For you to win, we don’t have to resolve the question of whether every case like this could be resolved as a class action, and we don’t have to make a sweeping statement regarding use of statistics.  Freudenberger:  Correct.

Justice Liu:  For this kind of case, why wasn’t this immediately apparent to the trial court from the outset?  Your theory is a broad one; it would have forestalled certification to begin with. So your position is that certification is not appropriate ever for this type of case.  I don’t see a narrower position that you can offer.  Freudenberger:  My position is based on the evidence in this case. The trial court should not have missed it to begin with, because we submitted 75 declarations.  There is no ambiguity, they were exempt.  So the bank’s position is it was clear at the time of initial certification that a significant number of class members were properly classified as exempt and the issue would be the amount of time spent outside the bank.  The supposed common evidence never materialized.

Chief Justice Cantil-Sakauye:  What was the trial court’s response when you moved for decertification?  Freudenberger:  The trial court misinterpreted the exemption and placed the bank’s expectations above all else instead of actual time spent per Ramirez.  See footnote 38 of the Court of Appeal’s opinion.  The bank’s expectations don’t matter.  If they in fact spend 50% outside they are exempt.  Expectation was a secondary consideration.  If they weren’t spending 50% of their time outside then they weren’t performing the job correctly.  These people weren’t meeting the bank’s expectations.  But the trial court elevated this above evidence of actual time spent and this colored the class certification and liability determinations.

Justice Kennard:  I have some concerns about how the motions unfolded in the trial court.  One was the trial court allowing plaintiffs to try liability by presenting evidence of a random sample of 22 persons.  Is it correct to say that the bank was precluded from presenting evidence of work habits outside the 22-person group?  Freudenberger:  Yes. Justice Kennard: Is there any case on point that says this is a perfectly acceptable way of doing this?  Freudenberger:  No, no California case says that an exemption can be determined by statistical sampling or representative sampling.  The Bell case is different because it involved only damages.  We cited 7 cases holding it’s not appropriate, Walsh, Dunbar [and he named several others].  The cases cited by plaintiffs have been rejected.  For example, Morgan was a FLSA case with an entirely different standard, “primary duty performed.”  Very different, qualitative analysis.  Justice Kennard:  So what the trial court did was a serious problem.

Rebuttal Argument for Plaintiffs:  Ed Wynne

Justice Corrigan cut in before Ed Wynne could speak:  I have a threshold question.  There’s a class of 260 people, with liability based on a 20-person sample.  Wynne:  19 randomly selected plus two class representatives.  Justice Corrigan:  So you want the trial court to draw an inferential conclusion based on the sample.  Why should the defendant be prevented from challenging the inference you urge by putting on other people, to show that the inference is not valid?  Wynne:  This would challenge random evidence with non-random evidence.  There was no evidentiary basis to put in the declarations that the defendant offered.

Justice Werdegar:  The trial court didn’t accept them.  Wynne:  For two reasons, they were not random, and even if they were random they were not credible.  The trial court was within its discretion not to go outside the sample.  Justice Werdegar:  Is this consistent with due process?  Wynne:  The defendant is entitled to due process, not unlimited process.  Justice Werdegar:  At trial, how did the defendant refute your case?  Wynne:  By cross-examining all 21 people, bringing in the supervisors of those people, and corporate representative testimony.  Defendant was not precluded from attempting to rebut the inference.  In this case the question was even simpler than in Sav-on.  In this case, it is yes or no, binary.  In Sav-on it wasn’t.

Justice Liu:  What is wrong with the non-random nature of the evidence defendants want to put on?  Wynne:  The problem with non-random evidence is that you can’t extrapolate from it.  [The second part of his answer related to the claims-processing stage, aggregate liability and Sav-on.] Justice Liu:  Due process speaks only to aggregate liability?  Wynne: Yes.  Justice Liu:  What’s the best authority for it?  Wynne:  Bell, and the logic of Sav-on and Brinker:  If it can be certified it can be tried.  Justice Corrigan:  If it can be certified it can be tried?  Wynne: Yes.  Manageability is an element of certification.  Justice Corrigan:  Do you agree that the trial court has an obligation to decertify in some cases? Wynne:  Yes, the trial court retains that discretion.

The argument concluded there. The opinion is expected in 90 days (by June 2, 2014).

BREAKING NEWS: Oral argument scheduled in arbitration case: Iskanian v. CLS Transportation

The California Supreme Court just set one of the arbitration cases for oral argument.  Iskanian v. CLS Transportation, No. S204032, will be argued on Thursday, April 3, 2014 at 9:00 a.m. in Los Angeles. 

These are the issues on review, per the docket: 

(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?

The Court of Appeal, in a 2012 opinion, affirmed the trial court's order compelling arbitration.   Iskanian v. CLS Transp. Los Angeles, LLC, 206 Cal.App.4th 949 (2012).  See this blog post for more.

I am in search of a roving reporter to cover this argument and provide a report for posting here.  If you are interested, please drop me a line. 

Yesterday's oral argument in Duran v. U.S. Bank

I barely made it into the packed courtroom for the Duran argument yesterday.  The bench was hot, and the tenor of the questions varied significantly from justice to justice, with the starkest contrast between Justices Werdegar and Liu, on the one hand, and Justices Baxter and Corrigan, on the other. 

The Recorder's headline is "Justices Seek Middle Road on Sampling in Employment Class Action."   The article posits that the court is unlikely to uphold the classwide judgment in the Duran case itself, but at the same time, precedents like Sav-on remain on solid ground.  That is not an unreasonable assessment, as a broad, general summary of the import of the questioning.  Yet we know from Brinker that the questioning does not always portend what we might expect.

Judges Carvill and Hernandez of the Alameda County Superior Court complex litigation departments were both in attendance, and I also saw Judge Carvill's research attorney, Mr. Stemmler.  This case, as you know, challenges a series of rulings by their colleague, Judge Freedman.

I took detailed notes during the argument, but I have not had time to type them up because of the press of other business.  I hope to have them up and posted soon.  Meanwhile, here is an interesting report by attorney Bryan Schwartz, who was also in attendance.  Bryan is one of the attorneys of record for CELA in this case.

The opinion is due in 90 days, or by Monday, June 2, 2014.

Oral argument preview: Duran v. U.S. Bank, N.A.

This morning at 9:00 a.m., the Supreme Court will hear oral argument in Duran v. U.S. Bank National Association, no. S200923.   There is no indication on the California Channel website that this argument wil be either broadcast or streamed.  I am planning to attend, however, and hope to have a report on the argument posted here tomorrow.

Links to the merits and amicus briefs can be found at this blog post.  The docket states that the 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."

After the argument was scheduled, the plaintiffs filed a letter with citations to additional authorities handed down after the merits briefs were filed.  U.S. Bank filed a response last Friday, February 28. 

On February 21, 2014, the Recorder had an article (subscription) on the case and the upcoming argument, in which the amicus brief I filed for CELA was extensively quoted. 

Oral argument set in class certification case: Duran v. U.S. Bank, N.A.

Yesterday, the Supreme Court scheduled oral argument for March 4, 2014 at 9:00 a.m. in Duran v. U.S. Bank National Association, no. S200923.  The argument will take place in San Francisco. 

This argument setting is lightning-speed compared to many other cases, including Brinker.  Review was granted in Duran in May 2012, and the case will be argued, and perhaps decided, less than two years later. 

Links to the merits and amicus briefs are available here.  This is the issue on review, according to the docket:

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.

The underlying action is for employee misclassification.  The Court of Appeal (First Appellate District, Division One) reversed both class certification and the judgment.  See Duran v. U.S. Bank National Ass'n., 203 Cal.App.4th 212 (2012) (discussed in this blog post).

I am looking forward to this argument and hope to be able to attend in March.

Supreme Court sets oral argument in UCL case: Loeffler v. Target Corp.

On February 4, 2014, at 10:00 a.m. in Sacramento, the California Supreme Court will hear oral argument in Loeffler v. Target Corp., No. 173972, in which review was granted in 2009. The case arose out of a shopping trip to Target, where the plaintiff was charged sales tax on a cup of hot coffee "to go."

This is the issue on review, according to the docket:

Does article XIII, section 32 of the California Constitution or Revenue and Taxation Code section 6932 bar a consumer from filing a lawsuit against a retailer under the Unfair Competition Law (Bus. & Prof. Code sections 17200 et seq.) or the Consumers Legal Remedies Act (Civ. Code, section 1750 et seq.) alleging that the retailer charged sales tax on transactions that were not taxable?

The Court of Appeal (Second Appellate District, Division Three) held that "plaintiffs are attempting to resolve a sales tax dispute by using consumer and common law remedies rather than the procedure set forth by the Legislature [in the Revenue and Taxation Code]. This they cannot do under article XIII, section 32."  Loeffler v. Target Corp., 173 Cal.App.4th 1229, 1235 (2009).

My original take on this case was that it involved obscure issues involving the state tax code.  The Court of Appeal opinion says almost nothing about the UCL or CLRA.  But the UCL and CLRA issues appear to be moving to the forefront.  On December 16, 2013, the Court ordered supplemental briefing on these issues:

(1) May a cause of action be brought under the UCL (see Bus. & Prof. Code, § 17200 et seq.) or CLRA (see Civ. Code, § 1750 et seq.) based on an allegation that a retailer misrepresented that it was collecting an amount as tax reimbursement when in fact the retailer failed to remit the amount to the Board of Equalization?

(2) If so, do the allegations in plaintiffs' second amended complaint state a cause of action under the UCL or CLRA on this theory, and, if not, should plaintiffs be afforded an opportunity to amend their complaint to state such causes of action?

A few months earlier, on April 11, 2013, the Court ordered supplemental briefing on a very different issue:

The parties are requested to serve and file simultaneous supplemental letter briefs addressing whether and, if so, in what manner the doctrine of primary jurisdiction (see Jonathan Neil & Assoc., Inc. v. Jones (2004) 33 Cal.4th 917, 931-937), appropriately may be invoked and applied in the present case, including whether the issue was preserved in the trial and appellate courts and whether article XIII, section 32 of the California Constitution would be implicated by applying the doctrine.

Here are copies of some of the briefs:

• Opening Brief on the Merits (filed 11-09-09)
• Answer Brief on the Merits (filed 01-11-10)
• Reply Brief on the Merits (filed 02-01-10)
• Amicus Curiae Brief of State Board of Equalization (filed 04-15-10)
• Target's Consolidated Answer to Amicus Curiae Briefs (filed 05-05-10)
• Plaintiff's Consolidated Answer to Amicus Curiae Briefs (filed 05-05-10)
• Plaintiff's Request for Judicial Notice in Support of Consolidated Answer to Amicus Curiae Briefs (filed 05-05-10)
• Supplemental Amicus Curiae Brief of State Board of Equalization (filed 07-08-11)
• Plaintiffs' Response to Supplemental Amicus Curiae Brief of State Bd. of Equalization (filed 08-08-11)
• Target's Letter Brief re Primary Jurisdiction (filed 04-22-11)
• Plaintiff's Letter Brief re Primary Jurisdiction (filed 04-22-11)
• Target's Reply Letter Brief re Primary Jurisdiction (filed 04-25-11)
• Plaintiff's Reply Letter Brief re Primary Jurisdiction (filed 04-26-11)
• Target's Supplemental Brief re UCL and CLRA (filed 01-13-14)
• Plaintiff's Supplemental Brief re UCL and CLRA (filed 01-13-14)

There are several "grant and hold" cases also pending in the Supreme Court.  Does anyone know if any cases raising similar issues have been stayed in the lower courts pending resolution of Loeffler?

Also, if anyone plans to attend the argument and would like provide a report for publishing here (with or without attribution), please drop me a line.

UPDATE:  On May 1, 2014, the Supreme Court affirmed the Court of Appeal's judgment, holding that the tax code provides the exclusive remedy for the type of violation asserted in this case.  Loeffler v. Target Corp., 58 Cal.4th 1081 (2014). 

No cases of interest set for oral argument in September 2013

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.

Last week's arguments in Rose and Zhang

As I previously reported, last week the Supreme Court heard oral arguments in two cases potentially implicating the ordinary rule that a UCL "unlawful" prong may proceed regardless of whether the legislature intended the "borrowed" law to carry a private right of action.  Zhang v. Superior Court (Cal. Cap. Ins.), no. S178542, was argued last Wednesday, and Rose v. Bank of America, no. S199074, was argued Tuesday. 

Emily Green of the Daily Journal had a story on the Zhang argument in last Thursday's paper.  An excerpt:

Plaintiffs lawyers and insurance companies have waited more than three years for the state Supreme Court to take up the case of Yanting Zhang, a homeowner who sued her insurance company for false advertising after it repeatedly stalled her efforts to get recovery after an apartment fire.

But at oral argument Wednesday, ... the questions posed by the justices suggested the court is inclined to rule in favor of Zhang, who wants to move forward with her claim.

....

The backdrop to the case is a prior California Supreme Court decision that says private citizens can't privately sue insurers who commit unfair practices under the state's Unfair Insurance Practices Act. Only the insurance commissioner can do that.  Moradi-Shalal v. Fireman's Fund Ins. Companies, 46 Cal.3d 287 (1988).

Much of oral argument centered on whether Moradi-Shalal affected Zhang's case.  ....

[Justice] Corrigan questioned why Zhang should be precluded from suing the company for false advertising. If one of the parties has no intention of living up to its side of the contract, she said, then the contract is "fraudulently induced." 

Justice Corrigan is one of the more conservative members of the Court, so if her questions favored the plaintiff, that is a strong signal that the plaintiff may ultimately prevail. 

I have seen no press coverage of Rose, but an attorney present reported that the questioning in that case also seemed to favor the plaintiffs' position.  The attorney said that from the questioning, it appeared that the justices were accepting the argument that the repeal of the private right of action for violations of the Truth in Savings Act (12 U.S.C. § 4301 et seq.) did not affect the Act's preemption language or establish a federal policy precluding state enforcement of its provisions. 

Both opinions are due to be filed no later than the week of August 5, 2013.  

Oral argument preview: Zhang v. Superior Court

Today at 1:00 p.m. in San Francisco, the Supreme Court will hear oral argument in Zhang v. Superior Court (Cal. Cap. Ins.), no. S178542:

• Issues: (1) Can an insured bring a cause of action against its insurer under the unfair competition law (Bus. & Prof. Code, § 17200) based on allegations that the insurer misrepresents and falsely advertises that it will promptly and properly pay covered claims when it has no intention of doing so? (2) Does Moradi-Shalal v. Fireman's Fund Ins. Companies (1988) 46 Cal.3d 287 bar such an action?
• Court of Appeal Opinion:Zhang v. Superior Court (Cal. Cap. Ins. Co.), 178 Cal.App.4th 1081 (Oct. 29, 2009.

For more on the case, see this blog post.  The opinion will be due in ninety days, or by August 6, 2013.

It appears that the Supreme Court sees the issues raised in this case as somewhat related to those presented in in Rose v. Bank of America, no. S199074, which was argued yesterday.  In Rose, review was granted in March 2012, barely a year ago.  Zhang, on the other hand, has been pending since February 2010.  It could be coincidence, but I think there must be a reason for the setting on adjacent days.  The issues appear to be substantively related, as I explained here.

Unfortunately, the press of business has prevented me from attending either of the arguments.  If you attended yesterday (or are planning to attend today) and would like your report to appear here, please drop me a line. 

Oral argument preview: Rose v. Bank of America

This morning at 9:00 a.m. in San Francisco, the Supreme Court will hear oral argument in Rose v. Bank of America, no. S199074:

• Issue: 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?
• Court of Appeal Opinion: Rose v. Bank of America, N.A., 200 Cal.App.4th 1441 (2011)

Justice Louis R. Mauro of the Third Appellate District will sit in place of Justice Chin, who is recused.  For more on this case, see this blog post. 

Once the case is submitted, the opinion will be due in 90 days, or by August 5, 2013. 

California Courts YouTube channel

Here is the link to the YouTube channel of the California Courts: The Judicial Branch of California.  "Video content on this channel was produced exclusively by or in partnership with the California Administrative Office of the Courts." 

It includes video of Judicial Council meetings; speeches by court officials including the Chief Justice; courthouse groundbreaking ceremonies; confirmation ceremonies; and various other videos. 

The channel was created in January 2009, but I will admit I was unaware of it until now.  This explains how the Brinker video could have been posted on YouTube before it was available on the California Channel website. 

Supreme Court hears oral argument in class certification case: Brinker Restaurant Corp. v. Superior Court (Hohnbaum)

Yesterday, the Supreme Court heard oral argument in Brinker Restaurant Corp. v. Superior Court (Hohnbaum), no. S166350.  I had the privilege of presenting the argument on behalf of the workers along with my co-counsel Michael Rubin. 

The argument focused primarily on the substantive Labor Code issues.  There was comparatively little argument or questioning on the class certification issues.  Of the few questions asked during my brief rebuttal, none related to class certification. 

Matt Bailey has an interesting summary of the argument at his blog, the Bailey Class Action Daily.  Unfortunately it turns out that the live web feed had some technical glitches.

The complete video of the argument is available on YouTube at this link.  It should also soon be available at the California Channel website, but it isn't up yet.

There has been quite a bit of press coverage as well.   According to Laura Ernde's article in this morning's Daily Journal (link not available), the justices were "skeptical" of the idea that meal periods should be mandatory in the sense that workers can never choose to work through them, but seemed to accept the idea that employees cannot be required to work more than five hours at a time without a meal period.  The article does not address any of the class certification issues. 

The opinion will be due in 90 days, which is going to be no later than early February.

Oral argument in Harris v. Superior Court (Liberty Mutual Insurance)

Last week, I attended the oral argument in Harris v. Superior Court (Liberty Mutual Insurance), no. S156555.  In Harris, the Court of Appeal reversed the trial court's order decertifying the plaintiff insurance adjusters' overtime claims, which were predicated on the adjusters' alleged misclassification as exempt from the overtime laws. 

I did not think that any of the justices' questions were particularly illuminating.  The class certification issues were not really discussed at all.  Justice Liu's scholarly bent was evident from his questions. 

Laura Ernde of the Daily Journal had a different take.  Her headline described the justices as "skeptical of overtime for insurance adjusters."  Either way, we'll know in 90 days.

Justice Liu confirmed to California Supreme Court

Happy Labor Day!  In case you haven't already heard, Justice Goodwin Liu was sworn in as the newest Associate Justice of the California Supreme Court on September 1, 2011, the day after his confirmation hearing.  (The video of the swearing-in ceremony is available here.)

On Friday, the Supreme Court issued an amended oral argument calendar for this week. It indicates that Justice Liu will hear six of the seven cases that are set for argument (in lieu of the pro tem justices previously assigned to those cases).  I imagine he is having a busy holiday weekend.

One of the cases is of particular interest (and no, I don't mean the Prop. 8 case, which will be argued Tuesday morning and broadcast live by California Channel).  In Serrano v. Stefan Merli Plastering, no. S183372 (review granted 08/18/10), the Court will consider Code of Civil Procedure section 1021.5 and whether a plaintiff is eligible for fees for work in a case that established a legal precedent.  The Court of Appeal said no in Serrano v. Stefan Merli Plastering Co., 184 Cal.App.4th 178 (2010).  

Serrano is scheduled for argument on Wednesday, September 7, 2011 at 1:30 p.m.  The argument is part of a special session taking place at U.C. Hastings College of the Law.   

Oral argument preview: Erica P. John Fund, Inc. v. Halliburton Co.

The U.S. Supreme Court will hear oral argument today at 10:00 a.m. Eastern in Erica P. John Fund, Inc. v. Halliburton Co., no. 09-1403. 

Transcripts of U.S. Supreme Court arguments are generally available within hours after the argument takes place.  When it is posted online, the Erica P. John Fund transcript should be available at this link.  [UPDATE:  The broken link to the transcript has been fixed.]

These are the issues on review as stated in the cert. petition:

(1) Whether the Fifth Circuit correctly held, in direct conflict with the Second Circuit and district courts in seven other circuits and in conflict with the principles of Basic v. Levinson, 485 U.S. 224 (1988), that plaintiffs in securities fraud actions must not only satisfy the requirements to trigger a rebuttable presumption of fraud on the market, but must also establish loss causation at class certification by a preponderance of admissible evidence without merits discovery;

(2) whether the Fifth Circuit improperly considered the merits of the underlying litigation, in violation of both Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974), and Federal Rule of Civil Procedure 23, when it held that a plaintiff must establish loss causation to invoke the fraud-on-the-market presumption.

Class action attorneys in all areas of practice, not just securities, have been closely watching this case given its potential to construe the Eisen case and the rule against unnecessary merits determinations at the class certification stage.  The Fifth Circuit's opinion is Archdiocese of Milwaukee Supporting Fund, Inc. v. Halliburton Co., 597 F.3d 330 (5th Cir. 2010).

For an interesting analysis of the issues in the case, see this article by Professor Linda S. Mullinix of the University of Texas School of Law, Austin.  (Via SCOTUSblog.)

Oral argument report: Sullivan v. Oracle Corp.

Many thanks to Thomas R. Kaufman of Sheppard Mullin's Los Angeles office for attending and providing the following report of the oral argument yesterday morning in Sullivan v. Oracle Corp., no. S170577:

I attended the oral argument today at the California Supreme Court for Sullivan v. Oracle. The case raised essentially two main issues: (1) If an employee who normally works out of state for a company headquartered in California comes to California for a short stint of work, does he have to be paid overtime under California's overtime laws? and (2) if an employer who is headquartered in California makes a decision in California to classify employees across the country as exempt, can a class action under the California Unfair Competition Law borrow the FLSA as a predicate act and sue for misclassification of the nationwide class? I am more interested in issue (2), but almost the entirety of the argument focused on issue (1).

From the questioning, it looks as though most of the justices are leaning to holding that out-of-state employees of a California-based company who come to California must be paid overtime under California law (e.g., daily overtime and California exemptions apply). The few comments there were on the second question give me some hope that the Court may find for the employer on the nationwide UCL issue, but that is far less clear because the questioning on that issue was so minimal.

Charles Russell of Callahan, Thompson, Sherman & Caudill argued for Sullivan and Paul Cane of Paul Hastings argued for Oracle. The case was well argued on both sides, but Cane faced a lot more questioning and the questioning he faced was much more aggressive. I took copious notes, so here is my best effort at a play by play recounting of the oral argument:

Sullivan Argument

Charles Russell started by claiming that the answer to question (1) is answered by the plain meaning of Labor Code section 510, which states that "any work" in excess of eight hours in one workday must be paid at overtime rates. There is no exception made for work of employees who reside out of state. Justice Kennard interjected that there is language in the preamble to the statute (not sure what statute she is referring to) that suggests that it applies to all individuals employed in the state. Russell agreed.

Justice Kennard then asked what law applies to work outside the state of California. Russell stated that, for the plaintiff's Labor Code claims, he was not contending that work performed outside California is subject to the Labor Code. The issue is simply employees who worked for Oracle within California (note, this is somewhat misleading, as he is claiming that employees everywhere can sue under California law, but just via the UCL rather than the Labor Code).

Justice Chin then interjected that there is a 9th Circuit case involving a Texas company holding that California law applies to employees who are paid in the State of California. Russell did not really respond to the question, but stated that the issue here was simply employees who worked in California. Russell said in the Tidewater decision, the court examined whether California law applied to work by employees who lived in California and worked in California, but the dispute there was whether the employees were actually working in the state. Russell contended that the case implied that California law applies to all work performed in California. Justice Chin corrected Russell, stating that Tidewater did not involve employees who lived out of state, so it didn't really address the issue. Russell backed off his original statement a bit and said that Tidewater at least left the issue open.

Chief Justice Cantil-Sakauye interjected about the plain meaning again. She noted that there are exceptions delineated in Labor Code section 510 as to when overtime pay is required, and there wasn't one for out-of-state employees. Russell agreed.

Russell then noted that the "parade of horribles" imagined by the defense really has no application to the issue of daily overtime. For example, an employee who is working on a plane that merely flies through California airspace would not work more than eight hours in a day within California, so the daily overtime rule would not apply. The case is limited to situations where employees come to California for a long enough stint that they actually work daily overtime that is not also weekly overtime compensable under the FLSA. Russell said that there is nothing unusual about applying state laws to people who visit a state. When you drive into California, you are governed by the California speed limit even if the state where you drove from has a higher speed limit.

Justice Chin asked Russell if the plaintiffs were seeking retroactive overtime pay. Russell explained that, in the course of the litigation, Oracle reclassified all the subject employees as non-exempt and now pays them overtime (it was unclear whether they pay California overtime for visitors, but I assume not). The issue is that Oracle did not concede they were misclassified in the first instance, so this case seeks overtime for the period in which the employees were classified as exempt. California law is relevant to determine amount of damages if employees were misclassified as well as the statute of limitations (to the extent UCL is used to extend statute of limitations to four years on claims for restitution of wages).

At this point, Russell began a long recitation and did not receive questions for a while. He made some policy arguments about how the statute is to be liberally construed (recently reiterated in the Martinez v. Combs case) and how that justifies supporting Sullivan's position. He cast Oracle's argument as trying to create a "non-residents exception" for overtime that is not supported by public policy or the text of the statute.

The last comment on issue (1) came from Justice Kennard who asked whether the result would be different for other Labor Code sections or for employees of a company that was not based in California. She suggested that the Court need not address other statutes or non-California companies because that is outside the facts of the case. Russell eagerly agreed that the Court need not address those issues, but could limit the holding to the facts before the Court. Russell indicated that it would be administratively easy for employers based in California simply to follow the California overtime rules when their employees are working in California.

The only discussion of issue (2) was Russell making an analogy to someone living in a house and throwing rocks at other houses. He said that if you consider California as a house, California law can punish the conduct of the homeowner who is throwing rocks into other states and hurting people in those other states because the conduct took place in California. It doesn't matter where the victims are when the rocks hit them; for jurisdiction purposes, the UCL can apply so long as the rock is thrown from California. In a rather strained analogy, Russell stated that the rock throwing here was Oracle misclassifying employees under the FLSA from their company headquarters in California. This violation of the FLSA impacted employees throughout the country, but the decision to classify the employees as exempt emanated from California, and that was sufficient to trigger the UCL for all victims of the California-based act.

Justice Boren, sitting by designation, was the only judge to ask any questions to Russell about issue (2). He asked whether you could sue under the UCL for a claim by a Colorado employee that arose under Colorado law. Russell sidestepped the question and said that the issue here was the FLSA, which also applies in California. By suing under the UCL, you give up some relief (penalties, attorney's fees) and are limited to restitution under the UCL. I don't know if this concerned Justice Boren in that he was worried now that employees anywhere who happen to work for a company based in California can use state laws and transform them into UCL claims. He provided no further explanation of these questions. 

Oracle Argument

Paul Cane began by providing the example of a New York Times reporter in attendance to watch this argument. He began to state that by merely coming here for this story, under Sullivan's argument, the employee would be subject to all of California's wage and hour laws.

Before he could finish making this point, Justice Kennard interjected that this case need not reach all California wage and hour laws or all types of employers. It is just addressing California-based employers and the narrow issue of overtime pay. She asked whether this could be answered by the plain language of the preamble of the statute without addressing broader issues.

Cane said because the broader issue of which state law applies to an employee visiting another state is unavoidable.  There is a Washington state case that said that Washington law applies to truckers whose home base is in Washington but who drive for the day into Oregon. Similarly here, the state where most of the employee's work is performed should apply. This same standard has been adopted by the state Labor Commissioner for California employees working temporarily out of state. You couldn't have it be that California law applies to employees whose base is California when they go to another state AND employees based on other states are also governed by California law when they come to California. There is no reason to believe California sought to ignore general principles of comity and to have its law trump every other state's laws.

Justice Baxter asked whether Cane was arguing that a Mexican national who comes to this country to perform agricultural labor has no right to protections of California law but instead is protected only by Mexican law. (As a parenthetical, when the justices start comparing your employees to Mexican farmworkers, it doesn't bode well for the employer.) Cane explained to Justice Baxter that the analogy was inapt because the employee's work relationship with the employer was not primarily in Mexico even if the employee resided there when he wasn't working in California. The only employment relationship between that employee and the employer in the hypothetical would be in California (presuming the employee was not working for a Mexican company visiting California for an assignment-- which Cane did not address).

Justice Kennard then stated that Mr. Russell had allegedly conceded that the rule would be different for an employee of a non-California company temporarily visiting California, but this case dealt with employees of a California-based company. Cane replied that Mr. Russell had not agreed that a different rule applied to a non-California company, but rather that Russell's position was that the headquarters of the company is irrelevant. Cane stated that he agreed that the state of incorporation of the employing company should not bear on the issue. Justice Kennard stated that she thought it was relevant and that Mr. Russell had agreed.

Cane then argued further that it would be irresponsible to decide this issue focused solely on California-based companies and overtime law while leaving the employer community in the dark as to how this rule would be applied to other wage and hour laws and non-California companies. Cane noted that as soon as this case came down, the broader issues would be litigated next, and the employment community would be in a state of panic and extreme confusion about how to handle employees visiting California. The potential penalties for non-compliance could be massive and it would take years for this issue to be sorted out in the appellate courts. Cane then noted that the issue was not limited to daily overtime but also conflicting exemptions. In New York the laws governing whether newspaper reporters are exempt are different than in California. Could a company be expected to perform an exemption analysis for every employee that visited California. How would you deal with the exemption for an employee who was exempt four days in a week (under NY law) and non-exempt three days?

Chief Justice Cantil-Sakauye jumped in again and stated that the Ninth Circuit certified only a very narrow question, so what basis would the Court have to address other questions?

Cane stated that the Court must be mindful that rules it announces can be applied. Why should the determination of whether an employee is treated as exempt or non-exempt or paid daily overtime turn on where the company is headquartered?

Justice Corrigan responded that companies headquartered or doing most of their business in California are more likely to be familiar with California laws than a company headquartered in Rhode Island.

Cane stated that, whether that is true or not, exposing employers to a more punitive standard would scare businesses out of headquartering in California.

Chief Justice Cantil-Sakauye asked why it was such a burden to pay daily overtime.

Cane responded that laws are different all over because different states strike different balances between the interests of employees and those of the business community. California should respect those balances and defer to the other states where the work of that employee is primarily in the other state.

Justice Werdegar -- who seemed most sympathetic to Oracle's position -- asked whether a conflict of laws analysis would apply and, if so, which state would have the greater interest.

Cane stated that the state where more work was performed would have the greater interest. That is why you look to the state where the employee is primarily employed to determine which law to apply. Cane asserted that if the Court looked at the amicus briefing, it would see that no company pays according to the rule Sullivan advocates. That is, no company pays employees under California law when they visit California for a temporary visit.

Chief Justice Cantil-Sakauye asked what Cane meant by the issue being controlled by where the employment being primarily based in a state.

Cane responded that this analysis is from the Restatement of Contracts which allegedly says you look to where the majority of the work is performed in the relationship.

Justice Baxter interjected with his Mexican laborer example again and asked why that wasn't a proper analogy. Cane explained (again) that the focus is on the employment relationship between the employer and employee -- not on the state of residence of the employee. In the Mexican laborer example, the entirety of the employment relationship is in California, so California law applies. This is different from the analysis of which speed limit applies (Russell's analogy) because that question is geographically based. Wage/hour law is governed by where the employment relationship is primarily based.

Justice Corrigan asked whether Oracle's proposed rule actually hurts California employees because employers would have an incentive when they need a teacher for an assignment to use non-Californians rather than Californians. Cane indicated that this example was unrealistic because employers would need to send a wave of "shock troops" from out-of-state, over and over again each week, but Justice Corrigan corrected him that it would apply whenever an employer had a need for teachers for a limited stint. Cane stated that those were not the facts of the case, but Justice Corrigan chided him that Oracle wants the Court to consider real world consequences when it advantages them but not when it doesn't (that is a paraphrase, not a quote).

Cane regained his footing here a bit and stated that the case deals with situations of a business traveler who is primarily employed in another state. If an employee is hired just to come to California to work from another state but doesn't have a primary employment relationship with the same employer in another state, California law would apply. He didn't say (but probably should have said) that it was not realistic that employers are going to repeatedly fly employees from their Minnesota office to California for two-week stints to avoid overtime because the cost of transporting and housing them in California would swamp the savings from avoiding daily overtime.

Cane reiterated that if the rule is that you suffer more punishing regulation by being headquartered in California, then you are encouraging employers to relocate their headquarters to Arizona. That is not in California's interest.

Cane then briefly turned to issue (2). He challenged the notion of the rock throwing analogy by stating that where an employee who resides, works and is paid outside California (and may have never even been to California), you cannot say that the violation of the law happened in California. Even if a decision to classify the employee as exempt was made by someone in California, the "violation" is having the employee work more hours than 40 under the FLSA (which happens outside California) and then paying the employee no overtime pay (which happens outside California).

Rebuttal Argument

The rebuttal went a bit better for Oracle as Charles Russell had to backpedal from a couple points he made. Justice Werdegar did most of the questioning and was rather tough on Russell.

Justice Werdegar said she was troubled if it was true that no company follows the rule that Sullivan was advocating of paying employees under California law when they visit California.

Russell denied that there was any factual basis in the record for Cane's assertion of that alleged "fact." He claimed that Cane essentially made it up. I suspect there were statements in industry amicus briefs without evidence actually being part of the appellate record.

Justice Werdegar then asked whether the Restatement really announced a rule that the law that governs is where the employment relationship is principally based.

Russell conceded that was the common-law standard, but stated that the common law does not apply here. Under Martinez v. Combs, the IWC regulations trump the common law (unclear which IWC regulation he was referring to).

Justice Werdegar then asked whether what Justice Kennard has said was true. Was he conceding that different rules would apply if the company was not headquartered or principally based in California?

Russell stated that he made no such concession, but rather just stated that the Court did not need to reach that issue to decide the case (this is what Cane had also pointed out). Russell stated the laws that apply to an employer are the FLSA and the law of the state where the employee works.

Justice Werdegar then asked whether that meant that employees who work stints in multiple different states are governed by the different state law wherever they happen to work?

Russell somewhat sidestepped that question and stated that it wasn't a burden to make employers comply with California law because complying with California law generally has you comply with all states' laws (note, this is actually not true in all circumstances -- e.g. commission sales exemption is broader under California law than under FLSA; tip-pooling laws more onerous in Massachusetts than California).

Justice Werdegar finally asked Russell a question about issue (2). She asked if it really was a violation of California law if an employee who worked totally outside California experiences an FLSA violation, even when the only contact to California was that the company's headquarters is in California?

Russell said, yes, and said that similar conclusions were reached in Wersheba v. Apple and Norwest. So long as the bad conduct occurred in California, UCL applied. None of the justices explored the question of whether "misclassification" is bad conduct in California, or whether the conduct is where the work is performed and where the employee is paid.

Justice Boren then asked "what about the statute of limitations?" Russell stated that the UCL borrows the violation of the underlying law and applies its own (4-year) statute of limitations. So the UCL's statute of limitations would apply regardless of the statute of limitations for the underlying law. On the other hand, the UCL has lesser remedies than some of the underlying laws it borrows. I'm not sure that is what Justice Boren was asking.

Conclusions

As stated above, except perhaps Justice Werdegar, the justices who spoke seemed uniformly skeptical of Oracle's position that employees who visit California to work are governed only by the state law from the state where they principally worked. It appeared that Justice Baxter was not accepting the notion that this was not a residence issue, but an issue of where the primary employment relationship was. If forced to bet, I'd predict 6-1 or 7-0 for Sullivan on that issue.

The only questions asked about the nationwide UCL/FLSA claim seemed to question the notion of applying California law to employees who worked totally outside California. Justice Boren's questions suggested that he may be concerned about this issue. Justice Werdegar expressed at least some skepticism of the notion of applying California law to employees working out of state who experienced a violation of federal law. Five of the seven justices made no comment whatsoever on the issue though, so there is a lot more ambiguity.  If forced to bet, I'd bet they follow the Ninth Circuit's original ruling and state that the UCL cannot apply to create a nationwide UCL/FLSA class under the facts of the case.

Oral argument preview: Dukes v. Wal-Mart

This morning at 10:00 a.m. Eastern, the U.S. Supreme Court will hear oral argument in Wal-Mart Stores, Inc. v. Dukes, no. 10-277.

Transcripts of U.S. Supreme Court arguments are generally available within hours after the argument takes place.  When it is posted online, the Dukes transcript should be available at this link. 

Wal-Mart's reply brief was filed just twelve days ago, on March 17.  Links to the other briefs are available at this blog post. 

UCL case set for argument in April: Sullivan v. Oracle Corp.

The Supreme Court has released its oral argument calendar for April.  The following UCL case will be heard on Wednesday, April 6, 2011 at 10:00 a.m. in Los Angeles: 

Sullivan v. Oracle Corp., no. S170577 (questions accepted 04/22/09)

• Issues: (1) First, does the California Labor Code apply to overtime work performed in California for a California-based employer by out-of-state plaintiffs in the circumstances of this case, such that overtime pay is required for work in excess of eight hours per day or in excess of forty hours per week? (2) Second, does § 17200 apply to the overtime work described in question one? (3) Third, does § 17200 apply to overtime work performed outside California for a California-based employer by out-of-state plaintiffs in the circumstances of this case if the employer failed to comply with the overtime provisions of the FLSA?
• Ninth Circuit Opinion:  Sullivan v. Oracle Corp., 547 F.3d 1177 (9th Cir. 2008) (withdrawn) (see this blog post)

Presiding Justice Roger W. Boren of the Second Appellate District, Division Two, has been assigned to sit pro tem in place of Justice Moreno, who is now retired. 

I probably will not make it down to L.A. for this argument, so I'm seeking a volunteer to attend for me and provide a report.  Please drop me a line at [email protected] if you can do this.  Your report can be with or without attribution, your choice.  Thanks! 

Argument transcript available in class action case: Smith v. Bayer Corp.

The transcript of this morning's oral argument in Smith v. Bayer Corp., no. 09-1205 (U.S.), discussed in my post immediately below, is now available at this link.