In Lambert v. Nutraceutical Corp., the Ninth Circuit examines Rule 23(f) petitions

I won't diminish the expectant quality of your Friday by providing a blow-by-blow of the decision, but Lambert v. Nutraceutical Corp. (9th Cir. Sept. 15, 2017) takes a thorough look at the timing requirements of Fed. R. Civ. P. 23(f) petitions, concluding that the 14-day filing deadline of Rule 23(f) is not jurisdictional and can be extended or tolled for a variety of reasons.  The opinion also reversed the District Court's decertification order in the consumer class action, concluding that it erred in its treatment of the plaintiff's damage model.

Appellant was successfully represented by Gregory Weston (argued) and David Elliott, The Weston Firm, San Diego, California; and, Ronald A. Marron, The Law Offices of Ronald A. Marron APLC, San Diego, California.

Just reading Cortez v. Doty Bros. Equipment Company should earn you CLE credit for appellate specialization

When I started reading this opinion, I went a little too fast on the first page, read on a few more pages, got really confused, re-read the first page, and then re-read the next four pages, marveling and what happened.  Cortez v. Doty Bros. Equipment Company (September 1, 2017) (Second Appellate District, Division Seven) is one of those decisions that you read and say, "I didn't know they could do that."

Here's what gets you.  The first page say, "APPEAL from orders of the Superior Court of Los Angeles County, Jane L. Johnson, Judge. Appeal dismissed."  Slip op., at 1.  If you are rushing, you assume that some procedural failing led to a dismissal.  This incorrect conclusion is only amplified when you read this:

While Cortez’s appeal was pending, the appellate courts in Munoz v. Chipotle Mexican Grill, Inc. (2015) 238 Cal.App.4th 291, 310 (Munoz) and Miranda v. Anderson Enterprises, Inc. (2015) 241 Cal.App.4th 196, 201-202 (Miranda) held the death knell doctrine did not apply to the denial of class certification or dismissal of class claims while a plaintiff’s PAGA claim remained pending in the trial court. Concerned about the viability of his initial appeal, Cortez voluntarily dismissed his PAGA claim with prejudice on March 30, 2016 and filed a second notice of appeal on May 20, 2016, again identifying the September 19, 2014 order compelling arbitration and the March 23, 2015 order dismissing all class claims as the orders subject to appellate review. We consolidated the two appeals. 

Slip op., at 2-3.  At this point (if you were me), you figure that the filing of the second appeal and the dismissal of the PAGA claim in the trial court were going to interact somehow to lead to the dismissal of the appeal, perhaps on some timeliness ground.  Nah.  You're way off base (if you are me).

Here's where the whiplash gets you:

Although not fully identified by the parties in their briefs, Cortez’s appeal poses several difficult jurisdictional questions, in particular, the effect of Cortez’s dismissal of his PAGA claim on the appealability of the earlier order dismissing the class claims, including whether a plaintiff’s voluntary action can create an appealable order under the death knell doctrine and whether the second notice of appeal from an order entered more than a year before was timely; and the applicability of Code of Civil Procedure section 906 to an order made appealable under the judicially created death knell doctrine rather than pursuant to Code of Civil Procedure section 904.1. We resolve none of those issues. Rather, in light of the uncertainty of the appealability of the orders challenged by Cortez and the absence of any delay or prejudice our intervention at this stage would cause, we find this an appropriate case in which to exercise our discretion to treat the consolidated appeal as a petition for writ of mandate and reach the merits of the superior court’s orders compelling arbitration of Cortez’s individual claims and terminating the class claims.

Slip op., at 4.  "We resolve none of those issues."  What?  "[W]e find this an appropriate case in which to exercise our discretion to treat the consolidated appeal as a petition for writ of mandate and reach the merits of the superior court’s orders compelling arbitration of Cortez’s individual claims and terminating the class claims."  Spectacular.

The actual result is far less amazing than the procedural knot that was circumvented to get there.  The outcome is a fairly standard application of how Stolt-Nielsen is currently construed:

We grant Cortez’s petition in part, finding Cortez’s cause of action under the Labor Code for Doty Bros.’ failure to timely pay wages upon his separation from employment (Lab. Code, § 203) (sixth cause of action) and his unfair competition action based on that alleged statutory violation (Bus. & Prof. Code, § 17200) (seventh cause of action) are not encompassed by the arbitration provision in the CBA. In all other respects, we deny the petition, concluding the remaining causes of action are subject to 5 arbitration, and the court’s termination of class claims proper on the ground the CBA does not authorize classwide arbitration. 

Slip op., at 4-5.

Near the end of the opinion, the Court notes the split of federal authority at the Circuit level on the issue of whether a ban on classwide arbitration is antithetical to the NLRA.  While this panel might have done that issue justice, it noted that the California Supreme Court had rejected that argument in Iskanian, and concluded that it was bound by that determination.

Kingsley & Kingsley, Eric B. Kingsley, Liane Katzenstein Ly, Kelsey M. Szamet and Ari J. Stiller; DesJardins & Panitz, Michael A. DesJardins and Eric A. Panitz successfully represented Plaintiff and Appellant (though as a petitioner)

Arbitration bid sunk in Sprunk

Yes, yes I did write that post title.  In Sprunk v. Prisma LLC (August 23, 2017), the Court of Appeal (Second Appellate District, Division One) considered whether a defendant in a putative class action can waive its right to compel arbitration against absent class members by deciding not to seek arbitration against the named plaintiff.  The Court agreed that it did, holding that Prisma LLC "waived its right to seek arbitration by filing and then withdrawing a motion to compel arbitration against the named plaintiff, Maria Elena Sprunk, and then waiting until after a class had been certified to seek arbitration against class members."  Slip op., at 2.

Some of the less interesting issues in the opinion concern the sufficiency of evidence of arbitration agreements with class members.  The juicy stuff, however, is described as follows:

Plan B [Prisma LLC] also raises a legal issue concerning the status of absent class members. Plan B argues that the trial court erred in considering Plan B’s delay in moving to compel arbitration before the court decided class certification because the unnamed class members were not parties until a class was certified. Because this argument raises an issue of law concerning the time period that the trial court could properly consider in analyzing waiver, we review it de novo. (Sky Sports, Inc. v. Superior Court (2011) 201 Cal.App.4th 1363, 1367 (Sky Sports) [applying the de novo standard to the issue whether a defendant “waived its right to compel arbitration because it did not bring the motion before certification of a class that included parties to the arbitration agreement”].)

Slip op., at 12.  The Court concluded that strategic delay can properly result in waiver:

An attempt to gain a strategic advantage through litigation in court before seeking to compel arbitration is a paradigm of conduct that is inconsistent with the right to arbitrate. For example, Bower was a putative wage and hour class action in which the defendant engaged in discovery and attempted to settle the case on a classwide basis when the class was a modest size. (Bower, supra, 232 Cal.App.4th at pp. 1038–1040.) When the plaintiff sought an amendment that would have expanded the class, the defendant (Inter-Con) moved to compel arbitration. The trial court found waiver, and the appellate court affirmed, concluding that Inter-Con’s decision to delay seeking arbitration “appears to have been tactical.” (Id. at pp. 1045, 1049). Based upon Inter-Con’s litigation conduct, “[o]ne can infer that InterCon chose to conduct discovery, delay arbitration, and seek a classwide settlement because it saw an advantage in pursuing that course of action in the judicial forum.” (Id. at p. 1049.) Such conduct provided substantial evidence to support the finding that “Inter-Con’s actions were inconsistent with a right to arbitrate.” (Id. at p. 1045.)

Slip op., at 18.  The discussion about waiver is extensive (seriously - about 24 pages of the opinion concern waiver).  The Court seems to leave the door open for situations where the trial court believes that there is a bona fide desire to wait for an expected clarification in the law, but it would seem to be a risky bet for a defendant if its actions could just as well be perceived as done for strategic benefit.

I'm somewhat surprised that this hasn't come up more frequently.

Knapp, Petersen & Clarke, André E. Jardini, Gwen Freeman and K. L. Myles successfully represented Plaintiff and Respondent.

Occidental College, my alma mater, vexes me greatly

Hey, so I went to Occidental College.  Just like Mr. Obama (Emily Post says the title of "President" ends with the end of the term of office - yes, I checked).  Two differences stand out between us, I think.  I graduated.  And he's more famous.  Oh, plus I never inhaled.

So I mention Occidental College because I received correspondence from my alma mater today that struck me immediately as insipid and deeply troubling.  Here's what the e-mail said:

To the Occidental Community,

n Charlottesville last weekend, we saw the ugly face of racism and hate, naked and unadorned. White supremacy in all of its manifestations is an assault on the fundamental values of Occidental, the community of scholars of which we are a part, and the kind of country we want to be. Love of knowledge, intellectual rigor and mutual respect are essential in creating the kind of just, inclusive and loving community we all want to be a part of. As we welcome the Class of 2021 to campus next week, and throughout the coming months, let’s embrace these values as we continue our effort to create such a community here at Oxy.

Best,

President Veitch

A few questions came to mind immediately.  The first thing I asked myself was whether the current crop of incoming students needs to be told that white supremacists are bad.  It never came up when I was there, but I'm really confident that had I conducted a poll, 100% of my classmates would have, without hesitation, said, "Bad."  (A few might have first asked if it was some sort of trick.)  This would have been the easiest quiz, with the highest average score in the history of Occidental.

But, today, not so much.  The school has to tell them it's bad.  Here's my first tip to the admissions committee at Occidental:  if you think you need to tell incoming freshmen this, raise your standards. You are diluting the value of my degree.  Maybe there's a class action there.  Kidding. Probably.  No, kidding for sure.

The second thing I asked myself was why the President of Occidental didn't think to make any mention of the fact that Occidental also abhors the use of violence to silence even reprehensible hate speech.  I've heard quite a few political commentators in recent months suggesting that the First Amendment doesn't protect "hate speech."  Go check with a colleague that practices First Amendment law and see if they concur.  Surely it must be the case that as much as hateful viewpoints like white supremacy, misogyny, or other bigoted beliefs are contrary to fundamental values of Occidental, so, too, are any attempts to forcibly silence even unpleasant ideas.  However, as I am sure that President Veitch did not issue this letter without substantial thought and input, I have to wonder whether the omission of any warning to new students that violent suppression of speech will not be tolerated was intentional.

I can't say it isn't tempting to be sympathetic, for a moment, when a nutter white supremacist is receiving a beat down with a club.  But I would caution everyone to remember Neimoller's words:

First they came for the Socialists, and I did not speak out—
Because I was not a Socialist.

Then they came for the Trade Unionists, and I did not speak out—
Because I was not a Trade Unionist.

Then they came for the Jews, and I did not speak out—
Because I was not a Jew.

Then they came for me—and there was no one left to speak for me.

You can't send a message that criticizes what is, fortunately, a viewpoint considered by a vast majority of Americans as reprehensible while tacitly condoning vigilantism to silence that idea (if you actually doubt that, consider that a little more than 100 years ago, the KKK had membership in the millions, but a century later the membership was believed to be under 10,000). Violent repression of speech won't stop at the white supremacists.  It's already moved past that. Recall riots at Berkley, the birthplace of contrary viewpoint expression, to silence a speaker.  If thuggish retaliation against speech is allowed to build up a head of steam, it will be hard to stop.

Occidental's alumni should be very disappointed by the absence of a strong message renouncing violence to limit speech and encouraging civil dialog between members of the Occidental community at all times (with at least an implied reminder that anyone acting contrary to that principle will need to find themselves a new college to attend in short order).

I would note, in closing, that Occidental's website does a far better job of recognizing that dialog can often be challenging, but open discussion and critical thinking are central to the educational mission.  Why doesn't the President of Occidental know that?

Further nuances to PAGA and arbitration clauses in Esparza v. KS Industries, L.P.

Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal. 4th 348 (2014) held that PAGA representative claims for civil penalties are not subject to arbitration.  In Esparza v. KS Industries, L.P. (August 2, 2017), the Court of Appeal (Fifth Appellate District) tackled the question of whether any claims asserted under PAGA can be "individual" claims, and, if so, how are they treated for purposes of arbitration agreements. The issue arose, in particular, because it appeared that the plaintiff asserted, within the PAGA claim, a claim to recover wages under Labor Code section 558, which, unlike the other PAGA penalties (in the sense of the word meaning something akin to a fine) sought, would result in the recovery of the underlying wages owed, with no portion going to the State from the recovered wages.  The Court directed the plaintiff on remand to declare unequivocally whether only penalties would be sought or whether, in addition, individual recovery claims would be pursued.  The Court concluded that such individual recovery claims would be severed and arbitrated.

Don't see the Fifth Appellate District having to wade into these issues regularly, so hat tip to that District for getting into the PAGA mix.

The trial court was technically affirmed, but the holding and directions on remand make this one a win for defendant/respondent, who was represented by Call & Jensen, John T. Egley and Jamin S. Soderstrom.

DOJ switches teams in NLRB v. Murphy Oil

The DOJ announced on Friday, June 16, 2017, that it was reversing its position on the validity of class action waivers in arbitration agreements and would file an amicus brief in support of the employer's position in NLRB v. Murphy Oil.  I get that a change in administration can bring with it a change in policy, but this is unfortunate in that it overtly politicizes a legal analysis that should at least attempt to be a textual analysis that doesn't depend on which way the wind blows.  I suppose Judge Posner has the right of it when he argues that all the supposedly dispassionate judicial reasoning is just a veneer over personal preference and wanting anything as significant as this issue to be decided apolitically is laughably naive.  Still, I think the better approach for the DOJ would have been to undertake the equivalent of a noisy withdrawal, officially retracting its position and choosing to take a neutral position in the case.

Briefs on the merits are available in Troester v. Starbucks

Briefing on the merits is complete in Troester v. Starbucks Corporation (S234969).  The California Supreme Court granted the Ninth Circuit's request to decide an issue of California law.  The issue, taken from the California Supreme Court's Case Summary page is:

Request under California Rules of Court, rule 8.548, that this court decide a question of California law presented in a matter pending in the United States Court of Appeals for the Ninth Circuit. The question presented is: Does the federal Fair Labor Standard Act's de minimis doctrine, as stated in Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 692 (1946) and Lindow v. United States, 738 F.2d 1057, 1063 (9th Cir. 1984), apply to claims for unpaid wages under California Labor Code sections 510, 1194, and 1197?

If you are interested, I've made the Briefs available here.  A new sidebar link will also get you there.

A rest break says what? Vaquero v. Stoneledge Furniture LLC holds that commission-only pay employees must be paid separately for rest periods.

California is the wage and hour gift that keeps on giving.  And if you thought every wage and hour question must have been answered by now....well....the naivete is charming.  A few weeks ago, in Vaquero v. Stoneledge Furniture LLC (February 28, 2017), the Court of Appeal (Second Appellate District, Division Seven) tackled two new questions related to rest breaks:

Are employees paid on commission entitled to separate compensation for rest periods mandated by state law? If so, do employers who keep track of hours worked, including rest periods, violate this requirement by paying employees a guaranteed minimum hourly rate as an advance on commissions earned in later pay periods? 

Slip op., at 2.  And how do you think the Court answered these questions?  Everyone should pass this test; it's still California we're talking about.  The Court said yes to both questions.

The facts are important to the outcome, since this result would not apply to every commission plan.  The defendant had two different plans in operation during the class period. The first was described as follows:

After a training period during which new employees received $12.01 per hour, Stoneledge paid sales associates on a commission basis. If a sales associate failed to earn “Minimum Pay” of at least $12.01 per hour in commissions in any pay period, Stoneledge paid the 3 associate a “draw” against “future Advanced Commissions.” The commission agreement explained: “The amount of the draw will be deducted from future Advanced Commissions, but an employee will always receive at least $12.01 per hour for every hour worked.”

Slip op., at 2-3.  Later, the plan was changed:

Effective March 30, 2014, Stoneledge implemented a new commission agreement that pays sales associates a base hourly wage of $10 “for all hours worked.” In addition, sales associates can earn various types of incentive payments based on a percentage of sales. Under the new agreement, no portion of a sales associate’s base pay is deducted from or credited against incentive payments.

Slip op., at 4.  The Court began its analysis by exhaustively setting forth the rest break requirement, the nature of Wage Orders, and the policies underlying California wage and hour laws, beginning with a citation to Augustus.  Next, the Court examined whether Wage Order 7 requires separate compensation for rest breaks:

The plain language of Wage Order No. 7 requires employers to count “rest period time” as “hours worked for which there shall be no deduction from wages.” (Cal. Code Regs. tit. 8, § 11070, subd. 12(A), italics added.) In Bluford v. Safeway Stores, Inc. (2013) 216 Cal.App.4th 864 the court interpreted this 12 language to require employers to “separately compensate[ ]” employees for rest periods where the employer uses an “activity based compensation system” that does not directly compensate for rest periods. (Id. at p. 872.)

Slip op., at 11-12.  After a thorough examination, the Court agreed that the approach in Bluford was correct:

We agree with Bluford that Wage Order No. 7 requires employers to separately compensate employees for rest periods if an employer’s compensation plan does not already include a minimum hourly wage for such time. (See Gonzales, supra, 215 Cal.App.4th at pp. 48-49 [concluding that the identical language in Wage Order No. 4 requires employers to separately pay piecerate workers for nonproductive time].) All of the federal courts that have considered this issue of California law have reached a similar conclusion and have held employers must separately compensate employees paid by the piece for nonproductive work hours.

Slip op., at 14.  The Court then concluded that the same result applies to commission-pay employees:

The plain language of Wage Order No. 7 covers employees paid by commission. (See Cal. Code Regs. tit. 8, § 11070, subd. 1 [applying to “all persons employed in the mercantile industry whether paid on a time, piece rate, commission, or other basis”]; id. at § 11070, subd. 2(O) [“wages” includes “amounts for labor performed by employees of every description, whether the amount is fixed or ascertained by the standard of time, task, piece, commission basis, or other method of calculation”].) Where, as here, the language of a wage order is unambiguous, it is dispositive. (Brinker, supra, 53 Cal.4th at p. 1028; see also Gonzales, supra, 215 Cal.App.4th at p. 49 [the wage order “does not allow any variance in its application based on the manner of compensation”].)

Slip op., at 15.  The Court explained that commission pay systems and piece rate systems were essentially identical in their treatment of rest breaks:

The commission agreement used by Stoneledge during the class period is analytically indistinguishable from a piece-rate system in that neither allows employees to earn wages during rest periods. Indeed, the purpose of a rest period is to rest, not to work.

Slip op., at 16.  After reaching its conclusion, the Court then spent the balance of its discussion disposing of various arguments by the defendant.  In one example, the Court rejected that a guaranteed base drawn against future commissions did not pay for rest periods:

For sales associates whose commissions did not exceed the minimum rate in a given week, the company clawed back (by deducting from future paychecks) wages advanced to compensate 23 employees for hours worked, including rest periods. The advances or draws against future commissions were not compensation for rest periods because they were not compensation at all. At best they were interest-free loans. Stoneledge cites no authority for the proposition that a loan for time spent resting is compensation for a rest period. To the contrary, taking back money paid to the employee effectively reduces either rest period compensation or the contractual commission rate, both of which violate California law. (See § 221 [prohibiting employers from collecting or receiving from an employee “any part of wages theretofore paid by said employer”]; § 222 [prohibiting employers from withholding any part of a wage agreed upon]; § 223 [prohibiting employers from “secretly pay[ing] a lower wage while purporting to pay the wage designated by statute or by contract”]; cf. Armenta, supra, 135 Cal.App.4th at p. 323 [averaging wages across pay periods to satisfy minimum wage requirements “effectively reduces [employees’] contractual hourly rate”].)

Slip op., at 22-23.  The Court then went through mathematical examples to show that the system in place earlier in the class period did compensate employees differently depending upon whether they took rest breaks or not.  If you are paid exclusively on commission, expect to see your compensation system get a tweak in the near future.

E-DISCOVERY: State-by-state resources to set you in the right direction

Quite some time ago, I covered a few e-discovery resources on this blog.  You can find that old post here.

I'm adding another to that list (additions being long overdue).  This list has an interesting collection of state-by-state links.  It might set you in the right direction if you have to deal with e-discovery in a state in which you don't normally practice:

Electronic Discovery Law Throughout the United States

In Mohamed v. Uber Technologies, Inc., the Ninth Circuit adds to the list of decisions severing PAGA claims from claims sent to arbitration

Mohamed v. Uber Technologies, Inc. (9th Cir. Dec. 21, 2016) isn't the first decision to hold, in the face of a motion to compel arbitration in a wage and hour suit, that (1) PAGA claims should be severed from the rest of the claims and proceed in Court, and (2) the arbitrability of all other claims was for an arbitrator to determine.  The Court said:

In Iskanian v. CLS Transp. L.A., LLC, 327 P.3d 129 (Cal. 2014), the California Supreme Court held that where “an employment agreement compels the waiver of representative claims under the PAGA, it is contrary to public policy and unenforceable as a matter of state law.” Id. at 149. We have held that the Federal Arbitration Act does not preempt this rule. Sakkab v. Luxottica Retail N. Am., Inc., 803 F.3d 425, 427 (9th Cir. 2015). 

Slip op., at 21.