In Amalgamated, the companion opinion to Arias, the Supreme Court analyzes whether PAGA and UCL claims can be assigned by individuals to their labor union

June 29, 2009 was a busy day for California Supreme Court news.  In Amalgamated Transit Union, Local 1756, AFL-CIO v. Superior Court (First Transit, Inc.) (June 29, 2009), the California Supreme Court issued the second of companion opinions addressing aspects of California’s unfair competition law (“UCL”) and the Labor Code Private Attorneys General Act of 2004 (“PAGA”) (Cal. Lab. Code § 2698, et seq.). See previous post on Arias.  Because the decisional authority analyzing the recently-passed PAGA is sparse, Amalgamated is important to understanding the reach of PAGA and its role in securing civil penalties for California employees.

Amalgamated addressed two issues. First, the Supreme Court rhetorically asked whether “a plaintiff labor union that has not suffered actual injury under the unfair competition law, and that is not an ‘aggrieved employee’ under the Labor Code Private Attorney General Act of 2004, nevertheless bring a representative action under those laws (1) as the assignee of employees who have suffered an actual injury and who are aggrieved employees, or (2) as an association whose members have suffered actual injury and are aggrieved employees.” Slip op., at 2. Second, the Supreme Court asked whether “a representative action under the unfair competition law be brought as a class action.” Slip op., at 2.

As to the second issue, the Supreme Court noted that Arias sufficiently addressed that issue, holding that an action under the unfair competition law must be brought as a class action.

Before turning to the first issue, the procedural background of Amalgamated touches on a procedural practice recently the subject of appellate consideration.  If you have practiced in the Civil Central West courthouse in Los Angeles, you may be familiar with that Court’s former practice of allowing parties to obtain early determinations of “threshold” issues. See post on Magana Cathcart McCarthy v. CB Richard Ellis, Inc. (May 21, 2009) (holding that early determination of "threshold issues" is not a substitute for the summary adjudication procedural requirements). As in Magana, the parties in Amalgamated briefed threshold issues. The trial court found that plaintiff unions lacked standing under the unfair competition law because the union had not suffered any injury themselves. The trial court further found that the unions lacked standing under PAGA because they were not “aggrieved employees.” The unions appealed and a divided Court of Appeal denied the petition.

The Supreme Court, however, granted the Petition and affirmed the trial court’s ruling. The unions could not be assigned the right to sue under the unfair competition law as a result of amendments passed as part of Proposition 64. The Supreme Court reasoned that the new requirement of “injury in fact” would be undermined by allowing non-injured assignees to stand in the shoes of the injured parties.

With direct standing through assignment precluded, associational standing was next considered.  The Supreme Court found that the post-Proposition 64 UCL was at odds with the doctrine of associational standing: In proposing the amendment to the unfair competition law, section 1 of Proposition 64 sets forth its findings and declarations of purpose. Subdivision (e) of section 1 states: “It is the intent of California voters in enacting this act to prohibit private attorneys from filing lawsuits for unfair competition where they have no client who has been injured in fact under the standing requirements of the United States Constitution.” (Voter Information Guide, Gen. Elec. (Nov. 2, 2004) text of proposed law, p. 109, italics added.) That intent is reflected in the amended statutory language stating that an unfair competition law action can be brought only by a person who has suffered “injury in fact.” (Bus. & Prof. Code, § 17204, italics added.) This standing requirement is inconsistent with the federal doctrine of associational standing. That doctrine applies only when the plaintiff association has not itself suffered actual injury but is seeking to act on behalf of its members who have sustained such injury.

Slip op. at p. 10.  Hence, the unions could neither be assigned the right to sue or bring suit as an association whose members had suffered actual injury.

Regarding PAGA, the Supreme Court repeated comments from Arias, observing:

In bringing such an action, the aggrieved employee acts as the proxy or agent of state labor law enforcement agencies, representing the same legal right and interest as those agencies, in a proceeding that is designed to protect the public, not to benefit private parties. (Arias v. Superior Court, supra, ___ Cal.4th ___, ___ [pp. 16-17]; see People v. Pacific Land Research Co. (1977) 20 Cal.3d 10, 17.)

Slip op. at p. 8.  Keeping with the theme from Arias, it is interesting that the Supreme Court has again pointed out that, under PAGA, an aggrieved employee acts like a “proxy or agent” of the state labor law enforcement agencies.

Because PAGA created neither a property right nor any other substantive right, and because it did not create any legal obligations, PAGA claims cannot be assigned. That prohibition on assignment is not new; rather, it is consistent with previous Supreme Court holdings that preclude the assignment of a right to collect statutory penalties.  Further, because PAGA allows only an aggrieved employee to bring an action to recover civil penalties, unions are foreclosed from asserting PAGA claims on behalf of their members. In effect, there is no associational standing available for a claim uniquely assigned to the employee by the State.

[Editor’s Note: A Contributing Author byline has been added for Shawn Westrick, given that he did not flake after one post.]

Ninth Circuit makes overtime misclassification cases a little bit tougher with opinions in Vinole v. Countrywide Home Loans, Inc. and In re: Wells Fargo Home Mortgage

Overtime misclassification cases were first out of the blocks when wage & hour employment class actions surged in the last decade or so.  Misclassification cases, when successful, usually generate larger per-class member recoveries than other wage & hour class actions.  But their early success was eventually met with more sophisticated defense tactics in the perpetual chess match of move and counter-move.  For those misclassification cases unfortunate enough to end up in federal court, the Ninth Circuit has just made them a bit harder than they were a few days ago.

The first of this duo, In re: Wells Fargo Home Mortgage (July 7, 2009), considered whether the trial " court abused its discretion in finding that the predominance requirement of Federal Rule of Civil Procedure 23(b)(3) was satisfied, based — in large part — on an employer’s internal policy of treating its employees as exempt from overtime laws."  Slip op., at 8328.  The Trial Court though that Wells Fargo was unfairly trying to have its cake and eat it too:

Wells Fargo’s uniform policies regarding HMCs weigh heavily in favor of class certification. As numerous courts have recognized, it is manifestly disingenuous for a company to treat a class of employees as a homogenous group for the purposes of internal policies and compensation, and then assert that the same group is too diverse for class treatment in overtime litigation.

Slip op., at 8330.  The Ninth Circuit focused its review on whether the Trial Court's treatment of that classification policy was correct:

District courts within this circuit have split on the relevance of exemption policies. The district court relied primarily on Wang v. Chinese Daily News, Inc., 231 F.R.D. 602, 612-13 (C.D. Cal. 2005), which found predominance of common issues based on an employer’s policy of treating all employees in a certain position as uniformly exempt from overtime compensation requirements. In contrast, another district court has expressed doubt about Wang, and found that uniform exemption policies are merely a minor factor in the predominance analysis. See Campbell v. PricewaterhouseCoopers,, 253 F.R.D. 586, 603-04 (E.D. Cal. LLP 2008) (rejecting “estoppel” position of Wang).

Slip op., at 8333.  The Ninth Circuit concluded that the approach in Wang went too far, but then emphasized that employer policies remain very important in the majority of certification analyses in this area of law:

Of course, uniform corporate policies will often bear heavily on questions of predominance and superiority. Indeed, courts have long found that comprehensive uniform policies detailing the job duties and responsibilities of employees carry great weight for certification purposes. Damassia v. Duane Reade, Inc., 250 F.R.D. 152, 160 (S.D.N.Y. 2008) (“Where . . . there is evidence that the duties of the job are largely defined by comprehensive corporate procedures and policies, district courts have routinely certified classes of employees challenging their classification as exempt, despite arguments about ‘individualized’ differences in job responsibilities.”).  Such centralized rules, to the extent they reflect the realities of the workplace, suggest a uniformity among employees that is susceptible to common proof.

Slip op., at 8334-35.  So too much Wang is no good, but some Wang is okay.  Got it.  The Ninth Circuit concluded that exemption policies, in particular, are less likely to have a "transformative" power that turns an otherwise individual issue into a common one.

In Vinole v. Countrywide Home Loans, Inc. (July 7, 2009), the Ninth Circuit considered two primary issues, one of which matters.  Countrywide filed a motion to deny class certification before the plaintiffs could file their motion for class certification.  The defendant's motion was granted.  As an issue of first impression, the Ninth Circuit was asked to determine whether it was per se improper for the trial court to hear defendant's motion.  The Ninth Circuit concluded that it was not per se improper:

Rule 23(c)(1)(A) addresses the timing of a district court’s class certification determination, and states: “Time to Issue: At an early practicable time after a person sues or is sued as a class representative, the court must determine by order whether to certify the action as a class action.” Fed. R. Civ. P. 23(c)(1)(A). Nothing in the plain language of Rule 23(c)(1)(A) either vests plaintiffs with the exclusive right to put the class certification issue before the district court or prohibits a defendant from seeking early resolution of the class certification question. The only requirement is that the certification question be resolved “[a]t an early practicable time.”  The plain language of Rule 23(c)(1)(A) alone defeats Plaintiffs’ argument that there is some sort of “per se rule” that precludes defense motions to deny certification, and Plaintiffs have produced no authority to the contrary.

Slip op., at 8307-8.  That seems simple enough.  But these things rarely are.  The Ninth Circuit was particularly interested in the fact that the plaintiffs had (1) failed to bring their motion in almost a year, (2) admitted during a hearing that they didn't need additional discovery to file their motion, and (3) didn't request any sort of continuance of the hearing of defendant's motion:

First, at the time of the hearing Plaintiffs had conducted significant discovery and did not intend to propound any additional discovery seeking information from Countrywide regarding the propriety of class certification. Second, it is evident that Plaintiffs had made a strategic choice to limit the amount of evidence it presented to the district court in opposition to Countrywide’s motion; they proffered their class certification arguments through their “preview” declarations. Third, Plaintiffs’ real complaint is not that they were deprived of adequate time in which to complete discovery, but that they “didn’t want to be on defendants’ schedule.” But, again, this is just a variation on Plaintiffs argument in favor of a per se rule.

Slip op., at 8314.  I can only assume that Defendants will now race to be the first to file a motion related to certification.  Plaintiffs will need to be diligent in their litigation and discovery efforts to fend off this counter-assault.  One thing is certain - different trial courts will deal with this complication in a wide variety of ways.

The standards for adequate class settlement review received a confirmatory boost in Clark v. American Residential Services LLC, et al.

Last year, in Kullar v. Foot Locker Retail, Inc., 168 Cal. App. 4th 116 (2008), the Court of Appeal held that a trial court reviewing a class action settlement must receive and independently consider information sufficient to assess the reasonableness of the terms of the settlement.  Id. at 130, 133.  In Kullar, the Court of Appeal vacated a trial court's approval of a class action settlement because the court was not "provided with basic information about the nature and magnitude of the claims in question and the basis for concluding that the consideration being paid for the release of those claims represents a reasonable compromise."  Id. at 133.  In Clark v. American Residential Services LLC, et al. (July 6, 2009), the Court of Appeal (Second Appellate District, Division Eight) articulated the same standard, to the same result.

Adopting the Kullar analysis, the Court said:

In Kullar, the court pointed out that "neither Dunk . . . nor any other case suggests that the court may determine the adequacy of a class action settlement without independently satisfying itself that the consideration being received for the release of the class members' claims is reasonable in light of the strengths and weaknesses of the claims and the risks of the particular litigation."

Slip op., at 14.  Elaborating on what the trial court must do to assess the validity of a class action settlement, the Court continued:

Kullar further explains that, while there is usually an initial presumption of fairness when a proposed class action settlement was negotiated at arm's length by counsel for the class, "'to protect the interests of absent class members, the court must independently and objectively analyze the evidence and circumstances before it in order to determine whether the settlement is in the best interests of those whose claims will be extinguished.'"  (Kullar, supra, 168 Cal.App.4th at p. 130.) To make that determination, "'the factual record before the . . . court must be sufficiently developed,'" and the initial presumption to which Dunk refers "'must then withstand the test of the plaintiffs' likelihood of success.'" (Ibid.) Again, "'"The most important factor is the strength of the case for plaintiffs on the merits, balanced against the amount offered in settlement."'"  (Ibid.)  In Kullar, because the trial court was not presented with data permitting it to review class counsel's evaluation of the sufficiency of the settlement, the order approving the settlement was vacated.  (Kullar, supra, 168 Cal.App.4th at p. 131.)  As we shall see, the same result is required here.

Slip op., at 15.  The Court of Appeal was particularly concerned about the absence of information in the record that would permit the trial court to independently assess whether an overtime claim in the case was essentially valueless:

When the objectors protested, at the fairness hearing, that overtime is to be calculated on the technician's actual commission wages, not on the minimum wage, and contended that class counsel's evaluation was thus based on a "staggering mistake of law," the trial court made no comment, and proceeded to approve the settlement. This, it seems to us, demonstrates the court made no independent assessment of the strength of the plaintiffs' case, simply accepting class counsel's assessment of value, including his assertion that the overtime claim – which "is what this [case] was about" – had "absolutely no" value. But if in fact there is a legitimate dispute on the appropriate way to calculate overtime, then the class's overtime claim obviously has some value, and if the objectors were correct on the law, the claim may have had considerable value. None of these possibilities was considered or evaluated when the trial court approved the settlement; instead, the trial court simply accepted class counsel's assessment. Without some kind of evaluation of this legal point – and in light of declarations from objectors stating they worked at least 10 hours of overtime every week without compensation – we cannot see how the trial court could "satisfy itself that the class settlement is within the 'ballpark' of reasonableness." (Kullar, supra, 168 Cal.App.4th at p.133.)

Slip op., at 17-18.  On a second issue in the appeal, the Court reversed class representative enhancement awards of $25,000, noting that they were approximately 44 times more than what the average class member received in the proposed settlement.

The consequences of this standard are likely to be seen first in the realm of mediation.  Parties interested in settling a class action are going to need to be a bit more forthcoming with concrete data that can then be provided, at least in summary form, to the trial court asked to give its blessing to a proposed class action settlement.

Arias v. Superior Court (June 29, 2009) analyzes certification obligations under two of California's representative action statutes

[Editor’s Note: This post was prepared by new Contributing Author, Shawn Westrick. Mr. Westrick is an attorney at Initiative Legal Group, LLP, and it is the Editor’s hope that this column is the first of many such posts. Mr. Westrick has spent considerable time in his career litigating PAGA issues, and the Arias decision was of particular interest as source material for a first blog post submission.]

By Shawn Westrick:

In Arias v. Superior Court (Angelo Dairy) (June 29, 2009), the California Supreme Court issued its long-anticipated opinion addressing when conventional class action procedural requirements must be met in representative actions filed against employers.

Plaintiff Jose Arias sued his employer Angelo Dairy, alleging, among other things, violations of the unfair competition law and under the Labor Code Private Attorneys General Act of 2004 (“PAGA”) (Cal. Lab. Code § 2698, et seq.). The trial court granted defendant’s motion to strike the causes of action based on the unfair competition law. The trial court’s reasoning was that claims brought under the unfair competition law and PAGA had to plead class action requirements.

In essence, the appellate court affirmed a portion of the trial court’s Order, directing the trial court to “issue a new order striking the representative claims alleged in the seventh through tenth causes of action, but not the eleventh cause of action” (slip op., at 3), the eleventh cause of action being the claim arising under PAGA.

The Supreme Court began its analysis with a thorough discussion of Proposition 64. Proposition 64 amended the unfair competition law to ensure that a plaintiff suffering injury in fact must comply with Code of Civil Procedure § 382. However, Proposition 64 did not specifically use the phrase “class action” in any of its statutory language. Nevertheless, the Supreme Court ruled that a literal construction would frustrate the purpose of Proposition 64. A review of the Voter Information Guide, the official summary of Proposition 64, and the ballot measure summary suggested that the purpose of Proposition 64 was to require plaintiffs to meet the requirements for a class action.

Turning to PAGA, the Supreme Court then analyzed the question of whether PAGA claims must be certified as class actions to proceed on a representative basis. As an important distinction to be aware of, it has already been determined that actions under the Labor Code Private Attorneys General Act of 2004 may be brought as class actions. (Amaral v. Cintas Corp. No. 2 (2008) 163 Cal.App.4th 1157, 1173.) At issue in Arias was whether such actions must be brought as a class action. Beginning its discussion, the Supreme Court noted that the statute was passed because of the lack of adequate financing for labor law enforcement. Employees would act as private attorneys general to collect civil penalties for violations of the Labor Code:

Before bringing a civil action for statutory penalties, an employee must comply with Labor Code section 2699.3. (Lab. Code, § 2699, subd. (a).) That statute requires the employee to give written notice of the alleged Labor Code violation to both the employer and the Labor and Workforce Development Agency, and the notice must describe facts and theories supporting the violation. (Id., § 2699.3, subd. (a).) If the agency notifies the employee and the employer that it does not intend to investigate (as occurred here), or if the agency fails to respond within 33 days, the employee may then bring a civil action against the employer. (Id., § 2699.3, subd. (a)(2)(A).) If the agency decides to investigate, it then has 120 days to do so. If the agency decides not to issue a citation, or does not issue a citation within 158 days after the postmark date of the employee‘s notice, the employee may commence a civil action. (Id., § 2699.3, subd. (a)(2)(B).)

Slip op., at 9.

The Supreme Court rejected the employer’s convoluted argument that permitting employees to proceed with representative actions that did not satisfy class action requirements would cause absurd results. Explaining the strange reasoning of the employer, the Supreme Court said:

Defendants read the Court of Appeal‘s decision as holding that class action requirements do not apply to actions under Labor Code section 2699, subdivision (a) only because class action requirements are "provisions of law" and subdivision (a) says that it applies regardless of, or notwithstanding, "any other provision of law." Defendants then argue that because Labor Code section 2699, subdivision (g) does not contain subdivision (a)'s "[n]otwithstanding any other provision of law" language, it follows that actions under that subdivision must comply with class action requirements. According to defendants, to conclude that subdivision (g) actions must satisfy class action requirements but subdivision (a) actions need not is "absurd" and therefore the Court of Appeal's statutory construction must be wrong. We disagree.

Slip op., at 11. According to the Supreme Court, Defendants' argument presupposed that class action requirements apply to all representative actions unless the Legislature affirmatively precludes their application by inserting the phrase "notwithstanding any other provision of law," or similar words, in the statute authorizing the representative action. The Court rejected that assumption.

The Supreme Court then turned to the employer’s argument that the legislative history required PAGA actions be brought as class actions. The Supreme Court noted that some committee reports expressed concerns that PAGA would allow employees to sue as a class action and some commentators were concerned that without a class action there could be no preclusive effects. The Supreme Court rejected committee report comments as insufficient to demonstrate any particular legislative intent regarding certification of PAGA claims.

The Court then turned to the due process issue of collateral estoppel. The employer argued that in the absence of class action requirements, employers would be subject to constant one-way intervention, violating their rights to due process. However an action under PAGA is binding not only on the named employee but also on the government agencies and any aggrieved employee not a party to the proceeding. An employee suing under PAGA does so as a “proxy or agent of the state’s labor law enforcement agencies.” Slip op., at p. 16. The employee can only bring a PAGA action after giving written notice pursuant to Section 2699.3. Id. An employee acts as a substitute for “the government itself” and a “judgment in an action binds all those ... who would be bound by a judgment in an action brought by the government.” Slip op., at p. 17.

Overall, the Court’s decision on the unfair competition law is straightforward. The long term effect of the Court’s foray into res judicata could have far reaching consequences for class actions in California. Taken as a whole, Arias should be a lesson to lawyers representing employers during settlements. Arias is clear that a PAGA action can only be commenced by adhering to the requirements under Section 2699.3. Slip op., at p. 16. In conjunction with the Supreme Court’s suggestion that the State of California has a vested interest in the civil penalties in PAGA, employers who settle class actions but do not settle PAGA actions with an employee who is authorized to file a PAGA action may find themselves liable for civil penalties owed to California (and, if authorized, other employees) for the same time period and the same class members who participated in a previous class action.

[Full Disclosure: Mr. Westrick is counsel in the matter of Deleon v. Verizon Wireless, in which the Supreme Court issued a “grant and hold” Order pending disposition of Arias. The Deleon matter directly raises the issue of whether settlement of wage & hour claims implicitly settles PAGA claims based upon the same underlying violations.]

Supreme Court will issue opinion in Arias v. Superior Court (Dairy, RPI) and other cases on Monday, June 29, 2009

The Supreme Court pre-announces the release of opinions one business day before they are made available to the public.  This morning, the Supreme Court announced forthcoming decisions in two cases that are of interest to wage & hour class/mass action practitioners.  The first, Arias v. Superior Court (Dairy, RPI), concerns issues related to the Labor Code Private Attorneys General Act of 2004 ("PAGA").  The Court lists two questions that will be answered in the opinion:  "(1) Must an employee who is suing an employer for labor law violations on behalf of himself and others under the Unfair Competition Law (Bus. & Prof. Code, § 17203) bring his representative claims as a class action? (2) Must an employee who is pursuing such claims under the Private Attorneys General Act (Lab. Code, § 2699) bring them as a class action?"

The Supreme Court will also render its opinion in Amalgamated Transit Union, Local 1756, AFL-CIO et al. v. Superior Court (First Transit, Inc., et al., RPI).  Amalgamated addresses novel issues under PAGA and the UCL:  "(1) Does a worker’s assignment to the worker’s union of a cause of action for meal and rest period violations carry with it the worker’s right to sue in a representative capacity under the Labor Code Private Attorneys General Act of 2004 (Lab. Code, § 2698 et seq.) or the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.)? (2) Does Business and Professions Code section 17203, as amended by Proposition 64, which provides that representative claims may be brought only if the injured claimant "complies with Section 382 of the Code of Civil Procedure," require that private representative claims meet the procedural requirements applicable to class action lawsuits?"

In Satterfield v. Simon & Schuster, Inc., Ninth Circuit defers to FCC and construes text messages as "calls" under TCPA

In Satterfield v. Simon & Schuster, Inc. (June 19, 2009), the Ninth Circuit issued a consumer-oriented opinion that exemplifies the challenges faced by courts that are asked to apply existing laws to developing areas of technology.  By technology standards, Satterfield is not cutting-edge material.  Plaintiff Satterfield alleged a violation of the Telephone Consumer Protection Act ("TCPA"), 47 U.S.C. § 227, arising after Satterfield received an unsolicited text message.  At the time of the TCPA's enactment, text messaging was not yet in use:

The precise language at issue here is what did Congress intend when it said “to make any call” under the TCPA. Utilizing the aforementioned canons of statutory construction, we look to the ordinary, contemporary, and common meaning of the verb “to call.” Webster’s defines “call” in this context as “to communicate with or try to get into communication with a person by a telephone.” Webster’s Third New International Dictionary 318 (2002). This definition suggests that by enacting the TCPA, Congress intended to regulate the use of an ATDS to communicate or try to get into communication with a person by a telephone. However, this law was enacted in 1991 when text messaging was not available.

Slip op., at 7342.  With no court having addressed this question, the Ninth Circuit looked to the FCC's determination on the issue for guidance:

The TCPA makes it unlawful “to make any call” using an ATDS. 47 U.S.C. § 227(b)(1)(A). While the TCPA does not define “call,” the FCC has explicitly stated that the TCPA’s prohibition on ATDSs “encompasses both voice calls and text calls to wireless numbers including, for example, short message service (SMS) calls . . . .” In re Rules and Regulations, Report and Order, 18 FCC Rcd. 14014, 14115 Implementing the Telephone Consumer Protection Act of 1991 (July 3, 2003) (hereinafter “2003 Report and Order”). The FCC subsequently confirmed that the “prohibition on using automatic telephone dialing systems to make calls to wireless phone numbers applies to text messages (e.g., phone-to-phone SMS), as well as voice calls.”  In the Matter of Rules and Regulations Implementing the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003; Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, 19 FCC Rcd. 15927, 15934 (FCC August Implementing the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003; Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991 12, 2004).  In the Notice of Proposed Rulemaking of the CANSPAM Act, the FCC also noted “that the TCPA and Commission rules that specifically prohibit using automatic telephone dialing systems to call wireless numbers already apply to any type of call, including both voice and text calls.”  Id. at 15933.  Therefore, the FCC has determined that a text message falls within the meaning of “to make any call” in 47 U.S.C. § 227(b)(1)(A).

Slip op. at 7338-39.  Applying the two-step test for judicial review of administrative agency interpretations of federal law set forth in Chevron v. Natural Res. Def. Council, Inc., 467 U.S. 837, 843-44 (1984), the Ninth Circuit concluded that the FCC's treatment of text messaging as "calls" under the TCPA was reasonable.  The Ninth Circuit reversed the trial court's grant of summary judgment.  It is unclear whether this proposed class action was certified prior to the summary judgment motion.

Hernandez v. Vitamin Shoppe (Spencer, Appellant) examines limits on advocacy by class action settlement objector

Unlike single party cases, class actions routinely have more than one plaintiff that purports to represent the same (or similar) class. In Hernandez v. Vitamin Shoppe (Spencer, Appellant) (June 17, 2009), the Court of Appeal (First Appellate District, Division Two) examined the ability of trial courts to set limits on the methods and extent of that advocacy:

After the trial court conditionally certified the class for settlement purposes, appellant Jeffrey Spencer, attorney for appellant Lisa Hernandez, a plaintiff in Perry, sent a letter to various class members urging them to opt out of the settlement, and to retain him as counsel against Vitamin Shoppe in another class action involving the same matters. The court subsequently issued orders and rulings regarding these communications, barring Spencer from certain future communications, and granting monetary sanctions against him, which appellants Hernandez and Spencer challenge on appeal. In the published portion of this opinion, we affirm these rulings and orders, except that we reverse the trial court‘s imposition of monetary sanctions against Spencer.

Slip op., at 1-2. Later, the Court described aspects of the letter to class members:

Spencer, identifying himself as counsel in Thompson, represented in his letters to various members of the conditionally certified class that if the Perry settlement were approved, "substantial compensation will be forfeited," that "you will not be able to recover compensation for all the rest and meal periods you were denied or for all of the overtime compensation or penalties you are owed," and that "[u]nder California law you are entitled to an extra hour of pay for each rest and meal period that you missed during your employment." He advised them to "protect" themselves from the Perry settlement by opting out of the class and joining the Thompson action, which he stated was "in progress," encouraged them to request exclusion from the settlement, and warned that those who did not exclude themselves would be "stuck" with the settlement‘s terms. He solicited them to retain him as counsel, or to contact him for advice or assistance with respect to excluding themselves from the class, and enclosed his retainer agreement.

Slip op., at 4-5. So, to recap, there are acceptable means of objecting to a proposed class action settlement, and there are unacceptable means. This opinion concerns one of those unacceptable means. But I will note that it is a tough position to be in as an attorney for the same putative class if you believe that you can obtain a better result for that class. In the end, class action settlements are approved not on the basis of whether they are the best possible settlement; instead, the proposed settlement need only be good enough.

Other June 10, 2009 actions by the California Supreme Court

After two weeks without a conference, June 10, 2009 was an active day for the California Supreme Court.  Aside from the other activity posted today, some other notable actions include:

• A Petition for Review was denied in Chindarah v. Pick Up Stix, Inc. (2009) 171 Cal. App. 4th 796 [Operation of Labor Code section 206.5]
• A depublication request was denied in Tarkington v. California Unemployment Insurance Appeals Board (Albertson’s, Inc.) (April 13, 2009) [Regarding demurrers to class action allegations]

An unprecedented alliance of interests fails to elicit review or depublication of Troyk v. Farmers Group, Inc.

In a potentially singular confluence of interests, all parties in Troyk v. Farmers Group, Inc., distressed that the Court of Appeal reissued its opinion despite their notice of settlement, filed a Joint Petition for Review on April 20, 2009. The 72-page opinion from the Court of Appeal (Fourth Appellate District, Division One) addresses issues of standing under the UCL, alter-ego liability and insurance service charges as premiums. The petition was filed by Coughlin Stoia Geller Rudman & Robbins for class plaintiffs, Gibson, Dunn & Crutcher and Skadden, Arps, Slate, Meagher & Flom for defendants, and Fulbright & Jaworski for third-party movants. Consumer Attorneys of California, among others, filed a letter seeking depublication on the grounds that the appellate court's ruling "threatens to upend settled law."

Despite that unholy alliance, on June 10, 2009 the Supreme Court denied the Joint Petition for Review and the Requests for Depublication.  Justices Baxter, Chin, and Corrigan were of the opinion that the petition should have been granted.  I can't say that this result offers encouragement to parties that finally work to settle their disputes.  Such polarized interests rarely agree on anything.  When they do, its a signal that careful scrutiny is in order.  However, others have suggested that if all the parties are unhappy with the result, there may be some validity to it.  (Note: The Recorder article on Law.com appears to have been authored before the Supreme Court's decision to deny the Petition was publicly available.)

Haro v. City of Rosemead confirms that "opt-in" class actions are unavailable under California's class action statute, Code of Civil Procedure section 382

In a case of flirting with issues of first impression, the Court of Appeal (Second Appellate District, Division Eight) was asked to review an order denying plaintiffs' motion for class certification pursuant to Code of Civil Procedure section 382. The plot twist? Haro v. City of Rosemead (June 9, 2009) concerns plaintiffs' attempt to certify pursuant to section 382 a claim for violation of 29 U.S.C. § 216(b), a part of the Fair Labor Standards Act of 1938 (FLSA). After concluding that FLSA claims cannot be certified under section 382 as a matter of law, the Court of Appeal dismissed the appeal.

The Court first summarized the FLSA provision at issue in the appeal:

Section 216(b) goes on to provide that an action under this provision may be brought against any employer in a federal or state court “by any one or more employees for and in behalf of himself or themselves and other employees similarly situated. No employee shall be a party plaintiff to any such action unless he gives his consent in writing to become such a party and such consent is filed in the court in which such action is brought.” The italicized sentence is colloquially referred to as an “opt-in” provision (7B Wright et al., Fed. Practice and Procedure (3d ed. 2005) § 1807, p. 472) and it is this opt-in provision that this purported appeal addresses.

(Slip op., at p. 2.) The Court then expressed the tension between the FLSA's "opt-in" procedure and the "opt-out" mechanism of California's class action statute:

As one court has put it: “There is a fundamental, irreconcilable difference between the class action described by Rule 23 and that provided for by FLSA § 16(b). In a Rule 23 proceeding a class is described; if the action is maintainable as a class action, each person within the description is considered to be a class member and, as such, is bound by judgment, whether favorable or unfavorable, unless he has 'opted out' of the suit. Under § 16(b) of FLSA, on the other hand, no person can become a party plaintiff and no person will be bound by or may benefit from judgment unless he has affirmatively 'opted into' the class; that is, given his written, filed consent.” (LaChapelle v. Owens-Illinois, Inc., supra, 513 F.2d at p. 288, fn. omitted.)

The fact that the opt-in feature is irreconcilable with a class action has not only been reaffirmed as a matter of federal civil procedure (Whalen v. W.R. Grace & Co. (3d Cir. 1995) 56 F.3d 504, 506, fn. 3), at least one California court has held that the opt-in feature cannot be adopted in California class actions. (Hypertouch, Inc. v. Superior Court (2005) 128 Cal.App.4th 1527, 1550 (Hypertouch).)

(Slip op., at p. 3.) After concurring in the analysis supplied by Hypertouch, the Court then added yet another reason why "opt-in" class actions are not available in California:

We add to the foregoing the observation that it is no small matter that California Rules of Court, rule 3.766, which governs notice to class members, makes no provision for notice when the class members opt into, rather than out of, the class. Rule 3.766 addresses the contents of the notice and the manner of giving notice in considerable detail; notice in class actions is not a simple matter. The same is true of notice to persons “similarly situated” in FLSA actions. Evidently, there may be as many as three distinct procedures employed by federal courts in dealing with notice in FLSA cases. Some courts employ a two-step process that extends to the time that discovery is complete, others follow class action procedures and yet others have adopted the old procedures employed in the pre-1966 spurious class action cases. (Thiessen v. General Electric Capital Corp. (2001) 267 F.3d 1095, 1102-1103.) Given such disparities, it is unthinkable that if California class actions under section 382 include opt-in classes, the giving of notice in such classes would not be regulated by rule 3.766. Putting the same point more directly, given the potential complexities with notice to persons “similarly situated” in opt-in FLSA actions, the fact that rule 3.766 does not deal with opt-in notices is a very clear indication that there are no opt-in class actions in California.

(Slip op., at p. 9.) In an interesting procedural close to the opinion, the Court dismissed the appeal because it could not meet the "death knell" standard for the appeal of the denial of class certification:

First. Appellants cannot maintain their FLSA action with the opt-in feature as a class action under section 382. (Hypertouch, supra, 128 Cal.App.4th 1527, 1550.) In other words, as a matter of California law appellants are not entitled to a class action certification.

Second. Ordinarily, under the death knell doctrine the appellate court will review the merits of the decision denying certification. That is not true of this case; neither the trial court nor this court addressed the substantive merits of class action certification in this case.

Third. The order denying class certification is not the death knell of appellants‟ action. The order does not produce a terminal result, i.e., there is no reason why the action cannot go forward with appellants as plaintiffs. Specifically, there is nothing to prevent this action going forward as an opt-in, collective FLSA action. While there may or may not be issues about the statute of limitations, there is no question that this FLSA action as it is presently constituted can go forward to trial.

(Slip op., at p. 11.) In case anyone missed it, no "opt-in" class actions can be certified in California under Code of Civil Procedure section 382.