Written contact with putative class members for purpose of finding new plaintiff is not solicitation under California Rule of Professional Conduct 1-400

United States District Court Judge Susan Illston (Northern District of California) concluded that letters to putative class members seeking a new plaintiff were neither in violation of the Court's prior order governing class member contact nor a violation of California Rule of Professional Conduct 1-400, which governs solicitation.  Rand v. American National Insurance Company, 2010 WL 2758720 (N.D. Cal July 13, 2010).

In an earlier Order in that matter, the Court, in an effort to ensure protection of putative class members' privacy rights, instructed plaintiff's counsel to:

inform each policyholder at the outset of the initial contact that he or she has a right not to speak with counsel and that if he or she chooses not to speak with counsel, counsel will immediately terminate contact and not contact them again. Additionally, counsel will inform the policyholder that his or her refusal to speak with counsel will not prejudice his or her rights as a class member if the Court certifies a class. Finally, counsel is to keep a record for the Court of policyholders who make it known that they do not wish to be contacted.

Slip op., at 1.  After the death of the plaintiff, plaintiff's counsel sent a letter containing a first paragraph with substantially compliant language in the first paragraph.  The letter then went on to encourage contact to discuss the circumstances of annuity purchases.  The Court concluded that the inclusion of the disclaimer language in the first paragraph satisfied the Court's prior Order and was not an improper solicitation:

The Court also finds that the letter complies with California Rule of Professional Conduct 1-400. That rule defines “communication” as “any message or offer made by or on behalf of a member concerning the availability for professional employment....” Cal. R. Prof. Conduct 1-400(A). The rule defines “solicitation” as “any communication ... concerning the availability for professional employment of a member or a law firm in which a significant motive is pecuniary gain; and ... [w]hich is: (a) delivered in person or by telephone.” Id. at 1-400(B)(1)-(2). The rule generally prohibits “solicitations.” Id. at 1-400(C). As plaintiffs note, the letter was sent by mail, and thus it is not a “solicitation.” Defendant argues that because the letter invited policyholders to contact plaintiff's counsel by telephone, the letter is a “solicitation.” The Court disagrees, as the plain language of Rule 1-400(B) states that a solicitation is a communication “delivered” in person or by telephone. Here, the communication was delivered by mail. See Parris v. Superior Court, 109 Cal.App. 4th 285, 298 n. 6 (2003) (neither mail notice nor web site was “solicitation” under Rule 1-400(B)).

Slip op., at 2.

In Nelson v. Pearson Ford Co., Court of Appeal reviews judgment in class action, clarifies "causation" in UCL "omission" cases

The opinion in Nelson v. Pearson Ford Co. (July 15, 2010) is hot off the presses and over 50 pages long.  Plaintiff Nelson sued Pearson Ford, alleging violations of the Automobile Sales Finance Act (ASFA) (Civ. Code, § 2981 et seq.), California's unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et seq.), and the Consumers Legal Remedies Act (CLRA) (Civ. Code, § 1750 et seq.)  The trial court certified the matter as a class action, with two classes: the backdating class and the insurance class. After a bench trial, the trial court found Pearson Ford not liable under the ASFA to the backdating class, but liable under the ASFA to the insurance class. It also found Pearson Ford liable to both classes under the UCL, but not the CLRA. The trial court issued certain remedies under the ASFA and the UCL, and awarded Nelson his attorney fees and costs under the ASFA. Both parties appealed.

With a 50-page-plus opinion, there is a lot to digest, but the comments regarding UCL "causation" are so valuable in and of themselves that I wanted to post them in full immediately:

A. Liability

The UCL defines "unlawful competition" to include an "unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising . . . ." (Bus. & Prof. Code, § 17200.) "By proscribing 'any unlawful' business practice, '[Business & Professions Code,] section 17200 "borrows" violations of other laws and treats them as unlawful practices' that the unfair competition law makes independently actionable." (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180 (Cel-Tech).) After the 2004 amendment of the UCL by Proposition 64, a private person has standing to sue only if he or she "'has suffered injury in fact and has lost money or property as a result of [such] unfair competition.'" (In re Tobacco II Cases (2009) 46 Cal.4th 298, 305 (Tobacco II), citing Bus. & Prof. Code, § 17204, italics added.) In the context of a class action, only the class representatives must meet Proposition 64's standing requirements of actual injury and causation. (Tobacco II, supra, at pp. 315-316.)

The actual payment of money by a plaintiff, as wrongfully required by a defendant, "constitute[s] an 'injury in fact' for purposes of Business and Professions Code section 17204. [Citations.]" (Troyk v. Farmers Group, Inc. (2009) 171 Cal.App.4th 1305, 1347 (Troyk).) Causation for UCL standing purposes is satisfied if "a causal connection [exists] between the harm suffered and the unlawful business activity." (Daro v. Superior Court (2007) 151 Cal.App.4th 1079, 1099 (Daro); accord, Troyk, supra, at p. 1349.) However, "[t]hat causal connection is broken when a complaining party would suffer the same harm whether or not a defendant complied with the law." (Daro, supra, at p. 1099.)

For example, in Troyk, an insured filed a class action against his automobile insurer alleging the insurer violated the UCL by requiring him to pay a service charge for payment of his automobile insurance policy premium and, because the service charge was not stated in his policy, the insurer violated Insurance Code section 381, subdivision (f), requiring that this be done. (Troyk, supra, 171 Cal.App.4th at p. 1314.) Although the Troyk court found that the insurer had violated the Insurance Code as alleged (id., at p. 1334), it concluded that causation under the UCL did not exist because plaintiff did not show that had the insurer disclosed the monthly service charges in the policy documents as required by the Insurance Code, he would not have paid them. (Id. at p. 1350.) Significantly, the lack of disclosure of proper charges, not illegal charges, violated the UCL in Troyk.

Here, the trial court impliedly found that Pearson Ford had violated the UCL as to both classes through its violations of the ASFA, and we have affirmed that Pearson Ford is liable for its violations of the ASFA. (Ante, part II.A.2.) Pearson Ford does not challenge the conclusion that its violations of the ASFA support Nelson's UCL claims; rather its appeal is limited to the trial court's finding that Nelson had standing to pursue claims under the UCL. Pearson Ford focuses its argument on whether Nelson suffered injury "as a result of" its unfair competition under the UCL. (Bus. & Prof. Code, § 17204.) Relying on Troyk, Pearson Ford contends that Nelson needed to prove he would not have bought the car if he had known that the second contract: (1) charged him pre-consummation interest; (2) misstated the APR; and (3) failed to separately itemize the $250 insurance premium. We disagree.

The failure of Pearson Ford to comply with the ASFA caused Nelson to suffer an injury and lose money as to both classes because he paid pre-consummation interest (the backdating class), and paid sales tax and financing charges on the insurance premium (the insurance class). Unlike Troyk, these illegal charges violated the UCL and Pearson Ford improperly collected additional funds from Nelson. UCL causation exists because Nelson would not have paid pre-consummation interest, or sales tax and financing charges on the insurance premium had Pearson Ford complied with the ASFA. Because Nelson had standing to pursue claims under the UCL, we reject Pearson Ford's argument that the judgment in favor of both classes should be vacated to the extent it grants relief under the UCL.

Slip op., at 32-34.  This discussion adds some clarity to the situation where an unlawful act underlies the imposition of a charge or fee.  The plaintiff need not plead that the product or service wouldn't have been purchased had the truth been disclosed.  Instead, it is enough to plead that money was spent on the product or service and that the amount charged included some unlawful component that would not have been charged had the law been followed.  This won't resolve all cases alleging fraud or omissions, but it does offer some blunt guidance about so-called "causation" under the UCL.

I don't know if I will get around to posting more about Nelson, but you can follow the link above to peruse it yourself if automobile financing just gets you crazy with anticipation.

Ninth Circuit finds that propriety of independent contractor status is not well suited to summary adjudication in Narayan v. EGL, Inc.

In Narayan v. EGL, Inc. (July 13, 2010), the Ninth Circuit reviewed a district court order granting summary judgment to defendant EGL, Inc. on the theory that the plaintiffs were independent contractors, not employees as contended in their lawsuit.  After examining choice of law issues, the Court turned to the showing required to obtain summary judgment on the employment-status issue.  In particular, the Court explained the special burdens in this type of action:

There are two special circumstances that are relevant to the application of this standard here. First, under California law, once a plaintiff comes forward with evidence that he provided services for an employer, the employee has establisheda prima facie case that the relationship was one of employer/employee. Robinson v. George, 105 P.2d 914, 917 (Cal. 1940). As the Supreme Court of California has held, “[t]he rule . . . is that the fact that one is performing work and labor for another is prima facie evidence of employment and such person is presumed to be a servant in the absence of evidence to the contrary.” Id. at 916; see also Cristler v. Express Messenger Sys., Inc., 171 Cal. App. 4th 72, 83 (Ct. App. 2009). Once the employee establishes a prima facie case, the burden shifts to the employer, which may prove, if it can, that the presumed employee was an independent contractor. Cristler, 171 Cal. App. 4th at 84 (approving a jury instruction that “[t]he Defendant has the obligation to prove that the Plaintiffs were independent contractors”)

Slip op., at 10078.  The Court then discussed the employment test in California, saying:  "The Supreme Court of California has enumerated a number of indicia of an employment relationship, the most important of which is the 'right to discharge at will, without cause.' Borello, 769 P.2d at 404 (quoting Tieberg v. Unemployment Ins. App. Bd., 471 P.2d 975, 979 (Cal. 1970)).  Slip op., at 10079.  Incidentally, the right to discharge at will is concomitant with, and, to a large extent creates, the right to control.  The Court then listed the many additional employment test factors approved by Borello.  Such multi-factor tests, the Court concluded, don't lend themselves to summary adjudication:

Judge Easterbrook has keenly observed in a case under the Fair Labor Standards Act that:

[i]f we are to have multiple factors, we should also have a trial. A fact-bound approach calling for the balancing of incommensurables, an approach in which no ascertainable legal rule determines a unique outcome, is one in which the trier of fact plays the principal part. That there is a legal overlay to the factual question does not affect the role of the trier of fact.

Sec’y of Labor v. Lauritzen, 835 F.2d 1529, 1542 (7th Cir. 1987) (Easterbook, J., concurring) (internal citations omitted).

Slip op., at 10080-81.  The Court then reviewed the record, criticizing the trial court for not crediting evidence of the right to terminate at will set forth in the contracts between defendant and plaintiffs and other evidence consistent with employment, including the lack of any need for specialized training and the fact that the Internal Revenue Service declared the plaintiffs employees under its multi-factor employment test.

Judge Easterbrook received a number of nods from the Court.  In describing the policy goals of wage & hour statutes, the Court said:

As Judge Easterbrook observed in a closely analogous context, statutes enacted to confer special benefits on workers are “designed to defeat rather than implement contractual arrangements.” Sec’y of Labor v. Lauritzen, 835 F.2d 1529, 1545 (7th Cir. 1987) (Easterbook, J., concurring).

Slip op., at 10073.  In other words, the protections granted by California's Labor Code are designed, in part, to defeat employer attempts to circumvent them with "independent contractor" agreements. 

California rejects pass-on defense for antitrust conspirators

In Hanover Shoe v. United Shoe Mach., 392 U.S. 481 (1968) (Hanover Shoe), the United States Supreme Court held that antitrust violators generally could not assert as a defense that any illegal overcharges had been passed on by a suing direct purchaser to indirect purchasers.  In Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) (Illinois Brick), the United States Supreme Court concluded that only direct purchasers, not indirect purchasers, could sue for price fixing.  In 1978, in direct response to Illinois Brick, the California Legislature amended the state's Cartwright Act (Bus. & Prof. Code, § 16700 et seq.) to provide that, contrary to federal law, indirect purchasers as well as direct purchasers could sue under California law (§ 16750, subd. (a)).  However, until July 12, 2010, California had not considered the other question: whether a pass-on defense was available.

In Clayworth v. Pfizer, Inc. (July 12, 2010), the California Supreme Court considered that unresolved question, holding that "under the Cartwright Act, as under federal law, generally no pass-on defense is permitted."  Slip op., at 2.  The Supreme Court also examined whether, under the UCL, the pharmacies alleging price fixing could state a claim.  The trial court and Court of Appeal concluded that the pharmacies lacked standing and were ineligible for relief.  The Supreme Court reversed:

While Manufacturers argue that ultimately Pharmacies suffered no compensable loss because they were able to mitigate fully any injury by passing on the overcharges, this argument conflates the issue of standing with the issue of the remedies to which a party may be entitled. That a party may ultimately be unable to prove a right to damages (or, here, restitution) does not demonstrate that it lacks standing to argue for its entitlement to them. (See Southern Pac. Co. v. Darnell-Taenzer Co., supra, 245 U.S. at p. 534 [“The plaintiffs suffered losses . . . when they [over]paid. Their claim accrued at once in the theory of the law and it does not inquire into later events.”]; Adams v. Mills, supra, 286 U.S. at p. 407 [“In contemplation of law the claim for damages arose at the time the extra charge was paid,” notwithstanding any subsequent reimbursement].) The doctrine of mitigation, where it applies, is a limitation on liability for damages, not a basis for extinguishing standing.

Slip op., at 39.  Turning to the separate issue of remedies, the Supreme Court said:

The Court of Appeal affirmed summary judgment on a second, overlapping ground: Pharmacies were not entitled to any remedy. Pharmacies' complaint seeks two forms of relief: restitution and an injunction. We need consider only the latter. If a party has standing under section 17204 (as Pharmacies do here), it may seek injunctive relief under section 17203. (See § 17204 [authorizing without limitation “[a]ctions for relief pursuant to this chapter” to be brought by parties who satisfy the provision‟s standing requirement].) Manufacturers‟ papers identify no obstacle that would preclude Pharmacies from obtaining injunctive relief if they establish Manufacturers were engaged in an unfair business practice.

Slip op., at 40.  "Section 17203 makes injunctive relief 'the primary form of relief available under the UCL,' while restitution is merely 'ancillary.' (In re Tobacco II Cases (2009) 46 Cal.4th 298, 319.)"  Slip op., at 41.

While the discussion about the pass-on defense issue is much longer, it leads inevitably to the unanimous conclusion that California would apply the federal approach of denying a pass-on defense.  Thus, unless you practice in that specific area, the discussion would not be interesting, despite the thoroughness.  There are also some brief comments about the respective burdens on summary judgment.  The decision is worth scanning for just the UCL and summary judgment remarks.

Munoz v. BCI Coca-Cola Bottling Company of Los Angeles (Greenwell, objector) provides much-needed words of restraint concerning Kullar

Since Kullar v. Foot Locker Retail, Inc., 168 Cal. App. 4th 116 (2008) (Kullar) and Clark v. American Residential Services LLC, 175 Cal. App. 4th 785 (2009) (Clark) were decided, trial courts and settling parties in class actions have been looking over their shoulder at every settlement, concerned about the amount of information necessary to meet the Kullar/Clark standard for adequate settlement review.  For example, the Los Angeles Superior Court appears to be utilizing some form of checklist derived, in part, from Kullar to analyze proposed class action settlements.  Fortunately, in Munoz v. BCI Coca-Cola Bottling Company of Los Angeles (ord. pub. July 2, 2010) (Greenwell, objector), the Court of Appeal (Second Appellate District, Division Eight) explains that much of the angst over Kullar/Clark is overblown because their requirements have been overstated and/or misconstrued.

Plaintiffs in Munoz filed a class action lawsuit against BCI Coca-Cola Bottling Company of Los Angeles (BCI), alleging unpaid overtime wages, missed meal and rest period wages, and other Labor Code violations and unfair business practices. The proposed class consisted of production supervisors and merchandising supervisors who were allegedly misclassified as exempt.  After mediation, the parties agreed to settle the matter for $1.1 million. Notice of the proposed settlement elicited one objection. Two of the 188 class members opted out.  The average net payment to each class member would be about $4,300. The trial court found the settlement fair and reasonable. The objector, Greenwell, appealed, arguing that the trial court abused its discretion in approving the settlement, principally because the parties did not provide the court with the information necessary to make a finding that the settlement was reasonable and fair.

The Court of Appeal summarized the obligation of a trial court evaluating a class action settlement:

Some cases state that a presumption of fairness exists “where: (1) the settlement is reached through arm's-length bargaining; (2) investigation and discovery are sufficient to allow counsel and the court to act intelligently; (3) counsel is experienced in similar litigation; and (4) the percentage of objectors is small.” (Dunk, supra, 48 Cal.App.4th at p. 1802.) Kullar emphasizes that this is only an initial presumption; a trial court's approval of a class action settlement will be vacated if the court “is 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.” (Kullar, supra, 168 Cal.App.4th at pp. 130, 133.) In short, the trial court may not 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.” (Id. at p. 129.)

Slip op., at 10.  However, after explaining that the objector complained "that the record before the trial court contained no evidence of 'the potential value of the claims,'" the Court went on to explain that Kullar is misunderstood:

Greenwell misunderstands Kullar, apparently interpreting it to require the record in all cases to contain evidence in the form of an explicit statement of the maximum amount the plaintiff class could recover if it prevailed on all its claims--a number which appears nowhere in the record of this case. But Kullar does not, as Greenwell claims, require any such explicit statement of value; it requires a record which allows “an understanding of the amount that is in controversy and the realistic range of outcomes of the litigation.”

Slip op., at 11.  Continuing, the Court noted, "Indeed, the standard list of factors a trial court should consider in determining whether a settlement is fair and reasonable does not expressly include specification of the maximum amount of recoverable damages (see Kullar, supra, 168 Cal.App.4th at p. 128), and Kullar is clear that the most important factor '"'is the strength of the case for plaintiffs on the merits, balanced against the amount offered in settlement.'"' (Id. at p. 130.)"  Slip op., at 11, n. 6.

The Court itemized the information available to the trial court in the case before it:

The information before the court included the size of the class (188) and the payroll data on all class members during the class period (including total amounts of salaries paid during the class period). It also included declarations from 30 class members (15 percent of the class) indicating the number of hours worked per week and per day (and the significant differences in those numbers): e.g., 70 hours per week, 48 hours per week, 60 hours per week, 42-44 hours per week, 55 hours per week, “no more than 50 hours per week,” 45 hours per week in winter and 50-60 hours per week at other times of the year, eight to nine hours per day, 45 hours per week, and so on. These declarations also showed significant variations....

Slip op., at 11.  In other words, the trial court had more than enough information to evaluate the "strength of the case" and compare that to the amount offered in settlement.

As an additional measure of assistance, the Court highlighted the facts from Kullar and Clark that undermined those settlements:

As a final observation on this topic, we note that the evidentiary records in Kullar and Clark, upon which Greenwell relies so heavily, are significantly different from this case. In Kullar (which did not involve the misclassification of exempt employees), there was no discovery at all on meal period claims that were added in an amended complaint and were the focal point of the objections to the settlement. (Kullar, supra, 168 Cal.App.4th at pp. 121-122.) While Kullar class counsel argued that the relevant information had been exchanged informally and during mediation (id. at p. 126), nothing was presented to the court--no discovery, no declarations, no time records, no payroll data, nothing (id. at pp. 128-129, 132)--to allow the court to evaluate the claim. And in Clark, the problem was that the trial court was not given sufficient information on a core legal issue affecting the strength of the plaintiffs' case on the merits, and therefore could not assess the reasonableness of the settlement terms. (Clark, supra, 175 Cal.App.4th at p. 798.) The record in this case contains neither of the flaws that doomed the Kullar and Clark settlements.

Slip op, at 13.

Munoz v. BCI clearly holds that there is no obligation on parties seeking approval of a class action settlement to state a specific sum that would represent the maximum possible recovery if the class prevailed on all theories.  Rather, the Court must have information that permits it to evaluate the strength of the claims compared to the amount offered in settlement.  This showing ought to be satisfied by a discussion of the specific risk factors associated with the various theories, along with data about such things as the size of the class.  In other words, if a trial court can roughly approximate the magnitude of the claims and the likelihood of recovery, it can fashion the necessary metric.

In addressing other arguments, the Court rejected a challenge to the $5,000 incentive awards approved by the trial court.

Does Anderson v. Nextel presage assault on percentage-of-fund fee awards?

United States District Court Judge Stephen V. Wilson refused to award a percentage-of-fund fee award, choosing, instead, to apply a lodestar approach with no multiplier and refused to award an incentive payment to the plaintiffs, as part of an Order granting in part and denying in part a final award of attorneys' fees, costs and incentive payments.  Anderson, et al. v. Nextel Retail Stores LLC (June 30, 2010).

The opinion includes an incredibly thorough analysis of hourly rates and fee billing entries (it is helpful reading in that regard), among other things, as part of the Court's decision to examine the lodestar and then cross-check against the requested 25% of the available fund in the wage & hour class action settlement.  After determining that the lodestar would need to multiplied by all of 1.64 to arrive at the percentage-of-fund request at the 25% level, the Court offers this surprising analysis:

In the present case, the Court is unable to conclude that counsel is entitled to a multiplier over the lodestar amount. The lodestar amounts provide perfectly adequate compensation, see generally Perdue, 130 S.Ct. 1662, 1674-75, and none of the relevant considerations justify an upward increase in the amount of compensation. For example, the considerations raised in Vizcaino – the complexity of the case, the duration of the litigation, the risk of nonpayment – are inapplicable. This case was little more than a run-of-the-mill wage-and-hour dispute.

Slip op., at 17.  I find this statement astounding.  No wage & hour class action is "run-of-the-mill" in federal court.  A survey of outcomes in the last few years would, I submit, confirm that.

If a trend favoring lodestar awards over percentage of the fund awards develops, plaintiffs' firms will face an asymmetrical result when compared to firms paid on an hourly basis.  The contingent award (the percentage of the fund in class actions) offsets to some degree the fact that a good percentage of cases generate no recovery to speak of.  This mitigation of risk allows plaintiffs with no resources to challenge unlawful practices causing comparatively smaller amounts of harm on a per capita basis.  An increase in lodestar awards won't cause children to starve, but it will likely result in decisions to decline difficult cases and induce some unscrupulous members of the bar to inflate billing entries.  Courts will then view all fee bills with even more skepticism, further punishing the ethical billers in the plaintiffs' bar.

"See, with those plaintiffs' lawyers, it's all about the fees."  Come closer so I can do that Moe thing to your eyes.  "Why I oughta..."  You don't like working for free any more than I do or anyone else does.  If I won the lottery, I'd be willing to work for a trifling.  Then it would be just about the ability to help others and the intellectual reward.  But I digress.  Taking percentage of the fund awards off the table means that a good portion of the work done by plaintiffs' attorneys in class actions will be done for free.  I hear that at some defense firms, partners don't get paid their shares unless they collect their clients' accounts receivable.  Who's all about the fees again?

In another fairly uncommon move, the Court declined to award any incentive payment to the plaintiffs that obtained the recovery for the class.  So much for rewarding the plaintiffs that accept the stigma associated with suing their employer.

You can view the embedded opinion in the acrobat.com flash viewer below:

If the viewer isn't working for you (say, if you are viewing this on an iPad or iPhone), you can download the opinion here.  Thanks to the (other) reader that alerted me to this decision.

District Court de-CAFA-nates Hollinghurst v. Lacoste USA

United States District Court Judge Christina A. Snyder granted a motion to remand an action removed pursuant to the Class Action Fairness Act ("CAFA").  Hollinghurst v. Lacoste USA (C.D.Cal. June 28, 2010).  That part isn't so interesting.  The interesting part is that the Court found that the face of the initial complaint had enough information from which the defendant could have extrapolated an amount in controversy over $5 million.  The defendant argued that it was not until discovery responses were received that the calculation was possible.  The Court disagreed:

The only new information from plaintiff’s supplemental responses that defendant cites to in its notice was the frequency by which plaintiff was denied her meal breaks and rest periods (two to fifteen meal and/or rest breaks per week) and the amount of time plaintiff was made to work off-the-clock (twenty minutes to one hour per week). The frequency by which plaintiff was denied her meal breaks and rest periods was not a critical discovery because plaintiff has always sought unpaid wages and penalties based on the claim that all class members “were also prevented from taking all daily meal periods . . . and also prevented from taking any and all rest breaks.” See Compl. ¶ 5.  Therefore, from the outset defendant could have calculated the amount in controversy under the assumption that all rest breaks and meal periods had been denied to class members.

Slip op., at 8, fn. 5.  The Court briefly noted a second ground supporting remand:

Additionally, the Court finds that defendant waived its right to remove when it demurred to dismiss the class allegations, a substantial affirmative action in which defendant submitted issues for determination in state court. By doing so, defendant indicated its willingness to litigate in state court before it filed its notice of removal to federal court.

Slip op., at 9.  It's a one-two punch:  a strict standard applied to the timing of first awareness of the right to remove under CAFA and a definitive finding that a demurrer to class action allegations is a submission to the jurisdiction of the superior court.

You can view the embedded opinion in the acrobat.com flash viewer below:

If the viewer isn't working for you (say, if you are viewing this on an iPad or iPhone), you can download the opinion here.  Thanks to the reader that alerted me to this decision.

In Faulkinbury v. Boyd & Assoc., Court confirms the broad discretion given to trial courts considering certification

After weeks in the doldrums, a California Court of Appeal finally got around to issuing an opinion related to class actions.  Unfortunately, it isn't very exciting.  In Faulkinbury v. Boyd & Associates, Inc. (June 24, 2010), the Court of Appeal (Fourth Appellate District, Division Three) reviewed an order denying class certification of meal period, rest break and overtime (regular rate calculation) claims.

The Court confirmed what is, by now, a fairly well-established set of standards for appellate review of certification rulings:

Trial courts have discretion in granting or denying motions for class certification because they are well situated to evaluate the efficiencies and practicalities of permitting a class action. (Sav-On, supra, 34 Cal.4th at p. 326.) Despite this grant of discretion, appellate review of orders denying class certification differs from ordinary appellate review. Under ordinary appellate review, we do not address the trial court's reasoning and consider only whether the result was correct. (Kaldenbach v. Mutual of Omaha Life Ins. Co. (2009) 178 Cal.App.4th 830, 843.) But when denying class certification, the trial court must state its reasons, and we must review those reasons for correctness. (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 435-436 (Linder).) We may only consider the reasons stated by the trial court and must ignore any unexpressed reason that might support the ruling. (Id.; see also Bufil v. Dollar Financial Group, Inc. (2008) 162 Cal.App.4th 1193, 1204-1205 (Bufil).)

Slip op., at 7.  The majority of the opinion simply confirms that, in the face of evidence apparently in conflict, the determination of which evidence to credit is left to the trial court.

The Court did reverse the trial court as to the overtime claim.  The Court found that the issue of whether certain payments should be included in the calculation of the regular rate is an issue well-suited to class-wide determination.

Get back to work.

California Supreme Court activity for the week of June 7, 2010

After two weeks with no conferences, the California Supreme Court held its (usually) weekly conference today.  The only marginally notable result I see is:

• A non-substantive correction to the opinion in Martinez v. Combs (June 9, 2010) (expansive definition of "employee" for certain labor code violations) was issued.  The decision was mentioned on this blog here.

Update on 2010-06-12 01:46 by The Complex Litigator

A reader alerts me to the fact that I missed one key petition grant:

• Coito v. Superior Court will be reviewed by the Supreme Court.  See post for discussion about this interesting work product decision.  At least we may finally get some guidance about the reach of Nacht & Lewis Architects, Inc. v. Superior Court, 47 Cal.App.4th 214 (1996).

American Nurses Association v. O'Connell invalidates as illegal a portion of a class action settlement involving rights of students with diabetes

Class actions involving allegations of discrimination regularly include injunctive relief provisions as part of a settlement or judgment.  However, the complexity of these types of actions increases the likelihood that settlement terms will have unintended consequences.  In American Nurses Association v. O'Connell (June 8, 2010), the Court of Appeal (Third Appellate District) reviewed a challenge to terms of a class action settlement between public school students and Jack O'Connell, in his capacity as the Superintendent of Public Schools for California, the Board of Education of California and the individual members of the Board of Education, the California Department of Education (CDE), and two local school districts and their superintendents.  The students alleged defendants violated various federal laws (ADA and others) by failing to ensure the provision of health care services to students with diabetes, including insulin administration, that was necessary to enable those students to obtain free appropriate public education.  The settlement of that action required, among other things, the issuance of an advisory by the CDE about insulin administration.  The advisory took the position that "in order to comply with federal law, California law should be interpreted to allow, if a licensed person is not available or feasible, trained unlicensed school employees to administer insulin during the school day to a student whose Section 504 Plan or IEP requires such insulin administration."  (Slip op., at 3.)

The American Nurses Association and the American Nurses Association/California filed an action against O'Connell as Superintendent of Public Instruction and the CDE challenging section 8 of the advisory, the portion of the legal advisory that permits unlicensed school employees to administer insulin to students with diabetes.  The Nurses Associations alleged that section 8 is inconsistent with the Nursing Practice Act (NPA) (Bus. & Prof. Code, § 2700 et seq.) and is an illegal regulation implemented by the CDE without compliance with the Administrative Procedure Act (APA) (Gov. Code, § 11340 et seq.).

The trial court agreed with the Nurses Associations, ruling that the NPA prohibited the administration of insulin by unlicensed school employees.  The trial court also rejected the argument that California's laws were preempted by federal law.  Finally, the trial court determined that the challenged portion of the legal advisory was an invalid regulation under the APA.  The Court of Appeal affirmed the finding that current California law does not permit the administration of insulin by unlicensed school employees.  Having so ruled, the Court of Appeal did not reach the alternative basis for the trial court's ruling.

The only moral of the story is that you must craft your injunctive relief language with great care.