Class Action Defense Blog provides good "unofficial" filing data

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If statistics and trends interest you, then click, don't walk, over to the Class Action Defense Blog.  As a regular feature, Class Action Defense Blog summarizes (with self-described "unofficial" data) the number and type of class action filings in the major metropolitan centers of California.  Their April 19, 2008 post is good example of the type of summary you will find on the site.  In reviewing the numbers for at least 2008, it should come as little surprise to most class action practitioners that wage & hour class actions habitually hold sway with the largest percentage of filings by claim type.

Class Action Defense Blog is unashamedly and openly a firm-sponsored blog of Jeffer, Mangels, Butler & Marmaro, LLP, so it understandably tends towards a staid tone in its posts (I, on the other hand, having no restraining guidance behind me, am a loose cannon that could go off at any time).  That blog is, nevertheless, dense with information about results and transactions in class actions around the country.

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When correctly used, Person Most Qualified (PMQ) Depositions are powerful discovery tools

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In Costco Wholesale Corporation v. Superior Court (Greg Randall et al.) (March 27, 2008) ___ Cal.Rptr.3d ___ [2008 WL 803143, 08 Cal. Daily Op. Serv. 3627], the Court of Appeal (Second Appellate District, Division Three) denied a Petition for a Writ of Mandate after the Trial Court (Hon. Emilie H. Elias) granted a Motion to Compel the production of documents that included a partially redacted letter from outside counsel to Costco, commenting upon the appropriateness of classifying certain managerial employees as exempt from California’s overtime pay laws and regulations.  (Hereinafter, point page citations are to the Slip Opinion, available from the Opinions page of the California Courts website.)

The procedural history of the Writ Petition is interesting and merits a quick read if appellate procedure floats your boat.  In short, the following occurred: a Petition was filed, an OSC issued, the OSC was dismissed without an opinion, the Supreme Court directed the Court of Appeal to issue an OSC, the matter was heard, and, finally, the Petition was denied.  (Slip op., at p. 10.) But while I am interested in such things, it doesn’t concern the point I want to make (and will get to) in this post. The result of the case is also of substantial interest to wage & hour practitioners (an area in which I happen to practice). But again, that discussion is for another time, or possibly another blog. (See, e.g., The California Wage And Hour Law Weblog, discussing all thing wage & hour.)

What I find most interesting from this opinion is the dramatic effect created by what was likely a short line of questioning at a Person Most Qualified deposition. Plaintiff deposed the person most knowledgeable (Mr. Matthews) about Costco’s exemption defense. (Slip op., at p. 5.) For those of you who don’t practice wage & hour law in California, the claim that an employee is “exempt” from overtime pay laws and regulations is an affirmative defense in California. The employee establishes a prima facie case by simply alleging that work was performed in excess of 8 hours per day or 40 hours per week, but overtime (premium rate) wages were not paid for that time. The employer then asserts an affirmative defense of “exemption” under the any of the recognized exemption categories.

In any event, plaintiffs’ counsel questioned Mr. Matthews about Costco’s expectations of its managers:

Matthews testified about Costco’s reasonable expectations regarding the duties of managers historically classified as exempt. He testified that in making the classification decision, Costco gathered information during interviews with managers. Matthews also testified that Costco relied, in part, on input from counsel in classifying its employees as exempt or nonexempt. During the deposition, Costco’s counsel explicitly stated that Costco was not relying upon the advice of counsel defense. Costco’s counsel instructed Matthews not to relay any information as to what was discussed during interviews with Costco’s attorneys.

(Slip op., at p. 6.) That question and answer exchange set in motion a series of events that ultimately led to the production of a letter from outside counsel to Costco’s corporate counsel. By way of background, “In June 2000, Costco’s then corporate counsel (attorney Donna M. Brandon) engaged ‘the law firm[ ] of Sheppard Mullin . . . to undertake [a] comprehensive factual investigation and legal analysis regarding the classification of managers within Costco Warehouses.’” (Slip op., at p. 3.) After a thorough review of decisional authority supporting the Trial Court’s ability to review a document in camera to ascertain whether the communications in the letter were privileged under attorney-client or work product doctrines (slip op., at pp. 11-17), the Court concluded that Costco had not met is burden to establish that extraordinary relief was warranted (slip op., at p. 20).

The ultimate significance of the Costco ruling to the parties in that matter seems relatively insignificant:

We have examined the redacted letter, which is presented to us under seal. As redacted, it demonstrates that Costco was successful in precluding discovery of a majority of the August 4, 2000, letter. Thirteen of the 22 pages (pages 2-9 and 17-21) were redacted in their entirety. Large portions of the remaining pages were eliminated by the referee. The only parts remaining visible are inconsequential and do not infringe on the attorney-client relationship. They came from non-privileged written job descriptions and interviews with the two managers.

(Slip op., at p. 18.) Rather, the significance, in my opinion, is that the plaintiffs obtained any portion of that letter. It bears repeating: the plaintiffs obtained part of a letter written by Sheppard Mullin to Costco's general counsel. They did so by asking a PMQ to explain everything that Costco relied upon when classifying its managers. His answer opened, at least in part, Pandora’s box.

The lesson I take away from this is that PMQ depositions provide a rich discovery opportunity that is often squandered when careful thought and preparation are absent.  I once overlooked PMQ depositions as a discovery tool.  I no longer do, and you shouldn't either.

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Gentry v. Superior Court (Circuit City Stores, Inc.) (2007) 42 Cal.4th 443 is officially the law of this land (California).

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On March 31, 2008, the United States Supreme Court denied a Petition for a Writ of Certiorari in the Petition encaptioned Circuit City Stores, Inc. v. Gentry, Supreme Court Case No. 07-998.  The actual question posed in Gentry was whether lower courts had incorrectly enforced an arbitration clause barring class actions.  While the California Supreme Court didn’t determine the enforceability of the provision, it did remand the matter for further unconscionability analysis.  In doing so, the Gentry decision offered one of the strongest statements (certainly in recent years) in favor of California’s class action device, especially in wage & hour cases:

“ ‘Frequently numerous consumers are exposed to the same dubious practice by the same seller so that proof of the prevalence of the practice as to one consumer would provide proof for all. Individual actions by each of the defrauded consumers is often impracticable because the amount of individual recovery would be insufficient to justify bringing a separate action; thus an unscrupulous seller retains the benefits of its wrongful conduct. A class action by consumers produces several salutary by-products, including a therapeutic effect upon those sellers who indulge in fraudulent practices, aid to legitimate business enterprises by curtailing illegitimate competition, and avoidance to the judicial process of the burden of multiple litigation involving identical claims. The benefit to the parties and the courts would, in many circumstances, be substantial.’ ” ( Discover Bank, supra, 36 Cal.4th at p. 156, 30 Cal.Rptr.3d 76, 113 P.3d 1100.)

(Gentry, at pp. 453.)

First, individual awards in wage and hour cases tend to be modest. In addition to the fact that litigation over minimum wage by definition involves the lowest-wage workers, overtime litigation also usually involves workers at the lower end of the pay scale, since professional, executive, and administrative employees are generally exempt from overtime statutes and regulations.

(Gentry, at pp. 457-458.)

A second factor in favor of class actions for these cases, as noted in Bell, is that a current employee who individually sues his or her employer is at greater risk of retaliation. We have recognized that retaining one’s employment while bringing formal legal action against one's employer is not “a viable option for many employees.”

(Gentry, at p. 459.)

Third, some individual employees may not sue because they are unaware that their legal rights have been violated. The New Jersey Supreme Court recently emphasized the notification function of class actions in striking down a class arbitration waiver in a consumer contract: “[W]ithout the availability of a class-action mechanism, many consumer-fraud victims may never realize that they may have been wronged. As commentators have noted, ‘often consumers do not know that a potential defendant’s conduct is illegal. When they are being charged an excessive interest rate or a penalty for check bouncing, for example, few know or even sense that their rights are being violated.’ ” ( Muhammad v. County Bank of Rehoboth Beach, Delaware (2006) 189 N.J. 1, 912 A.2d 88, 100.)

(Gentry, at p. 461.)

We also agree with the Bell court that “class actions may be needed to assure the effective enforcement of statutory policies even though some claims are large enough to provide an incentive for individual action. While employees may succeed under favorable circumstances in recovering unpaid overtime through a lawsuit or a wage claim filed with the Labor Commissioner, a class action may still be justified if these alternatives offer no more than the prospect of ‘random and fragmentary enforcement’ of the employer’s legal obligation to pay overtime.”

(Gentry, at p. 462.)

Circuit City makes a number of arguments that we have already concluded lack merit. As in Discover Bank, we again reject the “unsupported assertions [of some courts] that, in the case of small individual recovery, attorney fees are an adequate substitute for the class action or arbitration mechanism. Nor do we agree ... that small claims litigation, government prosecution, or informal resolution are adequate substitutes.”

(Gentry, at p. 464.)  Gentry’s strong policy statements concerning at least wage & hour class actions all but declared the use of the class action device superior to any other means of enforcing California’s wage & hour laws.  The Gentry decision is available for free through FindLaw, so long as you create a free account first.  Thanks to The UCL Practitioner for noting the denial of the Petition.

UPDATE:  The significance of Gentry is confirmed by the press coverage a simple certiorari denial is receiving.  (See, e.g., Wage Law discussing Gentry.)

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"Class" missing in Daily Journal column on class actions

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Yesterday, while perusing the Daily Journal's March 20, 2008 issue, I stumbled across a Forum column that addressed a topic near and dear to me: class action law in California.  As an aside, that column did a fine job at evoking sufficient scorn to push me out onto the dance floor with the rest of the blawgers.  Entitled "No Class," John H. Sullivan purports to explain why California has one of the five worst class action laws in the United States (evidently, the characteristic necessary to achieve that honor is the relative effectiveness of California's class action law).  Some of that article's assertions are noteworthy for their disconnect with the facts:

Lest you think we are looking at only a few icons gone bad, note that when it comes to plaintiff-hiring, San Diego's Lerach claimed that "Everybody was paying plaintiffs ... it was an industry practice."

Mr. Sullivan would have one believe, on the strength of an assertion by the discredited Bill Lerach, that it is common practice for class action lawyers to pay to find plaintiffs.  Setting aside the fact that the "industry" referred to by Mr. Lerach was probably the narrow field of shareholder derivative class actions, Mr. Sullivan's assertion about plaintiff-hiring is just that, an assertion, with little to back it up.  Instead, this manipulation of the truth sets the tone for what is a political agenda posing as a reasoned editorial, and I'm offended by it.  I've litigated class actions as an attorney since 1999, and for years before that as a clerk.  I've never "hired" a plaintiff.  I've never known another class action attorney that did so.  I've personally enjoyed several white-knuckle rides as I've hoped that a plaintiff would step forward to spearhead a class when the initial lead plaintiff had second thoughts.  Ad hominem commentary about all plaintiff-side class action practitioners has no place in a debate about how California implements its class action procedural mechanism.

[I]t's not surprising that the plaintiffs' class action lawyers, once they lock onto their defendant targets, aim to win every possible procedural advantage over their adversaries and fight on every front to preserve that edge.

And other lawyers don't?  Recall the defense bar's victory when it successfully engineered the passage of Proposition 64, which extracted a few teeth from California's Unfair Competition Law (Bus. & Prof. Code § 17200, et seq.).  If you take Mr. Sullivan literally, it is (1) bad to zealously represent your client, and (2) only plaintiff-side class action attorneys actually accomplish that goal.

In California, only the plaintiff has a right to appeal [a decision regarding] class certification.  For plaintiffs' lawyers, this is a wonderful double standard.

Let's review how class actions work.  When class certification is denied, the bulk of the claim is essentially extinguished.  Absent class members must decide whether to file a tidal wave of individual suits.  Allowing an appeal of the denial of certification is comparable to the right of appeal following the termination of a claim.  A defendant, on the other hand, retains the right to challenge a claim on the merits after certification is granted.  If the defendant prevails, that victory is enforceable against the entire class.  If the defendant loses on the merits after certification, the defendant can then challenge both the certification order and the order on the merits on appeal.  And if the defendant can't beat certification and doesn't prevail on the merits and can't convince a court of appeal that any error of significance was responsible for the result below, then the system operated correctly.

The alternative is what the Civil Justice Association of California wants: the immediate cessation of litigation in the trial court upon the issuance of an order granting or denying certification.  And the class that may have been victimized by a defendant gets to sit and wait several more years for recompense.

California has the fifth-worst class action law in the country.

According to whom?  The U.S. Chamber's Institute for Legal Reform.  In other words, if it in any way facilitates the assertions of rights against defendant businesses, it must, by definition, be bad and need fixin'.

Senate Bill 1202, authored by Sen. Tom Harman, will help ensure that settlement funds are not misused.  The bill allows judges to withhold part of the plaintiff's attorney's fees until class members have been contacted and have received their share of the settlement.

Why is it reasonable for attorneys in every other area of practice to expect payment for their services upon completion of the professional service?  Certainly the attorneys representing the defendant in a class action will expect to be paid, even though they were unsuccessful in opposing certification or defending against the merits.  SB 1202 is unnecessary and creates more problems than it solves.  First, judges have wide latitude.  Some already hold back a portion of fees as an incentive to wrap up a class action.  Second, what happens when the class counsel can't locate every class member?  Answer:  class counsel will get to spend additional, uncompensated time, pleading with the trial court for their earned fees on the ground that they have made reasonable efforts to locate class members.

The 2005 federal Class Action Fairness Act has begun to shift national class actions into federal courts, but plaintiffs' lawyers have strong incentives to avoid the act if there is any way they can file and keep their case before California judges and juries.

Once again, more half-truths to create the impression of unfairness.  What is true in California is true in most states:  plaintiffs prefer to be in state court and defendants want to be in federal court.  It is true for individual actions just like it is for class actions.  That CAFA was not the panacea hoped for by the defense (business) bar does not call into question California's class action procedural device.  And anyone that has some experience with CAFA removal knows that federal judges are doing everything in their power to find ways to justify remand to state courts.

Statistics also make great fodder for pressing an agenda.  Consider the following passage in Mr. Sullivan's column:

The study of six major California counties, commissioned by the Civil Justice Association of California, detected 3,400 class actions filed in superior courts from July 2004 through June 2007.  That's nearly five new class action suits every day the courthouses are open.

Viewed in isolation, those numbers sound shocking.  What will our system of justice do under the weight of so many class actions?  It likely won't notice them, as suggested by these additional statistics from the 2007 Court Statistics Report Introduction:

Civil filings totaled 1,418,490, and civil dispositions totaled 1,268,153 in FY 2005–2006.

One and one-half million civil filings in a one year period in California.  Would our justice system be better off in California if any significant number of absent class members had to file individual suits to assert their rights?

Our unbalanced rules are sending a message every day that California is a dangerous place to hire employees and do business.

If a business abides by the law, it won't have anything of consequence to fear, at least from class actions.  Our high state taxes send the message that businesses (and residents) aren't welcome.  Our inflated real estate prices don't help.  If the Civil Justice Association of California wants to do something good for business, it can start lobbying for budgetary responsibility in Sacramento, followed by tax rate reductions for all Californians.

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