Brinker news, and other California Supreme Court activity

This blog's last post on Brinker Restaurant v. Superior Court (Hohnbaum) indicated that the Reply Brief would be filed on July 6, 2009.  After a few unexpected bumps, the Reply Brief was filed on July 20, 2009.  The case is fully briefed.  Now the amicus bloodbath may commence.

In other Supreme Court news, today the Supreme Court denied review in Gomez v. Lincare (April 28, 2009).  See this prior post for information about Gomez.

And in Miller v. Bank of America, 46 Cal. 4th 630 (2009), the Supreme Court denied a Petition for Modification of the opinion.

Blawg Review #221

Tough acts to follow. Blawg Review #220 was hosted by Overlawyered, believed by many to be the Internet’s oldest law blog. Then there was Blawg Review #214. We won’t speak much of that blawger from the UK who takes a bit too much delight in his smokedo, and his consumption of alcohol in its many forms, and his jabs at England’s prodigal child, the United States. No, we won’t dally there. And let’s not overlook the beautifully styled and beautifully written Blawg Review #216 (and be sure to “Click this link to continue...” if you want to know what I’m talking about). All of them and many others - tough acts to follow.

And so, realizing that I just have to do what I do best to present a credible Blawg Review #221, I turn back to Overlawyered and Blawg Review #220 for inspiration. Overlawyered comments on (criticizes) the costs of the American legal system. According to Overlawyered, you don't always have to hire a lawyer. Not for every little thing. Sometimes, you “just have to get over it.” But sometimes...if you wait until you have lots of people suffering lots of little things...you just have to file a class action...

 

Remember, remember the Fifth of November...

So I promised that I wouldn’t dwell on “that blawger,” the author of Charon QC and notorious host of several Blawg Reviews. But before I direct your attention to the best (or not necessarily so) of the blawgosphere over the last week, there is something I want to talk about first: Guy Fawkes Night, also known as Bonfire Night. It seems that some well-intentioned, but ever-so-slightly misguided gang of Catholics (including Guy Fawkes) planned to blow up the Houses of Parliament in London on November 5, 1605. They might have succeeded, too, if one of the conspirators hadn’t been so worried about the number of Catholics in line for collateral damage status that he sent a warning note to Lord Monteagle.

Why do I care about any of this, you ask? It has to do with the resulting holiday and an important lesson that we can draw from it. Until 1859, it was mandatory to celebrate the failed assassination attempt by lighting bonfires each November 5th. So, in England you need an official holiday and an order of the King to light a bonfire. Here, in America, all you need is for a professional sports team to win a championship. See, Man Charged for Arson in Lakers Melee. The child surpasses the parent. Keep your soccer hooligans, England. We have <em>real</em> idiots. By the way, Charon QC, it’s “organization,” not “organisation.” Just thought I’d tweak your English a bit. It seems to have stopped evolving a few centuries back, after all the Americans left. Although I concede that I prefer your punctuation rules for quotation marks.  Lay on, McDuff.

 

Class Actions

Based on the number of daily visitors and readers at The Complex Litigator, the odds are good that you, kind reader, are visiting for the first time. That is not to say that this blog has no readers. It’s just that Blawg Review is at another level entirely. Thus, for those that are new visitors, I will introduce this blog and its primary area of pontification.

This blog is mostly about class actions. I would say that this blog is about “complex litigation,” but what actually qualifies as “complex litigation” is a bit of a judgment call. A class action, on the other hand, is fairly easy to spot, being that it is a lawsuit that calls itself a “class action.”

One might think that there are a lot of class actions, based upon the attention they receive in the media. In so thinking, you’d be wrong. As this blog noted some time back, several thousand class actions are filed each year in California, which compares somewhat poorly against civil filings totaling 1,418,490, and civil dispositions totaling 1,268,153 in FY 2005–2006. In a Judicial Council study, statistics taken from 12 sample courts around California revealed that class action cases represented less than one-half of one percent of all unlimited (greater than $25,000 in controversy) civil filings in the sample courts during the study period spanning 2000-2006.

So why all the fuss? One simple answer is that the level of fuss is proportionate to the size of the check written by the typical defendant. In the case of class actions, those checks tend to be much larger and draw more public attention as a result. And, by that measure, class actions are despicable. For example, the Institute of Legal Reform (right...a public service it is), an affiliate of the U.S. Chamber of Commerce (now we see the motivation), writes about The American Export You Don’t Want. It seems that some European countries, which do not have class actions of the type used in the American legal system, are contemplating adopting a form of the class action procedural device for mass litigation management. It’s hard for me to know whether to be excited by this news. On the one hand, Europeans have, as of late, shown the decidedly good judgment of moving away from the implausible socialism that dominated decades past. On the other hand, the E.U. thinks that it knows better than an upstanding American software company whether an Internet browser is or is not part of the core operating system on a computer. Thus, I have no idea whether their interest in class actions is motivated by a desire for market-based regulatory enforcement or some irrational pique.

On that same note, Popehat asks, What Do Rome, England, Germany, and Hamsters Have In Common? Turns out they’ve all conquered France. After the rimshot, Popehat goes on to observe that a representative action on behalf of abused hamsters will likely result in a decidedly American outcome: “If this follows the lead of American class actions, the lawyers will get $36.999 million and the hamsters will each get a coupon good for 10% off of a box of Hamster Chow, redeemable in a store operated by feral cats.” More than fair, I say. Those hamsters need chow anyhow, and a coupon’s a coupon. I apologize if you’ve seen this post that is several weeks old, but it deserves to be here.

In case you were wondering, my political leanings remain a bit vague on this blog, but I am definitely not a socialist. I leave the task of reconciling my occasional political observations and my defense of the class action device to each reader. The most amusing part is hearing the different deconstructions that follow from this reconciliation.

And now, more on class actions and blogging. Nothing about Blawg Review’s guidelines suggested that a post has to be long to be included. So I assume that quality over quantity is an acceptable measure (though we have both right here at The Complex Litigator, if I do say so myself. References available upon request.). The newsworthiness and timeliness of a post is as important as its length. On July 14, 2009, the new blog Oregon Class Action Blog reported that the State of Minnesota sued the National Arbitration Forum on July 14, 2009, over unfair credit card collection arbitrations. On July 19, 2009, Businessweek reported that the National Arbitration Forum was withdrawing from the credit card arbitration business entirely as part of a consent decree. It’s not easy to stay on top of a story lasting 5 days. Good job, Mr. Sugerman.

If you hang out with drugs and medical devices long enough, you end up with (1) a great party, (2) a horror movie, or (3) a whole bunch of opportunities for class actions! Jim Beck and Mark Herrmann hang out with drugs and medical devices, defending their manufacturers, and while I can’t speak about their experiences with options one and two, they do have a bit to say about class actions. This week, Drug and Device Law Blog offers a spirited defense of the proposition that punitive damages are unconstitutional in class actions in their article, Going Our Way? Class Actions, Punitive Damages & Due Process. They call their article something of a “legal smackdown” after a recent law review article criticized their position on the unconstitutionality of class actions for punitive damages, calling their views "tainted." In their post, they reiterate and explain their position, and critique the thesis of the law review article.

Sometimes the helpful government implements regulations that are so impossible to keep straight with other laws and regulations that widespread violations are almost inevitable. Class actions end up as the preferred tool for forcing compliance. HealthBlawg offers a warning to medical providers that they, soon, will need to reconcile their HIPAA and ARRA compliance policies with new rules from the FTC that impact a wide variety of “creditors” in many industries: Red Flags Rule: The FTC piles on, because HIPAA, ARRA and overlapping state laws just weren't enough. Good luck with that, Mr. Harlow. I think I smell blood in the water...

Class actions receive more than their fair share of criticism. But then again, when big piles of money and lots of people are involved, you’re bound to find some naughty behavior. ClassActionBlawg.com writes about one case, in which naughty attorneys promised incentive awards of specific amounts to the potential class representatives: Incentive Awards OK, But Not Incentive Agreements.

I know what you are thinking. The Class Action Fairness Act isn’t a laughing matter. That just means you haven’t read CAFA Law Blog. This past week, CAFA Law Blog explains why Dual Citizenship Does Not Give You a CAFAteria Pass to Eat at the Buffet in Federal Court. CAFA was designed for the primary purpose of dragging all but the smallest class actions and mass actions into federal court. Given the ferocity over which parties fight about remand, you’d have to think that plaintiffs don’t want to be in federal court and defendants do. I wish that there was a source of reliable statistical data tracking contested certification rates in state and federal courts, but I am unaware of comprehensive source. The study prepared by California’s Judicial Council (mentioned above) revealed that certifications occurred in contested cases at a rate that was most likely well below 20%. That’s lower than the appellate reversal rate in recent years in California’s appellate courts. Still, when the stakes are high enough, even single percentage points matter.

Some of my favorite class action and class action-related blogs have been fairly quiet in recent weeks. As a result, while preparing this edition of Blawg Review, I looked back a few weeks for class action news of interest. On Point supplies one story too good to exclude, the end of a class action lawsuit challenging the absence of “Crunch Berries” in Cap’n Crunch cereal: Lawyers’ Cereal Litigation Suffers Crunching Blow. News like this explains why life at Overlawyered is so easy. In baseball parlance, this is known as serving up a fat one. Translated into British English, this is known as throwing a ball that is very easy to hit with one of those funny bats while playing cricket, which is like baseball but much goofier.

Despite the recent lull due to other pressing business, you still shouldn’t overlook The UCL Practitioner, as she comments on all manner of decisions, such her recent post entitled Massachusetts Supreme Judicial Court strikes down no-class-action arbitration clause: Feeney v. Dell, Inc., and other decisions affecting consumer litigation. Kimberly Kralowec, author of The UCL Practitioner, is a former host of Blawg Review and is usually out front with posts about class action and consumer law news affecting or of interest to California attorneys.

I want to end my discussion of posts emphasizing class actions with a special note of thanks to Shawn Westrick, a co-worker of mine, and the first true Contributing Author at The Complex Litigator. He earned his title when he came through with a second post in two weeks about recent California Supreme Court decisions involving the Labor Code Private Attorneys General Act of 2004. PAGA actions will be inspiring confusion and awe in wage & hour actions, now that the California Supreme Court has determined that PAGA actions need not be certified to proceed as representative actions.

 

Sotomayor's Confirmation Hearings

It’s arguably big news that a new United States Supreme Court Justice is, by all accounts, about to be confirmed by the Senate. It’s also allegedly big news that Judge Sotomayor will be the first Hispanic member of the United States Supreme Court. It’s also allegedly big news that Judge Sotomayor will be the third woman to ever sit on the United States Supreme Court. As for the last two, wouldn’t Martin Luther King be so proud to know that we’re still checking off quota boxes to prove how egalitarian we’ve become? Sounds more like a scrivener on Noah’s Ark: “Two lions. Check. A Hispanic. Check. Third Woman – who’s also Hispanic. Double-check.” We’re eventually going to choke ourselves on the fumes of our societal guilt if we don’t move on to a place where ability matters first.

As for the first observation, Judge Sotomayor is more likely than not a “liberal” in a very general sense. She replaces a Justice that was generally liberal. Very exciting. But perhaps that’s just the grumpy cynic in me.

Regardless of your political leanings, you have to admire anyone that makes it as far as one of the United States Court of Appeals and sits on the cusp of appointment to the United States Supreme Court. I recall the giddy sensation when I was admitted to the bar of the United States Supreme Court. I was elated to know that I had permission to speak in front of that Court. I can’t fathom the notion of being confirmed to sit on that Court. Speaking of which, I won’t be holding my breath waiting for my appointment. I recall a reporter saying a few days ago that Senators’ expressions were inscrutable after receiving a briefing from the FBI on their investigation into Sotomayor’s background. If that had been a briefing on my background, the Senators would have returned from the briefing with that sallow look and vomit stained chin seen only on persons whom have received far too much information and wish they could wash their ears out with soap. Or they’d have high-fived me.

I now direct your attention to the wealth of commentary about Judge Sotomayor’s confirmation process.

Balkinization provides a wealth of information about the confirmation process. But first, Balkinization asks, What are Supreme Court confirmation hearings good for? Balkinization answers that questions by delicately suggesting that the confirmations are a dog and pony show for Senators to pontificate, look important, and speak to their core constituents. (The dog and pony show comment is my editorializing.) Next, Balkinization provides A Brief History of Supreme Court Partiality. It turns out that we’ve been blasting nominees for bias since Chief Justice John Marshall announced his retirement. Balkinization completes our education about the confirmation process by reviewing the famous testimony elicited during the Confirmation Hearings of Master Yoda, Day Two:

Senator Patrick Leahy: Now I wanted to get your views on some constitutional issues. To begin with, what is your opinion of President Bush and Vice-President Cheney and their views of executive power?

Yoda: Always two there are, no more, no less. A master and an apprentice. But which one is the master and which one is the apprentice?

PrawfsBlawg treats the confirmation questioning as an opportunity to discuss how judges can “use” foreign law in the educational, rather than conceptual sense: Misunderstanding Judging: Foreign Law.

Volokh Conspiracy presented a look from the inside of the confirmation circus; Ilya Somin testified at the confirmation hearings and blogged about the experience.

PointofLaw theorizes that Judge Sotomayor’s very controlled testimony may undermine President Obama’s ability to appoint Justices with a more decidedly liberal bend. Additional thoughts can be found in the post entitled Deconstructing Law and Sotomayor’s Testimony.

ScotusBlog runs with the baseball imagery (no cricket for us yanks) in Box Score: Calling “balls and strikes” at Sotomayor’s confirmation hearing. Here’s a preview: “An (incomplete) review of the senators’ written statements and oral testimony finds the phrase ‘balls and strikes’ used 11 times, ‘umpire’ or ‘umpires’ used 16 times, and ‘playing field’ used twice today.”

Likelihood of Success expresses second thoughts about guarded enthusiasm for Sotomayor when asking Was Rosen Really Right?

Carolyn Elefant, at My Shingle, uses the confirmation hearings to discuss an interesting ethics issue. In The Lessons of Sotomayor and Associates, My Shingle discusses the bending of the truth by solo practitioners that append to their firm names “and Associates,” which Sotomayor apparently did some years ago.

I’ll wrap up the Sotomayor-inspired posts by mentioning Concurring Opinions, which also talks (briefly) about The Confirmation Hearings.

 

Around The World And Back Again

Class actions often utilize statistics to determine all sorts of information, from liability to damages. But Carl Gardner explores what happens when you take sacrifice common sense for statistical methods in Truth, bias and blue taxis.

Charon QC reviews and raves about the book BabyBarista and the Art of War. After reading the book, Charon QC says that “whatever he was drinking as he plotted out and wrote BabyBarista and The Art of War... I want some... it certainly does the business.” According to Charon QC, BabyBarista is proof that not all barristers are boring. Geeklawyer’s Blog concurs and revels, “BabyBarista enters the fray with his Machiavellian flailing, undoing all attempts at the rehabilitation of our image. Excellent.”

China Law Blog explains that it’s not as hard as one might thing to do business in China: Enforcing Contracts In China. Way, Way Better Than You Think.

Family Lore describes a nearly inoperative family law court that is Barely Functioning. That phenomenon isn’t unique to family law, or England. For example, courts in Los Angeles are now closed one day a month because of the bankrupt state I live in is so incompetently run that even its massive resources are insufficient to fix freeways and keep courts open.

Defending People lauds Anita Mugeni: Criminal Defense Hero of the Day for her work in Rwanda, where she is one of only 300 lawyers and was responsible for training 80 of them to work as criminal defense lawyers.

Idealawg offers guidance on the art of storytelling in closing arguments.

 

The Law Beyond: What I Don't Practice

I know something about class actions. I know a bit about employment law. I’ve handled a fair number of appeals. And I’ve learned that what I know is a drop in the bucket. Here are some posts from the wide variety of legal subjects that comprise bits and pieces of “the law.”

Ideoblog explains that legislators are thinking of crushing non-public businesses with SOX-like disclosure requirements: SOX for the little guy.

TradingSecrets discusses IBM’s ongoing efforts to restrict post-IBM employment of its former executives: First Apple, Now Dell: IBM Pursues a Departing Executive.

I don’t know what to say about The Arab-Israeli Peace Process as a Real Estate Transaction, but I commend Opinio Juris for writing it.

The photographer of the image used for the Obama “Hope” poster has joined the fracas over the use of the photo. Marquette University Law School Faculty Blog comments about the new player in The Obama “Hope” Poster Case — Mannie Garcia Weighs In.

In HITECH Headaches: HIPAA issues for Business Associates, The Employment News Spot explains that HIPPA penalties now apply to entities providing services to covered entities. Here’s yet another example of a significant law sliding into operation without much fanfare but with much potential to trip up companies unaware of its passage.

Does your insurance company cover you for cyber attacks or denial of service outages? Corporate Insurance Blog discusses this new frontier of insurance.

 

Interesting Miscellany

Eugene Volokh, of the famous Conspiracy, politely let a Feminist Law Professor feel his ire in his post "Where Are The Women? A precious few were published in recent addition of the UCLA Law Review", after she criticized the lack of female authors in a Symposium edition dedicated to the Second Amendment.

Google continues to face challenges by trademark holders over its AdWords practices. Blogger Eric Goldman tries to keep up with the mounting suits but is showing signs of fatigue.

Mad Kane’s Political Madness is pretty angry about Amazon.com’s ability to yank books you’ve purchased off your Kindle. I have to admit, it would be strange to come home and find that your paperback book had been repossessed and replaced with a credit for future purchases.

In Search Of Perfect Client Service challenges the notion that you can’t be dedicated to your profession and enjoy a quality of life outside work in the post: Work Life Balance and the Kobayashi Maru. As an employee of a law firm, I have no comment. None. Simple Justice offers the contrarian view to the work-life balance debate.

Above The Law weighs in on the controversy surrounding a visiting professor at NYU Law School. Dr. Li-ann Thio is credited with some remarks that would not be described as supportive of a non-hetero lifestyle (I’m not interested in having filters block my blog, hence the circumspection). The Volokh Conspiracy weighs in with a discussion that is somewhat more academic in its approach. That’s “academic” as in scholarly, not simple.

 

The Periphery: All That Stuff You Want Or Need To Practice Law Better

Lawyers need to write well. I say that Twitter won’t help to improve your writing. But there are ways to do so: 7 Simple Ways to Improve Everything You Write.

Lawyers, those scoundrels, aren’t considered entirely trustworthy. But lawyers need to be trusted. Learn techniques for making your firm more trustworthy: Four Principles of Organizational Trust: How to Make Your Company Trustworthy. Speaking of trust, Adrian Dayton hosts the July edition of the Carnival of Trust.

I love my iPhone and it loves me. I stroke it and it tells me things. Sui Generis – a New York law blog says Practicing law: There's an iPhone app for that. Not the phone-stroking part... Just wanted to clear that up.

Oh, look, Another new networking site for lawyers, at Robert Ambrogi’s LawSites. The site is HubSTREET. I can barely keep up with the ones I do use, so what makes anyone think that I’m going to add another?

 

Ethics

I grew up in Las Vegas. As a kid, I thought it seemed like a shady place. Legally Unbound agrees, noting that Nevada Needs Strict Judicial Canons, Increased Judicial Evaluations, Not Judicial Appointment By The Governor.

Unsilent partners writes about The legalo-ethics position on assisted suicide. No jokes to see here.

Twitter. Facebook. LinkeIn. Do you spend any time considering the ethical implications of these new marketing tools. Lawyerist.com does, in Legal marketing ethics in a web 2.0 world.

 

That last paragraph mentioned Twitter. That’s makes this as good a time as any to wrap this edition of Blawg Review. After all, Twitter is the alpha and the omega of legal networking. It is the panacea that will solve all problems, build community, develop clients and spread accurate news with greater speed than any conventional media. I’d better upload this post so I can Twitter about it. I not supposed to thank the sherpas, so I won’t.

Blawg Review has information about next week's host, and instructions how to get your blawg posts reviewed in upcoming issues.

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.]

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.

Reminder: no dismissals as a term of settlement in California class actions

In a recent Class Action Alert, DLA Piper reminds defendants that, as of January 2009, settlements of California class actions cannot include dismissal of the class action as part of the settlement.  (Totino, Briones & Tagvoryan, California: Defendants May No Longer Request Dismissal of Settled Class Actions (May 27, 2009) www.dlapiper.com.)  Instead, California Rule of Court 3.769 requires a trial court that approves a class action settlement to enter a judgment and prohibits the entry of an order dismissing the action with or after entry of judgment.  Speaking from personal experience, defendants are not thrilled with this new development and many practitioners are still unaware of this changed rule.

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]

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.

Petition for Review denied in Cristler v. Express Messenger Systems, Inc.

The California Supreme Court has denied the Petition for Review in Cristler v. Express Messenger Systems, Inc. (2009) 171 Cal. App. 4th 72.  My prior post on the case can be found here.  The denial is unfortunate, as the case is likely to be misconstrued as a decision about the independent contractor/employee distinction, rather than the jury instruction and standard of review opinion that it is.