UPDATED: Lu v. Hawaiian Gardens Casino, Inc. offers a reminder that the UCL can borrow statutes that do not themselves include a private right of action

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Greatsealcal100Better late than never, a brief comment about Lu v. Hawaiian Gardens Casino, Inc. (Jan. 22, 2009) is in order. In Lu, the Second Appellate District, Division Three, considered whether dealer tip pooling in casinos (1) gives rise to a private right of action under California Labor Code section 351 and/or 450, and (2) whether those or other Labor Code sections can serve as predicates for an Unfair Competition Law claim.

After reviewing the two Labor Code sections at issue, the Lu Court concluded with little difficulty that neither section (351 or 450) created a private right of action. However, the Lu Court then noted that such Labor Code sections could nevertheless serve as predicates for the “unlawful” conduct prong under the UCL:

“Nevertheless, Lu alleged a cause of action under the UCL for violation of Labor Code sections 351 and 450. “ ‘Virtually any law -- federal, state or local -- can serve as a predicate for an action under Business and Professions Code section 17200.’ [Citation.]” (Ticconi v. Blue Shield of California Life & Health Ins. Co. (2008) 160 Cal.App.4th 528, 539; cf. Louis v. McCormick & Schmick Restaurant Corp. (C.D.Cal. 2006) 460 F.Supp.2d 1153, 1156, fn. 5; Matoff v. Brinker Restaurant Corp., supra, 439 F.Supp.2d at pp. 1037-1038.) The UCL is a proper avenue for Lu to challenge violations of these Labor Code provisions. Therefore, we turn to the substantive question of whether the tip pool procedure here violates the Labor Code sections enumerated in the complaint such as would support UCL causes of action.

(Slip op., at p. 11.) The Court then analyzed various Labor Code sections asserted in the plaintiff’s complaint, concluding that section 351 could support a UCL “unlawful” prong claim sufficient to withstand summary judgment. (Slip op., at pp. 21-23.)

UPDATE:  Just when you get around to writing a post, wouldn't you know that the Court of Appeal changes the Opinion.  A Modified Opinion issued on February 11, 2009, which slightly alters the judgment.

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CLE: The Rutter Group offers upcoming 17200 seminar

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The Rutter Group will be offering a seminar in March on the newest developments in 17200 (and CLRA) practice.  Live programs will be held on March 3, 2009 in San Francisco and March 5, 2009 in Los Angeles.  Other locations will offer video replays later in March.  All programs are from 6:00 p.m. to 9:15 p.m.  New case discussions will include, among others, Meyer v. Sprint Spectrum L.P.  For more information, visit www.RutterGroup.com.

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No restitutionary recovery of Labor Code section 203 wage penalties

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Greatsealcal100Is it a wage, subject to restitution under the Unfair Competition Law, or is it a penalty, which would be considered damages for purposes of the Unfair Competition Law? In connection with California’s Labor Code, this question has arisen on several occasions in recent years, the most memorable instance being Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094. In the most recent incarnation of this issue, the Court of Appeal (First Appellate District, Division Three) examined whether “penalties” under Labor Code section 203 are recoverable via the Unfair Competition Law in Pineda v. Bank of America, N.A. (January 21, 2009)

Labor Code section 203 provides, in part, that “If an employer willfully fails to pay, without abatement or reduction, in accordance with Sections 201, 201.3, 201.5, 202, and 205.5, any wages of an employee who is discharged or who quits, the wages of the employee shall continue as a penalty from the due date thereof at the same rate until paid or until an action therefore is commenced; but the wages shall not continue for more than 30 days. . . . [¶] Suit may be filed for these penalties at any time before the expiration of the statute of limitations on an action for the wages from which the penalties arise.” In McCoy v. Superior Court (2007) 157 Cal.App.4th 225, the Court held that the extended statute of limitations set forth in section 203 applies only if the penalties are sought in connection with an action for unpaid wages. But if the action seeks only waiting time penalties under section 203, the one-year statute of limitations found in Code of Civil Procedure section 340, subdivision (a) applies. (McCoy, at p. 233.)

In Pineda, the Court of Appeal concluded that, since section 203 permitted recovery of something in excess in earned wages, it could not be considered property subject to restitution:

“ Penalties under section 203, however, are not imposed as compensation for the labor of the employee, but are triggered by the employer’s willful failure to timely pay the wages that have been earned. As the court explained in Tomlinson v. Indymac Bank, F.S.B. (C.D.Cal. 2005) 359 F.Supp.2d 891, 895, “the remedy contained in Section 203 is a penalty because Section 203 does not merely compel [the employer] to restore the status quo ante by compensating Plaintiffs for the time they worked; rather, it acts as a penalty by punishing [the employer] for willfully withholding the wages and forces [the employer] to pay Plaintiffs an additional amount. This type of payment clearly is not restitutionary, and thus cannot be recovered under the UCL.” (See also Montecino v. Spherion Corp. (C.D.Cal. 2006) 427 F.Supp.2d 965, 967 [“§ 203 payments are clearly a penalty, and thus cannot be claimed pursuant to the UCL”]; In re Wal-Mart Stores, Inc. Wage and Hour Litigation (N.D.Cal. 2007) 505 F.Supp.2d 609, 619; Murphy, supra, 40 Cal.4th at pp. 1108-1109.)

(Slip op., at pp. 1-2, footnote omitted.) Plaintiff Pineda advanced the theory that restitution was available because the penalty was a vested property interest due upon failure to timely pay wages.  The Court of Appeal rejected that theory, but complimented Plaintiff for creativity. Nice try, but no cigar.

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Comcast, Time Warner sued for anti-competitive prohibition on set-top box purchases

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The cell phone companies like providing subsidized handsets because the long-term contracts are worth more to them than the subsidy they provide on the hanset.  Cable companies use their oligopoly position to provide hardware through an entirely different model.  They "rent" consumers the hardware customers need for digital and enhanced services (movies on demand, information services, etc.).  Customers can't buy the set-top box on the open market and still receive the full set of services from their cable provider.  Those fees add up when a customer has multiple televisions on which enhanced services are desired.


As it turns out, consumers are challenging this scheme as an illegal tying arrangement, alleging Sherman Act violations, among other things.  In August 2008, class action lawsuits were filed in, among other states, California and Kansas, challenging Time Warner's practice of preventing customers from purchasing their set-top boxes.  You can read some background on those suits here.

Now Comcast is in the crosshairs.  Ars Technica reports, via Multichannel News, that Comcast was sued in late November for similar anti-competitive practices.  (Nate Anderson, Comcast sued for not selling set-top boxes, Cable-CARDs (December 26, 2008) arstechnica.com.)

Let me just add, on a personal note, that I can't think of a more deserving industry.  Earlier tonight I spent some time unplugging (to reset) the pathetic set-top box that I received from Time Warner after they took my beautiful MOXI boxes from me (while I sobbed uncontrollably).  As I noted in a June 4, 2008 post, Time Warner acquired Adelphia in my part of Southern California.  Time Warner then set about pushing their junky boxes with their junky menu systems on anyone that had Adelphia equipment.  The conspiracy theorist in me thinks that they intentionally fried my two boxes, which both "failed" within a month of each other.  Of course, it could have been bad luck.  But since I can't go out and buy the control box I want, I'll never know.

Suits like these broke the AT&T phone monopoly (back when you couldn't buy a home telephone of your choosing).  If these suits have any effect on the cable industry and its anti-competitive behaviors, I'll be a big fan.
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Court of Appeal reverses order decertifying a class in Harper v. 24 Hour Fitness, Inc.

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Greatsealcal100This is proving to be a busy day in the world of class actions.  And once again, Division Seven in the Second Appellate District is in the mix.  Division Seven seems to be one of those lucky divisions that attracts interesting class action issue appeals (I don't know if they consider themselves "lucky" to be the beneficiaries of these questions).  Just the last year was a busy one for them.  Division Seven recently took some of the sting out of Alvarez v. May Dept. Stores Co., 143 Cal.App.4th 1223 (2006) with their decision in Johnson v. Glaxosmithkline, Inc., 166 Cal.App.4th 1497 (September 19, 2008), as modified (October 14, 2008).  In Lee v. Dynamex (2008) 166 Cal.App.4th 1325 (discussed here), Division Seven reversed an Order denying class certification after the trial court refused to allow discovery of class member identity and contact information.  And in Puerto v. Superior Court (2008) 158 Cal.App.4th 1242, Division Seven added to the body of post-Pioneer decisions confirming the right to discovery putative class member (witness) identity.  And that's just the published decisions.

Division Seven also decided Belaire-West Landscape, Inc. v. Superior Court (2007) 149 Cal.App.4th 554, the first post-Pioneer decision confirming the right to discovery putative class member identity.  Other notable, fairly recent opinions include: Aron v. U-Haul Co. of California (2006) 143 Cal.App.4th 796; Aguiar v. Cintas Corp. No. 2 (2006) 144 Cal.App.4th 121; Singh v. Superior Court (2006) 140 Cal.App.4th 387; Caliber Bodyworks, Inc. v. Superior Court (2005) 134 Cal.App.4th 365; Consumer Cause, Inc. v. Mrs. Gooch's Natural Food Markets, Inc. (2005) 127 Cal.App.4th 387; and, Newell v. State Farm General Ins. Co. (2004) 118 Cal. App. 4th 1094.  There are many substantial class action issues implicated in that list, including fee awards, insurance claims arising out of the Northridge earthquake, PAGA interpretation, and wage & hour law issues.  And the list includes decisions both favorable and unfavorable to positions advocated by the respective class action proponents.  But, uniformly, this Division endeavors to correctly state and apply highly nuanced issues arising in class actions.

Division Seven's latest opinion in the class action arena, Harper v. 24 Hour Fitness, Inc. (October 22, 2008), in a 2-1 opinion, reverses a trial court order decertifying a class action.  The bulk of the opinion examines the trial court's reliance on the pre-Proposition 64 formulation of the UCL.  I will leave discussion of that aspect of the opinion to the UCL Practitioner.  However, the opinion also offers some confirming language as to how the "ascertainability" requisite is measured.  The Court explains that "ascertainability" exists when the class members can tell if they are included, irrespective of whether anyone else knows the constituency of the class:

“With respect to the difficulty in confirming the identity of all class members prior to a determination on the merits, Division One of this court recently affirmed certification of a class consisting of FedEx drivers over FedEx’s objection “the members of this class shifted ‘in and out, sometimes on a day-to-day basis.’” (Estrada v. FedEx Ground Package System, Inc. (2007) 154 Cal.App.4th 1, 14.) The court explained, “The class is ascertainable if it identifies a group of unnamed plaintiffs by describing a set of common characteristics sufficient to allow a member of that group to identify himself as having a right to recover based on the description. [Citation.] [¶] . . . If FedEx’s claim is that every member of the class had to be identified from the outset, FedEx is simply wrong.” (Ibid.; accord, Lee v. Dynamex, Inc., supra, 166 Cal.App.4th at p. 1335; see also Sav-On Drug Stores, supra, 34 Cal.4th at p. 333 [“‘a class action is not inappropriate simply because each member of the class may at some point be required to make an individual showing as to his or her eligibility for recovery’”]; Bufil v. Dollar Financial Group, Inc. (2008) 162 Cal.App.4th 1193, 1207 [class of employees ascertainable in spite of absence of specific rest period records; “speculation that goes to the merits of ultimate recovery [is] an inappropriate focus for the ascertainability inquiry”]; Bell v. Farmers Ins. Exchange (2004) 115 Cal.App.4th 715, 744 [fact that class may ultimately turn out to be overinclusive not determinative; most class actions contemplate eventual individual proof of damages, including possibility some class members will have none].)

(Slip op., at pp. 11-12.)  This is an important distinction.  Too many trial courts succumb to arguments that the class identity can't be explicitly stated at the time of certification.

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Procedural news in Johnson v. Glaxosmithkline, Inc.

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Greatsealcal100This blog briefly reported on a new opinion in Johnson v. Glaxosmithkline, Inc. (September 19, 2008).  You can read that post here.  To recap, the Court of Appeal (Second Appellate District, Division Seven) examined the validity of the decision in Alvarez v. May Dept. Stores Co. (2006) 143 Cal.App.4th 1223 and whether Alvarez was effectively nullified by the United States Supreme Court decision in Taylor v. Sturgell, supra, __ U.S. __ [128 S.Ct. 2161].

A few things have occured since the September 19, 2008 opinion.  First, a Petition for Rehearing was filed on October 7, 2008.  It was denied the day it was filed.  You can view the docket here.  On October 14, 2008, the Court of Appeal modified its opinion, without changing the judgment.  The modification added a footnote and added some clarifying language about record review.

The logical guess is that the Petition for Rehearing is a prelude to a Petition for Review.

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Johnson v. Glaxosmithkline, Inc. analyzes parts of Alvarez-type class action preclusion

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Greatsealcal100It's a bit dicey commenting on an appellate decision that isn't truly final.  By "comment," I mean something more than the soundbites one hears in the media when a high-profile decision is redered ("We're very pleased with this outcome and feel that justice was served...").  And while I'm not going to offer any detailed analysis of this new opinion, Johnson v. Glaxosmithkline, Inc. (September 19, 2008) is news that merits coverage, despite the fact that I contributed in a small way to that appeal.

Readers may know that I was counsel in Alvarez v. May Dept. Stores Co. (2006) 143 Cal.App.4th 1223.  I expressed some of my disappointment with the Alvarez decision in this post.  Since Alvarez, I have watched for signs that would indicate whether the opinion would receive further reinforcement or be limited into irrelevance.  Early signs suggested the later.  Last Friday, the Court of Appeal (Second Appellate District, Division Seven) had an opportunity to take a second look at Alvarez.  In doing so, the Court of Appeal noted the shadow cast over Alvarez by a recent U.S. Supreme Court decision:

“. . . Taylor v. Sturgell, supra, __ U.S. __ [128 S.Ct. 2161] would appear to preclude the use of collateral estoppel to bar absent putative class members from seeking class certification following the denial of a certification motion in an earlier lawsuit at least to the extent Taylor is understood as resting on due process considerations, and not simply federal common law. Because we reverse the trial court’s application of collateral estoppel on different grounds, however, we leave resolution of these important issues to another day.

(Slip op., at p. 15, n. 8.)  The Court noted the possibility that Taylor overruled Alvarez, but didn't go through that door because it found an alternative basis for reversing the trial court.  What the Court did conclude was something akin to, but more detailed in its analysis, than Bufil v. Dollar Financial Group, Inc. (2008) 162 Cal.App.4th 1193.  Specifically, the Court held that, because a prior attempt to certify a nationwide class action was not identical to the class at issue, collateral estoppel did not apply and the Alvarez approach of using a primary rights analysis for assessing the preclusive effect of the denial of class certification was not supportable:

“Moreover, the procedural right to prosecute a claim as a class action, “a means to enforce substantive law” by collectively litigating substantive claims (Washington Mutual Bank v. Superior Court (2001) 24 Cal.4th 906, 918; see Alch v. Superior Court (2004) 122 Cal.App.4th 339, 388), shares none of the characteristics of a “cause of action” as defined by the primary rights theory. (See Crowley v. Katleman, supra, 8 Cal.4th at p. 681 [primary rights theory “provides that a ‘cause of action’ is comprised of a ‘primary right’ of the plaintiff, a corresponding ‘primary duty’ of the defendant, and a wrongful act by the defendant constituting a breach of that duty”].) A primary right in its simplest form is the plaintiff’s right to be free from the particular injury suffered. (Slater v. Blackwood, supra, 15 Cal.3d at p. 795.) The procedural means for protecting that right cannot be confused with the right itself.

(Slip op., at p. 22; see also, p. 16.)  Aside from noting these two points in the opinion, I will leave further analysis and commentary to others . . . at least for now.

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