California Supreme Court activity for the week of May 10, 2010

The California Supreme Court held its (usually) weekly conference today.  Notable results include:

• A Petition for Review and depublication was denied in Jaimez v. DAIOHS USA, Inc., et al., 181 Cal. App. 4th 1286 (February 8, 2010), (detailed analysis of certification standard as applied to various wage & hour claims) discussed on this blog here.  This opinion has already influenced trial courts considering certification motions in the wage & hour context.

I don't see anything else in this week's conference summary that would be of interest here.  If I missed anything after my very quick scan, I will update this post.

District Court certifies a class of Kelly Services employees alleging unpaid wages

United States District Court Judge Claudia Wilken (Northern District of California) granted plaintiff's motion to certify a class of California-based staffing agency employees that spent time and incurred expenses for interviews with the staffing agency's clients.  Sullivan v. Kelly Services, Inc., 2010 WL 1729174 (N.D. Cal. Apr. 27, 2010).  After prior cross-motions for summary judgment, the Court held that Plaintiff Catherine Sullivan should be compensated for the time she spent in her interviews, but not for her time preparing for and traveling to the interviews or her commuting expenses.  While the Court gives attention to the defendant's arguments, it looks as though this certification was not a close call after the summary judgment rulings.

District Court certifies a class of Penske Logistics delivery drivers and installers

United States District Court Judge Janis Sammartino (Southern District of California) granted plaintiff's motion to certify a class of California-based logistics employees that drove delivery trucks or rode along as installation helpers.  Dilts v. Penske Logsiticcs, LLC (S.D. Cal. Apr. 26, 2010) 2010 WL 1709807.  The analysis was long but not unusual in the wage & hour setting.  The Court offered these comments about its decision to certify the meal period subclass:

The first issue to deal with is the employer's obligation with respect to meal periods under California law. The legal uncertainty about this issue has been a recent source of heartburn for courts. Although it is presently before the California Supreme Court in Brinker Restaurant v. Superior Court, until that decision has issued this Court must proceed as best it can.

As such, the Court finds that California meal break law requires an employer to affirmatively act to make a meal period available where the employee are relieved of all duty. See Cicairos v. Summit Logistics, Inc., 133 Cal.App.4th 949, 35 Cal.Rptr.3d 243, 252-53 (Cal.Ct.App.2006) (“[T]he defendant's obligation to provide the plaintiffs with an adequate meal period is not satisfied by assuming that the meal periods were taken, because employers have ‘an affirmative obligation to ensure that workers are actually relieved of all duty.’ ”); Brown v. Fed. Express Corp., 249 F.R.D. 580, 585 (C.D.Cal.2008) (“It is an employer's obligation to ensure that its employees are free from its control for thirty minutes.”). An illusory meal period, where the employer effectively prevents an employee from having an uninterrupted meal period, does not satisfy this requirement. Cicairos, 35 Cal.Rptr.3d at 252-53; Brown, 249 F.R.D. at 585. However, the employee is not required to use the provided meal period.

Slip op., at 11.

California Supreme Court activity for the week of April 26, 2010

The California Supreme Court held its (usually) weekly conference today.  Notable results include:

• A Petition for Review was granted in Pellegrino v. Robert Half International, Inc. (February 25, 2010) (G039985), (reversed trial court order decertifying class after applying Tobacco II) - discussed on this blog here.  The matter will be HELD pending resolution of the lead case, Harris v. Superior Court (Liberty Mutual), Case No. S156555.  The issue for review is the applicability of the administrative overtime exemption to claims adjusters.  The second opinion in Pellegrino does not appear to be under review, based upon the Supreme Court docket.
• A Petition for Review and depublication was denied in Pipefitters Local No. 636 Defined Benefit Plan v. Oakley, Inc., 180 Cal. App. 4th 1542 (Jan. 13, 2010) (held: if plaintiffs claim that their lawsuit was the catalyst to action by the defendant, the pre-lawsuit notification requirement applies not only when fees are sought under Code of Civil Procedure section 1021.5, pursuant to Graham v. DaimlerChrysler Corp., 34 Cal. 4th 553 (2004), but also to fee requests under the common-law substantial benefit doctrine).  The decision is consistent with Abouab v. City and County of San Francisco, 141 Cal. App. 4th 643 (2006).
• A Petition for Review was denied in Arce v. Kaiser Foundation Health Plan, Inc., 181 Cal. App. 4th 471 (January 27, 2010) (held: community of interest adequately alleged in putative class action such that defendant's demurrer should have been denied) - discussed on this blog here.

Discovery ruling in Currie-White v. Blockbuster, Inc. holds that a protective order is sufficient protection for class member contact information ordered produced

United States Chief Magistrate Judge Maria-Elena James is on a roll with the class member contact information discovery orders.  In Currie-White v. Blockbuster, Inc., 2010 WL 1526314 (N.D.Cal. Apr 15, 2010), Magistrate Judge James Ordered defendant to produce class member contact information, subject to certain modifications to a pre-existing protective order in the case.  The interesting additional tidbit in this case is that it is described as a "class action against Defendant under the Labor Code Private Attorneys General Act of 2004, Cal. Labor Code §§ 2698, et seq."  Moving to certify PAGA-based penalty claims certainly eliminates all the uncertainty about PAGA-based representative actions.

in brief: Ninth Circuit joins others in holding that denial of certification does not destroy CAFA jurisdiction

In United Steel, Paper & Forestry, Rubber, Manufacturing, Energy, Allied Industrial & Service Workers International Union, AFL-CIO, CLC, et al. v. Shell Oil Company (9th Cir. Apr. 21, 2010) (say that three times fast), a putative class action alleging various wage & hour violations was removed to federal district court pursuant to 28 U.S.C. § 1332(d)(2) (CAFA).  Certification was eventually denied.  The district court concluded that it lacked jurisdiction and remanded the matter to state court.  On appeal, the Ninth Circuit joined the Seventh and Eleventh Circuits in holding that denial of class certification does not divest the federal district court of jurisdiction.  The Court recognized the general principles that jurisdiction is evaluated at the time it is invoked, and subsequent developments do not destroy jurisdiction if it was properly invoked originally.  All else equal, this decision should reduce the overall degree of hapiness experienced by district court judges.  Now they can't put an unsuccessful, removed class action out of its misery with a remand bullet to the head.  Thus, federal district courts will have the pleasure of overseeing more individual, state law-based actions.

Conditionally certified FLSA class of United Auto Credit Corporation Supervisors classified as exempt

United States District Court Judge Ronald M. Whyte (Northern District of California) granted United Auto Credit Corporation's motion to decertify a class of California-based Supervisor (and related) employees after the class was conditionally certified under the FLSA.  Hernandez v. United Auto Credit Corporaiton (N.D. Cal. Apr. 2, 2010) 2010 WL 1337702.  In FLSA actions, many Courts employ a two-phase process for "certification" of FLSA classes, an approach used by the trial court here:

Under the two-step approach, the court first considers whether to certify a collective action and permit notice to be distributed to the putative class members. See Thiessen, 267 F.3d at 1102; Russell v. Wells Fargo & Co., 2008 WL 4104212, at *2-3 (N.D.Cal. Sept.3, 2008). At this first stage, the standard for certification is fairly easy to satisfy. Courts have required only “substantial allegations, supported by declarations or discovery, that the putative class members were together the victims of a single decision, policy, or plan.” Russell, 2008 WL 4104212, at *2.

At the second stage, after discovery has been taken, the court may decertify the class if it concludes that the class members are not similarly situated. Id. at *3. The court can consider a number of factors in deciding whether an action should ultimately proceed collectively, including: (1) the disparate factual and employment settings of the individual plaintiffs; (2) the various defenses available to the defendant and whether they appear to be individual to each plaintiff; (3) fairness and procedural considerations; and (4) whether plaintiffs made the required filings before filing suit. Thiessen, 267 F.3d at 1103. However, a requirement that the class members be identical would be inconsistent with the intent of FLSA's provision that a case can proceed as a collective action. Pendlebury v. Starbucks Coffee Co., 518 F.Supp.2d 1345, 1361 (S.D.Fla.2007).

Slip op., at 2.  The motion filed by the defendant in this case concerned the more rigorous showing required in the second stage.  (Side Note:  The Ninth Circuit has not yet explicitly held that it concurs with the two-stage approach, but District Courts have been employing that approach in the Ninth Circuit for many years without opposition.)

In the course of briefing, the plaintiffs apparently advanced the novel argument that the supervision requirement included in the executive exemption test created a ratio requirement where an employer had to show that there were at least two non-exempt employees for every executive:

Plaintiffs' argument overstates the requirement of the pertinent FSLA regulation. Plaintiffs are correct that in order to qualify for the executive exemption, an employee must “customarily and regularly direct[ ] the work of two or more other employees.” 29 C .F.R. § 541.100(a)(3). The language of the regulation, however, does not require a strict mathematical ratio between an “employee employed in a bona fide executive capacity” and “other employees.” All the regulation requires is that an employee customarily or regularly direct the work of two or more other employees. The other employees whose work the executive directs may or may not themselves be executives. Thus, the FLSA does not create a “ratio requirement.” Whether the present conditional class should be decertified, then, depends on the individualized assessment of whether the class members are “similarly situated.” The court now turns to that inquiry.

Slip op., at 3.  No dice.  Turning to the merits of the motion by defendant, the Court, as did the District Court in Weigele v. Fedex (discussed here), placed little weight on the uniform classification of employees by a central office:  "[T]he recent decision of In re Wells Fargo Homes Mortg. Overtime Litig., 571 F.3d 953 (9th Cir.2009), which involved certification under Federal Rule of Civil Procedure 23(b)(3), cautions against placing too much weight on an internal policy of classifying all members of a particular class of employees as exempt."  Slip op., at 5.  More importantly, however, the Court discussed the plaintiffs' inability to rebut substantial evidence showing great disparity in the job duties of different Supervisors.

Are there really that many large businesses out there that let their employees do whatever they want?

Certified class of fedex managers is subsequently decertified

United States District Court Judge Janis Sammartino (Southern District of California) granted FedEx's motion to decertify a class of California-based Dock Service Managers.  Weigele v. Fedex Ground Package System, Inc. (S.D. Cal. Apr. 5, 2010) 2010 WL 1337031.  Taking In re Wells Fargo Home Mortgage Overtime Pay Litig. (Wells Fargo II), 571 F.3d 953 (9th Cir. 2009) really seriously, the Court concluded that predominance was lacking.  Perhaps the Court took Wells Fargo II a bit too seriously: "The Court's second reason [for] its finding that common issues do not predominate is that with the substantially decreased importance of Defendant's common classification scheme, the common issues are a relatively minor portion of this litigation."  I don't think that Wells Fargo II said that a common classification scheme should be viewed with substantially decreased importance.  It said that a common classification scheme could not treated as the sole factor used in a certification analysis.  In any event, the Court's changed view was very clear:

[T]he Court is unclear how a jury will be able to sort out the issues placed before it. It appears that they will need to determine whether each testifying witness was or was not exempt and determine to what extent that witness was not provided with mandated overtime, meal, and rest breaks. They will then need to extrapolate from all of the testifying witnesses to the entire class. But it is unclear which the tools they will have to perform that extrapolation. At worst it appears that they would be left to guess. This is too amorphous to expect a reasonable and rational result from any jury.

Order, at 11.

As I said the other day, another misclassification theory, another class that doesn't make the cut.

Class certification denied to El Torito managers in misclassification suit

In other news, early reports now indicate that the Pope is Catholic.  Another day, another order denying certification in a misclassification suit is upheld.  More specifically, in Arenas, et al. v. El Torito Restaurants, Inc. (ord. pub. April 6, 2010), the Court of Appeal (Second Appellate District, Division Five) affirmed a trial court order denying certification to three subclasses of managerial employees at El Torrito restaurants.  At this point, misclassification suits have the feeling of an arms race where the defendant companies hold a significant technological lead.  Six years after all the excitement occasioned by Sav-On Drug Stores, Inc. v. Superior Court, 34 Cal. 4th 319 (2004), the upshot appears to be that, once a trial court picks a side, a Court of Appeal is unlikely to get involved.

In this particular decision, the Court relied heavily on a mix of California Supreme Court decisions and, somewhat disturbingly, a number of federal decisions.  For example, citing Marlo v. United Parcel Service, 251 F.R.D. 476 (C.D. Cal 2008), the Court said: 

The Marlo court identified the exact problem that this Court faces. Individual declarations submitted by the parties have anecdotal value but cannot be considered representative or common evidence. Specifically, the Marlo court stated the following:[¶] ‘Plaintiffs evidence is essentially individual testimony and an exemption policy. Under the circumstances in this case, where Plaintiff alleges that 1200 [class members] have been misclassified as exempt employees, Plaintiff had to provide common evidence to support extrapolation from individual experiences to a class-wide judgment that is not merely speculative. Plaintiff has not come forward with common proof sufficient to allow a fact-finder to make a class-wide judgment as to the class members. . . . Because Plaintiff lacks common experience, the Court has no confidence that the jury will be able to do anything but speculate as to a class-wide determination.’

Slip op., at 7.  The Court emphasized that it was not permitted to substitute its view of the evidence for the trial court's view:  "As the Supreme Court made clear in Sav-On Drug Stores, Inc., this court cannot now substitute its own judgment."  Slip op., at 12.

Plaintiffs appear to have argued that it is unfair to accept a uniform classification by defendant but require individualized proof of misclassification, an argument that has not been well received at the appellate level as of late.  The argument fared no better here: 

Plaintiffs argue defendants cannot on one hand assert they have determined, based on job activities, that all managers are exempt but on the other hand argue a court must examine each individual’s tasks to determine whether that person is exempt. This argument was answered in Campbell v. PricewaterhouseCoopers, LLP (E.D.Cal. 2008) 253 F.R.D. 586, 603-604, as follows: “Some courts . . . have determined that it is unfair for an employer to ‘on the one hand, argue that all [class members] are exempt from overtime wages and, on the other hand, argue that the Court must inquire into the job duties of each [class member] in order to determine whether that individual is “exempt.”’ [Citation.] But, under Walsh [v. IKON Office Solutions, Inc. (2007) 148 Cal.App.4th 1440, 1461,] there is no estoppel effect given to an employer’s decision to classify a particular class of employees as exempt—whether right or wrong, or even issued in bad faith; instead, the only legally relevant issue to alleged misclassification is whether the exemption in fact applies. 

Slip op., at 13.  Continuing with the extensive quotations from Campbell, the Court of Appeal wrote: 

“It may be intuitively unfair to permit an employer, who has historically classified a particular group of employees as exempt based on a uniform rule, to argue in the context of litigation that the exemption inquiry will require an individualized analysis. But the assumption behind such an intuitively appealing argument is that an employer should somehow be bound by its prior position—which is foreclosed by Walsh. ‘[I]n resolving questions of California law, this court is bound by the pronouncement of the California Supreme Court . . . and the opinions of the California Courts of Appeal are merely data for determining how the highest California court would rule . . . [but] the opinion of the Court of Appeals on questions of California law cannot simply be ignored.’ [Citation.]” 

Slip op., at 14.  After Ramirez in particular, misclassification suits were in no small supply.  But the arms race was equalizing by the time Sav-On was decided, and it looks like the defense bar has pulled ahead in this area.  To make misclassification suits a legitimate mechanism for correcting classification errors on a class-wide basis, plaintiffs will need to find news ways to show trial courts that systemic misclassification errors are really correctable on a class-wide basis.