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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Get back to work.

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

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

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

Brinker Watch 2010 - Version 2

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In March of this year, I observed that Brinker Restaurant v. Superior Court (Hohnbaum) was fully briefed back in October 2009.  At that time, I moved the over-under on an Opinion release date from August 2010 to October 2010.  I regret to inform anyone with office pools that I must now make a second, larger move of the line and set the over-under at February 2011.

The problem arises because the Supreme Court is done hearing cases for Summer 2010.  As you can see here, July and August will have no case arguments.  September is the earliest that Brinker could be placed on an oral argument calendar.  For purposes of wagering only (which I fully support but will not participate in), I'm guessing that the argument occurs in November, resulting in a February 2011 opinion release target date.

Martinez v. Combs receives thorough treatment from The California Wage and Hour Law Blog

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The California Supreme Court, in Martinez v. Combs (May 20, 2010) (reposted to correct formatting error), addressed a topic that should prove to be of long-lasting significance.  The opinion addresses the weighty question of who is and is not an "employee" under California wage law.

The California Wage Wage and Hour Law Blog, authored by Steven G. Pearl, includes a thorough post discussing this holding, including this important observation:

[T]he Wage Orders set forth a multi-pronged, disjunctive definition of employment: an employer is one who, directly or indirectly, or through an agent or any other person, engages, suffers, or permits any person to work, or exercises control over the wages, hours, or working conditions of any person. Slip op. at 25-26. The “engage, suffer, or permit” component of the definition does not require a common law “master and servant” relationship, but is broad enough to cover “irregular working arrangements the proprietor of a business might otherwise disavow with impunity.” Slip op. at 25. Further, “phrased as it is in the alternative (i.e., wages, hours, or working conditions”), the language of the IWC's 'employer' definition has the obvious utility of reaching situations in which multiple entities control different aspects of the employment relationship, as when one entity, which hires and pays workers, places them with other entities that supervise the work.” Slip op. at 26-27. Finally, the IWC’s “employer” definition is intended to distinguish state law from the federal FLSA.

This is a monumental clarification of the breadth of the definition of employment when wage laws are at issue.  The opinion also provides a mighty boost to the authority of the IWC.

For more, visit the blog or see today's Daily Journal for a revised version of the same article.

Arguelles-Romero v. Superior Court explains rules in Gentry and Discover Bank

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If you were an arbitration agreement, this is your moment in the spotlight.  In Arguelles-Romero v. Superior Court (May 13, 2010), the Court of Appeal (Second Appellate District, Division Three) granted a petition for a writ of mandate after the trial court ordered the plaintiff to submit to individual arbitration.  The trial court also ruled that a class action waiver provision in the automobile financing contract was not unconscionable.  That finding by the trial court prompted the Court of Appeal to spend a good deal of time discussing the two different tests presented in the California Supreme Court cases of Discover Bank v. Superior Court, 36 Cal. 4th 148 (2005) (Discover Bank) and Gentry v. Superior Court, 42 Cal. 4th 443 (2007) (Gentry).  The Court of Appeal held:

While we hold the trial court did not err in finding the class action waiver was not unconscionable, we also conclude that it should have also performed a discretionary analysis on whether a class action is a significantly more effective practical means of vindicating the unwaivable statutory rights at issue. We therefore grant the petition and remand with directions.

Slip op., at 2.  To provide some context, the Court stated the basic standard of review as follows:

“California law, like federal law, favors enforcement of valid arbitration agreements.” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 97 (Armendariz).) Under both federal and California law, arbitration agreements are valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the voiding of any contract. (Id. at p. 98 & fn. 4.) Unconscionability is a recognized contract defense which can defeat an arbitration agreement. (Szetela v. Discover Bank (2002) 97 Cal.App.4th 1094, 1099.)

Slip op., at 12.

Cutting right to it, here is the first money quote:

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

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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

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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.

Stolt-Nielsen S. A. et al. v. AnimalFeeds International Corp.: Less than meets the eye

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The interplay between class actions and arbitration provisions was a controversial topic for many years in California until Discover Bank v. Superior Court, 36 Cal. 4th 148 (2005) and Gentry v. Superior Court, 42 Cal. 4th 443 (2007) eliminated a substantial amount of uncertainty about class arbitration waivers in the areas of consumer contracts and employment arbitration agreements. These decisions, and other applying their principles, declared that, in California, many class action waivers in the consumer and employment law settings are unconscionable under California law. Gentry, at 779. “[A]lthough ‘[c]lass action and arbitration waivers are not, in the abstract, exculpatory clauses’ (Discover Bank, supra, 36 Cal.4th at p. 161, 30 Cal.Rptr.3d 76, 113 P.3d 1100), such a waiver can be exculpatory in practical terms because it can make it very difficult for those injured by unlawful conduct to pursue a legal remedy.” Gentry, at 783.

On April 27, 2010, the United States Supreme Court issued its Opinion in Stolt-Nielsen S. A. et al. v. AnimalFeeds International Corp. Initial commentary quickly concluded that Stolt-Nielsen will eliminate many consumer and employment law class actions. Whether that is accurate at the macro level won’t be known for years. However, the question raised by Stolt-Nielsen, for the perspective of California litigation, is whether Stolt-Nielsen altered controlling California law negatively, or, perhaps unexpectedly, added strength to California’s approach to arbitration provisions.

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

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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.