Ninth Circuit issues its first opinion on criteria that appellate courts should consider when deciding whether to accept an appeal of a remand order under CAFA

Under the Class Action Fairness Act of 2005 (“CAFA”), a party may seek leave to appeal a remand order to the court of appeals, which has discretion whether to accept the appeal. 28 U.S.C. § 1453(c)(1).  While other Circuits have discussed the criteria that an appellate court should consider when deciding whether it is appropriate to hear such a discretionary appeal, the Ninth Circuit, until today, had not set forth its own set of such criteria.  In Coleman v. Estes Express Lines (9th Cir. Nov. 30, 2010), the Ninth Circuit set forth criteria to guide a reviewing court.

Coleman sued both Estes West and Estes Express Lines for wage and hour violations.  After its acquisition, Estes West was an internal regional division of Estes Express Lines.  After removal, Coleman moved to remand under the local controversy exception to CAFA jurisdiction.  Estes Express Lines argued that, as a Virginia-based company from which any relief would be obtained, the local controversy exception did not apply.  The district court granted the motion to remand, noting that courts are divided as to whether to look beyond the complaint to determine whether the local controversy exception applies.

The Ninth Circuit used this petition as an opportunity to adopt the First Circuit's list of criteria to use in evaluating applications for leave to appeal under section 1453(c)(1):

In Dental Surgeons, the First Circuit held that a key factor in determining whether to accept an appeal is “the presence of an important CAFA-related question” in the case. Coll. of Dental Surgeons, 585 F.3d at 38. Because discretion to hear appeals exists in part to develop a body of appellate law interpreting CAFA, “[t]he presence of a non-CAFA issue (even an important one) is generally not thought to be entitled to the same weight.” Id. If the CAFA-related question is unsettled, immediate appeal is more likely to be appropriate, particularly when the question “appears to be either incorrectly decided [by the court below] or at least fairly debatable.” Id.

The First Circuit also enumerated several case-specific factors, including the importance of the CAFA-related question to the case at hand and the likelihood that the question will “evade effective review if left for consideration only after final judgment.” Id. The appellate court should also consider whether the record is sufficiently developed and the order sufficiently final to permit “intelligent review.” Id. Finally, the First Circuit observed that the court should conduct the familiar inquiry into the balance of the harms. Id. at 39.

Slip op., at 19025-26.  Applied to the case before it, the Court concluded that leave to appeal was appropriate because it would advance CAFA jursiprudence:

Applying these criteria, we grant Estes Express’ application for leave to appeal. Although the local controversy exception to CAFA jurisdiction is “narrow,” it is nonetheless an enumerated exception to a federal court’s CAFA removal jurisdiction. It is intended to “identify . . . a controversy that uniquely affects a particular locality” and to ensure that it is decided by a state rather than a federal court. See Evans v. Walter Indus., Inc., 449 F.3d 1159, 1163-64 (11th Cir. 2006) (internal quotation marks and citation omitted). The question whether the district court must rely only on the pleadings or should look to extrinsic evidence will often determine whether a case will be remanded under the local controversy exception. This case thus raises an important issue of CAFA law. As the district court recognized, this is an unsettled question in this Circuit. We do not say that district court’s decision “appears to be incorrectly decided,” but the array of courts on both sides of the question indicates that it is at least “fairly debatable” and that appellate review would be useful.

Slip op., at 19026.  The Court concluded that the issue would escape appellate review if not taken now and that no harm other than delay would be suffered by the plaintiff.  It follows that we can expect guidance from the Ninth Circuit in the next year or so on this issue.

Supreme Court holds that a single statue of limitation governs Labor Code section 203 claims

California Labor Code § 203 provides that, if an employer willfully fails to timely pay final wages, “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 therefor is commenced; but the wages shall not continue for more than 30 days.”  Lab. Code § 203(a).  Usually, a one-year statute of limitation governs actions to recover penalties (Code Civ. Proc. § 340(a)), but section 203 states that an employee may sue 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.” Lab. Code § 203(b).  In Pineda v. Bank of America, N.A. (November 18, 2010), the California Supreme Court answered two questions related to section 203 claims:  first, whether a different statute of limitation applies when an employee seeks to recover only section 203 penalties (in this case, final wages were paid late but before the filing of the action), as opposed to when an employee seeks both final wages and penalties; and, second, whether section 203 penalties recoverable as restitution under California's Unfair Competition Law (UCL) (Bus. & Prof. Code, § 17200 et seq.).  A unanimous Supreme Court answered both questions in the negative, holding that (1) the underlying wage claim statute of limitation is tied to the 203 cause of action, and (2) since employees have no ownership interest in section 203 penalties they cannot use the UCL to recover those penalties as a form of restitution.

The Court had little difficulty concluding that a single, longer statute of limitation applies to section 203 claims:

Plaintiff urges us to conclude the Legislature intended for a single statute of limitations — the one set forth in section 203(b) — to govern the filing of any and all suits for section 203 penalties, regardless of whether a claim for unpaid final wages accompanies the claim for penalties. He contends this is the only plausible construction of section 203, and his contention has merit.  Absent explicit statutory language to the contrary, common sense would suggest that, where the Legislature has set forth a statute of limitations in one part of a statute, the prescribed limitations period governs the filing of actions provided for in another part of the same statute. In providing when “[s]uit may be filed for [section 203] penalties” (§ 203(b)), the Legislature could have employed language unambiguously limiting the application of section 203(b)‟s limitations period to those suits that seek both unpaid wages and penalties. For example, it could have provided that “[s]uit for unpaid final wages and these penalties may be filed at any time before . . . .” It did not.

Slip op., at 5-6.  The Court then spent several pages dismissing the defendant's strained construction of the Legislature's grammatical choices, concluding by remarking on the important public policy served by the prompt payment of final wages.

As for the UCL, the Court was equally quick to reach its conclusion that 203 penalties cannot be recovered by means of restitution under the UCL:

By contrast, permitting recovery of section 203 penalties via the UCL would not “restore the status quo by returning to the plaintiff funds in which he or she has an ownership interest.” (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1149.) Section 203 is not designed to compensate employees for work performed. Instead, it is intended to encourage employers to pay final wages on time, and to punish employers who fail to do so.  In other words, it is the employers' action (or inaction) that gives rise to section 203 penalties. The vested interest in unpaid wages, on the other hand, arises out of the employees' action, i.e., their labor. Until awarded by a relevant body, employees have no comparable vested interest in section 203 penalties. We thus hold section 203 penalties cannot be recovered as restitution under the UCL.

Slip op.,  at 14-15.

Compared to many others from the Supreme Court, this was a short opinion.  The direct language suggests that the Court found little over which to disagree as the opinion was prepared.  Congratulations to my colleague, Mr. Greg Karasik, on obtaining this partial reversal.

Supreme Court activity for the week of November 15, 2010

The California Supreme Court held its (usually) weekly conference on November 17, 2010.  Notable results include:

• On a Petition for Review, review was granted in  in Kirby v. Immoos Fire Protection, Inc. (July 27, 2010), covered previously here.  The issue under review is limited as follows:  "Does Labor Code section 218.5 govern attorney's fees awarded on a cause of action alleging violation of the statutorily mandated wage payment for missed meal and rest periods (Lab. Code, [sec.] 226.7), or is an attorney's fee award governed by Labor Code section 1194?"
• On a Request for Depublication, depublication was denied in Nelson v. Pearson Ford Co. (July 15, 2010).  Prior comments from this blog are here.

BREAKING NEWS: Pineda v. Bank of America, N.A. decision to be released November 18, 2010

Earlier today, the California Supreme Court posted a notice of forthcoming filings, indicating that  Pineda v. Bank of America, N.A. will be filed on November 18, 2010, at approximately 10:00 a.m.

In Pineda v. Bank of America, N.A., plaintiff Pineda advanced the theory that restitution of "penalties" recoverable under Labor Code section 203 (waiting time penalties) was available under the UCL because the penalty was a vested property interest due upon failure to timely pay wages.  Pineda also argued that the correct statute of limitation was that for suits to recover wages (3 years), not the statute for recovery of penalties (generally 1 year).  The Court of Appeal rejected both theories.  My earlier post about Pineda is here.

Bright v. 99¢ Only Stores holds that PAGA penalties are available for certain wage order violations

Employer:  Give it to me straight, Doc, is it serious?

Defense Counsel:  You'll need to sit down for this one.

Employer:  Okay.  Wait, there aren't any chairs here.

Defense Counsel:  I know!  Get it?  No chairs?  Now don't be like that....

I'm delaying the reporting just to build the suspense.  You have been wondering whether violations of Wage Order No. 7, subdivision 14 are violations of Labor Code § 1198, and here I am writing my first play.  But your wait is over.  In Bright v. 99¢ ONLY STORES, the Court of Appeal (Second Appellate District, Division Five) held that (1) violations of Wage Order No. 7, subdivision 14 are violations of section 1198; and (2) civil penalties under section 2699, subdivision (f) are available despite the fact that Commission wage order No. 7-2001 has its own penalty provision.

This action arises from a claim for civil penalties under the Private Attorneys General Act of 2004 ("PAGA") for violation of the suitable seating order of the Commission.  Commission Wage Order No. 7, subdivision 14, provides, in part: Wage Order No. 7, subdivision 14 provides: “(A) All working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats. [¶] (B) When employees are not engaged in the active duties of their employment and the nature of the work requires standing, an adequate number of suitable seats shall be placed in reasonable proximity to the work area and employees shall be permitted to use such seats when it does not interfere with the performance of their duties.”  Slip op., at 2, n. 2.  This requirement is sometimes known as the suitable seating requirement.  The trial court sustained the defendant's demurrer on the grounds that (1) failure to provide sufficient seating is not a condition “prohibited” by Wage Order No. 7, subdivision 14, and (2) even if it were, civil penalties are not recoverable under section 2699, subdivision (f), because Commission Wage Order No. 7-2001 contains its own civil penalty provision.

The Court of Appeal concluded that the issues raised in the appeal were matters of first impression.  On an issue of first impression, the Court began with the statute at issue:

We begin by examining the statutory and administrative scheme, starting with section 1198, which provides: “The maximum hours of work and the standard conditions of labor fixed by the commission shall be the maximum hours of work and the standard conditions of labor for employees. The employment of any employee for longer hours than those fixed by the order or under conditions of labor prohibited by the order is unlawful.”

Slip op., at 5.  The Court then held that, under the plain meaning of section 1198, suitable seating is a "standard condition of labor fixed by the commission."  Slip op., at 6.  The Court rejected defendant's argument that because the seating language was not expressed in prohibitory language, it was merely a suggestion.

Employer:  What about chairs that give off electric shocks at random intervals so nobody wants to sit in them?

Defense Counsel:  No.  Wait.  Yes, if that's what you want to do, but only after you augment your retainer.  Significantly.

Turning to the second question, the Court of Appeal quickly concluded that, because the suitable seating requirement did not have its own penalty provision, it is governed by section 2699, subdivision (f) of PAGA.  The Court noted that the penalty set forth in subdivision 20 is expressly described as a cumulative remedy, rendering it nonexclusive.

Employer:  I had a nightmare.  It was horrible.

Defense Counsel:  Tell  me about it.

Employer:  It was dark.  There was a sound.  It was like nothing I have ever heard before.  I think it was the sound of drool from a million plaintiff's attorneys splattering on the floor.

Defense Counsel:  It was no dream!

Employer:  Aaaaahhh!!!!..........

California Supreme Court activity for the week of November 8, 2010

The California Supreme Court held its (usually) weekly conference on November 10, 2010. Notable results include:

• On a Petition for Review, review was denied in Walnut Producers v. Diamond Foods (August 16, 2010), discussed briefly on this blog here.  [Arbitration agreement with class arbitration ban not unconscionable]
• On a Petition for Review, with an associated request to depublish, review and depublication were both denied in Gutierrez v. Commerce Club (August 23, 2010), discussed on this blog here.  [Reversal of Order sustaining demurrer to class allegations]

Despite pending Brinker case, Hernandez v. Chipotle Mexican Grill, Inc. declares that standard for rest break applies to meal periods

In case you hadn't heard, Brinker Restaurant v. Superior Court (Hohnbaum) is pending before the California Supreme Court.  Jaimez v. DAIOHS USA, Inc., 181 Cal. App. 4th 1286 (2010), rev. denied (2010) held that certification of meal period claims was appropriate because, among other reasons, that unsettled meal period standard was also a classwide issue.  But in an unexpected twist, the Court of Appeal (Second Appellate District, Division Eight), in Hernandez v. Chipotle Mexican Grill, Inc., decided that, rather than recommending to the trial court that it certify the meal period claim and await Brinker, it would just tell us what that standard is right now.  And, according to the Hernandez Court, the meal period standard is the same standard that applies to rest breaks:

Hernandez admits employers must provide, i.e., authorize and permit, employees to take rest breaks, but contends a different standard applies to meal breaks and thus, the trial court‟s legal analysis was faulty. This contention is not persuasive. “The California Supreme Court has described the interest protected by meal break provisions, stating that „[a]n employee forced to forgo his or her meal period . . . has been deprived of the right to be free of the employer‟s control during the meal period.‟ Murphy v. Kenneth Cole Prods., Inc., 40 Cal.4th 1094, 1104 (2007). It is an employer's obligation to ensure that its employees are free from its control for thirty minutes, not to ensure that the employees do any particular thing during that time. Indeed, in characterizing violations of California meal period obligations in Murphy, the California Supreme Court repeatedly described it as an obligation not to force employees to work through breaks. [Citation.]” (Brown v. Federal Express Corp. (C.D.Cal. 2008) 249 F.R.D. 580, 585, fn. omitted.)

Slip op., at 11, emphasis in original.  The Court affirmatively adopts some of the specious arguments from district courts, including the notion that it would be too hard for employees to actually make employees take breaks:

Hernandez's position also is not practical. “Requiring enforcement of meal breaks would place an undue burden on employers whose employees are numerous or who . . . do not appear to remain in contact with the employer during the day. See White v. Starbucks Corp., 497 F.Supp.2d 1080, 1088-89 (N.D.Cal.2007).

Slip op., at 13.  That argument is insulting.  Evidently an employer can control when employees come and go.  That's not too hard.  But they can't decide whether people work during other parts of the day.  Whatever standard is ultimately declared by the California Supreme Court, arguments like this cheapen the discussion.

Elsewhere in the opinion, the Court opines that it is perfectly fine to assess merits during certification.  It's a brave new world here in California.

Amended Order and Class Notice in Adoma v. University of Phoenix

While I don't regularly post Orders from federal cases I mention, I do so here by special request.  In University of Phoenix, Inc., the District Court (Eastern District of California, Judge Karlton presiding) issued an Order on October 15, 2010, approving in part and modifying in part a proposed Class Notice.  On October 20, 2010, the Court issued an amended Order.  The Amended Order and attached Notice are available through the Acrobat.com links below:

• Amended Order
• Notice

California Supreme Court activity for the week of October 18, 2010

The California Supreme Court held its (usually) weekly conference on October 20, 2010. Notable results include: 

• On a Petition for Review, review was denied in Morgan v. United Retail (July 13, 2010) [obligations under Labor Code section 226], covered previously here.
• On a Petition for Review, review was granted in Aryeh v. Cannon Business Solutions (June 22, 2010).  In Aryeh, the plaintiff argued that a continuing violation theory applied to his UCL claim, extending the period during which he could bring a claim.  The Court of Appeal rejected that argument. 

California Supreme Court activity for the week of October 11, 2010

The California Supreme Court held its (usually) weekly conference on October 13, 2010.  Notable results include:

• On a Petition for Review, a grant and hold was issued in Faulkinbury v. Boyd & Associates, Inc. (June 24, 2010), covered previously here.

I previously wrote that the opinion in Faulkinbury offered nothing interesting in my opinion.  The Court of Appeal simply repeated the refrain that the trial court has fairly broad discretion when ruling on a motion for class certification.  However, after Wednesday, Faulkinbury just got more interesting.  The Supreme Court issued its grant and hold pending...wait for it...the outcome in Brinker.  One might surmise that the standard applied by the trial court in Faulkinbury may be materially affected by the outcome of Brinker.  That's interesting.  It suggests that the Supreme Court is thinking about how the certification process will be impacted by its ruling in Brinker.  In fact, the Supreme Court may already have some tentative thoughts about the likelihood of that occurring.  After all, since the trial court denied certification of a meal period claim in Faulkinbury, one could suppose that the Supreme Court is leaning towards a decision in Brinker that would change that result.