Tarkington v. California Unemployment Insurance Appeals Board (Albertson’s, Inc.) strictly limits instances where class actions can be decided on the pleadings

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Greatsealcal100On April 13, 2009, the Court of Appeal (Second Appellate District, Division One) ordered the publication of its March 12, 2009 opinion in Tarkington v. California Unemployment Insurance Appeals Board (Albertson’s, Inc.). The appeal followed a somewhat complex effort to obtain unemployment insurance benefits by locked-out employees of Albertsons, Inc. If you are curious about such things as writ petitions following adverse administrative ruling and the disdainful lack of honor by defendants that demand procedural compliance only to throw that compliance in the plaintiffs’ face when they satisfy those demands, then I urge you to read the opinion since I won’t be discussing those niceties here.

The very basic procedural summary of the case is as follows:

“ This is an appeal from the denial of a writ petition, styled as a class action, filed by employees of Albertson’s Inc. (Albertson’s) seeking to reverse an administrative decision denying them unemployment insurance benefits during an 18-week lockout by Albertson’s. On demurrer, the trial court ruled that the employees failed to allege sufficient facts supporting equitable tolling. The trial court also struck the class allegations as overly broad. The employees elected not to amend their petition in order to pursue the present appeal. We reverse and remand for further proceedings.

(Slip op., at p. 2.) The aspect of the opinion of interest in the context of class action litigation is the near-adamant holding that class actions should be decided at the pleading stage only in mass tort and similar actions not well-suited to class treatment. That section is quoted here in full:

““California’s judicial policy [is to allow] potential class action plaintiffs to have their action measured on its merits to determine whether trying their suits as a class action would bestow the requisite benefits upon the litigants and the judicial process to justify class action litigation.” (Beckstead v. Superior Court (1971) 21 Cal.App.3d 780, 783.) “In order to effect this judicial policy, the California Supreme Court has mandated that a candidate complaint for class action consideration, if at all possible, be allowed to survive the pleading stages of litigation.” (Id. citing La Sala v. American Sav. & Loan Assn. (1971) 5 Cal.3d 864, 868-869 [reversing trial court’s sustaining of demurrer against class action suit]; Vasquez v. Superior Court (1971) 4 Cal.3d 800, 816 [same]; Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 716-717 [same]; Jones v. H. F. Ahmanson & Co. (1969) 1 Cal.3d 93, 121 [affirming trial court’s overruling of demurrer attacking class allegations].)

“The wisdom of allowing survival is elementary. Class action litigation is proper whenever it may be determined that it is more beneficial to the litigants and to the judicial process to try a suit in one action rather than in several actions . . . . It is clear that the more intimate the judge becomes with the character of the action, the more intelligently he may make the determination. If the judicial machinery encourages the decision to be made at the pleading stages and the judge decides against class litigation, he divests the court of the power to later alter that decision . . . Therefore, because the sustaining of demurrers without leave to amend represents the earliest possible determination of the propriety of class action litigation, it should be looked upon with disfavor.” (Beckstead, supra, 21 Cal.App.3d at p. 783.) Despite the policy disfavoring the determination of class suitability issues at the pleading stage, several cases, including those cited by Albertson’s, have done exactly that. (See, e.g, Silva v. Block (1996) 49 Cal.App.4th 345, 348 [trial court properly determined class issues on demurrer, since it was apparent from the face of the pleading that issues requiring separate adjudication—both of liability and damages—predominated over common questions]; Clausing v. San Francisco Unified School Dist. (1990) 221 Cal.App.3d 1224, 1234 [in this mass-tort action, “it would be a waste of time and judicial resources to require a full evidentiary hearing [on class suitability] when the matter can properly be disposed of by demurrer”; Brown v. Regents of University of California (1984) 151 Cal.App.3d 982, 990-991 [determination of class status by demurrer proper in mass-tort action].)

In Prince v. CLS Transportation, Inc. (2004) 118 Cal.App.4th 1320, after an exhaustive review of the relevant case law, this division determined that the apparent conflict was in fact not a conflict at all: “[I]t is only in mass tort actions (or other actions equally unsuited to class action treatment) that class suitability can and should be determined at the pleading stage. In other cases, particularly those involving wage and hour claims, class suitability should not be determined by demurrer.” (Id. at p. 1325.) We reasoned that in mass tort actions individual questions of liability and damages frequently predominate over common questions and resolving class suitability at the pleading stage is therefore proper. (Id. at pp. 1327-1328.) In contrast, we explained, “wage and hour disputes (and others in the same class) routinely proceed as class actions” because they usually involve “’a single set of facts applicable to all members’,” and “’one question of law common to all class members.’” (Ibid.) As long as a plaintiff “alleges institutional practices . . . that affected all of the members of the potential class in the same manner, and it appears from the complaint that all liability issues can be determined on a class-wide basis,” we held that “no more is required” at the pleading stage. (Id. at p. 1329.)

In our view, the petition in this case is more like a wage and hour case than a mass-tort action. It involves a single set of facts (i.e., those allegations pertaining to Albertson’s selective lockout and illegal hiring of locked out employees), one question of law common to all class members (i.e., whether employees who could not work because of Albertson’s lockout fall under the ambit of section 1262), and one institutional practice (i.e., the denial of benefits to locked out employees by the EDD and CUIAB Board). While there may be individual questions of the amount of benefits, if any, to which each claimant is entitled, we do not see these questions as predominant over the common factual allegations and legal questions cited above. (Accord Vasquez v. Superior Court (1971) 4 Cal.3d 800, 809 [“the fact that each member of the class must prove his separate claim to a portion of any recovery by the class is only one factor to be considered in determining whether a class action is proper”]; Reyes v. Board of Supervisors (1987) 196 Cal.App.3d 1263, 1272, 1279 [rejecting county’s argument that denial of governmental benefits was not suitable for class treatment because “each recipient’s right to recover depends on the facts peculiar to his/her case” and noting that “it is especially appropriate to proceed with a class action to provide effective relief when, as here, a large number of [class members] have been allegedly, improperly denied governmental benefits on the basis of an invalid administrative practice”].)

In line with our decision in Prince, we conclude that it was premature for the trial court to make determinations pertaining to class suitability on demurrer. We reverse the court’s order granting Albertson’s motion to strike and the court’s accompanying legal ruling that the class definition was “too broad.” The putative class definition alleged in the petition, which we cite here, is sufficient to move forward past the pleading stage:

“Petitioners . . . bring this petition for writ of administrative mandamus on behalf of the entire class of individuals who were employed by Albertson’s at any time during the period October 11, 2003 through February 26, 2004, and who filed timely claims with the EDD for unemployment insurance benefits for all or some of this period, and were denied such benefits on the basis of the trade dispute exception, California Unemployment Insurance Code § 1262 . . . .”

(Slip op., at pp. 17-20.) This holding is likely to see immediate use in every class action challenged by way of demurrer or motion to strike, and it may deter these procedural wastes of time.  At least I hope so.  Nothing ruins a perfectly good day like receiving the obligatory demurrer to class allegations.

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E-Discovery: Outside Law Firm and One Of Its Partners Stung By Fees And Expenses For Not Producing Native Formatted Database

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California is making a second attempt to revise the Civil Discovery Act to address the unique issues surrouding e-discovery.  On March 3, 2009, Assembly Bill 5 passed the Assembly Judiciary Committee.  Assembly Bill 5 is almost identical to Assembly Bill 926 that was vetoed by Gov. Arnold Schwarzenegger on Sept. 27, 2008.  The only new provision in Assembly Bill 5 is the inclusion of an urgency provision that would make the proposed law effective immediately upon signature by the Governor.  (See David M. Hickey and Veronica Harris, California Rules to Amend Inaccessible ESI (March 27, 2009) www.law.com.)

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In Hunt v. Imperial Merchant Services, the Ninth Circuit goes the extra mile to address class notice cost-shifting

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Ninth Circuit Seal“We have never addressed when it is appropriate to place notice costs on a class action defendant,” said the Ninth Circuit on March 31, 2009, in Hunt v. Imperial Merchant Services. When an appellate court says that, you are almost guaranteed to get an answer to that question (unless the appellate court takes that opportunity to mention that it isn’t going to answer that question because it doesn’t have to reach the question to resolve the appeal). In this instance, you are in luck. Hunt provides something of an answer to that question.

The “holding” is summarized in the final paragraph of the opinion:

“District courts may order a class action defendant to pay the cost of class notification after they determine that the defendant is liable on the merits. They may in an appropriate case shift these notice costs even when the liability decision is under appeal. Here, considering the totality of circumstances, we conclude that the district court did not abuse its discretion by placing the cost of class notification on IMS.

(Opinion, at p. 3895.) From this paragraph, we already know that trouble is afoot. We know that merits were decided, in some fashion, against the defendant, and that decision is on appeal. One could also infer, rightly in this case, that the opinion doesn’t resolve the liability appeal. So we have a notice cost shifting order resolved on an appeal before the underlying liability decision is resolved. The truth, as is often the case in litigation, is even worse than that:

“This appeal reaches us in unusual procedural circumstances [author’s note: “uh oh”] that have resulted in two active appeals assigned to different panels of our circuit. Brandy Hunt and Brian Castillo (collectively “Hunt”) filed a class action complaint against IMS, alleging that it violated the FDCPA by attempting to collect both an interest charge and a statutory service charge on dishonored checks. The district court concluded that whether IMS violated the FDCPA turned on whether California law permits a debt collector to demand both a statutory service charge and interest in addition to the debt amount. Hunt v. Check Recovery Sys., Inc., 478 F. Supp. 2d 1157, 1161 (N.D. Cal. 2007). The district court granted Hunt partial summary judgment on liability in March 2007, concluding that IMS’ collection efforts violated California law and thus the FDCPA. In a separate order filed the same day, the district court certified two subclasses under Federal Rules of Civil Procedure (“Rule”) 23(b)(2) and 23(b)(3), with Hunt and Castillo as named plaintiffs.

(Opinion, at p. 3885.) But wait, there’s more:

“The class action was not the first time Brandy Hunt had pursued her FDCPA claim against IMS. Hunt had declared bankruptcy before filing her class action complaint, and the bankruptcy court determined that IMS could not collect both an interest charge and a statutory service charge from Hunt under California law. IMS appealed the bankruptcy court’s decision to the district court, and the appeal was assigned to the same district judge responsible for the consolidated class action cases. The district court affirmed the bankruptcy court’s decision, incorporating its March 2007 partial summary judgment order in this class action case as the basis for affirming. IMS appealed the district court’s judgment affirming the bankruptcy court, and the appeal was assigned to a different panel of our circuit as case number 07-15976 (the “merits appeal”). On May 12, 2008, the other panel certified to the California Supreme Court the question whether a debt collector recovering on a dishonored check may impose both a service charge and prejudgment interest under California law. Imperial Merchant Servs., Inc. v. Hunt, 528 F.3d 1129, 1130 (9th Cir. 2008).

The California Supreme Court granted certification in July 2008, but has not yet issued its decision, and so the merits appeal is still active. The class action case has been stayed since June 2008, pending resolution of both this appeal and the merits appeal.

(Opinion, at p. 3886-7.) Amazing. You can decide for yourself whether you think that this is amazing “good” or amazing “bad”. If you are curious about the cost-shifting analysis, it is but a smidgeon of the opinion. Before the Court ever reaches that issue, it has to decide whether it can hear the appeal, what standard of review applies, whether the appeal is moot, whether it is “anticipatorily moot,” and whether the Court will hear the matter regardless. The Court decides to hear the issue because it is an “issue that often arises in district courts but typically evades appellate review.”

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California Supreme Court denies Petitions for Review in Ghazaryan and Marin

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In its April 1, 2009 Conference Report, the California Supreme Court noted that Petitions for Review were denied in Ghazaryan v. Diva Limousine, LTD. (2009) 169 Cal.App.4th 1524 and Marin v. Costco Wholesale Corporation (2008) 169 Cal.App. 4th 804 (among other denials).  You can read about Ghazaryan on this blog here, and Marin here.

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Nationwide class action against American Express goes to trial; Amex prevails

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In the grand scheme of civil litigation, there aren't that many class actions as a percentage of lawsuits filed (probably around one half of one percent of unlimited civil filings in California, for example; see post).  Rarer still are the nationwide class actions.  And rarest of all, the nationwide class action that goes to trial.  Believed by some to be extinct, a recent sighting in the wild confirms that it still exists, at least in theory.

On March 26, after 11 weeks of testimony from the class, Judge George Hernandez of the California Superior Court in Fremont, California, in a nonjury trial, ruled that plaintiffs failed to prove their case.  (Pamela A. MacLean, Amex Wins Rare National Class Action Trial Over Allegations of Overcharging (March 31, 2009) www.law.com and www.nlj.com.)  The suit alleged that Amex charged a fee for airline travel purchased on its charge card and would sweep in inappropriate insurance charges for flights consumers later canceled, seat upgrades and baggage fees.

Not surprisingly, plaintiffs' counsel indicated that an appeal is on the way.

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"Tip Pooling" class actions are the latest craze

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Greatsealcal100Today, in Etheridge v. Reins International California, Inc., the California Court of Appeal (Second Appellate District, Division Three) issued an opinion in a class action lawsuit about the practice of "tip pooling" common in restaurants and casinos.  That, by itself, might not even be interesting enough to write about here.  But it is news when it marks the third such opinion on the topic this year.  Lu v. Hawaiian Gardens Casino, Inc. (2009) 170 Cal.App.4th 466 began the trend, followed by Grodensky v. Artichoke Joe’s Casino (March 11, 2009) ___ Cal.App.4th ___.  Grodensky was exciting in that it created a split of authority as to whether Labor Code section 351 provides for a private right of action or serves merely as a predicate violation of law under the UCL.

This effectively sums up the dearth of good class action-related news in California this week.

UPDATE (3/30/09):  A reader has been kind enough to let me know that I missed the fourth such case this year, Budrow v. Dave & Buster's of California, Inc. (March 2, 2009) (Second Appellate District, Division Eight).  That same reader advised me that Petitions for Review have been or will be filed in several of these cases.

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Post frequency and miscellany

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Last week was pretty hectic, and this one isn't shaping up to be any better for different reasons, but The Complex Litigator will work to get back on track with more frequent posts as soon as possible.  For very short news links, the sidebar Twitter feed is a sort of micro-blogging adjunct to this site.

On an unrelated note, I've noticed a massive increase in trackback spam, most of it related to various pharmaceuticals.  The spam filters on Typepad have done a great job at catching that junk, but if something slips through, I apologize and don't follow those links.

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In Naranjo v. Spectrum Security Services, Inc., another pre-emption argument falls flat

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Greatsealcal100With collateral attacks on the class action device – such as several efforts to amend California’s class action law (Code Civ. Proc., § 382) – proving unsuccessful, the name of the game in recent years has been pre-emption arguments. In general, it’s fair to say that those arguments have had limited success. <cough> Wyeth. <cough> In Naranjo v. Spectrum Security Services, Inc. (March 24, 2009), the Court of Appeal (Second Appellate District, Division Four) considered whether the McNamara-O’Hara Service Contract Act of 1965 (SCA) (41 U.S.C. § 351 et seq.) pre-empts all state law remedies for wage & hour violations.

The Court described the SCA:

“ The SCA requires government contractors to pay service employees “minimum wages and benefits determined by the Secretary of Labor.” (U.S. ex rel. Sutton v. Double Day Office Services (9th Cir. 1997) 121 F.3d 531, 533.) “Its purpose is to protect employees of government contractors. Before the [SCA], the federal government had been ‘subsidizing’ substandard levels of compensation by awarding contracts to those who were able to bid low by paying less. [Citation.]” (Saavedra v. Donovan (9th Cir. 1983) 700 F.2d 496, 497.)

(Slip op., at p. 4.) After considering the pre-emption argument successfully raised by defendant at summary judgment, the Court concluded that the SCA did not pre-empt the Labor Code Claims at issue:

“ We therefore conclude that Naranjo’s action to recover additional wages under Labor Code section 226.7 neither conflicts with the SCA nor hinders the achievement of its goals. The wage determination attached to Spectrum’s contract sets forth the minimum basic wage rates for a large number of employment categories, including Naranjo’s category of detention officer; in addition, it contains provisions setting minimum rates for night pay, Sunday pay, and a “[h]azardous [p]ay [d]ifferential,” but none regarding additional pay for the denial of meal and rest breaks. Naranjo’s suit thus seeks state-required wages that exceed the minimum wages determined by the Secretary. In view of the language of the form clause in Spectrum’s contract and the authorities discussed above, Naranjo’s action under Labor Code section 226.7 does not conflict with the SCA and promotes, rather than impedes, its goals.

We reach the same conclusions regarding Naranjo’s claims under Labor Code sections 203 and 226. Labor Code section 203, subdivision (a), imposes a penalty upon employers who willfully fail to pay discharged employees their full compensation in a timely manner. Naranjo’s complaint seeks this penalty for the additional wages allegedly not paid under Labor Code section 226.7. As explained above, Naranjo may properly seek the wages in a state court without impeding the operation of the SCA. In view of Butler, we conclude that Naranjo’s litigation of his request for a penalty under Labor Code section 203 also would not hinder or conflict with the SCA.

Finally, Labor Code section 226 obliges employers to provide their employees with records of their earnings and deductions, and imposes penalties upon employers who knowingly and intentionally fail to supply the records. In contrast, under the SCA and its regulations, employers must maintain records and disclose them to the Secretary, but are not required to disclose the records to employees. (29 C.F.R. § 4.6(g)(1).) The employer’s sole duty regarding employees is to post a form notice in a prominent place regarding the wages and benefits required under the SCA. (29 C.F.R. §§ 4.183, 4.184.) The form clause in Spectrum’s contract specifying its SCA obligations imposes no duty upon Spectrum to provide wage and benefit records to its employees. (48 C.F.R. § 52.222-41(i).) As the evident goal of the employer’s recordkeeping duties under the SCA is to ensure compliance with the SCA, we conclude that Labor Code section 226 complements the SCA and facilitates its goals by enhancing scrutiny of the employers’ conduct.

(Slip op., at pp. 13-14.) The plaintiff did not address the trial court’s ruling of pre-emption as to claims for violation of the UCL, conversion, and injunctive relief. Having not raised those rulings as erroneous, the Court did not address them. And so another pre-emption argument fizzles.

The life cycles of these trends are interesting.  Consider, for example, the anti-class action arbitration provisions that were struck down in waves, or the run of decisions about class member identity discovery after Pioneer.  Makes you wonder how these issues manage to percolate up to the appellate level in such temporal proximity.  Probably coincidence, but maybe a vast defense conspiracy...

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Courtroom View Network provides sample video from Diet Drug trial opening statement

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On March 9, 2009, I mentioned in a post that Courtroom View Network would be providing live and on-demand video coverage of the Diet Drug trial in the Los Angeles Superior Court, Judge Anthony Mohr presiding.  After that post, Courtroom View Network was kind enough to provide a long sample clip from the Opening Argument.  It's a chance to see how modern technology will change trial practice as it has existed for centuries, and I encourage you to have a look.

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