California Supreme Court grants review in Lu v. Hawaiian Gardens Casino, Inc.

The Supreme Court has granted review in Lu v. Hawaiian Gardens Casino, Inc.  The docket indicates that review has been granted on the limited issue of whether a private right of action exists under Labor Code section 351.  In Lu, the Court of Appeal was called upon to determine whether plaintiffs challenging a tip-pooling arrangment could bring a private right of action under Labor Code section 351.  The Court of Appeal concluded that Labor Code section 351 did not create a private right of action. The Court of Appeal 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.)  My original post on Lu is here.  Lu was the first in a group of tip-pooling decisions that were all decided in the last few months.  See a recap here.

California Supreme Court depublishes Liceaga v. Debt Recovery Solutions LLC, 169 Cal.App.4th 901 (December 29, 2008)

In Liceaga v. Debt Recovery Solutions LLC (December 29, 2008) the Court of Apppeal (First Appellate District, Division One) held that the federal Fair Credit Reporting Act completely preemted private rights of action under California's Consumer Credit Reporting Agencies Act.  Today, the Supreme Court directed The Reporter of Decisions not to publish the opinion in the official report.  This depublication is something of a boon consumers.  Until a Court in California holds otherwise, private actions under California’s Consumer Credit Reporting Agencies Act, Civil Code section 1785.1 et seq. (CCRAA), are not preempted by the corresponding federal Fair Credit Reporting Act (15 U.S.C. § 1681 et seq.) (FCRA)).  For some reason, the Court's weekly conference summary isn't available online, but the docket confirms the depublication Order of April 29, 2009.  My original post on Liceaga is here.

in brief: Gomez v. Lincare, Inc. provides a satisfying "I told you so"

In Gomez v. Lincare (April 28, 2009), the Court of Appeal (Fourth Appellate District, Division Three) reversed portions of various Trial Court Orders that caused the dismissal of a putative class action by employees that provided respiratory services and medical equipment setup to patients in their homes. The opinion, from the habitually conservative Fourth Appellate District, was originally unpublished. I find the decision particularly satisfying because I worked on that case for several years while employed by Plaintiffs' counsel. I may post more on this decision later.

in brief: another employment class arbitration waiver is rejected as unconscionable in Olvera v. El Pollo Loco, Inc.

Once again, an employer tried to avoid the potential for class-wide liability to employees by creating an arbitration agreement that included a class action waiver provision. Once again, that effort met with failure. In Olvera v. El Pollo Loco, Inc. (April 27, 2009), the Court of Appeal (Second Appellate District, Division Three) affirmed the Trial Court (Judge Peter Lichtman) Order denying a motion to compel arbitration.

Ninth Circuit gives some solace to class action objectors when it directs trial court to re-consider whether a fee award to objectors' counsel is justified

Class action objectors don’t get much love. Usually the trial court overrules their objections. Usually their attorneys get nothing or some sliver of fees paid out by class counsel to buy the objector’s silence. But in Rodriguez, et al. v. West Publishing Corporation, et al. (April 23, 2009), the Ninth Circuit gives a little bit of that much-needed love to some objectors. But first, the bad news for the objectors: the Court affirmed the trial court’s approval of a class action settlement in the antitrust class action brought by those who purchased BAR/BRI bar review course materials between August 1, 1997 and July 31, 2006.

Now the good news for the objectors: the Court remanded the matter for consideration of several issues, including whether the class counsel fee award should be reduced and whether the objectors’ counsel should receive some compensation for benefits conferred upon the class:

“ The district court should have recognized that Objectors’ position on the impropriety of incentive agreements had some effect on its decision to deny the request for incentive awards; and it should have considered what effect, if any, the ethics implications of a conflict of interest created by the incentive agreements had on class counsel’s request for an award of attorney’s fees.

Therefore, we affirm approval of the settlement. We reverse and remand the award of attorney’s fees to class counsel for consideration of the effect, if any, of the incentive agreements on entitlement to fees. We also reverse and remand the denial of fees to Objectors’ counsel for a determination of a reasonable amount given their contribution to the denial of the requests for incentive awards.

(Opinion, at pp. 4776-77.) Class counsel bought themselves quite a bit of unnecessary grief by including some provisions in their retainers that promised requests for incentive awards of specific size if various settlement value targets were achieved:

“ By tying their compensation — in advance — to a sliding scale based on the amount recovered, the incentive agreements disjoined the contingency financial interests of the contracting representatives from the class. As the district court observed, once the threshold cash settlement was met, the agreements created a disincentive to go to trial; going to trial would put their $75,000 at risk in return for only a marginal individual gain even if the verdict were significantly greater than the settlement. The agreements also gave the contracting representatives an interest in a monetary settlement, as distinguished from other remedies, that set them apart from other members of the class. Further, agreements of this sort infect the class action environment with the troubling appearance of shopping plaintiffships. If allowed, ex ante incentive agreements could tempt potential plaintiffs to sell their lawsuits to attorneys who are the highest bidders, and vice-versa. In addition, these agreements implicate California ethics rules that prohibit representation of clients with conflicting interests. See Image Tech. Serv., Inc. v. Eastman Kodak Co., 136 F.3d 1354, 1358 (9th Cir. 1998) (noting that “[s]imultaneous representation of clients with conflicting interests (and without informed written consent) is an automatic ethics violation in California”); Flatt v. Superior Court, 885 P.2d 950, 955 (Cal. 1994).

(Opinion, at pp. 4760-61, footnote omitted.) Not a great outcome when the Ninth Circuit goes out of its way to note various ethics rules that are “implicated” by the conduct of class counsel. Beyond this case (in which counsel actually obtained a commendable $49 million settlement), the result, if any, will be to encourage objectors to try their luck in contesting a settlement in the hope that some modest fee award is issued by the trial court to safeguard against any appellate review.