En banc hearing requests denied in Gorman v. Wolpoff & Abramson

On October 21, 2009, in Gorman v. Wolpoff & Abramson (previously discussed by this blog here), the Ninth Circuit panel issued an amended Opinion that does not substantively alter the original Opinion and denied all petitions for panel rehearing or rehearing en banc.  When everybody wants a case reheard en banc, it was either a very good opinion or a disasterously bad opinion.  In this instance, it's much closer to the former.  Read the Opinion for pointers on how to be an effective disgruntled consumer and provide sufficient notice to your credit card company that you are royally ticked off about some goods you've received to reduce the likelihood of unqualified negative credit report entries.

In Rutti v. Lojack Corporation, Inc., a divided Ninth Circuit panel examines compensability of pre and post-workday activities

The whole business of "preliminary" and "postliminary" is a bit perplexing.  Under the Fair Labor Standards Act, 29 U.S.C. §§ 201-19 ("FLSA"), employers need not pay for "activities which are preliminary to or postliminary to said principal activity or activities, which occur either prior to the time on any particular workday at which such employee commences, or subsequent to the time on any particular workday at which he ceases, such principal activity or activities."  29 U.S.C. § 254(a)(2).  In Rutti v. Lojack Corporation, Inc. (August 21, 2009), the Ninth Circuit examined this admittedly "ambiguous" language in an attempt to discern whether "preliminary" and "postliminary" work by Lojack technicians was compensable.

The Court summarized the essential facts:

Rutti was employed by Lojack as one of its over 450 nationwide technicians who install and repair vehicle recovery systems in vehicles. Most, if not all of the installations and repairs are done at the clients’ locations. Rutti was employed to install and repair vehicle recovery systems in Orange County, and required to travel to the job sites in a company-owned vehicle. Rutti was paid by Lojack on an hourly basis for the time period beginning when he arrived at his first job location and ending when he completed his final job installation of the day.

In addition to the time spent commuting, Rutti sought compensation for certain “off-the-clock” activities he performed before he left for the first job in the morning and after he returned home following the completion of the last job. Rutti asserted that Lojack required technicians to be “on call” from 8:00 a.m. until 6:00 p.m. Monday through Friday, and from 8:00 a.m. until 5:00 p.m. on Saturdays. During this time, the technicians were required to keep their mobile phones on and answer requests from dispatch to perform additional jobs, but they were permitted to decline the jobs.  Rutti also alleged that he spent time in the morning receiving assignments for the day, mapping his routes to the assignments, and prioritizing the jobs. This included time spent logging on to a handheld computer device provided by Lojack that informed him of his jobs for the day.  In addition, it appears that Rutti may have completed some minimal paperwork at home before he left for his first job.

Slip op., at 11455.  The district court disposed of all federal claims through a motion for partial summary judgment.  The district court subsequently issued an order dismissing the remaining state law claims for lack of subject matter jurisdiction.

The majority first dealt with the claim for commuting time compensation, applying the Employee Commuting Flexibility Act ("ECFA"), 29 U.S.C. § 254(a)(2):

The ECFA’s language states that where the use of the vehicle “is subject to an agreement on the part of the employer and the employee,” it is not part of the employee’s principal activities and thus not compensable.

Slip op., at 11459.  Evidently, all an employer needs to do is narrowly define principal duties, and the rest is gravy.  The Court then rejected Rutti's contention that the heavy restriction on the use of the Lojack vehicle transformed the use of the vehicle from "incidental" to "integral."

The Court reached the same conclusion under California law.  Despite the more flexible "control" standard set forth in Morillion v. Royal Packing Co., 22 Cal. 4th 575 (2000).  The Court concluded that the use of the Lojack vehicle was more like a commute to a mandatory departure point than restricted time in an employer-controlled vehicle.

The Court then spent considerable time discussing the imprecise de minimis rule as it applied to Rutti's morning and evening activities.  The Court determined that Rutti had not supplied evidence that his morning activities consumed more than a couple of minutes or involved anything other than commute preparation, which was noncompensable.

The evening data transmission time was not so easily relegated to the de minimis woodshed.  Based on the evidence supplied in the District Court, the Ninth Circuit concluded that summary judgment was inappropriate.  The Court noted that the Ninth Circuit had no fixed time standard under the rule:  "Furthermore, we have not adopted a ten or fifteen minute de minimis rule."  Slip op., at 11474.  The evidence was also sufficient to overcome summary judgment:

Rutti asserts that the transmissions take about 15 minutes a day. This is over an hour a week. For many employees, this is a significant amount of time and money. Also, the transmissions must be made at the end of every work day, and appear to be a requirement of a technician’s employment. This suggests that the transmission “are performed as part of the regular work of the employees in the ordinary course of business,” Dunlop, 527 F.2d at 401, and accordingly, unless the amount of time approaches what the Supreme Court termed “split-second absurdities,” the technician should be compensated. See Anderson, 328 U.S. at 692.

Slip op., at 11476.

Circuit Judge Hall would have gone further, finding the postliminary data transmission by Rutti to be de minimis as well, despite the conflicting evidence.  Slip op., at 11479.

Circuit Judge Silverman dissented with the majority analysis of whether Rutti was controlled by his employer during his commute:

The majority attempts to distinguish Morillion by summarily concluding that “Rutti’s use of Lojack’s automobile to commute to and from his job sites is more analogous to the ‘home to departure points’ transportation in Morillion than to the employees’ transportation on the employer’s buses.” Aside from the lack of factual analysis to support this ipse dixit, the majority also utterly ignores the relevant question under California law, which is whether Rutti was “subject to the control of an employer” during his mandatory travel time. A straightforward application of Morillion easily answers that question in the affirmative. Rutti was required not only to drive the Lojack vehicle to the job site, but was forbidden
from attending to any personal business along the way. Because he was obviously under the employer’s control in these circumstances he was, under California law, entitled to be paid.

Slip op., at 11483.

As an aside, I've noticed that when Ninth Circuit Judges dissent, they really dissent.  No punches pulled.  It just confirms that the Ninth Circuit is far from the monolith it supposedly presents.

In Gordon v. Virtumundo, Inc., Ninth Circuit engages in pioneering analysis of standing to sue under CAN-SPAM Act

"The CAN-SPAM Act became effective on January 1, 2004, and was enacted in response to mounting concerns associated with the rapid growth of spam e-mails."  Gordon v. Virtumundo, Inc. (9th Cir. August 6, 2009), at 10,491.  In Gordon, the Ninth Circuit was called upon, in a case of first impression amongst the Circuits, to determine when a private plaintiff possesses standing to sue under the CAN-SPAM Act.  In doing so, the Ninth Circuit attempted, at least in part, to thoroughly examine the standing issue:

As recognized by several courts, the case law regarding the relevant legal standards under the CAN-SPAM Act is “scant,” ASIS Internet Servs. v. Optin Global, Inc., No. 05-05124, 2008 WL 1902217, at *15 (N.D. Cal. Apr. 29, 2008), and few courts have construed the standing provision, ASIS Internet Servs. v. Active Response Group, No. 07-6211, 2008 WL 2952809, at *2 (N.D. Cal. July 30, 2008). Neither we nor any of our sister circuits have comprehensively addressed this issue. We endeavor to do so here, at least in part.

Slip op., at 10,494.  One important question in Gordon was whether the plaintiff, who provided e-mail addresses to some friends and family members through a domain housed on leased server space.  The Ninth Circuit described the basic standing inquiry:

We begin by acknowledging that the CAN-SPAM standing inquiry involves two general components: (1) whether the plaintiff is an “Internet access service” provider (“IAS provider”), and (2) whether the plaintiff was “adversely affected by” statutory violations. See, e.g., Brosnan v. Alki Mortgage, LLC, No. 07-4339, 2008 WL 413732, at *1-*2 (N.D. Cal. Feb. 13, 2008).  Beyond that, however, the statutory standing provision read as a whole is ambiguous—a point upon which all parties agree. We therefore employ familiar techniques of statutory construction to evaluate Congress’s intent with regard to both components and their relation to one another.

Slip op., at 10,494.  The Ninth Circuit then noted that the standing conferred by the Act was narrowly tailored by Congress:

Congress conferred standing only on a narrow group of possible plaintiffs: the Federal Trade Commission, certain state and federal agencies, state attorneys general, and IAS providers adversely affected by violations of the CANSPAM Act. See 15 U.S.C. § 7706(a), (b), (f), (g). The decision to restrict the right of action does not reflect an indifference or insensitivity to the effects of spam on consumers. The contrary is true. The CAN-SPAM Act’s express findings and legislative history are littered with references to the burdens shouldered by individuals, businesses, and other institutions.  The Act itself recognizes the “costs to recipients . . . for the storage of [unsolicited commercial e-mail], or for the time spent accessing, reviewing, and discarding such mail, or both.” 15 U.S.C. § 7701(a)(3). We surmise that Congress’s intent was to limit enforcement actions to those best suited to detect, investigate, and, if appropriate, prosecute violations of the CAN-SPAM Act—those well-equipped to efficiently and effectively pursue legal actions against persons engaged in unlawful practices and enforce federal law for the benefit of all consumers.

Slip op., at 10,496.  Then Ninth Circuit then had to address whether Gordon was, in fact, an IAS provider.  Struggling somewhat with that question, the Court said:

There may well be a technical or hardware component implicit in the definition. But, we find the parties’ briefing on the topic inadequate to reach an informed decision here. Because it is not necessary to our holding, we decline this opportunity to set forth a general test or define the outer bounds of what it means to be a provider of “Internet access service.”

Slip op., at 10,500.  Despite passing on the opportunity to define the outer bounds of IAS provision, the Ninth Circuit concluded that Gordon, who gave e-mail addresses to a few friends and family members, didn't meet any reasonable definition of IAS provider.

At this point, Gordon loses, because he lacks standing.  But the Ninth Circuit went on to address whether he had been adversely affected by the spam received in the various e-mail accounts he created.  That analysis, too, didn't favor plaintiff.

I was particularly interested in this decision because I, like Gordon, have a domain through which I provide a number of e-mail addresses to family.  Had things broken Gordon's way, I'd be an IAS provider right now.  But since I'm not, I'll also conclude that we won't see the CAN-SPAM Act in a class action unless a major provider like a cable or phone company decides to use the CAN-SPAM Act in some crazy way and allege a defendant class of spammers blasting their network.

The Ninth Circuit concluded its opinion with a thorough analysis of pre-emption, holding that the CAN-SPAM Act pre-empts all state efforts to regulate spam, save those predicated upon traditional tort theories related to fraud and deceit.  In case you were holding your breath, spam isn't going anywhere any time soon.

Ninth Circuit makes overtime misclassification cases a little bit tougher with opinions in Vinole v. Countrywide Home Loans, Inc. and In re: Wells Fargo Home Mortgage

Overtime misclassification cases were first out of the blocks when wage & hour employment class actions surged in the last decade or so.  Misclassification cases, when successful, usually generate larger per-class member recoveries than other wage & hour class actions.  But their early success was eventually met with more sophisticated defense tactics in the perpetual chess match of move and counter-move.  For those misclassification cases unfortunate enough to end up in federal court, the Ninth Circuit has just made them a bit harder than they were a few days ago.

The first of this duo, In re: Wells Fargo Home Mortgage (July 7, 2009), considered whether the trial " court abused its discretion in finding that the predominance requirement of Federal Rule of Civil Procedure 23(b)(3) was satisfied, based — in large part — on an employer’s internal policy of treating its employees as exempt from overtime laws."  Slip op., at 8328.  The Trial Court though that Wells Fargo was unfairly trying to have its cake and eat it too:

Wells Fargo’s uniform policies regarding HMCs weigh heavily in favor of class certification. As numerous courts have recognized, it is manifestly disingenuous for a company to treat a class of employees as a homogenous group for the purposes of internal policies and compensation, and then assert that the same group is too diverse for class treatment in overtime litigation.

Slip op., at 8330.  The Ninth Circuit focused its review on whether the Trial Court's treatment of that classification policy was correct:

District courts within this circuit have split on the relevance of exemption policies. The district court relied primarily on Wang v. Chinese Daily News, Inc., 231 F.R.D. 602, 612-13 (C.D. Cal. 2005), which found predominance of common issues based on an employer’s policy of treating all employees in a certain position as uniformly exempt from overtime compensation requirements. In contrast, another district court has expressed doubt about Wang, and found that uniform exemption policies are merely a minor factor in the predominance analysis. See Campbell v. PricewaterhouseCoopers,, 253 F.R.D. 586, 603-04 (E.D. Cal. LLP 2008) (rejecting “estoppel” position of Wang).

Slip op., at 8333.  The Ninth Circuit concluded that the approach in Wang went too far, but then emphasized that employer policies remain very important in the majority of certification analyses in this area of law:

Of course, uniform corporate policies will often bear heavily on questions of predominance and superiority. Indeed, courts have long found that comprehensive uniform policies detailing the job duties and responsibilities of employees carry great weight for certification purposes. Damassia v. Duane Reade, Inc., 250 F.R.D. 152, 160 (S.D.N.Y. 2008) (“Where . . . there is evidence that the duties of the job are largely defined by comprehensive corporate procedures and policies, district courts have routinely certified classes of employees challenging their classification as exempt, despite arguments about ‘individualized’ differences in job responsibilities.”).  Such centralized rules, to the extent they reflect the realities of the workplace, suggest a uniformity among employees that is susceptible to common proof.

Slip op., at 8334-35.  So too much Wang is no good, but some Wang is okay.  Got it.  The Ninth Circuit concluded that exemption policies, in particular, are less likely to have a "transformative" power that turns an otherwise individual issue into a common one.

In Vinole v. Countrywide Home Loans, Inc. (July 7, 2009), the Ninth Circuit considered two primary issues, one of which matters.  Countrywide filed a motion to deny class certification before the plaintiffs could file their motion for class certification.  The defendant's motion was granted.  As an issue of first impression, the Ninth Circuit was asked to determine whether it was per se improper for the trial court to hear defendant's motion.  The Ninth Circuit concluded that it was not per se improper:

Rule 23(c)(1)(A) addresses the timing of a district court’s class certification determination, and states: “Time to Issue: At an early practicable time after a person sues or is sued as a class representative, the court must determine by order whether to certify the action as a class action.” Fed. R. Civ. P. 23(c)(1)(A). Nothing in the plain language of Rule 23(c)(1)(A) either vests plaintiffs with the exclusive right to put the class certification issue before the district court or prohibits a defendant from seeking early resolution of the class certification question. The only requirement is that the certification question be resolved “[a]t an early practicable time.”  The plain language of Rule 23(c)(1)(A) alone defeats Plaintiffs’ argument that there is some sort of “per se rule” that precludes defense motions to deny certification, and Plaintiffs have produced no authority to the contrary.

Slip op., at 8307-8.  That seems simple enough.  But these things rarely are.  The Ninth Circuit was particularly interested in the fact that the plaintiffs had (1) failed to bring their motion in almost a year, (2) admitted during a hearing that they didn't need additional discovery to file their motion, and (3) didn't request any sort of continuance of the hearing of defendant's motion:

First, at the time of the hearing Plaintiffs had conducted significant discovery and did not intend to propound any additional discovery seeking information from Countrywide regarding the propriety of class certification. Second, it is evident that Plaintiffs had made a strategic choice to limit the amount of evidence it presented to the district court in opposition to Countrywide’s motion; they proffered their class certification arguments through their “preview” declarations. Third, Plaintiffs’ real complaint is not that they were deprived of adequate time in which to complete discovery, but that they “didn’t want to be on defendants’ schedule.” But, again, this is just a variation on Plaintiffs argument in favor of a per se rule.

Slip op., at 8314.  I can only assume that Defendants will now race to be the first to file a motion related to certification.  Plaintiffs will need to be diligent in their litigation and discovery efforts to fend off this counter-assault.  One thing is certain - different trial courts will deal with this complication in a wide variety of ways.

In Satterfield v. Simon & Schuster, Inc., Ninth Circuit defers to FCC and construes text messages as "calls" under TCPA

In Satterfield v. Simon & Schuster, Inc. (June 19, 2009), the Ninth Circuit issued a consumer-oriented opinion that exemplifies the challenges faced by courts that are asked to apply existing laws to developing areas of technology.  By technology standards, Satterfield is not cutting-edge material.  Plaintiff Satterfield alleged a violation of the Telephone Consumer Protection Act ("TCPA"), 47 U.S.C. § 227, arising after Satterfield received an unsolicited text message.  At the time of the TCPA's enactment, text messaging was not yet in use:

The precise language at issue here is what did Congress intend when it said “to make any call” under the TCPA. Utilizing the aforementioned canons of statutory construction, we look to the ordinary, contemporary, and common meaning of the verb “to call.” Webster’s defines “call” in this context as “to communicate with or try to get into communication with a person by a telephone.” Webster’s Third New International Dictionary 318 (2002). This definition suggests that by enacting the TCPA, Congress intended to regulate the use of an ATDS to communicate or try to get into communication with a person by a telephone. However, this law was enacted in 1991 when text messaging was not available.

Slip op., at 7342.  With no court having addressed this question, the Ninth Circuit looked to the FCC's determination on the issue for guidance:

The TCPA makes it unlawful “to make any call” using an ATDS. 47 U.S.C. § 227(b)(1)(A). While the TCPA does not define “call,” the FCC has explicitly stated that the TCPA’s prohibition on ATDSs “encompasses both voice calls and text calls to wireless numbers including, for example, short message service (SMS) calls . . . .” In re Rules and Regulations, Report and Order, 18 FCC Rcd. 14014, 14115 Implementing the Telephone Consumer Protection Act of 1991 (July 3, 2003) (hereinafter “2003 Report and Order”). The FCC subsequently confirmed that the “prohibition on using automatic telephone dialing systems to make calls to wireless phone numbers applies to text messages (e.g., phone-to-phone SMS), as well as voice calls.”  In the Matter of Rules and Regulations Implementing the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003; Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, 19 FCC Rcd. 15927, 15934 (FCC August Implementing the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003; Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991 12, 2004).  In the Notice of Proposed Rulemaking of the CANSPAM Act, the FCC also noted “that the TCPA and Commission rules that specifically prohibit using automatic telephone dialing systems to call wireless numbers already apply to any type of call, including both voice and text calls.”  Id. at 15933.  Therefore, the FCC has determined that a text message falls within the meaning of “to make any call” in 47 U.S.C. § 227(b)(1)(A).

Slip op. at 7338-39.  Applying the two-step test for judicial review of administrative agency interpretations of federal law set forth in Chevron v. Natural Res. Def. Council, Inc., 467 U.S. 837, 843-44 (1984), the Ninth Circuit concluded that the FCC's treatment of text messaging as "calls" under the TCPA was reasonable.  The Ninth Circuit reversed the trial court's grant of summary judgment.  It is unclear whether this proposed class action was certified prior to the summary judgment motion.

In Hatfield v. Halifax PLC, et al., the Ninth Circuit explains that American Pipe tolling and California's equitable tolling doctrine are not identical

The Ninth Circuit issued a very interesting opinion last week about serial class action tolling in California state courts (for purposes of this post, let's just assume that "interesting" and "serial class action tolling" are phrases you would arguably use in a single sentence that did not also involve irony or sarcasm).  In Hatfield v. Halifax PLC, et al. (May 8, 2009), the Ninth Circuit reviewed a district court decision in which the district court found that Plaintiff "Hatfield’s claims, brought eight-and-a-half years after her causes of action arose, were barred by California’s statutes of limitations, which are four years or less for each of Hatfield’s claims."  (Slip op., at p. 5403.)  On appeal, Hatfield argued, in part, that the "limitations period was tolled by the filing of a previous class action in New Jersey state court, making this action timely.  (Id.)

First, the Ninth Circuit concluded that Hatfield, as an individual, was entitled to tolling from the filing of the New Jersey class action.  (Slip op., at pp. 5412-15.)  The Ninth Circuit then turned to the more difficult question of whether Hatfield could claim such tolling on behalf of class members that Hatfield sought to represent:

While there is no California precedent directly on point, based on closely analogous precedent, we see no reason why California’s equitable tolling doctrine would not also apply to the claims of its unnamed putative class members who, like Hatfield, are California residents.  First, the California Supreme Court has indicated a general agreement with tolling in the class action context, going so far as to cite with approval the Supreme Court’s decision in American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974). See Jolly v. Eli Lilly & Co., 751 P.2d 923, 934-35 (Cal. 1988). In American Pipe, the Supreme Court held that “the commencement of a class action suspends the applicable statute of limitations as to all asserted members of the class who would have been parties had the suit been permitted to continue as a class action.” 414 U.S. at 554.  In Jolly, 751 P.2d 934-35, the California Supreme Court noted with approval the two major policies that underlie the American Pipe tolling rule, the first of which is most relevant here.  That policy protects the class action device because, without it, potential class members would be induced to file protective actions to preserve their claims, thus depriving class actions of their ability to secure “efficiency and economy of litigation.”  Id. at 935 (quoting American Pipe, 414 U.S. at 553).  In Jolly, despite the endorsement of American Pipe, the court rejected its application under the facts of that case.  Id. at 935-36.

(Slip op., at pp. 5415-16, footnotes omitted.)  Defendant Halifax then argued that a recent Ninth Circuit opinion, Clemens v. DaimlerChrysler Corp., 534 F.3d 1017 (9th Cir. 2008), precluded "cross-jurisdictional tolling."  The Ninth Circuit agreed that, while Clemens would preclude American Pipe tolling, it would not bar California's equitable tolling doctrine:

Although the Clemens decision would foreclose application of American Pipe here, it does not dictate a similar rejection of California’s equitable tolling doctrine, especially as it applies to California’s own residents. Although the two types of tolling—equitable and American Pipe —overlap to some extent, see Becker, 277 Cal. Rptr. at 496, and even though California courts have treated them at times as interchangeable, they are not congruent. The Halifax Appellees themselves concede that “the equitable tolling applied to individual actions is distinct from American Pipe tolling.” They cite Newport v. Dell, Inc., No. CV-08-0096, 2008 WL 4347311, at *4 n.8 (D. Az. Aug. 21, 2008), a case decided shortly after Clemens, which stated that “[t]he class-action tolling discussed in American Pipe and Crown is a species of legal tolling, not equitable tolling.” Thus, by the Halifax Appellees’ own admission, Clemens, which only rejected the application of American Pipe tolling in a cross-jurisdictional action, does not affect the application of California’s equitable tolling doctrine, which covers situations beyond those covered by American Pipe. See McDonald v. Antelope Valley Cmty. Coll. Dist., 194 P.3d 1026, 1032 (Cal. 2008) (“[California’s equitable HATFIELD v. HALIFAX PLC tolling] may apply where one action stands to lessen the harm that is the subject of a potential second action; where administrative remedies must be exhausted before a second action can proceed; or where a first action, embarked upon in good faith, is found to be defective for some reason.”).

(Slip op., at pp. 5417-18.)  The Court concluded that California would protect its own citizens with its equitable tolling doctrine ("California has a strong interest in providing a remedy for wrongs committed against its citizens"), but would not extend that same equitable tolling protection to individuals outside of California. 

As a final observation, the Ninth Circuit also offered a useful comment on the extent of tolling that is available under American Pipe:

Although American Pipe is clearly applicable to individual actions, some federal decisions have refused to allow the doctrine to toll the limitations period for subsequently filed class actions. See Robbin v. Fluor Corp., 835 F.2d 213, 214 (9th Cir. 1987) (“We agree with the Second Circuit that to extend tolling to class actions ‘tests the outer limits of the American Pipe doctrine and . . . falls beyond its carefully crafted parameters into the range of abusive options.’ ” (quoting Korwek v. Hunt, 827 F.2d 874, 879 (2d Cir. 1987) (alteration in original))).  In Catholic Social Services, Inc. v. INS, 232 F.3d 1139, 1149 (9th Cir. 2000) (en banc), however, the Ninth Circuit extended American Pipe to toll the claims of an entire class where “[p]laintiffs . . . are not attempting to relitigate an earlier denial of class certification, or to correct a procedural deficiency in an earlier would-be class.”  Whether the subject class action was actually trying to relitigate the certification issue was disputed by one of the dissents.  Id. at 1157-58 (Graber, J., dissenting in part).  However, the current action is clearly not an instance in which Hatfield is trying to reargue a denial of class certification because of a failure to meet Rule 23 of the Federal Rules of Civil Procedure or its state counterpart.  Rather, the previous class action was dismissed for lack of in personam jurisdiction.  Thus, if Hatfield had brought the original class action in California, American Pipe would permit tolling for the entire class action.

(Slip op., at p. 5419, fn. 8.)

In D'Este v. Bayer Corporation, Ninth Circuit certifies interesting issue to California Supreme Court

The Ninth Circuit has been certifying questions to various state Supreme Courts with increasing frequency.  After giving this observed increase some thought, I theorize that at least one reason for this increase is the shift of some class actions to federal court as a result of CAFA.  For example, in a post on this blog, I noted a recent question certified to the California Supreme Court about e-mail spam.  Other issues certified to state supreme courts are simply questions of first impression, at least as the caselaw is viewed by the Ninth Circuit.  One example of such an issue involves a question about statutes of limitation in California, noted in this post on Products Liability Prof Blog.  The most famous recent example involves the certification of questions in Sullivan v. Oracle Corp., covered on The UCL Practitioner.

On May 5, 2009, in D'Este v. Bayer Corporation (link now corrected) the Ninth Circuit certified a challenging question that actually a colleague of mine fits in a class action we both worked on several years ago.  Here is the key question certified to the California Supreme Court:

“The Industrial Welfare Commission’s Wage Orders 1-2001 and 4-2001 define “outside salesperson” to mean “any person, 18 years of age or over, who customarily and regularly works more than half the working time away from the employer’s place of business selling tangible or intangible items or obtaining orders or contracts for products, services or use of facilities.” 8 Cal. Code Regs., tit. 8, §§ 11010, subd. 2(J); 11040, subd. 2(M). Does a pharmaceutical sales representative (PSR) qualify as an “outside salesperson” under this definition, if the PSR spends more than half the working time away from the employer’s place of business and personally interacts with doctors and hospitals on behalf of drug companies for the purpose of increasing individual doctors’ prescriptions of specific drugs?

(Order, at p. 5193.)  But the question doesn't really capture the issue.  The underlying issue, developed in the factual description, turns on the fundamental nature of sales for purposes of the "outside salesperson" overtime exemption.  The pharmaceutical representatives in question promote Bayer products to doctors and hospitals, but they don't actually enter into bindings sales agreements.  Instead, they attempt to influence the prescription decisions of doctors and hospitals.  Are they "selling" when they engage in this promotion that does not end in a commercial transaction?  The Ninth Circuit thinks that the wage order can be interpreted in either manner.  Without CAFA, this issue would certainly have made its way to a California Court of Appeal.  Instead, it has moved outside the state court system, up to the Ninth Circuit, and may end up at the California Supreme Court through this inefficient route.

Update on 2009-05-07 23:39 by The Complex Litigator

UPDATE:  With apologies to the UCL Practitioner, I've fixed the link error to the 9th Circuit opinion.  It happens from time to time when posting while tired.