in brief: Post-Tobacco II remand case, Pfizer v. Superior Court, is now published

The shockwaves of Tobacco II continue.  Today, the Court of Appeal (Second Appellate District, Division Three) published its Opinion in Pfizer v. Superior Court (March 2, 2010) after the matter was remanded by the California Supreme Court following the Tobacco II decision.  The Court focused heavily on the length of time and extent of the advertising campaign for Listerine that was at issue in the case.  Less than half a year and sporadic distribution wasn't enough to convince the Court to apply Tobacco II.  So now we have Morgan, et al. v. AT&T Wireless Services, Inc. (September 23, 2009), that found an advertising campaign of around a year to be long enough for a reliance inference, but just under half a year is insufficient.  I suppose those 8-month ad campaigns will be judged on a fact-intensive analysis that looks at whether the ads were continuous and pervasive or sporadic and poorly circulated.

In brief: Ninth Circuit issues new opinion in Rutti v. Lojack Corporation, Inc.

After granting a panel petition for rehearing, the Ninth Circuit withdrew the Opinion in Rutti v. Lojack Corporation, Inc., 578 F.3d 1084 (9th Cir. 2009), and issued a new opinion, Rutti v. Lojack Corporation, Inc. (9th Cir. March 2, 2010).  The change is significant on the issue of commute time under California law: "[W]e vacate the district court’s grant of summary judgment on Rutti’s claim for compensation of his commute under California law and on his postliminary activity of required daily portable data transmissions, and remand the matter to the district court for further proceedings consistent with this opinion."  Slip op., at 3237.  I may provide a longer post about this change later.  The earlier post on Rutti can be found here.

Congratulations to The UCL Practitioner...

on the occasion of announcing the formation of her own firm.  Kimberly Kralowec, author of The UCL Practitioner, has announced the The Kralowec Law Group.  I wish Kim the best of luck; she was an inspiration to my own blogging efforts.  I hope that four years from now I will be able to say, "I have every intention of continuing to write this blog as I have done for the past six years."

The beauty of SquareSpace...

is that it allows for quite a bit of tinkering with site layout on the fly.  See, SquareSpace for some examples of how far you can go with their hosting platform.  This is both good and bad.  The good part is self-evident.  The bad part is that you can lose hours and hours of time creating graphics and adjusting layouts without realizing it.  So don't mind my tinkering with the layout; once I got started, I had to keep going until I was marginally satisfied with it.  I was bored, and I may tinker more.  So don't be surprised if the blog looks a little different every day.

Speaking of adjustments, the page-width header and "floating" banner required very precise pixel registration of some graphics.  Interestingly, chrome rendered part of the header 1 pixel off from how both Internet Explorer and Firefox render the same images.  I suspect that there is difference in how the browsers handle a rounding issue.  Regardless, everything now aligns in Chrome, Firefox 3.6, and Internet Explorer 8.  I can't help the rest of you.

The Fourth Appellate District brings us not one, but two opinions in Pellegrino v. Robert Half International, Inc.

On January 28, 2010, I posted a quick note about an Opinion in Pellegrino v. Robert Half International, Inc. (G039985).  See post here.  But, in the last two days, the Pellegrino matter has generated one additional Opinion and a modification of the earlier Opinion.  The first opinion, Pellegrino v. Robert Half International, Inc. (February 24, 2010) (G040762), was previously unpublished.  The now-published Opinion concerns an award of attorneys' fees:

RHI challenges the trial court's attorney fees award on the grounds the court (1) failed to sufficiently discount a portion of plaintiffs' attorney fees to account for the trial on the unfair competition claims for which no attorney fees were available; (2) should not have applied any multiplier to the lodestar figure in determining the attorney fees award, much less a multiplier as high as 1.75; and (3) improperly awarded an enhancement for “fees on fees.”

We affirm in part and reverse in part. The trial court did not err by reducing the lodestar amount by no more than 15 percent to reflect the parties' litigation of the unfair competition claims, because the legal and factual issues presented in those claims were interrelated with those issues presented by plaintiffs' wage and hour claims (for which attorney fees are available). The record supports the trial court's application of a 1.75 multiplier to the reduced lodestar amount for attorney fees generated up until plaintiffs brought their motion for attorney fees, based on the factors set forth in Ketchum v. Moses (2001) 24 Cal.4th 1122 (Ketchum). The record does not support, however, the application of a 1.75 multiplier to fees incurred in bringing the motion for attorney fees. We therefore reverse the amended judgment to the extent it applies a multiplier to fees incurred in bringing the attorney fees motion and remand to the trial court to recalculate the attorney fees award accordingly. We otherwise affirm the amended judgment.

Slip op., at 2-3.

The modification opinion, Pellegrino v. Robert Half International, Inc. (February 25, 2010) (G039985) concerned RHI's contention that its petition for rehearing should have been granted pursuant to Government Code section 68081 because the Court's decision was based on issues not briefed or proposed by any party.  The Court of Appeal disagreed.  Stridently.

Other commentary:

Storm's California Employment Law

Lexology and Lexology

California Employment Law Report

McAdams v. Monier, Inc. opinion after remand is published; most of original opinion remains intact

In a prior published opinion, McAdams v. Monier, Inc. (May 30, 2007, C051841), as mod. June 25, 2007, reversed a trial court order denying certification of the proposed CLRA and UCL classes.  The gravamen of the complaint was an alleged failure to disclose that the color composition of defendant's roof tiles would erode away, leaving bare concrete, well before the end of the tiles‟ represented 50-year lifetime.  Then, the Supreme Court granted review and deferred the matter (grant and hold) in light of In re Tobacco II Cases (2009) 46 Cal.4th 298 (Tobacco II), pending on the Supreme Court's docket at the time.  After Tobacco II was decided, the Supreme Court remanded with directions to vacate the decision and reconsider in light of Tobacco II.

Today, the Court of Appeal (Third Appellate District) issued its amended Opinion on Remand in McAdams v. Monier, Inc. (February 24, 2010).  But indicating that much of its Opinion would remain unchanged, the Court said, "In doing so, we reiterate our position involving the CLRA, as Tobacco II concerned only the UCL."  Slip op., at 2.  Going on, the Court summarized the new Opinion as follows:

We agree with case law that an “inference of common reliance” may be applied to a CLRA class that alleges a material misrepresentation consisting of a failure to disclose a particular fact. (Massachusetts Mutual Life Ins. Co. v. Superior Court (2002) 97 Cal.App.4th 1282, 1293 (Massachusetts Mutual).)

As for the UCL, we remand for the trial court to determine if the representative plaintiff meets the Proposition 64 standing requirements, as interpreted in Tobacco II. Otherwise, we find the UCL action suitable for class certification.

Consequently, we reverse the trial court's order denying certification of the proposed CLRA and UCL classes. We do so, however, with one proviso as to defining these classes, which we will explain in this opinion: The members of these classes, prior to purchasing or obtaining their Monier roof tile product, had to have been exposed to a statement along the lines that the roof tile would last 50 years, or would have a permanent color, or would be maintenance-free. (See Tobacco II, supra, 46 Cal.4th at p. 324.)

Slip op., at 2-3.

The opinion is extensive in its analysis of both the CLRA and the UCL.  The CLRA discussion is interesting for many reasons, including approving citation of the standing analysis in Chamberlan v. Ford Motor Co. (N.D.Cal. 2005) 369 F.Supp.2d 1138 (slip op., at 17) and clarification (and, to a degree, limitation) of the extent of the misrepresentation/omission discussion in Outboard Marine Corp. v. Superior Court (1975) 52 Cal.App.3d 30 (slip op., at 13-16).

The UCL discussion is also interesting on many levels.  For instance, the Court provides a simple reminder about what happened in Tobacco II: "In Tobacco II, the high court reversed an order that had denied class certification in a UCL lawsuit."  Slip op., at 21.  In other words, it reversed every element of the trial court order and Court of Appeal Opinion necessary to support that order.  Ultimately, the Court applied much of its certification analysis discusses in its CLRA discussion to the UCL claim, concluding that certification was appropriate.  The Court then directed the trial court "to determine whether the representative plaintiff can establish UCL standing as defined in Tobacco II and, if not, whether amendment should be permitted to add a new class representative."  Slip op., at 28.

Update on 2010-02-24 21:55 by The Complex Litigator

Check The UCL Practitioner for more on Monier.  Ms. Kralowec has reported extensively on this case and has promised to post detailed comments soon.

California's budget problems are threatening a constitutional crisis

A colleague of mine (Linh Hua) and I have been talking out an issue that has troubled me for some time now.  It occurred to me that there must be a constitutional limit of some sort to the underfunding of California's judiciary.  I didn't have any specific case in mind when the concept crossed my mind, and my discussions with other practitioners elicited general agreement without specific supporting authority.  Coincidentally, just as I began to look into this issue, a confirming answer of sorts dropped into my lap.

This evening (for publication on 2/24/2010), Joel Stashenko reports in the New York Law Journal that New York's highest court has held unconstitutional the failure to grant pay raises to judges for the last 11 years.  Joel Stashenko, Denial of N.Y. Judicial Pay Raise Is Ruled Unconstitutional (February 24, 2010) www.law.com.  The high court (the New York Court of Appeals) declared the de facto pay freeze a "crisis" that threatened the separation of powers.  Declining requests for an order mandating an immediate pay raise, the Court said, "By ensuring that any judicial salary increases will be premised on their merits, this holding aims to strike the appropriate balance between preserving the independence of the Judiciary and avoiding encroachment on the budget-making authority of the Legislature."

While the Court proceeded with caution, it also warned, "It [the Legislature] should keep in mind, however, that whether the Legislature has met its constitutional obligations in that regard is within the province of this Court," citing Marbury v. Madison, 1 Cranch 137 (1803). "We therefore expect appropriate and expeditious legislative consideration."

Writing for the 5-1 majority, Judge Pigott said, "Because the Separation of Powers doctrine is aimed at preventing one branch of government from dominating or interfering with the functioning of another co-equal branch, we conclude that the independence of the judiciary is improperly jeopardized by the current judicial pay crisis, and this constitutes a violation of the Separation of Power doctrine."

In California we don't just have a pay crisis, we have a funding crisis.  Our Courts are closed one Wednesday each month, and I've heard mention that an additional closure day is under consideration by some.  We've lost a complex litigation court in Los Angeles County, a court designed to better manage the burdens imposed by complex, multi-party litigation.  If the pay issue in New York is a constitutional "crisis," what California is experiencing is a constitutional debacle.  The judiciary is not just impaired here, it is hamstrung and handcuffed.  As participants operating within one of the presumably co-equal branches of government, we must be vigilant and speak out when it is clear that a failure by one branch imperils the unfettered operation of another.

I intend to continue speaking about this issue until the futility of it all depresses me into silence.

Breaking News: Supreme Court holds that a corporation's "principal place of business" refers to the place where high level officers direct and control the company

A unanimous United States Supreme Court held today, in Hertz Corp. v. Friend, 559 U.S. ____ (February 23, 2010):

The federal diversity jurisdiction statute provides that "a corporation shall be deemed to be a citizen of any Stateby which it has been incorporated and of the State where it has its principal place of business." 28 U. S. C. §1332(c)(1) (emphasis added). We seek here to resolve different inter-pretations that the Circuits have given this phrase. In doing so, we place primary weight upon the need for judicial administration of a jurisdictional statute to remain assimple as possible. And we conclude that the phrase "principal place of business" refers to the place where thecorporation’s high level officers direct, control, and coordinate the corporation’s activities. Lower federal courts have often metaphorically called that place the corporation’s "nerve center."

Opinion, at 1.  In light of this holding, Tosco Corp. v. Communities for a Better Environment, 236 F. 3d 495 (9th Cir. 2001) is no longer good law.  The result is likely to be fewer diversity-based suits but more CAFA-based removals for class actions.

Update on 2010-02-23 21:09 by The Complex Litigator

It occurs to me that an amicus filing in support of the plaintiff would be a friend of a Friend.  You see, the amicus filing is also called .... oh nevermind.

Update on 2010-02-23 22:05 by The Complex Litigator

Other media commentary on Hertz v. Friend:

• Court Says Business HQ Is Where Executives Are (ABC News)
• Jurisdiction Hinges On Company's 'Nerve Center' (Courthouse News)
• U.S. top court: Companies are based where execs are (Reuters)

Second Interim Report on class actions in California sheds new light on certification

Earlier this month, the Administrative Office of the Courts released its Second Interim Report from the Study of California Class Action Litigation.  The Second Interim Report specifically analyzed class certifications in cases initially filed with a class action designation.  The findings were surprising.

First, over the period of 2000 to 2005, certification rates plummeted: "The rate of class certification (by any means) decreased by more than 50 percent over the study years."  Report, at 6.  This sharp decline mirrored findings in federal courts.

Second, a meager 13% of cases initially filed as a class action ever had a motion for class certification filed before final disposition, and only 46% of those motions were granted.  Report, at 8-9.  However, three times more cases were certified as part of a settlement.  Report, at 11.  The Report speculated that the rate of certification by settlement could be attributable to the State's complex litigation programs:  "In California, the frequency of classes certified as part of a settlement agreement may be another product of the Complex Civil Litigation Program."  Report, at 11.  Sadly, the apparent success of this program hasn't ensured that class actions filed in Los Angeles County receive the careful attention of the Complex Civil Litigation Program.  Due to limited resources, the Los Angeles County Complex Courts are rejecting most class actions to focus on construction defect cases, mass torts, and other multi-party suits.

The Second Interim Report also examined data to test the hypothesis that class certification pressures settlements from defendants.  The data did not support that hypothesis.  For example, the lack of interlocutory review of orders granting certification did not reveal a settlement pressure when compared to federal courts:

Given the absence of an interlocutory appeal option in California, one may conclude that settlement pressure would exert more effect and more cases would be compelled to settle after the granting of a motion for class certification as compared to federal court. However, the disposition composition for certified cases that reached a final outcome in California does not support this hypothesis. Table 16 shows that the rate of settlement after certification through a court-granted motion for certification is 69%. This is actually slightly lower than the rate of 72% in the federal court. California‘s lack of intermediate recourse in response to the granting of class certification does not result in a higher rate of settlement in that situation when compared to data from federal court.

Report, at 26.  Summing up the data analysis related to the theorized pressure to settle, the Report concluded:

In sum, California data show that very few cases could be included in a category in which the commonly discussed parameters that define settlement pressure from class certification may have been a factor in the decision to settle. Many cases circumvented the issue altogether by including class certification as an element of the settlement itself. In cases with a class certified through a court-granted motion for certification, neither the overall disposition composition nor the time-to-settlement analyses seem to suggest an automatic or immediate progression from certification through motion to settlement which would allow the determination that pressure results in inevitable settlement. The conclusion here is not that the idea of settlement pressure is fabricated, or even altogether negligible, but rather that the pervasive effect of settlement pressure in California does not appear to be supported by the data.

Report, at 28.  It is at least fair to say that the only comprehensive study of California class action data available does not provide support for the recent, repeated claims by CJAC, Governor Schwarzenegger, and others that class actions are out of control, forcing settlements or in need of reforms such as the right to immediately appeal any order certifying a class.  Such a reform would likely lower the number of contested settlements from meager to negligible.  Certainly, that is a desirable result for businesses that underpay employees, sell defective products, or falsely advertise goods and services.  It is not, however, necessary to save our bankrupt state.

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