Class certification denied to El Torito managers in misclassification suit

In other news, early reports now indicate that the Pope is Catholic.  Another day, another order denying certification in a misclassification suit is upheld.  More specifically, in Arenas, et al. v. El Torito Restaurants, Inc. (ord. pub. April 6, 2010), the Court of Appeal (Second Appellate District, Division Five) affirmed a trial court order denying certification to three subclasses of managerial employees at El Torrito restaurants.  At this point, misclassification suits have the feeling of an arms race where the defendant companies hold a significant technological lead.  Six years after all the excitement occasioned by Sav-On Drug Stores, Inc. v. Superior Court, 34 Cal. 4th 319 (2004), the upshot appears to be that, once a trial court picks a side, a Court of Appeal is unlikely to get involved.

In this particular decision, the Court relied heavily on a mix of California Supreme Court decisions and, somewhat disturbingly, a number of federal decisions.  For example, citing Marlo v. United Parcel Service, 251 F.R.D. 476 (C.D. Cal 2008), the Court said: 

The Marlo court identified the exact problem that this Court faces. Individual declarations submitted by the parties have anecdotal value but cannot be considered representative or common evidence. Specifically, the Marlo court stated the following:[¶] ‘Plaintiffs evidence is essentially individual testimony and an exemption policy. Under the circumstances in this case, where Plaintiff alleges that 1200 [class members] have been misclassified as exempt employees, Plaintiff had to provide common evidence to support extrapolation from individual experiences to a class-wide judgment that is not merely speculative. Plaintiff has not come forward with common proof sufficient to allow a fact-finder to make a class-wide judgment as to the class members. . . . Because Plaintiff lacks common experience, the Court has no confidence that the jury will be able to do anything but speculate as to a class-wide determination.’

Slip op., at 7.  The Court emphasized that it was not permitted to substitute its view of the evidence for the trial court's view:  "As the Supreme Court made clear in Sav-On Drug Stores, Inc., this court cannot now substitute its own judgment."  Slip op., at 12.

Plaintiffs appear to have argued that it is unfair to accept a uniform classification by defendant but require individualized proof of misclassification, an argument that has not been well received at the appellate level as of late.  The argument fared no better here: 

Plaintiffs argue defendants cannot on one hand assert they have determined, based on job activities, that all managers are exempt but on the other hand argue a court must examine each individual’s tasks to determine whether that person is exempt. This argument was answered in Campbell v. PricewaterhouseCoopers, LLP (E.D.Cal. 2008) 253 F.R.D. 586, 603-604, as follows: “Some courts . . . have determined that it is unfair for an employer to ‘on the one hand, argue that all [class members] are exempt from overtime wages and, on the other hand, argue that the Court must inquire into the job duties of each [class member] in order to determine whether that individual is “exempt.”’ [Citation.] But, under Walsh [v. IKON Office Solutions, Inc. (2007) 148 Cal.App.4th 1440, 1461,] there is no estoppel effect given to an employer’s decision to classify a particular class of employees as exempt—whether right or wrong, or even issued in bad faith; instead, the only legally relevant issue to alleged misclassification is whether the exemption in fact applies. 

Slip op., at 13.  Continuing with the extensive quotations from Campbell, the Court of Appeal wrote: 

“It may be intuitively unfair to permit an employer, who has historically classified a particular group of employees as exempt based on a uniform rule, to argue in the context of litigation that the exemption inquiry will require an individualized analysis. But the assumption behind such an intuitively appealing argument is that an employer should somehow be bound by its prior position—which is foreclosed by Walsh. ‘[I]n resolving questions of California law, this court is bound by the pronouncement of the California Supreme Court . . . and the opinions of the California Courts of Appeal are merely data for determining how the highest California court would rule . . . [but] the opinion of the Court of Appeals on questions of California law cannot simply be ignored.’ [Citation.]” 

Slip op., at 14.  After Ramirez in particular, misclassification suits were in no small supply.  But the arms race was equalizing by the time Sav-On was decided, and it looks like the defense bar has pulled ahead in this area.  To make misclassification suits a legitimate mechanism for correcting classification errors on a class-wide basis, plaintiffs will need to find news ways to show trial courts that systemic misclassification errors are really correctable on a class-wide basis.

Wells Fargo's attempt to decertify a consumer class action bounces

You can't blame them for trying.  Unless you are a judge.  Then you can.  In Gutierrez v. Wells Fargo & Co., 2010 WL 1233810 (N.D. Cal. Mar. 26, 2010, Judge William Alsup was not impressed with defendant's attempt to decertify a consumer class action involving over 1 million class members.  First, some background is in order.

Plaintiffs alleged that defendants Wells Fargo & Company and Wells Fargo Bank, N.A. improperly assessed overdraft charges on their customers' debit card transactions.  Two separate practices were allegedly employed by defendants: (1) the publication, in the “online banking” section of the Wells Fargo Bank website, of inaccurate available-balance information to their customers, and (2) the re-sequencing of debit card transactions from highest to lowest value-rather than in the order in which purchases were completed-prior to being posted against a customer's account. Plaintiffs alleged that the false balance information was employed to increase the likelihood that customers would incur overdraft charges, while the resequencing was employed to maximize the number of overdraft charges defendants could assess against their customers. Defendants denied these allegations. A few months into the dispute, defendant Wells Fargo & Company was voluntarily dismissed from the action, leaving only Wells Fargo Bank.  Both practices were used to certify classes, but the court later decertified claims resting upon the inaccuare balance theory.

Wells Fargo Bank then moved for summary judgment or decertificaiton of the re-sequencing class.  The court denied the request for decertification:

Counsel have been reminded on various occasions that the presence of individualized issues is not fatal to class actions brought under Rule 23 ( see, e.g., Dkt. No. 245 at 9). Rather, the rule tolerates some individualized issues, so long as “questions of law or fact common to the members of the class predominate over any questions affecting only individual members.” FRCP 23(b)(3). Rule 23 also requires a court to be ever cognizant of whether the class action device “is superior to other available methods for the fair and efficient adjudication of the controversy.”

The legal claims of the “re-sequencing” class target the alleged overcharging of overdraft fees for over a million different Wells Fargo customers (Dkt. No. 285, Exh. A at 37-38). All members of the “re-sequencing” class were charged overdraft fees due to defendant's accused high-to-low posting of transactions. The fees themselves, however, were only around $34 each. Given this backdrop, it cannot be disputed that a denial of class-certification would close the door of justice to a staggering amount of claimants. The deterrent value of class litigation and the desirability of providing recourse for the injured consumer who would otherwise be financially incapable of bringing suit clearly render the class action a viable and important mechanism in challenging an alleged fraud on the public. This is especially important here, where the allegedly unlawful practice disproportionately gouges those who maintain, due to choice or (more likely) financial hardship, a shallow amount of funds in their checking accounts.

On the other hand, this order must give full consideration to whether plaintiffs' revised damages study is sufficient to establish class-wide proof of actual injury and/or damages for each absent class member. Otherwise, Rule 23 would be used to truncate the required substantive elements of proof by each claimant in violation of the Rules Enabling Act, 28 U.S.C.2071-77. Having considered the various limitations inherent in Wells Fargo's transaction data (discussed in detail by this order), and the fact that proving actual injury if suits were brought individually would still require the same types of assumptions made by Olsen in his report, this order finds that plaintiffs have presented sufficient class-wide proof of actual injury to survive defendant's motion for decertification. Given this showing, there is no question that common questions predominate in this action. As such, defendant's motion for class decertification is Denied.

Slip op., at 13 -14.  It is interesting that the weaknesses in defendant's transaction data was used by the court to nullify challenges to the methodology used by plaintiffs' expert to assess damages for the class.  The court found that the same flaws in data would impact an individual's attempt to prove damages.  The opinion contains a detailed discussion, with an example, of the allged practices and the damage extrapolation methodology used by plaintiffs' expert.

Northern District Court certifies class in misclassification suit against Deloitte & Touche LLP

United States District Court Judge Susan Illston (Northern District of California) certified a class of salaried employees alleging that they were misclassified as exempt by Deloitte & Touche LLP.  Brady v. Deloitte & Touche LLP, 2010 WL 1200045 (N.D. Cal. Mar. 23, 2010).  The class consists of salaried employees in the audit line of service but who were not licensed accountants.  The Court identified common issues of law and fact as follows:

Common questions of law include whether the professional exemption under California law requires a license for accountants, whether accounting is a “learned profession” under California Wage Order 4-2001, and whether the duties of proposed class members would qualify for administrative exception under California law. Common factual questions include whether defendant's standardized policies and procedures prevented the class members from customarily and regularly exercising discretion and independent judgment with respect to matters of significance, whether defendant categorically classified all class members as exempt, whether defendant required class members to work overtime, along with a host of other questions relating to overtime, meal breaks, timekeeping and pay.

Slip op., at 4.  Generally, the Court maintained a sharp delineation between certification questions and merits issues.

For attendees of the LACBA conference looking for the e-mail forensics software I mentioned...

it can be obtained through Paraben.  The product is currently known as Network Email Examiner (Nemex), version 3.0.  I under-priced it a bit.  It is listed currently as a $799 purchase.  Still cheap when you consider what it does.  The feature list is as follows:

• Supports GroupWise information stores up to 7.03
• Supports Microsoft Exchange information stores 5.0, 5.5, 2000, Exchange 2003 & 2007 (.EDB)
• Supports Lotus Notes information stores 4.0, 5.0, 6.0, 8 (.NSF)
• Easy to use interface
• Advanced searching options
• View one or all individual e-mail accounts in information store
• View all meta-data within individual messages
• Complete Bookmarking
• Export data for review in Paraben's E-mail Examiner
• Summary HTML reporting
• Export to PST files
• NEW Output to MSG & EML format
• Supports Deleted--Deleted recovery with Exchange

Imagine the ability to view and export one complete e-mail account from a massive Exchange information store.  Brilliant! 

The product page lists "free one year subscription" with purchase, but this pertains to the right to receive free updates.  When the year is up, you can still use the version that you have. 

Happy belated second birthday to The Complex Litigator

Last week The Complex Litigator turned two years old.  Since this blog's first birthday, it has moved to SquareSpace for hosting, received quite a bit of cosmetic attention, and continued to grow its readership.  I appreciate that last part most of all.

Random facts:

I was surprised to see that the post about Coito is currently the single most popular post on this site since the move to SquareSpace.  It even beats out Brinker posts.  (I don't have post-by-post statistics prior to the move to SquareSpace, so I can't say for sure the Coito is the most popular post of all time.)

The number of RSS subscribers now exceeds the total average number of visitors per day when this blog was one year old.

CLE: The Thirtieth Annual Labor and Employment Law Symposium

On March 31, 2010, the Labor & Employment Law Section of the Los Angeles County Bar Association will present the Thirtieth Annual Labor and Employment Law Symposium:

The 2010 Labor and Employment Law Symposium provides practical advice and cutting-edge panel discussions on labor and employment law issues of critical importance to attorneys, judges, neutrals, government practitioners, union representatives, in-house counsel, and human resource professionals. The Symposium provides a unique intellectual experience allowing the panelists, all of whom are recognized experts in their fields, to share new perspectives, ideas and information. Each panel discussion covers opposing viewpoints, interpretations and strategies, and will encourage audience questions and participation.

The location details:

Biltmore Hotel
506 South Grand Ave. 
Los Angeles, California

I will be speaking on the panel entitled "20 Tips for Successful Navigation of e-Discovery Requirements," with Moderator Angela Robledo, Hon. Carl J. West, and Heather Morgan.

In Alberghetti v. Corbis Corp., District Court denies certification, but not for the usual reasons

In Alberghetti v. Corbis Corp., 263 F.R.D. 571 (C.D. Cal Jan. 13, 2010), Judge Stephen V. Wilson denied plaintiffs' motion for class certification.  A denial of class certification is not an unusual event.  But, in this case, certification was denied even though the Court found that the plaintiffs satisfied the "commonality," "typicality," and "numerosity" requisites of Rule 23.

In Alberghetti, artists and entertainers filed suit against a photo-licensing company, alleging that it misappropriated plaintiffs' statutory and common law rights of publicity by using plaintiffs' names, images, and likenesses without plaintiffs' consent.  Citing Valentino v. Carter-Wallace, Inc., 97 F.3d 1227 (9th Cir.1996), the Court first concluded that a majority of the class members could not be identified and would have no knowledge that their likenesses had been misappropriated or that their rights would be determined by the action.  The Court concluded that the plaintiffs had not adequately addressed that due process concern.

Second, the Court found fatal conflicts between the plaintiffs themselves and between plaintiffs and their counsel.  "Plaintiffs disagree as to whether injunctive relief is appropriate: one named Plaintiff wants to enjoin all of Defendant's uses of her image; the other named Plaintiff seems to recognize that media-related uses may be beneficial."  Alberghetti, at 577.  The Court also noted a very unusual rift between the plalintiffs and their attorneys: "In the present case, the individual Plaintiffs and their lawyer are all in conflict over whether to seek injunctive relief and how to define the scope of injunctive relief."  Id., at 578.  The plaintiffs and their counsel even disagreed as to who should be included in the class.

Not the usual reasons one sees for a denial of class certification.  It is an interesting opinion for that reason alone.

U.S.D.C. Judge finds Affinity Logistics drivers are independent contractors...under Georgia law

On March 22, 2010, the United States District Court for the Southern District of California issued its Memorandum Decision and Order finding that drivers for Affinity Logistics were properly classified as independent contractors following a bench trial of the claims of a certified class of delivery truck drivers.  Ruiz v. Affinity Logistics Corp., ___ F.Supp.2d ___, 2010 WL 1038226 (S.C. Cal. Mar. 22, 2010).  Unlike California's strong presumption in favor of and employer-employee relationship, Georgia law apparently includes a presumption that a contract specifying an independent contractor relationship is presumed true.  According to Judge Sammartino, the plaintiffs didn't meet their burden in the bench trial for the certified class of delivery/logistics drivers.

The plaintiffs submitted evidence of highly detailed manuals specifying how work was to be performed.  The Court did not believe defendant's testimony that the detailed manuals were mere "wishes" about how work should be performed.  The problem, according to the Court, was that no real evidence demonstrated that the manuals were given to all drivers or that any of them read the manuals.  Coupled with evidence that drivers could have someone else drive the route for them, this absence of substantial proof of control, according to the Court, doomed plaintiffs' claims.

Brinker Watch 2010

If you were in a coma for a while, Brinker Restaurant v. Superior Court (Hohnbaum) was fully briefed back in October 2009.  And...that's it.  Other than a striking new logo for 2010, there is no news.  I post this only because this blog receives traffic from Brinker searches on an almost daily basis.  I should have added some sort of extra bit to the logo, like "Now with EXTRA uncertainty...."  Back in September 2009 I moved my estimate for an Opinion release date out from June 2010 to August 2010.  The notice of argument would need to issue in April to make that August Opinion release date a near certainty.  Thus, I need to adjust the over-under to October 2010 to equalize the wagering.  Place your bets, folks.

Blogs of Note: The Pop Tort

It's been a while since I noted an update to the "Blawgs" of Note, but I've been meaning to get back to recommending some quality reading from around the "Blawgosphere" (ack - that's a painful pseudo-word).  Today's recommended reading is The Pop Tort, brought to you by the Center for Justice & Democracy.  If you are big business, you probably think that the Center for Justice & Democracy is another cover group for "greedy" trial lawyers.  If you are a consumer attorney (or a consumer), you probably think that the Center for Justice & Democracy is that thin line between unchecked corporate tyranny and hapless, helpless individuals that would have tire tracks up their back but for the voice of stalwarts like CJ&D.  Regardless of your perspective, The Pop Tort is good reading.

You can follow The Pop Tort (@ThePopTort) on Twitter or become their fan on Facebook.  Personally, I have grave misgivings about Facebook, but it's hard to resist the FaceBorg, with its hundreds of millions of assimilated drones.