in brief: Ninth Circuit joins others in holding that denial of certification does not destroy CAFA jurisdiction

In United Steel, Paper & Forestry, Rubber, Manufacturing, Energy, Allied Industrial & Service Workers International Union, AFL-CIO, CLC, et al. v. Shell Oil Company (9th Cir. Apr. 21, 2010) (say that three times fast), a putative class action alleging various wage & hour violations was removed to federal district court pursuant to 28 U.S.C. § 1332(d)(2) (CAFA).  Certification was eventually denied.  The district court concluded that it lacked jurisdiction and remanded the matter to state court.  On appeal, the Ninth Circuit joined the Seventh and Eleventh Circuits in holding that denial of class certification does not divest the federal district court of jurisdiction.  The Court recognized the general principles that jurisdiction is evaluated at the time it is invoked, and subsequent developments do not destroy jurisdiction if it was properly invoked originally.  All else equal, this decision should reduce the overall degree of hapiness experienced by district court judges.  Now they can't put an unsuccessful, removed class action out of its misery with a remand bullet to the head.  Thus, federal district courts will have the pleasure of overseeing more individual, state law-based actions.

Judge Patel offers interesting comments about the puzzle of PAGA

United States District Court Judge Marilyn Hall Patel (Northern District of California) offered some interesting comments, but no clear solutions, to the puzzle posed by litigation of PAGA claims as representative actions.  Ochoa-Hernandez v. Cjaders Foods, Inc.. (N.D. Cal. Apr. 2, 2010) 2010 WL 1340777.  In the course of denying plaintiff's motion to preclude the defendant from contacting current or former employees about the litigation, the Court said:

From a practical perspective, plaintiff's analogy between class actions and PAGA claims is also misplaced. While both fall within the general category of virtual representation, there are significant differences between the two. Unlike a class action seeking damages or injunctive relief for injured employees, the purpose of PAGA is to incentivize private parties to recover civil penalties for the government that otherwise may not have been assessed and collected by overburdened state enforcement agencies. Id. (“The act's declared purpose is to supplement enforcement actions by public agencies, which lack adequate resources to bring all such actions themselves.”). Unlike class actions, these civil penalties are not meant to compensate unnamed employees because the action is fundamentally a law enforcement action. Moreover, unlike the binding finality of a class action with respect to damages, the individual employee has less at stake in a PAGA representative action: if the employer defeats a PAGA claim, the nonparty employees, because they were not given notice of the action or afforded an opportunity to be heard, are not bound by the judgment as to remedies other than civil penalties. Id. at 987, 95 Cal.Rptr.3d 588, 209 P.3d 923. Thus, nonparty employees can bring an action against the employer based on identical facts so long as they do not seek civil penalties. Class members, however, would be bound by a judgment against the class, independent of the remedy later sought.

*5 Class actions litigated in federal court also contain numerous procedural protections that are not available in PAGA claims. Unnamed employees need not be given notice of the PAGA claim, nor do they have the ability to opt-out of the representative PAGA claim. There is no indication that the unnamed plaintiffs can contest a settlement, if any, reached between the parties. The court does not have to approve the named PAGA plaintiff, nor does the court inquire into the adequacy of counsel's ability to represent the unnamed employees. These procedural protections ensure the fidelity of the attorney-client arrangement in a class action. Their absence further militate against considering a PAGA claim akin to a certified class action.

Additionally, in order to bridge the gap between Arias and the creation of an attorney-client relationship, at least two inferential steps are required, and neither is present. First, Arias is silent on what procedures, if not class action procedures, are sufficient to perfect representative status in representative actions. While representative status may accrue once administrative requirements have been satisfied, Arias does not so hold and plaintiff cites no further authority. Second, assuming that representative status is perfected once administrative requirements are satisfied, Arias does not contemplate the practical issue of when, if at all, an attorney-client relationship arises between plaintiff's counsel and the current or former employees.

Slip op., at 4-5.  If it isn't obvious from this long excerpt, the argument up for discussion was whether an attorney-client relationship existed between the absent employees and the attorney for the named plaintiff.  While the Court's comments explain why a PAGA claim is different from a class action, the discussion is not intended to address the case management question posed by PAGA.  Nevertheless, the brief observations by this Court are of interest to practitioners in this area of law.

Conditionally certified FLSA class of United Auto Credit Corporation Supervisors classified as exempt

United States District Court Judge Ronald M. Whyte (Northern District of California) granted United Auto Credit Corporation's motion to decertify a class of California-based Supervisor (and related) employees after the class was conditionally certified under the FLSA.  Hernandez v. United Auto Credit Corporaiton (N.D. Cal. Apr. 2, 2010) 2010 WL 1337702.  In FLSA actions, many Courts employ a two-phase process for "certification" of FLSA classes, an approach used by the trial court here:

Under the two-step approach, the court first considers whether to certify a collective action and permit notice to be distributed to the putative class members. See Thiessen, 267 F.3d at 1102; Russell v. Wells Fargo & Co., 2008 WL 4104212, at *2-3 (N.D.Cal. Sept.3, 2008). At this first stage, the standard for certification is fairly easy to satisfy. Courts have required only “substantial allegations, supported by declarations or discovery, that the putative class members were together the victims of a single decision, policy, or plan.” Russell, 2008 WL 4104212, at *2.

At the second stage, after discovery has been taken, the court may decertify the class if it concludes that the class members are not similarly situated. Id. at *3. The court can consider a number of factors in deciding whether an action should ultimately proceed collectively, including: (1) the disparate factual and employment settings of the individual plaintiffs; (2) the various defenses available to the defendant and whether they appear to be individual to each plaintiff; (3) fairness and procedural considerations; and (4) whether plaintiffs made the required filings before filing suit. Thiessen, 267 F.3d at 1103. However, a requirement that the class members be identical would be inconsistent with the intent of FLSA's provision that a case can proceed as a collective action. Pendlebury v. Starbucks Coffee Co., 518 F.Supp.2d 1345, 1361 (S.D.Fla.2007).

Slip op., at 2.  The motion filed by the defendant in this case concerned the more rigorous showing required in the second stage.  (Side Note:  The Ninth Circuit has not yet explicitly held that it concurs with the two-stage approach, but District Courts have been employing that approach in the Ninth Circuit for many years without opposition.)

In the course of briefing, the plaintiffs apparently advanced the novel argument that the supervision requirement included in the executive exemption test created a ratio requirement where an employer had to show that there were at least two non-exempt employees for every executive:

Plaintiffs' argument overstates the requirement of the pertinent FSLA regulation. Plaintiffs are correct that in order to qualify for the executive exemption, an employee must “customarily and regularly direct[ ] the work of two or more other employees.” 29 C .F.R. § 541.100(a)(3). The language of the regulation, however, does not require a strict mathematical ratio between an “employee employed in a bona fide executive capacity” and “other employees.” All the regulation requires is that an employee customarily or regularly direct the work of two or more other employees. The other employees whose work the executive directs may or may not themselves be executives. Thus, the FLSA does not create a “ratio requirement.” Whether the present conditional class should be decertified, then, depends on the individualized assessment of whether the class members are “similarly situated.” The court now turns to that inquiry.

Slip op., at 3.  No dice.  Turning to the merits of the motion by defendant, the Court, as did the District Court in Weigele v. Fedex (discussed here), placed little weight on the uniform classification of employees by a central office:  "[T]he recent decision of In re Wells Fargo Homes Mortg. Overtime Litig., 571 F.3d 953 (9th Cir.2009), which involved certification under Federal Rule of Civil Procedure 23(b)(3), cautions against placing too much weight on an internal policy of classifying all members of a particular class of employees as exempt."  Slip op., at 5.  More importantly, however, the Court discussed the plaintiffs' inability to rebut substantial evidence showing great disparity in the job duties of different Supervisors.

Are there really that many large businesses out there that let their employees do whatever they want?

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)

Ninth Circuit holds that a class representative can voluntarily settle individual claims but retain a personal stake sufficient to appeal the denial of class certification

In the last few years, California Courts of Appeal have examined the question of whether an putative class representative can voluntarily settle individual claims while "agreeing" with the defendant that the plaintiff would retain a right to appeal the denial of class certification.  That examination hasn't gone well for plaintiffs:  "The parties' intent cannot compel this court to issue an advisory opinion on issues in which, after the settlement, Larner no longer retains any individual, personal stake."  Larner v. Los Angeles Doctors Hospital Associates, LP, 168 Cal. App. 4th 1291, 1298 (2008).  However, the Larner Court suggested that, had Larner "reserved any right to shift attorney fees to other class members," she might have retained an interest in the litigation sufficient to support her right to appeal.  Larner, at 1304.

After Larner, the trend continued, and with increasing momentum against plaintiffs.  Watkins v. Wachovia Corp., 172 Cal. App. 4th 1576 (2009) actually criticized Larner: "We believe that it is illogical to import the law governing 'pick off' cases into the context of a voluntary settlement."  Watkins, at 1591.  Watkins bluntly declared, "There are no public policy interests implicated by a settlement voluntarily accepted."  Watkins, at 1591.

The Ninth Circuit had occasion to examine this same issue.  In Narouz v. Charter Communications (9th Cir. Jan. 15, 2010), the Court examined "whether the settlement and voluntary dismissal by a class representative of his personal claims in a putative class action lawsuit renders moot his appeal of the denial of class certification."  Slip op., at 1172.  Identifying the issue as one open in the Ninth Circuit, the Court began its analysis with an examination of decisions arising in the context of "involuntary" claim expiration:

The Supreme Court held in Geraghty that when a class representative’s claims expire involuntarily, that representative “retains a ‘personal stake’ in obtaining class certification sufficient” to maintain jurisdiction to appeal a denial of class certification. Id. at 404. The Court reasoned that the class representative maintained at least an interest in spreading litigation costs and shifting fees and expenses to the other litigants with similar claims. Id. at 403; see also Deposit Guar. Nat’l Bank, Jackson Miss. v. Roper, 445 U.S. 326, 334 n.6 (1980).

Slip op., at 1175.  Much like the Larner Court, the Ninth Circuit held:

We hold that when a class representative voluntarily settles his or her individual claims, but specifically retains a personal stake as identified by Geraghty and Roper, he or she retains jurisdiction to appeal the denial of class certification. In so holding, we join several other circuits. See Richards v. Delta Air Lines, Inc., 453 F.3d 525 (D.C. Cir. 2006); Potter v. Norwest Mortgage, Inc., 329 F.3d 608 (8th Cir. 2003); Toms v. Allied Bond & Collection Agency, Inc., 179 F.3d 103 (4th Cir. 1999); Love v. Turlington, 733 F.2d 1562 (11th Cir. 1984).

Slip op. at 1175.  The Court then emphasized that "a class representative cannot release any and all interests he or she may have had in class representation through a private settlement agreement" and still assert the existence of a "personal stake" in the litigation.  Slip op. at 1175.

The Court then briefly criticized the District Court's failure to create a proper record for review when it refused to certify the proposed class for settlement purposes:  "It is clear here that the district court erred in denying class certification without providing any findings or providing any analysis of the Rule 23 factors."  Slip op., at 1179.  The Court succinctly said, "Meaningful appellate review is impossible."  Slip op., at 1179.

There was also a spirited exchange between District Judge Korman (Senior United States District Judge for the Eastern District of New York, sitting by designation), who concurred in the decision, and Circuit Judge Rymer, who dissented.

California Proposition 8 elicits constitution-based, discovery rights opinion from Ninth Circuit

For those following the complicated twists and turns of litigation over California Ballot Proposition 8, which amended the California Constitution to provide that only marriage between a man and a woman is valid or recognized in California, the litigation about that measure continues.  Today, the Ninth Circuit, in Perry, et al. v. Arnold Schwarzenegger (9th Cir. January 4, 2009), issued a writ of mandamus directing the trial court to enter a protective order barring access to internal campaign communications of proponents of the Proposition.  I'm no constitutional law expert, but high-stakes litigation like this tends to create its own complexity, so I simply note the opinion for the constitutional law scholars, fans and practitioners.  I can say that it's not every day that you see discovery limited because it would intrude on the the First Amendment right of freedom to associate.  The one-page appendix to the opinion is also available.

Back to the drawing board: AT&T's arbitration agreement that bans class actions is still unconscionable

It seems to me that the telecommunications and credit card industries are more determined to make an arbitration agreement with a class action ban stick than any other industry.  Most employers have given up that dream, but not the phone company and not the bank.  The latest arbitration agreement with a class action ban comes to us compliments of AT&T Mobility LLC.  But, in Laster v. AT&T Mobility LLC (October 27, 2009), the Ninth Circuit sends another class action ban to the unconscionability graveyard, and just in time for Halloween.

Those crazy mad scientists in the secret AT&T Arbitration Agreement Drafting Lab (also known as the "Triple A - DL" to those in the know), their latest scheme to ban class actions was ingenious, and could have helped them take over the world!  The plan was to circumvent the holding of Shroyer v. New Cingular Wireless Services, Inc., 498 F.3d 976 (9th Cir. 2007) with a little bonus payment clause:

[T]he phone company points to a new wrinkle: unlike the arbitration clause in Shroyer, this arbitration clause provides for a “premium” payment of $7,500 (the jurisdictional limit of California’s small claims court) if the arbitrator awards the customer an amount greater than the phone company’s last written settlement offer made before selection of an arbitrator. Hence, says the phone company, the arbitration clause is not an artifice that has the practical effect of rendering it immune from individual claims.

Slip op., at 14391.  The Ninth Circuit disagreed, and shot down a preemption argument along the way:

We will find, on second blush, the new “premium” payment does not distinguish this case from Shroyer, and that under California law, the present arbitration clause is unconscionable and unenforcable [sic]. Further, we will also find no merit to the phone company’s claim the Federal Arbitration Act (FAA) preempts California unconscionability law.

Slip op., at 14391.  Back to the Triple A - DL, Snidely.  For those not satisfied with just the holding, the Court's analysis relied heavily on Discover Bank v. Superior Court, 36 Cal. 4th 148 (2005):

The California Supreme Court addressed the unconscionability of class action waivers in arbitration agreements for the first time in Discover Bank v. Sup. Ct., 113 P.3d 1100 (Cal. 2005), holding that class action waivers were at least sometimes unconscionable under California law. 113 P.3d at 1108. Class actions, the court reasoned, serve the important policy function of deterring and redressing wrongdoing, particularly where a company defrauds large numbers of consumers out of individually small sums of money. Id. at 1105. Class action waivers pose a problem because, “small recoveries do not provide the incentive for any individual to bring a solo action prosecuting his or her rights.” Id. at 1106. In this way, the class action waiver allows the company to insulate itself from liability for its wrongdoing and the policy behind class actions is thwarted. Id. at 1109.

Slip op., at 14394.  The Court then explained how it interpreted the test in Discover Bank:

We have interpreted Discover Bank as creating a three-part test to determine whether a class action waiver in a consumer contract is unconscionable: (1) is the agreement a contract of adhesion; (2) are disputes between the contracting parties likely to involve small amounts of damages; and (3) is it alleged that the party with superior bargaining power has carried out a scheme deliberately to cheat large numbers of consumers out of individually small sums of money. Id. at 983. In Shroyer, we noted that “there are most certainly circumstances in which a class action waiver is unconscionable under California law despite the fact that all three parts of the Discover Bank test are not satisfied.” Id. Because we hold that the class action waiver at issue satisfies all three parts of the test, as was true in Shroyer, “it is unnecessary to explore those circumstances here.” Id.

Slip op., at 14395.  The application of the Discover Bank test tracks Shroyer.  The Court then disposed of AT&T's contention that the promise of a premium payment distinguished this agreement from Shroyer:

The $7,500 premium payment is available only if AT&T does not make a settlement offer to the aggrieved customer in a sum equal to or higher than is ultimately awarded in arbitration, and before an arbitrator is selected. This means that if a customer files for arbitration against AT&T, predictably, AT&T will simply pay the face value of the claim before the selection of an arbitrator to avoid potentially paying $7,500. Thus, the maximum gain to a customer for the hassle of arbitrating a $30.22 dispute is still just $30.22. We held in Shroyer that a claim worth a few hundred dollars did not provide adequate incentive for a customer to bother pursuing individual arbitration. 498 F.3d at 986. The $30.22 at issue here is even less of an incentive to file a claim. As a result, aggrieved customers will predictably not file claims—even if the odds are that after the letter-writing and arbitrator-choosing, they will get a $30.22 offer—thereby “greatly reduc[ing] the aggregate liability” AT&T faces for allegedly mulcting small sums of money from many consumers. See id. The premium payment provision has no effect on this conclusion, nor do any of the other provisions of AT&T’s revised arbitration clause. The actual damages a customer will recover remain predictably small, thus under the rationale of Discover Bank and Shroyer, AT&T’s class action waiver is in effect an exculpatory clause, hence substantively unconscionable.

Slip op., at 14397-98.  I'll spare you any excerpts from the preemption discussion.  It's sufficient to say that the Court was impressed with a repeat of arguments rejected in Shroyer.

In Cartwright, et al., v. Viking Industries, Inc., District Court certifies consumer class action claims under UCL, CLRA, fraudulent concealment and unjust enrichment theories

On September 11, 2009, the United States District Court, Eastern District of California, issued a substantial class certification opinion in Cartwright, et al. v. Viking Industries, Inc. Cartwright is a consumer class action alleging that certain Viking windows are defective, allowing water and air intrusion into homes. The suit alleged claims for Strict Products Liability, Negligence, Breach of Express Warranty, Breach of Implied Warranty, Violation of the Consumer Legal Remedies Act (“CLRA”), Violation of California’s Unfair Competition Law (“UCL”), Fraudulent Concealment, and Restitution.

The District Court ultimately certified a class for the following claims: CLRA, UCL, fraudulent concealment and unjust enrichment. The District Court denied certification of strict liability and negligence claims. In a thorough opinion that emphasizes a number of pro-consumer certification decisions, the Court certified fraudulent concealment claims by allowing a presumption of reliance. The Court's analysis is as interesting for what it does not cite as for what it does cite. Tobacco II is not mentioned. But the Court does cite Mazza v. Am. Honda Motor Co., 254 F.R.D. 610 (C.D. Cal. 2008), which is currently on appeal to the Ninth Circuit following a 23(f) Petition for Permission to Appeal, and Chamberlan v. Ford Motor Corp., 223 F.R.D. 524, 526-27 (N.D. Cal. 2004).

The Opinion also cites to some principles of federal certification that may be surprising to practitioners that rarely venture outside of California's Superior Court. For instance, the Court notes that evidence inadmissible at trial, and, in particular, expert testimony, may be considered as part of a certification decision. "'On a motion for class certification, the court may consider evidence that may not be admissible at trial.'" Order, citing Mazza, 254 F.R.D. at 616 (citing, in turn, Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 178 (1974)). "'[R]obust gatekeeping of expert evidence is not required; rather, the court should ask only if expert evidence is "useful in evaluating whether class certification requirements have been met."' Ellis v. Costco Wholesale Corp., 240 F.R.D. 627, 635 (N.D. Cal. 2007)."

Now let's see if the acrobat.com embed object will display here:

If you don't see the flash object above, you can directly download the Order. Thanks to Mark Moore for the tip.

Seventh Circuit provides sharply defined view on class member standing in Kohen, et al. v. Pacific Investment Management Company LLC, et al.

I don't follow the Seventh Circuit's decisions closely.  It's a bit outside my regular commute.  But it has served up an educational opinion about class member standing that is too intriguing to pass up without comment.

Kohen v. Pacific Investment Management Co. (7th Cir. Jul. 7, 2009) follows from a successful Rule 23(f) petition by defendants for permission to appeal a District Court's order certifying a class.  The suit, based on section 22(a) of the Commodity Exchange Act, 7 U.S.C. § 25(a), accuses the defendants (referred to in the appeal as “PIMCO”) of having violated section 9(a) of the Act, 7 U.S.C. § 13(a), by cornering a futures market.  What's a cornered futures market?  Glad you asked.  Circuit Judge Posner explains in a very educational discussion that breaks down how a short seller can monopolize a futures market:

Changes in the demand for or the supply of the underlying commodity will make the price of a futures contract change over the period in which the contract is in force. If the price rises, the “long” (the buyer) benefits, as in our example, and if it falls the “short” (the seller) benefits. But a buyer may be able to force up the price by “cornering” the market—in this case by buying so many June contracts for 10-year Treasury notes that sellers can fulfill their contractual obligations only by dealing with that buyer.

Slip op. at 4.  But defendants were trying to corner financial commodities, and you can't corner the money supply...except in one particular instance involving Treasury notes:

Board of Trade v. SEC, supra, 187 F.3d at 725, remarks that since the possibility of manipulation “comes from the potential imbalance between the deliverable supply and investors’ contract rights near the expiration date[,] . . . [f]inancial futures contracts, which are settled in cash, have no ‘deliverable supply’; there can never be a mismatch between demand and supply near the expiration, or at any other time.” But while it is correct that most financial futures contracts are settled in cash, CFTC v. Zelener, 373 F.3d 861, 865 (7th Cir. 2004); Kolb, supra, at 16, and that if a cash option exists there is no market to corner (no one can corner the U.S. money supply!), futures contracts traded on the Chicago Board of Trade for ten-year U.S. Treasury notes are an exception; they are not “cash settled.” Short sellers who make delivery must do so with approved U.S. Treasury notes; otherwise they must execute offsetting futures contracts.

Slip op. at 5.  The class certified by the district court consisted of all persons who between May 9 and June 30, 2005, bought a June Contract in order to close out a short position.  PIMCO challenged the definition on the ground that it includes persons who lack “standing” to sue because they did not lose money in their speculation on the June Contract.  For example, some of the class members might have taken both short and long positions (in order to hedge—that is, to limit their potential losses) and made more money in the long positions by virtue of PIMCO’s alleged cornering of the market than they lost in their short positions. The plaintiffs acknowledged this possibility but argued that its significance was best determined at the damages stage of the litigation.  The Court rejected PIMCO's contention:

PIMCO argues that before certifying a class the district judge was required to determine which class members had suffered damages. But putting the cart before the horse in that way would vitiate the economies of class action procedure; in effect the trial would precede the certification. It is true that injury is a prerequisite to standing. But as long as one member of a certified class has a plausible claim to have suffered damages, the requirement of standing is satisfied. United States Parole Commission v. Geraghty, 445 U.S. 388, 404 (1980); Wiesmueller v. Kosobucki, 513 F.3d 784, 785-86 (7th Cir. 2008).  This is true even  if the named plaintiff (the class representative) lacks standing, provided that he can be replaced by a class member who has standing. “The named plaintiff who no longer has a stake may not be a suitable class representative, but that is not a matter of jurisdiction and would not disqualify him from continuing as class representative until a more suitable member of the class was found to replace him.” Id. at 786.

Slip op. at 7.  Thus far, the Court has stated little more than settled principles about the ability to substitute class representatives after certification.  But the Court also commented on pre-certification standing:

Before a class is certified, it is true, the named plaintiff must have standing, because at that stage no one else has a legally protected interest in maintaining the suit. Id.; Sosna v. Iowa, 419 U.S. 393, 402 (1975); Walters v. Edgar, 163 F.3d 430, 432-33 (7th Cir. 1998); Murray v. Auslander, 244 F.3d 807, 810 (11th Cir. 2001). And while ordinarily an unchallenged allegation of standing suffices, a colorable challenge requires the plaintiff to meet it rather than stand mute. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992). PIMCO tried to show in the district court that two of the named plaintiffs could not have been injured by the alleged corner. We need not decide whether it succeeded in doing so, because even if it did, that left one named plaintiff with standing, and one is all that is necessary.

Slip op. at 7-8.  The Court then explained that it is unnecessary to know whether all class members have standing to bring claims prior to certification:

What is true is that a class will often include persons who have not been injured by the defendant’s conduct; indeed this is almost inevitable because at the outset of the case many of the members of the class may be unknown, or if they are known still the facts bearing on their claims may be unknown. Such a possibility or indeed inevitability does not preclude class certification, Carnegie v. Household Int’l, supra, 376 F.3d at 661; 1 Alba Conte & Herbert Newberg, Newberg on Class Actions § 2:4, pp. 73-75 (4th ed. 2002), despite statements in some cases that it must be reasonably clear at the outset that all class members were injured by the defendant’s conduct. Adashunas v. Negley, 626 F.2d 600, 604 (7th Cir. 1980); Denney v. Deutsche Bank AG, 443 F.3d 253, 264 (2d Cir. 2006). Those cases focus on the class definition; if the definition is so broad that it sweeps within it persons who could not have been injured by the defendant’s conduct, it is too broad.

Slip op. at 9-10.  Later, California authority received a nod from the Court:

At argument PIMCO’s lawyer told us that he could obtain names of class members. If so, he can, as in Bell v. Farmers Ins. Exchage, 9 Cal. Rptr. 3d 544, 550-51, 568, 571 (Cal. App. 2004), and Long v. Trans World Airlines, Inc., 1988 WL 87051, at *1 (N.D. Ill. Aug. 18, 1988), depose a random sample of class members to determine how many were net gainers from the alleged manipulation and therefore were not injured, and if it turns out to be a high percentage he could urge the district court to revisit its decision to certify the class. Cf. Hilao v. Estate of Marcos, 103 F.3d 767, 782-84 (9th Cir. 1996); Long v. Trans World Airlines, Inc., 761 F. Supp. 1320, 1325-30 (N.D. Ill. 1991); Marisol A. v. Giuliani, 1997 WL 630183, at *1 (S.D.N.Y. Oct. 10, 1997). PIMCO has not done this; should it take the hint and try to do so now, this will be an issue for consideration by the district judge.

Slip op. at 13.  The Opinion finishes with a sharp kick to the shins: "PIMCO’s attempt to derail this suit at the outset is ill timed, ill conceived, and must fail. The district court’s class certification is AFFIRMED."  Slip op. at 15.  Nothing like an educational and blunt opinion to keep legal discourse interesting.

My thanks to Kimberly Kralowec for the mention at UCL Practitioner.  And thanks to some guy whose name sounds like "I am - saw the end" for directing me to the case.

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.