District Court declines to decertify class because of alleged conflict-based inadequacy of counsel

United States District Court Judge Lawrence J. O'Neill (Eastern District of California) denied a renewed motion to decertify a class of former members of Calcot that marketed their cotton in a Seasonal Pool.  Andrews Farms v. Calcot, LTD., 2010 WL 3341963 (E.D.Cal. Aug. 23, 2010).  Defendants argued that counsel was inadequate because of an irreconcilable conflict between the interests of a former named plaintiff represented by counsel and the interests of the certified class.  The Court found class counsel to be adequate and declined to apply a mechanical disqualification rule:

Because class actions are unique, “the traditional rules that have developed in the course of attorneys' representation of the interests of clients outside of the class action context should not be mechanically applied to the problems that arise in the settlement of class action litigation.” In re Agent Orange Prod. Liab. Liti., 800 F.2d 14, 19 (2nd Cir.1986). Class actions provide a particular problem with respect to the rules on conflict because “the potential for conflicts in the course of representing numerous class members is greatly enhanced.” In re Joint Eastern and Southern Dist. Asbestos Litig., 133 F.R.D. 425, 431 (S.D.N.Y.1990). Thus, “although automatic disqualification might promote the salutary ends of confidentiality and loyalty,” the courts do not apply such rules automatically in a class action context, because automatic disqualification “would have a serious adverse effect on class actions.” In re Agent Orange, 800 F.2d at 18. Accordingly, to determine whether class counsel will represent the interests of the class vigorously, the Court must employ “a balancing of the interests of the various groups of class members and of the interest of the public and the court in achieving a just and expeditious resolution of the dispute.” In re Joint Eastern and Southern Dist. Absestos Litig., 133 F.R.D. at 431 (quoting In re Agent Orange, 800 F.2d at 19).

Slip op., at 8.

Widespread manifestation of a defect is not essential to class certification

The Ninth Circuit giveth and it taketh away.  On the one hand, the Fourth Amendment is better described as the Fourth Suggestion around these parts.  But consumer class actions received a booster shot last week.  In Wolin v. Jaguar Land Rover (9th Cir. Aug. 17, 2010), the Ninth Circuit reversed a denial of class certification in a consumer class action alleging a defective design in an automobile.  Plaintiffs Gable and Wolin each brought a class action lawsuit against Jaguar Land Rover North America, LLC (“Land Rover”) alleging that Land Rover’s LR3 vehicles suffer from an alignment geometry defect that causes tires to wear prematurely. The district court declined to certify a class because Gable and Wolin were unable to prove that a majority of potential class members suffered from the consequences of the alleged alignment defect.  The Ninth Circuit reversed.

The Court first examined commonality:

Federal Rule of Civil Procedure 23(a)(2) provides that “questions of law or fact common to the class” are a prerequisite to class certification. Commonality exists where class members’ “situations share a common issue of law or fact, and are sufficiently parallel to insure a vigorous and full presentation of all claims for relief.” Cal. Rural Legal Assistance, Inc. v. Legal Servs. Corp., 917 F.2d 1171, 1175 (9th Cir. 1990) (internal quotation marks and citation omitted). “The existence of shared legal issues with divergent factual predicates is sufficient, as is a common core of salient facts coupled with disparate legal remedies within the class.” Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019 (9th Cir. 1998). [2]

Appellants easily satisfy the commonality requirement. The claims of all prospective class members involve the same alleged defect, covered by the same warranty, and found in vehicles of the same make and model. Appellants’ complaints set forth more than one issue that is common to the class, including: 1) whether the LR3’s alignment geometry was defective; 2) whether Land Rover was aware of this defect; 3) whether Land Rover concealed the nature of the defect; 4) whether Land Rover’s conduct violated the Michigan Consumer Protection Act or the Florida Deceptive and Unfair Trade Practices Act; and 5) whether Land Rover was obligated to pay for or repair the alleged defect pursuant to the express or implied terms of its warranties. These common core questions are sufficient to satisfy the commonality test. See Hanlon, 150 F.3d at 1019-20.

Slip op., at 11991.  The Court then rejected the argument that individualized factors would affect tire wear:  "What Land Rover argues is whether class members can win on the merits. For appellants’ claims regarding the existence of the defect and the defendant’s alleged violation of consumer protection laws, this inquiry does not overlap with the predominance test."  Slip op., at 11993.

Then, discussing typicality, the Court made what is probably the most striking pronouncement of the opinion:

Whether they experienced premature tire wear at six months, nine months, or later goes to the extent of their damages and not whether named appellants “possess the same interest and suffer[ed] the same injury as the class members.” E. Tex. Motor Freight Sys. Inc. v. Rodriguez, 431 U.S. 395, 403 (1977) (internal quotation marks omitted). Typicality can be satisfied despite different factual circumstances surrounding the manifestation of the defect. See Daffin, 458 F.3d at 553. Gable and Wolin, like the rest of the class, may have a viable claim regardless of the manifestation of the defect. The fact that Gable and Wolin already received discounts and some free services also does not defeat typicality. See Lymburner v. U.S. Fin. Funds, Inc., 263 F.R.D. 534, 540 (N.D. Cal. 2010) (finding named plaintiff typical of class despite availability of plaintiff-specific remedy and finding “no authority for the argument that typicality is defeated because the remedies may be different for class members or that the availability of rescission as a remedy will monopolize this case”). Gable’s and Wolin’s claims are typical of the class.

Slip op., at 11996.  Finally, the Court concluded that superiority is closely connected to commonality:

Appellants aver that no other prospective class members have filed other related actions, and Land Rover does not dispute this point. The amount of damages suffered by each class member is not large. Forcing individual vehicle owners to litigate their cases, particularly where common issues predominate for the proposed class, is an inferior method of adjudication.

Slip op., at 11997.

Fun fact:  This same panel also heard the Mazza, et al. v. American Honda Motor Company case.

Ninth Circuit: Rule 12(f) cannot be used to strike a claim for damages unavailable as a matter of law

Rule 12(f) of the Federal Rules of Civil Procedure states that a district court “may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.”  In Whittlestone v. Handi-Craft Co. (9th Cir. Aug. 17, 2010), the Ninth Circuit answered a question of first impression regarding the permissible uses of a Motion to Strike.  The district court struck a claim for damages that it found to be unavailable as a matter of law.  The Court wasted no time answering the question and reversing the district court:

It is quite clear that none of the five categories covers the allegations in the pleading sought to be stricken by Handi- Craft. First, the claim for damages is clearly not an insufficient defense; nobody has suggested otherwise. Second, the claim for damages could not be redundant, as it does not appear anywhere else in the complaint. Third, the claim for damages is not immaterial, because whether these damages are recoverable relates directly to the plaintiff’s underlying claim for relief. See Fogerty, 984 F.2d at 1527 (“Immaterial matter is that which has no essential or important relationship to the claim for relief or the defenses being plead.”) (quoting 5A Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 1382, at 706-07 (1990) (quotation marks omitted)). Fourth, the claim for damages is not impertinent, because whether these damages are recoverable pertains directly to the harm being alleged. Id. (“Impertinent matter consists of statements that do not pertain, and are not necessary, to the issues in question.”) (quotation marks and citation omitted). Finally, a claim for damages is not scandalous, and Handi-Craft has not alleged as much.

Slip op., at 12066-67.  The Court concluded that to permit the use attempted by the defendant would create a redundancy within the federal rules.  I say let's have less time-wasting on pleadings squabbles and more time on substance.

District Court de-CAFA-nates Hollinghurst v. Lacoste USA

United States District Court Judge Christina A. Snyder granted a motion to remand an action removed pursuant to the Class Action Fairness Act ("CAFA").  Hollinghurst v. Lacoste USA (C.D.Cal. June 28, 2010).  That part isn't so interesting.  The interesting part is that the Court found that the face of the initial complaint had enough information from which the defendant could have extrapolated an amount in controversy over $5 million.  The defendant argued that it was not until discovery responses were received that the calculation was possible.  The Court disagreed:

The only new information from plaintiff’s supplemental responses that defendant cites to in its notice was the frequency by which plaintiff was denied her meal breaks and rest periods (two to fifteen meal and/or rest breaks per week) and the amount of time plaintiff was made to work off-the-clock (twenty minutes to one hour per week). The frequency by which plaintiff was denied her meal breaks and rest periods was not a critical discovery because plaintiff has always sought unpaid wages and penalties based on the claim that all class members “were also prevented from taking all daily meal periods . . . and also prevented from taking any and all rest breaks.” See Compl. ¶ 5.  Therefore, from the outset defendant could have calculated the amount in controversy under the assumption that all rest breaks and meal periods had been denied to class members.

Slip op., at 8, fn. 5.  The Court briefly noted a second ground supporting remand:

Additionally, the Court finds that defendant waived its right to remove when it demurred to dismiss the class allegations, a substantial affirmative action in which defendant submitted issues for determination in state court. By doing so, defendant indicated its willingness to litigate in state court before it filed its notice of removal to federal court.

Slip op., at 9.  It's a one-two punch:  a strict standard applied to the timing of first awareness of the right to remove under CAFA and a definitive finding that a demurrer to class action allegations is a submission to the jurisdiction of the superior court.

You can view the embedded opinion in the acrobat.com flash viewer below:

If the viewer isn't working for you (say, if you are viewing this on an iPad or iPhone), you can download the opinion here.  Thanks to the reader that alerted me to this decision.

If an arbitration agreement allows the arbitrator to determine if the agreement is enforceable, the arbitrator can, unless that agreement is challenged...huh?

Today, the United States Supreme Court added to its recent spate of arbitration-related decisions.  In Rent-A-Center, West, Inc. v. Jackson (June 21, 2010), the Supreme Court considered one aspect of when a court determines arbitration agreement enforceability and when that determination must be left to the arbitrator.  In short, the Court held that, under the FAA, where an agreement to arbitrate includes anagreement that the arbitrator will determine the enforceability of that agreement, if a party specifically challenges the enforceability of the specific agreement to give the arbitrator the power to determine enforceability, the trial court considers that specific challenge.  But if a party challenges the enforceability of the agreement as a whole, the challenge is reserved for the arbitrator because of the delegation of that power to the arbitrator.

The dissent is rightly perplexed by this strange outcome:

In other words, when a party raises a good-faith validity challenge to the arbitration agreement itself, that issue must be resolved before a court can say that he clearly and unmistakably intended to arbitrate that very validity question. This case well illustrates the point: If respondent’s unconscionability claim is correct—i.e., if the terms of the agreement are so one-sided and the process of its making so unfair—it would contravene the existence of clear and unmistakable assent to arbitrate the very question petitioner now seeks to arbitrate. Accordingly, it is necessary for the court to resolve the merits of respondent’s unconscionability claim in order to decide whether the parties have a valid arbitration agreement under §2.  Otherwise, that section’s preservation of revocation issues for the Court would be meaningless.

Dissent, at 7.  In light of the current Court's view on arbitration agreements, it will likely take legislation to protect consumers and employees from adhesive arbitration agreements.

Will grant of certiorari in Laster v. AT&T Mobility LLC affect other cases? Not so far.

The Ninth Circuit's decision in Laster v. AT & T Mobility LLC, 584 F.3d 849 (9th Cir.2009) will be reviewed by the Supreme Court in AT & T Mobility LLC v. Concepcion, --- S.Ct. ----, 2010 WL 303962, 78 USLW 3454, 78 USLW 3677, 78 USLW 3687 (U.S. May 24, 2010) (NO. 09-893).  The issue presented in Concepcion has been framed by some as calling for a determination of whether the Federal Arbitration Act (“FAA”) preempts the State of California from conditioning the enforcement of an arbitration agreement on the availability of class-wide arbitration.  Others have more aggressively described the issue more broadly.  In either event, the question of concern to litigants now is the effect, if any, of that decision to grant review in other cases.  In at least one case, there was no evident effect.

United States District Court Judge Jeremy Fogel (Northern District of California) denied a motion to stay that was predicated upon the Supreme Court's decision to grant certiorari in Concepcion.  Kaltwasser v. Cingular Wireless LLC, 2010 WL 2348642 (June 8, 2010) (unpublished).

While the Ninth Circuit still hasn't defined "similarly situated" under the FLSA, California's federal courts continue to apply the two-stage process

United States Magistrate Judge Edward M. Chen (Northern District of California) granted plaintiff's motion to conditionally certify a collective action of Sales Representatives working for Defendant Vector Marketing Corporation.  Harris v. Vector Marketing Corp., 2010 WL 1998768 (N.D. Cal. May 18, 2010).  In doing so, Magistrate Judge Chen added his name to the long list of federal courts in California that have adopted a two-step approach for determining whether a class is “similarly situated.” Under this approach, a district court first determines, based on the submitted pleadings and, perhaps, a few declarations, whether the proposed class should be notified of the action.  At the first stage, the determination of whether the putative class members will be similarly situated is made using a "fairly lenient" standard, and typically results in "conditional certification" of a representative class. District courts have held that conditional certification requires only that “ ‘plaintiffs make substantial allegations that the putative class members were subject to a single illegal policy, plan or decision.’ ”

The second-step usually occurs after discovery is complete, at which time the defendants may move to decertify the class.  In the second step, the court makes a factual determination about whether the plaintiffs are similarly situated by weighing such factors as (1) the disparate factual and employment settings of the individual plaintiffs, (2) the various defenses available to the defendant which appeared to be individual to each plaintiff, and (3) fairness and procedural considerations. If the court determines that the plaintiffs are not similarly situated, the court may decertify the class and dismiss the opt-in plaintiffs' action without prejudice. Even when the parties settle, the court must make some final class certification finding before approving a collective action settlement.

AT&T's preemption argument based on Stolt-Nielsen is dead before it hits the floor

United States District Court Judge Claudia Wilken (Northern District of California) has already been gifted with the privilege of considering whether Stolt-Nielsen S. A. et al. v. AnimalFeeds International Corp. (discussed on this blog here) preempts any state law that would preclude enforcement of an arbitration agreement.  McArdle v. AT & T Mobility LLC, 2010 WL 1532334 (N.D.Cal. May 10, 2010).  Judge Wilken took care of that argument in one sharp paragraph:

Defendants assert that Stolt-Nielsen creates a substantial question as to whether the “FAA would preempt any holding that California law precludes enforcement of McArdle's agreement to arbitrate his disputes with” them on an individual basis. Mot. for Leave at 4. The Court disagrees. The issue presented in Stolt-Nielsen was “whether imposing class arbitration on parties whose arbitration clauses are ‘silent’ on that issue is consistent with the Federal Arbitration Act (FAA).” 2010 WL 1655826, at *4. The Supreme Court did not address FAA preemption. Nor did it overrule its precedent upon which the Ninth Circuit relied in Shroyer v. New Cingular Wireless Services, Inc., which held that California law on unconscionability could render an arbitration clause unenforceable, 498 F.3d 976, 986-87 (9th Cir.2007).  Stolt-Nielsen is distinguishable both on the facts and the law and, therefore, does not require this Court to reconsider its order on Defendants' motion to stay this action pending their appeal.

Slip op., at 1.  One interesting bit of information is also included in the Order.  The Ninth Circuit recently held that Shroyer continues to control the issue of unconscionability analysis under California law.  Laster v. AT & T Mobility LLC, 584 F.3d 849 (9th Cir.2009). AT&T filed a petition for certiorari in Laster, upon which they expect the Supreme Court to rule by May 24.  If the Supreme Court takes up Laster, they will be forced to explicitly address carve-outs alluded to by the dissent in Stolt-Nielsen but not addressed by the majority opinion.

Discovery ruling in McArdle v. AT&T Mobility LLC finds that notice is unnecessary when ordering class member contact information produced

United States Chief Magistrate Judge Maria-Elena James, as if predicting the very contents of my April 21, 2010 Daily Journal article, ordered Defendants AT & T Mobility LLC, New Cingular Wireless PCS LCC, and New Cingular Wireless Services, Inc. to produce the contact information for thousands of customers that had complained after incurring international roaming charges without first issuing a privacy notice.  McArdle v. AT & T Mobility LLC, 2010 WL 1532334 (N.D.Cal. Apr 16, 2010).

Chief Magistrate Judge James said:

As to providing a written notice to the customers, the Court finds such notice unnecessary. First, Pioneer does not impose a notice requirement. Second, notice would make no sense here, as witnesses cannot choose to “opt out” of civil discovery.  Tierno v. Rite Aid Corp., 2008 WL 3287035, at *3 (N.D.Cal.2008). “Generally, witnesses are not permitted to decline to participate in civil discovery, even when the information sought from them is personal or private.” Puerto v. Superior Court, 158 Cal.App.4th at 1242, 1256-57 (2008). The Court notes that the minimal information Plaintiff requests is indeed contemplated under the Federal Rules of Civil Procedure as basic to the discovery process. Specifically, Rule 26(a)(1)(A) requires each party to disclose before formal discovery begins “the names, addresses and telephone numbers of each individual likely to have discoverable information that the disclosing party may use to support its claims or defenses.” Here, many of Defendants' complaining customers may be considered percipient witnesses to the relevant issue - international-roaming charges, and could therefore be considered persons having discoverable knowledge and proper subjects of discovery.

Slip op., at 4; see also, Boo-ya, at page bite me.  Defendants were given 14 days to provide the contact information.

“Generally, witnesses are not permitted to decline to participate in civil discovery, even when the information sought from them is personal or private.”  Yes.  Witnesses don't get to opt-out of being witnesses.