a California-centric collection of comments and resources about complex litigation and class action practice
Some time in the last week my address and e-mail information reverted back to old information in the CM/ECF system for the Central District of California. It happened to at least one other attorney. Have you heard about this happening to anyone else?
Oral argument was finally held in Brinker last week. Wagering on appellate court outcomes after listening to oral arguments is not a smart use of gambling funds in most instances, and it seems dangerous here as well. But most assessments of the argument seem to agree on two things. First, the consensus is that the Justices appeared to direct a more critical set of questions to plaintiffs' counsel, Kimberly Kralowec, on the issue of whether employers must "ensure" that meal periods are taken, rather than simply "provide" employees with an opportunity to take a meal period. Second, on the issue of when a meal must occur, at least Justice Liu appeared to take exception with an interpretation that would allow an employer to schedule meal period after more than five hours of work.
Here are a few examples of coverage of or opinions about the oral argument:
In something approximating 90 days we will finally know the answer to this great mystery.
On Monday, October 31, 2011 (hello, Halloween), the United States Supreme Court issued the following Order:
10-1450 SONIC-CALABASAS A, INC. V. MORENO, FRANK The petition for a writ of certiorari is granted. The judgment is vacated, and the case is remanded to the Supreme Court of California for further consideration in light of AT&T Mobility LLC v. Concepcion, 563 U.S. ___ (2011).
In Sonic Calabasas A, Inc. v. Moreno (2011), reported at 51 Cal. 4th 659, a divided California Supreme Court (4-3) concluded that (1) "Berman" hearings are an unwaivable statutory right, (2) arbitration is an acceptable alternative to de novo review by the Superior Court, (3) a waiver of the right to a "Berman" hearing before the Labor Commissioner is against public policy, and (4) the waiver of a "Berman" hearing is unconscionable under standard contractual principles of unconscionability analysis.
What does this mean? It means that the underpinnigs of Gentry may be explored in the follow-up opinion. It also means that the new Justices, including the new Chief Justice of the California Supreme Court, may be deciding votes, given that Chief Justice George was in the majority and Justice Moreno authored the original opinion.
With AT&T Mobility LLC v. Concepcion, ___ U.S. ___, 131 S.Ct. 1740 (2011) in the bank and earning interest, the new defense playbook includes a renewed, direct assault on Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal. 4th 83 (2000). But in Sanchez v. Valencia Holding Company, LLC (October 24, 2011), the Court of Appeal (Second Appellate District, Division One) stongly declared the ongoing viability of Armendariz after Concepcion. In other words, Concepcion is to state law unconscionability analysis as tap water is to vampires - no effect.
The allegations are easy to summarize. Plaintiff Sanchez wanted to buy a used Mercedes. The dealer charged him $3,700 to have the vehicle "certified" as eligible for a lower interest rate. That was a lie. The charge was for an undisclosed and optional extended warranty. The dealer charged him new tire fees when not all of the tires were new. Plaintiff was also told that the vehicle was a "certified" used Mercedes, having been through a rigorous inspection and maintenance process. That was also a lie. Sanchez filed a class action alleging, among other things, violations of the CLRA, ASFA, UCL, Song-Beverly Act, and Public Resources Code section 42885.
Valencia moved to compel arbitration. The trial court denied the motion, stating that the CLRA expressly provides for class actions and declares the right to a class action to be unwaivable. (See Civ. Code, §§ 1781, 1751.) As a consequence, the class action waiver in the arbitration provision was unenforceable. Further, because the agreement included a poison pill clause, the unenforceability of the class action waiver made the entire arbitration provision unenforceable. The trial court therefore denied the motion. Valencia appealed.
The Court of Appeal began its discussion by summarizing its conclusion:
We do not address whether the class action waiver is unenforceable. Rather, we conclude the arbitration provision as a whole is unconscionable: The provision is procedurally unconscionable because it is adhesive and satisfies the elements of oppression and surprise; it is substantively unconscionable because it contains terms that are one-sided in favor of the car dealer to the detriment of the buyer. Because the provision contains multiple invalid terms, it is permeated with unconscionability and unenforceable. Severance of the offending terms is not appropriate. It follows that the case should be heard in a court of law.
Slip op., at 10. Next, focusing on Concepcion and Armendariz, the Court said:
Before applying Armendariz to the present case, we note that Concepcion, supra, 131 S.Ct. 1740, does not preclude the application of the Armendariz principles to determine whether an arbitration provision is unconscionable. Concepcion disapproved the "Discover Bank rule," stating: "In Discover Bank, the California Supreme Court applied [the doctrine of unconscionability] to class-action waivers in arbitration agreements and held as follows: [¶] '[W]hen the [class action] waiver is found in a consumer contract of adhesion in a setting in which disputes between the contracting parties predictably involve small amounts of damages, and when it is alleged that the party with the superior bargaining power has carried out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money, then . . . the waiver becomes in practice the exemption of the party "from responsibility for [its] own fraud, or willful injury to the person or property of another." Under these circumstances, such waivers are unconscionable under California law and should not be enforced.'" (Concepcion, at p. 1746, italics added.) With the exception of the Discover Bank rule, the Court acknowledged that the doctrine of unconscionability is still a basis for invalidating arbitration provisions. (Concepcion, at pp. 1746, 1747; see Kanbar v. O’Melveny & Myers (N.D.Cal. 2011) 2011 U.S. Dist. Lexis 79447, pp. *15–*16, *23–*24, 2011 WL 2940690, pp. *6, *9.) Thus, Concepcion is inapplicable where, as here, we are not concerned with a class action waiver or a judicially imposed procedure that conflicts with the arbitration provision and the purposes of the Federal Arbitration Act (FAA) (9 U.S.C. §§ 1–16). (See Concepcion, at pp. 1748–1753.)
Slip op., at 11-12. In the balance of the opinion, the Court found procedural unconscionability (one-sided and surprise) and substantive unconscionability (several terms favoring dealer). The Court then concluded that some of the substantive defects could not be cured by striking provisions.
The Court explicity declined to address the issue of whether the CLRA rendered the class action waiver provision unenforceable.
Justice Rothschild concurred in the judgment.
After returning from a week of travel for work, I wanted to post a quick comment about the 4th Annual Class Action Symposium presented by Consumer Attorneys of San Diego. After speaking at the Symposium, I can now say quite confidently that it contains top-tier material for class action practitioners. Almost any class action practitioner will benefit in some way. I regret that I could not attend the second day of the Symposium because of my travel schedule. Make a mental note to attend the Symposium next year. You will be glad you attended this Symposium, and not one targeted at a more basic level of experience.
The 21st Annual Golden State Antitrust and Unfair Competition Law Institute is now open for registration. This informative MCLE program is sponsored by the State Bar of California, Antitrust and Unfair Competition Law Section. The full day Institute (followed by the Antitrust Lawyer of the Year Award Dinner) will take place on Thursday, October 27, 2011 at the Westin St. Francis Hotel in San Francisco.
View the complete program here.
View a printable brochure here.
Register here.
I attended this program last year as a speaker, and I can tell you from personal experience that the panels are heavy-duty stuff.
There we have it. Brinker is set for argument on Tuesday, November 8, 2011, at 9:00 a.m., in San Francisco. I have to wonder if this will amount to less of a bombshell now that the class action practitioners of the world are intensely focused on how Concepcion will impact wage & hour class actions generally. But we've waited so long for answers to the many questions raised by Brinker that we deserve an answer. Thank goodness I don't have to make a Brinker-Watch 2012 graphic.
I've been swamped at work, so posts around here have been few and far between. But there haven't been many class-related decisions to write about either, so maybe you didn't miss much. Today, however, when the legal profession is repenting, I at least have some time to write. In Degelmann v. Advanced Medical Optics (9th Cir. Sept. 28, 2011), the Ninth Circuit examined UCL standing and medical device preemption. In Degelmann, the plaintiffs sought to represent a putative class of purchasers of contact lens solution. Their suit alleged that defendant violated California’s Unfair Competition Law (“UCL”) and False Advertising Law (“FAL”) by marketing Complete MoisturePlus (“MoisturePlus”) as a product that cleans and disinfects lenses. The district court granted defendant's motion for summary judgment, ruling that plaintiffs lacked standing.
First, the Court examined the plaintiffs' standing under the UCL:
Here, as in Kwikset, the plaintiffs allege that they paid more for a product due to reliance on false advertising. The district court in this case was likely correct that Degelmann and Lin would have bought other contact lens solution had they not purchased MoisturePlus. However, as elucidated by the Kwikset court’s discussion, it does not necessarily follow that they did not suffer economic harm. Degelmann and Lin presented evidence that they were deceived into purchasing a product that did not disinfect as well as it represented. Had the product been labeled accurately, they would not have been willing to pay as much for it as they did, or would have refused to purchase the product altogether. The district court’s reasoning—that class members would have bought other contact lens solution, and therefore suffered no economic harm— conceived of injury in fact too narrowly.
Slip op., at 18565. In that same discussion, the Court distinguished Birdsong v. Apple, Inc.:
The inquiry into injury in fact in this case, where the class makes claims under both the UCL’s fraud prong and the FAL, is not controlled by Birdsong v. Apple, Inc., 590 F.3d 955 (9th Cir. 2009). In that case, purchasers of iPod headphones pursued a claim under the UCL’s “unfair” and “unlawful” prongs, asserting that listening to loud music on the headphones could result in hearing loss. They did not allege economic harm from having purchased headphones in reliance on false advertising, but rather claimed that the inherent risk of the headphones reduced the value of their purchase and deprived plaintiffs of the benefit of their bargain. Id. at 961. The court in that case found that the claim of economic harm was not sufficient to plead injury in fact in part because, in distinct contrast to the MoisturePlus labeling at issue in this case, Apple had not represented that the headphones were safe at high volume. Rather, “Apple provided a warning against listening to music at loud volumes.” Id. Because there is allegedly false labeling and advertising at issue in this case, Birdsong does not aid our disposition here.
Slip op., at 18565-66. So far, so good for the plaintiffs. But then the Court discusses preemption. The Court found that the lens solution at issue satisfied FDA requirements for labelling contact lens solution. The Court concluded that, having met the standard, the UCL and FAL would necessarily have to impose additional obligations in order for the plaintiffs to state any claim, which would then invoke preemption, immediately precluding the claim:
In order for the class to recover in this lawsuit, a court would have to hold that California’s UCL and FAL required something different than what the FDA required in order for AMO to label MoisturePlus a disinfectant. Those California laws would have to require that AMO test for Acanthamoeba, and show that MoisturePlus kills it in sufficient quantities. That is, California law would have a requirement that is additional to the federal requirements.
Slip op., at 18569. And that, as they say, was that. You have standing, but you lose. At least it's good to have some guidance from the Ninth Circuit on the application of Kwikset to federal standing arguments.
A combination of being buried at work and precious few appellate decisions filled with class action gold have made things a little slow around here. But now I've got something for you. The Consumer Attorneys of San Diego are presenting their 4th Annual Class Action Symposium on Friday, October 14, 2011 and Saturday, October 15, 2011, at the Hilton San Diego Bayfront, 1 Park Blvd.
The Hilton San Diego Bayfront Hotel is the newest waterfront hotel located directly adjacent to the Padre Stadium and a short walk from downtown’s Gaslamp Quarter and East Village.
Good for 10.0 General Credits and 1.0 Ethics MCLE Credit, the Symposium will include an impressive lineup of speakers. The panel speakers will address topics such as: Class Arbitration, Dukes, Ticketmaster, and Damages and Equitable Relief, just to name a few. Featured speakers include: Arthur Bryant of Public Justice, the nation's leading lawyer on the issue of class wide arbitration, Judge Vaughn Walker (Ret.), whose creative legal mind will help navigate emerging complex cases and activist Harvey Rosenfield, founder of Consumer Watchdog, to put it all in perspective. I will be speaking there too, but you should sign up anyhow.
This one entertains me becaues it faintly evokes the studio system of the 1930's and the decades of antitrust action by the FTC, with United States v. Paramount Pictures, 334 U.S. 131 (1948) stealing a good deal of the spotlight. It's not quite as big as Paramount, but it's what we have. In Flagship Theaters of Palm Desert LLC v. Century Theaters, Inc. (August 31, 2011), the Court of Appeal (Second Appellate District, Division One) considered an appeal of a summary judgment ruling that ended Flagship's antitrust action. The allegations were summarized by the Court:
Flagship filed this antitrust action against Century and two film distributors, alleging that Century has used the power deriving from both the size of its theater circuit and its many theaters in noncompetitive markets to undermine the competitive process through which theaters bid for and obtain licenses to exhibit first-run films. According to Flagship, under previous ownership the River and the Palme obtained roughly equal numbers of first-run films, but under Century the River now obtains licenses for far more first-run films than the Palme, the few that are left to the Palme are commercially inferior, and the imbalance is not based on the relative merits of the Palme's and the River's bids. On the contrary, according to Flagship, superior bids by the Palme are often rejected in favor of inferior bids by the River as a result of Century's abuse of the power of its circuit
Slip op., at 2. I'm not going to cover the Court's interesting attempt to assess the current state of unlawful circuit dealing under the Sherman Act and the Cartwright Act. But if you practice or dabble in antitrust law, this is like a brief history lesson centered around the movie distribution world. I will note, however, that the Court wasn't thrilled with all of the sealed documents the Court received and later concluded were not appropriately classified as confidential.
The Complex Litigator reports on developments in related areas of class action and complex litigation. It is a resource for legal professionals to use as a tool for examining different viewpoints related to changing legal precedent. H. Scott Leviant is the editor-in-chief and primary author of The Complex Litigator.
