a California-centric collection of comments and resources about complex litigation and class action practice
So I changed the like button on the sidebar to a standard one linked to this page, and not the facebook page for The Complex Litigator. Since facebook removed the ability to import a blog rss feed into a page, I would have to duplicate all information from here again on facebook to make the page useful. It's hard enough to find the time to write this stuff once, let alone log onto facebook so they can snoop in my business all the while I am logged onto facebook.
The United States Supreme Court, in Christopher et al. v. Smithkline Beecham Corp., dba Glaxosmithkline (June 18, 2012), examined the question of whether pharmaceutical sales representatives, whose primary duty was to obtain nonbinding commitments from physicians to prescribe their employer’s prescription drugs, were correctly classified as exempt from overtime pay requirements set forth in the Fair Labor Standards Act. In the courts below, defendant moved for summary judgment, arguing that plaintiffs were “employed in the capacity of outside salesman,” §213(a)(1), and therefore were exempt from the FLSA’s overtime compensation requirement. The District Court agreed and granted summary judgment to defendant. Plaintiffs filed a motion to alter or amend the judgment, contending that the District Court had erred in failing to accord controlling deference to the DOL’s interpretation of the pertinent regulations, which the DOL had announced in an amicus brief filed in a similar action. The District Court rejected this argument and denied the motion. The Ninth Circuit, agreeing that the DOL’s interpretation was not entitled to controlling deference, affirmed.
The opinion was decided on sharply divided 5-4 lines, with one majority opinion and one minority opinion. The opinion considered three of the DOL’s regulations: §§541.500, 541.501, and 541.503. The Court referred to the three regulations as the “general regulation,” the “sales regulation,” and the “promotion-work regulation,” respectively.
First, the majority observed that the DOL’s own interpretation of its regulations was not consistent over time. In briefs filed before the Second and Ninth Circuits, “the DOL took the view that ‘a “sale” for the purposes of the outside sales exemption requires a con- summated transaction directly involving the employee for whom the exemption is sought.’” Slip op., at 9. After certiorari was granted in this matter, the DOL took the position that “ ‘[a]n employee does not make a “sale” for purposes of the “outside salesman” exemption unless he actually transfers title to the property at issue.’ ” Slip op., at 9.
Next, the majority observed that Auer deference to the DOL’s ambiguous regulations was not justified because to do so would allow for imposition of “potentially massive liability on respondent for conduct that occurred well before that interpretation was announced.” Slip op., at 10. Continuing, the Court said:
Until 2009, the pharmaceutical industry had little reason to suspect that its longstanding practice of treating detailers as exempt outside salesmen transgressed the FLSA. The statute and regulations certainly do not provide clear notice of this. The general regulation adopts the broad statutory definition of “sale,” and that definition, in turn, employs the broad catchall phrase “other disposition.” See 29 CFR §541.500(a)(1). This catchall phrase could reasonably be construed to encompass a nonbinding commitment from a physician to prescribe a particular drug, and nothing in the statutory or regulatory text or the DOL’s prior guidance plainly requires a contrary reading. See Preamble 22162 (explaining that an employee must “in some sense” make a sale); 1940 Report 46 (same).
Slip op., at 12. Then the majority noted that, despite the industry’s decades of applying an exempt classification, the DOL never initiated any enforcement action.
The majority then discussed the DOL’s interpretations and found them unpersuasive, particularly with respect to the definition of “sale.” The Court held:
This new interpretation is flatly inconsistent with the FLSA, which defines “sale” to mean, inter alia, a “consignment for sale.” A “consignment for sale” does not involve the transfer of title. See, e.g., Sturm v. Boker, 150 U. S. 312, 330 (1893) (“The agency to sell and return the proceeds, or the specific goods if not sold . . . does not involve a change of title”); Hawkland, Consignment Selling Under the Uniform Commercial Code, 67 Com. L. J. 146, 147 (1962) (explaining that “‘[a] consignment of goods for sale does not pass the title at any time, nor does it contemplate that it should be passed’” (quoting Rio Grande Oil Co. v. Miller Rubber Co. of N. Y., 31 Ariz. 84, 87, 250 P. 564, 565 (1926))).
Slip op., at 15. The majority then spends some time construing the regulation itself, concluding that the language of the statute was intended to broadly include all manner of transactions that, in certain industries, were tantamount to a sale in the most conventional sense. In the regulated industry of pharmaceutical sales, the majority observed that the representatives did all that was allowed:
Obtaining a nonbinding commitment from a physician to prescribe one of respondent’s drugs is the most that petitioners were able to do to ensure the eventual disposition of the products that respondent sells. This kind of arrangement, in the unique regulatory environment within which pharmaceutical companies must operate, comfortably falls within the catch- all category of “other disposition.”
Slip op., at 20-21.
The minority opinion, authored by Justice Breyer, accepted the majority’s description of the job in question and agreed that deference to the DOL interpretation was not justified given the recent change in that interpretation. Instead, the minority opnion simply disagrees with the construction of the language at issue:
Unless we give the words of the statute and regulations some special meaning, a detailer’s primary duty is not that of “making sales” or the equivalent. A detailer might convince a doctor to prescribe a drug for a particular kind of patient. If the doctor encounters such a patient, he might prescribe the drug. The doctor’s client, the patient, might take the prescription to a pharmacist and ask the pharmacist to fill the prescription. If so, the pharmacist might sell the manufacturer’s drug to the patient, or might substitute a generic version. But it is the pharmacist, not the detailer, who will have sold the drug.
Minority slip op., at 3. The minority opinion concludes that the representatives stimulate sales eventually made by others:
The detailer’s work, in my view, is more naturally characterized as involving “[p]romotional activities designed to stimulate sales . . . made by someone else,” §541.503, e.g., the pharmacist or the wholesaler, than as involving “[p]romotional activities designed to stimulate” the detailer’s “own sales.”
Minority slip op., at 5. The minority emphasized the fact that doctors determine what to prescribe, based on medical need:
To the contrary, the document makes clear that the pharmaceutical industry itself understands that it cannot be a detailer’s “primary duty” to obtain a nonbinding commitment, for, in respect to many doctors, such a commitment taken alone is unlikely to make a significant difference to their doctor’s use of a particular drug. When a particular drug, say Drug D, constitutes the best treatment for a particular patient, a knowledgeable doctor should (hence likely will) prescribe it irrespective of any nonbinding commitment to do so. Where some other drug, however, is likely to prove more beneficial for a particular patient, that doctor should not (hence likely will not) prescribe Drug D irrespective of any nonbinding commitment to the contrary.
Minority slip op., at 6. The minority concluded by dismissing the majority’s fears that a salesman who takes an order would suddenly become non-exempt by transferring the order to jobber’s employee to be filled. The minority noted that the example created no basis for fear, given that the salesman had obtained a firm commitment to buy the product. Regardless of the quality of the counter-arguments, the minority opinion by Justice Breyer is just that, a minority opinion, and "sales" are evidently in the eye of the beholder.
I've been working on a project involving arbitration issues. My uncertainty about whether to keep all of my powder dry, so to speak, caused a fair bit of my delay in commenting about two relatively new arbitration decisions from California Courts of Appeal. In Hoover v. American Income Life Insurance Company (June 13, 2012), the Court of Appeal (Fourth Appellate District, Division Two) affirmed a trial court's denial of a motion to compel arbitration. In Iskanian v. CLS Transportion Los Angeles, LLC (June 4, 2012), the Court of Appeal (Second Appellate District, Division Two) affirmed a trial court order granting a motion to compel arbitration and dismissing class claims. Looks like the unremarkable results of Courts of Appeal deferring to finding of trial courts, right? No. So very wrong. What these two actually do is create an explicit rift on the issue of whether statutory rights, at least in the labor context, are subject to individual arbitration. In the process, the Iskanian Court rejects its sister-division's holding in Brown v. Ralphs Grocery Co., 197 Cal. App. 4th 489 (2011) that Concepcion does not apply to PAGA's representative claims. The Iskanian Court also refused to follow the NLRB's D.R. Horton decision that protects an employee's right to pursue class claims as a form of concerted activity. The two cases also disagree as to the reach of Concepcion and Stolt-Neilsen. In sum, the relative clarity that existed in California following Gentry and Discover Bank is now a distant memory. The California Supreme Court will need to resolve these issues soon, regardless of whether the United States Supreme Court takes on any of these issues in the future.
Hoover concerned a dispute as to whether an individual was misclassified as an independent contractor rather than an employee. Hoover framed where its analysis would go very early in the opinion, with this footnote:
The conclusions we reach here avert any dependence, as urged by AIL, on two recent United States Supreme Court opinions, addressing the issue of class arbitrations for antitrust claims and consumer sales contracts. (Stolt-Nielsen S.A. v. AnimalFeeds International Corp. (2010) ___ U.S. ___, 130 S.Ct. 1758; AT&T Mobility LLC v. Concepcion (2011) ___ U.S. ___, 131 S.Ct. 1740.) “AT&T does not provide that a public right . . . can be waived if such a waiver is contrary to state law.” (Brown v. Ralphs Grocery Co. (2011) 197 Cal.App.4th 489, 500, 502-503.) We also do not need to address the unconscionability argument and the continuing viability of Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83.)
Hoover slip op., at 3 n. 2. From this we know that (1) Hoover views Concepcion and Stolt-Nielsen as limited to consumer sales contracts and antitrust issues respectively, and (2) Hoover views Brown v. Ralphs as correctly decided.
Hoover first discusses (extensively, if you are interested) the concept of waiver following too great a delay in moving to compel arbitration. That discussion doesn't pave a lot of new ground.
Hoover gets interesting when it talks about the Labor Code claims asserted in the matter:
As a general rule, state statutory wage and hour claims are not subject to arbitration, whether the arbitration clause is contained in the CBA or an individual agreement. The CBA cannot waive the right to sue under applicable federal or state statutes because these statutory rights “devolve on petitioners as individual workers, not as members of a collective organization.” (Barrentine v. Arkansas-Best Freight System, Inc. (1981) 450 U.S. 728, 745, overruled on other grounds in Gilmer v. Interstate/Johnson Lane Corp. (1991) 500 U.S. 20; Zavala v. Scott Brothers Dairy, Inc. (2006) 143 Cal.App.4th 585, 592 [rule applicable to wage claims under Labor Code and IWC wage orders].)
Hoover slip op., at 15-16. Continuing, Hoover held:
An individual arbitration agreement also does not apply to an action to enforce statutes governing collection of unpaid wages, which “may be maintained without regard to the existence of any private agreement to arbitrate. . . .” (§ 229.) The intent is to assure a judicial forum where there exists a dispute as to wages, notwithstanding the strong public policy favoring arbitration. (Ware v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1972) 24 Cal.App.3d 35, 43; Flores v. Axxis Network & Telecommunications, Inc. (2009) 173 Cal.App.4th 802, 811.) An exception to the general rule occurs when there is federal preemption by FAA, as applied to contracts evidencing interstate commerce. (Perry v. Thomas (1987) 482 U.S. 483, 490.)
Hoover slip op., at 17. Statutory claims for unpaid wages may proceed in court, regardless of an agreement to arbitrate. Zowwee! But wait - there is an exception for contracts related to interstate commerce. Does Hoover fit into that exception? No, says the Hoover Court:
Based on this record, it cannot be said the subject agreement involves interstate commerce. AIL had the burden to demonstrate FAA coverage by declarations and other evidence. (Shepard v. Edward Mackay Enterprises, Inc. (2007) 148 Cal.App.4th 1092, 1101; Woolls v. Superior Court (2005) 127 Cal.App.4th 197, 213-214.) The only established facts are that Hoover was a California resident who sold life insurance policies. Even though AIL is based in Texas, there was no evidence in the record establishing that the relationship between Hoover and AIL had a specific effect or “bear[ing] on interstate commerce in a substantial way.” (Citizens Bank v. Alafabco, Inc. (2003) 539 U.S. 52, 56-57.) Hoover was not an employee of a national stock brokerage or the employee of a member of a national stock exchange. (Thorup v. Dean Witter Reynolds, Inc., supra, 180 Cal.App.3d at p. 233; Baker v. Aubry (1989) 216 Cal.App.3d 1259, 1266.) Unlike the plaintiff in Giuliano v. Inland Empire Personnel, Inc. (2007) 149 Cal.App.4th 1276, 1287, Hoover did not work in other states or engage in multimillion dollar loan activity that affected interstate commerce by negotiating with a bank that was headquartered in another state. Under these circumstances, if the FAA did not apply, the exception favoring federal preemption and arbitration did not operate.
Hoover slip op., at 17-18. So that's going to get some unmentionables in a twist.
Iskanian is, at least in spirit, the antimatter to Hoover's matter. Iskanian involves a certified class that avoided arbitration once before, when the issuance of Gentry caused the reversal of the trial court's first Order compelling arbitration. Following Concepcion and Stolt-Nielsen, the defendant in Iskanian tried again. This time, the Iskanian Court affirmed the second Order compelling individual arbitration. In the process, the Court gave Concepcion and Stolt-Nielsen the broadest possible constructions, held Gentry overruled, disregarded Brown v. Ralphs and rejected protections supplied by the NLRA and preserved by D.R. Horton.
First, regarding Gentry, Iskanian said:
Now, we find that the Concepcion decision conclusively invalidates the Gentry test. First, under Gentry, if a plaintiff was successful in meeting the test, the case would be decided in class arbitration (unless the plaintiff could show that the entire arbitration agreement was unconscionable, in which case the agreement would be wholly void). But Concepcion thoroughly rejected the concept that class arbitration procedures should be imposed on a party who never agreed to them. (Concepcion, supra, 131 S.Ct. at pp. 1750-1751.) The Concepcion court held that nonconsensual class arbitration was inconsistent with the FAA because: (i) it “sacrifices the principal advantage of arbitration—informality—and makes the process slower, more costly, and more likely to generate procedural morass than final judgment”; (ii) it requires procedural formality since rules governing class arbitration “mimic the Federal Rules of Civil Procedure for class litigation”; and (iii) it “greatly increases risks to defendants,” since it lacks the multilevel review that exists in a judicial forum. (Id. at pp. 1751-1752; see also StoltNielsen S. A. v. AnimalFeeds Int'l Corp. (2010) 130 S. Ct. 1758, 1775 [“a party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so”].) This unequivocal rejection of court-imposed class arbitration applies just as squarely to the Gentry test as it did to the Discover Bank rule.
Iskanian slip op., at 8-9. But the Court wasn't done:
Third, the premise that Iskanian brought a class action to “vindicate statutory rights” is irrelevant in the wake of Concepcion. As the Concepcion court reiterated, “States cannot require a procedure that is inconsistent with the FAA, even if it is desirable for unrelated reasons.” (131 S.Ct. at p. 1753.) The sound policy reasons identified in Gentry for invalidating certain class waivers are insufficient to trump the far-reaching effect of the FAA, as expressed in Concepcion. Concepcion's holding in this regard is consistent with previously established law. (See Perry v. Thomas, supra, 482 U.S. at p. 484 [finding that § 2 of the FAA preempts Lab. Code, § 229, which provides that actions for the collection of wages “may be maintained 'without regard to the existence of any private agreement to arbitrate'”]; Southland Corp. v. Keating (1984) 465 U.S. 1, 10-11 [holding that the California Supreme Court's interpretation of the Franchise Investment Law as requiring judicial consideration despite the terms of an arbitration agreement directly conflicted with section 2 of the FAA and violated the Supremacy Clause]; Preston v. Ferrer (2008) 552 U.S. 346, 349-350 [holding, “when parties agree to arbitrate all questions arising under a contract, state laws lodging primary jurisdiction in another forum, whether judicial or administrative, are superseded by the FAA”].)
Iskanian slip op., at 9-10. In its analysis, the Iskanian Court selectively disregarded valid federal law recognizing that vindication of statutory rights remains a basis for declining to enforce an arbitration agreement. And all of this leaves unanswered the true foundational question: how does the federal government have the constitutional authority over a state's distribution of disputes alleging state law violations in state courts? Even Concepcion cannot be viewed as answering that question, as it was decided in federal courts over which the federal government does have jurisdiction. Anyhow, Iskanian had more carnage to release...
Next, the Iskanian Court rejected D.R. Horton, but without any cogent analysis as to why it was incorrectly decided. In D.R. Horton, the NLRB held that a mandatory, employer-imposed agreement requiring all employment-related disputes to be resolved through individual arbitration (and disallowing class or collective claims) violated the NLRA because it prohibited the exercise of substantive rights protected by section 7 of the NLRA. Section 7 provides in part that employees shall have the right “to engage in . . . concerted activities for the purpose of collective bargaining or other mutual aid or protection . . . .” (29 U.S.C. § 157.) The NLRB found that “employees who join together to bring employmentrelated claims on a classwide or collective basis in court or before an arbitrator are exercising rights protected by Section 7 of the NLRA.” However, that holding was not new to D.R.Horton, as Iskanian implies. Rather, decades of authority confirm that class and collective actions constitute protected concerted activity. That, at least, is well-settled.
Next, Iskanian declares that since D.R. Horton analyzes laws beyond the NLRA, the Court would not defer to it. Problematically, declining to defer is different than independently reaching the same result following a review of the relevant authority. Here, Iskanian seems to view a right to decline to defer as a right to choose the alternative construction, absent any analysis. Instead, the Court said:
The D.R. Horton decision identified no “congressional command” in the NLRA prohibiting enforcement of an arbitration agreement pursuant to its terms. D.R. Horton’s holding—that employment-related class claims are “concerted activities for the purpose of collective bargaining or other mutual aid or protection” protected by section 7 of the NLRA, so that the FAA does not apply—elevates the NLRB's interpretation of the NLRA over section 2 of the FAA. This holding does not withstand scrutiny in light of Concepcion and CompuCredit.
Iskanian slip op., at 13. Iskanian is simply wrong. D.R. Horton provided a very detailed discussion of the fact that the FAA does not authorize agreements that violate federal law, including the NLRA and related statutory provisions. The NLRB was working squarely within its area of expertise when it concluded that an agreement interfering with section 7 rights was unenforceable as an illegal contract. The fact that the agreement was an arbitration agreement is irrelevant. Illegal contracts are unenforceable. Concepcion did not change contract law precluding enforcement of illegal agreements. Moreover, the NLRB noted in D.R. Horton that the Norris-LaGuardia Act was enacted after the FAA. Thus, it cannot be said that the FAA "overruled" the NLRA. Rather, if anything, the NLRA limited the FAA in that it defined a new zone of contracts that were illegal. Iskanian Court don't care!
Next, Iskanian opined that Brown v. Ralphs was wrongly decided:
In finding that Concepcion did not apply to PAGA representative claims, the Brown majority wrote: “[Concepcion] does not purport to deal with the FAA's possible preemption of contractual efforts to eliminate representative private attorney general actions to enforce the Labor Code. As noted, the PAGA creates a statutory right for civil penalties for Labor Code violations 'that otherwise would be sought by state labor law enforcement agencies.' . . . This purpose contrasts with the private individual right of a consumer to pursue class action remedies in court or arbitration, which right, according to [Concepcion], may be waived by agreement so as not to frustrate the FAA—a law governing private arbitrations. [Concepcion] does not provide that a public right, such as that created under the PAGA, can be waived if such a waiver is contrary to state law.” (197 Cal.App.4th at p. 500.)
Respectfully, we disagree with the majority's holding in Brown. We recognize that the PAGA serves to benefit the public and that private attorney general laws may be severely undercut by application of the FAA. But we believe that United States Supreme Court has spoken on the issue, and we are required to follow its binding authority.
Iskanian slip op., at 15. Again, Iskanian avoids any analysis of authority that might undercut its decision. Vindication of statutory rights is currently a recognized basis for declining to enforce an arbitration agreement. All Iskanian does is point at Concepcion and declare that it is following it. In doing so, Iskanian goes too far and creates a rift in California law that requires immediate attention by the California Supreme Court.
Two cases, two contrary sets of conclusions.
As a blogger myself, I find myself growing increasingly uncomfortable about reports of speech suppression of other bloggers through threats, intimidation, maliciously false process and the like. In this installment, some dissenting Harvard Law students were the victims of a likely bogus DMCA takedown demand issued by Harvard to WordPress.com. Bogus is as bogus does. If you are a Harvard alum, tell them you'll be a little short in the donation area this year. But this story has a better ending than some; the students didn't stand for it and immediately started a new blog. Keep fighting the good fight.
As this post on Popehat eloquently says, we should defend fundamental liberties (such as free speech), not because someone on "our side" was wronged, but because all of us lose when the fundamental liberties of anyone are trampled.
Lebrilla v. Farmers Group, Inc., 119 Cal. App. 4th 1070 (2004) reversed a trial court's denial of certification in a suit against an automobile insurer. The suit alleged that sheet metal parts known as "crash parts" were used to effectuate accident repairs, but the "crash parts" were not manufactured by original equipment manufacturers. The use of "crash parts" allegedly resulted in substandard repairs that did not restore damaged vehicles to pre-loss condition. In Ortega v. Topa Insurance Company (May 24, 2012), the Court of Appeal (Second Appellate District, Division Three) examined a similar, but not identical situation, in which non-OEM parts were used to complete repairs to vehicles. The trial court concluded that common issues could not predominate when evaluation of a breach of contract claim would require a comparison of each installed non-OEM part to the OEM equivalent to determine whether the repair part was inferior to the OEM part.
The Court of Appeal agreed:
We do not read Lebrilla v. Farmers Group, Inc., supra, 119 Cal.App.4th 1070, to suggest, for example, that all non-OEM replacement parts are uniformly inferior. That case addressed crash parts. (Id. at p. 1073 & fn. 1.) In this case, to recover damages each member of the putative Steered Claimant Class (Class B) must identify the non-OEM part, which includes radiators and heat and cooling systems, among others, and prove the particular manufacturer's part is inferior. Thus, unlike Lebrilla, the court would have to determine whether the installed repair part is inferior. As alleged, common issues do not predominate.
Slip op., at 18. Pretty straightforward analysis. When the issue was the adequacy of "crash parts," the question of their adequacy could be resolved on a classwide basis. Here, the the issue of adequacy could vary wildly, depending upon what part was replaced and what manufacturer supplied the replacement part. This particular case provides an example of the relatively narrow category of class complaints that reveal predominance issues on the face of the complaint itself.
Generally speaking, unpublished cases cannot be cited or relied upon by parties or courts. California Rules of Court, rule 8.1115 states, in part: "Except as provided in (b), an opinion of a California Court of Appeal or superior court appellate division that is not certified for publication or ordered published must not be cited or relied on by a court or a party in any other action." Cal. Rules Ct., rule 8.1115(a). The only exceptions arise when the same parties are involved, or the conduct of a party in one case is relevant in criminal or disciplinary proceedings in another. When review of a published case is granted by the California Supreme Court, it is depublished: "Unless otherwise ordered under (2), an opinion is no longer considered published if the Supreme Court grants review or the rendering court grants rehearing." Cal. Rules Ct., rule 8.1105(e). In The People v. E*Poly Star, Inc. (May 14, 2012), the Court of Appeal (Second Appellate District, Division Seven) let E*Poly and the Trial Court have it for referencing Aryeh v. Canon Business Solutions, Inc. (2010) 185 Cal.App.4th 1159, review granted Oct. 20, 2010 (S184929) (Aryeh).
On the issue of improper citation of an unpublished decision, the Court said:
Supreme Court review in Aryeh was granted on October 20, 2010 (S184929), more than a month prior to the filing of the district attorneys' lawsuit. As of that date any citation to, or reliance upon, that decision was expressly prohibited by rule 8.1115(a) of the California Rules of Court except under the limited circumstances set forth in rule 8.1115(b), none of which appears to be applicable to the case at bar. (See rule 8.1105(e)(1) [“[u]nless otherwise ordered . . ., an opinion is no longer considered published if the Supreme Court grants review”].) Nonetheless, employing something akin to the rhetorical device formally known as paraleipsis or apophasis—that is, mentioning something while disclaiming any intention of mentioning it—E*Poly Star in the trial court and once again in its brief in this court, after noting the Court of Appeal decision in Aryeh is not citable, has discussed the case at length and argues we should defer to its reasoning. This use of an unpublished, noncitable opinion is a direct violation of rule 8.1115(a) and is wholly unacceptable. (Cf. rule 8.276(a)(4) [authorizing sanctions on the court's own motion for any unreasonable violation of the Rules of Court].)
Slip op., at 12-13 (footnote references omitted). But the Court wasn't done, stating in a footnote:
E*Poly Star's improper use of Aryeh transcends suggesting we consider the case for its persuasive value. While purporting to recognize the split panel decision by our colleagues in Division Eight is no longer even citable, E*Poly Star contends it is, in fact, binding on us: “It is respectfully submitted that it is not the function of this reviewing court to second-guess itself and re-address a prior published decision, merely and especially because the decision is being reviewed by the State Supreme Court.” That is simply wrong. Even were the case still published, we would not be obligated to adopt its result; there is no “horizontal stare decisis” in the Court of Appeal. (Jessen v. Mentor Corp. (2008) 158 Cal.App.4th 1480, 1489, fn. 10; In re Marriage of Shaban (2001) 88 Cal.App.4th 398, 409.) Although, as E*Poly Star states, we frequently follow a prior decision by another division of this court or another district, we will not do so if there is reason to disagree with the conclusion of that case. (People v. Kim (2011) 193 Cal.App.4th 836, 847; Greyhound Lines, Inc. v. County of Santa Clara (1986) 187 Cal.App.3d 480, 485.)
Slip op., at 12. "Horizontal stare decisis." Priceless. There really ARE some things money can't buy.
Ending its discussion of the use of uncitable authority, the Court also chided the Trial Court:
Similarly, the trial court's reference to the Aryeh opinion and its implicit adoption of its holding with the statement it “agrees with Aryeh's analysis” constitute an impermissible use of a noncitable decision. If the trial court is somehow familiar with an unpublished opinion and finds its analysis persuasive, then it is free to utilize that analysis, just as courts may adopt as their own the analysis contained in the parties' briefs. Any reference to the unpublished case itself, however, violates rule 8.1115(a) even if, as here, accompanied by the qualification, “even though not citable.”
Slip op., at 13. I saw this happen several times while Brinker was pending. A number of trial courts observed that Brinker was under review but then said that they agreed with its analysis and were adopting it. Naughty.
The Court also discusses statute of limitation and accrual issues that may be impacted by Aryeh, but I thought the discussion of uncitable authority was a lot more entertaining than a discussion that could be mooted by Aryeh and might be nullified on a grant and hold pending Aryeh in any event.
The California Supreme Court held its (usually) weekly conference on May 16, 2012. Highly notable results include:
Yesterday, Governor Brown's rosy revenue projections ran smack into the brick wall of reality. California's budgetary deficit isn't the paltry $9 billion predicted by the Governor. Heck, we could have found $9 billion in the state's couch cushions. No problem.
Instead, our deficit, thanks to the inexcusable fiscal malfeasance of years of legislators spending beyond our means, and the inexcusable electorate allowing them to do so, is more like $16 billion. That's billion with a "B." This year. A one-year deficit against a $91 billion budget.
The solution proposed by the Governor is to (1) tax us more than we already are, and (2) cut stuff. What gets cut? As far as our constitutionally created branch of government knows as the judiciary is concerned, the cut proposed is another $544 million from the courts budget, which has already lost $650 million over the last three years.
One retired judge recently told me that the Los Angeles Superior Court is just rearranging deck chairs on the Titanic. But, for the most part, the leaders of the Courts, while complaining loudly about the cuts, are too political to take on the Legislature and Governor over this constutional crisis.
Where is the leadership? When are the advocates of Court access and the constitutional scholars and the judges crushed under this unchecked robbery going to stand up and demand that the third branch of government receive the first distribution of funds, regardless of what revenue is available. The Courts are entitled to protected funds sufficient to discharge their constitutional role in California.
See, for example, coverage in the Los Angeles Times.
As a general rule, the law lacks a sense of humor. Because of that substantial absence of levity, it is up to us to find amusement in unexpected places. Sometimes a court authors a witty opinion that is entertaining as a form of sharp commentary. Other times, the humor is relegated to commentary on current legal news. But that doesn't exhaust our options. Today, in Kirby, et al. v. Immoos Fire Protection, Inc. (April 20, 2012), the California Supreme Court demonstrated that humor exists in the law when a case outcome is contrary to all expectations. When asked to decide whether the plaintiff alone, or any prevailling party, is entitled to attorney's fees for alleged violations of Labor Code § 226.7, the Court chose Answer C, none of the above.
The plaintiffs brought a wage & hour class action. Certification was denied. The plaintiffs dismissed the case with prejudice. Defendant Immoos moved for fees as the prevailing party on claims for meal and rest break violations. Plaintiffs argued that, because section 226.7 claims require payment of wages for the violation of the statute in a manner that is tantamount to a minimum wage obligation, the one-way fee-shifting statute applicable to section 1194 applies. Defendant Immoos argued that the action was for the "non-payment of wages," thereby brining the action within the two-way fee provision of section 218.5. Breaking its task down, the Supreme Court said:
In resolving the case before us, we must initially ask whether a section 226.7 claim is a claim for which attorney's fees could be awarded to a prevailing employee under section 1194. If so, then IFP may not be awarded fees under section 218.5 even though it prevailed on the rest period claim in this case. If not, then we must separately examine whether section 218.5 authorizes a fee award to IFP on plaintiffs' section 226.7 claim.
Slip op., at 6. The Court immediately rejected the argument that any statutory or administrative compensation requirement is a "legal minimum wage." Instead, the Court supplied a common sense reading to the meaning of section 1194, finding that it created a minimum hourly rate of pay, and not a one-way fee shifting provision for every form of statutory or administrative compensation. Based on this construction, the Court concluded that section 226.7 claim is not a claim for which attorney's fees could be awarded to a prevailing employee under section 1194.
Nonpayment of wages is not the gravamen of a section 226.7 violation. Instead, subdivision (a) of section 226.7 defines a legal violation solely by reference to an employer's obligation to provide meal and rest breaks. (See § 226.7, subd. (a) [“No employer shall require any employee to work during any meal or rest period mandated by an applicable order of the Industrial Welfare Commision.”].) The “additional hour of pay” provided for in subdivision (b) is the legal remedy for a violation of subdivision (a), but whether or not it has been paid is irrelevant to whether section 226.7 was violated. In other words, section 226.7 does not give employers a lawful choice between providing either meal and rest breaks or an additional hour of pay. An employer's failure to provide an additional hour of pay does not form part of a section 226.7 violation, and an employer's provision of an additional hour of pay does not excuse a section 226.7 violation. The failure to provide required meal and rest breaks is what triggers a violation of section 226.7. Accordingly, a section 226.7 claim is not an action brought for nonpayment of wages; it is an action brought for non-provision of meal or rest breaks.
Slip op., at 13-14. Thus, since section 226.7 is not an action for nonpayment of wages, section 218.5 does not apply either. The Court followed with this observation:
It is no answer to say that a section 226.7 claim is properly characterized as an action brought for (i.e., on account of) nonpayment of wages because if a defendant employer had provided the additional hour of pay remedy, presumably the plaintiff would not have brought the action at all. Such a characterization is a departure from the way we conventionally distinguish between the legal basis for a lawsuit and the remedy sought. Consider a typical lawsuit that alleges unlawful injury and seeks compensatory damages. We may say that the suit is an action brought for violation of some legal duty. But we do not say that the suit is an action brought for nonpayment of damages — even though the action would not have been brought had the defendant paid the damages for the plaintiff's injury.
Slip op., at 14. So that's that. No fees for prevailing party under section 226.7 for either side.
Meanwhile, note again this little morsel: "In other words, section 226.7 does not give employers a lawful choice between providing either meal and rest breaks or an additional hour of pay." Oops. Even if the employer pays the money, it isn't excused from the violation. But, since attorney's fees aren't available directly, the chances of an action for injunctive relief are diminished. That leaves 1021.5 or other fee-shifting bases, which are far from guaranteed.
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.
