a California-centric collection of comments and resources about complex litigation and class action practice
Paul Bland, of Public Justice, was more than up to the challenge of explaining the intellectual dishonesty and depravity of the Supreme Court's most recent hatchet job on employees and consumers. Well, he didn't use those words, so consider that my editorial paraphrase of what happened in Episode 3. Available for download, streaming audio in your browser and through iTunes.
I've been slammed the past month, but this Sunday is the beginning of my effort to dig out. My co-host and I will have a special guest on to record the Class Re-Action podcast. Paul Bland, of Public Justice, is as well versed in the twists of class arbitration law as anyone you could find. I should have the episode finalized and available by Sunday night.
The press of obligations at work left little time for my blogging, which I regret. And, I haven't seen anything all that interesting in the class action/complex litigation arena in the last few weeks. That did change last week when, in Faulkinbury v. Boyd & Associates, Inc. (May 10, 2013), the Court of Appeal (Fourth Appellate District, Division Three) [What?!?] reconsidered its prior decision following remand after Brinker. The Court concluded that, along with the overtime class it previously ordered certified, the meal period and rest break claims should also have been certified.
Just to summarize, if my prose above was too painful to follow, the trial court denied class certification as to all claims, covered by three subclasses referred to as the Meal Break Class, the Rest Break Class and the Overtime Class. The Court of Appeal, in a decision previously published as Faulkinbury v. Boyd & Associates, Inc., 185 Cal. App. 4th 1363 (2010), review granted Oct. 13, 2010, S184995 (Faulkinbury I), reversed the order denying certification of the overtime class but affirmed the order denying certification of the Meal Break Class and the Rest Break Class. Then Brinker. Then review granted. Then remand with an order to vacate Faulkinbury I and reconsider in light of Brinker.
Summarizing the Supreme Court's guidance regarding the consideration of merits at the certification stage, the Court said:
The Supreme Court confirmed a class certification motion should not be a vehicle for resolving the merits of a claim, but recognized too that “[w]hen evidence or legal issues germane to the certification question bear as well on aspects of the merits, a court may properly evaluate them.” (Brinker, supra, 53 Cal.4th at pp. 1023‑1024.) The court concluded: “Presented with a class certification motion, a trial court must examine the plaintiff’s theory of recovery, assess the nature of the legal and factual disputes likely to be presented, and decide whether individual or common issues predominate. To the extent the propriety of certification depends upon disputed threshold legal or factual questions, a court may, and indeed must, resolve them. Out of respect for the problems arising from one-way intervention, however, a court generally should eschew resolution of such issues unless necessary. [Citations.] Consequently, a trial court does not abuse its discretion if it certifies (or denies certification of) a class without deciding one or more issues affecting the nature of a given element if resolution of such issues would not affect the ultimate certification decision.” (Id. at p. 1025.)
Slip op., at 6. Continuing, the Court observed that the Supreme Court "emphasized that '[c]laims alleging that a uniform policy consistently applied to a group of employees is in violation of the wage and hour laws are of the sort routinely, and properly, found suitable for class treatment.'" Slip op., at 7. The support for that last proposition was summarized as follows:
Brinker court cited three Court of Appeal cases: Jaimez v. Daiohs USA, Inc. (2010) 181 Cal.App.4th 1286 (Jaimez); Ghazaryan v. Diva Limousine, Ltd. (2008) 169 Cal.App.4th 1524 (Ghazaryan); and Bufil v. Dollar Financial Group, Inc. (2008) 162 Cal.App.4th 1193 (Bufil). In Jaimez, Ghazaryan, and Bufil, the Court of Appeal held the trial court abused its discretion by denying class certification. (Jaimez, supra, at pp. 1299‑1307; Ghazaryan, supra, at pp. 1534‑1538; Bufil, supra, at pp. 1205‑1206.) These courts reasoned that the plaintiffs were challenging a uniform employment policy that allegedly violated California law, and, therefore, this violation could be proved (or disproved) through common facts and law. (Jaimez, supra, at pp. 1299‑1300; Ghazaryan, supra, at pp. 1536‑1538; Bufil, supra, at p. 1206.) The courts in Jaimez and Ghazaryan also concluded that common issues predominated even if the employment policy did not affect each employee in the same way and damages would need to be proved individually. (Jaimez, supra, at pp. 1301, 1303‑1305; Ghazaryan, supra, at p. 1536.)
Slip op., at 7, n. 1.
This is one area in which California certification procedural law appears to track somewhat more favorably for certification than does federal law applying Rule 23. At the very least, it appears to conceptually negate the flavor-of-the-month argument, magically extracted from Wal-Mart, that a defendant is entitled to assert individual defenses in every case against every class member, thereby defeating class certification in virtually every conceivable case (which, logically, could not be true or someone might have noticed this over the decades upon decades of class action jurisprudence, but I digress as I so often do). Wal-Mart, a case about a specific intent type of violation, says nothing of the sort, absent very creative quote extraction, coupled with very creative editorial content used to describe that very creative quote extraction. But stated another way, Brinker doesn't diverge from the federal track so much as hold the line that California has charted for some time, while cagey defense counsel try to move the tracks over on the federal side. I suspect that, when the dust settles, the tracks will have moved back to a point closer to convergence, but not until there isn't much left of that Wal-Mart horse to beat.
Turning back to the Faulkinbury II decision, other observations of note include:
I can't promise that work obligations won't steal blogging time, but I will keep doing my best to highlight major decisions and events, intermingled with my brand of commentary.
Federal Rule of Civil Procedure 68 allows a defendant to pony up the dough to resolve a claim and avoid the expense of litigation so long as the amount to fully resolve the claim can be clearly calculated in full and is offered in full (more can be offered if the defendant wants to be sure that the full claim under any method of calculation is fully resolved by the offer). In Genesis Healthcare v. Symczyk, 569 U. S. ____ (April 16, 2013), the Supreme Court entirely ducked the issue of whether a Rule 68 offer moots a collective action filed under the FLSA, instead resting on a concession by the plaintiff in the court below. And thanks for nothing.
To sum up, the plaintiff brought a collective action under the Fair Labor Standards Act of 1938 (FLSA) on behalf of herself and “other employees similarly situated.” She ignored defendant’s offer of judgment under Rule 68. The District Court, finding that no other individuals had joined and that the Rule 68 offer fully satisfied her claim, concluded that the suit was moot and dismissed it for lack of subject-matter jurisdiction. The Third Circuit reversed. It held that her individual claim was moot but that her collective action was not, explaining that allowing defendants to “pick off” named plaintiffs before certification with calculated Rule 68 offers would frustrate the goals of collective actions. The case was remanded to the District Court to allow the plaintiff to seek “conditional certification,” which, if successful, would relate back to the date of her complaint.
Relying on the case or controversy requirement, the Court ducked the entire "pick off" issue:
While the Courts of Appeals disagree whether an unaccepted offer that fully satisfies a plaintiff ’s claim is sufficient to render the claim moot, we do not reach this question, or resolve the split, because the issue is not properly before us. The Third Circuit clearly held in this case that respondent’s individual claim was moot. 656 F. 3d, at 201. Acceptance of respondent’s argument to the contrary now would alter the Court of Appeals’ judgment, which is impermissible in the absence of a cross-petition from respondent. See Northwest Airlines, Inc. v. County of Kent, 510 U. S. 355, 364 (1994); Trans World Airlines, Inc. v. Thurston, 469 U. S. 111, 119, n. 14 (1985). Moreover, even if the cross-petition rule did not apply, respondent’s waiver of the issue would still prevent us from reaching it. In the District Court, respondent conceded that “[a]n offer of complete relief will generally moot the [plaintiff ’s] claim, as at that point the plaintiff retains no personal interest in the outcome of the litigation.” App. 93; 2010 WL 2038676, at *4. Respondent made a similar concession in her brief to the Court of Appeals, see App. 193, and failed to raise the argument in her brief in opposition to the petition for certiorari. We, therefore, assume, without deciding, that petitioners’ Rule 68 offer mooted respondent’s individual claim. See Baldwin v. Reese, 541 U. S. 27, 34 (2004).
Slip op., at 5. So, given that the Supreme Court said that it is refusing to consider the "pick off" issue, what has been the general reaction of the defense bar? Naturally they have already written that this means the "pick off" is completely acceptable. I happen to think that this means you shouldn't concede anything ever, even if the court you are before thinks you are a punk for holding fast to your view of the law.
Justice Kagan had a few choice words for the 5-4 majority in her dissent. She wrote:
The Court today resolves an imaginary question, based on a mistake the courts below made about this case and others like it. The issue here, the majority tells us, is whether a “ ‘ collective action’ ” brought under the Fair Labor Standards Act of 1938 (FLSA), 29 U.S.C. § 201 et seq., “is justiciable when the lone plaintiff's individual claim becomes moot.” Ante, at ––––. Embedded within that question is a crucial premise: that the individual claim has become moot, as the lower courts held and the majority assumes without deciding. But what if that premise is bogus? What if the plaintiff's individual claim here never became moot? And what if, in addition, no similar claim for damages will ever become moot? In that event, the majority's decision—founded as it is on an unfounded assumption—would have no real-world meaning or application. The decision would turn out to be the most one-off of one-offs, explaining only what (the majority thinks) should happen to a proposed collective FLSA action when something that in fact never happens to an individual FLSA claim is errantly thought to have done so. That is the case here, for reasons I'll describe. Feel free to relegate the majority's decision to the furthest reaches of your mind: The situation it addresses should never again arise.
Slip diss. op., at 1-2. Justice Kagan then observed that the underlying issue was already answered indirectly by the Supreme Court recently:
We made clear earlier this Term that “[a]s long as the parties have a concrete interest, however small, in the outcome of the litigation, the case is not moot.” Chafin v. Chafin, 568 U.S. ––––, ––––, 133 S.Ct. 1017, 1023, –––L.Ed.2d –––– (2012) (internal quotation marks omitted). “[A] case becomes moot only when it is impossible for a court to grant any effectual relief whatever to the prevailing party.” Ibid. (internal quotation marks omitted). By those measures, an unaccepted offer of judgment cannot moot a case. When a plaintiff rejects such an offer—however good the terms—her interest in the lawsuit remains just what it was before. And so too does the court's ability to grant her relief. An unaccepted settlement offer—like any unaccepted contract offer—is a legal nullity, with no operative effect. As every first-year law student learns, the recipient's rejection of an offer “leaves the matter as if no offer had ever been made.” Minneapolis & St. Louis R. Co. v. Columbus Rolling Mill, 119 U.S. 149, 151, 7 S.Ct. 168, 30 L.Ed. 376 (1886). Nothing in Rule 68 alters that basic principle; to the contrary, that rule specifies that “[a]n unaccepted offer is considered withdrawn.” Fed. Rule Civ. Proc. 68(b). So assuming the case was live before—because the plaintiff had a stake and the court could grant relief—the litigation carries on, unmooted.
Slip diss. op., at 3. Don't forget this admonition from Justice Kagan when you receive the inevitable pick-off attempt, followed by a motion to dismiss.
The Rees-Levering Motor Vehicle Sales and Finance Act protects consumers involved in, you guessed it, motor vehicle sales and finance transactions. In Ramirez v. Balboa Thrift and Loan (pub. Ord. April 12, 2013 and published April 22, 2013), the Court of Appeal (Fourth Appellate District, Division One) concluded that the trial court's decision to deny class certification of Plaintiffs' UCL claim asserting violation of the Rees-Levering Act was predicated upon an erroneous legal analysis.
Ramirez financed a car, but didn't make many payments in a timely manner. Ramirez then voluntarily surrendered the car. Balboa sold the car and asserted a deficiency. Ramirez then sued, contending that the NOI failed to comply with the Act.
On the legal issue, the Court said:
[A] seller cannot recover a deficiency unless the NOI specifically and timely notifies the buyer of the conditions precedent to loan reinstatement OR timely notifies the buyer that there is no right of reinstatement and provides a statement of reasons for this conclusion. Reading together sections 2983.2 and 2983.3, a seller/holder who wishes to preserve its rights to claim a deficiency must determine within a 60-day period after repossession whether a buyer is entitled to a reinstatement, and then notify the buyer of this decision. Given the Legislature's manifest intent to set forth the exclusive process for creditors to obtain a deficiency balance after a vehicle repossession or surrender, there is no room for reading additional exceptions into the statutory scheme.
Slip op., at 18. More interesting for class purposes, the Court also noted the following:
Equally important for class certification purposes, even assuming the statutory exception could be asserted after the statutory time period had expired, Balboa did not proffer any facts showing that any such exception would apply to any of the other class members. Instead, it merely stated that individual issues would predominate because it should be provided the right to "investigate" each class member to determine whether it could find any facts showing the applicability of any of the statutory exceptions. Without any foundational basis showing that such evidence could or would be discovered, this possibility does not raise a likelihood that individual issues would predominate over common issues in the litigation. (See Brinker, supra, 53 Cal.4th at p. 1025 [in deciding certification question court must examine the plaintiff's theory of recovery and "assess the nature of the legal and factual disputes likely to be presented," italics added].)
Slip op., at 20. While plaintiffs often consider their obligations only at the time of certification, this is a reminder to examine the defendant's showing in opposition carefully; if the defendant failed to support a contention, point it out.
I've covered the very interesting moves of attorneys from Initiative Legal Group to Capstone Law here. Now, a suit filed in San Francisco Superior Court, entitled Maxon v. Capstone Law, CGC-13-528884, offers a possible context for the rapid movement of attorneys from Initiative Legal Group to Capstone Law, and that context is disturbing. In a column on law.com, Scott Graham, of The Recorder, reports on the allegations contending that Capstone Law was formed to hide assets from a fraud lawsuit filed against Initiative Legal Group related to dealings with 600 clients. Scott Graham, Plaintiffs Shop Hit With New Ethics Suit, The Recorder (February 21, 2013).
On April 10, 2013, the California held its (usually) weekly conference. Significant results include:
Today the Ninth Circuit, in Busk v. Integrity Staffing Solutions, Inc. (9th Cir. April 12, 2013) joined other circuits in concluding that FLSA opt-in collective actions are not incompatible with state law claims asserted as Rule 23 class actions:
In sum, we agree with the other circuits to consider the issue that the fact that Rule 23 class actions use an opt-out mechanism while FLSA collective actions use an opt-in
mechanism does not create a conflict warranting dismissal of the state law claims.
Slip op., at 9. I will write up a bit more later, but this holding should put an end to the wasteful motion practice around this issue in the Ninth Circuit. Given the agreement manifesting between the Circuits, it is unlikely that we will see Supreme Court review of this issue any time soon.
In Armenta v. Osmose, Inc., 135 Cal. App. 4th 314 (2005), one Court of Appeal (2/6) concluded that the governing Wage Order required payment of the minimum wage during every hour worked (as opposed to dividing compensation by total hours worked to check whether the average hourly compensation exceeds minimum wage). In Gonzalez v. Downtown LA Motors, LP, et al., (April 2, 2013), the Court of Appeal (Second Appellate District, Division Two) examined the same issue, and reached the same conclusion.
In Gonzalez, the defendant compensated its automotive service technicians on a what was characterized as a “piece rate” basis for repair work. The question before the trial court was whether the defendant was also required to pay those technicians a separate hourly minimum wage for time spent during their work shifts waiting for vehicles to repair or performing other non-repair tasks directed by the employer. The defendant argued that it was not required to pay the technicians a separate hourly minimum wage for such time because it ensured that a technician's total compensation for a pay period never fell below what the defendant called a “minimum wage floor,” calculated as the total number of hours the technician was at work during the pay period (including hours spent waiting for repair work or performing non-repair tasks), multiplied by the applicable minimum wage rate. The employer did so by supplementing a technician's pay, if necessary, to cover any shortfall between the technician's piece-rate wages and the minimum wage floor. The trial court did not find this persuasive, concluding that each hour had to be separately compensated at above minimum wage, even if other hours were compensated well above the minimum wage. The Court of Appeal agreed.
In its analysis of Armenta, the Court observed:
Finally, the court in Armenta considered "the policies underlying California's minimum wage law and regulations" which "reflect a strong public policy in favor of full payment of wages for all hours worked." (Armenta, supra, 135 Cal.App.4th at p. 324.) Given that public policy, the court concluded that a method of "averaging all hours worked 'in any work week' to compute an employer's minimum wage obligation under California law is inappropriate." (Ibid.) The court in Armenta held that use of such an averaging method to determine an employer's minimum wage obligation violates California law and that "[t]he minimum wage standard applies to each hour worked by [the employees] for which they were not paid." (Ibid.)
Slip op., at 11-12. Gonzalez, when coupled with Armenta, solidifies the construction of California's minimum wage obligation.
I overlooked last week's Conference Results from the California Supreme Court until today, but better late than never. On March 20, 2013, the Court denied review in Bradley v. Networkers International (December 12, 2012). See earlier post here. This is a significant result, as the case applies Brinker to a certification analysis in the context of whether workers were misclassified as independent contractors.
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.
