Class certification in California is still actually a "procedure"

What to make of this one?  I should have commented on it long ago, I know, but that start-your-own-law-firm thing is fairly time consuming, so I get to writing when I can.   So while I was doing some show prep for this upcoming weekend's podcast, I finally took a look at Benton v. Telecom Network Specialists, Inc. (Oct. 16, 2013) to see for myself what the Court of Appeal (Second Appellate District, Division Seven) did that has many plaintiff-side practitioners so excited.

In Benton, the plaintiffs, cell-phone tower technicians, filed a wage and hour class action lawsuit against Telecom Network Services (TNS) alleging, among other things, violation of meal and rest break requirements and failure to pay overtime.  Most of the proposed class of technicians were hired and paid by staffing companies that contracted with TNS. The remainder of the technicians were hired and paid by TNS directly.  Plaintiffs alleged that TNS was the employer of both categories of technicians and moved to certify their claims.  The trial court denied certification, holding that TNS’s liability could not be established “through common proof because: (1) the technicians worked under ‘a diversity of workplace conditions’ that enabled some of them to take meal and rest breaks; and (2) the staffing companies that hired and paid many of the TNS technicians had adopted different meal, rest break and overtime policies throughout the class period.”

The Court of Appeal reversed, remanding for further proceedings.  In an extensive opinion tracking development of the certification standards as applied to wage and hour cases beginning primarily with Brinker, the Court also examined decisions in Bradley v. Networkers International, 211 Cal. App. 4th 1129 (2012) and Faulkinbury v. Boyd & Associates, 216 Cal. App. 4th 220 (2013).

Discussing Bradley, the Court said:

On remand from the Supreme Court, however, the Court of Appeal concluded that, under the analysis set forth in Brinker, the trial court had improperly focused on individual issues related to damages, rather than on the plaintiffs’ theory of liability. (Bradley, supra, 211 Cal.App.4th at p. 1151.) According to the court, Brinker had clarified that “in ruling on the predominance issue in a certification motion, the court must focus on the plaintiff’s theory of recovery and assess the nature of the legal and factual disputes likely to be presented and determine whether individual or common issues predominate.” (Id. at p. 1150.) The court further explained that “plaintiffs’ theory of recovery [wa]s based on Networkers’ (uniform) lack of a rest and meal break policy and its (uniform) failure to authorize employees to take statutorily required rest and meal breaks. The lack of a meal/rest break policy and the uniform failure to authorize such breaks are matters of common proof. Although an employer could potentially defend these claims by arguing that it did have an informal or unwritten meal or rest break policy, this defense is also a matter of common proof.” (Id. at p. 1150.)

Slip op., at 22-23.  Notice that, at least in the context of these wage particular wage & hour claims, which have a natural tendency to be governed by some set of implementing policies, the certification question endorsed in this case is the question of whether the defendant's policy is legal, not whether any particular employee stumbled into compliant behavior.  Similarly, discussing Faulkinbury, the Court said:

Upon remand from the Supreme Court, the appellate court concluded that Brinker had rejected the mode of analysis set forth in its original opinion. As to plaintiffs’ meal break claim, the appellate court explained that Brinker clarified that the defendant’s liability would attach “upon a determination that [defendant’s] uniform on-duty meal break policy was unlawful . . . . Whether or not the employee was able to take the [off-duty] required break goes to damages, and ‘[t]he fact that individual [employees] may have different damages does not require denial of the class certification motion.’ [Citation.]” (Faulkinbury, supra, 216 Cal.App.4th at p. 235.)

Slip op., at 24-25.  This line of cases appears to strongly emphasize what was, for a time, an argument receiving less traction: variations in damages does not require denial of certification.

After establishing the framework for its analysis, the Court examined the trial court’s ruling:

The written order (as well as statements made at the motion hearing) make clear that the trial court did not believe TNS would be liable upon a determination that its lack of a meal and rest policy violated applicable wage and hour requirements; rather, it concluded that TNS would become liable only upon a showing that a technician had missed breaks as a result of TNS’s policies.

Slip op., at 27.  The Court then rejected the trial court’s mode of analysis, holding that Brinker, and then Bradley and Faulkinbury clarified the correct approach:

As explained in Bradley and Faulkinbury, however, Brinker “expressly rejected” this mode of analysis. (Bradley, supra, 211 Cal.App.4th at pp. 1143, 1151; Faulkinbury, supra, 216 Cal.App.4th at pp. 235, 237.) As succinctly stated in Faulkinbury: “the employer’s liability arises by adopting a uniform policy that violates the wage and hour laws. Whether or not the employee was able to take the required break goes to damages, and ‘[t]he fact that individual [employees] may have different damages does not require denial of the class certification motion.’ [Citation.]” (Faulkinbury, supra, 216 Cal.App.4th at p. 235; see also Bradley, supra, 211 Cal.App.4th at p. 1151 [“under the logic of [Brinker],when an employer has not authorized and not provided legally-required meal and/or rest breaks, the employer has violated the law and the fact that an employee may have actually taken a break or was able to [take a break] during the work day does not show that individual issues will predominate in the litigation”].) Indeed, Bradley and Faulkinbury both specifically concluded that evidence showing that some class members’ working conditions permitted them to take breaks, while others did not, was not a sufficient basis for denying certification. (See Faulkinbury, supra, 216 Cal.App.4th at pp. 236-237 [evidence that some employees were able to “take breaks at [their] posts”, while others “could not leave the assigned post for a rest break” does not “establish individual issues of liability”]; Bradley, supra, 211 Cal.App.4th at p. 1150 [evidence that some employees worked “alone for long periods of time” or “took the authorized rest or meal break” was insufficient to show individual issues predominated.)

Slip op., at 27.  The Court continued in this same vein, thoroughly rejecting both the defendant’s theories and trial court’s method of analysis, repeatedly holding that variations in experiences by class members impacted their damages, not the plaintiffs’ theory of the case, which challenged the absence of lawful policies required by the Wage Order.

You can, at least in this context, certify the question of whether the defendant did the right thing, not the question of whether the plaintiffs always received the right thing.  In other words, luck won't save you; legal policies, implemented as written, will.  Somehow, I think the wage & hour defense bar is celebrating this just as much... 

Not Guilty! Not Guilty! Not Guilty!

Got my client off with a "not guilty" verdict today.  Yeah!  Of course, I was the client, and it was a bogus traffic ticket, but...still.  Not Guilty! 

Two tips for for resolving networking errors caused by Windows 8.1

I tend to stay fairly close to the bleeding edge when it comes to personal technology.  For instance, while it seems to freak people out, I have been using Windows 8 since it was in public beta release more than a year ago.

When the 8.1 update to was released last week, I naturally installed it the very first day on three different computers.  Personally, the installs were trouble-free on all three machines, though I set them to automatically download and install Windows updates, which made made that installation easier for me than it could have been (there are Windows updates that must be installed prior to the 8.1 update, and the 8.1 update will now show up for you if you don't do that step first). 

Last night, however, I did encounter a networking issue related to Windows 8.1, which appears to be a fairly wide-spread issue (lots of talk about it online already in forums, so many people are seeing similar issues).   I noticed that, after I woke my machine from sleep, it almost immediately lost internet connectivity (actually, network connectivity of all types, since it couldn't even see the local network printers).  I temporarily regained access by disabling the network card and connecting via wifi, but that was erratic as well.  I had to disable and enable network cards several times to get enough online search time to troubleshoot.  Here are my two suggestions for how to deal with this.

First, roll back the driver on your network card to an earlier version.  For many, just reading that was probably very terrifying.  Here's how to do it: 

You can do this by going to device manager, right click on your network adapter, go to update driver, then "browse my computer for driver software, then"let me pick from a list of...." , uncheck the "show compatible hardware" checkbox and finally select the older version of current driver (if you dont know which, just use trial and error).

Hat tip to Technet.   Let me elaborate.  Right click in the lower left hand corner of your screen, where the new Windows start screen icon now sits.  This brings up the power user menu.  Click on Device Manager.  Expand the portion of the device list showing "Network adapters."  My machine has several, including an ethernet card and a wi-fi adapter.  Right click on the adapter giving you trouble.  Select update driver.  Follow the instructions above (browse my computer for driver...then choose let me pick from a list).  In my case, I had 3 drivers, one labelled a "Microsoft" driver and two from the card manufacturer.  I selected one from the manufacturer and installed that one.  The installation of a manufacturer driver has fixed my problem for the last day.

Now, for a more robust solution, when you are in the Device manager, take note of the name of your network adapter (including any model number) for ethernet and/or wifi.  Search online (if you can get there) for that manufacturer's website.  Look for a support/downloads menu option and try to find current downloads.  I found drivers updated for Windows 8.1 for both of my adapters that way (I haven't installed them yet, since my rollback fix is working for now and I have work to finish).  The newest manufacturer drivers should replace any glitchy drivers added during setup.

As an aside, this seems to be something that manufacturers knew was coming, since Dell pulled all of the BIOS files for my computer about a week ago and then released an updated BIOS a few days ago that had unspecified changes to networking compatibility in its change log.  Interesting...  I installed the updated BIOS and so far everything is behaving. 

If you stumble on this post while pulling your hair out over networking problems, I hope it helps. 

9th Circuit concludes that unaccepted Rule 68 offers don't moot claims

A recent guest on the Class Re-Action podcast concluded that Rule 68 claims were underutilized.  As it turns out, at least in the Ninth Circuit, that may not be the case, since defendants might not achieve what they would like from unaccepted Rule 68 offers.  In Diaz v. First American (9th Cir. Oct. 4, 2013), the Court examined whether an unaccepted Rule 68 offer renders a claim moot.  Aware of a split of authority, the Ninth Circuit held that it does not.

The case originated as a putative consumer class action related to a home warranty plan.  After several claims for relief were dismissed, the plaintiff moved for class certification.  That motion was denied.  First American then made an offer of judgment on the plaintiff's remaining individual claims – for misrepresentation, breach of contract and breach of the implied covenant of good faith and fair dealing – pursuant to Rule 68.  The offer included an expiration date, and the plaintiff did not accept prior to that date.  First American then moved to dismiss the action as moot.  The trial court found that the offer would have fully satisfied the remaining individual claims and dismissed.

After noting that the Supreme Court has not answered the issue, the Ninth Circuit examined the Circuit position, concluding that it had yet to be answered by the Circuit: 

In Pitts v. Terrible Herbst, Inc., 653 F.3d 1081, 1091–92 (9th Cir. 2011), we held “that an unaccepted Rule 68 offer of judgment – for the full amount of the named plaintiff’s individual claim and made before the named plaintiff files a motion for class certification – does not moot a class action” (emphasis added), but we did not squarely address whether the offer mooted the plaintiff’s individual claim. We assumed that an unaccepted offer for complete relief will moot a claim, but we neither held that to be the case nor analyzed the issue. See id. at 1090–92. In GCB Communications, Inc. v. U.S. South Communications, Inc., 650 F.3d 1257, 1267 (9th Cir. 2011), we noted that a case will “become moot” when “an opposing party has agreed to everything the other party has demanded,” but we did not address the effects of an unaccepted Rule 68 offer, an issue not presented in that case. We therefore treat this as an open question in this circuit.

Slip op., at 8.   The Court then examined the different approaches in the Seventh, Sixth and Second Circuits.  After noting a split between them, the Court observed that four justices of the Supreme Court had offered guidance:

As noted, the majority in Genesis Healthcare did not reach whether an unaccepted offer that fully satisfies a plaintiff’s claim is sufficient to render the claim moot. See Genesis Healthcare, 133 S. Ct. at 1528–29. In a dissenting opinion, however, Justice Kagan, writing for all four justices who reached the question, agreed with the Second Circuit that “an unaccepted offer of judgment cannot moot a case.” Id. at 1533 (Kagan, J., dissenting); accord Brief for the United States as Amicus Curiae Supporting Affirmance, Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013) (No. 11-1059), 2012 WL 4960359, at *10–15.

Slip op., at 11.   The Court quoted extensively from Justice Kagan's dissent:

"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, 133 S. Ct. 1017, 1023 (2012) (internal quotation marks omitted)."

Slip op., at 11.   Continuing, the Court quoted further from the dissent in Genesis:

"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 (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 op., at 12. 

So a friendly suggestion to the Third Circuit: Rethink your mootness-by-unaccepted-offer theory. And a note to all other courts of appeals: Don’t try this at home.

Slip op., at 13.  Concluding that Justice Kagan was correct in her explanation of how unaccepted Rule 68 offers work, the Court then held that the refusal to accept a Rule 68 offer did not moot the case.

It appears that it will take something more than a simple Rule 68 offer to impose mootness on plaintiffs' claims in the Ninth Circuit. 

Episode 6 of the Class Re-Action podcast is in the can

Episode 6, which is a smidge longer than usual, is now available for streaming and direct download and through iTunes and the XBox music store soon after that.  Thanks to Ken Sulzer of Proskauer and Eric Kingsley for contributing as guests.

Moore & Leviant LLP

I didn't anticipate all the twists and turns that led to this day, but here it is.  I'm excited (and nervous) to see what comes next.  You can find our new firm at www.mllawyers.net.

Episode 5 of the Class Re-Action podcast is now available

Episode 5 is now available for streaming, direct download, and, shortly, through iTunes and the XBox music store.  Thanks to Keith Jacoby of Littler and Josh Konecky of Schneider Wallace for contributing as guests.  My apologies for the bit of echo in this episode, but it was beyond my control.

PAGA claims of multiple employees are not a "common and undivided interest"

In  Urbino v. Orkin Servs. of California, Inc. (9th Cir. Aug. 13, 2013), the Ninth Circuit took up the question of whether PAGA claims aggregate for purposes of CAFA's damage prerequisite.  Plaintiff, a California citizen, worked in a nonexempt, hourly paid position for defendants, each of whom is a corporate citizen of another state, in California. Alleging that defendants illegally deprived him and other nonexempt employees of meal periods, overtime and vacation wages, and accurate itemized wage statements, plaintiff filed a representative PAGA action.  Defendants removed.  Plaintiff moved to remand.  The district court was obligated to decide whether the potential penalties could be combined or aggregated to satisfy the amount in controversy requirement. If they could, federal diversity jurisdiction would lie because statutory penalties for initial violations of California’s Labor Code would total $405,500 and penalties for subsequent violations would aggregate to $9,004,050. If not, the $75,000 threshold would not be met because penalties arising from plaintiff’s claims would be limited to $11,602.40.  Acknowledging a split of opinion, the district court found PAGA claims to be common and undivided and therefore capable of aggregation.

The Court examined the "common and undivided interest" exception to the rule that multiple plaintiffs cannot aggregate claims.  Observing that common questions do not create that common and undivided interest, the Court said:

But simply because claims may have “questions of fact and law common to the group” does not mean they have a common and undivided interest.  Potrero Hill Cmty. Action Comm. v. Hous. Auth., 410 F.2d 974, 977 (9th Cir. 1969). Only where the claims can strictly “be asserted by pluralistic entities as such,” id., or, stated differently, the defendant “owes an obligation to the group of plaintiffs as a group and not to the individuals severally,” will a common and undivided interest exist, Gibson v. Chrysler Corp., 261 F.3d 927, 944 (9th Cir. 2001) (quoting Morrison v. Allstate Indem. Co., 228 F.3d 1255, 1262 (11th Cir. 2000)).

Slip op., at 8.

The defendants then argued that the interest asserted by plaintiff was not his, but was actually the state's interest.  The Court's majority did not find that argument compelling:

To the extent Plaintiff can—and does—assert anything but his individual interest, however, we are unpersuaded that such a suit, the primary benefit of which will inure to the state, satisfies the requirements of federal diversity jurisdiction. The state, as the real party in interest, is not a “citizen” for diversity purposes. See Navarro Sav. Ass’n v. Lee, 446 U.S. 458, 461 (1980) (courts “must disregard nominal or formal parties and rest jurisdiction only upon the citizenship of real parties to the controversy.”); Mo., Kan. & Tex. Ry. Co. v. Hickman, 183 U.S. 53, 59 (1901); see also Moor v. Cnty. of Alameda, 411 U.S. 693, 717 (1973) (explaining that “a State is not a ‘citizen’ for purposes of the diversity jurisdiction”).

Slip op., at 9.   By the way, this cleverly avoids deciding an unnecessary issue that is of some consequence in the world of arbitration.  It does, however, suggest a point upon which the California Supreme Court will likely have to express an opinion when it decides whether PAGA claims are excused from arbitration clause enforcement or, alternatively, from arbitration clauses that preclude “class” claims.

The dissent, like the majority opinion, is also relatively short, but it is also well argued.

Thanks to the tipster for directing me to the decision (since I don't know whether you want to be identified, you remain anonymous).

NOTE:  This is an updated version of an earlier post on this case.  The older post has been removed. 

Ninth Circuit confirms that Lowdermilk is overruled and damage caps won't save you from CAFA (Rodriquez v. AT&T Mobility)

In Rodriguez v. AT&T Mobility Services LLC (9th Cir. Aug. 27, 2013), the plaintiff brought a putative class action against AT&T Mobility Services, LLC, on behalf of himself and all other similarly situated retail sales managers of AT&T wireless stores in Los Angeles and Ventura counties.  The plaintiff asserted various claims related to alleged unpaid wages, overtime compensation, and damages for statutory violations, filing in Los Angeles County Superior Court in a doomed effort to escape federal court.  AT&T removed the case to federal court under 28 U.S.C. § 1332(d)(2).  Plaintiff moved to remand the case to state court, arguing that defendant could not establish subject-matter jurisdiction because the total amount in controversy did not exceed $5 million.  Plaintiff cited his First Amended Complaint, in which he alleged as much, that “the aggregate amount in controversy is less than five million dollars.” To bolster his position, in that pleading, he also “waive[d] seeking more than five million dollars ($5,000,000) regarding the aggregate amount in controversy for the class claims alleged.”  The district court rejected AT&T’s argument and ordered remand to state court.  The trial court did not address the parties’ calculations of amount in controversy.

The Ninth Circuit recognized the applicability of the U.S. Supreme Court's first CAFA decision, Standard Fire Ins. Co. v. Knowles, ___ U.S. ___, 133 S.Ct. 1345 (2013).  As to Standard Fire, the parties agreed that Standard Fire mandated reversal of the district court's remand order, which was issued before Standard Fire was decided.  The Ninth Circuit directed the district court to reconsider the remand motion. Slip op., at 7.

On the second issue involved in the appeal, the burden of proof, the Court held that Standard Fire overruled Lowdermilk v. U.S. Bank National Association, 479 F.3d 994 (9th Cir. 2007), which had imposed a "legal certainty" standard, instead of a “preponderance of the evidence” standard, for defeating a pleading’s allegations of amount-in-controversy:

The reasoning behind Lowdermilk's imposition of the legal certainty standard is clearly irreconcilable with Standard Fire. We hold that Standard Fire has so undermined the reasoning of our decision in Lowdermilk that the latter has been effectively overruled. A defendant seeking removal of a putative class action must demonstrate, by a preponderance of evidence, that the aggregate amount in controversy exceeds the jurisdictional minimum. This standard conforms with a defendant's burden of proof when the plaintiff does not plead a specific amount in controversy.

Slip op., at 14.  The Court went on to observe that a “lead plaintiff of a putative class cannot reduce the amount in controversy on behalf of absent class members, so there is no justification for assigning to the allegation weight so significant that it affects a defendant's right to a federal forum under § 1332(d)(2).”  Slip op., at 15.

With this decision in mind, a lead plaintiff is taking a serious chance with their adequacy if there is an attempted waiver of any recovery exceeding $5 million that cannot be supported down the road as having been based on a good faith calculation of recoverable damages.

It's always commonality that gets you in the end (Hendelman v. Los Altos)

When it comes to certification, you can fix almost any problem other than commonality (community of interest).  Inadequate representative?  Get a new one.  Problem with inexperienced class counsel?  Co-counsel.  Numerosity is not really amenable to correction, but most of the time firms just pass on the tiny classes.  But commonality, there's where the rubber meets the road.  In Hendelman v. Los Altos Apartments, L.P. (Jul. 22, 2013; pub. ord. Aug. 20, 2013), the Court of Appeal (Second Appellate District, Division Three) affirmed a trial court order denying plaintiffs' motion for class certificaiton for lack of ascertainability, community of interest, and superiority.  The bulk of the Court of Appeal opinion addresses the commonality-related failings.

The Court first held that the warranty of habitability claim was not suitable for resolution through common proof:

[T]he mere “existence of a prohibited (uninhabitable) condition or other noncompliance with applicable code standards does not necessarily constitute a breach of the warranty of habitability.” (Friedman et al., Cal. Practice Guide: Landlord-Tenant (The Rutter Group 2012) § 3:39, p. 3-13, citing Green v. Superior Court, supra, 10 Cal.3d at pp. 637-638.) “Whether the defect or code noncompliance is ‘substantial’ (and thus a cognizable breach) or ‘de minimis’ (no actionable breach) is determined on a case-by-case basis.” (Friedman et al., supra, § 3:40, p. 3-13.) “In considering the materiality of an alleged breach, both the seriousness of the claimed defect and the length of time for which it persists are relevant factors. Minor housing code violations standing alone which do not affect habitability must be considered de minimis and will not entitle the tenant to reduction in rent; and likewise, the violation must be relevant and affect the . . . common areas which [the tenant] uses.” (Hinson v. Delis (1972) 26 Cal.App.3d 62, 70, disapproved on other grounds by Knight v. Hallsthammar (1981) 29 Cal.3d 46, 55, fn. 7.) Stated otherwise, whether a particular defect or violation of a housing code constitutes a breach of the implied warranty of habitability depends on the severity and duration of the defect or violation. Breach is a rebuttable presumption affecting the burden of producing evidence. (Friedman et al., supra, §§ 3:46 to 3:47, pp. 3-14 to 3-15.)

Slip op., at 11.  The trial court concluded that even the code violations impacting all tenants did so differently and to different degrees, and the Court of Appeal, giving deference to the trial court, agreed.  One question raised by this decision is whether variation in entitlement to damage tainted the analysis as to whether liability could be shown through common proof, especially where strict liability is imposed on the landlord.  At times the Court seems to conflate proof of liability with nominal damages.

The Court then found that the claim for increased rent injected the same individualized questions about whether services to each tenant were reduced in any substantial manner that amounted to an implied increase in rent.

As to the retaliation claim, the Court found that no representative could state that claim, either due to statute of limitations problems or a failure to have been a tenant during the relevant time period.  And as with the habitability claim, the Court agreed that a nuisance action depended heavily on facts unique to each tenant, defeating commonality.

The Court declined to consider the many proposed adjustments or amendments to claims or the class definition on Appeal, finding that such arguments are, in the first instance, matters for the trial court.