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. 

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.

In American Express Co., et al. v. Italian Colors Restaurant, et al. (June 20, 2013), the Supreme Court tries to take class arbitration off life support

This one made me too sad to write about it quickly.  I had to grieve first.  Another day, another chance for the United States Supreme Court to pork litigants with an arbitration ruling.  In today's chapter, American Express Co., et al. v. Italian Colors Restaurant, et al. (June 20, 2013), we have the last saga in a long-running case addressing effective vindication of statutory rights.   Merchants who accept American Express cards brought a class action against Amex for violations of the federal antitrust laws. According to the merchants, American Express used its monopoly power in the market for charge cards to force merchants to accept credit cards at rates approximately 30% higher than the fees for competing credit cards. This tying arrangement, they said, violated §1 of the Sherman Act. They sought treble damages for the class under §4 of the Clayton Act.  The agreement with Amex contains a clause that requires all disputes between the parties to be resolved by arbitration. The agreement also provides that“[t]here shall be no right or authority for any Claims to be arbitrated on a class action basis.” In re American Express Merchants’ Litigation, 667 F. 3d 204, 209 (CA2 2012).  The Court of Appeal reversed an order compelling arbitration, agreeing with the merchants that the expense required to prove antitrust claims was so high that no individual merchant would be able to vindicate their statutory rights without the ability to aggregate claimants in a class action.

The 5 Justice majority opinion, authored by Justice Scalia, focused its analysis on the meaning of the “effective vindication” exception to the requirements of the FAA, concluding that it did not apply to a prohibitively expensive process for resolving claims on an individual basis only:

But the fact that it is not worth the expense involved in proving a statutory remedy does not constitute the elimination of the right to pursue that remedy. See 681 F. 3d, at 147 (Jacobs, C. J., dissenting from denial of rehearing en banc). The class-action waiver merely limits arbitration to the two contracting parties. It no more eliminates those parties’ right to pursue their statutory remedy than did federal law before its adoption of the class action for legal relief in 1938, see Fed. Rule Civ. Proc. 23, 28 U. S. C., p. 864 (1938 ed., Supp V); 7A C. Wright, A. Miller, & M. Kane, Federal Practice and Procedure §1752, p. 18 (3d ed. 2005). Or, to put it differently, the individual suit that was considered adequate to a

ssure “effective vindication” of a federal right before adoption of class-action procedures did not suddenly become “ineffective vindication” upon their adoption.

Slip op., at 7.  The majority, in referring in later discussion to Concepcion, made it very clear that, while you may have a “right” conferred by statute, you have no right to insist on an effective method to enforce that “right.”

The dissent, authored by Justice Kagan, offers a passionate but ultimately unavailing criticism of the majority’s holding:

Here is the nutshell version of this case, unfortunately obscured in the Court’s decision. The owner of a small restaurant (Italian Colors) thinks that American Express (Amex) has used its monopoly power to force merchants to accept a form contract violating the antitrust laws. The restaurateur wants to challenge the allegedly unlawful provision (imposing a tying arrangement), but the same contract’s arbitration clause prevents him from doing so. That term imposes a variety of procedural bars that would make pursuit of the antitrust claim a fool’s errand. So if the arbitration clause is enforceable, Amex has insulated itself from antitrust liability—even if it has in fact violated the law. The monopolist gets to use its monopoly power to insist on a contract effectively depriving its victims of all legal recourse.

Slip diss. op., at 1.  The dissent began by positing an uncontroversial proposition: “We would refuse to enforce an exculpatory clause insulating a company from antitrust liability—say, ‘Merchants may bring no Sherman Act claims’—even if that clause were contained in an arbitration agreement.” Slip diss. op., at 2.  But the dissent then observed, “If the rule were limited to baldly exculpatory provisions, however, a monopolist could devise numerous ways around it.”  Slip diss. op., at 3.

Applied as our precedents direct, the effective- vindication rule furthers the purposes not just of laws like the Sherman Act, but of the FAA itself. That statute reflects a federal policy favoring actual arbitration—that is, arbitration as a streamlined “method of resolving dis- putes,” not as a foolproof way of killing off valid claims. Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U. S. 477, 481 (1989). Put otherwise: What the FAA prefers to litigation is arbitration, not de facto immunity. The effective-vindication rule furthers the statute’s goals by ensuring that arbitration remains a real, not faux, method of dispute resolution. With the rule, companies have good reason to adopt arbitral procedures that facili- tate efficient and accurate handling of complaints. With- out it, companies have every incentive to draft their agreements to extract backdoor waivers of statutory rights, making arbitration unavailable or pointless. So down one road: More arbitration, better enforcement of federal statutes. And down the other: Less arbitration, poorer enforcement of federal statutes. Which would you prefer?  Or still more aptly: Which do you think Congress would?

Slip diss. op., at 5-6.  The balance of the dissent is an effective and scathing dismantling of the majority reasoning.  In conclusion, Justice Kagain writes:  “To a hammer, everything looks like a nail. And to a Court bent on diminishing the usefulness of Rule 23, everything looks like a class action, ready to be dismantled.” Slip diss. op., at 14.  But it is for naught at this point.  The majority opinion is the one that will rule day, and it is the one that should cause great concern if not checked legislatively.

In Busk v. Integrity Staffing Solutions, Ninth Circuit joins others to hold that FLSA and Rule 23 Classes are not incompatible

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.

Good news for Chinese Daily News when Ninth Circuit vacates certification under 23(b)(2), remands for further review of 23(b)(3) certification

The long-running saga of Wang v. Chinese Daily News, Inc. took its latest turn today, when the Ninth Circuit, on remand from the United States Supreme Court, issued the most decision in Wang v. Chinese Daily News, Inc. (9th Cir. Mar. 4, 2013).  The Ninth Circuit reversed various aspects of the District Court's certification order after applying Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011) to the District Court's decision.

First, the Court vacated the District Court's Rule 23(a)(2) analysis and directed the District Court to conduct the rigorous analysis required by Wal-Mart:

We vacate the district court’s Rule 23(a)(2) commonality finding and remand for reconsideration in light of Wal-Mart. On remand, the district court must determine whether the claims of the proposed class “depend upon a common contention . . . of such a nature that it is capable of classwide resolution — which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.” Wal-Mart, 131 S. Ct. at 2551. Plaintiffs must show “significant proof that [CDN] operated under a general policy of [violating California labor laws].” Ellis, 657 F.3d at 983 (quoting Wal-Mart, 131 S. Ct. at 2553 (alteration omitted)). However, plaintiffs need not show that every question in the case, or even a preponderance of questions, is capable of classwide resolution. So long as there is “even a single common question,” a would-be class can satisfy the commonality requirement of Rule 23(a)(2).

Slip op., at 10.

Next, the Court quickly concluded that the monetary relief sought by the plaintiffs was not "incidental."  The Court reversed the District Court's order certifying the class under Rule 23(b)(2).

Finally, the Court remanded for further consideration as to whether certification was warranted under Rule 23(b)(3):

For two reasons, we remand to the district court for reconsideration of the propriety of class certification under Rule 23(b)(3). First, the district court’s conclusion that common questions predominate in this case rested on the fact, considered largely in isolation, that plaintiffs are challenging CDN’s uniform policy of classifying all reporters and account executives as exempt employees. See Wang, 231 F.R.D. at 612–13. In two recent decisions, we criticized the nature of the district court’s Rule 23(b)(3) predominance inquiry in this case. See In re Wells Fargo Home Mortg. Overtime Pay Litig., 571 F.3d 953, 958–59 (9th Cir. 2009); Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935, 944–48 & n.14 (9th Cir. 2009). We observed that the district court in this case “essentially create[d] a presumption that class certification is proper when an employer’s internal exemption policies are applied uniformly to the employees.” In re Wells Fargo Home Mortg. Overtime Pay Litig., 571 F.3d at 958. We wrote that such a presumption “disregards the existence of other potential individual issues that may make class treatment difficult if not impossible.” Id. The main concern of the predominance inquiry under Rule 23(b)(3) is “the balance between individual and common issues.” Id. at 959. “[A] district court abuses its discretion in relying on an internal uniform exemption policy to the near exclusion of other factors relevant to the predominance inquiry.” Vinole, 571 F.3d at 946.

Slip op., at 13.  The Court also noted that Brinker impacted the analysis of meal period claims and required evaluation by the District Court.

Ninth Circuit finds that BMW timely removed under CAFA

In Kuxhausen v. BMW Financial Services (9th Cir. Feb. 25, 2013), the Ninth Circuit circuit granted leave to appeal a District Court's Order granting a motion to remand on the ground that removal was untimely under CAFA.  The case was originally filed on August 30, 2011, alleging various claims arising from Retail Installment Sales Contracts issued through one BMW dealership.  On February 9, 2012, the plaintiff amended to include a proposed class of all California-BMW purchasers affected by the same alleged RISC non-disclosures.  BMW removed on March 9, 2012.  The District Court granted a motion to remand on the ground that the motion to remand under CAFA was untimely.

The Court examined each element that must be established for CAFA jursidiction, focusing on the amount in controversy and the timing of the pleading that disclosd the amount:

In Harris, a non-CAFA case, the plaintiffs made a similar demand. They argued that the defendant “should have looked in its files within the first thirty days” to discover that a named defendant whose presence in the suit frustrated complete diversity of citizenship had died, and therefore should have recognized that the case was immediately removable under 28 U.S.C. § 1332(a). Harris, 425 F.3d at 696. Preferring a clear rule, and unwilling to embroil the courts in inquires “into the subjective knowledge of [a] defendant,” we declined to hold that materials outside the complaint start the thirty-day clock. Id. at 695 (quoting Lovern v. Gen. Motors Corp., 121 F.3d 160, 162 (4th Cir. 1997)). Applying that principle here, we conclude that BMW was not obligated to supply information which Kuxhausen had omitted.

However, that does not fully resolve whether the amount in controversy was “stated by the initial pleading.” 28 U.S.C. § 1446(b). The district court also was influenced by the fact that for a 200 member class, the average contract price per vehicle needed only to exceed $25,000 in order to put greater than five million dollars in controversy. Presumably, it thought that sum was a plausible-enough guess for a case involving German luxury automobiles, perhaps doubly so since Kuxhausen’s individual vehicle contract was more than twice that amount. The fact remains, however, that we “don’t charge defendants with notice of removability until they’ve received a paper that gives them enough information to remove.” Durham, 445 F.3d at 1251. This principle helps avoid a “Catch–22” for defendants desirous of a federal forum. By leaving the window for removal open, it forces plaintiffs to assume the costs associated with their own indeterminate pleadings. That is only fair after all, because—even under CAFA—“the burden is on the party removing the case from state court to show the exercise of federal jurisdiction is appropriate.” Lewis v. Verizon Commc’ns, Inc., 627 F.3d 395, 399 (9th Cir. 2010). Thus, because nothing in Kuxhausen’s complaint “indicate[d] that the amount demanded by each putative class member exceed[ed] $25,000,” it fell short of triggering the removal clock under Section 1446(b). Carvalho, 629 F.3d at 886.

Slip op., at 10-11.  In this same discussion, the Court also held that the timing trigger of the 30-day removal period and a defendant's ability to go beyond the pleadings to show CAFA jurisdiction are not linked.  A defendant is not obligated to establish what is not included in the pleadings.​

In the "Pitts" of despair, a "Terrible" attempt to pick off a class representative fails

I remember when what was probably the first Terrible Herbst gas station opened a mere block from my home in Las Vegas.  Refilled a lot of bike tires there.  But enough about my childhood.  Terrible Herbst isn't the friendly local gas station of my youth.  Now it's just another corporate slave to the whisperings of defense counsel skilled in the dark arts.  In Pitts v. Terrible Herbst, Inc. (August 9, 2011), the Ninth Circuit considered whether a rejected offer of judgment for the full amount of a putative class representative's individual claim moots a class action complaint where the offer precedes the filing of a motion for class certification.  The Ninth Circuit concluded that it did not.

Pitts filed a hybrid FLSA and Nevada labor law class action.  The defendant removed it to federal court.  With a discovery motion pending, Terrible made a Rule 68 offer of judgment in the amount of $900.  Pitts claimed $88.00 in damages but rejected the offer.  Terrible then sought to have the matter dismissed.  The Ninth Circuit rejected this attempt to impede consideration of the class certification question:

An inherently transitory claim will certainly repeat as to the class, either because “[t]he individual could nonetheless suffer repeated [harm]” or because “it is certain that other persons similarly situated” will have the same complaint. Gerstein, 420 U.S. at 110 n.11. In such cases, the named plaintiff’s claim is “capable of repetition, yet evading review,” id., and “the ‘relation back’ doctrine is properly invoked to preserve the merits of the case for judicial resolution,” McLaughlin, 500 U.S. at 52; see also Geraghty, 445 U.S. at 398; Sosna, 419 U.S. at 402 n.11.

Slip op., at 10453.  The Court then discussed the argument that the claims in this matter were not "inherrently" transitory:

We recognize that the canonical relation-back case—such as Gerstein or McLaughlin—involves an “inherently transitory” claim and, correspondingly, “a constantly changing putative class.” Wade v. Kirkland, 118 F.3d 667, 670 (9th Cir. 1997). But we see no reason to restrict application of the relation-back doctrine only to cases involving inherently transitory claims. Where, as here, a defendant seeks to “buy off” the small individual claims of the named plaintiffs, the analogous claims of the class—though not inherently transitory—become no less transitory than inherently transitory claims. Thus, although Pitts’s claims “are not ‘inherently transitory’ as a result of being time sensitive, they are ‘acutely susceptible to mootness’ in light of [the defendant’s] tactic of ‘picking off’ lead plaintiffs with a Rule 68 offer to avoid a class action.”

Slip op., at 10454.  Interestingly, the Court essentially found that the right to certify a class was an additional right not satisfied by the Rule 68 offer, and that right could not be extinguished unless certification were denied and all appellate efforts were exhausted.

Next, the Court ruled that it was error to find that Pitts failed to timely file a motion for class certification when the trial court refused to rule on a pending discovery motion to obtain evidence necessary for certification.

Other issues raised in the appeal were not addressed by the Court once it concluded that the trial court erred in its ruling regarding the timing of certification.

Sullivan v. Oracle Corporation addresses how California law applies to nonresident employees working both in and outside California

Today, the California Supreme Court issued an Opinion following its acceptance of questions about the construction of California law from the United States Court of Appeals for the Ninth Circuit.  In Sullivan v. Oracle Corporation (June 30, 2011), the Court addressed (1) whether the Labor Code's overtime provisions apply to plaintiffs' claims for compensation for work performed in this state [with the ancillary question of whether the same claims can serve as predicates for claims under California's unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et seq.)], and (2) whether the plaintiffs' claims for overtime compensation under the federal Fair Labor Standards Act of 1938 (FLSA) (29 U.S.C. § 201 et seq.; see id., § 207(a)) for work performed in other states can serve as predicates for UCL claims.

The Court responded "yes" to the first question group, and "no" to the second.

On the first issue, the Court said:  "The California Labor Code does apply to overtime work performed in California for a California-based employer by out-of-state plaintiffs in the circumstances of this case, such that overtime pay is required for work in excess of eight hours per day or in excess of forty hours per week. (See Sullivan III, supra, 557 F.3d 979, 983.)"  (Slip op., at 18.)

On the related UCL question, the Court said: "Business and Professions Code section 17200 does apply to the overtime work described in question one. (See Sullivan III, supra, 557 F.3d 979, 983.)"  Slip op., at 19.)

The full answer to the last issues was:  "Business and Professions Code section 17200 does not apply to overtime work performed outside California for a California-based employer by out-of-state plaintiffs in the circumstances of this case based solely on the employer's failure to comply with the overtime provisions of the FLSA."  (Slip op., at 23.)

The Opinion was issued by a unanimous Court.

Update on 2011-06-30 17:42 by The Complex Litigator

The post title was corrected after the initial posting.

Breaking News: Walmart Stores, Inc. v. Dukes decided by Supreme Court; Reversed

I'll preface this brief post by noting that I have not had a chance to read the entire opinion, but the opnion in Walmart Stores, Inc. v. Dukes (June 20, 2011) was released this morning by the United States Supreme Court.  The Court reversed the Ninth Circuit and the District Court, finding that the matter was not suitable for class certification.  The core majority was authored by Justice SCALIA. ROBERTS, C. J., and KENNEDY, THOMAS, and ALITO, JJ., joined in that opinion, and GINSBURG, BREYER, SOTOMAYOR, and KAGAN, JJ., joined as to Parts I and III.  Justice GINSBURG authored an opinion concurring in part and dissenting in part.  BREYER, SOTOMAYOR, and KAGAN joined in Justice GINSBURG'S opinion.

Some key aspects of the holding are:

• Proof of commonality necessarily overlaps with respondents’ merits contention that Wal-Mart engages in a pattern or practice of discrimination. The crux of a Title VII inquiry is “the reason for a particular employment decision,” Cooper v. Federal Reserve Bank of Richmond, 467 U. S. 867, 876, and respondents wish to sue for millions of employment decisions at once. Without some glue holding together the alleged reasons for those decisions, it will be impossible to say that examination of all the class members’ claims will produce a common answer to the crucial discrimination question.
• General Telephone Co. of Southwest v. Falcon, 457 U. S. 147, describes the proper approach to commonality. On the facts of this case, the conceptual gap between an individual’s discrimination claim and “the existence of a class of persons who have suffered the same injury,” id., at 157–158, must be bridged by “[s]ignificant proof that an employer operated under a general policy of discrimination,” id., at 159, n. 15. Such proof was absent here.
• Claims for monetary relief may not be certified under Rule 23(b)(2), at least where the monetary relief is not incidental to the requested injunctive or declaratory relief.
• The mere “predominance” of a proper (b)(2) injunctive claim does nothing to justify eliminating Rule 23(b)(3)’s procedural protections, and creates incentives for class representatives to place at risk potentially valid monetary relief claims.

Justice Ginsburg is concerned that the majority imported too much of the "predominance" analysis into the Rule 23(a) requirement that common questions of law or fact must exist:

The Court’s emphasis on differences between class members mimics the Rule 23(b)(3) inquiry into whether common questions “predominate” over individual issues. And by asking whether the individual differences “impede” common adjudication, ante, at 10 (internal quotation marks omitted), the Court duplicates 23(b)(3)’s question whether “a class action is superior” to other modes of adjudication.

Slip op., Ginsburg concurring and dissenting, at 9.  Otherwise, Ginsburg agrees that the class should not have been certified under Rule 23(b)(2) but would  have saved the issue of whether certification was appropriate under Rule 23(b)(3) for the District Court on remand.

The opinion looks as though it will prove to have the greatest impact on cases of this type.  While the Rule 23(a) construction seems to be inconsistent with well-settled standards, the balance of the opinion was predictable, given the massive size of the class.