Cohn v. Corinthian Colleges, Inc., et al. suggests developing statutory construction trend in Fourth Appellate District, Division Three

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Greatsealcal100Statistically speaking, it is difficult to ascribe trends to any particular Court of Appeal on the basis of just a few opinions on a given topic. That said, one Appellate District in particular appears, at minimum, to be skeptical of the validity of class actions predicted upon statutory violations. In Cohn v. Corinthian Colleges, Inc. (pub. order December 19, 2008), the Court of Appeal (Fourth Appellate District, Division Three) affirmed a summary judgment granted in favor of various defendants, including Angels Baseball LP, in a case in which a Mother's Day tote bag giveaway to mothers was alleged to have violated the Unruh Civil Rights Act (Civ. Code, §§ 51, 52.).

In describing the nature of the appeal, the Court left little doubt about the nature of the opinion to follow:

“As we will explain, the Unruh Act protects against intentional discrimination that is unreasonable, arbitrary, or invidious. This important piece of legislation provides a safeguard against the many real harms that so often accompany discrimination. For this reason, it is imperative we not denigrate its power and efficacy by applying it to manufactured injuries such as those alleged by the plaintiff in this case.

(Slip op., at p. 2.)  The Court later suggest that the outcome was appropriate in light of the plaintiff's prior litigation activities:

“Cohn’s complaint gathers further suspicion because Cohn, his friends, and his counsel have been involved in numerous of what have been characterized as “‘shake down’” lawsuits. (E.g., Angelucci v. Century Supper Club (2007) 41 Cal.4th 160, 178.) They proclaim themselves equal rights activists, yet repeatedly attempted to glean money from the Angels through the threat of suit. The Unruh Act is a valuable tool for protecting our citizens and remedying true injuries. We are not convinced the Angels’ tote bag giveaway was in anyway unreasonable, arbitrary, or invidious discrimination.

(Slip op., at p. 6.)  However, if the Court was satisfied that the claim was so lacking in merit that summary judgment was the appropriate means of disposition, the need for the discussion about Cohn's motiviation seems unclear.  In fact, it weakens the Court's analysis by suggesting that the hinted inequity is a necessary supporting factor in the decision.  Presumably, the outcome would have been the same for a first-time litigant with no known associations with activists.

This decision could be viewed in isolation, as a fact-driven outcome.  However, there are some legitimate indications that this Division's construction of statutory rights favors a strict construction that tends to limit claims.  For example, in Starbucks v. Superior Court (Lords) (December 10, 2008) the District reversed an Order certifying a class action and denying summary judgment, holding that plaintiff job applicants lacked standing to sue and obtain penalties under a statutory scheme precluding inquiry into certain drug convictions.  (Full disclosure - I assisted with some of the appellate briefing in that matter)   There was no language in the statutory scheme suggesting that the legislature sought to limit standing only to convicted job applicants, as opposed to all job applicants.  Nevertheless, the Court limited the parties entitled to enforce a statutory mandate by the legislature.

And in McCoy v. Superior Court (Kimco) (2007) 157 Cal.App.4th 225 (review denied), the Third Division disregarded a discussion in Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094 when it held that Labor Code § 203 waiting time penalties are governed by a one-year statute of limitation.

At least circumstantially, it appears that the Third Division is not inclined to view statutory protection schemes as strict liability standards entitled to uniform enforcement.

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For the moment, California law is clear: no punitive damages for violations of labor code provisions regulating breaks

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Greatsealcal100Whether punitive damages are available for violations of various labor code provisions has been something of an open question in California. You may recall, for instance, that a jury found against Wal-Mart in the matter of Savaglio v. Wal-Mart, awarding $172 million to the class members, including $115 million in punitive damages.  In that particular case, after Wal-Mart argued that punitive damages amounted to a penalty on a penalty, Judge Ronald Sabraw rejected the argument that meal and rest break premiums were penalties.  That particular finding was later confirmed as the correct interpretation in Murphy v. Kenneth Cole (2007) 40 Cal.4th 1094.  In any case, without clear guidance on the question, it has seemed prudent to at least request punitive damages for such violations and let a Court say that they weren't recoverable.

Yesterday, however, a Court of Appeal approached this issue from a different perspective.  In Brewer v. Premier Golf Properties (December 3, 2008) the Court of Appeal (Fourth Appellate Distirct, Division One) reviewed, among other things, whether a punitive damage award for violation of various Labor Code sections was valid.  The Brewer Court concluded that punitive damages are not available for several violations of the Labor Code: 

“We are convinced, both by application of the "new right-exclusive remedy" doctrine and under more general principles that bar punitive damages awards absent breach of an obligation not arising from contract, punitive damages are not recoverable when liability is premised solely on the employer's violation of the Labor Code statutes that regulate meal and rest breaks, pay stubs, and minimum wage laws.

(Slip op., at pp. 10-11.)  The Brewer case was an individual action, but it is covered here because of the significant impact on many wage & hour class actions.  If you are curious about the "new right-exclusive remedy" doctrine, take a look at Rojo v. Kliger (1990) 52 Cal.3d 65.

It is worth noting that Savaglio remains on appeal and may ultimately affect this area of law.  However, Savaglio has been stayed pending the outcome in Brinker, so it will be several years before that case moves forward.

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If a Protective Order governing trade secrets is issued in your case, don't do this (or get out your checkbook)

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Greatsealcal100This blog is intended to cover topics related to complex litigation.  But, based solely on the appellate decisions covered here, one might think that this site is restricted to class action topics.  While it is true that the bulk of appellate decisions mentioned on this blog relate to class actions, that has more to do with the fact that class actions are an easily "ascertained" subset of complex litigation than any decision to limit coverage of other "complex litigation" decisions.  Today, in Wallis v. PHL Associates (November 25, 2008), the Court of Appeal (Third Appellate District) considered some of the thorny issues related to trade secrets and protective orders in the context of reviewing a sanction award in the eyebrow-raising amount of $43,678.42.

The Court explained the conduct resulting in that unusually high sanction: 

“ In the course of this long-running litigation, the parties agreed to a protective order, which the court issued, allowing the parties to file under seal certain confidential documents containing alleged trade secrets. Cross-complainant PHL Associates, Inc. (PHL) filed the declaration of its attorney Tory E. Griffin, with attachments containing what PHL alleged were trade secrets. Although the declaration designated that it was filed under seal pursuant to the protective order and was sent to the trial court in a sealed envelope and labeled appropriately, the document later appeared in the court file available to the public.

Upon learning of the public availability of the declaration, attorney Mendoza notified her clients of the public availability. In an attempt to defeat PHL’s claim that the information attached to the declaration contained trade secrets, the Wallises and Mendoza had third-parties view and copy the declaration.

PHL, along with fellow cross-complainants Jeffrey T. Wichmann and Mary B. Holmes, filed a motion for sanctions pursuant to Code of Civil Procedure section 128.5 (section 128.5) against the Wallises and Mendoza for their conduct relating to the declaration. The trial court granted the motion, finding that the actions of the Wallises and Mendoza were frivolous and taken in bad faith.

(Slip op., at pp. 2-3.)  The Court of Appeal wasn't any more impressed with the conduct or the arguments than the trial court:  "The position of the Wallises and Mendoza, that the appearance of the declaration in the court’s public file allowed them to disclose the information attached to the Griffin declaration, was frivolous. And they acted in bad faith when they disclosed the information."  (Slip op., at pp. 3-4.)

File this under too cute by half.  Protective Orders are fairly common in class actions and other types of complex litigation.  But, in my experience, Protective Orders are not taken as seriously as they should be.  This decision is a painful reminder that a court may not look favorably on cynical attempts to end-run a protective order.  And this (disregarding protective orders) may be more common that you might think.  I was commended by a trial court recently for not using information subject to a "use" protective order, despite an urgent need to do so.  Following the trial court's order shouldn't have been so unusual as to receive praise, but it was.  Just remember that they call them protective Orders for a reason.

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In Vasquez v. State of California Supreme Court declines to impose a pre-filing resolution requirement to all 1021.5 fee requests, but...

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Greatsealcal100This morning the California Supreme Court issued an opinion that examined the limits on its attorney fee opinion in Graham v. DaimlerChrysler Corp. (2004) 34 Cal.4th 553, 560 (Graham). "  In Vasquez v. State of California (November 20, 2008), the Supreme Court was asked to extend Graham, a catalyst theory case, to all Code of Civil Procedure section 1021.5 requests for fees resulting from a public benefit.  The summary of the holding neatly encapsulates the Supreme Court's "no, and yes" answer to that invitation: 

“Today we revisit one of the “limitations on the catalyst theory” adopted in Graham, supra, 34 Cal.4th 553, 575 — specifically, the rule that the plaintiff in a “catalyst case,” to recover attorney fees under section 1021.5, “must have engaged in a reasonable attempt to settle its dispute with the defendant prior to litigation” (Graham, at p. 561). While this is not a catalyst case (see post, at p. 19), defendant argues the rule just mentioned should apply whenever fees are sought under section 1021.5. We hold that no such categorical rule applies in noncatalyst cases. In all cases, however, section 1021.5 requires the court to determine that “the necessity and financial burden of private enforcement . . . are such as to make the award appropriate . . . .” (Ibid., italics added.) In making this determination, one that implicates the court’s equitable discretion concerning attorney fees, the court properly considers all circumstances bearing on the question whether private enforcement was necessary, including whether the party seeking fees attempted to resolve the matter before resorting to litigation.

(Slip op., at pp. 2-3.)  So you don't have to attempt to resolve a matter before litigation to claim sectin 1021.5 fees, but the Court can consider whether you did as a factor when deciding if it will award fees under section 1021.5.  I suppose this means that the reasonability of the defendant and its counsel and the inclinations of the particular judge hearing the case will now have a lot more to do with whether a plaintiff is successful in recovering fees under 1021.5.  An intractable defendant with obstructive counsel will have a hard time convincing a court that it would have cooperated without the need for litigation had the plaintiff but asked.  On the other hand, a very cooperative defendant could save itself fees under this section by demonstrating its willingness to change practices and correct problems.

I wonder if this mixed set of incentives will change any behaviors on either side of the bar.

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Procedural news in Johnson v. Glaxosmithkline, Inc.

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Greatsealcal100This blog briefly reported on a new opinion in Johnson v. Glaxosmithkline, Inc. (September 19, 2008).  You can read that post here.  To recap, the Court of Appeal (Second Appellate District, Division Seven) examined the validity of the decision in Alvarez v. May Dept. Stores Co. (2006) 143 Cal.App.4th 1223 and whether Alvarez was effectively nullified by the United States Supreme Court decision in Taylor v. Sturgell, supra, __ U.S. __ [128 S.Ct. 2161].

A few things have occured since the September 19, 2008 opinion.  First, a Petition for Rehearing was filed on October 7, 2008.  It was denied the day it was filed.  You can view the docket here.  On October 14, 2008, the Court of Appeal modified its opinion, without changing the judgment.  The modification added a footnote and added some clarifying language about record review.

The logical guess is that the Petition for Rehearing is a prelude to a Petition for Review.

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Governor Schwarzenegger issues veto of e-discovery reform bill, AB 926

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Last week, California Governor Arnold Schwarzenegger issued a veto of the much anticipated e-discovery reform bill, AB 926, despite the passage of the bill without a single "no" vote (I didn't check, but maybe somebody voted "present").  After the Governor issued similar vetoes for over 300 bills, it has been speculated that the vetoes are intended to encourage the legislature to pass a budget that deals with the deficit problem in California (as an aside, if we tied every legilator's ability to run for any state office or receive any pay or benefits to the passage of a [projected] balanced State budget, what are the odds that we'd have a balanced budget every year?).  (Cheryl Miller, Schwarzenegger's Veto: A Raw Deal for E-Discovery? (October 3, 2008) www.law.com.)  The new rules tracked the federal rules and would spell out how and when records from fax machines, computer databases, e-mails and cell phones should be exchanged in litigation. They also set up procedures for settling disputes over data that one party contends are trade secrets or privileged attorney work-product.  Legislators promise to reintroduce the bill when the Governor isn't as cranky.

[Via ElectronicDiscovery]

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Johnson v. Glaxosmithkline, Inc. analyzes parts of Alvarez-type class action preclusion

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Greatsealcal100It's a bit dicey commenting on an appellate decision that isn't truly final.  By "comment," I mean something more than the soundbites one hears in the media when a high-profile decision is redered ("We're very pleased with this outcome and feel that justice was served...").  And while I'm not going to offer any detailed analysis of this new opinion, Johnson v. Glaxosmithkline, Inc. (September 19, 2008) is news that merits coverage, despite the fact that I contributed in a small way to that appeal.

Readers may know that I was counsel in Alvarez v. May Dept. Stores Co. (2006) 143 Cal.App.4th 1223.  I expressed some of my disappointment with the Alvarez decision in this post.  Since Alvarez, I have watched for signs that would indicate whether the opinion would receive further reinforcement or be limited into irrelevance.  Early signs suggested the later.  Last Friday, the Court of Appeal (Second Appellate District, Division Seven) had an opportunity to take a second look at Alvarez.  In doing so, the Court of Appeal noted the shadow cast over Alvarez by a recent U.S. Supreme Court decision:

“. . . Taylor v. Sturgell, supra, __ U.S. __ [128 S.Ct. 2161] would appear to preclude the use of collateral estoppel to bar absent putative class members from seeking class certification following the denial of a certification motion in an earlier lawsuit at least to the extent Taylor is understood as resting on due process considerations, and not simply federal common law. Because we reverse the trial court’s application of collateral estoppel on different grounds, however, we leave resolution of these important issues to another day.

(Slip op., at p. 15, n. 8.)  The Court noted the possibility that Taylor overruled Alvarez, but didn't go through that door because it found an alternative basis for reversing the trial court.  What the Court did conclude was something akin to, but more detailed in its analysis, than Bufil v. Dollar Financial Group, Inc. (2008) 162 Cal.App.4th 1193.  Specifically, the Court held that, because a prior attempt to certify a nationwide class action was not identical to the class at issue, collateral estoppel did not apply and the Alvarez approach of using a primary rights analysis for assessing the preclusive effect of the denial of class certification was not supportable:

“Moreover, the procedural right to prosecute a claim as a class action, “a means to enforce substantive law” by collectively litigating substantive claims (Washington Mutual Bank v. Superior Court (2001) 24 Cal.4th 906, 918; see Alch v. Superior Court (2004) 122 Cal.App.4th 339, 388), shares none of the characteristics of a “cause of action” as defined by the primary rights theory. (See Crowley v. Katleman, supra, 8 Cal.4th at p. 681 [primary rights theory “provides that a ‘cause of action’ is comprised of a ‘primary right’ of the plaintiff, a corresponding ‘primary duty’ of the defendant, and a wrongful act by the defendant constituting a breach of that duty”].) A primary right in its simplest form is the plaintiff’s right to be free from the particular injury suffered. (Slater v. Blackwood, supra, 15 Cal.3d at p. 795.) The procedural means for protecting that right cannot be confused with the right itself.

(Slip op., at p. 22; see also, p. 16.)  Aside from noting these two points in the opinion, I will leave further analysis and commentary to others . . . at least for now.

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LIVEBLOGGING CAALA: Notes on class actions and procedure in complex cases

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Jerome Ringler, of Ringler Kearney Alvarez LLP, is speaking this year on the topics of class actions and complex cases.

Concerning class actions, Mr. Ringler notes the following basic concepts:

  • Choose a good class representative that doesn't bring along a lot of baggage [bankruptcies, criminal convictions, etc.].  I note that this is much easier said than done.  Individuals willing to step forward and litigate a cause on behalf of a group often have, at minimum, interesting personality quirks that supply the fortitude to endure a class action.
  • Decide where to file.  Again, easier said than done.  CAFA often dictates that a case may end up in federal court, whether you want to be there or not.
  • Compared to individual party litigation, discovery may be limited to certification issues.  Mr. Ringler notes, and I have also found, that there is often entanglement between merits issues and, in particular, commonality and typicality analysis.
  • Mr. Ringler notes that Pioneer and Belaire-West supply the procedure for obtaining class member contact information.  He notes that the process requires filing a motion and agreeing on a third-party administrator that will send out notices permitting the putative class members to opt-out of disclosure of their contact data.  I think that this summary of the current state of the law is, at minimum, incomplete, and, arguably, inaccurate.  Puerto and the recent Writers' Guild decision Alch (discussed here), both suggest in different ways that the class representative may have a right to obtain contact information and other class member data, irrespective of whether any  putative class member objects.
  • Watch out for client representation issues.  What if you represent a putative class member at a deposition?  Do you continue to represent that person until certification?  You probably do, but be careful with this hot potato.  Don't hand over communications - you may be waiving a privilege that you ought to make the Court determine.

This seminar lecture appears targeted at attorneys with limited experience in the area of class actions.  If you are interested in learning about class action procedure, you will probably do better reading portions of treatises, major decisional authority, and then co-counseling class actions with more experienced class action litigators.  I'm going to wrap this post up as my battery is dying.

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LIVEBLOGGING CAALA: Hon. Lee Edmon discusses likely e-discovery laws

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The Complex Litigator is here at CAALA, bringing you information selected from the best (my opinion) that the conferences have to offer.  First up is e-discovery developments presented by the Hon. Lee Edmon.

  • The scope of e-discovery in California will soon be comparable to the scope allowed by the Federal Rules.  Judge Edmon suggests that practitioners start looking at federal cases for guidance.
  • The demanding party will be able to demand the format of a production, including in native format, pdf, tiff, etc.  (CCP section 2031.030(a)(2).)
  • Protective Orders shift the burden onto the objecting party to show that information is from a source that is not reasonably accessible because of undue burden or expense.  The parties must meet and confer.  Judge Edmon believes that these "meet and confers" will be very important:  learn how and where documents are stored so that you know the cost of compelling the production.  You may have to do discovery specifically for the purpose of deciding whether data is inaccessible, the cost of retrieving it, and options.
  • Even if a party establishes that Electronically Stored Information (ESI) is unavailable due to the burden, the Court can still order the production if the requesting party establishes good cause for production.
  • Courts can limit ESI discovery if information is available from alternative sources.
  • The new law will allow a safe harbor for ESI inadvertently destroyed through the normal operation of an electronic system.
  • Send a preservation letter regarding ESI to the opposing party at the earliest opportunity to do so.
  • Responses:  If no format is specified in a demand, the producing party can specify the form, including form in which it is kept and a form that is reasonably usable.  Federal cases have held that placing production in a form that is not text-searchable is insufficient.  If a party objects that requested information is not reasonably accessible, the party must specify details as to why.
  • Data translation costs provision, CCP section 2031.280(e), allows responding party to translate, at requesting party's expense, productions into a reasonably usable format.
  • In the case of inadvertent production of privileged material, a new procedure will require prompt notification to the requesting party of the inadvertent production.  If the requesting party claims waiver, the requesting party will have to move within 30 days to retain the material and adjudicate the claim of waiver.
  • Many of these new procedures will also apply to subpoenas for ESI.  To protect third parties, courts and requesting parties must try to
  • CRC Rule 3.724 will now require the initial conference of counsel to address topics regarding conferring about ESI issues (form of production, clawback provisions, protection issues, and allocation of costs).
  • Judge Edmon believes that the new ESI provisions are going to be very complicated for Courts to apply.
  • If these measures are implemented, we will probably see them on January 1, 2008 (law was delayed by California budget crisis issues).

I will try to update this post later to elaborate on some of the points raised by Judge Edmon.  Please excuse any typos as I post from a conference ballroom.

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Sometimes "complex litigation" is about the complexity of the legal issues and not just the size of the pile of dollars

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Greatsealcal100Most cases described as "complex litigation" involve some combination of numerous parties or very large amounts of money.  Sometimes, though, "complex litigation" is primarily about the difficult nature of legal issues or the passion with which opposing parties vie over a difficult policy having wide-reaching consequences.  Jonathan L. v. Superior Court (August 8, 2008) is one one such case.

Jonathan L. addresses, in part, whether home schooling is permissible in California.  The details of the Court's analysis are outside the core areas of coverage for this blog.  However, the obviously difficult time the Court of Appeal had with this decision is an opportunity to learn something about what it takes to prevail in such hotly contested waters.  The listing of Amici Curiae spans three pages.  The August 8, 2008 Opinion follows after rehearing was granted by the Court.  Regarding that procedural history, the Court said:  "We filed our original opinion on February 28, 2008, granting the petition on the bases that: (1) California statutory law does not permit home schooling; and (2) this prohibition does not violate the U.S. Constitution."

On rehearing, the Court reversed itself, concluding that home schooling is permissible in California (my daughter is in trouble now).  You don't see u-turns like that happen with any regularity in appellate practice.  If you have any spare time, I suggest that you take a look at the opinion for the insight it offers into a Court struggling to get a very difficult decision right.  In this instance, I think their hard work resulted in the correct outcome.

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