a California-centric collection of comments and resources about complex litigation and class action practice
I previously mentioned the surprising appellate court opinion in Huff v. Securitas Security Services USA (May 23, 2018). When it was issued, I was certain that review would be requested, and I would not have been surprised if review had been granted. However, I missed the fairly quick denial of review and depublication. That denial issued on August 8, 2018. Sorry I missed that; this is a noteworthy opinion.
I won't hit you with too much analysis of a case right before the 4th of July holiday, but in Juarez v. Wash Depot Holdings, Inc. (July 3, 2018), the Court of Appeal (Second Appellate District, Division Six), upheld a trial court order declining to enforce an arbitration agreement. The peculiarity that led to the result is pretty simple:
A company provides its employees with a handbook setting forth its employment policies. The handbook is written in English and Spanish. The handbook requires arbitration of employment disputes and denies an employee's right to bring an action under the California Private Attorneys General Act (PAGA). The English version states that the denial of the right to bring a PAGA action is severable if such denial is found by a court to be unenforceable. The Spanish version provides that the PAGA denial is not severable.
Slip op., at 1. The Court concluded that this was potentially deceitful and declined to sever the provision regarding PAGA, agreeing that the entire agreement was unenforceable.
Jack Bazerkanian of Shin Ryu Bazerkanian, LLP, and James M. Lee, Caleb H. Liang of LTL Attorneys LLP, represented the successful Plaintiff and Respondent.
See what I did there? Shine. Spotlight. Nevermind. Today's wage and hour class action opinion comes to us courtesy of Shine v. Williams-Sonoma, Inc. (May 29, 2018). In Shine, the Court of Appeal (Second Appellate District, Division Four) reviewed de novo whether a demurrer to a reporting time pay complaint was properly sustained on res judicata grounds. Multiple bases were argued in support of the Trial Court's Order, but the Court found that the res judicata basis was sufficient alone, and did not require analysis of the other arguments. As to res judicata, the Court said:
The Morales complaint sought recovery of unpaid wages on behalf of class members employed by Williams-Sonoma since June 24, 2009. The allegations in that case included the claims of failure to provide meal and rest periods, overtime and minimum wages, timely wages, and final paychecks to the Morales class plaintiffs.
In the present action, Mr. Shine seeks reporting-time pay for on-call shifts that were canceled in early 2013, within the period covered by the Morales settlement agreement. Because reporting-time pay is a form of wages, a claim for reporting-time pay could have been raised in the Morales action. (See Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1111–1112 [reporting-time pay, like split-shift and overtime pay, is a form of wages even though it serves a dual purpose of shaping employer behavior].) The fact that no claim for reporting-time pay was alleged in Morales does not alter our determination that the same primary right, to seek payment of wages due, was involved in both Morales and this case. (See Boeken v. Phillip Morris USA, Inc. (2010) 48 Cal.4th 788, 798–799.)
Slip op., at 7. The Court also discussed Villacres, but, compared to Villacres, the outcome seems more obvious here when the language of the prior release is considered:
Like the Augustus release, the Bonilla settlement agreement released “all claims, demands, rights, liabilities and causes of action that were or could have been asserted (whether in tort, contract or otherwise) for violation of the Fair Labor Standards Act, the California Labor Code, the California Business and Professions Code, the Private Attorneys General Act (‘PAGA’), the applicable Industrial Welfare Commission Orders or any similar state or federal law, whether for economic damages, non-economic damages, liquidated damages, punitive damages, restitution, penalties, other monies, or other relief based on any facts, transactions, events, policies, occurrences, acts, disclosures, statements, omissions or failures to act pled in the Complaint, which are or could be the basis of claims that Defendant failed to pay wages or overtime, failed to provide meal or rest breaks or compensation in lieu thereof, failed to provide timely wages and final paychecks, committed record-keeping violations, provided noncompliant wage statements, failed to reimburse for business expenses, or engaged in unfair business practices at any time on or before the date of Preliminary Approval.” (Italics added.)
Slip op., at 12 (boldface emphasis added).
Separate from all of this, I have a concern about the Villacres holding that allows any enumerated list of released items to be treated as a "general release." This seems to muddy the waters as to what constitutes a general release and what constitutes a specific release. As it stands, this seems to re-define "specific release" to mean a release with an expressly enumerated scope and a "general release" to mean any release with coverage broader than what is expressly enumerated, particularly where identified by the phrase "all claims." So you can have a "general" release of "all" wage payment claims. Perhaps we should call "general" releases "total coverage" releases and all other releases "specific" or "itemized" coverage releases.
Respondents and Defendants were successfully represented by Melanie L. Bostwick, Randall C. Smith, Jessica R. Perry, and Allison Riechert Giese of Orrick, Herrington & Sutcliffe
On May 9, 2018, a panel of the Ninth Circuit certified questions to the California Supreme Court in two different cases involving airlines. In Ward v. United Airlines, Inc., the Court asked for review of the following two questions:
(1) Wage Order 9 exempts from its wage statement requirements an employee who has entered into a collective bargaining agreement (CBA) in accordance with the Railway Labor Act (RLA). See 8 C.C.R. § 11090(1)(E). Does the RLA exemption in Wage Order 9 bar a wage statement claim brought under California Labor Code § 226 by an employee who is covered by a CBA?
(2) Does California Labor Code § 226 apply to wage statements provided by an out-of-state employer to an employee who resides in California, receives pay in California, and pays California income tax on her wages, but who does not work principally in California or any other state?
Order, at 2-3.
In Oman v. Delta Air Lines, Inc., the Court asked for review of the following three questions:
(1) Do California Labor Code §§ 204 and 226 apply to wage payments and wage statements provided by an out-of-state employer to an employee who, in the relevant pay period, works in California only episodically and for less than a day at a time?
(2) Does California minimum wage law apply to all work performed in California for an out-of-state employer by an employee who works in California only episodically and for less than a day at a time? See Cal. Labor Code §§ 1182.12, 1194; 8 C.C.R. § 11090(4).
(3) Does the Armenta/Gonzalez bar on averaging wages apply to a pay formula that generally awards credit for all hours on duty, but which, in certain situations resulting in higher pay, does not award credit for all hours on duty? See Gonzalez v. Downtown LA Motors, LP, 155 Cal. Rptr. 3d 18, 20 (Ct. App. 2013); Armenta v. Osmose, Inc., 37 Cal. Rptr. 3d 460, 468 (Ct. App. 2005)?
Order, at 2.
Of the two sets of questions, Delta certainly presents questions that are likely of broader applicability.
It's easy to say that California courts look to Rule 23 decisions for guidance when there is a gap in California's jurisprudence on class-related issues. But how that works out in practice is a different matter. In Fierro v. Landry's Restaurant Inc. (May 14, 2018), the Court of Appeal (Fourth Appellate District, Division One) waded into uncharted procedural terrain when they sorted out how American Pipe tolling interacts with California's different procedural approach to certification as a "death knell" versus interlocutory issue. The core of the American Pipe application issue is captured by the Court's discussion of how federal and state procedure differ:
In the federal system, because there can be no appellate review of an order denying class certification until after entry of a final judgment in the class action, there can be years of delay—including potentially a trial on the merits of the individual claims—before the parties have the benefit of appellate review of the denial of class certification. Under such a procedure, the policy of protecting the efficiency and economy of litigation is not furthered by the continuation of tolling—first, pending resolution of the remaining claims in the trial court and, then, pending review and disposition in the appellate court.
In contrast, in our state system, the death knell doctrine allows the parties the benefit of immediate appellate review of an order denying class certification. This procedure advances the efficiency and economy of class action litigation. Stated differently, neither efficiency nor economy will result if, upon the denial of class certification, an unnamed class member is required either to seek intervention in the individual action that remains in the trial court or to file a new action while an immediate appeal of the order denying class certification is pending. Thus, in both the state and federal systems, once the trial court denies certification, the putative class member is on notice that he or she must take action to protect his or her rights; however, in the state system, there is a right to immediate review of that decision, and to deny American Pipe tolling under such circumstances is to encourage a multiplicity of actions—i.e., to encourage inefficiency and expense—before the order denying class certification is final
Slip op., at 20. The Court's effort to get under the hood and examine how policy interacts with procedural differences is commendable.
Separately, this case presents an unusual procedural history in its own right, as the Court had to engage in some very proactive digging to try to get as complete a record as it could and still fell short of getting all of what it wanted.
Appellants were successfully represented by Matthew Righetti and John J. Glugoski of Righetti Glugoski.
The term "joint employer" is used to identify the wide variety of situations where one worker is controlled in frequently different ways by two employers. Staffing agency relationships with client companies are a commonly cited example. In Castillo v. Glenair, Inc., the Court of Appeal (Second Appellate District, Division Two), tackled a novel question:
In a joint employer arrangement, can a class of workers bring a lawsuit against a staffing company, settle that lawsuit, and then bring identical claims against the company where they had been placed to work.
Slip op, at 2. The Court's answer was succinct: "We answer no." (Slip op., at 2.)
Before you get the wrong idea, this is not the situation you might have first imagined. One firm did not sue a staffing agency, settle, and then bring the identical set of claims against the client company of the staffing agency. Rather, the staffing company class action was running in parallel before another trial court and made it to the settlement finish line first. (Slip op., at 2.) There are many procedural niceties to this that don't matter. What matters is that the first suit (known as the "Gomez" action), settled on a classwide basis, with a broad release of claims against the staffing company and its agents. The Court in this matter concluded that Glenair was an agent of CGA with respect to CGA's payment of wages to its employees who performed work at Glenair.
While the reasoning of the Court is guided, in part, by a number of factual stipulations of the parties regarding the relationship between Glenair and the staffing company GCA, the core issue for purposes of res judicata application of the Gomez settlement hinged on whether Glenair was either a party in the Gomez settlement or in privity with a party. The Court found that Glenair was both in privity with CGA as to the Gomez settlement and a released party in the Gomez settlement.
After reviewing developments in the law of privity, the Court said:
With this in mind, it is clear Glenair and GCA are in privity for present purposes. The subject matter of this litigation is the same as the subject matter of the Gomez litigation—namely, both cases involve the same wage and hour causes of action arising from the same work performed by the same GCA employees (the Castillos) at GCA’s client company Glenair. Based on the undisputed facts, it is apparent Glenair and GCA share the same relationship to the Castillos’ claims here. Both Glenair and GCA were involved in and responsible for payment of the Castillos’ wages. Glenair was authorized by GCA and responsible for recording, reviewing and transmitting the Castillos’ time records to GCA. GCA paid the Castillos based on those time records. And, by virtue of the Gomez settlement, the Castillos were compensated for any errors made in the payment of their wages. Thus, with respect to the Castillos’ wage and hour causes of action, the interests of Glenair and GCA are so intertwined as to put Glenair and GCA in the same relationship to the litigation here. Accordingly, we conclude they are in privity for purposes of the instant litigation.
(Slip op., at 23.) The Court emphasized that this should not be construed as a finding that Glenair and GCA are in privity for all purposes (e.g., a tort claim for an on-premises injury). The Court also found that Glenair was an agent of CGA based on facts that could not be reasonably construed any other way:
Glenair was an agent of GCA for the purpose of collecting, reviewing, and providing GCA’s employee time records to GCA so that GCA could properly pay its employees. The evidence is undisputed that GCA authorized Glenair to collect, review, and transmit GCA employee time records to GCA. Thus, Glenair was authorized to represent, and did represent, GCA in its dealings with third parties, specifically GCA’s payment of wages to its employees placed at Glenair. (Civ. Code, § 2295; Borders Online, supra, at p. 1189; see also Garcia v. Pexco, LLC (2017) 11 Cal.App.5th 782, 788 [in concluding the plaintiff employee’s claims must be arbitrated, court considered “alleged joint employers” staffing company and its client company “agents of each other in their dealings with” the plaintiff].)
(Slip op., at 26.) The Court rebuffed the plaintiffs' argument that there was no evidence of the requisite control necessary to support the agency conclusion:
Here, GCA authorized Glenair to perform certain timekeeping-related tasks on behalf of GCA and the only reasonable inference is that GCA required Glenair to perform those tasks. Had Glenair failed to perform those timekeeping tasks, GCA would not have been able to pay its employees.
(Slip op., at 27.) This raises a question in my mind. Many large staffing companies install their own timekeeping systems in the workplaces of large clients. If the staffing company collects its own time records, or its employees report time themselves, does this vitiate the agency analysis in this decision?
The decision also includes an extended discussion of procedural rules governing summary judgment, if that floats your boat.
Respondent was successfully represented by Jesse A. Cripps, Sarah Zenewicz and Elizabeth A. Dooley of Gibson, Dunn & Crutcher,
When I started reading this opinion, I went a little too fast on the first page, read on a few more pages, got really confused, re-read the first page, and then re-read the next four pages, marveling and what happened. Cortez v. Doty Bros. Equipment Company (September 1, 2017) (Second Appellate District, Division Seven) is one of those decisions that you read and say, "I didn't know they could do that."
Here's what gets you. The first page say, "APPEAL from orders of the Superior Court of Los Angeles County, Jane L. Johnson, Judge. Appeal dismissed." Slip op., at 1. If you are rushing, you assume that some procedural failing led to a dismissal. This incorrect conclusion is only amplified when you read this:
While Cortez’s appeal was pending, the appellate courts in Munoz v. Chipotle Mexican Grill, Inc. (2015) 238 Cal.App.4th 291, 310 (Munoz) and Miranda v. Anderson Enterprises, Inc. (2015) 241 Cal.App.4th 196, 201-202 (Miranda) held the death knell doctrine did not apply to the denial of class certification or dismissal of class claims while a plaintiff’s PAGA claim remained pending in the trial court. Concerned about the viability of his initial appeal, Cortez voluntarily dismissed his PAGA claim with prejudice on March 30, 2016 and filed a second notice of appeal on May 20, 2016, again identifying the September 19, 2014 order compelling arbitration and the March 23, 2015 order dismissing all class claims as the orders subject to appellate review. We consolidated the two appeals.
Slip op., at 2-3. At this point (if you were me), you figure that the filing of the second appeal and the dismissal of the PAGA claim in the trial court were going to interact somehow to lead to the dismissal of the appeal, perhaps on some timeliness ground. Nah. You're way off base (if you are me).
Here's where the whiplash gets you:
Although not fully identified by the parties in their briefs, Cortez’s appeal poses several difficult jurisdictional questions, in particular, the effect of Cortez’s dismissal of his PAGA claim on the appealability of the earlier order dismissing the class claims, including whether a plaintiff’s voluntary action can create an appealable order under the death knell doctrine and whether the second notice of appeal from an order entered more than a year before was timely; and the applicability of Code of Civil Procedure section 906 to an order made appealable under the judicially created death knell doctrine rather than pursuant to Code of Civil Procedure section 904.1. We resolve none of those issues. Rather, in light of the uncertainty of the appealability of the orders challenged by Cortez and the absence of any delay or prejudice our intervention at this stage would cause, we find this an appropriate case in which to exercise our discretion to treat the consolidated appeal as a petition for writ of mandate and reach the merits of the superior court’s orders compelling arbitration of Cortez’s individual claims and terminating the class claims.
Slip op., at 4. "We resolve none of those issues." What? "[W]e find this an appropriate case in which to exercise our discretion to treat the consolidated appeal as a petition for writ of mandate and reach the merits of the superior court’s orders compelling arbitration of Cortez’s individual claims and terminating the class claims." Spectacular.
The actual result is far less amazing than the procedural knot that was circumvented to get there. The outcome is a fairly standard application of how Stolt-Nielsen is currently construed:
We grant Cortez’s petition in part, finding Cortez’s cause of action under the Labor Code for Doty Bros.’ failure to timely pay wages upon his separation from employment (Lab. Code, § 203) (sixth cause of action) and his unfair competition action based on that alleged statutory violation (Bus. & Prof. Code, § 17200) (seventh cause of action) are not encompassed by the arbitration provision in the CBA. In all other respects, we deny the petition, concluding the remaining causes of action are subject to 5 arbitration, and the court’s termination of class claims proper on the ground the CBA does not authorize classwide arbitration.
Slip op., at 4-5.
Near the end of the opinion, the Court notes the split of federal authority at the Circuit level on the issue of whether a ban on classwide arbitration is antithetical to the NLRA. While this panel might have done that issue justice, it noted that the California Supreme Court had rejected that argument in Iskanian, and concluded that it was bound by that determination.
Kingsley & Kingsley, Eric B. Kingsley, Liane Katzenstein Ly, Kelsey M. Szamet and Ari J. Stiller; DesJardins & Panitz, Michael A. DesJardins and Eric A. Panitz successfully represented Plaintiff and Appellant (though as a petitioner)
Yes, yes I did write that post title. In Sprunk v. Prisma LLC (August 23, 2017), the Court of Appeal (Second Appellate District, Division One) considered whether a defendant in a putative class action can waive its right to compel arbitration against absent class members by deciding not to seek arbitration against the named plaintiff. The Court agreed that it did, holding that Prisma LLC "waived its right to seek arbitration by filing and then withdrawing a motion to compel arbitration against the named plaintiff, Maria Elena Sprunk, and then waiting until after a class had been certified to seek arbitration against class members." Slip op., at 2.
Some of the less interesting issues in the opinion concern the sufficiency of evidence of arbitration agreements with class members. The juicy stuff, however, is described as follows:
Plan B [Prisma LLC] also raises a legal issue concerning the status of absent class members. Plan B argues that the trial court erred in considering Plan B’s delay in moving to compel arbitration before the court decided class certification because the unnamed class members were not parties until a class was certified. Because this argument raises an issue of law concerning the time period that the trial court could properly consider in analyzing waiver, we review it de novo. (Sky Sports, Inc. v. Superior Court (2011) 201 Cal.App.4th 1363, 1367 (Sky Sports) [applying the de novo standard to the issue whether a defendant “waived its right to compel arbitration because it did not bring the motion before certification of a class that included parties to the arbitration agreement”].)
Slip op., at 12. The Court concluded that strategic delay can properly result in waiver:
An attempt to gain a strategic advantage through litigation in court before seeking to compel arbitration is a paradigm of conduct that is inconsistent with the right to arbitrate. For example, Bower was a putative wage and hour class action in which the defendant engaged in discovery and attempted to settle the case on a classwide basis when the class was a modest size. (Bower, supra, 232 Cal.App.4th at pp. 1038–1040.) When the plaintiff sought an amendment that would have expanded the class, the defendant (Inter-Con) moved to compel arbitration. The trial court found waiver, and the appellate court affirmed, concluding that Inter-Con’s decision to delay seeking arbitration “appears to have been tactical.” (Id. at pp. 1045, 1049). Based upon Inter-Con’s litigation conduct, “[o]ne can infer that InterCon chose to conduct discovery, delay arbitration, and seek a classwide settlement because it saw an advantage in pursuing that course of action in the judicial forum.” (Id. at p. 1049.) Such conduct provided substantial evidence to support the finding that “Inter-Con’s actions were inconsistent with a right to arbitrate.” (Id. at p. 1045.)
Slip op., at 18. The discussion about waiver is extensive (seriously - about 24 pages of the opinion concern waiver). The Court seems to leave the door open for situations where the trial court believes that there is a bona fide desire to wait for an expected clarification in the law, but it would seem to be a risky bet for a defendant if its actions could just as well be perceived as done for strategic benefit.
I'm somewhat surprised that this hasn't come up more frequently.
Knapp, Petersen & Clarke, André E. Jardini, Gwen Freeman and K. L. Myles successfully represented Plaintiff and Respondent.
Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal. 4th 348 (2014) held that PAGA representative claims for civil penalties are not subject to arbitration. In Esparza v. KS Industries, L.P. (August 2, 2017), the Court of Appeal (Fifth Appellate District) tackled the question of whether any claims asserted under PAGA can be "individual" claims, and, if so, how are they treated for purposes of arbitration agreements. The issue arose, in particular, because it appeared that the plaintiff asserted, within the PAGA claim, a claim to recover wages under Labor Code section 558, which, unlike the other PAGA penalties (in the sense of the word meaning something akin to a fine) sought, would result in the recovery of the underlying wages owed, with no portion going to the State from the recovered wages. The Court directed the plaintiff on remand to declare unequivocally whether only penalties would be sought or whether, in addition, individual recovery claims would be pursued. The Court concluded that such individual recovery claims would be severed and arbitrated.
Don't see the Fifth Appellate District having to wade into these issues regularly, so hat tip to that District for getting into the PAGA mix.
The trial court was technically affirmed, but the holding and directions on remand make this one a win for defendant/respondent, who was represented by Call & Jensen, John T. Egley and Jamin S. Soderstrom.
The California Rules of Court are just bursting with procedural rules designed to operate in conjunction with the Code of Civil Procedure. However, while much effort clearly went into ensuring that the Rules work with each other in a smooth fashion, every now and then the Rules conflict with each other. One area where I find this to be so arises in the context of motion page length when filing motions for preliminary (or final) approval of class action settlements.
As most civil litigation practitioners in California would know off of the of their head, California Rules of Court, rule 3.1113(d) specifies that motions other than summary judgment or summary adjudication motions can be no longer than 15 pages, with 20 pages permitted for the summary adjudication and judgment motions. There are no other listed exceptions in that rule. But California Rules of Court, rule 3.764(c) specifies that any motion seeking certification (or decertification) of a class action can be up to 20 pages in length. Rule 7.764 then says that the remaining provisions of rule 3.1113 apply, apparently meaning that the page limit is intended as an exception to 3.1113. The confusion arises in what is expected by Court ruling on motions for preliminary (or final) approval of class action settlements. Those motions are required to discuss the key settlement terms, the settlement process, why the settlement if fair and adequate, and (and here's the rub), why certification of a settlement class is appropriate. Now, that certification discussion is certainly more streamlined than on contested motion, but Courts still expect at least some discussion of certification requisites. So, which page limit applies? Is it 15 pages, or 20 pages, given that motions for preliminary (or final) approval of class action settlements discuss certification of a settlement class?
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.
