In Greenwood v. Compucredit Corp., District Court denies motion to decertify, criticizing Cohen line of cases

United States District Court Judge Claudia Wilken (Northern District of California) denied defendants' motion to decertify a class alleging violations of the federal Credit Repair Organization Act (CROA), 15 U.S.C. § 1679 et seq., and California's Unfair Competition Law (UCL), Cal. Bus. and Prof.Code § 17200 et seq.  Greenwood v. Computcredit Corp., 2010 WL 4807095 (N.D. Cal. Nov. 19, 2010).  The defendant relied, in part, on Avritt v. Reliastar Life Ins. Co., 615 F.3d 1023 (8th Cir.2010).  While my amicus briefing efforts were not successful in Avritt, this Court didn't pull any punches:

The decision in Avritt does not bind this Court, and it is unpersuasive. Avritt acknowledges that federal courts “do not require that each member of a class submit evidence of personal standing.” 615 F.3d at 1034.

Slip op., at 3.  The Court the criticized Avritt on another ground:

Defendants rely on Avritt for the additional argument that the class should be decertified for failure to satisfy Rule 23(b) (3), because of individualized issues of reliance. The present case is factually distinguishable on this point. First, class members in this case by definition have been exposed to Defendants' advertising, unlike the proposed class members in Avritt. The class in this case comprises California residents who were mailed a solicitation by CompuCredit Corporation for the issuance of an Aspire Visa by Columbus Bank and Trust. In Avritt, class members were not required to have received any promotional materials, and the named plaintiffs did not recall receiving any printed sales materials or brochures.

Slip op., at 4.  The Court then took exception with the analysis of Tobacco II supplied by Cohen:

To the extent that the court of appeal's decision in Cohen might be read to require individualized evidence of class members' reliance, it is inconsistent with Tobacco II. The California Court of Appeal made the same point in In re Steroid Hormone Product Cases, 181 Cal.App.4th 145, 158, 104 Cal.Rptr.3d 329 (2010). The court stated:

As Tobacco II made clear, Proposition 64 did not change the substantive law governing UCL claims, other than the standing requirements for the named plaintiffs, and “before Proposition 64, ‘California courts have repeatedly held that relief under the UCL is available without individualized proof of deception, reliance and injury.’ [Citation]” Id. (citing Tobacco II, 46 Cal.4th at 326, 93 Cal.Rptr.3d 559, 207 P.3d 20).

This is a question of the meaning of a California state law, on which the California Supreme Court's decision in Tobacco II is determinative.

Slip op., at 5.  Interesting that a District Court seems more clear on the weight given to California Supreme Court decisions than some Courts of Appeal.

Ninth Circuit defers the submission of Mazza v. American Honda Motor Company, Inc. pending outcome in Wal-Mart Stores, Inc. v. Dukes

In a somewhat dodgy maneuver, the Ninth Circuit, on December 7, 2010, issued an Order deferring submission of Mazza v. American Honda Motor Company, Inc. pending a decision in Wal-Mart Stores, Inc. v. Dukes, 603 F.3d 571 (9th Cir. 2010) (en banc), cert. granted, --- S.Ct. ----, 79 U.S.L.W. 3128 (U.S. Dec. 6, 2010) (No. 10-277).  Huh?  That seems like a stretch, unless you think that Wal-Mart will issue some sort of proclamation about all nationwide class actions, which seems to be far down on the list of likely outcomes.  More about Mazza here and here.

Certiorari granted by United States Supreme Court in Wal-Mart v. Dukes

On December 6, 2010, the United States Supreme Court granted certiorari in what will eventually be known as Wal-Mart v. Dukes.  The Supreme Court limited review to two issues, Question I from the Petition, and a second issue included by the Court.  The Court said:

The petition for a writ of certiorari is granted limited to Question I presented by the petition. In addition to Question I, the parties are directed to brief and argue the following question: "Whether the class certification ordered under Rule 23(b)(2) was consistent with Rule 23(a)."

Question I from the Petition is as follows:

Whether claims for monetary relief can be certified under Federal Rule of Civil Procedure 23(b)(2)—which by its terms is limited to injunctive or corresponding declaratory relief—and, if so, under what circumstances.

Petition, at i.  The Court declined to hear Question II, which asked, "Whether the certification order conforms to the requirements of Title VII, the Due Process Clause, the Seventh Amendment, the Rules Enabling Act, and Federal Rule of Civil Procedure 23."

This decision could run the gamut from a highly fact-specific outcome, to a treatise on discrimination class actions, to a wholesale commentary on the Rule 23(a) requisites.  Considering the scope of issues covered in the Dukes v. Wal-Mart en banc decision, it's very difficult to handicap this race.

Despite pending Brinker case, Hernandez v. Chipotle Mexican Grill, Inc. declares that standard for rest break applies to meal periods

In case you hadn't heard, Brinker Restaurant v. Superior Court (Hohnbaum) is pending before the California Supreme Court.  Jaimez v. DAIOHS USA, Inc., 181 Cal. App. 4th 1286 (2010), rev. denied (2010) held that certification of meal period claims was appropriate because, among other reasons, that unsettled meal period standard was also a classwide issue.  But in an unexpected twist, the Court of Appeal (Second Appellate District, Division Eight), in Hernandez v. Chipotle Mexican Grill, Inc., decided that, rather than recommending to the trial court that it certify the meal period claim and await Brinker, it would just tell us what that standard is right now.  And, according to the Hernandez Court, the meal period standard is the same standard that applies to rest breaks:

Hernandez admits employers must provide, i.e., authorize and permit, employees to take rest breaks, but contends a different standard applies to meal breaks and thus, the trial court‟s legal analysis was faulty. This contention is not persuasive. “The California Supreme Court has described the interest protected by meal break provisions, stating that „[a]n employee forced to forgo his or her meal period . . . has been deprived of the right to be free of the employer‟s control during the meal period.‟ Murphy v. Kenneth Cole Prods., Inc., 40 Cal.4th 1094, 1104 (2007). It is an employer's obligation to ensure that its employees are free from its control for thirty minutes, not to ensure that the employees do any particular thing during that time. Indeed, in characterizing violations of California meal period obligations in Murphy, the California Supreme Court repeatedly described it as an obligation not to force employees to work through breaks. [Citation.]” (Brown v. Federal Express Corp. (C.D.Cal. 2008) 249 F.R.D. 580, 585, fn. omitted.)

Slip op., at 11, emphasis in original.  The Court affirmatively adopts some of the specious arguments from district courts, including the notion that it would be too hard for employees to actually make employees take breaks:

Hernandez's position also is not practical. “Requiring enforcement of meal breaks would place an undue burden on employers whose employees are numerous or who . . . do not appear to remain in contact with the employer during the day. See White v. Starbucks Corp., 497 F.Supp.2d 1080, 1088-89 (N.D.Cal.2007).

Slip op., at 13.  That argument is insulting.  Evidently an employer can control when employees come and go.  That's not too hard.  But they can't decide whether people work during other parts of the day.  Whatever standard is ultimately declared by the California Supreme Court, arguments like this cheapen the discussion.

Elsewhere in the opinion, the Court opines that it is perfectly fine to assess merits during certification.  It's a brave new world here in California.

Amended Order and Class Notice in Adoma v. University of Phoenix

While I don't regularly post Orders from federal cases I mention, I do so here by special request.  In University of Phoenix, Inc., the District Court (Eastern District of California, Judge Karlton presiding) issued an Order on October 15, 2010, approving in part and modifying in part a proposed Class Notice.  On October 20, 2010, the Court issued an amended Order.  The Amended Order and attached Notice are available through the Acrobat.com links below:

• Amended Order
• Notice

District Court evaluates proper class notice in Adoma v. University of Phoenix, Inc.

United States Senior District Court Judge Lawrence K. Karlton (Eastern District of California) examined the contents of a class notice proposed by the plaintiff in Adoma v. University of Phoenix, Inc., 2010 WL 4054109 (E.D. Cal. Oct. 15, 2010).  The lawsuit alleges state law wage & hour claims, including allegations of off-the-clock work and break violations.  The Court certified the class.  The plaintiff moved for approval of a proposed Class Notice.  The Court's Order provides a good discussion of the appropriate contents in a class notice.

Chinese Wang decision is big news

Wrong, but necessary somehow.  A little later than promised, but Wang v. Chinese Daily News, Inc. (9th Cir. Sept. 27, 2010) has too much going on not to receive some additional attention.  At the outset, Wang was a basic wage & hour case.  The plaintiffs alleged that employees were made to work in excess of eight hours per day and/or forty hours per week. They alleged that they were wrongfully denied overtime compensation, meal and rest breaks, accurate and itemized wage statements, and penalties for wages due but not promptly paid at termination.  The subsequent procedural twists and turns were anything but standard.  But despite the many moving parts in the decision, the Ninth Circuit summarized the case in a few sentences:

The district court certified the FLSA claim as a collective action. It certified the state-law claims as a class action under Rule 23(b)(2) and, alternatively, under Rule 23(b)(3). In the state-law class action, it provided for notice and opt out, but subsequently invalidated the opt outs. It granted partial summary judgment to plaintiffs; held jury and bench trials; entered judgment for plaintiffs; awarded attorney’s fees to plaintiffs; and conducted a new opt-out process. CDN appeals, challenging aspects of each of these rulings, as well as the jury’s verdict.

Slip op., at 16393.  After the trial court certified a narrowed class under Rule 23(b)(2) (finding that injunctive relief was on "equal footing" with monetary relief), the trial court approved a notice that authorized class members to opt into the FLSA action and out of the state law-based class action.  The notice precipitated the first major upheaval in the case:

Forms were mailed to 187 individuals, and notice was posted and forms made available at CDN’s Monterey Park facility. Plaintiffs received back about 155 opt-out forms, including 18 from individuals not on the original list of class members.  Plaintiffs filed a motion to invalidate the opt outs, for curative notice, and to restrict CDN’s communication with class members. On June 7, 2006, the court granted the motion, finding that “the opt out period was rife with instances of coercive conduct, including threats to employees’ jobs, termination of an employee supporting the litigation, the posting of signs urging individuals not to tear the company apart, and the abnormally high rate of opt outs.” Wang v. Chinese Daily News, Inc., 236 F.R.D. 485, 491 (C.D. Cal. 2006). The district court deferred any future opt-out procedure until after the trial on the merits.

Slip op., at 16395.  Facing cross-motions for summary judgment, the trial court then ruled that news reporters were not exempt professionals.  Next, the matter proceeded to a trial.  The defendant contended that only the FLSA claims should be tried and that UCL claims were pre-empted by the FLSA, but the trial court elected to retain supplemental jurisdiction, rejected the pre-emption argument and tried the state law claims as well.

The Court of Appeal first tacked the exemption analysis.  After examining decisions from other Circuits, the Court concluded that the reporters did not satisfy the creative professionals exemption.

Although the evidence submitted revealed disputes over how to characterize CDN’s journalists, we agree with the district court that, even when viewing the facts in the light most favorable to CDN, the reporters do not satisfy the criteria for the creative professional exemption.

Slip op., at 16400.  Next, the Court examined whether the trial court had applied the correct criteria for determining whether certification under Rule 23(b)(2) was appropriate.  The Court concluded that, although the matter was decided prior to Dukes v. Wal-Mart Stores, Inc., 603 F.3d 571 (9th Cir. 2010) (en banc), the trial court applied essentially identical standards and correctly decided the issue.

The Court then turned to the invalidation of opt-outs.  The Court first held that a trial court's authority to regulate class communications and the notice process implicitly confers that power to take corrective action when that process has been tainted.  The Court then considered whether the evidence submitted was sufficient to support the trial court's decision.  The Court noted in particular the evidence submitted by a class action notice company regarding normal opt-out rates:

Finally, plaintiffs submitted a declaration from the president of a class action notice company explaining that ordinarily opt-out rates do not exceed one percent. In this case, the district court found that current employees opted out at a 90 percent rate, whereas former employees opted out at a 25 percent rate.

Slip op., at 16407.  After concluding that the decision to invalidate the opt-outs was supported, the Court examined whether deferring a new opt-out period until after the trial was appropriate.  Again the Court noted the trial court's broad discretion to regulate the notice process: "The ordinary procedure is to give notice at the time of class certification. But the rule does not mandate notice at any particular time. See Fed. R. Civ. P. 23(c)(2)."  Slip op., at 16408.  The Court then affirmed the trial court's conclusion that it was necessary to delay a new notice and opt-out process in order to avoid the taint imposed during the initial process.

Finally, after observing that the evidence supported the jury verdict regarding meal periods under either the "provide" or "ensure" standards currently up for review by the California Supreme Court, the Court ended its Opinion by explicitly holding what most courts in the Ninth Circuit had already concluded: the FLSA does not preempt state law claims like the UCL.

District Court narrows but does not entirely decertify class alleging misclassification as exempt from overtime

United States District Court Judge Samuel Conti (Northern District of California) granted in part and denied in part Defendant Dollar Tree Stores, Inc.'s Motion to Decertify a class of store managers contending that they were misclassified as exempt from overtime.  Cruz v. Dollar Tree Stores, Inc., 2010 WL 3619800 (N.D. Cal. Sept. 9, 2010).  The facts and result here are interesting.

Dollar Tree requires its store managers to certify that they spend more than fifty percent of their actual work time each week performing tasks on a list of 17 items that are all arguably managerial-type duties. Dollar Tree's expert, Robert Crandall, MBA, analyzed employee task certifications comprising 29,431 workweeks during the class period.  The analysis shows that approximately 62 percent of store managers "always certified that they spent the majority of their workweeks on the seventeen managerial tasks, 2.5 percent reported that they never spent most of their time performing these tasks, and about 35 percent of SMs fall somewhere in between."  Slip op., at 2.

The Court then offered this interesting analysis:

In this case, unlike in Wells Fargo II, Whiteway, and Weigele, Plaintiffs have common proof of how SMs were actually spending their time. Plaintiffs can rely on the certification forms that SMs signed every week to, in the words of the Ninth Circuit, transform what would otherwise be an individual issue into a common one. See Wells Fargo I, 571 F.3d at 959. However, the Ninth Circuit's reasoning in Vinole and Wells Fargo I persuades the Court of the need to narrow the class definition to include only SMs who responded “no” on their certification forms during the class period. Narrowing the class in this way ensures that common issues will predominate over individual ones, and significantly lessens the risk that the class consists of both injured and uninjured parties.

In this case, Plaintiffs “must show that it is more likely than not that [Dollar Tree's] exemption as applied to [SMs] was a policy or practice of misclassification.” Marlo, 251 F.R.D. at 483. In order to make this showing, Plaintiffs can point to common evidence including Dollar Tree's decision to uniformly classify SMs as exempt, Dollar Tree's employment hierarchy and structure, its standardized policies and training procedures for SMs, the common tools it requires SMs to utilize, and, most importantly of all, the fact that SMs often certified on a weekly basis that they were not spending most of their time on managerial tasks. Dollar Tree's common policy of having SMs fill out weekly certifications obviates the need for much individual testimony from SMs concerning how they spent their time.

The Court is persuaded that common issues will predominate over individual ones only if it narrows the class to SMs who responded “no” at least once on the weekly payroll certification forms. According to Dollar Tree's analysis of certification forms comprising 29,431 workweeks, approximately 62 percent of SMs always certified that they spent a majority of their time performing managerial tasks. Crandall Decl. ¶¶ 15, 22-23. If the class were to continue to include SMs who always certified “yes,” then Plaintiffs would be required to show that these SMs were not always being truthful, and this issue could not be resolved without resorting to individualized inquiries that would quickly overwhelm the common issues in this case.

No such individualized inquiries are necessary if the Court focuses its attention on SMs who certified “no.” Dollar Tree classified this group of employees as exempt, yet they certified at least once that they were spending most of their time during particular workweeks performing non-managerial tasks. With regard to this group of employees, Plaintiffs can use the weekly payroll certifications and the other evidence of Dollar Tree's standardized practices and procedures in their attempt to convince the jury that “misclassification was the rule rather than the exception” at Dollar Tree. See Sav-On Drugs Stores, Inc. v.Super. Ct., 34 Cal.4th 319, 330, 17 Cal.Rptr.3d 906, 96 P.3d 194 (2004).

Slip op., at 6-7.  The Court then addressed what is, perhaps, the most obvious challenge to this approach:

Nonetheless, the Court recognizes that some SMs may have always certified “yes” even though they were not spending most of their time on managerial tasks. The Court does not want to preclude these SMs from pursuing their misclassification claims on an individual basis. The Court is willing to entertain a motion to equitably toll the statute of limitations on their misclassification claims so as to preserve their right to pursue individual claims against Dollar Tree. See Marlo, 251 F.R.D. at 476, 488 (after decertification of case, inviting parties to brief question of whether statute of limitations on plaintiff's individual claims should be tolled).

Slip op., at 8.  The balance of the opinion consists mostly of a discussion about the positions of the respective experts used by the parties.  While that is also an educational read, the Court's solution regarding the class definition (only those persons that certified at least once that they did not meet the 50% level) is worth taking the time to evaluate carefully.

Widespread manifestation of a defect is not essential to class certification

The Ninth Circuit giveth and it taketh away.  On the one hand, the Fourth Amendment is better described as the Fourth Suggestion around these parts.  But consumer class actions received a booster shot last week.  In Wolin v. Jaguar Land Rover (9th Cir. Aug. 17, 2010), the Ninth Circuit reversed a denial of class certification in a consumer class action alleging a defective design in an automobile.  Plaintiffs Gable and Wolin each brought a class action lawsuit against Jaguar Land Rover North America, LLC (“Land Rover”) alleging that Land Rover’s LR3 vehicles suffer from an alignment geometry defect that causes tires to wear prematurely. The district court declined to certify a class because Gable and Wolin were unable to prove that a majority of potential class members suffered from the consequences of the alleged alignment defect.  The Ninth Circuit reversed.

The Court first examined commonality:

Federal Rule of Civil Procedure 23(a)(2) provides that “questions of law or fact common to the class” are a prerequisite to class certification. Commonality exists where class members’ “situations share a common issue of law or fact, and are sufficiently parallel to insure a vigorous and full presentation of all claims for relief.” Cal. Rural Legal Assistance, Inc. v. Legal Servs. Corp., 917 F.2d 1171, 1175 (9th Cir. 1990) (internal quotation marks and citation omitted). “The existence of shared legal issues with divergent factual predicates is sufficient, as is a common core of salient facts coupled with disparate legal remedies within the class.” Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019 (9th Cir. 1998). [2]

Appellants easily satisfy the commonality requirement. The claims of all prospective class members involve the same alleged defect, covered by the same warranty, and found in vehicles of the same make and model. Appellants’ complaints set forth more than one issue that is common to the class, including: 1) whether the LR3’s alignment geometry was defective; 2) whether Land Rover was aware of this defect; 3) whether Land Rover concealed the nature of the defect; 4) whether Land Rover’s conduct violated the Michigan Consumer Protection Act or the Florida Deceptive and Unfair Trade Practices Act; and 5) whether Land Rover was obligated to pay for or repair the alleged defect pursuant to the express or implied terms of its warranties. These common core questions are sufficient to satisfy the commonality test. See Hanlon, 150 F.3d at 1019-20.

Slip op., at 11991.  The Court then rejected the argument that individualized factors would affect tire wear:  "What Land Rover argues is whether class members can win on the merits. For appellants’ claims regarding the existence of the defect and the defendant’s alleged violation of consumer protection laws, this inquiry does not overlap with the predominance test."  Slip op., at 11993.

Then, discussing typicality, the Court made what is probably the most striking pronouncement of the opinion:

Whether they experienced premature tire wear at six months, nine months, or later goes to the extent of their damages and not whether named appellants “possess the same interest and suffer[ed] the same injury as the class members.” E. Tex. Motor Freight Sys. Inc. v. Rodriguez, 431 U.S. 395, 403 (1977) (internal quotation marks omitted). Typicality can be satisfied despite different factual circumstances surrounding the manifestation of the defect. See Daffin, 458 F.3d at 553. Gable and Wolin, like the rest of the class, may have a viable claim regardless of the manifestation of the defect. The fact that Gable and Wolin already received discounts and some free services also does not defeat typicality. See Lymburner v. U.S. Fin. Funds, Inc., 263 F.R.D. 534, 540 (N.D. Cal. 2010) (finding named plaintiff typical of class despite availability of plaintiff-specific remedy and finding “no authority for the argument that typicality is defeated because the remedies may be different for class members or that the availability of rescission as a remedy will monopolize this case”). Gable’s and Wolin’s claims are typical of the class.

Slip op., at 11996.  Finally, the Court concluded that superiority is closely connected to commonality:

Appellants aver that no other prospective class members have filed other related actions, and Land Rover does not dispute this point. The amount of damages suffered by each class member is not large. Forcing individual vehicle owners to litigate their cases, particularly where common issues predominate for the proposed class, is an inferior method of adjudication.

Slip op., at 11997.

Fun fact:  This same panel also heard the Mazza, et al. v. American Honda Motor Company case.

District Court certifies a class of newspaper carriers classified as independent contractors

United States District Court Judge Barry Ted Moskowitz (Southern District of California) certified a class of newspaper home delivery carriers classified as independent contractors by Lee Publications, Inc. but alleging their status as employees of Lee Publications.  Dalton, et al. v. Lee Publications, Inc., ___ F.R.D. ___, 2010 WL 2985130 (July 27, 2010).  As is usually the case, commonality was the primary area of dispute.  The Court succinctly stated California's approach to identifying the employer-employee relationship:

Under California law, the most important aspect of the employee-employer relationship is the “right to control the manner and means of accomplishing the result desired.” Cristler v. Express Messenger Sys., Inc., 171 Cal.App.4th 72, 77, 89 Cal.Rptr.3d 34 (2009) (citing Empire Star Mines Co. v. Cal. Employment Comm'n, 28 Cal.2d 33, 43-44, 168 P.2d 686 (1946), overruled on other grounds by People v. Sims, 32 Cal.3d 468, 479 n. 8, 186 Cal.Rptr. 77, 651 P.2d 321 (1982)).

Although control is the primary factor, California courts also consider several secondary factors. “Strong evidence in support of an employment relationship is the right to discharge at will, without cause.” Empire Star Mines, 28 Cal.2d at 43, 168 P.2d 686. Other secondary factors include (1) whether the one performing services is engaged in a distinct occupation; (2) the kind of occupation and whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision; (3) the skill required; (4) whether the principal or the worker supplies the tools and the place of work; (5) the length of time for which the services are to be performed; (6) the method of payment, by time or by job; (7) whether the work is a part of the regular business of the principal; (8) whether the parties believe they are creating an employer-employee relationship; (9) the hiree's degree of investment in his business and whether the hiree holds himself or herself out to be in business with an independent business license; (10) whether the hiree has employees; (11) the hiree's opportunity for profit or loss depending on his or her managerial skill; and (12) whether the service rendered is an integral part of the alleged employer's business. JKH Enterprises, Inc. v. Dep't of Indus. Relations, 142 Cal.App.4th 1046, 1064 n. 14, 48 Cal.Rptr.3d 563 (2006) (citing S.G. Borello & Sons, Inc. v. Dep't of Indus. Relations, 48 Cal.3d 341, 350-55, 256 Cal.Rptr. 543, 769 P.2d 399 (1989)).

Slip op., at 5.