District Court denies certification in suit challenging property intrusions by telecommunications company Qwest Communications

United States District Court Judge William B. Schubb (Eastern District of California) denied, for the second time in the suit, a motion for class certification in a suit contesting the use of railroad right-of-ways by Qwest Communications International, Inc. (and other companies) to install fiber optic lines.   Regan v. Qwest Communications Intern., Inc., 2010 WL 3941471 (E.D.Cal. Oct. 5, 2010). The Court found that typicality issues of individual land ownership and the commonality problems relating to the many statutes conveying land in different ways were insurmountable problems.  For example, the Court said the following:

With regard to the miles of right-of-way subject to private conveyances, plaintiffs argue the individual deeds can be placed in groups based on common conveyance language and the court can decide motions for partial summary judgment with respect to each group on the fee versus easement issue. While plaintiffs have submitted a handful of such conveyances from the same railroad route in Kings County, California in order to show that these conveyances can use identical or similar language, (Ex. to Supp. Millea Aff. (Docket No. 193) Ex. B), the court has no evidence that there is a limited range of granting language or that there will be a limited number of potential deed “groups.” See Kirkman v. N.C. R. Co., 220 F.R.D. 40 (M.D.N.C.2004). When the private conveyances number somewhere between five hundred and two thousand, spanning hundreds of miles and multiple railroad routes, plaintiffs' offering is no assurance that interpretation of private deeds is a “common” issue at all.

Slip op., at 7.

Nationwide breach of contract class certified; laws of 48 states at issue

United States District Court Judge Susan Illston (Northern District of California) certified a nationwide class action alleging declaratory relief and breach of contract claims.  In re Conseco Life Ins. Co. LifeTrend Ins. Sales and Marketing Litigation, 2010 WL 3931096 (N.D.Cal. Oct 06, 2010).  Plaintiffs sought certification of a nationwide class, challenging certain life insurance policy changes for policies administered by defendant Conseco Life Insurance Company (“Conseco”).  The Court granted the motion to certify the nationwide class, but denied the motion to certify a California sub-class.

The interesting portion of the discussion focuses on the laws at issue:

Conseco relies heavily on Zinser and In re Paxil in contending that the variations in state law defeat certification. Both of those cases, however, concerned nationwide product liability actions involving significant variations in the state tort laws governing the multiple claims asserted by the plaintiffs. See Zinser, 253 F.3d at 541-42; In re Paxil, 212 F.R.D. at 542-44. Here, by contrast, plaintiffs assert only two claims-breach of contract and declaratory judgment-on behalf of the national class. Conseco has not identified any state-to-state variations in the law governing declaratory judgment, and Conseco overstates the extent of any variations in state contract law, including as to the definition of breach, the existence of causation and damages requirements, and the admissibility of extrinsic evidence.  First, contrary to Conseco's representations, several courts have recognized that the law relating to the element of breach does not vary greatly from state to state. See, e.g., Klay v. Humana, Inc., 382 F.3d 1241, 1262-63 (11th Cir.2004); Leszczynski v. Allianz Ins., 176 F.R.D. 659, 672 (S.D.Fla.1997). Second, plaintiffs have persuasively rebutted Conseco's assertions concerning variations in the causation and damages elements of the contract claim. Finally, the Court agrees with plaintiffs that, as neither party has asserted that the form policy contract contains ambiguous terms (rather, they offer competing interpretations based on the face of the documents), admission of extrinsic evidence should not be necessary to interpret the contractual provisions at issue. Plaintiffs' contractual interpretations may ultimately be rejected at the summary judgment stage or disproved at trial, but they are not patently untenable from the face of the documents, and do not demonstrate a lack of common issues of law.

Slip op., at 6.

The Court rejected the California sub-class, concededly asserted as an alternative pleading, because the fraud theory of liability was inconsistent with the theory underlying the nationwide class claims.

District Court decertifies class of customer service representative employed by Safety-Kleen Systems, Inc.

United States District Court Judge Phyllis J. Hamilton (Northern District of California) granted Defendant Safety-Kleen Systems, Inc.'s motion to decertify a class of "customer service representatives."  Wamboldt v. Safety-Kleen Systems, Inc., 2010 WL 3743925 (N.D. Cal. Sept. 20, 2010).  The CSRs had duties extending well beyond what one might expect from the job title, including customer sales, client collections, and various telephone responsibilities, as well as on-site servicing of equipment, transportation of hazardous waste, and driving of company vehicles in order to perform customer service calls.  The hazardous waste transportation and the occasional use of large vehicles (in excess of 30,000 lbs. gross vehicle weight) were the primary culprits underlying the motion to decertify.

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.

District Court certifies class of borrowers allegedly subjected to discrimination based on race

United States District Court Judge Thelton E. Henderson (Northern District of California) certified a class of African-American and Hispanic borrowers allegedly charged higher rates on mortgage loans compared to whites as a result of Defendant GreenPoint Mortgage Funding, Inc.'s practice of allowing its brokers to mark up the price of wholesale loans.  Ramirez v. Greenpoint Mortg. Funding, Inc., ___ F.R.D. ___, 2010 WL 2867068 (July 20, 2010).  The suit alleges violation of federal fair lending and housing laws.  The alleged conduct presents an interesting theory:

The pricing of GreenPoint's mortgage loans consisted of an objective and a subjective component. GreenPoint relied on objective risk factors-such as FICO score, property value, and loan-to-value ratio-to determine credit parameters and set prices for its loan products. This information was communicated to brokers on a rate sheet listing GreenPoint's “par” interest rate, which did not result in any broker compensation. That objective component of loan pricing is not at issue here.

Plaintiffs' allegations relate to GreenPoint's discretionary pricing policy, which governed brokers' compensation for their services. GreenPoint paid brokers a “yield spread premium” or “rebate” when they set the interest rate higher than par; brokers were also permitted to charge loan origination and processing fees. GreenPoint did not set any objective criteria for the imposition of these higher rates and fees, which were set by the brokers according to their discretion. Brokers were paid more for loans that cost more to the borrower, but their compensation was capped at 5 percent of the loan amount. GreenPoint monitored the fees charged by its brokers to ensure they complied with its policies.

Slip op., at 1-2.

In Faulkinbury v. Boyd & Assoc., Court confirms the broad discretion given to trial courts considering certification

After weeks in the doldrums, a California Court of Appeal finally got around to issuing an opinion related to class actions.  Unfortunately, it isn't very exciting.  In Faulkinbury v. Boyd & Associates, Inc. (June 24, 2010), the Court of Appeal (Fourth Appellate District, Division Three) reviewed an order denying class certification of meal period, rest break and overtime (regular rate calculation) claims.

The Court confirmed what is, by now, a fairly well-established set of standards for appellate review of certification rulings:

Trial courts have discretion in granting or denying motions for class certification because they are well situated to evaluate the efficiencies and practicalities of permitting a class action. (Sav-On, supra, 34 Cal.4th at p. 326.) Despite this grant of discretion, appellate review of orders denying class certification differs from ordinary appellate review. Under ordinary appellate review, we do not address the trial court's reasoning and consider only whether the result was correct. (Kaldenbach v. Mutual of Omaha Life Ins. Co. (2009) 178 Cal.App.4th 830, 843.) But when denying class certification, the trial court must state its reasons, and we must review those reasons for correctness. (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 435-436 (Linder).) We may only consider the reasons stated by the trial court and must ignore any unexpressed reason that might support the ruling. (Id.; see also Bufil v. Dollar Financial Group, Inc. (2008) 162 Cal.App.4th 1193, 1204-1205 (Bufil).)

Slip op., at 7.  The majority of the opinion simply confirms that, in the face of evidence apparently in conflict, the determination of which evidence to credit is left to the trial court.

The Court did reverse the trial court as to the overtime claim.  The Court found that the issue of whether certain payments should be included in the calculation of the regular rate is an issue well-suited to class-wide determination.

Get back to work.

California Supreme Court activity for the week of May 10, 2010

The California Supreme Court held its (usually) weekly conference today.  Notable results include:

• A Petition for Review and depublication was denied in Jaimez v. DAIOHS USA, Inc., et al., 181 Cal. App. 4th 1286 (February 8, 2010), (detailed analysis of certification standard as applied to various wage & hour claims) discussed on this blog here.  This opinion has already influenced trial courts considering certification motions in the wage & hour context.

I don't see anything else in this week's conference summary that would be of interest here.  If I missed anything after my very quick scan, I will update this post.