Supreme Court activity for the week of April 25, 2011

The California Supreme Court held its (usually) weekly conference on April 27, 2011.  Notable results include:

• On a petition for review, review was denied in Arechiga v. Dolores Press, Inc. (February 7, 2011) (construing Labor Code section 515(d)), covered previously here.
• On a petition for review, review was denied in Safaie v. Jacuzzi Whirlpool Bath, Inc. (February 22, 2011) (death knell doctrine), covered previously here.
• On a petition for review, review was denied in Kullar v. Foot Locker Retail, Inc. (January 18, 2011) (disqualification issues), covered previously here.

Overall, a rough day in the land of class actions.

Legislative reaction to AT&T v. Concepcion: Sens. Franken, Blumenthal, Rep. Hank Johnson announce legislation in response

From Sentator Franken's official site:

After consumers were dealt a blow today when the Supreme Court ruled that companies can ban class action suits in contracts, U.S. Sens. Al Franken (D-Minn.) and Richard Blumenthal (D-Conn.) and Rep. Hank Johnson (D-Ga.) said today they plan to introduce legislation next week that would restore consumers' rights to seek justice in the courts. Their bill, called the Arbitration Fairness Act, would eliminate forced arbitration clauses in employment, consumer, and civil rights cases, and would allow consumers and workers to choose arbitration after a dispute occurred.

Many businesses rely on mandatory and binding pre-dispute arbitration agreements that force consumers and employees to settle any dispute with a company providing products or services without the benefit of legal recourse.

"This ruling is another example of the Supreme Court favoring corporations over consumers," said Sen. Franken. "The Arbitration Fairness Act would help rectify the Court's most recent wrong by restoring consumer rights. Consumers play an important role in holding corporations accountable, and this legislation will ensure that consumers in Minnesota and nationwide can continue to play this crucial role."

"Powerful companies who take advantage of ordinary consumers must be held accountable," said Sen. Blumenthal. "Today's misguided Supreme Court ruling is a setback for millions of Americans, denying injured consumers access to justice. The Arbitration Fairness Act would reverse this decision and restore the long-held rights of consumers to hold corporations accountable for their misdeeds."

"Forced arbitration agreements undermine our indelible Constitutional right to trial by jury, benefiting powerful businesses at the expense of American consumers and workers," said Rep. Johnson. "Americans with few choices in the marketplace may unknowingly cede their rights when they enter contracts to buy a home or a cell phone, place a loved one in a nursing home, or start a new job. We must fight to defend our rights and re-empower consumers."

In Concepcion v. AT&T, consumers brought a claim against AT&T for false advertising. However, because the value of their case was only $30, their case was consolidated into a class action. AT&T sought to block the lawsuit by pointing to the mandatory arbitration clause in the service contract but lower courts applying state law rightly invalidated the arbitration clause because it banned class actions entirely.

In today's 5-4 decision, the Supreme Court overturned these lower court decisions which sought to protect consumers. The majority of the Court held that the Federal Arbitration Act barred state courts from protecting consumers from these arbitration clauses. The effect of this decision essentially insulates companies from liability when they defraud a large number of customers of a relatively small amount of money.

A longtime advocate for consumers and workers in cases of forced arbitration, in 2009 Sen. Franken passed legislation with bipartisan support that restricts funding to defense contractors who commit employees to mandatory binding arbitration in the case of sexual assault and other civil rights violations. Congressman Johnson, a longtime champion of workers and consumer rights, first introduced the Arbitration Fairness Act in 2007.

Breaking News: Supreme Court invalidates Discover Bank in AT&T Mobility LLC v. Concepcion

Today, in AT&T Mobility LLC v. Concepcion (April 27, 2011), the Supreme Court held, 5-to-4, that California's Discover Bank rule is preempted by the Federal Arbitration Act.  What a thing to wake up to after sleeping extra to try and recover faster from being sick.  I'll write more about the deaths of class arbitration and state's rights later.  So much for federalism.  This is truly the era of the Central Planning Bureau.

Central District certifies false advertising class of consumers that purchased YoPlus yogurt

United States District Court Judge Cormac J. Carney (Central District of California) certified a class of California consumers that purchased YoPlus yogurt.   Johnson v. General Mills, Inc., --- F.R.D. ----, 2011 WL 1514702 (C.D.Cal. Apr 20, 2011).  The Court followed Tobacco II when analyzing whether reliance affected commonality:

Mr. Johnson may bring these UCL and CLRA claims on behalf of a class. Although Proposition 64 requires that Mr. Johnson actually relied on General Mills' alleged misrepresentations to bring his UCL claim, that requirement does not apply to absent class members. See In re Tobacco II Cases, 46 Cal.4th 298, 321, 326 (2009) (finding that Proposition 64 “was not intended to have any effect at all on unnamed members of UCL class actions”). Indeed, “relief under the UCL is available without individualized proof of deception, reliance and injury.” Id. at 320; see also In re Steroid Hormone Prod. Cases, 181 Cal.App. 4th 145, 154 (2010) (explaining that once the named plaintiff meets standing requirements “no further individualized proof of injury or causation is required to impose restitution liability [under the UCL] against the defendant in favor of absent class members”).

As the Supreme Court of California has explained in the UCL context, " ‘a presumption, or at least an inference, of reliance arises whenever there is a showing that a misrepresentation was material.’ " In re Tobacco II Cases, 46 Cal.4th at 327 (quoting Engalla v. Permanente Med. Grp., Inc., 15 Cal.4th 951, 977 (1997)). Similarly, a CLRA claim can be litigated on a classwide basis when the “record permits an ‘inference of common reliance’ to the class.” McAdams v. Monier, Inc., 182 Cal.App. 4th 174, 183 (2010) (quoting Mass. Mut. Life Ins. Co. v. Superior Court, 97 Cal.App. 4th 1282, 1293 (2002)). A representation is material “if a reasonable man would attach importance to its existence or nonexistence in determining his choice of action in the transaction in question.” In re Tobacco II Cases, 46 Cal.4th at 327 (internal quotation marks omitted); see also Clemens v. DaimlerChrysler Corp., 534 F.3d 1017, 1025 (9th Cir.2008) (explaining that a concealed fact is “material” under the UCL if reasonable consumers are likely to be deceived). This “objective standard ... is susceptible to common proof.” Wolph v. Acer Am. Corp., ––– F.R.D. ––––, No. C 09–01314 JSW, 2011 WL 1110754, at *9 (N.D.Cal. Mar. 25, 2011). And materiality is generally a question of fact for the jury. In re Tobacco II Cases, 46 Cal.4th at 327.

Accordingly, Mr. Johnson's UCL and CLRA claims present core issues of law and fact that are common and suitable for adjudication on a classwide basis. These issues include: (1) whether General Mills communicated a representation—through YoPlus packaging and other marketing, including television and print advertisements—that YoPlus promoted digestive health; (2) if so, whether that representation was material to individuals purchasing YoPlus; (3) if the representation was material, whether it was truthful; in other words, whether YoPlus does confer a digestive health benefit that ordinary yogurt does not; and (4) if reasonable California consumers who purchased YoPlus were deceived by a material misrepresentation as to YoPlus' digestive health benefit, what is the proper method for calculating their damages. The commonality requirement is also met here.

Slip op., at 2-3.  Seems like products claiming digestive health benefits inevitably cause indigestion for the companies making those claims.

Northern District Court certifies under 23(b)(2) a class of shift workers alleging meal period violations at a Shell refinery

United States District Court Judge Claudia Wilken (Northern District of California) granted a motion for class certification in a suit alleging failure to comply with California's meal period requirements and pay an additional hour of pay for each instance of a violation.  Gardner v. Shell Oil Co., 2011 WL 1522377 (N.D.Cal. Apr 21, 2011).  The particularly interesting aspect of this case is the Court's decision to permit certification under Fed. R. Civ. P. 23(b)(2):

"Claims for money relief may be certified as part of a Rule 23(b)(2) class, but the rule ‘does not extend to cases in which the appropriate final relief relates exclusively or predominantly to money damages.’ "  Wang v. Chinese Daily News, Inc., 623 F.3d 743, 753 (9th Cir.2010) (internal quotation marks omitted) (citing Dukes, 603 F.3d at 615 n. 38).

Citing Allison v. Citgo Petroleum Corp., 151 F.3d 402, 412–16 (5th Cir.1998), Defendants contend that monetary relief in this case predominates because Plaintiffs seek damages for alleged unpaid wages and waiting-time penalties. However, the Ninth Circuit has expressly rejected the Allison approach to determining whether monetary relief in a given case disqualifies the class from certification under Rule 23(b)(2). In Wang, the Ninth Circuit explained, “In Dukes, we rejected as ‘deficient’ ... the Allison ‘incidental damages standard’ that permits certification of claims for monetary relief under Rule 23(b)(2) only when they are ‘incidental to requested injunctive or declaratory relief,’ because it is unduly restrictive.” 623 F.3d at 753–54. In this circuit, Rule 23(b)(2) is interpreted to require “only that claims for monetary relief not predominate over claims for injunctive relief” and certification is acceptable when the claims are on “equal footing.” Id. at 754.

Plaintiffs in the present case, like those in Wang, have a substantial claim for injunctive relief because they seek to end long-standing employment policies. Id. The claims for injunctive and monetary relief are closely related because back wages are sought for those who were deprived of lawful meal periods due to the policies Plaintiffs seek to enjoin. As a result of this close relationship, the request for monetary relief does not introduce “new and significant legal and factual issues,” nor raise particular due process or case management concerns. Id. Furthermore, courts have held that back wages are a form of relief that may be permitted in a Rule 23(b)(2) action. Dukes, 603 F.3d at 618–19 (holding that back pay in a Title VII case is fully consistent with certification of a Rule 23(b)(2) class action and noting that “every circuit to have addressed the issue has acknowledged that Rule 23(b)(2) does allow for some claims for monetary relief.”). In Dukes, the Ninth Circuit reasoned that back pay in the Title VII context generally involves relatively uncomplicated factual determinations and few individualized issues, and is an integral component of Title VII's “make whole” remedial scheme. Id. at 619. Nor are waiting-time penalties so significant or complex that they render Plaintiffs' monetary claim predominant over their request for injunctive relief. Accordingly, class certification under Rule 23(b)(2) is warranted.

Slip op., at 6.  The balance of the opinion discusses predominance, and the Court concluded that common issues predominate and certified a Rule 23(b)(3) class as well.

The slip opinion on Westlaw does not identify the counsel involved in this uncommon attempt at 23(b)(2) certification in the wage & hour context, and I don't have time to track that down.  Thus, I don't know who to applaud.  If you do, given them a pat on the back.

You (or your support staff) should know this Acrobat feature

I'm working on Part II of my Acrobat X review.  Until that is finished, here's a bit of instructional advice that will help you survive that dreaded court requirement to consecutively number exhibits.  Compliments of PDF for Lawyers, the "Header & Footer" option in the Document menu allows for the addition of all sorts of numbering and labeling schemes.  I must confess that the ease with which pdfs can be created and assembled and the increasing ease with which documents can be e-filed with some courts has had an unexpected side-effect on some of my filings - I forget the exhibit labeling requirements imposed under some rules of court.  It was almost easier to remember when you had to go to the trouble of hand stamping each page or running the exhibit through a laser printer a second time.

AT&T finally allows (err, finishes testing) updates for two of its Windows Phone 7 handsets

The Windows Phone 7 update debacle is crawling to its final resting place (at least for the current set of updates...for some U.S. customers...on AT&T).  As of April 19, 2011, Microsoft was allowed by AT&T to deliver updates to Samsung Focus and LG Quantum owners (but not the HTC Surround).  Microsoft engaged in some speculation about whether the carrier-specific updates could be received by phones that had been updated though "hacker" means, such as the ChevronWP7.Updater technique delivered by Chris Walsh (who was, allegedly, told by Microsoft that his update method would prevent phones from receiving future updates), when it suggested to the public (contrary to what it told Walsh) that such updating techniques might block future updates.  As an aside, Chris became a verb when phone treated to his update tool were characterized as "Walshed."

Well, I can now confirm that the fears of brickdom were greatly overstated.  My Samsung Focus, which was somehow updated (Walshed) with the ChevronWP7.Updater tool (I am shocked, shocked to learn of "hacker" updates on my phone), recevied and applied the carrier-specific and OEM firmware updates through the normal channel yesterday.  The AT&T address book tool was installed.  The Focus-specific firmware was also updated.

As far as the potential of Windows Phone 7 for the legal set, this OS will need the "Fall" update, called "Mango," before it will have all the tools in place that most attorneys/IT departments/corporations would want for a wide deployment.  New development tools are about to be released, with access to a huge number of new APIs.  Major software developers should be able to deliver much improved productivity tools with the Mango release this fall.  What I can't wait to...read about...is whether the ChevronWP7.Updater tool that evidently worked very well for the current round of updates will be able to pull the Mango update as soon as it is ready.  This would allow phone owners to bypass the many months of "testing" that AT&T will perform.  That's right - I can't wait to read about that.

Supreme Court activity for the week of April 18, 2011

The California Supreme Court held its (usually) weekly conference on April 20, 2011.  Notable results include:

• On a petition for review, review was denied in MKJA, Inc. v. 123 Fit Franchising, LLC (January 4, 2011) (arbitration issues), covered previously on this blog here.
• On a petition for review, review was denied in Telscape Communications v. Superior Court (Gallardo) (March 7, 2011)

McDonald's sued to stop it from offering toys in Happy Meals; Opponents of personal responsibility celebrate

According to Reuters, the Center for Science in the Public Interest is representing a mother of two in a suit agasint McDonald's.  The suit alleges violation of California consumer protection laws.  McDonald's removed the suit to the United States District Court for the Northern District of California.

I have a kid.  I sometimes let her eat McDonald's.  I could say no to a request to eat there.  That's my choice.  But if McDonald's axes Happy Meal toys to deal with these claims, then I will have less choice, thanks to people that think they can do a better job than I can of raising my child.  Have we completely lost our minds?  Plenty of companies do actual, real, bad things.  We just dilute attention from real misconduct when we shove responsibility for our sloth and inattention onto businesses.  Underpaying employees: bad.  Undisclosed toxins in food or medication: bad.  Defrauding investors: bad.  Kids eating too much junk food: lack of parental discipline (unless the children are out buying their own food, in which case it is a lack of parental oversight).

In Mora, et al., v. Big Lots Stores, Court affirms denial of certification in manager misclassification case

I've comment previously that misclassification cases (especially in the retail and restaurant sectors) appear to be an increasingly difficult sell.  See post regarding Arenas v. El Torito Restaurants, Inc., 183 Cal. App. 4th 723 (2010).  Since then, I haven't seen anything to change my opinion that the tide has shifted from the Sav-on high water mark.  Yesterday, in Mora, et al. v. Big Lots Stores (April 18, 2011), the Court of Appeal (Second Appellate District, Division Seven) affirmed a trial court order denying certification of a class of Big Lots store managers alleged to have been misclassified as exempt from overtime pay and other labor code obligations.

The Court summarized the two ends of the legal spectrum defining the legal criteria applied to certification:

As the Supreme Court held in Sav-On, supra, 34 Cal.4th at page 326, the central issue in a class certification motion is whether the questions that will arise in the action are common or individual, not the plaintiffs' likelihood of success on the merits of their claims. (Accord, Ghazaryan v. Diva Limousine, Ltd. (2008) 169 Cal.App.4th 1524, 1531 ["trial court must evaluate whether the theory of recovery advanced by the plaintiff is likely to prove amenable to class treatment"].) The putative class representatives contend the trial court disregarded this standard, improperly focusing on the potential conflicting issues of fact that may arise on an individual basis rather than the common questions presented by their theory of recovery. To the contrary, the court employed the correct analysis and concluded the theory of recovery advanced—operational standardization imposed by Big Lots—was not supported by substantial evidence and thus not amenable to class treatment. No legal error was committed: "[A] class action will not be permitted if each member is required to 'litigate substantial and numerous factually unique questions' before a recovery may be allowed. . . . '[I]f a class action "will splinter into individual trials," common questions do not predominate and litigation of the action in the class format is inappropriate.'" (Arenas v. El Torito Restaurants, Inc. (2010) 183 Cal.App.4th 723, 732 [affirming order denying certification on misclassification allegations where trial court found tasks performed by restaurant managers and time devoted to each task varied widely from restaurant to restaurant].)

Slip op., at 12.  The Court noted that the outcome was much like Arenas and Dunbar v. Albertson’s, Inc., 141 Cal. App. 4th 1422 (2006).

The outcome was driven by the standard of review.  The Court emphasized on several occasions that it couldn't second guess the trial court's decision to credit Big Lots' evidence over the plaintiffs' evidence:

In essentially rejecting the putative class representatives' evidentiary submission, the court observed that for more than half of the declarants the percentage of time estimated to have been spent on non-managerial, non-exempt duties was different from the estimates given in deposition testimony or statements to third party prospective employers.

Slip op., at 14, n. 10.  The trial court also credited the very individualized manager declarations submitted by Big Lots over the declarations from the plaintiffs.  The Court of Appeal found that that trial court did not abuse its discretion because substantial evidence supported the trial court's conclusion.  This is the anti-Sav-on.