a California-centric collection of comments and resources about complex litigation and class action practice
Bridgeport is holding its Mid Year Wage & Hour Litigation Conference on June 3, 2011, in San Diego, California, at the Westin San Diego Hotel. I will be speaking with Julie Trotter, of Call & Jensen, about the impact of Concepcion on the employment law practice area. View the full program agenda here.
About a week ago, on behalf of Consumer Attorneys of California ("CAOC"), I filed an amicus curiae brief in support of the plaintiff in Brown v. Ralphs Grocery Company. In Brown, after oral argument, the Court of Appeal requested supplemental briefs on the question of whether AT&T Mobility LLC v. Concepcion (April 27, 2011) precludes the Gentry v. Superior Court (2007) 42 Cal.4th 443 defense to certain arbitration agreements. After determining that the parties had not already addressed the issues, CAOC presented several bases for rejecting the contention that Concepcion overruled Gentry, including the fact that a bar on class actions violates the National Labor Relations Act's protection of concerted action by employees to improve their wages and working conditions. You can view the brief viat the Spiro Moss website here.
Other attorneys at Spiro Moss contributed to the brief, including Dennis F. Moss (who conceived of the argument involving the NLRA), Gregory N. Karasik, and J. Mark Moore. David M. Arbogast of Arbogast & Berns LLP also contributed to CAOC's brief.
An error in the post title was corrected.
In Part 1 of my Acrobat X review, I provided an overview of changes to Acrobat X and described changes to the look and feel of the Acrobat X family of products. But no list of new features will matter unless those new features matter to you. With that in mind, I want to dive into a few of the new and enhanced features of Acrobat X that are likely to be of use in the legal setting.
Adobe introduced “PDF Portfolios” in Acrobat 9. Acrobat X enhances the PDF Portfolio concept in crucial ways, filling some gaps from the first version of the tool and fixing a key issue that prevented me from making more than passing use of the PDF Portfolio tool.
If you haven’t seen a PDF Portfolio, think of it as a wrapper, much like a zip file, but with interactive properties. When you assemble a PDF Portfolio, you can include multiple files, of different file types, inside the Portfolio. Once created, the PDF Portfolio is more like an electronic binder that can hold Microsoft Office files, pdfs, flash videos, graphic file formats, and, interestingly, folders and web pages, among other types of supported content.
Why not just covert all your files to pdfs and then combine them into one giant pdf? There are actually many reasons why using a PDF Portfolio can prove to be a superior alternative to merging multiple files into a single PDF:
PDF Portfolios have a number of use cases that should be of interest to the legal profession. In my case, I have used PDF Portfolios to create mediation briefs with exhibits. I have prepared mediation briefs that incorporate as many as 30 attached exhibits, all wrapped into a PDF Portfolio. At least for Mediators that are tech-fans, this was easier and less expensive than sending everything to a printer for binding. But when I created PDF Portfolios in Acrobat 9, I found that I had to use a file-naming trick to organize the files in my Portfolio. Acrobat 9 did not allow you to control the order of files in a PDF Portfolio; they were alphabetical, using alpha-numeric rules. To sort the exhibits to my mediation briefs, I had to use a two or three digit number with the exhibits to get them to sort right (e.g., “Tab 01 – Name1” “Tab 02 – Name2,” etc.). If I used a single digit for “Tab 1,” it didn’t sort correctly when I made it up to “Tab 11.”
Acrobat X fixed that difficult limitation. Now drag-and-drop organizing is available. This makes the PDF Portfolio so much more flexible. Now you can create a Mediation brief, a client document package, or an evidence repository, complete with customized tags for sorting and a comment field for annotations. You could actually use a Portfolio as a “hot documents” binder that you update as a case moves along.
The interface, like the rest of the program, is clean and attractive:
Screenshot 1
Acrobat X also includes a number of additional tools for layouts, themes, backgrounds and colors. A Portfolio can be branded with a firm’s identity colors and logo (but don’t overdo it; heavy-handed branding makes my head hurt):
Screenshot 2
The PDF Portfolio tool is now a feature with some punch, thanks, in no small part, to the small but crucial addition of drag-and-drop sorting to organize the PDF Portfolio.
You’ve probably heard the stories about firms filing “redacted” documents with courts, only to become front page legal news when someone discovered that the “redaction” was an easily removed black box over the sensitive information. And despite those stories, I still encounter law firms that don’t understand how to use the redaction tools in Acrobat. For example, opposing counsel in a case that I am currently working on revealed personal contact information because of an incorrect redaction. Things like this should no longer be happening.
While redaction was available in Acrobat 9, the redaction and security tools are enhanced in Acrobat X.
Among the new features in Acrobat X Pro is the ability to customize the appearance of text or images marked for redaction. You can change the fill color and the opacity at the bottom of the window to personalize how redaction marks appear before they are applied. I find this enhancement helpful when reviewing a long document for redaction. A fill color makes an unapplied redaction stand out until you are ready to apply it.
You can also repeat a redaction mark across multiple pages when, for example, a number or e-mail address repeats across pages. Just mark the first instance, right-click and select “Repeat” to apply the same redaction to additional pages.
Acrobat X has also improved its ability to find and permanently remove metadata, annotations, attachments, form fields, layers, and bookmarks. The Remove Hidden Information feature can now find content including JavaScript, links, and overlapping images and shapes. I haven’t tested this yet, but this enhanced tool might help when a pdf is rejected by an electronic filing system, such as the painful system used by the U.S. District Court for the Central District of California.
PDF Portfolios and enhanced redaction and security tools are two feature sets that law firms should take into account if an upgrade to Acrobat X is under consideration. Importantly, these two feature sets are only available in Acrobat Pro X and above - two good reasons to spring for Acrobat Pro X.
I'm having some issues with the commenting module, so I am going to responde to comments here.
You can link to specific pages in other documents in a portfolio. Here is a link to some instructions:
Portfolio Linking Instructions
Basically, you need to open the document that will include hyperlinks from within the Portfolio. Don't preview it - open it. Then use the tools menu to insert a link. Once you see the dialog to confirm the target page, don't click it yet. Instead, open the target document from the Portfolio, scroll to the desired page, and then use the dialog box to confirm the target page.
You can also create your own templates for PDF Portfolios if you don't like the templates provided in Acrobat X. Feedback to Adobe might also encourage them to create a repository for user-created PDF Portfolio templates.
In Glasser v. Volkswagon of American, Inc. (9th Cir. May 17, 2011), the Ninth Circuit considered objector-appellant David Murray's contention that the district court erred when it awarded attorneys’ fees and costs to plaintiff-appellee Jacob Glasser. Glasser challenged the inadequacy of disclosures by Volkswagon about the limited availability of "smart keys" for certain Audi and Volkswagon vehicles. Soon after the case was filed, the parties initiated settlement discussions. As part of those discussions, Glasser evidently learned that replacement key technology was available through independent dealers and agreed that Volkswagon had not fixed the price of replacement keys. Volkswagon agreed to make additional disclosures about "smart keys," but no monetary benefit was obtained for the class.
The trial court approved a settlement in which the class was notified of the agreement to make new disclosures and Volkswagon's agreement to either pay an agreed-upon amount of attorney's fees or let the trial court decide fees if the parties did not reach agreement on that issue. Murry filed an objection to the settlement. The district court awarded plaintiff attorney's fees in the amount of $417,663.75, costs and expenses in the amount of $16,614.40, and an incentive award to Glasser in the amount of $2,500.
The Court began with a discussion of Article III standing. The Court observed that fees paid from common funds confer standing on objectors because the fees reduce the fund:
When attorneys’ fees are paid out of a common fund, from which both the class recovery and the fee award are paid, a class member who participates in the settlement generally has standing to challenge the fee award because any reduction in the fee award results in an increase to the class recovery.
Slip op., at 6356. But the Court then concluded that Murray failed to satisfy his obligation to establish Article III standing:
Murray does not contend that Plaintiff’s counsel colluded with VW to orchestrate an excessively high fee award in exchange for an unfair settlement for the class. Had he alleged as much, he may have been able to meet the requirements of Article III standing under a “constructive common fund theory.” See Lobatz, 222 F.3d at 1147. However, Murray has expressly disclaimed recovery under a “constructive common fund” theory. Instead, he argues Plaintiff’s claims were entirely meritless from the beginning of the lawsuit. Further, he claims only that an excess fee award will cause VW to pass along the cost to its shareholders and customers, and that he may somehow benefit as a consumer from any savings that may result from the denial or reduction of the award.
Slip op., at 6537. The appeal was then dismissed for lack of standing. Oops. I suppose an assertion of a "constructive common fund" theory will become the new standard refrain for objectors, particularly in consumer class actions.
The California Supreme Court held its (usually) weekly conference on May 18, 2011. Notable results include:
The California Supreme Court held its (usually) weekly conference on May 11, 2011. Notable results include:
Unless you've been living in a compound, off the grid with no internet access in a medium sized city outside the capital of a troubled nation in South Asia, you undoubtedly are aware of the Supreme Court's decision in AT&T Mobility LLC v. Concepcion (April 27, 2011). For a number of reasons, which I will revisit obliquely in a moment, I decided against providing any immediate analysis. Apparently this silence was disconcerting to some, as several readers actually inquired about my silence. Beginning first with a synopsis, here are some, but not all, of my comments on Concepcion.
The result was all but pre-determined by the way in which the issue was framed: "We consider whether the FAA prohibits States from conditioning the enforceability of certain arbitration agreements on the availability of classwide arbitration procedures." Slip op., at 1. But Justice Scalia, writing for the Court, went ahead with the rest of the opinion. The Court summarized the findings in the courts below:
In March 2008, AT&T moved to compel arbitration under the terms of its contract with the Concepcions. The Concepcions opposed the motion, contending that the arbitration agreement was unconscionable and unlawfully exculpatory under California law because it disallowed classwide procedures. The District Court denied AT&T’s motion. It described AT&T’s arbitration agreement favorably, noting, for example, that the informal disputeresolution process was “quick, easy to use” and likely to “promp[t] full or . . . even excess payment to the customer without the need to arbitrate or litigate”; that the $7,500 premium functioned as “a substantial inducement for the consumer to pursue the claim in arbitration” if a dispute was not resolved informally; and that consumers who were members of a class would likely be worse off. Laster v. T-Mobile USA, Inc., 2008 WL 5216255, *11–*12 (SD Cal., Aug. 11, 2008). Nevertheless, relying on the California Supreme Court’s decision in Discover Bank v. Superior Court, 36 Cal. 4th 148, 113 P. 3d 1100 (2005), the court found that the arbitration provision was unconscionable because AT&T had not shown that bilateral arbitration adequately substituted for the deterrent effects of class actions. Laster, 2008 WL 5216255, *14.
The Ninth Circuit affirmed, also finding the provision unconscionable under California law as announced in Discover Bank. Laster v. AT&T Mobility LLC, 584 F. 3d 849, 855 (2009). It also held that the Discover Bank rule was not preempted by the FAA because that rule was simply “a refinement of the unconscionability analysis applicable to contracts generally in California.” 584 F. 3d, at 857. In response to AT&T’s argument that the Concepcions’ interpretation of California law discriminated against arbitration, the Ninth Circuit rejected the contention that “ ‘class proceedings will reduce the efficiency and expeditiousness of arbitration’ ” and noted that “ ‘Discover Bank placed arbitration agreements with class action waivers on the exact same footing as contracts that bar class action litigation outside the context of arbitration.’ ” Id., at 858 (quoting Shroyer v. New Cingular Wireless Services, Inc., 498 F. 3d 976, 990 (CA9 2007)).
Slip op., at 3. At this point, I parenthetically comment as follows: "Right."
After describing the "liberal" federal policy favoring arbitration agreements, the Court described the savings clause of the FAA thusly:
The final phrase of §2, however, permits arbitration agreements to be declared unenforceable “upon such grounds as exist at law or in equity for the revocation of any contract.” This saving clause permits agreements to arbitrate to be invalidated by “generally applicable contract defenses, such as fraud, duress, or unconscionability,” but not by defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue. Doctor’s Associates, Inc. v. Casarotto, 517 U. S. 681, 687 (1996); see also Perry v. Thomas, 482 U. S. 483, 492–493, n. 9 (1987). The question in this case is whether §2 preempts California’s rule classifying most collective-arbitration waivers in consumer contracts as unconscionable. We refer to this rule as the Discover Bank rule.
Slip op., at 5. California law includes an unconscionability defense to any contract. The consumers in Concepcion argued that this generally applicable defense, and California's general policy against exculpation, are not arbitration-specific, and even if they are, the same principles apply to any dispute resolution contract. The Court commented:
When state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the FAA. Preston v. Ferrer, 552 U. S. 346, 353 (2008). But the inquiry becomes more complex when a doctrine normally thought to be generally applicable, such as duress or, as relevant here, unconscionability, is alleged to have been applied in a fashion that disfavors arbitration. In Perry v. Thomas, 482 U. S. 483 (1987), for example, we noted that the FAA’s preemptive effect might extend even to grounds traditionally thought to exist “ ‘at law or in equity for the revocation of any contract.’ ” Id., at 492, n. 9 (emphasis deleted). We said that a court may not “rely on the uniqueness of an agreement to arbitrate as a basis for a state-law holding that enforcement would be unconscionable, for this would enable the court to effect what . . . the state legislature cannot.” Id., at 493, n. 9.
Slip op., at 7-8. Before this decision was rendered, I knew that the outcome is dependent upon how you choose to look at the situation. It is very subjective. If one views a policy against exculpation as a policy applicable to all contracts, it is arbitration neutral. If one views a policy against exculpation as directed at arbitration agreements, it would be invalidated under just that logic. When the outcome is so subjective, the result is highly dependent upon the predilictions of the majority.
The Court then did something that I find highly inconsistent with Justice Scalia's professed refusal to consider legislative intent and other indicia of legislative meaning. The Court restricted the FAA's savings clause to preclude any generally applicable contract defense that might interfere with the FAA (which begs the question of what defense that overcomes an arbitration agreement does not do so):
Although §2’s saving clause preserves generally applicable contract defenses, nothing in it suggests an intent to preserve state-law rules that stand as an obstacle to the accomplishment of the FAA’s objectives. Cf. Geier v. American Honda Motor Co., 529 U. S. 861, 872 (2000); Crosby v. National Foreign Trade Council, 530 U. S. 363, 372–373 (2000). As we have said, a federal statute’s saving clause “ ‘cannot in reason be construed as [allowing] a common law right, the continued existence of which would be absolutely inconsistent with the provisions of the act. In other words, the act cannot be held to destroy itself.’ ” American Telephone & Telegraph Co. v. Central Office Telephone, Inc., 524 U. S. 214, 227–228 (1998) (quoting Texas & Pacific R. Co. v. Abilene Cotton Oil Co., 204 U. S. 426, 446 (1907)).
Slip op., at 9. After spending some time criticizing the dissent for disputing the majority's characterization of the legislative purpose in passing the FAA, the Court rejected the Discover Bank rule as a rule interfering with the FAA. In doing so, the Court candidly declared all consumer contracts to be contracts of adhesion:
California’s Discover Bank rule similarly interferes with arbitration. Although the rule does not require classwide arbitration, it allows any party to a consumer contract to demand it ex post. The rule is limited to adhesion contracts, Discover Bank, 36 Cal. 4th, at 162–163, 113 P. 3d, at 1110, but the times in which consumer contracts were anything other than adhesive are long past.
Slip op., at 12. Troubling comment pepper the Court's opinion. For instance the Court observes, "And faced with inevitable class arbitration, companies would have less incentive to continue resolving potentially duplicative claims on an individual basis." Slip op., at 13. So what this evidently means is that, if a company faces only sporadic, individual challenges to its misconduct, it will have some incentive to buy those few people off, but if it faces a whole class, it will fight tooth and nail to retain its ill-gotten goods. Charming. What a great reason to favor arbitration agreements and bar class actions.
Wrapping up, the Court said, "States cannot require a procedure that is inconsistent with the FAA, even if it is desirable for unrelated reasons." Slip op., at 17. One might observe two things at this point: (1) There is a notable absence of conservative protection of federalism where the federal government is imposing dispute resolution procedures on state law claims in state courts, and (2) setting aside the unconstitutionality of federal interference in state dispute resolution procedures related to their substantive law, the federal government can certainly impose procedures that are inconsistent with the FAA.
Justice Thomas "reluctantly" concurred. In his view, "As I would read it, the FAA requires that an agreement to arbitrate be enforced unless a party successfully challenges the formation of the arbitration agreement, such as by proving fraud or duress." Slip op., concurrance, at 1-2.
Justice Breyer delivered the dissenting opinion, crisply defining the subjectivity of this debate in his summary of the issue:
The Federal Arbitration Act says that an arbitration agreement “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U. S. C. §2 (emphasis added). California law sets forth certain circumstances in which “class action waivers” in any contract are unen forceable. In my view, this rule of state law is consistent with the federal Act’s language and primary objective. It does not “stan[d] as an obstacle” to the Act’s “accomplishment and execution.” Hines v. Davidowitz, 312 U. S. 52, 67 (1941). And the Court is wrong to hold that the federal Act pre-empts the rule of state law.
Slip op., dissent, at 1. The dissent found good support for its position in other California decisions:
The Discover Bank rule does not create a “blanket policy in California against class action waivers in the consumer context.” Provencher v. Dell, Inc., 409 F. Supp. 2d 1196, 1201 (CD Cal. 2006). Instead, it represents the “appli cation of a more general [unconscionability] principle.” Gentry v. Superior Ct., 42 Cal. 4th 443, 457, 165 P. 3d 556, 564 (2007). Courts applying California law have enforced class-action waivers where they satisfy general uncon scionability standards. See, e.g., Walnut Producers of Cal. v. Diamond Foods, Inc., 187 Cal. App. 4th 634, 647–650, 114 Cal. Rptr. 3d 449, 459–462 (2010); Arguelles-Romero v. Superior Ct., 184 Cal. App. 4th 825, 843–845, 109 Cal. Rptr. 3d 289, 305–307 (2010); Smith v. Americredit Financial Servs., Inc., No. 09cv1076, 2009 WL 4895280 (SD Cal., Dec. 11, 2009); cf. Provencher, supra, at 1201 (considering Discover Bank in choice-of-law inquiry). And even when they fail, the parties remain free to devise other dispute mechanisms, including informal mechanisms, that, in context, will not prove unconscionable. See Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U. S. 468, 479 (1989).
Slip op., dissent, at 2-3. The dissent then questioned the majority's asseration that individual, rather than class, arbitration is a "fundamental attribute" of arbitration:
When Congress enacted the Act, arbitration procedures had not yet been fully developed. Insofar as Congress considered detailed forms of arbitration at all, it may well have thought that arbitration would be used primarily where merchants sought to resolve disputes of fact, not law, under the customs of their industries, where the parties possessed roughly equivalent bargaining power.
Slip op., dissent, at 6. If fact, the dissent spent a good deal of time challenging the assertions of the majority, which appear thinly supported in some areas:
the majority provides no convincing reason to believe that parties are unwilling to submit high-stake disputes to arbitration. And there are numerous counterexamples.
Slip op., dissent, at 8. And the dissent also observed:
Because California applies the same legal principles to address the unconscionability of class arbitration waivers as it does to address the unconscionability of any other contractual provision, the merits of class proceedings should not factor into our decision. If California had applied its law of duress to void an arbitration agreement, would it matter if the procedures in the coerced agreement were efficient?
Slip op., dissent, at 9. It is with irony not lost on me that the dissent concluded as follows:
[F]ederalism is as much a question of deeds as words. It often takes the form of a concrete decision by this Court that respects the legitimacy of a State’s action in an individual case. Here, recognition of that federalist ideal, embodied in specific language in this particular statute, should lead us to uphold California’s law, not to strike it down. We do not honor federalist principles in their breach.
Slip op., dissent, at 12. So Concepcion ends with the "liberal" justices decrying the death of federalist principles. I think we need to revisit the "strict constructionist" labels that get tossed around. Maybe Posner really has it right when he says, essentially, that every judge does whatever they damn well want, reverse engineering a justification that makes them feel good about their decision.
I've seen a number of theories floated around for responding to Concepcion. In Marks v. United States, 430 U.S. 188 (1977), the Supreme Court oexplained how the holding of a case should be viewed where there is no majority supporting the rationale of any opinion: “When a fragmented Court decides a case and no single rationale explaining the result enjoys the assent of [the majority], the holding of the Court may be viewed as that position taken by those Members who concurred in the judgments on the narrowest grounds.” Marks, 430 U.S. at 193. I don't think it likely that California courts will parse the holdings of the Court and the concurring opinion for a narrower holding. Justice Thomas said that, even though he differs slightly in the reasoning, the result will generally be the same. Marks isn't going to accomplish what plaintiffs would like it to accomplish.
Calling for legislative action is just silly. Either something gets through Congress or it doesn't. If it does, it may moot all of this, but the assumption must be that it won't. With that in mind, non-legislative responses to Concepcion should occupy the plaintiffs' class action bar.
I've suggested on several occasions that I favor the argument that the FAA is unconstitutional when applied to state law claims in state courts. I believe, and will believe even if a Court says otherwise, that the FAA is exclusively a procedural statute regulating how substative claims are to be resolved. Unless the federal government would purport to pre-empt contract law of the states, a dubious effort in its own right, I believe the Commerce Clause goes too far when it treads upon the sovereignty of states deciding their own dispute resolution procedures. Procedural rules are no place for some form of partial pre-emption. But I also doubt that any Court would have the stomach to declare the FAA unconstitutional as applied to state law claims in state courts.
I have a project in the works that may affect how far Concepcion applies in, at least, the wage & hour context. Once it is in the can and safe from intermeddlers, I'll report in detail on that project and what I view as better ways to keep Concepcion in its proper place.
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.
