Second Appellate District concludes that Gentry remains good law, despite Concepcion

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While it may not last much longer than it takes the ink to dry on the opinion, the Court of Appeal (Second Appellate District, Division One), in Franco v. Arakenian Enterprises, Inc. (November 26, 2012) considered a significant question: "The question on appeal is whether Gentry was overruled by Stolt-Nielsen S.A. v. AnimalFeeds International Corp. (2010) 559 U.S. ___ [130 S.Ct. 1758] (Stolt-Nielsen) and AT&T Mobility LLC v. Concepcion (2011) 563 U.S. ___ [131 S.Ct. 1740] (Concepcion)."  Slip op., at 3.  Summarizing a 65-page opinion, the Court said:

We conclude that Gentry remains good law because, as required by Concepcion, it does not establish a categorical rule against class action waivers but, instead, sets forth several factors to be applied on a case-by-case basis to determine whether a class action waiver precludes employees from vindicating their statutory rights. And, as required by Stolt-Nielsen, when a class action waiver is unenforceable under Gentry, the plaintiff's claims must be adjudicated in court, where the plaintiff may file a putative class action. Accordingly, we affirm.

Slip op., at 3.

The decision follows an earlier opinion in the matter, Franco v. Athens Disposal Co., Inc., 171 Cal. App. 4th 1277 (2009) (Franco I).  That procedural and factual history is extensive, and I won't summarize it.  The opinion also contains a footnote indicating that it invited comment on D.R. Horton, but because Franco did not respond to the request, the Court declined to address the impact of that matter.

 The decision also has an exhaustive review of arbitration decisions in the context of statutory claims.  After that history, the Court examined the reach of the Concepcion.  An extended portion of the Court's analysis cited approvingly to a law review analysis: Gilles & Friedman, After Class: Aggregate Litigation in the Wake of AT&T Mobility v. Concepcion (2012) 79 U.Chi. L.Rev. 623.

Ultimately, after looking at the Question Presented in Concepcion, the Court concluded that, in this case, Franco lacked the means, not the incentive, to pursue his claims.  That distinction, the Court held, justified the trial court's decision to deny the petition to compel arbitration.

Then, tucked right into the end of the opinion, the Court offered a monumental observation that would have had great significance if the Court had considered D.R. Horton:

Which brings us to the subject of Concepcion's effect, if any, on PAGA claims. We have already concluded that Athens Services's arbitration agreement — the MAP — contains two unenforceable clauses: the class action waiver and the prohibition on acting as an attorney general. (See Franco I, supra, 171 Cal.App.4th at pp. 1297–1300, 1303; fn. 2, ante.) Those clauses operate independently of each other: One restricts Franco‘s pursuit of his rest and meal period claims while the other prohibits his recovery under the PAGA. Together, they render the MAP tainted with illegality, making it unenforceable and permitting Franco to adjudicate his claims in a judicial forum. (See Franco I, at p. 1303; fn. 2, ante.) Concepcion does not preclude a court from declaring an arbitration agreement unenforceable if the agreement is permeated by an unlawful purpose.

Slip op., at 64.  See that?!  Right there?!  This Court gets it!  If you impose a contract that violates the law (e.g., the NLRA), then the contract is unenforcable in Court on the general ground of illegality.  Any contract that violates the NLRA, not just arbitration agreements, is void and unenforceable.  How hard is this, really?  And here we finally see a Court clearly articulate the illegality defense analysis, but the Court declined to address the NLRA argument because one of the parties was too busy to answer.  Wonderful.

Of course, this case may vanish for years when it gets sucked up into the California Supreme Court's Gentry re-examination.

Perhaps a name change for a controversial plaintiff-side class action law firm is in the works... (Bumped)

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It appears that attorneys at Initiative Legal Group are starting to appear at a "new" firm named Capstone Law, APC.  But Capstone is in the same building as Initiative Legal Group, so, fishy.  Perhaps its is just a coincidence, but maybe it has something to do with the problems Iniative Legal Group is having in Lofton v. Wells Fargo Home Mortgage, Case No. CGC-11-509502 (see also, Maxon v. Initiative Legal Group APC, App. Ct. Case No. A136626).  Nothing like a change of name to shake off the taint of allegations like those, right?

In Ayyad v. Sprint Spectrum, L.P., Sprint's call cannot be completed as dialed

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I did warn you, but in the post below, so you might not be aware that you were warned.  In Ayyad v. Sprint Spectrum, L.P. (October 29, 2012), the Court of Appeal (First Appellate District, Division Five) had yet more work to do in the long-running saga of the Cellphone Termination Fee Cases.  In Cellphone Termination Fee Cases, 193 Cal. App. 4th 298 (2011) the Court affirmed a December 2008 judgment in favor of the plaintiffs in this class action against Sprint Spectrum, L.P. (Sprint).  The Court also affirmed the trial court's order granting Plaintiffs a partial new trial on the issue of Sprint's actual damages and the calculation of a setoff to which Sprint might be entitled.  The case was then remanded for further proceedings limited to those issues.  But, when the matter returned to the trial court, Sprint moved to compel arbitration of the named plaintiffs' claims, the same claims addressed in the Court's affirmance of the 2008 judgment.  The trial court declined to consider the motion, finding that jurisdiction on remand was limited to the issues set forth in the Court's opinion.

While this sounds like it could be a case about arbitration law, it isn't.  It is entirely a decision about trial court jurisdiction after an appeal and remand with directions:

As the language of the cited cases indicates, the rule requiring a trial court to follow the terms of the remittitur is jurisdictional in nature. (People v. Dutra (2006) 145 Cal.App.4th 1359, 1367 (Dutra).) The issues the trial court may address in the remand proceedings are therefore limited to those specified in the reviewing court‘s directions, and if the reviewing court does not direct the trial court to take a particular action or make a particular determination, the trial court is not authorized to do so. (Bach, supra, 215 Cal.App.3d at pp. 302, 303, 304; accord, Hanna v. City of Los Angeles (1989) 212 Cal.App.3d 363, 376 (Hanna) [where on prior appeal reviewing court did not direct trial court on remand to determine whether statutory violations had occurred, any such determination would be in excess of jurisdiction on remand].)

Slip op., at 8.  The Court then explained that a new trial on damages only did not open the door for the trial court to consider other issues raised by Sprint.

See's Candy Shops, Inc. v. Superior Court provides modest confection for employers

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If I tried really hard, I could probably come up with similarly dumb headlines for most posts on appellate decisions.  But it would hurt me as much as it would hurt you, so I don't.  But, getting back on track, in See's Candy Shops, Inc. v. Superior Court (October 29, 2012), the Court of Appeal (Fourth Appellate District, Division One) granted a petition for a writ filed by See's Candy after the trial court granted summary adjudication in favor of the plaintiff as to four affirmative defenses asserted in the case.  The defenses related to See's Candy's practice of rounding hourly employee punch in and punch out times to the nearest tenth of an hour.

In an amended answer, See's Candy denied plaintiff's allegations and "asserted 62 affirmative defenses, including defenses based on See's Candy's claim that: (1) any unpaid amounts are de minimis; (2) the nearest-tenth rounding policy is consistent with federal and state law; and (3) the grace period policy is lawful under federal and state law."  Slip op., at 5.  Two of the defenses concerned See's Candy's claim that any unpaid wages based on off-the-clock claims or its rounding policies were "de minimis."  The "de minimis" defense was not at issue in the writ proceedings, so don't get excited.  The other two challenged defenses encompassed See's Candy's claim that its rounding policy is consistent with state and federal laws "permitting employers to use rounding for purposes of computing and paying wages and overtime" and that the nearest-tenth rounding policy did not deny plaintiffs or the class members "full and accurate compensation." Plaintiff did not move for summary adjudication on See's Candy's affirmative defense that its grace period policy is "lawful under both federal and California law."

Plaintiff argued that there is no California statutory or case authority allowing See's Candy to use a rounding policy, and its policy violates section 204, which generally requires an employer to pay an employee "All wages" every two weeks, and section 510, which requires an employer to pay an employee premium wages for "Any work" after eight hours per day or 40 hours per work week.  See's Candy then argued that its timekeeping records were inaccurate because of its unusual grace period policy that allows employees to clock in up to 10 minutes before their scheduled shift time so long as they do not start working until the actual start time.

The Court of Appeal examined the competing approaches, holding that See's Candy had the better view:

Although California employers have long engaged in employee time-rounding, there is no California statute or case law specifically authorizing or prohibiting this practice. Absent specific binding authority under California law, See's Candy argues that it is appropriate for this court to adopt the federal regulatory standard, which is also used by the DLSE (the state agency charged with enforcing California's wage and hour laws), and allows rounding if the employees are fully compensated "over a period of time." (29 C.F.R. § 785.48(b).) Silva counters that this federal/DLSE rule violates California statutes and rounding should be permitted only if the employer "unrounds" every two weeks to ensure full compensation. For the reasons explained below, we conclude the federal/DLSE standard is the appropriate standard.

Slip op., at 17.  To support this conclusion, an extensive discussion of federal law, state law, and DLSE regulations follows.  Distilled to its essence, the key holding of the Court turns on its construction of Labor Code section 204:

Moreover, Silva's contention has a false premise — that using unrounded figures within a finite time period is the only way to measure "All" earned wages. (§ 204, subd. (a).) Fundamentally, the question whether all wages have been paid is different from the issue of how an employer calculates the number of hours worked and thus what wages are owed. Section 204 does not address the measurement issue. The Legislature has amended section 204 since the DLSE adopted the federal rounding regulation, and has never indicated that the state agency's adoption of the federal rounding rule is inconsistent with its statutory provision.

Slip op., at 24.  The Court then declared its finding as to California law, and addressed the analysis that it would apply in the context of the case before it:

Relying on the DOL rounding standard, we have concluded that the rule in California is that an employer is entitled to use the nearest-tenth rounding policy if the rounding policy is fair and neutral on its face and "it is used in such a manner that it will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked." (29 C.F.R. § 785.48; see DLSE Manual, supra, §§ 47.1, 47.2.) Applying this legal standard, we turn to address whether the parties met their summary adjudication burdens with respect to the 39th and 40th affirmative defenses alleging that See's Candy's nearest-tenth rounding policy was consistent with California law.

Slip op., at 27.  Thus, as with federal law, the legality of rounding in California turns on the outcome, not its use.  Rounding is judged "as applied," not "as defined."  In this matter, the Court concluded that the plaintiff did not meet the burden of proof on a motion for summary judgment to dispose of See's Candy's affirmative defenses before trial.