Posts belonging to Category Caselaw Developments

In Chen v. Allstate Insurance Co., Allstate asked the Ninth Circuit Court of Appeals to answer the hypothetical question raised in Campbell-Ewald v. Gomez, 136 S. Ct. 663 (Jan. 20, 2016) (previously covered on the ILJ here): whether a defendant can defeat a class action by depositing the full amount of the named plaintiff’s individual claim in an escrow account payable to the plaintiff, followed by entry of judgment for the plaintiff in that amount, thereby mooting the plaintiff’s individual claims. No. 13-16816 (9th Cir. April 12, 2016) (slip op. available here). Holding that such a tactic does not moot the class’s claims under Article III, the Ninth Circuit declined to direct the district court to enter judgment on the named plaintiff’s individual claims before he had a fair opportunity to move for class certification.

Plaintiff Florencio Pacleb sued Allstate for violations of the Telephone Consumer Protection Act stemming from automated calls made to his cell phone without his consent. In April of 2013, before a motion for class certification had been filed, Allstate initially made Plaintiff Pacleb a Rule 68 offer of judgment in the amount of $20,000 (including reasonable attorneys’ fees and costs accrued to date), which allegedly more than satisfied his individual claim. When the two named plaintiffs did not accept the offer within 14 days, Allstate then filed a motion to dismiss the plaintiffs’ entire case for lack of subject matter jurisdiction, arguing that, under Gomez v. Campbell-Ewald Co., 768 F.3d 871 (9th Cir. 2014), the district court should be required to enter judgment against Allstate and order payment to the plaintiff. While the motion to dismiss was pending, the other named plaintiff accepted the offer, though Pacleb did not; then, the district court denied Allstate’s motion. After the Supreme Court decided Campbell-Ewald, Allstate took the additional step of depositing the $20,000 in a bank escrow account and offering to cease sending Pacleb non-emergency telephone calls and text messages.

On appeal, Allstate argued that the judgment to which it consented would offer complete relief to the plaintiff and that the district court should be compelled to enter judgment on those terms, thus mooting the plaintiff’s individual claims and rendering the remaining class allegations insufficient to preserve a live controversy. The Ninth Circuit agreed with Allstate’s first contention only (that the offer of relief was apparently “complete”), but affirmed the district court’s denial of their motion to dismiss. The court noted that even if the district court entered judgment affording Pacleb complete relief on his individual damages and injunctive relief claims, effectively mooting those claims, Pacleb would still be able to seek certification under Pitts v. Terrible Herbst, Inc., 653 F.3d 1081 (9th Cir. 2011). Pitts held that a plaintiff could continue to represent a class despite a settlement offer for complete individual relief from defendant, as long as the plaintiff could still file a timely motion for class certification at the time the offer was made. Chen now expands the logic of Pitts from mere settlement offers to actual monetary deposits and holds that, even if Pitts were not binding and Allstate could moot the plaintiff’s individual claims, the plaintiff could still seek class certification despite the absence of a live individual claim. Following the circuit’s prior analysis in Gomez, the panel determined that Pitts remained good law after the Supreme Court’s decision in Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013), because Genesis Healthcare concerned collective actions brought under the Fair Labor Standards Act rather than class actions under Rule 23 (of the Federal Rules of Civil Procedure) and that “courts have universally concluded that the Genesis discussion does not apply to class actions.” Id. at 16 (internal citations omitted).

Second, assuming Pitts was not controlling and Allstate could moot the plaintiff’s individual claims for damages and injunctive relief, the court rejected Allstate’s attempt to moot the action prior to a fair opportunity to move for class certification. The Chen court noted that placing funds in an escrow account was not the same as the actual receipt of all relief by a plaintiff and concluded that the depositing of funds into an escrow account was not enough to moot the claim because the plaintiff did not yet have the money in his possession. Lastly, the Ninth Circuit considered whether to order the district court to enter judgment before the plaintiff has had an opportunity to move for certification and concluded that doing so would be inconsistent with Campbell-Ewald:

. . . Campbell-Ewald clearly suggests it would be inappropriate to enter judgment under these circumstances. As Campbell-Ewald explained, “[w]hile a class lacks independent status until certified, a would-be class representative with a live claim of her own must be accorded a fair opportunity to show that certification is warranted.” Campbell-Ewald, 136 S. Ct. at 672. Accordingly, when a defendant consents to judgment affording complete relief on a named plaintiff’s individual claims before certification, but fails to offer complete relief on the plaintiff’s class claims, a court should not enter judgment on the individual claims, over the plaintiff’s objection, before the plaintiff has had a fair opportunity to move for class certification.

Id. at 22-23 (internal citations omitted). Thus, the appeals court affirmed the district court’s ruling and denied Allstate’s motion to dismiss for lack of subject matter jurisdiction, a victory for the plaintiffs’ bar foreclosing defendant “pick-off” tactics in the Ninth Circuit.

Authored by: 
Daniela Saspe, Associate
CAPSTONE LAW APC

On March 22, 2016, the Supreme Court affirmed a district court’s class certification decision following the $2.9 million judgment against Tyson Foods. Tyson Foods, Inc. v. Bouaphakeo, No. 14-1146 (U.S. Sup. Ct. March 22, 2016) (slip op. available here) (previously covered on the ILJ here). Tyson had been sued under the Fair Labor Standards Act of 1938 (FLSA) for failing to pay workers at a pork processing plant for time spent donning and doffing protective gear required for their jobs. Following certification as a collective action under 29 U.S.C. §216 and as a class action under Rule 23 of the Federal Rules of Civil Procedure, the jury awarded $2.9 million to the class. Tyson appealed to the 8th Circuit Court of Appeals and lost; Tyson filed a cert petition in the Supreme Court, which was granted.

In the Supreme Court, Tyson argued that the class action judgment should be reversed because the case should not have been certified. It also argued that judgment should be reversed because the plaintiffs identified no distribution mechanism that would not improperly compensate those class members who were not entitled to payment because they did not work more than 40 hours per week. The Supreme Court rejected Tyson’s bid to overturn the certification order and remanded to the district court for a determination of how the proceeds would be disbursed.

The plaintiffs’ problem, which they ultimately overcame, related to off-the-clock nature of the claims: Tyson’s time records did not demonstrate the amount of time necessary to don and doff the protective gear. Slip op. at 5. To prove damages, the Tyson plaintiffs retained Dr. Kenneth Mericle, an industrial relations expert, to conduct an observational study, which included 744 videotaped observations demonstrating that the average donning and doffing time was 18 minutes a day for employees in the cut and retrim department and 21.23 minutes per day for the kill department. A second expert, Dr. Liesl Fox, analyzed time records to identify whether or not the average donning and doffing time would result in more than 40 hours/week and by how much. Dr. Fox’s opinion was that there was $6.7 million in aggregate, uncompensated overtime. Slip op. at 7.

Tyson argued against the plaintiffs’ methods of using average donning and doffing times, since individual employees could have spent less (or more) time, and suggested a categorical rejection of using statistical evidence to approximate damages in such cases. Slip op. at 9. However, the Supreme Court rejected Tyson’s categorical argument, finding that such evidence has been used historically and often provides “the only practicable means to collect and present relevant data.” Id. at 10 (internal citations omitted). Critically, the Supreme Court relied on Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680 (1946), which held that, where an employer does not maintain records of uncompensated time worked, the employee’s “just and reasonable inference” of the time worked would be accepted, with the burden then shifting to the employer to show either the actual time worked or negate the reasonableness of the inference. Slip op. at 11-12. In Tyson, as in Anderson, there were not sufficient records for the employees to rely on to establish the amount of time spent donning and doffing. Thus, “[i]n FLSA actions, inferring the hours an employee has worked from a study such as Mericle’s has been permitted by the Court so long as the study is otherwise admissible [under Fed. Rules Evid. 402 and 702].” Id. at 15.

Tyson also argued that there was no way to apportion damages, especially where the jury ultimately rejected the plaintiffs’ damages estimates, ultimately awarding a number less than half of what Dr. Fox found. Slip op. at 16. Thus, the defendant argued, there was no way to determine which class members the jury was considering when it awarded damages. The Supreme Court ultimately remanded this issue to the district court for a determination of how to separate out of the jury’s aggregate damages the individual award payments to uninjured class members, allowing Tyson to raise the same argument before the district court.

Thus, the Court affirmed, holding that plaintiffs may use statistical evidence to demonstrate class certification under Rule 23 and to prove classwide liability.

Authored by: 
Matthew Theriault, Partner
CAPSTONE LAW APC

On April 4, 2016, the California Supreme Court answered three questions certified by the United States Court of Appeals for the Ninth Circuit regarding interpretation of the California wage order requirements for the provision of seating to employees (previously covered on the ILJ here). This opinion arose from two federal court class actions on the issue, one against CVS Pharmacy and the other against Chase Bank. See Kilby v. CVS Pharmacy, Inc., No. S215614 (Cal. April 4, 2016) (slip op. available here). The much-anticipated clarification is welcomed by plaintiffs’ attorneys following a dearth of authority as to how to evaluate claims based on an employer’s failure to provide adequate seating.

The three questions certified to the California Supreme Court were:

1. Does the phrase “nature of the work” [under Wage Order Nos. 4-2001 and 7-2001, § 14(A)] refer to individual tasks performed throughout the workday, or to the entire range of an employee’s duties performed during a given day or shift?
2. When determining whether the nature of the work “reasonably permits” use of a seat [as used in Wage Order Nos. 4-2001 and 7-2001, § 14(A)], what factors should courts consider? Specifically, are an employer’s business judgment, the physical layout of the workplace, and the characteristics of a specific employee relevant factors?
3. If an employer has not provided any seat, must a plaintiff prove a suitable seat is available in order to show the employer has violated the seating provision?

Slip op. at 1. First, the court rejected the employers’ argument that the work in question should be evaluated based on a “holistic” consideration of all of an employee’s job duties during an entire shift, which would require a weighing of all of an employee’s “standing” tasks against all of the “sitting” tasks, and then classifying a job as either a “sitting” or “standing” job. It also rejected the employees’ argument that the work in question should be evaluated separately for each individual task that the employee might perform. Rather, the court referenced legislative history and the California Division of Labor Standards Enforcement—which had submitted an amicus brief—to hold that the “nature of the work” under the wage order should be examined as to each of the subsets of tasks that an employee would perform or would be expected to perform in a particular location within their workplace (out of the total tasks and duties performed during a shift), “such as those performed at a cash register or a teller window, and consider whether it is feasible for an employee to perform each set of location-specific tasks while seated.” Id. at 16. In other words, seating might be required while attending to certain work tasks (grouped by their location) but not others, even for the same employee.

Second, the court held that whether work “reasonably permits” use of a seat should depend on the totality of circumstances, including both whether tasks can be performed while seated, as well as whether seating would be feasible, with no single factor being determinative. In doing so, the court preserved a role for the employer’s “business judgment” (such as to the efficacy of providing customer service when seated versus standing) and the physical layout of the workplace among the factors to be considered. Slip op. at 20-23. However, the court rejected consideration of the physical differences among employees as a relevant factor, because “the provision requires a seat when the nature of the work reasonably permits it, not when the nature of the worker does.” Id. at 24.

Lastly, because the wage order “unambiguously states employees ‘shall be provided with suitable seats,’” the court held that any claim that “compliance is infeasible because no suitable seating exists” would be the employer’s burden to prove. Slip op. at 25.

Kilby appears to be a boon for plaintiffs seeking to certify seating claims, because the evaluation now focuses more on objective inquiries common to groups of employees. Further, plaintiffs no longer need to prove that seating could have feasibly been provided, often an awkward and time-consuming exercise. With this much-needed clarification of the law regarding seating claims, California employees can be expected to bring and seek to certify an increasing number of seating actions. 

Authored by: 
Jonathan Lee, Associate
CAPSTONE LAW APC

A California Court of Appeal affirmed an order issued by Judge Jane Johnson denying a motion to compel arbitration where the arbitration agreement was contained in an online “browsewrap” agreement. Long v. Provide Commerce, Inc., No. B257910, 2016 WL 1056555 (March 17, 2016) (slip op. available here). The plaintiff had purchased flowers through ProFlowers.com, a website operated by the defendant. In his putative consumer class action lawsuit, the plaintiff alleged that, despite being advertised as a completed, assembled product, the flowers were delivered in a “do-it yourself kit requiring assembly.” Slip op. at 3. The defendant moved to compel arbitration based on an arbitration clause in the website’s Terms of Use.

In Long, the Terms of Use were available via a hyperlink at the bottom of each page on the website—what is known in e-commerce as a browsewrap agreement. A browsewrap agreement does not require any express manifestation of agreement to the Terms of Use; rather, the user agrees to the Terms simply by using the website. Slip op. at 7. This is in contrast to a “clickwrap” agreement, where the consumer must click on a checkbox indicating his assent to be bound by the Terms of Use in order to continue using the website. Id. As there was no dispute that the plaintiff had no “actual knowledge” of the Terms of Use when he made his online purchase, the court analyzed the design and placement of both the hyperlink and the website to determine whether they were “sufficient to put a reasonably prudent Internet consumer on inquiry notice of the browsewrap agreement’s existence and contents.” Id. at 8.

The question of “what sort of website design elements would be necessary or sufficient to deem a browsewrap agreement valid in the absence of actual notice” was an issue of first impression in California. Slip op. at 9. While the hyperlink to the Terms of Use appeared on every page of the website and was visible without scrolling down, the hyperlink was nonetheless deemed too inconspicuous to provide the plaintiff with inquiry notice. Id. at 12-13. First, the hyperlink was light green-colored on a lime green background, and thus could blend in. Id. at 13. Additionally, there was nothing on the ProFlowers.com website to notify the consumer that, in using the website to buy flowers, “he should also be on the lookout for a reference to ‘Terms of Use’ [elsewhere] on the website[].” Id. at 12. Also, when a consumer selected his purchase and proceeded to checkout, the hyperlinks were not, contrary to the defendant’s characterization, “located next to” the form fields that a consumer would fill out to complete his order. Rather, there were several layers of other text and images that a consumer would need to look past to find the Terms. Furthermore, the inclusion of the Terms of Use hyperlink in a confirmation email did not remedy the problem; in the email, the Terms of Use hyperlink appears in inconspicuous grey font on a white background and was “located on a submerged page,” forcing the recipient to scroll down past layers of information, advertisements, logos, and other hyperlinks. Id. at 13.

The opinion expressly focused on the “practical reality” of how a consumer would interact with the website and the confirmation email. Slip op. at 13. Although it did not need to decide this issue, the court opined that, even if the hyperlink had been displayed conspicuously on the website, “without notifying consumers that the linked page contains binding contractual terms, the phrase ‘terms of use’ may have no meaning or a different meaning to a large segment of the Internet-using public.” Id. The court thus “advised” online retailers to include a conspicuous textual notice rather than just a hyperlink. Id. at 12-13 (agreeing with Nguyen v. Barnes & Noble, Inc., 763 F.3d 1171 (9th Cir. 2014)). Finally, the Court of Appeal also held that, as the plaintiff was not bound by the Terms of Use browsewrap agreement, the plaintiff also was not bound by the forum selection clause included therein. Id. at 14-15.

Authored By:
Katherine Kehr, Senior Counsel
CAPSTONE LAW APC