Posts belonging to Category Caselaw Developments

In Gaines v. Fidelity National Title Insurance Co., a majority of the California Supreme Court found that an agreement entered into by the parties to stay a case pending mediation did not toll the five-year time period within which an action must be brought to trial under California Code of Civil Procedure section 583.310. No. S215990 (Feb. 25, 2016) (slip op. available here). Section 583.340(b) provides that courts must automatically exclude from the five-year period any time there is a “complete stay,” when the “[p]rosecution or trial of the action was stayed or enjoined.” Section 583.340(c) also mandates exclusion of any time there is a “partial stay,” where it was “impossible, impracticable, or futile” to bring the case to trial. California Code of Civil Procedure section 583.330 further permits tolling by a written stipulation or express oral agreement in court between the plaintiff and the defendant. Notwithstanding these provisions, the trial court held that the case was due to be dismissed for violation of the five-year time period. The Court of Appeal affirmed, as did the California Supreme Court, each over vigorous dissenting opinions.

Plaintiff Gaines filed a lawsuit in 2006, alleging that the defendant mortgage company defrauded her and her (deceased) husband into selling their home to an unscrupulous property manager—who turned out to be the fiancé of the lender’s employee—to “help” them avoid foreclosure. See slip op. at 2-3. The case encountered numerous procedural hurdles; Mrs. Gaines had to amend the complaint four times during the first 14 months to add various defendants. Gaines v. Fidelity Nat’l Title ins. Co., 165 Cal. Rptr. 3d 544, at 570 (Cal. App. 2013). In 2008, the plaintiff and defendant Aurora stipulated to a 120-day stay to attempt mediation. Slip op. at 4. The court vacated the trial date, ordered mediation, and stayed the litigation, except that parties were to respond to previously-served discovery; however, the mediation ultimately failed. Id. Additionally, Aurora initially admitted to owning the loan in January 2009, but then claimed 11 months later that Lehman Brothers was the owner; the parties then struggled to bring Lehman, which was by then in bankruptcy, into the lawsuit, further compounding delays. Slip op. at 3. That same month (November 2009), the plaintiff passed away, and her son, Milton Howard Gaines, became the plaintiff as her successor in interest. Id.

Remarkably, the California Supreme Court found that the trial court’s stay order—to which the plaintiff agreed at the defendants’ request—did not toll the five-year time limit. A complete stay under section 583.340(b) will operate to automatically toll the five-year period, while a partial stay under section 583.340(c) will not do so unless it results in a circumstance of impossibility, impracticability, or futility. See slip op. at 2. The court first found that the stay was not a “complete” stay under Section 583.340(b) because limited discovery and mediation were allowed to proceed, and because the “stay” was not due to an “extrinsic” event such as contractual arbitration. Slip op. at 10-13. Yet, as Justice Kruger, joined by Justice Liu, asserted in her dissent, the majority’s opinion wrongly relied upon Bruns v. E-Commerce Exchange, Inc., 51 Cal. 4th 717 (2011), which found that a stay of discovery did not toll the five-year time limit. Slip op., Kruger dissenting op. at 5-6. Gaines involved the opposite of a stay of discovery—it was stayed for all purposes except certain limited discovery. Id., Kruger dissenting op. at 7.

Second, the California Supreme Court found no tolling under section 583.340(c), because that section required a “period of impossibility, impracticability or futility, over which plaintiff had no control.” Slip op. at 23. And, because the parties chose to attempt mediation, the plaintiff had control over the progress of the case. Id. Notably, as Justice Kruger pointed out in her dissent, the “beyond the plaintiff’s control” language does not appear in section 583.340(c). Slip op., Kruger dissenting op. at 12. Further, the dissent observed, the majority made no allowance for Aurora’s mistake in claiming ownership, which stalled the case for 11 months. 165 Cal. Rptr. 3d at 572. Consequently, the decision “reward[s] plaintiff for working cooperatively with an opposing party by depriving her of her day in court.” Slip op., Kruger dissenting op. at 1.

After Gaines, plaintiffs’ counsel should take note: the majority gave weight to the plaintiff’s failure to secure an express stipulation pursuant to section 583.330 to toll the five-year limit. Slip op. at 10. Justice Kruger countered that, before the majority’s opinion, a plaintiff “would have had no reason to believe such a stipulated extension would be necessary.” Slip op., Kruger dissenting op. at 14. However, in the future, plaintiffs embroiled in protracted litigation in California courts should heed Gaines, and stipulate or move for the tolling of section 583.310.

Authored By:
Jennifer Bagosy, Senior Counsel
CAPSTONE LAW APC

Last month, in Hopkins v. BCI Coca-Cola Bottling Co. of Los Angeles, the Ninth Circuit Court of Appeals maintained its position, finding that California’s public policy prohibiting waiver of Private Attorneys General Act (“PAGA”) claims was not preempted by the Federal Arbitration Act (“FAA”). See Hopkins, No. 13-56126 (9th Cir. Feb. 19, 2016) (slip op. available here). In Hopkins, the panel reversed and remanded the district court’s order dismissing the plaintiff’s PAGA claim and granting the defendant’s motion to compel arbitration, finding that an employee’s right to bring a PAGA action cannot be waived. See id. at 1-2.

In Hopkins, as in Sakkab v. Luxottica Retail N. Am., Inc., 803 F.3d 425 (9th Cir. 2015) before it, the Ninth Circuit followed the California Supreme Court’s landmark decision, Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal. 4th 348 (2014). In Iskanian, the California Supreme Court found that the state’s public policy prohibiting waiver of PAGA claims was not preempted by the FAA, establishing the unenforceability of PAGA waivers in arbitration agreements. See Iskanian, 59 Cal. 4th at 388-89. A few months ago, the Ninth Circuit set forth its view in Sakkab v. Luxottica Retail N. Am., Inc., 803 F.3d 425 (9th Cir. 2015), upholding Iskanian and finding that a contractual waiver of the right to bring a representative PAGA action is unenforceable. Id. at 431.

First, the Hopkins panel held that the Iskanian rule applied to the arbitration agreement and thus, Hopkins’ waiver of his right to bring a PAGA action is unenforceable. The appeals court rejected the defendant’s contention that the FAA preempts the Iskanian rule and requires enforcement of the PAGA waiver, an argument the court held was “foreclosed in light of [the] decision in Sakkab.” Slip op. at 2. After severing the clause containing the representative claims waiver from the arbitration agreement, the court stated it was unclear whether the plaintiff had argued the arbitration agreement itself was unconscionable and whether the parties had agreed to litigate or arbitrate remaining claims. Accordingly, case was remanded to determine in what venue Hopkins’ representative PAGA claims should be resolved.

Hopkins illustrates the Ninth Circuit’s continued fidelity to Iskanian. Indeed, just recently the Ninth Circuit also denied Luxottica’s petition seeking rehearing en banc in Sakkab, a decision that seems less likely to be reviewed by the United States Supreme Court, now that the Court’s composition has changed. As employers continue to use arbitration agreements with representative action waivers to avoid having to face class or representative actions, Hopkins clears the way for employees’ PAGA claims to be heard in some forum.

Authored by: 
Ruhandy Glezakos, Associate
CAPSTONE LAW APC

The Ninth Circuit revived a consumer class action that had been dismissed without leave to amend by Judge Manuel Real of the Central District of California. See Balser, et al. v. The Hain Celestial Group Inc., No. 14-55074 (9th Cir. Feb. 22, 2016) (slip op. available here). Plaintiffs Balser and Kresha claimed that Hain misled them into paying a premium price for Alba Botanica products labeled “Natural” and “100% Vegetarian” when they allegedly contained synthetic/non-natural substances and were not made entirely with plant-derived products.

The district court had previously dismissed the plaintiffs’ claims, finding that they had not alleged what they thought the “natural” representation meant, nor had they sufficiently pled how they relied on and were harmed by the representation. Judge Real stated, “[r]ead as a whole, no reasonable consumer would be misled by the label ‘natural.’” See Order Granting Defendant’s Motion to Dismiss, Balser, et al. v. The Hain Celestial Group Inc., No. CV 13-05604-R (C.D. Cal. Dec. 18, 2013). In a brief 5-page opinion, the panel found that the plaintiffs’ allegations are “sufficient . . . to [plausibly] allege a reasonable consumer’s understanding of ‘natural’ as used on Hain’s packaging, and so are adequate under California law.” Slip op. at 2. Additionally, the opinion stated that the consumers’ allegation of reliance—that they relied on the “natural” labeling when they purchased the products, and allegation of economic injury—that they paid more than they otherwise would have because of the misrepresentation, were also sufficiently pled. Id. at 2-3. Applying Williams v. Gerber Prods. Co., 552 F.3d 934 (9th Cir. 2008), the court stated, “[w]hether a business practice is deceptive, misleading, or unfair is ordinarily a question of fact to be decided by a jury.” Williams at 938-39. Williams also involved claims of deceptive labeling on Gerber Fruit Juice Snacks packaging (including a “natural” claim) and the Ninth Circuit had reversed dismissal; similarly, in the present case, statements that the products were “natural” and “100% vegetarian” plausibly could be interpreted as a claim that the products contained no synthetic chemicals, a claim alleged to be false.

Finally, the plaintiffs argued that the district court abused its discretion in denying them pre-certification discovery; the Ninth Circuit agreed, finding the plaintiffs had been improperly denied the chance to conduct discovery, partly due to Central District’s Local Rule 23-3 that requires that the motion for class certification be filed within 90 days of a complaint. The district court had deferred the plaintiffs’ discovery requests beyond the 90-day mark, “thereby implicitly denying the motion by rendering it moot.” Slip op. at 5. Citing Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2551 (2011), the appeals court noted the schedule, “when considered alongside federal rules regarding status conferences and the timing of discovery, is quite unrealistic in light of recent case law regarding the need to establish a sufficient factual record at the class certification stage.” Id. at 3-4 (emphasis added).

The panel reversed and remanded the district court’s ruling and required the lower court to consider whether precertification discovery is necessary.

Authored by: 
Mao Shiokura, Associate
CAPSTONE LAW APC

Last month, in a 6-3 decision, the United States Supreme Court held that an unaccepted offer to settle a named plaintiff’s individual claim in a class action suit does not render the case moot. Campbell-Ewald Co. v. Gomez, No. 14-857 (U.S. Sup. Ct. Jan. 20, 2016) (slip op. available here). Justice Ruth Bader Ginsburg, writing for the majority, held that, in accordance with Rule 68 of the Federal Rules of Civil Procedure, “an unaccepted settlement offer has no force.” Slip op. at 1. The Court found that “like other unaccepted contract offers, it creates no lasting right or obligation.” Id. As such, adversity between the parties continues with the offer off the table and Article III standing persists.

In Campbell-Ewald, plaintiff Jose Gomez brought a nationwide class action alleging that the marketing firm Campbell-Ewald violated the Telephone Consumer Protection Act (TCPA), 47 U.S.C. § 227(b)(1)(A)(iii), by sending him unauthorized text messages under its contract with the United States Navy as part of a recruitment campaign. The plaintiff alleged he did not consent to any such text messages and sought treble statutory damages for willful and knowing violation of the TCPA and an injunction against Campbell-Ewald’s involvement in unsolicited messaging. Prior to the class certification deadline, Campbell-Ewald sought to settle the plaintiff’s individual claim by offering him approximately $1,500, thereby satisfying his personal treble-damages claim, and proposed a stipulated injunction that included a denial of liability. Campbell-Ewald also filed a Rule 68 offer of judgment, but the plaintiff did not accept the settlement offer and let the Rule 68 offer lapse. Thereafter, Campbell-Ewald sought to dismiss, arguing that its offer mooted the plaintiff’s individual claim by providing him with complete relief and that he had not moved for class certification prior to his claim becoming moot. Both the district court and the Ninth Circuit found that the plaintiff’s case remained a live controversy and was not mooted when the offer was not accepted.

The Court granted certiorari to resolve a split among the Courts of Appeal and determine whether an unaccepted offer can moot a plaintiff’s claim and thus deprive the federal court of Article III jurisdiction. The Court adopted the analysis of Justice Kagan from her dissent in Genesis HealthCare Corp. v. Symczyk, 569 U.S. __ , 133 S.Ct. 1523 (2013), which is a Fair Labor Standards Act (FLSA) case in which the Court assumed, without deciding, that an unaccepted settlement offer under Rule 68 would render an employee’s individual FLSA claim moot. Writing in dissent, Justice Kagan explained that “[w]hen a plaintiff rejects such an offer—however good the terms—her interest in the lawsuit remains just what it was before. And so too does the court’s ability to grant her relief.” Slip op. at 7. Under this reasoning, “[a]n unaccepted settlement offer—like any unaccepted contract offer—is a legal nullity, with no operative effect.” Id. The Court noted that since Genesis HealthCare, every federal appeals court that has ruled on this issue has adopted Justice Kagan’s analysis.

The Court found that pursuant to basic principles of contract law, the settlement offer and Rule 68 offer of judgment here, once rejected, have no continuing efficacy. The door was left open for a later determination on whether there would be a different result if a defendant deposits the full amount of the plaintiff’s individual claim in an account payable to the plaintiff, rather than just making an offer. Nonetheless, the Court’s decision is useful for class action practitioners, as it forecloses one avenue for defendants seeking early dismissal of class actions via offers of complete relief made to the named plaintiffs. 

Authored By:
Liana Carter, Senior Counsel
CAPSTONE LAW APC