Posts belonging to Category Caselaw Developments

In the past 10 days, the California Court of Appeal, Second Appellate District, has published a pair of recent opinions reversing the denial of class certification by the trial court. See Martinez v. Joe’s Crab Shack Holdings, No. B242807 (Cal. Ct. App. Nov. 12, 2013); Jones et al. v. Farmers Insurance Exchange, No. B237765 (Cal. Ct. App. Oct. 28, 2013) (slip opinions available here and here). The publication orders issued on 12/4/13 and 11/26/13, respectively. Both Martinez and Jones are wage and hour class actions asserting multiple claims, including for unpaid overtime and improper wage statements.

In Martinez, filed in 2007, a proposed class of restaurant managers sued their employers for unpaid overtime, based on a theory of misclassification. The defendants claimed that individualized determinations would have to be made regarding the amount of time each employee spent on non-managerial tasks in order to determine liability for misclassification, and the trial court denied certification on that basis. However, the appellate court disagreed, finding that individual issues of proof did not predominate over common issues, and held that the trial court had not followed the directives of Sav-On and Brinker: “Sav-on instructs courts in overtime exemption cases to proceed through analysis of the employer’s realistic expectations and classification of tasks rather than whether the employee can identify in retrospect whether, at a particular time, he or she was engaged in an exempt or nonexempt task” and “we understand from Brinker . . . a renewed direction that class-wide relief remains the preferred method of resolving wage and hour claims, even those in which the facts appear to present difficult issues of proof.” Slip op. at 15, 19.

The Jones plaintiffs, a putative class of insurance adjusters, filed their complaint in 2009, alleging unpaid overtime, wage statement, and minimum wage violations. All of the purported violations stemmed from a company-wide written policy dictating that time spent on certain job-related tasks (such as logging into the company’s computer system to get an assignment, or travel time to the first assignment of the day) was not compensable. The trial court had denied class certification, finding that common issues did not predominate and that the plaintiffs had not demonstrated that defendant had a classwide policy of refusing to pay overtime, but the court of appeal emphatically disagreed. Just as in Martinez, the court relied on Sav-on and Brinker, as well as Jaimez v. Daiohs, and concluded that the trial court erred in “focusing on individual issues concerning the right to recover damages rather than evaluating whether the theory of recovery is amenable to class treatment.” Slip op. at 14.

Publication of Martinez and Jones appears to represent a renewed endorsement of resolving wage and hour class actions on a class-wide basis, and should be frequently cited in the future.

In her stinging dissent in Genesis Healthcare Corp. v. Symczyk, Justice Kagan stressed that the majority opinion, which held that an FLSA collective action can be terminated if the class representative is “picked off” by a settlement offer that fully resolves her claims, should not be used as precedent for future cases: “Feel free to relegate the majority’s decision to the furthest reaches of your mind: The situation it addresses should never again arise.” Justice Kagan specifically referred to the case’s odd posture, wherein neither party contested the premise that an unaccepted Rule 68 settlement offer serves to moot the plaintiff’s individual action, a premise the dissenting justices found to be incorrect.

In Diaz v. First American Home Buyers Protec. Corp., No. 11-57239 (9th Cir. Oct. 4, 2013) (slip opinion available here), the Ninth Circuit considered whether an unaccepted Rule 68 offer would moot a Rule 23 class action prior to a ruling on class certification. Noting a circuit split on this issue, Diaz examined Justice Kagan’s reasoning in Genesis and found it to be the “correct approach,” concluding that “an unaccepted Rule 68 offer that would have fully satisfied a plaintiff’s claim does not render that claim moot.” Slip op. at 14. The Diaz court thus vacated the district court order dismissing the putative class action.

While Diaz distinguished Genesis on the ground that Justice Kagan identified, other courts have distinguished Genesis as being wholly inapplicable to Rule 23 class actions. See, e.g., Craftwood II, Inc. v. Tomy Int’l, Inc., No. 12–1710 (C.D. Cal. July 15, 2013) (“[Genesis] does not cover class actions, nor does it even address how a rejected offer could moot a claim.”); Chen v. Allstate Ins. Co., No. 13-0685 (N.D. Cal. June 10, 2013) (holding that Genesis has no application to Rule 23 class actions); see also, Kensington Physical Therapy, Inc. v. Jackson Therapy Partners, LLC, No. 11-02467 (D. Md. Oct. 2, 2013) (same). These cases indicate that Justice Kagan’s dissent has already proven to be quite influential in limiting Genesis’ impact. However, considering that Diaz has exacerbated an unresolved circuit split (by siding with the Second Circuit against the Sixth and Seventh Circuits), it will shock no one if the Supreme Court takes up this issue again in the near future.

In Brinker v. Superior Court, the court affirmed certification of a rest break subclass, reversed certification of an “off-the-clock” subclass and remanded for reconsideration the question of meal period subclass certification in light of clarifications of law provided in that decision. Last Thursday, Judge Dato granted certification of the meal period subclass (tentative ruling available here). 

Judge Dato’s class certification decision focused on “the plaintiff theory of liability and proof, not on alternative approaches a defendant might prefer were being pursued.” The plaintiffs’ main theory of meal period liability is that Brinker’s meal period policies, particularly its written policy, violate California law. Focusing on that theory, Judge Dato held that the validity of Brinker’s meal period policy is a classwide issue subject to common proof.

Judge Dato’s decision is in line with other post-Brinker decisions (which he cites) such as Bradley v Networkers International LLC (2012) 211 Cal.App.4th 129 and Faulkinbury v. Boyd Associates, Inc. (2013) 216 Cal.App.4th 1129, which also read Brinker as focusing on plaintiffs’ theory of liability and, in particular, whether they allege that a policy violates California law. Whether in fact a policy violates California law is not part of the certification analysis – it is a merits issue. Brinker, Bradley and Faulkinbury all follow this approach. In addition, to show that common issues did not predominate, Brinker argued that there is wide variation in how meal period policies were implemented and applied. Judge Dato, relying on Bradley, stated that whether there is a lack of company-wide policy that violates California law is also a classwide issue subject to common proof.

Several weeks after reinstating certification of two multistate consumer class actions involving defective, moldy washing machines in Butler v. Sears, Roebuck & Co., the Seventh Circuit has again upheld the viability and desirability of consumer class actions in another opinion authored by Judge Richard Posner, Hughes v. Kore of Indiana Enterprise Inc. (slip opinion available here). In Hughes, the Seventh Circuit reaffirmed some basic principles of class actions that seem to have been obscured of late, including the utility of class actions for prosecuting small value claims and the propriety of deterrence as a goal for class actions.

The conduct at issue in Hughes was the defendant’s alleged failure to post the required notice of a $3 transaction fee that its ATMs charged to users (over 2800 times during the class period). The district court held that the plaintiffs would be better off forgoing class certification, since class members would receive only a few dollars each, but could receive statutory damages of between $100 and $1000 for individual suits.

The Seventh Circuit reversed, observing that individual actions would be extremely unlikely due to the inability of a plaintiff to enlist a competent attorney to press such an action: “What lawyer could expect the court to award an attorney’s fee commensurate with his efforts in the case, if the client recovered only $100?” Instead, the court indicated that the better course would be to proceed with a class action, and instead of attempting to distribute very small awards to individual class members, to disburse the recovery to a charity under the cy pres doctrine. Even if the remedy were thus “purely punitive,” the court held that would be better than individual suits, as one of the proper goals of a class action is to prevent the defendant from “walking away from the litigation scot-free.”