Posts belonging to Category Caselaw Developments

A federal judge has certified a class of current and former Costco employees who allege that the wholesale giant failed to promote women to management positions at a rate commensurate with male employees. Ellis v. Costco, No. 04-3341 (N.D. Cal. Sept. 25, 2012) (order certifying class) (available here). In a sprawling, meticulously detailed 86-page decision, Judge Edward M. Chen extensively distinguishes the Title VII claims against Costco from those deemed not suitable for class treatment in the U.S. Supreme Court’s Wal-Mart v. Dukes (131 S.Ct. 2541 (2011)). As such, Ellis is expected to provide widely applicable guidance to trial courts as they interpret and apply Dukes.

Ellis has traveled a long procedural path; its 2007 certification ruling by then-presiding Judge Marilyn Hall Patel was vacated by the Ninth Circuit, which directed the trial court to reprise its certification analysis in light of Dukes. See Ellis v. Costco Wholesale Corp., 657 F.3d 970 (9th Cir. 2011). Though also a Title VII discrimination case, Dukes is distinguishable from Ellis, most conspicuously in class size. While the Dukes plaintiffs sought to certify a class of some 1.5 million female Wal-Mart employees, the Ellis class is comprised of approximately 700 current and former Costco employees. Judge Chen reasoned, “[a]lthough class size has no per se bearing on commonality, when the claims focus in part on the exercise of managerial discretion, it is reasonable to suspect that the larger the class size, the less plausible it is that a class will be able to demonstrate a common mode of exercising discretion.” Order at 24. 

Indeed, Judge Chen relied on and excerpted extensively from the Ninth Circuit’s decision, in particular its description of Costco’s store-level management structure, concluding that “[d]espite the lack of written guidelines” governing Costco’s promotion procedures, “as observed by the Ninth Circuit, Costco nonetheless imposes uniform practices and policies with regard to its promotion system.” Id. at 7. 

However, it is the “specific employment practices” identified by the Ellis plaintiffs which are cited as the “most important” distinguishing factor in the opinion: “Unlike in Dukes, which the Supreme Court concluded merely identified the delegation of discretion (i.e., the absence of a policy), here Plaintiffs identify specific practices and a common mode of guided discretion directed from the top levels of the company.” Id. at 25.

Because the Ellis opinion closely tracks the Ninth Circuit’s remand order (and in so doing distinguishes Dukes), the plaintiffs’ discovery strategy and presentation of evidence of predominant common questions are likely to be used as a template for certification motions filed in other employment class actions. Specifically, the Ellis order notes that Costco employs the “same recruitment and selection process” company-wide, and “[t]op management’s involvement in the promotion process is also consistent, and pervasive.” Id. at 28, 29.

Ellis is likely to be a key ruling in the post-Dukes era, and it provides a far more optimistic view of the possibilities for class treatment than many had predicted when Dukes was issued.

Just days after the California Supreme Court granted the petition for review in Iskanian v. CLS Transp. Los Angeles, LLC, ___ Cal. App. 4th ___ (2012), the Ninth Circuit granted a motion for en banc rehearing in Kilgore v. KeyBank Nat’l Assn., No. 09-16703 (9th Cir. Sept. 21, 2012) (available here). Since both decisions entail critical interpretations of the U.S. Supreme Court’s AT&T Mobility v. Concepcion decision, it is expected that, in concert, Iskanian and Kilgore will substantially determine the jurisprudence governing arbitration agreements in California state and federal courts.

At issue in Kilgore are the holdings in two California Supreme Court cases, Broughton v. Cigna Healthplans (21 Cal. 4th 1066 (1999)) and Cruz v. PacifiCare Health Systems, Inc. (30 Cal. 4th 303 (2003)), which until Concepcion stood without credible dissent for the proposition that public injunctive relief claims under California’s Consumer Legal Remedies Act (CLRA) and Unfair Competition Law (UCL), respectively, are not arbitrable as a matter of California public policy. The three-judge panel in Kilgore ruled that Concepcion overruled Broughton and Cruz. The en banc proceeding will reconsider that ruling.

In Iskanian, the California Supreme Court will be chiefly concerned with whether Concepcion overrules the unconscionability jurisprudence of Gentry v. Superior Court (42 Cal. 4th 443 (2007)) and whether Concepcion applies to actions seeking civil penalties under the California Labor Code’s Private Attorneys General Act, or PAGA. Reversal in both Iskanian and Kilgore would thus make for a decidedly different narrative than had been predicted when Concepcion was issued and many observers assessed it as the “death knell for class actions.” Instead, Concepcion has generally been narrowly interpreted. And where it has not been—as in Iskanian and Kilgore—those rulings have shown signs of frailty.

The California Supreme Court will soon determine the applicable scope of AT&T Mobility v. Concepcion vis-à-vis the state’s longstanding unconscionability doctrine, as the court has granted a petition for review of the Second Appellate District’s ruling in Iskanian v. CLS Transp. Los Angeles, LLC (___ Cal. App. 4th ___ (2012) (available here)). The Iskanian court rejected Brown v. Ralphs (197 Cal. App. 4th 489 (2011)), which held PAGA claims to be outside the ambit of Concepcion, and also took the position that the California Supreme Court’s decision in Gentry v. Super. Ct. (42 Cal. 4th 443 (2007)) was overruled by Concepcion.

The Supreme Court’s review of Iskanian is expected to produce the definitive ruling on the post¬Concepcion applicability of California’s arbitration and unconscionability doctrines. The court contemporaneously denied petitions for review and depublication in Hoover v. Amer. Income Life Ins. Co. (___ Cal. App. 4th ___ (2012) (available here)), in which California’s Fourth Appellate District upheld a trial court’s denial of defendant’s motion to compel arbitration of classwide wage-and-hour claims. This may be an indication that the court is poised to overrule the aggressive Iskanian decision while allowing the Hoover decision to stand, a scenario sure to delight the plaintiffs’ bar.

More than 11,000 Verizon employees are now part of a certified class alleging that Verizon failed to comply with specific requirements set forth in California’s Pay Stub Law (Cal. Lab. Code § 226). The case is Banda v. Verizon California Inc., No. BC434587 (L.A. Super. Ct. Sept. 4, 2012) (order granting motion for class certification) (available here).

Superior Court Judge Charles F. Palmer rejected Verizon’s argument — commonly made by defendants facing class actions alleging wage statement violations — that the “injury” required by Labor Code section 226(e) rendered individual questions of injury predominant. Judge Palmer held that because “injury” as used in Section 226(e) is coextensive with the deprivation of a legal right, and the plaintiffs alleged that they had been uniformly deprived of the right to statutorily compliant pay stubs, individualized inquiries would not be substantially implicated. Additionally, Judge Palmer interpreted the statute as mandating that the nine pieces of information specifically required by Section 226(a)(1)-(9) be provided by the employer, thus rejecting Verizon’s contention that employees could find the missing information by doing simple math.

Section 226 requires that wage statements (commonly known as pay stubs) issued to California’s hourly workers show gross wages (Cal. Lab. Code § 226(a)(1)); total hours worked (§ 226(a)(2)); piece-rate units (§ 226(a)(3)); deductions (§ 226(a)(4)); net wages (§ 226(a)(5)); pay period beginning and ending dates (§ 226(a)(6)); employee’s name (§ 226(a)(7)); employer’s legal name (§ 226(a)(8)); and all hourly rates (§ 226(a)(9)). Filed in April of 2010, Banda alleged that the Verizon pay stubs issued to him and fellow employees failed to show the beginning dates of pay periods, hourly rates, and the number of hours worked at each hourly rate. The now-certified class is comprised of Verizon hourly employees who worked for the company in California between April 2009 and May 2011.

Because of the systematic nature of wage statements, few workplace violations are better suited to class treatment. The “injury” argument rejected in Banda has historically been the chief impediment to certification. To clarify that the Legislature’s intention as to the Section 226(e) “injury” language is consistent with Judge Palmer’s reading of it, the Legislature’s current term has been debating amendments to Section 226 that would effectively foreclose other defendants from relying on this argument in the future.