Posts belonging to Category Caselaw Developments

Last week, in one fell swoop, a Los Angeles Superior Court Judge denied a defendant’s motion for summary adjudication and motion to decertify the plaintiffs’ rest break class, granted plaintiffs’ motion for summary judgment, and issued a $90 million award to a class of 15,000 plaintiffs, while following the California Supreme Court’s landmark ruling in Brinker v. Super. Ct., 42 Cal. 4th 1004 (2012).  See Augustus v. Amer. Commercial Sec. Servs., No. BC336416 (Los Angeles Super. Ct. Jul. 6, 2012) (order granting summary judgment) (available here).  The Brinker decision, initially touted as a win for defendants, continues to favor plaintiffs alleging meal and rest break violations.

Here, the plaintiff class, made up of security guards, sought damages for missed rest periods, claiming that they were “on call” during their breaks and therefore not “relieved of all duty” as required under Brinker.  Defendants contended that, because plaintiffs were not required to carry radios during rest breaks, they were per se off duty.  See Order at 2-3.  Judge John Shepard Wiley, Jr. countered defendant’s argument, pointing out that “[t]here are many alternatives to the radio for hailing a person back to work,” and categorically agreed with plaintiffs, stating, “[p]ut simply, if you are on call, you are not on break” and “these on-call breaks are all legally invalid.”  Id. at 2-3.

Judge Wiley took the defendant to task several times in the order (to great comic effect), for citing to an unpublished opinion (id. at 2); for being critical of the length of plaintiffs’ reply brief despite having submitted an opposition brief that “included 21 small font footnotes” (id. at 3); and for arguing a due process violation despite having “had an opportunity to be heard — repeatedly, and at length” (id. at 4).

On a day of surprises at the U.S. Supreme Court, it was a terse ruling on Article III standing — the gateway that determines which plaintiffs may and may not be in federal court — that could have greater consequences than the widely-covered healthcare ruling.  Because many class actions that were formerly resolved in state courts are now channeled into federal courts by the Class Action Fairness Act, advocates for consumers and workers feared that the Court took up Edwards v. First American Corp. in order to craft an onerous Article III “actual injury” standard that would lead to a rash of dismissals in these cases, without further recourse for the plaintiffs.  A 5-4 majority opinion imposing such a rule would be consistent with recent decisions increasing the burden on plaintiffs in federal court.

The at-issue statute in Edwards was the Real Estate Settlement Procedures Act (RESPA), which prohibits “kickbacks” and other quid pro quo arrangements between title companies and other entities in connection with real estate closings.  See Edwards v. First Am. Corp., 610 F.3d 514 (9th Cir. 2010) (available here).  Under RESPA, a party to a real estate transaction is entitled to relief when such an arrangement occurs, even if the party suffers no financial loss or diminution of services as a result of the RESPA violation.  Denise Edwards did not allege financial or other loss from the kickback arrangement that First American, her title company, engaged in, but she nonetheless sued First American under RESPA, on behalf of herself and all others similarly situated.  See id. at 516-17.  The defendant argued that Edwards lacked standing to pursue a claim because she did not suffer any injury.  Id.  The Ninth Circuit rejected this argument, holding that Edwards had standing to sue First American because RESPA provided her a statutory right to do so.  Id. at 518.

What followed was a two-year legal odyssey: the granting of defendant’s writ of certiorari, months of anticipation, oral arguments, copious briefing as to a Ninth Circuit decision that many believed would be reversed, all culminating in the Supreme Court’s issuance of a two-sentence opinion, “The writ of certiorari is dismissed as improvidently granted.  It is so ordered.”  First Amer. v. Edwards, 567 U. S. ____ (2012) (available here).  With that, the appeal in Edwards was over, with a swiftness and simplicity that belied the concern the case had engendered.

The U.S. Supreme Court has decided to review a Third Circuit decision bearing on a key element of class certification jurisprudence. See Behrend v. Comcast Corp., 655 F.3d 182 (3d Cir. 2011), cert. granted, 80 U.S.L.W. 3442 (U.S. June 25, 2012) (No. 11-864) (available here).

In its petition, Comcast asked the Court to address “whether a district court may certify a class action without resolving ‘merits arguments’ that bear on Rule 23’s prerequisites for certification, including whether purportedly common issues predominate over individual ones under Rule 23(b)(3).” Petition for Writ of Certiorari at i, Comcast Corp. v. Behrend, __ S. Ct. __ (2012) (No. 11-864), 2012 WL 105558 (available here). This seemed a ripe issue for the Court to take up, given the tension between the traditional doctrinal separation between class certification and “merits” analysis and recent decisions mandating “rigorous analysis” that seemingly implicates a merits-based inquiry. Compare, e.g., Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 178 (1974) (“In determining whether to certify a class action, ‘the question is not whether the plaintiff or plaintiffs have stated a cause of action or will prevail on the merits, but rather whether the requirements of Rule 23 are met.’”) with Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2551 (2011) (quoting Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 161 (1982) (district courts must engage in “rigorous analysis” to ensure that the “party seeking class certification [can] affirmatively demonstrate his compliance” with Rule 23)).

However, in agreeing to review the case, the Supreme Court took the unusual step of reframing the core issue, narrowing the scope of its review to: “Whether a district court may certify a class action without resolving whether the plaintiff class has introduced admissible evidence, including expert testimony, to show that the case is susceptible to awarding damages on a class-wide basis.” (emphasis added). This is likely a signal that the Court plans to resolve the debate sparked by its dicta in Dukes, where, in response to the conclusion of California Northern District Court Judge Jenkens that a full Daubert analysis is not appropriate at the certification stage, the Court stated: “We doubt that is so.” 131 S. Ct. 2541, 2554.

In an unusual procedural turn and exemplar of the virtue of persistence, this appeal was “relisted” seven times. Thus, on six prior occasions, the certiorari petition was scheduled for a vote, and each time, the vote was deferred and listed for a subsequent conference. The repeated delays likely resulted from proponents’ difficulty in securing the four votes necessary to grant a certiorari petition, which in turn could suggest that those proponents will have a similarly difficult time finding the five-vote majority necessary to promulgate their favored doctrine as to the proper expert analysis to be undertaken by courts attendant to Rule 23 class certification analysis.

California’s Fourth Appellate District has upheld a trial court’s denial of a defendant’s motion to compel arbitration of the plaintiff’s classwide wage-and-hour claims. The three-judge panel held that the defendant had, in failing to assert its arbitration clause for nearly one year, conducting discovery, and lobbying putative class members so as to reduce the size of the class, waived its right to arbitrate. See Hoover v. Amer. Income Life Ins. Co., ___ Cal. App. 4th ___ (2012), available here. The court further found that, even had the defendant not waived arbitration by first litigating the case, the result would be the same, since the lack of an “interstate” component to the plaintiff’s job rendered the FAA inapplicable. Slip op. at 17-18

Perhaps more significant than the court’s refusal to compel arbitration is its interpretation (or lack thereof) of the U.S. Supreme Court’s AT&T Wireless v. Concepcion decision and its reading of California precedent as to the circumstances in which arbitration cannot be compelled. The decision purports to not expressly interpret Concepcion, stating, “[t]he conclusions we reach here avert any dependence . . . on two recent United States Supreme Court opinions, addressing the issue of class arbitrations for antitrust claims and consumer sales contracts.” Slip op. at 3 n.2.

The two “recent cases” are of course Concepcion and Stolt-Nielsen. Yet contrary to the court’s contention that the Hoover decision does not rely on either, that “‘[Concepcion] does not provide that a public right . . . can be waived if such a waiver is contrary to state law’” is perhaps Hoover’s key legal conclusion, a conclusion that is drawn directly from Brown v. Ralphs, the Court of Appeal’s first case interpreting Concepcion. See Hoover at 3 n.2, quoting Brown v. Ralphs Grocery Co., 197 Cal. App. 4th 489, 500 (2011).

Though not initially designated for publication in California’s official reporter, Hoover has now been certified for publication. As such, Hoover vividly underscores the opposing and irreconcilable outcomes as to the scope of Concepcion’s application. Compare Brown v. Ralphs, 197 Cal. App. 4th at 489 (PAGA claims not arbitrable) with Iskanian v. CLS Transp. Los Angeles, LLC, ___ Cal. App. 4th ___ (2012) (rejecting Brown v. Ralphs). As trial court and Court of Appeal decisions continue to fall under either the Brown or Iskanian rubric, speculation is rampant that the California Supreme Court will have no choice but to take up and resolve this aspect of Concepcion’s application.

Moreover, Hoover’s citation to and reliance on Cruz v. PacifiCare Health Systems, Inc., 30 Cal. 4th 303 (2003), for the proposition that a claim for injunctive relief under the Unfair Business Practices Act is not arbitrable (see Hoover at 19), is notable in that in Iskanian, the Second Appellate District had arguably deemed Cruz overruled (see Iskanian slip op. at 16-17). Consequently, Hoover represents further confirmation that the ultimate resolution of Concepcion’s scope will come only with California Supreme Court review.