Posts belonging to Category Caselaw Developments

The California Court of Appeal has ruled that a showing of actual reliance by class members other than the named plaintiff is not required for claims brought under California’s Unfair Competition Law (UCL). See Medrazo v. Honda of North Hollywood, ___Cal. App. 4th ___ (Mar. 27, 2012), available here. The underlying claims in the certified class action were based on the plaintiff’s allegation that the defendant sold new motorcycles without the dealer tags required by two section s of the California Vehicle Code. See Slip op. at 4. The mandatory tags must show a motorcycle’s recommended retail price, as well as the price of each accessory and the amount by which the price being charged exceeds the recommended retail price. See Cal. Veh. Code §§ 11712.5, 24014 (West 2012).

 The appeal arose from the trial court’s granting the defendant’s motion for judgment, which had been filed immediately after the plaintiff presented evidence at trial. See Slip op. at 2. The trial court found that the plaintiff had failed to establish that either she or any other member of the certified class had been injured by the defendant’s conduct, and thereby entered judgment on the plaintiff’s UCL cause of action. Id. However, the Court of Appeal reversed the trial court’s entry of judgment on the UCL claim. Id.

Expounding on the California Supreme Court’s landmark “Tobacco II” decision, In re Tobacco II Cases, 46 Cal. 4th 298, (2009), the unanimous Medrazo panel explained its reversal of the trial court as follows:

As the Supreme Court explained in Tobacco II, the language in the UCL limiting standing to plaintiffs who lost money “as a result of the unfair competition” (Bus. & Prof. Code, § 17204) imposes an actual reliance requirement on the named plaintiff (and only the named plaintiff) in a UCL action based upon the fraudulent prong or false advertising because “reliance is the causal mechanism of fraud.” (Tobacco II, supra, 46 Cal.4th at p. 326; see also id. at p. 320 [the standing requirement to show causation does not apply to absent class members].) But the Supreme Court also explained that an actual reliance requirement does not apply to UCL actions that are not based upon a fraud theory. (Id. at p. 325, fn. 17). In those actions, the plaintiff must simply show that the alleged violation caused or resulted in the loss of money or property. Because, as discussed below, we find that Medrazo presented sufficient evidence to establish standing under the unlawful prong of the UCL, we need not address whether the fact that [the defendant] disclosed all of the dealer-added charges precludes her from establishing actual reliance under the fraud or false advertising prong of the UCL.

Slip op. at 14 (emphasis added).

This was the most recent appeal in a case that earlier saw the Court of Appeal reverse the trial court’s denial of class certification, with the affirmative order that the class be certified. See Medrazo v. Honda of North Hollywood, 166 Cal. App. 4th 89 (2008). Though originally designated as unpublished, the Medrazo opinion has since been designated for publication in the official reports. As such, it is expected to be an important and much-cited elaboration on the Tobacco II holding.

In addition to being an exhaustive statement as to California’s substantive meal and rest break law, the Supreme Court’s 54-page Brinker decision (available here) also sets forth important class action doctrine, most of which favors class-wide adjudication. Moreover, the concurring opinion (authored by Justice Werdegar, who also wrote the unanimous majority opinion) suggests that the First Appellate District’s Duran v. U.S. Bank National Ass’n, 203 Cal. App. 4th 212 (2012)—considered by many to be a radical departure from established class action jurisprudence—might not sit well with some of the justices.

As to class certification, Brinker reversed the Court of Appeal’s finding that the trial court had abused its discretion by certifying the class but failing “to determine the elements of plaintiffs’ claims.” Slip op. at 10. Brinker ruled that although “trial courts must resolve any legal or factual issues that are necessary to a determination whether class certification is proper, the Court of Appeal went too far by intimating that a trial court must as a threshold matter always resolve any party disputes over the elements of a claim.” Slip op. at 10. In doing so, Brinker reasserts the long-established divide between merits- and certification-related determinations, and the primacy of the plaintiff’s “theory of recovery” in trial courts’ certification analysis. Slip op. at 13.

The Brinker concurrence elaborated on the decision’s core class certification content by endorsing statistical and sampling methodologies ideally suited to class actions: “[W]e have encouraged the use of a variety of methods to enable individual claims that might otherwise go unpursued to be vindicated, and to avoid windfalls to defendants that harm many in small amounts rather than a few in large amounts.” See Concurring slip op. at 4. The concurrence supported this statement with citations to the substantial body of California Supreme Court precedent, from Daar v. Yellow Cab Co., 67 Cal. 2d 695 (1967), to Sav-On Drug Stores, Inc. v. Superior Court, 34 Cal. 4th 319 (2004). Many observers take the support for statistical methods to be a sign of willingness, on the part of the concurring justices at least, to review Duran, which has been interpreted (mainly by the defense bar) as purporting to import “due process” doctrine akin to that in the U.S. Supreme Court’s Wal-Mart v. Dukes decision into California’s class action jurisprudence.

Thus, while Brinker is perhaps a mix of holdings on substantive meal and rest break law, it is a uniformly strong endorsement of class actions as well as suitable methodologies and case management tactics.

As analysts and practitioners on both sides continue to digest last week’s sprawling Brinker decision from the California Supreme Court (Brinker Restaurant Corp. v. Super. Ct., No. S166350 (Cal. Apr. 12, 2012), available here), the consensus is emerging that Brinker is a “mixed” result, with some of the newly-articulated doctrines more pleasing to the defense bar. However, amid the predominant air of compromise as to meal breaks and the requisites for class certification, workers can claim a clear, and surprising, victory on one particular issue: rest breaks. The defendant and its amicus supporters had argued that employees are entitled only to a single rest break in an 8-hour day, but the court categorically rejected this interpretation of the at-issue Labor Code and Wage Order provisions.

Indeed, it was as to rest breaks that the unanimous decision issued its strongest rebuke to the Court of Appeal opinion under review. “Employees are entitled to 10 minutes’ rest for shifts from three and one-half to six hours in length, 20 minutes for shifts of more than six hours up to 10 hours, 30 minutes for shifts of more than 10 hours up to 14 hours, and so on.” Slip op. at 20. Therefore, in the typical eight-hour shift, entitlement to a second rest break vests after six hours of work has passed and work on the seventh hour commences.

The employers’ “single rest break” theory was thus rejected, despite many observers having predicted that the rest break claim would be the most vulnerable. One tangible consequence of the ruling will be that many rest break class actions that had been either formally or informally stayed will now proceed, with the employer/defendants’ exposure on rest break claims now greater than during the protracted pre-Brinker phase.

In a stinging rebuke to recent Supreme Court decisions that demonstrate an implicit faith in arbitration, United States District Judge Max O. Cogburn has observed that “arbitration under the Federal Arbitration Act is a process that, although retaining the appearance of constitutionality by involving the courts in confirming an award, does not even attempt to retain the appearance of fairness.” Memorandum of Decision and Order at 1, Wells Fargo Advisors, LLC v. Watts, No. 5:11-cv-00048 (W.D. N.C. Mar. 9, 2012). The full opinion is available here. This bleak assessment of arbitration arose in connection with Wells Fargo’s motion to confirm an arbitration award. Although the at-issue arbitration award was confirmed, the award of attorney’s fees was not.

It appears that Judge Cogburn was affronted by Wells Fargo’s counsel challenging the court’s authority to “refuse to enforce an illegal contract.” Id. Judge Cogburn proceeded to catalogue the inequities attendant to arbitration, noting defendants’ built-in advantage over plaintiffs in arbitration and Wells Fargo’s counsel’s testimony that she has never lost any of the 30 to 40 arbitrations she handles each year. Id. at 2. Judge Cogburn punctuated his written opinion with this stark statement: “Now there’s a level playing field.” Id. The confirmation of the arbitration award was a Pyrrhic victory, at least for the defendant’s lawyers, as the award of attorney’s fees was wholly vacated.

As to the adhesive arbitration agreements that have become more prevalent since last year’s decision in AT&T Mobility v. Concepcion, Judge Cogburn observed that the “argument that the parties voluntarily agreed to arbitration and that the process saves money is also disingenuous.” Id. He went on to explain that, “[s]ince financial institutions and large employers have virtually all of the available lending capital and a large number of the jobs, individuals have no recourse but to agree to an arbitration clause,” and “since the individuals seldom win and are forced to reimburse costs and attorney fees, the only ones saving money are large institutions like the claimant.” Id. at 2-3.

While not binding authority, Judge Cogburn’s candid decision will no doubt be invoked to cut through the platitudes that so often accompany arbitration discussion and analysis.