Posts belonging to Category Motion Practice

A Ninth Circuit en banc panel recently heard oral argument in the much-watched Kilgore v. KeyBank Nat’l Assn., No. 09-16703 (audio recording available here), which concerns whether two California Court of Appeal decisions remain good law in light of the U.S. Supreme Court’s holding in AT&T Mobility v. Concepcion. The two California cases are Broughton v. Cigna Healthplans, 21 Cal. 4th 1066, 988 P.2d 67 (1999) (public injunctive relief claims not arbitrable as a matter of California public policy; California’s Consumer Legal Remedies Act (CLRA) injunctive actions), and Cruz v. PacifiCare Health Systems, Inc., 30 Cal. 4th 303 (2003) (same; UCL injunctive actions).

Specifically at issue in Kilgore is whether public injunctive relief claims under the CLRA and UCL are not arbitrable as a matter of California public policy, as established in Broughton and Cruz. A three-judge Ninth Circuit panel had previously ruled that Concepcion overruled Broughton and Cruz. Additionally, Kilgore was issued just days after the California Supreme Court granted a petition for review in Iskanian v. CLS Transp. Los Angeles, LLC, ___ Cal. App. 4th ___ (2012). In Iskanian, the California Supreme Court will decide whether Concepcion overruled the unconscionability jurisprudence of Gentry v. Superior Court, 42 Cal. 4th 443 (2007). Since both appeals concern the extent of FAA preemption, with an underlying issue of California substantive law, the Kilgore appeal will likely be stayed until there is a disposition of Iskanian (the discussion of which provided a moment of levity during the oral argument as the attorney for KeyBank indicated that he was not familiar with Iskanian). Similarly, some members of the Kilgore panel queried whether a disposition of Kilgore ought to be deferred until the U.S. Supreme Court issues a decision in American Express Co. v. Italian Colors Restaurant, as to which a certiorari petition was just granted, or whether, instead of awaiting the Iskanian ruling, the procedure whereby a question is “certified” to the California Supreme Court ought to be used, thereby obtaining a definitive interpretation as to issues of state substantive law.

The Kilgore appeal has attracted considerable amicus interest, and the oral argument got underway with Chief Judge Kozinski questioning the Chamber of Commerce’s amicus counsel, asking if Concepcion is distinguishable on the most apparent ground: that the public injunctions in Broughton and Cruz are remedies, not claims. Responding to that and other similar inquires, the amicus counsel gave emphasis to the fact that seeking a public injunction under the UCL requires class certification, and was ready with an adept citation to Supreme Court precedent in which punitive damages were preempted by the Federal Arbitration Act (FAA).

Considerable time was devoted to discussing the FAA’s “savings clause,” which Concepcion held did not prevent FAA preemption. But does Concepcion bar any state-created legislation that might limit arbitration, even in circumstances where, as in Broughton and Cruz, public health and safety are implicated? Assuming a judicial posture, amicus counsel reiterated that the FAA had preemptive effect in the case at hand, sidestepping the broader hypothetical.

Judge M. Margaret McKeown pressed as to whether there is an intersection between unconscionability and public policy, and invoked the U.S. Supreme Court’s recent Marmet Health Care Ctr., Inc. v. Brown decision (132 S. Ct. 1201 (2012)), which seemingly puts state-created unconscionability doctrine outside the ambit of FAA preemption, before the proceedings focused on Cruz and Broughton. When questioned whether overruling Broughton and Cruz would be applicable only in federal courts or in California state courts as well, the voluble Chamber of Commerce amicus counsel opted for the more aggressive interpretation, whereby the disposition would be applicable in state and federal courts alike. While the degree to which the amicus parties worked cooperatively with counsel for KeyBank is unknown, but it is often an indication of confidence that an appellate panel is a favorable one when counsel opts for a broader interpretation when a narrower, more risk-averse interpretation is available.

Judge Harry Pregerson, widely viewed as among the most “plaintiff friendly” in the Ninth Circuit, questioned counsel only sparingly, and as to relatively technical issues of standing under the UCL. However, Judge William Fletcher worked off Judge Pregerson’s reference to UCL standing to elicit from KeyBank’s counsel the concession that there would be no injunctive relief available in a private action (i.e., other than in an action brought by the California Attorney General) even if there were a general fraud. Later in the oral argument, and at a moment of abrupt candor, Judge Pregerson asked the plaintiff’s counsel (who Pregerson let it be known is a personal acquaintance): “What is the bottom line of your lawsuit?” Counsel responded in essence that the preservation of the right to bring private actions that seek public injunctions to combat broad wrongs is the “bottom line” in Kilgore.

In addition to the judges referenced above, the 12-member Kilgore en banc panel consisted of Judges Paul Jeffrey Watford, Mary Murguia, Consuelo Callahan, Richard C. Tallman, Milan D. Smith Jr., Morgan Christen, and Andrew Hurwitz.

California’s Second Appellate District has clarified the proper application of the “death knell” doctrine to denials of class certification, and in the process has carved out an exception to the general rule proscribing successive class certification motions. See Aleman v. AirTouch Cellular, No. B231142, ___ Cal. App. 4th ___ (Sept. 20, 2012) (available here). The unanimous opinion, certified for publication, thus provides important guidance for practitioners navigating California’s rules pertaining to appealing denials of class certification and determining when multiple class certification motions are, and are not, permissible in California trial courts. In particular, Aleman is clear in its holding that, where class certification is denied without prejudice, the death-knell doctrine may not be invoked to allow an appeal. Aleman thus also underscores that, notwithstanding the general rule that a plaintiff may only bring one class certification motion in a California trial court, it is a permissible exercise of a trial court’s discretion to deny certification without prejudice and subsequently allow successive class certification motions.

In the underlying wage and hour class action, employees who worked at AirTouch stores and mall kiosks alleged violations concerning both split shift and reporting time pay. See slip op. at 2-3. The plaintiffs moved for class certification while issues bearing on the split shift and reporting time claims were on appeal. See slip op. at 6-7. The trial court denied the class certification motion, but did so “without prejudice” to the plaintiffs bringing a subsequent class certification motion, after the disposition of the pending appeal. Id. Additionally, the trial court provided express guidance as to the first class certification motion’s weaknesses, noting that the plaintiffs would have to reconcile potential intra-class conflicts to satisfy the adequacy requirement. See slip op. at 7.

Rather than awaiting the resolution of the appeal concerning the split shift and reporting time issues, the plaintiffs appealed the trial court’s denial of class certification, thereby giving rise to the central legal question in Aleman: Was the plaintiffs’ appeal a proper invocation of the “death-knell” doctrine? See slip op. at 29-31. The Aleman panel answered in the negative, formulating a bright-line rule that where class certification is denied without prejudice, an interlocutory appeal is not appropriate: “The death knell has not yet sounded. The remaining plaintiffs’ ability to pursue class certification has not been terminated. Because the denial order was without prejudice, the remaining plaintiffs are free to move for class certification again.” Slip op. at 30.

Therefore, it is critical for practitioners, when a California state trial court judge denies class certification “without prejudice,” to establish on the record (as in Aleman) that the trial court will in fact exercise its authority to hear a second class certification motion. See slip op. at 29 (“The court made clear that plaintiffs would be able to bring a new motion.”). A similar record in which the trial court’s intentions are unambiguous coupled with citation to Aleman should suffice to overcome a defendant’s argument based on the abundant authority holding that, in California state court, plaintiffs may move only once for class certification. See, e.g., Stephen v. Enterprise Rent-A-Car, 235 Cal. App. 3d 806 (1991) (explaining that California’s strict one-certification-motion rule necessitates applying the death-knell doctrine).

In a case that continues to deal surprise rulings, the U.S. Supreme Court has denied a certiorari petition filed by Merrill Lynch in a case challenging the certification of a class of brokers alleging race discrimination. See Merrill Lynch v. McReynolds, No. 12-113, (U.S. Oct. 1, 2012). The Supreme Court’s declination to review McReynolds (despite its decision in Wal-Mart v. Dukes tightening class certification standards) follows the Seventh Circuit’s affirmative reversal of the trial court’s denial of class certification, thereby exhausting Merrill Lynch’s avenues for judicial review. Judge Richard Posner, generally regarded as holding to a conservative orientation, defied ideology-based expectations by authoring the Seventh Circuit’s opinion. See McReynolds v. Merrill Lynch, 672 F.3d 482 (7th Cir. 2012).

The Supreme Court’s denial of review, together with the Seventh Circuit’s ruling, are expected to be heralded as indications that Dukes is not the “death knell” for class actions, as many had predicted. Judge Posner’s opinion pointedly distinguished Dukes, noting that, while “there was no company-wide policy to challenge in Wal-Mart,” this was not the case with Merrill Lynch, whose policies were alleged to be company-wide and therefore better suited to class action treatment. McReynolds v. Merrill Lynch 672 F.3d at 488. While Dukes arguably imposes greater rigor on the analysis attendant to grants of class certification, McReynolds exemplifies that a similar rigor is required of judicial orders denying class certification. Thus, Dukes appears to have established standards that are fully accessible to plaintiffs presenting strong evidence of employer practices applicable across a tightly-defined class.

The denial of Merrill Lynch’s petition for review preserves the practical note that Judge Posner struck when he acknowledged the familiar argument by defendants that numerous “mini trials” could be necessary to resolve particular individual issues. Id. at 490-91. However, in a passage likely to appear in many reply briefs in support of class certification, Posner reasoned that “at least it wouldn’t be necessary in each of those trials to determine whether the challenged practices were unlawful.” Id. at 491.

Judge Posner also addressed the possibility of “issue classes,” stating: “Rule 23(c)(4) provides that ‘when appropriate, an action may be brought or maintained as a class action with respect to particular issues.’ The practices challenged in this case present a pair of issues that can most efficiently be determined on a class-wide basis, consistent with the rule just quoted.” Id.

Whether the parties will in fact propose the use of 23(c)(4) procedures on remand, and whether the rebuked trial court will adopt such procedures, remains to be seen. However, to the extent that the McReynolds case continues to demonstrate workable class action devices, it is expected to be copiously cited to by plaintiffs seeking to emulate its successful formula.

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.