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In a major victory for employees, the United States Supreme Court has denied Ralphs’ Petition for Certiorari in Brown v. Ralphs Grocery Co., 197 Cal. App. 4th 489 (2011), which held that AT&T Mobility v. Concepcion, 131 S.Ct. 1740 (2011), does not apply to representative actions brought pursuant to PAGA, the Labor Code Private Attorneys General Act of 2004. Coupled with the California Supreme Court’s refusal to review Brown, the decision now stands on strong footing that unequivocally exempts PAGA from the ambit of Concepcion and the Federal Arbitration Act.

Not surprisingly, the U.S. Supreme Court’s Dukes v. Wal-Mart decision caused many class action defendants to file motions asking trial courts to revisit prior class certification rulings.  One such motion for decertification was recently denied in Driver v. AppleIllinois.  In that action, the defendant argued that Dukes required the decertification of a wage and hour class.  The trial court disagreed, distinguishing Dukes from Driver on grounds that class treatment in Dukes would have required the assessment of numerous subjective employment decisions, whereas class treatment in Driver would involve “strictly objective” issues of law and fact.  See Driver v. AppleIllinois, No. 06-C-6149, Slip op. at 5 (N.D. Ill. Mar. 2, 2012) (order denying motion to decertify) (available here). 

 In Driver, the defendant’s decertification motion came at an unusually late stage in the case, after notice had been distributed to class members and merits discovery had been completed.  See Slip. op. at 2.  The defendant sought a further review of the certification decision following the issuance of new authority, including Dukes and several decisions from within the Seventh Circuit “elucidating the application of [Dukes v.] Wal-Mart.”  Slip op. at 2.

 In denying the motion to decertify, the Driver court emphasized that Dukes was “significantly different” from Driver.  Slip. op at 4.  The Dukes class lacked commonality because the plaintiffs could not show a policy of gender discrimination applicable to all members of the class.  Rather, the plaintiffs’ allegations were predicated on the notion that local store managers exercised their discretion in a manner that created an unlawful disparate impact on female employees.  Slip op. at 4 (quoting Dukes v. Wal-Mart, 131 S. Ct. 2541, 2548).  In contrast, the Driver class shared a common question: “whether AppleIllinois required its tipped employees to engage in duties unrelated to their tipped occupation without paying them at the minimum wage rate.”  Slip op. at 5.  Unlike the Dukes gender discrimination claim, the Driver class’ claims do not require any proof of individual discriminatory intent.  Rather,  “[t]he analysis is strictly objective.”  Id.

 The Driver court’s analysis distinguishing Dukes from wage and hour class actions is potentially advantageous authority for plaintiffs’ counsel as they seek certification.  Notably, the minimum wage and employee classification laws at issue in Drivers are quite similar to California’s comparable statutes.

 Driver may also prove useful in wage and hour actions where the relevant employment policy is unofficial (and thus often referred to as a “practice”).  Analogizing to an earlier Seventh Circuit ruling, the Driver decision concluded that “[t]his case parallels the Ross case, in which declarations supported the plaintiffs’ theory that the defendant enforced an unofficial policy of denying employees overtime pay that was lawfully due.”  Slip op. at 6 (citing Ross v. RBS Citizens, N.A., No. 10-3848, 2012 WL 251927, *7 (7th Cir. Jan. 27, 2012)).

 Between the Driver decision, Ross, and Messner v. Northshore University HealthSystem, No. 10-2514 (7th Cir. Jan. 13, 2012) (reversing denial of certification), the Seventh Circuit has made a substantial contribution to post-Dukes jurisprudence.  Above all, it appears that the death knell for state law wage and hour class actions was sounded prematurely, as post-Dukes jurisprudence has distinguished these cases from gender discrimination claims.

The Texas Court of Appeals has more than doubled the attorneys’ fee award in a securities class action, holding that the trial court misconstrued the multiplier doctrine and failed to enhance class counsel’s lodestar according to several well-established factors. See Stratton v. XTO Energy, No. 02-10-00483, 2012 Tex. App. LEXIS 1089 (Tex. App. Feb. 9, 2012) (available here). The lodestar multiplier methodology applied in the Texas case is substantially the same across jurisdictions, including California. See Lealao v. Beneficial California, 82 Cal. App. 4th 19, 26 (2000) (“the primary method for establishing the amount of ‘reasonable’ attorney fees is the lodestar method”) and Wershba v. Apple Computer, 91 Cal. App. 4th 224, 255 (2001) (“Multipliers can range from 2 to 4 or even higher.”).

In Stratton, class counsel had successfully negotiated a settlement of the plaintiffs’ claims for breach of fiduciary duty arising out of defendants’ $41 billion merger. See Stratton, 2012 Tex. App. LEXIS at *1-4. The trial court awarded fees of $3.97 million. However, the appellate court held that the trial court had misapplied the widely used “Johnson factors,” which are analyzed to determine whether a multiplier is warranted and how large the multiplier ought to be. See id. at *6-13 (citing Johnson v. Georgia Highway Express, 488 F.2d 714 (5th Cir. 1974)). The Court of Appeals applied a 2.17 multiplier to the trial court’s award, arriving at the new, substantially increased fee award of $8.6 million. Stratton, 2012 Tex. App. LEXIS at *20-29.

In overturning the trial court’s fee award, the appellate court found that “the trial court ignored the uncontroverted evidence that (1) the suggested lodestar was calculated without enhancement by the Johnson factors and (2) that an enhancement was warranted by the facts of the case.” Id. at *9. The appellate court thus rejected the trial court’s assertion that a fee enhancement was inappropriate due to “a lack of evidence that the hours worked and rates billed were reasonable.” Id. at *3. The trial court’s failure to give due consideration to the Johnson factors and to the evidence thus “resulted in an award that cannot be said to be just.” Id.

The appellate court concluded that application of the Johnson factors supported the use of a multiplier. “The unenhanced lodestar does not reflect the exceptional results achieved by Plaintiffs’ counsel, the undesirability of this litigation, the high risk borne by its contingent nature, or the fact that the fee award requested is comparable to that awarded in similar class action litigation.” Id. at 29; accord Consumer Privacy Cases, 175 Cal. App. 4th 545, 556 (2009) (“Once the court has fixed the lodestar, it may increase or decrease that amount by applying a positive or negative ‘multiplier’ to take into account a variety of other factors, including the quality of the representation, the novelty and complexity of the issues, the results obtained, and the contingent risk presented.”).

In addition to analyzing the application of the Johnson factors, the Stratton decision also illuminates other commonly adopted principles of fee awards, including the valuation of work performed by paralegals and the use of expert testimony in determining whether the lodestar reflects a reasonable rate and number of hours. Id. at *14.

Stratton is likely to be relied on in California and the numerous other jurisdictions that have adopted the same lodestar multiplier framework, just as Johnson has been widely influential in shaping the analysis of attorney fee motions.