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In a per curiam opinion today applying the rule in Concepcion, the U.S. Supreme Court  reversed and remanded orders of the Supreme Court of Appeals of West Virginia, which held unenforceable all predispute arbitration agreements that apply to claims alleging personal injury or wrongful death against  nursing homes.  Marmet Health Care Center, Inc., et al. v.  Clayton Brown, et al., Case Nos. 11–391 and 11–394, 565 U. S. ____ (Feb. 21, 2012).

The U.S. Supreme Court held that the “Supreme Court of Appeals of West Virginia, by misreading and disregarding the precedents of this Court interpreting the FAA, did not follow controlling federal law implementing that basic principle.”  Id.  “When this Court has fulfilled its duty to interpret federal law, a state court may not contradict or fail to implement the rule so established.”

Background

In each of three negligence suits, a family member of a patient requiring extensive nursing care had signed an agreement with a nursing home on behalf of the patient.  Id. The agreements included arbitration clauses requiring the parties to arbitrate all disputes, other than claims to collect late payments owed by the patient.  Id. In each of the three cases, a family member of a patient who had died sued the nursing home in state court, alleging that negligence caused injuries or harm resulting in death. Id.

In a decision concerning all three cases, the Supreme Court of Appeals of West Virginia held that “as a matter of public policy under West Virginia law, an arbitration clause in a nursing home admission agreement adopted prior to an occurrence of negligence that results in a personal injury or wrongful death, shall not be enforced to compel arbitration of a dispute concerning the negligence.”  Id.

The state court considered whether the state public policy was pre-empted by the FAA:

The state court found unpersuasive this Court’s interpretation of the FAA, calling it “tendentious,” id., at 51a, and “created from whole cloth,” id., at 53a. It later concluded that “Congress did not intend for the FAA to be, in any way, applicable to personal injury or wrongful death suits that only collaterally derive from a written agreement that evidences a transaction affecting interstate commerce, particularly where the agreement involves a service that is a practical necessity for members of the public,”  id., at 84a.  The court thus concluded that the FAA does not pre-empt the state public policy against predispute arbitration agreements that apply to claims of personal injury or wrongful death against nursing homes.

Id.

Discussion

The Supreme Court held that the “West Virginia court’s interpretation of the FAA was both incorrect and inconsistent with clear instruction in the precedents of this Court.”  Id.  The Court held that the FAA includes “no exception for personal-injury or wrongful-death claims.”  Id.

Citing AT&T Mobility LLC v. Concepcion, 563 U. S. ___, ___ (2011), the Court wrote:

When state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the FAA.”  AT&T Mobility LLC v. Concepcion, 563 U. S. ___, ___ (2011) (slip op., at 6–7).  That rule resolves these cases. West Virginia’s prohibition against predispute agreements to arbitrate personal-injury or wrongful-death claims against nursing homes is a categorical rule prohibiting arbitration of a particular type of claim, and that rule is contrary to the terms and coverage of the FAA. See ibid.  See also, e.g., Preston v. Ferrer, 552  U. S. 346, 356 (2008) (FAA pre-empts state law granting  state commissioner exclusive jurisdiction to decide issue the parties agreed to arbitrate); Mastrobuono v. Shearson  Lehman Hutton, Inc., 514 U. S. 52, 56 (1995) (FAA preempts state law requiring judicial resolution of claims  involving punitive damages);  Perry v.  Thomas, 482 U. S.  483, 491 (1987) (FAA pre-empts state-law requirement that litigants be provided a judicial forum for wage disputes); Southland Corp. v.  Keating, 465 U. S. 1, 10 (1984) (FAA pre-empts state financial investment statute’s  prohibition of arbitration of claims brought under that  statute).

Granting the petition for certiorari, the Court vacated the judgment of the Supreme Court of Appeals of West Virginia is and remanded the cases for proceedings not inconsistent with this opinion.

By CHARLES JUNG

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Editorial note:  The author of California Wage & Hour Law appeared for respondent Ajamian in the opinion summarized below, Ajamian v. CantorCO2e, L.P., et al.  

In an opinion certified for publication, the First District Court of Appeal held that a broadly worded arbitration agreement that stated that “[a]ny disputes, differences or controversies arising under” a contract shall be settled by a panel of arbitrators was insufficient to establish “clear and unmistakable” evidence of an intent to delegate issues of enforceability or arbitrability to the arbitration panel.  Ajamian v. CantorCO2e, L.P., et al., No. A131025 (1st Dist., Div. 5 Feb. 6, 2012) (available at http://www.courtinfo.ca.gov/opinions/documents/A131025.PDF).

Although the arbitration provision was broadly worded and indicated that arbitration might be conducted under the rules of an arbitration service that gives arbitrators the power to decide the validity of arbitration agreements, it did not provide clear and unmistakable evidence that the parties intended to delegate authority to the arbitrator, rather than to the court, to decide the threshold issue of whether the arbitration provision itself was unconscionable.

Id.

Background

Plaintiff Ajamian filed a complaint against Defendants CantorCO2e and Margolis, asserting claims under the California’s Fair Employment and Housing Act, the California Labor Code, and other theories.  Id.  Defendants filed a petition to compel arbitration pursuant to the terms of a written employment agreement or, alternatively, an employee handbook.  Id.

The arbitration provision of the employment agreement read:

Any disputes, differences or controversies arising under this Agreement shall be settled and finally determined by arbitration.” (Italics added.) Further, the provision states: “It is expressly agreed that arbitration as provided herein shall be the exclusive means for determination of all matters arising in connection with this Agreement and neither party hereto shall institute any action or proceeding in any court of law or equity other than to request enforcement of the arbitrators’ award hereunder. The foregoing sentence shall be a bona fide defense to any action or proceeding instituted contrary to this Agreement.

Id.

Defendants contended that the threshold question of the enforceability of the arbitration provision should be decided by the arbitrator, Ajamian could not establish procedural unconscionability, and any provisions that were substantively unconscionable could simply be severed. Id.  Ajamian opposed the petition, contending that the court rather than the arbitrator was required to determine the issue and the arbitration provisions were unconscionable. Id. In addition, she argued that, even if there were a clear and unmistakable delegation of authority to the arbitrator to decide the enforceability of the arbitration provision, such a delegation is itself unconscionable and unenforceable. Id.

The Trial Court Order

The trial court judge Hon. Peter Busch of the San Francisco Superior Court agreed with Ajamian and denied the petition to compel arbitration. Id. By written order, the court ruled: (1) Ajamian is not bound by the arbitration provision in the handbook; (2) the court, rather than the arbitration panel, determines whether the arbitration provision of the Employment Agreement is enforceable; (3) the arbitration clause in the Employment Agreement is unconscionable; (4) the damages limitation in the arbitration provision of the Employment Agreement is unlawful and “the attorneys’ fee clause which the arbitration provision in the Employment Agreement would enforce is unconscionable;” and (5) the court would not sever the offending portions of the arbitration provision in order to save it. Id.

Discussion

Defendants contended that the employment agreement clearly and unmistakably sets forth an intent to delegate arbitrability issues to the arbitration panel.  Id.  Defendants “pointing primarily to the breadth of the arbitration provision and its proviso that arbitration may be conducted according to the rules of the AAA (under which an arbitrator has the power to determine the validity of an arbitration agreement).”  Id. Ajamian disagreed, and pointed to other language in the Employment Agreement that “suggests the arbitrator was not given exclusive authority to determine the enforceability of the arbitration provision.”

The Court of Appeal concluded that “Ajamian — and the trial court — have it right.”

We therefore hold that the clear and unmistakable evidence test is not met by language requiring arbitration of “[a]ny disputes, differences or controversies arising under” a contract. Even though, in this case, the agreement also contains language referring to “all matters” and purporting to preclude the parties from initiating a court proceeding, it remains uncertain whether this language merely buttresses the requirement that every substantive claim must be arbitrated. Thus, while there might be something short of an express delegation that constitutes clear and unmistakable evidence of the parties’ intent to arbitrate the unconscionability of an arbitration provision, this is not it.

Id.

Delegation Under AAA Rules

Defendants also contended that there was clear and unmistakable evidence of the parties’ intent to arbitrate the enforceability of the arbitration provision because the employment agreement specified that the arbitration could proceed according to the rules of the AAA, and those rules state that the arbitrator has the power to determine issues of his or her own jurisdiction.  Id.

The Employment Agreement stated that arbitration would be held “according to the rules of the National Association of Securities Dealers, Inc. (or, at [CantorCO2e's] sole discretion, the American Arbitration Association or any other alternative dispute resolution organization) now in force and hereafter adopted and the laws of the state of New York then in effect.” There is no evidence that Ajamian was given the AAA rules by the time she signed the Employment Agreement. After Ajamian sued, CantorCO2e exercised its unilateral discretion and demanded that Ajamian submit her claims to the AAA. As it turns out, the AAA rules provide: “The arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope or validity of the arbitration agreement.” (AAA Employment Arbitration Rules and Mediation Procedures (eff. Nov. 1, 2009) rule 6.a.)

Id.

In the end, the Court did not need to decide whether an “unqualified incantation of AAA rules establishes a clear and unmistakable delegation” since the Court concluded that the reference to AAA rules in the agreement was insufficient for another reason: the “Employment Agreement did not mandate that AAA rules would necessarily apply”.  Id.

Instead, the arbitration clause stated that the arbitration would be held according to NASD rules, AAA rules, or the rules of “any other alternative dispute resolution organization” selected by CantorCO2e in its sole discretion. As the trial court stated to appellants’ counsel: “But your argument depends on it being the AAA rules, and there’s . . . no way the plaintiff can know . . . as of the time that she signs this employment agreement that those are the rules that are going to apply.”

Id.

The Court concluded that the agreements language failed to clearly and unmistakably evince the parties’ mutual intent to have the arbitrators decide even the issue of enforceability.   Id. “The mere possibility that employer CantorCO2e might in the future require application of AAA rules does not show that employee Ajamian clearly and unmistakably assented to arbitrate the unconscionability of the arbitration agreement.”  Id.

Other Language in the Employment Agreement Raised Uncertainty

The Court further concluded that “[e]ven if the broad language of the arbitration provision and the reference to AAA rules evinced an intent to delegate the unconscionability issue to the arbitrators, in this case other provisions of the Employment Agreement create an ambiguity that renders the totality of the evidence on the issue neither clear nor unmistakable.”  Id.

Citing other California Court of Appeal decisions, the Court noted that as a “general matter, where one contractual provision indicates that the enforceability of an arbitration provision is to be decided by the arbitrator, but another provision indicates that the court might also find provisions in the contract unenforceable, there is no clear and unmistakable delegation of authority to the arbitrator.”  Id. (citing Parada v. Superior Court, 176 Cal.App.4th 1554, 1565-66 (2009) (fact that the contract’s severability clause authorized the “trier of fact of competent jurisdiction” — instead of “arbitration panel” or “panel of three (3) arbitrators” — to sever unenforceable contractual provisions suggests that the court could find the arbitration provision unenforceable); Hartley v. Superior Court, 196 Cal.App.4th 1249, 1257-58 (2011); Baker v. Osborne Development Corp., 159 Cal.App.4th 884, 888-94 (2008).

The agreement provided that a “court of competent jurisdiction” may determine that a covenant in the Employment Agreement is impermissibly “broad in scope, duration or geographical area” or in the nature of a penalty, in which case the court should limit the scope, duration or geographical area of such covenant or reduce the liquidated damages to the extent necessary to render the covenant reasonable and enforceable.  Id.  The Court concluded that this language shows that a court would in some circumstances have authority to rule on the breadth of the parties’ covenants.  Id.

Moreover, the Court found that the “fact that the Employment Agreement recognizes the court’s authority to adjudicate the proper scope of some covenants in the Employment Agreement is inconsistent with the assumption . . . that all issues in connection with the agreement must be determined by the arbitrator.”  Id.  Noting that other alternative inferences might be drawn from the agreement’s language, the court concluded that “[i]n the final analysis, the language creates an ambiguity that precludes a finding of clear and unmistakable evidence.” Id.

Arbitration Under the Handbook

As an alternative to enforcing the arbitration provision in the Employment Agreement, Defendants sought to enforce the arbitration provision in the Handbook.  Id.  The Court rejected this argument.  Id.

The employment agreement was “terminated as of March 1, 2010” and pursuant to a section of the agreement, at that point “the terms of Employee’s employment, including, but not limited to Employee’s compensation, shall be governed by Company’s policies then in effect. . . .”  Id. By continuing in CantorCO2e’s employ, Defendants argued, she agreed to abide by the arbitration policy and, more specifically, the arbitration agreement contained in the Handbook.  Id.

The Court disagreed:

Although section 4 of the Employment Agreement dictates that Ajamian’s employment would be “governed” by CantorCO2e’s “policies then in effect,” it does not specifically state she would be bound by any arbitration agreement or even mention arbitration at all. Nor was there evidence that she was provided, upon termination of the Employment Agreement, a copy of those “policies then in effect.” Moreover, while Ajamian did have the Handbook containing the company’s policy of arbitrating disputes, she never signed or agreed to the actual arbitration agreement in the Handbook, and she was never even asked to do so after the Employment Agreement was terminated. Under the circumstances, section 4 cannot be construed to validly obligate Ajamian to arbitrate her claims.

Id.

The Court further noted the oddity of the result sought by appellants:

Although not a basis for our ruling, we also note a certain oddity to the result appellants urge. Appellants do not contend Ajamian was bound by the arbitration provision in the Handbook until after the termination of the Employment Agreement on March 10, 2010. Because the arbitration provision in the Employment Agreement was unconscionable, Ajamian was not bound by any valid arbitration provision from the commencement of her employment in September 2006 through March 10, 2010; if the arbitration clause in the Handbook did apply, it applied only from March 10, 2010, until the termination of her employment on April 16, 2010. It would be a strange result indeed if, under the facts of this case, an arbitration clause covering approximately the last five weeks of Ajamian’s employment compelled arbitration of claims that had accrued within the 30 months prior. In our view, such a holding would permit the tail to wag the dog, an untenable proposition no matter how favored a breed arbitration might be.

The Court concluded that Defendants failed to establish error, and affirmed the trial court’s order.

Justices and Attorneys

Associate Justice Henry E. Needham, Jr. wrote the opinion for the Court.  Acting Presiding Justice Mark B. Simons and Associate Justice Terence L. Bruiniers concurred.

Trial court judge: Hon. Peter Busch of the San Francisco Superior Court.

Brian L. Johnsrud and Patrick M. Sherman of Curley, Hessinger & Johnsrud for Defendants and Appellants.

Charles H. Jung and Andrew R. Kislik of Nassiri & Jung LLP for Plaintiffs and Respondents.

William C. McNeill, Michael Gaitley, Claudia Center, Rachael Langston of The Legal Aid Society – Employment Law Center, Counsel for Amicus Curiae in Support of Plaintiff Lena Ajamian.

By CHARLES JUNG

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In an unpublished opinion, the Second District Court of Appeal held that an arbitration clause that states that “[a]ny dispute whatsoever arising out of or referable to this Agreement, . . . as to the arbitrator’s jurisdiction, or as to the ability to arbitrate any such dispute, shall be submitted to final and binding arbitration” manifested a clear and unmistakable intent to delegate the arbitrability decision to the arbitrator.  Gallo v. Youbet.com, Inc., 2012 WL 470426, No. B230274 (Feb. 14, 2012).

Background

Plaintiff Gallo is an attorney a former General Counsel of defendant Youbet.com, Inc. Id. He signed an employment agreement, which included the following arbitration clause:

Any dispute whatsoever arising out of or referable to this Agreement, including, without limitation, any dispute as to the rights and entitlements and performance of the parties under this Agreement or concerning the termination of Executive’s employment or of this Agreement or its construction or its validity or enforcement, or as to the arbitrator’s jurisdiction, or as to the ability to arbitrate any such dispute, shall be submitted to final and binding arbitration in Los Angeles, California, by and pursuant to the Labor Arbitration Rules of the American Arbitration Association with discovery proceedings pursuant to Section 1283.05 of the California Code of Civil Procedure.   The arbitrator shall be entitled to award any relief, which might be available at law or in equity, including that of a provisional, permanent or injunctive nature.   The prevailing party in such arbitration as determined by the arbitrator, or in any proceedings in respect thereof as determined by the person presiding, shall be entitled to receive its or his reasonable attorneys’ fees incurred in connection therewith.

Id.

Defendant moved to compel arbitration, and the trial court granted the motion except for two causes of action for alleged violation of FEHA.  Id. The trial court did not issue a written rationale for its ruling or orally explain its rationale at the hearing.  Id.

Discussion

The Second District held that the arbitration agreement clearly and unmistakably delegated the threshold issue of arbitrability to the arbitrator.  Id.

Here, the arbitration provision in the Employment Contract, on its face, manifests a clear and unmistakable intent to have the arbitrator determine issues of arbitability.   The parties specifically and unambiguously agreed that “[a]ny dispute whatsoever arising out of or referable to this Agreement, … as to the arbitrator’s jurisdiction, or as to the ability to arbitrate any such dispute, shall be submitted to final and binding arbitration.   In our view, this language, standing alone, leaves no doubt that Gallo and appellant intended the arbitrator (rather the court) to decide whether claims arising out of the Employment Agreement are subject to arbitration.

Id.

The court further found that the incorporation of the AAA rules, which include themselves include a delegation clause, also supported delegation.

This conclusion is bolstered by the fact that Gallo agreed to have the AAA Employment Dispute Resolution rules, which assign issues of arbitability to the arbitrator,FN8 apply to his dispute when he originally sought arbitration of his claims against appellant in 2009.

Id.

Accordingly, the court agreed with appellant that under the arbitration provision in Gallo’s Employment Agreement, the issue of whether the FEHA claims were subject to arbitration was a determination for the arbitrator to make rather than the lower court.  Id.

Judges and Attorneys

Associate Justice Fred Woods wrote the opinion for the Court.  Presiding Justice Dennis M. Perluss and Associate Justice Frank Y. Jackson concurred.

Ogletree, Deakins, Nash, Smoak & Stewart, P.C., Charles L. Thompson and Michael J. Nader for Defendant and Appellant.

Rosa Kwong for Plaintiff and Respondent.

By CHARLES JUNG

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In an unpublished decision, the First District Court of Appeal affirmed the trial court’s denial of a motion to compel arbitration in a wage and hour class action, where defendants conducted voluminous discovery and filed and fully litigating two motions to compel further responses to discovery, a motion for sanctions and a motion for a protective order.    Partridge, et al. v. Hott Wings, Inc., et al., No. A130266, 2012 WL 470458 (Feb. 14, 2012).

Discussion

The Court found that Defendants’ delay in filing their petition to compel arbitration “connotes an intent not to arbitrate”.  Id. Defendants conducted substantial discovery:

Between March 2010 and the October 2010 hearing on defendants’ motion to compel arbitration, defendants engaged in voluminous written discovery to which plaintiffs responded.   In addition, defendants deposed numerous plaintiffs and third party witnesses.   Although plaintiffs had begun deposing witnesses, they had not yet obtained basic documents from defendants through discovery.   The discovery focused on the liability of individual defendants and the franchise defendants that employ plaintiffs.   As a result of defendants’ discovery requests, plaintiffs provided information regarding plaintiffs’ estimated damages, which defendants were responsible for which violations, and the liability of the individual as well as the franchise defendants.   A reasonable inference is that the information gained from defendants’ discovery goes to significant issues in plaintiffs’ case.

Id.

In addition, the Court found that Defendants “substantially invoked the litigation machinery” by:

filing and fully litigating two motions to compel further responses to discovery, a motion for sanctions and a motion for a protective order.   They also initiated numerous meet and confer proceedings and threatened to file additional motions to compel, for sanctions or to enforce discovery orders.   The court’s order noted it had presided over some of the discovery disputes, while others were before the appointed discovery referee.

Id.

Supporting the order, was trial court’s express finding that defendants “used the discovery processes of the court to gain information about Plaintiff’s claims that could not have been gained in arbitration.” Id.

The Court of Appeal concluded that the “circumstances here, considered as a whole, establish that defendants unreasonably delayed in moving to compel arbitration and conducted voluminous discovery to gain information regarding plaintiffs’ case not available in arbitration, and that plaintiffs were prejudiced.” Id.  Finding that substantial evidence supported the trial court’s finding that defendants waived the right to compel arbitration, the Court of Appeal affirmed the decision.  Id.

Justices and Attorneys

Associate Justice Mark B. Simons wrote the opinion for the court.  Presiding Justice Barbara J.R. Jones and Associate Justice Terence L. Bruiniers concurred.

Burton Fredrick Boltuch, Law Offices of Burton Boltuch, 1300 Clay Street, Suite 600, Oakland, CA 94612-1427, Rachel Elizabeth Brill, Goldstein, Demchak, Baller, et al, 300 Lakeside Drive-Suite 1000, Oakland, CA 94612, for Plaintiffs and Respondents.

Timothy Charles Cronin, Law Ofcs of Timothy C. Cronin, 744 Montgomery Street, Second Floor, San Francisco, CA 94111, for Defendants and Appellants.

By CHARLES JUNG

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The Court of Appeal for the First District granted plaintiff’s motion to dismiss an appeal, where the employer appellant sought review of a trial court order that did not compel an employee to arbitrate her PAGA claims.  Reyes v. Macy’s, Inc., No. A133411, 202 Cal.App.4th 1119 (1st Dist. Dec. 21, 2011).  The court held that the portion of the trial court’s order that failed to compel employee to arbitrate her class claims and PAGA claims was not immediately appealable; and plaintiff’s PAGA claim was not an individual claim and thus was not within the scope of arbitration request.  Id. (holding that the order granting Defendant’s own motion to compel arbitration of the individual claims “is not appealable, and the remainder of the order denying the motion to dismiss representative [PAGA] claims is not a final judgment and, therefore, also is not appealable . . . .”).

Background

Plaintiff and respondent Reyes brought action against her employer Macy’s, alleging numerous class action labor code violations and a cause of action under the Labor Code Private Attorneys General Act of 2004 (“PAGA”), as well as individual claims for discrimination, harassment, and retaliation.  Id.

In the trial court, Macy’s filed a “motion to compel arbitration on an individual basis, dismiss class allegations, and stay civil action,” asking the court to enforce the parties’ agreement to arbitrate, compel the plaintiff to arbitrate individual claims, dismiss class/representative claims and, if the motion were granted, stay the proceedings until arbitration is completed.  Id.  San Francisco Superior Court Judge Charlotte Walter Woolard held that:

All of plaintiff’s individual claims are severed and are subject to arbitration.   These individual claims are to proceed to arbitration.   Plaintiff’s class claims and PAGA claims, and discovery related to those claims, are stayed and shall remain in this court until the individual claims are arbitrated.

Macy’s filed a notice of appeal and plaintiff has moved to dismiss the appeal.

Discussion

An “order granting a motion to compel arbitration is not an appealable order.” Id. (citing Abramson v. Juniper Networks, Inc., 115 Cal.App.4th 638, 648-49 (2004)).  Macy’s argued that an order denying or dismissing a motion to compel arbitration is an appealable order, and “attempt[ed] to justify the present appeal by arguing that by refusing to compel plaintiff to arbitrate her class claims and the claim for penalties under PAGA, the trial court partially denied the motion to compel arbitration, rendering the order appealable.”  Id.  The court did not agree:

Neither literally nor functionally  did Macy’s request the trial court to compel the arbitration of these claims, nor did the court refuse to do so.   Macy’s moved the trial court “to dismiss Reyes’ class allegations set forth in her second amended complaint.”   Macy’s contention is not that the representative claims should be arbitrated, but that they should be dismissed.   The trial court stayed the class and PAGA claims; it has not yet determined whether some or all of these claims should eventually be dismissed or may warrant judicial relief.

Macy’s further argued that plaintiff’s PAGA claim sought relief for herself as well as for other employees and that the court’s order therefore is effectively a denial of the request to arbitrate her individual claim under PAGA.  The court disagreed, noting that “plaintiff may not and does not bring the PAGA claim as an individual claim, but as the proxy or agent of the state’s labor law enforcement agencies.” Id. (internal quotation omitted).

Although plaintiff’s complaint alleges, in conformity with the statutory language, that “as an aggrieved employee, [she] hereby seeks recovery of civil penalties as prescribed by the Labor Code Private Attorney General Act of 2004 on behalf of herself and other current and former employees of Defendant against whom one or more of the violations of the Labor Code was committed,” the claim is not an individual one. A plaintiff asserting a PAGA claim may not bring the claim simply on his or her own behalf but must bring it as a representative action and include “other current or former employees.”

Id.

The Court concluded that “[b]ecause the PAGA claim is not an individual claim, it was not within the scope of Macy’s request that individual claims be submitted to arbitration and the court’s order may not be construed as a denial of any such request.” Id.

Judges and Attorneys

Associate Justice Stuart R. Pollak wrote the opinion for the court.

Administrative Presiding Justice William R. McGuiness and Associate Justice Martin J. Jenkins concurred.

The trial court judge was Hon. Charlotte Walter Woolard of the San Francisco Superior Court.

Daniel H. Qualls, Robin G. Workman, Aviva N. Roller, Qualls & Workman, L.L.P., San Francisco, for plaintiff and respondent.

David S. Bradshaw, Jackson Lewis, L.L.P., Sacramento, Betty Thorne Tierney, Brian M. Parsons, for defendants and appellants.

By CHARLES JUNG

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The Court of Appeal for the Second District held that a denial of class certification cannot establish collateral estoppel against unnamed putative class members. Bridgeford v. Pacific Health Corporation, et al., No. B227486, 202 Cal.App.4th 1034 (2d Dist. Jan. 18, 2012).

Background

Plaintiffs Bridgeford and Tarin filed a class action complaint in May 2010 against Pacific Health Corporation and other entities, alleging that defendants committed numerous wage and hour violations, including (1) failure to pay wages due upon discharge or resignation, (2) failure to pay regular and overtime wages due semimonthly, (3) failure to provide meal breaks, (4) failure to provide rest breaks, (5) failure to provide itemized wage statements, (6) failure to pay minimum wages for time worked off-the-clock, (7) failure to pay overtime wages, and (8) unfair competition.  Id.

The trial court sustained a demurrer without leave to amend.  Id.  Plaintiff’s appealed, contending the trial court misapplied the doctrine of collateral estoppel in holding that their class claims are precluded, and there is no basis to dismiss their individual claims or their representative claims under the Labor Code Private Attorneys General Act of 2004 (PAGA) (Lab. Code section 2698, et seq.).

Discussion

Following the recent U.S. Supreme Court decision in Smith v. Bayer  Corporation, — U.S. —-, 131 S.Ct. 2368, 180 L.Ed.2d 341 (2011), the Second District held that unnamed putative members of a class that was never certified cannot be bound by collateral estoppel.   Id. The court concluded that “if no class was certified by the court in the prior proceeding, the interests of absent putative class members were not represented in the prior proceeding and the requirements for collateral estoppel cannot be established . . . .”  Id.

The Second District discussed the Bayer case:

Applying common law principles of issue preclusion, the high court held that unnamed putative class members cannot be bound by issue preclusion if the class was never certified in the prior proceeding.   (Id. at pp. 2380-2381.)   Smith v. Bayer  Corporation stated, “[n]either a proposed class action nor a rejected class action may bind nonparties” (id. at p. 2380), and, “[t]he great weight of scholarly authority … agrees that an uncertified class action cannot bind proposed class members.”   (Id. at p. 2381, fn. 11.)   The high court explained that unnamed putative class members as nonparties can be bound by issue preclusion only if there was a properly certified class because only in those circumstances can the court in the later proceeding conclude that their interests were adequately represented in the prior proceeding.   (Id. at pp. 2379-2381 & fn. 11.)

The Second District found the reasoning persuasive and concluded that “under California law, that the denial of class certification cannot establish collateral estoppel against unnamed putative class members on any issue because unnamed putative class members were neither parties to the prior proceeding nor represented by a party to the prior proceeding so as to be considered in privity with such a party for purposes of collateral estoppel.”  Id.

The court reasoned that since plaintiffs were not named plaintiffs in a prior case and the trial court in the prior case denied class certification, “plaintiffs as unnamed putative class members . . . cannot be bound by collateral estoppel with respect to any issue decided in connection with the denial of class certification.” Id.

Judges and Attorneys

Associate Justice H. Walter Croskey wrote the opinion for the Court.  Presiding Justice Joan D. Klein and Associate Justice Patti S. Kitching concurred.

Law Offices of Mark Yablonovich, Mark Yablonovich, Los Angeles, Neda Roshanian and Michael D. Coats for Plaintiffs and Appellants.

Silver & Freedman, Los Angeles, Andrew B. Kaplan and Jeffrey W. Mayes for Defendants and Respondents.

By CHARLES JUNG

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The First District Court of Appeal held that summary judgment was properly granted in a wage and hour case because plaintiff unlicensed law school graduate performed duties that brought him within the exemption for learned professionals.  Zelasko-Barrett v. Brayton-Purcell, LLP, — Cal.Rptr.3d —-, 2011 WL 3594015, No. A130540 (1st Dist. Aug. 17, 2011) .

Background

Plaintiff was employed by the Brayton-Purcell, LLP (Brayton) law firm as a Law Clerk II after he graduated from law school but before he passed the bar examination. Id. *1. After being admitted to the bar, plaintiff was designated as an associate attorney, and performed tasks customarily performed by junior attorneys. Id. He drafted pleadings, discover demands and responses, did legal research and drafted memoranda of points and authorities, interviewed witnesses, etc. Id. The trial court granted Brayton’s motion for summary judgment and sustained objections to numerous statements where plaintiff denied he was employed in a professional capacity and performed work covered by the professional exemption. Id.

Plaintiff filed an action after voluntarily departing from the law firm, and alleged that he had been misclassified.  Brayton successfully moved for summary judgment on the ground that in the Law Clerk II position plaintiff had been an “exempt professional employee.” Id. Plaintiff appealed. Id.

Two Distinct Professional Exemptions

Under Section 3(a) of IWC Wage Order 4-2001, the professional exemption applies when an employee is licensed or certified in California and primarily engaged in the practice of law, medicine, dentistry, optometry, architecture, engineering, teaching, or accounting. Id. This is generally considered the “enumerated professions” exemption. Id.
Additionally, the professional exemption applies, pursuant to Section 3(b), to employees who are primarily engaged in an occupation recognized as a learned or artistic profession, defined as work requiring advanced knowledge customarily acquired by a prolonged course of specialized intellectual instruction and study or that is predominantly intellectual and varied in character. Id. The output of the work cannot be standardized in relation to a given period of time. This is sometimes described as the “learned professions” exemptions. Id. Both professional exemptions require that the employee customarily and regularly exercise discretion or independent judgment and who earns a monthly salary that is no less than twice the state minimum wage for full-time employment. Id.

Discussion

The trial court held that plaintiff was an exempt employee under the learned professions exemption.  Id. *3.  Plaintiff argued that because the law requires licensure, he could not be considered an exempt employee unless he was licensed to practice law. Id. The Ninth Circuit addressed this issue in Campbell v. Pricewaterhouse Coopers, LLP, 602 F.Supp.2d 1163, 1172, revd. (2011) 642 F.3d 820 (E.D. Cal. 2009), which held that unlicensed accountants can fall under the learned professions exemption. Id. The Ninth Circuit noted that the learned professions exemption was added to the wage order because the enumerated professions exemption relied too much on credentials. Id.

The Ninth Circuit in Campbell rejected plaintiff’s argument that allowing unlicensed accountants to fit within Subsection (b) would render Subsection (a) “surplusage”.  The Campbell Court reasoned that the two sections had distinct purposes, because subsection (a) is much easier for an employer to prove.  Id. *4.

The First District agreed with the reasoning of the Ninth Circuit:

Consistent with the decision of the Ninth Circuit, we conclude that the professional exemption applies to a law school graduate performing legal services but not yet licensed to practice law if all of the conditions of subsections (b), (c), and (d) of section 11040, subdivision (1)(A)(3) are satisfied.

Judges and Attorneys

Acting Presiding Justice Stuart R. Pollak wrote the opinion for the court.  Justices Peter J. Siggins and Martin J. Jenkins concurred.

Arthur Chambers for Plaintiff and Appellant.

Littler Mendelson, Alan S. Levins, Kurt R. Bockes, Rachelle L. Wills for Defendant and Respondent.

By CHARLES JUNG

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Defendant United Parcel Service, Inc. prevailed against plaintiff employee on various wage and hour causes of action including failure to pay overtime and failure to provide breaks.  Plancich v. United Parcel Service, Inc., — Cal. Rptr. 3d —-, 2011 WL 3506066, No. E050631 (4th Dist. Aug. 11, 2011). UPS won on all six counts, and the trial court awarded costs but then granted Plaintiff Plancich’s motion to strike costs.  Id. *1.  The Fourth District reversed the order granting the motion to strike costs, holding that a prevailing employer may recover costs in a wage suit.

Background

Plancich worked for UPS as an on-road supervisor.  Id.  He asserted in his complaint that he worked more than eight hours a day and more than 40 hours a week.  Id.  He also alleged that UPS misclassified him as exempt under the executive, administrative, or professional exemptions. Id.  The jury found Plancich was an exempt employee. Id. As to the unfair competition cause of action, the trial court found in favor of UPS. Id. The trial court ordered that UPS recover its costs from Plancich, in an amount to be determined. Id.

After UPS filed its memorandum of costs in the amount of $38,387.20, Plancich filed a motion to strike and tax costs based on Earley v. Superior Court, 79 Cal. App. 4th 1420 (4th Dist. 2000).  Plaintiff argued that in Earley, the appellate court held that, according to Labor Code section 1194, an employer may not recover costs in an employee’s unsuccessful case for overtime compensation. Id. Plancich asserted both that the trial court could not order Plancich to pay UPS’s costs because it was bound by this precedent, and that UPS’s costs were unreasonable. Id.

The trial court agreed that allowing costs in this case would eviscerate the “public policy benefits” of section 1194. Id. *2. Also, because all of Plancich’s claims were statutorily based, the trial court determined that any apportionment of costs would defeat the legislative intent and chill workers who have had their statutory rights violated.  Id. The trial court granted the motion to strike costs in its entirety. Id.

Discussion

Code of Civil Procedure Section 1032

The Fourth District reversed.  The Court agreed with UPS’s assertion that it is entitled to costs pursuant to Code of Civil Procedure § 1032(b), the “prevailing party” cost shifting statute, which provides that “Except as otherwise expressly provided by statute, a prevailing party is entitled as a matter of right to recover costs in any action or proceeding.”  Id. The court cited the California Supreme Court decision in Murillo v. Fleetwood Enterprises, 17 Cal. 4th 985, 991(1998) for the proposition that if a statute is silent regarding costs for a particular party, then the statute does not contain an “express” costs provision for that particular party. The court reasoned that since Labor Code section 1194 does not provide an express exception to the general rule permitting a prevailing party to recover costs under C.C.P. 1032, UPS was entitled to recover its costs.  Id. *3.

Plancich argued that Code of Civil Procedure section 1032 (b) is not applicable to the instant case, and that Labor Code section 218.5 instead governs whether a prevailing party can collect costs in a suit for nonpayment of wages. Id. Without deciding the issue, the court held that UPS should still be awarded its costs under Labor Code section 218.5 as the prevailing party. Id.

The Court also rejected Plancich’s argument that allowing a prevailing employer to collect costs will have a chilling effect on employees bringing suits for unpaid overtime compensation. Id. *5.

Plancich’s argument about the chilling effect on employee lawsuits cannot be reached by this court, because when the statutory language is unambiguous, as it is in this case, then the plain meaning of the statute governs the outcome. The argument that a possible chilling effect could result from prevailing employers recovering their costs is more properly addressed to the Legislature.

Id. (internal quotation omitted).

Judges and Attorneys

Associate Justice Douglas P. Miller wrote the opinion for the Court, with Associate Justices Betty Ann Richli and Jeffrey King concurring.

Appeal from an order of Judge Ben T. Kayashima of the Superior Court of San Bernardino County.

Paul, Hastings, Janofsky & Walker, Paul Hastings, George W. Abele and Caroline Lee Elkin for Defendant and Appellant.

Furutani & Peters and John A. Furutani for Plaintiff and Respondent.

By CHARLES JUNG

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California’s Sixth District Court of Appeal held that a genuine issue of material fact existed as to whether eight-week leave was a sabbatical or regular vacation precluded summary judgment in former employee’s class action against the former employer.  Paton v. Advanced Micro Devices, — Cal. Rptr. 3d —-, 2011 WL 3369346, No. H034618 (6th Dist. Aug. 5, 2011).

Background

Plaintiff Eric Paton sued defendant Advanced Micro Divices, Inc. on behalf of himself and a class of others, alleging that Defendant had failed to pay him for an eight-week sabbatical he earned but had not used when he retired. Id. *1 Salaried employees who served for seven years were eligible for an eight-week fully paid sabbatical.  Id. Plaintiff argued that the sabbatical was extra vacation and, pursuant to Labor Code section 227.3, the employer could not require an employee to forfeit vacation pay.  Id.  Plaintiff cited Suastez v. Plastic Dress-Up Co., 31 Cal. 3d 774 (1982), to support his claim that the sabbatical had vested over the seven years he had worked for defendant and he was entitled to the pay when he resigned.  Id.  Class members who had not worked for the full seven years or more were entitled to payment for the unused sabbatical in proportion to the time they had worked. Id.

The trial court granted defendant’s motion for summary adjudication, finding that the sabbatical program offered a true sabbatical. Id.

Discussion

The court first addressed the issue of what a “vacation” means under Section 227.3.  Id. at *6.  It noted that in Suastez, the California Supreme Court characterized vacation as deferred compensation, or a concurrently earned component of an employee’s wages. Id. Vacation is typically earned in proportion to the length of employment.  Id.  Because vacation is considered deferred compensation, the only requirement for vacation is the employee’s rendering services for the employer. Id. The Sixth District noted that the Suastez Court differentiated vacation from incentive compensation, such as cash bonuses or stock option plans, which are used to induce employees to serve efficiently and faithfully. Id. The material difference is that vacation vests simply by the employee working for his employer while incentive compensation requires that the employee meet certain threshold requirements to earn the compensation. Id.

In the instant case, the Court of Appeal also differentiated vacation from paid time off because paid time off is conditioned on the occurrence of a specific event, such as a federal holiday, or granted for a particular purpose, such as illness. Id. An employee’s right to paid time off vests when the reason for the leave arises and the employee is expected to use the leave for the identified purposes. Id. Vacation, on the other hand, can be used at any time for any purpose. Id.

Therefore, the definition of vacation is paid time off that accrues in proportion to the length of the employee’s service, is not conditioned upon the occurrence of any event or condition, and usually does not impose conditions upon the employee’s use of the time away from work. Id. *7.

Second, the court discussed the definition of “sabbatical” and defined “sabbaticals” as a conditional type of paid leave.  Id.  Sabbaticals are for a special purpose and conditional because the employee is expected to use their time in a certain identified purpose. Id. They also give the employee incentive to continue with the institution that allows them to grow professionally. Id. The court recognized that traditionally, the sabbatical is used in academic settings but could be applied to corporate settings as well. Id.

The court noted that in the corporate setting, sabbaticals are typically shorter and more frequent than the traditional academic sabbatical and do not require the employee to have a particular purpose or to account for his or her time while on leave. Id. The difficulty of determining whether a corporate sabbatical should be considered vacation arises when the sabbatical is granted based only on the length of service and is unconditional as to the use of the employee’s time. Id. *8. The court reasoned that while a sabbatical program like this has elements of a regular vacation, it could still be classified a legitimate sabbatical if the facts show that the leave is designed as an incentive for continued and improved performance by the most experienced employees and not merely as a reward for a prior period of service. Id.

Plaintiff urged the court to apply a federal district court opinion, Drumm v. Morningstar, Inc., 2009 U.S. Dist. LEXIS 108709 (N.D.Cal. Nov. 5, 2009), and a four factor test set forth in DLSE opinion letters.  Id.  The Court noted that it neither Drumm nor the DLSE test is binding on the court and articulated its own four factor test for identifying when a sabbatical program is not regular vacation.  Id. The four factors articulated by the Court were : (1) whether the leave is granted frequently or infrequently; (2) whether the length of the leave is adequate to achieve the employer’s purpose; (3) whether it is granted in addition to a regular vacation; and (4) whether the program incorporates some features to demonstrate that the employee is expected to return to work for the employer after the leave is over. Id.

Additionally, the court noted that other factors, such as the rank or classification of the employee to whom the sabbatical is offered, may be relevant so each case must be decided on its own facts. Id.

Holding

The court concluded that defendant did not meet its burden of showing that one or more of the elements of plaintiff’s wage claim could not be established or there was a complete defense to it. Id. The court found that evidence showed that the defendant’s sabbatical program had elements of a vacation: it was based on the employee’s length of service, allowed defendant to postpone a planned leave for business reasons, and the written policy did not impose any conditions on the time off. Id. *10. Employees did not have to account for the way they spent their time off.  Id.  While the defendant did produce evidence to support its claim that the leave was a legitimate sabbatical, it was not dispositive.  Id.  The court found that a jury could reach a reasonable decision that the policy was intended as an incentive to induce experienced employees to continue working for the program and increase their productivity or creativity when they did return to work; a jury could also reasonably decide that the leave was intended as an additional vacation for longer-term employees. Id. at *11.

The “crucial factual question” for the court was: “What was the true purpose of the program?”  Id. at *10.

Although the underlying facts, such as they are, are essentially undisputed, the ultimate fact to be determined is defendant’s purpose in establishing its sabbatical policy. That is the central fact in dispute and the record before us does not resolve it conclusively. While there are facts to support a finding that the sabbatical was intended as incentive to induce experienced employees to continue working for defendant and increase their productivity or creativity upon return to work, reasonable minds could find, instead, that the leave was actually intended as additional vacation for longer term employees.

Therefore, the court reversed and remanded, deciding that summary judgment was not appropriate.

Judges and Attorneys

Justice Eugene M. Premo wrote the opinion for the Court, with Presiding Justice Conrad L. Rushing and Justice Franklin D. Elia concurring.

Trial Judge: Hon. Jack Komar, of the Santa Clara County Superior Court.

Gergosian & Gralewski, Edward M. Gergosian, Robert J. Gralewski, Jr.,  Clarissa E. Riley, Eric J. Sidebotham, APC, Eric J. Sidebotham, Daniel M. Shafer, Law Offices of Russell J. Hanlon, Russell J. Hanlon, for Plaintiffs/Appellants, Eric Paton et al.

Orrick, Herrington & Sutcliffe, Lynne C. Hermle, Michael A. Aparicio, for Defendant/Respondent, Advanced Micro Devices, Inc.

By CHARLES JUNG

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In a wage and hour, failure to accommodate, and disability discrimination case, a welder alleged that his employer terminated him because of his intestinal ailment.  Cubias v. Murray’s Iron Works Inc., 7 Trials Digest 14th 14, 2010 WL 5690615, Case No. BC406749 (Cal. Superior, Verdict: July 29, 2010).

Plaintiff alleged that he was employed as an aluminum welder until defendant Murray’s Iron Works terminated his employment.  Plaintiff alleged he was harassed and terminated, when he disclosed his medical condition/disability called diverticulosis or diverticular disease., which occurred when pressure in plaintiff’s colon formed bulging pouches that can cause severe stomach cramps, aches, constipation, and/or diarrhea. Id.

Plaintiff alleged disability discrimination, failure to provide reasonable accommodation, failure to engage in the interactive process, unlawful retaliation, unlawful retaliation in violation of public policy, harassment, wrongful termination in violation of public policy, failure to prevent discrimination and harassment, failure to prevent retaliation, invasion of privacy, intentional infliction of emotional distress, and failure to pay overtime wages against defendant Murray’s Iron Works.  Id. Against defendant Irene Leisner, the Human Resources Manager and co-owner of Murray’s Iron Works, plaintiff alleged harassment, invasion of right to privacy, and intentional infliction of emotional distress for allegedly entering the men’s restroom at work and yelling at him to get back to work and to hurry up while he was using the restroom. Id.

The jury found that: plaintiff had a disability but found that it was not a motivating reason for his termination; plaintiff did not request an accommodation; he was not terminated in violation of public policy; defendants’ conduct was not outrageous; defendants did not invade plaintiff’s privacy, and defendant Murray’s Iron Works did not willfully fail to pay the full amount of wages earned by plaintiff on his last day of employment.  Id. But Plaintiff was awarded $212 against defendant Murray’s Iron Works on the cause of action for violation of Labor Code sections 201 and 203, for failure to pay all wages that are earned and unpaid are due immediately at the time of termination.

Judges and Attorneys

Judge Kevin C. Brazile

For Plaintiff:  Richard Y. Chen, Torey J. Favarote, Paul M. Gleason, Tuyet T. Nguyen, Janet S. Yavrouian, of Gleason & Favarote, Los Angeles.

For Defendant:  Paul M. Kelley and Amy Semmel, of Donfeld, Kelley & Rollman, Los Angeles.

By CHARLES JUNG

The Northern District dismissed plaintiffs’ FLSA and California Labor Code claims in an involuntary servitude case.  Shuvalova v. Cunningham, No. C 10-02159 RS, 2010 WL 5387770 (N.D. Cal. Dec. 22, 2010).  The case involved the “unusual scenario of one spouse bringing claims against the other for alleged violations of the Trafficking Victims Protection Reauthorization Act (TVPRA).” Id. *1.  Natalya Shuvalova and her daughter Elizabeth Shuvalova claimed that defendant and his adult son fraudulently lured them from Russia to the United States, induced Natalya to marry one defendant, and then forced plaintiffs into involuntary servitude at defendant’s rural property in Clearlake, California.  Id. Plaintiffs claimed that for seven months, they were forced by defendants’ alleged verbal and physical threats to perform heavy, outdoor labor on the property. Id. Plaintiffs raised eighteen claims for violations of the TVPRA, federal and state labor law, and state contract and tort law.  Id. Defendants moved to dismiss the entire complaint under Rule 12(b)(6).  Id.

Background

The court presented the allegations of the complaint as follows:

Natalya and Joe met through a computer dating service in October 2005. At the time, Natalya lived in Russia and Joe lived then and now in Clearlake, California. They began a two-year relationship involving frequent emails and phone calls, as well as two vacations together each lasting two weeks. In October 2005, [FN1] Joe proposed to Natalya and promised to provide a loving home to her and her daughter Liza. Natalya and Liza arrived in the United States in February 2008 and began living with Joe at the Clearlake property. Joe’s thirty-five-year-old son, Dan, also lived at the house on the weekends. Natalya and Joe married on May 3, 2008. . . .

According to the complaint, Joe began physically and verbally threatening both Natalya and Liza within weeks of their arrival. Joe threatened Natalya with serious physical harm including death. He asked Liza to help him “[get] rid of her mother.” Joe threw furniture, plates, and cups at plaintiffs. He kept guns and large knives around the house, often grabbed them during his bouts of rage, and threatened plaintiffs with physical violence if they disobeyed him or told anyone about their situation. He enforced his threats by grabbing and violently shaking Natalya.

Plaintiffs were forced by Joe, with Dan’s help, to engage in heavy, manual labor on the rural property. Natalya was locked out of the house and made “to move around earth, large rocks and stones, [and] remove brush and debris.” Natalya was forced to labor for eight to ten hours a day or more, usually seven days per week. She was not allowed to rest or drink water. Joe also forced Liza to engage in the same work for hours each day.

Joe isolated plaintiffs from outside contact. He prevented them from leaving the house for most of the seven months they lived with him. Usually Natalya could only leave with Joe to attend church and Liza could not leave the house at all until July 2008. Liza was not allowed to attend school until mid-September 2008. Additionally, defendants prevented plaintiffs from having Internet or phone access.

Joe forced Liza to massage his naked body several times a week. He routinely talked to Liza explicitly about sex, even though she told him it made her uncomfortable. Joe also prevented Liza from receiving treatment for an ear infection until it developed into an emergency. Instead, he physically restrained her in order to force a homemade treatment into her ear. Dan also forced Liza to engage in unwanted physical contact and made sexual references about her body. He routinely grabbed, forcibly kissed, and fondled her. He would come into Liza’s bedroom and remain without her consent while she was dressing and would enter the bathroom while she was showering. In September 2007, after seven months, plaintiffs were able to escape Joe’s property and move to a shelter in Sonoma County.

Id. **1-2.

FLSA Claim

Plaintiffs alleged that defendants violated the FLSA: in particular they claim they were denied minimum wage as required by 29 U.S.C. s 206(a), which establishes the minimum wage to be paid by “[e]very employer” to each of his “employees” engaged in commerce.  Id. *4.  The complaint raised two distinct issues: (1) whether the FLSA provides a measure of damages for TVPRA violations; and (2) whether plaintiffs can maintain a FLSA claim independent of their causes of action under that statute. Id.

On the first issue, the court held that plaintiffs may rely on the FLSA as a measure of damages for the alleged TVPRA violations.  Id.

[S]ection 1593 of the TVPRA expressly provides that victims shall be compensated, at a minimum, for the value of their services and labor “as guaranteed under the minimum wage and overtime guarantees of the Fair Labor Standards Act.” 18 U.S.C. s 1593(b)(3). Accordingly, courts have relied on the FLSA’s provisions to calculate restitution for TVPRA violations. See, e.g., United States v. Sabhnani, 599 F.3d 215, 254-57 (2d Cir. 2010) (reviewing district court’s calculation of award after criminal conviction under the TVPRA). In a recent decision, relied on by plaintiffs, the court entered default judgment against the defendant on numerous claims including those for TVPRA, FLSA, and California Labor Code violations. Pena Canal v. de la Rosa Dann, No. 09-03366 CW, 2010 U.S. Dist. LEXIS 97856 (N.D. Cal. Sept. 2, 2010). The court’s award of compensatory damages included the value of the plaintiff’s wages, including applicable penalties available under the California Labor Code. Id. at *10. While the court entered default judgment on both the TVPRA and labor code claims, it declined the plaintiff’s separate request for an equal amount as restitution, stating that it would constitute a double award. Id. In similar fashion, plaintiffs in this case may rely on the FLSA as a measure of damages for the alleged TVPRA violations.

Id. *4.

On the second issue, the court held that “to the extent plaintiffs seek to maintain an FLSA claim independent of their forced labor allegations, they fail to state a claim.” Id. *5.

Plaintiffs contend that Joe was an “employer” because he fraudulently lured them into living at the Clearlake property. Although Joe and Natalya married, plaintiffs argue in their Opposition that she and her daughter were “not in a true familial relationship with Joe,” because of this fraud. Thus, plaintiffs apparently seek application of the FLSA based on whether labor was “truly” performed for the family or not. Plaintiffs advance no authority, however, for the proposition that fraud is a sufficient basis for finding an employer-employee relationship among household members under the FLSA. . . .

In the end, plaintiffs’ putative FLSA claim appears grounded on allegations of forced labor. For example, plaintiffs argue that they fall under the definition of domestic service employee, because they labored, not for any “family” benefit, but involuntarily as a result of threats by Joe and Dan. Where their claim is based on allegations of forced labor, they may state it directly under the TVPRA. To the extent claim seven alleges violation of the FLSA based on the contention that plaintiffs were fraudulently induced into a family relationship, the claim is dismissed without leave to amend.

Id. *5.

California Labor Code

Plaintiffs alleged multiple claims arising under the California Labor Code including: failure to pay minimum wage and overtime, failure to pay wages on time, failure to provide days of rest, and knowingly false representations made to induce plaintiffs to move to California for employment.  Id. *5.

The court dismissed the California Labor Code claims without leave to amend:

As before, the problem is that plaintiffs fail to advance a theory for finding an employer-employee relationship between household members on the grounds that Natalya was induced to enter the marriage fraudulently. In short, the California Labor Code may provide a basis for calculating the value of plaintiffs’ labor under their TVPRA claims. As independent claims, however, claims eight through eleven must be dismissed without leave to amend.

Id.

Conclusion

The court held that “Plaintiffs may rely on the FLSA and the California Labor Code in arguing the value of their labor, if they prevail on their TVPRA claims, but their FLSA and California Labor Code claims may not proceed as stand-alone causes of action premised on fraudulent inducement to marry, so defendants’ motion to dismiss claims for relief seven through eleven is granted without leave to amend.”  Id. *8.

Judges and Attorneys

District Judge Richard Seeborg.

By CHARLES JUNG

The Northern District of California denied class certification of a meal and rest break class action in Washington v. Joe’s Crab Shack, No. C 08-5551 PJH, 2010 WL 5396041 (N.D. Cal Dec. 23, 2010.) (slip op.).  Plaintiff Drew Garrett Washington asserted that defendant Crab Addison, Inc. (“Crab Addison”), a company that operates a number of Joe’s Crab Shack restaurants, failed to provide employees with meal and rest breaks, allowed its restaurant managers to manipulate employee time records to deprive employees of pay for all hours worked (including overtime and missed meal break pay), required employees to perform work “off the clock”; and required employees to pay for their own employer-mandated uniforms.  Id. *1.

Class Definition

Plaintiff moved pursuant to Federal Rule of Civil Procedure 23, to certify a plaintiff class consisting of “all non-exempt restaurant employees employed by Crab Addison at Joe’s Crab Shack restaurants in California from January 1, 2007, through the present.”

Discussion

The court denied the certification motion.  Id. *11.  “Plaintiff’s position is that common questions predominate because the main issue is whether—notwithstanding Crab Addison’s written policies—Joe’s Crab Shack restaurants in California followed a common unwritten policy of denying meal and rest breaks, failing to pay employees who did not take breaks, failing to pay for overtime, requiring employees to purchase their own uniforms, and so forth.” Id. Plaintiff contended that the existence of a policy or practice that in effect contradicts Crab Addison’s written policies can be ascertained by an analysis of the data in Crab Addison’s computer systems.  Id. “But since plaintiff has failed to adequately explain how that analysis works and exactly what the data shows, he has failed to adequately establish the existence of such a policy or practice.” Id.

The court also found that plaintiff’s arguments regarding the missed meal breaks and the arguments regarding off-the-clock and overtime claims focused on individualized inquiries. “The fact that the information relating to individual employees may be available (or capable of being extracted) from Crab Addison’s Aloha system and other computerized systems does not mean that these are issues that are not [dependent] on an individualized inquiry.”  Id. The “only way of showing the ‘practice’ that plaintiff claims existed at the California restaurants would be to determine how when and how it was applied in each instance.” Id.

Meal and Rest Breaks

The court noted that “employers are required to make meal breaks available, but need not compel employees to take meal breaks if they are unwilling to do so.” Id. *12 (citing Perez v. Safety-Kleen Sys., Inc., 253 F.R.D. 508, 512-15 (N.D. Cal. 2008) (distinguishing Cicairos and citing Brown and other cases that have rejected the proposition that employers are required to ensure that meal breaks are taken)). Under this standard, plaintiff “must show that the employer impeded, discouraged, or prohibited him from taking a proper break.”  Id. Thus the “crucial issue with regard to the meal break claim is the reason that a particular employee may have failed to take a meal break.” Id.

Plaintiff does not claim that Crab Addison’s written meal break policy is in violation of the law, and therefore cannot rely on that facially compliant policy to show that common issues predominate. In the absence of any common policy, an individualized inquiry will be required to determine whether any single employee failed to take a meal break because he/she was too busy, and also to determine whether a particular employee signed a waiver based on a decision not to take meal breaks. For this reason alone, common issues do not predominate with regard to the meal break claim. In addition, plaintiff’s suggested solution of simply examining time records to determine when meal breaks were not taken would be unavailing, as that would not answer the question why the employees did not take breaks.

Id.

Overtime Claim

The court found that Crab Addison established that it has a lawful overtime policy in place, and that it has paid its California employees for more than 28,000 hours of overtime since January 2007.  Id. *13.  Plaintiff’s current position is that employees were not paid for work done “off-the-clock” and that managers “shaved” their time.

Crab Addison has established that it has a lawful written policy prohibiting work off-the-clock. Moreover, 19 of Crab Addison’s declarants have stated that they never worked “off-the-clock,” that they received compensation for all overtime worked, and that no other employee has claimed that any manager told him/her to work “off-the-clock.” Plaintiff has provided no evidence of any company-wide or class-wide policy of requiring “off-the-clock” work, and the individualized assessment necessary to ascertain whether there were in fact any employees who were told to work “off-the-clock” would not be susceptible to common proof.

Uniform Claim

With regard to the uniform claim, Crab Addison had a written policy is to provide T-shirts to employees, and to replace those T-shirts when they become worn.  Id. Plaintiff provided declarations from six employees, who claim that they purchased T-shirts, but the court noted that “the declarations provide no details of the circumstances under which they did so.” Id. By contrast, a number of Crab Addison’s declarants state that they were provided with T-shirts in accordance with Crab Addison’s written policy.  “This dispute in the evidence highlights the need for individualized inquiries.”  Id.

Plaintiff claimed that the number of T-shirts provided to employees can be determined from subtracting the number sold to customers from the number delivered to a given restaurant, that calculation would not take into account the existing inventory of T-shirts, the fact that T-shirts are provided free of charge to customers as part of promotional events, and the fact that some T-shirts may be stolen.  Id. *14.  The court rejected this argument: “plaintiff’s proposed method of proof would not answer the most important question–who purchased T-shirts, or why.” Id. “The only way to determine who purchased T-shirts, and why they purchased them, is through individualized analyses, and class treatment is therefore not appropriate.”

Certification of “Typical Wage and Hour Case”

Plaintiff characterized the action as a “typical wage-and-hour case of the type that is routinely certified as a class action.” Id. The court rejected this view:

It is true that courts, including this [court], often find wage-and-hour cases to be appropriate for class treatment. Nevertheless, there is no rule that requires that wage-and-hour claims be certified for class treatment regardless of the evidence submitted in support of the motion for certification. . . . In this case, the court finds that class certification is not warranted because plaintiff has not met his burden of showing that the questions of law and fact common to class members predominate over questions affecting only individual members, or of showing that a class action would be a superior method of resolving these claims.

Judges and Attorneys

District Judge Phyllis J. Hamilton.

Plaintiff’s counsel Michael Ng.

Defense counsel Michael S. Kun.

By CHARLES JUNG

I am in trial, so there will be fewer updates until December 11.

Best,

Charles

The United States District Court for the Central District of California held that (1) relatively formulaic pleadings in a wage and hour case were sufficient to meet the pleading requirements of Rule 8, even under Twombly and Iqbal; (2) the FLSA is a proper predicate for a UCL claim; and (3) plaintiffs’ prayer for attorneys fees under Cal. Code Civ. Proc. section 1021.5 should be stricken. Whitaker v. Countrywide Financial Corp., No. CV CAS 09-5898 (PJWx), 2010 WL 4537098 (C.D. Cal. Nov. 1, 2010).

Background

A putative class action was brought on behalf of current and former employees of Countrywide Financial Corporation and Countrywide Home Loans, Inc. (the “Countrywide Defendants”) against the Countrywide Defendants and Bank of America, the alleged successor employer and/or successor in liability to the Countrywide Defendants. Id. *1. The FAC alleges claims for: (1) failure to pay overtime in violation of Cal. Labor Code s 510 and s 1194 and IWC Wage Order 4-2001; (2) Cal. Labor Code s 203 waiting penalties; (3) failure to provide an accurate itemized wage statement pursuant to Cal. Labor Code s 226; (4) failure to pay minimum wage in violation of Cal. Labor Code s 1194 and IWC Wage Order No. 4-2001; (5) failure to pay minimum and overtime wages in violation of the Fair Labor Standards Act, 29 U.S.C. s 206(a); and (7) unfair competition pursuant to Cal. Business & Professions Code, s 17200 et seq. Id. Defendants moved to dismiss or strike plaintiffs’ first amended complaint.  Id.

Discussion

Defendants argued that plaintiffs’ claims should be dismissed because they are factually devoid and simply “parrot the statutory language and proffer purely conclusory allegations”, thereby running afoul of the standards set out in Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1964-65 (2007) and Ashcroft v. Iqbal, 556 U.S. ___, 129 S.Ct. 1937 (2009). “Rule 8 does not empower [plaintiffs] to plead the bare elements of [a] cause of action, affix the label ‘general allegation,’ and expect [a] complaint to survive a motion to dismiss.” Iqbal, 129 S.Ct. at 1954 (2009).  Defendants cited several cases to support their contention that courts have granted motions to dismiss in wage and hour actions in reliance on Iqbal and Twombly. See, e.g., Harding v. Time Warner, Inc., 2009 U.S. Dist. LEXIS 72841 at *9 (S.D. Cal. August 18, 2009); Deleon v. Time Warner Cable, LLC, 2009 U.S. Dist. LEXIS 74345 at *6-7 (C.D. Cal. July 17, 2009); Anderson v. Blockbuster, Inc., 2010 U.S. Dist. LEXIS 53854 at *5-8 (E.D. Cal. May 4, 2010).

Defendants also argued that plaintiffs’ fourth and fifth claims for relief should be dismissed because the factual basis of these claims is a failure to be compensated for time spent on “booting up” and “shutting down” activities. Id. *3. Defendants argued that the FAC makes no suggestion that the time spent on these seemingly de minimis activities was compensable or that it took the Plaintiffs or putative class members more than a few minutes per day. Id.

The court disagreed, finding that all of plaintiffs’ claims met the requirements of  Rule 8, providing defendants with fair notice of facially plausible claims. Id. The court found that plaintiffs allegations that they were required to perform certain tasks before clocking in and after clocking out, were sufficient to state claims for violations of state and federal wage and hour laws that would allegedly require the class members to be compensated for the time spent performing those tasks at overtime rates. Id. The court found that defendants were provided with sufficient notice of plausible claims against them by plaintiffs’ allegations that defendants have failed to properly calculate the overtime rate, and to provide wages “in the form of checks that fail to provide either a detachable stub or separate document containing the total hours worked by the employee.” Id.

Plaintiffs’ UCL Claim

Defendants argued that plaintiffs’ UCL claim cannot stand because it is based in part on violations of the FLSA , and the remedial and enforcement provisions of the FLSA are exclusive. Id. *3.  The court disagreed: “a violation of the FLSA appears to be a proper predicate for a claim under the UCL.” Id. (citing Esparza v. Two Jinn, Inc., 2009 WL 2912657 at *2 (C.D. Cal. Sept. 9, 2009).

Attorneys’ Fees Under Cal.Code Civ. Proc. § 1021.5

Defendants argued that plaintiff’s request for attorneys’ fees pursuant to Cal. Code Civ. Proc. § 1021.5 should be stricken because plaintiffs are motivated by their own pecuniary interests in bringing the lawsuit and cannot establish that they were motivated by a desire to pursue a public benefit.  Id. *4.  The court agreed, striking plaintiff’s prayer for fees under C.C.P. §1021.5

The Court finds that plaintiffs’ prayer for attorneys’ fees pursuant to  Cal. Code Civ. Proc. § 1021.5 should be stricken. See Flannery v. Ca. Highway Patrol, 61 Cal.App. 4th 629, 635 (Cal.Ct.App.1998) (“Because the public always has a significant interest in seeing that laws are enforced, it always derives some benefit when illegal private or public conduct is rectified. Nevertheless, the Legislature did not intend to authorize an award of fees under section 1021.5 in every lawsuit enforcing a constitutional or statutory right.”); Kistler v. Redwoods Community College Dist., 15 Cal.App. 4th 1326, (Cal.Ct.App.1993) (finding fees pursuant to s 1021.5 unavailable in a wage and hour case where plaintiffs “were not disinterested citizens seeking to establish new law on a question of public importance, they were simply seeking the wages due to them”). The Court therefore GRANTS defendants’ motion to strike plaintiffs’ prayer for attorneys’ fees in paragraph 78 of the FAC.

Id. *4.

Judges and Attorneys

Judge Christina A. Snyder.

Paul Cullen, Shaun Setareh, for Plaintiffs.

Michael Mandel, for Defendants.

By CHARLES JUNG

The Second District Court of Appeal reversed an order compelling arbitration after the conclusion of an arbitration and judicial confirmation of the arbitration award because defendants waived their right to arbitrate.  Knight v. Toe Brights, Inc., et al., No. B220648, 2010 WL 4542324 (Cal. App. 2d Dist. Nov. 12, 2010).

Background

Plaintiff Knight filed an action against her former employer, Toe Brights, Inc. (TBI), and two of its officers/directors/stockholders, alleging that they failed to pay her more than $9,000 in salary and reimbursement for expenses that was due at the time of her termination, and also failed to repay a loan from her to TBI in the amount of $41,783. Id. TBI filed its answer to Knight’s complaint, and alleged as an affirmative defense that “Plaintiff’s action is barred by any arbitration agreement requiring that this action be arbitrated.”  Id.

Defendants moved to compel arbitration about eight months after plaintiff Knight filed her suit.  Id. *1.  By that time, defendants had propounded multiple sets of discovery to which Knight had responded, and numerous discovery motions were pending.  Id. Defendants had claimed “priority” in discovery, and then refused to respond to Knight’s discovery.  Id. The court ordered the matter to arbitration less than three months before the date set for trial. Id.

The case proceeded through arbitration, and the arbitrator awarded Knight $40,000 for the repayment of her loan plus “interest at the statutory rate from the date she filed her lawsuit”.  Id. *4. Knight did not prevail on her other claims for unauthorized use of her jewelry designs, name and likeness, and the arbitrator awarded defendants $60,000 in attorney fees and $1,160 in filing fees as the prevailing parties on some of Knight’s claims. Id. The arbitrator denied Knight’s motion for attorney fees  and costs. Id.

Knight filed a petition to vacate the arbitration award. Id.

Ruling

The court found that although defendants’ answers raised arbitration as an affirmative defense, defendants “waived the right to arbitrate by vigorously litigating this action in the trial court in a manner inconsistent with their right to arbitrate.” Id. *1. The court found prejudice by defendants’ delay in seeking arbitration.  Id. The court concluded that “It is unfortunate that the parties incurred the time and expense of an arbitration hearing. But the trial court erred in granting the motion to compel arbitration, and Knight is entitled to raise that error on appeal from the judgment confirming the arbitration award.” Id.

The court reasoned that “waiver may be found under circumstances where the case has not been litigated to judgment” where the party opposing arbitration can show prejudice.  Id. *5. “Prejudice typically is found only where the petitioning party’s conduct has substantially undermined this important public policy or substantially impaired the other side’s ability to take advantage of the benefits and efficiencies of arbitration.” Id. *7 (internal citation omitted).

Defendants misled Knight by indicating that they intended to try this case in court. During the seven and a half months between the time Knight filed her complaint and defendants disclosed their intent to arbitrate, the parties vigorously litigated this case. Knight was responding to discovery and preparing her case for trial. With less than three months to go before trial, defendants apparently decided they would fare better in arbitration. After they had participated in a court-ordered mediation, filed a cross-complaint which Knight answered, and received responses from Knight to two sets of special interrogatories, two sets of requests for production of documents, one set of form interrogatories, and one set of requests for admissions, defendants forced the case to arbitration over Knight’s objection.

Knight did not reap the benefits of arbitration. She responded to discovery which defendants would not have been permitted to propound in arbitration, and she received no responses from defendants to her discovery. She endured more than six months of discovery battles rather than a more limited and controlled exchange of information, “consistent with the expedited nature of arbitration.” (AAA Commercial Arbitration Rules, rule R-21.) Defendants took advantage of the many ways a party can gain information about an opponent’s case in trial court litigation through discovery and court-ordered mediation. And defendants ensured that Knight would not experience the efficiencies of arbitration.

Id.

The court concluded that the “trial court’s order compelling arbitration is not supported by substantial evidence of nonwaiver.” Id. *8.  Defendants “have incurred the expense of an arbitration hearing, and now possibly will incur the additional expense of a trial, as a result of their gamesmanship.”

Judges and Attorneys

Justice Victoria Gerrard Chaney wrote the opinion for the court.  Presiding Justice Robert M. Mallano concurred.  Justice Frances Rothschild dissented.

Appeal from a judgment of the Superior Court of Los Angeles County. Phrasel L. Shelton (Retired Judge of the San Mateo Sup.Ct. assigned by the Chief Justice pursuant to art. VI, s 6 of the Cal. Const.), Joseph R. Kalin (Retired Judge of the Los Angeles Sup.Ct. assigned by the Chief Justice pursuant to art. VI, s 6 of the Cal. Const.), and Teresa Sanchez-Gordon, Judges.

Hillel Chodos for Plaintiff and Appellant.

Charlston, Revich & Wollitz and Tim Harris for Defendants and Respondents.

By CHARLES JUNG

The United States District Court for the Northern District of California denied the production of names, addresses and telephone numbers of non-opt-in members of a FLSA collective and putative Labor Code class action.  Hill v. R+L Carriers Shared Services, LLC, No. C 09-1907 CW (MEJ), 2010 WL 4175958 (N.D. Cal. Oct. 20, 2010).  Plaintiff Glenn Hill is a former employee of Defendant R+L Carriers Shared Services, LLC, which provides administrative employees to transportation companies all across the United States.  Id. *1. Plaintiff worked as a “dispatcher” at Defendant’s San Lorenzo terminal in California, and brought a collective and class action pursuant to the Fair Labor Standards Act (“FLSA”), California’s wage-and-hour laws and California Business & Professions Code section 17200. Id.

Background

Plaintiff sought two sub-classes: those employees in California and those that he refers to as a Nationwide Collective.  Id. The California Class is defined as “all persons who worked for any period of time in California who were classified as Dispatchers (including “City Dispatchers” and any other position(s) who are either called, or work(ed) as, dispatchers) in the four years prior to the filing of this Complaint, up through the final disposition of this action.” Id. In Defendant contended that a collective action under the FLSA is improper because the job duties, work schedules, and salary of its employees varies across the United States, as well as in the State of California. Id.

Hon. Claudia Wilken, the presiding judge in this matter, conditionally certified a class of Nationwide Collective Plaintiffs.  Judge Wilken also ordered Defendant to “disclose to Plaintiff, subject to a protective order if necessary, the number, location and actual job titles of persons who are classified as dispatchers.”  Id. Defendant provided the class members’ contact information to a third-party administrator, who propounded notice to all putative class members.  Id. Defendant also disclosed the number, location and actual job titles of putative class members to Plaintiff. Id. Two California putative members subsequently opted into the case. Id.

Motions to Compel

Plaintiff sought production of names, addresses and telephone numbers of “dispatcher employees” in California who have opted out, arguing that they are necessary for supporting its motion for class certification pursuant to Federal Rule of Civil Procedure 23. Id. Plaintiff argued that although he has the number, location and actual job titles of putative California Class members as of February, he needs updated information of non-opt-in plaintiffs to address numerosity issues in the class certification motion. Id. Plaintiff also insisted that he needs to interview non-opt-in plaintiffs for whom Defendant has declarations.  Plaintiff also sought production of Performance Management memos, which are one-page lists of all the “dispatcher” positions at Defendant’s terminals in California, so that Plaintiff can acquire a better understanding of Defendant’s “dispatcher job positions.”  Id. *2.

Defendant refused to provide the contact information directly to Plaintiff, citing privacy grounds. Id. Defendant argued that it has an obligation to maintain privacy of the employees who expressly chose not to opt-in, and that Plaintiff does not need contact information of non-opt-in individuals.  Id. Defendant admitted that it has declarations of both opt-ins and non-opt-ins regarding their job duties. Id. As to the Performance Management memos, Defendant refused to produce them on grounds of relevance and confidentiality. Id. Defendant further contended that the discovery requests should be denied in order to prevent Plaintiff’s council from soliciting clients. Id.

The court conducted a balancing of Plaintiff’s discovery rights against the opt-out individuals’ privacy rights, citing to Tierno v. Rite Aid Corp., No. C 05-02520 TEH, 2008 U.S. Dist. LEXIS 58748, at *7 (N.D.Cal. July 31, 2008) and Pioneer Electronics, Inc. v. Superior Court, 40 Cal.4th 360, 370-71, 53 Cal.Rptr.3d 513, 150 P.3d 198 (2007):

Here, the Court notes that Plaintiff needs to examine the declarations to assist in effectively preparing their class certification motion, because they refer to the job duties of “dispatchers.” Plaintiff also needs access to the updated number, location and actual job titles of the “dispatchers” for addressing numerosity issues. However, considering the third parties’ privacy rights and the history of discovery disputes in this case, (Dkt.# 203), the Court finds it inappropriate to order Defendant to provide the names, addresses, and telephone numbers of non-opt-in plaintiffs at this point. If, after reviewing the declarations, Plaintiff still finds it necessary to contact non-opt-in plaintiffs, the parties shall meet and confer, and file a joint letter if necessary.

As to the Performance Management memos, the Court finds Plaintiff is entitled to review the memos which refer to the “dispatcher job positions” of Defendant’s terminals in California. As Plaintiff does not have clear view on how many “dispatcher” positions Defendant has in California, he needs to examine the memos in order to effectively classify California Class members in his class certification motion. However, because the memos contain irrelevant employees’ names and job titles, the Court orders Defendant to redact the names of persons who are not classified as “dispatchers.”

Judges and Attorneys

United States Chief Magistrate Judge Maria-Elena James.

Robert S. Nelson, Nelson Law Group, San Bruno, CA, for Plaintiff.

Charles Oliver Thompson, Esq., Jill Vogt Cartwright, Melynnie Anne Rizvi, Lewis Brisbois Bisgaard & Smith LLP, San Francisco, CA, Ellis B. Murov, Deutsch Kerrigan Stiles, New Orleans, LA, O. Judson Scheaf, III, Anthony C. White, Thompson Hine LLP, Columbus, OH, for Defendant.

By CHARLES JUNG

The Court of Appeal for the Second District held that a “DFEH complaint will [not] toll the statute on a claim for unpaid wages under the Labor Code.”  Parvizian v. California Department of Transportation, No. B215608, 2010 WL 4012070 (Cal. Ct. App. 2d Dist. Oct. 14, 2010).

Background

Plaintiff-appellant Syrus Parvizian brought a suit against his former employer, respondent State of California Department of Transportation (“DOT”).  Id. *1.  The operative first amended complaint brought six causes of action, titled Damages for Violation of Statutory Duty to Pay Wages and Compensation, Unpaid Wages, Accounting, Conversion, Money Had and Received, and Discrimination, Harassment and Retaliation in Violation of Government Code section 12940.  Id. DOT’s demurrer was sustained with leave to amend as to the causes of action for Damages of Violation of the Statutory Duty to Pay Wages and Compensation, Accounting, Conversion, and Money Had and Received.  Id. The court ruled that the claims were not properly pled, noting that “the state can only be sued if it authorizes a lawsuit, and you don’t plead the proper statutory authority to do so.”  Id. The court overruled the demurrer to the cause of action for unpaid wages, which was brought under Labor Code sections 201 and 202. Id. The court found that the cause of action for violation of Government Code section 12940 had been dismissed with prejudice in the earlier case, and sustained the demurrer as to that cause of action without leave to amend. Id. Plaintiff elected not to amend his complaint, and DOT filed a motion for judgment on the pleadings on the cause of action under the Labor Code, on the defense of statute of limitations.  Id. The court granted the motion and dismissed the complaint. Id.

Statute of Limitations

Plaintiff’s cause of action for unpaid wages alleged violations of Labor Code sections 201 and 202. Id. *3.  The statute of limitations under Cal. Code Civ. Proc. § 338(a) is three years.  Plaintiff’s employment with respondent ended in 2003, and the complaint was not filed until late in 2007.  The court concluded that the statute of limitations barred this action, rejecting plaintiff’s argument that the statute was tolled, under the doctrine of equitable tolling, while appellant pursued his administrative remedies before the Department of Fair Employment and Housing. Id. Plaintiff contended that his complaint to that agency included the claim for unpaid wages, and argued that the statute began to run when he received from DFEH right to sue letter.  The court disagreed:

We do not see that appellant’s administrative complaint included his claim for unpaid wages, and in any event do not believe that a DFEH complaint will toll the statute on a claim for unpaid wages under the Labor Code. “Though equity will toll the statute of limitations while a plaintiff, who possesses different legal remedies for the same harm, reasonably and in good faith pursues one, it will not toll the statute while a plaintiff, who has allegedly suffered several different wrongs, pursues only one remedy as to one of those wrong.” (Aerojet General Corp. v. Superior Court (1986) 177 Cal. App. 3d 950, 956.) The claim for discriminatory treatment and the claim for unpaid wages are, simply put, different wrongs.

Id.

Judges and Attorneys

Justice Orville A. Armstrong wrote the opinion for the court.  Justices Paul Turner and Richard M. Mosk concurred.

Appeal from a judgment of the Superior Court of Los Angeles County, Hon. William F. Fahey.

Syrus Parvizian, in pro per., for Plaintiff and Appellant.

Ronald W. Beals, Chief Counsel, Linda Cohen Harrel, Deputy Chief Counsel, Jill Siciliano-Okoye, Helen Lemmon-Alarcon for Defendant and Respondent.

By CHARLES JUNG

I am traveling this week, so California Wage & Hour Law will be updated less frequently.  I’ll resume daily updates next week, October 26, 2010.

Cheers!

Charles Jung

The United States District Court for the Eastern District of California remanded a wage and hour class action case for failure to meet the $5,000,000 amount in controversy requirement under the Class Action Fairness Act (“CAFA”).  Rhoades v. Progressive Casualty Insurance Co., Inc., No. 2:10-cv-1788-GEB-KJM, 2010 WL 3958702 (E.D. Cal. Oct. 8, 2010).  Plaintiffs alleged that they and the members of the putative class were “employed in the State of California by the Defendant[ ] to adjust insurance claims and their positions were known as ‘Claims Adjuster,’ ‘Claims Generalist Associate,’ or similar titles” during the past four years. Id. Plaintiffs and members of the putative class were allegedly “not paid overtime wages for all hours worked” and were not “provided accurate itemized wage statements.” Id.

Apparently attempting to avoid federal court jurisdiction, Plaintiffs also alleged that “the individual members of the classes herein have sustained damages under the seventy-five thousand … jurisdictional threshold and that the aggregate claim is under the five million dollar … threshold, [and argue therefore] removal under the CAFA would be improper.” Id. Plaintiffs state in their prayer for relief: “Plaintiffs are informed and believe that the damages, back-wages, restitution, penalties, interest and attorneys’s [sic] fees do not exceed an aggregate of $4,999,999.99 and that Plaintiffs’ individual claims do not exceed $74,999.99.” Id.

CAFA “vests district courts with ‘original jurisdiction of any civil action in which, inter alia, the amount in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs,’ and in which the aggregate number of proposed plaintiffs is 100 or greater, and any member of the plaintiff class is a citizen of a state different from any defendant.” Id. *1 (citing Lowdermilk v. U.S. Bank Nat’l Ass’n, 479 F.3d 994, 997 (9th Cir.2007) (quoting 28 U.S.C. s 1332(d)(2))).

Standard

The court stated the standard set forth in Lowdermilk, discussed as follows in Guglielmino v. McKee Foods Corp.,506 F.3d 696 (9th Cir.2007):

[I]n the CAFA context[,] … when a state-court complaint affirmatively alleges that the amount in controversy is less than the jurisdictional threshold, the “party seeking removal must prove with legal certainty that CAFA’s jurisdictional amount is met.” Two animating principles informed our judgment in Lowdermilk. The first is that federal courts are courts of limited jurisdiction which we will strictly construe. The second principle is that the plaintiff is “master of her complaint” and can plead to avoid federal jurisdiction. Thus, in Lowdermilk, by adopting “legal certainty” as the standard of proof, “we guard[ed] the presumption against federal jurisdiction and preserve[d] the plaintiff’s prerogative, subject to the good faith requirement, to forgo a potentially larger recovery to remain in state court.”

Id. *2 (citing Guglielmino, 506 F.3d at 699-700 (quoting Lowdermilk, 479 F.3d at 998- 1000)).

The court held that Defendant failed to meet the “legal certainty” standard for the amount in controversy. Id. *3

However, Defendant has over estimated the terminated class by not limiting its estimate to those “who were not paid all wages due upon termination,” which is alleged in the FAC. (FAC P 12.)  In addition, Defendant has not presented evidence on the number of class members in the overtime subclass, but instead assumes that the 544.53 individuals in the proposed class also comprise the overtime subclass. However, Defendant offers no evidence that all members of the proposed class “did not receive overtime wages for all hours worked in excess of eight (8) hours per day and/or forty hours (40) hours per week[.]” . . . .

Defendant could have better tailored its estimate of the size of the overtime class by addressing Plaintiffs’ specific allegations with regard to the overtime subclass. Therefore, it is unclear how many individuals are included in the overtime subclass and what amount in controversy is involved with the claims of this subclass.

Id. *4.

Likewise with respect to the claim for unpaid overtime, the court held that Defendant failed to present sufficient evidence to meet the amount in controversy:

However, Defendant’s provides insufficient evidence in support of its supposition that 544.53 class members comprise the overtime subclass, and that each member of this subclass worked fifty-two weeks a year. “[A]bsent more concrete evidence, it is nearly impossible to estimate with any certainty the actual amount in controversy.” Lowdermilk, 479 F.3d at 1001.

Id. *5.

The court concluded that “Defendant has left the Court to speculate as to the value of Plaintiffs’ claims for relief, and “whether or not members of [a] class qualify for penalty [and other damages].” Id. *7 (citing Lowdermilk, 479 F.3d at 1002).  “[S]uch speculation does [not] meet the ‘legal certainty’ standard.”  Id. Accordingly, the court remanded the case.

Judge

District Judge Garland E. Burrell, Jr.

By CHARLES JUNG

The Northern District rejected defendant’s motion for stay of a meal and rest break action where the primary focus of complaint was unrelated to the break claims.  Murphy v. J.B. Hunt Transport Services, Inc., No. C 10-01568 WHA, 2010 WL 3911786 (N.D. Cal. Oct. 5, 2010) (slip op.).  Defendant J.B. Hunt Transport, Inc., moved to stay a case alleging three claims for discrimination and one claim for nonpayment of wages for regular meal-and-rest periods.  Id. *1.  Defendant’s stay motion sought a stay pending the resolution of a case pending before the California Supreme Court, Brinker Restaurant Corp. v. Superior Court, 196 P.3d 216 (Oct. 22, 2008), in which the court will decide whether the California Labor Code requires employers to affirmatively ensure that employees take rest and meal breaks. Id.

The court recited the standard for a stay of federal court proceedings as follows:

The proponent of a stay bears the burden of establishing its need. Clinton v. Jones, 520 U.S. 681, 708 (1997). In determining whether to stay an action three competing interests must be weighed: (1) the possible damage which may result from granting the stay; (2) the hardship or inequity which a party may suffer in being required to go forward; and (3) the orderly course of justice measured in terms of simplifying or complicating of issues, proof, and questions of law expected to result from a stay. CMAX, Inc. v. Hall, 300 F.2d 265, 268 (9th Cir. 1962).

Id.

The court found that defendant had not established its burden for any of the three competing interests. Id. *2.

First, the possible damage to plaintiff resulting from a stay is far greater than the potential damage to defendant. Plaintiff filed four claims against defendant, three of which related to employment discrimination. While the California Supreme Court is addressing a legal issue related to the fourth claim, the decision in Brinker will not impact the other three claims in this case whatsoever. Making plaintiff wait, potentially for several months, for a decision that will not impact the primary focus of plaintiff’s claims against defendant is prejudicial and damaging to plaintiff. Defendant argues that plaintiff will suffer little to no damage as a result of a stay, but this argument ignores the cost plaintiff must incur to wait to make his case in court.

Second, the hardship on defendant going forward is minimal. Defendant argues that additional substantial discovery relating to plaintiff’s fourth claim will be required without a stay. Plaintiff correctly points out, however, that additional discovery will actually be minimal because the facts of the instant case will not change. If Brinker is decided before this case ends and the California Supreme Court clarifies the California Labor Code in regard to meal-and-rest breaks, the parties can argue that standard in this case. During discovery, however, both parties must gather all the facts related to the fourth claim, and doing so will be necessary no matter how Brinker is resolved. The impact on defendant is minimal.

Third, the orderly course of justice is best served by moving forward. Defendant does not make a compelling argument as to why granting a stay would provide for better justice in this case. The potential prejudice to plaintiff is large if a stay is granted and the impact on defendant of moving forward without a stay is minimal. The time has come to proceed with this case.

Accordingly, the court denied defendant’s motion to stay.

Judge

District Judge William Alsup.

By CHARLES JUNG