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Archive for April, 2013|Monthly archive page

Allowing Amendment of Complaint Near End of Trial Found an Abuse of Discretion

In Other Cases of Interest on April 30, 2013 at 5:45 pm
My new lateness reminder...

My new lateness reminder… (Photo credit: adityasen)

The Second District issued its ruling today in Duchrow v. Forrest, __ Cal. App. 4th __, No. B233736 (2d Dist. Apr. 30, 2013).  The panel held that the lower court abused its discretion by permitting an amendment to a complaint on the fourth day of a five-day trial, where there was no reason the amendment could not have been made sooner.  The court found prejudice because, inter alia, the damages sought changed from $44,082.22, as pleaded in the complaint, to $312,260 in attorney fees.   You can read more here.

By CHARLES H. JUNG

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Attorney Disqualification Opinion Published: Khani v. Ford Motor Company

In Other Cases of Interest on April 26, 2013 at 7:53 pm
Ford Motor Company of Canada Limited, St. Thom...

Ford Motor Company of Canada Limited, St. Thomas Assembly Plant – Cars Stored at St. Thomas Municipal Airport, 1978 (Photo credit: Elgin County Archives)

The Second District yesterday ordered published Khani v. Ford Motor Company, et al., No. B239611, __ Cal.App.4th __ (2d Dist. Apr. 25, 2013).   Plaintiff’s attorney in a lemon law case previously worked at a law firm that represented defendant, reportedly provided unspecified “input” to defendant and communicated regularly with defendant about lemon law cases.  The trial court disqualified plaintiff’s counsel.  The Court of Appeal reversed, finding that:

The evidence in this case does not establish that any information to which Shahian was exposed during his representation of Ford would be material to his representation of Khani in this case. While Ford presented evidence that Shahian represented it in California Lemon Law cases, it did not establish that any confidential information about the defense in those cases would be at issue in this case.

You can read more here.

By CHARLES H. JUNG

A Pair of Employment Decisions Outside the Wage & Hour Context

In Other Cases of Interest on April 26, 2013 at 5:31 pm
English: War poster : Women are Working Day an...

English: War poster : Women are Working Day and Night to Win the War / Witherby & Co. London. Français : Affiche de guerre : Les femmes travaillent jour et nuit pour gagner la guerre (Photo credit: Wikipedia)

A pair of interesting, non-wage, employment decisions were issued today: one from the Ninth Circuit and the other from the California Court of Appeal for the Fourth District.

  • In California Department of Corrections and Rehabilitation v. State Personnel Board (Moya), No. D061653, __ Cal. App. 4th __ (4th Dist. April 26, 2013).  The court considered whether the Public Safety Officers Procedural Bill of Rights Act, Gov. Code § 3300, et seq., excepts internal workers’ compensation fraud investigations from the one-year limitations period established in section 3304, subdivision (d)(1).  The court concluded that it does and affirmed the judgment.
  • In Petersen v. Boeing Company, No. 11-18075, __ F.3d __ (9th Cir. Apr. 26, 2013), a district court dismissed plaintiff’s case on the basis of a Saudi forum selection clause without holding an evidentiary hearing as to whether plaintiff was induced to assent to the forum selection clause through fraud or overreaching.  The Ninth Circuit reversed, holding that a triable issue of fact existed as to whether the forum selection clause was enforceable.

By CHARLES H. JUNG

Class Action Settlement Approval Reversed Where Class Representative Incentive Awards Conditioned on Settlement Support

In Class Actions, Incentive Award on April 22, 2013 at 9:32 pm
Sometimes money is a powerful incentive.

Sometimes money is a powerful incentive. (Photo credit: wayneandwax)

The Ninth Circuit today reversed a trial court’s approval of a class action settlement against credit reporting agencies under the Fair Credit Report Act, citing a failure by the class representatives and class counsel to adequately represent the class.  Radcliffe, et al v. Experian Information Solutions, Inc., et al., Case No. 11-56376, __ F.3d __ (Apr. 22, 2013).  The court took issue with the incentive awards to the class representatives that were conditioned on the class representatives’ support for the settlement.  The court reasoned that these conditional awards caused a divergence of interests between the representatives and the class:

These conditional incentive awards caused the interests of the class representatives to diverge from the interests of the class because the settlement agreement told class representatives that they would not receive incentive awards unless they supported the settlement.

You can read more here.

By CHARLES H. JUNG

Non-Mutual Arbitration Agreement Saved by Reference to Mutual Agreement to Arbitrate in Employee Handbook

In Arbitration, Employee Handbook, Mutuality on April 19, 2013 at 4:41 pm
Handbook

Handbook (Photo credit: Jeff Hester)

The Second District ordered published today an opinion reversing the denial of a motion to compel arbitration. Serpa v. California Surety Investigations, Inc., et al., No. B237363, __ Cal. App. 4th __ (filed Mar. 21, 2013, modified Apr. 19, 2013).  The case involved an agreement to arbitrate that was non-mutual, but which referenced an employee handbook’s arbitration clause.

At the trial court level, the court denied defendants’  motion to compel arbitration, finding the agreement to arbitrate lacked mutuality.  Defendants argued that the requisite mutuality was provided by the bilateral arbitration provisions in the employee handbook, incorporated by reference into the arbitration agreement.  The trial court rejected this argument because defendant could change the handbook at its sole discretion and without notice.  The Second District reversed.

Because the agreement incorporated the arbitration policy in the employee handbook, the Court concluded that this “salvages the agreement by establishing an unmistakable mutual obligation on the part of [employer and plaintiff] to arbitrate ‘any dispute’ arising out of her employment.”  Plaintiff argued that the while the arbitration policy in the handbook establishes a bilateral obligation to arbitrate, she insisted that the mutual obligation is illusory because, the employer is authorized to alter the terms of any policy contained in the handbook at its sole discretion and without notice.  The Court disagreed, reasoning that the right to alter the terms was limited by the covenant of good faith and fair dealing implied in every contract.

You can read more here.

By CHARLES H. JUNG

Second District Affirms Denial of Arbitration, Drawing Distinction Between Allegations and Judicial Admissions

In Arbitration on April 17, 2013 at 10:21 pm
English: Admission of the Senior Wrangler in 1842

English: Admission of the Senior Wrangler in 1842 (Photo credit: Wikipedia)

The Court of Appeal for the Second District affirmed on Monday a trial court’s denial of a motion to compel arbitration.  Barsegian v. Kessler & Kessler, et al., No. B237044, __ Cal.App.4th __ (2d Dist. Apr. 15, 2013), where some defendants moved to compel arbitration, but the remaining defendants did not.  Slip Op. at 2.  The trial court denied on the grounds of waiver and the possibility of inconsistent rulings.

Moving defendants sought a reversal, arguing that plaintiff’s complaint alleged that all defendants are agents of one another, and that allegation is a binding judicial admission that gives the non-moving defendants the right to enforce the arbitration agreement.  The court disagreed, noting that:

[N]ot every factual allegation in a complaint automatically constitutes a judicial admission.  Otherwise, a plaintiff would conclusively establish the facts of the case by merely alleging them, and there would never be any disputed facts to be tried. . . . A judicial admission is therefore conclusive both as to the admitting party and as to that party’s opponent. (4 Witkin, Cal. Procedure (5th ed. 2008) Pleading, § 454, p. 587.) Thus, if a factual allegation is treated as a judicial admission, then neither party may attempt to contradict it—the admitted fact is effectively conceded by both sides.

Here, the moving defendants sought to reserve the right to argue at arbitration that the allegation of mutual agency was false, and thus it was not conceded by both sides.

Although the Kessler defendants frame their argument using the term “judicial admission” and rely on case law concerning judicial admissions, their counsel confirmed at oral argument that they do not in fact wish to treat Barsegian‟s allegation of mutual agency as a judicial admission, because the Kessler defendants do wish to be able to contest the truth of that allegation, either in court or before an arbitrator. That is, the Kessler defendants wish to hold Barsegian to the mutual agency allegation only for purposes of the motion to compel arbitration, but, should they succeed in compelling arbitration on the basis of that allegation, they wish to retain the right to prove to the arbitrator that the allegation is false. That is not how judicial admissions operate.

You can read more here.

By CHARLES H. JUNG

U.S. Supreme Court Holds That Unaccepted FLSA Pick-Off Offer Deprives Court of Subject Matter Jurisdiction

In Collective Action, FLSA, Pick-off Offer on April 16, 2013 at 4:51 pm
Official portrait of Justice

Official portrait of Justice (Photo credit: Wikipedia)

Today, the U.S. Supreme Court held that an FLSA collective action was properly dismissed for lack of subject matter jurisdiction, where the lead plaintiff ignored the employer’s offer of judgment under Federal Rule of Civil Procedure 68.  Genesis Healthcare Corp., et al. v. Symczyk, No. 11-1059, 569 U.S. __ (April 16, 2013).

Plaintiff brought a collective action under the Fair Labor Standards Act (“FLSA”), and Genesis Healthcare Corp. promptly made an offer of judgment under F.R.C.P. 68.  The District Court found that the Rule 68 offer fully satisfied plaintiff’s claim and that no other individuals had joined her suit, and it dismissed the suit for lack of subject matter jurisdiction.  The Third Circuit reversed.

Justice Thomas, writing for the 5-4 majority, concluded that:

Reaching the question on which we granted certiorari,we conclude that respondent has no personal interest in representing putative, unnamed claimants, nor any other continuing interest that would preserve her suit from mootness. Respondent’s suit was, therefore, appropriately dismissed for lack of subject-matter jurisdiction.

More later.

By CHARLES H. JUNG

Press Quotes About Analysis of Ninth Circuit’s Kilgore v. KeyBank, N.A. Case

In Arbitration, Injunctive Relief, Press Quotes, Public Claims on April 15, 2013 at 9:15 am
ProfWhiteboard_Injunctions

ProfWhiteboard_Injunctions (Photo credit: cali.org)

Abigail Rubenstein of Law360 published an article Friday quoting the blog author’s analysis of the Ninth Circuit’s recent en banc ruling in Kilgore v. KeyBank, N.A.  Kilgore v. Keybank, N.A., No. 09-16703, __ F.3d __ (9th Cir. Apr. 11, 2013) (en banc):

Employers who were hoping that the full court would adopt the original appellate panel in the case’s flat-out rejection of the Broughton-Cruz rule may be disappointed, but the narrower en banc decision will still likely prove useful to businesses trying to enforce their arbitration agreements in employment disputes, lawyers told Law360.

“The decision left open the question of the viability of the Broughton-Cruz rule, but the reasoning of the court at the end of the day might please the defense bar more than the plaintiffs bar because although the Ninth Circuit sidestepped the continued viability of the rule, what it did say was that to extent that an exception [to the FAA] for public injunctive relief exists, it is quite a narrow one,” Charles Jung of Nassiri & Jung LLP said.

And employers facing Private Attorney General Act claims, which plaintiffs often argue fit into that exception, can seize on the appeals court’s narrow construction to make the case that the claims should be sent to an arbitrator, employment defense lawyers said.

Ninth Circuit Holds That FLSA Collective Action and State Law Class Action Are Not Inherently Incompatible

In Class Notice, Collective Action, FLSA, Opt-in, Opt-out on April 12, 2013 at 5:17 pm
Threatened Class Action Against Second Life Br...

Threatened Class Action Against Second Life Brautigan & Tuck Holdings (Photo credit: TaranRampersad)

In a wage and hour class action, Bush v. Integrity Staffing Solutions, Inc., No. 11-16892, __ F.3d __ (9th Cir. Apr. 12, 2013), a Ninth Circuit panel today affirmed in part and reversed in part the district court’s dismissal of warehouse workers’ claims for unpaid wages under the Fair Labor Standards Act and Nevada state law.  The court reversed the dismissal of state law claims on the basis that they would be certified using different class certification procedures than the federal wage-and-hour claims.  Agreeing with other circuits, the panel held that a FLSA collective action and a state law class action are not inherently incompatible as a matter of law even though plaintiffs must opt into a collective action under the FLSA but must opt out of a class action under Federal Rule of Civil Procedure 23.

Our sister circuits have correctly reasoned that FLSA’s plain text does not suggest that a district court must dismiss a state law claim that would be certified using an opt-out procedure. Its opt-in requirement extends only to “any such action” – that is, a FLSA claim. . . . Nor does the legislative history of Section 216(b) support the view of some district courts that allowing both actions to proceed simultaneously “would essentially nullify Congress’s intent in crafting Section 216(b) and eviscerate the purpose of Section 216(b)’s opt-in requirement.”

Judges

Before: Jerome Farris, Sidney R. Thomas, and N. Randy Smith, Circuit Judges. Opinion by Judge Thomas.

The case was argued and submitted at Stanford Law School.

Attorneys

Mark R. Thierman, Jason J. Kuller, Joshua D. Buck (argued), Thierman Law Firm, P.C., Reno, Nevada, for Plaintiffs- Appellants.

Rick D. Roskelley (argued), Roger L. Grandgenett II, Cory Glen Walker, Littler Mendelson, P.C., Las Vegas, Nevada, for Defendant-Appellee.

By CHARLES H. JUNG

Ninth Circuit Avoids Broad Ruling, Leaving Question of Viability of Broughton-Cruz to Another Day

In Arbitration, Class Waiver, Concepcion, Public Claims on April 12, 2013 at 11:09 am
U.S. Court of Appeals for the Ninth Circuit

U.S. Court of Appeals for the Ninth Circuit (Photo credit: Wikipedia)

The Ninth Circuit’s en banc ruling yesterday in Kilgore v.Keybank, N.A. (you can read more here) was a decidedly restrained opinion.  The court could certainly have held, as many expected, that the Broughton-Cruz public injunction exception to the general rule that the “FAA requires state courts to honor arbitration agreements” does not stand in light of Concepcion, particularly in light of the Supreme Court’s reaction to state courts taking a narrow read of Concepcion.

But while some reports justifiably see Kilgore as a narrow victory for the plaintiff’s bar, the Ninth Circuit arguably took a narrow read of the public injunction exception.  The court held that the claim for injunctive relief fell outside Broughton-Cruz because the “requested prohibitions against reporting defaults on the Note and seeking enforcement of the Note plainly would benefit only the approximately 120 putative class members.”  Slip op. at 17 (emphasis supplied).

In Kilgore, defendant withdrew from the private school loan business, and accordingly the court concluded that the “injunctive relief sought thus, for all practical purposes, relates only to past harms suffered by the members of the limited putative class.”

The central premise of Broughton-Cruz is that “the judicial forum has significant institutional advantages over arbitration in administering a public injunctive remedy, which as a consequence will likely lead to the diminution or frustration of the public benefit if the remedy is entrusted to arbitrators.” Broughton, 988 P.2d at 78. That concern is absent here, where Defendants’ alleged statutory violations have, by Plaintiffs’ own admission, already ceased, where the class affected by the alleged practices is small, and where there is no real prospective benefit to the public at large from the relief sought.

This suggests an argument for defendants in class action cases where there is a mandatory arbitration agreement: where the company has stopped an alleged unlawful practice, and the proposed private attorney general action affects only the class members, then a defendant might argue that the Broughton-Cruz rule does not apply.  It’s worth noting that 120 putative class members is not an unusually small class in an employment case, and if the Ninth Circuit sees a class of that size as only a “limited putative class”, then it might arguably see many wage and hour cases as affecting only a limited portion of the public.

If this is a victory for the plaintiff’s bar, it is indeed a very narrow one.  And it highlights the importance of the California Supreme Court’s upcoming decision in Iskanian.

By CHARLES H. JUNG