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U.S. Supreme Court Rules a Putative Class Action Plaintiff May Not Stipulate Around CAFA Amount in Controversy

In Breaking News, CAFA, Class Actions on March 19, 2013 at 6:38 pm
U.S. Supreme Court building.

U.S. Supreme Court building. (Photo credit: Wikipedia)

In a ruling today with substantial implications for wage & hour class actions, a unanimous U.S. Supreme Court held that a putative class representative’s stipulation that he and the class would seek less than $5 million in damages does not defeat federal jurisdiction under the Class Action Fairness Act of 2005 (“CAFA”).  Standard Fire Insurance Co. v. Knowles, No. 11-1450, 586 U.S. __ (Mar. 19, 2013).

The question presented concerned a class-action plaintiff who stipulates, prior to certification of the class, that he, and the class he seeks to represent, will not seek damages that exceed $5 million in total. Does that stipulation remove the case from CAFA’s scope?

Justice Breyer writing for the Court concluded no, reasoning that stipulations must be binding, and a “plaintiff who files a proposed class action cannot legally bind members of the proposed class before the class is certified.”

 We do not agree that CAFA forbids the federal court to consider, for purposes of determining the amount in controversy, the very real possibility that a nonbinding, amount-limiting, stipulation may not survive the class certification process. This potential outcome does not result in the creation of a new case not now before the federal court. To hold otherwise would, for CAFA jurisdictional purposes, treat a nonbinding stipulation as if it were binding, exalt form over substance, and run directly counter to CAFA’s primary objective: ensuring “Federal court consideration of interstate cases of national importance.” §2(b)(2), 119 Stat. 5. It would also have the effect of allowing the subdivision of a $100 million action into 21 just-below-$5-million state-court actions simply by including nonbinding stipulations; such an outcome would squarely conflict with the statute’s objective.

The Court concluded that “the stipulation at issue here can tie Knowles’ hands, but it does not resolve the amount-in-controversy question in light of his inability to bind the rest of the class.”

By CHARLES H. JUNG

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South Los Angeles Garment Factory Settles Overtime Case With City Attorney’s Office

In Breaking News on September 3, 2010 at 5:00 am
garment factory line
Image by beelaineo via Flickr

Richard Winton of the Los Angeles Times reports that a South Los Angeles garment factory has agreed to pay backpay and overtime to settle a suit filed by the City Attorney’s office in 2009.

The settlement will bring long overdue compensation for unpaid overtime to employees and will require an independent monitor at the factory to oversee compliance with workplace laws, city attorneys said.

The owners agreed to pay for an independent monitor, the first time a domestic garment manufacturer has consented to do so, said Asst. City Atty Jim Colbert.

The lawsuit filed in July 2009 alleged that Seventeen Inc. and its predecessor, Q&I Inc., along with their owners and operators, required employees to work 12-hour shifts, sometimes two or three shifts back-to-back, six days a week without overtime pay or rest breaks. Read the rest of this entry »

Raided California Company Sued in Wage & Hour Class Action for Mistreating Undocumented Workers

In Breaking News on September 1, 2010 at 6:22 am

Business Week reports that civil rights lawyers filed a federal lawsuit Tuesday against Terra Universal Inc., a government contractor that was the target of an immigration raid this summer, accusing the company of bilking illegal workers out of pay and violating their rights.  The civil suit alleges that Terra Universal and its owner denied illegal immigrant workers overtime and sick pay and discriminated against them because of their visa status. Read the rest of this entry »

Expedited Jury Trial Bill Passes

In Breaking News on August 25, 2010 at 4:19 pm
California State Senate chamber
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In a positive development for both plaintiffs and defendants, a bill establishing an expedited jury trial procedure has sailed through the California Legislature.  The Wall Street Journal Law Blog and The Recorder reported today that Assembly Bill No. 2284 was approved by the legislature on a unanimous vote.  The bill, entitled the Expedited Jury Trials Act, was introduced by Assembly Member Noreen Evans (D-Santa Rosa).  It calls for the establishment of strealined jury trials in civil cases, where the parties stipulate to them.  Some of the highlights:

  • Waiver of all rights to appeal, motions for directed verdict, and post-trial motions;
  • Only 3 hours per side to present its case;
  • Jury sizes of 8 or fewer, with no alternates, and only 3 peremptory challenges;
  • Provision for high/low agreements: (i.e., a voluntarily agreement specifying a minimum and maximum amount of damages, regardless of the ultimate verdict issued returned by the jury).

By CHARLES H. JUNG

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Judge Walker Lifts Stay

In Breaking News, Other Cases of Interest on August 12, 2010 at 1:13 pm
2008 Proposition 8 Protest
Image by Fibonacci Blue via Flickr

Judge Vaughn R. Walker of the Northern District of California today lifted a stay on his decision where he ruled that Proposition 8 was unconstitutional.  Judge Walker, however, delayed implementation of the order to lift his stay until August 18.

Defendant-intervenors Dennis Hollingsworth, Gail Knight, Martin Gutierrez, Mark Jansson and ProtectMarriage.com brought a motion to stay the court’s judgment last week to ensure that Proposition 8 remains in effect as they pursue their appeal in the Ninth Circuit. In the alternative, proponents sought a brief stay to allow the court of appeals to consider the matter.

San Francisco asked the court to deny the stay and order the injunction against Proposition 8 to take effect immediately. California’s Governor and Attorney General also opposed any stay.

The Court held that “[b]ecause proponents fail to satisfy any of the factors necessary to warrant a stay, the court denies a stay except for a limited time solely in order to permit the court of appeals to consider the issue in an orderly manner.”

Federal courts look to four factors in deciding whether a stay is appropriate:

(1) whether proponents have made a strong showing that they are likely to succeed on the merits;

(2) whether proponents will be irreparably injured absent a stay;

(3) whether the stay will substantially injure other interested parties; and

(4) whether the stay is in the public interest.

See Nken v. Holder, 556 U.S. —-, 129, S. Ct. 1749, 1761 (2009) (noting overlap with Winter v. Natural Resources Defense Council, Inc., 555 U.S. —-, 129 S. Ct. 365, 374 (2008)).  The first two factors “are the most critical.”  Nken, 129 S. Ct. at 1757.

The order reads:

None of the factors the court weighs in considering a motion to stay favors granting a stay. Accordingly, proponents’ motion for a stay is DENIED. Doc #705. The clerk is DIRECTED to enter judgment forthwith. That judgment shall be STAYED until August 18, 2010 at 5 PM PDT at which time defendants and all persons under their control or supervision shall cease to apply or enforce Proposition 8.

By CHARLES H. JUNG

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Breaking News: California Supreme Court Rejects Private Right of Action for Plaintiffs in Tip Pooling Cases Under Labor Code section 351

In Breaking News, Private Rights of Action, Tip Pooling on August 9, 2010 at 2:30 pm
Hawaiian Gardens from the 605
Image by lavocado@sbcglobal.net via Flickr

The California Supreme Court today issued its opinion in Lu v. Hawaiian Gardens Casino, Inc., an eagerly anticpiated decision where the issue was whether Labor Code section 351 provides a private cause of action for employees to recover any misappropriated tips from employers.  The Court concluded that “section 351 does not contain a private right to sue.”

Labor Code section 351 prohibits employers from taking any gratuity patrons leave for their employees, and declares that such gratuity is “the sole property of the employee or employees to whom it was paid, given, or left for.” Several appellate opinions have held that this prohibition, at least in the restaurant context, does not extend to employer-mandated tip pooling, whereby employees must pool and share their tips with other employees. (See Leighton v. Old Heidelberg, Ltd. (1990) 219 Cal. App. 3d 1062, 1067 (Leighton); see also Etheridge v. Reins Internat. California, Inc. (2009) 172 Cal. App. 4th 908, 921-922; Budrow v. Dave & Buster’s of California, Inc. (2009) 171 Cal.App.4th 875, 878-884; Jameson v. Five Feet Restaurant, Inc. (2003) 107 Cal.App.4th 138, 143.)

Plaintiff Louie Hung Kwei Lu (plaintiff) was employed as a card dealer at defendant Hawaiian Gardens Casino, Inc. (the Casino), from 1997 to 2003. The Casino had a written tip pooling policy.  Plaintiff brought a class action against the Casino and its general manager. His complaint alleged that the Casino‟s tip pooling policy amounted to a conversion of his tips, and violated the employee protections under sections 221 (prohibiting wage kickbacks by employer), 351 (prohibiting employer from taking, collecting, or receiving employees‟ gratuities), 450 (prohibiting employer from compelling employees to patronize employer), 1197 (prohibiting payment of less than minimum wage), and 2802 (indemnifying employee for necessary expenditures). The complaint also alleged that the Casino‟s conduct giving rise to each statutory violation constituted an unfair business practice under the unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et seq.).

The trial court granted the Casino‟s motion for judgment on the pleadings on the causes of action based on sections 351 and 450. It agreed with the Casino that neither section contained a private right to sue. The court also granted the Casino‟s successive motions for summary adjudication on the remaining causes of action. Plaintiff appealed.

The Court of Appeal held, “pursuant to the analysis in Leighton, that tip pooling in the casino industry is not prohibited by Labor Code section 351.” However, it reversed the trial court‟s order granting summary adjudication of the UCL cause of action based on section 351. While section 351 itself contains no private right to sue, the Court of Appeal concluded this provision may nonetheless serve as a predicate for a UCL claim because plaintiff presented triable issues of fact as to whether section 351 prohibited certain employees who participated in the tip pool from doing so because they were “agents” of the Casino.

Less than two months later, another Court of Appeal expressly disagreed with the holding on section 351 of the appellate court below. (See Grodensky v. Artichoke Joe’s Casino (2009) 171 Cal.App.4th 1399, review granted June 24, 2009, S172237.) The Supreme Court granted review to resolve the conflict on this narrow issue.

The Court concluded that the statutory language does not “unmistakabl[y]” reveal a legislative intent to provide wronged employees a private right to sue.  Based on a review of section 351‟s legislative history, the Court also concluded that there is no clear indication that the legislative history showed an intent to create a private cause of action under the statute.

Justice Chin wrote the opinion for the California Supreme Court, with all other Jusitices concurring.  Judge David L. Minning of the Los Angeles Superior Court was the trial judge.

The attorneys for appellant were Spiro Moss, Dennis F. Moss, and Andrew Kopel.

David Arbogast submitted an amicus curiae brief for the Consumer Attorneys of California.

Respondents were represented by Tracey A. Kennedy and Michael St. Denis

Anna Segobia Masters and Jennifer Rappoport submitted an amicus curiae brief for the California Gaming Association on behalf of Defendants and Respondents.

Dennis F. Moss and Tracey A. Kennedy argued in front of the Court.

By CHARLES H. JUNG

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Breaking News: Judge Vaughn Walker Strikes Down Proposition 8

In Breaking News, Other Cases of Interest on August 4, 2010 at 2:11 pm
Rally for Prop 8 in Fresno, California
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Judge Vaughn R. Walker of the Northern District of California issued his much anticipated ruling today in Perry, et al. v. Shwarzenegger, et al., Case No. C09-2292 VRW.  Judge Walker struck down the so-called gay marriage ban, Proposition 8, concluding that “Plaintiffs have demonstrated by overwhelming evidence that Proposition 8 violates their due process and equal protection rights and that they will continue to suffer these constitutional violations until state officials cease enforcement of Proposition 8.”   The case involved a challenge to the November 2008 voter-enacted amendment to the California Constitution (“Proposition 8” or “Prop 8”).  Cal. Const. Art. I, § 7.5.

The Court concluded that:

Proposition 8 fails to advance any rational basis in singling out gay men and lesbians for denial of a marriage license. Indeed, the evidence shows Proposition 8 does nothing more than enshrine in the California Constitution the notion that opposite-sex couples are superior to same-sex couples.Because California has no interest in discriminating against gay men and lesbians, and because Proposition 8 prevents California from fulfilling its constitutional obligation to provide marriages on an equal basis, the court concludes that Proposition 8 is unconstitutional.

Plaintiffs have demonstrated by overwhelming evidence that Proposition 8 violates their due process and equal protection rights and that they will continue to suffer these constitutional violations until state officials cease enforcement of Proposition 8. California is able to issue marriage licenses to same-sex couples, as it has already issued 18,000 marriage licenses to same-sex couples and has not suffered any demonstrated harm as a result, see FF 64-66; moreover, California officials have chosen not to defend Proposition 8 in these proceedings.

The Court ordered the following:

Because Proposition 8 is unconstitutional under both the Due Process and Equal Protection Clauses, the court orders entry of judgment permanently enjoining its enforcement; prohibiting the official defendants from applying or enforcing Proposition 8 and directing the official defendants that all persons under their control or supervision shall not apply or enforce Proposition 8. The clerk is DIRECTED to enter judgment without bond in favor of plaintiffs and plaintiff-intervenors and against defendants and defendant-intervenors pursuant to FRCP 58.

By CHARLES H. JUNG

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