Class Action Defense Blog

Summary Judgment in Labor Law Class Action Turned on Issues of First Impression Recurrent in Federal Court Class Action Appeals, Warranting Referral of Questions Underlying Class Action to California Supreme Court for Resolution Ninth Circuit Holds

Plaintiff filed a putative class action against her employer, Bayer Pharmaceuticals, in California state court alleging labor law violations; specifically, the class action complaint asserted that Bayer misclassified pharmaceutical sales representatives (PSRs) as exempt employees, and accordingly failed to pay them overtime or provide them with meal breaks to which they would be entitled as non-exempt employees. D'Este v. Bayer Corp., 565 F.3d 1119, 1121-22 (9th Cir. 2009). Defense attorneys removed the class action to federal court, and the district court granted Bayer’s motion for summary judgment “finding that [plaintiff] was exempt under California's outside sales exemption”’ and based on that finding, the district court did not address whether Bayer also was correct in relying on the “administrative exemption” in its classification of PSRs. Id., at 1122. Plaintiff appealed, id., at 1122. The Ninth Circuit observed that “The question whether PSRs are exempt under California's outside salesperson and administrative exemptions is the central issue in multiple class action lawsuits in the Ninth Circuit as well as in other circuits.” Id. Accordingly, the Circuit Court – pursuant to Rule 8.548 of the California Rules of Court – certified two questions to the California Supreme Court, id., at 1120.

The Ninth Circuit summarized the relevant facts as follows. Bayer gave plaintiff a list of doctors and hospitals, as well as a list of products, for which she was responsible: “[Plaintiff’s] job was to communicate information about her Bayer products to her roster of doctors and seek their non-binding commitment to write prescriptions for those products. She was also responsible for communicating with hospitals in her territory to influence them to add the Bayer products for which she was responsible to their formularies.” D’Este, at 1121. Plaintiff was “trained on a message” and was required to “adhere closely to the information provided by Bayer about its products”; beyond this, however, “she had the freedom to develop her own strategy for communicating with and influencing doctors.” Id. Additionally, she “had flexibility regarding how she spent her day,” id., at 1122. Specifically, “[Plaintiff] developed her own schedule for meeting with the doctors on her list. She received little or no daily supervision, and saw her manager once every six to eight weeks.” Id. According to the class action complaint, plaintiff regularly worked more than 8 hours per day and more than 40 hours per week, id. For this, she received between $81,000 and $103,000 per year in compensation, id., at 1121. And plaintiff was “not required to keep or maintain set hours.” Id., at 1122.

Continue reading "Labor Law Class Action Defense Cases–D'Este v. Bayer: Ninth Circuit On Class Action Appeal Certifies Two Questions To California Supreme Court As Central Issues In Numerous Federal Court Class Action Appeals" »

Posted In: Employment Law Class Actions, Class Action Court Decisions

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Unopposed by Class Action Plaintiffs, and Transfers Actions to District of New Jersey

Six class actions – two in Massachusetts and one each in Connecticut, New Jersey, New York and Pennsylvania – were filed against Staples alleging violations of state and federal labor laws; specifically, the class action complaints allege that Staples failed to pay its assistant, operations and/or sales managers overtime pay under the federal Fair Labor Standards Act (FLSA) and/or various state wage and hour statutes. In re Staples, Inc., Wage & Hour Employment Practices Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. April 14, 2009) [Slip Opn., at 1]. Defense attorneys filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the District of New Jersey or Massachusetts, id. No one opposed the motion; four groups of class action plaintiffs supported the selection of New Jersey, while plaintiffs in the other two class actions favored Connecticut. Id. In the end, all parties agreed on New Jersey as the appropriate transferee court, id. The Judicial Panel granted the motion to centralize the class action lawsuits and agreed that the District of New Jersey was the appropriate transferee court because “(1) this choice is supported by all parties at least in the alternative, and (2) this district is already presiding over a similar action against Staples which is in its final stages.” Id.

Posted In: Employment Law Class Actions, Multidistrict Litigation, Class Action Court Decisions

Class Action Certification Order of Labor Law Class Action must be Reversed because District Court Failed to Conduct “Rigorous Analysis” of Rule 23’s Requirements for Class Action Treatment Eleventh Circuit Holds

Plaintiff filed a putative nationwide class action against his former employer, T-Mobile, after it fired him for poor attendance; the class action complaint alleged labor law violations. Vega v. T-Mobile USA, Inc., ___ F.3d ___, 1260-61 (11th Cir. 2009). Specifically, the class action alleged that “by charging back commissions advanced on sales of ‘deactivated’ prepaid service plans, T-Mobile violated the terms of the compensation program, failed to pay commissions earned by the sales representatives, and was unjustly enriched by retaining the benefit of its employees' services without fully compensating them for such services.” Id., at 1262. T-Mobile’s compensation package for retail sales representatives consisted of an hourly wage plus commissions. Id., at 1261. The commissions were incentive-based, paid on the employee’s “net activations” – if a customer canceled service within 180 days of activation then T-Mobile would “charge-back” the commission previously paid “in order to reclaim that amount from the sales representative.” Id. Under T-Mobile’s plan, commissions paid within the 180-day window are “paid as an advance against commissions anticipated to be earned in the future” and “[c]ommissions are not earned until the expiration of the 180-day commission charge back window.” Id. Additionally, T-Mobile, in its sole discretion, determined whether sales qualified for commission payments, id. The class action complaint was filed in Florida state court, id., at 1262, but defense attorneys removed the class action to federal court under the Class Action Fairness Act (CAFA), id., at 1263. Plaintiff moved the district court to certify the litigation as a class action; defense attorneys opposed class action treatment and moved for summary judgment. Id. The district court denied T-Mobile’s summary judgment motion, and granted class action certification on behalf of a Florida class only. Id., at 1263-64. Pursuant to Federal Rule of Civil Procedure 23(f), the Eleventh Circuit granted interlocutory review of the class action certification order and reversed. Id., at 1264.

The class action complaint did not impress the Circuit Court, which it characterized as “incomplete and ambiguous.” Vega, at 1263. The vague complaint “simply alleges: (1) that, because prepaid customers paid up-front for their service, T-Mobile ‘bore no risk of non-payment’; (2) that when T-Mobile charged its employees back for commissions on prepaid plans, ‘even though T-MOBILE received the full benefit of its agreement with the prepaid plan customers, T-MOBILE's commission based employees lost the benefits of those sales and the resulting commissions’; and (3) that ‘T-MOBILE has unfair [sic] and unjustly profited from its internal systems error by unduly charging back its employees on the prepaid plans and retaining its employee's [sic] wages for its own use and benefit.’” Id., at 1262. The class action asserted two claims – one for “unpaid wages” and one for “unjust enrichment” – arising out of the central allegation that “T-Mobile improperly withheld or charged back from its employees.” Id. The class action did not allege that employees nationwide were subject to the same compensation structure, id. The Eleventh Circuit noted that the district court certified the litigation as a class action despite two concerns: first, that a nationwide class “lacked commonality due to variations in the contract and employment laws of the fifty states,” and second, that the class action complaint’s allegations “focused on charge backs of commissions already paid, but indicated nothing about any failure to pay commissions in the first instance, the inclusion in the class of T-Mobile ‘employees ... who ... were entitled to receive[ ] commissions ... who did not receive their commissions’ would implicate claims falling outside the scope of the complaint, as pled, and, thus, failed the typicality requirement.” Id., at 1263-64.

Continue reading "T-Mobile Class Action Defense Cases–Vega v. T-Mobile: Eleventh Circuit Reverses Class Action Certification Order And Orders Lawsuit To Proceed On Individual Rather Than Class Action Basis" »

Posted In: Certification of Class Actions, Employment Law Class Actions, Class Action Court Decisions

Class Action Waiver in Arbitration Clause Unconscionable thereby Warranting Denial of Motion to Compel Plaintiff to Arbitrate Individual Claims rather than Pursue Labor Law Class Action Complaint California State Court Holds

Plaintiff, the general manager of an El Pollo Loco restaurant, filed a putative class action against El Pollo Loco alleging violations of California’s labor code; the class action complaint alleged inter alia that defendant misclassified its general managers as exempt when they “spent the majority of their time performing nonmanagerial tasks” and that it wrongfully denied its general managers overtime compensation and meal breaks. Olvera v. El Pollo Loco, Inc., 173 Cal.App.4th 447, 451 (Cal.App. 2009). As part of his employment, plaintiff received written materials that, in part, required that all work-related disputes be resolved through binding arbitration, governed by the Federal Arbitration Act (FAA). Id., 449-50. Class action litigation was prohibited, but the parties were permitted “to conduct discovery and bring motions in an arbitration as provided by the Federal Rules of Civil Procedure,” id., at 450. Defense attorneys moved to compel arbitration of the class action complaint as to plaintiff’s individual claims only, id., at 451. Plaintiff opposed the motion to compel arbitration, arguing that the arbitration clause was unconscionable; defense attorneys argued that the clause was not unconscionable because employees were not required to sign the acknowledgement form by which they were bound to the arbitration clause. Id., at 452. The trial court denied the motion to compel arbitration, concluding that the clause was both procedurally and substantively unconscionable. Id., at 453. Under California law, an order denying a motion t compel arbitration is an appealable order. Cal. Code Civ. Proc., § 1294. Defendant appealed, and the Court of Appeal affirmed.

After summarizing the relevant law regarding arbitration agreements, see Olvera, at 453-54, the appellate court turned first to the issue of procedural unconscionability. The Court of Appeal explained at page 454, “Procedural unconscionability focuses on oppression or unfair surprise, while substantive unconscionability focuses on overly harsh or one-sided terms.” (Citations omitted.) California courts view these two factors on a sliding scale: “The more procedural unconscionability is present, the less substantive unconscionability is required to justify a determination that a contract or clause is unenforceable. Conversely, the less procedural unconscionability is present, the more substantive unconscionability is required to justify such a determination.” Id., at 454 (citations omitted). The appellate court found that the arbitration clause was procedurally unconscionable because of (1) the unequal bargaining power between the employees and the employer, which “makes it likely that the employees felt at least some pressure to sign the acknowledgment and agree to the new dispute resolution policy” even if the company insists that they were not required to do so, and (2) agreement to the dispute resolution procedure was “not an informed decision” because the description of the dispute resolution policy “was totally inaccurate.” Id., at 455-56.

Continue reading "Class Action Defense Cases–Olvera v. El Pollo Loco: California Court Affirms Denial Of Motion To Compel Individual Arbitration Of Labor Law Class Action Holding Class Action Arbitration Waiver Unenforceable" »

Posted In: Arbitration, Employment Law Class Actions, Class Action Court Decisions

Trial Court Judgment in Class Action Alleging Starbucks Violated Labor Code by Sharing Tips with Shift Supervisors Required Reversal because California Law does not Prohibit Starbucks’ Shift Supervisors from Sharing in Tips California State Court Holds

Plaintiff filed a class action against Starbucks alleging violations of California’s Unfair Competition Law (UCL) and Labor Code; the class action complaint alleged that Starbucks alleged shift supervisors to participate in tip pools in violation of California law, specifically Labor Code section 351. Chau v. Starbucks Corp., 174 Cal.App.4th 688 (Cal.App. 2009) [Slip Opn., at 1-2]. The trial court certified the litigation as a class action, id., at 2. Starbucks moved to decertify the class, but the motion was denied. Id., at 6. Prior to trial, the court granted plaintiff’s in limine motion to exclude evidence that shift supervisors serve customers, finding that such evidence was “irrelevant” (though it did allow some evidence on the matter). Id., at 7. Ultimately, the trial court awarded the class $86 million as restitution based on its finding at the conclusion of a bench trial that plaintiff had proved the UCL claim. Id., at 2. Starbucks appealed. The Court of Appeal reversed, holding that Starbucks’ tip sharing policy did not violate California law: “The applicable statutes do not prohibit Starbucks from permitting shift supervisors to share in the proceeds placed in collective tip boxes.” Id. The Court explained that the tip-pooling practice challenged by the class action “concern[ed] an employer's authority to require equitable allocation of tips placed in a collective tip box for those employees providing service to the customer.” Id., at 2-3. The appellate court held at page 3, “There is no decisional or statutory authority prohibiting an employer from allowing a service employee to keep a portion of the collective tip, in proportion to the amount of hours worked, merely because the employee also has limited supervisory duties.” Accordingly, it reversed the trial court judgment.

Starbucks’ thousands of stores are staffed by baristas, shift supervisors, assistant store managers, and store managers. Chau, at 3. The Court of Appeal explained the differences between the store employees as follows: “Baristas are entry-level, part-time hourly employees responsible for customer service related tasks, such as working the cash register and making coffee drinks. Shift supervisors are also part-time hourly employees who perform all the duties of a barista, but are also responsible for some additional tasks, including supervising and coordinating employees within the store, opening and closing the store, and depositing money into the safe. A barista is eligible for promotion to shift supervisor after six months on the job. A store manager is a full-time salaried employee, and has the authority to recruit, hire, promote, transfer, schedule, discipline, and terminate baristas and shift supervisors. In some stores, a store manager is assisted by an assistant store manager, who is also a fulltime salaried employee.” Id., at 3-4. At trial, Starbucks introduced evidence that shift supervisors spend 90-95% of their time “performing the same jobs as baristas,” and that they had “no authority to hire, discipline, or terminate baristas.” Id., at 8. Moreover, shift supervisors are not considered “management” by the company, id. The trial court ruled against Starbucks because it found that shift supervisors “‘supervise’ and ‘direct’ the acts of other employees,” and that they were barred by California law to share in tip pools. Id., at 8-9.

Continue reading "Starbucks Class Action Defense Cases–Chau v. Starbucks: California Appellate Court Reverses $86 Million Class Action Judgment Against Starbucks Holding Labor Law Class Action Claims Failed" »

Posted In: Employment Law Class Actions, Class Action Court Decisions

Labor Law Class Action Challenging Defendant’s Classification of Pharmaceutical Sales Representatives as Exempt from Overtime Laws Dismissed on Defense Motion for Summary Judgment because Plaintiff Fell within Outside Sales Exemption Pennsylvania Federal Court Holds

Plaintiff, a pharmaceutical sales representative, filed a class action in Pennsylvania state court against her employer, AstraZeneca, alleging labor law violations; the class action complaint asserted that defendant improperly classified her as “exempt” and failed to pay her overtime required by Pennsylvania law. Baum v. AstraZeneca LP, 605 F.Supp.2d 669, 2009 WL 827920, *1 (W.D.Pa. 2009). Defense attorneys removed the class action to federal court, id. Defense attorneys then moved for summary judgment on the class action claims, id. The facts are quite detailed: in broad terms, plaintiff’s job was to increase defendant’s market share by selling directly to physicians, which required that she build relationships with the doctors and exercise discretion in determining how best to pitch AstraZeneca to doctors. Id., at *2-*3. The defense motion was based on the argument that plaintiff “exercised substantial judgment and discretion while discussing pharmaceutical products with physicians.” Id., at *3. Plaintiff responded that she “gave the same canned speech to each physician.” Id. The district court granted the motion for summary judgment and entered judgment in favor of the defense as to the class action claims.

After summarizing the standard of review and the similarities between the federal Fair Labor Standards Act (FLSA) and Pennsylvania’s Minimum Wage Act (PMWA), see Baum, at *4-*5, as well as the outside sales exemption and administrative exemption, id., at *5-*6, the court turned to an examination of whether either of those exemptions applied. The district court readily concluded that plaintiff had been properly classified. Id., at *6. The federal court’s decision was based on its finding that plaintiff made sales and obtained orders, and had been employed for the purpose of doing so, see id., at *7-*12. Put simply, “where pharmaceutical representatives seek to obtain physician commitments to write prescriptions, these representatives make sales and are engaged in the process of making sales for purposes of Pennsylvania’s outside sales exemption.” Id., at *12. Further, the district court found that plaintiff’s job involved sales activity, confirming she was employed for the purpose of making sales. Id., at *12-*14. Moreover, as noted above, plaintiff spent 90% of her time in the field, id., at *14. Accordingly, the outside sales exemption applied, id., at *14-*15. The court also opined that it would find that the administrative exemption would also apply to plaintiff. Id., at *16. Accordingly, the district court granted defendant’s motion for summary judgment and dismissed the class action complaint. Id., at *16-*17.

Posted In: Employment Law Class Actions, Class Action Court Decisions

Class Action Failed to Allege Discrimination Against Employer that Calculated Pension Benefits under Pre-Pregnancy Discrimination Act (PDA) Rules, Lawful at the Time, that Gave Less Retirement Credit to Pregnancy Leave than for Medical Leave Supreme Court Holds

Plaintiffs filed a class action against AT&T alleging violations of Title VII of the Civil Rights Act of 1964; the class action complaint asserted that defendant discriminated against employees on the basis of sex and pregnancy by providing pension and other benefits on a seniority system that treated pregnancy differently from other medical conditions. AT&T Corp. v. Hulteen, 556 U.S. ___ (May 18, 2009) [Slip Opn., at 1-3]. AT&T has provided pension and other benefits to employees since 1914 “based on a seniority system that relies upon an employee’s term of employment, understood as the period of service at the company minus uncredited leave time.” Id., at 1-2 (footnote omitted). According to the allegations underlying the class action, from 1960s until the mid-1970s, AT&T gave employees full service credit for “disability” leave but a maximum of 30 days of credit for “personal” leaves of absence, and the company treated pregnancy leave as “personal” rather than disability. Id., at 2. AT&T modified this program in 1977 “entitling pregnant employees to disability benefits and service credit for up to six weeks of leave”; however, leave beyond 6 weeks was still treated as “personal” leave. Id. Both plans were lawful at the time they were in use, id. But in 1978 Congress enacted the Pregnancy Discrimination Act (PDA), which made it unlawful to “treat pregnancy-related conditions less favorably than other medical conditions.” Id., at 3 (citation omitted). AT&T again modified its procedures to comply with the PDA, but it did not “make any retroactive adjustments to the service credit calculations of women who had been subject to the pre-PDA personnel policies.” Id. In the Ninth Circuit (where plaintiffs’ class action had been filed), case law held that “calculation of service credit excluding time spent on pregnancy leave violates Title VII,” id., at 4(citation omitted); in the Sixth and Seventh Circuits, case law held that “reliance on a pre-PDA differential accrual rule to determine pension benefits does not constitute a current violation of Title VII,” id. (citations omitted). The Supreme Court granted certiorari to resolve this conflict.

The Supreme Court defined the issue presented as “whether an employer necessarily violates the Pregnancy Discrimination Act (PDA), 42 U.S.C. §2000e(k), when it pays pension benefits calculated in part under an accrual rule, applied only prior to the PDA, that gave less retirement credit for pregnancy leave than for medical leave generally.” AT&T, at 1. The Supreme Court held “there is no necessary violation; and the benefit calculation rule in this case is part of a bona fide seniority system under §703(h) of Title VII of the Civil Rights Act of 1964…which insulates it from challenge.” Id. We do not discuss the opinion in greater detail. We note only that Justice Ginsburg filed a dissenting opinion, joined by Justice Breyer, arguing in essence that properly paying women today for service credit that should have been earned pre-PDA, is not a retroactive application of the law. Accordingly, AT&T’s conduct constitutes a “current violation of Title VII when, post-PDA, it did not totally discontinue reliance upon a pension calculation premised on the notion that pregnancy-based classifications display no gender bias.” AT&T, at 4 (Ginsburg, J., dissenting).

Posted In: Employment Law Class Actions, Class Action Court Decisions

Labor Law Class Action Against 3M Alleging Age Discrimination Warranted Class Action Certification Minnesota State Court Holds

Plaintiff filed a class action against his employer, 3M, alleging labor law violations; the class action complaint asserted that 3M discriminated against employees on the basis of age with respect to leadership development opportunities, promotion decisions, compensation decisions, and job eliminations. Whitaker v. 3M Co., Ramsey County District Court, Second Judicial District, Case No. 62-C4-04-012239 (April 11, 2009) [Slip Opn., at 2-3]. According to the allegations underlying the class action, 3M’s employment practices had a disparate impact on members of the putative class, id., at 3. Plaintiff’s attorneys moved the trial court to certify the litigation as a class action on behalf of “All persons who were 46 or older when employed by 3M in Minnesota in a salaried exempt position below PS grade 180 at any time on or after may 10, 2003, and who did not sign a document on or about their last day of employment purporting to release claims arising out of their employment with 3M.” Id., at 1. The trial court determined that class action treatment was warranted and therefore granted plaintiffs’ class action certification motion.

Posted In: Certification of Class Actions, Employment Law Class Actions, Class Action Court Decisions

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Unopposed by Class Action Plaintiffs, and Transfers Class Actions to District of New Jersey

Six class actions – two in Massachusetts, and one each in Connecticut, New Jersey, New York and Pennsylvania – were filed against Staples alleging labor law violations; specifically, the class action complaints allege “that Staples assistant, operations and/or sales managers are entitled to overtime pay under the Fair Labor Standards Act and/or various state wage and hour statutes.” In re Staples, Inc., Wage & Hour Employment Practices Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. April 14, 2009) [Slip Opn., at 1]. Defense attorneys filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the District of New Jersey or, alternatively, in the District of Massachusetts; none of the class action plaintiffs opposed centralization, though plaintiffs in four of the class actions supported transfer to New Jersey while plaintiffs in the remaining class actions supported transfer to Connecticut. Id. The Judicial Panel granted the motion to centralize the class action lawsuits and agreed that the District of New Jersey was the appropriate transferee court “because (1) this choice is supported by all parties at least in the alternative, and (2) this district is already presiding over a similar action against Staples which is in its final stages.” Id. Accordingly, the Panel ordered all class actions outside of New Jersey transferred as requested by Staples, id., at 1-2.

Posted In: Employment Law Class Actions, Multidistrict Litigation, Class Action Court Decisions

District Court Order Rejecting Proposed Class Action Settlement of ERISA Class Action as Unfair not Appealable Ninth Circuit Holds

Plaintiffs, employees of Montana Power and participants in the company’s retirement plan (the “Plan”), filed a class action against the Plan’s trustee and against directors of Montana Power alleging violations of ERISA; the class action complaint asserted that defendants breached fiduciary duties owed to Plan participants and mismanaged the Plan. In re Touch America Holdings, Inc. ERISA Litig., 563 F.3d 903 (9th Cir. 2009) [Slip Opn., at 4713, 4717]. The defendant-directors entered into a proposed class action settlement with plaintiffs; under the terms of the class action settlement the directors would make a payment “of nearly all the funds remaining in the directors’ fiduciary liability insurance policy.” Id., at 4717. The proposed class action settlement also contained two conditions – (1) directors cooperation in the class action claims against the Plan trustee, and (2) obtaining a district court order that “bar[red] suits for contribution or indemnity against the directors.” Id. The district court rejected the proposed class action settlement, id.; in part, the court found the settlement was not fair to the class because the monetary contribution represented only “three cents on the dollar” which it found was “not good in terms of recovery” and characterized as “a pittance…of the total amount of loss,” id., at 4719. The parties appealed, id., at 4717. The Ninth Circuit dismissed the appeal.

The Ninth Circuit noted that the parties did not dispute that the order rejecting the proposed class action settlement was not a “final decision.” In re Touch America, at 4718. The Circuit Court noted also the general rule that, in order to avoid “piecemeal appeals,” only final decisions are reviewable on appeal, id. The parties, therefore, sought interlocutory review of the district court’s order, id. The Ninth Circuit explained that “some disapprovals of class settlements are appealable under the section as orders refusing an injunction.” Id. (citation omitted). And the Court set forth the rule at page 4718 as follows: “To be immediately appealable, orders disapproving class settlements must satisfy three requirements: ‘First, the interlocutory order must have the practical effect of denying an injunction. Second, the order must have “serious, perhaps irreparable, consequence[s].” Finally, the order must be one that can be “effectively challenged” only by immediate appeal.’” (Citation omitted). The Circuit Court dismissed the appeal because it found that the second requirement had not been satisfied – that is, the Court concluded that the district court order would not cause “serious, perhaps irreparable, consequences.”

Continue reading "Class Action Settlement Cases–In re Touch America: Ninth Circuit Dismisses Appeal Seeking Review Of District Court Order Rejecting Proposed Class Action Settlement Holding Circuit Court Lacked Jurisdiction Over Appeal" »

Posted In: Employment Law Class Actions, Class Action Court Decisions

Class Action Complaint Alleging Violations of FLSA (Fair Labor Standards Act) based on Misclassification of Store Managers and Consequent Failure to Pay Overtime Satisfied First-Tier’s “Lenient Standard” for Conditional Class Action Certification Florida Federal Court Holds

Plaintiff filed a class action against Starbucks alleging violations of the federal Fair Labor Standards Act (FLSA); the class action complaint asserted that Starbucks misclassified him (and other store managers) as exempt and failed to pay him overtime. Reed v. Starbucks Coffee Co., ___ F.R.D. ___ (S.D.Fla. April 23, 2009) [Slip Opn., at 1]. According to plaintiff, a similar class action was filed over this issue in 2004 entitled Pendlebury v. Starbucks, which was settled in August 2008. Id., at 1-2. The present class action seeks overtime pay for store managers who worked for Starbucks on or after January 15, 2006, id., at 2. Plaintiff filed a motion with the district court for conditional certification of the litigation as a class action, id., at 1, and provided notices from five other individuals who consented to joining in the action since the class action complaint had been filed, id., at 2. The district court determined that conditional class action treatment was warranted and therefore granted plaintiffs’ conditional class action certification motion.

The district court explained that the Eleventh Circuit “has endorsed a two-tiered approach to certification of collective actions” under the FLSA. Reed, at 3 (citation omitted). The first stage employs “a fairly lenient standard” that requires the district court to determine whether the lawsuit is “suitable” for class action treatment. Id. This requires “some evidence that there are other employees of the defendant-employer who wish to opt-in the action.” Id. (citation omitted). The federal court found persuasive not only the five notices of consent to join filed in the present case, but “the fact that a previous suit resulted in 900 opt-in plaintiffs.” Id. The first stage requires also a showing that the members of the proposed class are “similarly situated,” id. In this regard, the district court found adequate plaintiff’s allegation “that there is a company-wide pay policy that results in all store managers being improperly classified as exempt and thus denied overtime compensation.” Id., at 4. The federal court therefore found that plaintiff had adequately established a basis for granting conditional class action certification to the lawsuit, id., at 4-5. Accordingly, the district court granted plaintiff’s motion and authorized the sending of notification to potential class members, id., at 5.

Posted In: Certification of Class Actions, Employment Law Class Actions, Class Action Court Decisions

Trial Court Properly Granted Defense Motion for Summary Judgment in Class Action Alleging Violation of California Labor Code by Sharing Tip Pools with Non-Managerial Employees that only "Indirectly Service" Tables because California Law does not Impose "Direct Table Service" Requirement on Participation in Tip Pools California State Court Holds

Plaintiff filed a class action in California state court against, their employer, Dave & Buster’s, alleging labor law violations; the class action complaint was premised “on the theory that distributions from the ‘tip pool’ to persons who did not provide direct table service violated [California] Labor Code section 351.” Budrow v. Dave & Buster’s of California, Inc., ___ Cal.App.4th ___ (Cal.App. March 2, 2009) [Slip Opn., at 1-2]. According to the allegations underlying the class action, defendant – an owner and operator of restaurants – “requires that servers contribute one percent of their gross sales to bartenders and other employees.” Id., at 2. (The class action did not allege that any manager participated in the tip pool, id., at 3.) The theory underlying the class action claims was that this policy violates Section 351, which plaintiff interpreted as limiting tip pools to those persons who “provide ‘direct’ table service.” Id., at 2. Defense attorneys successfully demurred to two of the three causes of action in the class action, and then moved for summary judgment on the last class action claim, which asserted an unfair business practice violation of Business & Professions Code section 17200 (“the UCL claim”). Id. The parties “disputed whether bartenders serve food and drink to patrons sitting at tables,” but the trial court found no triable issue of fact existed sufficient to preclude summary judgment in favor of the defense. Id., at 3. The trial court granted summary judgment on the UCL claim and entered judgment in favor of defendant on the class action. Id., at 2. The Court of Appeal affirmed.

Plaintiff’s class action was premised, in part, on the argument that California law imposed a “direct table service requirement” that excluded employees from sharing in tip pools unless they “directly serve the table.” Budrow, at 3. The Court of Appeal held that California law does not distinguish between “direct” and “indirect” table service, see id., at 3-5, and that the case relied on by plaintiff, Leighton v. Old Heidelberg, Ltd., 219 Cal.App.3d 1062 (Cal.App. 1990), did not impose such a requirement, see id., at 5-10. Accordingly, the appellate court affirmed judgment for the defense in the class action, id., at 11.

Posted In: Employment Law Class Actions, Class Action Court Decisions

As Matter of First Impression, Class Action Complaint Alleging Labor Law Violations and Challenging Releases Signed by Employees within Putative Class Action under Direct Settlements Offered by Employer Following Failure to Settle with Named Plaintiffs in Class Action Properly Subject to Summary Judgment because Releases Executed by Members of Class Action were Enforceable California State Court Holds

Plaintiffs filed a class action against their former employer, Pick Up Stix, alleging labor law violations; the class action complaint alleged that defendant failed to pay its employees overtime and misclassified employees as exempt from overtime pay. Chindarah v. Pick Up Stix, Inc., ___ Cal.App.4th ___ (Cal.App. February 26, 2009) [Slip Opn., at 2]. According to the allegations underlying the class action, defendant misclassified general managers, assistant managers and lead cooks, id. Defense attorneys sought to settle the class action and, when that failed, offered settlements directly to members of the putative class. Id. These individual settlement offers were based on the same formula offered at the mediation, and more than 200 people covered by the class action accepted the offers, id. As a condition of these settlements, the class members executed a general release and “acknowledged that he or she had spent more than 50% of the time performing managerial duties.” Id. Plaintiffs then amended their class action complaint to include a new party-plaintiff (one who had accepted the settlement offer) and a claim that the settlements reached with members of the putative class violated California labor laws, id., at 2-3. Defense attorneys filed a cross-complaint alleging breach of contract and of the settlement agreement, and seeking declaratory relief, id., at 3. Defense attorneys then moved for summary judgment, and the trial court upheld the releases concluding that they were “valid as a matter of law.” Id. Plaintiffs appealed, and the California Court of Appeal affirmed.

Plaintiffs argued that each release obtained by defendant were “void as a matter of law to the extent it releases claims for any wages actually due and unpaid and to the extent it constitutes an agreement to work for less than the overtime compensation actually due and unpaid. “ Chindarah, at 4. The Court of Appeal found no case directly on point, id., but after summarizing the relevant provisions of California’s Labor Code and of various state and federal cases addressing releases of disputed wage claims, see id., at 3-9, the appellate court ultimately relied on the fact that “there is no statute providing that an employee cannot release his claim to past overtime wages as part of a settlement of a bona fide dispute over those wages,” id., at 9. The Court further held that “public policy is not violated by a settlement of a bona fide dispute over wages already earned.” Id., at 9. Accordingly, the trial court properly found that the releases executed by members of the putative class who had accepted defendant’s settlement offers were valid and barred the claims in the amended class action complaint challenging those releases, id., at 9-10. The Court of Appeal therefore affirmed the judgment of the trial court and awarded defendant costs on appeal. Id., at 10.

Posted In: Employment Law Class Actions, Class Action Court Decisions

Labor Law Class Actions did not Warrant Class Action Treatment because Hiring Process Involved too many Individual Questions to Meet Requirements for Class Action Certification under Rule 23 Michigan Federal Court Holds

Plaintiffs filed two separate class actions against Cintas Corporation, a company that provides uniforms and other supplies to various businesses across the United States, alleging labor law violations; the class action complaints asserted that Cintas discriminated against employees in violation of Title VII of the Civil Rights Act. Serrano v. Cintas Corp., ___ F.Supp.2d ___ (E.D. Mich. March 31, 2009) [Slip Opn., at 1-2]. According to the allegations underlying one class action (Serrano), Cintas discriminated against Michigan employees who applied for position of Service Sales Representative (SSR) on the basis of gender; according to the other class action (Avalos), Cintas discriminated against employees nationwide on the basis of race. Id., at 2. The two class actions were consolidated for pretrial purposes, id., at 1. Plaintiffs in the companion cases filed motions with the district court to certify each lawsuit as a class action. Id. The district court determined that class action treatment was not warranted in either lawsuit and therefore denied both plaintiffs’ class action certification motions.

Cintas SSRs perform a wide range of duties, and are used by the company as entry-level sales and customer service representatives. Serrano, at 2. Each SSR reports to a Service Manager, who in turn reports to a General Manager; and in addition to a “common corporate structure,” Cintas also “uses common orientation manuals and policy statements throughout its facilities” and “has standard courses and training sessions for managers and SSRs.” Id. Importantly, the class action complaints allege further that Cintas “has a standard system for hiring SSRs.” Id. The district court summarized the hiring process as including “an initial screening of the application, a series of interviews, a route ride with another SSR, standardized tests, an exchange of information among hiring managers, and a final hiring decision made by the General Manager of the Cintas facility.” Id., at 2-3. Finally, the federal court explained that “[t]he hiring process has both objective and subjective components,” and that some criteria are required while others are preferred. Id., at 3.

Continue reading "Cintas Class Action Defense Cases–Serrano v. Cintas: Michigan Federal Court Denies Class Action Treatment Of Labor Law Class Action Against Cintas Holding Commonality, Typicality And Adequacy Of Representation Elements Not Met" »

Posted In: Certification of Class Actions, Employment Law Class Actions, Class Action Court Decisions

Trial Court Order Denying Defense Motion to Dismiss Labor Law Class Action and Compel Arbitration of Individual Claim based on Class Action Waiver in Unsigned Arbitration Agreement Proper because Class Action Waiver Unenforceable as Contrary to Public Policy California State Court Holds

Plaintiff, a delivery driver for a Domino’s Pizza owned by Western Pizza, filed a putative class action Western Pizza alleging labor law violations; the class action complaint asserted inter alia that defendant failed to reimburse its drivers for business expenses, and failed to pay minimum wage or provide itemized wage statements. Sanchez v. Western Pizza Enterprises, Inc., 172 Cal.App.4th 154 (Cal.App. 2009) [Slip Opn., at 2, 5]. Defense attorneys moved to dismiss the class action and compel arbitration, id., at 6. The parties were subject to an undated arbitration agreement that contained a class action waiver provision, id., at 3-4; the arbitration agreement was “not a mandatory condition of employment,” but it was governed by the Federal Arbitration Act (FAA), id., at 3. Further, though Western Pizza would pay all arbitration fees, “Except as otherwise required by law, each party shall bear its own attorney fees and costs.” Id. The arbitration agreement further provided that the arbitrator “shall be responsible for resolving any disputes over the interpretation or application of this Arbitration Agreement.” Id. With respect to the class action waiver, the agreement provided, “[T]he Arbitrator shall not consolidate or combine the resolution of any claim or dispute between the two Parties to this ADR Agreement with the resolution of any claim by any other party or parties, including but not limited to any employee of the Company. Nor shall the Arbitrator have the authority to certify a class under Federal Rule of Civil Procedure Rule 23, analogous state rules, or Arbitrator’s rules pertaining to class arbitration, and the Arbitrator shall not decide claims on behalf of any other party or parties.” Id., at 4. Plaintiff’s counsel argued that the class action arbitration waiver was unenforceable and that plaintiff would not agree to arbitration unless the class action waiver was stricken. Id., at 5. Defense counsel countered that the enforceability of the arbitration agreement, including the class action waiver, must be determined by the arbitrator. Id., at 6. The trial court denied the motion to compel arbitration, id., at 6-7. The California Court of Appeal affirmed.

After stating that the FAA does not preempt California law because it does not conflict with California law, see Sanchez, at 7-8, the Court of Appeal concluded that the enforceability of the arbitration agreement, including the class action waiver, was properly determined by the trial court rather than the arbitrator, id., at 8-11. The appellate court then turned to the enforceability of the class action arbitration waiver, and held that it was unenforceable as contrary to public policy. See id., at 11-35. We do not discuss the opinion in detail, as it follows the ground set forth in articles summarizing similar opinions that rely on Gentry v. Superior Court, 42 Cal.4th 443 (Cal. 2007) and Discover Bank v. Superior Court, 36 Cal.4th 148 (Cal. 2005). At bottom, the appellate court affirmed the trial court order denying the motion to dismiss the class action and compel arbitration. Id., at 36.

Posted In: Arbitration, Employment Law Class Actions, Class Action Court Decisions

In Labor Law Class Action, Trial Court Erred in Granting Defense Petition to Compel Plaintiff to Arbitrate his Claims on an Individual Basis because Class Action Waiver in Arbitration Agreement Signed by Employee was Unconscionable California State Court Holds

Plaintiff, a trash truck driver, filed a putative class action against his former employer, Athens Disposal, alleging labor law violations; the class action complaint asserted that Athens denied its employees meal and rest periods. Franco v. Athens Disposal Co., Inc., 171 Cal.App.4th 1277 (Cal.App. 2009) [Slip Opn., at 2]. According to the allegations underlying the class action, Athens failed to pay its employees overtime, and failed to provide meal periods or to pay employees an additional hour of compensation for each workday that they missed a meal period. Id., at 3. Defense attorneys moved to dismiss the class action complaint and to compel arbitration based on the terms of the employment agreement with plaintiff, id., at 2. The employment agreement contained an arbitration clause as well as a provision waiving class action relief or the right to bring an action in “a private attorney general capacity.” Id. Plaintiff countered that the class action waiver was unconscionable, id. The trial court disagreed and granted Athens’ motion to compel plaintiff to proceed with arbitration on an individual basis. Id. The California Court of Appeal reversed, concluding that the class action arbitration wavier was unconscionable “given ‘the modest size of the potential individual recovery, the potential for retaliation against members of the class, [and] the fact that absent members of the class may be ill informed about their rights.’” Id. (quoting Gentry v. Superior Court, 42 Cal.4th 443, 463 (Cal. 2007)). The appellate court further held that the arbitration clause was unconscionable in that it sought to prevent plaintiff from serving as a private attorney general, it conflict with California’s Private Attorneys General Act of 2004 (PAGA). Id.

In its petition to compel arbitration and to dismiss the class action, Athens argued that the arbitration agreement was governed by the Federal Arbitration Act (FAA). Franco, at 3-4. Indeed, the employment agreement expressly provided that it was governed by the FAA, and that any arbitration would be conducted under the employment arbitration rules of the American Arbitration Association (AAA). Id., at 4. The petition to compel arbitration was simplicity itself: “Under the FAA, arbitration was mandatory.” Id. Plaintiff argued that the class action waiver was invalid under Discover Bank v. Superior Court, 36 Cal.4th 148 (Cal. 2005), which defense counsel sought to distinguish. Id., at 4-5. The trial court agreed that Discover Bank did not cover employment cases and granted the motion to compel. Id., at 5. Plaintiff sought reconsideration based on Gentry, which the trial court denied based in part on its conclusion that plaintiff’s meal and rest period claims were not suitable for class action treatment because of the specific inquiries that would be required of the various claims. See id., at 5-7.

Continue reading "Class Action Defense Cases–Franco v. Athens Disposal: California State Court Reverses Order In Labor Law Class Action Compelling Plaintiff To Arbitrate Individual Claims Holding Class Action Waiver Unconscionable" »

Posted In: Arbitration, Employment Law Class Actions, Class Action Court Decisions

Class Action Challenging Casino-Employer’s Tip-Pooling Policy Properly Thrown Out on Summary Judgment, but Single Claim – alleging Casino Violated Unfair Competition Law (UCL) by Sharing Tips with Employer’s Agents – Reversed because Triable Issue of Fact Existed as to Whether Employer Participated in Tip Pool in Violation of California Law State Court Holds

Plaintiff filed a class action against his employer, Hawaiian Gardens Casino, alleging violations of California’s Labor Code and of the state’s unfair business practices statute; specifically; the class action complaint asserted defendant’s written tip pool policy governing casino dealers, which “requires dealers to segregate 15 or 20 percent of the tips they receive at the close of each shift” but permits the dealers to keep the remaining portion of the tips they receive, violated California law. Lu v. Hawaiian Gardens Casino, Inc., ___ Cal.App.4th ___, 88 Cal.Rptr.3d 345, 350 (Cal.App. 2009). According to the allegations underlying the class action, the money placed into the tip pool was distributed among “designated employees who provide service to customers, such as the chip service people (also known as ‘chip runners’), poker tournament coordinators, poker rotation coordinators, hosts, customer service representatives or ‘floormen,’ and concierges.” Id. However, defendant’s policy expressly prohibited “employers, managers, or supervisors” to participate in the tip pool, id. Defendant moved for summary judgment on the grounds that its tip pooling policy did not violate California law, relying in part on Leighton v. Old Heidelberg, Ltd., 219 Cal.App.3d 1062 (Cal.App. 1990). Id., at 349. The trial court granted defendant’s motion and dismissed the class action, and the appellate court affirmed.

Defendant paid its dealers the minimum hourly wage every two week, without deduction for any tips they received; defendant did not use the tip pool to “offset or pay” the salaries it paid dealers and did not divert any of the money “for its own use.” Lu, at 350. The dealers’ take home pay was “significantly” in excess of the minimum wage, id. Plaintiff alleged that the casino’s tip pooling policy “constituted a conversion of his wages, and violated employee protections contained in Labor Code section 221 (employers may not compel wage kickbacks); section 351 (employers may not take, collect or receive gratuities); section 450 (employers may not compel employees to patronize the employer); section 1197 (employers may not pay less than minimum wage); and section 2802 (employer indemnification for employee's necessary expenses).” Id. The class action alleged further that defendant’s policy constituted an unfair business practice, id. The appellate court noted that Leighton held that California law does not prohibit tip pooling in restaurants, but that no California case had addressed tip pooling in casinos. Id., at 349. Plaintiff argued that Leighton was distinguishable because “unlike restaurants where tips are left on the tables, in casinos, gratuities are handed directly to dealers, with the result that such gratuities belong solely to the dealers.” Id. Like the trial court, the Court of Appeal disagreed, concluding that “nothing in Labor Code section 351 prohibits tip pooling in casinos.” Id. The appellate court held further that while certain labor laws did not provide a private right of action, they could “nonetheless serve as predicates for suits under the UCL” and, accordingly, the trial court’s order was reversed as to that limited issue, id.

Continue reading "Class Action Defense Cases–Lu v. Hawaiian Gardens Casino: California State Court Affirms Summary Judgment For Defense In Labor Law Class Action Except For Class Action Claim Under UCL" »

Posted In: Employment Law Class Actions, Class Action Court Decisions

Defendant Improperly Removed Labor Law Class Action to Federal Court and Therefore District Court Erred in Dismissing Class Action for Lack of Subject Matter Jurisdiction Ninth Circuit Holds

Plaintiff filed a class action against Alaska Airlines alleging labor law violations; the class action complaint asserted that defendant willfully failed to pay its former employees all wages due upon termination as required by Oregon law. Moore-Thomas v. Alaska Airlines, Inc., ___ F.3d ___ (9th Cir. January 27, 2009) [Slip Opn., at 979]. Plaintiff, a customer service agent employed by defendant and subject to a collective bargaining agreement (CBA), filed a class action in Oregon state court, seeking “statutory penalties, costs and disbursements, pre- and post-judgment interest, and reasonable attorneys’ fees,” id., at 980. Defense attorneys removed the class action to federal court, and argued that the district court had jurisdiction under 28 U.S.C. § 1331 because the class action was governed by the Railway Labor Act, id. Defense attorneys then moved to dismiss the class action for lack of subject matter jurisdiction, arguing that the RLA preempts the class action’s state law claims, and therefore that the class action must be dismissed because plaintiff had not complied with the mandatory arbitration provisions of the RLA, id., at 980-81. Plaintiff moved to remand her class action to state court on the grounds that the RLA did not preempt her claims and so the federal court lacked subject matter jurisdiction, id., at 981. The district court ruled that the RLA preempts the claim in plaintiff’s class action “because her claim requires interpretation of the CBA”; thus, removal was proper, and the class action was dismissed for lack of subject matter jurisdiction because plaintiff failed to arbitrate her claim pursuant to the RLA. Id. Plaintiff appealed, and the Ninth Circuit reversed.

Relying on the Supreme Court opinion in Hawaiian Airlines, Inc. v. Norris, 512 U.S. 246 (1994), which considered preemption under the Labor Management Relations Act (LMRA), the Ninth Circuit explained that “the RLA similarly ‘pre-empts state law only if a state-law claim is dependent on the interpretation of a CBA.’” Moore-Thomas, at 982-83 (quoting Hawaiian Airlines, 512 U.S. at 262-63 & n.9). The Circuit Court found that “the district court here understandably impliedly interpreted the analogy drawn between LMRA and RLA preemption in Hawaiian Airlines as rendering the two standards fully coequal such that LMRA complete pre-emption applies in the RLA context as well.” Id., at 983. Plaintiff argued that the district court erred because “the RLA is subject to ‘ordinary’ rather than ‘complete’ pre-emption.” Id. The Ninth Circuit explained, “[Plaintiff] asserts that the distinction is crucial because, under the complete pre-emption exception to the well-pleaded complaint rule, ‘federal law displaces a plaintiff’s state-law claim, no matter how carefully pleaded.’” Id. (citation omitted). Based on its analysis, see id., at 984-87, the Court agreed that the RLA “does not provide a basis for finding complete pre-emption in this case and that, as a result, Alaska’s removal on the grounds of the RLA’s governing this action was improper.” Id., at 983. Accordingly, the Ninth Circuit concluded that the district court erred in dismissing the class action, and held that the class action was improperly removed to federal court, id., at 987. The Circuit Court therefore remanded the class action to the district court with orders to deny the motion to dismiss and to remand the class action to state court, id.

Posted In: Employment Law Class Actions, Class Action Court Decisions

In FLSA Class Action, Plaintiffs’ Motion to Dismiss Crossclaims by Defendants Granted because Negligence and Breach of Fiduciary Duty Claims could not Survive New York Federal Court Holds, but Conversion Claim not Challenged and Defendants Granted Leave to Amend Tortious Interference Claim

Six plaintiffs filed a class action against their employer, Capala Brothers, a construction company, alleging violations of the federal Fair Labor Standards Act (FLSA) and the New York Minimum Wage Act; in response to the class action complaint, defendants counterclaimed against the plaintiffs for conversion, negligence, tortious interference with contract, and breach of fiduciary duty. Gortat v. Capala Brothers, Inc., 585 F.Supp.2d 372, 374 (E.D.N.Y. 2008). The counterclaims to the class action were premised on the following: (1) the negligence claims alleged that four plaintiffs were negligent in replacing a roof to a building, resulting in $40,000 in rain damage, that three plaintiffs were negligent in failing to secure electrical motors at the site, which were also damaged by rain, that two plaintiffs were negligent in allowing concrete to harden in a concrete mixer, and that two plaintiffs were negligent in failure to secure two certain equipment resulting in their loss; (2) the tortious interference with contract claim alleged that three plaintiffs interfered with the employment contracts of current Capala employees, “caused lower moral[e], dissent and lower productivity” causing $100,000 in damage to Capala, and that one plaintiff, after quitting, “interfered with the employment contracts of the other four plaintiffs” causing $300,000 in damages to Capala, and (3) the breach of fiduciary duty claim alleged that plaintiffs “fail[ed] to provide ‘adequate and timely notice’ before quitting…as required by their employment contracts” causing Capala to default on certain construction contracts and suffer $400,000 in damages. Id., at 374-75. Plaintiffs answer the conversion counterclaim, but moved to dismiss the remaining counterclaims, id., at 374. The district court granted plaintiffs’ motion.

The district court first addressed the negligence claims, explaining that New York law “prohibits employers from making any deduction from employee wages except as required by law or regulation or as authorized by the employee for his or her benefit,” including claims for negligence or lost profits. Gortat, at 375 (citations omitted). The federal court concluded that while defendants’ crossclaims were not “obvious examples of attempted wage deduction,” they served the same function and so could be “treated as such to prevent employers from circumventing the protection of employee wages” provided for by New York law. Id., at 375-76. Accordingly, it granted the motion to dismiss defendants’ negligence claims against the named plaintiffs, id., at 376. With respect to the tortious interference claims, the district court observed that plaintiffs were terminable at will and that plaintiffs could not be liable unless they engaged in “culpable” conduct. Id. The court found that the allegations failed to allege wrongful conduct adequate to support the interference claim, so those claims, too was dismissed. Id. Turning to the breach of fiduciary duty claim against the plaintiffs, the federal court noted that defendants were required to pleading “both the existence of a duty based on a relationship of trust and confidence and breach of that duty.” Id. (citation omitted). Failing to give advance notice of terminating their employment, standing alone, did not constitute a sufficient basis to support the breach of fiduciary duty claim, id., at 376-77.

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Posted In: Employment Law Class Actions, Class Action Court Decisions

District Court Erred in Remanding Labor Law Class Action Complaint to State Court because Defendants Separately Filed Notices of Removal Pursuant to Class Action Fairness Act (CAFA), and Timely Removal under CAFA by One Defendant was Sufficient to Remove Class Action to Federal Court for All Defendants Ninth Circuit Holds

The United Steel Workers union filed a class action in California state court against Shell Oil, Equilon and Tesoro alleging various labor law violations; the class action complaint asserted that defendants failed to provide employees with meal or rest periods, failed to provide proper wage statements, and failed to timely pay wages on termination. United Steel, etc. v. Shell Oil Co., 549 F.3d 1204, 1206-07 (9th Cir. 2008). Royal Dutch Shell plc is the parent company of both Shell Oil and Equilon (collectively “Shell”); the union served Shell with the class action complaint on May 6, 2008, and served Tesoro on May 7, 2008. Id., at 1207. On the thirtieth day after service, Shell removed the class action to federal court alleging removal jurisdiction under the Class Action Fairness Act (CAFA) and asserting federal question jurisdiction; the following day, Tesoro filed a separate notice of removal on the same grounds. Id. The class actions were assigned to different federal district court judges, id. The district court in Shell’s case remanded the class action to state court because Shell had failed to join Tesoro in its notice of removal; the court rejected Shell’s argument that “CAFA permits one defendant to remove the entire case without the consent of all defendants.” Id. Plaintiff then had the Tesoro case transferred to the same district court judge, and the federal court then remanded that class action on the same grounds. Id. The Ninth Circuit granted Shell’s and Tesoro’s separate petitions for permission to appeal the orders remanding the class actions to state court, and reversed. Id., at 1206.

Defense attorneys argued that because CAFA permits a single defendant to remove an entire class action, the district court erred in remanding the class action to state court because Shell and Tesoro failed to include each other in their separate notices of removal. , at 1207. The union conceded that Shell properly removed the class action under CAFA, but argued that the class action was properly remanded as to Tesoro because its notice of removal was untimely as it was filed more than 30 days after service of the class action on Shell., id. The Ninth Circuit disagreed. The Circuit Court noted the split in authority, still unresolved in the Ninth Circuit, over whether the 30-day period for removal “begins to run on the day of service on the first-served or last-served defendant,” but that federal courts have “traditionally required that all defendants consent to, or join in, removal.” Id., at 1208 (citations omitted). CAFA, however, expanded rights to removal in class actions and expressly states that class actions “may be removed by any defendant without the consent of all defendants.” Id. (citation omitted). The Ninth Circuit cited with approval an Eleventh Circuit opinion that held it “‘need not concern [itself] with the circumstances pertinent to each named defendant’” because any single defendant could, under CAFA, remove the entire class action to federal court. Id. (quoting Lowery v. Alabama Power Co., 483 F.3d 1184, 1194 n.25 (11th Cir. 2007). Thus, the Ninth Circuit concluded at page 1208, “it is undisputed that United Steel Workers's class action is removable under CAFA, and it is undisputed that Shell timely filed its notice of removal,” so Shell’s removal governed the entire class action to the point where “Tesoro could not have prevented removal even if it wished to do so,” id., at 1208-09. Accordingly, the Circuit Court reversed the district court orders remanding the class action to state court, id., at 1209.

Posted In: Class Action Fairness Act (CAFA), Employment Law Class Actions, Class Action Court Decisions

Statutes of Limitation for Class Action Claims Against UPS were Tolled in Labor Law Class Action during Appeal from Summary Judgment in Favor of UPS in Certified Class Action Alleging Related Claims Fifth Circuit Holds

Plaintiff filed a class action against his former employer, United Parcel Service, alleging labor law violations; the class action complaint asserted that UPS discriminated against its employees on the basis of race. Taylor v. United Parcel Service, Inc., ___ F.3d ___, 2008 WL 5401487, *1 (5th Cir. December 30, 2008). Plaintiff worked for UPS from 1975 to 2004, during which time he was member of class action lawsuit that had been filed in 1994. Id. The 1994 class action alleged that UPS engaged in race discrimination; plaintiff “was a member of the pay and promotion class and gave deposition testimony on behalf of the class” in a class action that was dismissed on UPS’s motion for summary judgment in June 2000 and affirmed by the Eighth Circuit in August 2004. Id. (citing Morgan v. United Parcel Service of America, Inc., 143 F.Supp.2d 1143 (E.D.Mo. 2000), aff'd, 380 F.3d 459 (8th Cir. 2004), cert. denied, 544 U.S. 999 (2005)). In January 2003, during the pendency of the appeal in the prior class action, plaintiff filed a Title VII charge with the Equal Employment Opportunity Commission, and in March 2003, plaintiff filed the present putative class action “alleging that UPS had denied him promotion on the basis of race and retaliation since at least 1993, denied him equal pay on the basis of race and retaliation since November 1991, and provided a hostile work environment.” Id. As the Fifth Circuit explained, “The biggest difference between the claims asserted in the Morgan class action [filed in 1994] and this suit is [plaintiff’s] addition of the retaliation claims, which allegedly are related to his participation in Morgan.” Id. Defense attorneys moved for summary judgment as to all of the class action claims; the district court granted the motions as to the promotion and hostile work environment claims, but denied the motions as to plaintiff’s discriminatory and retaliatory pay disparity claims. Id., at *2 (citing Taylor v. United Parcel Service, Inc., 421 F.Supp.2d 946, 956 (W.D.La. 2006)). Plaintiff appealed, and the Fifth Circuit reversed.

The Fifth Circuit explained that its statute of limitations analysis played a “central part” in the district court's decision to toss out of the class action complaint. Taylor, at *2. Specifically, “[t]he district court found that tolling ceased on [plaintiff’s] claims in 2000, when the Eastern District of Missouri dismissed the Morgan class claims, rather than in 2004, when the Eighth Circuit affirmed that dismissal”; based on that conclusion, all of plaintiff’s promotion claims in the current class action were time-barred to the extent they arose prior to March 2002. Id. (For reasons we do not here discuss, the district court found that plaintiff’s post-March 2002 promotion claims failed on the merits. See id.) With respect to the “retaliatory promotion” claims, the district court entered summary judgment in favor of UPS because plaintiff presented no evidence that the decision makers at UPS knew of his role in the Morgan class action, and that the time between plaintiff’s involvement in the 1994 class action and the March 2002 pay period “was simply too long to independently support an inference of causation.” Id. Finally, the lower court rejected the class action’s “hostile work environment” claim, and held that the four-year statute of limitations barred the class action’s discriminatory and retaliatory pay claims. Id., at *2-*3. Plaintiff challenged on appeal the district court’s ruling only as to the promotion and pay disparity claims, but not the hostile work environment claim. Id., at *3.

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Posted In: Employment Law Class Actions, Class Action Court Decisions

In Denying Motion for Class Action Certification, Trial Court Erroneously Concluded that it would be Required to Reach Merits of Class Action Allegations in order to Determine Ascertainability and Numerosity, Thus Necessitating Reversal and Remand with Instructions to Certify Labor Law Class Action California State Appellate Court Holds

Plaintiffs filed a class action against his employer, Diva Limousine, alleging labor law violations; the class action complaint asserted, in part, that Diva failed to pay overtime and failed to provide its employees with meal and rest breaks. Ghazaryan v. Diva Limousine, Ltd., ___ Cal.App.4th ___ (Cal.App. January 12, 2009) [Slip Opn., at 3, n.3]. According to the class action’s allegations, Diva’s drivers collectively made anywhere from 100 to more than 200 trips on any given day, id., at 2. The facts underlying the class action complaint are as follows: Diva would provide its drivers with their first few assignments in order to permit the drivers to plan their breaks. Id. Diva also permitted about 75% of its drivers to take their vehicles home so that they could drive straight to their first assignment. Id. Once the first batch of trips had been completed, Diva’s dispatcher would dole out “additional trips according to location, availability and fairness among drivers”; on any given day, a driver may have as many as 8 assignments or less than 5. Id. The class action alleged that “Drivers have no way of predicting the length of any particular period of gap time although, on occasion, dispatchers may accommodate requests to schedule assignments around the drivers’ personal appointments.” Id. at 2-3. Plaintiff worked full-time for Diva, was “hard working” and “asked for as many assignments as available.” Id., at 3. Nonetheless, plaintiff “frequently had significant periods of on-call time between assignments.” Id. Diva prohibited its drivers from using company vehicles during “gap time” and required its drivers “to utilize gap time for their mandatory rest and lunch breaks, which could be interrupted if dispatched on an assignment.” Id. Further, drivers were not permitted to turn down assignments, even if the assignment conflicted with a meal or rest break, id. Plaintiff moved the trial court to certify the litigation as a class action, id., at 2. The trial court denied the motion, but the California Court of Appeal reversed.

Defense attorneys argued against class action treatment “principally because of the purported difficulties in identifying eligible members of the class and assessing the validity of Diva’s compensation policy as applied to different drivers who may or may not have used their gap time for personal pursuits”; certain employees, for example, are “dedicated event drivers” and are paid for their gap time. Ghazaryan, at 4. Additionally, a number of Diva’s drivers provided declarations that they “typically use unpaid gap time for their own purposes, such as working out at the gym, napping or eating at home or running personal errands,” and that they opposed plaintiff’s efforts to modify the manner in which Diva paid its drivers. Id. The trial court was persuaded by the defense arguments and refused to grant class action treatment to the litigation because of the “many individualized issues” raised by the class action complaint. Id. The trial court explained that determining numerosity would require that it “first determine an ultimate issue in the case, which this Court cannot do to determine the class.” Id., at 5. The trial court found further that the class was not ascertainable because it would first have to “determine if Diva’s practices are improper and, if so, which drivers fit into an appropriate class.” Id. The Court of Appeal reversed.

Continue reading "Class Action Defense Cases– Ghazaryan v. Diva Limousine: California State Court Reverses Denial Of Class Action Treatment In Labor Law Class Action Holding Trial Court Erred In Believing It Had To Reach Merits To Certify Class Action" »

Posted In: Certification of Class Actions, Employment Law Class Actions, Class Action Court Decisions

Class Action Plaintiff Alleging Violations of Fair Labor Standards Act (FLSA) Entitled to Summary Judgment because Employers Improperly took “Tip Credits” Against Employee Wages and Failed to Pay Overtime Required by FLSA Texas Federal Court Holds

Plaintiff filed a class action against his former employers – TDS Entertainment (which owns Dixie's Country Bar), Chicago Bar and Vankar Enterprises (which owns Babcock Bar) – alleging violations of the federal Fair Labor Standards Act (FLSA); the class action complaint asserted that defendants failed to pay employees minimum wage because they unlawfully credited tips against their employees’ salaries. Bernal v. Vankar Enterprises, Inc., 579 F.Supp.2d 804, 805 (W.D.Tex. 2008). Specifically, the class action alleged that plaintiff worked at defendants' bars for less than the federal minimum wage, that plaintiff received tips from customers, and that defendants required that plaintiff contribute a portion of his tips to a “tip pool” to be shared with “managers and/or other employees who do not customarily and regularly receive tips.” Id., at 805-06. The class action alleged that defendants were not permitted to take “tip credits” against plaintiff’s minimum, and so violated the FLSA by paying him less than minimum wage. Id., at 806. The class action complaint prayed to recover as wages the difference between the federal minimum wage and the actual wage paid by defendants., id. The district court granted plaintiff’s motion for class action certification, id. Plaintiff’s counsel then moved for summary judgment as to “(1) whether the bars failed to pay the applicable minimum wage under circumstances in which the bars were not permitted to claim a tip credit; and (2) whether the bars failed to pay overtime as required by the FLSA.” Id. The federal court granted the motion.

The district court explained that “[t] he primary issue before the Court is whether a genuine issue of material fact exists regarding Defendants' entitlement to use the amount of tips its employees received in satisfaction of a portion of Defendants' minimum wage obligations.” Bernal, at 806. After summarizing the well-known standards governing summary judgment motions, see id., at 806-07, the court discussed the FLSA’s authorization, under “limited circumstances,” to pay a “tipped employee” less than the federal minimum wage, id., at 807. A “tipped employee” – defined as an employee who customarily receives more than $30 per month in tips, see 29 U.S.C. § 203(t), may be paid less than minimum wage (but no less than $2.13 per hour) “if the amount of the tips the employee actually receives, added to the hourly wage the employer pays, is at least equal to the minimum wage in effect,” a practice known as “taking a ‘tip credit.’” Bernal, at 807. The district court explained, however, that “An employer may not…take a tip credit ‘with respect to any tipped employee unless such employee has been informed by the employer of the [tip credit] provisions’” and that “no tip credit may be taken ‘with respect to any tipped employee unless ... all tips received by such employee have been retained by the employee,’ except in cases in which tips are pooled ‘among employees who customarily and regularly receive tips.’” Id. (citations omitted).

Continue reading "FLSA Class Action Defense Cases–Bernal v. Vankar: Texas Federal Court Grants Class Action Plaintiffs Summary Judgment In Labor Law Class Action Concluding Employers Failed To Pay Minimum Wages And Overtime Required By FLSA" »

Posted In: Employment Law Class Actions, Class Action Court Decisions

District Court Independently Analyzes Class Action Certification Requirements of ERISA Class Action Complaint, despite Lack of Defense Objection to Class Action Treatment, and Concludes Class Action Certification Warranted Texas Federal Court Holds

Plaintiffs, retirees of BellSouth Corporation, a subsidiary of AT & T, filed a class action against AT&T and BellSouth alleging violations of the he Employee Retirement Income Security Act of 1974 (ERISA); specifically, the class action complaint alleged “that (1) a benefit known as telephone concession, which was provided to certain employees of BellSouth after retirement, constitutes a defined benefit pension plan under ERISA (hereinafter, ‘plan claims’); and (2) that Defendants violated ERISA in administering and maintaining the telephone concession plan (hereinafter, ‘benefit claims’).” Boos v. AT&T, Inc., 252 F.R.D. 319, 321 (W.D. Tex. 2008). Plaintiffs’ lawyers filed a motion with the district court to certify the litigation as a class action. Id. Defense attorneys did not oppose plaintiffs’ motion for class action treatment; nonetheless, the district court conducted a thorough analysis of the propriety of class action certification under Rule 23 because Rule 23(c)(1)(A) requires that the district court “determine by order whether to certify the action as a class action.” Id. The federal court further observed at page 321 that “[t]he Fifth Circuit has also held that in order to certify a class, a district court must specifically find that the proposed class satisfies the requirements of Rule 23.” (citing Vizena v. Union Pac. R.R. Co., 360 F.3d 496, 503 (5th Cir. 2004)). Based on its detailed analysis, see id., at 321-26, the district court concluded that the requirements for class action certification had been satisfied and therefore granted plaintiffs’ motion. Id., at 326-27.

NOTE: We discuss this case only to make the point that Rule 23 requires a district court to independently determine whether class action treatment is warranted, whether the defendant objects or whether the parties stipulate to class action certification as part of a settlement agreement.

Posted In: Certification of Class Actions, Employment Law Class Actions, Class Action Court Decisions

Class Action Complaint Alleging Computer Problems Systematically Caused Sprint to Pay Employees Less than they were Due Warranted Class Action Treatment as Common Issues – Centered on Sprint’s Computer System – Predominated Class Action Claims Kansas Federal Court Holds

Plaintiffs filed a class action against Sprint Nextel Corporation and Sprint/United Management (collectively “Sprint”) alleging labor law violations; the class action complaint asserted that a computer error caused Sprint to systematically fail to properly calculate commissions due employees of Sprint’s Business Direct Channel. Harlow v. Sprint Nextel Corp., ___ F.Supp.2d ___ (D.Kan. December 10, 2008) [Slip Opn., at 1-2]. According to the allegations underlying the class action, these computer problems resulted in Sprint employees receiving each month $500-$1000 less than the amounts they were due, id., at 2. The class action centered, then, on a “problem with Sprint’s computer system that affects the amount of commissions the class members received.” Id. Originally, the class action complaint alleged causes of action for violations of Kansas’s Wage Payment Act, breach of contract, quantum meruit, promissory estoppels and unjust enrichment, but the parties stipulated to the dismissal of all claims except the Wage Payment Act and breach of contract class action claims. Id., at 4-5. Plaintiffs’ attorneys moved the district court to certify the litigation as a class action; defense attorneys argued against class action treatment. Id., at 1. The district court determined that class action treatment was warranted and therefore granted plaintiffs’ class action certification motion.

In ruling on the class action certification motion, the federal court stressed that the class action “centers on Sprint’s computerized procedures for calculating and paying commissions and not, for example, [on] a policy-based decision by Sprint to award a particular commission to one employee over another.” Harlow, at 5. The district court stressed that “[t]his distinction is key to the certification analysis.” Id. As the district court had little difficulty in finding that the requirements for class action certification under Rule 23(a) had been met, see id., at 13-17 (discussing numerosity, commonality, typicality, and adequacy of representation), we focus here – like the court – on the class action requirements set forth in Rule 23(b)(3). And in that regard, the federal court had little difficulty in determining that a class action is a superior means of resolving the issues presented in the complaint, rejecting Sprint’s objection that “a class action of this magnitude would be unmanageable because of the individualized inquiries to each plaintiffs’ claims” because the individual questions involved damage calculations. See id., at 11-13.

Continue reading "Sprint Class Action Defense Cases–Harlow v. Sprint: Kansas Federal Court Grants Class Action Treatment To Labor Law Class Action Against Sprint Alleging Systematic Failure To Properly Calculate Commissions Due Employees" »

Posted In: Certification of Class Actions, Employment Law Class Actions, Class Action Court Decisions

Class Action Seeking Statutory Damages on behalf of all Applicants could not Survive Defense Motion for Summary Judgment because Class Action Representatives Suffered no Injury and Legislature did not Intend to Permit Unaffected Individuals to Recover Statutory Damages California State Court Holds

Plaintiffs filed a class action against Starbucks alleging violations of California labor law provisions concerning information collected from prospective employees during the application process; specifically, the class action complaint asserted that Starbucks improperly asked applicants “about prior marijuana convictions that are more than two years old.” Starbucks v. Superior Court, 168 Cal.App.4th 1436 (Cal.App. 2008) [Slip Opn., at 2]. According to the class action, “Starbucks uses the same two-page job application form nationwide for store level employees” and that one of the questions asked is, “Have you been convicted of a crime in the last seven (7) years?” Id. The application makes clear that “arrests are not convictions,” and advises that a conviction “will not necessarily disqualify you for employment.” Id. The class action sought statutory damages in the amount of $200 per applicant – “a remedy which, by Starbucks’ estimation, could total a whopping $26 million.” Id. The trial court granted plaintiffs’ motion for class action treatment, certifying a class of approximately 135,000 applicants. Id. The trial court certified the class action on behalf of all applicants who completed a questionnaire with the convictions question and who sought no more than $200 in damages, id., at 5. In the trial court’s words, “The mere offering of the application containing the impermissible question is a violation of the Labor Code. [¶] Damages may be calculated simply by multiplying the probable number of applicants during the class period times $200.00.” Id. Defense attorneys moved for summary judgment of the class action claims, asserting in part that class members suffered no damage. Id., at 2. The trial court denied the motion, and defense attorneys sought extraordinary relief from the Court of Appeal, id. The California Court of Appeal reversed, concluding that “[n]othing in the statutes in question authorizes job applicants to automatically recover $200 per person without proof they were aggrieved persons with an injury the statute was designed to remedy,” and ordered the trial court to enter judgment in favor of Starbucks.

The thrust of the class action was that California prohibits employers “from asking about marijuana-related convictions that are more than two years old.” Starbucks, at 4. The class action further argued that California law permits applicants “to recover actual damages or $200 each, whichever is greater.” Id. (citations omitted). The appellate court observed, however, that Starbucks disclosed on the reverse side of the application that California applicants need not disclose marijuana-related convictions that are more than two years old, stating in full: “CALIFORNIA APPLICANTS ONLY: Applicant may omit any convictions for the possession of marijuana (except for convictions for the possessions of marijuana on school grounds or possession of concentrated cannabis) that are more than two (2) years old, and any information concerning a referral to, and participation in, any pretrial or post trial diversion program.” Id., at 2-3. Notably, each of the named plaintiffs had read the disclaimer on the reverse of the Starbucks application and each understood that they were not required to disclose any marijuana convictions that were more than two years old; moreover, none of the named plaintiffs had been arrested for or convicted of a marijuana-related crime. Id., at 4-5. The Court of Appeal summarized at page 2, “Plaintiffs’ lawsuit suffers from two fundamental flaws, either of which provides ample grounds for writ relief. First, Starbucks attempted to disclaim an interest in such prohibited information, and two of the plaintiffs understood Starbucks not to be seeking it. Second, no plaintiff had any marijuana-related convictions to reveal.”

Continue reading "Class Action Defense Cases–Starbucks v. Superior Court: California State Appellate Court Orders Judgment In Favor Of Starbucks In Labor Law Class Action Holding Named Plaintiffs In Class Action Suffered No Injury" »

Posted In: Certification of Class Actions, Employment Law Class Actions, Class Action Court Decisions

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Unopposed by Class Action Plaintiffs, but Transfers Class Actions to Eastern District of Wisconsin

Eight class actions – one in New Jersey and one in Pennsylvania – were filed against common defendants Velocity Express Corp., Velocity Express, Inc., and Velocity Express Leasing, Inc. (collectively “Velocity Express”), and others, alleging labor law violations; specifically, the class action complaints alleged that defendants misclassified package delivery drivers as independent contractors rather than as employees. In re Velocity Express, Inc., Wage & Hour Employment Practices Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. October 8, 2008) [Slip Opn., at 1]. The several class action complaints had been filed in seven district courts – two in the Central District of California, and one each in the Northern District of California, the District of Connecticut, the Southern District of Florida, the Western District of New York, the Western District of North Carolina, and the Eastern District of Wisconsin. Id. Defense attorneys for Velocity Express filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Northern District of California or, alternatively, in the Southern District of Texas. Id. Plaintiffs in the three California class actions supported centralization but argued that the Central District of California was the transferee district. Id. Plaintiffs in each of the other five class actions, as well as the lone potential tag-along class action, also supported pretrial coordination but argued for the Eastern District of Wisconsin as the appropriate transferee district. Id.

The Judicial Panel granted the motion to centralize the class action lawsuits: The court recognized that “While it is possible there are certain regional differences in the application of work rules, whatever differences exist do not negate the many common factual issues. On balance, centralization under Section 1407 will eliminate duplicative discovery; prevent inconsistent pretrial rulings, especially with respect to class certification; and conserve the resources of the parties, their counsel and the judiciary.” In re Velocity Express, at 1. The Panel rejected the defense requests for transfer to either California or Texas, agreeing instead with those class action plaintiffs that argued for the Eastern District of Wisconsin as the transferee court. Id. The Judicial Panel reasoned, “Given the geographic dispersal of pending actions, as well as the nationwide business of Velocity Express, no particular district or region emerges as the focal point for this litigation. We are persuaded that the Eastern District of Wisconsin is an appropriate transferee forum for this litigation. It is a centrally located district with the time and resources to devote to this litigation.” Id. Accordingly, the Panel ordered all class actions pending outside of Wisconsin transferred to that district, id., at 2.

Posted In: Employment Law Class Actions, Multidistrict Litigation, Class Action Court Decisions

Labor Law Class Action Dismissed because Class Action Predominance Test of Rule 23(b) could not be Satisfied and, Absent Potential for Class Action Certification, Federal Court Lacked Subject Matter Jurisdiction because Class Action Fairness Act (CAFA) was Inapplicable Mississippi Federal Court Holds

Plaintiffs filed a class action lawsuit against Wal-Mart Stores alleging violations of Mississippi’s labor laws; specifically, the class action complaint alleged that Wal-Mart required plaintiffs to work hours “off the clock,” and to work through meal and rest periods for which they were not paid in violation of state law. Robinson v. Wal-Mart Stores, Inc., 253 F.R.D. 396, 397-98 (S.D. Miss. 2008). The class action sought to represent “all current and former hourly-paid employees of Wal-Mart Stores, Inc., in the State of Mississippi that were employed from May 28, 1999 until the present,” and prayed for compensatory and punitive damages. Id., at 398. Defense attorneys moved to dismiss the class action for lack of subject matter jurisdiction, and the district court granted the motion with leave to amend because plaintiffs had failed to allege citizenship as required to establish diversity jurisdiction, id. The amended class action complaint is “virtually identical” to the original class action complaint, and defense attorneys again moved to dismiss for lack of subject matter jurisdiction because the class action failed to allege the $5 million amount in controversy required for federal court jurisdiction under the Class Action Fairness Act (CAFA). Id. Also, the defense asked the federal court to dismiss the class action allegations in the complaint. Id. The district court granted the defense motion in part, and denied it in part.

Consistent with Fifth Circuit authority, the district court began its analysis with the jurisdictional attack under Rule 12(b)(1): “When a Rule 12(b)(1) motion is filed in conjunction with other Rule 12 motions, the court should consider the Rule 12(b)(1) jurisdictional attack before addressing any attack on the merits.” Robinson, at 398 n.1 (quoting Ramming v. United States, 281 F.3d 158, 161 (5th Cir.2001)). After noting that the burden of establishing federal court jurisdiction rested on “the party seeking to litigate in federal court,” id., at 398, the district court turned to Wal-Mart’s argument that CAFA’s $5 million amount in controversy requirement had not been met, id., at 399. Plaintiffs’ argued that the putative class consisted of 80,000 people and, accordingly, “each class member's claim would only need to equal $62.50 to satisfy the $5,000,000 jurisdictional requirement.” Id., at 399. Plaintiffs’ noted also that they sought punitive damages, id. Defense attorneys made several arguments in support of the position that the $5 million threshold had not been met, but the district court concluded “it is not apparent, to a legal certainty, that Plaintiffs cannot recover the jurisdictional amount of $5,000,000 as claimed in their Amended Complaint.” Id. On this ground, then, the district court denied the motion to dismiss the class action, id. It rejected also Wal-Mart’s claim that the federal court lacked subject matter jurisdiction because the claims of some of the class members arose prior to CAFA’s effective date. Id., at 399-400.

Continue reading "Wal-Mart Class Action Defense Cases–Robinson v. Wal-Mart: Mississippi Federal Court Grants Wal-Mart Motion To Dismiss Labor Law Class Action Holding Rule 23(b) Requirements For Class Action Treatment Could Not Be Met" »

Posted In: Class Action Fairness Act (CAFA), Certification of Class Actions, Employment Law Class Actions, Class Action Court Decisions

Class Action Alleging Violations of Kansas Wage Payment Act may be Brought by Plaintiffs who do not Live or Work in Kansas because State Law Contains no Express Geographical Limitation and Employment Agreement Expressly Contained Kansas Choice of Law Provision Federal Court Holds

Plaintiffs filed a class action against their employer, Sprint Nextel and Sprint/United Management (collectively “Sprint”) alleging violations of federal securities law; specifically, the class action claimed that “Sprint failed to pay [plaintiffs] proper commissions.” Harlow v. Sprint Nextel Corp., 574 F.Supp.2d 1224, 1225 (D. Kan. 2008). According to the class action, plaintiffs were to be paid according to a “Business Incentive Compensation Plan that governed commissions they would receive based on sales of various products and services”; however, due to computer problems plaintiffs were not paid the proper amount of commissions. Id. None of the plaintiffs lived or worked in Kansas, id., at 1226, but the class action was filed in Kansas because the Plan provides that Kansas law governs the employment agreement and that any disputes under the Plan must be brought in Kansas, id., at 1225. The class action complaint alleged violations of Kansas’s Wage Payment Act, and sought relief also under theories of breach of contract, quantum meruit, promissory estoppels, and unjust enrichment. Id., at 1225. Defense attorneys filed a motion to dismiss the class action, which the district court treated as a motion for judgment on the pleadings because Sprint had already filed an answer to the class action complaint. Id. At the time the district court ruled on the motion, the only issue that remained open for resolution was the viability of the Wage Payment Act claim, id. The district court denied the motion as to that claim, holding that it could not determine as a matter of law that the Kansas Wage Payment Act could not be brought by employees who neither lived nor worked in the state.

After discussing the applicable standard of review, see Harlow, at 1225-26, the district court turned to Sprint’s argument that “the named Plaintiffs cannot seek protection under the Kansas Wage Payment Act (KWPA) because none of them live or work in Kansas,” id., at 1226. The district concluded that the Seventh Circuit opinion relied upon by the defense – Glass v. Kemper Corp., 133 F.3d 999 (7th Cir. 1998), which held that “the Illinois Wage Payment and Collection Act does not apply to employees outside of Illinois” – was distinguishable from the class action before it because (1) the Illinois Wage Payment Act expressly limits its reach to “employers and employees in this state,” and (2) the employment agreement in Glass did not include a choice of law provision, whereas the Sprint employment agreement expressly provided that “Kansas law governs the Plan.” Id. Defense attorneys argued that the choice of law provision in the Plan could not give “extraterritorial effect” to Kansas’s Wage Payment Act, id. In the absence of Tenth Circuit authority on the subject, the district court adopted the reasoning of the Ninth Circuit, which held that “where a state law includes no express geographical limitation, courts may apply it to a contract that, because of a choice of law provision, falls under that state's law,” but that “[if] the state law contains limits on its geographical scope, ‘courts will not apply it to parties falling outside those limitations, even if the parties stipulate that the law should apply.’” Id. (quoting Gravquick A/S v. Trimble Navigation Int'l Ltd., 323 F.3d 1219, 1223 (9th Cir. 2003)). Following Ninth Circuit authority, then, the federal court concluded that the Kansas Wage Payment Act could be applied “with no geographical restriction” because of the Plan’s choice of la provision. Id., at 1226-27. The district court held, further, that the Kansas Wage Payment Act “is not limited to employees who live and work in Kansas, and the choice of law provision contained in the Plan allows Plaintiffs to seek relief under Kansas law, including the KWPA.” Id., at 1227. Accordingly, it denied the motion to dismiss.

Posted In: Employment Law Class Actions, Class Action Court Decisions

Class Action Against Oracle Alleging Failure to Pay Overtime Pursuant to State and Federal Laws Survives Summary Judgment as to California Law Claims because Nonresidents are Protected by California Labor Code for Work Performed within California, but District Court Properly Granted Summary Judgment as to Class Action Claim Alleging Violation of California’s Unfair Business Practices Act (UCL) for Failure to Pay Overtime under Federal Fair Labor Standards Act (FLSA) because California’s UCL “does not have Extraterritorial Application” Ninth Circuit Holds

Plaintiffs filed a class action against their employer, Oracle, alleging labor law violations; specifically, the class action complaint asserted that Oracle failed to pay employees overtime under either the federal Fair Labor Standards Act (FLSA) or California state law. Sullivan v. Oracle Corp., ___ F.3d ___ (9th Cir. November 6, 2008) [Slip Opn., at 15261]. According to the class action, Oracle hired hundreds of employees “to train Oracle customers in the use of its software” but “classified these workers as teachers who were not entitled to compensation for overtime work under either federal or California law.” Id. The putative class was not limited to California residents, and the three putative class representatives were nonresidents of California who “performed only some of their work for Oracle in California,” id. The class action complaint contained three claims for relief – two of them sought recovery for work performed in California, and one for work performed “anywhere in the United States.” Id. Each of the claims, however, was premised on California law; specifically, either the California Labor Code, or California Business & Professions Code section 17200 (unfair business practices). Id., at 15264-65. Defense attorneys moved for summary judgment on all claims in the class action; the district court granted the motion “on the ground that the relevant provisions of California law did not, or could not, apply to the work performed by Plaintiffs.” Id., at 15261. The district court reasoned that California’s Labor Code “do[es] not apply to nonresidents who work primarily in other states,” and that it would violate the Due Process Clause of the Fourteenth Amendment to construe the Labor Code so as to apply to work performed primarily outside of California, id., at 15265. Similarly, the federal court concluded that California’s unfair business practices statute does not apply to work performed outside of California, id. The Ninth Circuit affirmed as to the class action’s unfair business practices claim premised on work performed outside of California, but reversed as to the first two claims for relief.

Briefly, Oracle’s principal place of business is California, and it hires “instructors” on a contract basis to travel throughout the U.S. and for the purpose of training its customers in the use of Oracle software. Sullivan, at 15261-62. Three individuals – two of them residents of Colorado, and the third a resident of Arizona – worked as Oracle Instructors; they each spent a limited amount of time in California, though not necessarily each calendar year. See id., at 15262-63. None of the plaintiffs worked more than 36 days in California during a calendar year, and one of the plaintiffs did not work in California at all one year. Id. Oracle originally classified its instructors as “teachers” and did not pay them overtime; however, in 2003 Oracle reclassified its California instructors and began paying them overtime under California law, and in 2004 it reclassified its remaining instructors and began paying them overtime under the FLSA. Id., at 15263.

Continue reading "Oracle Labor Law Class Action Defense Cases–Sullivan v. Oracle: Ninth Circuit Reverses Summary Judgment In Favor Of Defense In Labor Law Class Action Holding California Labor Code Applies To Work Performed In The State By Nonresidents" »

Posted In: Employment Law Class Actions, Class Action Court Decisions

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Unopposed by Class Action Plaintiffs, and Transfers Actions to Eastern District of Louisiana

Three class actions –in the Eastern District of Louisiana, the Western District of Tennessee and the Eastern District of Texas – were filed against DirecTech Southwest alleging violations of the federal Fair Labor Standards Act; specifically, the class action complaints allege defendant failed to pay its technicians overtime as required by the FLSA. In re DirecTech Southwest, Inc., Fair Labor Standards Act (FLSA) Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. October 8, 2008) [Slip Opn., at 1]. Defense attorneys filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Eastern District of Louisiana; plaintiffs in all three class actions supported the motion. Id. The Judicial Panel granted the motion to centralize the class action lawsuits and agreed that the Eastern District of Louisiana was the appropriate transferee court “because the first-filed and most advanced action is pending there and this choice is supported by all responding parties.” Id.

Posted In: Employment Law Class Actions, Multidistrict Litigation, Class Action Court Decisions

Class Action Claims Alleging Employer Violated State Law because it did not Ensure Employees took Meal and Rest Breaks Failed because Employer need only make Meal and Rest Breaks “Available” but need not “Ensure” they are taken California State Court Holds

Plaintiff filed a class action against his former employer, Public Storage, alleging state labor law violations; in pertinent part, the class action complaint alleged that the paystubs defendant provided to employees failed to comply with state law, and that defendant failed to ensure that employees took all meal and rest breaks permitted by state law. Brinkley v. Public Storage, Inc., 167 Cal.App.4th 1278 (Cal.App. 2008) [Slip Opn., at 2]. The trial court granted plaintiff’s motion to certify the litigation as a class action. Id., at 4-5. Defense attorneys then moved for summary judgment on the grounds that (1) the class action paystub claim failed because defendant’s misstatements were not knowing and intentional, and plaintiff did not suffer any injury, and (2) the class action meal and rest period claims failed because defendant made the breaks available, and California law requires nothing more. Id., at 2. The trial court granted the defense motion and entered judgment in favor of defendant as to all causes of action in the class action complaint premised on those theories (the third, fifth and sixth causes of action). Id., at 5. The California Court of Appeal affirmed. We address the issues in reverse order, because far more labor law class action complaint allege missed meal and rest breaks.

With respect to the class action’s meal and rest period claim, the appellate court held that an employer need only make such breaks available to employees but need not ensure that they are taken. Brinkley, at 10-12 (meal periods) and 12-13 (rest periods). Specifically addressing the class action’s meal breaks claim, the appellate court explained that while plaintiff introduced evidence only that he and other class members “at times missed meal breaks,” but he “did not produce evidence that he or other employees were denied an opportunity to take them.” Id., at 12. Similarly, as for the class action’s rest period claim, defendant pointed to its written policy authorizing employees to take rest breaks, plaintiff’s receipt of that policy, and defendant statements at meetings instructing employees that they were required to take rest periods. Id., at 13. The Court of Appeal held that plaintiff’s allegation that he “could not” take rest breaks was insufficient to raise a triable issue of material fact, id.

Continue reading "Class Action Defense Cases–Brinkley v. Public Storage: In Labor Law Class Action, California State Court Affirms Defense Summary Judgment On Class Action’s Meal And Rest Period Claims Holding Breaks Need Only Be Available" »

Posted In: Employment Law Class Actions, Class Action Court Decisions

FLSA Class Action Plaintiffs Required to Disclose Evidence of Computation of Damages under Rule 26(a) and Failure to do so Justified District Court Order Granting Motion In Limine Barring such Damages Evidence at Trial as Sanction under Rule 37 Ninth Circuit Holds

Plaintiffs filed a class action against Construction Protective Services alleging violations of the federal Fair Labor Standards Act (FLSA) and of the California Labor Code. Hoffman v. Construction Protective Services, Inc., 541 F.3d 1175, 1177 (9th Cir. 2008). The district court certified an opt-in class under the FLSA, and the parties provided with discovery. However, “at no time prior to trial did [named plaintiffs] disclose damage calculations either for each individual Opt-In Plaintiff other than themselves or for the group as a whole.” Id., at 1177-78. Defense attorneys moved in limine to preclude any evidence not produced pursuant to Rule 26; ultimately, the district court severed the named plaintiffs’ claims from the opt-in plaintiffs because of the court’s concern that plaintiffs’ lawyer “did not have a solid understanding of his clients' damages.” Id., at 1178. The court further excluded all evidence of damage not related to the named plaintiffs. Id. A jury returned partial verdicts in favor of the named plaintiffs, and the class appealed “the exclusion of damages evidence and the award of attorney fees.” Id. The Ninth Circuit affirmed.

The issue before the Ninth Circuit was “whether the district court erred in precluding the admission of evidence regarding damages as a sanction under [Rule 37] for failure to disclose damage calculations under Rule 26(a).” Hoffman, at 1177. Reviewing the district court’s ruling for abuse of discretion, and giving “particularly wide latitude to the district court’s discretion to issue sanctions under Rule 37(c)(1), id., at 1178, the Circuit Court first held that plaintiffs’ had not been denied a “meaningful opportunity” to oppose the motion in limine, id., at 1179. Turning to the merits of the district court’s ruling, the Ninth Circuit held plaintiffs’ failure to disclose their damage computations was not substantially justified and, accordingly, the district court had not abused its discretion in precluding plaintiffs from introducing such evidence at trial. Id., at 1179-80. Put simply, “plaintiffs’ disclosure of their damage calculations was required under Rule 26(a), and their failure to do so was not harmless. Id., at 1180. Indeed, the Ninth Circuit held that it was “eminently reasonable for the court to require full disclosure of damages for the entire case.” Id. Accordingly, it affirmed the ruling of the district court.

Posted In: Employment Law Class Actions, Class Action Court Decisions

District Court Properly Dismissed ERISA Class Action because Employer’s Termination of Pensioner Death Benefits Underlying Class Action Claims were “an Unvested Welfare Benefit” and ERISA did not Prohibit Termination of the Benefit Third Circuit Holds

Plaintiffs, former employees of AT&T and Lucent Technologies, filed a putative class action against various defendants alleging violations of the Employee Retirement Income Security Act (ERISA); specifically, the class action complaint alleged that defendants violated ERISA in terminating a pensioner death benefit. In re Lucent Death Benefits ERISA Litig., 541 F.3d 250, 252 (3d Cir. 2008). The class action asserted “four claims under ERISA and federal common law on behalf of a putative class of pensioners” and centered on the allegation “that Lucent had terminated the pensioner death benefit unlawfully and sought declaratory and injunctive relief reversing that termination.” Id., at 253. Defense attorneys moved to dismiss the class action on the ground that the benefit underlying the putative class action was “an unvested welfare benefit” and, accordingly, “neither [ERISA], nor unilateral contract principles prohibited its termination.” Id., at 252. The district court dismissed the class action complaint, finding that “the plan documents were not ambiguous and therefore extrinsic evidence was not relevant to construing them” and holding, as argued by defense attorneys, that “the pensioner death benefit was an unvested welfare benefit and that neither ERISA nor unilateral contract principles prohibited its elimination.” Id., at 253. The Third Circuit affirmed.

As the Circuit Court’s opinion centers on the substantive law governing ERISA rather than the class action aspects of the lawsuit, we do not further discuss the case. We quote only the Circuit Court’s conclusion: “The pensioner death benefit, a lump-sum payment made in the event of a pensioner's death, was an unvested welfare benefit that Lucent could terminate without violating ERISA or unilateral contract principles. We thus affirm the decision of the District Court dismissing the pensioners' complaint….” In re Lucent Death Benefits, at 257. Interested readers may find the Third Circuit’s entire opinion here.

Posted In: Employment Law Class Actions, Class Action Court Decisions

Class Action Claim on which Federal Court’s Original Jurisdiction was Based Dismissed for Failure to Plead Necessary Elements, and Supplemental Jurisdiction over Remaining Labor Law Class Action Claims will not be Exercised California Federal Court Holds

Plaintiffs-employees filed a labor law class action against Brinderson Constructors; the class action complaint contained five wage and hour claims, and a claim for alleged violation of California Labor Code section 2810.  Rojas v. Brinderson Constructors Inc., 567 F.Supp.2d 1205, 1207 (C.D. Cal. 2008).  With respect to the wage-and-hour claims, “[a] class action involving these very claims has been pending in California state court since 2004.”  Id.  Defense attorneys moved to dismiss the class action’s Labor Code section 2810 claim, which the district court had previously dismissed with leave to amend.  Id.  The district court granted the defense motion to dismiss the class action’s sixth cause of action, and then declined to exercise supplemental jurisdiction over the class action’s remaining state law claims and, accordingly, dismissed the class action complaint in its entirety.  Id.

Because the district court found Section 2810 to be unambiguous, the court found it unnecessary to consider the statute’s legislative history.  Rojas, at 1208.  The federal court explained at page 1208, “Under Section 2810(a), an entity is liable ‘where the entity knows or should know that the contract or agreement [it entered] does not include funds sufficient to allow the contractor to comply with all applicable local, state, and federal laws.’”  According to the statute, liability is predicated on an entity “entering into a contract with actual or constructive knowledge of the insufficiency of the funds,” thus requiring that the class action allege not only that Brinderson violated labor laws but that the Refinery Defendants “knew or should have known that their contracts with Brinderson did not include sufficient funds for Brinderson to comply with those laws.”  Id., at 1208-09.  The district court found that “Plaintiffs' scattered allegations and incongruous arguments firmly ground this claim in conjecture.”  Id., at 1209.  Based on the court’s analysis, see id., at 1209-10, it held that “Plaintiffs may not proceed with this claim based on such vacuous allegations,” id., at 1210.

Continue reading "Class Action Defense Cases–Rojas v. Brinderson:  California Federal Court Dismisses Labor Law Class Action For Failure To Allege Facts Necessary To Establish Class Action Claim" »

Posted In: Employment Law Class Actions, Class Action Court Decisions

ERISA Class Action Claims Satisfied Requirements for Class Action Treatment because “Federal Courts have Overwhelmingly Held that ERISA Breach of Fiduciary Duty Claims are Appropriate for Class Action Treatment” Ohio Federal Court Holds

Plaintiffs, former employees of Fifth Third Bancorp and participants in the company’s profit sharing plan, filed a class action against various defendants alleging breach of fiduciary duties under ERISA; specifically, the class action complaint asserted that the company’s stock was an “imprudent investment” during the proposed class period. Shirk v. Fifth Third Bancorp, ___ F.R.D. ___ (S.D. Ohio September 30, 2008) [Slip Opn., at 1-2]. According to the class action, defendants “knew or should have known that the merger of Fifth Third with Old Kent Financial Corp. severely strained Fifth Third’s infrastructure and exposed a widespread breakdown in Fifth Third’s internal controls, … [which] ultimately led Fifth Third to take an $81 million dollar pre-tax charge for its erroneous accounting reconciliation.” Id., at 2. Thus, the district court explained at page 2 that “[t]he quintessential claim is that Fifth Third stock was an imprudent investment for the Plan throughout the class period.” Plaintiff filed a motion with the federal court for certification of the litigation as a class action; the district court granted the motion.

Preliminarily, the federal court stated that “federal courts have overwhelmingly held that ERISA breach of fiduciary duty claims are appropriate for class action treatment.” Shirk, at 3 (footnote omitted). The district court readily found the class action numerosity requirement had been met because the proposed class contained 20,000 people. Id., at 3-4. The court also found that the commonality and typicality requirements for class action treatment had been satisfied, id., at 4-5, and that plaintiff was an adequate class representative, id., at 5-6. Finally, analyzing the class action requirements of Rule 23(b), the federal court concluded that ERISA breach of fiduciary duty class actions are properly certified under Rule 23(b)(1)(B), which states that courts may certify a lawsuit as a class action if “the prosecution of separate actions by or against individual members of the class would create a risk of * * * adjudications with respect to individual members of the class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests.” Id., at 7. Accordingly, the district court granted plaintiff’s class action certification motion. Id., at 9.

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Posted In: Certification of Class Actions, Employment Law Class Actions, Class Action Court Decisions

Class Action Alleging Employer Coerced Restaurant Employees to Share Tips in Violation of Federal Fair Labor Standards Act (FLSA) Decertified as Class Action because “Critical Questions of Fact” in Proposed Class Action “Vary from Plaintiff to Plaintiff and Restaurant to Restaurant” Texas Federal Court Holds

Plaintiff filed a class action against her employer, Brinker International, alleging violations of the federal Fair Labor Standards Act (FLSA); specifically, plaintiff alleged that at its Chili’s restaurants, defendant required that servers share their tips with “Quality Assurance employees (QAs). Roussell v. Brinker International, Inc. ___ F.R.D. ___ (S.D. Tex. September 30, 2008) [Slip Opn., at 1]. The district court certified the lawsuit as a class action on behalf of approximately 3500 servers, id. The 3500 servers who opted into the FLSA class action worked at 775 Chili’s restaurants in 45 states, id., at 3. In July 2008, the federal court reaffirmed that “the question of whether QAs were eligible to participate in a mandatory tip pool could be tried collectively,” but it expressed concern that “the question of manager coercion could not be fairly tried using representative testimony based on Plaintiffs’ original trial plan.” Id. The district court requested that plaintiff submit a revised trial plan, id. Plaintiff proposed a three-phase trial plan, id., at 2; defense attorney objected to the proposal and requested that the district court decertify the class action, id., at 3. The federal court granted defendant’s motion and decertified the lawsuit as a class action.

Plaintiff argued that class action treatment was warranted and proposed the following trial plan. The federal court summarized the proposed class action trial plan at page 2 of its opinion. In Phase 1, the court would decide whether QAs are entitled to share in server tips. It they are found to be ineligible, then in Phase 2 the court “a second jury [would] consider whether a test flight of 20 to 50 of the opt-ins deposed in this case were coerced or required to share tips with QAs”; plaintiff argued that Phase 2 would “clarify the legal and evidentiary issues necessary to fully adjudicate such claims.” Roussell, at 2. In Phase 3, the federal court would hold a case management conference to determine how to resolve the claims of the remaining opt-in class members, id. Defense attorneys argued that the revised trial plan did not solve the deficiencies in the original plan, id., at 3. The district court agreed, explaining at pages 3 and 4: “One of the questions central to liability in this case is whether Plaintiffs were coerced by different managers at the 775 stores to share tips with QAs. Plaintiffs’ Revised Trial Plan does not demonstrate that this question can be fairly tried collectively ….” The federal court explained that class action treatment “is only justified in cases in which plaintiffs are similarly situated and where proceeding collectively will not render trial unfair to defendants.” Id., at 4. Class action treatment was inappropriate in this case because “this lawsuit involves critical questions of fact that vary from plaintiff to plaintiff and restaurant to restaurant, and does not allow resolution of the case in a single collective proceeding.” Id., at 5. Accordingly, it granted the defense motion to decertify the class action, id., at 5-6.

Posted In: Certification of Class Actions, Employment Law Class Actions, Class Action Court Decisions