Source: http://www.impactlitigation.com/2015/02/
Timestamp: 2019-04-19 17:11:00+00:00

Document:
Courts have long held that individual and varying damages calculations for putative class members does not necessarily preclude class certification. However, a shadow of doubt was cast over this well-settled principle by the United States Supreme Court’s decision in Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013). In Comcast, the Supreme Court reversed the district court and Third Circuit Court of Appeals’ certification orders because it found that the plaintiff’s expert testimony was insufficient to establish classwide damages. Predictably, defense counsel have cited Comcast to argue that individual damages issues preclude certification. If adopted, this rationale would effectively end class actions as we know them, given that most class actions involve varying individual damages.
Recently, the influential Court of Appeals for the Second Circuit weighed in on the scope of Comcast and whether it overruled the law of its Circuit, holding that class certification cannot be denied merely because damages have to be ascertained on an individual basis. Roach v. T.L. Cannon Corp., No. 13-3070-cv (2d Cir. Feb. 10, 2015) (slip op. available here). In Roach, the plaintiff alleged that T.L. Cannon, an Applebee’s restaurant franchisee, had a policy of not paying hourly employees an extra hour of pay when working a ten-hour work day as was required at the time by New York law (the “spread-of-hours” claim) and that the defendant required its managers to subtract pay for required rest breaks that the employees did not take (the rest break claim). The magistrate judge recommended that the spread-of-hours claim be certified, finding the common question of whether the company had a policy of depriving employees of an extra hour of pay predominated over individual issues, but ultimately denied certification of the rest break claim because the class representatives were inadequate. The district court, without considering whether common issues existed, denied certification of both claims on the sole basis that the presence of individualized damages precluded certification under Comcast. Slip op. at 9.
The Second Circuit disagreed with the lower court, holding that the court had misinterpreted Comcast. Id. at 26. According to the Second Circuit, Comcast did not hold that a class cannot be certified under Rule 23(b)(3) simply because damages cannot be measured on a classwide basis. Id. at 19. Rather, Comcast’s more narrow ruling was “that a model for determining classwide damages relied upon to certify a class under Rule 23(b)(3) must actually measure damages that result from the class’s asserted theory of injury.” Id. at 20. Although Comcast reiterated that the damages question should be considered at the certification stage, the fact that damages may have to be ascertained on an individual basis is only a factor to consider when determining whether common issues outweigh individual issues. Id at 22. The Roach court noted that its ruling was consistent with the five other Circuits that had applied Comcast, including the Ninth Circuit’s decision in Leyva v. Medline Indus. Inc., 716 F.3d 510 (9th Cir. 2013). The court then vacated the order denying class certification and remanded the case.
In an unpublished opinion issued last week, the California Court of Appeal found that a lower court incorrectly denied class certification in a proposed class action involving the collection of consumers’ ZIP codes at Party America retail stores. Aguirre v. Amscan Holdings, Inc., No. C073059 (Cal. Ct. App. Feb. 11, 2015) (slip op. available here). The plaintiff alleged that Amscan, d/b/a Party America, collected and recorded customers’ ZIP codes at the point of sale, in violation of the Song-Beverly Credit Card Act.
The trial court examined the criteria for class certification and denied the plaintiff’s motion based on lack of ascertainability, because the plaintiff could not “clearly identify, locate and notify class members through a reasonable expenditure of time and money.” Slip op. at 13. However, this is a much stricter definition of ascertainability than is generally imposed on class action plaintiffs, and the appellate court categorically rejected the trial court’s conclusion, stating that “the representative plaintiff need not identify, much less locate, individual class members to establish the existence of an ascertainable class.” Slip op. at 11-12 (relying on Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 706).
The Amscan court found that an ascertainable class exists, since the class definition “describes a set of common characteristics sufficient to allow a member of that group to identify himself or herself as having a right to recover based on the description.” Slip op. at 19 (citing Bartold v. Glendale Federal Bank (2000) 81 Cal.App.4th 816, 828). The case was remanded back to the trial court with instructions to reevaluate their class certification determination in light of the appellate court’s finding of an ascertainable class.
On February 3, 2015, Judge Edward Chen of California’s Northern District issued an order in Hernandez v. DMSI Staffing LLC, No. C-14-1531 EMC (N.D. Cal Feb. 3, 2015) (slip op. available here), denying DMSI’s motion to compel arbitration to the extent it sought to enforce a waiver of the plaintiff’s representative claims under California’s Private Attorneys General Act (PAGA), following the reasoning of the California Supreme Court in its landmark ruling in Iskanian v. CLS Transportation. In Iskanian, the California Supreme Court held that an arbitration agreement precluding representative claims under PAGA is invalid as a matter of California public policy, and moreover that California’s rule against forced waivers of PAGA enforcement actions is not preempted by the Federal Arbitration Act (FAA). The Court emphasized that PAGA disputes—like qui tam actions—are between the state and the employer, and not between two contracting private parties.
Judge Chen’s recent ruling in Hernandez follows Iskanian’s reasoning, analogizing PAGA actions to qui tam actions, insofar as under PAGA a private citizen files suit in court to enforce the California Labor Code on behalf of the government. In Hernandez, the plaintiff sought civil penalties under PAGA for violations of the Labor Code, including: failure to pay minimum wage, failure to pay wages for all hours worked, failure to pay overtime, failure to pay wages timely upon termination, and failure to provide accurate and compliant wage statements. Defendants DMSI and Ross Stores sought to compel arbitration of the plaintiff’s individual claims, and to have the district court dismiss the plaintiff’s representative claims under PAGA. The court rejected the defendants’ arguments in support of enforcing the PAGA waiver, focusing on the enforceability of PAGA waivers under state law and on whether the state non-waiver rule is preempted by the FAA.
The court also rejected the defendant’s reliance on Ferguson v. Corinthian Colleges, Inc., 733 F.3d 928 (9th Cir. 2013), which held that the FAA preempts the Broughton-Cruz rule. In Broughton-Cruz, a plaintiff seeking broad injunctive relief under various consumer statutes could not be compelled to arbitrate those claims; in Ferguson, the court determined that a state law that precludes arbitration of a particular type of claim must be preempted by the FAA. Judge Chen distinguished PAGA actions from the consumer claims addressed in Broughton-Cruz and Ferguson, reiterating the qui tam nature of PAGA actions—a PAGA action is not a dispute between two private parties, but brought on behalf of the state, which retains the majority of the penalties collected. On this point, the Hernandez court flatly disagreed with the several federal district courts that have refused to follow Iskanian, holding that these courts are simply incorrect because they fail to distinguish between the public law enforcement aspect of PAGA and the private enforcement actions for injunctive relief at issue in Ferguson.
In any event, given the firm rejection of the federal district courts that have refused to follow Iskanian, an eventual showdown in the Ninth Circuit Court of Appeals seems likely.

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