Source: https://www.classactiondefenseblog.com/
Timestamp: 2019-04-25 08:25:53+00:00

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The Supreme Court issued a seminal decision yesterday in Epic Systems Corp. v. Lewis, 584 U.S. ___ (May 21, 2018), ruling 5-4 that the Federal Arbitration Act (FAA) compels enforcement of an employer-employee arbitration agreement to resolve disputes on an individual basis, rejecting the employees’ claim that the National Labor Relations Act (NLRA) authorizes the utilization of the class action procedure to resolve employee complaints.
After the Supreme Court decision in AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) – which held that class action waivers in arbitration agreements are valid under the Federal Arbitration Act (“FAA”) – companies rushed into class action waiver arbitration agreements without heeding the proverb, “Look before you leap.” While avoiding class actions is an admirable goal, doing so through arbitration agreements may lead to unintended and painful consequences. In addition, many companies have found courts reluctant to enforce the class action waiver and/or the arbitration clause, which can cost tens of thousands of dollars in law and motion practice only for the case to remain in state or federal court. Read the full article here.
As I state in the article, “If it is advisable to adopt an arbitration clause with a class action waiver, a company should be aware that arbitration agreements are not widgets: one size does not fit all.” It is always advisable to have legal counsel draft agreements that are specific to your company and its intended goals.
The decision of the California Court of Appeal in Williams v. Superior Court (Marshalls), No. B259967 (Cal. Ct. App. May 15, 2015) will have California employers breathing a sigh of relief, at least for representative actions involving multiple locations.
In Williams, the California Court of Appeals for the Second Appellate District (which includes Los Angeles County) upheld the decision of the trial court denying Plaintiff’s motion to compel the disclosure of the names and contact information for all putative class members in a representative wage and hour action brought under California’s Private Attorney General Act (“PAGA”).
Plaintiff Michael Williams alleged in his PAGA action that Marshalls failed to provide its employees with meal and rest breaks, accurate wage statements, reimbursement for business-related expenses, and earned wages as required by California law.
At the outset of the case and prior to Plaintiff sitting for his own deposition, Plaintiff served interrogatories seeking production of the names and contact information for all non-exempt employees of Marshalls. Defendant objected to the requests and Plaintiff moved to compel.
Plaintiffs – a group of merchants who accept American Express cards – filed a putative class action against American Express alleging of the Sherman Act and seeking treble damages under the Clayton Act; the class action complaint alleged that American Express violated federal antitrust laws by “us[ing] its monopoly power in the market for charge cards to force merchants to accept credit cards at rates approximately 30% higher than the fees for competing credit cards.” American Express Co. v. Italian Colors Restaurant, __ U.S. __, __ S.Ct. __, 2013 WL 3064410, *1-2 (June 20, 2013). Plaintiffs’ contract with American Express “contains a clause that requires all disputes between the parties to be resolved by arbitration” and further provides that “[t]here shall be no right or authority for any Claims to be arbitrated on a class action basis.” Id., at *1 (citing In re American Express Merchants’ Litig., 667 F. 3d 204, 209 (2d Cir. 2012)). Accordingly, American Express moved under the Federal Arbitration Act (FAA) to compel arbitration of Plaintiffs’ individual claims, id., at *2. Plaintiffs opposed dismissal of their class action complaint, submitting an expert witness declaration that estimated the cost of proving Plaintiffs’ antitrust claims could “exceed $1 million,” while the maximum recovery for any individual plaintiff would be less than $40,000. Id. The district court rejected Plaintiffs’ argument, granted the motion to compel arbitration of the individual claims and dismissed the class action complaint. Id. The Second Circuit reversed, holding that because pursuit of Plaintiffs’ antitrust claims would be prohibitively expensive if pursued individually, the class action waiver was unenforceable. Id. (citing In re American Express Merchants’ Litig., 554 F. 3d 300, 315-16 (2d Cir. 2009)). The Supreme Court reversed.
Plaintiffs filed a putative class action in California state court against their employer, Brinker Restaurant, alleging various labor law violations; specifically, the class action complaint alleged that Brinker failed to provide employees with rest breaks, failed to provide employees with meal breaks, and that Brinker required employees to work “off-the-clock.” Brinker Restaurant Corp. v. Superior Court, ___ Cal.4th ___ (April 12, 2012) [Slip Opn., at 1, 4]. With respect to the meal period claim, plaintiffs argued that state law requires employers “to provide a 30-minute meal period at least once every five hours.” Id., at 5. Defense attorneys argued that state law does not so long as it provides one meal period for work shifts exceeding 5 hours and two meal periods for work shifts exceeding 10 hours, then it has complied with state law. Id. Brinker also argued that individual issues predominated so that class action treatment would be inappropriate, id. Specifically, Brinker argued that it was required only to permit its employees to take meal and rest breaks, but it was under no legal obligation to ensure that its employees take such breaks. Id., at 6. Plaintiffs moved the trial court to certify the litigation as a class action, id., at 5. The trial court agreed with plaintiffs, and granted plaintiffs’ motion to certify the lawsuit as a class action. Id., at 7. The Court of Appeal granted Brinker’s petition for writ relief and reversed. The Court of Appeal concluded that common issues did not predominate as a matter of law, and therefore the trial court erred in certifying the claims for class action treatment. Id., at 15. The California Supreme Court granted review and held (1) the trial court properly certified the rest break claim for class action treatment, (2) improperly certified the “off-the-clock” claim, and (3) needed to reconsider the meal period claim. Id., at 1-2. Importantly, with respect to the meal break claim, the Supreme Court held that “an employer’s obligation is to relieve its employee of all duty, with the employee thereafter at liberty to use the meal period for whatever purpose he or she desires, but the employer need not ensure that no work is done.” Id., at 2.
The Supreme Court decision in Brinker has been awaited by both sides of the class action bar. Unfortunately, the decision creates as many questions as it solves. For example, with respect to the general rules governing class certification, the Supreme Court recognized that both state and federal decisions hold that consideration of the merits may overlap class certification issues. See Brinker, at 10-12. The Court also held that “[t]o the extent the propriety of certification depends upon disputed threshold legal or factual questions, a court may, and indeed must, resolve them.” Id., at 13. However, in the next breath, the Supreme Court stated that “a court generally should eschew resolution of such issues unless necessary,” id. And relying on its prior decisions, the Court strongly discouraged trial courts from considering the merits of a claim in determining class certification. See id., at 11. But the Court summarized its holding as follows: “if the presence of an element necessary to certification, such as predominance, cannot be determined without resolving a potential legal issue, the trial court must resolve that issue at the certification stage.” Id., at 14. So precisely when trial court consideration of the merits is necessary or prohibited is less clear post-Brinker.
Plaintiffs filed a putative class action in Florida state court against various defendants, including KPMG LLP, for damages suffered as a result of investments made with Bernard Madoff; the class action named the investment funds, the entity that managed the funds, and KPMG as auditor. KPMG LLP v. Cocchi, 565 U.S. ___ (November 7, 2011) [Slip Opn., at 1-2]. With respect to KPMG, the class action alleged negligent misrepresentation, professional malpractice, aiding and abetting a breach of fiduciary duty, and violation of Florida’s Deceptive and Unfair Trade Practices Act (FDUTPA). Id., at 2. KPMG moved to compel arbitration under the Federal Arbitration Act (FAA) on the grounds that the audit services agreement between it and the funds’ management company contained an arbitration clause. Id. The trial court denied the motion, and the state appellate court affirmed on the ground that “‘[n]one of the plaintiffs…expressly assented in any fashion to [the audit services agreement] or the arbitration provision.’” Id., at 2-3 (citation omitted). However, the state courts apparently found it sufficient to conclude that neither the FDUTPA claim nor the negligent misrepresentation claim were subject to arbitration, without analyzing whether the professional malpractice or breach of fiduciary duty claim were subject to arbitration. Id., at 3. The Supreme Court granted certiorari and reversed.
Despite its April 27, 2011 decision in AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011), some state courts have continued to find “creative” ways to avoid its mandate. “The Federal Arbitration Act reflects an ‘emphatic federal policy in favor of arbitral dispute resolution.’” KPMG, at 3 (citations omitted, italics added). “Agreements to arbitrate that fall within the scope and coverage of the [FAA]…must be enforced in state and federal courts.” Id., at 1 (italics added). Thus, “State courts…‘have a prominent role to play as enforcers of agreements to arbitrate.’” Id. (citation omitted). And because the FAA “has been interpreted to require that if a dispute presents multiple claims, some arbitrable and some not, the former must be sent to arbitration even if this will lead to piecemeal litigation,” id. (citation omitted), “[a] court may not issue a blanket refusal to compel arbitration merely on the grounds that some of the claims could be resolved by the court without arbitration,” id. (citation omitted).
The author of the Class Action Defense Blog found Rich’s book to be a great read, particularly in its ability to illustrate through real-life examples the proverb that “the grass is always greener.” Rich does a great job weaving in experiences with his own family to show that one need not be super wealthy to experience the joy of true friendship or the treasure of a close-knit family.
Plaintiffs filed a putative class action against Costco Wholesale alleging that it discriminates in its promotional practices based on gender. Ellis v. Costco Wholesale Corp., ___ F.3d ___, 2011 WL 4336668 (9th Cir. September 16, 2011) [Slip Opn., at 17693, 17697]. The class action complaint was filed after the Equal Employment Opportunity Commission (EEOC) dismissed a charge that Costco engaged in gender discrimination in its practice of promoting employees. The class action complaint alleges violations of Title VII, and sought to be brought on behalf “of a Title VII class of all women employed by Costco in the United States denied promotion to [assistant general managers] and/or [general managers] positions.” Id., at 17702-03. The class action “sought class-wide injunctive relief, lost pay, and compensatory and punitive damages.” Id., at 17703. Plaintiffs moved the district court to certify the lawsuit as a class action based, in part, on the declarations of three experts – a statistician, a labor economist, and a sociologist – who opined that Costco’s female employees were “promoted at a slower rate” and were “underrepresented” in management positions relative to their male peers. Id. Costco opposed class action treatment, based in part on the declarations of 200 employees and the declarations of its own experts. Id. The district court granted class certification, id., at 17703-04. The Ninth Circuit granted Costco’s request for leave to file an interlocutory appeal, and proceeded to affirm in part, vacate in part, and remand the matter for further proceedings. Id., at 17697.
Briefly, Costco operates 350 warehouses, each containing a general manager (GM), two or three assistant general managers (AGM), and three or four senior staff managers (who are themselves divided into four categories consisting of front end managers, administration managers, receiving managers, and merchandise managers). Ellis, at 17699. The company “promotes almost entirely from within its organization” and “[o]nly current Costco AGMs are eligible for GM positions.” Id. No written policy exists explaining the criteria that Costco considers in selecting employees for consideration or in making its promotion decisions. Id., at 17699-700. Among senior staff managers, however, Costco generally rotates managers among the various categories as part of its belief that this exposure trains and develops employees for future positions as AGMs and GMs. Id., at 17700.
The California Supreme Court will hear oral argument in Brinker Restaurant v. Superior Court (Hohnbaum, et al., real parties in interest) on November 8, 2011, according to the Court docket issued recently. The Court generally issues decisions within 90 days after completion of oral argument and submission of post-argument briefs, if any. A decision is expected by mid-February, 2012.
The decision is extremely important to California employers because meal and rest period claims have been the basis of hundreds of class action lawsuits in California. The Court’s decision could make it more difficult for plaintiffs to bring these claims as class actions, or, depending on the ruling, could establish rigid guidelines which may foster more class actions. Either way, California employers and Plaintiffs class action lawyers alike have eagerly awaited this decision since the Supreme Court took up the case in October, 2008 and look forward to receiving guidance from the high court.
Plaintiff filed a putative class action against cellular telephone service provider, AT&T Mobility, alleging violations of California’s Unfair Competition Law (UCL), False Advertising Law (FAL), Consumer Legal Remedies Act (CLRA) and breach of contract. Kaltwasser v. AT&T Mobility LLC, ___ F.Supp.2d ___, 2011 WL 4381748 (N.D.Cal. September 20, 2011) [Slip Opn., at 1-2]. According to the allegations underlying the class action complaint, plaintiff renewed his cell service with AT&T based on the company’s representations that it had the “fewest dropped calls.” Id., at 2. Because he alleges that this representation was false, plaintiff filed this lawsuit. AT&T moved to compel arbitration and to dismiss the class claims on the grounds that the service contract included an arbitration clause with a class action waiver. Id. In April 2008, the district court denied AT&T’s motion finding the class action waiver unconscionable under Discover Bank v. Superior Court, 36 Cal.4th 148 (Cal. 2005). Id., at 2-3. Plaintiff subsequently filed a motion to have his lawsuit certified as a class action; the district court delayed ruling on the motion pending the U.S. Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011). Id., at 1. Based on Concepcion, the federal court denied plaintiff’s motion and ordered his claims to be arbitrated on an individual basis. Id., at 1-2.
After providing a general discussion of the FAA and Concepcion, the district court noted Concepcion’s holding that “California’s Discover Bank rule is preempted by the FAA.” Kaltwasser, at 5 (quoting Concepcion, at 1753). Plaintiff, however, argued that Concepcion did not require reconsideration of the district court’s prior order denying AT&T’ s motion to compel arbitration because (1) “Concepcion left intact a vindication-of-rights doctrine under federal common law” permitting him to avoid arbitration “if he can show that the costs involved in proving his claims exceed the damages he can potentially recover”; (2) “Concepcion did not affect public policy principles of contract law” which hold that “‘a law established for a public reason cannot be contravened by a private agreement’”; and (3) AT&T waived its right to arbitration. Id., at 5-6. The district court disagreed.

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