Employment Class Action Blog

California Appeals Court Finds Plaintiffs' Counsel Inadequate, Upholds Denial of Class Certification Motion

Gilbert Brosky — Mon, 14 May 2012 13:33:19 -0500

It’s bad enough that a plaintiff’s attorney loses a motion to certify a class – it must be even worse when the reason the motion is denied is the attorney’s own failure to plead his case properly. A recent California court of appeals decision affirmed the denial of a California meal and rest break class in part because it found that the plaintiffs’ attorney could not adequately represent the class. Interestingly, the court cited errors made by the attorney during certification briefing in support of this finding.

In Chaaban v. Wet Seal, Inc., Super Ct. No. 07CC01290 (Cal. 4^th App. Dist. April 4, 2012), the plaintiffs appealed an order denying their motion to certify a class action against their former employer, Wet Seal. They alleged various violations of California’s Labor Code and the applicable wage order, including claims for unpaid meal and rest periods. They filed their motion for certification in June 2010 along with 67 exhibits. In what the court described colorfully described as “evidentiary bloodletting,” the trial court found the vast bulk of this evidence to be inadmissible. After clearing away the “deadwood,” the trial court denied plaintiffs’ motion based on their failure to make the well-established showings of commonality and typicality, as well as its determination that the plaintiffs’ counsel could not adequately represent the proposed class.

In affirming the trial court’s decision, the court found that the plaintiffs had not established commonality because they had failed to show how they could prove that Wet Seal had not provided meal and rest breaks to its employees on a class-wide basis. The plaintiffs’ evidentiary failures aside, the court noted that they had failed to explain how allegations of missed meals and breaks could be determined for the class as a whole without resorting to numerous individual inquiries. The court found the plaintiffs’ reporting time and split-shift payments to be “even more complex problems” in terms of class treatment.

As for typicality, the court found that the potential class representatives did not establish through admissible evidence that they had claims against Wet Seal. Rather, the plaintiffs’ declarations contained unfounded assertions such as “I was never paid an additional hour of pay for any missed rest break” without explaining what foundation they used to establish this. Thus, because the plaintiffs had not shown they had claims against Wet Seal, they failed to demonstrate that they had claims against Wet Seal that were typical of the class they proposed to represent.

Running the risk of piling on, the court then cited the plaintiffs’ counsel’s certification briefing missteps to support its conclusion that class counsel was unable to handle a large class action properly. The court found that the plaintiffs’ counsel’s inability to offer admissible evidence, overruled objections to West Seal’s expert declaration, and inability to prepare an adequate reply brief did “not install confident in appellants’ counsel’s qualifications to be class counsel.” Perhaps sensing a sinking ship, the court also noted that more experienced plaintiff class action lawyers had already dissociated themselves from the case. The court concluded that plaintiffs’ counsel’s relative lack of experience and questionable resources to handle a case with potentially 10,000 class members provided “ample” support for the trial court’s ruling.

The bottom line: While this case provides some guidance for a possible inadequacy of representation argument based on poor lawyering, practically this will likely be a moot issue since errors that could give rise to such a defense are also likely to result in the plaintiffs producing a losing certification motion.

Pharmaceutical Companies Receive A Late-Season Pick-up With Regard To Seventh Circuit Ruling On Administrative Exemption

Jeffrey Vlasek — Fri, 11 May 2012 16:09:19 -0500

Posted by Jeffrey Vlasek

Early May in America is known for several things. For most of us living outside the Sunbelt, the temperature manages to stay above 60 degrees consistently, flowers start to bloom in earnest, baseball season begins to heat up, and (perhaps most importantly), the annual tradition of waiting for television networks to announce what shows are being renewed for the fall is finally upon us. For fans of Big Bang Theory or any other CBS sitcom, it’s a foregone conclusion that you will see your favorite characters returning in the fall. For the small, but dedicated fans of pretty much any show on NBC, but specifically Community or Parks and Recreation, however, these weeks bring another period of nail-biting as we anxiously await the news on pick-up or cancellation.

In many ways, pharmaceutical companies have been like those fans of 30 Rock awaiting word of their Liz Lemon’s fate from above, with the Supreme Court playing the role of NBC executives. For years, drug companies have classified their sales representatives to be exempt from the FLSA’s overtime requirements. A tidal wave of class action lawsuits in the past several years, however, have challenged that thinking (and resulted in great expense to companies like Eli Lilly & Co. and Abbott Laboratories). Oral arguments regarding GlaxoSmithKline PLC’s sales reps were heard before the Supreme Court just last month.

Unlike those fifteen fans of Awake that are still waiting for the dire news next week (folks, you know it’s canceled), the Seventh Circuit has granted some relief for the drug companies in its decision in Schaefer-LaRose v. Eli Lilly & Co., No. 10-3855, and Jirak v. Abbott Laboratories, Inc., Nos. 11-1980 & 11-2131 (7th Cir. May 8, 2012). The opinion, which addresses a pair of consolidated cases, involves the application of outside sales and administrative exemptions of the FLSA to drug reps.

In short, the drug company employers argued that both the sales and administrative exemptions applied to their reps. The court agreed that the employees’ duties were covered by the administrative exemption, and specifically held that that representatives were “the public face of their employer to the most important decision-maker regarding the use of their companies’ products, the prescribing physicians.” Thus, while the reps may not have ultimately closed the sale, they were still performing work directly related to the general business operations of the employer.

Perhaps unsurprisingly, given the inevitable decision on the outside sales exemption currently pending before the Supreme Court, the Seventh Circuit did not address the issue in its decision.

The Bottom Line: With the Supreme Court’s decision on the outside sales exemption due in June, drug companies (and potentially other employers with similar sales representative structures) received a bit of good news with the decision that there is still more than one overtime exemption that may apply to their sales representatives.

California Supreme Court Limits Attorney Fee Awards in Meal and Rest Period Cases

Greg Mersol — Fri, 04 May 2012 13:51:46 -0500

Posted by Greg Mersol

A Decent Ruling, But Not All It Could Be

Rest and meal period class actions have vexed California employers and outsiders trying to conduct business in California for several years. Even a minor violation is argued to cascade into an array of class-wide claims that have been used to extract tens or hundreds of millions of dollars from employers. Worse, plaintiffs may be awarded their attorney fees, making litigation of a wage and hour class action doubly expensive for the employer. Last month’s Brinker decision, which we discussed here on April 12, cut back the worst of the theories raised by plaintiffs and also addressed other issues that may be used to curtail California wage and hour class actions in the future.

Last Monday, the California Supreme Court issued a decision on the issue of attorney fees in meal and rest period cases. While Brinker was far better for employers than not, the new case, Kirby v. Immoos Fire Protection Inc.pdf., Case No. S185827 (Cal. S. Ct. Apr. 30, 2012), is less of a clear victory.

The issue in Kirby related to attorney fees and presented the unusual question of whether an employer who prevailed in a meal and rest period case could recover its attorney fees. The court of appeals, construing California’s statutory requirements literally, found that it could, and awarded attorney fees against the plaintiffs.

The California Supreme Court began its opinion by noting that the question was, indeed, one of statutory construction. The issue related to the construction of two California wage and hour statutes, one only permitting attorney fee awards to plaintiffs (Labor Code section 1194), and one permitting attorney fee awards in both directions (section 218.5). Section 218.5, at first blush, appeared to apply in that it governed actions brought for the nonpayment of wages and the California Supreme Court had previously held that rest and meal period claims were wage claims, not ones for penalties (subject to a shorter statute of limitations). See Murphy v. Kenneth Cole Productions, Inc., 40 Cal. 4^th 1094 (2007).

Engaging in mental gymnastics to avoid the ruling in Murphy, the court created a distinction between a claim to “obtain” unpaid wages versus one “on account of” unpaid wages. Based on this new distinction, the court found that NEITHER side could recover their attorney fees in a rest and meal period case because a claim based on claimed rest and meal period violations was not specifically one to “obtain” unpaid wages.

So, this presents a bad news, good news, bad news result. The bad news is that employers who prevail in rest and meal period cases cannot recover their attorney fees. This is not a major issue because it arises so rarely. The good news, and it is very good, is that plaintiffs cannot recover their attorney fees in these cases either, making it less profitable for the attorneys to file and pursue such claims, and also less expensive for the employer.

But here is the second bit of bad news. Increasingly plaintiffs are joining their rest and meal periods with Private Attorneys General Act (“PAGA”) claims under which attorney fees may be recovered. Further the California legislature can, and may very well, amend the statute to permit one-way recovery of attorney fees in rest and meal period cases. For now, this looks like a better ruling for employers than not, but one that may prove to be short-lived.

The Bottom Line: Prevailing plaintiffs in California meal and rest period cases cannot recover their attorney fees as part of claims to recover wages, but other avenues may exist for them to do so.

California Court Proves That They'll Print Anything These Days With Denial of Decertification in Newspaper Carrier Case

Jeffrey Vlasek — Mon, 30 Apr 2012 13:13:17 -0500

Posted by Jeffrey Vlasek

When James Bond brandishes his Walther PPK and walks into a printing plant, you know one thing is certain - you will be "treated" to at least a half-dozen newspaper puns. And, since this article is about a recent California case involving newspaper carriers, it will, of course, be no different.

Ever since Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), stopped the presses last summer, courts have been struggling with how to interpret the decision, and more importantly, how to define its holding with pending class actions. The judge in Dalton v. Lee Publications, Inc., Case No. 3:08-cv-01072 (S.D. Cal. April 24, 2012), faced just such a dilemma. The plaintiffs, employed as newspaper home delivery carriers, initially sued in 2008 on the premise that the employer, Lee, had misclassified them as independent contractors. In July 2010, the court certified the class as Lee newspaper home delivery carriers who had signed written agreements designating them as independent contractors.

Lee was black, white, and red all over its face when it saw that a class of 800 employees had been certified, so it quickly appealed. In November 2010, however, the Ninth Circuit denied its appeal. Still determined that the certification was not fit to print, Lee moved for decertification following the Dukes decision in 2011. Primarily, Lee argued that individualized issues predominated over common issues, and that the class of 800 would be unmanageable.

The court disagreed. Using Dukes as front page, above the fold material, it wasted no time distinguishing the 1.5 million individuals involved there with the "scant" 800 employees of Lee. Lee argued that the court could not merely look to the similar contracts signed by the plaintiff class members as a "common answer" to the question. Plaintiffs, on the other hand, convinced the court that Lee kept "extensive records" that purportedly demonstrated mileage, hours, and other information with respect to each class member. Any individual damages could be determined through those records, and without any kind of "representative sampling."

It wasn't all bad news for Lee, however. Before putting the paper to bed, the court conceded that if the workers could not present such proof of individualized damages at trial, and they were forced to resort to individual testimony, Lee could renew its motion for decertification at that time.

The Bottom Line: Even after Dukes, it is difficult to allege individualized damages for decertification purposes when the defendant keeps meticulous records from which it can easily calculate the amounts.

Pattern-or-Practice Claim Doesn't Trump Arbitration Agreement - Karp v. CIGNA Healthcare Inc.

John Lewis — Mon, 23 Apr 2012 15:49:18 -0500

Posted by John Lewis

Once again a court has been required to consider whether a federal statutory claim might limit the reach of the Federal Arbitration Act, 9 U.S.C. § 1 et. seq. (“FAA”), and prevent arbitration of an individual discrimination claim. This twenty-two-page decision reflects the on-going struggle by plaintiffs to discover potential exceptions to the U.S. Supreme Court’s decision in AT&T Mobility LLC v. Concepcion.

On April 18 a Massachusetts district court held that a plaintiff must arbitrate gender discrimination claims despite alleging that her employer engaged in a pattern-or-practice of sex discrimination violative of Title VII of the 1964 Civil Rights Act and state law.

In Karp v. CIGNA Healthcare Inc.pdf (Case No. 11-CV-10361, D. Mass, 04/18/2012), Judge F. Dennis Saylor, IV compelled arbitration of Bretta Karp’s individual sex discrimination claim despite her arguments that she never waived her rights to a class action or class arbitration proceeding and that individual arbitration would deny her statutory rights under Title VII to bring a pattern-or-practice claim.

The Dispute Resolution Procedure

Karp, a former Provider Contract Manager, began working for CIGNA in 1997 and in early 1998 signed a receipt acknowledging that she received the Company’s 1998 Employment Dispute Arbitration Policy requiring employees to arbitrate their disputes with the company instead of going to court. The 1998 policy did not reference class actions or class arbitration.

In 2005, CIGNA revised its Employee Handbook to reflect changes in its policies and procedures and circulated an e-mail to advise employees. The e-mail provided a link to an electronic version of the Handbook and required employees to complete an electronic receipt. Karp checked “yes” on the Handbook receipt, which acknowledged that she reviewed the 2005 Handbook and agreed that disputes would be resolved through CIGNA’s Employment Dispute Arbitration Program. Neither the Handbook, CIGNA’s e-mails nor the electronic receipt mentioned class arbitration or a class action waiver. However, as noted above, the Handbook referred to the company’s Employee Dispute Arbitration Policy, Rules and Procedures which clearly provided that no class-wide arbitrations were allowed and “no class or representative actions permitted.” And, while the court expressed concerns that the Company policies and procedures could be enforced against Karp, there was “no doubt that [CIGNA] did not agree to permit class arbitration.” Thus based on AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1840, 1750 (2011), the court held that CIGNA “could not be compelled to submit to class arbitration.”

Is Litigation an Option?

While the District Court found Karp could not arbitrate her class claims, “it did not necessarily follow that she may litigate those claims in a judicial forum.” Indeed, it ultimately found she could not. The Opinion found that “by agreeing to arbitrate her individual claims, [Karp] cannot serve as a class representative in a litigated class action.” But, Karp had contended that if she was compelled to arbitrate her claims individually, she would not be able to vindicate her statutory right under Title VII to pursue pattern-or-practice claims. Thus, according to Karp, the arbitration clause could not be enforced because it was not a viable alternative to litigation. The Court disagreed after considering the history, potential viability and practical impact of those claims.

According to the Court, the pattern-or-practice “claim” under Title VII was in reality “merely a method of proof.” The District Court would not permit “a procedural device – a burden-shifting rule contained within a method of proof – to trump the arbitration agreement and the FAA.”

Based upon that analysis, the District Court granted CIGNA’s Motion to Compel arbitration and stayed Karp’s action pending arbitration.

The Bottom Line: Another lower court enforces U.S. Supreme Court precedent supporting arbitration. An individual cannot assert a pattern-or-practice discrimination claim to defeat arbitration.

Federal Court Dismisses Retirees' Health Care Claims For Lack Of Standing

Gilbert Brosky — Fri, 20 Apr 2012 15:50:32 -0500

Posted by Gilbert Brosky

The Sixth Circuit has been a hotbed of class action litigation involving retiree healthcare under collectively bargained plans. Retirees seeking benefits have prevailed in many such cases based on the 1983 Sixth Circuit case of UAW v. Yard-Man, Inc., 716 F.2d 1476 (6^th Cir. 1983). But what if an employer has only threatened to reduce benefits, but has not actually done so? A federal court in Michigan recently held that an employer’s rescinded plan to eliminate health care benefits for retirees did not constitute an actual injury to the retirees sufficient for the court to assert jurisdiction.

In Hawkins v. Howden Buffalo Inc., E.D. Mich., No. 2:05-cv-74437 (March 30, 2012), a group of retirees from defendant Howden Buffalo, Inc. brought an action for damages and declaratory relief under the LMRA and ERISA for alleged violations of collective bargaining agreements. The crux of the plaintiffs’ allegations was that Howden was required to provide them with lifetime retiree health care under various collective bargaining agreements, and that Howden had informed them that their health care benefits would be terminated effective January 1, 2006. However, on February 9, 2006, Howden sent out a retraction letter stating that it would not be terminating their health care coverage and that it had no present intention to terminate benefits in the future.

In 2006, Howden filed a motion to dismiss on the grounds that the court lacked subject matter jurisdiction over the matter. Howden argued that the plaintiffs lacked standing to pursue their claims because they had not suffered an actual injury and were essentially asking the court to provide an impermissible “advisory opinion.” The court agreed.

The court noted that in order for it to have jurisdiction, there must be “a real and substantial controversy” and that “[a]llegations of possible future injury do not satisfy the requirements of Art. III.” The court also noted that while section 512(a)(1) of ERISA allows plan participants to assert an action to clarify future benefits, it does not abrogate the requirement that there must be an injury in fact in order for the court to assert jurisdiction over the matter. Likewise, while declaratory relief is available under section 301 of the LMRA, the court found that it must have jurisdiction over an action before it can determine whether declaratory relief is appropriate.

The court then held that the plaintiffs had not suffered an actual injury and that any claimed injury was merely speculative in nature. The court found it determinative that while Howden announced it would terminate benefits, it rescinded its intention to terminate benefits before taking any action. The court also found it significant that Howden announced that it had no intention to revise benefits in the future. The court found the plaintiffs’ cited case law distinguishable because it dealt with actual changes in benefits such as increasing co-payments and deductibles. In contrast, the court found that the plaintiffs were receiving the exact same benefits as they were receiving prior Howden’s letter advising that benefits would be terminated. Because there was only a possible threat of future change in health care, the court concluded that it “cannot make a declaration based on hypotheticals.”

The Bottom Line: An employer’s rescinded intention to eliminate health care benefits, standing alone, does not provide retirees with standing to bring a federal lawsuit to prevent the employer from again changing its mind at a later date.

California Supreme Court Decides Brinker

Greg Mersol — Thu, 12 Apr 2012 14:58:15 -0500

Posted by Greg Mersol

Employers Prevail on Duty to Provide Meal Periods; Mostly Good on Certification

“We will decide no case before its time.” Alright, that’s not really the California Supreme Court’s motto, but it certainly did take its time deciding the Brinker case. During the three and a half years the case was pending before the state Supreme Court, neither employers nor claimants could say what an employer’s meal period obligations might be or how to prove them. Likely hundreds of millions of dollars changed hands in settlement given the uncertainty of the law.

By way of background, California employers are required to “provide” meal and rest periods for their non-exempt employees within a certain number of hours. Cal. Labor Code §§ 226.7, 512. To oversimplify, the employer must provide a 10-minute paid rest period for every 4 hours of work (or major fraction), and an unpaid 30-minute meal period for every 5 hours of work. California also penalizes employers for one hour of pay per type of violation per day if they fail to follow the law. The rest period requirement has generally not been the center of controversy, because courts quickly concluded that the employer need only make such breaks available. The question, however, has been whether employers need only make meal periods available, or whether they must actually force (or less threateningly “ensure”) employees to actually take them.

In 2005, one California appellate court appeared to say that the employer had an affirmative duty to make sure that the employees actually took their meal periods. See Cicairos v. Summit Logistics, Inc., 133 Cal. App. 4^th 949, 35 Cal. Rptr. 3d 243 (2005). Federal district courts quickly distinguished Cicairos and read California law to mean that the employer has no affirmative duty to require employees to take such breaks. See, e.g., White v. Starbucks Corp., 497 F. Supp. 2d 1080 (C.D. Cal. 2007); Brown v. Federal Express Corp., 249 F.R.D. 580 (C.D. Cal 2008).

Meanwhile, the California appellate courts split on the issue when a different appellate district decided the case of Brinker Restaurant Corp. v. Superior Court, 2007 WL 2965604 (Ct. App. Oct. 12, 2007). If you’re counting, that is precisely four years and six months ago. The trial court in Brinker had construed the law to require the employer to ensure that meal periods were actually taken. It certified classes for rest periods, meal periods, and for so-called “off the clock” time. The court of appeals reversed, however, finding that the employer need only make meal periods available and also concluding that the classes had not been properly certified. In October, 2008, the California Supreme Court accepted review.

While the case was sitting (OK, if you want to be polite, you can say “pending”), class action lawsuits alleging meal period violations continued to be filed. A number of cases were stayed pending the decision in Brinker. See, e.g., Iniguez v. Evergreen Aviation Ground Logistics Enterprise, Inc., 2009 WL 3157420 (C.D. Cal. Sept. 25, 2009). Others were resolved on other grounds, such as, in cases affecting the trucking industry, preemption under the Federal Aviation Administration Authorization Act (“FAAAA”). See Dilts v. Penske Logistics LLC, No. 08-cv-318, 2011 U.S. Dist. LEXIS 1224221 at *15 (C.D. Cal. Oct. 19, 2011). Countless claims settled given the long time the Brinker case was undecided, the uncertainty of the ultimate ruling, and (for employers) the escalating potential risk while the cases were pending.

Today the California Supreme Court announced its holding in Brinker. Was it worth the wait? Well . . . Yes.

The 53-page decision addresses a host of issues, including rest periods, meal periods, whether the court should consider the merits of a case on certification, as well as others. For the most part, employers prevailed on the important substantive aspects of the case, but the certification parts of the order are more mixed. Commentators and parties will likely quibble over this lengthy opinion for years, but the key points appear to be:

1. Duty to Provide Meal Periods. Employers do not need to ensure that employees are actually taking their meal periods, and are not even liable if they are aware that the employees are working through them so long as they have provided a meaningful opportunity to make them freely available. In the words of the Court:

To summarize: An employer’s duty with respect to meal breaks under both section 512, subdivision (a) and Wage Order No. 5 is an obligation to provide a meal period to its employees. The employer satisfies this obligation if it relieves its employees of all duty, relinquishes control over their activities and permits them a reasonable opportunity to take an uninterrupted 30-minute break, and does not impede or discourage them from doing so.

The employer may however be liable for straight pay if it “knew or reasonably should have known that the worker was working through the authorized meal period.”

2. No Bright-Line Test. There is no bright-line test for when the employer has satisfied its obligation to provide a meal period:

What will suffice may vary from industry to industry, and we cannot in the context of this class certification proceeding delineate the full range of approaches that in each instance might be sufficient to satisfy the law.

This is an issue that can lead to litigation, but may also make it more difficult to certify a class because the context may vary between different situations. (So it’s both good and bad for employers).

3. No “Rolling” Period for Meal Periods. The Court rejected a “rolling” time period urged by the plaintiffs that would have made it more difficult for employers to administer the law’s requirements and could have had devastating financial consequences if decided differently and retroactively applied

4. Courts Deciding Certification Can Peek at The Merits. The Court held that it should defer to the trial court’s decision to certify a class so long as it is supported by “substantial evidence.” More importantly, citing the United States Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), it held that the trial court may “properly evaluate” the merits of a case when “evidence or legal issues germane to the certification question bear as well on aspects of the merits.” This is generally a positive standard for employers as oftentimes the merits will demonstrate that certification is not appropriate. Similarly, it can also tip the court’s hand and signal that settlement may be appropriate if the claim is ultimately certified.

5. Computation of Number of Rest Periods. The Court adopted a somewhat more employee-friendly approach to rest periods than the employer urged for situations in which the employee worked more than four hours (or fraction thereof), but less than a multiple of four. The requirement of the Wage Order is of a 10-minute rest period for every four hours of work, and the employer argued that the right to a rest period did not accrue until the completion of a full multiple of 4 hours so that, for example, an employee working 7 hours would only have a right to a single rest period. Following the language of the Wage Order, the Court concluded that an employee working 3-1/2 hours or more was entitled to a 10-minute rest period both for the initial 4 hours and for any additional 4-hour segment in which the employee worked more than two hours. For example, an employee working 6 hours (4+2) is entitled to one rest period, an employee working more than 6 hours but up to 10 is entitled to two rest periods, one working more than 10 hours (4+4+2) to three rest periods, etc.

The Court, however, rejected broad timing arguments raised by the plaintiff that the rest period must come before a meal period. Still, it appeared to approve guidance from the Department of Labor Standards enforcement that “[a]s a general matter,” if there are two rest periods they should fall on either side of the meal period. For most employers this should not be a problem as that is how employees typically take their breaks, but it does leave open the problem of timing for atypical shifts.

6. Rest Period Class Could be Certified Due to Uniform Policy. In that light, the Court found that a rest period class had been properly certified in light of the company’s uniform policies that allegedly did not satisfy the employer’s obligations under these timing requirements. This is a positive for the employees, but leaves open the question of whether such a class could survive if the employer’s policies were in compliance with the California requirements.

7. Trial Court Must Revisit Meal Period Class. The Court largely punted on the issue of whether the meal period class should have been certified, finding that the trial court had improperly construed the law with respect to the need to ensure employees took their meal periods and how the time for such periods had been computed. It therefore remanded the case for further consideration under the correct standard.

8. “Off-the-Clock” Claim Should Not Have Been Certified. It found that no substantial evidence supported the existence of an “off-the-clock” class and therefore found that it should not have been satisfied. This is a very good aspect of the decision for employers because, as is true in most cases, it recognized that it would need to determine liability on an individual basis.

Overall, the Brinker decision is more good for employers than not. As to the most important issue, it adopted a more employer-friendly view of the meal period requirements. While the employees won a technical issue regarding the calculation of rest periods, for most employers this should not prove especially problematic. With regard to certification, the court did affirm certification given a uniform arguably non-compliant break policy, but did not issue broad pronouncements that such cases should be certified in the future and, in fact, found absent a uniform policy (as in the case of off the clock time) a claim should not be certified. This holding may prove especially important for employers in the future as it cuts into the heart of many wage and hour putative class claims.

The bottom line: Brinker has been decided. California employers need only make meal periods available for their employees. A class may be appropriate in the case of employers with uniform policies that do not comply with California law, but absent such a policy it may be difficult for plaintiffs to maintain a class claiming wage and hour violations.

Authorship credit: Greg Mersol, Margaret Rosenthal, Sabrina Shadi, Gil Brosky, and Jeff Vlasek

ERISA Class Actions Still Being Certified Post-Dukes

Greg Mersol — Mon, 09 Apr 2012 09:04:26 -0500

Posted by Greg Mersol

Authorship credit: Paul S. Enockson

ERISA class certification motions routinely cite cases for the proposition that ERISA cases are the paradigmatic example of cases that are appropriate for class certification. The United States District Court for the Southern District of Ohio’s recent decision in Adams v. Anheuser-Busch Companies, Case No. 2:10-cv-826, provides continuing support for this oft-cited proposition even after the Supreme Court’s decision in Wal-Mart-Stores, Inc. v. Dukes.

In Adams, the named plaintiffs, former employees of an Anheuser-Busch subsidiary, sought to pursue claims on behalf of a class of former employees for denial of benefits under ERISA § 502(a)(1)(B) , 29 U.S.C. Sec. § 1132(a)(1)(B), and for breach of fiduciary duty under ERISA § 502(a)(2), 29 U.S.C. § 1132(a)(2). The claims at issue were based on plaintiffs’ claim that when their AB subsidiary was sold, they had been “involuntarily terminated” under the AB Pension Plan. The plaintiffs’ claims for benefits were denied and, after the named plaintiffs exhausted their plan remedies, they filed a class action lawsuit.

The District Court in Adams certified the class. In discussing commonality, the District Court cited without any significant discussion the Supreme Court’s Dukes opinion. According to the District Court, common questions of law existed because the meaning of the AB Pension Plan’s provisions regarding change of control and involuntary termination were at issue. The Adams Court also concluded that common questions of fact existed because the class was comprised of former employees impacted by the same fiduciary decision, and the same denial of benefits determination.

Despite suggestions of the demise of class actions following the Supreme Court’s decision in Dukes, the Adams decision is an indication that little has likely changed in ERISA class actions. For cases that involve challenges to fiduciary decisions that impact an ERISA governed plan, it will likely remain the case that certification will continue to be the de facto result.

The Bottom Line: Successful challenges to class in ERISA cases on commonality will continue to be left to those cases where questions of law or fact are so individualized that commonality can be defeated by showing the unique and individualized nature of the claims for which certification is being sought—the same challenges that were common before Dukes.

Editor’s Note: This post is a joint article for the Baker Hostetler Class Action Lawsuit Defense and Employment Class Action Blogs. Be sure to visit the Class Action Lawsuit Defense Blog for additional content regarding class action news and developments.

Conditional Certification Of Assistant Manager Overtime Class Denied.....For Now

Todd Dawson — Thu, 05 Apr 2012 15:52:05 -0500

Posted by Todd Dawson

No "One-And-Done" Rule For FLSA Collective Actions

Perhaps it's a tad unrealistic, but here's hoping that John Calipari's one-and-done recruiting strategies start influencing FLSA jurisprudence now that he's finally won a national championship.

From an employer's perspective, it's hard to tell whether the recent denial of conditional certification in Jenkins v. The TJX Companies is a game-winning shot or if it simply sends the matter into overtime. See 2012 U.S. Dist. LEXIS 46394 (E.D.N.Y. Mar. 31, 2012). There's certainly plenty in the opinion to celebrate. The plaintiff in Jenkins was an assistant store manager and claimed that he should have been paid overtime because he performed primarily nonexempt duties. He furthermore asked the court to conditionally certify his case as a nationwide FLSA collective action because the employer had one, common job description for all assistant store managers.

The court didn't bite on the head fake, however. It noted that the plaintiff was claiming that he performed duties other than those listed in the job description (which were indisputably exempt). Because the plaintiff provided no evidence that other assistant store managers performed similar duties that departed from the job description, the court found that there was no basis upon which to authorize nationwide notice.

But, the employer must be feeling somewhat like Rick Pitino as he watched the ball leaving Christian Laettner's hand. After rejecting conditional certification, the court said that the denial was without prejudice to renewing the motion later. So, having seen the analytical framework the court will apply and the arguments the employer will assert, the plaintiff essentially gets to call a do-over.

In the words of Dickie V., "ARE YOU KIDDING ME?!" The employer goes to significant lengths (and, presumably, expense) to collect declaration testimony and other evidence, successfully demonstrates that the plaintiff's motion for conditional certification is without foundation, and gets the payoff of going through the whole process again? To be sure, the judge in the Jenkins case only allowed the plaintiff 20 days to renew his motion, and (assuming that date sticks) it may be a challenge to come up with sufficient evidence in that time period to support certification of a nationwide action. But, not all courts put a deadline on such renewed motions. That just doesn't seem right.

Maybe the federal courts should adopt something like the NBA's one-and-done rule--the plaintiff gets one chance to make a case for class/conditional certification, and presents his/her best arguments on the issue. If they come through in the clutch, it's on to the bigs, i.e., class litigation. If not, they go the D-league route of a single-plaintiff action. (That's actually nothing like the NBA rule or, for that matter, John Calipari's recruiting strategy, but it's still an apropos moniker.)

The Bottom Line: Some courts will not grant FLSA conditional certification motions automatically, but even they may give the plaintiffs a second chance to make their certification "case."

In Through the Out Door: Third Circuit Says FLSA Collective Actions Not Incompatible With Rule 23 State Law Class Actions

Todd Dawson — Mon, 02 Apr 2012 10:27:02 -0500

Posted by Todd Dawson

In a decision that will thrill readers of all ages with its scintillating recitation of the Portal-to-Portal Act's legislative history, the Third Circuit has held that there is no inherent incompatibility between the opt-in mechanism of Section 16(b) of the Fair Labor Standards Act (that's 29 U.S.C. 216(b) for those of you keeping score at home) and the opt-out mechanism required by Rule 23(b)(3) of the Federal Rules of Civil Procedure. Knepper v. Rite Aid Corp., 2012 U.S. App. LEXIS 6218 (3d Cir. Mar. 27, 2012). But, before digging through the garbage cans behind the Third Circuit's opinion, some background on this question will be helpful.

While the plaintiffs' bar finds the FLSA's multitude of employer pitfalls absolutely adorable (not to mention its liquidated damages and fee recovery provisions), they're much less enamored with its opt-in mechanism. In a typical Rule 23(b)(3) class action, absent class members are bound by a judgment in the case unless they affirmatively refuse to join (i.e., they must "opt out"). In a Section 16(b) collective action, on the other hand, an individual can only be part of the "class" if he/she affirmatively consents in writing to join (i.e., they must "opt in"). (As an aside, there technically isn't a "class" in a Section 16(b) case. That's what everyone calls it, however, probably because it's a lot easier to say than "the group of party plaintiffs who were not originally in the case but who received the notice ordered by the Court and decided to join thereafter by giving their consent in writing.")

So, what's wrong with the FLSA's opt-in mechanism? Well, to borrow a simply precious euphemism coined by one commentator, it doesn't "encourage fee-maximizing behavior." (If you look closely at your screen, you can actually see the academia dripping from that phrase.) While estimates of the average opt-in rate for an FLSA collective action vary wildly, most fall in the range of 10-20%, with virtually no estimates higher than 30 percent. In a Rule 23(b)(3) opt-out class action, however, the average opt-out rate is almost non-existent, a fraction of a percent. More people means more money, which can be good or bad depending on whether you're the payor or the payee.

Always the enterprising folk, the plaintiffs' bar has been trying over the last several years to get the best (or worst, again depending on your perspective) of both worlds--they bring FLSA Section 16(b) collective actions joined together with one or more proposed Rule 23 class actions under state wage and hour laws. The federal hook--the FLSA claim--gives them the convenience of a single forum from which they can send, in many cases, nationwide notice. Once they get their multi-state collection of opt-in plaintiffs--voila!--they can select named class representatives for Rule 23 state law class actions. Best of all, they can still keep the case in one court on their own playground (not to suggest that there's any forum-shopping involved).

Feeling much like the NBA team that Joey Crawford bets against in a game he's officiating, employers have cried foul on this neat little procedural maneuver. They've argued that the FLSA's opt-in requirement is inherently inconsistent with Rule 23(b)(3)'s opt-out procedure.

In Knepper, the Third Circuit unfortunately joined the Second, Seventh, Ninth and D.C. Circuits in rejecting this argument. The court held that, because Congress did not intend for the FLSA to displace state regulation of wages and working hours, the FLSA's opt-in enforcement mechanism cannot displace enforcement of state wage-and-hour laws through Rule 23 opt-out class actions. From this premise, the Third Circuit concluded that there is no barrier to joining such claims together in the same matter.

At first glance, it might seem that there's a silver lining to this grandaddy of a cumulo-nimbus storm cloud. After all, the Third Circuit was very careful to distinguish a prior case where it rejected the combination of an FLSA collective action with a Rule 23(b)(3) class action (De Asencio v. Tyson Foods, Inc., 342 F.3d 301 (3d Cir. 2003)). The court distinguished De Asencio on the basis that the district court in that case was only exercising supplemental jurisdiction over the state law claims, and the state law class proposed in the case would have swallowed the federal action in terms of both size and complexity. In contrast, the Third Circuit noted that the state law class at issue in Knepper was brought under the Class Action Fairness Act, and that the district court therefore had independent diversity jurisdiction over the state law claims.

But, as Jerry Garcia once sagely observed, every silver lining's got a touch of grey. (Brief pause to enjoy melody playing in head.) Indeed, if that brief stroll through federal court jurisdiction didn't put you to sleep, you've probably already noticed the inconsistency in the reasoning. The proposed state law class in De Asencio was just too darn big, so it was appropriate to reject a combined action. But, if a state law class action is so big that it satisfies CAFA's requirements (including the requisite $5 million in controversy), then, by all means, proceed! Well, that's.....interesting logic.

In truth, it seems the real distinction between Knepper and De Asencio is the fact that CAFA didn't exist when De Asencio was decided in 2003. That's a bad omen for two reasons. First, it means that the bigger a proposed state law class is, the more likely it can go forward (at least in the Third Circuit). Second, it means that any number of the CAFA victories we enjoy on the employer side may someday come back to bite us on our collective backside.

The Bottom Line: The best we can hope for on combined FLSA/Rule 23 collective/class actions is a circuit split, and that prospect grows dimmer with every circuit to weigh in on the issue.