Adams v. Postmates: Arbitrator to Decide If Mass Arb Violates Class Action Waiver, Says 9th Cir.

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In Adams v. Postmates, Inc., 9th Cir. Sept. 29, 2020 (slip op. available here), the Ninth Circuit recently affirmed an order granting the petition of over 5,200 delivery drivers to compel Postmates to arbitrate their misclassification claims pursuant to an arbitration provision in their fleet agreement. Adams v. Postmates, Inc., 414 F.Supp.3d 1246 (2019). The drivers filed individual arbitration demands with the American Arbitration Association and paid their portion of the arbitration filing fees. Id. at 1251. The petition was filed after Postmates refused to pay its share, which is estimated to be $9.36 million. Id. Postmates contended that the petitioners were improperly pursuing a “de facto class action” in violation the class action and representative action waivers in the fleet agreement.

The Ninth Circuit held that the delegation provision in the fleet agreement clearly delegated that issue to the arbitrator. The agreement granted the arbitrator exclusive authority to resolve disputes over the interpretation of the agreement, except that any claim that the class action waiver is “unenforceable, unconscionable, void, or voidable” was to be resolved by a court. Postmates’ argument that the delivery drivers violated the class action waiver was not an attack on the validity the class action waiver itself.

Postmates’ arbitration agreement does exactly what it was designed to do. It protects Postmates from class actions by drivers by compelling their claims to arbitration. Then, it precludes drivers from arguing to an arbitrator that the class action waiver is unenforceable by reserving that issue for a court. It did not anticipate drivers petitioning to compel arbitration en masse which, if allowed, will likely negate the very advantages to employers that class action waivers were meant to preserve.

It remains to be seen whether the drivers’ tactic of filing over 5,200 arbitration demands violated the class action waiver, or whether Postmates will be required to pay millions of dollars in arbitration filing fees. Those issues will now be for the arbitrator to decide.

Authored by:
Robert Friedl, Senior Counsel
CAPSTONE LAW APC

Keurig K-Cup Consumers Win Class Cert of False “Recyclable” Claims

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In Smith v. Keurig, N.D. Cal. Sept.  21, 2020, the district court granted Plaintiff Kathleen Smith’s motion for certification of a class of purchasers of Keurig coffee pods (“K-Cups” or “Pods”) based on Keurig’s allegedly false representation that the Pods are “recyclable.” The decision (slip op. available here) touches on a number of familiar issues that have been brewing in food labeling cases for years.

The plaintiff’s theory of liability boils down to allegations that K-Cups are not recyclable because they fail to meet Federal Trade Commission (“FTC”) guidance for Use of Environmental Marketing Claims (“Green Guides”). Under the Green Guides, the district court had previously stated, “if a product is rendered non-recyclable because of its size or components—even if the product’s composite materials are recyclable—then labeling the product as recyclable would constitute deceptive marketing” (citing 16 C.F.R. § 260.12(d)). In addition, a marketer may make an unqualified recyclability claim only “[w]hen recycling facilities are available to a substantial majority of consumers or communities where the item is sold.” 16 C.F.R. § 260.12(b)(1).  According to the plaintiff, the K-Cups are not “recyclable” because (a) less than 60% (or a “substantial majority”) of facilities will accept the products, (b) the products’ size prevents them from being properly sorted by recycling programs, and (c) there is a lack of end markets to recycle the products.

The plaintiff’s theory provides the grounds for several causes of action, including claims under California’s Unfair Competition Law (“UCL”) and the California Consumers Legal Remedies Act (“CLRA”). The plaintiff also sought to certify her claims under Fed. R. Civ. P. 23(b)(2), in order to obtain injunctive relief.

On the UCL claim, Smith discusses whether Keurig’s advertising raises the presumption of classwide reliance available under Tobacco II in the context of internet sales. The plaintiff testified that she was aware of Keurig’s claims that its products were recyclable, believing that the recycling claims on Keurig’s website and the packaging of products she purchased on the website were true. Smith, slip op. at 9. Since the plaintiff provided evidence that she relied on those representations, and “all the class members were exposed to Keurig’s recyclability representations,” the district court found that Keurig’s “advertising campaign” warranted a presumption of classwide reliance. Id. citing Walker v. Life Ins. Co. of the Sw., 953 F.3d 624, 630 (9th Cir. 2020), In re Tobacco II Cases, 46 Cal.4th 298, 328, 207 P.3d 20, 28 (2009).

Unlike the UCL, the CLRA requires a plaintiff to establish classwide reliance on misrepresentations. Here, the plaintiff successfully argued that, under the California Environmental Marketing Claims Act (“EMCA”) recyclability is material to reasonable consumers, raising an inference of classwide reliance. The EMCA makes it unlawful to make deceptive environmental marketing claims, including “any claim contained in the [Green Guides] published by the [FTC].” Cal. Bus. & Prof. Code § 17580.5(a). As the district court observed, by “specifically outlawing” an allegedly deceptive representation, the Legislature “recognizes the materiality of [the] representation.” Kwikset Corp. v. Superior Court, 51 Cal.4th 310, 329 (2011).

Lastly, Smith applied Davidson v. Kimberly-Clark Corp., 889 F.3d 956, 969 (9th Cir. 2018), to determine that the plaintiff had Article III standing to pursue injunctive relief. Keurig deployed the standard “can’t be fooled again” argument, i.e. that under Davidson, the plaintiff lacked Article III standing to pursue injunctive relief because she is now fully informed that the K-Cups are not “recyclable,” and therefore cannot be harmed by the representation in the future. Smith, slip op. at 18-19. However, Smith presents a factual scenario in which, absent injunctive relief, the plaintiff cannot know whether the “recyclable” representation is true. As the district court observed, “MRF’s [Materials Recovery Facilities] could evolve to capture small plastics such as Pods.” Id. Thus, the court found the plaintiff had Article III standing to seek injunctive relief under Davidson.

Authored by:
Robert Friedl, Senior Counsel
CAPSTONE LAW APC

Time Spent on Bag Checks Constitute “Hours Worked” Under Frlekin v. Apple, Inc.

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In Frlekin, et al. v. Apple, Inc., case number 15-17382, the Ninth Circuit requested that the California Supreme Court decide, as a matter of California law, whether time spent by Apple retail employees undergoing required security checks on Apple’s premises constituted “hours worked” under Wage Order 7, even though the packages, bags and technology devices checked were brought to work purely for employees’ convenience (slip op. available here). The California Supreme Court’s answer was a resounding “yes.” Frlekin v. Apple, Inc., __ F.3d __ at p. 8 (9th Cir. Sept. 2, 2020) citing Frlekin v. Apple, Inc., 8 Cal.5th 1038, 1042 (2020).

As the California Supreme Court explained, under California law, the definition of “hours worked” has two independent parts: “time during which an employee is subject to the control of an employer” and “time the employee is suffered or permitted to work, whether or not required to do so.” In the case of the Apple employees’ security checks, the California Supreme Court needed only to address the “control clause” of the minimum wage order. Frlekin, __ F.3d __ at p. 10, n. 2.

The underpinning of the California Supreme Court’s analysis under the “control clause” was that, during the searches, Apple controlled its employees in several ways. First, it had a bag search policy that employees were required to comply with under threat of discipline. Second, employees were confined to the premises while waiting and undergoing the searches, that took anywhere from 5 to 20 minutes. Third, employees had to actively participate in the search by locating a manager or security guard, moving or removing items, unzipping containers, opening packages, and removing personal Apple devices for inspection. Frlekin, 8 Cal.5th at 1046.

The fact that the employees’ packages, bags, and technology devices were brought for the employees’ own convenience did not sway the court. As “a practical matter,” employees routinely bring such items to work including, in particular, iPhones. The irony that Apple argued (unsuccessfully) that iPhones were not necessary for its own employees was lost on the Court. Frlekin, 8 Cal.5th at 1056.

Authored by:
Robert Friedl, Senior Counsel
CAPSTONE LAW APC

Come Fly with Me Another Day– No COVID Refunds for Consumers

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Just as water only flows downhill, money seems to only flow in one direction—out of the wallets of consumers and into the coffers of corporations, nary to return. This has never been so evident as during the COVID-19 crisis, in which hundreds of thousands of consumers, taken unaware by the crisis, purchased pre-paid services that they now cannot use, or dare not to use, because of the pandemic. Although these purchases are either now worthless, or literally “worth less,” many businesses are recalcitrant to refund money for bargained-for services that they are now unable to provide.

The difficulty in obtaining “COVID refunds” is an issue that permeates every strata of pre-paid consumer services. Prior to March of 2020, consumers paid money in advance for professional sporting events, concert tickets (e.g. In re: StubHub Refund Litig., MDL No. 2951), hotels, vacation rentals, cruises, summer camps, youth sports programs, and college tuition. See Latisha Watson v. The University of Southern California, et al., No. 20-04107 (C.D. Cal., filed May 5, 2020) (seeking refunds for student tuitions for the Spring 2020 academic semester due to COVID-19). The list goes on. Then there is the airline industry.

All of the major airlines have enacted COVID-related refund and flight change policies. However, some consumers allege in recently filed actions that their chosen airlines refused to refund money for air travel that they failed to deliver. A case in point is Southwest Airlines customer Adrian Bombin, who purchased two tickets to Havana, Cuba, in February 2020. According to Bombin, Southwest cancelled the flights and could not offer any other comparable flight to Cuba. Still, the plaintiff was not given a refund, but was only offered a credit for use on a future flight. See Bombin v. Southwest Airlines Co., No. 20-01883 (E.D. Penn., filed April 13, 2020). Other consumers have filed similar actions. See Rudolph v. United Airlines Holdings Inc. et al., No. 20-02142 (N.D. Ill., filed April 6, 2020) (alleging United denied a refund for cancelled flight, and offered only rebooking or ticket credit for travel within one year); Levey v. Concesionaria Vuela Compania de Aviacion SAPI de CV et al., No. 20- 02215 (N.D. Ill., filed May 8, 2020) (alleging Mexican airline Volaris canceled several of its U.S. flights to Mexico amid the coronavirus pandemic and refused to refund its travelers or let them rebook their flights without penalty).

The problem is so widespread that the U.S. Department of Transportation (DOT) issued an enforcement notice on April 3, 2020, clarifying airlines’ refund obligations in the context of the COVID-19 public health emergency. See U.S. Department of Transportation Issues Enforcement Notice Clarifying Air Carrier Refund Requirements, Given the Impact of COVID-19. Nevertheless, some airlines remain recalcitrant to provide refunds, as is evidenced by the allegations in these later-filed class actions.

Although these airlines contend that they have operated within the law, it is evident that the opportunity or ability of most consumers to engage in air travel has all but been severely curtailed or eliminated due to the pandemic. Offering travel credit is not a solution under these circumstances. Consumers are subject to numerous travel restrictions, possible quarantine on arrival, a risk of infection through close contact with other air travelers, and now, unpredictable flight cancellations that risk loss of airfare in many cases. The possibility that travelers may someday receive the air travel is not a solution in these unprecedented times. Sometimes “someday” means never.

We plan to keep the filed cases Bombin, Rudolph, and Levey on our radar and see where they land.

Authored by:
Robert Friedl, Senior Counsel
CAPSTONE LAW APC