Articles from July 2011

Pennsylvania’s Superior Court has affirmed the jury verdict against Wal-Mart in a rare class action trial. The class members alleged that, as hourly workers, they regularly and systematically were not paid by Wal-Mart for “off-the-clock” work and they were not provided with rest breaks in compliance with Pennsylvania law. See Braun v. Wal-Mart Stores, No. 3373 EDA 2007 (Pa. Super. Ct. June 10, 2011) (opinion available here).

The named plaintiffs sought to represent a class of approximately 187,000 current and former Wal-Mart employees in Pennsylvania, and the court granted the plaintiffs’ class certification motion. When the parties did not reach a settlement, the case went to trial, and the jury found in favor of the class as to both the off-the-clock and rest break claims. The total award of $187,648,589 included statutory penalties and attorneys’ fees. But for the correction of a minor mathematical error, the portion of the award to be paid to class members was unaltered by the Superior Court’s decision. The attorneys’ fees portion of the decision was remanded to the trial court with instructions that a proper calculation of the lodestar multiplier be conducted.

The rest break claim is notable because it was grounded in a contract theory, rather than relying solely on a statutory violation. The class alleged that Wal-Mart had promised employees paid rest breaks but systematically failed to provide those breaks. On appeal, Wal-Mart argued that both the promise of paid breaks and any failure of Wal-Mart to have delivered them raised individual issues, rendering class treatment inappropriate. The appellate court disagreed, affirming the trial court’s grant of certification.

Wal-Mart also unsuccessfully challenged the jury’s findings of fact. In finding liability on the rest break claim, the jury accepted as credible plaintiffs’ evidence showing that pressure from Wal-Mart’s home office in Arkansas to reduce labor costs directly resulted in the deprivation of paid rest breaks that Wal-Mart was contractually obligated to provide. The appellate court affirmed this as a reasonable and thus permissible factual inference.

Governor Jerry Brown today nominated Boalt Hall law professor Gordon Liu to the California Supreme Court to replace retiring Justice Carlos Moreno.

If confirmed, Liu would bring sterling credentials and a classically American story of upward mobility to the California Supreme Court. The son of Taiwanese immigrants, Liu attended public schools growing up in Sacramento, before attending college at Stanford and then Yale Law School, after which he clerked for U.S. Supreme Court Justice Ruth Bader Ginsberg. Liu joined the faculty at UC Berkeley’s Boalt Hall School of Law in 2003 after having worked in private practice in Washington, D.C.

The California Bar’s Commission on Judicial Nominees Evaluation will first consider the Liu nomination, and make a non-binding recommendation to the Commission on Judicial Appointments, which will then schedule at least one public hearing. It is the Commission on Judicial Appointments that must ultimately confirm Liu or not.

Despite having withdrawn his nomination by President Obama to the Ninth Circuit Court of Appeals in response to a successful filibuster by Senate Republicans, Professor Liu is expected to enjoy a relatively easy confirmation to the California Supreme Court.

On June 16, 2011, Central District Judge Gary Allen Feess granted the plaintiffs’ certification motion in McKenzie v. Fed. Express Corp., No. 10-cv-02420, 2011 U.S. Dist. LEXIS 65278 (C.D. Cal. June 16, 2011) (order granting class certification) (available here).  In McKenzie, the plaintiffs alleged violations of three of the nine Section 226(a) requirements: total hours worked (Cal. Lab. Code § 226(a)(2)), the pay period inclusive dates (Cal. Lab. Code § 226(a)(6)), and overtime rates (Cal. Lab. Code § 226(a)(9)).  Such claims are an archetype for class treatment, since wage statements or pay stubs tend to be identically formatted for all employees (and thus contain identical defects).

This ruling rebuffed the commonality defense most frequently offered by wage statement defendants (that Section 226(e)’s injury requirement gives rise to individual questions that destroy commonality and render class treatment inappropriate), situating the injury discussion as part of the damages phase, where it is well established that variation in damages among class members is not an impediment to class certification.  See McKenzie at *2, *25.  Moreover, although the ruling adhered to a California Court of Appeal holding in Price v. Starbucks Corp., 192 Cal. App. 4th 1136 (Ct. App. 2011) (stating that Section 226(e) requires an injury separate from but causally related to the violation of Section 226(a)(1)-(9)), Judge Feess adopted a minimalist approach, whereby the injury requirement is satisfied if the wage statement recipient must “engage ‘in discovery and mathematical computations’” to determine if wages were correctly paid.  McKenzie at *10 (citing Price at 1143).

Judge Feess noted that “even the declarations submitted by FedEx in opposition to McKenzie’s motion for class certification indicate that common issues predominate” because the declarations stated that employees use FedEx’s computer system and consult their own handwritten notes “to determine whether they have been paid correctly every pay period.”  McKenzie at *30-*31. In an apparent declaration–drafting blunder, “one employee even stated in his declaration that he initially found FedEx’s wage statements confusing and had to consult his manager to understand the paystub.”  Id. at *31.  As such, the declarations submitted by FedEx were directly responsive to the “confusion” threshold for satisfying the Section 226(e) injury requirement, and, as with most admissions against interest, were likely fatal to the FedEx certification opposition.

Southern District of New York Judge Jed Rakoff, long recognized as an innovative thinker on matters concerning class actions, has granted certification in a class action brought by investors concerning residential mortgage-backed securities initially valued at $16.5 billion. See Public Employees’ Retirement System of Mississippi v. Merrill Lynch & Co., Inc., No. 08-cv-10841 (S.D.N.Y. June 16, 2011) (order granting certification) (available here). The plaintiffs allege that the $16.5 billion valuation was massively overstated, as it was premised on unrealistic assumptions about the ability of individuals to repay home loans, and that Merrill Lynch knew but failed to disclose that fact to investors. Judge Rakoff’s ruling is the first certification of a class of mortgage-backed securities purchasers, and the case is expected to be closely watched not only as to developments in the still-inchoate substantive law around mortgage-backed securities, but also as to procedural devices proposed or actually employed for the determination of liability and damages.

Although titled with a Mississippi-based public employee pension plan as the first-named plaintiff, this action was brought on behalf of several similar plans in Wyoming, Connecticut, and California, including the massive Los Angeles County Employees Retirement Association. The plaintiffs are represented by the Bernstein Litowitz Berger & Grossmann firm, while Merrill Lynch is represented by Skadden Arps.

In opposing class certification, the Skadden lawyers followed a familiar formula: focusing on a purported lack of commonality and urging Judge Rakoff to follow a colleague’s certification ruling in a similar case. They argued that the plaintiffs failed to establish that common issues will predominate, and frequently pointed Judge Rakoff toward the order denying certification in New Jersey Carpenters Health Fund v. Residential Capital, LLC, No. 08-cv-8781(S.D.N.Y. Jan 18, 2011) (order denying certification).

Judge Rakoff declined to adopt the reasoning of the earlier mortgage-backed securities action, but did not elaborate, opting to save his explanation for “a forthcoming written opinion” which has yet to be issued. Order at 2. Though not expressly stated in the Order, it seems likely that Judge Rakoff was deferring the issuance of a fully-reasoned order until the Supreme Court’s issuance of its Dukes v. Wal-Mart decision (which occurred a mere four days later). It is notable that, while Judge Rakoff implicitly acknowledged that Dukes is likely to alter the terms of certification, the fact of certification is presumed to be unaffected.