Articles from August 2011

While the wait continues for a California Supreme Court decision in the Brinker case that will establish exactly what constitutes meal and rest break violations, the Second Appellate District has issued an important, pro-worker ruling regarding the Labor Code’s requirement (under § 226.7(b)) that employers compensate employees with an additional hour of pay for meal and rest break violations.  See United Parcel Serv. v. Super. Ct., No. B227190 (Cal. Ct. App. Feb. 16, 2011) (order denying petition for writ of mandate) (available here).

At issue in Allen v. UPS, pending in L.A. Superior Court’s Complex Division, before Judge Carl J. West, was the defendant’s contention that Section 226.7(b) provides for only one penalty, or “premium,” payment per employee per day, irrespective of the total number of meal and rest break violations.  Thus, by UPS’s conception of the statute, if both meal and rest break violations occur for the same employee, during the same workday, the employer would owe only one extra hour of pay pursuant to Section 226.7(b).  Judge West disagreed, and denied the UPS motion.

UPS filed their writ petition, which Division Eight of the Second Appellate District denied, thereby sustaining Judge West’s ruling.  The extensively-reasoned written decision is expected to have influence beyond the somewhat limited realm in which California intermediate appellate opinions are formally binding.  Foremost, federal courts, which increasingly preside over wage-and-hour class actions concerning questions of California law, are likely to consult and rely on the UPS ruling.  Additionally, the valuation of meal and rest break claims settled in mediations now have a definite reference point, and a non-speculative basis for countering defendants who insist that Section 226.7 payments are limited to one per day, per employee. 

In an important articulation of the standing requirements under California’s Unfair Competition Law (UCL) and Rule 23’s requirement that common questions of law or fact predominate in certified class actions, the Ninth Circuit has reversed Central District Judge Dale Fischer’s 2008 denial of class certification in three consolidated cases alleging that Ticketmaster deceived plaintiffs into registering for a coupon program that resulted in nearly $60 million in unintended charges triggered by a website “click through.”  See Stearns v. Ticketmaster Corp., No. 08-56065, No. 09-56126, No. 10-55341, 2011 U.S. App. LEXIS 17454 (9th Cir. Aug 22, 2011) (available here).   

Judge Fischer had denied certification of the UCL action, reasoning that all class members—the named plaintiffs as well as the absent class members—must identically prove the requisite injury to establish standing and thereby be eligible to seek remedies for the allegedly deceptive practice.  Stearns at *11-12.  The necessity of those individual determinations, Judge Fischer concluded, gave rise to individual issues, thus precluding certification.  Id.  The Ninth Circuit reversed.  

Writing for a unanimous three-judge panel, Circuit Judge Ferdinand F. Fernandez explained that the California Supreme Court’s In re Tobacco II requires only that the named plaintiff in a UCL action demonstrate actual injury and that Ninth Circuit precedent holds the same, as do class actions generally, stating: “At least one named plaintiff must satisfy the actual injury component of standing in order to seek relief on behalf of himself or the class.  The inquiry is whether any named plaintiff has demonstrated that he has sustained or is imminently in danger of sustaining a direct injury as the result of the challenged conduct.”  Id., citing Casey v. Lewis, 4 F.3d 1516, 1519 (9th Cir. 1993).  He also underscored that “our law keys on the representative party, not all of the class members, and has done so for many years.”  Stearns at *15.

An Ohio court has ordered Ford Motor Co. to pay $2 billion to a class of more than 3,000 Ford-franchised truck dealers who allege that Ford unfairly concealed wholesale price discounts from certain dealers, causing them to overpay for large commercial trucks.  See Westgate Ford Truck Sales, Inc. v. Ford Motor Co., No. CV-02-483526 (Ohio Ct. Common Pleas June 10, 2011) (ruling re: motions for summary judgment) (available here).

The dealers sued Ford in 2002, alleging that the company breached its agreement to sell trucks at published prices, which forced them to overpay for the trucks from 1987 through 1998 and resulted in lost profits.  Following a trial that adjudicated the claims of only the named plaintiff, Ford attempted to revive ten separate summary judgment motions and to decertify the class represented by the named plaintiff.  Judge Peter J. Corrigan rejected all of Ford’s post-trial motions; upheld a $4.5 million verdict awarded to the named plaintiff; and ordered Ford to pay similar damages, plus interest, to a class of approximately 3,000 other dealers, resulting in the roughly $2 billion total judgment.

In arguing for decertification, Ford contended that the named plaintiff had abandoned the damages model that had been the basis for class certification, and that the damages model actually used created conflicts within the certified class (thus warranting decertification).  See Id. at 5.  The court rejected both arguments, holding that the damages model proffered by plaintiffs was based upon the same methodology as the one relied upon at the certification stage, and in any event was not a source of conflict.  See Id. at 5-6. 

The damages model employed was quite straightforward, and likely has considerable application to consumer class actions alleging misrepresentations or omissions.  The court described a dealer’s damages as simply “the total of the differences between the discounts he should have received and the discounts he actually received.”  Id. at 6.  Likewise, where a consumer alleges that a manufacturer or retailer has omitted material information about a product, the determination of damages is easily amenable to class treatment as the difference between the amount that consumers paid and the amount by which the omitted information would have diminished the price of the at-issue product for a reasonable consumer.

In a consolidated consumer class action brought under California’s unfair competition law (UCL, Cal. Bus. & Prof. Code §§ 17200, et seq.) and Consumer Legal Remedies Act (CLRA), the plaintiffs allege that the defendant’s Coppertone SPF 30 Sunblock Lotion is misleadingly labeled, such that consumers are erroneously caused to believe that the lotion blocks potentially carcinogenic UVA rays.  Judge Carl West denied the plaintiffs’ class certification motion on the familiar ground that common questions did not predominate.  California’s Second Appellate District reversed the trial court judge’s denial of class certification.  See Gaston v. Schering-Plough Corp., No. B214935 (Cal. Ct. App. Aug. 9, 2011) (order reversing denial of class certification) (available here).

Although Judge West acknowledged that Proposition 64 could not be reasonably interpreted as imposing the requirement that absent class members prove individual reliance and damages—not least because practically no class could ever be certified under such a stricture—he nonetheless found the presumption of UCL reliance, most prominently set forth in Vasquez v. Superior Court and In re Tobacco II Cases, inapplicable to the plaintiffs’ claims.  Specifically, Judge West found the reliance question to be “highly individual” because consumers would have different motives for buying the sunblock and, moreover, because the consumers responding to the survey presented by the plaintiffs’ expert were likely to have interpreted key terms differently.  See Gaston at 11-12.  The Court of Appeal panel disagreed and held that any difference in purchasing motives is irrelevant, since the only requirement for establishing the reliance of absent class members in a UCL claim is that members of the public are likely to be deceived, and stated, “the labeling claims were material to a reasonable person, and the court should have applied the presumption of reliance as a matter of law.”  Id. at 21.

Indeed, the plaintiffs amply supported their claims, primarily as to the predominance of common questions and incidentally on the merits, by introducing survey evidence confirming that over 90 percent of consumers believed the defendant’s sunblock in fact blocked the sun’s UVA rays.  In addition, 87 percent of those surveyed believed that the product’s claim of being waterproof implied that the lotion’s UVA blockage would endure swimming and other water exposure, and over 80 percent of consumer respondents were willing to pay up to 15 percent extra to obtain these perceived benefits.  See Id. at 6.

The Second District’s opinion confirms the validity of using expert economic and survey testimony to determine damages that are formally restitution under the UCL.  Consumer class actions regularly allege that a retailer’s or manufacturer’s omission or misrepresentation caused purchasers to pay more than they would have had they been in possession of all material information, and Gaston provides an important counter-weight to defendants’ contentions that such determinations are either impossible or unduly individualized for class treatment.