Articles from November 2011

On November 8, 2011, more than three years after granting review, the California Supreme Court heard oral argument in Brinker v. Super. Ct., 80 Cal. Rptr. 3d 781 (Cal. Ct. App. 2008), rev. granted, 196 P.3d 216 (Cal. Oct. 22, 2008) (No. S166350).  Chiefly at issue is Brinker’s holding that employers “need only provide and not ensure [that meal breaks] are taken.”  Id. at 31.  The hearing also covered rest break issues implicated by Brinkley v. Pub. Storage, Inc., 84 Cal. Rptr. 3d 873, 883 (Cal. Ct. App. 2008), rev. granted, 198 P.3d 1087 (Cal. Jan. 14, 2009) (No. S168806) (“California law does not require an employer to ensure that employees take rest periods.  An employer need only make rest periods available.”).  Video of the oral argument is available at http://www.californiawagelaw.com/wage_law/2011/11/brinker-oral-argument-video.html. 

On the pivotal issue—the interpretation of “provide” and “providing” as used in Labor Code sections 226.7(a) and 512(a)—the justices’ questioning suggested a more formalistic analysis than that seen in previous wage and hour decisions.  Justice Joyce Kennard began the proceedings by asking about whether Sections 226.7 and 512 are “in harmony” with the meal and rest break provisions in California’s IWC Wage Orders.  Chief Justice Tani Cantil-Sakauye, in her first major wage and hour case, then asked her own follow-up questions.  Justice Goodwin Liu, also new to the court, focused his questions on practical matters, asking whether an employee can simply choose to work through a break.

Kimberly Kraweloc, counsel for the real party in interest and the plaintiff at the trial court, responded unequivocally: employers must affirmatively ensure that breaks are taken.  Justice Baxter then asked whether an employer must still pay the premium provided for by Section 226.7(b) when an employee disregards the employer’s instructions and works through a break, to which Kraweloc responded in the affirmative.  As to whether employers can reasonably be expected to implement systems that reliably ensure that all employees take breaks, Kraweloc persuasively argued that, insofar as employers have demonstrated adeptness at otherwise controlling employees’ work schedules, notably in avoiding overtime, it is reasonable to expect that they can do the same as to meal and rest breaks.  Finally, in response to Justice Baxter’s question concerning whether the ruling in Brinker would be applied retroactively, Ms. Kraweloc’s co-counsel, Michael Rubin, responded that the decision would have retroactive effect, pursuant to controlling United States Supreme Court authority.

The Supreme Court must issue its decision within 90 days after the oral argument.

The Supreme Court’s Dukes v. Wal-Mart decision has garnered a great deal of attention in the popular press, likely due to the prominence of the defendant and the allegations that Wal-Mart systematically discriminated against female employees.  In addition to introducing a more onerous commonality standard, Dukes entailed at least two other issues bearing on the mechanics of class actions: (1) that individualized money damages cannot be awarded in Rule 23(b)(2) class actions; and (2) that affirmative defenses must be assessed in individualized hearings, seemingly precluding the sampling and survey methods that buttress class actions’ essential efficiencies.

Professor John C. Coffee, who holds the Adolf A. Berle Professorship at Columbia Law School, has suggested how these more complex Dukes issues might play out.  In a recent National Law Journal article, Professor Coffee suggested that the post-Dukes realities might not be as bleak as has been projected for plaintiffs, so long as plaintiffs’ lawyers advocate, and federal district court judges adopt, innovative procedural methods and intellectually cutting-edge approaches.

No Individualized Money Damages Under 23(b)(2).  With the Dukes holding that Rule 23(b)(2) injunctive actions can no longer commingle with Rule 23(b)(3) actions seeking monetary damages, class actions seeking monetary damages must be certified under Rule 23(b)(3).  However, the latter rule’s severe “predominance” requirement makes it ill-suited to the natural diversities that arise in cases against large defendants, such as violations occurring across multiple employment locations.  While Rule 23(b)(2) injunctive actions remain an option, the lack of certain methods for valuing such relief, and thus establishing fee awards, will continue to function as a disincentive.  Moreover, “claim splitting” prohibitions (exacerbated by the 23(b)(2) no-opt-out provision) and conflict arguments have typically been seen as insurmountable obstacles to bringing separate class actions for injunctive and monetary relief.  Not so, argues Professor Coffee.  First, federal courts can certify (and have certified) parallel (b)(2) and (b)(3) cases, each with their own class representatives.  Second, courts have ruled that the Due Process Clause trumps Rule 23(b)(2)’s mandatory provision proscribing opt outs, thereby obviating the claim splitting impediment.  Finally, Professor Coffee suggests that the pure muscle of legal argument may provide a solution: because Dukes prohibits monetary damages in (b)(2) classes, there is no overlap with (b)(3) classes.  Thus, the essence of claim splitting—failure to raise an argument in one case that could have been raised in the other case—is altogether avoided.

Rejection of Sampling Procedures.   Professor Coffee offers several possible solutions for dealing with Dukes’ holding permitting individualized hearings as to affirmative defenses.  First, he suggests challenging whether the affirmative defenses are pleaded with sufficient particularity, using the heightened pleading standards of Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009), and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007).  While this tool is most often employed by defendants to challenge the particularity of complaints, it is equally applicable to Rule 12 challenges to affirmative defenses.  Second, plaintiffs can concede the necessity of individualized hearings and take the initiative to propose pragmatic ways for those hearings to take place, such as before a special master or magistrate judge.  Finally, Professor Coffee suggests decoupling the liability determination from affirmative defenses by using the much-neglected Federal Rule 23(c)(4).  This would permit plaintiffs to adjudicate only liability on a class-wide basis, and, thereafter, resolve affirmative defenses and determine damages in individual actions.  The “issue certification” authorized by Rule 23(c)(4) has so thin a record in reported caselaw that, perhaps fortunately for plaintiffs’ counsel contemplating this innovative use, there is little pre-existing guidance.

 At a minimum, Dukes implies that the trial plans long encouraged by federal courts and practical treatises such as the Manual for Complex Litigation must now become more detailed in addressing the requirements and challenges imposed by Dukes.  As such, some or all of Professor Coffee’s suggested innovations will perhaps turn up, first in trial plans, and later in reported cases.  Already, Dukes has been cited more than 50 times and distinguished in 23 of those cases, suggesting that the new strictures are just as navigable as Professor Coffee suggests.

A Massachusetts district court judge has granted preliminary approval of a $28.5 million class action settlement against Reebok.  See In re Reebok Easytone Litig., No. 4:10-cv-11977-FDS (D. Mass. Oct. 6, 2011) (order preliminarily approving class settlement) (available here).  The settlement resolves five separate but related consumer class actions against Reebok for deceptive advertisements that suggest the company’s Easytone shoes “tone” muscles.  The settlement provides for cash payments to class members as well as injunctive relief in the form of changes to Reebok’s advertising and marketing practices for its shoes and apparel. 

The settlement bars Reebok from making claims that its Easytone line is effective in toning or strengthening without supporting scientific evidence.  As of November 2, 2011, Reebok’s website—http://www.reebok.com/US/search?t=easytone—still advertises Easytone products.  But, per the settlement, Reebok has disposed of advertisements stating that wearing the shoes will result in “28% more muscle activation in the gluteus maximus, 11% more muscle activation in the hamstrings and 11% more muscle activation in the calves” as compared to regular athletic shoes.  Complaint at ¶ 27, In re Reebok Easytone Litig., No. 4:10-cv-11977-FDS (D. Mass. Filed November 16, 2010).

 This settlement comes as the result of extensive negotiations involving the ten private law firms representing the named plaintiffs and attorneys from the Federal Trade Commission (FTC).  After the five class actions had been filed, the FTC filed an additional complaint against Reebok alleging that the dubious toning claims were violations of federal laws that prohibit “unfair or deceptive” practices and false advertising.  Settlement Agreement at 7, In re Reebok Easytone Litig., No. 4:10-cv-11977-FDS (September 28, 2011) (citing 15 U.S.C. § 45(a)) (available here).

 The FTC’s participation in this action underscores a trend in which the Obama Administration’s FTC and Labor Department have been markedly more aggressive in prosecuting consumer and workplace violations than previous administrations.  Here, the settlement agreement recites that the cooperation of the FTC with private counsel “maximize[d] the settlement consideration . . . including the money to be paid to Class Members.”  Id.  For example, rather than reverting to Reebok, any unclaimed settlement proceeds are paid to the FTC.  Id. at 16.

 The Final Fairness Hearing is set for January 17, 2012.