Articles from January 2012



Ross v. Charter One: Distinguishing Dukes

The Seventh Circuit recently affirmed class certification of wage and hour claims in a decision that provides considerable guidance on the commonality requirements of Dukes v. Wal-MartSee Ross v. Charter One, No. 10-3848 (7th Cir. Jan. 27, 2012) (order affirming class certification) (available here).  In Ross, the district court granted certification of the plaintiffs’ unpaid overtime claims.  The defendant appealed to the Seventh Circuit, arguing that the commonality requirements could not be met because the plaintiffs’ claims required individualized proof.  When the Dukes decision was issued, the appellate panel ordered supplemental briefing “addressing whether the class certification order satisfied Dukes.”  Slip op. at 2

The Seventh Circuit ultimately found that Dukes did not require reversal of class certification, because the plaintiffs had shown sufficient evidence of classwide employment policies relating to unpaid overtime.  Slip op. at 15.  For example, the plaintiffs presented 89 putative class member declarations attesting to defendant’s companywide policy of instructing employees not to record overtime.  Slip op. at 18.  This evidence was sufficient to overcome defendant’s contention that putative class members worked unpaid overtime for at least four different reasons, necessitating individualized inquiries.  Slip op. at 16-17. 

The Ross decision is significant because it suggests that the Dukes commonality requirement can be met by clearly articulating a companywide policy and establishing it by means of putative class member declarations.

Alvarez v. Brookstone: Applying Pineda Retroactively

California’s Fourth Appellate District recently concluded that the Pineda v. Williams-Sonoma Stores decision applies retroactively.  See Alvarez v. Brookstone Co., No. D057567 (Cal. Ct. App. Dec. 20, 2011) (available here).  In Pineda v. Williams-Sonoma Stores, 51 Cal. 4th 524 (2011), the California Supreme Court held that the collection of ZIP codes as part of a credit card transaction violates California Civil Code section 1747.08.  Civil Code section 1747.08 prohibits businesses from requesting or recording “personal identification information,” but does not expressly forbid the collection of ZIP codes.  See Cal. Civ. Code § 1747.08 (a)(2) and (b).  The Supreme Court concluded in Pineda that “the only reasonable interpretation of section 1747.08 is that personal identification information includes a cardholder’s ZIP code.”  Id. at 534.

In 2008, the Alvarez plaintiff filed suit alleging that Brookstone violated section 1747.08 when its retail store cashiers requested and recorded customers’ ZIP codes.  Alvarez v. Brookstone Co., No. D057567 (Cal. Ct. App. Dec. 20, 2011), slip op. at 2.  In 2009, the trial court granted the defendant’s demurrer without leave to amend, on grounds that ZIP codes are not “personal identification information” pursuant to section 1747.08.  Slip. op. at 3.  The Court of Appeal reversed, holding that the state Supreme Court’s February, 2011 decision in Pineda is properly applied retroactively.  Slip op. at 6-11.  In its reasoning, the appellate court cited “the general rule of retrospective application of court decisions.”  Slip op. at 6. 

This ruling should prove helpful to California consumers who experienced ZIP code violations prior to the February 2011 ruling in Pineda.  The Alvarez plaintiff is now expected to proceed with her putative class action against Brookstone. 

 

Bridgeford v. Pacific Health: Denial of Class Certification No Bar to Absent Class Members

In an important victory for class action plaintiffs, California’s Second Appellate District has held that “unnamed putative members of a class that was never certified cannot be bound by collateral estoppel.”  Bridgeford v. Pacific Health Corp., No. B227486, 2012 Cal. App. LEXIS 26, * 1-2 (Cal. Ct. App. Jan. 18, 2012) (available here).  The unanimous decision, designated for publication, reverses the trial court’s misapplication of the doctrine of collateral estoppel in reliance on the U.S. Supreme Court’s ruling in Smith v. Bayer Corp., 131 S. Ct. 2368 (2011).  In Smith, the Supreme Court resolved a circuit split and held that unnamed putative class members cannot be bound by issue preclusion if a class in a prior proceeding was denied certification.  Id. at *15 (citing Smith, 131 S. Ct. at 2380-2381).

The Bridgeford plaintiffs alleged numerous wage and hour violations against their employer, Los Angeles Memorial Medical Center, a subsidiary of Pacific Health Corporation.  Their lawsuit sought classwide relief including compensatory damages and civil penalties pursuant to PAGA, the California Labor Code Private Attorneys General Act.  Id. at *2-3.  In a prior class action, another named plaintiff had moved for and lost class certification against the same defendant as to the same wage and hour claims.  Id. at *3-6.  In Bridgeford, the defendant demurred on grounds that collateral estoppel barred the plaintiffs from re-litigating class certification.  Id. at *6.  The trial court sustained the demurrer, without leave to amend.  Id

The Court of Appeal reversed, holding that “the denial of class certification cannot establish collateral estoppel against unnamed putative class members on any issue because unnamed putative class members were neither parties to the prior proceeding nor represented by a party to the prior proceeding so as to be considered in privity with such a party for purposes of collateral estoppel.”  Id. at *16.  Accordingly, because the Bridgeford plaintiffs were not parties to the prior action, they could not be precluded from pursuing their own class claims against the defendant.  Id. at *16-17. 

 

Boschma v. Home Loan Center: Misleading Loan Documents Are Actionable Under UCL

California’s Fourth Appellate District has made it more difficult for defendants to dismiss consumer claims brought under California’s Unfair Competition Law (UCL).  The court found that plaintiffs could adequately plead a cause of action under the UCL based on allegations that the defendant provided misleading, inaccurate, or incomplete disclosures in adjustable rate mortgage (ARM) loan documents.  Boschma v. Home Loan Center, 198 Cal. App. 4th 230, 243 (Aug. 10, 2011) (available here). 

The Boschma plaintiffs’ operative complaint alleged that the defendant’s loan documents failed to clearly state that making payments pursuant to the payment schedule would definitely result in negative amortization during the initial years of the loan.  Id. at 242.  Rather, the defendant only disclosed that negative amortization could occur.  Id.  The court concluded that the plaintiffs had adequately pled their UCL claim against the defendant lender for failure to accurately disclose the terms of its ARM loans.  Id. at 251-254.

Boschma thus represents an important contribution to California’s consumer protection doctrine.  In addition to upholding the UCL claim for misleading loan documents, the court also sustained the plaintiffs’ allegations of fraudulent concealment on the basis that pertinent loan information had been presented in a confusing manner.  Id. at 248-249.   This broad interpretation of fraudulent concealment may be applicable in other finance and home mortgage lawsuits, as well as in consumer class actions generally.