Articles from April 2012

Schulz v. QualxServ: Federal Court Certifies Class Based on Brinker

In what appears to be the first class certification ruling to expressly invoke the California Supreme Court’s recent Brinker decision, Central District judge Anthony J. Battaglia has certified meal period, rest break, expense reimbursement, wage statement, untimely final paycheck, and off-the-clock claims. See Schulz v. QualxServ LLC, No. 09-CV-17-AJB (C.D. Cal. Apr. 26, 2012) (order granting motion for class certification), available here. Thus, although Brinker only addressed meal period, rest break, and off-the clock claims, the decision is also a strong endorsement of class action procedures to adjudicate wage-and-hour claims in general.

As to the often-pivotal commonality requirement, Judge Battaglia found it satisfied, citing the same authorities relied on in Brinker:

The Court finds that there are sufficient common questions under this standard because Plaintiffs’ challenge the Defendants’ common corporate policy of failing to relieve the technicians of all work during the rest and meal breaks. Adoma, 270 F.R.D. at 552-53 (noting unsettled California law but finding class issues predominate on meal periods); Dilts, 267 F.R.D. at 634-39 (certifying class of off-site truck drivers who worked through meal and rest breaks based on company-wide, common practice); Ortega, 258 F.R.D. at 366-70 (common questions predominate because focus on employer’s “compensation system, which applies in the same manner to all potential class members on all work days,” regardless of California Supreme Court’s decision on meaning of duty to “provide” rest and meal breaks); Cervantez, 253 F.R.D. at 576 (certifying class on common corporate policy concerning rest and meal breaks); see Jaimez v. DAIOHS USA, Inc., 181 Cal. App. 4th 1286, 1305 (2010) (certifying class under California rules).

Order at 11-12.

This action alleges that the class of field technicians, whose duties included driving to clients’ homes and businesses to repair and service computers, were paid only a flat rate for making repair calls and were not relieved of duty during meal and rest breaks (which were also not properly recorded). See id. at 2-4, 11-12. Defendants countered that, due to the nature of the job, the technicians were fully in control of their own breaks. See id. at 6. While Brinker struck a note for worker autonomy, Schulz suggests the limits of such autonomy, particularly where an employer cedes virtually all responsibility for supervising and administering breaks to workers.

Federal Consumer Protection Agency to Assess Impact of Mandatory Arbitration on Consumers

The federal Consumer Financial Protection Bureau (CFPB) has arrayed itself as a counterforce to recent judicial branch decisions that have had the effect of channeling more litigation into arbitration and making it more difficult to adjudicate broad violations as class actions. The CFPB has announced that it will be undertaking a “public inquiry” into whether mandatory arbitration clauses adversely affect consumers’ ability to seek remedies for violations of consumer protection laws and statutes.

The CFPB public inquiry will consist of soliciting consumer input as to the prevalence of mandatory arbitration clauses and how consumers are affected by them. In seeking broad public input, the CFPB follows a largely unprecedented model among federal agencies. Any proposed regulations concerning mandatory arbitration that grow out of the public inquiry will also be subject to public comment, as have other proposed CFPB regulations. See, e.g., The relative authority of CFPB regulations with regard to U.S. Supreme Court decisions such as AT&T Mobility v. Concepcion (which endorsed adhesive arbitration clauses and class action waivers virtually without qualification) has yet to be tested.

Founded in 2011, the CFPB is the newest executive branch agency. See (describing CFPB mission as follows: “[T]o make markets for consumer financial products and services work for Americans — whether they are applying for a mortgage, choosing among credit cards, or using any number of other consumer financial products.” First headed by former Harvard Law School Professor, now U.S. Senate candidate, Elizabeth Warren, the CFBP’s current Director is Richard Cordray, who remarked that “We want to learn how arbitration clauses affect consumers, and how effective arbitration is in resolving consumers’ issues. This inquiry will help the bureau assess whether rules are needed to protect consumers.” The Dodd-Frank Act authorized and created the CFPB, and invests it with the authority to both study arbitration clauses in consumer financial products and to issue regulations to protect consumers based on the findings derived from the study.

Medrazo v. Honda of North Hollywood: No Showing of Actual Reliance Necessary under California UCL

The California Court of Appeal has ruled that a showing of actual reliance by class members other than the named plaintiff is not required for claims brought under California’s Unfair Competition Law (UCL). See Medrazo v. Honda of North Hollywood, ___Cal. App. 4th ___ (Mar. 27, 2012), available here. The underlying claims in the certified class action were based on the plaintiff’s allegation that the defendant sold new motorcycles without the dealer tags required by two section s of the California Vehicle Code. See Slip op. at 4. The mandatory tags must show a motorcycle’s recommended retail price, as well as the price of each accessory and the amount by which the price being charged exceeds the recommended retail price. See Cal. Veh. Code §§ 11712.5, 24014 (West 2012).

 The appeal arose from the trial court’s granting the defendant’s motion for judgment, which had been filed immediately after the plaintiff presented evidence at trial. See Slip op. at 2. The trial court found that the plaintiff had failed to establish that either she or any other member of the certified class had been injured by the defendant’s conduct, and thereby entered judgment on the plaintiff’s UCL cause of action. Id. However, the Court of Appeal reversed the trial court’s entry of judgment on the UCL claim. Id.

Expounding on the California Supreme Court’s landmark “Tobacco II” decision, In re Tobacco II Cases, 46 Cal. 4th 298, (2009), the unanimous Medrazo panel explained its reversal of the trial court as follows:

As the Supreme Court explained in Tobacco II, the language in the UCL limiting standing to plaintiffs who lost money “as a result of the unfair competition” (Bus. & Prof. Code, § 17204) imposes an actual reliance requirement on the named plaintiff (and only the named plaintiff) in a UCL action based upon the fraudulent prong or false advertising because “reliance is the causal mechanism of fraud.” (Tobacco II, supra, 46 Cal.4th at p. 326; see also id. at p. 320 [the standing requirement to show causation does not apply to absent class members].) But the Supreme Court also explained that an actual reliance requirement does not apply to UCL actions that are not based upon a fraud theory. (Id. at p. 325, fn. 17). In those actions, the plaintiff must simply show that the alleged violation caused or resulted in the loss of money or property. Because, as discussed below, we find that Medrazo presented sufficient evidence to establish standing under the unlawful prong of the UCL, we need not address whether the fact that [the defendant] disclosed all of the dealer-added charges precludes her from establishing actual reliance under the fraud or false advertising prong of the UCL.

Slip op. at 14 (emphasis added).

This was the most recent appeal in a case that earlier saw the Court of Appeal reverse the trial court’s denial of class certification, with the affirmative order that the class be certified. See Medrazo v. Honda of North Hollywood, 166 Cal. App. 4th 89 (2008). Though originally designated as unpublished, the Medrazo opinion has since been designated for publication in the official reports. As such, it is expected to be an important and much-cited elaboration on the Tobacco II holding.

Brinker: Strong Endorsement of Class Actions to Adjudicate Meal and Rest Claims

In addition to being an exhaustive statement as to California’s substantive meal and rest break law, the Supreme Court’s 54-page Brinker decision (available here) also sets forth important class action doctrine, most of which favors class-wide adjudication. Moreover, the concurring opinion (authored by Justice Werdegar, who also wrote the unanimous majority opinion) suggests that the First Appellate District’s Duran v. U.S. Bank National Ass’n, 203 Cal. App. 4th 212 (2012)—considered by many to be a radical departure from established class action jurisprudence—might not sit well with some of the justices.

As to class certification, Brinker reversed the Court of Appeal’s finding that the trial court had abused its discretion by certifying the class but failing “to determine the elements of plaintiffs’ claims.” Slip op. at 10. Brinker ruled that although “trial courts must resolve any legal or factual issues that are necessary to a determination whether class certification is proper, the Court of Appeal went too far by intimating that a trial court must as a threshold matter always resolve any party disputes over the elements of a claim.” Slip op. at 10. In doing so, Brinker reasserts the long-established divide between merits- and certification-related determinations, and the primacy of the plaintiff’s “theory of recovery” in trial courts’ certification analysis. Slip op. at 13.

The Brinker concurrence elaborated on the decision’s core class certification content by endorsing statistical and sampling methodologies ideally suited to class actions: “[W]e have encouraged the use of a variety of methods to enable individual claims that might otherwise go unpursued to be vindicated, and to avoid windfalls to defendants that harm many in small amounts rather than a few in large amounts.” See Concurring slip op. at 4. The concurrence supported this statement with citations to the substantial body of California Supreme Court precedent, from Daar v. Yellow Cab Co., 67 Cal. 2d 695 (1967), to Sav-On Drug Stores, Inc. v. Superior Court, 34 Cal. 4th 319 (2004). Many observers take the support for statistical methods to be a sign of willingness, on the part of the concurring justices at least, to review Duran, which has been interpreted (mainly by the defense bar) as purporting to import “due process” doctrine akin to that in the U.S. Supreme Court’s Wal-Mart v. Dukes decision into California’s class action jurisprudence.

Thus, while Brinker is perhaps a mix of holdings on substantive meal and rest break law, it is a uniformly strong endorsement of class actions as well as suitable methodologies and case management tactics.