Articles from February 2013

Vedachalam v. Tata: $30 Million Wage-and-Hour Settlement Announced

Tata Consultancy Services — an India-based software company that bills itself as providing clients with technology-based solutions — has agreed to pay $30 million to resolve classwide claims growing out of allegations that the company required employees to sign tax refund checks over to Tata. See Motion for Preliminary Approval, Vedachalam v. Tata Consultancy Servs., Ltd., No. 06-0963 (N.D. Cal. Feb. 21, 2013). The settlement must be approved by the Northern District of California federal district court in which the action has been pending.

The plaintiffs allege that, in addition to reneging on salaries promised as inducements to workers to relocate to the US, Tata (one of India’s largest software concerns) required non-US-citizen employees to both delegate the calculation of their taxes to an outside agency chosen by Tata and to send their refund checks to Tata.

The settlement comprises 12,800 class members who will receive an average payment of $1,600 each, while a standard one-third of the settlement was negotiated to be for attorneys’ fees.

Brown v. Citicorp: District Court Follows D.R. Horton, Blocks Arbitration Bid in FLSA Action

Once again, a case named Brown has produced an arbitration ruling that is being greeted favorably by advocates for workers and consumers. See Brown v. Citicorp, No. 12-0062 (D. Idaho Feb. 21, 2013) (order denying motion to compel arbitration and to dismiss).

In Brown v. Citicorp, a federal district court has followed the National Labor Relations Board’s (NLRB) holding in In re D.R. Horton, Inc. that an employee’s lawsuit seeking a collective action under the federal Fair Labor Standards Act (FLSA) is “concerted action” protected by Section 7 of the National Labor Relations Act (NLRA). As such, enforcement of an arbitration clause relating to such a lawsuit would be precluded. See order at 5. Because enforcing the at-issue arbitration clause would materially impede the plaintiff’s ability to redress employee rights under the FLSA, the Brown v. Citicorp court held the clause unenforceable, stating, “[a] contract that violates public policy must not be enforced.” Order at 6-7.

Like many defendants in non-NLRB proceedings, Citicorp argued that D.R. Horton is inapplicable, contending that it “is not a valid decision because only two Board members joined in the decision.” Order at 5, n.2. However, the Brown v. Citicorp court rejected this argument, reasoning that “[t]he [NLRB’s] interpretation in Horton of Section 7 of the NLRA is rational and consistent with the Act: A collective action seeking recovery of wages for off-the-clock work falls easily within the language of Section 7 protecting ‘concerted action’ brought for the ‘mutual aid and protection’ of the employees.” On that basis, the court concluded that Citicorp’s proffered arbitration agreement “waives [the plaintiff’s] Section 7 rights to bring an FLSA collective action.” Order at 6.

Mirroring the NLRB in D.R. Horton, the court explained that “Citicorp’s arbitration agreement does more than merely waive Brown’s right to a procedural remedy; it bars her from asserting a substantive right that is critical to national labor policy.” Order at 6.

Florida Appellate Court Inadvertently Exemplifies Farce of Arbitration

A Florida appellate court recently held that even though a vulnerable, elderly woman “could not possibly have understood” an arbitration clause, that fact had no bearing on the clause’s enforceability. On that basis, the Second District Court of Appeal reversed a trial court’s refusal to enforce an arbitration agreement between a 92-year-old woman with a fourth-grade education and her nursing home. See Spring Lake NC, LLC v. Holloway, No. 2D12-2140 (Fla. Dist. Ct. App. Feb. 1, 2013).

The plaintiff, Jessie V. Holloway (now deceased), had a history of memory problems and was documented to have been “increasingly confused” at the time she moved into Spring Lake Rehabilitation Center. Upon her admission to the nursing home, Ms. Holloway was asked to sign an assortment of forms that included an arbitration clause. See slip op. at 2. The Florida courts thus faced the question as to whether the plaintiff’s signature constituted consent to the at-issue arbitration clause. Despite the U.S. Supreme Court’s demanding standard applied to corporations when their consent to classwide arbitration is being determined, the Florida appellate court took a laissez-faire view of consent in this instance: “We have little doubt that the trial court correctly assessed Ms. Holloway’s ability to understand these documents. For better or worse, her limited abilities are not a basis to prevent the enforceability of this contract.” Slip op at 2.

With a momentary flash of nostalgia, the appellate court noted that “[t]here was a time when most contracts were individually negotiated and handwritten. In that period, perhaps the law could adequately describe a mutual agreement as a ‘meeting of the minds’ between the parties.” Slip op. at 4. However, echoing Justice Scalia’s aside in AT&T Wireless v. Concepcion to the effect that virtually all contracts in the modern, enlightened society are adhesion contracts, the Florida court made a pronouncement: “Our modern economy simply could not function if a ‘meeting of the minds’ required individualized understanding of all aspects of the typical standardized contract that is now signed without any expectation that the terms will actually be negotiated between the parties.” Slip op. at 4.

The opinion’s ultimate conclusion: “[T]he law must address abuses in standardized contracts by rules other than the ‘meeting of the minds.’” Slip op. at 4. No word yet on whether law school contracts casebooks are being revised accordingly.

Cabral v. Supple: Cal. Fed. Court Certifies Class Alleging False Joint-Pain Drink Ads

California-based U.S. District Court Judge Michael W. Fitzgerald has certified a class of consumers accusing the maker of the drink “Supple” of deceptively marketing the beverage by touting its ability to relieve joint pain. See Cabral v. Supple, LLC, No. 12-0085 (C.D. Cal. Feb. 14, 2013) (order granting motion for certification).

The named plaintiff has alleged that she bought Supple in reliance on the defendant’s claims that its “key ingredients” are “clinically proven effective, produce evidence-based solutions for joint problems, and provide fast relief from joint suffering caused by ailments such as arthritis.” Order at 1-2. A 7-week supply of Supple cost the plaintiff $94.95, plus shipping and handling, but it allegedly proved to be useless.

The certified class will consist of all people living in California who bought Supple since December of 2007. As is often the case in contested class certifications, the defendant argued that individual issues predominated, precluding certification. Additionally, the defendant argued that repeat purchases of Supple demonstrated satisfaction with the product and attendant claims about its clinical properties, rather than inducement due to the defendant’s misleading claims.

The court rejected both arguments and found that common questions predominated: “The truth or falsity of Supple’s advertising will be determined on the basis of common proof — i.e., scientific evidence that the Beverage is ‘clinically proven effective’ (or not) — rather than on the question whether repeat customers were satisfied or received multiple shipments of the Beverage because of automatic renewals.” Order at 7.

Notably, despite perhaps indicating some amount of consumer satisfaction, the fact of multiple purchases did not negate the posited link between the defendant’s representations about Supple’s curative properties and consumers buying it.