Articles from February 2013

McDonald’s has opted to settle a class action rather than risk further litigation of allegations that it falsely advertised its chicken products as being halal (prepared according to Islamic dietary law). See Settlement Agreement, Ahmed v. McDonald’s Corp., No. 11-014559-CZ (Mich. Circ. Ct. filed Nov. 23, 2011). The suit, filed in Michigan state court, targeted two Dearborn-based McDonald’s franchises that allegedly served non-halal McNuggets and McChicken sandwiches after advertising those products as being halal.

A portion of the settlement proceeds will be paid to a pair of Michigan-based Muslim organizations. Of the $700,000 settlement fund, $274,000 will be paid to the Health Unit on Davison Avenue, Inc., a medical clinic serving a predominantly Muslim clientele, and approximately $172,000 will go to Dearborn’s Arab American National Museum. The settlement agreement also provides for $233,333 in attorneys’ fees and a $20,000 incentive award for the named plaintiff.

The parties acknowledge the decision to forego direct payments to class members — customers at just two McDonald’s franchises — describing such disbursements as being “impractical,” and touting the settlement’s benefits to Michigan’s Muslim community. See Settlement Agreement at 9-10. Notice of the settlement is to be posted in numerous area mosques.

Though modest by class action standards, the Ahmed settlement is likely to send a signal to defendants facing similar claims involving religious dietary restrictions that settlement is more prudent than risking a substantial judgment attendant to class certification and subsequent findings of liability.

A federal district court’s ruling has solidified the principle that actions seeking civil penalties for workplace violations under California’s Private Attorneys General Act (PAGA) needn’t satisfy the requirements applicable to class actions. See Alcantar v. Hobart Service, No. 11-1600 (C.D. Cal. Jan. 14, 2013) (order denying defendants’ motion in limine).

In Alcantar, the plaintiff alleged claims arising under the California Labor Code for unpaid overtime, uncompensated commute time, and meal break violations, and sought standard compensatory damages in a putative class action. The plaintiff’s motion for class certification was denied, and on that basis, defendants filed a motion in limine arguing that the plaintiff was also precluded from seeking civil penalties predicated on the same Labor Code violations. However, in denying defendants’ motion, Judge Philip S. Gutierrez distinguished class actions and PAGA actions: “Unlike a class action, which allows individuals to seek financial remuneration as a way to redress personal injuries, a PAGA action is brought on behalf of the state labor agencies to punish noncompliant employers.” Order at 2. Thus, “PAGA is a law-enforcement mechanism, and not an action designed to confer a private benefit.” Id. As such, actions seeking civil penalties on behalf of aggrieved employees under PAGA need not satisfy the Federal Rule 23 requirements applicable to class actions.

In ruling that the familiar Rule 23 requirements — numerosity, commonality, and so forth — do not apply to PAGA actions, Alcantar mirrors the California Supreme Court’s holding in Arias v. Super. Ct., 46 Cal. 4th 969 (2009), that PAGA actions need not satisfy California’s analogous class certification criteria because, unlike a class action, “a plaintiff suing under PAGA steps into the shoes of the state labor law enforcement agencies.” Order at 2. In so ruling, Judge Gutierrez is in accord with the bulk of California district courts to have confronted the same question. See Thomas v. Aetna Health of California, No. 10-01906, 2011 WL 2173715, *12-13 (E.D. Cal. June 2, 2011).

At least as significant as Arias being applied in federal court was Judge Gutierrez’s rejection of defendants’ due process argument, which posited that the adjudication of PAGA claims with representative evidence constituted the sort of “trial by formula” that the U.S. Supreme Court proscribed in the landmark Wal-Mart v. Dukes decision. Judge Gutierrez distinguished Dukes (which he described as “notably different” from Alcantar) based on the fact that Dukes arose out of Title VII of the Civil Rights Act of 1964, while the Alcantar claims are predicated solely on California Labor Code violations. Order at 5-6. Using expansive language potentially applicable beyond the PAGA context, Judge Gutierrez noted that “both the Ninth Circuit and California courts have permitted district courts to award damages for Labor Code violations based on a representative sampling of class members.” Order at 6.

California’s Fourth Appellate District has reversed a trial court’s denial of class certification as to meal and rest break claims where the employer/defendant had no discernible policy governing employees’ breaks. See Bradley v. Networkers International, LLC, __ Cal. App. 4th __ (2012). In addition to substantial reliance on the California Supreme Court’s landmark Brinker decision, Bradley also substantially relied on Jaimez v. Daiohs USA, Inc., 181 Cal. App. 4th 1286 (2010), in which the trial court was found to have committed reversible error by “focusing on the potential conflicting issues of fact or law on an individual basis, rather than evaluating ‘whether the theory of recovery advanced by the plaintiff is likely to prove amenable to class treatment.’” Jaimez at 1299.

The Bradley analysis is notable in several respects, foremost its finding that plaintiffs’ theory that the defendant entirely lacked a meal or rest break policy necessarily presented a common issue suitable for class treatment. Slip op. at 28-31. Bradley is also notable in underscoring that the pertinent question for trial courts is whether a plaintiff’s meal and rest break theory of liability is amenable to classwide adjudication. See slip op. at 21. In so ruling, the Bradley panel noted that the issue of why breaks were missed is not properly a basis for finding a lack of predominant questions. See slip op. at 20-21. Rather, the reasons underlying a particular missed break and whether there is liability in a particular instance go only to damages. Id. Copious class action jurisprudence holds that individual variations in damages may not be a bar to class treatment.

The Court of Appeal recently denied defendants’ petition for rehearing and modified the opinion without altering the judgment. The order is available here.

Wal-Mart has again found itself at the center of developing class action jurisprudence. The retail giant is now before the high court of Pennsylvania appealing a $187 million damages award granted to employees alleging off-the-clock violations. Wal-Mart maintains that because the substantial damages award was based solely on the testimony of six workers, the procedure exemplifies “trial-by-formula,” a means of finding liability proscribed by the U.S. Supreme Court’s landmark Dukes decision, whereby a representative group of class members’ claims are used to determine the value and validity of the claims of the remainder of the class. See Braun v. Wal-Mart Stores Inc., No. 32 EAP 2012 (Penn. 2012) and Hummel v. Wal-Mart Stores Inc., No. 33 EAP 2012 (Penn. 2012).

Plaintiffs argue that Wal-Mart is invoking trial-by-formula beyond its intended scope: “Contrary to Wal-Mart’s arguments on appeal, the ‘trial-by-formula’ catchphrase does not outlaw the use of routine and well-regarded summaries of voluminous business records.” Braun at 22. Because federal and other state jurisdictions regularly confront the question of what proportion of class members must have experienced violations in order to trigger classwide liability for a defendant, the resulting Pennsylvania Supreme Court rulings are expected to be widely influential.

Pennsylvania’s intermediate appellate court affirmed the $187 million judgment in a sprawling opinion, but failed to address the trial-by-formula argument. This is the only issue on which the Pennsylvania Supreme Court requested briefing in its order granting allowance of appeal of the judgment. See Petition for Allowance of Appeal from the Order of the Superior Court, No. 551 EAL 2011 (Penn. July 2, 2012).