Articles from April 2013

Last Friday, Orange County (California) District Attorney Tony Rackauckas announced that a $16 million settlement had been reached with Toyota concerning sudden acceleration defects. This settlement is entirely separate from last December’s widely-publicized $1.3 billion settlement compensating consumers for economic damages in connection with the same defects. Numerous cases also remain pending in federal multidistrict litigation on behalf of those who died or were injured as a result of sudden acceleration.

Using a procedural device whereby a DA may file an action on the public’s behalf, Tony Rackauckas stood in the role usually occupied by class representatives. While just a modest proportion of the total damages Toyota will ultimately pay as a result of the sudden acceleration defect, the Orange County DA’s $16 million settlement is significant in that it is precisely the kind that, if brought by individual consumers instead of a public official, could be blocked by the increasingly broad interpretation of the Federal Arbitration Act (FAA) that expounds on the five-member majority’s anti-class action doctrine in AT&T Mobility v. Concepcion.

California’s Unfair Competition Law (UCL) empowers district attorneys and other specified public officials to enforce important public rights or seek broad remedies for stark, unitary wrongs (like the sudden acceleration defect) that are suitable for class treatment. Even the most ardently hostile reading of the FAA does not support forcing a public prosecution into private arbitration, or finding that a prosecutor tacitly waived class or representative procedures. Thus, the device employed by District Attorney Rackauckas may stand as an impregnable bulwark against the continuing attack on consumers and workers seeking rational, efficient adjudication of claims in a single class or representative proceeding.

Of the $16 million paid by Toyota, $4 million is designated to pay costs and fees (including payment to outside counsel hired to prosecute the case), $4 million will go into a fund to help combat economic crime, and the remaining $8 million will be paid to a local gang prevention program. While fighting economic crime and gang activity has no obvious connection to automobile defects, at least one can argue that these programs are beneficial to the public at large.

A detailed analysis of the arguments and counterarguments around a plaintiff’s motion to certify a class alleging meal and rest break violations has been published in the Federal Rules of Decision. See Avilez v. Pinkerton Gov’t Servs., 286 F.R.D. 450 (2012). The ruling, by Central District of California Judge David O. Carter, methodically works through the Rule 23 certification elements, and in doing so provides unusually broad guidance as to the more rigorous procedural requirements implied by the U.S. Supreme Court’s Dukes decision as well as the substantive aspects of California’s meal break statute set forth by the California Supreme Court in Brinker v. Superior Court, 53 Cal. 4th 1004 (2012).

While Pinkerton did not contest the easily-established numerosity requirement, the company did challenge typicality, the cited reason being that “some unstated number of putative class members signed a document purporting to waive their right to participate in a class action against Defendant, whereas Plaintiff signed no such document.” However, Judge Carter concluded that the defendant’s argument merely postulated that the plaintiff had a stronger claim than some other putative class members, and that there is no authority holding that such a circumstance precludes certification. Avilez at 456-7.

Judge Carter also rebuffed the defendant’s challenge to the named plaintiff’s adequacy, which was premised on a survey purporting to show that a majority of Pinkerton employees prefer the “present arrangement” with respect to meal breaks, seemingly irrespective of whether that arrangement complies with Brinker. See Avilez at 457-58. Judge Carter methodically deconstructed Lanzarone v. Guardsmark Holdings, Inc., 2006 U.S. Dist. LEXIS 95785 (C.D. Cal. Sept. 7, 2006), the defendant’s main authority supporting this point, finding that it “betrays a deep naïveté” about incumbent employees’ motivations and incentives. See Avilez at 458. Moreover, the survey that was the basis for the defendant’s adequacy argument covered only 30 employees, and the defendant failed to disclose the identity of the person who conducted the survey. Judge Carter thus struck the survey evidence, vitiating the defendant’s adequacy challenge. Avilez at 458-60.

Beyond providing plaintiffs with a favorable adequacy ruling, this analysis also offers useful benchmarks for contrasting the truly rigorous surveys that class action plaintiffs will often proffer in support of class certification. See id. For instance, the survey altogether excluded former employees, even though the defendant’s own deponent testified that former employees constituted at least half, and perhaps nearly three-quarters, of the class members. Id. Judge Carter also noted his skepticism with respect to “the motivations behind and credibility of current employees’ responses to employer-elicited questions regarding employees’ contentment with their employer’s policy.” Id. at 458.

Finally, as to the often pivotal question of whether common questions of law and fact predominate, Judge Carter’s analysis brought to bear the procedural and substantive mandates of Dukes and Brinker, and concluded that the plaintiff’s prima facie case is subject to common proof, “which is all that is necessary to meet the predominance requirement of Rule 23(b)(3).” Avilez at 469. Thus, the defendant’s challenges to predominance not focused on the prima facie case are not relevant, a finding that is in keeping with “courts ‘traditionally be[ing] reluctant to deny class action status’ under predominance requirement of Rule 23(b)(3) ‘simply because affirmative defenses may be available against individual members.’” Avilez at 469, citing Lorber v. Beebe, 407 F. Supp. 279, 294 (S.D.N.Y. 1975).

As the U.S. Supreme Court continues to take aim at class actions, federal and state trial courts are policing abuses that illuminate why employers would prefer that workplace protections not be broadly enforced by class and representative actions. For instance, a federal judge in the influential Southern District of New York recently found that an FLSA defendant engaged in deceptive and intimidating communications intended to dissuade class members from opting into a class action involving the non-payment of overtime. See Zamboni v. Pepe West 48th Street LLC, No 12-3157 (S.D.N.Y. Mar. 12, 2013) (order re: class member communications).

The Zamboni plaintiffs alleged that employees eligible to opt into the conditionally-certified FLSA class were summoned to a meeting presided over by the defendant employer, where they were instructed to sign, without reading, a document disavowing overtime work. One of the employees present at the meeting testified that he was handed a document and told to “read it quickly and sign it even quicker.” Order at 4. After initially being rebuffed when he asked to see a copy of the signed document, the employee discovered that it included the statement, “I do not believe that I am owed any monies for unpaid wages . . . or for any other reasons.” Id. Additionally, the employee was told that he could not opt into the FLSA class if he signed the document, even though the document had no actual bearing on employees’ ability to be members of the FLSA class. Id. Judge James C. Francis IV concluded that “it was inherently coercive for the defendants to solicit from each employee a statement that he does not have a claim for unpaid wages.” Order at 9.

Echoing the analysis around unconscionable contracts, Judge Francis found that “an employee who signs such a statement . . . may well believe that . . . he is precluded from opting in to this litigation. Furthermore, an employee could well sign such a statement without full recognition of the extent of his rights and potential claims under the FLSA.” Order at 9. As a remedy, Judge Francis ordered that a notice be disseminated informing the employees that they had not in fact waived FLSA rights and that the lawsuit’s opt-in period be extended. Order at 10.

Classwide adjudication of workplace violations has become increasingly difficult in recent years, due to heightened certification scrutiny and the widespread use of arbitration agreements and class waivers by employers.  However, a tentative ruling by an intermediate appellate court portends an easier path, in tandem with the growing significance of the California Labor Code’s Private Attorneys General Act (PAGA).

California’s Second Appellate District, Division Eight, is expected to confirm that plaintiffs seeking civil penalties on the State’s behalf and representing fellow employees pursuant to PAGA may continue to do so even where class certification has been denied. See Nelson v. Southern Cal. Gas Co., No. B238845 (Cal. Ct. App. argued Mar. 28, 2013). During oral argument, the three-judge panel tentatively indicated that it would reverse the ruling of Los Angeles Superior Court Judge Zaven V. Sinanian (available here). Judge Sinanian denied the plaintiff’s motion for class certification, chiefly on the ground of insufficient common questions of law or fact, then subsequently ruled that the plaintiff’s PAGA claims couldn’t go forward, citing the same commonality problem that supported the denial of class certification.

Judge Sinanian issued this ruling despite the California Supreme Court having held, in Arias v. Super. Ct., that a PAGA representative action need not satisfy the familiar class certification requirements of numerosity, typicality, commonality, and adequacy of representation. Arias, 46 Cal. 4th 969 (2009) (available here). In its Arias decision, the court specifically distinguished PAGA actions from other representative actions, finding that “the employee plaintiff represents the same legal right and interest as state labor law enforcement agencies — namely, recovery of civil penalties that otherwise would have been assessed and collected by the Labor Workforce Development Agency.” Arias at 986.

The official decision in Nelson is expected to issue shortly.