Articles from July 2016

Last month, the Ninth Circuit applied the “suitable seating” framework from the California Supreme Court’s opinion in Kilby v. CVS Pharmacy, Inc., No. S215614 (Cal. April 4, 2016), for the first time in Brown v. Wal-Mart Stores, Inc., an unpublished decision. No. 12-17623 (9th Cir. June 8, 2016) (slip op. available here). Brown involved the Court of Appeals’ review of the district court’s grant of certification of a class of cashiers employed by Wal-Mart in California. In Kilby, the California Supreme Court answered questions certified by the Ninth Circuit involving California wage order requirements that “[a]ll working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats.” Cal. Code Regs., tit. 8, § 11040, subd. 14(a) (Wage Order No. 4-2001) (Kilby previously covered on the ILJ here). After the California Supreme Court weighed in on the Kilby questions, the Ninth Circuit reversed and remanded two seating cases that were on appeal following denials of class certification: Kilby, No. 12-56130 (S.D. Cal. May 31, 2012, D.C. No. 09-cv-2051-MMA-KSC) and Henderson v. JPMorgan Chase Bank NA, No. 13-56095 (C.D. Cal March 4, 2013, D.C. No. 2:11-cv-03428-PSG-PLA).

In Brown, the Ninth Circuit applied the Kilby framework, affirming the lower court’s order granting certification. Wal-Mart had challenged the district court’s decision to certify the class, arguing the court had abused its discretion in finding that the requirements of commonality and predominance were met. See Fed. R. Civ. P. 23(a)(2) and 23(b)(3). Regarding commonality, the Ninth Circuit found the district court had not abused its discretion based on the lower court’s finding that both a common policy and a common nature of work were applicable to the proposed class, that is, that Wal-Mart had a common policy of not providing cashiers with seating, that cashiers spent the majority of their time working at registers, and that the work done by cashiers at registers was generally the same across variations in the stores, locations, and shifts. See slip op. at 2-3.

The Court of Appeals also noted that the district court’s consideration of whether cashiers spent the “majority” of their time working at register was inconsistent with Kilby, since the California Supreme Court rejected this “holistic approach” in favor of a more narrow analysis into each subset of tasks that employees were expected to perform in a particular location within the workplace. See slip op. at 3 n.1. However, since the Kilby interpretation would have been more beneficial for the plaintiffs than the “holistic approach” used by the district court and the district court had certified the class anyway, the Ninth Circuit found the application of the wrong legal standard to have been harmless error. Id. As to the predominance inquiry, the Ninth Circuit also found the district court had not abused its discretion based on the court’s conclusion that “a trier of fact could determine whether these common tasks could reasonably be performed while seated, and such a determination would apply to all Wal-Mart cashiers at its California stores,” since the answer to this question would determine whether Wal-Mart violated the Wage Order’s suitable seating provision as to all class members. Id. at 3-4.

The panel further noted that the plaintiffs’ claim under California’s Private Attorneys General Act (“PAGA”) does not require an individualized penalty assessment that would defeat certification. Slip op. at 4. The Ninth Circuit’s wording on this last issue apparently caused the defendants concern, as they have now filed a petition seeking rehearing en banc, despite the fact that the Brown decision is unpublished. Wal-Mart’s petition (available here) states that the panel’s conclusion failed to provide clear guidance and could lead to an expansive interpretation of PAGA that would permit aggregate penalties without any sort of individual assessment. In the alternative, Wal-Mart requests the court to grant rehearing and remand for reconsideration on the grounds that the Ninth Circuit’s reasoning that the Kilby framework appeared to be more beneficial for the plaintiff fell short of the “rigorous analysis” required by Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350-51 (2011).

The Ninth Circuit’s simple and straightforward application of the Kilby framework is a welcome sign of things to come for plaintiffs seeking to certify seating claims.

Authored by: 
Brandon Brouillette, Associate
CAPSTONE LAW APC

Last month, Judge David O. Carter of the Central District of California issued an order granting in part Hyundai’s Motion to Dismiss and/or Strike Allegations in First Amended Complaint in Glenn, et al. v. Hyundai Motor America, et al. No. SA CV 15-2052-DOC (June 24, 2016 C.D. Cal.) (slip op. available here). The Glenn plaintiffs had alleged that the Hyundai vehicles’ panoramic sunroofs had a tendency to spontaneously shatter. Notably, the National Highway Traffic Safety Administration (“NHTSA”) had already begun investigating the same sunroof issues in the Sorento, a vehicle produced by Kia, Hyundai’s sister company. The Glenn plaintiffs demanded injunctive relief in the form of a recall. Hyundai moved to dismiss the plaintiffs’ prayer for a recall injunction under the doctrines of primary jurisdiction and preemption. The district court, in addition to leaving intact the plaintiffs’ remaining fraud-based claims and allowing the plaintiffs to have standing to represent consumers who purchased different vehicles, denied Hyundai’s motion on the grounds of primary jurisdiction and preemption, providing guidance for other class action plaintiffs on how to avoid such a dismissal.

The primary jurisdiction doctrine applies, exempting an issue from federal court jurisdiction, based on: “(1) the need to resolve an issue (2) that has been placed by Congress within the jurisdiction of an administrative body having regulatory authority (3) pursuant to a statute that subjects an industry or activity to a comprehensive regulatory authority that (4) requires expertise or uniformity in administration.” Slip op. at 24 (quoting Astiana v. Hain Celestial Grp., Inc., 783 F.3d 753, 760 (9th Cir. 2015) (internal citations omitted)). The district court in Glenn held that, applying these considerations, the primary jurisdiction doctrine did not apply. As to the first two elements, the court found that because the plaintiffs sought monetary relief—relief beyond what NHTSA can provide in a recall—there is a substantial need to resolve the issue in court. Id. Regarding the third factor, there was also no authority suggesting that Congress intended NHTSA to have exclusive regulatory authority over vehicle safety. Id. at 24. Even though Hyundai had been asked to cooperate with NHTSA in its Kia Sorento sunroof investigation, the court found that the scope of NHTSA’s investigation did not clearly cover all of the Glenn class vehicles and thus, no actual conflict existed between the plaintiffs’ claims regarding the Hyundai sunroofs and NHTSA’s Kia investigation. Id. at 25 (quoting In re Toyota Motor Corp. Unintended Acceleration Mktg. Sales Practices and Prods. Liab. Litig., 754 F. Supp. 2d 1145, 1199 (C.D. Cal. 2010)). Finally, the court noted that the plaintiffs’ claims were strictly based on state and federal consumer protection laws, as opposed to the National Traffic and Motor Vehicle Safety Act (“Safety Act”) or NHTSA regulations, and thus there is no need to ensure uniformity of regulation and NHTSA is not better-equipped than the court to address the issues presented. Id.

Similarly, the court held that the plaintiffs’ request for injunctive relief was not preempted by the Safety Act at this point, finding that Hyundai had not “met its burden of showing that it was Congress’ clear and manifest intent for the Safety Act to preempt the relief Plaintiffs seek pursuant to their State law claims.” In re Toyota, at 1197 (emphasis added). Hyundai failed to show that the ongoing NHTSA investigation with Kia encompasses all the models of the Glenn class vehicles, and thus, the court declined to find preemption because there was no actual conflict between the relief the plaintiffs sought and the Safety Act. Slip op. at 26.

These findings are instructive when developing a car class action where a NHTSA investigation is already ongoing and the plaintiff is confronted with a defendant’s argument that its claims for a recall injunction should be dismissed due to the doctrines of primary jurisdiction or preemption. Plaintiffs should consider demanding monetary relief, distinguishing the vehicles at hand from those under investigation by NHTSA, and basing their claims strictly on state and federal consumer protection laws, with no reference to the Safety Act or NHTSA Regulations, to avoid primary jurisdiction and preemption.

Authored by: 
Tarek Zohdy, Associate
CAPSTONE LAW APC

Earlier this year, the United States Supreme Court decided Campbell-Ewald Co. v. Gomez, No. 14-857 (U.S. Sup. Ct. Jan. 20, 2016) (previously covered on the ILJ here). The Court, in a majority opinion authored by Justice Ginsburg, focused on traditional contract law principles and concluded that a class action plaintiff’s case is not mooted where the plaintiff rejects an offer to settle his or her individual claim. The case was sent back to the district court for adjudication. However, the Court’s decision in Campbell-Ewald provided arguably more questions than answers in the debate over the Article III consequences of plaintiffs’ unaccepted offers of individual relief in class actions. In particular, the Supreme Court left it to the lower courts to reconcile the suggestion that an individual claim may be moot where “a defendant deposits the full amount of the plaintiff’s individual claim in an account payable to the plaintiff, and the court then enters judgment for the plaintiff in that amount” while emphasizing that “a would-be class representative with a live claim of her own must be accorded a fair opportunity to show that certification is warranted.” Campbell-Ewald Co. v. Gomez, slip op. at 11.

The Ninth Circuit has since attempted to address the ambiguities left by the Court in Campbell-Ewald. In Chen v. Allstate Insurance Co., a class action alleging violations of the Telephone Consumer Protection Act, the defendant deposited the full amount of the named plaintiff’s individual claim in an escrow account payable to the plaintiff and agreed to an injunction to satisfy the plaintiff’s individual claims. No. 13-16816 (9th Cir. April 12, 2016) (previously covered on the ILJ here). However, the Ninth Circuit in Chen concluded that the defendant’s actions were insufficient to moot the plaintiff’s claim based on its interpretation of Campbell-Ewald. The appeals court in Chen concluded that the escrow account did not equate to actual receipt of the complete relief available to plaintiff and entering judgment on the plaintiff’s individual claims before he had a fair opportunity to move for class certification contradicts the Court’s reasoning in Campbell-Ewald.

On June 3, 2016, Judge Dolly M. Gee of the Central District of California, now equipped with guidance from the U.S. Supreme Court and Ninth Circuit, turned to Campbell-Ewald’s motion to dismiss for lack of jurisdiction, or, in the alternative, the defendant’s motion for entry of judgment for the plaintiff and a motion for leave to deposit funds with the court, which were filed in March 2016. See Order re: Defendant’s Motion to Dismiss, Gomez v. Campbell-Ewald Co., No. CV-10-2007 DMG (slip op. available here). Following the Supreme Court’s decision, Campbell-Ewald sent the plaintiff’s counsel a certified check for $10,000 and asked the district court to accept a payment in the same amount. The defendant argued that the certified check to the plaintiff’s counsel constituted an “unconditional, irrevocable” payment and, as such, had been actually received and accepted by the plaintiff, and therefore rendered the plaintiff’s claims moot. Id. at 3. However, the court disagreed, stating that the defendant may not “force Gomez to accept a settlement which has not been negotiated for or accepted merely by sending his counsel an unsolicited check and deeming it ‘unconditional’ and ‘irrevocable.’” Id. Further, the court followed Chen, finding that a judgment of complete relief on a plaintiff’s individual claim is inappropriate in a class action where the plaintiff has not yet been afforded a “fair opportunity to show that certification is warranted.” Id. (quoting Chen, internal citations omitted).

Ultimately, the district court denied Campbell-Ewald’s motions to dismiss and for leave to deposit funds with the court, and did not enter judgment in the plaintiff’s favor. By preserving Gomez’s claims and narrowing the types of transactions that may constitute acceptance of an individual settlement offer in a class action, the district court further limited the ability of a defendant in a class action to unilaterally moot a case via an unaccepted offer of judgment. Additionally, the district court, as in Chen, highlighted the Supreme Court’s emphasis on providing plaintiffs with a fair opportunity to move for certification in class actions.

Authored by: 
Trisha Monesi, Associate
CAPSTONE LAW APC

On May 18, 2016, the Department of Labor (“DOL”) announced new overtime rules under the Federal Labor Standards Act (“FLSA”), giving employers until December 1, 2016, to comply. The rules increase the salary threshold over which employers may classify their employees as exempt under one of the white-collar exemptions—administrative, executive, or professional. The salary threshold under federal regulations had been $23,660, meaning that employees only had to earn at least $23,660 annually in order to qualify for one of these exemptions. The new rules double the annual salary threshold to $47,476.

This is an important increase, as employees who are classified as exempt are not entitled to overtime pay. The DOL estimates that under the previous salary threshold, only 7% of salaried workers were entitled to overtime pay. With the increase in the salary threshold, the DOL estimates that 35% of salaried workers will now be entitled to overtime pay. Department of Labor, “The New Overtime Rule & Working Women: By the Numbers,” available here. According to the DOL, the new rules will impact 4.2 million workers, 56% of whom are women, who will either gain new overtime protections or get a raise to the new salary threshold. Id. California employees will also see an increase in the salary threshold, although a less substantial one. California law already applies a salary threshold of $41,600 to qualify as exempt under a white-collar exemption. Thus, the DOL’s changes increase the minimum salary threshold for California employees by nearly $6,000.

Regarding the exemption for highly compensated employees (“HCE”), the total annual compensation level above which most white collar workers will be ineligible for overtime was raised to the 90th percentile of full-time salaried workers nationally, up from the current $100,000 to $134,004 a year. An HCE exemption may apply where the employee needs only to perform at least one of the exempt duties or responsibilities of an exempt executive, administrative, or professional employee to satisfy the exemption. Additionally, non-discretionary bonuses, incentive pay, or commissions can now be included to satisfy up to 10 percent of the salary threshold for non-HCE employees, provided these payments are made on at least a quarterly basis. Also, no changes were made to the existing “duties test” which determines whether white collar salaried workers earning more than the salary threshold are ineligible for overtime pay, due to the executive, administrative, or professional exemption.

Finally, the new rules establish a mechanism for automatically updating the salary threshold every three years to ensure that the threshold reflects workers’ earnings, instead of allowing a lengthy gap between updates, like the nearly twelve years that have passed since the DOL last updated them.

Authored By:
Bevin Allen Pike, Senior Counsel
CAPSTONE LAW APC