Articles from December 2016

Bouaphakeo v. Tyson: Defendant’s Request for New Trial Denied

A few months ago, the United States District Court for the Southern District of Iowa (Chief Judge John A. Jarvey, presiding) issued an order denying the defendant’s request for a new trial in Bouaphakeo v. Tyson Foods, Inc. on remand from the United States Supreme Court. No. 5:07-cv-04009-JAJ (Oct. 5, 2016) (slip op. available here). The ILJ has previously covered the Tyson Foods litigation here and here.

On March 22, 2016, the Supreme Court affirmed the district court’s order granting class certification of a claim under the Fair Labor Standards Act for uncompensated time meat processing plant employees spent donning and doffing required protective gear. Tyson Foods v. Bouaphakeo, 136 S. Ct. 1036 (2016). A jury issued an award for the class after a non-bifurcated trial. The Supreme Court rejected Tyson’s arguments that class certification should be overturned and remanded the matter to the district court to determine how to distribute the award, expressly “noting Tyson ‘may raise a challenge to the proposed method of allocation when the case returns to the District Court.’” Slip op. at 1.

On remand, the plaintiffs argued that the award could be distributed in two ways, both of which would be consistent with the trial court’s jury verdict and with the Supreme Court’s ruling. The first method limited the distribution to the weeks in which each injured class member had worked more than 40 hours without adding any extra minutes for donning and doffing from an expert’s time study, and the second limited distribution to the weeks in which each injured class member had worked more than 40 hours, including weeks in which those extra minutes are added that are consistent with the jury’s verdict (i.e. donning and doffing minutes but excluding any time attributable to meal period-adjacent donning and doffing, as the jury did not allocate damages for that particular time). Tyson objected to the jury verdict and the plaintiffs’ two proposed alternate methods of disbursement, and requested a new trial because the Supreme Court had instructed the trial court to “determine . . . whether there are uninjured class members who are not entitled to recover damages, such that the jury’s verdict cannot stand.” Slip op. at 5. Tyson argued that there are multiple different ways in which the jury could have reached its verdict, and there it is therefore “impossible to ensure only injured plaintiffs participate in the aggregate award.” Id. Tyson further argued that damages and liability are so intertwined in this case that the court should award a new jury trial on both liability and damages. Id. The district court reached three primary conclusions in its order denying Tyson’s request.

First, the court held that the jury’s aggregate award did not, despite Tyson’s arguments, include uninjured individuals. The district court noted that the parties had agreed to certain limitations to ensure that uninjured individuals would not receive any damages. The parties had agreed to exclude from the award those employees who did not work 40 hours in a week without the additional donning and doffing time and also those who, despite having worked 40 hours in a week, were owed less than $50. Slip op. at 6. Further, the jury had been instructed that damages only be awarded as to injured individuals and nonetheless chose to award damages. Id.

Second, the district court held that Tyson invited any uncertainty that may exist. Slip op. at 6. The district court acknowledged that the combined circumstances of a non-bifurcated trial and the use of an aggregate jury award based on dollars rather than time worked “has lessened the precision with which the Court is able to distribute damages. But, as recognized by the Supreme Court, Tyson invited both problems by opposing bifurcation of the original trial and by its failure to keep complete records. Neither the lack of records . . . nor the use of a non-bifurcated trial should be held against Plaintiffs.” Id. at 6-7.

Third, the district court ordered distribution according to one of the methods the plaintiffs’ expert proposed, which limits distribution to weeks during which the injured class member worked more than 40 hours without any extra time attributed for donning and doffing. Slip op. at 7. The court found that this method, along with the requirement that the individual must have earned at least $50 in damages, “resolves any uncertainties in favor of upholding the jury’s verdict.” Id.

Authored by:
Katherine Kehr, Senior Counsel

Perez v. U-Haul: PAGA Claims Cannot Be Separated Into “Arbitrable” and “Inarbitrable” Components

The 2nd District Court of Appeal recently affirmed a ruling by Los Angeles Superior Court Judge Jane Johnson in Perez v. U-Haul Co. of California, denying the defendant company’s move to compel its workers to arbitrate their representative Private Attorney General Act claims for wage-and-hour violations. Perez, No. B262029 (2nd Dist. Div. 7 Sept. 16, 2016) (slip op. available here). Following the California Supreme Court’s decision in Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal. 4th 348 (2014), the three-judge appellate panel rejected U-Haul’s argument that it could force employees first to arbitrate whether they have individual standing to bring a PAGA claim.

While the California Supreme Court in the prominent Iskanian decision upheld the enforceability of class action waivers, it held that waiver of PAGA claims through a similar “representative action” waiver is unenforceable. In Perez, U-Haul attempted to circumvent this distinction by arguing that the issue of whether the plaintiffs were “aggrieved employees” as defined by the PAGA statute was a severable “threshold question” that should proceed to arbitration first, to determine standing. The appellate court disagreed, stating that “[g]iven that the parties did not agree to arbitrate representative claims, and that a PAGA action is by definition a form of representative claim, we conclude that PAGA claims are categorically excluded from the arbitration agreement.” Slip op. at 11. U-Haul’s lawyers tried to convince the court that the defendant was not seeking to prevent the plaintiffs from pursuing their PAGA claims entirely, but rather that it simply wanted to enforce its arbitration agreements to determine the plaintiffs’ “underlying employment claims” which could ultimately render the PAGA claims moot. However, the Court of Appeal held that the arbitration agreement did not contain any language suggesting that the parties had agreed to arbitrate whether the plaintiff had standing to bring a representative claim in court. Id. The court also added that, even if the agreement did contain such a provision, it would be unenforceable under California law since there is no authority supporting that a PAGA action can be split into individual “underlying claims” brought in arbitration and separate “representative” claims brought in court. Id. at 11-14.

PAGA is a vital enforcement mechanism for employees in California who work for companies that have implemented arbitration agreements banning class actions. Perez is another in the growing line of cases that shut down employers’ attempts at implementing arbitration agreements that seek to impede employees’ ability to bring PAGA claims.

Authored By:
Rebecca Labat, Partner

Nguyen v. Applied Medical Resources: Availability of Class Arb is a Q for the Arbitrator

In October 2016, the California Court of Appeal held that a trial court erred in dismissing class claims due to a governing arbitration agreement. The court found that class arbitration may, in fact, be available—but that this was a question for the arbitrator to decide.

The Court of Appeal in Nguyen v. Applied Medical Resources Corporation, No. G052207 (4th Dist. Div. 3, Oct. 4, 2016) (slip op. available here), heard an appeal from Da Loc Nguyen, a former employee of surgical equipment manufacturer Applied Medical Resources Corporation (“Applied”), who had brought individual and class claims against her employer for violations of the California Labor Code and the Unfair Competition Law, and claims for civil penalties under the Private Attorneys General Act (“PAGA”). The trial court had granted Applied’s motion to compel arbitration due to an arbitration clause in Nguyen’s employment application, and had dismissed Nguyen’s class claims without prejudice, allowing only the PAGA claims to remain.

The Court of Appeal issued a writ of mandate ordering the trial court to vacate the portion of its order dismissing the class claims. Although arbitration could be compelled, the appellate court found, the trial court could not simply dismiss the class claims outright. The court’s analysis relied heavily on the California Supreme Court’s decision in Sandquist v. Lebo Automotive, Inc., 1 Cal.5th 233 (2016), which involved a very similar arbitration clause. Sandquist addressed the question of “‘who decides whether the [arbitration] agreement permits or prohibits classwide arbitration, a court or the arbitrator[?]’” Nguyen, slip op. at 24, emphasis in original (citing Sandquist, 1 Cal.5th at 241).

First, the Nguyen court followed Sandquist’s holding that state law, rather than federal law, applied to the question of “who decides” whether class arbitration is available, as this is a question of contract interpretation that is usually subject to state law. Slip op. at 26. Next, the court examined the language of the arbitration clause and found that it was similar in two key respects to Sandquist: (1) the arbitration clause contained “inclusive” language, that is, it provided that all disputes (as opposed to specific, enumerated disputes) should go to arbitration; (2) the provision extended to all claims “arising from, related to, or having any relationship or connection whatsoever” with the employment relationship within the parties. Id. at 26-28 (citing Sandquist, 1 Cal. 5th at 245-46). These factors weighed in favor of allowing the arbitrator to make all decisions regarding the case—including the arbitrability of class claims. Id.

Finally, Nguyen followed Sandquist in applying two general principles of law: first, “when the allocation of a matter to arbitration or the courts is uncertain, we resolve all doubts in favor of arbitration.” Slip op. at 28. Second, ambiguous terms in written contracts should be construed against the drafter—especially when the contract is one of adhesion. Id. Thus, because Applied, the employer, drafted the arbitration clause in its take-it-or-leave-it employment application, Applied could have expressly stated whether class claims could be arbitrated. It did not, so it could not benefit from that ambiguity after the fact. Id. at 28-29 (citing Sandquist, 1 Cal. 5th at 247-48). Consequently, Nguyen held that the arbitration agreement gave the arbitrator—not the trial court—the power to decide whether class arbitration may occur.

Authored By:
Jennifer Bagosy, Senior Counsel