Posts belonging to Category Caselaw Developments

Campbell-Ewald v. Gomez: High Court Rules Unaccepted Offer to Settle Individual Claim Does Not Moot Class Action

Last month, in a 6-3 decision, the United States Supreme Court held that an unaccepted offer to settle a named plaintiff’s individual claim in a class action suit does not render the case moot. Campbell-Ewald Co. v. Gomez, No. 14-857 (U.S. Sup. Ct. Jan. 20, 2016) (slip op. available here). Justice Ruth Bader Ginsburg, writing for the majority, held that, in accordance with Rule 68 of the Federal Rules of Civil Procedure, “an unaccepted settlement offer has no force.” Slip op. at 1. The Court found that “like other unaccepted contract offers, it creates no lasting right or obligation.” Id. As such, adversity between the parties continues with the offer off the table and Article III standing persists.

In Campbell-Ewald, plaintiff Jose Gomez brought a nationwide class action alleging that the marketing firm Campbell-Ewald violated the Telephone Consumer Protection Act (TCPA), 47 U.S.C. § 227(b)(1)(A)(iii), by sending him unauthorized text messages under its contract with the United States Navy as part of a recruitment campaign. The plaintiff alleged he did not consent to any such text messages and sought treble statutory damages for willful and knowing violation of the TCPA and an injunction against Campbell-Ewald’s involvement in unsolicited messaging. Prior to the class certification deadline, Campbell-Ewald sought to settle the plaintiff’s individual claim by offering him approximately $1,500, thereby satisfying his personal treble-damages claim, and proposed a stipulated injunction that included a denial of liability. Campbell-Ewald also filed a Rule 68 offer of judgment, but the plaintiff did not accept the settlement offer and let the Rule 68 offer lapse. Thereafter, Campbell-Ewald sought to dismiss, arguing that its offer mooted the plaintiff’s individual claim by providing him with complete relief and that he had not moved for class certification prior to his claim becoming moot. Both the district court and the Ninth Circuit found that the plaintiff’s case remained a live controversy and was not mooted when the offer was not accepted.

The Court granted certiorari to resolve a split among the Courts of Appeal and determine whether an unaccepted offer can moot a plaintiff’s claim and thus deprive the federal court of Article III jurisdiction. The Court adopted the analysis of Justice Kagan from her dissent in Genesis HealthCare Corp. v. Symczyk, 569 U.S. __ , 133 S.Ct. 1523 (2013), which is a Fair Labor Standards Act (FLSA) case in which the Court assumed, without deciding, that an unaccepted settlement offer under Rule 68 would render an employee’s individual FLSA claim moot. Writing in dissent, Justice Kagan explained that “[w]hen a plaintiff rejects such an offer—however good the terms—her interest in the lawsuit remains just what it was before. And so too does the court’s ability to grant her relief.” Slip op. at 7. Under this reasoning, “[a]n unaccepted settlement offer—like any unaccepted contract offer—is a legal nullity, with no operative effect.” Id. The Court noted that since Genesis HealthCare, every federal appeals court that has ruled on this issue has adopted Justice Kagan’s analysis.

The Court found that pursuant to basic principles of contract law, the settlement offer and Rule 68 offer of judgment here, once rejected, have no continuing efficacy. The door was left open for a later determination on whether there would be a different result if a defendant deposits the full amount of the plaintiff’s individual claim in an account payable to the plaintiff, rather than just making an offer. Nonetheless, the Court’s decision is useful for class action practitioners, as it forecloses one avenue for defendants seeking early dismissal of class actions via offers of complete relief made to the named plaintiffs. 

Authored By:
Liana Carter, Senior Counsel

MacDonald v. Ford: “Catalyst” Attorney’s Fees in Automotive Defect Cases

In a recent Northern District of California ruling, Judge Tigar found that the plaintiffs, owners and lessees of certain Ford Escape Hybrid and Mercury Mariner Hybrid vehicles, were entitled to attorney’s fees after Ford Motor Company issued a recall for the very component over which the plaintiffs had recently filed suit. See MacDonald, et al. v. Ford Motor Company, No. 13-02988 (N.D. Cal., Nov. 2, 2015) (slip op. available here) (Ms. MacDonald is represented by Capstone Law APC). The court held that the plaintiffs were entitled to “catalyst fees” for causing Ford to issue the safety-related recall, finding that Ford had failed to rebut the inference that the plaintiffs’ lawsuit motivated Ford to provide the relief. This ruling should make it more difficult for automakers to sidestep consumer lawsuits by “voluntarily” recalling products as soon as suit is filed in an effort to moot the lawsuits.

California’s Code of Civil Procedure section 1021.5 provides that a court may award attorney’s fees to a “successful party” when the action has resulted in the enforcement of an important right affecting the public interest. See Graham v. DaimlerChrysler Corp., 34 Cal. 4th 553, 565 (2004). To be a “successful party,” a plaintiff need not obtain a court-ordered change in the defendant’s behavior; it is enough for the plaintiff’s lawsuit to have catalyzed, or motivated, the defendant to provide the primary relief sought. Id. at 567. “To be a catalyst, the lawsuit must have been ‘a substantial causal factor’ contributing to Defendant’s conduct, though the lawsuit need not be the only cause of Defendant’s conduct.” Slip op. at 6 (emphasis added, internal citations omitted). The plaintiff bears the burden of proving he or she catalyzed the relief.

In a first for automotive class actions, where Ford issued a recall 14 months after the plaintiffs filed a class action, the court found that “the chronology of events raise[d] an inference that the lawsuit must have been ‘a substantial causal factor’ contributing to [Ford’s] decision to recall the Class Vehicles.” Slip op. at 7. According to Judge Tigar, “[o]ne month after this Court issued the order denying in part Ford’s motion to dismiss, Ford reported that it began to look into the MECP [Motor Electronic Coolant Pump] Defect. Less than six months after the Court issued the order, Ford issued a recall on the Class Vehicles.” The court rejected Ford’s proffered explanation as to why it commenced its recall investigation just after the court denied in part its motion to dismiss. Though Ford presented testimony of a data specialist who argued that his workload happened to lighten up at the same time the court issued its order, allowing him to commence the recall, the court dryly noted, “[t]his is just too much of a coincidence to be a coincidence.”

Judge Tigar also rejected another explanation proffered by Ford for the recall. Ford argued that an email from Transport Canada, a Canadian auto safety regulator, and not the plaintiffs’ lawsuit, had triggered its investigation. However, the court found it “unconvincing that an email inquiry . . . about one car stalling in a parking lot would trigger [Ford’s investigation] and subsequent recommendation to recall the Class Vehicles, even though several complaints to the NHTSA and a class action lawsuit did not.” In short, the court concluded that Ford’s evidence failed to overcome the presumption that the plaintiffs’ lawsuit had been a substantial factor in the manufacturer’s decision to initiate the recall, and granted the MacDonald plaintiffs’ motion for fees. Additional briefing regarding the amount of attorneys’ fees that Ford will owe is currently progressing.

Authored by: 
Cody Padgett, Associate

“Once Bitten, Twice Shy” Plaintiffs May Lack Standing Because They Won’t Be Fooled Again

To have Article III standing for injunctive relief, a plaintiff must allege that a “real and immediate threat” exists that he will be wronged again. Chapman v. Pier 1 Imps. (U.S.), Inc., 631 F.3d 939, 946 (9th Cir. 2011). In cases alleging deceptive labeling of products, this requirement presents a contradiction because a consumer who was originally deceived by a product label when he bought the product must, by definition, now know that the label was deceptive to allege that fact in a complaint.

District courts in the Ninth Circuit have struggled with this issue. In Rahman v. Mott’s LLP, a food labeling case challenging the legality of a “No Sugar Added” statement on Mott’s Apple Juice, Judge Illston observed that district courts in the Ninth Circuit have basically taken three approaches to the standing analysis in cases alleging violations of California’s unfair competition laws by food and other consumer product manufacturers. See Order Granting in Part and Denying in Part Defendant’s Motion for Summary Judgment, No. CV 13-3482 SI, 2014 WL 5282106 (N.D. Cal. Oct. 15, 2014) (slip op. available here) (Mr. Rahman is represented by Capstone Law APC). “Some courts have held, on public policy grounds, that a plaintiff need not even allege that he intends to purchase the mislabeled product in the future in order to have standing for injunctive relief.” Slip op. at 8 (internal citations omitted). Other courts take a “no standing” approach, “that the plaintiff’s knowledge of the allegedly unlawful or misleading conduct precludes standing for injunctive relief under Article III,” (id. at 9 (internal citations omitted)), an unnecessarily strict approach that undermines consumer protection statutes. A third line of cases takes the “middle ground,” finding “that a plaintiff must allege an intent to purchase the challenged product in the future in order to have standing for injunctive relief.” Id.

This three-way split in authority may be resolved in Jones v. ConAgra Foods, a case before the Ninth Circuit which has been fully briefed and is awaiting oral argument. No. C 12-01633 CRB, 2014 WL 2702726 (June 13, 2014) (9th Cir. Case No. 14-16327). The Jones district court decision is a “middle ground” case: Judge Breyer noted that while “[c]ourts have rejected the argument that a plaintiff cannot establish standing if he has learned that a label is misleading and therefore will not be fooled by it again,” they “do require [that] plaintiffs . . . express an intent to purchase the products in the future.” Id. at *12 (citing Rahman v. Mott’s LLP, 2014 WL 32541 at *10 (N.D. Cal. Jan. 29, 2014)). Judge Breyer found, however, that the plaintiff did not meet that requirement. Jones at *13 (stating, “Jones could have testified, if true, that he bought the Hunt’s products in reliance on the label because he seeks out natural products, but that he might purchase Hunt’s products in the future if they were properly labeled. He did not so testify.”).

Hopefully, the Ninth Circuit will adopt a more permissive standing rule that will not bar plaintiffs in deceptive advertising cases from seeking injunctive relief in federal court. If the Ninth Circuit adopts Judge Breyer’s approach, it should reconcile it with Rahman, which is also fully briefed before the Ninth Circuit. Rahman v. Mott’s LLP (9th Cir. Case No. 15-15579) (appellant’s opening brief available here). In Rahman, the court adopted an unduly narrow approach, simultaneously acknowledging that a plaintiff must allege an intent to purchase a challenged product in the future to have standing and also finding that the plaintiff lacked standing because he could not plausibly prove that he would rely on the “No Sugar Added” label in the future. (“[T]he Court finds that introducing evidence which merely shows an intent to purchase the product in the future, where the product itself remains the same, is not sufficient to confer standing for injunctive relief.” Rahman, 2014 WL 5282106 at *6, n. 4.) Thus, contrary to Judge Breyer’s opinion, at least where the packaging itself remains the same, Rahman suggests deceptive food labeling plaintiffs will always lack standing because “they won’t be fooled again,” resulting in an absurd outcome where a consumer essentially could never seek injunctive relief.

Authored By:
Robert Friedl, Senior Counsel

Cal. Supreme Court to Clarify Employer’s Obligation to Provide Seating

On January 5, 2016, the California Supreme Court, at the request of the Ninth Circuit United States Court of Appeals, heard oral argument in two cases alleging that the employers failed to provide seating to their employees as required by California law. Kilby v. CVS Pharmacy, Inc., 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). The order from the Ninth Circuit is available here. These cases involve the proper interpretation of California Wage Orders that require that an employer provide “suitable seats” to employees “when the nature of the work reasonably permits the use of seats.” IWC Wage Order 4-2001 § 14(A); IWC Wage Order 7-2001 § 14(A).

In the Kilby case, Plaintiff Nykeya Kilby sued on behalf of Clerk/Cashier employees of CVS. The plaintiff worked for CVS as a Clerk/Cashier where she spent 90% of her time operating a cash register and the balance of her time moving throughout the store gathering shopping carts and restocking display cases. The district court found that the “‘nature of the work’ performed by an employee must be considered in light of that individual’s entire range of assigned duties” and that “courts should consider an employer’s ‘business judgment’ when attempting to discern the nature of an employee’s work.” Order at 5-6. Using this interpretation, the court denied class certification because the duties of Clerks/Cashiers varied from day-to-day, shift-to-shift, and employee-to-employee. The lower court also granted summary judgment in favor of CVS, because many of the plaintiff’s duties required her to stand, CVS expected its Clerk/Cashiers to stand, and CVS informed Kilby of that expectation.

The second case, Henderson v. JPMorgan, was brought by former tellers of JPMorgan Chase who spent the majority of their time at their stations accepting deposits, cashing checks, and handling withdrawals. Bank tellers also had additional duties, such as escorting customers to safety deposit boxes, working the drive-up teller window, or checking if ATMs are working properly, and some of JPMorgan’s banks had physically different layouts. Thus, the district court denied class certification, finding that a teller’s work could change based on the tasks he/she performs while away from the teller station, the bank at which the teller works, and which shift the teller works.

In both cases, the district courts adopted a “holistic” approach proposed by the defendants, by asking whether “the majority of an employee’s assigned duties must physically be performed while standing and if the answer is yes, then “the ‘nature of the work’ requires standing.” Order at 8. Under the holistic approach, the entire range of duties must be considered along with the layout of the workplace and the employer’s job description and expectations. On the other hand, the plaintiffs in Kilby and Henderson contend that Section 14 of the Wage Order refers to discrete tasks performed by employees. In their view, if an employee is engaged in a task that can objectively be performed while seated, the employer must provide the employee with a suitable seat. Under this interpretation, neither the employee’s other tasks nor the employer’s business judgment would affect whether the nature of the work reasonably permits the use of seats.

The Ninth Circuit noted that the Wage Orders do not define “nature of the work,” “reasonably permits,” or “suitable seats,” and while the different approaches advocated by the parties would produce drastically different results, “the text of the regulation precludes neither.” Given the dearth of cases interpreting the Wage Orders, the Ninth Circuit asked the California Supreme Court for guidance. The California Supreme Court, in turn, sought input from the Department of Labor Standards Enforcement (DLSE) which stated a position that seemed to combine the parties’ two approaches (DLSE amicus brief available here).

At oral argument, the plaintiffs argued that the seating requirement is a minimum labor standard, akin to overtime or minimum wages, that must have an objective measure and asserted that an employer’s business judgment should have no part in the analysis of whether to provide seating. If the state Supreme Court adopts this objective measure and limits the inquiry to whether an employee is engaged in a task that can objectively be performed while seated, class certification of these claims will be much easier. The defendants again advocated the holistic approach based on the totality of the circumstances and which considers the employer’s business judgment. The holistic approach would make class certification more difficult because a court would be required to assess a variety of factors that could vary day-to-day and location-by-location. Most of the questions from the justices concerned the phrase “nature of the work” and whether the proper unit of analysis was the job as a whole or the discrete duties of each job. Some justices appeared to favor the plaintiffs’ interpretation, such as Justice Corrigan, who solely posed questions to the employers (the substance of her questions indicating she may favor the plaintiffs’ position), while others’ comments seemed to favor the defendants, with Justice Liu stating that it is not unreasonable that the defendants want their employees to demonstrate a certain presence with respect to customer service.

The California Supreme Court’s opinion will have a dramatic impact on employers and employees and will likely influence whether seating claims can be certified as class actions. However, even if seating claims ultimately cannot easily be certified, aggregate liability for seating violations still may be imposed via the Private Attorneys General Act of 2004 (PAGA), which need not be certified to impose aggregate liability, pursuant to Arias v. Superior Court, 46 Cal.4th 969 (2009). PAGA civil liability can be quite substantial, as the statute provides $100 for each aggrieved employee per pay period for the initial violation and $200 for each aggrieved employee per pay period for each subsequent violation. See California Labor Code §2699(f)(2).

Authored By:
Robert Drexler, Senior Counsel