Posts belonging to Category Caselaw Developments

9th Cir. Reverses Order Compelling Arbitration in TCPA Suit Against Sirius

Last week, the Ninth Circuit reversed a California federal court’s decision compelling individual arbitration of a putative class action alleging Sirius XM Radio violated the Telephone Consumer Protection Act (TCPA) by making unauthorized marketing calls to the plaintiff and other consumers. Knutson v. Sirius XM Radio Inc., No. 12-56120 (9th Cir. Nov. 10, 2014) (slip op. available here). The panel, comprised of circuit Judges Harry Pregerson, Marsha Berzon, and Michael Murphy (sitting by designation), held the at-issue arbitration agreement to be unenforceable due to lack of mutual assent, because the plaintiff was unaware he had entered into a contract with Sirius.

The plaintiff filed the suit as a class action in 2012, alleging that after he bought his new Toyota vehicle and began his 90-day free trial subscription for Sirius XM, he received three unsolicited marketing calls from Sirius to his cell phone, even though he had never provided his phone number to the company. Knutson alleged that the calls were a violation of the TCPA, a statute prohibiting the use of automatic dialing to cell phones. The defendant argued that the plaintiff’s failure to timely opt out of the agreement’s arbitration provision he had been sent just after his account activation, and failure to cancel his subscription, effected an implicit agreement to the customer agreement’s terms, including the binding arbitration provision. In June 2012, U.S. District Judge Anthony Battaglia sided with Sirius and sent the dispute to individual arbitration, dismissing the class action suit.

The Ninth Circuit reversed. In an opinion authored by Circuit Judge Pregerson, the panel wrote, “A reasonable person in Knutson’s position could not be expected to understand that purchasing a vehicle from Toyota would simultaneously bind him or her to any contract with Sirius XM, let alone one that contained an arbitration provision without any notice of such terms.” Slip op. at 13. The Court of Appeals found that Knutson had no reason to believe he was entering into a contract with Sirius when he purchased his car from Toyota and was given a Sirius trial subscription, because Sirius sent him the customer agreement over a month after the three-day period during which he could reject its terms. Moreover, because he never opened the welcome kit and therefore was not aware that he had ever entered into the contract, his continued use of the radio service after receiving the agreement did not constitute assent to the terms. Further, the panel rejected Sirius’ argument that Knutson could not avoid the terms of the contract simply because he had not read it and was similarly unconvinced by the defendant’s argument that the contract was enforceable even though it had only been sent after the service had already been activated, distinguishing it from other cases cited by Sirius, because Knutson had not specifically elected to receive the service. Since he did not initially receive any documentation from Sirius, the plaintiff was only aware of being in a contract with Toyota. Finally, finding that the arbitration clause in Sirius’ agreement was unenforceable for lack of mutual assent, the panel stated that it need not address whether the customer agreement was unconscionable. 

Godfrey v. Oakland Port Services: CA Ct. of App. Affirms Judgment for Driver Class

Last month, the California Court of Appeal affirmed an order by the Alameda County Superior Court certifying a class of drivers for various wage-and-hour violations against their employer, Oakland Port Services Corp, d/b/a AB Trucking. Godfrey v. Oakland Port Services Corp., No. A139274 (First Dist. Div. 2 Oct. 28, 2014) (slip op. available here). The drivers claimed that that they had not been paid for missed meal and rest periods, among other violations. The appellate court also upheld the lower court’s judgment for the plaintiffs after a bench trial in which the plaintiffs had been awarded nearly $1 million, in addition to attorney fees, litigation expenses, and class representative enhancement awards. It also found that the Federal Aviation Administration Authorization Act (FAAAA) did not preempt California’s meal and rest break requirements.

The plaintiffs had alleged that the defendant had failed to pay its drivers for all hours worked, misclassified some drivers as non-employee trainees, and failed to provide meal and rest breaks. Finding for the plaintiffs, the trial court’s statement of decision and judgment held that: (1) AB Trucking failed to pay for all hours worked because its records showed that “it deducted one hour per day from each employee . . . , even though the driver did not receive a one hour meal period”; (2) “AB misclassified drivers who were suffered or permitted to work as non- employees, or unpaid ‘trainees.’”; and (3) plaintiffs had “presented substantial and persuasive evidence that class members were routinely and consistently precluded by AB from taking meal periods and rest breaks.” Slip op. at 3-4.

AB Trucking argued, on appeal, that the trial court had found erroneously that the FAAAA did not preempt state law with regard to meal and rest breaks. The FAAAA provides for federal regulation of commercial carriers and preempts state law “related to a price, route, or service of any motor carrier . . . with respect to the transportation of property.” 49 U.S.C. § 14501(c)(1). The court disagreed with the defendant, finding that the FAAA does not preempt claims for missed meal and rest periods by the drivers and that the defendant failed to offer any evidence that the state’s break laws had any actual impact on its prices, routes, or services. Citing recent federal and California precedents such as Dilts v. Penske Logistics, LLC, No. 12-55705 (9th Cir. July 9, 2014), and People ex rel. Harris v. PAC Anchor Transportation, Inc., No. S194388 (July 28, 2014), which have limited the preemptive reach of the FAAAA, the court concluded that compliance with the state’s meal and rest break laws does not conflict with federal law. 

Employee Class Certified in Tian v. Ma Laboratories

The trial judge in the Santa Clara Superior court, Judge Peter H. Kirwan, certified a class of employees who alleged that Ma Laboratories Inc. failed to pay for all “hours worked” pursuant to 8 Cal. Code Regs., § 11070(2)(G). The wage-and-hour lawsuit claimed that the defendant was shaving time off employees’ actual hours worked; the judge found that time-shaving is a “one-way” practice and that workers are under their employers’ control as soon as they are on the clock, even if they are not performing any actual work. Tian v. Ma Laboratories Inc., No. 1-11-cv-195373 (Cal. Super. Ct. Oct. 9, 2014) (slip op. available here).

The court certified the time-shaving class and several subclasses, finding that even workers who are sitting around before their shifts smoking cigarettes and waiting for instructions are considered on the clock and working and thus must be paid. The class consisted of approximately 550 employees who worked at Ma Labs’ headquarters in San Jose or in its facility in Los Angeles. Stating, “even those who are waiting for instructions in the morning are clocked in and subject to Ma Labs’ control/suffered or permitted to work, whether or not required to do so,” the court held that, per the plaintiffs’ theory, “this still constitutes ‘hours worked’ for purposes of compensation, and the necessary findings can be made from the timekeeping alone.” Slip op. at 7.

Ma Labs allegedly had a strict start and end time for each employee, so that if and when workers clocked in before that set time starts or clocked out after it ends, the extra time needed to be approved and manually revised by a system administrator. The plaintiffs also alleged that this time-shaving practice allowed Ma Labs to not always pay for the extra time when workers arrived early or stayed late, but consistently docked their pay if they came in late or clocked out early. Approval for pre-shift time was “rarely if ever” granted, and post-shift time was not typically approved unless it was less than ten minutes. Slip op. at 6. The defendant argued that the plaintiffs were unable demonstrate that each particular employee was not incorrectly reporting his or her time or individual reasons for each individual’s denial of overtime or time card adjustment. Ma Labs also contended that workers would sometimes swipe their cards to clock in, then eat breakfast or perform personal tasks, rather than begin work right away. However, the court declined to address the merits of the plaintiffs’ time-shaving theory and stated that “[defendant’s] evidence that some employees occasionally engaged in personal activities after clocking in does not defeat certification because the record does not suggest that such instances would predominate over common ones.” Slip op. at 7 (emphasis added).

The court granted certification as to the time-shaving subclass, the auto-deduct lunch policy subclass consisting of employees from March 1, 2007 to February 15, 2010, the second meal period policy subclass, the rest period policy subclass from March 1, 2007 to February 15, 2010, the derivative wage statement class, and derivative waiting time penalty subclass. However, it denied the certification motion as to a drivers subclass within the auto-deduct lunch policy theory and a broader rest period policy subclass after February 15, 2010.

Lee v. Dynamex Operations: Defining “Employee” in Misclassification Context

The California Court of Appeal ruled that independent contractor delivery drivers who were formerly classified as employees could rely on the California Industrial Welfare Commission’s (IWC) definition of “employee” for claims that fall within the scope of its wage orders. Lee v. Dynamex Operations West, Inc., No. B249546 (2nd Dist. Div. 7 Oct. 15, 2014) (slip op. available here).

The Dynamex plaintiff had filed the lawsuit in April 2005 on behalf of a class of approximately 1,800 drivers, after Dynamex converted the status of its drivers from employee to independent contractor in 2004. The suit alleged that drivers were still performing the same tasks as they had when classified as employees, with no substantive changes to how their work was performed or the degree of control Dynamex exercised, and, therefore, that the reclassification was in violation of California labor law. Slip op. at 2. After the trial court initially denied class certification, a ruling later reversed by the appellate court, the respondent superior court then certified the proposed class in 2011. Following that certification decision, Dynamex unsuccessfully moved to decertify the class twice and then filed a petition a writ of mandate to the court of appeal, arguing that the lower court “had improperly adopted the definition of ‘employee’ found in [IWC] wage orders to ascertain the status of class members . . . and had failed to use the common law test for distinguishing between employees and independent contractors.” Slip op. at 2 (internal citations omitted).

Wage Order No. 9, applicable to the transportation industry, defines “employ” to mean “to engage, suffer, or permit to work,” while an “employer” is defined as any person “who directly or indirectly . . . employs or exercises control over the ages, hours, or working conditions of any person,” the same language reviewed by the California Supreme Court in Martinez v. Combs, 49 Cal.4th 35 (2010). While acknowledging that it was not inappropriate to rely on the common law standard to determine whether an employment relationship exists, the Martinez court embraced the IWC’s employee-centric definition, stating that they could not ignore the IWC’s broad regulatory definition because it would endanger the IWC’s ability to achieve its statutory purposes. The panel held that the plaintiff should rely on the IWC’s definition of “employee” for claims that fall within the ambit of the wage orders, including claims under unfair competition, failure to pay overtime compensation (1194), failure to provide accurate wage statements (226), and some claims for failure to reimburse for business expenses (2802), while claims that are not violations of the wage orders should apply the common law definition of “employee” under S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal. 3d 341 (1989). The panel ordered the trial court to reevaluate, in light of Ayala v. Antelope Valley Newspapers, Inc., 59 Cal. 4th 522 (2014), whether class certification was still appropriate for any claims that fell outside of Wage Order No. 9.

Dyanmex is the first case in California to directly state that the much broader Wage Order definitions of “employment” discussed in Martinez (rather than the common law definition under Borello) apply to wage-and-hour claims, so long as the claims fall within the reach of Wage Order No. 9.