Posts belonging to Category Caselaw Developments

The Third Circuit Court of Appeals has taken a moderate approach to the predominance analysis required by the U.S. Supreme Court’s ruling in Dukes v. Wal-Mart, 131 S. Ct. 2541 (2011).  See Sullivan v. DB Investments, No. 08-2784 (3rd Cir. Dec. 20, 2011) (order affirming class certification for settlement purposes) (available here).  In an en banc decision, the Sullivan majority interpreted Dukes as holding that “the focus is on whether the defendant’s conduct was common as to all of the class members, not on whether each plaintiff has a ‘colorable’ claim.”  Id. at 42. 

Two of the panel’s nine judges dissented, arguing that the majority’s relaxed commonality standard resulted in the improper certification of a nationwide class that “includes people who have no legal claim whatsoever.”  Id. at 1 (Jordan, J., dissenting).  The dissenters claim that Dukes expressly requires classwide common questions and answers, which necessarily entail a finding that each class member has a colorable legal claim.  Id. at 10 (Jordan, J., dissenting) (discussing Dukes, 131 S. Ct. 2551).  However, the dissenters do not acknowledge or confront the fact that class members who are ultimately found to lack a viable claim may nevertheless share common questions with the rest of the class. 

The majority addressed the dissent’s contentions and affirmed its holding as consistent with Dukes:

In Dukes, the Court held that commonality and predominance are defeated when it cannot be said that there was a common course of conduct in which the defendant engaged with respect to each individual.  But commonality is satisfied where common questions generate common answers “apt to drive the resolution of the litigation.”  Dukes, 131 S. Ct. at 2551.  That is exactly what is presented here, for the answers to questions about De Beers’s alleged misconduct and the harm it caused would be common as to all of the class members, and would thus inform the resolution of the litigation if it were not being settled.

 Id. at 42.

Because the disagreement between the majority and dissent is likely to play out in other trial and appellate courts, practitioners would do well to anticipate the dissent’s position and to note the majority’s compelling reasoning in response.

A federal appellate court has further limited the application of the U.S. Supreme Court’s ruling in Concepcion v. AT&T.  The Second Circuit has invalidated a class action waiver contained in the arbitration agreement between American Express and the merchant plaintiffs.  See In re American Express Merchants’ Litigation, No. 06-1871-cv (2nd Cir. Feb. 1, 2012) (available here).  The agreement precluded the merchants from having any claim arbitrated on a collective basis.  Slip op. at 8-12 (discussing Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758, 1775 (2010) (holding that parties cannot be compelled into classwide arbitration absent a clear contractual basis)).  The appellate court held that the waiver was unenforceable despite Concepcion, because a prohibition against collective actions would impair the plaintiffs’ ability to enforce their statutory rights under the Sherman Act.  Slip op. at 24.  Specifically, “the cost of plaintiffs’ [sic] individually arbitrating their dispute with Amex would be prohibitive, effectively depriving plaintiffs of the statutory protections of the antitrust laws.”  Slip op. at 21-22.  The panel remanded the case to the district court with instruction to deny American Express’ motion to compel arbitration.  Slip op. at 25.

The Seventh Circuit recently affirmed class certification of wage and hour claims in a decision that provides considerable guidance on the commonality requirements of Dukes v. Wal-Mart.  See Ross v. Charter One, No. 10-3848 (7th Cir. Jan. 27, 2012) (order affirming class certification) (available here).  In Ross, the district court granted certification of the plaintiffs’ unpaid overtime claims.  The defendant appealed to the Seventh Circuit, arguing that the commonality requirements could not be met because the plaintiffs’ claims required individualized proof.  When the Dukes decision was issued, the appellate panel ordered supplemental briefing “addressing whether the class certification order satisfied Dukes.”  Slip op. at 2

The Seventh Circuit ultimately found that Dukes did not require reversal of class certification, because the plaintiffs had shown sufficient evidence of classwide employment policies relating to unpaid overtime.  Slip op. at 15.  For example, the plaintiffs presented 89 putative class member declarations attesting to defendant’s companywide policy of instructing employees not to record overtime.  Slip op. at 18.  This evidence was sufficient to overcome defendant’s contention that putative class members worked unpaid overtime for at least four different reasons, necessitating individualized inquiries.  Slip op. at 16-17. 

The Ross decision is significant because it suggests that the Dukes commonality requirement can be met by clearly articulating a companywide policy and establishing it by means of putative class member declarations.

California’s Fourth Appellate District recently concluded that the Pineda v. Williams-Sonoma Stores decision applies retroactively.  See Alvarez v. Brookstone Co., No. D057567 (Cal. Ct. App. Dec. 20, 2011) (available here).  In Pineda v. Williams-Sonoma Stores, 51 Cal. 4th 524 (2011), the California Supreme Court held that the collection of ZIP codes as part of a credit card transaction violates California Civil Code section 1747.08.  Civil Code section 1747.08 prohibits businesses from requesting or recording “personal identification information,” but does not expressly forbid the collection of ZIP codes.  See Cal. Civ. Code § 1747.08 (a)(2) and (b).  The Supreme Court concluded in Pineda that “the only reasonable interpretation of section 1747.08 is that personal identification information includes a cardholder’s ZIP code.”  Id. at 534.

In 2008, the Alvarez plaintiff filed suit alleging that Brookstone violated section 1747.08 when its retail store cashiers requested and recorded customers’ ZIP codes.  Alvarez v. Brookstone Co., No. D057567 (Cal. Ct. App. Dec. 20, 2011), slip op. at 2.  In 2009, the trial court granted the defendant’s demurrer without leave to amend, on grounds that ZIP codes are not “personal identification information” pursuant to section 1747.08.  Slip. op. at 3.  The Court of Appeal reversed, holding that the state Supreme Court’s February, 2011 decision in Pineda is properly applied retroactively.  Slip op. at 6-11.  In its reasoning, the appellate court cited “the general rule of retrospective application of court decisions.”  Slip op. at 6. 

This ruling should prove helpful to California consumers who experienced ZIP code violations prior to the February 2011 ruling in Pineda.  The Alvarez plaintiff is now expected to proceed with her putative class action against Brookstone.