Posts belonging to Category Caselaw Developments

The Second Circuit has recently issued a decision with important guidance for trial courts assessing attorney fee applications under a fee-shifting statute. In Millea v. Metro-North Railroad, the plaintiff successfully brought claims against his former employer under the federal Family Medical Leave Act (FMLA), but was awarded only $204 in attorneys’ fees (one-third of the approximately $612 he recovered). See Millea v. Metro-North R.R. Co., 10-409-cv, 2011 U.S. App. LEXIS 16354 (2d Cir. Aug. 8, 2011) (available here).

Because the FMLA contains a fee-shifting provision, the Second Circuit began its analysis with the observation that both it and the U. S. Supreme Court have held that the lodestar method sets a presumptively reasonable fee in actions where a fee-shifting statute applies. See id. at *24. There was no express indication in the district court record of whether a lodestar analysis was conducted, though it does state that Millea requested fees totaling $144,792. Although downward adjustments to a lodestar are sometimes appropriate, the Second Circuit notes that such adjustments should be limited only to “rare circumstances.”  Id.

In assessing the district court’s stated reasons for reducing the fee request, the Second Circuit’s decision took up and rejected each in succession. The decision first addressed the district court’s reliance on the case’s supposed lack of novelty and complexity as one factor in reducing the fee request. The appellate panel reasoned that it is inappropriate to use such reasoning, since novelty and complexity are already embodied in a lodestar, which is based on the total hours billed. More complex or novel cases will naturally require expending a greater number of hours, while less complex issues require fewer hours.  See id. at *25. The panel also rejected the district court’s analysis that the plaintiff’s FMLA claim lacked public policy significance, reasoning that since Congress enacted the fee-shifting provision for FMLA claims, the public policy significance of such claims is not in dispute.  See id. at *26. As to the district court’s conclusion that the fee request should be reduced on the basis of the plaintiff losing on his intentional infliction of emotional distress (IIED) claim, the appellate panel pointed out that, again, this is already incorporated into a lodestar calculation, which excludes claims not eligible for fee shifting (such as the plaintiff’s IIED claim).  Id. at *27.

Finally, as a general statement of principal as to the rules for determining attorney fee awards under fee-shifting statutes, the appellate panel held that it was “legal error” for the district court to have “calculated its final fee award as a proportion of the damages” awarded to the plaintiff.  Id. at *30. The plaintiff’s FMLA-related award was $612.50, and the district court determined the $204 fee award in relation to those damages. The unanimous panel took issue with the implicit premise that the fees must be a fraction of the recovery, irrespective of the amount of the recovery or the significance of the legal issue, stating: “The whole purpose of fee-shifting statutes is to generate attorneys’ fees that are disproportionate to the plaintiff’s recovery.”  Id. at *31.

While the wait continues for a California Supreme Court decision in the Brinker case that will establish exactly what constitutes meal and rest break violations, the Second Appellate District has issued an important, pro-worker ruling regarding the Labor Code’s requirement (under § 226.7(b)) that employers compensate employees with an additional hour of pay for meal and rest break violations.  See United Parcel Serv. v. Super. Ct., No. B227190 (Cal. Ct. App. Feb. 16, 2011) (order denying petition for writ of mandate) (available here).

At issue in Allen v. UPS, pending in L.A. Superior Court’s Complex Division, before Judge Carl J. West, was the defendant’s contention that Section 226.7(b) provides for only one penalty, or “premium,” payment per employee per day, irrespective of the total number of meal and rest break violations.  Thus, by UPS’s conception of the statute, if both meal and rest break violations occur for the same employee, during the same workday, the employer would owe only one extra hour of pay pursuant to Section 226.7(b).  Judge West disagreed, and denied the UPS motion.

UPS filed their writ petition, which Division Eight of the Second Appellate District denied, thereby sustaining Judge West’s ruling.  The extensively-reasoned written decision is expected to have influence beyond the somewhat limited realm in which California intermediate appellate opinions are formally binding.  Foremost, federal courts, which increasingly preside over wage-and-hour class actions concerning questions of California law, are likely to consult and rely on the UPS ruling.  Additionally, the valuation of meal and rest break claims settled in mediations now have a definite reference point, and a non-speculative basis for countering defendants who insist that Section 226.7 payments are limited to one per day, per employee. 

In an important articulation of the standing requirements under California’s Unfair Competition Law (UCL) and Rule 23’s requirement that common questions of law or fact predominate in certified class actions, the Ninth Circuit has reversed Central District Judge Dale Fischer’s 2008 denial of class certification in three consolidated cases alleging that Ticketmaster deceived plaintiffs into registering for a coupon program that resulted in nearly $60 million in unintended charges triggered by a website “click through.”  See Stearns v. Ticketmaster Corp., No. 08-56065, No. 09-56126, No. 10-55341, 2011 U.S. App. LEXIS 17454 (9th Cir. Aug 22, 2011) (available here).   

Judge Fischer had denied certification of the UCL action, reasoning that all class members—the named plaintiffs as well as the absent class members—must identically prove the requisite injury to establish standing and thereby be eligible to seek remedies for the allegedly deceptive practice.  Stearns at *11-12.  The necessity of those individual determinations, Judge Fischer concluded, gave rise to individual issues, thus precluding certification.  Id.  The Ninth Circuit reversed.  

Writing for a unanimous three-judge panel, Circuit Judge Ferdinand F. Fernandez explained that the California Supreme Court’s In re Tobacco II requires only that the named plaintiff in a UCL action demonstrate actual injury and that Ninth Circuit precedent holds the same, as do class actions generally, stating: “At least one named plaintiff must satisfy the actual injury component of standing in order to seek relief on behalf of himself or the class.  The inquiry is whether any named plaintiff has demonstrated that he has sustained or is imminently in danger of sustaining a direct injury as the result of the challenged conduct.”  Id., citing Casey v. Lewis, 4 F.3d 1516, 1519 (9th Cir. 1993).  He also underscored that “our law keys on the representative party, not all of the class members, and has done so for many years.”  Stearns at *15.

With the issuance of its opinion in Plows v. Rockwell Collins, the Central District has added to the list of cases circumscribing the application of the U.S. Supreme Court’s Concepcion v. AT&T, articulating a doctrine of waiver that is likely applicable to many defendants that have suddenly moved for arbitration following the April 27, 2011 issuance of Concepcion; underscoring the California Court of Appeal’s holding in Brown v. Ralphs Grocery Co. that Concepcion is inapplicable to representative actions brought pursuant to PAGA (the Labor Code Private Attorney General Act of 2004); and holding that Gentry v. Superior Court remains good law.  See Plows v. Rockwell Collins, Inc., No. SACV-10-1936 DOC, 2011 U.S. Dist. LEXIS 88781 (C.D. Cal. Aug. 9, 2011) (available here).

In finding that Rockwell Collins had waived any entitlement to arbitration, Central District Judge David O. Carter found that the defendant had behaved in a manner “inconsistent with a demand for arbitration” by availing itself of the court system with venue transfer and removal motions, propounding discovery, participating in meeting and scheduling conferences, and waiting to move to compel arbitration until nearly 13 months after the case was filed, just a matter of days after Concepcion was issued.  Plows at *6.

Additionally, Judge Carter denied the defendant’s motion to compel arbitration as to PAGA claims, citing to the Court of Appeal’s Brown v. Ralphs decision concerning precisely the same issue:

The California Court of Appeals, in Brown, comprehensively and persuasively discussed the reasons why class action waivers contained in arbitration agreements may not be used to divest plaintiffs of their right to bring representative actions under PAGA.  Specifically, the Court of Appeals emphasized that “the purpose of the PAGA is not to recover damages or restitution, but to create a means of ‘deputizing’ citizens as private attorneys general to enforce the labor code.”

Plows at * 14-15, quoting Brown v. Ralphs, 197 Cal. App. 4th at 501.

Finally, Plows distinguished Gentry v. Superior Court (which establishes a four-factor test for determining whether mandatory arbitration provisions are unenforceable in employment contracts) from Discover Bank v. Superior Court (which governed arbitration clauses in consumer contracts and was expressly overruled by Concepcion).  Plows, relying on Brown v. Ralphs, notes that, in contrast to Discover Bank, Gentry’s focus is on unwaivable rights, and that the Supreme Court expressly limited itself to overruling Discover Bank.  Again lauding Brown v. Ralphs as being “persuasive” (Plows at *13), Judge Carter ruled that the plaintiff would be permitted to conduct discovery precisely directed at establishing whether the at-issue employment agreement and arbitration clause are enforceable under Gentry.