Posts belonging to Category Motion Practice



Bailey v. Rite Aid Corporation: Deception Is in the Eye of the Beholder

In Bailey v. Rite Aid Corporation, Defendant Rite Aid recently petitioned the Ninth Circuit for permission to appeal an order certifying a class of California consumers who purchased Rite Aid gelcaps (an acetaminophen product) labeled as “rapid release.” See Petition for Permission to Appeal Under Federal Rule of Civil Procedure 23(f), Bailey v. Rite Aid Corporation, No. 21-80061 (9th Cir. June 9, 2021) Dkt. No. 1-3 (“Petition”) (petition available here).

According to the plaintiff, Rite Aid gelcaps labeled as “rapid release” are sold in Rite Aid stores within “eye-view” of less expensive Rite Aid acetaminophen tablets that are not labeled “rapid release.” The plaintiff’s theory of liability is that because both products are within “eye-view,” and only one product is labeled “rapid release,” reasonable consumers would conclude that the gelcaps are faster-acting than the tablets, when in fact they are not. See Bailey v. Rite Aid Corporation, No. 4:18-cv-06926-YGR, N.D. Cal. April 28, 2021 (order granting in part and denying in part motion for class certification; order re: motions to seal, slip op. available here) (“Bailey”). The district court accepted the plaintiff’s theory and concluded that whether a reasonable consumer is likely to be deceived by Rite Aid gelcaps’ “rapid release” claim can be resolved by common evidence on a class-wide basis. Id. at 7-8.

Rite Aid states in its petition, “[t]his is not a typical product mislabeling case where the challenged product label is false or misleading on its face.” Petition at 1 (emphasis in original). That is true. “[The plaintiff]’s theory of liability requires a comparison by consumers of the label and price of the Rite Aid gelcaps against the labels and prices of cheaper Rite Aid acetaminophen tablets placed near the gelcaps.” Slip op. at 5 (emphasis added).    

That is no bar to liability. It is indisputable that consumers compare labels when shopping for products. The plaintiff’s “eye-view” theory simply applies the merchandising principle that in comparing products, in-store product placement and layout strategy has a powerful influence on consumers’ purchasing decisions. Therefore, as Bailey demonstrates, consumer deception in labeling cases need not be limited to the four corners of a product’s label. Rather, the context of how products are presented in stores—what consumers see—can also deceive.

Authored by:
Robert Friedl, Senior Counsel
CAPSTONE LAW APC


Brown v. Cinemark: 9th Cir. Finds Cert Denial Appealable Following Settlement for Consideration & Recognizes Minimal Standard for PAGA Notice Letters

On December 7, 2017, in a published order, the Ninth Circuit rejected dismissal of an appeal of the denial of class certification by two plaintiff employees who had settled their individual claims and preserved certain class and representative claims for appeal, because the parties’ mutual settlement for consideration did not amount to “sham tactics” to manufacture an appealable final judgment under recent Supreme Court precedent. Brown v. Cinemark USA, Inc., No. 16-15377 (9th Cir. Dec. 7, 2017) (Ms. Brown and Mr. De La Rosa are represented by Capstone Law APC) (order available here). In an unpublished memorandum filed with the order, the panel reversed the denial of class certification and the dismissal of the claim under the Private Attorneys General Act (“PAGA”), finding that the district court had erred in denying class certification based on the pleadings and had erroneously dismissed the PAGA claim for failure to exhaust administrative remedies under Williams v. Superior Court, 3 Cal.5th 531 (2017), a case decided after the district court had issued its order (memorandum available here).

Plaintiffs Brown and De La Rosa were movie theater employees who brought a wage and hour class and representative action against their employer and consolidated their case with another action. The district court denied the plaintiffs’ joint motion for class certification, which, among others, sought to certify a direct wage statement claim under Labor Code section 226(a). The district court’s ruling was based solely on the pleadings, finding the wage statement claims had been pleaded derivatively rather than directly, and provided no Rule 23 class certification analysis. The court also dismissed the direct wage statement PAGA claim for failure to exhaust administrative remedies, finding that the PAGA notice letters had not provided sufficient information. Finally, the district court denied leave to amend the complaint and the remaining individual claims were set for trial. However, prior to trial, the parties settled all remaining individual claims for consideration, reserving the right to challenge the district court’s denial of class certification and the dismissal of Ms. Brown’s PAGA claim. Order at 4. Both plaintiffs appealed the issues reserved by the settlement. Id.

Cinemark subsequently brought a motion to dismiss the appeal in light of Microsoft Corp. v. Baker, 137 S. Ct. 1702 (2017), which was issued after the notice of appeal was filed. The Ninth Circuit denied the motion to dismiss the appeal. First, the Ninth Circuit distinguished Baker, noting that in Baker, the district court had denied class certification and the Ninth Circuit had denied discretionary interlocutory review under Rule 23(f). Order at 4. Then, “rather than pursue their individual claims on the merits, the plaintiffs voluntarily dismissed their own claims with the express purpose of creating a final judgment for appeal.” Id. The Baker plaintiffs subsequently only appealed the district court’s interlocutory order denying class certification. The Supreme Court of the United States found that such a voluntary dismissal did not qualify as a “final decision” within the parameters of 28 U.S.C. § 1291 and was a tactic that would undermine section 1291’s firm finality principle. Id. Here, however, the Ninth Circuit found that “unlike Baker, where the plaintiffs openly intended to sidestep Rule 23(f) when they voluntarily dismissed their claims[,]” after the district court denied certification, the Brown plaintiffs continued litigating their remaining individual claims, some of which resolved in favor of the defendants and some resulted in settlement. Id. at 5. The Brown plaintiffs did not engage in any “sham tactics to achieve an appealable final judgment,” and “the parties’ mutual settlement for consideration in this case does not raise the same concerns.” Id.

Second, the Ninth Circuit reversed the district court’s dismissal of Ms. Brown’s PAGA claim based on a failure to exhaust administrative remedies “[g]iven the import of Williams.” Memorandum at 2. The panel found that the PAGA notice letter “pleaded facts and theories sufficient to put the Defendants and the California Labor and Workforce Development Agency [LWDA] on notice for potential investigation, which satisfies the policy goal of California Labor Code section 2699.3(a).” Id. at 2-3. Quoting the California Supreme Court’s unanimous decision verbatim, the Ninth Circuit underscored that “[h]urdles that impede the effective prosecution of representative PAGA actions undermine the Legislature’s objectives.” Id. at 3. The panel further relied on the powerful dicta in Williams setting a very modest standard for PAGA notice letter sufficiency, recognizing that “[n]othing in Labor Code section 2699.3, subdivision (a)(1)(A), indicates the ‘facts and theories’ provided in support of ‘alleged’ violations must satisfy a particular threshold of weightiness, beyond the requirements of nonfrivolousness generally applicable to any civil filing.” Id.

Third, the Ninth Circuit found the district court erred in denying class certification of the direct wage statement claim on the basis of the pleadings. Memorandum at 3. Because the district court based its decision to deny certification solely on the pleadings rather than a Rule 23 analysis, the Ninth Circuit reviewed that decision de novo rather than applying the more deferential abuse of discretion normally reserved for certification rulings. It concluded that the pleadings put the defendants on sufficient notice of wage statement violations, whether direct or derivative, and further found that the plaintiffs’ pleadings merited a Rule 23 analysis for their direct wage statement claim. Id. It thus vacated the order and remanded for the district court to conduct a Rule 23 analysis.

The import of the Brown rulings is that Baker does not necessarily preclude federal appellate review of certification orders pursuant to partial settlements for consideration, particularly when the parties continue litigation. Further, with respect to PAGA notice letters, the Ninth Circuit has demonstrated that the California Supreme Court’s recent pronouncement in Williams is key—that PAGA notice letters need not meet any “threshold of weightiness,” but need only put defendants and the LWDA on notice of potential investigations, a low bar that need only pass the requirements of “non-frivolousness.”

Authored By:
Liana Carter, Senior Counsel
CAPSTONE LAW APC

Recent N.D. Cal. Decisions Provide Framework for W&H Litigation Against Commercial Airlines

The extent to which California’s wage-and-hour protections apply to airline industry employees was recently clarified in two decisions out of the Northern District of California: first in Bernstein v. Virgin America, No. 15-cv-02277 (N.D. Cal. Jan. 5, 2017) (“Bernstein”) (slip op. available here), and second, in Oman v. Delta Airlines, No. 15-cv-00131 (N.D. Cal. Jan. 6, 2017) (“Oman”) (slip op. available here). Together, these decisions affirm that airline industry employees who work in California may be protected by the California Labor Code and provide a framework for how courts will analyze whether the Labor Code applies to employees in positions that require interstate travel.

In Bernstein, the plaintiff brought a class action lawsuit on behalf of Virgin American flight attendants who worked in California, seeking classwide relief for Virgin America’s alleged failure to pay overtime and minimum wages, failure to provide meal and rest breaks, and failure to provide accurate wage statements. After the court certified a class of California-based flight attendants and a California residents subclass, Virgin America moved for summary judgment on the plaintiffs’ claims on the basis that California labor law did not apply to their employment because of the presumption against extraterritorial application of California’s labor laws and the Dormant Commerce Clause. Slip op. at 6. Virgin America also moved for summary judgment on the plaintiffs’ meal and rest break claims based on preemption under the Federal Aviation Act and Airline Deregulation Act, but those arguments were rejected. Id.

Virgin America’s primary argument was that California labor law did not apply to the flight attendants because they did not work either exclusively or principally in California, but rather across multiple jurisdictions and in federally-regulated airspace. Slip op. at 6. The court rejected the premise of Virgin America’s argument that job situs alone was determinative. Id. at 7. Instead, the court relied on the California Supreme Court’s decision in Sullivan v. Oracle Corp., 51 Cal. 4th 1191 (2011), in adopting a “multi-faceted approach,” in which the court considers several factors, including: 1) California residency; 2) receipt of pay in California; 3) exclusive or principal “job situs” in California; 4) the employer’s residency; and 5) whether the employee’s absence from the state was temporary in nature. Slip op. at 8. Applying these factors, the court found the plaintiffs were California residents who received their pay in California and that Virgin America is a California-based airline headquartered in California. Id. at 8-9. The court further relied on evidence that Virgin received millions of dollars in state subsidies to train its flight attendants in California and that between 88 and 99 percent of Virgin America’s flights each day departed or arrived in a California airport. Id. at 9. Importantly, the court found the fact that the plaintiffs spent only about 25 percent of their total work time in California was not only not dispositive, but relatively less important where temporary out-of-state travel is an inherent part of the job. Id.

In Oman, the court distinguished Bernstein in holding that Labor Code section 226 did not apply to a class of Delta flight attendants, stating that, in contrast to Bernstein where the court recognized multiple factors supporting application of the Labor Code, the plaintiffs sought to apply section 226 “based solely on a flight attendant’s performance of a de minimis amount of work in California during any pay period.” Slip. op. at 9 (italics in original). The court stressed the plaintiffs’ failure to raise any additional facts supporting the application of section 226, noting the plaintiffs did not rely on the flight attendants’ residence, the employer’s residence or other “deep ties” to California, or the performance of a significant amount of work in California during a particular pay period. Id.

Read together, these decisions support plaintiffs’ ability to pursue California Labor Code violations against airlines and other interstate employers. Although it remains unclear just how much of an evidentiary showing is required for the Labor Code to apply, and such determinations will be made on a case-by-case basis, Oman provides that something more than a de minimis amount of work in California is required, while Bernstein provides even as little as 25% of an employees’ work in California will not preclude application of California law as long as there are other facts tying the employee and/or the employer to California. This rather flexible standard should allow plaintiffs to pursue Labor Code claims against interstate employers in industries that that had previously evaded wage-and-hour liability, like the commercial airline industry.

Authored by:
Brandon Brouillette, Associate
CAPSTONE LAW APC

Cohen v. Donald J. Trump: Judge Permits Trump U. RICO Class Action to Proceed to Trial

This month, Judge Gonzalo P. Curiel of the Southern District of California issued a decision that bodes well for consumers seeking relief under the Rackateer Influenced and Corrupt Organizations Act’s (“RICO”) civil action provision. See Cohen v. Donald J. Trump, No. 3:13-cv-02519 (S.D. Cal. Aug. 2, 2016) (slip op. available here). The consumer class action, brought by former attendees of Donald Trump’s “Trump University,” gained national attention after Trump questioned the court’s impartiality given Judge Curiel’s Mexican heritage. Notwithstanding the hype, Judge Curiel’s order denying Trump’s Motion for Summary Judgment offers consumer plaintiffs a roadmap in the sometimes murky landscape surrounding RICO-based class actions.

RICO, enacted in 1970, contains a civil provision providing for treble damages and a private right of action, against certain fraudulent conduct. 18 U.S.C. § 1964(c). Liability under § 1962(c) requires (1) the conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity. Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496 (1985). “Racketeering activity” can include fraud with intent, including misrepresentations and material omissions, made over the mails or “wires.” Slip op. at 7.

The class, certified in 2014, alleged that Trump had violated RICO’s civil provision by portraying Trump University (“TU”) as a “university,” with instructors personally “handpicked” by Donald Trump himself. Slip op. at 2. TU sent consumers “Special Invitation[s] from Donald J. Trump” stating, “[m]y handpicked instructors and mentors will show you how to use real estate strategies,” and that “I can turn anyone into a successful real estate investor, including you.” Id. Discovery revealed an internal TU’s policy encouraging TU employees to “[t]hink[] of Trump University as a real University, with a real admissions process” and encouraging TU employees to “[u]se terminology such as ‘Enroll,’ ‘Register,’ and ‘Apply.’” Id. at 3.

In its motion, Trump argued that the plaintiffs sought “an unprecedented expansion of RICO law” by allowing civil RICO to become “a federal cause of action and treble damages” for every plaintiff in “garden-variety business disputes.” Slip op. at 7. Trump also argued policy dictated against applying civil RICO to consumer class action cases (a false advertising class action, Low, et al. v. Trump University, LLC, et al., No. 3:10-cv-00940, had already been filed; this Cohen RICO action was separately filed and litigated to address different harms). Id. at 10. Judge Curiel noted that while courts have often struggled with the scope of RICO’s civil provision, the U.S. Supreme Court in 1985 noted that Congress stated RICO should be “liberally construed,” and the policy implications of the statute’s breadth were issues for Congress, not the courts, to address. See Sedima, 473 U.S. at 481. The court also rejected the defendant’s argument that several courts have declined to apply RICO to “routine commercial relationships,” finding that in such cases, the plaintiffs had failed to establish an underlying element, such as knowing participation, financial loss, or the existence of an “enterprise.” See slip op. at 9-10.

The defendant further argued the plaintiffs could not show Mr. Trump “conducted the affairs of TU.” Slip op. at 10. Civil RICO requires the defendant to have “participated in the operation or management of the enterprise itself.” Id. (quoting Reves v. Ernst & Young, 507 U.S. 170, 183 (1993)). Mr. Trump argued his role was limited that of an investor and executive. The court noted that the statute’s use of the word “participated” makes clear that RICO liability is not limited to an individual or exclusive director or manager—it is enough for a defendant to play “some part” in directing the enterprise’s affairs. Id. at 12. Further, the court found persuasive the testimony of TU’s Chief Marketing Operator, who stated that, following the publication of TU’s first advertisement, Mr. Trump had asked why the advertisement had been placed on an even numbered page, when odd numbered pages are more visible to readers, calling Mr. Trump “very hands on.” Id. at 10-11 n5. The court found the plaintiffs had made a prima facie showing Mr. Trump had failed to rebut.

The court also rejected Trump’s arguments that the alleged omissions and misrepresentations were not material, finding that the plaintiffs’ evidence, including internal TU policies encouraging employees to use “real university” terminology such as “apply,” and “enroll,” and mailers addressed from Mr. Trump himself stating he had “handpicked” instructors, raised a genuine issue of material fact. Id. at 13-14. Lastly, the court rejected Mr. Trump’s argument that the plaintiffs had failed to show the requisite knowledge and intent, noting that “direct proof of knowledge and fraudulent intent—of what a person is thinking—is almost never available.” Id. at 16.

The court previously vacated pre-trial deadlines while the Motion for Summary Judgment was under submission. With the court’s recent order denying the motion in its entirety, trial dates will likely be reset.

Authored by:
Cody Padgett, Associate
CAPSTONE LAW APC