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In Silva v. Medic Ambulance Services, Inc., 9th Cir., No. 20-16135, memorandum 5/4/21 (unpublished mem. available here), the plaintiff, an Emergency Medical Technician, alleged in her state law complaint that her employer, Medic Ambulance Service, Inc. (“Medic”) violated California Labor Code § 226.7 and the Industrial Welfare Commission Wage Order by requiring her to remain on call during rest periods. Mem. at 1. Medic removed the action to the district court on the grounds that the Labor Management Relations Act (“LMRA”) completely preempted at least one of plaintiff’s claims and therefore presented a federal question. Id. at 2.

The plaintiff moved to remand. The district court denied the motion, reasoning that her claims were preempted because they “substantially depend on analysis of” the provisions of a collective bargaining agreement (“CBA”) that governed the terms of the plaintiff’s employment with Medic.  The plaintiff then appealed. The Ninth Circuit reversed, finding that Silva’s state law claims were not preempted because they were not substantially dependent on the CBA (i.e. she could prove them without resort to the CBA), and that the district court therefore lacked removal jurisdiction. The Ninth Circuit remanded the matter back to the district court with instructions to remand the action back to the state court.

What makes this case interesting is that the Emergency Ambulance Employee Safety and Preparedness Act, California Labor Code §§ 880, et seq. (“the Act”), became effective on December 19, 2019, before judgment was entered, potentially mooting plaintiff’s claim under section 226.7. Section 887 provides, in pertinent part, “[n]otwithstanding any provision of law to the contrary: (a) In order to maximize protection of public health and safety, emergency ambulance employees shall remain reachable by a portable communications device throughout the entirety of each work shift.” According to the concurring opinion, as a result of the Act, the plaintiff no longer had a viable statutory claim, there was no longer any “case or controversy,” and therefore plaintiff lacked Article III standing to pursue the appeal. Rawlinson, J. conc. at 1-3.

The majority of the justices did not reach the issue of whether section 887(a) eliminated plaintiff’s claim, finding it moot in light of its determination that “the federal courts lack subject matter jurisdiction over Silva’s claims.” Mem. at 4, n.1. This is important in a procedural sense since the district court never properly had subject matter jurisdiction over plaintiff’s claims, since they were never actually preempted by the LMRA. Remand is the proper remedy when a federal court lacks removal jurisdiction, not dismissal under Article III. 

Authored by:
Robert Friedl, Senior Counsel
CAPSTONE LAW APC

Smith v. LoanMe, Inc., No. S260391 (April 1, 2010) (“Smith”) (slip op. available here) presents a familiar scenario—a person answers his or her cellular or cordless phone and hears a “beep” during a call. The caller then records the call without first seeking the receiving party’s consent. In Smith, a unanimous California Supreme Court interpreted Penal Code section 632.7 to prohibit parties to a call made between a cellular or cordless phone and another telephone device from intentionally recording the call without the consent of all parties to the communication. Slip op. at 26. Smith reversed an appellate court that held that section 632.7 only applied to third parties who intentionally recorded calls.

In Smith, the defendant had extended a loan to the plaintiff’s wife. In connection with the loan, one of the defendant’s employees called the phone number provided by the wife. The plaintiff answered the call on a cordless phone. Three seconds later, the defendant caused a “beep” tone to sound on the call and recorded the call. Smith told the defendant’s representative that his wife was not home and the call ended. Slip op. at 2.

The Court of Appeal found this conduct to be legal, holding that section 632.7 was unambiguous and only prohibited intentional recording of phone calls on cellular and cordless phones by third party eavesdroppers. The appellate decision turned on statutory construction. “The statute . . . requires that the interception or receipt of the [covered] communication be without the parties’ consent. But the parties to a phone call always consent to the receipt of their communications by each other — that is what it means to be a party to the call.” Slip op. at 3. The appellate court concluded that “parties to a phone call are incapable of violating section 632.7, because they do not intercept or receive each other’s communications without all parties’ consent.” Id. at 3-4.

The California Supreme Court allowed that section 632.7 could conceivably support the Court of Appeal’s interpretation, but found that the statute was ambiguous. Considering the context, legislative history, and public policy of section 362.7, the court came to the opposite conclusion—that section 326.7 does apply to parties to a phone call. Id. at 10-22.

In particular, Smith brought the interpretation of section 632.7 in line with section 632 (applying to landlines) and vindicated the legislature’s intent that section 326.7 provides a greater degree of privacy and security to persons who use cellular or cordless telephones. Section 632 already provided parties as well as nonparties from nonconsensual recording of “confidential communications.” Slip op. at 7. Smith held that the same protection should be afforded users of cellular and cordless phones. In addition, the legislature intended that users of cellular and radio telephone technology have greater privacy protections because such systems inherently have less of a guarantee of privacy than landline systems. Id. at 20. Section 632.7 extends the protections of the Invasion of Privacy Act even to non-confidential communications. Id. at 9-10.

Smith is also important because the appellate court’s decision was the first published opinion by a California appellate court to have specifically addressed whether section 632.7 applies to the intentional recording of a communication by a party. The majority of federal district courts hold that section 632.7 applies to parties to a call, but a minority aligns with Court of Appeal’s conclusion that the section only prohibits intentional recording of calls by third parties. Slip op. at 8-9. Had the California Supreme Court not granted review, federal courts could have followed the minority view, chipping away at the protections intended by the Invasion of Privacy Act.

Unresolved by Smith is whether a “beep” tone at the beginning of a phone call gives a person sufficient notice that their conversation is being recorded. Slip op. at 26. Given that a “beep” tone at the beginning of a telephone call has become ubiquitous, that will be an important issue for another day.

Authored by:
Robert Friedl, Senior Counsel
CAPSTONE LAW APC

The unpublished opinion in Melissa Magana v. Zara USA, Inc. (9th Cir. Feb. 2, 2021) (“Magana”) (slip op. available here), highlights a notable concern when bringing an action under the Private Attorneys General Act (“PAGA”). If the PAGA representative was an unnamed class member in a prior wage-and-hour class action that settled, is he or she barred from maintaining a later action under PAGA?

In Magana, the plaintiff filed a lawsuit seeking PAGA penalties based on suitable seating violations under the California Labor Code. The defendant Zara moved to dismiss. The district court held that the PAGA action was not contractually barred by the terms of the prior settlement, but was barred under the doctrine of claim preclusion. The Ninth Circuit reversed.

On the first issue, the defendant argued that the plaintiff’s PAGA action based on suitable seating violations was barred because the settlement agreement defined “PAGA Settlement Amount” as constituting “full satisfaction of all claims for PAGA civil penalties under the California Labor Code, Wage Orders, regulations, and/or other provisions of law alleged to have been violated with respect to the settlement class.” Slip op. at 2-3. The majority of the court disagreed. The Release of Claims in the prior action applied only to “claims for relief based on the facts alleged in [the complaint].” Id. at 3. Those claims included unpaid overtime, unpaid minimum wages, noncompliant wage statements, failure to provide meal and rest breaks, and the untimely payment of wages in violation of the California Labor Code, as well as a derivative claim for PAGA penalties. However, the complaint did not allege any facts relating to seating. Id. at 4.

The panel’s conclusion was not unanimous. Justice VanDyke argued in a dissent that the prior release did bar the later action because the “all claims for PAGA civil penalties” language in the definition of the PAGA Settlement Amount “is pretty clear,” while the “based on facts alleged” language of the Release of Claims is ambiguous. Slip op., VanDyke, J., dissenting at 1-2. The dissenting justice concluded, “I would not use an ambiguous phrase to limit a clear one.” Id.

On the second issue, the majority of the court held that claim preclusion did not apply to bar the plaintiff’s suitable seating claim because the “primary rights” at issue in the earlier action did not implicate the same primary rights as the plaintiff’s suitable seating claim. Slip op. at 5. The justices reasoned that it makes sense to draw a distinction between wage-related claims such as those in the earlier action, and non-wage claims such as Magana’s suitable seating claim. Id. at 6. The court stated that the harm at the center of the earlier case was “nonpayment of wages,” while “the harm of a suitable seating violation is much more abstract and cannot be redressed via the payment of wages.” Id. at 9. However, the court’s reasoning in this unpublished case is not unequivocal. It stated, “[w]e recognize that the resolution of the primary-rights question ultimately boils down to a question of framing: does the suitable seating claim narrowly implicate the right to seating, or does it implicate a broader right to a minimum guaranteed standard of labor?” Id. at 6.

Magana underscores that California citizens who plan to file actions under PAGA need to take care if they were class members in a prior class action against the employer that has settled. Even if the prior class action involved facially different Labor Code violations, broad language in a settlement agreement, or similar “primary rights,” could bar a subsequent PAGA action.

Authored by:
Robert Friedl, Senior Counsel
CAPSTONE LAW APC

In McGill v. Citibank, N.A., 2 Cal.5th 945 (2017), the California Supreme Court held that under California law, a provision in any contract purporting to waive a party’s right to seek public injunctive relief in any forum is contrary to public policy and unenforceable. Id. at 952. The legal requirement that contracts must allow public injunctive relief is known as the McGill rule. DiCarlo v. MoneyLion, Inc., 9th Cir. Feb. 19, 2021 (“DiCarlo”). Slip op. at 6 (available here). The McGill rule has provided consumer plaintiffs with a stalwart defense against being compelled to arbitration. In DiCarlo, the Ninth Circuit held that an arbitration agreement that allows a litigant “all remedies” available in an individual lawsuit does not violate the rule.

In DiCarlo, the defendant operated a smartphone app that provided financial services to its customers. The services included a product called the MoneyLion Plus program, which offered a credit-builder loan. The plaintiff joined the program and signed a membership agreement, but fell behind on her fees and loan payments. Unable to cancel her membership without paying off the loan, the plaintiff filed a putative class action under California’s Unfair Competition Law (“UCL”), False Advertising Law (“FAL”), and Consumers Legal Remedies Act (“CLRA”). Slip op. at 3-4.

The defendant moved to compel the plaintiff’s claims to arbitration under an arbitration provision contained in the membership agreement. DiCarlo opposed the motion based on the McGill rule, arguing that the provision violated California law by prohibiting public injunctive relief. Slip op. at 5. The defendant argued that its arbitration provision, in fact, allowed public injunctive relief. Id. The Ninth Circuit agreed.

The defendant’s arbitration provision “‘authorize[s] the arbitrator to ‘award all [injunctive] remedies available in an individual lawsuit under [California] law.’” Slip. op. at 7. McGill has made clear that a litigant can seek public injunctive relief in an individual lawsuit under the UCL and FAL. Id. at 14 (citing McGill, 2 Cal.5th at 959). Public injunctive relief is typically available in consumer arbitrations, according to the Ninth Circuit. Id. (citing Blair v. Rent-A-Ctr., Inc., 928 F.3d 819, 829 (9th Cir. 2019)). Thus, the court of appeals concluded, the “all remedies” clause in the arbitration provision allowed the plaintiff to seek public injunctive relief in arbitration. Furthermore, the Ninth Circuit held that a plaintiff need not act as a private attorney general or represent others in order to obtain a public injunction.

Authored by:
Robert Friedl, Senior Counsel
CAPSTONE LAW APC