In Nelson, the plaintiffs, drivers for the SoCal Gas Company, brought a putative class action seeking unpaid wages and other damages arising from alleged meal and rest break violations, “off-the-clock” work, and other derivative violations. Slip op. at 2. The plaintiffs also sought separate relief, as the proxy of the State seeking the recovery of civil penalties pursuant to PAGA. Slip op. at 3. The defendant filed a motion for an order that would both declare the suit inappropriate for class treatment and deny the plaintiffs’ PAGA claim. Soon after, the plaintiffs filed a motion for class certification. The trial court denied the motion for class certification, reasoning that common questions would not predominate. Applying substantially the same analysis, the trial court also held that the plaintiffs could not bring their PAGA claim “because individual issues would predominate and a representative action would not be manageable.” Slip op. at 13.

The plaintiffs appealed both the trial court’s denial of their class certification motion and the effective dismissal of the PAGA claim. While this Court of Appeal held that the trial court had not abused its discretion in denying class certification (see slip op. at 14-29), it reversed the trial court’s PAGA analysis and holding, concluding that “the trial court abused its discretion in applying class action requirements to the PAGA claim.” Slip op. at 29.

Although Arias v. Superior Court, 46 Cal.4th 969 (2009), firmly held that class action requirements are inapplicable to PAGA, Arias did not address a case where the PAGA claim is alleged alongside class claims, which is a common type of pleading. The Arias court therefore had no occasion to draw rigorous distinctions between class actions and PAGA representative actions. Indeed, the Nelson trial court was convinced by the defendant’s argument that it could dismiss the plaintiffs’ PAGA claim on the ground that the PAGA litigation would be “unmanageable”― an element found nowhere in the PAGA statute but which is functionally identical to one aspect of the class certification “superiority” analysis. See slip op. at 31. The Court of Appeal identified the fallacy in the defendant’s argument, noting that the trial court’s conclusion that the PAGA claims would be unmanageable was based entirely on a class certification commonality analysis, and found that “[s]ince, under Arias, a plaintiff need not even plead a representative PAGA claim in accordance with class action requirements, it seems anomalous to require that the plaintiff establish the community of interest class action requirement with respect to a PAGA claim, in the context of a class certification procedure.” Slip op. at 31.

Though Nelson has been designated “unpublished,” it is expected that requests for publication will be filed by the June 19th deadline, at least as to the decision’s PAGA reasoning and holding. Although the ultimate holding is identical to Arias, Nelson arose in the context of a motion attacking both class action and PAGA claims, whereas, in Arias, only PAGA claims were at issue. Nelson would thus provide directly on-point authority to the effect that a trial court’s denial of class certification does not imply dismissal of PAGA claims, even (and especially) where the predicate PAGA violations are the same as the alleged violations underlying a plaintiff’s class action claims.

While numerous other cases have argued that interns ought to be paid, Glatt appears to be the first decision to adopt this argument, after rigorously reasoning through the applicable six-part test. See order at 20-26. While not every factor weighed strongly in favor of finding the plaintiffs entitled to pay, Judge William H. Pauley III concluded that the plaintiffs “were classified improperly as unpaid interns and are ‘employees’ covered by the FLSA,” and that “[t]he benefits they may have received—such as knowledge of how a production or accounting office functions or references for future jobs—are the results of simply having worked as any other employee works, not of internships designed to be uniquely educational to the interns and of little utility to the employer.” Order at 26.

Though the decision arose in the context of the entertainment industry, where unpaid internships have for some time gained neophytes entrée to an elite field with virtually limitless long-run income prospects, the decision’s wide media coverage suggests that a major re-think might be underway in all fields that make use of unpaid interns, including politics, high tech, and fashion. Interns who have gone on to major accomplishments in diverse fields include Steve Jobs (Hewlett-Packard), Bill Gates and Patrick Ewing (U.S. Congress), Anderson Cooper (CIA), and Steven Spielberg (Universal Studios).

Eric Glatt, the lead plaintiff, has an MBA from Case Western Reserve University and is currently in law school at Georgetown University. No doubt having already helped shape a major legal issue will assist Glatt in the increasingly competitive atmosphere around landing highly-paid summer associate positions during law school.

Oxford arose when doctors sued their insurance company over reimbursements, and the insurer moved to compel arbitration. Slip op. at 2. After the arbitrator initially found the parties had agreed to class-wide arbitration, the insurer sought reconsideration on the basis of the Supreme Court’s Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010) decision, the most expansive reading of which has been that arbitrators’ referral to class-wide arbitration must be vacated when arbitrators conclude in favor of class arbitration on the basis of anything short of an unambiguous, overt, and mutual consent to use class arbitration. See, e.g., Reed v. Florida Metropolitan Univ., Inc., 681 F.3d 630 (5th Cir. 2012). Instead, Oxford largely adopts a narrower reading of Stolt-Neilsen, embodied in decisions like Jock v. Sterling Jewelers, Inc., 646 F.3d 113 (2d Cir. 2011), which focus on the quite inelastic range of judicial review afforded by the quite clear provisions of Section 10(a)(4) of the FAA and have found an intent to use class arbitration even where the parties’ arbitration agreement does not expressly consent to, or even reference, class arbitration.

Oxford turns entirely on the scope of judicial review under Section 10(a)(4). Under Oxford, there is little or no room for second-guessing the arbitrator’s interpretation provided the arbitrator has done a plausible impersonation of contract interpretation. Though seemingly an aggressive jurisprudential gesture, that Oxford is a unanimous decision is perhaps best explained by how little room Section 10(a)(4) leaves for cogent interpretation other than that adopted in the Kagan opinion concerning the deference owed arbitrators under Section 10(a)(4): “[C]onvincing a court of an arbitrator’s error—even his grave error—is not enough. So long as the arbitrator was ‘arguably construing’ the contract—which this one was—a court may not correct his mistakes. . . . The potential for those mistakes is the price of agreeing to arbitration.” Slip op. at 8.

Specifically excluded from the virtually nationwide settlement are California residents, likely because California has recently enacted among the strictest laws governing the cancellation of automatic monthly payments. Widely known as the “California Gym Cancellation Law,” the Health Studio Services Contract statute (Cal. Civil Code §§ 1812.80-1812.97) would likely have made approval of the Vaughn settlement vulnerable to choice of law doctrines. Also excluded are New Jersey residents, who are class members in a separate class action in which settlement has been reported to be imminent.

The Vaughn complaint, filed in Florida federal court, explained the swiftness with which new members could be signed up, and contrasted that with LA Fitness’ arduous and hard-to-find cancellation procedures: “[W]hile it takes minutes for LA Fitness to sign up a person for a monthly dues membership, it is virtually impossible for a person to cancel the membership and stop paying dues when they want to.” Complaint at ¶ 4, Vaughn v. L.A. Fitness Int’l, LLC, No. 11-0457 (M.D. Fla. Filed Mar. 4, 2011) (available here).

The crux of the allegations in Vaughn and the two other settled actions is that LA Fitness’ representation of a “monthly” contract was deceptive, because as a practical matter new members were obligated to pay dues for a minimum of three months, not merely one month – if they could even effectuate the labyrinthine cancellation procedures. Complaint at ¶¶ 5-7; 19-27. The cancellation procedure was thus designed to “extract dues” and frustrate cancellation, rather than facilitating members’ cancelling a membership they no longer wanted. Complaint at ¶ 7. Exemplifying a growing trend, the plaintiffs made considerable use of online forums in which LA Fitness customers frustrated by their cancellation experiences detailed their attempts to cancel. Complaint at ¶¶ 42-55.

Lou v. Ma Laboratories involved multiple agreements presented to plaintiff Cher Feng, both with and without arbitration provisions. See Lou v. Ma Labs., Inc., No. 12-5409 (N.D. Cal. May 17, 2013) (order denying motion to compel arbitration, available here). Yet despite the defendant having assiduously attempted to preserve its ability to force the plaintiff to arbitration, Judge William Alsup, of California’s Northern District, declined to enforce the at-issue arbitration agreement. See slip op. at 1-2.

Ms. Feng worked as an account manager at Ma Laboratories, and upon being hired, she signed a detailed, fourteen-page employment contract providing for disputes to be litigated in court. Slip op. at 1. However, a few months later, the plaintiff was asked to sign a nine-page “supplement” to the employment contract, which drastically changed the terms of her employment, including the addition of an arbitration clause, and which she contends she was required to sign in order to keep her job. Slip op. at 1-2.

Throughout the Lou decision, Judge Alsup’s focus was on the arbitration clause in the contract supplement. In finding the clause unconscionable, Judge Alsup undertook unconscionability analysis under California law, which has both a substantive and procedural component. “To determine whether an arbitration agreement is unconscionable, courts apply a sliding scale: ‘the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.’” Slip op. at 3, citing Armendariz v. Foundation Health Psychcare Servs., Inc., 24 Cal. 4th 83, 114 (2000). By relying on Armendariz and only making passing reference to Concepcion, Alsup thus tacitly affirmed the continuing vitality of California’s unconscionability doctrine.

Judge Alsup determined that the at-issue arbitration clause was procedurally unconscionable due to it being a contract of adhesion, since there was effectively no opportunity to negotiate its terms. Slip op. at 3-4. In addition, Alsup held to California authority requiring that if the rules governing an arbitration are not attached to an arbitration contract that an employee signs, that weighs as evidence of procedural unconscionability. Slip op. at 4-6. It was as to the arbitration provision’s substantive unconscionability that Alsup deployed his sharpest criticism, assailing the contract’s lack of mutuality (the defendant could litigate claims for injunctive relief, whereas the employer couldn’t) and asymmetric, ambiguous fee-shifting provision. Slip op. at 7-8.

While the decision made clear that the ruling is limited to Ms. Feng’s arbitration agreement, and not to any other class member, it would be surprising if future motions to compel arbitration did not meet the same fate, since the company presumably used the same or similar documents and procedures with all of their employees.

“[A] private agreement purporting to waive the right to take representative action is unenforceable,” the unanimous three-judge panel held, “because it wholly precludes the exercise of this unwaivable statutory right.” Slip op. at 1. The panel noted that AT&T Mobility v. Concepcion, the leading case for those seeking to squelch representative actions through arbitration agreements, “does not require otherwise.” Slip op. at 2.

The plaintiffs worked for the defendant’s “Wheel Works” subsidiary and alleged various wage-and-hour violations. See slip op. at 2. In addition to seeking restitution and damages, the plaintiffs also sought to recover civil penalties, as the state’s proxy, arising from the same workplace violations. The plaintiffs signed a standard dispute-resolution contract, which provided for arbitration of disputes and prohibited arbitration “‘on a class basis or as a collective action or representative action.’” Slip op. at 3. When the action was filed, California had unambiguously made a public policy choice to invalidate representative action waivers in both consumer and wage-and-hour cases. Thereafter, however, a narrow majority of U.S. Supreme Court justices held, in Concepcion, that at least in the consumer context, the FAA trumped California’s policy decision as to representative action waivers. Seizing on the opportunity to extend Concepcion, the Brown defendant moved to compel arbitration, arguing that the FAA also abrogated California’s invalidation of representative action waivers in wage-and-hour actions. The trial court agreed and granted the defendant’s motion. Slip op. at 3.

The Court of Appeal reversed, formally by way of a writ of mandate. See slip op. at 4, 20. The decision comes amid anything but judicial unanimity on the dispositive issue, with Iskanian v. CLS Transportation coming down in favor of enforcing representative action waivers, whereas Franco v. Arakelian Ent. and Brown v. Ralphs hold that Concepcion does not require the enforcement of such waivers. The California Supreme Court is likely to forge the issue’s ultimate resolution when it decides whether to reverse or uphold Iskanian. And if, as did Associate Justice Eugene Premo in Brown v. Morgan Tire, the Supreme Court relies on Brown v. Ralphs, then reversal would appear likely in Iskanian, too.

Justice Premo explained that, similar to the Ralphs appellate court’s holding that FAA preemption would essentially nullify the benefits of PAGA, “[i]n the present case, the EDRP does not explicitly prohibit private attorney general actions but it does prohibit representative actions. Accordingly, it effectively prohibits the employee from prosecuting any PAGA claim at all.” Slip op. at 16. Thus, neither the FAA nor a particular arbitration contract may altogether block a worker from pursuing PAGA civil penalties on a class or collective basis, because a PAGA claim is intrinsically representative. See slip op. at 17.

Judge Lungstrum declined to apply Comcast, giving particular emphasis to Dow’s belated move to decertify, as the decision criticized Dow’s untimeliness in bringing its motion, “literally on the eve of trial.” Slip op. at 2. “Dow has not offered any reason why it could not have filed its motion much earlier. . . . Reconsideration of the Court’s certification order at that time or even post trial would cause severe prejudice to plaintiffs, who prepared for a long and complex trial at great expense.” Id.

Del Monte sought to foreclose these issues from ever being assessed on the merits with a motion to dismiss based on standing, preemption, and abstention. See Order at 4-6. While District Court Judge Yvonne Gonzalez Rogers formally denied in part and granted in part the motion, as a practical matter the motion was denied, as the claims emerged nearly fully unscathed.

Del Monte’s basis for dismissal with perhaps the broadest resonance was its theory that the named plaintiffs lacked standing by not having plead injury-in-fact. See Order at 15-17. Specifically, Del Monte argued that the diminution in value alleged by the plaintiffs (i.e., the quantum by which the products were priced above their true market value owing to the deceptive labeling) was insufficiently tangible and particularized to satisfy Article III standing requirements. Id. Additionally, Del Monte contended that the plaintiffs failed to satisfy purportedly more exacting standing requirements under California’s Unfair Competition Law. Id. The court sided with the plaintiffs, however, holding: “Plaintiffs allege they paid a premium for Del Monte’s products which they otherwise would not have paid but for Del Monte’s misrepresentations. As with Article III standing, the Court finds that Plaintiffs have alleged economic injury resulting from Del Monte’s alleged unfair competition and false advertising.” Order at 17.

Del Monte had argued that the claims are preempted by federal food-labeling legislation, the determination of which turned on whether the plaintiffs’ claims seek to impose labeling requirements in excess of those mandated by federal law. Order at 7. Judge Rogers held that there was no federal preemption, as the plaintiffs sought to impose labeling requirements coextensive with federal law. Order at 10-11. Additionally, Judge Rogers rejected Del Monte’s theory of implied preemption. Order at 13.

No more availing was Del Monte’s abstention theory, based on the primary jurisdiction doctrine, which allows trial courts to stay cases pending resolution of the same issues by an administrative agency with special competence in the issue being litigated. See Order at 13-14. Del Monte posited the FDA to be the federal agency with special food labeling competence, but because the plaintiffs’ claims did not encroach on the FDA’s role in promulgating regulations, and merely sought to enforce what the FDA and California law both already required, the abstention theory of dismissal was also rejected. Order at 15.

The plaintiff’s claims were typical of those in wage and hour class actions, with each individual employee’s damages likely to be too small to be economically feasible to support individual actions. The Leyva plaintiff sought to represent 500-plus fellow employees who worked in the warehouse of Medline Industries, a maker of medical products. Slip op. at 3. The plaintiff alleged that Medline’s policy of rounding employees’ start times according to 29-minute increments systematically resulted in off-the-clock work and that Medline improperly calculated employees’ overtime pay rates, in addition to waiting-time penalty and wage statement claims. Slip op. at 3-4.

The district court had denied certification principally because “[e]ach of the 500 putative class members are allegedly entitled to different damage awards for being ‘short-changed’ by the rounding policy and/or the [overtime calculation] policy.” Slip op. at 6. The court also found that management of the case of a class action would be too unwieldy, again because of the differences in the class members’ damages. In rejecting Central District Judge R. Gary Klausner’s reasoning, the Ninth Circuit underscored the continuing validity of a maxim many had thought imperiled by Comcast: that variations in damages cannot, alone, defeat certification. See slip op. at 7-8, citing Blackie v. Barrack, 524 F.2d 891, 905 (9th Cir. 1975).

The decision also emphasized that “damages determinations are individual in nearly all wage-and-hour class actions” (slip op. at 7, referencing Brinker), implying that Comcast would not be allowed to indirectly eliminate what has been recognized as the only practical way of enforcing California’s workplace protections. The decision explained as follows: “Here, unlike in Comcast, if putative class members prove Medline’s liability, damages will be calculated based on the wages each employee lost due to Medline’s unlawful practices. . . . Medline’s computerized payroll and time-keeping database would enable the court to accurately calculate damages and related penalties for each claim.” Slip op. at 8-9.

The Leyva decision goes on to demonstrate how Medline had used these computerized records in its Notice of Removal, and had separately calculated each prospective class member’s potential damages. Slip op. at 9. While defendants will likely take this as a reason to avoid offering up similar calculations, the data underlying those calculations is typically available through discovery in wage-and-hour class actions.

However, rather than an altruistic gesture on Schwab’s part, removal of the class action waiver comes as the result of a complex set of events, whereby a FINRA (Financial Industry Regulatory Authority) panel decided to permit such waivers, but the decision was later opposed by the larger body of the FINRA itself. Thus, rather than renouncing arbitration and class action waivers altogether, it appears that Schwab is temporarily opting out while the FINRA sorts out its ultimate policy decision. FINRA is the organization that has conducted the bulk of arbitrations between Schwab and its clients.