The Ninth Circuit has revived a prospective nationwide class action in which the plaintiffs allege that developers knowingly marketed properties in the plaintiffs’ neighborhoods to high-risk borrowers, decreasing both the resale value and desirability of the plaintiffs’ properties.  See Maya v. Centex Corp., 2011 U.S. App. LEXIS 19344 (9th Cir. Sept. 21, 2011) (available here).  Last year, the district court granted the defendants’ Rule 12 motion to dismiss, holding that the plaintiffs had failed to allege an “injury” as required by Article III.  Id. at *3-4.  In reversing the district court, the unanimous three-judge panel found that “decreased economic value and desirability are cognizable injuries.”  Id. at 28 (referencing Maya v. Centex Corp., 2010 U.S. Dist. LEXIS 44829 (C.D. Cal. Mar. 31, 2010)).

 The appellate court specifically rejected the district court’s analysis that the plaintiffs’ proffered injuries were too speculative, even if the “plaintiffs will not realize any decrease in the value of their property until they attempt to sell.”  Id. at *23.  Instead, the Ninth Circuit held that “[a] current reduction in the economic value of one’s home is a cognizable injury for constitutional standing purposes.”  Id. at *21. 

 The court also held that the plaintiffs had alleged a separate “injury” because the defendants’ lending practices made the plaintiffs’ properties “less desirable.”  Id. at *24.  The resulting decrease in the plaintiffs’ quality of life is adequate to support standing.  Id.

While this ruling helps homeowners seeking redress for decreased home value and neighborhood desirability, Maya will likely also be extended to other contexts in which the plaintiffs allege a harm that has not yet been realized through a formal economic transaction.

A district court has granted final approval of a remarkable $42 million settlement against J.P. Morgan Chase bank.  In Davis v. J.P. Morgan Chase & Co., the plaintiffs alleged that the defendant had misclassified loan underwriters as “managers,” and thus impermissibly failed to pay them overtime wages as required by the federal Fair Labor Standards Act (FLSA).  Davis v. J.P. Morgan Chase & Co., No. 01-CV-6492L, 2011 U.S. Dist. LEXIS 117082 (W.D. N.Y. Oct. 11, 2011) (available here).  Class members now stand to recover as much as $94,625 each in compensation from the settlement.  The Court also approved attorneys’ fees in the amount of $14 million dollars, or one-third of the $42 million common fund.  Id. at *10-11.

Emphasizing that class counsel obtained a “very sizable” recovery for the class, the Court found that the $14 million award was justified.  Id. at *33.  The parties relied upon the “percentage method” for awarding fees, “i.e., basing the calculation of attorneys’ fees on a percentage of the fund secured by counsel, rather than using the traditional ‘lodestar’ approach of multiplying an hourly rate by the number of hours reasonably expended.”  Id. at *26-29.  Though the percentage method is commonly used in the Second Circuit, the Court cross-checked the requested attorneys’ fees “’by dividing the proposed fee award by the lodestar calculation, resulting in a lodestar multiplier.’”  Id. at *26-29 (citing In re AT & T Corp., 455 F.3d 160, 164 (3d Cir. 2006)).  Finding a multiplier of 5.3, the Court acknowledged that this is “toward the high end of acceptable multipliers,” but “not atypical.”  Id. 

The Court further observed that any reduction in attorneys’ fees would not benefit the class.  Id. at *24.  “[I]f the Court awards less than one third of the settlement fund as attorney’s fees, that will not increase the amount paid to class members; it will simply decrease the amount paid by defendants.”  Id.  The Court took a similarly pragmatic view in rejecting any analysis of class members’ maximum potential recovery.  The Court wrote that “any dollar figure assigned as the maximum potential aggregate recovery by plaintiffs would mean little, and would not provide a particularly useful benchmark for measuring the reasonableness of the settlement,” because plaintiffs may have had little realistic chance of actually recovering that theoretical sum.  Id. at *12-14.

In approving this settlement, the Davis court substantially deferred to the parties’ negotiated settlement terms, and took a pragmatic, real-world approach.  The Court also underscored the value of the percentage method in tying the recovery of class counsel to that of class members.

In a major victory for the wage-and-hour plaintiffs’ bar, the California Supreme Court denied the petition for review in Brown v. Ralphs, 197 Cal. App. 4th 489 (2011) on Wednesday, October 19, 2011. Brown is widely cited as one of the most significant decisions interpreting the United States Supreme Court’s AT&T Mobility v. Concepcion decision. In Brown, the Court of Appeal held that Concepcion is inapplicable to claims brought pursuant to PAGA, the California Labor Code’s Private Attorneys General Act. The Brown opinion has been relied upon in both state and federal courts to circumscribe the reach of Concepcion. See, e.g., Urbino v. Orkin Servs. of Cal., 2011 U.S. Dist. LEXIS 114746 (C.D. Cal. Oct. 5, 2011). By removing the possibility of Supreme Court reversal of Brown v. Ralphs, the denial of review is expected to solidify the Court of Appeal’s holding and inform the interpretation of Concepcion beyond PAGA.

A district court in the Central District of California has denied a motion to compel arbitration of a representative action brought pursuant to “PAGA,” the California Labor Code Private Attorneys General Act of 2004.  In Urbino v. Orkin Services of California, the Court deemed the parties’ arbitration agreement and representative action waiver unconscionable and unenforceable.  Urbino v. Orkin Services of California, Inc., No. 11-cv-6456, 2011 U.S. Dist. LEXIS 114746, *31-34 (C.D. Cal. Oct. 5, 2011) (available here).  In so ruling, the Court distinguished representative action waivers from the class action waivers enforced by the U.S. Supreme Court in Concepcion v. AT&T Mobility. 

The Urbino court refused to extend Concepcion to PAGA actions because of “the fundamental nature and purpose of a PAGA claim.”  Id. at *39.  PAGA cases are private actions that seek to enforce the Labor Code in the place of the California Labor and Workforce Development Agency.  Id. at *19.  Unlike the consumer claims at issue in Concepcion, which a plaintiff could pursue on an individual basis, PAGA actions must be brought as representative actions on behalf of the plaintiff and other aggrieved employees.  Id. at *41.  In other words, enforcement of a representative action waiver would leave the plaintiff with no viable PAGA claim whatsoever.  The Court’s decision to deny the motion to compel arbitration thus preserved the plaintiff’s right to pursue his PAGA action. 

In reaching this conclusion, the Court affirmed the continuing viability of a California case decided before Concepcion, Franco v. Athens Disposal Co., 171 Cal. App. 4th 1277 (2009).  In Franco, the court held that a PAGA representative action waiver was unconscionable, and thus unenforceable, because the waiver provision prevented aggrieved employees “‘from performing the core function of an attorney general.’”  Urbino, 2011 U.S. Dist. LEXIS 114746 at *35 (quoting Franco, 171 Cal. App. 4th at 1303). 

Urbino confirms the continuing viability of the unconscionability defense to representative action waivers in a post-Concepcion world.  Other California courts have also recently declined to enforce representative action waivers, despite Concepcion, perhaps signaling a positive trend in California towards permitting enforcement of employees’ rights pursuant to PAGA.  See Brown v. Ralphs Grocery Co., 197 Cal. App. 4th 489, 500 (2011) and Plows v. Rockwell Collin, Inc., No. SACV 10-01936, 2011 U.S. Dist. LEXIS 88781, *14-15 (C.D. Cal. Aug. 9, 2011).