On March 3, 2014, the Supreme Court granted a petition for certiorari in Busk v. Integrity Staffing Solutions, Inc., No. 11-16892 (9th Cir. April 12, 2013) (slip opinion available here). The Court will resolve the issue of whether time spent in security screenings is compensable under the Fair Labor Standards Act (“FLSA”), as amended by the Portal-to-Portal Act of 1947 (certiorari petition available here).

Busk involves claims by warehouse employees for back pay, overtime, and double damages under the FLSA for time spent in post-shift security screenings. The district court dismissed the employees’ claims, holding that security screenings are typical “preliminary” or “postliminary” activities, and are thus non-compensable under the FLSA pursuant to the Portal-to-Portal Act. The Ninth Circuit reversed, holding that time spent in post-shift security screenings was compensable under the FLSA because the screenings were “require[d]” by the employer, “necessary to employees’ primary work as warehouse employees,” and performed for the employer’s benefit in preventing employee theft. Slip op. at 11. In its cert petition, Defendant argued that the Ninth Circuit’s holding conflicts with decisions from the Second and Eleventh Circuits, which have ruled that time spent in security screenings is not subject to the FLSA because it is not “integral and indispensable” to employees’ principal job activities.

How the Supreme Court rules on this case should have a significant impact on the liability of employers who require employees to pass through security screenings before or after a shift.

The Ninth Circuit Court of Appeals issued a precedent-setting decision in Baumann v. Chase Investment Services Corp. last week (Mr. Baumann is represented by Capstone Law APC), holding that a pure Private Attorneys General Act of 2004 (“PAGA”) action does not meet the definition of a “class action” under Class Action Fairness Act of 2005 (“CAFA”) and thus cannot be removed to federal court. No. 12-55644 (9th Cir. March 13, 2014) (slip opinion available here). Baumann was argued together with Urbino v. Orkin Services of Calif., 726 F.3d 1118 (9th Cir. 2012), as both cases presented the issue of whether PAGA penalties can be aggregated to meet the $75,000 amount in controversy threshold for diversity jurisdiction. In Urbino, the Court answered that question in the negative. The defendant in Baumann had also argued that federal jurisdiction was established under CAFA as a “class action,” and because the United States Supreme Court had granted certiorari in Mississippi ex rel. Hood, Attorney General v. AU Optronics Corp., 571 U.S. __ (2014), to determine whether a parens patriae suit brought by the state is removable under CAFA (albeit under the “mass action” prong), the Baumann court issued a stay following oral argument, pending the outcome of Hood. Ultimately, the Supreme Court in Hood held that a parens patriae suit does not qualify as a “mass action” under CAFA, and is thus not removable.

Baumann is a case based on the unlawful misclassification of Financial Advisor Associates as salaried and exempt employees, and was brought solely for civil penalties under California overtime, meal and rest breaks, and business expense reimbursement statutes. The complaint stated that the plaintiff’s potential share of any penalties recovered and attorneys’ fees would be less than $75,000. Defendant removed the case based on diversity jurisdiction, arguing that the penalties attributable to all non-party aggrieved employees could be aggregated to meet the $75,000 threshold under CAFA, and the plaintiff moved to remand, citing the well-established federal “anti-aggregation rule” that precludes such aggregation, as well as the fact that a PAGA action is not a “class action” under CAFA. The district court denied the motion to remand, but granted a subsequent motion to certify the case for interlocutory appeal. The Ninth Circuit then granted the plaintiff permission to file a discretionary appeal due to the split among federal district courts as to PAGA’s treatment under both federal diversity jurisdiction and CAFA.

After a full merits briefing and oral argument, the panel reversed the lower court’s order. Building on the Ninth Circuit’s decision in Washington v. Chimei Innolux Corp., which held that parens patriae suits are not “class actions” within the plain meaning of CAFA because they “lack the defining attributes of true class actions . . . [and] only ‘resemble’ class actions in the sense that they are representative suits,” 659 F.3d 842, 847-850 (9th Cir. 2011), the Baumann court held that PAGA actions are likewise not sufficiently similar to Rule 23 class actions to establish original jurisdiction under CAFA. Dissimilarities between PAGA and class actions identified by the court included that, in PAGA actions, there are no notice requirements, non-party aggrieved employees cannot opt out of the proceedings, the court does not assess the adequacy of the named plaintiff or counsel, and a final judgment does not preclude aggrieved employees from seeking other remedies based on the same predicate labor code violations in the future. The panel stated, “[i]n the end, Rule 23 and PAGA are more dissimilar than alike. A PAGA action is at heart a civil enforcement action filed on behalf of and for the benefit of the state, not a claim for class relief.” Slip op. at 14. Also, in light of Urbino, because plaintiff’s portion of the recovery would be less than $75,000, the court found no diversity jurisdiction under 28 U.S.C. section 1332(a), and therefore plaintiff’s motion to remand should have been granted.

Taken together, Baumann and Urbino would seem to foreclose federal jurisdiction for nearly all suits filed in state court seeking only civil penalties under PAGA.

After re-listing the “moldy washing machine” cases multiple times, the Supreme Court finally denied certiorari petitions in a trio of cases: Whirlpool Corp. v. Glazer, 722 F.3d 838 (6th Cir. 2013), Sears, Roebuck & Co. v. Butler, 727 F.3d 796 (7th Cir. 2013), and BSH Home Appliance Corp. v. Cobb, 289 F.R.D. 466 (C.D. Cal. 2012). See Supreme Court 2013 Term Order List 02/24/14 (available here). Plaintiffs in the Whirlpool and Sears suits alleged that various models of Whirlpool’s front-loading washing machines contain a design defect that causes moldy odors. Petitioners asked the Court to rule on two issues: 1) whether a class can be certified where most members did not experience the alleged defect or harm and 2) whether Federal Rule 23(b)(3) predominance requirement can be fulfilled where the courts have not found that the aggregate of common liability issues predominates over the aggregate of individual issues.

Previously, the courts in Whirlpool and Sears (Sixth and Seventh Circuits, respectively) had upheld certification of classes which included consumers whose washers did not manifest the alleged mold defect. The Sixth Circuit had found that the presence of a defect might be a compensable injury even if it never manifested in some washers, because the plaintiffs might be able to show they were injured by having to pay a premium for the washer as it was designed. Whirlpool, 678 F.3d 409, at 420 (6th Cir. 2012). The Seventh Circuit had found that the class could be certified even if the members had not all suffered the same damages. Sears, 702 F.3d 359 (7th Cir. 2012). However, following the Supreme Court’s ruling in Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013), which held that where damages are an element of liability, they need be determinable on a class-wide basis, the Court granted, vacated, and remanded the certiorari petitions in Whirlpool and Sears, instructing the circuit courts to revisit the certification analysis in light of Comcast. On remand, both the Sixth and Seventh Circuits reaffirmed their prior decisions granting certification, construing the Comcast decision narrowly, as not applicable to cases where the plaintiffs proposed the certification of liability-only classes and left damages issues for individual determination.

Many in the legal community thought that another reversal and vacatur would have dealt a huge blow to consumer class actions, in keeping with the trend of the conservative, pro-business Supreme Court’s decisions circumscribing class certification. Instead, the Court’s passing on any kind of review shows that consumer class actions, where fewer than all of the class members experienced injury, remain fully viable. The denial of certiorari in these moldy washer cases leaves the circuit courts’ decisions undisturbed, allowing for more favorable class certification standards in product defect and privacy cases.

The federal government filed nearly-identical amicus curiae briefs in two cases pending before the U.S. Court of Appeal for the Ninth Circuit, arguing that the Federal Aviation Administration Authorization Act (“FAAAA”) does not preempt California’s meal and rest break law. See United States Amicus Brief, Dilts v. Penske Logistics, LLC, 9th Cir., No. 12-55705 (available here) and United States Amicus Brief, Campbell v. Vitran Express, 9th Cir., No. 12-56250 (available here). At issue is an FAAAA provision which provides that a state “may not enact or enforce a law . . . related to a price, route, or service of any motor carrier . . . with respect to the transportation of property.” 49 U.S.C. § 14501(c)(1).

The plaintiffs, delivery drivers for Penske Logistics LLC and Vitran Express, had appealed their respective district court orders holding that the FAAAA preempted their California meal and rest break claims. The Ninth Circuit invited attorneys from the Department of Transportation, the Federal Motor Carrier Safety Administration, and the Department of Justice to state their views on the preemption issue. In amicus briefs filed on February 18, 2014, the government argued that California’s meal and rest break law has no significant effect on motor carrier prices, routes, or services, taking the position that it is “squarely within the states’ traditional power to regulate the employment relationship and to protect worker health and safety. Moreover, it is a law of longstanding, general applicability and does not reflect any state effort to regulate motor carriers directly.” Vitran Amicus Brief at 10-11.

The government further argued that California’s meal and rest break law does not conflict with and is not otherwise preempted by federal regulations because it does not specifically address commercial motor vehicle safety and is not incompatible with federal safety standards. Moreover, because plaintiffs were short-haul commercial drivers operating exclusively in intrastate commerce, federal regulations governing the number of hours a commercial motor vehicle carrier may drive without a break were inapplicable and not in conflict with state law. Finally, the government argued that its views on preemption should be accorded deference.

Oral argument in both cases is set for March 3, 2014.