A unanimous panel of California’s intermediate appellate court has upheld a trial court ruling that denied the defendant’s petition to compel arbitration. See Franco v. Arakelian Enterprises, Inc., __ Cal. App. 4th __ (Nov. 26, 2012). The decision from the Second Appellate District’s Division One took up whether the U.S. Supreme Court’s AT&T v. Concepcion ruling abrogated Gentry v. Superior Court (42 Cal. 4th 443 (2007)). In contrast to a decision out of Division Two of the Second District from earlier this year, Iskanian v. CLS Transportation (206 Cal. App. 4th 949 (2012)), Franco II holds that it does not.

Franco II involves a class action suit brought by a truck driver for meal and overtime violations, where the defendant employer attempted to compel individual arbitration pursuant to an arbitration clause with a class action waiver in plaintiff’s employment contract. Franco I (Franco v. Athens Disposal Co., Inc., 171 Cal. App. 4th 1277 (2009)) is a pre-Concepcion ruling in the same case, with essentially the same holding as Franco II, notwithstanding the intervening Concepcion decision.

In Gentry, the California Supreme Court held that, in arbitration agreements governing employment, class action waivers may be unenforceable in “some circumstances [where they] . . . would lead to a de facto waiver [of employees’ statutory rights] and would impermissibly interfere with employees’ ability to vindicate [those] rights.” Gentry at 457. In Franco II, the Second District held that Concepcion leaves room for California courts to make individual findings on the validity of waivers, thus limiting the preemption analysis of Concepcion to state rules that would categorically exempt a certain type of contract from arbitration. “We conclude that Gentry remains good law because, as required by Concepcion, it does not establish a categorical rule against class action waivers but, instead, sets forth several factors to be applied on a case-by-case basis to determine whether a class action waiver precludes employees from vindicating their statutory rights.” Franco II, slip op. at 3.

In reaching this holding, the Franco II panel credited the attestations of the plaintiff’s counsel that there was little chance of an attorney taking on the plaintiff’s case as an individual matter, owing to the maximum recovery of just over $10,000 being vastly exceeded by the legal resources necessary to prosecute the individual action. “The United States Supreme Court has recognized the necessity of a class action in cases where, as here, the potential recovery exceeds the cost of litigating a plaintiff‘s claims on an individual basis.” Slip op. at 63.

The Franco II court conducted what might be the California Court of Appeal’s most thorough history of U.S. Supreme Court case law on arbitration, cataloging decisions from 1953 to the present. This history included post-Concepcion developments in courts across the country. Additionally, this court outlined the history of the Vindication of Statutory Rights doctrine, central to the California Supreme Court case Armendariz v. Foundation Health Psychcare Services, Inc. (24 Cal. 4th 83 (2000)) and the U.S. Supreme Court case Green Tree Financial Corp.-Ala. v. Randolph (531 U.S. 79 (2000)). This doctrine permits the invalidation of arbitration agreements where an individual would be unable to effectively vindicate his or her statutory rights in the particular arbitral forum outlined in the arbitration agreement. This doctrine was a central component of the Franco II court’s finding that Gentry had not been overruled, as “Concepcion did not address or question prior Supreme Court cases recognizing that an arbitration agreement may be unenforceable if it prevents a plaintiff from vindicating his or her statutory rights.” Slip op. at 14.

The split between divisions of the Court of Appeal’s Second District will be resolved pursuant to the California Supreme Court’s grant of review of Iskanian on September 19, 2012. While it is probable that the Supreme Court will grant and hold review of Franco II pending its decision in Iskanian, the Court may instead consider Franco II alongside Iskanian. Additionally, the Vindication of Statutory Rights doctrine, as well as other issues addressed in Franco II, will likely be addressed by the U.S. Supreme Court when it reviews the Second Circuit case In re Am. Express Merchants’ Litig. (“Amex III”) later this term.

A settlement has been reached in a class action alleging that FedEx Office stores violated the Fair and Accurate Credit Transactions Act (FACTA) by printing receipts that reveal too many digits of consumers’ debit and credit card account numbers. See Tchoboian v. FedEx Office and Print Servs. Inc., No. 10-1008 (C.D. Cal. Nov. 29, 2012) (Order Granting Motion for Preliminary Approval). Per the Settlement Agreement, the plaintiff class members find themselves in line to receive FedEx “Store Value Cards” worth $50 each, upon submission of a valid claim form. The cards can be used on purchases of items and services related to those through which the class members encountered the FACTA violations. These include use of the store’s copy machines, computer rentals, faxes, printing, and binding. The case moved toward settlement after FedEx’s summary judgment motion was denied in November of 2011.

The proposed class at issue in Tchoboian is defined as “All consumers . . . in the United States of America who can present an original or copy of a printed FedEx Office receipt printed between April 2009 and April 2010 displaying the first two and last four digits of their credit or debit card number.” Order at 2. The FACTA provides that credit card receipts may not show more than the last five digits of the card number, nor may the receipts show credit or debit card expiration dates.

Although the Class Action Fairness Act (CAFA) heightened the scrutiny on coupon settlements such as Tchoboian, there exists a misconception that CAFA categorically prohibits such settlements. Coupon settlements are not disfavored, particularly where coupons or gift cards represent a substantial proportion of what could have been recovered at trial. There is no cap on total damages under the FACTA, and FedEx faced the possibility of fines between $100 and $1000 per violation. Such damages are available under theories of either negligence or willful violation, though if the violations are shown to have been committed negligently, plaintiffs must show that they incurred damages as a result.

ING, the global investment and insurance concern, has agreed to settle two class actions alleging that ING violated its fiduciary duty under the federal Employee Retirement Income Security Act of 1974 (ERISA) by investing retirement funds in stocks that performed poorly. See In Re ING Groep, N.V. ERISA Litigation, No. 09-0400 (N.D. Ga. Nov. 14, 2012) (MPA ISO Preliminary Approval). The pending preliminary approval motion is seeking the court’s authorization to send class members the notice required by Federal Rule 23 informing them of the terms of the settlement, which is valued at $3.5 million.

The underlying actions arose around facts coated in irony, as ING, whose primary business is managing the investments of other companies and individuals, was accused by the plaintiffs of mismanaging its own employees’ retirement accounts, in part by investing in ING’s own stock. See MPA at 5-6. The litigation invited inquiry around an unsettled ERISA doctrine: whether there is a lesser standard of care applied to claims involving investments in a company’s own stock (or, alternatively, whether there is a heightened presumption that the investment is prudent). See MPA at 12. The presumption of prudence accorded defendants is known as the “Moench presumption,” as articulated in Moench v. Robertson, 62 F.3d 533 (3d Cir. 1995). Indeed, the Moench presumption issue was before the Eleventh Circuit in an appeal from one of the ING actions when the settlement was negotiated. The settlement thus mooted that appeal, leaving the Moench prudent investor doctrine to be parsed another day.

The risk attendant to the pending appeal was cited as one of the bases for the settlement, as the Eleventh Circuit has recently given indications that it would adopt the more permissive Moench standard as to same-company stock purchases by retirement funds. See Lanfear v. Home Depot, Inc., 679 F.3d 1267 (11th Cir. 2012). Even had the plaintiffs obtained a favorable ruling from the Eleventh Circuit, the class members would likely have had to wait several years before the claims were tried to judgment and, thereafter, endure another round of appeals on entirely new issues engendered by a trial. See MPA at 13-15.

Public relations company Rogers & Cowan has resolved a class action lawsuit filed by employees alleging that they were compelled to work off-the-clock without pay, in a settlement that is likely to influence other classwide off-the-clock litigation. See Malakhov v. CMGRP, Inc., No. 11-06605 (C.D. Cal. Oct. 22, 2012) (MPA ISO Conditional Certification & Preliminary Approval).

As set forth in the recently filed preliminary approval papers, the plaintiffs allege that “junior employees, who wanted to move up and create a career from themselves in the Defendant companies, had to put in a lot of ‘volunteer’ hours if they wished to succeed.” MPA at 6.

The settlement covers 169 employees, and although relatively modest in its total value (just $327,500), the Malakhov settlement embodies several encouraging signs for off-the-clock class actions. First, the allegations of off-the-clock work were premised entirely on unofficial and unwritten company “policies.” Specifically, the plaintiffs claim that the defendant’s prevailing workplace culture sent the unmistakable message to employees that only by performing off-the-clock work could they advance.

Additionally, Malakhov is notable for settling without class certification having been granted. As such, the settlement will function as a benchmark for both pre- and post-certification settlement of off-the-clock claims, with the settling class members in Malakhov in line to receive an average of approximately $1,000 per class member in back pay for their off-the-clock work.

The approval papers simultaneously seek conditional certification and settlement approval as to a federal Fair Labor Standards Act collective class, as well as a California-based class seeking approval and certification under Federal Rule 23.