Court Dismisses California Class Action Due to Limited California Nexus

evening traffic at airportIt is no secret that California is a desired and favorable forum for class action litigation. It is therefore not surprising that plaintiffs might try to take advantage of that forum even when the connection between employment and California could be questioned. But how far do California’s tentacles reach?

In Vidrio v. United Airlines, Case No. 2:15-CV-0985-PSG-MRW (C.D. Cal. Mar. 15, 2017), the plaintiffs were United flight attendants who from time to time worked on flights that took off from or landed in one of eight airports in California. They asserted California state law claims based on the airline’s alleged failure to provide California-compliant wage statements. The U.S. District Court for the Central District of California certified a class consisting of United employees for whom United had applied California tax laws.  Continue Reading

Chipotle Wins One, Loses One, in Wage and Hour Class Litigation

indecisive and lost man chooses the right pathA Tale of Two Cases . . .

We’ve commented on numerous occasions about the peculiar paths taken by wage and hour class litigation, particularly with respect to collective actions under the FLSA. Two cases involving the same employer decided only days apart continue to highlight the challenges and sometimes surprising outcomes in those cases.

Both cases were brought against the Chipotle food chain, but they involved different classes of employees and were filed in different jurisdictions. In the first, Scott v. Chipotle Mexican Grill, Inc., Case No. 12-CV-8333 (ALC)(SN) (S.D.N.Y. March 29, 2017), the plaintiffs alleged that the company misclassified its “apprentices,” essentially management trainees, as exempt. They brought a collective action under the FLSA and parallel state law wage and hour claims under the laws of several states against Chipotle in federal court in New York. Applying a low standard for conditional certification under the FLSA, the court conditionally certified a class. It based its decision largely on the company’s use of a single job description and its albeit limited study about the similarity of the work performed by apprentices nationwide. A total of 516 apprentices opted in to the case. After years of additional litigation, Chipotle moved to decertify the collective class and the plaintiffs moved to certify several smaller state law class actions.

The court addressed the state law claims first. While it found that the class did satisfy Rule 23(a), it concluded that in fact the class did not meet the requirements of Rule 23(b)(3). In doing so, the court looked at the standard for the executive exemption under 29 C.F.R. § 541.100(a), and specifically the need to examine “the employees’ actual job characteristics and duties” to determine their primary duties. In doing so, the court found, not surprisingly, substantial variation in the experiences of the apprentices based on geographic location, local management, store size, the ability to influence hiring and firing, and scheduling. Thus, the court found, class issues did not predominate. Further, for the same reasons, and based on differences among the state laws applicable in the various jurisdictions, the court concluded that superiority was lacking as well.

The court then turned to the motion to decertify the collective action under the FLSA. It rightly found that the standard was different under the FLSA, and focused instead on the similar, but not identical, factors such as the existence of disparate employment settings, defenses and procedural fairness. These, too, suggested that the class members’ claims were not similarly situated and should be decertified. The court therefore refused to certify the state law claims, decertified the FLSA class and dismissed the opt-ins’ claims without prejudice.

Meanwhile, halfway across the country, the company had tried to avoid the decertification process altogether in a case involving FLSA claims only. In the case of In re Chipotle Mexican Grill, Inc., Case No. 17-1028 (10th Cir. March 27, 2017), the plaintiffs asserted claims that they were required to work off the clock at the end of some shifts. Although this seems to be an inherently individual case that would turn on the practices of individual managers and stores, the district court conditionally certified the case under a low standard. Turner v. Chipotle Mexican Grill, Inc., Case No. 1:14-cv-02612-JLK (D. Colo. Sept. 22, 2014). This was particularly surprising because a different court had refused to certify a similar case in which the same plaintiff had opted in, because it viewed the practices as involving a single store. Following conditional certification, thousands of plaintiffs opted in.

At this point, Chipotle faced the difficulty that makes many defendants settle at this stage. Unlike Rule 23(f), there is no right to appeal (even on a discretionary basis) a decision granting conditional certification. An employer at this juncture must therefore make the decision whether to litigate the case through decertification or beyond, or to attempt settlement. Chipotle tried to create a third option by petitioning for mandamus relief to the Tenth Circuit. The difficulty with this third approach, however, is that mandamus review is extremely limited and requires something beyond even an abuse of discretion by the district court. Ultimately, the count concluded that although the district court’s order “may be debatable,” it was not a sufficient abuse of discretion to meet this standard.

The takeaway from these two decisions is that a statutory provision, section 16(b) of the FLSA, which was enacted in an effort to curb wage and hour class actions, is being interpreted by the courts in a manner that not only encourages these but makes them lengthy and expensive cases for even an entirely innocent employer to defend. Courts apply varying, but generally low, standards on conditional certification. At that point, the employer has a Hobson’s choice of settling or continuing the case at least through conditional certification. Even then, should the case be decertified, the employer faces the specter of individual cases that would never have been brought but for the prior conditional certification. In the New York case above, it took the company nearly four years to get out from under the conditional certification order, and even now it will likely face individual claims from the former opt-ins. In the Tenth Circuit case, the litigation will now continue further even though it seems obvious that the case should not proceed as a class. Employers defending these actions must continue to consider the increased risk caused not by any wrongdoing on their part, but by the mechanisms courts have created that expand rather than manage wage and hour litigation.

The Bottom Line:

Appellate courts are reluctant even to review conditional certification decisions, but decertification remains a viable if expensive means to defend collective actions under the FLSA.

Arbitration of PAGA Claims: Another California Divide Emerges

In a March 8, 2017, article, we talked about how the Ninth Circuit Court of Appeals compelled the arbitration of a California Private Attorney General Act (PAGA) representative claim in Valdez v. Terminix International Co., L.P., No. 15-56736 (9th Cir. Mar. 3, 2017). And, while we mentioned potential difficulties in arbitrating such cases, we didn’t address the differing interpretations of Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal. 4th 348 (2014) by California courts. But a recent California Court of Appeals opinion has highlighted the issue.

In Betancourt v. Prudential Overall Supply, No. EO64326 (Cal. Ct. App. 4th Dist., Mar. 7, 2017), the California Court of Appeals took the position that arbitration was not available. The Betancourt plaintiff sued Prudential Overall Supply, raising only a PAGA claim. The trial court denied Prudential’s motion to compel arbitration, concluding that a PAGA claim was not subject to arbitration under an existing agreement. The Court of Appeals affirmed. Continue Reading

Proposed Legislation That Could Impact Class Action Litigation and Arbitration – The Fairness in Class Action Litigation Act of 2017 and the Arbitration Fairness Act of 2017

3d Office chair in spotlightTwo new pieces of proposed legislation could, if passed, change the architecture and requirements of class actions and outlaw mandatory arbitration clauses in employment and consumer contracts. But neither is a sure thing. Vocal critics as well as supporters are already lined up on both sides of each bill.

The Fairness in Class Action Litigation Act of 2017

On March 9, 2017, the U.S. House of Representatives passed the Fairness in Class Action Litigation Act of 2017 (H.R. 985) (the Act).

The Act – introduced by Chairman of the House Judiciary Committee Bob Goodlatte, who also introduced the Class Action Fairness Act of 2005 (CAFA) – makes several significant changes to class action practice. In passing this Act, the House asserted these changes were intended to “diminish abuses in class action and mass tort litigation that are undermining the integrity of the U.S. legal system” and “ensure Federal court consideration of interstate controversies of national importance consistent with diversity jurisdiction principles.” Continue Reading

Arbitrating PAGA Claims: The Ninth Circuit Compels It in the Valdez Case

California State CapitalSo much case law has come down in the past several years regarding California’s Private Attorneys General Act (PAGA) – and its ability to withstand class and representative action waivers – that observers might have overestimated PAGA’s arbitration-avoidance powers. The Ninth Circuit Court of Appeals offered a reminder on Tuesday that even though an arbitration agreement cannot validly waive the right to assert PAGA claims, a plaintiff may nevertheless be compelled to arbitrate PAGA representative claims.

Although the opinion in Valdez v. Terminix International Co., L.P., 9th Cir. No. 15-56236 was unreported and nonprecedential, it illustrates in the post-Iskanian landscape that PAGA claims can be arbitrated. In Iskanian v. CLS Transp. Los Angeles, LLC, 327 P.3d 129 (Cal. 2014), the California Supreme Court held that even though class-action waivers in arbitration agreements were enforceable, where “an employment agreement compels the waiver of representative claims under the PAGA, it is contrary to public policy and unenforceable as a matter of state law.” PAGA claims, the Iskanian court noted, could not be waived because PAGA effectively deputizes employees to act on behalf of the state in vindicating the state’s “interest in enforcing the Labor Code,” which “does not interfere with the FAA’s goal of promoting arbitration as a forum for private dispute resolution.” In Iskanian, though, the California Supreme Court reserved for lower-court consideration on remand the question of whether the PAGA claims would proceed in litigation or “the parties would prefer to resolve a representative PAGA claim through arbitration.” Continue Reading

Court Decertifies Class Challenging Timekeeping Practices

TravelYogi Berra often has been quoted for the phrase “It ain’t over till it’s over,” and Lenny Kravitz even made a hit song of it in 1991. While no one will likely ever make a popular song out of Rule 23, the phrase applies just as well to class action litigation, as a recent case indicates.

The litigation in Angeles v. US Airways, Inc., No. C-12-05860 CRB (N.D. Cal. Feb. 13, 2017), looked in many respects like countless other California wage and hour claims. The plaintiffs in Angeles were flight support personnel who performed tasks like handling bags and cargo and pushing back or cleaning planes. In 2008, the airline introduced a new electronic timekeeping system called “Workbrain” that tied into the employees’ schedules and essentially permitted the employees to log time only during established hours. If any employees clocked in before or after shift, the system assumed they were not working and logged the minutes as unpaid time called “grace time.” The question therefore came down to whether employees actually worked during this grace time, and whether they were paid through some other mechanism if they did, or whether they engaged in personal activities.

The employees brought suit under California law, asserting the raft of claims one generally sees in such litigation. In 2014, the court, noting that it was a close call, certified a class, and discovery continued. The court also rejected the airline’s arguments under the California wage order that excluded employees governed by the Railway Labor Act (RLA), 45 U.S.C. § § 151 et seq., from coverage. (For those not familiar with it, the RLA also covers airlines, 45 U.S.C. § 181). As later events would prove, this second ruling was erroneous, but the plaintiffs at this stage should have been feeling pretty confident, in that they had a certified class in a favorable jurisdiction with the court refusing to accept the employer’s primary argument. Continue Reading

Court Dismisses Disparate Impact Class Claims Due to Limited EEOC Charge

Class Claims Disparate impact cases are different in kind from the far more common disparate treatment claims that are the staple of single-plaintiff discrimination cases. Disparate treatment claims, of course, are ones in which an employee contends that he or she was treated less favorably than others on account of a protected trait, such as sex, race or color. Disparate impact claims not only involve different allegations (generally a facially neutral policy that has the effect of discrimination), but almost always require a virtual classwide review of the facts and careful statistical analysis.

Those differences proved fatal to the plaintiff’s disparate impact claims in the case of Spencer v. Comcast Corp., Civil Action No. 16-2589 (E.D. Pa. Feb. 17, 2017), because the plaintiff failed to account for them in his charge before the Equal Employment Opportunity Commission (EEOC). In Spencer, the plaintiff worked at a call center for the defendant. In early March 2015, he received a poor performance review for, among other things, communications, interpersonal affect, cultural diversity and discriminating on the basis of race. In response, he filed his own internal complaint contending that he was himself a victim of race discrimination. Shortly afterward, he was terminated for hanging up on a customer.

The plaintiff filed a charge of discrimination with the EEOC that focused on his own individual claim, but also referred to lighter-skinned African American or white employees who were not terminated for similar offenses. After the EEOC issued its notice of right to sue, he brought a proposed class action suit for, among other things, disparate impact race discrimination under Title VII. The defendant moved to dismiss because the allegations were beyond the scope of the plaintiff’s charge. Continue Reading

Court Refuses to Certify Class Due to Lack of Adequacy of Class Counsel

Class action litigation is not for amateurs

We’ve commented before in this blog on cases in which courts declined to certify employment actions due to adequacy of class counsel. A recent case reflects that some courts will look not only to the presence or absence of conflicts or litigation misconduct but also to the plaintiffs’ counsel’s experience in other class action cases.

In Goers v. L.A. Entertainment Group, Inc., Case No. 2-15-dv-412-FtM-99CM (M.D. Fla., Jan. 9, 2017), the plaintiffs described themselves as former exotic dancers who worked at an adult night club in Fort Myers, Florida. They claimed that they, the other exotic dancers and possibly other club employees were misclassified as independent contractors and thus failed to receive the minimum wage and overtime. They sought to certify a class under state law under federal Rule 23, and also sought certification of a collective action under section 16(b) of the Fair Labor Standards Act. Continue Reading

Justices to Consider Arbitration Agreements With Class Waivers – The End of the Beginning?

glasses iStock_000048458646_LargeApologies to Winston Churchill,[1] but the conflict over the enforcement of arbitration agreements with class waivers has become an ongoing legal and ideological struggle. Some view individual arbitration as a quicker and less costly means to resolve employment disputes, while others believe it is a means to deprive employees of their legal rights.

Since 2012, the National Labor Relations Board (NLRB) has taken the position that arbitration agreements with class or collective action waivers deprive employees of their rights under Section 7 of the National Labor Relations Act (NLRA). That NLRB position ultimately provoked a federal circuit split that posed serious challenges to national and multistate employers. Continue Reading

Third Circuit Rejects Procedural Runarounds to Appeal Decertification of FLSA Collective Action

Road barrierWhat’s good for the goose …

We’ve written many times in this blog about the two-step procedure used by many courts in Fair Labor Standards Act (FLSA) cases in collective actions. The first step is to provide notice to the proposed class and is typically decided under a lenient standard. If the court “conditionally certifies” the class, there is usually an opt-in period, followed by some measure of additional discovery, followed by a motion to decertify by the defendant. Although section 16(b) of the FLSA was passed to limit collective actions, Hoffman-La Roche v. Sperling, 493 U.S. 165 (1989), the use of this procedure by courts is now working to encourage and facilitate collective actions. Part of this stems from the fact that because Rule 23 does not apply to the FLSA, a defendant facing a successful motion for conditional certification has virtually no appeal rights until the case is over. For this reason, many employers settle not long after a case is conditionally certified and the opt-in period has closed.

But what if the defendant sticks it out and files the motion to decertify, and the motion is granted? Or what if the less common scenario occurs, where conditional certification is denied? The same rule applies, much to the frustration of unsuccessful plaintiffs’ counsel, as a recent case demonstrates.

In Halle v. West Penn Allegheny Health System, Inc., Case No. 15-3089 (3d Cir. Nov. 18, 2016), the plaintiffs sought to bring two separate collective actions against various hospitals for work they claimed they performed during their unpaid meal periods. In 2009, the district courts conditionally certified the two cases, and a total of nearly 3,800 employees opted in to the two cases. Following two years of discovery, the courts in both cases decertified the actions because of multiple differences among the class members relating to individual supervisors, job duties and experiences. In an effort to obtain an appeal, the individual plaintiffs dismissed their own claims under Rule 41(a) to create a final, appealable order, and then appealed. That effort failed because the Third Circuit found that the dismissal of the plaintiffs’ claims extinguished their right to represent the class as well. We blogged this initial decision here.

Was that the end? Not quite.

The same law firms then filed two brand-new cases with two of the former class members, with slightly different proposed class definitions. They again sought conditional certification and, while that motion was pending, submitted 250 opt-in forms in one of the cases, before the court concluded that the matter was essentially the same as the originals and should not proceed as a collective action. It dismissed the attempted opt-ins’ claims without prejudice. Three of the individuals who had tried to opt in to the first case appealed. (In the second action, the lead plaintiff accepted a Rule 68 offer of judgment and his claims were dismissed, so that case was effectively over.)

The Third Circuit was therefore left with the question of whether three attempted opt-ins whose claims were dismissed without prejudice had standing to appeal the denial of conditional certification. The court concluded that they did not. Instead, like unsuccessful defendants, they had to await the conclusion of the litigation and appeal then if they chose.

Cases like Halle stem from a fundamental difference in how some may view a class or collective action, and specifically whether the right to proceed in that fashion is itself a substantive right. These mechanisms, however, are not substantive rights but rather procedural vehicles. And while the inability to appeal conditional certification decisions overwhelmingly disadvantages employers, on occasion it can also work to the detriment of putative class representatives.

The bottom line: The rules limiting appeals of decisions regarding conditional certification or decertification of FLSA collective actions apply to plaintiffs, too.

 

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