Tag Archives: Supreme Court of the United States

Supreme Court Endorses Dismissal of FLSA Collective Action for Lack of Subject Matter Jurisdiction After Full-Value F.R.C.P. 68 Offer

Pick Off Attempt

Pick Off Attempt (Photo credit: Rich Anderson)

In a ruling with broad implications for employers facing federal wage & hour collective actions, the U.S. Supreme Court held that an FLSA collective action was properly dismissed for lack of subject matter jurisdiction, where the lead plaintiff ignored the employer’s offer of judgment under Federal Rule of Civil Procedure 68.  Genesis Healthcare Corp., et al. v. Symczyk, No. 11-1059, 569 U.S. __ (April 16, 2013).

Plaintiff brought a collective action under the Fair Labor Standards Act (“FLSA”), and Genesis Healthcare Corp. promptly made an offer of judgment under F.R.C.P. 68.  The District Court found that the Rule 68 offer fully satisfied plaintiff’s claim and that no other individuals had joined her suit, and it dismissed the suit for lack of subject matter jurisdiction.  The Third Circuit reversed, explaining that allowing defendants to “pick off” named plaintiffs before certification with calculated Rule 68 offers would frustrate the goals of collective actions.

A 5-4 majority of the Supreme Court (led by Justice Thomas) disagreed, concluding that:

Reaching the question on which we granted certiorari,we conclude that respondent has no personal interest in representing putative, unnamed claimants, nor any other continuing interest that would preserve her suit from mootness. Respondent’s suit was, therefore, appropriately dismissed for lack of subject-matter jurisdiction.

You can read more here.

By CHARLES H. JUNG

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Supreme Court Issues Ruling With Implications for Federal Employment Class Actions

English: Supreme Court Associate Justice Anton...

English: Supreme Court Associate Justice Antonin Scalia testifies before the House Judiciary Committee’s Commercial and Administrative Law Subcommittee on Capitol Hill May 20, 2010 in Washington, DC. Scalia and fellow Associate Justice Stephen Breyer testified to the subcommittee about the Administrative Conference of the United States. (Photo credit: Wikipedia)

Today, the U.S. Supreme Court issued its ruling in Comcast Corp., et al. v. Behrend, et al., No. 11-864, 569 U.S. ___ (Mar. 27, 2013), which may impact how employers attack discrimination and other employment class actions.  In a 5 to 4 opinion, the Court reversed certification of a proposed antitrust class action.  Justice Scalia, writing for the Court, concluded that the class was improperly certified under Rule 23(b)(3) because plaintiff’s damages model fell short of establishing that damages can be measured classwide.  The District Court and Third Circuit approved certification of a class of more than 2 million current and former Comcast subscribers who sought damages for alleged violations of the federal antitrust laws.

At the trial court level, plaintiffs proposed four theories of antitrust impact, only one of which–the “overbuilder” theory–the trial court accepted.  To establish damages, plaintiffs relied solely on the testimony of Dr. James McClave, who designed a regression model comparing actual cable prices in one area with hypothetical prices that would have prevailed but for defendant’s allegedly anticompetitive practices.  Dr. McClave acknowledged that the model did not isolate damages resulting from any one theory of antitrust impact.  Id. at 4.

The Supreme Court held that the class was improperly certified.

By refusing to entertain arguments against respondents’ damages model that bore on the propriety of class certification, simply because those arguments would also be pertinent to the merits determination, the Court of Appeals ran afoul of our precedents requiring precisely that inquiry. And it is clear that, under the proper standard for evaluating certification, respondents’ model falls far short of establishing that damages are capable of measurement on a classwide basis. Without presenting another methodology, respondents cannot show Rule 23(b)(3) predominance: Questions of individual damage  calculations will inevitably overwhelm questions common to the class.

The Court reasoned that the “model failed to measure damages resulting from the particular antitrust injury on which petitioners’ liability in this action is premised.”  Id. at 8.  Justice Scalia emphasized that “it may be necessary for the court to probe behind the pleadings before coming to rest on the certification question, . . . Such an analysis will frequently entail overlap with the merits of the plaintiff ’s underlying claim.” Id. at 6 (internal quotations omitted).

By CHARLES H. JUNG

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California Court of Appeal Reverses Arbitration Order in Wage Case, Citing Viability of Armendariz Bilateriality Rule

English: own work

English: own work (Photo credit: Wikipedia)

Yesterday, the California Court of Appeal for the Second District reversed the lower court’s order granting a petition to compel arbitration in a putative wage & hour class action.  Compton v. Superior Court of Los Angeles County, No. B236669, — Cal.Rptr.3d —-, 2013 WL 1120619 (2d Dist. Mar 19, 2013).  Plaintiff was a property manager who was required to sign an arbitration agreement that also barred arbitration of class claims.  The trial court granted defendants’ petition to compel arbitration.

Normally an order compelling arbitration is not appealable.  But the Court of Appeal determined it had jurisdiction, citing the “death knell” doctrine:

An order compelling arbitration is not appealable. (Elijahjuan v. Superior Court (2012) 210 Cal.App.4th 15, 19.) The parties argue over whether this matter is appealable under the “death knell” doctrine, which applies when an order effectively terminates a class action. Rather than parse the case law on that issue, we conclude that we have jurisdiction to treat this nonappealable order as a petition for writ of mandate in this unusual case because: (1) the unconscionability issue is one of law based on undisputed facts and has been fully briefed; (2) the record is sufficient to consider the issue and it appears that the trial court would be only a nominal party; (3) if we were to dismiss the appeal, and the ultimate reversal of the order is inevitable, it would come in a post-arbitration award after the substantial time and expense of arbitrating the dispute; and (4) as a result, dismissing the appeal would require the parties to arbitrate nonarbitrable claims and would be costly and dilatory.

The Court concluded that the arbitration agreement was unconscionably one-sided because (1) it exempted from arbitration claims the employer would more likely bring, such as claims for injunctive or equitable relief from trade secret disclosures; (2) it limited the time to demand arbitration to a period shorter than the relevant statutes of limitation; (3) it retained the statute of limitations period for itself  and (4) it suggested that the arbitrator had the discretion not to award mandatory attorney’s fees under the Labor Code.

The Court determined that it was not violating Concepcion by enforcing Armendariz’s bilaterality rule: Continue reading

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Supreme Court Holds CAFA Jurisdiction May Not Be Defeated With Amount in Controversy Stipulation

The top of the west façade of the U.S. Supreme...

The top of the west façade of the U.S. Supreme Court Building (Photo credit: Wikipedia)

In a ruling today with substantial implications for California wage & hour and other employment class actions, a unanimous U.S. Supreme Court held that a putative class representative’s stipulation that he and the class would seek less than $5 million in damages does not defeat federal jurisdiction under the Class Action Fairness Act of 2005 (“CAFA”).  Standard Fire Insurance Co. v. Knowles, No. 11-1450, 586 U.S. __ (Mar. 19, 2013).

The question presented concerned a class-action plaintiff who stipulates, prior to certification of the class, that he, and the class he seeks to represent, will not seek damages that exceed $5 million in total. Does that stipulation remove the case from CAFA’s scope?

Justice Breyer writing for the Court concluded no, reasoning that stipulations must be binding, and a “plaintiff who files a proposed class action cannot legally bind members of the proposed class before the class is certified.”

We do not agree that CAFA forbids the federal court to consider, for purposes of determining the amount in controversy, the very real possibility that a nonbinding, amount-limiting, stipulation may not survive the class certification process. This potential outcome does not result in the creation of a new case not now before the federal court. To hold otherwise would, for CAFA jurisdictional purposes, treat a nonbinding stipulation as if it were binding, exalt form over substance, and run directly counter to CAFA’s primary objective: ensuring “Federal court consideration of interstate cases of national importance.” §2(b)(2), 119 Stat. 5. It would also have the effect of allowing the subdivision of a $100 million action into 21 just-below-$5-million state-court actions simply by including nonbinding stipulations; such an outcome would squarely conflict with the statute’s objective.

The Court concluded that “the stipulation at issue here can tie Knowles’ hands, but it does not resolve the amount-in-controversy question in light of his inability to bind the rest of the class.”

By CHARLES H. JUNG

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California Court of Appeal for the First District Invalidates Arbitration Agreement Citing Lack of Mutuality

albanian car dealer

albanian car dealer (Photo credit: gabork)

In a ruling with implications for employment class action litigants, the California Court of Appeal struck down an arbitration agreement by a defendant in a putative class action, rejecting an argument that an unconscionability analysis that focuses on the lack of mutuality in an arbitration contract violates Concepcion. Natalini v. Import Motor, Inc., 213 Cal. App. 4th 587 (1st Dist., mod. February 5, 2013).

Relying on the U.S. Supreme Court’s holding in AT & T Mobility LLC v. Concepcion,  563 U.S. –––– , 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011), appellant car dealer argued that an “unconscionability analysis that focuses on the lack of mutuality or bilaterality in an arbitration provision is ‘an example of applying a generally applicable contract defense in a manner which disfavors arbitration.'”  The First District declined to read Concepcion so broadly, and noted that:

Recent California and federal district court decisions addressing arbitration provisions very similar to that in the present case and in the identical car purchase context have not read  Concepcion so broadly.  (See  Trompeter v. Ally Financial, Inc. (N.D.Cal., June 1, 2012, No. C–12–00392 CW) 2012 WL 1980894 [p. *8] [nonpub. opn.]  ( Trompeter );   Smith v. Americredit Financial Services, Inc. (S.D.Cal., Mar. 12, 2012, No. 09cv1076 DMS (BLM)) 2012 WL 834784 [pp. *2–*4] ( Smith );   Lau v. Mercedes–Benz USA, LLC (N.D.Cal., Jan. 31, 2012, No. CV 11–1940 MEJ) 2012 WL 370557 [pp. *6–*7] ( Lau );  see also  Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 804, fn. 18, 137 Cal.Rptr.3d 773.)   Continue reading

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Applying Concepcion, U.S. Supreme Court Strikes Down West Virginia Rule That Held Unenforceable Certain Predispute Arbitration Agreements Claims Against Nursing Homes

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In a per curiam opinion today applying the rule in Concepcion, the U.S. Supreme Court  reversed and remanded orders of the Supreme Court of Appeals of West Virginia, which held unenforceable all predispute arbitration agreements that apply to claims alleging personal injury or wrongful death against  nursing homes.  Marmet Health Care Center, Inc., et al. v.  Clayton Brown, et al., Case Nos. 11–391 and 11–394, 565 U. S. ____ (Feb. 21, 2012).

The U.S. Supreme Court held that the “Supreme Court of Appeals of West Virginia, by misreading and disregarding the precedents of this Court interpreting the FAA, did not follow controlling federal law implementing that basic principle.”  Id.  “When this Court has fulfilled its duty to interpret federal law, a state court may not contradict or fail to implement the rule so established.”

Background

In each of three negligence suits, a family member of a patient requiring extensive nursing care had signed an agreement with a nursing home on behalf of the patient.  Id. The agreements included arbitration clauses requiring the parties to arbitrate all disputes, other than claims to collect late payments owed by the patient.  Id. In each of the three cases, a family member of a patient who had died sued the nursing home in state court, alleging that negligence caused injuries or harm resulting in death. Id.

In a decision concerning all three cases, the Supreme Court of Appeals of West Virginia held that “as a matter of public policy under West Virginia law, an arbitration clause in a nursing home admission agreement adopted prior to an occurrence of negligence that results in a personal injury or wrongful death, shall not be enforced to compel arbitration of a dispute concerning the negligence.”  Id.

The state court considered whether the state public policy was pre-empted by the FAA: Continue reading

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Northern District Awards $618,812.82 in Compensatory Damages and Punitive Damages in Case Involving Labor Code and Human Trafficking Allegations

The Northern District granted a default judgment in a human trafficking and Labor Code case.  Canal v. Dann, No. 09-03366 CW, 2010 WL 3491136 (N.D. Cal. Sept. 2, 2010) (slip op.).

Plaintiff Zoraida Peña Cenal alleged that from July, 2006 to April, 2008, Peña Canal worked for Defendant Dann for fifteen hours a day, seven days a week, caring for Defendant’s three young children and cooking and cleaning for the household. Id. For all of this work, plaintiff alleged that Defendant paid Peña Canal only once: on Christmas day in 2006, Defendant gave Peña Canal $100. Id. *1

After Peña Canal escaped from Defendant, the U.S. Attorney charged Dann with five counts: forced labor, unlawful use of documents in furtherance of servitude, harboring an illegal alien for private financial gain, visa fraud and conspiracy to commit visa fraud.  Id. *2.  A jury convicted Dann on all counts, and the criminal court sentenced her to sixty months in prison and three years of supervised release, and ordered her to pay $123,740.34 in restitution. Id. The restitution amount was based upon the government’s calculation, which was derived from data submitted from the federal government’s Foreign Labor Certification Program, as evidence of the value of Peña Canal’s labor during the period at issue. Id. Continue reading

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Navy Wins MSJ in Reverse-FOIA Case with a Trade Secrets Act Cause of Action

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In a reverse-FOIA case, JCI Metal Products v. U.S. Dept. of the Navy, Slip Copy, 2010 WL 2925436 (S.D. Cal.  Jul 23, 2010) (NO. 09-CV-2139-IEG), Plaintiff JCI Metal Products (“JCI”) brought an action seeking to prevent disclosure of certain information relating to its past contract with Defendant United States Department of the Navy (“Navy”). Before the Court were Plaintiff’s and Defendant’s cross-Motions for Summary Judgment. The court granted Defendant’s Motion for Summary Judgment.

JCI’s second cause of action alleged that disclosure by the Navy of JCI’s unit prices for each contract line item (“CLIN”) information at issue would violate and contravene the Trade Secrets Act, 18 U.S.C. § 1905.

The Trade Secrets Act provides a criminal penalty for:

Whoever, being an officer or employee of the United States . . . publishes, divulges, discloses, or makes known in any manner or to any extent not authorized by law any information coming to him in the course of his employment or official duties . . . which information concerns or relates to the trade secrets, processes, operations, style of work, or apparatus, or to the identity, confidential statistical data, amount or source of any income, profits, losses, or expenditures of any person, firm, partnership, corporation, or association . . . .

The Court held that the Trade Secrets Act “cannot override the FOIA’s obligatory disclosure provisions.” Citing CNA Fin. Corp., 830 F.2d at 1141-42; Gen. Elec. Co. v. U.S. Nuclear Regulatory Comm’n, 750 F.2d 1394, 1401-02 (7th Cir.1984) (“[T]he Trade Secrets Act has no independent force in cases where the Freedom of Information Act is involved….”).  The Court concluded that the information sought was not protected by Exemption 4 of the FOIA, which exempts from disclosure “trade secrets and commercial or financial information obtained from a person and privileged or confidential.”  Accordingly, “because the information in this case is not protected by Exemption 4, neither can it be protected by the Trade Secrets Act.”  Therefore, the Court granted the Navy’s Motion for Summary Judgment on the Trade Secrets Act cause of action.

By CHARLES H. JUNG

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Northern District Denies Certification of Joe’s Crab Shack Meal and Rest Break Class Action

A Joe's Crab Shack branch in San Diego, CA. Th...
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The Northern District of California denied class certification of a meal and rest break class action in Washington v. Joe’s Crab Shack, No. C 08-5551 PJH, 2010 WL 5396041 (N.D. Cal Dec. 23, 2010.) (slip op.).  Plaintiff Drew Garrett Washington asserted that defendant Crab Addison, Inc. (“Crab Addison”), a company that operates a number of Joe’s Crab Shack restaurants, failed to provide employees with meal and rest breaks, allowed its restaurant managers to manipulate employee time records to deprive employees of pay for all hours worked (including overtime and missed meal break pay), required employees to perform work “off the clock”; and required employees to pay for their own employer-mandated uniforms.  Id. *1.

Class Definition

Plaintiff moved pursuant to Federal Rule of Civil Procedure 23, to certify a plaintiff class consisting of “all non-exempt restaurant employees employed by Crab Addison at Joe’s Crab Shack restaurants in California from January 1, 2007, through the present.”

Discussion

The court denied the certification motion.  Id. *11.  “Plaintiff’s position is that common questions predominate because the main issue is whether—notwithstanding Crab Addison’s written policies—Joe’s Crab Shack restaurants in California followed a common unwritten policy of denying meal and rest breaks, failing to pay employees who did not take breaks, failing to pay for overtime, requiring employees to purchase their own uniforms, and so forth.” Id. Plaintiff contended that the existence of a policy or practice that in effect contradicts Crab Addison’s written policies can be ascertained by an analysis of the data in Crab Addison’s computer systems.  Id. “But since plaintiff has failed to adequately explain how that analysis works and exactly what the data shows, he has failed to adequately establish the existence of such a policy or practice.” Id. Continue reading

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