Tag Archives: United States

Jan 09 2011
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Verdicts

Morrison & Foerster Wins $9.36 Million in Compensatory Damages and $1.525 Million in Punitive Damages in Trade Secrets Trial

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A San Francisco Superior Court jury granted $1.525 million in punitive damages Friday to Technology Information Group, adding to the $9.36 million in compensatory damages it awarded to the company a day earlier in a trade secrets dispute with its former employees and a competitor. As reported in law360.com, the “jury found San Francisco-based FusionStorm, three of its executive officers and three former TIG employees who were hired by FusionStorm liable for breach of fiduciary duty, breach of loyalty, misappropriation of trade secrets and other causes of action . . . .”

The complaint alleged that the improper conduct began while the former employees still worked at TIG’s Tampa, Fla., offices. The former employees were accused of trying to lure away other of TIG’s employees and customers to FusionStorm, which was then setting up in the area. TIG filed its lawsuit in 2007 and won a temporary restraining order that enjoined FusionStorm from soliciting additional TIG employees and from conducting business with certain customers, MoFo said.

The jury verdict comes after a five-week trial.  FusionStorm was represented by Orrick Herrington & Sutcliffe LLP.  TIG was represented by Morrison & Foerster LLP.  The docket may be viewed here.

By CHARLES H. JUNG

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Jan 09 2011
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Affirmative Defenses, CAFA Jurisdiction, Class Actions, Remand

Central District Remands Class Action Based on Local Controversy Exception to CAFA

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In Coleman v. Estes Express Lines, Inc., No. CV 10-2242 ABC (AJWx), — F. Supp. 2d —-, 2010 WL 3156850 (C.D. Cal. July 19, 2010) a wage and hour plaintiff brought a motion to remand, after the case was removed pursuant to CAFA.  The Court granted Plaintiff’s remand motion.

While Defendants have demonstrated that more than $5,000,000 is in controversy under CAFA, Plaintiff has demonstrated that CAFA’s Local Controversy exception applies in this case. Therefore, the Court must decline to exercise jurisdiction. See Serrano, 478 F .3d at 1022. Plaintiff’s motion is GRANTED and this case is REMANDED to Los Angeles Superior Court.

Plaintiffs were represented by Mark P. Estrella, Miriam L. Schimmel, Robert E. Byrnes, Sue Jin Kim of Initiative Legal Group APC and Payam Shahian of Strategic Legal Practices APC.

Defendants were represented by David L. Terry, David L. Woodard of Poyner Spruill LLP and Sarah N. Drechsler and Timothy M. Freudenberger of Carlton Disante & Freudenberger LLP.

The judge is Hon. Audrey B. Collins.

By CHARLES H. JUNG

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Jan 09 2011
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CAFA Jurisdiction, Class Actions

Southern District of California Denies Remand in Case Asserting CAFA Jurisdiction

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In Johnson v. U.S. Vision, Inc., No. 10-CV-0690 BEN (CAB), 2010 WL 3154847 (S.D. Cal. Aug. 9, 2010) the Southern District of California faced a remand motion in a wage and hour case that had been removed pursuant to the Class Action Fairness Act (“CAFA”), 28 U.S.C. §§ 1332, 1441, 1453.

Judge Roger T. Benitez denied the motion to remand.  Defendant presented a calculation of damages, supporting its calcualtions with declaration from, among other people, the Assistant Controller, Operations, for U.S. Vision, Inc., responsible for enforcing Defendants’ payroll policies and procedures.  The declaration set forth Plaintiff’s most recent hourly rate of pay, as well as the specific number of optical managers and optechs employed during the Class Period, average hourly rates of pay for managers and optechs, number of employees who separated their employment with Defendants, and number of possible wage statements for each employee per year.

Plaintiff argued that Defendants miscalculated the amount in controversy because:

Defendants erroneously assumed “each class member was damaged to the same extent that Plaintiff Johnson was, and that every putative class member, among other things, worked off the clock and incurred a break violation every single day of the entire class period.” Mot. 6. Plaintiff emphasizes that Defendants have access to more specific figures to calculate the amount in controversy and that “each [class] member can be identified using information contained in Defendants’ payroll, scheduling and personnel records.” Compl. ¶ 39.

But the Court held that absent a “persuasive argument that Defendants are required to prove actual damages in order to remove this action, however, the Court must consider the amount put in controversy by the Complaint, not the ultimate or provable amount of damages.”  (citing Rippee v. Boston Market Corp., 408 F. Supp. 2d 982, 986 (S.D. Cal. 2005).)  The Court found that, having based their calculations on allegations provided in the Complaint, Defendants proved with a legal certainty that CAFA’s jurisdictional threshold is satisfied.

Despite Plaintiff’s attempt to provide supplemental information in the motion to remand, Defendants were entitled to, and did, use the factual allegations in the Complaint to calculate the amount in controversy. See Gaus v. Miles, Inc., 980 F.2d 564, 567 (9th Cir. 1992) (holding that defendant must use specific factual allegations or provisions in the complaint to support its argument of proper removal). The Court finds that Defendants provided detailed and competent evidence supporting their calculations and showing, to a legal certainty, that the jurisdictional threshold under CAFA is met. To the extent subsequent events show that jurisdiction would not be proper, the Court can address remand at that time. 28 U.S.C. § 1447(c).

By CHARLES H. JUNG

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Jan 09 2011
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Dept. of Labor

Labor Department Has Hired 250 New Wage-and-Hour Investigators, Representing a Staff Increase of One-Third

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As reported by Robert Pear of the New York Times yesterday, the Department of Labor has bulked up its staffing of wage and hour   investigators by one-third, or 250 investigators.  Mr. Pear reports that the Obama administration is paying particular attention to the pay practices in the healthcare industry “after finding that many hospitals and nursing homes do not pay proper overtime to nurses and other employees who work more than 40 hours a week.”

By CHARLES H. JUNG

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Jan 09 2011
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Motion for Summary Judgment/Adjudication

Evidence of Possession of Alleged Trade Secret and Ability to Bring Devices to Market Faster Than Claimant Sufficient to State Claim

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In Aqua-Lung America, Inc. v. American Underwater Products, Inc., 2010 WL 2991512 (N.D. Cal. July 28, 2010) (slip op.), plaintiff moved for reconisderation of an order denying summary judgment on trade secret misappropriation claim for trade secret misappropriation.  Judge Richard Seeborg of the Northern District of California held that relying on evidence from an economic expert, joined with evidence that plaintiff was in possession of the alleged trade secrets and that it was able to bring its devices to market in advance of defendants, allows sufficient inferences to support the existence of triable issues of fact as to the trade secrets claim.  The court denied reconsideration.

By CHARLES H. JUNG

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Jan 09 2011
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News, Private Rights of Action, Tip Pooling

California Supreme Court Rejects Private Right of Action for Plaintiffs in Tip Pooling Cases Under Labor Code section 351

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The California Supreme Court today issued its opinion in Lu v. Hawaiian Gardens Casino, Inc., an eagerly anticpiated decision where the issue was whether Labor Code section 351 provides a private cause of action for employees to recover any misappropriated tips from employers.  The Court concluded that “section 351 does not contain a private right to sue.”

Labor Code section 351 prohibits employers from taking any gratuity patrons leave for their employees, and declares that such gratuity is “the sole property of the employee or employees to whom it was paid, given, or left for.” Several appellate opinions have held that this prohibition, at least in the restaurant context, does not extend to employer-mandated tip pooling, whereby employees must pool and share their tips with other employees. (See Leighton v. Old Heidelberg, Ltd. (1990) 219 Cal. App. 3d 1062, 1067 (Leighton); see also Etheridge v. Reins Internat. California, Inc. (2009) 172 Cal. App. 4th 908, 921-922; Budrow v. Dave & Buster’s of California, Inc. (2009) 171 Cal.App.4th 875, 878-884; Jameson v. Five Feet Restaurant, Inc. (2003) 107 Cal.App.4th 138, 143.)

Plaintiff Louie Hung Kwei Lu (plaintiff) was employed as a card dealer at defendant Hawaiian Gardens Casino, Inc. (the Casino), from 1997 to 2003. The Casino had a written tip pooling policy.  Plaintiff brought a class action against the Casino and its general manager. His complaint alleged that the Casino‟s tip pooling policy amounted to a conversion of his tips, and violated the employee protections under sections 221 (prohibiting wage kickbacks by employer), 351 (prohibiting employer from taking, collecting, or receiving employees‟ gratuities), 450 (prohibiting employer from compelling employees to patronize employer), 1197 (prohibiting payment of less than minimum wage), and 2802 (indemnifying employee for necessary expenditures). The complaint also alleged that the Casino‟s conduct giving rise to each statutory violation constituted an unfair business practice under the unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et seq.).

The trial court granted the Casino‟s motion for judgment on the pleadings on the causes of action based on sections 351 and 450. It agreed with the Casino that neither section contained a private right to sue. The court also granted the Casino‟s successive motions for summary adjudication on the remaining causes of action. Plaintiff appealed.

The Court of Appeal held, “pursuant to the analysis in Leighton, that tip pooling in the casino industry is not prohibited by Labor Code section 351.” However, it reversed the trial court‟s order granting summary adjudication of the UCL cause of action based on section 351. While section 351 itself contains no private right to sue, the Court of Appeal concluded this provision may nonetheless serve as a predicate for a UCL claim because plaintiff presented triable issues of fact as to whether section 351 prohibited certain employees who participated in the tip pool from doing so because they were “agents” of the Casino.

Less than two months later, another Court of Appeal expressly disagreed with the holding on section 351 of the appellate court below. (See Grodensky v. Artichoke Joe’s Casino (2009) 171 Cal.App.4th 1399, review granted June 24, 2009, S172237.) The Supreme Court granted review to resolve the conflict on this narrow issue.

The Court concluded that the statutory language does not “unmistakabl[y]” reveal a legislative intent to provide wronged employees a private right to sue.  Based on a review of section 351‟s legislative history, the Court also concluded that there is no clear indication that the legislative history showed an intent to create a private cause of action under the statute.

Justice Chin wrote the opinion for the California Supreme Court, with all other Jusitices concurring.  Judge David L. Minning of the Los Angeles Superior Court was the trial judge.

The attorneys for appellant were Spiro Moss, Dennis F. Moss, and Andrew Kopel.

David Arbogast submitted an amicus curiae brief for the Consumer Attorneys of California.

Respondents were represented by Tracey A. Kennedy and Michael St. Denis

Anna Segobia Masters and Jennifer Rappoport submitted an amicus curiae brief for the California Gaming Association on behalf of Defendants and Respondents.

Dennis F. Moss and Tracey A. Kennedy argued in front of the Court.

By CHARLES H. JUNG

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Jan 09 2011
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Federal Jurisdiction

Mere Reference to Patent Does Not Confer Federal Jurisdiction Over UTSA Claim

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In this next case, Judge James Lorenz of the Southern District of California runs through a federal question analysis and concludes that Plaintiff’s mere reference to the fact his intellectual property is patented does not convert a state law UTSA claim into a federal question that can impart original jurisdiction in the federal courts.  Markey v. Verimatrix, Inc., 2010 WL 2976164 (S.D. Cal. July 22, 2010) (slip op.).

A careful review of plaintiff’s misappropriation of trace secret claim as found in the complaint does not suggest a basis for federal jurisdiction. The issue presented for decision is not whether plaintiff’s patents are valid or invalid or are or are not being infringed but whether his intellectual property was misappropriated. Mere reference to the fact that plaintiff’s intellectual property was patented does not turn on a substantial question of federal law. Plaintiff is not seeking to prove his trade secrets are protected under federal patent law and that defendant infringed on the patent. And the Court is not called to determine in any manner the scope and meaning of plaintiff’s patent in order to consider the alleged trade secret misappropriation. The misappropriation of trade secret claim does not ‘turn on substantial questions of federal law,’ and does not ‘really and substantially involv[e] a dispute or controversy respecting the validity, construction or effect of [federal] law.’ “ Williston Basin, 524 F.3d at 1102. Instead, the sole remaining claim in the complaint is based solely on California law. As a result, the Court does not have original jurisdiction over plaintiff’s claim.

By CHARLES H. JUNG

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Jan 09 2011
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Legislation

New York Rejects Farmworker Overtime Pay Legislation

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Already discussed and rejected several times this year, the New York legislature has again rejected legislation that would have give farmworkers overtime pay and other workplace rights.  The bill was voted down 31 to 28.  Before that, the bill was defeated in the Agriculture Committee.  The Post-Journal covers the story here.

By CHARLES H. JUNG

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Jan 09 2011
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Trade Secrets Act

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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Jan 09 2011
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Class Actions, Demurrer/Motion to Dismiss

Second District Court of Appeal Holds That “in the vast majority of wage and hour disputes, class suitability should not be determined on demurrer.”

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This next case highlights the difficulty of successfully eliminating a wage and hour class action in California at the demurrer stage.  After 3 bites at the apple, the trial judge in Gutierrez v. California Commerce Club, Inc., 2010 WL 2991875 (Cal. Ct. App. 2d Dist. August 02, 2010) (not reported) sustained without leave to amend the defendant California Commerce Club, Inc.’s (“Club”)  demurrer to plaintiff’s third amended complaint on the ground the plaintiffs had failed to show the existence of a class, and dismissed the action as to all representative claims.  In a 3-0 opinion, Justice Jeffrey J. Johnson, writing for the Second District Court of Appeal, reversed the trial court’s order.

Putative class representatives Sergio Gutierrez and Hector Salazar filed the operative third amended class action complaint against the Club, alleging, among other things, that they and other similarly situated members of the putative class were injured by the Club’s unlawful policy and practice of denying meal and rest breaks to certain hourly, non-union employees.

The Court of Appeal held that “In this action, as in the vast majority of wage and hour disputes, class suitability should not be determined on demurrer.”

Plaintiffs alleged that, pursuant to a Club policy or practice, they and similarly situated hourly, non-union employees have been denied meal and rest breaks to which they are legally entitled, or compensation therefor.  The Court reasoned that “[o]n these allegations, it is clear that the Club liability, if any, to the class as a whole, can be determined by reviewing a single or set of facts common to all.” Id. *6.  The Court wrote:

We return again to and rely upon the well-established principle, that “only in mass tort actions (or other actions equally unsuited to class action treatment) [should] class suitability … be determined at the pleading stage. In other cases, particularly those involving wage and hour claims, [such as the instant action,] class suitability should not be determined by demurrer.” ( Prince, supra, 118 Cal.App.4th at p. 1325, italics added; see also Tarkington, supra, 172 Cal.App.4th at p. 1512.).  Id.

We will reverse the order dismissing the action following the sustaining without leave to amend of the demurrer to the TAC based on the trial court’s finding that the pleading failed “to allege facts sufficient to show the existence of a class.” It was premature for the trial court to make determinations pertaining to class suitability on demurrer. The allegations of the operative complaint are sufficient to move the action beyond the pleading stage.

Id. *6.

The appeal was taken from an order of Judge Aurelio Munoz of the Superior Court of Los Angeles County. (Judge Munoz is a retired judge of the L.A. Sup. Ct. assigned by the Chief Justice pursuant to art. VI, § 6 of the Cal. Const.).  Matthew J. Matern and Thomas S. Campbell appeared for Plaintiffs and Appellants.  Anna Segobia Master and Jennifer Rappoport appeared for Defendant and Respondent.

By CHARLES H. JUNG

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