California Courts of Appeal
CALLEROS v. RURAL METRO OF SAN DIEGO, INC.
AMBULANCE WORKERS ALLEGED THEY WERE UNLAWFULLY FORCED TO REMAIN ON CALL DURING REST BREAKS
Plaintiffs Reuben Calleros and Ralph Rubio filed a class action against Defendant Rural Metro of San Diego and other ambulance entities for wage and hour violations. The plaintiffs alleged that Defendants unlawfully required employees to remain on call during rest breaks. The court denied the plaintiff’s motion for class certification. During the pendency of the case, voters passed Proposition 11, enacting provisions requiring ambulance employees to remain reachable by a communication device during shifts, including rest breaks. The plaintiffs appealed the denial of class certification. The Defendants opposed on the merits and also moved to dismiss the appeal, arguing that the plaintiffs’ claims are now moot due to Proposition 11. The Court of Appeal agreed that the appeal was moot and dismissed it.
PROPOSITION 11 WAS RETROACTIVE AND RENDERED THE CASE MOOT
Proposition 11 is codified as Labor Code sections 880-890. Labor Code 887 requires emergency ambulance employees to remain reachable by portable communication device throughout each shift, including on rest breaks. This provision was expressly retroactive and applied to all actions pending on or commencing after October 25, 2017. Therefore, on-call rest periods are now required for ambulance employees. Because the plaintiffs’ claims were based only on remaining on-call during rest periods, their appeal is now moot.
COA 4th Dist., Div. 1. Filed 11/23/20, publication ordered 12/15/20. 58 Cal.App.5th 660. Opinion by Justice Haller.
DOMESTIC LINEN SUPPLY CO., INC. v. L J T FLOWERS, INC.
THE ARBITRATION PROVISION WAS IN SMALL PRINT AND INCONSPICUOUS
The parties entered into a business contract under which Plaintiff Domestic Linen rented uniforms to Defendant L J T Flowers. The contract was printed on both sides of one page, but the signature line for both parties was on the front. The back side of the page contained paragraphs 5 through 21 of the contract. Paragraph 15 contained an arbitration provision. All of the paragraphs on the back of the page were in small 8-point type, and paragraph 15 contained no heading, boldface, or italics. There was no signature or initial line on the back. After three years, a dispute arose, and Domestic filed a petition to compel arbitration. The court denied the petition, finding a lack of procedural due process because the arbitration agreement was “inconspicuous.” Domestic appealed, and the Court of Appeal affirmed.
AN INCONSPICUOUS ARBITRATION AGREEMENT IS NOT ENFORCEABLE
Arbitration agreements are enforceable except upon such grounds that exist in law or equity for voiding a contract. The Constitutional right to trial by jury is basic “and should be zealously guarded by the courts.” When in doubt, the issue should be resolved in favor of the right to trial by jury. The contract was deceptive, with the arbitration provision located after the signature line and on the back of the agreement. The arbitration provision was effectively hidden in fine print. “An arbitration clause in a contract is invalid because the clause is as inconspicuous as a frog in a thicket of water lilies.” Therefore, there was no agreement to arbitrate.
COA 2nd Dist., Div. 6. Filed 12/4/20. 58 Cal.App.5th 180. Opinion by Presiding Justice Gilbert.
GULF OFFSHORE LOGISTICS, LLC v. SUPERIOR COURT OF VENTURA COUNTY (CLAUDE NORRIS)
PLAINTIFFS WORKED OFFSHORE IN CALIFORNIA WATERS
Defendant Gulf Offshore Logistics employed Plaintiff Norris and others to work as crew members on a vessel that provided maintenance to offshore oil platforms. The vessel docked at a California port and traveled through California waters to the platforms, which were located outside of California’s boundaries. Plaintiffs alleged that Gulf violated numerous California wage and hour laws, and they filed a class action. Gulf moved for summary judgment, arguing that Louisiana law applied and the FLSA preempted California law. The court denied the motion, and Gulf filed a petition for writ of mandate. The Court of Appeal concluded that Louisiana law applied. The California Supreme Court granted review and subsequently transferred the case back to the Court of Appeal. In light of the Supreme Court’s opinion, the Court of Appeal vacated its prior opinion and concluded that California law applied, affirming denial of the motion for summary judgment.
CALIFORNIA LAW APPLIES IN CALIFORNIA’S BOUNDARIES, INCLUDING ITS WATERS
Whether employees are entitled to California-compliant wage statements depends on whether their principal place of work is in California. The relevant geographic location is where the work occurs. California’s power to protect employees is not limited if the worker or employer is a nonresident. Since the plaintiffs performed most of their work within the boundaries of California, California law applies.
CELA Involvement: Congratulations to CELA member Kristi Rothschild of Rothschild & Alwill, APC!
COA 2nd Dist., Div. 6. Filed 12/7/20. 58 Cal.App.5th 264. Opinion by Acting Presiding Justice Yegan.
https://law.justia.com/cases/california/court-of-appeal/2020/b298318a.html
KAO v. JOY HOLIDAY
OWNERS OF A CORPORATION PAID PLAINTIFF KAO FOR HIS WORK FROM PERSONAL ACCOUNTS
Defendant Joy Holiday was a bus tour company owned by Jessy Lin and Harry Chen as a closely-held corporation. Plaintiff Ming-Hsiang Kao moved to the United States upon receiving an offer to work for Defendants as a computer systems administrator. Kao lived with Lin and Chen. Lin and Chen paid Kao a “stipend” for his work and did not add Kao to Joy Holiday’s payroll. Kao sued for various wage and hour violations. Following a bench trial, the court rejected all of Kao’s statutory claims but found Defendants owed him unpaid wages under quantum meruit. On a previous appeal, the Court of Appeal found that Kao was a non-exempt employee and was entitled to recover unpaid wages under his statutory claims and remanded the matter. The trial court held further proceedings and awarded Kao over $480,000, payable by Joy Holiday, Lin, and Chen jointly and severally. The court found that Kao was employed by Joy Holiday and invoked the alter ego doctrine to hold Lin and Chen personally liable for wages owed. Lin and Chen appealed the alter ego finding, and the Court of Appeal affirmed.
THE ALTER EGO DOCTRINE APPLIED DUE TO A LACK OF SEPARATION BETWEEN JOY HOLIDAY AND ITS OWNERS AND THE RESULTING INJUSTICE TO KAO
The alter ego doctrine applies where an opposing party uses a corporate form unjustly and in derogation of the plaintiff’s interests. When the doctrine applies, the court will hold individual shareholders liable for the actions of the corporation. Alter ego liability depends on: (1) unity of interest and ownership such that the separate personalities of the corporation and individual no longer exist, and (2) whether adherence to the fiction of separateness would promote fraud or injustice. Factors a court may consider include: commingling of funds and other assets, an individual treating the corporate assets as his own, failure to maintain adequate corporate records, sole ownership of all of the stock in a corporation by the members of a family, use of the corporation as a mere shell or conduit for the business of an individual, the concealment of personal business activities, the use of the corporate entity to procure services or merchandise for another person or entity, and the use of the corporation as a subterfuge for illegal transactions. Alter ego liability is not a question of law. Lin and Chen commingled assets with Joy Holiday, made unauthorized use of corporate assets, used personal funds to pay Kao, and owned all of Joy Holiday’s stock and made all of the management decisions. These facts were sufficient to meet prong one of the alter ego analysis. Regarding prong two, the court could reasonably infer from Lin and Chen’s commingling of assets that failure to impose alter ego liability would lead to an inequitable result.
COA 1st Dist., Div. 3. Filed 11/12/20, publication ordered 12/7/20. 58 Cal.App.5th 199. Opinion by Justice Petrou.
KWAN SOFTWARE ENGINEERING, INC. v. HENNINGS
KWAN SOFTWARE ENGAGED IN EGREGIOUS DISCOVERY MISCONDUCT
Plaintiffs Kwan Software and others sued business competitor Foray Technologies and its president Thomas Hennings. The parties litigated extensively, resulting in 175 hearings over five years. Documents revealed that Kwan lied during his deposition and engaged in spoliation of evidence. Defendants moved for sanctions against Plaintiffs and their former counsel for misuse of the discovery process, including extensive litigation misconduct, destroying and hiding evidence, filing false declarations, and pursuing meritless claims. The court issued an OSC re sanctions. The court ultimately found that Kwan filed false declarations, committed fraud on the court, spoliated and suppressed evidence, and engaged in bad faith misconduct. The court ordered various sanctions including dismissal of claims with prejudice but denied Defendants’ motion for monetary sanctions to recover millions in litigation costs. Defendants appealed the denial of monetary sanctions, and the Court of Appeal reversed.
THE COURT MUST ORDER MONETARY SANCTIONS FOR DISCOVERY ABUSE WHERE THE REQUIREMENTS OF THE CODE ARE MET
CCP section 2023.030 describes the trial court’s authority to issue monetary sanctions for discovery abuse. It states that the court “shall” impose a sanction unless the subject “acted with substantial justification” or sanctions would otherwise be unjust. “Substantial justification” requires a justification that is clearly reasonable because it is well-grounded in both law and fact. There was no indication in the record that Kwan’s conduct was substantially justified, and Kwan did not argue it was. Nor would imposition of monetary sanctions have been unjust. Sanctions have a remedial purpose and are not designed to punish and should therefore not be a windfall. Nothing in the record indicated that monetary sanctions would constitute punishment of Kwan. Therefore, under CCP 2023.030, monetary sanctions were required, and the court abused its discretion in failing to award them. Consideration of punishment influences the amount of the award, not entitlement to the award. On remand, the trial court must determine the amount of monetary sanctions.
COA 6th Dist. Filed 12/2/20. 58 Cal.App.5th 57. Opinion by Justice Danner.
ROJAS-CIFUENTES v. SUPERIOR COURT (AMERICAN MODULAR SYSTEMS, INC.)
PLAINTIFF ROJAS-CIFUENTES SUED UNDER PAGA
Plaintiff Rojas-Cifuentes sued Defendant American Modular Systems, Inc., for a number of statutory violations. As relevant here, it sued for violations of the Labor Code under California’s Private Attorneys General Act (“PAGA”).
THE TRIAL COURT GRANTED SUMMARY JUDGMENT
PAGA requires that, before a representative claim can be made under that statute, the Plaintiff must file a notice with the Labor & Workforce Development Agency (“L&WDA”) and serve the defendant. That notice must put the L&WDA and the defendant on notice of sufficient “facts and theories” to allow the L&WDA to determine if it wants to file suit on behalf of the aggrieved employees. If they L&WDA either affirmatively does not do so, or sufficient time elapses without the L&WDA doing so, the plaintiff may file his or her own claim.
Agreeing with the Defendant, the trial court granted summary judgment as to Plaintiff’s PAGA claim. It did so on the single ground that Plaintiff had failed to exhaust his administrative remedies by providing an insufficient PAGA notice.
FAILURE TO EXHAUST CANNOT BE REMEDIED BY AMENDING THE COMPLAINT
The appellate court first rejected Defendant’s argument that Plaintiff had an adequate remedy before the trial court, and did not need writ relief. Defendant argued that Plaintiff had filed an amended complaint, and Defendant’s demurrer was pending. If the demurrer were overruled, Defendant argued, then Plaintiff’s case could continue.
The appellate court pointed out, however, that the trial court had granted summary judgment on the ground of failure to exhaust administrative remedies. No amendment could remedy that failure, and thus Plaintiff had no adequate remedy against the trial court’s ruling in that regard.
THE NOTICE ALLEGATIONS WERE SUFFICIENT
The appellate court then rejected Defendant’s argument that there must be modicum of evidentiary basis behind a PAGA notice. The court pointed out that PAGA notices precede discovery, and should not be held to a standard higher than that applied to complaints. So long as sufficient “facts and theories” were alleged – even if imperfect, and even if the dates of violations were not given – the notice will do enough to exhaust.
CONCLUSION
There is no heightened standard for PAGA notices. They are intended to give the L&WDA enough information to decide if it wants to pursue a claim on its own, and to give the Defendant a chance to remedy its defects. Otherwise, the courts will read such notices with liberality to determine if they allege sufficient “facts and theories.”
CELA INVOLVEMENT
Congratulations to CELA Members Marco Palau and Hilary Hammell on this excellent result for California workers.
COA, 3rd Dist., filed 12/21/20. Opinion by Acting Presiding Justice Blease.
Ninth Circuit
CHRISTIAN v. UMPQUA BANK
PLAINTIFF CHRISTIAN ALLEGED THAT SHE WAS STALKED
The facts of the case were largely undisputed. A bank customer allegedly stalked Plaintiff Jennifer Christian, leaving her unwanted notes, entering the bank without a business purpose and staying to stare at her, making unwanted inquiries of her co-workers about her, and appearing at a charity event where Christian volunteered.
Plaintiff Christian brought the matter to her supervisors, asking them to close the customer’s account and prohibit him from entering the premises. Although it closed (and subsequently re-opened) the customer’s account, and finally barred him from the bank, its actions prior to that were arguably suspect. For example, according to the complaint, at least two supervisors told Christian that she should “hide in the break room” when the customer entered.
PLAINTIFF CHRISTIAN REQUESTED A TRANSFER AND ULTIMATELY QUIT
Believing that Defendant Umpqua Bank was not doing enough to protect her safety, Plaintiff Christian requested a transfer to another branch. She accepted shorter hours, despite the financial hardship that this imposed. She ultimately quit because her doctor advised her to.
THE CONTINUING ALLEGED HARASSMENT VIOLATED TITLE VII
The Ninth Circuit reversed the summary judgment granted by the district court. It found that the trial judge erred by disregarding those incidents which Plaintiff Christian did not herself witness, but about which she was nonetheless informed. For example, the customer left notes for Plaintiff Christian which were ultimately given to her, and her co-workers told her when the customer asked about her.
The district court erred further by disregarding the incidents between the first and last acts of harassment because they were seven months apart. The appellate court instructed that the continuing pattern of harassment was not to be disregarded just because it happened over a long period of time.
THE ALLEGATIONS WERE SUFFICIENT TO HOLD DEFENDANT UMPQUA BANK LIABLE
Moreover, the allegations of Defendant Umpqua Bank’s actions – and frequent inactions – were sufficient that a reasonable jury could find that it either ratified the conduct, failed to take reasonable steps to stop it, or both.
CONCLUSION
Title VII allows for an employer’s liability for the actions of third parties if the employer either ratifies the actions, or fails to take immediate and appropriate corrective action.
Ninth Circuit, Filed 12/31/20. Opinion by Justice Paez.