California Courts of Appeal
AREA 55 v. NICHOLAS & TOMASEVIC, LLP
This is a malicious prosecution case against a law firm that brought a consumer class action that was ultimately dismissed for failure to prosecute and failure to provide discovery. The named plaintiff in the underlying consumer class action case filed for bankruptcy nine months after the lawsuit was filed and more than a year prior to class certification. The named plaintiff failed to list the lawsuit on her schedule of assets, thereby forfeiting the claim as a matter of law. After learning of the plaintiff’s bankruptcy, Class Counsel, who are now defendants in the malicious prosecution case, failed to take any action to dismiss the named plaintiff’s claims and find a new class representative. Rather, they continued litigating for more than a year, through the class certification stage. A class was certified in 2011. After a class was certified, Class Counsel failed to notify the class of the certification order, as required by the court. Years later, in 2013, the class action was dismissed in light of the plaintiff’s bankruptcy, but Class Counsel were given leave to amend to add a new class representative. Class Counsel did so, but then failed to further prosecute the case or respond to discovery. As a result, the case was ultimately dismissed. Next came the malicious prosecution case against Class Counsel. Class Counsel moved to dismiss under the anti-SLAPP statute – CCP section 425.16. The trial court dismissed the case, finding the complaint arose from protected activity under the Anti-SLAPP law, and that the Plaintiffs had not shown a probability of success on the merits. The Court of Appeal reversed, holding that although every case of malicious prosecution arises from protected activity under the anti-SLAPP law, there was a probability of prevailing on the merits.
The case has a detailed discussion of the elements of malicious prosecution and how – in light of the law setting a low bar for establishing a “probability of prevailing on the merits” in the context of an anti-SLAPP motion – the elements were satisfied here. The ultimate takeaways from this case for plaintiff lawyers are: (1) whenever you learn of a client’s bankruptcy, take immediate action to assess whether the pending claim was forfeited, and if so, to dismiss the case; and (2) if a client is not cooperating in discovery, do not try to hide that fact from opposing counsel or the court.
This case also discusses waiver of a statute of limitations defense, although that is not the main issue. On the SOL issue, the Court held the Defendants to the malicious prosecution action (i.e. Class Counsel) waived a statute of limitations defense by failing to identify the specific code section of the applicable statute of limitations in their Answer as required by CCP section 458. Practice tip: if you receive an Answer that asserts a purported statute of limitations defense without citing the applicable code section, you can move for summary adjudication of that defense on the grounds of waiver.
COA Fourth District, Division 1. Filed 1/29/2021, publication subsequently ordered. 61 Cal.App.5th 136. Opinion by Justice Irion.
DONGXIAO YUE v. WENBIN YANG
This is not an employment case, but it is an interesting read and has practical civil procedure considerations, nonetheless. Plaintiff Dongxiao Yue, a software developer, lives in Northern California and established a Chinese language online community website called Zhen Zhe Bay (“ZZB”). Muye Liu, another California resident, owns and operates a competing website, Yeyeclub.com (“Yeyeclub”). Defendant Wenbin Yang, a Canadian resident, posted on both websites. As alleged, Yang posted “sexually explicit, violent and insulting” posts on ZZB, which Plaintiff removed. Consequently, Yang began posting defamatory attacks about Plaintiff on Yeyeclub and colluded with Liu to siphon off ZZB bloggers to join Yeyeclub while simultaneously attacking Plaintiff. Yang challenged Plaintiff to sue him in California so that Yang “could leave a glorious record in…American legal history” and taunted Plaintiff, “I always stated that I would destroy you the shyster in U.S. federal court…I want to go to California State for a tour, with your support, what a pleasure.” Yang also announced he would travel to San Francisco to carry out a meeting “as originally planned,” and that he “would go to California State and bully Dr. Yue in his physical backyard.” Yang accused Plaintiff of having violated a court order, contended that Plaintiff’s family “was nearly driven to the streets,” and accused Plaintiff of stealing Yang’s information using a “Trojan horse” virus, all on Yeyeclub.
When Plaintiff attempted to assert personal jurisdiction in California Superior Court, Defendant moved to quash service of the summons and complaint, contending his posts were not directed exclusively at California residents and that he therefore lacked minimum contacts with the state. Plaintiff countered that Defendant had intentionally directed the defamatory comments at California because many of Yeyeclub’s bloggers and readers resided in the Golden State, that Defendant had threatened to travel to California and harm Plaintiff, and that therefore Defendant had purposefully availed himself of California benefits and Plaintiff’s claims arose out of Defendant’s contacts with California.
The trial court granted the motion to quash, holding it lacked jurisdiction over a Canadian resident, and finding that the contacts between Plaintiff and Defendant occurred on the Internet, which did not constitute “minimum contacts” with California for jurisdictional purposes. The First District Court of Appeal, in an opinion written by Judge Brad Seligman (sitting on special assignment), reversed the order granting Defendant’s motion to quash and ordered the trial to enter a new order denying the motion and reinstating the complaint. The Court held Defendant was subject to specific personal jurisdiction, which requires a finding that (1) the defendant has purposefully availed themself of forum benefits, (2) the controversy relates to, or arises out of, the defendant’s contacts with the proposed forum, and (3) the exercise of such jurisdiction comports with notions of fair play and substantial justice.
Regarding purposeful availment, courts apply the “effects test” in the defamation context: even if the intentional conduct occurred elsewhere, it may give rise to personal jurisdiction here if it is calculated to cause injury in California. The mere posting of defamatory comments is insufficient to establish specific jurisdiction, but it is enough to send “California-focused” messages directed at California residents with the purpose of causing injury in California. The Court of Appeal found Defendant’s conduct met this requirement.
The Yue court found the element of relatedness between the controversy and the forum contacts was easily satisfied here, as Defendant’s posts on Yeyeclub injured Plaintiff in California, which sufficed as an “adequate link” between Plaintiff’s claims and Defendant’s contacts here.
Because the appellate court found Plaintiff had established the first two elements of specific personal jurisdiction, the burden was on Defendant to show that asserting jurisdiction in California would be unfair or unreasonable. While the Court acknowledged that requiring Defendant, a Canadian resident, to defend himself in California would be burdensome to a degree, that was but one factor that determined the reasonableness prong. The Court did not give that factor much weight as Defendant not only presented zero evidence that he would be at a “severe disadvantage” as compared to Plaintiff by having to appear in California. Further, the Court held that the evidence supporting Plaintiff’s claims likely would be found in California, and Defendant had failed to identify any witnesses or evidence to be found elsewhere. Moreover, the Court reasoned, California “has a manifest interest in providing a local forum for its residents to redress injuries inflicted by out-of-state defendants,” and Defendant should have anticipated being held accountable in California for reaching into California with his conduct.
COA, First District, Division 5. Filed 3/8/21. 62 Cal.App.5th 539. Opinion by Judge Seligman (Judge of the Superior Court of Alameda County, sitting on special assignment).
FELCZER v. APPLE, INC.
In a case against Apple Inc., the Superior court entered judgment for Plaintiffs, a subclass of retail workers, in September 2017. Afterward Plaintiffs moved for attorney fees and costs pursuant to Code of Civil Procedure section 1021.5. At issue was whether interest on the attorney fees and costs began in September 2017—the date the judgment was entered—or in March and April 2018—the dates when fee and costs amounts were made certain. Analyzing Lucky United Properties Investment, Inc., v. Lee, (2010) 185 Cal.App.4th 125, the Court agreed with Lucky’s general underlying principle that interest ordinarily begins to accrue upon entry of judgment. It cautioned, however, that what “constitutes a judgment” is not always clear. In making this finding, the Court rejected Defendant’s assertion that Lucky was inapplicable because it dealt with cost incurred postjudgment to enforce the judgment. Instead, it noted that if postjudgment cost to enforce the judgment are added to the judgment, then certainly prejudgment attorney fees and costs become “part of the judgment, at least for some purposes.” However, the Court stated that Lucky does not address a situation where it is unclear at the time of judgment whether the prevailing party will recover any fees.
THE COURT CLERK’S NUNC PRO TUNC POWER IS NARROW AND DOES NOT APPLY TO ENTERING NEWLY DETERMINED COSTS ONTO A PREVIOUS JUDGMENT.
The Nunc Pro Tunc (“NPT”) power is limited to two occasions: (1) to correct mistakes to bring the judgment into alignment with the court’s intention at the time, and (2) to preserve substantial rights when justice requires. Entering a newly determined judgment amount onto an order does not fall within the two occasions for NPT power. This is because doing so does not correct a prior mistake and because the routine nature of litigating fees and costs does not amount to an issue of justice.
THE ACCRUAL OF POSTJUDMENT INTEREST BEGINS ON THE DATE THE COURT DECIDES A PARTY IS ENTITLED TO A MONEY JUDGMENT, EVEN IF THE EXACT AMOUNT IS UNKNOWN
Under California law, a money judgment is a judgment which requires the payment of money. Interest on a money judgment accrues on the date judgment was entered. Awards of costs and fees are separate and complete money judgments in and of themselves. If a court has not ruled that a party is entitled to a money judgment, then an order for fees and costs cannot be construed as a money judgment. Actual entitlement is necessary. However, the court need not enter a judgment that states a sum certain dollar amount. In this case, the September 2017 order stated Plaintiff was entitled to certain costs, thus starting the clock for interest on those costs. It did not include an entitlement to attorneys’ fees. Instead, the Court ruled on Plaintiff’s Motion for Attorneys’ fees pursuant to the Private Attorney General Act (“PAGA”) in March 2018. Therefore, interest on that judgment began to accrue in March 2018. Clarifying further, the Court stated that if fees and/or costs are already an established right, then the entry of judgment date–even if the judgment has no statement as to costs—is the start date for accrual of interest. However, if costs are discretionary then the accrual of interest begins only once the court recognize the prevailing party’s right to fees and/or costs.
COA Fourth District, Division 1. Filed 4/23/2021. 63 Cal.App.5th 406. Opinion by Justice Dato.
GOMEZ v. REGENTS OF THE UNIVERSITY OF CALIFORNIA
Plaintiff Guivini Gomez sued her form employer, the Regents of the University of California (Regents), for failure to pay her minimum wage, alleging that Regents’ time-keeping procedures of rounding hours and automatically deducting 30-minute meal breaks resulted in her not being paid minimum wage for all hours she worked. Regents demurred, and the trial court sustained the demurrer without leave to amend and entered judgment in the Regents’ favor. Plaintiff appealed, arguing that the trial court erred in finding that Regents was not subject to the minimum wage laws. The Court of Appeal affirmed.
The California Constitution establishes the Regents as a “public trust” with the “full powers of organization and government.” (Cal. Const., art. IX, § 9.) As a result, the Regents have been characterized as a branch of the state with general immunity from legislative regulation. However, Regents are not entirely autonomous; the Legislature may regulate the Regents’ conduct in three areas: (1) preventing the compelled appropriations for salaries, (2) regulating behavior and enforcing order pursuant to general police power, and (3) regulating matters of statewide concern not involving internal university affairs.
The Court of Appeal held that the Regents did not fall within the meaning of “employer” as defined by the Industrial Welfare Commission (IWC) wage orders. However, even assuming the Regents was an employer, the Court of Appeal held that the Regents’ time-keeping procedures were matters of internal affairs of the university that do not come within any exceptions to the Regents’ constitutional immunity.
COA Fourth District, Division 1. Filed 4/23/21. Opinion by Justice Huffman.
PARADA v. EAST COAST TRANSPORT
DYNAMEX ABC TEST APPLIES RETROACTIVELY
After the first phase of a bifurcated bench trial, the trial judge held the plaintiff-drivers were properly classified as independent contractors under the multi-factor test from S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal.3d 341 (1989). The trial judge refused to apply the ABC test, opining that Dynamex Operations W. v. Superior Ct., 4 Cal.5th 903 (2018) did not apply retroactively. Judgment was entered for defendant.
After judgment was entered, the Supreme Court, in Vazquez v. Jan-Pro Franchising International, 10 Cal.5th 944 (2021), held that Dynamex does apply retroactively to all cases that were not yet final at the time of the opinion. Vazquez held that retroactivity is appropriate because judicial decisions generally are retroactive. Moreover, Dynamex was an issue of first impression, did not change a settled rule on which the parties had relied, and was foreseeable, all factors that weigh in favor of retroactivity. Therefore, the recent Vazquez opinion controlled and required reversal and a remand for the trial court to consider, in the first instance, whether plaintiffs were misclassified as independent contractors under Dynamex’ ABC test.
FEDERAL LAW DOES NOT PREEMPT THE ABC TEST
The Federal Aviation Administration Authorization Act of 1994 (“FAAAA”) expressly preempts state laws “related to a price, route, or service of any motor carrier … with respect to the transportation of property.” 49 U.S.C. § 14501(c)(1). The ABC test is a law of general application that does not mandate the use of employees for any business or hiring entity. Independent contractors can be used if properly classified as such. Because the ABC test does not sufficiently relate to a price, route or service, the test is not preempted by the FAAAA.
COA Second District, Division 2. Filed 3/21/21, publication ordered 4/1/21. 62 Cal.App.5th 692. Opinion by Justice Lui.
ROSALES v. UBER TECHNOLOGIES, INC.
UBER SOUGHT TO HAVE ARBITRATOR FIRST DECIDE WHETHER A WORKER WAS AN EMPLOYEE (RATHER THAN INDEPENDENT CONTRACTOR) BEFORE THE WORKER COULD BRING A COURT ACTION UNDER PAGA.
Rosales was an Uber driver under an express contract that provided that: (1) she was an independent contractor; (2) any and all work-related claims had to be submitted to arbitration, and (3) any arbitration was controlled by the Federal Arbitration Act (“FAA”). The agreement also provided that an arbitrator was to decide the validity and enforceability of the agreement. The Rosales/Uber agreement also expressly provided that Rosales waived her right to bring a representative action under PAGA, and any individual action she might bring under PAGA would be submitted to arbitration. Nevertheless, Rosales filed a representative action under PAGA in Los Angeles Superior Court, seeking penalties for unpaid wages under Labor Code 216. After several demurrers, Uber brought a motion to compel arbitration of Rosales’ standing to bring a PAGA claim, asserting that the arbitration agreement Rosales had electronically signed as a requirement to drive for Uber was governed by the FAA and mandated that the question of her standing to bring a PAGA action be decided by an arbitrator. Alternatively, Uber sought to have her PAGA claim dismissed, as the arbitration agreement had included a waiver of Rosales’ right to bring representative claims. The trial court, following two published appellate decisions, concluded that a plaintiff cannot be compelled to arbitrate whether she was an “aggrieved employee” with standing to enforce a PAGA claim because the arbitration agreement could not bind the State of California, on whose behalf any PAGA claim was being asserted.
A WORKER’S STANDING TO BRING A PAGA CLAIM AS AN “EMPLOYEE” CANNOT BE DELEGATED TO AN ARBITRATOR, EVEN IF THE WORKER SIGNED AN AGREEMENT EXPRESSLY STATING THAT SHE WAIVES HER RIGHT TO BRING A REPRESENTATIVE ACTION.
This decision contains a good discussion of the application of recent state and federal cases addressing the arbitrability of issues arising under PAGA. Reinforcing the California Supreme Court’s decision in Iskanian, this case makes clear that California law, not FAA, governs how standing will be determined in a PAGA action, including the issues of who is “aggrieved” and who is an “employee,” both of which are elements of a plaintiff’s claim under PAGA. Unless and until the United States Supreme Court decides these issues directly, even its decisions regarding FAA preemption of state laws do not require that issues relating to PAGA be submitted to arbitration, even in the face of express contractual language requiring such.
COA Second District, Division 8. Filed 4/30/21. 2021 WL 1711585. Opinion by Justice Grimes.
ROUSSOS v. ROUSSOS
This was a corporate dispute over the removal of the managing director of two corporations. The parties had an arbitration agreement stating the parties “stipulate and agree not to contest that Judge John P. Shook will arbitrate all issues with binding authority” over them. The arbitrator’s disclosures of potential conflicts revealed that Judge Shook was an arbitrator in two other matters involving the same parties and witnesses. A defendant timely served a notice to disqualify under CCP section 1281.91. The arbitrator denied the disqualification request and ultimately ruled against the defendant who sought disqualification. The trial court granted a petition to confirm the arbitration award and denied a motion to vacate the award. The Court of appeal reversed.
An arbitrator agreed upon in an arbitration agreement is a “proposed” neutral arbitrator as that term is defined in CCP section 1281.91. But, even if there were any distinction between “proposed neutral arbitrators” and “serving neutral arbitrators,” all arbitrators are required to comply with the ethics standards for neutral arbitrators adopted by the Judicial Council. Ethics Standards, Standard 7(d) requires a “proposed arbitrator or arbitrator” to “disclose all matters that could cause a person aware of the facts to reasonably entertain a doubt that the arbitrator would be able to be impartial.” Standard 7(d) includes as examples of required disclosures: a family, “significant personal,” or attorney-client relationship with a party or lawyer in the arbitration; a financial or other interest in the outcome of the arbitration; prior service as an arbitrator for a party or lawyer; and knowledge of “disputed evidentiary facts concerning the proceeding.” Standard 7(e) requires the arbitrator to disclose other matters relating to professional discipline and the arbitrator’s inability to conduct and complete the arbitration in a timely manner. Code of Civil Procedure Section 1281.91(b)(2) authorizes parties to disqualify an arbitrator without cause by serving a notice of disqualification within 15 days after the arbitrator serves disclosures of potential conflicts of interest pursuant to CCP section 1281.9.
In light of the two prior matters involving the same parties that Judge Shook had arbitrated, he should have recused himself upon the timely request of any party. The parties’ arbitration agreement, which specified neither party would “contest that Judge John P. Shook will arbitrate all issues” did not waive the right to request disqualification upon disclosure of significant potential conflicts of interest. “[T]he parties cannot contract away California’s statutory protections for parties to an arbitration, including mandatory disqualification of a proposed arbitrator upon a timely demand.”
COA Second District, Division 7. Filed 2/16/21. 60 Cal.App.5th 962. Opinion by Justice Feuer.
RUBIO v. CIA WHEEL GROUP
Plaintiff Maria Lopez filed an action against her former employer, CIA Wheel Group (Defendant or CWG), alleging they terminated her employment because she had cancer. Plaintiff died during the first trial, and the court declared a mistrial. Thereafter, the court appointed Plaintiff’s children as her successors in interest. Following the second trial, the court found that Defendant terminated Plaintiff because of her medical condition. The court awarded $15,057 in economic damages and determined that Plaintiff suffered emotional distress damages in the range of $100,000 to $150,000 but that they were not recoverable after her death due to the provisions of the Code of Civil Procedure section 377.34. However, taking the emotional distress into account, the court awarded punitive damages in the amount of $500,000. Defendant appealed, and the Court of Appeal affirmed.
On appeal, CWG argued, in part, that the punitive damages, which were 33.3 times the amount of the economic damages awarded, were excessive. Lopez argued that the comparison should be based on the total harm, which included the $100,000 to $150,000 noneconomic damages. If based on the total harm, the multiplier was 3.3 to 5. The Court of Appeal agreed with Lopez and noted that courts have regularly considered uncompensated damages in determining punitive damages awards. The Court of Appeal further held that the ratio (3.3 to 5) was not constitutionally impermissible given the reprehensibility of CWG’s conduct. Note: in April 2021, the California State Senate passed SB-447, which would amend Code of Civil Procedure section 377.34 to allow for the recovery of emotional distress damages in an action by a successor in interest on behalf of a decedent. The bill is currently before the Assembly.
CELA Involvement: Congratulations to CELA members v. James DeSimone and Carmen D. Sabater of v. James DeSimone Law.
COA Second District, Division 8. Filed 4/15/21. Opinion by Justice Stratton.
SPEIER v. THE ADVANTAGE FUND
AFTER ACCEPTING AN ARBITRATOR APPOINTED BY COURT AND ENGAGING IN NINE-DAY COMMERCIAL ARBITRATION, CLAIMANT SPEIER SOUGHT TO HAVE AN ADVERSE AWARD OVERTURNED BASED ON ARBITRATOR’S ALLEGED FAILURE TO DISCLOSE HER OWNERSHIP INTEREST IN JAMS AND THE FULL EXTENT OF DEFENSE COUNSEL’S BUSINESS RELATIONSHIP TO JAMS
After being terminated from his role as manager of several commercial real estate investment funds, Speier sought unpaid shareholder distributions and backend interest payments. The Funds contended that Speier had taken advantage of his position by paying himself both distributions and a salary after improperly appointing himself president of the Funds. The parties were both sophisticated and were represented by high-powered firms (Speier – Allston & Bird; the Funds – O’Melveny & Myers) who frequently used JAMS to arbitrate disputes involving their clients. After initially being unable to agree on an arbitrator, Speier filed a petition to compel arbitration, asking the court to appoint an arbitrator. The parties could not agree on a name from the court’s short list, so the court appointed Hon. Gail Andler (Ret.), a JAMS part-owner and panel member, from that list. Speier then filed his arbitration petition with JAMS and both JAMS and Andler provided the parties with detailed disclosures of their prior contacts with the parties and attorneys, of which there were many. Neither party objected to the assignment. After a nine-day arbitration hearing, Andler issued an award in favor of the Funds, including a substantial attorneys fee award. Only after the award was issued did Speier seek to disqualify Andler, claiming she had failed to fully disclose her ownership interest in JAMS and the full extent of JAMS’s prior business relationship with O’Melveny & Myers. The trial court determined that, because the parties had conceded that theirs was not a consumer case, it was not subject to the higher disclosure requirements set forth in Ethics Standard 8, which requires full disclosure of the arbitrator’s relationship to the provider (JAMS), and more detailed disclosure of its prior contacts with the opposing party and counsel.
ATTEMPTS TO DISQUALIFY ARBITRATORS SHOULD BE BROUGHT BEFORE AN AWARD IS ISSUED, AND ONLY WHEN THE ARBITRATOR’S FAILURE TO DISCLOSE FACTS RAISES AN OBJECTIVELY REASONABLE DOUBT AS TO THEIR NEUTRALITY
This decision describes in detail the relationship between JAMS’ owner/arbitrators and JAMS’ administration, along with some statistics about how many arbitrations it handles yearly. It also includes a general discussion of the law regarding disqualification of arbitrators, which allows the appellate court to review de novo the issue of whether an “objective, reasonable” person – not a “partisan litigant” – would reasonably entertain a doubt as to the impartiality of the arbitrator. The decision contains helpful language about the importance of arbitrator neutrality, the dangers of the “repeat player” phenomenon, and the need to raise concerns regarding impartiality before any award is issued.
COA Fourth District, Division 3. Filed 4/19/21. 63 Cal.App.5th 134. Opinion by Justice Fybel.
TRUCK INSURANCE EXCHANGE v. FEDERAL INSURANCE
Plaintiff filed a lawsuit for fraud against an insurer, claiming the insurer’s actions in three previous lawsuits constituted extrinsic fraud. Defendant filed an anti-SLAPP motion, claiming the lawsuit arose out of its “acts of furtherance of its right to petition” and was therefore protected speech. The trial court agreed, but then found that, under the second prong of the anti-SLAPP analysis, the plaintiff proved they were reasonably likely to prevail on the merits. The trial court denied the anti-SLAPP motion, and defendant appealed.
The Court of Appeal held that because the standard of de novo review was applied to the trial court’s ruling on the anti-SLAPP motion, a reporter’s transcript was not necessary for appellate review, and the absence of it was not fatal to the appeal. However, because there was no reporter’s transcript, appellant could not rely on claimed errors at the hearing, unless the claimed errors appeared on the face of the actual record before the appellate court. Here, Appellant could not meet its burden to affirmatively prove prejudicial error relating to the evidentiary rulings without the reporter’s transcript. Without that, there was no adequate record for meaningful review when the evidentiary rulings are subject to an abuse of discretion standard. The litigation privilege does not apply to cases involving extrinsic fraud, and as a result, the plaintiff was reasonably likely to prevail on its claims. Practice tip: always have a court reporter for motion hearings that could lead to appellate review.
COA, Second District, Division 8. Filed 4/20/21. 63 Cal.App.5th 211. Opinion by Justice Stratton.
WILSON-DAVIS v. SSP AMERICA, INC.
Plaintiff was a dishwasher for a concession operator at LAX. Plaintiff filed a wage and hour action alleging multiple Labor Code violations, as both an individual and member of a putative class. Employer brought a motion to compel arbitration based upon a provision in the collective bargaining agreement. Employer argued that: (1) the issue of arbitrability must be decided by the arbitrator, and (2) all claims were subject to arbitration. The trial court denied the motion to compel arbitration, and the employer appealed.
The Court of Appeal reaffirmed the principle that courts presume the parties intend courts – not arbitrators – will decide threshold issues of arbitrability unless there is a “clear delegation” of this duty to an arbitrator. The Court rejected the employer’s argument that a “clear delegation is present” simply when a CBA contains a broad arbitrability clause. The arbitration provision in this case says the parties may submit unresolved grievances to the arbitrator, not that they must, and that the arbitrator’s powers are limited to disputes the parties explicitly agree to submit to the arbitrator. This is a permissive – not mandatory – arbitration provision, and does not constitute a “clear delegation” requiring arbitration.
The CBA in this case defined the “grievances” which could be submitted to arbitration as any claim or dispute which “involves the interpretation, application, or enforcement of this Agreement.” For an employee’s waiver of the right to a judicial forum to be valid, the waiver must be “clear and unmistakable.” The employer argued that the “clear and unmistakable” standard only applied to discrimination claims, not to wage and hour claims. The Court of Appeal rejected this argument, relying on federal case law from the First and Seventh Circuits which held the “clear and unmistakable” standard also applied to claims under the FLSA, and thus, by analogy, to the Labor Code. In order to be “clear and unmistakable” it must be a waiver relating to statutory claims, not, as in this case, relating to the interpretation of the CBA only.
COA Second District, Division 3. Filed 4/9/21. 62 Cal.App.5th 1080. Opinion by Presiding Justice Edmon.
Ninth Circuit
BERNSTEIN v. VIRGIN AMERICA, INC.
Plaintiffs, California-based flight attendants, brought a wage and hour class action in federal court for violations of the California Labor Code. The district court granted class certification and summary judgment in Plaintiffs’ favor. The Ninth Circuit affirmed the rulings, holding that the dormant Commerce Clause – which invalidates state regulations that substantially burden interstate commerce – did not bar applying California law in this case.
At issue was whether the flight attendants had standing to assert violations of the California Labor Code when only 25% of Defendant’s flights were between California airports and class members spent only approximately 31.5% of their time working in California and in any event never more than 50% of their time in California. The district court certified a class of all California-based flight attendants who worked in California at any time during the relevant period, with two subclasses, one for California-based flight attendants who resided in California during the relevant period and one for formerly employed California-based flight attendants.
The Ninth Circuit began its analysis by noting that very few Supreme Court cases had invalidated state laws under the dormant Commerce Clause, and only then where “a compelling need for national uniformity in regulation” was shown. The Court of Appeals distinguished the cases upon which Defendant relied, finding that the dormant Commerce Clause did not apply to the main class here because “a claim that a proliferation of similar state laws would substantially burden Virgin is dubious.”
With regard to the two subclasses, the appellate court looked to the California Supreme Court’s decisions in Ward v. United Airlines, Inc. (2020) 9 Cal.5th 732, Oman v. Delta Air Lines, Inc. (2020) 9 Cal.5th 762, and Sullivan v. Oracle Corp. (2011) 51 Cal.4th 1191 for guidance as to what type of connections to California would trigger invoking the California Labor Code for each cause of action while rejecting Defendant’s “job situs” test as a misinterpretation of California law. As to the minimum wage claim, the Court of Appeals found the Oman rule controlled, that Defendant’s scheme, when taken as a whole, offered a guaranteed level of compensation rather than one based on hours worked. With respect to Plaintiffs’ overtime claim, the Ninth Circuit found the holding in Sullivan, where the California high court found California’s overtime provision applied to non-residents performing work in California, required the federal court to apply California overtime law to the proposed class, not only for work performed in California by non-residents but also for out-of-state work performed by California residents. Regarding the meal and rest period claims, as an initial matter the Court of Appeals found such claims were not preempted by either the Federal Aviation Act or the Airline Deregulation Act because neither law was intended to occupy the field of meal and rest breaks, just as it had held seven years earlier that the Federal Aviation Administration Authorization Act of 1994 does not preempt meal and rest breaks in the trucking industry. Having found California’s meal and rest break laws were not preempted, the Ninth Circuit held they also applied to the flight attendants, for the same reasons that Sullivan compelled application of California’s overtime laws to the proposed classes. Relying on Ward, the Court of Appeals also found California’s Labor Code section 226 (wage statements) applied to the proposed classes, since that Code section applies to workers who “perform the majority of their work in California; but if they do not perform the majority of their work in any one state, they will be covered if they are based for work purposes in California;” the record did not show that the flight attendants worked a clear majority in any one state. The Ninth Circuit also held, in the absence of controlling California authority, that Labor Code section 203 was analogous to Section 226 and therefore should apply to the proposed classes, too. Given the above, the Court reversed summary judgment as to the minimum wage claim but affirmed as to the overtime, meal and rest break, wage statement, and waiting time penalty claims.
The Court of Appeals also upheld the district court’s ruling on class certification, finding Plaintiffs had satisfied Rule 23 requirements. However, the Ninth Circuit limited the PAGA penalties to the lower penalty ($100 per aggrieved employee per pay period for an initial violation), finding Defendant had presented a defense thereby creating a good faith dispute and therefore Defendant did not receive notice it was violating the law until the district court ruled on summary judgment. Regrettably, this also meant the Court vacated the award of fees and costs.
CELA member Monique Olivier co-argued this appeal on behalf of the prevailing side. Kudos to Monique and her team!
Ninth Circuit. Filed 2/23/21. 990 F.3d 1157. Opinion by Judge Smith.
CALFORNIA TRUCKING ASSOCIATION v. BONTA
AB-5 CODIFIED THE ABC TEST FROM DYNAMEX
In 2018, the California Supreme Court adopted the “ABC test” for classifying workers as either employees or independent contractors in Dynamex Operations W. v. Superior Ct., 4 Cal.5th 903 (2018). The legislature enacted AB-5 to codify the ABC test.
FAAAA PREEMPTS STATE LAWS THAT SIGNIFICANTLY AFFECT A CARRIER’S RELATIONSHIP WITH CUSTOMERS
The Constitution’s Supremacy Clause voids any state law that “conflicts with, or frustrates, federal law.” The FAAAA expressly preempts state laws “related to a price, route, or service of any motor carrier … with respect to the transportation of property.” 49 U.S.C. § 14501(c)(1). Laws are preempted where they “are significantly related to rates, routes, or services, even indirectly” but are not preempted if they “have only a tenuous, remote, or peripheral connection.”
AB-5 IS A GENERALLY APPLICABLE LAW THAT DOES NOT AFFECT PRICES, ROUTES, OR SERVICES ENOUGH TO TRIGGER FAAAA PREEMPTION
The district court erred when it granted a preliminary injunction against the State of California enforcing AB-5; the COA reversed. AB-5 is a generally applicable labor law that affects a motor carrier’s relationship with its workforce and does not bind, compel, or otherwise freeze into place the prices, routes, or services motor carriers provide to customers. Thus, it is not preempted by the FAAAA. A law is not “related to” prices under the FAAAA merely because it increases the cost of doing business vis-à-vis increased labor costs.
Ninth Circuit. Filed 4/28/21. 996 F.3d 644. Opinion by Judge Ikuta.
FREYD v. UNIVERSITY OF OREGON
Plaintiff was a Professor of Psychology at Defendant University of Oregon. Defendant paid four male professors of psychology more than plaintiff, despite comparable rank and tenure. Plaintiff’s case was the most glaring disparity, but statistical evidence proved a significant gender pay disparity amongst all professors in the University of Oregon’s psychology department, even after regression analysis was used to rule out factors other than gender. The trial court dismissed the case on summary judgment, finding Plaintiff’s four comparator employees did not perform equal work. Plaintiff appealed, and the Ninth Circuit affirmed in part and reversed in part.
On a summary judgment motion, the “substantially equal” element of an Equal Pay claim is generally satisfied by evidence that the plaintiff and comparator share the same “core duties” (i.e. same job title, same job description). If the two jobs have the same core duties, the Court must then look to “determine whether any additional tasks, incumbent on one job but not the other, make the two jobs ‘substantially different.’ Pay disparities allegedly based on individual differences in the way or difficulty with which employees perform their job duties (e.g. Employee A’s research is funded privately while Employee B’s research is publicly funded, requiring Employee B to spend more time grant writing) are not necessarily a defense to an Equal Pay Act claim, so long as the comparator jobs are not “substantially different.” Whether a comparator’s job is “substantially different” is a question of fact for a jury.
On the disparate impact claim, Plaintiff alleged the University of Oregon had a facially neutral policy of not offering pay raises to professors of comparable merit and seniority when another professor is offered a retention raise, which is a raise offered to a professor to keep that professor from taking a higher paying job elsewhere. Plaintiff’s theory was that, because women are less likely than men to be offered higher paying jobs elsewhere, the University of Oregon’s policy of not increasing female professors’ pay while other male professors were receiving retention pay increases resulted in a discriminatory impact. The trial court rejected this theory, finding the statistical evidence of gender pay disparities too unreliable to create a genuine issue of fact. The Ninth Circuit reversed, holding the strength of the statistical evidence was for a jury to weigh, at least where Plaintiff’s expert testified the evidence was valid and reliable.
In a disparate impact case under Title VII, even where the employer establishes the elements of a business necessity defense, the plaintiff can rebut that defense by showing a “viable alternative practice that would serve the [employer’s] needs.” Here, Plaintiff established a viable alternative practice that would serve the University’s needs because Plaintiff’s expert testified that a policy of across the board pay raises whenever any one professor is provided a retention raise would promote the University’s goal of recruiting and retaining quality faculty and students.
Ninth Circuit. Filed 3/15/2021. 990 F.3d 1211. Opinion by Senior Circuit Judge Bybee.
ZOLLER v. GCA ADVISORS, LLC
Plaintiff Shannon Zoller, began working for Defendant GCA Advisors, LLC as an investment banker in 2014 and was terminated in 2016. As part of the job, Zoller signed several documents regarding arbitration: an employment contract with a binding arbitration provision, the specific arbitration procedures document, and a Form U4 containing an arbitration provision. The Form U4 document was required by the Financial Industry Regulatory Authority (“FINRA”). FINRA also has a rule stating that certain employment claims may only be arbitrated if the “parties have agreed to arbitrate” them. At issue on appeal was whether the district court properly permitted Zoller to pursue her Equal Pay Act claim, Fair Pay Act claim, Fair Employment and Housing Act claim, and Civil Rights Act of 1871 claim in Federal Court rather than arbitration because Zoller had not “knowingly” waived her right to pursue these claims in court.
The Ninth Circuit reversed, finding Plaintiff must arbitrate her claims. Notably, the Court refrained from determining the question of whether Civil Rights claims required a “knowing” waiver as required for Title VII claim and the ADA. Instead, the Court assumed that even if there was a “knowing” requirement, it was easily met by the clear language of the arbitration agreement Zoller signed, which stated that it covered employment disputes. Additionally, the Court reasoned she was informed because she signed multiple parallel agreements which laid out that the parties would submit to binding arbitration for employment matters.
Ninth Circuit. Filed 4/14/2021. 993 F.3d 1198. Opinion by Judge Wallace.