ERISA Class Action Defense Cases–Kirschbaum v. Reliant Energy: Fifth Circuit Affirms Summary Judgment In Favor Of Defense In ERISA Class Action Complaint Holding Class Action Claims

Summary Judgment in Favor of Defense in ERISA Class Action Proper because Class Action Claims that Defendants should not have Invested in Company Stock ran Counter to Terms of Eligible Individual Account Plan (EIAP) and because Negligent Misrepresentations Alleged in Class Action Complaint were not made in Fiduciary Capacity Fifth Circuit Holds

Plaintiff filed a class action against his employer, Reliant Energy, Inc. (REI) and the Benefits Committee of his employer’s savings plan alleging violations of ERISA (Employee Retirement Income Security Act). The Plan is an Eligible Individual Account Plan (EIAP) under ERISA, and the class action complaint alleged that defendants breached fiduciary duties owed to current and former participants in the Plan in that defendants “had a fiduciary duty to liquidate the Common Stock Fund and cease purchasing REI shares, notwithstanding the Plan’s express contrary requirements.” Kirschbaum v. Reliant Energy, Inc., ___ F.3d ___, 2008 WL 1838324, *1 (5th Cir. April 25, 2008). The district court granted plaintiff’s motion to certify the litigation as a class action, _id._ Defense attorneys moved for summary judgment on the ground that defendants satisfied their legal duties to the class: The district court granted summary judgment as to all class action claims, and entered judgment in favor of defendants on the class action complaint. _Id._ Plaintiff appealed, and the Fifth Circuit affirmed.

Under the Plan participants were permitted to invest up to 16% of their compensation in a number of funds, “ranging from riskier, growth-oriented funds to more stable mutual funds”; one of these options was the REI Common Stock Fund which essentially consisted of REI common stock. Kirschbaum, at *1. Moreover, “REI agreed to match up to the first six percent of an employee’s contribution with shares of REI common stock allocated to the employee’s Common Stock Fund account,” but the matching contributions had to stay in Common Stock Fund until the employee was 55 years old and had 10 years of service with the company. Id. After the disclosure of certain “sham transactions” by REI employees and another energy trader, the stock dropped 40% causing a substantial loss in the value of the Common Stock Fund, id. REI later admitted that the trades in question inflated REI’s revenue by 10% over a three-year period. Id. Plaintiff filed his class action complaint alleging that defendants were “responsible under ERISA to make good the losses the Plan sustained on REI common stock.” Id., at *2. Specifically, the class action alleged that defendants knew REI stock “was not a prudent investment” and that they owed a fiduciary duty to discontinue purchasing REI stock, to sell the Plan’s holdings of REI stock, and to discontinue the Common Stock Fund. Id. The district court certified the litigation as a class action, but agreed with defense attorneys that summary judgment was appropriate as to each of the class action claims because “the Plan afforded [defendants] no discretion to terminate the fund or halt investments in it” and, accordingly, “defendants had no fiduciary duty to do so.” Id.

Class Action Court Decisions Employment Law Class Actions Uncategorized

Wal-Mart Class Action Defense Cases–Sepulveda v. Wal-Mart: In Unpublished Opinion Ninth Circuit Reverses Denial Of Class Action Treatment In Labor Law Class Action Filed On Behalf Of Assistant Managers

Fifth Circuit’s “Incidental Damages” Approach to Class Action Certification under Rule 23(b)(2) Inapplicable in Ninth Circuit and District Court Erred in Denying Class Action Treatment of Labor Law Class Action based on Conclusion that “Claims for Monetary Relief were Non-Incidental” Ninth Circuit Holds

Plaintiffs filed a class action against Wal-Mart on behalf of assistant managers alleging labor law violations. Plaintiffs filed a motion with the district court for class action certification, arguing that class action treatment was appropriate under Rule 23(b)(2) and 23(b)(3). In an order denying class action certification that may be found here, see Sepulveda v. Wal-Mart Stores, Inc., 237 F.R.D. 229 (C.D.Cal. 2006), the district court refused to certify the litigation as a class action on the grounds that (1) the claims for monetary relief in the class action complaint were not incidental, thus rendering certification under Rule 23(b)(2) inappropriate, and (2) the duties of associate managers “are not susceptible to collective proof,” thus rendering class action treatment under Rule 23(b)(3) inappropriate. Id., at 245-46 and 248-49. Plaintiffs appealed. Sepulveda v. Wal-Mart Stores, Inc., Case No. 06-56090 (9th Cir. April 25, 2008) [Slip Opn., at 1-2]. In an unpublished opinion, the Ninth Circuit reversed. In a single paragraph, the Circuit Court stated that the district court had “misapplied Ninth Circuit precedent when, relying on its conclusion that Plaintiffs’ claims for monetary relief were non-incidental, it denied certification under [Rule] 23(b)(2),” and cited a Ninth Circuit opinion that “refus[ed] to adopt the incidental damages approach set forth by the Fifth Circuit in Allison v. Citgo Petroleum Corp., 151 F.3d 402 (5th Cir. 1998).” Id., at 2 (citing Molski v. Gleich, 318 F.3d 937, 949-50 (9th Cir. 2003)). Rather, the lower court should have “focus[ed] on the intent of the Plaintiffs in bringing suit.” Id. (citation omitted). By failing to do so, the district court abused its discretion in denying class action treatment under Rule 23(b)(2). Id. The Ninth Circuit instructed the district court to reconsider on remand whether class certification was appropriate under Rule 23(b)(2) and, further, to consider “using Rule 23(c)(4) to certify issues under the Rule 23(b)(2) standard.” Id. (citation omitted).

The author notes that the district court opinion contains the following discussion of Rule 23(b)(2):

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Labor Law Class Action Defense Cases–Isner v. Falkenberg: California Court Affirms Summary Judgment In Favor Of Defense In Labor Law Class Action Holding Resident Employees Need Only Be Compensated For Carrying Out Assigned Duties

Class Action Alleging Failure to Pay Resident Employees for Time Spent “On Call” though not Performing Assigned Tasks Properly Subject to Summary Judgment in Favor of Defense California State Court Holds

Plaintiffs filed a putative labor law class action against their former employer, a property management company, alleging inter alia that it had failed to pay them for overtime and waiting time; specifically, the class action complaint alleged that defendant failed to pay its “resident employees” for “on-call” time. Isner v. Falkenberg/Gilliam & Associates, Inc., 160 Cal.App.4th 1393, 73 Cal.Rptr.3d 433, 434 (Cal.App. 2008). The class action alleged that the resident employee employment agreement signed by plaintiffs required that they be on call “on designated evenings from 5:00 p.m. until 8:00 a.m. and on designated weekends from 5:00 p.m. Friday evening until 8:00 a.m. Monday morning.” The agreement further required employees to “remain on the facility premises within hearing distance of the emergency alarms systems and telephone” while on call, but provided that they were “otherwise free to use on-call time as he or she chooses.” Id. The appellate court explained, “The gravamen of the complaint was that these resident employees were entitled to payment not just for the hours they spent responding to emergencies while on call, but for all the hours they were on call and thus confined to their apartment or the building office so as to remain within audible range of the telephone and alarm.” Id., at 436. Defense attorneys moved for summary judgment arguing that plaintiffs were entitled to wages only for time spent on the job; the trial court agreed that payment was due only for work “actually performed” and, accordingly, granted summary judgment on the class action complaint. Id. The appellate court affirmed.

The pertinent facts established that resident employees were allowed to arrange for another resident employee to “respond to emergency calls with the Employee, or in the place of the Employee” and that employees would be paid for “[a]ll time spent in responding to emergencies.” Isner, at 434. Moreover, if emergencies prevent an employee from obtaining 5 hours of “uninterrupted sleep,” then defendant agreed to “credit Employee with eight hours’ time worked under the terms of [the agreement].” Id., at 435. Plaintiffs were given an apartment to live in, and at least one of them stayed within range of the alarm and telephone while on duty or on call. Id. “While [plaintiffs] were on duty and on call, they slept, ate, talked on their personal telephone, used the internet, played computer games, read magazines or watched television in their apartment when they were not responding to an emergency.” However, while on duty or on call, plaintiffs could not go to the pool or walk around the apartment, because they would be unable to hear the alarm or telephone, and they could not leave the apartment. Id. It was plaintiffs’ responsibility to keep track of and bill their time with respect to “both their usual eight-hour work day and times spent responding to emergencies,” id. And while defendant permitted them to bill all time spent on the job, plaintiffs generally “recorded only the calls that took 15 minutes or more.” Id., at 435-36. “[T]here was never an occasion when [plaintiffs] were not paid for time they recorded on their time sheets.” Id., at 436.

Class Action Court Decisions Employment Law Class Actions Uncategorized

Attorney-Client Privilege/Class Action Defense Cases–Costco v. Superior Court: California State Court Denies Writ Relief Of Court Order Requiring Defense To Produce In Labor Law Class Action Copy Of Redacted Letter Prepared By Outside Counsel

Class Action Discovery Order Requiring Defense to Produce Redacted Letter Prepared by Outside Counsel did not Warrant Extraordinary Writ Relief because Unredacted Portions were “Inconsequential” and Disclosure to Class Action Plaintiffs would not cause Costco “Irreparable Harm” California Court Holds

Plaintiffs filed a putative labor law class action against Costco alleging that it “misclassified certain managers as exempt employees.” Costco Wholesale Corp. v. Superior Court, ___ Cal.App.4th ___, 74 Cal.Rptr.3d 345, 347 (Cal.App. 2008). According to the class action complaint, each Costco warehouse store “has hundreds of employees and up to 20 managers”; a “general manager” (apparently the most senior person at the warehouse store), and “ancillary managers” (in charge of various departments, such as meat, bakery, pharmacy, optical, _etc._). _Id._, at 348. The class action alleges that “[s]enior operations personnel at Costco determine how to classify employees for compensation purposes,” and in June 2000 Costco’s corporate counsel hired a law firm to “‘undertake [a] comprehensive factual investigation and legal analysis regarding the classification of managers within Costco Warehouses.’” _Id._ In response to that request, outside counsel conducted interviews, performed legal research and prepared a 22-page letter dated August 4, 2000, addressed to Costco’s corporate counsel. _Id._ Internal meetings followed, attended by in-house counsel, and in 2001 Costco reclassified ancillary managers as non-exempt employees. _Id._, at 348-49. The gravamen of the class action is that Costco “unlawfully failed to pay overtime to ancillary managers…because Costco categorically had misclassified these employees as exempt employees”; Costco’s answer to the class action complaint included the affirmative defense that “plaintiffs were _exempt_ from the protection of the California overtime laws (the exemption defense).” _Id._, at 349. In discovery, plaintiffs sought _inter alia_ production of the August 4 letter, which defense attorneys had listed on a privilege log; the trial court ordered production of a redacted copy of the letter. Costco sought a writ of mandate but the Court of Appeal denied the petition.

This discovery dispute centered on whether Costco had placed the contents of the August 4 letter at issue by virtue of its affirmative exemption defense and other discovery responses. Specifically, in response to interrogatories Costco stated that it “reasonably expected that employees who held the position of salaried Costco manager regularly and customarily exercised their independent judgment and discretion performing such exempt tasks…for more than 50% of their time.” Costco, at 349. The defense “person most knowledgeable about Costco’s exemption defense” testified that “Costco relied, in part, on input from counsel in classifying its employees as exempt or nonexempt.” Id., at 350. Defense attorneys stated that Costco was not relying on “advice of counsel” as a defense, and asserted the attorney-client privilege as to any discussion with counsel, id. Plaintiffs demanded discovery of legal advice provided by outside counsel on the grounds that the privilege had been waived; defense attorneys reiterated that Costco’s “‘reasonable expectation’ exemption defense was not dependent upon legal advice.” Id.

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CAFA Class Action Defense Cases–Lussier v. Dollar Tree: Ninth Circuit Upholds Denial Of Attorney Fees For Flawed Removal Of Class Action Under Class Action Fairness Act Because Basis For Removal Was Objectively Reasonable

Following Remand of Labor Law Class Action to State Court on Grounds that Class Action had been “Commenced” Prior to Effective Date of Class Action Fairness Act of 2005 (CAFA) thus Precluding Removal Jurisdiction under CAFA, District Court did not Abuse its Discretion in Refusing to Award Plaintiffs Attorney Fees because Defense Removed Class Action under a Novel Theory of First Impression Ninth Circuit Holds Plaintiffs filed a class action lawsuit against Dollar Tree Stores alleging various labor law violations.

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FLSA Class Action Defense Cases–In re Pilgrim’s Pride: Arkansas Federal Court Conditionally Certifies Class Action In MDL Labor Law Class Action Alleging Failure To Pay For Time Spent Donning And Doffing Protective Equipment

FLSA Class Action Alleging Failure to Compensate Workers for Time Spent Donning, Doffing and Cleaning Safety and Sanitary Gear Involved Putative Class Action Representatives “Similarly Situated” to Members of Proposed Class Warranting Certification of FLSA Collective Action for Purposes of Notice Despite Differences in Employee Equipment Utilized, Time Incurred and Timekeeping Methods Arkansas Federal Court Holds Various class action lawsuits were filed against Pilgrim’s Pride for violations of the Fair Labor Standards Act (FLSA) alleging failure to compensate employees for time spent donning and doffing safety and sanitary gear at chicken processing plants; the Judicial Panel on Multidistrict Litigation centralized the class actions in the Western District of Arkansas, and plaintiffs filed a consolidated motion for class action certification (technically, a “collective action” under the FLSA).

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Class Action Defense Cases-Holmgren v. County of Los Angeles: California State Court Affirms Judgment Adverse To Class Action Plaintiffs Holding Engineers Of Firms Under Contract With County Were Not Common Law Employees Of County

Trial Court Properly Entered Judgment for Defense in Class Action by Engineers, Employed by Firms Working under Contract for County, because Engineers were not “Common Law Employees” of County California State Court Holds

Plaintiff-engineers filed a putative class action against the County of Los Angeles alleging that they had been designated improperly as employees of the independent contractors hired to perform work for the County, rather than as employees of the County itself. Holmgren v. County of Los Angeles, ___ Cal.App.4th ___, 71 Cal.Rptr.3d 611, 613 (Cal.App. 2008). As authorized by the California Government Code, Los Angeles outsourced engineering work to two firms: “The engineers were employees of the contracting firms and paid by the contracting firms, and all signed written acknowledgements that they were _not_ employees of the County and _not_ entitled to any of the benefits available to County employees.” _Id._, at 612. Nonetheless, plaintiffs filed the class action complaint alleging that they were “common law employees” of the County and, as such, entitled to benefits under the County’s retirement plan. _Id._, at 612-13. The “theme” of the class action complaint was that even though plaintiffs were paid by the independent contractor and designated as a contract employees, they had been “screened, interviewed, and effectively hired by the County; worked solely on County business; had [their] salary fixed by the County; [were] subject to the direct supervision and control of the County; and used County facilities, equipment and supplies to perform County business.” _Id._, at 613-14. The class action further alleged that plaintiffs performed the same work as, and worked side-by-side with, “recognized County employees,” but for lower pay and without receiving the benefits of County employees. _Id._, at 614. The trial court granted plaintiffs’ motion for class action treatment of the lawsuit, _id._, but decided three critical “threshold” issues in favor of the County that effectively eviscerated the class action, _see id._, at 614-15. Accordingly, plaintiffs stipulated to entry of judgment in favor of the County and appealed, _id._, at 615. The Court of Appeal affirmed, holding that the engineers were not County employees.

The facts underlying the class action claims were as follows: The County entered into “Master Agreements” with two firms for engineering services pursuant to which each firm would supply the County with the firm’s own employees, bill the County for work performed, and receive payment from the County. The Master Agreement provided that each firm was “solely liable” for the compensation and benefits of their employees, and expressly prohibited the County from soliciting the firms’ engineers. Holmgren, at 613. The named plaintiffs in the putative class action each acknowledged, in writing, that they were not County employees and that they “do not have and will not acquire any rights or salary benefits of any kind from the County of Los Angeles by virtue of my performance of work [for the County].” Id. and n.1. The class action alleged that plaintiffs were “temporary” or “leased” employees, entitled to County benefits, id., at 613.

Class Action Court Decisions Employment Law Class Actions Uncategorized

ERISA Class Action Defense Cases–Adams v. IBM: New York Federal Court Grants Defense Motion To Dismiss ERISA Class Action Finding Res Judicata Barred Class Action Against Plan And Plan Administrator

ERISA Class Action Barred by Plaintiff’s Prior Lawsuit Against IBM thus Supporting Defense Motion to Dismiss Class Action New York Federal Court Holds Plaintiff filed a putative class action in New York against his former employer’s pension plan and its administrator alleging violations of ERISA (Employee Retirement Income Security Act of 1974) by failing to pay him plan benefits. Adams v. IBM Personal Pension Plan, 533 F.Supp.2d 342, 343 (S.D.N.Y. 2008).

Class Action Court Decisions Employment Law Class Actions Uncategorized

FedEx Class Action Defense Cases–In re FedEx Ground: Indiana Federal Court Grants Class Action Treatment In 19 Labor Law Class Action Cases Alleging Misclassification Of Pickup/Delivery Drivers But Denies Certification In 9 Other Class Actions

In Considering Class Action Certification in 28 Labor Law Class Action Lawsuits Centralized by the Judicial Panel on Multidistrict Litigation, 19 Cases Satisfied Class Action Prerequisites but 9 other Putative Class Actions would Require Individualized Inquiries Sufficient to Defeat Class Action Treatment Indiana Federal Court Holds

Numerous class action lawsuits were filed against FedEx Ground alleging that the company misclassified its pickup and delivery drivers as independent contractors rather than employees; the Judicial Panel on Multidistrict Litigation consolidated the class actions in the Northern District of Indiana, and the plaintiffs in the class action cases characterized as “Wave 1,” “Wave 2” and “Wave 3” moved the district court for class action certification. In re FedEx Ground Package System, Inc., Employment Prac. Litig., ___ F.Supp.2d ___ (N.D. Ind. March 25, 2008) [Slip Opn., at 1]. As the federal court summarized, these class action plaintiffs “assert that although FedEx Ground represents to its drivers that they are only partnering with FedEx Ground and will essentially own their own businesses, all FedEx Ground drivers sign the FedEx Ground Operating Agreement, which actually reserves to FedEx Ground the right to exercise pervasive control over the method, manner, and means of the drivers’ work,” _id._ FedEx opposed class action treatment, arguing that “the plaintiffs’ claims turn on individualized issues, including whether contractors should be classified as employees under the states’ statutory tests, and whether any individual contractor can meet the high bar for rescission of his individual contract.” _Id._, at 2. In a 164-page opinion, the district court certified the Wave 1, Wave 2 and Wave 3 cases as class actions with respect to cases involving drivers from Alabama, Arkansas, California, Florida, Indiana, Kentucky, Maryland, Minnesota, New Hampshire, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, West Virginia and Wisconsin; the court denied class action treatment for drivers from Illinois, Iowa, Massachusetts, Michigan, Mississippi, Missouri, Montana, South Dakota and Virginia. _Id._, at 3. The district court noted that it had previously granted class action certification with respect to drivers from Kansas, _id._, at 9, bringing to 20 the total number of states for which class action treatment has been approved.

Given the extraordinary length and detail of the district court opinion, we provide here only a broad outline of its holdings. Because it had previously granted class action treatment on behalf of the Kansas drivers, the district court used its prior ruling as a benchmark against which it considered the new class action certification motions. In re FedEx Ground, at 9. The court held that class action complaints containing only former drivers as named-plaintiffs could still proceed as class actions on behalf of former and current drivers because “courts have held that former employees have standing to represent a class consisting of both current and past employees.” Id., at 10 (citations omitted); see also, e.g., id., at 24-25 and 30. But with respect to defense attorney efforts to defeat class action treatment on the ground that individual inquiries would be required to determine whether the Operating Agreements were valid and the manner and extent to which the “right to control” will impact the validity of the Operating Agreements, the federal court rejected this argument with respect to the laws of certain states, see, e.g., id., at 14-16 (Tennessee), 25-27 (Arkansas) and 39-42 (Texas), but agreed with FedEx Ground that common questions would not predominate under the laws of other states, see, e.g., id., at 18-20 (Montana), 20-23 (Mississippi) and 80-84 (Michigan). For example, with respect to the Missouri putative class action, the district court explained that class action certification was not warranted because “Whether FedEx Ground has the right to control its drivers within the meaning of Missouri agency law cannot be resolved by simple reference to the Operating Agreements and corporate policies.” Id., at 105. Rather, “Missouri courts define the ‘right to control’ with reference to the actual exercise of control, [citation], which will require a driver-by-driver, terminal-by-terminal, supervisor-by-supervisor analysis that is unnecessary in most other states.” Id., at 105-06. This presented the primary basis for the difference among states for which the court certified class actions and states for which it denied motions for class certification.

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ADEA Class Action Defense Cases-Peterson v. Seagate: Minnesota Federal Court Denies Motion To Certify Interlocutory Appeal Of Order Denying Defense Motion To Dismiss Class Action Claims In Age Discrimination Class Action

Order Denying Motion to Dismiss ADEA (Age Discrimination in Employment Act) Class Action Claims did not Warrant Interlocutory Appeal Minnesota Federal Court Holds

Plaintiffs filed a class action lawsuit against their employer, Seagate, alleging age discrimination in violation of the federal Age Discrimination in Employment Act (ADEA). Peterson v. Seagate U.S. LLC, 534 F.Supp.2d 996, 2008 WL 398968, *1 (D.Minn. 2008). The putative class action also sought “declaratory relief relating to the enforceability of a purported release and waiver that was signed by many of the plaintiffs upon the termination of their employment with Seagate.” Id. Defense attorneys moved to dismiss the class action as to “the claims of those named plaintiffs that signed a release and waiver”; the district court denied the motion, as well as a subsequent motion for reconsideration. Id. Defense attorneys requested that the district court certify the issue for interlocutory appeal, id. The district court denied the motion.

Defense attorneys sought certification on two grounds: “1) whether nineteen plaintiffs who failed to file an EEOC charge properly exhausted their administrative remedies with respect to their age discrimination claims; and 2) whether the SIRP Release that plaintiff Paul Calcagno signed in connection with Defendants’ 2004 voluntary early retirement program is valid and enforceable.” Peterson, at *1. The district court noted that such certification is only appropriate if the order “involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation.” Id. (quoting 28 U.S.C. § 1292(b)). The court concluded that this test was not satisfied.

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