Class Action Defense Cases—In re Staples: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation In District Of New Jersey

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Unopposed by Class Action Plaintiffs, and Transfers Actions to District of New Jersey Six class actions – two in Massachusetts and one each in Connecticut, New Jersey, New York and Pennsylvania – were filed against Staples alleging violations of state and federal labor laws; specifically, the class action complaints allege that Staples failed to pay its assistant, operations and/or sales managers overtime pay under the federal Fair Labor Standards Act (FLSA) and/or various state wage and hour statutes.

Class Action Court Decisions Employment Law Class Actions Multidistrict Litigation Uncategorized

T-Mobile Class Action Defense Cases–Vega v. T-Mobile: Eleventh Circuit Reverses Class Action Certification Order And Orders Lawsuit To Proceed On Individual Rather Than Class Action Basis

Class Action Certification Order of Labor Law Class Action must be Reversed because District Court Failed to Conduct “Rigorous Analysis” of Rule 23’s Requirements for Class Action Treatment Eleventh Circuit Holds

Plaintiff filed a putative nationwide class action against his former employer, T-Mobile, after it fired him for poor attendance; the class action complaint alleged labor law violations. Vega v. T-Mobile USA, Inc., ___ F.3d ___, 1260-61 (11th Cir. 2009). Specifically, the class action alleged that “by charging back commissions advanced on sales of ‘deactivated’ prepaid service plans, T-Mobile violated the terms of the compensation program, failed to pay commissions earned by the sales representatives, and was unjustly enriched by retaining the benefit of its employees’ services without fully compensating them for such services.” _Id._, at 1262. T-Mobile’s compensation package for retail sales representatives consisted of an hourly wage plus commissions. _Id._, at 1261. The commissions were incentive-based, paid on the employee’s “net activations” – if a customer canceled service within 180 days of activation then T-Mobile would “charge-back” the commission previously paid “in order to reclaim that amount from the sales representative.” _Id._ Under T-Mobile’s plan, commissions paid within the 180-day window are “paid as an advance against commissions anticipated to be earned in the future” and “[c]ommissions are not earned until the expiration of the 180-day commission charge back window.” _Id._ Additionally, T-Mobile, in its sole discretion, determined whether sales qualified for commission payments, _id._ The class action complaint was filed in Florida state court, _id._, at 1262, but defense attorneys removed the class action to federal court under the Class Action Fairness Act (CAFA), _id._, at 1263. Plaintiff moved the district court to certify the litigation as a class action; defense attorneys opposed class action treatment and moved for summary judgment. _Id._ The district court denied T-Mobile’s summary judgment motion, and granted class action certification on behalf of a Florida class only. _Id._, at 1263-64. Pursuant to Federal Rule of Civil Procedure 23(f), the Eleventh Circuit granted interlocutory review of the class action certification order and reversed. _Id._, at 1264.

The class action complaint did not impress the Circuit Court, which it characterized as “incomplete and ambiguous.” Vega, at 1263. The vague complaint “simply alleges: (1) that, because prepaid customers paid up-front for their service, T-Mobile ‘bore no risk of non-payment’; (2) that when T-Mobile charged its employees back for commissions on prepaid plans, ‘even though T-MOBILE received the full benefit of its agreement with the prepaid plan customers, T-MOBILE’s commission based employees lost the benefits of those sales and the resulting commissions’; and (3) that ‘T-MOBILE has unfair [sic] and unjustly profited from its internal systems error by unduly charging back its employees on the prepaid plans and retaining its employee’s [sic] wages for its own use and benefit.’” Id., at 1262. The class action asserted two claims – one for “unpaid wages” and one for “unjust enrichment” – arising out of the central allegation that “T-Mobile improperly withheld or charged back from its employees.” Id. The class action did not allege that employees nationwide were subject to the same compensation structure, id. The Eleventh Circuit noted that the district court certified the litigation as a class action despite two concerns: first, that a nationwide class “lacked commonality due to variations in the contract and employment laws of the fifty states,” and second, that the class action complaint’s allegations “focused on charge backs of commissions already paid, but indicated nothing about any failure to pay commissions in the first instance, the inclusion in the class of T-Mobile ‘employees … who … were entitled to receive[ ] commissions … who did not receive their commissions’ would implicate claims falling outside the scope of the complaint, as pled, and, thus, failed the typicality requirement.” Id., at 1263-64.

Certification of Class Actions Class Action Court Decisions Employment Law Class Actions Uncategorized

Class Action Defense Cases–Ojo v. Farmers: Ninth Circuit Reverses Dismissal Of FHA Class Action Holding Class Action Claims Not Reverse-Preempted And Class Action Did Not Challenge Credit Scoring Per Se

Class Action Alleging Violations of Federal Fair Housing Act (FHA) Claiming Insurer used “Undisclosed Factors” to Compute Credit Scores and, Based on those Scores, Increase Insurance Premiums of Minorities should not have been Dismissed because Class Action did not Challenge Credit Scoring Per Se and because Class Action Claims were not “Reverse-Preempted” by McCarran-Ferguson Ninth Circuit Holds

Plaintiff filed a putative class action against various Farmers Group entities alleging violations of the federal Fair Housing Act (FHA); specifically, the class action complaint alleged disparate impact race discrimination in that Farmers “used ‘a number of undisclosed factors’ to compute credit scores and price homeowners’ insurance policies.” Ojo v. Farmers Group, Inc., 565 F.3d 1175 (9th Cir. 2009) [Slip Opn., at 5700-01]. According to the class action, “Farmers charged minorities higher premiums for homeowners’ property and casualty insurance than the premiums charged to similarly situated Caucasians.” Id., at 5701. Defense attorneys moved to dismiss the class action under Rule 12(b)(1) for lack of subject matter jurisdiction and under Rule 12(b)(6) for failure to state a claim. Id. The district court granted the 12(b)(1) motion on the grounds that the class action claims were “reverse-preempted” by federal law. Id. The Ninth Circuit reversed finding two errors in the district court’s ruling: “First, the district court erroneously read [plaintiff’s] claim as challenging the practice of credit scoring per se. Second, the district court erroneously interpreted Texas state insurance law as permitting disparate impact race discrimination that results from credit scoring, thereby triggering McCarran-Ferguson reverse-preemption.” Id.

Plaintiff, an African-American resident Texas, filed suit after Farmers increased the insurance premium on his homeowner’s policy by 9% on the basis of “unfavorable credit information” revealed by Farmers’ automated credit scoring system. Ojo, at 5703. The class action complaint alleged that Farmers used various factors to target minorities for higher premiums than those charged to “similarly situated Caucasians.” Id. After discussing the McCarran-Ferguson Act which leaves the business of insurance to state law, see id., at 5704-06, and the federal Fair Housing Act (FHA) and Texas state law, see id., at 5706-08, the Ninth Circuit noted that Farmers sought to use Texas state law “as a shield against any scrutiny of its credit scoring practices,” id., at 5709. The Circuit Court rejected this attempt, explaining at page 5709 that the class action “does not challenge Farmers’ use of credit scoring per se”; rather, the class action complaint challenges only Farmers’ use of certain “undisclosed factors” as part of its credit scoring system. The Ninth Circuit agreed with plaintiff that he should have been given an opportunity to conduct discovery in an effort to learn the specific factors used by Farmers’ as part of its credit scoring system. Id.

Class Action Court Decisions Uncategorized

Class Action Defense Cases–Olvera v. El Pollo Loco: California Court Affirms Denial Of Motion To Compel Individual Arbitration Of Labor Law Class Action Holding Class Action Arbitration Waiver Unenforceable

Class Action Waiver in Arbitration Clause Unconscionable thereby Warranting Denial of Motion to Compel Plaintiff to Arbitrate Individual Claims rather than Pursue Labor Law Class Action Complaint California State Court Holds

Plaintiff, the general manager of an El Pollo Loco restaurant, filed a putative class action against El Pollo Loco alleging violations of California’s labor code; the class action complaint alleged inter alia that defendant misclassified its general managers as exempt when they “spent the majority of their time performing nonmanagerial tasks” and that it wrongfully denied its general managers overtime compensation and meal breaks. Olvera v. El Pollo Loco, Inc., 173 Cal.App.4th 447, 451 (Cal.App. 2009). As part of his employment, plaintiff received written materials that, in part, required that all work-related disputes be resolved through binding arbitration, governed by the Federal Arbitration Act (FAA). Id., 449-50. Class action litigation was prohibited, but the parties were permitted “to conduct discovery and bring motions in an arbitration as provided by the Federal Rules of Civil Procedure,” id., at 450. Defense attorneys moved to compel arbitration of the class action complaint as to plaintiff’s individual claims only, id., at 451. Plaintiff opposed the motion to compel arbitration, arguing that the arbitration clause was unconscionable; defense attorneys argued that the clause was not unconscionable because employees were not required to sign the acknowledgement form by which they were bound to the arbitration clause. Id., at 452. The trial court denied the motion to compel arbitration, concluding that the clause was both procedurally and substantively unconscionable. Id., at 453. Under California law, an order denying a motion t compel arbitration is an appealable order. Cal. Code Civ. Proc., § 1294. Defendant appealed, and the Court of Appeal affirmed.

After summarizing the relevant law regarding arbitration agreements, see Olvera, at 453-54, the appellate court turned first to the issue of procedural unconscionability. The Court of Appeal explained at page 454, “Procedural unconscionability focuses on oppression or unfair surprise, while substantive unconscionability focuses on overly harsh or one-sided terms.” (Citations omitted.) California courts view these two factors on a sliding scale: “The more procedural unconscionability is present, the less substantive unconscionability is required to justify a determination that a contract or clause is unenforceable. Conversely, the less procedural unconscionability is present, the more substantive unconscionability is required to justify such a determination.” Id., at 454 (citations omitted). The appellate court found that the arbitration clause was procedurally unconscionable because of (1) the unequal bargaining power between the employees and the employer, which “makes it likely that the employees felt at least some pressure to sign the acknowledgment and agree to the new dispute resolution policy” even if the company insists that they were not required to do so, and (2) agreement to the dispute resolution procedure was “not an informed decision” because the description of the dispute resolution policy “was totally inaccurate.” Id., at 455-56.

Arbitration Class Action Court Decisions Employment Law Class Actions Uncategorized

Starbucks Class Action Defense Cases–Chau v. Starbucks: California Appellate Court Reverses $86 Million Class Action Judgment Against Starbucks Holding Labor Law Class Action Claims Failed

Trial Court Judgment in Class Action Alleging Starbucks Violated Labor Code by Sharing Tips with Shift Supervisors Required Reversal because California Law does not Prohibit Starbucks’ Shift Supervisors from Sharing in Tips California State Court Holds

Plaintiff filed a class action against Starbucks alleging violations of California’s Unfair Competition Law (UCL) and Labor Code; the class action complaint alleged that Starbucks alleged shift supervisors to participate in tip pools in violation of California law, specifically Labor Code section 351. Chau v. Starbucks Corp., 174 Cal.App.4th 688 (Cal.App. 2009) [Slip Opn., at 1-2]. The trial court certified the litigation as a class action, id., at 2. Starbucks moved to decertify the class, but the motion was denied. Id., at 6. Prior to trial, the court granted plaintiff’s in limine motion to exclude evidence that shift supervisors serve customers, finding that such evidence was “irrelevant” (though it did allow some evidence on the matter). Id., at 7. Ultimately, the trial court awarded the class $86 million as restitution based on its finding at the conclusion of a bench trial that plaintiff had proved the UCL claim. Id., at 2. Starbucks appealed. The Court of Appeal reversed, holding that Starbucks’ tip sharing policy did not violate California law: “The applicable statutes do not prohibit Starbucks from permitting shift supervisors to share in the proceeds placed in collective tip boxes.” Id. The Court explained that the tip-pooling practice challenged by the class action “concern[ed] an employer’s authority to require equitable allocation of tips placed in a collective tip box for those employees providing service to the customer.” Id., at 2-3. The appellate court held at page 3, “There is no decisional or statutory authority prohibiting an employer from allowing a service employee to keep a portion of the collective tip, in proportion to the amount of hours worked, merely because the employee also has limited supervisory duties.” Accordingly, it reversed the trial court judgment.

Starbucks’ thousands of stores are staffed by baristas, shift supervisors, assistant store managers, and store managers. Chau, at 3. The Court of Appeal explained the differences between the store employees as follows: “Baristas are entry-level, part-time hourly employees responsible for customer service related tasks, such as working the cash register and making coffee drinks. Shift supervisors are also part-time hourly employees who perform all the duties of a barista, but are also responsible for some additional tasks, including supervising and coordinating employees within the store, opening and closing the store, and depositing money into the safe. A barista is eligible for promotion to shift supervisor after six months on the job. A store manager is a full-time salaried employee, and has the authority to recruit, hire, promote, transfer, schedule, discipline, and terminate baristas and shift supervisors. In some stores, a store manager is assisted by an assistant store manager, who is also a fulltime salaried employee.” Id., at 3-4. At trial, Starbucks introduced evidence that shift supervisors spend 90-95% of their time “performing the same jobs as baristas,” and that they had “no authority to hire, discipline, or terminate baristas.” Id., at 8. Moreover, shift supervisors are not considered “management” by the company, id. The trial court ruled against Starbucks because it found that shift supervisors “‘supervise’ and ‘direct’ the acts of other employees,” and that they were barred by California law to share in tip pools. Id., at 8-9.

Class Action Court Decisions Employment Law Class Actions Uncategorized

New Labor Law Class Action Lawsuits Maintain Top Spot Among Weekly Class Actions Filed In California State And Federal Courts

As a resource to California class action defense attorneys, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in the state and federal courts located in Los Angeles, San Francisco, San Jose, Sacramento, San Diego, San Mateo, Oakland/Alameda and Orange County areas. We include only those categories that include 10% or more of the class action filings during the preceding week. This report covers the period from June 5 – 11, 2009, during which time 40 new class actions were filed.

Class Actions In The News Uncategorized

Class Action Defense Cases—In re Payless ShoeSource: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation In Eastern District Of California

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Unopposed by Class Action Plaintiffs, and Transfers Actions to Eastern District of California Two class actions – one in Central District of California and one in the Eastern District of California – were filed against Payless ShoeSource alleging violations of California’s Song-Beverly Act; specifically, the class action complaints allege that Payless “requests and records customers’ personal identification information in violation of California Civil Code § 1747.

Class Action Court Decisions Multidistrict Litigation Uncategorized

CAFA Class Action Defense Cases–Marshall v. H & R Block: Seventh Circuit Reverses Remand Of Class Action To State Court Holding Potential Increase In Liability Rendered Class Action Removable Under CAFA

District Court Erred in Remanding Class Action to State Court because Decertification Order and Dismissal of Co-Defendants Substantially Increased Remaining Defendant’s Liability such that Amended Class Action Complaint did not “Relate Back” to Original Class Action Complaint, Rendering Class Action Removable under Class Action Fairness Act of 2005 (CAFA) Seventh Circuit Holds Plaintiff filed a putative class action in Illinois state court against various H & R Block companies alleging violations of the state’s Consumer Fraud Act; the class action complaint alleged that defendants “had used deceptive practices to sell ‘Peace of Mind’ insurance against mistakes by H & R Block that increased customers’ tax liabilities.

Class Action Court Decisions Class Action Fairness Act (CAFA) Removal & Remand Uncategorized

TILA Class Action Defense Cases–Barrer v. Chase: Ninth Circuit Reverses Dismissal Of TILA Class Action Holding “Buried” Disclosures Did Not As A Matter Of Law Comply With TILA

Lender’s Disclosures that APR may Increase based on Information in Credit Report not Clear and Conspicuous Within Meaning of TILA so District Court Erred in Dismissing Class Action Complaint Ninth Circuit Holds

Plaintiffs filed a class action against Chase Bank alleging violations of the federal Truth in Lending Act (TILA), and Regulation Z promulgated thereunder; the class action complaint alleged that plaintiffs “have been the victims of a practice they now call ‘adverse action repricing,’ which apparently means ‘raising . . . a preferred rate to an essentially non-preferred rate based upon information in a customer’s credit report.’” Barber v. Chase Bank USA, N.A., 566 F.3d 883 (9th Cir. 2009) [Slip Opn., at 5996 ]. Specifically, Chase increased plaintiffs’ annual percentage rate (APR) on their outstanding credit card balance from 8.99% to 24.24% based on information obtained from a consumer credit reporting agency; Chase stated that it increased the interest rate “‘outstanding credit loan(s) on revolving accounts . . . [were] too high’ and there were ‘too many recently opened installment/revolving accounts.’” Id., at 5995-96. The class action did not allege that Chase’s practice of increasing the APR based on information in a consumer’s credit report was illegal, but rather that Chase violated federal law by failing to fully disclose it to them. Id. Defense attorneys moved to dismiss the class action complaint for failure to state a claim; the district court agreed with Chase and dismissed the class action. Id., at 5997. Plaintiffs appealed, and the Ninth Circuit reversed.

The Ninth Circuit explained, “We must decide whether a credit card company violates the Truth in Lending Act when it fails to disclose potential risk factors that allow it to raise a cardholder’s Annual Percentage Rate.” Barber, at 5994. Given the purpose of TILA – viz., “to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit,” 15 U.S.C. § 1601(a) – the Ninth Circuit reversed. The Circuit Court explained that TILA requires disclosure of “[t]he conditions under which a finance charge may be imposed,” “[t]he method of determining the amount of the finance charge,” and, “[w]here one or more periodic rates may be used to compute the finance charge, each such rate . . . and the corresponding nominal annual percentage rate.” Barber, at 5998 (quoting § 1637(a)(1), (a)(3) & (a)(4)). And under Reg. Z, “creditors must make the required disclosures ‘clearly and conspicuously in writing.’” Id., at 5999 (quoting 12 C.F.R. § 226.5(a)(1)). According to the class action, “Chase failed to disclose completely under the Act why it would change the APRs of its cardholders, in violation of subsection 226.6(a)(2) of Regulation Z.” Id., at 6000.

Class Action Court Decisions RESPA/TILA Class Actions Uncategorized

BofA Class Action Defense Cases–Miller v. Bank of America: California Supreme Court Upholds Reversal Of Class Action Judgment Holding Banks May Offset Overdraft/NSF Fees Against Public Benefit Deposits

$360 Million-Plus Class Action Judgment Against Bank of America Properly Reversed by Court of Appeal because Offsetting Overdraft and Insufficient Funds Fees Against Public Benefit Deposits (such as SSI Benefits) does not Violate State Law California Supreme Court Holds

Plaintiff filed a putative class action against Bank of America alleging, inter alia, violations of California’s Unfair Competition Law (UCL) and Consumers Legal Remedies Act (CLRA); the class action complained that BofA improperly offset Supplemental Security Income (SSI) from bank accounts to cover sums owed the bank. Miller v. Bank of America, NT & SA, ___ Cal.4th ___, 94 Cal.Rptr.3d 31 (Cal. 2009) [Slip Opn., at 4, 5]. Plaintiff opened an account with BofA in 1975; he began receiving SSI benefits in 1992, and in 1994 he began having those benefits deposited directly into his BofA checking account. _Id._, at 2. BofA erroneously placed $1800 in plaintiff’s account in January 1998, and a few months later it reversed the credit without notice to plaintiff or his consent. _Id._, at 2-3. In so doing, BofA created a negative balance in plaintiff’s account and, as soon as they were deposited into plaintiff’s account, BofA withdrew the entirety of his May, June and July 1998 SSI payments. _Id._, at 3. Each month, plaintiff complained that BofA’s conduct meant that he would not have the funds to live, and each month BofA returned the funds to his account, _id._ BofA also charged plaintiff insufficient funds fees that ranged from $14 to $32 each, up to a maximum of $160 per day. _Id._, at 3-4. Defense attorneys moved for summary judgment on the class action claims, but the trial court largely denied the motion on the grounds that triable issues of material fact exist, _id._, at 4-5. The trial court also granted plaintiff’s motion for class action certification; “the class consisted of all Bank customers who received directly deposited public benefit funds without regard to whether those class members had available alternate sources of income to cover their basic living expenses.” _Id._, at 5. At issue was the $284 million in NSF that BofA debited from customer accounts between January 1994 and May 2003. _Id._ In a bifurcated trial, a jury found against the bank, awarding $75 million in compensatory damages, plus $1000 in statutory damages to each class member. _Id._, at 5-6. After the bench trial, the trial court also found against the bank and awarded more than $284 million in damages as well as $1000 to each class member. _Id._, at 6. In so ruling, the trial court relied on _Kruger v. Wells Fargo Bank_ (1974) 11 Cal.3d 352, 356, which held that “a bank may not satisfy a credit card debt by deducting the amount owed from a separate checking account containing deposits that ‘derived from unemployment and disability benefits’ and, thus, were ‘protected from the claims of creditors.’” _Id._, at 1. Immediately after _Kruger_, the California legislature enacted Financial Code section 864, which “comprehensively governs the manner in which banks may exercise the right to set off debts” and “expressly excludes overdrafts and bank charges from the statute’s definition of debt.” _Id._ The Court of Appeal reversed the judgments, “holding that _Kruger_ did not apply to the Bank’s practice of debiting overdrafts and charging NSF fees to account holders who deposited public benefit funds.” _Id._, at 6. The California Supreme Court affirmed.

Class Action Court Decisions Uncategorized