CALIFORNIA CLASS ACTION LAW

Second District Publishes Attorney Disqualification Opinion: Khani v. Ford Motor Company

1961 Ford H-Series trucks

1961 Ford H-Series trucks (Photo credit: Wikipedia)

The Court of Appeal for the Second Appellate District yesterday ordered published Khani v. Ford Motor Company, et al., No. B239611, __ Cal.App.4th __ (2d Dist. Apr. 25, 2013).   Plaintiff, represented by attorney Shahian, brought a suit under California’s Song-Beverly Consumer Warranty Act (Civ. Code, § 1790, et seq., popularly known as California‘s Lemon Law) for defects in a 2008 Lincoln Navigator.

Ford moved to disqualify Shahian and his law firm.  Ford presented a declaration from Shahian’s former law firm which was Ford’s corporate counsel.  The declaration stated that Shahian worked on 150 cases, including California Lemon Law cases and was purportedly privy to confidential client communications and information relating to the defense of such cases. Shahian provided unspecified “input” to Ford‘s Office of General Counsel and Consumer Affairs and communicated regularly with Ford about lemon law cases.  The court granted the disqualification motion.

The Court of Appeal reversed:

The evidence in this case does not establish that any information to which Shahian was exposed during his representation of Ford would be material to his representation of Khani in this case. While Ford presented evidence that Shahian represented it in California Lemon Law cases, it did not establish that any confidential information about the defense in those cases would be at issue in this case. Neither the allegedly defective 2008 Lincoln Navigator nor its repair history by Galpin Motors was the subject of any lawsuit in which Shahian represented Ford. Takahashi‘s declaration does not show that Ford had any policies, practices, or procedures generally applicable to the evaluation, settlement or litigation of California Lemon Law cases at the time Shahian represented Ford, or that any such policies, practices, or procedures continued in existence unchanged between 2007 and 2011. Nor does it show that the same decision makers that were involved in cases Shahian handled for Ford are involved in this case.

The trial court abused its discretion in concluding that the prior cases were substantially related to the current case just because they involved claims under the same statute. The substantial relationship test does not subject an attorney to automatic disqualification on this ground alone. (See Banning Ranch Conservancy v. Superior Court (2011) 193 Cal.App.4th 903, 918 [successive representations in cases under 6 California Environmental Quality Act not substantially related].)1 The court also incorrectly assumed that Shahian‘s exposure to playbook information in prior lemon law cases was sufficient to disqualify him in this case without any showing of its materiality. (See Farris, supra, 119 Cal.App.4th at p. 680; see also Elliott v. McFarland Unified School Dist. (1985) 165 Cal.App.3d 562, 572 [conclusory statements insufficient].) Ford‘s bare-bones evidence in this case is insufficient to establish that Shahian‘s previous representation of Ford in California Lemon Law cases exposed him to confidential information that would be material to his current representation of Khani.

Judges & Attorneys

Presiding Justice Norman L. Epstein issued the opinion for the court.  Associate Justices Thomas L. Willhite, Jr. and Steven C. Suzukawa concurred.

Appeal from order of the Superior Court of Los Angeles County, Judge Amy D. Hogue.

Strategic Legal Practices, Payam Shahian, Gielegheim & Associates and Neil Gielegheim, for Plaintiffs and Appellants.

Baker & Hostetler, Mary L. Arens, Rosslyn Hummer, and Jack Samet for Defendants and Respondents.

By CHARLES H. JUNG

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Ninth Circuit Issues Forum Selection Clause Opinion

English: Kingdom Centre, Riyadh, Saudi Arabia....

English: Kingdom Centre, Riyadh, Saudi Arabia. Taken by BroadArrow in 2007. (Photo credit: Wikipedia)

The Ninth Circuit issued an opinion today in Petersen v. Boeing Company, No. 11-18075, __ F.3d __ (9th Cir. Apr. 26, 2013).  The district court dismissed plaintiff’s case on the basis of a Saudi forum selection clause without holding an evidentiary hearing as to whether plaintiff was induced to assent to the forum selection clause through fraud or overreaching.  In a per curiam opinion, a Ninth Circuit panel reversed, holding that a triable issue of fact existed as to whether the forum selection clause was enforceable.  You can read more here.

By CHARLES H. JUNG

Ninth Circuit Reverses Approval of Class Settlement Where Incentive Awards Were Conditioned on Representatives’ Support for Settlement

Experian in Ruddington Fields

Experian in Ruddington Fields (Photo credit: Ruddington Photos)

Today, the Ninth Circuit reversed a district court’s approval of a class action settlement against credit reporting agencies under the Fair Credit Report Act, citing a failure by the class representatives and class counsel to adequately represent the class.  Radcliffe, et al v. Experian Information Solutions, Inc., et al., Case No. 11-56376, __ F.3d __ (Apr. 22, 2013).  The court took issue with the incentive awards to the class representatives that were conditioned on the class representatives’ support for the settlement.  The agreement provided for incentive awards:

On or before October 19, 2009, Proposed 23(b)(3) Settlement Class Counsel shall file an application or applications to the Court for an incentive award, to each of the Named Plaintiffs serving as class representatives in support of the Settlement, and each such award not to exceed $5,000.00.

The court concluded that these conditional awards caused a divergence of interests between the representatives and the class: Read the rest of this entry »

Employer’s Right to Alter Handbook’s Terms Doesn’t Render Illusory Mutual Obligation to Arbitrate

Battle Foods Employee Handbook Cover

Battle Foods Employee Handbook Cover (Photo credit: johntrainor)

The Second District ordered published today Serpa v. California Surety Investigations, Inc., et al., No. B237363, __ Cal. App. 4th __ (filed Mar. 21, 2013, modified Apr. 19, 2013).  In Serpa, the Court of Appeal reversed the denial of a motion to compel arbitration.

At the trial court level, the court denied defendants’  motion to compel arbitration, finding the agreement to arbitrate lacked mutuality.  Defendants argued that the requisite mutuality was provided by the bilateral arbitration provisions in the employee handbook, incorporated by reference into the arbitration agreement.  The trial court rejected this argument because defendant could change the handbook at its sole discretion and without notice.  The Second District reversed.

Because the agreement incorporated the arbitration policy in the employee handbook, the Court concluded that this “salvages the agreement by establishing an unmistakable mutual obligation on the part of [employer and plaintiff] to arbitrate ‘any dispute’ arising out of her employment.”  Plaintiff argued that the while the arbitration policy in the handbook establishes a bilateral obligation to arbitrate, she insisted that the mutual obligation is illusory because, the employer is authorized to alter the terms of any policy contained in the handbook at its sole discretion and without notice.  The Court disagreed, reasoning that the right to alter the terms was limited by the covenant of good faith and fair dealing implied in every contract.

You can read more here.

By CHARLES H. JUNG

Second District Draws Distinction Between Allegations and Judicial Admissions in Denying Arbitration

Boulder City, Nevada.. cute homes..

Boulder City, Nevada.. cute homes.. (Photo credit: iwona_kellie)In

In a tax day ruling that may have implications for co-defendants seeking to compel arbitration, the Second District affirmed a trial court’s denial of a motion to compel arbitration.  Barsegian v. Kessler & Kessler, et al., No. B237044, __ Cal.App.4th __ (2d Dist. Apr. 15, 2013).  Some defendants moved to compel arbitration, but the remaining defendants did not.  Slip Op. at 2.  The trial court denied on the grounds of waiver and the possibility of inconsistent rulings.

Moving defendants sought a reversal, arguing that plaintiff’s complaint alleged that all defendants are agents of one another, and that allegation is a binding judicial admission that gives the non-moving defendants the right to enforce the arbitration agreement.  The court disagreed, noting that:

[N]ot every factual allegation in a complaint automatically constitutes a judicial admission.  Otherwise, a plaintiff would conclusively establish the facts of the case by merely alleging them, and there would never be any disputed facts to be tried. . . . A judicial admission is therefore conclusive both as to the admitting party and as to that party’s opponent. (4 Witkin, Cal. Procedure (5th ed. 2008) Pleading, § 454, p. 587.) Thus, if a factual allegation is treated as a judicial admission, then neither party may attempt to contradict it—the admitted fact is effectively conceded by both sides.

Here, the moving defendants sought to reserve the right to argue at arbitration that the allegation of mutual agency was false, and thus it was not conceded by both sides.

Although the Kessler defendants frame their argument using the term “judicial admission” and rely on case law concerning judicial admissions, their counsel confirmed at oral argument that they do not in fact wish to treat Barsegian‟s allegation of mutual agency as a judicial admission, because the Kessler defendants do wish to be able to contest the truth of that allegation, either in court or before an arbitrator. That is, the Kessler defendants wish to hold Barsegian to the mutual agency allegation only for purposes of the motion to compel arbitration, but, should they succeed in compelling arbitration on the basis of that allegation, they wish to retain the right to prove to the arbitrator that the allegation is false. That is not how judicial admissions operate.

You can read more here.

By CHARLES H. JUNG

Supreme Court Holds That Unaccepted, Full-Value Rule 68 Offer of Judgment Deprives Court of Subject Matter Jurisdiction Over FLSA Collective Action

Uni 5s: Pick-off Attempt at 3rd

Uni 5s: Pick-off Attempt at 3rd (Photo credit: pj_in_oz)

In an case with broad implications for federal class action practice, the U.S. Supreme Court held today, in a 5-4 opinion, that an FLSA collective action was properly dismissed for lack of subject matter jurisdiction, where the lead plaintiff did not accept the employer’s full-value offer of judgment under Federal Rule of Civil Procedure 68.  Genesis Healthcare Corp., et al. v. Symczyk, No. 11-1059, 569 U.S. __ (April 16, 2013).

Justice Thomas, writing for the 5-4 majority, concluded that:

Reaching the question on which we granted certiorari,we conclude that respondent has no personal interest in representing putative, unnamed claimants, nor any other continuing interest that would preserve her suit from mootness. Respondent’s suit was, therefore, appropriately dismissed for lack of subject-matter jurisdiction.

You can read more here.

By CHARLES H. JUNG

Ninth Circuit Reverses Dismissal of State Law Claims, Holding That FLSA Collective Actions and State Law Class Actions are Not Inherently Incompatible

English: Stanford Memorial Church, Stanford Un...

English: Stanford Memorial Church, Stanford University, Stanford, California. (Photo credit: Wikipedia)

Agreeing with other circuits, the Ninth Circuit held today that FLSA collective actions and state law class actions are not inherently incompatible.  Bush v. Integrity Staffing Solutions, Inc., No. 11-16892, __ F.3d __ (9th Cir. Apr. 12, 2013).  The district court dismissed warehouse workers’ claims for unpaid wages under the Fair Labor Standards Act and Nevada state law.  The Ninth Circuit reversed the dismissal of state law claims on the basis that they would be certified using different class certification procedures than the federal wage-and-hour claims.  Agreeing with other circuits, the panel held that a FLSA collective action and a state law class action are not inherently incompatible as a matter of law even though plaintiffs must opt into a collective action under the FLSA but must opt out of a class action under Federal Rule of Civil Procedure 23.

You can read more about the ruling here.

Judges

Before: Jerome Farris, Sidney R. Thomas, and N. Randy Smith, Circuit Judges. Opinion by Judge Thomas.

The case was argued and submitted at Stanford Law School.

By CHARLES H. JUNG

Ninth Circuit Declines to Vitiate Broughton-Cruz Rule

Flight Academy 03

Flight Academy 03 (Photo credit: bestarns)

Declining to issue a broad ruling vitiating the Broughton-Cruz rule, the Ninth Circuit filed its en banc opinion today in Kilgore v. Keybank, National Association, No. 09-16703, __ F.3d __ (9th Cir. Apr. 11, 2013) (en banc).  While the court reversed and remanded with instructions to compel arbitration, it took a narrow approach.  The appeal involved a putative class action by former students of a failed flight-training school who seek broad injunctive relief against the bank that originated their student loans among others.  The court held that the arbitration agreement was not unconscionable under California law and compelled arbitration.

The court concluded that the injunctive relief claim at issue fell outside Broughton-Cruz’s “narrow exception to the rule that the FAA requires state courts to honor arbitration agreements.”

The central premise of Broughton-Cruz is that “the judicial forum has significant institutional advantages over arbitration in administering a public injunctive remedy, which as a consequence will likely lead to the diminution or frustration of the public benefit if the remedy is entrusted to arbitrators.” Broughton, 988 P.2d at 78. That concern is absent here, where Defendants’ alleged statutory violations have, by Plaintiffs’ own admission, already ceased, where the class affected by the alleged practices is small, and where there is no real prospective benefit to the public at large from the relief sought.

You can read more about today’s ruling here.

By CHARLES H. JUNG

In Wage Class Action, Second District Affirms Labor Code Section 203 Penalties and Requires Separate Minimum Wage Pay for Certain Piece Rate Workers

1905 American Mercedes In a year when the aver...

1905 American Mercedes In a year when the average wage was only $200 to $400 annually, the Mercedes was a car for the rich readers of Country Life magazine. (Photo credit: Wikipedia)

Today, the Second District Court of Appeal published Gonzalez v. Downtown LA Motors, LP, et al., Case No. B235292, __ Cal. App. 4th __ (2d Dist. Mar. 6, 2013).  Gonzalez is a wage class action where the question presented was whether California’s minimum wage law requires an employer that compensates its automotive service technicians on a “piece-rate” basis for repair work must also pay those technicians a separate hourly minimum wage for time spent during their work shifts waiting for vehicles to repair or performing other non-repair tasks directed by the employer.  Defendant automobile dealership contended it was not required to pay the technicians a separate hourly minimum wage for such time because it ensured that a technician’s total compensation for a pay period never fell below what the employer refers to as the “minimum wage floor” — the total number of hours the technician was at work during the pay period (including hours spent waiting for repair work or performing non-repair tasks), multiplied by the applicable minimum wage rate.  The employer supplemented pay, if necessary, to cover any shortfall.

The Court of Appeal concluded that class members were entitled to separate hourly compensation for time spent waiting for repair work or performing other non-repair tasks directed by the employer during their work shifts, as well as penalties under Labor Code section 203, subdivision (a).  You can read more about the Gonzalez opinion here.

By CHARLES H. JUNG

California Court of Appeal Reverses Denial of Arbitration Petition, Despite Presence of Class Waiver

Used Car Lot

Used Car Lot (Photo credit: Hugo90)

California’s First District yesterday approved of an arbitration agreement, despite the presence  of a class waiver and a requirement to arbitrate public claims.  See Vasquez v. Greene Motors, Inc., et al., Case No. A134829, __ Cal.App.4th __ (1st Dist. Mar. 27, 2013).

The Court described the clause as follows:

The reverse side, also dense with text, contains a number of provisions in separate boxes, many dealing with typical ―boilerplate legal matters, such as warranties, applicable law, and buyer and seller remedies. None of the provisions on the back page requires a buyer‘s signature. Toward the bottom of the page is the arbitration clause. The entire text of the clause is outlined in a black border. In all capital letters and bold type at the top is written, ―ARBITRATION CLAUSE [¶] PLEASE REVIEW— IMPORTANT—AFFECTS YOUR LEGAL RIGHTS. Immediately below, three numbered provisions, also in all capital letters, inform the buyer either party may request arbitration, this would prevent a court or class-wide proceeding, and it might limit discovery. Below these, in smaller type, are the actual terms of the clause. Pursuant to these terms, the arbitration may be conducted under the auspices of the National Arbitration Forum or the American Arbitration Association (AAA), at the election of the buyer, or by any other mutually agreeable organization; the initial arbitration will be conducted by a single arbitrator; it will occur in the federal district of the buyer‘s residence; the seller must advance up to $2,500 of the buyer‘s arbitration costs; the award is binding unless it is $0 or more than $100,000 or includes injunctive relief, in which 4 case either party can request a second arbitration before three arbitrators; and the use of self-help remedies and small claims court is exempted.

The Court validated the presence of a class action waiver and requirement to arbitrate public claims, finding the arguments against each “foreclosed” by Concepcion:

Finally, Vasquez argues the waiver of class action rights and the requirement to arbitrate ―public claims, such as the statutory violations alleged here, are impermissible. (See Discover Bank v. Superior Court (2005) 36 Cal.4th 148 (Discover Bank); Cruz v. PacifiCare Health Systems, Inc. (2003) 30 Cal.4th 303.) Both arguments have been foreclosed by the United States Supreme Court‘s decision in AT&T Mobility, LLC v. Concepcion (2011) 131 S.Ct. 1740 (Concepcion), which found preemption by the Federal Arbitration Act (9 U.S.C. § 1 et seq.). (See Phillips v. Sprint PCS (2012) 209 Cal.App.4th 758, 769; Nelsen v. Legacy Partners Residential, Inc. (2012) 207 26 Cal.App.4th 1115, 1136–1137.) Although Concepcion expressly considered only Discover Bank‘s judicially created ban on class action waivers as unconscionable, the same rationale would require a finding of preemption of the statutory ban on class action waivers in section 1751, which is similarly based on public policy.

You can read more about this opinion here.

Judges & Attorneys

Justice Margulies wrote the opinion for the court, and Justices Dondero and Banke concurred.  The trial court judge was Hon. Robert S. Bowers of Solano County Superior Court

Toschi, Sidran, Collins & Doyle, David R. Sidran and Thomas M. Crowell for Defendants and Appellants.

Rosner, Barry & Babbitt, Hallen D. Rosner, Christopher P. Barry and Angela J. Smith for Plaintiff and Respondent.

By CHARLES H. JUNG