CALIFORNIA CLASS ACTION LAW

In an Antitrust Class Action, U.S. Supreme Court Holds That Expert’s Damages Study Must Translate the Legal Theory of Harmful Event to Economic Impact of Event

photograph of the justices, cropped to show Ju...

photograph of the justices, cropped to show Justice Scalia (Photo credit: Wikipedia)

In a 5 to 4 opinion today written by Justice Scalia, the U.S. Supreme Court found that a proposed antitrust class action was improperly certified under Rule 23(b)(3) because plaintiff’s damages model fell short of establishing that damages can be measured classwide.  Comcast Corp., et al. v. Behrend, et al., No. 11-864, 569 U.S. ___ (Mar. 27, 2013).  The District Court and Third Circuit approved certification of a class of more than 2 million current and former Comcast subscribers who sought damages for alleged violations of the federal antitrust laws.

At the trial court level, plaintiffs proposed four theories of antitrust impact, only one of which–the “overbuilder” theory–the trial court accepted.  To establish damages, plaintiffs relied solely on the testimony of Dr. James McClave, who designed a regression model comparing actual cable prices in one area with hypothetical prices that would have prevailed but for defendant’s allegedly anticompetitive practices.  Dr. McClave acknowledged that the model did not isolate damages resulting from any one theory of antitrust impact.  Id. at 4.

The Supreme Court held that the class was improperly certified.

By refusing to entertain arguments against respondents’ damages model that bore on the propriety of class certification, simply because those arguments would also be pertinent to the merits determination, the Court of Appeals ran afoul of our precedents requiring precisely that inquiry. And it is clear that, under the proper standard for evaluating certification, respondents’ model falls far short of establishing that damages are capable of measurement on a classwide basis. Without presenting another methodology, respondents cannot show Rule 23(b)(3) predominance: Questions of individual damage  calculations will inevitably overwhelm questions common to the class.

The Court reasoned that the “model failed to measure damages resulting from the particular antitrust injury on which petitioners’ liability in this action is premised.”  Id. at 8.  Justice Scalia emphasized that “it may be necessary for the court to probe behind the pleadings before coming to rest on the certification question, . . . Such an analysis will frequently entail overlap with the merits of the plaintiff ’s underlying claim.” Id. at 6 (internal quotations omitted).

By CHARLES H. JUNG

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Press Quotes Regarding Analysis of Compton Case

English: Seal of the Supreme Court of California

English: Seal of the Supreme Court of California (Photo credit: Wikipedia)

LexisNexis’s Law360 today published an article quoting the author’s analysis of the Compton v. Superior Court case.  Compton v. Superior Court of Los Angeles County, No. B236669, — Cal.Rptr.3d —-, 2013 WL 1120619 (2d Dist. Mar 19, 2013):

“In both cases, the First and Second districts applied Armendariz and invalidated arbitration agreements for lack of mutuality,” said Charles Jung, a Nassiri & Jung LLP attorney. “At least as far as California courts are concerned, Armendariz is alive and well, and it appears that this is going to continue to be the case until the California Supreme Court overrules it.”

In light of the latest ruling, plaintiffs and their attorneys looking to defeat mandatory arbitration agreements will keep an eagle eye out for any type of one-sidedness, according to Jung.

“The Compton ruling creates an avenue for employees to argue that mandatory agreements are unlawfully one-sided and that under Armendariz, they should be stricken,” he said. “For employers, it suggests the way to make arbitration agreements enforceable is by making them simple and even-handed. Employers can’t have their cake and eat it too.”

“The California Supreme Court really has its work cut out for it,” Jung said. “The challenge for the California Supreme Court is to try to preserve what it can of California’s public policy, yet not fall afoul of and directly contradict or simply ignore the U.S. Supreme Court. It’s a very tricky position for the court to be in.”

California Court of Appeal Cites Death Knell Doctrine to Assert Jurisdiction Over Appeal of Order Granting Arbitration

Ring His Death Knell - NARA - 534312

Ring His Death Knell – NARA – 534312 (Photo credit: Wikipedia)

Yesterday, in a proposed wage and hour class action, the California Court of Appeal for the Second District reversed the lower court’s order granting a petition to compel arbitration.  Compton v. Superior Court of Los Angeles County, No. B236669, — Cal.Rptr.3d —-, 2013 WL 1120619 (2d Dist. Mar 19, 2013).  Plaintiff was a property manager who was required to sign an arbitration agreement that also barred arbitration of class claims.  The trial court granted defendants’ petition to compel arbitration.

Normally an order compelling arbitration is not appealable.  But the Court of Appeal determined it had jurisdiction, citing the “death knell” doctrine:

An order compelling arbitration is not appealable. (Elijahjuan v. Superior Court (2012) 210 Cal.App.4th 15, 19.) The parties argue over whether this matter is appealable under the “death knell” doctrine, which applies when an order effectively terminates a class action. Rather than parse the case law on that issue, we conclude that we have jurisdiction to treat this nonappealable order as a petition for writ of mandate in this unusual case because: (1) the unconscionability issue is one of law based on undisputed facts and has been fully briefed; (2) the record is sufficient to consider the issue and it appears that the trial court would be only a nominal party; (3) if we were to dismiss the appeal, and the ultimate reversal of the order is inevitable, it would come in a post-arbitration award after the substantial time and expense of arbitrating the dispute; and (4) as a result, dismissing the appeal would require the parties to arbitrate nonarbitrable claims and would be costly and dilatory.

The Court concluded that the arbitration agreement was unconscionably one-sided because (1) it exempted from arbitration claims the employer would more likely bring, such as claims for injunctive or equitable relief from trade secret disclosures; (2) it limited the time to demand arbitration to a period shorter than the relevant statutes of limitation; (3) it retained the statute of limitations period for itself  and (4) it suggested that the arbitrator had the discretion not to award mandatory attorney’s fees under the Labor Code.

The Court determined that it was not violating Concepcion by enforcing Armendariz’s bilaterality rule:

Read the rest of this entry »

Central District Grants Final Approval to Injunctive Relief Settlement in Qunol CoQ10 Liquid Labeling Litigation

DSC_9962

DSC_9962 (Photo credit: k_haruna)

On March 13, 2013, Judge David O. Carter granted final approval to a class action based on claims that Defendants mislabeled their “Qunol” product as “six times more effective” than other similar products.  Bruno v. Quten Research Institute, LLC, et al. (In re Qunol CoQ10 Liquid Labeling Litigation), No. SACV 11–00173 DOC (Ex), 2013 WL 990495 (C.D. Cal. March 13, 2013) (slip op.).

Class

All excluding officers, directors, and employees of Quten Research Institute, LLC or Tishcon Corp. and their immediate families, who on or after January 31, 2007 purchased Qunol CoQ10 in the United States for personal or household uses, rather than resale or distribution, in packaging stating that Qunol offers six times better absorption or effectiveness. Read the rest of this entry »

U.S. Supreme Court Rules a Putative Class Action Plaintiff May Not Use Stipulation to Defeat CAFA Amount in Controversy

Official portrait of Supreme Court Justice Ste...

Official portrait of Supreme Court Justice Stephen Breyer. (Photo credit: Wikipedia)

In a unanimous opinion written by Justice Breyer, the U.S. Supreme Court held today that a putative class representative’s stipulation that he and the class would seek less than $5 million in damages does not defeat federal jurisdiction under the Class Action Fairness Act of 2005 (“CAFA”).  Standard Fire Insurance Co. v. Knowles, No. 11-1450, 586 U.S. __ (Mar. 19, 2013).

The question presented concerned a class-action plaintiff who stipulates, prior to certification of the class, that he, and the class he seeks to represent, will not seek damages that exceed $5 million in total. Does that stipulation remove the case from CAFA’s scope?

The Court concluded no, reasoning that stipulations must be binding, and a “plaintiff who files a proposed class action cannot legally bind members of the proposed class before the class is certified.”

 We do not agree that CAFA forbids the federal court to consider, for purposes of determining the amount in controversy, the very real possibility that a nonbinding, amount-limiting, stipulation may not survive the class certification process. This potential outcome does not result in the creation of a new case not now before the federal court. To hold otherwise would, for CAFA jurisdictional purposes, treat a nonbinding stipulation as if it were binding, exalt form over substance, and run directly counter to CAFA’s primary objective: ensuring “Federal court consideration of interstate cases of national importance.” §2(b)(2), 119 Stat. 5. It would also have the effect of allowing the subdivision of a $100 million action into 21 just-below-$5-million state-court actions simply by including nonbinding stipulations; such an outcome would squarely conflict with the statute’s objective.

The Court concluded that “the stipulation at issue here can tie Knowles’ hands, but it does not resolve the amount-in-controversy question in light of his inability to bind the rest of the class.”

By CHARLES H. JUNG

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California’s First District Invalidates Auto Dealer’s Arbitration Agreement Due to Lack of Mutuality

English: The Earl Warren Building and Courthou...

English: The Earl Warren Building and Courthouse at Civic Center Plaza, San Francisco, California. This building is home to the Supreme Court of California and the Court of Appeal for the First Appellate District. Photographed by user Coolcaesar on August 31, 2006. (Photo credit: Wikipedia)

The California Court of Appeal struck down an arbitration agreement by a car dealer defendant in a putative class action, rejecting an argument that an unconscionability analysis that focuses on the lack of mutuality in an arbitration contract violates Concepcion. Natalini v. Import Motor, Inc., 213 Cal. App. 4th 587 (1st Dist., mod. February 5, 2013).

Relying on the U.S. Supreme Court’s holding in AT & T Mobility LLC v. Concepcion,  563 U.S. –––– , 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011), appellant car dealer argued that an “unconscionability analysis that focuses on the lack of mutuality or bilaterality in an arbitration provision is ‘an example of applying a generally applicable contract defense in a manner which disfavors arbitration.'”  The First District declined to read Concepcion so broadly, and noted that:

Recent California and federal district court decisions addressing arbitration provisions very similar to that in the present case and in the identical car purchase context have not read  Concepcion so broadly.  (See  Trompeter v. Ally Financial, Inc. (N.D.Cal., June 1, 2012, No. C–12–00392 CW) 2012 WL 1980894 [p. *8] [nonpub. opn.]  ( Trompeter );   Smith v. Americredit Financial Services, Inc. (S.D.Cal., Mar. 12, 2012, No. 09cv1076 DMS (BLM)) 2012 WL 834784 [pp. *2–*4] ( Smith );   Lau v. Mercedes–Benz USA, LLC (N.D.Cal., Jan. 31, 2012, No. CV 11–1940 MEJ) 2012 WL 370557 [pp. *6–*7] ( Lau );  see also  Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 804, fn. 18, 137 Cal.Rptr.3d 773.)    Read the rest of this entry »

U.S. Supreme Court Dismisses Certiorari in First American Financial Corp. v. Edwards

In a notable non-decision, the U.S. Supreme Court today decided not to decide First American Financial Corporation v. Edwards.  567 U. S. ____ (2012) (available at http://www.supremecourt.gov/opinions/11pdf/10-7081b2d.pdf).  Edwards was a case closely watched by class action attorneys.  Class action defense counsel have argued that putative class representatives lack Article III standing where the basis for standing is solely statutory damages (i.e., not actual damages).  The Ninth Circuit ruled that Article III injury can exist solely by statutes creating legal rights. In a per curiam opinion, the U.S. Supreme Court ordered that the “writ of certiorari is dismissed as improvidently granted.”

Questions Presented

Section 8(a) of the Real Estate Settlement Procedures Act of 1974 (“RESPA” or “the Act”) provides that “[n]o person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding … that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person.” 12 U.S.C. § 2607(a). Section 8(d)(2) of the Act provides that any person “who violate[s],” inter alia, § 8(a) shall be liable “to the person or persons charged for the settlement service involved in the violation in an amount equal to three times the amount of any charge paid for such settlement service.” Id. § 2607(d)(2). The questions presented were:

1. Did the Ninth Circuit err in holding that a private purchaser of real estate settlement services has standing under RESPA to maintain an action in federal court in the absence of any claim that the alleged violation affected the price, quality, or other characteristics of the settlement services provided?

2. Does such a purchaser have standing to sue under Article III, § 2 of the United States Constitution, which provides that the federal judicial power is limited to “Cases” and “Controversies” and which this Court has interpreted to require the plaintiff to “have suffered an ‘injury in fact,'” Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992)?

On June 20, 2011, the Court granted cert on Question 2; and it reversed itself today.  More later.

By CHARLES JUNG

Ninth Circuit Holds that FAA Under Concepcion Broadly Preempts State Law Invalidating Class-Action Waivers in Arbitration Agreements

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The Ninth Circuit Court of Appeals in a published opinion today, held that the Federal Arbitration Act broadly preempts state law invalidating class-action waivers in arbitration agreements, even where the waivers would preclude effective vindication of statutory rights.  The opinion can be found here: http://www.ca9.uscourts.gov/datastore/opinions/2012/03/16/09-35563.pdf.

More on this later.

By CHARLES JUNG

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U.S. Supreme Court Applies Concepcion to Strike Down West Virginia Arbitration Rule

U.S. Supreme Court building.

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In a per curiam opinion today applying the rule in Concepcion, the U.S. Supreme Court  reversed and remanded orders of the Supreme Court of Appeals of West Virginia, which held unenforceable all predispute arbitration agreements that apply to claims alleging personal injury or wrongful death against  nursing homes.  Marmet Health Care Center, Inc., et al. v.  Clayton Brown, et al., Case Nos. 11–391 and 11–394, 565 U. S. ____ (Feb. 21, 2012).

The U.S. Supreme Court held that the “Supreme Court of Appeals of West Virginia, by misreading and disregarding the precedents of this Court interpreting the FAA, did not follow controlling federal law implementing that basic principle.”  Id.  “When this Court has fulfilled its duty to interpret federal law, a state court may not contradict or fail to implement the rule so established.”

Background

In each of three negligence suits, a family member of a patient requiring extensive nursing care had signed an agreement with a nursing home on behalf of the patient.  Id. The agreements included arbitration clauses requiring the parties to arbitrate all disputes, other than claims to collect late payments owed by the patient.  Id. In each of the three cases, a family member of a patient who had died sued the nursing home in state court, alleging that negligence caused injuries or harm resulting in death. Id.

In a decision concerning all three cases, the Supreme Court of Appeals of West Virginia held that “as a matter of public policy under West Virginia law, an arbitration clause in a nursing home admission agreement adopted prior to an occurrence of negligence that results in a personal injury or wrongful death, shall not be enforced to compel arbitration of a dispute concerning the negligence.”  Id.

The state court considered whether the state public policy was pre-empted by the FAA: Read the rest of this entry »

Broad “Any Disputes” Language in Arbitration Agreement Insufficient to Manifest Clear and Unmistakable Intent to Delegate Threshold Arbitrability Determination to Arbitrators

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Editorial note:  The author of California Class Action Law appeared for respondent Ajamian in the opinion summarized below, Ajamian v. CantorCO2e, L.P., et al.  

In an opinion certified for publication, the First District Court of Appeal held that a broadly worded arbitration agreement that stated that “[a]ny disputes, differences or controversies arising under” a contract shall be settled by a panel of arbitrators was insufficient to establish “clear and unmistakable” evidence of an intent to delegate issues of enforceability or arbitrability to the arbitration panel.  Ajamian v. CantorCO2e, L.P., et al., No. A131025 (1st Dist., Div. 5 Feb. 6, 2012) (available at http://www.courtinfo.ca.gov/opinions/documents/A131025.PDF).

Although the arbitration provision was broadly worded and indicated that arbitration might be conducted under the rules of an arbitration service that gives arbitrators the power to decide the validity of arbitration agreements, it did not provide clear and unmistakable evidence that the parties intended to delegate authority to the arbitrator, rather than to the court, to decide the threshold issue of whether the arbitration provision itself was unconscionable.

Id.

Background

Plaintiff Ajamian filed a complaint against Defendants CantorCO2e and Margolis, asserting claims under the California’s Fair Employment and Housing Act, the California Labor Code, and other theories.  Id.  Defendants filed a petition to compel arbitration pursuant to the terms of a written employment agreement or, alternatively, an employee handbook.  Id.

The arbitration provision of the employment agreement read: Read the rest of this entry »