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Proskauer on Class and Collective Actions

Ninth Circuit Clarifies Removal CAFA Removal Requirements

Posted in FLSA, Uncategorized

In its recent per curiam opinion in Rea v. Michaels Stores, Inc., the U.S. Court of Appeals for the Ninth Circuit clarified rules and procedures relevant to defendants seeking to remove cases to federal court.

In Rea, the plaintiffs filed a class action alleging that Michaels improperly classified California store managers as exempt from overtime.  Michaels removed the action to federal court under the Class Action Fairness Act (CAFA), but the district court remanded the case back to state court because Plaintiffs had expressly waived the right to recover more than $4,999,999.99, meaning that the case fell one-cent shy of the necessary $5,000,000 amount in controversy.  After remand, the U.S. Supreme Court decided Standard Fire Ins. Co. v. Knowles, which invalidated purported damage waivers used by plaintiffs to defeat CAFA removal.  Michaels once again removed to federal court under CAFA, but the district court deemed Michaels’ attempted removal barred by CAFA’s 30-day rule and found that Michaels failed to show that the amount in controversy exceeded $5 million.

The Ninth Circuit reversed, finding that the California state court’s post-remand decision to certify the class could not defeat federal removal jurisdiction “if jurisdiction was properly invoked as of the time of the filing.”  As to Michaels’ failure to remove within 30 days of receiving the complaint, the Ninth Circuit held that that CAFA’s 30-day time period does not start to run until a complaint or an amended pleading, motion, order, or other paper “affirmatively reveals on its face” that the case is removable. Because controlling law generally recognized damages waivers as valid and effective when plaintiffs filed their complaint, the Ninth Circuit ruled that the complaint did not “affirmatively reveal” the facts necessary for federal court jurisdiction and, therefore, did not trigger the initial 30-day removal period. Here, the Court explained, Michaels’ 30-day limit did not commence until the U.S. Supreme Court decided Standard Fire, after which Michaels timely filed for removal.  Even so, the Court found that Standard Fire amounted to “a relevant change in circumstances” that justified reconsideration of Michaels’ “successive, good faith petition for removal.”

The Ninth Circuit also held that Michaels satisfied CAFA’s $5 million amount-in-controversy requirement by providing evidence that managers were expected to work at least 45 hours per week and by pointing out that named plaintiffs testified that they actually worked at least 45 hours per week.  This, the Court found, was “substantial, plausible evidence” that the amount in controversy could exceed $5 million, despite the fact that Michaels did not proffer evidence that any of the other class members actually worked more than 45 hours per week.

Rea thus fortifies employers’ right to remove class actions under CAFA. Particularly valuable is Rea’s rejection of the “legal certainty” standard for establishing the amount in controversy and holding that defendants can establish the amount in controversy by pointing to plausible, rather than actual, damages.  Using such tactics, defendants should have an easier time establishing removal jurisdiction, especially since Rea indicates any plausible showing of an amount in controversy exceeding $5 million effectively shifts the burden to plaintiffs to affirmatively prove that the value of their case is less than $5 million, which few plaintiffs are likely to want to do.

American Conference International (ACI)

Posted in FLSA, Uncategorized

American Conference International (ACI)
21st National Forum on Wage and Hour Claims and Class Actions

May 29-30, 2014
New York Marriott East Side Hotel * New York, NY

Laura Reathaford has been invited to speak on a panel titled “Donning and Doffing & Walking Time Allegations, and the Latest Claims Arising from Meal and Rest Breaks.” This premiere conference features two days of programming related to best practices and developing law related to wage and hour claims.

As a result of our participation, we are able to offer our friends and clients a discount on the registration cost by entering code 851L14.S  Registration needs to be made by February 26.

Here is a link to the full conference program. (http://www.americanconference.com/2014/851/wage–hour-claims-and-class-actions)


California Appellate Court Affirms Denial Of Class Certification

Posted in Uncategorized

As we recently reported here, there have been a number of appellate decisions ordering class certification based on the existence of an employer’s companywide policy – all while overlooking numerous individualized questions that would undoubtedly create manageability problems during trial.  On December 30, 2013, the California Court of Appeal in Johnson v. California Pizza Kitchen, Inc., 2013 WL 6858373 (Cal. App. 2 Dist. Dec. 30 2013) anticipated these trial management issues and upheld the trial court’s decision denying class certification.

David Johnson and three other former non-exempt employees sued California Pizza Kitchen, Inc. (“CPK”) and alleged the company failed to pay them and other non-exempt employees for their off-the-clock work, including time spent performing opening and closing duties and working through their meal and rest breaks.  Plaintiffs also alleged that although CPK’s policies were “facially compliant,” the company chronically understaffed its restaurants, resulting in missed, interrupted or late breaks.  Finally, plaintiffs claimed that as a result of the aforementioned alleged violations, CPK failed to furnish its employees with accurate itemized wage statements.

The trial court denied class certification on the ground that common questions did not predominate the litigation.  The California Court of Appeal agreed.

The Court recognized that the Supreme Court’s decision in Brinker Rest. Corp. v. Superior Court, requires plaintiffs to show the existence of “a uniform policy consistently applied to a group of employees in violation of the wage and hour laws” (emphasis added).  Here, the Court concluded that plaintiffs failed to make this showing.  The court noted that CPK’s company policy expressly prohibited off-the-clock work and similarly observed that if there were deviations from the company’s official policy, this was due, among other things, to each individual supervisor’s varied application of the policy.  Specifically, the court noted that out of 89 employee declarations submitted by plaintiffs, only 42 claimed any off-the-clock work.  With respect to the meal and rest break subclasses, the Court highlighted the trial court’s findings that fewer than 50% of the declarations submitted claimed any missed meal or rest periods.  As a result, the trial court properly denied class certification as to these claims.

Unfortunately for employers, this decision is not published and therefore, it is not citable nor binding precedent upon other courts.  On January 9, 2014, the California Employment Law Counsel filed a request to publish this decision.  If published, employers can rely on the decision for the principle that class certification is only appropriate where plaintiffs have shown with evidence that the company has a companywide policy of violating California employment laws.  This is markedly different from other decisions affirming class certification where plaintiffs have shown merely that the employer has a facially neutral policy that allegedly violates California employment laws.

California Employers Down, But Not Out, Concerning Class Certification Issues

Posted in FLSA, Uncategorized

Shortly after the California Supreme Court issued its 2012 decision in Brinker Restaurant Corp. v. Superior Court, employers saw an immediate uptick in appellate court decisions supporting the denial of class certification to plaintiffs in wage and hour lawsuits.

Today, the opposite seems to be true: appellate courts are reversing decisions denying class certification and directing trial courts to certify wage and hour class actions.  In some of the more recent cases, the courts justify class certification based on the existence of one common question and reserve for another (unspecified) day the multitude of admittedly individualized questions that are summarily characterized as irrelevant questions about “damages.”

In Martinez v. Joe’s Crab Shack, the California Court of Appeal for the Second District reversed a trial court’s denial of class certification as to the restaurant’s managers who claimed they had been misclassified as exempt employees.  The plaintiffs alleged they spent more than 50 percent of their time performing nonexempt tasks (cooking and bussing tables), and thus were entitled to overtime premiums.  The employees moved for class certification, but the trial court denied the motion because individual trials would be necessary to resolve the amount of time each employee spent performing exempt duties.  In doing so, the trial court applied the logic of other appellate decisions denying class certification in misclassification cases, such as Dailey v. Sears, Roebuck & Co., Mora v. Big Lots Stores, Inc., and Arenas v. El Torito Restaurants, Inc.

This time, however, the Court of Appeal reversed the trial court’s decision denying class certification.  While acknowledging that the time spent on particular tasks is relevant to the employer’s ultimate liability, the Court held that restaurant’s policy of classifying managers as exempt from overtime and the managers’ allegations that their tasks did not differ from nonexempt tasks was common enough to justify class certification.  The Court said that the trial court should have focused on “the employer’s realistic expectations [of the job] and its classification of the tasks [that] managers may have been expected to perform rather than whether the employee can identify in retrospect, the amount of time he or she was engaged in an exempt or nonexempt task.”  The appellate court therefore instructed the trial court to refocus its analysis on the policies and practices of the employer, “even those in which the facts appear to present difficult issues of proof.”

In Jones v. Farmers Ins. Exch., insurance claims representatives and senior claims adjusters alleged that their employer should have compensated them for preparatory work they were purportedly required to perform before their scheduled shifts and for the time it took them to drive to their first appointments each day.  The trial court denied class certification on the ground that that individualized trials would be required to resolve whether employees actually performed these pre-shift tasks.

In reversing this decision, the Court of Appeal for the Second District found that common issues predominated because the existence of a uniform policy requiring pre-shift tasks was, in and of itself, a common question amenable to class treatment.  It further reserved any individualized issues—such as actual time spent on these tasks—as applicable only to the amount of “damages,” which, in its view, did not preclude class certification.  On remand, the Court instructed the trial court to focus on whether plaintiffs’ theory of recovery is amenable to class treatment, as opposed to whether any individual might actually be able to recover at trial.

Finally, in Williams v. Superior Court (Allstate Ins. Co.), the California Court of Appeal for the Second District reversed the lower court’s decertification of a class of automotive field adjusters who claimed they were not paid for certain pre- and post-shift activities, such as logging onto their computers, setting voicemail messages, and checking for schedule and travel changes.  The trial court initially certified the class, finding that Allstate’s alleged requirement that the employees perform these pre- and post-shift tasks was a common question justifying class certification.  Shortly after the class was certified, however, the United States Supreme Court handed down its decision in Wal-Mart Stores, Inc. v. Dukes.  Based on that decision, Allstate moved to decertify the class, arguing that individualized issues predominated as to whether any employee spent more than a de minimis amount of time on pre- or post-shift tasks.  Specifically, Allstate argued that since Dukes rejected a “trial by formula” approach to class actions, a series of mini-trials would be necessary to establish any individual employee’s right to compensation for time spent on the allegedly required pre- or post-shift tasks.

Although the trial court agreed with Allstate and decertified the class, the Court of Appeal reversed the decertification order with directions to certify.  The Court found that “[t]rial by formula is [merely] a method of calculating damages,” which “have little, if any, relevance at the certification stage.”  Accordingly, it held that “whether Allstate had a practice of not paying adjusters for off-the-clock time was common enough to justify class certification, regardless of whether Allstate’s de minimis defense could, arguably, eviscerate any one employee’s right to recover any wages at all.”

These decisions do clearly leave employers exposed to a greater risk of a class being certified, which typically works in favor of plaintiffs’ leveraging multi-million dollar settlements.  All is not lost, however.  Since the appellate courts still have yet to address precisely how these (admittedly difficult to prove) cases should be tried, class wide liability may not be a foregone conclusion.

For example, should the trial court determine that Joe’s Crab Shack required its managers to perform certain nonexempt tasks (thereby resolving the arguably common question), plaintiffs presumably will still have to prove – as a matter of liability – that every single class member did not perform exempt tasks more than 50 percent of the time.  Since the court must address this question eventually, employers may have an opportunity to win the war prior to trial – even after losing the initial class certification battle.

Should evidence be developed that numerous class members did not perform nonexempt tasks, for instance, an employer may later move to decertify the class or may ask the court to require that each and every class member attend trial in order to prove his or her actual damages.  Another option may be to move in limine to preclude statistical or “representative” evidence of time spent on nonexempt tasks where, after certification, there is evidence of a wide variance among class members regarding how much time each spent on these tasks.  Given the opportunities to deflate a certified class later in the litigation and the prospect of thousands of mini-trials, employers may be down after these recent decisions, but they certainly are not out.  In short, a class action may be certified – though not suitable — for trial.

Court Holds Arbitration Agreement Requiring Employee to Pay Half of Arbitration Costs is Unconscionable

Posted in Arbitration

In Chavarria v. Ralphs Grocery Co., No. 11-56673, 2013 WL 5779332 (9th Cir. Oct. 28, 2013), the plaintiff, a former deli clerk, brought a class action against Ralphs for various alleged wage and hour violations of the California Labor Code.  As a condition of employment, Chavarria signed an arbitration agreement containing a class action waiver.  Ralphs filed a motion to compel arbitration.

The U.S. Court of Appeals for the Ninth Circuit affirmed the district court’s ruling that Ralphs’ arbitration agreement was unconscionable and therefore unenforceable.  The Court said the agreement was procedurally unconscionable because it was “presented on a ‘take it or leave it’ basis with no opportunity for Chavarria to negotiate its terms.”  Further, Chavarria was not provided with the terms of the agreement until three weeks after she agreed to be bound by it and the policy required no signature by the employee or Ralphs to become effective.

Regarding substantive unconscionability, the Court found that Ralphs’ arbitrator selection provision would always result in Ralphs’ choosing the arbitrator whenever an employee initiated the arbitration and also explicitly precluded the use of institutional arbitration administrators, AAA or JAMS.  The Court also found that the agreement’s requirement that the arbitrator apportion his or her fees evenly between Ralphs and the employee unless and until the U.S. Supreme Court ordered otherwise was directly contrary to California state law requiring that employers bear the costs of arbitration.  Despite the Supreme Court’s recent pronouncement favoring the enforceability of arbitration agreements, the Court found that American Express Corp. v. Italian Colors Rest., 133 S. Ct. 2304 (2013), did not preclude it from considering the cost the arbitration agreement imposed on employees in order for them to bring a claim.  In this case, the failure to shift the arbitration costs to the employer presented a potentially prohibitive obstacle to having the claim heard.

This decision signals a willingness by the Ninth Circuit to invalidate arbitration agreements which appear to be one-sided.  Employers, therefore, should resist the urge to “gild the lily” and should instead focus on drafting arbitration agreements that meet the fairness rules of their respective states and ensure that the agreements are presented to employees in a non-coercive manner.

Fourth Circuit Finds District Court Erroneously Applied Wal-Mart Stores, Inc. v. Dukes In Denying Leave to Amend Complaint in Pay Discrimination Suit

Posted in FLSA

In its recent decision in Scott v. Family Dollar Stores, Inc., No. 12-1610 (4th Cir. Oct. 16, 2013), the Fourth Circuit ruled that the district court abused its discretion by refusing to allow plaintiffs asserting claims of gender-based pay discrimination leave to file an amended complaint based upon an erroneous interpretation of the Rule 23(a) commonality requirements for class certification set forth by the United States Supreme Court in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011).  In a 2-1 decision, the majority held that plaintiffs should have been permitted to amend their complaint to challenge discretionary decision making by managers on a nationwide class, reasoning that “the discretionary authority at issue was exercised by high-level managers, as distinct from the low-level type managers in Wal-Mart.” As the dissent argued, this ruling is in tension with Wal-Mart and other courts that have held when discretionary management decisions are involved, the appropriate unit of analysis must be the discretionary decision maker.

Plaintiffs, fifty-one female managers at Family Dollar Stores, Inc. (“Family Dollar”), originally filed a putative class action complaint in 2008, prior to the Supreme Court’s decision in Wal-Mart.  In September 2011, Family Dollar moved to dismiss or strike the class allegations citing the Wal-Mart decision, to which plaintiffs responded by requesting leave to file an amended complaint they argued “’elaborate[s]’ on the original complaint’s allegation of ‘centralized control of compensation for store managers at the corporate level.’”  A Western District of North Carolina court granted Family Dollar’s motion to dismiss and denied plaintiffs’ motion for leave to amend, determining that amendment was futile because the only source of alleged discrimination in the proposed amended complaint was the “discretionary pay of managers,” which the district court found was “foreclosed” under Wal-Mart.

On appeal, after determining it could properly exercise pendent appellate jurisdiction over the denial of leave to amend because that decision was “inextricably linked” to the grant of the motion to dismiss, the majority reasoned that “Wal-Mart did not set out a per se rule against class certification where subjective decision-making or discretion is alleged,” but rather “directs courts to examine whether ‘all managers [] exercise discretion in a common way with[] some common discretion.’”  (Quoting Wal-Mart, 131 S. Ct. at 2554.)  Further, the majority sought to limit Wal-Mart by asserting “Wal-Mart is limited to the exercise of discretion by lower-level employees, as opposed to upper-level, top-management personnel,” as decisions by upper-level management impact a much larger group of employees.  Thus, the majority reasoned  “discretionary authority exercised by high-level corporate decision-makers . . . is more likely to satisfy the commonality requirement than the discretion exercised by low-level managers in Wal-Mart.”

On a related point, the majority believed the amended complaint was not just challenging discretionary decision making by managers, but also the policies and practices that channeled that discretion. These policies consisted of standard ones that channel manager discretion, such as use of salary ranges making pay raises based on performance. According to the majority, the proposed amended complaint “clearly specifies” four company-wide practices that are alleged to be implemented and applied by upper levels of management, and therefore “the proposed amended complaint’s allegations of uniform corporate policies and of high-level corporate decision-making are substantively different from those that the Supreme Court held sufficient in Wal-Mart.”  The court remanded for the district court to consider, consistent with this opinion, whether the proposed amended complaint satisfies the Rule 23 class certification requirements.

In a lengthy dissent, Circuit Judge J. Harvie Wilkinson III argued that the majority “unloaded on the district court the prospect of a massive, nationwide class action whose administrability would in all likelihood prove impossible,” and took issue with the majority’s interpretation of Wal-Mart as applying “only where decisions are left to the complete discretion of low-level managers” and not where “middle managers” exercise delegated discretion.  The dissent further argued that plaintiffs’ repeated assertion in the proposed amended complaint that “[d]efendant engages in centralized control of compensation for store managers at the corporate level of its operations” was an “uninformative bit of boilerplate” that “seeks to subject corporations to nationwide class actions by virtue of their mere existence,” as “[p]laintiffs’ reasoning in this respect would penalize a company for little more than operating on a national scale under the same corporate name.”

Concluding thoughts.  As the dissent noted, Family Dollar is in tension with Wal-Mart’s admonition that there is a lack of class commonality for nation-wide classes regarding discretionary decision making by managers.   First, as the dissent noted, there were almost 500 decision makers making these discretionary decisions, and determining why one acted does not answer why another did.  There are thus at least 500 answers – not one – to each of Plaintiff’s discrimination claims on whether and, if so, why members within the proposed nationwide class were disfavored in the exercise of discretion.  Second, the fact that discretion was exercised within boundaries set by corporate policies does not change the analysis.  This is standard, and the same thing that occurred in Wal-Mart where, e.g., the pay ranges were set by corporate policy.  There is no claim that the salary range policy – which applies equally to men and women – is somehow illegal.  Rather, the claim challenges the managers’ exercise of discretion within that policy, which as Wal-Mart notes, means the claim turns on why each manager acted.  The dissent correctly analyzed the import of Wal-Mart, but Family Dollar must now raise these arguments at the class certification stage, where they will have greater force than at the motion to dismiss stage.  The plaintiffs’ desire to amend the complaint, and the liberal rules regarding pleading standards, were sufficient to defer consideration of the obvious Rule 23 defects in the claims.

CA Supreme Court Holds That Employees Are Bound By Arbitration Agreements Waiving Right To A Labor Comm’r Hearing

Posted in FLSA, Uncategorized

Frank Moreno agreed, as a condition of his employment with Sonic-Calabasas A, Inc., to arbitrate all of this employment disputes with his employer.  After terminating his employment with Sonic, Moreno filed an administrative wage claim with the Labor Commissioner for unpaid vacation pay.  Filing such a claim is the first step toward obtaining a “Berman” hearing (an administrative dispute resolution forum designed to assist employees in recovering wages).

The California Supreme Court held in Sonic–Calabasas A, Inc. v. Moreno, 2013 WL 5645378 (Oct. 17, 2013) (Sonic II) that under the rule established in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011) and American Express Co. v. Italian Colors Rest., 133 S. Ct. 2304 (2013) that the FAA preempts California law to the extent it prohibits waiver of a Berman hearing.  The Court reasoned that compelling the parties to participate in a Berman hearing imposes significant delays to arbitration and it is, therefore, inconsistent with the FAA.  This decision reverses the Court’s prior ruling in Sonic–Calabasas A, Inc. v. Moreno, 51 Cal. 4th 659 (2011), which held that such waivers were contrary to public policy and unconscionable because a Berman hearing is a dispute resolution forum established by the Legislature to assist employees in recovering purportedly unpaid wages.

The Court clarified that state courts may continue to enforce unconscionability rules that do not interfere with “fundamental attributes of arbitration.”  The Court concluded that, while the Berman statutes confer important benefits on claimants (lowering the cost of pursuing wage claims and enforcing judgments), arbitration may provide the same benefits.  For this reason, the Court held that an employee’s surrendering the right to a Berman hearing does not, on its own, render an agreement unconscionable.

While Sonic II opens the door for employers to require employees to waive their rights to a Berman hearing as a condition of employment (as long as the overall bargain is not unreasonably one-sided), this decision may also provide insight to the Court’s expected decision in Iskanian v. CLS Transp. (which we previously discussed here).  In Iskanian, the Court is considering whether the United States Supreme Court’s decision in AT&T Mobility requires enforcement of a class action waiver when applied to a claim asserted under the Private Attorney General Act (“PAGA”).

Brinker Round 2: Plaintiffs Secure Class Certification in Trial Court

Posted in FLSA

After the renowned remand from the California Supreme Court, the Hohnbaum plaintiffs in Brinker Rest. Corp. v. Superior Court, 53 Cal. 4th 1004 (2012) sought to certify meal period claims alleging that all California employees were denied meal periods because Brinker’s corporate meal period policies were unlawful.

Plaintiffs argued that Brinker’s corporate policies were unlawful because (1) prior to 2002, it had no meal period policy at all; (2) between 2002 and 2012, the policy failed to inform employees of their right to take a second meal period; and (3) from 2002 to the present, the policy failed to accurately inform employees of the specific times they were entitled to take meal periods.

On DATE, the trial court certified the meal period class finding that the legality of Brinker’s corporate meal period policies was a common question that predominated the litigation because liability would turn on this question alone.  The court said, “Plaintiffs ultimately may be able to prove that the policy is invalid” and “should Brinker prevail in proving that its written policies are valid, it will have the benefit of a judgment that binds the entire class.”

The court seemed to overlook entirely the notion that Brinker can only be liable for meal period violations if employees actually missed their breaks – irrespective of what the policy says.  Notably, the court refused to consider whether employees actually received their meal periods, stating “whether or not the employee was able to take the required break goes to damages, and the fact that individual employees may not have different damages does not require denial of the class certification motion.”

The court also rejected the idea that individualized issues would necessarily predominate the litigation because employees may miss meal periods for different reasons.  Instead, the court held that, “[t]he fact that individual employees might be able to establish a violation of the law regarding meal periods by using evidence unique to their particular circumstances – e.g., the practices of an individual restaurant – does not mean that a class action cannot be tried based on only common evidence.”  The court held that the “focus is on the plaintiffs’ theory of liability and proof, not on alternative approaches a defendant might prefer were being pursued.”

While this lower court decision has no precedential effect, it is likely that other employees will follow these plaintiffs’ lead and allege that corporate policies – whether facially lawful or not – violate California law in order to generate a common question justifying class certification.  And, should trial courts adopt this court’s reasoning, class actions will invariably be much easier to certify.

Former Dukes Class Members Foiled by Eleventh Circuit’s “No Piggybacking” Rule

Posted in FLSA

Former Wal-Mart Stores, Inc. v. Dukes class members were dealt another blow this week when Southern District of Florida District Judge Robert N. Scola, Jr. granted Wal-Mart’s motion to dismiss more regionally-focused class claims that had been brought by certain members of the doomed Dukes class.  In Love v. Wal-Mart Stores, Inc., No. 12-61959-Civ-SCOLA (S.D. Fla. Sept. 23, 2013), the district court held that the class claims being asserted were time-barred and thus subject to dismissal.

Following the United States Supreme Court’s landmark holding in Dukes, 131 S. Ct. 2541 (2011), reversing the certification of a nationwide class of female Wal-Mart employees alleging broad claims of sex discrimination upon a finding that plaintiffs failed to provide evidence of some specific company-wide discriminatory pay and promotion policy, a number of former Dukes class members – including the plaintiffs in the subject matter – filed separate putative class action suits in other jurisdictions, asserting claims of discrimination at a more regional level.  While the statute of limitations for individual claims by the Dukes class members was tolled during the pendency of that action, once the case was remanded following the Supreme Court’s decision, former class members faced deadlines to file individual charges with the EEOC and comply with the statute of limitations for their individual claims.  Plaintiffs filed the subject putative class action on October 4, 2012, alleging that Wal-Mart engaged in sex discrimination in three regions in the Southeast United States, and asserting six counts of Title VII disparate treatment and disparate impact for each of the regions.  They further asserted that they each met the statute of limitations deadline established by the remand court.

The district court, however, found that plaintiffs’ class claims were time-barred by virtue of the Eleventh Circuit’s “no piggybacking” rule, as set forth in Griffin v. Singletary, 17 F.3d 356 (11th Cir. 1994).  In Griffin, the Eleventh Circuit held that “the pendency of a previously filed class action does not toll the limitations period for additional class actions by putative members of the original class.”  Id. at 359.  Thus, under the Griffin rule, while the statute of limitations is tolled and a class member may file a new suit asserting individual claims following the rejection of previously filed class claims, he or she “may not piggyback one class action onto another.”  Id. at 359.  The Fifth and Sixth Circuits have also adopted similar rules.

Pursuant to Griffin, Judge Scola held that “Plaintiffs’ claims are time-barred – the limitations period for class claims was not tolled, and Plaintiffs cannot assert class claims that were previously asserted and rejected in Dukes.”  Rejecting plaintiffs’ argument that the “no piggybacking” rule does not apply as the scope of the present class is narrower than that in Dukes and the complaint contains new region-specific allegations, the court stated that limiting a class by geographic region and asserting region-specific allegations “does not transform the class claims into something different from the class claims asserted in Dukes,” but rather “serves only to attempt to cure the deficiencies in the Dukes class identified by the Supreme Court.”  Griffin, stated the court, “prevents class members from pursuing their claims as class claims, regardless of whether the class is framed in a different manner or the class itself is different.”

Finally, the court rejected plaintiffs’ argument that two more recent Supreme Court cases – Shady Grove Orthopedic Associates v. Allstate Insurance Co., 559 U.S. 393 (2010), and Smith v. Bayer Corporation, 131 S. Ct. 2368 (2011) – “implicitly” overrule Griffin, concluding that neither case “directly addresses whether the pendency of a class action will toll the limitations period for successive class actions,” but rather “both address discrete issues of federalism.”  The court, however, did note that “[t]he rationale for the no-piggybacking rule is certainly undermined by the Supreme Court’s rulings,” but concluded that while “[t]he Eleventh Circuit may wish to refine Griffin’s bright-line rule barring successive class actions by former class members,” the court was bound to apply the rule in the present matter.

This decision highlights yet another barrier that former Dukes class members have faced in attempting to re-define the scope of their class claims following the Supreme Court’s decision.  (See Dukes v. Wal-Mart Stores, Inc., No. CV 01-022520-CRB (N.D. Cal. Aug. 2, 2013), discussed in a recent post found here – http://classactions.proskauer.com/2013/08/07/plaintiffs-once-again-denied-class-certification-in-dukes-v-wal-mart-stores-inc/)  As this case seems likely to be appealed, however, it has the potential to provide a platform for the Eleventh Circuit to re-address the Griffin “no piggybacking” rule and clarify its position on the rule going forward.

Ninth Circuit Invalidates Attempt To Plead Around CAFA’s Jurisdictional Amount In Controversy

Posted in Uncategorized

In 2005, Congress passed the Class Action Fairness Act (CAFA), which creates federal jurisdiction over class actions involving more than 100 class members and $5 million in controversy.  Plaintiffs have long attempted to avoid CAFA’s invocation of federal jurisdiction by stipulating to no more than $5 million in classwide damages.  In Standard Fire Ins. Co. v. Knowles, 133 S. Ct. 1345 (2013), the Supreme Court’s first CAFA case, the Court rejected such stipulations on the basis that, prior to class certification, a named plaintiff has no authority to legally bind unnamed class members.

Rodriguez v. AT&T Mobility Servs. LLC, 2013 WL 4516757 (9th Cir. Aug. 27, 2013), is the first published U.S. Court of Appeals opinion to analyze Standard Fire in detail.  Specifically, the Ninth Circuit reevaluated its prior opinion in Lowdermilk v. US Bank Nat’l Ass’n, 479 F.3d 994 (9th Cir. 2007), which had significantly curtailed a defendant’s right to remove class action cases under CAFA.

In Lowdermilk, the complaint alleged that the classwide damages were under $5 million.  The Lowdermilk court held that a plaintiff’s damages allegation was presumptively correct provided it was made in “good faith.”   Accordingly, if a defendant wanted to remove a case to federal court under CAFA in which a plaintiff had tried to plead around CAFA’s jurisdictional minimum, the Ninth Circuit ruled that  the defendant would have to rebut this presumption by showing to a “legal certainty” that the amount in controversy exceeded $5 million.  Lowdermilk unfairly increased the evidentiary burden to a defendant from establishing the amount in controversy by a preponderance of the evidence to one requiring a showing of “legal certainty” associated with plaintiff’s alleged damages.

In Rodriguez, the Ninth Circuit expressly overruled Lowdermilk, holding that it was “clearly irreconcilable” with Standard Fire.  The court noted that Lowdermilk was based on the theory that a plaintiff was the “master of his complaint,” including his damages claim.  Standard Fire made clear that this principle is not applicable in the class action context.  For CAFA purposes, the relevant question is not the face of the pleading, but the aggregate value of all claims which could be asserted by all members of the class.  This requires a court to look beyond the “four corners of the complaint.”  Rodriguez is a welcome development for class action defendants in California, including employers, making it easier to remove putative class action cases to federal court.

In related news, the Ninth Circuit held in Urbino v. Orkin Servs. of Cal., Inc., 2013 WL 4055615 (9th Cir. Aug. 13, 2013), that claims under the Private Attorneys General Act of 2004 (“PAGA”) cannot be aggregated to satisfy the $75,000 jurisdictional minimum required for removal of actions based on diversity of citizenship.  The court reasoned that “Defendants’ obligation to [the employees] is not ‘as a group,’ but as ‘individuals severally.’  Thus diversity jurisdiction does not lie because their claims cannot be aggregated.”