Supreme Court: Interstate Transport Companies’ Independent Contractor-Drivers are Exempt from FAA

In New Prime, Inc. v. Oliveira, the U.S. Supreme Court held that the Federal Arbitration Act’s (FAA) Section 1 exemption applies to transportation workers, regardless of whether they are classified as independent contractors or employees. No. 17-340 (Jan. 15, 2018). Please click here to access our article discussing this recent decision.

New Guidance from the Northern District of California for Class Action Settlements

The U.S. District Court for the Northern District of California has published procedural guidance for parties submitting class action settlements for preliminary and final approval in the Northern District. Details of the Northern District’s procedural guidance for Class Action Settlements may be accessed here.

The new guidance may be a response to the Ninth Circuit’s ruling in Espinosa v. Ahearn (In re Hyundai & Kia Fuel Econ. Litig.) 2018 U.S. App. LEXIS 1626 (Jan. 23, 2018) regarding the “rigorous analysis” required by district courts in reviewing class certification, and the “heightened” attention needed for reviewing class action settlements in particular.

The Northern District’s detailed procedural guidance provides a roadmap of topics and issues for parties to consider during class action settlement negotiations, when drafting class notices, and in preparing and submitting preliminary and final approval documents. While many of these issues are generally known and discussed amongst experienced class action counsel, some of the more granular considerations include requests to provide information about “lead counsel’s firms’ history of engagements with the settlement administrator over the last two years,” consulting “relevant prior orders by the judge” related to incentive awards, and submitting information about lead counsel’s “past comparable class settlements.”

Parties attempting to avoid unnecessary delay or denial of approval in the Northern District would be well-served by carefully reviewing and following the Court’s new guidelines when appropriate, in addition to the specific orders of their presiding judge.

Please contact Jackson Lewis with any questions about the guidance.

 

 

Criticizing Lower Court, Third Circuit Reverses Class Certification in Suit Alleging Pay Violations

A three-judge panel of the Third Circuit has struck down U.S. District Judge Arthur J. Schwab’s decision granting class certification in a suit brought by mortgage loan officers claiming they were denied overtime pay by their employer. Reinig v. RBS Citizens, NA, No. 17-3464 (3d Cir. Dec. 31, 2018).

In reversing the lower court’s Rule 23 certification, the panel criticized Judge Schwab for doing a substandard job of outlining the classes and claims at issue, forcing the appeals court “to comb through and cross-reference multiple documents in an attempt to cobble together the parameters defining the class and a complete list of the claims, issues, and defenses to be treated on a class basis.” Even “wading through” all of those documents still did not provide the Court a clear picture of the suit’s classes and claims. The Third Circuit noted that, while it does not impose a “strict format” for compliance with Rule 23, it has explicitly rejected orders that force it to “cobble together various statements” and “comb the entirety of its text” in search of “isolated statements that may add up to a partial list of class claims, issues, or defenses.”

The Third Circuit found the District Court’s ruling wanting in other aspects, as well. The panel concluded that there was not enough evidence to determine whether the loan officers had sufficiently shown the employer had an unofficial policy that contradicted its official policy on off-the-clock work to satisfy the commonality and predominance prongs of Rule 23. It found the District Court’s “barebones analysis” did not permit it to conclude that the lower court undertook the “rigorous review” required for Rule 23 certification. For example, the panel said it was unclear how Judge Schwab reconciled contradictory testimony and other evidence cited by the defendant that undermined the plaintiffs’ claim of a companywide “policy to violate the policy.” These and other concerns left the Third Circuit with serious doubts about the lower court’s conclusions, forcing it to vacate the District Court’s order and remand the case with instructions to conduct a “rigorous” examination of the factual and legal allegations underpinning the plaintiffs’ claims before deciding if class certification was warranted.

Despite that, though, the Third Circuit declined to review Judge Schwab’s decision to grant Fair Labor Standards Act (FLSA) collective action certification. The panel reasoned that it could not exercise pendent appellate jurisdiction over the issue because, while related, the Rule 23 class certification and FLSA collective action certification issue were still “fundamentally different creatures.” Thus, it reasoned that it did not have jurisdiction to disturb the lower court’s ruling on that separate issue.

Please contact Jackson Lewis with any questions about this case or class and collective actions.

Counting Down the Top 5 Employment Class Action Developments of 2018

On the last day of the year, we take a look back at some highlights and our most-read employment class action articles of 2018.

#5-Department of Labor Nullifies “80/20” Tip Credit Rule

In November, the Wage and Hour Division of the Department of Labor (DOL) rescinded Obama-era enforcement guidance that had made the tip credit unavailable to tipped employees who spend more than 20% of their time performing allegedly non-tip generating duties. The so-called 80/20 Rule had spawned a number of lawsuits, many of them collective actions, claiming that servers spent too much time performing allegedly non-tipped work. Reissuing an opinion letter first promulgated at the end of the George W. Bush administration in 2009, the DOL  clarifies that it “do[es] not intend to place a limitation on the amount of duties related to a tip-producing occupation that may be performed, so long as they are performed contemporaneously with direct customer-service duties and all other requirements of the Act are met.”

#4-Ninth Circuit Permits Use of “Inadmissible” Expert Testimony for Certification Purposes

The U.S. Court of Appeals for the Ninth Circuit denied a request to review en banc a panel ruling that authorizes trial courts to consider evidence that would be inadmissible at trial when deciding whether a class may be certified. Sali v. Corona Regional Medical Ctr., No. 15-56460 (9th Cir. Nov. 1, 2018). The decision was filed over a sharply critical dissenting opinion authored by Judge Carlos Bea. Bea, who was joined by four of his colleagues, wrote that the majority’s decision “involves a question of exceptional importance and is plainly wrong.”

#3- Sexual Harassment Class Investigations on the Rise with EEOC

Since Fall of 2017, stories of sexual harassment have dominated the headlines. In what USA Today dubbed the “Weinstein Effect,” workplaces of all types and sizes have been seeing employees step forward to take part in the #MeToo movement by shining light on abuses of power by companies’ leadership. The increased focus on sexual harassment has created a surge in discrimination lawsuits and government investigations, with almost no industry being immune.

#2- Class Action Stacking Is Not Permitted, U.S. Supreme Court Rules

Once class action certification has been denied, a putative class member may not start a new class action beyond the applicable statute of limitations, the U.S. Supreme Court has ruled, 9-0, in an opinion by Justice Ruth Bader Ginsburg. China Agritech, Inc. v. Resh, No. 17-432 (June 11, 2018). Justice Sonia Sotomayor filed an opinion concurring in the judgment.

#1- Supreme Court: Class Action Waivers in Employment Arbitration Agreements Do Not Violate Federal Labor Law

Class action waivers in employment arbitration agreements are enforceable under the Federal Arbitration Act (FAA), the U.S. Supreme Court held in a much-anticipated decision in three critical cases. Epic Systems Corp. v. Lewis, No. 16-285; Ernst & Young LLP et al. v. Morris et al., No. 16-300; National Labor Relations Board v. Murphy Oil USA, Inc., et al., No. 16-307 (May 21, 2018).

The Supreme Court’s decision resolves the circuit split on whether class or collective action waivers contained in employment arbitration agreements violate the National Labor Relations Act (NLRA). In a 5-4 decision authored by Justice Neil Gorsuch, the Court held that the FAA states that arbitration agreements providing for individualized proceedings are enforceable and neither the FAA nor the NLRA require otherwise. Chief Justice John Roberts and Justices Anthony Kennedy, Clarence Thomas, and Samuel Alito joined in that decision. You can read our analysis of the decision here.

Wishing all of you and your families a very happy New Year!

 

Jackson Lewis Class Action Trends Report Fall 2018

Below is a link to the latest issue of the Jackson Lewis Class Action Trends Report.  This report is published on a quarterly basis by our firm’s class action practice group in conjunction with Wolters Kluwer.  We hope you will find this issue to be informative and insightful.  Using our considerable experience in defending hundreds of class actions over the last few years alone, we have generated another comprehensive, informative and timely piece with practice insights and tactical tips to consider concerning employment law class actions. We hope you enjoy!

https://www.jacksonlewis.com/publication/class-action-trends-report-fall-2018

 

Lawsuit Filed Against California’s Attorney General Alleging the Private Attorney General Act (“PAGA”) is Unconstitutional

On November 28, 2018, the California Business & Industrial Alliance (an association that represents the interests of small and mid-sized businesses in California and which was formed for the specific purpose of accomplishing the appeal or reform of the Private Attorney General Act (“PAGA”)) filed a lawsuit against Xavier Becerra in his official capacity as the Attorney General for the State of California for injunctive and declaratory relief in the Orange County Superior Court. Please find the rest of this article in our California Workplace Advisor Blog here.

Department of Labor Nullifies “80/20” Tip Credit Rule

The Wage and Hour Division of the Department of Labor (“DOL”) today rescinded Obama-era enforcement guidance that had made the tip credit unavailable to tipped employees who spend more than 20% of their time performing allegedly non-tip generating duties. The so-called “80/20” Rule has spawned a number of lawsuits, many of them collective actions, claiming that servers spent too much time performing allegedly non-tipped work. Reissuing an opinion letter first promulgated at the end of the George W. Bush administration in 2009, the DOL now clarifies that it “do[es] not intend to place a limitation on the amount of duties related to a tip-producing occupation that may be performed, so long as they are performed contemporaneously with direct customer-service duties and all other requirements of the Act are met.”

More information on this significant development can be found here and in a forthcoming Jackson Lewis web article. In the meantime, if you have any questions about this development or any other wage and hour or class/collective action question, please consult the Jackson Lewis attorney(s) with whom you regularly work.

Supreme Court Hears Oral Argument in Lamps Plus Case

On October 29, 2018, the Supreme Court heard oral argument in the case of Lamps Plus, Inc. v. Varela.  At issue in Lamps Plus is what standard should be applied in determining whether parties have agreed to submit claims to class arbitration.  The arbitration agreement between Lamps Plus and one of its employees did not contain an explicit waiver prohibiting arbitration of class or collective claims. The Ninth Circuit held that the arbitration agreement was ambiguous as to whether the parties agreed to submit class claims to arbitration.  The Court applied a California contract-law principle that any ambiguity is to be construed against the drafter, and therefore held that the arbitration agreement permitted arbitration of the employee’s class claims.

On appeal to the Supreme Court, Lamps Plus argued that the Ninth Circuit (i) improperly found an “implicit agreement to authorize class-action arbitration” in violation of the Supreme Court’s prior decision in Stolt-Nielsen, and (ii) Stolt-Nielsen required an explicit agreement between the parties before they could be compelled to class arbitration. At oral argument, counsel for Lamps Plus argued that the parties must “clearly and unmistakably” agree to class arbitration for such arbitration to be compelled by a court.

Justice Kagan questioned Lamps Plus’s counsel extensively regarding the language of the arbitration agreement at issue, suggesting that the language was broad enough to encompass class arbitration. For example, Justice Kagan asked that if the agreement covered “disputes, claims, or controversies” between the parties, “[w]hy wouldn’t you include class disputes, claims, or controversies, unless there’s some kind of special contractual interpretive rule coming in that we wouldn’t apply in other contexts?”

Justice Sotomayor also expressed concern that the Supreme Court had previously been clear that state law controls the interpretation of arbitration agreements and that adopting a “clear and unmistakable” standard would be “creating a federal common law . . . something we’re loathe to do in virtually every other context.” Justice Kavanaugh expressed concerns regarding whether such a standard had any basis in the text of the Federal Arbitration Act (FAA).

During questioning of Varela’s counsel, other Justices expressed concerns regarding whether class claims can be appropriately handled in arbitration. Chief Justice Roberts, paraphrasing Justice Jackson, stated that the “FAA is not a suicide pact. So, if the FAA says enforce the contracts according to its terms, but one of the terms, as our prior precedents say, is fundamentally inconsistent with arbitration itself, then presumably, the FAA would preclude that term.” Justices Gorsuch and Alito voiced due process concerns with class arbitration, noting that potential class members could be bound by an arbitration award even though they never agreed to arbitration.

Justice Breyer separately noted that California applies a lower standard than other states to find an ambiguity in a contract which could result in an improper inference that the parties had agreed to class arbitration which is “what Stolt-Nielsen says you shouldn’t have.”

Although it is difficult to predict how the Supreme Court will rule in Lamps Plus based on the oral argument, the questioning suggests that the Justices may be split on what standard should be applied to determine whether parties have agreed to class arbitration and what role state and federal law should play in making that determination.

Ninth Circuit Permits Use of “Inadmissible” Expert Testimony for Class Certification Purposes

The U.S. Court of Appeals for the Ninth Circuit just denied a request to review en banc a panel ruling that authorizes trial courts to consider evidence that would be inadmissible at trial when deciding whether a class may be certified (Sali v. Corona Regional Medical Center (D.C. No. 5:14-cv-00985-PSG-JPR)). The decision was filed on Thursday, November 1 over a sharply critical dissenting opinion authored by Judge Carlos Bea. Bea, who was joined by four of his colleagues, wrote that the majority’s decision “involves a question of exceptional importance and is plainly wrong.”

In Sali, the plaintiffs sought to represent a series of seven classes of nurses claiming the Medical Center’s time-rounding policy robbed them of several minutes of wages each time they worked. The plaintiffs’ attempt to satisfy the “typicality” element of class certification under California state law was supported by a data analysis prepared by a paralegal of the law firm that brought the claim. The Medical Center argued that the analysis could not be considered by the trial court at the class certification stage because it would not be admissible at trial under the Daubert standard for expert analyses. The Federal District Court agreed, rejected the paralegal’s analysis as inadmissible evidence and denied the motion for class certification.

Plaintiffs’ appeal was considered by a Ninth Circuit panel, which found that the trial court had erred in declining to consider the paralegal’s analysis, reasoning that inadmissibility is not a proper basis to reject evidence at the class certification stage. The Medical Center filed petitions for panel rehearing and for rehearing en banc, which a majority of the panel denied in its November 1 holding.

In his scathing, 13-page dissent, Judge Beas described the panel’s holding that expert opinion testimony need not be admissible at the class certification stage as “undermin[ing] the purpose of the class certification proceeding.” Judge Beas wrote:

[T]he panel has reduced the requirements of class certification below even a pleading standard. It has accepted the undisputedly inadmissible opinion of plaintiffs’ paralegal – not even that of an attorney who is subject to certain pleading standards – that the plaintiffs have damages typical of the class sought to be certified.

This doesn’t pass the straight-face test.

Id. at * 3 (citing Fed. R. Civ. P. 11) (emphasis in original).

The dissent also noted that the panel decision conflicts with decisions of four out of five other Circuit Courts that have considered this issue. The Second, Third, Fifth, and Seventh Circuits have required expert testimony to pass the typical admissibility standards at the class certification stage. Only the Eighth Circuit has held otherwise.

Availability of Class Arbitration is for Court to Decide, Appeals Court Rules

Vacating a $10 million arbitration award resulting from a “collective action” arbitration, the U.S. Court of Appeals for the Seventh Circuit ruled that whether class or collective arbitration is authorized by an arbitration agreement is a threshold question for the district court, not an arbitrator. Herrington v. Waterstone Mortgage Corp., No. 17-3609 (7th Cir. Oct. 22, 2018). Please find the rest of the article on our website here.

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