In a boon to defendants seeking to remove cases to federal court under the Class Action Fairness Act (“CAFA”), the Ninth Circuit has overturned a rule requiring defendants to show to a “legal certainty” that the jurisdictional amount in controversy is satisfied when a complaint alleges a lesser amount of damages.
CAFA authorizes federal jurisdiction over civil class actions when the class has more than 100 members, there is minimal diversity, and the amount in controversy exceeds $5 million. The claims of individual class members are aggregated to determine whether the jurisdictional threshold is met. But until last week, Lowdermilk v. U.S. Bank Nat’l Ass’n, 479 F.3d 994 (9th Cir. 2007), required defendants to establish to a “legal certainty” that the amount in controversy exceeded $5 million in order to remove a case when a putative class action complaint alleged damages below that amount. This rule allowed plaintiffs to avoid federal jurisdiction by artful pleading. Read More
Imagine for a second that you’re watching your favorite sports team: They’re losing, time is winding down, and you’re left watching the other team run down the clock. That frustration you’re feeling is something similar to what defendants in a state court case might feel as they watch the days pass by, one by one, until they’re out of time, and it’s too late to remove their case to federal court. Read More
Last week, in Irizarry v. Catsimatidis, Docket No. 11-4035-cv (July 9, 2013), the Second Circuit held that Gristedes Foods CEO—and current NYC mayoral candidate—John Catsimatidis faces personal liability for settlement payments of FLSA claims against his company. The Court determined that Catsimatidis’ active participation in the operation of the company qualified him as an “employer” under the FLSA and could therefore lead to personal liability. Read More
As employers welcome a new group of eager interns to their offices this summer, employers may be thinking about the recent wave of class action lawsuits alleging that unpaid internships violate minimum wage and overtime laws. Should these claims be litigated on a classwide basis? Read More
The United States Supreme Court’s recent ruling in Comcast Corp. v. Behrend, Case No. 11-864 (March 27, 2013) reinforces class certification requirements as spelled out in Wal-Mart v. Dukes. However, the closely divided court (5-4) and a strong dissent underscore that the battle over class certification standards may be far from over. While Comcast involved antitrust claims, the Court’s decision has implications for all Rule 23 cases, including employment class actions. Read More
The U.S. Supreme Court’s decision in Standard Fire Insurance Co. v. Knowles confirms that a plaintiff cannot avoid federal jurisdiction under the Class Action Fairness Act (“CAFA”) by stipulating that the class will seek less than CAFA’s $5 million amount in controversy threshold. Read More
Employers in California have been watching closely to see how courts will apply the United States Supreme Court’s decision in AT&T Mobility v. Concepcion, 131 S. Ct. 1740 (2011), which held that the Federal Arbitration Act (FAA) preempted state law concerning the enforceability of class action waiver provisions, in which a party waives his or her right to arbitrate claims on a class basis. Read More
On October 10, 2012, a California Court of Appeal held that a wage and hour class action could not be certified where the common company-wide policy at issue did not answer the “central liability” question of the case.
The case, Morgan v. Wet Seal, Inc., was brought by former Wet Seal employees against the clothing store alleging that the company violated California law by requiring employees to 1) purchase Wet Seal clothing and merchandise as a condition of employment; and 2) travel between Wet Seal business locations without reimbursing them for mileage. The plaintiffs moved for class certification, pointing to written company policies as evidence of the common issues of fact and law that predominated over individual issues. Wet Seal opposed the plaintiff’s motion for class certification arguing, among other things, that their written policies actually undermined the plaintiff’s claims. The policies at issue specifically state that employees are not required to wear Wet Seal clothing and that employees may be eligible for reimbursement for mileage.
The Court of Appeal affirmed the trial court’s holding that the facially legal policies made it impossible to use a class-wide method of proving liability. For example, the Court explained that the plaintiffs’ dress code claims raised issues of 1) whether Wet Seal requires employees to wear the merchandise as a condition of employment; 2) whether the allegedly required attire constitutes a uniform; and 3) whether any given purchase by an employee constituted a “necessary expenditure.” Here, the Court found that the policy explicitly did not require wear and the policy’s description of the dress code as “consistent with the current fashion style that is reflected in the stores” was too broad and vague to constitute a “uniform” under the definition provided by the DLSE. Therefore, any question of liability would inevitably turn on what each Plaintiff was told, who told it to them, how they interpreted that information, whether the interpretation was reasonable and whether the employee then purchased merchandise pursuant to that conversation.
The Court of Appeal emphasized that the allegation of a companywide policy is not sufficient in and of itself to establish that common issues predominated because “there was no class wide method of proof for resolving this key liability question.” The anecdotal evidence provided in Plaintiffs’ declarations attempting to show a practice of requiring employees to purchase Wet Seal clothing as a uniform only reinforced the Court’s conclusion that liability would have to be decided on an individualized basis.
The ongoing saga of the more than decade-old sex discrimination class action against Wal-Mart (Dukes v. Wal-Mart) will continue after the federal district court handling the case allowed plaintiffs’ fourth amended complaint to survive a motion to dismiss in a ruling on September 21, 2012. In June of last year, the Supreme Court rejected the plaintiffs’ attempt to bring a nationwide class action against Wal-Mart, holding that the plaintiffs failed to satisfy Federal Rule of Civil Procedure 23(a) because they could not show sufficient commonality between the almost 1.5 million members of the class and reversing class certification. In response, the plaintiffs filed a fourth amended complaint in district court, narrowing their proposed class to several hundred thousand female Wal-Mart employees in four regions of California. Wal-Mart subsequently filed a motion to dismiss the new complaint, arguing (among other things) that it suffered from the same commonality problems as the class rejected by the Supreme Court.
The district court handling the case rejected Wal-Mart’s argument, finding that the Supreme Court took issue with plaintiffs’ evidence, not necessarily their theories and that plaintiffs should therefore have the opportunity to present evidence to demonstrate commonality among the new class members at the class certification stage. In particular, the district court noted that plaintiffs’ new complaint alleged that they could provide class-wide proof of a “culture and philosophy of gender bias shared by the relevant decision-makers,” citing to allegedly gender-biased comments made at management training meetings. The district court found that this allegation allowed the complaint to survive a motion to dismiss, while noting that the plaintiffs “still must prove that every decision-maker in the group—perhaps four hundred or so…operated under a common policy or mode of decision-making” to obtain class certification. So, although the district court found that plaintiffs’ theories do not fail as a matter of law, whether or not they will actually be successful in a renewed attempt at class certification is a different question entirely. For now, we will all have to wait to find out if the nation’s once largest sex discrimination class action can survive under the Supreme Court’s latest class certification ruling.
The United States Supreme Court recently granted certiorari to review whether class action plaintiffs can avoid federal court jurisdiction under the Class Action Fairness Act (“CAFA”) by stipulating that their damages do not exceed the federal jurisdictional prerequisite. This issue is particularly significant to employers because they frequently rely on the CAFA to remove cases to federal court when hit with wage-and-hour and other employment class action lawsuits. The CAFA generally permits class action defendants to remove cases with minimal diversity to federal court where the amount in controversy exceeds $5 million. Read More
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