9th Circuit Limits Potential Defenses To Class Certification

By Christopher S. Andre and Scott K. Dauscher

In Bateman v. American Multi-Cinema, Inc., the Ninth Circuit Court of Appeals reversed the decision of the United States District Court for the Central District of California to deny class certification on the ground that a class action would not be a superior method of litigating the case under Federal Rule of Civil Procedure 23(b)(3) on account of (1) potential liability proportionate to the actual harm, if any, to the plaintiff and class members, (2) the size of the potential damages, and (3) the defendant's good faith compliance.  The Ninth Circuit held that none of those three considerations was a proper basis for the District Court to deny class certification.  

The plaintiff brought a class action alleging he and some 290,000 potential class members received automated movie ticket counter receipts that violated the Fair and Accurate Credit Transactions Act ("FACTA") in that the receipts included both the first four and the last four digits of customers' credit card account numbers.   FACTA provides for statutory damages of $100 to $1,000 for each willful violation of the Act.  

The District Court agreed with American Multi-Cinema that class certification should be denied under Federal Rule of Civil Procedure 23(b)(3) because class litigation of the claims for statutory damages under FACTA would not be superior because the court believed "class treatment could result in enormous liability completely out of proportion to any harm suffered by the plaintiff," and, further, American Mult-Cinema "demonstrated good faith by complying with FACTA within a few weeks of the filing of" plaintiff's complaint.  

The Ninth Circuit rejected the concerns of the District Court as valid bases for denying class certification even though the Ninth Circuit recognized that "[i]t is widely accepted that class certification 'may force a defendant to settle rather than incur the costs of defending a class action and run the risk of potentially ruinous liability.'"

The Ninth Circuit's reasoning would likely apply to employers defending class action lawsuits in Federal Court.  

However, the court left open the possibility of defending against potentially ruinous liability on constitutional grounds.  The court expressly reserved judgment about "whether a showing of 'ruinous liability' would warrant denial of class certification in a FACTA or similar action," and expressly reserved judgment about whether a District Court "may be entitled to reduce" a damages award in a class case "if it is unconstitutionally excessive." 

Plaintiffs bringing class action wage and hour lawsuits now routinely include allegations that their claims fall under California's Labor Code Private Attorneys General Act of 2004 ("PAGA"), which provides for awards of very sizable penalties when aggregated to account for hundreds or even thousands of class members.  PAGA provides for penalties of $100 per employee per pay period for each initial violation and of $200 per employee per pay period for each subsequent violation.  We believe the possibility of potentially ruinous liability under PAGA is subject to challenge on constitutional grounds. 

AALRR Attorney Thomas Lenz Quoted In The Riverside Press-Enterprise Regarding Labor Negotiations

AALRR attorney Thomas Lenz was quoted by the Riverside Press-Enterprise on September 10, 2010, in an article on labor negotiations, which you can read here. 

NLRB Holds Bannering of Secondary Employers Lawful

By Ronald W. Novotny

In a long-awaited decision, the National Labor Relations Board held that a union’s display of a peaceful stationary banner at the location of an employer with whom it had no dispute did not violate the secondary boycott provisions of the National Labor Relations Act. Likening such activity to the mere distribution of handbills that was found lawful by the U.S. Supreme Court in its 1988 decision in Edward J. DeBartolo Corp. v. Florida Gulf Coast Bldg. Trades, the Board concluded that the bannering merely attempted to “persuade” members of the public to assist it in its objectives, and not to “coerce” or “restrain” anyone in violation of the law.

The case involved efforts by the Carpenters Union in Arizona to publicize its disputes with three construction contractors by stationing banners outside of three hospitals on which they had performed work. The banners were between 3 and 4 feet high and 15 to 20 feet long, and bore the words “SHAME ON” followed by the name of the hospital and “Labor Dispute” on each of them. While two or three people held the banner, others distributed handbills explaining that the union’s dispute was with the non-union contractors and that by using their services the hospitals were “contributing to the undermining of area labor standards.”

In a split decision supported by only three of the agency’s five members, the Board found that this activity did not constitute the same kind of “confrontational conduct” that picketing normally does, and that most passing motorists and others to whom it was directed would not feel intimidated by the banners. The majority noted that the banner holders did not move, shout, impede access, or otherwise interfere with the secondary employers’ (i.e., the hospitals’) operations, and “did not engage in any other activity that is considered confrontational within the context” of the dispute. Accordingly, while a complaint alleging a violation of the secondary boycott laws was dismissed in that case, union bannering activity which becomes confrontational can presumably still be challenged as unlawful in the future. (Carpenters Local 1506 and Eliason & Knuth of Arizona, Inc., 355 NLRB No. 159)

California Employment Legislation Affecting Credit Checks, Meal & Rest Periods, and Leaves of Absence Await Governor’s Consideration

By Jonathan Judge

The following employment-related legislation met the August 31, 2010 deadline for passage by the California Legislature. Among the legislation are bills limiting the use of credit checks, allowing exemptions from meal and rest periods for certain employees covered by collective bargaining agreements, requiring paid bereavement leave, and extending paid marrow and organ donation leave to certain private employers. Governor Schwarzenegger has until September 30, 2010 to sign, veto, or let the bills become law without his signature.


AB 482 (Mendoza) Consumer Credit Reports - This bill would prohibit employers, with the exception of certain financial institutions, from obtaining a consumer credit report for employment purposes unless the information is (1) substantially job-related, meaning that the position of the person for whom the report is sought has access to trade secrets, money, other assets, or confidential information, and (2) the position of the person for whom the report is sought is a position in the state Department of Justice, a managerial position, that of a sworn peace officer or other law enforcement position, or a position for which the information contained in the report is required to be disclosed by law or to be obtained by the employer.

AB 569 (Emmerson) Meal & Rest Periods - This bill would exempt from meal and rest period provisions, employees in construction, commercial drivers, employees of local publically owned electric utilities, and security officers if such employees are covered by a valid Collective Bargaining Agreement (“CBA”) containing specified terms, including meal period provisions.

AB 1881 (Monning) Liquidated Damages in Wage Claims - This bill would, in cases of minimum wage violations, increase the amount of liquidated damages that may be awarded to an employee to twice the amount of wages unlawfully unpaid, plus interest.

AB 2187 (Arambula) Failure to Pay Final Wages Additional Penalty - This bill would create a new separate prohibition against a person, who, having the ability to pay, willfully fails to pay all wages due to an employee who has been discharged or quit within 90 days. The bill would impose a fine of between $1,000 and $10,000, up to six months jail time, or both, for such conduct. The violating individual would also be required to pay restitution to the aggrieved employee upon conviction.

AB 2340 (Monning) Bereavement Leave - This bill would allow for three days unpaid leave for bereavement purposes upon the death of a spouse, child, parent, sibling, grandparent, grandchild, domestic partner, or domestic partner’s child, within 13 months of the death of the bereaved individual. The provisions of the bill would not apply to an employee who is covered by a valid CBA that provides for bereavement leave and other specified working conditions.

AB 2468 (De Leon) Lactation Breaks - This bill would authorize an employer to use the designation "Mother-Friendly Worksite" in its promotional materials, if it submits its workplace breast-feeding policy to the Labor Commissioner and the Labor Commissioner determines that the employer's policy provides for specified criteria.

AB 2770 (Monning) Labor Code Enforcement - This bill would, until January 1, 2017, establish a pilot program to investigate employment and payment practices within the swimming pool and spa construction industry. The Employment Development Department (“EDD”), in conjunction with other agencies and industry representatives, would be required to establish criteria that would trigger a recommendation for an audit or investigation state authorities.

SB 903 (Wright) Statute of Limitations - This bill would extend the period within which the Division of Labor Standards Enforcement (“DLSE”) may commence a collection action, as defined, from one year to 3 years.

SB 1304 (DeSaulnier) Marrow Donation Leave - This bill would require employers with 15 or more employees to permit employees to take paid leaves of absence for organ donation (up to 30 days) and bone marrow donation (up to five days), and to restore an employee returning from such leave to the same or equivalent position. The bill would also prohibit an employer from interfering with, or retaliating against, an employee taking such leave, or opposing an unlawful employment practice related to such leave. The bill would also create a private right of action for aggrieved employees to seek enforcement of these provisions. Covered employers would be able to require an employee take up to five days of earned but unused sick or vacation leave for bone marrow donation, and up to two weeks of earned but unused sick or vacation leave for organ donation as a condition of receiving such leave.

SB 1370 (Ducheny) Commission Agreements - Effective January 1, 2012, this bill would require all employers entering into commission agreements with employees to enter into written agreements or face liability in a civil action to the employee for treble damages.

SB 1474 (Steinberg) Agricultural Employee Labor Representatives - This bill would authorize the Agricultural Labor Relations Board, under specified circumstances, to set aside an election where there has been misconduct by the employer affecting the outcome of the election and to certify a labor organization as the exclusive bargaining representative for a bargaining unit if the organization had previously presented the board with authorization cards signed by more than 50% of the employees in that bargaining unit.

Please check back regularly for updates on these bills.