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California Employment Law Blog

March 2014 California Employment Law Notes

Posted in Attorney's Fees, Class Actions, Collective Bargaining, Employment Law Notes, FEHA, FMLA, Harassment, Kin Care, Leaves of Absence, Overtime, Privacy, Retaliation, Sexual Harassment, Wage and Hour, Whistleblowers, Wrongful Termination

$150,000 Sexual Harassment Verdict And $680,000 Fee Award Affirmed
Taylor v. Nabors Drilling USA, LP, 222 Cal. App. 4th 1228 (2014)

Max Taylor worked as a floorhand on an oil rig where he alleged he was harassed by his supervisors who called him “queer,” “fagot [sic],” “homo,” and “gay porn star” and was subjected to other humiliating and harassing conduct, including simulated masturbation in his presence. Following a trial, the jury awarded Taylor $160,000 in damages, including $10,000 for past economic loss. In its unsuccessful motion for judgment notwithstanding the verdict (“JNOV”), the defense argued that Taylor had failed to prove that he was harassed “because of his sex and/or perceived sexual orientation” in the absence of evidence of actual sexual desire or intent by the harassers. The Court of Appeal affirmed denial of the JNOV motion on the ground that “the focus of a [sexual harassment] case is whether the victim has been subjected to sexual harassment, not what motivated the harasser.” See also newly enacted Cal. Gov’t Code § 12940(j)(4)(C) (same). The defense also unsuccessfully challenged a defective special verdict form because it had failed to object to it before the jury was discharged. Because the jury had concluded that Taylor had been lawfully discharged, the Court reduced the verdict by $10,000 (from $160,000 to $150,000) but otherwise affirmed the verdict and the award of $680,520 in attorney’s fees. See also Kelley v. CUIAB, 2014 WL 505343 (Cal. Ct. App. 2014) (conditions for return to work demanded by employee’s lawyer were not “ultimatums” and did not justify employer’s termination of employee for purposes of eligibility for unemployment benefits).

$238,000 Wrongful Termination Verdict Is Reversed In Light Of Improper Jury Instructions
Mendoza v. Western Med. Ctr. Santa Ana, 222 Cal. App. 4th 1334 (2014)

Romeo Mendoza worked as a nurse for the hospital for more than 20 years. In late 2010, Mendoza reported that he was being sexually harassed by a supervisor (Del Erdmann). Both Mendoza and Erdmann are gay. Mendoza’s complaint was investigated, and it was determined that Erdmann had made inappropriate sexual comments to Mendoza and that he had shown his genitals to Mendoza. Erdmann contended that Mendoza welcomed the behavior and that he had “bent over provocatively” in front of Erdmann, requested that Erdmann display his genitals and in fact had “assisted Erdmann in exposing his genitals.” Erdmann claimed he was a “reluctant participant” in the conduct initiated by Mendoza. Upon completion of the investigation, the hospital fired both Mendoza and Erdmann for “unprofessional conduct.” Mendoza subsequently sued for wrongful termination in violation of public policy (for reporting sexual harassment to his employer), and the jury awarded him $238,328, including $145,000 in past emotional distress damages. However, because the jury was instructed to determine if Mendoza’s reporting sexual harassment was “a motivating reason” and not “a substantial motivating reason” for his termination as required by Harris v. City of Santa Monica, 56 Cal. 4th 203 (2013), the Court of Appeal reversed the judgment. The Court rejected the employer’s contention that its simultaneous termination of Erdmann was “conclusive proof” that it had acted in good faith in light of the “numerous shortcomings in the investigation” conducted by the employer following Mendoza’s complaint.

$100,000 Attorney’s Fees Award Was Properly Granted Against Employee
Robert v. Stanford Univ., 2014 WL 739112 (Cal. Ct. App. 2014)

Francis Robert, an American Indian, was terminated from his employment at Stanford due to his harassment of a female Stanford employee. Before his termination, Robert was given several warnings and was the subject of a restraining order. Robert then sued Stanford for discrimination under the Fair Employment and Housing Act (“FEHA”), claiming he was discriminated against on the basis of his “native ancestry.” The trial court granted Stanford’s motion for nonsuit as to his FEHA claim but allowed his claims for retaliation and breach of contract to go to the jury, which returned a defense verdict in 15 minutes. The trial court awarded Stanford $100,000 in attorney’s fees against Robert on the ground that the “FEHA claim was without merit and was frivolous and vexatious. It was a legal theory in search of facts.” The Court of Appeal affirmed the award against Robert despite the trial court’s failure to make written findings or consider Robert’s purported impecuniousness.

State Overtime Law Does Not Apply To Employees Covered By Collective Bargaining Agreement
Vranish v. Exxon Mobil Corp., 223 Cal. App. 4th 103 (2014)

George Vranish, Jr. and Steve Teague are employees of Exxon Mobil whose employment is governed by the terms of a collective bargaining agreement (“CBA”). Plaintiffs contend that the CBA does not provide premium compensation for all “overtime hours worked” and, therefore, Cal. Lab. Code § 514 (exempting employees subject to a CBA from the state’s overtime law) does not apply. The trial court granted the employer’s summary judgment motion, and the Court of Appeal affirmed on the ground that the word “overtime” as used in Section 514 is defined by the CBA and not by Cal. Lab. Code § 510. See also Sandifer v. United States Steel Corp., 571 U.S. ___, 134 S. Ct. 870 (2014) (unionized steelworkers’ donning and doffing of protective gear constituted non-compensable time spent “changing clothes” within the meaning of the Fair Labor Standards Act).

Employer Proved Conversion By Employee’s Misuse Of Its Credit Card
Welco Elec., Inc. v. Mora, 223 Cal. App. 4th 202 (2014)

Welco sued its former quality assurance manager (Nicholas J. Mora) for more than $400,000 based on Mora’s use of Welco’s credit card to transfer specific sums of money to Mora’s bank account. Mora contended that Welco agreed to pay him “like a vendor using [Welco's] credit card account” because Welco’s president “was concerned about a garnishment of Mora’s wages.” Following a bench trial, judgment was entered in favor of Welco and against Mora in the amount of $446,447.81. The Court of Appeal affirmed, holding that Mora’s use of a credit card to obtain money wrongfully from Welco constituted the tort of conversion – “[t]aking a credit card or its information in order to obtain money is not materially different in effect than conversions by taking other instruments such as checks, bonds, notes, bills of exchange, warehouse receipts, stock certificates, and information related to those instruments, to obtain someone else’s money.”

Federal Court In California Has No Jurisdiction Over Foreign Employees’ Claims
Daimler AG v. Bauman, 571 U.S. ___, 134 S. Ct. 746 (2014)

In this case, 22 Argentinian residents (including a Chilean national) sued DaimlerChrysler Aktiengesellschaft (“DCAG”) in federal court in California, alleging that one of DCAG’s subsidiaries, Mercedes-Benz Argentina (“MBA”), collaborated with state security forces to kidnap, detain, torture and kill plaintiffs and their relatives during Argentina’s “Dirty War” in the 1970s. (Some of the plaintiffs are former employees of MBA.) The Ninth Circuit held that the district court had personal jurisdiction in California over DCAG through the contacts of its subsidiary and agent, Mercedes-Benz USA, in view of the “interest of California in adjudicating important questions of human rights….” In this opinion, the Supreme Court unanimously reversed the Ninth Circuit, holding that “[e]xercises of personal jurisdiction so exorbitant… are barred by due process constraints on the assertion of adjudicatory authority.”

Former Employee Could Proceed With Age Discrimination Lawsuit
Cheal v. El Camino Hosp., 223 Cal. App. 4th 736 (2014)

Carol Cheal worked as a “Dietetic Technician Registered” for the hospital for 21 years before her termination at age 61. Before Kim Bandelier became Cheal’s supervisor (approximately a year before her termination), Cheal received the “highest category of performance” ratings on her annual evaluations; after Bandelier became Cheal’s supervisor, she was “accused of numerous shortcomings” and received written warnings and her employment was terminated. Cheal sued for age discrimination under the Fair Employment and Housing Act, and the trial court granted summary judgment in favor of the employer. In this opinion, however, the Court of Appeal reversed the summary judgment, holding that “[a] factfinder could conclude that, apart from … one error eight months before her discharge, plaintiff exhibited no significant failures of competence while under Bandelier’s supervision.” The Court also relied upon an alleged “confession of bias,” which it characterized as “another smoking gun,” that Bandelier told a “former friend” that she favored “younger and pregnant workers.”

Staffing Company Is Not Liable For Employee’s Poisoning Of Coworker
Montague v. AMN Healthcare, Inc., 2014 WL 659690 (Cal. Ct. App. 2014)

AMN Healthcare, Inc., dba Nursefinders, is a staffing company that provides prescreened nurses and medical personnel to hospitals and other medical facilities. Nursefinders hired Theresa Drummond as a medical assistant and later assigned her to Kaiser (one of Nursefinders’ clients) where Sara Montague also worked as a medical assistant. Drummond and Montague had a couple of disagreements at work before Drummond surreptitiously poured carbolic acid into Montague’s water bottle, which burned Montague’s tongue and throat and caused her to vomit. Montague and her husband sued Nursefinders for negligent training of Drummond and various related torts under a theory of respondeat superior. The trial court granted summary judgment in favor of Nursefinders, and the Court of Appeal affirmed, holding that “[t]he facts, construed most favorably for Montague, do not support liability against Nursefinders because Drummond’s poisoning of Montague was highly unusual and startling.” The Court also affirmed dismissal of Montague’s husband’s loss of consortium claim and found that Nursefinders was not liable for negligently training Drummond because the poisoning could not have been caused by its failure to properly train her. See also Elsheref v. Applied Materials, Inc., 223 Cal. App. 4th 451 (2014) (employer did not owe duty of care to not-yet-conceived child of employee who had been exposed to toxic chemicals, but plaintiffs could proceed with products liability claim); Gonzalez v. Seal Methods, Inc., 223 Cal. App. 4th 405 (2014) (employee could not proceed with civil claim under Lab. Code § 4558 because there was no evidence that employer bypassed, removed or tampered with point of operation guard on power press); Solus Indus. Innovations, LLC v. Superior Court, 2014 WL 690512 (Cal. Ct. App. 2014) (federal OSHA preempts California law, precluding prosecutor’s pursuit of civil penalties under Unfair Competition Law); People v. Superior Court (Solus Indus. Innovations, LLC), 2014 WL 690607 (Cal. Ct. App. 2014) (district attorney has no power to pursue civil penalties unless specifically authorized by statute to do so).

Terminated Physician Need Not Succeed In Mandamus Action Before Proceeding With Civil Suit
Fahlen v. Sutter Central Valley Hosps., 2014 WL 655995 (Cal. S. Ct. 2014)

Dr. Mark T. Fahlen claimed that Sutter terminated his physician staff privileges in retaliation for his reports of substandard performance by hospital nurses in violation of Health & Safety Code § 1278.5. The hospital moved to dismiss Fahlen’s action on the ground that he could not bring a civil suit under Section 1278.5 unless he first succeeded by mandamus in overturning the hospital’s action. The trial court denied the motion, the Court of Appeal reversed in part, and in this opinion the California Supreme Court affirmed the appellate court, holding that a hospital staff physician who claims a hospital decision to restrict or terminate his staff privileges was an act in retaliation for his or her whistleblowing in furtherance of patient care and safety need not seek and obtain a mandamus petition to overturn the decision before filing a civil action under Section 1278.5. See also Air Wis. Airlines Corp. v. Hoeper, 571 U.S. ___, 134 S. Ct. 852 (2014) (immunity from suit under Aviation and Transportation Security Act may not be denied without a determination that a disclosure was materially false); Driscoll v. Superior Court, 223 Cal. App. 4th 630 (2014) (state courts have concurrent jurisdiction over federal False Claims Act retaliation claims).

United Airlines’ Sick Leave Plan Is Not Exempt From Kin Care Law
Airline Pilots Ass’n Int’l v. United Airlines, Inc., 223 Cal. App. 4th 706 (2014)

United Airlines created an employee sick leave plan and trust, which United contends is subject to ERISA and, thus, exempt from state regulation, including California’s Kin Care Law (Lab. Code § 233), which requires employers that provide paid sick leave to their employees to allow them to use sick leave to care for family members. The trial court ruled against United, holding that application of the Kin Care Law to California-domiciled pilots was not preempted by ERISA. The Court of Appeal affirmed, holding that the trusts United established are not “bona fide separate trusts” and thus ERISA preemption does not apply. The Court also rejected United’s argument that the pilots union did not have standing to prosecute the action.

Continuous Videotaping Of Truck Drivers Does Not Violate Labor Code § 1051
Opinion of Cal. Atty. Gen. Kamala D. Harris, No. 12-1101 (Feb. 13, 2014)

The question presented by the Hon. Jerry Hill, Member of the State Senate, is “Does continuous videotaping surveillance of truck drivers during their on-the-job driving constitute a misdemeanor under Labor Code section 1051 [which prohibits requiring an employee to be photographed for the purpose of furnishing the photograph to another employer or third party] where the video file is inspected by a third party and used as a basis for discipline by the driver’s employer.” The Attorney General answered the question “No,” provided that “the third party is an agent of the driver’s employer who is videotaping and inspecting the file for the sole benefit of the driver’s employer, and that the file is furnished only to the driver’s employer.” The Attorney General reasoned that the statute was originally intended as an anti-blacklisting provision (that predates more modern laws on the subject) and that in any case the videotapes in question are not being provided to another employer or a third party who is not the agent of the current employer.

Contractor’s Employees’ Wage And Hour Claims Against Airlines Were Properly Dismissed
Hawkins v. TACA Int’l Airlines, S.A., 223 Cal. App. 4th 466 (2014)

Arlette Hawkins filed a putative class action alleging wage and hour claims against her former employer (Sereca Security Corp.) and a Labor Code § 2810 claim against the airlines that had hired Sereca on the ground that Section 2810 authorizes the employees of a service contractor to sue the party hiring the contractor if the hiring party knowingly pays a contract price that is insufficient to permit the contractor to comply with the law in performing the contract. Hawkins sued the airline defendants (Sereca was not a party to this appeal) for entering into “underfunded contracts” with Sereca though she admitted she had never seen the relevant contracts and had no information concerning their contents. The trial court sustained the airlines’ demurrers on the ground that Hawkins had failed to allege any facts to show that they had knowingly entered into underfunded contracts in violation of Section 2810. The Court of Appeal affirmed dismissal on demurrer, holding that Hawkins should have obtained the contracts with the airlines through means of third-party discovery – “upon obtaining the contracts, Hawkins could have ascertained whether they were underfunded.”  Further, Hawkins’ allegation that Sereca had the ability to pay all wages earned by the putative classes meant “the contracts were not underfunded.” See also Petrosyan v. Prince Corp., 223 Cal. App. 4th 587 (2014) (mistrial should not have been granted in employee’s case against former employer where employee represented himself and had not violated judge’s in limine order).

Employee Who Expressly Declined To Take FMLA Leave Was Properly Denied Relief Under The Statute
Escriba v. Foster Poultry Farms, Inc., 2014 WL 715547 (9th Cir. 2014)

Maria Escriba worked in a Foster Poultry Farms processing plant in Turlock, California for 18 years before her employment was terminated for failing to comply with the company’s “three day no show, no call rule” at the end of a previously approved period of leave during which she was caring for her ailing father in Guatemala. She claimed her termination was an unlawful interference with her rights under the Family Medical Leave Act (“FMLA”), but Foster Farms contended that Escriba had explicitly declined to have her time off count as FMLA leave. The jury found in favor of the employer, and the Ninth Circuit affirmed, holding that “an employee can affirmatively decline to use FMLA leave, even if the underlying reason for seeking the leave would have invoked FMLA protection.” The Court further found that the district court did not abuse its discretion in declining to award costs of suit to Foster Farms as the prevailing party.

Overtime Class Action Was Properly Removed To Federal Court Under CAFA
Rea v. Michaels Stores, Inc., 2014 WL 607322 (9th Cir. 2014)

Plaintiffs brought this putative class action against Michaels Stores, alleging the misclassification of store managers as exempt from overtime. Michaels removed the case to federal court within 30 days under the Class Action Fairness Act (“CAFA”). The district court remanded the case back to state court, finding that CAFA’s $5 million amount-in-controversy requirement was not met because plaintiffs expressly disclaimed any recovery in excess of $4,999,999.99. Michaels removed the case again the day after the Supreme Court’s opinion in Standard Fire Ins. Co. v. Knowles, 133 S. Ct. 1345 (2013), holding that attempted damages waivers are ineffective to defeat removal under CAFA. The district court again remanded on the grounds that the second removal was untimely and that Michaels had failed to carry its burden to demonstrate that the amount in controversy exceeded $5 million. The United States Court of Appeals for the Ninth Circuit reversed the second remand, holding that the amount in controversy is to be determined from the time of the first removal (thus ignoring subsequent developments that might suggest a lower amount in controversy) and that the second removal was timely because of a “change of circumstances” created by the Supreme Court’s opinion in Standard Fire Ins.

 

Ninth Circuit Clarifies CAFA Removal Requirements

Posted in Class Actions, Federal Jurisdiction

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 million amount in controversy requirement. 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.

Another Fortune 500 Employer is Leaving California…

Posted in News

Charles Schwab announced last week that it is planning to move “a significant number of San Francisco-based jobs” out of state over the next three to five years.  According to a recent article in Forbes, “Observers close to the situation blame the city’s extreme payroll tax and high cost of doing business in California as the reasons for the company’s exodus.”  The article notes that Schwab joins Chevron, The Campbell Soup Company, Boeing and many other large employers in leaving California or shifting operations to other states in the recent past.  California is consistently ranked as one of the least business-friendly states in the nation in terms of  its taxation rates, regulation, and litigation risks.  (In related news, California’s unemployment rate hovers at 8.3 percent — the fifth highest rate in the nation.)

NLRB Takes D.R. Horton One Step Further While the Ninth Circuit Upholds Its Contrary Decision

Posted in Arbitration Agreements, NLRA

On January 17, 2014, the National Labor Relations Board Judge Lisa D. Thompson concluded that an agreement that did not prohibit class or collective action still violated Section 8(a)(1) of the National Labor Relations Act because the Agreement “interfere[d], restrain[ed], or coerce[d]” plaintiff and other similarly situated employees’ “substantive rights to file classwide litigation.”  This ruling stems from Cunningham v. Leslie’s Poolmart, Inc., an overtime class action lawsuit, alleging that Leslie’s compensation plan failed to properly calculate the overtime rate for their hourly employees.   After plaintiff brought the suit in California, Leslie’s removed the matter to federal court and filed a motion to compel individual arbitration.  The arbitration agreement at issue, which plaintiff signed as a condition of his employment, did not expressly prohibit the right to assert class-wide, collective, or representative actions.  

After Leslie’s filed its motion to compel, plaintiff’s lawyers filed an Unfair Labor Practice Charge with the NLRB claiming the agreement violated section 8(a)(1) of the NLRA.  Judge Thompson agreed with Plaintiff’s argument and found that the agreement violated the section by “maintaining and enforcing a mandatory and binding arbitration agreement which required employees to resolve certain employment-related disputes exclusively through individual arbitration and, though not expressly, but in practice, required them to relinquish any right they have to resolve such disputed through collective or class action.”  In other words, it was the combination of such an agreement coupled with Leslie’s motion to compel individual arbitration of plaintiff and other similarly situated employees, that made the agreement unlawful, by “clos[ing] the avenue to pursue collective and/or classwide litigation.”  A copy of Judge Thompson’s Order can be found here.

In reaching her conclusion, Judge Thompson rejected Leslie’s arguments including her assertion that the Supreme Court has determined that the NLRA is preempted by the Federal Arbitration Act with respect to mandatory arbitration agreements.  Judge Thompson reasoned that although the Supreme Court has given deference to the enforcement of arbitration agreements, it has not expressly overruled D.R. Horton because it has not addressed or resolved the issue of exclusive arbitration over class and/or collective actions.  Thus, she concluded, even in the face of contrary federal circuit decisions, she was bound by the Board’s precedent in D.R. Horton.  

This decision leaves employers wondering at what point the NLRB will draw the line at denying the enforcement of valid arbitration agreements in the context of class or collective actions.  What does appear to be comforting is the Ninth Circuit’s current position on arbitration agreements that include express class action waivers.  On January 21, 2014, the Ninth Circuit declined to rehear Richards v. Ernst & Young, LLP, where it confirmed the enforceability of class action waivers despite D.R. Horton.  In September of last year, the Court reversed a district court order denying Ernst & Young’s motion to compel arbitration, finding Ernst & Young’s arbitration agreement, which included a class waiver, enforceable.  

The Ninth Circuit rejected plaintiff’s argument that it should rely on D.R. Horton, and instead noted that the Eighth Circuit and a majority of the district courts have declined to defer to the NLRB’s decision “because it conflicts with the explicit pronouncements of the Supreme Court concerning the policies undergirding [the FAA].”  The Ninth circuit also highlighted the Supreme Court’s recent pronouncement in American Express v. Italian Colors Restaurant that “courts must rigorously enforce arbitration agreements according to their terms” including for claims alleging a violation of a federal statute, “unless the FAA’s mandate has been overridden by a contrary congressional command.” Because Congress “did not expressly provide that it was overriding any provision in the FAA when it enacted the NLRA,” the Ninth Circuit vacated the district court’s decision certifying a class action, finding that the district court should have compelled arbitration of plaintiff’s claims based on the signed arbitration agreement which precluded class arbitration.  

Court of Appeal Holds that State Courts Have Concurrent Jurisdiction over FCA Retaliation Claims

Posted in FCA, Federal Jurisdiction, Retaliation, Whistleblowers

On January 30, 2014, the California Court of Appeal for the Fifth Appellate District ruled that California State courts have concurrent jurisdiction over retaliation claims under the federal False Claims Act (FCA) in Driscoll v. Superior Court (Spencer). The following addresses the basis for that ruling and its implications.

Background

Radiologist Scott Driscoll worked for physician Todd Spencer and his medical practice, the Todd Spencer, M.D., Medical Group, Inc. On behalf of himself and the Medical Group, Spencer sued Driscoll for defamation and various other contract and tort-based claims. Driscoll subsequently filed a cross-complaint, alleging retaliation in violation of 31 U.S.C. § 3730(h), the FCA whistleblower protection provision. Driscoll asserted that he was demoted, and eventually discharged, because he complained about billing practices he believed defrauded Medicaid and Medi-Cal. Spencer moved to dismiss, arguing that California courts lacked subject matter jurisdiction over FCA retaliation claims because the provision of the FCA creating a cause of action for retaliation authorizes a person to bring an action “in the appropriate district court of the United States.” The trial court granted Spencer’s motion with respect to the FCA retaliation claim, and Driscoll petitioned for a writ of mandate directing the trial court to vacate its order.

The Appellate Court’s Ruling

The Court of Appeal granted Driscoll’s petition for a writ of mandate. The court began its analysis by recognizing that the “deeply rooted presumption in favor of concurrent state court jurisdiction” is rebutted only where Congress “ousts” the state courts of jurisdiction over a particular federal claim by: (1) explicit statutory directive; (2) “unmistakable implication from legislative history”; or (3) “clear incompatibility between state-court jurisdiction and federal interests.”  The court concluded that the FCA’s authorization of an action “in the appropriate district court of the United States” did not constitute an “explicit statutory directive” precluding state court jurisdiction because the FCA said nothing about state court jurisdiction. In addition, in response to Spencer’s argument the federal government’s status as “true party in interest” implicitly created exclusive federal jurisdiction over an FCA claim, the court highlighted the fact that FCA whistleblower retaliation claims are not brought in the federal government’s name. The court also disagreed with Spencer’s argument that permitting state courts to hear FCA claims would be incompatible with federal interests. In this regard, it noted that the California False Claims Act was modeled after the federal FCA and contained comparable whistleblower protections, such that state court judges would not be “unsympathetic” to FCA retaliation claims. The court added that state court judges presumably have great expertise in FCA matters since the FCA involves claims originally based in common law.

Implications

As a result of Driscoll, employers may now be subject to federal FCA whistleblower litigation in California state court, which some may view as a fairly employee-friendly forum in the employment retaliation context. Moreover, when coupled with the recent amendments to the California whistleblower statute that took effect on January 1, 2014, Driscoll creates the conditions for whistleblower litigation to increase by an order of magnitude in California state court in the next few years.

Don’t Miss Our Upcoming Webinar! “The Employee Handbook: Every Word Counts” (Feb. 12 at 10:00-11:15 a.m. PST)

Posted in Employee Handbooks

Are your employee handbooks and policies collecting dust? In the highly regulated workplace, human resource professionals, compliance officers, IT, and their counsel must work together to ensure that employee handbooks and policies reflect current best practices in light of expanding employment laws and regulations. In this interactive webinar, you will learn:

• Best practices for employee handbooks and policies

• How to avoid liability when drafting employee handbooks

• What to include, and not include, in employee handbooks

• New legal developments you should consider when revising employee handbooks

The Employee Handbook: Every Word Counts
Feb. 12, 2014
10:00-11:15 AM PST/1:00-2:15 PM EST

View Live And/Or Access Recordings:

  • Attend live session at date/time listed above, and/or
  • View recording of live session for 3 months after the webinar.

Price Per Attendee (Money-Back Guarantee)
$199

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About the Presenter 

anthonyoncidi

Anthony J. Oncidi heads the Labor & Employment Law Group in the Los Angeles office of Proskauer Rose LLP. Tony represents employers and management in all aspects of labor relations and employment law, and is a frequent speaker on employment law topics.

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Proskauer Wins Summary Judgment On Behalf Of Paramount Pictures

Posted in Constructive Discharge, Discrimination, Wrongful Termination

On December 16, we obtained summary judgment on behalf of our client, Paramount Pictures Corporation, in a case brought by a former paralegal in the studio’s Business Affairs Administration department.  The plaintiff claimed discrimination, constructive discharge and wrongful termination on the basis of her race.  (The plaintiff was represented by Tom Girardi, who had previously represented Erin Brockovich.)  Yarbrough v. Paramount Pictures Corp., Los Angeles Superior Court Case No. BC 495673.

Los Angeles Superior Court Judge Terry A. Green dismissed the claims in their entirety, finding that the plaintiff failed to meet the legal standard for a hostile work environment because she had produced no evidence that she was the victim of discrimination or harassment  based upon her race.  During the hearing, the Judge stated that the evidence showed that Paramount “bent over backwards” to accommodate the plaintiff during her cancer treatments and while she was pursuing her MBA degree.  The Judge noted that none of the alleged statements made by plaintiff’s supervisors to or about her were based on her race.  (The plaintiff theorized that her supervisor was a “closet racist.”) 

Plaintiff’s failure-to-promote claim was dismissed because she offered no admissible evidence that Paramount offered a promotion to anyone after the position was voluntarily vacated by another employee of the same race as the plaintiff.  With respect to the constructive discharge claim, Judge Green sustained Paramount’s objections to declarations submitted by two former employees as being inadmissible hearsay and irrelevant evidence, and he noted that many places “might not be the nicest places to work,” but that does not mean there was any actionable conduct or that the plaintiff had been constructively discharged.  Finally, the wrongful termination claim was found to be superfluous and was similarly dismissed.  

Anthony J. Oncidi and Julia Brodsky represented Paramount Pictures in this matter, with assistance from paralegals Robert Linton, Olia Golinder, and Yena Kim.

D.R. Horton and the Arbitration Hotchpotch: Emerging “Rules” and the Future of Compelled Arbitration in California

Posted in Arbitration Agreements, Class Actions, NLRA

Horton Hears an Employer Victory

Last December, the Fifth Circuit issued its long-awaited decision in D.R. Horton, Inc. v. NLRB, holding that employers may require employees to sign arbitration agreements categorically waiving the right to pursue employment claims in a collective or class action. In doing so, the Fifth Circuit’s rejected the NLRB’s opinion that such agreements violate employees’ right under Section 7 of the NLRA to engage in “concerted activities for the purpose of collective bargaining or other mutual aid or protection.”

As the New York Times and others noted, the Fifth Circuit’s decision represents a big win for employers, who frequently use arbitration agreements and class waivers to minimize exposure to costly litigation. Viewed alongside decisions in the Second and Eighth Circuits also upholding class action waivers in arbitration agreements and declining to follow the NLRB’s contrary opinion, the Fifth Circuit’s holding in D.R. Horton signals a growing consensus in favor of labor arbitration, one that the Ninth Circuit has suggested it will join if given the chance.

Remaining Hurdles

Despite significant decisions upholding compelled individual-arbitration agreements, the fight is far from over. As Ronald Meisburg wrote recently on Proskauer’s Labor Relations Update, the NLRB is not likely to back away from its view that the NLRA invalidates arbitration agreements with class action waivers until more Courts of Appeals or the Supreme Court resolve the issue.

In California, moreover, state courts have aggressively employed the doctrine of “unconscionability” to nullify arbitration agreements under the Federal Arbitration Act’s “savings clause,” which empowers courts to invalidate arbitration contracts “upon such grounds as exist at law or in equity for the revocation of any contract.” As recently as October 2013, the California Supreme Court’s opinion in Sonic-Calabasas A, Inc. v. Moreno emphasized that the unconscionability doctrine remains alive and well, holding that “unreasonably one-sided” arbitration agreements may be challenged and deemed unenforceable under California law on a case-by-case basis, notwithstanding recent U.S. Supreme Court precedent. The Ninth Circuit is in apparent agreement, recently stating that “Federal law favoring arbitration is not a license to tilt the arbitration process in favor of the party with more bargaining power.”

All of this is poised to come to a boil when the California Supreme Court reviews Iskanian v. CLS Transportation Los Angeles, which held that the U.S. Supreme Court’s decision in AT&T Mobility v. Concepcion impliedly overruled California cases requiring the invalidation of class waivers in arbitration agreements if a class action would be “a significantly more effective practical means of vindicating the [unwaivable statutory] rights of the affected employees than individual litigation or arbitration.” Iskanian also created a split within the California courts by finding the FAA applicable to representative claims brought under the California Labor Code’s Private Attorneys General Act (“PAGA”).

Emerging “Rules” for Compelling Arbitration in California

In the face of this murky hotchpotch, employers may wonder how they are supposed to go about creating enforceable arbitration agreements in California.  Although Iskanian may throw a whole new wrench into the mix, a paper by Judge William F. Highberger of the Los Angeles Superior Court hints at some emerging rules for compelling arbitration in California courts.

The first point of issue is, of course, whether the FAA covers the agreement. Most of the time, FAA coverage exists, although there is a narrowly-read exception for “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” Additionally, it is not yet clear whether PAGA claims are exempt from FAA coverage since federal and state courts have reached different conclusions on the point.

If the FAA covers the agreement, then, as the Supreme Court emphasized in Concepcion, courts have the responsibility to enforce arbitration agreements according to their terms. Accordingly, employers should give significant attention to language delineating the scope of the arbitration agreement and the designated decision-making authorities. Among the issues Judge Highberger suggests an agreement’s language should contemplate are:

  • The claims to be submitted to arbitration;
  • Applicable rules of procedure;
  • The permissibility of class or representative claims;
  • Whether a court or the arbitrator initially determines the enforceability of an arbitration agreement; and
  • Whether a court or the arbitrator decides certain “gateway matters,” such as whether a particular claim is capable of arbitration.

Judge Highberger’s “decision tree” also includes considering whether an agreement’s terms might be deemed unconscionable under general California contract principles. California law requires “procedural” and “substantive” unconscionability to invalidate an agreement. Arbitration agreements presented to an employee on a “take it or leave it” basis without the opportunity to negotiate the agreement’s terms are usually deemed procedurally unconscionable. Unfortunately, the California Supreme Court resisted formulating a precise standard for “substantive unconscionability” in Sonic-Calabasas. Sweeping broadly, the California Supreme Court said only that the unconscionability doctrine prohibits “unreasonably one-sided” agreements, which it suggested might mean an agreement that “shocks the conscience.” As examples, the Court identified:

  • A provision in an arbitration agreement effectively giving the party imposing an adhesive contract the right to choose a biased arbitrator
  • An agreement setting  $50,000 threshold for an arbitration appeal
  • An agreement containing a damages limitation clause under which “the customer does not even have the theoretical possibility he or she can be made whole”; and
  • An arbitration agreement obligating the employee to pay the employer’s attorneys’ fees if the employer prevails, but not vice versa.

Lastly, arbitration agreements should reflect the developments surrounding D.R. Horton. Although, as mentioned above, numerous courts have rejected the view that the NLRA prohibits class waivers in arbitration agreements, the Fifth Circuit’s recent decision made clear that arbitration agreements must not “lead employees to a reasonable belief that they were prohibited from filing unfair labor practice charges [with the NLRB].” For this reason, employers should have their arbitration agreement’s language carefully reviewed to ensure that the agreement is not overbroad.

In a legal-regime still rife with uncertainty, considering the emerging “rules” discussed above is an employer’s best bet to crafting a successful arbitration agreement.

Looking Forward: The Future of Compelled Arbitration

In light of the above “rules” and the present trend of enforcing arbitration agreements and upholding class action waivers, an important question remains: how will plaintiffs respond?

One possibility is that plaintiffs’ attorneys confronted with an enforceable class action waiver will corral an identifiable class into a throng of individual arbitrations, hoping that sizable up-front arbitration costs borne by employers can be run up and leveraged into favorable settlements. But as one prominent attorney told Forbes this past summer: proceeding individually simply doesn’t make financial sense since it requires attorneys to incur substantial costs to assess the merit and probable recovery of each individual client rather than a few class representatives. Just last year, in fact, the U.S. Supreme Court considered—and ultimately rejected—the argument that contractual waivers of class arbitration should not be enforced where the cost of individual arbitration would be prohibitively high.  Thus, when dealing with low-value claims for which any recovery may only marginally cover an attorney’s costs, a wave of individual proceedings seems unlikely.

However, as Cardozo Law Professors Myriam Gilles and Anthony Sebok point out in forthcoming law review article, business models under which attorneys can arbitrate individual claims cost-effectively may still exist. Gilles and Sebok specifically advance two models. First, they propose a hybrid injunction-to-serial-arbitration model under which attorneys first seek broad injunctive relief in court that can later dictate the outcome in an individual arbitration. Since the Ninth Circuit has, within the past year, at least twice held that claims for “public” injunctive relief may be subject to mandatory arbitration, plaintiffs may be left waiting for the rare occasions on which the State Attorney General initiates a parens patrie action seeking injunctive relief.

Alternatively, Gilles and Sebok envision an “arbitration entrepreneur” model akin to the already rampant practice of small-value debt collection litigation. In that model, an attorney “buys up” the claims of similarly situated plaintiffs in order to collectively resolve the claims in a single arbitration. Although the fact that the “entrepreneur” “owns” each bundled claim might circumvent a class action waiver, the claims-buying process is of questionable legality. Where assignment of a claim is little more than a “lawsuit-mining arrangement” conducted without regard for the real parties in interest, California courts may, as the Fourth Circuit has done, find the assignment contrary to public policy.

Whether or not either practice will come to dominate the future of arbitration is too uncertain to predict now. The important takeaway for employers is that the success of compelled arbitration and class-action waiver agreements do not necessarily portend the death of large-scale, aggregated-claim disputes.

California Appellate Court Affirms Denial Of Class Certification

Posted in Class Actions, Meal Periods and Rest Breaks, Off-the-clock Issues

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.

January 2014 California Employment Law Notes

Posted in Employment Law Notes

TV Station’s Failure To Hire Weather News Anchor Was Protected By Free Speech Rights
Hunter v. CBS Broadcasting, Inc., 221 Cal. App. 4th 1510 (2013)

Kyle Hunter sued CBS Broadcasting for age and gender discrimination after it refused to hire him as a weather news anchor. Hunter alleged that CBS “repeatedly shunned him for numerous on-air broadcasting positions due to his gender and age” and that excluding him was “part of a plan to turn prime time weather broadcasting over to younger attractive females.” In response to the complaint, CBS filed a motion to strike pursuant to Cal. Code Civ. Proc. § 425.16, asserting that its selection of on-air weather reporters qualified as a protected exercise of its free speech rights. The trial court denied CBS’s motion, but the Court of Appeal reversed, agreeing with the station that the selection of a news anchor is conduct in furtherance of the exercise of free speech rights. The Court remanded the matter to the trial court to determine whether Hunter had demonstrated a reasonable probability of prevailing on the merits – an issue the trial court had not reached. See also Kurz v. Syrus Sys., LLC, 221 Cal. App. 4th 748 (2013) (employer’s cross-complaint against wrongful termination plaintiff for malicious prosecution of claim for unemployment benefits should have been stricken under anti-SLAPP statute).

Malpractice Claim Against In-House Counsel Should Not Have Been Dismissed
Yanez v. Plummer, 221 Cal. App. 4th 180 (2013)

Michael Yanez sued his former employer, Union Pacific Railroad Co., for wrongful discharge as well as Union Pacific’s in-house counsel, Brian Plummer, for legal malpractice, breach of fiduciary duty and fraud. Union Pacific fired Yanez for dishonesty based upon a discrepancy between a witness statement that Yanez wrote and a deposition answer that he gave concerning another employee’s on-the-job injury. At the deposition, Plummer represented both Union Pacific and Yanez (without first obtaining informed written consent from the clients as required by Rule of Prof. Conduct 3-310(C)). Yanez claimed the alleged dishonesty was a simple miswording in his witness statement that Plummer “manufactured [during the deposition] into something sinister for Union Pacific’s benefit.” The trial court granted summary judgment in favor of Plummer on the ground that Yanez could not meet the causation element of his claims. However, the Court of Appeal reversed, holding that it was Plummer’s conduct during the deposition (in which Plummer questioned his own client) that highlighted the discrepancy between Yanez’s deposition testimony and a witness statement Yanez had previously written about the accident, which ultimately resulted in the termination of Yanez’s employment. See also Optimal Markets, Inc. v. Salant, 221 Cal. App. 4th 912 (2013) (Cal. Code Civ. Proc. § 128.7 sanctions motion against attorneys who prosecuted allegedly frivolous trade secrets claim in arbitration was properly denied).

Court Affirms $700,000 Attorney’s Fee Award To Demoted Employee Who Recovered Only $27,280
Muniz v. United Parcel Serv., Inc., 2013 WL 6284357 (9th Cir. 2013)

Kim Muniz sued UPS for employment discrimination based on various theories, but proceeded to trial only on her claim of gender discrimination in violation of the Fair Employment and Housing Act. The jury found in favor of Muniz only with respect to her claim that her demotion from division manager to supervisor was based on her gender and awarded her a total of $27,280 for lost earnings, medical expenses and non-economic damages. After the trial, Muniz requested that the court grant her more than $1.9 million in prevailing-party attorney’s fees, which the court adjusted downward to $698,000. Over a spirited dissent from Judge Smith, a three-judge panel of the Ninth Circuit affirmed the award, holding that the district court had not abused its discretion in awarding fees to the employee even though the fees dwarfed the amount of the verdict by a factor of more than 25-to-1. In his dissent, Judge Smith wrote that the lower court failed to explain how such a huge fee award “could have been reasonable in light of the mere $27,280 that plaintiff recovered in damages” and that the majority opinion “departs from and adds confusion to our well-settled jurisprudence governing the review of fee awards.”

Former Employee Who Was Unemployed For Only Eight Months Was Properly Awarded Three Years Of Lost Wages
Villacorta v. Cemex Cement, Inc., 221 Cal. App. 4th 1425 (2013)

Alfredo Villacorta sued Cemex, his former employer, for wrongful termination in violation of public policy, intentional infliction of emotional distress and national origin discrimination. At trial, Villacorta’s attorney asserted that he had suffered only $44,000 in lost wages during his eight months of unemployment following his allegedly wrongful termination, but the jury awarded him $198,000 after the judge told the jury that “The amount [of damages] is up to you.” The Court of Appeal affirmed the judgment on the ground that the jury may have concluded that the new job Villacorta obtained (which paid him more than he was earning at Cemex) was actually inferior because it was located two to three hours away from his home.

Applicant For Union Organizer Job Was Unqualified Due To Prior Criminal Conviction
Horne v. International Union of Painters & Allied Trades, 221 Cal. App. 4th 1132 (2013)

Raymond E. Horne was a glazier and a member of the glazier’s union. He also served as an officer and a member of the council and of the executive board of the union. Horne, who is African American, twice applied for an organizer position with the council but both times the position was filled by whites. Horne sued the union for racial discrimination under the Fair Employment and Housing Act. During discovery, Horne admitted that he had been convicted of possession of narcotics for sale and that he had served a prison term for that conviction. He also admitted that his citizenship rights had been revoked as a result of the conviction, but denied that those rights had not been restored. When, during the course of the lawsuit, the union found out about the conviction, it asserted that under federal law (29 U.S.C. § 504(a)), Horne was barred from employment as a union organizer because of the criminal conviction. The trial court granted the union’s motion for summary judgment, and the Court of Appeal affirmed, holding that Horne was disqualified for the organizer position due to the criminal conviction. See also Dzakula v. McHugh, 737 F.3d 633 (9th Cir. 2013) (plaintiff’s employment discrimination action was barred based on judicial estoppel doctrine due to her failure to list it in her Chapter 7 bankruptcy schedules); United States v. Kahre, 737 F.3d 554 (9th Cir. 2013) (criminal convictions affirmed for three defendants who paid employees their wages in gold and silver coins (later exchanged for cash) in order to avoid payment of payroll and income taxes).

Employee Could Proceed With Constructive Termination Claim
Vasquez v. Franklin Mgmt. Real Estate Fund, Inc., 2013 WL 6869682 (Cal. Ct. App. 2013)

Jorge L. Vasquez quit his job as a maintenance technician and sued for constructive discharge in violation of public policy and intentional infliction of emotional distress because he could “not tolerate the work environment of only being paid $10.00 per hour, not being paid for gas and having to drive around town for work without being reimbursed for mileage.” The trial court sustained the employer’s demurrers and dismissed the case, but the Court of Appeal reversed, holding that Vasquez could proceed with his constructive discharge claim based on his allegation that “the duties [the employer] assigned required such extensive driving that the [mileage] reimbursement to which he was entitled represented a significant percentage of his already low salary.” Because Vasquez alleged that he was “effectively being paid less than the minimum wage” after he paid his own mileage expenses, his claim implicated a fundamental public policy in the form of California’s minimum wage law. The Court affirmed dismissal of the claim for intentional infliction of emotional distress because of the absence of allegations of sufficiently severe emotional distress or outrageous conduct on the part of the employer. See also Rivera v. Peri & Sons Farms, Inc., 735 F.3d 892 (9th Cir. 2013) (agricultural employer was required to reimburse its immigrant employees during the first week of work for inbound travel and immigration expenses to the extent such expenses lowered their compensation below the minimum wage).

Employees Who Were Denied Stay Bonuses Could Proceed With Claims For Fraud And Breach Of Contract
Moncada v. West Coast Quartz Corp., 221 Cal. App. 4th 768 (2013)

Three plaintiff-employees sued after they were denied bonuses they had been promised would be large enough for them to retire and that would be paid to them if they continued to work for the company until it was sold. The trial court sustained defendants’ demurrers and dismissed the action, but the Court of Appeal reversed, holding that plaintiffs had sufficiently pled the elements of promissory estoppel, fraud and breach of contract. The Court rejected defendants’ argument that the alleged promises were too vague to be enforceable. However, the appellate court affirmed dismissal of the claims for intentional infliction of emotional distress (no extreme or outrageous conduct alleged), negligent misrepresentation (no honest but unreasonable belief by defendants in the representations alleged) and “estoppel in pais” (no such cause of action under California law).

Owner-Operated Business With No Employees May Still Be A “Place Of Employment” Under Anti-Smoking Law
Opinion of Cal. Attorney Gen. Kamala D. Harris, No. 12-901 (Dec. 20, 2013)

The question presented by the Hon. Jeff Gorell, Member of the State Assembly, is “Under what circumstances does an owner-operated business with no employees nevertheless constitute a ‘place of employment’ under Labor Code section 6404.5, which prohibits smoking in the workplace?” The Attorney General answered that such a workplace is covered by the anti-smoking statute when “employment of any kind is carried on at the business location – that is, even when such employment is carried on by persons who are employed by someone other than the business owner [e.g., workers rendering temporary clerical or accounting services, janitorial, maintenance or repair services].”

$377 Million Judgment Upheld For Tortious Interference With Contract
Asahi Kasei Pharma Corp. v. Actelion Ltd., 2013 WL 6726150 (Cal. Ct. App. 2013)

Asahi, a Japanese company that develops and markets pharmaceutical products and medical devices, entered into a licensing and development agreement with CoTherix (a California-based company) to develop and commercialize one of Asahi’s drugs in North America and Europe. Actelion, a Swiss pharmaceutical company, that sells a drug that competes with Asahi’s drug, acquired all of the stock of CoTherix through a subsidiary and concurrently notified Asahi that CoTherix would discontinue development of Asahi’s drug for “business and commercial reasons.” Asahi sued Actelion and three of its senior executives for tortious interference with the licensing agreement, among other things, and obtained a jury verdict of more than $577 million (including $30 million in punitive damages against the executives individually), which was subsequently reduced by the trial court to $377 million. The Court of Appeal affirmed the judgment, holding that the jury was properly instructed concerning tortious interference with contractual relations. The Court further held that the executives were properly found liable for tortious interference (even though they had acted within the scope of their employment) and that the “manager’s privilege” defense did not apply because there was no contract between Actelion and Asahi – “The manager’s privilege does not exempt a manager from liability when he or she tortiously interferes with a contract or relationship between third parties.”

Non-Resident Professional Basketball Player Is Denied California Workers’ Comp Benefits
Federal Ins. Co. v. WCAB (Johnson), 221 Cal. App. 4th 1116 (2013)

Adrienne Johnson, an applicant for California workers’ compensation benefits, was a professional basketball player who was not employed by a California team, never resided in California, played only one professional game in California out of 34 games during the 2003 season and suffered no specific injury in California. In this action, she sought a workers’ compensation award in California against her former non-California team and its insurer for a disability based on an alleged cumulative injury. The Court of Appeal held that California does not have a sufficient interest in this matter to apply its workers’ compensation law or to retain jurisdiction over the case. See also AB 1309, 2013 Cal. Stats. Ch. 653 (amending Cal. Lab. Code § 3600.5 to exclude from workers’ compensation benefits professional athletes who have spent less than 20 percent of their working days in California).

Auto Insurance Field Adjusters’ Class Action Should Not Have Been Decertified
Williams v. Superior Court, 221 Cal. App. 4th 1353 (2013)

In this case, a putative class of auto field adjusters (led by Christopher Williams) who work for Allstate Insurance Co. claimed they were denied overtime because they worked more than eight hours per day and 40 hours per week and that Allstate’s Work Force Management System incorrectly presumed that each adjuster’s eight-hour workday began when the adjuster arrived at his first vehicle-inspection appointment of the day. Williams claimed the adjusters’ (unpaid) overtime tasks included logging onto their work computers; downloading their assignments; making courtesy calls to auto repair shops and car owners to confirm appointments; checking their voicemail and traveling to and from their first appointment of the day. Although the class was initially certified, the trial court granted Allstate’s motion to decertify the class following the Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011). The Court of Appeal then summarily denied Williams’ petition for a writ of mandate, but the California Supreme Court subsequently returned the matter to the Court of Appeal with directions to issue an order to show cause why the relief sought (vacating the decertification order and ordering certification of the class) should not be granted. In this opinion, the Court of Appeal issued a writ of mandate granting the relief sought by Williams on the ground that Dukes does notsupport decertification because California’s class action statute differs from the federal law at issue in Dukes. The Court further noted that “differences in the amount of individual damages do not by themselves defeat class certification.” See also Martinez v. Joe’s Crab Shack, 221 Cal. App. 4th 1148 (2013) (denial of class certification of claims by managerial employees reversed and remanded); Jones v. Farmers Ins. Exch., 221 Cal. App. 4th 986 (2013) (same, involving uniform employer policy as applied to insurance claims representatives and adjusters); Palagin v. Paniagua Constr., Inc., 2013 WL 6657053 (Cal. Ct. App. 2013) (trial court should have dismissed employer’s appeal from Labor Commissioner’s award in employee’s favor after employer failed to timely post an undertaking).

Ninth Circuit Certifies Suitable Seating Questions To The California Supreme Court
Kilby v. CVS Pharmacy, Inc., 2013 WL 6908934 (9th Cir. 2013)

The United States Court of Appeals for the Ninth Circuit certified questions to the California Supreme Court regarding Section 14(A) of California Wage Orders 4-2001 and 7-2001. Section 14(A) requires that “all working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats.” The Ninth Circuit’s questions include whether the phrase “nature of the work” refers to an individual task or duty that an employee performs during the course of his or her workday or whether courts should construe the term “holistically” and evaluate the entire range of an employee’s duties; whether courts should consider the employer’s business judgment as to whether the employee should stand, the physical layout of the workplace or the physical characteristics of the employee; and whether a plaintiff needs to prove what would constitute “suitable seats” to show the employer has violated Section 14(A).