Relief In Sight For Calif. Employers? as appeared in Law360March 9, 2010
The California wage-hour epidemic has entered its second decade. While there is little on the horizon to suggest that these cases are about to come to an end, there are a few glimmers of hope now.
The first glimmer of hope comes from a case that has been pending before the California Supreme Court since 2008. California employers continue to await a ruling on meal and rest breaks from the California Supreme Court in Brinker.
A ruling that breaks need only be "made available," not "ensured," may not put an end to meal and rest break class actions, but it should slow them down considerably and make it exceedingly difficult to certify a class in most cases.
The second glimmer of hope comes from the recent Hertz decision from the United States Supreme Court, which suggests that more class actions in California will now be removable to federal court under the Class Action Fairness Act.
Foreign companies previously had difficulty removing cases in California because they often did the most business in California or had the most employees there simply because of its size.
As the court explained in Arellano v. Home Depot U.S.A. Inc., 245 F.Supp.2d 1102, 1107 (S.D. Cal. 2003), "it is unlikely that Congress intended that every corporation that does more business in California than any other state should be considered a citizen of California."
It looks like the Supreme Court agrees, and now a "nerve center" test will be used. Employers with headquarters outside California now should be able to remove many class actions filed in California as a result.
Now, there is a third glimmer of hope in the form of a new bill that could change the game further.
The key word is "could."
In an interview I did with EmploymentLaw360 last year, I mentioned the need to reform California's class action procedures to provide more guidance to the trial courts.
Too much discretion for the trial courts, and not enough guidance, has created an untenable situation in which one judge could certify a class where the judge in the very next courtroom might have denied certification, leaving employers lost and often with no recourse other than to settle in the face of uncertainty.
I also mentioned the need to address a form of litigation that rewarded plaintiff's attorneys, often for doing little work and often at the expense of their own clients.
I wish I could say that my comments were profound, or that someone read my comments and decided to act. It's enough to know that someone shared my thoughts and decided to do something about it.
California Assembly Member Audra Strickland has introduced a bill to reform California's class action procedures based on the "lack of clear standards for certifiction and management of class actions."
The bill proposes standards modeled after Rule 23 of the Federal Rules of Civil Procedure, removing "any presumption or policy in favor of class certification," and only allowing class actions to proceed where all criteria are met.
That change alone would be a welcome one for class action defendants in California.
But the bill goes further. It also proposes a system by which a defendant can propose a settlement to the court that has not been approved by plaintiff's counsel, essentially removing one of the largest obstacles to settlement — plaintiff's counsel who hold up settlements out of self-interest.
Sounds logical to you and me. And sounds like something the plaintiff's bar will fight to the death.
(Feel free to insert your own joke here about class action plaintiff's lawyers taking 40 percent of multimillion dollar settlements, often for doing little more than showing up for a mediation, where they meet their clients for the first time. Think that doesn't happen? I'm handling a class action now where plaintiff's counsel met their client for the first time two years after the lawsuit had been filed. And, no, you didn't misread that last sentence.)
Will this bill get passed?
Will it gain any traction at all?
If it were anywhere other than California, you would have to think there was a chance, perhaps even a significant one, that the bill would become law, even with some revision.
But it's California.
The plaintiff's bar, and legislators counting their votes for the next election, may not let Ms. Strickland's bill get far. And they will make Ms. Strickland's next election hellish. In fact, they're probably already preparing fliers explaining to voters how Ms. Strickland is trying to make it more difficult for them to get money in lawsuits.
Now you can insert your own joke about why California is teetering on the edge of bankruptcy. Again.
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