Alerts

Employment Class Action Newsletter—May 5, 2011

Alerts / May 5, 2011

In This Issue:

Supreme Court Breathes New Life Into Class Action Waivers in Arbitration Agreements
On April 27, 2011, the United States Supreme Court held in a 5-4 decision that California’s rule invalidating arbitration agreements with class action waivers was preempted by the Federal Arbitration Act (“FAA”), 9 U.S.C. Section 2, and, therefore, could not serve as a basis to avoid arbitration.

California Appellate Court Sends Mixed Signals in Affirming Denial of Class Certification
The Second Appellate District in California recently affirmed a trial court’s refusal to certify a class of store managers in Mora v. Big Lots, Inc., Case No. B221949 (April 18, 2011).

Recent Decisions Provide Answers to Emerging CAFA Issues
The Class Action Fairness Act of 2005 (CAFA) was designed to curb problems and abuses inherent in certain class action litigation. Prior to CAFA, certain state courts were well-known for being very plaintiff-friendly.

Employment Class Action Blog
Please visit Baker Hostetler’s Employment Class Action Blog. We created this blog to acquaint employers, clients and other interested parties with developing issues impacting employment class actions, including those involving employment discrimination, wage and hour, civil rights and benefits issues.

SUPREME COURT BREATHES NEW LIFE INTO CLASS ACTION WAIVERS IN ARBITRATION AGREEMENTS

By Sabrina L. Shadi and Alastair J. Gamble

On April 27, 2011, the United States Supreme Court held in a 5-4 decision that California’s rule invalidating arbitration agreements with class action waivers was preempted by the Federal Arbitration Act (“FAA”), 9 U.S.C. Section 2, and, therefore, could not serve as a basis to avoid arbitration. AT&T Mobility LLC v. Concepcion, 2011 U.S. LEXIS 3367. Although the Concepcion case did not arise out of an employment agreement, the opinion will impact the enforceability of many types of arbitration agreements, including those in employment contracts.

The Concepcions, customers of AT&T Mobility LLC (“AT&T”), brought suit after they were charged sales tax on a phone that had been advertised as “free” with the purchase of an AT&T service plan. The service contract included an arbitration agreement requiring that claims be brought in the parties’ “individual capacity, and not as a plaintiff or class member in any purported class or representative proceeding.”

When AT&T moved to compel arbitration, the Concepcions successfully had the class waiver provision declared invalid under a California rule (the so-called “Discover Bank rule,” named for the seminal case on the issue: Discover Bank v. Superior Court, 36 Cal. 4th 148 (2005)). Under that California rule, class waiver provisions, like that contained in the AT&T arbitration agreement, are unconscionable and in violation of the state’s public policy. AT&T appealed, and the Ninth Circuit affirmed.

The Supreme Court reversed. Justice Antonin Scalia, writing for the majority, held that the Discover Bank rule conflicted with the purpose and language of the FAA and, therefore, was preempted as an improper challenge to the enforcement of arbitration agreements.

The Court began its analysis with an examination of the text of the FAA, which provides, in part, that arbitration agreements “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” (Emphasis added.) The Court emphasized that the “saving clause permits agreements to arbitrate to be invalidated by ‘generally applicable contract defenses, such as fraud, duress, or unconscionability,’ but not by defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue.” (Emphasis added.)

The Concepcions contended that the Discover Bank rule is a ground that “exit[s] at law or equity for the revocation of any contract” under FAA Section 2. The Court disagreed. While the Court acknowledged that the Discover Bank rule was based on the generally applicable doctrine of unconscionability, it was applied in a fashion that disfavored arbitration and essentially mandated class arbitration procedures that were not agreed to by the parties. Hence, it was inconsistent with and, therefore, preempted by the FAA.

The Court reasoned that forcing class proceedings into an arbitration agreement is inconsistent with the FAA for three main reasons: (1) switching from bilateral to class arbitration sacrifices the informal nature of arbitration, thereby making the process “slower, more costly, and more likely to generate procedural morass than final judgment;” (2) class arbitration requires procedural formality to preserve the interests of absent parties, again detracting from the informality the Court found to be a “primary advantage” of arbitration; and (3) the risk concomitant with bilateral arbitration, most notably the limited grounds for review of arbitrators’ decisions, “greatly increases” with class arbitrations. Similarly, the Court found “[a]rbitration is poorly suited to the higher stakes of class litigation.”

The Court concluded that because the Discover Bank rule “stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress,” it is preempted by the FAA.

In a separate concurrence, Justice Clarence Thomas maintained that the text of the FAA permits a party to avoid an arbitration agreement only if he could establish a defect in the contract’s formation, such as duress or fraud in the inducement.

The dissent, written by Justice Stephen Breyer, contended that the Discover Bank rule applied to all class waivers equally, not just in the context of arbitration agreements. Therefore, it “put[] agreements to arbitrate and agreements to litigate ‘upon the same footing,’” which is all that the FAA requires. The dissent disagreed with the majority’s characterization of the Discover Bank rule as frustrating the purpose behind arbitration by necessarily increasing the procedural complexity of arbitration to handle class claims. According to the dissent, class arbitration—when compared with class litigation (rather than, as the majority had done, bilateral arbitration)—was less procedurally complicated and, therefore, the Discover Bank rule actually was consistent with one of the fundamental purposes behind arbitration.

While the decision will have an immediate effect on the use of class action waivers, its ultimate impact on other restrictions on arbitration agreements cannot be predicted at this time. Will state rules that require arbitration agreements to contain certain elements (such as formal discovery, finding of facts and conclusions of law, no cost sharing etc.) be preempted by the FAA? A footnote in the opinion suggests that may be true in certain areas: “States remain free to take steps addressing the concerns that attend contracts of adhesion,” wrote the Court, “for example, requiring class-action-waiver provisions in adhesive arbitration agreements to be highlighted. Such steps cannot, however, conflict with the FAA or frustrate its purpose to ensure that private arbitration agreements are enforced according to their terms.”

Further, the impact of the opinion may be limited by the application of other federal laws. For example, in a June 16, 2010 opinion letter, the General Counsel’s Office of the National Labor Relations Board (“NLRB”) interpreted Section 7 of the National Labor Relations Act (“NLRA”) as providing protection to employees who file class or collective actions to enforce their rights to engage in concerted activities for the purpose of mutual aid and protection. Also, the NLRB’s acting general counsel has issued unfair labor practice complaints against companies that have class action waivers in mandatory arbitration agreements premised on the notion that the agreements interfere with employees’ rights to engage in concerted activity under NLRA. While these relatively novel positions are certainly subject to question, it remains to be seen what further formal action the Board is likely to take and how the courts react to any such challenges once they are fully litigated.

Similarly, federal agencies, such as the U.S. Equal Employment Opportunity Commission, are not prevented from bringing “pattern and practice” actions under section 707 of Title VII against employers, notwithstanding the existence of a class waiver. And, while some debate in Congress about the ruling is expected, no new laws in response are imminent given its current composition.

CALIFORNIA APPELLATE COURT SENDS MIXED SIGNALS IN AFFIRMING DENIAL OF CLASS CERTIFICATION

By Todd A. Dawson

The Second Appellate District in California recently affirmed a trial court’s refusal to certify a class of store managers in Mora v. Big Lots, Inc., Case No. B221949 (April 18, 2011). Whether this case should be treated as a welcome sign for employers, however, remains something of a mystery.

The plaintiff store managers claimed they were owed overtime (and asserted the usual array of related claims under California law) because they spent the majority of their work hours performing nonmanagerial, nonexempt work. The plaintiffs used a somewhat nuanced variation on what has now become a common approach in moving for class certification, arguing that (i) they all shared the same job classification and job description, (ii) the company classified them as exempt executives based on the duties listed in the job description, and (iii) their duties all varied from the job description in the same respects and to the same extent. In support of this position, the plaintiffs submitted 44 declarations from current and former store managers, all describing precisely the same nonmanagerial duties (i.e., stocking shelves, moving merchandise, working a cash register). They also relied upon testimony from a corporate representative that the company classified all store managers as exempt under the California executive exemption based upon the duties listed in the corporate job description.

In response, the company argued that the activities performed by its store managers varied based on a number of factors, and that they split their time among these various responsibilities in unique ways. In addition to the deposition testimony of plaintiffs and company representatives on this point, the company introduced a report from an expert, Robert W. Crandall, that was based on data collected through direct observation of 40 randomly selected store managers. This observation consisted of trained “shadowers” who followed the 40 store managers in their day-to-day duties constantly for a full workweek, recording in real time literally every action and the time spent on it into a computerized handheld device. Crandall reviewed this data and identified each task as either managerial or nonmanagerial. (Crandall acknowledged in his report that the determination of whether a particular duty is exempt was a matter to be decided by the finder of fact and, furthermore, stated that he had been cautiously conservative in designating tasks as managerial.) Crandall concluded from the data that there were large differences among the store managers in the functions they performed and how they allocated their time among their responsibilities. He further concluded that approximately 2/3 of the managers included in the sample spent more than 50 percent of their time on managerial functions. (The quantitative 50 percent threshold is unique to California state wage and hour law.)

Applying the California “well-defined community of interest” test (which essentially incorporates the concepts of typicality, adequacy and predominance from Rule 23(a) and (b) of the Federal Rules of Civil Procedure), the trial court denied class certification. The court found that the variation among the store managers in how they allocated their time among their responsibilities precluded the plaintiffs from establishing typicality and predominance. (Interestingly, the court also found that the named plaintiffs’ “checkered” work histories precluded them from serving as adequate class representatives.)

On appeal, the plaintiffs argued that the trial court’s decision improperly focused on “issues of fact” that pertained to the merits of their claims. The appellate court disagreed. Though it acknowledged the plaintiffs’ showing that all class members were treated as exempt and that they shared the same job description, regardless of store location, the court found it notable that the plaintiffs did not allege that the duties listed in the job description were nonmanagerial (and therefore nonexempt). Rather, the court explained, the plaintiffs were attempting to obtain class certification based upon a factual showing that their actual duties varied in similar ways from the corporate job description, due to a common corporate policy and practice. Because the trial court had conflicting evidence before it on this point, the appellate court held that it was not an abuse of discretion for the judge to credit Big Lots’ position over that of the plaintiffs.

On the one hand, this decision is an encouraging sign in that both the trial court and the appellate court looked past the mere fact that the putative class members shared a common job description. Moreover, both courts gave careful consideration to the expert testimony presented by the employer, which was of particular note in that it was based on direct observation of a significant sample. Thus, the expert was able to base his opinion on actual, day-to-day activities rather than statistics and inferences.

On the other hand, however, this optimism is necessarily tempered by the appellate court’s observation that it would not have been an abuse of discretion for the trial court to certify the proposed class based on the plaintiffs’ evidence. The trial court described this evidence as consisting of “identical and undetailed declarations.” The employer, in contrast, submitted expert testimony based on direct observation of 99,000 work events spanning more than 1,700 work hours. Even the suggestion that form declarations would be sufficient to overcome such evidence is troubling from an employer’s perspective.

Thus, in preparing job descriptions, employers should remain vigilant of the fact that such materials are frequently appropriated by plaintiffs and their counsel, and that courts have considerable leeway to certify classes based on such descriptions. Where practical and accurate, the potential variations in a particular job classification should be acknowledged and at least minimally described.

RECENT DECISIONS PROVIDE ANSWERS TO EMERGING CAFA ISSUES

By John B. Lewis and Andrew T. Johnson

The Class Action Fairness Act of 2005 (CAFA) was designed to curb problems and abuses inherent in certain class action litigation. Prior to CAFA, certain state courts were well-known for being very plaintiff-friendly. These courts often decided cases of national importance, and allowed plaintiffs’ lawyers to get rich, while class members would only receive coupons or other nominal settlements. CAFA attempts to correct these abuses by expanding federal courts’ jurisdiction over class actions. As a relatively new statute, there are unanswered questions about CAFA’s scope and application. In November 2009, Baker Hostetler published an article addressing many of the threshold questions surrounding CAFA.[1] Since then, as more decisions have been published, it is clearer how CAFA is actually being applied by courts. This article focuses on cases decided within the past two years and provides answers to many emerging CAFA issues, such as what happens when class certification is denied, the effect of amended pleadings on CAFA jurisdiction, whether remand orders are subject to appeal and what type of evidence parties can present in order to satisfy CAFA’s amount in controversy requirement.

A Brief CAFA Primer

CAFA jurisdiction exists when there are at least 100 plaintiffs, at least five million dollars in controversy and minimal diversity of the parties. Minimal diversity means that at least one plaintiff is from a different state than a defendant.

A party seeking to remove a case to federal court has the burden of showing that CAFA jurisdiction exists. If a complaint is silent as to the amount in controversy, all federal Courts of Appeal apply a preponderance standard, meaning that a removing party needs to show that it is more likely than not that CAFA jurisdiction exists. If a plaintiff specifically alleges that damages are less than five million dollars, the Circuits are split on what burden applies. The Sixth, Eighth, Tenth and Eleventh Circuits are the most removal-friendly—because they use a preponderance standard.[2] The First, Second, Fourth and Seventh Circuits use a “reasonable probability” standard, which the First Circuit notes is functionally equivalent to the preponderance standard.[3] The Third and Ninth Circuits are the most hostile to federal CAFA jurisdiction, as they apply a “legal certainty” standard.[4] Recent district court cases conform to these standards[5] and the Supreme Court has yet to weigh in on the Circuit split.

Cases can be removed within one year of being filed. However, once a party discovers that a case is removable, that party only has thirty days to file removal paperwork.

The amount in controversy for purposes of CAFA can include economic, consequential and punitive damages, along with attorneys’ fees and the costs of any injunctions. Prejudgment interest and general costs are specifically excluded by statute.[6] Just because a specific type of damage can be included in the amount in controversy does not mean that in a given case it will be. A future article in this newsletter will analyze what types of damages courts find are properly included, and what sort of evidence parties need to present before damage estimates will be credited.

What Happens When Class Certification Is Denied?

In general, defendants can fight class certification without worrying that their efforts will land them back in state court. If class certification is denied, the majority of federal courts retain jurisdiction over the case.[7] The Seventh,[8] Ninth[9] and Eleventh[10] Circuits have all upheld district court decisions retaining jurisdiction after the denial of class certification.

The First Circuit does not agree, however.[11] The Southern District of Florida is also an outlier, holding that federal courts are automatically divested of jurisdiction after the denial of class certification, unless there is a foreseeable probability that a plaintiff will obtain class certification in the future.[12]

Although in a majority of courts the denial of class certification does not automatically divest jurisdiction, that does not mean that courts are precluded from determining that jurisdiction is improper on other grounds. For example, after denying class certification, the district court for the Central District of California reserved the right to determine that jurisdiction was improper based on facts that existed when the action was removed. Other courts, such as in the Northern District of Ohio[13] and the District of Minnesota[14] have held that the jurisdictional question is based on facts existing at the time of filing, not removal.

Can a Plaintiff Amend Pleading to Avoid CAFA Jurisdiction?

Likely not; a party’s efforts to avoid federal CAFA jurisdiction by amending pleadings will likely fail. The Seventh Circuit held that post-removal filings do not affect jurisdiction, even when the plaintiffs voluntarily eliminated all class allegations.[15] Similarly, in Baldanzi v. WFC Holdings Corp., jurisdiction was based on facts and pleadings at time of filing.[16] The party seeking remand had to prove to a legal certainty that the amount in controversy was not met and, thus, that jurisdiction never existed.

Are Remand Orders Subject to Interlocutory Appeal?

Generally, yes; the Circuits agree that discretionary interlocutory appeals of remand orders are allowed.[17] Although courts differ on whether they refer to the appeal as “discretionary”[18] or “permissive,”[19] this difference is inconsequential, as both describe appeals based on Rule 5 of the Federal Rules of Civil Procedure. The Ninth Circuit held that federal appellate jurisdiction exists even after a state court conducted proceedings pursuant to a remand order. Likewise, the Tenth Circuit held that although a remand order divested a district court of jurisdiction, the Court of Appeals still had jurisdiction over an appeal.[20]

The ability to file a Rule 5 interlocutory appeal challenging remand is unlikely to change in the near future. However, some courts, like the Ninth Circuit, will not hear an appeal unless it involves an important CAFA-related issue.[21] Because CAFA is relatively new, many issues are still “important” because they have not been previously decided. Over time, the number of unresolved CAFA issues will decrease. The Fifth Circuit has recognized that once courts develop an adequate body of appellate law, interlocutory appeals in CAFA cases will diminish.[22]

Establishing the Amount in Controversy

A number of monetary components potentially may be considered in establishing the amount in controversy.

Punitive Damages

Punitive damages generally must be available under state law to be included in the amount in controversy. The Ninth Circuit has ruled that punitive damages could not be included in the amount of controversy because they were not authorized under state law.[23] Likewise, the Central District of California held that a one-to-one ratio of punitive damages to compensatory damages could be included, because they were permitted under the particular state law in question. Although punitive damages were available in that case, the defendants still had to prove economic damages before punitives were included, because punitive damages were dependent upon economic loss.[24]

Attorneys’ Fees

Attorneys’ fees may be included in the amount of controversy, provided they are sufficiently certain and allowed by statute. Often, because economic damages are uncertain, so too will be attorneys’ fees. Even when economic damages are clear, courts can scrutinize fee estimates to ensure that they reflect what is normally awarded in comparable cases. For example, an Oregon district court closely scrutinized the defense attorneys’ estimated fees, finding that because the attorney successfully defended similar actions in the past for less, the $50,000 fee estimate was inappropriate.[25]

Fees also must be allowed by the specific state statute or contract upon which a plaintiff is suing. A district court in the Western District of Pennsylvania recently held in a breach of contract case that attorneys’ fees could not be included in the amount in controversy when a plaintiff did not seek them in the complaint, and the contract called for disputes to be settled in arbitration with each party bearing its or their own costs.[26]

Aggregating Multiple Suits

In contrast to plaintiffs’ attempts at avoiding federal jurisdiction through amended pleadings, courts do allow plaintiffs to structure their action to avoid federal jurisdiction. In a California case, Royalty Alliance, Inc. v. Trasadia Hotel, a defendant was not permitted to combine the amounts in controversy in two closely related cases. The district court assumed that the plaintiff had some colorable basis for bringing separate suits.[27] Many courts will stretch to find a colorable basis for separate actions. But in a case in the Central District of California the court went a step further, allowing plaintiffs to structure nearly identical suits in a completely arbitrary fashion.[28] In Vanegas v. Dole Food Co., Inc., multiple suits with ninety-nine plaintiffs each were brought on behalf of Central American banana workers. Class members were assigned to suits based on their last names and nationality. Nevertheless, the district court did not permit combining the actions.

Conclusions

A number of conclusions can be derived from the case law reviewed above:

  • Denial of class certification does not divest federal courts of jurisdiction, but there is a minority position;
  • Amended pleadings likely have no effect on CAFA jurisdiction;
  • Remand orders are often subject to a discretionary appeal;
  • Punitive damages can be included in the amount in controversy if they are permitted by state law;
  • Attorneys’ fees can also be included, provided they are reasonable and available under state law; and
  • Courts often do not allow parties to combine the amounts in controversy in closely related suits to show that CAFA jurisdiction exists.

[1] “CAFA Removal Standards Still Being Defined,” Baker Hostetler Employment Class Action Newsletter, November 3, 2009.

[2] Smith v. Nationwide Property and Casualty Ins. Co., 505 F. 3d 401, 407 (6th Cir. 2007); Bell v. Hershey Co., 557 F.3d 953, 956 (8th Cir. 2009); McPhail v. Deere & Co., 529 F.3d 947, 952-53 (10th Cir. 2008); Lowery v. Ala. Power Co., 483 F.3d 1184, 1207-08 (11th Cir. 2007).

[3] Amoche v. Guarantee Trust Life Ins. Co., 556 F.3d 41, 50 (1st Cir. 2009) (applying a reasonable probability test, but noting that the test is functionally equivalent to a preponderance test); Blockbuster, Inc. v. Galeno, 472 F.3d 53, 57-58 (2d Cir. 2006); Strawn v. AT&T Mobility LLC, 530 F.3d 293, 296-97 (4th Cir. 2008); Brill v. Countrywide Home Loans, Inc., 427 F.3d 446, 447-48 (7th Cir. 2005).

[4] Frederico v. Home Depot, 507 F. 3d 188, 196 (3rd Cir. 2007); Lowedermilk v. U.S. Bank Nat’l Assoc., 479 F. 3d 994, 998-1000 (9th Cir. 2007).

[5] A panel of the Eleventh Circuit held that for CAFA to apply, in addition to a total of more than five million dollars in controversy, at least one plaintiff needed to have damages in excess of $75,000. This decision was overturned by the Eleventh Circuit sitting en banc months later. Cappuccitti v. DirectTV, Inc. No. 09-14107, 2010 WL 4027719 (11th Cir. Oct. 15, 2010).

[6] 18 USC § 1332(d)(2).

[7] Courts often cite 18 USC §1332 (d)(8), which states that class certification is not a necessary prerequisite for federal CAFA jurisdiction.

[8] Cunningham Charter Corp. v. Learjet, Inc., No. 09-8042, 2010 WL 199627 (7th Cir. Jan. 22, 2010).

[9] Id.

[10] Vega v. T-Mobile USA, Inc., 564 F.3d 1256 (11th Cir. 2009).

[11] In re TJX Companies, 564 F.3d. 489 (1st Cir. 2009).

[12] Clausnitzer v. Federal Exp. Corp., No. 06-21457-civ, 2008 WL 4194837 (S.D. Fla. June 18, 2008).

[13] Macula v. Lawyers Title Ins. Corp., No. 1:07-cv-1545, 2010 WL 1278868 (N.D. Ohio March 30, 2010).

[14] Delsing v. Starbucks Coffee Corp, No. 08-cv-1154-pjs/jsm, 2010 WL 1507642 (D. Minn. Apr. 14, 2010).

[15] In re Burlington Northern Santa Fe Railway Co., 606 F.3d 379 (7th Cir. 2010), see also Rhoades v. Progressive Cas. Ins. Co., No. 10-17129, 2010 WL 5139258 (9th Cir. Nov. 23, 2010); Long v. Dick’s Sporting Goods, Inc., 2010 WL 2044524 (W.D. Ky. May 21, 2010).

[16] Baldanzi v. WFC Holdings Corp., No. 07-civ-9551-lts-gwg, 2010 WL 125999 (S.D.N.Y. Jan. 13, 2010).

[17] See, e.g. College of Dental Surgeons of Puerto Rico v. Conn. Gen. Life Ins. Co., 585 F.3d 33 (1st Cir. 2009); Alvarez et. al. v. Midland Credit Mngt. Inc., et. al., 585 F.3d 890 (5th Cir. 2009); Froud v. Anadarko E & P Co. Ltd. P’ship., No. 10-8010, 2010 WL 2196015 (8th Cir. June 3, 2010); Coleman v. Estes Express Lines, Inc., No. 10-80152, 2010 WL 4925407 (9th. Cir. Nov. 30, 2010); BP America, Inc. v. Oklahoma, No. 09-705, 2010 WL 2961253 (10th Cir July 29, 2010).

[18] See, e.g. BP America, Inc., 2010 WL 2961253.

[19] See, e.g. Froud, 2010 WL 2196015.

[20] BP America, Inc., 2010 WL 2961253.

[21] Coleman, 2010 WL 4925407.

[22] Alvarez, 585 F. 3d 890.

[23] Trahan v. U.S. Bank Nat’l. Assn., No. 100-15665, 2010 WL 1986182 (9th Cir. May 18, 2010).

[24] Hayrapetyan v. American Intern. Group, No. CV-10-1590 GAFPJWX, 2010 WL 2044521 (C.D. Cal. May 18, 2010).

[25] Perez v. Del Monte Fresh Produce N.A., Inc., No. CV-09-1194-AC, 2010 WL 1406390 (D. Or. Jan. 21, 2010).

[26] Lohr v. United Financial Cas. Co., No. 09-752 (W.D. Pa. Aug. 25, 2009).

[27] Royalty Alliance, Inc. v. Trasadia Hotel, No. 09-cv-2739-dms-cab, 2010 WL 3339202 (S.D. Cal. Aug. 23, 2010).

[28] Vanegas v. Dole Food Co., Inc., No 09-181 (C.D. Cal. Jan. 29, 2009).

EMPLOYMENT CLASS ACTION BLOG

Please visit Baker Hostetler’s Employment Class Action Blog. We created this blog to acquaint employers, clients and other interested parties with developing issues impacting employment class actions, including those involving employment discrimination, wage and hour, civil rights and benefits issues. Below are a few blog posts on these topics.

Please feel to share information about our blog with your colleagues. The blog supplements our Class Actions Newsletter, which will continue to be published periodically.

Subscribe to Baker Hostetler’s Employment Class Action Blog

Too Big to Succeed—Are Class Actions a Proper Procedural Tool or a Means to Coerce Settlements and Enrich a Few?
In the wake of the oral argument in the mega class action, Wal-Mart v. Dukes, The New York Times ran an interesting April 3, 2011, article by Adam Liptak entitled “When a Lawsuit Is Too Big.” The subtitle, “Class-action suits can be large and impersonal. Critics say this is why they are often unfair to everyone involved,” actually presents the theme. And while we might not normally look to The New York Times for legal commentary, this article identified several legitimate issues applicable to many employment-related class actions, including Dukes. These issues negatively impact claimants and companies alike and include deprivation of due process, decision making by formula and settlements that only benefit plaintiffs’ counsel.

Seventh Circuit Affirms Denial of Certification in Equal Pay Act/Title VII Gender Case
Decades ago, Rolls-Royce drew some attention for contending that its cars did not “break down,” but, rather, “failed to proceed.” In a recent case from the Seventh Circuit, a putative class action against that company not only “failed to proceed,” but broke down utterly. In Randall v. Rolls-Royce Corporation, Case No. 10-3446 (7th Cir. Mar. 30, 2011), two female Rolls-Royce employees brought a putative class action against the company for sex discrimination. While claims arising from the production of Rolls-Royce luxury cars might have had more panache, their claims actually arose from an Indiana plant that manufactured aircraft, commercial, and...

Maryland Court Rules Employer Cannot Participate In Employee Tip Pool
Once again, tip pool cases are getting attention in the federal courts. Most recently, several former employees of two taverns in Baltimore sued under the Fair Labor Standards Act (“FLSA”) and Maryland state laws alleging unlawful wage and hour practices. Gionfriddo v. Zink, 2011 WL 855799 (D.Md. March 11, 2011). Specifically, they claimed the owner of the two taverns where they worked, Jason Zink, was improperly receiving money from the collective tip pool.


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