Tag: Ninth Circuit

In Trio of Decisions, Supreme Court Resolves Circuit Splits on Arbitration

Three recent Supreme Court Decisions—Coinbase v. Suski, Smith v. Spizzirri, and Bissonnette v. LePage Bakeries—based on consumer and employment disputes have resolved significant circuit splits over arbitration. These cases were all decided by a unanimous Court, with Justices Jackson, Sotomayor, and Roberts authoring the three opinions.

Supreme Court Considers Arbitrability Based on Conflicting Contracts

In Coinbase v. Suski (May 23, 2024), the Supreme Court held that where there is a conflict between one or more contracts between same parties regarding the arbitrability of a dispute, a court alone (and not the arbitrator) must decide which contract governs. The appeal arose from a sweepstakes dispute wherein the official rules of the sweepstakes conflicted with the defendant’s user agreement.

After the plaintiff consumers brought a class action in California federal court, the defendant sought a motion to dismiss based on an arbitration provision in the user agreement. The district court denied the defendant’s motion based on the forum selection clause in a contract detailing the sweepstakes’ rules. The Ninth Circuit affirmed, agreeing that the forum selection clause, which gave sole jurisdiction over sweepstakes-related disputes to California courts, superseded the arbitration provision in the user agreement.

In a unanimous decision, the Supreme Court agreed with the Ninth Circuit that courts, not arbitrators, must decide the threshold question of whether a subsequent agreement supersedes an arbitration provision, dismissing concerns that the holding would invite challenges to delegation clauses that empower arbitrators to decide disputes concerning arbitrability.

Prior to the decision in Suski, there was no precedent in the First Circuit addressing the question of who resolves conflicting dispute resolution clauses. However, the Court’s decision accords with the approach of the First Circuit to related questions.

In Biller v. S-H OpCo Greenwich Bay Manor, LLC (2020), the First Circuit held that for parties to agree to have an arbitrator decide gateway questions of arbitrability, they must do by “clear and unmistakable evidence,” safeguarding a court’s jurisdiction to decide questions of arbitrability. Similarly, in McKenzie v. Brennan (2021), the First Circuit held that the court holds the decision-making power to decide whether parties intend to arbitrate a dispute when a new contract between the parties does not contain a broad arbitration clause, but an earlier contract does.

District Courts May Not Dismiss Cases Referred to Arbitration Upon a Request to Stay

In Smith v. Spizzirri (May 16, 2024), the Supreme Court interpreted 9 U.S.C. § 3 to mean that when a district court finds that a contract compels arbitration and a party has requested a stay of court proceedings pending arbitration, the court lacks jurisdiction to dismiss the suit. Instead, the Supreme Court determined that a lower court must stay the proceedings until the dispute is resolved in arbitration or the dispute is brought back before the court.

The decision arose from a California class action alleging delivery drivers had been misclassified as independent contractors and denied required wages and paid leave. While the Ninth Circuit affirmed the lower court’s discretion to dismiss the action referred to arbitration on a motion by the defendant, the Supreme Court unanimously reversed and remanded. Spizzirri may be understood as the complement to an earlier decision also involving Coinbase, Coinbase v. Bielski (June 23, 2023) (see our prior alert here), which held that a district court must stay its proceedings while an interlocutory appeal on the question of arbitrability is ongoing.

The First Circuit (as well as the Fifth, Eighth, and Ninth Circuits) had previously held that a district court has discretion to either dismiss litigation without prejudice or stay the proceedings. Dismissal following a referral to arbitration provided plaintiffs with an opportunity to appeal that final, adverse ruling, with the Supreme Court’s decision now requiring plaintiffs to wait until the arbitration has been completed.

While the First Circuit has not yet passed a decision under following Spizzirri, a recent decision by the Rhode Island District Court may indicate how post-Spizzirri questions will be decided. In De Simone v. Citizens Bank (June 17, 2024) the court directly cited to Spizzirri to conclude that the proceedings in that case must be stayed pending arbitration. At the appellate level, the Ninth Circuit (which previously, like the First Circuit, held that courts have discretion to stay or dismiss) amended its opinion in Herrera v. Cathay Pacific Airways Ltd. (March 11, 2024; amended June, 24, 2024) to reflect the decision in Spizzirri, writing that “Spizzirri made clear that a district court does not have discretion to dismiss the action when granting a motion to compel arbitration under 9 U.S.C. § 3.”

Supreme Court Holds Workers in Any Industry May Benefit from Arbitration Exemption

In Bissonnette v. LePage Bakeries Park St. LLC (May 14, 2024), the Supreme Court unanimously held that the Federal Arbitration Act’s exemption for transportation workers at 9 U.S.C. § 1, which protects workers in foreign or interstate transportation from having their employment claims referred to mandatory arbitration, may apply to workers in any industry.

In LePage Bakeries, the defendant companies argued that baked goods delivery drivers were not protected from the exemption because they were not transportation industry employees. The district court and Second Circuit agreed, compelling arbitration of the parties’ dispute. The Supreme Court reversed, noting that the Second Circuit has created a transportation-industry requirement without any basis in the text of the statute.

The decision resolves a split among the First and Second Circuits in favor of workers seeking to bring class action claims. In two 2023 cases, Canales v. CK Sales Co. and Fraga v. Premium Retail Servs., Inc., the First Circuit explicitly rejected the Second Circuit’s reading of the Federal Arbitration Act that a worker must be employed in the transportation industry to benefit from the exemption to mandatory arbitration. Instead, the First Circuit focused on the worker’s role instead of the employer’s business, a test that the Supreme Court has now embraced. The Court’s decision follows New Prime, Inc. v. Oliveira (2019) and Southwest Airlines Co. v. Saxon (2023) wherein the Court held the exemption applies to independent contractors and airplane cargo loaders.

Recent Decisions Reflect Critical Questions on Jurisdiction Over Arbitration Disputes

The Supreme Court’s trio of unanimous arbitration decisions outline three areas in which district courts retain jurisdiction over arbitration disputes. The rulings reflect the outer limits of a multi-decade trend in which the Supreme Court has consistently issued arbitration-friendly decisions, encouraging the resolution of arbitrable matters without involving the courts.

It is likely that challenges to arbitrability based on conflicting contracts and transportation work will remain flashpoints in federal court litigation for years to come, with federal courts retaining jurisdiction over disputes referred to arbitration, hearing fewer appeals of orders compelling arbitration, and resolving matters that arise during those proceedings. The decisions serve as reminders to businesses that they should work with experienced counsel to draft and regularly review dispute resolution clauses in consumer and employment contracts to ensure that, if disputes do ultimately arise, they will be resolved via the intended procedure.

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Thank you to firm summer associate Jonathan Tucker for his contribution to this post.

©2024 Pierce Atwood LLP. All rights reserved.
For more on Arbitration, visit the NLR ADR Arbitration Mediation section.

Supreme Court Holds That the Eighth Amendment Does Not Prevent Enforcement of Local Camping Bans, Authorizing a Significant Shift in Local Policies on Homelessness

Until recently, local policies on homelessness have been guided by two controversial rulings from the Ninth Circuit Court of Appeals: Martin v. Boise (9th Cir. 2019) 920 F.3d 584 and Johnson v. City of Grants Pass (9th Cir. 2022) 50 F.4th 787.[1] However, the Supreme Court’s decision in City of Grants Pass v. Johnson(2024) 603 U.S. ____, is likely to transform local jurisdictions’ policy approaches to managing homelessness. In a 6-3 decision, the Supreme Court upheld the city’s ban on camping and parking overnight on public property.

By way of background, in Martin, the Ninth Circuit held that the Eighth Amendment’s restriction against cruel and unusual punishment barred cities from imposing criminal penalties for violations of public-camping ordinances whenever the number of homeless individuals exceeds the number of “practically available” shelter beds in a jurisdiction. In Johnson, the Ninth Circuit expanded on Martin and held that a city cannot enforce its camping ban or impose fines or civil penalties unless the city has enough shelter beds for its entire population. Since then, affected cities and states have widely criticized these two Ninth Circuit rulings, which effectively blocked the enforcement of local ordinances prohibiting or regulating camping and sleeping outdoors.

In the Supreme Court’s decision in Johnson, the Court rejected the Ninth Circuit’s rulings and held that ordinances prohibiting camping, overnight parking, or sleeping outdoors do not violate the Eighth Amendment’s protections against cruel and unusual punishment because these ordinances regulate “conduct” and “actions”, rather than “mere status.”

The Court focused on the practical implications of Martin and Johnson, finding that the Ninth Circuit created an unworkable and confusing test to evaluate public camping ordinances, based on subjective and vague determinations of who is “involuntarily” homeless. The Court also criticized judicial injunctions prohibiting the enforcement of public camping ordinances, finding that these determinations are “public policy responses” best handled by local governments and the legislature (not courts).

In doing so, the Court agreed with local jurisdictions that complained that the Ninth Circuit inappropriately limited available policymaking tools and “undermined” local efforts to address homelessness. The Court emphasized that local governments have “broad power” over the substance and enforcement of their laws and must be afforded “wide latitude” and “flexibility” to address homelessness.

Although the Court’s ruling authorizes the enforcement of public camping ordinances, it does not grant unfettered power to local jurisdictions. The Court acknowledges that public camping ordinances could still implicate other constitutional concerns, including potential violations under the Due Process Clause. The Court further notes that local governments are not required to adopt public camping ordinances, and may choose to narrow such laws by imposing relevant time, place, and manner restrictions.

Even with these limitations, the Court’s decision is likely to significantly alter the future of local policies on homelessness, especially throughout California. Local governments are now authorized to take more aggressive actions to enforce existing ordinances (or enact new ones) prohibiting or otherwise regulating overnight camping and parking on public property. Ordinances that include relevant time, place and manner restrictions (e.g., regulating when, where, and how people sleep in public) are likely to be particularly insulated from constitutional challenges.

We will continue to monitor updates to local policies on the homeless in response to this decision and provide updates as they become available.

FOOTNOTES

[1] See prior article here.

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Copyright © 2024, Sheppard Mullin Richter & Hampton LLP.

by: Alexander L. Merritt, Kathryn C. Kafka of Sheppard, Mullin, Richter & Hampton LLP

For more news on the Supreme Court’s decision in City of Grants Pass v. Johnson, visit the NLR Real Estate section.

Junk Science or Relevant Evidence: Supreme Court Says Experts May Now Aid in Determining Criminal Intent

In criminal cases, oftentimes the most significant element in dispute is whether the defendant harbored the intent to “knowingly” or “willfully” violate the criminal law at issue. If the defendant denies that he knew what he was doing was illegal, the government must prove beyond a reasonable doubt that the defendant had the required mens rea — or mental state — to violate the law. The government does this by presenting circumstantial evidence that it argues supports a reasonable inference that the defendant had the required mental state to violate the law. And defense lawyers test that evidence largely on cross examination and by presenting counterevidence.

The more complicated the law — think tax, securities, or federal election conduit contribution laws — the riskier it is that a person can be held criminally liable for what seemed like innocent or at least not illegal conduct. In these cases, experts may be called to testify about how a certain industry or regulatory regime is structured or how it operates, and the parties can argue to the jury whether the facts of the case circumstantially prove the reasonable inference that the defendant knowingly or willfully violated a criminal law related to that industry or regulatory regime. But Federal Rule of Evidence 704(b) prohibits an expert from stating an opinion about whether a criminal defendant “did or did not have the mental state or condition that constitutes an element of the crime charged or of a defense. Those matters are for the trier of fact alone.” FRE 704(b) was adopted in response to President Ronald Reagan’s shooter, John Hinkley, being found not guilty by reason of insanity after competing experts offered opinions on the ultimate issue of Hinkley’s sanity. So FRE 704(b) now requires that a jury alone must decide whether the defendant intended to commit a crime. And the answer to this question is often the difference between freedom or years in prison.

In Diaz v. United States, ___ S. Ct. ___, 2024 WL 3056012 (June 20, 2024), the U.S. Supreme Court ruled that FRE 704(b) does not preclude expert testimony about the likelihood that the defendant intended to commit a crime based on the defendant’s membership in a particular group. Diaz was charged with “knowingly” transporting drugs across the U.S.-Mexican border. She argued the “blind mule” defense: she did not know there were drugs in the car, therefore she did not knowingly transport them. The government called as an expert a Homeland Security Investigations Special Agent to testify that “in most circumstances, the driver knows they are hired to take drugs from point A to point B.” The Agent said that drug-trafficking organizations would expose themselves to too much risk by using unknowing couriers. The Agent admitted on cross examination that he was not involved in Diaz’s case, and that drug-trafficking organizations sometimes use unknowing couriers. The jury found Diaz guilty and she was sentenced to 84 months in prison.

Diaz argued that the Agent’s expert testimony violated FRE 704(b)’s proscription of expert’s providing opinions about whether a defendant did or did not have the required state of mind to violate the law. The Court affirmed the Ninth Circuit’s opinion that the Agent’s expert testimony did not violate FRE 704(b) because the expert “did not express an opinion about whether Diaz herself knowingly transported [drugs].” Instead, he testified that “most” drug couriers know they are hired to drive drugs from point A to point B. “That opinion does not necessarily describe Diaz’s mental state. After all, Diaz may or may not be like most drug couriers.” The Court acknowledged that it would have violated Rule 704(b) if the Agent had testified that “all” drug couriers know they are transporting drugs, since Diaz would be included in that drug courier group thus making it an opinion about Diaz’s mental state.

The Court said that FRE 704(b) only proscribes expert opinions “in a criminal case that are about a particular person (‘the defendant’) and a particular ultimate issue (whether the defendant has ‘a mental state or condition’ that is ‘an element of the crime charged or of a defense.’).” Because the Agent “did not give an opinion ‘about whether’ Diaz herself ‘did or did not have a mental state or condition that constitutes an element of the crime charged or of a defense,’ his testimony did not violate Rule 704(b).”

In her concurrence, Justice Ketanji Brown Jackson inferred that “what’s good for the goose is good for the gander” when she wrote that criminal defendants were now free to offer expert testimony “‘on the likelihood’ that the defendant had a particular mental state, ‘based on the defendant’s membership in a particular group.’” For example, “Diaz could have offered expert testimony on the prevalence and characteristics of unknowing drug couriers.” Justice Jackson said that the Diaz opinion will now allow psychiatrists to testify as experts “to tell the jury that when people with schizophrenia as severe as a defendant’s commit acts of violence, it is generally because they do not appreciate the wrongfulness of their conduct.” This would not create a “spectacle of dueling experts on the defendant’s mental state,” Justice Jackson wrote, but instead “could help jurors better understand a defendant’s condition and thereby call into question a mens rea that might otherwise be too easily assumed…given the biases, stereotypes, and uneven knowledge that many people have about mental health conditions.”

Justice Neil Gorsuch wrote a terse dissent that was joined by Justices Sonia Sotomayor and Elena Kagan. The dissent said the Agent’s probabilistic assessment that “most” couriers know they are transporting drugs violated FRE 704(b) because it was a statement “about whether the defendant” had a “mental state . . . that constitutes an element of the crime charged.” The word “about” is defined as “concerning, regarding, with regard to, with reference to; in the matter of.” And according to the dissent, expert testimony about what most drug couriers know was testimony about the likelihood of what Diaz knew. Justice Gorsuch warned of “warring experts” on the issue of a defendant’s intent, which he says will make the criminal justice system less reliable as lawyers may try and find probabilistic expert opinions on intent rather than doing the hard work of gathering circumstantial evidence and arguing about what that evidence reasonably infers about a defendant’s intent.

© 2024 Miller, Canfield, Paddock and Stone PLC

Ninth Circuit Rules Against Apache in Dispute Over Sacred “Oak Flat” Site

On March 1, the U.S. Court of Appeals for the Ninth Circuit sided with a lower court decision denying an Apache interest group’s motion for a preliminary injunction against the transfer of copper-rich federal land to private company Resolution Copper.

Oak Flat, a piece of land that the Ninth Circuit acknowledges is “a site of great spiritual value to the Western Apache Indians,” has been at the center of the dispute largely due to the significant copper ore deposits it sits on. Through the Land Transfer Act, Congress directed the federal government to transfer the land to Resolution Copper, which would then mine the ore. Apache Stronghold sued the government, seeking an injunction against the land transfer on the ground that the transfer would violate its members’ rights under the Free Exercise Clause of the First Amendment, the Religious Freedom Restoration Act (“RFRA”), and an 1852 treaty between the United States and the Apaches. The Ninth Circuit disagreed, holding that Apache Stronghold was unlikely to succeed on the merits on any of its three claims before the court.

First, the Ninth Circuit found that under the Supreme Court’s controlling decision in Lyng. There, the Supreme Court held that while the government’s actions with respect to “publicly owned land” would “interfere significantly with private persons’ ability to pursue spiritual fulfillment according to their religious beliefs,” it would also have no “tendency to coerce” them “into acting contrary to their religious beliefs.” The Ninth Circuit also found that the transfer of Oak Flat for mining operations did not discriminate against nor penalize Apache Stronghold’s members, nor deny them an “equal share of the rights, benefits, and privileges enjoyed by other citizens.”

Second, Apache Stronghold’s claim that the transfer of Oak Flat to Resolution Copper would violate RFRA failed for the same reasons because “what counts as ‘substantially burden[ing] a person’s exercise of religion’ must be understood as subsuming, rather than abrogating, the holding of Lyng.”

Finally, the court ruled that Apache Stronghold’s claim that the transfer of Oak Flat would violate an enforceable trust obligation created by the 1852 Treaty of Sante Fe because the government’s statutory obligation to transfer Oak Flat abrogated any treaty obligation.

The case demonstrates the difficulty Tribes have in stopping major development projects on federal land on religious grounds.

© 2024 Van Ness Feldman LLP
For more news on Tribal Litigation, visit the NLR Tribal Law / Indigenous Peoples section.

Non-Negotiable Arbitration Agreements May Be Required as a Condition of Employment

On February 15, 2023, the Ninth Circuit struck down AB 51, a California statute that imposed criminal and civil penalties against employers who required employees to enter into an arbitration agreement as a condition of employment, finding the statute to be an “unacceptable obstacle to the accomplishment and execution of the full purposes and objectives” of the Federal Arbitration Act (“FAA”).  Chamber of Commerce of the United States of America, et al. v. Bonta, et al., No. 20-15291 (9th Cir. 2023).

As discussed in our prior post and articles (link here), in August 2022 the Ninth Circuit withdrew its prior decision, which had upheld portions of AB 51, following the United States Supreme Court’s June 2022 decision in Viking River Cruises v. Moriana.

AB 51, embodied in California Labor Code §432.6 effective January 1, 2020, prohibited an employer from entering into a non-negotiable agreement that required the employee to waive “any right, forum, or procedure” for a violation of the Fair Employment and Housing Act or the California Labor Code, including “the right to file and pursue a civil action.”  Further, AB 51 imposed harsh penalties for employers who violated the statute, including a fine of up to $1,000 and up to six months’ imprisonment, as well as the potential for civil litigation by the State of California or by private individuals.  In an effort to avoid Supreme Court decisions striking down state laws that improperly targeted arbitration agreements, the California legislature also created the confusing outcome that potentially criminalized the formation of non-negotiable arbitration agreements, but permitted their enforcement once executed.

Noting that arbitration agreements by their very nature require parties to waive their rights to bring disputes in court, and crediting the plaintiffs’ evidence that the possible imposition of civil and criminal penalties deterred employers from attempting to enter into non-negotiable agreements with employees, the court affirmed the district court’s preliminary injunction in favor of several trade associations and business groups who sought to block the implementation of the statute.  Relying on principles of preemption and judicial precedent striking down similar state laws or judge-made rules that singled out executed arbitration agreements, the Court found AB 51 improperly “burden[s]” the formation of arbitration agreements in violation of the FAA.

Having written the previous 2-1 decision upholding AB 51, Judge Lucero now found himself dissenting.  Arguing that the majority “misconstrue[d] the jurisprudence” of the Supreme Court, the dissent claimed that arbitration was permissible only if consensual and that AB 51 only applied to conduct occurring prior to the formation of the contract and thus was not an obstacle to the objectives of the FAA.

Employers may require their California employees to sign non-negotiable arbitration agreements to obtain or maintain their employment.  Arbitration agreements may still be unenforceable however if they are procedurally and substantively unconscionable, if the agreement lacks mutual consent because a party was forced to sign by threats or physical coercion or “upon such grounds as exist at law or in equity for the revocation of any contract.”  Thus, employers should review their agreements to ensure they are in compliance with other California requirements, that the terms are not unfair or one-sided, and, the agreement presented is not unfair, surprising or oppressive.

Article By Sheryl L. Skibbe of Vedder Price

For more arbitration legal news, click here to visit the National Law Review.

© 2023 Vedder Price

Update Alert on Mickelson v. PGA Tour, Inc.

On August 16, 2022, we prepared an alert discussing Mickelson v. PGA Tour, Inc. and the claims made by suspended PGA Tour players (“Player Plaintiffs”) against PGA Tour, Inc. (“Tour.”) Quite a bit has transpired in the past three weeks both in and out of the courtroom. This alert highlights new developments that stem from an amended complaint that was filed in the US District Court, Northern District of California on August 26, 2022 (the “Amended Complaint.”)

The Amended Complaint can be found here and the original alert can be found here.

The Amended Complaint removes several Player-Plaintiffs listed as plaintiffs in the original complaint. Originally, the Player Plaintiffs were comprised of the following eleven golfers: Abraham Ancer, Bryson DeChambeau, Taylor Gooch, Matt Jones, Jason Kokrak, Phil Mickelson, Carlos Ortiz, Pat Perez, Ian Poulter, Hudson Swafford, and Peter Uihlein. Per the Amended Complaint, four of the original Plaintiff Players have been removed as plaintiffs, namely: Abraham Ancer, Jason Kokrak, Carlos Ortiz, and Pat Perez.[1] As a result, only seven of the eleven original Player Plaintiffs remain as Player Plaintiffs.

Perhaps the most significant development in the case is that LIV Golf has been added as a Plaintiff in the Amended Complaint. The Amended Complaint generally reiterates allegations made by the Player Plaintiffs (together with LIV Golf, collectively, the “Plaintiffs”) in the original complaint and incorporates LIV Golf’s alleged harm, mainly, that the Tour’s efforts made to prevent LIV Golf’s entry into the elite professional golf market forced LIV Golf to delay and restructure its 2022 launch plans and required LIV Golf “to pay excessively higher guaranteed payments to recruit a number of marquee players than would be required in a competitive market.”

Three more claims were added to the Amended Complaint, for a total of eight claims brought by the Plaintiffs. The first new claim alleges that Tour has violated Section 2 of the Sherman Antitrust Act by monopolizing the market for promotion of elite professional golf events (which is in addition to the Section 2 claim in the original complaint that alleges that the Tour maintains a monopoly on elite event services.) In addition to the now three antitrust claims brought in the Amended Complaint, LIV Golf also brought separate tortious interference claims of contractual relationships and prospective business relationships. The antitrust claims and the tortious interference claims are based on the premise that the Tour’s exclusionary actions: (i) prevent competition for the promotion of golf entertainment among stakeholders, such as broadcasters, players (via the Media Rights Regulation), vendors, sponsors, advertisers, partners, and agencies, and (ii) interfere with LIV Golf’s ability to negotiate and enter into contracts with those stakeholders.

Key Observations

Although more than one-third of the original Player Plaintiffs have withdrawn from Mickelson v. PGA Tour, Inc., the addition of LIV Golf as a plaintiff elevates the lawsuit because it brings the very public rivalry between the Tour and LIV Golf to the courtroom. The circumstances surrounding the case are also rapidly evolving. Since the order denying Player Plaintiffs Talor Gooch, Hudson Swafford, and Matt Jones’s motion for temporary restraining order (“TRO”) issued on August 9, 2022, six Tour members (most notably world number 2 Cameron Smith) have joined LIV Golf, which amounts to nearly half of the major winners since 2016 and 26 of the world’s top 100 golfers that have now signed with LIV Golf. In addition, the Tour announced various rule changes for the 2023 PGA Tour season, including increased purse winnings, bonus pools, and elevated events. It remains to be seen whether these circumstances will materially alter the arguments made throughout the TRO proceedings.

The tentative date to hear dispositive motions (such as summary judgment) has been scheduled for July 23, 2023, and the jury trial date is expected to begin on January 8, 2024.

FOOTNOTES

[1] Pat Perez was the only player who directly provided the reason for his withdrawal: “I didn’t really think it through… I did it to back our guys,” he reportedly said. He also said that he does not have “ill will” towards the Tour and emphasized his content of playing for LIV Golf.

Article By Richard L. Brand, Thomas R. Castiello, Brian D. Schneider, and Anjelica L. Fuccillo of ArentFox Schiff LLP

For more entertainment, art, and sports legal news, click here to visit the National Law Review.

© 2022 ArentFox Schiff LLP

Federal District Court Says Pre-Shift COVID Screening Time Not Compensable

In the first reported decision we’ve seen addressing the issue head on, a federal district court in California dismissed a putative collective action claim under the Fair Labor Standards Act (FLSA) seeking payment for time spent in pre-shift COVID screening.

Prior to clocking in each day, the plaintiff—a non-exempt truck driver whose job duties included loading and transporting automobile parts from a central distribution center to stores throughout southern California—was required to submit to COVID-related health screening conducted on his employer’s premises.  During the screening process, a company employee asked the plaintiff a series of questions and took the plaintiff’s temperature.  The total time spent in the screening process often exceeded five minutes, which included waiting time.

The plaintiff filed a collective action claim, contending that the time spent by him and other employees participating in the daily screening was compensable under the FLSA.

Starting with the premise that time spent in pre-shift activities is only compensable under the FLSA if it is “integral and indispensable” to the employee’s “principal activities or activities which [the] employee is employed to perform,” the district court granted the employer’s motion to dismiss the FLSA claims, noting:

A pre-shift COVID screening is not the “principal activity or activities which [the] employee is employed to perform.”  29 U.S.C. § 254(a)(1).  O’Reilly did not hire the employees to undergo health screenings, but instead to load and transport products to stores….  [T]he pre-shift COVID screenings were not “integral and indispensable” to the employees’ duties because the screening was not an intrinsic element of the loading and transporting of products to the stores.  The screenings were not indispensable to the employees’ duties because O’Reilly could eliminate them completely without hindering the employees’ ability to perform their duties….  A pre-shift COVID temperature check and short questions regarding exposure do not share the required nexus with Plaintiff’s duties of retrieving automotive parts and delivering them to auto part stores to make the screening a compensable activity that is integral and indispensable to those activities.

Notably, the court referenced—and then distinguished—the U.S. Department of Labor’s COVID-19 and the Fair Labor Standards Act Questions and Answers, which were issued during the height of the pandemic and which many employers felt were ambiguous on the issue of which COVID-related activities were and weren’t considered “hours worked” under the FLSA:

Unlike the nurse in the DOL example whose principal job duty is to keep patients healthy and has direct patient contact, Plaintiff’s principal activities consisted of manual labor and transportation of auto parts to stores.

We examined those agency Q&As—and the broader issues around compensability of time spent in vaccination, testing, and screening activities—in an earlier blog.

The decision is Pipich v. O’Reilly Auto Enterprises, LLC (S.D. Cal. Mar. 15, 2022).

Article By Allan S Bloom of Proskauer Rose LLP

For more coronavirus legal news, click here to visit the National Law Review.

© 2022 Proskauer Rose LLP.

Ninth Circuit Reverses Class Certification Order Because Liability Issues, Not Merely Damages, Were Individualized

The Ninth Circuit recently addressed an issue that tends to arise frequently in class certification motion practice: how trial courts should apply the predominance requirement where appellate decisions have said that the need to calculate individualized damages generally is not sufficient on its own to defeat class certification, but some putative class members likely have no damages. On these types of issues, plaintiffs often try to characterize defendants’ arguments in opposition to class certification as raising mere “damages issues” that can be addressed individually at the end of a class case, and defendants often respond that the issues they raise go to liability, not merely damages, and in any event the damages trials would be too complicated and impractical. The Ninth Circuit recently clarified that if determining liability requires highly individualized inquiries, a class should not be certified, and any individualized damages trials would have to be feasible.

In Bowerman v. Field Asset Services, Inc., Nos. 18-16303, 18-17275, — F.4th –, 2022 WL 2433971 (9th Cir. July 5, 2022), the plaintiffs contracted with the defendant to perform preservation services on properties being foreclosed on. They claimed that they should have been classified as employees rather than independent contractors under California law, and therefore should have been paid overtime and reimbursed for business expenses. The district court certified a class, decided certain issues on partial summary judgment in favor of the class, and left for a later damages trial whether a class member worked overtime (and to what extent) and whether the class member was entitled to reimbursement for business expenses (and the amount thereof).

The Ninth Circuit reversed the class certification order. It explained that “We need not decide whether common evidence can prove that [defendant] has a uniform policy of misclassifying its vendors” because “[defendant’s] liability to any class member for failing to pay them overtime wages or to reimburse their business expenses would require highly individualized inquiries on whether that particular class member ever worked overtime or ever incurred any ‘necessary’ business expenses.” (Emphasis in original.) The plaintiffs had “mischaracterize[d] an issue of individualized liability as an issue of individualized damages.” (Emphasis in original.) The Ninth Circuit explained that if the question involves the existence of damages, that is a liability issue, not a damages issue.

The Ninth Circuit also concluded that, under its interpretation of the Supreme Court’s decision in Comcast Corp. v. Behrend, 569 U.S. 27 (2013), the plaintiffs had failed to demonstrate that damages were “capable of measurement on a classwide basis” because they could not “show that the whole class suffered damages traceable to their alleged misclassification as independent contractors,” even if the amounts of those damages would need to be proven individually. In addition, determining damages would require “excessive difficulty” because there was little documentary evidence, and “using the individual testimony of self-interested class members to calculate the overtime hours they worked and the business expenses they incurred isn’t easy.” In a bellwether trial conducted by the district court, eight trial days had been required to determine damages for a sample of only eleven class members.

This decision helpfully clarifies the perennial debate between what constitutes a “damages” issue versus a “liability” issue. As I’ve often written on this blog, it can be helpful to think about the class certification analysis by analyzing how the named plaintiffs’ or putative class members’ claims would be tried in an ordinary individual case, and what evidence the defendant would be entitled to introduce. Here, the bellwether trial helped the Ninth Circuit determine that this case could not be litigated on a class basis.

Article By Wystan M. Ackerman of Robinson & Cole LLP

For more litigation legal news, click here to visit the National Law Review.

Copyright © 2022 Robinson & Cole LLP. All rights reserved.

Even in the 9th Circuit, merely conveying contaminated groundwater isn’t “transportation” of a “solid waste”

Just before the July 4th holiday, two Judges on a Ninth Circuit panel reversed their earlier conclusion that conveying contaminated groundwater can give rise to RCRA liability for the “transportation” of a “solid waste”.  The panel now agrees that the City of Vacaville’s mere conveyance of drinking water contaminated by someone else is not something Congress intended to criminalize (or make subject to civil penalties) in RCRA.

The two Judges reiterated their view that the contaminated groundwater does fall within RCRA’s definition of “solid waste”.

This case first caught my attention in January after the panel’s first bite at this apple. (See https://insights.mintz.com/post/102hg8l/overturning-the-9th-circuit-vaca…).

I guess it is progress that the panel has corrected one of its two mistakes.  But to suggest that conveying groundwater containing parts per billion of anything is the transportation of a solid waste is completely unfaithful to the language of RCRA as the panel has now recognized with respect to the definition of “transportation” but not the definition of “solid waste”.

It bears repeating that the water the City is providing to the residents of Vacaville reportedly meets all applicable federal and state standards, including those established under the Federal Safe Drinking Water Act, and the State of California has stringent standards of its own.  It is those laws, and not the federal law having to do with the transportation and disposal of solid waste, that should apply.

As I wrote in January, if we think those laws, or any of our other federal and state environmental laws, need improving, we should lobby our elected officials to improve them.  But stoking the fears of an already cynical citizenry that our federal, state and local governments aren’t doing their job isn’t worth whatever citizen suit plaintiffs might stand to gain from misusing the laws that we do have.

“RCRA’s context makes clear that mere conveyance of hazardous waste cannot constitute ‘transportation’ under the endangerment provision,” writes Judge Patrick J. Bumatay in the new ruling, joined by District Judge Douglas L. Rayes, sitting on the 9th Circuit by designation.

Article By Jeffrey R. Porter of Mintz

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Full Ninth Circuit Removes Unwarranted Hurdles to Class Certification in Big Tuna Antitrust Case

Court delivers a necessary course correction in the law of class certification.

There was reason for optimism in August 2021, when the Ninth Circuit Court of Appeals granted rehearing en banc of a 2-1 decision that would have made it more difficult for antitrust claimants to secure class certification. The three-judge panel in Olean Wholesale Grocery Coop., Inc. v. Bumble Bee Foods LLC, 993 F.3d 774 (9th Cir. 2021) had determined that Federal Rule of Civil Procedure 23(b)(3) required a district court to find that no more than a de minimis number of class members are uninjured before a class may be certified. Having announced this de minimis rule in its opinion, the court then took the unusual step of inviting the parties to argue whether the full court should rehear the issue en banc.

As we wrote last year when en banc rehearing was granted, with its de minimis rule, “the panel really jumped the median strip.” We argued that the rule conflated the question of whether issues common to the class predominate over issues unique to individual class members with the question of how the class is defined and that the Ninth Circuit’s new and unrealistic de minimis requirement erected an unnecessary procedural hurdle to class certification. Other commentators and amici argued that requiring proof that all but a de minimis number of class members are injured requires a determination on the merits, impermissible at the class certification stage.

In welcome news for claimants and attorneys who bring antitrust class actions, the Ninth Circuit sitting en banc decided against the de minimis rule, for all of the foregoing reasons, in Olean Wholesale Grocery Coop., Inc. v. Bumble Bee Foods LLC, No. 19-56514, 2022 U.S. App. LEXIS 9455 (9th Cir. Apr. 8, 2022).

In a thorough review of the requirements for class certification under Rule 23, the Ninth Circuit held that the movant’s burden is to prove the prerequisites of Rule 23 by a preponderance of the evidence, bringing the Ninth Circuit in line with the law in the First, Second, Third, Fifth, and Seventh Circuits. As for the predominance requirement of a Rule 23(b)(3) class, the court cited In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 311 (3d Cir. 2008) as amended (Jan. 16, 2009), to hold that, when assessing whether a plaintiff has proven that a common question related to a central issue in the claim predominates, a district court is limited to resolving whether the evidence establishes that a common question is capable of class-wide resolution, not whether the evidence in fact establishes that plaintiffs would win at trial.”

In rejecting the de minimis rule, the court began with the notion that class-wide proof is not required for all issues. Thus, the need for individualized assessment of a class member’s damages does not preclude a court from certifying a class. It contradicts this notion to require proof of injury of not more than a de minimis number of class members.

The presence of uninjured class members, the court held, does not defeat predominance. Predominance is defeated only where the class members cannot rely on the same body of common evidence to establish the common issue.

The presence of a large number of uninjured class members, however, could require a district court to consider whether the class definition is “fatally overbroad.” The remedy in that case, the court said, is to “redefine the overbroad class to include only those members who can rely on the same body of common evidence to establish the common issue.” “[T]he problem of a potentially ‘over-inclusive’ class,” the court said, “can and often should be solved by refining the class definition rather than by flatly denying class certification on that basis” (citation and internal quotation omitted).

With that, the Ninth Circuit reversed the three-judge panel and affirmed the certification of the classes by U.S. District Judge Janis L. Sammartino of California’s Southern District*, holding that the district court did not abuse its discretion in concluding that the methodology employed—statistical regression analysis and other expert evidence—”was capable of showing that a price-fixing conspiracy caused class-wide antitrust impact.”  [*Judge Sammartino subsequently recused herself and the case was reassigned to Chief Judge Dana Sabraw.]

The 9-2 decision was written by Circuit Judge Sandra S. Ikuta. In a dissenting opinion, Circuit Judge Kenneth K. Lee said as much as a third of the class members were unharmed. This is a “victory to plaintiffs” who will now be able to settle the action without having to prove their case trial, he said.

The suit was brought by direct purchasers of tuna products, indirect purchasers of bulk-sized tuna products, and individual end purchasers against the owners of Bumble Bee Foods LLC (currently in Chapter 11), StarKist Co., and Chicken of the Sea—which sell more than 80 percent of the packaged tuna in the United States. The industry has also been investigated by the Department of Justice in recent years, resulting in criminal guilty pleas by industry executives for participating in a price-fixing conspiracy.

Nothing in Rule 23 suggests that the presence of more than a de minimis number of uninjured class members affects whether questions affecting only individual class members predominate.

The now vacated de minimis rule conflates impact with damages and the predominance inquiry with potential overbreadth in the class definition. The Ninth Circuit’s en banc decision is a model of clear thinking and a welcome course correction in the law of class certification.

Article By Dan Mogin and Jonathan Rubin of MoginRubin

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