Class And Tort Actions

McDonald’s On The Hook For Class Certification Of Wage And Hour Claims Under Ostensible Agency Theory

Emily Leahy
July 18, 2016

Despite finding that as a matter of law McDonald’s was not directly liable as a joint employer, a California federal judge granted class certification to McDonald’s workers, saying the claims against McDonald’s Corp. can proceed on a classwide basis under a theory of ostensible agency.  Under this theory, McDonald’s could be liable because employees reasonably believed they were employed by McDonald’s.

The Facts

The workers filed the class action in 2014, alleging a variety of wage and hour violations by defendant the Edward J. Smith and Valerie S. Smith Family Limited Partnership (“Smith”), which owns and operates five restaurants in California under a franchise agreement with McDonald’s. Plaintiffs also sued McDonald’s on direct and vicarious liability grounds.

McDonald’s moved for summary judgment on the grounds that it was not a joint employer. The Court granted summary judgment on plaintiffs’ direct liability theories, finding that McDonald’s is not directly liable as a joint employer with the Smiths, but denied it on the issue of whether McDonald’s may be liable on an ostensible agency basis. Ostensible agency exists where (1) the person dealing with the agent does so with reasonable belief in the agent’s authority; (2) that belief is “generated by some act or neglect of the principal sought to be charged,” and (3) the relying party is not negligent. Kaplan v. Coldwell Banker Residential Affiliates, Inc., 59 Cal. App. 4th 741, 747 (1997).

Plaintiffs then settled with the Smiths, leaving the McDonald’s entities as the last standing defendants.

Plaintiffs moved for certification of a class to pursue claims for: (1) miscalculated wages; (2) overtime; (3) meals and rest breaks; (4) maintenance of uniforms; (5) wage statements; and (6) related derivative claims.

Ostensible Agency Not A Bar To Class Certification

McDonald’s argued that allegations of ostensible agency are incapable of being resolved on a classwide basis because they involve individualized questions of personal belief and reasonable reliance on an agency relationship.

The court disagreed, holding that ostensible agency does not demand unique or alternative treatment, and “certainly does not stand entirely outside Rule 23 as impossible to adjudicate on a classwide basis.”

Continue reading McDonald’s On The Hook For Class Certification Of Wage And Hour Claims Under Ostensible Agency Theory

SCOTUS Decision in Spokeo Creates Additional Obstacle for Plaintiffs Seeking Redress for Statutory Violations

Chris Spiers
May 18, 2016

On Monday, the Supreme Court delivered an opinion in Spokeo v. Robins that raises the bar for class action plaintiffs bringing suit for violations of federal statutes, such as the Fair Credit Reporting Act of 1970 (FCRA). In a 6-2 decision, the Supreme Court held that Article III standing requires a concrete injury even in the context of a statutory violation, at the same time confirming that an intangible injury can be considered “concrete” under the right circumstances.

Plaintiff Thomas Robins filed suit under the FCRA after Spokeo, a consumer reporting agency, published incorrect information about him on its “people search engine.” According to the complaint, Spokeo willfully violated the FCRA by publishing false information regarding Robins’ age, income, and marital status. The District Court dismissed the complaint on the grounds that Robins failed to meet Article III’s standing requirements because he did not allege that the false report resulted in an injury-in-fact. The Ninth Circuit reversed the decision, holding that it was enough for Robins to allege that Spokeo violated an individual right imposed by statute. Monday’s ruling vacates that decision and remands the case to the Ninth Circuit.

According to Justice Alito’s majority opinion, the Ninth Circuit erred in its Article III standing analysis by failing to address the requirement that an injury be “concrete,” as well as “particularized.” According to the decision, “Robins could not, for example, allege a bare procedural violation, divorced from any concrete harm, and satisfy the injury-in-fact requirement of Article III.” Instead, the Court held that “a ‘concrete’ injury must be ‘de facto’; that is, it must actually exist,”in order to satisfy Article III. At the same time, the Court pointed out that “’[c]oncrete is not, however, necessarily synonymous with ‘tangible.’” Instead, the Court recognized that an intangible right may provide the foundation for Article III standing if there is a ”close relationship” between the alleged intangible harm and a harm traditionally recognized by Congress and common law.

In a concurring opinion, Justice Thomas reached the same conclusion via an historical analysis of private versus public rights provided by statute. His concurrence points out that the concept of injury-in-fact differs depending on the nature of the suit. According to Justice Thomas, a private plaintiff bringing suit to protect his own statutory rights need not allege actual harm beyond the violation of that particular right, while a private plaintiff bringing suit to protect the public’s statutory rights must make a showing of concrete and particularized harm.

In dissent, Justice Ginsburg, joined by Justice Sotomayor, disagreed that remand was necessary because the injuries alleged in the complaint were both particularized and concrete. Particularly disturbing to Justice Ginsburg was the fact that the incorrect information on Spokeo’s website included a picture, as well as information about Robin’s finances and marital status.

In a score for class action defendants, the Spokeo decision makes it clear that bare allegations that a consumer protection statute was violated will no longer be enough for a class action plaintiff to advance past the pleading stage. Moreover, although the opinion leaves the door open for suits based on intangible injuries, the majority cautions that such injuries would have to reflect an injury that the courts, as well as Congress, have previously been determined to be particularized and concrete enough to satisfy Article III.

California’s ‘Made In The USA’ Law Is Now More Business-Friendly

Eric Junginger
February 29, 2016

So what exactly does the “Made in the USA” label on products and clothing sold in California really mean?  Starting on January 1, 2016, it means that not all of the parts of the merchandise with that label were actually made in the U.S.A.

Prior to 2016, California had the most stringent law governing “Made in the USA” labels on products, which made it unlawful for any entity to sell a product in California with the “Made in the USA” label when the product or any part of the product was made entirely or substantially produced outside of the U.S.  In other words, the general rule was that 100% of the product (including all of its components) had to be made in the U.S. in order to market it with the “Made in the USA” label in California.  This law generated many class actions in California.

Under amended California Business and Professions Code section 17533.7, California now allows the “Made in the USA” label if one of the following two criteria are met:  (1) If all of the foreign-made units or parts in a product is not more than 5% of the final wholesale value of the product; or (2) If all of the foreign-made units or parts in a product – that cannot be obtained from a domestic source – is not more than 10% of the final wholesale value of the product.  California Governor Jerry Brown signed this law to stop the tide of class actions filed in California concerning “Made in the USA” claims where tiny components of the end product were foreign-made, and to bring its law closer to the rules set forth by the Federal Trade Commission (“FTC”) .

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Key Class Action Developments In 2016 In Northern California

Eric Junginger
February 25, 2016

Class action filings are plentiful in California.  Each day, there are 10-20 new class actions filed in California’s state and federal courts.  They include the following categories of cases:

  1. Labor and Employment [e.g., wage and hour, overtime, Fair Labor Standards Act (“FLSA”), discrimination, and Employee Retirement Income Security Act of 1974 (“ERISA”) / employee benefits];
  2. Consumer class actions [g., products, food labeling, Unfair Competition Law (“UCL”) (Cal. Bus. & Prof. Code, § 17200 et seq.), False Advertising Law (“FAL”) (Cal. Bus. & Prof. Code, § 17500 et seq.), and Consumers Legal Remedies Act (“CLRA”) (Cal. Civ. Code, §1750 et seq.)];
  3. Civil Rights (42 U.S.C. § 1983 claims), including Americans with Disabilities Act of 1990 (“ADA”) Titles II and III class actions and disability claims; and
  4. Data Breach and Privacy class actions [g., Fair Credit Reporting Act of 1970 (“FCRA”) and Fair and Accurate Credit Transactions Act of 2003 (“FACTA”) (15 U.S.C. §1681 et seq.), Telephone Consumer Protection Act of 1991 (“TCPA”) (47 U.S.C. §227)].

Specifically, over the past month in Northern California, consumer, employment, and TCPA class actions have dominated the filings, as indicated in the chart below.


With so many class actions filed, many of them are settled prior to trial – 2 were especially noteworthy.

  • On February 8, 2016, Warner/Chappell Music Inc. agreed to establish a $14 million fund to repay those who have over the last 60+ years paid fees to license use of “Happy Birthday to You!” (Marya v. Warner/Chappell Music, Inc., C.D. Cal., No. 13-04460).
  • On February 16, 2016, a class settled for $13 million with LinkedIn over sending multiple e-mails to members. The settlement included a $3.25 million attorney fee award and $1,500 incentive awards for each of nine lead plaintiffs.  [Perkins v. LinkedIn Corp., N.D. Cal., No. 5:13-cv-04303-LHK).

Attorneys in Hanson Bridgett’s Class Actions and Mass Torts group monitor these developments in Northern California on a daily basis and have deep experience defending and favorably resolving these types of claims.

SCOTUS Reminds CA Courts of the Strength of Preemption Under Concepcion

Matthew Peck
December 21, 2015

In a 6-3 opinion authored by Justice Breyer, the Supreme Court reversed a California court of appeal decision that refused to enforce a class-wide arbitration waiver on the grounds the waiver—although unenforceable under California state law at the time of contracting—was preempted by the Court’s holding in AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011).  DirecTV, Inc. v. Imburgia, 2015 WL 8546242 (Dec. 14, 2015) (“Imbrugia“). In Concepcion, the Court applied Federal Arbitration Act (“FAA”) preemption to strike down a California law that prohibited consumer class-arbitration waivers on unconscionability grounds.

At issue in Imbrugia was a provision in a DirecTV agreement that required binding arbitration to resolve any disputes but then voided the arbitration requirement “if the law of your state would find this agreement to dispense with class arbitration procedures unenforceable.” While the case was pending in the trial court, the Court issued its opinion in Concepcion. DirecTV then sought to compel arbitration because it could now avoid class-wide arbitration given that California’s prohibition on class-wide waivers was invalidated by Concepcion. Notwithstanding, the court of appeal affirmed the trial court’s denial of DirecTV’s motion to enforce the arbitration agreement reasoning that “law of your state” meant California law as it existed prior to Concepcion. The Ninth Circuit came to a conclusion directly opposite of that in Murphy v. DirecTV, Inc., 724 F.3d 1218 (9th Cir. 2013) on precisely the same issue involving a substantively identical arbitration agreement.

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CA’s Highest Court: Organic Consumer Protection Suits Not Preempted

Shannon Nessier
December 4, 2015

Justice Werdegar, in a unanimous opinion released late Thursday, delivered news the Organic industry was hoping not to get: California consumers are not prohibited from challenging false organic food labels on the basis of federal preemption.

In Quesada v. Herb Thyme Farms Inc., S216305 (California Supreme Court Dec. 3, 2015), a consumer alleged that Herb Thyme Farms Inc. was selling herbs labeled organic, which were, in whole or in part, made up of conventionally grown herbs. The district court found the deceptive labeling action preempted by the Organic Foods Production Act of 1990, which regulates farming methods for organic-marketed produce and organic certification programs. The Court of Appeals affirmed that outcome, though by finding the claims preempted by implication.

The California Supreme Court disagreed. The silence of the Organic Foods Production Act on the issue of consumer protection lawsuits, and the fact that deceptive labeling claims are generally governed by state law, both weighed against the presumption of federal preemption. (Id. at *7.) The Court reasoned that the purpose of a clear national definition of organic production was so consumers could rely on organic labels and to curtail consumer fraud. (Id. at *2.) Because the state claims advance, rather than hinder, the Legislature’s purposes and objectives in the Organic Foods Production Act, the Court found that the state claims would not get in the way of the federal statutory scheme. (Id.)

Though consumers and Organic producers will have to wait and see what impact this decision will have on the way Organic food is marketed in California and the volume of Organic deceptive labeling claims filed in state courts, it is certain they will all be watching carefully.

SCOTUS To (Hopefully) Clarify Congress’ Right To Create Art. III Standing

Chris Spiers
November 20, 2015

Can Congress create a statutory right to standing for a Plaintiff who suffers no concrete harm?

On November 3, 2015, the Supreme Court heard oral arguments in the closely watched class action, Spokeo, Inc. v. Robins, a case dealing with a statutory cause of action created by the Fair Credit Reporting Act (FCRA). At issue: whether Congress can create a statutory right to standing for a plaintiff who suffers no concrete harm?

Spokeo is a website that allows users to search for an individual’s personal information. In Spokeo, Plaintiff Robins alleges that Spokeo willfully violated the FCRA by publishing a consumer report that falsely claimed he had a graduate degree and was married with children. According to Plaintiff, the false report injured his job prospects. Spokeo moved to dismiss the case, arguing that the alleged injury was not enough to meet Article III’s requirement that a party seeking relief must have suffered an injury-in-fact. The District Court had dismissed the case, finding that Robins lacked standing because he failed to allege an injury in fact. The Ninth Circuit Court of Appeals sided with Robins and reversed the District Court’s decision, holding that Robins had Article III standing because the mere violation of a statutory right was enough to satisfy Article III.

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Defending Discrimination Lawsuits in Silicon Valley Before They Are Filed

Emily Taylor
April 6, 2015

Employment policies and procedures are often an afterthought when starting a tech company, but they could mean the difference between success or failure.  Even well-established tech companies are learning their lessons the hard way.

A lawsuit filed in March by a former computer engineer at Twitter serves as a wake-up call for tech companies to have clear, written, nondiscriminatory, employment policies and procedures and to train supervisors on those policies.  These simple steps could prevent costly employment discrimination lawsuits altogether, or at a minimum, enhance the defensibility of such cases.

Implementing equal employment opportunity and anti-discrimination policies early as well as the consistent enforcement of such policies help promote a non-discriminatory culture as a company develops.

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Proposed Prop. 65 Regulations Make California More Unfriendly Market

Shannon Nessier
March 16, 2015

California’s Safe Drinking Water and Toxic Enforcement Act of 1986 [Cal. Health & Safety Code §25249.5 et seq.], known as Prop. 65, has created numerous hurdles for manufacturers and distributors who want to sell their products to the expansive California market.  On January 12, 2015, the Office of Environmental Health Hazard Assessment (“OEHHA”) released proposed modifications to Prop. 65 which, if adopted, would make those hurdles even larger, especially for those in the food industry.

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Express Release Of Liability By Minor Bars Parents’ Claims

February 1, 2015

If you think that your minor child signing a waiver or release agreement will not affect your rights as a parent and can be set aside when the child becomes an adult, think again.  In Eriksson v. Nunnink, the California Court of Appeal held that a release signed by a minor child and her parent cannot be disaffirmed with the minor turns 18, and the release is an absolute defense to a parents’ subsequent tort and emotional distress claims.

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