Cal Biz Lit

Just Say No! To Headless Class Actions

"What is a headless class action?" CBL hears you ask.  The usual scenario is this:  Plaintiff, or plaintiffs, file a class action.  It then turns out the plaintiffs have no standing to 
sue because they aren't class members, either because they never had causes of action against the defendant or, because, as a result of changed circumstances or law, they no longer do.  In such headless class action cases, the question presented is whether the plaintiffs can conduct discovery from the defendant to try to find better class representatives.  There was quite a bit of appellate activity on this issue several years ago, which CBL blogged about here, here and here, among other places.  But in general, the answer to the question often was "yes."

Well, here's a case where the answer isn't just "no."  The answer is "hell no!"  We're talking Starbucks Corporation v. Superior Court (Lords) (April 25, 2011) ___Cal.App.4th___ (Fourth Dist., G043650). 

Facts:  back in the day when Jerry Brown was the youngest governor in the history of the Golden State, and long before he became the oldest, California passed a law that required the "destruction" by "permanent obliteration" of all records of minor marijuana convictions that were more than two years old, and made it illegal for employers to ask about such convictions on their job applications.  Violation brought either actual damages or statutory penalties of $200 per applicant.  The statutes can be found at Health & Safety Code sections 11361.5, subd. (a), 11361.7 and Labor Code section 432.7, subd. (a).

Starbucks allegedly had a "have you ever been convicted" question on its job application that didn't exclude old, minor marijuana convictions.  So three applicants -- who had nary a conviction among them -- had the bright idea of suing Starbucks on behalf of 135,000 job applicants, seeking some $26 million in penalties.  In a previous published decision, Starbucks Corporation v. Superior Court (2008) 168 Cal.App.4th 1436 (Starbucks I), the Court of Appeal reached the rather sensible conclusion that applicants who had no marijuana convictions had no standing and that as such, the plaintiffs could not serve as class representatives. 

So, after Starbucks I, everybody hauled themselves back to the trial court, where the plaintiffs asked to conduct discovery so they could find some better class representatives.  The idea was this:  Starbucks should search through all their job applications to find applicants with marijuana convictions.  They should then send this information to a "neutral administrator" who would write the convicted applicants and ask, "hey, how would you like to disclose your marijuana conviction to the world and be class representatives in our great big fancy case against Starbucks?"  And amazingly, the trial court said "Sure, why not?"

To which the Court of Appeal said "We'll tell you why not:"

Nobody can misunderstand this clear legislative purpose. Records of minor marijuana convictions are to be accorded the highest degree of privacy; they must be treated as if they never existed. Despite these strongly worded prohibitions, the subject discovery order requires Starbucks to rummage through old job applications to locate offenders whose existence otherwise would be hidden from public exposure.
Considering the manifest harm and the minimal benefit (all of which are wrapped up in the same legislation), the discovery order cannot possibly pass the Parris balancing test. As Hooper holds, publicly disclosing marijuana-related offenses covered by the marijuana reform legislation violates the individual offender's right of privacy.

But there's additioanal language CBL likes even more. 

Plaintiffs' attorneys say the class remedy is necessary because the $200 statutory penalty is de minimis. They frankly desire to achieve a “more powerful litigation posture” because “[i]n numbers there is strength.”
We recognize class counsel's tactical motivations to increase their side‟s bargaining leverage, but the argument militates against a class action, rather than in its favor. The excessive penalties sought by class counsel bear little relationship to any true public interest for what, at most, appears to be a technical violation of Labor Code section 432.8 by Starbucks. The strength that may be gained in numbers also may produce the “absurd result of turning the statute into the veritable adding machine that has been decried by our Supreme Court.”

Wow.  Language that will appear forever after in briefs opposing class certification in California.

One side note:  years ago, a friend who is also a marketing consultant told CBL that his blog posts would be more compelling if he included images.  So CBL often does.  But who knew we'd get to include both the Starbucks logo and a marijuana leaf in the same post!

Arbitration: US Supremes Overrule California's Discover Bank Rule

In Discover Bank v. Superior Court (2005) 36 Cal. 4th 148,the Cal Supremes held that in a contract of adhesion (which virtually all consumer contracts are), arbitration provisions that waived class actions were void as against public policy.

Today, in a decision that shouldn't have been too surprising, the US Supremes said "oh no they aren't."  5-4 vote, opinion by Justice Scalia, Discover Bank held preempted by the Federal Arbitration Act, 9 USC §2.  Period.  No exceptions.  Thank you for playing.  No room for argument.  End of story.  A T & T Mobility LLC v. Concepcion ___ U.S. ___.

Did We Say $100M for Barbie? No No -- We Meant $88M for Bratz

CBL likes reporting on big verdicts.  We particularly like the fact that we aren't the ones having to make that phone call reporting that things didn't go so well.  At least we haven't been lately.  And that takes us to Mattel v. MGA Entertainment.  The legal press and blogosphere were all agog over this huge intellectual property fight over who owned the rights to the Bratz dolls.  And CBL certainly got its licks in here, here, here and probably a bunch of other places. 

So, brief history:  Federal jury in Riverside, CA finds MGA stole the Bratz doll IP from Mattel, awards $100 million to Mattel. Trial judge enjoins MGA from selling any more of the pouty ones, imposes a constructive trust in Mattel's favor over the Bratz names and just about anything else relating to the idea of the product.  As Judge Kozinski of the Ninth Circuit puts it:  "In effect, Barbie captured the Bratz.."  The Ninth Circuit takes away the equitable relief and makes a variety of rulings that require vacating the jury's verdict and having a new trial.  Judge Kozinski again:  "America thrives on competition; Barbie, the all-American girl, will too."

So, the file and all the lawyers get shipped over to the Federal District Court in Orange County for a new trial.  And late last week,  the jury reached a verdict.  Only this time, it finds Mattel guilty of corporate espionage and awards $88.5 Million to MGA against Mattel.   

This Just In: California Court Throws Out Tort Case For Want of Legal Duty

Last month, CBL was blogging about legal duty, cars flying off the street into phone booths and the like, and generally grumbling that tort duty seemed to extend just about every place and to everything.  Well, here's a case suggesting there may be some limits after all.

Back when California had actual factories where products were actually made, we used to see quite a few personal injury cases involving unguarded power presses and similar equipment.  I'm guessing most of those cases went to Asia along with the manufacturing and the equipment.  But Garcia v. Becker Bros. Steel Co. (April 18, 2011) ___Cal.App.4th____ (Second Dist., B221096) is such a case. 

Here's the deal:  Becker Bros. buys a slitter line (a collection of machines that slices sheet metal) from Cincinnati Company in 1973.  In 1974, California starts requiring guarding, and Cincinnati sends Becker Bros. a couple of letters telling it to guard the equipment.  Becker Bros. doesn't, and over the course of twenty-six years, one employee sustains a  finger-tip amputation.

In 1999, Becker Bros. sells the equipment to Columbia Steel.  Columbia Steel tanks, its bank takes the equipment.  Bank eventually sells the equipment to Lexwest.  In 2004, Lexwest's employee Garcia sustains a finger amputation using the still unguarded equipment.  Garcia sues Becker Bros. for strict product liability and negligence.

Trial court says ixnay, and Court of Appeal agrees.  1.  No strict product liability for occasional sale of equipment.  2.  As to negligence, no legal duty to an employee of a subsequent purchaser.   Period.  Ever.  Assuming, without deciding, that Becker Bros. may have owed a duty to employees of Columbia Steel, that's where the duty ended.  No legal duty to employees owners farther down the feeding chain.

Attorney General Posts 2010 Proposition 65 Settlements

All Proposition 65 settlements are supposed to be reported to the California Attorney General at least 45 days before going to court for approval, and all are posted on the Attorney General's web site.  Then, once a year, the AG posts a compilation of the settlements on her web site here.

CalBizLit spent some time looking at this year's settlements to see what we could detect in the way of trends.  And we now have our own compilation showing the average penalty, attorneys' fee / costs allocation and other payment for each bounty hunter private party enforcer.  But first, some caveats:

First, what the AG herself says about this data is true: 

Settlements generally include injuctive relief . . . such as product reformulation, emission reduction or warnings.  This injunctive relief is often complex, cannot be presented in summary form, and requires reference to the actual settlement documents to accurately assess.  This report should not be used by itself to evaluate Proposition 65 settlements.

Fine.  Now another thing.  The AG's counting of numbers of settlements isn't always accurate.  For example, the AG shows 37 settlements by Center for Environmental Health for a thumping total of $6,933.300.  That would average $187K per settlement, seemingly suggesting we should have all become bounty hunter private party enforcer lawyers when we got out of law school.  But that's not right.  Several of these were large opt-in settlements where scores of companies chose to join in.  Since CBL doesn't have the time to wade through these settlement documents to get an actual count, we left these out of our analysis.

So with those caveats, here are the numbers for 2010 (you can click the image to see it upclose and big):

  

As you can see, the major players for 2010 were Russel Brimer, Center for Environmental Health, Consumer Advocacy Group, Anthony Held and Mateel Environmental Justice.  CBL took a look at how their average settlement numbers compared over the last four years.  Again, you can click the graphic to get a larger version:

Finally, CBL compared allocation of all the settlements over the same four year period amongst penalties (75% of which go to the State of California, which can use the money), "other payments" (environmental organizations designated by the plaintiff, and often the plaintiff organization itself) and attorneys' fees and costs.  The more cynical among our readers will not be surprised at what we found:

Yes, that's right.  Looking just at bounty hunters with settlements in 2010, less than 10% of the more than $38 million paid to them in the past four years went to penalties.  64% went to attorneys' fees and costs.  And if you exclude the settlements by As You Sow and Center for Environmental Health, which are genuine environmental adocacy groups with missions far broader than Proposition 65 enforcement, seventy-six percent of all amounts paid to the remaining persons and organizations over the past four years went to attorneys' fees and costs.

Hmm, do we think this is what the voters had in mind twnty-five years ago when they went to the polls and enacted the "Safe Drinking Water and Toxic Enforcement Act of 1986?"  I'm thinking maybe not . . . . .