Tuesday, December 28, 2010

Do you own a body part or cell after it is removed by medical procedure?

This quote basically explains why I love the practice of law: 
[Moore v. Regents of the University of California (1990) 51 Cal3d Page 120, at 135]

No court, however, has ever in a reported decision imposed conversion liability for the use of human cells in medical research.*fn15 While that fact does not end our inquiry, it raises a flag of caution. (See fn. 16.) In effect, what Moore is asking us to do is to impose a tort duty on scientists to investigate the consensual pedigree of each human cell sample used in research.*fn16 To impose such a duty, which would affect medical research of importance to all of society, implicates policy concerns far removed from the traditional, two-party ownership disputes in which the law of  conversion arose.*fn17 Invoking a tort theory originally used to determine whether the loser or the finder of a horse had the better title, Moore claims ownership of the results of socially important medical research, including the genetic code for chemicals that regulate the functions of every human being's immune system.*fn18

By the way, the Supreme Court declined to recognize a continuing property interest in one’s own body parts once they are removed by medical procedures.  Thus, the Court did not extend the “Conversion” tort to cover those parts, stating that the person undergoing the procedure lost any continuing property interest on removal.  Instead, the liability, if any, the Court concluded, would arise out of a researcher’s or physician’s duty to disclose before the removal what the intended use of the body part was to be. 

© 2010 FXP
 "If the pink slip doesn't fit, get redressed!"
Click to see my wardrobe of remedies. Link

U.S. Supreme Court to Corporations: "You've Got A Lot of Nerve!" -- But Where Is It?

In my practice, a question arises from time to time:  Is this case appropriate to file in U.S. District Court?  The answer is not a matter of whim, but statutory duty:  if a defendant is resident outside the state of California, and my client (the party suing the defendant) is resident within California, and no other defendant resides in California, then the action must be filed in federal court (assuming the claim is sufficiently large).   This requirement is jurisdictional, and was originally thought necessary by Congress to avoid an out-of-state defendant being treated unfavorably by a  local court system biased in favor of its own citizens. 

Ah, but lawyers are ever parsing the meaning of seemingly plain words, such as "residency."  Where in heaven's name, is a "corporation" resident?  Where it is incorporated?  Where it does most of its business?  Where it maintains its corporate headquaters?  Where its top executives meet to run the operation?   Where oh where can my corporation be?   Plaintiff employees care about questions like these because their lawyers generally feel more comfortable in local state courts--and well they should.  The rules of evidence, the rules of pleading, and the rules of procedure are also sometimes foreign to attorneys accustomed to practicing in State courts.  Federal courts also have a nasty reputation of finding ways to dismiss employment law cases by summary judgment.  Maybe they find them somewhat parochial compared to big white collar crime or anti-trust cases.  

And so, I present this information to my readers.  The U.S. Supreme Court has elected to "brighten the line" of when "diversity of citizenship" exists where the "citizen" is a corporation.  Hint:  Look for the phrase "nerve center."  Who said corporations can't "feel"?   
The following was written by Michael J. Holmes
 and Heather Sullivan Riley
 Allen Matkins Leck Gamble Mallory & Natsis LLP
 San Diego Office
Source: Martindale-Hubbell
This decision sets out a simplified, more predictable jurisdictional rule for determining whether certain cases involving corporations that operate in multiple states can be removed to federal court. It clarifies what is often an unpredictable and expensive phase of litigation. Affected companies should review their policies and procedures in light of this decision.
Hertz Corp. v. Friend
In early 2010, the U.S. Supreme Court unanimously ruled that a corporation's "principal place of business" (i.e., where it is a citizen for jurisdictional purposes) is the place where the corporation's high level officers direct, control, and coordinate the corporation's activities - the corporation's "nerve center." Hertz Corp. v. Friend (February 23, 2010).
Essentially, the decision clarifies the rule concerning federal diversity jurisdiction by:
• Uniformly defining a corporation's "principal place of business" as the place where the corporation's activities are controlled;
• Limiting a corporation's "principal place of business" to only one state; and
• Disregarding the total amount of business activity a corporation may conduct in particular states, as well as other factors previously considered by the various circuit courts to determine a corporation's citizenship.
Various Tests Previously Employed By The Circuits
Before the Hertz decision, the circuits (and sometimes different courts within a single circuit) applied general multifactor tests in different ways to try to determine the citizenship of a corporation for diversity jurisdiction purposes. Some courts looked to where a corporation's "nerve center" was located - the place from which "it radiates out to its constituent parts and from which its officers direct, control and coordinate all activities without regard to locale." Other courts focused more heavily on where a corporation's actual business activities were located and examined a large list of factors, including, for example, plant location, sales or servicing centers, transactions, payrolls, or revenue generation. Because these tests were not uniform, a corporation's citizenship could be different depending on the circuit deciding the question. Further, the expense of determining corporate citizenship was often unnecessarily high due to the complexity and unpredictability of some of these tests.
The Hertz Decision: Applying The "Nerve Center" Test
In Hertz, two California citizens sued Hertz Corporation in state court alleging violations of California's wage and hour laws. Hertz sought to remove the case to federal court because of diversity jurisdiction. In support of their request, Hertz filed a declaration showing that although Hertz did business in California, Hertz' "principal place of business" was in New Jersey, the location of its corporate headquarters and the place where its core executive and administrative functions are carried out.
The District Court applied Ninth Circuit precedent that looked at the amount of a corporation's business activity state by state. Because the amount of Hertz' business activity was significantly larger in California than in other states, the District Court determined that California was Hertz' "principal place of business," and, thus, Hertz was a California citizen. The Ninth Circuit affirmed the decision, and the U.S. Supreme Court granted a writ of certiorari.
To address the split in the circuits and to try to simplify the jurisdictional test, the Supreme Court concluded:
. . . "principal place of business" is best read as referring to the place where a corporation's officers direct, control, and coordinate the corporation's activities. It is the place that Courts of Appeals have called the corporation's "nerve center." And in practice it should normally be the place where the corporation maintains its headquarters - provided that the headquarters is the actual center of direction, control, and coordination, i.e., the "nerve center," and not simply an office where the corporation holds its board meetings (for example, attended by directors and officers who have traveled there for the occasion).
The Supreme Court explained that this approach would avoid the complex jurisdictional tests that complicate a case, eat up time and money, produce appeals and reversals, encourage gamesmanship, waste judicial resources, and diminish the likelihood that a definite outcome can be predicted. Predictability, the Supreme Court noted, is valuable to corporations making business and investment decisions, and it benefits plaintiffs deciding whether to file in state or federal court.
The Supreme Court recognized, however, that the test will not always be simple. For example, in this age of video conferences, email and telecommuting, corporate officers may work at several different locations, dividing the company's command and coordinating functions. Further, a company's business activities may be very visible to the public in one state, while its top officers quietly direct those activities in another state. Such situations will require greater discovery and expense as opposed to the simpler situation addressed by Hertz.

"If the pink slip doesn't fit, get redressed!"
Click to see my wardrobe of remedies. Link

The Sovereign Fox Among the Chickens: The University of California.

The University of California is a special creature of the State Constitution. Our Supreme Court in 2008 described it as having broad autonomy in self-governance, even to the extent of devising internal quasi-judicial procedures and remedies for the resolution of employer-employee disputes. The Supreme Court has interpreted the California Whistleblower Protection Act [section 8547.10, subdivision (c), pertaining to employees of the University of California.] to confer upon the University uniquely the power to establish its own investigative procedure and fact finding to arrive at a final decision, unreviewable except by Writ of Mandate, and when reached, ending an employee’s further recourse. That is, there is no cause of action in common law tort or under the Whistleblower Protection Act to bring a separate and independent court action for damages.

This special conferral of nearly autonomous power reflects the power invested in the Board of Regents as uniquely suited to govern the affairs and practices of the University system. The State Personnel Board likewise has substantial autonomy to oversee employment relations of the other state agencies, but not the kind of nearly unreviewable power given to the Regents. In 2001 the Legislature accorded an aggrieved an employee the right to pursue a court action even if the Agency reached a decision on the employee’s internal complaint. The Legislature however did not give that same right to University employees.

The result is that the “exhaustion of remedies” behind Govt. C. Section 8547.10 has real teeth. It is the exclusive remedy available to the University employee if the University reaches a decision. Only if the University fails to reach a decision within the time accorded by the statute is the employee allowed the “back up” remedy of bringing a court action.

In conclusion, the University of California stands apart from other state agencies in that it may conclusively determine if it, as an employer, has violated the employment rights of a University employee in retaliating against an employee under the Whistleblower Protection Act. This quasi-sovereign fox must surely enjoy the taste of the hapless chickens.

See generally: Miklosy v. Regents of University of California (2008) 44 Cal.4th 876, 900.

© 2010 FXP

"If the pink slip doesn't fit, get redressed!"
Click to see my wardrobe of remedies. Link

Monday, December 27, 2010

Maybe Home Depot Execs Now Feel the Need "to Sit Down".

Home Depot brought a demurrer [attack by motion that the complaint does not allege facts sufficient to state a cause of action] to allegations that its failure to provide its retail employees seating accommodations was a violation of Labor Code Section 1198 and Wage Order 2-2001.  Specifically, Home Depot alleged that the plaintiffs could not, as a matter of law, allege a violation of the "Private Attorneys General Act of 2004" ["PAGA"] because that Act did not contemplate actions to recover penalties by private action where: a) the Wage Order stated the employer duty as an affirmative obligation rather than a prohibition and b) the Wage Order contained its own penalty provision, so the "default remedy" under "PAGA" did not apply.  The Court of Appeal rejected both arguments based on careful statutory interpretation getting to the question of what the Legislature intended. 

What does this summary mean in plain English used by non-lawyers?  The decision establishes that violations of the Labor Code and Wage Orders for matters other than wage violations will also be covered by PAGA.  This decision invites an attack by employees upon company wide practices for a wider category of violations.  The court's analysis was that the Legislature wanted exactly that, because of inadequate Agency resources to enforce the penalty provisions.  The incentive to lawyers and clients:  share in the penalties, and collect sizable fees, either as a percentage, or by "lodestar" hourly rates. [75% goes to the State, and 25% to the employees.  See generally Labor Code Sec. 2699(j).]

In the Home Depot case, the wage order, long ignored, will now be taken seriously.  The Order requires an employer to provide reasonable seating arrangements at counters in the immediate work area for employees where to do so would not interfere unduly with the business operation and work to be done.  The penalties are $100 for the first violation "per each aggrieved employee" for the first payperiod, and $200 for each violation "for each aggrieved employee" for each payperiod thereafter.  

What is the money at stake?  Assume for example 3000 retail employees in the 300 Home Depot Stores in California.  Assume a one year statute of limitations on a "penalty" recovery provision.  Assume 26 pay period per year.  $5,100 per "aggrieved employee" per year times 3000 employees times 3 years equals $45,900,000.00.   Only $11,475,000.00 of that would go to the employees themselves.  If a percentage of 40% is used for attorney's fees, those would be $4,590,000.00.   With numbers like these, it is possible to understand the incentive behind the PAGA action, and Home Depot's furious effort to stop it at the demurrer stage.  
The Case:  Home Depot USA Inc., v. Superior Court (2010) 2010 DJDAR 19245. 

"If the pink slip doesn't fit, get redressed!"
Click to see my wardrobe of remedies. Link

The Logic of Scarcity.

Here is the logic of scarcity: I hurt, therefore you should hurt too. If this is the prism by which I see the world, then I will allocate, measure, and divide according to the limitations I experience. If I am poor, I too will seek for you to be poor by my choices. In my scarcity mindset, that is only “fair” because I, that is, my ego, am the measure of what is available.

This is not abstract spirituality. This mindset plays out in jury verdicts during hard economic times when people either are unemployed or fear becoming unemployed. This “scarcity mindset” operates from the language of fear that “there is not enough.”

Now, the reality is that jurors are awarding less in damages during these difficult days. I admit that it is pure speculation on my part as to why. Any reputable social scientist would begin by asking the jurors themselves about their attitudes. Whatever the cause, my brethren in the trial bar are reporting a common trend: jurors are awarding less, and more often, awarding nothing.

The main arm of the plaintiff’s personal injury bar, the “Consumer Attorneys of California” [Note how that dirty phrase “personal injury attorney” is omitted by the name] reports that the number of personal injury cases filed has dropped 24 per cent in the last decade. Even so, trial lawyers are getting feedback from disgruntled jurors that they are more cynical, less compassionate, more withholding. Jamie Court, president of the Santa Monica based consumer rights group “Consumer Watchdog” states: “If you’re out of work and trying to find a job, why should someone who has been injured get money when you’re hurting too?”

A more systematic investigation is needed to draw reliable conclusions. Such inquiry would include some social psychology to interpret the results as well. But the reports of trial lawyers who are well known in Southern California, such as Browne Greene in Los Angeles, are that “It’s harder today for a plaintiff to get justice than it was before.” Mr. Greene also says it is harder to weed out cynical, angry jurors because the courts have reduced the time and scope of voir dire [jury selection].

The cynicism is aggravated by poorly selected cases, overreaching requests for damage awards, and delays in trial caused by overtaxed courts. People are just getting pissed off.

A good trial lawyer will feel passionately about his case, and that passion has to come through as sincerity in the presentation of the case. An excellent trial lawyer I know takes negative attitudes of jurors during voir dire, and uses them as springboards to explore why that negative attitude should not operate in his particular case. I think recent juror feedback indicates too that careful preparation, efficient use of time when qualifying documents and witnesses as evidence, and a reputable demonstration of the actual harm done to a client, will aid the trial lawyer in getting past the scarcity mindset.

Yet, I am disturbed by the logic that states that I will have less if I award you more. If that is the explanation for recent reduced jury verdicts, it does not reflect well upon the community spirit.

[Quotes are taken from the Los Angeles Daily Journal, Vol. 123, No. 249, Mon. Dec. 27, 2010, page 1]

"If the pink slip doesn't fit, get redressed!"
Click to see my wardrobe of remedies. Link

Thursday, December 23, 2010

Disclaimer: This contest, the prize, and the rules are completely random.

I am preparing a mediation brief.  Each case has its own theme.  In this one I have constructed a line adapted from a classic tale:  "If you play croquet by the Queen's rules, all is well."  Trivia quiz:  What was the full real name of the author?  I will send a prize to the first person who posts the correct response on this page. 

"If the pink slip doesn't fit, get redressed!"
Click to see my wardrobe of remedies. Link

Wednesday, December 22, 2010

On the Brinker of Disaster: Give Employees a Break, Will Ya?

Oh, that economics, law, and ethics would perfectly align.  In such a world, employers would not only know the law, but they would follow it scrupulously.  They would not allow the emergence of a corporate structure that encouraged the skipping of rest breaks.  Such enlightened employers would not allow overworked employees to skip or delay their lunches.  These same workers, in an economic climate of layoffs and increased work loads, would not sulk in fear at the thought of insisting on their breaks, nor would supervisors mentally mark for layoff those "slaggard" employees who took breaks. 

Soon, an uncitable decision now on appeal to the California Supreme Court [Brinker Restaurant Corp. v. Superior Court (2008) 165 Cal.App.4th 25] will result in a final decision on whether an employer must not only have and follow a rest break and meal break policy in accordance with law, but must also actively police the employee population to assure the breaks are actually taken.  In effect, pre-Brinker, employers were charged with nearly "strict liability" if an employee showed breaks were not taken.  The likely presumption behind a "strict liability" standard is that the employer "permitted" and even encouraged employees to avoid their breaks [or risk adverse performance evaluations or ranking for layoff].

I predict the California Supreme Court will affirm Brinker's rule of lax enforcement.  Courts have a fascination with this term "reasonable" as if human conduct was not only "reasonable" but well intentioned.  In truth, a "reasonable" entrepreneur in a competitive environment will seek greater productivity by various kinds of tactics to encourage employees to work through break times and lunch breaks.  One very simple method is to load everyone down with more work because layoffs have reduced the available resources.  Fear of layoffs itself will be enough to induce both employers and employees to "overlook" the break rules.  Will the California Supreme Court see this larger economic
reality of the workplace?  Is it relevant legally?  If the information is relevant, how do they even have access to that information?  Their "world" is limited to the formal record on appeal.  This limitation illustrates why courts are so limited and ill suited (pardon the pun) to decide matters of social policy. 

Even so, one truth is paramount:  employers are constantly enforcing the rules of the workplace.  The best level of enforcement is not the courts, but at the "front lines" where disputes first arise.  In this situation, a rule that placed the "strict liability" on employers to enforce a break and meal time policy would have two good effects:  1) it would present a bright line rule that would make outcomes clear if the policy was violated and 2) it would reduce the amount of litigation because courts would not be presented with the thorny issue of whether an employer was "reasonable" in tracking a rest break and meal time policy. 

"If the pink slip doesn't fit, get redressed!"
Click to see my wardrobe of remedies. Link

Tuesday, December 21, 2010

The Big Bananas and the Big Banana Judgment: A sadly sterile outcome.

I remember Walter Lack as a prominent attorney many years ago.  His reputation has not flagged, and he remains a "big banana" in the profession, as does his friend and occasional co-counsel Thomas Girardi.  Both of these Los Angeles based attorneys sought to enforce a half-billion dollar judgment entered by a Nicaraguan Court against Dole Food Co. The judgment mistakenly listed the defendant as "Dole Food Corporation" instead of the correct identification of "Dole Food Company".  Go figure:  Corporation vs. Company, and a half billion dollars in the balance. 

The judgment was a noble cause:  to recover damages for Nicaraguan banana workers who claimed sterility because Dole used pesticides without warning of the "family planning" implications.  Lack and Girardi came under investigation by the CA State Bar for alleged impropriety in misleading the U.S. District Court in Los Angeles that the judgment debtors were properly named:  that is, that the judgment was indeed enforceable.  The Ninth Circuit Court of Appeals was upset at the alleged misrepresentation, and suspended Lack from appearing before the Court and "reprimanded" Girardi.  The State Bar however found no wrong doing, and declined to discipline either man.  After peeling away the layers on these bananas, they were found still fit for resale to the public. 

So the subtext:  two consumer rights champions making individual fortunes by taking on mega-corporations with unlimited resources to mount a defense, have a tense time before the State Bar, probably with the help of the "poor and victimized" defendant, Dole Food Company.  The big bananas almost slipped on their own peels.  Fortunately for the sterile banana workers, their tripped up advocates landed on their feet, to fight yet another day. 

"If the pink slip doesn't fit, get redressed!"
Click to see my wardrobe of remedies. Link

Monday, December 20, 2010

Peeling the Layers of the Non-Compete Onion: It's Enough to Make You Cry!

Introduction: Oh, that it would be so simple as to render an opinion on a non-compete provision for a California California employee, contracting with a California employer, for services rendered in California, for California customers. Such an effort to restrict an employee’s pursuit of trade would be clearly unenforceable. See California Business & Professions Code Sec tion 16200, et seq; D’Sa v. Playhut (2000) 85 Cal.App.4th 927 at 931 and Advanced Bionics v. Medtronic (2002) 29 Cal.4th 697.

But “what if . . . “ For example, what if the employer is out of state, what if the employer inserts a foreign choice of law provision in its employment contract; what if the employment agreement selects a non-California exclusive venue for filing; what if the employee is “reasonably restricted” under the laws of that foreign jurisdiction; what if the employment agreement specifically excludes its restrictions from application to California employment—that is, it restricts only the solicitation of customers located outside of California? What if the employee is served in California, along with her current employer, with an out of state temporary restraining order or preliminary injunction restraining the employee from working within California to contact, solicit or serve out of state customers? What if a foreign state jurisdiction has issued a restraining order or injunction that limits a California employee from pursuing his livelihood in California by contacting customers and businesses located within California?

How will California courts respond to these various real world scenarios?

Analysis: Here are the answers to the “what ifs”:

California courts will not enforce a foreign jurisdiction’s judicial restraining order to restrict a California employee from pursuing his trade in California by working for California businesses or soliciting California customers. Powell v. Biosense Webster, Inc. (2009) 179 Cal.App.4th 564. Why? Because California has broad ranging, fundamental, and nearly absolute public policy according employees the right to pursue their livelihoods without contractual restraint. Stated differently:

a) Private “choice of law” principles will not operate to trump California law on a matter of fundamental public policy. California courts will neither apply nor enforce another court’s laws to deprive a California employee working within California of his right to pursue his livelihood in California.

b) “Comity”, that is the constitutional principle of giving full faith and credit to the laws and judicial processes of another state, will not operate to require California Courts to follow and enforce the laws and orders of another state to restrain a California employee from pursuing his California based employment.

A non-compete agreement choosing non-California law, and choosing a venue outside of California will operate to restrict the employee’s pursuit of his trade outside of California. Biosense Webster, Inc. v. Superior Court (2006) 135 Cal.App.4th 827. Although no California Court has, to my knowledge, ruled on this precise question, I believe the reasoning of the Biosense v. Superior Court, supra, would lead to a conclusion that California does not have a overriding interest in allowing its employees unfettered access to the markets of other states, in violation of those individual states’ own “non-compete” laws. Stated differently, the constitutional principle of “comity” protected by the decision in Advanced Bionics v. Medtronic (2002) 29 Cal.4th 697 will operate to require a California Court to honor the orders of other state courts restraining California employees from competitive activities within the foreign state. See also, TSMC North America, et al. v. Semiconductor Manufacturing International Corp. (2008) 161 Cal.App.4th 581. [an antitrust action seeking a restraining order to prevent legal proceedings in the Peoples Republic of China.]

1. Under an unusual twist, if a California employee agrees to a application of another state’s law to restrict that employee’s free pursuit of livelihood outside of California, under California “choice of law” principles (a multi-factor test ), a California Court, in my opinion, would be required to apply that foreign jurisdiction’s laws, but only as to employment activities outside of California, and then, only as to the particular state whose laws were deemed to have been chosen by the parties. Of course, the more likely and practical procedure by the former employer seeking the restraint would be to apply for the restraining order directly in the foreign jurisdiction. Advanced Bionics v. Medtronic (2002) 29 Cal.4th 697.

2. If a California employee is served with a restraining order in California, but issued by an out of state court, and if the order is broad reaching to include even employment opportunities within California, the California court is not required to enforce the order. Why? The principle of “comity” is not applicable because of the “exceptional circumstance” that California has a compelling interest in protecting the livelihoods of its own citizens expressed in Business and Professions Code Section 16200. D’Sa v. Playhut (2000) 85 Cal.App.4th 927 at 931.

3. The recourse of the employee and new employer is to obtain a restraining order and eventually an injunction against the former employer [or the foreign court jurisdiction itself] from obtaining or seeking to enforce out of state court orders that operate to restrain a California employee from pursuing his employment within his or her resident state of California.

Conclusion: The reality of interstate commerce, indeed, international commerce, renders “non-compete” agreements a complex issue when these agreements restrain competition across political borders. Thorny issues of choice of law, comity, venue, and “reasonable restraint” can enter into the analysis. California courts cannot simply issue orders operating to impose California law on business conducted within those foreign jurisdictions. Likewise, those foreign jurisdictions cannot enjoin California employees to restrict those employees’ livelihoods within California. The result, in my opinion, is a “patchwork” set of court orders, at least for California residents, that operate to protect the California employee in pursuing his livelihood without restraint in California, but which will also operate to allow other states to issue and enforce orders restraining the competitive activities of those same employees in other states. The economic complexity cannot be resolved: when is a business or customer a “California business” or “California customer”? Like corporations engaged in interstate or international commerce, customers and businesses do not confine themselves to individual state borders. Will the test be the place of incorporation for the targeted customer? Will it be the targeted customers “headquarters” address? Will it be the location and concentration of the bulk of its business? Will it be the place where the customer will receive, use, or distribute the products or services of the new employer? I believe the tension of non-compete agreements existing in an era of free trade across political boundaries will continue to result in repeated conflicts among the jurisdictions. The best resolution, I believe, is to advance the purposes of both free trade and free competition for human talent by allowing each state to protect its citizens from restrictive covenants to the fullest extent they may desire.


CA Business and Professions Code Sec. 16200 et seq.

The Application Group, Inc. v. The Hunter Group, Inc. (1998) 61 Cal.App.4th 881.

Powell v. Biosense Webster, Inc. (2009) 179 Cal.App.4th 564.

Biosense Webster, Inc. v. Superior Court (2006) 135 Cal.App.4th 827.

Advanced Bionics Corp. v. Medtronic, Inc. (2002) 29 Cal.4th 697.

TSMC North America, et al. v. Semiconductor Manufacturing International Corp. (2008) 161 Cal.App.4th 581.

D’Sa v. Playhut (2000) 85 Cal.App.4th 927.

"If the pink slip doesn't fit, get redressed!"
Click to see my wardrobe of remedies. Link

Thursday, December 16, 2010

You Slapp Me; I'll Slapp You Back: Free Speech or Defamation?

Overhill Farms, Inc. v. Nativo Lopez, et al. 2010 DJDAR 18717.

Overhill produces frozen food products and employs 1,000 workers in the industrial Southern California city of Vernon (Los Angeles County). The workers are unionized. Overhill received an IRS notice that a substantial number of its employees had discrepancies in their social security numbers: names and numbers did not match. Many of Overhill’s employees were Hispanic. Overhill faced as much as $80,000 in penalties. Overhill gave its employees 30 days written notice to correct the discrepancies. It continued to pay the employees during the notice period. Most of the employees getting the notice did not respond. Thirty-one employees resigned. Only one submitted a correct social security number. Overhill fired all employees failing to provide accurate social security numbers.

An activist organization, “Hermandad Mexicana Lantinoamericanca (HML) organized the affected workers into a mass protest in which the protesting workers carried signs and distributed pamphlets, and issued a press release. The essential protest message was that Overhill completed the firings for racist motives. The protest included demonstrating outside a Panda Express store, one of Overhill’s customers. The flyers urged recipients to boycott Overhill and accused Overhill of exploiting Latinos “for 30, 20, 15, and 10 years, and then threw them to the streets—many single female heads-of-household.”

Overhill’s response to these demonstration and publication tactics was to sue the Director of HML for defamation, intentional interference with prospective economic advantage, interference with contractual relations, extortion, and unfair competition. HML brought a motion to strike the allegations as attempts to silence HML’s constitutional freedom of public speech. This special motion is called an “anti-SLAPP” motion [C.C.P. Sec. 425.16—the “strategic lawsuit against public participation”]. To grant such a motion a court must first find that the defendant has proven by its evidence in support of the motion that the defendant’s activity or speech is protected by the constitution. Then, the burden of proof shifts to the Plaintiff to prove that the “protection” of the defendant’s speech should not apply because the plaintiff has proof that its case for false and defamatory statements is sufficiently strong that the plaintiff is likely to prevail on those issues.

Overhill succeeded in presenting proof that it was likely to succeed in showing that HML made knowingly false statements about Overhill’s motives in firing the employees. So, even though HML met its burden of proving that it was engaged in speech on a matter of public importance, Overhill overcame that proof with its own proof that HML abused its speech rights by engaging in deliberate falsification of the facts, with the result of injury to Overhill’s business reputation. Specifically, Overhill proved that HML’s repeated public statements that Overhill’s firing of Hispanic employees for racist motives were false. The truth was that Overhill had given the employees notice of the need to provide proof of non-discrepant social security numbers in compliance with the IRS directive. It acted only when those individuals fired failed to provide accurate information. HML failed to present any substantial evidence that the motive for the firing was racially motivated.

Two justices reached this decision. The third dissenting justice reasoned that the use of the term “racist” in a public forum by itself to describe an employer would not be “defamatory” and even the word “racist” added to the words “engaged in a mass employment termination for racist reasons” would not be defamatory, but would be simple “hyperbole” in public rhetoric, not reasonably construed by listeners as more that the speaker’s own interpretation and opinion. The dissenting justice stated: “First, my colleagues in the majority have incorrectly made this court the first state or federal appellate court in America, ever, to hold that the epithet “racist” constitutes a provably false assertion of fact as the basis of a claim for defamation.”

In my opinion, this case presents an interesting clash of interests: a society needs broad opportunity for an exchange of viewpoints and arguments, including room for exaggerated rhetorical attacks. This latitude of speech is probably most essential concerning topics of public importance and interest. Business by its nature is public, and products and services are consumed by citizens with an interest in knowing how those products and services are placed in commerce. On the other hand, if a participant in a public squabble makes statements he knows to be false and that the audience believes to be true unless provided critical unstated facts, then this kind of vile and harmful speech may not merit protection. The overall circumstances of the communications made by HML indicate to me that HML’s purpose was to “chill” a lawful activity, and to intimidate a company from following the law. HML had the opportunity in opposing the anti-SLAPP motion to present substantial evidence that Overhill’s motive was racist, but none was presented. On the contrary, Overhill acted in response to an IRS mandate, and gave its employees the opportunity to show compliance. Only when they failed, did it terminate their employment.

The unwritten “subtext” of this case was a political clash. HML sought to champion the cause of its unemployed immigrant constituency. Overhill likely hired falsely documented workers for financial reasons. Overhill most likely elected lax enforcement until challenged by the IRS. In contrast, HML apparently has an issue with the immigration laws, as indicated by its readiness to disregard the fact that all the persons fired failed to provide necessary legal documentation to work in the U.S. Firing undocumented workers for lack of valid documentation, according to the HML, was an act of “racism.” This charge didn’t convince the Court of Appeal because HML failed to produce any substantial evidence that the firings were racially motivated. The matter is made more complicated by both union and political organizations that give a concerted voice to illegal immigrants to insist upon work in the U.S. when these persons cannot produce valid documentation.

In my opinion, the Court reached the correct decision.

"If the pink slip doesn't fit, get redressed!"
Click to see my wardrobe of remedies. Link

Monday, December 13, 2010

Prayer to St. Agnes, Patron Saint of Arbitrations

St. Agnes,  intervene for me before the Court of Appeal to cause, by your four factors, a decision that compels arbitration.  Amen. 

A physician sued for malpractice by his patient would ordinarily want to arbitrate under his own arbitration agreement with the patient. The patient had sought liposuction surgery with the doctor. Apparently, matters did not turn out well. This patient filed and litigated in court, but near the eve of trial, sought a court order to have the matter arbitrated. Probably to her surprise, the defendant physician refused. In holding for the physician, the court wrote: “Audiences matter . . .” [Burton v. Cruise, 2010 DJDAR 18393.] In this case, the audience was a jury.

In this December 2010 decision, the Court of Appeal provided a glimpse into the minds of counsel who may delay a petition to compel arbitration until well into the usual court litigation process. The Plaintiff Burton brought an ex parte motion to shorten time for a petition to compel arbitration. Defendant Cruise had already selected and exchanged experts. Burton had requested a jury trial at the case management conference. Inconsistently, in the motion to compel arbitration, Burton stated she wasn’t sure she would add other parties not subject to the arbitration agreement, and so did not request arbitration. Also, Burton’s counsel did not demand arbitration or even an inquiry about arbitration just before bringing her petition to compel arbitration.

The Court of Appeal cited the four “St. Agnes” factors to decide if arbitration has been “waived’: 1) actions inconsistent with seeking arbitration, including failure to request it; 2) are the parties “well into preparation” of the lawsuit; 3) is there an imminent trial date; and 4) has the delay caused harm to the other party? St. Agnes Medical Center v. PacifiCare of California (2003) 31 Ca.4th 1187, 1196. Applying these factors, the court affirmed the trial court’s denial of the petition to compel arbitration. Burton v. Cruise, 2010 DJDAR 13893 at 18396.

The Burton court reasoned that the purpose of arbitration: to expedite a hearing at less expense, is turned upside down by tactics that delay arbitration until the near-end of a civil litigation process. The Court adopted the reasoning of Guess?, Inc. v. Superior Court (2000) 79 Cal.App.4th 553, 558 that “the courtroom may not be used as a convenient vestibule to the arbitration hall so as to allow a part to create his own unique structure combining litigation and arbitration.” The Court also accepted the defendant’s argument that it selected and exchanged experts with a jury trial in mind, making tactical decisions differently than if the matter was destined for arbitration.

The value of the Burton case to the party opposing a petition to compel arbitration is that it exposes improper tactics of subverting an arbitration agreement to increase delay and costs. Those costs can include the extra expense of choosing different experts than one might otherwise. This case will have particular value as precedent to deny a petition to compel where the case management conference has been held with no reference to arbitration, where the other party has not referenced the arbitration agreement by additional demand for arbitration, and where experts or other witnesses have been tactically selected and prepared for jury trial.

Now, there is text and there is subtext. The latter is subject to speculation of course, but educated speculation. My view of the subtext is that the doctors’ attorneys were struck with a case of hubris. They really thought they could so bedazzle a jury with their experts that they did not want to forego the opportunity. The truth of course is that experts do not often bedazzle juries, who often disregard most of what they say, assuming the expert makes it understandable to them. Secondly, one wonders why the Plaintiff would not want her great case before twelve of her peers. The plaintiff almost always prefers a jury. Why this change of direction on the eve of trial? I suspect the answer also pertains to experts. Possibly the Plaintiff hoped the arbitrator would allow a late designation of experts. Or perhaps the Plaintiff was worried that the medical evidence was weak for her case, and hoped an arbitrator would do what arbitrators do, but never admit: produce a “compromise” outcome that might salvage the case, and at least provide for a possible recovery of attorney’s fees under the arbitration agreement. Or maybe the Plaintiff just wanted to delay the hearing because a witness was not available or she hoped to re-open discovery. These speculations matter little, except to point out that the real story is not often told in the formal appellate decision.

"If the pink slip doesn't fit, get redressed!"
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Friday, December 10, 2010

Let’s Face Up to Facebook Discovery: the Defense Can Discover an Employee’s Postings.

She says she was sexually harassed, but the defendant employer wants to get access to her Facebook postings because it has information that she lists herself as “single” while in truth married.  The employer asserts this is enough information to bring into question her credibility on the sexual harassment charge.  It wants a court order requiring the employee to provide password and username to access and search the site.  How will a court likely rule? 

Another way to ask this question is:  What are the employee’s reasonable privacy expectations, having filed a harassment suit against the employer.  Restrictions on the scope of the social media search are likely, but are total denial of a search legally mandated by privacy expectations? 

Let’s begin by stating that there is no definitive California a case law on this subject as yet.   The legislature has not entered the arena with specific discovery statutes aimed at social media.  Yet, some guiding principles are available.

First, the terms of agreement between the social media host and its user will be very relevant.  If the user has agreed that the posting is for full or partial public viewing, the “privacy expectation” will be determined in part by that agreement.  See Moreno v. Hanford Sentinel, Inc. (2009) 172 Cal.App.4th 1125.  In Mackelprang v. Fidelity National Title Agency of Nevade Inc. 2007 U.S. Dist. LEXIS 2379 (D. Nev. Jan. 9, 2007) the court denied an employer’s motion to compel the employee to give direct access to her MySpace account.  The facts are those stated by the opening paragraph of this  article.  The court reasoned that the “open ended” search for all MySpace positings was too broad and invasive.  It suggested a more focused description of the discoverable information. 

Discovery seeking “direct access” from the employee has a better chance of surviving a motion for protective order from the employee.  Third party access, that is, serving a subpoena on the website host itself, is unlikely of success due to federal laws generally designed to promote free use the internet.  In Crispin v. Christian Audigier Inc. 2010 U.S. Dist. Lexis 52832 (2010) the Court ruled that the Stored Communications Act (SCA) prohibited a power of subpoena to compel Facebook and MySpace to disclose plaintiff’s  private messages (non-posted, and to specific identified persons).  However, the Court remanded on the question of whether wall postings were discoverable under the SCA.  This 2010 decision, or one like it, is likely to be ultimately the subject of a published decision on the matter of SCA’s impact on the discovery of wall postings.
Bottom line:  the law is unsettled, but the best chance of getting social media information through formal discovery is to seek direct access and by a particularized discovery request anticipating the “privacy” objection by the employee.  Because the law is unsettled, the best approach is to enter into a stipulated restriction on the scope of search, and to agree to the confidentiality of the information except as necessary to the presentation of proof at trial or hearing. 

"If the pink slip doesn't fit, get redressed!"
Click to see my wardrobe of remedies. Link

Monday, December 06, 2010

A Class Act: Women Take on Wal-Mart by the Thousands.

So what do hundreds of thousands of women have in common at Wal-Mart?  They are class action plaintiffs proceeding in a case for gender discrimination against the retail behemoth.  The U.S. Supreme Court has accepted Wal-Mart's appeal to hear the issue of whether the class action certification was properly granted.  Among other matters, there must be an economy of disposition of the class claims because the claimants have factual and legal issues in common.  The conservative position is that they have nothing in common but their gender and that they work for Wal-Mart.  The liberal position is that they were all treated with a common systemic practice of limiting promotion and pay opportunities because they were women.  This case will decide the future of massive future class actions, and whether they will have an impact on how companies operate.  Will this one be scored for David or Goliath?  We should find out in mid 2011.  New York Times Article

"If the pink slip doesn't fit, get redressed!"
Click to see my wardrobe of remedies. Link