US Supreme Court Permits Waivers Of Class Action Rights In Arbitration Agreements
Supreme Court upholds class action waivers in AT&T v. Concepcion.
This is bad law. In effect, the US Supreme Court has created a safe harbor for corporate fraud, it’s sort of like licensing a tax on everything we buy. So long as the amounts stolen are too small to justify an individual case, crooked practices will be profitable.
At some point, corporate greed will demonstrate to all why this decision is wrongheaded. In the meantime, caveat emptor (ie, “buyer beware”), big time.
Winning cases is great, however, you still gotta get paid.
This week, a California appeals court granted the tobacco giant, R.J. Reynolds Tobacco Co., a reprieve from paying $700,000 in attorneys’ fees in a dispute with the state. This case alleged Reynolds violated a settlement agreement by “ ‘using or causing to be used’ any ‘cartoon’ in the advertising, promoting, labeling or packaging of tobacco products“. Court of Appeals of California, Fourth District, Division One. No. D056589.
This goes to show the risk of the contingent fee. It is one thing to successfully bring a valid claim. It is another to actually recover money. Lawyers who do contingency fee work truly do risk their own capital and time to help people work out their disputes in a productive fashion, that is, in a justice system. Compare that free market system with what goes on in, say, China, and you begin to understand why the founding fathers put the right to a civil jury trial in our federal constitution.
Agreeing to a settlement doesn’t mean it’s over.
DHL Express Inc. has agreed to settle a putative wage-and-hour class action brought in California federal court by former employees.
Although DHL has agreed this week on the settlement, the case is not actually closed.
Once the parties agree to a settlement, the Court needs to approve it. The process is generally a motion for preliminary approval, where we explain the terms of the settlement to the Court, preliminary approval (or disapproval) by the Court, notice to the class about the terms of the settlement with an opportunity to object or opt out, motion for final approval and final approval (or disapproval) by the Court.
It can take quite awhile for the entire process, much more cumbersome than a conventional individual case.
More on Class Actions: 5 Tips for Understanding Class Actions
Justice for Common Working Folks
A case in Florida is a classic example of protecting the powerful from regular people.
In Roberts v. Angelfish Swim School, Inc., the defendant, the interim secretary of state is arguing that to take part in a class action lawsuit, a potential class member must prove that he or she can individually fund the entire litigation for the entire class.
In our wage and hour class actions, we regularly represent common working folks who have been shorted on their pay. We invest ten of thousands, sometimes hundreds of thousands of dollars in hard costs for experts, document copying, etc., plus attorney and staff time that can easily run into the millions. When we prevail, large groups of employees receive back pay or other compensation and we earn a fair fee. A working class plaintiff, for that matter, anyone outside of the moneyed class, simply can’t shoulder the burden. It’s hard enough for us lawyers, not too many of us can take on the risk of these cases.
Wallmart Stores v Dukes transcript
The Supreme Court heard oral argument Tuesday on a challenge to the certification of a class-action lawsuit on behalf of female employees against the giant retailer Wal-Mart.
This is an important case. We are all waiting to see how the Supreme Court treats class actions in the context of gender discrimination.
Click here to read the Supreme Court transcript.
Class Cert. Denied In Lockheed OT Suit
Last week a California federal judge shot down a motion for class certification in an overtime suit against Lockheed Martin Corp., saying that the proposed class of industrial security representatives was too diverse in their actual duties to be certified.
Judge Michael M. Anello wrote the order denying class certification. He based his decision primarily on the plaintiffs’ inability to meet the FRCP Rule 23(b) requirement that common issues predominate.
Basically, plaintiffs argued all putative class members were public safety employees who were entitled to overtime. Judge Anello wasn’t convinced. He found that the plaintiffs hadn’t put on evidence that all the putative class members were engaged in the same type of work. He then focused on defendant’s argument that each putative class member had different job duties depending on which project they were assigned to in denying certification.
The lesson is, do your discovery on Rule 23 criteria early and thoroughly. Plaintiffs have the burden and, if you forget that fact, the judge will happily remind you.
A Class Act
One of the reasons I enjoy class actions and complex litigation is they force you to be disciplined. Take the simple task of organizing and interviewing percipient witnesses.
In individual cases, you have a list of witnesses, you interview or depose them as seems appropriate and it’s pretty much a simple process. In class actions, you need a system or things can get out of hand pretty quick.
One of my favorite parts of prosecuting a class action is getting a contact list for the potential (we call them “putative”) class members and conducting the initial interviews that tell me just what it is that I have on my plate.
Getting the list isn’t always a simple deal. In the wage and hour cases I’ve litigating during the past several years, I’ve seen both
extremes. Sometimes the defense will give up the list almost upon request. Usually this means they are feeling pretty good about their prospects. Sometimes, the defense fights tooth and nail, withholding the list until ordered by the court. Usually this means they are feeling insecure and then prepare for a bloody discovery battle.
We generally ask for a class list as soon as discovery opens and we ask in at least three different ways, which is further explained in this article on my website.
5 Tips for Understanding Class Actions
1. Class Actions Help Address Common Problems.
A notice in the mail is usually how we learn that we might be connected to a class action. The notice might say that a claim has been made on our behalf, or that we can receive some benefit by mailing back a form. So, what is it all about, this “class action” thing and is it a good thing or a bad thing?
2. Class Actions are a Unique Class of Case.
In simplest terms, class actions are a way for groups of people with common problems to seek a common solution. Class actions typically seek to solve simple questions that impact large number of people.
So, that notice that comes in the mail is worth reading, because it means that someone is trying to determine if you have been harmed by a third party and, if so, how you might have been damaged.
3. Understanding Class Action Procedure is Important.
Class actions can be brought in either state of federal court. Though state courts remain an important forum for class action litigation, recent federal legislation has tended to make Class actions more of a federal area than traditionally.
Class actions start with the filing of a complaint. Generally, the complaint will have specifics about what it is that the class actions seek to address and what kind of remedies the plaintiff class is looking for. The class plaintiffs named in the complaint seek to be representatives for the entire class.
4. Resources for researching Class Actions.
When you get a class action notice in the mail, it will always contain certain types of information. Most importantly, the notice will include the names of the lawyers of both sides of the case. If you have questions, simply pick up the phone and call or, if available, use the Internet to find the informational website that is often set up to give class members the lastest scope on what is happening with the case.
The notice will also tell you where the case is being litigated and include the case name and docket number. With this information and a web browser, you can often log onto the court’s website and get detailed information about when the complaint was filed, what has happened in the case and any critical dates you should know about.
5. Deciding whether to respond.
In the not so distant past, class actions might settle for a small discount or non-cash benefit to the class members, known as a “coupon settlement,” along with a fee for the attorneys. These coupon settlements have been criticized as not providing a real benefit to the class members.
The law has changed so the judges are now supposed to look hard at settlements to make sure the class is receiving something of substance where there is a legitimate legal claim. So read the notice closely. You may be pleasantly surprised that the legal system is working for you, just as it should.
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William A. Daniels is a Trial Attorney with BILL DANIELS | LAW OFFICES, APC, in Encino, CA. His practice focuses on class actions, employment and serious personal injury. A graduate of Loyola Law School of Los Angeles, he is a member of the Consumer Attorney Association of Los Angeles Board of governors and a founding member of the Civil Justice Program and the 21st Century Trial School at Loyola. For several consecutive years he has been names a “Super Lawyer” Los Angeles Magazine in Southern California.
He can be reached at William.Daniels@BillDanielsLaw.com; www.BillDanielsLaw.com
Exposing Carriers Who Abuse Efficient Proximate Cause
A. Introduction.
Whenever there are two or more causes of a loss, it is likely that the carrier’s investigation will focus on exaggerating an excluded cause and ignoring any fact that argues for coverage.
Carriers habitually push the envelope when trying to deny coverage in concurrent causation situations. The most recent evidence is found in Palub v. Hartford Underwriters Ins. Co.,92 Cal. App. 4th 645, 112 Cal. Rptr. 2d 270 (2001) (rev. den. Dec. 12, 2001), where the Court of Appeal reaffirmed the basic principal that when the proximate cause of a loss is a covered peril, it doesn’t matter if there is an excluded peril somewhere else in the causation chain.
To the extent that the “exclusion” would exclude loss proximately caused by [a covered peril], it violates Insurance Code section 530 and the long-standing principal that a property insurer is liable whenever a covered risk is the proximate cause of a loss, and is unenforceable.
92 Cal. App. 4th at 650, 112 Cal. Rptr. 2d at 274.
Since this is an area fraught with the potential for the carrier to manipulate its investigation and coverage analysis to the policy holder’s detriment, it is critical to understand how California law applies proximate cause to insurance claims.
B. Proximate Cause, Efficient or Otherwise.
In California, it is settled that where a policy exclusion conflicts with state law the exclusion has no effect. Howell v. State Farm Fire & Cas. Co., 218 Cal. App. 3d 1446, 1464, n.4, 267 Cal. Rptr. 708 (1990). It is also settled that where there are two or more causes of loss “concurrent causes” and the efficient proximate cause is a covered peril, then there is coverage for the loss, even if one or more of the concurrent causes is excluded.. Garvey v. State Farm Fire & Cas. Ins. Co., 48 Cal. 3d 395, 257 Cal. Rptr. 292 (1989).
Just as Justice Stanley Mosk warned in his Garvey dissent, the insurance industry has devoted considerable energy to twisting and contorting efficient proximate cause to fit any claims denial situation. Plaintiff’s counsel’s job is to us to cut through the confusion.
Whenever there are two or more causes of a loss, and one or more of those causes is excluded, the analysis begins with Insurance Code section 530, which states:
An insurer is liable for a loss of which a peril insured against was the proximate cause; although a peril not contemplated by the contract may have been a remote cause of the loss; but he is not liable for a loss of which the peril insured against was only a remote cause.
If the covered cause is closer in time to the loss than the excluded cause, this is generally where the analysis will stop. A prime example of how this works is found in Brooks v. Metropolitan Life Ins. Co., 27 Cal. 3d 305, 163 P.2d 689 (1945).
In Brooks, an insured with terminal cancer died in a fire. The carrier denied coverage under an accidental death policy, arguing essentially that since the insured would have not have died of his burns if he had not already been sick, the exclusion for “disease and mental infirmity” applied. Disease, argued the insurance company, was a concurrent cause and trumped the covered peril, i.e., death by fire.
The California Supreme Court rejected the argument:
The presence of preexisting disease or infirmity will not relieve the insurer from liability if the accident is the proximate cause of death; and [] recovery may be had even though a diseased or infirm condition appears to actually contribute to cause the death if the accident sets in progress the chain of events leading directly to death, or if it is the prime or moving cause.
Brooks, supra, 163 P. 2d at 691.
In other words, in a hypothetical claim situation such as where wind a covered peril requires replacing a roof that was previously functioning adequately and the carrier denies the claim by arguing (1) the roof was negligently installed, (2) third-party negligence is excluded, (3) the wind would not have blown off the roof but for the negligent installation, Brooks tells us that the carrier is not being reasonable.
The Brooks rule is critical in understanding proximate cause and efficient proximate cause because it was expressly followed when our Supreme Court examined an excluded cause of loss within the causal chain in Sabella v. Wisler, 59 Cal. 2d 21, 32, 27 Cal. Rptr. 689, 696 (1963) and Garvey v. State Farm Fire & Cas. Co., 48 Cal. 3d 395, 403, 257 Cal. Rptr. 292, 296 (1989).
Both Sabella and Garvey demonstrate how concurrent causation analysis becomes a shade more complex when an excluded cause occurs after a covered peril. The analysis then becomes a search for the “efficient proximate cause” of the loss, also known as the “predominate” cause.
When an excluded peril appears within the causal chain, carriers often look to Insurance Code section 532 as a basis for denying coverage. The statute provides:
If a peril is specially excepted in a contract of insurance and there is a loss which would not have occurred but for such peril, such loss is thereby excepted even though the immediate cause of loss was a peril which was not excepted.
In 1963, the California Supreme Court reconciled sections 350 and 352 in Sabella v. Wisler, 59 Cal. 2d 21, 27 Cal. Rptr. 689 (1963), which concerned a subsidence damage claim made under a homeowner policy. In Sabella, the policy specifically excluded “settling” and the carrier denied coverage, relying on section 352. The policy holder argued that the reason the house settled was that a negligently installed sewer line had ruptured, spilling water into loose fill and “setting in motion the forces tending towards settlement.” The Supreme Court held that the loss was covered because third party negligence was a covered peril under the policy and that negligence was the efficient cause of the damage.
“In determining whether a loss is within an exception in a policy, where there is a concurrence of different causes, the efficient cause the one that sets the others in motion is the cause to which the loss is attributed, though the other causes may follow it and operate more immediately in producing the disaster.”
Sabella, supra, 59 Cal. 2d at 31, 27 Cal. Rptr. at 695 (quoting, 6 Couch, Insurance (1930) § 1466). As the high court later explained in Garvey:
We reasoned [in Sabella] that sections 530 and 532 were not intended to deny coverage for losses whenever “an excepted peril operated to any extent in the chain of causation so that the resulting harm would not have occurred ‘but for’ the excepted peril’s operation.” Rather, we explained that when section 532 is read along with section 530, the “but for” clause of section 532 necessarily refers to a “proximate cause” of the loss, and the “immediate cause” refers to the cause most immediate in time to the damage.
Garvey, supra, 48 Cal. 3d at 402, 257 Cal. Rptr. at 295. Garvey reaffirmed the Sabella analysis in 1989 when the Supreme Court considered another claim for damage to a home damaged by earth movement. Again the carrier denied coverage under an earth movement exclusion and again the insureds argued that their policy covered losses caused by third party negligence. The Supreme Court looked to efficient proximate cause to solve the coverage question.
Sabella defined “efficient proximate cause” alternatively as the “one that sets others in motion” and as “the predominating or moving efficient cause.” We use the term “efficient proximate cause” (meaning predominating cause) when referring to the Sabella analysis because we believe the phrase “moving cause” can be misconstrued to deny coverage erroneously, particularly when it is understood to mean the “triggering” cause.
Garvey, supra, 48 Cal. 3d at 403-404, 257 Cal. Rptr. at 296.
Garvey, teaches a number of lessons. First, in determining an efficient proximate cause, look for an active cause that sets a causal chain in motion. Following Brooks, a simple condition of person or property can never be an efficient proximate cause.
Second, an efficient proximate cause is a predominating cause and a term of art. In denying coverage, carriers will be creative and expansive in their own definitions of efficient proximate cause, but cannot be allowed to get away with loose definitions.
C. Reading Exclusions Out of the Policy.
Even though Sabella, Garvey, Howell and their progeny have been the law in California for over a generation, carriers still attempt to push the efficient proximate cause doctrine beyond its limits to deny coverage.
For example, some carriers will argue that efficient proximate cause translates into the “most important” cause of a loss and then will fixate on an excluded event in the chain of causation in order to document a denial. This is a position that relies on a misstatement of the law. Garvey, after all, establishes that efficient proximate cause is equivalent to predominating cause, the meaning first offered in Sabella. Nowhere do the cases discuss “most important” cause as a standard.
The distinction is not mere linguistics. Going back to our roof loss hypothetical, a sloppy roofing job may well prove adequate against the elements for a decade or more before a windstorm tears it apart. The roofer’s negligence cannot by definition be an efficient proximate cause of the loss because it sets nothing in motion. It is simply a state of condition and the Brooks rule is that “recovery may had even though a diseased or infirm condition appears to actually contribute to cause the [loss] if the [covered peril] sets in progress the chain of events leading directly to [the loss], or if it is the prime or moving cause.” 163 P.2d 689, 691. Since it is the windstorm a covered peril that sets the damage chain in motion, following Brooks, Sabella and Garvey, windstorm is the efficient proximate cause and triggers coverage under the policy.
For its part, roofer negligence an excluded peril is an infirm condition that is a remote cause as a matter of law and cannot defeat coverage. The reasonable expectations of both insured and insurer that wind damage is covered are met. The carrier is free to pursue the roofer on its own in subrogation, but it must pay the claim benefits provided by the policy.
Palub v. Hartford Underwriters Ins. Co., 92 Cal. App. 4th 645, 112 Cal. Rptr. 2d 270 (2001), provides a good example of how carriers continue to try to abuse efficient proximate cause analysis. In Palub, the insureds made a claim under their all-risk homeowner policy for damage to their home after a slope behind the house failed. The insured argued that weather conditions caused the slope to fail and were the efficient proximate cause of the loss. The insurer argued that weather conditions were excluded under the policy by a provision stating, “We do not insure against loss to property . . . caused by any of the following . . . (a) Weather conditions. However, this exclusion only applies if weather conditions contribute in any way with a cause or event excluded in paragraph 1. above to produce the loss.”
The Court of Appeal observed that in light of this language, weather conditions were not an excluded cause of loss by themselves. The Court also held that to the extent that the policy provision attempted to exclude coverage for weather conditions that acted as the efficient proximate cause of a loss, the exclusion violated Insurance Code section 530 and was unenforceable.
Palub, in turn, relied on Howell v. State Farm Fire & Cas. Co., 218 Cal. App. 3d 1446, 267 Cal. Rptr. 708 (1990), which addressed much the same problem. Howell involved an all-risk homeowner’s policy and a claim for damage due to landslide. The insured argued that fire had destroyed the vegetation on a nearby slope and unusually heavy rains then drenched the bare unprotected ground, resulting in a landslide. An expert testified that the landslide probably would not have happened had the ground cover been intact. The Court held that the fire was the efficient proximate cause of the loss under this analysis and found coverage. 218 Cal. App. 3d at 456, 267 Cal. Rptr. at 714-715.
The primary issue decided by Howell is that an insurer cannot contractually exclude coverage when an insured peril is the efficient proximate cause of the loss, no matter how the policy is written. Any exclusion purporting to defeat coverage where the efficient proximate cause is a covered peril is simply read out of the policy.
D. Conclusion.
Just as Justice Mosk warned in Garvey, the efficient proximate cause analysis has tempted many a carrier to engage in studied mischief. But Sabella and Garvey provide the bedrock definitions for efficient proximate cause. Brooks confirms that a pre-existing, latent infirmity can never be an efficient proximate cause since is a condition rather than a moving cause. And Palub and Howell render inapplicable exclusions that seek to limit coverage where a covered peril is the efficient proximate cause of loss.
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William A. Daniels is a Trial Attorney with BILL DANIELS | LAW OFFICES, APC, in Encino, CA. His practice focuses on class actions, employment and serious personal injury. A graduate of Loyola Law School of Los Angeles, he is a member of the Consumer Attorney Association of Los Angeles Board of governors and a founding member of the Civil Justice Program and the 21st Century Trial School at Loyola. For several consecutive years he has been names a “Super Lawyer” Los Angeles Magazine in Southern California.
He can be reached at William.Daniels@BillDanielsLaw.com; www.BillDanielsLaw.com
Sun Tzu, Lao Tsu; Using yin and yang to help make your cases stronger.
Yin and yang are, of course, Chinese archetypes describing two opposing aspects of a single common principle. Yin is generally characterized as soft, slow, tranquil and gentle, while Yang is hot, restless, hard and rapid. Westerners assume one is female and the other male, but that’s not strictly true. In Chinese philosophy, both coexist, complementing even as they stand opposite. Either gender can possess elements of either aspect without automatically being labeled as “sissy” or “butch.”
Still, we’re talking about practical principles here and what yin and yang teach us is, when working your cases, it is important not to overload on any one approach. Too gentle never works, but neither does too harsh.
The best lawyers find a balance point and they work it. Ever notice how folks will speak in admiring tones about attorneys who are fierce opponents in the courtroom but great to have a drink with afterwards? That’s what I’m talking about.
So, two useful perspectives on being a more effective trial lawyer can be found in the writings of those yinny and yangy Chinese ancients: Sun Tzu and Lao Tsu.
Sun Tzu, in case you never saw Wall Street or plotted the overthrow of anyone in particular, wrote The Art of War in 500 B.C. His slender volume is the oldest military Lao Tsu, on the other hand, authored the Tao Te Ching, which according to tradition was completed somewhere in the 6th Century B.C. The book embodies the essence of Taoism and, 2,500 years later, provides one of the major underlying influences in Chinese thought and culture.
Both volumes contain crisp little axioms that you can either ponder endlessly in search of higher meaning or, toss away dismissively. I suppose it all depends on your personal outlook. Could be you are George Harrison at the feet of the swami. Could be you’re a native New Yorker who stumbles into a Malibu ashram on saffron robe Sunday.
Personally, being part Chinese (Portuguese trading family. Someone’s long ago mistress, apparently), I try to remember and apply both schools. Two more arrows in my quiver, if you will.
Starting with the yang:
Sun Tzu said: The art of war is of vital importance to the state. It is a matter of life and death, a road either to safety or to ruin. Hence it is a subject of inquiry which can on no account be neglected.
Practicing civil law is very much like engaging in the kind of warfare Sun Tzu describes in his book. There are strategic challenges, supply and maneuver, training, intelligence, discipline and tactics. The objective, of course, is to win justice for your client. The battlefield is the courtroom. The ground is generally hostile and consumer attorneys are usually out-manned and outgunned.
Accordingly, when pursuing a case, getting to the point is critical to success. In war, then, let your great object be victory, not lengthy campaigns. So, be proactive in litigation, not reactive. Even if the temptation is to lay back and let your files work themselves, that’s not a winning strategy. Whoever is first in the field and awaits the coming of the enemy, will be fresh for the fight; whoever is second in the field and has to hasten to the battle, will arrive exhausted.
Keep your plan of attack to yourself when possible. You can maintain tactical surprise while adhering to the letter and spirit of the Discovery Act. The spot where we intend to fight must not be made known; for then the enemy will have to prepare against a possible attack at several different points; and his forces being thus distributed in many directions, the numbers we shall have to face at any given point will be proportionately few.
When you work your cases, don’t get stuck in a rut. Vary your tactics to prevent becoming overly predictable. The general who thoroughly understands the advantages that accompany variation of tactics knows how to handle his troops. The general who does not understand these may be well acquainted with the configuration of the country, yet he will not be able to turn his knowledge to practical account.
I highly suggest taking a couple of hours to either acquaint or reacquaint yourself with The Art of War. Grab a printout off the internet and read it by the pool. It’s only thirteen short chapters. Read it and you’ll really get a supercharged educational experience. Nothing like imagining 10,000 charging warhorses while getting the latest tips on when to ask for supermarket sweep sheets in your slip and fall case. Adds spice to the proposition.
More in the yin category is Lao Tsu’s way of thinking. This is softer philosophy but, again, you can’t have effective yang without its opposite and, Taoist principles are so cool, they even make wrinkled puppets sound profound in pretty much every George Lucas film ever made.
The three basic virtues in Taoism, called the “Three Jewels” or “Three Treasures” are compassion, moderation and humility. All are virtues, even here in the West, though sometimes we throw one or more aside in our headlong rush to win.
Lao Tsu reminds us that in order to truly succeed, we need to accept that from time to time, we will fail. Accept disgrace willingly. Accept misfortune as the human condition. What do you mean by ‘Accept disgrace willingly’? Accept being unimportant.
We always need to be willing to speak openly and earnestly with jurors and judges as we present our client’s case. He who does not trust enough will not be trusted. Juries, after all, are bull#$%@ meters. Spinning a false yarn leads only to disaster. In all your dealings, treat others with dignity and respect. A good soldier is not violent. A good fighter is not angry. A good winner is not vengeful. A good employer is humble. This is known as the Virtue of not striving. This is known as ability to deal with people. This since ancient times has been known as the ultimate unity with heaven. This is also known as the mensch principle.
So, I guess the lesson for today is, don’t forget to ground your wisdom and knowledge in humanity. As the Gerry Spence people teach, what we do is all about finding our own voice and using it to speak eloquently for our clients. Whether it’s Eastern, Western, Christian, Jewish, whatever, stay true to your basic principles and according to the great rule of the universe, you will thrive.
