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Consolidation of Multiple Actions Can Transform Those Actions Into a “Mass Action” For Purposes of CAFA Removal

Dunson v. Cordis Corporation, Ninth Cir., 04/14/2017

Plaintiffs claimed that they were injured by a medical device made by Cordis Corporation.  Between them, Plaintiffs filed eight separate actions in state court.  Each case involved less than 100 plaintiffs; however, the aggregate number of plaintiffs in all eight actions exceeded 100.  Plaintiffs moved to consolidate the actions for “for all pretrial purposes, including discovery and other proceedings, and the institution of a bellwether-trial process.” They told the state judge that this would help avoid inconsistent adjudications.  The state court granted their request for consolidation; Cordis then removed the consolidated case to federal court under CAFA’s mass tort provision.  The district court remanded the case. Held: Affirmed.

The Class Action Fairness Act (CAFA) provides more permissive removal provisions for certain class actions, and for certain mass actions as well.  For CAFA, a “mass action” means those in which the monetary claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiffs’ claims involve common questions of law or fact.” 28 U.S.C. § 1332(d)(11)(B)(i). 


Claims that are subject to a “bellwether trial” process, are not necessarily “tried jointly” for purposes of CAFA?  There are two kinds of bellwether trials: Those that bind plaintiffs in other actions, and those that are used for strictly informational purposes. Only the first type of bellwether trial meets the requirements of § 1332(d)(11)(B)(i).  

Where plaintiffs agree to a bellwether trial process, without saying more, the bellwether trial is not binding but informational. Here, plaintiffs didn’t say that “something more.” For example, merely agreeing to “consolidation” is not enough because, under California law, the parties can consolidate cases for pretrial purposes only. While plaintiff did ask for consolidation “to avoid inconsistent adjudications,” it was unclear whether plaintiffs were referring to inconsistent rulings at trial or inconsistent rulings on other pre-trial motions (like motions for summary judgment and motions in limine.)  

Finally, Plaintiffs included this language in their motion for consolidation: “To be clear, Moving Plaintiffs are not requesting a consolidation of Related Actions for purposes of a single trial to determine the outcome for all plaintiffs, but rather a single judge to oversee and coordinate common discovery and pretrial proceedings.”  That pretty much settles it.

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Wylie Aitken Does It Again — Court Reverses Summary Judgment Against His Client Using Novel Application of the Business Errand Exception

Sumrall v. Modern Alloys, Inc., 4/13/17 CA4/3
It’s hard not to appreciate the outcome of this case based on the questionable employment practice of Modern Alloys. 
Campos was employed by Modern Alloys as a cement finisher.  He was required to drive to the company’s yard at 8 a.m., pick up a truck and then drive equipment and other employees to the job site, where he would work from 9 to 5.  He was not paid commute time from his home to the yard (that’s okay); nor was he paid for his commute time from the yard to the jobsite (that’s not okay).  On his way driving from home to the yard one day, he hit a motorcyclist, and the motorcyclist sued the company.   Modern Allows asked for summary judgment, asserting that the coming and going rule was a bar to recovery; plaintiff argued the “business errand” exception applied and the Campos was acting within the scope of employment at the time of the accident. The trial court threw the case out on summary judgment.  Held: Reversed.

Ordinarily, an employee is considered outside the scope of employment while he/she is commuting.  An exception to that is the “business errand” exception.  That is normally a question of fact for the jury.  In reversing summary judgment, the Court explained: “Here, it is undisputed that Campos was driving his own vehicle from his home to the Modern Alloys yard at the time of the collision. Thus, there is a reasonable inference that Campos was on a normal commute. However, it is also undisputed that Campos transported Modern Alloys’ vehicle, workers, and materials from its yard to the jobsite, and that Modern Alloys did not pay Campos until he reached the jobsite. Thus, there is a reasonable inference that Campos was also on a business errand for Modern Alloys’ benefit while commuting from his home to the yard.”

While there is no published case that resembles the facts of this case, the court noted that tort law is not static, each case is driven by its facts, and where plaintiff’s interests are entitled to protection, then the novelty of the case is not a bar to a remedy.

Typically, the business errand exception applies when there is an incidental benefit to the employer not common to the ordinary commute.  One of the important factors in the court’s analysis of whether there was an “incidental benefit” was that Modern Alloy did not pay Campos for driving their truck and hauling their equipment and other employees from the yard to the jobsite.  No kidding — An hour of driving a truck, equipment and employees from the yard to the jobsite is a HUGE incidental benefit.  In fact, it was so important that if Modern Allow had paid Campos for his drive time from the yard to the jobsite, the Court didn’t think the business errand exception could apply. 
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Arbitration Agreements and Arbitration Procedures — Handling the Hiring Process With Less Paper!

A new hire packet for an employee can be painfully long (for the employer and the employee).  The company’s grievance and arbitration policy and procedure can take up a lot of space in the packet.  Getting an enforceable arbitration agreement is obviously critical.  So that raises the question: Can an employer have a one-page arbitration agreement in the new hire packet and incorporate the grievance and arbitration procedures (which can span over 10 pages) by reference. The answer is yes, but the employer has to handle this process carefully.

General contract law principles govern whether the parties have entered into a binding arbitration agreement.  Therefore, the employee’s acceptance of the arbitration policy may be express or implied-in-fact by the employee’s continued employment where acceptance of the agreement is made a condition of employment. 
  
Courts have drawn a line (although not perfectly) between the agreement to arbitrate, on one hand, and the procedures governing the arbitration process on the other.  The employer and employee can agree to arbitration, but use procedures of JAMS, AAA, the California Arbitration Act (CAA), or its own company specific grievance and arbitration procedure. 

It is also well established that the parties may incorporate by reference into their contract the terms of some other document. Each case turns on its facts.  Generally, for the terms of another document to be incorporated into the document executed by the parties the reference must (1) be clear and unequivocal, (2) be called to the attention of the other party who must consent thereto, and (3) the terms of the incorporated document must be known or easily available to the contracting parties.  The contract need not recite that it “incorporates” another document, so long as it guides the reader to the incorporated document. If these conditions are met, an employee may agree to arbitrate claims against his or her employer by signing an acknowledgment form that incorporates the employer’s employee handbook and the arbitration policy it contains.  But again, handle this with care and make sure it’s done right.

In litigation, an employee may still oppose a motion to compel arbitration even though it signed an acknowledgment re: arbitration agreement, by arguing that it didn’t get a copy of the arbitration procedures.   This shouldn’t present too much of a problem (perhaps depending on the judge) if the employer handles this part of the process really well.

In Cruise v. Kroger Co., 233 Cal.App.4th 390 (2015), a new hire signed a one-page document agreeing to arbitration.  Despite being only one page, the agreement was pretty specific and incorporated by reference the company’s dispute resolution policy (what many companies call a “DRP”).  The DRP wasn’t attached to the Agreement and the employee said she never got a copy.  The trial court accepted employee’s evidence and denied Kroger’s motion to compel arbitration, finding there was no agreement to arbitrate. The appellate court reversed.  The court drew a distinction between an agreement to arbitrate (which was detailed, in writing and signed by the employee) and procedures governing arbitration (which the employee said she never received). The court noted that in California, the general rule is that arbitration should be upheld unless it can be said with assurance that an arbitration clause cannot be interpreted to cover the asserted dispute.  The only impact of Kroger’s inability to establish the contents of its arbitration policy is that Kroger failed to establish that the parties agreed to govern their arbitration by procedures different from those prescribed in the CAA (found at Code of Civil Procedure §§ 1280 et seq.). Unless the parties otherwise agree, the conduct of an arbitration proceeding is controlled by the California’s Arbitration Act. (See, e.g., §§ 1281.6, 1282, 1282.2.)  So, the arbitration agreement was upheld as enforceable, but the appellate court said that arbitration would take place under the CAA.  (The CAA is actually first rate substitute.)

But there are various ways to avoid the issue faced by Kroger  — the employer just needs to think, plan and execute well (with the help of its labor attorney).

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Alleged Agency Relationship Between U.S. Subsidiary and its Foreign Parent Not Enough to Impose Personal Jurisdiction Over Foreign Company in California Court

Williams v. Yamaha Motor Corporation, 9th Cir., 3/24/17

Yamaha Motor Co. Ltd. (YMC) is a Japanese company that makes boat motors that are sold around the world, including in California. The motors are imported through it wholly owned subsidiary, Yamaha Motor Corporation U.S.A (YMUS).  Plaintiffs filed a class action in California district court against YMC and YMUS, alleging that the motors they bought were defective in violation of federal and state warranty claims. YMC filed a motion to dismiss for lack of personal jurisdiction — it has no offices or employees in California; YMUS filed successive 12(b)(6) motions to dismiss, arguing that Plaintiffs’ warranty claims weren’t plausible. In its final stage, the class action covered plaintiffs from five different states.  The trial court ultimately granted all motions to all claims and dismissed the entire case with prejudice.  Held: Affirmed.

Plaintiffs arguments that the court had general and specific jurisdiction over YMC both failed.  Per Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915 (2011), courts have general jurisdiction over a foreign corporation only if the corporation’s connections to the forum state are so ‘continuous and systematic’ as to render it essentially at home in the forum State.   This generally (though not always) means that the defendant must be incorporated or have its principal place of business in the forum state; continuous contact by itself is not enough.  Using principles set out in Daimler AG v. Bauman, 134 S. Ct. 746 (2014), the Ninth Cir. rejected plaintiffs argument that YMUS’s (subsidiary) contacts could be imputed to YMC (parent) for purposes of establishing general jurisdiction, even if the those contacts could in fact be imputed to its parent. If the rule were otherwise, it could render a foreign corporation subject to general jurisdiction wherever its subsidiary engages in a substantial, systematic and continuous course of business.  Finally, while 17% of YMC worldwide sales were in California, that didn’t render it “at home” in California.

There was also no specific jurisdiction.  Finding specific jurisdiction must conform to traditional notions of fair play and substantial justice, and defendant’s suit-related conduct must create “a substantial connection with the forum state.”  The contacts must be created by the defendant itself (e.g., purposefully avails itself of the forum’s laws) and must be with the state itself, not just with people who reside there.

In Daimler, the U.S. Supreme Court left open whether agency principles could be used to support specific (as opposed to general) jurisdiction.  But given the logic of the holding in Daimler, the Ninth Cir. seriously questioned (without actually killing forever) the notion that agency is sufficient to establish specific jurisdiction. The court also noted that even if the existence of an agency relationship was still relevant to the issue of specific jurisdiction, plaintiffs failed to make out a prima facie case in support of agency — Agency turns on control and plaintiffs failed to plead or show how YMC had the right to control YMUS in any manner at all.

The attorneys for Yamaha, Gibson Dunn, also took out the warranty claims against YMUS: Plaintiffs alleged that the subject engines corroded in a way that significantly reduced their life expectancy. All engines have a life expectancy. In their 12(b)(6) motion, YMUS argued that the notion that a reduced life expectancy made engines an “unreasonable safety hazard” (an element of a warranty claim) was not plausible under the pleading standards of Twombly.  The Ninth Cir. agreed.

Great lawyering!