The beginning for all discussions on this subject is the axiom that arbitration “is a matter of contract and a party cannot be required to submit to arbitration any dispute which [it] has not agreed so to submit.” Steelworkers v. Warrior & Gulf Nav. Co., 363 U.S. 574, 582 (1960).

However clear that principal may appear, if the underlying contract is silent or ambiguous with respect to the particular matter in dispute, it is not at all obvious how it should be applied.

In addressing such disputes over the years, the courts have delineated two “interpretive rules” to bridge the gap in the contract. Howsam v. Dean Witter Reynolds, 537 U.S. 79, 83 (U.S. 2002).

Where the dispute arises out of “any doubts concerning the scope of arbitrable issues [it] should be resolved in favor of arbitration.” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25 (U.S. 1983).

However, the presumption is reversed where the dispute arises out of the question of who should decide arbitrability. First Options v. Kaplan, 514 U.S. 938, 944-945 (U.S. 1995) (“In this manner the law treats silence or ambiguity about the question ‘who (primarily) should decide arbitrability’ differently from the way it treats silence or ambiguity about the question ‘whether a particular merits-related dispute is arbitrable because it is within the scope of a valid arbitration agreement.’”).

Those disputes are resolved by the courts rather than in arbitration. The reason for the different treatment is understandable:

The [former] question arises when the parties have a contract that provides for arbitration of some issues. In such circumstances, the parties likely gave at least some thought to the scope of arbitration. And, given the law’s permissive policies in respect to arbitration, one can understand why the law would insist upon clarity before concluding that the parties did not want to arbitrate a related matter. On the other hand, the [latter] question — the “who (primarily) should decide arbitrability” question — is rather arcane. A party often might not focus upon that question or upon the significance of having arbitrators decide the scope of their own powers.

Id. The question of arbitrability is simply, in the view of the Supreme Court of the United States, too “arcane” an issue to assume the parties have considered it.

For that very sensible reason, in the absence of “clear and unmistakable” evidence of the parties’ intent to the contrary, the courts decide questions of arbitrability. Id. at 944 (“Courts should not assume that the parties agreed to arbitrate arbitrability unless there is “clea[r] and unmistakabl[e]” evidence that they did so.”) (quoting AT&T Technologies, Inc. v. Communications Workers, 475 U.S. 643, 649 (1986)).

Although the liberal federal policy favoring arbitration has been elevated above state law and perhaps even the mandates of other federal statutes, important limitations remain. It is important for litigators and, in particular, class action litigators, to keep the presumptions described above in mind.

Abbey Spanier Rodd & Abrams, LLP, located in New York City, is a well-recognized national class action and complex litigation law firm.

Wonderful as these protections sound you cannot be protected by these and other Board decisions if you are not an employee as defined by the NLRA.  The Act provides no protection to employees whom it defines to be supervisors, even if these individuals are protected by the FLSA because they spend only ten percent of their time performing supervisory functions or have no power to reward or discipline the employees whom they “supervise.”  Conversely the NLRA explicitly protects professional employees even if they are exempt from the overtime requirements of the FLSA.

Under the NLRA individuals are supervisors, and therefore unprotected, if they have the authority to perform any one of twelve functions, even if performing these functions is a very minor part of their job duties.  These functions, listed in section 2(11) are authority “to hire, transfer, suspend, lay off, recall, promote, discharge, assign, reward, or discipline other employees, or responsibly to direct them, or to adjust their grievances, or effectively to recommend such action.”  As a result of the Supreme Court’s ruling on the interpretation of two of these functions – “assign” and “responsibly to direct” – in NLRB v. Kentucky River Community Care, Inc., 532 U.S. 706 (2001) and the NLRB’s subsequent decisions in a three related cases in 2006, Oakwood Healthcare Inc., 348 NLRB No. 37, Croft Metals, 348 NLRB No. 38, and Golden Crest Healthcare Center, 348 NLRB No. 39, many individuals are statutorily classified as supervisors merely because they have the authority to assign particular tasks even though they have no power to hire, fire, reward or discipline.

Recently Senators Richard Blumenthal, D-Conn., Tom Harkin, D-Iowa, and Dick Durbin, D-Ill., introduced legislation to protect those individuals without real supervisory power.  The bill, entitled the Re-Empowerment of Skilled and Professional Employees and Construction Tradeworkers Act, or RESPECT Act, would remove “assign” and “responsibly to direct,” the two supervisory functions that do not involve actual managerial authority over co-workers from section 2(11) of the NLRA.  In addition individuals who spend less than half their time performing supervisory functions would not be defined as supervisors.  Thus the RESPECT Act would extend the protections of the NLRA to workers who need the protection because they have no real supervisory power in the workplace.

Abbey Spanier Rodd & Abrams, LLP, located in New York City, is a well-recognized national class action and complex litigation law firm.

Shortly after Morrison was decided, the Dodd-Frank Act was enacted, which restored the ability of the SEC and DOJ to bring enforcement actions for securities fraud if the matter involves: “(1) conduct within the United States that constitutes significant steps in furtherance of the violation, even if the securities transaction occurs outside the United States and involves only foreign investors; or (2) conduct occurring outside the United States that has a foreseeable substantial effect within the United States.”  Although the Act did not provide the same protections for private citizens, Section 929Y directed the SEC to conduct a study to determine whether private rights of action should be extended to the same extent as that provided to the SEC and DOJ.

On April 11, 2012, the SEC released its “Study on the Cross-Border Scope of the Private Right of Action Under Section 10(b) of the Securities Exchange Act of 1934.”  A copy of the 73 page report can be found here.  In response to the SEC’s request for public comments, the SEC received 72 comment letters (30 from institutional investors; 19 from law firms and accounting firms; 8 from foreign governments; 7 from public companies and associations representing them; 7 from academics; and 1 from an individual investor). Of these, 44 supported enactment of the conduct and effects tests or some modified version of the tests, while 23 supported retention of the Morrison transactional test.

In the study, the SEC does not take any position on the question of whether or not Congress should pass legislation to overturn Morrison.  Instead, the SEC presents several options for Congress to consider, including (1) enactment of the “conduct and effects” tests; (2) narrowing the conduct test’s scope to require the plaintiff to demonstrate that his/her injury resulted directly from conduct within the United States; (3) enacting the conduct and effects tests only for U.S. resident investors; (4) clarifying the transaction test by permitting investors to pursue a Section 10(b) claim for the purchase or sale of any security that is of the same class of securities registered in the United States, irrespective of the actual location of the transaction; (5) authorizing Section 10(b) private actions against securities intermediaries such as broker-dealers and investment advisers that engage in securities fraud while purchasing or selling securities overseas for U.S. investors or providing other services related to overseas securities transactions to U.S. investors; (6) permitting investors to pursue a Section 10(b) private action if they can demonstrate that they were fraudulently induced while in the United States to engage in the transaction, irrespective of where the actual transaction takes place; and (7) clarifying that an off-exchange transaction takes place in the United States if either party made the offer to sell or purchase, or accepted the offer to sell or purchase, while in the United States.

In connection with the release of the study, Commissioner Luis A. Aguilar issued a harsh dissenting statement relating to the SEC’s report. As part of a press release entitled, “Defrauded Investors Deserve Their Day in Court,” Mr. Aguilar recommended that Congress enact for private litigants a standard that is identical to the standard set forth in Section 929P of the Dodd-Frank Act — the standard for SEC and DOJ actions:

Today the Commission has authorized that a Study be sent to Congress expressing the views of the Staff on the cross-border scope of the private right of action under Section 10(b) of the Securities Exchange Act of 1934. However, my conscience compels me to write separately to record my views on the Study. I write to convey my strong disappointment that the Study fails to satisfactorily answer the Congressional request, contains no specific recommendations, and does not portray a complete picture of the immense and irreparable investor harm that has resulted, and will continue to result, due to Morrison v. National Australia Bank, Ltd

***

If American investors are defrauded by a company that they have invested in – and that company is listed on a foreign exchange – investors may be unable to have their day in court and seek redress against this company for its lies and misrepresentations. Thus, investors have been stripped of a traditional American right.

***

The answer to the Congressional query about whether to re-establish extraterritorial private rights of action under Section 10(b) of the Exchange Act through the application of the pre-Morrison tests of conduct and effect is an unequivocal yes.

The Study is incomplete in many ways, but I will just highlight the following:

It Fails to Adequately Explain how Private Rights of Action are a Vital Complement to SEC Actions and Essential to Investor Protection;

It Overstates the International Comity Concerns Associated with Restoring Investors’ Rights to Assert Private Claims Under Section 10(b);

It Does Not Accurately Portray Investor Harm Resulting from Morrison and Fails to Convey a Sense of Urgency as to the Harm Being Suffered; and

It Provides as an Option That Congress Take No Action at All Despite the Continuing Harm to Investors.

The Study should have recommended that Congress enact for private litigants a standard that is identical to the standard set forth in Section 929P of the Dodd-Frank Act – the standard for SEC and DOJ actions. The harm that has resulted and continues to result to investors is significant, and Congress should act to rectify this with haste.

Abbey Spanier Rodd & Abrams, LLP, located in New York City, is a well-recognized national class action and complex litigation law firm.

Plaintiffs alleged violations of the California Consumers Legal Remedies Act (“CLRA”), Cal. Civ. Code § 1750 et seq., California’s Unfair Competition Law (“UCL”), Cal. Bus. Prof. Code. § 17200 et seq., breach of implied covenant of good faith and fair dealing, restitution, unjust enrichment, money had and received, and plaintiffs also sought a declaratory judgment.  On March 31, 2012, the district court denied the motion to dismiss against all the claims, except for the claim for breach of implied covenant of good faith, but did provide plaintiffs with leave to amend their complaint.  Plaintiffs made the interesting argument that each app purchase was a separate and voidable contract between Apple and the plaintiffs’ children, which could be disaffirmed by a parent.  Apple countered that the contractual relationship was based on the original Terms & Conditions signed by the plaintiffs.  Therefore, the individual purchases were not voidable.  The district court rejected Apple’s argument and noted that on a motion to dismiss the court must construe the complaint in the light most favorable to the plaintiffs and resolve any ambiguity in their favor.

Abbey Spanier Rodd & Abrams, LLP, located in New York City, is a well-recognized national class action and complex litigation law firm.

The court held that presented with a class certification motion, a trial court must examine the plaintiff’s theory of recovery, assess the nature of the legal and factual disputes likely to be presented and decide whether individual or common issues predominate. To the extent the propriety of certification depends upon disputed threshold factual or legal questions, a court may, and indeed must resolve them. Recognizing the problems that might arise as a result of the rule against one way intervention, the Brinker court cautioned courts to generally eschew resolution of such issues unless necessary. Therefore, the court held that it is not an abuse of discretion for a trial court to certify a class without deciding one or more issues affecting the nature of a given element if resolution of such issues would not affect the ultimate certification decision. 2012 Cal. LEXIS 3149, at *28.

In reviewing the issue of the scope of an employer’s duty to provide meal periods, the Brinker court concluded that an employer must relieve an employee of all duty for the meal period, but need not ensure that the employee does not work. 2012 Cal. LEXIS 3149, at *49. The employer satisfies this obligation if it relieves its employees of all duty, relinquishes control over their activities and permits them a reasonable opportunity to take an uninterrupted 30-minute break, and does not impede or discourage them from doing so. However, the Court held that work by a relieved employee during a meal break, does not create liability for premium pay by the employer. 2012 Cal. LEXIS 3149, at *64-65.

Abbey Spanier Rodd & Abrams, LLP, located in New York City, is a well-recognized national class action and complex litigation law firm.

Plaintiffs filed a class action alleging wage and hour violations against their employer, Los Angeles Memorial Medical Center, a subsidiary of Pacific Health Corporation.  In a prior class action, another named plaintiff had moved for and lost class certification against the same defendant for substantially the same wage and hour claims. The defendants demurred case on grounds that collateral estoppel barred the plaintiffs from seeking class certification because the issue of class certification was decided against plaintiffs in a prior related action.  The trial court sustained the demurrer, without leave to amend.

Relying on the Supreme Court’s decision in Smith v. Bayer, which held that a District Court’s denial of a Rule 23 class certification motion does not prevent separate plaintiffs from seeking certification in a separate state court action, the Court of Appeal reversed the trial court’s and held that “the denial of class certification cannot establish collateral estoppel against unnamed putative class members on any issue because unnamed putative class members were neither parties to the prior proceeding nor represented by a party to the prior proceeding so as to be considered in privity with such a party for purposes of collateral estoppel.” Accordingly, because the plaintiffs in Bridgeford were not parties to the prior action, they could not be precluded from pursuing their own class claims against the defendant.

This is a good decision for plaintiffs and class actions.

Abbey Spanier Rodd & Abrams, LLP, located in New York City, is a well-recognized national class action and complex litigation law firm.

The case concerns the social networking site’s use of members’ names and photos in advertisements as part of its “Sponsored Stories” feature.  Plaintiffs claimed that Facebook misappropriated their images in violation of California’s Right of Publicity Statute (CRPS), Unfair Competition Law (UCL), and the doctrine of unjust enrichment, by using their names and photos in paid advertisements without their consent.  See Fraley v. Facebook, No. 11–CV–01726–LHK, 2011 WL 6303898 (N.D. CA Dec. 16, 2011) (Fraley I).

On December 16, 2011, District Judge Lucy Koh granted in part, and denied in part, Facebook’s motion to dismiss the plaintiffs’ claims.  Fraley I., 2011 WL 6303898. In upholding the claims under the CRPS and UCL, Judge Koh wrote that the plaintiffs “articulated a coherent theory of how they were economically injured by the misappropriation of their names, photographs, and likenesses for use in paid commercial endorsements.” Id. at 14.

In doing so, Judge Koh distinguished the current case from Cohen v. Facebook. No. 10-cv-5282-RS, 2011 WL 3100565 (N.D. Cal. June 28, 2011).  In Cohen, the plaintiffs were unable to show how they had suffered damages when Facebook used their names and images to promote its “Friend Finder” service.  However, in the current case, Judge Koh found that the plaintiffs “made specific allegations that their personal endorsement of Facebook advertisers’ products are worth two to three times more than traditional advertisements on Facebook.”  Fraley I, 2011 WL 6303898, at 29. Their evidence included statements from Facebook executives extolling the effectiveness of using members’ images to promote products to friends who would value their endorsement. Id. at 14–15.

As to the claim for unjust enrichment, California courts have recently held that unjust enrichment is not a stand-alone cause of action in the state.  See, e.g., Hill v. Roll Int’l Corp., 195 Cal. App. 4th 1295, 1307 (2011) (“Unjust enrichment is not a cause of action, just a restitution claim.”).  Therefore, Judge Koh granted Facebook’s motion to dismiss on the third cause of action. Fraley I, 2011 WL 6303898, at 36.

Then, in February 2012, two of the named plaintiffs in the case, Angel Fraley and Paul Wang, sought to withdraw as class representatives.  Fraley based her motion “on privacy concerns and potential embarrassment” from details that could emerge during the proceedings. Fraly II, 2012 WL 555071, at 1.  In addition, Fraley asked for a protective order barring Facebook from conducting her deposition. Id.

Judge Grewal ruled on February 21 that Fraley failed to show good cause for issuing the protective order, holding that her “legitimate desire to protect her privacy does not outweigh the relevance or propriety of [a deposition].” Id. at 3.  Moreover, “by agreeing to be a class representative, she understood that she would have to participate in discovery and provide testimony.” Id.  Following Judge Grewal’s ruling, Judge Koh granted Fraley and Wang’s motion for dismissal on March 13, leaving three plaintiffs remaining as class representatives.  See Fraley v. Facebook, No. 11–CV–01726–LHK, 2012 WL 893152 (N.D. CA Mar. 13, 2012).

The plaintiffs’ brief in support of a motion for class-certification was submitted in early March.  Keep checking this blog for updates on the case, as they develop.

Nicholas Turner is a third year law student at New York Law School.  He is a Notes & Comments editor of Law Review and a John Marshall Harlan Scholar.  Mr. Turner came in second in the 2011 ABA Torts, Insurance, and Compensation Law Section Writing contest.  He was a 2011 Review Editor of the school’s Global Human Rights Bulletin.  Mr. Turner is proficient in French.

Abbey Spanier Rodd & Abrams, LLP, located in New York City, is a well-recognized national class action and complex litigation law firm.

Used with permission from Microsoft.

On February 24, 2012, the Court of Appeals for the Seventh Circuit reversed a district court ruling denying class-action certification in an employment discrimination suit against brokerage firm Merrill Lynch. See McReynolds v. Merrill Lynch, Pierce, Fenner, & Smith. Case No. 11-3639, 2012 WL 592745 (7th Cir. Feb. 24, 2012). In doing so, Judge Posner distinguished the firm’s employment practices from those at issue in Wal-Mart v. Dukes. 131 S. Ct. 2541 (2011).

The plaintiffs represent a class of roughly 700 former and current employees who worked as brokers in Merrill Lynch’s branch offices. Plaintiffs claimed that two of Merrill Lynch’s management policies worked to discriminate against black employees in violation of Title VII of the Civil Rights Act of 1964. The first allowed brokers to choose to work on teams and to select their own team members. The second was to distribute accounts to brokers based on past performance, including team performance.

Although managers did not select teams, managers could veto the teams and rely on their performance in evaluating employees. Plaintiffs argued the policies had a disparate negative impact because, taken together, the policies caused black brokers to be excluded from certain business opportunities and to receive lower compensation.

The District Court for the Northern District of Illinois, Eastern Division, denied class certification in August 2010. The plaintiffs filed an amended motion for class certification in July 2011, following the Supreme Court’s decision in Dukes. The district court judge again denied certification. However, he opined that while Dukes was presumed to benefit the defendants, an appeal would help clarify how Dukes should apply to policies at issue in the case. See McReynolds 2012 WL 592745, at 11–12.

After the plaintiffs filed for leave to appeal, Merrill Lynch argued that the Circuit Court should refuse to hear the case because Rule 23(f) requires plaintiffs to file for leave within 14 days of a District Court’s ruling. Merrill Lynch argued that the plaintiffs forfeited their right to an appeal by not filing in August 2010, when the court first rejected class certification. However, the Circuit Court found that it retained jurisdiction over the matter and that it could not hold that “the failure to take a timely appeal from one interlocutory order operates as a forfeiture … of the right to appeal a subsequent order.” Id. at 7.

The Court then turned its attention to whether Dukes barred class-certification. The Supreme Court held in Dukes that discrimination by local managers would not “present a common issue that could be resolved efficiently in a single proceeding” in the absence of a company-wide policy. Id at 12. Merrill Lynch argued that Dukes was controlling in this case because “any discrimination here would result from local, highly-individualized implementation of policies rather than the policies themselves.” Id. at 17.

However, Judge Posner wrote that Merrill Lynch’s interpretation offered “too stark a dichotomy” and that the alleged impact was attributed to company-wide policies. While noting that Merrill Lynch’s policies may not be racially discriminatory, Judge Posner emphasized that the question “is whether the plaintiffs’ claim of disparate impact is most efficiently determined on a class-wide basis rather than in 700 individual lawsuits.” Id. at 18. While each plaintiff must “prove that his compensation had been adversely affected” it is not necessary to determine in each case “whether the challenged practices were unlawful” under Title VII. Id. 18–19.

Nicholas Turner is a third year law student at New York Law School. He is a Notes & Comments editor of Law Review and a John Marshall Harlan Scholar. Mr. Turner came in second in the 2011 ABA Torts, Insurance, and Compensation Law Section Writing contest. He was a 2011 Review Editor of the school’s Global Human Rights Bulletin. Mr. Turner is proficient in French.

Abbey Spanier Rodd & Abrams, LLP, located in New York City, is a well-recognized national class action and complex litigation law firm

In our July 2011 blog post, we reported about Judge William J. Hibbler’s decision to deny IndyMac Mortgage Servicers, FSB’s (a division of OneWest Bank, FSB) motion to dismiss a class action lawsuit related to its failure to comply with guidelines established by the Home Affordable Modification Program (“HAMP”).  See Fletcher v. OneWest Bank, FSB, 2011 U.S. Dist. LEXIS 72562 (N.D. Ill. June 30, 2011)(order denying OneWest’s motion to dismiss plaintiff’s class action claims for breach of contract, promissory estoppel and violations of the Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA”)).  Abbey Spanier is lead counsel in the Fletcher litigation.

On July 15, 2011, OneWest filed a motion to stay the Fletcher litigation pending the U.S. Court of Appeal for the Seventh Circuit’s decision in Wigod v. Wells Fargo Bank, N.A., Appeal No. 11-1423 (7th Cir. Feb. 22, 2011).  In Wigod, Judge Manning dismissed the plaintiff’s claims stemming from defendant Wells Fargo’s alleged non-compliance with HAMP.  Like the Fletcher litigation, plaintiff Wigod’s class action complaint alleged violations of Illinois law under common-law contract and tort theories and under the ICFA.  The district court’s reason for dismissing Wigod’s complaint was primarily that Wigod alleged Wells Fargo had violated HAMP, a federal statute which it determined did not allow for a private right of action. See Wigod v. Wells Fargo Bank, N.A., No. 10 CV 2348, 2011 WL 250501 (N.D. Ill. Jan. 25, 2011). After the Wigod appeal, OneWest argued that a stay was warranted in the Fletcher litigation because the issues raised were virtually identical to those pending before the Seventh Circuit Court of Appeals.  During a status hearing with the Court, plaintiff consented to OneWest’s motion for a stay so long as the status quo was to be maintained.

On March 7, 2012, the Seventh Circuit issued its opinion in Wigod v. Wells Fargo Bank, N.A., No. 11-1423, 2012 U.S. App. LEXIS 4714 (7th Cir. March 7, 2012), a copy of which is located here.  Relying in part on Judge Hibbler’s June 30, 2011 opinion denying OneWest’s motion to dismiss, the Seventh Circuit reversed the judgment of the Wigod district court on breach of contract, promissory estoppel, fraudulent misrepresentation and ICFA claims.  In its decision, the Seventh Circuit determined that plaintiff Wigod’s state law claims are not preempted or otherwise barred by federal law.

In light of the Seventh Circuit’s decision reversing the district court’s decision in Wigod, the Court has lifted the stay in the Fletcher litigation and the case will now proceed.  Abbey Spanier intends to aggressively litigate the Fletcher action and seek compensation for homeowners who have been harmed by OneWest’s deceptive practices.  If you have been harmed by OneWest’s improper practices, please tell us your story here.

In related news, on March 26, 2012, Judge Hibbler unexpectedly passed away at the age of 65.  Abbey Spanier passes along its sincere condolences to Judge Hibbler’s family, friends and colleagues at the Northern District.

Abbey Spanier Rodd & Abrams, LLP, located in New York City, is a well-recognized national class action and complex litigation law firm.

The panel discussed the significant role that e-discovery plays in litigation and noted that it “is estimated that in 2011, 1.8 zettabytes of data were created, the equivalent of 57.5 billion iPads, each with thirty-two gigabytes of storage.”  The Third Circuit held “that of the numerous services the vendors performed, only the scanning of hard copy documents, the conversion of native files to TIFF, and the transfer of VHS tapes to DVD involved ‘copying,’ and that the costs attributable to only those activities are attributable under § 1920(4)’s allowance for the ‘costs of making copies of any materials.’”

The court also provided some comfort to parties that are concerned about being held responsible for e-discovery costs when they lose a case.  The court opined that “[n]either the language of § 1920(4), nor its history, suggests that Congress intended to shift all the expenses of a particular form of discovery—production of ESI—to the losing party.  Nor can such a result find support in Supreme Court precedent, which has accorded a narrow reading of the cost statute in other contexts.”

Abbey Spanier Rodd & Abrams, LLP, located in New York City, is a well-recognized national class action and complex litigation law firm.