Reverse chronological e-mail alerts prepared pro bono for the California Lawyers Association (formerly State Bar of California) Labor & Employment Law Section, unofficially since 2003 and officially since 2007, covering California, 9th Circuit and US Supreme Court decisions, and new laws signed by Governor. To subscribe, contact LaborLaw@CLA.Legal.
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McCormick v. CalPERS (CA1/1 A164672, filed 4/3/23, pub. ord. 4/25/23) Public Sector Disability Retirement
Cari McCormick sought disability retirement based on symptoms caused by her office environment, and the California Public Employees’ Retirement System (CalPERS) denied her application. After the trial court denied her petition for a writ of administrative mandate, we issued a published opinion reversing the judgment. (McCormick v. Public Employees’ Retirement System (2019) 41 Cal.App.5th 428, 430–431 (McCormick I).) We held that CalPERS members are eligible for disability requirement under the Public Employees’ Retirement Law (PERL) (Gov. Code, § 20000 et seq.) when they can no longer perform their usual duties at the location where they are required to work. (McCormick I, at pp. 430–431.) We also clarified that a CalPERS member need not request an accommodation to become eligible for disability retirement. (Id. at p. 441.)
On remand, McCormick filed a motion under Code of Civil Procedure section 1021.5 (section 1021.5), which authorizes the award of attorney fees to a prevailing party when the action has conferred “a significant benefit . . . on the general public or a large class of persons.” She now appeals from the denial of that motion, contending that the trial court erred by concluding she did not satisfy the significant-benefit requirement. Applying a de novo standard of review, we agree with McCormick that our prior opinion conferred a significant benefit on the public and that she is otherwise entitled to attorney fees under section 1021.5. Thus, we reverse and remand for the court to determine the appropriate amount of fees to award.
https://www.courts.ca.gov/opinions/documents/A164672.PDF
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Westmoreland v. Kindercare Education LLC (CA1/2 A164090 4/24/23) Arbitration | PAGA
Appellant Kindercare Education LLC (Kindercare) first asked the trial court to compel arbitration of respondent Rochelle Westmoreland’s claims under the Labor Code and to stay her claims under the California Private Attorneys General Act (PAGA) back in 2019. A year later, the trial court granted the motion, but this court subsequently issued an alternative writ of mandate denying it. Kindercare unsuccessfully petitioned the California Supreme Court for review and the United States Supreme Court for certiorari.
Kindercare now returns to contend that “new law” requires that we compel Westmoreland to arbitrate at least some part of her case. Kindercare urges that our sister district’s decision in Western Bagel Co., Inc. v. Superior Court (2021) 66 Cal.App.5th 649 (Western Bagel), specifically its discussion of Lamps Plus, Inc. v. Varela (2019) 139 S.Ct. 1407 (Lamps Plus), requires that we revisit our earlier decision. Kindercare also argues that the United States Supreme Court’s decision in Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906 (Viking River), a footnote in this court’s decision in Vaughn v. Tesla, Inc. (2023) 87 Cal.App.5th 208, 218, fn. 5 (Tesla), and the recent decision in Piplack v. In-N-Out Burgers (2023) 88 Cal.App.5th 1281 (Piplack) further support its position.
Kindercare appeals from an unappealable order. Simply put, “an order denying a renewed motion,” including a renewed motion to compel arbitration, “is not appealable.” (Chango Coffee, Inc. v. Applied Underwriters, Inc. (2017) 11 Cal.App.5th 1247, 1252 (Chango Coffee); Tate v. Wilburn (2010) 184 Cal.App.4th 150, 160 (Tate).) Realizing the error, Kindercare now asks us to exercise our discretion to hear the appeal as a petition for writ of mandate. We will do so in order to reach the merits, given the unusual circumstances of this case and because “refusing review at this point . . . would result in a significant waste of time and judicial resources.” (Phillips v. Sprint PCS (2012) 209 Cal.App.4th 758, 768, 770–771 (Phillips).)
We agree with the trial court that Western Bagel is not “new law” under Code of Civil Procedure section 1008 that justifies a different decision on Kindercare’s renewed motion to compel arbitration. We conclude that the decision not to compel arbitration is mandated by the language and structure of the arbitration agreement. The result we reach here remains consistent with Western Bagel and the other cases Kindercare relies upon, including Lamps Plus. The result is also appropriate in light of recent precedent, including the Viking River decision.
https://www.courts.ca.gov/opinions/documents/A164090.PDF
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Fuentes v. Empire Nissan, Inc. (CA2/8 B314490 4/21/23) Arbitration | Unconscionability
Evangelina Yanez Fuentes signed an arbitration agreement with Empire Nissan, Inc. Nissan fired Fuentes, she sued, and Nissan moved to compel arbitration. The trial court ruled the arbitration contract was unconscionable. The unconscionability defense has two mandatory elements: a party must establish both procedural and substantive unconscionability. (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 125 (Kho).) We reverse because there was a fatal omission: no substantive unconscionability.
By coincidence, this arbitration contract is substantially similar to the form Nissan arbitration contract in another case we decide today: Basith v. Lithia Motors, Inc. (Apr. 21, 2023, B316098) ___ Cal.App.5th ___. The contract also is substantially similar to contracts in other cases, as we will describe.
https://www.courts.ca.gov/opinions/documents/B314490.PDF
Basith v. Lithia Motors, Inc. (CA2/8 B316098 4/21/23) Arbitration | Unconscionability
A twist of fate brings to us substantially the same Nissan employment arbitration contract in two otherwise unrelated cases. The other case we decide today is Fuentes v. Empire Nissan, Inc. (April 21, 2023, B314490) __ Cal.App.5th __ (Fuentes).
These two cases raise the same vital question in contract law: what exactly is California’s test for unconscionability? More precisely, when there is a very high degree of procedural unconscionability, is there any meaningful content to the second element of substantive unconscionability? In an online world where contracts usually appear only in a take-it-or-leave-it format and where there thus is much procedural unconscionability, this question about substantive unconscionability looms large.
Our holding is that, unless we are to imperil the vast online world of take-it-or-leave-it contracts, substantive unconscionability must retain meaningful independent content. For that reason, the contracts here and in Fuentes are valid and enforceable, despite their procedural unconscionability.
Mohammad Basith signed an online arbitration agreement before starting work at a car dealership. He had to sign if he wanted a job: the car dealership presented it as a take-it-or-leave-it mandatory condition. Basith took the mandatory step, signed the arbitration contract, and the dealership hired him. The employment relationship turned out to be unsuccessful: Basith sued the dealership for firing him. The dealership moved to compel arbitration. The trial court ruled the arbitration contract was unconscionable. This defense requires both procedural and substantive unconscionability. (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 125 (Kho).) We reverse because Basith suffered no substantive unconscionability, which is indispensable to the unconscionability defense.
https://www.courts.ca.gov/opinions/documents/B316098.PDF
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Groff v. DeJoy (US 22-174 Oral Arg. Transcript 4/18/23) Title VII Religious Discrimination
QUESTION PRESENTED:
Title VII of the Civil Rights Act of 1964 generally prohibits an employer from discriminating against an individual "because of such individual's * * * religion." 42 U.S.C. §§ 2000e-2(a)(l), (2). The statute defines "religion" to include "all aspects of religious observance and practice, as well as belief, unless an employer demonstrates that he is unable to reasonably accommodate to an employee's or prospective employee's religious observance or practice without undue hardship on the conduct of the employer's business." Id. § 2000e(j). In Trans World Airlines, Inc. v. Hardison, 432 U.S. 63 (1977), this Court stated that an employer suffers an "undue hardship" in accommodating an employee's religious exercise whenever doing so would require the employer "to bear more than a de minimis cost." Id. at 84.
The questions presented are:
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Whether this Court should disapprove the more-than-de-minimis-cost test for refusing Title. VII religious accommodations stated in Trans World Airlines, Inc. v. Hardison, 432 U.S. 63 (1977).
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Whether an employer may demonstrate "undue hardship on the conduct of the employer's business" under Title VII merely by showing that the requested accommodation burdens the employee's co-workers rather than the business itself.
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Gola v. University of S.F. (CA1/2 A161477 4/13/23) LMRA Preemption
Kelly Gola and members of the class she represents were adjunct faculty—part-time university professors engaged to teach on a semester-by-semester basis—at the University of San Francisco (the University). This consolidated appeal arises from Gola’s lawsuit challenging aspects of the University’s employment practices as violating California law.
The University appeals the trial court’s judgment, after a bench trial, awarding Gola penalties and attorneys’ fees in connection with the University’s failure to issue wage statements compliant with Labor Code section 226, subdivision (a) (section 226(a)). We reject the University’s argument that newly enacted Labor Code section 515.7—permitting employers to classify certain adjunct faculty as exempt from specified wage statement requirements—should be applied retroactively to the wage statements at issue here. We also reject the University’s arguments that the trial court erred in finding it liable for section 226 violations.
Gola cross-appeals the trial court’s dismissal of her claims for unpaid wages and waiting-time penalties as preempted by federal law. The federal Labor Management Relations Act (LMRA) (29 U.S.C. § 141 et seq.) preempts state courts from adjudicating claims requiring them to interpret or construe collective bargaining agreements (CBAs). Because we conclude that Gola’s claims cannot be resolved without interpreting the CBA between the University and the labor organization of its adjunct faculty, we agree with the trial court’s determination that federal law preempts Gola’s claims. We affirm the judgment.
https://www.courts.ca.gov/opinions/documents/A161477.PDF
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Castellanos v. State of California (CA1/4 A163655M, filed 3/13/23, mod. 4/12/23) Proposition 22
THE COURT*:
The concurrence and dissent to this opinion filed on March 13, 2023, is modified as follows:
1. On page 18 of the concurrence and dissent, in second full paragraph (which begins: “The deficiency I see here is structural.”), in the last sentence of text, change the state constitutional reference at the end of that sentence from “article XIV, section 4” to “article XII, section 5” so the sentence reads:
Because voter “electors” and the “Legislature” share the police power, they may each legislate on the subject of workers’ compensation, which is why our Supreme Court has held that the article II, section 8(a) power to adopt initiative statutes is “encompass[ed]” within the Legislature’s article XII, section 5 power.
2. On page 20 of the concurrence and dissent, in the partial paragraph at the top of the page, delete the phrase “workers’ compensation matters” and insert in its place the phrase “matters falling within the scope of that provision” so that it reads:
pointed out that the electors’ ability to adopt statutes by initiative is a “similar power” to that of the Legislature under article XII, section 5 (McPherson, supra, 38 Cal.4th at p. 1033), not that the electors are “the Legislature” when they legislate on matters falling within the scope of that provision, having simply stepped into the shoes of the Legislature, clothed with article XII, section 5, authority.
3. On page 43 of the concurrence and dissent, in the first full paragraph (which begins: “Disagreeing with me on this point, . . .”), in the last sentence of text, change the word “appeared” to “appears” so that it reads:
Nor do these cases give any reason for why the binding effect clause should be read as an implicit partial definition of “employer,” a term that appears nowhere in the constitutional language and was already fully defined in the statutory scheme the voters ratified in 1918.
The modifications effect no change in the judgment.
​ https://www.courts.ca.gov/opinions/documents/A163655M.PDF
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Nickson v. Shemran, Inc. (CA4/1 D080914 4/7/23) PAGA | Arbitration
Shemran, Inc. (Shemran) appeals the denial of its motion to compel arbitration of a Labor Code Private Attorneys General Act of 2004 (PAGA) (Lab. Code, § 2698 et seq.) action brought by a former employee, Blaine Nickson. The motion was based on Nickson’s agreement to arbitrate all individual claims arising from his employment (the Agreement). At the time of the trial court’s ruling, a predispute agreement to arbitrate PAGA claims was unenforceable under Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348 (Iskanian). But during the pendency of this appeal, the United States Supreme Court decided Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906 (Viking River), holding that the Federal Arbitration Act (FAA) (9 U.S.C., § 1 et seq.) preempts Iskanian in part. The issue now is whether the trial court’s ruling survives Viking River. We hold it does not. Nickson’s individual PAGA claims are arbitrable.
Viking River aside, Nickson further contends the Agreement is unenforceable because it is unconscionable. But as we explain, the Agreement delegates to the arbitrator the exclusive authority to decide that point.
The final issue is what to do with Nickson’s nonindividual PAGA claims, since only his individual ones are arbitrable. In Viking River, purporting to apply California law, the United States Supreme Court stated that a plaintiff lacks standing to prosecute nonindividual PAGA claims when their individual ones are ordered to arbitration. (Viking River, supra, 142 S.Ct. at p. 1925.) Shemran contends we should, therefore, dismiss Nickson’s nonindividual PAGA claims. California courts, however, are the final word on the meaning and application of this state’s statutes. (See Beal v. Missouri P.R. Corp. (1941) 312 U.S. 45, 50 (Beal).) In Kim v. Reins (2020) 9 Cal.5th 73, 80, the California Supreme Court held that employees do not lose PAGA standing even after settling and dismissing individual claims. Indeed, relying on Kim, we recently held that an employee whose individual PAGA claims are time-barred still has standing to pursue nonindividual claims. (Johnson v. Maxim Healthcare Services, Inc. (2021) 66 Cal.App.5th 924, 929 (Johnson).) Pending further guidance from the California Supreme Court, we are compelled to follow Kim and hold that Nickson’s nonindividual PAGA claims should not be dismissed.
https://www.courts.ca.gov/opinions/documents/D080914.PDF
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Earnest v. Com. on Teacher Credentialing (CA3 C095602 4/5/23) Commission on Teacher Credentialing | Teacher Discipline
The Commission on Teacher Credentialing (Commission) and its Committee of Credentials (Committee) (collectively defendants) appeal from a judgment granting Russell Charles Earnest’s petition for writ of mandate to set aside the Committee’s disciplinary recommendation against him and to enjoin the Commission from acting on that recommendation. Defendants assert the trial court erred in finding: (1) Earnest was excused from exhausting his administrative remedies; and (2) the Committee lacked jurisdiction to conduct a formal review pursuant to Education Code section 44242.5, subdivision (d). They further assert the trial court should have denied the petition under the doctrine of judicial restraint. We affirm.
In the unpublished portion of the opinion, we conclude all three factors outlined in Coachella Valley weigh in favor of excusing Earnest from exhausting his administrative remedies: There is a significant public interest in obtaining a definitive resolution as to the question concerning the Committee’s jurisdiction; Earnest makes a strong and ultimately persuasive argument that the Committee acted in excess of its jurisdiction by pursuing a formal review; and we are satisfied that judicial intervention would not deprive us of the benefit of defendants’ administrative expertise. (Coachella Valley Mosquito & Vector Control Dist. v. California Public Employment Relations Bd. (2005) 35 Cal.4th 1072, 1082 (Coachella Valley).) We further find defendants’ judicial restraint argument unavailing.
In the published portion of the opinion, we interpret the language of section 44242.5, subdivision (b)(3). Although section 44242.5, subdivision (b)(3) generally provides a jurisdictional basis for the Committee to commence initial reviews, as discussed post, the provision is also incorporated in section 44242.5, subdivision (d)(3) to provide a jurisdictional basis for the Committee to commence formal reviews. It was this jurisdictional provision the Committee relied upon in commencing a formal review of Earnest’s fitness to hold a credential.
Section 44242.5, subdivision (b)(3) provides, inter alia and pertinent to this appeal, that the Committee has jurisdiction to commence a formal review of a credential holder’s fitness to hold a credential upon receipt of a statement from an employer notifying the Commission that, as a result of an allegation of misconduct, the employer took an enumerated adverse employment action or the employee resigned or otherwise left employment (notifying statement). The question presented is whether, if an employer determines the circumstances do not meet the requirements for providing a notifying statement, the Committee may later interpret an employer’s statements in response to an inquiry from the Committee to indicate the existence of allegations of misconduct against the employee when an enumerated action was taken, when the employer expressly states no allegation of misconduct existed.
We conclude the plain language of section 44242.5, subdivision (b)(3) imposes the onus on the employer to determine whether to provide a notifying statement to the Committee, and thus only the employer may determine whether an enumerated action was the “result of an allegation of misconduct,” triggering the Committee’s jurisdiction. Applying that interpretation to the facts of this case, we conclude the Committee does not have jurisdiction to commence a formal review of Earnest’s fitness to hold a credential.
https://www.courts.ca.gov/opinions/documents/C095602.PDF
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Bolden-Hardge v. Cal. State Controller (9th Cir. 21-15660 4/3/23) Employment Discrimination | Free Exercise
Reversing the district court’s dismissal of Brianna Bolden-Hardge’s complaint challenging a state employer’s refusal to allow a religious addendum to the public-employee loyalty oath set forth in the California Constitution, and remanding, the panel held that Bolden-Hardge stated claims under Title VII and the California Fair Employment and Housing Act and was entitled to leave to amend her claims under the Free Exercise Clauses of the federal and state constitutions.
Bolden-Hardge, a devout Jehovah’s Witness, objected to California’s loyalty oath because she believed it would violate her religious beliefs by requiring her to pledge primary allegiance to the federal and state governments and to affirm her willingness to take up arms to defend them. When she was offered a position at the California Office of the State Controller, the Controller’s Office asked her to take the loyalty oath. She requested an accommodation to sign the oath with an addendum specifying that her allegiance was first and foremost to God and that she would not take up arms. The Controller’s Office rejected this proposal and rescinded the job offer. Bolden-Hardge returned to a lower-paying job at the California Franchise Tax Board, which then required her to take the oath but permitted her to include an addendum like the one that she had proposed to the Controller’s Office.
Bolden-Hardge sued the Controller’s Office and the California State Controller in her official capacity, alleging violations of Title VII under both failure-to-accommodate and disparate-impact theories. She also asserted a failure-to-accommodate claim against the Controller’s Office under the California Fair Employment and Housing Act (“FEHA”), and she alleged that the refusal by both defendants to accommodate her religious beliefs violated the Free Exercise Clauses of the federal and state constitutions. Bolden-Hardge sought declaratory relief for all of her claims, and she sought damages for all of her claims except the California free-exercise claim.
The panel held that, as currently pleaded, BoldenHardge’s alleged injury was redressable only through a claim for damages. The panel held that she lacked the actual and imminent threat of future injury required to have standing to seek prospective relief on any of her claims, but she could attempt to cure this defect by amendment. The panel held that Bolden-Hardge could seek damages from the Controller’s Office on her claims under Title VII, which abrogates states’ sovereign immunity, and FEHA, which similarly subjects state employers to suits for damages. As currently pleaded, she could not obtain damages for her freeexercise claim under 42 U.S.C. § 1983, which does not provide a cause of action to sue state entities or state officials in their official capacities. The panel held, however, that the district court abused its discretion in denying Bolden-Hardge leave to amend to seek damages from the State Controller in her individual capacity.
The panel held that, because Bolden-Hardge had standing to seek damages on her claims under Title VII and FEHA, it had jurisdiction to consider the merits of those claims. The panel held that Bolden-Hardge pleaded a prima facie case of failure to accommodate religion under Title VII and FEHA by alleging that she held a bona fide religious belief that conflicted with the “faith and allegiance” component of the loyalty oath, which was an employment requirement. Assuming without deciding that accommodating Bolden-Hardge would violate the California Constitution, the panel held that the Controller’s Office could not rebut Bolden-Hardge’s prima facie case by arguing that violating state law would pose an undue hardship as a matter of law. The panel explained that the presumption of undue hardship applies only when accommodating an employee’s religious beliefs would require a private employer to violate federal or state law. Where the employer is part of the very state government that is responsible for creating and enforcing the law, and there is no indication that violating that law would subject the public employer to an enforcement action by another part of state government, deeming accommodation a presumptive undue hardship at the pleadings stage would permit states to legislate away federal accommodation obligations. The panel noted that the Third Circuit has similarly focused on the risk of enforcement in assessing undue hardship.
The panel held that Bolden-Hardge pleaded a prima facie case of disparate impact, which requires a plaintiff to (1) show a significant disparate impact on a protected class or group, (2) identify the specific employment practices or selection criteria at issue, and (3) show a causal relationship between the challenged practices or criteria and the disparate impact. The panel held that to satisfy the first prong of a prima facie case, the plaintiff need not support her claim with statistics where a disparate impact is obvious. The panel further held that, at this stage of the case, the Controller’s Office did not show that it was entitled to a business necessity defense.
https://cdn.ca9.uscourts.gov/datastore/opinions/2023/04/03/21-15660.pdf
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GRFCO, Inc. v. Super. Ct. (CA4/2 E076823, filed 3/10/23, pub. ord. 4/3/23) DLSE Debarment Appeal
After an administrative hearing, the Department of Industrial Relations, Division of Labor Standards Enforcement (Division) debarred the following from acting as public works contractors: (1) GRFCO, Inc. (GRFCO), a contractor; (2) George Rogers Frost, the principal in GRFCO; (3) Garcia Juarez Construction (GJC), a contractor and apparent alter ego of GRFCO; and (4) James Craig Jackson, the principal in GJC and an employee of GRFCO. The Division found that, in six instances, the contractors had violated apprenticeship requirements, and in two instances, Frost and Jackson had made false certifications under penalty of perjury. The trial court denied the contractors’ petition for administrative mandate.
The contractors appeal. They contend that:
(1) There is insufficient evidence that the apprenticeship violations were knowing.
(2) There is insufficient evidence to support the false certification findings.
(3) The contractors were debarred because they refused to join a union, in violation of the First Amendment.
(4) The Division, the hearing officer, and/or the investigator were biased.
(5) The hearing officer erred by denying the contractors’ request to reopen, which was based on new evidence of bias.
We find no error. Therefore, we will affirm.
https://www.courts.ca.gov/opinions/documents/E076823.PDF
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Seifu v. Lyft, Inc. (CA2/4 B301774 3/30/23) Arbitration| PAGA Waiver
Respondent Million Seifu is a former driver for appellant Lyft, Inc. In 2018, he filed suit against Lyft under the Private Attorneys General Act of 2004 (PAGA) (Lab. Code, § 2698 et seq.). He alleged that Lyft misclassified him and other drivers as independent contractors rather than employees, thereby violating multiple provisions of the Labor Code. Lyft moved to compel arbitration based on the arbitration provision in the “Terms of Service” (TOS) that it required its drivers to accept in order to offer rides through Lyft’s smartphone application.
The trial court denied the motion, finding the PAGA waiver in the arbitration provision unenforceable under then-controlling California law. Lyft appealed, and in June 2021 we affirmed the denial of Lyft’s motion to compel arbitration.
Lyft petitioned the United States Supreme Court for a writ of certiorari. In June 2022, the Court granted Lyft’s petition, vacated the judgment, and remanded the case for further consideration in light of Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. ___ [142 S.Ct. 1906, 213 L.Ed.2d 179] (Viking River). We recalled the remittitur, vacated our prior decision, and requested supplemental briefing from the parties on the application of Viking River to this case.
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Seifu concedes that under Viking River his claim for civil penalties based on alleged Labor Code violations he personally suffered (his individual PAGA claim) is subject to arbitration. We agree, and therefore reverse the denial of that portion of Lyft’s motion to compel arbitration.
The crux of the parties’ dispute here is the fate of Seifu’s remaining claims for civil penalties based on alleged Labor Code violations suffered by other employees (his non-individual PAGA claims). Lyft argues that Seifu lacks standing to litigate the non-individual claims once his individual claims are sent to arbitration, and the former claims therefore must be dismissed. Seifu counters that, as a matter of state law, he retains standing to pursue the non-individual PAGA claims in court.
We conclude that we are not bound by the analysis of PAGA standing set forth in Viking River. As Justice Sotomayor recognized in her concurring opinion, PAGA standing is a matter of state law that must be decided by California courts. Until we have guidance from the California Supreme Court, our review of PAGA and relevant state decisional authority leads us to conclude that a plaintiff is not stripped of standing to pursue non-individual PAGA claims simply because his or her individual PAGA claim is compelled to arbitration.
We therefore reverse in part and affirm in part the trial court’s order denying Lyft’s motion to compel arbitration. We remand the matter to the trial court with directions to: (1) enter an order compelling Seifu to arbitrate his individual PAGA claim; and (2) conduct further proceedings regarding Seifu’s non-individual claims consistent with this opinion.
https://www.courts.ca.gov/opinions/documents/B301774.PDF
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Gregg v. Uber Technologies, Inc. (CA2/4 B302925 3/24/23) PAGA | Arbitration
Johnathon Gregg sued Uber Technologies, Inc., and Rasier-CA, LLC (collectively, “Uber”), under the Private Attorneys General Act of 2004 (PAGA), Labor Code section 2698 et seq. He alleged Uber willfully misclassified him as an independent contractor rather than an employee, which led to numerous other Labor Code violations. In response, Uber moved to compel arbitration under the “Arbitration Provision” in the “Technology Services Agreement” (“TSA”), which Gregg accepted to use Uber’s smartphone application and become an Uber driver.
The trial court denied Uber’s motion and, in April 2021, this court affirmed. The United States Supreme Court vacated the affirmance in June 2022, when it granted Uber’s petition for writ of certiorari and remanded the case for further consideration in light of Viking River Cruises, Inc. v. Moriana (2022) ___ U.S. ___ [142 S.Ct. 1906, 213 L.Ed.2d 179] (Viking River).
In light of Viking River, we first determine the TSA’s PAGA Waiver is invalid and must be severed from the Arbitration Provision. We then conclude that under the Arbitration Provision’s remaining terms, Gregg must resolve his claim for civil penalties based on Labor Code violations he allegedly suffered (i.e., his individual PAGA claim) in arbitration, and that his claims for penalties based on violations allegedly suffered by other current and former employees (i.e., his non-individual PAGA claims) must be litigated in court. Lastly, we conclude that under California law, Gregg is not stripped of standing to pursue his non-individual claims in court simply because his individual claim must be arbitrated. Consequently, his non-individual claims are not subject to dismissal at this time. Instead, under the Arbitration Provision, they must be stayed pending completion of arbitration.
Accordingly, we affirm in part and reverse in part the order denying Uber’s motion to compel arbitration. We remand the case to the trial court with directions to: (1) enter an order compelling Gregg to arbitrate his individual PAGA claim; and (2) stay his non-individual claims pending completion of arbitration.
https://www.courts.ca.gov/opinions/documents/B302925.PDF
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Wood v. Kaiser Foundation Hospitals (CA4/1 D079528M, filed 2/24/23, mod. 3/23/23) Healthy Workplaces, Healthy Families Act | Lab. Code § 248.59(e) Statutory Interpretation
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THE COURT:
It is ordered that the opinion filed February 24, 2023 be modified on footnote 16 (page 25), deleting the word “not” from the sentence, so it reads as follows:
Because of this disposition, it is unnecessary to consider Wood’s alternative arguments that PAGA penalties are “equitable” remedies within the meaning of section 245.8, subdivision (e).
There is no change in the judgment.
https://www.courts.ca.gov/opinions/documents/D079528M.PDF
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Perez v. Sturgis Public Schools (US 21–887 3/21/23) IDEA Exhaustion | ADA
Petitioner Miguel Luna Perez, who is deaf, attended schools in Michigan’s Sturgis Public School District (Sturgis) from ages 9 through 20. When Sturgis announced that it would not permit Mr. Perez to graduate, he and his family filed an administrative complaint with the Michigan Department of Education alleging (among other things) that Sturgis failed to provide him a free and appropriate public education as required by the Individuals with Disabilities Education Act (IDEA). See 20 U. S. C. §1415. They claimed that Sturgis supplied Mr. Perez with unqualified interpreters and misrepresented his educational progress. The parties reached a settlement in which Sturgis promised to provide the forward-looking relief Mr. Perez sought, including additional schooling. Mr. Perez then sued in federal district court under the Americans with Disabilities Act (ADA) seeking compensatory damages. Sturgis moved to dismiss. It claimed that 20 U. S. C. §1415(l) barred Mr. Perez from bringing his ADA claim because it requires a plaintiff “seeking relief that is also available under” IDEA to first exhaust IDEA’s administrative procedures. The district court agreed and dismissed the suit, and the Sixth Circuit affirmed.
Held: IDEA’s exhaustion requirement does not preclude Mr. Perez’s ADA lawsuit because the relief he seeks (i.e., compensatory damages) is not something IDEA can provide. Pp. 3–8.
(a) Section §1415(l) contains two features. The first clause focuses on “remedies” and sets forth this general rule: “Nothing [in IDEA] shall be construed to restrict” the ability to seek “remedies” under “other Federal laws protecting the rights of children with disabilities.” The second clause carves out an exception: Before filing a civil action under other federal laws “seeking relief that is also available” under IDEA, “the procedures under [§1415](f) and (g) shall be exhausted.” Those provisions provide children and families the right to a “due process hearing” before local or state administrators, §1415(f)(1)(A), followed by an “appeal” to the state education agency, §1415(g)(1). Mr. Perez reads §1415(l)’s “seeking relief” clause as applying only if he pursues remedies that are also available under IDEA. And because IDEA does not provide compensatory damages, §1415(l) does not foreclose his ADA claim. Sturgis reads the provision as requiring exhaustion of §1415(f) and (g) so long as a plaintiff seeks some form of redress for the underlying harm addressed by IDEA. And because Mr. Perez complains about Sturgis’s education-related shortcomings, his failure to exhaust is fatal. Pp. 3–4.
(b) Mr. Perez’s reading better comports with the statute’s terms. Because §1415(l)’s exhaustion requirement applies only to suits that “see[k] relief . . . also available under” IDEA, it poses no bar where a non-IDEA plaintiff sues for a remedy that is unavailable under IDEA. This interpretation admittedly treats “remedies” as synonymous with the “relief” a plaintiff “seek[s].” But that is how an ordinary reader would interpret the provision, based on a number of contextual clues. Section 1415(l) begins by directing a reader to the subject of “remedies,” offering first a general rule then a qualifying exception. IDEA treats “remedies” and “relief” as synonyms elsewhere, see §1415(i)(2)(C)(iii), (3)(D)(i)(III), as do other provisions in the U. S. Code, see 18 U. S. C. §3626(d); 28 U. S. C. §3306(a)(2)–(3). The second clause in §1415(l), moreover, refers to claims “seeking relief” available under IDEA. In law that phrase (or some variant) often refers to the remedies a plaintiff requests. Federal Rule of Civil Procedure 8(a)(3), for example, says a plaintiff’s complaint must include a list of requested remedies—i.e., “a demand for the relief sought.” Likewise, this Court often speaks of the “relief” a plaintiff “seeks” as the remedies he requests. See, e.g., South Carolina v. North Carolina, 558 U. S. 256, 260. Pp. 4–6.
(c) Sturgis suggests this interpretation is foreclosed by Fry v. Napoleon Community Schools, 580 U. S. 154. But the Court in Fry went out of its way to reserve rather than decide this question. What the Court did say in Fry about the question presented there does not advance the school district’s cause here. Finally, Sturgis says the Court’s interpretation will frustrate Congress’s wish to route claims about educational services to administrative experts. It is unclear what this proves, as either party’s interpretation of §1415(l) would preclude some unexhausted claims. In any event, it is the not the job of this Court to “ ‘replace the actual text with speculation as to Congress’s intent.’ ” Henson v. Santander Consumer USA Inc., 582 U. S. 79, 89. Pp. 6–7.
3 F. 4th 236, reversed and remanded.
GORSUCH, J., delivered the opinion for a unanimous Court.
https://www.supremecourt.gov/opinions/22pdf/21-887_k53m.pdf
Chong Yim v. City of Seattle (9th Cir. 21-35567 3/21/23) First Amendment | Seattle’s Fair Chance Housing Ordinance
The panel reversed in part and affirmed in part the district court’s judgment upholding the constitutionality of the City of Seattle’s Fair Chance Housing Ordinance, which prohibits landlords from inquiring about the criminal history of current or potential tenants and from taking adverse action, such as denying tenancy, against them based on that information.
Plaintiffs are landlords who filed an action against the City, alleging violations of their federal and state rights of free speech and substantive due process. The district court held that the Ordinance regulates speech, not conduct, and that the speech it regulates is commercial speech. The district court applied an intermediate level of scrutiny to hold that the Ordinance was constitutional as a “reasonable means of achieving the City’s objectives and does not burden substantially more speech than is necessary to achieve them.”
The panel did not decide whether the Ordinance regulates commercial speech and calls for the application of intermediate scrutiny, or whether the Ordinance regulates non-commercial speech and is subject to strict scrutiny review, because it concluded that the Ordinance did not survive the intermediate scrutiny standard of review. The panel held that the Ordinance’s inquiry provision impinged upon the First Amendment rights of landlords. The City’s stated interests—reducing barriers to housing faced by persons with criminal records and the use of criminal history as a proxy to discriminate on the basis of race—were substantial. The panel disagreed with the district court that the Ordinance was narrowly drawn to achieve the City’s stated goals. Here, the inquiry provision—a complete ban on any discussion of criminal history between the landlords and prospective tenants—was not in proportion to the interest served by the Ordinance in reducing racial injustice and reducing barriers to housing. The panel therefore concluded that the inquiry provision failed intermediate scrutiny.
The panel rejected the landlords’ claim that the adverse action provision of the Ordinance violated their substantive due process rights because the landlords did not have a fundamental right to exclude, and the adverse action provision survived rational basis review. Because the Ordinance contains a severability provision, the panel remanded the case to the district court to determine whether the presumption of severability was rebuttable and for further proceedings.
Judge Wardlaw concurred. While the majority assumes, but does not decide, that the Ordinance regulates commercial speech, she would agree with the district court that the speech it regulates is commercial speech. Applying the three-factor test in Bolger v. Youngs Drug Products Corp., 463 U.S. 60 (1983), she would hold that the Ordinance regulates commercial speech and is subject to an intermediate standard of review, which it fails to survive.
Judge Bennett concurred in the majority opinion, except for Part III.B.i and footnote 16, and concurred in the result. He wrote separately because under Sorrell v. IMS Health Inc., 564 U.S. 552 (2011), he would hold that strict scrutiny applies because the Ordinance, on its face, is a content- and speaker-based restriction on noncommercial speech, and the Ordinance fails strict scrutiny.
Judge Gould concurred in part and dissented in part. He concurred in Parts I, II, III(A), III(B)(i), and IV of the majority opinion. He agreed with Judge Wardlaw that Seattle’s inquiry provision regulates commercial speech and is subject to intermediate scrutiny. He dissented from the majority’s conclusion that the inquiry provision is not narrowly tailored, and from the resulting judgment that the provision is unconstitutional. He would instead hold that the inquiry provision survives intermediate scrutiny and affirm the district court in full.
https://cdn.ca9.uscourts.gov/datastore/opinions/2023/03/21/21-35567.pdf
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Olson v. State of California (9th Cir. 21-55757 3/17/23) ABC Test | AB 5 as Amended
The panel affirmed in part and reversed in part district court orders dismissing Plaintiffs’ Second Amended Complaint and denying Plaintiffs’ motion for a preliminary injunction, and remanded, in an action seeking to enjoin the State of California and the California Attorney General from enforcing California Assembly Bill 5 (“A.B. 5”), as amended by California Assembly Bills 170 and 2257.
A.B. 5, as amended, codified the “ABC test” adopted by the Supreme Court of California in Dynamex Operations West, Inc. v. Superior Court of Los Angeles, 4 Cal. 5th 903 (2018), to categorize workers as employees or independent contractors for the purposes of California wage orders. A.B. 5, as amended, however, incorporated numerous exemptions into its provisions.
The panel first held that, even under the fairly forgiving rational basis review, Plaintiffs plausibly alleged that A.B. 5, as amended, violated the Equal Protection Clause for those engaged in app-based ride-hailing and delivery services. Thus, Plaintiffs plausibly alleged that the primary impetus for the enactment of A.B. 5 was the disfavor with which the architect of the legislation viewed Uber, Postmates, and similar gig-based business models. Additionally, Plaintiffs plausibly alleged that their exclusion from the wide-ranging exemptions, including for comparable app-based gig companies, could be attributed to animus rather than reason. The district court therefore erred by dismissing Plaintiffs’ equal protection claim.
The panel held that the district court correctly dismissed Plaintiffs’ due process claims because Plaintiffs failed to plausibly allege that A.B. 5, as amended, completely prohibited them from exercising their “right to engage in a calling.” In addition, Plaintiffs’ allegations did not plausibly allege that A.B. 5, as amended, would bar plaintiffs Olson and Perez from continuing their work as “business owners in the sharing economy” with network companies that were exempted from A.B. 5, as amended.
The panel held that A.B. 5, as amended, did not violate the Contract Clause because it neither interfered with Plaintiffs’ reasonable expectations nor prevented them from safeguarding or reinstating their rights. Plaintiffs’ Bill of Attainder claims likewise failed because Plaintiffs did not plausibly allege that A.B. 5, as amended, inflicted punishment on them.
Addressing the district court’s denial of Plaintiffs’ motion for a preliminary injunction, the panel noted that the district court’s order was based on allegations contained in the Initial Complaint, which did not include Plaintiffs’ allegations regarding facts—namely the passage of A.B. 2257 and Proposition 22—that did not exist when the Initial Complaint was filed. The panel therefore remanded for the district court to reconsider Plaintiffs’ motion for a preliminary injunction, considering the new allegations contained in the Second Amended Complaint.
https://cdn.ca9.uscourts.gov/datastore/opinions/2023/03/17/21-55757.pdf
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Forrest v. Spizzirri (9th Cir. 22-16051 3/16/23) Arbitration
The panel affirmed the district court’s order granting defendants’ motion to compel arbitration of all claims in an employment law action and dismissing the action without prejudice, rather than staying the action pending arbitration.
The panel held that, although the plain text of the Federal Arbitration Act appears to mandate a stay pending arbitration upon application of a party, binding Ninth Circuit precedent establishes that district courts may dismiss when, as here, all claims are subject to arbitration. The panel concluded that this precedent was not abrogated by Badgerow v. Walters, 142 S. Ct. 1310 (2022) (relying on plain statutory text to limit the range of materials federal courts can consult when assessing jurisdiction over an application to confirm or vacate an arbitration award). The [panel further] held that the district court did not abuse its discretion in dismissing rather than staying the action because the district court did not misstate the law, misconstrue the facts, or otherwise act arbitrarily.
Concurring, Judge Graber, joined by Judge Desai, wrote that she concurred fully in the majority opinion. Judge Graber wrote that she encouraged the Supreme Court to take up the question, on which the courts of appeals are divided, of whether a stay is required when a district court refers a claim to arbitration. Judge Graber also urged the Ninth Circuit to take this case en banc in order to follow statutory language requiring a stay.
https://cdn.ca9.uscourts.gov/datastore/opinions/2023/03/16/22-16051.pdf
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Lopez v. La Casa de Las Madres (CA1/3 A163133 partial pub. 3/16/23) Pregnancy Discrimination
Gabriela Lopez filed the underlying action for employment discrimination and wrongful termination against La Casa de Las Madres (La Casa). La Casa is a non-profit organization that provides services to women and children who are victims of domestic violence. Lopez worked for La Casa at various times between 2002 and 2017. In 2014, she accepted the position of shelter manager at La Casa’s residential shelter for domestic violence victims. In September 2016, Lopez gave birth to a baby girl. Thereafter she did not return to work due to events that gave rise to this action. Following a bench trial, the court entered judgment in favor of La Casa. On appeal, Lopez contends the trial court misapplied provisions of the Fair Employment and Housing Act (FEHA) that require an employer to provide reasonable accommodations for a pregnancy-related condition. (Govt. Code, § 12940 et seq.; subsequent statutory references are to this code.) We affirm the judgment.
In the published portion of our decision, we observe there are no California cases articulating the elements of a pregnancy discrimination claim under section 12945, subdivision (a)(3)(A) (section 12945(a)(3)(A)). Drawing from the statutory language and applicable regulatory law, as well as pertinent FEHA case law, we conclude a cause of action under section 12945(a)(3)(A) requires proof that: (1) the plaintiff had a condition related to pregnancy, childbirth, or a related medical condition; (2) the plaintiff requested accommodation of this condition, with the advice of her health care provider; (3) the plaintiff’s employer refused to provide a reasonable accommodation; and (4) with the reasonable accommodation, the plaintiff could have performed the essential functions of the job. Here, the trial court applied a correct understanding of these elements and, contrary to plaintiff's contentions otherwise, properly placed the burden on plaintiff to prove that she had a condition related to pregnancy and that she was able to perform the essential functions of her job with reasonable accommodation. (See e.g. Green v. State of California (2007) 42 Cal.4th 254, 262, 264 (Green).)
In the unpublished portion of this opinion, we reject Lopez’s argument that she proved La Casa engaged in an unlawful employment practice under section 12945 and section 12940 by failing to accommodate Lopez’s pregnancy-related disability.
https://www.courts.ca.gov/opinions/documents/A163133.PDF
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Atalla v. Rite Aid Corporation (CA5 F082794, filed 2/24/23, ord. pub. 3/14/23) Sexual Harassment | Offsite & Afterhours Texting between Former Friends
Plaintiff Hanin Atalla filed a sexual harassment, failure to prevent sexual harassment, wrongful constructive termination, discrimination, and retaliation action against her former employer, Rite Aid Corporation and Thrifty Payless, Inc., dba Rite Aid. Atalla’s lawsuit stemmed from an offsite and afterhours text exchange she had with a Rite Aid district manager, Erik Lund, in which the latter sent lewd photographs to her. Atalla and Lund knew each other, and were friends, from a time before Atalla started working at Rite Aid. The Rite Aid defendants brought a summary judgment motion. The trial court granted summary judgment in favor of the Rite Aid defendants as to all of Atalla’s claims. Atalla appealed. We affirm.
https://www.courts.ca.gov/opinions/documents/F082794.PDF
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Bassett Unified School Dist. v. Super. Ct. (CA2/5 B323528 3/14/23) Judicial Impartiality
This writ proceeding involves a statutory challenge for cause filed against a trial court judge presiding over a wrongful termination lawsuit. The parties are plaintiff Michael Ross and his former employer, defendant Bassett Unified School District.
Following a multimillion dollar jury verdict in favor of Ross, the trial judge in this action, Honorable Stephanie Bowick, received a text message from another judge on the court, Honorable Rupert Byrdsong. According to Judge Bowick, “I received a text message from Judge Byrdsong on my cellphone that stated, quote, ‘$25 Million!! [Confetti emoji], [confetti emoji].’[ ] I did not respond to the text message.” Judge Byrdsong had previously informed Judge Bowick that attorneys from his former firm were trying the case. On one occasion he had greeted Ross’s counsel in Judge Bowick’s courtroom during a break in the proceedings and later brought Judge Bowick a food item. On another, Judge Byrdsong had briefly observed, from the audience, the jury selection in Judge Bowick’s courtroom, until Judge Bowick had a note passed to him asking him to leave.
Upon receipt of the postverdict text message, Judge Bowick disclosed to the parties the entire course of events involving Judge Byrdsong. Pointing to Judge Byrdsong’s apparent support for Ross and the resulting verdict in Ross’s favor, the school district sought Judge Bowick’s disqualification, asserting that a “ ‘person aware of the facts might reasonably entertain a doubt that the judge would be able to be impartial’ ” (Code Civ. Proc., § 170.1, subd (a)(6)(A)(iii)). The disqualification motion was assigned to Orange County Superior Court Judge Maria D. Hernandez. (See Code Civ. Proc., § 170.3, subd. (c)(5).) In a 10-page order, the assigned judge denied the disqualification motion.
Defendant sought review by petition for writ of mandate. We issued an order to show cause, and now deny the petition.
https://www.courts.ca.gov/opinions/documents/B323528.PDF
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Castellanos v. State of California (CA1/4 A163655 3/13/23) Proposition 22 | Legislature’s Workers Compensation Authority
In November 2020, the voters approved Proposition 22, the Protect App-Based Drivers and Services Act (Proposition 22). (Bus. & Prof. Code, §§ 7448–7467, as added by Prop. 22, approved by the voters at Gen. Elec. (Nov. 3, 2020).) Shortly afterwards, Hector Castellanos, Joseph Delgado, Saori Okawa, Michael Robinson, Service Employees International Union California State Council, and Service Employees International Union (SEIU; collectively, plaintiffs) filed a petition for writ of mandate seeking a declaration that Proposition 22 is invalid because it violates the California Constitution. The trial court granted the petition, ruling that the proposition (1) is invalid in its entirety because it intrudes on the Legislature’s exclusive authority to create workers’ compensation laws; (2) is invalid to the extent that it limits the Legislature’s authority to enact legislation that would not constitute an amendment to Proposition 22, and (3) is invalid in its entirety because it violates the single-subject rule for initiative statutes.
Proposition 22’s proponents and the state appeal, arguing the trial court was mistaken on all three points. We agree that Proposition 22 does not intrude on the Legislature’s workers’ compensation authority or violate the single-subject rule, but we conclude that the initiative’s definition of what constitutes an amendment violates separation of powers principles. Because the unconstitutional provisions can be severed from the rest of the initiative, we affirm the judgment insofar as it declares those provisions invalid and to the extent the trial court retained jurisdiction to consider an award of attorney’s fees, and otherwise reverse.
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https://www.courts.ca.gov/opinions/documents/A163655.PDF
Buero v. Amazon.com Services, Inc. (9th Cir. 20-35633 3/10/23) Wait Time
The panel affirmed the district court’s judgment on the pleadings in favor of Defendants Amazon.com Services, Inc. and Amazon.com, Inc., in a class action alleging that Defendants’ failure to compensate employees for time spent waiting for and passing through mandatory security screenings before and after work shifts and off-premises meal breaks violated Oregon’s wage and hour laws.
The panel had certified the following issue to the Oregon Supreme Court: “Under Oregon law, is time that employees spend on the employer’s premises waiting for and undergoing mandatory security screenings compensable?” In response, the Oregon Supreme Court held that Oregon law aligns with federal law regarding what activities are compensable. Therefore, time that employees spend on the employer’s premises waiting for and undergoing mandatory security screenings before or after their work shifts is compensable only if the screenings are either (1) an integral and indispensable part of the employees’ principal activities, or (2) compensable as a matter of contract, custom, or practice.
Plaintiff’s complaint did not allege that either of the identified exceptions applied. Accordingly, the panel held that the district court properly granted judgment on the pleadings to Defendants. Although the Oregon Supreme Court’s opinion did not address separately or directly Plaintiff’s meal-period claim, the logic of that opinion yielded the same result. Under both federal and state law, the test is whether an employee performed work duties during the meal period. And under both Oregon and federal regulations, employees on meal breaks must be relieved from duty. Because the Oregon Supreme Court squarely held that Oregon law aligns with federal law regarding what activities are compensable and because Plaintiff failed to allege that undergoing a mandatory security screening was “an integral and indispensable part” of an employee’s principal activities, her claim failed.
https://cdn.ca9.uscourts.gov/datastore/opinions/2023/03/10/20-35633.pdf
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Garcia-Brower v. Nor-Cal Venture Group (CA3 C089148 3/9/23) Labor Commissioner Subpoena
During an investigation into possible violations of California overtime laws by appellant Nor-Cal Venture Group, Inc. (Nor-Cal), a company that operates fast food restaurants in the Sacramento area, respondent Labor Commissioner for the State of California (Commissioner) subpoenaed business records from Nor-Cal. Later, Commissioner issued a wage citation to Nor-Cal, seeking over $900,000 in penalties and unpaid wages for alleged misclassification of about 40 restaurant managers. Nor-Cal challenged the wage citation in an “informal” adjudicatory hearing, and while that adjudication was pending, Commissioner issued a subpoena directing Nor-Cal’s “Person(s) Most Knowledgeable” on certain topics to testify at a deposition. When Nor-Cal refused, Commissioner filed a petition in the trial court to compel Nor-Cal to comply. The trial court agreed with Commissioner and ordered Nor-Cal to comply with the deposition subpoena.
On appeal, Nor-Cal challenges the trial court’s order, arguing (1) the Government Code does not contemplate parties to adjudicatory informal hearings taking depositions for the purpose of discovery; and (2) because, under the trial court’s reasoning, only Commissioner may issue deposition subpoenas during the pendency of an informal adjudication, the trial court’s order permitting non-reciprocal discovery violates due process principles.
California’s overall statutory scheme regarding administrative proceedings provides for only limited discovery in connection with informal agency adjudications. So while Commissioner has broad power to issue investigative subpoenas to a company for suspected violations of the law, that broad power ends upon initiation of adjudicative proceedings against the company. Accordingly, we reverse the trial court’s order compelling Nor-Cal to comply with Commissioner’s deposition subpoena.
https://www.courts.ca.gov/opinions/documents/C089148.PDF
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Winsor v. Sequoia Benefits & Ins. (9th Cir. 21-16992 3/8/23) ERISA | Standing
The panel affirmed the district court’s dismissal, for lack of Article III standing, of ERISA plan participants’ putative class action alleging breach of fiduciary duty by the manager of a Multiple Employer Welfare Arrangement, or MEWA.
Plaintiffs, current and former employees of RingCentral, participated in RingCentral’s employee welfare benefits plan. The plan participated in the “Tech Benefits Program” administered by Sequoia Benefits and Insurance Services, LLC, a management and insurance brokerage company. The Tech Benefits Program was a MEWA that pooled assets from employer-sponsored plans into a trust fund for the purpose of obtaining insurance benefits for employees at large-group rates.
Plaintiffs filed this putative class action on behalf of the RingCentral plan and other Tech Benefits Program participants, asserting that Sequoia owed fiduciary duties to the plan under ERISA because Sequoia allegedly exercised control over plan assets through its operation of the Tech Benefits Program. Plaintiffs alleged that Sequoia violated its fiduciary duties by receiving and retaining commission payments from insurers, which plaintiffs regarded as kickbacks, and by negotiating allegedly excessive administrative fees with insurers, leading to higher commissions for Sequoia.
The panel held that plaintiffs failed to establish Article III standing as to either of their two theories of injury. Plaintiffs’ first theory of injury was that Sequoia’s actions allegedly caused them to pay higher contributions for their insurance, and that eliminating Sequoia’s commissions and reducing administrative fees would therefore have lowered plaintiffs’ payments. The panel held, as to this out-of-pocket-injury theory, that plaintiffs failed to establish the injury in fact required for Article III standing because their allegations did not demonstrate that they paid higher contributions because of Sequoia’s allegedly wrongful conduct. Plaintiffs thus also failed to plead causation, the second element of Article III standing. And plaintiffs failed to plead the third element, that their injury would likely be redressed by judicial relief, either by the imposition of a constructive trust on Sequoia’s ill-gotten profits or by the award of damages to the RingCentral plan.
Plaintiffs’ second theory of injury was that, as beneficiaries, they retained an equitable ownership in the Tech Benefits Program’s trust fund. The panel held that this theory of standing was barred under Thole v. U.S. Bank N.A., 140 S. Ct. 1615 (2020), which held that participants in a defined-benefit pension plan lacked standing to bring an ERISA claim alleging that the plan’s fiduciaries had violated their duties of loyalty and prudence by poorly investing the plan’s assets. The plaintiffs in Thole received a fixed monthly payment, which did not fluctuate based on the value of the plan, and therefore suffered no monetary injury. The panel held that the plaintiffs here did not establish that they had some equitable interest in plan funds that the Thole plaintiffs lacked, or that a comparison to trust law could support their standing when such a comparison did not prevail in Thole. Although the Tech Benefits Program was not a defined-benefit pension plan, it similarly provided a fixed set of benefits as promised in plan documents.
https://cdn.ca9.uscourts.gov/datastore/opinions/2023/03/08/21-16992.pdf
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