On May 26, 2011 the California Court of Appeal, First Appellate District issued its ruling in Hill v. Roll International Corp., 2011 Cal. App. LEXIS 653 (Cal. App. 1st Dist. May 26, 2011). In upholding the lower court’s decision to sustain Defendants’ demurrer without leave to amend, the Court found that Plaintiff’s complaint failed to state a cause of action as it did not meet the reasonable consumer standard applicable to its claims under the UCL (Bus. & Prof. Code §17200, et seq.), FAL (Bus. & Prof. Code §17500, et seq.), and CLRA (Civ. Code §1750, et seq.), and did not demonstrate how amending could cure this defect.

Plaintiff filed a proposed a class action on behalf of herself and other consumers of Fiji bottled water on the basis that Defendants were misleading consumers by using a common marketing practice known as “greenwashing.” Specifically, Plaintiff maintained that Defendant put a green drop on the labels of its bottles that allegedly represented that the water was environmentally superior to other waters and was endorsed by a third party environmental organization.

Even assuming each of Plaintiff’s allegations to be true, in applying the reasonable consumer standard as expressed by the Federal Trade Commission and as applicable to state consumer laws, the Court held that Plaintiff could not meet the burden. Hill v. Roll Internat. Corp., 2011 Cal. App. LEXIS 653 at *15. Specifically, under the UCL and FLA, a plaintiff must show that “potential deception of consumers acting reasonably in the circumstances – not just any consumers.” Id. at *16. The Court reiterated that the standard is not the least sophisticated consumer, an unwary consumer, or an overly suspicious consumer. Id.

In finding that Plaintiff had failed to state a cause of action, the Court explained how a reasonable consumer would not believe that a green drop of water on a bottle of water could be construed to mean that a product was environmentally superior or endorsed by any environmental group. Id. at *17-18. The Court reasoned that not only was the drop a logical icon for the product at issue, but that absent a name, logo, trademark symbol, or any other indication that the drop signified a particular group’s endorsement, the symbol does not mislead the consumer. Id. In addressing the context of the symbol, the Court pointed out that the symbol is placed on the bottle aside Fiji’s website, making it even less likely that a reasonable consumer would think it signified a third party endorsement. Id. at *18. As for the drops green color, the Court emphasized that the FTC guides do not prohibit “touting” a products “green” feature, but in fact promotes such marketing, so long as it does not mislead. Id. at *17-18. Moreover, the Court distinguished the instant type of advertisement from those set forth in both Koh v. S.C. Johnson & Son, Inc., 2010 U.S. Dist. LEXIS 654 (N.D. Jan. 6, 2010), and Kwikset Corp. v. Superior Court, 51 Cal. 4th 310 (2011).

In Koh, Plaintiffs had alleged similar claims against S.C. Johnson & Son, Inc., alleging that Defendant’s use of “Greenlist Ingredients” defined as a rating system that promotes the use of environmentally responsible ingredients, misleads a reasonable consumer into believing that a third party endorses the “Greenlist” as environmentally superior ingredients. 2010 U.S. Dist. LEXIS 654 at *1-3. The Koh Court found that the “Greenlist” was deceptive, but here the Court explained that the Fiji green drop symbol was distinguishable because unlike the representation of the “Greenlist” the Fiji green drop made no express representations suggesting environmental superiority or that an independent source rated the product. Hill v. Roll Internat. Corp., 2011 Cal. App. LEXIS 653 at *20-21.

Similarly, the Court found that the procedure and facts of Kwikset, relied upon by Plaintiff, were distinguishable. The Court explained that Kwikset related to standing, and holds only that a person has standing to sue if they can truthfully allege they were deceived into spending money based on a deceptive product label. Id. at *20-22. Although the Court agreed with the Kwikset Court’s stress that “labels matter”, the Court refused to find that a reasonable consumer would construe Fiji’s green drop label in the manner that Plaintiff alleged. Id. at *22.

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On April 27, 2011, the U.S Supreme Court issued its much-awaited ruling in ATT Mobility, LLC v Concepcion(“Concepcion”). The holding was not favorable to consumers because it found that the California Supreme Court ruling in Discovery Bank v Superior Court, 36 Cal 4th 148 (2005), which outlawed class action bans in California in many consumer contracts, is preempted by the Federal Arbitration Act (“FAA”) because Discovery Bank stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress. The 5-4 decision, authored by Justice Scalia, was split along predictable lines, with Justices Roberts, Kennedy, and Alito joining the majority opinion and Justice Thomas filing a concurring opinion.

This case was filed in federal court by the Concepcions, who entered into a cell phone agreement with AT&T, and who claimed that AT&T had engaged in false advertising and fraud by charging sales tax on “free” phones. Their agreement provided for arbitration of all disputes between the parties, but required that claims be brought in the parties’ individual capacity, and not as a plaintiff or class member in any purported class or representative capacity, in other words, a class action ban. AT&T moved to compel the case to arbitration, but the federal trial court and Ninth Circuit Court of Appeals refused, finding the class action ban unconscionable, citing the California Supreme Court decision in Discovery Bank. The Ninth Circuit also found that Discover Bank was not preempted by the FAA because it was a refinement of the unconscionability analysis to contracts generally in California and section 2 of the FAA permits arbitration agreements to be not enforced “upon such grounds as exist at law or in equity for the revocation of any contract.”

The U.S. Supreme Court disagreed and reversed the Ninth Circuit decision finding that section 2’s saving clause preserves generally contract defenses, but does not preserve state law rules that stand as an obstacle to the accomplishment of the FAA’s objectives which, the Court stated, is to enforce arbitration agreements according to their terms and facilitate an informal streamlined procedure proceeding. However, as Justice Breyer pointed out in dissent, “a single class proceeding is surely more efficient than thousands of separate proceedings for identical claims. Thus, if speedy resolution of disputes were all that mattered, then the Discover Bank rule would reinforce, not obstruct, that objective of the Act.”

The initial reaction to this opinion by many representing the interests of both consumers and big business was to announce that the decision represents and end to the class action practice as we know it, especially to consumer class cases. While no doubt the ruling will eliminate some class cases and make others more difficult to prosecute, it should not be read as the death knell to class actions. After all, in order for Concepcionto apply, an enforceable contract must exist which compels meaningful and fair arbitration and that contract must preclude class claims. Some companies may not be able to enter into such contracts considering the type of transaction or relationship that they have with their customers or employees and others may choose to not arbitrate believing they may get better results in court. Additionally, as time passes and more reflective assessments of the opinion are made, strategies are being developed to continue the fight for consumers and workers.

Among the thought leaders for the consumers are the fine attorneys at Public Justice. They believe that Concepcion still permits class claims to proceed if the plaintiffs can establish a factual record that would show that a particular class action ban actually prevents consumers or employees from having a meaningful chance at pursuing their particular legal claims. The Concepcion decision praised the speed and efficiency of the AT&T arbitration process and assumed that it would make consumers whole. If evidence can be established that that is not true with respect to another arbitration clause and process then an argument can be made that Concepcion does not apply. Also, the arbitration clause at-issue should be examined to determine if consumers are required to waive certain substantive rights under the arbitration clause. If so, this may prevent consumers from pursuing their legal claims. Further, although Concepcion found that the California Supreme Court’s Discovery Bank ruling was an obstacle to the FAA, it did not specifically address the rationale in California’s Supreme decision in Gentry v. Superior Court (Circuit City), 42 Cal. 4th 443 (2007), which struck class action bans in certain types of employment disputes. For example, Plaintiffs will argue that Gentry focused on the importance of class actions in the employment context especially given the impediments that employees face when bringing suit against their current employer and the limitations of remedies in administrative hearings. In other words, a class action ban in the employment context may effectively prevent employees from pursuing their legal claims. Moreover, Concepcion did not address a class action ban that would prevent plaintiffs from pursuing claims under federal statutes. Several courts have struck down class action bans that undermine federal antitrust laws and plaintiffs will seek to expand the federal claims that are not covered by Concepcion.

Public Justice also believes that Concepcion’s preemption holding does not apply in state court because, Justice Thomas, who provided the necessary fifth vote for the majority via a separate concurring opinion, has consistently taken the position that the FAA does not apply in state court. If true, then class cases will likely be filed in state court and be pled to avoid removal from to federal court. Such cases would allege purely state law violations and would likely limit class definitions geographically to a single state’s borders so as to try to fall within the “local controversy” or “home state” exceptions of the Class Action Fairness Act. Finally, Public Justice also points out that arbitration clauses that solely name the National Arbitration Forum (“NAF”) may not be enforceable given NAF was forced to abandon consumer arbitrations by law enforcement agencies. This argument, however, will not likely succeed if an alternate arbitral forum such as the American Arbitration Association (AAA) is named or if the defendant can argue that the naming of NAF was not an important part of the arbitration agreement.

If you have questions or comments about this article, we would value the opportunity to hear from you. For information on other topics in consumer advocacy and to learn more about Khorrami Pollard & Abir, please visit our website or subscribe to our Consumer Advocate Legal Update blog.

According to the EEOC, employment lawsuits have risen to their highest level in history, with nearly 100,000 claims filed in 2010. That number reflects a 31% increase from just four years ago. In California, a significant number of employment cases allege violations of the state’s meal and rest break requirements. In fact, many consider meal and rest break cases the “lawsuit du jour” for both individual and class actions. As such, it is no surprise that so many are eagerly awaiting the California Supreme Court’s decision in Brinker Restaurant Corp. v. Superior Court, 165 Cal. App. 4th 25 (2008), pet. for review granted (October 22, 2008).

In California, an employer may not employ an employee for a work period of more than five hours per day without providing the employee with a meal period of not less than 30 minutes. See Labor Code §§ 226.7 and 512; IWC Wage Orders. California law further provides that every employer shall authorize and permit all employees to take a 10-minute rest period for every four hours worked. See Labor Code § 226.7; IWC Wage Orders Additionally, if an employer fails to provide an employee a meal or rest period in accordance with these provisions, the employer shall pay the employee one additional hour of pay at the employee’s regular rate of compensation for each workday that a meal and/or rest period is not provided. See Labor Code § 226.7.

In Brinker, the California Court of Appeal reversed an order granting class certification of meal and rest period (and other) claims after concluding that “meal breaks need only be ‘made available’ and not ‘ensured.’” Brinker, 165 Cal. App. 4th at 55. The court found that because meal and rest breaks need only be “made available,” individual issues predominated and, based upon the evidence presented to the trial court, such claims were not amenable to class treatment. Id. at 31.

In October 2008, the California Supreme Court granted review in Brinker, noting that the case presents questions “of widespread importance for millions of workers and their employers across California.” While the California Supreme Court has not yet scheduled oral argument in Brinker, many anticipate the court will set oral argument shortly, with a decision published within 90 days thereafter. The Supreme Court’s decision in Brinker will finally clarify what it means to “provide” a meal and rest period and undoubtedly will also impact certification in class cases.

If the Supreme Court holds that an employer must “ensure” that employees take breaks, this will not only make it easier for employees to establish liability but also to obtain certification of such claims, as the focus will be on the employer’s policies and practices, or lack thereof. On the other hand, if the Supreme Court holds that an employer need only make meal and rest breaks available, employers will argue that this precludes certification as the question whether an employee was forced to forego a break or voluntarily chose not to take one is a highly individualized inquiry. However, cases premised on an employer’s policies or practices which impede employees from taking breaks may survive an employer-friendly decision in Brinker.

In Cicairos v. Summit Logistics, Inc., 133 Cal. App. 4th 949 (2005), the Court of Appeal held that an employer violates the applicable wage orders when it constructs impediments to employees’ ability to freely access rest breaks mandated under California law. The employer in Cicairos utilized an on-board computer system to track its drivers’ activities. However, the employer did not include an activity code for meal and rest breaks and breaks were not on the list of acceptable delays. Additionally, the employer did not schedule meal or rest breaks, and plaintiffs presented evidence that defendant’s management pressured drivers to make more than one daily trip. Based thereon, the court concluded that, despite defendant’s written policies which permitted breaks, “as a practical matter, the defendant did not permit the plaintiffs to take their rest breaks.” Id. at 963 (emphasis in original).

A number of courts have found that Cicairos is consistent with a duty to merely provide the right to take breaks since the employer in Cicairos actively pressured its employees not to take breaks through its policies and compensation scheme. See, e.g., Brown v. Federal Express Corp., 249 F.R.D. 580, 586 (C.D. Cal. 2008) (Cicairos is “consistent with an obligation to make breaks available, rather than to force employees to take breaks”); Kenny v. Supercuts, Inc., 252 F.R.D. 641, 645 (N.D. Cal. 2008); White v. Starbucks Corp., 497 F. Supp.2d 1080, 1089 (N.D. Cal. 2007). Thus, the “barrier theory” addressed in Cicairos will likely survive the Supreme Court’s decision in Brinker regardless of the outcome because an employer’s construction of impediments fails to meet even the minimal obligation to make rest breaks available.

In fact, several courts which have held that an employer need only make breaks available, including the Court of Appeal in Brinker, have confirmed that, consistent with this obligation, an employer cannot impede, discourage or dissuade employees from taking breaks. See Brinker, 165 Cal. App. 4th at 31 (“[W]hile employers cannot impede, discourage or dissuade employees from taking [meal and] rest periods, they need only provide, not ensure, [meal and] rest periods are taken.”); Brown v. Fed. Express Corp., 249 F.R.D. 580, 585-86 (C.D. Cal. 2008) (reasoning that while an employer is not obligated “to force employees to take breaks[,]” an employer may be liable where “an employer simply assumed breaks were taken, despite its institution of policies that prevented employees from taking… breaks.”);Perez v. Safety-Kleen Sys, 253 F.R.D. 508, 515 (2008) (“employers cannot impede, discourage or prohibit employees from taking…breaks”); Tien v. Tenet Healthcare Corp., 192 Cal. App. 4th 1055, 1067 (2011), pet. for review granted (May 18, 2011) (“That an employer may not frustrate the exercise of the employees’… breaks does not equate with the obligation to ensure that an employee actually takes the break.”).

Other California courts have certified class actions in which plaintiffs alleged the employers prevented employees from taking meal and rest breaks. In Bufil v. Dollar Financial Group, Inc., 162 Cal. App. 4th 1193 (2008), the court found certification appropriate where plaintiffs alleged the employer had a policy of scheduling certain employees to work alone, thereby prohibiting them from taking their breaks. More recently, in Jaimez v. Daiohs USA, Inc., 181 Cal. App. 4th 1286 (2010), the Court of Appeal reversed the trial court’s order denying class certification. The court noted that the question whether an employer must “ensure” breaks are taken was unsettled but found that it was unnecessary to resolve the issue. Id. at 1303. The court found that certification was appropriate as plaintiffs’ declarations established there were predominant common factual issues whether employees missed breaks based on the employer’s practice of designating delivery schedules and routes that made it impossible for employees to both take their breaks and complete their deliveries on time. Id. at 1305.

Thus, even if the Supreme Court holds an employer need only make breaks available, arguably, class certification will still be appropriate where an employee can demonstrate that the employer, through uniform policies and practices, prevented employees from taking meal and rest breaks.

If you have questions or comments about this article, we would value the opportunity to hear from you. For information on other topics in consumer advocacy and to learn more about Khorrami Pollard & Abir, please visit our website or subscribe to our Consumer Advocate Legal Update blog.