18th Annual Workplace Class Action Report - 2022 Edition

406 Annual Workplace Class Action Litigation Report: 2022 Edition (“PAGA”). Specifically, Plaintiff claimed that Defendant’s misclassification practice deprived couriers of traditional employment benefits such as minimum wages, meal and rest breaks, and itemized wage statements. As a condition of employment, Defendant required Plaintiff to execute an employment agreement, which contained an arbitration provision as well as class and representative action waivers. Defendant filed a motion to compel arbitration, and the trial court denied the motion. Defendant appealed the trial court’s order contending that the U.S. Supreme Court’s decision in Epic Systems Corp. v. Lewis , 138 S. Ct. 1612 (2018) – which upheld the enforceability of class and collective action waivers – abrogated the California Supreme Court’s ruling in Iskanian v. CLS Transportation Los Angeles, LLC , 327 P.3d 129 (2014). In Iskanian , the California Supreme Court held that an employee’s right to file a representative action under the PAGA cannot be waived under California law, and that the PAGA is not preempted by the Federal Arbitration Act (“FAA”). Id. at *1. On appeal, the Court of Appeals affirmed the trial court’s order because it reasoned that Epic Systems did not address the same issue as Iskanian with respect to the enforceability of representative action waivers. Id. at *8. The Court of Appeals noted that, in alignment with Iskanian , the U.S. Supreme Court in Epic Systems found that the National Labor Relations Act’s protection of workers’ rights to engage in collective bargaining did not override the FAA’s protection of the right to consent to individual arbitration rather than proceeding as a class. Id. at *10. However, this consistency was immaterial here because Plaintiff’s case concerned the enforceability of representative action waivers. According to the Court of Appeals, the Supreme Court in Epic Systems did not decide the issue in Iskanian that controls the outcome in this case, i.e. , whether the FAA preempts a state law rule prohibiting waiver of a worker’s right to bring a representative action on behalf of the state.” The Court of Appeals also noted that several other California appellate courts had similarly reasoned that the Epic Systems ruling did not relate to the representative action issue decided in Iskanian . Accordingly, the Court of Appeals affirmed the trial court’s order denying Defendant’s motion to compel arbitration. Shi, et al. v. Wolfsdorf Rosenthal, LLP, 2021 Cal. App. Unpub LEXIS 3129 (Cal. App. 2d Dist. May 13, 2021). Plaintiffs brought a putative class action lawsuit alleging claims of legal malpractice against multiple Defendants for their alleged role in a conspiracy to defraud foreign investors in connection with a failed investment visa program under the U.S. Government’s EB-5 investment visa program. Wolfsdorf Rosenthal LLP (“Wolfsdorf”) was one of several firms and attorneys that represented more than 50 individuals who each invested $500,000 from in a proposed cancer treatment center in Southern California. The project’s founder allegedly misappropriated much of the $26 million invested in the center, which was never constructed. Neither Plaintiff was represented by Wolfsdorf. Plaintiff Lu did not invest in the visa program directly and merely lent money to Plaintiff Shi, who was represented by a different attorney, to participate in the program. Plaintiffs divided the class into subclasses of Plaintiffs according to which attorney had represented the subclass. While Plaintiffs did not claim to have been represented by Wolfsdorf personally, they argued that any insufficiency in standing was due to Wolfsdorf’s refusal to comply with discovery. Wolfsdorf demurred on the grounds that Plaintiffs lacked standing to sue and did not state a legal malpractice cause of action against the firm because it had not represented either Plaintiff. The trial court sustained the demurrer and dismissed the complaint without leave to amend. The trial court ruled that Plaintiffs lacked standing to sue individually because they had not actually been injured by Wolfsdorf. Because Plaintiffs lacked individual standing, the trial court further ruled that they also could not represent the class. The trial court also determined that Plaintiffs’ claims against Wolfsdorf were not appropriate for class treatment because they involved factual questions that could only be resolved by individual proof. In so ruling, the trial court concluded the fact that all investors received the same Private Offering Memorandum drafted by Miller Mayer, LLP was, by itself, insufficient to establish commonality. On appeal, the California Court of Appeal affirmed the trial court’s judgment. Plaintiffs conceded that Shi did not have an individual claim against Wolfsdorf, but argued that Shi’s lack of standing did not preclude her from representing the subclass. Plaintiffs viewed the issue as a question of practicality, not jurisdiction. The Court of Appeal rejected Plaintiffs’ argument. It found that standing was relevant to the inquiry of whether a particular Plaintiff could fairly represent a class, and it opined that in most instances the lack of standing would prevent a named Plaintiff from such representation. Additionally, the Court of Appeal rejected Plaintiffs’ argument that the trial court abused its discretion by deciding the issue of commonality before meaningful discovery had been conducted. The Court of Appeal determined that it was appropriate for the trial court to decide commonality at this stage of proceedings because it was clear that there was no reasonable possibility that Plaintiffs could establish a community of interest among the potential class members and that individual issues predominated over common questions of law and fact. Finally, the Court of Appeal concluded that the trial court did not err in