California Labor Law Compliance:
Employee Applications
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No FCRA Liability Waiver
Unclear Notices
Limits on Salary History
Ban the Box
ICRAA
FCRA
Arbitration and Discrimination Suit
Arbitration / Choic of Law Clause
No FCRA Liability Waiver
No FCRA Liability Waiver
Syed v. M-I LLC
SOURCE:
KEY WORDS:
FCRA, Liability, Liability Waiver, Employee Applications
AGENCY:
US Court of Appeals, Ninth Circuit
ACTION:
Modified and Certified for Publication (7/23/2020)
Document Citation:
No. 14-17186
SARMAD SYED, an individual, on behalf of himself and all others similarly situated, Plaintiff-Appellant, v. M-I, LLC, a Delaware Limited Liability Company; PRECHECK, INC., a Texas Corporation, Defendants-Appellees | No. 14-17186 D.C. No. 1:14-cv-00742-WBS-BAM |
MEMORANDUM AND ORDER RE: PRELIMINARY APPROVAL OF CLASS SETTLEMENT
Plaintiff Sarmad Syed brought this putative class action lawsuit against M-I, LLC ("M-I") and other parties alleging M-I violated federal credit reporting laws while conducting pre-employment background checks.
The parties have reached a settlement which would resolve plaintiff's claims against defendant M-I. (See Dion-Kindem Decl. Ex. 1, Joint Stipulation of Class Action Settlement and Release ("Settlement Agreement") (Docket No. 127-2).) Presently before the court is plaintiff's unopposed motion for preliminary approval of the proposed class, proposed class settlement, proposed class counsels' fee and settlement allocation, and proposed plan of notice. (Docket No. 127.)
I. Factual and Procedural Background
Plaintiff applied for a job with M-I on July 20, 2011. (FAC ¶ 14.) During the application process, plaintiff filled out and signed a one-page form entitled "Pre-Employment Disclosure and Release." (Id.) That form included the following language:
I understand that the information obtained will be used as one basis for employment or denial of employment. I hereby discharge, release, and indemnify prospective employer [defendant M-I LLC], PreCheck, Inc., their agents, servants, and employees, and all parties that rely on this release and/or the information obtained with this release from any and all liability and claims arising by reason of the use of this release and dissemination of information that is false and untrue if obtained by a third party without verification.
It is expressly understood that the information obtained through the use of this release will not be verified by PreCheck, Inc.
(Id.)
Plaintiff alleges that M-I violated Section 1681(b)(2) of the Fair Credit Reporting Act by procuring or causing to be procured a consumer report for employment purposes via a disclosure form that contained not only language authorizing the procurement of a consumer report, but also an indemnity clause and release. (Id. ¶ 17.) Plaintiff alleges that as a result, class members could recover statutory damages between $100 and $1,000 as well as punitive damages under 15 U.S.C. § 1681n(a). (Id. ¶ 31.)
The complaint also included related allegations against PreCheck Inc., the company that provided the credit reports in question. Plaintiff and defendant PreCheck reached a settlement which this court approved in early 2016. (Docket No. 79.)
In September 2014, Defendant M-I moved this court for dismissal of plaintiff's First Amended Complaint (Docket No. 39) and the court granted that motion (Docket No. 46). Plaintiff appealed the dismissal to the Ninth Circuit, which reversed this court's ruling and remanded the case. See Syed v. M-I, LLC, 853 F.3d 492, 495 (9th Cir.), cert. denied, 138 S. Ct. 447 (2017).
In October 2018, the parties reached a settlement. (See Docket No. 122.) Their Settlement Agreement provides for a gross settlement amount of $556,000. (Settlement Agreement ¶ 34.) The Settlement Agreement specifies that the defendants agree not to oppose a motion by class counsel for attorney's fees (up to $300,000) and attorney's costs (up to $10,000) from this gross settlement amount. (Id. ¶¶ 37-38.) It also estimates the settlement administration costs of approximately $25,000 (Id. ¶ 36) and a class representative service award of up to $5,000 (Id. ¶ 35), both of which will be deducted from the gross settlement amount.
The Settlement Agreement provides that the amount remaining after these deductions ("Net Settlement Amount") will be equally distributed among those class members who have not opted out of the settlement, with each one receiving a pro rata share of the Net Settlement Amount. (Id. 39.)
Plaintiff now seeks preliminary approval of the parties' stipulated class-wide settlement pursuant to Federal Rule of Civil Procedure 23(e). M-I has not opposed this motion.
II. Discussion
Judicial policy strongly favors settlement of class actions. Class Plaintiffs v. City of Seattle, 955 F.2d 1268, 1276 (9th Cir. 1992). "To vindicate the settlement of such serious claims, however, judges have the responsibility of ensuring fairness to all members of the class presented for certification." Staton v. Boeing Co., 327 F.3d 938, 952 (9th Cir. 2003).
There are two stages to a court's approval of a proposed class action settlement. In the first phase, the court temporarily certifies a class, authorizes notice to that class, and preliminarily approves the settlement, with final approval contingent on the outcome of a fairness hearing. Ontiveros v. Zamora, No. 2:08-567 WBS DAD, 2014 WL 3057506, at *2 (E.D. Cal. July 7, 2014.) If a court determines that a proposed class action settlement does deserve preliminary approval, then notice of the action is given to the class members and a fairness hearing is held.
At the fairness hearing, the court will entertain class members' objections to both the suitability of the class action as a vehicle for this litigation and the terms of the settlement. See Murillo v. Pac. Gas & Elec. Co., 266 F.R.D. 468, 473 (E.D. Cal. 2010) (Shubb, J.). After the fairness hearing, the court will make a final determination regarding whether the parties should be allowed to settle the class action pursuant to the agreed upon terms. See Mora v. Cal W. Ag Servs., Inc., No. 1:15-CV-1490 LJO EPG, 2018 WL 3201764, at *3 (E.D. Cal. June 28, 2018), report and recommendation adopted, No. 1:15-CV-1490 LJO EPG, 2018 WL 4027017 (E.D. Cal. Aug. 22, 2018)("Following the fairness hearing, taking into account all of the information before the court, the court must confirm that class certification is appropriate, and that the settlement is fair, reasonable, and adequate.").
Here, the court performs only the preliminary step of class settlement approval. Before turning to the propriety of the proposed settlement, however, the court must first determine whether certification of the settlement class is proper. See Staton, 327 F.3d at 952 (stating that in cases where "parties reach a settlement agreement prior to class certification, courts must peruse the proposed compromise to ratify both the propriety of the certification and the fairness of the settlement.").
A. Class Certification
To be certified, the putative class must satisfy both the requirements of Federal Rule of Civil Procedure 23(a) ("Rule 23(a)") and Federal Rule of Civil Procedure 23(b)("Rule 23(b)"). See Leyva v. Medline Indus. Inc., 716 F.3d 510, 512 (9th Cir. 2013). In the settlement context, the court's careful scrutiny of the extent to which the putative class complies with the requirements of Rules 23(a) and 23(b) is especially important since the court will "lack the opportunity, present when a case is litigated, to adjust the class, informed by the proceedings as they unfold." Amchem Prods. Inc. v. Windsor, 521 U.S. 591, 620 (1997).
1. Rule 23(a) Requirements
Rule 23(a) restricts class actions to cases where:
(1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class.
Fed. R. Civ. P. 23(a). The court will address each of these four requirements in turn.
a. Numerosity
A proposed class must be "so numerous that joinder of all members is impracticable." Fed. R. Civ. P. 23(a)(1). Though there is no definite threshold for determining numerosity, the requirement is presumptively satisfied by a proposed class of at least forty members. See Collins v. Cargill Meat Sols. Corp., 274 F.R.D. 294, 300 (E.D. Cal. 2011) (Wanger, J.) ("Courts have routinely found the numerosity requirement satisfied when the class comprises 40 or more members."). Here, plaintiff seeks to represent a class of approximately 4,500 members. (Settlement Agreement ¶ 2.) The numerosity requirement is easily satisfied by the proposed settlement class.
b. Commonality
Commonality hinges on whether the class members' claims "depend upon a common contention" that is "capable of classwide resolution -- which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke." Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011). Moreover, "[a]ll questions of fact and law need not be common to satisfy the rule." Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019 (9th Cir. 1998). Rather, the "existence of shared legal issues with divergent factual predicates is sufficient, as is a common core of salient facts coupled with disparate legal remedies within the class." Id.
Here, the settlement class is comprised of:
All persons residing in the United States (including all territories and other political subdivisions of the United States) as to whom M-I L.L.C. may have procured or caused to be procured a consumer report for employment purposes during the period from May 19, 2009 through November 1, 2018, who M-I L.L.C. hired, and who have not signed a severance agreement and release or equivalent agreement releasing the claims asserted in the Action.
(Settlement Agreement ¶ 2.)
The members of the putative class allege that defendant procured or caused to be procured consumer reports about them, for employment purposes, without making the disclosure required by the Fair Credit Reporting Act. Specifically, the proposed class members all allege that the defendant used a disclosure form that also contained indemnifying language when obtaining their consent to obtain credit reports about them for employment purposes.
These contentions arise out of a common core of salient facts and constitute a shared set of allegations regarding the legality of defendant's conduct vis-à-vis the Fair Credit Reporting Act. The statutory damages could also be resolved on a class-wide basis. See 15 U.S.C. § 1681n(a). The proposed class thus meets the commonality requirement.
c. Typicality
Rule 23(a) also requires that the "claims or defenses of the representative parties [be] typical of the claims or defenses of the class." Fed. R. Civ. P. 23(a)(3). The Ninth Circuit has held that to meet the typicality requirement, the named plaintiff's claims must be "reasonably coextensive with those of absent class members." Hanlon, 150 F.3d at 1020. In evaluating the named plaintiff's typicality, courts must look to "whether other members have the same or similar injury, whether the action is based on conduct which is not unique to the named plaintiffs, and whether other class members have been injured by the same course of conduct." Hanon v. Dataprods. Corp., 976 F.2d 497, 508 (9th Cir. 1992) (quoting Schwartz v. Harp, 108 F.R.D. 279, 282 (C.D. Cal. 1985)).
The putative class members allege a set of facts that is essentially identical to those alleged by the named plaintiff. Specifically, they allege that the defendant violated Section 1681b(b)(2) of the Fair Credit Reporting Act by:
procuring or causing to be procured consumer reports for employment purposes regarding Plaintiff and other class members without making the required disclosure "in a document that consists solely of the disclosure" by using the disclosure and authorization form to obtain indemnity and a release of claims[.]
(FAC ¶ 17.)
Plaintiff and class members thus allege similar injuries and class members would presumably seek the same remedy that plaintiff does here: statutory and punitive damages under § 1681n(a). (See FAC ¶ 31.) Accordingly, plaintiff's claims appear to be reasonably coextensive with those of the proposed class, and the proposed class thus meets the typicality requirement.
d. Adequacy of Representation
Finally, Rule 23(a) requires that "the representative parties will fairly and adequately protect the interests of the class." Fed. R. Civ. P. 23(a)(4). "Resolution of two questions determines legal adequacy: (1) do the named plaintiffs and their counsel have any conflicts of interest with other class members and (2) will the named plaintiffs and their counsel prosecute the action vigorously on behalf of the class?" Hanlon, 150 F.3d at 1020.
In most respects, for reasons discussed above in the "commonality" and "typicality" sections, the named plaintiffs' interests appear to be co-extensive with those of the class. However, the settlement provides for an incentive award of up to $5,000 for the named plaintiff. (See Settlement Agreement ¶ 35.)
Although the Ninth Circuit has specifically approved the award of "reasonable incentive payments" to named plaintiffs, the use of an incentive award nonetheless raises the possibility that a plaintiff's interest in receiving that award will cause his interests to diverge from the class's interest in a fair settlement. See Staton, 327 F.3d at 977-78 (declining to approve a settlement agreement where size of incentive award suggested that named plaintiffs were "more concerned with maximizing [their own] incentives than with judging the adequacy of the settlement as it applies to class members at large."). As a result, district courts must "scrutinize carefully the awards so that they do not undermine the adequacy of the class representatives." Radcliffe v. Experian Info. Sys., Inc., 715 F.3d 1157, 1163 (9th Cir. 2013).
The proposed $5,000 incentive award to plaintiff is very disproportionate to the anticipated $50 recovery of other class members. See e.g., Ybarrondo v. NCO Fin. Sys., Inc., 2008 WL 183714, at *3 (S.D. Cal. 2008) (denying preliminary approval of class action settlement and requiring the parties to "address the issue of the named Plaintiff's proposed $2,000 cash award," which the court felt was "disproportionately large in comparison to the class members' $23 cash award."). Such a substantial fee award must be justified by, for example, "the actions the plaintiff has taken to protect the interests of the class, the degree to which the class has benefitted from those actions, . . . and [plaintiff's] reasonabl[e] fear[s of] workplace retaliation." Staton, 327 F.3d at 977 (citation and quotation omitted). In the instant case, the only evidence of plaintiff's contributions to the class submitted alongside the instant motion is Peter Dion-Kindem's declaration that absent plaintiff's action "none of the [c]lass [m]embers would have reaped the rewards of this action. (Dion-Kindem Decl. ¶ 22.) The plaintiff has also previously declared that in bringing this action he bore the risk that his future employers might learn about this lawsuit and be hesitant to hire him. (Syed Decl. ¶ 2 (Docket No. 76-4.) Though relevant, these facts, taken together, do not provide strong support for a $5,000 incentive award in a settlement where the average class member will recover only $50.
At this stage, however, the court cannot determine that the proposed $5,000 incentive awards render the named plaintiff an inadequate representative of the class. It emphasizes, however, that this is only a preliminary determination. On or before the date of the final fairness hearing, the parties should prepare evidence of the named plaintiff's substantial efforts as class representative in order to better justify the discrepancy between this award and those of the unnamed class members.
The second prong of the adequacy inquiry examines the vigor with which the named plaintiff and his counsel have pursued the common claims. "Although there are no fixed standards by which 'vigor' can be assayed, considerations include competency of counsel and, in the context of a settlement-only class, an assessment of the rationale for not pursuing further litigation." Hanlon, 150 F.3d at 1021.
Plaintiff's counsel state that they have substantial experience in prosecuting employment claims. (Dion-Kindem Decl. ¶ 2; Blanchard Decl. ¶ 2 (Docket No. 127-3).) Peter R. Dion-Kindem states that he currently is, or previously has been, counsel of record in more than two dozen class/PAGA proceedings. (Dion-Kindem Decl. ¶¶ 4-5.) Lonnie C. Blanchard, III makes the same declaration. (Blanchard Decl. ¶¶ 4-5.) The court thus has some assurance that plaintiff's counsel has the experience necessary to maximize the return on this matter and vindicate the injuries of the class.
Plaintiff's counsel also indicate that the decision to settle plaintiff's claim was made after taking into account the uncertainty and risk of further litigation and the difficulties and delays inherent in class action litigation. (Dion-Kindem Decl. ¶ 7.) As such, "the court can safely assume that plaintiff's counsel has vigorously sought to maximize the return on its labor and to vindicate the injuries of the entire class." Murillo, 266 F.R.D. at 476. Accordingly, the court finds that plaintiff and plaintiff's counsel are adequate representatives of the class, and therefore that plaintiff has satisfied all of the requirements for certification set forth in Rule 23(a).
2. Rule 23(b)
To be certified as a class action, an action must not only meet all of the prerequisites of Rule 23(a), but also satisfy the requirements of one of the three subdivisions of Rule 23(b). Plaintiffs seek certification under Rule 23(b)(3), which provides that a class action may be maintained only if (1) "the court finds that questions of law or fact common to class members predominate over questions affecting only individual members" and (2) "that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy." Fed. R. Civ. P. 23(b)(3).
a. Predominance
"Because Rule 23(a)(3) already considers commonality, the focus of the Rule 23(b)(3) predominance inquiry is on the balance between individual and common issues." Murillo, 266 F.R.D. at 476 (citing Hanlon, 150 F.3d at 1022).
Plaintiff's and the class members' claims turn on the legality of a common method used by M-I for providing notice when obtaining consumer reports for employment purposes. Central to these claims are common questions regarding, for example, whether the notice M-I used to disclose its procurement of consumer reports violated the FCRA and, in the event that it did, whether that violation was willful. The class claim thus demonstrates a "common nucleus of facts and potential legal remedies," Hanlon, 150 F.3d at 1022, for the class members that can be resolved in a single adjudication. Accordingly, the court finds that common questions of law and fact predominate over questions affecting only individual class members.
b. Superiority
In addition to the predominance requirement, Rule 23(b)(3) permits class certification only upon a showing that "a class action is superior to other available methods for fairly and efficiently adjudicating the controversy." Fed. R. Civ. P. 23(b)(3). It sets forth four non-exhaustive factors that courts should consider in making this determination. They are: "(A) the class members' interests in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already begun by or against class members; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and (D) the likely difficulties in managing a class action." Id. Since the parties settled this action prior to certification, factors (C) and (D) are inapplicable. See Murillo, 266 F.R.D. at 477 ("Some of these factors, namely (D) and perhaps (C), are irrelevant if the parties have agreed to a pre-certification settlement.").
If class members pursued individual litigation, they could possibly recover statutory damages between $100 and $1,000 as well as punitive damages under the FCRA. See 15 U.S.C. § 1681n(a). This settlement would limit their recovery to their pro rata share of the net settlement amount. As such, class members might have an interest in individually prosecuting their own separate actions. However, given the substantial risks associated with litigating this case, class members' interests in pursuing individual actions are likely relatively low, although objectors at the fairness hearing may reveal otherwise.
Additionally, the court is unaware of any concurrent litigation already begun by class members regarding the FCRA issues presented here against M-I. The class action device thus appears to be the superior method for adjudicating this controversy.
3. Rule 23(c)(2) Notice Requirements
If the court certifies a class under Rule 23(b)(3), it "must direct to class members the best notice that is practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort." Fed. R. Civ. P. 23(c)(2)(B). Actual notice is not required. Silber v. Mabon, 18 F.3d 1449 (9th Cir. 1994). The notice provided to absent class members, however, must be "reasonably certain to inform the absent members of the plaintiff class". Id. at 1454 (quoting In re Victor Techs. Sec. Litig., 792 F.2d 862, 865 (9th Cir. 1986).)
The Settlement Agreement (¶ 31) indicates that Simpluris, Inc. will serve as the settlement administrator. Simpluris has substantial experience administering class action settlements (Dion-Kindem Decl. ¶ 23), and has previously served as settlement administrator in several cases in this district. See, e.g., Ontiveros v. Zamora, 303 F.R.D. 356 (E.D. Cal. 2014); Bond v. Ferguson Enters., No. 1:09-CV-1662 OWW MJS, 2011 WL 2648879 (E.D. Cal. 2011); Vanwagoner v. Siemens Indus., Inc., No. 2:13-CV-01303 KJM EFB, 2014 WL 7273642 (E.D. Cal. 2014).
The Settlement Agreement provides that within 21 days of the settlement's preliminary approval, M-I will provide Simpluris with a class list (Settlement Agreement ¶ 41) that shall contain, to the extent available in M-I's records, each class member's full name, last known address, and Social Security Number (id. ¶ 7). It also provides that Simpluris shall conduct reasonable verification measures related to the class member's addresses and, within 14 days of receiving the list, shall send, via First Class U.S. Mail, a notice packet to all class members. (Id. ¶ 41.) The court is satisfied that this system of providing notice is reasonably calculated to provide notice to class members.
The Settlement Agreement provides that if, on or before the response deadline, a notice packet is returned to the settlement administrator as non-delivered, the settlement administrator will send the notice packet to the forwarding addressed affixed to it. (Id.) The Settlement Agreement makes the following provisions for notice packets returned without a forwarding address:
If no forwarding address is provided, the Settlement Administrator shall promptly attempt to determine a correct address using a skip-trace, or other search using the name, address and/or Social Security number of the Class Member involved, and shall re-mail the Notice Mailing. If after performing a skip-trace search, the Notice Mailing is returned to the Settlement Administrator as non-deliverable, that individual will be deemed a Participating Class Member, and the Settlement Administrator will have no further obligation to undertake efforts to obtain an alternative address.
(Id.) The court is satisfied that this system of providing notice is reasonably calculated to provide notice to class members.
Likewise, the notice itself very clearly identifies the options available to putative class members in an easy to read chart. (Dion-Kindem Decl. Ex. A ("Notice of Settlement") at 1 (127-2).) It also comprehensively explains the proceedings, the definition of the class, the terms of the settlement, and the procedure for objecting to, or opting out of, the settlement. (Id. at 2-5.) The content of the notice is therefore sufficient to satisfy Rule 23(c)(2)(B). See Churchill Vill., LLC v. Gen. Elec., 361 F.3d 566, 575 (9th Cir. 2004) ("Notice is satisfactory if it 'generally describes the terms of the settlement in sufficient detail to alert those with adverse viewpoints to investigate and to come forward and be heard.'") (quoting Mendoza v. Tucson Sch. Dist. No. 1, 623 F.2d 1338, 1352 (9th Cir. 1980)).
B. Rule 23(e): Fairness, Adequacy, and Reasonableness of Proposed Settlement
Having determined that the proposed class preliminarily satisfies the requirements of Rule 23, the court will now examine whether the terms of the parties' settlement appear fair, adequate, and reasonable. See Fed. R. Civ. P. 23(e)(2). This process requires the court to "balance a number of factors," including:
the strength of the plaintiff's case; the risk, expense, complexity, and likely duration of further litigation; the risk of maintaining class action status throughout the trial; the amount offered in settlement; the extent of discovery completed and the stage of the proceedings; the experience and views of counsel; the presence of a governmental participant; and the reaction of the class
members to the proposed settlement.
Hanlon, 150 F.3d at 1026. Since many of these factors cannot be considered until the final fairness hearing, "the court need only conduct a preliminary review so as to resolve any 'glaring deficiencies' in the settlement agreement before authorizing notice to class members." Ontiveros 2014 WL 3057506, at *12 (citing Murillo, 266 F.R.D. at 478).)
1. Negotiation of the Settlement Agreement
Plaintiff states that "[t]his action has been vigorously litigated by the Parties and sufficient motion and appellate practice has been conducted by Plaintiff to assess the strengths of the parties' respective claims and defenses." (Mem. in Supp. of Mot. for Preliminary Approval of Class Action Settlement at 19 (Docket No. 127-1).) Given the stage of this matter and plaintiff's representation, the court does not question that the proposed settlement was the result of arms-length bargaining. See Fraley v. Facebook, Inc., 966 F.Supp.2d 939, 942 (N. D. Cal. 2013) (holding that a settlement reached after informed negotiations "is entitled to a degree of deference as the private consensual decision of the parties" (citing Hanlon, 150 F.3d at 1027)).
2. Amount Recovered and Distribution
In determining whether a settlement agreement is substantively fair to class members, the court must balance the value of expected recovery against the value of the settlement offer. See In re Tableware Antitrust Litig., 484 F. Supp. 2d 1078, 1080 (N.D. Cal. 2007). Though each class member's approximately $50 recovery under the proposed settlement is less than could potentially be secured if the case went to trial, it is not plainly deficient. See Officers for Justice v. Civil Serv. Comm'n of City & Cty. of San Francisco, 688 F.2d 615, 628 (9th Cir. 1982) ("It is well-settled law that a cash settlement amounting to only a fraction of the potential recovery will not per se render the settlement inadequate or unfair.") Numerous district courts have approved similar recoveries in other FRCA class action settlements. See Hillson v. Kelly Servs. Inc., 2017 WL 3446596, at *3 (E.D. Mich. 2017) (granting final approval for FRCA class action settlement with $19 per-capita net recovery); Moore v. Aerotek, Inc., No. 2:15-CV-2701, 2017 WL 2838148, at *4 (S.D. Ohio June 30, 2017) (recommending final approval of a FRCA class action settlement providing between $13 and $80 payouts to each class member), report and recommendation adopted, 2017 WL 3142403 (S.D. Ohio July 25, 2017).
The court notes that though the plaintiff characterizes Lagos v. Leland Stanford Junior University, No. 15-CV-04524-KAW, 2017 WL 1113302 (N.D. Cal. Mar. 24, 2017), as approving a net payoff of approximately $14, the opinion actually denies preliminary approval of a FRCA class action settlement with a net payoff of $13.82 on the grounds that it is far less than the minimum statutory penalty of $100 provided for by the FRCA. --------
For reasons discussed elsewhere in this order, the amount of the attorney's fee award, see infra II.B.3, gives the court pause. Nonetheless, the court cannot conclude at this stage that the award is excessive, let alone so grossly excessive that it imperils the fairness or adequacy of this settlement. Cf. Murillo, 266 F.R.D. at 480 (preliminarily approving settlement in spite of concerns that attorney's fee award was excessive). Accordingly, because the settlement appears "fair, reasonable, and adequate," Fed. R. Civ. P. 23(e)(2), the court will preliminarily approve the settlement agreement pending a final fairness hearing.
3. Attorney's Fees
If a negotiated class action settlement includes an award of attorney's fees, then the court "ha[s] an independent obligation to ensure that the award, like the settlement itself, is reasonable, even if the parties have already agreed to an amount." In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 941 (9th Cir. 2011).
"Under the 'common fund' doctrine, 'a litigant or a lawyer who recovers a common fund for the benefit of persons other than himself or his client is entitled to a reasonable attorney's fee from the fund as a whole.'" Staton, 327 F.3d at 969 (quoting Boeing Co. v. Van Gemert, 444 U.S. 472, 478 (1980)). In common fund cases, the district court has discretion to determine the amount of attorney's fees to be drawn from the fund by employing either the percentage method or the lodestar method. Id. at 968. The percentage method is particularly appropriate in common fund cases where, as here, "the benefit to the class is easily quantified." Bluetooth, 654 F.3d at 942. The Ninth Circuit has permitted courts to award attorney's fees using the percentage method "in lieu of the often more time-consuming task of calculating the lodestar." Id. The court will thus adopt the percentage method here.
Under the percentage method, the court may award class counsel a percentage of the total settlement fund. See Vizcaino v. Microsoft Corp., 290 F.3d 1043, 1047 (9th Cir. 2002). The Ninth Circuit "has established 25% of the common fund as a benchmark award for attorney fees." Hanlon, 150 F.3d at 1029. Class counsel request $300,000 in attorney's fees, which constitutes a remarkable 53.95% of the gross class settlement.
Class counsel attempts to justify the requested upward departure from the Ninth Circuit's 25% benchmark by comparing the $300,000 in requested attorneys' fees with a supposed $347,375 lodestar. (Dion-Kindem Decl. ¶¶ 15-20.) The court is not convinced by this attempted justification. Even in light of the class counsel's successful appeal from the dismissal of the First Amended Complaint, this fee award is extraordinarily high.
Lodestar calculation is a two-step process. Fischer v. SJB-P.D. Inc., 214 F.3d 1115, 1119 (9th Cir. 2000). First, the court "tak[es] the number of hours reasonably expended on the litigation and multipl[ies] it by a reasonable hourly rate." Id. Second, the court may adjust the resulting figure upwards or downwards based on a variety of factors. Id. In this case, the problems with the first step of plaintiffs' counsel's lodestar calculation process are so fundamental, that the court will not even reach the second part of the analysis.
Plaintiffs' counsel asks for $875 per hour for both Lonnie Blanchard and Peter R. Dion-Kindem. (See Dion-Kindem Decl. ¶ 18.) Plaintiffs' counsel's lodestar figure relies on the assumption that the typical hourly rates of an experienced Los Angeles lawyer are "reasonable" in this case. They are not.
The definition of a "reasonable hourly rate" for purposes of lodestar calculation is tethered to the "prevailing market rate in the relevant community." BMO Harris Bank N.A. v. CHD Transp. Inc., No. 1:17-CV-00625 DAD BAM, 2018 WL 4242355, at *7 (E.D. Cal. Sept. 6, 2018). When calculating the lodestar, the "relevant community" is the forum in which the adjudicating district court sits. Id. In this case, the "relevant community" for purposes of lodestar calculation is the Fresno division of the Eastern District of California. Here, a more appropriate hourly rate for an attorney with approximately 40 years of experience is approximately $400 per hour. See Willis v. City of Fresno, No. 1:09-CV-01766 BAM, 2018 WL 1071184, at *7 (E.D. Cal. 2018)(awarding rate of $400 to attorney with more than forty years of experience); Verduzco v. Ford Motor Co., No. 1:13-CV-01437 LJO, 2015 WL 4131384, at *4 (E.D. Cal. 2015), report and recommendation adopted, No. 1:13-CV-01437 LJO, 2015 WL 4557419 (E.D. Cal. 2015)(awarding an hourly rate of $380 to an attorney with more than forty years of experience). Given the market rates in Fresno, the requested hourly rates are unreasonably high.
In spite of these reservations, the court need not reduce the fee award at this point in the case. See Murillo, 266 F.R.D. at 480 (granting preliminary approval of the settlement despite concerns that the proposed attorney's fee award was unreasonable). Instead, the court only preliminarily approves the fee award on the understanding that class counsel must demonstrate, on or before the date of the final fairness hearing, that the extraordinarily high proposed award is reasonable in light of the circumstances of the case. In the likely event that class counsel is unable to do so, the court would then be required to reduce class counsel's fees to a reasonable amount or to deny final approval of this settlement.
Accordingly, the court finds that preliminary approval of the proposed class, proposed class settlement, proposed class counsels' fee and settlement allocation, and proposed plan of notice is appropriate.
IT IS THEREFORE ORDERED that plaintiff's motion for preliminary certification of a conditional settlement class and preliminary approval of the class action settlement (Docket No. 127) be, and the same hereby is, GRANTED.
IT IS FURTHER ORDERED THAT:
(1) the following class be provisionally certified for the purpose of settlement in accordance with the terms of the stipulation: All persons residing in the United States (including all territories and other political subdivisions of the United States) as to whom M-I L.L.C. may have procured or caused to be procured a consumer report for employment purposes during the period from May 19, 2009 through November 1, 2018, who M-I L.L.C. hired, and who have not signed a severance agreement and release or equivalent agreement releasing the claims asserted in the Action;
(2) Sarmad Syed is appointed as the representatives of the settlement class and is provisionally found to be an adequate representative within the meaning of Federal Rule of Civil Procedure 23;
(3) Peter R. Dion-Kindem, P.C., 21550 Oxnard St., Suite 900, Woodland Hills, CA 91367; and Blanchard Law Group, APC, 3311 East Pico Boulevard Los Angeles, CA 90023, are provisionally found to be fair and adequate representatives of the settlement class and are appointed as class counsel for the purposes of representing the settlement class conditionally certified in this order;
(4) Simpluris, Inc. is appointed as the settlement administrator;
(5) the form and content of the proposed Notice of Settlement (Dion-Kindem Decl., Ex. A) are approved, except to the extent that they must be updated to reflect dates and deadlines specified in this order;
(6) no later than twenty-one (21) days from the date this order is signed, defendant shall provide the class list to Simpluris, Inc.;
(7) no later than fourteen (14) days from the date it receives the class list from defendant, Simpluris shall mail a Notice of Settlement to all members of the settlement class in the manner provided for in this order;
(8) no later than ninety (90) days from the date this order is signed, any member of the settlement class who intends to object to, comment upon, or opt out of the settlement shall mail written notice of that intent to Simpluris, pursuant to the instructions in the Notice of Settlement;
(9) a final fairness hearing shall be held before this court on Monday, August 5, 2019, at 1:30 p.m. in Courtroom 5 to determine whether the proposed settlement is fair, reasonable, and adequate and should be approved by this court; to determine whether the settlement class's claims should be dismissed with prejudice and judgment entered upon final approval of the settlement; to determine whether final class certification is appropriate; and to consider class counsel's applications for attorney's fees, costs, and an incentive award to plaintiff. The court may continue the final fairness hearing without further notice to the members of the class;
(10) no later than twenty-eight (28) days before the final fairness hearing, class counsel shall file with this court a petition for an award of attorneys' fees and costs. Any objections or responses to the petition shall be filed no later than fourteen (14) days before the final fairness hearing. Class counsel may file a reply to any objections no later than seven (7) days before the final fairness hearing;
(11) no later than twenty-eight (28) days before the final fairness hearing, class counsel shall file and serve upon the court and defendant's counsel all papers in support of the settlement, the incentive award for the class representative, and any award for attorneys' fees and costs;
(12) no later than twenty-eight (28) days before the final fairness hearing, Simpluris, Inc. shall prepare, and class counsel shall file and serve upon the court and defendant's counsel, a declaration setting forth the services rendered, proof of mailing, a list of all class members who have opted out of the settlement, and a list of all class members who have commented upon or objected to the settlement;
(13) any person who has standing to object to the terms of the proposed settlement may appear at the final fairness hearing in person or by counsel and be heard to the extent allowed by the court in support of, or in opposition to, (a) the fairness, reasonableness, and adequacy of the proposed settlement, (b) the requested award of attorneys' fees, reimbursement of costs, and incentive award to the class representative, and/or (c) the propriety of class certification. To be heard in opposition at the final fairness hearing, a person must, no later than ninety (90) days from the date this order is signed, (a) serve by hand or through the mails written notice of his or her intention to appear, stating the name and case number of this action and each objection and the basis therefore, together with copies of any papers and briefs, upon class counsel and counsel for defendants, and (b) file said appearance, objections, papers, and briefs with the court, together with proof of service of all such documents upon counsel for the parties.
Responses to any such objections shall be served by hand or through the mails on the objectors, or on the objector's counsel if there is any, and filed with the court no later than fourteen (14) calendar days before the final fairness hearing. Objectors may file optional replies no later than seven (7) calendar days before the final fairness hearing in the same manner described above. Any settlement class member who does not make his or her objection in the manner provided herein shall be deemed to have waived such objection and shall forever be foreclosed from objecting to the fairness or adequacy of the proposed settlement, the judgment entered, and the award of attorneys' fees, costs, and an incentive award to the class representative unless otherwise ordered by the court.
(14) pending final determination of whether the settlement should be ultimately approved, the court preliminarily enjoins all class members (unless and until the class member has submitted a timely and valid request for exclusion) from filing or prosecuting any claims, suits, or administrative proceedings regarding claims to be released by the settlement. Dated: March 12, 2019
/s/_________
WILLIAM B. SHUBB
UNITED STATES DISTRICT JUDGE
Unclear Notices
Unclear Notices
Gilberg v. Cal. Check Cashing Stores, LLC
SOURCE:
KEY WORDS:
Employee Applications, Notices, Unclear Notices
AGENCY:
US Court of Appeals, Ninth Circuit
Document Citation:
No. 17-16263
Desiree GILBERG, on Behalf of Herself, all Others Similarly Situated, Plaintiff-Appellant, v. CALIFORNIA CHECK CASHING STORES, LLC, a California Corporation; CheckSmart Financial, LLC, a Delaware Limited Liability Company, Defendants-Appellees. | No. 17-16263 D.C. No. 2:15-cv-02309- JAM-AC |
H. Scott W. Leviant (argued), Thomas Segal, and Shaun Setareh, Setareh Law Group, Beverly Hills, California, for Plaintiff-Appellant. Timothy W. Snider (argued) and Chrystal S. Chase, Stoel Rives LLP, Portland, Oregon; Bryan L. Hawkins, Stoel Rives LLP, Sacramento, California; for Defendants-Appellees.
FISHER, Circuit Judge
H. Scott W. Leviant (argued), Thomas Segal, and Shaun Setareh, Setareh Law Group, Beverly Hills, California, for Plaintiff-Appellant.
Timothy W. Snider (argued) and Chrystal S. Chase, Stoel Rives LLP, Portland, Oregon; Bryan L. Hawkins, Stoel Rives LLP, Sacramento, California; for Defendants-Appellees.
Before: Raymond C. Fisher and Milan D. Smith, Jr., Circuit Judges, and Lawrence L. Piersol, District Judge.
The Honorable Lawrence L. Piersol, United States District Judge for the District of South Dakota, sitting by designation.
FISHER, Circuit Judge:
The widespread use of credit reports and background checks led Congress to pass the Fair Credit Reporting Act (FCRA) to protect consumers’ privacy rights. FCRA requires employers who obtain a consumer report on a job applicant to provide the applicant with a "clear and conspicuous disclosure" that they may obtain such a report (the "clear and conspicuous requirement") "in a document that consists solely of the disclosure" (the "standalone document requirement") before procuring the report. 15 U.S.C. § 1681b(b)(2)(A)(i). This appeal requires us to decide two questions: (1) whether a prospective employer may satisfy FCRA’s standalone document requirement by providing job applicants with a disclosure containing extraneous information in the form of various state disclosure requirements, and (2) whether the specific disclosure provided by the employer in this case satisfied the clear and conspicuous requirement.
We held in Syed v. M-I, LLC , 853 F.3d 492 (9th Cir. 2017), that FCRA contains "clear statutory language that the disclosure document must consist ‘solely’ of the disclosure." Id . at 496. Consistent with Syed , we now hold that a prospective employer violates FCRA’s standalone document requirement by including extraneous information relating to various state disclosure requirements in that disclosure. We also hold that the disclosure at issue here is conspicuous but not clear. Accordingly, we affirm in part, vacate in part and remand.
We address Gilberg’s remaining contentions in a concurrently filed memorandum disposition.
I. Background
In the process of applying for employment with CheckSmart Financial, LLC, Desiree Gilberg completed a three-page form containing an employment application, a math screening and an employment history verification. Two weeks later, Gilberg signed a separate form, entitled "Disclosure Regarding Background Investigation," that is the subject of this litigation. A copy of the disclosure is appended to this opinion. The form appears to have been printed in Arial Narrow, size 8 font.Because the legal sufficiency of the FCRA disclosure provided to Gilberg is in question, we include the full text of the disclosure:
DISCLOSURE REGARDING BACKGROUND INVESTIGATION
DISCLOSURE AND ACKNOWLEDGMENT
[IMPORTANT — PLEASE READ CAREFULLY BEFORE SIGNING ACKNOWLEDGMENT]
CheckSmart Financial, LLC may obtain information about you from a consumer reporting agency for employment purposes. Thus, you may be the subject of a ‘consumer report’ and/or an ‘investigative consumer report’ which may include information about your character, general reputation, personal characteristics, and/or mode of living, and which can involve personal interviews with sources such as your neighbors, friends, or associates. These reports may include employment history and reference checks, criminal and civil litigation history information, motor vehicle records (‘driving records’), sex offender status, credit reports, education verification, professional licensure, drug testing, Social Security Verification, and information concerning workers’ compensation claims (only once a conditional offer of employment has been made). Credit history will only be requested where such information is substantially related to the duties and responsibilities of the position for which you are applying. You have the right, upon written request made within a reasonable time after receipt of this notice, to request whether a consumer report has been run about you, and the nature and scope of any investigative consumer report, and request a copy of your report. Please be advised that the nature and scope of the most common form of investigative consumer report obtained with regard to applicants for employment is an investigation into your education and/or employment history conducted by Employment Screening Services, 2500 Southlake Park, Birmingham, AL 35244, toll-free 866.859.0143, www.es2.com or another outside organization. The scope of this notice and authorization is all-encompassing; however, allowing CheckSmart Financial, LLC to obtain from any outside organization all manner of consumer reports and investigative consumer reports now and, if you are hired, throughout the course of your employment to the extent permitted by law. As a result, you should carefully consider whether to exercise your right to request disclosure of the nature and scope of any investigative consumer report.
New York and Maine applicants or employees only : You have the right to inspect and receive a copy of any investigative consumer report requested by CheckSmart Financial, LLC by contacting the consumer reporting agency identified above directly. You may also contact the Company to request the name, address and telephone number of the nearest unit of the consumer reporting agency designated to handle inquiries, which the Company shall provide within 5 days.
New York applicants or employees only : Upon request, you will be informed whether or not a consumer report was requested by CheckSmart Financial, LLC , and if such report was requested, informed of the name and address of the consumer reporting agency that furnished the report.
Oregon applicants or employees only : Information describing your rights under federal and Oregon law regarding consumer identity theft protection, the storage and disposal of your credit information, and remedies available should
you suspect or find that the Company has not maintained secured records is available to you upon request.
Washington State applicants or employees only : You also have the right to request from the consumer reporting agency a written summary of your rights and remedies under the Washington Fair Credit Reporting Act.
ACKNOWLEDGMENT AND AUTHORIZATION
I acknowledge receipt of the NOTICE REGARDING BACKGROUND INVESTIGATION and A SUMMARY OF YOUR RIGHTS UNDER THE FAIR CREDIT REPORTING ACT and certify that I have read and understand both of those documents. I hereby authorize the obtaining of "consumer reports" and/or "investigative consumer reports" at any time after receipt of this authorization and, if I am hired, throughout my employment. To this end, I hereby authorize, without reservation, any law enforcement agency, administrator, state or federal agency, institution, school or university (public or private), information service bureau, employer, or insurance company to furnish any and all background information requested by ESS, 2500 Southlake Park, Birmingham, AL 35244, toll free 866.859.0143, www.es2.com , or another outside organization acting on behalf of CheckSmart Financial, LLC , I agree that a facsimile ("fax"), electronic or photographic copy of this Authorization shall be as valid as the original.
California applicants or employees only : By signing below, you also acknowledge receipt of the DISCLOSURE REGARDING BACKGROUND INVESTIGATION PURSUANT TO CALIFORNIA LAW. Please check this box if you would like to receive a copy of an investigative consumer report or consumer credit report if one is obtained by the Company at no charge whenever you have a right to receive such a copy under California law.
[ ]
Minnesota and Oklahoma applicants or employees only : Check this box if you would like to receive a free copy of a consumer report if one is obtained by the Company.
[ ]
New York applicants or employees only : By signing below, you also acknowledge receipt of Article 23-A of the New York Correction Law.
After receiving Gilberg’s signed disclosure form, CheckSmart obtained a criminal background report, which confirmed that Gilberg did not have a criminal record. CheckSmart did not obtain a credit report. CheckSmart hired Gilberg, who worked for CheckSmart for five months before voluntarily terminating her employment.
Gilberg then brought this putative class action against CheckSmart, alleging two claims relevant here: (1) failure to make a proper FCRA disclosure and (2) failure to make a proper disclosure under California’s Investigative Consumer Reporting Agencies Act (ICRAA).
FCRA prohibits an employer from obtaining an applicant’s consumer report without first providing the applicant with a standalone, clear and conspicuous disclosure of its intention to do so and without obtaining the applicant’s consent:
Except as provided in subparagraph (B), a person may not procure a consumer report, or cause a consumer report to be procured, for employment purposes with respect to any consumer, unless —
(i) a clear and conspicuous disclosure has been made in writing to the consumer at any time before the report is procured or caused to be procured, in a document that consists solely of the disclosure , that a consumer report may be obtained for employment purposes; and
(ii) the consumer has authorized in writing (which authorization may be made on the document referred to in clause (i) ) the procurement of the report by that person.
15 U.S.C. § 1681b(b)(2)(A) (emphasis added).
California imposes its own FCRA-like disclosure requirements. See Cal. Civ. Code §§ 1785.20(5)(a), 1786.16(a)(2)(B). Under ICRAA:
(2) If, at any time, an investigative consumer report is sought for employment purposes other than suspicion of wrongdoing or misconduct by the subject of the investigation, the person seeking the investigative consumer report may procure the report, or cause the report to be made, only if all of the following apply:
...
(B) The person procuring or causing the report to be made provides a clear and conspicuous disclosure in writing to the consumer at any time before the report is procured or caused to be made in a document that consists solely of the disclosure , that:
(i) An investigative consumer report may be obtained.
...
(C) The consumer has authorized in writing the procurement of the report.
Id. § 1786.16(a)(2) (emphasis added). As relevant here, the ICRAA and FCRA provisions are identical.
CheckSmart moved for summary judgment on both claims. The district court entered summary judgment against Gilberg, concluding that CheckSmart’s disclosure form complied with FCRA and ICRAA. Gilberg timely appealed.
II. Jurisdiction and Standard of Review
We have jurisdiction under 28 U.S.C. § 1291. We review de novo an order granting summary judgment. See Travelers Cas. & Sur. Co. of Am. v. Brenneke , 551 F.3d 1132, 1137 (9th Cir. 2009).
III. FCRA and ICRAA Standalone Document Requirements
A. The Relevant Disclosure Form
Gilberg contends the relevant document for our analysis includes every form she filled out in the employment process — a total of four pages. We disagree. Gilberg does not offer any judicial authority, legislative history or dictionary definition to support her argument that the word "document," as used in FCRA, encompasses the universe of employment application materials furnished by an employer to a prospective employee. She relies instead on California contract law, under which "[s]everal contracts relating to the same matters, between the same parties, and made as parts of substantially one transaction, are to be taken together." Cal. Civ. Code § 1642. Gilberg, however provides no persuasive reason to extend this contract law principle to FCRA’s definition of a document, and we decline to do so. Moreover, under Gilberg’s proposed interpretation, it is difficult to see how an employer could ever provide an applicant written application materials without violating FCRA’s standalone document requirement.
Gilberg’s three-page employment packet was distinct from the one-page disclosure document. The relevant form for our analysis, therefore, is the disclosure form alone, not the entire four pages.
B. CheckSmart’s disclosure form violates FCRA’s standalone document requirement.
Gilberg contends CheckSmart’s disclosure form violates FCRA’s standalone document requirement. We agree.We analyzed FCRA’s standalone document requirement in Syed v. M-I, LLC , 853 F.3d 492 (9th Cir. 2017). Syed held that "a prospective employer violates Section 1681b(b)(2)(A) when it procures a job applicant’s consumer report after including a liability waiver in the same document as the statutorily mandated disclosure." Id . at 496. We concluded the statute meant what it said: the required disclosure must be in a document that "consist[s] ‘solely’ of the disclosure." Id . We based this holding on the statute’s plain language, noting "[w]here congressional intent ‘has been expressed in reasonably plain terms, that language must ordinarily be regarded as conclusive.’ " Id. at 500 (quoting Griffin v. Oceanic Contractors, Inc. , 458 U.S. 564, 570, 102 S.Ct. 3245, 73 L.Ed.2d 973 (1982) ). "That other FCRA provisions mandating disclosure omit the term ‘solely’ is further evidence that Congress intended that term to carry meaning in 15 U.S.C. § 1681b(b)(2)(A)(i)." Id . at 501.
CheckSmart contends Syed is not applicable here, because the surplusage in Syed was a liability waiver, which did "not comport with the FCRA’s basic purpose" because it pulled "the applicant’s attention away from his privacy rights protected by the FCRA by calling his attention to the rights he must forego if he signs the document." Id . at 502. CheckSmart argues its disclosure is distinguishable because all of the extraneous information consists of other, state-mandated disclosure information, which furthers rather than undermines FCRA’s purpose.
We disagree. Syed ’s holding and statutory analysis were not limited to liability waivers; Syed considered the standalone requirement with regard to any surplusage. See id . at 501. Syed grounded its analysis of the liability waiver in its statutory analysis of the word "solely," noting that FCRA should not be read to have implied exceptions, especially when the exception — in that case, a liability waiver — was contrary to FCRA’s purpose. See id . at 501–03. Syed also cautioned "against finding additional, implied exceptions" simply because Congress had created one express exception. Id . at 501. Consistent with Syed , we decline CheckSmart’s invitation to create an implied exception here.
FCRA’s one express exception to the standalone document requirement, specified in 15 U.S.C. § 1681b(b)(2)(A)(ii), allows the applicant to "authorize in writing" the procurement of a consumer report on the same document as the disclosure.
--------
Although CheckSmart contends its disclosure form is consistent with the congressional purpose of FCRA because it helps applicants understand their state and federal rights, purpose does not override plain meaning. As Syed explained, congressional intent "has been expressed in reasonably plain terms" and "that language must ordinarily be regarded as conclusive." Id. at 500 (quoting Griffin , 458 U.S. at 570, 102 S.Ct. 3245 ). The ordinary meaning of "solely" is "[a]lone; singly" or "[e]ntirely; exclusively." The American Heritage Dictionary of the English Language 1666 (5th ed. 2011). Because CheckSmart’s disclosure form does not consist solely of the FCRA disclosure, it does not satisfy FCRA’s standalone document requirement.
CheckSmart, moreover, fails to explain how the surplus language in its disclosure form comports with FCRA’s purpose. Its disclosure refers not only to rights under FCRA and under ICRAA applicable to Gilberg, but also to rights under state laws inapplicable to Gilberg and to extraneous documents that are not part of the FCRA-mandated disclosure — e.g., a "Notice Regarding Background Investigation" and a "Summary of Your Rights Under the Fair Credit Reporting Act." Because the presence of this extraneous information is as likely to confuse as it is to inform, it does not further FCRA’s purpose.
CheckSmart urges us to follow the district court’s decision in Noori v. Vivint, Inc. , No. CV 16-5491 PA (FFMX), 2016 WL 9083368 (C.D. Cal. Sept. 6, 2016), aff’d on other grounds , 726 F. App'x 624 (9th Cir. 2018), which reasoned that the inclusion of information "closely related" to FCRA’s disclosure requirements does not violate the standalone document requirement. Id. at *5. Our subsequent decision in Syed , however, forecloses that approach. Noori , moreover, did not explain how to determine what information would be "closely related" to FCRA’s disclosure requirements. Indeed, even "related" information may distract or confuse the reader.
In sum, Syed holds that the standalone requirement forecloses implicit exceptions. The statute’s one express exception does not apply here, and CheckSmart’s disclosure contains extraneous and irrelevant information beyond what FCRA itself requires. The disclosure therefore violates FCRA’s standalone document requirement. Even if congressional purpose were relevant, much of the surplusage in CheckSmart’s disclosure form does not effectuate the purposes of FCRA. The district court therefore erred in concluding that CheckSmart’s disclosure form satisfies FCRA’s standalone document requirement.
C. CheckSmart’s disclosure form also violates ICRAA’s standalone document requirement.
As the parties appear to agree, the standalone document requirements under FCRA and ICRAA are identical. Thus, because we conclude CheckSmart’s disclosure violates FCRA, we conclude it violates ICRAA’s standalone document requirement as well.
IV. CheckSmart’s disclosure form was not "clear and conspicuous."
FCRA and ICRAA require a disclosure form to be "clear and conspicuous." 15 U.S.C. § 1681b(b)(2)(A)(i) ; Cal. Civ. Code § 1786.16(a)(2)(B). Neither statute, however, defines the term "clear and conspicuous."
Like other circuits, we "draw upon the wealth of [Uniform Commercial Code (UCC) ] and [Truth in Lending Act (TILA) ] case law in determining the meaning of ‘clear and conspicuous’ under the FCRA." Cole v. U.S. Capital , 389 F.3d 719, 730 (7th Cir. 2004) ; see also Stevenson v. TRW Inc. , 987 F.2d 288, 295–96 (5th Cir. 1993) (interpreting "clear and conspicuous" language used in 15 U.S.C. § 1681i(d) with reference to TILA and UCC cases). We adopt our "clear and conspicuous" analysis from Rubio v. Capital One Bank , 613 F.3d 1195 (9th Cir. 2010), a TILA disclosure case. In Rubio , we explained that clear means "reasonably understandable." Id. at 1200 (citation omitted); accord Applebaum v. Nissan Motor Acceptance Corp. , 226 F.3d 214, 220 (3d Cir. 2000) (holding in the TILA context that "clear" means the "language used in a disclosure must be cast in [a] reasonably understandable form." (internal quotation marks omitted) ). Conspicuous means "readily noticeable to the consumer." Rubio , 613 F.3d at 1200 (citation omitted). Because the parties do not argue that ICRAA’s clear and conspicuous requirement differs from FCRA’s, we apply those definitions to Gilberg’s ICRAA claim as well.Although the "clear and conspicuous" requirement imposes a single statutory obligation, we may analyze each prong separately, see, e.g. , In re Bassett , 285 F.3d 882, 885 (9th Cir. 2002) (interpreting 11 U.S.C. § 524 ), and we do so here. In the TILA context, we have said that clarity and conspicuousness are questions of law. See Rubio , 613 F.3d at 1200. Because neither party suggests we should treat FCRA differently, we assume for the purposes of our analysis, without deciding, that clarity and conspicuousness under FCRA present questions of law rather than fact.
A. CheckSmart’s disclosure form was not clear.
CheckSmart’s disclosure form is not reasonably understandable for two distinct reasons. First, the disclosure form contains language that a reasonable person would not understand. It says:
The scope of this notice and authorization is all-encompassing; however, allowing CheckSmart Financial, LLC to obtain from any outside organization all manner of consumer reports and investigative consumer reports now and, if you are hired, throughout the course of your employment to the extent permitted by law.
The beginning of this sentence does not explain how the authorization is all-encompassing and how that would affect an applicant’s rights. The second half of the sentence, following the semicolon, lacks a subject and is incomplete. It suggests that there may be some limits on the all-encompassing nature of the authorization, but it does not identify what those limits might be.
Second, the disclosure would confuse a reasonable reader because it combines federal and state disclosures. The disclosure, for example, states: "New York and Maine applicants or employees only: You have the right to inspect and receive a copy of any investigative consumer report requested by CheckSmart Financial, LLC by contacting the consumer reporting agency identified above directly." A reasonable reader might think that only New York and Maine applicants could contact the consumer reporting agency to get a copy of the report. Such an understanding would be contrary to both FCRA and ICRAA. See 15 U.S.C. § 1681m(3)–(4) ; Cal. Civ. Code § 1786.22.
We hold, therefore, that the district court erred by deeming CheckSmart’s disclosure form clear.
B. CheckSmart’s disclosure form was conspicuous.
The district court properly concluded, however, that CheckSmart’s disclosure form is conspicuous. As noted, conspicuous means "readily noticeable to the consumer." Rubio , 613 F.3d at 1200. CheckSmart capitalized, bolded and underlined the headings for each section of the disclosure and labeled the form so an applicant could see what she was signing. Although the font is small and cramped (we think inadvisably so), it is legible. All relevant information appears on the front of the page and the headings help applicants understand the purpose of the form. The disclosure, therefore, is conspicuous.
Nevertheless, because CheckSmart’s disclosure form was not both clear and conspicuous, the district erred in granting CheckSmart’s motion for summary judgment with regard to the FCRA and ICRAA "clear and conspicuous" requirements. V. Conclusion
We hold that the district court erred by concluding that the standalone document requirements of FCRA and ICRAA were satisfied here. We further hold that CheckSmart’s disclosure satisfies the FCRA and ICRAA requirements for conspicuousness but not for clarity. For these reasons, and the reasons stated in our contemporaneously filed memorandum disposition, we affirm in part and vacate in part the judgment of the district court, and we remand for further proceedings consistent with these dispositions. Each party shall bear its own costs of appeal.
AFFIRMED IN PART; VACATED IN PART; REMANDED.
Appendix A
Limits on Salary History
Limits on Salary History
California Labor Code Section 432.3
SOURCE:
KEY WORDS:
Employee Apilcation, Labor Law, Salary, Salary History
AGENCY:
State of California
Document:
LABOR CODE - LAB
DIVISION 2. EMPLOYMENT REGULATION AND SUPERVISION [200 - 2699.5] ( Division 2 enacted by Stats. 1937, Ch. 90. )
PART 1. COMPENSATION [200 - 452] ( Part 1 enacted by Stats. 1937, Ch. 90. )
CHAPTER 3. Privileges and Perquisites [350 - 452] ( Chapter 3 enacted by Stats. 1937, Ch. 90. )
ARTICLE 3. Contracts and Applications for Employment [430 - 435] ( Article 3 enacted by Stats. 1937, Ch. 90. )
432.3.
(a) An employer shall not rely on the salary history information of an applicant for employment as a factor in determining whether to offer employment to an applicant or what salary to offer an applicant.
(b) An employer shall not, orally or in writing, personally or through an agent, seek salary history information, including compensation and benefits, about an applicant for employment.
(c) An employer, upon reasonable request, shall provide the pay scale for a position to an applicant applying for employment. For purposes of this section, “pay scale” means a salary or hourly wage range. For purposes of this section “reasonable request” means a request made after an applicant has completed an initial interview with the employer.
(d) Section 433 does not apply to this section.
(e) This section does not apply to salary history information disclosable to the public pursuant to federal or state law, including the California Public Records Act (Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1 of the Government Code) or the federal Freedom of Information Act (Section 552 of Title 5 of the United States Code).
(f) This section applies to all employers, including state and local government employers and the Legislature.
(g) Nothing in this section shall prohibit an applicant from voluntarily and without prompting disclosing salary history information to a prospective employer.
(h) If an applicant voluntarily and without prompting discloses salary history information to a prospective employer, nothing in this section shall prohibit that employer from considering or relying on that voluntarily disclosed salary history information in determining the salary for that applicant.
(i) Nothing in this section shall prohibit an employer from asking an applicant about his or her salary expectation for the position being applied for.
(j) Consistent with Section 1197.5, nothing in this section shall be construed to allow prior salary to justify any disparity in compensation.
(k) For purposes of this section, the term “applicant” or “applicant for employment” means an individual who is seeking employment with the employer and is not currently employed with that employer in any capacity or position.
(Amended by Stats. 2018, Ch. 127, Sec. 1. (AB 2282) Effective January 1, 2019.)
Ban the Box
Ban the Box
California Assembly Bill No. 1008
SOURCE:
KEY WORDS:
Employee Apilcation, Employee Discrimination, Fair Chance Act
AGENCY:
State of California
Document:
Assembly Bill No. 1008
CHAPTER 789
An act to add Section 12952 to the Government Code, and to repeal Section 432.9 of the Labor Code, relating to employment discrimination.
[ Approved by Governor October 14, 2017. Filed with Secretary of State October 14, 2017. ]
LEGISLATIVE COUNSEL'S DIGEST
AB 1008, McCarty. Employment discrimination: conviction history.
Existing law, the California Fair Employment and Housing Act (FEHA), prohibits an employer from engaging in various defined forms of discriminatory employment practices.
Existing law prohibits an employer, whether a public agency or private individual or corporation, from asking an applicant for employment to disclose, or from utilizing as a factor in determining any condition of employment, information concerning an arrest or detention that did not result in a conviction, or information concerning a referral or participation in, any pretrial or posttrial diversion program, except as specified. Existing law also prohibits a state or local agency from asking an applicant for employment to disclose information regarding a criminal conviction, except as specified, until the agency has determined the applicant meets the minimum employment qualifications for the position.
This bill would repeal the prohibition on a state or local agency from asking an applicant for employment to disclose information regarding a criminal conviction, as described above. The bill would, instead, provide it is an unlawful employment practice under FEHA for an employer with 5 or more employees to include on any application for employment any question that seeks the disclosure of an applicant’s conviction history, to inquire into or consider the conviction history of an applicant until that applicant has received a conditional offer, and, when conducting a conviction history background check, to consider, distribute, or disseminate information related to specified prior arrests, diversions, and convictions.
This bill would also require an employer who intends to deny an applicant a position of employment solely or in part because of the applicant’s conviction history to make an individualized assessment of whether the applicant’s conviction history has a direct and adverse relationship with the specific duties of the job, and to consider certain topics when making that assessment. The bill would require an employer who makes a preliminary decision to deny employment based on that individualized assessment to provide the applicant written notification of the decision. The bill would require the notification to contain specified information. The bill would grant an applicant 5 business days to respond to that notification before the employer may make a final decision. If the applicant notifies the employer in writing that he or she disputes the accuracy of the conviction history and is obtaining evidence to support that assertion, the bill would grant the applicant an additional 5 business days to respond to the notice. The bill would require an employer to consider information submitted by the applicant before making a final decision. The bill would require an employer who has made a final decision to deny employment to the applicant to notify the applicant in writing of specified topics. The bill would exempt specified positions of employment from the provisions of the bill.
DIGEST KEY
Vote: majority Appropriation: no Fiscal Committee: yes Local Program: no
BILL TEXT
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares all of the following:
(a) In 2013, the State of California passed historic legislation to reduce barriers to employment for people with conviction histories, and to decrease unemployment in communities with concentrated numbers of people with conviction histories, recognizing that these barriers are matters of statewide concern. The Ban the Box law passed in 2013 applied to state agencies, all cities and counties, including charter cities and charter counties, and special districts.
(b) In 2015, President Obama directed all federal agencies to “Ban the Box” and refrain from asking applicants about their convictions on the initial job application.
(c) Nationwide, 29 states and over 150 cities and counties have adopted a “Ban the Box” law, and over 300 companies have signed the White House Fair Chance hiring pledge.
(d) Nine states and 15 major cities, including Los Angeles and San Francisco, have adopted fair chance hiring laws that cover both public and private sector employers. Over 20 percent of the United States population now lives in a state or locality that prohibits private employers from inquiring into an applicant’s record at the start of the hiring process.
(e) Since 2013, when Assembly Bill 218 was signed into law, five states have adopted fair chance hiring laws that cover private employers, Connecticut, Illinois, New Jersey, Oregon, and Vermont, as well as several major cities, including Baltimore, New York City, Philadelphia, and Austin, Texas.
(f) Roughly seven million Californians, or nearly one in three adults, have an arrest or conviction record that can significantly undermine their efforts to obtain gainful employment.
(g) Experts have found that employment is essential to helping formerly incarcerated people support themselves and their families, that a job develops prosocial behavior, strengthens community ties, enhances self-esteem, and improves mental health, all of which reduce recidivism. These effects are strengthened the longer the person holds the job, and especially when it pays more than minimum wage.
(h) Experts have found that people with conviction records have lower rates of turnover and higher rates of promotion on the job and that the personal contact with potential employees can reduce the negative stigma of a conviction by approximately 15 percent.
SEC. 2. Section 12952 is added to the Government Code, to read:
12952. (a) Except as provided in subdivision (d), it is an unlawful employment practice for an employer with five or more employees to do any of the following:
(1) To include on any application for employment, before the employer makes a conditional offer of employment to the applicant, any question that seeks the disclosure of an applicant’s conviction history.
(2) To inquire into or consider the conviction history of the applicant, including any inquiry about conviction history on any employment application, until after the employer has made a conditional offer of employment to the applicant.
(3) To consider, distribute, or disseminate information about any of the following while conducting a conviction history background check in connection with any application for employment:
(A) Arrest not followed by conviction, except in the circumstances as permitted in paragraph (1) of subdivision (a) and subdivision (f) of Section 432.7 of the Labor Code.
(B) Referral to or participation in a pretrial or posttrial diversion program.
(C) Convictions that have been sealed, dismissed, expunged, or statutorily eradicated pursuant to law.
(4) To interfere with, restrain, or deny the exercise of, or the attempt to exercise, any right provided under this section.
(b) This section shall not be construed to prevent an employer from conducting a conviction history background check not in conflict with the provisions of subdivision (a).
(c) (1) (A) An employer that intends to deny an applicant a position of employment solely or in part because of the applicant’s conviction history shall make an individualized assessment of whether the applicant’s conviction history has a direct and adverse relationship with the specific duties of the job that justify denying the applicant the position. In making the assessment described in this paragraph, the employer shall consider all of the following:
(i) The nature and gravity of the offense or conduct.
(ii) The time that has passed since the offense or conduct and completion of the sentence.
(iii) The nature of the job held or sought.
(B) An employer may, but is not required to, commit the results of this individualized assessment to writing.
(2) If the employer makes a preliminary decision that the applicant’s conviction history disqualifies the applicant from employment, the employer shall notify the applicant of this preliminary decision in writing. That notification may, but is not required to, justify or explain the employer’s reasoning for making the preliminary decision. The notification shall contain all of the following:
(A) Notice of the disqualifying conviction or convictions that are the basis for the preliminary decision to rescind the offer.
(B) A copy of the conviction history report, if any.
(C) An explanation of the applicant’s right to respond to the notice of the employer’s preliminary decision before that decision becomes final and the deadline by which to respond. The explanation shall inform the applicant that the response may include submission of evidence challenging the accuracy of the conviction history report that is the basis for rescinding the offer, evidence of rehabilitation or mitigating circumstances, or both.
(3) The applicant shall have at least five business days to respond to the notice provided to the applicant under paragraph (2) before the employer may make a final decision. If, within the five business days, the applicant notifies the employer in writing that the applicant disputes the accuracy of the conviction history report that was the basis for the preliminary decision to rescind the offer and that the applicant is taking specific steps to obtain evidence supporting that assertion, then the applicant shall have five additional business days to respond to the notice.
(4) The employer shall consider information submitted by the applicant pursuant to paragraph (3) before making a final decision.
(5) If an employer makes a final decision to deny an application solely or in part because of the applicant’s conviction history, the employer shall notify the applicant in writing of all the following:
(A) The final denial or disqualification. The employer may, but is not required to, justify or explain the employer’s reasoning for making the final denial or disqualification.
(B) Any existing procedure the employer has for the applicant to challenge the decision or request reconsideration.
(C) The right to file a complaint with the department.
(d) This section does not apply in any of the following circumstances:
(1) To a position for which a state or local agency is otherwise required by law to conduct a conviction history background check.
(2) To a position with a criminal justice agency, as defined in Section 13101 of the Penal Code.
(3) To a position as a Farm Labor Contractor, as described in Section 1685 of the Labor Code.
(4) To a position where an employer or agent thereof is required by any state, federal, or local law to conduct criminal background checks for employment purposes or to restrict employment based on criminal history. For purposes of this paragraph, federal law shall include rules or regulations promulgated by a self-regulatory organization as defined in Section 3(a)(26) of the Securities Exchange Act of 1934, as amended by 124 Stat. 1652 (Public Law 111-203), pursuant to the authority in Section 19(b) of the Securities Exchange Act of 1934, as amended by 124 Stat. 1652 (Public Law 111-203).
(e) The remedies under this section shall be in addition to and not in derogation of all other rights and remedies that an applicant may have under any other law, including any local ordinance.
(f) For purposes of this section:
(1) “Conviction” has the same meaning as defined in paragraphs (1) and (3) of subdivision (a) of Section 432.7 of the Labor Code.
(2) Notwithstanding paragraph (1), the term “conviction history” includes:
(A) An arrest not resulting in conviction only in the specific, limited circumstances described in subdivision (f) of Section 432.7 of the Labor Code, when an employer at a health facility, as defined in Section 1250 of the Health and Safety Code, may ask an applicant for certain positions about specified types of arrests.
(B) An arrest for which an individual is out on bail or his or her own recognizance pending trial.
SEC. 3. Section 432.9 of the Labor Code is repealed.
ICRAA
ICRAA
Investigative Consumer Reporting Agencies Act (ICRAA)
SOURCE:
KEY WORDS:
Employee Apilcation, Information, Consumer Reporting
AGENCY:
State of California
Document:
CIVIL CODE - CIV
DIVISION 3. OBLIGATIONS [1427 - 3273] ( Heading of Division 3 amended by Stats. 1988, Ch. 160, Sec. 14. )
PART 4. OBLIGATIONS ARISING FROM PARTICULAR TRANSACTIONS [1738 - 3273] ( Part 4 enacted 1872. )
TITLE 1.6A. INVESTIGATIVE CONSUMER REPORTING AGENCIES [1786 - 1786.60] ( Title 1.6A added by Stats. 1975, Ch. 1272. )
ARTICLE 1. General Provisions [1786 - 1786.2] ( Article 1 added by Stats. 1975, Ch. 1272. )
1786. The Legislature finds and declares as follows:
(a) Investigative consumer reporting agencies have assumed a vital role in collecting, assembling, evaluating, compiling, reporting, transmitting, transferring, or communicating information on consumers for employment and insurance purposes, and for purposes relating to the hiring of dwelling units, subpoenas and court orders, licensure, and other lawful purposes.
(b) There is a need to insure that investigative consumer reporting agencies exercise their grave responsibilities with fairness, impartiality, and a respect for the consumer’s right to privacy.
(c) The crime of identity theft in this new computer era has exploded to become the fastest growing white collar crime in America.
(d) The unique nature of this crime means it can often go undetected for years without the victim being aware his identity has been misused.
(e) Because notice of identity theft is critical before the victim can take steps to stop and prosecute this crime, consumers are best protected if they are automatically given copies of any investigative consumer reports made on them.
(f) It is the purpose of this title to require that investigative consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for employment, insurance information, and information relating to the hiring of dwelling units in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of the information in accordance with the requirements of this title.
(g) The Legislature hereby intends to regulate investigative consumer reporting agencies pursuant to this title in a manner which will best protect the interests of the people of the State of California.
(Amended by Stats. 2001, Ch. 354, Sec. 6. Effective January 1, 2002.)
1786.1. This title may be referred to as the Investigative Consumer Reporting Agencies Act.
(Added by Stats. 1975, Ch. 1272.)
1786.2. The following terms as used in this title have the meaning expressed in this section:
(a) The term “person” means any individual, partnership, corporation, limited liability company, trust, estate, cooperative, association, government or governmental subdivision or agency, or other entity. The term “person” as used in this title shall not be construed to require duplicative reporting by any individual, corporation, trust, estate, cooperative, association, government, or governmental subdivision or agency, or other entity involved in the same transaction.
(b) The term “consumer” means a natural individual who has made application to a person for employment purposes, for insurance for personal, family, or household purposes, or the hiring of a dwelling unit, as defined in subdivision (c) of Section 1940.
(c) The term “investigative consumer report” means a consumer report in which information on a consumer’s character, general reputation, personal characteristics, or mode of living is obtained through any means. The term does not include a consumer report or other compilation of information that is limited to specific factual information relating to a consumer’s credit record or manner of obtaining credit obtained directly from a creditor of the consumer or from a consumer reporting agency when that information was obtained directly from a potential or existing creditor of the consumer or from the consumer. Notwithstanding the foregoing, for transactions between investigative consumer reporting agencies and insurance institutions, agents, or insurance-support organizations subject to Article 6.6 (commencing with Section 791) of Chapter 1 of Part 2 of Division 1 of the Insurance Code, the term “investigative consumer report” shall have the meaning set forth in Section 791.02 of the Insurance Code.
(d) The term “investigative consumer reporting agency” means any person who, for monetary fees or dues, engages in whole or in part in the practice of collecting, assembling, evaluating, compiling, reporting, transmitting, transferring, or communicating information concerning consumers for the purposes of furnishing investigative consumer reports to third parties, but does not include any governmental agency whose records are maintained primarily for traffic safety, law enforcement, or licensing purposes, or any licensed insurance agent, insurance broker, or solicitor, insurer, or life insurance agent.
(e) The term “file,” when used in connection with information on any consumer, means all of the information on that consumer recorded and retained by an investigative consumer reporting agency regardless of how the information is stored.
(f) The term “employment purposes,” when used in connection with an investigative consumer report, means a report used for the purpose of evaluating a consumer for employment, promotion, reassignment, or retention as an employee.
(g) The term “medical information” means information on a person’s medical history or condition obtained directly or indirectly from a licensed physician, medical practitioner, hospital, clinic, or other medical or medically related facility.
(Amended by Stats. 2013, Ch. 444, Sec. 6. (SB 138) Effective January 1, 2014.)
FCRA
FCRA
Fair Credit Reporting Act
SOURCE:
KEY WORDS:
Employee Apilcation, Information, Consumer Reporting
AGENCY:
Fair Trade Commission
Document:
What Is the Fair Credit Reporting Act (FCRA)?
The Fair Credit Reporting Act (FCRA) is a federal law that regulates the collection of consumers' credit information and access to their credit reports. It was passed in 1970 to address the fairness, accuracy, and privacy of the personal information contained in the files of the credit reporting agencies.
What Is A Credit Score?
The Fair Credit Reporting Act is the primary federal law that governs the collection and reporting of credit information about consumers. Its rules cover how a consumer's credit information is obtained, how long it is kept, and how it is shared with others—including consumers themselves.
KEY TAKEAWAYS
The Fair Credit Reporting Act (FCRA) governs how credit bureaus can collect and share information about individual consumers.
Businesses check credit reports for many purposes, such as deciding whether to make a loan or sell insurance to a consumer.
FCRA also gives consumers certain rights, including free access to their own credit reports.
The Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) are the two federal agencies charged with overseeing and enforcing the provisions of the act. Many states also have their own laws relating to credit reporting. The act in its entirety can be found in United States Code Title 15, Section 1681.
The three major credit reporting bureaus—Equifax, Experian, and TransUnion—as well as other, more specialized companies, collect and sell information on individual consumers' financial history. The information in their reports is also used to compute consumers' credit scores, which can affect, for example, the interest rate they'll have to pay to borrow money.
Determining the Data to Collect
The Fair Credit Reporting Act describes the kind of data that the bureaus are allowed to collect. That includes the person's bill payment history, past loans, and current debts. It may also include employment information, present and previous addresses, whether they have ever filed for bankruptcy or owe child support, and any arrest record.
FCRA also limits who is allowed to see a credit report and under what circumstances. For example, lenders may request a report when someone applies for a mortgage, car loan, or another type of credit. Insurance companies may also view consumers' credit reports when they apply for a policy. The government may request it in response to a court order or federal grand jury subpoena, or if the person is applying for certain types of government-issued licenses. In some, but not all, instances, consumers must have initiated a transaction or agreed in writing before the credit bureau can release their report. For example, employers can request a job applicant's credit report, but only with the applicant's permission.
The Fair Credit Reporting Act restricts who can see a consumer's credit file and for what purposes.
Consumer Rights Under the Fair Credit Reporting Act (FCRA)
Consumers also have a right to see their own credit reports. By law, they are entitled to one free credit report every 12 months from each of the three major bureaus. They can request their reports at the official, government-authorized website for that purpose, AnnualCreditReport.com. Under FCRA, consumers also have a right to:
Verify the accuracy of their report when it's required for employment purposes.
Receive notification if information in their file has been used against them in applying for credit or other transactions.
Dispute—and have the bureau correct—information in their report that is incomplete or inaccurate.
Remove outdated, negative information (after seven years in most cases, 10 in the case of bankruptcy).
If the credit bureau fails to respond to their request in a satisfactory manner, a consumer can file a complaint with the Federal Consumer Financial Protection Bureau.
Arbitration and Discrimination Suit
Employee must arbitrate her discrimination suit against her employer because she consented to an arbitration agreement by continuing to work.
Diaz v. Sohnen Enters.
SOURCE:
KEY WORDS:
WIP
AGENCY:
COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION SEVEN
B283077
Erika DIAZ, Plaintiff and Respondent,
v. SOHNEN ENTERPRISES et al., Defendants and Appellants. | B283077 (Los Angeles CountySuper. Ct. No. BC644622) |
_________________________
ZELON, Acting P. J.
Wolflick & Simpson, Gregory D. Wolflick, David B. Simpson and Theodore S. Khachaturian, Glendale, for Defendants and Appellants.
Bruce Loren Karey,Long Beach, for Plaintiff and Respondent.
ZELON, Acting P. J.
Sohnen Enterprises appeals from the denial of its motion to compel arbitration of claims brought by its employee, Erika Diaz. The record before this court demonstrates there was no evidence to support the denial; accordingly, we reverse with directions.
FACTUAL AND PROCEDURAL BACKGROUND
Erika Diaz, an employee of Sohnen Enterprises, filed a complaint alleging workplace discrimination on December 22, 2016. Twenty days earlier, on December 2, 2016, she and her co-workers received notice at an in-person meeting that the company was adopting a new dispute resolution policy requiring arbitration of all claims. At that meeting, according to the declaration of Marla Carr, the Chief Operating Officer of Sohnen, Carr informed all employees present, including Diaz, about the new dispute resolution agreement. She included in her explanation that continued employment by an employee who refused to sign the agreement would itself constitute acceptance of the dispute resolution agreement. According to Carr, she provided the explanation in English and Elaina Diaz, a human resources employee, explained the terms in Spanish. Diaz confirmed this in her own declaration, in which she stated that she discussed the terms in Spanish; she did not provide further details about the December 2 meeting. All employees received a copy of the agreement to review at home.
On December 19, 2016, representatives of the company met privately with Diaz, who had indicated to Elaina Diaz on December 14 that she did not wish to sign the agreement. Carr and Diaz advised her again, in Spanish and English, that continuing to work constituted acceptance of the agreement.
On December 23, 2016, Diaz and her lawyer presented to Sohnen a letter dated December 20, 2016 rejecting the agreement but indicating that Diaz intended to continue her employment. On the same date, Diaz also served the complaint in this action.On January 17, 2017, Sohnen sent a demand for arbitration to Diaz’s counsel, based on the fact of Diaz’s continued employment at the company. Counsel for Diaz did not reply. Sohnen filed its motion to compel arbitration in April. Diaz filed opposition in May. The trial court heard argument, and denied the motion.
The trial court, in its oral ruling, held that the agreement was a "take-it or leave-it contract and (sic ) adhesion. There is no meeting of the minds." The court made no factual findings, nor did it address whether the agreement was substantively unconscionable.
DISCUSSION
A. We Review The Ruling De Novo
The facts in the record are undisputed. Accordingly, our review is de novo. ( Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413, 58 Cal.Rptr.2d 875, 926 P.2d 1061 ; Flores v. Nature’s BestDistribution, LLC (2016) 7 Cal.App.5th 1, 9, 212 Cal.Rptr.3d 284 ; Esparza v. Sand & Sea, Inc. (2016) 2 Cal.App.5th 781, 787, 206 Cal.Rptr.3d 474.)B. The Record Demonstrates Consent to Arbitration
Respondent Diaz argues that she was off-work, due to illness, between December 17 and December 23, 2016. The record, however, contains no evidence to support that assertion; Diaz filed no declaration in opposition to the motion to compel, nor did any of the declarations filed present facts supporting the argument of counsel. We review based on the factual record before the trial court.
When presented with a petition to compel arbitration, the initial issue before the court is whether an agreement has been formed. ( American Express Co. v. Italian Colors Restaurant (2013) 570 U.S. 228, 233 [133 S.Ct. 2304, 2306, 186 L.Ed.2d 417 ] [arbitration is a matter of contract]; Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US ), LLC (2012) 55 Cal.4th 223, 236, 145 Cal.Rptr.3d 514, 282 P.3d 1217 [" ‘ " ‘a party cannot be required to submit to arbitration any dispute which he has not agreed to so submit’ " ’ "].)
It is the party seeking to compel arbitration which bears the burden of proving the existence of the agreement. ( Rosenthal, supra , 14 Cal.4th at p. 413, 58 Cal.Rptr.2d 875, 926 P.2d 1061.) In this case, Sohnen presented to the trial court evidence of the manner in which the agreement was presented to Diaz, and the actions which followed. This undisputed evidence was sufficient to meet Sohnen’s burden. California law in this area is settled: when an employee continues his or her employment after notification that an agreement to arbitration is a condition of continued employment, that employee has impliedly consented to the arbitration agreement. ( Pinnacle, supra , 55 Cal.4th at 236, 145 Cal.Rptr.3d 514, 282 P.3d 1217 ; Harris v. TAP Worldwide, LLC (2016) 248 Cal.App.4th 373, 383, 203 Cal.Rptr.3d 522 ; Craig v. Brown & Root, Inc. (2000) 84 Cal.App.4th 416, 420, 100 Cal.Rptr.2d 818 ; cf. Asmus v. PacificBell (2000) 23 Cal.4th 1, 11, 96 Cal.Rptr.2d 179, 999 P.2d 71 [continued employment demonstrated implied acceptance of change in job security rules].)
The dissent relies in part on three cases, two of which apply the law of other states, which come to a different conclusion. The first, Scott v. Education Management Corporation (3d Cir. 2016) 662 Fed.Appx. 126 involved an arbitration agreement presented to the employee after a federal civil rights dispute arose. The case was decided under Pennsylvania law which, according to the decision, requires an explicit agreement, not an implied agreement. (Id. at p. 131 ) The decision, by its own terms, does not constitute binding precedent. In the second case, Bayer v. Neiman Marcus Holdings, Inc. (N.D.Cal. Nov. 8, 2011, No. CV 11-3705 MEJ), 2011 WL 5416173, a court in the Northern District of California, acknowledging that under California law an employee could either expressly consent to a new arbitration agreement or be bound by continuing to work after it was presented, found that the terms of the agreement before it required a signature to be effective. Finally, in Kunzie v. Jack-In-The-Box, Inc . (Mo.Ct.App. 2010) 330 S.W.3d 476, 486, the court held that, under Missouri law, the assent of an employee cannot be implied where the employee has continued to work after a change in conditions of employment was presented.
Diaz relies on Mitri v. Arnel Management Co. (2007) 157 Cal.App.4th 1164, 69 Cal.Rptr.3d 223, and Gorlach v. Sports Club Co. (2012) 209 Cal.App.4th 1497, 148 Cal.Rptr.3d 71, arguing that these cases support the trial court’s ruling. Neither case, however, addresses the situation presented here; accordingly, neither supports the result below.
In Mitri, the employee acknowledged receipt of an employee handbook containing an arbitration provision, but the acknowledgement form did not reference or contain any agreement to comply with the arbitration provision. ( Mitri, supra , 157 Cal.App.4th at p. 1173, 69 Cal.Rptr.3d 223.) The general acknowledgment stands in distinction to the express explanation provided twice to Diaz: that continued employment would itself be a manifestation of agreement to the arbitration provisions.
In Gorlach, the handbook provided to employees contained an express signature requirement for the arbitration agreement: "[T]he handbook told employees that they must sign the arbitration agreement, implying that it was not effective until (and unless) they did so. Because Gorlach never signed the arbitration agreement, we cannot imply the existence of such an agreement between the parties." ( Gorlach, supra , 209 Cal.App.4th at p. 1509, 148 Cal.Rptr.3d 71.) Here, there was no such implication because Diaz was told that her continued employment was sufficient. Moreover, unlike Diaz, Gorlach left her employment to avoid the arbitration obligation. ( Gorlach, supra , 209 Cal.App.4th at p. 1508, 148 Cal.Rptr.3d 71.) The uncontradicted evidence in this record demonstrates that Diaz maintained her employment status between December 2 and December 23, and remained an employee at the time of the hearing in this case. As a result, she was already bound by the arbitration agreement before the presentation of the letter indicating both her rejection of the agreement and her intent to remain employed. Although Diaz now asserts that this forced Sohnen to choose whether to proceed without arbitration, this is incorrect. At most, the letter was an attempt to repudiate the agreement. (See, e.g. Taylor v. Johnston (1975) 15 Cal.3d 130, 137, 123 Cal.Rptr. 641, 539 P.2d 425 [express repudiation requires clear and unequivocal refusal to perform]; Mammoth Lakes LandAcquisition, LLC v. Town of Mammoth Lakes (2010) 191 Cal.App.4th 435, 463, 120 Cal.Rptr.3d 797 [same].)
Neither party has briefed the issue of repudiation, and the potential effect of an attempted repudiation on the rights of the parties is not before this court.
In any event, because the employment agreement between Diaz and Sohnen was at-will, Sohnen could unilaterally change the terms of Diaz’s employment agreement, as long as it provided Diaz notice of the change. "[I]t is settled that an employer may unilaterally alter the terms of an employment agreement, provided such alteration does not run afoul of the Labor Code. [Citations.]" ( Schachter v. Citigroup (2009) 47 Cal.4th 610, 619, 101 Cal.Rptr.3d 2, 218 P.3d 262.) "The at-will presumption authorizing an employer to discharge or demote an employee similarly and necessarily authorizes an employer to unilaterally alter the terms of employment, provided that the alteration does not violate a statute or breach an implied or express contractual agreement." ( Id. at p. 620, 101 Cal.Rptr.3d 2, 218 P.3d 262 ; see also DiGiacinto v. Ameriko-Omserv Corp. (1997) 59 Cal.App.4th 629, 636-637, 69 Cal.Rptr.2d 300 [in adopting the majority view of at-will contracts, the court stated "[T]the majority line of cases supports the proposition that as a matter of law, an at-will employee who continues in the employ of the employer after the employer has given notice of changed terms or conditions of employment has accepted the changed terms and conditions. Presumably, under this approach, it would not be legally relevant if the employee also had complained, objected, or expressed disagreement with the new offer; as long as the employee continued in employment with notice of the new terms, the employee has no action for breach of contract as a matter of law."].)
C. Diaz Has Not Demonstrated That The Arbitration Agreement Is Unenforceable
Once the party seeking arbitration has established that a binding agreement was formed, as Sohnen did here, the burden shifts to the party opposing arbitration to demonstrate the agreement cannot be enforced. ( Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972, 64 Cal.Rptr.2d 843, 938 P.2d 903 ; Rosenthal, supra , 14 Cal.4th at pp. 409-410, 58 Cal.Rptr.2d 875, 926 P.2d 1061.)
A showing that an agreement is unconscionable can bar enforcement. The doctrine has "both a procedural and a substantive element, the former focusing on oppression or surprise due to unequal bargaining power, the latter on overly harsh or one-sided results." ( Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1243, 200 Cal.Rptr.3d 7, 367 P.3d 6.) Both elements must be present for a court to refuse enforcement. ( Ibid. ; see also Pinnacle, supra , 55 Cal.4th at p. 246, 145 Cal.Rptr.3d 514, 282 P.3d 1217 [both elements must be present, but there is a sliding scale; if more of one element is shown, less of the other need be present].)
The trial court found that the contract was adhesive in nature, but that finding, standing alone, is not sufficient. (See Baltazar, supra , 62 Cal.4th at p. 1245, 200 Cal.Rptr.3d 7, 367 P.3d 6 ["[t]he adhesive nature of the employment contract requires us to be ‘particularly attuned’ to her claim of unconscionability [citation], but we do not subject the contract to the same degree of scrutiny as ‘[c]ontracts of adhesion that involve surprise or other sharp practices.’ "].)
This record contains no evidence of surprise, nor of sharp practices demonstrating substantive unconscionability. While Diaz argues in the introduction to her briefing that the agreement is substantively unconscionable, she fails to specify, with appropriate citations to the record and relevant legal authority, any terms of the agreement that she believes are unconscionable. Accordingly, Diaz has waived any argument that the agreement is unenforceable. ( Okorie v. Los Angeles Unified School Dist. (2017) 14 Cal.App.5th 574, 599-600, 222 Cal.Rptr.3d 475 [parties must present legal authority for all arguments made]; Benach v. County of Los Angeles (2007) 149 Cal.App.4th 836, 852, 57 Cal.Rptr.3d 363 [party raise or support issues by argument and citation to authority]; Berger v. California Ins. Guarantee Assn. (2005) 128 Cal.App.4th 989, 1007, 27 Cal.Rptr.3d 583 [parties must make coherent argument and cite authority in support of a contention; failure to do so waives the issue on appeal].)
DISPOSITION
The order denying the petition to compel arbitration is reversed and the matter is remanded for the trial court to conduct further proceedings consistent with this opinion. Appellant is to recover its costs on appeal.
I concur:
FEUER, J.
SEGAL, J., Dissenting.I agree an employee can impliedly accept an arbitration agreement by continuing to work for his or her employer. I also think an employee, like any other contracting party, can reject an arbitration agreement offered by an employer and yet continue to work for the employer. Whether an employer and an employee entered into an implied agreement regarding the terms of employment is a factual issue we routinely ask a trier of fact to decide in employment cases. Because the facts in this case do not support only one reasonable conclusion, I would defer to the trial court’s resolution of that factual issue.
"The issue of an implied agreement or consent is ordinarily a factual question to be resolved by the trier of fact." ( Antelope Valley Groundwater Cases (2018) 30 Cal.App.5th 602, 618, fn. 11, 241 Cal.Rptr.3d 692 ; see Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 677, 254 Cal.Rptr. 211, 765 P.2d 373 [whether the parties’ conduct created an implied agreement is generally a question of fact]; Citizens for Amending Proposition L v. City of Pomona (2018) 28 Cal.App.5th 1159, 1189, 239 Cal.Rptr.3d 750 ["The existence and scope of implied-in-fact contracts are determined by the totality of the circumstances. [Citation.] ‘The question whether such an implied-in-fact agreement exists is a factual question for the trier of fact unless the undisputed facts can support only one reasonable conclusion.’ "]; Unilab Corp. v. Angeles-IPA (2016) 244 Cal.App.4th 622, 636, 198 Cal.Rptr.3d 211 ["Whether an implied contract exists ‘ " ‘is usually a question of fact for the trial court. Where evidence is conflicting, or where reasonable conflicting inferences may be drawn from evidence which is not in conflict, a question of fact is presented for decision of the trial court.’ " ’ "]; Kashmiri v. Regents of University of California (2007) 156 Cal.App.4th 809, 829, 67 Cal.Rptr.3d 635 ["the question whether the parties’ conduct creates ... an implied agreement is generally " ‘a question of fact" ’ "].) In the arbitration context, while "California law permits employers to implement policies that may become unilateral implied-in-fact contracts when employees accept them by continuing their employment," whether "employment policies create unilateral contracts is ‘a factual question in each case.’ " ( Gorlach v. Sports Club Co. (2012) 209 Cal.App.4th 1497, 1508, 148 Cal.Rptr.3d 71, quoting Asmus v. Pacific Bell (2000) 23 Cal.4th 1, 11, 96 Cal.Rptr.2d 179, 999 P.2d 71.)
Because we are reviewing the trial court’s resolution of a factual issue, I would not apply, as the majority does, a de novo standard of review. Indeed, I would not even apply a substantial evidence standard of review. I think the standard of review is much more onerous on the appellant in this case.
As the majority acknowledges, Sohnen had the burden of proving the existence of the implied arbitration agreement. (Maj. opn. at p. 830; see Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236, 145 Cal.Rptr.3d 514, 282 P.3d 1217 ["[t]he party seeking arbitration bears the burden of proving the existence of an arbitration agreement"]; Cohen v. TNP 2008 Participating Notes Program, LLC (2019) 31 Cal.App.5th 840, 859, 243 Cal.Rptr.3d 340 [same].) The trial court found Sohnen failed to meet its burden. In this situation, we do not review the record to determine whether substantial evidence supports the trial court’s finding, but whether the evidence compels the opposite finding as a matter of law. Thus, where the trier of fact, here the trial court ruling on a motion to compel arbitration, " ‘expressly or implicitly concluded that the party with the burden of proof did not carry the burden and that party appeals, it is misleading to characterize the failure-of-proof issue as whether substantial evidence supports the judgment. ... [¶] [W]here the issue on appeal turns on a failure of proof at trial, the question for a reviewing court becomes whether the evidence compels a finding in favor of the appellant as a matter of law. [Citations.] Specifically, the question becomes whether the appellant’s evidence was (1) "uncontradicted and unimpeached" and (2) "of such a character and weight as to leave no room for a judicial determination that it was insufficient to support a finding." ’ " ( Dreyer’s Grand Ice Cream, Inc. v. County of Kern (2013) 218 Cal.App.4th 828, 838, 159 Cal.Rptr.3d 832 ; accord, Glovis America, Inc. v. County of Ventura (2018) 28 Cal.App.5th 62, 71, 238 Cal.Rptr.3d 895 ; Atkins v. City of Los Angeles (2017) 8 Cal.App.5th 696, 734, 214 Cal.Rptr.3d 113.) For this reason, " ‘[w]here, as here, the judgment is against the party who has the burden of proof, it is almost impossible for him to prevail on appeal by arguing the evidence compels a judgment in his favor. That is because unless the trial court makes specific findings of fact in favor of the losing plaintiff, we presume the trial court found the plaintiff’s evidence lacks sufficient weight and credibility to carry the burden of proof. [Citations.] We have no power on appeal to judge the credibility of witnesses or to reweigh the evidence.’ " ( Patricia A. Murray Dental Corp. v. Dentsply Internat., Inc. (2018) 19 Cal.App.5th 258, 270, 227 Cal.Rptr.3d 862.)
The evidence does not compel a finding Diaz and Sohnen impliedly agreed to arbitrate. The evidence shows Diaz attended a meeting on December 2, 2016, where Marla Carr, Sohnen’s chief operating officer, and Eliana Diaz, an employee in the human resources department, announced the company was implementing a new arbitration policy. Carr and Eliana Diaz gave the employees copies of the new dispute resolution agreement, "in English and Spanish, to take home and review." Eliana Diaz and Carr, however, had different recollections of the chronology of events. Eliana Diaz did not state in her declaration that employees were told on December 2, 2016 that, even if they refused to sign the arbitration agreement, continuing to work at the company would constitute acceptance of the agreement. Eliana Diaz stated it was not until December 19, 2016 that, during a private meeting with Diaz, she read Diaz a document stating, "If you continue working for Sohnen Enterprises on or after December 20, 2016, your actions will be viewed just as if you signed the [arbitration agreement]." Eliana Diaz also stated in her declaration that, in the meantime, Diaz told her on December 14, 2016 she would not sign the arbitration agreement. Eliana Diaz also said that on December 23, 2016 Sohnen received a letter from Diaz’s attorney dated December 20, 2016 again rejecting the arbitration agreement. The letter from counsel for Diaz stated: "This letter will serve as a formal response [to], and rejection of, the attempt at obtaining Ms. Erika Diaz’[s] agreement to forced arbitration as set forth in an agreement presented to her on, or about, 12-2-16." The letter also stated that Diaz "intends to, and will continue, with [sic ] her employment by Sohnen Enterprises on all the terms, and conditions, of her employment in effect prior to the presentation to her of the [arbitration agreement]."
On the other hand, Carr stated in her declaration that at the December 2, 2016 meeting she "explained in English the basic terms of the [arbitration agreement]" and "[s]pecifically" told the employees that "continued employment would constitute acceptance" of the agreement. The documentary evidence, however, does not support this statement in her declaration. The memorandum advising Diaz that Sohnen would consider continued employment as acceptance is dated December 19, not December 2. In addition, the December 19 memorandum suggests that it was the first time the company had made this statement and that Diaz had until the next day to decide (presumably demonstrated by continuing to work, because Diaz had already said she was not going to sign the arbitration agreement) whether she would agree to the arbitration provision. The document states: "This memo is to inform you that if you continue working for Sohnen Enterprises on or after December 20, 2016, you will be deemed for all purposes to have accepted the terms of the [arbitration agreement]." (Italics added.) Counsel for Diaz wrote his letter the next day.
This evidence created factual disputes and supported different reasonable conclusions about what happened and whether Diaz impliedly agreed to Sohnen’s proposed arbitration agreement. The trial court resolved this conflict in favor of Diaz and ruled the parties did not reach an implied agreement to arbitrate. The court stated, "You can’t have an agreement where one side says, ‘This is the deal,’ and the other side says, ‘No, this is not the deal,’ " and the court found "there [was] no meeting of the minds." We do not have the authority to reweigh the evidence and come to a different conclusion, let alone conclude the evidence compels a finding the parties did enter into an implied agreement.There was also a conflict in the evidence concerning whether the employees needed to sign the arbitration agreement in order to accept it. The arbitration agreement stated it had to be accepted in writing: "[B]y my signature below ... I agree to comply with and be bound by this Agreement." But Carr stated she told the employees they could accept the arbitration agreement, even if they did not sign it, by continuing to work there. Which was it? Again, the trial court resolved this conflict against Sohnen and found Diaz did not accept the agreement, a finding we should respect on appeal. (See Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 337, 100 Cal.Rptr.2d 352, 8 P.3d 1089 ["Where there is no express agreement, the issue is whether other evidence of the parties’ conduct has a ‘tendency in reason’ ( Evid. Code, § 210 ) to demonstrate the existence of an actual mutual understanding on particular terms and conditions of employment. If such evidence logically permits conflicting inferences, a question of fact is presented."].) The trial court’s ruling was also consistent with California cases holding that courts will not imply an employee’s consent to an arbitration agreement where the agreement requires the employee’s signature to be effective. (See Gorlach v. Sports Club Co. , supra , 209 Cal.App.4th at p. 1509, 148 Cal.Rptr.3d 71 [court would not "imply the existence of [an arbitration] agreement" where "the handbook told employees that they must sign the arbitration agreement, implying that it was not effective until (and unless) they did so," and the employee "never signed the arbitration agreement"]; Mitri v. Arnel Management Co. (2007) 157 Cal.App.4th 1164, 1172-1173, 69 Cal.Rptr.3d 223 [no implied agreement to arbitrate where the agreement’s "express term requir[ed] a signed agreement"].)
None of the cases the majority or Sohnen cites involved a plaintiff who expressly rejected the arbitration agreement, as Diaz did here twice (once orally and once in writing). (See Scott v. Education Management Corporation (3d Cir. 2016) 662 Fed.Appx. 126, 130-131 [continuing to work did not constitute an implied agreement to an arbitration provision where the employees "promptly voiced their specific objection to and rejection of the ADR policy" and, "[r]ather than indicate their assent, both men quite clearly expressed their strong disagreement with its terms"]; Bayer v. Neiman Marcus Holdings, Inc. (N.D.Cal. Nov. 8, 2011, No. CV 11-3705 MEJ), 2011 WL 5416173, at p. 5 [employee did not impliedly agree to an arbitration agreement where the employee refused to sign the arbitration agreement and told his supervisors he was not agreeing to the employer’s arbitration program]; Kunzie v. Jack-In-The-Box, Inc. (Mo.Ct.App. 2010) 330 S.W.3d 476, 486 [employee’s "rejection [of an arbitration agreement] and continued employment, under basic contract principles, reasonably could be viewed as [the employee’s] counteroffer to [the employer] that [the employee] would continue his employment without being subject to [the employer’s] arbitration policy," and the employer’s "failure to then terminate [the employee’s] employment could be deemed to constitute an acceptance of such counter-offer"].) Presented with evidence of those two express rejections and, at most, 18 days (December 2 to December 20, 2016) of continued employment, the trial court was entirely justified in giving the former more weight than the latter, and we should defer to that finding. (See Haworth v. Superior Court (2010) 50 Cal.4th 372, 385, 112 Cal.Rptr.3d 853, 235 P.3d 152 [trial courts "generally are in a better position to evaluate and weigh the evidence"]; Tucker v. Pacific Bell Mobile Services (2010) 186 Cal.App.4th 1548, 1562, 115 Cal.Rptr.3d 9 [" ‘[i]t is the exclusive function of the trial court to weigh the evidence, resolve conflicts and determine the credibility of witnesses’ "]; see also Haraguchi v. Superior Court (2008) 43 Cal.4th 706, 711, fn. 3, 76 Cal.Rptr.3d 250, 182 P.3d 579 ["that the trial court’s findings were based on declarations and other written evidence does not lessen the deference due those findings"]; Ramos v. HomewardResidential, Inc. (2014) 223 Cal.App.4th 1434, 1441, 168 Cal.Rptr.3d 114 ["we defer to factual determinations made by the trial court when the evidence is in conflict, whether the evidence consists of oral testimony or declarations"]; Poniktera v. Seiler (2010) 181 Cal.App.4th 121, 130, 104 Cal.Rptr.3d 291 ["we resolve all conflicts in favor of the judgment, even when (as here) the trial court’s decision is based on evidence received by declaration rather than by oral testimony"].)
The cases the majority cites are also factually distinguishable. Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC, supra , 55 Cal.4th 223, 145 Cal.Rptr.3d 514, 282 P.3d 1217 did not involve an implied agreement to arbitrate, by conduct or otherwise. In that case there was a written arbitration agreement in the applicable CC&Rs. ( Id. at p. 231, 145 Cal.Rptr.3d 514, 282 P.3d 1217.) The court in Craig v. Brown & Root, Inc. (2000) 84 Cal.App.4th 416, 100 Cal.Rptr.2d 818 held the employee’s continued employment constituted acceptance of an arbitration agreement her employer had proposed. ( Id. at pp. 420-421, 100 Cal.Rptr.2d 818.) But the employee in that case continued to work at the company for four years ( id. at pp. 418, 421, 100 Cal.Rptr.2d 818 ), without ever saying a word about the arbitration agreement, whereas Diaz continued to work at Sohnen one day or 18 days and expressly rejected the arbitration agreement twice. And in Harris v. TAP Worldwide, LLC (2016) 248 Cal.App.4th 373, 203 Cal.Rptr.3d 522 the employer gave the employee the arbitration agreement when the employee began working full time, and the employee worked at the company for at least a year (and perhaps three) before the company terminated his employment. (See id. at pp. 376-377, 203 Cal.Rptr.3d 522.) Again, a far cry from the (at most) 18 days Diaz continued to work at Sohnen before she rejected the agreement in writing.Neither Schachter v. Citigroup, Inc. (2009) 47 Cal.4th 610, 101 Cal.Rptr.3d 2, 218 P.3d 262 nor DiGiacinto v. Ameriko-Omserv Corp. (1997) 59 Cal.App.4th 629, 69 Cal.Rptr.2d 300, both cited by the majority, involved an arbitration agreement, express or implied. (See Gorlach v. Sports Club Co. , supra , 209 Cal.App.4th at p. 1510, 148 Cal.Rptr.3d 71 [" ‘ DiGiacinto v. Ameriko-Omserv Corp. [did not] address[ ] whether an arbitration agreement existed between an employer and employee’ "]; Mitri v. Arnel Management Co. , supra , 157 Cal.App.4th at p. 1171, 69 Cal.Rptr.3d 223 [same].) Certainly, as the majority points out (maj. opn. at p. 831), "California law permits employers to implement policies that may become unilateral implied-in-fact contracts when employees accept them by continuing their employment." ( Asmus v. Pacific Bell , supra , 23 Cal.4th at p. 11, 96 Cal.Rptr.2d 179, 999 P.2d 71.) But here the evidence was disputed whether Sohnen made such a unilateral change in the terms of Diaz’s employment. There was some evidence Sohnen intended to implement arbitration unilaterally, which Diaz could accept by continued employment, but there was also evidence Sohnen intended to implement arbitration as part of a bilateral agreement, which, as stated, Diaz could accept by signing the agreement. Indeed, the language of the arbitration agreement suggested that the parties were intending to exchange mutual promises, not that Sohnen was implementing arbitration unilaterally. The arbitration agreement states, "By this Agreement, you and Sohnen Enterprises ... agree to resolve by arbitration any and all disputes arising out of or related to your employment by [Sohnen]." (Italics added.) The agreement also states, "By mutually agreeing to arbitrate covered disputes, we both recognize that these disputes will not be resolved by a court or jury." (Italics added.) (See Bleecher v. Conte (1981) 29 Cal.3d 345, 350, 213 Cal.Rptr. 852, 698 P.2d 1154 ["[a] bilateral contract is one in which there are mutual promises given in consideration of each other"].) The trial court again resolved these factual issues in favor of Diaz. (See Asmus , at p. 11, 96 Cal.Rptr.2d 179, 999 P.2d 71 ["whether employment policies create unilateral contracts will be a factual question in each case"]; Davis v. Jacoby (1934) 1 Cal.2d 370, 378, 34 P.2d 1026 [in many cases, "whether the particular offer is one to enter into a bilateral or unilateral contract" depends on "the intent of the offerer and the facts and circumstances of the case"].)
The defendant in Harris terminated the plaintiff’s employment in December 2013. (Harris v. TAP Worldwide, LLC , supra , 248 Cal.App.4th at p. 376, 203 Cal.Rptr.3d 522.) The new arbitration policy went into effect in January 2010. (Id. at p. 379, 203 Cal.Rptr.3d 522.) The plaintiff stated he signed the acknowledgement of receipt of the documents containing the arbitration provision in September 2012, "but the year was erroneously listed as 2010." (Id. at p. 377, 203 Cal.Rptr.3d 522.)
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Finally, I believe that courts, not employers, should determine whether there is an implied agreement to arbitrate. That the employer told its employees continued employment would constitute acceptance, or that the employer gave the employee a reasonable period of time to consider whether to sign an arbitration agreement, is evidence that may support a finding the parties entered into an implied agreement. But it is not the only evidence a trier of fact can consider. The majority’s decision takes from courts the power to determine whether (the party seeking to compel arbitration has met its burden of proving) the evidence shows an implied agreement to arbitrate, because the decision gives employers the unilateral power to create an implied agreement simply by announcing that continued employment will constitute acceptance, no matter how strongly or clearly the employee manifests his or her rejection of the proposed agreement. Carr’s memorandum stated that continuing to work for Sohnen would "be viewed" as acceptance. The issue for me is, "viewed" by whom? I believe the "viewer" should be the court, not the employer.
Because in my opinion the majority applies the wrong standard of review and does not give sufficient deference to the trial court’s resolution of the factual issues in this case, I respectfully dissent.
Arbitration / Choic of Law Clause
Arbitration agreement with choice-of-law clause requiring interpretation in accordance with California law required all claims to be arbitrated despite Labor Code section 229.
Bravo v. RADC Enters., Inc.
SOURCE:
KEY WORDS:
California Law, Arbitration Agreement, Choice-of-law clause
AGENCY:
COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION EIGHT
B289506
Mel R. BRAVO, Plaintiff and Respondent, Bleau Fox, Martin R. Fox, Los Angeles, Megan A. Childress, and Elizabeth M. Martin, for Defendant and Appellant. Law Offices of Ann A. Hull, Ann A. Hull, Tarzana, and Joseph S. Socher, Los Angeles, for Plaintiff and Respondent. v. RADC ENTERPRISES, INC., Defendant and Appellant. | B289506 Mar 29, 201933 Cal.App.5th 920 (Cal. Ct. App. 2019) |
_________________________
WILEY, J.
Bleau Fox, Martin R. Fox, Los Angeles, Megan A. Childress, and Elizabeth M. Martin, for Defendant and Appellant.
Law Offices of Ann A. Hull, Ann A. Hull, Tarzana, and Joseph S. Socher, Los Angeles, for Plaintiff and Respondent.
WILEY, J.
This employment case concerns a choice-of-law clause in an arbitration agreement. The trial court interpreted the clause to mean some but not all individual employment claims must be arbitrated. We conclude all of them must be arbitrated.
The facts are simple. RADC Enterprises, Inc. hired Mel R. Bravo to manage a store. The parties signed a two-page arbitration agreement covering "all disputes" arising from the employment relationship. On page two, near the end, the agreement added a one-sentence choice-of-law provision: "This Agreement shall be governed by and shall be interpreted in accordance with the laws of the State of California."
After RADC fired him, Bravo sued RADC on individual employment claims, as well as on representative claims under the Private Attorneys General Act of 2004 (PAGA). RADC moved to stay Bravo’s PAGA claims and to compel arbitration on his individual claims.
The trial court severed and stayed the PAGA claims. The court found RADC engaged in interstate commerce and thus the Federal Arbitration Act governed the agreement. But the court compelled arbitration for only three of Bravo’s nine individual claims, denying the arbitration motion on the remaining six individual claims. The logic was that, while the Federal Arbitration Act did apply, the choice-of-law sentence meant the parties wanted California law to govern their relationship. California Labor Code section 229 directs courts to disregard agreements to arbitrate wage claims, so the trial court declined to send Bravo’s remaining claims to arbitration. ( Lab. Code, § 229.) On appeal, RADC correctly contends the choice-of-law provision did not mean the parties wanted to oust arbitration from their arbitration agreement. RADC rightly says the trial court should have sent all Bravo’s individual claims to arbitration.
We independently review contract interpretation where, as here, there is no extrinsic evidence about contract meaning and the facts are undisputed.
As RADC correctly explains, the choice-of-law clause does not remove any arbitration from this arbitration agreement. The first textual clue is the title: "ARBITRATION AGREEMENT." This agreement is for arbitration and not against it.
The text of the agreement swiftly announces its objective: the parties will arbitrate "any and all disputes" arising from Bravo’s employment, "including any claims brought by the Employee related to wages" under the California Labor Code. The main point of the deal was to arbitrate all employment disputes. The parties could not have intended to apply Labor Code section 229 to this contract because that section prohibits arbitrating wage claims and requires courts to disregard private agreements to arbitrate. ( Lab. Code, § 229.) Applying this California law would contradict the parties’ intent to arbitrate "any and all disputes," including claims "related to wages ...."
Interpreting the choice-of-law provision to negate the purpose of the two-page agreement is incorrect. Readers must assume legal authors mean to draft texts that cohere. To assume otherwise departs from common sense and makes mischief. So we read documents to effectuate and harmonize all contract provisions. (E.g., Mastrobuono v. Shearson Lehman Hutton, Inc. (1995) 514 U.S. 52, 63, 115 S.Ct. 1212, 131 L.Ed.2d 76.) Bravo’s interpretation of the choice-of-law provision in this agreement is untenable because it unnecessarily sets one clause in conflict with the rest of the agreement. ( Id. at p. 64, 115 S.Ct. 1212.)
The choice-of-law provision becomes consistent with the parties’ intent to arbitrate all disputes when we read "the laws of the State of California" to include substantive principles California courts would apply, but to exclude special rules limiting the authority of arbitrators. (See Mastrobuono, supra, 514 U.S. at pp. 63–64, 115 S.Ct. 1212 ; Preston v. Ferrer (2008) 552 U.S. 346, 363, 128 S.Ct. 978, 169 L.Ed.2d 917.) This arbitration agreement is like the one in Preston v. Ferrer , which contained a similar choice-of-law provision. The Supreme Court of the United States interpreted that agreement as we interpret this one. ( Id. at pp. 362–363, 128 S.Ct. 978.)
The trial court cited Mastick v. TD Ameritrade, Inc. (2012) 209 Cal.App.4th 1258, 1264, 147 Cal.Rptr.3d 717, which does not apply here. Mastick involved Code of Civil Procedure section 1281.2, subdivision (c). That statute is not at issue here. The same goes for Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior University (1989) 489 U.S. 468, 471, 475–477, 109 S.Ct. 1248, 103 L.Ed.2d 488. Code of Civil Procedure section 1281.2, subdivision (c) permits a court to refuse to enforce an arbitration agreement or stay arbitration pending resolution of related litigation between a party to the arbitration agreement and third parties not bound by it, where there is a possibility of conflicting rulings on a common issue of law or fact. ( Id . at p. 471, 109 S.Ct. 1248.) There are no third parties in this case. Cases dealing with this third-party statute do not apply where there are no third parties. DISPOSITION
We affirm part of the trial court’s order and reverse part of it. We affirm the part severing the agreement provision requiring the parties to arbitrate the PAGA claims. We also affirm the order granting RADC’s motion as to three individual claims. We reverse the order denying the motion as to the remaining six individual claims. RADC is awarded costs on appeal.
WE CONCUR:
GRIMES, Acting P. J.
ADAMS, J.
Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
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