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Employers Cannot Remove PAGA Actions to Federal Court

The California Labor Code Private Attorneys General Act of 2004 (“PAGA”) does not provide a basis for employers to remove PAGA actions from state to federal court. PAGA allows employees to bring claims on behalf of the State of California against their employers. PAGA claims seek statutory penalties for violations of the California Labor Code, such as overtime and meal and rest period violations. Under PAGA, employees can bring the action on their own behalf and on behalf of other aggrieved employees and recover twenty-five percent of the statutory penalties, in addition to attorneys’ fees and costs. (The State retains seventy-five percent of the statutory penalties.)

In Baumann v. Chase Inv. Services Corp., 2014 WL 983587 (9th Cir., March 13, 2014, 12-55644), Baumann sued his employer in California state court under PAGA based on statutory violations for withheld overtime pay. Baumann did not assert any federal claims. However, Baumann’s employer removed the action to federal court based on the federal Class Action Fairness Act of 2005 (“CAFA”), which confers original jurisdiction in federal courts for certain class actions. Baumann’s employer argued that the PAGA claims were a class action under CAFA. The district court found removal to federal court was proper. The Ninth Circuit Court of Appeal reversed. The Court of Appeal held that the district court did not have original jurisdiction over Baumann’s removed PAGA suit under CAFA. The Court of Appeal determined that PAGA actions are not sufficiently similar to federal class actions because they are not claims for class relief. Rather, they are enforcement actions “filed on behalf of and for the benefit of the state.” Accordingly, CAFA did not provide a basis for federal jurisdiction of the PAGA lawsuit.

When employers are served with a lawsuit by their employees, one of the first considerations for defending that lawsuit will be deciding venue for the action in state or federal court. Employees generally file employment actions in State court. Employers oftentimes prefer to defend employment lawsuits in federal court. Federal courts have stricter pleading requirements, expedited discovery schedules, and may even be considered more employer friendly. Employers need to establish a grounds for federal jurisdiction in order to remove a state action to federal court. PAGA will not provide grounds for removing an action from state to federal court. But, a federal court may allow a PAGA action to proceed in federal court if the federal court has other grounds for establishing federal jurisdiction.

Employees have one year from the date of an allegedly wrongful act to file a complaint with the Department of Fair Employment and Housing under the Fair Employment and Housing Act (FEHA). Parties to a contract can agree to shorten statutes of limitation as long as the shortened period is reasonable, BUT employers probably cannot shorten the FEHA statute of limitations. Ellis v. U.S. Security Associates, 14 Cal. Daily Op. Serv. 3098 (Cal. Ct. App., Mar. 20, 2014) (six-month period not enforceable).

Wilke Fleury Partner Weighs In On Mold Debate

As an attorney who practices primarily in the construction defect arena, I read Dr. Craner’s commentary1 with particular interest. My practice includes both prosecution as well as defense of owners and developers in residential and commercial property cases, many of which have a “mold” component. Indeed, my deposition of Dr. Bruce Kelman in the Kerruish v. Kimball Hill Homes case is cited in Craner’s article.

In my many years of experience on both the plaintiff and defense sides of the “mold” debate, i.e., whether and to what extent indoor mold arising in water-damaged buildings is a valid, diagnosable, treatable, and preventable environmental health disorder, I have, since its publication, consistently observed defense experts relying upon the ACOEM’s statement on “Adverse Human Health Effects Associated with Molds in the Indoor Environment”2 as the “final” scientific word on the issue. Plaintiff experts, on the other hand, are routinely challenged to defend and prove the scientific basis of their affirmative opinions as a rebuttal to the ACOEM Statement.

Those of us who practice in this area have long suspected that the heretofore concealed process by which the ACOEM Mold Statement was created was flawed and biased, not only in its content and balance as an “evidence-based” guideline, but especially in its tone, which blatantly comes across as a “defense argument” to any attorney willing to read it. How can any advocate come away with any other impression when the same experts who were profiting from defense medical/legal consultations and testifying in mold-related litigation were incredibly selected by ACOEM to be the primary authors of its organizational position statement on this subject?

Dr. Craner’s critique has finally brought some light and balance to the issue. Construction defects and resultant litigation related to indoor mold will go on, but I strongly suspect the ACOEM Mold Statement will no longer receive the same level of reliance or respect that it has been unduly given up to this point by attorneys and experts. ACOEM, as an organization, has major credibility problems as a result of this document and would do well to follow Dr. Craner’s recommendations to restore organizational integrity and respect.

1. Craner J. A critique of the ACOEM statement on mold: undisclosed conflicts of interest in the creation of an “evidence-based” statement. Int J Occup Environ Health. 2008 Oct-Dec;14(4): 283-98.
2. Adverse Human Health Effects Associated with Molds in the Indoor Environment. Journal of Occupational and Environmental Medicine:Volume 45(5): 470-478 (2003).

Wilke Fleury Obtains Licensure for Dental Disability Insurer in Six States

Wilke Fleury successfully obtained licensure for its dental disability insurance client, Premier Access Insurance Company, in six states. Wilke Fleury Partner Michael G. Polis obtained licensure for Premier Access in New York, Kentucky, Florida, New Jersey, Pennsylvania and Virginia. The licensure allows Premier Access to operate as a dental insurance company for PPO and indemnity dental products throughout the eastern seaboard. Previously doing business only on the west coast, these additional licensures significantly expand the scope of Premier Access’ offerings.

Firm Wins $6 Million For Manufacturing Client In Green Dispute

After a nine week trial in the Federal District Court in Sacramento, a jury unanimously awarded our client, Pacific MDF Products, Inc., $6,670,185. Pacific MDF manufactures home improvement products, such as baseboards and crown moulding, out of fiberboard at its plant in Rocklin, California. The manufacturing process generates a significant amount of sawdust, which must be disposed of in environmentally sensitive ways. Pacific MDF decided to purchase from Defendants, Advanced Recycling, Inc., Bio-Mass Energy Concepts, LLC and Donald Kunkel, a system which would permit Pacific MDF to burn the sawdust to create both steam heat and electricity to run its plant.

When Defendants were unable to overcome both design and manufacturing defects in the cogeneration system, Thomas G. Redmon and Daniel L. Baxter of our office filed the lawsuit alleging 11 different causes of action, including breach of contract, breach of warranty, fraudulent and negligent misrepresentation, and making false promises. The jury deliberated for less than two days before finding in favor of our client on every cause of action.

Pacific MDF expressed praise for the quality of the representation it received based, not just on the end result, but on the fact that Mr. Redmon and Mr. Baxter exhausted every effort on its behalf to settle the matter in a cost effective manner prior to taking the matter to trial.

Wilke Fleury Obtains Defense Verdict For Lodi Memorial Hospital

A Sacramento jury deliberated less than three hours before returning a near-unanimous verdict in favor of Lodi Memorial Hospital in a medical negligence action. The two week trial in Sacramento County Superior Court pitted Joan Perry, the widow of Stanley Perry, against the hospital and its staff after her husband died suddenly of a ruptured aortic aneurysm during a routine treadmill test one day following admission for sudden onset of chest pain. Mrs. Perry claimed that the hospital and others mismanaged her husband’s care.

Retained by Optima Insurance, the insurance carrier for the hospital, Wilke Fleury partner, David A. Frenznick, successfully argued that the hospital had met and exceeded the standard of nursing care in all aspects of Mr. Perry’s care. Mr. Perry presented with classic signs of coronary artery disease and, prior to the treadmill test, his cardiologist was timely informed by the nursing staff of all pertinent changes in the patient’s condition.

Lodi Memorial Risk Manager, Daleen Murray, praised Wilke, Fleury attorneys after receiving the jury’s verdict. “Your devoted time, expertise and professionalism lead us to the desired outcome of a defense verdict,” she said.

Wilke Fleury Completes Sale of 125 Acres to the California Tahoe Conservancy

Wilke Fleury recently completed the negotiation and sale of 125 acres of undeveloped land to the California Tahoe Conservancy. The sale is the second largest purchase in the history of the Conservancy. Wilke Fleury Partner Jim Krtil worked closely with the property owners, members of the Barton family, in negotiating acceptable terms for the sale of the land, which had been in the family for generations. The California Tahoe Conservancy will preserve the land, which is likely to be a vital link for a new bike trail through the south portion of the Tahoe basin. The Firm previously negotiated and closed the largest purchase ever to the Conservancy on behalf  of Alva Barton. That sale involved over 300 acres of meadow land, with more than a half-mile of Lake Tahoe beach front. The land now serves as important stream zone land. Each transaction involved years of negotiations, taking into consideration not only the real estate aspects of the transaction, but also the income tax and estate tax implications to the family.

Wilke Fleury Wins Defense Verdict In Medical Malpractice Case

In a three week jury trial involving allegations of medical malpractice, a family practice specialist employed by the Regents of the University of California was successfully defended by Wilke Fleury. The case involved the death of a young man from an aggressive malignant melanoma. The lawsuit was brought on behalf of the patient’s son, who was born four months after his father died of his skin cancer. In a case that abounded with sympathy, Wilke Fleury Partner Scott Gassaway was successful in presenting a scientific and medically-based defense. The claim was largely based on a theory that an uncommon type of benign mole (a “halo nevus”) has a known but very, very uncommon association with a contemporaneously growing malignant melanoma somewhere else on the body. Plaintiff’s theory was that if a physician sees an admittedly benign halo nevus on one part of the body, the physician must rule out malignant melanoma elsewhere on the body. Plaintiff unsuccessfully argued that the presence of the uncommon mole required a full body skin and mucous membrane examination. The defense experts testified that the standard of care for a family practice physician does not require such measures given the extremely small statistical likelihood of discovering a malignant melanoma on a patient with a benign halo nevus. The jury unanimously found that the physician met the standard of care.

Wilke Fleury Obtains Quick Dismissal for Mortgage Lender

Wilke Fleury obtained an order from the San Diego County Superior Court dismissing its client—a large mortgage lender—from a piece of highly contested litigation. In the case, Wilke Fleury’s client was sued by a borrower who was attempting to rescind his home loan nearly three years after the transaction was consummated. After Wilke Fleury’s initial motion resulted in the plaintiff amending his complaint, Wilke Fleury again moved for dismissal on the basis that the amendments failed to state a legally cognizable claim. Over the strenuous opposition of plaintiff and his attorney, the court agreed with Wilke Fleury partner Dan Baxter’s argument that no degree of further amendment could cure the defective character of the plaintiff’s action. As a result, the court dismissed the action in full.

Firm Wins $52,350,000 Award for Owner/Seller of Railroad Station to City of Sacramento

After a lengthy and intense arbitration, Judge William A. Bettinelli found in favor of our client, Thomas Enterprises, Inc. by awarding $52,350,000 as the fair market value of 32 acres of land surrounding the Sacramento Train Depot. Previously, Thomas Enterprises had agreed to sell the acreage to the City of Sacramento, but the parties could not agree on a purchase price. The City offered to purchase the property prior to arbitration for $8,200,000.

Thomas Enterprises had purchased the 237 acre Downtown Railyards site (owned for over a century by Southern Pacific Railroad) and sold the 32 acre parcel to the City for the development of a centralized intermodal site, to include all forms of transportation servicing downtown Sacramento and the surrounding area. Judge Bettinelli’s decision represents the final step in the sales process.

Wilke, Fleury attorneys Tom Redmon and Dan Baxter handled the matter on Thomas Enterprises’ behalf.

Wilke Fleury Wins $12.6 Million Jury Verdict Against CCPOA

On Friday, October 22, a federal jury in Sacramento returned a punitive damages award of over $10,000,000 in a case brought by Wilke Fleury on behalf of plaintiffs Brian Dawe, Gary Harkins, and Flat Iron Mountain Associates. That award was in addition to the same jury’s October 18 award of $2.58 million in compensatory damages.

Represented by Wilke Fleury partner Dan Baxter, the plaintiffs sued the California Correctional Peace Officers’ Association, Corrections USA, and two individual defendants for breach of contract and defamation—among other claims—stemming from a campaign of misconduct perpetrated by the defendants in 2006 and 2007. After a three-month trial, the jury found in favor of Dawe, Harkins, and Flat Iron on their claims, as well as on an assortment of counterclaims made by Corrections USA. Of the total damages awarded to plaintiffs, over $12 million was against CCPOA, the largest correctional officers’ union in the country and a powerful force in California politics.

Firm Closes Sixty Million Dollar Deal

On December 31, 2010 the firm’s Mergers and Acquisitions group successfully closed the sale of our client’s high-tech manufacturing business to an equity capital fund for cash, debt, and equity consideration of approximately $60,000,000. Much of the management of the business has been retained, and Wilke Fleury continues to provide legal services to the client as general corporate counsel under the new ownership. As is typically the case with business mergers, negotiation and closure of the deal required legal counsel in many areas of business law including contract, employment, Uniform Commercial Code, entity formation, real estate, environmental, and other areas.

Firm Wins Defense Verdict in Lengthy Medical Malpractice Trial

Robert F. Tyler of the firm’s litigation department recently prevailed in a major complex medical malpractice case brought against one of the firm’s longstanding clients. The case involved a 48 year old man who was brought into the client’s hospital with a severe brain bleed after falling as the result of an apparent loss of consciousness. Various tests done shortly after admission disclosed cardiac abnormalities, which were ultimately felt to have been caused by the injuries resulting from the fall, rather than being the cause of the loss of consciousness and fall itself. Twenty months later, the patient died in his sleep.

At the time of his death, the patient was 50 years old and earning between $150,000 and $350,000 per year. Both before and after his hospital stay, the patient never complained of any significant medical problems and never took any sick leave. On autopsy, it was found that he had suffered a major heart attack at some point in the past, and that all of his cardiac arteries were severely clogged, with the cause of death stated as untreated cardiac problems.

The wife and the two minor daughters of the patient brought a wrongful death claim, contending that the events leading up to the fall were caused by cardiac problems, which they claimed should have been found and worked up by the hospital. The plaintiffs contended that had that taken place, the patient’s severe underlying cardiac disease would have been demonstrated, and steps would have been taken to avert the patient’s untimely death.

The trial itself involved 32 witnesses, with strongly conflicting testimony from experts in cardiology, intensive care, neurology, clinical laboratory operations, and emergency room care. Plaintiffs postulated an earnings loss of $3.9 million, and ultimately requested a total award in excess of $11.7 million. After a six week trial, the jury returned a 9-3 verdict in favor of the defense, finding that the defendant hospital had correctly interpreted the abnormalities shown on the test in question as being due to the injury caused by the fall (rather than causing the fall), and that the hospital’s workup of the patient was correct and complete. While those conclusions were and are medically correct, they were complex and were very vigorously contested by well-credentialed experts on both sides. Therefore, the fact that the jury ultimately came to appreciate the defendant’s position despite their obvious sympathy for the plaintiffs, clearly constituted a very successful result for the client.