Articles Posted in California Business Litigation

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A decision in a California lawsuit may have implications for retail employers who require workers to be available for on-call shifts. Under the decision, it may be wise for such employers to consider whether or not their employees are entitled by law to compensation for their time when they are requested to “report to work” by telephone.

clock-overtime-110616811-001Ward v. Tilly’s, Inc. is a class action lawsuit filed by Skylar Ward, an employee of retail chain Tilly’s. The plaintiff alleges that her employer institutes a policy of on-call shifts in which employees are required to call in two hours in advance to ask the employer if they are needed. In the complaint, attorneys argue that such an obligation triggers an employer responsibility to compensate the employee for their time under the California Industrial Welfare Commission’s Wage Orders.

The Wage Orders state that when an employee complies with a requirement to report for work, they are entitled to half of their usual pay or no less than two-hours’ pay. Tilly’s policy stated that employees should assume that they were scheduled to work up until the moment they were told that they weren’t needed. This meant that employees would have to schedule their time as if they were going to be working, leading to arrangements for childcare, giving up social engagements and being unable to schedule academic courses.

Under Tilly’s policy, employees could be disciplined for failing to call in or for refusing to work an on-call shift. Such actions received the same discipline as missing a regularly scheduled shift.

Ward’s complaint was refused by the trial court. An appeal brought the case before the Court of Appeal, which reversed the trial court’s findings two to one. Appeal judges determined that reporting for work under the definition in the Wage Orders means “presenting oneself as ordered.”

The dissenting opinion argued that the Wage Order’s intent applied to the employee’s physical presence at the store. Nonetheless, the outcome of this matter demonstrates the need for employers to review their pre-shift call-in policy to bring it in line with the findings in Ward v. Tilly’s.

If you are an California employer or business owner with questions about any legal issue feel free to contact me, attorney Richard Oppenheim at 818-461-8500 or via the Contact form on this page.

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Facebook is dealing with a massive class action lawsuit that may see them refunding millions of dollars to parents who were the victims of so-called “friendly fraud.” The complaint alleges that since around 2011, Facebook has permitted minors to unwittingly make multiple transactions on their parent’s credit card through playing online games at the social media platform’s website.

Social-Media-37877338-001Kids love to play games like Angry Birds, Barn Buddy, Ninja Saga and others on Facebook. Frequently, they log in to the website using their parent’s Facebook account, though they also may have an account of their own. If the parent lets the child use their credit card to make an in-game purchase just once in one of Facebook’s games, the system stores the card number. Subsequently, the child makes multiple charges as they play, sometimes adding up to hundreds or thousands of dollars that parents may not be aware of until weeks later.

Evidence suggests that Facebook was aware of the loophole and that employees took a fairly hard line against allowing refunds for a practice that they referred to as “friendly fraud” or “FF.”

A paper trail from within Facebook shows conflicting viewpoints on the practice. One email from a Facebook employee mentions that game developers should be counseled to block friendly fraud transactions. Other internal documents reveal that Facebook actually educated developers about friendly fraud and encouraged them to enable such practices in their games.

When parents were stonewalled in their attempts to get refunds from Facebook, they contacted their credit card companies in attempts to invalidate the charges made by their children. Once again, internal Facebook documents show that the company was aware of an inordinate number of chargebacks associated with games like Angry Birds. However, there was concern that taking steps to minimize or eliminate friendly fraud transactions might also interfere with legitimate transactions.

The California lawsuit is still ongoing, but the recently published documents concerning it are illuminating. Business owners and executives may want to consider the transparency of their transactions and how well they communicate pricing strategies to customers in order to avoid similar confusion.

If you a California business owner with a legal challenge or issue, I invite you to call and let’s find out whether we are a great fit for each other. I can be reached at 818-461-8500 or via the Contact form on this page.

Richard Oppenheim

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When a worker suffers an on-the-job injury, what sort of accommodation is her employer legally required to make to ensure her ability to return to work? The law is deliberately vague on this subject, generally stating that employers must make “reasonable” accommodations. Failing to do so can lead to legal headaches.

Wrongful-TerminationThat’s the case for Dignity Health in California. Dignity manages St. John’s Pleasant Valley Hospital. Virginia Hoover had been working at the hospital for approximately 24 years as a radiologic technologist. In 2014, she suffered an injury to her shoulder while moving some equipment. The hospital granted her a leave of absence for recovery.

By August 2014, Hoover was cleared to return, but she was given limitations. She wasn’t supposed to lift anything heavier than 15 pounds with her non-dominant left arm and she was not permitted to raise that arm above her head. However, Hoover claims that Dignity made no effort to accommodate these restrictions. She was fired in December 2014 after her employer concluded that she couldn’t perform her duties.

Hoover filed a lawsuit against Dignity in 2016. Recently, a jury awarded her just over one million dollars for lost wages and emotional distress. The plaintiff claimed that Dignity had wrongfully terminated her and discriminated against her based on her age. Among the claims, Hoover says that another employee with similar restrictions had been accommodated by the hospital to remain in their position.

Dignity argued that they accommodated Hoover by granting her a leave of absence and then working with her to return to her duties. However, supervisors ultimately concluded that she wasn’t capable of performing the essential functions of her job.

In such cases, the law states that employers must find alternative work for an employee, but no documents from the lawsuit indicate whether or not this was attempted.

If you are an employer and one of your workers gets injured on the job, do you know how to comply with the relevant laws? Failing to do so can result in a costly lawsuit and negative publicity. If you are an California employer or business owner with questions about on the job injuries or any legal issue feel free to contact me, attorney Richard Oppenheim at 818-461-8500 or via the Contact form on this page.

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Shareholders Sue Mindbody Over Acquisition Deal

Shareholders in software company Mindbody are suing the company for breach of fiduciary duty. Plaintiffs claim that the company’s proposed acquisition by Vista Equity Partners provides plenty of compensation for Mindbody executives and the board of directors but leaves stockholders out in the cold.

Vista Equity Partners is a private equity company that focuses on acquiring promising software and tech companies like Mindbody. In December 2018, Vista and Mindbody reached an acquisition agreement that is valued at $1.9 billion.

Lawsuit-64354059-001The next month, public shareholder in Mindbody Joseph Schmit filed a lawsuit against the companies in San Luis Obispo Superior Court. Among the claims, Schmit alleges that Mindbody and its board “breached their fiduciary duties of loyalty, good faith, due care and disclosure” with their acceptance of the acquisition deal.

Schmit believes that the deal was engineered to benefit Mindbody executives and board members without giving appropriate consideration to the financial interests of shareholders. The company went public in 2015, and stocks traded at an all-time high of $43.85 in May 2018. However, the acquisition deal will make the company private again. Vista will pay just $36.50 per share.

Schmit argues that Mindbody is a company on the rise. While the stocks may be trading today at approximately $36.50 per share, he believes that profits will skyrocket. The acquisition locks out shareholders from financially benefitting from that profit.

In the lawsuit, Schmit details that Mindbody executives and board members will receive huge payouts because of the deal. One executive stands to take home $61 million while another may receive just over $11 million. Several other executives and board members stand to earn a few million dollars each.

Qatalyst Partners LP, an investment bank, advised Mindbody on the terms of the agreement and whether or not it was fair to all involved. The bank also acted as an adviser to Apptio Inc. which was acquired by Vista in November 2018.

Several other law firms are looking for plaintiffs who feel they may have been injured by this deal, which may mean that Mindbody and Vista could be facing a class action lawsuit.

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Sidecar, a former competitor in app-based ride-sharing services, recently launched a lawsuit against Uber. The complaint alleges that Uber used illegal anticompetitive strategies to drive its rivals out of business so that it could monopolize the industry.

Sunil Paul, who was the CEO of Sidecar, writes on his blog that “It was never a fair fight.” He goes on to argue that customers are now stuck paying higher rates and being forced to choose Uber because of that company’s illegal practices.

scales-and-gavel-90061933-001Uber was established in 2009. At the time, they specialized in providing black-car rides that were summoned via an app. Sidecar began offering paid shared rides in 2012. In their complaint, plaintiffs state that their company fostered many innovations including estimations for trip duration and fares. Uber then launched UberX in 2013, which offered a similar paid ride-sharing service. This soon made up the bulk of Uber’s business.

In the complaint, lawyers note that Uber began engaging in predatory pricing practices in an effort to stifle competition. It’s alleged that the company was subsidizing passenger fares as well as driver payments.

Additionally, Sidecar alleges that Uber engaged in a campaign of fake ride requests, with these requests either being subsequently canceled or being taken by a representative of Uber who would try to convince the driver to switch allegiances. Back in 2014, Lyft made similar accusations against the ride-sharing giant. Those charges were substantiated at the time.

Sidecar shuttered operations in 2015 with its assets and technology being sold to GM. Reports suggest that GM is now using those items to develop a robot-driven taxi service. Meanwhile Uber is looking to go public in the first quarter of 2019. It’s one of the most highly anticipated IPOs to come along in recent years, and Uber executives feel that the timing of the lawsuit is suspicious at best.

After all, it’s been three years since Sidecar ceased operations, so why sue now? It may be that Sidecar’s former executives are hoping to undermine the public offering. Time will tell, but it may be difficult for Sidecar to substantiate its claims.

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Since 2004, PAGA has been a concern for California employers. The Private Attorneys General Act enabled workers to sue their employers for all Labor Code violations. This is normally the realm of the state’s Attorney General. However, lawmakers knew that they had a problem with underground businesses avoiding taxes and licenses. They hoped that empowering employees to sue their employers as if they were representing an agency would uncover unsafe working conditions.

1504001-Gavel-Money-3As many laws do, PAGA had unintended effects. Soon potential plaintiffs, and the attorneys representing them, discovered that they could sue for every violation under the sun. What’s more, the process was extremely profitable for everyone involved, except for business owners.

Suddenly, employers were being sued for minor, non-monetary violations. As an example, consider the case of the 99 Cents Only Stores. Cashiers sued for the right to have chairs at their workstations. The employees won, and the decision was upheld by the California Court of Appeal. This early case demonstrated how profitable such litigation could be.

Under PAGA, employees have the right to recover monetary penalties for an employer’s violation of any Labor Code. Prior to passage of the law, these civil matters would have to be brought by the State Labor Commissioner. PAGA also made it possible for fines to be imposed against employers for virtually every provision of the Labor Code.

Moreover, plaintiffs may recover 100 percent of their attorney’s fees. This meant that employees could address any perceived shortcomings in their working conditions, and that plaintiff’s lawyers were motivated to help them.

The California Business & Industrial Alliance is now suing California Attorney General, Xavier Becerra claiming that PAGA is unconstitutional. The plaintiff’s say that the state’s powers have been turned over to attorneys who are focused on personal gain. They claim that attorneys are using the law to avoid mediation and to extort millions of dollars from employers.

This lawsuit is new and nowhere near a resolution. However, it’s a reminder that employers should do their utmost to ensure compliance with Labor Codes, and it underscores the importance of working with a qualified business attorney.

If you are an California employer or business owner with questions about PAGA or any legal issue feel free to contact me, attorney Richard Oppenheim at 818-461-8500 or via the Contact form on this page.

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Although California recently passed net neutrality laws, the state is putting its plan to implement these laws on hold. This is in response to the challenge that the Federal Communications Commission, or FCC, is facing at the federal level. If federal courts decide that current FCC regulations concerning net neutrality are illegal or unenforceable, then they will be undone. This would render California’s new laws moot.

Scales-of-Justice-Digital-94824052-001At the end of 2017, the FCC repealed Obama-era regulations regarding net neutrality. This means that no government authority is policing broadband providers to ensure that they are not unfairly throttling or discriminating against certain Internet content. California and other states decided to implement net neutrality laws at the state level in response to ensure a level playing field.

As soon as California passed their laws, the FCC sued the state, claiming that the state had no power to regulate what is essentially an interstate system. However, the FCC also is facing several lawsuits from companies like Public Knowledge, Vimeo and Mozilla. These lawsuits argue that the FCC’s new rules are plagued by factual and procedural issues.

If these lawsuits succeed, then the FCC’s most recent regulations will be voided in whole or in part. Such a decision would eliminate the need for California’s new net neutrality laws. California Attorney General Xavier Becerra decided against litigating the suit that the FCC filed. Instead, an agreement was reached between the U.S. Justice Department and the state to hold off on enforcing the state law.

In a statement, Becerra said, “… every action we launch is intended to put us in the best position to preserve net neutrality for the 40 million people of our state.” State Senator Scott Wiener similarly notes, “After the DC Circuit appeal is resolved, the litigation relating to California’s net neutrality law will then move forward.”

FCC official Ajit Pai has a different perspective. “This substantial concession reflects the strength of the case made by the United States earlier this month,” Pai said in a statement.

For now, the battle for net neutrality will continue to be fought in federal court.

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A decision in the California Court of Appeals serves as a reminder that compliance with wage and hour laws should be a primary concern for all employers.

The case is Atempa v. Pedrazzani. Arguing that their former employer did not pay them in accordance with the law, two former co-workers from a restaurant filed a suit against the company. They sued not only their former employer Pama, Inc. but also the owner of the company, Paolo Pedrazzani.

clock-overtime-110616811-001The plaintiffs alleged that Pama and Pedrazzani violated several wage and hour laws. Among these were California Labor Code Section 558 regarding unpaid overtime and California Labor Code Section 1197.1 regarding unpaid minimum wages. The plaintiffs used the Private Attorney General Act of 2004, or PAGA, as the basis for their suit. In a bench trial, the plaintiffs prevailed. According to the court’s decision, Pedrazzani and Pama were jointly and severally responsible for any civil penalties that were based on wage and hour violations. Using PAGA, the court also declared that Pedrazzani was liable for the plaintiffs’ attorney fees.

Pedrazzani and Pama appealed the decision, and when Pama filed for bankruptcy, Pedrazzani became the only party to be held responsible for paying the attorneys’ fees and civil penalties.

In his appeal, Pedrazzani argued that an individual could not be held legally responsible for the wage and hour violations of an employer unless plaintiffs showed that the employer was an alter ego of the individual. However, the appeals court denied this argument and decided that Pedrazzani was personally liable for all civil penalties.

The court stated that an employer and an “other person” could be held liable for failing to follow wage and hour laws and that the employer’s business structure is irrelevant. Pedrazzani, so the court argued, was the “other person” under the definition of Labor Code Sections 558 and 1197.1.

With this decision, the court says that an employer and its owners and officers may be held personally liable for civil penalties arising from wage and hour violations. Clearly, vigilance with regard to wage and hour compliance is more critical than ever.

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California’s legislature recently passed a bill that would give the state the toughest Internet neutrality laws in the country. However, a lawsuit filed by the federal Department of Justice may prevent the law from going into effect on January 1, 2019.

System-Failure-51347065-001Back in 2015, the Federal Communications Commission instituted a set of net neutrality regulations that were aimed at preventing businesses, namely Internet service providers, from showing favoritism for their websites or the sites of their affiliates. Those regulations were rolled back in 2017 under President Trump’s administration.

In response, lawmakers in California’s legislature began agitating for statewide net neutrality laws. The legislation passed in both houses by a wide margin, and Governor Jerry Brown subsequently signed the bill into law. Among the elements of the new law are prohibitions against Internet service providers blocking data or narrowing bandwidth when users try to look at certain content or websites. Internet service providers, or ISPs, have a practice of speeding up access to the video streams and websites of companies that pay them extra fees or are in some way affiliated with them.

The new law also includes a prohibition against using a so-called “zero-rating” system in which ISPs don’t count visits to certain websites against monthly data caps for users. Typically, the data from these websites doesn’t “count” because the website is in some way affiliated with the ISP.

After Governor Brown signed the bill, the U.S. Department of Justice filed a lawsuit against it. Arguing that only the federal government has the power to regulate the Internet, the DOJ claims that having different net neutrality laws on a state-by-state basis is inviting chaos.

Law professor at Stanford University Barbara van Schewick argues that the California law is simply adopting the same regulations at the state level that the FCC put in place just a few years ago. Van Schewick went on to say that there’s a case in federal appeals court that may have significant bearing on California’s law.

That case was brought by 22 state attorneys general in protest against the repealing of the federal net neutrality laws.

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Facebook is facing legal woes as a group of plaintiffs charges the tech giant with making it possible for companies to post employment advertisements in a discriminatory manner. The plaintiffs include the American Civil Liberties Union, a coalition for workers and three women who were seeking employment.

Smart-Phone-with-Apps-48915227-001In addition to Facebook, 10 employers are named as defendants in the complaint. Plaintiffs say that Facebook’s ad-targeting technology made it possible for these employers to direct their help-wanted ads exclusively to men. The jobs on offer included truck drivers, law enforcement officers and sales clerks at sporting goods retailers.

The Equal Employment Opportunity Commission received the complaint, which argues that since an increasing number of job and housing applicants are conducting their searches online, it has been increasingly easy for employers and landlords to engage in discriminatory practices. Under federal law, it is illegal for employers and landlords to discriminate against people based on their race, religion, gender, national origin, disability status or other protected categories.

However, in the online world, it is routine for tech companies to use algorithms that fast-track certain ads to specific users. Facebook excels at “microtargeting” users for certain advertisements. Additionally, the social media platform allows users to click on a link that says “Why am I seeing this?” This feature is actually what prompted lawyers with the ACLU to file the complaint.

Outten & Golden, a Washington, D.C. law firm, performed an experiment in which people used Facebook to search for a job or otherwise indicate that they were engaged in a job hunt. Employment ads for the 10 employers named in the suit were displayed for the male job candidates but not for the female ones. The Facebook users then clicked on the “Why am I seeing this?” link, where it was stated that their gender played a role in the targeting of that particular ad to that user.

This is not the first such complaint that has been lodged against Facebook. An earlier EEOC complaint alleged that Facebook employment ads were targeted to unfairly exclude older employees. Both of these cases are pending.