Articles Posted in Complex Business Litigation

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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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A class action lawsuit has concluded with Motel 6 agreeing to an $8.9 million settlement. Central to the litigation was the assertion that motel employees conveyed private information regarding Latino guests to officials working for Immigration and Customs.

on-brass-scale-32746330-001The claims in the lawsuit centered around two Motel 6 locations in Phoenix. Eight hotel guests claimed that their private data was given to ICE officials even though the officials didn’t have a warrant. Among the complaints were that hotel employees invaded the privacy of its guests and that the employees discriminated against the guests based on their national origin and race.

Motel 6 admitted in September that employees at its Arizona locations shared guest information with government officials. This transfer of information led to guests being detained or even deported on numerous occasions.

It was the Phoenix New Times that initially brought the practice to light. In the aftermath, public cries to boycott the Motel 6 brand became difficult to ignore. G6 Hospitality, which owns the Motel 6 brand, states that the actions of the employees in Phoenix do not represent company policy. In fact, the corporate office was unaware of the practice.

Subsequently, Motel 6’s corporate offices instituted a company-wide policy forbidding the sharing of information with law enforcement unless employees are compelled to do so. A warrant or subpoena must be presented before any information can be exchanged.

The Mexican American Legal Defense and Educational Fund represented the eight plaintiffs in the lawsuit. A spokesman for the organization says that upwards of $7.6 million of the settlement will go directly to the plaintiffs. An estimated $1.3 million will be used to pay for the costs of administering the settlement and for attorney fees. Those plaintiffs who were placed in removal proceedings stand to get the largest share of the settlement money.

With planning and some luck, most businesses never have occasion to deal with law enforcement. However, this case is a helpful reminder that it is wise to have policies in place so that employees will know how to react in the event of an encounter with law enforcement.

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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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Self-driving cars have been the dream of many a science fiction writer over the decades, and modern technology is drawing ever closer to making that dream a reality. The companies that have been selling cars with autonomous features have run into difficulties, which sometimes include lawsuits.

scales-and-gavel-90061933-001One such car maker is Tesla. Heather Lommatzsch has filed a lawsuit in Utah with the main complaint being that Tesla spokespeople weren’t honest when describing how to use her Model S’s Autopilot feature. Lommatzsch claims that she didn’t understand how to use the feature, which resulted in a serious crash. Her Model S collided with the back of a stopped firetruck, and Lommatzsch says that she was left with life-altering injuries.

Tesla issued a statement saying that they always recommend that drivers do not remove their hands from the steering wheel while using Autopilot. Moreover, the company emphasizes that this feature does not make vehicles impervious to crashes.

Lommatzsch charges that when she bought the car in 2016, the salespeople told her that she only had to touch the wheel intermittently. Additionally, she claims that when she realized that the car was not slowing down to avoid a collision with the firetruck, she attempted to manually use the brakes, but they failed.

Lommatzsch broke bones in her foot in the crash, and police charged her with a misdemeanor for not keeping a proper lookout. Dave Arnold, a spokesman for Tesla, notes that Lommatzsch told authorities that she was using the GPS feature on her cell phone before the crash. Data from the car suggests that her hands were not on the wheel for almost a minute and a half before the collision. Additionally, the car actually picked up speed for about three and a half seconds before the crash, and the brakes were manually engaged just a fraction of a second before the impact occurred.

It’s not clear which party will prevail in this lawsuit. However, this situation is a reminder for companies to ensure that their marketing campaigns and sales staff provide accurate portrayals of the features and benefits of any product.

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A group of current and former Tinder employees are suing their parent company over an alleged scheme to cheat them out of stock options. Match Group, and its parent company IAC/InterActiveCorp, are the defendants.

Legal-Fees-PaidSean Rad, Justin Mateen and Jonathan Badeen, who are the co-founders of Tinder, are among the plaintiffs in the two billion dollar lawsuit. The plaintiffs accuse IAC and Match Group of manipulating financial data to make it appear that Tinder’s value was drastically lower than it actually was. After formulating the lowball valuation, the plaintiffs say that the parent company stripped many of Tinder’s employees of their stock options. IAC/Match removed Rad as Tinder’s CEO, putting in his place Greg Blatt, a Match CEO.

Blatt is accused of harassing Tinder employee and plaintiff Rosette Pambakian at a company holiday party in 2016. However, plaintiffs allege that IAC/Match kept Blatt in place long enough to complete the unreliable value of the company and to orchestrate a merger with Match Group, essentially transforming the successful company into a stagnant holding company.

IAC/Match claimed that Tinder was worth about three billion dollars at the time, which was the same value that the parent companies had assigned to Tinder two years before. This valuation remained the same even though Tinder’s user base had increased by 50 percent in that period with revenue expanding by 600 percent.

In the lawsuit, plaintiffs allege that the parent companies systematically lied to Tinder’s employees with the aim of cheating them out of the stock-option money to which they were entitled according to a contract. A recent SEC filing by IAC/Match shows a projected $800 million in earnings for 2018, which totals 75 percent more than the projections the company published last year.

The complaint states that the more Tinder earned, the more the parent companies were required to pay to Tinder employees. This seems like a fairly solid motive for IAC/Match’s alleged actions. However, copious discovery and a possible jury trial will be required. Protect the interests of your company by working with a qualified business attorney.

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Retail giant Walmart is facing a two billion dollar lawsuit. The plaintiff, a Silicon Valley company called Zest Labs, says that Walmart employees stole their trade secrets, later implementing the technology for Walmart’s benefit without crediting or compensating Zest Labs.

Spoiled-fruit-73671769-e1533921700439Estimates suggest that in excess of $85 billion worth of fresh food goes to waste every year in America. The reasons for this waste are complex and various, but Zest Labs felt that they had devised innovative methods for minimizing “fresh food shrink.” The company began developing the system in 2010, and by 2015, Walmart had expressed an interest in the technology. Under an agreement, Zest Labs began sharing its discoveries and innovations with representatives from Walmart. The disclosures included demonstrations and presentations that highlighted proprietary information that Zest Labs had developed over the course of their work in the previous five years.

Zest Labs alleges that Walmart participated in numerous trials over a two-year period. Then, the company abruptly pulled out of the arrangement in November 2017. In the complaint, Zest Labs executives describe being “stunned” by the sudden about-face, and their consternation only grew four months later when Walmart announced its new Eden project.

Zest Labs employees felt that the similarities between their technology and Walmart’s new Eden system were too significant to ignore. They argue that “Walmart used its years of unfettered access to plaintiffs’ trade secrets, proprietary information, and know how to steal the Zest Fresh technology and misappropriate it for Walmart’s own benefit.” The complaint goes on to say that “Walmart integrated the Zest Labs technology into Eden without authorization and without compensating Zest Labs.”

While this particular case represents something of a David vs. Goliath situation, no organization of any size can afford to neglect the protection of its intellectual property. This includes valuable trade secrets that help one company differentiate itself from the competition. Whenever confidential information or trade secrets are shared, it is advisable to have an enforceable non-disclosure agreement signed first. This not only protects the company that is sharing its proprietary information but also provides them with additional leverage should court action become necessary.

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Is it acceptable for a third-party app developer to have access to private email inboxes? That’s the central question in a new class-action lawsuit that was filed in Sacramento. The lead plaintiff is James Coyne, an Ohio resident with a Gmail account, and he alleges that Google allows others to look at the emails in Gmail user’s inboxes for purposes of marketing and data mining.

Big-Brother-Spy-4Google has already pledged to stop scanning emails in user inboxes for advertising purposes. However, Coyne says that the company didn’t go far enough to protect user privacy. Google’s pledge came in the wake of another class-action suit in which the plaintiffs charged that their privacy rights were violated by the company’s practice of scanning incoming emails to generate targeted advertisements.

Nonetheless, the plaintiffs in this new case allege that the company continues to allow third parties to sift through the inboxes of users who sign up for certain email newsletters such as those that contain price comparison tools. The Wall Street Journal and other media outlets say that the purpose of this sifting is to mine data, produce new marketing efforts and other unspecified tasks.

Coyne argues that “Gmail users never provided consent to Google to provide privileged access to third-party developers.” He goes on to assert that this practice is in contrast with the company’s recent vow to make every effort to protect user privacy. The problem as Coyne sees it is that users might opt out of using Gmail if they knew that their emails would be scanned by strangers.

Google says that every third party that has access to Gmail inboxes is thoroughly vetted. This means that Google is satisfied that the third parties won’t use any data that they collect for nefarious purposes. Additionally, the company argues that third-party apps aren’t allowed to access inboxes until Gmail users are shown a permissions screen.

Coyne argues that the permissions screens don’t go far enough. Protecting data and customer privacy is increasingly important in this technology-driven era. Consult with a business attorney to ensure that you and your clients are sufficiently protected.

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Disney and Redbox are continuing their legal battle over the codes that customers use to download digital copies of movies. Typically, these codes are included in movie “combo packs” that include DVD and Blu-ray versions of films plus a code that customers can use to download a digital version of the film. Redbox has been purchasing these combo packs, placing the DVDs and Blu-rays in their machines and also enabling customers to purchase the digital download code. Disney says that Redbox’s practice is a breach of their copyrights to the media.

redbox-1Redbox argues that Disney engages in practices that include false advertising, misuse of copyrights and unfair competition. Additionally, they say that Disney’s behavior is anti-consumer, and they go on to assert that the restrictions that Disney puts on its media is tantamount to copyright misuse.

However, Disney attorney Glenn Pomerantz argues that Redbox is not Disney’s direct competitor. This means that Redbox wouldn’t be able to claim that Disney is using unfair tactics to gain dominance in the marketplace.

Attorney for Redbox Michael Geibelson responded by accusing Disney of “aggressive” behavior in their efforts to prevent Redbox from purchasing movie combo packs, but Pomerantz refutes this claim. He says that Disney and Redbox entered into a contractual agreement, and that Disney is simply trying to enforce that agreement.

Geibelson countered by asserting that Disney does not appropriately outline the terms and conditions of the purchase of movie combo packs. Once again, Pomerantz disputed this argument, saying that customers who purchase a download code have no way of knowing that it came from a combo pack, and therefore they could not be aware of the terms and conditions nor could Redbox claim false advertising.

Both parties acknowledge that talks between them are ongoing. As they continue to battle it out in the courtroom and conference room, it seems clear that the outcome of this case may have a far-reaching effect on other media companies. Now is the perfect time for businesses to consider how well protected their intellectual property is and to explore the efficacy and comprehensiveness of their contracts.