Monday, October 31, 2016
C.A. Upholds Order Tossing Counsel in Apple Wage Suit
Panel Says Unnamed Class Member Became Firm’s Client Once Class Was Certified
By KENNETH OFGANG, Staff Writer
The Fourth District Court of Appeal has disqualified a San Diego law firm from representing the putative class in a wage-and-hour suit against Apple Inc., saying its representation of a certified class in another action created a conflict of interest.
Div. One Friday ordered publication of its Sept. 28 opinion disqualifying Hogan & Belong from representing the plaintiffs in the second of two actions brought by the firm based on allegations that Apple policies do not conform to the California Labor Code. The court upheld San Diego Superior Court Judge Ronald L. Styn’s determination that because a member of the certified class in the first action has interests adverse to the plaintiffs in the second, the firm cannot appear in both.
Plaintiffs in the first action, Felczer v. Apple, Inc., allege that they were deprived of statutorily mandated rest breaks and meal breaks, and that the company systematically failed to provide a final paycheck and accurate wage statement upon termination of employment. The trial judge certified a class that included six subclasses and about 20,000 class members.
In the second action, plaintiffs Tyler and Stacey Walker, who had worked at the Apple Store in Carlsbad, alleged that the company routinely delivered wage statements to employees via on an online portal called “myPage.” But because Apple routinely terminates access to the page at the end of an employee’s service, employees do not obtain final wage statements, in violation of the Labor Code, the plaintiffs claim.
Apple responded that responsibility for employee terminations, both voluntary and involuntary, lies with “store leaders,” whose duties include providing the employees with final paychecks and wage statements.
In moving to disqualify Hogan & Belong from the Walker case, Apple noted that Meg Karn, who managed the store where the Walkers worked, had been a nonexempt employee during the period covered by the Felczer suit, and was thus a member of the certified class. This created a serious conflict, Apple argued, because the plaintiff law firm “would have to cross-examine its own client—Ms. Karn—about the alleged failure to comply with the law.”
Hogan & Belong argued in response that because Karn was an unnamed class member, she was not a “client” for purposes of the rule barring concurrent representation of clients with conflicting interests. It also argued that there was no real conflict between the interests of the Felczer class and those of the Walkers, and that the motion was made for tactical advantage.
After Styn rejected those arguments, the law firm contended on appeal, again, that Karn was not its client. It also argued that even if she was, her interests and the Walkers’ did not collide, and that even if they did, the conflict was too minor to justify disqualification.
Justice Judith Haller, writing for the Court of Appeal, said the firm’s conflict was significant and real, based not merely on Karn’s membership in a certified class, but on her “identity and likely role in this case.”
She noted that unnamed class members have been found by state and federal courts to be class counsel’s clients for purposes of the rule barring communication with represented parties, as well as the attorney-client privilege. While there are circumstances in which it would impractical to treat such class members as class counsel’s clients, such as when those members have not been identified, that is not the case here, she said.
The interests of Karn and her former subordinates, the Walkers, are actually conflicting, Haller went on to say, because Karn’s testimony may be critical to the issue of whether Apple committed a “knowing and intentional” violation of the wage-statement requirement, or whether it acted in good faith, as it contends.
“….Karn will be in the unenviable position of being pressured by her own counsel to contradict her employer’s class action litigation strategy” of contending that she and other store leaders were given responsibility for providing wage statements, Haller reasoned. “On the other hand, if Karn testifies she was either unaware she had a duty to provide the Walkers with their final wage statements, or was aware of this duty but simply failed to fulfill it, she may undermine Apple’s confidence in her as a Store Leader. Under these unusual circumstances, it would be unseemly for Karn’s own counsel to force this Hobson’s choice on her for the potential benefit of other clients. Doing so would violate the Firm’s duty of loyalty to Karn.”
Nor, the justice said, did the firm establish that an exception to automatic disqualification should apply.
That argument was based on Radcliffe v. Hernandez (9th Cir. 2016) 818 F.3d 537, in which the court held that a balancing test should be applied in class actions, and that the policy justifications for the automatic disqualification rule might not apply where some class members have interests adverse to each other, but all have interests adverse to the opposing parties.
Haller said the court would not opine on whether Radcliffe was correctly decided, but that it was in any event inapposite, because in this case, the conflict arose between members of different classes in separate cases.
The case is Walker v. Apple Inc., 16 S.O.S. 5399.
Copyright 2016, Metropolitan News Company