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The most important court decisions of the month
Welcome to Berger Kahn's monthly e-publication summarizing the most important California state and federal court decisions.

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Adjusters' Class Action Certified For Allstate's Alleged Unofficial Policy Requiring Unpaid Overtime Work
Jimenez v. Allstate Ins. Co.
U.S. Ct. App., 9th Cir.), filed on September 3, 2014

The District Court granted class certification for 800 California-based Allstate employees who sued for unpaid overtime, missed meal periods, and untimely wage payments after termination. Allstate adjusters had been re-classified from exempt to hourly positions. But after re-classification their duties stayed the same. The adjusters did not keep time records. Instead, at the adjuster’s request, the local office manager could file an “exception” or “deviation” if the work exceeded 8 hours a day or 40 hours a week. Each office had a non-negotiable budget, which limited the overtime a manager could approve. The district court identified several common questions: (1) did class members generally work overtime because Allstate discouraged overtime; (2) did Allstate know or should it have known the adjusters were working overtime; and (3) did Allstate do anything to assure overtime would be paid. The district court approved class treatment because statistical sampling could resolve the common liability questions. The Ninth Circuit affirmed. The Court noted that the common questions met the standard for off-the-clock claims under California law. The Court rejected Allstate’s argument that statistical sampling would threaten its due process rights since Allstate’s affirmative defenses were preserved. The Court also balanced Allstate’s rights by disallowing sampling during the damages phrase. Finally, the Court held that the sampling method selected was a fair statistical analysis that would lead to a fair determination of Allstate’s liability.

Unemployment Benefits Denied For Driver's Repeated Misconduct In Falsifying Timecards
Irving v. California Unemployment Ins. Appeals Bd.
(Ct. App., 2d. Dist., Div. 5), filed September 12, 2014

The California Unemployment Insurance Appeals Board refused to grant Jim Irving’s unemployment compensation benefits based on his misconduct in falsifying his timecards. Irving alleged he had not been granted a fair trial. The record documented an unsatisfactory service notice, which documented Irving repeatedly taking more than his 20-minute break during the last hour of his assignment, and then falsifying his daily truck and time report slip. Irving was suspended pending dismissal from his probationary position. The EDD determined that this was not misconduct. The district appealed and presented several other instances where Irving had falsified his timecard. The trial court ultimately allowed unemployment benefits, finding that Irving testified that his supervisors instructed him to file incorrect work records since the “work schedule would not always conform to the posted break schedule and that he should apply the posted schedule to his time records regardless of when the breaks actually were taken.” The Court of Appeal found that manipulating his timecard on four occasions to hide breaks that exceeded his allowable break was dishonest conduct. The Court emphasized that there was “no evidence that a good faith misunderstanding existed or could exist concerning plaintiff’s admitted taking of excessive breaks on four occasions and falsifying his time records.” Therefore, Irving was not entitled to unemployment compensation benefits.

Policy Describing Vehicle Is Primary While Other Not Mentioning The Vehicle Becomes Excess
Scottsdale Indem. Co. v. Nat’l Continental Ins. Co.
(Ct. App. 3rd Dist.), filed August 20, 2014,
ordered published September 17, 2014

Manuel Lainez operated Lainez Trucking. He purchased a $1 million liability policy from Scottsdale which covered the tractor he drove. Lainez entered into a motor carrier agreement with Western Transportation Services where Lainez would be an independent contractor. Lainez named Western Transport as an additional insured on his policy. Western Transport was insured with NCI, which described the named insured as: “1 Trucker for Hire-Excess.” Lainez was named as a driver, but his vehicle was not listed. Both policies were in effect when Lainez got into a fatal accident with Constancio Barcenas. NCI tendered Western Transport’s defense to Scottsdale. After exclusively handling the defense for two years, Scottsdale demanded that NCI indemnify it for its pro rata share. NCI participated in the mediation, ultimately contributing $200,000 to the $675,000 settlement. Scottsdale sued NCI for indemnity and equitable contribution for defense costs. The insurers filed cross-summary judgment motions. The trial court granted NCI’s motion and Scottsdale appealed. The Court applied Insurance Code Section 11580.9(d) which said where “two or more policies affording valid and collectible liability insurance apply to the same motor vehicle or vehicles in an occurrence out of which a liability loss shall arise, it shall be conclusively presumed that the insurance afforded by that policy in which the motor vehicle is described or rated as an owned automobile shall be primary and the insurance of any other policy should be excess.” Since only Scottsdale’s policy listed Lainez’s vehicle, the Court affirmed the trial court’s decision holding that Scottsdale was primary and NCI was excess.


Yelp Not Liable For Speculative Civil Extortion Claims Alleging That Yelp Manipulated And Authored Reviews
Levitt v. Yelp! Inc.
(U.S. Ct. App. 9th Cir.), filed September 2, 2014

Small business owners Boris Levitt, Cats and Dogs Animal Hospital, Inc., John Mercuro, and Dr. Tracy Chan alleged that Yelp “extorts or attempted to extort advertising payments from them by manipulating user reviews and penning negative reviews of their businesses.” They filed a class-action lawsuit against Yelp for violating California’s Unfair Competition Law, for civil extortion, and attempted civil extortion. The District Court dismissed the lawsuit for failing to state a cause of action. The business owners represented two subclasses -- those who declined to advertise with Yelp and those who purchased advertising from Yelp. They alleged that Yelp has paid users to write reviews in the past (although it does not do so anymore). The business owners each separately alleged that after they had declined to purchase advertising with Yelp, their ratings decreased. The District Court held that “there were insufficient facts to infer that Yelp authored or manipulated the negative reviews and ratings; and there were insufficient factual allegations from which to infer communication of an extortionate threat.” Specifically, there was “no allegation that Yelp directly threatened economic harm if the business owners refused to purchase advertising packages from Yelp.” The Court also held that the “business owners have not alleged sufficient facts to support their claim that Yelp authored negative user reviews of the businesses in question.” Finally, the Court held that unfair competition cause of action failed because “Yelp does not compete with the business owners.” Instead, “the complaint is that Yelp’s conduct unfairly injures their economic interests to the benefit of other businesses who chose to advertise with Yelp.” Accordingly, the Ninth Circuit affirmed the district court’s decision in dismissing the complaint.

Employment-Related Practices Exclusion Applied To Claim That Supervisor Falsely Imprisoned Employees
Jon Davler, Inc. v. Arch Ins. Co.
(Ct. App. Ct. 2d Dist. Div. 7), filed August 25, 2014, modified and ordered published on September 15, 2014

Female employees of Jon Davler sued Jon Davler and Christina Yang, their supervisor, for false imprisonment, among several other causes of action. The employees alleged that they had been wrongfully detained and confined for an underwear inspection to determine who was menstruating after Yang found a used sanitary napkin and blood in the bathroom. Arch issued a commercial general liability policy which covered “personal and advertising injury,” including injuries arising out of false imprisonment. The policy also included an Employment-Related Practices Exclusion for injury “arising out of” employment-related “practices policies, acts or omission, such as coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation, discrimination, or malicious prosecution.” Jon Davler tendered the lawsuit to Arch, but Arch refused to defend. Jon Davler sued for bad faith. Arch demurred, arguing that the employment-related practices exclusion applied. The Court sustained the demurrer without leave to amend. Jon Davler argued that the employment-related practices exclusion was ambiguous, particularly because “false imprisonment” was covered. But the Court disagreed. Since the false imprisonment and its corresponding injuries arose out of the employees’ employment, the employment-related practices exclusion applied. In affirming the judgment, the Court remarked, “it is hard to conceive how the false imprisonment claim of the employee at work in the company bathroom could be unrelated to their employment, and Jon Davler has not suggested how the claim could be.”



Our Dedicated Key Decisions Team! 

Lance LaBelle
Orange County

David Ezra
Orange County

Ann Johnston
S. F. Bay Area

Roberta Winston
San Diego


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