Maybe I should have titled this:  How I Learned to Stop Worrying and Love My Exorbitant Expert Fees.

Because as much as employers like to complain about the cost of employment litigation, including the often substantial expert fees, those very same expert fees might just be the ticket to discouraging future employment lawsuits. 

Or at least that’s one way to interpret the California appellate court’s opinion in Holman v. Altana Pharma Us, Inc., (June 30, 2010, Cal. App. Ct.). 

But to understand how this works, it helps to take a step back for a minute and look at how California’s legislature and courts have altered the fee-shifting landscape in two potentially-conflicting ways.

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It’s been a while since we’ve last posted here on Who’s The Boss, and to all our Faithful Followers (yes, Mom, I’m talking to you), we apologize.  It’s amazing how billable hours and sunny weekends at the beach can mess up an otherwise perfect day for blogging.  But I digress.  We’re back, we’re happy, and we have things to say.

Let’s start with California’s special take on trade secrets, one of our favorite subjects.  In particular, recall the state statute requiring plaintiffs to identify their trade secrets “with reasonable particularity” before discovery can be commenced.  (California Code of Civil Procedure Section 2019.210.)  We blogged about this earlier when Sylvester Stallone’s low carb chocolate pudding kindly added to our understanding of the parameters of the trade secret designation statute.  Well, the statute is in the legal news again.

This time, the question is whether CCP 2019.210 applies to trade secret cases in federal court.  One would think this would be a relatively easy issue – pick one, yes or no, and let’s get on with it.  But apparently that would take the fun out of it.  Instead, California’s district courts have had a tough time making up their minds on this one…and it’s causing we trade secret practitioners some consternation.

The latest to try his hand at this one is Judge Moskowitz in the Southern District of California, who believes he has sorted it all out for us in his recent opinion in Hilderman v. Enea Teksci, Inc. (USDC SD CA 2010) No. 05cv1049, 2010 WL 143440.

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What's good for the goose is good for the gander...at least that's what plaintiff's attorneys are squawking about with respect to the new stricter "plausibility standard" that has been ushered in by the Supreme Court in fellow blogger Martha Doty's new favorite cases, Bell Atlantic v. Twombly and Ashcroft v. Iqbal.  After all, if the Supreme Court is going to have the temerity to require plaintiffs to actually assert "plausible" claims for relief in order to survive a motion to dismiss, shouldn't defendants be required to meet that same standard for their affirmative defenses?  This is the question our employment law colleague in Atlanta, Jon Roth, ponders in the following short blog article.

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There are people out there who believe the rules are stacked in favor of employees when it comes to employment lawsuits here in the Generally Sunny State.  Why?  Look no further than the rules on the recovery of attorney’s fees.

Despite a very neutral sounding statute that allows for “the prevailing party” in FEHA cases to recover his, her, or its attorney’s fees from the non-prevailing party, the reality is (as interpreted by our Courts of Infinite Wisdom) that prevailing employees “ordinarily” recover their fees, whereas prevailing employers are only entitled to their fees if they can show the plaintiff’s case was frivolous or brought in bad faith.

In other words, prevailing employees get damages and their attorney’s fees; prevailing employers get ... nothing.

This has had quite an impact on how employment cases, especially small ones, are filed and litigated in the state.  The value of a $10,000 case becomes $10,000 plus attorney’s fees.  How much in attorney’s fees?  Well, that depends, does it not, on how much work the employee’s attorney puts into the case?  Do you see the incentives here?  If the attorney works the case up more and more and more, then the employee can recover more and more and more...even if the actual damages to the employee are pretty small.

Could you turn an $11,500 employee verdict into an attorney’s fee application for $870,000?   

The employee in Chavez v. City of Los Angeles thought so.  In fact, so did the appellate court, which ordered the trial court to grant the plaintiff’s fee application, thereby obligating the employer to pay over $1 million (if you count its own attorney’s fees) to cover an $11,500 verdict for the employee. 

In its infinite wisdom, the Supremes reversed.  (Here is the Supreme Court's decision.)  And in the process, the Court may have swung the Giant Employment Law Pendulum (the GELP for short) just a wee bit back in the employer’s direction. 

Here’s what happened....

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Good news for California employers in sexual harassment cases arrived recently in the 4th District Court of Appeal's opinion in Haberman v. Cengage Learning, Inc., 2009 DJDAR 17689 (12/18/09).  In Haberman, the court held that a plaintiff who alleges upwards of 10-20 "incidents" of so-called sexual harassment comprised of comments like, "You look really hot today" or "My customer says he really wants to date you" or asking plaintiff if she has any friends "who just want to have sex" - failed to establish a hostile environment sexual harassment claim and summary judgment was proper.

In Haberman, the plaintiff alleged sexual harassment against two individuals, based on six incidents against one and 13 against the other.  As to the first individual, the court held that most of the incidents alleged against him were not sexual in nature and the few that were were not sufficiently severe or pervasive to constitute sexual harassment.  As to the other individual, the court determined two of the 13 alleged incidents were not sexual in nature and the remaining 11 incidents, while possibly vulgar, were brief and isolated and insufficient to constitute a hostile environment.

Haberman is important for defendants/employers....

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Part 5 (The Final Entry):  The California Courts In Action

This is where the action has been in 2009 employment law -- in the appellate courts.  From commuting to class actions, tip pools to trade secrets, California’s courts were busy.  In this, our final installment of the year in review, we look at just a few employment decisions we found particularly interesting.

On The Subject Of Commuting…: 

A few commuting technicalities were cleared up for employees and employers in 2009, including a clarification of exactly what constitutes the commute.  (And all this time I thought it was all that sitting in traffic I do twice a day, along with tens of thousands of my closest smog-spewing friends.)

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Pausing on our trip down memory lane, we take a quick peek around the corner at what the California Supreme Court will be soon be waxing so eloquently about.  Here are this reporter’s favorites:

Shorten Those Pesky Statutes Of Limitations?:  Why can’t employers simply impose an Armendariz-compliant arbitration requirement on their employees as a condition of employment, and (while they are at it) include a provision whereby the parties “agree” that the statute of limitations will be shortened to something less than that permitted by FEHA?  Seems reasonable (if you are an employer), doesn’t it?  The Supreme Court will help us with this when it rules in Pearson Dental Supplies, Inc. v. Superior Court (No. S167169.)  The matter is fully briefed.  (Check here for latest court update or to request automatic email notifications about the case.)

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NOTE FROM THE EDITOR:  We reported on the Quon v. Arch Wireless case many moons ago (see here for our summary).  In that opinion, the Ninth Circuit held that -- in the case before it -- the employee police officers had a reasonable expectation of privacy in the text messages they sent and received on their employer-provided PDAs. 

The media had a field day, proclaiming the end of employer monitoring of employee electronic communications.  However, as we explained in our summary, the case didn't go that far.  It was limited to situations where the electronic communication did not reside on the employer servers (contrary to the practice of most company email systems), and where there was an informal policy that the employer would not monitor the communications (contrary to most employers' express policy permitting monitoring).

Guess what?  This may not be the end of the story.  According to Alston & Bird employment and privacy specialist Jesse Jauregui, today the U.S. Supreme Court has just picked up the case for review (under the caption City of Ontario, California v. Jeff Quon, et al.).  See here.

Based on how the Ninth Circuit usually gets treated by the U.S. Supremes, anyone want to bet how this one will come out?

Here's Jesse's take on the Supreme Court's action:

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As promised, we continue our trip down memory lane by looking at some of the more significant California Supreme Court employment decisions in 2009.  Don’t bother putting on your shoes, it’s a really short trip.  In fact, in this reporter’s humble opinion, the 2010 journey will be much more interesting as there are a number of novel issues fully briefed just waiting for that splash of Supreme Court brilliance.  For now, we look at employer spying, supervisor harassment, punitive damages, and the infamous 17200 unfair competition law.

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A jury found the California Unemployment Insurance Appeals Board, one of the most notoriously employee-friendly governmental bodies in the State, liable under FEHA for unlawful retaliation against one of its employees. 

On appeal, the court affirmed the judgment, finding there to be sufficient evidence to support the jury's verdict.  [George v. Cal. Unempl. Ins. Appeals Bd. (CA5 F055385 12/9/09)]

Am I the only one who finds this incredibly ironic???

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Part 1:  The U.S. Supremes

We here at Alston & Bird’s Who’s The Boss? employment blog have taken a look in the rearview mirror to see what has happened in our insular world over the past 12 months or so.  We looked at court cases, legislative enactments, and regulatory developments, particularly those impacting California.  What we found was pretty interesting, even entertaining. 

While the developments seem more along the lines of moderate refinements than any earth-shattering alterations in the basic power balance between employers and employees, their impact will nonetheless be felt in various degrees as we head into the next decade. 

With no promises that these are the “most significant’ employment law developments of 2009, we nonetheless share what we think are some of the more interesting highlights of the year.

We’ll do this in stages. 

• Today, we’ll highlight four U.S. Supreme Court opinions impacting employers. 

• We’ll follow this with highlights from the California Supreme Court.  Don’t blink, there aren’t many.

• Next, we’ll look at some of the more interesting issues still on the California Supreme Court’s docket for next year.  There are a bunch.

• Then comes legislative and executive developments (were 750 pages of FMLA regulations really necessary?)

• Finally, we’ll take a look at some of the California appellate court employment opinions that made headlines or simply impacted employers, employees, or their attorneys.

[Our thanks to Employment Law 360, which ran a version of this article in two parts in its influential employment law publication.]

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Now what has the California Supreme Court done to employment law here in the Golden State?

In Roby v. McKesson (S149752), the latest masterpiece from the state’s top court, it looks as if both employees and employers can claim a modicum of victory. 

The employees will find it easier to assert and prove harassment claims against individual supervisors, which will make it easier to (a) defeat removal to federal court based on diversity jurisdiction; and (b) defeat summary judgment of harassment claims by individual supervisor defendants.

For the employers?  The Court may be signaling further disenchantment with high punitive damages, particularly in cases involving high non-economic (emotional distress) damages where there is little evidence that upper management knew about the bad conduct.

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If only I could be paid for my commute.  See, I live in the South Bay (the Southern California version) and commute to downtown Los Angeles along the 405, 105 and 110 freeways.  It's neither quick, nor particularly attractive.  (I save a little time in my Natural Gas Honda Civic, which gets me in the carpool lane, but not nearly as much as I did P.H. (pre-hybrid).  Now that those pesky Prius’ are allowed in the carpool lanes, I often go no faster than the carbon monoxide spewing Hummers two lanes over.)

So imagine if I could get paid for commuting.  I’d be rich!... and wouldn’t need to commute to work anymore.  Think of the incentives in car-happy California?  I might even want to drive in the slow lanes (which is redundant, especially during “rush hour,” which isn’t an hour and no one rushes.)

But getting paid to sit in morning gridlock listening to NPR (fine, Mark & Brian) would be wrong, wouldn’t it?

Mike Rutti decided to find out (or perhaps his attorney did).  Rutti v. Lojack Corp. is the result.

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Martha Doty, one of our California L&E specialists, has been railing for years (at least it seems like years to those of us who have to listen to it in group meetings and lunchroom therapy sessions) against the ease by which employees can destroy diversity jurisdiction – and hence prevent removal to federal court – by the simple artifice of naming sham defendants.  Indeed, at the risk of further educating and emboldening the plaintiff’s bar, Martha even wrote a piece on the apparent upsurge in the use of defamation claims as the diversity-killing tool de jour:  “Defamation: The New Diversity-Killing Claim For Employment Actions.” 

Well, for once, there is some good news for diversity employers.  As Martha explains in her new piece, the U.S. Supreme Court has provided employers with a little help in the battle against sham defendants.  Read on to find out how Twombly and Iqbal are changing the removal landscape.

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Plaintiffs have grown increasingly clever at frustrating defendants hoping to remove cases to federal court, by joining non-diverse defendants based on the barest of allegations.

Given the high bar required for defendants to establish fraudulent joinder, district courts are increasingly finding even those thin allegations sufficient to defeat removal, particularly in employment cases.

For example, a plaintiff alleging slander based on a supervisor’s statement that the plaintiff had a conflict of interest was held to have stated facts sufficient to defeat fraudulent joinder where the plaintiff had alleged in conclusory fashion that the alleged defamatory statement “was made with malice,” that the defendants knew the statements “were false when they made them,” and that the plaintiff “could allege facts sufficient to support malice.”  The district court remanded the case to state court, ruling that these boilerplate and conclusory allegations were sufficient because the defendant had not established that “there was no possibility” the plaintiff could recover.  In other words, merely pleading the basic elements of a cause of action, with no added facts about the particular employment relationship at issue, defeated diversity.

The standard should be higher.  Two recent U.S. Supreme Court decisions may bolster defendants’ efforts to establish the insufficiency of boilerplate allegations, force plaintiffs to plead more facts, and defeat remand motions to keep cases in federal court.

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We all know that non-competes are generally verboten in California.  If you aren’t sure, read this brilliant blog entry (and this one).  California is very protective of its workers’ rights to move from job to job, shopping his or her talents to the highest bidder (so to speak).

We also know that California is very protective of an employer’s right to protect its intellectual property, including especially its trade secrets.  This includes, of course, customer lists and client information under proper circumstances.

So what happens when these two important and closely protected public policies crash head on into one another? 

What happens when workers want to compete with their former employer by soliciting business from the employer’s customers…and the customer contact information is both stored in the employer’s database and (with a little digging) available from public sources?  Who wins this one? 

A new California case helps us sort it all out.

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Remember way back when, when we reported on the reversal of the $86 million Starbucks tip pool verdict?  You can read about it here.  At the time, we agreed with the court's decision, opining that:

It made no sense to deprive hard working baristas, who happen to also be shift supervisors, of tips they helped generate.  These folks steam the soy and press the espresso, standing shoulder to shoulder with their barista brethren, doling out caffeinated charm to an often charmless public, and deserve the tips just as much as those they supervise.

Not surprisingly, the winners of that $86 million windfall were not pleased to see their tip money evaporate like the steam off a freshly foamed decaf cappuccino, dusted with cinnamon (I'm telling you, with similes like this, I should have been a novelist!).  They did what anyone would do in their shoes, they pleaded with the Supreme Court to review the appellate ruling.

Alas, it was to no avail.  Yesterday, the Supremes in their infinite wisdom declined to hear the case (only Justice Werdegar voted in favor of review), thereby leaving the tip jar $86 million short, according to the plaintiffs. 

So now what?  It's not clear there is any more steam in this engine (I'm on a roll).  The appellate court ordered that judgment be entered in Starbuck's favor, and that's apparently the end of it.

Or is it?  According to the IWW Starbucks Workers Union, it is already gearing up for a new class action, this one (according to the Union's website) based on alleged use of "harsh police-style interrogation tactics" that has led to "numerous false confessions, which Starbucks has then used to terminate or extort 'restitution' from employees."

As I said before:  "I think I’ll grab my decaf cappuccino and watch the show."

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What does the California Supreme Court's recent decision in Hernandez v. Hillsides, Inc. mean to California employers who have legitimate needs for workplace video surveillance of its employees and work areas?  Plenty. 

Alston & Bird workplace privacy specialist Jesse Jauregui not only explains the case, but offers valuable insights and tips to California employers.  (Our thanks to Employment Law 360 for publishing the article in its August 13, 2009, edition.)

The two ends of the workplace privacy spectrum have been fairly well defined by prior California law.  On the one hand are those cases that have allowed covert videotaping in open and accessible workplace areas. 

On the other hand are those cases that find a violation of the right to privacy by videotaping areas reserved for personal acts such as employee restrooms and dressing areas. 

In Hernandez v. Hillsides, Inc., S147552 (August 3, 2009), the California Supreme Court was confronted with a scenario that falls between those extremes and further delineated the extent to which an employer may conduct workplace video surveillance of its employees without violating their right to privacy. 

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_{[A Flir infrared imaging system utilizing a microbolometer array]}

You’ve probably heard about the inevitable disclosure doctrine.  It’s a great trick for employers.  It’s like getting all the benefits of a non-compete without actually having to bother with those nettlesome non-compete agreements.

Just don’t try it here in California.

At least not without a sizeable bankroll and a Get Out Of Jail Free card, as Flir Systems, Inc. learned the hard way.  It was sanctioned $1.6 million for seeking to invoke the doctrine in a California trade secret case.

This is just one of the many lessons provided to us by the California appellate court in the case of Flir Systems, Inc. v. Parrish (2d Civ. No. B209964, June 15, 2009).

For those of us who practice trade secret law, it’s a good read.

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We’ve had it backwards all these years!

For decades, employers have been trying to insert arbitration clauses in their employment contracts.  Why?  Because they are afraid of the unpredictability of juries.  Especially those whacky California ones.

And during this same time period, employees (actually their attorneys) have been trying to avoid those arbitration clauses.  Why?  Because they like the unpredictability of juries.  Especially those whacky California ones.

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It had to happen, didn’t it?  The $86 million class action verdict against Starbucks had to be reversed, didn't it?

It made no sense to deprive hard working baristas, who happen to also be shift supervisors, of tips they helped generate.  These folks steam the soy and press the espresso, standing shoulder to shoulder with their barista brethren, doling out caffeinated charm to an often charmless public, and deserve the tips just as much as those they supervise.

So it was strange indeed when, in March of 2008, a San Diego superior court judge ordered Starbucks to pay its non-supervising baristas $86 million in restitution.  This was based on a state Labor Code statute (Calif. Labor Code Section 351) that stated:

"No employer or agent shall collect, take, or receive any gratuity or a part thereof that is paid, given to, or left for an employee by a patron.”

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