The trial court granted summary judgment in favor of defendant and respondent Children's Hospital Los Angeles (Children's Hospital or the hospital) and against plaintiff and appellant Michelle Falk on the ground her wage and labor claims were time-barred. The court rejected Falk's argument the filing of a prior class action tolled her limitations periods, under American Pipe & Construction Co. v. Utah (1974) 414 U.S. 538 (American Pipe), which held that, under certain circumstances, the filing of a class action tolls a limitations period for class members who file subsequent actions. We find that American Pipe tolling applies to some of Falk's claims, but not to others. We therefore affirm in part and reverse in part the judgment.
I. The class action complaints.
Since May 2007, four class action complaints, including Falk's, have been filed against Children's Hospital raising wage and labor violations.
A. May 1, 2007: The
Palazzolo class action. 1
Children's Hospital employed Thomas Palazzolo from July 2005 to January 2007 as a non-exempt, hourly paid patient care service aide. On May 1, 2007, Palazzolo filed a class action complaint on behalf of "[a]ll non-exempt or hourly paid persons." The complaint asserted these causes of action:
Summary judgment was entered in the hospital's favor on April 7, 2009. The trial court ruled on the merits that there were no triable issues of material fact. Class claims and class certification were never addressed.
We affirmed the judgment. (Palazzolo v. Children's Hospital of Los Angeles (Dec. 1, 2010, B216508) [nonpub. opn.].) Class certification was also not raised or addressed in the appeal. The remittitur issued on February 3, 2011.
B. January 27, 2012: The
Mays class action. 3
Denise Mays, a registered nurse, worked for Children's Hospital as a "non-exempt hourly employee." She began working for the hospital in September 2008, and her employment ended May 31, 2012.
Mays's operative class action complaint
In Mays, Children's Hospital filed a form notice of related case to Palazzolo.
C. December 3, 2012: The
Falk class action.
Falk worked at Children's Hospital from March 6, 2006 to August 25, 2006 as a licensed vocational nurse. Falk's class action alleged these causes of action, substantively identical to Mays, against the hospital:
D. January 24, 2013: The
Schmidt action. 8
On January 24, 2013, Joseph Schmidt filed a class action for, among other things, Labor Code violations against Children's Hospital.
II. Children's Hospital moves for summary adjudication and judgment.
A. The motion for summary judgment.
Before class certification was decided, the hospital moved for summary judgment on the ground that the statutes of limitations applicable to Falk were not tolled by Palazzolo or Mays. The hospital argued that American Pipe tolling did not apply to Falk's claims because the judgment in Palazzolo was the equivalent of an adverse ruling on the substantive merits of the class; American Pipe tolling applies only to individual actions and not to successive class actions; and Palazzolo did not place the hospital on notice of Falk's dual rate wage claims and highly specific meal and rest period claims.
Falk responded that Palazzolo tolled her claims; the hospital was judicially estopped from arguing that Falk was unrelated to Mays and Palazzolo; and the statutes of limitations should be equitably tolled.
It was undisputed that the trial and appellate courts in Palazzolo never addressed class certification.
B. The trial court's ruling.
The trial court granted summary judgment against Falk on July 3, 2013. Judgment was entered on July 15, 2013. The court found American Pipe tolling inapplicable because judgment in Palazzolo was on the ground the individual plaintiff had no viable causes of action. The court also rejected the notion that American Pipe permits "piggybacking" of successive class actions. Even if American Pipe applied, the court found that Palazzolo did not put the hospital on notice of the "esoteric `dual rate'" claim raised by Falk.
I. Standard of review.
We independently review the trial court's order granting summary judgment and determine if the undisputed facts establish that Children's Hospital is entitled to judgment as a matter of law on its statute of limitations defense. (Code Civ. Proc., § 437c, subd. (c); Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 849, 860.)
American Pipe tolling.
Falk's employment ended on August 25, 2006. Assuming that four years is the outermost limitations period applicable to her claims,
A. American Pipe tolling commences when the initial class action is filed.
American Pipe applied tolling under the following circumstances. Utah filed a putative class action. Class certification was denied, under Federal Rules of Civil Procedure, rule 23 (28 U.S.C.) (Rule 23), because the class was so numerous that joinder of all members was impracticable. (American Pipe, supra, 414 U.S. at p. 543.) Class members then filed motions to intervene, but their motions were denied on statute of limitations grounds. (Id. at p. 544.) American Pipe concluded that Utah's filing of the putative class action tolled the statute of limitations for the intervenors: "where class action status has been denied solely because of failure to demonstrate that `the class is so numerous that joinder of all members is impracticable,' the commencement of the original class suit tolls the running of the statute for all purported members of the class who make timely motions to intervene after the court has found the suit inappropriate for class action status." (Id. at pp. 552-553.)
Crown, Cork & Seal Co. v. Parker (1983) 462 U.S. 345 (Crown, Cork), extended American Pipe. The plaintiffs filed a class action discrimination case. Their motion for class certification was denied because the named plaintiffs' claims were atypical of those of the class, they were not adequate representatives, and the class was not so numerous as to make joinder impracticable. (Crown, Cork, at pp. 347-348.) After denial of class certification, Parker filed an individual action alleging similar claims as in the class action. Crown, Cork held that the "filing of a class action tolls the statute of limitations `as to all asserted members of the class,' [citation] not just as to intervenors." (Id. at p. 350.) "Once the statute of limitations has been tolled, it remains tolled for all members of the putative class until class certification is denied. At that point, class members may choose to file their own suits or to intervene as plaintiffs in the pending action." (Id. at p. 354.)
Our California Supreme Court summarized the tolling rule derived from American Pipe and Crown, Cork: "under limited circumstances, if class certification is denied, the statute of limitations is tolled from the time of commencement of the suit to the time of denial of certification for all purported members of the class who either make timely motions to intervene in the surviving individual action [citation], or who timely file their individual actions [citation]." (Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1119 (Jolly).)
Based on American Pipe and its progeny, Falk contends that the filing of Palazzolo, as well as Mays, tolled any limitations periods for her subsequent class action. Sawyer v. Atlas Heating & Sheet Metal Works, Inc. (7th Cir. 2011) 642 F.3d 560, 562 (Sawyer), is instructive. A class action was filed. Before the district court had decided whether to certify the class, the plaintiff voluntarily dismissed the complaint, leaving the other putative class members "in the lurch." (Id. at p. 561.) Sawyer tried to intervene in the action to keep it alive, but the district court denied intervention. Sawyer therefore filed his own class action. In applying American Pipe tolling to Sawyer's action, the court rejected the defendant's argument the initial action did not "count" because it was "`never a class action.'" (Sawyer, at p. 563.) That could not be determinative, because American Pipe and Crown, Cork also were never class actions. (Ibid.)
Rather, the "rationale of American Pipe does not permit a distinction among situations in which the putative class representative gives up before, or after, the judge decides whether the case may proceed on behalf of a class. Tolling lasts from the day a class claim is asserted until the day the suit is conclusively not a class action—which may be because the judge rules adversely to the plaintiff, or because the plaintiff reads the handwriting on the wall and decides not to throw good money after bad." (Sawyer, supra, 642 F.3d at p. 563; see also American Pipe, supra, 414 U.S. at p. 554 ["the commencement of a class action suspends the applicable statute of limitations as to all asserted members of the class who would have been parties had the suit been permitted to continue as a class"], italics added.) American Pipe's "goal of enabling members of a putative class to rely on a pending action to protect their interests can be achieved only if the way in which the first suit ends—denial of class certification by the judge, abandonment by the plaintiff, or any other fashion—is irrelevant." (Sawyer, at p. 562.)
Denial of certification, however, is important to the extent denial is based on a "reason that would be equally applicable to any later suit," "for example, that the supposed victims are too few to justify class litigation, that a common question does not predominate, or that person-specific issues would make class treatment unmanageable," in which circumstances tolling would not apply. (Sawyer, supra, 642 F.3d at p. 564; see generally Yang v. Odom (3d Cir. 2004) 392 F.3d 97, 104 ["American Pipe tolling applies to would-be class members who file a class action following the denial of class certification due to Rule 23 deficiencies of the class representative. American Pipe tolling would not apply to sequential class actions where the earlier denial of certification was based on a Rule 23 defect in the class itself"];
What happened here is similar to Sawyer. Palazzolo was filed as a class action. Class certification was never denied or granted.
B. Palazzolo gave Children's Hospital sufficient notice of claims in Falk.
Still, tolling will not apply unless the two policy considerations underlying American Pipe are met. Those considerations are, first, protection of efficiency and economy in litigation as promoted by the class action device, and, second, effectuation of the purpose of the statute of limitations to protect a defendant from unfair claims. (Jolly, supra, 44 Cal.3d at pp. 1121-1122.) Crucial to this second consideration is that the initial class action provide the defendant with sufficient notice of the substantive claims brought against it as well as the "`number and generic identities of the potential plaintiffs.'" (Id. at p. 1121, quoting American Pipe, supra, 414 U.S. at pp. 554-555.)
Justice Blackmun thus cautioned that American Pipe" must not be regarded as encouragement to lawyers in a case of this kind to frame their pleadings as a class action, intentionally, to attract and save members of the purported class who have slept on their rights. . . . [¶] . . . [Class members] will be permitted to press their claims subject only to the requirement that they have an interest relating to the property or transaction and be impaired or impeded in their ability to protect that interest. . . . Such claims, therefore, invariably will concern the same evidence, memories, and witnesses as the subject matter of the original class suit, and the defendant will not be prejudiced by later intervention. . . ." (American Pipe, supra, 414 U.S. at pp. 561-562 (conc. opn. of Blackmun, J.); see also Crown, Cork, supra, 462 U.S. at p. 354 ["The tolling rule of American Pipe is a generous one, inviting abuse. It preserves for class members a range of options pending a decision on class certification. The rule should not be read, however, as leaving a plaintiff free to raise different or peripheral claims following denial of class status"] (conc. opn. of Powell, J.).)
Hence, that the initial class action put the defendant on notice of claims against it is essential to the applicability of tolling. (Crown, Cork, supra, 462 U.S. at p. 355 (conc. opn. of Powell, J.); Jolly, supra, 44 Cal.3d at p. 1122 [prior class action involving the drug DES did not toll subsequent personal injury action for DES-related claims; noting that mass tort claims are not amenable to class actions].) The claims in the first action need not necessarily be identical to the ones in the subsequent action, but they must be substantively similar, based on the same claims and subject matter and similar evidence. (Perkin, supra, 225 Cal.App.4th at p. 504; see, e.g., Tosti v. City of Los Angeles (9th Cir. 1985) 754 F.2d 1485, 1489.)
Did Palazzolo put Children's Hospital on sufficient notice of the claims in Falk? Palazzolo was light on specifics. It was brought on behalf of "all non-exempt or hourly" employees. As to the unpaid wages/overtime claim, the complaint generically alleged that the hospital failed to pay "premium wages for overtime compensation" at one and a half or two times the regular hourly rate. The pleading also referred to "incentives in the form of shift differentials" which were not incorporated in overtime.
In contrast to these general allegations in Palazzolo, Mays and Falk were specific. With respect to unpaid wages, Mays and Falk alleged that the hospital used a "dual rate" compensation system that deprived employees of proper overtime pay by reducing the "regular rate of pay" for overtime hours. In other words, a 12-hour shift employee was paid a lower hourly rate than an eight-hour employee to offset the overtime hours. The 12-hour shift employees against whom this dual rate scheme was instituted were a "subclass" of a "`regular rate class.'" The regular rate class were "hourly non-exempt employees . . . from January 2003 to the present and who were not paid all earned wages, as a result of the [hospital's] failure to include certain remuneration that must be included in hourly non-exempt employees' regular rate." The "remuneration" includes forms of compensation such as "nondiscretionary bonuses, charge nurse premium, shift differentials premium, preceptor premium, shift bonuses, and in-house registry into the hourly non-exempt employees' regular rate." "Plaintiff . . . alleges that [the hospital] does not add all compensation paid to hourly non-exempt employees when calculating the regular rate as required by law."
Tolling applies. Palazzolo claimed that the hospital failed to pay proper overtime. Falk raises the same claim, although Falk explains in detail how overtime was improperly calculated by describing the dual rate system. Falk's specificity does not undermine the notice the hospital had, by virtue of Palazzolo, that the hospital was allegedly not paying legal overtime wages. The evidence to support both claims would be the same or similar, in that how the overtime rate is calculated would be at issue in Palazzolo and Falk. Had Palazzolo gone forward, evidence of any dual rate scheme presumably would have been discovered.
Similarly, as to causes of action concerning meal and rest periods, Palazzolo and Falk raise the same substantive claims. Palazzolo alleged, generally, that employees were required to work without meal and rest periods and were not compensated for work performed during those periods. Falk elaborated: the hospital discouraged these periods, required the class to carry pagers and to answer them during meal periods, and required hourly employees to punch out and in for meal periods even if a meal was not taken. Falk's elaboration of the ways in which the class was deprived of meal and rest periods does not somehow render the meal and rest period claims different from those in Palazzolo. Although the hospital dismisses the similarity in the evidence and witnesses in Palazzolo and Falk as neither here nor there, for this will often be the case in wage and hour lawsuits against an entity, the similarity in evidence and witnesses weighs in favor of tolling.
The hospital concedes that the Business and Professions Code section 17200, improper wage statement, and waiting time penalty claims are derivative of the unpaid wages/overtime and meal and rest period claims. Because they rise or fall based on the unpaid wages and meal and rest period claims that we have found subject to tolling, they are also tolled.
The timeliness, however, of Falk's claims still depends on the length of the tolling period, which we address next.
C. The tolling period.
The tolling period began May 1, 2007, when Palazzolo was filed. The parties disagree as to when the tolling period ended.
The hospital contends that any tolling period ended on April 7, 2009, when judgment was entered in Palazzolo. The hospital thus equates the judgment with a denial of class certification. (See generally Jolly, supra, 44 Cal.3d at p. 1119 [American Pipe held that "under limited circumstances, if class certification is denied, the statute of limitations is tolled from the time of commencement of the suit to the time of denial of certification"]; Bangert v. Narmco Materials, Inc. (1984) 163 Cal.App.3d 207, 212-213 [statute of limitations tolled until the day class certification denied].)
Falk contends that the tolling period ended February 3, 2011, when the remittitur issued in Palazzolo. She distinguishes Jolly and Bangert because no class certification ruling was ever made in Palazzolo like in those cases. Falk again cites Sawyer, which found, "[t]olling lasts from the day a class claim is asserted until the day the suit is conclusively not a class action." (Sawyer, supra, 642 F.3d at p. 563.)
Under the somewhat unique circumstances here, where no certification decision was made before the action was dismissed, tolling until the date the remittitur issued, thereby conclusively ending the case and any opportunity putative class members might have had to intervene in Palazzolo, is equitable. The hospital chose to litigate the merits of Palazzolo's individual claims before the class was certified. (See Fireside Bank v. Superior Court (2007) 40 Cal.4th 1069, 1081 [procedural class-action issues must ordinarily be resolved before a decision on the merits]; Williams v. Superior Court (2013) 221 Cal.App.4th 1353, 1360 [class certification motion is not a trial on the merits].) The hospital took the risk that the putative class would remain extant when the hospital chose to attack Palazzolo's individual claims before class certification could be decided.
Falk's claims were therefore tolled from May 1, 2007 to February 3, 2011 (1375 days or 3 years 9 months 3 days). Because 249 days
D. "Piggybacking" class actions is, under certain circumstances, permissible.
American Pipe and Crown, Cork applied tolling to individuals intervening in the initial putative class action and to subsequent individual actions. They did not address subsequent class actions seeking the benefit of tolling based on a prior class action. The valid concern is "stacking" or "piggybacking" class actions (as opposed to individual actions) could allow a limitations period to run indefinitely.
But the Ninth Circuit has allowed "piggybacking" of class actions under certain circumstances: if class certification is denied in the earlier action based solely on Rule 23 deficiencies in the putative class representative—and not on Rule 23 deficiencies in the class itself—then tolling applies. (Yang v. Odom, supra, 392 F.3d 97; Catholic Social Services, Inc. v. I.N.S. (9th Cir. 2000) 232 F.3d 1139 [successive class actions permissible where the subsequent class is not attempting to relitigate an earlier denial of class certification or to correct a procedural deficiency in the earlier would-be class]; see Kandel v. Brother Int'l Corp., supra, 2009 U.S.Dist. Lexis 105242 [tolling applies to second class action, consolidated with the first, where second action asserted identical claims against defendant and did not seek to relitigate a denial of class certification or correct a procedural deficiency]; Sawyer, supra, 642 F.3d at pp. 563-565; Wasserman, Tolling: The American Pipe Tolling Rule and Successive Class Actions (2006) 58 Fla. L.Rev. 803; but see Robbin v. Fluor Corp. (9th Cir. 1987) 835 F.2d 213 [stacking limitations periods by filing successive class actions is not permissible].)
Because there was no ruling in Palazzolo implicating any deficiency in the putative class (as opposed to Palazzolo's individual claims), Falk may file a successive class action.
The judgment is affirmed in part and reversed in part. The judgment is affirmed as to claims subject to a one-year limitations period. The judgment is reversed as to claims subject to a three- or four-year limitations period. The parties are to bear their own costs on appeal.
KITCHING, Acting P. J. and EGERTON, J.,
CERTIFIED FOR PUBLICATION
ORDER CERTIFYING OPINION FOR PUBLICATION [NO CHANGE IN JUDGMENT]
The opinion in the above-entitled matter filed on June 3, 2015, was not certified for publication in the Official Reports. For good cause it now appears that the opinion should be published in the Official Reports and it is so ordered.
[There is no change in the judgment.]
Falk suggests that Palazzolo's attorney committed malpractice by failing to preserve the class claims, and she submits documents showing that Palazzolo's trial counsel was sued for malpractice in connection with its handling of another class action.