SAN FRANCISCO — Division One of the Second District Court of Appeal cannot take a hint.
So say California employers, who are furious that the Los Angeles-based appellate panel has stuck with a high-profile wage-and-hour decision even after the state Supreme Court granted review, criticized it and sent it back to the appellate court for reconsideration.
“A divided court of appeal has reinstated — word for word — the same erroneous limitation on the scope of the overtime exemption for administrative employees that this court unanimously rejected just nine months ago,” Sidley Austin lawyers wrote earlier this month for two insurance companies facing millions in overtime payouts.
But while Sidley and its clients are asking the California Supreme Court to review the case — again — amicus curiae California Employment Law Council is proposing a more eyebrow-raising response: stripping Division One of the case and assigning it to another panel of the Second District.
Sending Harris v. Superior Court (Liberty Mutual), S205097, back to Division One “would appear to be an exercise in futility, given that Division One now has essentially issued the same opinion twice,” wrote Jeffrey Michalowski, an associate at Paul Hastings who represents the California Employment Law Council, in a Sept. 20 letter to the Supreme Court.
Jon Eisenberg, an author of a treatise on appellate procedure and of counsel to Horvitz & Levy, said he had not heard of such a request before. “If the Supreme Court perceives a problem here, what the amicus is proposing would seem to be a tidy solution,” said Eisenberg, who’s not involved in the case. “But as tidy as it would be, it would be equally unusual.”
It’s been 11 years since the claims adjusters first filed their cases against Liberty Mutual Insurance Co. and Golden Eagle Insurance Corp. Their counsel at Robbins Geller Rudman & Dowd have said they’re owed some $100 million in unpaid overtime. The insurers say claims adjusters, whose duties include investigating claims and making coverage determinations, perform high-level work that brings them under the administrative exemption to state and federal wage laws.
Calling the law unsettled, L.A. Superior Court Judge Carolyn Kuhl in 2006 certified some class claims but not others, and suggested the parties seek guidance from the court of appeal. By a 2-1 vote, Division One ruled in 2007 that claims adjusters are not exempt. They fall on the production side of the “administrative/production dichotomy” established in Bell v. Farmers Insurance Exchange, 87 Cal.App.4th 715, the seminal 2001 wage-and-hour opinion, the majority concluded. Then-Justice Miriam Vogel dissented, saying the dichotomy established by Bell is “merely an analytical tool” and not a dispositive test.
The California Supreme Court granted review, and after ruminating on the case for four years, issued a unanimous opinion largely siding with Vogel. “The court of appeal majority’s overreliance on the Bell cases created much of the confusion here,” Justice Carol Corrigan wrote, saying the administrative/production dichotomy had been superseded by newer California laws that incorporate federal labor standards. The Supreme Court also faulted the Second District for relying on a 1990 U.S. Court of Appeals for the Ninth Circuit case involving probation officers, pointing instead to Miller v. Farmers Insurance Exchange, 481 F.3d 1119, a more recent Ninth Circuit case that specifically found claims adjusters exempt.
While perhaps hinting strongly at how the case should come out, Corrigan concluded her opinion by cautioning that the issue is fact-specific. “We express no opinion on the strength of the parties’ relative positions,” she wrote. “We merely hold that the court of appeal majority erred in its analysis.”
Seven months later, the Second District issued a new published opinion. Although removing the citations to Bell and the language referring to the dichotomy, the court reaffirmed its conclusion that “only work performed at the level of policy or general operations” can qualify for the administrative exemption. And that, the court reiterated, does not include claims adjusters.
The opinion by Presiding Justice Robert Mallano also removed the citation to the probation officer case, and instead relied heavily on a 1991 case from the Third Circuit involving sales staff. It did not mention the Miller case commended by the Supreme Court.
The insurance companies are not amused. Letting the Second District’s new opinion stand “would seriously damage the integrity of the appellate process,” Sidley partners Douglas Hart and Geoffrey DeBoskey wrote in their Sept. 4 petition for review. “The court should insist upon fidelity to its ruling.”
The lawyers go so far as to include a table with side-by-side quotes from the court of appeal’s 2007 and 2012 opinions to underscore their similarity.
For their part, the claims adjusters say the insurers want “a do over” at the Supreme Court that would waste judicial resources and cause even more delay. “Defendants have sought — and received — exhaustive appellate scrutiny of the issues they seek to relitigate in this court,” Robbins Geller partner Kevin Green wrote in his Sept. 25 answer to the insurers’ petition. “They have shown no reason to dive back into the same thicket.”
Issuing a second opinion addressing the same issues in the same case would be unprecedented for the high court, Green added. “Future cases, involving different types of employment, will present better vehicles to develop the contours of California’s administrative exemption,” he wrote.
Meanwhile, the California Employment Law Council, which counts big companies like Bechtel Corp., DirecTV LLC and Wells Fargo among its members, is looking for a way to win the case without the Supreme Court having to review it again. If the high court doesn’t want to issue another opinion, the council’s Michalowski says in his amicus letter, it can transfer the case to a different appellate panel for reconsideration.
While it’s true the that Supreme Court frequently sends cases back to the court of appeal for reconsideration, it’s typically to the same division, and for reconsideration in light of some new precedent.
Michalowski recites California Rule of Court 8.528(d), which says the Supreme Court “may transfer the cause to a court of appeal without decision but with instructions to conduct such proceedings as the Supreme Court orders.” By using the words “a court of appeal” rather than “the court of appeal,” Michalowski contends, the rule leaves open the possibility of transfer to a different division.
Eisenberg, of Horvitz & Levy, notes that appellate courts on rare occasions have ordered cases reassigned to a new trial judge on remand. “There’s analogous support,” he said, but transferring a case to a new appellate panel is, so far, unheard of.
Green’s answer didn’t address Michalowski’s proposal, and he did not respond to a message relayed through a firm spokesman.