U.S. District Judge William Alsup, Northern District of California
U.S. District Judge William Alsup, Northern District of California (Hillary Jones-Mixon)

SAN FRANCISCO — Citing the potential for “preclusion, collusion, and exclusion,” U.S. District Judge William Alsup has thrown the brakes on a hard-fought wage-and-hour case because class counsel represent another group of workers against the same company in state court.

“When there are different plaintiffs in different actions proceeding at the same time with the same claims, same counsel, and same defendants, the risk of counsel compromising one class for another is intensified,” Alsup wrote, denying class certification in Lou v. Ma Laboratories on Wednesday. “Counsel have a conflict and may not serve.”

The decision turns the tables in a case where class counsel at Sanford Heisler and solo practitioner Thomas Marc Litton had obtained a favorable earlier ruling keeping the case out of arbitration.

The plaintiffs attorneys allege that Ma Laboratories, a privately owned distributor of computer components in San Jose with about 1,000 U.S. employees, showed “blatant disregard” for federal and state labor laws by refusing to pay overtime and instructing workers to clock out at 5:30 p.m. even if they worked later. The attorneys represent 283 former employees in Lou and another 553 in a Santa Clara County Superior Court case, Tian v. Ma Laboratories, that is scheduled for a class certification hearing in August.

The company’s lawyers at Berliner Cohen and Law Offices of Craig Hansen moved to disqualify Sanford Heisler last fall for allegedly soliciting clients in violation of a protective order. At the time Sanford Heisler managing partner Janette Wipper called it “one in a series of aggressive tactics aimed at diverting attention away from Ma Labs’ egregious overtime violations.”

Alsup did not decide the DQ motion Wednesday, but ruled that class counsel failed to meet the Rule 23(a) standard of adequacy. Because of the similarities with the Tian action, “defendants have an incentive to settle all claims at once, if [the case] settles at all, thereby creating opportunities for counsel to manipulate the allocation of settlement dollars,” Alsup wrote. “A class in this case deserves to be championed by its counsel unencumbered by their duties to other clients.”

The case can still move forward if new counsel is substituted in by Jan. 24, Alsup added. But based on his further appraisal of class certification, it seems unlikely new firms will be banging at the door. Contrary to plaintiff claims that Ma Laboratories systematically shaved employee hours, the employees’ own testimony showed that timekeeping and overtime practices varied within the company, Alsup wrote. This would cause any case to “necessarily devolve into a series of mini-trials … swollen with individualized, anecdotal, and occasionally speculative testimony and hearsay.”

“We’re certainly pleased with the decision,” said Berliner Cohen partner Christine Long, adding it was clear Alsup had carefully considered the issues after hearing two days of argument.

Sanford & Heisler spokesman Jeremy Heisler said in a written statement that the judge “made a manifest error of law in his ruling. We are confident that the Ninth Circuit will overturn the order.”

Contact the reporter at sgraham@alm.com.