Sandra Weishart

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Sandra Weishart is a partner in the firm’s Los Angeles office, and has been with the firm since 1979. She is a trial attorney specializing in business litigation, with experience in all aspects of civil litigation, through trial and appeal stages.
A major focus of her practice involves life, health and disability insurance matters, including bad faith lawsuits, claims arising under California’s Unfair Competition Law and class actions. Additionally, Ms. Weishart speaks at professional conferences regarding insurance topics and is a member of the Insurance Law Advisory Board for Strafford Publications.
Ms. Weishart also handles professional liability and lender liability matters and has served as lead counsel in complex professional liability and lender liability cases and investigations for banking institutions and on behalf of the Federal Deposition Insurance Corporation.

Articles By This Author

California Supreme Court Refines the Scope of Considering "the Merits" of the Case in Class Certification Motions

by Larry M. Golub and Sandra I. Weishart

On April 12, 2012, the California Supreme Court issued its long-awaited decision in Brinker Restaurant Corp. v. Superior Court. Plaintiffs had sought to certify three subclasses of California restaurant employees based on the employer’s alleged violations of California’s wage and hour laws relating to rest breaks and meal breaks. The decision provides critical guidance for all employers, including insurers, as to how they should address the issue of rest breaks and meal breaks for their employees.

The trial court in San Diego certified the three subclasses, and the Court of Appeal, Fourth Appellate District, reversed that order, rejecting certification of all three subclasses. The Supreme Court accepted review in October 2008 and, on review, affirmed certification of one subclass, rejected certification of one subclass, and remanded the case to the trial court for further proceedings as to whether the third subclass should be certified. More significantly, the Supreme Court clarified when trial courts may consider the merits of a claim at the certification stage – and the Court itself addressed the merits on one issue in the case so as to provide guidance to the trial court in the next phase of the lawsuit.

In the course of its opinion, the Supreme Court also provided important substantive rulings as to the nature of employers’ duty to provide rest periods and meal breaks to non-exempt restaurant employees, in particular, and non-exempt employees in other industries, more generally. This post addresses the Court’s class certification rulings, and Michael Newman of this office analyzes the substantive employment law questions here

Considering the Merits:

After reviewing the basic class certification principles, the Supreme Court addressed the often-disputed issue as to when a trial court should consider the merits of a plaintiff’s claims in deciding a motion for class certification. In Brinker, the only class certification element at issue was whether individual questions or questions of common interest predominated with respect to the three subclasses the plaintiffs sought to certify. 

The trial court ruled that the three subclasses presented common questions that predominated and, in certifying the class, it refused to consider the correctness of the employer’s legal position concerning its obligations to provide rest breaks and meal breaks. In contrast, the court of appeal concluded the refusal to consider the merits was erroneous because the trial court needed to resolve the “threshold issue” of duty in determining whether individual or common issues predominated. The Supreme Court charted a mid-course between these two extremes.

In analyzing the issues, the Supreme Court reviewed a number of its prior decisions, confirming that class certification is essentially a procedural device “that does not ask whether an action is legally or factually meritorious,” and that “resolution of disputes over the merits of a case generally must be postponed until after class certification has been decided.”  The Court nevertheless explained that there are “issues affecting the merits of a case [that] may be enmeshed with class action requirements.” In those instances, when “evidence or legal issues germane to the certification question bear as well on aspects of the merits, a court may properly evaluate them.” In other words:

“To the extent the propriety of certification depends upon disputed threshold legal or factual questions, a court may, and indeed must, resolve them.”

Independent of these basic tenets of class certification, the Supreme Court next explained that a trial court can, at the parties’ request, examine the merits of their substantive legal disputes. Quoting its well-known decision on the ability of trial courts to consider the merits on class certification motions, Linder v. Thrifty Oil Co., 23 Cal. 4th 429, 443 (2000), the Court stated:

“[W]e see nothing to prevent a court from considering the legal sufficiency of claims when ruling on certification where both sides jointly request such action.”

While the Court did not address any merits issues “enmeshed” with the class action requirements, it did nevertheless analyze a merits issue specifically requested by the parties concerning whether the employer’s duties to provide employee rest periods and meal breaks are common issues in the plaintiffs’ three subclasses. 

The Class Certification Rulings:

The first subclass the Court examined was the “rest period subclass” that covered class members “who worked one or more work periods in excess of three and a half (3.5) hours without receiving a paid 10 minute break during which the Class Member was relieved of all duties.” On this subclass, the plaintiffs merely asserted that the employer failed to provide the requisite rest periods for non-exempt employees based on the employer’s own “uniform corporate rest break policy” that allegedly violated the applicable Wage Order.  The Court observed that the employer “conceded” the existence of “a common, uniform rest break policy.” 

The Court rejected the employer’s argument that employees could waive their rest breaks and that this was an individual issue, advising that “[n]o issue of waiver ever arises for a rest break that was required by law but never authorized; if a break is not authorized, an employee has no opportunity to decline to take it.”  Accordingly, the Court concluded that the “rest period subclass” was certifiable and that this issue was not “dependent upon resolution of threshold legal disputes over the scope of the employer’s rest break duties.”

The Court then turned to the “meal period subclass,” defined as class members “who worked one or more work periods in excess of five (5) consecutive hours, without receiving a thirty (30) minute meal period during which the Class Member was relieved of all duties.” On this subclass, the Court found, among other issues, that the subclass not only covers every employee who might have a claim under the plaintiffs’ failure to provide meal periods theory, but also, because of the timing as to when a meal break was taken, might include employees with no possible claim under the applicable Wage Order or Labor Code statute.  

The Supreme Court merits ruling concerning the existence of employees who would have no claim was, as noted above, specifically requested by the parties.  The Court found the subclass definition adopted by the trial court to be over-inclusive since it “embraces individuals who now have no claim” against the employer. Accordingly, the Court remanded the certification question as to this subclass to the trial court to reconsider based on the clarification of the substantive law provided by the Court.

Finally, the Court addressed the “off-the-clock subclass,” which was an offshoot of the meal period subclass, and was composed of class members who worked without pay, allegedly because the employer “required employees to perform work while clocked out during their meal periods” and “they were neither relieved of all duty nor afforded an uninterrupted 30 minutes, and were not compensated.” 

For this claimed subclass, the Court found that, unlike the rest period subclass, there was no common policy or apparent common method of proof. Rather, the “only formal Brinker off-the-clock policy submitted disavows such work, consistent with state law.”  Additionally, plaintiffs had failed to present “substantial evidence of a systematic company policy to pressure or require employees to work off the clock.” Consequently, “proof of off-the-clock liability would have had to continue in an employee-by-employee fashion, demonstrating who worked off the clock, how long they worked, and whether Brinker knew or should have known of their work.” Such individual issues and a lack of common issues required dismissing any “off the clock subclass.”

United States Supreme Court Holds that Summary Plan Descriptions are Not Part of the Plan

In a significant loss for employees, the United States Supreme Court has determined that a pension plan's Summary Plan Description ("SPD") is not a part of the plan itself (CIGNA Corp. v. Amara). 

The decision, supported by all eight justices who participated, severely limits the ability of plan participants to sue for benefits based upon claimed irregularities in the SPD.

Until 1998, CIGNA's pension plan provided a retiring employee with an annuity based on pre-retirement salary and length of service. The new plan replaced the annuity with a cash balance based on a defined annual contribution from CIGNA, plus interest. The new plan translated earned benefits under the previous plan into an opening amount in the cash balance account. 

Plaintiffs, beneficiaries under CIGNA's pension plan (and the plan itself), acting on behalf of approximately 25,000 beneficiaries, challenged the new plan in a class action, claiming CIGNA failed to give them proper notice of the changes, particularly because the new plan provided less generous benefits. 

The District Court held that CIGNA's descriptions of the new plan were significantly incomplete and inaccurate and that CIGNA intentionally misled its plan participants, violating sections 102(a), 104(b) and 204(h) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA").  See 29 U.S.C. §§ 1022(a), 1024(a), 1054(h)

The District Court found that only class members who had suffered harm due to CIGNA's disclosure improprieties could obtain relief, but it did not require each class member to show individual injury. 

Instead, it found the evidence raised a presumption of "likely harm" suffered by class members and that, because CIGNA failed to rebut this presumption as to some or all participants, the evidence warranted class-applicable relief. 

Although section 204(h) of ERISA permits invalidation of plan amendments imposed without proper notice, the District Court did not do so here, reasoning that striking the new plan would further harm, rather than help, injured class members. 

Instead, granting relief under section 502(a)(1)(B) of ERISA, which authorizes a civil action to recover "benefits due" under the terms of the plan, the District Court reformed the new plan, substituted a more generous retirement payment, and ordered CIGNA to pay benefits under the plan, as reformed.  See 29 U.S.C. § 1132(a)(1)(B). 

The Court of Appeals for the Second Circuit affirmed. 

The Supreme Court held that the lower court improperly relied upon section 502(a)(1)(B) of ERISA, as that section does not authorize the District Court to change plan terms, rather than enforce existing terms. 

The Court rejected the argument that the District Court merely enforced existing terms of the plan because it enforced the SPD, which is part of the plan. 

In rejecting this theory, the Supreme Court reasoned that the SPD is not part of the plan, but merely information about the plan.  See 29 U.S.C. § 1022(a)

The Court commented that the argument ignores the distinction between the plan sponsor (which creates the plan and the procedures for making plan amendments) and the plan administrator (which manages the plan and provides the SPD in readily understandable form). 

The Court explained that, even where the duties of the plan sponsor and the plan administrator are performed by the same entity, the division of responsibilities between sponsor and administrator is significant. 

Imposing a rule that makes the SPD part of the plan and, therefore, allows statements in the SPD to modify the plan "might bring about complexity that would defeat the fundamental purpose of the summaries." 

While the Supreme Court did not find authority to reform plans under section 502(a)(1)(B), it nevertheless held that such authority exists under section 502(a)(3), which allows "other appropriate equitable relief" to redress violations of ERISA or plan terms.  See 29 U.S.C. § 1132(a)(3). 

Accordingly, even though a legal remedy such as compensatory damages is not permitted, the Supreme Court concluded that the District Court had the power to impose equitable remedies, including reformation of plan terms, injunctions to enforce plan terms, and orders to refrain from taking already accrued benefits (i.e., equitable estoppel).  

The Supreme Court noted ERISA does not establish a particular standard for determining harm, but requires the plan administrator to distribute written notice that is "'sufficiently accurate and comprehensive to reasonably apprise'" participants of "'their rights and obligations'" under the plan (quoting § 102(a)).

Thus, the Court explained the requirement of harm must come from the law of equity. Moreover, to determine if "detrimental reliance" must be proved to obtain equitable relief, the lower court must look to the specific equitable remedy it seeks to impose.  

With respect to the action against CIGNA, the Supreme Court explained that, to obtain relief by surcharge for the claimed ERISA violations, a plan participant or beneficiary must show that the violation caused injury--i.e., harm and causation, but not necessarily detrimental reliance, and that the prejudice standard, if applicable, must be borrowed from equitable principles, as modified by the obligations and injuries identified by ERISA itself. 

The Supreme Court remanded the case, allowing the District Court to further evaluate the remedy it will impose in light of its opinion.   

Although this case arose in the context of alleged irregularities concerning pension benefits, the decision will apply with equal force to other forms of plan benefits, including SPDs concerning insurance benefits.

Originally posted on Barger & Wolen's Life, Health, Disability Insurance Law blog.

U.S. Supreme Court to Hear Dukes v. Wal-Mart Petition on Scope of Class Actions

By Sandra I. Weishart

On December 6, 2010, the United States Supreme Court granted certiorari in Wal-Mart Stores, Inc., v. Dukes, no. 10-277, agreeing to hear Wal-Mart's appeal of a California district court's order certifying a class alleging sex discrimination in the workplace.

Although the claims in Dukes specifically relate to Wal-Mart's alleged unfair employment practices concerning paying and promoting women, the Supreme Court's decision, expected in summer of 2011, could dramatically affect the class action landscape for all large companies, including insurers. 

Class action litigators following Dukes have been particularly interested in whether a class can be "too big" to certify.

In Dukes, six named plaintiffs allege that Wal-Mart -- the nation's largest employer -- discriminates against women in violation of Title VII of the Civil Rights Act of 1964. They seek to certify a nationwide class encompassing thousands of women employed by Wal-Mart at any time since December 26, 1998, in a range of positions, from part-time, entry-level hourly employees to salaried managers. The proposed class involves 3,400 Wal-Mart stores in 41 regions. Wal-Mart's counsel estimates the class size could exceed 1.5 million women. Given the size of this class, billions of dollars are potentially at stake. 

The district court certified for class treatment all of plaintiffs' claims for injunctive relief, declaratory relief and back pay, and included a separate opt-out class for employees seeking punitive damages.

On appeal, the Ninth Circuit affirmed the district court's certification, under Federal Rule of Civil Procedure ("FRCP") 23(b)(2), of a class of current employees with respect to the claims for injunctive relief, declaratory relief, and back pay and, as to the punitive damages claims, it remanded the case to the district court to make further rulings under FRCP 23(b)(2) and (b)(3). 

As to former Wal-Mart employees, the Ninth Circuit remanded the action to the district court to consider whether to certify an additional class or classes under FRCP 23(b)(3). See Dukes v. Wal-Mart Stores, 605 F.3d 571 (9th Cir. 2010).

In addition to the arguments that class action counsel routinely make to defeat class certification, such as whether the issues are sufficiently common and the claims of named class members are typical of others in the class, Wal-Mart's counsel argued that a class action this size would be inherently unmanageable and coercive. The allegations cover diverse job positions held by thousands of employees with different supervisors in numerous geographic locations. There is no way that all of the evidence relating to these plaintiffs can be presented. Further, it is unlikely that evidence relating to a "representative sample" of plaintiffs can prove the case as to the more than a million class members. 

For these reasons, if classes of this size are going to be certified, independent of the manageability issue, there is also a significant Due Process concern. Moreover, if such huge classes are certified, there is a far greater likelihood that defendants will feel compelled to settle, regardless of the merits of the action, to avoid potential billion-dollar litigation.   

Although the "too big to certify" argument is of great importance to class action lawyers and their clients, it is unclear whether or to what degree the Supreme Court will resolve that issue.

The Court granted certiorari on only one, narrow issue raised in Wal-Mart's petition:

Whether claims for monetary relief can be certified under FRCP 23(b)(2) — which by its terms is limited to injunctive or corresponding declaratory relief — and, if so, under what circumstances." 

The Court denied certiorari as to the broader issues of "whether the class certification order conforms to the requirements of Title VII, the Due Process Clause, the Seventh Amendment, the Rules Enabling Act, and FRCP 23."

Nevertheless, the Court instructed the parties to brief the issue of "whether the class certification ordered under Rule 23(b)(2) was consistent with Rule 23(a)." Although this vaguely worded request leaves open the door to discussion of the broader issues, it appears unlikely that the Court will focus its decision on the bigger issues.  

If the Supreme Court affirms the order granting class certification, Dukes will be the largest class action in United States history. Given the size of the class, the case potentially affects all large companies that may find themselves embroiled in class action litigation. Therefore, regardless of which way the Supreme Court decides Dukes, the case is likely to have a significant impact on future class action practice.


Insurer Has No Duty to Disclose Means of Obtaining Lower Premiums

by Sandra Weishart

In Levine v. Blue Shield of California, the California Court of Appeal for the Fourth Appellate District, Division One, unanimously held that a health insurer has no duty to advise an applicant concerning how coverage could be structured to obtain lower monthly insurance premiums. 

The Levines filed the action, both individually and on behalf of a putative class, alleging causes of action for fraudulent concealment, negligent misrepresentation, breach of the implied covenant of good faith and fair dealing, unjust enrichment and unfair competition under Business and Professions Code section 17200

The appellate court affirmed the trial court's order sustaining Blue Shield's demurrer to the entire complaint, holding that Blue Shield had no duty to disclose the information that the Levines alleged was not provided during the application process.

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"Principal Place of Business" defined by Supreme Court in Hertz Corp vs. Melinda Friend

U.S. Supreme Court Holds "Principal Place of Business" for Federal Diversity of Citizenship Purposes Is Corporations' "Nerve Center"— Where Their Executives Direct and Control Corporate Activities

by Sandra I. Weishart

In a decision closely watched by multi-state corporations, including those in the insurance industry, the U.S. Supreme Court ruled today that a company’s “principal place of business” is where “a corporation’s officers direct, control, and coordinate the corporation’s activities.”  Hertz Corp vs. Melinda Friend et al., a class action which the corporate defendant wished to remove to federal court, presented the following issue:

[w]hether, for purposes of determining principal place of business for diversity jurisdiction citizenship under 28 U.S.C. § 1332, a court can disregard the location of a nationwide corporation’s headquarters – i.e., its nerve center.

In analyzing the issue, the Court first reviewed the history of Section 1332, noting the increasing difficulty, in modern times, of defining a corporation's "principal place of business," which resulted in the application of different criteria and inconsistent precedents among the federal Circuits. Accordingly, in an unanimous opinion authored by Justice Breyer, the Court held:

In an effort to find a single, more uniform interpretation of the statutory phrase [“principal place of business”] this Court returns to the “nerve center” approach: “[P]rincipal place of business” is best read as referring to the place where a corporation’s officers direct, control, and coordinate the corporation’s activities. In practice it should normally be the place where the corporation maintains its headquarters — provided that the headquarters is the actual center of direction, control, and coordination, i.e., the “nerve center,” and not simply an office where the corporation holds its board meetings.

This decision is of particular interest to insurance companies and other corporations with a "nerve center" in another state but which, nevertheless, conduct a significant amount of business in California. In recent years, the Ninth Circuit has imposed increasingly more onerous requirements on corporate entities' ability to remove actions to federal court, if the corporation has employees, offices or property or otherwise conducts business activities here in California. Now, in most cases, removal to federal court will be far more easily accomplished.

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