Walker v. Apple, Inc.

• Decision Date: 28 September 2016
• Docket Number: D069713
• Court: California Court of Appeals Court of Appeals
• Parties: Stacey WALKER et al., Plaintiffs and Appellants, v. APPLE, INC., Defendant and Respondent.

4 Cal.App.5th 1098

209 Cal.Rptr.3d 319

Stacey WALKER et al., Plaintiffs and Appellants,

v.APPLE, INC., Defendant and Respondent.

D069713

Court of Appeal, Fourth District, Division 1, California.

Filed September 28, 2016

Law Offices of Martin N. Buchanan and Martin N. Buchanan for Plaintiffs and Appellants.

Carothers Disante & Freudenberger, Timothy M. Freudenberger, Irvine, Kent J. Sprinkle, San Francisco, Steven A. Micheli, San Diego, and Teresa W. Ghali, San Francisco, for Defendant and Respondent.

HALLER

, J.

Stacey Walker and Tyler Walker (together, the Walkers),¹ the plaintiffs in this putative class action against their former employer, Apple, Inc. (Apple), appeal the trial court's order disqualifying their counsel, Hogue & Belong (the Firm). The trial court found automatic disqualification was required on the basis the Firm had a conflict of interest arising from its concurrent representation of the putative class in this case and the certified class in another wage-and-hour class action pending against Apple (Felczer v. Apple, Inc. (Super. Ct. San Diego County No. 37–2011–00102573–CU–OE–CTL) (Felczer )). Specifically, based on the parties' litigation strategies and evidence Apple submitted in support of its disqualification motion, the trial court concluded that to advance the interests of its clients in this case, the Firm would need to cross-examine a client in the Felczer class (the Walkers' store manager) in a manner adverse to that client.

On appeal, the Walkers contend the trial court erred by concluding (1) the store manager, as an unnamed member of the Felczer class, is a Firm client; (2) the Walkers' and the store manager's interests conflict; and (3) disqualification was automatic in the class action context. On the record before us—where a class has been certified in Felczer , and undisputed evidence establishes the store manager's identity and her likely significant role in this case—we conclude the trial court did not err in finding the Firm represents the store manager and that a disqualifying conflict exists between her interests and the Walkers' interests. Therefore, we affirm.

FACTUAL AND PROCEDURAL BACKGROUND

The Felczer Class Action

In 2011, Brandon Felczer and others, represented by the Firm, filed the Felczer wage-and-hour class action against Apple in San Diego County Superior Court. The operative fourth amended complaint alleges Apple's meal and rest period policies are facially noncompliant with California law, and that Apple systematically failed to timely pay employees upon termination. The complaint also alleges that as a result of the meal and rest period violations, Apple failed to provide accurate wage statements as required by Labor Code section 226

and implementing regulations.

The Felczer plaintiffs sought certification of a class of current and former nonexempt Apple employees who had worked for Apple since December 16, 2007, at any of its California locations. In July 2014, the Felczer court granted plaintiffs' motion and certified six subclasses. The first four subclasses relate to meal and rest period violations; the fifth subclass relates to former nonexempt employees who were not provided timely payment upon termination; and the sixth subclass relates to nonexempt employees' derivative claim that they were not provided timely and accurate wage statements. The court noted the final-payment and wage-statement claims were merely “derivative” of the meal and rest period claims because “wherever meal and rest period penalties should have been paid but were not, the corresponding wage statement is inaccurate.”

In January 2015, a class notice was sent to more than 20,000 identified Felczer class members. Nearly 20,000 opted to remain in the class.

The Walkers' Class Action Complaint

In April 2015, nine months after the Felczer class was certified, the Walkers, also represented by the Firm, filed this putative class action against Apple in San Diego County Superior Court. The Walkers are former nonexempt employees of Apple who worked at Apple's Carlsbad store until their employment ended in 2014. They allege Apple did not furnish them with final wage statements upon termination of their employment, in violation of Labor Code section 226

and applicable wage orders.

The complaint alleges Apple's failure to provide final wage statements is part of a uniform policy and practice applicable to all of its nonexempt California employees. Specifically, the complaint alleges that employees who receive their wage statements via Apple's online “myPage” portal never receive a final wage statement because Apple immediately terminates access to myPage upon termination of employment—before terminated employees can obtain a final wage statement. The complaint asserts Apple never provided terminated employees with final wage statements “in any other manner.”

The Walkers allege that during their employment, Apple paid them by direct deposit and furnished their wage statements through myPage. Once their employment ended, however, Apple immediately terminated their access to myPage. Consequently, they never received final pay wage statements in any format.

The complaint seeks certification of a class of employees who have worked for Apple since April 17, 2011, and to whom Apple failed to provide final wage statements, in violation of Labor Code section 226

and applicable wage orders.

Apple denies it has a uniform policy of denying terminated employees their final wage statements. Instead, Apple asserts its retail store managers (which Apple calls “Store Leaders”) are responsible for handling voluntary and involuntary terminations. Their responsibilities in the termination process include delivering final paychecks and wage statements to terminated employees. Apple claims this process establishes a “good faith dispute” defense to the Walkers' claims.

Apple's Disqualification Motion

Apple moved to disqualify the Firm as plaintiffs' counsel in this case. Apple contended the Firm had “irreconcilable conflicts of interest” by virtue of its concurrent representation of both the certified Felczer class and the putative Walker class. Apple argued that in advocating on behalf of the Walkers, the Firm will necessarily have to take a position adverse to the interests of certain of the Firm's clients in the Felczer class.

Apple supported its motion with pleadings and evidence from Felczer , and a declaration from Marnie Olson (the Olson Declaration), the human resources manager responsible for Apple's Southern California retail stores, including the Carlsbad store where the Walkers worked. Olson stated “Meg Karn was the Store Leader for the Carlsbad Apple retail store where [the Walkers] worked at the time of [their] termination in late 2014. As Store Leader, Meg Karn was ... involved in the terminations of the Walkers and the process of getting the Walkers their final pay and paystubs.”

Olson explained in her declaration that Karn had been a nonexempt Apple employee during the Felczer class period, before she was promoted to the exempt Store Leader position. Consequently, as shown by other evidence submitted by Apple, Karn was a member of the certified Felczer class. Olson noted “there were many other Apple employees” who, like Karn, had been nonexempt employees during the Felczer class period but had been subsequently promoted to exempt positions and “were responsible for terminations of non-exempt employees.”

Based on this evidence, Apple argued the Firm had a conflict because it “would have to cross-examine its own client—Ms. Karn—about the alleged failure to comply with the law.” In other words, to establish the Walkers' claim that Apple had a uniform policy of not providing final wage statements, the Firm would have to cross-examine Karn to have her contradict Apple's assertion that she was ultimately responsible for providing the Walkers' final wage statements. Alternatively, the Firm would force Karn to admit on cross-examination that she was either unaware of this responsibility, or was aware of it but failed to fulfill it—neither of which would reflect well on her managerial competence.

The Walkers opposed Apple's disqualification motion on grounds including the following: (1) there was no actual, existing conflict, and Apple's motion was based on speculation and conjecture that such a conflict might arise in the future; (2) Apple's motion to disqualify was a tactical strategy to delay the proceedings and drive up costs; and (3) the claims asserted in Felczer and this action are separate and distinct. The Walkers supported their opposition with Apple's certification briefs from two other cases, but submitted no other opposing evidence.

The Disqualification Order

On January 8, 2016, the trial court heard Apple's motion and, later that day, issued a minute order disqualifying the Firm. The court found it was undisputed that Store Leader Karn was a Felczer class member and was also responsible for timely providing the Walkers their final wage statements. The court rejected the Walkers' argument that “it is Apple's company-wide policies and practices that form the basis of Plaintiff's claims”; rather, the court explained, “it is Apple's employees such as Karn who implement[ed] these policies.” Consequently, the court concluded “there exists the potential that [Firm] client Karn (in Felczer ) will be called by Apple in this case to testify on issues relating to whether Karn/Apple knowingly and intentionally failed to provide timely final wage statements to [the Walkers]. This will put [the Firm] in the position of having to cross-examine Karn—[the Firm]'s client in Felczer . Such circumstance establishes that [the Firm] is simultaneously representing clients who have conflicting interests. Under the authorities set forth herein, disqualification is automatic.”

The court explained it was “not persuaded by the [Walkers'] argument that disqualification is speculative and premature” because the court concluded the law “ ‘does...