Category: Daily News

Charter Communications has nearly 100,000 employees and provides telecommunications services throughout the United States. Charter has adopted an alternative dispute resolution program called Solution Channel, which it describes as “the means by which a current employee, a former employee, an applicant for employment, or Charter can efficiently and privately resolve covered employment-based legal disputes.”

Charter job applicants had to agree to use Solution Channel. If a job offer was made, prospective employees used a computerized onboarding process. They were required to read several company documents and policies and to agree by use of an electronic signature. Thse documents included a Mutual Arbitration Agreement and the Solution Channel Guidelines.

Charter hired plaintiff Angelica Ramirez in July 2019. Using the onboarding process, Ramirez accepted the proposed Agreement, including adherence to the Guidelines. In May 2020, Ramirez was fired. She sued Charter in July 2020, alleging claims for discrimination, harassment, and retaliation under the Fair Employment and Housing Act along with a claim of wrongful discharge in violation of public policy.

Charter moved to compel arbitration. The trial court found that the Agreement was one of adhesion because it was required as a condition of employment and also concluded additional provisions were unconscionable. Finding the Agreement was “permeated with unconscionability,” the court refused to enforce it and denied the motion to compel arbitration

The California Supreme Court granted review of the to consider the remedy (among other issues). Should the courts have refused to enforce the agreement, or could they have severed the unconscionable provisions and enforced the rest?

The Supreme Court concluded that the matter must be remanded for further consideration of this question in the case of Ramirez v. Charter Communications, Inc. -S273802 (July 2024).

In its Opinion, the Supreme court agreed that some of the provisions of the Agreement were appropriately found to be unconscionable by the Court of Appeal, and disagreed in the reasoning of the Court of Appeals in others.  Many pages of the Opinion were dedicated to a discussion of the standards to be used in the analysis, and indeed are a clear guideline for employers who have agreements with employees as to arbitration of disputes.  However the Supreme Court when on to discuss the concept of severing the unconscionable provisions rather than refusing to enforce the agreement as a whole.

Civil Code section 1670.5, enacted in 1979,codifies the principle that a court can refuse to enforce an unconscionable provision in a contract. Civ. Code, § 1670.5, subd. (a).) provides that “If a contractual clause is found unconscionable, the court may, in its discretion, choose to do one of the following: (1) refuse to enforce the contract; (2) sever any unconscionable clause; or (3) limit the application of any clause to avoid unconscionable results.”

The “strong legislative and judicial preference is to sever the offending term and enforce the balance of the agreement.” Though the “statute appears to give a trial court some discretion as to whether to sever or restrict the unconscionable provision or whether to refuse to enforce the entire agreement,” it “also appears to contemplate the latter course only when an agreement is ‘permeated’ by unconscionability.” The trial court’s decision to act as Civil Code section 1670.5 permits is reviewed for abuse of discretion. (Murphy v. Check ’N Go of California, Inc. (2007) 156 Cal.App.4th 138, 144 (Murphy).)

According to Charter, the Court of Appeal assumed that “while one or two provisions may be severed from an arbitration agreement, three or four is too many.” Charter urges that there is no hard and fast rule regarding the number of provisions that may be severed from a contract.

The Supreme Court noted that “some Courts of Appeal have treated the severance question as more of a quantitative inquiry than a qualitative one. (See, e.g., Carmona v. Lincoln Millennium Car Wash, Inc. (2014) 226 Cal.App.4th 74, 90; Ontiveros v. DHL Express (USA), Inc. (2008) 164 Cal.App.4th 494 at p. 515; Murphy supra, 156 Cal.App.4th at p. 149.) However, other courts have rejected the proposition that ‘more than a single unconscionable provision in an arbitration agreement precludes severance.’ (Lange, supra, 46 Cal.App.5th at p. 454.) “

The Supreme Court then clarified by saying: “Here, we clarify that no bright line rule requires a court to refuse enforcement if a contract has more than one unconscionable term. . Likewise, a court is not required to sever or restrict an unconscionable term if an agreement has only a single such term. Instead, the appropriate inquiry is qualitative and accounts for each factor Armendariz identified. At the outset, a court should ask whether ‘the central purpose of the contract is tainted with illegality.’ ” Other clarifying remarks on this topic were made in the Opinion.

“The Court of Appeal’s judgment is reversed. The matter is remanded for further proceedings consistent with our decision.” … “On remand, the Court of Appeal may consider the severance question anew, in light of its answers to those questions, and in a manner consistent with this opinion.”

The San Francisco Zen Center is the largest Soto Zen Buddhist temple in North America. It was formed to “encourage the practice of Zen Buddhism by operating one or more religious practice facilities and educating the public about Zen Buddhism.”

The Center operates three residential programs that build on each other. First, an individual can be a “guest student” who lives at the temple for two to six weeks. Second, an individual can be a Work Practice Apprentice (WPA) for a two-to-three-year residency. Third, an individual who completes a Work Practice Apprenticeship can be staff at the temple as a continuation of Zen training.

WPAs follow a strict practice schedule of formal and work practice. Formal practice includes morning and evening meditations and services, soji (temple cleanings), dharma talks, classes, and a range of other events. Work practice includes things like cooking, dishwashing, cleaning, and doan ryo ceremonial tasks ‘which support the formal practice, such as ringing bells, cleaning altars, and watching the door during zazen meditations.

Alexander Behrend became involved with the Center in 2014 after he was in a car accident that left him with physical disabilities and PTSD. Following his car accident, Behrend was unable to remain in his prior employment and therefore unable to afford his apartment. In 2016, he spoke with the Center’s head of practice because he was given a one-month notice of losing his housing. He then applied and was accepted as a guest student in November 2016. In January 2017, he was accepted as a WPA, where he received room and board at the center and a small stipend.

Behrend was assigned to the maintenance crew in September 2018, but that work exacerbated his PTSD symptoms. Behrend sought accommodations, including moving off the maintenance crew, but eventually the Center “made a decision to end [his] participation in the Program.”

Behrend sued for disability discrimination under the Americans with Disabilities Act (ADA) in the Northern District of California, and the Center moved for summary judgment on its affirmative defense under the First Amendment’s ministerial exception.

The district court granted the Center’s motion, determining that no party disputed that the Center is a religious organization and the undisputed facts established that Behrend fit within the ministerial exception. Behrend appealed, arguing that he was not a minister because he performed mostly menial work and did not have a “key role in making internal church decisions and transmitting the faith to others.”

The 9th Circuit Court of Appeals affirmed the district court’s grant of summary judgment in the published case of Alexander Behrend V. San Francisco Zen Center, Inc. -23-15399 (July 2024).

The ministerial exception exempts a church’s employment relationship with its ‘ministers’ from the application of some employment statutes, even though the statutes by their literal terms would apply. The exception is grounded in both religion clauses of the First Amendment. The Establishment Clause prevents the Government from appointing ministers, and the Free Exercise Clause prevents it from interfering with the freedom of religious groups to select their own.

The ministerial exception was recognized to preserve a church’s independent authority to select, supervise, and if necessary, remove a minister without interference by secular authorities.

Behrend argued on appeal that the exception only covers those with “key roles” in preaching and transmitting the faith to others. But precedent from the 9th Circuit and the Supreme Court evinces a much broader rule that covers positions like his.

There is no “rigid formula for deciding when an employee qualifies as a minister.” Hosanna-Tabor Evangelical Lutheran Church and School. v. EEOC, 565 U.S. 171(2012) at 190. In Hosanna-Tabor, the Supreme Court of the United States considered whether the exception applied to a “called” teacher at a Lutheran school who was commissioned by the Church after completing a special religious teaching program, and who taught elementary school math, language arts, social studies, gym, art, music, and religion to her students. Id. at 178.

Even though only a small part of her day was spent actually teaching religion, the Court determined the exception applied, considering “all the circumstances of her employment.” The Court found relevant that she was given a formal title by the Church, that she held herself out as a minister, and that she received the title after “a formal process of commissioning.”

“Here, the ministerial exception protects the Center’s ability to determine who may serve in its WPA program. While Behrend argues that he was not a minister because, as a WPA, he performed mostly menial work, there is no genuine dispute that ‘[w]ork itself is an essential component of Zen training and is indistinguishable from other forms of practice.’ “

While working inside a jet fuel tank at the San Francisco International Airport, Eugene Bowen fell from a ladder and was injured. Bowen attributed his fall to the flexible metal floor at the bottom of the fuel tank and the sand on that floor. The floor was made of pieces of metal welded together. When walked on, the surface would “raise up and down like a waterbed,” “flex” and “pop and move.” There was sand on the floor of the tank, underneath the ladder. Bowen did not notice the sand before he decided to use the ladder.

At the time, Bowen was employed by sub-tier independent contractor Team Industrial Services, Inc.. He sued general contractor Burns & McDonnell Engineering Company Inc. and subcontractor HMT, LLC  who hired Team, alleging a premises liability cause of action based on defendants’ negligence and negligent supervision.

The operative first amended complaint alleged a single cause of action for premises liability. Bowen averred defendants negligently owned, maintained, and operated premises with dangerous conditions that caused his injuries, including a ladder that was not properly secured to the scaffolding, an unbalanced floor, and debris on the floor.

Bowen received workers’ compensation benefits through Team in connection with the incident.

The trial court granted defendants’ respective motions for summary judgment based on the Privette doctrine (Privette v. Superior Court (1993) 5 Cal.4th 689 (Privette)), which limits a hirer’s liability for on-the-job injuries sustained by an independent contractor or its workers unless an exception applies.

With respect to Burns, the court observed that it did not own, install, or tag the ladder or scaffolding, nor did it direct or control the means by which Team did its work. Relative to HMT, the court stated HMT demonstrated it had a contract with Team providing that Team would “furnish all material, equipment, and labor necessary to perform the work.” Additionally, HMT presented evidence that it installed the scaffolding and ladder for its own work. Bowen did not dispute these facts or introduce evidence that Burns or HMT directed Teams or Bowen or required them to use HMT’s equipment. The court therefore entered judgment for defendants.

The Court of Appeal affirmed the trial court in the published case of Bowen v. Burns & McDonnell Engineering Co., Inc. -A166793 (July 2024). (NOTE:The opinion in the above-entitled matter filed on June 17, 2024 was not certified for publication in the Official Reports.  For good cause, the request for publication by Association of Southern California Defense Counsel was granted.)

Under the Privette doctrine, “a hirer is typically not liable for injuries sustained by an independent contractor or its workers while on the job.” As originally articulated, the doctrine was grounded on the principle that it would be unfair for the hirer of an independent contractor to be held liable for injuries to a contractor’s employee when the contractor’s own liability would be capped by the limits of its workers’ compensation coverage.

However, an exception to the Privette doctrine may exist when a hirer fails to effectively delegate all responsibility for workplace safety to the independent contractor. For the retained control exception to apply, there must be some indication the hirer directed that the contractor perform its work in a certain way or interfered with the means and methods by which the work was to be accomplished

“Here, it is undisputed that the Privette doctrine applies, and Bowen bears the burden of raising a triable issue of fact as to the applicability of an exception to the doctrine.” Bowen asserts that HMT “failed to meet its burden on summary judgment to show that there was no triable issue of material fact” regarding HMT’s retention of control over safety conditions; he further contends HMT “effectively” retained control because it was contractually responsible for the safety of its subcontractors and negligently set up a ladder and scaffolding for Bowen to use.

“But these arguments erroneously place the burden on HMT to demonstrate the lack of a triable issue of material fact when it is Bowen’s burden to raise a triable issue of fact as to an exception to the Privette doctrine once defendants demonstrate the applicability of that doctrine.”

“Bowen has presented no evidence HMT directed his work or told him to use the scaffold it left in place for its own employees. In fact, the evidence indicates that HMT was completely unaware Bowen would use its ladder and scaffold.”

Truck Insurance Exchange is the primary insurer for companies that manufactured and sold products containing asbestos. Two of those companies, Kaiser Gypsum Co. and Hanson Permanente Cement (Debtors), filed for Chapter 11 bankruptcy after facing thousands of asbestos-related lawsuits.

As part of the bankruptcy process, the Debtors filed a proposed reorganization plan. That Plan creates an Asbestos Personal Injury Trust under 11 U. S. C. §524(g), a provision that allows Chapter 11 debtors with substantial asbestos-related liability to fund a trust and channel all present and future asbestos-related claims into that trust.

Truck is contractually obligated to defend each covered asbestos personal injury claim and to indemnify the Debtors for up to $500,000 per claim. For their part, the Debtors must pay a $5,000 deductible per claim, and assist and cooperate with Truck in defending the claims.

The Plan treats insured and uninsured claims differently, requiring insured claims to be filed in the tort system for the benefit of the insurance coverage, while uninsured claims are submitted directly to the Trust for resolution.

Truck sought to oppose the Plan under §1109(b) of the Bankruptcy Code, which permits any “party in interest” to “raise” and “be heard on any issue” in a Chapter 11 bankruptcy. Among other things, Truck argues that the Plan exposes it to millions of dollars in fraudulent claims because the Plan does not require the same disclosures and authorizations for insured and uninsured claims. Truck also asserts that the Plan impermissibly alters its rights under its insurance policies.

The District Court confirmed the Plan. It concluded, among other things, that Truck had limited standing to object to the Plan because the Plan was “insurance neutral,” i.e., it did not increase Truck’s pre-petition obligations or impair its contractual rights under its insurance policies.

The Fourth Circuit affirmed, agreeing that Truck was not a “party in interest” under §1109(b) because the plan was “insurance neutral.”

The United States Supreme Court Reversed in the case of Truck Insurance Exchange v. Kaiser Gypsum Company, Inc. No. 22-1079 (June 2024)

An insurer with financial responsibility for bankruptcy claims is a “party in interest” under §1109(b) that “may raise and may appear and be heard on any issue” in a Chapter 11 case. Section 1109(b)’s text, context, and history confirm that an insurer such as Truck with financial responsibility for a bankruptcy claim is a “party in interest” because it may be directly and adversely affected by the reorganization plan.

“Section 1109(b)’s text is capacious. To start, it provides an illustrative but not exhaustive list of parties in interest, all of which are directly affected by a reorganization plan either because they have a financial interest in the estate’s assets or because they represent parties that do. This Court has observed that Congress uses the phrase “party in interest” in bankruptcy provisions when it intends the provision to apply “broadly.”Hartford Underwriters Ins. Co. v. Union Planters Bank, N. A., 530 U. S. 1, 7.”

“This understanding aligns with the ordinary meaning of the terms “party” and “interest,” which together refer to entities that are potentially concerned with, or affected by, a proceeding. The historical context and purpose of §1109(b) also support this interpretation. Congress consistently has acted to promotegreater participation in reorganization proceedings. That expansion of participatory rights continued with the enactment of §1109(b).Broad participation promotes a fair and equitable reorganization process.”

“Applying these principles, insurers such as Truck are parties in interest. An insurer with financial responsibility for bankruptcy claims can be directly and adversely affected by the reorganization proceedings in myriad ways.”

Elon Musk has successfully had a $500 million lawsuit against him dismissed. The lawsuit was brought by thousands of former Twitter employees who claimed they were owed severance pay after Musk laid off a significant portion of the workforce following his acquisition of the company.

From August 2020 through January 4, 2023, Plaintiff Courtney McMillian was an employee at Twitter as the Head of People Experience leading Compensation, Benefits, and other global functions.From June 2021 through April 28, 2023, Plaintiff Ronald Cooper was a Workplace Operations, Facilities, and People Manager.

McMillian and Cooper filed this putative class action under the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. §§ 1001, et seq. Plaintiffs claim that their former employer, Twitter, Inc., now X Corp, provided insufficient severance payments under a post-termination benefits plan that applies to former Twitter employees due to Twitter’s takeover in October 2022.

Defendant Twitter is a social media company and online platform. Plaintiffs McMillian and Cooper, along with the putative class members, were employed by Twitter before their employment was terminated due to the takeover layoffs. Defendant X Corp is successor in interest to Twitter. After the March 2023 merger, X Corp assumed all of Twitter’s debts and obligations.

Plaintiffs claim that after the takeover they were only offered one months’ worth of severance pay but are entitled to a higher amount under the plan. As a result, Plaintiffs seek relief for (1) wrongful denial of benefits under an ERISA plan; (2) breach of fiduciary duties imposed by ERISA for failure to fund plan; and (3) failure to provide complete and accurate information about an ERISA plan.

The class is defined as “[a]ll participants and beneficiaries of the Plan who were terminated from Twitter since the date of Defendant Musk’s takeover, October 27, 2022, through the date of judgment.”

McMillian’s class action is one of multiple lawsuits filed by former Twitter employees relating to the 2022 restructuring of Twitter and subsequent layoffs. For example, on November 3, 2022, Cornet v. Twitter, Inc. was filed amidst ongoing layoffs at Twitter. No. 22-cv-06857-JD, 2022 WL 18396334, at (N.D. Cal. Dec. 14, 2022). About four months after the second amended complaint was filed in Cornet, Cornet was transferred from the Northern District of California to the District of Delaware and assigned Case No. 23-cv-00441-JLH, transfer date April 20, 2024.

The Cornet plaintiffs assert contract-based claims for severance benefits on behalf of a nationwide putative class of X Corp employees and former employees that had been promised that “if there were layoffs, employees would receive benefits and severance at least as favorable as the benefits and severance that Twitter previously provided to employees.”

Both this action and the Cornet action concern Twitter’s deficient severance payments following mass layoffs in November 2022, December 2022, February 2023, and September 2023 after Twitter was purchased in October 2022.

Defendants filed a Motion to Dismiss asserting, among other things, that ERISA did not apply to Twitter’s post-buyout plan because there was no “ongoing administrative scheme” where the company reviewed claims case-by-case, or offered benefits such as continued health insurance and out placement services. On July 9, 2024 the federal judge agreed with Plaintiffs and dismissed the case of McMillian v Musk et.al. -3:23-cv-03461in her 23 page ruling.The Court granted leave to amend the complaint, but only as to claims that are not governed by ERISA.

For Plaintiffs’ operative complaint to survive the Motion to Dismiss, Plaintiffs must plead sufficient facts that allow the court to draw the reasonable inference that the severance plan is governed by ERISA. For a severance benefit plan to be governed by ERISA however, it must be an ongoing administrative program for processing claims and paying benefits. (Fort Halifax Packing Co. v. Coyne, 482 US 1at 12.)

“The operative complaint lists the severance benefits components and the payments Plaintiffs expected for each of those components after Twitter’s takeover. The allegations state the formulas provided for the human resources staff to calculate amounts (or the cash equivalent) of benefits that would be paid to the terminated employees in one lump sum and provided at one point in time. Because there are set formulas, or mathematical calculations of severance benefits, to be paid at one point in time without any “ongoing particularized discretion”, these allegations do not show that Plaintiffs adequately pled an ongoing administrative scheme under Velarde.” (Velarde v. PACE Membership Warehouse, Inc., 105 F.3d 1313, 1317 (9th Cir. 1997) )

Upon the filing of a sufficient complaint (stating non-ERISA claims for breach of contract, promissory estoppel, etc.), the Court will consider issuing an Order finding this case related to one of the cases currently pending, such as Cornet, No. 23-cv-00441-JLH. Also related to Cornet are Arnold, No. 23-cv-00528-JLH-CJB and Woodfield, No. 23-cv-0780-JLH, both of which are pending in the District of Delaware.

If this action is found to be related to Cornet, then it can be transferred to the District of Delaware since the ERISA venue provisions will not apply once the SAC is filed with its non-ERISA claims.