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Wang v. Chinese Daily News

September 27, 2010

LYNNE WANG; YU FANG INES KAI; HUI JUNG PAO, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED; LIEN YI JUNG; YU FANG KAI; CHANG CHINGFANG; JEFFREY SUN; SHIEH-SHENG WEI; YUN MIN PAO; HUI JUNG LEE; CHENGYANG YAN; SHIANG HUANG; CHIH-MING SHEU; MINH VI-HUYNH; JENNY LIU HUNG, PLAINTIFFS-APPELLEES,
v.
CHINESE DAILY NEWS, INC., DEFENDANT-APPELLANT.
LYNNE WANG; YU FANG INES KAI; HUI JUNG PAO, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS-APPELLEES, AND LIEN YI JUNG; YU FANG KAI; CHINGFANG CHANG; SHIEH-SHENG WEI; YUN MIN PAO; HUI JUNG LEE; CHENYANG YAN; SHIANG L. HUANG; CHIH-MING SHEU; MINH VI-HUYNH; JENNY LIU HUNG; JEFFREY SUN, PLAINTIFFS,
v.
CHINESE DAILY NEWS, INC., DEFENDANT-APPELLANT.



Appeal from the United States District Court for the Central District of California Consuelo B. Marshall, District Judge, Presiding D.C. Nos. 2:04-cv-01498-CBM-JWJ & 2:04-cv-01498-CBM-JWJ.

The opinion of the court was delivered by: W. Fletcher, Circuit Judge

FOR PUBLICATION

Argued and Submitted June 7, 2010 -- Pasadena, California

Before: Stephen S. Trott and William A. Fletcher, Circuit Judges, and Charles R. Breyer,*fn1 District Judge.

OPINION

Chinese Daily News, Inc. ("CDN"), a Chinese-language newspaper, appeals the district court's judgment in an action brought by some of its California-based employees under the federal Fair Labor Standards Act ("FLSA") and under California law. The district court certified the FLSA claim as a collective action. It certified the state-law claims as a class action under Rule 23(b)(2) and, alternatively, under Rule 23(b)(3). In the state-law class action, it provided for notice and opt out, but subsequently invalidated the opt outs. It granted partial summary judgment to plaintiffs; held jury and bench trials; entered judgment for plaintiffs; awarded attorney's fees to plaintiffs; and conducted a new opt-out process. CDN appeals, challenging aspects of each of these rulings, as well as the jury's verdict. We have jurisdiction under 28 U.S.C. § 1291 and we affirm.

I. Background

On March 5, 2004, three employees of CDN, Lynne Wang, Yu Fang Ines Kai, and Hui Jung Pao, filed suit against CDN on behalf of current, former, and future CDN employees based in CDN's San Francisco and Monterey Park (Los Angeles), California locations. They alleged violations of the FLSA, California's Labor Code, and California's Unfair Competition Law, Cal. Bus. & Prof. Code § 17200. They alleged that employees were made to work in excess of eight hours per day and forty hours per week. They further alleged that they were wrongfully denied overtime compensation, meal and rest breaks, accurate and itemized wage statements, and penalties for wages due but not promptly paid at termination. They sought monetary damages, restitution, attorney's fees, and injunctive relief.

After plaintiffs narrowed the class definition to include only non-exempt employees at the Monterey Park facility, the district court certified the FLSA claim as a collective action. As we discuss in greater detail later in this opinion, group claims for violations of FLSA are typically maintained as an opt-in "collective action" to which each participant must individually consent.

The district court certified the state-law claims as a class action under Rule 23(b)(2). Wang v. Chinese Daily News, Inc., 231 F.R.D. 602 (C.D. Cal. 2005). Recognizing that Rule 23(b)(2) certification is not appropriate where claims for monetary relief predominate, the district court held that Rule 23(b)(2) certification was appropriate because plaintiffs' claims for monetary and injunctive relief were on "equal footing," and because future compliance by CDN was potentially the remedy of greatest value to plaintiffs. In light of the substantial claims for monetary relief, the district court exercised its discretion to provide class members notice and an opportunity to opt out. The district court later "clarified" that the opportunity to opt out was restricted to the claims for monetary relief. When it certified the class, the court also concluded, in the alternative, that certification was appropriate under Rule 23(b)(3).

After the court approved the form of notice, putative class members were given a three-month period, ending October 15, 2005, to opt in to the FLSA action and to opt out of the state-law claims. Forms were mailed to 187 individuals, and notice was posted and forms made available at CDN's Monterey Park facility. Plaintiffs received back about 155 opt-out forms, including 18 from individuals not on the original list of class members. Plaintiffs filed a motion to invalidate the opt outs, for curative notice, and to restrict CDN's communication with class members. On June 7, 2006, the court granted the motion, finding that "the opt out period was rife with instances of coercive conduct, including threats to employees' jobs, termination of an employee supporting the litigation, the posting of signs urging individuals not to tear the company apart, and the abnormally high rate of opt outs." Wang v. Chinese Daily News, Inc., 236 F.R.D. 485, 491 (C.D. Cal. 2006). The district court deferred any future opt-out procedure until after the trial on the merits.

Both sides sought summary judgment on the question whether CDN's reporters were exempt or non-exempt employees. Non-exempt employees are entitled to overtime; exempt employees are not. The court granted summary judgment to plaintiffs, holding that CDN's reporters did not qualify for the "creative professional exemption." Wang v. Chinese Daily News, Inc., 435 F. Supp. 2d 1042 (C.D. Cal. 2006); see 29 C.F.R. § 541.302(d). Plaintiffs were also granted summary judgment on other issues, from which CDN has not appealed.

CDN contended that the district court should adjudicate only the FLSA claim and should decline to exercise supplemental jurisdiction over the state-law claims. The court disagreed, exercising its discretion to retain supplemental jurisdiction. CDN twice more objected to the exercise of supplemental jurisdiction, and objected, further, that the § 17200 claim was preempted by FLSA. The district court rejected these objections.

The court held a 16-day jury trial starting in November 2006, and the jury returned a special verdict on January 10, 2007. On appeal, CDN challenges the jury's finding that CDN did not provide reporters with meal breaks. CDN also challenges the amount of damages awarded on all class claims, contending that the award was based on a class that was too large.

From July 31, 2007 to August 2, 2007, the court held a bench trial on the remaining issues of injunctive relief, penalties, prejudgment interest, and restitution pursuant to the § 17200 claim. The court concluded, inter alia, that a cause of action under § 17200 based on violations of FLSA was not preempted. It denied an injunction after concluding that CDN had abandoned its unlawful business practices and had taken substantial steps toward compliance, and that plaintiffs' remaining injuries could be remedied by money damages. On appeal, CDN contends that the district court erred in permitting salespersons who had not opted in to the FLSA collective action to pursue claims for relief under § 17200 based on FLSA violations.

The district court entered judgment, denied CDN's post-trial motions, and granted plaintiffs' motion for attorney's fees. On May 15, 2008, the court issued an order establishing a new 30-day window to opt out of the class action and appointing a special master to oversee the opt-out process and distribution of the award. Out of 273 class members to whom notice was sent, 116 opted in, 61 opted out, and 96 did not respond. On June 25, 2008, the district court issued an order providing that distribution of unclaimed shares of the award from class members who had opted in, and the share of the award attributable to those who had opted out, would await the running of the statute of limitations on the filing of individual suits against CDN.

CDN timely appealed.

II. Discussion

A. Reporters' Exemption Status

CDN argues that the district court erred in holding on summary judgment that CDN's reporters were non-exempt employees entitled to overtime. Specifically, CDN argues that its reporters were subject to the "creative professional exemption" and were therefore exempt employees not subject to FLSA and state-law overtime pay and break requirements. We review the district court's grant of summary judgment de novo. Bamonte v. City of Mesa, 598 F.3d 1217, 1220 (9th Cir. 2010).

[1] Federal law exempts employers from paying overtime to "any employee employed in a bona fide... professional capacity." 29 U.S.C. § 213(a)(1). To qualify as an exempt professional under federal law, an employee must be compensated "at a rate of not less than $455 per week," and his or her "primary duty" must be the performance of exempt work. 29 C.F.R. §§ 541.300, 541.700. "[A]n employee's primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor as opposed to routine mental, manual, mechanical or physical work." 29 C.F.R. § 541.302(a). The exemption is construed narrowly against the employer who seeks to assert it. Cleveland v. City of Los Angeles, 420 F.3d 981, 988 (9th Cir. 2005). California wage and hour law largely tracks federal law. See Industrial Welfare Commission Order 4-2001 § 1(A)(3)(b) (defining professional to include "an employee who is primarily engaged in the performance of... [w]ork that is original and creative in character in a recognized field of artistic endeavor... and the result of which depends primarily on the invention, imagination, or talent of the employee"); see also id. § 1(A)(3)(e) (directing that the exemption is "intended to be construed in accordance with... [inter alia, 29 C.F.R. § 541.302] as [it] existed as of the date of this wage order").

[2] As applied to journalists, the federal Department of Labor construed the "creative professional exemption" in a 2004 regulation:

Journalists may satisfy the duties requirements for the creative professional exemption if their primary duty is work requiring invention, imagination, originality or talent, as opposed to work which depends primarily on intelligence, diligence and accuracy. Employees of newspapers, magazines, television and other media are not exempt creative professionals if they only collect, organize and record information that is routine or already public, or if they do not contribute a unique interpretation or analysis to a news product. Thus, for example, newspaper reporters who merely rewrite press releases or who write standard recounts of public information by gathering facts on routine community events are not exempt creative professionals. Reporters also do not qualify as exempt creative professionals if their work product is subject to substantial control by the employer. However, journalists may qualify as exempt creative professionals if their primary duty is performing on the air in radio, television or other electronic media; conducting investigative interviews; analyzing or interpreting public events; writing editorials, opinion columns or other commentary; or acting as a narrator or commentator.

29 C.F.R. § 541.302(d) (2004). Unlike the "interpretation" it replaced, the 2004 regulation was promulgated pursuant to notice and comment rulemaking and therefore has the force of law. See 69 Fed. Reg. 22122, 22157-58 (Apr. 23, 2004). In promulgating the new regulation, the Department of Labor explained that "[t]he majority of journalists, who simply collect and organize information that is already public, or do not contribute a unique or creative interpretation or analysis to a news product, are not likely to be exempt." Id. at 22158.

Although we have not decided a case applying the creative professional exemption to journalists, other courts have explored the circumstances under which print journalists qualify for the exemption. In Reich v. Gateway Press, Inc., 13 F.3d 685 (3d Cir. 1994), the Third Circuit concluded that none of the reporters at a chain of nineteen local weeklies was exempt. The newspapers largely contained "information about the day-to-day events of their respective local communities... overlooked by the Pittsburgh metropolitan daily press." Id. at 688. The reporters primarily generated articles and features using what they knew about the local community, spent 50-60% of their time accumulating facts, and mostly filed recast press releases or information taken from public records. They wrote a feature article or editorial about once per month. Id. at 689. The court held that they were among the majority of reporters who were non-exempt. Id. at ...


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