Morrison & Foerster LLP

09/24/2021 | News release | Distributed by Public on 09/24/2021 15:11

This Week at The Ninth: Abatement and Discharge

This week, the Court considered the retroactivity of California's Proposition 22-which designates "app-based drivers" as independent contractors under certain conditions-and addressed the requirements for Clean Water Act citizen suits.

LAWSON v. GRUBHUB, INC.

The Court holds that California's Proposition 22 does not apply retroactively or abate preexisting wage-and-hour claims.

The panel: Judges W. Fletcher, Watford, and Collins, with Judge Fletcher writing the opinion.

Key highlight: "Grubhub argues that the phrase in Proposition 22 that reads '[n]otwithstanding any other provision of law, including . . . the Labor Code' abolished the ABC test. Cal. Bus. & Prof. Code § 7451. But Proposition 22 did not wholly abolish causes of action under the ABC test. Rather, it crafted a conditional and prospective exemption from the test for some workers. Proposition 22 neither changed the underlying Labor Code provisions governing these claims nor 'changed the portion of AB-5 that set forth the ABC test itself.'"

Background: Plaintiff Raef Lawson had worked as a food delivery driver for Grubhub. Lawson brought suit for violations of the California Labor Code, claiming he had been improperly classified as an independent contractor rather than an employee. The district court granted Grubhub's preemptive motion to deny class certification, then, at a bench trial, concluded that Lawson had been properly classified as an independent contractor. In reaching that conclusion, the district court applied the then-applicable test set forth by S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 769 P.2d 399 (Cal. 1989). After the district court's decision, the California Supreme Court adopted the "ABC" test for determining whether an individual is an independent contractor or an employee (Dynamex Operations W., Inc. v. Superior Court, 416 P.3d 1 (Cal. 2018)) and subsequently made it retroactive, the California Legislature codified that test in part, and California voters passed Proposition 22 making "app-based drivers" independent contractors if certain conditions are met.

Result: The Ninth Circuit affirmed in part and vacated in part. First, the Court of Appeals concluded that the district court had not abused its discretion in denying class certification. As the Court explained, nearly all the members of Lawson's putative class of delivery drivers had signed agreements waiving their rights to participate in any class action-the sole exceptions being Lawson and one other individual. Thus, the Court concluded, Lawson "is neither typical of the class nor an adequate representative," and "the proceedings would be unlikely to generate common answers."

Next, the Court vacated the district court's judgment on the merits. It rejected Grubhub's argument that Proposition 22 had "abated" the application of the ABC test to these claims. First, the Court of Appeals held that Proposition 22-unlike the Dnyamex decision adopting the ABC test-"does not apply retroactively." As it reasoned, statutes are presumptively prospective in application, and nothing in Proposition 22 indicated any intent to depart from that default rule. Second, the Court then dismissed Grubhub's contention that Proposition 22 nevertheless governed Lawson's claim to employment benefits because it had been enacted before Lawson secured a judgment. In doing so, the Court applied California's 4-factor "abatement" test-which considers "(1) the statutory nature of the plaintiffs' claim"; (2) "the unvested nature of the plaintiffs' claimed rights"; (3) "the timing of the elimination of those rights"; and (4) "the nature of the mechanism by which the right of action was eliminated." While the Court concluded that the first factor slightly favored Grubhub because Lawson's claims were "primarily statutory," it determined that the remaining three factors counseled against abatement, largely because Lawson's right to unpaid wages were "vested property rights," and because Proposition 22 had not wholly abolished claims under the ABC test, but had instead simply set forth a number of conditions for such claims.

INLAND EMPIRE WATERKEEPER v. CARONA CLAY CO.

The Court holds that Clean Water Act ("CWA") citizen suits can be based on ongoing violations of procedural permit conditions, and thus do not require proof of an ongoing discharge violation.

The Panel: Judges Siler (6th Cir.), Hurwitz, and Collins, with Judge Hurwitz writing the opinion, and Judge Collins dissenting.

Key Highlight: "Relying on the text and structure of the CWA, we conclude that the district court erred in interpreting Gwaltney as requiring an ongoing discharge violation as a prerequisite to a CWA citizen suit asserting ongoing monitoring and reporting violations."

Background: Two nonprofits sued Corona Clay Company, a company that processes clay products near Temescal Creek, for violating the Clean Water Act by violating discharge, monitoring, and reporting conditions of the permit issued by the California State Water Resources Board. The district court granted partial summary judgment to plaintiffs, finding it undisputed that Corona Clay had violated certain conditions of the permit. The remaining claims alleging discharge, monitoring, and reporting violations proceeded to trial, where the district court instructed the jury that to prevail on those claims the plaintiffs must prove either a forbidden discharge after the complaint was filed, or a reasonable likelihood that discharge violations would thereafter recur. In crafting that instruction, the court relied on the Supreme Court's decision in Gwaltney of Smithfield, Ltd.v. Chesapeake Bay Foundation, 484 U.S. 49 (1987), which precludes a CWA citizen suit for "wholly past" violations of the CWA. The district court interpreted that decision as requiring not just any ongoing permit violation, but specifically ongoing discharge violations. After the jury reached a verdict for Corona Clay, the district court entered judgment for Corona Clay.

Result: The Ninth Circuit vacated the district court's judgment and remanded. The court first held that the plaintiffs had Article III standing to pursue their discharge claims because their members live near the Creek and use it for recreation. They also had standing to pursue their reporting and monitoring claims because their members demonstrated individual concern that Corona's monitoring and reporting failures created a genuine threat of undetected past or future polluted discharge, harming the plaintiffs' aesthetic or recreational interest.

On the merits, the Court concluded that the district court misinterpreted Gwaltney as requiring an ongoing discharge violation as a prerequisite to a CWA suit asserting ongoing monitoring and reporting violations. The Court held that Gwaltney permits a citizen suit based on ongoing or imminent procedural violations.

The Court also determined that this case was affected by since-overruled Ninth Circuit precedent that had required CWA plaintiffs to show only that pollutants in navigable waters were fairly traceable from the point source. In the district court, jurisdiction had been premised on Corona's admission that its storm water discharge flows indirectly into Temescal Wash. After the final judgment in this case, the Supreme Court in County of Maui v. Hawaii Wildlife Fund, 140 S. Ct. 1462 (2020) held that, under the CWA's jurisdictional discharge requirement, an offending discharge must reach the waters of the United States either through a direct discharge or a functional equivalent. The Court concluded that it was no longer obvious that the admitted flow was direct as required by the County of Maui. The Court concluded that the parties should have an opportunity to address whether the required discharge had been met.

Judge Collins dissented. He concluded that the plaintiffs had not satisfied the requirements for Article III standing, and he would have remanded for the district court to determine whether the jury's defense verdict precluded the plaintiffs from making that showing.

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