Archive for June, 2010

Happy Meal Lawsuit Threatened Against McDonald’s: Is the Happy Meal Really Like “Joe Camel,” and Does It Really Violate Consumer Protection Laws?

Friday, June 25th, 2010

Chris Vrountas offers the following post:

The Center for Science in the Public Interest has threatened to file consumer protection lawsuits in a number of jurisdictions against McDonald’s unless the fast food chain stops its practice of offering toys to children who order the Happy Meal, which typically includes a cheeseburger and “fries.” The Group claims that McDonald’s marketing “unfairly and deceptively” targets children by enticing them with toys to “nag” their parents to have them buy allegedly unhealthy or high fat meals. “McDonald’s “couldn’t disagree more” and asserts that the chain offers a great variety of foods that include low fat and healthier options.”

While McDonald’s may have its own legal defenses, there is another perhaps larger potential defect in the group’s theory against the chain. “Ultimately, it is one of causation.” Or in other words, as some skeptics have argued, it’s called “parenting,” and perhaps those concerned with what their children eat should “just do it.”  It is one thing if the concern” was about children old enough, to have their own purchasing power and about advertising that in fact deceives them “into purchasing a harmful product.” Think, for example, of Joe Camel, a marketing program allegedly targeted to children who were not legally permitted to use the product but who nevertheless could purchase it with their own money. “Here, however, the customers are parents who presumably can read labels and the nutrition content offered by the chain to anyone who asks.” While toys may entice children to ask their parents for something that is not good for them, parents with access to full information make the final call. In that context, the defense argument goes, how can the real customer genuinely argue that the chain has been “deceptive” in its marketing?

The Group, however, insists that the targeting of children, who are “really the ultimate customers, is calculated to mislead them so that they may press their parents into purchasing allegedly unhealthy products for them.” And, if the chain’s marketing is not actually “deceptive,” then perhaps it is “unfair” to market in such a fashion as to mislead children into becoming “an unpaid army drone army of work-of- mouth marketers, causing them to nag their parents to bring them to McDonald’s.”

The Group is not the only critic of the Happy Meal practice. “Santa Clara County in California this year” enacted a ban in restaurants on toy give-aways associated with high calorie meals aimed at children. “There are a number of ways a restaurant could arguably comply with this ban while nevertheless continuing to offer loss leader toys to children.” For example, one could offer an alternative series of meal packages, including both “healthy” and “high calorie” options, that would all include the toy give-away. “There” really is no reason why kiddie toys should only be associated with the “lunch box of death.”

The Group has served its demand letter upon McDonald’s, giving the chain 30 days to respond with a reasonable offer of settlement. “What McDonald’s may do remains to be seen.” “While it is a free country, hopefully McDonald’s and the nutrition activists can bring freedom of choice and health to a workable compromise and settle this alleged consumer protection claim, as there is no reason why a Happy Meal cannot also be a healthy meal.

Posted in Health & Safety, Industry News, Menu Labeling, Restaurant Liability | No Comments »

Supreme Court Rules Police Departments Search of Employee Text Messages Reasonable

Friday, June 18th, 2010

Yesterday the Supreme Court ruled that the Ontario, California Police Department acted reasonably in reading employee text messages to determine if City pagers were being used primarily for work purposes. “The unanimous decision, in Quon v. City of Ontario, will have implications for the privacy rights of both public and private employees.”

The City purchased pagers capable of sending and receiving text messages and a data plan that permitted each pager to send or receive a finite number of characters per month, with overage charges for additional messaging. “The city’s privacy policy stated, [u]sers should have no expectation of privacy or confidentiality, in network activity such as internet and e-mail use.” Though the policy did not explicitly cover the pagers, the Police Department orally represented at a meeting (which plaintiff Jeff Quon attended) that the policy applied to the pagers.

After one or two billing cycles indicated that some officers, including Quon, were exceeding their character limits, a Police Lieutenant told Quon and other officers that the Department would not audit (i.e. read) the messages to determine if they were work-related if the officers “personally paid their overage fees.” Later, after the lieutenant “had become tired of being a bill collector,” the Chief of Police decided to determine whether the character limit was too low for official business, or whether the overages were the result of personal use.” To do that, the Chief ordered a review of two months in which Quon and another officer had overages to determine the reason for those overages.” Ultimately, a Department report found that of the 456 messages Quon send during work hours in August 2002, only 57 were work-related.” In fact, many turned out to be sexually explicit communications made to his now ex-wife and a female officer with whom Quon had been having an affair.

Quon and others sued the Department, among others, alleging the search violated his reasonable expectation of privacy in the text messages protected by Fourth Amendment. “After a jury trial, the federal trial court found no violation of Quon’s Fourth Amendment rights, noting that the jury had found the purpose of the search was not to investigate Quon, but rather to evaluate Department policy (i.e. whether the character limit was too low).” As we have previously blogged, the 9th Circuit Court of Appeals reversed the trial court’s decision, holding that Quon had a reasonable expectation of privacy, and there were “a host of simple ways” to conduct a less intrusive audit, “such as warning Quon at the beginning of the month that his future messages would be audited, or asking Quon himself to redact the transcript of his messages.”

In a unanimous opinion, the Supreme Court reversed the 9th Circuit, holding that the circuit court’s opinion suffered from “analytic errors,” and that the search did not violate Quon’s Fourth Amendment rights.  “Noting that it has,”repeatedly refused to declare that only the least intrusive search practicable can be reasonable under the Fourth Amendment, “the Supreme Court found the search to be reasonable, given the Department’s legitimate business purpose in conducting the audit and its attempts to redact from review messages sent by Quon while off duty.

Perhaps even more anticipated than the ultimate outcome of the case (the Ninth Circuit is frequently reversed) was whether the Court would use the opportunity to erase confusion about its precedents on workplace privacy for public employees, and update previous holdings for the information age.  “This question was answered, disappointingly many will feel, in the first sentence of Justice Kennedy’s opinion for the Court, which states that, [t]hough the case touches issues of far-reaching significance, the Court concludes it can be resolved by settled principles determining when a search is reasonable.” Justice Scalia, concurring in the judgment, chastised the Court for refusing to tackle the need to revise legal standards in light of emerging technologies.

Although the Quon court vindicated the City’s search, most employers, public or private, would prefer to avoid a trial, followed by two rounds of appellate practice ending at the Supreme Court. “Simple, common sense procedures by Police Department management may have prevented the litigation from occurring in the first place.” Had the Department updated its written communications policy to include pager transmissions, disseminated that policy to officers, and enforced its written policy in a consistent manner, the lawsuit may have been averted.” Consistent enforcement of disseminated written policies is the best defense to an employee’s claim that he or she had expectations that differed from that policy.” While Quon may be interesting reading for lawyers, avoiding Quon-type litigation is certainly more interesting for employers.

This entry was submitted by Stephen Coppolo, a member of the Firm’s Employment Counseling and Litigation Practice Group, and Samantha Yanco, a summer associate with Nelson, Kinder, Mosseau & Saturley.

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New Use of Old Policy Starts New Clock for Timely Workplace Race Discrimination Claims Based on Disparate-Impact Theory

Wednesday, June 9th, 2010

A recent opinion by the Supreme Court clarified the time limit for bringing workplace race discrimination claims based on a disparate-impact theory of discrimination. In a unanimous opinion issued on May 24, 2010 in Lewis v. City of Chicago, the Court held that African-Americans who had taken the exam to become Chicago firefighters and earned scores in the ???qualified??? range, but not the ???well qualified??? range brought a timely disparate-impact claim because their claim was within the deadline of when the City applied those classifications, even if it would have been time-barred as to when the City first established the classification.

The Court highlighted that Title VII prohibits employers from using a particular employment practice that causes a disparate impact on the basis of race, color, religion, sex or national origin. The Court found that the City of Chicago had used the classifications from its 1995 firefighter exam each time that it selected applicants to advance from the eligibility list, which it did multiple times during the subsequent years. When it ???used??? the list, the City committed a new discriminatory act. Because the plaintiff class filed discrimination charges with the EEOC within 300 days after one such unlawful practice occurred, it was not time-barred under the Title VII requirements for a timely complaint.

The opinion noted that the effect of this opinion could allow for workplace race discrimination lawsuits challenging employment practices that had been in place for years, during which time the employer???s evidence of the business necessity behind the challenged policy might become diluted. Nevertheless, the Court found this to be the meaning intended under the disparate-impact section of Title VII of the Civil Rights Act of 1964 in 42 U.S.C. ??2000e-2(k)(1)(A)(i).

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Employee Class Actions Increase Heat on National Employers across all industries: Just ask Novartis, Wal*Mart, Starbucks and Outback

Thursday, June 3rd, 2010

Employee class actions have increased the heat on national employers across all industries; just ask Novartis, Wal*Mart, Starbucks and Outback Steakhouse.?? Employee class actions can be expensive to defend against and harder to settle than single plaintiff litigation.?? In fact, the class action plaintiffs??? bar generally operates on a ???the bigger they are, the harder they fall??? model.?? For them, a class of sixty employees is just another case on the docket, but a class of sixty thousand can be national news, increasing public pressure on the employer to settle.

Case in point: a recent federal appeals court decision allowed a massive class action lawsuit to go forward against Wal*Mart, the nation???s largest private employer.?? On April 26, 2010, an eleven-judge panel of the Ninth Circuit ruled 6-5 that a class action alleging less favorable treatment of female employees filed on behalf of all women who worked at Wart*Mart from 1998 and the present could go forward.?? In 2001, at the time of filing, the named class was estimated to contain 1.5 million members.?? Wal*Mart unsuccessfully argued that such a lawsuit was inherently unmanageable, and is now considering an appeal to the Supreme Court.?? This is not an insolated incident for Wal-Mart, which in December 2008 alone settled 63 class actions for a total of $640 million.

Wal*Mart, of course, is not alone.?? A federal jury in Manhattan ruled on May 19, 2010 that Novartis Pharmaceuticals Corporation engaged in a pattern of discrimination against women from 2002 through 2007 and must pay $250 million in punitive damages.?? The jury found that Novartis discriminated against thousands of female sales representatives concerning pay, promotion, and pregnancy.?? The jury also awarded $3.3 million in compensatory damages to twelve women who testified in the class action suit.?? The compensatory award allows 5,588 other women to apply for compensatory damages, which will be determined on an individual basis.?? ??Obviously, the total payout could increase exponentially with the inclusion of the additional claims of the other class members.

Other recent cases point in a similar direction.?? In Chau v. Starbucks Corp., filed in California state court in 2004, the plaintiff class alleged that Starbucks violated California???s Labor Code by pooling tips left in tip jars and sharing those not just with baristas (part-time hourly employees), but also with shift supervisors (also part-time hourly employees), who spend 90 percent of their time performing barista tasks.?? The Plaintiffs alleged that this violated California Labor Code Cal. Labor Code ?? 351, which states that ???[n]o employer or agent shall collect, take, or receive any gratuity or a part thereof that is paid, given to, or left for an employee by a patron.???

The California superior court certified the class of current and former baristas, and after a bench trial, the trail judge found the tip pooling violated ?? 351 because the shift supervisors were ???agents??? of the employer.?? The class was awarded $86 million in damages.?? Recently, the California Court of Appeals overturned the multimillion dollar verdict, holding that under Starbucks??? team service concept, tips were left for the entire team of employees, including shift supervisors whom to customers were visually indistinguishable from baristas.?? Despite the ultimate victory in California, the original verdict led to copycat class-actions in Massachusetts and New York.?? Outcomes there may differ as the wage laws in the various states differ, but the threat of class action remains constant.

In EEOC v. Outback Steakhouse, filed in Colorado federal court in 2006, the Equal Employment Opportunity Commission acting on behalf of all female employees at company-owned restaurants, alleged that Outback denied women equal opportunities for advancement.?? Specifically, the EEOC alleged that Outback engaged in ???gender discrimination on a systemic scale??? by maintaining a glass ceiling that kept women from promotion to higher-level profit-sharing positions.

From the outset, this was a difficult case to defend for Outback, as a joint venture partner had stated that female employees had ???let him down??? and ???lost focus??? when they had children, and that he wanted ???the cute girls??? work in the front as servers.?? In December 2009, the court accepted a $19 million settlement between the parties, which also included a host of other requirements, such as hiring a ???Vice President of People??? (query exactly what that position entails).

No one ???cure-all??? exists for your business to avoid an employee class action suit.?? But creating a culture of best practices can help minimize risk: (1) develop written employment policies with your attorney and communicate them; (2) follow up with training like you mean it rather than holding mere ???one off??? trainings with little impact on employees, (3) develop a culture of respect and team work with a diversity action program that integrates a strategy through hiring, mentoring, promoting and monitoring, (4) make your cultural values specific and reviewable on a performance level with your managers and staff, (5) ensure your human resources department works closely with operations to develop, promote and enforce your culture and values, including legal compliance, (5) make the process of reporting of complaints clear and easy, and investigations of those complaints quick, thorough and confidential.?? While size matters for the plaintiff lawyers, culture can combat the risk of class actions and in the end give your company an edge in the market for talented workers.

Chris Vrountas, Chair of the Employment Counseling and Litigation Practice Group, contributed this posting.

Posted in Class Actions, Diversity, Employment Law/Cases, Industry News | No Comments »