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Poole & Shaffery, LLP

Poole & Shaffery, LLP’s litigation practice concentrates in the areas of general liability, transportation, product liability, construction defect, business litigation, employment litigation, toxic torts, professional liability and intellectual property.

Issue 5 | February 2017


A new administration naturally brings with it a flurry of regulatory course changes, and regulations of the Federal Motor Carrier Safety Administration (FMCSA) are no exception as seen with the FMCSA's recent postponement of the implementation of its Entry-Level Driver Training rule (ELDT).

On January 20, 2017, the White House issued a directive to all the federal agencies ordering them to "temporarily postpone" the effective date of rules that had already been published in the Federal Register for 60-days. Accordingly, the FMCSA announced through the Federal Register (82 FR 8903) that the effective date of the ELDT is continued from February 6, 2017 to March 21, 2017. However, the FMCSA cautioned that the effective date could be delayed beyond March 21, 2017, depending on any whether any further directives are issued by the White House.

The ELDT, as published on December 8, 2016 (81 FR 88732), establishes new minimum training standards for certain first time commercial drivers including those applying for a Class A or Class B commercial driver's license (CDL), seeking to upgrade their CDL, or seeking a hazardous materials, passenger, or school bus endorsement. The training will include a prescribed program of theory (knowledge) and behind-the-wheel (range and public road) instruction provided by an FMCSA approved entity.

Although the initial draft of the ELDT required 30 hours of behind the wheel training, the current ELDT lacks such minimum training time. Instead, the current ELDT simply requires trainers to train new drivers to allow them to demonstrate proficiency "to the satisfaction of the trainer."

On December 21, 2016, four groups petitioned the FMCSA to halt the implementation of the ELDT until the 30 hours of behind the wheel training was restored. The groups included the Owner-Operator Independent Drivers Association, The Advocates for Highway and Auto Safety, the Truck Safety Coalition and Citizens for Reliable and Safe Highways. Notably, other recently published rules have not been affected, including mandating electronic logging devices and establishing a CDL Drug and Alcohol Clearinghouse.

Notwithstanding, this reexamination will likely not be the last regulation to be thrown into the realm of uncertainty while a new administration seeks to secure its footing.

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By: Jaion Chung

TRUCKING & TRANSPORTATION: Filter Fires: ACB’s Renewed Efforts to Protect the Safety of Drivers

The Alliance for California Business ("ACB") received a renewed attempt at attacking regulations propagated by the California Air Resources Board ("CARB") which pose a safety hazard to the California Trucking community. Specifically ACB initiated litigation aimed at the requirement that all trucks and buses manufactured prior to 2007 be retrofitted with special filters which have been linked to engine fires. The outcome of this litigation will hopefully shed light on the hazards of this regulation and the development of better, more effective regulations that protect the safety of drivers.

For almost three years the ACB, a non-profit boasting more than 400 members with the goal of protecting and promoting business in California, has condemned both the attorney general and the CARB for failing to investigate the truck fires which it attributes to Diesel Particular Filters ("DPF"). After having a prior lawsuit dismissed in July, the ACB initiated a new lawsuit (Alliance for California Business v. California State Transportation Agency, 80002491 [Sac. Super Ct., filed Nov. 22, 2016]) based on newly discovered information that was not available when the previous action was filed.

This controversy began in 2008 when CARB established the 'California Statewide Truck and Bus Rule,' which requires large diesel trucks and buses manufactured prior to 2007 to be retrofitted, repowered or replaced in order to reduce particulate matter emissions.

The purpose of DPF is to trap particulate matter from large diesel engines before they are expelled in the exhaust of a truck or other large diesel vehicle. As a result of what the ACB contends was a flawed study, CARB instituted environmental regulations requiring large diesel vehicles to utilize DPFs. Although DPFs are standard equipment on newer engines, they must now be installed into the engines of older vehicles.

The prior case by ACB challenged CARB's regulation requiring the installation of DPF on large tracks, arguing that the CARB withheld data about the safety of using the DPF. However, the previous case was dismissed this past summer based on the Court's finding that CARB's safety regulations were adequate.

Nevertheless, as part of the prior case, ACB was able to obtained thousands of documents from CARB which it is now using as the basis for a new lawsuit challenging CARBS' DPF requirement. According to the documents obtained by ACB, CARB's own studies and investigations show that the DPF are riddled with serious issues. Notably, these devises experience problems with high temperatures and clogging, even when they are used properly, which leads to fires that sensors cannot identify in time. Indeed, according to ACB's complaint, of the 15 buss fires and 50 truck fires that occurred between 2014 and 2016, the vast majority were caused by DPF devices.

Although, CARB denies the allegations (asserting instead that these fires are caused by poor maintenance) ACB's cause has been revived in its effort protect the interest of the California trucking industry. Perhaps most importantly, the investigation and subsequent results of the pending litigation will undoubtedly shed light on the adequacy of DFT regulations and may lead to better and more limited regulations that protect the safety of the trucking community.

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By: Mark A. Johnson

EMPLOYMENT LAW: Court’s “Swift” Action Threatens Greater Employment Litigation

The largest interstate truckload carrier in the U.S., Swift Transportation Co., was dealt a major blow in early January 2017, when an Arizona federal district court bypassed the trucking giant's arbitration agreements with five of its drivers, ruling that the drivers were in fact employees, rather than independent contractors. In concluding that the plaintiffs are exempt from arbitration under section 1 of the Federal Arbitration Act ("FAA"), the Arizona District Court effectively vitiated Swift's independent contractor and arbitration agreements with its drivers. Section 1 of the FAA specifically excludes the arbitration of "contracts of employment" of transportation workers.

The ruling came after years of litigation and follows two companion decisions from 2016 wherein a Ninth Circuit Court of Appeals Panel declined to issue a writ of mandamus ordering the district court to compel arbitration and found that that it lacked jurisdiction to review the district court's interlocutory order compelling discovery and trial on the issue of whether the drivers were properly classified as independent contractors. The district court had previously held that the district court, rather than an arbitrator, must decide whether the dispute was exempt from arbitration under Section 1 of the FAA.

The FAA is an act of Congress that applies in both state and federal courts and provides for judicial facilitation and resolution of private disputes through arbitration. Arbitration is a preferred method of dispute resolution in many industries because of knowledgeable arbitrators, the speedy and cost-effective process, the flexibility of confidentiality, and the benefit of a global decision across several jurisdictions. Arbitration is also an effective means of controlling the risks and costs of litigation. This is particularly true in large industries, such as trucking. For example, without the benefit of enforceable class-action waivers in arbitration agreements, companies like Swift could face the threat of a class-action prompted by a single disgruntled driver. Moreover, the costs and exposure associated with class actions can lead companies like Swift to settle otherwise defensible claims, rather than place their companies at risk.

For Swift, the threat of more law suits premised on driver classification following the district court's ruling is a real concern. According to a filing with the Securities and Exchange Commission, in the quarter ending in September 2016, Swift averaged 17,480 active drivers, of which 4,391 were classified by Swift as independent contractors. Following the district court's decision, the latter potentially have suits against the company on the same issue.

In California alone, truck drivers have filed 799 wage claims on the grounds of employee misclassification since 2011 and more than $35 million has been awarded to drivers in 302 cases, according to the California Labor Commissioner's Office. In December 2016, one Southern California port trucking firm was ordered to pay 38 drivers nearly $7 million in back pay after the state Labor Commissioner's Office ruled they were improperly treated as independent contractors instead of employees.

The key difference between Federal law and California law on this issue is that California Labor Code Section 229 allows for the pursuit of a claim for unpaid wages despite the existence of an arbitration agreement. Federal law does not have such a provision. In fact, the FAA expresses a clear federal policy in favor of arbitration and any doubts concerning the scope of arbitration issues are most often resolved in favor of arbitration.

However, the FAA only mandates arbitration in contracts that contain arbitration provisions involving interstate commerce (as opposed to exclusively intrastate commerce), and Section 1 of the FAA exempts from coverage contracts of employment involving transportation workers, such as truck drivers. In general, the Section 1 exemption is narrowly construed and the party opposing arbitration bears the burden of proving that it applies.

The Arizona district court apparently found that the drivers for Swift overcame their burden and reclassified five independent contractors as employees, thereby eliminating the mandatory arbitration provision in their contracts. Swift has appealed the decision with the Ninth Circuit, but the final outcome is uncertain.

Given the high stakes involved in the potential re-classification of drivers, transportation companies and other businesses operating in the field of intermodal transportation and logistics in California need a trusted partner in navigating the changing landscape. Poole & Shaffery, LLP has garnered a reputation throughout California for providing professional, effective legal representation in litigation, business counseling, transactional services, arbitration and mediation, and a range of other legal services. The firm has a strong track record for providing exceptional representation in both transportation and employment law by combining the personal, hands-on attention and focus of a smaller firm with the extensive professional resources that are customarily found in a much larger firm.

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By: Silviana Dumitrescu

CONSTRUCTION LAW: Elliot Homes Decision Casts Further Doubt on the Viability of the Liberty Mutual Decision

We previously discussed how the Fourth Appellate District's decision in LibertyMutual Insurance Company v. Brookfield Crystal Cove (2013) 219 Cal.App.4th 1194 held that the California Right to Repair Act (S.B. 800 – Civil Code Section 895 et seq.) was not an exclusive remedy for residential construction defect cases where tort liability arising from actual damage was found. After the Second Appellate District followed the Liberty Mutual decision in Burch v. Superior Court (2014) 223 Cal.App. 4th 1411, it appeared settled that homeowners would be able to pursue both statutory and common law tort claims and could escape the notice requirements, statutes of limitations, and damage limitations imposed by the Right to Repair Act by solely pursuing common law tort claims. However, in McMillin Albany v. Superior Court (2015) 239 Cal.App.4th 1132, review granted November 24, 2015, S229762, the Fifth Appellate District rejected the Liberty Mutual holding, finding that the Liberty Mutual court had failed to fully analyze the language in Civil Code Sections 896, 897, and 943. Consequently, the court held that the Legislature did intend that all claims arising out of residential construction, involving new residences sold on or after January 1, 2003, be subject to the standards and requirements of the Act.

The Third Appellate District has now issued a decision in line with the McMillin decision, holding that a homeowner must comply with the Act's notice provisions even in actions in which the plaintiff has not alleged a violation of the Act's performance standards. In Elliott Homes, Inc. v. Superior Court (December 2, 2016) California Court of Appeal, Third Appellate District, Case No. C078122, plaintiffs filed suit against the developer of their homes for alleged deficiencies in their construction. Plaintiffs' complaint, however, did not include any allegations concerning a violation of The Right to Repair Act, but, rather, only alleged common law tort actions. The developer sought to stay Plaintiffs' complaint until Plaintiffs complied with the Act's pre-litigation procedures. Plaintiffs opposed the motion on the grounds that their complaint did not include a cause of action under the Act and, therefore, compliance with those procedures was not required. Relying on the Liberty Mutual decision, the trial court agreed.

When considering the developer's writ petition, the Third Appellate District rejected the trial court's reliance on Liberty Mutual, holding that the Act and its pre-litigation procedures applies to any suit to recover damages for construction defects in residential construction falling within the purview of the Act. The court based its holding upon the language and intent of the Act, concluding that a homeowner must comply with the notice provisions in the Act. Absent such compliance, the court found that a developer could stay a lawsuit, even one which did not allege any violation of the Act. While the issue of whether compliance with the pre-litigation procedures was the only issue before it, the court in dicta indicated clearly its position that the Liberty Mutual court reached the wrong decision on the issue of whether the Act provided the sole remedy for construction defect claims for residential construction involving new residences sold on or after January 1, 2003.

The decision in Elliott Homes provides further hope that the California Supreme Court will overturn the decisions in Liberty Mutual and Burch when ruling upon the appeal in McMillin. In the interim, the Third Appellate District's decision to certify the Elliott Homes decision for publication gives the construction industry a decision to which to cite when countering homeowners who bring actions relying upon the decisions in Liberty Mutual and Burch.

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By: J. Kevin Moore