Posts belonging to Category Settlements

On December 6, 2018, Judge Edward Davila approved a $65 million PAGA settlement for Wal-Mart’s failure to provide seats to its front-end cashiers. Williamson v. Wal-Mart Stores, Inc., No. 5:09-cv-03339-EJD (N.D. Cal. Dec. 6, 2018), Order Granting Motion for Preliminary Approval (slip op. available here). This represents the largest PAGA settlement in the history of the statute. In addition, the settlement provided for injunctive relief in the form of a “Seating Pilot Program” for these employees.

Suitable seating is one of the worker protections covered by California’s Wage Orders, which have the same dignity as statutes, are remedial in nature, and are to be broadly construed to effectuate the goal of protecting the comfort and welfare of employees. Brinker Restaurant Corp. v. Superior Court, 53 Cal.4th 1004, 1027 (2012). The suitable seating requirement at issue is contained in section 14(A) of the of the Wage Order and states: “All working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats.”

Although this sentence has been in the Wage Orders for decades and was originally included as a protection for women and children, its meaning was frequently debated by employers, who argued that it was only applicable if the employer believed that seating would have no effect on the job—essentially rendering it a nullity. However, in 2016, the California Supreme Court in Kilby v. CVS Pharmacy, Inc., 63 Cal.4th 1 (2016), issued its interpretation. As the Supreme Court explained, first, “[t]here is no principled reason for denying an employee a seat when he spends a substantial part of his workday at a single location performing tasks that could reasonably be done while seated, merely because his job duties include other tasks that must be done standing.” Furthermore, “[t]he inquiry does not turn on the individual assignments given to each employee, but on consideration of the overall job duties performed at the particular location by any employee while working there, and whether those tasks reasonably permit seated work.” Finally, it stated:

When evaluating whether the “nature of the work reasonably permits the use of seats,” courts must examine subsets of an employee’s total tasks and duties by location, such as those performed at a cash register or a teller window, and consider whether it is feasible for an employee to perform each set of location-specific tasks while seated . . . . An employee may be entitled to a seat to perform tasks at a particular location even if his job duties include other standing tasks, so long as provision of a seat would not interfere with performance of standing tasks . . . the frequency and duration of those tasks with respect to each other, and whether sitting, or the frequency of transition between sitting and standing, would unreasonably interfere with other standing tasks or the quality and effectiveness of overall job performance.

Id. at 10, 17-18.

The Wal-Mart settlement was reached when the parties were less than a month away from trial, and after nearly a decade of litigation. Notably, unlike many PAGA settlements, because the Williamson case was one of the first suitable seating cases filed, it faced unique challenges, such as a dispute regarding if Wage Order claims could be brought under PAGA. Moreover, unlike many PAGA actions, this was an already-certified class action.

Although, at first blush, the settlement may seem like an extraordinary gift to the plaintiffs, a closer analysis shows that it is in fact quite reasonable. The settlement involved approximately 99,000 employees and 2,610,921 pay periods. Thus, the settlement provided for approximately $25 per pay period. The PAGA statute provides for default penalties of $100 for each initial violation and $200 for each subsequent violation. Accordingly, when weighed against Wal-Mart’s potential exposure at trial, the settlement amounts to only approximately 12.45% of its exposure.

Authored by:
Arnab Banerjee, Senior Counsel
CAPSTONE LAW APC

In early 2018, the Ninth Circuit dropped a live grenade into the already-besieged class action bar by issuing In re Hyundai and Kia Fuel Economy Litigation, 881 F.3d 679 (9th Cir. 2018) (slip op. available here) (“Hyundai”). In Hyundai, a divided panel, over Judge Nguyen’s strong dissent, threatened to obliterate nationwide class actions in the Ninth Circuit. Inventing a new predominance requirement not found anywhere in Rule 23, the Hyundai majority held that a district court may certify a nationwide class alleging violations of California law only after “apply[ing] the California governmental interest test.” Slip op. at 49. Under this test, if there are material differences in the 50 states’ consumer protection laws, then predominance is not satisfied. Id. at 50. In practice, Hyundai erected a near-insurmountable obstacle for nationwide class action settlement, as state consumer protection laws invariably differ.

Thankfully, the impending class action apocalypse has been put on hold. On July 27, 2018, the en banc court of the Ninth Circuit granted the parties’ petition for rehearing, rendering the panel decision non-precedential. Rehearing in the en banc court took place on September 27, 2018, and comes after public interest organizations, pro-business groups, and academics joined forces, forming a formidable alliance to advocate for en banc review.* As set forth in the amicus briefs and the settling parties’ petitions, the Hyundai panel flouted decades of Ninth Circuit authority, including the seminal Hanlon v. Chrysler Corp., 150 F.3d 1011 (9th Cir. 1998), which has guided lower courts on settlement approval and did not require a conflict-of-law test to satisfy predominance. Hyundai’s reasoning was also directly at odds with the influential Third Circuit en banc decision Sullivan v. DB Investments, Inc., 667 F.3d 273, 308 (3d Cir. 2011), which held that state law variations do not matter for settlements since no trial will commence.

The amici also warn that, if nationwide settlements can no longer be certified, not only will consumers be disempowered, but defendants would be unable to get their peace. Instead, defendants will be forced to defend suits in piecemeal fashion, perhaps a suit in every state. This defeats the purpose of the class device—efficiency—by multiplying litigation involving the same products and similar claims.

Although the order granting rehearing is obviously good news for the settling parties and consumers, reversal is not certain, partly due to the unusual nature of the Ninth Circuit en banc practice. While the full en banc court votes on whether to rehear the matter, the rehearing itself is handled by the Chief Judge and ten non-recused active judges who are randomly drawn. Depending on the makeup of the en banc court, the Hyundai panel decision may yet be affirmed. However, close observers expect that the en banc court will curtail, if not completely reverse, the panel’s broad holding. One possibility is that the en banc court will adopt the reasoning of Sullivan and hold that state law variations are not relevant to settlements, which would be a clear win for consumers. But, the en banc court could also hold that state law variations can only be a basis for denying approval of class action settlements if raised by an objector (and variations in state law were not raised by objectors in this case), which would be a Pyrrhic victory, benefiting professional objectors and no one else. Whatever the result, both consumers and businesses hope that the en banc court will ultimately limit the damage caused by the heedless panel decision.

*Capstone Law APC, working with Glancy Prongay and Murray LLP, submitted an amicus brief supporting rehearing en banc in this case on behalf of retired District Judge Stephen G. Larson and Professor David Rosenberg of Harvard Law School. The author of this post was the primary author of that amicus brief.

Authored By:
Ryan Wu, Partner
CAPSTONE LAW APC

California Code of Civil Procedure section 902 provides that “[a]ny party aggrieved” may appeal a judgment. For the past half century, courts and commentators have regarded settlement objectors as “aggrieved” parties with standing to appeal. See Trotsky v. Los Angeles Fed. Sav. & Loan Assn., 48 Cal. App. 3d 134, 139-40 (1975). This practice essentially tracked federal appellate procedure and appeared non-controversial; indeed, few would have foreseen this precedent would be overturned in favor of an even older, seemingly-forgotten precedent (see Eggert v. Pac. States S. & L. Co., 20 Cal. 2d 199 (1942)) by the California Supreme Court in Hernandez v. Restoration Hardware, Inc., No. S233983 (Jan. 29, 2018) (slip op. available here) (holding that unnamed class members may not appeal a class judgment, settlement, or attorney fees award unless they intervene in the action or move to vacate the judgment).

In Restoration Hardware, the plaintiffs in a class action alleged that the home furnishings store violated the Song-Beverly Credit Card Act by requesting and recording customer zip codes. After years of litigation, the court certified the class, and ordered the parties to notify class members that they had the option to remain in the certified class and be bound by the judgment, or to exclude themselves from the class and not be bound to the judgment. The notice also advised class members they had the option of appearing through counsel if they wished to remain in the class. In response, class member Francesca Muller appeared through her counsel, Lawrence W. Schonbrun (who also represented the objector in Laffitte v. Robert Half Intern. Inc., 1 Cal. 5th 480 (2016)). After a bench trial, the court awarded the class over $36 million in penalties and ordered the parties to meet and confer regarding an appropriate claims process to distribute the award to the class. The parties stipulated to treat the award as a common fund that included class member payments and any attorneys’ fees, costs, class representative enhancements, and administrative costs associated with administering the claims process. The plaintiffs then moved for attorneys’ fees equal to 25% of the total judgment recovered for the class. At the hearing, Muller (who was served with the moving papers) objected to the attorneys’ fees sought by class counsel. The court overruled her objection and entered a judgment that tracked the parties’ proposed claims procedure. Muller appealed.

Citing Eggert, the plaintiffs argued that Muller lacked standing to appeal because she had neither moved to intervene nor to vacate the judgment. Muller argued that Eggert should be disregarded because it was decided before the 1966 revisions to rule 23 of the Federal Rules of Civil Procedure—persuasive authority in modern California class action jurisprudence (see, e.g., Arias v. Superior Court, 46 Cal. 4th 969, 989 (2009)). She also relied on Trotsky and its progeny to support her contention that class members gain standing to appeal by objecting. The Court of Appeal disagreed and ruled that it was bound to follow Eggert, and that neither Trotsky, Consumer Cause, Inc., nor Wershba made any attempt to reconcile their opinions with Eggert.

On appeal to the California Supreme Court, Muller once again argued that she had standing to appeal under Trotsky, and that California law should be updated to mirror Rule 23 and federal appellate practice, which generally permit class member objectors to appeal. The state Supreme Court disagreed, finding that, first, the right to appeal judgments in state civil actions, including class actions, is entirely statutory, and, pursuant to California Code of Civil Procedure section 902 and Eggert, unnamed class members may only become parties of record to class actions by making a timely complaint in intervention before final judgment or by filing a motion to set aside and vacate the class judgment under section 663. Second, Trotsky’s failure to address section 902’s requirements for the right to appeal a settlement, or to distinguish or otherwise reconcile its holding with Eggert, renders the opinion unpersuasive. Third, California state common law, legislation, and procedural rules of court differ significantly from the federal common law and procedural rules, and California’s legislature has chosen to continue Eggert’s rule despite changes in federal class action rules.

In addition to the above rulings, the California Supreme Court also cited several policy reasons for upholding Eggert, including the public policy in favor of discouraging professional objectors: “Meritless objections can disrupt settlements by requiring class counsel to expend resources fighting appeals, and, more importantly, delaying the point at which settlements become final. These . . . professional objectors, are thought to harm the class members whose interests they claim to protect. . . . .  [B]y feeding off the fees earned by class counsel who took the risk of suing defendants on a purely contingent basis, . . . professional objectors create a disincentive for class counsel to take on such risky matters.” Slip op. at 15 (internal citations omitted).

This is the first of the state high court’s opinions to use the term “professional objector,” and its use suggests that the court is now taking proactive measures to curb the abuse of class action procedures by serial objectors, who have been, for too long, exploiting their appellate rights under Trotsky to extort generous side settlements.

Authored by:
Eduardo Santos, Senior Counsel
CAPSTONE LAW APC

Late last year, Hon. George H. Wu of the Central District of California granted final approval of a $12 million class action settlement in the action Casas, et al. v. Victoria’s Secret Stores, LLC, et al., No. 2:14-cv-06412 (C.D. Cal., Nov. 21, 2017) (slip op. available here). The settlement came while a decision from the Ninth Circuit Court of Appeals was still pending, regarding whether the plaintiffs’ allegations about Victoria’s Secret’s call-in scheduling policy were sufficient to state a claim for failure to provide reporting time pay. It resolves a more than three-year-long journey of litigation on behalf of a class of nearly 44,000 non-exempt employees in California from July 9, 2010, to August 11, 2017.

Although the settlement releases several other wage-and-hour claims, one of the core claims at issue was the plaintiffs’ allegation that Victoria’s Secret’s call-in scheduling practices violated California law. Specifically, the plaintiffs alleged that the retailer’s policy and practice of requiring its store employees to call in to work two hours before the start of their scheduled shifts to see if they would need to come in resulted in, among other things, a failure to pay minimum wages, applicable overtime wages, and reporting time pay. The plaintiffs further alleged that employees would be disciplined if they did not call when they were scheduled to do so.

At the pleading stage, the district court dismissed the plaintiffs’ reporting time claim based on an analysis of the plain meaning of Wage Order 7-2001’s reporting time requirements and legislative history, finding that Victoria’s Secret’s call-in policy did not violate the Wage Order. The applicable section of the Wage Order provides:

Each workday an employee is required to report for work and does report, but is not put to work or is furnished less than half said employee’s usual or scheduled day’s work, the employee shall be paid for half the usual or scheduled day’s work, but in no event for less than two (2) hours not more than four (4) hours, at the employee’s regular rate of pay, which shall not be less that the minimum wage.

Cal. Code Regs., tit. 8, § 11070(5)(A) (emphasis added). The district court had analyzed the meaning of the phrase “report for work and does report” and found that it means to “actually, physically show up at the workplace.” Tentative Order on Defendant’s Motion to Dismissed Plaintiffs’ First Amended Complaint (adopted as final), at 7. However, since Victoria’s Secret’s employees did not have to physically report to work and only had to call-in, the district court determined that the Wage Order did not provide a remedy and dismissed the claim with prejudice, while also noting that the policy was “somewhat unfriendly to employees and disrespects their time.” Id.

After dismissing the reporting time claim, the district court stayed the action to allow the plaintiffs to file an interlocutory appeal of the court’s order. The issue was fully briefed on appeal and, in October 2016, the parties presented oral argument before a Ninth Circuit panel. During oral argument, the panel commented that the issue would be more appropriately decided by the California Supreme Court and suggested that the Ninth Circuit would ultimately decide to certify the question for the California Supreme Court to answer. However, before the Ninth Circuit came to a decision on certification of the issue, the parties settled, leaving the question open for other pending litigation involving call-in scheduling policies.

Authored by:
Brandon Brouillette, Associate
CAPSTONE LAW APC