Posts belonging to Category Settlements



The Restoration of Eggert by Hernandez v. Restoration Hardware

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

Victoria’s Secret Settles On-Call Claims for $12M for 44K Class Members

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

Cifuentes v. CEVA Logistics U.S.: $1.75M Settlement for 65 Class Members

CEVA Logistics US Inc., a delivery company, agreed to pay $1.75 million to settle a class action brought by 65 drivers for unpaid minimum wages, unpaid overtime, and business expenses premised on misclassification of the drivers as independent contractors. Cifuentes v. CEVA Logistics U.S., Inc., No. 3:16-cv-01957-H-DHB (S.D. Cal.), see Order Granting Preliminary Approval and Order Granting Final Approval of Class Settlement here and here, respectively. The final approval of the settlement comes approximately 14 months after Plaintiff Cifuentes commenced his suit in the Southern District of California. Cifuentes brought the wage-and-hour class action “on behalf of all individuals who have performed one or more deliveries in California for CEVA, while being classified as an independent contractor.” Preliminary Approval Order, at 2. The plaintiff claimed that the delivery company “improperly categorized class members as independent contractors, rather than as employees, and as a result denied them the rights and protections afforded by the California Labor Code,” which include meal and rest periods, accurate and itemized wage statements, and reimbursements for reasonable business expenses. Id. Cifuentes also claimed that CEVA “failed to compensate class members for all hours worked, overtime, and full wages upon departure from the company.”  Id.

The CEVA settlement translates to an average recovery of $15,855.26 for each of the 65 drivers and checks are issued automatically, without any requirement for a claim form. The court noted that the “settlement is outstanding when compared with other wage and hour settlements approved in recent years by federal courts sitting in California.” Final Approval Order, at 9. In finding that the settlement class met the predominance and superiority requirements of Rule 23(b)(3), U.S. District Judge Marilyn L. Huff held that the “common question of whether the class members were misclassified as independent contractors predominates over all individual issues, because once that issue is determined on a class-wide basis, the only remaining issues would be determining the amount of damages that each class member is entitled to.” Id. at 7. The court also found typicality and numerosity requirements satisfied because the settlement class consists 65 individuals, all of whom “held the same position with CEVA and claim the same injuries.” Id. at 6. Further, the court found the adequacy requirement satisfied and awarded class counsel $583,333 in fees, which represents approximately three times the anticipated lodestar, finding that a “multiplier of three is well within the accepted range for common fund cases where class counsel has taken the case on a contingency fee arrangement.” Id. at 12-13. Finally, the named plaintiff was awarded $7,500 incentive payment for his services as a class representative.

The settlement joins a growing number of settlements reached in California class actions brought by misclassified delivery drivers alleging wage-and-hour violations. This line of cases and plaintiff-favorable results suggest that, in California, companies must use great caution in classifying, or continuing to classify, their drivers as independent contractors. In addition, this should encourage independent contractors and workers in other industries and positions that share similar characteristics to come forward to assert their rights and protections under the California Labor Code.

Authored by:
Suzy Lee, Associate
CAPSTONE LAW APC

The Gig Is Up: $8.75M Deal in Singer v. Postmates Courier Case Approved

In early September, Judge Jeffrey S. White preliminarily approved a nearly $9 million settlement for couriers of Postmates Inc., the on-demand delivery service, bringing the parties one step closer to resolving the proposed class action that alleged that the company misclassified couriers as independent contractors and failed to pay them minimum wages. See Singer, et al. v. Postmates, Inc., Case No. 4:15-CV-01284-JSW (N.D. Cal. Sept. 1, 2017), Order Granting Plaintiff’s Motion for Preliminary Approval of Class Action Settlement (slip op. available here). The action is another in a recent spate of misclassification cases brought about by the “gig economy,” in which temporary, flexible jobs are commonplace and workers are often asked to sacrifice certain benefits for purported freedom from the traditional workplace.

On March 19, 2015, couriers across the country sued Postmates in the United States District Court, Northern District of California. In Singer, the plaintiff and other couriers alleged that, in treating them as independent contractors, Postmates violated the federal Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 201, et seq., by failing to pay them minimum wage or overtime for all hours worked in excess of forty per week. The suit further alleged violations of  California’s labor statutes (minimum wage, wage statement, and expense reimbursement laws), the Private Attorneys General Act (“PAGA”), and New York overtime and minimum wage laws, as to couriers who made deliveries in California and New York and personally bore necessary business-related expenses and costs without reimbursement from Postmates.

Although classified as independent contractors by Postmates, the couriers argued they are actually employees, given that they are required to follow detailed requirements imposed on them by Postmates, are graded or evaluated by Postmates, and are subject to termination based on Postmates’ discretion and/or their failure to adhere to those requirements (such as rules regarding their conduct with customers, their timeliness in picking up items and delivering them to customers, and the accuracy of their orders). By being misclassified as independent contractors, Postmates’ couriers alleged they were not paid proper compensation for hours worked and were required to bear many of the expenses of their employment, including those for their vehicles and bicycles, gas, and phone and data plans, without reimbursement.

In recognizing that no California court has conclusively determined whether the gig workers are, in fact, employees or independent contractors, and that both parties faced substantial risks of further litigation, Judge White preliminarily approved the $8.75 million deal, which provides reimbursement for mileage and travel expenses to couriers who submit claims. The non-reversionary settlement also provides non-monetary relief whereby Postmates will modify the terms of its Independent Contractor Agreement to permit termination of couriers only for specified material breaches of the agreement, permit couriers to appeal contract terminations through a neutral arbitration process at Postmates’ expense, provide couriers access to accident insurance at negotiated group rates, and establish a forum for receiving feedback from couriers regarding proposed changes to its business practices. The proposed settlement class includes approximately 88,000 California couriers, 28,000 New York couriers, 3,000 couriers in Massachusetts, 8,000 couriers in Washington, D.C., and 107,000 couriers throughout the remainder of the country.

The Postmates settlement is one of other similar deals either already approved or currently being considered by judges presiding over misclassification suits brought by gig economy workers.[1] Recently, several state and federal agencies—including the Internal Revenue Service—have cracked down on companies claiming to use independent contractors who perform work like employees of the company. Despite pressure from public agencies and private actions intent on curbing corporate misuse of independent contractor models similar to Postmates’, companies will likely continue to pass operating costs onto workers in the gig economy until California courts definitively decide whether gig workers are employees or independent contractors.

[1] See, e.g., grocery delivery drivers (Casey Camp, et al. v. MapleBear, Inc., dba Instacart, Los Angeles County Superior Court, Case No. BC652216); rideshare drivers (Steven Price v. Uber Technologies, Inc., et al., Los Angeles County Superior Court, Case No. BC554512; Patrick Cotter, et al., v. Lyft, Inc., N.D. Cal., Case No. 3:13-cv-04065-VC); parcel delivery drivers (FedEx Ground Package System, Inc. Employment Practices Litigation, N.D. Ind., Case No. 3:05-md-00527); call center workers (Norman, et al., v. Dell Inc., et al., D. Ore., Case No. 07-cv-06028); and exotic dancers (Roe v. SFBSC Management, LLC, N.D. Cal., Case No. 14-cv-03616).

Authored by:
Ari Basser, Associate
CAPSTONE LAW APC