Hernandez v. Vitamin Shoppe (Spencer, Appellant) examines limits on advocacy by class action settlement objector

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Unlike single party cases, class actions routinely have more than one plaintiff that purports to represent the same (or similar) class. In Hernandez v. Vitamin Shoppe (Spencer, Appellant) (June 17, 2009), the Court of Appeal (First Appellate District, Division Two) examined the ability of trial courts to set limits on the methods and extent of that advocacy:

After the trial court conditionally certified the class for settlement purposes, appellant Jeffrey Spencer, attorney for appellant Lisa Hernandez, a plaintiff in Perry, sent a letter to various class members urging them to opt out of the settlement, and to retain him as counsel against Vitamin Shoppe in another class action involving the same matters. The court subsequently issued orders and rulings regarding these communications, barring Spencer from certain future communications, and granting monetary sanctions against him, which appellants Hernandez and Spencer challenge on appeal. In the published portion of this opinion, we affirm these rulings and orders, except that we reverse the trial court‘s imposition of monetary sanctions against Spencer.

Slip op., at 1-2. Later, the Court described aspects of the letter to class members:

Spencer, identifying himself as counsel in Thompson, represented in his letters to various members of the conditionally certified class that if the Perry settlement were approved, "substantial compensation will be forfeited," that "you will not be able to recover compensation for all the rest and meal periods you were denied or for all of the overtime compensation or penalties you are owed," and that "[u]nder California law you are entitled to an extra hour of pay for each rest and meal period that you missed during your employment." He advised them to "protect" themselves from the Perry settlement by opting out of the class and joining the Thompson action, which he stated was "in progress," encouraged them to request exclusion from the settlement, and warned that those who did not exclude themselves would be "stuck" with the settlement‘s terms. He solicited them to retain him as counsel, or to contact him for advice or assistance with respect to excluding themselves from the class, and enclosed his retainer agreement.

Slip op., at 4-5. So, to recap, there are acceptable means of objecting to a proposed class action settlement, and there are unacceptable means. This opinion concerns one of those unacceptable means. But I will note that it is a tough position to be in as an attorney for the same putative class if you believe that you can obtain a better result for that class. In the end, class action settlements are approved not on the basis of whether they are the best possible settlement; instead, the proposed settlement need only be good enough.

Reminder: no dismissals as a term of settlement in California class actions

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In a recent Class Action Alert, DLA Piper reminds defendants that, as of January 2009, settlements of California class actions cannot include dismissal of the class action as part of the settlement.  (Totino, Briones & Tagvoryan, California: Defendants May No Longer Request Dismissal of Settled Class Actions (May 27, 2009) www.dlapiper.com.)  Instead, California Rule of Court 3.769 requires a trial court that approves a class action settlement to enter a judgment and prohibits the entry of an order dismissing the action with or after entry of judgment.  Speaking from personal experience, defendants are not thrilled with this new development and many practitioners are still unaware of this changed rule.

An unprecedented alliance of interests fails to elicit review or depublication of Troyk v. Farmers Group, Inc.

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In a potentially singular confluence of interests, all parties in Troyk v. Farmers Group, Inc., distressed that the Court of Appeal reissued its opinion despite their notice of settlement, filed a Joint Petition for Review on April 20, 2009. The 72-page opinion from the Court of Appeal (Fourth Appellate District, Division One) addresses issues of standing under the UCL, alter-ego liability and insurance service charges as premiums. The petition was filed by Coughlin Stoia Geller Rudman & Robbins for class plaintiffs, Gibson, Dunn & Crutcher and Skadden, Arps, Slate, Meagher & Flom for defendants, and Fulbright & Jaworski for third-party movants. Consumer Attorneys of California, among others, filed a letter seeking depublication on the grounds that the appellate court's ruling "threatens to upend settled law."

Despite that unholy alliance, on June 10, 2009 the Supreme Court denied the Joint Petition for Review and the Requests for Depublication.  Justices Baxter, Chin, and Corrigan were of the opinion that the petition should have been granted.  I can't say that this result offers encouragement to parties that finally work to settle their disputes.  Such polarized interests rarely agree on anything.  When they do, its a signal that careful scrutiny is in order.  However, others have suggested that if all the parties are unhappy with the result, there may be some validity to it.  (Note: The Recorder article on Law.com appears to have been authored before the Supreme Court's decision to deny the Petition was publicly available.)

BREAKING NEWS: First appellate construction of Labor Code section 206.5 concludes that it doesn't mean what it seems to say

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Greatsealcal100As predicted in this post, the Fourth Appellate District, Division Three, has issued a published opinion in Chindarah et al. v. Pick Up Stix, Inc. et al (February 26, 2009).  The opinion construes Labor Code section 206.5, concluding that employer-obtained releases of wage claims in dispute were not void by operation of section 206.5.  There is some qualifying language in the opinion worth mentioning, but, that must wait for another day.

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Labor Code section 206.5 may be the focus of forthcoming opinion in Fourth Appellate District

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Greatsealcal100I’m told that the Fourth Appellate District, Division Three, has an interesting opinion on the way in the next couple of weeks. According to Wage Law via Twitter (@wagelaw), Chindarah et al. v. Pick Up Stix, Inc. et al. is going to have something interesting to say about Labor Code section 206.5. @wagelaw suggests that the decision is due this week, and the docket nominally supports that contention, noting that the decision is “due” on February 19, 2009. However, at least some of the Courts of Appeal around the state interpret the 90-day deadline on the issuance of opinions in submitted matters to mean that the case must be decided by the end of the month in which the decision is due (when the Court reports on whether it has resolved all pending matters under penalty of nonpayment of Justices’ salaries). I don’t know if this interpretation is universal across the state, but, if it applies here, the decision could issue any time before the end of the month. And don’t forget that, in rare circumstances, the Court can essentially vacate the submission and resubmit the matter if the press of other business makes issuance of an opinion by its orginal due date impossible.

Section 206.5 fascinates me.  Maybe "fascinates" is a bit strong.  In any event, there is little in the way of decisional law about this Labor Code section, which states:

“(a) An employer shall not require the execution of a release of a claim or right on account of wages due, or to become due, or made as an advance on wages to be earned, unless payment of those wages has been made. A release required or executed in violation of the provisions of this section shall be null and void as between the employer and the employee. Violation of this section by the employer is a misdemeanor.

(b) For purposes of this section, "execution of a release" includes requiring an employee, as a condition of being paid, to execute a statement of the hours he or she worked during a pay period which the employer knows to be false.

Subdivision (b) is new, so the opinion can’t address that provision. That leaves subdivision (a). In the world of wage and hour class actions, the only time I ever ran across this section was when an employer was picking off class members by making them sign a release to get an offered payment. I believed that the releases obtained were void, but I never had the opportunity to test that belief. I’m very curious to see if that is the issue that has been presented in Chindarah. Of course, there is no guarantee of publication, but, as a matter of first impression (while I wildly speculate about the issues on appeal), one has to believe that publication would be certain.

And to digress for a moment, Twitter is definitely building momentum as a source for breaking news (amongst the nonsense about what somebody has decided to eat for dinner). You can read my recent posts in the sidebar on this blog or see whose posts I am following on Twitter by going to http://twitter.com/hsleviant (@hsleviant, in Twitter-ese).  If you start by reading posts from legal news sources, you may find that you can build a customized legal news amalgamation that suits your interests very precisely.

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California Supreme Court lets two appellate court decisions stand

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Mentioned by UCL Practitioner and Wage Law (note their new domain of www.californiawagelaw.com), this week the California Supreme Court denied review in Harper v. 24 Hour Fitness, Inc. (2008) 167 Cal.App.4th 966 (reversing an order order decertifying UCL and FAL claims) and denied a request to depublish Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116 (holding that trial court must independently review adequacy of class aciton settlement value).

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Sprint settles early termination fee (ETF) claims and topclassactions.com helps consumers get their share

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The Complex Litigator previously reported on Sprint's win before a jury and loss in a related Court trial on claims arising from Sprint's practice of charging Early Termination Fees (ETFs) to consumers.  Now, Sprint has apparently reached a settlement of those claims, and TopClassActions.com is provinding consumers with a helping hand.  Visit their page explaining the Sprint settlement, and you will be walked through the claim-form process with loving care.

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In Vasquez v. State of California Supreme Court declines to impose a pre-filing resolution requirement to all 1021.5 fee requests, but...

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Greatsealcal100This morning the California Supreme Court issued an opinion that examined the limits on its attorney fee opinion in Graham v. DaimlerChrysler Corp. (2004) 34 Cal.4th 553, 560 (Graham). "  In Vasquez v. State of California (November 20, 2008), the Supreme Court was asked to extend Graham, a catalyst theory case, to all Code of Civil Procedure section 1021.5 requests for fees resulting from a public benefit.  The summary of the holding neatly encapsulates the Supreme Court's "no, and yes" answer to that invitation: 

“Today we revisit one of the “limitations on the catalyst theory” adopted in Graham, supra, 34 Cal.4th 553, 575 — specifically, the rule that the plaintiff in a “catalyst case,” to recover attorney fees under section 1021.5, “must have engaged in a reasonable attempt to settle its dispute with the defendant prior to litigation” (Graham, at p. 561). While this is not a catalyst case (see post, at p. 19), defendant argues the rule just mentioned should apply whenever fees are sought under section 1021.5. We hold that no such categorical rule applies in noncatalyst cases. In all cases, however, section 1021.5 requires the court to determine that “the necessity and financial burden of private enforcement . . . are such as to make the award appropriate . . . .” (Ibid., italics added.) In making this determination, one that implicates the court’s equitable discretion concerning attorney fees, the court properly considers all circumstances bearing on the question whether private enforcement was necessary, including whether the party seeking fees attempted to resolve the matter before resorting to litigation.

(Slip op., at pp. 2-3.)  So you don't have to attempt to resolve a matter before litigation to claim sectin 1021.5 fees, but the Court can consider whether you did as a factor when deciding if it will award fees under section 1021.5.  I suppose this means that the reasonability of the defendant and its counsel and the inclinations of the particular judge hearing the case will now have a lot more to do with whether a plaintiff is successful in recovering fees under 1021.5.  An intractable defendant with obstructive counsel will have a hard time convincing a court that it would have cooperated without the need for litigation had the plaintiff but asked.  On the other hand, a very cooperative defendant could save itself fees under this section by demonstrating its willingness to change practices and correct problems.

I wonder if this mixed set of incentives will change any behaviors on either side of the bar.

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In Kullar v. Foot Locker Retail, Inc., Court of Appeal sides with objector to class action settlement

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Greatsealcal100Objectors to class action settlements have limited prospects for success.  I haven't seen any data, but the success rate of objectors looks to be exceedingly low.  So it is of some note when a published opinion accepts an objector's contention that a class action settlement is "fair, reasonable and adequate."  In Kullar v. Foot Locker Retail, Inc. (Echeverria as Objector and Appellant) (November 7, 2008), the Court of Appeal (First Appellate District, Division Three) did just that.

Echeverria contended that the trial court erred in finding a settlement "fair, reasonable and adequate without any evidence of the amount to which class members would be entitled if they prevailed in the litigation...." (Slip op., at p. 1.) The Court of Appeal agreed that the trial court was obligated to consider the potential range of possible recoveries before concluding that a settlement meets that standard:

“More fundamentally, neither Dunk, 7-Eleven, nor any other case suggests that the court may determine the adequacy of a class action settlement without independently satisfying itself that the consideration being received for the release of the class members’ claims is reasonable in light of the strengths and weaknesses of the claims and the risks of the particular litigation. The court undoubtedly should give considerable weight to the competency and integrity of counsel and the involvement of a neutral mediator in assuring itself that a settlement agreement represents an arm’s length transaction entered without self-dealing or other potential misconduct. While an agreement reached under these circumstances presumably will be fair to all concerned, particularly when few of the affected class members express objections, in the final analysis it is the court that bears the responsibility to ensure that the recovery represents a reasonable compromise, given the magnitude and apparent merit of the claims being released, discounted by the risks and expenses of attempting to establish and collect on those claims by pursuing the litigation. “The court has a fiduciary responsibility as guardians of the rights of the absentee class members when deciding whether to approve a settlement agreement.” (4 Newberg on Class Actions, supra, § 11.41 at p. 118; 7-Eleven, supra, 85 Cal.App.4th at p. 1151.) “The courts are supposed to be the guardians of the class.” (Dickerson, Class Actions: The Law of 50 States (2008 ed.) § 9.02[2], p. 9-6.)

(Slip op., at pp. 13-14.)  The Court of Appeal acknowledged the factual circumstances that guided the trial court but ultimately dismissed those circumstances (a possible mediation privilege) as a basis for presuming the fairness of a settlement without testing it against the range of potential recoveries: 

“Here, the trial court acknowledged that “in logic” it would have been preferable for it to have been presented with data permitting it to review class counsel’s evaluation of the sufficiency of the settlement, but felt that this was precluded because the supporting information was exchanged in the course of mediation. We disagree with this conclusion for two reasons. First, the fact that the settlement was reached during mediation to which Evidence Code section 1119 applies does not eliminate the court’s obligation to evaluate the terms of the settlement and to ensure that they are fair, adequate and reasonable. If some relevant information is subject to a privilege that the court must respect, other data must be provided that will enable the court to make an independent assessment of the adequacy of the settlement terms. Secondly, the fact that communications were made during the mediation and writings prepared for use in the mediation that are inadmissible and not subject to compulsory production does not mean that the underlying data, not otherwise privileged, is also immune from production. (Evid. Code, § 1120 [“Evidence otherwise admissible or subject to discovery outside of a mediation . . . shall not be or become inadmissible or protected from disclosure solely by reason of its introduction or use in a mediation . . .]; Rojas v. Superior Court (2004) 33 Cal.4th 407, 417; Wimsatt v. Superior Court (2007) 152 Cal.App.4th 137, 157-158.) Foot Locker’s payroll records, for example, if relevant to the quantification of the claims being settled, are subject to discovery and may be introduced in opposition to the settlement even if they were disclosed to class counsel during the mediation, and even if class counsel was shown only a summary or analysis of those records that is not itself subject to production because prepared for use in the mediation.

(Slip op., at pp. 16-17.)

Easy moral:  Give the trial court something to hang its hat on when seeking approval of a settlement.  Sample calculations for claimants would be a good start, coupled with a discussion of how risk impacts a claim calculated at any particular recovery level.

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Commerce websites need to make themselves accessible to visually imparied visitors in a hurry

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The question of whether the Americans with Disabilities Act applies to websites has been simmering for several years.  (Sherry Karabin, Companies, Courts Debate Whether ADA Applies to Web Sites (September 6, 2007) www.law.com.)  The answer is coming into focus.  On Wednesday, after several years of litigation, Target Corp. agreed to a settlement with the National Federation of the Blind that calls for Target Corp. to pay out $6 million in damages and make its website fully accessible to blind customers.  (Evan Hill, Settlement Over Target's Web Site Marks a Win for ADA Plaintiffs (August 28, 2008) www.law.com.)  Judge Marilyn Hall Patel likely moved the parties closer to settlement after ruling that the ADA and California's Unruh Civil Rights Act both apply to businesses' websites.

Other companies have decided to avoid litigation (probably to foster more goodwill with consumers).  Amazon.com and RadioShack both agreed to make changes to their sites without protracted litigation.  Following Target's settlement, I think it is likely that online retailers can expect a rapid surge in litigation of this type.  And frankly, the only reason why I am not 100% certain that this area of litigation will explode is that Internet-linked issues seem to deter some otherwise confident litigators because of an irrational fear of all things digital.

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