Ninth Circuit considers claim preclusion where WARN Act settlement deficiency was sought from non-settling defendant

Taylor v. Sturgell, 553 U.S. 880 (2008) was written specifically to torment me. But, since it was issued, I haven’t seen its analysis of res judicata in class cases arise too often. Here, claim preclusion meets a bankruptcy court’s approval of a class settlement against other parties in Wojciechowski v. Kohlberg Ventures (9th Cir. May 9, 2019). The quick summary of the two cases sums it up well.

Wojciechowski filed an adversary class action against the ClearEdge entities in the bankruptcy court. He alleged that the two ClearEdge entities were a “single employer” under the Worker Adjustment and Retraining Notification (“WARN”) Act, 29 U.S.C. §§ 2101–2109, and that the entities violated that act when they fired him and other employees without 60 days’ advance notice. Wojciechowski settled that action. Per the settlement agreement, the class released all claims it had against “(i) Defendants ClearEdge, Power, Inc. and ClearEdge Power, LLC and their respective estates,” and “(ii) each of the Defendants’ current and former shareholders, officers, directors, employees, accountants, attorneys, representatives and other agents, and all of their respective predecessors, successors and assigns, excluding any third parties which may or may not be affiliated with Defendants ClearEdge Power, Inc. and ClearEdge Power LLC, including, but not limited to Kohlberg Ventures LLC.” Kohlberg was not involved in the bankruptcy proceedings or in settlement negotiations. The bankruptcy court approved the settlement agreement and closed the case soon after. The ClearEdge estates paid a portion of the class members’ WARN Act wages and benefits.

Wojciechowski then filed this putative class action. He alleges that Kohlberg, as a “single employer” with the ClearEdge entities, violated the WARN Act when it fired him without advance notice. Wojciechowski seeks “an award for the balance of the Class’[s] WARN Act wages and benefits.” That is, he seeks what the class is owed under the Act less the amount received from the ClearEdge estates.

Slip op., at 4-5. In this instance, the Court had little difficulty concluding that the scope of preclusion was clearly specified in the settlement approved in the first suit before the bankruptcy court. Kohberg argued that it was not a party to the initial settlement and could not be limited by it. The Ninth Circuit quickly rejected that argument, observing that two parties can contract to settle a claim on just about any terms they want, particularly when it is then approved by a court.

Shine v. Williams-Sonoma, Inc. puts the spotlight on releases in wage and hour class actions

See what I did there?  Shine. Spotlight.  Nevermind.  Today's wage and hour class action opinion comes to us courtesy of Shine v. Williams-Sonoma, Inc. (May 29, 2018).  In Shine, the Court of Appeal (Second Appellate District, Division Four) reviewed de novo whether a demurrer to a reporting time pay complaint was properly sustained on res judicata grounds.  Multiple bases were argued in support of the Trial Court's Order, but the Court found that the res judicata basis was sufficient alone, and did not require analysis of the other arguments.  As to res judicata, the Court said:

The Morales complaint sought recovery of unpaid wages on behalf of class members employed by Williams-Sonoma since June 24, 2009. The allegations in that case included the claims of failure to provide meal and rest periods, overtime and minimum wages, timely wages, and final paychecks to the Morales class plaintiffs.

In the present action, Mr. Shine seeks reporting-time pay for on-call shifts that were canceled in early 2013, within the period covered by the Morales settlement agreement. Because reporting-time pay is a form of wages, a claim for reporting-time pay could have been raised in the Morales action. (See Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1111–1112 [reporting-time pay, like split-shift and overtime pay, is a form of wages even though it serves a dual purpose of shaping employer behavior].) The fact that no claim for reporting-time pay was alleged in Morales does not alter our determination that the same primary right, to seek payment of wages due, was involved in both Morales and this case. (See Boeken v. Phillip Morris USA, Inc. (2010) 48 Cal.4th 788, 798–799.)

Slip op., at 7.  The Court also discussed Villacres, but, compared to Villacres, the outcome seems more obvious here when the language of the prior release is considered:

Like the Augustus release, the Bonilla settlement agreement released “all claims, demands, rights, liabilities and causes of action that were or could have been asserted (whether in tort, contract or otherwise) for violation of the Fair Labor Standards Act, the California Labor Code, the California Business and Professions Code, the Private Attorneys General Act (‘PAGA’), the applicable Industrial Welfare Commission Orders or any similar state or federal law, whether for economic damages, non-economic damages, liquidated damages, punitive damages, restitution, penalties, other monies, or other relief based on any facts, transactions, events, policies, occurrences, acts, disclosures, statements, omissions or failures to act pled in the Complaint, which are or could be the basis of claims that Defendant failed to pay wages or overtime, failed to provide meal or rest breaks or compensation in lieu thereof, failed to provide timely wages and final paychecks, committed record-keeping violations, provided noncompliant wage statements, failed to reimburse for business expenses, or engaged in unfair business practices at any time on or before the date of Preliminary Approval.” (Italics added.)

Slip op., at 12 (boldface emphasis added).

Separate from all of this, I have a concern about the Villacres holding that allows any enumerated list of released items to be treated as a "general release."  This seems to muddy the waters as to what constitutes a general release and what constitutes a specific release.  As it stands, this seems to re-define "specific release" to mean a release with an expressly enumerated scope and a "general release" to mean any release with coverage broader than what is expressly enumerated, particularly where identified by the phrase "all claims."  So you can have a "general" release of "all" wage payment claims.  Perhaps we should call "general" releases "total coverage" releases and all other releases "specific" or "itemized" coverage releases.

Respondents and Defendants were successfully represented by Melanie L. Bostwick, Randall C. Smith, Jessica R. Perry, and Allison Riechert Giese of Orrick, Herrington & Sutcliffe

Castillo v. Glenair, Inc. examines a novel joint employer question

The term "joint employer" is used to identify the wide variety of situations where one worker is controlled in frequently different ways by two employers.  Staffing agency relationships with client companies are a commonly cited example.  In Castillo v. Glenair, Inc., the Court of Appeal (Second Appellate District, Division Two), tackled a novel question:

In a joint employer arrangement, can a class of workers bring a lawsuit against a staffing company, settle that lawsuit, and then bring identical claims against the company where they had been placed to work.

Slip op, at 2.  The Court's answer was succinct: "We answer no."  (Slip op., at 2.)

Before you get the wrong idea, this is not the situation you might have first imagined.  One firm did not sue a staffing agency, settle, and then bring the identical set of claims against the client company of the staffing agency.  Rather, the staffing company class action was running in parallel before another trial court and made it to the settlement finish line first.  (Slip op., at 2.)  There are many procedural niceties to this that don't matter.  What matters is that the first suit (known as the "Gomez" action), settled on a classwide basis, with a broad release of claims against the staffing company and its agents.  The Court in this matter concluded that Glenair was an agent of CGA with respect to CGA's payment of wages to its employees who performed work at Glenair.

While the reasoning of the Court is guided, in part, by a number of factual stipulations of the parties regarding the relationship between Glenair and the staffing company GCA, the core issue for purposes of res judicata application of the Gomez settlement hinged on whether Glenair was either a party in the Gomez settlement or in privity with a party.  The Court found that Glenair was both in privity with CGA as to the Gomez settlement and a released party in the Gomez settlement.

After reviewing developments in the law of privity, the Court said:

With this in mind, it is clear Glenair and GCA are in privity for present purposes. The subject matter of this litigation is the same as the subject matter of the Gomez litigation—namely, both cases involve the same wage and hour causes of action arising from the same work performed by the same GCA employees (the Castillos) at GCA’s client company Glenair. Based on the undisputed facts, it is apparent Glenair and GCA share the same relationship to the Castillos’ claims here. Both Glenair and GCA were involved in and responsible for payment of the Castillos’ wages. Glenair was authorized by GCA and responsible for recording, reviewing and transmitting the Castillos’ time records to GCA. GCA paid the Castillos based on those time records. And, by virtue of the Gomez settlement, the Castillos were compensated for any errors made in the payment of their wages. Thus, with respect to the Castillos’ wage and hour causes of action, the interests of Glenair and GCA are so intertwined as to put Glenair and GCA in the same relationship to the litigation here. Accordingly, we conclude they are in privity for purposes of the instant litigation.

(Slip op., at 23.)  The Court emphasized that this should not be construed as a finding that Glenair and GCA are in privity for all purposes (e.g., a tort claim for an on-premises injury).  The Court also found that Glenair was an agent of CGA based on facts that could not be reasonably construed any other way:

Glenair was an agent of GCA for the purpose of collecting, reviewing, and providing GCA’s employee time records to GCA so that GCA could properly pay its employees. The evidence is undisputed that GCA authorized Glenair to collect, review, and transmit GCA employee time records to GCA. Thus, Glenair was authorized to represent, and did represent, GCA in its dealings with third parties, specifically GCA’s payment of wages to its employees placed at Glenair. (Civ. Code, § 2295; Borders Online, supra, at p. 1189; see also Garcia v. Pexco, LLC (2017) 11 Cal.App.5th 782, 788 [in concluding the plaintiff employee’s claims must be arbitrated, court considered “alleged joint employers” staffing company and its client company “agents of each other in their dealings with” the plaintiff].)

(Slip op., at 26.) The Court rebuffed the plaintiffs' argument that there was no evidence of the requisite control necessary to support the agency conclusion:

Here, GCA authorized Glenair to perform certain timekeeping-related tasks on behalf of GCA and the only reasonable inference is that GCA required Glenair to perform those tasks. Had Glenair failed to perform those timekeeping tasks, GCA would not have been able to pay its employees.

(Slip op., at 27.)  This raises a question in my mind.  Many large staffing companies install their own timekeeping systems in the workplaces of large clients.  If the staffing company collects its own time records, or its employees report time themselves, does this vitiate the agency analysis in this decision?

The decision also includes an extended discussion of procedural rules governing summary judgment, if that floats your boat.

Respondent was successfully represented by Jesse A. Cripps, Sarah Zenewicz and Elizabeth A. Dooley of Gibson, Dunn & Crutcher, 

California Supreme Court activity for the week of February 14, 2011

The California Supreme Court held its (usually) weekly conference on February 16, 2011.  Notable results include:

• Petition for Review denied in Villacres v. ABM Industries, 189 Cal. App. 4th 562 (2010) [PAGA claims precluded when underlying claims released in prior settlement];
• Petition for Review denied in Bright v. 99¢ Only Stores, 189 Cal. App. 4th 1472 (2010) [PAGA penalties available for violation of wage order suitable seating requirement], discussed on this blog here.

I am slightly surprised by the decision not to review Villacres, considering only the strength of the dissent in that decision.