Court of Appeal: Release Bars Employee's Class Action

Watkins and Brown sued Wachovia Bank for mis-classification as exempt, as well as for individual wrongful termination and wage claims. There was a lot of litigation over arbitration, discovery and the like.

Brown ultimately settled her claims and signed a release, which covered all claims, including disputed claims for overtime. The trial court granted summary judgment against her, holding she no longer could participate in the class action. On the same day, the court denied the plaintiffs' motion for class certification of the wage claims.

Watkins settled her claims and signed a release as well. However, she purported to reserve the right to press any "class claims," and to receive an enhanced payment if the class claims were successful. She also reserved the right to appeal the denial of class certification.

On appeal, Brown argued that her release did not encompass claims for unpaid wages and that she was free to have signed the general release, but still maintain her wage claim. Relying on the recent decision in Chindarah v. Pick Up Stix, covered here, the court of appeal held that a release may properly include disputed claims for wages.

Then, the court turned to Watkins. The court held that Watkins could not preserve her right to appeal since she had signed a general release. Because parties cannot confer appellate jurisdiction and a court of appeal will not issue an opinion about a moot claim, the court dismissed the appeal. That left no appeal of the denial of class certification and, maybe, some annoyed absent class members?

The court of appeal was careful to distinguish what are called "pick off" cases. In those cases, the defendant pays a class representative all that s/he claims is due and then seeks dismissal of the action against that plaintiff. The plaintiff can stay in the case if s/he has an adequate economic interest in remaining in the case, such as the interest in attorneys' fees. But the court squarely held that a plaintiff accepting a voluntary settlement of all claims is not picked off and, therefore, not entitled to maintain a class action:

We believe that it is illogical to import the law governing "pick off" cases into the context of a voluntary settlement. Often, a plaintiff brings an action as a class action precisely because the attorney‟s fees involved in bringing the action individually would exceed the value of the any judgment the plaintiff could obtain individually. (Roper, supra, 445 U.S. at p. 338, fn. 9.) In such a situation, a "pick off" settlement, which gives the plaintiff only the relatively small amount sought as damages, may be inadequate to cover the substantial attorney‟s fees incurred in pursuing the litigation. Thus, the plaintiff who has been involuntarily picked off has not obtained satisfactory
relief, and is therefore permitted to continue pursuing the class litigation
until complete relief is received. This conclusion is supported by policy considerations which seek to prevent a defendant from avoiding class liability by picking off individual plaintiffs.

This is to be distinguished from the case of a voluntarily settling plaintiff. In such a case, the plaintiff has accepted an amount the plaintiff believes is sufficient to make the plaintiff whole. By voluntarily settling, the plaintiff has agreed to accept the offered sum in full satisfaction of the plaintiff‟s claim against the defendant. There are no public policy interests implicated by a settlement voluntarily accepted.

* * *

Applied to this case, it is apparent that Watkins‟s appeal must be dismissed. She has voluntarily released her wage claim against Wachovia in exchange for a $51,000 payment. While she attempted to reserve her right to pursue her "class claim," her "class claim" is simply a procedural device by which she pursued her substantive claim for overtime wages. Having settled her substantive claim, the class claim disappears, and her appeal of the denial of class certification must be dismissed. Watkins cannot salvage her right to appeal by asserting an economic interest in class certification in terms of a right to shift her attorney‟s fees to the class, if successful. If the class obtains a judgment or settlement, such recovery would belong to the class. Having voluntarily settled, she is, by her own choice, no longer a member of the class and cannot share in any such recovery.

The opinion is Watkins v. Wachovia Corporation and the opinion is here.

California Court: USERRA Claims Cannot Be Released

General releases are ineffective to release a growing list of statutory claims. Claims under the FLSA, FMLA, and claims for unpaid wages under California law are just some of the claims that may not be included in a release. The California Supreme Court is going to decide whether claims for unpaid expenses under Lab. Code section 2802 may be released, as was held in Edwards v. Arthur Andersen, discussed here.

So, add another statute to the list of un-releseable laws: USERRA. The Court of Appeal decided in Perez v. Uline, Inc. that a general release was ineffective against a later claim for wrongful termination in violation of public policy and breach of contract. USERRA contains language invalidating such waviers:

This chapter supersedes any State law . . . contract, agreement, . . . or other matter that reduces, limits, or eliminates in any manner any right or benefit provided by this chapter . . . .

Applying this section, the Court held that a release of USERRA claims was invalid. The common law Tameny and contract claims, however, are not USERRA claims. But the Court of Appeal did not make that distinction.

An alternative practice may be to have the employee agree (if true) that he or she has received all wages and leave to which he or she is entitled.

USERRA claims will be more prevalent as more soldiers return to work from duty in Iraq and Afghanistan. Employers should be aware of their obligations under this law. A release apparently is not an option.

As a final note, the case is interesting, too, because it reminds practitioners that waivers of Civ. Code section 1542 are not required in a release for it to be enforceable:

Plaintiff testified he understood he was releasingclaims arising under all statutes the agreement referred to, even those he did notunderstand. This knowledge is sufficient to withstand the provisions of Civil Codesection 1542. Nothing in that statute requires that it be designated in the release or that aparty specifically waive its provisions. While it might have been more comprehensive to have a reference to Civil Code section 1542 in the release, “‘To be effective, a releaseneed not achieve perfection . . . .’ [Citation.]”

This is not exactly news, but it may be new to you. For the record, we always recommend inclusion of the waiver to avoid disputes over the enforceability of a general release.

Greg

Defective offer to compromise is expensive

In ENGLE v.COPENBARGER AND COPENBARGER, the Court of Appeal held that the defendant's offer to compromise under section 998 did not include the plaintiffs' attorneys' fees and costs. That is because the offer as expressed in the section 998 offer did not expressly provide fees and costs were included. So, the plaintiff was able to collect the settlement and then file for attorneys' fees and costs on top of that. They should have read my article (here)!*

DGV

* [Of course...the 998 was served a few years before I wrote the article. Don't mess with my premise. I'm marketing over here. You're also having a conversation with yourself. Can both of us bill then?]

Applicant Waives ADA claim in Employment Application

Christine Nilsson applied for a job as a police officer in Mesa, Arizona. As part of the application process, she had to undergo a detailed background investigation. she signed a waiver regarding this investigation:

Nilsson agreed to “waive all [her] legal rights and causes of action to the extent that the Mesa, Arizona, Police Department investigation (for purposes of evaluating [her] suitability or application for employment) . . . violate[d] or infringe[d] upon . . . [her] legal rights and causes of action . . .” In addition, Nilsson: [A]gree[d] to hold harmless and release from liability under any and all possible causes of legal action the City of Mesa, Arizona Police Department, their officers, agents, and employees for any statements, acts, or omissions in the course of the investigation into [her] background, employment history, health, family, personal habits and reputation.

Ultimately, Nilsson was denied employment allegedly based on a negative psychological evaluation. She sued under the ADA, Title VII (for retaliation) and state law.

The Court of Appeals held that the ADA claim, based on denial of employment due to a mental disability, was barred by the release. However, the court said that the Title VII claim was different. The release covered the entire background and investigation process, but did not cover the interview. Nilsson claims Mesa asked improper questions about a prior EEOC proceeding. That claim was permitted to proceed to the merits. (The Ninth Circuit then said summary judgment was properly granted).

Of note, the opinion does not discuss the Fair Credit Reporting Act and its potential effect on the case. In addition, the Court first analyzed whether Nilsson knowingly and voluntarily released the claims. The Court found Nilsson had the necessary education and experience to sign the release. The release also advised her to consult with counsel if she did not understand it.

So, at least where the employee is sufficiently sophisticated to understand a release, a relatively simple release in an application bars claims based on pre-hire background checks, medical examinations, etc.

The case is Nilsson v. City of Mesa.

DGV