Alonzo v. First Transit CA2/7 ( 2015 )

Filed 10/15/15 Alonzo v. First Transit CA2/7
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
ANGEL ALONZO et al., B253699
Plaintiffs and Respondents, (Los Angeles County
Super. Ct. No. BC433932)
v.
FIRST TRANSIT, INC.,
Defendant and Respondent;
ERIC P. CLARKE,
Movant and Appellant.
APPEAL from an order and a judgment of the Superior Court of Los Angeles
County, Elihu M. Berle, Judge. Order affirmed, judgment reversed.
Law Offices of Mark Yablonovich, Mark Yablonovich, Patrick J. Clifford, and
Joseph Hoff for Movant and Appellant.
Sundeen Salinas & Pyle, Hunter Pyle and Mana Barari for Plaintiffs and
Respondents.
Littler Mendelson, Theodore R. Scott and David J. Dow for Defendant and
Respondent.
____________________________________
INTRODUCTION
Plaintiffs, a group of drivers employed by defendant First Transit, Inc., filed a
class action alleging various wage and hour claims. Eric P. Clarke was a member of the
class, but he opted out several months after the trial court certified the class. Plaintiffs
and First Transit subsequently reached a settlement that resolved the wage and hour
claims as well as claims under the Private Attorneys General Act (PAGA) (Lab. Code,
§ 2699).1
Shortly before the hearing on final approval of proposed settlement, Clarke filed
an ex parte application for leave to intervene. The court denied Clarke’s ex parte
application, gave final approval to the settlement agreement, and entered a stipulated
judgment under Code of Civil Procedure section 664.6. Clarke appeals from the order
denying his ex parte application for leave to intervene and the judgment entered after the
court approved the settlement. We affirm the order denying intervention, but we reverse
the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
A. Clarke’s Employment
First Transit, a private contractor that provides bus and other public transit
services throughout California, hired Clarke in February 2000 to drive bus routes in Los
Angeles. First Transit assigned Clarke to the bus routes associated with its Community
Downtown Area Short Hop (DASH) Package 6. Clarke drove buses on DASH Package 6
routes between February 2000 and June 2006. First Transit terminated his employment
in February 2007.
1
All undesignated statutory references are to the Labor Code.
2
B. The Class Action
In March 2010 plaintiffs filed a class complaint alleging that First Transit had
violated Labor Code provisions governing rest breaks (§ 226.7), wage statements (§ 226),
and the payment of compensation after an employee is discharged or resigns (§§ 201,
202, & 203). The complaint also alleged violation of the Unfair Competition Law (UCL)
(Bus. & Prof. Code, § 17200 et seq.).
The second amended complaint defined the class as follows: “All bus operators
that worked for FIRST TRANSIT, driving bus routes associated with Community DASH
Packages 2 and/or 6 in Los Angeles County, at any time during the Class Period in unit(s)
represented for purposes of collective bargaining by Teamsters Local Union 572.” The
“Class Period” included members of the class who worked for First Transit on or after
August 13, 2003.
In July 2012 the trial court certified the class defined in the second amended
complaint. Clarke was a member of the class, but he opted out in October 2012.
In February 2013 the parties, after having conducted discovery, participated in
mediation and reached a settlement agreement.2 In June 2013 the trial court preliminarily
approved a revised settlement agreement. Pursuant to this agreement, plaintiffs agreed to
amend the complaint to add a claim for statutory penalties under PAGA. First Transit
agreed to pay $2 million to settle the plaintiffs’ class claims, $10,000 of which First
Transit agreed to pay to the California Labor and Workforce Development Agency to
settle the PAGA claims. The settlement agreement distributed no portion of the $10,000
allocated to the PAGA claims to the aggrieved employees. The court set the final
approval hearing for October 8, 2013.
2
Counsel for Clarke had participated in an earlier mediation session but was
excluded from the February 2013 session.
3
Following the trial court’s preliminary approval, the class representatives provided
notice of the settlement to the class members. The class members had until September 8,
2013 to submit claims. By that date, 350 members had submitted claims, which
accounted for 83 percent of the $2 million allotted by the settlement. None of the class
members objected to the proposed settlement.
On September 11, 2013 plaintiffs filed a third amended complaint adding the
PAGA claims. The PAGA claims sought civil penalties for First Transit’s Labor Code
violations and restitution for the UCL violations.
On October 2, 2013 Clarke filed an ex parte application for leave to intervene.
Clarke asserted that he was entitled to intervene because, among other reasons, he had an
interest in the parties’ resolution of the PAGA claims, which he claimed the parties had
drastically undervalued, and the parties had colluded in reaching the proposed settlement.
On October 8, 2013 the trial court heard Clarke’s ex parte application. When
questioned by the court about why he had waited until less than a week before the final
approval hearing to file an ex parte application for leave to intervene, counsel for Clarke
admitted that he became aware in late July 2013 that the parties were settling the PAGA
claims. Counsel for Clarke explained that he had not sought intervention earlier because
he had first sought unsuccessfully to enjoin the settlement in a separate lawsuit he had
previously filed against First Transit.3
3
In August 2007 Clarke filed a class complaint against First Transit in Los Angeles
Superior Court. First Transit removed the case to federal district court. In 2010 the
district court dismissed the case because Clarke’s claims were barred by the statute of
limitations. In January 2008 Clarke filed a second lawsuit against First Transit in Los
Angeles Superior Court. In the second lawsuit, Clarke sought only civil penalties under
PAGA for the same conduct alleged in his first lawsuit. In February 2009 the court
stayed the second lawsuit. In September 2013 Clarke sought an order lifting the stay in
the second lawsuit so that he could obtain an injunction to enjoin the parties from
finalizing the class action settlement in this action.
4
On the merits of the application, Clarke argued that he had a sufficient interest to
intervene because the settlement of the PAGA claims would collaterally estop him from
bringing his PAGA claims. He claimed that the parties had settled the PAGA claims with
the intent to prevent him from pursuing his PAGA claims.
The trial court denied Clarke’s ex parte application as untimely. The court stated
that Clarke had failed to justify why he waited until less than a week before the final
approval hearing to seek intervention. The court also found that Clarke had failed to
demonstrate that his interest in intervening outweighed the parties’ interests in settling the
lawsuit. The court reasoned that Clarke’s decision not to rejoin the class after the parties
had reached a settlement and his considerable delay in seeking to intervene after learning
about the parties’ intention of settling the PAGA claims demonstrated that his interest did
not outweigh the interests of the parties in settling the case.
After denying Clarke’s ex parte application, the court approved the settlement.
The court found that the parties had conducted sufficient discovery to inform their
negotiations, and that they had conducted their negotiations in good faith and at arm’s
length. The court also found that the value of the settlement was reasonable and adequate
because it exceeded First Transit’s maximum exposure on the Labor Code and UCL
claims. The court also found that the attorneys for the class had given proper notice to
the class members, and the court approved $666,666 in attorneys’ fees for class counsel
and $66,233.70 in costs. Clarke appeals from the trial court’s order denying his ex parte
application for leave to intervene and from the judgment giving final approval of the
settlement agreement.
DISCUSSION
A. The Trial Court Did Not Abuse Its Discretion in Denying Clarke’s Ex Parte
Application for Leave To Intervene
Clarke argues that the trial court abused its discretion in denying his ex parte
application for leave to intervene as untimely because he sought intervention soon after
5
plaintiffs filed their amended class action complaint to allege the PAGA claims.
Because Clarke unreasonably delayed in seeking intervention, the trial court properly
denied his application.
Code of Civil Procedure section 387 allows a nonparty to intervene in a lawsuit
under certain circumstances. Intervention may be mandatory or permissive depending on
the nature of the nonparty’s interest in the litigation. (See Code Civ. Proc., § 387; Siena
Court Homeowners Assn. v. Green Valley Corp. (2008) 164 Cal. App. 4th 1416, 1423-
1428.) A nonparty has an unconditional right to intervene where the nonparty has an
interest in the property or transaction underlying the litigation that may be impaired by
resolution of the action and the existing parties do not adequately protect that interest.
(Siena Court Homeowners Assn. v. Green Valley Corp., supra, 164 Cal.App.4th at
pp. 1423-1424.) A nonparty may also have a mandatory right to intervene where
authorized by statute. (See Code Civ. Proc., § 387, subd. (b) [court must allow a
nonparty to intervene “[i]f any provision of law confers an unconditional right to
intervene”].) Intervention is permissive where the person seeking to intervene has an
interest in the subject matter of the litigation or an interest in common with, or in
opposition to, the parties to the lawsuit. (Code Civ. Proc., § 387, subd. (a).) The
nonparty’s interest “must be direct rather than consequential, and it must be an interest
that is capable of determination in the action.” (Royal Indem. Co. v. United Enterprises,
Inc. (2008) 162 Cal. App. 4th 194, 203-204.)4
Whether the nonparty is seeking mandatory or permissive intervention, the
application to intervene must be timely. (Code Civ. Proc., § 387; see Marken v. Santa
Monica-Malibu Unified School Dist. (2012) 202 Cal. App. 4th 1250, 1277.) Even where a
nonparty has an unconditional right to intervene, the court may deny the application if it
is untimely. (Marken, supra, 202 Cal.App.4th at p. 1277.) Although there is no statutory
4
Clarke did not specify whether he was seeking mandatory or permissive
intervention.
6
time limit on seeking intervention, an unreasonable delay in filing an application for
leave to intervene is a proper ground for denying the application. (See ibid. [“‘it is the
general rule that a right to intervene should be asserted within a reasonable time and the
intervener must not be guilty of an unreasonable delay after knowledge of the suit’”];
Noya v. A.W. Coulter Trucking (2006) 143 Cal. App. 4th 838, 842 [court did not abuse its
discretion by denying nonparty insurer’s application as untimely where the insurer knew
the litigation had been ongoing for several years and did not seek to intervene until after
the parties had reached a settlement].) “An order denying intervention is reviewed under
the deferential abuse-of-discretion standard.” (Noya, supra, 143 Cal.App.4th at p. 842.)
Although the trial court denied his application as untimely, Clarke devotes little
argument on appeal to the issue of timeliness. Clarke contends that he did not discover
that the parties were going to settle the PAGA claims until plaintiffs filed the third
amended complaint on September 11, 2013, about three weeks before he filed his ex
parte application. He argues that his ex parte application was timely because he filed it
“shortly” thereafter.
As his attorney admitted at the hearing on his application, however, Clarke knew
in July 2013 that the parties intended to settle the PAGA claims. Clarke also knew or
reasonably should have known in June 2013 that the parties intended to settle the PAGA
claims because by then the court had preliminarily approved the settlement agreement
and set a hearing date for final approval. Yet Clarke did not attempt to intervene until
October 2013, several weeks after the deadline for class members to submit claims under
the settlement agreement. Clarke did not provide a satisfactory explanation for why he
waited to seek intervention until more than three months after preliminary approval of the
settlement, more than two months after admittedly learning the settlement would include
the PAGA claims, nearly one month after the deadline for class members to submit
claims, and less than one week before the hearing on final approval of the settlement.
The trial court did not abuse its discretion in denying Clarke’s eleventh-hour request to
intervene.
7
B. Clarke Has Standing To Appeal from the Judgment
Plaintiffs and First Transit argue that Clarke lacks standing to appeal from the
judgment giving final approval to the settlement agreement because he is not a party to
the action and he did not object to the settlement agreement or file a motion to vacate the
judgment. Clarke argues that, despite the trial court’s denial of his ex parte application
for leave to intervene, he has standing to challenge the judgment because resolution of
the PAGA claims in this action will bar the PAGA claims alleged in his lawsuit.
A person must have standing to appeal from an order or a judgment.
(Conservatorship of Gregory D. (2013) 214 Cal. App. 4th 62, 67.) Generally, a person
must be a party of record and aggrieved by the challenged judgment to have standing.
(Code Civ. Proc., § 902; Bridgeman v. Allen (2013) 219 Cal. App. 4th 288, 292.) A
nonparty may have standing to appeal, however, where “a judgment or order has a res
judicata effect on the nonparty.” (In re Clergy Cases I (2010) 188 Cal. App. 4th 1224,
1233; see Marsh v. Mountain Zephyr, Inc. (1996) 43 Cal. App. 4th 289, 295 [“‘[a] person
who would be bound by the doctrine of res judicata, whether or not a party of record,
is . . . [entitled] to appeal’”].) Clarke has standing to appeal the judgment because under
Arias v. Superior Court (2009) 46 Cal. 4th 969 (Arias) the settlement agreement will
preclude him from pursuing his PAGA claims.
In Arias, the California Supreme Court decided whether a representative PAGA
claim must satisfy class action requirements. (Arias, supra, 46 Cal.4th at pp. 981-987.)
The defendant employer in that case argued that PAGA claims had to satisfy class action
requirements because to allow employees to file separate PAGA lawsuits would unfairly
subject employers to open-ended litigation or “one-way intervention.” (Arias, at p. 985.)
The defendant in Arias argued that, if class action requirements did not apply to PAGA
claims, individual employees aggrieved by the same conduct could file successive
lawsuits until one employee obtained a favorable judgment, after which all other
aggrieved employees could use the favorable judgment to bind the defendant in their
lawsuits. (Ibid.)
8
The Supreme Court rejected the defendant’s arguments and held that PAGA
claims need not satisfy class action requirements. (Arias, supra, 46 Cal.4th at pp. 984-
987.) The Supreme Court explained that, because an aggrieved employee suing under
PAGA acts as the agent of the state’s labor law enforcement agencies, and because the
state’s agencies represent the interests of all aggrieved employees, all nonparty aggrieved
employees are in privity with an employee suing under PAGA and therefore are bound by
the employee’s PAGA judgment. (Arias, at p. 986.) Thus, under Arias, a judgment in a
PAGA action brought by a single employee, or a group of employees, precludes all
aggrieved employees who were not named in that action from later bringing PAGA
claims against the same defendant. (See Arias, at p. 986 [“nonparty employees as well as
the government are bound by the judgment in an action brought under [PAGA]”]; accord,
Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal. 4th 348, 380
(Iskanian).) Such a judgment does not, however, preclude nonparty aggrieved employees
from pursuing remedies other than civil penalties based on the same underlying Labor
Code violations. (Arias, 46 Cal.4th at p. 986; see Baumann v. Chase Inv. Servs. Corp.
(9th Cir. 2014) 747 F.3d 1117, 1123 [“‘nonparty employees, because they were not given
notice of the action or afforded an opportunity to be heard, are not bound by the judgment
as to remedies other than civil penalties’”].)
Clarke was employed by First Transit throughout the period covering the Labor
Code violations that are the bases of the PAGA claims in this action. During that period,
Clarke, like members of the class, drove buses on First Transit’s DASH Package 6 routes.
In his proposed complaint in intervention, Clarke alleges that he was subject to the same
Labor Code violations as the class members who were working the DASH Package 6
routes at the same time. Thus, Clarke’s PAGA claims seek to collect the same civil
penalties that plaintiffs’ PAGA claims seek to collect in this action. Thus, the judgment
in this action will bar the PAGA claims alleged in Clarke’s action. (See Arias, supra, 46
Cal.4th at p. 986.)
9
Citing to language in the court’s opinion in Villacres v. ABM Industries Inc.
(2010) 189 Cal. App. 4th 562 (Villacres), plaintiffs and First Transit argue that the
settlement agreement will not preclude Clarke from pursuing his separate PAGA claims
against First Transit. In Villacres the plaintiff, who was a member of a class of security
guards in a prior lawsuit involving Labor Code claims against his former employer, filed
a separate PAGA action against the same employer after the prior class action had settled.
(Villacres, at p. 573.) The settlement agreement in the prior class action contained a
provision releasing the employer from “any and all claims” that could have been asserted
against it arising out of the same conduct underlying the Labor Code claims of the class.
(Villacres, at p. 572.) The settlement agreement did not mention PAGA penalties. (See
Villacres, at pp. 570-573.) The plaintiff in Villacres did not opt out of the prior class,
object to the settlement agreement in the prior class action, or attempt to intervene in the
prior class action to assert his PAGA claims. (Villacres, at p. 574.)
The trial court in Villacres granted the defendant employer’s motion for summary
judgment because the class action settlement in the prior lawsuit, which bound the
plaintiff, barred his PAGA claims under the doctrine of res judicata. (Villacres, supra,
189 Cal.App.4th at p. 574.) The Court of Appeal affirmed. The court explained that, in
the prior class action, the plaintiff had received notice of the class settlement and did not
object to the settlement, seek to intervene in the class action to preserve his PAGA
claims, or opt out of the class action to pursue his PAGA claims independently.
(Villacres, at pp. 581-582.) Because the class settlement released the defendant employer
from liability for any and all claims that could have been raised based on the employer’s
conduct, and because the plaintiff’s PAGA claims arose out of that conduct, the
plaintiff’s participation in the class settlement barred him from later seeking additional
penalties based on the same conduct by the employer. (Villacres, at pp. 582-587.) As
part of its analysis, the Court of Appeal noted, in dicta and without citing Arias, that the
plaintiff in the subsequent class action “could have easily preserved his PAGA claims by
opting out of the class” in the prior class action. (Villacres, at p. 583.) Plaintiffs and
10
First Transit argue that this language demonstrates that Clarke will not be bound by their
settlement agreement because Clarke opted out of the class.
Villacres is distinguishable. Unlike the plaintiffs in this case, the plaintiffs in
Villacres never pleaded or sought recovery for any PAGA claims. (See Villacres, supra,
189 Cal.App.4th at p. 572.) Thus, in Villacres, the trial court did not enter a judgment on
any PAGA claims after it had given final approval to the settlement agreement. In
addition, the court in Villacres stated that the plaintiff’s PAGA claims were barred by res
judicata because the plaintiff had participated in the prior class action, and that, had the
plaintiff opted out of the class in the prior lawsuit, the terms of the class settlement would
not have barred his PAGA claims. (See Villacres, at pp. 581-582.) The court in
Villacres, however, did not discuss whether Arias would have barred the plaintiff’s
PAGA claims if he had opted out of the class in the prior lawsuit. (See Villacres, at pp.
578-593.) And, to the extent plaintiffs and First Transit urge us to extend the dicta from
the Villacres opinion to the facts of this case, we are bound by the Supreme Court’s
contrary holding in Arias. (See Arias, supra, 46 Cal.4th at p. 985 [“the judgment in [a
PAGA action] is binding not only on the named employee plaintiff but also on
government agencies and any aggrieved employee not a party to the proceeding”].)
Because under the Supreme Court’s decision in Arias the settlement of the PAGA claims
in this action will bar the PAGA claims in Clarke’s action, Clarke has standing to appeal
from the judgment.
C. The Judgment Must be Reversed to Allow the Trial Court to Comply with
Section 2699
Clarke argues that the trial court erred in approving the provision of the settlement
agreement resolving the PAGA claims because (1) the settlement agreement does not
allocate 25 percent of the civil penalties to the aggrieved employees, as required by
section 2699, subdivision (i); (2) there is no evidence in the record that the court
specifically reviewed and approved the civil penalties allocated to the PAGA claims, as
required by section 2699, subdivision (l); (3) plaintiffs and First Transit colluded in
11
settling the PAGA claims; and (4) the settlement agreement contravenes PAGA’s
purpose of deterring employers from committing Labor Code violations because it
significantly undervalues the PAGA claims. (See Montano v. Wet Seal Retail, Inc.
(2015) 232 Cal. App. 4th 1214, 1223 [“PAGA was clearly established . . . to deter [Labor
Code] violations”].) We agree with Clarke’s first two arguments (and do not reach the
second two).
Section 2699, subdivision (i), provides that civil penalties recovered under PAGA
“shall be distributed” 75 percent to the Labor and Workforce Development Agency and
25 percent to the aggrieved employees, which includes “all employees affected by the
Labor Code violation[s].” (Iskanian, supra, 59 Cal.4th at p. 382.) The settlement
agreement, however, allocates 100 percent of the $10,000 in PAGA civil penalties to the
Labor Workforce Development Agency. Plaintiffs and First Transit do not address this
misallocation of the PAGA penalties in their briefs, although at oral argument counsel for
plaintiffs admitted that the agreement’s failure to distribute 25 percent of the civil
penalties to the employees aggrieved by the Labor Code violations was an “oversight.”
Thus, there is no dispute the agreement fails to comply with PAGA’s distribution
requirements.
In addition, under section 2699, subdivision (l), the trial court must “review and
approve any penalties sought as part of a proposed settlement agreement pursuant to
[PAGA].” In its order approving the settlement agreement, the court summarized the
material terms of the agreement, and noted that the agreement included a provision
settling the PAGA claims. The court’s analysis of the settlement terms and description of
the settlement process, however, do not address the sufficiency of the $10,000 allocated
to the PAGA claims. Rather, the court’s analysis and comments at the final approval
hearing are devoted entirely to whether the gross amount of the settlement is fair under
the standards governing class action settlements, and whether the class members received
proper notice of the settlement. PAGA claims, however, are not subject to or governed
by class action rules and requirements. (See Arias, supra, 46 Cal.4th at pp. 980-987.)
Therefore, we cannot infer, as plaintiffs ask us to infer , that the court’s analysis of the
12
gross amount of the settlement under class action standards necessarily indicates that the
court separately reviewed and approved the settlement of the PAGA claims. (See
Baumann v. Chase Inv. Servs. Corp., supra, 747 F.3d at. p. 1124 [class actions and
PAGA claims “are more dissimilar than alike” because a “PAGA action is at heart a civil
enforcement action filed on behalf of and for the benefit of the state, not a claim for class
relief”].) Indeed, the fact that the court overlooked the agreement’s failure to allocate
25 percent of the PAGA penalties to the aggrieved employees, as required by section
2699, subdivision (i), strongly suggests that the court did not separately review and
approve the PAGA portion of the agreement. We therefore remand the matter and direct
the court to review the agreement’s provision settling the PAGA claims and ensure that
any approved settlement of the PAGA claims complies with section 2699, subdivision (i).
DISPOSITION
The order denying Clarke’s ex parte application for leave to intervene is affirmed.
The judgment is reversed and the matter remanded to the trial court to conduct a new
hearing for final approval of the settlement agreement in compliance with the
requirements of section 2699, subdivisions (i) and (l). The trial court is directed to allow
Clarke to participate in the final approval hearing for the purpose of contesting the
settlement of the PAGA claims. Each party is to bear its costs on appeal.
SEGAL, J.
We concur:
ZELON, Acting P. J.
STROBEL, J.*
*
Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to
article VI, section 6 of the California Constitution.
13