Morrow-Meadows Wage and Hour Cases CA2/6 ( 2021 )

Filed 1/6/21 Morrow-Meadows Wage and Hour Cases CA2/6
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SIX
MORROW-MEADOWS WAGE 2d Civ. No. B298816
AND HOUR CASES. JCCP No. 4858
(Los Angeles County Super. Ct.
No. BC590427, San Diego
County Super. Ct. No. 37-2015-
00033224-CU-OE-CTL)
This appeal involves a pair of complex civil actions
that were coordinated for trial. The first was a class action
brought against the Morrow-Meadows Corporation by Marie
Pacheco and Rafael Robinson (collectively, Appellants) that
alleged violations of various Labor Code and Business and
Professions Code provisions. It did not seek relief pursuant to
the Private Attorney General Act (PAGA). The second was
brought by Araceli Noriega. In contrast to the Pacheco action,
the Noriega action did not seek classwide relief, but did seek
PAGA relief.
After the actions were coordinated for trial, Noriega
amended her complaint to encompass the claims set forth in the
Pacheco complaint. She then entered into a settlement
agreement with Morrow-Meadows that released all claims
against the company. The trial court certified the class action,
approved the settlement, and entered judgment accordingly.
Appellants contend the court erred when it: (1) deemed Noriega
an adequate class representative, and (2) approved the
settlement. Because we agree with Appellants’ first contention,
we do not reach the second. We reverse.
FACTUAL AND PROCEDURAL HISTORY
The complaints
Morrow-Meadows is an electrical contractor. About
95 percent of its hourly employees are unionized field workers.
The other five percent are nonunionized office workers.
Pacheco is a former Morrow-Meadows employee. In
August 2015, she filed a class action complaint on behalf of all
current and former hourly employees who had worked for
Morrow-Meadows in California since August 2011. In it, she
alleged that Morrow-Meadows did not: (1) pay minimum wages,
(2) pay overtime wages, (3) timely pay wages, (4) reimburse
business expenses, (5) provide meal and rest periods, (6) provide
compliant wage statements, or (7) keep the requisite payroll
records. She also alleged that Morrow-Meadows engaged in
unlawful business practices. She sought classwide damages for
unpaid wages, premium wages, actual damages, restitution of
unpaid wages, statutory penalties, interest, and attorney fees,
but did not seek PAGA relief. Robinson was added as a named
plaintiff the following year.
Noriega filed her complaint in October 2015. She
alleged causes of action for minimum wage violations, overtime
violations, failure to reimburse business expenses, meal and rest
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period violations, wage statement violations, and failure to pay
wages upon separation. Noriega brought her complaint as a
representative of the State of California pursuant to PAGA, not
as a class action. She sought unpaid wages, statutory civil
penalties, interest, and attorney fees on behalf of Morrow-
Meadows’s employees who had worked for the company during
the previous year.
Morrow-Meadows petitioned for coordination of the
two actions. (Code Civ. Proc., § 404 et seq.; Cal. Rules of Court,
rule 3.501 et seq.) Noriega opposed coordination, claiming that
her case was “a purely PAGA action” requiring only limited
discovery. Her attorney also stated that he did not intend to
represent unionized employees. The actions were coordinated
over Noriega’s objections.
Noriega settles with Morrow-Meadows
In mid-2017, Noriega and Morrow-Meadows entered
into a $1.1 million settlement that released all claims against the
company, including the classwide claims asserted in the Pacheco
action. The settlement provided that 75 percent of the net
proceeds would go to the employees delineated in Noriega’s
original complaint, with the remaining 25 percent going to the
additional employees delineated only in the original Pacheco
complaint.
Before seeking approval of the settlement, Noriega
requested leave to file an amended complaint. The proposed
amended complaint asserted class action allegations on behalf of
the same putative class delineated in the Pacheco complaint,
including most of the same Labor Code violations. It did not
include allegations related to Morrow-Meadows’s alleged failure
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to maintain requisite payroll records, however, nor did it include
all of the theories on which Appellants sought recovery.
After a series of amendments, Noriega and Morrow-
Meadows executed the operative fourth amended settlement
agreement. Appellants objected on a number of grounds,
including that Noriega was an inadequate class representative.
Preliminary approval proceedings
Noriega moved for preliminary approval of the
settlement and certification of a settlement class. In support of
the motion, Noriega’s counsel submitted a declaration stating
that the $1.1 million settlement was fair and reasonable because
the best-case recovery was $1.8 million while the worst case was
a defense verdict. Appellants objected that the claims included in
counsel’s declaration totaled $2.5 million, not $1.8 million. They
also complained that counsel’s valuation ignored several claims
in their original complaint, including those made on behalf of
unionized employees. They continued to object that Noriega was
an inadequate class representative.
The trial court preliminarily approved the
settlement, and preliminarily certified the matter as a class
action with two subclasses: a PAGA subclass and a non-PAGA
subclass. It found that Noriega’s claims were “typical of the
claims of the members of the [s]ettlement [c]lass” and appointed
her as class representative, finding that she was “qualified and
suitable” to serve in that role because she would “fairly and
adequately protect the interests of the . . . [c]lass.”
Final approval proceedings
After mailing out class notices, the claims
administrator reported that only Appellants had objected to the
settlement. Noriega moved for final approval. Attached to her
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motion was another declaration from counsel valuing the claims
in settlement, this one with a best-case recovery of slightly more
than $1.8 million. The valuation excluded claims made by
unionized employees for everything but the wage statement
claim. Appellants’ counsel countered with a valuation of more
than $312 million for the settled claims plus penalties.
At the final approval hearing, Appellants complained
that the settlement grossly undervalued the class claims and was
reached without adequate discovery, without pursuing claims on
behalf of 95 percent of the class members, and without providing
the court with accurate information about the nature and
magnitude of the claims. They also claimed that Noriega was not
an adequate class representative.
The trial court granted final approval of the
settlement. The court deemed the settlement fair and
reasonable, the product of good-faith negotiations after adequate
discovery. It found the difference in the amounts paid to PAGA
class members and non-PAGA class members to be fair. Its order
stated that it resolved all claims asserted in the coordinated
proceeding.1
DISCUSSION
Appellants contend the trial court erred when it
certified the class action and approved the settlement because it
1 AfterAppellants timely filed their notice of appeal,
Morrow-Meadows moved to dismiss the appeal for lack of
standing. We denied the motion. Morrow-Meadows and Noriega
ask that we now reconsider our denial. We decline to do so:
Appellants were parties of record in the coordinated action, and
thus have standing to appeal. (Hernandez v. Restoration
Hardware, Inc. (2018) 4 Cal.5th 260, 269.)
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did so without setting forth its reasons for concluding that
Noriega was an adequate class representative. We agree.
“Code of Civil Procedure section 382 authorizes class
actions ‘when the question is one of a common or general interest,
of many persons, or when the parties are numerous, and it is
impracticable to bring them all before the court.’” (Sav-On Drug
Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 326 (Sav-On
Drug Stores).) “The party seeking certification has the burden to
establish the existence of both an ascertainable class and a well-
defined community of interest among class members.” (Ibid.) A
“community of interest” requires proof of “predominant common
questions of law or fact,” “class representatives with claims or
defenses typical of the class,” and “class representatives who can
adequately represent the class.” (Ibid.)
We review the trial court’s finding that Noriega was
an adequate class representative for abuse of discretion. (Sav-On
Drug Stores, supra, 34 Cal.4th at p. 326.) We will not disturb
that finding “‘“unless (1) it is unsupported by substantial
evidence, (2) it rests on improper criteria, or (3) it rests on
erroneous legal assumptions.”’ [Citation.]” (Ayala v. Antelope
Valley Newspapers, Inc. (2014) 59 Cal.4th 522, 530 (Ayala).) In
contrast to ordinary appellate review, “[w]e review the trial
court’s actual reasons for granting or denying certification.”
(Ibid., emphasis added.) “[I]f they are erroneous, we must
reverse, whether or not other reasons not relied upon might have
supported the ruling.” (Ibid.)
Here, we cannot determine whether the trial court’s
reasons for certifying the coordinated cases as a class action were
erroneous because the court did not articulate any basis for its
finding that Noriega could adequately represent the settlement
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class. Though the court “parroted the ultimate finding needed to
[grant class] certification,” it “did not provide any insight into its
analytic route in reaching that finding.” (Myers v. Raley’s (2019)
32 Cal.App.5th 1239, 1247 (Myers).) When it preliminarily
granted certification, the court stated that Noriega was “qualified
and suitable” to serve as class representative because she would
“fairly and adequately protect the interests of the . . . [c]lass.”
But it did not explain why it reached that conclusion. Nor did the
court provide an explanation at the final approval hearing. The
court’s “failure to explain itself is fatal.” (Ibid.)
Neither Morrow-Meadows nor Noriega point to
anything in the record to support a contrary conclusion. Morrow-
Meadows notes that Noriega submitted a declaration detailing
the work she had done in the case, while her attorney’s
declaration noted his experience in class action litigation. Were
this case subject to normal appellate review standards, these
declarations might provide support for the trial court’s finding
that Noriega would be an adequate class representative. But this
is an appeal of a class action. “To turn to the record to concoct
some basis for the trial court’s [grant] of certification is to abolish
the relevant standard of review . . . and apply ordinary appellate
review contrary to the legion of cases that prohibit appellate
revisionism.” (Myers, supra, 32 Cal.App.5th at p. 1251.)
Noriega similarly urges us to rely on her declaration,
noting that the trial court cited it when it concluded that she was
entitled to an incentive award. This again ignores the standard
of review in class action appeals, and instead would require us to
infer a basis for the court’s determination that Noriega would
have fairly and adequately represented the class where no
explanation was given. “This we cannot do.” (Myers, supra, 32
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Cal.App.5th at p. 1251.) The trial court abused its discretion
when it failed to explain why Noriega was an adequate class
representative. Reversal is therefore required. (Id. at p. 1252;
see also Ayala, supra, 59 Cal.4th at p. 530.)
DISPOSITION
The orders certifying the coordinated cases as a class
action and granting final approval of the settlement, entered
March 6 and 27, 2019, are vacated, and the judgment is reversed.
The matter is remanded to the trial court with directions to
articulate a statement of reasons for approving or denying class
certification. Appellants shall recover their costs on appeal.
NOT TO BE PUBLISHED.
TANGEMAN, J.
We concur:
GILBERT, P. J.
YEGAN, J.
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Yvette M. Palazuelos, Judge
Superior Court County of Los Angeles
______________________________
Lawyers for Justice, Edwin Aiwazian, Arby Aiwazian
and Joanna Ghosh for Plaintiffs and Appellants.
Stuart Kane, Bruce D. May, Shane P. Criqui and
Patricia H. Jun for Defendant and Respondent.
Sullivan Law Group, William Bransfield Sullivan and
Eric Keith Yaeckel for Respondent.