A More Rigorous Standard for Approving Wage and Hour Class Action Settlements

Spring 2009Newsletters California Update - Second Quarter 2009

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A court of appeal’s recent rejection of a court-approved settlement will make it more difficult to settle wage and hour class actions in early mediation,when only limited discovery has been completed. Kullar v. Foot Locker Retail, Inc., 168 Cal. App. 4th (2008), involved a class action lawsuit filed on behalf of approximately 18,000 Foot Locker employees. During discovery, the plaintiff served special interrogatories on Foot Locker, none of which addressed the meal period claims or any of the other wage claims that were first brought in the amended complaint. No subsequent discovery demands were submitted and plaintiffs took no depositions. The parties subsequently engaged in a successful mediation, and the trial court approved the settlement, concluding that the settlement was reached at arm’s length, that the attorneys and mediator were experienced, that the parties had exchanged sufficient data during the mediation, and that only a few members of the class had objected. The trial court also emphasized that Evidence Code § 1119, which provides for confidentiality in mediation, prevented it from reviewing the information exchanged during the mediation.

The court of appeal vacated the trial court’s approval of the settlement. Significantly, the appellate court rejected the trial court’s conclusion that it could not review data relating to class counsel’s evaluation of the settlement because the information was protected by Evidence Code § 1119.The appellate court determined that the trial court had an obligation to ensure that the settlement terms were fair, adequate and reasonable, and that any non-privileged communications exchanged during the mediation should have been disclosed to and reviewed by the trial court.