IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON DEBRA PUGH, AARON BOWMAN and FLOANN BAUTISTA on their own behalfand on behalfof all persons similarly situated, Respondents,

v. EVERGREEN HOSPITAL MEDICAL CENTER a/k/a KING COUNTY PUBLIC HOSPITAL DISTRICT NO. 2, Appellant, WASHINGTON STATE NURSES ASSOCIATION, Appellant. No. 68550-3-1 DIVISION ONE PUBLISHED OPINION

FILED: October28, 2013 

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Grosse, J. — Court approval is not required of a settlement of a lawsuit brought 

### by a union in its associational capacity when it is brought by the union itself, as here, and not as a class naming certain members as representative parties. Accordingly, we

reverse. FACTS 

### King County Public Hospital District No. 2 operates Evergreen HospitalMedical Center (Evergreen). Evergreen includes 26 separate, independently-managed medical departments. Each departmentvaries in itsprocedures for meal and rest breaks for its registered nurses (RNs). 

### On September 15, 2010, the Washington State Nurses Association (WSNA), the exclusive bargaining unit for RNs at Evergreen, filed a lawsuit against Evergreen 

### seeking to enforce state required rest periods for RNs. The suit was based onNo. 68550-3-1/2 

### Washington's Industrial Welfare Act,1 which requires Washington employers toprovide 

### at leasttenminutes ofpaid resting timeforeveryfourhours ofwork.2 Despitethis state mandate, many of the hospitals represented by WSNA do not use this break system consistently or at all. As a result, the RNs have become responsible for finding coverage for patient care during the break period rather than the hospital providing the RNs relief from duty. This practice has resulted in RNs needing to take a break, being forced to ask other nurses to double their patient loads, or skip a break to avoid burdening a fellow RN with an unmanageable patient load. In 2010 and earlier, 

### Evergreen did not maintain a hospital-wide system for providing rest periods or 

### recording denied rest periods, nor did it compensate RNs for denied rest periods. WSNA's lawsuit sought unpaid wages to RNs for alleged missed rest breaks and injunctive relief requiring Evergreen to provide restperiods. 

### On September 17, 2010, a similar suit against Evergreen was filed as a putative class action by two former emergency department RNs, Debra Pugh and Aaron Bowman, seeking unpaid wages for alleged missed rest breaks and missed or interrupted meal breaks. On February 4, 2011, Pugh and others (Pugh) moved to intervene in the WSNA case in an effort to challenge WSNA's standing to sue for 

### damages on their behalf and to protect their interests in obtaining full back pay damages for missed breaks. 

### On February 10, 2011, WSNA and Evergreen entered into a settlement agreementto settle the RNs' rest break claims for $375,000. As part of the agreement 

### 1Chapter49.12RCW. 2Winaert v. Yellow Freight Svs.. Inc.. 146 Wn.2d 841, 50 P.3d 256 (2002); WAC 296- 126-092(4). 2No. 68550-3-1 / 3 WSNA released its right to sue Evergreen in its associational capacity on behalfof its

nurse members at the hospital for injunctive relief or damages related to denied rest periods. WSNA then posted on its website and e-mailed to the RNs its announcement ofthe settlementand also stated thatit would hold a meeting aboutthe settlement. On February 17, 2011, WSNA held a meeting at the hospital and informed the RNs about their options to participate in the settlement or pursue wage claims on their own, including by joining the Pugh lawsuit. Debra Pugh was present at the meeting and distributed information about the class action lawsuit, encouraging the RNs not to participate inthe settlement. On February 18, 2011, WSNA and Evergreen filed a joint motion for court approval ofthe settlement. The trial court set a hearing date on the motion for March 18, 2011 and seta briefing schedule. The deadlineforfiling objections to the settlement

was set as March 9, 2011. On February 25, 2011, during a scheduling telephone 

### conference withthe parties, the trial court (Judge Middaugh) questioned its authority to approve such a settlement. 

### On March 2, 2011, Pugh deposed Evergreen's representative, Kathleen Groen, and asked her whether, during settlement negotiations, Evergreen had determined a 

### back pay amount owed to the RNs for missed breaks. Groen stated that forsettlement 

### purposes, Evergreen came up with one calculation that estimated an amount of $600,000 in back pay, which was based on results in similar lawsuits and assumptions that most nurses did in fact receive their breaks. Groen also confirmed that Evergreen did not have records ofmissed breaks orthe amountofbackpay owed.No. 68550-3-1/4 On March 4, 2011, WSNA and Evergreen filed a joint motion to dismiss WSNA's lawsuit and the court entered a stipulation and agreed order ofdismissal ofthe lawsuit. The motion for joint settlement approval was then stricken as well as Pugh's motion to intervene. Pugh filed an appeal ofthis dismissal, but ultimatelydismissed thatappeal. On March 9, 2011, WSNA mailed letters to the RNs describing the settlement and notifying them that they would be sent a check for their portion ofthe settlement thatthey could either accept and release the right to sue Evergreen, or send back and 

### retain the right to pursuetheir own lawsuit. The checks were mailed to 1,257 RNs along with a letter explaining the purpose of the check and the legal consequences of keeping the check. Counsel for Pugh also sent a letter to the RNs, asserting that his firm could

recover more forthem and warning thatthey could not cash the check and be a part of the class action lawsuit for missed rest breaks and had to return the check if they wanted to be a member ofthe rest break class action. 

### On August 19, 2011, Pugh amended the complaint to add Floann Bautista, a
nurse who settled her rest breakclaim and executed a release, as a putative memberof


### a subclass consisting of all RNs who settled their individual claims. The amended complaint challenged the validity of the WSNA settlement and the individual releases. 

### Evergreen then tendered defense of the settlements to WSNA, under the indemnity provision of the settlementagreement, and WSNA intervened. Pugh then askedthe court to certifythe following class and subclass: 

### All registered nurses engaged in patientcarewho have been employed by 

### Evergreen Hospital Medical Centerin King County, Washington andwho, at any time between September 17, 2007 and the present, were denied rest and/or meal breaks.No. 68550-3-1 / 5

Allmembers ofthe Class who received and cashed a check purporting to waive and resolve their rest break claims with Evergreen. Pugh also moved for partial summary judgment to invalidate the WSNA settlement agreement and the individual releases and to dismiss WSNA from the lawsuit. Evergreen cross moved for summary judgment, based on evidence that Bautista knowingly released her rest break claims. The trial court granted Pugh's motion for class certification and motion for partial summary judgment, and denied Evergreen's cross motion for partial summary judgment, concluding that the settlement agreement was invalid because the parties failed to obtain court approval of the settlement and WSNA lacked standing to sue. Both Evergreen and WSNA moved for discretionary review, which was granted by this court. This opinion addresses Evergreen's appeal. We address WSNA's appeal in a 

### separateopinion.3
ANALYSIS I. Validity ofthe Settlement 

### Evergreen contends thatthe trial court erred by invalidatingthe settlementon the basis thatthe parties did not obtain court approval ofthe settlementagreementbecause the case was not a class action requiring such courtapproval. We agree. 

### CR 23(e) provides, "A class action shall not be dismissed or compromised without the approval ofthe court, and notice ofthe proposed dismissal or compromise 

### shall be given to allmembers of the class insuch mannerasthe court directs." Thetrial

3Pugh v. Evergreen Hospital and Wash. State Nurses Ass'n, No. 68651-8 (Wash. Ct. App. October28, 2013). 5No. 68550-3-1 / 6
court concluded that court approval ofthe settlement agreement was required because itwas broughton behalfofthe membernurses and therefore class action rules applied: Because WSNA brought a suit on behalf of the member nurses under a legal theory of associational standing, any settlement that followed would be maintained under class action rules. As Evergreen and WSNA noted intheirJoint Motion to Approve Settlement, court approval of a class action is mandated under CR 23(e) to assure that the interests of absentclass members are considered and adequately protected.

. . . Notwithstanding Evergreen's and [WSNAJ's explanations and arguments to the contrary, court approval oftheir settlement was not optional and it should have been obtained as mandated under CR 23(e). Pickett v. Holland American Line-Westours, Inc., 145 Wn.2d 178, 187-88[, 35 P.3d 351](2001). While Pugh is correctthat both WSNA and Evergreen initiallyjointlysought court 

### approval of the settlement agreement, the record shows that they ultimatelyconcluded that itwas not legally required after conferring with the trial court. On February 18, 2011, WSNA and Evergreen sought court approval of settlement, stating in a joint
motion: While there is no legal requirementthatthe parties obtain approval of the settlement, the parties have jointly agreed to seek court approval due to the nature ofthis action. While this action is not a class action, but instead an action based on WSNA's associational standing to pursue back 

### wages on behalf of the nurses it represents, the rules governing settlements ofclass actions are informative to aid this Court indetermining whetherthis settlement should be approved. 

### Shortly thereafter, the trial court questioned its authority to approve such a settlement. On March 4, 2011, the court entered a stipulation and agreed order of dismissal of WSNA's lawsuit. The order stated in part: 

### Due in part to the Court's comments on February 25, 2011, including with 

### regard to itsauthority or lack thereof to approve the settlement, the partiesNo. 68550-3-1 / 7 have determined that Court approval of the parties' settlement is not necessary orrequired. We agree that the trial court did infact lack authority to approve the settlement. As Evergreen contends, this was not a class action, but a suit brought bythe WSNA in its associational capacity, and therefore court approval of a settlement under CR 23(e) is not required. Indeed, both parties agreed in supplemental briefing to this court that class action rules relating to suits brought by an association do not apply here. CR 23.2 addresses suits brought by an association "as a class by naming certain members as representative parties" and provides that dismissals or compromise of such suits are governed by CR 23(e). As both parties correctly point out, WSNA's suit was not 

### brought as a class and did not name certain members as representative parties. Thus, CR 23(e) does not apply here and court approval ofthe settlement was not required. The trial court therefore erred by concluding that CR 23(e)'s requirement of court 

### approval of class action settlements applies to any lawsuit brought on a theory of associational standing. 

### Pickettv. Holland America Line-Westours, Inc.,4 cited by thetrial court, does not require a different result. Unlike here, that casewas brought as a class action and was conditionally certifiedas a class action forpurposes ofsettlement. Thus, court approval 

### ofthatsettlementwasrequired underCR23(e).5

4145 Wn.2d 178, 35 P.3d 351 (2001). 

### 5There, cruise ship passengers brought a class action againstthe cruise line and after the trial court denied class certification, the parties reached a settlement agreement. Pickett, 145 Wn.2d at 185. The courtthen conditionally certified the class for settlement 

### purposes and preliminarily approved the settlement. Pickett, 145Wn.2d at 185-86. Class members were then notified of the settlement and the court set a hearing to determine the reasonableness ofthe settlement. Atthat hearing, a passengerobjected 7No. 68550-3-1 / 8 Pugh further contends that even if the WSNA suit was not a class action, Evergreen still had a duty to obtain court approval for the settlement under CR 23(e) because itcompromised the claims ofthe putative class inthe class action case. Pugh argues that by failing to obtain court approval, Evergreen denied the RNs due process by providing insufficient notice ofthe settlementand depriving them an opportunityto be heard. But as Evergreen contends, the settlement did not in fact "compromise" the claims ofthe putative class members; itresolved only WSNA's claim and simply offered checks to and sought releases from those RNs who chose to settle their individual claims. Thus, none of the putative class members were bound by the settlement or released theirindividual claims unless they affirmatively chose to do so by accepting the check. The settlement simply bound the WSNA, Evergreen, and those nurses who opted to acceptthe individual settlementchecks. Moreover, the RNs were not denied due process rights to notice and opportunity 

### to be heard. They were provided ample notice ofthe settlement terms, including the option not to acceptthe individualchecks and release their claims. They were also well

aware of the pending class action suit and that they had the choice to pursue their 

### individual claims by joining that lawsuit. In fact, 19 of the RNs affirmatively refused to acceptthe settlementchecks.

to the settlementbutthe courtapproved the settlement. On appeal, this court reversed the denial of class certification and the court's approval of the settlement. The cruise 

### line appealed and the Supreme Court reversed, concluding that the Court of Appeals erred byaddressing the merits of the class certification ruling and should have instead confined itselfto determining the reasonableness of the settlement. Pickett, 145 Wn.2d at 191. 8No. 68550-3-1 / 9 Evergreen further contends thatthetrial courterred by invalidating the settlement agreement on the basis that WSNA lacked standing to sue. As we conclude in our 

### opinion in WSNA's appeal, WSNA did have standing.6 Accordingly, the trial court's ruling was withoutbasis and therefore error. II. Validity ofIndividual Settlements Evergreen next challenges the trial court's ruling invalidating the individual settlements. Evergreen contends thatthe RNs' individual acceptances ofthe settlement checks and releases of their claims resulted in accord and satisfaction ofthe dispute between the RNs and Evergreen and are therefore valid. We agree. The principle of accord and satisfaction recognizes a debtor and creditor's 

### agreement to settle a claim by some performance different than that which is claimed due; once the creditor accepts the substituted performance, it amounts to full 

### satisfaction of the claim.7 Accord and satisfaction requires a bona fide dispute, an 

## agreementto settlethe disputefor acertain sum, and performanceoftheagreement.8 Evergreen contends that by signing the checks, the RNs settled their claims againstthe hospital because the settlementchecks included a specific statement of the settlement, 

### Evergreen tendered the checks infinal payment, and the RNs endorsed the checks 

### therebyacceptingthepayment.9

6SeePugh,No. 68651-3-1, slip op. at 5. 7NorthwestMotors. Ltd. v. James. 118 Wn.2d 294, 303-04, 822 P.2d 280 (1992). 

### 8Perezv. Pappas. 98 Wn.2d 835, 843, 659 P.2d 475 (1983). 

### 9Evergreencites OregonMut. Ins. Co.v. Barton, 109Wn. App. 405,410, 36 P.3d1065 (2001) (accord and satisfactionoccurred wheninsured deposited settlement checkfrom insurance company givenin "full settlement" ofclaim and check was accompanied by a letterconfirming the settlement). 9No. 68550-3-1/10 The trial court did not appear to quarrel with this argument, but instead invalidated the individual settlements based on WSNA's lack ofstanding to sue: While Evergreen correctly states the law concerning the defense of accord and satisfaction, the invalidity of the settlement due to WSNA's lack ofstanding fundamentally undermines their argument. While it istrue that each nurse had the option of returning the check, the checks themselves were only made available as a part of Evergreen's agreement with WSNA. Further, WSNA developed the distribution plan concerning the payments to be made to individual nurses. The settlement could not have been possible without WSNA's claiming associational standing, which the courthas been [sic] found to be invalid. As noted above, and as we held in our opinion inWSNA's appeal, the trial court erred 

### by concluding that WSNA lacked standing. Thus, the court's ruling invalidating the individual settlementsfor lack ofstanding iswithoutbasis and therefore error. 

### Pugh also contends that the individual releases were invalid because they amounted to an illegal kickback of wages under RCW 49.52.050. Under RCW 49.52.050 it is a crime when an employer who "[wjillfully and with intent to deprive the 

### employee of any part of his or her wages, shall pay any employee a lower wage than the wage such employer is obligated to pay such employee by any statute, ordinance, or contract." Anagreementbetween an employer and employee that the employee will accept less than the amount owed under contractor law is voidagainstpublicpolicy as 

### anillegalrebateofwages.10 The trialcourtreserved ruling on this argument, concluding that itwas an issue of factfor thejury: 

### Plaintiffs allege that sinceWSNA and Evergreen settledforpennies on the dollar ofwhat either Evergreen or WSNA calculated what was owed, the discount amounted to an illegalkickback ofwages to Evergreen. Whether 

### 10 McDonald v. Wockner, 44 Wn.2d 261, 267 P.2d 97 (1954). 10No. 68550-3-1/11

an employer acts willfully for purposes of RCW 49.52.050, and RCW 49.52.070, is normally a question for the jury. Pope v. University of Wash., 121 Wn.2d 479, 490[, 852 P.2d 1055] (1993). There are generally two instances where an employer's failure to pay wages is not willful: where the employer was careless or erred in failing to pay; or where a "bona fide" dispute exists between the employer and the employee. Schilling v. Radio Holdings. Inc., 136 Wn.2d 152, 160[, 961 P.2d 371] (1998). Depending on the evidence at trial, itmay well be that willfulness cannot be shown by plaintiffs due to a "bona fide" dispute about the amount ofwages owed. This issue must awaitthe fulldevelopment ofthe trial evidence and is reserved until then. Evergreen contends that the evidence established a bona fide dispute over the amount ofwages owed for the missed breaks. Evergreen notes that itdisputed how many rest breaks were missed, if any, and offered a settlement to each RN based on the total numberofhours worked by those RNs. Evergreen cites a Fifth Circuitcase, Martin v. Spring Break '83 Productions, LLC, where a release was held to be enforceable in a wage dispute case even though the 

### employee accepted less than the amount claimed.11 There, the union sued an employerundertheFairLaborStandards Actof1938 (FLSA)12 alleging thatemployee union members were not paid for all work performed. Afterdetermining that it would not 

### be possible to determine whether the union members actually worked on the days claimed, the union settledwiththe employerand the union memberemployees received and cashed settlement checks and released their FLSA claims. The employees later 

### sued for unpaid wages, arguing that they could not privately settle wage claims under the FLSA. The court disagreed, concluding that "payment offered to and accepted by 

### [theemployees]

... is an enforceable resolution ofthose FLSA claims predicated on a 

### 11688F.3d247(5thCir. 2012). 1229U.S.C. §§201-219. 11No. 68550-3-1/12 bona fide dispute about time worked and not as a compromise of guaranteed FLSA 

### substantive rights themselves."13 Similarly here, as Evergreen contends, there may be difficulty in determining whether and when breaks were missed. Thus, the individual RNs were best situated to determine whetherthe settlementwas a fair compromise of a bona fide dispute overthe hours worked during missed rest breaks. Pugh further contends for the first time on appeal that the individual releases

were invalid because they were obtained by overreaching, fraud, and misrepresentation. A party seeking to avoid a release based on overreaching, fraud, or 

### misrepresentation must produce clear andconvincing evidence.14 Here, thetrial court did not make any such finding as itwas not presented withthe issue. Thus, we decline to review the issue as not properly preserved for appeal. Inany event, we note that at most, the record contains disputed evidence, leaving the issue a question of fact for 

### resolution bythejury.15 The trial court's rulings that the settlement agreement and individual settlements

are invalid are without basis. Thus, the trial court erred by granting summaryjudgment 

### for Pugh. Accordingly, we reverse and remand for the trial court to reinstate the

13 Martin, 688 F.3d at 255. 14 Cortez v. Spokane Int'l Rv. Co.. 112 Wash. 289, 294, 191 P. 820 (1920) (quoting Nath v. Oregon R. &Nav. Co.. 72Wash. 664, 131 P. 251 (1913)). 

### 15 Evergreen points to Bautista's testimony that that there was nothing inaccurate or misleading in the letter that accompanied the settlementcheck, that she understood she 

### was settling even though it was less than what she wanted, that she knew she had access to more information about the settlement but declined to seek it because she 

### believed it was pointless, and that she had the contactinformation forplaintiffscounsel inthe class action but chose not to pursue itat the time. Pugh points to hertestimony that she did not know that Evergreen admitted itowed nurses almost twice the amount ofthe settlement. 12No. 68550-3-1/13 settlement agreement between WSNA and Evergreen and the individual settlements by RNs who chose to acceptthe settlementchecks.
III. Class Certification Evergreen next challenges the order granting class certification, contending that Pugh failed to establish commonality of claims and the class representatives did not adequately representthe class. This court reviews an order ofclass certification for an 

### abuse ofdiscretion.16 Under CR 23(a), to obtain class certification the plaintiffmust show numerosity, commonality, typicality, and adequacy ofrepresentation. A trial court 

### mustconducta"rigorousanalysis" to ensurethattheserequirements aresatisfied.17 Given our reversal of the trial court's ruling on summary judgment and reinstatement of the settlement of the WSNA lawsuit, it is unclear what remains of 

### Pugh's lawsuit. Thus, determining whether the class certification requirements of numerosity, commonality,typicality, and adequacy ofrepresentation have been satisfied would be speculative, if not difficult to determine at all, at this point. Accordingly, we remand to the trial court to reevaluate its class certification ruling in light of our order thattheWSNA settlementagreement is valid and binding.
We reverse and remand.

WE CONCUR: 

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16 Nelson v. Applewav Chevrolet. Inc.. 160Wn.2d 173, 188, 157 P.3d 847 (2007). 

### 17Anfinsonv. FedEx Ground, 159 Wn. App. 35, 67, 244 P.3d 32 (2010). 13