Court Opinion

ID: 9745509
Source: CourtListenerOpinion
Date Created: 2023-08-26 23:05:24.935871+00
Date Added: 2024-06-11T07:24:48.778712
License: Public Domain

CHANEY, J., Dissenting.
The Augustus class action (Augustus v. American Commercial Security Services, Inc. (Super Ct. L.A. County, 2008, No. BC347914) (Augustus)) ended with a settlement agreement, approved by Judge Minting, that released all claims that could have been raised “as part of’ the plaintiffs’ claims. In the Carlos Villacres action, Judge Lichtman granted summary judgment on the ground that Villacres’s claims fell into the “category of claims that could have been asserted in” the Augustus matter. The sole issue on appeal is whether a triable issue exists as to the scope of the release. It is ultimately a matter of contract interpretation.

Comparing the Lawsuits

The Augustus plaintiffs alleged their employers failed to compensate employees for overtime and split shifts, in violation of Labor Code sections 510 and 1194 (undesignated statutory references are to this code) and section 11040 of title 8 of the California Code of Regulations, and by doing so also violated the unfair competition law. They sought damages, interest, attorney fees and costs, civil penalties under section 558, an injunction, and such other relief as the court may deem appropriate. The case settled, the defendants agreeing to set up a $1 million maximum “general pool” of “unpaid overtime wages” from which to pay $1.56 per week of employment to those with valid claims, and a $750,000 maximum “penalty pool” from which to pay $1.35 per week of employment. The defendants also agreed to pay the plaintiffs’ attorney fees and costs (up to $730,000) and $20,000 in incentive awards to the class representatives.
In exchange, the defendants were released from liability on “any and all claims ... or causes of action of any kind .. . which have been or could have been asserted against the Releasees arising out of or related to all claims for wages, overtime pay, pay for all time allegedly worked but not compensated, and all other claims of any kind for wages, penalties, interest, costs and attorneys’ fees arising from the alleged violation of any provision of common *594law, California law and/or Federal law which was or could have been raised as part of the Plaintiffs’ claims . . . .” (Italics added.)
Notice of the settlement was sent to the putative class. The content of the notice is not in the record. The class administrators received 2,106 claim forms. The record does not indicate how much was paid on these claims, but the maximum payout per class member would have been $81.12 in “unpaid overtime wages” and $70.20 in penalties per year worked ($1.56 and $1.35 multiplied by 52, respectively).
In its order preliminarily approving the settlement the trial court found the class notice “fully and accurately” informed the class of “all material elements” of the proposed settlement agreement. In its order granting final approval, the trial court characterized the released claims as “claims for unpaid wages, interest, penalties and fees, including but not limited to overtime, split shift premiums, ‘off-the-clock’ work [and] wai[t]ing time penalties . . . .” No mention was made of the release of claims that “could have been raised as part of’ the plaintiffs’ claims.
In this action, plaintiff alleged defendants failed to pay overtime wages, provide complete wage statements, provide meal or rest periods or compensation in lieu thereof, reimburse him for the cost of a uniform it required him to purchase, or pay wages on a timely basis. He sought damages, interest, attorney fees and costs, civil penalties under the PAGA, and such other relief as the court may deem appropriate.

The Villacres Trial Court Action

Defendants moved for summary judgment, arguing plaintiff’s causes of action had been raised and settled in Augustus. This is so, they argued, because plaintiff’s claims and the Augustus claims all involved “infringement of the same primary right—failure to pay wages . . . .” In essence, defendants argued all employment claims involve the same primary right—the right to receive compensation for work—and thus constitute one cause of action.
In opposition, plaintiff argued his claims relating to meal periods, rest periods, unreimbursed business expenses, and wage statements presented different causes of action from the Augustus plaintiffs’ claims for unpaid overtime and split shifts. Though admitting his overtime claim was duplicative, he nevertheless argued it was not barred by res judicata because it involved “a different primary right—that of a PAGA action.”
In their reply, defendants maintained that “all claims” without limitation had been released.
*595The trial court granted defendants’ motion for summary judgment on the ground that plaintiff’s claims “could have been asserted in” the Augustus matter. The trial court cited no evidence for this finding, and indeed there was none, as defendants had not argued plaintiff’s claims could have been raised in Augustus', they argued the claims were actually raised there, because all employment compensation claims constitute one cause of action.
On appeal, defendants continue to maintain that all employment compensation claims constitute the same cause of action.

Plaintiff’s Overtime Claim Is Barred

No triable issue exists as to whether plaintiff’s cause of action for failure to pay overtime is barred by res judicata because the Augustus plaintiffs sued on the same cause of action, settled the lawsuit, and obtained a stipulated judgment.
The doctrine of res judicata operates to bar multiple litigation “arising out of the same subject matter of a prior action as between the same parties or parties in privity with them.” (Gates v. Superior Court (1986) 178 Cal.App.3d 301, 308 [223 Cal.Rptr. 678]; see id. at p. 311; Frommhagen v. Board of Supervisors (1987) 197 Cal.App.3d 1292, 1299 [243 Cal.Rptr. 390].) The doctrine has two effects. “First, where the causes of action and the parties are the same, a prior judgment is a complete bar in the second action. This is fundamental and is everywhere conceded.” (Sutphin v. Speik (1940) 15 Cal.2d 195, 201 [99 P.2d 652].) “In its secondary aspect res judicata has a limited application to a second suit between the same parties, though based on a different cause of action. The prior judgment is not a complete bar, but it ‘operates as an estoppel or conclusive adjudication as to such issues in the second action as were actually litigated and determined in the first action.’ (Todhunter v. Smith [(1934)] 219 Cal. 690, 695 [28 P.2d 916].) This aspect of the doctrine of res judicata, now commonly referred to as the doctrine of collateral estoppel, is confined to issues actually litigated.” (Clark v. Lesher (1956) 46 Cal.2d 874, 880 [299 P.2d 865]; see Sutphin v. Speik, supra, 15 Cal.2d at pp. 201-202.)
“California law defines a cause of action ‘by focusing on the “primary right” at stake: if two actions involve the same injury to the plaintiff and the same wrong by the defendant then the same primary right is at stake even if in the second suit the plaintiff pleads different theories of recovery, seeks different forms of relief and/or adds new facts supporting recovery. [Citations.] A cause of action is based upon the nature of a plaintiff’s injury. The cause of action, as it appears in the complaint when properly pleaded, will therefore always be the facts from which the plaintiff’s primary right and the *596defendant’s corresponding primary duty have arisen, together with the facts which constitute the defendant’s delict or act of wrong. [Citation.]’ [Citation.]” (Tensor Group v. City of Glendale (1993) 14 Cal.App.4th 154, 160 [17 Cal.Rptr.2d 639].)
A stipulated judgment is res judicata as to those issues it embraces. (Ellena v. State of California (1977) 69 Cal.App.3d 245, 260 [138 Cal.Rptr. 110]; California State Auto. Assn. Inter-Ins. Bureau v. Superior Court (1990) 50 Cal.3d 658, 664 [268 Cal.Rptr. 284, 788 P.2d 1156] [“a stipulated judgment may properly be given collateral estoppel effect, at least when the parties manifest an intent to be collaterally bound by its terms.”]; Avery v. Avery (1970) 10 Cal.App.3d 525, 529 [89 Cal.Rptr. 195] [a judgment entered on stipulation has the same effect as if the action were tried on its merits].)
Because plaintiff was a member of the Augustus class and did not opt out, he is bound by the judgment in that lawsuit and his cause of action for failure to pay overtime is extinguished. It does not matter that he employs a different mechanism, the PAGA (Labor Code Private Attorneys General Act of 2004; § 2698 et seq.), to enforce the right to overtime or that he seeks different penalties than were sought in Augustus. A cause of action is defined by the parties’ rights, not by the mechanism by which those rights are enforced or the remedies sought.

Plaintiff’s Nonovertime Claims Are Not Barred

Plaintiff’s claims regarding wage statements, meal and rest periods (or compensation in lieu of them), expense reimbursement, and the timeliness of wages (the nonovertime claims) are not barred by res judicata because they involve neither the same causes of action as were asserted in Augustus nor the same issues that were actually litigated and determined in that action.

Different causes of action

That plaintiff’s nonovertime claims do not involve the same causes of action as the Augustus plaintiffs’ overtime and split-shift claims should be plain. A cause of action is identified by examining one party’s right and the other’s obligation. An employee’s right to receive premium payment for overtime stems from the Legislature’s determination that too much work in a day or week can be harmful. (Stats. 1999, ch. 134, § 2, p. 1820 [“Numerous studies have linked long work hours to increased rates of accident and injury,” and “[flamily life suffers when either or both parents are kept away from home for an extended period of time on a daily basis”].) It is not the same as his or her right to receive wages promptly, to receive detailed and accurate wage data, to be reimbursed for required expenses, or to receive *597meal and rest breaks. (See California Manufacturers Assn. v. Industrial Welfare Com. (1980) 109 Cal.App.3d 95, 113, 115 [167 Cal.Rptr. 203] [purpose of wage data requirement is to help employee in the resolution of disputes and dealings with the IRS; purpose of meal and rest period requirements is to promote employee health and welfare].)
Defendants’ argument that plaintiff’s nonovertime claims were largely the same as those presented in Augustus and that both lawsuits were triggered by the infringement of the same primary right—failure to pay wages—is therefore meritless.

Different issues

The question remains whether issues (as opposed to causes of action) in this lawsuit were actually litigated and determined Augustus. The scope of issues actually litigated and determined is defined by the stipulated judgment. (Ellena v. State of California, supra, 69 Cal.App.3d at p. 260 [“res judicata effect extends only to those issues embraced within the consent judgment”].)
“In a stipulated judgment, or consent decree, litigants voluntarily terminate a lawsuit by assenting to specified terms, which the court agrees to enforce as a judgment. [Citations.] . . . [Stipulated judgments bear the earmarks both of judgments entered after litigation and contracts derived through mutual agreement: ‘[C]onsent decrees “have attributes both of contracts and of judicial decrees”; a dual character that has resulted in different treatment for different purposes.’ [Citation.] . . . [T]he issue before us is ‘not whether we can label a consent decree as a “contract” or a “judgment,” for we can do both.’ [Citation.]” (California State Auto. Assn. Inter-Ins. Bureau v. Superior Court, supra, 50 Cal.3d at pp. 663-664.) “[A] stipulated judgment is indeed a judgment; entry thereof is a judicial act that a court has discretion to perform. Although a court may not add to or make a new stipulation without mutual consent of the parties [citation], it may reject a stipulation that is contrary to public policy [citation] .... ‘While it is entirely proper for the court to accept stipulations of counsel that appear to have been made advisedly, and after due consideration of the facts, the court cannot surrender its duty to see that the judgment to be entered is a just one, nor is the court to act as a mere puppet in the matter.’ [Citation.]” (Id. at p. 664.)
A class action settlement, where a class representative purports to settle third party claims, is subject to particular scrutiny, because the trial court, as guardian of the class, must independently satisfy itself that the consideration received for a release of class claims is reasonable in light of the magnitude of the release. (Clark v. American Residential Services LLC (2009) 175 Cal.App.4th 785, 799-800 [96 Cal.Rptr.3d 441]; Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 129 [85 Cal.Rptr.3d 20].)
*598The Augustus settlement released all claims that “could have been raised as part of the Plaintiffs’ claims.” We must determine the meaning of the quoted phrase to define the extent to which the release operates as an estoppel.
“[T]he interpretation of a release or settlement agreement is governed by the same principles applicable to any other contractual agreement.” (General Motors Corp. v. Superior Court (1993) 12 Cal.App.4th 435, 439 [15 Cal.Rptr.2d 622].) Interpretation of a contract, including resolution of any ambiguity, is solely a judicial function. (MacKinnon v. Truck Ins. Exchange (2003) 31 Cal.4th 635, 647-648 [3 Cal.Rptr.3d 228, 73 P.3d 1205].) The primary goal of contract interpretation is to give effect to the mutual intent of the parties. (Civ. Code, § 1636; Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264 [10 Cal.Rptr.2d 538, 833 P.2d 545].) That intent is to be determined solely from the written provisions of the contract if possible (Civ. Code, § 1639; Bank of the West, at p. 1264; AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807, 821-822 [274 Cal.Rptr. 820, 799 P.2d 1253]), but also considering “the circumstances under which the contract was made and the matter to which it relates.” (American Alternative Ins. Corp. v. Superior Court (2006) 135 Cal.App.4th 1239, 1245 [37 Cal.Rptr.3d 918].) Specific language must be interpreted in context and with regard to its intended function and the structure of the agreement as a whole. (Civ. Code, § 1641; La Jolla Beach & Tennis Club, Inc. v. Industrial Indemnity Co. (1994) 9 Cal.4th 27, 37 [36 Cal.Rptr.2d 100, 884 P.2d 1048]; Mirpad, LLC v. California Ins. Guarantee Assn. (2005) 132 Cal.App.4th 1058, 1069 [34 Cal.Rptr.3d 136].) “Contractual language is ambiguous if it is susceptible to more than one reasonable interpretation in the context of the policy as a whole.” (American Alternative, supra, 135 Cal.App.4th at p. 1245.) “In determining whether an ambiguity exists, a court should consider not only the face of the contract but also any extrinsic evidence that supports a reasonable interpretation.” (Id. at p. 1246.)
The phrase “could have been raised as part of the Plaintiffs’ claims” is similar in wording to the well-established res judicata principle that a judgment is binding not only as to a claim actually raised, but also as to those matters that might have been raised in support of the claim actually raised. (E.g., Price v. Sixth District Agricultural Assn. (1927) 201 Cal. 502, 511 [258 P. 387]; Pacific Mut. Life Ins. Co. v. McConnell (1955) 44 Cal.2d 715, 724-725 [285 P.2d 636]; Amin v. Khazindar (2003) 112 Cal.App.4th 582, 590 [5 Cal.Rptr.3d 224].) “In other words, when an issue has been litigated all inquiry respecting the same is foreclosed, not only as to matters heard but also as to matters that could have been heard in support of or in opposition thereto. . . . . [E]ven tho the causes of action be different, if the second *599action involves a right, title or issue as to which the judgment in the first action is a conclusive adjudication, the estoppel so far as that right, title or issue is concerned must likewise extend to every matter which was or might have been urged to sustain or defeat the determination actually made.’ [Citation.]” (Price v. Sixth Dist. Agricultural Assn., supra, 201 Cal. at p. 511.)
The question is whether the phrase “could have been raised as part of the Plaintiffs’ claims” means the same thing in the Augustus settlement as it would in the res judicata context. Though no party submitted evidence on the issue (which itself necessitated that defendants’ motion for summary judgment be denied), substantial evidence suggests the Augustus parties intended to release only claims that related to the plaintiffs’ overtime and split-shift claims. First, as noted, the release language mirrors the phrasing of the res judicata precept. This commonality itself suggests the Augustus parties intended the release to preclude, in accordance with res judicata principles, only claims that had already been asserted or those that could have been asserted to support claims already asserted. If the parties had intended a broader release they could have released “all claims,” or even “all claims that could have been raised” in the Augustus litigation, not merely claims that could have been raised “as part of’ the plaintiffs’ claims.
Second, the fund created by the settlement was designated for payment of “unpaid overtime wages.” No mention was made of payment for other claims.
Third, when characterizing the release, Judge Minning said it pertained to “claims for unpaid wages, interest, penalties and fees, including but not limited to overtime, split shift premiums, ‘off-the-clock’ work [and] wai[t]ing time penalties . . . .” He said nothing about a release of other Labor Code claims.
Fourth, the parties had good reason to install a limited release—they needed court approval of the settlement. Class representatives have no standing to release all claims, and overbroad general releases should be avoided. “Any attempt to include in a class settlement terms which are outside the scope of the operative complaint should be closely scrutinized by the trial court to determine if the plaintiff genuinely contests those issues and adequately represents the class.” (Trotsky v. Los Angeles Fed. Sav. & Loan Assn. (1975) 48 Cal.App.3d 134, 148 [121 Cal.Rptr. 637].) “[T]o exercise this power of careful scrutiny over the inclusion of additional claims in the *600settlement, the trial court has the right to expect the settling parties to disclose the effect of such terms at the time the proposed settlement is brought to the attention of the court.” (Ibid.) Judge Minning presumably would have found a release of all conceivable claims to be overbroad.
Finally, when defendants moved for summary judgment, they did not argue that Villacres’s nonovertime causes of action could have been raised in the Augustus litigation. (And nowhere in their brief on appeal do they argue that.)
All of this suggests that the phrase “could have been raised as part of’ means “relevant to,” as it would in the res judicata context. If that is the case, the judgment must be reversed because no evidence suggests Villacres’s nonovertime claims were in any way relevant to the Augustus plaintiffs’ overtime or split-shift claims.
I will also note that because the notice to Augustus class members is not part of the record on appeal, we have no way of knowing whether class members were informed that the settlement released (as defendants argue) all employment-related claims. If the class notice did not inform class members of all claims released, they could not be said to be in privity with the class representatives as to any claims for which notice of a release was not given. “ ‘[T]he determination of privity depends upon the fairness of binding appellant with the result obtained in earlier proceedings in which it did not participate. [Citation.] “ ‘Whether someone is in privity with the actual parties requires close examination of the circumstances of each case.’ ” ’ ” (Rodgers v. Sargent Controls & Aerospace (2006) 136 Cal.App.4th 82, 91 [38 Cal.Rptr.3d 528].) “This requirement of identity of parties or privity is a requirement of due process of law.” (Clemmer v. Hartford Insurance Co. (1978) 22 Cal.3d 865, 874 [151 Cal.Rptr. 285, 587 P.2d 1098].) Here, the only evidence of what class members were told about the release is the trial court’s finding that the notice “fully and accurately” informed the class of “all material elements” of the proposed settlement agreement. But it is not clear that Judge Minning himself construed the release in the manner defendants construe it here, because when he characterized the released claims in his order granting final approval he made no mention of the release of claims that “could have been raised as part of’ the Augustus plaintiffs’ claims.
Under another possible (but I submit unlikely) reading, the phrase “could have been raised” refers to the availability of a procedure to make a claim in the Augustus action, e.g., by objection or intervention. If that is the case, for *601the release to be meaningful it must refer only to a necessarily successful procedure, because a release of any claim that can be articulated in an objection or complaint in intervention, even frivolously, would be truly limitless. But no evidence suggests Villacres’s nonovertime claims could have been interposed as a matter of right in Augustus, either by intervention or objection. A party may not intervene as a matter of right in a class action unless a “provision of law confers an unconditional right to intervene.” (Code Civ. Proc., § 387, subd. (b).) No such provision exists here. Though a person who “claims an interest relating to the property or transaction which is the subject of the action and ... is so situated that the disposition of the action may as a practical matter impair or impede that person’s ability to protect that interest” may seek to intervene, the court need not permit intervention if “that person’s interest is adequately represented by existing parties.” {Ibid.) In a class action, the proposed intervenor’s interests are, by definition, adequately represented by the class representatives.
As a practical matter, intervention in a class action to bring a separate claim is permitted rarely, if at all. A class may be certified only where a well-defined community of interest exists among class members. (Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 326 [17 Cal.Rptr.3d 906, 96 P.3d 194].) The “community of interest” requirement embodies three factors: “(1) predominant common questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class. [Citation.]” {Ibid.) Questions of fact and law are “predominant” if the factual and legal issues “common to the class as a whole [are] sufficient in importance so that their adjudication on a class basis will benefit both the litigants and the court.” (Vasquez v. Superior Court (1971) 4 Cal.3d 800, 811 [94 Cal.Rptr. 796, 484 P.2d 964].) A class member would not be permitted to intervene where his or her separate claim threatens to destroy the community of interest. Even if the trial court were to contemplate establishing a subclass, it would not do so to accommodate a single class member’s separate claim.
Here, no evidence suggests the Augustus plaintiffs or any class members were deprived of proper wage statements, meal or rest periods, expense reimbursement or prompt payment. Therefore, no evidence suggests separate claims based on those delicts would have been entertained in the Augustus litigation, either by intervention or establishing a subclass. Any motion by a class member to intervene to pursue such claims would have been denied because their presence would threaten to destroy the community of interest required to maintain class treatment. For similar reasons, a class member will not be heard either to assert his individual causes of action or expand the class by objection, as to do so would undermine the community of interest and destabilize the settlement.
*602Even if intervention and objection were available in the abstract—and because no evidence was submitted on the issue we can deal here only in abstracts—I submit it is unlikely the Augustus parties grounded the release of potentially significant claims on the hypothetical availability of such procedures.
In sum, on the issue of whether the Augustus settlement was intended to release claims unrelated to those asserted in that action, such as Villacres’s claims for damages arising from unreimbursed expenses, missed meal and rest periods, and inaccurate wage statements, no evidence exists other than the settlement language itself. But as I have shown, that language is at least ambiguous as to the meaning urged by defendants—that the release of any claim that “could have been raised as part of the Plaintiffs’ claims” released any individual claim possessed by a class member, regardless of its relevance to the plaintiffs’ claims or the likelihood that the trial court would have entertained it.

Conclusion

Defendants brought a motion for summary judgment that ignored the dispositive issue—the meaning in the Augustus release of the phrase “could have been raised as part of the Plaintiffs’ claims”—and relied on two fictions—that all employment compensation claims constitute the same cause of action and that the Augustus settlement released “all claims.” Opposing the motion, plaintiff relied on a fiction of his own—that a claim under the PAGA is a separate cause of action.
With little guidance from the parties, Judge Lichtman, one of the state’s preeminent class action jurists, effected what is likely the appropriate final result in this case: he shut down the lawsuit because it is duplicative of at least one other. But he did so by creating another fiction—that Villacres’s causes of action could have been asserted as part of the Augustus plaintiffs’ claims. The better course would have been to employ the procedural tools of relation, consolidation, coordination, abatement and, yes, remedies flowing from the operation of res judicata.
For example, it appears defendant’s employment practices are being challenged in four other lawsuits. At oral argument defense counsel intimated that the claims presented in those actions largely duplicate those presented here. If they do, this action could have been abated until resolution of the earlier *603actions. Or it could have been related to or consolidated or coordinated with them. Once the earlier cases were resolved, the claims at issue there could have been compared with plaintiffs claims here, and the duplicative claims barred under res judicata.
I would therefore reverse.
Appellant’s petition for review by the Supreme Court was denied February 16, 2011, SI88659.