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California Employees That Received Wage Settlement Barred From “Double Dipping” In Second Lawsuit

Published by on November 3, 2010

The Second District of the California Court of Appeal recently held in Villacres v. ABM Industries that a court-approved settlement in a prior wage and hour class action precludes subsequent litigation not only on the same causes of action but related issues that could have been raised in the prior suit.  The decision effectively blocked […]

The Second District of the California Court of Appeal recently held in Villacres v. ABM Industries that a court-approved settlement in a prior wage and hour class action precludes subsequent litigation not only on the same causes of action but related issues that could have been raised in the prior suit.  The decision effectively blocked the plaintiffs from “double dipping” in a second lawsuit to recover damages for the same issues settled in the prior lawsuit.  More after the break.

In Villacres, employees sued their employer in a prior class action for failure to pay overtime wages, failure to pay split shift wages, and violation of California Business and Professions Code section 17200 et seq.  The employees also sought civil penalties under Labor Code section 558.  The action was ultimately dismissed with prejudice pursuant to a court-approved settlement agreement in which the employer agreed to pay the class and their counsel $2.5 million.  The parties designated up to $730,000 of the settlement amount as “civil and statutory penalties.”  In approving the settlement agreement, the trial court ordered that class members’ claims for unpaid wages, interest, penalties, and fees be forever barred.  

Two days after the initial matter was dismissed, plaintiff (a member of the prior class) filed the instant action against the same employer seeking penalties for himself and other aggrieved employees under the Labor Code Private Attorneys General Act of 2004 (PAGA) for various Labor Code violations, such as failing to properly pay overtime wages, providing incomplete wage statements, refusing to provide meal and rest periods, failing to indemnify business expenses and losses, and failing to timely pay wages.  In the prior action, the plaintiff did not opt out of the class, object to the settlement, or seek to intervene in the suit.  The employer filed a motion for summary judgment, contending the doctrine of res judicata barred the second action.  The trial court granted the employer’s motion for summary judgment on the grounds that plaintiff’s causes of action could have been asserted in the initial matter, and therefore, the claims were barred by res judicata

The Court of Appeal affirmed summary judgment in favor of the employer.  The Court of Appeal held that plaintiff could have sought to expand the scope of the initial action to recover the Labor Code civil penalties he sought in the second action, or alternatively, he could have opted out of the initial class.  Plaintiff did neither, and instead, he received the benefits of the settlement in the prior action and filed another suit.  Therefore, res judicata barred the second action in which plaintiff sought to recover additional penalties under the Labor Code.  

For a copy of the full decision, please click here.

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