On October 22, 2010, the California Court of Appeal in Villacres v. Abm Industries Inc., No. B219584, __ Cal. App. 4th __ (2010) rejected an attempt by a settling class member to use the California Private Attorney Generals Act (PAGA) to bring successive claims for civil penalties against his former employer, from whom he had previously accepted the proceeds from a class action settlement involving similar claims. In so doing, the Court of Appeal affirmed the trial court’s granting of summary judgment for the employer on the ground that the plaintiff’s claims were barred under the doctrine of res judicata. This outcome is a clear victory for employers who purchase costly peace through court-approved class action settlements, and a welcome clarification that PAGA cannot be used to peck an employer to death once such settlements are final.
In Villacres, the plaintiff had been a member of a prior class action against his employer which had alleged a failure to pay overtime compensation, failure to pay wages for a split shift, a violation of the unfair competition law (Cal. Bus. & Prof. Code, §§ 17200), and which sought related civil penalties under PAGA. That action resulted in a court-approved settlement with the employer agreeing to pay up to $2.5 million to class members and their counsel, up to $730,000 of which was allocated for penalties. Despite the having the opportunity, Villacres neither opted-out of nor objected to that settlement, but remained in the class and accepted his share of the proceeds.
Two days after the first action was dismissed, Villacres filed his own action against his former employer, this time exclusively under PAGA on behalf of himself and “all other members of the public similarly situated.” This new action sought only civil penalties under PAGA for alleged Labor Code violations relating to paying overtime compensation, furnishing complete wage statements, providing meal and rest periods, indemnifying employees for business expenses and losses, and paying wages on a timely basis.
The employer moved for summary judgment on the ground that this new action was barred by res judicata in light of the settlement and dismissal of the prior action. The Court agreed, finding that Villacres’ PAGA claims could have been raised in the prior action. In addition, the Court explained why Villacres’ lawsuit was improper in light of his participation in the prior settlement class, specifically noting that, in response to the class notice he received, he could have
(1) objected to the proposed settlement on the ground it should have included additional Labor Code violations and corresponding PAGA penalties, (2) sought to intervene in [the prior action] to pursue the same goal, or (3) opted out of the settlement and preserved his right to bring an independent action. (Slip Op. at 18.)
The Court held that Villacres “could not partake of the [prior action] settlement proceeds, which included an amount for penalties, and then bring an action for additional penalties.” (Slip Op. at 22.) The Court also found that his claims were barred by the general release the plaintiff agreed to by not opting out of the settlement in the first action, despite that the release did not expressly mention PAGA by name. (Slip Op. at 26-27.)