Seyfarth Shaw LLP | www.seyfarth.com Litigating CA Wage & Hour Class and PAGA Actions (23rd Edition) 173 XVIII.Class Action Settlement A. Generally The vast majority of class actions result in a settlement. Unlike an individual settlement of employment law claims, a court must approve a class settlement to ensure that it is fair and reasonable, is not the product of collusion, and does not subordinate the interests of the broader class to those of the named plaintiffs.872 Typically, the plaintiffs and the defendant enter into a stipulation of settlement, which a court analyzes to determine if the agreement looks reasonable on its face. If so, the court will grant preliminary approval and then notice of the settlement will be sent to the class. Often, class members will be given a choice to: (1) return a claim form to receive money under the agreement, (2) complete a request for exclusion (“opt out”) form that excludes them from the settlement and preserves their individual right to sue, or (3) do nothing, in which case the class members receive nothing but still are bound by the class release. Those class members who do not request exclusion will also have the option of filing an objection to the settlement.873 After a fixed period following the issuance of notice (usually 45-60 days), the claims period will end, and class counsel will seek final approval of the settlement. Above and beyond the analysis the court conducted at preliminary approval, the court will examine the extent of class participation in the settlement, will rule on any objections, and will make final determinations as to class counsel’s request for attorney’s fees and costs, as well as an incentive payment or “enhancement” for the class representative (additional money beyond that received by other class members, as a reward for taking the risk of filing the class action). When Labor Code class actions were relatively novel, there was little consistency among judges as to the scrutiny of settlements they would undertake or the rules they would apply. Most courts who did not have much experience with class actions typically undertook very little scrutiny of class settlements beyond ensuring that they were not collusive and that the notice provided clear instruction to the class. Over the intervening years, however, a substantial body of law has developed to provide courts with better guidance as to how to evaluate class settlements in wage and hour cases. B. Restrictions on Reversions of Settlement Funds Most class settlements result from mediation. Unlike a court, which must protect the interests of a class, a mediator seeks solely to broker a settlement acceptable to the parties who hired the mediator. Irrespective of their 872 See generally Dunk v. Ford Motor Co., 48 Cal. App. 4th 1794, 1800-01 (1996). 873 See generally Wershba v. Apple Computer, Inc., 91 Cal. App. 4th 224, 251-52 (2001) (explaining the different choices class members typically have upon receiving class notice). Case law also implies that it may be permissible to settle a certified class action through the acceptance of an offer of judgment by the class representative. See Nelson v. Pearson Ford Co., 186 Cal. App. 4th 983, 1024-26 (2010) (assuming without deciding that a valid California Code of Civil Procedure § 998 offer can be made in a certified class action); but see Campbell-Ewald Co. v. Gomez, 577 U.S. 153 (2016) (holding an unaccepted offer of judgment under Federal Rule of Civil Procedure 68 by a plaintiff does not moot the plaintiff’s individual claims or class claims as to which the plaintiff serves as a class representative). Should this process be used, after acceptance, the parties would then provide class notice, etc., just as if a stipulation of settlement had been entered.
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