Tormey v. The Vons Companies CA4/1 (2014) · DecisionDepot
Tormey v. The Vons Companies CA4/1
California Court of Appeal Aug 27, 2014 No. D057912Unpublished
Filed 4/24/12 Tormey v. The Vons Companies CA4/1 Received for posting 8/27/14 NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
DONALD J. TORMEY, D057912
Plaintiff and Respondent,
v. (Super. Ct. No. 37-2007-00069418- CU-OE-CTL) THE VONS COMPANIES, INC., et al.,
Defendants and Respondents;
DENNIS HUGHES et al.,
Objectors and Appellants.
APPEAL from an order and judgment of the Superior Court of San Diego County,
Joan Lewis, Judge. Reversed and remanded with directions.
Appellants Dennis Hughes and Robert C. Wieck (collectively objectors) appeal
from an order approving the settlement and judgment of dismissal of a class action
lawsuit filed by plaintiff and respondent Donald Tormey against defendants and
respondents the Vons Companies, Inc. (Vons) and Safeway, Inc. (Safeway). Objectors
challenge the trial court's final approval of the class settlement as premature and thus
reversible per se on due process grounds, or so prejudicial as to require reversal. They
further contend the order should be vacated as a result of class counsel's conflict of
interest, as well as the misleading and inadequate notice to the class. Finally, objectors
11040) and that the violations constituted unlawful activity prohibited by the Unfair
Competition Law (UCL; Bus. & Prof. Code, § 17200, et seq.). Among other relief, he
sought damages, injunctive and declaratory relief, and restitution. Defendants answered
the complaint in August 2007. Tormey commenced discovery about four months later,
serving sets of form and special interrogatories and a request for documents. Defendants
later took Tormey's deposition. Counsel for Tormey took no depositions.
In February 2008, former Vons employee Kenneth Amodeo filed a putative class
action complaint in Los Angeles Superior Court (Amodeo v. Safeway, et al. (Super. Ct.
L.A. County, No. BC385354)) assertedly containing nearly identical causes of action on
behalf of licensed pharmacists employed or previously employed in California by
Safeway and Vons.
In May 2008, Tormey and defendants participated in a 12-hour day of mediation
before retired Superior Court Judge William Pate. Thereafter, they reached a classwide
settlement of a proposed class of hourly-paid pharmacists or pharmacy managers who
worked for Vons or Safeway from June 29, 2003, to the date of the preliminary order
approving the settlement. In September 2008, they executed a stipulation of settlement
and release providing that defendants would jointly pay $760,000 into a fund from which
a $10,000 enhancement payment to Tormey and the costs of a claims administrator would
be deducted, and the claims administrator would calculate individual settlement amounts
3
under a specified formula.1 The agreement allowed the defendants to retain unclaimed
settlement funds. Defendants agreed to separately pay class counsel $200,000 in attorney
fees and costs subject to court approval and payable only upon entry of an order
approving the settlement and a judgment of dismissal with prejudice, and the expiration
of time for any appeal from those orders.
Tormey and defendants unsuccessfully moved for an order preliminarily
approving the settlement. The trial court denied the motion without prejudice, finding it
had insufficient evidence to determine whether the settlement was fair, adequate and
reasonable absent evidence concerning class size, the number of weeks and/or hours
subject to the action, and class counsel's time and effort expended before the settlement.
At the hearing on the matter, counsel for Kenneth Amodeo, Armond Marcarian, appeared
to seek consolidation of the Tormey and Amodeo cases. The court invited Marcarian to
file an appropriate motion.
In December 2008, respondents renewed their joint motion to preliminarily
approve the settlement. They advised the court that the class consisted of approximately
1,729 individuals, the average member would receive $439.56 under the settlement, and
1 The agreement provides that the claims administrator, using information received from defendants, would assign each class member a "settlement ratio:" a fractional number composed of the class member's individual workweek as the numerator, and the aggregate total of all class members' individual workweeks as the denominator. The administrator would then calculate each individual settlement amount by multiplying that member's settlement ratio with what the parties referred to as the "net settlement number," that is, the amount remaining after the deductions for Tormey and the claims administrator were made from the $760,000 fund.
4
the aggregate number of weeks worked by the putative class was 186,424. According to
respondents, a class member who worked the maximum number of weeks during the
applicable class period would be entitled to $1,133.33. Respondents asked the court to
assess the settlement in light of the fact that defendants had obtained signed declarations
from approximately 556 individuals in the putative class, approximately one-third of the
class, that they claimed "completely dispose[d] of their individual claims" and also
weighed heavily against class certification. According to respondents, the declarations
showed class members knew they were entitled to rest breaks and meal periods under
defendants' policies; they took their rest breaks and meal periods in accordance with
those policies; and if any declarant failed to take a rest break or meal period, his or her
failure to do so was voluntary and based on personal individualized reasons.
Respondents also modified their stipulation of settlement and release to provide for
mailing of the notice of the proposed settlement using mailing address information
provided by the defendants, and included procedures for returned notices due to incorrect
addresses.
The trial court granted preliminary approval of the settlement. However, it
observed that each putative class member would be entitled to no more than $4 per week
in compensation for the missed rest and meal breaks, and expressed concern that the
amount did not meet a threshold showing that the settlement was adequate, fair, or
reasonable. It ordered the parties to provide argument on the issue at the time of the final
approval hearing, which it set for December 11, 2009.
5
In October 2009, Marcarian and the law firm of Harris & Kaufman filed a notice
of intent to object to final approval of the Tormey class settlement on behalf of 21
individuals, including objectors. They maintained the class notice did not permit an
informed decision by class members in that it lacked information from which each class
member could calculate his or her individual potential recovery, and thus violated
Fourteenth Amendment due process. Objectors also argued the notice included Labor
Code section 1194 overtime claims and causes of action that were not within the scope of
Tormey's operative complaint, and failed to mention the Amodeo action and the effect the
settlement would have on that action, which they claimed was more developed than the
Tormey action. They asserted the court had no data concerning the amount in
controversy and realistic range of outcomes of the litigation, and the settlement was not
fair, adequate or reasonable given evidence in their possession showing putative class
members were denied the opportunity to take uninterrupted, duty-free, meal and/or rest
breaks. Marcarian represented he had obtained evidence establishing commonality
required for class certification as well as demonstrating defendants' liability for meal- and
rest-break violations.
The following month, respondents jointly applied ex parte to correct errors that
had caused "inaccuracies in the notice process," and sought to continue the hearing on
final settlement approval. Marcarian appeared telephonically for objectors. He protested
he had not received notice of the hearing, and argued respondents were improperly trying
to get a "second bite at the apple" to correct their class notice, causing confusion among
the putative class. The court permitted respondents to submit an amended notice as well
6
as a revised schedule for the motion on final settlement approval. The final approval
hearing was eventually set for May 7, 2010.
On January 15, 2010, respondents' claims administrator served an amended claim
and notice to 1,825 class members. Two months later, objectors (within a group of 26
individuals) renewed their objections to final approval of the Tormey class settlement. In
addition to repeating their previous objections, they challenged the adequacy and
comprehensibility of the amended notice, which advised class members who had already
submitted a claim that they need not take further action if they agreed with the number of
workweeks identified on the amended claim form. According to objectors, the amended
notice invited putative class members to overlook substantive changes, including the
deletion of a reference to Labor Code section 1194 overtime claims, and the addition of a
reference to the Amodeo action. They argued removal of the overtime claims did not
resolve problems of those putative class members who had sent in claims before the
amended claim forms were sent, thereby releasing overtime claims they might possess.
Objectors asserted the two different claim forms created a disparity in treatment among
the class, rendering the settlement unfair. Objectors presented 22 declarations from the
objectors as well as 14 pharmacist declarations provided by defendants in the Amodeo
action, 36 survey responses, and four deposition excerpts from class members assertedly
demonstrating the plaintiffs' case was strong on the merits; that the class members were
unable to take 30-minute duty-free meal and rest breaks due to various interruptions, and
some class members chose to have interrupted breaks to provide better customer service.
On April 14, 2010, respondents filed a joint motion for final approval of the
7
settlement. They asserted that discovery had revealed strong legal and factual defenses to
liability, including federal preemption under section 301 by virtue of the fact Vons's
pharmacists were members of the United Food and Commercial Workers' Union
(UFCW), whose terms and conditions of employment were governed by a collective
bargaining agreement with detailed provisions for one-hour lunch periods, 10- and 15-
minute rest periods, and in some cases, fully paid on-call meal periods. Respondents
stated Tormey had admitted he was subject to Vons policies and procedures requiring
employees to properly record all time worked and take required lunch hours and breaks.
They further stated defendants had obtained 554 sworn declarations from pharmacists
largely explaining that they took their meal periods and rest breaks as expected or
instructed, and had never been told to skip those breaks. Respondents pointed out they
had reached a compromise after a full day of mediation and had concluded the risks
warranted the settlement. They asserted only 33 of 1,825 class members had opted out
and only one objection had been filed: that of the 26 class members represented by the
Amodeo attorneys. In part, respondents argued the settlement was adequate because it
accounted for the legal weaknesses of the case and the strengths of the defenses.
On April 30, 2010, defendants separately filed a response to objectors' papers,
including evidentiary objections to the declarations objectors had submitted. Defendants
argued objectors had not challenged the settlement on grounds it was a product of fraud
or collusion and they had not sufficiently rebutted the presumption of fairness arising
where the settlement is reached through arms-length bargaining, investigation and
discovery are sufficient to allow counsel and the court to act intelligently, counsel is
8
experienced in similar litigation, and the percentage of objectors is small. They argued
the settlement value was generous given the state of the law, including federal authorities
decided after the settlement affirming that meal and rest break claims were not generally
subject to class treatment. Defendants reiterated that Tormey's claims were subject to a
total preemption defense because they "inherently require[d] interpretation of the
[collective bargaining agreement] . . . ." They asserted the class notice was full and
complete, and disputed the objectors' claims as to its insufficiency. Defendants argued
the settlement was reasonable given their strong legal and factual defenses and that
objectors' remedy was to opt out if they disputed the settlement amount's adequacy.
On May 7, 2010, the trial court issued a tentative ruling denying final approval of
the settlement. Noting the law was unsettled and under review by the California Supreme
Court,2 the court asked the parties for evidence demonstrating the value of the case to
Tormey should the law support his claims, that is, the potential dollar amount of those
claims. It expressed concern about its ability to conclude sufficient discovery had been
conducted before the parties reached their settlement. Finally, the court observed that
while the notice contained a calculation, it did not appear to allow class members to
easily determine the value of the settlement to them.
2 In part, the court cited Cicairos v. Summit Logistics, Inc. (2005) 133 Cal.App.4th 949 and Brinkley v. Public Storage, Inc. (2008) 167 Cal.App.4th 1278, review granted Jan. 14, 2009, S168806. Both cases involve issues now resolved by the California Supreme Court in Brinker Restaurant Corp. v. Superior Court (Apr. 12, 2012, S166350) ___ Cal.4th ___. We express no opinion concerning Brinker's impact on the present case. 9
The parties argued the matter, with Marcarian and two additional attorneys
appearing telephonically for objectors. Tormey's attorneys, Michael Ian Rott and Eric
Overholt of Hiden, Rott & Oertle, LLP first addressed the trial court's concerns. They
argued the formula provided in the notice was sufficient to allow each class member to
calculate their dollar figure, and the law did not require them to include a dollar figure.
Rott and Overholt recounted the informal and formal discovery they and their firm had
conducted, which had allowed them to send out fliers to Vons pharmacists. Rott stated
they were "shocked by the lackluster response," which, coupled with the discovery they
had conducted and the 556 pharmacist declarations produced by defendants in mediation,
changed the "climate" of the case. Counsel for defendants addressed the absence of class
member depositions. He acknowledged plaintiffs usually took a representative sample of
depositions, but asserted defendants had obtained declarations from 99 percent of all of
the pharmacists they currently employed so as not to "cherry pick." He pointed out the
Vons pharmacists were subject to a collective bargaining agreement setting up a paid on-
duty meal period, countering the objectors' complaints that the declarants had not asserted
their meal periods were duty free. He pointed out the Safeway pharmacists stated in their
declarations that they did not work during their meal or rest periods. Tormey's counsel
described possible ranges of settlement outcomes given different factual scenarios of the
number of missed rest and meal breaks, reflecting ranges from over $57.2 million if
plaintiffs missed every single meal period, to $1.4 million if one half of the class missed
10
one meal and rest period each month.3 Counsel for both Tormey and Vons stressed their
doubts as to whether plaintiffs could meet commonality requirements.
Marcarian, for objectors, advised the court that he agreed the value of the case was
at least $60 million and maintained the $760,000 was a token settlement in view of the
extensive formal discovery he had conducted. He represented that "a lot" of pharmacists
informally stated they felt compelled to sign defendants' declarations or risk their
employment. He stated he and his colleagues had taken eight to ten depositions of
randomly chosen class members, deposed two upper managers, and conducted surveys in
which about 40 pharmacists reported they did not take duty-free breaks or a 10-minute
rest break. Marcarian complained the notice did not include any individual settlement
estimate and posited that respondents did not want class members to focus on the low
individual recovery amounts. He represented that his co-counsel was able to negotiate
much higher settlements for other retail pharmacists.
Following arguments, the court took the matter under submission. However, it
allowed supplemental briefing to be filed by respondents no later than 30 days from the
hearing date, and by objectors no later than 15 days from the date of service of
3 Counsel for Tormey represented that they had arrived at an average wage of $46.17, and stated if they took the total workweeks (229,129) and multiplied it by $50 per day, the total figure for 100 percent missed meal breaks would be over $57,282,250. If everyone in the class missed one meal and rest period per week, it would be "roughly" $11 million. If one-half of the class missed only one week or one meal period per week, the number would be approximately $5.7 million. If one-half of the class missed one meal and one rest break per month, the figure would be over $1,432,056.25. He argued the $766,000 guaranteed some money for the class in the face of substantial risk and costs of litigation and large procedural hurdles of class certification. 11
respondents' supplemental briefing. The court specified that the briefing was limited to
providing support for statements made at the hearing.
Respondents filed their supplemental briefs on June 4, 2010. Tormey included a
breakdown of the potential recovery amounts based on a $46.17 average hourly wage
taken from the UFCW Local 135 contract from 2004 to 2007. Attorney Rott represented
in a supporting declaration that his law firm's connections with the UFCW allowed him
to conduct a substantial amount of informal discovery, including by obtaining from the
UFCW a copy of the collective bargaining agreement (the UFCW, Locals 135 "Retail
Food and Meat Agreement") covering Vons's pharmacists, and a store list for various
regions in the state of California. He stated that the collective bargaining agreement
provided the pharmacists with paid "on-call" meal and rest periods. Rott had met with
UFCW representatives and reportedly learned the Safeway pharmacists in San Francisco
were receiving their uninterrupted meal and rest periods. In October 2007, the UFCW
Local 136 distributed and posted a flyer in break rooms for Vons's pharmacists to contact
Rott's law firm if they had missed or had questions regarding meal and rest periods. Rott
stated Tormey served special interrogatories on January 11, 2008, and a request for
production of documents on January 22, 2008, receiving 1169 pages of documents in
March 2008 including an internal summary of policies and procedures and separate
pharmacy policies and procedures. Defendants took Tormey's deposition on May 8,
2008, and elicited his concession that he had the ability to take a break as well as his
reasons for deciding whether or not to take his break. According to Rott, Tormey's
deposition confirmed concerns that had arisen as a result of their interviews with other
12
pharmacists: that every individual's experience was different, creating a " 'commonality
factor' flaw."
In their supplemental brief, defendants argued the state of the law and range of
outcomes demonstrated the settlement amount was fair and reasonable; they repeated
there was a significant probability Tormey would not obtain class certification or recover
any amount given their policies, memos and postings providing meal and rest breaks, as
well as the binding union contract also providing for such breaks. They argued even if
some degree of liability existed and Tormey were able to obtain class certification, the
settlement amount was within the " 'realistic range of outcomes of the litigation' " taking
into account the above factors and the class members' sworn testimony. For the first
time, defendants presented a new damages calculation: they asserted that most potential
liability scenarios resulted in an monetary outcome lower than the settlement amount,
and that to reach a greater recovery, the court would have to make several assumptions:
that the class was certified; the union-represented class members bypassed exclusive
remedy provisions in their collective bargaining agreement in violation of federal law;
and class members would present testimony differing radically from their sworn
declarations. They illustrated their calculations in hypotheticals based on payroll and
time records.4
4 For example, defendants stated: "Defendants' time records demonstrate that a total of 229,129 workweeks were worked (in whole or in part) by class members in the relevant time period. Liberally assuming that each workweek consisted of a full five days, there are potentially 1,145,645 workdays upon which a pharmacist could possibly have missed a meal or rest period. Of these, 55 [percent] (representing the percentage of 13
On June 10, 2010, the court issued its final order approving settlement and entered
a judgment of dismissal with prejudice. It found the respondents' joint stipulation to be
fair, reasonable, adequate and in the class's best interests; found the amended notice and
amended claim in compliance with California Rules of Court, rule 3.769(f) and due
process; and approved a $5,000 enhancement payment to Tormey, class counsel fees of
$195,977.56, $4,022.44 in costs, and the payment of claims administrator expenses.
About a week later, objectors filed a "notice of premature ruling," asserting the
court had issued its ruling before permitting them to file their supplemental briefing,
which had been due on June 19, 2010. On July 16, 2010, the court, having reviewed the
objectors' notice, issued an order vacating the judgment subject to its receipt of an
objection challenging its power to do so. The order provided that if no objection were
filed by August 6, 2010, the judgment would be vacated and objectors given until August
pharmacists who were subject to the [collective bargaining agreement]) should be disregarded because of [section] 301 preemption, leaving 515,540 opportunities for a missed meal or rest period that would fall within the jurisdiction of this Court. Defendants have established (and Objectors have not disputed) that defendants maintained policies providing meal and rest periods, and 99.5 [percent] of the pharmacists interviewed testified under oath that they were never instructed by defendants to skip any rest or meal period. . . . Applying the remaining .5 [percent] to the 515,540 workdays noted above yields roughly 2,578 'opportunities' for a missed break or meal period. Even if every pharmacist were able to prove at trial that he or she missed every such meal period, the resultant liability at an average hourly rate of $49.52 would be $127,662.56—a fraction of the amount being paid in settlement." The sole support for these figures was an attorney's declaration attesting he had supervised attorneys who interviewed and gathered declarations from nearly every current pharmacist employed by defendants in California, and that of the pharmacists interviewed, approximately 55 percent worked for Vons. He also stated based on defendants' payroll records that the average hourly rate of pay of the entire class during the relevant time period was $49.52. 14
27, 2010, to respond to respondents' supplemental papers. The court clerk, however, did
not serve the order on the parties.
Objectors filed a notice of appeal on August 10, 2010. It was not until October 5,
2010, that the court advised the parties of its July 16, 2010 order. The minute order from
that hearing states that the court read the order to counsel, the clerk faxed it to all counsel,
and "[a]fter reviewing the order, counsel will contact the court as to how they wish to
proceed."
DISCUSSION
I. July 16, 2010 Order Purporting to Vacate Judgment
Tormey argues this court may not consider matters occurring after the trial court
entered its June 10, 2010 judgment; that error cannot be predicated on any matter
occurring subsequent to that judgment. However, because the trial court in its July 16,
2010 order purported to vacate the judgment, raising questions as to this court's
jurisdiction to consider this appeal, we asked the parties for supplemental briefing on the
effect of the court clerk's failure to serve the July 16, 2010 order on the parties, and
whether or not that order in fact vacated the judgment of dismissal.
We conclude the clerk's failure to mail serve the order on the parties in compliance
with Code of Civil Procedure section 1013, subdivision (a), and the resulting lack of
notice, rendered the order ineffective. (See Triumph Precision Products, Inc. v.
Insurance Co. of North America (1979) 91 Cal.App.3d 362, 365 [section 1013,
subdivision (a) "is applicable to the mailing by a court clerk of notice announcing the
entry of an appealable judgment or order"]; Lee v. Placer Title Co. (1994) 28 Cal.App.4th
15
503, 510 [because notice of the court's intent to file a dismissal "was not sent to the
'office address as last given by [litigant] on any document filed in the cause,' as required
by [Code of Civil Procedure] section 1013, subdivision (a), the notice was not effective"
and dismissal subsequently entered was void]; Valley Vista Land Co. v. Nipomo Water &
Sewer Co. (1967) 255 Cal.App.2d 172, 174 [clerk's mailing of notice of entry of
judgment "must, in all respects, comply with the provisions of the Code of Civil
Procedure relating to service by mail"]; Dobrick v. Hathaway (1984) 160 Cal.App.3d
913, 921 [service by mail must be made in strict compliance with the mandates of
sections 1013 and 1013a].)
Thereafter, the filing of objectors' August 10, 2010 notice of appeal divested the
trial court of jurisdiction to act further on the matter, including to cure defects in the June
2010 judgment. (See Varian Medical Systems, Inc. v. Delfino (2005) 35 Cal.4th 180, 197
[effect of appeal is to divest court of jurisdiction over subject matter of action; the court
has no power to vacate or modify the judgment or even to cure any purported defect in
the judgment or order appealed from]; Betz v. Pankow (1993) 16 Cal.App.4th 931, 938-
940 [appeal precludes trial court from vacating the appealed judgment or order].) For
this reason, it is immaterial that the court purported to give objectors an opportunity to
advise the court how they wished to proceed concerning the prematurely entered
judgment. Because the court was without jurisdiction to give them any relief, objectors
were powerless to influence it to do anything affecting the judgment.
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II. The Court's Premature Entry of the June 10, 2010 Order and Judgment is Not
Reversible Per Se
Objectors contend the trial court denied them their due process right to be heard
when it prematurely entered the order approving final settlement and judgment. They
maintain the error was reversible per se because the court refused to permit them to
present evidence and thus deprived them of a fair hearing.
Whether a denial of fundamental due process has occurred depends on the
circumstances of the particular case. (See, e.g., Southern Cal. Underground Contractors,
Inc. v. City of San Diego (2003) 108 Cal.App.4th 533, 543, citing Mathews v. Eldridge
(1976) 424 U.S. 319, 333.) In Southern Cal. Underground Contractors, this court
explained that due process " ' "is not a technical conception with a fixed content unrelated
to time, place and circumstance." [Citation.]' [Citation.] Rather, it ' "is flexible and calls
for such procedural protections as the particular situation demands." ' " (Southern Cal.
Underground Contractors, 108 Cal.App.4th at p. 543.) As we explain, we cannot say
under the present circumstances that such a fundamental due process violation occurred.
It is true that as a general proposition, failing to accord a party litigant his or her
constitutional right to due process by denying that litigant a full and fair hearing is
reversible per se, so no prejudice need be demonstrated. (Kelly v. New West Federal
Savings (1996) 49 Cal.App.4th 659, 677; Hoffman Street, LLC v. City of West Hollywood
(2009) 179 Cal.App.4th 754, 773; In re Marriage of Carlsson (2008) 163 Cal.App.4th
281, 292, 293.) Thus, "[d]enying a party the right to testify or to offer evidence is
reversible per se." (Kelly, at p. 677; Carlsson, at p. 291.)
17
This principle, however, is applicable where a "trial court erroneously denies all
evidence relating to a claim, or essential expert testimony without which a claim cannot
be proven . . . because it deprives the party offering the evidence of a fair hearing and of
the opportunity to show actual prejudice." (Gordon v. Nissan Motor Club One., Ltd.
(2009) 170 Cal.App.4th 1103, 1114; see also Kelly v. New West Federal Savings, supra,
49 Cal.App.4th at pp. 667-668, 675, 677 [trial court's in limine ruling prevented plaintiffs
from pursuing the only factual theory of liability supported by the evidence]; Fewel v.
Fewel (1943) 23 Cal.2d 431 [reversal required for trial court's refusal in a child custody
proceeding to consider any parties' affidavits or permit the plaintiff the right to produce
evidence and cross-examine adverse witnesses]; In re Waite's Guardianship (1939) 14
Cal.2d 727 [reversal required where court refused to allow the alleged incompetent to
testify in a guardianship proceeding, where evidence showed she was of sound mind and
qualified to testify]; Hoffman Street, LLC v. City of West Hollywood, supra, 179
Cal.App.4th 754, 773 [error was reversible per se when court entered judgment on
several counts in petition for writ of mandate without conducting hearing on the merits of
those counts and absent any dispositive motion as to them]; In re Marriage of Carlsson,
supra, 163 Cal.App.4th 281 [trial court's arbitrary termination of presentation of evidence
during husband's case in chief and while expert witness was on the stand denied husband
his constitutional right to a fair hearing, and required reversal without an assessment of
actual prejudice]; Adoption of Baby Girl B. (1999) 74 Cal.App.4th 43, 51-52 [reversal
required where prospective adoptive parent was denied an evidentiary hearing before
adoptive placement was terminated; such parent had both a constitutional right to notice
18
and a full hearing and a statutory right to an evidentiary hearing]; Caldwell v. Caldwell
(1962) 204 Cal.App.2d 819 [reversal required where court refused to hear wife's
testimony as to child's needs in a child support modification proceeding].)
Here, objectors invoke these principles, arguing class members have a due process
interest in expressing their views to the court, and must be afforded an opportunity to
" 'make the [c]ourt aware of any undisclosed inadequacies.' " They correctly point out the
purpose of a settlement hearing is to insure the opportunity for all relevant facts and
objections to be placed before the trial court so it has sufficient facts to intelligently
evaluate the settlement proposal. But objectors did in fact appear by counsel, both at the
preliminary approval and final approval hearing, and they were given the opportunity to,
and did, present written arguments expressing their objections to the proposed settlement
terms. "The erroneous denial of some but not all evidence relating to a claim [citations]
differs . . . . In [that] situation, the appellant must show actual prejudice . . . ." (Gordon
v. Nissan Motor Club One., Ltd., supra, 170 Cal.App.4th at p. 1115.) The court's
approval of the settlement and entry of judgment before objectors' deadline to file
supplemental briefing did not deprive objectors from presenting all argument or evidence
in support of their positions, just evidence they believed rebutted or contradicted the
statements or assertions made by respondents at the final approval hearing.
Objectors have not provided us with authority for the proposition that, in this
factual context, where they had notice of the arguments made by counsel prior to and
during a hearing in which they participated, their inability to provide additional briefing
invited on those points violated fundamental constitutional due process rights in such a
19
way to render the trial court's premature entry of judgment reversible per se. None of the
authorities on which objectors rely present such factual circumstances.
III. Reversal is Nevertheless Required To Permit the Trial Court to Conduct an Informed
and Independent Assessment of the Settlement's Fairness
However, we are persuaded by objectors' alternative contention that they were
prejudiced by the court's premature entry of the order and judgment. They point out
respondents' supplemental papers urged the court to disregard, or discount to zero, 55
percent of the value of Tormey's claims due to Vons's federal preemption defense, and
relied on federal district court authority (Brown v. Federal Express Corp., supra, 249
F.R.D. 580) to argue the remaining discounted value of the case was little if any.
Objectors argue they were unfairly denied the opportunity to respond with relevant
arguments and authorities that would significantly affect the court's valuation of the case.
In support, objectors set forth the legal arguments they would have made to the
trial court. They argue defendants' assertion of a federal preemption defense is untenable;
that California statutory meal and rest break claims are based on fundamental state rights
that cannot be bargained away by a private collective bargaining agreement. According
to objectors, any purported waiver of duty-free breaks in the bargaining agreement
directly conflicts with California public policy (reflected in Labor Code sections 850
through 853, as well as California Code of Regulations, title 16, section 1714.1)
restricting the working hours of retail pharmacists, mandating days of rest, and ensuring
pharmacists' ability to have duty-free breaks and meal periods. Objectors contend the
court had an obligation to pass on whether a legitimate controversy existed on these legal
20
points in its fairness evaluation, and without doing so it did not consider the strength and
considerable value of Tormey's class claims, requiring reversal as in Clark v. American
When a class action settlement has been reached, the trial court bears the
responsibility of ensuring that the recovery represents a reasonable compromise, and in
so doing, the court has a fiduciary responsibility as guardian of the rights of absent class
members. (Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal.App.4th 116, 129 (Kullar) ;
see 7-Eleven Owners for Fair Franchising v. Southland Corp. (2000) 85 Cal.App.4th
1135, 1150 (7-Eleven).) "Although '[t]here is usually an initial presumption of fairness
when a proposed class settlement . . . was negotiated at arm's length by counsel for the
class, . . . it is clear that the court should not give rubber-stamp approval. . . . Rather, . . .
the court must independently and objectively analyze the evidence and circumstances
before it in order to determine whether the settlement is in the best interests of those
whose claims will be extinguished.' [Citation.] 'To make this determination, the factual
record before the . . . court must be sufficiently developed.' [Citation.] . . . 'The
proposed settlement cannot be judged without reference to the strength of plaintiffs'
claims. "The most important factor is the strength of the case for plaintiffs on the merits,
balanced against the amount offered in settlement." ' [Citation.] The court 'must stop
short of the detailed and thorough investigation that it would undertake if it were actually
trying the case,' but nonetheless it 'must eschew any rubber stamp approval in favor of an
independent evaluation.' " (Kullar, supra, 168 Cal.App.4th at p. 130, emphasis added.)
In this process, the parties must provide "a meaningful and substantiated explanation of
21
the manner in which the factual and legal issues have been evaluated." (Id. at pp. 132-
133.) The court must have "basic information about the nature and magnitude of the
claims in question and the basis for concluding that the consideration being paid for the
release of those claims represents a reasonable compromise." (Id. at p. 133.)
Our inquiry on appeal, of course, is not whether the Tormey class settlement terms
are "fair, adequate and reasonable . . . ." (Kullar, supra, 168 Cal.App.4th at pp. 127-128;
Munoz v. BCI Coca-Cola Bottling Co. of Los Angeles (2010) 186 Cal.App.4th 399, 407-
408; Dunk v. Ford Motor Club One. (1996) 48 Cal.App.4th 1794, 1801.) That is a
question for the trial court in the first instance. (Nordstrom Com'n Cases (2010) 186
Cal.App.4th 576, 581 [appellate court's task is not to make an independent determination
whether the terms of the settlement are fair, adequate and reasonable, but to determine
only whether the trial court acted within its discretion]; Kullar, at pp. 127-128 [same];
Munoz, at p. 407 [same]; Dunk, at p. 1802 ["We will not 'substitute our notions of
fairness for those of the [trial court] and the parties to the agreement' "].) Nor are we
required to pass on the merits of defendants' preemption defense. (7-Eleven, supra, 85
Cal.App.4th at p. 1146 [appellate court does not have " 'the right or the duty to reach any
ultimate conclusions on the issues of fact and law which underlie the merits of the
dispute,' " and " ' "need not reach any dispositive conclusions on the admittedly unsettled
legal issue" ' "]; see also Clark, supra, 175 Cal.App.4th at p. 803.) We decide only
whether objectors have demonstrated prejudice resulting from their inability to submit
briefing in response to respondents' supplemental showing; whether, absent the
information objectors say they would have provided, the court was without sufficient
22
information to conduct an independent and objective analysis of the circumstances so as
to satisfy itself that the settlement was fair, adequate and reasonable to the class.
Here, the trial court was poised to deny final approval, apparently unconvinced by
respondents' papers seeking final approval and feeling it lacked sufficient information to
decide the $760,000 settlement was fair and reasonable. Its invitation for additional
briefing sought a response from objectors as to counsel's calculations assuming the merit
of the class claims. As Tormey acknowledges, the additional information was intended
to "memorialize the potential [settlement] ranges and the strengths and weaknesses in
writing . . . ." Yet, objectors were precluded from presenting argument on the preemption
defense in response to defendants' new assertion in their supplemental papers that the
defense rendered the majority of class members' claims worthless, and that all reasonable
settlement ranges would come in lower than the proposed $760,000. Objectors are
entitled to " ' "meaningful participation" ' " in the settlement proceedings, and " ' "leave to
be heard . . . ." ' " (Hemphill v. San Diego Association of Realtors (S.D.Cal. 2004) 225
F.R.D. 616, 619.) In this respect, the fundamental question again is whether the judge
overseeing settlement approval "has sufficient facts before him [or her] to intelligently
approve or disapprove the settlement." (Hemphill, at pp. 619-620.)
In Clark, the appellate court explained that "the trial court [considering the
fairness of a class settlement] is obliged, at a minimum, to determine whether a legitimate
controversy exists on a legal point, if that legal point significantly affects the valuation of
the case for settlement purposes." (Clark, supra, 175 Cal.App.4th at p. 803.) There, the
trial court did not set forth a " 'substantiated explanation' " of the manner in which it
23
evaluated a core legal issue (the method of calculating overtime), but rather "simply
accepted class counsel's conclusion the overtime claim had 'absolutely no' value . . . ."
(Ibid.) The Clark court held the trial court thus "lacked a sufficient basis to 'satisfy itself
that the class settlement is within the "ballpark" of reasonableness' [citation], and
therefore abused its discretion in approving the settlement." (Ibid.)
We conclude the trial court could not make the required independent and objective
evaluation without considering the additional points raised by objectors in passing on the
settlement so as to reach an informed, just and reasoned decision. This result is
compelled not only by the trial court's fiduciary obligation to the class, but also by the
fact that objectors were not given an opportunity to challenge defendants' supplemental
valuation calculations based on the preemption defense, which discounted over half of
the Tormey class claims and thus had a substantial effect on the potential total recovery.
As in Clark, the trial court's order granting final approval did not contain an analysis of
the legal and factual issues presented concerning the merits or value of the class claims.
(Clark, supra, 175 Cal.App.4th at p. 801 [court's order granting final approval, "while
finding the settlement was 'the product of serious, informed, non-collusive negotiations'
and was 'fair, reasonable and adequate,' gives no hint as to the court's 'independent
assessment of the adequacy of the settlement terms' "].) It is unknown whether the court
was ultimately persuaded by defendants' assertion that a reasonable valuation calculation,
in view of the preempted claims, was well below the $760,000 settlement amount.
Absent consideration of objectors' position on the merits of the preemption defense
underlying defendants' newly presented settlement calculations, we are not convinced the
24
trial court had before it all information that would be helpful to assist it in determining
the strength of the class claims on the merits, a critical consideration in assessing whether
the settlement terms are fair, reasonable and adequate to the class. Accordingly, we
vacate the judgment and remand with directions that the court reconsider the fairness and
adequacy of the settlement after considering objectors' responsive federal preemption
arguments.
IV. Class Counsel's Purported Conflict of Interest
Objectors further contend they were unable to present argument to the trial court
that class counsel, Rott and his law firm Hiden, Rott & Oertle, LLP, operated under a
"per se" disqualifying conflict of interest due to their simultaneous representation of the
UFCW and the settlement class. They maintain that as a result of his conflicting
representation, Rott violated his duty of loyalty by "blindly" discounting potential class
claims as a result of the collective bargaining agreement, and also misrepresented state
and federal law in a manner adverse to his clients' interest, demonstrating inadequacy and
incompetence as class counsel. Objectors ask us to vacate the judgment with directions
that the trial court deny final approval of the class with prejudice, on grounds Rott and his
firm are inadequate representatives and per se disqualified from representing the class.
We need not decide whether simultaneous or dual representation of the UFCW
and its members is a disqualifying conflict of interest. As Tormey points out, objectors'
conflict claims are based on an erroneous factual premise. Rott did not state in his
supplemental declaration that he represented the UFCW, only that he represented UFCW
members in San Diego and Imperial Counties. Because objectors' conflict claims are
25
based on the factual premise that Hiden, Rott & Oertle, LLP presently represent the
UFCW or did so while also representing UFCW members during these proceedings, we
reject them on the basis that the claims are not supported by the record.
V. Class Notice
Though we remand for a further hearing on the class settlement's final approval,
we nevertheless address objectors' contention that inadequacies and omissions in the
January 2010 amended notice of the class settlement render the notice insufficient to
permit an adequate basis for informed decision-making and violate class members' due
process rights. Specifically, objectors argue the amended notice inaccurately describes
the differences between it and the original class settlement notice by stating the "primary
differences" are merely the new hearing date and the number of workweeks, thus lulling
class members into believing they merely needed to verify their workweeks and failing to
draw attention to the original deficiencies (the deletion of overtime claims and addition of
a reference to the Amodeo action). They argue the amended notice does not permit any
class member to make an informed decision because the notice does not include
that individual member's settlement amount, but only a "confusing and ambiguous
formula . . . ." Finally, pointing out settlement class members were not required by the
amended notice to sign and return an amended claim form, objectors assert the use of
different claims caused some members who used the original claim form to release
overtime claims, and created an intra-class disparity " 'not rationally based on legitimate
considerations' " that is a prima facie indication of unfairness.
26
1. Review Standard
The parties dispute the applicable standard of review. Objectors argue this court
independently reviews the content of the notice for its adequacy and clarity. Defendants
argue the trial court has "virtually unfettered discretion" regarding the notice's contents,
suggesting we apply the deferential abuse of discretion standard.
We conclude de novo review applies to the question of whether the content of the
class settlement notice is legally sufficient and satisfies due process; whether the notice
" ' "fairly apprise[s] the class members of the terms of the proposed compromise and of
the options open to dissenting class members." ' " (Cho v. Seagate Technology Holdings,
Inc. (2009) 177 Cal.App.4th 734, 746, citing Wershba v. Apple Computer, Inc. (2001) 91
Cal.App.4th 224, 251; see also in re Cellphone Fee Termination Cases (2010) 186
Cal.App.4th 1380, 1390.) The authority relied upon by defendants, Martorana v. Marlin
& Saltzman (2009) 175 Cal.App.4th 685, presented a challenge to the settlement notice
procedure, and the Martorana court cites 7-Eleven, supra, 85 Cal.App.4th at page 1164,
which refers to the trial court's "virtually complete discretion" as to the manner of notice.
(Martorana, 175 Cal.App.4th at p. 694.) Martorana's unsupported dicta is not a
definitive statement of the standard of review for due process challenges or challenges to
the adequacy of a class action notice's contents.
2. The Notice Satisfies Due Process
Having reviewed the content of the original and amended notices, we perceive no
due process violations. The amended notice begins with the following capitalized
statement: "Attention: Former and current hourly paid pharmacists or pharmacy
27
managers of the Vons Companies, Inc. or Safeway Inc. employed between June 29, 2003
and June 12, 2009; this is an amended notice. Please read it carefully even if you have
already read and/or responded to a prior notice regarding this action." (Capitalization
omitted.) The notice identifies the claims, sets forth the date of the final settlement
approval hearing, and sets forth the class members' options in either submitting a claim,
excluding themselves from the settlement, or objecting to the settlement. It summarizes
the effect of the settlement and specifies the "released rights and claims," specifying that
upon final approval, each class member would waive his or her right to participate in the
Amodeo action.
The amended notice has none of the procedural deficiencies presented in Mullane
v. Central Hanover Bank & Trust Club One. (1950) 339 U.S. 306 or Pillsbury v. South
Coast Regional Com. (1977) 71 Cal.App.3d 740, relied upon by objectors. Mullane held
court-ordered publication for four successive weeks constitutionally defective as to
known persons whose whereabouts were also known; the notice was not "reasonably
calculated, under all the circumstances, to apprise interested parties of the pendency of
the action and afford them an opportunity to present their objections." (339 U.S. at pp.
314; see also id. at p. 315 ["The means [of notice] employed must be such as one desirous
of actually informing the absentee might reasonably adopt to accomplish it"].) The
appellate court in Pillsbury held an administrative regulation for "written public notice"
to persons affected by a coastal development was not satisfied by one posting on a fence
obscured by a large bush and trash container on the site of the proposed development, and
neither that notice nor postings on nearby public buildings would satisfy due process
28
under Mullane's principles because neither was reasonably likely to reach the nearby
residents, who were the most affected. (Pillsbury v. South Coast Regional Com., at
pp. 750, 753.) Objectors cite no authority for the proposition that a class settlement
notice otherwise containing the information required by the California Rules of Court5
violates such due process principles for failing to identify the differences between it and
any prior settlement notice.
Nor can we conclude the notice fails to provide an adequate basis for an informed
decision by the class members. A class action settlement notice should present
information neutrally, simply, and understandably. (7-Eleven, supra, 85 Cal.App.4th at
p. 1164 [notice must express no opinion on the merits of the settlement]; Rodriquez v.
West Publishing Corp. (9th Cir. 2009) 563 F.3d 948, 962.) It should describe the
aggregate amount of the settlement fund and a formula or plan for computing recoveries.
(See In re Cellphone Fee Termination Cases, supra, 186 Cal.App.4th at p. 1393 [" 'The
5 California Rules of Court specify the contents of class notice that gives members the right to request exclusion from the class, as does the notice at issue. The notice must contain (1) a brief explanation of the case, including the basic contentions or denials of the parties; (2) a statement the court will exclude the member from the class if the member so requests by a specified date; (3) a procedure for the member to follow in requesting exclusion from the class; (4) a statement that the judgment, whether favorable or not, will bind all members who do not request exclusion; and (5) a statement that any member who does not request exclusion may, if the member so desires, enter an appearance through an attorney. (Cal. Rules of Court, rule 3.766(d).) In determining the manner of giving notice to the class, the court must consider the interests of the class; the type of relief requested; the stake of the individual class members; the cost of notifying class members; the resources of the parties; the possible prejudice to class members who do not receive notice; and the res judicata effect on class members. (Cal. Rules of Court, rule 3.766(e).) Objectors do not challenge the manner or procedure for mailing of the amended notice to the class members.
29
aggregate amount available to all claimants was specified and the formula for
determining one's recovery was given. Nothing more specific is needed' "]; Rodriquez, at
p. 962; Torrisi v. Tucson Elec. Power Club One. (9th Cir. 1993) 8 F.3d 1370, 1373-
1374.) In Torrisi, the Ninth Circuit rejected a similar argument by objectors to a class
settlement that a notice was insufficient because it "did not specify their potential
recovery," where the notice clearly stated the aggregate settlement and the formula for
computing awards. (8 F.3d at p. 1374.)6 Similarly, the First District, Division Five
Court of Appeal recently upheld the adequacy of a class settlement notice where the mail
and long form notices identified the "total amount of the common fund recovery, the
nature of the costs and fees to be deducted from the common fund, and the fact that the
balance of the fund would be allocated among qualified class claims." (In re Cellphone
Fee Termination Cases, at p. 1393; see also id. at p. 1392 [citing federal unpublished
authorities rejecting objections to settlement notices on grounds they did not provide
details about " 'actual individual settlement values' " or " 'the actual value of the
settlement as to each class member' "].)
The amended notice in this case states that the defendants would jointly pay "a
maximum total payment of . . . $760,000" that would be the "total gross amount to be
paid by Defendants for all claims of Class Members alleged in the Action" including the
6 " ' "California courts may look to federal authority for guidance on matters involving class action procedures." [Citations.]' [Citation.] '[W]hen there is no relevant California precedent on point [regarding attorney fees in class actions] federal precedent should be consulted.' " (In re Cellphone Fee Termination Cases, supra, 186 Cal.App.4th at p. 1392, fn. 18.) 30
enhancement payment, costs of the claims administrator, interest, and penalties. The
notice explains that that number, minus the enhancement payment to the class
representative and claims administrator costs, would be the "net settlement number" and
that individual settlement amounts would be calculated by multiplying the net settlement
number with a ratio based on the member's individual workweek, divided by the total
aggregate workweeks. This sort of formula is all the specificity that due process requires.
(In re Cellphone Fee Termination Cases, at p. 1393; Torrisi v. Tucson Elec. Power Club
One, supra, 8 F.3d at p. 1374.)
Finally, we are not persuaded by objectors' contention that the different release
forms contained in the original and amended notices result in an intraclass disparity by
which some class members have released unpleaded claims for overtime under Labor
Code section 1194. Objectors provided no indication of whether any class members
returned an original claim form or, if so, how many. Nor did they provide evidence any
class members were in fact misled by the contents of the amended notice or the
discrepancies in the original and amended notice. Objectors only state it is "quite likely"
that the majority of class members opted to rest on their original claim form pursuant to
the instruction of the amended notice. It is "significant[]" that objectors did not present
evidence that any class members were actually deceived or misled by the notice, or that
anyone actually submitted the original claim containing a release of unpleaded overtime
claims. (Accord, In re Cellphone Fee Termination Cases, supra, 186 Cal.App.4th at p.
1391.) Such speculation is not enough for us to conclude the existence or use of two
31
claim forms renders the amended class settlement notice impermissibly defective, or the
settlement terms unfair.
Our conclusion does not change by objectors' reliance on Trotsky v. Los Angeles
settlement including claims that were not included in the complaint but were the subject
of a separate pending class action lawsuit. The Court of Appeal reversed a judgment
finding the class settlement and class notice to be fair and reasonable, explaining that the
related action should have been disclosed to the settling class so that the class could
decide which plaintiff could better represent their interests, and also to the court which
could have consolidated the two actions and resolved them together. (Id. at pp. 151-152.)
Unlike Trotsky, there has been no showing of the existence of a pending action involving
overtime claims (including within the Amodeo action), or any showing at all, for that
matter, that defendants were violating overtime laws in connection with the class.
Objectors cite other authorities addressing contentions of inequity in class
settlements stemming from "intraclass disparities." (See 7-Eleven, supra, 85 Cal.App.4th
1135; National Super Spuds, Inc. v. New York Mercantile Exchange (2nd Cir. 1981) 660
F.2d 9.) But they are inapposite and do not compel a finding of unfairness in this case.
These cases involved concrete examples of settlements that distributed settlement
amounts differently for class members who were differently situated. (See, e.g.,
7-Eleven, at pp. 1162-1163 [court upheld payment of $25 million in future benefits to
current franchisees and $7 million in cash to former operators held justified because
former franchisees could only be compensated by money, and current franchisees, who
32
had been with the defendant longer and had an ongoing business relationship, could be
compensated by other means over time and through contractual changes]; New York
Mercantile, 660 F.2d at pp. 14, 18-19 [settlement approval reversed because it harmed a
definable minority that held "unliquidated" claims based on positions in potato futures
contracts that were different from the "liquidated" claims the class shared and notice did
not address the unliquidated contract claims, eliminating class members' opportunity to
opt out]; In re Vitamin Cases (2003) 107 Cal.App.4th 820, 824-825, 829-830 [cash
payment to "commercial class" and charitable distribution to "consumer class" upheld
where distinction was based on the legitimate consideration of potential exorbitant
distribution cost of cash payment to consumer class].)
In short, we have no basis to conclude any prejudice resulted to the class or
whether true "intraclass disparity" or disparate treatment otherwise occurred by the
inclusion of a release of overtime claims in the original notice. Those claims are now
omitted from the amended notice and claim form, and the amended notice and claim was
served on all class members. We cannot say on this record class members lacked notice
of the differences between the two claims.
V. Entry of Judgment of Dismissal
Because we reverse the judgment and remand for further proceedings, we do not
reach objectors' contention pertaining to the trial court's entry of judgment of dismissal.
We leave it to the trial court on remand to interpret and apply the class settlement
provisions of the California Rules of Court, which now provide: "If the court approves
the settlement agreement after the final approval hearing, the court must make and enter
33
judgment. The judgment must include a provision for the retention of the court's
jurisdiction over the parties to enforce the terms of the judgment. The court may not
enter an order dismissing the action at the same time as or after entry of judgment. (Cal.
Rules of Court, rule 3.769(h).) Further, California Rules of Court, rule 3.770 provides:
"The court may not grant a request to dismiss a class action if the court has entered
judgment following final approval of a settlement. . . . " (Cal. Rules of Court, rule
3.770(a).)
DISPOSITION
The order finally approving the class action settlement agreement and judgment
dismissing the case with prejudice are reversed and the matter is remanded for further
proceedings consistent with this opinion. The parties shall bear their own costs on
appeal.
O'ROURKE, J.
WE CONCUR:
McDONALD, Acting P. J.
IRION, J.
34
AI Brief
AI-generated · verify before citing
Holding. The court reversed and remanded the order approving the class action settlement because the trial court failed to consider the objectors' arguments regarding federal preemption under section 301 of the Labor Management Relations Act, which were introduced in supplemental briefing. The court also clarified that class settlement provisions preclude dismissing an action with prejudice at the same time as or after the entry of judgment.
Issues
Whether the trial court erred in approving the class settlement without considering objectors' arguments regarding federal preemption under section 301 of the Labor Management Relations Act.
Whether class counsel had a conflict of interest.
Whether the class notice was adequate.
Whether the trial court exceeded its authority in dismissing the action with prejudice.
Disposition. reversed and remanded
Quotations verified verbatim against the opinion
“We conclude the trial court in the first instance should pass on objectors' arguments relating to the strength of the defense of federal preemption under section 301 of the Labor Management Relations Act”
“Because we reverse and remand for further proceedings on final approval of the class action settlement, we need not reach objectors' contentions regarding dismissal of the action with prejudice”