Wage Law

A prior release of various labor code claims might preclude later actions brought under the PAGA for the same underlying violations, but cannot preclude subsequent actions based upon continuing or repeated violations that occur after the release date. Deleon v. Verizon Wireless (2009) __ Cal.App.4th __.

Saul Deleon, on behalf of himself and other aggrieved employees, brought this action under the Labor Code Private Attorneys General Act (Labor Code § 2698) against AirTouch Cellular, doing business as Verizon Wireless, alleging various Labor Code violations. The trial court sustained without leave to amend the demurrer brought by Verizon Wireless ruling that Deleon’s lawsuit was barred by the doctrine of res judicata to the extent Deleon seeks relief on behalf of class members who settled a prior class action against Verizon Wireless that adjudicated the same claims. While we agree with the trial court’s analysis, we conclude that it abused its discretion in denying Deleon leave to amend to state claims that accrued after the date of the earlier action. Accordingly, we reverse.

In 2006, a class was certified, for settlement purposes, comprising “all individuals who worked for Verizon Wireless as an hourly commissioned sales employee ... who were subject at any time during the Class Period to Verizon Wireless’ policy providing that sales commission advances are not earned if the customer cancelled service for any reason within 365 days...." The class period was from March 6, 1999 to April 1, 2006. Class members who did not opt out released Verizon from all “Released Claims,” which were defined to include

all claims, actions, suits, causes of action, damages whenever incurred, liabilities of any nature whatsoever, including penalties arising out of “any conduct, events, or transactions occurring during the class period” that were alleged or which were required to have been alleged in the litigation under the doctrine of compulsory joinder in the prior suit.

In exchange for this release, Verizon agreed to pay a maximum settlement of $5.2 million. Deleon and a few others opted out of the settlement. Deleon then brought a complaint under the PAGA on essentially the same factual grounds as the original lawsuit. Deleon contended that the prior action made no PAGA allegations and “hence Plaintiff and the aggrieved employees are entitled to recover the civil penalties available under PAGA.” Verizon demurred, asserting res judicata.

Deleon opposed the motion “for one simple reason,” namely, that the element of privity was lacking. According to Deleon, the State or the Attorney General is the “real party in interest” in a PAGA action, not the employees on whose behalf the PAGA action is brought. Hence, the question is not whether he as private attorney general is in privity with the Evenson plaintiffs, but whether the State is in privity with the Evenson plaintiffs, Deleon reasoned. Also, Deleon argued that the Evenson plaintiffs had never exhausted the administrative prerequisites to sue under PAGA, and so unlike he, they were never authorized to pursue their action on behalf of the State

Next, after assuming the State is the interested party, Deleon argues that the State could not be in privity with the Evenson plaintiffs because Evenson made no attempt to demonstrate compliance with PAGA’s prerequisites. This same contention was rejected by the Federal District Court in Waisbein v. UBS Financial Services, Inc. (N.D.Cal. Dec. 5, 2007, No. C-07-2328) 2007 WL 4287334. There, the plaintiffs filed a prior class action against UBS for violations of various Labor Code provisions and pursuant to PAGA. In the ensuing settlement, the class released UBS for the state law claims. (Id. at p. *1.) As did Deleon here, Waisbein opted out of the class and filed his action against UBS on behalf of himself and “ ‘other aggrieved employees’ ” bringing, among other things, PAGA claims for many similar Labor Code violations. (Ibid.)

The Court of Appeal rejected Deleon's arguments concerning the PAGA claims, but held that Deleon must be given the opportunity to amend his complaint to allege violations of the Labor Code that accrued after the Evenson release period. Therefore, the judgment is reversed and remanded to allow Deleon to amend his complaint to allege violations that occurred after April 1, 2006. Deleon may continue to bring this lawsuit on behalf of himself and those Evenson plaintiffs who opted out of the Evenson settlement.

You can download the full text of Deleon here in PDF or Word format.