Hunton Employment & Labor Perspectives

When settling class actions, there is always a question regarding how broad the release can be, and whether an employee can stay silent through the settlement process, only to later sue for claims that arguably were not released.  A California Court of Appeal recently held in Villacres v. ABM Industries that a court-approved class action settlement can prevent a class member from filing a new lawsuit asserting claims that were brought in the previously settled class action and also claims that could have been brought in the prior action − as long as the terms of the settlement’s general release are broad enough to cover those types of claims.

Plaintiff Villacres was a class member in a prior class action, in which the plaintiffs asserted various wage and hour claims against ABM, but did not include a claim for civil penalties under California’s Private Attorneys General Act (“PAGA”).  That said, a part of the settlement proceeds were allocated to cover civil and statutory penalties.  The court approved the settlement, and the case was dismissed.  Villacres neither opted-out of nor objected to the settlement.  Two days after the court’s dismissal, Plaintiff Villacres filed a new lawsuit against ABM, seeking PAGA penalties arising from claims settled in the prior action.  The trial court granted summary judgment to ABM finding that Villacres’s claims were barred by res judicata, and the appellate court affirmed this decision.  

The take-away from this decision is that employers should be able to protect themselves from successive lawsuits asserting claims that are covered by a prior class action settlement agreement.  Accordingly, employers should pay close attention to the scope and content of the general or specific releases in their class action settlement agreements.