Prieto v. US Bank: District Court Denies Motion for Summary Judgment on Prior Class Action Res Judicata Grounds

Thank you to Christian Schreiber for providing this decision.

In Prieto v. U.S. Bank, 2011 WL 2181459 (E.D. Cal. 6/2/11), the District Court for the Eastern District of California (Judge Kimberly J. Mueller) held, on a defendant's motion for summary judgment, that a wage and hour class action settlement on behalf of hourly employees does not prevent an action by an employee who alleges that the defendant misclassified her as exempt during part of her employment. That sounds more confusing than it is. Here are the facts:

Dolores Prieto worked for U.S. Bank in both non-exempt and exempt positions. She filed an action alleging that U.S. Bank misclassified her as exempt and thereby violated California and federal wage and hour laws. U.S. Bank settled a separate class action (Ross) on behalf of non-exempt employees. The settlement included a broad release of claims under California and federal law. Ms. Prieto was a member of the Ross settlement class for the time when she worked as a non-exempt employee. U.S. Bank moved for summary judgment, arguing that the Ross settlement barred Ms. Prieto's action.

The Court denied U.S. Bank's motion. First, relying on California law, the Court held that Ms. Prieto's claims were not barred by the doctrine of release because Ms. Prieto did not sign a release in the Ross action. Then the Court held:

Even if the court construes the settlement provisions of the Ross class action as a release, there are material issues of fact as to its scope.... [T]he agreement in this case must be read in its context: it was negotiated by hourly employees on behalf of other hourly employees, as defined by the two classes. Defendant has pointed to nothing beyond the language of the agreement itself suggesting that the named class members had any authority to negotiate a settlement on behalf of non-exempt employees.

Slip op. at 12. The Court then held that res judicata also did not bar Ms. Prieto's action:

Plaintiff does not dispute the fact that there was a final judgment in the Ross case, but argues that the instant cause of action is different than that litigated in Ross. Defendant insists that the same primary right is involved: the right to be compensated for earned overtime and for meal and rest periods that were denied. ECF No. 44 at 14. To resolve this dispute, the court “must compare the two actions, looking at the rights which are sought to be vindicated and the harm for which redress is claimed.” Citizens for Open Access to Sand and Tide, Inc. v. Seadrift Association, 60 Cal.App.4th 1053, 1067 (1998).

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There is much overlap in the two actions, starting with the similarity of the facts and the Labor Code violations presented through the requests for payment of lost wages. In the case proceeding in this court, however, the harm flowed from defendant’s alleged misclassification of plaintiff and could have occurred even if it honored all its obligations concerning meal and rest periods and off the clock work to hourly employees; in Ross, the harm flowed from defendant’s refusal to pay hourly employees’ wages due under the provisions of the Labor Code. The harm in the instant case is the misclassification, which led to the alleged failure to pay, while the harm in Ross was the failure to pay. Because the actions involve different primary rights, res judicata does not bar the instant suit.

Slip op. at 14-15.