Tuesday, January 19, 2010
Court: Settlement Not a Bar To Class Certification Appeal
By SHERRI M. OKAMOTO, Staff Writer
The Ninth U.S. Circuit Court of Appeals on Friday clarified that a putative class representative’s voluntary settlement of his individual claims does not moot an appeal from a denial of certification.
Vacating the decision of U.S. District Court Judge Manuel L. Real, the panel said Hani Narouz maintained a personal stake in litigation sufficient to support standing on appeal of the certification issue even after settling his wrongful termination claim against Charter Communications LLC.
Narouz had filed a complaint in the Los Angeles Superior Court accusing Charter of various Labor Code violations and unfair business acts and practices on behalf of a class of non-exempt employees. The complaint also asserted a wrongful termination claim by Narouz alone.
Charter removed the case to federal court and after more than a year and a half of litigation, the parties entered into mediation which resulted in a joint stipulation of settlement to the class claims providing for the gross payment by Charter of $267,500, including attorney’s fees.
Charter and Narouz also entered into a separate agreement which called for Charter to pay $60,000 for the release of Narouz’s wrongful termination claim and claims for any unpaid wages and emotional distress, “aside from those related to Narouz’s class allegation.”
Under the terms of the separate agreement, Narouz was also eligible to receive an additional $20,000 if the district court approved the class settlement.
Narouz filed a motion in the district court seeking certification of the class for settlement purposes and preliminary approval of the class action settlement and Charter filed papers supporting the motion, but Real declined to certify the class. In his written order, the judge said he could not “ascertain a class” but offered no other explanation.
On appeal, Judge Milan D. Smith Jr. wrote that Narouz had standing to appeal the denial of class certification since he did not release his interest in class representation through his settlement agreement with Charter.
Smith emphasized that Narouz only agreed to release those claims “aside from those related to Narouz’s class allegation” and that Narouz retained a continued financial interest in the advancement of the class claims because of the $20,000 enhancement he would receive if the class settlement agreement were approved. The jurist further noted that Narouz also had not released his claim for attorney fees and costs.
Noting the plain language of the settlement agreement and Narouz’s “obvious financial interest in obtaining a reversal of the district court’s decision,” Smith concluded that “Narouz maintains a sufficient personal stake in the class litigation to appeal the district court’s denial of class certification, and that the appeal is not moot.”
He added that meaningful appellate review of Real’s decision to deny certification was “impossible” since the judge had not provided any findings to consider.
“While both parties make a strong case in their briefs for why class certification for settlement purposes is appropriate, and although we tentatively see no reason why preliminary approval should not be granted, we prefer to remand the issue to the district court for its determination,” Smith said.
Senior U.S. District Judge Edward R. Korman of the Eastern District of New York, sitting by designation, concurred, but wrote separately to address the issues raised by Judge Pamela Ann Rymer’s partial dissent.
Rymer contended that the class settlement agreement contained “a comprehensive release, and does not reserve the right to appeal a class certification claim.”
She suggested that a settlement agreement has to “expressly carve out the settling plaintiff’s interest in the class claims or retain some other cognizable interest such as shifting the costs of litigation to other members of the class” in order for that plaintiff to maintain a sufficient interest to appeal an adverse certification ruling.
Korman opined that the settlement agreement “does not contain any expression of an intent to confer unreviewable discretion on the district court” with regard to the certification issue and that there was no policy reason to impose a requirement that a party must reserve any right to appeal an adverse determination of certification, the terms of the class, or class settlement.
To the contrary, he said, “only an explicit waiver of the right to appeal would deny Narouz the opportunity to appeal the adverse judgment by the district court.”
Knapp, Peterson & Clarke’s Stephen M. Harris represented Narouz while Steven D. Allison, Mandana Massoumi and Jessica Linehan of Dorsey & Whitney LLP represented Charter.
The case is Narouz v. Charter Communications, LLC, 07-56005.
Copyright 2010, Metropolitan News Company