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Denial of Intervention Faulted in Class Action Against CVS for Wage-and-Hour Violations
Dissenter Accuses Ninth Circuit of ‘Overriding’ Federalism
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeals has held that a District Court judge erred in approving a class settlement covering claims under California’s Private Attorneys General Act that were not the subject of the lawsuit and in denying motions to intervene by plaintiffs in separate litigation who did assert those claims, drawing a dissent by Circuit Judge Patrick Bumatay who accused the majority of failing to follow governing California law.
At issue is an order granting final approval of a class action settlement in a consolidated case asserting claims against CVS Pharmacy Inc. and related entities for purported violations of California wage and hour laws.
One plaintiff, Sevag Chalian, filed a putative wage and hour class action against CVS in the Los Angeles Superior Court on July 20, 2016, asserting claims relating to an alleged practice of requiring pharmacists to complete unpaid mandatory trainings.
A few weeks later, Sigfredo Cabrera filed a broader putative wage and hour class action against CVS in Alameda Superior Court, asserting claims on behalf of all pharmacy workers relating to hours worked before and after their shifts. Both matters were removed to the U.S. District Court for the Northern District of California and were later consolidated.
Two other plaintiffs, Ryan Hyams and Regine Duhon, also asserted wage and hour claims in a separately filed PAGA putative class action, including three claims that were not alleged by Chalian or Cabrera—namely, violations of the California Labor Code relating to sick and rest days and maximum work provisions established for pharmacy employees. They learned of the Chalian/Cabrera matter in January 2019 at a joint case management session.
After the Chalian/Cabrera plaintiffs lodged an amended consolidated complaint, on June 3, 2020, that included, for the first time, these three non-overlapping claims, Hyams and Duhon received notice of a proposed settlement in that matter.
On June 5, 2020, Hyams and Duhon sought to intervene under Federal Rule of Civil Procedure 24, which provides that “the court must permit anyone to intervene” who, in a timely motion, “claims an interest relating to the property or transaction that is the subject of the action, and is so situated that disposing of the action may as a practical matter impair or impede the movant’s ability to protect its interest, unless existing parties adequately represent that interest.”
The section also allows “permissive intervention” if the party “has a claim or defense that shares with the main action a common question of law or fact” but cautions that a court “the court must consider whether the intervention will unduly delay or prejudice the adjudication of the original parties’ rights.”
District Court Judge Andre Birotte Jr. of the Northern District of California denied the motion, saying that intervention would “delay resolution of this nearly 4-year-old case indefinitely,” and approved a final settlement, resolving all claims for $10,371,346.60 over multiple objections; Hymans and other plaintiffs appealed both decisions. In a pair of memorandum decisions, diled Friday and signed by Circuit Judges Morgan Christen and Roopali H. Desai, the court reversed the order denying intervention and vacated the approval of the settlement.
Christen and Desai pointed out that Chalian and Cabrera failed to give notice to the Labor and Workforce Development Agency, as required by PAGA, on the newly asserted claims, and as such “the Hyams plaintiffs are the State’s only proxy entitled to pursue and settle the sick-days-notice, rest-days, and pharmacy-maximum-work claims.”
Bumatay’s View
Bumatay penned dissents to both decisions, saying:
“Ryan Hyams and Regine Duhon…appeal the district court’s order denying their…motions for mandatory and permissive intervention in a [PAGA]….action brought by Sevag Chalian and Sigfredo Cabrera against CVS Pharmacy, Inc. The district court concluded that the attempted intervention was untimely and that Proposed Intervenors lacked a protectable interest. In reversing, the majority ignores the district court’s timeliness ruling and California courts’ interpretation of PAGA. Because the majority follows its preferred reading of PAGA rather than California’s, I respectfully dissent.”
Saying that Birottte’s order “hit[] all three factors” of the timeliness test governing intervention, he opined:
“The fact is that Proposed Intervenors moved to intervene in the final breaths of this lawsuit….Proposed Intervenors learned of the Chalian/Cabrera cases at least as early as January 2019, when CVS identified them in a case-management report. At that point, Proposed Intervenors knew that their case substantially overlapped with Chalian and Cabrera’s but was ultimately ‘far broader’ than the Chalian/Cabrera cases. To protect their overlapping and non-overlapping claims, Proposed Intervenors could have intervened then and there. They had everything they needed, including knowledge of the overlapping factual predicates at the heart of this settlement.”
The jurist added:
“The majority concedes that Proposed Intervenors learned of the Chalian/Cabrera cases in January 2019 and that they knew of the overlapping nature of many of their claims. But for some reason, the majority doesn’t start the intervention clock until June 2020—when Proposed Intervenors saw that the settlement may include their non-overlapping claims. Even if this were a shock to Proposed Intervenors (which seems implausible given their knowledge of CVS’s purported common evasion tactics through class action waivers), it makes no difference. That’s because Proposed Intervenors didn’t limit their intervention to non-overlapping claims—they sought to intervene in the whole shebang.”
Turrieta Case
Bumatay pointed to last year’s California Supreme Court decision in Turrieta v. Lyft Inc., in which the high court said:
“[A]n aggrieved employee’s status as the State’s proxy in a PAGA action does not give that employee the right to seek intervention in the PAGA action of another employee, to move to vacate a judgment entered in the other employee’s action, or to require a court to receive and consider objections to a proposed settlement of that action.”
He acknowledged that Turrieta deals with overlapping claims but remarked that the court’s “analysis applies with equal force to PAGA plaintiffs seeking to intervene on non-overlapping claims.” He explained:
“That’s because the nature of the PAGA claim does not change—at all times it remains the state’s interest to be vindicated….That is true regardless of who submitted notice to the LWDA….The California Supreme Court’s rationale does not hinge on which plaintiff submitted notice to the LWDA because it is always the state’s underlying interest. And notice to the LWDA doesn’t transform the nature of the PAGA claim. And being deputized under PAGA is distinct from having a ‘protectable interest’ necessary for mandatory intervention. As the California Supreme Court made clear, deputization does not confer a protectable interest because the state retains the interest at all times.”
Approval of Settlement
As to the approval of the settlement, he wrote:
“[U]nder Ninth Circuit precedent, a nonparty objector lacks standing to appeal the district court’s approval of a PAGA settlement when the objector’s motion to intervene is properly denied….And this rule shouldn’t change because the objector was the only claimant to file notice with the State. The interest in settling PAGA claims belongs to the State—not to the claimants who first filed notice….And ‘unlike a class action, there is no individual component to a PAGA action because every PAGA action is a representative action on behalf of the state.’ ”
He concluded:
“Here, it shouldn’t matter that Hyams Objectors were the only claimants to file notice with the State on the non-overlapping claims. That’s because the State had notice of the settlement of the non-overlapping claims and did nothing to oppose the settlement in the district court….Because the PAGA interest is the State’s, not any aggrieved employee, it doesn’t matter that Hyams Objectors were the only claimants to lodge a notice with the LWDA. They shouldn’t have standing to appeal.”
Bumatay declared:
“The purpose of our diversity jurisdiction is to prevent home-state bias against out-of-state defendants. But, to protect federalism, when we sit in diversity, it’s important that we defer to the State’s reading of its own laws in deciding substantive law. Otherwise, we substitute our preferred reading of the law for the State’s. This is contrary to our role. This case follows an unfortunate trend in the Ninth Circuit—our court overriding the principles of federalism to reach outcomes unsupported by state law in unpublished memorandum dispositions….At some point, our court needs to put more guardrails on these types of cases.”
The cases are Chalian v. CVS Pharmacy Inc., 20-55916 and 21-55817.
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