Issued by: Leeh A. DiBello

Pearl Rangel v. PLS Check Cashiers of California, Inc. (United States Court of Appeal, Ninth Circuit) August 16, 2018

Plaintiff Pearl Rangel allegedly worked for PLS Check Cashers from September 2012 to August 2014. Employees of PLS filed a California state court action alleging several violations of the California Labor Code. The complaint did not assert any federal claims and made no mention of the Fair Labor Standards Act (“ FLSA”). A settlement was reached in the California class action. This settlement covered all class members who did not timely send a valid opt-out request (which included Ms. Rangel). The California court granted final approval.

Later, in a FLSA lawsuit, Ms. Rangel sought to be the plaintiff representative of a class of similarly situated persons. She requested damages for unpaid wages, compensatory and punitive damages. Ms. Rangel’s claims in the FLSA lawsuit were the same as those in the California class action settlement. She acknowledged that she was subject to the California class action settlement releasing her claims in the state action. However, Ms. Rangel contended that the FLSA lawsuit was exempt from the ordinary operation of res judicata. She claimed that the settlement was the product of an opt-out class asserting only state labor law claims. PLS filed a motion to dismiss on res judicata grounds. PLS argued that the settlement in the California state case resulted in a final judgment, and that the settlement expressly released all claims that could have been brought based on the same facts. Applying federal preclusion law, the district court agreed with PLS and dismissed the action.

The issue for the Ninth Circuit was whether a settlement to which Ms. Rangel did not object, and to which it was obligated to give effect, extended to her current claims. The Court determined that the application of res judicata in California adhered to the California “primary rights” approach.

In California, res judicata applies if (1) the decision in the prior proceeding was final and on the merits; (2) the present proceeding is on the same cause of action as the prior proceeding; and (3) the parties in the present proceeding or parties in privity with them were parties to the prior proceeding. The Ninth Circuit found all three elements were satisfied. The class settlement covered “all claims” that “could have been pled based on the factual allegations in the Complaint.” Ms. Rangel’s FLSA claims were direct federal counterparts to the state law claims settled in the state action. The release provision in the settlement referred to factually related claims. It did not limit itself to those claims that class members were functionally capable of bringing in the prior action itself.

California’s “primary rights” approach refers to “the right to obtain redress for a harm suffered, regardless of the specific remedy sought or legal theory advanced.” Boeken v. Phillip Morris USA, Inc.(2010) 48 Cal 4th 788, 798. “Even when there are multiple legal theories upon which recovery might be predicated, one injury gives rise to only one claim of relief.” Id. “Hence a judgment…is a bar to a subsequent action…based on the same injury to the same right, even though [the plaintiff] presents a different legal ground for relief.” Slater v. Blackwood (1975) 15 Cal.3rd 791,795.

Here Ms. Rangel’s FLSA claims were the same as those asserted in the California state action. The Ninth Circuit concluded that these claims invoked “the same injury to the same right” already litigated. Further, Ms. Rangel was wrong in her premise that the FSLA claims could not have been litigated through an opt-out class. The mechanism of litigation has no impact on the primary rights analysis. The same injuries and rights are at issue in both the FLSA and California state cases. Ms. Rangel did not opt-out of the state action and was therefore a party to the settlement.

CONCLUSION
The Ninth Circuit concluded that the settlement applied to her FSLA claims and affirmed the lower Court’s dismissal on the ground of res judicata.

For a copy of the complete decision, see: 16-56826

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