Litigating California Wage & Hour and Labor Code Class Actions

the case. As any one of these class representatives could enter into a settlement with the
defendant and seek to have the settlement approved, a dissenting class representative
may be placed in the position of an objector. Because the law disfavors setting aside a
class settlement on the ground that the objector could have obtained an even better class
settlement, 482 objectors instead argue that the plaintiff failed to undertake the necessary
due diligence to properly evaluate the claim.
There has never been a requirement that exhaustive formal discovery be undertaken
before a class settlement could be affirmed. Rather, the general standard has been that “in
the context of class action settlements, formal discovery is not a necessary ticket to the
bargaining table where the parties had sufficient information to make an informed decision
about settlement.” 483 Most courts have generally accepted the sworn statements from
counsel that they conducted the necessary investigation and settled the case in mediation
and in an arms length transaction.
In late 2008, however, the First District Court of Appeal decided Kullar v. Foot Locker
Retail, Inc., 484 which signaled greater judicial scrutiny of the value of class settlements,
especially those obtained following limited, informal discovery.
In Kullar, a settlement was negotiated by experienced class action counsel (on both sides)
with the assistance of a respected mediator. The parties had undertaken only informal
discovery and the exchange of information had been conducted as part of the mediation,
protecting the nature of the information disclosed from disclosure. The parties ultimately
settled the action for $2 million. Another plaintiff who had filed a separate class action
alleging similar claims objected and contended that the plaintiff’s counsel had failed to
provide any evidence that counsel had conducted enough investigation to intelligently
valuate the case for mediation. The trial court overruled the objections and found that
sworn representations from counsel that they had exchanged necessary information in
mediation and that the matter was negotiated at arms length were sufficient to support
approval of the settlement. The objector appealed. 485
The court remanded the case and ordered the trial court to conduct a more searching
inquiry into the investigation of class counsel. The court explained that this inquiry should
require the settling parties to introduce evidence reflecting the potential recovery if the
482
483
484
485
See generally 7-Eleven Owners for Fair Franchising v. Southland Corp., 85 Cal. App. 4th 1135, 1149-50 (2000) (noting
that courts are allowed to look with skepticism on claims from objectors that settlements were inadequate and should
have been for more money: “proposed settlement is not to be judged against a hypothetical or speculative measure of
what might have been achieved by the negotiators”).
Id. at 1149.
168 Cal. App. 4th 116.
Id. at 121-27.
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