899 F.3d 1106
9th Cir.2018Background
- PLS Check Cashers (PLS) faced a California opt-out class action (Dieguez) alleging state wage-and-hour violations; parties reached a settlement covering all class members who did not timely opt out and containing a broad release of "all claims that were or could have been pled based on the factual allegations in the Complaint."
- The California Superior Court granted final approval of the Dieguez settlement and entered judgment; Rangel did not opt out and thus was a class member bound by the settlement.
- In August 2016 Rangel filed an individual/putative FLSA collective action in federal court alleging unpaid minimum wage and overtime under 29 U.S.C. §§ 206–07. No other plaintiffs opted into her collective.
- PLS moved to dismiss the FLSA action on res judicata grounds, arguing the Dieguez settlement released the same claims; the district court applied federal preclusion law, found res judicata satisfied, and dismissed with prejudice.
- Rangel argued the FLSA’s opt-in requirement prevented an opt-out state-class settlement from releasing FLSA claims; she contended that collective-action mechanics preclude preclusion here.
- The Ninth Circuit applied California preclusion (res judicata/primary-rights) law and affirmed dismissal, holding the state settlement released Rangel’s factually identical FLSA claims and that she was bound because she failed to opt out.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether an opt-out state-class settlement can preclude/ release FLSA claims that were not pled | Rangel: FLSA claims cannot be released because FLSA actions require opt-in; she never could have joined Dieguez as an FLSA plaintiff | PLS: Dieguez released all claims "based on the factual allegations" and the settlement judgment is preclusive as to those claims | Held: Yes — under California law the settlement released factually identical FLSA claims; res judicata applies |
| Whether the Dieguez judgment was "final and on the merits" for preclusion | Rangel: Settlement judgment should not bar claims that implicate different procedural mechanisms (opt-in) | PLS: A final class settlement/judgment is conclusive and qualifies as a final judgment on the merits | Held: Settlement judgment is final and on the merits and suffices for preclusion |
| Whether the FLSA’s opt-in requirement prevents binding absent class members | Rangel: Because she never opted into an FLSA collective, she could not be bound as a plaintiff in an FLSA action | PLS: Rangel was a party to the state settlement because she failed to opt out and therefore is bound | Held: Failure to opt out made Rangel a class member bound by the settlement, so she is precluded |
| Which law governs preclusive effect of a state-court judgment | Rangel: (implicit) federal forum should not allow preclusion of FLSA rights by state-class settlement | PLS: The state judgment has preclusive effect; federal court must give it full faith and credit | Held: California law governs the preclusive effect of the California judgment; 28 U.S.C. § 1738 requires effect given to state judgments |
Key Cases Cited
- Genesis Healthcare Corp. v. Symczyk, 569 U.S. 66 (U.S. 2013) (describes formation and opt-in nature of FLSA collective actions)
- Smith v. T-Mobile USA Inc., 570 F.3d 1119 (9th Cir. 2009) (FLSA collective-action opt-in principles)
- Manufactured Home Communities Inc. v. City of San Jose, 420 F.3d 1022 (9th Cir. 2005) (state law governs preclusive effect of state-court judgments)
- Robi v. Five Platters, Inc., 838 F.2d 318 (9th Cir. 1988) (standard of review for dismissal on preclusion grounds)
- Boeken v. Philip Morris USA, Inc., 48 Cal.4th 788 (Cal. 2010) (California "primary rights" approach to res judicata)
- Citizens for Open Access to Sand & Tide, Inc. v. Seadrift Ass’n, 60 Cal. App.4th 1053 (Cal. Ct. App. 1998) (class settlement judgment is as conclusive as a judgment after trial)
- Richardson v. Wells Fargo Bank, N.A., 839 F.3d 442 (5th Cir. 2016) (applying California law to hold an opt-out settlement bound absent opt-out plaintiff, including FLSA claims)