Raymond Richardson v. Wells Fargo Bank, N.A
839 F.3d 442
| 5th Cir. | 2016Background
- Plaintiffs are former Wells Fargo home mortgage consultants who sued under the FLSA for overtime, alleging misclassification as exempt employees.
- A prior California opt‑out class action, Lofton, asserted state wage claims (based on the same facts) and approved a $19 million settlement that expressly released state and federal wage claims, including FLSA claims, for class members who did not opt out.
- 1,516 plaintiffs in this FLSA suit were members of the Lofton class and did not opt out; 1,283 submitted claim forms and 233 did not.
- After litigation over payments to a separate counsel (ILG) and subsequent proceedings in state court, the Lofton court found the settlement fair, approved it, and retained jurisdiction; some post‑judgment disputes and appeals followed.
- Wells Fargo moved for summary judgment in the instant case arguing res judicata/full faith and credit precludes the California plaintiffs’ FLSA claims; the district court granted summary judgment.
- The Fifth Circuit affirmed, holding (1) California law gives preclusive effect to the Lofton settlement; (2) the FLSA does not create an exception to § 1738; and (3) plaintiffs failed to show a due process defect in representation or notice sufficient to defeat preclusion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Lofton settlement precludes plaintiffs’ FLSA claims under California res judicata | FLSA claims cannot be bound by an opt‑out class settlement because FLSA collective actions require opt‑in under § 216(b) | Lofton was a judicially approved opt‑out state class settlement that expressly released FLSA claims and thus binds non‑opt‑outs under California preclusion law | Lofton precludes the FLSA claims; California law treats a court‑approved class settlement as a final judgment binding absent class members |
| Whether the FLSA implies an exception to the Full Faith & Credit Act (28 U.S.C. § 1738) | § 216(b) creates an irreconcilable conflict with § 1738 because FLSA requires opt‑in and protects claim enforcement in federal fora | No irreconcilable conflict: § 216(b) does not prevent state courts from supervising settlements that release FLSA claims; Matsushita controls | FLSA does not create an implied exception to § 1738; federal courts must give the Lofton judgment the same preclusive effect California would |
| Whether Lofton was a final judgment for preclusion given subsequent appeals and post‑judgment motions | Later appeals/motions (e.g., to vacate) mean the settlement is not final for res judicata purposes | The relevant appeal period for the settlement judgment expired in 2011; later collateral proceedings do not negate finality | Lofton was final for preclusion when the appeal period expired; later proceedings do not defeat finality |
| Whether due process (adequate representation/notice) prevents preclusion | ILG’s conduct and class counsel’s alleged failures diluted class recovery and created inadequate representation; notice was inadequate/boilerplate | Class interests remained aligned; Lofton court found notice adequate; post‑settlement disputes over ILG fees do not show inadequate representation for res judicata purposes | Plaintiffs failed to prove a due process violation. Representation and notice were sufficient to bind absent class members |
Key Cases Cited
- Matsushita Elec. Indus. Co. v. Epstein, 516 U.S. 367 (federal courts must give state judgments the preclusive effect they have in the rendering state)
- Taylor v. Sturgell, 553 U.S. 880 (defendant bears burden to prove nonparty preclusion issues; limits on nonparty preclusion)
- Gonzales v. Cassidy, 474 F.2d 67 (5th Cir.) (absent class members are bound absent a showing of inadequate representation)
- Kremer v. Chem. Constr. Corp., 456 U.S. 461 (framework for resolving conflicts between federal statutes and full faith and credit obligations)
- Carter v. Countrywide Credit Indus., Inc., 362 F.3d 294 (5th Cir.) (FLSA claims may proceed to arbitration or be settled under certain conditions)
- Martin v. Spring Break ’83 Prods., L.L.C., 688 F.3d 247 (5th Cir.) (private settlement of FLSA claims upheld in certain circumstances)
- Villacres v. ABM Indus. Inc., 117 Cal. Rptr. 3d 398 (Cal. Ct. App.) (judicially approved class settlement can bar later claims based on underlying allegations)