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Watkins v. Wachovia Corp.

April 16, 2009


APPEAL from a judgment and an order of the Superior Court of Los Angeles County, Terry A. Green, Judge. Brown appeals from a judgment; we affirm. Watkins appeals from an order; we dismiss the appeal. (Los Angeles County Super. Ct. No. BC290892).

The opinion of the court was delivered by: Croskey, J.


Plaintiffs and appellants Felicia M. Watkins and Patricia Brown are former employees of defendant and appellant Wachovia.*fn1 They brought a class action against Wachovia, seeking damages for unpaid overtime compensation, for themselves and a purported class of similarly situated workers. The trial court granted summary judgment in favor of Wachovia against Brown, on the basis that Brown had signed a release of all claims in exchange for enhanced benefits upon her termination from Wachovia. Thereafter, the court denied Watkins‟s motion for class certification. Subsequently, Watkins settled her own claims against Wachovia, but attempted to retain the right to appeal the denial of class certification in her representative capacity. We conclude summary judgment was appropriately granted with respect to Brown, and that Watkins no longer has standing to pursue this appeal. We therefore affirm the judgment in favor of Brown and dismiss Watkins‟s appeal.


Wachovia has 36 branches in California. Both Brown and Watkins were employed as "sales assistants,"*fn2 who assisted stockbrokers with client contact and numerous other tasks. Some of Wachovia‟s sales assistants were registered with the National Association of Securities Dealers ("NASD"). Registered sales assistants were authorized to perform additional tasks which non-registered sales assistants could not perform, such as directly placing trades for clients. Brown and Watkins were both non-registered sales assistants; Brown worked at Wachovia‟s Newport Beach branch, while Watkins worked at the Woodland Hills branch.

On February 24, 2003, Watkins, alone, brought suit against Wachovia, alleging, among other things, causes of action for wrongful termination and a failure to pay overtime wages. She also brought a cause of action under Business and Professions Code section 17200 on behalf of "similarly situated members of the general public" asserting Labor Code violations, but she did not plead a class action at this time.

Class action allegations first appeared in Watkins‟s second amended complaint, filed December 8, 2003. In the interim, the U.S. Department of Labor had completed an investigation of Wachovia‟s Century City office, covering the period from May 1, 2000 to May 1, 2002. The Department of Labor had concluded that Wachovia‟s Century City branch had incorrectly classified its sales assistants as exempt from overtime laws, when they were, in fact, non-exempt. Wachovia ultimately paid all 11 of its Century City sales assistants back wages for the period of the investigation. Wachovia also agreed to keep better records and pay overtime wages in the future.

Given this determination, Watkins amended her complaint to allege a class action on behalf of all Wachovia employees not paid overtime within four years of the date of her complaint, and specifically all such employees who were not paid overtime as a result of having been misclassified as exempt.*fn3 Watkins alleged that "it was Wachovia‟s policy not to pay overtime compensation."

Watkins‟s second amended complaint did not distinguish between registered and non-registered employees of Wachovia. All registered individuals, as part of the registration process, sign an agreement to arbitrate all disputes with their employers via NASD arbitration. Therefore, Wachovia moved to compel NASD arbitration with respect to every registered member of the purported plaintiff class. Watkins opposed the motion on the basis that the NASD arbitration rules provide that class action claims are not subject to arbitration. The issue was thus whether: (1) the arbitration agreement constituted a waiver of class action rights of registered employees, requiring them to arbitrate their claims individually; or (2) the exemption from NASD arbitration permitted registered employees to pursue class actions in court. At the time, the issue was an open one. The trial court in this case concluded that registered employees must arbitrate their claims on an individual basis, and therefore granted the motion to compel arbitration. Subsequently, it would be determined, in an appeal in a related case,*fn4 that this is not the proper result and that, in fact, registered employees may nonetheless pursue class actions against their employers in court. (Clark v. First Union Securities, Inc. (2007) 153 Cal.App.4th 1595.) However, that appellate opinion would not be filed until 2007. In this case, the trial court‟s order compelling arbitration had the practical effect of removing the registered employees from the case;*fn5 non-registered employees could continue to pursue the action.

Discovery proceeded.*fn6 Further amended complaints were filed and challenged. Nearly simultaneously, Watkins filed her fifth amended complaint, which added Brown as another class representative, and a motion for class certification.*fn7 Although the class certification motion was filed in September 2005, it would not be heard until April 2007.

During this time, plaintiffs‟ counsel attempted to challenge the trial court‟s order compelling arbitration of the claims of the registered employees. At the hearing on one such challenge,*fn8 plaintiffs‟ counsel candidly conceded that he could not arbitrate the claims of any individual registered sales assistants because he did not represent any of them on an individual basis. Plaintiffs‟ counsel stated that: (1) he possessed evidence that Wachovia had improperly denied its registered sales assistants overtime pay; (2) he wanted to pursue the class action on their behalf; but (3) he could not arbitrate their individual claims because none of them were willing to pursue such a claim. He stated, "You know, these [registered sales assistants] who [were] deposed, they don‟t want to pursue their own individual claims. They would be happy to be benefitted by a class, but they don‟t want to advance their own individual claim." The court expressed concern as to why a class action should proceed when there is no individual who believes he or she has been sufficiently harmed to warrant pursuing the claim.*fn9

While briefing proceeded on the class certification motion, Wachovia filed its motion for summary judgment with respect to Brown. Wachovia based its motion on the fact that, when Brown‟s employment was terminated, she signed a release of all claims, known or unknown, specifically including wage claims, in exchange for enhanced severance benefits. In opposition, Brown conceded that she had signed the release and received the enhanced benefits. However, she argued that the release was unenforceable under Labor Code section 206.5, which prohibits employers from requiring their employees to release claims for wages due unless payment of those wages has been made. Brown took the position that this statute invalidates any releases of claims for unpaid wages. In reply, Wachovia argued that the statute is not violated when payment is made for all wages concededly owed and the release is of a claim subject to a bona fide dispute.

The motion for summary judgment and the motion for class certification were argued simultaneously. Rulings were issued in April, 2007. The trial court granted the motion for summary judgment with respect to Brown, on the basis that Labor Code section 206.5 does not prohibit the release of disputed claims, and evidence which established Brown was aware of her overtime claim at the time she signed the release. The court was also persuaded by the fact that Brown was not required to sign the release in any way; she could have chosen to forgo the enhanced severance benefits and retain her overtime claim, and still would have received all wages concededly due and regular severance benefits. The court also denied the motion for class certification, relying primarily on its conclusion that common issues do not predominate, given evidence establishing that overtime practices varied among Wachovia‟s California branches.

On May 1, 2007, Watkins and Wachovia placed a settlement on the record in open court; the agreement was later reduced to writing. Pursuant to the agreement, Wachovia was to pay $51,000 -- comprised of a $2,500 payment to Watkins for her alleged lost wages; and $48,500 for her emotional distress and attorney‟s fees. In exchange, Watkins would release all of her individual claims, but not her right to assert claims on behalf of the class. The settlement of individual claims was not limited to Watkins‟s claims for wrongful termination, but also encompassed her overtime claims. Watkins agreed that, if the class ...

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