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Barboza v. West Coast Digital GSM

November 19, 2009

JESUS BARBOZA ET AL., PLAINTIFFS AND APPELLANTS,
v.
WEST COAST DIGITAL GSM, INC., ET AL., DEFENDANTS AND RESPONDENTS.



APPEAL from an order of the Superior Court for Los Angeles County, William F. Fahey, Judge. Affirmed. (Los Angeles County Super. Ct. No. BC325051).

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

CERTIFIED FOR PUBLICATION

What are the obligations of class counsel when he learns that the defendant in the class action he is prosecuting has ceased operations, sold its assets to a third party, and intends to file for bankruptcy? In the case before us, counsel obtained a stipulated default and a default judgment that included more than $4 million in aggregate damages for the class, plus more than $1 million in prejudgment interest. So far, so good. But counsel then asserted that his job would be completed once his motion for attorney fees was heard, i.e., that he had no obligation to enforce the judgment on behalf of the class. The trial court disagreed. It ruled that "by assuming the responsibility of pursuing claims on behalf of the class, class counsel assumed the obligation to pursue it until the end (i.e., enforcement of the judgment) and not just until judgment." Based upon the principles guiding class actions, we agree that class counsel's obligations to the class do not end with the entry of judgment, and hold that class counsel's obligations continue until all class issues are resolved, which may include enforcement of the judgment.

BACKGROUND

This case is before us for the third time. In the first appeal (Case No. B188151), we reversed the trial court's denial of class certification. In the second appeal (Case No. B193619), we reversed the trial court's disallowance of certain attorney fees. Our summary of the facts in this case relies in part on our earlier unpublished opinions.

The complaint in this case was filed as a class action in November 2004 by nine named plaintiffs. Plaintiffs, and the class they sought to represent, were employees of defendant West Coast Digital GSM, Inc. (WCD). They alleged causes of action against WCD*fn1 for damages arising from WCD's alleged unlawful deductions from wages, failure to pay overtime, and failure to provide meal and rest breaks.

Plaintiffs moved for class certification in August 2005. The trial court denied the motion in October 2005, and plaintiffs filed a notice of appeal from that ruling. While that ruling was on appeal, the trial court rejected the parties' request to stay the trial of the named plaintiffs' claims, and trial on those claims went forward in February or March 2006.*fn2 The named plaintiffs prevailed on all but one of their causes of action. Plaintiffs moved for their attorney fees under the Labor Code for fees related to prosecution of the individual claims. The trial court granted some, but not all, of the requested fees; it disallowed fees for trial preparation and trial related to two of the plaintiffs on the ground that they rejected an informal settlement offer that exceeded the amounts they recovered at trial. Plaintiffs appealed from that order.

In November 2006, we issued our opinion in the first appeal, reversing the denial of class certification and directing the trial court to certify the class. But because the named plaintiffs had already litigated their individual claims by that time, we directed the trial court to determine whether the named plaintiffs could suitably represent the class and, if it found they could not, we directed the court to give them the opportunity to substitute new named plaintiffs to represent the class. For reasons not reflected in the record, the motion to certify the class (apparently with the same three named plaintiffs) was not submitted until September 2007. It was granted that same day. In the meantime, we issued our decision in the second appeal.

It appears that, in December 2007, WCD's president, Victor Chapron, filed a declaration stating that WCD sold its assets to a third party and ceased its operations in August 2007.*fn3 In an effort to avoid the expense of trial, in February 2008, plaintiffs and WCD entered into a stipulation that allowed plaintiffs to take a default against WCD.

Following submission of evidence of damages suffered by the class, judgment was entered on September 16, 2008. The judgment attached a list of class members whose claims were adjudicated, a list of former employees who are not members of the class and whose claims were not adjudicated, and an order designating the time periods applicable to the claims that were adjudicated. The judgment awarded aggregate damages of $4,105,262 and prejudgment interest in the amount of $1,669,955 in favor of the class against WCD, awarded additional enhancement amounts to each of the named plaintiffs, and stated that plaintiffs "are to be awarded reasonable attorneys' fees."

Plaintiffs filed their motion for attorney fees, but sought a continuance of the hearing on the motion so that notice of the judgment and of the hearing on the attorney fee motion could be given to the class. In February 2009, plaintiffs submitted a proposed notice for approval by the court. The proposed notice explained that WCD had sold it assets and ceased operations, and that it claimed to have no assets and would eventually declare bankruptcy. It noted that despite WCD's claims, class counsel obtained a judgment against WCD and filed a motion for attorney fees. But the proposed notice also stated that class counsel no longer had any obligation to pursue the matter on behalf of the class because its obligation was only to represent the class until judgment was obtained. Therefore, the proposed notice advised the class that class counsel would not be taking further steps to enforce the judgment.

The trial court denied plaintiffs' request to approve the proposed class notice, on the ground that there was no authority that would permit class counsel to limit its obligations in the manner stated in the proposed notice. Relying upon Janik v. Rudy, Exelrod & Zieff (2004) 119 Cal.App.4th 930, which addressed the duty of care owed by class counsel to class members, the trial court concluded that class counsel had a duty to pursue the class claims "until the end (i.e., enforcement of the judgment) and not just until judgment." The court also noted that a well-known practice guide warns of the disadvantages of class actions, including that class counsel may find themselves caught in a class action that has proven to be undesirable due to the costs involved, because they are unable to dismiss class claims or parties without the court's approval.

Plaintiffs, and class counsel as an aggrieved party, timely filed a notice of appeal from the order denying their request to ...


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