Lawrence Peck v. Swift Transportation Company ( 2022 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
GILBERT SAUCILLO; JAMES R. No. 20-55119
RUDSELL, on behalf of themselves
and all others similarly situated, D.C. No.
Plaintiffs-Appellees, 5:10-cv-00809-
VAP-OP
and
JOHN BURNELL; JACK POLLOCK,
Plaintiffs,
v.
LAWRENCE PECK,
Objector-Appellant,
v.
SWIFT TRANSPORTATION COMPANY
OF ARIZONA, LLC, an Arizona
corporation,
Defendant-Appellee,
and
SWIFT TRANSPORTATION COMPANY
INCORPORATED; DOES,
Defendants.
2 PECK V. SWIFT TRANSPORTATION
GILBERT SAUCILLO; JAMES R. No. 20-55159
RUDSELL, on behalf of themselves
and all others similarly situated, D.C. No.
Plaintiffs-Appellees, 5:10-cv-00809-
VAP-OP
and
JOHN BURNELL; JACK POLLOCK, OPINION
Plaintiffs,
v.
SADASHIV MARES,
Objector-Appellant,
v.
SWIFT TRANSPORTATION COMPANY
OF ARIZONA, LLC, an Arizona
corporation,
Defendant-Appellee,
and
SWIFT TRANSPORTATION COMPANY
INCORPORATED; DOES,
Defendants.
Appeal from the United States District Court
for the Central District of California
Virginia A. Phillips, Chief District Judge, Presiding
PECK V. SWIFT TRANSPORTATION 3
Argued and Submitted April 16, 2021
Pasadena, California
Filed February 11, 2022
Before: MILAN D. SMITH, JR. and SANDRA S. IKUTA,
Circuit Judges, and JOHN E. STEELE, * District Judge.
Opinion by Judge Milan D. Smith, Jr.
SUMMARY **
Class Action Settlement / CA Private Attorney
General Act
The panel dismissed an objector’s appeal of the district
court’s approval of a California Private Attorney General
Act (“PAGA”) settlement, vacated the district court’s
approval of the class-action settlement, and remanded for
further proceedings.
Plaintiffs and Swift Transportation Company reached a
settlement pertaining to plaintiffs’ class claims, alleging
violations of California labor law, and claims brought
pursuant to PAGA, which allows private citizens to recover
civil penalties on behalf of themselves “and other current or
former employees” for violations of the California Labor
*
The Honorable John E. Steele, United States District Judge for the
Middle District of Florida, sitting by designation.
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
4 PECK V. SWIFT TRANSPORTATION
Code. Lawrence Peck and Sadashiv Mares filed separate
objections to the settlement agreement. The district court
overruled the objections, and gave final approval of the
settlement.
The panel held that Peck may not appeal the PAGA
settlement because he was not a party to the underlying
PAGA action. The PAGA claim was brought by two private
plaintiffs, and Peck was not a party to the PAGA action.
Accordingly, the panel held that Peck failed to show that he
had any right to appeal the district court’s approval of the
PAGA settlement. The panel rejected Peck’s arguments as
to why he may appeal the PAGA settlement anyway.
Although Peck is a class member of the class action, a PAGA
action is distinct from a class action, and objectors to a
PAGA settlement are not “parties” to a PAGA suit in the
same sense that absent class members are “parties” to a class
action. The fact that Peck may ultimately receive a portion
of the PAGA settlement did not make him a party to the
lawsuit. Moreover, a PAGA action has “no individual
component.” Finally, although Peck has a separately filed
PAGA action, that does not make him a party to this PAGA
case. The panel dismissed Peck’s appeal and did not consider
whether the district court erred in approving the PAGA
settlement.
The panel next considered the objection to the class
action settlement. Mares contends that because the district
court approved the settlement before certifying a class, the
court should have applied a heightened standard of review.
Swift argued that the panel could not reach the merits of
Mares’s objection because he did not raise such an objection
in the district court. Mares countered that “he could not pre-
object” to the district court employing the incorrect legal
PECK V. SWIFT TRANSPORTATION 5
standard. The panel held that when the district court
considered an issue in its final order approving a class action
settlement, the issue was not waived on appeal even if no
objector to the settlement raised that issue to the district
court. Therefore, Mares did not, and could not, waive his
objection to the legal standard employed by the district court
in its final order.
Concerning the proper legal standard for the class action
settlement, the panel held that the district court erred in
applying a presumption that the settlement was fair and
reasonable, and the product of a non-collusive, arms-length
negotiation. The district court applied the presumption that
this court reversed in Roes 1-2 v. SFBSC Mgmt., LLC, 944
F.3d 1035, 1048 (9th Cir. 2019) (holding that “[w]here . . .
the parties negotiate a settlement agreement before the class
has been certified, settlement approval requires a higher
standard of fairness and a more probing inquiry than may be
normally required under Rule 23(e)”). The panel rejected
attempts to distinguish the district court’s order from the
decision in Roes. The panel held further that the district
court’s error was not harmless. Applying the erroneous
presumption cast a shadow on the entirety of the district
court’s order. The panel vacated the district court’s approval
of the class-action settlement. The panel remanded so that
the district court could make findings in accordance with the
applicable heightened standard. The panel offered no
opinion as to the merits of Mares’s allegations.
6 PECK V. SWIFT TRANSPORTATION
COUNSEL
Neal J. Fialkow (argued) and James S. Cahill, Law Office of
Neal J. Fialkow Inc., Pasadena, California, for Objector-
Appellant Lawrence Peck.
Joseph Clapp (argued), Aiman-Smith & Marcy, Oakland,
California, for Objector-Appellant Sadashiv Mares.
Deepak Gupta (argued) and Urja Mittal, Gupta Wessler
PLLC, Washington, D.C.; James R. Hawkins and Gregory
Mauro, James Hawkins APLC, Irvine, California; Stanley D.
Saltzman, Marlin & Saltzman LLP, Agoura Hills,
California; for Plaintiffs-Appellees.
Paul S. Cowie (argued), Karin Dougan Vogel, and John D.
Ellis, Sheppard Mullin Richter & Hampton LLP, San
Francisco, California, for Defendant-Appellee.
OPINION
M. SMITH, Circuit Judge:
Gilbert Saucillo and James Rudsell (Plaintiffs) are
plaintiffs in actions brought against Swift Transportation
Company of Arizona and associated entities and individuals
(Swift). In 2019, after years of litigation, Plaintiffs and Swift
reached a settlement pertaining to Plaintiffs’ class claims and
claims brought pursuant to the California Private Attorneys
General Act (PAGA), Cal. Lab. Code §§ 2698 et seq., which
allows private citizens to recover civil penalties on behalf of
themselves “and other current or former employees” for
violations of the California Labor Code. Cal. Lab. Code
§ 2699(a). Lawrence Peck and Sadashiv Mares filed
PECK V. SWIFT TRANSPORTATION 7
objections to the settlement agreement. Peck objected to the
PAGA portion of the settlement, while Mares argued that the
monetary award for the class claims was not fair and
reasonable. The district court overruled both sets of
objections and gave final approval to the settlement.
We hold that Peck may not appeal the PAGA settlement
because he is not a party to the underlying PAGA action, and
so we dismiss his appeal. However, we vacate the district
court’s approval of the class action settlement agreement and
remand the class action for further proceedings, as we agree
with Mares that the district court abused its discretion by
applying an incorrect legal standard when evaluating the
settlement.
FACTUAL AND PROCEDURAL BACKGROUND
I. Facts
Swift is a trucking company that operates throughout the
United States. In September 2009, John Burnell, a former
Swift driver, informed the California Labor and Workforce
Development Agency (LWDA) of Swift’s alleged violations
of California labor law. Burnell specifically claimed that
Swift was violating California Labor Code § 2802, which
requires an employer to “indemnify his or her employee for
all necessary expenditures or losses incurred by the
employee in direct consequence of his or her duties . . . .”
Cal. Lab. Code § 2802(a). The next month, LWDA
informed Burnell that it would not investigate the claim. In
October 2010, another former Swift driver, Jack Pollock,
sent a letter to LWDA asserting various violations of
California labor law, including § 2802. Pollock’s letter
purportedly “serve[d] as an update to [Burnell’s]
correspondence.”
8 PECK V. SWIFT TRANSPORTATION
II. District Court Proceedings
In February 2010, Burnell filed a class action against
Swift in California state court alleging various wage and
hour violations pursuant to California law. In June 2010,
Swift removed the case to federal court. Burnell then
amended the complaint in October 2010, adding Pollock as
a named plaintiff. The amended complaint asserted both an
independent cause of action pursuant to § 2802 and a PAGA
cause of action. Pollock subsequently withdrew as a named
plaintiff, and Burnell then filed another amended complaint,
this time adding Saucillo as a named plaintiff. In 2016, the
district court denied a motion by Burnell and Saucillo for
class certification. Burnell v. Swift Transp. Co of Ariz., LLC,
No. EDCV10809VAPSPX, 2016 WL 2621616, at *1 (C.D.
Cal. May 4, 2016). We denied a petition for permission to
appeal pursuant to Federal Rule of Civil Procedure 23(f).
Eventually, the district court granted Swift’s motion for
partial judgment on the pleadings, but we vacated that ruling
after issuing Dilts v. Penske Logistics, LLC, 769 F.3d 637(9th Cir. 2014).
In 2012, Rudsell, another Swift driver, sent his own letter
to the LWDA, similarly alleging that Swift had violated
various California labor laws. Rudsell did not specifically
cite § 2802, nor did his complaint, which he attached to the
letter. Rudsell next filed an amended complaint, and Swift
eventually removed Rudsell’s suit to federal court. The
district court stayed Rudsell’s suit while Burnell’s action
was pending. Rudsell never moved for class certification.
In May 2019, Burnell, Saucillo, and Rudsell reached a
settlement with Swift pertaining to the class claims and
PAGA claims in both their suits. The settlement provided
that Swift would pay $7,250,000 for the class claims,
$2,416,666.66 for attorneys’ fees, and $500,000 for the
PECK V. SWIFT TRANSPORTATION 9
PAGA claim. Pursuant to PAGA, $375,000 (75%) would be
paid to the LWDA, and $125,000 (25%) would be paid to
aggrieved employees. See Cal. Lab. Code § 2699(i).
Upon the instruction of the district court, Plaintiffs 1 filed
a new, consolidated complaint in June 2019. In the
consolidated complaint, Plaintiffs alleged that Swift violated
§ 2802. Plaintiffs also asserted a PAGA cause of action that
“incorporate[d] each and every one of the allegations
contained in the preceding paragraphs of [the consolidated]
Complaint.” The parties submitted a copy of the settlement
agreement to the LWDA, in accordance with PAGA. See
Cal. Labor Code § 2699(l). The LWDA did not object to the
settlement.
Peck and Mares, two Swift drivers, objected to the
proposed settlement. Both Peck and Mares had filed their
own suits against Swift. Peck filed a PAGA complaint in
California state court, while Mares filed a class action. 2
Despite these objections, the district court granted final
approval to the settlement agreement in January 2020. In
outlining the legal standard by which to evaluate the
agreement, the district court wrote:
As previously found by this Court, the parties
engaged in arm’s-length, serious, informed,
1
On the same day that Plaintiffs filed the consolidated complaint,
they also removed Burnell as a class representative. Thus, only Saucillo
remained as a class representative for Burnell’s suit.
2
The district court denied class certification and granted Swift’s
motion for summary judgment in Mares’s case. His case is on appeal to
this court, but is stayed pending the outcome of this case. See Mares v.
Swift Transp. Co., Inc., No. 19-55065.
10 PECK V. SWIFT TRANSPORTATION
and non-collusive negotiations between
experienced and knowledgeable counsel.
Additionally, the Settlement Agreement was
reached after mediation with a neutral
mediator, Mark Rudy. The Settlement
Agreement is therefore presumptively the
product of a non-collusive, arms-length
negotiation. See Roe v. SFBSC Management,
LLC, No. 14-cv-03616-LB, 2017 WL
4073809, at *9 (N.D. Cal. Sept. 14, 2017)
(holding that a settlement that is the product
of an arm’s-length negotiation “conducted by
capable and experienced counsel” is
presumed to be fair and reasonable); Satchel
v. Fed. Express Corp., No. 03-cv-2878-SI,
2007 WL 1114010, at *4 (N.D. Cal. Apr. 13,
2007) (“The assistance of an experienced
mediator in the settlement process confirms
that the settlement is non-collusive.”). This
factor weighs in favor of approval.
(Some citations omitted.) The district court then evaluated
the agreement pursuant to the eight-factor test in Hanlon v.
Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998). 3
3
The Federal Rules of Civil Procedure were amended in 2018 to list
factors a district court should consider when evaluating a class action
settlement agreement. See Fed. R. Civ. P. 23(e)(2). Because we vacate
the district court’s approval of the settlement agreement in this case for
reasons unrelated to the Hanlon or Rule 23(e)(2) factors, we need not
reach the question as to how district courts should incorporate the Rule
23(e)(2) factors into their analyses. See Campbell v. Facebook, Inc.,
951 F.3d 1106, 1121 n.10 (9th Cir. 2020); see also Ciuffitelli v. Deloitte
& Touche LLP, No. 3:16-CV-00580-AC, 2019 WL 6893018, at *3
(D. Or. Nov. 26, 2019) (Acosta, M.J.), report and recommendation
PECK V. SWIFT TRANSPORTATION 11
The district court rejected the objections raised by Peck
and Mares. Peck argued that “the class representatives lack
standing to settle the PAGA clam, as they allegedly failed to
exhaust certain administrative procedures before bringing
the present lawsuit.” The district court dismissed this
argument because “‘[f]ailure to exhaust administrative
remedies under the PAGA is an affirmative defense subject
to waiver’ rather than a prerequisite to standing.” (Citations
omitted.)
Mares contended that the monetary award in the
settlement was “inadequate for several reasons, the common
theme of which is that he believes the parties’ estimate of
[Swift’s] maximum possible exposure is too low.” The
district court concluded that the settlement agreement was
fair and reasonable, and that the parties’ calculation of
Swift’s possible exposure was accurate. The district court
granted final approval to the settlement agreement for both
the class claims and the PAGA claim, though the court
reduced the attorneys’ fees.
III. Developments on Appeal
Peck raises his same objection on appeal, while Mares
now argues that the district court applied an incorrect
presumption that the settlement agreement was the product
of arm’s-length negotiations. Both appeals were fully
briefed, oral argument was held, and both Peck’s and
Mares’s cases were submitted in April 2021.
Approximately one month later, we decided Magadia v.
Wal-Mart Associates, Inc., 999 F.3d 668 (9th Cir. 2021),
adopted, No. 3:16-CV-00580-AC, 2019 WL 6840844 (D. Or. Dec. 16,
2019).
12 PECK V. SWIFT TRANSPORTATION
which concluded that the plaintiff—Roderick Magadia—
lacked Article III standing 4 to bring a “meal-break claim”
under PAGA “because he did not suffer an injury himself.”
See id. at 672. 5 This conclusion flowed from Magadia’s
core holding that plaintiffs seeking penalties under PAGA
for California labor law violations must satisfy the
traditional Article III standing requirement of an injury in
fact. See id. at 678 (“[W]e hold that Magadia lacks standing
to bring a PAGA claim for Walmart’s meal-break violations
since he himself did not suffer injury.”). We noted that there
is an exception to the injury-in-fact requirement for so-called
qui tam statutes, which allow private plaintiffs to sue on
behalf of the government in order to vindicate a public right
even if they have not personally been injured by unlawful
conduct. Id. at 674. Magadia recognized that “PAGA has
several features consistent with traditional qui tam actions.”
Id. at 675. However, we also explained that “PAGA differs
in significant respects from traditional qui tam statutes,” id.
at 676, and so ultimately held that PAGA was not “qui tam
for purposes of Article III” because its features “depart from
the traditional criteria of qui tam statutes,” id. at 678.
4
Article III standing “limits the category of litigants empowered to
maintain a lawsuit in federal court” to those who have suffered a
judicially redressable injury. Spokeo, Inc. v. Robins, 578 U.S. 330, 338
(2016). Without such an injury, federal courts lack jurisdiction to
entertain the plaintiff’s lawsuit. See id.5
We also held that Magadia had standing to bring “two wage
statement claims” under California Labor Code § 226(a), id. at 678, and
that “other class members who can establish § 226(a) injuries have
standing to collect damages,” id. at 680, though we did not directly
address standing under PAGA for those claims. We concluded that the
wage-statement claims failed on the merits. See id. at 680–82.
PECK V. SWIFT TRANSPORTATION 13
After this decision was filed, we directed the parties to
file supplemental briefs addressing Magadia’s impact with
respect to Plaintiffs’ standing to sue under PAGA. We also
asked for a discussion of the following issues:
[T]he parties shall give their views as to
whether Plaintiffs-Appellees suffered an
injury in fact, and whether that injury in fact
gives Plaintiffs-Appellees the ability to seek
relief on behalf of other current or former
employees in light of our previous holding
that a PAGA claim cannot be brought as a
class action under the Class Action Fairness
Act. The parties shall also give their views as
to whether the current and former employees,
on whose behalf the Plaintiffs-Appellees
filed their PAGA action, have also suffered
an injury in fact in light of the language in
Section 2699(g)(1) of the California Labor
Code providing that a PAGA plaintiff may
recover the civil penalty in a civil action
“filed on behalf of himself or herself and
other current or former employees against
whom one or more of the alleged violations
was committed,” and the language in in
Section 2699(i) providing that 25 percent of
the civil penalties recovered are allocation
“to the aggrieved employees.” Finally, the
parties shall address whether current and
former employees who may receive part of
the penalties recovered must themselves have
Article III standing, given that such
employees are not parties before the court
14 PECK V. SWIFT TRANSPORTATION
because a PAGA claim cannot be brought as
a class action.
(Cleaned up.)
We have reviewed the parties’ supplemental briefs, as
well as the parties’ letters directing us to additional, recent
authorities. For the reasons given in Part I of our discussion
below, we conclude that we have no occasion to reach many
of these issues.
DISCUSSION
The cases before us include both a class action and a
representative PAGA action. As explained below, these two
actions are distinct, with different parties and procedures.
Consequently, we address each action separately.
I. Objections to the PAGA Settlement
In renewing his objection to the district court’s approval
of the PAGA portion of the settlement, Peck identifies three
potential errors made by the district court: (1) Rudsell and
Saucillo lack standing to enter into the PAGA settlement
because they allegedly did not ask the LWDA to investigate
a potential § 2802 violation; (2) the PAGA release is
overbroad; and (3) the $500,000 PAGA penalty is too
small. 6 Swift counters that Peck lacks standing to object to
such a settlement, and that Peck may not appeal the
settlement in any event because he is a non-party to the
6
Peck also argues that the district “court did not respond to Peck’s
objections,” which he contends is an abuse of discretion. Peck’s
argument on this topic is extremely brief and only references the same
issues noted above.
PECK V. SWIFT TRANSPORTATION 15
underlying litigation. We agree with the latter contention,
and so we must dismiss Peck’s appeal.
A. Right to Appeal a PAGA Settlement
The PAGA claim before us was brought by two private
plaintiffs, Saucillo and Rudsell. Although Peck brought his
own PAGA claim in a different case, he is not a party to the
PAGA action here. “The rule that only parties to a lawsuit,
or those that properly become parties, may appeal an adverse
judgment, is well settled,” and so Peck has failed to show
that he has any right to appeal the district court’s approval of
the PAGA settlement here. United States ex rel. Alexander
Volkhoff, LLC v. Janssen Pharmaceutica N.V., 945 F.3d
1237, 1241 (9th Cir. 2020) (quoting Marino v. Ortiz,
484 U.S. 301, 304 (1988) (per curiam)); see also Fed. R.
App. P. 3(c)(1)(A) (notice of appeal must “specify the party
or parties taking the appeal” (emphasis added)).
Peck raises several arguments as to why he may appeal
the PAGA settlement anyway. None of them has merit.
First, he argues that because he is a class member of the class
action, he may also object to the PAGA action. However, as
indicated above, a PAGA action is distinct from a class
action. A class member may appeal from approval of a
class-action settlement, because he “has an interest in the
settlement” and the “legal rights he seeks to raise are his
own.” Devlin v. Scardelletti, 536 U.S. 1, 6–7 (2002). “But
a representative action under PAGA is not a class action.
There is no individual component to a PAGA action because
every PAGA action is a representative action on behalf of
the state. Plaintiffs may bring a PAGA claim only as the
state’s designated proxy . . . .” Kim v. Reins Int’l Cal., Inc.,
459 P.3d 1123, 1130–31 (Cal. 2020) (cleaned up); see also
Canela v. Costco Wholesale Corp., 971 F.3d 845, 851, 856
(9th Cir. 2020) (stating that “PAGA causes of action [are]
16 PECK V. SWIFT TRANSPORTATION
nothing like Rule 23 class actions,” and holding that in a
PAGA suit, “an aggrieved employee[] has no individual
claim of her own and is not seeking individual relief”).
To put a finer point on it:
Nonnamed class members are parties to
[class action] proceedings in the sense of
being bound by the settlement. It is this
feature of class action litigation that requires
that class members be allowed to appeal the
approval of a settlement when they have
objected at the fairness hearing. To hold
otherwise would deprive nonnamed class
members of the power to preserve their own
interests in a settlement that will ultimately
bind them, despite their expressed objections
before the trial court.
Devlin, 536 U.S. at 10 (emphasis added).
Conversely, while “a judgment from a PAGA suit binds
all those, including nonparty aggrieved employees, who
would be bound by a judgment in an action brought by the
government . . . without an opportunity to opt out,” that
preclusive effect extends only to an employee’s ability to
seek “civil penalties” under PAGA. Canela, 971 F.3d at 851
(citations and internal quotation marks omitted). “[U]nlike
class action judgments that preclude all claims the class
could have brought under traditional res judicata principles,
employees [precluded from bringing a PAGA claim] retain
all rights to pursue or recover other remedies available under
state or federal law.” Id. (citations and internal quotation
marks omitted). That is consistent with PAGA’s “remedial
scheme,” which is “different” than a class action: while class
actions typically seek compensation for individual wrongs,
PECK V. SWIFT TRANSPORTATION 17
PAGA is a delegation of California’s power to enforce its
labor laws to private parties. Id. at 852; accord Iskanian v.
CLS Transportation Los Angeles, LLC, 327 P.3d 129, 147
(Cal. 2014) (citing Arias v. Superior Court, 209 P.3d 923,
933 (Cal. 2009)); Robinson v. S. Ctys. Oil Co., 267 Cal. Rptr.
3d 633, 637–38 (Cal. Ct. App. 2020). Because they have no
comparable individual stake, objectors to a PAGA
settlement are not “parties” to a PAGA suit in the same sense
that absent class members are “parties” to a class action.
Relatedly, Peck argues that he may appeal because he
may be entitled to some part of the PAGA award as an
aggrieved employee. This argument also fails. The fact that
Peck may ultimately receive a portion of the PAGA
settlement does not make him a party to the lawsuit.
Analogously, in class action settlements, “Federal district
courts often dispose of . . . unclaimed [funds] by making
what are known as cy pres distributions,” Klier v. Elf
Atochem N. Am., Inc., 658 F.3d 468, 473 (5th Cir. 2011),
which generally go to charitable organizations. See, e.g., In
re Google Inc. St. View Elec. Commc’ns Litig., — F.4th —,
2021 WL 6111383, at *6 (9th Cir. 2021); Lane v. Facebook,
Inc., 696 F.3d 811, 822 (9th Cir. 2012). In such cases,
proceeds from the settlement go “to a third party,” Klier,
658 F.3d at 475, not to the named plaintiffs or absent class
members who are parties to the underlying litigation.
Moreover, a PAGA action has “no individual
component.” Kim, 459 P.3d at 1131; see also Canela,
971 F.3d at 852 (describing civil penalties allocated to
aggrieved employees as an incentive to bring an enforcement
suit, and not as restitution for harm suffered). The aggrieved
employees’ 25% portion of the PAGA proceeds “is not
restitution for wrongs done to members of the class” but is
instead “an incentive to perform a service to the state.”
18 PECK V. SWIFT TRANSPORTATION
Canela, 971 F.3d at 852 (citation and internal quotation
marks omitted); see also Magadia, 999 F.3d at 675 (noting
that “a PAGA plaintiff must give the ‘lion’s share’ (75%) of
the civil penalties recovered to the LWDA” (citing Cal. Lab.
Code § 2699(i))). In other words, Peck does not receive a
portion of the PAGA settlement because of any injury, but
instead because the California legislature made a policy
choice that the bounty that normally serves as the incentive
for the plaintiff to bring the suit should instead be shared
with all aggrieved employees.
We do not view this reasoning as inconsistent with
statements in Magadia suggesting that “PAGA . . . creates
an interest in penalties, not only for California and the
plaintiff employee, but for nonparty employees as well,” and
disagreeing with “the notion that the aggrieved employee is
solely stepping into the shoes of the State rather than also
vindicating the interests of other aggrieved employees.”
999 F.3d at 676–77. Magadia addressed the narrow
question of whether PAGA “hew[ed] closely to the
traditional scope of a qui tam action . . . under Article III,”
thereby allowing an “uninjured plaintiff to maintain suit” in
federal court. Id. at 675. More precisely, Magadia was
concerned with whether “PAGA’s features diverge from” a
specific “assignment theory of qui tam injury” articulated by
the Supreme Court in Vermont Agency of Nat. Res. v. U.S.
ex rel. Stevens, 529 U.S. 765, 773 (2000). 999 F.3d at 678.
That is an altogether different inquiry than whether Peck’s
right to share in settlement proceeds makes him an actual
party to the underlying PAGA suit. Cf. Johnson v. Maxim
Healthcare Servs., Inc., 281 Cal.Rptr.3d 478, 484 & n.4
(Cal. Ct. App. 2021) (holding that Magadia was “not
instructive” on PAGA standing question because it
addressed only “standing under Article III of the United
States Constitution and does not address Kim whatsoever”).
PECK V. SWIFT TRANSPORTATION 19
Indeed, Magadia expressly distinguished itself from other
Ninth Circuit cases on these grounds. See 999 F.3d at 678
n.6. In any event, as discussed above, the fact that Peck
might have some interest in the outcome of Saucillo’s and
Rudsell’s PAGA lawsuit does not make him a “party” to that
suit.
Finally, Peck argues that his separately filed PAGA
action gives him standing to object and to appeal in
Saucillo’s and Rudsell’s case. But maintaining a parallel
action does not change the fact that Peck is not a party to the
PAGA lawsuit brought by Saucillo and Rudsell. See Kim,
459 P.3d at 1130 (“[A] PAGA claim is an enforcement
action between the LWDA and the employer, with the
PAGA plaintiff acting on behalf of the government.”).
B. Conclusion
Because Peck lacks the right to appeal the PAGA
settlement, we dismiss his appeal and do not consider
whether the district court erred in approving the PAGA
settlement. See Baranowicz v. Comm’r of Internal Revenue,
432 F.3d 972, 976 (9th Cir. 2005). Two final observations
are warranted. First, Peck did not move to intervene in the
cases before us. See Fed. R. Civ. P. 24. Consequently, we
do not address whether he could have been permitted to
intervene, raise objections to the PAGA settlement, and then
pursue those objections on appeal. Cf. Uribe v. Crown Bldg.
Maint. Co., 285 Cal. Rptr. 3d 759, 770 (Cal. Ct. App. 2021),
as modified (Oct. 26, 2021). Second, we have occasionally
allowed a non-party to appeal when “exceptional
circumstances” warrant a departure from this general rule.
Volokh, 945 F.3d at 1241 (citation omitted). “We have
allowed such an appeal only when (1) the appellant, though
not a party, participated in the district court proceedings, and
(2) the equities of the case weigh in favor of hearing the
20 PECK V. SWIFT TRANSPORTATION
appeal.” Id. (quoting Hilao v. Estate of Marcos, 393 F.3d
987, 992 (9th Cir. 2004)); see, e.g., Citibank Int’l v. Collier-
Traino, Inc., 809 F.2d 1438, 1441 (9th Cir. 1987) (declining
to apply this exception because appellant’s “prejudgment
activity . . . was nonexistent”). Peck does not argue that this
exception applies here, and so we express no opinion on
whether a PAGA settlement objector could invoke it in an
appropriate appeal.
II. Correct Legal Standard for the Class Action
Settlement
“We review a district court’s approval of a class action
settlement for clear abuse of discretion. Such review is
extremely limited, and we will affirm if the district judge
applies the proper legal standard and his findings of fact are
not clearly erroneous.” In re Bluetooth Headset Prod. Liab.
Litig., 654 F.3d 935, 940 (9th Cir. 2011) (internal citation
and quotation marks omitted). However, “[a]pplying the
incorrect legal standard is an abuse of discretion.”
Manufactured Home Cmtys. Inc. v. City of San Jose,
420 F.3d 1022, 1037 (9th Cir. 2005); see also Campbell v.
Facebook, Inc., 951 F.3d 1106, 1121 (9th Cir. 2020) (“A
district court clearly abuses its discretion by either failing to
apply the correct legal standard or by making clearly
erroneous factual determinations.”).
To the district court, Mares objected to the size of
settlement for the class claims, believing that it was
inadequate. Mares does not renew his same objections on
appeal. Instead, he now argues that “the district court
erroneously applied a presumption of fairness.” Mares
contends that because the district court approved the
settlement before certifying a class, the court should have
applied a heightened standard of review, in line with our
decision in Roes, 1–2 v. SFBSC Mgmt., LLC, 944 F.3d 1035PECK V. SWIFT TRANSPORTATION 21
(9th Cir. 2019). Mares additionally highlights what he
believes are six signs of self-interest on the part of Plaintiffs
and Swift.
A. Waiver
Swift first argues that we cannot reach the merits of
Mares’s objection because he did not raise such an objection
in the district court. Generally, an objector to a class action
settlement must raise an issue before the district court if he
or she wishes to preserve it for appeal. See Devlin, 536 U.S.
at 9. However, “[s]uch waiver is a discretionary, not
jurisdictional, determination. We may consider issues not
presented to the district court, although we are not required
to do so.” In re Mercury Interactive Corp. Sec. Litig.,
618 F.3d 988, 992 (9th Cir. 2010) (internal citation omitted).
Mares concedes that he did not raise this particular
objection to the district court, but he argues that “he could
not pre-object” to the district court employing the incorrect
legal standard. In other words, Mares believes that an
objector cannot waive an objection to the district court’s
application of an incorrect legal standard. For support,
Mares highlights the following passage from the Newberg
treatise on class actions:
The sole exception to the requirement that
only issues raised below may be appealed is
that issues that surface for the first time in the
court’s final order may be appealed even if
they were not the basis for an objection. For
example, if the trial court applied the wrong
legal standard in granting final approval or
made some other error that had not existed
prior to the objection deadline, the waiver
doctrine does not apply. Because the issue
22 PECK V. SWIFT TRANSPORTATION
was not available to be objected to until final
judgment, the parties and objectors did not
“waive” objections by not objecting prior to
that time.
4 Newberg on Class Actions § 14:18 (5th ed.).
We do not adopt this language verbatim. 7 However, we
agree that when “the district court considered [an] issue” in
its final order approving a class action settlement, the issue
is “not waived on appeal” even if no objector to the
settlement raised that issue to the district court. 8 JL
Beverage Co., LLC v. Jim Beam Brands Co., 828 F.3d 1098,
1108 (9th Cir. 2016) (citing Cmty. House, Inc. v. City of
Boise, 490 F.3d 1041, 1054 (9th Cir. 2007)); see also
Thompson v. Runnels, 705 F.3d 1089, 1098 (9th Cir. 2013)
(“[W]e have the authority to identify and apply the correct
legal standard, whether argued by the parties or not.”). In
other words, an objector need not be an oracle and predict
issues that will arise for the first time in the district court’s
final order.
7
Specifically, it is unclear that the Newberg treatise is correct in
referring to “issues that surface for the first time in the [district] court’s
final order” as the “sole exception” to ordinary waiver principles in this
context. Id. Our cases suggest other exceptions may exist. See, e.g.,
United States v. Northrop Corp., 59 F.3d 953, 957 n.2 (9th Cir. 1995)
(“[E]ven if the precise issue we face has been raised for the first time on
appeal, the waiver rule is not one of jurisdiction, but discretion. We can
exercise that discretion to consider a purely legal question when the
record relevant to the matter is fully developed.” (citations omitted)).
8
For judicial efficiency, an objector might raise such an issue in a
motion pursuant to Federal Rules of Civil Procedure 59(e) or 60(b), but
such actions are not necessary to preserve the issue for appeal.
PECK V. SWIFT TRANSPORTATION 23
The district court’s order granting preliminary approval
to the settlement agreement noted that the negotiations were
conducted at “arms-length.” However, the district court did
not state in its preliminary approval order that it was
applying a presumption that the agreement was non-
collusive. The district court did use such language in its
order granting final approval. Because the district court did
not apply the presumption before its final order, Mares had
no reason to make the objection he now makes on appeal.
Therefore, Mares did not (and could not) waive his objection
to the legal standard employed by the district court in its final
order.
B. The District Court’s Legal Standard
In Roes, the district court approved a settlement “in the
absence of a certified class.” 944 F.3d at 1039. On appeal,
objectors to the settlement “contend[ed] that the district
court was required to, but did not, apply heightened scrutiny
of the settlement after being faced with several indicia of
collusion.” Id. at 1048. We held that “[w]here . . . the parties
negotiate a settlement agreement before the class has been
certified, settlement approval requires a higher standard of
fairness and a more probing inquiry than may normally be
required under Rule 23(e).” Id. (citation and internal
quotation marks omitted). We did not announce a new rule
in Roes, but rather reiterated a number of our previous
holdings. See Lane v. Facebook, Inc., 696 F.3d 811, 819
(9th Cir. 2012); Dennis v. Kellogg Co., 697 F.3d 858, 864
(9th Cir. 2012); Bluetooth, 654 F.3d at 946; Hanlon,
150 F.3d at 1026. In Roes, we noted that we had adopted
this rule “to ensure that class representatives and their
counsel do not secure a disproportionate benefit at the
expense of the unnamed plaintiffs who class counsel had a
24 PECK V. SWIFT TRANSPORTATION
duty to represent.” Roes, 944 F.3d at 1049 (quoting Lane,
696 F.3d at 819) (some internal quotation marks omitted).
We specifically critiqued the language employed by the
district court in Roes:
Nowhere in the final approval order,
however, did the district court cite or
otherwise acknowledge our longstanding
precedent requiring a heightened fairness
inquiry prior to class certification. To the
contrary, the district court declared that,
“[w]here a settlement is the product of arms-
length negotiations conducted by capable and
experienced counsel, the court begins its
analysis with a presumption that the
settlement is fair and reasonable.” (Emphasis
added.) But such a presumption of fairness is
not supported by our precedent, and the
district court cites no Ninth Circuit case
which adopted this standard. Particularly in
light of the fact that we not only have never
endorsed applying a broad presumption of
fairness, but have actually required that
courts do the opposite—by employing extra
caution and more rigorous scrutiny—when it
comes to settlements negotiated prior to class
certification, the district court’s declaration
that a presumption of fairness applied was
erroneous, a misstatement of the applicable
legal standard which governs analysis of the
fairness of the settlement.
Id. at 1048. Because the Roes district court both “misstate[d]
the legal standard” and “failed to apply the correct legal
PECK V. SWIFT TRANSPORTATION 25
standard and to conduct the searching inquiry required,”
based on the record, we concluded that the district court
abused its discretion. Id. 9 We then vacated the district
court’s approval of the settlement and “le[ft] the final
fairness determination to the district court after an
opportunity to apply the appropriate heightened review and
further develop the record.” Id. at 1050.
The district court here stated:
As previously found by this Court, the parties
engaged in arm’s-length, serious, informed,
and non-collusive negotiations between
experienced and knowledgeable counsel.
Additionally, the Settlement Agreement was
reached after mediation with a neutral
mediator, Mark Rudy. The Settlement
Agreement is therefore presumptively the
product of a non-collusive, arms-length
negotiation. See Roe v. SFBSC Management,
LLC, No. 14-cv-03616-LB, 2017 WL
4073809, at *9 (N.D. Cal. Sept. 14, 2017)
(holding that a settlement that is the product
of an arm’s-length negotiation “conducted by
capable and experienced counsel” is
presumed to be fair and reasonable) . . . .
(Some citations omitted.) The district court not only applied
the same presumption that we reversed in Roes, but it
9
In Roes, we also “identif[ied] several aspects of the settlement that
in our view cast serious doubt on whether the settlements me[t] the
applicable fairness standard.” 944 F.3d at 1050. Those possible signs
of unfairness added support to our decision to vacate approval of the
district court’s settlement, but application of an incorrect legal standard
alone constitutes an abuse of discretion. See Campbell, 951 F.3d at 1121.
26 PECK V. SWIFT TRANSPORTATION
actually cited the very language from the district court’s
order in Roes that we criticized. Having had not only the
benefit of our decision in Roes, but also the cases preceding
it applying the heightened standard, the district court should
not have applied that presumption.
Swift and Plaintiffs attempt to distinguish the district
court’s order from our decision in Roes in a number of ways.
First, Swift argues that Roes applies only to cases where a
party never sought class certification. According to Swift,
because “Saucillo moved for certification of a litigation class
. . . , which the district court denied,” the heightened legal
standard does not apply. This argument is plainly at odds
with our decision in Roes. We apply the heightened standard
“in the absence of a certified class,” not in the absence of a
motion for class certification. Roes, 944 F.3d at 1039; see
also id. at 1048 (applying the heightened standard “before
the class has been certified”); Lane, 696 F.3d at 819
(applying the heightened standard “when . . . the settlement
takes place before formal class certification”). Saucillo’s
unsuccessful motion for class certification meant there was
an “absence of a certified class” and that the district court
approved the settlement “before the class ha[d] been
certified.” Roes, 944 F.3d at 1039, 1048.
Next, Swift argues that the district court “held only that”
the presumption of fairness “was a factor that weighs in favor
of approval.” Swift is correct that the district court noted
that the presumption was a “factor” that “weighs in favor of
approval.” The district court then applied the Hanlon
factors. However, the district court in Roes did the same
thing, only for us to reverse. The Roes district court stated
that it “be[gan] its analysis with a presumption that the
settlement is fair and reasonable.” Roe, 2017 WL 4073809,
at *9 (citation and internal quotation marks omitted). The
PECK V. SWIFT TRANSPORTATION 27
Roes district court then evaluated the settlement pursuant to
the Hanlon factors. See id. at *9–11. Despite the district
court in Roes only “begin[ning] its analysis with [the]
presumption,” id. at *9, we reversed because “the district
court’s declaration that a presumption of fairness applied
was erroneous, a misstatement of the applicable legal
standard which governs analysis of the fairness of the
settlement,” Roes, 944 F.3d at 1049. The district court here
did the same.
Plaintiffs also argue that we should ignore the district
court’s error, citing our decision in Campbell, 951 F.3d
1106, as authority for that proposition. There, we noted that
the district court erred in applying a single factor from the
three-factor list in Bluetooth that district courts should apply
when a settlement is approved prior to class certification.
See Campbell, 951 F.3d at 1125 (listing the Bluetooth
factors). We held that “any error in the district court’s
discussion of” one of the factors was “harmless” because
“[n]o one factor is dispositive.” Id. at 1127. Unlike in
Campbell, however, the district court here overlayed its
entire discussion of the settlement agreement with the
erroneous presumption. The district court never applied
Bluetooth because it did not utilize the heightened standard
for pre-class certification settlements. Although the district
court stated that the presumption was a “factor,” our
precedent is clear that district courts must apply a more
searching review for a pre-class certification settlement. See
Lane, 696 F.3d at 819.
Swift additionally tries to distinguish Roes by arguing
that the concerns underlying our decision are not present
here, where “the parties actively litigated for several years,
conducted comprehensive discovery, and contest
certification of a litigation class on the merits.” But the
28 PECK V. SWIFT TRANSPORTATION
procedural posture in Roes was similar. There, the plaintiffs
brought a putative class action in 2014, and the parties
actively litigated the case over a number of years, including
engaging in mediation and attempting to compel arbitration.
See Roes, 944 F.3d at 1039–40. We reversed despite this
litigation history, and we do the same here. Furthermore,
our holding in Roes announced a bright-line rule: district
courts must apply a more searching legal standard “[w]here
. . . the parties negotiate a settlement agreement before the
class has been certified.” Id. at 1048. We did not make any
exceptions based on how long the parties have been
litigating prior to approval of the settlement.
Finally, Swift and Plaintiffs ask us to affirm the district
court’s approval of the settlement despite application of an
erroneous legal standard. We generally do not employ “a
harmless error standard for class action settlement review.”
In re Volkswagen “Clean Diesel” Mktg., Sales Practices, &
Prod. Liab. Litig., 895 F.3d 597, 613 (9th Cir. 2018); but see
Campbell, 951 F.3d at 1127. However, we have affirmed a
district court’s approval of a settlement, despite that court
making an error. For example, in Volkswagen, we assumed
that the district court failed to respond to a non-frivolous
objection, which the district court was required to do. See
id. at 612–13. Nevertheless, we affirmed the district court
because “the objector’s complaint appear[ed] to be purely
technical—it dr[ew] no link between the district court’s
supposed oversight and any substantive deficiency in the
settlement.” Id. at 613.
Failure to respond to a “purely technical” objection, id.,
is not analogous to employing an incorrect legal standard.
The district court here began its analysis by applying the
presumption that the settlement was “the product of a non-
collusive, arms-length negotiation.” Applying that
PECK V. SWIFT TRANSPORTATION 29
erroneous presumption cast a shadow on the entirety of the
district court’s order. The “district court’s . . . oversight,”
id., is at the very heart of Mares’s objection on appeal.
“[W]hen a district court’s findings are based upon an
incorrect legal standard, the appropriate remedy is to remand
so that findings can be made in accordance with the
applicable legal standard.” Jeldness v. Pearce, 30 F.3d
1220, 1231 (9th Cir. 1994). That is because “factfinding is
the basic responsibility of district courts, rather than
appellate courts.” Pullman-Standard v. Swint, 456 U.S. 273,
291 (1982). We offer no opinion as to whether there is merit
to Mares’s allegations. On remand, the district might decide
to once again approve the settlement pursuant to the correct
legal standard, or it might not. We, however, cannot review
the settlement in the first instance under the appropriate legal
standard.
CONCLUSION
We dismiss Peck’s appeal of the district court’s approval
of the PAGA settlement because we conclude that his appeal
is not properly before us. However, because the district
court abused its discretion by employing an erroneous legal
standard, we vacate its approval of the class-action
settlement and remand for further proceedings consistent
with this opinion. See McKinney-Drobnis v. Oreshack,
16 F.4th 594, 612 (9th Cir. 2021). 10
10
We have sometimes “reversed” settlement approval when the
district court used the wrong legal standard, see Nachshin v. AOL, LLC,
663 F.3d 1034, 1042 (9th Cir. 2011), but “vacate” seems the more
appropriate term here. It is not always clear when we should “vacate”
rather than “reverse.” Cf. SCOTUS Style Manual on Difference Between
“Reverse” and “Vacate,” Josh Blackman Blog (Mar. 28, 2016),
30 PECK V. SWIFT TRANSPORTATION
DISMISSED IN PART, VACATED AND
REMANDED IN PART.
https://joshblackman.com/blog/2016/03/28/scotus-style-manual-on-diff
erence-between-reverse-and-vacate/ (positing, “Reverse is when things
are really, really wrong. Vacate is when it is somewhat wrong.”).
Terminology aside, the point is that the district court must apply the
correct legal standard on remand in determining whether the parties’
settlement should be approved.