Edwards v. Heartland Payment Systems, Inc. ( 2018 )

Filed 11/130/18
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
ROBIN EDWARDS et al., B284000
Plaintiffs and Respondents, (Los Angeles County
Super. Ct. No. BC606083)
v.
HEARTLAND PAYMENT
SYSTEMS, INC.,
Defendant and Respondent.
JAIME TORRES et al.,
Interveners and Appellants.
APPEAL from an order of the Superior Court of Los
Angeles County. Maren E. Nelson, Judge. Affirmed.
Shanberg, Stafford & Bartz, Ross E. Shanberg and Aaron
A. Bartz for Interveners and Appellants.
Lawyers for Justice, Edwin Aiwazian, Arby Aiwazian, and
Joanna Ghosh for Platintiffs and Respondents.
Fisher & Phillips, Todd B. Scherwin, Wendy McGuire Coats
and Shaun J. Voigt for Defendant and Respondent.
_____________________________
Employee Robin Edwards filed a putative class action
lawsuit against employer Heartland Payment Systems, Inc.
(Heartland) for myriad wage and hour violations. Employees
Jaime Torres and Jorge Martinez filed a separate, later putative
class action lawsuit against Heartland for similar wage and hour
violations. After Edwards entered into a proposed class action
settlement with Heartland and amended her complaint to
encompass the claims asserted by Torres and Martinez, Torres
and Martinez filed a motion to intervene in Edwards’ lawsuit.
The trial court denied the motion, and Torres and Martinez
appealed the court’s order. We affirm.
BACKGROUND
1. Three Lawsuits Are Filed Against Heartland
Heartland provides electronic processing services in
California and employs sales-based employees to secure clients
for those services. It was sued in three separate class action
lawsuits for alleged wage and hour violations—Edwards v.
Heartland Payment Systems, Inc. (Super Ct. L.A. County, 2016,
No. BC606083) (Edwards), Wilson v. Heartland Payment
Systems, Inc. (Super Ct. L.A. County, 2016, No. PC056816)
(Wilson); and Torres v. Heartland Payment Systems, Inc. (Super
Ct. Orange County, 2016, No. 30–2016–00838951–CU–OE–CXC)
(Torres). The timing of the filing of the original and amended
complaints in these lawsuits is important, so we set it out in
some detail.
The original complaints in Edwards (the case before us)
and Wilson were filed on the same day—January 5, 2016.
Edwards alleged the plaintiff Robin Edwards was a “California-
based Relationship Manager.” It identified the putative class as
“California-based Relationship Managers” who worked for
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Heartland within the prior four years, including two sub-classes
of Relationship Managers who were not paid minimum wage for
participating in new hire orientation and mandatory training
sessions, and Relationship Managers who were not reimbursed
for business expenses. The complaint alleged a host of violations
of the Labor Code and Industrial Welfare Commission Wage
Orders. Specifically, it asserted claims for failure to pay
minimum wage, to pay wages upon termination, to provide
accurate wage statements, and to reimburse employee expenses,
as well as violations of Business and Professions Code section
17200, et seq.
Wilson was a representative suit asserting a claim under
the Private Attorneys General Act (PAGA) for similar wage and
hour violations.
A first amended complaint was filed in Edwards on
January 14, 2016. It was substantially similar to the original
complaint, although it added the “Jump Start Program” alongside
new hire orientation and mandatory training as categories of
work for which California-based Relationship Managers were not
paid minimum wage.
A first amended complaint was filed in Wilson on February
29, 2016, adding claims for failure to pay wages, to provide meal
and rest breaks, to reimburse business expenses, to provide
itemized wage statements, and to pay termination wages, as well
as violations of Business and Professions Code section 17200,
et seq. The class was defined as all “commission-based
employees” employed by Heartland during the prior four years.
The complaint in Torres was filed on March 4, 2016, after
the other two cases were filed. Plaintiff Jaime Torres was a
“Sales Manager” and plaintiff Jorge Martinez was a
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“Relationship Manager” for Heartland. The complaint identified
classes of individuals “(1) Heartland has classified as temporary
employees and/or trainees in a ‘Jump Start’ program and who
failed to receive proper wages during the Jump Start program
(‘Trainees’); and/or (2) Heartland’s sales-based employees,
including those holding the title of Relationship Manager, Sales
Manager, and similar job titles, who have not received full
reimbursement for all expenses necessarily incurred in
discharging their sales-related duties for Heartland, pursuant to
Heartland’s policies, practices and procedures (‘Salespersons’).”
The basic claims were the same as in Edwards, albeit adding
factual detail and adding claims for failure to pay wages and to
pay overtime compensation.
A first amended complaint was filed in Torres on April 11,
2016, adding a PAGA claim.
A second amended complaint was filed in Torres on August
2, 2016, adding more factual detail to the claims already pled and
adding claims for illegal deductions from wages, injunctive relief,
and accounting. The job title of “Division Manager” was added as
part of the sales-based employees sub-class. Factual detail was
also added for the alleged illegal deductions and failure to
reimburse business expenses based on several alleged Heartland
policies and practices, which were not expressly identified in the
Edwards or Wilson complaints.
2. The Parties Settle Edwards After Mediation;
The Edwards Complaint is Amended
Prior to mediation, Edwards had served discovery on
Heartland, and it is not clear whether Heartland responded.
The parties in all the cases agreed to stay discovery and
participate in mediation. The mediation was conducted on
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November 1, 2016, and plaintiffs’ counsel from all three cases
was present. Counsel in Torres claimed that counsel in Edwards
refused to speak with him or with counsel in Wilson during the
mediation. The plaintiffs in Edwards and Heartland reached a
settlement in principle and executed a memorandum of
understanding.
After the preliminary settlement was reached, Edwards
propounded additional “confirmatory discovery” on Heartland.
Heartland provided “formal and informal responses” to those
requests.
The complaint in Edwards was then amended twice after
the settlement but before the Torres plaintiffs moved to
intervene. Filed on March 14, 2017, the third amended
complaint was the operative complaint when the Torres plaintiffs
filed their motion. It basically brought the Edwards case in line
with the allegations in Wilson and Torres. Suzanne Armstrong
was named as a second plaintiff as a “sales-based employee” of
Heartland. The proposed class was defined as all current and
former sales-based employees, including those holding the
positions of “Relationship Manager, Territory Manager, Sales
Manager, Division Manager, and/or similar job titles,” for the
prior four years. Claims were added for meal and rest period
violations, unlawful wage deductions, injunctive relief,
declaratory relief, an accounting, and a violation of PAGA.
And factual allegations were added to support the unreimbursed
business expenses claim, identifying several of the alleged
Heartland policies and practices mentioned in the Torres
complaint.
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3. The Trial Court Denies the Torres Plaintiffs’
Motion to Intervene in Edwards
On April 27, 2017, the Torres plaintiffs filed their motion
to intervene in Edwards. They argued for both mandatory and
permissive intervention pursuant to Code of Civil Procedure
section 387, subdivisions (a) and (b).
Several days later on May 5, 2017, plaintiff’s counsel in
Edwards moved for preliminary approval of the settlement.
The filing disclosed a proposed total settlement amount of
$650,000 and a putative class of 581 members. Heartland’s
counsel later updated the number of proposed class members to
773. The Torres plaintiffs filed an opposition to the motion for
preliminary approval of the settlement.
The trial court denied the Torres plaintiffs’ motion to
intervene on May 24, 2017.1 The court denied mandatory
intervention because the Torres plaintiffs could “opt-out of or
object to the settlement,” and it noted that they had already
objected. Further, at the time of approval of the settlement, the
court would “undertake its duties as a fiduciary to evaluate the
fairness of the Edwards settlement, which includes whether the
settlement was reached through arm’s length bargaining and
whether there was sufficient investigation and discovery to allow
counsel and the Court to act intelligently. . . . Procedural
mechanisms are in place to safeguard the interest of putative
1 The court sustained Heartland’s objections to portions of a
declaration from Torres’s counsel and attached exhibits. Torres
has not addressed those rulings on appeal, so any challenge has
been forfeited. (Salas v. Department of Transportation (2011)
198 Cal. App. 4th 1058, 1074.) We thus limit our analysis to the
evidence admitted.
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class members and concerns by [the Torres plaintiffs] can be
raised at the time of preliminary and final approval.”
The court denied permissive intervention because “[a]t this
stage of the proceeding, the settlement has not been approved by
the Court and thus [the Torres plaintiffs’] rights have not been
detracted. Furthermore, if the settlement is approved, they will
have the opportunity to challenge the release in the Edwards
settlement by objecting to the settlement or may opt out of the
settlement completely, such that their legal rights in the action
are not hindered.”
The Torres plaintiffs timely appealed the court’s order
denying intervention.
4. Trial Court Proceedings Continue Until We Issue a
Stay
While the Torres plaintiffs’ appeal was pending, the Torres
plaintiffs, the Edwards plaintiffs, and Heartland filed further
briefing on the preliminary approval of the settlement. As
pertinent here, the Torres plaintiffs briefed whether the claims in
Edwards were “typical of the class (notably Sales Managers)”;
whether the Edwards plaintiffs “suffer[ed] the kinds of damages
alleged in the 4th cause of action in the Second Amended
Complaint—unlawful deduction of wages, portfolio buyout,
grossing up”; and whether the Edwards plaintiffs were “Sales
Managers.” The Torres plaintiffs also briefed the extent of
discovery conducted after mediation on the “newly added causes
of action” and the reasonable estimate of recovery for each class
member, including the value of the unlawful wage deduction
cause of action.
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A fourth amended complaint was filed in Edwards on
March 2, 2018.2 It named two additional sales-based employees
as class representatives. Both worked as Relationship Managers
and Territory Managers, and one also held the position of
Division Manager. The gross settlement amount was also
increased to $775,000.
We thereafter stayed the trial court proceedings in order to
consider the Torres plaintiffs’ appeal.
DISCUSSION
The Torres plaintiffs contend the trial court erred in
denying both mandatory and permissive intervention pursuant to
Code of Civil Procedure section 387.3 We find no error under
either provision.
I. The Torres Plaintiffs Were Not Entitled to
Mandatory Intervention
Mandatory intervention is governed by section 387,
subdivision (b), which provides in relevant part, “[I]f the person
seeking intervention claims an interest relating to the property
or transaction which is the subject of the action and that person
2 We grant Heartland’s unopposed request for judicial notice
of the fourth amended complaint in Edwards. (Evid. Code, § 452,
subd. (d).)
3 Code of Civil Procedure section 387 was amended effective
January 1, 2018. (Stats. 2017, ch. 131, § 1.) The subdivisions
were reorganized but the substantive requirements for
intervention did not change. The parties cite the previous
version of the statute in effect at the time the court denied the
Torres plaintiffs’ motion to intervene, and we will do the same.
All undesignated statutory references are to the Code of Civil
Procedure.
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is so situated that the disposition of the action may as a practical
matter impair or impede that person’s ability to protect that
interest, unless that person’s interest is adequately represented
by existing parties, the court shall, upon timely application,
permit that person to intervene.”
Stated differently, to establish mandatory intervention,
a proposed intervener must show (1) “ ‘an interest relating to the
property [or] transaction which is the subject of the action’ ”;
(2) the party is “ ‘so situated that the disposition of the action
may as a practical matter impair or impede that person’s ability
to protect that interest’ ”; and (3) the party is not adequately
represented by existing parties. (Siena Court Homeowners Assn.
v. Green Valley Corp. (2008) 164 Cal. App. 4th 1416, 1423–1424
(Siena Court).)4 In assessing these requirements, we may take
guidance from federal law. Since “[s]ubdivision (b) of . . . section
387 is in substance an exact counterpart to rule 24(a) of the
Federal Rules of Civil Procedure,” we assume “ ‘ “the Legislature
must have intended that they should have the same meaning,
force and effect as have been given the federal rules by the
federal courts [citations].” ’ ” (See Hodge v. Kirkpatrick
Development, Inc. (2005) 130 Cal. App. 4th 540, 556 (Hodge).)
California cases are not settled on whether we review the
denial of a request for mandatory intervention pursuant to
section 387 de novo or for abuse of discretion. (See Siena Court,
supra, 164 Cal.App.4th at p. 1425 [citing cases].) Federal courts
4 For both mandatory and permissive intervention, the
request to intervene must be made “upon timely application.”
(§ 387, subds. (a)–(b).) The trial court found the Torres plaintiffs’
motion timely, and respondents do not dispute that finding on
appeal.
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review de novo the denial of a motion for mandatory intervention
under Federal Rule of Civil Procedure 24(a)(2). (Smith v. Marsh
(9th Cir. 1999) 194 F.3d 1045, 1049.) We need not decide which
standard is correct under state law because we find no error in
denying mandatory intervention under any standard.
The trial court did not expressly analyze the “interest”
requirement, but it noted that the Torres plaintiffs “argue they
have an interest in preserving their claims and rights.”
Respondents do not genuinely dispute this issue on appeal, and
the Torres plaintiffs seem to accept the trial court’s
characterization. We agree that the Torres plaintiffs have an
interest in preserving their claims encompassed by the Edwards
complaint and settlement.5
The trial court found the Torres plaintiffs’ ability to protect
their interest would not be practically impaired or impeded by
the settlement in Edwards because they could opt out of or object
to the settlement. On this record, that conclusion was manifestly
correct. Despite all of the Torres plaintiffs’ various arguments,
they truly only seek one goal—to challenge the adequacy of the
settlement in Edwards. If they are unhappy with the settlement,
they can opt out and fully preserve their causes of action.
(Villacres v. ABM Industries Inc. (2010) 189 Cal. App. 4th 562, 582
[class member may opt out of settlement and “preserve[] his right
5 The Torres plaintiffs also suggest in passing that they have
an interest in the “procedural vehicle of a class action,” quoting
Koike v. Starbucks Corp. (N.D. Cal. 2009) 602 F. Supp. 2d 1158,
1161. They cite no California case supporting the view that an
unnamed class member’s preference in pursuing a class action is
an “interest relating to the property or transaction which is the
subject of the action” under section 387, subdivision (b). Given
the inadequate briefing on the issue, we reject their suggestion.
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to bring an independent action”].) If they do not want to opt out,
they may object to the class settlement and point out why they
believe it is unfair or inadequate. Indeed, as noted above, they
have already filed extensive objections to the settlement both
before they sought to intervene and after the court denied their
motion. With these available options, formal intervention is
unnecessary.
Presuming they remain members of the class, the Torres
plaintiffs will receive additional protection from the trial court
itself, which must approve any settlement in order to prevent
fraud, collusion or unfairness to the class. (Luckey v. Superior
Court (2014) 228 Cal. App. 4th 81, 93.) “Ultimately, ‘ “in the final
analysis it is the court that bears the responsibility to ensure
that the recovery represents a reasonable compromise, given the
magnitude and apparent merit of the claims being released,
discounted by the risks and expenses of attempting to establish
and collect on those claims by pursuing the litigation. ‘The court
has a fiduciary responsibility as guardians of the rights of the
absentee class members when deciding whether to approve a
settlement agreement.’ ” ’ ” (Id. at pp. 94–95.) In denying
intervention, the trial court here recognized this fiduciary duty to
evaluate the fairness of the settlement in Edwards.
The Torres plaintiffs argue the trial court applied the
“incorrect legal standard” when it focused on its fiduciary duties
to the class, rather than on the adequacy of the class
representatives themselves. (See § 387, subd. (b) [intervener’s
interest must be “adequately represented by existing parties”
(italics added)].) They also contend the availability of other
procedures should not factor into whether the class members can
adequately represent their interests. (See Hodge, supra, 130
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Cal.App.4th at p. 555 [“[T]he standard in deciding intervention is
whether existing parties adequately represent the intervener’s
interest in the filed lawsuit, not whether the intervener has a
remedy outside of intervention if the existing parties fail to
adequately represent the intervener’s rights.”].) While these
argument may be relevant to the separate question of adequate
representation, we see no reason why the court’s fiduciary duties
to review the settlement cannot reinforce the conclusion that the
Torres plaintiffs’ ability to protect their interests would not be
practically impaired or impeded by the settlement.
The Torres plaintiffs rely heavily on the California
Supreme Court’s recent decision in Hernandez v. Restoration
Hardware, Inc. (2018) 4 Cal.5th 260 (Hernandez) to argue that
they must intervene to become parties of record in order to
appeal any settlement. They read Hernandez too narrowly.
Hernandez held that an unnamed class member lacked
standing to appeal a judgment when the class member had
merely objected to the attorney’s fees portion of a class settlement
but had not become a party of record. The court reaffirmed the
longstanding rule that unnamed class members must be parties
of record to appeal, and it explained there are two ways to do so.
“First, they may file a timely complaint in intervention before
final judgment that sets forth the grounds upon which the
intervention rests. (§ 387.)” (Hernandez, supra, 4 Cal.5th at
p. 267.)6 “Second, although not a method of intervention, an
unnamed party to the action may also become a named party by
6 The Hernandez court also noted, “The fact that section 387
allows for a ‘timely’ application means that intervention after a
judgment is possible.” (Hernandez, supra, 4 Cal.5th at p. 267.)
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filing an appealable motion to set aside and vacate the class
judgment under section 663.” (Ibid.) Thus, under Hernandez,
the Torres plaintiffs may preserve their rights to appeal by filing
a section 663 motion. (See Hernandez, at p. 273 [“Had [the
unnamed class member] properly intervened in the class action
or filed a section 663 motion to vacate the judgment, and been
denied relief, she could have had a clear path to challenge the
attorney fees award (or settlement or judgment) on appeal.”
(Italics added.)].)
In their opening brief, the Torres plaintiffs did not address
this second option of filing a motion to vacate the judgment under
section 663, even though the court in Hernandez clearly identified
it as an alternative. They argue for the first time in their reply
brief that a motion to vacate the judgment pursuant to section
633 provides “inferior rights” in the trial court and on appeal
compared to becoming a party through intervention. By failing to
assert this argument in their opening brief, the Torres plaintiffs
waived the contention. (In re Marriage of Khera & Sameer (2012)
206 Cal. App. 4th 1467, 1477–1478.)
The Torres plaintiffs also rely on Smith v. SEECO, Inc. (8th
Cir. 2017) 865 F.3d 1021, which concluded that opting out of a
class action did not preclude a class member from intervening in
a class action to preserve an interest in adequate representation.
While we look to federal cases for guidance in interpreting section
387 (see, e.g., Hodge, supra, 130 Cal.App.4th at p. 556), we are
not persuaded by the court’s reasoning. Treating “adequate
representation” as a stand-alone “interest” conflates the interest
and inadequate representation requirements in section 387.
Looking to the language of section 387, if adequate
representation is an “interest relating to the property or
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transaction which is the subject of the action,” then a proposed
intervener would have to show this interest—that is, adequate
representation—is not “adequately represented by existing
parties.” (§ 387, subd. (b).) This circular reading of section 387
does not make sense. In any event, federal cases are not uniform
on the issue—others have denied intervention because a class
member could protect his or her interests by opting out of the
class action or objecting to a settlement. (See, e.g., Davis v. J.P.
Morgan Chase & Co. (W.D.N.Y. 2011) 775 F. Supp. 2d 601, 605–
606 [citing federal cases].)
The trial court did not separately analyze the final element
of inadequate representation, and we need not address it. The
Torres plaintiffs’ failure to show their own ability to protect their
interests would be practically impaired or impeded by the
settlement defeats mandatory intervention. (See Siena Court,
supra, 164 Cal.App.4th at p. 1426 [affirming denial of mandatory
intervention because proposed intervener did not show he needed
to intervene to protect interests].)
II. The Trial Court Did Not Abuse its Discretion in
Denying Permissive Intervention
Permissive intervention is governed by section 387,
subdivision (a), which states, “Upon timely application, any
person, who has an interest in the matter in litigation, or in the
success of either of the parties, or an interest against both, may
intervene in the action or proceeding.” Under this provision,
“ ‘the trial court has discretion to permit a nonparty to intervene
where the following factors are met: (1) the proper procedures
have been followed; (2) the nonparty has a direct and immediate
interest in the action; (3) the intervention will not enlarge the
issues in the litigation; and (4) the reasons for the intervention
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outweigh any opposition by the parties presently in the action.
[Citation.]’ ” (Siena Court, supra, 164 Cal.App.4th at p. 1428.)
We review the denial of permissive intervention for abuse of
discretion. (Ibid.; see City of Malibu v. California Coastal Com.
(2005) 128 Cal. App. 4th 897, 906.)
The trial court denied permissive intervention because the
settlement in Edwards had not yet been approved and the Torres
plaintiffs could object to or opt out of any settlement, so “their
legal rights in the action are not hindered.” It is not clear which
specific element of permissive intervention the trial court found
lacking. On appeal, we presume the judgment is correct, and if it
is correct on any theory, we will affirm regardless of the trial
court’s reasoning. (Cahill v. San Diego Gas & Electric Co. (2011)
194 Cal. App. 4th 939, 956.) Given our discussion above, the trial
court could have reasonably concluded that the Torres plaintiffs’
reasons for intervening in light of their right to opt out or object
to the settlement did not outweigh the objections by the other
parties.
On appeal, the Torres plaintiffs advance three interests
that they contend outweigh any objections to intervention, none
of which is persuasive. First, they contend they must intervene
to protect their appeal rights, relying on Hernandez. For reasons
already explained, their reading of Hernandez is not accurate.
Second, they contend the Edwards plaintiffs intend to
resolve their class claims from the Torres complaint without
named class members who held the roles of Division Manager
and sales manager. This argument is moot because the Edwards
complaint was amended to add class representatives who held
the roles of Relationship Manager, Territory Manager, and
Division Manager.
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Third, they contend they must intervene to conduct
discovery for the claims added to the Edwards complaint after
the parties attended the mediation and entered the proposed
settlement. They do not need to intervene to seek discovery;
as objectors, they may seek discovery to ensure sufficient
information has been provided to evaluate the fairness of the
settlement. (Kullar v. Foot Locker Retail, Inc. (2008) 168
Cal. App. 4th 116, 132–133 [objectors may not “frustrate the
mutual interest of the class members and the defendant to
resolve the litigation promptly by conducting extended or
unnecessary discovery,” but when “the settling parties provide
essentially no information to explain, much less to substantiate,
their evaluation of the magnitude or potential merit of the claims
being settled, objectors should not be denied access to data that
reasonably may be expected to shed light on these issues”].)
DISPOSITION
The order is affirmed. Respondents Edwards and
Heartland are awarded costs on appeal. The stay of proceedings
we previously imposed is lifted.
CERTIFIED FOR PUBLICATION
BIGELOW, P.J.
We concur:
GRIMES, J. DUNNING, J.*
* Judge of the Orange Superior Court, assigned by the Chief
Justice pursuant to article VI, section 6 of the California
Constitution.
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