Labor & Employment Law Daily Wrap Up, WAGE-HOUR—SETTLEMENTS—C.D. Cal.: Employer barred from making misleading written communications to class members in wage dispute, (Jan 3, 2025)

By Ronald Miller, J.D.

The court observed that courts may limit communications with potential class members, but only through narrowly drawn orders based on specific findings of fact.

A federal district court in California granted employees of a logistics company their ex parte application for a temporary restraining order in part, prohibiting their employer from offering written settlement offers to individual employees without clarifications as outlined by the court. Although there was insufficient grounds to order the employer to cease communications with potential class members or to require all future communications be pre-approved by the court, the court found sufficient grounds to order the employer to cease all misleading written communications with potential class members, as well as to correct prior misleading written communications (Hamilton v. Knight Transportation, Inc. dba Arizona Knight Transportation Inc., No. 5:21-cv-01859-MEMF-SP (C.D. Cal. Jan 2, 2025)).

On November 2, 2021, the named plaintiff filed a class action complaint against the employer. He has since been joined by four other employees. The employees alleged that the employer engaged in various wage and hour violations.

In an action distinct from this one, Martinez v. Knight Transportation, Inc., two other employees filed a class action also asserting various wage and hour violations. The parties in that action reached a settlement on July 20, 2023. The court preliminarily approved the class settlement on December 5, 2023.

While final approval of the settlement in the Martinez action was pending, the plaintiffs in this action became aware of the Martinez settlement and objected to it. The court stayed this action pending the determination of whether to approve the final settlement in Martinez. On June 11, 2024, the court issued an order denying final approval of the Martinez settlement.

Temporary Restraining Order. On July 11, 2024, the plaintiffs in this action filed their motion for class certification. The plaintiffs filed the instant Ex Parte Application for a Temporary Restraining Order (TRO) on September 18, 2024, which the employer opposed.

The plaintiffs based the Application on allegations the employer was inappropriately communicating with potential class members and seeking to settle individual claims. They requested (1) that the court order the employer to cease such communications and only allow further communications after approval by the court, and (2) that the court invalidate any settlements that came from such communications.

Misleading communications. In their Application, the plaintiffs asserted that after the court denied final approval of the Martinez settlement, the employer began communicating with potential class members, seeking to settle individual claims. First, the employer mailed letters to potential class members offering to settle the individual recipients’ claims. Potential class members were offered between $75 and $250 to settle their claims. According to the plaintiffs, the letters were misleading in multiple respects. They did not state that the court had denied final approval of the Martinez settlement. Moreover, the individual offers were significantly less than the not-approved Martinez settlement would have been. Further, the letters did not include any other information that a recipient would need to evaluate the value of their individual claims.

Second, the plaintiffs asserted that the employer had inappropriate in-person conversations encouraging individual potential class members to settle. During a meeting conducted by a facility manager, the manager purportedly handed out copies of settlement offers and release forms.

Improper communications. The plaintiffs argued that the letters and the in-person communications were not only misleading but were improper communications with represented parties. Additionally, the plaintiffs claimed that a similar misleading conversation occurred with a potential class member at another facility on September 20, 2024.

Limitation on communications. In Gulf Oil Co. v. Bernard, 452 U.S. 89, 99–104 (1981), the Supreme Court held that a court may limit communications pursuant to its Rule 23(d) powers, but that an order limiting communications with class members must be narrowly drawn in response to specific findings. The Supreme Court explained that such orders can cause problems and inappropriately limit parties’ rights to communicate about the litigation.

There is a broad consensus among district courts interpreting Gulf Oil and Rule 23(d) that a court may “take action to cure inaccurate, confusing or misleading communications” from parties to potential or actual class members, as such communications “pose a threat to the fairness of the litigation process, the adequacy of representation and the administration of justice.”

Here, the court found that the letters distributed by the employer were, at the very least, confusing, if not inaccurate or misleading. The court held that communications can only justify an injunction if they meet a definition based on the guidance by the Supreme Court in Gulf Oil. The letters met this threshold as they had the potential for confusion in light of a prior Class Notice already distributed.

Confusion. The court found that the original Class Notice informed potential class members that there had been a settlement in the Martinez action and that class members would be part of the settlement if approved unless they affirmatively opted out. Because the employer sent the letters to potential class members, the letters were confusing in light of the prior Class Notice. Specifically, the letter gave the impression that the “settlement” it discussed was the same “settlement” that was preliminarily approved by the court in the Class Notice.

Where, as here, a court-approved notice has already gone out describing a preliminarily approved settlement and next steps in detail, a further communication that refers to a “settlement” without distinguishing the prior “settlement” that had been “reached” and “preliminarily approved” is confusing. Accordingly, the court concluded that the confusing nature of the written communications justified a limited injunction.

Limited injunction. In granting the employees’ Application in part, the court found that the record did not provide sufficient grounds for it to order the employer to cease communications with potential class members or to require all future communications be pre-approved by the court. However, it did find that the record provided sufficient grounds for it to order the employer to cease all misleading written communications with potential class members as well as to correct prior misleading written communications.

The case is No. 5:21-cv-01859-MEMF-SP.

Judge: Frimpong, M.

Attorneys: Reuben D. Nathan (Nathan and Associates) for Bennie Hamilton. John D. Ellis (Sheppard Mullin Richter and Hampton) for Kold Trans, LLC. Babak G. Yousefzadeh (Sheppard Mullin Richter and Hampton) for Knight Port Services, LLC.

Companies: Knight Transportation, Inc.; Arizona Knight Transportation Inc.; Kold Trans, LLC; Knight Port Services, LLC

Cases: WageHour ClassActions RemediesDamages CaliforniaNews