It Doesn’t Always Pay to Sue Your Employer
Employees often hear stories in the media about sensationalized settlements or judgments received by plaintiff-employees in employment cases. This publicity fuels more employment lawsuits by employees who feel “wronged” by their employers in some way. As California employers know, there is little disincentive for an employee to sue, because plaintiff-side lawyers represent them on a contingency fee basis and most claims are brought under statutes that allow an employee (but not an employer) who prevails to recover the attorneys’ fees incurred in the case. However, it is important for employees to recognize that an employer may refuse to settle and may win at trial. If the employer wins, the employer often has a statutory right to recover its costs of suit from the employee. Depending on the extent and type of litigation, the employer’s recoverable costs could be in the tens of thousands of dollars. In some instances, a prevailing employer also may recover its attorneys’ fees incurred to defend the unmeritorious case. CDF LLP is pleased to report one such successful result for its client, Opus Bank.
Sandra D’Amato Flores was a branch manager for Opus Bank who decided to jump on the bandwagon of employees suing their employers for often baseless wage and hour claims in California. As is common in these wage and hour cases, Flores alleged that she was misclassified as an exempt employee and denied overtime compensation as a result. She filed an individual lawsuit seeking unpaid wages from Opus. Then, she separately filed a putative class action lawsuit on behalf of all of Opus Bank’s branch managers in California, alleging that the entire class of employees was misclassified and denied overtime compensation. Flores’ counsel, the Brown Gitt Law Group, APC, eventually recognized that Flores had a conflict of interest in seeking to pursue her own individual lawsuit against the Bank while simultaneously seeking to represent a class of employees on similar claims in a separate case. As such, her attorneys proposed substituting in a different, former branch manager to represent the class. Unfortunately for Flores, the other former branch manager had signed a severance agreement releasing any and all claims, known or unknown, against Opus Bank in exchange for being provided severance benefits. As a result, he rather obviously had no standing to pursue any claims against Opus Bank, either on his own behalf or on behalf of a class of employees. However, Flores, through counsel, was unconvinced, and insisted on litigating the issue of whether the former branch manager’s severance agreement barred his claims. This was not the wisest of decisions, given that the severance agreement had a provision entitling the prevailing party in any action to enforce the severance agreement to recover its attorneys’ fees. Sure enough, the Los Angeles Superior Court agreed with Opus Bank that the severance agreement barred the former branch manager’s claims and awarded Opus Bank close to $55,000 in attorneys’ fees against the former branch manager and his attorneys, the Brown Gitt Law Group, APC. The former branch manager, apparently unhappy with this outcome, sued the Brown Gitt Law Group, APC for malpractice.
Meanwhile, Flores’ individual wage and hour claims went to trial, with CDF Partner Todd Wulffson and Senior Counsel Ashley Halberda presenting Opus’ defense that Flores was properly classified as an exempt employee, due to the fact that she earned a salary well above the minimum required for exempt status and easily spent the majority of her time on exempt duties. Indeed, Flores was responsible for managing a branch of the Bank (and at times, two branches), with ultimate supervisory responsibility over all branch employees and branch operations, and was responsible for representing Opus in the community and developing business for the Bank. Following the bench trial, Judge Wiley found in favor of Opus Bank and issued judgment (as well as an award of costs) in favor of Opus.
Not to be deterred, Flores appealed the judgment following the bench trial against her, and also appealed the order enforcing the other former branch manager’s severance agreement, as well as the order awarding Opus Bank its attorneys’ fees incurred in enforcing the agreement. CDF Partner Robin Largent led the defense of these appeals. Yesterday, the Court of Appeal issued its opinions in favor of Opus Bank on all three appeals. The Court held that the trial court’s judgment in favor of Opus Bank on Flores’ individual claims was supported by substantial evidence, and dismissed the other two appeals, agreeing with Opus that these appeals were procedurally defective because (1) Flores was attempting to appeal non-appealable, intermediate rulings of the trial court without any final judgment ever having been entered in the class action; (2) Flores did not have standing to appeal the order adjudicating her former colleague’s rights or awarding attorneys’ fees against him, and the former branch manager did not himself appeal these orders (no doubt because he did not want to risk being ordered to pay even more attorneys’ fees to Opus Bank for causing the Bank to incur fees to defend the appeals); and (3) Flores’ counsel did not file a valid notice of appeal on their own behalf in order to challenge the fee award issued jointly against them. As such, the order awarding Opus Bank its attorneys’ fees against the Brown Gitt Law Group, APC and Flores’ former branch manager colleague was upheld. Opus Bank was also awarded its costs on appeal from Flores.
The takeaway here is that, contrary to popular thought, it does not always pay to sue. In this case, the employee (and her counsel) have to pay. Let this be a word of caution to other employees out there to think twice before carelessly pursuing unmeritorious claims against their employer.