Case: Kullar v. Foot Locker Retail Inc., Case No. A119697 (Cal. Ct. App. 11/7/08)

The One Sentence Summary: Approval of a $2 million settlement in a wage-and-hour class action against a retailer was vacated because the trial court failed to independently analyze the evidence and circumstances surrounding the settlement.

What They Were Fighting About: Defendant Foot Locker agreed to settle this class action, which alleged various failures to properly compensate employees for their labor and expenses, for a total of $2 million. A member of the class filed a written objection to the settlement and requested discovery, arguing that the settlement was not fair and class counsel had not completed sufficient discovery to determine the extent of the class loss. At the hearing for final approval, the settling parties argued that information supporting the settlement had been exchanged at the mediation that resulted in the settlement, but that none of the information could be provided to the trial court due to the privilege accorded mediation discussions. The trial court concluded that it could not compel the parties to turn over documents exchanged at the mediation, and approved the settlement on the basis that “circumstantial evidence” indicated it was fair.

Upon the objector’s appeal, the appellate court vacated and remanded for further proceedings. The court held the trial court was required to independently analyze the evidence and circumstances to determine whether the settlement was in the best interests of the class. Although the trial court was not required to attempt to decide the merits of the case, it must at least satisfy itself that the class settlement is within “the ‘ballpark’ of reasonableness.” Accordingly, the trial court was required to examine the relevant data. If certain data were privileged, the parties could be required to provide the trial court with other data that would enable the court to make an independent assessment of the adequacy of the settlement terms. The appellate court further held that the objector should be permitted to renew its discovery requests, within limits.