114 | 2023 Cal-Peculiarities ©2023 Seyfarth Shaw LLP www.seyfarth.com 5.12.5 Windfall fees for plaintiffs’ attorneys in class action settlements Federal courts, to protect the interests of unnamed class members, often restrict plaintiff’s attorney fees to a maximum of 25% of the common-fund settlement, absent “special circumstances.”339 In California it’s different. The California Supreme Court—approving attorney fees amounting to a full one-third of the common fund—has held that an attorney fee is not unreasonable merely because it is a fixed percentage of the common fund.340 In the wage and hour case in question, the plaintiffs’ attorneys estimated that their lodestar (hours worked times hourly billing rate) were about $3 million, but successfully claimed fees in excess of $6 million (one-third of a $19 million gross settlement).341 5.13 Unfair Competition Claims 5.13.1 The Unfair Competition Law (UCL) California’s vaguely worded UCL permits lawsuits for any “unlawful, unfair or fraudulent business practice.”342 Wage and hour plaintiffs often add a UCL claim to obtain a four-year statute of limitations instead of the threeyear statute that applies to Labor Code claims generally. The UCL authorizes only limited remedies: it does not permit damage awards or a remedy of nonrestitutionary disgorgement (e.g., return of profits that an employer has realized through Labor Code violations).343 Nor does the UCL authorize recovery of penalties due for untimely payment of termination wages.344 The UCL does authorize injunctive relief and any order “necessary to restore to any person in interest any money or property which may have been acquired by means of such unfair competition.”345 The California Supreme Court thus held that an action seeking restitution for unpaid overtime wages could proceed as a representative action under the UCL, and that UCL’s four-year limitations period applied even though the underlying wage claim was governed by a three-year statute.346 Plaintiffs have used the UCL to circumvent a defendant employer’s right to jury trial. The Court of Appeal has upheld a trial court’s decision to have a wage and hour claim tried to the court, without a jury, over the defendant’s objection, on the basis that the UCL claim encompassed the traditional wage and hour claims and that the UCL claim is one for equitable relief, for which no jury trial is available. The Supreme Court decided to review this decision (on other grounds), making it unfit to cite as precedential authority.347 Historically, a UCL action also permitted the plaintiff to seek restitution on a class-wide basis without satisfying the usual requirements of class certification.348 This rule was amended by Proposition 64, however, discussed below. 5.13.2 Proposition 64 Proposition 64, enacted by a vote of the People of California in November 2004, reformed the UCL by requiring that a private UCL plaintiff must have suffered an “injury in fact” and have lost “money or property” as a result of the challenged business practice, and by requiring that UCL plaintiffs suing on behalf of others must satisfy the requirements for a class action.349 5.14 The Wage and Hour Class Action Explosion 5.14.1 California peculiarities favoring wage and hour class actions The number of class action lawsuits alleging California Labor Code violations has continued to rise. While just 29 were filed in 2000, 120 were filed in 2005,350 and they have continued to rise in frequency since, with hundreds pending every year. Moreover, PAGA actions have also become prolific, and PAGA claims are regularly included in class action lawsuits. The following factors make class actions particularly attractive to California wage and hour plaintiffs:
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