A settlement in a long-standing case between a group of drivers and Swift Transportation, filed almost a dozen years ago, is getting sent back to the federal court that first approved the agreement in 2019.
While Swift — now part of Knight-Swift Transportation (NYSE: KNX) — was victorious in other parts of the decision handed by the U.S. Court of Appeals for the 9th Circuit, the core of the case, the settlement with the drivers, was put back into the hands of the U.S. District Court for the Central District of California.
The original litigation goes back to 2010, starting in a California court before being moved to the federal district court.
The settlement was reached in May 2019. It set up a payout of $7.25 million for the defendants in the certified class, roughly $2.4 million for attorney fees and $500,000 for a claim brought under the state’s Private Attorney General Act (PAGA), which allows private citizens to sue over charges that a company violated California’s Labor Code.
John Burnell, a driver with Swift, filed the original lawsuit that was ultimately declared a class action. Charges that Burnell made in the lawsuit involved allegations that Swift had not paid required minimum wages; had not fairly provided meal and rest periods; had not indemnified its drivers; and had not supplied drivers with itemized information regarding pay and wages.
Judge Virginia Phillips of the district court approved both the class certification and the settlement in August 2019.
But two other drivers, Lawrence Peck and Sadashiv Mares, filed objections to the settlement.
The appellate court overruled the objection of Peck, which focused on the PAGA part of the lawsuit settlement.
But Mares had objected to the timing of the settlement being approved before the case was certified as a class action. Because of that timing, Mares’ action said, “the court should have applied a heightened standard of review,” according to a summary of the action in the appellate court’s decision.
That ultimately was the reason the 9th Circuit put the original case back in the hands of the district court. “We agree with Mares that the district court abused its discretion by applying an incorrect legal standard when evaluating the settlement,” the court wrote.
Phillips, in handing down her decision at the district court level, said Swift and the class-action plaintiffs “engaged in arm’s-length, serious, informed and non-collusive negotiations between experienced and knowledgeable counsel. The Settlement Agreement is therefore presumptively the product of a non-collusive, arms-length negotiation.”
The appellate court’s decision focuses on language used by the lower court that the decision to grant class certification for the action against Swift is “fair and reasonable.” But the appellate court notes that legal precedents require such decisions to require “a heightened fairness inquiry prior to class certification,” more than just “fair and reasonable.”
“The district court’s declaration that a presumption of fairness applied was erroneous, a misstatement of the applicable legal standard which governs analysis of the fairness of the settlement,” the appellate court wrote. Citing precedents, the court said that district courts “must apply a more searching legal standard where the parties negotiate a settlement agreement before the class has been certified.” The timing of the settlement and the class certification were at the heart of Mares’ objection.
The appellate court noted that it was not offering an opinion on Mares’ argument against the settlement, which it said was focused on “the size of settlement for the class claims, believing that it was inadequate.” But the rest of the case is now headed back to the district court.
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