Can a $22,000 Wage-and-Hour Settlement Still Support a Large Attorneys’ Fee Award?
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In Alvarado v. Wal-Mart Associates, Inc., the Ninth Circuit addressed a question that shows up often in California wage-and-hour litigation: when a plaintiff settles individual claims for a relatively modest amount, can she still seek substantial attorneys’ fees for work that also touched related class or PAGA theories? The court held that a section 998 settlement agreement did not automatically bar recovery of fees for work on related claims if that work was intertwined with the individual claims. But the Ninth Circuit also made clear that fee awards cannot be “because vibes.” Trial courts must explain how they arrived at the number. Here, the Ninth Circuit vacated the fee award and sent the case back for a clearer explanation.
Case: Alvarado v. Wal-Mart Associates, Inc.
Court: United States Court of Appeals for the Ninth Circuit
Case No.: 23-3927
The Plaintiff: Alvarado v. Wal-Mart Associates, Inc.
The plaintiff is a former employee of a large retail company who worked for approximately six weeks at a California store. She alleged that during her employment she was denied meal and rest breaks, was not paid overtime, did not receive compliant wage statements, and was required to use her personal cell phone for work-related tasks without reimbursement. Based on those allegations, she filed a lawsuit asserting individual claims as well as putative class and PAGA claims for violations of California’s Labor Code.
Who Are the Defendants in the Case?
Wal-Mart Associates, Inc. is the defendant in the case.
Wal-Mart is a nationwide retailer with operations throughout California. In this lawsuit, the company was accused of wage-and-hour violations involving breaks, overtime, wage statements, and expense reimbursement policies and practices. The case also addresses how employers can structure settlements and litigation strategy when a case begins with class and PAGA theories but later proceeds primarily on an individual basis.
A Brief History of the Alvarado v. Wal-Mart Case
The plaintiff filed the action in state court, asserting individual, class, and PAGA claims. The company removed the case to federal court.
The United States District Court for the Central District of California dismissed several of the plaintiff’s class claims and denied class certification on the remaining class claim. After that, the plaintiff continued pursuing her individual claims and PAGA claims. Shortly before trial, the parties resolved the individual claims through a $22,000 settlement under California Code of Civil Procedure section 998. As part of the deal, the plaintiff dismissed her PAGA claims without prejudice and preserved her right to recover reasonable attorneys’ fees and costs related to her individual claims.
After the settlement, the district court awarded the plaintiff $297,799 in attorneys’ fees and $14,630 in costs. The record reflects that the plaintiff had already voluntarily reduced her fee request by nearly half, excluding time spent on class certification work and certain legal assistant time.
Wal-Mart appealed. The Ninth Circuit held the section 998 settlement did not automatically preclude a fee request for work on related claims, as long as the work was sufficiently intertwined with the individual claims under the framework courts use to evaluate fee requests in cases with mixed success. However, the Ninth Circuit vacated the fee award. It remanded the case because the district court did not provide a sufficiently clear explanation of how it arrived at the awarded amount.
The Main Question in the Case
When a plaintiff settles her individual wage-and-hour claims under section 998 and agrees to dismiss other claims (like PAGA) without prejudice, can she still recover attorneys’ fees for work that also related to other claims that were not ultimately litigated to judgment, so long as the work was intertwined with the individual claims? And what level of explanation must a district court provide when awarding attorneys’ fees?
The Allegations: Alvarado v. Wal-Mart Associates, Inc.
The case involved wage-and-hour allegations commonly seen in California employment litigation, including:
1. Meal and rest break violations
The plaintiff alleged she was denied the legally required meal and rest breaks during her employment.
2. Unpaid overtime
She alleged she worked overtime hours without receiving proper overtime compensation.
3. Wage statement violations
She alleged the wage statements she received did not comply with California Labor Code requirements.
4. Expense reimbursement for required cell phone use
She alleged the employer required her to use her personal cell phone for work-related purposes without reimbursing the related costs.
The appellate decision discussed in your summary focused less on whether those violations occurred and more on what fee recovery is permitted and how fee awards must be justified procedurally.
The Ninth Circuit’s Ruling: Fees May Be Recoverable, But the Court Must Explain Why
The Ninth Circuit addressed two key points.
1) The court held that the settlement agreement did not categorically bar attorneys’ fees for work on related claims under the standard used to evaluate fee requests in cases where a party achieved partial success. The key question is whether the work on related claims was intertwined with and contributed to the individual claims that were actually settled. If the claims share a common core of facts and legal work, time spent on related claims can still sometimes be compensable.
2) The court found that the district court abused its discretion by failing to offer a clear explanation. Even if a fee award is legally permitted, the judge still has to show the math and reasoning. The Ninth Circuit faulted the district court for failing to provide a concise yet clear explanation of how it determined the final fee amount. Because the explanation was insufficient, the appellate court vacated the award and remanded the case to the district court for a more transparent fee analysis.
Why This Case Matters for Wage-and-Hour Litigation
This decision underscores two practical realities:
* Fee exposure can be significant even when the damages recovered by an individual plaintiff are relatively modest, especially in wage-and-hour cases where fee-shifting statutes may allow prevailing employees to recover reasonable fees.
* Trial courts must create a record. Fee awards cannot be affirmed on appeal if the judge does not clearly explain the basis for the number, particularly when the requested amounts are large and the litigation involves multiple claims with mixed outcomes.
FAQ: Alvarado v. Wal-Mart Associates, Inc.
Q: What is a section 998 settlement?
A: California Code of Civil Procedure section 998 is a settlement tool that can shift certain costs and influence fee exposure depending on whether a party beats or fails to beat the offer at trial. Parties often use it to encourage settlement and manage litigation risk.
Q: Why would attorneys’ fees be much higher than the settlement amount?
A: In wage-and-hour cases, fee-shifting statutes can allow a prevailing employee to seek reasonable attorneys’ fees. Litigation can be time-intensive even when the employee’s personal damages are relatively small.
Q: Did the Ninth Circuit say the plaintiff could not recover fees?
A: No. The Ninth Circuit held that the settlement did not automatically preclude recovery of fees for intertwined work. Still, it vacated the award because the district court did not adequately explain how it reached the fee amount.
Q: What does it mean for claims to be “intertwined”?
A: It generally means the claims share a common core of facts and legal work, so time spent on one claim also reasonably advances the other.
Q: What happens on remand?
A: The district court must reassess the fee request and provide a concise but clear explanation for any fee award it enters.
If you believe you were denied meal or rest breaks, not paid overtime, provided inaccurate wage statements, or required to use personal devices for work without reimbursement, the employment law attorneys at Blumenthal Nordrehaug Bhowmik De Blouw LLP can help. Contact one of our offices in Los Angeles, San Diego, San Francisco, Sacramento, Riverside, or Chicago today to learn how to hold your employer accountable.
