Narouz v. Charter Communications, LLC

• Decision Date: 15 January 2010
• Docket Number: No. 07-56005.,07-56005.
• Parties: Hani NAROUZ, individually and on behalf of a class of similarly situated individuals, Plaintiff-Appellant, v. CHARTER COMMUNICATIONS, LLC; Falcon Telecable, a California Limited Partnership; Interlink Communications Partners, LLC, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

591 F.3d 1261

Hani NAROUZ, individually and on behalf of a class of similarly situated individuals, Plaintiff-Appellant, v. CHARTER COMMUNICATIONS, LLC; Falcon Telecable, a California Limited Partnership; Interlink Communications Partners, LLC, Defendants-Appellees.

No. 07-56005.

United States Court of Appeals, Ninth Circuit.

Argued November 17, 2008.

Submitted December 1, 2009.

Filed January 15, 2010.

Stephen M. Harris, Knapp, Peterson & Clarke, Glendale, CA, for the appellants.

Steven D. Allison, Mandana Massoumi, Jessica Linehan, Dorsey & Whitney LLP, Irvine, CA, for the appellees.

Appeal from the United States District Court for the Central District of California Manuel L. Real, District Judge, Presiding. D.C. No. CV-06-02914-R.

Before: PAMELA ANN RYMER and MILAN D. SMITH, JR., Circuit Judges, and EDWARD R. KORMAN,^* District Judge.

Opinion by Judge MILAN D. SMITH, JR.; Concurrence by Judge KORMAN; Partial Concurrence and Partial Dissent by Judge RYMER.

MILAN D. SMITH, JR., Circuit Judge:

This case presents the question of whether the settlement and voluntary dismissal by a class representative of his personal claims in a putative class action lawsuit renders moot his appeal of the denial of class certification. We hold that under the circumstances of this case, the appeal is not rendered moot.

FACTUAL AND PROCEDURAL BACKGROUND

Hani Narouz filed a complaint on April 7, 2005 in the Los Angeles Superior Court, alleging causes of action for wrongful termination in violation of public policy; statutory violations of the California Labor Code based on failure to pay wages, failure to furnish meal periods, and failure to maintain accurate itemized wage statements; unfair, unlawful, and fraudulent business acts and practices under California Business and Professions Code Section 17200; and seeking declaratory relief. All of these claims were asserted on behalf of a putative class of Charter Communications, LLC's (Charter) non-exempt employees, except the wrongful termination claim, which was asserted by Narouz alone. Charter removed the case to the United States District Court for the Central District of California pursuant to 28 U.S.C. § 1441(b).

After over a year and a half of litigation, including the processing of two separate Motions to Strike, and extensive discovery, the parties commenced a mediation proceeding on December 7, 2006, which resulted in agreement on general settlement terms approximately ten days later.

The actual settlement agreement, which was negotiated over several additional months, included a "Class Action Joint Stipulation of Settlement," providing for the gross payment by Charter of $267,500 (including attorney's fees). A separate agreement was entered into between Charter and Narouz, which called for $60,000 to be paid by Charter to Narouz for the release of Narouz's wrongful termination claim, claims for any unpaid wages "aside from those related to Narouz's class allegation," claims for any emotional distress, pain and suffering, and penalties "aside from those related to Narouz's class allegation." Narouz was also eligible to receive an additional amount ($20,000) conditioned on the district court's final approval of the class settlement. The agreement specified, however, that if the Court did not approve the settlement, the $60,000 payment already made would be considered to be consideration for any and all remaining "individual claims." On December 20, 2006, the parties filed a stipulation and order relating to Narouz's motion for approval of settlement. On February 23, 2007, Narouz signed the "Confidential Settlement Agreement and Release," providing for full settlement and release of his individual claims.

On April 23, 2007, Narouz filed a motion in the district court seeking certification of the class for settlement purposes only and preliminary approval of the class action settlement. Charter filed papers supporting the motion. A hearing was held on May 21, 2007, wherein the district court refused to certify the case as a class action for settlement purposes, or to approve the settlement. The only comment the court made in its written order was that it could not "ascertain a class." The court offered no other analysis as to why the motion was denied.

On June 5, 2007, Narouz filed a stipulation and request for dismissal with prejudice as to all of his individual claims, pursuant to the settlement agreement. The court entered an order terminating the case the next day. Narouz now appeals. We have jurisdiction under 28 U.S.C. § 1291.

DISCUSSION

I. Mootness

The issue of whether a class representative who voluntarily settles his or her individual claims in a putative class action renders an appeal from a denial of class certification moot is an open one in this circuit. See Seidman v. City of Beverly Hills, 785 F.2d 1447, 1448 (9th Cir.1986) (stating "[w]e need not reach the question of whether a named plaintiff who settles all his individual claims after denial of class certification may appeal the adverse certification order"). The issue also remains open in the Supreme Court. See U.S. Parole Comm'n v. Geraghty, 445 U.S. 388, 404 n. 10, 100 S.Ct. 1202, 63 L.Ed.2d 479 (1980).

The Supreme Court held in Geraghty that when a class representative's claims expire involuntarily, that representative "retains a `personal stake' in obtaining class certification sufficient" to maintain jurisdiction to appeal a denial of class certification. Id. at 404, 100 S.Ct. 1202. The Court reasoned that the class representative maintained at least an interest in spreading litigation costs and shifting fees and expenses to the other litigants with similar claims. Id. at 403, 100 S.Ct. 1202; see also Deposit Guar. Nat'l Bank, Jackson Miss. v. Roper, 445 U.S. 326, 334 n. 6, 100 S.Ct. 1166, 63 L.Ed.2d 427 (1980).

We hold that when a class representative voluntarily settles his or her individual claims, but specifically retains a personal stake as identified by Geraghty and Roper, he or she retains jurisdiction to appeal the denial of class certification. In so holding, we join several other circuits. See Richards v. Delta Air Lines, Inc., 453 F.3d 525 (D.C.Cir.2006); Potter v. Norwest Mortgage, Inc., 329 F.3d 608 (8th Cir. 2003); Toms v. Allied Bond & Collection Agency, Inc., 179 F.3d 103 (4th Cir.1999); Love v. Turlington, 733 F.2d 1562 (11th Cir.1984).

In order to retain such a "personal stake," a class representative cannot release any and all interests he or she may have had in class representation through a private settlement agreement. See Toms, 179 F.3d at 105-06 (holding that the class representative had maintained no interest in a case where he expressly relinquished "any and all" claims "of any kind or nature whatsoever he may have individually" in addition to "any claims for attorney's fees, costs, or compensation as class representative, [and any claims] he may have as a member/representative of the putative class"). Conversely, a settlement agreement that specifically provides that the class representative is solely releasing individual claims may permit the class representative to retain a "personal stake" in the class claim. See Richards, 453 F.3d at 529 (holding that the named plaintiff maintained jurisdiction when the settlement agreement released defendant only of "any and all individual claims that she might have" which was not "in derogation of ... Plaintiff's class claim").

Here, the "Confidential Settlement and Release" between Narouz and Charter limits the release to only Narouz's individual claims, stating that the settlement payment received is consideration for dismissal of Narouz's claims "aside from those related to Narouz's class allegation" (emphasis added). The agreement also provides that Narouz retains a continued financial interest in the advancement of the class claims, because Narouz is to receive an award enhancement fee ($20,000) were the court to approve the settlement. Further, the agreement provides that the claim for attorney's fees and costs has not been released, nor will it be, if Narouz is not allowed to pursue an appeal of a denial of class certification. The dissent ignores the plain language of the settlement agreement and obvious financial interest in obtaining a reversal of the district court's decision, and instead relies upon a general release provision included in the agreement. It is clear here that Narouz maintains a sufficient personal stake in the class litigation to appeal the district court's denial of class certification, and that the appeal is not moot.

The dissent argues that voluntary settlement is different from involuntary disposition because "[b]y definition, voluntary settlement is wholly within the discretion of the parties; they can control what claims are dismissed, which survive, and what rights each party retains in the class certification claim." Dissent at 1269. This is a definition of voluntariness, not a reason for holding that Narouz lacks a personal stake in the outcome of the appeal. Narouz did not release the claims of the putative class members and, as discussed above, retains a personal financial interest in the outcome arising from his rights to represent the class. As the Supreme Court observed in Geraghty, "[a] plaintiff who brings a class action presents two separate issues for judicial resolution. One is the claim on the merits; the other is the claim that he is entitled to represent a class. The denial of class certification stands as an adjudication of one of the issues litigated. We think that in determining whether the plaintiff may continue to press the class certification claim, after the claim on the merits `expires,' we must look to the nature of the `personal stake' in the class certification claim." 455 U.S. at 402, 102 S.Ct. 1127 (internal quotation and citation omitted).

Moreover, viewed realistically, the decision of Narouz to settle this case is voluntary only in the sense...