In a recent decision, the Ninth Circuit in Alvarado v. Wal-Mart Associates, Inc. vacated a district court's award of $312,429 in attorneys' fees and costs but affirmed that plaintiffs can recover fees for work on related class and PAGA claims under a section 998 settlement agreement. Given the remedial nature of wage and hour laws, the decision ensures aggrieved workers can receive representation, even if class certification fails.
Claudia Alvarado sued Walmart for Labor Code violations, including denied meal breaks, unpaid overtime, and unreimbursed business expenses. She brought individual claims, a putative class action, and PAGA claims. After the district court denied class certification, Alvarado settled her individual claims for $22,000 under California Code of Civil Procedure section 998 and dismissed her PAGA claims without prejudice.
The settlement allowed Alvarado to seek "reasonable fees and costs actually incurred... in pursuit of [her] individual claims... and recoverable by law." She moved for $591,044 in fees and $44,879 in costs, arguing under Hensley v. Eckerhart that her class and PAGA work was intertwined with her successful individual claims, making apportionment unnecessary. Walmart opposed, but the district court awarded $297,799 in fees (after Alvarado's voluntary reduction) and $14,630 in costs.
On appeal, Walmart argued the agreement barred fees for anything beyond strictly individual work. The Ninth Circuit rejected this, holding that section 998 agreements do not limit fees recoverable under California law unless expressly stated. Since the agreement referenced fees "recoverable by law," it permitted Hensley recovery for intertwined claims. The court vacated the award only because the district court failed to provide a clear explanation, remanding for reconsideration.
This decision benefits California workers and unions in several ways. First, it clarifies that settling individual claims under section 998 does not forfeit fees for related class or PAGA efforts. Plaintiffs' lawyers can pursue broad litigation without fear that a partial settlement will wipe out compensation for overlapping work. Second, it upholds Hensley's flexible approach, allowing fees where claims share common facts or theories, which is common in wage cases involving systemic violations. Finally, by requiring only a "concise but clear" explanation on remand, the ruling keeps the door open for substantial fee awards proportional to the litigation's scope, even with limited monetary recovery. For unions, this means stronger leverage in negotiations and contract enforcement.
