Vail Resorts might have to go back to the drawing board in attempting to settle a class-action lawsuit involving tens of thousands of employees following Thursday’s ruling in a California appeals court.

Vail Resorts is currently involved in two separate lawsuits with employees who allege the company committed numerous Fair Labor Standards Act violations over several years. The allegations include unpaid hours and overtime, necessary equipment and expenses not being reimbursed, and other violations.

One of the cases is being heard in California state court while the other is being heard in federal court in Colorado. The Colorado case is on hold while the California case is being worked out, and the California case had received a judge’s approval of a potential settlement.

But on Thursday, California’s Third Appellate District ruled that the judge who granted final approval of that settlement made an error in presuming that the settlement was fair. The appeals court also ruled that the judge should have allowed the Colorado plaintiffs to intervene in that case.

The approval of that appeal, in addition to affecting the settlement in California, could have implications on the Colorado case as well.

Not at home in California

Vail Resorts, in 2022, negotiated a $13.1 settlement in the California state court case. The Colorado plaintiffs, in moving to intervene in that case, alleged the settlement was “pennies on the dollar” and the California court did not have proper jurisdiction in the case, and therefore the case should be dismissed.

A judge, in 2022, did not grant the motion to intervene, which the Colorado plaintiffs appealed. On Thursday, the appeals court agreed with the Colorado plaintiffs, saying the motion to intervene should have been granted. With that, the Colorado plaintiffs will now intervene in the case and move to dismiss the settlement. If that motion to dismiss is granted, the California settlement would be thrown out and the case would start up again in federal court in Colorado.

The Colorado plaintiffs argued that the case should not have been litigated in California state court because it involves workers in 15 other states besides California, and the federal court in Colorado has general jurisdiction over the case because Vail Resorts is headquartered in Colorado.

California’s Third Appellate District mentioned that fact in Thursday’s opinion.

“We cannot say that defendants are essentially at home in California, as required for general jurisdiction,” according to the opinion. “Nor can we say on this record that the out-of-state claims had a sufficient link to California to warrant specific jurisdiction. So absent defendants’ consent to suit, California courts would appear to lack personal jurisdiction over these claims.

“That is potentially problematic for California Plaintiffs,” the appeals court added.

In addition to the California settlement netting $13.1 million for the plaintiffs (a group that could potentially include 103,000 employees), the plaintiffs’ attorneys would receive more than $4 million, according to the settlement agreement.

The large payment the attorneys were to receive was called out on a website set up to encourage employees to opt out of the California settlement. The website was set up by an anonymous employee from a Vail-owned resort in California who had a message for those employees:

“These attorneys urge you to opt-in to the settlement that they negotiated. … What happens when you opt-in? You get about $0.05 for every $1.00 Vail should have paid you. The attorneys get paid $4,366,666.67. And Vail laughs all the way to its next annual meeting, noting that it disposed of a potential cost of over $100,000,000 for $13,100,000.”

While that message could be interpreted as a suggestion of collusion between the plaintiffs’ attorneys and the defendants, California’s Third Appellate District said it did not want to make the same suggestion when it noted that the California courts lacked jurisdiction.

“None of this is to say, as Colorado Plaintiffs sometimes claim, that California Plaintiffs in fact colluded with defendants to achieve a settlement,” the opinion stated. “But at the very least, it shows these plaintiffs had a significant incentive to settle with defendants to overcome (the lack of jurisdiction) issue. It shows too that these plaintiffs, relative to Colorado Plaintiffs, had a diminished bargaining position. Colorado Plaintiffs, after all, sued in a state with general jurisdiction over Vail Resorts, The Vail Corporation, and Heavenly, for according to the record, all three are incorporated or have their principal place of business in Colorado.”

In addition to granting the motion to intervene, the appeals court also ruled that the settlement itself should not have been granted final approval, noting that the California plaintiffs’ attorneys’ efforts to settle may have been tainted by the motivation to overcome the lack of jurisdiction issue.

In presuming that the settlement was fair, the judge who granted final approval of the settlement made an error by not recognizing that the settlement was negotiated before the final number of workers involved in the suit — the class itself in the class-action case — being “certified,” or deemed to have been represented in the court with the appropriate jurisdiction.

“As another court has explained, ‘settlements negotiated before class certification are subject to a heightened risk that self-interest, even if not purposeful collusion, will seep its way into the settlement terms’ — favoring a more probing inquiry than may normally be required,” the appeals court said in Thursday’s opinion. “Moreover, this risk is greater still here because of California Plaintiffs’
incentive to settle with defendants to overcome potential personal jurisdiction issues.”

Implications in Colorado

While the appeal was being worked out in California, the 10th Circuit Court of Appeals in Colorado put a hold on the federal court case in Denver, even though that case was the first to file a claim alleging national Fair Labor Standards Act violations against Vail Resorts.

That hold — or “stay” as it’s referred to in legal terms — has now been in effect for approximately three years in a decision the Colorado plaintiffs are currently appealing.

In a brief filed on Aug. 22, the Colorado plaintiffs cited a Ninth Circuit opinion saying “such stays create a danger of denying justice by delay,” raising a risk “that witnesses’ memories will fade and evidence will become stale,” or that plaintiffs “face irreparable harm during the time that their suits are on ice.”

Thursday’s decision in California only serves to strengthen that argument, as the settlement effort continues to be worked out.

The Colorado plaintiffs are now expected to send a letter to the 10th Circuit Court of Appeals informing the court of the California decision.

This story is from VailDaily.com