The California Court of Appeal recently reversed a $43 million judgment against North American Title Company (NATC) in a complex wage and hour class action case involving approximately 700 plaintiffs. The court's decision, filed on May 29, 2026, addresses significant issues surrounding the misclassification of employees and the management of class action trials.
This ruling is crucial as it impacts not only the plaintiffs involved in the case but also sets a precedent for how wage and hour claims are handled in California. The court's opinion highlights the challenges of managing large class actions, particularly when it comes to determining employee classifications and the validity of trial procedures.
Background
The case, Cortina v. North American Title Co., originated when Carolyn Cortina and other employees filed a class action lawsuit against NATC in 2007. The plaintiffs alleged that NATC misclassified them as exempt employees, denying them overtime pay and other benefits mandated by California labor laws. The lawsuit included two classes: the Nonexempt class, which comprised employees who were supposed to receive overtime, and the Exempt class, which claimed they were wrongfully classified as exempt.
The trial proceedings were lengthy and complicated, involving numerous appeals and legal maneuvers over nearly two decades. The trial court initially ruled against NATC on certain defenses regarding the Exempt class, leading to a referee being appointed to oversee the second phase of the trial. However, this appointment was made without the parties' consent, which became a critical point in the appeal.
The Ruling
The California Court of Appeal ruled that the trial court's decision to appoint a referee without consent was unauthorized and unprecedented in state jurisprudence. The judges stated, "A nonconsensual reference of the scope and magnitude ordered in this case is not merely a rare occurrence. It appears unprecedented in our state jurisprudence." This ruling prompted the court to reverse the judgment and call for a retrial of the individual claims of the plaintiffs.
Additionally, the court found that the trial court had committed prejudicial errors during the first phase of the trial. The judges noted that critical aspects of the trial plan contradicted previous court holdings, particularly regarding how the employer's affirmative defenses were handled. The ruling emphasized that the trial court should have decertified both classes due to the unmanageable nature of the claims.
Impact
This ruling significantly impacts the plaintiffs involved in the case, as the court's reversal means they will have to pursue their claims individually rather than as a class. The decision also sets a precedent for future wage and hour class actions in California, particularly regarding the management of class trials and the necessity for consent when appointing referees.
The court's opinion reinforces the importance of adhering to legal standards in class action cases, particularly when it comes to employee classifications. It highlights the need for clear evidence and methodology when determining whether employees qualify for exemptions under California labor laws.
What's Next
The case is now set for retrial, where the individual claims of the plaintiffs will be heard. The trial court may consider new motions for class certification based on the guidelines established in the appellate ruling. There is also the possibility that NATC may seek further appeals regarding the court's decision.