On October 31, 2014, in Oliver v. Orleans Parish Sch. Bd., No. 2014-C-0329 (La. Oct. 31, 2014), the Supreme Court of Louisiana reversed a Fourth Circuit Court of Appeal decision and dismissed a class action lawsuit brought by Plaintiffs, 7,600 former teachers and permanent school district employees who were terminated following Hurricane Katrina in 2005, against their school board and a host of State Defendants. While decision agreed with the Court of Appeal’s analysis of the res judicata doctrine (as the Plaintiffs had previously reached a settlement agreement with Defendant Orleans Parish School Board (“OPSB”), and the State of Louisiana (“State”), and those Defendants were previously dismissed from the lawsuit), the Supreme Court reversed the Court of Appeal’s application of the  “exceptional circumstances” exception to the res judicata doctrine. The Supreme Court also rejected Plaintiffs’ due process claims, citing the exigent circumstances caused by Hurricane Katrina.

This ruling from the Bayou country provides a valuable framework for how employers can use settlement agreements to preserve potential res judicata defenses in future litigation.

Case Background

On behalf of Plaintiffs, the Unified Teachers of New Orleans (“UTNO”), the exclusive bargaining representative for all Orleans Parish teachers, filed three lawsuits against the OPSB and the State defendants, alleging wrongful termination and a violation of due process rights, among other things. Id. at 11-12. Plaintiffs alleged that Defendants improperly placed class members on disaster leave, terminated them in violation of their employment contracts, and placed their schools in the hands of the State Defendants who failed to abide by certain statutes when re-staffing the schools, all as a result of Hurricane Katrina and the allegedly unconstitutional State Legislature Act 35. Id. at 24. While the claims against the State Defendants were dismissed, UTNO and OPSB reached a global settlement on September 18, 2007. Id. at 4, 8. A few months prior to settlement, Plaintiffs filed a class action lawsuit against the same OPSB and State Defendants, seeking class certification and damages.  Id. at 9.  In rejecting Defendants’ res judicata claims, both the trial court and the Court of Appeal let the newly filed lawsuit stand and subsequently allowed damages. Id. at 11-12.

The Decision Of The Supreme Court Of Louisiana

In reversing the Court of Appeal’s judgment, the Supreme Court of Louisiana held that the doctrine of res judicata applied, without any preclusion due to exceptional circumstances. Id. at 24. The Supreme Court applied the five requirements for a finding of res judicata under Burguieres v. Pollingue, 843 So. 2d 1049, 1052-53 (La. Feb. 25, 2003), including: (1) the judgment is valid; (2) the judgment is final; (3) the parties are the same; (4) the cause or causes of action asserted in the second suit existed at the time of the final judgment in the first litigation; and (5) the cause or causes of action asserted in the second suit arose out of the transaction or occurrence that was the subject matter of the first litigation. Id. at 13. The Supreme Court held that all five factors were satisfied here. Id. at 24. The Supreme Court discussed and rejected the potential “exceptional circumstances” exception to the res judicata defense based on the facts present. Id. at 20-21. Finally, in light of institutional damage caused by Hurricane Katrina, the Supreme Court held that Defendants’ post-termination staffing procedures satisfied due process. Id. at *22-23.

Implications For Employers

 Oliver is instructive for employers because it underscores the long-standing doctrine that settlement agreements are favored in the law and will be broadly construed. It also teachers that when reaching class action settlements with allegedly aggrieved workers, employers are well served to utilize the broadest possible language to document the resolution. This practice will often provide a res judicata defense in the face of later filed actions.