Jessica Garcia worked for The Merchant of Tennis, Inc. (Merchant), a California corporation operating in San Bernardino County, from July through December 2019. In May 2022, she filed a third amended consolidated class action complaint on behalf of herself and other employees, alleging various wage-and-hour violations under the California Labor Code and other federal and state employment laws.
While Garcia’s motion for class certification was pending in 2024, Merchant pulled approximately 954 current and former employees into mandatory meetings with management and asked them to sign individual settlement agreements releasing their wage and hour claims in exchange for cash payments averaging roughly $918 each — over $875,000 in total. Garcia had not signed an agreement, but the vast majority of putative class members had.
In November 2024, Garcia moved to invalidate the settlements, arguing Merchant obtained them through fraud and coercion. The trial court found that Merchant had made “false and misleading” representations to secure the agreements: it gave workers unfounded claims about the low recovery rates in class actions, falsely stated that certain claims had been dismissed, described the releases as limited when they actually covered all claims, marked communications “confidential” to discourage sharing with class counsel, and misleadingly suggested that arbitration agreements barred participation in the lawsuit without disclosing that only 40 percent of workers had such agreements. The court concluded the 954 individual settlement agreements were voidable and ordered a curative notice giving workers 45 days to revoke their agreements and join the class action.
The parties then fought over what the curative notice should say about repayment. Merchant wanted the notice to warn workers that if they revoked their settlements and Merchant ultimately prevailed, they could be required to return the money. Garcia argued that including such language would discourage low-wage workers from joining the suit and that any repayment issue could be addressed later through an offset against recovery.
The San Bernardino County Superior Court sided with Garcia. Finding no binding California authority on point, the court followed two federal cases — Marino v. CACafe, Inc. (N.D. Cal. Apr. 28, 2017) 2017 WL 1540717 and McClellan v. Midwest Machining, Inc. (6th Cir. 2018) 900 F.3d 297 — and ruled that the curative notice would inform workers they would not be required to return any payment, though the amount received might be treated as an offset against any future recovery. The court rejected Merchant’s argument that California’s rescission statutes (Civ. Code, §§ 1689, 1691) required immediate repayment, calling that position “simplistic legal analysis” that ignored the complexity of the employer-employee relationship and the court’s duty to prevent abuses undermining the administration of justice. The court stayed its order to allow Merchant to seek appellate review.
The Court of Appeal granted Merchant’s petition for writ of mandate in a 2–1 decision, directing the trial court to vacate its February 28, 2025 order and reconsider the curative notice in the published case of The Merchant of Tennis, Inc. v. Superior Court No. E085766 (March 2026).
The majority (Acting Presiding Justice Miller, joined by Justice Codrington) held that California’s rescission statutes govern the situation and require the curative notice to inform workers that repayment of settlement funds may be required at the conclusion of litigation. The court acknowledged that under Civil Code section 1693, repayment need not be immediate and can be delayed until judgment without substantial prejudice to the other party.
But the majority concluded that neither section 1692 nor section 1693 authorizes a trial court to forgive repayment entirely at the outset of litigation. The court read section 1692 — which permits a court to “in its judgment adjust the equities between the parties” — as contemplating equitable adjustments at the time of final judgment, not at the beginning of a case. The majority found the federal authorities relied on by the trial court unpersuasive, noting that Marino provided no analysis of California rescission law, and McClellan addressed a narrow exception for federal Title VII and Equal Pay Act claims brought by an individual plaintiff, not a California wage-and-hour class action.
However, the court stopped short of requiring immediate repayment, holding that the curative notice should inform class members that if they choose to rescind, they could be responsible for repayment at the conclusion of litigation under Civil Code sections 1689, 1691, and 1693, while the trial court retains discretion to adjust equities under section 1692 at the time of judgment.
Justice Raphael dissented, arguing that the majority’s reading of the rescission statutes was too rigid and that section 1692 grants trial courts broad equitable authority to fashion remedies — including excusing repayment — at any stage of a proceeding, not only at final judgment.