In the event that more than ten percent of class members opt out of the Settlement, their claim shares will be subtracted from the total Settlement Amount.
II. JURISDICTION
This Court has jurisdiction of this action under the Class Action Fairness Act ("CAFA") because the amount in controversy exceeds $ 5,000,000, there is minimal diversity, and the number of class members exceeds 100.
III. LEGAL STANDARD
A. Class Certification
Class certification under Federal Rule of Civil Procedure 23 is a two-step process. First, a plaintiff must demonstrate that the four requirements of Rule 23(a) are met: numerosity, commonality, typicality, and adequacy. "Class certification is proper only if the trial court has concluded, after a 'rigorous analysis,' that
Second, a plaintiff must establish that the action meets one of the bases for certification in Rule 23(b). Plaintiff relies on Rule 23(b)(3) and must therefore establish that "questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy." Fed. R. Civ. P. 23(b)(3).
When determining whether to certify a class for settlement purposes, a court must pay "heightened" attention to the requirements of Rule 23. Amchem Prods., Inc. v. Windsor ,
B. Preliminary Settlement Approval
The Ninth Circuit maintains a "strong judicial policy" that favors the settlement of class actions. Class Plaintiffs v. City of Seattle ,
If no class has yet been certified, a court must likewise make a preliminary finding that it "will likely be able to ... (ii) certify the class for purposes of judgment on the proposal." Fed. R. Civ. P. 23(e)(1)(B). If the court makes these preliminary findings, it "must direct notice in a reasonable manner to all class members who would be bound by the proposal."
Within this framework, preliminary approval of a settlement is appropriate if "the proposed settlement appears to be the product of serious, informed, non-collusive negotiations, has no obvious deficiencies, does not improperly grant preferential treatment to class representatives or segments of the class, and falls within the range of possible approval."
[T]he strength of the plaintiffs' case; the risk, expense, complexity, and likely duration of further litigation; the risk of maintaining class action status throughout the trial; the amount offered in settlement; the extent of discovery completed and the stage of the proceedings; the experience and views of counsel; the presence of a governmental participant; and the reaction of the class members to the proposed settlement.
IV. DISCUSSION
While some of the above factors lend support for finding that the Settlement falls within the range of possible approval, there are a number of obvious deficiencies that prevent the Court from granting preliminary approval at this time.
1. Release of FLSA Claims
The Court observes several problems with the Settlement's release of FLSA claims. See ECF No. 74-1 at 11-12, 20-21.
First, at no point has Plaintiff pleaded or otherwise attempted to pursue an FLSA claim in this action. Cf. ECF No. 1-1; ECF No. 28; TAC. As a general rule, the Court disfavors settlement release provisions that go "beyond the scope of the present litigation." Terry v. Hoovestol, Inc. , No. 16-CV-05183-JST,
The Court also notes that a number of district courts within this circuit have rejected attempts by plaintiffs moving for approval of a Rule 23 settlement to amend their complaints to add previously un-litigated FLSA claims. See, e.g. , Maciel v. Bar 20 Dairy, LLC , No. 117CV00902DADSKO,
Second, even assuming that the FLSA claims were properly included in the Settlement, Plaintiff's motion and supporting declaration do not inform the Court what potential FLSA claims might be subject to the release, let alone discuss the value of such claims. Cf. ECF No. 73 at 17 (describing risk-adjusted calculations for rest break and meal break violations only, and a separate maximum exposure calculation for the PAGA claim). The only reasonable inference the Court can draw is that the Settlement assigns those claims no value. A proposed settlement calling "for a release of the FLSA claim in exchange for no consideration does not appear to be a fair and reasonable resolution of a bona fide dispute over FLSA provisions." Maciel ,
Third, even assuming that the Settlement provided adequate value for released FLSA claims, Plaintiff has not addressed the Court's authority to approve a settlement that releases FLSA claims en masse without first certifying a collective action. Rule 23 class actions are "fundamentally different from collective actions under the FLSA." Thompson ,
Finally, even were the Court to preliminarily certify a collective action, Plaintiff would have to address how the Settlement's procedures comply with the FLSA's requirement that "[n]o employee shall be a party plaintiff to any [collective] action unless he gives his consent in writing to become such a party and such consent is filed in the court in which such action is brought."
In short, the parties face a formidable series of obstacles to justifying the release of FLSA claims in the Settlement. Because Plaintiff's motion does not discuss these additional issues, the Court expresses no conclusive opinion on them. But the Court expects that any renewed motion, if it includes such a release, will thoroughly address the concerns raised by these other courts.
2. Release of Claims Against United Airlines
The Court notes an additional concern with the scope of the Settlement's release provision. Although United Airlines was originally a Defendant in this action, Plaintiff voluntarily dismissed United without prejudice. ECF No. 51. United is not a party either to this action or to the Settlement. The Settlement's release provision, however, applies equally to claims against United Airlines. ECF No. 74-1 at 20.
The Court requires further explanation as to the propriety of requiring class members to release claims against a non-party such as United Airlines.
3. Range of Recovery
This Court "has more than once denied motions for approval where the plaintiffs 'provide[d] no information about the maximum amount that the putative class members could have recovered if they ultimately prevailed on the merits of their claims.' "
Here, Plaintiff provides minimal information as to the value of the class's claims. According to Plaintiff, a reasonably estimated exposure for rest break violations is $ 720,000. ECF No. 73 at 17. Plaintiff estimates that he faced a 33 percent likelihood of class certification and a 50 percent chance of proving liability, making the risk-adjusted value of the rest break claim $ 118,000.
Plaintiff's submission does not provide the Court with sufficient information to evaluate the reasonableness of the class's recovery. For the rest break and meal break claims, Plaintiff simply states that the maximum value of each is $ 720,000, with no explanation as to how he reached that number. ECF No. 73 at 17. As a result, the Court cannot assess whether these estimates have any basis in fact. Balancing the class's potential recovery against the amount offered in settlement is "perhaps the most important factor to consider" in preliminary approval, Cotter v. Lyft, Inc. ,
Similarly, Plaintiff has failed to supply "enough information to evaluate the strengths and weaknesses of [his] case." Eddings ,
In sum, any future motion should explain the basis for calculating the maximum value of Plaintiff's claims and articulate particularized reasons why the proposed discount is appropriate.
4. PAGA Penalties
The Court also requires additional information supporting the settlement of Plaintiff's representative PAGA claim.
"A PAGA representative action is ... a type of qui tam action" in which a private plaintiff pursues "a dispute between an employer and the state Labor and Workforce Development Agency" ("LWDA") on behalf of the state. Iskanian v. CLS Transp. L.A., LLC ,
"[B]ecause a settlement of PAGA claims compromises a claim that could otherwise be brought by the state," however, the Act also requires that a court "review and approve any settlement of any civil action filed pursuant to [the Act]." Ramirez v. Benito Valley Farms, LLC , No. 16-CV-04708-LHK,
It is thus important that when a PAGA claim is settled, the relief provided for under the PAGA be genuine and meaningful, consistent with the underlying purpose of the statute to benefit the public and, in the context of a class action, the court evaluate whether the settlement meets the standards of being 'fundamentally fair, reasonable, and adequate' with reference to the public policies underlying the PAGA.
O'Connor v. Uber Techs., Inc. ,
Where PAGA claims are settled in the same agreement with the underlying Labor Code claims, courts have also looked to the interplay of the two recoveries to determine whether PAGA's purposes have been served. The O'Connor court, for instance, adopted a "sliding scale," noting that "[b]y providing fair compensation to the class members as employees and substantial monetary relief, a settlement not only vindicates the rights of the class members as employees, but may have a deterrent effect upon the defendant employer and other employers, an objective of PAGA."
At the same time, the O'Connor court identified countervailing considerations suggesting that courts should scrutinize even more closely the settlement of PAGA claims. Critically, "[w]here plaintiffs bring a PAGA representative claim, they take on a special responsibility to their fellow aggrieved workers who are effectively bound by any judgment" despite the absence of the protections afforded by "class action procedures, such as notice and opt-out rights." O'Connor ,
Here, the Settlement allocates $ 25,000 to the PAGA claims. ECF No. 74-1 at 17. This represents one percent of the asserted maximum of $ 2,500,000 value of those claims. See ECF No. 73 at 17. As explained above, Plaintiff has provided no supporting detail for this calculation. Because Plaintiff has not demonstrated to any reasonable degree of certainty the denominator involved, the Court cannot yet draw definitive conclusions on whether the fractional recovery of the PAGA settlement is reasonable. The Court nonetheless offers some preliminary observations.
"In this district, courts have raised concerns about settlements of less than 1% of the total value of a PAGA claim."
In approving PAGA settlements accounting for less than one percent of the claims' value, courts have identified a number of factors that might support a lesser recovery. First, courts have taken into account LWDA's views, or lack thereof, on the settlement. See Jennings ,
Second, courts have considered whether they would be likely to exercise their discretion under California Labor Code § 2699(e)(2) to reduce the amount of PAGA penalties,
Third, courts have considered whether the settlement provides additional non-monetary relief. Cf. O'Connor ,
Finally, some courts have concluded that a lower PAGA settlement is permissible where the Rule 23 settlement is "relatively substantial" based on the circumstances of the case. Viceral ,
In sum, the Settlement's allocated PAGA recovery of one percent is on the border of percentages that raise heightened concerns. The Court defers resolution of its adequacy pending further information from the parties regarding the maximum value and reasons for discounted recovery of both the Rule 23 and PAGA claims.
5. Other Deficiencies
In addition to the above problems, there are a number of other omissions or deficiencies that should be addressed in any future motion for preliminary approval.
First, the parties should comply with this district's Procedural Guidance for Class Action Settlements , which instructs that "[t]he motion for preliminary approval should state," among other things, "any differences between the settlement class and the class proposed in the operative complaint and an explanation as to why the differences are appropriate in the instant case." Northern District of California, Procedural Guidance for Class Action Settlements § 1(a) ("Northern District Guidance"), https://www.cand.uscourts.gov/ClassActionSettlementGuidance. Here, Plaintiff originally sought certification of numerous subclasses for individual claims, TAC ¶ 10; ECF No. 62 at 11, but now seeks to certify a single class for settlement purposes, ECF No. 73 at 5. Plaintiff has also narrowed the class definition from "all persons employed ... in hourly paid or non-exempt positions," TAC ¶ 10, to "all current and former non-exempt airplane cabin cleaners ," ECF No. 73 at 5 (emphasis added).
Second, the parties should provide "an estimate of the number and/or percentage of class members who are expected to submit a claim in light of the experience of the selected claims administrator and/or counsel from other recent settlements of similar cases, the identity of the examples used for the estimate, and the reason for
Third, in addition to the proposed Settlement Administrator, "the parties should identify ... the settlement administrator selection process, how many settlement administrators submitted proposals, what methods of notice and claims payment were proposed, and the lead class counsel's firms' history of engagements with the settlement administrator over the last two years."
Fourth, Plaintiff states that counsel "will provide the Court with information for the purposes of calculating attorney's fees under the lodestar method should the Court so desire for ruling on Plaintiff's fee application at the final fairness hearing." ECF No. 73 at 20. The Northern District Guidance instructs class counsel to "include information about ... their lodestar calculation in the motion for preliminary approval." Northern District Guidance § 6. This information "should include the total number of hours billed to date and the requested multiplier, if any."
Fifth, "[t]he parties should address whether [Class Action Fairness Act of 2005 ("CAFA") ] notice is required and, if so, when it will be given." Northern District Guidance § 10; see also
6. Notice Plan
Finally, the Court notes several defects with the proposed notice plan.
First and foremost, the notice plan does not provide a free means for class members to access the Settlement and related documents. See Northern District Guidance § 3 ("[T]he notice should include ... the address for a website, maintained by the claims administrator or class counsel, that has links to the notice, motions for approval and for attorneys' fees and any other important documents in the case."). As it stands, class members will only be able to find this information by viewing the case file in person at the courthouse in San Francisco, California, or accessing the docket through PACER, which at the moment charges fees for access. ECF No. 74-1 at 42-43, 48. Class members should not have to travel to the Court or pay a fee to review the information necessary to make an informed choice as to whether to opt out of the class, absent some compelling explanation from Plaintiff why that is necessary in this case.
Second, for a class member to request exclusion from the Settlement, the only information the class member must provide in a letter to the Settlement Administrator is (1) the class member's name, (2) a statement that the class member wishes to
Finally, the Proposed Notice "should make clear that the court can only approve or deny the settlement and cannot change the terms of the settlement." Northern District Guidance § 5. The Court invites the parties to consider this district's suggested language. See
V. CONCLUSION
For the foregoing reasons, the Court DENIES WITHOUT PREJUDICE the motion for preliminary settlement approval. The Court defers ruling on preliminary class certification until the parties present a settlement that merits preliminary approval.
The Court sets a further case management conference on July 17, 2019 at 2:00 p.m. An updated joint case management statement is due July 10, 2019. The Court will vacate the July 17, 2019, hearing if a renewed motion for preliminary approval has been filed on or before July 9, 2019.
IT IS SO ORDERED.
Notes
The Court notes that the TAC states Plaintiff's view that the amount-in-controversy is less than $ 5 million. TAC ¶ 2. But because Plaintiff never actually challenged USAS's assertion that the amount-in-controversy was met, USAS was required to "include only a plausible allegation that the amount in controversy exceeds the jurisdictional threshold." Dart Cherokee Basin Operating Co., LLC v. Owens ,
These factors are substantially similar to those articulated in the 2018 amendments to Rule 23(e), which were not intended "to displace any factor [developed under existing Circuit precedent], but rather to focus the court and the lawyers on the core concerns of procedure and substance that should guide the decision whether to approve the proposal." Hefler v. Wells Fargo & Co. , No. 16-CV-05479-JST,
Based on Plaintiff's motion, the Court does not foresee obstacles to preliminarily certifying the class for settlement purposes only. But the Court will defer ruling on preliminary class certification until the parties have corrected the deficiencies in the Settlement.
Under the FLSA, "[d]ouble damages are the norm; single damages are the exception." Haro v. City of Los Angeles ,
The California Supreme Court has noted in passing only that "PAGA settlements are subject to trial court review and approval, ensuring that any negotiated resolution is fair to those affected." Williams v. Superior Court ,
Other cases that did not separately discuss the reasonable of the PAGA portion of the settlement involved similar ratios of PAGA recovery to overall settlement amount. See Clemens v. Hair Club for Men, LLC , No. C 15-01431 WHA,
Section 2699(e)(2) provides that "a court may award a lesser amount than the maximum civil penalty amount specified by this part if, based on the facts and circumstances of the particular case, to do otherwise would result in an award that is unjust, arbitrary and oppressive, or confiscatory."
The Court also notes that while Plaintiff's motion requests approval of ILYM Group as the Settlement Administrator, ECF No. 73 at 5, the Settlement itself names CPT Group, Inc. as the Settlement Administrator, ECF No. 74-1 at 9, 15. The Court invites the parties to clarify this inconsistency in a future motion.
Neither Plaintiff's counsel's motion for fees nor the request for a service award to Haralson is currently before the Court. The Court observes, however, that both requests exceed their respective benchmark amounts. See Rodman v. Safeway Inc. , No. 11-CV-03003-JST,