1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 Angela Alcazar, et al., No. 2:19-cv-01209-KJM-AC 12 Plaintiffs, ORDER 13 v. 14 | OEI Holdings, LLC, et al., 1S Defendants. 16 17 Plaintiffs move this court to preliminarily approve their unopposed proposed settlement of 18 | this class action. As explained below, the court approves the preliminary settlement. 19 | IT. BACKGROUND 20 A. History 21 This court has summarized this case’s history in a previous order and incorporates that 22 | summary by reference here. See Prior Order (Aug. 15, 2022), ECF No. 55. In its prior order, the 23 | court denied without prejudice plaintiffs’ previous motion for preliminary approval of a proposed 24 | settlement, Initial Mot, ECF No. 51, finding three deficiencies in the proposed settlement, Prior 25 | Order (Aug. 15, 2022). The court found the prior proposed settlement did not: (1) “specify what 26 | FLSA claims are subject to [] release nor discuss the value of these claims,” (2) “explain this 27 | court’s authority to approve a settlement that releases FLSA claims without first certifying a
1 collective action” and (3) include an opt-in notice for the FLSA claims in their notice of 2 settlement. Id. at 6–7. 3 B. Renewed Motion 4 Plaintiffs have submitted a renewed motion for preliminary approval of class and 5 collective action settlement. See Notice of Mot., ECF No. 61. For settlement purposes, class 6 members for both the Rule 23 class and the FLSA collective action number approximately 539 7 agricultural packing workers who were employed by defendants between June 28, 2015, and 8 June 1, 2018. Mot. at 17, ECF No. 61–1; Mallison Decl. Ex. 1 (Settlement Agreement) at 2, ECF 9 No. 61–3. The parties estimate the total value of plaintiffs’ claims to be $815,477. Mallison 10 Decl. ¶ 33, ECF No. 61–2. The parties’ settlement agreement provides a Gross Settlement 11 Amount (GSA) of $397,500—roughly 49 percent of plaintiffs’ estimated value—with an 12 escalator provision providing the GSA may be increased based on the total number of 13 workweeks. Id. ¶¶ 18, 21. The parties agree certain amounts will be subtracted from the GSA: 14 $132,500, or one-third, will cover attorneys’ fees, $12,000 will cover litigation costs and $7,500 15 will be paid to each of the six named plaintiffs as service awards. Id. ¶ 21; Settlement Agreement 16 ¶ II. The parties further allocate $10,000 to administer the settlement, Second Mallison Decl. ¶ 2, 17 ECF No. 67–1, and $50,000 toward the PAGA action, Settlement Agreement ¶ I.Y.1 The GSA 18 amount also covers “FLSA Claim Payments to all Participating Class Members who return FLSA 19 Opt-In forms.” Mot. at 6; Settlement Agreement ¶ I.P. 20 Overall, the proposal provides a net settlement amount of approximately $160,500. Mot. 21 at 11. This amount will be distributed on a pro rata basis based on the number of workweeks 22 worked by each class member. Settlement Agreement ¶ III.D.1. The parties estimate the average 23 distribution to each class member will be “just under” $300. Mot. at 11. Unclaimed funds will 24 be distributed cy pres to Legal Aid at Work. Id. at 12–13.
1 The settlement provides 75 percent, or $37,500, of the PAGA fund will be paid to the Labor and Workforce Development Agency (LWDA), as required by the California Labor Code. Id. ¶ I.S. 1 If the court approves the settlement, Rule 23 class members will release all non FLSA 2 claims. Settlement Agreement ¶ III.F.5.a. Members of the putative class may also opt out or 3 object. Mallison Decl. ¶ 28. Class members who timely return their FLSA opt-in forms will also 4 release their FLSA claims in return for a FLSA claim payment. Settlement Agreement ¶ III.F.5.b. 5 Membership in the PAGA subclass is automatic under California law. See Sakkab v. Luxottica 6 Retail N. Am., Inc., 803 F.3d 425, 436 (9th Cir. 2015). The parties’ proposed notice of settlement 7 informs the recipients about the FLSA collective action and the related opt-in procedures. 8 Settlement Agreement ¶ III.E.2.a. 9 Plaintiffs move the court to preliminarily approve the settlement. Notice of Mot. The 10 motion is unopposed. The court heard argument on March 10, 2023. See Hr’g Mins., ECF 11 No. 66. Stanley Mallison and Daniel Keller appeared for plaintiffs and Ryan Abernathy and John 12 Conger appeared for defendants. 13 II. LEGAL STANDARD 14 “Courts have long recognized that ‘settlement class actions present unique due process 15 concerns for absent class members.’” In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 16 946 (9th Cir. 2011) (quoting Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998), 17 overruled in part on other grounds by Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011)). For 18 example, the class's motivations may not perfectly square with those of its attorneys. See id. An 19 attorney representing a settlement class may be tempted to accept an inferior settlement in return 20 for a higher fee. Knisley v. Network Associates, Inc., 312 F.3d 1123, 1125 (9th Cir. 2002). 21 Likewise, defense counsel may be happy to pay an adversary a bit more if the overall deal is 22 better for its client. See id. In addition, if the settlement agreement is negotiated before the class 23 is certified, as in this case, the potential for an attorney's breach of fiduciary duty looms larger 24 still because the settlement is not negotiated by a court-designated class representative and 25 counsel. Hanlon, 150 F.3d at 1026. 26 As the Ninth Circuit has recognized, when it comes to reviewing proposed class 27 settlements, “[t]he governing principles are clear, but their application is painstakingly fact- 28 specific,” and the court normally sees only the final result of the parties’ bargaining. Staton v. 1 Boeing Co., 327 F.3d 938, 952 (9th Cir. 2003). “Judicial review also takes place in the shadow of 2 the reality that rejection of a settlement creates not only delay but also a state of uncertainty on all 3 sides, with whatever gains were potentially achieved for the putative class put at risk.” Id. 4 Balancing these interests, federal courts have long recognized a “strong” policy in favor of 5 settling class actions. Adoma v. Univ. of Phoenix, Inc., 913 F. Supp. 2d 964, 972 (E.D. Cal. 2012) 6 (citing Class Plaintiffs v. Seattle, 955 F.2d 1268, 1276 (9th Cir. 1992)). 7 Different standards apply to preliminary approval of a class under Federal Rule of Civil 8 Procedure 23 and conditional certification of a FLSA collective action. Under Rule 23, before 9 notice of a proposed settlement can be sent to a class, the court must determine it “will likely be 10 able to” both (1) “certify the class for purposes of the judgment on proposal” and (2) “approve the 11 proposal under Rule 23(e)(2).” Fed. R. Civ. P. 23(e)(1)(B). The first requirement, likelihood of 12 class certification, requires plaintiffs to satisfy the four prerequisites of Rule 23(a) and show their 13 claim fits within one of the three categories of Rule 23(b). See Walker v. Life Ins. Co. of the Sw., 14 953 F.3d 624, 630 (9th Cir. 2020). The second requirement, likely approval under Rule 23(e)(2), 15 focuses on the fairness of the settlement for absent class members. The court evaluates 16 preliminarily whether the proposed settlement “is fair, reasonable, and adequate,” considering 17 several factors listed in the Rule, such as whether the parties negotiated at arm's length and the 18 terms of any agreement on fee awards. See Fed. R. Civ. P. 23(e)(2)(A)–(D). Over the years, the 19 Ninth Circuit has also listed several “guideposts,” “warning signs,” and “red flags” for district 20 courts to consider, such as the strength of the plaintiffs’ case and the amount of fees in proportion 21 to the compensation to class members. See In re Volkswagen “Clean Diesel” Mktg., Sales 22 Pracs., & Prod. Liab. Litig., 895 F.3d 597, 610–11 & nn.18–19 (9th Cir. 2018). 23 The requirements for certification of FLSA collective actions, by contrast, have developed 24 through decisional law. The members of the collective action must be “similarly situated” to the 25 original plaintiffs. Campbell v. City of Los Angeles, 903 F.3d 1090, 1109 (9th Cir. 2018) (citing 26 29 U.S.C. § 216(b)). “Party plaintiffs are similarly situated, and may proceed in a collective, to 27 the extent they share a similar issue of law or fact material to the disposition of their FLSA 28 claims.” Id. at 1117. 1 If FLSA claims are settled, the settlement must be approved by either the Secretary of 2 Labor or a federal district court. Seminiano v. Xyris Enter., Inc., 602 F. App'x 682, 683 (9th Cir. 3 2015) (unpublished) (citing Nall v. Mal–Motels, Inc., 723 F.3d 1304, 1306 (11th Cir. 2013)). In 4 the absence of Supreme Court or Ninth Circuit guidance, district courts often assess whether the 5 settlement is “a fair and reasonable resolution of a bona fide dispute over FLSA provisions” under 6 Lynn's Food Stores, Inc. v. United States, 679 F.2d 1350, 1355 (11th Cir. 1982). Dahl v. Bay 7 Power Inc., 2021 WL 2313388, at *1 (N.D. Cal. May 28, 2021). A dispute is “bona fide” if there 8 are “legitimate questions” about the defendant's FLSA liability. Selk v. Pioneers Mem'l 9 Healthcare Dist., 159 F. Supp. 3d 1164, 1172 (S.D. Cal. 2016). Additionally, courts often 10 consider many of the same factors that guide preliminary certification of Rule 23 class actions. 11 See Maciel v. Bar 20 Dairy, LLC, 2018 WL 5291969, at *4 (E.D. Cal. Oct. 23, 2018). 12 The notice requirements of Rule 23 and the FLSA also differ. For classes likely to be 13 certified under Rule 23(b)(3), “the court must direct to class members the best notice that is 14 practicable under the circumstances, including individual notice to all members who can be 15 identified through reasonable effort.” Fed. R. Civ. P. 23(c)(2)(B). The notice may be made by 16 mail, electronic means, “or other appropriate means.” Id. Rule 23 also imposes specific 17 requirements on the contents of the notice. See Fed. R. Civ. P. 23(b)(2)(B)(i)–(vii). The FLSA is 18 less specific. It provides “[n]o employee shall be a party plaintiff to any such action unless he 19 gives his consent in writing to become such a party and such consent is filed in the court in which 20 such action is brought.” 29 U.S.C. § 216(b). Courts have understood this language as requiring 21 written consent filed with the court, without articulating this understanding in formal holdings. 22 See, e.g., Genesis Healthcare Corp. v. Symczyk, 569 U.S. 66, 75 (2013) (“[E]mployees ... become 23 parties to a collective action only by filing written consent with the court.” (citation omitted)). 24 III. ANALYSIS 25 The court will first analyze whether the parties have cured the deficiencies in their prior 26 preliminary settlement proposal. Then the court will evaluate whether the preliminary settlement 27 proposal satisfies Rule 23 and FLSA’s requirements. 1 A. Prior Deficiencies in the Proposed Settlement 2 As noted above, the court found three deficiencies in the parties’ prior proposed 3 preliminary settlement. Prior Order (Aug. 15, 2022) at 6–7. The court finds the parties have now 4 cured these defects. 5 1. Value of FLSA Claim Payment 6 First the court found the first proposed settlement did not “specify what FLSA claims are 7 subject to the release nor discuss the value of these claims.” Id. at 6. The proposed settlement 8 agreement now includes language on the FLSA claim and allows class members to opt into a 9 FLSA class collective, through which they would “receive an [sic] FLSA Claim Payment.” 10 Settlement Agreement ¶ I.Q. The proposed notice packet contains “a procedure for opting-in to 11 the FLSA Released Claims” in writing. McElmurry v. U.S. Bank Nat. Ass'n, 495 F.3d 1136, 1139 12 (9th Cir. 2007) (“ . . . in a collective action each plaintiff must opt into the suit by ‘giv[ing] his 13 consent in writing.’”) (internal citations and emphasis omitted). Plaintiffs estimate the value of 14 FLSA claims to be $146,765. Mot. at 19; Mallison Decl. ¶ 32. “Because those damages are also 15 recoverable under California law,” plaintiffs have divided the number in half, and “approximate 16 the value of the FLSA claims” for class collective members will be $73,382.50. Mallison Decl. 17 ¶ 32; see Sakkab v. Luxottica Retail N. Am., Inc., 803 F.3d 425, 436 (9th Cir. 2015). This amount 18 covers the claims for “pre- and post-shift work performed off-the-clock” during the “704 days in 19 the applicable FLSA limitations period.” Mallison Decl. ¶ 32. 20 2. FLSA Collective Certification 21 Second, the court found plaintiffs did not “explain[] this court’s authority to approve a 22 settlement that releases FLSA claims without first certifying a collective action.” Prior Order 23 (Aug. 15, 2022) at 7. Plaintiffs now ask this court to certify a collective action before approving 24 the settlement releasing FLSA claims. Mot. at 18; Thompson v. Costco Wholesale Corp., 25 No. 14-2778, 2017 WL 697895, *7 (S.D. Cal. Feb. 22, 2017). The court discusses the merits of 26 the proposed collective action in section C below. 1 3. Notice Plan for FLSA Claims 2 Third, plaintiffs did not include an opt-in notice for the FLSA claims in their notice of 3 settlement. Prior Order (Aug. 15, 2022) at 7. Plaintiffs’ proposed settlement agreement now 4 contains adequate notice to potential collective action members, satisfying the requirement that 5 notice forms explain: 6 (1) the hybrid nature of th[e] action; [ ] (2) the claims involved in 7 th[e] action; (3) the options that are available to [ ] Class members in 8 connection with the settlement, including how to participate or not 9 participate in the Rule 23 class action and the FLSA collection action 10 aspects of the settlement; and (4) the consequences of opting-in to 11 the FLSA collective action, opting-out of the Rule 23 class action, or 12 doing nothing. 13 Thompson, 2017 WL 697895, at *8 (quoting Pierce v. Rosetta Stone, Ltd., 2013 WL 1878918, at 14 *4 (N.D. Cal. May 3, 2013)). Plaintiffs’ notice packet, discussed in detail in section C, includes 15 the necessary information. See generally Ex. 1 (Notice Packet), ECF No. 67–2. 16 B. Rule 23 Class Action Certification 17 Plaintiffs first seek preliminary certification of the proposed California class under Rule 18 23. Mot. at 14. The class includes “539 agricultural packing workers” who worked for 19 defendants “between June 28, 2015, and June 1, 2018.” Id. at 6. As summarized above, Rule 20 23(a) imposes four prerequisites on every class. If these prerequisites are satisfied, the proposed 21 class must fit the requirements of one of the three subsections of Rule 23(b). Finally, Rule 23(e) 22 imposes several additional requirements when, as here, the parties have proposed to settle a 23 putative class action. 24 1. Rule 23(a)—Prerequisites 25 First, the class must be “so numerous that joinder of all members is impracticable.” Fed. 26 Civ. P. 23(a)(1). Joinder is “impracticable” when it is difficult or inconvenient. Smothers v. 27 NorthStar Alarm Servs., LLC, No. 17-00548, 2019 WL 280294, at *4 (E.D. Cal. Jan. 22, 2019) 28 (citing In re Itel Sec. Litig., 89 F.R.D. 104, 112 (N.D. Cal. 1981)). Although “no fixed 29 number . . . satisfie[s] the numerosity requirement, as a general matter, a class greater than forty 30 often satisfies the requirement, while one less than twenty-one does not.” Ries v. Ariz. Beverages 1 USA LLC, 287 F.R.D. 523, 526 (N.D. Cal. 2012). Here, there are 539 members in the proposed 2 class. Joinder of each putative member would be impracticable, so the numerosity requirement is 3 satisfied. 4 Second, a proposed class can be certified only if there are “questions of law or fact 5 common to the class.” Fed. R. Civ. P. 23(a)(2). The “claims must depend upon a common 6 contention . . . capable of classwide resolution—which means that determination of its truth or 7 falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.” 8 Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011). The court considers “the capacity of 9 [the] classwide proceeding to generate common answers” and takes note of “[d]issimilarities 10 within the proposed class [ ] [that] have the potential to impede the generation of common 11 answers.” See Millan v. Cascade Water Servs., Inc., 310 F. R. D. 593, 604 (E.D. Cal. 2015) 12 (quoting Dukes, 564 U.S. at 350) (internal quotation marks omitted). “[C]ommonality is 13 generally satisfied where . . . ‘the lawsuit challenges a system-wide practice or policy that affects 14 all of the putative class members.’” Franco v. Ruiz Food Prods., Inc., No. 10-02354, 2012 WL 15 5941801, at *5 (E.D. Cal. Nov. 27, 2012) (quoting Armstrong v. Davis, 275 F. 3d 849, 868 (9th 16 Cir. 2001), abrogated on other grounds by Johnson v. California, 543 U.S. 499, 504–05 (2005)). 17 Here, plaintiffs assert claims arising from “[d]efendant’s alleged failure to provide [c]lass 18 [m]embers with a sufficient number of time clocks to punch in/out, resulting in them having to 19 line up and wait several minutes before” clocking in and resulting in “upaid work time [] [and] 20 meal and rest break violations” Mot. at 6; Second Am. Compl. (SAC) ¶¶ 30–35, ECF No. 36. 21 Plaintiffs also allege defendants did not provide plaintiffs with necessary equipment, such as pairs 22 of gloves. Id. ¶ 24. Defendants’ alleged failures applied to all class members, presenting 23 common questions suitable to resolution with common answers. Dukes, 564 U.S. at 350. 24 At the same time, the court notes the motion lacks detailed information regarding the 25 makeup of the class. Plaintiffs provide no further details besides describing the class as 26 comprised of low paid workers in the agricultural packing industry, see generally SAC, leaving 27 unanswered questions that could affect the court’s ultimate determination when plaintiffs’ seek 28 final approval. For example, were all class members compensated in the same, or similar, 1 manner, and at the same, or similar, rate? See Millan, 310 F. R. D. 593, 604 (E.D. Cal. 2015) 2 (quoting Dukes, 564 U.S. at 350) (internal quotation marks omitted). While the court will need 3 more detailed information prior to final approval, it finds the information supporting plaintiffs’ 4 motion sufficient to find there are common questions of law for all members. 5 Third, “the claims or defenses of the representative parties” must be “typical of the claims 6 or defenses of the class.” Fed. R. Civ. P. 23(a)(3). “Measures of typicality include ‘whether 7 other members have the same or similar injury, whether the action is based on conduct, which is 8 not unique to the named plaintiffs, and whether other class members have been injured by the 9 same course of conduct.’” Torres v. Mercer Canyons Inc., 835 F.3d 1125, 1141 (9th Cir. 2016) 10 (quoting Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992), overruled in part on 11 other grounds by Dukes, 564 U.S. at 338)). Under this “permissive” requirement, “representative 12 claims are ‘typical’ if they are reasonably coextensive with those of absent class members; they 13 need not be substantially identical.” Parsons v. Ryan, 754 F.3d 657, 685 (9th Cir. 2014) (quoting 14 Hanlon, 150 F.3d at 1020). Here, defendants’ conduct applied to all members of the class, and 15 plaintiffs’ injuries were typical, if not identical, in that all proposed class members suffered lost 16 wages and meal and rest break violations. Mallison Decl. ¶ 37. Therefore, the typicality 17 requirement is satisfied. 18 Fourth, the class representatives and their counsel must “fairly and adequately protect the 19 interests of the class.” Fed. R. Civ. P. 23(a)(4). In evaluating this requirement, courts consider 20 both whether “(1) [ ] the named plaintiffs and their counsel have any conflicts of interest with 21 other class members and (2) [ ] the named plaintiff and their counsel [will] prosecute the action 22 vigorously on behalf of the class[.]” Hanlon, 150 F.3d at 1020. “Serious conflicts of interest can 23 impair adequate representation by the named plaintiffs, yet leave absent class members bound to 24 the final judgment, thereby violating due process.” In re Volkswagen, 895 F.3d at 607. Plaintiffs’ 25 counsel describes the process of reaching settlement as including “extensive investigation, 26 discovery, and expert assessment of damages,” Mallison Decl. ¶ 38, with the parties participating 27 in formal mediation in June 2021, Mot. at 9. Plaintiff’s counsel is very experienced in wage and 28 hour class action cases. Mallison Decl. ¶ 6. The briefing suggests the lead plaintiffs themselves 1 participated in the discovery process. Id. ¶ 38. However, the disparity between the $7,500 2 service award for each named plaintiff and the average $300 award for class members could 3 reflect a conflict of interest undermining the adequacy of representation. This disparity is 4 discussed in sub-section 3 below. 5 At this stage, the plaintiffs’ claims satisfy the four prerequisites of Rule 23(a) so as to 6 warrant preliminary approval. 7 2. Rule 23(b)—Type of Proposed Class 8 Plaintiff seeks certification under Rule 23(b)(3). Mot. at 23. A Rule 23(b)(3) class may 9 be certified only if (1) “the questions of law or fact common to class members predominate over 10 any questions affecting only individual members” and (2) “a class action is superior to other 11 available methods for fairly and efficiently adjudicating the controversy.” Fed. R. Civ. P. 12 23(b)(3). “The predominance inquiry asks whether the common, aggregation-enabling, issues in 13 the case are more prevalent or important than the non-common, aggregation-defeating, individual 14 issues.” Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036, 1045 (2016) (citation and internal 15 quotation marks omitted). “The superiority inquiry . . . requires determination of whether the 16 objectives of the particular class action procedure will be achieved in the particular case,” which 17 “necessarily involves a comparative evaluation of alternative mechanisms of dispute resolution.” 18 Hanlon, 150 F.3d at 1023 (citation omitted). Rule 23 lists “non-exclusive factors” to consider: 19 20 (A)the class members’ interests in individually controlling the prosecution or 21 defense of separate actions; 22 (B)the extent and nature of any litigation concerning the controversy already 23 begun by or against class members; 24 (C)the desirability or undesirability of concentrating the litigation of the claims in 25 the particular forum; and 26 (D)the likely difficulties in managing a class action. 27 Fed. R. Civ. P. 23(b)(3); Hanlon, 150 F.3d at 1023. 28 Wage and hour class actions are likely to be certified under this standard when “the major 29 questions in [the] case arise from [the defendants’] alleged [] failure to properly calculate wages 1 and overtime, account for meal periods and rest periods, and provide reimbursements.” Smothers, 2 2019 WL 280294, at *7. That may be true even when some factual questions call for 3 individualized evidence. See, e.g., Pena v. Taylor Farms Pac., 305 F.R.D. 197, 213–22 (E.D. 4 Cal. 2015). An employer's uniform policies often predominate when they apply to the entire 5 putative class and when class members did or do the same or similar work. See, e.g., Abdullah v. 6 U.S. Sec. Assocs., Inc., 731 F.3d 952, 964 (9th Cir. 2013); Smothers, 2019 WL 280294, at *7. 7 The court may not, however, “rely on uniform policies ‘to the near exclusion of other relevant 8 factors touching on predominance.’” Abdullah, 731 F. 3d at 964 (quoting In re Wells Fargo 9 Home Mortg. Overtime Pay Litig., 571 F. 3d 953, 955 (9th Cir. 2009)). 10 Here, plaintiffs claim common questions of law and fact predominate because all class 11 members were subject to the same policies and alleged failures of defendants regarding overtime 12 and rest breaks. Mot. at 6; Smothers, 2019 WL 280294, at *7. Thus, the primary questions turn 13 on defendants’ policies and their impact on the provision of adequate supplies such as gloves and 14 access to time-clocks to employees, all of whom were employed to carry out similar work. At the 15 same time, as noted above, the court is concerned by the lack of detailed information provided 16 regarding the similarities in pay structures and pay amounts for class members, on this record it 17 appears sufficient additional information can be provided by the time of preliminary approval. 18 The court finds preliminarily the questions common to the class predominate. 19 Because all proposed class members appear to have performed similar work and were 20 subject to the same alleged inadequate policies, the court finds the record at this stage supports a 21 preliminary conclusion the class action is the superior method for resolving this matter. See 22 Abdullah, 731 F.3d at 965. 23 In sum, the proposed class appears likely to be certified under Rule 23(b)(3) at this 24 preliminary stage. 25 ///// 26 ///// 27 ///// 1 3. Rule 23(e)(2)—Preliminary Certification and Approval 2 Under Rule 23(e), a class action may be settled “only with the court's approval,” and the 3 court may provide such approval “only after a hearing and only on finding that it is fair, 4 reasonable, and adequate . . . ” after considering whether: 5 (A) the class representatives and class counsel have adequately represented the class; 6 (B) the proposal was negotiated at arm's length; 7 (C)the relief provided for the class is adequate, taking into account: 8 (i)the costs, risks, and delay of trial and appeal; 9 (ii)the effectiveness of any proposed method of distributing relief to the 10 class, including the method of processing class-member claims; 11 (iii)the terms of any proposed award of attorney's fees, including timing of 12 payment; and 13 (iv)any agreement required to be identified under Rule 23(e)(3); and 14 (D) the proposal treats class members equitably relative to each other. 15 Fed. R. Civ. P. 23(e)(2). Ninth Circuit decisions predating this rule list several similar factors 16 district courts may consider when weighing a proposed settlement agreement, including: 17 • the strength of the plaintiffs’ case; 18 • the risk, expense, complexity, and likely duration of further litigation; 19 • the amount offered in settlement; 20 •the extent of discovery completed and the stage of the proceedings; and 21 •the experience and views of counsel. 22 In re Volkswagen, 895 F.3d at 610 n.18 (quoting Hanlon, 150 F.3d at 1026); see also Fed. R. Civ. 23 P.23, Advisory Committee's Notes to 2018 Amendment (explaining factors listed in Rule 24 23(e)(2) are not intended to “displace” factors listed in existing judicial decisions). The court here 25 addresses the relevant factors, noting that when, as here, a settlement agreement has been 26 negotiated before a class has been certified, there is no presumption of a fair and reasonable 27 settlement, and the court must “undertake an additional search for ‘more subtle signs that class 28 counsel have allowed pursuit of their own self-interests and that of certain class members to infect 1 the negotiations.’” In re Volkswagen, 895 F.3d at 610–11 (quoting Bluetooth, 654 F.3d at 946– 2 47). The court is primarily concerned with the lack of detail supporting a finding that the parties’ 3 negotiations were in fact arms-length, the attorneys’ fees and the lead plaintiff incentive fees. 4 First, the court notes the parties make only conclusory statements regarding their arms- 5 length negotiations. See Mot. at 6, 16 ( “[T]he [parties] conducted held arms-length negotiations 6 with the assistance of well-known and respected mediator Mark Rudy.”). Similarly, the briefing 7 provides little information to help the court ascertain how parties weighed the costs and risks of 8 trial against the proposed settlement amount, Id. at 7, or compared the strength of plaintiffs' case 9 with the settlement amount, See generally id. 10 Second, with regard to attorneys' fees, as noted, class counsel intend to seek fees of “up to 11 one third of the gross settlement [] for their reasonable attorneys’ fees” as well as reasonable costs 12 of up to $12,000 Mot. at 9, 11. A disproportionate award to counsel can be a “subtle sign[] that 13 class counsel have allowed pursuit of their own self-interests and that of certain class members to 14 infect the negotiations.” Bluetooth, 654 F. 3d at 947 (citations omitted). The benchmark for 15 attorneys’ fees in the Ninth Circuit is 25 percent. See In re Easysaver Rewards Litig., 906 F.3d 16 747, 754 (9th Cir. 2018). Departures from that benchmark are possible only if properly supported 17 and justified. See Powers v. Eichen, 229 F.3d 1249, 1256–57 (9th Cir. 2000). Counsel has not 18 provided the court with information to allow a cross-check of the proposed award against the 19 “lodestar” fee. See Vizcaino v. Microsoft Corp., 290 F.3d 1043, 1050 (9th Cir. 2002). This 20 additional information must be submitted along with any proposal for final approval. 21 Although the parties participated in mediation with a neutral mediator before reaching the 22 settlement before the court, Mot. at 9, the mere fact of mediation alone is insufficient to show 23 fairness, adequacy and reasonableness. In re Bluetooth, 654 F.3d at 948 (“the mere presence of a 24 neutral mediator. . . is not on its own dispositive of whether the end product is a fair, adequate, 25 and reasonable settlement agreement.”). Plaintiffs represent “[t]he $397,500 [s]ettlement is a 26 reasonable recovery in light of the modest—but not inconsequential— amount of damages 27 [,815,477,] incurred by each Class Member individually and the risks of continued litigation.” 28 Mot. at 17. And they note the proposed settlement was reached after “extensive production” by 1 defendants of data, which plaintiffs’ used to calculate damages. Mot. at 7; Mallison Decl. ¶ 16. 2 For final approval, they will need to provide more detail to make this clear, if possible. 3 Third, the proposed settlement would grant named plaintiffs approximately $7,500 each, 4 Mallison Decl. ¶ 22, compared to the estimated settlement award of “just under” $300 each for 5 class members, Mot. at 11. Although plaintiffs classify this award as a service award, courts 6 commonly refer to these awards as incentive awards, or “payments to class representatives for 7 their service to the class in bringing the lawsuit.” See Radcliffe, 715 F.3d at 1163. The amount of 8 the incentive awards here is cause for concern, given that they tend to set the named plaintiffs 9 apart from the absent class members; specifically, plaintiffs who stand to receive several thousand 10 dollars extra have an incentive to support agreements unfair to absent class members and can 11 “undermine the adequacy of the class representatives.” Id. at 1163, 1165 (“Instead of being 12 solely concerned about the adequacy of the settlement for the absent class members, the class 13 representatives now had a $5,000 incentive to support the settlement regardless of its fairness 14 . . . .”). For that reason, although the Ninth Circuit has agreed incentive awards “may be proper,” 15 it has “cautioned that awarding them should not become routine practice.” Id. at 1164. “[I]f class 16 representatives expect routinely to receive special awards in addition to their share of the 17 recovery, they may be tempted to accept suboptimal settlements at the expense of the class 18 members whose interests they are appointed to guard.” Id. (quoting Staton v. Boeing Co., 19 327 F.3d 938, 975 (9th Cir. 2003)). 20 The Circuit has also regularly reversed excessive awards. Rodriguez v. W. Pub. Corp., 21 563 F.3d 948 (9th Cir. 2009); Staton, 327 F.3d at 977–78 (finding total incentive award of 22 $890,000 to be split among 29 named class representatives excessive and unsupported by record); 23 cf. Rodriguez v. Disner, 688 F.3d 645 (9th Cir. 2012) (affirming district court's decision to decline 24 approval for incentive awards totaling $325,000 to be split among five named class members). 25 For example, in Radcliffe, the Ninth Circuit reversed a settlement where named plaintiffs received 26 a “$5,000 incentive award[] only if they supported the settlement,” while class members received 27 “awards ranging from $26 to $750.” 715 F.3d at 1165. In that case, the court found the 28 conditional incentive award by itself invalidated the adequacy of named plaintiffs’ representation, 1 but also noted the “significant disparity between the incentive awards and the payments to the rest 2 of the class members further exacerbated the conflict of interest . . . .” Id. Here, named plaintiffs 3 are not faced with a conditional incentive award, but the disparity between the award amounts is 4 substantial and will require greater support for final approval. 5 At the same time, the experience of counsel and the cy pres allocation for residual funds 6 favor settlement. The court has noted the adequacy of plaintiffs’ counsel above. See also 7 Mallison Decl. ¶ 6. The parties have designated a charity to receive any residual funds not 8 distributed through the settlement and proposed a plan for distribution to the charity. See Six 9 Mexican Workers v. Ariz. Citrus Growers, 904 F.2d 1301, 1305 (9th Cir. 1990). Specifically, 10 they have agreed remaining settlement funds will be distributed to “Legal Aid at Work, subject to 11 court approval.” Mallison Decl. ¶ 24. “Legal Aid at Work is a 501(c)(3) non-profit organization 12 which assists indigent workers with employment law claims.” Id. Because this action involves 13 low-paid workers and their employment law claims, it appears to be an appropriate plan, allowing 14 any unclaimed funds to indirectly benefit the entire class. Six Mexican Workers, 904 F.2d at 15 1305. 16 Despite the concerns regarding potential conflicts of interest reviewed above, the court is 17 mindful of the “strong judicial policy favor[ing] settlement of class actions.” Adoma, 18 913 F. Supp. 2d at 972 (citing Class Plaintiffs, 955 F.2d at 1276). In light of that policy and the 19 indicators of fairness also described above, the court preliminarily concludes the settlement 20 agreement is likely to be approved under Rule 23(e)(2) if the court’s concerns expressed above 21 can be resolved at the final approval stage. That said, the court can offer no assurance that the 22 proposed fee and incentive awards will be approved without the additional information called for 23 by this order. See, e.g., Greer v. Dick's Sporting Goods, Inc., No. 15-01063, 2019 WL 4034478, 24 at *5–7 (E.D. Cal. Aug. 27, 2019) (granting preliminary approval but deferring ultimate decision 25 on fees and incentive awards). 1 C. The FLSA Collective 2 1. Collective Action Certification 3 Members of a collective action must be “similarly situated” to the original plaintiffs. 4 Campbell v. City of Los Angeles, 903 F.3d at 1109 (citing 29 U.S.C. § 216(b)). “Party plaintiffs 5 are similarly situated, and may proceed in a collective, to the extent they share a similar issue of 6 law or fact material to the disposition of their FLSA claims.” Id. at 1117. 7 The court concludes the members of the proposed FLSA collective action are similarly 8 situated. See id. at 1109. Named plaintiffs’ claims here share similar issues of fact with 9 collective action members because all proposed collective action members suffered from the 10 same employer actions leading to unpaid work and meal and rest break violations. Mot. at 6; 11 SAC ¶¶ 30–34. However, the same concerns reviewed above apply here: the briefing lacks 12 details about class members and their similarities with respect to one another. Declarations of 13 similarly situated employees can support the plausibility of material similarities among FLSA 14 collective members. See Smothers, 2019 WL 280294, at *8 (considering declarations of putative 15 FLSA collective members). While not required, Campbell, 903 F.3d at 1109, it would appear 16 declarations could supply the necessary details to complete the record by the time of final 17 approval. 18 2. FLSA Settlement 19 The court finds there are legitimate questions about the defendant’s FLSA liability 20 because defendants contest liability. Mot. at 18; Selk, 159 F. Supp. 3d at 1172. Additionally, as 21 noted above, the court has reviewed the factors necessary for certification of a Rule 23 action, and 22 finds they support preliminary certification. See Maciel v. Bar 20 Dairy, LLC, 2018 WL 23 5291969, at *4. 24 D. Proposed Class Notice 25 Federal Rule of Civil Procedure 23(e) requires that prior to settlement of a class action, 26 the court must “direct notice in a reasonable manner to all class members who would be bound by 27 the proposal.” Where a class is certified under Rule 23(b)(3), the notice must meet the 28 requirements of Rule 23(c)(2)(B). “Adequate notice is critical to court approval of a class 1 settlement under Rule 23(e).” Hanlon, 150 F. 3d at 1025. Notice must be the “best notice . . . 2 practicable under the circumstances” and must provide “individual notice to all members who can 3 be identified through reasonable effort.” Fed. R. Civ. P. 23(c)(2)(B). 4 The notice must clearly and concisely state in plain, easily understood language: 5 (i)the nature of the action; 6 (ii) the definition of the class certified; 7 (iii)the class claims, issues, or defenses; 8 (iv)that a class member may enter an appearance through an attorney if the 9 member so desires; 10 (v) that the court will exclude from the class any member who requests exclusion; 11 (vi)the time and manner for requesting exclusion; and 12 (vii) the binding effect of a class judgment on members under Rule 23(c)(3). 13 Id. “Notice is satisfactory if it ‘generally describes the terms of the settlement in sufficient detail 14 to alert those with adverse viewpoints to investigate and to come forward and be heard.’” 15 Churchill Vill., L.L.C. v. Gen. Elec., 361 F.3d 566, 575 (9th Cir. 2004) (citations omitted). 16 Here, the parties’ proposed notice packet satisfies Rule 23. It explains in plain language 17 the claims at issue, terms of settlement and the instructions on how to opt out or object, along 18 with the corresponding deadlines. See generally Notice Packet. It clearly lays out members’ 19 “legal rights and options” as well as informs members of the date and location of the final 20 approval hearing. Id. at 4–5. Finally, the notice contains a section that provides the phone 21 number for the Settlement Administrator. Id. at 5. The court approves the notice plan. 22 E. Proposed FLSA Notice 23 A district court may authorize named plaintiffs in a FLSA collective action to send notice 24 to all potential plaintiffs and set a deadline for plaintiffs to file their consents with the court. See 25 Does I thru XXIII v. Adv. Textile Corp., 214 F.3d 1058, 1064 (9th Cir. 2000); see also Hoffman- 26 La Roche, Inc. v. Sperling, 493 U.S. 165, 169 (1989) (Hoffman-La Roche II). In approving a 27 form of notice for an FLSA action, “courts must be scrupulous to respect judicial neutrality.” 1 Hoffman-La Roche II, 493 U.S. at 174. “To that end, trial courts must take care to avoid even the 2 appearance of judicial endorsement of the merits of the action.” Id. 3 As discussed above, the parties have cured the prior deficiencies in the proposed FLSA 4 notice. The proposed notice now requires written consent from members who wish to opt-in to 5 the FLSA collective action, as required. See Genesis Healthcare Corp., 569 U.S. at 75. 6 Additionally, the proposed notice period during which individuals can opt-in to the collective is 7 45 days, which the court approves. The proposed notice also includes language disclaiming any 8 endorsement of any position in the suit by the court. Notice Packet at 2. The proposed notice is 9 sufficient. 10 IV. CONCLUSION 11 For the foregoing reasons, the court grants preliminary approval of the Rule 23 class and 12 proposed FLSA collective for settlement purposes only, but cautions the issues identified above 13 must be addressed before the parties seek final approval. Specifically, at the final approval 14 hearing the parties must be prepared to address the reasonableness of the settlement negotiation, 15 the reasonableness of the proposed attorneys’ fees, including in light of a lodestar analysis, and 16 the reasonableness of the named plaintiffs’ incentive award. When filing the motion for final 17 settlement approval, the parties should also lodge, in camera, the relevant mediation briefs. The 18 court approves and appoints Phoenix Settlement Administrators as Settlement Administrator. 19 The court approves and appoints plaintiffs Angela Alcazar, Rosa Cazarez, America Duarte, Maria 20 Teresa Valdovinos, Maria Juana Zaragoza and Lilian Anguianoas as Class Representatives. The 21 court approves and appoints Mallison & Martinez to represent the Settlement Class as Class 22 Counsel. 23 The court orders the following schedule, as consistent with the Settlement Agreement, 24 Settlement Agreement ¶ III.E.1: 25 Defendants shall provide the Settlement Administrator with the names, most recent 26 known mailing address and telephone number, social security number and the 27 respective number of workweeks that each class member worked for defendants 28 during each respective class period in .pdf format, within 14 days from entry of 29 this order. 30 ///// 1 • The Settlement Administrator shall mail the class notice packet to class members 2 via first-class regular U.S. Mail within 14 days after receipt of the contact information. 3 • Class members shall have 45 days from the mailing of notice packets to opt-out. 4 Collective members shall have 45 days from the mailing of notice packets to opt-in. 5 6 • Plaintiffs’ motion for final approval and attorneys’ fees and costs shall be filed 40 days in advance of the final approval hearing 7 8 • The final approval hearing is set for October 13, 2023, at 10:00 a.m. 9 This order resolves ECF No. 61. 10 11 IT IS SO ORDERED. 12 DATED: April 7, 2023. 13