1 WO 2 NOT FOR PUBLICATION 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA
9 Casey Howard, et al., No. CV-19-00513-PHX-DJH
10 Plaintiffs, ORDER
11 v.
12 Web.com Group Incorporated,
13 Defendant. 14 15 Before the Court is the parties’ Joint Motion for Preliminary Approval of Class 16 Action Settlement and FLSA Collective Action. (Doc. 39). The parties are asking the 17 Court to: (1) conditionally certify the class for settlement; (2) appoint Named Plaintiffs 18 Casey Howard, Phil Martinez, Lori Astwood, and Ben Azar as class representatives; (3) 19 appoint Plaintiffs’ counsel, Austin Anderson and Clifton Alexander, as class counsel; (4) 20 preliminarily approve the proposed settlement agreement; (5) approve the proposed class 21 notice; (6) set a Fairness Hearing; and (7) approve the FLSA collective action settlement. 22 (Id.) 23 I. BACKGROUND 24 Defendant Web.com Group Incorporated (“Defendant”) is a for-profit company 25 based in Jacksonville, Florida and provides domain registration and web development 26 services. (Doc. 39 at 5). Defendant operates call centers throughout the United States, 27 including in Arizona, Pennsylvania, and Washington. (Id.) Plaintiffs Casey Howard (“Mr. 28 Howard”), Phil Martinez (“Mr. Martinez”), Lori Astwood (“Ms. Astwood”), and Ben Azar 1 (“Mr. Azar”) (collectively “Named Plaintiffs” or “Plaintiffs”) were hourly call-center 2 employees in Defendant’s call centers1 and allege that they were not compensated for all 3 of the hours they worked—specifically including time spent on preliminary pre-shift start- 4 up activities. (Doc. 36 ¶¶ 2-4, 35-47). 5 Plaintiffs initiated this action on January 30, 2019 (Doc. 1); they filed a First 6 Amended Complaint on February 28, 2019 (Doc. 12) and a Second Amended Complaint 7 (“SAC”) on September 10, 2019 (Doc. 36). Plaintiffs’ hybrid class and collective action 8 SAC asserts claims under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 201–19, 9 to recover their unpaid overtime compensation and statutorily prescribed penalties. (Id. ¶¶ 10 48-76). In addition to their FLSA claims, Plaintiffs further allege state-law claims for those 11 current and former hourly call-center employees who worked in Arizona,2 Pennsylvania,3 12 and Washington.4 (Id. ¶¶ 77-135). Additionally, Plaintiffs allege that they did not perform 13 work that meets the definition of exempt work under the FLSA or Arizona, Pennsylvania, 14 or Washington state law. (Id. ¶ 8). Plaintiffs’ FLSA claims are asserted as a collective 15 action under Section 216(b) of the FLSA, while their state law claims are asserted as a class 16 action under Federal Rule of Civil Procedure 23(b)(3) (“Rule 23”). (Id.) On November 17 18, 2019, the parties notified the Court that they settled this action and filed this Joint 18 Motion. (Doc. 39). 19 II. Settlement Agreement 20 Pursuant to the Settlement Agreement, Plaintiffs seek to certify a settlement class 21 that is comprised of three settlement subclasses (“State Law Classes”) defined as follows:
22 1 Mr. Howard and Mr. Martinez worked at a call center in Arizona, Ms. Astwood worked at a call center in Pennsylvania, and Mr. Azar worked at a call center in Washington. 23 (Doc. 36 ¶¶ 14-17).
24 2 Arizona statutory claims for unpaid wages pursuant to the Arizona Fair Wages and Healthy Families Act (“Arizona Act”), A.R.S. §§ 23-350, et. seq. (Doc. 36 ¶¶ 77-96). 25 3 Pennsylvania statutory claims for unpaid wages pursuant to the Pennsylvania Minimum 26 Wage Act (“PMWA”), 43 P.S. §§ 333.101, et seq. (Doc. 36 ¶¶ 97-115).
27 4 Washington statutory claims for unpaid wages pursuant to the Washington Wage Statutes (“Washington Acts”), RCW 49.46.020, RCW 49.46.130, and RCW 49.52.050–.070. 28 (Doc. 36 ¶¶ 116-35). 1 (1) the “Arizona Class Action Members” includes all hourly call-center5 employees who 2 were employed by Web.com in the State of Arizona, at any time from January 30, 2018, 3 through the final disposition of this matter; (2) the “Pennsylvania Class Action Members” 4 includes all hourly call-center employees who were employed by Web.com in the State of 5 Pennsylvania, at any time from February 28, 2016, through the final disposition of this 6 matter; (3) the “Washington Class Action Members” includes all call-center workers 7 employed by Web.com in Spokane, Washington, at any time from May 23, 2016, though 8 the final disposition of this matter, except for Carl V. Jehle.6 (Doc. 39 at 7, 19). The parties 9 represent that there are approximately 982 individuals included in the three State Law 10 Classes. (Id. at 19). 11 Additionally, the parties have proposed an FLSA Collective Action that includes 12 the Named Plaintiffs; all hourly call-center employees who were employed by Defendant 13 from January 30, 2016, through final disposition of this case, excluding Carl V. Jehle, that 14 complete a Claim Form; State Law Class members that complete a Claim Form; and the 15 individuals identified in Exhibit A (Doc. 39-1 at 46-47) (“Opt-in Plaintiffs”) to the 16 proposed Settlement Agreement (“Settlement Agreement”). (Doc. 39-1 at 5-6). The 17 members of the State Law Classes and the FLSA Collective Action are collectively referred 18 to as the “Settlement Class”. 19 Under the Settlement Agreement, Defendant would pay a maximum settlement 20 amount of $500,000.00 (“Settlement Fund”). (Doc. 39 at 7). The Settlement Agreement 21 provides for the following allocation of the Settlement Fund: (1) up to $30,000.00 to the 22 claims administrator, ILYM Group, Inc.; (2) $10,000.00 to the four class representatives7; 23 (3) $125,000.00 to be paid to class counsel in attorney’s fees; and (4) estimated litigation
24 5 Exhibit B to the Settlement Agreement lists the job titles that are considered to be hourly call-center employees. (Doc. 39-1 at 48-57). 25 6 “Carl V. Jehle had previously filed his pre-notice consent to join this litigation and 26 subsequently requested that it be withdrawn as he no longer desired to continue as a party plaintiff.” (Doc. 39 at 7 n.3). 27 7 The four Named Plaintiffs have been proposed as the class representatives. Pursuant to 28 the Settlement Agreement, each of the four will receive an incentive award of $2,500.00 for a total of $10,000.00. (Doc. 39 at 10). 1 costs of up to $25,000.00. (Id. at 6–12). After these deductions from the Settlement Fund, 2 each member of the Settlement Class will receive their pro rata share of the Settlement 3 Fund based on their workweeks—a number unique to each class member calculated based 4 on the number of weeks he or she worked during the relevant period. (Doc. 39-1 at 19). 5 The parties estimate that the average settlement received by the Settlement Class will be 6 $94.00. (Id. at 18). Unclaimed payments will be returned to Defendant. (Id. at 14). 7 II. LEGAL STANDARDS 8 The parties seek preliminary certification and approval of the proposed FLSA 9 collective action settlement under 29 U.S.C. § 216(b) and the proposed class action 10 settlement under Rule 23(e) of the Federal Rules of Civil Procedure. Although “hybrid 11 actions” involving Rule 23 and FLSA collective actions are not prohibited, such combined 12 actions may cause confusion to potential class members. As the Ninth Circuit has noted, 13 “[u]nder the FLSA, a potential plaintiff does not benefit from (and is not bound by) a 14 judgment unless he or she affirmatively ‘opts-in’ to the lawsuit . . . . This rule is in contrast 15 to the typical Rule 23 class action, where a potential plaintiff must opt out to be excluded 16 from the class.” Busk v. Integrity Staffing Solutions, Inc., 713 F.3d 525, 528 (9th Cir. 17 2013). The notice of settlement, and the documents to be completed by the class members 18 to “opt-in” or “opt-out” of the settlement, and to submit claims must adequately inform the 19 class members of their respective rights under the FLSA and Rule 23. Id. at 529–30. 20 Rule 23(e) establishes the following procedures for approving a class action 21 settlement: (1) the court must direct notice in a reasonable manner to all class members 22 who would be bound by the proposal; (2) if the proposal would bind class members, the 23 court must approve it only after a hearing and on finding that it is fair, reasonable and 24 adequate; (3) the parties seeking approval must file a statement identifying any agreement 25 made in connection with the proposal; (4) if the class action was previously certified under 26 Rule 23(b)(3), the court may refuse to approve the settlement unless it affords a new 27 opportunity to request exclusion to individual class members who had an earlier 28 opportunity to request exclusion but did not do so; and (5) any class member may object 1 to the proposal if it requires court approval. 2 The approval of a class action settlement pursuant to Rule 23 takes places in two 3 stages. First, the court preliminarily approves the settlement pending a fairness hearing, 4 temporarily certifies a settlement class, and authorizes notice to the class. Chavez v. 5 Lumber Liquidators Inc., 2015 WL 2174168, at *3 (N.D. Cal. May 8, 2015). “At this 6 preliminary approval stage, the court need only ‘determine whether the proposed 7 settlement is within the range of possible approval.’” Murillo v. Pac. Gas & Elec. Co., 266 8 F.R.D. 468, 470 (E.D. Cal. 2010) (quoting Gautreaux v. Pierce, 690 F.2d 616, 621 n.3 (7th 9 Cir. 1982)). “The court is really only concerned with ‘whether the proposed settlement 10 discloses grounds to doubt its fairness or other obvious deficiencies such as unduly 11 preferential treatment of class representatives or segments of the class, or excessive 12 compensation of attorneys . . . .’” Id. (citing West v. Circle K Stores, Inc., 2006 WL 13 1652598, at *11 (E.D. Cal. June 13, 2006)). Once the court is satisfied as to the 14 certifiability of the class and the results of the initial inquiry into fairness, reasonableness, 15 and adequacy of the settlement, notice of a formal Rule 23(e) fairness hearing is given to 16 the class members. At the final fairness hearing, the court entertains class members’ 17 objections to (1) the treatment of the action as a class action and/or (2) the terms of the 18 settlement. The court then makes a final determination whether the parties should be 19 allowed to settle the case pursuant to the terms of the proposed settlement. Id. (citing 20 Manual for Complex Litigation, Fourth, § 21.633 (2004); Nat’l Rural Telecomms. Coop. 21 v. DIRECTTV, Inc., 221 F.R.D. 523, 525 (C.D. Cal. 2004)). 22 Before approving the settlement of an FLSA collective action, courts must 23 undertake an inquiry similar to that required for Rule 23 class action settlements. The 24 requirements for approval of a FLSA collection action settlement are less stringent, 25 however, because persons who do not opt-in as parties to the FLSA collective action are 26 not bound by the settlement. Millan v. Cascade Water Services, Inc., 310 F.R.D. 593, 607 27 (E.D. Cal. 2015). Most district courts in the Ninth Circuit evaluate a proposed FLSA 28 settlement under the standard established in Lynn’s Food Stores, Inc. v. United States, 679 1 F.2d 1350, 1355 (11th Cir. 1982), which requires that the settlement constitute a fair and 2 reasonable resolution of a bona fide dispute over FLSA provisions. Gonzalez–Rodriguez 3 v. Mariana’s Enterprises, 2016 WL 3869870, at *3 n. 1 (D. Nev. July 14, 2016) (citing 4 district court decisions from the Southern and Northern Districts of California and the 5 District of Arizona). Some courts adopt the factors for approving a Rule 23 class action 6 settlement even though some factors will not apply due to differences between FLSA 7 actions and Rule 23 class actions. Khanna v. Intercon Security Systems, Inc., 2014 WL 8 1379861, at *6 (E.D. Cal. April 8, 2014). 9 II. DISCUSSION 10 As the parties correctly recognize, certification of a FLSA collective action and a 11 Rule 23 wage and hour class action must be analyzed as separate analytical steps. This 12 Order will discuss: (A) certification of the Rule 23 class action; (B) certification of the 13 FLSA collective action; and (C) the appropriateness of the Settlement Agreement, 14 including the notice, release, and claim plan. 15 A. Rule 23 Class Action Certification 16 The Ninth Circuit has declared that a strong judicial policy favors settlement of class 17 actions. Class Plaintiffs v. City of Seattle, 955 F.2d 1268, 1276 (9th Cir. 1992). 18 Nevertheless, where, as here, “parties reach a settlement agreement prior to class 19 certification, courts must peruse the proposed compromise to ratify both [1] the propriety 20 of the certification and [2] the fairness of the settlement.” Staton v. Boeing Co., 327 F.3d 21 938, 952 (9th Cir. 2003). Federal courts must pay “undiluted, even heightened, attention” 22 to class certification requirements in a settlement context. Amchem Products, Inc. v. 23 Windsor, 521 U.S. 591, 620 (1997); Molski v. Gleich, 318 F.3d 937, 946 (9th Cir. 2003). 24 The parties cannot “agree to certify a class that clearly leaves any one requirement 25 unfulfilled,” and consequently the court cannot blindly rely on the fact that the parties have 26 stipulated that a class exists for purposes of settlement. Berry v. Baca, 2005 WL 1030248, 27 at *7 (C.D. Cal. May 2, 2005). 28 Before a court may evaluate a class action settlement under Rule 23(e), the 1 settlement class must meet the requirements of Rules 23(a) and (b). Rule 23(a) lists four 2 criteria that must be met to certify a class action: (1) numerosity; (2) commonality of law 3 or fact; (3) typicality of the representative plaintiff’s claims; and (4) adequacy of 4 representation. A class may only be certified if the court is “satisfied, after a rigorous 5 analysis, that the prerequisites of Rule 23(a) have been satisfied.” General Tel. Co. of 6 Southwest v. Falcon, 457 U.S. 147, 161 (1982). The burden is on the party seeking class 7 certification to show that these elements have been met. Doninger v. Pac. N.W. Bell, Inc., 8 564 F.2d 1304, 1308 (9th Cir. 1977). 9 Once Rule 23(a) is satisfied, the putative class must then fulfill the predominance 10 and superiority requirements of Rule 23(b)(3). If subsections (a) and (b) are satisfied, the 11 Court will evaluate whether the settlement is “fair, reasonable, and adequate.” Fed. R. Civ. 12 Pro. 23(e)(1)(C). 13 1. Rule 23(a) Numerosity 14 The proposed class must be so numerous that joinder of all members individually is 15 “impracticable.” Fed. R. Civ. P. 23(a)(1). Rule 23’s requirement that “the class be so 16 numerous that joinder of all members is impractical does not mean that joinder must be 17 impossible, but rather means only that the court must find that the difficulty or 18 inconvenience of joining all members of the class makes class litigation desirable.” In re 19 Itel Sec. Litig., 89 F.R.D. 104, 112 (N.D. Cal. 1981); accord Baghdasarian v. Amazon.com, 20 Inc., 258 F.R.D. 383, 388 (C.D. Cal. 2009) (defining “impracticability” as when joinder of 21 all class members is “difficult or inconvenient”); Campbell v. PricewaterhouseCoopers, 22 LLP, 253 F.R.D. 586, 594 (E.D. Cal. 2008) (holding that “an attempt to join all parties 23 must only be difficult or inconvenient” to satisfy Rule 23(a)(1)) (citing Harris v. Palm 24 Springs Alpine Estates, Inc., 329 F.2d 909, 913–14 (9th Cir. 1964)). 25 No specific numerical threshold is required. General Tel. Co. v. E.E.O.C., 446 U.S. 26 318, 330 (1980). Instead, it “requires examination of the specific facts of each case and 27 imposes no absolute limitations.” Id. That said, generally, forty or more members will 28 satisfy the numerosity requirement. Collins v. Cargill Meat Solutions Corp., 274 F.R.D. 1 294, 300 (E.D. Cal. 2011). The parties provide that there are approximately 982 individuals 2 in the three State Law Classes. (Doc. 39 at 19). Thus, the numerosity requirement is 3 satisfied. 4 2. Rule 23(a) Commonality 5 A class has sufficient commonality “if there are questions of fact and law which are 6 common to the class.” Fed. R. Civ. P. 23(a)(2). Because “[t]he Ninth Circuit construes 7 commonality liberally,” “it is not necessary that all questions of law and fact be common.” 8 West v. Circle K Stores, Inc., 2006 WL 1652598, at *3 (E.D. Cal. June 13, 2006) (citing 9 Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019 (9th Cir. 1998)). The commonality 10 requirement is met “when the common questions it has raised are apt to drive the resolution 11 of the litigation . . . .” Jimenez v. Allstate Ins. Co., 765 F.3d 1161, 1165 (9th Cir. 2014) 12 (internal quotation and citation omitted). In the wage and hour context, the inquiry is 13 whether the entire class was injured by the same allegedly unlawful wage and hour practice. 14 See Arredondo v. Delano Farms Co., 301 F.R.D. 493, 513 (E.D. Cal. 2014). 15 Plaintiffs allege Defendant had a company-wide policy of not paying hourly call- 16 center employees for “start-up” time before their respective shifts started. (Doc. 39 at 5, 17 22). Accordingly, as all of the individuals in the State Law Classes seem to have been 18 subject to the same allegedly unlawful wage and hour practice, this Court finds a common 19 nucleus of facts and potential legal remedies dominates this litigation. While members of 20 the State Law Classes will be entitled to different damages based on the number of hours 21 they worked without compensation, these individual issues do not overcome the fact that 22 common questions present a significant aspect of the case and can be resolved on a 23 representative rather than individual basis. Thus, Plaintiffs have established sufficient 24 commonality. 25 3. Rule 23(a) Typicality 26 The requirement of typicality is met if “the claims or defenses of the representative 27 parties are typical of the claims or defenses of the class.” Fed. R. Civ. P. 23(a)(3). 28 Typicality requires that class representatives “possess the same interest and suffer the same 1 injury” as the putative class. Falcon, 457 U.S. at 156. Representative claims need only be 2 “reasonably co-extensive with those of absent class members; they need not be 3 substantially identical.” Hanlon, 150 F.3d at 1020. The test for typicality “is whether other 4 members have the same or similar injury, whether the action is based on conduct which is 5 not unique to the named plaintiffs, and whether other class members have been injured by 6 the same course of conduct.” Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 7 1992) (internal quotation and citation omitted). This ensures that “the named plaintiff’s 8 claim and the class claims are so interrelated that the interests of the class members will be 9 fairly and adequately protected in their absence.” Falcon, 457 U.S. at 158 n.13. 10 As previously noted, Plaintiffs claim Defendant had a policy of refusing to pay 11 hourly call-center employees for the “start-up” time before their respective shifts started. 12 (Doc. 39 at 22-23). Although potentially different in extent from the State Law Class 13 members, Plaintiffs appear to have suffered the same injury—failure to be compensated 14 for compensable time worked—as the putative class. For purposes of preliminary 15 certification and settlement, Plaintiffs have made an adequate showing that the state law 16 claims are typical to the State Law Classes. 17 4. Rule 23(a) Adequacy 18 The requirement of adequate representation asks whether the representatives “will 19 fairly and adequately protect the interests of the class.” Fed. R. Civ. P. 23(a)(4). Courts 20 are to inquire: (1) whether the named plaintiffs and counsel have any conflicts of interest 21 with the rest of the potential class members and (2) whether the named plaintiff and counsel 22 will prosecute the action vigorously for the class as a whole. See Hanlon, 150 F.3d at 1020. 23 This adequacy inquiry considers a number of factors, including “the qualifications of 24 counsel for the representatives, an absence of antagonism, a sharing of interests between 25 representatives and absentees, and the unlikelihood that the suit is collusive.” Brown v. 26 Ticor Title Ins., 982 F.2d 386, 390 (9th Cir. 1992). “The adequacy-of-representation 27 requirement tend[s] to merge with the commonality and typicality criteria of Rule 23(a).” 28 Amchem, 521 U.S. at 626 n.20. 1 The examination of potential conflicts of interest in settlement agreements “has long 2 been an important prerequisite to class certification. That inquiry is especially critical 3 when [ ] a class settlement is tendered along with a motion for class certification.” Hanlon, 4 150 F.3d at 1020. There is nothing in the record to suggest that Plaintiffs have antagonistic 5 interests to the rest of the State Law Classes; rather, Plaintiffs and members of the State 6 Law Classes share a common interest in recovering their unpaid wages. (Doc. 39 at 23). 7 Additionally, there is no question that Plaintiffs’ counsel has extensive experience in 8 litigating wage and hour class actions. (Doc. 39-3). 9 The second prong of the adequacy inquiry examines the vigor with which Plaintiffs 10 and their counsel have pursued the common claims. “Although there are no fixed standards 11 by which ‘vigor’ can be assayed, considerations include competency of counsel and, in the 12 context of a settlement-only class, an assessment of the rationale for not pursuing further 13 litigation.” Hanlon, 150 F.3d at 1021. Probing Plaintiffs and their counsels’ rationale for 14 not pursuing further litigation, however, is inherently more complex. “District courts must 15 be skeptical of some settlement agreements put before them because they are presented 16 with a ‘bargain proffered for . . . approval without the benefit of an adversarial 17 investigation.’” Hanlon, 150 F.3d at 1022 (quoting Amchem, 521 U.S. at 620). 18 Plaintiffs provide that they diligently litigated this action from filing to mediation 19 and, after substantial investigation and analysis, negotiated a fair settlement with the 20 assistance of a third-party mediator. Thus, the Court finds that, to date, Plaintiffs and their 21 counsel have prosecuted this action vigorously on behalf of the class and there is nothing 22 to suggest that this vigorous representation will not continue. The Court, therefore, finds 23 that the adequacy of representation requirement has been met. 24 5. Rule 23(b)(3) Predominance 25 “[T]he focus of the Rule 23(b)(3) predominance inquiry is on the balance between 26 individual and common issues.” Alberto v. GMRI, Inc., 252 F.R.D. 652, 663 (E.D. Cal. 27 2008). Where common questions present a significant aspect of the case and are able to be 28 resolved for all class members in a single action, the case can be handled on a representative 1 rather than individual basis. Id. 2 The primary injuries to the members of the State Law Classes appear to be largely 3 identical and are all alleged to be the result of an overarching policy. Although the scope 4 of the damages will vary from individual to individual, the determination of whether the 5 policies at issue actually violate state law will answer a bulk of the inquiry before the Court. 6 Especially in light of the fact that the parties have agreed to a settlement, the common 7 issues appear to predominate over the required individual inquiries. The Court, therefore, 8 finds that common questions of law and fact predominate. 9 6. Rule 23(b)(3) Superiority 10 Rule 23(b)(3) provides that courts should consider “(A) the class members’ interests 11 in individually controlling the prosecution or defense of separate actions; (B) the extent 12 and nature of any litigation concerning the controversy already begun by or against class 13 members; (C) the desirability or undesirability of concentrating the litigation of the claims 14 in the particular forum; and (D) the likely difficulties in managing a class action.” Fed. R. 15 Civ. P. 23(b)(3)(A)-(D). The fact that the parties have reached a settlement is relevant to 16 consideration of these factors and when “[c]onfronted with a request for settlement-only 17 class certification, a district court need not inquire whether the case, if tried, would present 18 intractable management problems [under Rule 23(b)(3)(D)], for the proposal is that there 19 be no trial.” Amchem, 521 U.S. at 620. However, “other specifications of the Rule—those 20 designed to protect absentees by blocking unwarranted or overbroad class definitions— 21 demand undiluted, even heightened, attention in the settlement context.” Id. 22 Plaintiffs argue that class resolution is superior to other available methods for the 23 fair and efficient adjudication of the controversy because there is no evidence that members 24 of the State Law Classes would have any interest in maintaining this litigation in separate 25 actions. (Doc. 39 at 26). Moreover, Plaintiffs provide that the benefits of concentrating 26 the claims in this action are evident because Defendant has consented to this Court’s 27 jurisdiction and the action allows for the resolution of claims across multiple states. (Id.) 28 Further, this Court is unaware of any concurrent litigation begun by any of the other 1 putative class members regarding Defendant’s payment practices. A class action appears 2 to be the superior method of adjudicating the state law claims. 3 7. Conclusion 4 Because Plaintiffs have satisfied all of the Rule 23(a) criteria and the Rule 23(b)(3) 5 predominance and superiority requirements, the three State Law Classes are preliminarily 6 certified. 7 B. FLSA Collective Action 8 Plaintiffs also request that this matter be certified as a collective action under the 9 FLSA. (Doc. 39 at 29-32). The FLSA was enacted to protect workers from substandard 10 wages and oppressive working hours. See Barrentine v. Arkansas–Best Freight System, 11 450 U.S. 728, 739 (1981). Under the FLSA, “one or more employees” may file a civil 12 action—termed a collective action—“in behalf of himself or themselves and other 13 employees similarly situated.” 29 U.S.C. § 216(b). Unlike a class action under Rule 23, 14 to participate in the collective action, an employee is required to give his consent in writing 15 to become a party. 29 U.S.C. § 216(b); see Hoffmann-La Roche Inc. v. Sperling, 493 U.S. 16 165, 170 (1989) (rights in a collective action under the FLSA are dependent on the 17 employee receiving accurate and timely notice about the pendency of the collective action, 18 so that the employee can make informed decisions about whether to participate). “If an 19 employee does not file a written consent, then that employee is not bound by the outcome 20 of the collective action.” Edwards v. City of Long Beach, 467 F. Supp. 2d 986, 989 (C.D. 21 Cal. 2006). “When the parties seek settlement approval of an FLSA collective action claim 22 before seeking certification of a collective action, courts in this circuit first consider 23 whether certification is appropriate and then whether the proposed settlement is 24 substantively acceptable.” Kempen v. Matheson Tri-Gas, Inc., 2016 WL 4073336, at *4 25 (N.D. Cal. Aug. 1, 2016); Tijero v. Aaron Bros., Inc., 301 F.R.D. 314, 322–34 (N.D. Cal. 26 2013). 27 The Ninth Circuit’s recent decision in Campbell v. City of Los Angeles provides 28 guidance on what “similarly situated” means in the FLSA context. 903 F.3d 1090, 1110– 1 17 (9th Cir. 2018). According to the Ninth Circuit, “[p]arty plaintiffs are similarly situated, 2 and may proceed in a collective, to the extent they share a similar issue of law or fact 3 material to the disposition of their FLSA claims.” Id. at 1117. Campbell specified a two- 4 step approach for determining whether a FLSA collective action may proceed. In the first 5 step, the plaintiff moves for preliminary certification and the district court applies a “lenient 6 [standard] . . . loosely akin to a plausibility standard,” with the analysis “focused on a 7 review of the pleadings but [ ] sometimes [ ] supplemented by declarations or limited other 8 evidence.” Id. at 1109. If granted, “preliminary certification results in the dissemination 9 of a court-approved notice to the putative collective action members, advising them that 10 they must affirmatively opt in to participate in the litigation.” Id. In the second step, 11 typically following discovery, the employer may move for decertification, showing the 12 “similarly situated” requirement has not been satisfied, prompting the court to “take a more 13 exacting look at the plaintiffs’ allegations and the record.” Id. 14 Applying the Campbell framework, the Court finds that preliminary certification of 15 the FLSA Collective Action is appropriate. Plaintiffs define the Collective Action here as 16 the Named Plaintiffs; all hourly call-center employees who were employed by Defendant 17 from January 30, 2016, through final disposition of this case, excluding Carl V. Jehle, that 18 complete a Claim Form; State Law Class members that complete a Claim Form; and the 19 Opt-in Plaintiffs. (Doc. 39-1 at 5-6). The parties provide that the members of the FLSA 20 Collective Action are similarly situated because they were all employed in similar positions 21 and were subject to Defendant’s pattern, practice, and policy of failing to pay the proper 22 amount of overtime compensation for all hours worked. (Doc. 36 at 12-14). At this 23 preliminary stage, the Court is satisfied that the “putative ‘party plaintiffs are alike in ways 24 that matter to the disposition of their FLSA claims,’ as they held similar jobs with similar 25 functions and were uniformly subject to [Defendant’s] compensation policies that led to 26 the alleged FLSA violations here, presenting ‘similar issue[s] of law or fact material to the 27 disposition of their FLSA claims.’” Smothers v. NorthStar Alarm Servs., LLC, 2019 WL 28 280294, at *8 (E.D. Cal. Jan. 22, 2019) (quoting Campbell, 903 F.3d at 1117). 1 For the foregoing reasons, the Court will preliminarily certify the FLSA Collective 2 Action. 3 C. Preliminary Settlement Approval 4 Rule 23(e) requires the Court to determine whether a proposed settlement is 5 “fundamentally fair, adequate and reasonable.” Staton v. Boeing Co., 327 F.3d 938, 959 6 (9th Cir. 2003) (internal quotations omitted). In making this determination, a court may 7 consider what are termed the Churchill factors: (1) the strength of the plaintiff’s case; (2) 8 “the risk, expense, complexity, and likely duration of further litigation”; (3) “the risk of 9 maintaining class action status throughout the trial”; (4) “the amount offered in settlement”; 10 (5) the extent of discovery completed, and the stage of the proceedings; (6) “the experience 11 and views of counsel”; (7) “the presence of a governmental participant”; and (8) “the 12 reaction of the class members to the proposed settlement.” Churchill Vill., L.L.C. v. Gen. 13 Elec., 361 F.3d 566, 575 (9th Cir. 2004). Moreover, “the settlement may not be the product 14 of collusion among the negotiating parties.” In re Mego Fin. Corp. Sec. Litig., 213 F.3d 15 454, 458 (9th Cir. 2000). 16 Because some of the Churchill factors cannot be fully assessed until the final 17 fairness hearing, courts sometimes opt for a more curtailed fairness assessment, reasoning 18 that “a full fairness analysis is unnecessary at this stage.” See Alberto v. GMRI, Inc., 252 19 F.R.D. 652, 665 (E.D. Cal. 2008) (internal quotations omitted). Instead, courts at the 20 preliminary hearing stage tend to consider only whether the proposed settlement “(1) 21 appears to be the product of serious, informed, non-collusive negotiations; (2) has [] 22 obvious deficiencies; (3) [] improperly grant[s] preferential treatment to class 23 representatives or segments of the class; and (4) falls within the range of possible 24 approval.” Spann v. J.C. Penney Corp., 314 F.R.D. 312, 319 (C.D. Cal. 2016) (citations 25 omitted). 26 Similar considerations pertain to settling collective actions under the FLSA. “FLSA 27 claims may not be settled without approval of either the Secretary of Labor or a district 28 court.” Semiano v. Xyris Enter., Inc., 602 F. App’x 682, 683 (9th Cir. 2015) (citing Nall 1 v. Mal-Motels, Inc., 723 F.3d 1304, 1306 (11th Cir. 2013)). Courts within the Ninth Circuit 2 generally apply the Eleventh Circuit standard, which asks whether the settlement is “a fair 3 and reasonable resolution of a bona fide dispute over FLSA provisions.” Nall, 723 F.3d at 4 1308 n.3. “In conducting this inquiry, courts often turn to factors relied on in preliminary 5 certification of Rule 23 class actions to the extent those factors apply to FLSA actions.” 6 Smothers, 2019 WL 280294, at *9 (citing Maciel v. Bar 20 Dairy, LLC, 2018 WL 5291969, 7 at *4 (E.D. Cal. Oct. 23, 2018)). 8 Courts must evaluate the “settlement as a whole, rather than assessing its individual 9 components.” Lane v. Facebook, Inc., 696 F.3d 811, 818 (9th Cir. 2012). As a corollary, 10 it is not the Court’s role to “delete, modify or substitute certain provisions” of the 11 settlement. Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998) (quoting 12 Officers for Justice v. Civil Serv. Comm’n of San Francisco, 688 F.2d 615, 628 (9th Cir. 13 1982), overruled on other grounds by Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011). 14 Rather, “[t]he settlement must stand or fall in its entirety.” Id. 15 Having reviewed the parties’ Motion, the terms of the Settlement Agreement, and 16 the Notice of Class and Collective Action Settlement (“Notice”), the Court concludes that 17 there are issues concerning the Settlement Agreement and the Notice that will require 18 modification, and consequently, the Court will deny the preliminary approval of the 19 Settlement Agreement. Indeed, the flaws in the Settlement Agreement demonstrate why 20 the question of whether a Rule 23 class action can co-exist with a related FLSA collective 21 action has divided district courts in the Ninth Circuit. See Pitts v. Terrible Herbst, Inc., 22 653 F.3d 1081, 1093 (9th Cir. 2011) (recognizing the split between district courts in the 23 Ninth Circuit, but declining to address the issue because the plaintiff abandoned the FLSA 24 claim). These deficiencies must be remedied in any subsequent motion for preliminary 25 approval of a settlement. 26 First, the Settlement Agreement does not separate the Settlement Fund based on 27 claims; rather, it simply proposes to distribute payments with respect to all of the claims 28 based on weeks worked by the members of the Settlement Class. Without separate 1 settlement funds, it is unclear to the Court whether a State Law Class member will receive 2 additional compensation if he or she chooses to opt-in to the FLSA Collective Action. A 3 release of FLSA claims in exchange for no consideration is not “a fair and reasonable 4 resolution of a bona fide dispute over FLSA provisions.” 29 U.S.C. § 216(b). As a result, 5 courts that have approved settlements releasing both FLSA and Rule 23 claims generally 6 do so only when the parties expressly allocate settlement payments to FLSA claims. Millan 7 v. Cascade Water Services, Inc., 310 F.R.D. 593, 602 (E.D. Cal. 2015); see also Thompson 8 v. Costco Wholesale Corp., 2017 WL 697895, at *7-8 (S.D. Cal. Feb. 22, 2017) (denying 9 preliminary approval due to “suspect” opt-in structure and noting that “courts that have 10 approved settlements releasing both FLSA and Rule 23 claims generally do so only when 11 the parties expressly allocate settlement payments to FLSA claims”); Khanna v. Intercon 12 Sec. Systems, Inc., 2014 WL 1379861, at *2 (E.D. Cal. Apr. 8, 2014) (approving hybrid 13 settlement that allocated two-thirds of net settlement amount to state claims and one-third 14 of net settlement amount to FLSA claims); Pierce v. Rosetta Stone, Ltd., 2013 WL 15 1878918, at *3 (N.D. Cal. May 3, 2013) (same). If Defendant wants a release of a bona 16 fide FLSA claim, it should have to pay fair and reasonable consideration for that release. 17 Second, the Notice is inadequate. In an FLSA action, “the court must provide 18 potential plaintiffs ‘accurate and timely notice concerning the pendency of the collective 19 action, so that they can make informed decisions about whether or not to participate.’” 20 Adams v. Inter-Con Sec. Sys., 242 F.R.D. 530, 539 (N.D. Cal. 2007) (quoting Hoffmann- 21 La Roche, 493 U.S. at 170). In light of this requirement, and because of the inherent 22 differences between Rule 23 class actions and FLSA collective actions, courts considering 23 approval of settlements in these hybrid actions consistently require class notice forms to 24 explain: “(1) the hybrid nature of th[e] action; and (2) the claims involved in th[e] action; 25 (3) the options that are available to [the State Law] Class members in connection with the 26 settlement, including how to participate or not participate in the Rule 23 class action and 27 the FLSA collection action aspects of the settlement; and (4) the consequences of opting- 28 in to the FLSA collective action, opting-out of the Rule 23 class action, or doing nothing.” 1 Pierce, 2013 WL 1878918 at *4; see also Sharobiem, 2015 WL 10791914, at *4 (noting 2 that because the proposed claim form did not distinguish between a Rule 23 class action 3 and FLSA class action, it was “not clear and easy to follow”). 4 In this action, the Notice of Class and FLSA Collective Action Settlement (Doc. 39- 5 2 at 2-6) explains that state and federal claims are at issue in this action. (Id. at 2). 6 However, the Notice does not explain the difference between a class action and a collective 7 action. Additionally, it does not explain the scope of released claims for the members of 8 the State Law Classes and the FLSA Collective Action. Most significantly, however, it 9 does not appear to provide any mechanism for a recipient to participate in the State Law 10 Class but not opt in to the FLSA Collective Action. Instead, it gives the false—all or 11 nothing—option to either (a) opt-out of the State Law Class and the FLSA Collective 12 Action or (b) submit a claim and recover for both the FLSA claim and the Rule 23 claims. 13 In other words, the Notice does not explain the hybrid nature of this case and does not 14 adequately explain the option to exhaust only the FLSA claim or only the State Law claims. 15 To remedy this deficiency, if the parties wish to continue with a settlement of both State 16 Law and FLSA claims, any notice must: (1) explain how much of the settlement amount 17 will be paid for the release of the FLSA claims; (2) explain and provide a mechanism for 18 recipients to opt-in to the collective action that complies with the FLSA; and (3) explain 19 the consequences of opting into the FLSA collective, opting out of the Rule 23 class, or 20 doing nothing. 21 Third, and related to the previous issue, the Settlement Agreement and the Notice 22 appear to require members of the State Law Classes to submit a Claim Form in order to 23 receive a settlement payment. (Doc. 39-1 at 32; Doc. 39-2 at 4). The parties have muddled 24 the distinction between the mandatory opt-out procedure of a Rule 23 class action and the 25 mandatory opt-in procedure of an FLSA collective action. See Thorpe v. Abbott 26 Laboratories, Inc., 534 F. Supp. 2d 1120, 1123 (N.D. Cal. 2008). To provide clarity, a 27 party seeking class certification pursuant to Rule 23(b)(3) must give notice to any putative 28 class member “that the court will exclude from the class any member who requests 1 exclusion.” Fed. R. Civ. P. 23(c)(2)(B)(v). It does not require a class member opt-in to 2 the class action. As noted by the Federal Judicial Center, a claims process is not necessary 3 in all cases: “In too many cases, the parties may negotiate a claims process which serves 4 as a choke on the total amount paid to class members. When the defendant already holds 5 information that would allow at least some claims to be paid automatically, those claims 6 should be paid directly without requiring claim forms.” De Leon v. Bank of Am., N.A., 7 2012 WL 2568142, at *20 (M.D. Fla. Apr. 20, 2012) (quoting 2010 version of the “Judges’ 8 Class Action Notice and Claims Process Checklist and Plain Language Guide” produced 9 by the Federal Judicial Center); see Otey v. CrowdFlower, Inc., 2015 WL 4076620 (N.D. 10 Cal. July 2, 2015) (having previously rejected a claim procedure, the court approved a 11 claims process paying settlements directly to class members concurrent in time with the 12 notice provided). 13 In this instance, Defendant has all of the information necessary to process claims to 14 the 982 individuals in the State Law Classes (Doc. 39 at 19); i.e., Defendant possesses a 15 record of the number of hours worked by each of the 982 employees in the relevant time 16 period, the rate at which each worked, and the aggregate hours worked by all class members 17 during the same period. Thus, requiring submission of a claim form by the identified 982 18 individuals regarding the Rule 23 class appears to serve no legitimate purpose.8 19 Fourth, the Court is concerned that a portion of the Settlement Fund is reversionary. 20 Specifically, the Settlement Agreement provides that, if any settlement check remains 21 uncashed after 180-days, the amount of the settlement check shall be returned to Defendant. 22 (Doc. 39-1 at 32). Other courts in the Ninth Circuit have noted, and this Court agrees, that 23 where “a statute’s objectives include deterrence, as does the FLSA’s, ‘it would contradict 24 these goals to permit the defendant to retain unclaimed funds.’” Khanna v. Inter–Con Sec. 25 Sys. Inc., 2012 WL 4465558, at *11 (E.D. Cal. 2012) (quoting, inter alia, Six (6) Mexican 26 8 The claims process set out by the parties does serve a purpose as to the FLSA action. As 27 earlier indicated, the FLSA requires collective action members to give “consent in writing to become a party” and for such consent to be “filed in the court in which such action is 28 brought.” 29 U.S.C. § 216(b). Such a process should be preserved in any future motion for approval of class settlement. 1 Workers v. Arizona Citrus Growers, 904 F.2d 1301, 1308 (9th Cir. 1990)); see La Parne 2 v. Monex Deposit Co., 2010 WL 4916606, at *4 (C.D. Cal. Nov. 29, 2010) (“Relatively 3 low interest in settlement does not mean that [a] [d]efendant should receive a windfall 4 benefit as a result of absent class members failing to submit claims” in light of the deterrent 5 goals of the FLSA). If unclaimed funds are to revert to Defendant, the parties should 6 explain why those funds should revert to Defendant. See Dudum v. Carter’s Retail, Inc., 7 2015 WL 5185933, at *3 (N.D. Cal. Sept. 4, 2015) (citing Flores v. Alameda Cnty. Indus. 8 Inc., 2015 WL 3763605, at *3 (N.D. Cal. June 16, 2015). The parties have made no attempt 9 to do so in their Motion. 10 III. CONCLUSION 11 The Count will conditionally certify the State Law Classes and conditionally certify 12 the FLSA Collective Action. However, the Court is unconvinced that the Settlement 13 Agreement falls within the range of possible approval. In order for the Settlement 14 Agreement to be preliminarily approved, the following must be addressed: (1) the 15 Settlement Agreement must create separate funds for payment of the Rule 23 claims and 16 the FLSA claims; (2) the Notice must explain the hybrid nature of this case and explain the 17 option for a member of the State Law Class to exhaust only the FLSA claim or only the 18 State Law claims; (3) the settlement must eliminate the claim form submission requirement 19 for the Rule 23 class members presently employed by Defendant or explain the need for it; 20 and (4) the portion of the settlement attributed to FLSA violation cannot revert to the 21 Defendant if unclaimed; the parties may remove the reversion entirely or name an 22 appropriate cy pres recipient for unclaimed funds. 23 Accordingly, 24 IT IS ORDERED that the parties’ Joint Motion for Preliminary Approval of Class 25 Action Settlement and FLSA Collective Action (Doc. 39) is GRANTED in part and 26 DENIED in part as follows: 27 1) The State Law Classes are conditionally certified; 28 2) The FLSA Collective Action is conditionally certified; and 1 3) Preliminary approval of the Settlement Agreement is denied. The parties are granted forty-five (45) days from the date of this Order to file an amended motion for || approval of class and collective action settlement addressing the issues discussed herein. 4|| The parties are not required to discuss class or collative action certification in the amended || motion. 6 Dated this 8th day of July, 2020. 7 8 ZL we □ 7 norable'Dian¢g/4. Hunfetewa 10 United States District Fudge 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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