1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 GENNIFER MANZO, Case No. 1:20-cv-1175-HBK 12 Plaintiff, ORDER DENYING PRELIMINARY APPROVAL OF CLASS ACTION AND 13 v. PAGA SETTLEMENT WITHOUT PREJUDICE 14 MCDONALD’S RESTAURANTS OF CALIFORNIA, INC., AND DOES 1-50, (Doc. No. 15) 15 Defendants. 16
17 18 Currently before the Court is Plaintiff Gennifer Manzo’s (“Plaintiff” or “Manzo”) 19 unopposed Motion for Preliminary Approval of Class Action and Private Attorneys General Act 20 Settlement, filed on October 22, 2021. (Doc. No. 15). For the reasons stated herein, the Court 21 denies the motion without prejudice. 22 BACKGROUND 23 Plaintiff filed the present action on September 20, 2020. (Doc. No. 1). Asserting 24 diversity jurisdiction under the Class Action Fairness Act, 28 U.S.C. § 1332(d), she brought 25 claims for penalties under California Labor Code §§ 226 and 2698, et seq., the Private Attorney 26 Generals Act (“PAGA”). (Id. at 1-2). 27 Plaintiff is a former employee of Defendant. (Id. at 4 ¶ 7; Doc. No. 15-6 at XX). 28 1 Plaintiff’s claims were based on allegations that Defendant’s wage statements were inaccurate in 2 two ways. First, she alleged the wage statements “did not identify the overtime rate as 1.5 times 3 the regular rate of pay,” but instead reflected the rate of “one-half (0.5) the base hourly rate of 4 pay.” Second, she alleged the wage statements failed to identify the correct rates of pay and 5 applicable number of hours for “MQI True Up” wages. Though she does not explain “MQI True 6 Up” wages, she characterizes them as a form of overtime. (Doc. No. 1 at 9:3-10). Plaintiff 7 contends these inaccuracies violate Labor Code § 226 and entitle her and the putative class to 8 penalties under that section and under the PAGA. (Id. at 9:2-3; 9:22-27). At the outset of this 9 case, Plaintiff sought to represent non-exempt employees who, after April 6, 2019, were paid 10 overtime or “MQI True Up” wages. (Id. at 5:27-6:6). 11 The proposed settlement includes the following terms relevant to this Order: 12 Settlement Class 13 The proposed settlement class includes the following two groups: 14 2.23.1 The “June 2, 2020 Settlement Subclass” consists of all California non-exempt employees who received wage statements 15 that included daily, weekly, or seventh day premium overtime and/or MQI True Up wages at any time from June 2, 2020 through the 16 Preliminary Approval Date (“June 2, 2020 Subclass Class Period”) and who were subject to the class settlement reached in Sanchez v. 17 McDonald's Restaurants of Cal., Inc., Los Angeles County Superior Court Case No. BC499888. 18 2.23.2 The “April 6, 2019 Settlement Subclass” consists of all 19 California non-exempt employees who received wage statements that included daily, weekly, or seventh day premium overtime and/or 20 MQI True Up wages at any time from April 6, 2019 through the Preliminary Approval Date (“April 6, 2019 Subclass Class Period”), 21 and who were not subject to the class settlement reached in Sanchez v. McDonald's Restaurants of Cal., Inc., Los Angeles County 22 Superior Court Case No. BC499888. 23 (Doc. No. 15-2 at 13-14, ¶ 2.23). There are approximately 5,500 class members and 57,000 wage 24 statements at issue. (Doc. 15-2 at 6:1-10). 25 Gross and Net Settlement Amounts 26 a. Gross Settlement Amount 27 The Gross Settlement Amount is $2 million. (Doc. No. 15-2 at 14 ¶ 3.1). This amounts to 28 an average of $35.09 per wage statement. (Doc. No. 15 at 16:18-20). Should the actual number 1 of wage statements “containing daily, weekly, or seventh day premium overtime furnished to 2 these groups exceeds 57,000 during the” relevant subclass periods through June 30, 2021, “the 3 Gross Settlement Amount will increase proportionally on a per wage statement basis for the 4 number of wage statements in excess of 57,000.” (Doc. No. 15-2 at 14 ¶ 3.1). 5 No portion of the Gross Settlement Amount will be retained by or revert to Defendant. 6 (Id. at ¶ 3.2). 7 b. PAGA Penalties 8 The settlement allocates $100,000 of the Gross Settlement Amount for PAGA penalties. 9 (Id. at 13 ¶ 2.14). From this amount, 75% will be paid to the California Labor and Workforce 10 Development Agency (“LWDA”) and 25% will be distributed to the settlement class members. 11 (Id.). Potential class members who opt out of the class action settlement will receive $10.00 in 12 settlement of their PAGA claims. (Id. at 24 ¶ 10.4.1). 13 c. Estimate of Net Settlement Amount 14 Plaintiff estimates that the net settlement amount available for distribution to the class 15 members will be approximately $1,188,333,33, which would amount to up to $216.06 on raw 16 average. (Doc. No. 15 at 16:15-19). 17 d. Distribution of Penalties and Net Settlement Amount 18 The settlement provides that both the PAGA penalties and the net settlement amount are 19 to be distributed according to the class member’s “proportionate share.” (Doc. No. 15-2 at 22-23 20 ¶¶ 9.2, 9.3). The proportionate share is: 21 based on the number of qualifying wage statements they received during their applicable Subclass Class period as follows: 22 [ ] April 6, 2019 Subclass: the number of wage statements that 23 included daily, weekly, or seventh day premium overtime and/or MQI True Up wages received by the Settlement Class Member at 24 any time during the April 6, 2019 Subclass Class Period divided by the total number of wage statements that included daily, weekly, or 25 seventh day premium overtime and/or MQI True Up wages received by all April 6, 2019 Settlement Class Members during the April 6, 26 2019 Subclass Class Period. 27 [ ] June 2, 2020 Subclass: the number of wage statements that included daily, weekly, or seventh day premium overtime and/or 28 MQI True Up wages received by the Settlement Class Member at 1 any time during the June 2, 2020 Subclass Class Period divided by the total number of wage statements that included daily, weekly, or 2 seventh day premium overtime and/or MQI True Up wages received by all June 2, 2020 Settlement Class Members during the June 2, 3 2020 Subclass Class Period. 4 (Id.). No further description of individual settlement payment amounts is provided. (See id.). 5 APPLICABLE LAW 6 “Courts reviewing class action settlements must ensure[] that unnamed class members are 7 protected from unjust or unfair settlements affecting their rights, while also accounting for the 8 strong judicial policy that favors settlements, particularly where complex class action litigation is 9 concerned.” Campbell v. Facebook, Inc., 951 F.3d 1106, 1121 (9th Cir. 2020) (quotations and 10 citations omitted). Where parties reach a settlement agreement prior to class certification, “courts 11 must peruse the proposed compromise to ratify both the propriety of the certification and the 12 fairness of the settlement.” Staton v. Boeing Co., 327 F.3d 938, 952 (9th Cir. 2003). 13 Preliminary approval of a settlement and notice to the proposed class is appropriate if “[1] 14 the proposed settlement appears to be the product of serious, informed, non-collusive 15 negotiations, [2] has no obvious deficiencies, [3] does not improperly grant preferential treatment 16 to class representatives or segments of the class, and [4] falls with the range of possible approval . 17 . . .” Criswell v. Boudreaux, No. 1:20-cv-01048-DAD-SAB, 2021 WL 4461640, at *3 (E.D. Cal. 18 Sept. 29, 2021) (citations omitted). 19 ANALYSIS 20 A. Obvious Deficiency 21 As mentioned above, the settlement provides that the Gross Settlement Amount may 22 increase if the number of wage statements during the relevant subclass periods exceeds 57,000. 23 (Doc. No. 15 at 14 ¶ 3.1).
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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 GENNIFER MANZO, Case No. 1:20-cv-1175-HBK 12 Plaintiff, ORDER DENYING PRELIMINARY APPROVAL OF CLASS ACTION AND 13 v. PAGA SETTLEMENT WITHOUT PREJUDICE 14 MCDONALD’S RESTAURANTS OF CALIFORNIA, INC., AND DOES 1-50, (Doc. No. 15) 15 Defendants. 16
17 18 Currently before the Court is Plaintiff Gennifer Manzo’s (“Plaintiff” or “Manzo”) 19 unopposed Motion for Preliminary Approval of Class Action and Private Attorneys General Act 20 Settlement, filed on October 22, 2021. (Doc. No. 15). For the reasons stated herein, the Court 21 denies the motion without prejudice. 22 BACKGROUND 23 Plaintiff filed the present action on September 20, 2020. (Doc. No. 1). Asserting 24 diversity jurisdiction under the Class Action Fairness Act, 28 U.S.C. § 1332(d), she brought 25 claims for penalties under California Labor Code §§ 226 and 2698, et seq., the Private Attorney 26 Generals Act (“PAGA”). (Id. at 1-2). 27 Plaintiff is a former employee of Defendant. (Id. at 4 ¶ 7; Doc. No. 15-6 at XX). 28 1 Plaintiff’s claims were based on allegations that Defendant’s wage statements were inaccurate in 2 two ways. First, she alleged the wage statements “did not identify the overtime rate as 1.5 times 3 the regular rate of pay,” but instead reflected the rate of “one-half (0.5) the base hourly rate of 4 pay.” Second, she alleged the wage statements failed to identify the correct rates of pay and 5 applicable number of hours for “MQI True Up” wages. Though she does not explain “MQI True 6 Up” wages, she characterizes them as a form of overtime. (Doc. No. 1 at 9:3-10). Plaintiff 7 contends these inaccuracies violate Labor Code § 226 and entitle her and the putative class to 8 penalties under that section and under the PAGA. (Id. at 9:2-3; 9:22-27). At the outset of this 9 case, Plaintiff sought to represent non-exempt employees who, after April 6, 2019, were paid 10 overtime or “MQI True Up” wages. (Id. at 5:27-6:6). 11 The proposed settlement includes the following terms relevant to this Order: 12 Settlement Class 13 The proposed settlement class includes the following two groups: 14 2.23.1 The “June 2, 2020 Settlement Subclass” consists of all California non-exempt employees who received wage statements 15 that included daily, weekly, or seventh day premium overtime and/or MQI True Up wages at any time from June 2, 2020 through the 16 Preliminary Approval Date (“June 2, 2020 Subclass Class Period”) and who were subject to the class settlement reached in Sanchez v. 17 McDonald's Restaurants of Cal., Inc., Los Angeles County Superior Court Case No. BC499888. 18 2.23.2 The “April 6, 2019 Settlement Subclass” consists of all 19 California non-exempt employees who received wage statements that included daily, weekly, or seventh day premium overtime and/or 20 MQI True Up wages at any time from April 6, 2019 through the Preliminary Approval Date (“April 6, 2019 Subclass Class Period”), 21 and who were not subject to the class settlement reached in Sanchez v. McDonald's Restaurants of Cal., Inc., Los Angeles County 22 Superior Court Case No. BC499888. 23 (Doc. No. 15-2 at 13-14, ¶ 2.23). There are approximately 5,500 class members and 57,000 wage 24 statements at issue. (Doc. 15-2 at 6:1-10). 25 Gross and Net Settlement Amounts 26 a. Gross Settlement Amount 27 The Gross Settlement Amount is $2 million. (Doc. No. 15-2 at 14 ¶ 3.1). This amounts to 28 an average of $35.09 per wage statement. (Doc. No. 15 at 16:18-20). Should the actual number 1 of wage statements “containing daily, weekly, or seventh day premium overtime furnished to 2 these groups exceeds 57,000 during the” relevant subclass periods through June 30, 2021, “the 3 Gross Settlement Amount will increase proportionally on a per wage statement basis for the 4 number of wage statements in excess of 57,000.” (Doc. No. 15-2 at 14 ¶ 3.1). 5 No portion of the Gross Settlement Amount will be retained by or revert to Defendant. 6 (Id. at ¶ 3.2). 7 b. PAGA Penalties 8 The settlement allocates $100,000 of the Gross Settlement Amount for PAGA penalties. 9 (Id. at 13 ¶ 2.14). From this amount, 75% will be paid to the California Labor and Workforce 10 Development Agency (“LWDA”) and 25% will be distributed to the settlement class members. 11 (Id.). Potential class members who opt out of the class action settlement will receive $10.00 in 12 settlement of their PAGA claims. (Id. at 24 ¶ 10.4.1). 13 c. Estimate of Net Settlement Amount 14 Plaintiff estimates that the net settlement amount available for distribution to the class 15 members will be approximately $1,188,333,33, which would amount to up to $216.06 on raw 16 average. (Doc. No. 15 at 16:15-19). 17 d. Distribution of Penalties and Net Settlement Amount 18 The settlement provides that both the PAGA penalties and the net settlement amount are 19 to be distributed according to the class member’s “proportionate share.” (Doc. No. 15-2 at 22-23 20 ¶¶ 9.2, 9.3). The proportionate share is: 21 based on the number of qualifying wage statements they received during their applicable Subclass Class period as follows: 22 [ ] April 6, 2019 Subclass: the number of wage statements that 23 included daily, weekly, or seventh day premium overtime and/or MQI True Up wages received by the Settlement Class Member at 24 any time during the April 6, 2019 Subclass Class Period divided by the total number of wage statements that included daily, weekly, or 25 seventh day premium overtime and/or MQI True Up wages received by all April 6, 2019 Settlement Class Members during the April 6, 26 2019 Subclass Class Period. 27 [ ] June 2, 2020 Subclass: the number of wage statements that included daily, weekly, or seventh day premium overtime and/or 28 MQI True Up wages received by the Settlement Class Member at 1 any time during the June 2, 2020 Subclass Class Period divided by the total number of wage statements that included daily, weekly, or 2 seventh day premium overtime and/or MQI True Up wages received by all June 2, 2020 Settlement Class Members during the June 2, 3 2020 Subclass Class Period. 4 (Id.). No further description of individual settlement payment amounts is provided. (See id.). 5 APPLICABLE LAW 6 “Courts reviewing class action settlements must ensure[] that unnamed class members are 7 protected from unjust or unfair settlements affecting their rights, while also accounting for the 8 strong judicial policy that favors settlements, particularly where complex class action litigation is 9 concerned.” Campbell v. Facebook, Inc., 951 F.3d 1106, 1121 (9th Cir. 2020) (quotations and 10 citations omitted). Where parties reach a settlement agreement prior to class certification, “courts 11 must peruse the proposed compromise to ratify both the propriety of the certification and the 12 fairness of the settlement.” Staton v. Boeing Co., 327 F.3d 938, 952 (9th Cir. 2003). 13 Preliminary approval of a settlement and notice to the proposed class is appropriate if “[1] 14 the proposed settlement appears to be the product of serious, informed, non-collusive 15 negotiations, [2] has no obvious deficiencies, [3] does not improperly grant preferential treatment 16 to class representatives or segments of the class, and [4] falls with the range of possible approval . 17 . . .” Criswell v. Boudreaux, No. 1:20-cv-01048-DAD-SAB, 2021 WL 4461640, at *3 (E.D. Cal. 18 Sept. 29, 2021) (citations omitted). 19 ANALYSIS 20 A. Obvious Deficiency 21 As mentioned above, the settlement provides that the Gross Settlement Amount may 22 increase if the number of wage statements during the relevant subclass periods exceeds 57,000. 23 (Doc. No. 15 at 14 ¶ 3.1). Specifically, it provides: “if the actual number of wage statements 24 containing daily, weekly, or seventh day premium overtime furnished to these groups exceeds 25 57,000 during the periods defined above in Paragraphs 2.6.1 and 2.6.2, through June 30, 2021, 26 the Gross Settlement Amount will increase proportionally on a per wage statement basis for the 27 number of wage statements in excess of 57,000.” (Doc. No. 15 at 14 ¶ 3.1, emphasis applied). 28 There seems to be a minor error in this section, as Paragraphs 2.6.1 and 2.6.2 do not exist 1 in the settlement agreement. Instead, Paragraphs 2.23.1 and 2.23.2 seem to capture the relevant 2 subclass periods. Because this issue could potentially go to the calculation of the Gross 3 Settlement Amount, the parties must state the correct paragraph numbers or specify the 4 appropriate subclass periods in Paragraph 3.1. 5 B. Preferential Treatment 6 As part of the preliminary approval process, the Court examines whether the settlement 7 agreement provides preferential treatment to any class member or segment of the class. 8 Rodriguez v. Danell Custom Harvesting, LLC, 293 F. Supp. 3d 1117, 1132 (E.D. Cal. 2018); Fed. 9 R. Civ. P. 23(e)(2)(D). In this case, the settlement provides that each class member will receive 10 their “proportionate share” of the PAGA allocation and Net Settlement Amount. (Doc. No. 15-2 11 at 21-22 ¶¶ 9.2, 9.3). The proportionate share will be determined based on the class member’s 12 subclass, i.e., the number of class member’s qualifying wage statements in the subclass period 13 divided by the total number of qualifying subclass wage statements. (Doc. No. 15-2 at 21-22 ¶¶ 14 9.2, 9.3). This calculation results in a percentage, but the settlement lacks any indication as to 15 what that percentage is taken from. (See id.). Mathematically, the percentage cannot be taken 16 directly from the Net Settlement Amount, because each subclass’s total recovery would equal 17 100% of the Net Settlement Amount. 18 It is possible the individual proportionate share is intended to be taken from a subclass 19 allocation of the Net Settlement Amount; however, no subclass allocation is mentioned in the 20 settlement. Additionally, it seems there are other, simpler ways of calculating a proportionate 21 share that would appear to treat all class members equally, such as dividing the individual’s 22 number of qualifying wage statements by the total number of qualifying wage statements received 23 by both subclasses and multiplying this percentage against the Net Settlement Amount. Such a 24 calculation would, theoretically, be an appropriate method for determining payments. See, e.g., 25 Dearaujo v. Regis Corp., Nos. 2:14-cv-01408-KJM-AC, 2:14-cv-01411-KJM-AC, 2016 WL 26 3549473, at *12 (E.D. Cal. June 30, 2016) (finding at the preliminary approval stage that a 27 “mechanism for distributing the settlement funds proportionally based on the total number of 28 weeks worked” was “reasonable”); Pierce v. Rosetta Stone, Ltd., No. 11-cv-01238-SBA, 2013 1 WL 1878918, at *6 (N.D. Cal. May 3, 2013) (at preliminary approval, disbursement on a pro rata 2 basis reasonable). 3 It is also possible the parties intended some other calculation to follow the determination 4 of individual share percentages. Without clarification as to how the shares will be used to 5 determine actual payments, the Court cannot determine whether the settlement grants preferential 6 treatment to one group. Cf. Fed. R. Civ. P. 23(D). Moreover, the proposed class notice merely 7 repeats the incomplete description of how individual settlement payment amounts will be 8 calculated. (Doc. No. 15-2 at 32-33 § V (“Individual Settlement Shares”)). The absence of a 9 clear statement as to how the Net Settlement Amount will be distributed renders the notice 10 arguably confusing and may interfere with class members’ ability to determine whether to object. 11 Cf. Fed. R. Civ. P. 23(e)(5). The Court must therefore deny the motion for preliminary approval, 12 without prejudice to a renewed motion to correct and/or clarify this issue. 13 C. Notice Issues 14 The Court has identified the following minor deficiencies in the proposed class notice: 15 (1) On page 1 of the proposed notice (Doc. No. 15-2 at 3), in the “GO TO A HEARING” 16 row, the notice should advise potential class members that they may appear in person 17 or remotely. 18 (2) On page 2 of the proposed notice (Doc. No. 15-2 at 31), it refers to the action as “U.S. 19 District of California for the Eastern District of California Case No. 1:20-cv-01175- 20 NONE-HBK” instead of “U.S. District Court for the Eastern District of California 21 Case No. 1:20-cv-01175-HBK.” 22 (3) On page 2 of the proposed notice (Doc. No. 15-2 at 31 § I), it states a “‘Settlement 23 Class Member’ means a member of one or both of the June 2, 2020 Settlement 24 Subclass and/or the April 6, 2019 Subclass.” The settlement seems to contemplate the 25 subclasses as two different groups with no overlap. The notice should clarify whether 26 an individual can be a member of both subclasses. 27 (4) On page 6 of the proposed notice (Doc. No. 15-2 at 35 § VII[C]), wherever it states 28 that the potential class member may appear, it should clearly state that the class 1 member may appear in person or by remote means. Where it states that the Court will 2 consider the class member’s views, it should also state that the Court can only approve 3 or deny the settlement and cannot change the terms of the settlement. Additionally, 4 the reference to the “Action” should restate the name and case number of this action. 5 (5) On page 6 of the proposed notice (Doc. No. 15-2 at 35 § VII[D]), wherever it states 6 that the potential class member may appear, it should clearly state that the class 7 member may appear in person or by remote means. 8 CONCLUSION 9 For the reasons provided herein, the Court ORDERS the following: 10 (1) Plaintiff's Motion, (Doc. No. 15), is DENIED without prejudice to the parties 11 submitting a renewed motion to correct and/or clarify the deficiencies noted above. In 12 order to expedite the handling of this matter, the Court requests that such motion shall 13 be filed within five (5) days of the date of this Order. 14 (2) If Plaintiff files a renewed motion, she shall also specify the necessary number of days 15 between the Court’s anticipated issuance of any preliminary approval order and the 16 date of any final approval hearing. 17 | Dated: __ January 12, 2022 Mihaw. □□ fares Zackte 19 HELENA M. BARCH-KUCHTA UNITED STATES MAGISTRATE JUDGE 20 21 22 23 24 25 26 27 28