Schmidt v. Vision Service Plan

• Court: District Court, E.D. California
• Decided: August 30, 2023
• Docket: 2:20-cv-02400
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 MICHAEL SCHMIDT, on behalf of No. 2:20–cv–2400–KJN himself and the Class and Collective 12 members, ORDER 13 Plaintiffs, 14 v. 15 VISION SERVICE PLAN, et al., 16 Defendants. 17

18 19 Plaintiff Michael Schmidt moves for preliminary approval of settlement of his class, Fair 20 Labor Standards Act (“FLSA”) collective, and Private Attorney General Act (“PAGA”) claims. 21 (ECF No. 44).1 Defendants Vision Service Plan (VSP), VSP Global, Inc., Marchon Eyewear, 22 Inc., VSP Optical Group, Inc., and Eyefinity, Inc. do not oppose the motion. 23 By and through this motion, plaintiff seeks: (1) conditional certification of the settlement 24 class and FLSA collective; (2) preliminary approval of the settlement; (3) approval of the class 25 notice; (4) appointment of plaintiff as class representative; (5) appointment of plaintiff’s counsel 26 as class counsel; (6) appointment of the settlement administrator; and (7) scheduling 27 1 On consent of both parties, this case was referred to the undersigned by District Judge Drozd. 28 (ECF No. 52.) 1 final approval of the settlement. 2 The court has considered the motion before it and is prepared to find that the requirements 3 for conditional certification of the class and FLSA collective, settlement, appointment of the class 4 representatives, appointment of class counsel, and appointment of the settlement administrator are 5 satisfied at this preliminary stage. However, the court has noted below several concerns 6 regarding the proposed settlement terms and the notice of settlement which must be addressed 7 before the court can preliminarily approve the settlement. Thus, for the reasons set forth below, 8 this motion is DENIED without prejudice. 9 I. Background 10 A. Factual and Procedural History 11 On December 2, 2020, plaintiff filed this putative class action on behalf of himself and 12 other similarly situated non-exempt hourly employees for defendants. (ECF No. 1.) Plaintiff 13 alleges the following causes of action: (1) violation of the Fair Labor Standards Act, 29 U.S.C. 14 § § 201, et seq.; (2) failure to pay for all hours worked under California Labor Code § 204; (3) 15 failure to pay minimum wages under Labor Code §§ 1182.11, 1182.12, 1194, 1197, and 1197.1, 16 (4) failure to pay overtime wages under Labor Code § 510; (5) failure to authorize and permit 17 and/or make available meal and rest periods under Labor Code §§ 226.7 and 512; (6) failure to 18 provide accurate itemized wage statements under Labor Code § 226; (7) waiting time penalties 19 under Labor Code §§ 201-203; (8) violation of California Business and Professions Code §§ 20 17200 et seq.; (9) PAGA civil penalties to California Labor Code § 2699(a); (10) PAGA civil 21 penalties pursuant to California Labor Code § 2699(f). (See generally ECF No. 33.) 22 On August 9, 2022, plaintiff filed this motion for preliminary approval of class and 23 collective action settlement. (ECF No. 44.) On December 19, 2022, the matter was reassigned to 24 the undersigned on consent of all parties. (ECF No. 52.) 25 B. Terms of the Proposed Settlement 26 Defendants have agreed to pay a non-reversionary maximum gross settlement amount of 27 $3,450,000 to settle all claims in the amended complaint. (ECF No. 44-2 at 41, ¶ 2(n)). The 28 following will be deduced from the gross settlement award: 1 (i) Plaintiff’s service award (up to $15,000); 2 (ii) Class counsel’s fee awards (up to 33.33% of the gross settlement amount, or 3 $1,150,000); 4 (iii) Class counsel’s costs (estimated to be $25,000); 5 (iv) Settlement administrator costs (estimated to be $20,880); and 6 (v) the payment to the LWDA for its share of the PAGA payment ($75,000). 7 (Id. at 14, ¶ 24 and 42, ¶ 2(u)). 8 The above deductions, if fully approved, would yield a net settlement of $2,164,120. (Id. 9 at 14, ¶ 24.) As proposed, the net settlement would be distributed across all class members who 10 do not opt out of the settlement, on a pro-rata basis, as determined by the number of workweeks 11 they worked as class members during the class period. (Id. at 52-53, ¶ 33.) An individual is 12 eligible to share in the proposed settlement if he or she belongs to any of the following: 13 • “California Class Members”: All current and former employees of defendants who were 14 employed as customer service representatives (CSRs) or equivalent positions in California 15 at any time between December 2, 2016, and November 12, 2021; 16 • “PAGA Group”: All current and former employees of defendants who were employed as 17 CSRs or equivalent positions in California at any time between July 31, 2019 and 18 November 12, 2021; and 19 • “FLSA Collective Members”: All current and former employees of defendants who were 20 employed as CSRs or equivalent positions in the United States at any time between 21 December 2, 2017 and November 12, 2021. 22 (Id. at 40, ¶ 2(d)-(g)). 23 All settlement class members will be paid a settlement award from the net settlement 24 amount. (Id. at 52, ¶¶ 31-33.) Any settlement class member who fails to submit a timely request 25 to exclude themselves from the settlement by following the procedure set forth in the settlement 26 notice will automatically be deemed a settlement class member. (Id. at 52, ¶ 32.) Neither the 27 settlement agreement nor the briefing indicates what portion of the settlement amount, if any, is 28 allocated toward the FLSA collective action. (See generally ECF Nos. 44-1, 44-2.) 1 The settlement agreement dictates that the following language will appear on the reverse 2 side of settlement checks issued to class members included within the FLSA Period: 3 This check is your settlement payment in connection with the court- approved class action Settlement in the action Schmidt v. Vision Service 4 Plan, et al., filed in E.D. Cal., Case No: 2:20-cv-02400-JAM-KJN. By signing or cashing your check, you consent to join the Collective Action and 5 affirm your release of FLSA claims against Releasees. 6 (ECF No. 44-2 at 46, ¶ 18.) The class notice states “[a]ny person who requests exclusion (opts 7 out) of the settlement will not be entitled to any Settlement Award and will not be bound by the 8 Settlement Agreement or have any right to object, appeal or comment thereon.”2 (Id. at 64, ¶ 6.) 9 A. Legal Standards 10 1. Settlement agreement 11 Under Rule 23, a court must determine if it “will likely be able to” both: (1) “certify the 12 class for purposes of the judgment on proposal” under Rule 23(a) and 23(b); and (2) “approve the 13 proposal under Rule 23(e)(2).” Fed. R. Civ. P. 23(e)(1)(B). Under the FLSA, a court must ask if 14 members of the collective action are “similarly situated” to the original plaintiffs, see Campbell v. 15 City of Los Angeles, 903 F.3d 1090, 1109 (9th Cir. 2018), and whether the settlement is “a fair 16 and reasonable resolution of a bona fide dispute over FLSA provisions” under Lynn's Food 17 Stores, Inc. v. United States, 679 F.2d 1350, 1355 (11th Cir. 1982). Brown v. Tetra Tech, Inc, 18 No. 2023 WL 4162271, at *3 (E.D. Cal. June 23, 2023). 19 PAGA claims are distinct from class and FLSA claims. “[P]laintiffs may bring a PAGA 20 claim only as the state’s designated proxy, suing on behalf of all affected employees.” Kim v. 21 Reins Int’l Cal., Inc., 9 Cal. 5th 73, 86-87 (2020) (emphases original). Because a PAGA claim is 22 not “a collection of individual claims for relief” like a class action, Canela v. Costco Wholesale 23 Corp., 971 F.3d 845, 855 (9th Cir. 2020) (discussing Kim’s holding), PAGA claims “need not 24 satisfy Rule 23 class certification requirements,” Hamilton v. Wal-Mart Stores, Inc., 39 F.4th 575, 25 583 (9th Cir. 2022). However, like class action settlements, PAGA settlements must be approved 26

27 2 As discussed below, this statement is incorrect with respect to the PAGA claims; even those who opt out of the Rule 23 class settlement will still be entitled to a portion of the PAGA 28 payment and will be bound by settlement of the PAGA claims. 1 by the court. Cal. Lab. Code § 2699(l)(2). Courts in this circuit apply “a Rule 23-like standard,” 2 asking whether the settlement of the PAGA claims is “fundamentally fair, reasonable, and 3 adequate.” Haralson v. U.S. Aviation Servs. Corp., 383 F. Supp. 3d 959, 972 (N.D. Cal. 2019). 4 2. Notice Requirements 5 For classes likely to be certified under Rule 23(b)(3) “the court must direct to class 6 members the best notice that is practicable under the circumstances, including individual notice to 7 all members who can be identified through reasonable effort,” imposing specific requirements on 8 the contents of the notice. See Fed. R. Civ. P. 23(c)(2)(B). 9 Where parties seek settlement of PAGA claims and class claims in one action, this court, 10 along with other courts in this district, have required the class notice to clearly articulate that even 11 those who do not opt out of a settlement will release PAGA claims and will receive a portion of 12 the PAGA payment. Almanzar v. Home Depot U.S.A., Inc., 2022 WL 2817435, at *19 (E.D. 13 Cal. July 19, 2022). Uribe v. Crown Bldg. Maint. Co., 70 Cal. App. 5th 986, 1001 (4th Dist. 14 2021), as modified on denial of reh’g (Oct. 26, 2021) (“A defining feature of the class action 15 procedure is that a class member may opt out of the class if he or she does not wish to be bound 16 by the result of the suit . . . . PAGA actions do not afford the same opt out feature.”) (cleaned up). 17 Similarly, in hybrid Rule 23 and FLSA actions, the parties’ notice forms must indicate 1) 18 the hybrid nature of the action, 2) the claims involved, 3) the options available to the class 19 members, i.e., how to participate in or abstain from the Rule 23 and FLSA actions, and 4) the 20 consequences of opting in to the FLSA collective action, opting out of the Rule 23 class action, or 21 doing nothing. Brown, 2023 WL 4162271 at *3. 22 II. Analysis 23 A. Settlement Agreement 24 The FLSA requires written consent from members who wish to opt in to an FLSA 25 collective. See 29 U.S.C. § 216(b) (“No employee shall be a party plaintiff to any [collective] 26 action unless he gives his consent in writing to become such a party and such consent is filed in 27 the court in which such action is brought.”). This court has consistently found that obtaining 28 consent by cashing a check is inadequate under the FLSA. See, e.g., Beltran v. Olam Spices & 1 Vegetables, Inc., 2021 WL 1105246, at *4 (E.D. Cal. Mar. 23, 2021) (noting “weight of 2 authority” that consent via cashing a settlement check is insufficient under the FLSA, regardless 3 of whether checks are distributed prior to or after the final approval hearing); see also Haralson v. 4 U.S. Aviation Servs. Corp., 383 F.Supp.3d 959, 969 (N.D. Cal. 2019) (“Many courts, having 5 consulted § 216(b)’s requirements, have rejected this opt-in by settlement check proposal.”) 6 Here, the settlement agreement expressly provides that those who cash their settlement award 7 checks will be deemed to have become collective members and released their FLSA claims. 8 (ECF No. 44-2 at 46, ¶ 18.) Accordingly, the proposed opt in method described in the settlement 9 agreement does not comply with the FLSA and should be corrected in any renewed motion. 10 B. Notice 11 Federal Rule of Civil Procedure 23 imposes specific requirements on the contents of the 12 notice and provides that “the court must direct to class members the best notice that is practicable 13 under the circumstances, including individual notice to all members who can be identified 14 through reasonable effort.” See Fed. R. Civ. P. 23(c)(2)(B). The notice must inform potential 15 members that “that they may enter an appearance through an attorney if the member so desires.” 16 See Fed. R. Civ. P. 23(c)(2)(B)(i). Here, the notice fails to inform potential class members of 17 their right to appear through an attorney. 18 The settlement notice provides that those who opt out will not be bound by the settlement 19 and will receive no payment, while those who do not opt out will ultimately receive their 20 “prorated Settlement Award” by check. (ECF Nos. 44-2 at 64, ¶ 6). However, this statement is 21 incorrect. As this court has previously observed, opting out of a Rule 23 settlement will not 22 preserve any class member's right to bring their own PAGA claim for the alleged violations in a 23 future suit. Cf., e.g., Almanzar v. Home Depot U.S.A., Inc., 2022 WL 2817435, at *19 (E.D. Cal. 24 July 19, 2022) (reminding that “even those who opt out will still receive a share of the 25% 25 PAGA payment”); with, e.g., Almanzar v. Home Depot U.S.A., Inc., 2023 WL 4373979, at *3 26 (E.D. Cal. July 6, 2023) (granting preliminary approval where settlement and notice were revised 27 to accurately convey distinction between Rule 23 and PAGA payment). 28 The notice is similarly defective in its explanation of the FLSA claims. As with Rule 23 1 and PAGA settlements, courts considering approval of settlements in Rule 23 and FLSA actions, 2 including this court, consistently require class notice forms to explain: 1) the hybrid nature of the 3 action, 2) the claims involved, 3) the options available to the class members, i.e., how to 4 participate or abstain from the Rule 23 and FLSA actions, and 4) the consequences of opting-in to 5 the FLSA collective action, opting-out of the Rule 23 class action, or doing nothing. Brown, 6 2023 WL 4162271, at *3. Here, however, the proposed notice of settlement does not explain the 7 hybrid nature of the settlement, how the recipient can participate or not participate in the FLSA 8 collective action, or the consequences of opting-in to the FLSA collective action. (See generally 9 ECF No. 44-2 at 60-66.) 10 Finally, like the settlement agreement, the notice provides that those who cash their 11 settlement award checks will be deemed to have become collective members and released their 12 claims under the FLSA against releasees through November 12, 2021. (Id. at 64 at ¶ 5.) But as 13 noted above, the proposed opt-in by check procedure does not comply with the FLSA. See, e.g., 14 Beltran, 2021 WL 1105246, at *4. 15 C. FLSA allocation 16 Plaintiff’s briefing conveys sufficient information for the court to make a preliminary 17 determination on the settlement agreement, with one exception. The settlement provides for a 18 single settlement fund from which both the FLSA and Rule 23 claims are paid, but the parties 19 have not conveyed what portion is allocated to the FLSA claims. (See generally ECF No. 44-1 20 and 44-2.) “Courts that have approved settlements releasing both FLSA and Rule 23 claims 21 generally do so only when the parties expressly allocate settlement payments to FLSA claims.” 22 Thompson v. Costco Wholesale Corp., 2017 WL 697895, at *8 (S.D. Cal. Feb. 22, 2017). Millan 23 v. Cascade Water Servs., Inc., 310 F.R.D. 593, 602 (E.D. Cal. 2015). Thus, in any renewed 24 motion, it should be made clear to the court how the value of the FLSA claims is reflected in the 25 settlement amount. Plaintiff may convey this information to the court in supplemental briefing. 26 //// 27 //// 28 //// 1 Ill. Conclusion 2 For the foregoing reasons, the settlement agreement and notice are defective and must be 3 || cured before the court can properly evaluate them. Therefore, plaintiff's unopposed motion for 4 || provisional class certification and preliminary approval of settlement (ECF No. 44) is denied 5 || without prejudice to a renewed motion addressing the court's concerns. 6 IT IS SO ORDERED. 7 || Dated: August 30, 2023 Foci) Aharon 9 KENDALL J. NE schm.2400 UNITED STATES MAGISTRATE JUDGE 10 1] 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28