The opinion of the court was delivered by: VIRGINIA A. Phillips United States District Judge
ORDER GRANTING PLAINTIFFS' RENEWED MOTION FOR FINAL APPROVAL OF CLASS ACTION SETTLEMENT (DOC. NO. 317) AND GRANTING IN PART PLAINTIFFS' RENEWED MOTION FOR ATTORNEYS' FEES (DOC. NO. 311)
Plaintiffs' Renewed Motions for Final Approval of Class Action Settlement (Doc. No. 317) and for Attorneys' Fees and Incentive Awards (Doc. No. 311) came before the Court for hearing on August 30, 2012. For the reasons to follow, the Court GRANTS the Motion for Final Approval and GRANTS the Motion for Attorneys' Fees IN PART.
The Court has discussed the factual and procedural history of this matter at length, most recently in its June 21, 2012, Minute Order ("June 21 Order") (Doc. No. 305), in which it denied Plaintiffs' last attempt to procure the Court's approval of the proposed settlement of this class action. The Court therefore offers only the barest recitation of the facts necessary to place the current Motions in context.
Plaintiffs Tracy Dawn Trauth, Christeen Rivera, Jennifer Blair, Victoria Omlor, Jasmine Wright, Anicia Vintimilla, Marsha Ellington, Selena Denise Pelaez, Nicole Garcia, Reah Navarro, Tami Sanchez, Rose Shakespeare, Ashley Malott King, and Connie Linne, as representatives of a nationwide class of "exotic dancers" (collectively, "Dancers"), are moving to settle a three-year old class action against Defendants, the operators of a group of "adult entertainment" venues ("Clubs"). The Dancers charge that the Clubs classify Dancers improperly as independent contractors, thereby depriving them of benefits that employees are guaranteed under federal law (i.e., the Fair Labor Standards Act ("FLSA"), 29 U.S.C. §§ 201, et seq.) and various states' laws.
The Dancers and Clubs entered into a Settlement Agreement ("Agreement") (Ex. A to Decl. of Hart Robinovitch ("Robinovitch Decl.") (Doc. No. 318-1)), the relevant provisions of which are as follows:
* Within six months, the Clubs will no longer treat Dancers as independent contractors or lessees; instead the Clubs will treat Dancers "as either employees or owners (e.g. shareholder, limited partner, partner, member or other type of ownership stake)" of any Clubs in existence at the time of settlement. (Doc. No. 318-1 ¶ 4.2.) In California, Dancers will no longer be charged stage fees (i.e., fees a Dancer pays for the privilege of performing at a Club). (Id. ¶ 4.1.)
* After deducting from the agreed-upon $12,970,000 gross settlement amount the cost of administering the settlement (see id. ¶ 5.4), incentive payments for class representatives (see id. ¶ 5.6.1), and any attorneys' fees awarded to class counsel (see id. ¶
5.5.2), 50.14 percent of the remaining settlement amount is allocated to California Dancers; 42.69 percent to Nevada Dancers, and 7.16 percent to Kentucky, Idaho, Texas, Nevada, and Florida Dancers (see id. ¶ 5.7.2).
* Dancers' claims will be paid on a claims-made basis;
i.e., a Dancer who does not submit a written claim against the settlement fund will not be paid, even though she may still be bound by the settlement. (See id. ¶ 5.7.1) If the entire settlement is not claimed, the remainder reverts to the Clubs -- with the exception of a non-reversionary amount of $2,723,700. (See id. ¶ 5.8.)
* Any portion of the non-reversionary amount remaining after payment of Dancers' claims will be first used towards incentive payments for most of the class representatives (see id. ¶¶ 5.6.1, 5.6.2); if there is still any portion of the non-reversionary amount remaining, ten percent of that amount will be distributed on a pro rata basis to Dancers who submitted claims against the settlement fund, and the rest "shall be distributed over a five year period" to the Los Angeles County Bar Association Foundation
-- Domestic Violence Project, Foundation for an Independent Tomorrow, Women at Work -- Job Resource Center, and the National Association of Working Women (see id. ¶ 5.8).
* The Clubs will not oppose the payment of incentive awards to class representatives of up to $15,000 for Tracy Dawn Trauth and up to $6,250 each for Jennifer Blair, Christeen Rivera, Victoria Omlor, Jasmine Wright, Anicia Vintimilla, Marsha Ellington, Selena Denise Pelaez, Nicole Garcia, Reah Navarro, and Tami Sanchez. (Id. ¶ 5.6.1.) They also agree not to oppose awards of up to $1,000 each for Rose Shakespeare, Connie Linne, and Ashley Malott King; those awards, however, will not be paid from the $12,970,000 settlement fund. (Id. ¶ 5.6.2.)
* Any Dancer who does not file a timely request to opt out of the class -- whether or not she submitted a claim to settlement funds -- will, by effect of the Agreement, be deemed to have released the Clubs "from any and all claims, liabilities, demands, causes of action, or lawsuits, known or unknown . . . whether legal, statutory, equitable or of any other type of form, whether under federal law (excluding any and all claims arising under the FLSA . . . ) or state law . . . that in any way relate to or arise out of or in connection with acts, omissions, facts, statements, matters, transactions, or occurrences that have been or could have been alleged in [this action], including but not limited to overtime, minimum wages, missed or inadequate meal periods and rest breaks, unpaid tip income, reimbursement for uniform costs, itemized wage statement violations, record keeping violations, and waiting time penalties . . . ." (See, e.g., id. ¶ 7.1.)
* Any Dancer who does file a timely claim, however, will be deemed to have opted-in to an FLSA collective action, and will release any FLSA claim against the Clubs, as well any of the state law claims discussed above. (See id. ¶ 7.7.)
* The Clubs agree not to oppose an award of attorneys' fees, as long as the award is no greater than $2,500,000, to be deducted from the gross settlement amount of $12,970,000. (See id. ¶¶ 5.5.1, 5.5.2.)
The Court considers the Dancers' Motion for Final Approval, which would have the effect of settling both their FLSA and state law claims, under the following legal standards.
At the preliminary approval stage, the Court considered whether the proposed settlement "(1) appear[ed] to be the product of serious, informed, noncollusive negotiations; (2) ha[d] no obvious deficiencies; (3) d[id] not improperly grant preferential treatment to class representatives or segments of the class; and (4) f[ell] within the range of possible approval," Harris v. Vector Mktg. Corp., No. C-08-5198 EMC, 2011 WL 1627973, at *7 (N.D. Cal. Apr. 29, 2011) ("Harris II") -- all through the lens of the same criteria the Court applies now to determine whether the proposed settlement should be approved finally. The difference, however, is the "[c]loser scrutiny," id., with which the Court now considers the following factors.
A. Settling a Class Action Certified Under Federal Rule of Civil Procedure 23 Under Federal Rule of Civil Procedure 23, certifying a class for the sole purpose of settling a class action is a two-step process, requiring a court to "ratify both the propriety of the certification and the fairness of the settlement." Staton v. Boeing Co., 327 F.3d 938, 952 (9th Cir. 2003). First, the proposed class must meet the familiar criteria for certification outlined in Federal Rules of Civil Procedure 23(a) and (b) -- e.g., numerosity of claimants in the proposed class (Rule 23(a)(1)), commonality of the questions of law and fact among them (Rule 23(a)(2)), typicality of the claims they present (Rule 23(a)(3)), and adequacy of their representation before the court (Rule 23(a)(4)) -- that would apply in the absence of a settlement agreement. Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 619-22 (1997); see Narouz v. Charter Commc'ns, LLC, 591 F.3d 1261, 1266 (9th Cir. 2010) (noting that "[t]o obtain class certification" for settlement purposes, "a class plaintiff has the burden of showing that the requirements of Rule 23(a) are met and that the class is maintainable pursuant to Rule 23(b)"); see Fed. R. Civ. P. 23(a). Indeed, a court must pay "undiluted, even heightened, attention" to Rule 23's requirements when certifying a case for settlement, because the court "will lack the opportunity, present when a case is litigated, to adjust the class, informed by the proceedings as they unfold." Amchem Prods., Inc., 521 U.S. at 620.
In this case, the Dancers seek class certification pursuant to Rule 23(b)(3). Thus, in addition to finding the proposed class meets Rule 23(a)'s numerosity, typicality, commonality, and adequacy requirements, a court must find either "that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy," Fed. R. Civ. P. 23(b)(3). In making the requisite findings under Rule 23(b)(3), the court considers "the class members' interest in individually controlling the prosecution or defense of separate actions," Fed. R. Civ. P. 23(b)(3)(A), "the extent and nature of any litigation concerning the controversy already begun by or against class members," Fed. R. Civ. P. 23(b)(3)(B), and "the desirability or undesirability of concentrating the litigation of the claims in the particular forum," Fed. R. Civ. P. 23(b)(3)(C).*fn1
If a settlement class meets Rule 23's criteria and the court approves preliminarily of the settlement of the case, the court turns to the second step: it must hold a hearing to determine whether to finalize the settlement, thereby binding the entire class. Fed. R. Civ. P. 23(e)(2). In carrying out its charge to determine whether a settlement proposal is "fair, reasonable, and adequate," id., the court considers a variety of factors, including at least the following:
(1) the strength of the plaintiff's case; (2) the risk, expense, complexity, and likely duration of further litigation; (3) the risk of maintaining class action status throughout the trial; (4) the amount offered in settlement; (5) the extent of discovery completed and the state of the proceedings; (6) the experience and views of counsel; (7) the presence of a governmental participant; and (8) the reaction of the class members of the proposed settlement.
In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 946 (9th Cir. 2011) (quoting Churchill Vill., L.L.C. v. Gen. Elec., 361 F.3d 566, 575 (9th Cir. 2004)).
The Manual for Complex Litigation suggests further inquiries for a court reviewing a proposed settlement, including: asking "whether class or subclass members have the right to request exclusion from the settlement, and, if so, the number exercising that right"; inquiring about "the fairness and reasonableness of the procedure for processing individual claims under the settlement"; and evaluating whether "the named plaintiffs are the only class members to receive monetary relief or are to receive monetary relief that is disproportionately large." Manual for Complex Litigation (Fourth) § 21.62. (2004).
B. Settling an FLSA Collective Action
Settling a Rule 23 class action requires the existence of a class; settling an FLSA collective action first requires the existence of an FLSA collective action.*fn2 The FLSA authorizes "any one or more employees for and in behalf of himself or themselves and other employees similarly situated" to sue an employer for unpaid minimum wages or unpaid overtime compensation, provided that "[n]o employee shall be a party plaintiff to any such action unless he gives his consent in writing to become such a party and such consent is filed in the court in which such action is brought." 29 U.S.C. § 216(b). In other words, in an FLSA collective action "each plaintiff must opt into the suit," rather than out of it (as in a Rule 23 class action). McElmurry v. U.S. Bank Nat'l Ass'n, 495 F.3d 1136, 1139 (9th Cir. 2007) (emphasis in original).
Plaintiffs in a collective action must be "similarly situated"; the meaning of that phrase, however, remains undefined in the Ninth Circuit. Mitchell v. Acosta Sales, LLC, 841 F. Supp. 2d 1105, 1115 (C.D. Cal. 2011). The typical approach of courts in the Central District of California is to require the plaintiff who proposes a collective action to meet the light burden of showing not that she and her proposed class are identically positioned, just similarly so -- a test that reduces typically to requiring the plaintiff to substantiate with affidavits her "allegations that the putative class members were together the victims of a single decision, policy, or plan." Id. (quoting Sarviss v. Gen. Dynamics Info. Tech. Inc., 663 F. Supp. 2d 883, 903 (C.D. Cal. 2009) (internal quotation omitted)).
Before a putative collective action is tried, however, a court may -- though it need not, absent argument that the employees are not situated similarly -- take a second, more rigorous look at the class, enquiring as to "'(1) the disparate factual and employment settings of the individual plaintiffs; (2) the various defenses available to the defendants with respect to the individual plaintiffs; and (3) fairness and procedural considerations.'" Mitchell, 841 F. Supp. 2d at 1116 (quoting Edwards v. City of Long Beach, 467 F. Supp. 2d 986, 990 (C.D. Cal. 2006)); see Edwards, 467 F. Supp. 2d at 989-90 (noting that the FLSA contains no "certification" requirement or protocol to which courts must adhere; certification of a collective action is instead merely "an effective case management tool") (citing Hoffmann--La Roche Inc. v. Sperling, 493 U.S. 165, 170--72 (1989)).
Whatever role a court plays in certifying an FLSA class, it is not bound to exercise the same oversight of the settlement of a collective action as it must a class action under Federal Rule of Civil Procedure 23(e). Whereas the court's role in supervising the settlement of a class action "protects unnamed class members 'from unjust or unfair settlements affecting their rights,'" Amchem Prods., Inc., 521 U.S. at 623 (quoting 7B Charles Alan Wright, et al., Federal Practice & Procedure § 1797 (3d ed.)), members of an FLSA collective action have opted-in affirmatively; a court's involvement in the management of their action "has less to do with the due process rights" of those to be bound by a settlement, "and more to do with the named plaintiffs' interest in vigorously ...