United States District Court, S.D. California
YVONNE DALTON, DIAN GARZA, ARMINDA GUZMAN, SHARON HUGHEN, ETELVINA SALGADO, HECTOR MIGUEL SALGADO, REFUGIO SANCHEZ and LUISA RAMIREZ FLORES, individually and on behalf of all others similarly situated, Plaintiffs,
LEE PUBLICATIONS, INC., a Delaware Corporation, dba NORTH COUNTY TIMES, and DOES 1 through 50, Defendants.
ORDER: GRANTING MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT (Dkt. No. 207) 2) ORDERING MODIFICATIONS TO PROPOSED CLASS NOTICE 3) CONTINUING FINAL APPROVAL HEARING
GONZALO P. CURIEL, District Judge.
Plaintiffs are individuals who contracted with Defendant Lee Publications, Inc. dba North County Times ("NCT") to deliver newspapers to home subscribers. In April 2008, Plaintiffs filed suit in San Diego County Superior Court, Case No. 37-2008-00053545, alleging generally that NCT engaged in various violations of the California Labor Code, applicable Wage Orders, and the California Unfair Competition Law, Bus. & Prof. Code §§ 17200 et seq., based on a liability theory of misclassification of newspaper carriers as independent contractors. Plaintiffs later filed a First Amended Complaint, the operative Complaint in this Lawsuit, alleging nine causes of action for: failure to pay minimum wage, hourly wages, and overtime wages; failure to provide meal periods; failure to provide rest breaks; failure to reimburse business expenses; unlawful withholding of wages due; failure to provide itemized wage statements; failure to keep accurate payroll records; waiting time penalties; and unfair business practices. In June 2008, the Lawsuit was removed to this Court, under the Class Action Fairness Act of 2005. On July 27, 2010, the Court certified the Class under Federal Rule of Civil Procedure Rule 23(b)(3). On May 20, 2013, the Court granted in part and denied in part NCT's renewed motion to decertify. (Dkt. No. 166.) The Court affirmed class certification of Plaintiffs' claims for failure to reimburse for reasonable expenses and unfair business practices; however, the Court found that individual issues predominated on questions of liability and damages on the remainder of Plaintiffs' claims and decertified them.
Presently before the Court is Plaintiffs' Motion for Preliminary Approval of Settlement. (Dkt. No. 207.) Pursuant to the Parties' Joint Stipulation of Class Action Settlement (Dkt. No. 207-3 ("Settlement Agreement")), NCT does not oppose this Motion.
Prior to granting approval of a class action settlement, a court (1) assesses whether a class exists and (2) determines whether the proposed settlement is "fundamentally fair, adequate, and reasonable." Stanton v. Boeing Co. , 327 F.3d 938, 952 (9th Cir. 2003) (internal quotations omitted). Here, the Court has already granted class certification pursuant to Fed.R.Civ.P. 23(b)(3) and thus first turns to examining the fairness of the Settlement Agreement followed by the questions of a claims administrator and class notice.
I. THE SETTLEMENT
Rule 23(e) requires the Court to determine whether a proposed settlement is "fundamentally fair, adequate and reasonable." Stanton , 327 F.3d at 959 (internal quotations omitted). In making this determination, a court may consider: (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 stage 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 to the proposed settlement." Id . (internal quotations omitted.) Moreover, "the settlement may not be the product of collusion among the negotiating parties." In re Mego Fin Corp. Sec. Litig. , 213 F.3d 454, 458 (9th Cir. 2000).
Because some of these factors cannot be fully assessed until the Court conducts a final fairness hearing, "a full fairness analysis is unnecessary at this stage." See Alberto v. GMRI, Inc. , 252 F.R.D. 652, 665 (E.D. Cal. 2008) (internal quotations omitted). At the preliminary approval stage, a court need only review the parties' proposed settlement to determine whether it is within the permissible "range of possible approval" and thus, whether the notice to the class and the scheduling of a formal fairness hearing is appropriate. Id. at 666.
A. THE STRENGTH OF PLAINTIFFS' CASE AND THE RISK, EXPENSE, COMPLEXITY AND LIKELY DURATION OF FURTHER LITIGATION, AND THE RISK OF MAINTAINING CLASS ACTION STATUS THROUGHOUT THE TRIAL
Both sides recognize the risks of continuing to litigate this Action. Class Counsel understands the uncertainties associated with complex, class-action litigation. In particular, on the threshold issue of Plaintiffs' status, that is, whether they were properly classified as employees or independent contractors, Class Counsel acknowledges there is risk that if the case were to be tried, it could become apparent that Plaintiffs' status could not be ascertained by common proof, thus threatening to undo the underlying class certification decision. Likewise, Class Counsel acknowledges that Plaintiffs face a risk that they could be found to be independent contractors, not employees. Either of those outcomes could eliminate Plaintiffs' claims. Moreover, beyond the threshold issues, and as detailed in their Motion, although Plaintiffs maintain that their Labor Code claim for unreimbursed expenses includes a claim for at least partial non-payment of mileage expenses, Class Counsel concedes there was some doubt whether the mileage claim remained in the case. (Dkt. No. 171.) Class Counsel also acknowledges that there are additional risks, including that the Court might determine Plaintiffs lacked class-wide proof of actual damages, or evidence that NCT's system of enhanced compensation did not adequately reimburse carriers for their mileage expenses. For instance, the parties strongly disputed the weight to be given to the mileage estimates in what the parties refer to as the Henschen Spreadsheets. Defendant further asserts that the Henschen Spreadsheets fail to account for carrier's widespread use of substitutes and helpers. Moreover, there was a further risk that the Court might determine that the IRS Standard Mileage Rates are not the appropriate rate of reimbursement (Dkt. No. 189), thereby precluding Plaintiffs from relying on those rates as the proper common measure of damages. Such a ruling, Plaintiffs admit, would likely foreclose class treatment on their mileage claim. All of these arguments were hanging in the balance of multiple motions in limine set for hearing on the date settlement was reached.
Conversely, NCT also understands its own risks of litigation, and that trial of this matter would be costly. NCT has already expended considerable resources on discovery, motion practice, and trial preparation. Taken together, the costs, the risks to both sides, and delays of continued litigation weigh in favor of preliminary approval of the proposed settlement.
B. THE EXTENT OF DISCOVERY AND THE STAGE OF THE PROCEEDINGS
After over four years of extensive written and verbal discovery, discovery closed in this case in 2012. During the period leading up to Plaintiffs' motion for class certification (2008 through 2010), Class Counsel served multiple sets of written discovery. Class Counsel took the depositions of nearly a dozen witnesses and defended the depositions of seven Plaintiffs. Plaintiffs obtained more than 400, 000 pages of documents, as well as voluminous electronic data regarding Plaintiffs, retained an expert witness who authored an expert report, and defended the expert's deposition. (See Dkt. No. 207-2, Greer Decl. ¶ 3.)
The parties settled the case on the day of argument before this Court of a dozen fully-briefed significant substantive and procedural motions in limine and motions to clarify. (See Dkt. No. 205.) The settlement came following two separate attempts to resolve this matter in 2009 and 2012 before Magistrate Judge Nita Stormes, and less than 30 days prior to the date the case was scheduled for a jury trial scheduled to last 2-3 weeks.
Accordingly, the extent of discovery and stage of the proceedings weigh in favor of preliminary approval.
C. EXPERIENCE OF CLASS COUNSEL
Class Counsel have experience prosecuting class actions relating to employment claims, and lead Class Counsel, C. Keith Greer, has handled complex litigation for over twenty years. Counsel on both sides believe this Settlement is fair and reasonable in light of the uncertainties of continued certification and litigation. (See Dkt. No. 207-2, Greer Decl. ¶ 11.) Accordingly, this factor weighs in favor of preliminary approval. See In re Ominvision Techs., Inc. , 559 F.Supp.2d 1036, 1043 (N.D. Cal. 2008) ("The recommendations of plaintiffs' counsel should be given a presumption of reasonableness." (internal quotations omitted); Ellis v. Naval Air Rework Facility , 87 F.R.D. 15, 18 (N.D. Cal 1980).
D. THE AMOUNT OFFERED IN SETTLEMENT
A settlement is not judged against only the amount that might have been recovered had the plaintiff prevailed at trial, nor must the settlement provide 100% of the damages sought to be fair and reasonable. Linney, 151 F.3d at 1242. There is a "range of reasonableness" in determining whether to approve settlements, "which recognizes the uncertainties of law and fact in any particular cause and the concomitant risks and costs necessarily inherent in taking any litigation to completion." Frank v. Eastman Kodak Co. , 228 F.R.D. 174, 186 (W.D.N.Y. 2005) (quoting Newman v. Stein , 464 F.2d 689, 693 (2d. Cir. 1972)). The adequacy of the amount recovered must be judged as "a yielding of absolutes.... Naturally, the agreement normally embodies a compromise; in exchange for the saving of cost and elimination of risk, the parties each give up something they might have won had they proceeded with litigation." Officers for Justice v. Civil Serv. Comm'n , 688 F.2d 615, 624 (9th Cir. 1982) (internal quotations omitted). "It is well-settled law that a cash settlement amounting to only a fraction of the potential recovery will not per se render the settlement inadequate or unfair." Id. at 628.
Here, Plaintiffs assert a claim for unreimbursed business expenses and a derivative unfair competition law claim. NCT has agreed to establish a Maximum Settlement Fund in the amount of three million, two-hundred thousand dollars ($3, 200, 000.00). A Net Settlement Fund will be made available to Class Members, after deductions are made for attorneys' fees (estimated at $800, 000.00), attorneys' costs (estimated at $50, 000.00), claims administration (estimated between $30, 000.00 and $40, 000.00), and service awards to the named Plaintiffs (estimated at $36, 000.00), if approved by the Court. According to Class Counsel, the Maximum Settlement Fund of $3.2 million, less the anticipated deductions is estimated to bring the Net Settlement Fund to $2.27 million. Class Members may file claims ...