United States District Court, E.D. California
TIMOTHY MORGRET, individually and on behalf of others similarly situated, Plaintiffs,
APPLUS TECHNOLOGIES, INC.; VALLEY INDUSTRIAL X-RAY AND INSPECTION SERVICES, INC., and DOES 1 through 10, Defendants.
ORDER GRANTING PLAINTIFF'S MOTION FOR PRELIMINARY APPROVAL OF CLASS SETTLEMENT (DOC. 43) ORDER VACATING HEARING ON MOTION FOR PRELIMINARY APPROVAL OF CLASS SETTLEMENT
JENNIFER L. THURSTON, Magistrate Judge.
Plaintiff Timothy Morgret requests preliminary approval of a class settlement reached with Defendant Valley Industrial X-Ray and Inspection Services, Inc. (Doc. 43.) Plaintiff seeks: (1) the conditional certification of a settlement class; (2) preliminary approval of the settlement; (3) appointment of Plaintiff as the class representative; (4) appointment of Alexander Dychter and Walter Haines as Class Counsel; (5) approval of the proposed class notice and related materials; (6) appointment of Phoenix Settlement Administrators as the Claims Administrator; (7) approval of the Settlement distribution plan; and (8) scheduling for final approval of the settlement. ( See Doc. 43-2.) Defendant does not oppose the motion for preliminary approval of the class settlement. (Doc. 44.)
The Court has considered the proposed settlement between the parties, and the proposed Notice and related forms. Because the matters are set forth sufficiently in the moving papers and supporting documents, the hearing on the motion is VACATED. For the following reasons, Plaintiff's motion for preliminary approval of class settlement is GRANTED.
FACTUAL AND PROCEDURAL HISTORY
Plaintiff initiated this action by filing a complaint against Valley Industrial X-Ray and Inspection Services ("VIXR"). (Doc. 1.) Plaintiff is a former technician and assistant technician for VIXR, where he performed industrial inspection services utilizing x-ray imaging technology. (Doc. 23 at 3.) He alleges VIXR is liable for violations of California Labor laws for failure to pay its technicians and assistant technicians minimum and overtime wages, failure to provide meal periods, failure to provide accurate wage statements, and failure to pay all wages owed upon termination. (Doc. 23 at 2.) Further, Plaintiff alleges VIXR is liable for violations of California's unfair competition laws. (Id. )
Defendant filed a Notice of Related Case, noting the claims in Moore v. VIXR (Case No. 1:13-cv-01875-JLT) were similar to those presented by Plaintiff. The Court consolidated Moore with this action, finding both plaintiffs sought to represent classes of VIXR's current and former employees, and the claims presented by Morgret "encompass those claims raised in the Moore matter." (Doc. 31 at 2.) However, Moore dismissed his claims on September 22, 2014. (Docs. 33-34.) Thus, only the claims stated by Timothy Morgret, individually and on behalf of others, remain against VIXR.
Plaintiff and VIXR requested that the Court stay the action pending mediation. (Doc. 35.) On January 21, 2015, the parties engaged in mediation with Edward A. Infante. (Doc. 39.) The parties accepted the mediator's proposal, and Plaintiff filed the motion for preliminary approval of class settlement now pending before the Court on February 13, 2015. (Doc. 43.)
THE PROPOSED SETTLEMENT
Pursuant to the proposed settlement ("the Settlement"), the parties agree to a gross settlement amount totaling $2, 500, 000.00. (Doc. 43-1 at 12, Settlement § 1.17.) Defendant agrees to fund the Settlement for a class including "all individuals who are or previously were employed by VIXR in the State of California as Technicians or Assistant Technologies at any time from November 6, 2009, through January 21, 2015." (Id. at 17, Settlement § 3.1.) Within three business days of the Court's order granting final approval of the Settlement, Defendant will "provide the Claims Administrator with sufficient funds via wire transfer to pay the Class Settlement Amount and sufficient funds for the employer's share of payroll taxes." (Id. at 22, Settlement § 6.3.)
I. Payment Terms
The settlement fund will cover payments to class members with additional compensation to the Class Representative. (Doc. 43-1 at 17-18, Settlement § 4.2.) In addition, the Settlement provides for payments to Class Counsel for attorneys' fees and expenses, to the Settlement Administrator, and the California Labor & Workforce Development Agency. (Id. ) Specifically, the settlement provides for the following payments from the gross settlement amount:
The Class Representative will receive an incentive award up to $10, 000;
Class Counsel will receive no more than 25% of the gross settlement amount for fees, and $20, 000 for expenses;
The California Labor and Workforce Development Agency shall receive $7, 500 from the award pursuant to PAGA; and
The Claims Administrator will receive approximately $15, 000 for fees and expenses.
(Id. at 18-20, Settlement § 4.2.) After these payments are made, the remaining funds ("Net Settlement Amount") will be distributed as settlement shares to Class Members. (Id. at 13, Settlement § 1.19.)
Class members are not required to submit a claim form to receive a share from the Net Settlement Amount. (Doc. 256-1 at 5; Doc. 259-1 at 12-13, Settlement § III.C.) Class members' shares will be determined "by multiplying the Net Settlement Amount by a fraction, the numerator of which is the individual class member's total number of eligible workweeks, and the denominator of which is the total of all eligible workweeks for all members of the Settlement Class during the Settlement Class Period." (Doc. 43-1 at 18, Settlement § 220.127.116.11.) Although the exact amount class members receive depends upon the number of workweeks they were employed by VIXR, the average recovery per class member will be a minimum of $3, 200. (Doc. 43 at 10, citing Dychter Decl. ¶ 7.) The entire settlement fund will be distributed, but if any checks are not cashed, that money will be distributed to an identified cy pres beneficiary. (Doc. 43-1 at 20, Settlement §4.2.9; Doc. 14-1 at 13-14).
The Settlement provides that Plaintiffs and Class Members, other than those who elect to participate in the Settlement, shall release VIXR from the claims arising in the class period at the time final judgment is entered. Specifically, the release for class members includes:
[A]ny and all claims, rights, penalties, demands, damages, debts, accounts, duties, costs (other than those costs required to be paid pursuant to this Settlement Agreement), liens, charges, complaints, causes of action, obligations, liabilities, or causes of action of any nature or description, including any such claims, whether known or unknown, that were alleged in the Class Action Complaint or which could have been alleged based upon the facts set forth in the First Amended Class Action Complaint filed on April 17, 2014... including but not limited to claims under California Labor Code sections 201, 202, 203, 204, 218, 218.5, 218.6, 226, 226.7, 510, 512, 558, 1194, 1197, 2698 et seq., as well as the applicable California Industrial Welfare Commission Wage Order, Business and Professions Code sections 17200-17208 et seq., and Section 7 of the Fair Labor Standards Act ("FLSA"), 29 U.S.C. section 207. The Releasing Settlement Class Members will be deemed to have specifically acknowledged that this Release reflects a compromise of disputed claims.
(Doc. 43-1 at 25, Settlement § 7.1.)
III. Objections and Opt-Out Procedure
The Notice of Proposed Settlement ("the Notice") explains the claims that are released as part of the Settlement. (Doc. 43-1 at 36, 39.) The Notice explains the procedures to object to the settlement, or elect not to participate in the Settlement. (Id. at 38.) Any class member who wishes may file objections or elect not to participate in the Settlement within 45 days of receiving the Notice. (Doc. 43-1 at 12, Settlement § 1.8.)
IV. The Cy Pres Beneficiaries
Since many class action settlements result in unclaimed funds, parties should have a plan for distributing unclaimed funds. Six Mexican Workers v. Arizona Citrus Growers, 904 F.2d 1301, 1305 (9th Cir. 1990). The options for such distribution include cy pres distribution, escheat to the government, and reversion to the defendants. Id., 904 F.2d at 1307. Here, the parties propose that Greater Bakersfield Legal Assistance be the designated cy pres recipient. (Doc. 43-1 at 20, Settlement § 4.2.9.)
The Ninth Circuit has determined any proposed cy pres recipient should be "tethered to the nature of the lawsuit and the interest of the silent class members." Nachshin v. AOL, LLC, 663 F.3d 1034, 1039 (9th Cir. 2011). In other words, the Ninth Circuit "require[s] that there be a driving nexus between the plaintiff class and the cy pres beneficiaries." Dennis v. Kellogg Co., 697 F.3d 858, 865 (9th Cir. 2012) (citing Nachshin, 663 F.3d at 1038). Without such tethering, the distribution of funds "may create the appearance of impropriety" by catering "to the whims and self interests of the parties, their counsel, or the court." Nachshin, 663 F.3d at 1038. Thus, a cy pres award should not benefit a group that is "too remote from the plaintiff class." Six Mexican Workers, 904 F.2d at 1308.
In identifying a cy pres beneficiary, the Ninth Circuit directs courts to consider whether awards to the beneficiary "(1) address the objectives of the underlying statutes, (2) target the plaintiff class, or (3) provide reasonable certainty that any member will be benefitted." Nachshin, 663 F.3d at 1040. Further, the Court must consider whether the cy pres distribution is appropriate given the "size and geographic diversity" of the class members. Id. at 1040-41 (citing, e.g., In re Airline Ticket Comm'n Antitrust Litig., 307 F.3d 679, 683 (8th Cir. 2002); Houck on Behalf of U.S. v. Folding Carton Admin. Comm., 881 F.2d 494, 502 (7th Cir. 1989)). Here, the parties have not provided information to support a determination that Greater Bakersfield Legal Assistance is an appropriate cy pres beneficiary.
Nevertheless, the Ninth Circuit has determined also that issues related to the identity of a cy pres beneficiary are not generally ripe until there are funds that remain unclaimed. See Rodriguez v. West Publ'g Corp., 563 F.3d 948, 966 (9th Cir. 2009) (finding cy pres distribution "becomes ripe only if entire settlement fund is not distributed to class members" and declining to determine propriety of cy pres at that time). The Court explained that where a cy pres distribution is contingent on the outcome of the claims process for a cash distribution, issues regarding the identification of recipients "will not be ripe until it is determined that available cash remains in th[e] fund after the claims process has concluded." Dennis v. Kellogg Co., 697 F.3d 858, 865 (9th Cir. 2012). Clearly, at this time, there is no way to know whether there will be funds remaining and, therefore, the Court declines to determine whether Greater Bakersfield Legal Assistance is an appropriate cy pres beneficiary.
PRELIMINARY APPROVAL OF A CLASS SETTLEMENT
I. Legal Standard
When parties settle the action prior to class certification, the Court has an obligation to "peruse the proposed compromise 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). Preliminary approval of a class settlement is generally a two-step process. First, the Court must assess whether a class exists. Id. (citing Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 620 (1997)). Second, the Court must "determine whether the proposed settlement is fundamentally fair, adequate, and reasonable." Id. (citing Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 2998)). The decision to approve or reject a settlement is within the Court's discretion. Hanlon, 150 F.3d at 1026.
II. Conditional Certification of a Settlement Class
Class certification is governed by Rule 23 of the Federal Rules of Civil Procedure, which provides that "[o]ne or more members of a class may sue or be sued as representative parties on behalf of all." Fed.R.Civ.P. 23(a). Under the terms of the Settlement, the proposed class is comprised of "all individuals who are or previously were employed by VIXR in the State of California as a Technician or Assistant Technician at any time since November 6, 2009 through January 21, 2015." (Doc. 43-1 at 12, Settlement § 1.10.) Here, Plaintiff seeks conditional approval of the settlement class. (Doc. 43 at 10.) Pursuant to Rule 23, the Court may "make a conditional determination of whether an action should be maintained as a class action, subject to final approval at a later date." Fry v. Hayt, Hayt & Landau, 198 F.R.D. 461, 466 (E.D. Pa. 2000) (citations omitted).
Parties seeking class certification bear the burden of demonstrating the elements of Rule 23(a) are satisfied, and "must affirmatively demonstrate... compliance with the Rule." Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541, 2551 (2011); Doninger v. Pacific Northwest Bell, Inc., 563 F.2d 1304, 1308 (9th Cir. 1977). If an action meets the prerequisites of Rule 23(a), the Court must consider whether the class is maintainable under one or more of the three alternatives set forth in Rule 23(b). Narouz v. Charter Communs., LLC, 591 F.3d 1261, 1266 (9th Cir. 2010).
A. Rule 23(a) Requirements
The prerequisites of Rule 23(a) "effectively limit the class claims to those fairly encompassed by the named plaintiff's claims." General Telephone Co. of the Southwest. v. Falcon, 457 U.S. 147, ...