Valdez v. Neil Jones Food Co.

          ORDER GRANTING FINAL APPROVAL OF CLASS ACTION SETTLEMENT; AWARDING ATTORNEY FEES AND INCENTIVE AWARDS; AND ENTERING JUDGMENT IN FAVOR OF PLAINTIFFS AND AGAINST DEFENDANT NEIL JONES FOOD COMPANY (ECF NOS. 79-82, 86-87)

         On July 27, 2016, Plaintiffs Luis Valdez and Carolina Martinez, on behalf of themselves and others similarly situated (hereinafter collectively referred to as “Plaintiffs”), filed a motion for final approval of a class action settlement and motion for attorney fees. (ECF Nos. 79-83.) Plaintiffs’ motions are unopposed.

         A final fairness hearing was held on August 10, 2016. Dennis Wilson appeared for the class and Michael Wilbur appeared telephonically for Defendant. Having considered the moving papers, the Court’s file, as well as the arguments made at the August 10, 2016 hearing, the Court shall grant the request for final approval of the class action settlement.

         I. BACKGROUND

         A. Allegations in the First Amended Complaint

         The operative complaint in this action is the first amended complaint filed on October 21, 2013. Plaintiffs filed the first amended complaint against Defendant Neil Jones Food Company (“Defendant Jones” or “Defendant”) alleging failure to provide meal and rest breaks, failure to pay overtime, failure to pay required “reporting time”, failure to pay for all hours worked, failure to pay wages due upon termination, failure to provide itemized wage statements, unfair business practices, conversion, and violation of the Private Attorneys General Act. (ECF No. 31.)

         Plaintiffs reside in Fresno County and were employed as non-exempt hourly employees by Defendant Jones. (First Am. Compl. ¶¶ 8, 28, ECF No. 31.) Defendant Jones operates San Benito Foods which is a product line producing a wide variety of products such as chopped and crushed tomatoes, pasta sauces, diced and stewed tomatoes, purees, pizza sauces, peeled tomatoes, and seafood cocktail sauces. (Id. at ¶ 29.) Defendant Jones’ has canning and packing facilities in Firebaugh and Hollister, California. (Id. at ¶¶ 9, 29.)

         At the time the complaint was filed, Plaintiff Martinez was still employed by Defendant Jones and worked in the unskilled position of a hand processor or general laborer. (Id. at ¶¶ 39, 63.) Plaintiff Valdez was employed as a skilled mechanic who handled and worked with machinery. (Id. at ¶¶ 39, 63.) He was terminated on or about October 28, 2011. (Id. at ¶ 82.) Both Plaintiffs were laid off from the Firebaugh facility. (Id. at ¶ 40.)

         B. Procedural History

         Plaintiffs Valdez and Martinez filed this employment action on behalf of themselves and all others similar situated in the Superior Court of the State of California for the County of Fresno on January 11, 2013, alleging violations of California law. (Compl. 9-33, ^[1] ECF No. 1.) Defendant Jones removed this action to the Eastern District of California on April 9, 2013, under 28 U.S.C. §§ 1332, 1441, and 1446 on the basis of diversity jurisdiction. (Notice of Removal 1-2, ECF No. 1.)

         On May 9, 2013, Plaintiffs filed a motion to remand. (ECF No. 8.) Plaintiffs’ motion to remand was denied on September 11, 2013. (ECF No. 28.) On October 21, 2013, Plaintiffs filed the first amended complaint. (ECF No. 31.) Defendant Jones filed an answer to the complaint on November 27, 2013. (ECF No. 37.)

         On May 7, 2014, Plaintiffs filed a notice of class action settlement. (ECF No. 40.) Plaintiffs filed a notice of joint motion for preliminary approval of the class action settlement on June 23, 2014. (ECF No. 42.) On June 24, 2014, the parties filed a joint motion for preliminary approval of the class action settlement. (ECF No. 44.) A hearing on the motion was held on July 30, 2014 and an order issued on August 12, 2014, denying the motion for preliminary approval of the class action settlement finding that Plaintiffs had not met the requirements for class certification and that the structure of the settlement agreement raised concerns about the fairness of the agreement to the unnamed class members. The Court cited several areas of concern: 1) the notice provisions were inadequate to comply with due process and inform the unnamed class members of the rights that are being extinguished due to the settlement; 2) the agreement may have provide preferential treatment to some class members; 3) class counsel attorney fees raised at least an inference that the settlement may improperly favor counsel; 4) the agreement may result in over seventy-five percent of the net settlement fund reverting to Defendant; and 5) the incentive payments to the named Plaintiffs far exceeded the recovery of the individual class members. (ECF No. 47.)

         On December 23, 2014, Plaintiffs filed a second motion for preliminary approval of a class action settlement. (AR 48.) A hearing on the motion was held on January 21, 2015, and findings and recommendations issued recommending that preliminary approval of the class action settlement be denied as Plaintiffs had not demonstrated that the requirements of Rule 23(b) had been met; and the Court found the settlement was not fair, adequate, and reasonable. (ECF No. 51.) The parties filed objections to the findings and recommendations on February 9, 2015. (ECF Nos. 52, 53.) On March 27, 2015, the district judge issued an order adopting the findings and recommendations and denying the motion for preliminary approval of the settlement. (ECF No. 54.)

         On October 9, 2015, Plaintiffs filed a third motion for preliminary approval of the class action settlement. (ECF Nos. 58-60.) On October 27, 2015, Defendant filed a declaration in support of the motion for approval of the class action settlement. On November 2, 2015, findings and recommendations issued recommending that preliminary approval of the class action settlement be granted, however concerns were raised regarding the enhancement payment to the class representatives, the attorney fees sought by class counsel, and the reversion to Defendant. (ECF No. 63.) On December 3, 2015, the district judge ordered additional briefing to address three areas of concern: the reversion, the claims process, and the attorney fee request. (ECF No. 64.) On December 17, 2015, the parties each filed briefing in support of the preliminary settlement agreement. (ECF Nos. 65, 66.) On December 24, 2015, the district court issued an order denying preliminary approval of the class action settlement. (ECF No. 67.)

         On February 19, 2016, Plaintiff filed a fourth motion for preliminary approval of the class action settlement. (ECF No. 70.) The parties consented to the jurisdiction of the magistrate judge for all purposes and this action was reassigned to the undersigned on April 8, 2016. (ECF Nos. 73, 74, 75.) On this same date, an order issued granting Plaintiffs’ motion for preliminary approval of the class action settlement. (ECF No. 79.) The Court noted that at final approval the plaintiffs would need to provide evidence to support their request for an enhancement payment and expressed concern about the appropriateness of the cypress beneficiary which would need to be addressed in the motion for final approval of the class action settlement. (Id.)

         On July 27, 2016, Plaintiff filed a motion for final approval of the class action settlement and a motion for attorney fees. (ECF Nos. 79-82, 83.) At the direction of the Court, supplemental briefing was filed on August 5, 2016. (ECF Nos. 86, 87.) No objections to the settlement or opposition to the motion for final approval of the class action settlement have been filed.

         C. Terms of the Proposed Settlement Agreement

         Two classes have sought certification in this action. Subclass A is composed of any and all persons who were employed by Neil Jones in an hourly union-represented position at Neil Jones’ “Toma-Tek” facility located in Firebaugh, California at any time from January 11, 2009 through May 10, 2014. (ECF No. 71-3 at 14.) Subclass B is composed of all any and all persons who were employed by Neil Jones in an hourly union-represented position or hourly non-union position at Neil Jones’ “Toma-Tek” facility located in Firebaugh, California at any time from January 11, 2009 through December 31, 2014, but excluding anyone whose employment never ended during the class period by reason of a layoff. (Id.)

         Under the terms of the proposed settlement, Defendant agrees to pay $850, 000.00 in cash (“gross settlement amount”) to resolve the claims of any class members who do not timely and validly opt out. (Id. at 22.) Of the gross settlement amount, $650, 000.00 is allocated to the released claims of settlement class A and $200, 000.00 is allocated to the released claims of settlement Class B. (Id.) The following deductions are to be taken from the gross settlement amount:

• Up to $5, 000.00 each to Plaintiffs Martinez and Valdez for their services and participation as class representatives;

• Up to $212, 500.00 (25 percent of the gross settlement fund) to class counsel for attorney fees;

• Up to $30, 000.00 in legal costs and expenses;

• $40, 215.64 in claims administrator costs;

• $15, 000.00 for civil penalties under the California Private Attorney General Act; and

• Defendant’s portion of FICA, FUTA, and all other state and federal payroll taxes on the individual settlement payments.

(Id. at 18, 25-27.)

         The individual settlement payments to each class member in subclass A will be based on their “workweek equivalents” during the class period. (Id. at 22.) Each class member’s “workweek equivalents” will be calculated by dividing the class member’s total straight time work hours during the class period by forty hours for the class period of January 11, 2009 through May 10, 2014. (Id. at 23.) Each class member will be entitled to a proportionate share of the net settlement amount that is the same as that class member’s proportionate share of the total workweek equivalents for the entire class. (Id.)

         The individual settlement payments to each class member in subclass B will be calculated using a formula based on the number of years during the class period that the employee was laid off. (Id. at 23.) Each employee in settlement class B will receive a payment of $50 if laid off for one year during the class period; $75 if laid off for two years during the class period; $100 if laid off for three years during the class period; $125 if laid off for four years during the class period; $150 if laid off for five years during the class period; or $175 if laid off for six years during the class period. (Id.)

         Notices in English and Spanish were mailed to all class members at the last known address provided by Defendant Jones. (Id. at 18.) The settlement administrator was to resend notices returned by the United States Postal Service with a forwarding address. (Id. at 19.) If no forwarding address was provided, the claims administrator was to skip trace the individual names to obtain additional addresses and mail a second notice to any new or different address obtained. (Id.)

         The settlement provides that if the net settlement amount exceeds the sum of the individual payments, twenty-five percent of the difference will be allocated to the class members and seventy-five percent of the difference will be donated to the Firebaugh-Las Deltas Unified School District. (Id. at 22.) All funds from individual settlement payment checks that are uncashed 90 days after they are mailed by the settlement administrator shall be donated to Firebaugh-Las Deltas Unified School District. (Id. at 25.)

         The class A settlement resolves claims from January 11, 2009 through the preliminary approval date based on (1) Defendant’s alleged failure to provide meal periods or failure to comply with any provision of California law relating to the provision of meal periods; (2) Defendant’s alleged failure to provide rest breaks or failure to comply with any provision of California law relating to the provision of rest breaks; (3) Defendant’s alleged failure to pay regular wages or overtime premiums for all hours worked as a result of its practices of rounding employees’ clock times, requiring employees to submit to bag checks and other security checks, and the donning and doffing of protective clothing and equipment, as well as the time spent by employees walking between their work area and the employee parking lot at the beginning and end of each shift and the time spent by employees waiting to pick up paychecks; and (4) Defendant’s alleged failure to provide itemized wage statements in compliance with Labor Code section 226, as well as claims for violations of California Business and Professions Code section 17200, conversion and for penalties under the Private Attorney General Act arising out of the claims. (Id. at 12.) The class B settlement resolves claims arising out of Defendant’s alleged failure at any time from January 11, 2009 through December 31, 2014 to pay any member of the class all wages due within the appropriate time after layoff in violation of Labor Code section 201, 202, or 203, and any claims during the same period for alleged violation of Labor Code section 226 based on or arising out of the itemized wage statements that Neil Jones provided to laid off employees. (Id. at 12-13.) To achieve a full and complete release, each class member releases all released claims, either known or unknown, that exist at the time the Court enters a final order approving the settlement. (Id. at 30.) Plaintiffs and the class will seek dismissal of all claims against Defendant and will provide Defendant with a full release of the settled claims. (Id. at 30.) The class members will release all claims asserted in this action with prejudice. (Id.)

         II. LEGAL STANDARDS FOR APPROVAL OF CLASS SETTLEMENTS

         The Ninth Circuit has declared that a strong judicial policy favors settlement of class actions. Class Plaintiffs v. City of Seattle, 955 F.2d 1268, 1276 (9th Cir. 1992). Nevertheless, courts have long recognized that the settlement of class actions presents unique due process concerns for the absent class members. In re Bluetooth Headset Products Liability Litigation (“In re Bluetooth”), 654 F.3d 935, 946 (9th Cir. 2011). To guard against the potential for abuse, “Rule 23(e) of the Federal Rules of Civil Procedure requires court approval of all class action settlements, which may be granted only after a fairness hearing and a determination that the settlement taken as a whole is fair, reasonable, and adequate.” In re Bluetooth, 654 F.3d at 946. Since a settlement agreement negotiated prior to formal class certification creates a greater potential for a breach of the fiduciary duty owed to the class, “such agreements must withstand an even higher level of scrutiny for evidence of collusion or other conflicts of interest than is ordinarily required under Rule 23(e) before securing the court's approval as fair.” Radcliffe v. Experian Info. Solutions Inc., 715 F.3d 1157, 1168 (9th Cir. 2013) (quoting In re Bluetooth, 654 F.3d at 946).

         Review of the proposed settlement of the parties proceeds in two phases. True v. American Honda Motor Co., 749 F.Supp.2d 1052, 1062 (C.D. Cal. 2010). At the preliminary approval stage, the court determines whether the proposed agreement is within the range of possible approval and whether or not notice should be sent to class members. True, 749 F.Supp.2d at 1063. “If the proposed settlement appears to be the product of serious, informed, non-collusive negotiations, has no obvious deficiencies, does not improperly grant preferential treatment to class representatives or segments of the class, and falls within the range of possible approval, then the court should direct that the notice be given to the class members of a formal fairness hearing.” In re Tableware Antitrust Litigation, 484 F.Supp.2d 1078, 1079 (N.D. Cal. 2007) (quoting Manual for Complex Litigation, Second § 30.44 (1985)). At the final approval stage, the court takes a closer look at the settlement, taking into consideration objections and other further developments in order to make the final fairness determination. True, 749 F.Supp.2d at 1063.

         III. DISCUSSION

         When the settlement takes place before formal class certification, as it has in this instance, settlement approval requires a “higher standard of fairness.” Lane v. Facebook, Inc., 696 F.3d 811, 819 (9th Cir. 2012) reh’g denied 709 F.3d 791 (9th Cir. 2013). (quoting Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998)). This more exacting review of class settlements reached before formal class certification is required to ensure that the class representatives and their counsel do not receive a disproportionate benefit “at the expense of the unnamed plaintiffs who class counsel had a duty to represent.” Lane, 696 F.3d at 819.

         A. Final Certification of Class

         To certify a class, a plaintiff must demonstrate that all of the prerequisites of Rule 23(a), and at least one of the requirements of Rule 23(b) of the Federal Rules of Civil Procedure have been met. Wang v. Chinese Daily News, Inc., 737 F.3d 538, 542 (9th Cir. 2013). This requires the court to “conduct a ‘rigorous analysis’ to determine whether the party seeking class certification has met the prerequisites of Rule 23.” Wright v. Linkus Enterprises, Inc., 259 F.R.D. 468, 471 (E.D. Cal. 2009).

         The Court has previously found that the class meets the prerequisites of numerosity, commonality, typicality, and adequacy of representation. (Order Granting Plaintiffs’ Motion for Preliminary Approval of Class Action Settlement 9-12, ECF No. 76.) Further, the Court found that common questions predominate and allowing this action to proceed as a class action is the superior method of adjudicating the controversy of these employment related claims. (Id. at 12-13.)

         No class member has objected to the settlement of this action and the Court is unaware of any changes that would affect the class certification findings. For the reasons set forth in the April 8, 2016 order on Plaintiffs’ motion for preliminary approval of the class action settlement, the Court finds that the settlement classes ...