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Leverage v. Traeger Pellet Grills, LLC

United States District Court, N.D. California

May 2, 2017

DAVID LEVERAGE, et al., Plaintiffs,
v.
TRAEGER PELLET GRILLS, LLC, et al., Defendants.

          ORDER RE SUPPLEMENTAL BRIEFING ON PLAINTIFFS' MOTION FOR PRELIMINARY APPROVAL RE: DKT. NO. 74

          KANDIS A. WESTMORE UNITED STATES MAGISTRATE JUDGE

         The Court has reviewed Plaintiffs' motion for preliminary approval, and hereby orders the parties to provide a joint supplemental brief regarding the following issues. The supplemental briefing should be filed no later than May 17, 2017.

         A. Attorney's Fees

         Plaintiff's counsel intend to seek an award of 25% of the Gross Settlement Fund as the Fee Award, plus reimbursement of reasonable and actual expenses, not to exceed $60, 000, as the Expense Award. (Settlement Agreement ¶ 98, Dkt. No. 74-1.) To assess the fee request, even for purposes of preliminary approval, the Court requires information as to the lodestar claimed, i.e., the number of hours incurred in the case and the hourly rates claimed.

         B. Range of Reasonableness

         At the preliminary approval stage, courts in this district "have stated that the relevant inquiry is whether the settlement falls within the range of possible approval or within the range of reasonableness." Cotter v. Lyft, 176 F.Supp.3d 930, 935 (N.D. Cal. 2016) (internal quotation omitted). "In determining whether the proposed settlement falls within the range of reasonableness, perhaps the most important factor to consider is plaintiff's expected recovery balanced against the value of the settlement offer." Id.; see also O'Connor v. Uber Techs., Inc., 201 F.Supp.3d 1110, 1120-21 (N.D. Cal. 2016). This determination "requires evaluating the relative strengths and weaknesses of the plaintiffs' case; it may be reasonable to settle a weak claim for relatively little, while it is not reasonable to settle a strong claim for the same amount." Cotter, 176 F.Supp. at 936 (citing In re High-Tech Emp. Antitrust Litig., Case No: 11-cv-2509-LHK, 2014 WL 3917126, at *4 (N.D. Cal. Aug. 8, 2014). Furthermore, the Ninth Circuit has recognized that where no class has been formally certified, "there is an even greater potential for a breach of fiduciary duty owed the class during settlement. Accordingly, 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." In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 947 (9th Cir. 2011). Signs of collusion that the Court must consider include: (1) whether counsel receives a disproportionate distribution of the settlement, (2) where the parties negotiate a "clear sailing" provision for payment of attorneys' fees separate and apart from class funds; and (3) when the parties arrange for fees not awarded to revert to the defendants. Id.

         In the instant case, Plaintiffs bring employment misclassification claims, including claims for unpaid minimum wage and overtime wages under the Fair Labor Standards Act ("FLSA") and related state laws, as well as damages for meal and rest period violations, unlawful deductions, inaccurate wage statements, and waiting time penalties under various state laws. (Plfs.' Mot. at 1, Dkt. No. 74.) Plaintiffs also bring a California Private Attorneys General Act ("PAGA") claim. (Id.) The proposed settlement is for $2, 850, 000; once the attorney's fees ($712, 500), costs ($60, 000), incentive award ($65, 000), class administrative costs ($35, 000), and PAGA penalty ($66, 666.67) are excluded, the net settlement fund is estimated to be $1, 910, 833.33. (Id. at 19.)

         Plaintiffs state that the "settlement represents a recovery of about 73% of the projected expected recovery if this case were to proceed through certification and trial." (Plfs.' Mot. at 10.) The "projected expected recovery, " however, includes substantial discounts based on asserted risks of non-certification and loss on the merits. (Id. at 11 (discounting the unpaid overtime claim by 30% for risk of non-certification and an additional 60% for risk of losing on the merits), 12 (discounting the unpaid minimum wage claim by 30% for risk of non-certification and 40% for risk of losing on the merits), 13 (discounting the deductions claim by 25% for risk of non-certification and 55% for risk of losing on the merits), 14 (discounting the meal and rest periods claim by 50% for risk of non-certification and 70% for risk of losing on the merits), 15 (discounting the waiting time penalties by 45% for risk of non-certification and 65% for risk of losing on the merits, and discounting the wage statement penalties by 45% for risk of non-certification and 70% for risk of losing on the merits).) Thus, the "projected expected recovery" after the discounts amounts to $3, 915, 444, whereas the full verdict value -- without discounts -- is around $16, 234, 210. The $2, 850, 000 settlement represents an 82% discount from the full verdict value.

         The Court finds that Plaintiffs have not adequately explained why an 82% discount is warranted in this case. For example, with respect to the meal and rest period claim, Plaintiffs point to Defendants' argument that class members could take meal and rest periods whenever they want, but cite no authority that shows this would defeat certification or the claim itself. But see Benton v. Telecom Network Specialists, Inc., 220 Cal.App.4th 701, 726 (2013) ("the fact that individual inquiry might be necessary to determine whether individual employees were able to take breaks despite the defendant's allegedly unlawful policy (or unlawful lack of a policy) is not a proper basis for denying certification"). Plaintiffs also do not explain what risks of certification exist as to the classification claim, or what facts exist to show that Brand Ambassadors at Costco obtained nonbinding commitments from buyers. (See Plfs.' Mot. at 7.) Plaintiffs must fully explain the risks of non-certification and losing on the merits for each of their claims, citing to specific case law and facts, and why these risk warrant the proposed 82% discount.

         C. Settlement Formula

         The Settlement provides for three classes: (1) the "California Class, " which consists of employees who worked for Defendants in California; (2) the "Non-California Rule 23 Class, " which consists of employees who worked for Defendants in states outside of California under[1] whose laws Plaintiffs have alleged state-law claims in the proposed Fourth Amended Complaint; and (3) the "FLSA Class, " which consists of employees who worked for Defendants in all other states. (Plfs.' Mot. at 2.) The California Class and Non-California Rule 23 Class are opt-out classes, while the FLSA Class is an opt-in class. (Id.)

         Outside of California, the states are distributed into two tiers. "Tier 1 States" are Arizona, Colorado, Florida, Illinois, Kentucky, Maryland, Massachusetts, Michigan, Nevada, New Mexico, New York, Oklahoma, Oregon, and Washington. (Settlement Agreement ¶ 49.) Tier 1 States "are states whose state law claims alleged in the Complaint (and released under the Settlement) afford protections greater than the FLSA, but not as protective as California." (Plfs.' Mot. at 3.) "Tier 2 States" are all remaining states and the District of Columbia. (Settlement Agreement ¶ 51.) These two tiers do not match up with the Non-California Rule 23 Class and the FLSA Class; the Non-California Rule 23 Class includes states outside of the Tier 1 States. (See Settlement Agreement ¶¶ 31 (listing states included in the Non-California Rule 23 Class), 49 (listing states included in Tier 1).)

         In distributing the Settlement fund, the Settlement Administrator is to calculate the "Base Weekly Payment, " which is based on the number of weeks worked by all participating class members. (Settlement Agreement ¶ 86(a).) California Class members will receive a settlement payment equal to 2.2 times the Base Weekly Payment, multiplied by the number of weeks worked by that individual. (Settlement Agreement ¶ 86(b).) Individuals in Tier 1 States will receive a settlement payment equal to 1.3 times the Base Weekly Payment, multiplied by the number of weeks worked by that individual. (Settlement Agreement ¶ 86(b).) Finally, individuals in Tier 2 States will receive a settlement payment equal to the base Weekly Payment, multiplied by the number of weeks worked by that individual. The multiplier is based on the greater protections and remedies available to individuals who work in California and Tier 1 states. (Settlement Agreement ¶ 86(b).)

         The parties must explain how the 2.2 and 1.3 multipliers were chosen. The parties should also explain whether individuals who are in both the Tier 2 States and the Non-California Rule 23 Class should be entitled to a multiplier, as they are giving up additional state law ...


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