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Sanchez v. Frito-Lay, Inc.

United States District Court, E.D. California

June 26, 2017

ELIAZAR SANCHEZ, on behalf of himself and all others similarly situated, Plaintiff,
v.
FRITO-LAY, INC., Defendant.

          ORDER DENYING RENEWED MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT AND CONDITIONAL CLASS CERTIFICATION (DOC. NO. 43)

         For a third time, plaintiff has sought preliminary settlement approval and conditional class certification. (Doc. No. 43.) On April 4, 2017, this matter came before the court for hearing. Attorney Jerusalem Beligan appeared on behalf of plaintiff Eliazar Sanchez, and attorney Samantha Hardy appeared on behalf of defendant Frito-Lay, Inc. (“Frito-Lay”). For the reasons stated below, plaintiff's motion will be denied once again.

         BACKGROUND

         Plaintiff Eliazar Sanchez filed this putative class action in state court on April 11, 2014, alleging the following causes of action under California law: (1) failure to pay regular hourly wages, (2) failure to pay overtime wages, (3) failure to pay the correct overtime rate of pay, (4) failure to pay premium wages for denial of meal and rest periods, (5) failure to pay vested vacation wages, (6) illegal deductions of vested vacation wages, (7) breach of contract for failure to pay vested wages, (8) failure to pay final wages due upon termination, (9) failure to provide accurate itemized wage statements, and (10) violations of California Unfair Competition Law. (Doc. No. 1-3.) The putative class comprises non-exempt hourly employees of defendant Frito-Lay, the owner and operator of several distribution centers throughout California. Plaintiff alleges that defendant implemented policies and practices that resulted in the alleged violations of employment laws. On May 23, 2014, defendant removed the case to this court. (Doc. No. 1.)

         After the class action was filed, plaintiff's counsel investigated the claims further and determined that the contemplated class needed to be narrowed to cover only alternative work week employees (e.g., those working four ten-hour days a week) in the position of “Maintenance Mechanic.” (Doc. No. 43-2 (“Beligan Decl.”) ¶ 8.) Accordingly, plaintiff proceeded on two primary allegations related to these employees. First, plaintiff alleges defendant Frito-Lay engaged in a company-wide practice by which employees were denied a second meal period for every shift of ten or more hours. Second, plaintiff alleges Frito-Lay's company-wide practice and written rest break policy failed to authorize and permit a third rest break for shifts of ten or more hours.

         After submitting to mediation, the parties executed a settlement agreement. (See Doc. No. 9-3.) On December 11, 2014, plaintiff filed an unopposed motion for preliminary approval of the class action settlement and conditional certification of the class. (Doc. No. 9.) On January 30, 2015, the matter was presented before the assigned magistrate judge for a hearing. (Doc. No. 11.) The parties were directed by the magistrate judge to file supplemental briefing addressing a number of perceived deficiencies in the motion for preliminary approval. (See id.) On August 5, 2015, the magistrate judge issued findings and recommendations recommending that the motion for preliminary approval be denied after concluding that plaintiff had failed to provide sufficient information to establish a class or to permit a determination that the proposed settlement fell within the range of possible approval. (Doc. No. 16.) The then-assigned district judge adopted those findings and recommendations and denied plaintiff's motion. (Doc. No. 17.)

         On December 4, 2015, this case was reassigned to the undersigned. (Doc. No. 18.) On January 14, 2016, plaintiff filed a renewed motion for preliminary approval and conditional class certification which included additional evidence supported by declarations of plaintiff Sanchez and his counsel. (Doc. No. 20.) On February 16, 2016, the matter came before the undersigned for hearing. At that hearing, the court noted that plaintiff's motion did not fully address the previous concerns of the court expressed in the order denying preliminary approval. The matter was continued for further hearing, and on April 19, 2016, plaintiff filed supplemental briefing, including an amended settlement agreement, in response to the modifications to the settlement terms suggested by the court at the February 16, 2016 hearing. (Doc. No. 27.) Following a second hearing on the matter, the court denied plaintiff's renewed motion. (Doc. No. 29.) In relevant part, the court expressed substantial concern with the calculations plaintiff's counsel had used in determining an assumed violation rate. (See Id. 6-8.) Because the court found that plaintiff's counsel unnecessarily reduced his estimated recovery by half, it could not conclude that the amended settlement agreement was substantively fair or adequate, or the product of a well-informed negotiation. (Id. at 8.)

         On February 23, 2017, plaintiff filed the second renewed motion for preliminary approval and conditional class certification, which is now before the court. (Doc. No. 43.) This motion is based on the same amended settlement agreement previously presented to the court. (See Doc. No. 43-3 (“Amended Settlement”).) For purposes of this order, the court relies on its prior detailed description of the relevant terms of that Amended Settlement. (See Doc. No. 29 at 3-4.) At the hearing on the pending motion, the court expressed continued concerns and asked the parties to further advise how this litigation is to proceed should the court deny plaintiff's second renewed motion. On May 4, 2017, the parties filed a joint statement seeking a final opportunity to seek preliminary approval and conditional class certification. (Doc. No. 50.)

         LEGAL STANDARD & PROCESS FOR APPROVAL OF CLASS SETTLEMENTS

         “Courts have long recognized that settlement class actions present unique due process concerns for absent class members.” In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 946 (9th Cir. 2011) (citation and internal quotations omitted). To protect the rights of absent class members, Rule 23(e) of the Federal Rules of Civil Procedure requires the court approve all class action settlements “only after a hearing and on finding that it is fair, reasonable, and adequate.” Fed.R.Civ.P. 23(e)(2); Bluetooth, 654 F.3d at 946. However, it has been recognized that when parties seek approval of a settlement agreement negotiated prior to formal class certification, “there is an even greater potential for a breach of fiduciary duty owed the class during settlement.” Bluetooth, 654 F.3d at 946. Thus, the court must review such agreements with “a more probing inquiry” for evidence of collusion or other conflicts of interest than what is normally required under the Federal Rules. Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998); see also Bluetooth, 654 F.3d at 946.

         When parties seek class certification for settlement purposes only, Rule 23 “demand[s] undiluted, even heightened, attention” to the requirements for certification. Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 620 (1997). Although here the parties do not dispute that the class exists for the purposes of settlement, the district court must examine the propriety of certification under Rule 23 both at this preliminary stage and at a later fairness hearing. See, e.g., Ogbuehi v. Comcast, No. 2:13-cv-00672-KJM-KJN (E.D. Cal. Oct. 2, 2014); West v. Circle K Stores, Inc., No. 2:04-cv-00438-WBS-GGH, 2006 WL 1652598, at *2 (E.D. Cal. June 13, 2006).

         Review of a proposed class action settlement ordinarily proceeds in three stages. See Manual for Complex Litigation (4th) § 21.632. First, the court conducts a preliminary fairness evaluation and, if applicable, considers conditional class certification. Id. Second, if the court makes a preliminary determination on the fairness, reasonableness, and adequacy of the settlement terms, the parties are directed to prepare the notice of certification and proposed settlement to the class members. Id. Third, the court holds a final fairness hearing to determine whether to approve the settlement. Id.; see also Narouz v. Charter Commc'ns, Inc., 591 F.3d 1261, 1266-67 (9th Cir. 2010).

         DISCUSSION

         In the current motion for preliminary settlement approval and conditional class certification, plaintiff's counsel primarily addresses-in new and sometimes contradictory detail-his methodology for determining the adjusted number of relevant work weeks and the assumed violation rate underlying the valuation of plaintiff's two primary claims. As described below, plaintiff's explanations do not resolve the court's previously expressed concerns and only raise new questions about the fairness and reasonableness of the Amended Settlement.

         A. The Putative Class and ...


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