United States District Court, N.D. California, San Jose Division
KRISTOPHER A. SCHWARTZ, individually and on behalf of all others similarly situated, Plaintiff,
ART COOK, et al., Defendants, and BUCKLES-SMITH ELECTRIC COMPANY EMPLOYEE STOCK OWNERSHIP PLAN, Nominal Defendant.
ORDER GRANTING PLAINTIFF'S MOTION FOR FINAL
APPROVAL OF CLASS ACTION SETTLEMENT; AND GRANTING
PLAINTIFF'S MOTION FOR AWARD OF ATTORNEYS' FEES AND
COSTS [RE: ECF 129, 130]
LABSON FREEMAN United States District Judge.
15, 2017, the Court heard Plaintiff's Motion for Final
Approval of Class Action Settlement and Plaintiff's
Motion for Award of Attorneys' Fees and Costs.
See Minute Entry, ECF 137. The Court granted both
motions on the record and issued a short order memorializing
its rulings so that Plaintiff could begin administrative
tasks necessary to distribution of the settlement fund.
See Order Granting Plaintiff's Motion for Final
Approval, ECF 136. The Court indicated that it would issue a
lengthier order setting forth its reasoning, which it does
Kristopher A. Schwartz and class members were participants in
or beneficiaries of the Buckles-Smith Electric Company
Employee Stock Ownership Plan (“the ESOP” or
“the Plan”), an employee pension benefit plan
covered by the Employee Retirement Income Security Act of
1974 (“ERISA”). Plaintiff claims that Defendants
- Buckles-Smith Electric Company (“Buckles-Smith”
or “the Company”), several of its Board members,
and Bankers Trust Company of South Dakota - breached
fiduciary duties owed to the Plan and its participants.
See Second Amended Complaint (“SAC”),
ECF 118. Specifically, Plaintiff asserts that Defendants
terminated the ESOP in 2014 and forced a buyout at “far
less than the fair market value of the ESOP's shares, far
less than the amount the ESOP was entitled to under the
operative bylaws of Buckles-Smith, and far less than the
liquidation value of Buckles-Smith's assets - which
represented the price at which the Company's departing
shareholders had been redeemed for decades pursuant to
shareholder agreements.” SAC ¶ 1. Plaintiff also
alleges that “Defendants ignored in-hand, bona fide
written offers to purchase either all of the shares of
Buckles-Smith or just those shares owned by the ESOP for
nearly double the price actually paid.” Id.
Plaintiff claims that “[b]y this abuse of their
position of trust and authority with respect to the ESOP,
Defendants enriched themselves at the expense of the ESOP and
its participants.” Id.
more than a year of litigation, the parties settled the case
with the aid of a mediator, the Hon. Edward A. Infante. The
written Settlement Agreement contemplates the certification
of a non-opt out class pursuant to Federal Rule of Civil
Procedure 23, defined as: “All Persons who were
participants (whether vested or non-vested) in or
beneficiaries of the Plan at any time from and after
September 1, 2012 (the “Class Period”), provided,
however, that the Class shall not include any Defendant or
any beneficiary of any Defendant.” Settlement Agreement
¶¶ 1.3, 3.3.2, ECF 116-1 (emphasis omitted). The
Settlement Agreement provides that the Company will pay the
total amount of $350, 000 (“Settlement Payment”)
to settle all claims asserted against all defendants in the
action. Id. ¶¶ 1.20, 8.1.1. The $350, 000
Settlement Payment will be used to establish a Settlement
Fund which will be maintained and distributed by Class
Counsel. Id. ¶ 1.19. The cost of preparing and
mailing the class notice will be paid from the Settlement
Fund, and class counsel may apply to the Court for an award
of attorneys' fees and expenses to be paid from the
Settlement Fund. Id. ¶¶ 8.1.2, 8.2.
March 20, 2017, the Court issued an order which: granted
preliminary approval of the class action settlement;
preliminarily certified the class; appointed Plaintiff as
class representative; appointed Plaintiff's counsel as
class counsel; approved forms and methods of notice to the
class; set a deadline of May 15, 2017 for objections; and set
a hearing date of June 15, 2017 for Plaintiff's motion
for final approval of the class action settlement and for
Plaintiff's motion for attorneys' fees. See
Order Preliminarily Approving Settlement, ECF 125. The only
objection received in response to the class notice was a
letter dated May 10, 2017 from Robert J. Polito. See
Polito Objection, ECF 133. Mr. Polito does not object to the
settlement per se, but he suggests a modification to
the Settlement Agreement as discussed below. Id. Mr.
Polito does not object to Plaintiff's motion for
attorneys' fees and costs. Id.
15, 2017, the Court heard Plaintiff's motion for final
approval and motion for attorneys' fees and costs. Mr.
Polito appeared at the hearing and presented argument to the
Court. The Court thereafter granted both the motion for final
approval of class action settlement and the motion for
attorneys' fees on the record, and it advised the parties
that a short order memorializing the ruling would issue
immediately while a more lengthy order setting forth the
Court's reasoning would issue at a later date.
MOTION FOR FINAL APPROVAL OF CLASS ACTION SETTLEMENT
Rule of Civil Procedure 23(3) provides that “[t]he
claims, issues, or defenses of a certified class may be
settled, voluntarily dismissed, or compromised only with the
court's approval.” Fed.R.Civ.P. 23(e).
“Adequate notice is critical to court approval of a
class settlement under Rule 23(e).” Hanlon v.
Chrysler Corp., 150 F.3d 1011, 1025 (9th Cir. 1998).
Moreover, “[a] district court's approval of a
class-action settlement must be accompanied by a finding that
the settlement is ‘fair, reasonable, and
adequate.'” Lane v. Facebook, Inc., 696
F.3d 811, 818 (9th Cir. 2012) (quoting Fed.R.Civ.P. 23(e)).
The district court “must evaluate the fairness of a
settlement as a whole, rather than assessing its individual
components.” Id. at 818-19. “[A]
district court's only role in reviewing the substance of
that settlement is to ensure that it is fair, adequate, and
free from collusion.” Id. (internal quotation
marks and citation omitted). In making that determination,
the district court is guided by several factors articulated
by the Ninth Circuit in Hanlon v. Chrysler Corp
(“Hanlon factors”). Id. Those
the strength of the plaintiffs' case; the risk, expense,
complexity, and likely duration of further litigation; the
risk of maintaining class action status throughout the trial;
the amount offered in settlement; the extent of discovery
completed and the stage of the proceedings; the experience
and views of counsel; the presence of a governmental
participant; and the reaction of the class members to the
Hanlon, 150 F.3d at 1026-27; see also Lane,
696 F.3d at 819 (discussing Hanlon factors).
“Additionally, when (as here) the settlement takes
place before formal class certification, settlement approval
requires a ‘higher standard of fairness.'”
Lane, 696 F.3d at 819 (quoting Hanlon, 150
F.3d at 1026).
Notice was Adequate
Court previously approved Plaintiff's plan for providing
notice to the class when it granted preliminary approval of
the class action settlement. See Order Preliminarily
Approving Settlement, ECF 125. Prior to the preliminary
approval hearing, the Court examined carefully the proposed
class notice and found some aspects of the proposed notice to
be unclear. The Court required Plaintiff to make certain
changes to the notice to clarify the procedures for objecting
to the settlement and attending the final approval hearing.
Plaintiff submitted a revised proposed class notice along
with a blackline version showing that the required revisions
had been made. See Notice Re: Revised Form of Notice
of Proposed Settlement, ECF 128. Plaintiff provides
declaration of counsel stating that the notice was delivered
to all ...