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Goodwin v. Winn Management Group LLC

United States District Court, E.D. California

February 22, 2018

ADAM GOODWIN, individually and on behalf of all others similarly situated, Plaintiff,
v.
WINN MANAGEMENT GROUP LLC, Defendant.

          ORDER GRANTING FINAL APPROVAL OF CLASS ACTION SETTLEMENT (DOC. NO. 37)

         This matter came before the court for hearing on plaintiff's motion for final approval of a class action and Fair Labor Standards Act (“FLSA”) settlement, as well as a motion for award of attorneys' fees and an incentive payment for the class representative. (See Doc. Nos. 37, 37-2.) A hearing was held on November 7, 2017, with attorney Michael Malk appearing on behalf of plaintiff and the class, and attorney Mark Jacobs appearing on behalf of defendant. Considering all of the evidence supplied in connection with the motion and the representations of counsel at the hearing on this matter, the court will grant final approval of this settlement.

         BACKGROUND

         Preliminary certification of this class action was granted on July 26, 2017. (Doc. No. 34.) The claims brought by the plaintiff are set out in that document, and will not be repeated here. Notice was sent by the settlement administrator to the 1, 562 class members on September 19, 2017. (Doc. No. 37-6 at ¶¶ 5-7.) Only twenty-four class members were unable to receive notice, because the settlement administrator could not locate valid addresses for them. (Id. at ¶¶ 8-9.) No written objections to the settlement were received and only one class member requested to be excluded. (Id. at ¶¶ 13-14.)

         FINAL CERTIFICATION OF CLASS ACTION UNDER RULE 23

         The court has already evaluated the standards for class certification in its prior order granting preliminary approval of the class action settlement here. (Doc. No. 34 at 7-13.) Nothing has been raised subsequently that might affect the court's prior analysis of whether class certification is appropriate here, and the court has no cause to revisit that analysis. The court finds final certification of the following class is appropriate:

All non-exempt employees who worked for Defendant in California and both i) received non-discretionary compensation and ii) worked over 8 hours in a day or 40 hours in a week in at least one pay period between April 16, 2011 and July 26, 2017.

         Attorney Michael Malk is confirmed as class counsel, and plaintiff Adam Goodwin is confirmed as the class representative.

         FINAL APPROVAL OF CLASS ACTION SETTLEMENT

         Class actions require the approval of the district court prior to settlement. Fed.R.Civ.P. 23(e) (“The claims, issues, or defenses of a certified class may be settled, voluntarily dismissed, or compromised only with the court's approval.”). This requires that: (1) notice be sent to all class members; (2) the court hold a hearing and make a finding that the settlement is fair, reasonable, and adequate; (3) the parties seeking approval file a statement identifying the settlement agreement; and (4) class members be given an opportunity to object. Fed.R.Civ.P. 23(e)(1)-(5). The settlement agreement, as amended by the parties, was previously filed on the court's docket. (See Doc. Nos. 28-2, 32-1.) Class members have been given an opportunity to object, and none have done so. The court now turns to the adequacy of notice and its review of the settlement following the final fairness hearing.

         A. Notice

         “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). “Notice is satisfactory if it ‘generally describes the terms of the settlement in sufficient detail to alert those with adverse viewpoints to investigate and to come forward and be heard.'” Churchill Vill., L.L.C. v. Gen. Elec., 361 F.3d 566, 575 (9th Cir. 2004) (quoting Mendoza v. Tucson Sch. Dist. No. 1, 623 F.2d 1338, 1352 (9th Cir. 1980)). Any notice of the settlement sent to the class should alert class members of “the opportunity to opt-out and individually pursue any state law remedies that might provide a better opportunity for recovery.” Hanlon, 150 F.3d at 1025. It is important for class notice to include information concerning the attorneys' fees to be awarded from the settlement, because it serves as “adequate notice of class counsel's interest in the settlement.” Staton v. Boeing Co., 327 F.3d 938, 963 n.15 (9th Cir. 2003) (quoting Torrisi v. Tucson Elec. Power Co., 8 F.3d 1370, 1375 (9th Cir. 1993)) (noting that where notice references attorneys' fees only indirectly, “the courts must be all the more vigilant in protecting the interests of class members with regard to the fee award”).

         Here, the court reviewed the class notice that was proposed when the parties sought preliminary approval of the settlement and found it sufficient. (Doc. No. 34 at 21-22.) Notice was sent by the settlement administrator to the 1, 562 class members on September 19, 2017. (Doc. No. 37-6 at ¶¶ 5-7.) Of those notices, 119 were returned to the sender, of which sixteen had a forwarding address on file. (Id. at ¶ 8.) For the remaining 103 class members, notice was again attempted at new addresses for ninety-six of the class members, ultimately resulting in only twenty-four class members to whom no notice could be delivered. (Id. at ¶ 9.) Therefore, it appears that approximately 98 percent of the class members received notice of this settlement.

         Of the class members receiving notice of the settlement, the settlement administrator reports that no written objections were filed and only one request for exclusion was received. (Id. at ¶¶ 13-14.) Moreover, no class members or their representatives appeared at the final fairness hearing to object to the settlement.

         This settlement requires some class members to submit a claim in order to receive any proceeds from the settlement. The settlement administrator reports it has received forty-two invalid claims responses: forty from class members who were not required to file claims and two duplicates. (Id. at ¶ 10.) Further, one class member has filed a deficient claim form. (Id. at ¶ 11.) All told, the settlement will be paid out to 306 claimants-which includes those members of the California class and FLSA members in California who were employed by defendant as of July 26, 2017 and were not required to file claims-representing 54.93% of the total amount that could be claimed by class members from the settlement.[1] (Id. at ¶ 15.)

         Given the above, the court concludes adequate notice was provided to the vast majority of the class here. Silber v. Mabon, 18 F.3d 1449, 1453-54 (9th Cir. 1994) (noting the court need not ensure all class members receive actual notice, only that “best practicable notice” is given); Winans v. Emeritus Corp., No. 13-cv-03962-HSG, 2016 WL 107574, at *3 (N.D. Cal. Jan. 11, 2016) (“While Rule 23 requires that ‘reasonable effort' be made to reach all class members, it does not require that each individual actually receive notice.”). The court accepts the reports of the settlement administrator, and finds sufficient notice has been provided so as to satisfy Federal Rule of Civil Procedure 23(e)(1).

         B. Final Fairness Hearing

         The court held a final fairness hearing in this action on November 7, 2017. Both class counsel and defense counsel were present. No class members, objectors, or counsel representing the same appeared at the hearing. The court now determines that the settlement is fair, adequate, and reasonable. See Fed. R. Civ. P. 23(e)(2).

         In assessing whether a district court's determination of the fairness of a class action settlement was within its discretion, the Ninth Circuit Court of Appeals balances the following factors:

(1) the strength of the plaintiffs' case; (2) the risk, expense, complexity, and likely duration of further litigation; (3) the risk of maintaining class action status throughout the trial; (4) the amount offered in settlement; (5) the extent of discovery completed and the stage of the proceedings; (6) the experience and views of counsel; (7) the presence of a governmental participant; and (8) the reaction of the class members to the proposed settlement.

Churchill Vill., L.L.C., 361 F.3d at 575; see also In re Online DVD-Rental Antitrust Litig., 779 F.3d 934, 944 (9th Cir. 2015); Rodriguez v. West Publ'g Corp., 563 F.3d 948, 964-67 (9th Cir. 2009). This court's analysis is guided by those factors. These settlement factors are nonexclusive, and not each need be discussed if they are irrelevant to a particular case. Churchill Vill., L.L.C., 361 F.3d at 576 n.7. While the Ninth Circuit has observed that “strong judicial policy . . . . favors settlements, ” id. at 576 (quoting Class Plaintiffs v. City of Seattle, 955 F.2d 1268, 1276 (9th Cir. 1992)), where the parties reached a settlement agreement prior to class certification, the court has an independent duty on behalf of absent class members to be vigilant for any sign of collusion among the negotiating parties. See In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 946 (9th Cir. 2011) (noting “settlement class actions present unique due process concerns for absent class members, ” because the “inherent risk is that class counsel may collude with the defendants, tacitly reducing the overall settlement in return for a higher attorney's fee”) (internal quotations and citations omitted).

         In particular, where a class action settlement agreement was reached prior to a class being certified by the court, “consideration of these eight Churchill factors alone is not enough to survive appellate review.” In re Bluetooth, 654 F.3d at 946-47. District courts must be watchful “not only for explicit collusion, but also for more subtle signs that class counsel have allowed pursuit of their own self-interests and that of certain class members to infect the negotiations.” Id. at 947. These more subtle signs include: (1) “when counsel receive a disproportionate distribution of the settlement, or when the class receives no monetary distribution but class counsel are amply rewarded”; (2) the existence of a “clear sailing” arrangement, which provides “for the payment of attorneys' fees separate and apart from class funds, ” and therefore carries “the potential of enabling a defendant to pay class counsel excessive fees and costs in exchange for counsel accepting an unfair settlement on behalf of the class”; and (3) “when the parties arrange for fees not awarded to revert to defendants rather than be added to the class fund.” Id. (internal citations and quotations omitted). The Ninth Circuit has also recognized that a version of a “clear sailing” arrangement exists when a defendant expressly agrees not to oppose an award of attorneys' fees up to a certain amount. Lane v. Facebook, Inc., 696 F.3d 811, 832 (9th Cir. 2012); In re Bluetooth, 654 F.3d at 947; In re Toys R Us-Delaware, Inc., 295 F.R.D. 438, 458 (C.D. Cal. 2014) (“In general, a clear sailing agreement is one where the party paying the fee agrees not to contest the amount to be awarded by the fee-setting court so long as the award falls beneath a negotiated ceiling.”) (quoting Weinberger v. Great N. Nekoosa Corp., 925 F.2d 518, 520 n.1 (1st Cir. 1991)).

         While this court has wide latitude to determine whether a settlement is substantively fair, it is held to a higher procedural standard and “must show it has explored comprehensively all factors, and must give a reasoned response to all non-frivolous objections.” Allen v. Bedolla, 787 F.3d 1218, 1223-24 (9th Cir. 2015) (quoting Dennis v. Kellogg Co., 697 F.3d 858, 864 (9th Cir. 2012)). Thus, while the court should examine any relevant Churchill factors, the failure to review a pre-class certification settlement for those subtle signs of collusion identified above may also constitute error. Id. at 1224-25.

         1. Strength of the Plaintiff's Case

         Plaintiff explains in his brief in support of the motion for final approval that the class faced risks at the class certification stage due to two factors: (1) “the issue of whether Winn's bonuses and commissions were discretionary and therefore would not need to be included in the regular rate of pay for purposes of overtime”; and (2) the fact that defendant advised plaintiff that it had settled another class action previously which incorporated certain of the same class members, such that only about seven months of the class period remained relevant. (Doc. No. 37 at 17.)

         Under the FLSA and California labor laws, bonuses generally need not be included in the standard rate of pay from which overtime is calculated if “both the fact that payment is to be made and the amount of the payment are determined at the sole discretion of the employer at or near the end of the period and not pursuant to any prior contract, agreement, or promise.” 29 U.S.C. § 207(e)(3); Alonzo v. Maximus, Inc., 832 F.Supp.2d 1122, 1129-30 (C.D. Cal. 2011). Plaintiff's allegation that the bonuses are non-discretionary was therefore key to resolving the merits of this action in his favor, and was an important factual allegation of the complaint. (See Doc. No. 4 at ¶¶ 3-4, 6, 15, 20.) According to class counsel, there was “perhaps a 50% chance” that the class “would not prevail on the merits of some or all of their claims.” (Doc. No. 37-4 at ¶ 62.) Both counsel confirmed at the hearing on the pending motion that defendant had a good faith argument regarding the discretionary nature of the bonuses.[2] Since demonstrating the bonuses were not discretionary was a necessary component of plaintiff's case, resolution of this issue against plaintiff would have resulted in the class recovering nothing. Therefore, while plaintiff believes his claims had merit, it was not certain that he would ultimately prevail in this matter on behalf of the class.

         2. Risk, Expense, Complexity, and Likely Duration of ...


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