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Reynolds v. Direct Flow Medical, Inc.

United States District Court, N.D. California

September 3, 2019

DIRECT FLOW MEDICAL, INC., et al., Defendants.



         Plaintiff J. Jason Reynolds filed the instant putative class action against Defendants Direct Flow Medical, Inc. (“DFM”), Dan Lemaitre, John David Boyle, Gordon Bishop, Paul LaViolette, and Yuval Binur, alleging violations of various federal and California labor laws. (See First Amended Compl. (“FAC”), Dkt. No. 14.) The parties subsequently settled the case, and on March 7, 2019, the Court preliminarily approved the proposed settlement and directed that notice be sent to the class members. (Preliminary Approval Ord., Dkt. No. 75.) Pending before the Court is Plaintiff's motion for final approval of the settlement, attorney's fees and costs, and service award. (Plf.'s Mot. for Final Approval, Dkt. No. 77.) No. opposition was filed.

         Upon consideration of the parties' filings, as well as the arguments presented at the August 29, 2019 motion hearing, and for the reasons set forth below, Plaintiff's motion for final approval is GRANTED.

         I. BACKGROUND

         A. Factual Background

         Defendant DFM is a medical technology company, who employed approximately 250 employees in California. (FAC ¶¶ 13, 15.) The individual Defendants were officers and/or members of the Board of Directors of Defendant DFM at the relevant times. (FAC ¶¶ 8-12.) In 2016, Defendant DFM began negotiating with Haisco, a Chinese company, for a capital infusion of $100 million. (FAC ¶ 30.) On November 16, 2018, the financing arrangements collapsed. (FAC ¶ 33.) On November 18, 2018, Defendants furloughed the majority of their workforce, placing their employees on involuntary leave without pay. (FAC ¶ 22.) Defendants informed their employees that they were being furloughed due to lack of funding, but that they might eventually receive their unpaid wages. (FAC ¶ 24.) Defendants also told their employees that Defendants were contemplating layoffs. (FAC ¶ 24.)

         On November 30, 2016, Defendants terminated almost their entire workforce by e-mail. (FAC ¶ 25.) At the time of termination, terminated employees were still owed: (1) unpaid wages, including personal time off (“PTO”), (2) reimbursement for necessary business expenditures they had incurred, and (3) salary increases that had begun accruing but had been deferred. (FAC ¶¶ 26-27.) Defendants acknowledged these amounts but stated that they could not guarantee payment due to lack of funds. (FAC ¶¶ 26-27.) Defendants did not pay the amounts owed. (FAC ¶ 28.)

         On January 9, 2017, Defendant DFM entered into a General Assignment for the Benefit of Creditors (“ABC”), a judicially-unsupervised process for liquidating insolvent debtors pursuant to California Code of Civil Procedure § 493.010. (FAC ¶ 35.) On February 7, 2017, Defendants' employees were notified of the ABC, and given a deadline to submit claims against Defendant DFM's liquidated assets. (FAC ¶ 36.) Although Plaintiff and other employees submitted claims, none received any payments. (Mot. for Prelim. Approval at 4, Dkt. No. 71.)

         B. Procedural Background

         On January 13, 2017, Plaintiff filed the instant putative class action. (Dkt. No. 1.) On March 27, 2017, Plaintiff filed the operative complaint, alleging that the layoffs violated the Federal Worker Adjustment and Retraining Notification Act (“federal WARN Act”) and the California Worker Adjustment and Retraining Notification Act (“California WARN Act”). (FAC ¶¶ 53-67.) Plaintiff also sought waiting time penalties for failure to pay back wages and unused PTO, as well as reimbursement for the unpaid business expenses. (FAC ¶¶ 68-82.) Finally, Plaintiff brought a claim under the Private Attorneys General Act (“PAGA”). (FAC ¶ 93.)

         In litigating the case, Plaintiff served written discovery requests on Defendants, and deposed four individual Defendants. (Tindall Decl. ¶¶ 3, 4, Dkt. No. 77-1.) Plaintiff also obtained further information through a subpoena on the ABC. (Tindall Decl. ¶ 5.) In March 2018, the parties participated in mediation with Cynthia Remmers. (Tindall Decl. ¶ 9.) In preparation for the mediation, Defendant DFM provided information regarding Defendants' liability for the WARN Act violations, unpaid PTO, unreimbursed expenses, waiting time penalties, and retroactive pay increases. (Tindall Decl. ¶ 7.)

         The parties did not resolve the case at mediation, and continued to participate in multiple phone call sessions with Ms. Remmers. (Tindall Decl. ¶ 9.) Plaintiff also filed his motion for class certification. (See Dkt. No. 64.) Before Defendants' opposition was due, the parties reached an agreement to resolve the case. (Tindall Decl. ¶ 9.)

         On January 31, 2019, Plaintiff filed an unopposed motion for preliminary approval. On February 5, 2019, the Court requested supplemental briefing. (Dkt. No. 72.) On February 20, 2019, Plaintiff filed his supplemental brief. (Dkt. No. 73.) On March 7, 2019, the Court held a hearing on Plaintiff's motion for preliminary approval. (Dkt. No. 76.) That same day, the Court granted Plaintiff's motion.

         C. Settlement Agreement

         Under the terms of the settlement agreement (“Settlement”), Defendants agree to pay a “Gross Settlement Amount” of $911, 500. (Tindall Decl., Exh. A (“Settlement Agreement”) ¶ 1(m).) Defendants shall also separately pay the actual costs of settlement administration. (Settlement Agreement ¶ 6.) Of the Gross Settlement Amount, Plaintiff seeks an attorney's fee award of 25%, or $230, 875, costs of $22, 486.44, and a service award for named Plaintiff of $12, 500. (Settlement Agreement ¶¶ 20, 24; Plf.'s Mot. for Final Approval at 17, 22.) The Gross Settlement Amount also includes $13, 672 in PAGA penalties; $10, 254 shall be paid to the California Labor and Workforce Development Agency (“LWDA”) and $3, 418 will be part of the Net Settlement Amount for distribution to participating class members. (Settlement Agreement ¶ 25.) This leaves a Net Settlement Amount of $635, 384.56. (Plf.'s Mot. for Final Approval at 7.)

         A class member's share of the Settlement is calculated as two “Portions.” (Settlement Agreement ¶ 13.) First, the settlement administrator calculates each class member's “Annualized Compensation Ratio” by dividing the individual class member's annual compensation by the total annual compensation of all class members. The settlement administrator then multiplies the class member's “Annualized Compensation Ratio” by a figure representing 20% of the Net Settlement Amount to obtain “Portion 1” of the class member's settlement payment. (Settlement Agreement ¶ 13.)

         Second, the settlement administrator will add: (1) the amount of the class member's accrued but unpaid PTO, (2) the amount of unreimbursed work expenses the class member incurred, and (3) the amount of compensation the class member should have received from approved but deferred pay raises. (Settlement Agreement ¶ 14.) The settlement administrator then divides this figure by the sum of these three amounts for all class members to obtain the individual class member's “Unpaid Compensation & Expenses Ratio.” The class member's “Unpaid Compensation & Expenses Ratio”) is multiplied by a figure representing 80% of the Net Settlement Amount to obtain “Portion 2” of the class ...

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