Lusk v. Five Guys Enterprises LLC

          ORDER RE PRELIMINARY FAIRNESS EVALUATION (DOC. NO. 36)

         I. Introduction

         In this lawsuit an employee, on behalf of himself and a proposed class of his fellow employees, is suing his two employers for violating California wage-and-hour laws and California and federal consumer reporting laws. The employee is Plaintiff Jeremy Lusk, and the employers are Defendant Five Guys Enterprises LLC and Defendant Encore FGBF, LLC (collectively “Defendants”).

         After Lusk initiated this lawsuit, the parties reached a proposed class action settlement agreement, which the parties then presented to the Court for approval under Rule 23(e) of the Federal Rules of Civil Procedure. Accordingly, now before the Court is Lusk's motion for a preliminary fairness determination of the proposed settlement agreement. For the reasons discussed infra, the Court does not find that the proposed settlement agreement is fair or warrants class treatment.

         II. Background

         From approximately August 2016 to November 2016, Lusk worked in California as a manager-in-training for his fast-food restaurant employers, Defendants. In addition to employing Lusk, Defendants also employed a class of at least 2, 206 non-exempt employees (hereinafter the “Class”) in California from August 2013 to the present. According to Lusk, Defendants violated several California wage-and-hour laws and California and federal consumer reporting laws with respect to Lusk and the Class. Based on those violations, Lusk filed this lawsuit against Defendants, pleading the following claims:

         FCRA, ICRAA, and CCRAA disclosures (first, second, third, and fourth claims): Defendants evaluated Lusk and the Class for potential employment. In doing so, Defendants procured and/or caused to be prepared credit reports, background reports, and investigative consumer reports on Lusk and the Class. Defendants failed to make disclosures to Lusk and the Class that are required under the federal Fair Credit Reporting Act (“FCRA”), ^[1] California's Investigative Consumer Reporting Agencies Act (“ICRAA”), ^[2] and California's Consumer Credit Reporting Agencies Act (“CCRAA”).^[3]

         Meal breaks (fifth claim): Defendants failed to provide Lusk and the Class with meal breaks, and Defendants failed to pay premium wages to Lusk and the Class for unprovided meal breaks, thereby violating California's Labor Code.

         Rest breaks (sixth claim): Defendants failed to provide Lusk and the Class with rest breaks, and Defendants failed to pay premium wages to Lusk and the Class for unprovided rest breaks, thereby violating California's Labor Code.

         Minimum wages and overtime wages (seventh claim): Defendants forced Lusk and the Class to work off-the-clock. Consequently, Defendants failed to pay Lusk and the Class minimum wages and overtime wages, thereby violating California's Labor Code.

         Expenditure indemnification (eighth claim): Defendants failed to reimburse Lusk and the Class for necessary vehicle gas and mileage expenditures, thereby violating California's Labor Code.

         Wage statements (ninth claim): Defendants failed to provide Lusk and the Class with accurate itemized wage statements, thereby violating California's Labor Code.

         Timely payment of final wages (tenth claim): When the employment of Lusk and the Class ended, Defendants failed to timely pay Lusk and the Class all final wages, thereby violating California's Labor Code.

         Unfair competition (eleventh claim): On the basis of Defendant's alleged conduct identified supra in the fifth, sixth, seventh, and eighth claims, Defendants engaged in unfair competition, thereby violating California's unfair competition law (“UCL”).^[4]

         PAGA (twelfth claim): On the basis of Defendant's alleged violations of the California Labor Code, Lusk and the Class are aggrieved employees who seek penalties from Defendants on behalf of the State of California pursuant to California's Private Attorney General Act (“PAGA”).^[5]

         After Lusk filed the foregoing claims against Defendants, Lusk and Defendants conducted some discovery. Lusk and Defendants then participated in a mediation with Deborah Crandall Saxe on October 10, 2018. The mediation resulted in the parties agreeing on October 12, 2018, to the terms of a proposed class-wide settlement agreement.

         According to Lusk, the “primary material terms” of the proposed settlement agreement are as follows:

1. For purposes of settlement, all of Lusk's claims will be certified for class treatment pursuant to Rule 23(b)(3).

2. As noted supra, the Class consists of at least 2, 206 non-exempt employees who worked for Defendants in California from August 2013 to the present. For purposes of the settlement agreement and class notice, the Class will be defined as follows:

All persons who, from August 22, 2013, to the date the Court grants preliminary approval of this settlement, have previously been or currently are employed in California by Defendants, whether directly or through an employment agency or a professional services organization, as a non-exempt or hourly employee of Defendants.

3. Lusk will be appointed as the class representative.

4. Lusk's counsel, Shaun Setareh, will be appointed as the class counsel.

5. Defendants will pay $1, 200, 000 as the “Gross Settlement Amount” in a “claims-based settlement, ” exclusive of employer-side payroll taxes.

6. Class counsel will apply for a attorney's fee award of up to $400, 000, which will be paid from the Gross Settlement Amount.

7. Class counsel will apply for a cost reimbursement of $20, 000, which will be paid from the Gross Settlement Amount.

8. Lusk will apply for a class representative enhancement of up to $15, 000, which will be paid from the Gross Settlement Amount.

9. A third-party class claims administrator will be hired to provide notice to the Class of the class settlement, and the class claims administrator will be paid a fee of up to $30, 000, which will be paid from the Gross Settlement Amount.

10. The PAGA action will be settled for $100, 000, with that amount being encompassed within the Gross Settlement Amount. Accordingly, 75% (or $75, 000) of the $100, 000 PAGA settlement will be paid to the California Labor Workforce Development Agency from the Gross Settlement Amount. The remaining 25% (or $25, 000) of the PAGA settlement is included within the remaining $660, 000 of the Gross Settlement Amount, discussed infra.

11. The remaining $660, 000 of the Gross Settlement Amount will be paid to the non-opt-out members of the Class. Therefore, assuming none of the 2, 206 putative class members opt out, then the average settlement payment made to each class member will be approximately $299.18.

12. In consideration for Defendants' payment of the Gross Settlement Amount, the Class will release Defendants from all claims in this lawsuit, which, as noted supra, includes several California wage-and-hour claims as well as ...