Joh v. American Income Life Insurance Co.

          ORDER RE: MOTION FOR FINAL APPROVAL OF CLASS ACTION SETTLEMENT RE: DKT. NO. 42

          THOMAS S. HIXSON UNITED STATES MAGISTRATE JUDGE.

         Before the Court is the Plaintiffs' Motion for Final Approval of Class Action Settlement and Attorneys' Fees, Costs, and Service Awards. ECF No. 42. Having reviewed the Settlement agreement and the parties' arguments and papers, the Court DENIES the Motion.

         I. BACKGROUND

         A. Factual and Procedural History

         Plaintiffs are former insurance salesperson trainees or agents of American Life Insurance Company (“AIL”), who trained and worked at locations in California. Plaintiffs allege that as prospective AIL agents, trainees underwent training that lasted one week or more, during which they did not earn a commission and were not otherwise paid. Sec. Am. Compl. (“SAC”) ¶ 18, ECF No. 30. They allege that AIG promised prospective agents salaried positions, but then hired them as commission-only employees, and failed to pay or reimburse them while they worked as sales agents. Id. ¶ 42. They allege that as trainees and agents they were not paid a minimum wage or overtime pay, did not receive proper meal and rest breaks, and had to pay their own work-related expenses. Id. ¶ 20. They also allege that agents were subject to “chargebacks, ” meaning that if they sold policies and those policies were later cancelled by the customer, AIL illegally collected back commissions from the agents earned wages. Id. ¶ 28.

         Plaintiffs seek to represent a class of “[a]ll individuals who trained to become and/or worked as sales agents in California for Defendant during the last four years prior to the filing of the original Complaint.” Id. ¶¶ 32-33. Plaintiffs assert the following claims: unlawful, unfair, and fraudulent business practices in violation of California Business and Professions Code §§ 17200, et seq.; failure to pay California overtime compensation in violation of California Labor Code §§ 510 and 1094, and Industrial Welfare Commission (“IWC”) Wage Order No. 4; failure to pay minimum wages in violation of California Labor Code §§ 1194 and 1197, and IWC Wage Order No. 4; failure to provide meal periods in violation of California Labor Code §§ 226.7 and 512, and IWC Wage Order No. 4; failure to provide rest periods in violation of California Labor Code § 226.7 and IWC Wage Order No. 4; waiting time penalties pursuant to California Labor Code §§ 202 and 203; failure to furnish accurate wage statements in violation of California Labor Code § 226 and IWC Wage Order No. 4; failure to reimburse expenses and illegal chargebacks in violation of California Labor Code §§ 221 and 2802, and IWC Wage Order No. 4; failure to pay wages/commissions in violation of California Labor Code §§ 221, 203 and 204; declaratory relief pursuant to 28 U.S.C. § 2201; and civil penalties pursuant to the California Private Attorneys General Act (“PAGA”), California Labor Code §§ 2698, et seq.

         This action is the first-filed of a group of similar actions against AIL. Joh filed this case on September 12, 2018 in Contra Costa County Superior Court and AIL removed to this court. Joh filed on behalf of a class of current and former AIL agents who sold insurance in California, for California Labor Code violations, unfair business practices, and PAGA penalties. ECF No. 11. AIL moved to compel individual arbitration on November 21, 2018. ECF No. 12. Joh opposed, arguing that the arbitration agreement's PAGA waiver was unlawful and that the non-severability clause therefore rendered the entire section unenforceable. ECF No. 17.

         On December 14, 2018, Hamilton filed a separate case against AIL in this district. Hamilton v. American Income Life Ins. Co., Case No. 4:18CV7535. Hamilton named as plaintiffs both Hamilton and Smith, now Plaintiffs in this matter. They allege they were misclassified as independent contractors and deprived of compensation and benefits while participating in training and working as sales agents for AIL. Dkt. No. 14 ¶¶ 41(g), 88(h). That action also includes class and representative allegations concerning unpaid training time and improper training practices of prospective agents. Hamilton and Smith sought to represent a class of “[a]ll current and former California-based AIL agents who began training on or after December 14, 2014.” Id. ¶ 30. Hamilton asserted claims against AIL for unfair business practices under California's Unfair Competition Law (“UCL”); failure to pay overtime; failure to pay minimum wages; failure to provide meal and rest periods; waiting time penalties; failure to furnish accurate wage statements; failure to reimburse expenses; declaratory relief; and civil penalties under PAGA.

         Separately Golz, one of the objectors to the proposed Settlement, filed a case against AIL in the Los Angeles County Superior Court on October 18, 2018. AIL removed that case to the U.S. District Court for the Central District of California on November 26, 2018. Golz v. American Income Life Ins. Co., Case No. 2:18CV9879. Golz sought to represent a class of “[a]ll individuals employed by [AIL] who held job titles of Insurance Agents, Insurance Agent Trainee or likewise that were classified as ‘Independent Contractors' during the Class Period.” Dkt. No. 20, ¶ 73. She likewise brought claims of California meal and rest break violations; failure to pay California overtime compensation; failure to pay California minimum wage; failure to reimburse expenses in violation of the California Labor Code; and unfair competition in violation of the California Business and Professions Code.

         After the parties in this matter had fully briefed AIL's Motion to Compel Arbitration, they agreed to attempt to resolve both Joh and Hamilton through mediation. Mot. For Final Settlement Approval (“Mot.”) 3, ECF No. 42. On April 16, 2019, AIL and the plaintiffs in Joh and Hamilton participated in a full-day joint mediation with an experienced employment class action mediator, David Rotman. Id.; Decl. of Tindall in Supp. of Pl.'s Mot. (“Tindall Decl.”), Ex. B, ECF No. 42-1; Supp. Decl. of Tindall in Supp. of Pl.'s Reply Mem. (“Supp. Tindall Decl.”) ¶ 3, ECF No 50-1. The parties did not reach a resolution that day. Id. After the mediation ended, Rotman communicated a mediator's proposal to the parties, which included a total settlement amount. Id. Both sides accepted the proposal with conditions. Id.

         On August 1, 2019, the Plaintiffs filed their Motion for Preliminary Approval of Class Action Settlement, ECF No. 39, which the Court granted on August 16, 2019, ECF No. 41. The Court set a hearing on the motion for final approval for January 9, 2020. Id. ¶ 19. On November 5, 2019, Golz along with a number of other class members, filed an Objection to Final Settlement Approval. ECF No. 44.

         B. The Settlement Agreement

         The key terms of the Settlement agreement (“SA”), Ex. A, ECF No. 42-2, are as follows: Class Definition: The Settlement includes, “all individuals who trained to become and/or worked as sales agents in California for Defendant during the last four years prior to the filing of the original Complaint in Joh and whose training and/or work began before the date of preliminary approval of this settlement.” SA 5, § II.C.

         Settlement Benefits:

         AIL will pay a total settlement amount of $5, 750, 000. SA 7, §II.X. The SA contemplates amounts paid to class members, including Plaintiffs, after excluding: settlement fund costs and fees; administration costs of approximately $49, 500, Decl. of Zachary Cooley of Settlement Adm'r KCC (“Cooley Decl.”) ¶ 7, ECF No. 46; any incentive awards to Plaintiffs, up to $7, 500 each ($22, 500 total), SA 14, § III.I; any attorneys' fees and costs awarded, equal to not more than $1, 437, 500 in fees (approximately 25% of the value of the Settlement fund) plus litigation costs of $32, 000, SA 14-15, § III.J; and a payment of $75, 469 to the Labor Workforce Development Agency (“LWDA”) pursuant to PAGA, SA 15, § III.K. SA 9, § III.C.

         Individual settlement payments will be calculated proportionately based on the number of workweeks a class member accumulated while training or working as an agent for AIL. Class members who never entered into an agent contract with AIL, those who never completed training but who underwent at least one day of training with AIL, will receive a rebuttable one-work training presumption, double weighted. SA 10, § III.F. All class members who entered into an agent contract with AIL after training during the class period will receive a rebuttable four-workweek training presumption, double weighted, plus the total number of weeks contracted as agents with AIL during the class period. Id. Class members who trained prior to the class period but worked as agents during the period will receive a share of the net settlement amount based on the number of weeks worked as agents during the class period. Id. Individual settlement amounts will average $590.52, and the maximum allocation is estimated to be $5, 548.54. Cooley Decl. ¶ 7.

         Release: All settlement class members will release:

[A]ny and all rights, duties, obligations, claims, counterclaims, defenses, actions, causes of action or liabilities (including penalties of every kind or nature whatsoever), whether known or unknown, suspected or unsuspected, asserted or unasserted, foreseen or unforeseen, actual or contingent, liquidated or unliquidated, punitive or compensatory as of the date of the Final Approval Order/Judgment: (a) that were brought by Plaintiffs in this Action; or (b) that reasonably arise out of the facts alleged in the Action. The Parties intend for the releases to be sufficiently broad enough to cover all claims brought on behalf of all individuals who trained to become and/or worked as sales agents California for Defendant during the last four years prior to the filing of the original complaint in Joh, including the claims asserted in the operative complaints in Joh and Hamilton as well as in Golz v. American Income Life Insurance Co., 18-CV-09879 (C.D. Cal.) and Putros v. American Life Insurance Co., Case No. 30-2019-01044772-CU-OE-CXC (Orange Cty. Sup. Ct.).^[1]

SA 19, § III.R.

         II. ANALYSIS

         A. Final Settlement Approval

         The Court may not grant final approval of the Settlement unless it determines that (1) the proposed class meets the requirements for certification under Federal Rule of Civil Procedure 23, and (2) the Settlement reached on behalf of the class is fair, reasonable, and adequate. “Especially in the context of a case in which the parties reach a settlement agreement prior to class certification, courts must peruse the proposed compromise to ratify both the propriety of the certification and the fairness of the settlement.” Staton v. Boeing Co., 327 F.3d 938, 952 (9th Cir. 2003); Amchem Prods. v. Windsor, 521 U.S. 591, 620 (1997) (“[S]pecifications of the rule--those designed to protect absentees by blocking unwarranted or overbroad class definitions-- demand undiluted, even heightened, attention in the settlement context.”).

         1. Class Certification

         Final approval of a class action settlement requires an assessment of whether the proposed class satisfies the requirements of Federal Rule of Civil Procedure 23(a) and (b). ...