Parne et al v. Monex Deposit Company et al, No. 8:2008cv00302 - Document 185 (C.D. Cal. 2010)
Court Description: ORDER Granting Preliminary Settlement Approval by Judge David O. Carter 180 . Orders that a hearing on final approval be set for 2/28/11 at 8:30 a.m. See order for further details. (twdb)
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Parne et al v. Monex Deposit Company et al Doc. 185 1 2 O 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE CENTRAL DISTRICT OF CALIFORNIA 10 11 THOMAS LA PARNE et. Al. , 12 Plaintiff(s), 13 14 v. MONEX DEPOSIT COMPANY et. Al., 15 Defendant(s). 16 17 18 19 ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) CASE NO. SACV 08-0302 DOC (MLGx) O R D E R GRANTING PRELIMINARY SETTLEMENT APPROVAL _________________________________ 20 21 Before the Court is the parties' Joint Motion for Preliminary Approval of Class Action 22 Settlement and Release ("Joint Motion") (Docket 180). The parties request that the Court (1) 23 enter an order preliminarily approving the Settlement, including a proposed draft of the Class 24 Notice; (2) set a schedule for a hearing on Final Approval of the Settlement, Plaintiffs' 25 application for attorney's fees, and enhancement payments; (3) determine the scope of the 26 release; (4) determine whether the unclaimed portion of the Net Settlement Amount shall revert 27 to Defendant or be distributed as a cy pres award to the Red Cross, (5) approve the mailing of 28 the class notice, and (6) enter an order prohibiting class members from filing any new actions Dockets.Justia.com 1 similar to those covered by the settlement until the Court's judgment becomes final. 2 I. BACKGROUND 3 Plaintiffs represent a group of approximately 379 people who worked as account 4 representatives for Monex Deposit Company ("Defendant") at any time between March 18, 2004 5 and the present. Plaintiffs allege that they worked over forty hours per week without receiving 6 overtime pay and that Defendant failed to reimburse them for headsets purchased in relation to 7 their job duties. As a result, Plaintiffs assert claims under the federal Fair Labor Standards Act 8 ("FLSA") and the California Labor Code. Plaintiffs also assert that the above-described actions 9 constitute unfair business practices in contravention of Cal. Bus. & Prof. Code § 17200. 10 11 The Court granted class certification with respect to the claims discussed above on December 22, 2009 (Docket 94). 12 II. LEGAL STANDARD 13 Approval of a class action settlement rests in the sound discretion of the court. Class 14 Plaintiffs v. Seattle, 955 F.2d 1268, 1291 (9th Cir. 1992). Under Federal Rule of Civil Procedure 15 23(e), the Settlement, when taken as a whole, must be (1) fundamentally fair, (2) adequate, and 16 (3) reasonable to the Class. See Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998); 17 see also Dail v. George A. Arab, Inc., 391 F. Supp. 2d 1142, 1145 (M.D. Fla. 2005) (applying 18 general class action settlement standards in FLSA case). 19 To determine if a settlement is fair, some or all of the following factors should be 20 considered: (1) the strength of Plaintiffs' case; (2) the risk, expense, complexity, and duration of 21 further litigation; (3) the risk of maintaining class certification; (4) the amount of settlement; (5) 22 investigation and discovery; (6) the experience and views of counsel; and (7) the reaction of 23 class members to the proposed settlement. See, e.g., Hanlon, 150 F.3d at 1026; Staton v. Boeing 24 Co., 327 F.3d 938, 959 (9th Cir. 2003). In addition, judicial policy favors settlement in class 25 actions and other complex litigation where substantial resources can be conserved by avoiding 26 the time, cost, and rigors of formal litigation. In re Pacific Enterprises Securities Litigation, 720 27 F. Supp. 1379, 1387 (D. Ariz. 1989). 28 To determine whether preliminary approval is appropriate, the settlement need only be 2 1 potentially fair, as the Court will make a final determination of its adequacy at the hearing on 2 final approval, after such time as any party has had a chance to object and/or opt out. See 3 Armstrong v. Bd. of Sch. Dirs. of the City of Milwaukee, 616 F.2d 305, 314 (7th Cir. 1980), 4 overruled on other grounds by Felzen v. Andreas, 134 F.3d 873 (7th Cir. 1998). 5 III. DISCUSSION 6 Settlement Terms 7 The parties propose a total settlement fund value of $78,786.00, to be known as the 8 "Gross Settlement Amount." Joint Motion at 3. Under the proposed agreement, the following 9 amounts shall be deducted from the Gross Settlement Amount: 10 • object to the awarding of enhancement payments. Id. at 3-4. 11 12 13 14 Up to $4,500 in class representative enhancement payments. Defendant planS to • Up to $400 for reasonable address verification measures to determine the addresses of absent class members. Id. at 4. The remaining amount shall be known as the "Net Settlement Amount." The parties 15 propose to allocate 59.58% of the Net Settlement Amount to claims arising from Defendant’s 16 alleged failure to make overtime payments ("overtime amount"), with the remaining 40.42% 17 allocated to claims related to Defendant's alleged failure to reimburse Plaintiffs for headset 18 purchases ("headset amount"). Id. The parties have identified 379 possible class members. Id. 19 As such, the Joint Motion estimates that each participating class member will receive a 1/379th 20 share of the total headset amount. Id. Each participating class member's share of the overtime 21 amount shall be calculated to reflect the number of overtime hours worked by each claimant, 22 based on Defendant’s phone records. Id.; Exh. B to Settlement Agreement. The estimated 23 payments to each class member from the overtime amount range from $10.65 on the low end to 24 $4,480.24 on the high end. Id. 25 26 In addition, Class Counsel will petition the court for an award of attorneys' fees at the final approval hearing. Attorneys' fees will not be deducted from the Gross Settlement Amount. 27 Preliminarily, the settlement terms discussed above appear to be (1) fundamentally fair, 28 (2) adequate, and (3) reasonable to the Class. See Hanlon v. Chrysler Corp., 150 F.3d at 1026. 3 1 The parties state that the terms of the Settlement resulted from lengthy, arms-length negotiations, 2 including a formal mediation session before the Hon. William J. Cahill (Ret.) as well as 3 numerous settlement discussions outside this formal mediation setting. Joint Motion at 8. The 4 parties also have engaged in fairly significant discovery, including the taking of depositions and 5 the exchange of documents. Id. After reviewing this discovery and considering the information 6 exchanged during settlement negotiations, counsel for both sides, as well as the named plaintiffs, 7 have concluded that the proposed Settlement is appropriate. Therefore, at least two of the 8 factors identified by the Ninth Circuit as bearing on the fairness of a settlement - the amount of 9 "investigation and discovery" conducted as well as the "experience and views of counsel" - 10 weigh in favor of approving the Settlement. See, e.g., Hanlon, 150 F.3d at 1026; Staton v. 11 Boeing Co., 327 F.3d 938, 959 (9th Cir. 2003). 12 In addition, the parties in this case have already engaged in fairly lengthy litigation over 13 the issue of class certification, which resulted in the court granting class certification for the 14 claims at issue in the Settlement, but in denying class certification on other claims initially 15 asserted in Plaintiffs' Complaint. See Order Granting in Part and Denying in Part Plaintiffs' 16 Motion for Class Certification, December 22, 2009 (Docket 94). This suggests that the "risk, 17 expense, complexity, and duration of further litigation" militates in favor of settlement. See, 18 e.g., Hanlon, 150 F.3d at 1026. While the current Joint Motion does not contain sufficient 19 information to allow the court to independently assess several of the other factors bearing on the 20 fairness of a settlement, the parties have provided enough information to warrant preliminary 21 approval. 22 Scope of the Release 23 The proposed Settlement states that class members who do not “opt out” of the Settlement 24 will be bound by the Settlement's release of claims for all state-law causes of action. The Joint 25 Motion, however, asks the Court to determine whether those who do not “opt out” of the FLSA 26 claims will be similarly bound by the Settlement's release of FLSA claims, or whether only class 27 members who affirmatively “opt in” to the Settlement shall be bound by its release of liability 28 under the FLSA. Plaintiffs submit that only the absent class member who affirmatively “opt in” 4 1 to the Settlement should deemed to release their claims under the FLSA. Defendant, by contrast, 2 contends that all class members who choose not to exclude themselves should be bound by the 3 Settlement's release of liability under the FLSA. 4 The text of the FLSA states that “[n]o employee shall be a party plaintiff to any such 5 action unless he gives his consent in writing to become such a party and such consent is filed in 6 the court in which such action is brought.” 29 U.S.C. § 216(b). As such, several courts have 7 determined that it would be contrary to the statute to bind class members who do not 8 affirmatively elect, through opt-in procedures, to participate in the FLSA suit. See, e.g. 9 Thompson v. Sawyer, 678 F.2d 257, 269 (D.C. Cir. 1982); Misra v. Decision One Mortgage 10 Company, 2009 WL 4581276 at *2 (C.D. Cal. 2009); Kakani v. Oracle Corp, 2007 WL 1793774 11 at *7 (N.D.Cal., 2007); but see Kuncl v. IBM Corp., 660 F. Supp. 2d 1246 (N.D. Okla. 2009). 12 As the Northern District of California reasoned in Kakani, “[u]nder no circumstances can 13 counsel collude to take away FLSA rights including the worker's right to control his or her own 14 claim without the burden of having to opt out of someone else's lawsuit.” Kakani, 2007 WL 15 2221073 at *7. The Court finds the Kakani court's rationale persuasive. 16 Therefore, only class members who affirmatively “opt-in” to the Settlement should be 17 bound by the Settlement's release of FLSA liability. The following class members will be 18 deemed to have opted in for purposes of a release of FLSA liability: those who opted into the 19 FLSA action during the initial opt-in period and those who file claims under the Settlement. See 20 id. ("Workers who voluntarily send in a claim form and affirmatively join the action, of course, 21 can be bound to a full release of all federal and state claims."). 22 Unclaimed Settlement Funds 23 If fewer than 100% of the absent class members elect to participate in the Settlement, any 24 unclaimed funds may revert back to Defendant. Or, the parties have stipulated that the Court 25 may employ the doctrine of cy pres and award the unclaimed portion to the Red Cross. The Red 26 Cross is Defendant's preferred charity and though the Red Cross's mission does not obviously 27 relate to the issues litigated in this case, where a related charity does not exist, courts may direct 28 funds to organizations with general charitable aims. See Superior Beverage Co. v. 5 1 Owen-Illinois, Inc., 827 F. Supp. 477, 478-79 (N.D. Ill. 1993) (collecting cases). Plaintiff 2 prefers that any unclaimed settlement funds be given to the Red Cross, while Defendant asks the 3 Court to allow the unclaimed funds to revert back to Monex 4 Plaintiffs contend that awarding the unclaimed funds to a charitable organization like the 5 Red Cross will prevent Defendant from receiving a windfall benefit as a result of class members 6 failing to claim their share of funds. Plaintiffs further argue that allowing the unclaimed funds to 7 revert back to Defendant may cause Defendant to discourage its current employees from 8 participating in the settlement. In response, Defendant submits that they have no intention of 9 discouraging their current employees from filing claims. Defendant also argues that allowing 10 the unclaimed funds to revert to Defendant is fair under the circumstances of this case. In 11 particular, Defendant notes the relatively low initial opt-in rate to Plaintiffs' FLSA action, 12 arguing that this relatively low opt-in rate establishes “little interest in having Monex pay 13 anything to the class or to a charity.” Joint Motion at 12. 14 Defendant’s claim is somewhat puzzling. Relatively low interest in the settlement does 15 not mean that Defendant should receive a windfall benefit as a result of absent class members 16 failing to submit claims. Congress intended the FLSA to have a deterrent effect. See Brooklyn 17 Savings Bank v. O’Neil, 324 U.S. 697, 710 (1945) (citing the statute’s deterrent effect as grounds 18 for invalidating a release of FLSA liablity signed by an employee). Requiring Defendant to pay 19 the full amount of the settlement fund serves this deterrent goal. Plaintiffs contend that the 20 Gross Settlement Amount was derived from Defendant's own calculations, based on its phone 21 records, regarding the amount of money it failed to pay its employees. Whether or not this is 22 true, the Gross Settlement Amount consists of an amount that Defendant, after arms length 23 negotiations, voluntarily decided to pay in order to settle this lawsuit. There is no reason not to 24 require Defendant to actually pay this sum of money. 25 Accordingly, the Court ORDERS that any residual funds be distributed to the Red Cross. 26 Class Notice 27 The proposed class notice includes a description of the absent class members as well as 28 6 1 information pertaining to the pending settlement.1 The notice also sets forth a forty-five (45) day 2 time limit for responding to the notice. The notice identifies the options available to the class 3 members as follows: (1) claim your share of money under the settlement, (2) object to the 4 settlement, (3) do nothing or (4) exclude yourself from the settlement. Revised Proposed Class 5 Notice at 3-4 (Docket 183). The proposed notice then informs class members of the date of the 6 final approval hearing and instructs them on their right to attend. Id. at 7. A claim form and an 7 exclusion form accompany the notice, along with a warning that class members may not submit 8 both forms. Class members are instructed that submitting both a claim form and an exclusion 9 form will be construed as submitting only a claim form. Id. at 5. The notice also informs class 10 members that Plaintiffs counsel will move the Court for a reasonable amount of attorneys fees. 11 The Court finds the proposed class notice clear and sufficiently detailed; it merits 12 approval. 13 IV. 14 For the foregoing reasons, the Court hereby 15 1. GRANTS preliminary approval of the Settlement and revised proposed class 2. ORDERS that the Scope of Release with respect to FLSA liability extend only to 16 17 18 19 20 DISPOSITION notice. class members who “opt in” to the Settlement 3. ORDERS that the unclaimed portion of the Net Settlement Amount be distributed as a cy pres award to the Red Cross. 21 22 23 24 25 26 27 1 The parties submitted a revised proposed class notice on November 22, 2010 in order to address several deficiencies identified by the Court with respect the previous proposed notice (Docket 183). The Court discussed the deficiencies in the previous proposed notice at the preliminary approval hearing on November 16, 2010. The problems with the previous proposed notice concerned, first, the fact that the previous notice failed to sufficiently alert class members that failing to respond to the notice of settlement would result in a release of all state law claims against Defendants. The previous notice also referenced attorneys fees approaching $450,000 – a grossly disproportionate amount given the total settlement value in this case. 28 7 1 5. ORDERS that class members are prohibited from filing any new actions asserting 2 claims covered by the release of liability under the proposed Settlement, until the Court's 3 approval of the Settlement becomes final. 4 6. ORDERS that a hearing on final approval be set for February 28, 2011 at 8:30 a.m. 5 6 7 8 IT IS SO ORDERED. 9 DATED: November 29, 2010 10 11 12 _______________________________ DAVID O. CARTER United States District Judge 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 8
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