Retiree Support Group of Contra Costa County v. Contra Costa County, No. 3:2012cv00944 - Document 199 (N.D. Cal. 2016)
Court Description: ORDER DENYING MOTION FOR TEMPORARY RESTRAINING ORDER AND GRANTING IN PART AND DENYING IN PART MOTION FOR PRELIMINARY INJUNCTION by Judge Jon S. Tigar denying 183 MOTION for Temporary Restraining Order and Order to Show Cause re: Improper Class Communications. (wsn, COURT STAFF) (Filed on 7/29/2016)
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Retiree Support Group of Contra Costa County v. Contra Costa County Doc. 199 1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 RETIREE SUPPORT GROUP OF CONTRA COSTA COUNTY, et al., Plaintiffs, 8 v. 9 10 Case No. 12-cv-00944-JST CONTRA COSTA COUNTY, Defendant. 11 ORDER DENYING MOTION FOR TEMPORARY RESTRAINING ORDER AND GRANTING IN PART AND DENYING IN PART MOTION FOR PRELIMINARY INJUNCTION United States District Court Northern District of California Re: ECF No. 183 12 13 14 15 16 17 18 19 Plaintiffs Retiree Support Group of Contra Costa County, et. al. (“RSG”) have filed an Ex Parte Motion for a Temporary Restraining Order (“TRO”), seeking to prevent further communication between AFSCME Retiree Chapter 57 (“Chapter 57”) and the settlement class in this case. ECF No. 183. The motion also requests an order to show cause why a preliminary injunction should not be issued. Id. Defendant Contra Costa County (the “County”) joins in the filing of the motion. Id. Chapter 57 was given an opportunity to oppose the motion, ECF No. 191, and RSG was also allowed to file a reply, ECF No. 195. At oral argument, the parties agreed that no further briefing or evidence was necessary in regards to the preliminary injunction, and so 20 the Court addresses that request as well. The Court will deny the motion for a TRO and grant in 21 part and deny in part the request for a preliminary injunction. 22 I. 23 24 25 BACKGROUND The factual history of this case has been set out in previous orders and will not be repeated here. See, e.g., ECF No. 174. On June 14, 2016, the Court conditionally certified a settlement class and preliminarily 26 approved a settlement in this case. ECF No. 137. That order required that the Settlement 27 Administrator mail class notices to the class within twenty-five days after the date of the order, by 28 July 9, 2016, and set a deadline for class members to respond at sixty days after the class notices Dockets.Justia.com 1 were sent, by September 7, 2016. Id. at 14. A Fairness Hearing is scheduled for October 25, 2 2016. ECF No. 179. On June 17, 2016, the Court denied a Motion to Intervene filed by AFSCME Local 2700, 3 4 AFSCME Local 512, AFSCME Retiree Subchapter 142, and Richard Cabral (collectively, “the 5 Objectors”). ECF No. 174. The Objectors sought to intervene in order to oppose the proposed 6 settlement. Id. 7 On July 20, RSG, jointly with the County, filed this motion requesting a TRO. ECF No. 8 183. RSG alleges that during the week of July 4, AFSCME Retiree Chapter 57 (“Chapter 57”), 9 through its officers Nadine Peyrucain, Ruth Roe, and Mr. Cabral, sent to many class members a 10 United States District Court Northern District of California 11 12 13 14 15 16 17 letter urging them not to participate in the class settlement. Id. at 3. The letter included a form by which recipients could opt out and object to the settlement, and in so doing agree to be represented by Beeson, Tayer & Bodine, the same firm that represented the various objectors who filed the Motion to Intervene. RSG contends that the letter is false and misleading and requests a TRO enjoining Chapter 57 and its officers from communicating any further with the class members, as well as a preliminary injunction that requires Chapter 57 to send a corrective notice, declares ineffective any elections made by class members through Chapter 57’s form, and enjoins Chapter 57 from further communications without prior approval. Id. at 8-9. Chapter 57, for its part, notes that RSG circulated a response letter to the class refuting 18 19 Chapter 57’s letter. ECF No. 191 at 11. Chapter 57 contends that RSG’s own letter is also misleading, but it does not specify how. Id. Chapter 57 also has not requested any relief from the 20 Court. 21 22 23 In addition, RSG’s motion also requests that the Court order Chapter 57 to show cause why the Court should not issue a preliminary injunction in response to Chapter 57’s communications. ECF No. 183 at 8-9. Specifically, RSG requests (1) that a corrective letter be 24 sent1 that corrects any false and misleading statements in Chapter 57’s letter; (2) that any elections 25 made by class members using Chapter 57’s form be invalidated; and (3) that a preliminary 26 27 28 1 Though RSG initially requests that Chapter 57 be required to send the notice itself, it has since amended the request to require the Settlement Administrator to send out the notice at Chapter 57’s expense. ECF No. 195 at 19. 2 1 injunction be entered enjoining Chapter 57 from sending any further communications to class 2 members without prior review by the Court and the parties. Id. 3 A declaration submitted by RSG’s attorney, Jeffrey Lewis, indicates that Mr. Lewis sent an 4 e-mail to the three individuals who had signed the challenged communication with this motion and 5 related documents attached. ECF No. 188 ¶ 7. It also indicates that he sent the same documents 6 to an attorney for the firm of Beeson, Tayer & Bodine, and confirmed through subsequent e-mails 7 that this was sufficient to serve Mr. Cabral and Chapter 57. Id. Though Chapter 57 challenges 8 some of the statements made in Mr. Lewis’s declaration, it does not appear to contest that Chapter 9 57 received effective service. See ECF No. 191 at 20. Chapter 57 was given leave to respond, and did so, on July 25, 2016. ECF No. 191. RSG 10 United States District Court Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 was similarly given leave to reply, and did so, on July 27, 2016. ECF No. 195. The Court held a hearing on the motion on July 29, 2016. II. LEGAL STANDARD The Court applies a familiar four-factor test on both a motion for a temporary restraining order and a motion for a preliminary injunction. See Stuhlbarg Int'l Sales Co. v. John D. Brush & Co., 240 F.3d 832, 839 n. 7 (9th Cir. 2001). A plaintiff seeking either remedy “must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest.” Am. Trucking Associations, Inc. v. City of Los Angeles, 559 F.3d 1046, 1052 (9th Cir. 2009) (quoting Winter v. Nat. Resources Defense Council, 555 U.S. 7, 20 (2008)). Injunctive relief is “an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief.” Winter, 555 U.S. at 22. To grant preliminary injunctive relief, a court must find that “a certain threshold showing [has been] made on each factor.” Leiva-Perez v. Holder, 640 F.3d 962, 966 (9th Cir. 2011). Assuming that this threshold has been met, “‘serious questions going to the merits’ and a balance of hardships that tips sharply towards the plaintiff can support issuance of a preliminary injunction, so long as the plaintiff also shows that there is a likelihood of irreparable injury and that the injunction is in the public interest." Alliance for the Wild Rockies v. Cottrell, 632 F.3d 3 1 1127, 1135 (9th Cir. 2011). In addition, a movant seeking the issuance of an ex parte TRO must satisfy Federal Rule of 2 3 Civil Procedure 65(b), which requires a showing “that immediate and irreparable injury, loss, or 4 damage will result to the movant before the adverse party can be heard in opposition” and 5 certification of “efforts made to give notice and the reasons why it should not be required.” Fed. 6 R. Civ. P. 65(b)(1). 7 III. 8 9 JURISDICTION In its opposition, Chapter 57 begins by disputing that the Court has the authority to issue an order regulating its communications with the class. It offers two arguments as to why this Court lacks that authority. First, it contends that the Court lacks authority over Chapter 57 11 United States District Court Northern District of California 10 because it is not a party to this action, and because Rule 23 is not a jurisdictional statute. ECF No. 12 191 at 11. Second, it argues that the requested relief would violate the Norris-LaGuardia Act by 13 interfering with a labor dispute. Id. at 14. As set forth below, both of these arguments are 14 unpersuasive, and the Court concludes it has the authority to address the dispute now before it. 15 A. Authority over Nonparties 16 There is little dispute that the Court possesses the authority, under Rule 23, to regulate the 17 parties’ communications to class members when those communications are false and misleading 18 and interfere with the class’s due process rights. See Gulf Oil Co. v. Bernard, 452 U.S. 89, 100 19 (1981). The question raised by Chapter 57 is whether the Court possesses the same authority over 20 a nonparty when that party sends false and misleading communications to a class. 21 Chapter 57 argues only that “Rule 23 is not a jurisdictional statute and does not confer on 22 this Court the authority to regulate the speech of non-parties.” ECF No. 191 at 11. However, the 23 cases it cites for this proposition, Blyden v. Navient Corp., No. EDCV 14-02456-JGB, 2015 WL 24 4508069, at *9 (C.D. Cal. July 23, 2015); Pioche Mines Consol., Inc. v. Dolman, 333 F.2d 257, 25 264-65 (9th Cir. 1964); and Simon v. E. Kentucky Welfare Rights Org., 426 U.S. 26, 40 (1976), 26 are inapposite. Blyden and Simon both discuss the issue of whether a plaintiff who otherwise 27 lacks Article III standing may obtain it through Rule 23 by seeking class certification. Pioche 28 addresses the question of whether a court’s valid jurisdiction over the individual parties is lost if 4 1 the parties’ putative class action did not comply with the requirements of Rule 23. Neither of 2 those issues is relevant here. 3 RSG, for its part, cites several district court cases in which the court took curative action in 4 response to a nonparty’s interfering communications with absent class members. See ECF No. 5 195 at 12-13 (citing Williams v. Quinn, No. 05 C 4673, 2010 WL 3021576, at *3 (N.D. Ill. July 6 27, 2010); Georgine v. Amchem Products, Inc., 160 F.R.D. 478, 497–98 (E.D. Pa. 1995); In re 7 Synthroid Mktg. Litig., 197 F.R.D. 607, 610 (N.D. Ill. 2000); In re Lutheran Bhd. Variable Ins. 8 Products Co., No. 99-MD-1309PAMJGL, 2002 WL 1205695, at *2 (D. Minn. May 31, 2002); In 9 re Payment Card Interchange Fee & Merch. Disc. Antitrust Litig., No. 05-MD-1720 JG, 2014 WL 10 United States District Court Northern District of California 11 4966072, at *31 (E.D.N.Y. Oct. 3, 2014), appeal withdrawn (Feb. 17, 2015)). Generally, it appears that courts that have exercised authority over nonparties in this 12 context have done so on the basis of either Federal Rule of Civil Procedure 23, or under the All 13 Writs Act, 28 U.S.C. § 1651. See In re Payment Card, 2014 WL 4966072, at *31 (“The proper 14 exercise of judicial authority in this context may have either a procedural basis, under Federal 15 Rule of Civil Procedure 23(d), or an equitable basis, under the All Writs Act.”). Those courts that 16 have invoked Rule 23 as the basis for authority have relied on the Court’s duty, under Rule 23(d), 17 to protect the due process rights of absent class members through accurate notice procedures. See, 18 e.g., Williams, 2010 WL 3021576, at *3 (“This court, however, must ensure that proper and 19 adequate notice is provided to the Class. This power extends to non-parties that interfere with this 20 duty of the court.”); Georgine, 160 F.R.D. at 497–98 (“Included in my responsibility to direct to 21 the class the best notice practicable is the duty to ensure that the class receives accurate 22 information”); In re Lutheran, 2002 WL 1205695, at *2 (“Courts possess the inherent power to 23 protect the orderly administration of justice and to preserve the dignity of the tribunal.” (quoting 24 Kleiner v. First Nat’l Bank of Atlanta, 751 F.2d 1193, 1209 (11th Cir. 1985)). Citing to Gulf Oil, 25 which is discussed further below, and Rule 23(d), a court in this district enjoined further 26 communications from two law firms whose bids to serve as lead counsel for an accounting fraud 27 class action were rejected, and who subsequently sent solicitations to class members seeking to 28 recruit them. In re McKesson HBOC, Inc. Sec. Litig., 126 F. Supp. 2d 1239, 1241 (N.D. Cal. 5 1 2000). The court referred to Rule 23(d)’s granting of “broad powers to make ‘appropriate orders’ 2 to ensure efficient and fair proceedings in a class action,” which “include the authority to enjoin 3 communications with class members to protect them from undue interference.” Id. at 1242 4 (citations omitted). 5 Courts have also referred to the All Writs Act when addressing the actions of nonparties. 6 The act states that “[t]he Supreme Court and all courts established by Act of Congress may issue 7 all writs necessary or appropriate in aid of their respective jurisdictions and agreeable to the 8 usages and principles of law.” 28 U.S.C. § 1651(a). In In re Synthroid, 197 F.R.D. at 610, the 9 district court issued a corrective notice in response to a nonparty trade association’s communications with a settlement class, and while it declined to also enjoin them from further 11 United States District Court Northern District of California 10 communications, it concluded that it “is authorized” to do so “under the All Writs Act,” and 12 “[t]hat power extends to non-parties.” The court cited to United States v. New York Tel. Co., 434 13 U.S. 159, 174 (1977), which dealt with a court order to a nonparty telephone company ordering 14 cooperation with federal law enforcement, and held that “[t]he power conferred by the [All Writs] 15 Act extends, under appropriate circumstances, to persons who, though not parties to the original 16 action or engaged in wrongdoing, are in a position to frustrate the implementation of a court order 17 or the proper administration of justice[.]” See also In re Payment Card, 2014 WL 4966072, at *31 18 (“In sum, where, as here, a district court retains exclusive jurisdiction over settlement agreements 19 and distribution of settlement funds pursuant to those agreements, it may issue orders necessary to 20 protect the settlement from threats by both parties and non-parties.” (citation omitted)). 21 Having reviewed this case law, the Court concludes it possesses authority to grant the 22 requested relief against Chapter 57. RSG has argued that Chapter 57’s communications interferes 23 with the class’s due process rights under Gulf Oil and Rule 23, and accordingly, those 24 communications would also “frustrate the implementation” of this court’s efforts to properly 25 provide class notice to the settlement class. 26 B. 27 The Norris-LaGuardia Act states in part that “[n]o court of the United States, as defined in 28 The Norris-LaGuardia Act. this chapter, shall have jurisdiction to issue any restraining order or temporary or permanent 6 1 injunction in a case involving or growing out of a labor dispute.” 29 U.S.C § 101. Thus, under 2 the act, the Supreme Court has struck down injunctions by district courts ordering an end to work 3 stoppages. Jacksonville Bulk Terminals, Inc. v. Int'l Longshoremen's Ass'n, 457 U.S. 702, 704 4 (1982). 5 Chapter 57 contends that its “communications relate to its dispute with the County involving the treatment of retiree health benefits under the parties’ collective bargaining 7 agreement, and the County’s use of the proposed class settlement to contravene state labor 8 relations law.” ECF No. 191 at 14. Chapter 57 cites to declarations submitted in support of the 9 earlier Motion to Intervene. As the Court noted in its order denying that motion, the crux of that 10 motion were allegations that the County, in negotiations with various retiree chapters, had taken 11 United States District Court Northern District of California 6 the position that the settlement in this case will govern over other alleged agreements on employee 12 benefits. ECF No. 174 at 4. Accordingly, Chapter 57 contends that its communications are 13 related to a “labor dispute” within the meaning of the Norris-LaGuardia Act – though it also 14 contends that RSG’s broader lawsuit with the County is not. ECF No. 191 at 15-16. 15 In addressing the applicability of the Norris-LaGuardia Act, this case “should be 16 interpreted with reference to the congressional purpose behind the” act. Schuck v. Gilmore Steel 17 Corp., 784 F.2d 947, 949 (9th Cir. 1986). “That purpose was to prevent the then widespread use 18 of the labor injunction as a means of defeating the efforts of labor to organize and bargain 19 collectively.” Id. at 949-50 (citation omitted). 20 The Objectors oppose the settlement because they believe the County will use it to 21 Objectors’ disadvantage in collective bargaining negotiations. Certainly, if RSG sought to insert 22 the Court into those negotiations, Chapter 57’s Norris-LaGuardia Act argument might have some 23 teeth. But that is not the dispute before this Court. Rather, the question to be answered here is 24 whether the letter circulated by Chapter 57 to the class, and challenged in RSG’s motion, involves 25 or grows out of a labor dispute. Chapter 57’s position on that question is decidedly less 26 compelling. The letter makes no mention of any labor dispute between the retiree chapters and the 27 County, or even of collective bargaining generally; it focuses solely on reasons to reject the 28 settlement. 7 Chapter 57 does not contend that the Norris-LaGuardia Act bars the Court from 1 adjudicating the case as a whole; nor could it, since that act does not bar federal courts from 3 adjudicating a legal claim that an employer has failed to provide promised retiree benefits to its 4 employees. See San Diego Police Officers' Ass'n v. Aguirre, No. 05-CV-1581 H (POR), 2005 WL 5 3180000, at *10 (S.D. Cal. Nov. 5, 2005) (“[C]laims concern[ing] the failure to fund the 6 retirement fund and unlawfully depriving, eliminating and/or reducing retirement benefits . . . do 7 not constitute a “labor dispute” as intended under § 104.”). Chapter 57 is therefore forced to 8 maintain a distinction between the lawsuit itself, which it contends does not fall under the act, and 9 its communications to its members regarding the very same lawsuit, which it contends do fall 10 under the act. ECF No. 191 at 16-17. This argument simply cannot be correct. As discussed 11 United States District Court Northern District of California 2 further at oral argument, Chapter 57’s position would suggest that if the Court had granted the 12 earlier-filed Motion to Intervene – that is, if the Objectors became parties to the case – they would 13 be able to present arguments to the Court opposing the settlement, which the Court would have 14 jurisdiction to entertain, while simultaneously circulating letters to its members making those 15 same arguments, over which the Court could exercise no authority. To state the argument in this 16 way is to refute it. Finally, in turning to the purpose of the Norris-LaGuardia Act, the Court concludes these 17 18 communications do not grow out of a labor dispute. As the Ninth Circuit has held, the purpose of 19 the act is to prevent courts from “defeating the efforts of labor to organize and bargain 20 collectively.” Schuck, 784 F.2d at 949. Here, there is no attempt to prevent Chapter 57, or other 21 retiree chapters, from bargaining with the County. In fact, none of the relief RSG requests would 22 affect Chapter 57’s bargaining rights at all. In sum, the Norris-LaGuardia Act does not divest the Court of jurisdiction over this action. 23 24 Accordingly, the Court will address the merits of RSG’s motion. 25 IV. 26 DISCUSSION The Court will deny the requested TRO and grant in part and deny in part RSG’s request 27 for a preliminary injunction. As set forth in more detail below, the Court begins by concluding 28 that RSG has demonstrated a likelihood of success on the merits in regards to the need for 8 1 corrective action, as well as the likelihood of irreparable harm if no action is taken. Balancing the 2 hardships to the parties, the Court concludes that the equities tip in RSG’s favor regarding the 3 need to invalidate the opt-outs and issue curative notice, but not regarding the need to enact prior 4 restraints on Chapter 57’s communications. The same is true when considering which remedies 5 are in the public’s interest. Thus, the Court will grant RSG’s request for invalidation of opt-outs 6 and curative notice, but not for any form of injunction concerning Chapter 57’s future 7 communications. 8 A. 9 10 Likelihood of Success on the Merits 1. Legal Standard “Because of the potential for abuse, a district court has both the duty and the broad United States District Court Northern District of California 11 authority to exercise control over a class action and to enter appropriate orders governing the 12 conduct of counsel and parties.” Gulf Oil Co. v. Bernard, 452 U.S. 89, 100 (1981). “The 13 prophylactic power accorded to the court presiding over a putative class action under Rule 23(d) is 14 broad; the purpose of Rule 23(d)'s conferral of authority is not only to protect class members in 15 particular but to safeguard generally the administering of justice and the integrity of the class 16 certification process.” O'Connor v. Uber Technologies, Inc., No. C-13-3826 EMC, 2014 WL 17 1760314, at *3 (N.D. Cal. May 2, 2014). 18 Gulf Oil mandates that “an order limiting communications between parties and potential 19 class members should be based on a clear record and specific findings that reflect a weighing of 20 the need for a limitation and the potential interference with the rights of the parties.” 452 U.S. at 21 101. “[S]uch a weighing — identifying the potential abuses being addressed — should result in a 22 carefully drawn order that limits speech as little as possible, consistent with the rights of the 23 parties under the circumstances.” Id. at 102. An order under Gulf Oil “does not require a finding 24 of actual misconduct” — rather, “[t]he key is whether there is ‘potential interference’ with the 25 rights of the parties in a class action.” O’Connor v. Uber Technologies, Inc., No. C-13-3826 26 EMC, 2013 WL 6407583 at *4-5 (N.D. Cal. Dec. 6, 2013). 27 28 The parties (and non-parties) are free to encourage class members to opt out of or vote against a class action settlement, provided they do so in a fair manner that avoids material 9 1 misrepresentations or omissions. Cf. Parks v. Eastwood Ins. Servs., Inc., 235 F. Supp. 2d 1082, 2 1082 (C.D. Cal. 2002) (holding that “a defendant employer may communicate with prospective 3 plaintiff employees” regarding a class action under the Fair Labor Standards Act, “unless the 4 communication undermines or contradicts the Court’s own notice”). However, courts may limit 5 communications that improperly encourage potential class members to not join a suit, especially if 6 they fail to provide adequate information about the pending class action. See O’Connor, 2014 WL 7 1760314 at *6-7. The best notice will “contain an adequate description of the proceedings written 8 in objective, neutral terms, that, insofar as possible, may be understood by the average absentee 9 class member.” In re Nissan Motor Corp. Antitrust Litigation, 552 F.2d 1088, 1104 (5th Cir. 10 1977). United States District Court Northern District of California 11 Thus, courts in this district have imposed limitations on communications, and invalidated 12 agreements obtained through those communications, based on findings that the communications 13 were misleading, coercive, or omitted critical information. See, e.g., O’Connor, 2013 WL 14 6407583 at *6 (invalidating arbitration agreements that “shrouded” a class action waiver within 15 one of many provisions in a Licensing Agreement); County of Santa Clara v. Astra USA, Inc., No. 16 05-3740 WHA, 2010 WL 2724512 (N.D. Cal. July 8, 2010) (invalidating releases obtained by 17 letter to putative class that did not attach plaintiffs’ complaint, explain plaintiffs’ claims or the 18 status of the case, or include contact information for plaintiffs’ counsel); Camp v. Alexander, 300 19 F.R.D. 617, 620, 624 (N.D. Cal. 2014) (invalidating opt-outs obtained by letter to employees of 20 defendants stating the class action was “motivated by greed and other improper factors” and 21 “could result in the closure” of the business, and failed to include any explanation of plaintiffs’ 22 claims, a copy of the complaint, or contact information for plaintiffs’ counsel); Guifu Li v. A 23 Perfect Day Franchise, Inc., 270 F.R.D. 509, 518 (N.D. Cal. 2010) (invalidating opt-out forms 24 when defendant employer presented the forms in mandatory one-on-one meetings during work 25 hours, failed to provide forms in workers’ primary language, and refused to give workers copies to 26 take home); Wright v. Adventures Rolling Cross Country, Inc., No. 12-0982 EMC, 2012 WL 27 2239797 at *5 (N.D. Cal. June 15, 2012) (enjoining defendants from communicating with 28 potential class members after they e-mailed members warning that if they participate in the suit, 10 1 their “past transgressions will become very public” and they will be “left with tattered reputations 2 and substantial legal bills”). 3 Other courts throughout the country have also restricted communications or invalidated releases when the communications suffered from similar deficiencies. See, e.g., Kleiner v. First 5 Nat’l Bank of Atlanta, 751 F.2d 1193, 1197 (11th Cir. 1985) (defendant bank conducted telephone 6 campaign “shrouded” in “secrecy and haste” with explicit purpose of soliciting opt-outs from bank 7 customers); Freidman v. Intervet Inc., 730 F. Supp. 2d 758, 764 (N.D. Ohio 2010) (defendant 8 obtained settlement releases without informing class members they were giving up the right to 9 participate in putative class action); In re Currency Conversion Fee Antitrust Litigation, 361 F. 10 Supp. 2d 237, 251 (S.D.N.Y. 2005) (defendant did not inform class members of pending class 11 United States District Court Northern District of California 4 action). 12 13 2. Analysis RSG contends that curative action is necessary because Chapter 57’s letter contained 14 misleading and untrue statements. Though Chapter 57 argues that the letter is factually accurate, 15 ECF No. 191 at 8-11, a review of the communication sent to class members, which has been 16 submitted by RSG as an exhibit, see ECF No. 188 at 5, reveals a number of significant 17 misstatements and omissions. To begin, while the letter refers to a “Settlement” that is “the result 18 of an agreement between the County and RSG,” it provides no information about the underlying 19 case from which the settlement resulted. ECF No. 188 at 5-6. Indeed, the letter does not even 20 mention the existence of litigation at all, leaving recipients who may have received the letter prior 21 to the class notice to simply conjecture about why the settlement was reached. The letter does not 22 identify the case name and number, any of the claims brought by RSG, the Court in which the case 23 was filed, or any other way by which recipients could learn about the case. Nor does the letter 24 identify the class’s counsel or provide any way for the recipients to contact them. See County of 25 Santa Clara v. Astra USA, Inc., 2010 WL 2724512 at *6 (finding that communications “misled the 26 putative plaintiff class” because it “did not contain the complaint or Ninth Circuit opinion, did not 27 describe the claims, did not contain the current status of the case, [and] did not provide contact 28 information for the plaintiffs' attorneys). Surprisingly, the letter does not even appear to provide a 11 1 way for recipients to contact the senders of the letter or their counsel, other than a stock letterhead 2 for Chapter 57 at the top of the page. The sole form of contact made available to the recipients 3 was the opt-out form provided by Chapter 57. 4 Next, the Court finds that there are three significantly misleading statements in Chapter 5 57’s letter. First, it asserts that following the settlement, surviving spouses of deceased retirees 6 will not receive any County contributions to their premiums, an outcome that “is not equitable,” as 7 “‘[c]lass members’ will be prevented from ever having the county contribute to the surviving 8 spouse’s health care costs.” ECF No. 188 at 5. As RSG points out, however, this has long been 9 the County’s policy, with or without the settlement. Second, the letter similarly asserts that “Retirees with Medicare are not pooled with active employees” for the purpose of their premiums, 11 United States District Court Northern District of California 10 but once again fails to note that this is already true, and so is not something the settlement 12 changes. Id. at 6. 13 In its briefing and at oral argument, Chapter 57 contends that technically, these statements 14 contain no factual errors, since it is true that class members’ spouses will not receive contributions 15 and that Medicare-eligible retirees will not be pooled with active employees. However, this 16 semantic splitting of hairs ignores the clear –and quite obviously intentional – implication of the 17 language, which is that the settlement will cause these alleged deficiencies in coverage when in 18 fact it does not. See Williams v. Quinn, 2010 WL 3021576, at *3 (finding that it was misleading, 19 in a class action of residents of mental institutions, for a nonparty to suggest that a proposed 20 settlement was undesirable because it provided no guarantee that the institutions would continue to 21 be funded, when “there is not presently any guarantee that Illinois will fund” the institutions). 22 Also, there would be no need to bring these provisions to class members’ attention, and no 23 likelihood of their persuading anyone, if the class members were already fully aware of them. The 24 persuasive force of these sentences instead comes from the implication that the settlement is taking 25 something away, a conclusion supported by the structure of the letter. The sentences are included 26 in a list of bullet points following the phrase “What does the ‘Settlement’ provide.” ECF No. 188 27 at 5 (emphasis added). 28 Third, and most significantly, the letter also includes the following bullet point: 12 1 2 What do you get from the “Settlement”? NOTHING. You already enjoy and receive all the things that are included in the settlement, members of the “Class” are agreeing to things that can never be changed or renegotiated. 3 ECF No. 188 at 6. The only reasonable interpretation of this statement is that the settlement fails 4 to confer any benefits on the class that they do not already enjoy. Put another way, the letter tells 5 the class that if the settlement is rejected, the case is litigated, and the County prevails in all 6 respects, the class’s situation will be the same as if the settlement had been approved. 7 This statement is transparently false, and by itself perhaps constitutes grounds to correct the letter and invalidate any resulting opt-outs. The County has quite clearly disputed whether the 9 class’s benefits “can never be changed or renegotiated” – indeed, that dispute is the reason this 10 lawsuit was filed four years ago. The statement that the class will receive “nothing” from the 11 United States District Court Northern District of California 8 proposed settlement is also demonstrably wrong, and in fact contradicts this Court’s prior order 12 preliminarily approving the settlement. See ECF No. 169 (identifying the benefits provided by the 13 settlement). 14 Lastly, Chapter 57 provides an opt-out form for the recipients to submit, which indicates 15 they “do not wish to be covered by the settlement” and that they authorize the firm of Beeson, 16 Tayer and Bodine to represent them in opting out of and objecting to the settlement. ECF No. 188 17 at 7. This form, too, is misleading and confusing. For one, the form includes instructions to “sign 18 and date and return in the enclosed envelope,” with the clear implication that completing the form 19 will opt out of the settlement, but the enclosed envelope is in fact addressed to Chapter 57, not to 20 the Settlement Administrator. Next, the form purports to authorize a law firm to “represent me for 21 the limited and sole purpose of submitting my request to opt-out and objections to the settlement,” 22 but does not allow the recipient to specify whether they intend to opt-out or to object. Finally, 23 neither the form nor the letter explains the effects of opting out or objecting. 24 For all of these reasons, RSG has shown that it is likely it will succeed in demonstrating 25 that court action is necessary under Gulf Oil to remedy potential confusion caused by Chapter 57’s 26 communications with the class. 27 B. Likelihood of Irreparable Injury 28 Next, the Court must determine whether the parties have demonstrated the likelihood of 13 1 irreparable harm. The parties have done so here – indeed, RSG has not only demonstrated a 2 likelihood of harm but has been able to collect, in a very short period of time, unrebutted evidence 3 that class members have already been harmed by the misleading communications. RSG states in 4 its motion that class members have reported that they opted out of the settlement in response to 5 Chapter 57’s letter, but wished to rescind this decision after receiving further information. ECF 6 No. 183. It submits declarations from both lawyers who fielded these statements from class 7 members, and from class members themselves. ECF Nos. 184-187. While Chapter 57 objects to 8 these declarations on evidentiary grounds,2 it does not contest that its letter caused class members 9 to opt out of the settlement. Given the Court’s finding that the letter is misleading, and that RSG has been able to obtain evidence of harm to particular class members so quickly, it is reasonable to 11 United States District Court Northern District of California 10 assume that other members of the class have also been affected. This harm is irreparable. Class members have a due process right to not be misled while 12 13 they are deciding whether to participate in a class settlement affecting their rights. See O'Connor 14 v. Uber Technologies, Inc., No. C-13-3826 EMC, 2014 WL 1760314, at *3 (N.D. Cal. May 2, 15 2014) (concluding that courts have a duty to preserve the integrity of the class action process). 16 Members of this class are, by definition, of retirement age and some portion are undoubtedly 17 elderly. As noted above, a Fairness Hearing has been set for October 25, and class members have 18 until September 7 to respond to the class notice. Class members are therefore currently within 19 their limited time window for deciding how they wish to respond to the settlement. Without 20 remedial action from this Court, they will be forced to make that decision based on false and 21 misleading information. Chapter 57 contends that this harm is not irreparable because it has pledged to honor any 22 23 requests by class members who now wish to rescind their submitted opt-out forms. ECF No. 191 24 at 22. This argument assumes that all class members who were misled by the letter and submitted 25 an opt-out form will take the additional step of affirmatively requesting to rescind their request. 26 There is no basis in fact for this assumption. 27 2 28 See ECF No. 191 at 22. However, as RSG notes, a court is not constrained by the Federal Rules of Evidence when ruling on preliminary injunctive relief. ECF No. 195 at 20. 14 1 2 Accordingly, the Court concludes that irreparable harm has occurred, and will continue to occur, without some form of corrective action. 3 C. Balance of Hardships 4 In turning to the balance of hardships, the Court must next decide what action is 5 appropriate. As an initial matter, because the Court resolves the request for a preliminary 6 injunction in this order, it will deny the request for a TRO. A TRO is a stopgap measure to 7 prevent further harm until proceedings on a preliminary injunction are complete, and therefore is 8 unnecessary here. 9 The Court finds that the hardships imposed on the parties in the absence of relief would be significant. RSG has demonstrated that class members’ due process rights to make a decision 11 United States District Court Northern District of California 10 regarding the class settlement have been irreparably harmed by Chapter 57’s misleading 12 communications. More broadly, individual class members could endure significant hardship if 13 they were misled into opting out and were ultimately prevented from participating in a settlement 14 they believed, with the benefit of complete information, could benefit them. 15 On the other hand, the hardships imposed upon Chapter 57 may also be quite significant 16 because, depending on the corrective action taken, they could implicate Chapter 57’s free speech 17 rights under the First Amendment. As Chapter 57 notes, RSG has effectively asked for a prior 18 restraint on Chapter 57’s communications with its members; Chapter 57 describes it as a “gag 19 order” that it contends “is unprecedented and facially invalid under the First Amendment.” ECF 20 No. 191 at 17. 21 As noted above, Gulf Oil requires this Court to base its ruling on a clear record and 22 specific findings that justify “a carefully drawn order that limits speech as little as possible, 23 consistent with the rights of the parties under the circumstances.” 452 U.S. at 100-101. An order 24 restricting speech should “sweep[] no more broadly then necessary,” especially when considering 25 prior restraints. Pittsburgh Press Co. v. Pittsburgh Comm'n on Human Relations, 413 U.S. 376, 26 390 (1973). “Availability of less restrictive alternatives is, if not dispositive, an essential factor 27 that a court must consider before ordering a restraint on speech.” Fleury v. Richemont N. Am., 28 Inc., No. C-05-4525 EMC, 2007 WL 2349284, at *3 (N.D. Cal. Aug. 15, 2007) (citing to Gulf Oil, 15 1 452 U.S. at 104). Thus, the Fleury court noted that if less restrictive alternatives such as 2 counterspeech by the opposing party or curative notice are available and plausible solutions, they 3 should be used before resorting to prior restraints. Id. at 3-4. 4 Here, RSG has requested three remedies: (1) the invalidation of any opt-out elections 5 obtained through Chapter 57’s misleading communications; (2) a curative notice sent to the class; 6 and (3) that Chapter 57 receive prior approval from this Court and the parties before 7 communicating any further with the class. Beginning with the first two, less intrusive remedies 8 requested, the Court concludes they would impose minimal hardships on Chapter 57. Those class 9 members who still wish to opt-out after they receive the curative notice regarding the settlement may certainly do so. Chapter 57 asserts that it would be unprecedented to compel it to send a 11 United States District Court Northern District of California 10 curative letter that is authored by RSG or some other party to the class. ECF No. 191 at 17. Such 12 a remedy would indeed be drastic, and the Court will not require it. Instead, it will adopt RSG’s 13 amended request, which is to require the Settlement Administrator to circulate the notice, and 14 Chapter 57 merely to reimburse the administrator for the costs of printing and distribution. 15 As for RSG’s final request to restrict further communications from Chapter 57, the Court 16 concludes that the hardships would be too significant on Chapter 57 to warrant it. Importantly, 17 RSG requests a restriction on all communications between Chapter 57 and the class. ECF No. 183 18 at 9. This could potentially prevent Chapter 57 from communicating in any way with those of its 19 members within the class, regardless of subject or context. It could, for example, prevent Chapter 20 57 from holding meetings or coordinating its efforts in its dispute with the County or other 21 representative issues. 22 Moreover, the availability of the less restrictive remedies, in the form of invalidating opt- 23 outs and sending a curative notice, counsel strongly against the further step of restricting Chapter 24 57’s speech. The central harm to be remedied here is confusion and misinformation to the class 25 caused by Chapter 57’s communications. Invalidating any opt-outs will remove the most tangible 26 consequence to this, by allowing class members to reconsider their responses, while the curative 27 notice will largely or entirely remedy any confusion. It is less clear what additional benefit a prior 28 restraint would provide that these two less restrictive alternatives do not. 16 1 RSG’s counsel offered a number of points in response at oral argument. He noted that the 2 class consists of retirees, many of whom are elderly, who may be unwilling to or incapable of 3 wading through several notices to fully inform themselves regarding the settlement’s specifics. 4 He also contended that the burden of the requested injunction is lessened by the fact that Chapter 5 57 would not be prevented outright from communicating with the class, but merely required to 6 obtain approval of those communications. Finally, he emphasized the degree of harm caused by 7 Chapter 57’s communications, given the numerous and significant misrepresentations and the 8 available evidence that class members had relied on the communications to their detriment. 9 These are worthwhile considerations. There is no doubt that the class members have been significantly harmed by Chapter 57’s misleading communications, and if there were reason to 11 United States District Court Northern District of California 10 believe that Chapter 57 would again attempt to mislead its constituents, RSG’s requested 12 injunctive relief would likely be appropriate. As it currently stands, however, the Court cannot 13 grant this relief. Under Gulf Oil, it must provide specific findings for its conclusion that its 14 granted relief “limits speech as little as possible.” A prior restraint at this stage would not support 15 such a finding. 16 In sum, the Court concludes that in regards to the invalidation of the opt-out elections and 17 the issuance of a curative notice, the balance of hardships tilts in RSG’s favor. In regards to the 18 requested restrictions on Chapter 57’s communications with the class, however, the balance of 19 hardships tilts in Chapter 57’s favor. 20 D. Public Interest 21 As with the balance of hardships, the public interest at issue depends on the remedy. In 22 regards to the invalidation of opt-outs and the issuance of a curative notice by the Settlement 23 Administrator, this order serves the court’s duty “not only to protect class members in particular 24 but to safeguard generally the administering of justice and the integrity of the class certification 25 process.” O'Connor v. Uber Technologies, Inc., No. C-13-3826 EMC, 2014 WL 1760314, at *3 26 (N.D. Cal. May 2, 2014). As such, it is in the public’s interest. 27 28 A limitation on Chapter 57’s communications with at least some of its members, however, is not in the public interest. As noted above, the Court must carefully tailor any restriction on 17 1 speech to the specific record before it. Here, it has concluded that enjoining Chapter 57’s 2 communications would unnecessarily infringe on its First Amendment rights. CONCLUSION 3 Accordingly, the Court denies RSG’s motion for a TRO and grants in and denies in part its 4 5 request for preliminary injunctive relief. It will grant RSG’s request to invalidate the obtained 6 opt-outs and to issue a curative notice, and deny its request to enjoin further communications from 7 Chapter 57. The parties and Chapter 57 are hereby ordered to meet and confer, and submit by 8 Monday, August 1, 2016 at 5:00 p.m., a proposal that covers the following: 1. 9 A process by which the Settlement Administrator shall determine which class members wish to invalidate their opt-out elections based on the misleading communications sent 11 United States District Court Northern District of California 10 by Chapter 57. 2. 12 A proposed form of corrective notice. The notice will be issued on court letterhead 13 and should inform the recipients that any opt-out elections obtained through Chapter 57’s form 14 and communications have been invalidated by the Court, as well as the reasons for the 15 invalidation. 3. 16 A proposed method to confidentially submit to the Settlement Administrator a 17 complete list of the recipients of Chapter 57’s communications. The Settlement Administrator 18 shall distribute the corrective notice only to those recipients. 4. 19 A responsible official shall certify, under penalty of perjury, that the list submitted 20 to the Settlement Administrator is a complete and accurate list of the persons who received 21 Chapter 57’s letter, and the official’s declaration shall be filed without attachment on the docket. 22 Chapter 57 shall also lodge with the Court a copy of that declaration, attached to the list supplied 23 to the Settlement Administrator. 5. 24 A proposed stipulated protective order, or other method, to ensure the list remains 25 confidential. If appropriate, the Court may order the Settlement Administrator to be bound by the 26 order. 27 28 6. If necessary, whether, and how, the deadline for the class to respond to the settlement, as well as the remaining deadlines regarding the approval process, should be extended. 18 1 If the parties cannot agree, they are ordered to submit clearly red-lined competing 2 proposals to the Court, bearing in mind that the Court will choose one of the parties’ proposals, 3 and avoid crafting something anew, if at all possible. 4 Upon receipt of this proposal or proposals, the Court shall issue an order directing the 5 Settlement Administrator to circulate the corrective notice and to invalidate the necessary opt-out 6 elections. This order shall also require Chapter 57 to reimburse the Settlement Administrator for 7 all printing and mailing costs related to the curative notice. 8 9 10 United States District Court Northern District of California 11 12 IT IS SO ORDERED. Dated: July 29, 2016 ______________________________________ JON S. TIGAR United States District Judge 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 19
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