Judge: Gregory Keosian, Case: BC664559, Date: 2022-09-01 Tentative Ruling

Case Number: BC664559    Hearing Date: September 1, 2022    Dept: 61

Plaintiff Ismael Torres’s Motion for Final Approval of Class Action Settlement is DENIED.

Plaintiff to give notice.

I.      FINAL APPROVAL OF CLASS SETTLEMENT

A.    Notice

Phoenix Class Action Administration Solutions (Phoenix) has been entrusted to administer the class action settlement. Notices of settlement and allocation forms were sent to the 2,954 class members — an amount calculated and calculated and agreed to by the parties and Phoenix — on June 17, 2022. (Hamner Decl. ¶¶ 2–3.) A typo misidentifying the defendant on the allocation form was soon discovered, and an amended notice was sent on July 8, 2022. (Hamner Decl. ¶ 3.) Although the parties previously presented this court with a proposed class action settlement notice form — which informed members that they could opt out, object, or dispute an amount by a date left blank — no such notice has been provided with the present motion.

Plaintiffs claim that they have received no objections to the settlement, and that eight class members have opted out, and none of objected to the settlement. (Hamner Decl. Exh. B.) 33 notices were re-mailed, 13 were returned a second time, and eight were deemed undeliverable. (Ibid.)

Final approval of the settlement must await presentation of the notice that was mailed to the class members, to determine if the notice it gave was adequate.

B.    The Settlement Terms

An order preliminarily approving a class action settlement must set a date and time for a final approval hearing, before which time members of the class may make objections to the proposed settlement. (CRC Rule 3.769, subd. (e), (f).) “Before final approval, the court must conduct an inquiry into the fairness of the proposed settlement.” (CRC Rule 3.769, subd. (g).)

“When the following facts are established in the record, a class action settlement is presumed to be fair: ‘(1) the settlement is reached through arm's-length bargaining; (2) investigation and discovery are sufficient to allow counsel and the court to act intelligently; (3) counsel is experienced in similar litigation; and (4) the percentage of objectors is small.’” (Chavez v. Netflix, Inc. (2008) 162 Cal.App.4th 43, 52.)

In determining whether a class settlement is fair, adequate and reasonable, the trial court should consider relevant factors, such as “the strength of plaintiffs' case, the risk, expense, complexity and likely duration of further litigation, the risk of maintaining class action status through trial, the amount offered in settlement, the extent of discovery completed and the stage of the proceedings, the experience and views of counsel, the presence of a governmental participant, and the reaction of the class members to the proposed settlement.” [Citations.] The list of factors is not exclusive and the court is free to engage in a balancing and weighing of factors depending on the circumstances of each case. [Citation] Consistent with our standard of review on appeal, we do not reweigh these factors or substitute our notions of fairness for those of the trial court. [Citation.]

Although the court gives regard to what is otherwise a private consensual agreement between the parties, the court must also evaluate the proposed settlement agreement with the purpose of protecting the rights of the absent class members who will be bound by the settlement. [Citation.] The court must therefore scrutinize the proposed settlement agreement to the extent necessary to “‘reach a reasoned judgment that the agreement is not the product of fraud or overreaching by, or collusion between, the negotiating parties, and that the settlement, taken as a whole, is fair, reasonable and adequate to all concerned.’” [Citation.]

The burden is on the proponent of the settlement to show that it is fair and reasonable. However “a presumption of fairness exists where: (1) the settlement is reached through arm's-length bargaining; (2) investigation and discovery are sufficient to allow counsel and the court to act intelligently; (3) counsel is experienced in similar litigation; and (4) the percentage of objectors is small.”

(Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 244–45, overruled on other grounds in Hernandez v. Restoration Hardware, Inc. (2018) 4 Cal.5th 260, 269.)

The terms of the settlement were reviewed in this court’s order granting preliminary approval, and have remained, for the most part, the same:

·       $1.2 million total settlement amount

·       $400,000 in attorney fees

·       Up to $20,000 in litigation costs (reduced in the actual request to $11,817.00

·       An incentive award of $20,000 to Plaintiff Torres

·       A $25,000 class administration fee for Phoenix

·       $18,750 allocated to PAGA claims

·       A net settlement to be paid to employees in the amount of $715,250

This much does not appear to have changed since granting the motion for preliminary approval.

However, a substantial change has occurred in the number of class members and pay periods since that preliminary hearing, which warrants a change in the agreement. The parties and the settlement administrator agree that the class now contains 2,954 class members and 62,791 pay periods. (Hamner Decl. ¶ 2.) This represents a substantial increase over the estimated class size and pay period total presented in the motion for preliminary approval, which estimated 2,000 class members and 53,000 pay periods.

What’s more, Plaintiffs acknowledge that the settlement agreement contains an “upward adjustment” clause that requires the settlement amount to increase proportionally based on the amount that the number of actual pay periods exceeds the 53,000-pay-period estimate. They argue, however, that this requires the actual number of pay periods in the settlement class period to exceed the 53,000-pay-period-estimate by 15 percent, which has not happened here. (Motion at p. 2; see 12/20/2021 Olson Decl. Exh. 1, § A.32.)

This argument appears to be incorrect: By the court’s reckoning, a proportional escalation in the settlement amount is required under the upward adjustment clause, as a 15 percent increase in pay periods has occurred. 15 percent of 53,000 pay periods — the original estimate  — is 7,950 pay periods, and 53,000 plus 7,950 equals 60,950. Thus, under the settlement’s upward adjustment provision, this would require a proportional increase in the $1.2 million settlement amount if the actual pay periods met or exceed 60,950. And according to Plaintiffs, this threshold has been crossed: The true amount of pay periods is 62,791, an increase over the 53,000-estimate of 9,791, or roughly 18.5 percent.

As no provision has apparently been made for a proportional increase of the settlement, nor any explanation given as to why such an adjustment ought not be made under the upward adjustment clause, no final approval of the settlement is DENIED.