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Case Number: 19BBCV00362 Hearing Date: January 6, 2023 Dept: NCB
North Central District
|
belen hernandez, individually, and on
behalf of other aggrieved employees pursuant to the California Private
Attorneys General Act, Plaintiff, v. MORPHE, INC., et al., Defendants. |
Case
No.: 19BBCV00362 Hearing
Date: January 6, 2023 [TENTATIVE] order RE: motion for final approval of class action settlement, attorneys’ fees,
costs, and service award |
BACKGROUND
A.
Allegations
On April 30, 2019, Plaintiff Belen Hernandez
(“Plaintiff”) commenced this action for enforcement under the Private Attorneys
General Act (“PAGA”), California Labor Code, § 2968, et seq. against
Defendants Morphe, Inc. and Morphe LLC (“Defendants”). Plaintiff alleges that she and other
aggrieved hourly-paid or non-exempt employees were employed by Defendants and
Defendants had failed to compensate them for all hours worked and missed meal
period or rest periods. Plaintiff
alleges wage-and-hour violations against Defendants, including failure to pay
overtime, provide meal and rest periods, pay minimum wages, timely pay wages
during employment and upon termination, provide complete accurate wage
statements, keep complete and accurate payroll records, and reimburse necessary
business-related expenses and costs.
On September 3, 2021, Plaintiff filed the
First Amended Class Action Complaint (“FAC”) against Defendants for: (1)
violation of Labor Code, §§ 510, 1198 (unpaid overtime): (2) violation of Labor
Code, §§226.7, 512(a) (unpaid meal period premiums); (3) violation of Labor
Code, § 226.7 (unpaid rest period premiums); (4) violation of Labor Code, §§
1194, 1197, 1197.1 (unpaid minimum wages); (5) violation of Labor Code, §§ 201,
202 (final wages not timely paid); (6) violation of Labor Code, § 204 (wages
not timely paid during employment); (7) violation of Labor Code, § 226(a)
(non-compliant wage statements); (8) violation of Labor Code, § 1174(d)
(failure to keep requisite payroll records); (9) violation of Labor Code, §§
2800 and 2802 (unreimbursed business expenses); (10) violation of Business
& Professions Code, §§ 17200 et seq.; and (11) violation of Labor
Code, §§ 2698, et seq. (PAGA).
B. Relevant Background
On July 28, 2020, the parties participated in
private mediation with mediator Mark S. Rudy.
(Settlement Agreement at
p.1.) As a result, the parties entered
the Stipulation of Settlement of Class and PAGA Claims (“Settlement
Agreement”).
On September 2, 2020, a Post-Mediation Status
Conference came for hearing. Counsel advised
the Court that the parties had reached a settlement in mediation.
On January 15, 2021, the parties filed a
Joint Response to OSC re Dismissal (Settlement), stating that they reached a
class-wide settlement and, thus, seek the Court’s approval pursuant to CRC Rule
3.769(a).
On July 14, 2022, the Court granted
Plaintiff’s motion for preliminary approval of the settlement.
C. Motion on Calendar
On December 13, 2022, Plaintiff filed a motion
for final approval of class action settlement. The motion is unopposed.
DISCUSSION
A.
SETTLEMENT CLASS
DEFINITION
The parties stipulate and agree
to the conditional certification of the class for purposes of this settlement
only. (Settlement Agreement, at p.2.) The proposed settlement class is defined as:
“[A]ll current and former non-exempt retail employees who worked for Defendants
in California during the Settlement Period.”
(Id., §II.A.4.)
“Settlement Period” means the period
from April 29, 2015 through the date of the order approving Plaintiff’s Motion
for Preliminary Approval of Class Action Settlement. (Id., §II.A.31.)
“PAGA Employees” is defined as
Plaintiff and all Class Members who worked for Defendant in California during
the PAGA Period. (Id.,
§II.A.16.) The “PAGA Period” means the
period from February 20, 2018 through the date
of the order approving Plaintiff’s Motion for Preliminary Approval of Class
Action Settlement. (Id.,
§II.A.18.)
B.
TERMS OF SETTLEMENT
AGREEMENT
A copy
of the fully executed Stipulation of Settlement of Class and PAGA Claims
(“Settlement Agreement”) is attached as Exhibit 1 to the declaration of Brian
J. St. John, which was filed with the renewed motion for preliminary approval. The Settlement Agreement was entered between
Plaintiff (on behalf of herself and on behalf of the State of California and
all allegedly aggrieved employees) and FORMA Brands, LLC, Morphe, Inc. and
Morphe LLC (“the Company”). The essential terms are as follows:
·
The
Maximum Settlement Amount (“MSA”) is $750,000, non-reversionary. The MSA includes all individual settlement
payments to class members, individual PAGA payments to PAGA employees, the LWDA
payment, attorney’s fees and costs to class counsel, Plaintiff’s service award,
and settlement administration costs.
(§§II.A.13, II.B.2.)
·
The
Net Settlement Amount (“Net”) ($433,250)
is the MSA less (§§II.A.14, II.B.2):
o Up to $262,500 (35%) for attorney fees
(§II.B.2);
o Up to $13,000 for attorney costs (§II.B.2);
o $7,500 for a service award to the class
representative (§II.A.26);
o Up to $15,000 for claims administration costs
(§II.A.28); and
o Payment of $18,750 (75% of $25,000 PAGA penalty)
to the LWDA (§II.B.2).
·
Defendant
will pay the employer-side payroll taxes due on the wages portion of the
individual settlement payments. This
will be a separate additional obligation of Defendants from the MSA. (§II.A.13.)
·
Escalator: “There were approximately
18,000 Qualifying Workweeks worked by Class Members during the period from June
22, 2016 to March 16, 2020. Should the total number of Qualifying Workweeks
increase by more than eight percent (8%) of the number of Qualifying Workweeks
during the period from June 22, 2016 to March 16, 2020 (i.e., more than 1,440
workweeks), the Company shall increase the Maximum Settlement Amount on a
pro-rata basis equal to the percentage increase in the number of workweeks
worked by the Class Members above eight percent (8%) (e.g., if the number of
workweeks increases by 9% to 19,620 workweeks, the\Maximum Settlement Amount
will increase by 1%).” (§ II.C.7.)
·
The
settlement is subject to an opt-out procedure.
Class Members who timely submit requests to opt out of the settlement
(Request for Exclusion) will not participate in the settlement and will not be
bound by its terms. All PAGA Employees
will be bound by the settlement and release of the PAGA Released Claims. (§II.C.8.iv.)
·
“Response
Deadline” is the “deadline by
which Class Members must postmark to the Settlement Administrator any Requests
for Exclusion, Objections, or Workweek Disputes. The Response Deadline will be
sixty (60) calendar days after the Settlement Administrator first mails the
Class Notice. If the 60th day falls on a Sunday or holiday, the Response
Deadline will be the next business day that is not a Sunday or holiday The
Response Deadline will be extended by ten (10) calendar days for any Class
Member that receives a re-mailed Class Notice.”
(§II.A.25.)
·
Individual Class Settlement Payment Calculation: “The amount of each Settlement Class
Members Individual Settlement Payment will be calculated by (a) dividing the
Net Settlement Amount by the total number of Qualifying Workweeks for all
Settlement Class Members that occurred during the Settlement Period and (b)
multiplying the result by each individual Settlement Class Member’s number of
Qualifying Workweeks that occurred during the Settlement Period. Payments will
be reduced as necessary to account for mandatory payroll withholdings.
Recipients of payments pursuant to this Settlement Agreement are exclusively
responsible for all other tax obligations.”
(§II.C.17.)
o Tax Treatment: 20% wages and
80% as penalties and interest.
(§II.C.20.)
·
Individual PAGA Settlement Fund Payment Calculation: “Each PAGA Employee, regardless of
whether he or she opts out, will receive an Individual PAGA Payment. The PAGA
Payment shall be allocated pro-rata on a pay period basis to all PAGA Employees
for all pay periods during which PAGA Employees worked in California during the
PAGA Period. The amount of each PAGA Employee’s Individual PAGA Payment will be
calculated by (a) dividing the PAGA Employee Amount by the total number of PAGA
Pay Periods for all PAGA Employees that occurred during the PAGA Period and (b)
multiplying the result by each individual PAGA Employee’s number of PAGA Pay
Periods that occurred during the PAGA Period. Recipients of payments pursuant
to this Settlement Agreement are exclusively responsible for all tax
obligations. If the PAGA Employee submitted a timely and valid Request for
Exclusion, he or she will receive only their Individual PAGA Payment; if the
PAGA Employee has not opted out, he or she will receive their Individual PAGA
Payment in addition to the amount they will receive based on C.18, above.” (§II.C.19.)
o Tax Treatment: 100% as
penalties and interest. (§II.C.20.)
·
Uncashed Settlement Payment Checks: Class Members
have 180 days or else the uncashed checks will be deposited in the California
unclaimed Property Fund in the name of the Class Member. (§II.C.17.)
·
Effective Date means: “the date this Settlement is approved as
provided herein and the Court’s order granting Settlement Approval of both the
PAGA and class claims and entry of the Final Approval Order and Judgment becomes
final and is no longer appealable. For purposes of this Settlement, “becomes
final and is no longer appealable” means the later of: (a) the day after the
last date by which a notice of appeal to the applicable Court of Appeal of the
order and judgment approving this Settlement may be timely filed and none is
filed (i.e., 30 days from notice of entry of judgment); (b) if an appeal is
filed, and the appeal is finally disposed of by ruling, dismissal, denial, or
in any other manner that confirms the validity of the order and judgment, the
day after the last date for filing a request for further review of the order
and judgment approving this Settlement passes, and no further review is
requested; or (c) if an appeal is filed and the order approving this Settlement
is affirmed and further review of the order is requested, the day after the
review is finally resolved and the order and judgment approving this Settlement
is affirmed. The Effective Date cannot occur, and Defendants will not be
obligated to fund this Settlement, until and unless there is no possibility of
an appeal or further appeal that could potentially prevent this Settlement from
becoming final and binding. (§II.A.8.)
·
The
proposed settlement was submitted to the LWDA on September 10, 2021. (St. John Decl., Ex. 2.)
·
Simpluris
will perform settlement administration. (Mot. at p.22.)
·
Notice
of Final Judgment will be posted on the settlement administrator’s website for
a period of at least 60 days. (Mot. at
p.23.)
C.
ANALYSIS OF
SETTLEMENT AGREEMENT
1.
Standards for Final Fairness Determination
“Before final approval, the court
must conduct an inquiry into the fairness of the proposed settlement.” (Cal. Rules of Court, rule 3.769(g).) “If the court approves the settlement
agreement after the final approval hearing, the court must make and enter
judgment. The judgment must include a
provision for the retention of the court's jurisdiction over the parties to
enforce the terms of the judgment. The
court may not enter an order dismissing the action at the same time as, or
after, entry of judgment.” (Cal. Rules
of Court, rule 3.769(h).)
“In a
class action lawsuit, the court undertakes the responsibility to assess
fairness in order to prevent fraud, collusion or unfairness to the class, the
settlement or dismissal of a class action.
The purpose of the requirement [of court review] is the protection of
those class members, including the named plaintiffs, whose rights may not have
been given due regard by the negotiating parties.” (See Consumer Advocacy Group, Inc. v. Kintetsu Enterprises of America (2006)
141 Cal. App.4th 46, 60 [internal quotation marks omitted]; see also Wershba v. Apple Computer, Inc. (2001)
91 Cal.App.4th 224, 245 (“Wershba”),
disapproved on another ground in Hernandez
v. Restoration Hardware (2018) 4 Cal.5th 260 [Court needs to “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”] [internal quotation marks
omitted].)
“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.’” (See Wershba,
supra, 91 Cal.App.4th at pg. 245 [citing Dunk v. Ford Motor Co. (1996)
48 Cal.App.4th 1794, 1802. (“Dunk”)].) Notwithstanding an initial presumption of
fairness, “the court should not give rubber-stamp
approval.” (See Kullar
v. Foot Locker Retail, Inc.
(2008) 168 Cal.App.4th 116, 130 (“Kullar”).) “Rather, to protect the interests of
absent class members, the court must independently and objectively analyze the
evidence and circumstances before it in order to determine whether the
settlement is in the best interests of those whose claims will be extinguished.”
(Ibid.) In that determination, the court should
consider 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 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.” (Id.
at 128.) “Th[is] 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.” (Wershba supra, 91 Cal.App.4th at
pg. 245.)
Nevertheless,
“[a] settlement need not obtain 100 percent of the
damages sought in order to be fair and reasonable. Compromise is inherent and necessary in the
settlement process. Thus, even if ‘the
relief afforded by the proposed settlement is substantially narrower than it
would be if the suits were to be successfully litigated,’ this is no bar to a
class settlement because ‘the public interest may indeed be served by a
voluntary settlement in which each side gives ground in the interest of
avoiding litigation.’” (Wershba, supra, 91 Cal.App.4th at pg. 250.)
2.
Does a presumption of fairness exist?
a.
Was the settlement reached through arm’s-length
bargaining? Yes. (Aiwazian
Decl., ¶8.)
b.
Were investigation and discovery sufficient to allow
counsel and the court to act intelligently?
Yes. (Id., ¶¶5-8.)
c.
Is counsel experienced in similar litigation? Yes.
Class Counsel is experienced in class action litigation, including wage
and hour class actions. (Id., ¶¶13-18.)
d.
What percentage of the class has objected? Zero. (Burton Decl., ¶11.)
CONCLUSION: The settlement is entitled to a presumption
of fairness.
3.
Is the settlement
fair, adequate, and reasonable?
a.
Strength of Plaintiffs’ case. “The most important factor is the strength of
the case for plaintiffs on the merits, balanced against the
amount offered in settlement.” Kullar, supra at 130.
Class Counsel
believes that there is
sufficient evidence to support the allegations made in the lawsuit. (St. John Decl. re Preliminary Approval,
¶16.) Class Counsel provides the
estimates of the value of the claims, as well as their consideration of
Defendant’s defenses. (Id.,
¶¶21-25.) Counsel provides a breakdown
of the potential and realistic values of each of the claims for failure to pay
overtime wages, failure to pay minimum wages, failure to provide compliant meal
and rest periods, failure to timely pay wages during employment, failure to
timely pay wages after termination and waiting time penalties, failure to
provide complaint wage statements, failure to maintain payroll records, failure
to reimburse necessary business expenses, and PAGA penalties. (Id., ¶25(a)-(j).)
b.
Risk, expense, complexity and likely duration of
further litigation. Given the nature of the class claims, the
case is likely to be expensive and lengthy to try. Procedural hurdles (e.g., motion practice and
appeals) are also likely to prolong the litigation as well as any recovery by
the class members.
c.
Risk of maintaining class action status through trial. Even if a class is certified, there is always
a risk of decertification. (Weinstat v. Dentsply Intern., Inc. (2010) 180 Cal.App.4th 1213, 1226 [“Our Supreme
Court has recognized that trial courts should
retain some flexibility in conducting class actions, which means, under suitable circumstances, entertaining
successive motions on certification if the court subsequently
discovers that the propriety of a class action is not appropriate.”].)
d.
Amount offered in settlement. As indicated above, the Maximum Settlement
Amount is $750,000. In the order on the motion for preliminary
approval, the Court stated that if it approved all maximum requested
deductions, approximately $433,250 would be available for automatic
distribution to participating class members, or $1,328.98 in average
distributions to members ($433,250 NSA ÷ 326 class members = $1,328.98). At that time, Counsel estimated the NSA would
be $427,000. (St. John Decl. re
Preliminary Approval, ¶14.)
In the motion for final approval,
Plaintiff states that the NSA was $428,380.57.
Based on Simpluris’ calculation (which makes estimates from a $427,000
NSA), the highest individual PAGA payment will be $45.44 while the average
individual PAGA payment will be $11.47, as there are 535 PAGA employees. (Burton Decl., ¶¶13-14.) The highest individual settlement payment is
estimated to be $4,033.38 and the average individual settlement payment is
estimated to be $794.95. (Id.,
¶15.) Defendant will pay an additional
$17,037.30 in estimated employer taxes in addition to the GSA. (Id., ¶16.)
e.
Extent of discovery completed and stage of the
proceedings. As discussed above, at the time of the
settlement, Class Counsel had conducted extensive discovery.
f.
Experience and views of counsel. The settlement was negotiated and endorsed by
Class Counsel who, as indicated above, are experienced in class action
litigation, including wage and hour cases.
Based upon their investigation and
analysis, the attorneys representing Plaintiff and the class are of the opinion
that this settlement is fair, reasonable, and adequate. (Aiwazian Decl., ¶21.)
g.
Presence of a governmental participant. This factor is not applicable here.
h.
Reaction of the class members to the proposed
settlement.
Number
of class members: 550
Number
of notices mailed: 545
Number of undeliverable notices: 5
Number of opt-outs: 0
Number of objections: 0
Number of participating class
members: 550
(100%)[1]
(Burton
Decl., ¶¶5-11.)
CONCLUSION: The settlement can be
preliminarily deemed “fair, adequate, and reasonable.”
4.
May conditional
class certification be granted?
a.
Standards
A detailed analysis of the
elements required for class certification is not required, but it is advisable
to review each element when a class is being conditionally certified. Amchem
Products, Inc. v. Winsor (1997) 521 U.S. 591, 620, 622-627. The trial court
can appropriately utilize a different standard to determine the propriety of a
settlement class as opposed to a litigation class certification. Specifically, a lesser standard of scrutiny
is used for settlement cases. Dunk, supra at 1807, fn. 19. Finally, the Court is under no “ironclad
requirement” to conduct an evidentiary hearing to consider whether the
prerequisites for class certification have been satisfied. Wershba, supra at 240.
CONCLUSION: Based on information presented to the Court prior to preliminary approval,
the Court finds that Class Members are numerous and ascertainable, and that a
community of interest exists as to the settlement class.
D.
ATTORNEY FEES AND
COSTS
Class Counsel requests $262,500 (35% of the $750,000) for
attorney fees and $11,619.49 for
costs. The fees requested was the amount
requested in the Settlement Agreement.
The costs originally requested were $13,000.
In determining the appropriate amount of a fee award, courts may use
the lodestar method, applying a multiplier where appropriate. (PLCM Group, Inc. v. Drexler (2000) 22
Cal.4th 1084, 1095-96.) A percentage calculation is permitted in common
fund cases. (Laffitte v. Robert Half
Int’l, Inc. (2016) 1 Cal.5th 480, 503.) Despite any agreement by the
parties to the contrary, courts have an independent responsibility to review an
attorney fee provision and award only what it determines is reasonable. (Garabedian v. Los Angeles Cellular Telephone
Company (2004) 118 Cal.App.4th 123, 128.)
In the instant case, fees are
sought pursuant to the percentage method. (Mot.
for Final Approval at p.16.) The
$262,500 fee request is 35% of the Maximum Settlement Amount, which is average.
(In re Consumer Privacy Cases (2009)
175 Cal.App.4th 545, 558, fn. 13 [“Empirical studies show that, regardless
whether the percentage method or the lodestar method is used, fee awards in
class actions average around one-third of the recovery.”].)
Plaintiff also argues that the
lodestar analysis supports the attorneys’ fee award. (Mot. for Final Approval at p.25.) Plaintiff argues that a blended rate of $700
per hour for 426.10 hours spent on this case would be valued at $498,270, which
is higher than the $262,500 amount sought by Class Counsel under the percentage
method. (Aiwazian Decl., ¶11, Ex.
A.) The timekeeping record for Class Counsel is attached as Exhibit A to
the Declaration of Mr. Aiwazian.
Here, the $262,500
fee request represents a reasonable percentage of the total funds paid by
Defendant. Further, the notice expressly
advised class members of the fee request, and no one objected. (Notice, §3.) Accordingly, the Court awards fees in the
amount of $262,500.
As for costs, Class
Counsel requests $11,619.49. A higher amount of up to
$13,000 was disclosed to Class Members in the Notice, and no objections were
received. (Notice, §3.) Class
Counsel incurred actual costs in the amount of $11,619.49. (Aiwazian Decl.,
¶19, Ex. B.) Costs include filing fees, remote hearing fees, postage fees,
attorney service fees, mediation fees, and document download fees. (Id.)
The costs appear to be reasonable and
necessary to the litigation, are reasonable in amount, and were not objected to
by the class.
For all of the
foregoing reasons, costs of $11,619.49
are
approved.
E. INCENTIVE AWARD TO CLASS
REPRESENTATIVE
An incentive fee award to a
named class representative must be supported by evidence that quantifies time
and effort expended by the individual and a reasoned explanation of financial
or other risks undertaken by the class representative. (See Clark
v. American Residential Services LLC (2009) 175 Cal.App.4th 785, 806-807;
see also Cellphone Termination Cases
(2010) 186 Cal.App.4th 1380, 1394-1395 [“Criteria courts may consider in
determining whether to make an incentive award include: (1) the risk to the class
representative in commencing suit, both financial and otherwise; (2) the
notoriety and personal difficulties encountered by the class representative;
(3) the amount of time and effort spent by the class representative; (4) the
duration of the litigation and; (5) the personal benefit (or lack thereof)
enjoyed by the class representative as a result of the litigation.
(Citations.)”].)
Here, the Class Representative Belen
Hernandez requests enhancement awards totaling $7,500.
In her declaration, Plaintiff
states that she has been employed by Morphe, Inc. and Morphe LLC as an
hourly-paid non-exempt employee from February 2017 to May 2018. (Hernandez Decl., ¶2.) Plaintiff states that she decided to seek
legal advice about her work experience with Morphe and spoke with class
counsel. (Id.) She states that after speaking with counsel,
she investigated representative and class action lawsuits for 7 hours,
consulted with class counsel for 6 hours, and spent over 17 hours meeting with
counsel regarding the case and her responsibilities as a class and PAGA
representative. (Id.,
¶¶2-3.) She states that she spent at
least 13 additional hours speaking with counsel about the case and 6 hours
reviewing the settlement and asking questions.
(Id., ¶¶4-5.) Plaintiff
believes that she has done everything class counsel asked her to do and to
represent the class. (Id.,
¶6.)
In light of the
above, as well as the benefits obtained on behalf of the class after
approximately 3 years of litigation, the amount of $7,500 for the class representative appears to be a reasonable
inducement for the named Plaintiff’s participation in this case. Accordingly,
enhancement award in the requested amount is approved.
F. CLAIMS ADMINISTRATION COSTS
Claims administrator, Simpluris,
Inc. requests $15,000 in
compensation for its work in administrating this case. (Burton Decl., ¶17.) At
the time of preliminary approval, costs of settlement administration were
estimated at $15,000. Class Members were provided with notice of this amount
and did not object. (Id., ¶11.)
Accordingly, claims
administration costs are approved in the amount of $15,000.
CONCLUSION AND ORDER
The Court hereby:
(1)
Grants
class certification for purposes of settlement;
(2)
Grants
final approval of the settlement as fair, adequate, and reasonable;
(3)
Awards
$262,500 in attorney fees to Class
Counsel, Lawyers for Justice, PC;
(4)
Awards
$11,619.49 in litigation costs to
Class Counsel;
(5)
Approves
payment of $18,750 (75% of $PAGA
penalty) to the LWDA;
(6)
Awards
$7,500 as a Class Representative
Service Award to Plaintiff/Class Representative Belen Hernandez;
(7)
Awards
$15,000 in claims administration
costs to Simpluris, Inc.;
(8)
Orders
class counsel to lodge a proposed Judgment, consistent with this ruling and containing
the class definition, and full release language, by January 17, 2023;
(9)
Orders
class counsel to provide notice to the class members
pursuant to California Rules of Court, rule 3.771(b); and
(10)
A Non-Appearance Case Review re:
Final Report re: Distribution of Settlement Funds is set for March 8, 2023
at 8:30 a.m. Final Report is to be filed
by March 1, 2023.
[1] The settlement is subject to an opt-out procedure.
Hence, any individual who has not opted-out will participate in the settlement.