Cavazos v. Salas Concrete, Inc. ( 2020 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 JOHN CAVAZOS, on behalf of himself No. 19-cv-00062-DAD-EPG and all others similarly situated, 12 Plaintiff, 13 ORDER REQUIRING SUPPLEMENTAL v. BRIEFING 14 SALAS CONCRETE, INC., a California 15 Corporation, 16 Defendant. 17 18 This matter is before the court on the assigned magistrate judge’s findings and 19 recommendations, recommending that the unopposed motion for class certification and for 20 preliminary approval of a class action settlement filed on behalf of plaintiff John Cavazos be 21 granted.1 (Doc. Nos. 27, 31.) 22 In conducting its de novo review of the pending motion pursuant to 28 U.S.C. 23 § 636(b)(1)(C), the undersigned has identified some potential deficiencies with the parties’ 24 settlement agreement and the pending motion, thereby necessitating this order requiring the 25 ///// 26 1 Pursuant to the undersigned’s standing order in light of the ongoing judicial emergency in this 27 district, motions for class certification and for preliminary or final approval of collective or class action settlements are considered in the first instance by the assigned magistrate judge, who 28 thereafter issues findings and recommendations for the undersigned’s review. (Doc. No. 26 at 3.) 1 parties to provide the court with supplemental briefing. The court briefly summarizes the relevant 2 facts below. 3 On January 1, 2019, plaintiff John Cavazos, on behalf of himself and all others similarly 4 situated, commenced this collective and class action against defendant Salas Concrete, Inc. (Doc. 5 No. 1.) This action proceeded on plaintiff’s operative first amended complaint (“FAC”), which 6 asserted a federal Fair Labor Standards Act (“FLSA”) claim and several state law claims. (Doc. 7 No. 8.) The FAC alleged that this court had original subject matter jurisdiction over this action 8 based on the FLSA claim. (Id. at 3.) 9 On January 15, 2020, plaintiff file a notice of settlement, informing the court that “the 10 Parties successfully mediated this case and agreed on the material terms of a class action 11 settlement.” (Doc. No. 24 at 3) (emphasis added). However, the notice of settlement does not 12 mention the FLSA collective action. 13 On March 20, 2020, plaintiff filed the pending motion for class certification and for 14 preliminary approval of class action settlement, which also fails to mention the FLSA collective 15 action. (Doc. No. 27.) 16 On July 21, 2020, the assigned magistrate judge issued the pending findings and 17 recommendations, recommending that plaintiff’s unopposed motion to certify a class and for 18 preliminary approval of class action settlement be granted, but not making any findings regarding 19 plaintiff’s FLSA claim or the FLSA collective action (Doc. No. 31.) 20 Accordingly, as detailed below, the undersigned will order the parties to provide 21 supplemental briefing to address the court’s concerns. 22 Despite the FLSA claim being the sole basis for federal jurisdiction over this action, and 23 despite plaintiff defining and asserting claims on behalf of a separate, nationwide putative FLSA 24 collective, as distinct from the putative Federal Rule of Civil Procedure 23 “California class” (see 25 Doc. No. 8 at 6), and despite plaintiff informing the court that the parties “have successfully 26 mediated this case” (Doc. No. 24 at 3) (emphasis added), the pending motion does not seek to 27 certify the putative FLSA collective. Indeed, in the pending motion, plaintiff only addresses the 28 Rule 23 class certification and preliminary approval of class action settlement standards; he does 1 not address the standards for the certification of an FLSA collective, let alone provide any 2 analysis for whether those standards are met here. See Campbell v. City of Los Angeles, 903 F.3d 3 1090, 1101 (9th Cir. 2018) (“Collective actions and class actions are creatures of distinct texts— 4 collective actions of section 216(b), and class actions of Rule 23—that impose distinct 5 requirements.”); id. at 1109 (“Preliminary certification [of an FLSA collective] refers to the 6 dissemination of notice to putative collective members, conditioned on a preliminary 7 determination that the collective as defined in the complaint satisfies the “similarly situated” 8 requirement of section 216(b).”); see also Millan v. Cascade Water Servs., Inc., 310 F.R.D. 593, 9 601 (E.D. Cal. 2015). Also of concern, the parties’ settlement agreement provides for a broad 10 release of claims, including a release of the FLSA claim, as well as any related FLSA claims that 11 could have been asserted. (Doc. No. 27-2 at 33 –34.) Finally, the court has concerns with respect 12 to certification of the California class and preliminary approval of the class action settlement 13 pursuant to Rule 23. 14 Accordingly, the parties are directed to file supplemental briefing addressing the 15 following issues: 16 1. Has plaintiff abandoned the FLSA cause of action? If he has, on what basis does 17 this court have subject matter jurisdiction over this case?2 18 2. On what basis can the court conclude that the parties’ settlement agreement is fair, 19 reasonable, and adequate, given that it includes a broad release of FLSA claims 20 despite the fact that there is no settlement of the FLSA collective action, and there 21 is no showing that the settlement agreement satisfies the requirements to resolve 22 an FLSA claim by way of settlement?3 23 2 See Wright v. Special Logistics Portland, LLC, No. 3:15-cv-02058-SB, 2018 WL 358497, at *1 24 (D. Or. Jan. 10, 2018) (declining to exercise supplemental jurisdiction over remaining state law class action claims once the FLSA collection action claim was dismissed); Edwards v. City of 25 Long Beach, 467 F. Supp. 2d 986, 992 (C.D. Cal. 2006) (“Plaintiffs’ Rule 23 class is based solely on state law claims, and thus raises jurisdictional concerns. But for the FLSA claims, Plaintiffs 26 would not have jurisdiction in this Court.”). 27 3 See Murillo v. Pac. Gas & Elec. Co., 266 F.R.D. 468, 470 (E.D. Cal. 2010) (“The FLSA limits 28 participation in a collective action to only those parties that ‘opt-in’ to the suit.”). Millan, 310 1 3. Under the parties’ settlement agreement, the released claims 2 include any related Fair Labor Standards Act (‘FLSA’) wage claims . . ., but only for those Settlement Class Members who 3 endorse their Settlement checks by signing under the pre- printed language under each settlement check: “By 4 signing . . . this check, I hereby ‘opt in’ to the Settlement and release all claims pursuant to the [FLSA], 29 U.S.C. 5 § 216(b) et seq. 6 (Doc. No. 72-2 at 33–34.) To the extent that the parties contend that this provision 7 satisfies the notice requirements of FLSA collective action settlements, on what 8 authority is that contention based? 9 4. The settlement agreement provides that defendant shall deposit one seventh of the 10 gross settlement amount ($175,000.00) with the settlement administrator ninety 11 days after the “effective date,” and that every 180 days thereafter, defendant shall 12 deposit an additional one seventh of the gross settlement amount, until he has 13 made the seventh payment. (Doc. No. 27-2 at 41–42.) The parties anticipate that 14 defendant will have made all seven payments within 39 months of the effective 15 date, and only after the final payment is made, will the settlement administrator 16 distribute the settlement fund. (Id.; Doc. No. 27-1 at 17.) The pending findings 17 and recommendations note that “the Court is concerned with this protracted 18 payment plan and the risk that Defendant will default.” (Doc. No. 31 at 19.) The 19 undersigned shares that concern. Accordingly, the parties are directed to provide 20 authority for why the payment plan called for in their settlement agreement is 21 reasonable, fair, and adequate under Rule 23. Relatedly, the parties are directed to 22 explain what will happen to already-deposited funds in the event that defendant 23 defaults and is unable to make all seven payments. 24 5. Pursuant to the settlement agreement, “Defendant . . . ha[s] the exclusive right to 25 void this Settlement,” in the event that “more than twenty percent (20%)” of the 26 27 F.R.D. at 607 (noting that the first step in certifying a proposed collective is determining “whether the proposed class should be given notice of the action”) (internal quotation marks and 28 citation omitted) 1 putative class opts out of the settlement. (Doc. No. 27-2 at 49.) The parties are 2 directed to provide authority for why this “Defendant’s Right to Void Settlement” 3 provision in the settlement agreement is reasonable, fair, and adequate under Rule 4 23. 5 6. The parties estimate “there are 40 Class Members” (Doc. No. 27-1 at 19), and at 6 the April 24, 2020 hearing on the pending motion, the parties indicated there are 7 39 class members (Doc. No. 31 at 8 n.6). How is Rule 23’s numerosity 8 requirement met in this action?4 9 7. In the pending motion, plaintiff seeks appointment of his counsel—The Spivak 10 Law Firm and The United Employees Law Group, PC—as class counsel for the 11 putative class. (Doc. No. 27-1 at 21.) Plaintiff represents that his counsel “has 12 significant experience in employment litigation.” (Id.) However, as discussed 13 above, plaintiff’s counsel asserted an FLSA claim on behalf of a putative 14 collective, and appear to have, at best, unintentionally abandoned that claim. The 15 court is therefore concerned about the adequacy of counsel’s representation in this 16 matter. 17 8. In the pending motion, plaintiff’s counsel seek attorneys’ fees in the amount of 18 one-third of the gross settlement amount, which is above the Ninth Circuit 19 benchmark amount for attorneys’ fees.5 (Doc. No. 27-1 at 34–40.) Accordingly, 20 the court directs plaintiff’s counsel to provide documentation to substantiate their 21 fee request, including but not limited to their billing records in connection with 22 this action. 23 24 4 See Ikonen v. Hartz Mt. Corp., 122 F.R.D. 258, 262 (S.D. Cal. 1988) (“As a general rule, classes of 20 are too small, classes of 20–40 may or may not be big enough depending on the 25 circumstances of each case, and classes of 40 or more are numerous enough.”); see also Dunakin v. Quigley, 99 F. Supp. 3d 1297, 1327 (W.D. Wash. 2015) (“Generally, 40 or more members will 26 satisfy the numerosity requirement.”) (internal quotation marks and citation omitted). 27 5 See In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 942 (9th Cir. 2011); Staton v. 28 Boeing Co., 327 F.3d 938, 968 (9th Cir. 2003). 4:40 VV VUE OOM AE SMMC OO PC VO ee PAYS VM VY 1 9. In the pending motion, plaintiff seeks an incentive payment of up to $10,000.00, 2 which is significantly higher than the average recovery amount of individual class 3 members and does not appear to be warranted in this case. Accordingly, the court 4 directs plaintiff to provide support for why he should receive such a large incentive 5 payment, specifically identifying how he has participated in and contributed to the 6 prosecution of this action. 7 ORDER 8 The parties are directed to jointly file a brief responsive to the issues identified above 9 | within ten (10) days from the issuance of this order. 10 | IT IS SO ORDERED. a Dated: _ August 28, 2020 J aL A 4 7 a 12 UNITED STATES DISTRICT JUDGE 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28