Ang v. Bimbo Bakeries USA, Inc. ( 2020 )

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 ALEX ANG, et al., Case No. 13-cv-01196-HSG 8 Plaintiffs, ORDER DENYING MOTION FOR PRELIMINARY APPROVAL OF 9 v. CLASS ACTION SETTLEMENT 10 BIMBO BAKERIES USA, INC., Re: Dkt. No. 217 11 Defendant. 12 13 Pending before the Court is the unopposed motion for preliminary approval of class action 14 settlement filed by Plaintiffs Alex Ang and Lynn Streit. Dkt. No. 217. The parties have reached a 15 settlement regarding Plaintiffs’ claims and now seek the required court approval. The Court held a 16 hearing on the motion on February 13, 2020. See Dkt. No. 221. For the reasons detailed below, 17 the Court DENIES Plaintiffs’ motion for preliminary approval of class action settlement. 18 I. BACKGROUND 19 A. Factual Background 20 Plaintiffs bring this consumer class action against Defendant Bimbo Bakeries, Inc. alleging 21 that Defendant misbranded its baked goods. See generally Dkt. No. 40 (“SAC”). Plaintiffs allege 22 that Defendant owns and has distributed products under various brands, including Arnold, Ball 23 Park, Bimbo, Boboli, Brownberry, Earthgrains, Entenmann’s, Francisco, Freihofer’s, Marinela, 24 Mrs. Baird’s, Oroweat, Sara Lee, Stroehmann, Thomas’, and Tia Rosa. See id. at ¶ 1. According 25 to the complaint, many of Defendant’s products are sold with false, misleading, and deceptive 26 labeling. Specifically, Plaintiffs allege that they purchased food products manufactured and sold 27 by Defendant that improperly: (1) applied the American Heart Association’s “Heart-Check Mark” 1 “excellent source of whole grain”; (3) labeled products as “bread,” even though they contain 2 added coloring; and (4) labeled products as “100% Whole Wheat,” even though they were made 3 with non-whole wheat flour. See id. at ¶ 4; see also Dkt. No. 58 (Order Granting in Part Motion to 4 Dismiss Amended Complaint, narrowing products at issue). 5 Based on these allegations, Plaintiffs sought injunctive relief and statutory damages, 6 alleging violations of California’s Unfair Competition Law (“UCL), Cal. Bus. & Prof. Code 7 §§ 17200 et seq.; the California False Advertising Law (“FAL”), Cal. Bus. & Prof. Code §§ 17500 8 et seq.; and the Consumers Legal Remedies Act (“CLRA”), Cal. Civil Code §§ 1750 et seq. See 9 SAC at ¶¶ 32–40. Plaintiffs also sought to represent four separate classes corresponding to these 10 violations that include all California consumers who bought the same products (or products 11 substantially similar to the products) that they purchased at any time from March 18, 2009, to the 12 present. See Dkt. No. 102. 13 B. Procedural History 14 Plaintiffs initially filed this action on March 18, 2013. See Dkt. No. 1. Plaintiffs filed the 15 operative second amended complaint on November 4, 2013. See Dkt. No. 40. On March 13, 16 2014, the Court granted in part Defendant’s motion to dismiss the SAC, narrowing the claims for 17 which Plaintiffs could seek relief. See Dkt. No. 58. Defendant answered the SAC on April 2, 18 2014. Dkt. No. 64. On March 31, 2016, the Court stayed this action pending the resolution of 19 third-party appeals involving legal questions at issue in this case. Dkt. No. 164. On January 5, 20 2018, in response to an order to show cause, Dkt. No. 171, the parties jointly moved to lift the 21 stay, Dkt. No. 172, and the Court granted the request, Dkt. No. 174. Following the stay, on 22 August 31, 2018, the Court granted Plaintiffs’ motion for class certification as to all four classes 23 under Federal Rule of Civil Procedure 23(b)(2). See Dkt. No. 186 (“Class Certification Order”). 24 However, the Court denied certification of the proposed damages class under Rule 23(b)(3). Id. at 25 18, 28. The Court appointed named Plaintiffs as the Class Representatives and appointed 26 Fleischman Law Firm, PLLC and Barrett Law Group, P.A. as co-lead counsel, and Pratt & 27 Associates as local counsel (collectively, “Class Counsel”). Id. at 28–29. 1 Pro (Ret.), former Chief Judge for the United States District Court for the District of Nevada, now 2 a professional mediator with JAMS. See Dkt. No. 217 at 4. Through these efforts, the parties 3 reached settlement, formally executing the settlement agreement in December 2019. Id.; see also 4 Dkt. No. 217-2, Ex. 1. Plaintiffs then filed the unopposed motion for preliminary settlement 5 approval on December 13, 2019. See Dkt. No. 217. The settlement agreement provides for 6 injunctive relief altering the product labeling statements and formulations challenged in the SAC. 7 See Dkt. No. 217-2. Ex. 1 at § 4.4. 8 During the hearing on the motion for preliminary settlement approval, the Court raised 9 several concerns about the scope of the proposed release and the lack of notice to absent class 10 members. See Dkt. No. 225. Critically, as initially drafted, the release contained claims that the 11 Court did not certify in its Class Certification Order. See id. at §§ 1.2, 8.2 (releasing Defendant 12 from all claims, known or unknown, relating to and arising out of “all allegations, demands and 13 assertions in the SAC and any other filings or documents in the Class Action regarding the alleged 14 improper labeling of any of the Products”). Moreover, although absent class members would be 15 giving up significant legal rights under the settlement, the parties argued that notice was not 16 required because of the nature of the injunctive relief. See Dkt. No. 217 at 7–8. 17 In response to the Court’s concerns, the parties filed a joint statement in support of the 18 motion for preliminary approval and included a revised settlement agreement. See Dkt. No. 222-1, 19 Ex. A. However, the Court still had concerns about the structure of the settlement. Although the 20 parties revised the language of the release, under the revised settlement absent class members 21 would still release “any Claims for injunctive, declaratory or other equitable relief that were 22 certified for class treatment in the Class Certification Order.” See id. at §§ 1.14, 8, 8.2. And as 23 before, absent class members would not receive any notice of this release and would not have any 24 opportunity to object or opt out of the class if they found the injunctive relief somehow deficient. 25 See Dkt. No. 217 at 7–8. The Court accordingly sought supplemental briefing from the parties on 26 this issue. See Dkt. No. 223. In response, the parties urged that notice was not required to release 27 equitable claims on a class-wide basis. See Dkt. No. 226. The parties reasoned that even if an 1 The Court then set a case management conference on March 10, 2020, to discuss its 2 concerns about the lack of notice to absent class members. See Dkt. No. 227. During the case 3 management conference, the parties discussed the feasibility of notice by publication and agreed to 4 meet and confer and submit a proposed notice plan for the settlement class. See Dkt. No. 230. 5 The parties filed their proposed notice plan on March 20, 2020, and have proposed posting notice 6 only on Class Counsel’s websites. See Dkt. No. 231. 7 II. LEGAL STANDARD 8 Federal Rule of Civil Procedure 23(e) provides that “[t]he claims, issues, or defenses of a 9 certified class—or a class proposed to be certified for purposes of settlement—may be settled . . . 10 only with the court’s approval.” Fed. R. Civ. P. 23(e). “The purpose of Rule 23(e) is to protect 11 the unnamed members of the class from unjust or unfair settlements affecting their rights.” In re 12 Syncor ERISA Litig., 516 F.3d 1095, 1100 (9th Cir. 2008). Accordingly, before a district court 13 approves a class action settlement, it must conclude that the settlement is “fundamentally fair, 14 adequate and reasonable.” In re Heritage Bond Litig., 546 F.3d 667, 674–75 (9th Cir. 2008). 15 Courts may preliminarily approve a settlement and notice plan to the class if the proposed 16 settlement: (1) appears to be the product of serious, informed, non-collusive negotiations; (2) does 17 not grant improper preferential treatment to class representatives or other segments of the class; 18 (3) falls within the range of possible approval; and (4) has no obvious deficiencies. In re Lenovo 19 Adware Litig., No. 15-MD-02624-HSG, 2018 WL 6099948, at *7 (N.D. Cal. Nov. 21, 2018). 20 Courts lack the authority, however, to “delete, modify or substitute certain provisions. The 21 settlement must stand or fall in its entirety.” Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th 22 Cir. 1998). 23 III. DISCUSSION 24 The Court has been open with the parties about its concerns regarding the fairness of the 25 proposed settlement in this action and the need for adequate notice to absent class members. 26 Under Rule 23(c)(2), “any class certified under Rule 23(b)(1) or (b)(2), the court may direct 27 appropriate notice to the class.” See Fed. R. Civ. P. 23(a). Additionally, Rule 23(h) requires that 1 counsel, directed to class members in a reasonable manner.” Fed. R. Civ. P. 23(h)(1) (emphasis 2 added). 3 Here, the parties repeatedly urged that class notice was not required at all because the 4 settlement only provides for injunctive relief. See Dkt. Nos. 217, 222, 226. As the Court has 5 explained, however, notice in this case is not about allowing absent class members to opt out of 6 the injunctive relief, but rather is about giving them the opportunity to understand how their rights 7 will be affected by the proposed settlement; object to the settlement if they believe it is 8 insufficient; and weigh in on the anticipated motions for attorneys’ fees and incentive awards for 9 the named Plaintiffs. Aware of the parties’ effort to reach settlement in this action, the Court 10 provided them with ample opportunity to remedy the identified deficiencies. Yet at each turn the 11 parties have appeared reluctant to provide absent class members with meaningful notice of the 12 terms of the settlement and the nature of the rights they are releasing. 13 In Campbell v. Facebook, Inc., 951 F.3d 1106, 1127 (9th Cir. 2020), the Ninth Circuit 14 recently noted the oddity of parties arguing that class notice is not required, even in settlements 15 involving injunctive relief: 16 It does seem odd that the parties repeatedly emphasized the 17 informational value of the settlement while simultaneously arguing that it was unnecessary to provide class members formal notice that 18 this information exists and that, if they had been dissatisfied with the settlement terms, they could have objected. 19 20 Id. Although the Ninth Circuit in Campbell ultimately affirmed the district court’s approval of the 21 settlement, critically the district court did require notice that was likely to reach absent class 22 members in that case. Id. at 1127, & n.15. As the Court explained to the parties during the case 23 management conference in this case, the Court reads Campbell as a signal that district courts 24 should be particularly cautious where the parties are loath to provide notice to absent class 25 members. If the class action settlement is “fundamentally fair, adequate and reasonable,” as 26 required under Rule 23, the parties should have no fear or hesitation about disclosing its terms to 27 absent class members. See In re Heritage Bond Litig., 546 at 674–75. 1 notice by publication on Defendant’s websites during the case management conference. But in 2 || their proposed notice plan, the parties have only proposed notice by publication on Class 3 Counsel's websites. See Dkt. No. 231. The Court finds that there is a fundamental disconnect 4 || between the need for adequate notice and the parties’ proposal: How will an absent class member 5 know to look at Class Counsel’s websites for information about the settlement? Only those absent 6 || class members who happen to know about the class action already would possibly think to review 7 || Class Counsel’s website for information about Defendant’s products. The parties offer no 8 || explanation as to why notice could not be similarly provided on Defendant’s own websites or on 9 some other forum likely to be seen by absent class members. In the absence of such notice, the 10 || Court finds that the parties’ proposal is tantamount to no notice at all and does not adequately 11 account for the rights of absent class members. 12 || Iv. CONCLUSION 5 13 The Court DENIES the motion for preliminary approval of class action settlement. The 14 || Court further SETS a telephonic case management conference on April 14, 2020, at 2:00 p.m. All 3 15 counsel shall use the following dial-in information to access the call: 16 Dial-In: 888-808-6929 3 17 Passcode: 6064255 18 For call clarity, parties shall not use speaker phone or earpieces for these calls, and where at all 19 || possible, parties shall use landlines. The parties are further advised to ensure that the Court can 20 || hear and understand them clearly before speaking at length. The parties are DIRECTED to 21 submit a case management conference by April 7, 2020, with a proposal for how this case may 22 || move efficiently toward resolution. 23 IT IS SO ORDERED. 24 || Dated: 3/31/2020 Alaprrl 5 Mbt |) 6 HAYWOOD S. GILLIAM, JR. United States District Judge 27 28